ACIT 15(1), MUMBAI V. HI PACK, MUMBAI

ITA 4393/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3672 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 11-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V JHAVERI; D J SHUKLA
• Assessee Lawyers: K MOHANDA S
• Keywords: Unexplained cash credit; Additional evidence
• Section: 143(3); 80IB; 68

Judgement Text

HI PACK ITA 3939/M/13 ITA 4393/M/13 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H , MUMBAI , , BEFORE SHRI JASON P BOAZ , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDIC IAL MEMBER ITA NO. : 3939 /MUM/20 1 3 (ASSESSMENT YEAR: 200 9 - 1 0 ) HI PACK , 228 PRAGATI INDL ESTATE, N M JOSHI MARG, LOWER PAREL, MUMBAI .: PAN: AADFH 6242 C VS JT. COMMISSIONER OF INCOME TAX(OSD) - 15(1), MUMBAI (APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI B V JHAVERI AND SHRI D J SHUKLA RESPONDENT BY : SHRI K MOHANDAS ITA NO. : 4 393/MUM/2013 (ASSESSMENT YEAR: 2009 - 10 ) ASST. COMMISSIONER OF INCOME TAX - 15(1), R.NO. 104 MATRU MANDIR, 1 ST FLOOR, TARDEO ROAD, MUMBAI - 400 007 VS HI PACK , MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K MOHANDAS RESPONDENT BY : SHRI B V JHAVERI AND SHRI D J SHUKLA /DATE OF HEARING : 09 - 12 - 201 5 / DATE OF PRONOUNCEMENT : 07 03 - 201 6 ORDER : . . : P ER AMIT SHUKLA , JM : THE AFORESAID CROSS APPEAL S HA VE BEEN FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST IMPUGNED ORDER , DATED 26.03.2013 PASSED BY CIT(A) - 26, MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2009 - 10. HI PACK ITA 3939/M/13 ITA 4393/M/13 2 2. WE WILL FIRST TAKE - UP REVENUES APPEAL , VIDE WHICH FOLLOWING GROUNDS HAVE BEEN RAISED: - 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, T HE LD . CIT (A) HAS ERRED I N DELETING THE ADDITION OF RS.57,50,000/ - MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF UNSECURED LOANS AS THE ASSESSEE WAS UNABLE TO PROVE THE CREDITWORTHINESS OF THE LOAN CREDITORS AND BY ACCEPTING ADDITIONAL EVIDENCE ON LOAN CREDITORS IN VIOLATION OF RULE 46A. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD . CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.66,28,827/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ADVANCES RECEIVED LOANS AS THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF THESE ADVANCES AND BY ACCEPTING ADDITIONAL E VIDENCE IN RESPECT OF THESE ADVANCES IN VIOLATION OF RULE 47A. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 18,50,000 / - MADE BY THE ASSESSING OFFICER IN RESPECT OF CAPITAL INTROD UCED BY THE PARTNERS AS THE ASSESSEE WAS UNABLE TO PROVE THE SOURCE OF SAID CAPITAL AND CREDITWORTHINESS OF PARTNERS AND BY ACCEPTING ADDITIONAL EVIDENCE IN RESPECT OF THESE ADVANCES IN VIOLATION OF RULE 46A. 3 . T HE ASSESSEE IS PARTNERSHIP FIRM ENGAGED I N THE BUSINESS OF MANUFACTURING OF TIN CONTAINERS USED IN HEALTHCARE PRODUCTS AND DEODORANTS , ETC. 4 . AS REGARDS THE ISSUE RAISED IN GROUND NO.1, THE AO HAS NOTED THAT, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN RECEIVING OF FRESH LOANS F OR SUMS AGGREGATING TO RS. 57,50,500 / - FROM THE THREE PARTIES, NAMELY: - SR.NO. NAME OF THE PERSON AMOUNT OF LOAN TAKEN DURING THE YEAR(RS.) 1 BHOGILAL PATEL 10,50,000 2 WALL STREET DEVELOPERS (WHICH WAS WRONGLY MENTIONED AS SMART LINK) 28,00,000 3 LC P TRUST 19,00,000 TOTAL 57,50,000 THE ASSESSEE WAS REQUIRED TO FURNISH LOAN CONFIRMATIONS, BANK STATEMENTS AND INCOME - TAX RETURNS OF THESE PARTIES. HOWEVER, THE ENTIRE REQUISITE DETAILS FOR ALL THE THREE PARTIES COULD NOT BE HI PACK ITA 3939/M/13 ITA 4393/M/13 3 FURNISHED, AS MENTIONED BY THE A O , EXCEPT FOR LOAN CONFIRMATION AND IN CASE OF ONE PARTY, BANK STATEMENT. ACCORDINGLY, THE AO CONFIRMED THE UNSECURED LOAN AS INCOME OF THE ASSESSEE. 5. IN THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE FILED A PETITION FOR ADMISSION OF ADDITIONAL EVIDENCE S UNDER RULE 46A, VIDE LETTER DATED 15.06.2012. SINCE IT WAS AN ADDITIONAL EVIDENCE, THE LD. CIT(A) FORWARDED THE SAME TO THE AO TO SUBMIT HIS REMAND REPORT ON THE SUBMISSION MADE BY THE ASSESSEE AND TO EXAMINE THESE EVIDENCES . THE AO REQUESTED FO R TWO MONTHS TIME TO EXAMINE THE EVIDENCES, HOWEVER, SUBSEQUENTLY, IN HIS REMAND REPORT THE AO MERELY CONTENDED THAT, THE REASON FOR ADMISSION OF ADDITIONAL EVIDENCE GIVEN BY THE ASSESSEE IS NOT VALID AND ON MERITS OF THE EVIDENCE, HE DID NOT GAVE ANY REB UTTAL. THE LD. CIT(A) OBSERVED THAT, IN SUCH A CASE WHEN THE AO WAS REQUIRED TO SUBMIT HIS REMAND REPORT AND EXAMINE THE GENUINENESS OF LOAN LENDERS VIS - - VIS THEIR CREDITWORTHINESS AND EVIDENCE THEN THE AO WAS REQUIRED TO LOOK INTO AND, INSTEAD, HAS OBJEC TED THE ADMISSION OF ADDITIONAL EVIDENCE S , THEREFORE , HE HELD THAT IT IS PRESUMED THAT, NO ADVERSE COMMENT WHATSOEVER HAS TO BE GIVEN BY THE AO ON THE EVIDENCES SUBMITTED NOR HE HAS TREAD TO MAKE ANY ENQUIRY WHICH HE OUGHT TO HAVE MADE . ACCORDINGLY, HE ADM ITTED THE ADDITIONAL EVIDENCES FOR DECIDING THE APPEAL ON MERITS . REGARDING LOAN TAKEN FROM WALL STREET DEVELOPERS PVT LTD , FOR WHICH THE ASSESSEE HA D PROVIDED THE COPY OF BALANCE - SHEET, PROFIT & LOSS ACCOUNT AND BANK - STATEMENT S CLARIFIED THAT THE NAME SM AR T - LINK WAS ONLY A MISTAKE DONE BY THE DATA ENTRY OPERATOR IN THE OFFICE OF THE ASSESSEE WHEREAS THE CORRECT NAME OF THE PARTY WAS WALL STREET DEVELOPERS PVT. LTD. . APART FROM THAT, REGARDING ALL THE PARTIES, THE ASSESSEE HA D FILED CONFIRMATION OF LOAN ; COPY OF AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT; BANK STATEMENTS; AND ALL THE RELEVANT INCOME - TAX RECORDS. THE LD. CIT(A) BASED ON THE APPRECIATION OF EVIDENCES, DELETED THE SAID LOAN AMOUNT AFTER OBSERVING AND HOLDING AS UNDER: - HI PACK ITA 3939/M/13 ITA 4393/M/13 4 I HAVE CAREFULLY C ONSIDERED THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER, AS WELL AS THE SUBMISSIONS OF THE APPELLANT. IT IS NOTED THAT AT THE TIME OF ASSESSMENT STA G E THE APPELLANT HAS SUBMITTED THE CONFIRMATION OF ALL THE THREE PARTIES ALONG WITH THEIR PAN, BUT THE AO H AS NOT MADE ANY ENQUIRY EITHER FROM THE AOS OF SUCH PARTIES OR DIRECTLY FROM THESE PARTIES. HE HAS SUMMARILY TREATED THESE LOANS WHICH WERE OWNED UP BY THE CONCERNED PARTIES, AS UNEXPLAINED CREDITS ON THE GROUND THAT THE APPELLANT COULD NOT FILE THE BANK S TATEMENTS AND OTHER DETAILS OF SOURCE OF THESE DEPOSITS. IT IS FURTHER NOTED THAT IN THE REMAND PROCEEDINGS THE AO HAD ANOTHER OPPORTUNITY TO MAKE ENQUIRIES IN RESPECT OF SUCH LOANS, BUT HE HAS NOT MADE ANY ADVERSE OBSERVATION ON THE FRESH EVIDENCE FILED B Y THE APPELLANT IN FORM OF COPIES OF I.T. RETURNS AND BALANCE SHEET ETC. OF TH R EE PARTIES. ALL THESE PARTIES ARE REGULARLY ASSESSED TO TAX, FROM THEIR ACCOUNTS FILED BY THE APPELLANT THEY APPEARS TO BE THE PERSONS OF SOUND FINANCIAL STATE, THEY HAVE NOT ON LY GIVEN CONFIRMATION OF LOAN BUT HAS ALSO PROVIDED THEIR RELEVANT BANK STATEMENTS AND BALANCE SHEET ETC., THEREFORE, CONSIDERING ALL THESE CIRCUMSTANCES THE LOANS IN QUESTION APPEARS GENUINE, HENCE IN WANT OF ANY SPECIFIC ADVERSE INFORMATION THESE LOANS CANNOT BE HELD AS UNEXPLAINED CASH CREDITS. THE ADDITION MADE BY THE AO IS ACCORDINGLY DIRECTED TO BE DELETED. 6 . BEFORE US, THE LD. DR STRONGLY RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT, WHEN THE AO HAS GIVEN FULL OPPORTUNITY TO THE ASSESSEE , THEN WHY THE ASSESSEE DID NOT CHOSE TO FILE ANY PROPER EVIDENCES TO SUBSTANTIATE THE GENUINENESS OF LOAN. NO VALID REASON HAS BEEN GIVEN BY THE ASSESSEE FOR NOT FILING THE EVIDENCES BEFORE THE AO, ACCORDINGLY, SUCH AN EVIDENCE SHOULD NOT HAVE BEEN CONSID ERED OR ENTERTAINED BY THE CIT(A). HI PACK ITA 3939/M/13 ITA 4393/M/13 5 7 . BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, AT THE STAGE OF THE ASSESSMENT, LOAN CONFIRMATION OF THE PARTIES INCLUDING PAN AND OTHER DETAILS WERE ALREADY FURNISHED BEFORE THE AO WHICH CONTAINED ALL TH E DETAILS IN RESPECT OF THE NEW LOAN S TAKEN IN THIS YEAR . BESIDES THIS, BANK STATEMENTS WERE ALSO FILED. BEFORE THE CIT(A), THE ASSESSEE HAS MERELY FILED AUDITED BALANCE - SHEET WHEREIN PARTIES HAVE REFLECTED THE LOAN GIVEN TO THE ASSESSEE AND CO P Y OF ACKNOW LEDGEMENT OF RETURN OF INCOME WHICH IS ALREADY PART OF THE INCOME TAX - RETURNS. THE EVIDENCES FURNISHED BEFORE THE CIT(A) WERE PURELY CORROBORATIVE IN NATURE AND, THEREFORE, THERE COULD NOT HAVE BEEN ANY GRIEVANCE TO THE AO TO ADMIT THE SAME. MOREOVER, COLL ECTING OF ALL THE EVIDENCES FROM THE CREDITORS, AT TIMES TAKES LOT OF EFFORTS AND IF AO HAD ANY DOUBT, HE COULD HAVE CARRIED OUT ENQUIRY FORM THEM. T HEREFORE, ON SUCH A TECHNICAL GROUND AO COULD NOT HAVE REJECTED THE ADDITIONAL EVIDENCE WHICH WA S FILED AT THE STAGE OF THE CIT(A) AND SUFFICIENT OPPORTUNITY WAS GIVEN TO THE AO . 8 . AFTER CONSIDERING THE RIVAL SUBMISSION S AND ON PERUSAL OF THE IMPUGNED ORDER AND MATERIAL ON RECORD, WE FIND THAT, AT THE FIRST INSTANCE BEFORE THE AO, THE ASSESSEE HAS EXPLAINED T HE NATURE AND SOURCE OF CREDIT BY GIVING THE DETAILS OF THE PERSONS FROM WHOM THE LOANS WERE RECEIVED AND FOR PROVING THE SOURCE, THE ASSESSEE HAS FILED THE COPY OF THE LOAN CONFIRMATION GIVING DETAILS OF PAN AND THE RANGE / WARDS WHERE THESE CREDITORS WER E ASSESSED TO TAX. BESIDES THIS, BANK STATEMENT FOR THE LOAN AMOUNT RECEIVED DURING THE YEAR W AS ALSO FILED. BEFORE THE CIT(A), THE ASSESSEE HAD FURNISHED THE COP IES OF AUDITED BALANCE - SHEET REFLECTING THE LOAN AMOUNT, PROFIT & LOSS ACCOUNT AND ACKNOWLEDGM ENT OF INCOME - TAX RETURNS. THUS, FOR PROVING THE NATURE AND SOURCE OF CREDIT, THE FOLLOWING EVIDENCES WERE THERE IN THE RECORD BEFORE THE CIT(A) AS WELL AS BEFORE THE AO (IN THE REMAND PROCEEDINGS): (A) LOAN CONFIRMATION OF THE PARTIES INCLUDING PAN AND O THER DETAILS; HI PACK ITA 3939/M/13 ITA 4393/M/13 6 (B) BANK STATEMENTS OF THE PARTIES SHOWING LOAN AMOUNT GIVEN TO THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES ; (C) ACKNOWLEDGMENT OF INCOME - TAX RETURNS OF THE CREDITORS FOR AY 2009 - 10; (D) AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT OF TH E CREDITORS. ON CONSIDER ATION OF THESE EVIDENCES, THE LD. CIT(A) HAS DELETED THE SAID ADDITION BY HOLDING THAT, THE SAID LOAN WAS GENUINE AND ASSESSEE HAS PRIMA FACIE DISCHARGED ITS ONUS . IF THE ASSESSEE HAS SATISFACTORILY EXPLAINED THE NATURE AND SOURC E OF CREDIT BY ADDUCING PRIMA FACIE ALL THE NECESSARY EVIDENCE THEN ONUS OF THE ASSESSEE GETS DISCHARGED AND ONUS SHIFT UPON THE AO TO SHOW / PROVE THAT SUCH AN EXPLANATION IS NOT CORRECT. I N ABSENCE OF ANY ENQUIRY CONDUCTED BY THE AO EVEN WHEN SPECIFIC MA NDATE WAS GIVEN BY THE CIT(A) IN THE REMAND PROCEEDINGS, THE DEPARTMENT NOW CANNOT PLEAD THAT THE ONUS CAST UPON THE ASSESSEE HAS NOT BEEN DISCHARGED. NONE OF THE EVIDENCES FILED HAS BEEN REBUTTED AND A CCORDINGLY, WE DO NOT FIND ANY SUBSTANCE IN THE IMPUGN ED GROUND RAISED BY THE REVENUE AND ACCORDINGLY, GROUND NO.1 IS DISMISSED. 9 . IN GROUND NO.2, REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS.66,28,827/ - MADE ON ACCOUNT ADVANCES RECEIVED FROM CUSTOMERS WHICH HAS BEEN TREATED AS UNEXPLAINED CASH CRE DIT BY THE AO . 1 0 . THE AO OBSERVED THAT, ASSESSEE HAD SHOWN ADVANCES FROM CUSTOMERS FOR SUMS AGGREGATING TO RS. 66,28,827/ - FROM THE FOLLOWING PERSONS: SR. NO. NAME OF THE PERSON AMOUNT OF ADVANCE RECEIVED (RS.) 1 AEROSPRES (INDIA) PVT LTD 1,50,000 2 INNOVATIVE INDUSTRIES 9,99,522 3 SUPERIOR WORKS 14,30,000 4 EXCELLENT MANUFACTURING CO. 21,17,648 5 BEAUTY QUEEN COSMETICS PVT LTD 19,31,657 TOTAL 66,28,827 HI PACK ITA 3939/M/13 ITA 4393/M/13 7 IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE FILED CONFIRMATION LETTERS FROM THESE PARTIES , HOWEVER, AO NOTED THAT EXCEPT FOR CONFIRMATION, NO FURTHER DOCUMENTS WERE FURNISHED TO SUBSTANTIATE THE NATURE AND SOURCE OF CREDITS. ACCORDINGLY, HE AGAIN ISSU E D SHOW CAUSE NOTICE F O R GIVING THE DETAILS OF THE ADVANCE S RECEIVED , ALONG WITH THE NAME AND ADDRESS ES OF THE PARTIES, PURPOSE OF ADVANCE AND WHEN SUCH ADVANCE WAS SETTLED AND WHETHER THE TRANSACTION ITSELF WAS GENUINE OR NOT. AS PER THE NOTING BY THE AO, THE ASSESSEE DID NOT COMPLY WITH SUCH REQUIREMENT , ACCORDINGLY HE ADDED THE SAME AS UNEXPLAINED CREDIT AND AT THE SAME TIME HE ALSO INVOKED SECTION 41(1) FOR TREATING IT AS INCOME BY WAY OF CESSATION OF LIABILITY. 1 1 . BEFORE THE CIT(A), THE ASSESSEE SUBM ITTED THAT, CONFIRMATION OF THE BALANCE FROM EACH PARTY, W ERE DULY SUBMITTED BEFORE THE AO AND THESE AMOUNT REMAINED ADVANCES FROM THE CUSTOMERS AS ON 31 ST M ARCH, 2009. OUT OF THE FIVE PARTIES, TWO PARTIES, M/S EXCELLENT MANUFACTURING CO. A ND BEAUTY QUEEN COSMETICS PVT LTD THE ASSESSEE HAD REGULAR AS BUSINESS ACTIVITY WITH THE ASSESSEE DURING THE ASSESSMENT - YEAR 2009 - 10 . NOT ONLY THAT, COPIES OF THEIR ACKNOWLEDGEMENT OF INCOME - TAX - RETURN S AND ACCOUNTS WERE ALSO FILED. IN CASE OF OTHER THREE PARTIES, IT WAS SUBMITTED THAT, AMOUNT WAS APPEARING IN THE OPENING BALANCE AS ON 31 ST MARCH, 2008 AND HENCE, THESE AMOUNTS DOES NOT PERTAINED TO THIS ASSESSMENT YEAR. IN SUPPORT OF SUCH CONTENTION , ACKNOWLEDGEMENT OF LEDGER ACCOUNT AND CONFIRMATION FROM T HESE PARTIES WERE ALSO FILED . I T WAS ALSO BROUGHT TO THE NOTICE OF THE CIT(A) THAT, ALL THESE PARTIES ARE REGULARLY ASSESSED TO TAX AND HAVE BEEN FLING THE IR INCOME - TAX - RETURNS, THE DETAILS OF WHICH WAS ALREADY GIVEN BEFORE THE AO, THEREFORE, WITHOUT ANY E NQUIRY BY THE AO, THE CREDIT BALANCE APPEARING IN THE BOOKS OF THE ASSESSEE OF THESE PARTIES CANNOT BE TREATED AS UNEXPLAINED CASH CREDIT. HI PACK ITA 3939/M/13 ITA 4393/M/13 8 1 2 . THE LD. CIT(A) AFTER CONSIDERING THE ENTIRE MATERIAL ON RECORD, DELETED THE ADDITION AFTER OBSERVING AND HOLDIN G AS UNDER: - I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER, AS WELL AS THE SUBMISSIONS OF THE APPELLANT. IT IS AT THE TIME OF ASSESSMENT STAGE THE APPELLANT HAS SUBMITTED THE CONFIRMATION OF ALL THE FIVE PARTIES ALONG WITH TH EIR PAN, BUT THE AO HAS NOT MADE ANY ENQUIRY EITHER FROM THE AO OF SUCH PARTIES OR DIRECTLY FROM THESE PARTIES. HE HAS SUMMARILY TREATED THESE CREDITS WERE OWNED BY THE CONCERNED PARTIES, AS UNEXPLAINED CREDITS ON THE GROUND THAT THE APPELLANT COULD NOT FL ED THE OTHER DETAILS SUCH AS PURPOSE OF THESE ADVANCES AND WHEN THEY WERE SETTLED ETC. IT IS FURTHER NOTED THAT IN THE REMAND PROCEEDINGS THE AO HAD ANOTHER OPPORTUNITY TO MAKE ENQUIRIES IN RESPECT OF SUCH ADVANCES, BUT HE HAS NOT MADE ANY ADVERSE OBSERVAT ION ON THE FRESH EVIDENCE FILED BY THE APPELLANT IN THE FORM OF COPIES OF I.T. RETURNS AND BALANCE SHEET ETC. OF THESE PARTIES. ALL THESE PARTIES ARE REGULARLY ASSESSED TO TAX. FROM THEIR ACCOUNTS FILED BY THE APPELLANT THEY APPEARS TO BE THE PERSONS OF SO UND FINANCIAL STATE, THEY HAVE NOT ONLY GIVEN CONFIRMATION OF ADVANCES FOR BUSINESS PURPOSES BUT HAS ALSO PROVIDED THEIR BALANCE SHEET ETC. IT IS ALSO NOTED THAT TWO PARTIES HAVE REGULAR BUSINESS DURING THE CURRENT YEAR WITH THE APPELLANT AND THE OTHER THR EE PARTIES HAD BUSINESS TRANSACTIONS IN EARLIER YEARS. THEREFORE CONSIDERING ALL THESE CIRCUMSTANCES THE BUSINESS ADVANCES IN QUESTION APPEARS GENUINE, HENCE IN WANT OF ANY SPECIFIC ADVERSE INFORMATION THESE ADVANCES CANNOT BE HELD AS UNEXPLAINED CASH CRED ITS. SIMILARLY, NEITHER THESE BUSINESS ADVANCES HAVE BEEN WRITTEN OFF BY THE CONCERNED PARTIES, AS THEY HAVE CONFIRMED SUCH ADVANCES NOR THESE ADVANCES ARE TOO OLD TO BE CONSIDERED AS TIME BARRED ADVANCES, HENCE THESE CREDITS CANNOT ALSO BE TREATED AS CEAS ED LIABILITY U/S 41(1) OF THE I.T. ACT. THE ADDITION MADE BY THE AO IS ACCORDINGLY DIRECTED TO BE DELETED. 1 3 . AFTER CONSIDERING THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES AND ON PERUSAL OF THE MATERIAL AS DISCUSSED BY THE AO AS WELL AS CIT(A), WE F IND THAT, FIRSTLY , THESE ARE ADVANCES RECEIVED FROM THE CUSTOMERS DURING THE NORMAL COURSE OF BUSINESS WITH WHOM THE ASSESSEE HAD REGULAR BUSINESS DEALINGS. IN THE CASE OF THE THREE PARTIES, THE AMOUNT WAS APPEARING AS A N OPENING BALANCE AS ON 01.04.2008 I N THE ACCOUNTS OF THE ASSESSEE AND HENCE THE SAME CANNOT BE TREATED AS UNEXPLAINED CREDIT I N THE RELEVANT FINANCIAL YEAR TO BE ADDED UNDER SECTION 68 . APART FROM THAT, THE HI PACK ITA 3939/M/13 ITA 4393/M/13 9 ASSESSEE HAD F I LED CONFIRMATION LETTER AND CONFIRMATION OF ACCOUNT FROM THESE PARTIE S ALONG WITH THE PAN, COPY OF AUDITED BALANCE - SHEET AND PROFIT & LOSS ACCOUNT AND ACKNOWLEDGEMENT OF RETURN. ONCE THESE DOCUMENTS WE RE SUBMITTED AND REMANDED TO THE AO FOR HIS COMMENT AND EXAMINATION, THEN IT CANNOT BE HELD THAT THE NATURE OF ADVANCE RECEI VED FROM THE CUSTOMERS CAN BE TREATED AS UNEXPLAINED CREDITS, ESPECIALLY WHEN ASSESSEE HAD A REGULAR BUSINESS ACTIVITY AND DEALING WITH THESE PARTIES. IN ABSENCE OF ANY ENQUIRY MADE BY THE AO AND ANY ADVERSE MATERIAL BROUGHT ON RECORD, WE DO NOT FIND ANY R EASON TO DOUBT THE GENUINENESS OF THE CREDIT AND ACCORDINGLY, THE FINDING GIVEN BY CIT(A) FOR DELETING THE ADDITION IS UPHELD. THE AO, WHEN WAS REQUIRED TO LOOK AND EXAMINE THESE EVIDENCE, HAD SIMPLY CHOSEN TO IGNORE AND RAISE TECHNICAL OBJECTIONS. MOREOVE R, THE EVIDENCES FURNISHED MERELY CORROBORATES THE EXPLANATION AND EVIDENCES FILED BEFORE THE AO. THUS, ORDER OF THE CIT(A) IS CONFIRMED AND GROUND NO. 2 IS DISMISSED. 1 4 . IN GROUND NO.3, THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS.18,50,000 / - IN RESPECT OF CAPITAL INTRODUCED BY THE PARTNERS. THE PARTNERS OF THE ASSESSEE - FIRM, NAMELY M/S ASIAN AEROSOL P LTD AND M/S SHREE LAXMI TRUST INTRODUCED CAPITAL OF RS.5,00,000/ - AND RS. 13,50,000/ - RESPECTIVELY. IN RESPONSE TO THE SHOW CAUSE NOTICE B Y THE AO FOR WHICH THE ASSESSEE WAS REQUIRED TO FURNISH COPIES OF BALANCE - SHEET AND INCOME TAX RECORDS OF THE PARTNERS, THE ASSESSEE CO U LD N O T FURNISH THESE DETAILS AS NOTED BY THE AO. IN THE FIRST APPELLATE PROCEEDING, THE ASSESSEE SUBMITTED THAT, BOTH TH E ENTITIES (PARTNERS) ARE REGULARLY ASSESSED TO TAX FOR LAST SEVERAL YEARS AND IN SUPPORT OF THE SAID INTRODUCTION OF THE CAPITAL, THEY HAD FILED THEIR COPY OF BANK STATEMENT S AND AUDITED FINANCIAL STATEMENTS. APART FROM THAT, TH E SOURCE OF THEIR INCOME WA S ALSO FURNISHED. THE LD. CIT(A) REMANDED THE ENTIRE ISSUE TO THE AO, HOWEVER, IN THE REMAND PROCEEDINGS, THE AO DID NOT CHOSE TO EXAMINE THE SAME NOR DID HE MADE ANY ADVERSE OBSERVATION WITH HI PACK ITA 3939/M/13 ITA 4393/M/13 10 REGARD TO THE ADDITIONAL EVIDENCES FILED , LIKE, INCOME - TAX RETUR NS, PROOF OF SOURCE OF INCOME, AUDITED BALANCE - SHEET ETC. THE LD. CIT(A) AFTER APPRECIATING THE ENTIRE EVIDENCES HELD THAT, IT IS APPARENTLY EVIDENT FROM THE RECORDS FILE D BY THE ASSESSEE THAT THE PARTNERS HAVE HUGE SUFFICIENT INCOME AND BOTH ARE IN SOUND FINANCIAL STATE. NOT ONLY THEY HAVE CONFIRMED THE INTRODUCTION OF THE CAPITAL BUT HAS ALSO PROVIDED ALL THE NECESSARY DOCUMENTS OF SOURCE OF INCOME, RELEVANT INCOME - TAX RECORDS AND BALANCE - SHEET IN WHICH THE AMOUNT INTRODUCED HAS BEEN REFLECTED AS CAPITAL CONTRIBUTIONS. B ASED ON THESE EVIDENCES, HE DELETED THE SAID ADDITION. 1 5 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THERE IS NO INFIRMITY IN THE ORDER OF THE CIT(A) IN APPRECIATING THE EVIDENCES FILED BEFORE HIM, WHICH WAS ALSO SENT TO THE AO FOR VERI FICATION. THE AO INSTEAD OF VERIFYING THE EVIDENCES AND INCOME - TAX RECORDS OF THE PARTNERS HAS CHOSEN TO GIVE TECHNICAL OBJECTIONS. THE PRIMARY ONUS OF THE ASSESSEE HAS BEEN DULY DISCHARGED ONCE THE ASSESSEE HAS FILED THE CONFIRMATION FROM THE PARTNERS ALO NG WITH THEIR AUDITED BALANCE - SHEET AND INCOME - TAX RETURNS. ONCE, THESE EVIDENCES PROVING THE SOURCE OF THEIR INCOME AND GENUINENESS OF THE TRANSACTION HAVE NOT BEEN REBUTTED THEN WITHOUT ANY ADVERSE MATERIAL ON RECORD, THE AMOUNT RECEIVED IN THE FORM OF C APITAL INTRODUCTION BY THE PARTNERS CANNOT BE DOUBTED. ACCORDINGLY, FINDING GIVEN BY THE CIT(A) ON THIS SCORE IS ALSO AFFIRMED. 1 6 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. 1 7 . NOW, WE WILL TAKE - UP ASSESSEES APPEAL BEING ITA NO.3939/MUM/2013 , VIDE WHICH FOLLOWING GROUND HA S BEEN RAISED: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.71,38,571/ - MADE TO THE INCOME OF THE APPELL ANT BY THE ASSESSING OFFICER IN RESPECT OF ADDITIONAL COST OF MATERIAL CONSUMED. HI PACK ITA 3939/M/13 ITA 4393/M/13 11 1 8 . THE BRIEF FACTS ARE THAT, THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF TIN CONTAINERS USED IN HEALTHCARE PRODUCTS AND DEODORAN TS , ETC. THE ACTIVITY CARRIED OUT BY THE ASSESSEE FALLS UNDER THE PURVIEW OF CENTRAL EXCISE AND ENTIRE RAW MATERIAL CONSUMED AND PRODUCT MANUFACTURED ARE SUBJECTED TO CENTRAL EXCISE LAW. THE AO ON THE PERUSAL OF THE PROFIT AND LOSS ACCOUNT OBSERVED THAT, T HE COST OF MATERIAL CONSUMED IN RATIO TO THE TOTAL SALE WAS 40% IN THE AY 2009 - 10 , WHEREAS THE COST OF MATERIAL CONSUMED FOR THE IMMEDIATELY PRECEDING YEAR WAS SHOWN AT 30% OF THE SALES. HE FURTHER OBSERVED THAT, THE ASSESSEE WAS ENTITLED TO CLAIM OF DEDUC TION UNDER SECTION 80IB A N D FROM THIS YEAR THE CLAIM FOR DEDUCTION HAS BEEN REDUCED TO 25% OF THE PROFIT THEREFORE SUCH A RISE ON MATERIAL CONSUMED IS 40% WILL AFFECT THE PROFIT AS IT WILL NOT BE MUCH . THE AO NOTED THAT IN RESPONSE TO THE SHOW CAUSE NOTICE , THE ASSESSEE DID NOT JUSTIFY THE HIGH CONSUMPTION OF COST OF MATERIAL AND ACCORDINGLY, HE HAS MADE THE ADDITION OF RS.7 1 , 38, 571/ - IN THE FOLLOWING MANNER: - CONSIDERING THE INFLATION IN THE PRICES ADDITIONAL INCREASE IN COST UPTO 3% IS JUSTIFIABLE BUT N OT MORE THAN THAT. HERE THE ASSESSEE HAS INCREASED ITS COST BY ADDITIONAL 10% WHICH IS NOT ACCEPTABLE. SO AN ADDITION OF RS.71,38,571/ - (BEING 7% OF TOTAL SALES) IS BEING ADDED TO THE PROFITS OF THE BUSINESS. 19 . BEFORE THE CIT(A), THE WORKING OF THE COS T OF MATERIAL CONSUMED ON THE BASIS OF AUDITED ACCOUNTS WERE CLARIFIED AS UNDER: - F.Y. 2008 - 09 47.98% (48%) F.Y. 2007 - 08 41.49%(41.5%) AND NOT 30% AS TAKEN BY THE AO. APART FROM THAT, THE ASSESSEE SUBMITTED THE DETAIL S OF CONSUMPTION STATEMENTS OF RAW MATERIAL TOGETHER WITH THE SUPPORTING B IL L S , WHICH THE ASSESSEE SUBMITTED THAT COULD NOT BE SUBMITTED BEFORE THE AO BECAUSE THE AO DID NOT SPECIFY FOR WHAT IT WAS REQUIRED AND HI PACK ITA 3939/M/13 ITA 4393/M/13 12 ASSESSEE ALSO MISUNDERST OO D THE REQUIREMENT BY THE AO. REGARDING INCREASE IN CONSUMPTION OF COST OF 6.5%, IT WAS SUBMITTED THAT IT WAS MAINLY BECAUSE OF INCREASE IN THE COST OF FOREIGN EXCHANGE DIFFERENCE OF ABOUT 12% O N PURCHASE OF IMPORTED RAW MATERIAL. FURTHER, THE MAIN RAW MATERIAL TINPLATE IS AN IMPORTED MATERIAL AND ASSESSEE S FACTORY IS UNDER STRICT MONITORING UNDER CENTRAL EXCISE LAWS , THEREFORE, ALL THE RAW MATERIAL PURCHASED AND CONSUMED A RE FULLY ACCOUNTABL E FOR A LL THE TRANSACTIONS. HOWEVER, THE LD. CIT(A) HELD THAT, THE REASONS FOR INCREASE IN COST OF RAW MATERIALS HAS NOT BEEN PROPERLY EXPLAINED. FURTHER, IF THERE IS AN INCREASE IN THE COST OF RAW MATERIAL THEN IT LEADS TO INCREASE OF RATES IN F I NISHED PRODUCT WHICH IS EVIDENCE FROM THE FACT THAT ASSESSEES SALES HAVE INCREASE D IN THIS YEAR AS COMPARED TO THE LAST YEAR . NOT ONLY THAT, THERE IS DECREASE OF GROSS PROFIT FROM 48.78% TO 35.71% AS COMPARED TO THE LAST YEAR. THUS, ON THESE GROUNDS HE CONFIRMED THE ADDITION MADE BY THE AO. THE RELEVANT FINDING OF THE CIT(A) IS REPRODUCED HEREUNDER: - I HAVE CAREFULLY CONSIDERE D THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER, AS WELL AS THE SUBMISSIONS OF THE APPELLANT. T HE AO HAS MADE THIS ADDITION ON ACCOUNT OF INCREASED COST OF RAW MATERIAL AND ON THE GROUND THAT AT ASSESSMENT STAGE THE ASSESSEE DID NOT FILE ANY REPLY FOR REA SONS OF INCREASE IN COST OF MATERIAL CONSUMED WITH REFERENCE TO THE SALES. IN THE APPEAL PROCEEDINGS, THE APPELLANT HAD FILED OBJECTIONS TO THE FINDING OF THE AO AND ALSO SUBMITTED THE REASONS FOR INCREASE IN THE COST OF RAW MATERIAL WHICH WAS ON ACCOUNT O F ALMOST 12% INCREASE IN THE COST OF FOREIGN EXCHANGE UTILIZED FOR PURCHASE OF IMPORTED RAW MATERIAL. IT IS HOWEVER NOTED THAT THE INCREASE IN THE COST OF RAW MATERIAL OF ANY INDUSTRY IS ALSO ACCOMPANIED WITH THE INCREASE IN RATES OF FINISHED PRODUCTS, WHI CH IS EVIDENT FROM THE FACT THAT SALES ARE ALSO INCREASED AS COMPARED TO LAST YEAR. HAD THIS BEEN THE ONLY REASON FOR INCREASE IN COST OF RAW MATERIAL, THE APPELLANT COULD HAVE SUBMITTED IT TO AO AT THE HI PACK ITA 3939/M/13 ITA 4393/M/13 13 TIME OF ASSESSMENT. THE EXPLANATION OF THE APPELLANT APPEARS TO BE AN AFTERTHOUGHT WHICH IS NOT SUPPORTED BY CONVINCING DOCUMENTARY EVIDENCE. THERE IS ABRUPT DECREASE OF G.P. FROM 47.78% LAST YEAR TO 35.7% DURING THE YEAR FOR WHICH THE ASSESSEE DOES NOT HAVE ANY COGENT EXPLANATION. UNDER THESE CIRCUMSTANCES, THE ADDITION MADE BY THE AO APPEARS REASONABLE HENCE THE SAME IS CONFIRMED. 2 0 . BEFORE US, THE LD. COUNSEL SUBMITTED THAT, THE TOTAL QUANTITY OF RAW MATERIAL PURCHASED IN FINANCIAL YEAR 2007 - 08 WAS APPROXIMATELY RS.3.78 CRORES WHICH IN THIS YEAR HAS RIS EN TO RS. 6.55 CRORES. THE IMPORT OF TIN - PLATE, WHICH WAS AT RS.1.04 CRORES HAS INCREASED TO RS.3.88 CRORES IN THIS YEAR. NOT ONLY THAT, THERE IS A HUGE INCREASE IN RATE PER KILOGRAM UNIT WHICH IS EVIDENT FR OM THE FACT THAT IN FINANCIAL Y EAR 2007 - 08, THE IMPORTED TIN - PLATE COSTS AROUND RS. 49.41 CRORES AS COMPARED RS. 67.54 CRORES IN THIS YEAR. THUS, THERE IS HUGE DIFFERENCE IN RATE ALSO. HE ALSO FURNISHED COMPARISON OF PURCHASE RATE BETWEEN FY S 2007 - 08 & 2008 - 09 RELEVANT TO AYS 2008 - 09 AND 2009 - 10 , RESPECTIVELY IN THE FOLLOWING MANNER: - ITEM CATEGORY PURCHASES DIFFER - ENCE IN RATE FY 2007 - 08 F Y 2008 - 09 QTY VALUE PER KG/ UNIT QTY VALUE PER KG/ UNIT BOTTOMS 2288240 4073259 3.78 TOPS 4151921 6841249 1.65 6643150 10817960 1.63 OTHER PURCHASE 105447 8116283 133324 TINPLATE IMPORTED 210018 10378018 49.41 620256 38787895 62.54 13.12 LOCAL 272509 12472630 45.77 95588 5729 363 59.94 14. 17 TOTAL B 37808180 65502424 THEREAFTER, HE GAVE THE ANALYSIS BY APPLYING AVERAGE COST FOR BOTH THE YEARS AND SUB MITTED THAT UNDER SUCH CIRCUMSTANCES, NO ADDITION SHOULD BE MADE. HI PACK ITA 3939/M/13 ITA 4393/M/13 14 2 1 . ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE OR DER OF THE AO AS WELL CIT(A). 2 2 . WE HAVE HEARD RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT FINDING IN THE IMPUGNED ORDERS. WE FIND THAT, LD. AO HAS MADE THE ADDITION ON ACCOUNT OF ADDITIONAL COST OF CONSUMPTION OF RAW MATERIAL OF RS.71,38,571/ - IN TH E TRADING ACCOUNT BY HOLDING THAT, THE ASSESSEE COULD NOT JUSTIFY THE RISE IN THE C O S T OF RAW MATERIALS CONSUMED. SUCH AN ACTION OF THE AO HAS BEEN CONFIRMED BY THE LD. CIT(A) WITHOUT CONSIDERING THE FACT THAT, NO DEFECT WHATSOEVER HAVE BEEN FOUND EITHER I N THE PURCHASE BILLS OF THE COST OF RAW MATERIALS , OR ANY DEFECT IN THE REGULAR BOOKS OF ACCOUNT , EXCISE REGISTER, ETC. N OR T HERE IS ANY OTHER MATERIAL COMING ON RECORD TO SHOW THAT ASSESSEE HAS RESORTED TO INFLATE THE COST OF CONSUMPTION OF RAW MATERIAL. THE ASSESSEES MAIN CONTENTION BEFORE US IS THAT , COST OF INCREASE IN THE CONSUMPTION WA S MAINLY ON ACCOUNT OF FOREIGN EXCHANGE FLUCTU ATION AND OTHER RELEVANT FACTOR LIKE, INCREASE IN THE PER KG. UNIT. FROM THE PERUSAL OF THE AFORESAID CHART, AS FURNISHED BY THE LD. COUNSEL, IT IS SEEN THAT, THERE IS A HUGE DIFFERENCE I N PER KG. UNIT, WHICH DIFFERENCE HAS NOT BEEN REBUTTED EITHER BY THE AO OR BY THE LD. CIT(A) BY ANY EVIDENCE . NOT ONLY THERE HA S BEEN INCREASE IN THE RATE PER UNIT BUT ALSO THERE IS AN INCREA SE IN THE QUANTITY OF CONSUMPTION WHICH HAS LED TO THE OVERALL INCREASE IN THE QUANTITY OF CONSUMPTION . FURTHER GP RATE AND GROSS PROFIT HAS BEEN ACCEPTED. ONCE NO DISCREPANCY IS FOUND IN THE OPENING STOCK, PURCHASES AND DIRECT EXPENSES ON THE DEBIT SIDE A ND SALES HAVE BEEN ACCEPTED ON CREDIT SIDE ALONG WITH THE GROSS PROFIT, THEN NO ADDITION IN THE TRADING ACCOUNT CAN BE MADE MERELY ON THE BASIS SURMISES AND PRESUMPTION .A NALYSIS BASED ON EVIDENCES AND ENTITIES IN THE BOOKS OF ACCOUNT HAS TO BE DONE, AND ON LY IF BOOKS OF ACCOUNT OR CORROBORATING EVIDENCES ARE NOT PROPER, THE TRADING RESULT CAN BE DISTURBED. THE PURCHASE BILLS OF RAW MATERIAL HAS NOT BEEN DOUBTED NOR THERE IS ANY DISCREPANCY HI PACK ITA 3939/M/13 ITA 4393/M/13 15 IN EXCISE REGISTER OF RAW MATERIAL, HENCE, NO ADDITION CAN BE MADE EITHER ON ACCOUNT OF COST OR ON ACCOUNT OF CONSUMPTION. 2 3 . BEFORE US, THE LD. COUNSEL POINTED OUT THAT, IF THE ASSESSEE RATE OF COST OF MATERIAL PURCHASED AS ON 31 ST MARCH, 2008 IS APPLIED, THEN PERHAPS, THERE WOULD BE NEGLIGIBLE DIFFERENCE IN THE SO CAL LED INCREASE COST OF CONSUMPTION . HENCE, ON THIS PREMISE ALSO NO ADDITION IS CALLED FOR . THIS ASPECT HAS BEEN DEMONSTRATED BEFORE US BY WAY OF A SEPARATE CHART. HOWEVER, WITHOUT GOING INTO TH IS ASPECT, WE ON THE THRESHOLD HOLD THAT ADDITION ITSELF IS UNSU STAINABLE ESPECIALLY WHEN NO DEFECT HAS BEEN POINTED OUT EITHER IN PURCHASE BILLS OR PURCHASE R ATES OF RAW MATERIALS CONSUMED OR FACTOR OF FOREIGN EXCHANGE RATES AND WITHOUT THERE BEING ANY ADVERSE MATERIAL COMING ON RECORD. HENCE SUCH AN ADDITION AS SUSTA INED BY THE CIT(A) IS SET ASIDE AND GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 2 4 . IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALLOWED. TO SUM - UP: REVENUES APPEAL STANDS DISMISSED AND THAT OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH , 2016 . SD/ - SD/ - ( ) ( ) ( JASON P BOAZ ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 7 TH MARCH , 2016 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 2 6 , MUMBAI . 4 ) THE COMMISSIONER OF INCOME - 15 , MUMBAI . 5 ) , , / THE D.R. H BENCH, MUMBAI. HI PACK ITA 3939/M/13 ITA 4393/M/13 16 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS