Appeal details
Counselvise Citation
[2010] 135 COUNSELVISE.COM (IT) 9799 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 8 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-09-2010
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
09-09-2010
Assessment Year
2004-2005
Appeal Filed On
02-01-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.44/AHD/2008 (ASSESSMENT YEAR:-2004-05) DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4, BARODA V/S M/S PAN DRUGS LIMITED, 167/168, GIDC ESTATE, NANDESARI, BARODA [PAN: AABCP 1997 K] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI ANIL KUMAR, DR ASSESSEE BY:- SHRI J P SHAH, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 24-09-2007 OF THE LD. CIT(APPEALS)-III, BARODA, RA ISES THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE ID. CIT(A) ERRED - (I) IN DELETING THE ADDITION OF RS.2,92,55,763/- U/ S.68 THOUGH THE IDENTITY, CREDITWORTHINESS AND GENUINE OF THE TRANS ACTIONS WERE NOT PROVED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND FRESH EVIDENCE WERE ACCEPTED BY THE CIT(A) IN CONTRAVENTI ON TO RULE 46A, THOUGH THE A.O HAD NOT REFUSED ADMISSION OF TH E EVIDENCE OR THE ASSESSEE WAS NOT PREVENTED FROM ANY SUFFICIENT CAUSE FOR PRODUCING THE EVIDENCE, DURING THE ASSESSMENT PROCE EDINGS. (II) IN DELETING THE ADDITION U/S 40A(2)(B) OF RS.8 ,10,600/-THOUGH THE ASSESSEE HAD NOT PRODUCED ANY MATERIAL DURING THE C OURSE OF ASSESSMENT PROCEEDINGS TO PROVE ITS REASONABLENESS AND THE FRESH EVIDENCE PRODUCED DURING THE APPEAL PROCEEDIN GS WERE NOT REFUSED ADMISSION DURING THE COURSE OF THE ASSESSME NT PROCEEDINGS NOR THE ASSESSEE WAS PREVENTED BY SUFFI CIENT CAUSE FROM PRODUCING THE EVIDENCE DURING THE COURSE OF TH E ASSESSMENT PROCEEDINGS. (III) IN DELETING THE ADDITION OUT OF EXPENSES OF R S.5,06,04,368/-THOUGH NO DETAILS OF THE EXPENSES WERE PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE CIT(A) HAD ADMITTED FRESH EVIDENCE WHICH WAS IN CONTRAVENTION OF RULE 46A WHE REIN THE A.O. HAD NOT REFUSED ITS ADMISSION DURING THE COURS E OF ITA NO.44/AHD/2008 2 ASSESSMENT PROCEEDINGS AND THE ASSESSEE WAS NOT PRE VENTED BY SUFFICIENT CAUSE FROM ITS PRODUCTION DURING THE COU RSE OF ASSESSMENT PROCEEDINGS. 2. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR A LTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. 2 ADVERTING FIRST TO GROUND NO. 1(I) IN THE APPEAL, FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING LO SS OF RS.2,90,43,382/- FILED ON 17-10-2004 BY THE ASSESS EE COMPANY, ENGAGED IN MANUFACTURE AND EXPORT OF PARACETAMOL, AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 [H EREINAFTER REFERRED TO AS THE ACT], WAS SELECTED FOR SCRUTIN Y WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 6-07-2005 . SINCE T HE ASSESSEE DID NOT COMPLY WITH NOTICE U/S 143(2)/142(1) DATED 2.8. 2006 OR SUBSEQUENT SHOWCAUSE NOTICE DATED 17.11.2006 U/S 14 4(1) OF THE ACT, ASSESSMENT WAS COMPLETED EXPARTE ON THE BASIS OF MATERIAL ON RECORD. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER[ AO IN SHORT] NOTICED FROM THE B ALANCE SHEET AS ON 31-03-2004, INCREASE IN SECURED LOANS BY RS.2,67 ,41,566/- AND IN UNSECURED LOANS BY RS.25,14,197/-. IN THE ABSENC E OF ANY EVIDENCE, ESTABLISHING GENUINENESS OF THE LOANS, TH E AO ADDED THESE TWO AMOUNTS TOTALLING TO RS.2,92,55,763/- U /S 68 OF THE ACT. 3. ON APPEAL, THE ASSESSEE SUBMITTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED AND THE AUDIT REPOR T UNDER SECTION 44AB OF THE ACT FILED ALONG WITH THE RETURN REVEALED THE PAN N UMBER OF THE UNSECURED LOAN CREDITORS AND THE AMOUNTS WERE RECEIVED THROUGH CRO SSED CHEQUES. IN THE CASE OF SECURED LOANS, IT WAS CLEARLY MENTIONED THAT THE NET INCREASE WAS DUE TO INCREASE IN THE QUANTUM OF LOAN TAKEN FROM THREE BA NKS. THUS, THE ASSESSEE DISCHARGED ITS PRIMARY ONUS IN ESTABLISHING THE ID ENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE CREDITORS. IN THE LIGHT OF THESE SUBMISSIONS AND AFTER HAVING A REMAND REPORT FROM THE AO, THE LD. CIT(A) CONCLUD ED AS UNDER: ITA NO.44/AHD/2008 3 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE ID. A. R. AND THE FACTS OF THE CASE. THE ASSESSMENT WAS COMPLETED EX-PARTE U/S 144 ON THE GROUND THAT DETAILS RELEVANT TO THE ASSESSMENT WERE NOT FILED. ON THE OTHER HAND, THE APPELLANT STATES THAT ALL THE RELEV ANT DETAILS WERE FILED, BUT WERE NOT CONSIDERED BY THE AO. IN SUPPORT OF IT S CONTENTION, COPIES OF THE DOCUMENTS WERE FILED. THE VOLUMINOUS PAPER BOOK FILED BY THE ASSESSEE AT THE APPELLATE STAGE WAS FORWARDED TO TH E A.O. FOR COMMENTS. THE A.O. HAS NOT COMMENTED ON THE MERITS, BUT HAS STATED THAT NO FRESH EVIDENCE HAS BEEN FILED AT THE APPELL ATE STAGE AND THAT THE SAME MATERIAL WAS AVAILABLE AT THE ASSESSMENT STAGE ALSO. ACCORDINGLY, I PROCEED TO DECIDE THE ISSUES ON MERIT. 4.3 THE AO HAS DISALLOWED AN AGGREGATE OF RS.2,92,5 5,763/- U/S 68. THE BREAK UP THEREOF IS AS UNDER:- A SECURED LOANS . NAME OF THE LENDER CURRENT YEAR (RS.) PREVIOUS YEAR (RS.) 1.ANYONAYA CO-OP. BANK LTD. TERM LOAN .. 1,18,02,432 1,23,10,466 2.IDBI BANK LIMITED WORKING CAPITAL FACILITIES CASH CREDIT......... 5,73,24,882 2,94,17,673 3.BILLS PURCHASE/DISCOUNTED.. 41,60,000 1,01,63,884 4.IDBI FOREIGN BILLS (EXCLUDED IN SCH. 18). 11,91,015 24,10,218 5.STATE BANK OF HYDERABAD WORKING CAPITAL FACILITIES. 2,69,65,093 2,03,99,615 THE ABOVE DISCLOSURE IN THE BALANCE SHEET REVEALS THE FOLLOWING:- INCREASE IN BORROWING DECREASE IN BORROWING 1.ANYONAYA CO-OP. BANK LTD. - 5,08,034 2.IDBI BANK LIMITED 2,79,07,209 3.BILLS PURCHASE/DISCOUNTED.. 60,03,884 4.IDBI FOREIGN BILLS 12,20,203 ITA NO.44/AHD/2008 4 5.STATE BANK OF HYDERABAD 65,65,478 --------------- -------------- 3,44,72,687 77,32,121 NET INCREASE (A) RS.3,44,72,786 RS.77,32,121 = RS.2,67,41,566/- UNSECURED LOANS OP. BALANCE DEBIT CREDIT CLO. BALANCE FRIENDS & RELATIVES 332024 138706 NIL 193318 KOTAK MAHINDRA 47097 47097 NIL NIL ATUL N PANDYA 3150000 NIL NIL 3150000 KAMAL N PANDYA 1950000 NIL NIL 1950000 PANKAJ N PANDYA 1200000 NIL 600000 1800000 PENTACHEM INDUSTRIES NIL NIL 2100000 2100000 PRISM INTERNATIONAL 156364 ----------- NIL ------------ NIL ------------ 156364 ---------- 6835485 185803 2700000 9349682 ANNEXURE H OF THE TAX AUDIT REPORT SHOWS THE FOLLOW ING. NAME & ADDRESS PAN AMOUNT (RS. ) REMARKS 1. PANKAJ N PANDYA ACTPP3075B 6,00,000 BY CROSSE D CHEQUE 11, BUDDHADEV COLONY KARELIBAUG, BARODA 2.PENTACHEMINDUSTRIESABGPD9803K 21,00,000 BY CROSSE D CHEQUE 212/A, GIDC ESTATE NANDESARI, DIST. BARODA 4.4 SO FAR AS THE SECURED LOANS ARE CONCERNED, IT I S CLEARLY SEEN THAT THE ENTIRE INCREASE IS REPRESENTED BY NEW LOANS TAK EN FROM THREE BANKING INSTITUTIONS. HENCE THERE CANNOT BE ANY DOUBT REGAR DING EITHER THE IDENTITY OR THE CREDITWORTHINESS OF THE LOAN GIVERS OR THE GENUINENESS OF THE TRANSACTIONS. THIS FACT HAS ALSO BEEN CERTIFIED BY THE AUDITOR IN HIS REPORT. ACCORDINGLY, IT IS HELD THAT THE ASSESSEE H AD DISCHARGED ITS ONUS OF ESTABLISHING THE GENUINENESS OF THE SECURED LOAN S APPEARING IN ITS BOOKS. THE ADDITION OF RS.2,67,41,566/- IS THEREFOR E DIRECTED TO BE DELETED. ITA NO.44/AHD/2008 5 4.6.(ACTUALLY 4.5) SIMILARLY, THE ASSESSEE HAS FURN ISHED PAN NUMBERS OF THE LOANS GIVEN IN RESPECT OF UNSECURED LOANS. T HE AMOUNT HAS BEEN RECEIVED THROUGH BANKING CHANNELS BY WAY OF CROSSED CHEQUES. SHRI PANKAJ PANDYA IS A FORMER DIRECTOR OF THE COMPANY A ND IS BROTHER OF THE MANAGING DIRECTOR. CONFIRMATIONS HAVE ALSO BEEN FUR NISHED BY BOTH THE PARTIES. ACCORDINGLY, I AM OF THE OPINION THAT THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS OF ESTABLISHING THE IDE NTITY AND CREDITWORTHINESS OF THE CREDITORS, AND THE GENUINEN ESS OF THE TRANSACTIONS. NO MATERIAL HAS BEEN BROUGHT OUT TO S HOW THAT THE TRANSACTIONS WERE NON-GENUINE OR THAT THE LOANS TAK EN WERE FROM NON- EXISTENT PERSONS OR PERSONS OF NO SUBSTANTIAL MEANS . ACCORDINGLY, THE ADDITION OF RS.25,14,197/- IS DIRECTED TO BE DELETE D. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED D R SUPPORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF T HE ASSESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. THE ASSESSMENT IN THIS CASE WAS COMPLETED U/S 144 OF THE ACT. UNDISPUTEDLY AND AS POINTED OUT BY THE AO BEFORE THE LD. CIT(A), NO FRESH EVIDENCE HAD BEEN FILED AT THE AP PELLATE STAGE AND THE SAME MATERIAL WAS AVAILABLE AT THE ASSESSMENT STAGE ALSO . THEREFORE, THE ISSUE OF CONTRAVENTION OF RULE 46A OF THE IT RULES,1962, RAISED IN THE GROUND OF APPEAL IS BASELESS NOR THE LD. DR REFER RED US TO ANY DOCUMENT ADMITTED BY THE LD. CIT(A) IN CONTRAVENTI ON OF THE SAID RULE. AS IS APPARENT FROM THE FACTS OF THE CASE, SE CURED LOANS WERE RAISED FROM THE BANKS WHILE UNSECURED LOANS WERE RAISED FR OM THE AFORESAID COMPANY AND SHRI SHRI PANKAJ N PANDYA, A FORMER DIRECTOR OF THE COMPANY AND BROTHER OF THE MANAGING DIRECTOR. THE ASSESSEE FURNISHED TH EIR CONFIRMATIONS AS ALSO PAN AND THE AMOUNT WAS RECEIVED THROUGH CROSSED CHE QUES. THE AO DID NOT MAKE ANY FURTHER ENQUIRY WHILE COMPLETING BEST JUDG MENT ASSESSMENT NOR BROUGHT ANY MATERIAL ON RECORD IN SUPPORT OF HIS FI NDINGS . IN THESE CIRCUMSTANCES, THE LD. CIT(A) CONCLUDED THAT THE A SSESSEE DISCHARGED ITS PRIMARY ONUS OF ESTABLISHING THE IDENTITY AND CREDI TWORTHINESS OF THE CREDITORS, ITA NO.44/AHD/2008 6 AND THE GENUINENESS OF THE TRANSACTIONS. THERE IS NO MATERIAL ON RECORD TO CONCLUDE THAT THE TRANSACTIONS WERE NON-GENUINE OR THAT THE LOANS WERE RAISED FROM NON-EXISTENT PERSONS OR PERSONS OF NO SUBSTANT IAL MEANS. IN THE ABSENCE ANY MATERIAL , ENABLING US TO TAKE A DIFFERENT VIE W IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.1(I) IN THE APPEAL IS DISMISSED. 6. GROUND NO.1(II) RELATES TO AN ADDITION OF RS.8 ,10,600/-. THE AO NOTICED ON PERUSAL OF ANNEXURE-D TO THE AUDIT R EPORT THAT THE ASSESSEE PAID CONVERSION CHARGES OF RS.5,76,000- T O ITS ASSOCIATE CONCERN NAMELY M/S PARKSAN CHEMICALS PVT. LTD. IN WHICH DIRECTORS WERE INTERESTED BESIDES LEASE RENT OF RS .2,34,600/- TO PANKAJ N PANDYA (HUF) .SINCE THE ASSESSEE DID NOT F URNISH ANY REASONS AS TO WHY CONVERSION CHARGES HAD BEEN PAID NOR FURNISHED COPY OF AGREEMENT OF LEASE , THE AO DISALLOWED THE AFORESAID TWO AMOUNTS, REFERRING INTER ALIA, TO PROVISIONS OF SE C. 40A(2)(A) OF THE ACT. 7. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDITI ON WITH THE FOLLOWING OBSERVATIONS:- 5.1 IN APPEAL, IT WAS SUBMITTED THAT BOTH THE PAYM ENTS HAVE BEEN MADE FROM YEAR TO YEAR REGULARLY IN THE PAST. NO DI SALLOWANCE ON THIS ACCOUNT WAS EVER MADE IN THE PAST. THE PAYMENT TO M /S PARKSAN CHEMICALS PVT. LTD. IS MADE BY WAY OF CONVERSION CH ARGES FOR MAKING TABLETS. THE PAYMENT HAS BEEN MADE IN TERMS OF THE DRUGS PRICE CONTROL ORDER. THE RATE OF PAYMENT IS LOWER THAN THE RATE P RESCRIBED BY THE DRUGS PRICE CONTROL ORDER. HENCE THE PAYMENTS HAVE BEEN MADE AT ARMS LENGTH AND NO EXCESSIVE PAYMENT HAS BEEN MADE. SO FAR AS THE LEASE RENT IS CONCERNED, IT WAS SUBMITTED THAT THE PAYMENT WAS MADE BY WAY OF RENT FOR THE LAND ON WHICH THE FACTORY PREMI SES ARE SITUATED. THE PAYMENT HAS BEEN MADE SINCE THE TIME OF CONSTRUCTIO N OF THE FACTORY AND IS IN LINE WITH THE MARKET RATE PREVAILING IN THE L OCALITY. 5.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE ID. A. R. AND THE FACTS OF THE CASE. FOR MAKING A DISALLOWANCE U/S 40A(2)(B), IT IS NECESSARY THAT SOME MATERIAL SHOULD BE BROUGHT ON RECORD TO SHOW T HAT THE PAYMENT ITA NO.44/AHD/2008 7 WAS EITHER EXCESSIVE OR UNRELATED TO THE LEGITIMATE REQUIREMENTS OF THE BUSINESS. IN THE INSTANT CASE, THE BOOKS HAVE BEEN DULY AUDITED AND THE AUDITORS HAVE NOT POINTED OUT ANY EXCESSIVE OR UNRE ASONABLE PAYMENT. THE SAME PAYMENTS HAVE BEEN MADE IN THE PAST ALSO, WHICH HAVE BEEN ACCEPTED BY THE DEPARTMENT. THE PAYMENTS TO BOTH TH E PARTIES ARE AT ARMS LENGTH PRICE OR LOWER. ACCORDINGLY, I AM OF TH E OPINION THAT THE ADDITIONS AGGREGATING TO RS.8,10,600/- MADE BY THE A.O. WERE NOT JUSTIFIED. THE ADDITIONS ARE ACCORDINGLY DELETED. 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED D R SUPPORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF T HE ASSESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY AND AS POINTED OUT BY THE AO BE FORE THE LD. CIT(A), NO FRESH EVIDENCE HAD BEEN FILED AT THE APPELLATE STAGE AND THE SAME MATERIAL WAS AVAILABLE AT THE ASSESSMENT STAGE ALSO. THEREFORE, THE ISSUE OF CONTRAVENTION OF RULE 46A OF THE IT RULES, 1962, RAISED IN THE GROUND OF APPEAL IS BASELESS NOR THE LD. DR REFERRED US TO ANY DOCUMENT ADMITTED BY THE LD. CIT(A) IN CONTRAVE NTION OF THE SAID RULE. SIMILAR PAYMENTS ON ACCOUNT OF CONVERSI ON CHARGES AND LEASE RENT HAVE BEEN ALLOWED IN THE PRECEDING YEARS WHILE THE LD. CIT(A) CONCLUDED THAT THE PAYMENTS TO BOTH THE PARTIES WERE AT ARMS LENGTH PRICE OR LOWER. THERE IS NOTHING IN THE IMPUGNED ORDERS TO SUGGEST THAT P AYMENT TO THE AFORESAID PERSONS WAS EXCESSIVE OR UNREASONABLE, KEEPING IN V IEW THEIR FAIR MARKET VALUE. IT IS WELL SETTLED THAT THE PROVISIO NS OF SECTION. 40A(2)(A) OF THE ACT CANNOT HAVE ANY APPLICATION, UNLESS IT IS FIRST CON CLUDED THAT THE EXPENDITURE WAS EXCESSIVE OR UNREASONABLE, AS HELD IN THE CASE OF UPPER INDIA STEEL MANUFACTURING AND ENGINEERING CO. PRIVATE LIM ITED, 117 ITR 569(SC). IN THE CASE UNDER CONSIDERATION, THERE IS NO MATERIAL ON RECORD ON THIS ASPECT NOR THE AO EVEN CITED ANY COMPARABLE INSTANCES IN RESP ECT OF THE FAIR MARKET VALUE OF THE GOODS/SERVICES FOR WHICH THE PAYMENT HAD BE EN MADE, BEFORE CONCLUDING THAT EXPENDITURE WAS EXCESSIVE OR UNREA SONABLE.IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY ITA NO.44/AHD/2008 8 MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIE W IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.1(II) IS DISMISSED . 10. GROUND NO.1(III) RELATES TO AN ADDITION OF RS.5 ,06,04,368/-. SINCE THE ASSESSEE DID NOT FURNISH DETAILS OF EXPEN SES CALLED FOR IN TERMS OF QUESTIONNAIRE DATED 2.8.2006 , KEEPING IN VIEW THE FACT THAT DISALLOWANCE WAS MADE ON ACCOUNT OF DEFERRED T AX, PURCHASES, TELEPHONE EXPENSES, VEHICLE EXPENSES, COMMISSION, P ROFESSIONAL CHARGES, FACTORY EXPENSES, FOREIGN TOUR, SELLING EX PENSES, SUNDRY FEES IN THE ASSESSMENTS FOR THE AYS 2002-03 AND 2003-04, THE AO DISALLOWED 30% OF EXPENSES CLAIMED BY THE ASSES SEE BY WAY OF MATERIAL COST, PERSONNEL EXPENSES, OPERATING AND OTHER EXPENSES AND INTEREST, RESULTING IN DISALLOWANCE OF RS.5,06,04,368/-. 11. ON APPEAL, THE ASSESSEE CONTENDED THAT ALL THE NECESSARY DETAILS HAD BEEN FILED AT THE ASSESSMENT STAGE ITSELF AND T HE EXPENSES WERE CONSISTENT WITH THE TRENDS IN THE EARLIER YEARS. A COMPARATIVE CHART SHOWING SUCH EXPENSES FOR AYS 2002-03, 2003-04 AND 2004-05 WAS ALSO FILED BEFORE THE LD. CIT(A).IN THE LIGHT OF THESE SUBMISSIONS, THE LD. CIT(A) CONC LUDED AS UNDER: 8.2 I HAVE CONSIDERED THE SUBMISSIONS AND THE FACT S OF THE CASE. THE PRIMARY ONUS OF PROVING THE CORRECTNESS OF THE FIGU RES IN THE RETURN OF INCOME LIES ON THE ASSESSEE. THE ASSESSEE MUST SUBS TANTIATE THE FIGURES WITH DOCUMENTARY EVIDENCE. THE REPORT OF TH E AUDITOR IN FORM NO. 3CD WOULD CONSTITUTE GOOD EVIDENCE IN THIS REGARD. WHEN THE ASSESSEE HAS FILED THE TAX AUDIT REPORT, IT CAN BE SAID THAT IT IS DISCHARGED ITS PRIMARY ONUS OF SUBSTANTIATING THE CORRECTNESS OF T HE FIGURES IN ITS RETURN OF INCOME. IN ORDER TO MAKE AN ADDITION ON THE GROU ND OF INCORRECTNESS OF EXPENSES CLAIMED, IT IS INCUMBENT ON THE AO TO BRIN G OUT MATERIAL TO SHOW THAT THE CLAIM OF THE ASSESSEE WAS BOGUS OR IN CORRECT. IN SUCH A SITUATION, THE BURDEN WOULD LIE ON THE A.O. TO DISP ROVE THE CLAIM OF THE ASSESSEE. IN THE INSTANT CASE, THE AUDIT REPORT HAS BEEN DISBELIEVED AND DISREGARDED BY THE A.O. WITHOUT BRINGING OUT MATERI AL TO SHOW THAT THE FIGURES OF EXPENSES REFLECTED IN THE BOOKS WERE INC ORRECT. MOREOVER, FROM THE ANALYSIS OF THE PROFIT AND LOSS ACCOUNT, IT IS SEEN THAT THE MATERIAL ITA NO.44/AHD/2008 9 COST, PERSONNEL COST, OPERATING & OTHER EXPENSES, I NTEREST AND GROSS PROFIT HAS SHOWN THE FOLLOWING TREND: PARTICULARS A.Y. 2002- 03 A.Y. 2003- 04 A.Y.2004-05 MATERIAL COST 71.59% 77.54% 75.5% PERSONNEL COST 2.40% 3.25% 3.71% OPERATING & OTHER EXPENSES 9.39% 14.08% 13.26% INTEREST 5.55% 7.18% 3.14% GROSS PROFIT 28.54% 17.64% 27.26% 8.3 THERE IS CONSISTENCY IN THESE FIGURES AND THERE ARE NO SIGNIFICANT DIFFERENCES WHICH COULD MERIT THE ADDITION AS MADE BY THE A.O. ACCORDINGLY, I AM OF THE OPINION THAT THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADDITIONS TOTALLING TO RS.5,06,04,368/-, WHICH ARE DIRECTED TO BE DELETED. 12. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED D R SUPPORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF T HE ASSESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY AND AS POINTED OUT BY THE AO BE FORE THE LD. CIT(A), NO FRESH EVIDENCE HAD BEEN FILED AT THE APPELLATE STAGE AND THE SAME MATERIAL WAS AVAILABLE AT THE ASSESSMENT STAGE ALSO. THEREFORE, THE ISSUE OF CONTRAVENTION OF RULE 46A OF THE IT RULES, 1962, RAISED IN THE GROUND OF APPEAL IS BASELESS NOR THE LD. DR REFERRED US TO ANY DOCUMENT ADMITTED BY THE LD. CIT(A) IN CONTRAVE NTION OF THE SAID RULE. WE FIND THAT SIMILAR EXPENDITURE BY WAY OF MATERIAL COST, PERSONNEL EXPENSES, OPERATING AND OTHER EXPENSES AN D INTEREST ITA NO.44/AHD/2008 10 HAD BEEN ALLOWED IN THE PRECEDING YEARS WHILE GENUI NENESS OF THE EXPENDITURE IN THE YEAR UNDER CONSIDERATION HAS NOWHERE BEEN DO UBTED NOR IT HAS BEEN CONCLUDED THAT EXPENDITURE WAS EXCESSIVE OR UNREAS ONABLE. THERE IS NO BASIS FOR ADHOC DISALLOWANCE OF 30 % OF THE TOTAL EXPENDI TURE AT ALL. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIE W IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, GROUND NO.1(III) IS ALSO DISMISSED . 14. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERM S OF RESIDUARY GROUND NO.2 IN THE APPEAL, ACCORDINGLY, THIS GROUND IS DISMISSED. 15. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 24 -09-2010 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 24 -09-2010 COPY OF THE ORDER FORWARDED TO: 1. M/S PAN DRUGS LIMITED, 167/168, GIDC ESTATE, NAN DESARI, BARODA 2. DCIT, CIRCLE-4, BARODA 3. CIT CONCERNED 4. CIT(A)-III, BARODA 5. DR, BENCH-A, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD ITA NO.44/AHD/2008 11
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