I.T.O.-3(2), Mathura V. M/s Garg Industries (P) Ltd., Mathura

ITA 465/AGR/2012

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0621 (ITAT-AGRA)
• Duration Of Justice: 6 year(s) 7 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 04-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAHIB P SATSANGE
• Keywords: Unexplained investment; Commercial expediency; Set aside
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NOS.465 & 532/AGRA/2012 ASSESSMENT YEARS: 2008-09 & 2009-10 RESPECTIVELY INCOME TAX OFFICER 3(2), VS. M/S GARG INDUSTRIE S (P) LTD., MATHURA. 747, DAMPIER NAGAR, MATHURA. (PAN : AAACN 1921 G). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI WASEEM ARSHAD, SR. D.R. RESPONDENT BY : SHRI SAHIB P. SATSANGE, C.A. DATE OF HEARING : 25.03.2013 DATE OF PRONOUNCEMENT : 04.04.2013 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THESE ARE APPEALS FILED BY THE REVENUE AGAINST TWO DIFFERENT ORDERS DATED 23.03.2012 & 31.05.2012 PASSED BY THE LD. CIT(A)-I, AGRA FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 RESPECTIVELY. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- ITA NO.465/AGRA/2012 FOR A.Y. 2008-09 2 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 1) THAT THE LD. CIT(A) HAS ERRED IN LAW AND IN FAC TS IN MAKING DELETION OF RS.4,97,152/- IN RESPECT OF DISCREPANCY FOUND IN THE STOCK DURING THE COURSE OF SURVEY U/S 133A AT THE BUSINES S PREMISES OF THE ASSESSEE IGNORING THE GROUNDS OF THE ADDITION EXPLA INED BY THE AO TAKING THE PLEA THAT STOCK WAS DONE ON THE ESTIMATE BASIS AND NOT BY ADOPTING THE WEIGHT MEASURE METHOD. 2) THAT THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT S IN DELETING THE ADDITIONS OF RS.27,84,840/- IGNORING THE MARKET SCRAP RATE OF THE SAMPLE PLACED BEFORE HIM ON WHICH HE DIRECTED THE A O TO VERIFY THE MARKET RATE OF THE SAID SAMPLE OF SCRAP AND AS PER REMAND REPORT DATED 14.02.2012 THE MARKET RATE OF THE SAID SAMPLE WAS RS.5/- TO RS.6/- PER KG. I.E RS.5,000/- TO RS.6,000/- M.T. ON TOTAL SALE OF 232.070 M.T. IRON SCRAP AND LD. CIT(A) ACCEPTED THE MARKET RATE OF THE SAMPLE @ 2/- PER KG. I.E. RS.2,000/- M.T. AND T HUS APPLYING RS.5,000/- TO RS.6,000/- PER M.T. ON TOTAL SALE OF 232.070 M.T. AT LEAST RS.6,96,210/- OR RS.9,28,280/- ADDITION OUT OF TOTA L RS.27,84,840/- SHOULD HAVE BEEN SUSTAINED. 3) THAT THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT S IN DELETING THE ADDITIONS OF RS.27,60,000/- AS INTEREST CHARGEABLE ON THE ADVANCES/SECURITIES AMOUNTING TO RS.2,30,00,000/- G IVEN TO THE FOUR LANDLORDS OUT OF THE TOTAL ADDITION RS.42,69,552/- WHICH WAS INTEREST CHARGEABLE ON A/C OF THE ADVANCES/SECURITIES TO THE FOUR LANDLORDS AND SUNDRY CREDITORS RELATED TO THE BUSINESS. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD OR DELETE OR ALTER OR MODIFY ANY ONE OR MORE GROUND(S) OF APPEAL DURING T HE APPELLATE PROCEEDINGS. 5. THAT THE ORDER OF THE CIT(A)-1 AGRA DATED 31.03. 2012, BEING ERRONEOUS IN LAW AND ON FACTS BE SET ASIDE AND THAT THE ORDER DATED 22.12.2006 OF THE ASSESSING OFFICER BE RESTORED. 3 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 ITA NO.532/AGRA/2012 FOR A.Y. 2009-10 1. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN L AW IN DELETING THE ADDITION OF RS.2,94,240/- IGNORING THE MARKET RATE OF THE IRON SCRAP. 2. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LA W IN DELETING THE ADDITION OF RS.27,60,000/- AS INTEREST CHARGEABLE O N THE ADVANCES/SECURITIES AMOUNTING TO RS.2,30,00,000/- G IVEN TO THE FOUR LANDLORDS WHICH WAS INTEREST CHARGEABLE ON A/C OF T HE ADVANCES/SECURITIES TO THE FOUR LANDLORDS WHO ARE F AMILY MEMBERS OF THE DIRECTORS OF THE ASSESSEE AND SISTER CONCERNS O F THE ASSESSEE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR DELETE OR ALTER OR MODIFY ANY ONE OR MORE GROUND(S) OF APPEAL DURING T HE APPELLATE PROCEEDINGS. 4. THAT THE ORDER OF THE CIT(A)-1 AGRA DATED 31.03. 2012, BEING ERRONEOUS IN LAW AND ON FACTS BE SET ASIDE AND THAT THE ORDER DATED 22.12.2006 OF THE ASSESSING OFFICER BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF DEALING IN VARIOUS TYPES OF SCRAPS. A SURVEY UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) WAS CARRIED O N 11.01.2008. AS PER THE SURVEY REPORT, DISCREPANCY IN STOCK WAS FOUND. DUR ING THE ASSESSMENT PROCEEDINGS FOR A.Y. 2008-09, THE A.O., AFTER CONSIDERING THE D ISCREPANCY REPORT IN THE SURVEY REPORT AND OTHER INFORMATION COLLECTED, MADE ADDITI ON ON ACCOUNT OF DISCREPANCY IN STOCK OF RS.4,97,152/-. THE SAID ADDITION COMPRISE S TWO PARTS, RS.4,54,662/- IS ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK AS EXCES S STOCK WAS FOND IN SOME CASES AND RS.42,490/- IS IN RESPECT OF PROFIT OF SOME ITE MS WHICH WERE FOUND SHORT. THE 4 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 A.O. HAS GIVEN THE DETAILS OF VARIOUS ITEMS OF SCRA P AS PER BOOKS OF ACCOUNT AND AS PER PHYSICAL STOCK FOUND AT THE TIME OF SURVEY. TH E DERAILED CHART IS GIVEN BY THE A.O. AT PAGE NOS.1 & 2 OF HIS ORDER. BEFORE THE A. O. THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STOCK TAKING BY THE SURVEY TEAM. IT WAS SUBMITTED THAT PHYSICAL SOCK WAS NOT POSSIBLE AS NATURE OF BUSINESS IS SUCH INVOLVING VARIOUS TYPES OF SCRAPS. THE A.O. REJECTED THE ASSESSEES CONTENTIO N AS THE ASSESSEE HAS FAILED TO PRODUCE THE STOCK REGISTER. THE A.O. CALCULATED EX CESS SOCK OF RS.4,54,662/- WHICH WAS FOUND DURING THE COURSE OF SURVEY. THE S HORTAGE OF STOCK IS RS.18,71,831/-. THE A.O. CONSIDERED IT AS SOLD OUT OF BOOKS OF ACCOUNT AND AFTER TAKING G.P. RATE OF 2.27%. THE A.O. COMPUTED THE U NACCOUNTED INCOME/PROFIT OF RS.42,490/-. THUS, THE A.O. MADE ADDITION OF RS.4, 97,152/- (42,490 + 4,54,662). 4. THE CIT(A) HAS DELETED THE SAID ADDITION AFTER M AKING DETAILED DISCUSSION IN HIS ORDER. 5. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. THE CIT(A) WHILE GIVING HIS FINDING RECORDED THE FA CT THAT THE SURVEY WAS CONDUCTED IN TWO GROUPS SIMULTANEOUSLY, ONE IS N.D. METAL INDUSTRIES GROUP CONTROLLED BY SHRI AJAY GARG AND SECOND IS GARG IND USTRIES GROUP CONTROLLED BY SHRI SHYAM AGARWAL. BOTH THESE TWO GROUPS WERE DEA LING IN METAL SCRAP. THE 5 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 STOCK TAKING OF DIFFERENT TYPES OF METAL SCRAPS HAV E BEEN DONE FOR BOTH THE GROUPS BY THE SAME SURVEY TEAM COMPUTING EXCESS AND SHORTA GE OF STOCK ON THE BASIS OF PHYSICAL STOCK TAKING DONE ON THE DATE OF SURVEY AN D WHAT WAS RECORDED IN THE BOOKS OF ACCOUNT. IN THE FIRST GROUP, THERE ARE TW O COMPANIES, M/S. N.D. METAL INDUSTRIES LIMITED AND M/S SPRING MERCHANDISERS (P) LTD. FOR WHICH STOCK TAKING HAS BEEN DONE AND ON THE BASIS OF SUCH STOCK TAKING IN CASE OF THESE TWO COMPANIES THE A.O., MATHURA HAS COMPLETED THEIR ASSESSMENT UN DER SECTION 143(3) OF THE ACT IN THE SAME MANNER MAKING THE SIMILAR ADDITION FOR EXCESS STOCK AS UNEXPLAINED INVESTMENT AND FOR SHORTAGE OF STOCK AS SALE OUTSID E THE BOOKS OF ACCOUNT. THE CIT(A) NOTED THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE THEN CIT(A). IN THOSE CASES, IT WAS ASKED TO THE A.O. TO PROVIDE DETAILS OF STOCK TAKING DONE AS THE ASSESSEES COUNSEL QUESTIONED THE CORRECTNESS AND A CCURACY OF THE METHOD ADOPTED IN THOSE TWO CASES. THE A.O. ONLY STATED THAT THE PHYSICAL STOCK WAS TAKEN METICULOUSLY BUT HE COULD NOT EXPLAIN HOW BASIS OF METICULOUSLY STOCK TAKING WAS DONE BY THE SURVEY TEAM. IT WAS RECORDED THAT CLOS ING STOCK WAS TAKEN ON THE BASIS OF APPROXIMATE WEIGHT. THE CIT(A) NOTICED THAT THE SAME SURVEY TEAM TAKING STOCK TAKING IN CASE OF M/S. N.D. METAL INDUSTRIES GROUP WAS INVOLVED IN DOING THE STOCK TAKING IN CASE OF THE ASSESSEE AND SIMILAR ME THOD WAS ADOPTED. THE CIT(A) NOTED THAT THIS FACT HAS ALSO BEEN CORROBORATED FRO M THE LETTER DATED 14.01.2008 WRITTEN BY SHRI SHYAM AGARWAL IMMEDIATELY AFTER SUR VEY IN WHICH HE POINTED OUT 6 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 THAT INVENTORY OF STOCK TAKEN DURING SURVEY WAS NOT PROVIDED TO HIM AND THE INVENTORY OF STOCK WAS TAKEN DURING A SHORT PERIOD OF TIME ON ESTIMATE BASIS WITHOUT ANY ACTUAL COUNT OR WEIGHING MEASUREMENT. THE CIT(A) CAME TO THE CONCLUSION THAT THE METHOD ADOPTED FOR STOCK TAKING WAS APPROXIMATE METHOD. THE A.O. COULD NOT PROVIDE ANY EVIDENCE TO ESTABLISH TH AT AN ACCURATE METHOD OF PHYSICAL WEIGHING OF EACH ITEM OF SOCK WAS FOLLOWED FOR STOCK TAKING. THE CIT(A) HAS CONFIRMED THAT THE STOCK TAKING WAS DONE ON EST IMATE BASIS. THE CIT(A) NOTED THAT THE A.O. PASSED THE ASSESSMENT ORDER DESPITE A SPECIFIC OBJECTION WAS RAISED BY THE ASSESSEE. THE CIT(A) WHILE DELETING THE ADD ITION ACCEPTED THE ASSESSEES CONTENTION THAT ALL THE SALES AND PURCHASES OF THE ASSESSEE ARE FULLY VOUCHED AND DULY SUPPORTED BY STOCK ENTRIES AND THERE IS NOTHIN G BROUGHT ON RECORD DESPITE THE SURVEY CONCLUDED THAT THE ASSESSEE WAS INDULGING IN ANY OUT OF BOOKS ACTIVITIES. THE A.O. DID NOT FIND ANY DOCUMENTARY EVIDENCE EITH ER COLLECTED DURING SURVEY OR COLLECTED DURING POST SURVEY ENQUIRIES SHOWING THAT THE ASSESSEE WAS INDULGING IN ANY OUT OF BOOK SALE OR PURCHASES. THE CIT(A) FINA LLY DELETED THE ADDITION AS UNDER:- (PARAGRAPH NO.6.10, PAGE NOS.21 & 22) 6.10 WITH ALL THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INSTANT APPEAL AS DISCUSSED SO FAR, IN THIS CASE AL SO, IT HAS BEEN APPARENTLY FOUND THAT THE WEIGHT OF STOCK OF ALL IT EMS SHOWN IN THE CHART OF THE STOCK TAKING AS MADE IN THE SURVEY REP ORT AND REPRODUCED IN THE ASSESSMENT ORDER ARE APPROXIMATE WEIGHT RECO RDED ON ESTIMATE BASIS AS CONTENDED BY THE LD. AR BEFORE ME. THE AC CURACY OF SUCH 7 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 APPROXIMATE WEIGHT OF STOCK CANNOT BE CONSIDERED TO BE VERY HIGH. THE LD. AR IN A CHART SUBMITTED ALONG WITH HIS REJO INDER HAS SHOWN THAT THE SHORTAGE AND EXCESS OF THE STOCK OF CERTAI N ITEMS WHICH HAS BEEN COMPUTED ON ESTIMATE BASIS ARE WITHIN PERMISSI BLE LIMIT BEING LESS THAN 10% EXCEPT IN CASE OF F. OIL AND IRON SCR AP WHICH IS IN SHORTAGE OF 14.28% AND 10.82% RESPECTIVELY BUT IN T ERMS OF VALUE, SUCH SHORTAGE IS OF VERY SMALL AMOUNT BEING OF RS.1 8,140/- AND RS.1,838/- ON WHICH, IF ANY, UNACCOUNTED PROFIT IS COMPUTED, IT WOULD TO BE OF VERY NOMINAL AMOUNT. THEREFORE, I FIND THA T THE LD. AR IS JUSTIFIED IN HIS ARGUMENT THAT IN CASE OF THE BUSIN ESS OF THE ASSESSEE IN WHICH VOLUME OF TURNOVER AND STOCK ARE VERY HIGH, T HE DIFFERENCE OF STOCK POINTED OUT BY THE SURVEY PARTY IS INSIGNIFIC ANT AND IMMATERIAL SPECIALLY IN THE LIGHT OF THE FACT THAT SUCH STOCK TAKING WAS DONE WITHOUT DOING THE PHYSICAL WEIGHMENT AND THE WEIGHT HAS BEEN COMPUTED ON ESTIMATE BASIS AND CONSIDERING THESE FA CTS, I DO NOT FIND THAT THE AO IS JUSTIFIED IN MAKING ADDITION FOR STO CK SHOWN IN EXCESS IN CASE OF SOME ITEMS AND IN SHORTAGE IN CASE OF SOME OTHER ITEMS IN THE CHART PREPARED BY THE DDIT (INV.) IN THE SURVEY REP ORT WITHOUT PROVIDING DETAILS OF STOCK TAKING. THEREFORE, UNDE R THE SAME FACTS AND CIRCUMSTANCES AS IT WAS FOUND IN CASE OF M/S. N.D. METAL INDUSTRIES LTD. AND M/S SPRING MERCHANDISERS (P) LTD. AS DISCU SSED IN THEIR RESPECTIVE APPEAL ORDERS PASSED BY ME, IN WHOSE CAS E SURVEY WAS CONDUCTED SIMULTANEOUSLY, I DELETE THE ADDITION OF RS.4,54,662/- ON ACCOUNT OF EXCESS STOCK AND RS.42,490/- ON ACCOUNT OF SHORTAGE OF STOCK. ACCORDINGLY, GROUND NO.3 IS ALLOWED. 6. FROM THE ABOVE OBSERVATION OF THE CIT(A) WE NOTI CE THAT THE CIT(A) HAS ALSO EXAMINED THE ISSUE FROM A DIFFERENT ANGLE THAT CONSIDERING THE NATURE OF BUSINESS AND THE STOCK TAKING ON ESTIMATION BASIS, THE 10% DIFFERENCE IS PERMISSIBLE DIFFERENCE EXCEPT IN CASE OF F. OIL AN D IRON SCRAP IN WHICH SHORTAGE IS 14.28% AND 10.82% RESPECTIVELY. THE CIT(A) NOTED T HAT SUCH SHORTAGE IS OF VERY SMALL AMOUNT BEING OF RS.18,140/- AND RS.1,838/-. AFTER CONSIDERING TOTALITY OF THE 8 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 FACTS OF THE CASE, WE NOTICE THAT IN CASE OF ADDITI ON ON ACCOUNT OF EXCESS STOCK FOUND AT THE TIME OF SURVEY, A BASIC FORMULA IS THA T THE PHYSICAL STOCK MUST BE PHYSICALLY COUNTED IN QUANTITY AND THE SAME IS REQU IRED TO BE COMPARED WITH THE QUANTITY SHOWN IN THE BOOKS OF ACCOUNT. WE NOTICE THAT IN THE CASE UNDER CONSIDERATION, THE SURVEY TEAM AS WELL AS THE A.O. BOTH HAVE FAILED TO APPLY THIS FORMULA. THE SURVEY TEAM AND THE A.O. BOTH HAVE TA KEN THE PHYSICAL STOCK ON THE BASIS OF ESTIMATION AND SUCH STOCK TAKEN ON ESTIMAT ION CANNOT BE COMPARED WITH BOOKS OF ACCOUNT FOR MAKING ADDITION ON ACCOUNT OF EXCESS STOCK. FURTHER, THERE IS NO EVIDENCE THAT ASSESSEE CARRIED BUSINESS OUT OF B OOKS OF ACCOUNT. IN THE LIGHT OF DETAILED DISCUSSIONS MADE BY THE CIT(A), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ORDER OF CIT(A) ON THE ISSUE IS CONFIRM ED. 7. THE SECOND GROUND IS IN RESPECT OF ADDITION OF R S.27,84,840/-. DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE SOLD 232.00 M.T. OF IRON SCRAP @ RS.2000/- PER M.T. TO ITS SISTER CONCERN M/S. BERG TRADING PVT. LTD. WHICH HAS BEEN FOUND BY HIM AT LESSER RATE. THE A.O. MADE ENQUIRY TO COMPARE THE CASE OF THE ASSESSEE WI TH ANOTHER CASE OF M/S. BABU LAL BAJAJ IRON FOUNDRY AND FOUND THAT THE SALE OF I RON SCRAP WAS AT RS.14,000/- PER M.T. TO RS.20,000/- PER M.T. THE A.O. AFTER CONSID ERING THE ASSESSEES EXPLANATION CAME TO THE CONCLUSION THAT THE ASSESSE E SOLD THE IRON SCRAP TO ITS SISTER 9 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 CONCERN AT A RATE BELOW THE MARKET RATE TO BENEFIT ITS SISTER CONCERN AND LATER THIS SISTER CONCERN NAMED M/S BERG TRADING PVT. LTD. SOL D THESE SCRAP AS CASH SALE AFTER THEY WERE PURCHASED FROM THE ASSESSEE AND THUS CONC EALED THE PROFIT EARNED FROM THE ORIGINAL PRICE OF THE SCRAP. THE A.O. COMPUTED THE AMOUNT OF ADDITION ON 232.07 M.T. APPLYING RATE OF RS.12,000/- PER M.T. O F WHICH CALCULATION COMES TO RS.27,84,840/-. THE CIT(A) DELETED THE SAID ADDITI ON. BEFORE DELETING THE ADDITION THE CIT(A) MADE A DETAILED DISCUSSION AND FOUND THA T THE ASSESSEE HAS SOLD THE GOODS IN DAMAN AFTER BEING DERIVED FROM ITS MANUFAC TURING UNIT OF COPPER INGOT TO ITS SISTER CONCERN M/S BERG TRADING LIMITED AT RS.2 /- PER KG. PLUS TAXES AND FROM WHERE THESE SCRAP GETTING TRANSPORTED TO MATHURA BY M/S BERG TRADING LIMITED AND BEING SOLD AT RS.4.5 PER KG IN NORTH INDIA AND THE PROFIT EARNED BY BOTH COMPANIES ON SUCH SALE OF IRON SCRAP SHOWN BY THEM IN PAST AS SESSMENT YEARS WAS ACCEPTED BY THE DEPARTMENT WITHOUT DISTURBING THEIR TRADING RES ULTS. THE CIT(A) FURTHER NOTED THAT IN THE YEAR UNDER CONSIDERATION, NO EVIDENCE O F SELLING OF THE IRON SCRAP BY THE ASSESSEE AT A RATE MORE THAN WHAT IT HAD SHOWN IN T HE BOOKS OF ACCOUNT HAS BEEN COLLECTED EITHER BY THE A.O. OR BY THE INVESTIGATIO N WING IN SURVEY. THE CIT(A) EXAMINED THE ISSUE IN DETAIL AFTER CALLING THE REMA ND REPORT FROM THE A.O. THE CIT(A) NOTED THAT THE RATE OF RS.14,000/- PER M.T. ADOPTED BY THE A.O. FOR SALE OF IRON SCRAP TO DETERMINE THE EXTRA UNACCOUNTED INCOM E EARNED BY THE ASSESSEE AT RS.27,84,840/- WAS FOUND TO BE INCORRECT BECAUSE SU CH RATES WERE NOT FOUND 10 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 APPLICABLE FOR PIG IRON SCRAP AS CLEARLY ADMITTED B Y THE A.O. IN HIS REMAND REPORT DATED 14.02.2012 AND IT IS UNDISPUTED FACT THAT THE ASSESSEE WAS NOT DEALING IN PIG IRON SCRAP BUT IN RESIDUAL IRON SCRAP EXTRACTED FRO M UNDERGROUND CABLES. FOR SUCH IRON SCRAP, THE MARKET RATE AS INFORMED BY THE A.O. IN THE REMAND REPORT WAS FOUND TO BE RS.5/- TO 6/- PER KG. THE CIT(A) NOTED THAT SIMILAR RATES HAVE BEEN INFORMED TO OTHER DEALERS VIDE LETTER DATED 06.02.2012. THE CIT(A) HAS ALSO APPRECIATED THE ASSESSEES SUBMISSION AND EXPLAINED THAT FOR THE R ESIDUAL IRON SCRAP THERE WAS NO MARKET IN THE VICINITY OF DAMAN AREA AND VERY FEW P URCHASERS ARE AVAILABLE TO PURCHASE SUCH TYPE OF MATERIALS AND THE MARKET OF T HIS TYPE OF WASTE EXISTS PRIMARILY IN NORTH INDIA AND HENCE AS PER THE ASSES SEE IN ITS BEST BUSINESS INTEREST HAS SOLD THIS WASTE THROUGH M/S BERG TRADING PVT. L TD. IN NORTH INDIA. THE CIT(A) ALSO APPRECIATED THE CONTENTION OF THE ASSESSEE THA T M/S. ERG TRADING PVT. LTD. IS AN INDEPENDENT TRADING UNIT AND SINCE 1992 IS ENGAGED IN THE TRADING OF DIFFERENT KINDS OF FERROUS AND NON-FERROUS METAL. THE CIT(A) NOTED THAT THE ASSESSMENT OF M/S. BERG TRADING PVT. LTD. FOR A.Y. 2002-03, 2003-04, 2 004-05, 2006-07 AND 2008-09 HAVE BEEN COMPLETED UNDER SECTION 143(3) OF THE ACT WHERE THE TRADING RESULTS OF M/S. BERG TRADING PVT. LTD. WERE ACCEPTED. THE CIT (A) HAS ALSO NOTED THAT IN A.Y. 2005-06 SIMILAR ISSUE HAS BEEN ADJUDICATED AND FOUND THAT THE RATE OF SALE OF SCRAP SHOWN BY THE ASSESSEE WAS NOT QUESTIONED. TH E CIT(A) HAS ALSO NOTED THAT THE DURING THE SURVEY NO SUCH EVIDENCE WAS FOUND IN SPITE OF RAISING SPECIFIC 11 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 QUESTION TO THE ASSESSEE. THE STATEMENT OF SHRI SH YAM AGARWAL DATED 31.03.2008 IN POST-SURVEY ENQUIRY WHEREIN THE QUESTION NO.10 A ND ITS REPLY REPRODUCED BY THE CIT(A) AS UNDER:- Q.10. AT PRESENT IN THE MARKET, RATES OF IRON SCR AP ARE OF RS.14/- PER KG HOWEVER, YOUR SALES PRICES ARE OF RS.2/- PER KG. HOW DO YOU JUSTIFY ? ANS. THE MATERIAL WHICH YOUR HONOUR HAS POINTED OU T IS IN THE NATURE OF PURE IRON SCRAP AND IN THE FORM OF HEAVY MELTING SCRAP, FREE FROM ALL IMPURITIES. WHILE THE MATERIAL WHICH IS DERIVE D DURING THE PROCESS OF CABLE SCRAP IS NOT THE HEAVY MELTING SCRAP. IT IS IRON SCRAP IN SMALL PIECES HAVING HEAVY MUD, COAL TAR AND RUSTED. THIS IS BECAUSE THE CABLE SCRAP IS LYING UNDER THE GROUND WHICH CAUGHT THESE TYPE OF IMPURITIES, THEREFORE, THE SCRAP OF SUCH TYPES CANN OT BE COMPARED WITH THE NORMAL HEAVY MELTING SCRAP. IT IS VALUE LESS I TEM BUT WE GOT SOME PRICE WHICH IS DULY BEING REFLECTED IN THE BOOKS OF ACCOUNT. 8. THE CIT(A) RELIED UPON THE JUDGEMENT OF RADHA SW AMI SATSANG VS. CIT, 193 ITR 321 (SC) AND HELD THAT IN ABSENCE OF ANY FR ESH EVIDENCE AGAINST THE TRADING RESULT SHOWN BY THE ASSESSEE, THE APPOSITIO N OF TRADING RESULT AS ACCEPTED BY THE DEPARTMENT IN EARLIER YEARS SHOULD NOT BE CHANG ED. THE CIT(A) DELETED THE ADDITION FINALLY AS UNDER :- (PARAGRAPH NO.7.7) 7.7 AFTER CONSIDERING ALL THE FACTS AS DISCUSSED A BOVE RELATING TO SALE OF IRON SCRAP BEING RESIDUAL IRON SCRAP EXTRAC TED FROM UNDERGROUND CABLE AND SOLD BY THE ASSESSEE (APPELLA NT) IN DAMAN AFTER BEING DERIVED FROM ITS MANUFACTURING UNIT OF COPPER INGOT TO ITS SISTER CONCERN M/S BERG TRADING LTD. AT RS.2/- PER KG (+) TAXES AND FROM WHERE THESE SCRAP GETTING TRANSPORTED TO MATHU RA BY M/S BERG TRADING LIMITED AND BEING SOLD AT RS.4.5 PER KG (+) TAXES IN NORTH INDIA AND THE PROFIT EARNED BY BOTH THE COMPANIES O N SUCH SALE OF IRON 12 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 SCRAP SHOWN BY THEM IN PAST ASSESSMENT YEARS BEING ACCEPTED BY THE DEPARTMENT WITHOUT DISTURBING THEIR TRADING RESULTS AND IN THIS ASSESSMENT YEAR UNDER APPEAL, NO EVIDENCE OF SELLIN G OF THE IRON SCRAP BY THE ASSESSEE (APPELLANT) AT A RATE MORE THAN WHA T IT HAS SHOWN IN THE BOOKS OF ACCOUNT HAS BEEN COLLECTED EITHER BY T HE A.O. OR BY THE INVESTIGATION WING IN SURVEY, IN MY CONSIDERED OPIN ION, UNACCOUNTED PROFIT OF THE ASSESSEE CANNOT BE COMPUTED JUST ON T HE BASIS OF SOME INCOMPARABLE RATES OF SALE OF SCRAP COLLECTED BY TH E A.O. IN MATHURA. THEREFORE, I DELETE THE ADDITION OF RS.27,84,840/- MADE BY THE A.O. IN THIS RESPECT AND GROUND NO.4 IS ALLOWED. 9. ON PERUSAL OF ORDER OF CIT(A) AND ON ABOVE DISCU SSIONS MADE BY US, WE NOTICE THAT THE A.O. HAS FAILED TO MAKE OUT A CASE THAT THE GOODS SOLD TO SISTER CONCERN WAS LESSER THAN THE MARKET PRICE WHEREAS TH E ASSESSEE HAS DISCHARGED THE BURDEN SHOWING THAT THE TRANSACTION WITH THE SISTER CONCERN WAS ON MARKET PRICE. IN ABSENCE OF MATERIAL, A DIFFERENT VIEW AT THIS ST AGE CANNOT BE TAKEN. THE REVENUE HAS FAILED TO POINT OUT ANY MATERIAL FACT AGAINST T HE FINDING OF CIT(A) NOR THE SAME IS AVAILABLE ON RECORD. IN THE LIGHT OF THE FACT, ORDER OF CIT(A) IS CONFIRMED ON THE ISSUE. 10. THE THIRD GROUND IS IN RESPECT OF DELETING ADDI TION OF RS.27,60,000/- ON ACCOUNT OF INTEREST. 11. THE BRIEF FACTS OF THE AGROUND ARE THAT THE DUR ING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE DID NOT CHARGE I NTEREST ON ADVANCE GIVEN TO 13 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 CERTAIN PARTIES. THE DERAILS OF THESE PARTIES NOTE D BY THE CIT(A) IN HIS ORDER AT PAGE NO.36 ARE AS UNDER :- S.NO. NAME OF PERSONS/PARTIES INTT. FREE AMOUNTS ADVANCED/DEPOSITED AMOUNT OF INTEREST DISALLOWED A. SMT. NISHA GARGH SMT. SANGEETA GARG 1,00,00,000 1,00,00,000 2,00,00,000 @12% 24,00,000 B. M/S N.D. METAL IND. LTD. M/S SUNDER MERCHANDISER (P) LTD. 5,00,000 25,00,000 3,00,000 @12% 3,60,000 C. SUNDRY DEBTORS WHICH REMAINED UNREALIZED AS ON 01.04.07 NOR ANY INTEREST WAS RECEIVED (1) M/S PRADEEP IND., DELHI 12,94,774 (2) SATISH METAL CO. 9,98,998 (3) PRASHANTH CABLES P. LTD. DELHI 62,28,636 (4) VARDHMAN CABLES (I) P. LTD. DELHI 40,57,192 1,25,79,600 @12% 15,09,552 42,69,552 12. THE A.O. DISALLOWED THE INTEREST CLAIM OF THE A SSESSEE CALCULATING AMOUNT OF INTEREST TO BE DISALLOWED IN RESPECT OF TWO PARTIES SMT. NISHA GARGH AND SMT. SANGEETA GARGH REJECTING THE ASSESSEES CONTENTION THAT THE SAID ADVANCES WERE GIVEN FOR THE PURPOSE OF BUSINESS BY TAKING A PREMI SE ON RENT FROM THEM AND AS PER RENT AGREEMENT THE ASSESSEE TO GIVE INTEREST FREE A DVANCE TO THESE PARTIES. IN 14 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 RESPECT OF M/S. N.D. METAL IND. LTD. AND M/S SUNDER MERCHANDISER (P) LTD., THE A.O. NOTICED THAT THE RENT AGREEMENT WAS NOT REGIST ERED WITH BOTH THE COMPANIES. THE A.O. WAS OF THE VIEW THAT THE ASSESSEE HAS GIVE N ADVANCE TO HELP ITS SISTER CONCERN. THE A.O. CALCULATED AMOUNT OF DISALLOWANC ES OF RS.3,60,000/- BY APPLYING 12% RATE ON RS.30 LACS. THE A.O. HAS ALSO CALCULATED THE DISALLOWANCE OF AMOUNT OF INTEREST APPLYING 12% ON SUNDRY DEBTORS O N THE GROUND THAT THE ASSESSEE HAS NEITHER RECORDED MONEY FROM THESE DEBT ORS, THEREFORE, THE ASSESSEE SHOULD HAVE CHARGED INTEREST. THE DETAILS OF SUCH SUNDRY DEBTORS HAS BEEN NOTED BY THE CIT(A) AT PAGE NO.37 OF HIS ORDER WHICH IS A S UNDER :- (PAGE 37) 1. M/S PRADEEP INDUSTRIES DELHI 12,97,774/- 2. M/S SATISH METAL COMPANY 9,98,998/- 3. M/S PARASHNATH CABLES PVT. LTD. DELHI 62,28,63 6/- 4. M/S VARDHMAN CABLES (I) PVT. LTD. DELHI HO 6,0 0,000/- TOTAL 1,25,70,600/- 13. THE CIT(A) DELETED THE ADDITION AFTER DETAILED DISCUSSION. THE AMOUNT OF DISALLOWANCE OF RS.24,00,000/- AND RS.3,60,000/- AR E AS UNDER :- (PAGE NO.49) 8.7 IN VIEW OF THE FACTS AND CIRCUMSTANCES AND THE LEGAL POSITION AS DISCUSSED IN THE ABOVE PARA, I AGREE WITH THE FOLLO WING REASONS GIVEN BY THE LD. AR IN HIS REJOINDER JUSTIFYING THE PAYME NT OF DEPOSITS OUT OF COMMERCIAL EXPEDIENCY:- - INTEREST FREE DEPOSITS WERE MADE AS A MEASURE OF COMMERCIAL EXPEDIENCY EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. - THERE IS NO NEXUS BETWEEN THE INTEREST BEARING BO RROWED FUNDS WITH THE INTEREST FREE DEPOSITS MADE BY ASSESSEE. 15 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 - THE ALLEGED RELATIONSHIP BETWEEN THE DIRECTOR OF COMPANY AND THE TWO LADY MEMBERS OR RELATED CONCERNS TO WHOM TH E DEPOSITS WERE GIVEN AGAINST THEIR PROPERTY, DOES NOT GO TO A LTER THE SUBSTANCE OF THE TRANSACTION NOR DOES IT PROVE ANY ULTERIOR MOTIVE BEHIND THE EXECUTION OF AGREEMENT FOR TAKING THE PREMISES FOR THE PURPOSE OF BUSINESS. - SIMILARLY NON-REGISTRATION OF AGREEMENT ALSO DOES NOT HOLD THE DOCUMENT AS BOGUS OR SHAM PARTICULARLY WHEN THE ASS ESSEE WAS UTILIZING THE PROPERTY FOR BUSINESS PURPOSE AS PER THE TERMS AND CONDITIONS ENUMERATED IN THE SAID AGREEMENTS. AGREEING WITH THE ABOVE REASONS GIVEN BY THE LD. AR , AND TAKING INTO ACCOUNT MY FINDING AS DISCUSSED AN PARA NO.8.6 AND BY RELYING ON THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF S.A. BUILDER LTD. VS. CIT (SUPRA), I FIND THAT NO D ISALLOWANCE OF ANY INTEREST FOR GIVING OF INTEREST FREE DEPOSITS TO SM T NISHA GARG, SMT SANGEETA GARG, M/S N.D. METAL INDUSTRIES LIMITED AN D M/S. SUNDER MERCHANDISERS P. LTD. IS REQUIRED TO BE MADE. THER EFORE, DISALLOWANCE OF INTEREST ON THE DEPOSITS MADE TO TH ESE FOUR PERSONS AND ADDITION MADE ON ACCOUNT OF THESE DISALLOWANCES AT RS.24,00,000/- AND RS.3,60,000/- ARE DELETED. 14. THE CIT(A) DELETED THE ADDITION OF RS.15,09,552 /- AS UNDER :- (PAGE NO.50) 8.8 WITH REGARD TO DISALLOWANCE OF INTEREST ON OUT STANDING BALANCE OF DEBTORS, THE AO IN HIS REMAND REPORT HAS STATED THAT ALL THESE DEBTORS ARE ON ACCOUNT OF SALES BEING MADE BY THE A SSESSEE (APPELLANT) AND THEY ARE NOT IN THE NATURE OF LOAN GIVEN OUT OF BORROWED FUND AND ALL THE SALE PROCEEDS ARE RECOVER ED SUBSEQUENTLY. IN VIEW OF HIS REPORT OF THE AO, THE LD. AR IN HIS REJOINDER HAS CONTENDED THAT NO DISALLOWANCE OF ANY INTEREST SHOU LD BE MADE ON THE OUTSTANDING BALANCES OF DEBTORS. AFTER CONSIDERING THE REMAND REPORT OF THE AO, CONFIRMING THE FACT THAT ALL THE DEBTORS FOR WHICH INTEREST HAS BEEN DISALLOWED AGAINST THE OUTSTANDING BALANCE ARE DEBTORS ON ACCOUNT OF SALE MADE TO THEM AND NOT ON ACCOUNT OF ANY LOAN ARE 16 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 ADVANCES GIVEN TO THEM, I AGREE WITH THE LD. AR THA T ON SUCH OUTSTANDING BALANCES NO DISALLOWANCE OF INTEREST SH OULD BE MADE BECAUSE THE SALE DEBTORS ARE IN FACT OUT OF COMMERC IAL TRANSACTION AND RELATING TO THE BUSINESS OF THE ASSESSEE (APPELLANT ) AND NON REALIZATION OF SUCH DEBTORS OR DELAY IN ITS REALIZATION MAY BE BECAUSE OF SOME COMMERCIAL EXPEDIENCY FOR WHICH, DISALLOWANCE OF AN Y INTEREST FOR NOT CHARGING ANY INTEREST ON OUTSTANDING BALANCE IS NOT JUSTIFIED BECAUSE CHARGING OF INTEREST ON OUTSTANDING BALANCES OF THE DEBTORS IS A COMMERCIAL DECISION WHICH A TAX OFFICIAL CANNOT DEC IDE. THEREFORE, I DELETE THE ADDITION OF RS.15,09,552/- ALSO MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST ON OUTSTANDING BALANCE OF THE DEBTORS. 8.9 IN VIEW OF MY ABOVE DECISION, TOTAL AMOUNT OF R S.42,69,552/- ADDED IN THE INCOME OF THE ASSESSEE ON ACCOUNTS OF DISALLOWANCE OF INTEREST OF RS.24,00,000/- AND RS.3,60,000/- FOR NO T CHARGING OF INTEREST ON DEPOSITS GIVEN FOR TAKING PREMISES FOR USING THEM FOR THE BUSINESS PURPOSES AND DISALLOWANCE OF INTEREST OF R S.15,09,552/- FOR NOT CHARGING INTEREST ON OUTSTANDING BALANCES OF DE BTORS ARE HEREBY DELETED AND GROUND NO.5 IS ALLOWED. 15. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. WE NOTICE THAT THE CIT(A) HAS DELETED THE ADDITIONS WHICH WERE MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF INTEREST. THE CIT(A) FOUND THAT THE ADVANCES GIVEN TO SMT. NISHA GARGH, SMT. SANGEETA GARGH, M/S. N.D. METAL INDUSTRIES LIMITED AND M/S SUNDER MERCHANDISERS (P) LTD. WERE FOR THE PURPOSE OF BUSINESS AND UNDER SUCH CIRCUMSTANCES ON ACCOUNT OF SUCH ADVANCE DISAL LOWANCE IS NOT WARRANTED IN VIEW OF JUDGMENT OF HONBLE SUPREME COURT IN THE CA SE OF S.A. BUILDER LIMITED VS.A CIT, 288 ITR 1 (SC). WE NOTICE THAT THE CIT(A ) HAS ALSO RIGHTLY DELETED THE ADDITION OF RS.15,09,552/- AS THE A.O. WAS NOT CORR ECT IN DISALLOWING THE INTEREST 17 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 FROM SUNDRY DEBTORS. IN THE CASE UNDER CONSIDERATI ON, THE CIT(A) HAS GIVEN FINDING THAT THE SO-CALLED INTEREST FREE FUND WAS G IVEN BY THE ASSESSEE WHICH WERE IN ACCORDANCE WITH COMMERCIAL EXPEDIENCY. THE ASSE SSEE HAS DISCHARGED THE BURDEN IN THIS REGARD BY PRODUCING VARIOUS EVIDENCE S IN THE FORM OF RELEVANT AGREEMENT AND OTHER DOCUMENTS. THE REVENUE HAS FAI LED TO POINT OUT ANY CONTRARY MATERIAL TO THE FINDING OF CIT(A) NOR THE SAME IS A VAILABLE ON RECORD. IN THE LIGHT OF FACT, WE CONFIRM THE ORDER OF CIT(A). ITA NO.532/AGRA/2012 FOR A.Y. 2009-10 16. THE LD. REPRESENTATIVES OF THE PARTIES SUBMITTE D THAT THE FACTS OF THE GROUND NO.1 ARE SIMILAR TO THE FACTS OF THE GROUND NO.1 FO R A.Y. 2008-09. THE FACTS OF GROUND NO.2 ARE SIMILAR TO FACTS OF THE GROUND NOS. 3 & 4 FOR A.Y. 2008-09. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT SINCE THE FACTS ARE IDENTICAL, THEREFORE, THEIR CONTENTIONS ARE ALSO THE SAME WHICH WERE MADE FOR A.Y. 2008-09. SINCE THE ISSUE AND FACTS ARE IDENTICAL IN 2009-10, AFTER DET AILED DISCUSSION MADE AS ABOVE IN THIS ORDER, WE REJECT THE GROUNDS OF APPEAL OF REVE NUE. THEREFORE, FOLLOWING THE SAME DISCUSSIONS AS MADE IN A.Y. 2008-09, THE GROUN DS RAISED IN THE YEAR UNDER CONSIDERATION I.E. 2009-10 ARE ALSO REJECTED. 18 ITA NOS.465 & 532/AGRA/2012 A.YS.2008-09 & 2009-10 17. IN THE RESULT, BOTH THE APPEALS OF THE REVENUER ARE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY