Continental Carbon India Ltd., New Delhi V. ITO, New Delhi

ITA 5270/DEL/2010

• Counselvise Citation: 527020114 RSA 2010
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 26-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KRISHNA; ROHIT GARG SR DRS
• Assessee Lawyers: V MOHAN
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Retrospective amendment; Additional evidence; Bad and doubtful debts; Corroborative evidences; Onus to prove; Revenue expenditure
• Section: 142(1); 115JB; 133(6); 32; 68; 6; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI K.D. RANJAN ITA NOS. 5269, 5270 & 5271/DEL/2010 ASSTT. YRS: 2003-04, 05-06 & 06-07 CONTINENTAL CARBON INDIA LTD. VS. INCOME-TAX OFF ICER, F-40, NDSE, PART-I, WARD 3(3), NEW DELHI. NEW DELHI. PAN/GIR NO. AABCC8129N ITA NOS. 5242 & 5513/DEL/2010 ASSTT. YRS: 2003-04, 05-06 INCOME-TAX OFFICER, VS CONTINENTAL CARBON INDIA L TD. WARD 3(3), NEW DELHI. F-40, NDSE, PART-I, NEW DELHI. (APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI VED JAIN FCA & SHRI V. MOHAN CA REVENUE BY : S/SHRI KRISHNA & ROHIT GARG SR. DRS O R D E R PER BENCH : THIS IS A SET OF FIVE APPEALS, WHICH CONTAINS CROSS -APPEALS BY ASSESSEE AND REVENUE FOR A.Y. 2003-04 AND 2005-06 AND A SOLI TARY ASSESSEES APPEAL FOR A.Y. 2007-08. ALL THESE APPEALS WERE HEARD TOGE THER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 2 2. RESPECTIVE GROUNDS ARE AS UNDER:- ASSESSEES APPEALS: A.Y. 2003-04 1. BECAUSE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS ON FACTS WHILE CO NFIRMING THE FOLLOWING ADDITIONS OF RS. 16,36,599/- ON THE GROUN D THAT THE ASSESSEES BOOK BALANCE DOES NOT TALLY WITH THE BAL ANCE AS SHOWN BY THE PARTIES AND THEREFORE THE EXCESS BALAN CED SHOWN BY THE CREDITORS SHOULD BE ADDED AND NO ADDITIONAL EVIDENCE UNDER RULE 46A CAN BE ACCEPTED. 2. BECAUSE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS ON FACTS WHILE CO NFIRMING THE ADDITIONS OF RS. 1,53,43,292/- MADE BY THE LEARNED AO ON THE GROUND THAT SINCE THE NOTICES SENT TO THE 7 CREDITO RS EITHER CAME BACK WITH A REMARK LEFT OR WHERE DELIVERED NO BAL ANCE CONFIRMATION HAS BEEN RECEIVED FROM THEM. THE LEARN ED CIT(A) HAS ALSO ERRED IN NOT ACCEPTING THE CONFIRMATION FI LED BEFORE HIM FROM THE PARTIES WHICH CONTAIN THE SAME ADDRESSES A S PROVIDED TO THE LEARNED AO DURING THE COURSE OF ASSESSMENT. 3. BECAUSE, THE LEARNED CIT(A) HAS FAILED TO APPREC IATE THE FOLLOWING FACT MENTIONED BY THE LEARNED AO IN HIS O RDER AT PARA 2 AT PAGE 3: WE HAD SENT REQUEST TO THESE PARTIES TO PROVIDE US WITH THEIR STATEMENT OF ACCOUNT TO RECONCILE THE BALANCES. WE ARE PROVIDING HEREWITH THE COPY OF THE INVOICES AND BANK STATEMENT IN SUPPORT OF THE TRANSACTIONS ENTERED INTO WITH THESE PARTIES DURING THE YEAR UNDER CONSIDERATION. 4. BECAUSE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS ON FACTS WHILE DI SALLOWING THE EXPENDITURE AMOUNTING TO RS. 4,72,452/-. 5. THE APPELLANT CRAVES LEAVE TO ADD/ ALTER ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 3 A.Y. 2005-06 : 1. BECAUSE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS ON FACTS WHILE CO NFIRMING THE ADDITION OF RS. 1,23,000/- BEING AMOUNT OF ANNUAL C HAMBER MEMBERSHIP FEE PAID TO TAJ MAHAL HOTELS ON THE GROU ND THAT NO DOCUMENTARY EVIDENCE HAS BEEN FILED BEFORE THE LEAR NED AO. 2. BECAUSE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS ON FACTS WHILE CO NFIRMING THE ADDITION MADE BY THE LEANED AO ON THE GROUND THAT ASSESSEE HAD FAILED TO FURNISH THE BALANCE CONFIRMATIONS FRO M THE CREDITORS AND THEREBY FAILED TO PROVE THE GENUINENE SS OF THE OUTSTANDING TRANSACTIONS. 3. THE APPELLANT CRAVES LEAVE TO ADD/ ALTER ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. A.Y. 2007-08 : 1. BECAUSE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS ON FACTS WHILE CO NFIRMING THE ADDITIONS MADE BY THE LEARNED AO ON THE GROUND THAT NO EVIDENCE HAS BEEN FILED TO SUBSTANTIATE THE OUTSTAN DING BALANCES. 2. THE APPELLANT CRAVES LEAVE TO ADD/ ALTER ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. REVENUES APPEALS : A.Y. 2003-04 : 1. THE LEARNED CIT(A) HAS ERRED ON FACTS AND IN LA W IN DELETING ADDITION ON ACCOUNT OF DOUBTFUL DEBTS, OBS OLETE/ NON MOVING STORES AND LEAVE ENCASHMENT IN MAKING ADJUST MENT IN THE BOOK PROFIT FOR MAT U/S 115JB OF THE I.T. ACT AS: 2. LEARNED CIT(A) RELIED UPON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. HCL COMNET SYS TEMS & ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 4 SERVICES LTD. (2008) 13 ITR (SC) 105 WHICH IS CONTR ARY TO THE AMENDMENT MADE IN SECTION 115JB OF THE FINANCE ACT, 2009 EFFECTIVE FROM 1.4.2001. 3. AFTER THE ABOVE MENTIONED AMENDMENT THE PROVISIO N, IF ANY, SHOWN BY THE ASSESSEE ON THE DEBIT SIDE OF THE P&L ACCOUNT THEN THE SAME AMOUNT SHOULD BE ADDED TO THE INCOME OF THE ASSESSEE FOR CALCULATING BOOK PROFIT. 4. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEA L. A.Y. 2005-06: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING AD DITION OF RS. 50,549/- ON ACCOUNT OF DISALLOWANCE OF EXTRA DEPREC IATION ON COMPUTER PERIPHERALS/ ACCESSORIES IGNORING THAT AS PER THE IT RULES 60% DEPRECIATION IS ALLOWABLE ONLY ON COMPUTE R AND COMPUTER SOFTWARE AND NOT ON COMPUTER PERIPHERALS A ND ACCESSORIES. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING T O ALLOW DEPRECIATION OF RS. 10,94,274/- ON CAPITAL STORES I GNORING THAT ONCE THE INDIVIDUAL ASSET IS NOT PUT TO USE, WHICH IS PRE-REQUISITE FOR AVAILING DEPRECIATION U/S 32 OF THE I.T. ACT, T HE SAME BECOMES INELIGIBLE/ DISQUALIFIED FOR BLOCK OF ASSES ON WHICH DEPRECIATION IS ALLOWED AS PER RULE 5 AND APPENDIX IA OF THE I.T. RULES BUT SHALL CONTINUE TO REMAIN PART OF THE BLOCK OF ASSETS FOR ALL OTHER PURPOSES EXCEPT FOR THE PURPOS E OF CLAIMING DEPRECIATION UNLESS PUT TO USE. RELIANCE IS ALSO PL ACED ON THE DECISIONS IN LIQUIDATORS OF PURSA LTD. VS. CIT (195 4)N25 ITR 265(SC); CIT VS. SUHRID GEIGY LTD. (1982) 133 ITR 884(GUJ.)/CIT VS. JIWAJI RAO SUGAR CO. LTD. (1969) 71 ITR 319(MP)(APP.). ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 5 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEA L. 3. BRIEF FACTS ARE THAT THE ASSESSEE IS A MANUFACTU RER OF CARBON BLACK, WHICH IS USED IN MANUFACTURING OF TYRES AND RUBBER RELATED PRODUCTS. 99.9% SHARE HOLDING OF THE ASSESSEE COMPANY WAS OWNED BY A USA COMPANY KNOWN AS CONTINENTAL CARBON COMPANY. BOOKS OF ACCOU NT ARE DULY MAINTAINED AND AUDITED. THE PURCHASES AND SALES AS MADE BY THE ASSESSEE ARE ON CREDIT BASIS ONLY AND PAID TO SUPPLIERS BY ACCOU NT PAYEE CHEQUES. AT THE END OF A.Y. 2003-04, ASSESSEES BALANCE-SHEET REFLE CTED DEBTORS TO THE TUNE OF RS. 51,55,69,889/- AND CREDITORS OF RS. 27,99,72 ,730/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO ASKED THE ASSESSEE TO FURNISH LIST OF SUNDRY CREDITORS OUTSTANDING FOR LAST THREE YEARS ALONG WI TH NAMES AND ADDRESSES OF THE CURRENT CREDITORS, WHICH WAS REPLIED BY THE ASS ESSEE ON 22-12-2005 ALONG WITH THE REQUISITE LISTS. AO ISSUED NOTICES U/S 133 (6) TO 15 CREDITORS, OUT OF WHICH SOME OF THE NOTICES WERE RESPONDED WHILE SOM E REMAINED UNREPLIED. AO, ON THE BASIS THEREOF, SENT THE ASSESSEE A CHART SHOWING THE NON-REPLIED NOTICES AND INSTANCES OF DIFFERENCE IN THE FIGURES SHOWN BETWEEN THE ACCOUNTS OF ASSESSEE AND OTHER PARTIES, THE SAME I S AS UNDER: ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 6 S. NO. NAME OF THE S. CREDITORS CR. BALANCE SHOWN BY S. CREDITORS CR. BALANCES AS SHOWN BY THE ASSESSEE DIFFERENCE 1. AAR KAY LOGISTICS (INDIA) 1890848 1795729 95119 2. POWER MAX (INDIA) P. LTD. 1449312 974717 474595 3. BABA AGENCIES 238647 238647 NIL 4. EASTERN CARRIERS 5793133 5313241 479892 5. SHARMA ROADWAYS 1537937 1537937 - 6. RATHI FILTERS & INDS (P) LTD. 2060309 2087969 2 7660 7. PPL FEEDBACK PACKING LTD. 2269525 1682532 58699 3 8. ALLIED STEEL TRADERS RECEIVED BACK 401177 - 9. CHEMITACH INDIA -DO- 518881 - 10. PARKASH MACHINERY CO. NO REPLY 279900 - 11. DISCO CARBON & RIBBON MFG. CO. (P) LTD. -DO- 1694394 - 12. U.P. BOMBAY ROAD SERVICE -DO- 6253189 - 13. PACE CARRIER NO REPLY 3783236 - 14. GOEL ROADWAYS 560732 1221995 991223 15. JANTA ROADLINES NO REPLY 1412515 - 3.1. AO, AFTER CONSIDERING THE ASSESSEES DETAILED EXPLANATION IN THIS BEHALF HELD THAT ASSESSEE COULD NOT RECONCILE THE DIFFEREN CE IN BALANCES AS REFLECTED IN ITS PARTIES A/C AND THEREFORE, MADE AN ADDITION OF RS. 16,36,599/- IN RESPECT OF UNRECONCILED ACCOUTNS, BY OBSERVING AS U NDER: THE ASSESSEE IN THIS CONNECTION AHS FURNISHED COPY OF BILLS REFLECTING TRANSACTION WITH THE CONCERNED PARTIES. IT IS ACCEPTABLE THAT THERE WAS SOME TRANSACTION WITH THE SE PARTIES. THE ISSUE IS WHETHER THE CREDIT BALANCE SHOWN BY TH E ASSESSEE IN RESPECT OF THE ABOVE SAID PARTIES ARE GENUINE OR NO T. THESE BILLS, VOUCHERS DO NOT PROVE THE GENUINENESS OF OUTSTANDI NG BALANCES AGAINST THESE PARTIES. DESPITE OF REPEATED OPPORTUN ITY THE ASSESSEE FAILED TO PROVIDE NECESSARY DETAILS IN ITS SUPPORT AND EVEN FAILED TO RECONCILE THE BALANCES. IT IS WELL S ETTLED BY THE ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 7 APEX COURT IN THE CASE OF ROSHAN DI HATTI V. CIT (1 997) 107 ITR 938 (SC) THAT ONUS OF PROVING THE SOURCE OF A S UM OR MONEY FOUND TO HAVE BEEN CREDITED BY AN ASSESSEE IS ON HIM. IF THE ASSESSEE FAILS TO DISCHARGE ITS ONUS OR EXPLAIN UNSATISFACTORILY THE NATURE OF THE OUTSTANDING BALA NCE OR THE ASSESSEE FAILS TO REBUT THE SAME, THE SAME MUST BE TREATED AS INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR. AFTER CONSIDERING ALL THE AFOREMENTIONED FACTS RS. 16,36,599/- [RS. 95,119 + 174595 + + 479892 + 596993 BEING PART IES AT S. NO. 1,2,4 & 7 RESPECTIVELY] IS TREATED PURCHASE OUT OF BOOKS AS RS. 16,36,599/- IS SHOWN EXCESS CREDIT BALANCE BY T HE PARTIES AT S. NO. 1,2,4 AND 7 AS COMPARED TO THE AMOUNT SHOWN BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S. [ ADDITION: RS. 16,36,599/-]. 3.2. IN RESPECT OF PARTIES FROM WHOM NOTICES U/S 13 3(6) WERE NOT REPLIED OR REMAINED UNANSWERED; AO HELD THAT BURDEN TO PRODUCE THE PARTIES WAS ON THE ASSESSEE WHICH WAS NOT DISCHARGED AND, THEREFOR E, AN ADDITION OF RS. 1,53,43,292/- WAS MADE BY FOLLOWING OBSERVATIONS: PARTIES AT S. NO. 8 & 9 WERE NOT TRACEABLE AS THE NOTICES SENT WERE RECEIVED BACK UNDELIVERED BY THE POSTAL DEPART MENT WITH THE REMARKS LEFT. THE ASSESSEE, REGARDLESS OF OPP ORTUNITY, FAILED TO FURNISH CONFIRMATION FROM THESE PARTIES. THE ASSESSEE EVEN HAS NOT PROVIDED NEW ADDRESS OF THESE PARTIES. SIMILARLY THE ASSESSEE AHS NOT FURNISHED CONFIRMATION FROM TH E PARTIES AT S. NO. 10,11,12, 13 AND 15 AND THESE PARTIES ALSO N OT RESPONDED THE NOTICES U/S 133(6) OF THE I.T. ACT. THE BURDEN TO PROVE GENUINENESS OF THESE CREDIT BALANCES LIES ON THE AS SESSEE. THE ASSESSEE WAS REQUIRED TO FURNISH SUCH TYPE OF SUPPO RTING EVIDENCES THAT FAVOURS THE ASSESSEE. THERE ARE VAR IOUS CASE LAWS WHEREIN THE APEX COURT HELD THAT ASSESSEE HAS TO PROVE HIS CLAIM BY PRODUCING RELEVANT SUPPORTING EVIDENCES. S OME ARE MENTIONED BELOW: KALE KHAN MOHAMMAD HANIF V. CIT (1963) 50 ITR 1 (SC ) ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 8 ADDL. CIT V. GHAI LIME STONE CO. (1983) 144 ITR 140 (MP) DHANSIRAM AGARWALLA V. CIT (1995) 81 TAXMAN 1 (GAU. ) CIT V. R.S. RATHORE (1995) 212 ITR 390 (RAJ.) KEEPING IN VIEW OF THE FACTS MENTIONED ABOVE RS. 1, 53,43,292/- IS TREATED UNEXPLAINED LIABILITY AND ADDED TO THE A SSESSEES INCOME. (ADDITION: RS. 1,53,43,292/-.). 3.3. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL, WH ERE ASSESSEE REQUESTED FOR ADMISSION OF ADDITIONAL EVIDENCED, MAKING AN AP PLICATION IN THIS BEHALF. THE SAME WAS REFUSED TO BE ADMITTED, INTER ALIA, BY OBSERVING AS UNDER: 6. VIDE LETTER DATED SEPTEMBER 2008, THE ASSESSEE ALSO REQUESTED FOR ADMISSION OF FRESH EVIDENCE. ACCORDIN GLY VIDE LETTER NO. 117 DATED 19-11-2008, THE MATTER WAS REM ANDED TO THE LD. AO. IN THE RESPONSE FILED VIDE LETTER NO. 1 32 DATED 07- 07-2009, A RESPONSE WAS SENT BY THE LD. AO. IT WAS CONTENDED THAT M/S AAR KAY LOGISTICS (INDIA) THE INFORMATION WAS SUPPLIED VIDE THE LETTER DATED 25-01-2006 THE RESPO NSE FROM POWER MAX (INDIA) (P) LTD. THE RESPONSE WAS RECEIVE D ON 25- 01-2006. SIMILARLY, EASTERN CARRIERS HAD SUPPLIED T HE INFORMATION ON 28-02-2006 AND M/S RATHI FILTERS & I NDUSTRIES PVT. LTD. HAD FILED THE LETTER VIDE DATED 04-03-200 6. IN M/S PPL FEDBACK PACKAGING LTD. AND M/S GOEL ROADWAYS WH O FURNISHED INFORMATION VIDE LETTER DATED 25-02-2006 AND 17-03- 2006 RESPECTIVELY. IN RESPONSE TO THE LETTER BY LD. AO THE ASSESSEE HAS RESPONDED ON 10-08-2009, WHEREIN THEY HAVE FILED A STATEMENT OF RECONCILIATION OF DIFFERENCE V IZ. A VIZ. RK. LOGISTICS (INDIA) AND POWER MAX (INDIA) PVT. LTD. A S FAR AS M/S EASTERN CARRIERS ARE CONCERNED, IT WAS SUBMITTE D THAT THE BOOKS OF ACCOUNTS WERE MISPLACED. HOWEVER, THEY WER E ENCLOSING THE STATEMENTS SHOWING PAYMENT MADE TO TH E PARTY DURING THE CONCERNED PERIOD AND THE SAME MENTIONED BY THE PARTY. RECONCILIATION STATEMENT WAS FILED WITH REGA RD TO M/S RATHI FILTERS AND M/S PPL FEEDBACK PACKAGING LTD. A S FAR AS M/S GOEL ROADWAYS IS CONCERNED, A STATEMENT WAS FIL ED FILING A STATEMENT EXPLAINING A DIFFERENCE OF 9,91,91,223/ -. ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 9 7. ON RECEIPT OF THE RECONCILIATION STATEMENT, ANOT HER LETTER NO. 209 DATED 07-09-2009 WAS SENT TO THE AO WITH RE MINDERS BY MY LD. PREDECESSOR. THE ASSESSEE HAS RESPONDED V IDE LETTER NO. 269 DATED 28-07-2010, WHEREIN HE HAS OBJECTED T O ADMISSION OF ADDITIONAL EVIDENCE UNDER RULE 46A(1). THE LD. AO, INTER ALIA, HAS SUBMITTED THAT IN THE RECONCILI ATION STATEMENTS, THE ASSESSEE COMPANY HAS SUBMITTED THAT THE GOODS WERE LESS/EXCESS BOOKS BY PARTIES IN RESPECT OF WHICH THE DIFFERENCE AHS BEEN NOTED BY THE AO. HOWEVER, T HE ASSESSEE AHS NOT SUBMITTED ANY REASON WHY THE GOODS WERE LESS/ EXCESS BOOKS BY PARTIES IN SPITE OF SPECIFIC ORDERS BY THE ASSESSEE COMPANY. SIMILARLY IN SOME CASES BILLS WER E BOOKED BY THE ASSESSEE BUT WERE NOT PASSED BY THE PARTIES. THE ASSESSEE HAS FAILED TO ADDUCE ANY EVIDENCE IN SUPPO RT OF ITS CLAIM. THE ASSESSEE HAS, IN A GENERAL MANNER, FILED RECONCILED STATEMENTS WITHOUT BRINGING ON RECORD SPECIFIC DOCU MENTS TO ESTABLISH ITS CLAIM. 13. IN VIEW OF THE DISCUSSION ABOVE, THE ADDITIONA L EVIDENCE AS IS BEING ADVANCED DURING THE APPELLATE STAGE CAN NOT BE ACCEPTED FOR THE DISPOSAL OF THIS APPEAL. THE SAME IS REJECTED. 3.4. AFTER REFUSING TO ADMIT THE ADDITIONAL EVIDENC E, THE CIT(A) PROCEEDED TO DECIDE THE GROUNDS RAISED BY THE ASSESSEE. ADDIT ION OF RS. 16,36,599/- FOR DIFFERENCE IN BALANCES WAS UPHELD BY THE CIT(A) BY FOLLOWING OBSERVATIONS: 14. NOW I SHALL COME TO THE MERITS. HERE, ONE MAY STATE THAT THE ASSESSING OFFICER HAD RAISED THE ISSUE IN HIS I NVESTIGATION U/S 133(6). ON THE BASIS OF THE RESPONSE OF THE ENT ITIES I.E. R.K. LOGISTICS, POWER MAX (INDIA) P. LTD., EASTERN CARRI ERS, RATHI FILTERS & INDS. P. LTD., PPL FEEDBACK PACKAGING LTD . AND GOEL ROADWAYS, THE LD. AO ASKED THE ASSESSEE TO SUBMIT A RESPONSE. THE ASSESSEE COULD NOT SUBMIT THE RESPONSE DURING T HE COURSE OF THE ASSESSMENT PROCEEDINGS. IN THE APPELLATE PROCEE DINGS, THE ACCOUNTS OF VARIOUS PARTIES HAVE BEEN ENDEAVORED TO BE SUBMITTED AS ADDITIONAL EVIDENCE. IT AHS BEEN STATE D THAT THE GOODS WERE LESS/ EXCESS BOOKED BY PARTIES OR THAT T HE BILLS WERE ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 10 BOOKED BY THE ASSESSEE BUT WERE NOT PERMITTED BY TH E PARTIES. WHILE THIS MAY BE A PERSUASIVE REASON FOR THE DIFFE RENCE IN THE ACCOUNTS, BUT STILL THEY ARE NOT BACKED BY ANY COGE NT EVIDENCE, EVEN IF WE ARE TO ADMIT THE ADDITIONAL EVIDENCE. TH US, THE EXPLANATION GIVEN BY THE ASSESSEE IS TOO GENERALIZE D TO BE ACCEPTED. AS SUCH, THE ASSESSEE DESERVES TO FAIL IN GROUND OF APPEAL NO. 2. 3.5. THE ADDITION ON ACCOUNT OF NON-REPLY OF NOTICE S U/S 133(6), CIT(A) UPHELD THE SAME BY FOLLOWING OBSERVATIONS: 18. GROUND OF APPEAL NO. 4 PERTAINS TO DISALLOWANC E OF RS. 1,53,43,292/-. FROM THE IMPUGNED ORDER, IT IS OBSER VED THAT M/S ALLIED STEEL TRADERS AND M/S CHEMI TECH INDIA LTD. WERE UNTRACEABLE. THE REMARKS OF THE POSTAL DEPARTMENTS ON THE UNDELIVERED ENVELOPE WAS LEFT. THE ASSESSEE DID N OT FURNISH ANY CONFIRMATION FROM THE PARTIES. THEY EVEN FAILED TO PROVIDE THE NEW ADDRESS OF THE PARTIES. SIMILARLY, IN THE C ASE OF PRAKASH MACHINERY CO., DISCO CARBON & RIBBON MANUFACTURING CO., UP BOMBAY ROAD SERVICE, PACE CARRIER AND JANTA ROAD LINES NO RESPONSE HAS BEEN RECEIVED WITH REGARD TO THE QUER IES RAISED BY THE LD. AO. AS SUCH, THE LD. AO AFTER RELYING ON CE RTAIN CASE LAWS HAS PROCEEDED TO MAKE AN ADDITION OF RS. 1,53, 43,292/-. 19. THE ASSESSEE HAS TAKEN THE STAND THAT NON-FILIN G OF THE TRANSACTION CONFIRMATION BY ITSELF CANNOT BE REASON ENOUGH FOR DISALLOWANCE. THE ONUS WAS ON THE AO TO PROVE THAT THE TRANSACTIONS ENTERED WITH THE PARTIES WERE NOT GENU INE. RELIANCE WAS PLACED ON THE DECISION OF THE MUMBAI TRIBUNAL I N SANCHITA MARINE PRODUCTS PVT. LTD. VS. DCIT (2007) 15 SOT 28 0. 20. I HAVE CONSIDERED THE ORDER OF THE LD. AO AND T HE SUBMISSIONS MADE BY THE LD. AR OF THE ASSESSEE. IT IS SETTLED LAW THAT IN TRANSACTIONS OF SUCH NATURE, THE ASSESSEE P RIMARILY HAS TO PROVE THE IDENTITY AND THE CREDITWORTHINESS OF THE CREDITOR. HE ALSO HAS TO PROVE THE GENUINENESS OF THE TRANSACTIO N. ONE THIS PRIMARY ONUS IS DISCHARGED BY HIM, THEN ONLY THE ON US SHIFTS ON THE REVENUE. IN THE CASE IN HAND, THE PRIMARY ONUS WHICH RESTED ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 11 WITH THE ASSESSEE AHS NOT BEEN DISCHARGED INSPITE O F GETTING MORE THAN 3 OPPORTUNITIES. ONCE IT IS ESTABLISHED T HAT THE PRIMARY ONUS HAS NOT BEEN DISCHARGED, THERE IS NO O PTION BUT TO SUSTAIN THE ADDITION OF RS. 1,53,43,292/-. THE ASSE SSEE FAILS IN GROUND OF APPEAL NO. 4. 3.6. EXPENSES ON ACCOUNT OF CONSULTANCY SERVICES PE RTAINING TO EARLIER YEAR RS. 4,72,452/-, THE CIT(A) UPHELD THE DISALLOWANCE BY FOLLOWING OBSERVATIONS: 23. ON A PERUSAL OF THE IMPUGNED ORDER AS WELL AS THE SUBMISSIONS MADE BY THE ASSESSEE, IT IS CRYSTAL CLE AR THAT THE IMPUGNED EXPENSES DID NOT BELONG TO THE PREVIOUS YE AR IN QUESTION. THE ASSESSEES STATEMENT IS THAT IT RECEI VED THE BILL AND PAID THE BILL DURING THE YEAR ITSELF. THE MAIN ISSU E HERE, IS THAT THE ASSESSEE WHO FOLLOWS THE MERCANTILE SYSTEM OF A CCOUNTING, WHEN DID THE BILL CRYSTALLIZE IN THE ACCOUNT OF THE ASSESSEE. APART FROM MAKING A GENERAL STATEMENT, NO EVIDENCE HAS BEEN PROVIDED WHICH WOULD SUGGEST THAT THE BILLS WERE RE CEIVED AND PAID DURING THE YEAR AND THEREFORE THE EXPENSES HAV E CRYSTALLIZED DURING THE YEAR ITSELF. IN THE ABSENCE OF ANY SUCH DETAIL, THE ASSESSEE DESERVES TO FAIL IN GROUND OF APPEAL NO. 5. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 4. IN RESPECT OF REVENUES GROUND U/S 115JB, THE AS SESSEES CLAIM FOR REDUCTION ON FOLLOWING ITEMS FROM BOOK PROFITS WAS REJECTED BY THE AO. THE SAME WAS CLAIMED ON THE BASIS OF AUDITED STATEMENT AND CERTIFICATE. AO, HOWEVER, HELD THAT IT WAS TO BE NON-DEDUCTIBLE FROM THE PROFITS WHICH WAS ACCORDINGLY REJECTED. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL BEFORE THE CIT(A). WHILE DEALING WITH THE GROUND ON ACCOUNT OF 115JB, CIT(A) ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 12 OBSERVED THAT ASSESSEE HAD CLAIMED BENEFIT OF SEC. 115JB IN THE RETURN OF INCOME, IN RESPECT OF FOLLOWING: I. DOUBTFUL DEBTS RS. 2,18,17,060/- II. OBSOLETE/NON MOVING STORES RS. 5,00,000/- III. LEAVE ENCASHMENT RS. 4,34,150/- 4.1. BEFORE CIT(A) ASSESSEE RELIED ON FOLLOWING JUD GMENTS: - CIT V. HCL COMNET SYSTEMS & SERVICES LTD. (2007) 29 2 ITR 299 (DEL.); - CIT V. EICHER LTD. (2006) 287 ITR 170 (DEL.) - CIT V. ECHJAY FORGINGS PVT. LTD. 92001) 251 ITR 15 (MUM.) - JCIT V. USHA MARTIN INDUSTRIES LTD. 104 ITD 249 (KO L.) - BHARAT EARTH MOVERS VS. CIT 245 ITR 428 4.2. AS FAR AS PROVISION FOR OBSOLETE/ NON MOVING S TORES, IT WAS CONTENDED THAT THE SAME CANNOT BE CONSIDERED AS UNASCERTAINED LIABILITY AS THEY DIMINISH THE VALUE OF THE ASSET. 4.3. CIT(A) AFTER HEARING THE ASSESSEE, ALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF DOUBTFUL DEBTS, RELYING ON HONBLE SUPRE ME COURT JUDGMENT IN THE CASE OF CIT VS. HCL COMNET SYSTEMS AND SERVICES LTD. (2008) 13 DTR (SC) 105. 4.4. IN RESPECT OF OBSOLETE/NON-MOVING STORES, IT WAS HELD THAT THEY AMOUNT TO DIMINUTION IN THE VALUE OF THE ASSET WHI CH WAS MENTIONED IN THE AUDITED BALANCE-SHEET AND BY PLACING RELIANCE ON HO NBLE SUPREME COURT ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 13 JUDGMENT IN THE CASE OF BHART EARTH MOVERS VS. CIT 245 ITR 428 AND METAL BOX CO. OF INDIA VS. THEIR WORKMAN (1969) 73 ITR 53 . 4.5. DIMINUTION OF THE ASSET, IT WAS RECOGNIZED IN THE BOOKS OF ACCOUNT. SIMILARLY, THE PROVISION OF LEAVE ENCASHMENT WAS AL LOWED TO THE ASSESSEE FOLLOWING HONBLE SUPREME COURT JUDGMENT IN THE CAS E OF BHARAT EARTH MOVERS (SUPRA). AGGRIEVED, ON THIS COUNT, REVENUE IS IN APPEAL BEFO RE US. A.Y. 2005-06 5. BRIEF FACTS ARE THAT IN THIS YEAR THE AO AGAIN MADE THE ADDITION IN RESPECT OF SUNDRY CREDITORS I.E. NON-REPLY AND DIFF ERENCE IN ACCOUNTS BY FOLLOWING OBSERVATIONS: DURING THE YEAR, THE ASSESSEE HAS SHOWN TOTAL SUND RY CREDITORS OF RS. 51,02,05,428/- AS ON 31-03-2005 AS AGAINST R S. 32,03,44,048/- AS ON 31-03-2004. THE ASSESSEE COMPA NY WAS REQUIRED VIDE QUESTIONNAIRE DATED 18-07-2007 TO GIV E DETAILS OF SUNDRY CREDITORS ALONG WITH COMPLETE ADDRESSES FOR THE LAST THREE YEARS ALONG WITH CONFIRMATIONS OF BALANCE ABO UT RS. 5 LACS. THE AR HAS FILED A LIST OF SUNDRY CREDIT BALA NCES AS ON 31- 03-2003, 31-03-2004, 31-03-2005 AND 31-03-2006 WHIC H CONTAINS LIST OF PERSONS WHOSE TOTAL AS ON 31-03-20 05 HAS BEEN SHOWN AT RS. 26,38,55,743/-. THE ASSESSEE COMPANY WAS REQUIRED VIDE ORDER SHEET ENTRY DATED 7-11-2007 TO SHOW CAUSE AS TO WHY CREDITORS SHOULD NOT BE ADDED BACK TO THE INCOME AS THE SAME STILL REMAIN UNCONFIRMED. FURTHER VIDE ORDER SHEET ENTRY DATED 14-11-2007 THE AR WAS REQUIRED TO FURNISH EXPLANATION AS REGARDS CREDIT BALANCES STILL UNCONFIRMED WITH ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 14 SUPPORTING EVIDENCES AND CONFIRMATION. THE AR APPEARED ON VARIOUS DATES THEREAFTER HOWEVER NO CONFIRMATIONS WERE FURNISHED EXCEPT FOR THE FOLLOWING VIDE LETTER DATED 19-12-2007: - PROVISIONAL RECONCILIATION OF RIL FOR HE PERIOD 01-02-2004 TO 31-03-2006 FINALLY ARRIVING AT A PROVISIONAL BALANCE AS ON 31-03-2006 WHICH NO WAY EXPLAINS THE BALANCE AS ON 31-03-2005. - RECONCILIATION OF ALLIED ENGINEERS HOWEVER THE LEDGER ACCOUNT OF ALLIED ENGINEERS NOT FILED. A PHOTOCOPY OF A LEDGER ACCOUNT SHOWING CERTAIN TRANSACTIONS NEITHER HEARING THE NAME OF THE PERSON WHOSE BOOKS CONTAIN SUCH LEDGER ACCOUNT NOR IT HAS BEEN SIGNED BY ANY PERSON. NO COGNIZANCE OF SUCH PHOTOCOPY CAN BE TAKEN, - THE RECONCILIATION WHICH DIEO CARBON AND MANUFACTURING COMPANY LIMITED IS UNSIGNED. FURTHER THE RECONCILIATION FILED BY THE ARE COMPANY INCLUDES ENTRIES RELATING TO PERIOD NOT PERTAINING TO THE RELEVANT ASSESSMENT YEAR LIKE F.Y. 2003-04, 2006-07. THE FIGURES HAVE BEEN JUGGLED TO ARRIVE AT A SPECIFIC FIGURE JUST TO MACH THE BALANCES. IN THE ABSENCE OF SIGNATURE NO COGNIZANCE IS BEING TAKEN OF THE PHOTOCOPIES FILED BY THE AR. - A PHOTOCOPY OF LEDGER ACCOUNT OF PRIME WOVENS LIMITED HAS BEEN FURNISHED WHICH IS UNSIGNED. A MERE PHOTOCOPY OF A LEDGER ACCOUNT WITHOUT BEARING SIGNATURE OF THE CONCERNED PERSON IS NO CONFIRMATION. - CONFIRMATION SIGNED BY ACCOUNTS MANAGER ON BEHALF OF STORE SACKS INDIA PRIVATE LIMITED CONFIRMING BALANCE OF RS. 5,41,662/- IS ACCEPTED. ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 15 - THERE IS EMAIL FROM CHEMITECH TO DEBJEET BHATACHARYA CONFIRMING BALANCE OF RS. 602275.71 AS ON 31.03.2005. HOWEVER, THERE IS NO REFERENCE OF THE ASSESSEE COMPANY IN THE COMMUNICATION RELIED UPON BY THE AR. NO COGNIZANCE OF SUCH DOCUMENT CAN BE TAKEN. - A JOINT RECONCILIATION BETWEEN ASSESSEE COMPANY AND INDIA OIL CORPORATION FOR THE PERIOD 1.08.2006 TO 31.03.2007 IS IRRELEVANT AND HAS NO BEARING ON THE SUBJECT MATTER. TO SUM UP IT IS EVIDENT THAT OUT OF ALL THE DOCUMEN TS FILED BY THE AR ONLY ONE CONFIRMATION IN RESPECT OF CREDI T BALANCE OF RS. 5.41.662/- IN RESPECT OF M/S STORE SACKS INDIA PRIVATE LIMITED IS ACCEPTABLE AND NO OTHER CREDIT BALANCE H AS BEEN CONFIRMED. THE ASSESSEE HAS FILED THE LIST OF THE SUNDRY CRED ITORS FOR AS MANY AS 236 CREDITOR PARTIES WHERE CREDIT BALANCE W AS ABOVE RS. 1000/-. THE ASSESSEE FILED THE CREDITOR BALANCE S FOR THE LAST THREE YEARS. DURING THE PROCEEDINGS FOR A.Y. 2003-0 4 IN THE CASE OF THE ASSESSEE COMPANY, THE AO HAD ISSUED NOT ICES U/S 133(6) TO VARIOUS PARTIES AND IN MOST OF THE PARTIE S THE INFORMATION WAS NOT RECEIVED. ON THAT BASIS, AN AMO UNT OF RS. 1.58 CRORES WAS ADDED TO THE INCOME OF THE ASSESSEE COMPANY. AS DISCUSSED ABOVE IN PARA VI.1 EXCEPT FOR CONFIRMA TION OF RS. 5,41,662/-, THE BALANCE AMOUNT STILL REMAIN UNCONFI RMED THOUGH SUFFICIENT OPPORTUNITIES HAD BEEN AFFORDED TO THE A SSESSEE COMPANY. THE ASSESSEE HAS NOT FURNISHED CONFIRMATIO N W.R.T. ANY OTHER PARTY. SINCE THE ASSESSEE HAS NOT FILED T HE CONFIRMATIONS AS REQUIRED, THE AMOUNT SHOWN AGAINST THE BALANCE SUNDRY CREDITOR REMAINS UNVERIFIED. THE ADD ITION MADE W.R.T. THE SUNDRY CREDITOR CONSIDERED IN THE EARLIE R A.Y. I.E. 2003-2004 AND 2004-2005 AMOUNTING TO RS. 1.58 CRORE S AND RS. 3.76 CRORES RESPECTIVELY FURTHER SUGGESTS THAT THE ASSESSEE COMPANY HAS NOT BEEN ABLE TO FURNISH DOCUMENTARY EV IDENCE IN SUPPORT OF CREDITS APPEARING IN ITS BOOKS OF ACCOUN TS. HOWEVER, IT IS SEEN THAT BALANCES OF COMPANIES LIKE RELIANCE IND. LIMITED ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 16 HAS BEEN REDUCED FROM RS. 17.91 CRORES AS ON 31-03- 2004 TO RS. 10.74 CRORES AS ON 31-03-2005. THE ASSESSEE COMPANY HAS FURNISHED BILLS RAISED BY THEM AND IT HAS ALSO FURN ISHED LEDGER ACCOUNT THAT SHOWS REGULAR TRANSACTIONS. HOWEVER, I T AHS NOT BEEN ABLE TO GET THE BALANCES CONFIRMED. ACCORDINGL Y, KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES OF THE CASE THE BALANCES UNCONFIRMED ARE BEING ADDED TO THE INCOME OF THE AS SESSEE COMPANY. IN VIEW OF THE ABOVE, THE CONFIRMATION OF THE PARTI ES WHICH THE ASSESSEE HAS NOT PRODUCED ARE SHOWN AS UNDER: TOTAL SUNDRY CREDITOR SHOWN IN THE BALANCE SHEET RS. 26,38,55,743/- LESS: CONFIRMATIONS FILED BY THE ASSESSEE AS SHOWN ABOVE RS. 5,41,662/- LESS: CREDITORS ALREADY ADDED BACK IN A.Y. 2003-04 RS. 1,60,32,175/- LESS: CREDITORS ALREADY ADDED BACK IN A.Y. 2004-05 RS. 3,74,60,538/- RS. 20,98,21,368/- THE AMOUNT OF RS. 20,98,21,368/- WORKED OUT AS ABOV E REMAINS UNCONFIRMED AGAINST VARIOUS CREDITORS SHOWN BY THE ASSESSEE DURING THE YEAR. 5.1. AGGRIEVED, ASSESSEE ALONG WITH OTHER GROUNDS C HALLENGED THESE ADDITIONS BEFORE CIT(A). IN THIS YEAR ALSO ADDITIO NAL EVIDENCE WAS FILED BY THE ASSESSEE IN RESPECT OF RECONCILIATION OF ACCOUN TS AND BALANCE CONFIRMATION IN RESPECT OF UNREPLIED CREDITORS. ADD ITIONAL EVIDENCE WAS DULY FORWARDED FOR COMMENTS/REMAND REPORT, WHICH WAS SUB MITTED BY THE AO. IN THE REMAND REPORT THE AO OBJECTED TO ADMISSION OF A DDITIONAL EVIDENCE, ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 17 BESIDES SUBMITTED ITS COMMENTS ON THE NATURE OF EVI DENCE. THE COPY OF REMAND REPORT WAS PROVIDED TO ASSESSEE. IN REJOINDE R ASSESSEE CONTENDED THAT THE SPECIFIC COMPLIANCE IN THIS BEHALF WAS ASKED BY AO AT THE FAG END OF THE ASSESSMENT PROCEEDINGS, WHICH WERE TO BE OBTAINED F ROM THIRD PARTIES. DUE TO DELAYED RESPONSE FROM THE PURCHASERS, ASSESSEE C OULD NOT OBTAIN IT PRIOR TO THE FRAMING OF THE ASSESSMENT AND FURTHER CONTENDED AS UNDER: IT WAS FURTHER ADDED THAT BILLS AND RELEVANT RECORD S WERE P R ODUCED B E FOR E ASSESSING OFFICER FOR ESTABLISH I NG GENUINENESS OF THE TRANSACT I ONS DURING TH E Y EAR . DURING ASSESSMENT PROCEEDINGS , THE ASSESSEE HAD PROV I DED THE ASSESS I NG OFFICER WITH THE COPIES OF LETTERS TO ' ALL THE CREDITORS HAVING OUTSTANDING BALANCES OF RS . 5 , 00 , 000/- OR MORE AT THE YEAR END I . E . 31 . 3 . 2005 FOR THEIR BALANCE CONF I RMATION . THE ASSESS I NG OFF I CER AT PARA VI . 3 PAGE NO . 5 O F HIS ORDER HAS ACCEPTED THE FACT THAT REGULAR TRANSACTIONS ENTERED INTO BY TH E ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION WITH THE CREDITORS WE R E ALL DULY SUPPORTED BY THE BILLS , LEDGER ACCOUNTS , ETC . AND THUS GENU I NE . THE ASSESSING OFFICER HAD DISALLOWED ONLY THE BALAN CES OUTSTAND I NG AT THE END O F THE YEAR AND NOT THE TRANSACTIONS AS SUCH WITH ANY OF THE CREDITORS MEAN I N G THE R EBY THAT HE HAD NOT DOUBTED THE GENUINENITY OF EXPENSE/PURCHASE INCURRE D / M ADE DUR I NG THE YEAR . HE HAS DISALLOWED THE CREDIT BALANCE MEREL Y O N THE GROUND OF NON RECE I PT OF CONFIRMATION . IN THIS REGARD REFERENCE WAS MADE TO THE DECISION OF THE HON ' BLE MUMBAI TRI B UNA L IN THE CASE O F SANC HI TA MAR INE PRODUCTS PVT . LTD . VS . DY . CIT 15 SOT 2 8 0 WHEREIN IT WAS HE LD T H AT N O N FI L ING O F A TRANSACT I O N CONFIRMAT I ON B Y I TSELF CANNOT BE A R EA S ON E NOUGH FO R DISALLOWANCE . FURTHE R IT IS WELL SETTLE D THA T ONCE T HE ASSESSE E H AS PR O VED THE IDENTITY OF I TS CRED I TO R S , THE CAPAC I T Y OF H I S CREDITORS AND T H E G EN UIN E NESS OF T HE TRANSACT I ON , THE O N US SH IFT S ON THE DEPA R T M ENT TO D I SALLOW OR ADD ANY AMOUNT . REL I ANCE WAS PLACED ON THE C ASES CITED I N 9 5 TT J 7 1 . 101 T TJ 8 1 0 163 ITR 249 , 205 ITR 44 4 . ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 18 5.2. CIT(A), AFTER CONSIDERING THE MATERIAL AVAILAB LE ON RECORD, ADMITTED THE ADDITIONAL EVIDENCE ALLOWED PART RELIEF IN THIS BEHALF, BY FOLLOWING OBSERVATION: 4.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS M ADE BY LD. AR AND HAVE GONE THROUGH THE ASSESSMENT ORDER/ REMA ND REPORT. IN VIEW OF THE CIRCUMSTANCES EXPLAINED BY L D. AR AND PRINCIPLES OF NATURAL JUSTICE AND TO ARRIVE AT A FA CTUAL FINDING, THE EVIDENCES FILED BY THE APPELLANT ARE ADMITTED. THE ASSESSING OFFICER HAS MADE THE ADDITION ON ACCOUNT OF NON FIL ING OF CONFIRMATIONS FOR CREDIT BALANCES AS ON 31-3-2005. THE APPELLANT WAS GIVEN CREDIT BALANCE OF RS. 5,41,662/ - FOR WHICH CONFIRMATION OF STORE SACKS INDIA PVT. LTD. WAS FI LED. DURING THE APPEAL PROCEEDINGS, THE APPELLANT HAS FILED SOM E ADDITIONAL DOCUMENTS. THE ASSESSING OFFICER HAS OBJECTED TO TH ESE RECONCILIATIONS/ CONFIRMATIONS BY SAYING THAT BILLS/VOUCHERS/COPY OF ACCOUNT ETC. ARE NOT FILED. HOWEVER, I DO NOT FIND FORCE IN ASSESSING OFFICERS OBJECTION BE CAUSE IN ASSESSMENT ORDER ITSELF THE ASSESSING OFFICER HA AD MITTED THAT BILLS AND LEDGER ACCOUNTS WERE FILED BEFORE HIM. TH E OTHER OBJECTION RAISED BY THE ASSESSING OFFICER IS THAT C ONFIRMATION LETTERS FILED BY THE ASSESSEE FOR SOME OF THE PARTI ES ARE UNSIGNED AND THE ASSESSEE AHS JUST RECONCILED THE COPIES OF ACCOUNTS WITHOUT ANY SUPPORTING EVIDENCE. THE APPELLANT AHS NOT REPLIED TO THIS SPECIFIC OBJECTION AND HAS ONLY GIVEN GENER AL ARGUMENTS. FROM A PERUSAL OF THE DOCUMENTARY EVIDENCES FILED B Y THE APPELLANT, THE FOLLOWING POSITION EMERGES: I) FOR BVG INDIA LTD. THE APPELLANT AHS FILED ONE C OPY OF RECONCILIATION STATEMENT ALONG WITH THE COPY OF BAL ANCE CONFIRMATION. HOWEVER, THIS IN FACT, IS A LETTER SE NT BY THE ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 19 APPELLANT COMPANY TO BVG INDIA LTD. AND THE RECONCI LIATION IS SIGNED BY THE AUTHORIZED SIGNATORY OF THE ASSESSEE COMPANY. HENCE, THESE DOCUMENTS ARE IN NO WAY THE CONFIRMATI ON GIVEN BY BVG INDIA LTD. II) FOR CHEMITECH INDIA, ALLIED ENGINEERING WORKS, IMC LIMITED, EASTERN TAR PVT. LTD., RELIANCE INDUSTRIES LTD. AND PREMIER STEELS, THE PRINTOUTS OF E-MAIKLS ARE GIV EN WHICH ARE UNSIGNED AND UNAUTHENTICATED. WHEREVER RECONCILIATI ONS ARE FILED THEY ARE NOT SUPPORTED BY EVIDENCE. HENCE, TH IS DOES NOT MEET THE SPECIFIC QUERY/ REQUIREMENT OF THE ASSESSI NG OFFICER. III) FOR KUMAR & COMPANY, THE APPELLANT HAS FILED O NE LETTER WITH STAMP OF KUMAR & COMPANY WHICH SAYS THAT EH BA LANCE OF RS. 6,48,563/- REPORTED BY THE APPELLANT DOES NOT T ALLY WITH THE BALANCE OF RS. 6,86,479/- APPEARING IN THEIR BOOKS. THE APPELLANT HAS FILED A RECONCILIATION STATEMENT FOR RECONCILING THE DIFFERENCE. HOWEVER, NO SUPPORTING DOCUMENT IS FILE D IN SUPPORT OF THIS RECONCILIATION STATEMENT. SIMILAR I S THE POSITION WITH REGARD TO JANTA ROADLINES, DICO CARBON & MFG. CO. LTD., RAMSON ASSOCIATES. THUS THESE DOCUMENTS FAIL TO PRO VE THE CREDIT BALANCES IN THE BOOKS OF THE ASSESSEE AS ON 31-3-2005. IV) FOR D.S. TRANSPORT CORPORATION, TRANSPORT CORPO RATION OF INDIA LTD. & PACE CARRIER PVT. LTD., MERELY PHOT OCOPIES OF THE CONFIRMATION FOR CREDIT BALANCES ARE FILED WITH ILLEGIBLE STAMPS OR UNSUPPORTED RECONCILIATION. V) FOR CONTINENTAL CARBON INDIA LTD., A PHOTO COPY OF THE UNSIGNED CONFIRMATION IS FILED AND HENCE, DOES NOT MEET THE SPECIFIC REQUIREMENT OF A CONFIRMATION. FROM THE ABOVE, IT IS EVIDENT THAT OUT OF 19 PARTIE S, THE CONFIRMATIONS CAN BE STATED TO BE FILED ONLY WITH R EGARD TO DELHI ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 20 GWALIOR FREIGHT CARRIER, NAGPUR INDORE ROADWAYS, BI UC LOGISTICS LTD. & U.P. BOMBAY ROAD SERVICES. THE ASS ESSING OFFICER IS DIRECTED TO VERIFY AND IF THE BALANCES S TATED IN (VI) ABOVE TALLY WITH THE BALANCES AS APPEARING IN THE B ALANCE SHEET THE CREDIT BE GIVEN ACCORDINGLY. FOR OTHER PARTIES, THE APPELLANT HAS NOT BEEN ABLE TO DISCHARGE THE ONUS OF PROVING THE OUTSTANDING CREDIT BALANCES . EVEN THE RECONCILIATION STATEMENTS FILED BY THE APPELLANT AR E NOT SUPPORTED BY EVIDENCES. THE LD. AR AHS REFERRED TO CERTAIN JUDGMENTS. HOWEVER, IN A RECENT DECISION IN THE CAS E OF UPLAKSH METAL INDUSTRIES VS. CIT 177 TAXMAN 298,IT HAS BEEN HELD BY HONBLE PUNJAB & HARYANA HIGH COURT THAT IN CASE ASSESSEE CLAIMS LIABILITY OF PAYMENT TO TRADE CREDI TORS SHOWN IN THE BALANCE SHEET, IT IS DEFINITELY REQUIRED TO PRI MA FACIE PROVE IDENTITY OF TRADE CREDITORS AS WELL AS GENUINENESS OF TRANSACTION. ONCE ENTRY OF LIABILITY IS NOT ACCEPTED, TREATING A MOUNT OF LIABILITY AS INCOME OF ASSESSEE IS CONSEQUENTIAL. T HE HONBLE HIGH COURT HAS REFERRED TO THE OBSERVATIONS OF HON BLE TRIBUNAL THAT HERE IS NO DISTINCTION LAID BETWEEN THE TRADER CREDITOR AND THE NON-TRADE CREDITOR AND IN CASE THE ASSESSEE CLA IMS LIABILITY OF PAYMENT OF THE TRADE CREDITORS SHOWN IN THE BALANCE SHEET, THE ASSESSEE IS DEFINITELY REQUIRED TO PRIMA FACIE PROV E THE IDENTITY OF THE TRADE CREDITORS AS WELL AS THE GENUINENESS O F THE TRANSACTION. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS RAIS ED SPECIFIC QUERIES WITH REGARD TO THE OUTSTANDING CREDIT BALAN CES. DESPITE SUFFICIENT OPPORTUNITY BEING PROVIDED, THE APPELLAN T AHS FAILED TO PROVE THE GENUINENESS OF THE OUTSTANDING BALANCE S. IN VIEW OF THE FACTS OF THE PRESENT APPEAL, I FIND THAT FOR THE OUTSTANDING BALANCES WHICH REMAIN UNVERIFIED/ UNCON FIRMED, THE ASSESSING OFFICER IS JUSTIFIED IN TREATING THE AMOUNT OF ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 21 LIABILITY AS INCOME OF THE ASSESSEE AND THE SAME IS , THEREFORE, UPHELD. 5.3. AGGRIEVED ON THIS GROUND, BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. A.Y. 2007-08 : 6. BRIEF FACTS RELATING TO ASSESSEES APPEAL FOR A. Y. 2007-08 ARE THAT IN THIS YEAR THE ASSESSMENT ORDER WAS PASSED ON 24-12 -2009, VIDE ORDER-SHEET ENTRY DATED 24-11-2009 THE AO ASKED THE ASSESSEE TO EXPLAIN THE DIFFERENCE AND CREDIT BALANCES IN RESPECT OF WHICH IT WAS CLAI MED BY THE AO THAT NOTICES HAD BEEN RETURNED UNSERVED. IT HAS BEEN OBSERVED B Y AO THAT ALONG WITH ITS REPLY DATED 4-12-2009 THE ASSESSEE ENCLOSED COPIES OF CONFIRMATIONS WHICH WERE FILED EARLIER AND IN RESPECT OF REMAINING CRED ITORS IT WAS PLEADED THAT THEY WERE RUNNING ACCOUNTS ON ACCOUNT OF PURCHASES AND NOT CASH CREDITS. ACCORDING TO AO, 16 PARTIES DID NOT REPLY. IT WAS H ELD THAT THE ONUS FOR PROVIDING THE SOURCE OF A SUM OF MONEY FOUND TO HAV E BEEN RECEIVED BY THE ASSESSEE, HAD NOT BEEN EXPLAINED. THEREFORE, FOLLOW ING HIS LINE OF ACTION IN EARLIER YEARS THE AO MADE THE ADDITION OF RS. 1,83, 38,680/-. 6.1. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL, WH ERE ASSESSEE REITERATED THE CONTENTIONS RAISED IN EARLIER YEARS AND PLEADED THAT: (I) AO HAS HIMSELF ADMITTED THAT THE ASSESSEE HAD FILED COPIES OF CONFIRMATIONS, WHICH ARE ALREADY FILED; ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 22 (II) IT WAS PLEADED THAT IN RESPECT OF REMAINING CREDITO RS FOR WHICH DIFFERENCE EXISTED IN RESPECTIVE ACCOUNTS, THE SAME CANNOT BE ADDED IN AD HOC MANNER MERELY BECAUSE THE OTHER PARTIES D ID NOT FURNISH THE INFORMATION ABOUT DIFFERENCES. (III) THE ADDITION WAS MADE PURELY ON THE GROUND THAT THE ASSESSEE DID NOT FILE CONFIRMATIONS IN RESPECT OF DIFFERENCES. A LTHOUGH, FILING OF CONFIRMATION IS ADMITTED. (IV) OUT OF 16 PARTIES, ASSESSEE HAD PRODUCED CONFIRMATI ONS AND COPIES OF FORM 16A, WHICH WAS APPLICABLE TO 10 PARTIES AMO UNTING TO A SUM OF RS. 1,64,05,665/-. ASSESSEE HAD PRODUCED COM PLETE BOOKS OF ACCOUNT WHICH HAVE NEITHER BEEN DISTURBED NOR RE JECTED. ALL THE PURCHASES MADE BY THE ASSESSEE HAVE BEEN ALLOWED AS ELIGIBLE EXPENDITURE IN ALL THE YEARS. ONLY THE OUTSTANDING CREDIT BALANCES HAVE BEEN ADDED. ASSESSEE PROVIDED ALL THE BILLS, V OUCHERS, INVOICES, BANK STATEMENTS. THE ADDITION WAS UNJUSTI FIED. (V) CIT(A) THOUGH OBSERVED THAT IN A.Y. 2005-06 MAJOR ADDITIONS HAVE BEEN DELETED, HOWEVER, INSTEAD OF DECIDING, RE STORED THE MATTER BACK TO THE FILE OF AO FOR FRESH VERIFICATIO N BY FOLLOWING OBSERVATIONS: 2.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F LD. AR AND HAVE GONE THROUGH THE ASSESSMENT ORDER. IDENTICAL ISSUE CAME UP BEFORE ME IN APPELLANTS OW N CASE FOR ASSESSMENT YEAR 2005-06 WHEREIN THE ASSESS ING OFFICER HAD MADE THE ADDITION ON A/C OF NON-CONFIRM ATION OF OUTSTANDING CREDIT BALANCES. THE ADDITION IN THA T YEAR HAS BEEN UPHELD TO THE EXTENT THE APPELLANT COULD N OT SUBSTANTIATE THE OUTSTANDING BALANCES. IN THE PRESENT APPEAL, THE ASSESSING OFFICER HAS MA DE THE ADDITION, DESPITE CONFIRMATIONS BEING FILED. THE ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 23 ASSESSING OFFICER HAD SENT NOTICES U/S 133(6) TO 22 CONCERNS OUT OF WHICH 16 CONCERNS DID NOT RESPOND A ND HENCE, THE ASSESSING OFFICER ADDED THE OUTSTANDING BALANCES U/S 68 OF THE ACT. HOWEVER, THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DISCREPANCY IN THE CONFIRMATIONS FILED BY THE APPELLANT. IN SUCH CIRCUMSTANCES, THE DISALLOWANCE OF OUTSTANDING BALA NCES MERELY ON THE GROUND THAT THE PARTIES DID NOT RESPO ND TO NOTICE U/S 133(6) IS NOT JUSTIFIED. THE ASSESSING OFFICER HAS NOT GIVEN THE DETAILS WIT H REGARD TO CONFIRMATIONS FILED BY THE APPELLANT. AS PER THE SUBMISSIONS OF THE APPELLANT, CONFIRMATION OF 10 PA RTIES WERE FILED DURING THE ASSESSMENT PROCEEDINGS. WITH REGARD TO REMAINING PARTIES, NO FURTHER EVIDENCE IS FILED TO SUBSTANTIATE THE OUTSTANDING BALANCES. THUS THE APP ELLANT HAS NOT BEEN ABLE TO DISCHARGE THE ONUS OF PROVING THE OUTSTANDING CREDIT BALANCES IN CERTAIN CASES AND AD DITION TO THAT EXTENT IS UPHELD. IN THE CASE OF UPLAKSH ME TAL INDUSTRIES VS. CIT 177 TAXMAN 298, IT AHS BEEN HELD BY HONBLE PUBJAB & HARYANA HIGH COURT THAT IN CASE ASSESSEE CLAIMS LIABILITY OF PAYMENT TO TRADE CREDI TORS SHOWN IN THE BALANCE SHEET, IT IS DEFINITELY REQUIR ED TO PRIMA FACIE PROVE IDENTITY OF TRADE CREDITORS AS WE LL AS GENUINENESS OF TRANSACTION. ONE ENTRY OF LIABILITY IS NOT ACCEPTED, TREATING AMOUNT OF LIABILITY AS INCOME OF ASSESSEE IS CONSEQUENTIAL. IN VIEW OF THE ABOVE DISCUSSION AND ALSO IN VIEW OF THE DECISION ON SIMILAR ISSUE FOR APPEAL IN ASSESSMENT YEAR 2005-06, THE ASSESSING OFFICER IS DIRECTED TO VERIF Y FROM HIS RECORDS AND DELETE THE ADDITION TO THE EXTENT T HE APPELLANT HAS FILED CONFIRMATIONS FOR THE OUTSTANDI NG BALANCES AS ON 31-03-2007. THIS GROUND OF APPEAL IS , THEREFORE, TREATED AS PARTLY ALLOWED. AGGRIEVED ON THIS GROUND, ASSESSEE IS IN APPEAL. ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 24 7. LEARNED COUNSEL FOR THE ASSESSEE ADVERTING TO 20 05-06CONTENDS THAT ALL THE ADDITIONS MADE BY LOWER AUTHORITIES ARE WITHOUT APPRECIATION OF PROPER FACTS AND CONTENTIONS. ASSESSEE FULLY COOPERATED IN THE ASSESSMENT PROCEEDINGS, WHICH IS CLEAR FROM THE CORRESPONDENC E WITH AO IN THIS BEHALF. NOTICE FOR HEARING ALONG WITH LIST OF REQUIREMENTS WAS SENT BY AO ON 30-9- 2005 (AVAILABLE ON PAGES 30 & 31 OF THE PAPER BOOK ). IT WAS REPLIED BY THE ASSESSEE ON 22-12-2005 GIVING ALL THE DETAILS WHICH WERE ASKED FOR AND PARTICULARLY DETAILS OF SUNDRY CREDITORS ALONG WIT H THEIR ADDRESSES ETC. THE SAME IS ON PAPER BOOK PAGES 32 & 33. THEREAFTER, AO SENT A NOTICE DATED 6- 2-2006 IN WHICH REFERENCE WAS MADE TO THE NOTICE U/ S 133(6) SENT TO M/S ALLIED STEEL TRADERS AND M/S CHEMITACH INDIA, WHICH WERE RECEIVED BACK BY AO WITH POSTAL REMARK NO SUCH FIRM. THEREAFTER, V IDE NOTICE DATED 16-2- 2006 AO FURTHER ASKED TO RECONCILE THE DIFFERENCE BETWEEN THE ACCOUNTS OF M/S POWER MAX (INDIA) P. LTD. AND M/S AAR KAY LOGIS TICS (INDIA). ASSESSEE DULY REPLIED THE SAME ON 21-2-2006 TO SHOW THE GENU INENESS, ASSESSEE VIDE THIS LETTER SUBMITTED COPIES OF THE BILLS OF ALLIE D STEEL TRADERS AND CHEMITACH INDIA WITH WHOM ASSESSEE WAS STILL DEALIN G, INDICATING THAT THE CONCERNS WERE IN EXISTENCE AND THERE WAS NO QUESTIO N OF PARTIES BEING BOGUS; COPY OF THE ACCOUNT WAS SUBMITTED. IN RESPECT OF PO WER MAX (INDIA) P. LTD. AND AAR KAY LOGISTICS (INDIA), PROPER RECONCILIATIO N STATEMENT WAS ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 25 SUBMITTED. AGAIN VIDE LETTER DATED 24-3-2006, ASSES SEE MADE A REQUEST TO AO AS UNDER: COPY OF LEDGER ACCOUNTS OF ALL THE PARTIES TO WHOM NOTICES HAVE BEEN SENT U/S 133(6) AS ANNEXURE 4; FURTHER WE WOULD LIKE TO MENTION THAT WE HAD SENT REQUEST TO THESE PARTIE S TO PROVIDE US WITH THEIR STATEMENT OF ACCOUNTS TO RECONCILE TH E BALANCES. WE ARE HEREBY ENCLOSING THE COPY OF SOME OF THE INV OICES AND PAYMENT ADVICE IN SUPPORT OF TRANSACTIONS ENTERED I NTO WITH THESE PARTIES DURING THE YEAR UNDER CONSIDERATION. 7.1. THE INFORMATION IN POSSESSION OF THE ASSESSEE WAS DULY SUBMITTED BEFORE AO; FURTHER INFORMATION FOR RECONCILIATION O F ACCOUNTS WAS NOT AVAILABLE WITH THE ASSESSEE AS LATE AS ON 24-3-2006 . IT IS PERTINENT TO NOTE THAT ASSESSMENT ORDER HAS BEEN PASSED ON 27-3-2006 AS TH E SAME WAS TIME BARRING. THE FACT REMAINS THAT THE ASSESSEE WAS YET TO RECEIVE THE INFORMATION FROM THIRD PARTIES AND THE ASSESSMENT WAS FRAMED TO AVOID TIME BARRING. IN THESE CIRCUMSTANCES, THE ADDITIONAL EVIDENCE FURNIS HED BY THE ASSESSEE BEFORE CIT(A) OUGHT TO HAVE BEEN ADMITTED AS THE AS SESSEE WAS PREVENTED BY SUFFICIENT CAUSE WHICH WAS DULY COMMUNICATED TO AO ON 24-3-2006 I.E. 3 DAYS BEFORE FRAMING THE ASSESSMENT. THERE IS NEITHE R REJECTION NOR MENTION OF ASSESSEES REQUEST ABOUT TIME BY THE AO. 7.2. VIDE WRITTEN SUBMISSIONS DATED 10-9-2008, THE ASSESSEE MADE AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE, P LEADING THAT SUFFICIENT OPPORTUNITY TO PRODUCE THE THIRD PARTIES EVIDENCE ON WHICH ASSESSEE HAS NO ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 26 CONTROL, WAS NOT GIVEN. THE ADDITIONAL EVIDENCE IS LISTED ON LETTER WHICH IS PLACED ON PAGES 420 & 421 OF THE PAPER BOOK. THEREA FTER, ASSESSEE VIDE LETTER DATED 7-7-2009 & 10-8-2009 FURNISHED DETAILS ABOUT ACCOUNT FOR RECONCILIATION OF FOLLOWING SIX PARTIES: (I) AAR KAY LOGISTICS RS. 1795729/- (II) POWER MAX (INDIA) PVT. LTD. RS. 974717/- (III) EASTERN CARRIERS RS. 5313241/- (IV) RATHI FILTERS & INDS. P. LTD. RS. 2087969/- (V) PPL FEEDBACK PACKAGING LTD. RS. 1682532/- (VI) GOEL ROADWAYS RS. 1221955/- 7.3. UNDER THESE CIRCUMSTANCES, THE PRINCIPLE OF NA TURAL JUSTICE DEMANDED THAT THE ADDITIONAL EVIDENCE OUGHT TO HAVE BEEN ADM ITTED BY CIT(A). MORE SO WHEN THE EARLIER INCUMBENT IN OFFICE CIT(A) HAD TAKEN THE TROUBLE OF FORWARDING THE EVIDENCE TO THE AO FOR REMAND WHICH WAS DULY RECEIVED AND ASSESSEE WAS ASKED TO FILE REJOINDER THEREON, WHICH ALSO HAS BEEN DULY SUBMITTED BEFORE CIT(A). HAVING UNDERTAKEN ALL THIS EXERCISE, IT IS UNJUSTIFIED ON THE PART OF CIT(A) TO HAVE REFUSED T HE ADMISSION OF ADDITIONAL EVIDENCE AND CONFIRM THE ADDITIONS ON THE BASIS OF AOS ORDER. 7.4. LEARNED COUNSEL THUS CONTENDS THAT THERE WAS N O JUSTIFICATION IN REFUSING THE ADDITIONAL EVIDENCE. ALL THE PARTIES H AVE RUNNING A/C WITH THE ASSESSEE AND APART FROM THE YEAR IN QUESTION, IT HA D DEALINGS WITH THESE FIRMS IN SUBSEQUENT YEARS WHICH WAS TRIED TO BE EXPLAINED TO THE LOWER AUTHORITIES. ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 27 IT IS PLEADED THAT CIT(A) HAD NO JUSTIFICATION IN R EFUSING TO ADMIT THE ADDITIONAL EVIDENCE U/S 46A(3), THE REMAND REPORT O F AO IN RESPECT OF RECONCILIATION IS ON THE RECORD; THE ASSESSEE FILED REJOINDER THEREON; ENTIRE MATERIAL IS ON RECORD ON THIS ASPECT; THEREFORE, TH E ADDITIONAL EVIDENCE MAY BE ADMITTED AND THE RELEVANT MATERIAL BEING ON RECO RD, THE SAME MAY BE VERIFIED. 7.5. COMING TO THE AOS REMAND REPORT DATED 7-7-200 9, PLACED ON PAGE 458 OF THE PAPER BOOK, LEARNED COUNSEL VEHEMENTLY A RGUED THAT IN A.Y. 2003-04 THE CIT(A) UNDERTOOK THE ENTIRE EXERCISE FO R EXAMINATION OF ADDITIONAL EVIDENCE WHICH CLEARLY INDICATES THAT HE WAS INCLINED TO ADMIT THE ADDITIONAL EVIDENCE. THE SAME WAS JUSTIFIED IN VIEW OF THE FACT THAT THE INFORMATION WHICH COULD NOT BE SUPPLIED BY THE ASSE SSEE WAS SPECIFICALLY COMMUNICATED AT THE FAG END OF THE ASSESSMENT PROCE EDINGS. FURTHER, THE INFORMATION REQUIRED WAS TO BE OBTAINED FROM THIRD PARTIES, SPREAD ALL OVER INDIA. THE ASSESSEE COULD ONLY UTILIZE HIS GOOD REL ATIONS TO SEND THE INFORMATION. IT HAD NO POWER TO COMPEL THEM OR INSI ST IMMEDIATE COMPLIANCE. THE PARTIES WHICH COULD NOT SUBMIT THE NECESSARY DETAILS IN SHORT TIME WERE ADDED IN AD HOC MANNER BY THE AO ON THIS BASIS ONLY. THE SUCCESSOR OF THE CIT(A) THOUGH MENTIONED IN HIS ORD ER ABOUT THE REMAND REPORT FURNISHED BY AO AND THE REJOINDER REPORT OF THE ASSESSEE AND ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 28 RECORDING THAT THE TIME GIVEN TO THE ASSESSEE WAS S HORT, STILL REFUSED TO ADMIT THE ADDITIONAL EVIDENCE. IT IS IRONICAL THAT IN TH E SAME CIRCUMSTANCES FOR A.Y. 2005-06, THE CIT(A) ADMITTED SIMILAR TYPE OF A DDITIONAL EVIDENCE. IT IS PLEADED THAT THERE WAS NO JUSTIFICATION ON THE PART OF CIT(A) TO REFUSE THE ADMISSION OF ADDITIONAL EVIDENCE IN A.Y. 2003-04. T HE SAME MAY BE ADMITTED AND SINCE ALL THE CREDITORS ARE BY AND LAR GE THE SAME FOR A.Y. 2005- 06 AND 2007-08, THE MATTER MAY BE DECIDED ON MERITS . A.Y. 2005-06 : 7.6. IT IS CONTENDED THAT IN A.Y. 2005-06 THE AO A DOPTED A PECULIAR FEATURE BY ADDING ALL THE SUNDRY CREDITORS MINUS TH E CREDITORS ADDED IN A.Y. 2003-04. THIS ACTION SHOWS GROSS AD HOC APPROACH OF THE AO WHO FAILED TO NOTICE THAT ALL THESE CREDITS ARE NOT BY WAY OF LOA N OR ADVANCE BUT THEY WERE DAY TO DAY OUTSTANDING BALANCES OF THE SUPPLIERS OF THE ASSESSEE FROM WHICH ASSESSEE MADE DAY TO DAY PURCHASES OF RAW MATERIAL. THE PARTIES WERE IN EXISTENCE IN EARLIER YEARS AND SUBSEQUENT YEARS. ON E THE ASSESSEE HAS PROVED THE EXISTENCE OF PARTIES AND THE FACT THAT THE AMOU NT WAS IN CREDIT BECAUSE ALL THE PURCHASES WHICH ARE ENTERED IN THE STOCK REGIST ER AND DEBITED TO P&L A/C. AO ACCEPTED THE STOCK REGISTER AND ALLOWED THE EXPENDITURE ON ACCOUNT OF PURCHASES. UNFORTUNATELY, HE DISALLOWED THE OUTS TANDING BALANCES ONLY U/S ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 29 68 WHICH IS NOT APPLICABLE. THE WORKING OF UNFORTUN ATE ADDITION MADE BY THE AO IN A.Y. 2005-06 IS AS UNDER: ADDITIONS MADE ON THE GROUND THAT SINCE THE CONFIR MATIONS FROM CREDITORS HAVE NOT BEEN PRODUCED EXCEPT ONE CREDITO R, CREDITORS BALANCES ARE BEING ADDED AS INCOME ADDITIONS MADE BY AO TOTAL SUNDRY CREDITORS SHOWN IN THE BALANCE SHEET: 263855,743 LESS: CONFIRMATION PROVIDED IN RESPECT OF M/S STORE SACKS INDIA PVT. LTD. 541,662 LESS: CREDITORS ADDED IN AY 2003-04 16,032,175 HOWEVER TOTAL ADDITION MADE IN AY 2003-04 WERE RS. 176,68,774/- AND NOT 160,32,175/- LESS: CREDITORS ADDED BACK IN AY 2004-05 37,460,53 8 209,821,368 7.7. LEARNED COUNSEL THEN CONTENDS THAT BEFORE CIT( A) THE ADDITIONAL EVIDENCE IN RESPECT OF THESE PARTIES FILED. IN THIS YEAR IN THE SIMILAR FACTS ADDITIONAL EVIDENCE HAS BEEN ACCEPTED. CIT(A), HOWE VER, PARTLY DELETED THE ADDITIONS AS UNDER: S.NO. PARTY NAME EVIDENCES ACCEPTED BY CIT(A)VI EVIDENCES REJECTED BY CIT(A) VI AMOUNT AMOUNT AMOUNT 1. BVG INDIA LTD. 571,911 - 571,911 2. CHEMITECH INDIA 609,727 - 609,727 3. KUMAR & CO. 648,563 648,563 4. ALLIED ENGINEERING WORKS 834,800 834,800 5. D.S. TRANSPORT CORP 953,710 - 953,710 6. DELHI GWALIOR 1,168,563 1,168,563 - ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 30 FREIGHT CARRIER 7. NAGPUR INDORE ROADWAYS 1,553,420 1,553,420 - 8. TRANSPORT CORPN. OF INDIA 1,813,104 - 1,813,104 9. PACE CARRIERS PVT. LTD. 1,843,934 - 1,843,934 10. BIC LOGISTICS LTD. 2,088,650 2,088,650 - 11. IMC LTD. 2,091,361 - 2,091,361 12. JANTA ROAD LINES 2,868,105 - 2,868,105 13. EASTERN TAR PVT. LTD. 3,491,102 - 3,491,102 14. CONTINENTAL CARBON CO. 4,961,629 - 4,961,629 15. U.P. BOMBAY ROAD SERVICES 4,703,918 4,703,918 - 16. RELIANCE INDUSTRIES LTD. 107,430,240 - 107,430,240 17. PREMIER STEELS 569,275 - 569,275 18. DISCO CARBON & RIBON MANUFG. CO. 2,770,562 2,770,562 19. RAMSON ASSOCIATES PVT. LTD. 9,915,894 9,915,894 150,888,468 9,514,551 141,373,917 7.8. COMING TO A.Y. 2007-08, LEARNED COUNSEL CONTEN DS THAT IN THIS YEAR THERE IS NO ISSUE OF ADDITIONAL EVIDENCE AS ALL THE RELEVANT MATERIAL WAS BEFORE THE AO. ASSESSEE FILED A PROPER PAPER BOOK, CONTAINING ALL THE INFORMATION AND REQUISITE CONFIRMATIONS BEFORE CIT (A). IN THIS CASE, THOUGH THE ENTIRE MATERIAL WAS ON RECORD, THE CIT(A) COULD NOT FIND ANY FACTUAL DISCREPANCY THEREIN. HOWEVER, FOLLOWING THE ORDER F OR A.Y. 2005-06, PART OF THE ADDITIONS HAVE BEEN CONFIRMED. LEARNED CIT(A) H AS FAILED TO TAKE INTO CONSIDERATION THAT THE ASSESSEE HAS DISCHARGED ITS BURDEN BY FILING NECESSARY ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 31 EVIDENCE BEFORE AO AND THE INSISTENCE OF CONFIRMATI ONS FROM THIRD PARTY BY WAY OF SUMMONS WAS AT THE BEHEST OF AO AND IT WAS H IS DUTY TO HAVE ENFORCED THE SUMMONS. THIS COULD HAVE BEEN DONE BY WAY OF APPOINTING COMMISSIONS OR ASKING THE COUNTER PARTS HAVING THE JURISDICTION OVER SUPPLIERS TO GET THEIR ACCOUNTS VERIFIED AND SUBMIT A REPORT. THE ASSESSEE IS BEING SADDLED OVER AN IMPOSSIBLE BURDEN AS IT DOES NOT HAVE ANY OFFICIAL CONTROL OVER THE SUPPLIERS. THIS EXERCISE COULD HAV E BEEN UNDERTAKEN BY AO EITHER IN ORIGINAL OR IN REMAND PROCEEDINGS OR BY T HE CIT(A) IN HIS APPELLATE POWERS ENSHRINED BY THE ACT. IN THIS CASE, THE REVE NUE AUTHORITIES INSTEAD OF USING THEIR POWERS, HAVE FASTENED THE ASSESSEE WITH RESPONSIBILITY TO DISCHARGE AN IMPOSSIBLE BURDEN. 7.9. LEARNED COUNSEL CONTENDS THAT IN A.Y. 2007-08 THE POSITIONS OF ADDITIONS DELETED/ RETAINED BY THE CIT(A) IS AS UND ER: S.NO. NAME OF PARTIES TO WHOM NOTICE U/S 133(6) WAS ISSUED BUT NO REPLY HAS BEEN RECEIVED ADDITIONS MADE BY AO ADDITIONS DELETED BY CIT(A) VI SUBJECT TO VERIFICATION BY AO ADDITIONS UPHELD BY CIT(A) VI ON THE GROUND THAT APPELLANT HAS NOT BEEN ABLE TO DISCHARGE THE ONUS OF PROVING THE OUTSTANDING CREDIT BALANCES. AMOUNT AMOUNT AMOUNT 1. FEED BACK BUSINESS CONSULTING SERVICES 319,890 - 319,890 2. DEEPAK ROAD LINES 330,769 330,769 - 3. KENGAIN DISTRIBUTION 269,132 - 269,132 ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 32 INDIA 4. RAJASTHAN STEEL ENTERPRISES 615,986 615,986 - 5. STEEL AUTHORITY OF INDIA LTD. 379,513 - 379,513 6. DUKHIRAM MAURYA ENGINEERING & REF WORKS 373,986 373,986 7. MURUGAPPA MORGANS THERMAL CERA LTD. 303,957 303,957 8. INDIAN OIL CORPN LTD. 286,535 - 303,957 9. YUKTEE PATEL TPT PVT. LTD. 2,547,739 2,547,739 10. ORIENT MAI SPEED TPT SERVICE 1,375,033 1,375,033 - 11. TCI HI-WAYS PVT. LTD. 4,245,712 4,245,712 12. TRANSPORT CORPORATION OF INDIA PVT. LTD. 937,138 937,138 13. JANTA ROADLINES 3,041,943 3,041,943 14. THERMOWELD ENGINEERING PVT. LTD. CONTINENTAL CARBON CO. 664,335 664,335 15. D.S. TRANSPORT CORPN. 1,077,517 1,077,517 - 16. DELHI GWALIOR FREIGHT CARRIER 1,569,495 1,569,495 7.10. LD. COUNSEL IN FINE CONTENDS AS UNDER: (I) ALL THESE PARTIES ARE THE SUPPLIER OF RAW-MATERIAL TO ASSESSEE, THE CREDIT BALANCES BEING ON ACCOUNT OF PURCHASE OF GOODS THEY CANNOT BE ADDED U/S 68. THE CIT(A)S RELIANCE ON HO NBLE PUNJAB & HARYANA HIGH COURT JUDGMENT IN THE CASE OF UPLAKSH METAL INDUSTRIES VS. CIT (2009) 177 TAXMAN 298 IS N OT ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 33 APPLICABLE TO ASSESSEES CASE. IN THAT CASE, IDENTI TY, GENUINENESS OF SUPPLIER WAS IN DOUBT. IN THIS CASE IDENTITY OF THE SUPPLIER AND GENUINENESS OF PURCHASERS IS ESTABLISHED AND IS ACC EPTED BY THE AO, BY UPHOLDING THE BOOKS OF ACCOUNT AND FOLLOWING RECORD: (A) STOCK REGISTER; (B) CONSUMPTION BASED ON SUCH PURCHASES HAVE BEEN ACCEP TED; (C) UTILIZATION HAS NOT BEEN DISTURBED; (D) SALES HAVE BEEN ACCEPTED (E) THE ASSESSEES PURCHASES WITH THE SUPPLIERS HAVE BE EN ACCEPTED IN ONE OR OTHER SUBSEQUENT YEAR. CONSEQUENTLY IT CANNOT BE HELD THAT ASSESSEE HAS FA ILED TO DISCHARGE PRIMA FACIE ONUS FOR PROVING THE PURCHASE S AS GENUINE. AO UNFORTUNATELY ADOPTED CONTRADICTORY ST ANDARD ON ONE HAND, ALL THE PURCHASES ARE ACCEPTED AND ALLOWE D AS EXPENDITURE IN P&L A/C, BUT THE AMOUNT PAYABLE TO SUPPLIERS ON THE BASIS OF VERY SAME CREDIT PURCHASES IS BEING DISALLOWED BECAUSE AO COULD NOT SERVED THE NOTICE. THE WHOLE A PPROACH ADOPTED IS GROSSLY MISTAKEN WHICH HAS PUT THE ASSES SEE IN REPEATED LITIGATION. (II) THE ASSESSEES PAYMENTS AGAINST THE PURCHASES ARE T HROUGH BANK STATEMENTS, WHICH WERE EXPLAINED BEFORE AO WITH EVI DENCE ABOUT CLEARANCE OF CHEQUES BY BANK STAMENTS, UNDER THESE CIRCUMSTANCES, NO QUESTION CAN BE RAISED ON THE FIN ANCIAL IMPLICATIONS OF THE TRANSACTIONS AS THEY STAND PROV ED ON THESE FACTS. (III) THE ASSESSEE FILED ALL THE RELEVANT DOCUMENTS SHOWI NG THE GENUINENESS OF THE QUANTITY OF PURCHASES AND THAT O F THE SUPPLIER AND THE FACT THAT THE TRANSACTIONS WERE EN TERED INTO ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 34 RELEVANT BOOKS AND RECORD DURING THE NORMAL COURSE OF BUSINESS OF THE ASSESSEE, HAS NOT BEEN DISPTUED. THE ASSESSE E FILED BANK ACCOUNTS, CONFIRMATION, COPY OF LEDGER ACCOUNTS FOR ALL THE YEARS, COPIES OF PURCHASE BILLS, PAN NOS. OF SUPPLI ERS, THEIR VAT REGISTRATION ETC. WHICH PROVES THE GENUINENESS OF THE TRANSACTIONS BEYOND DOUBT. FURTHER, THE PERUSAL OF BANK ACCOUNT OF THE ASSESSEE AND THE LEDGER ACCOUNTS SHOW THAT THE PAYMENTS TO THE SUPPLIERS HAVE BEEN DULY MADE BY CHEQUE IN DUE COURSE OF THE BUSINESS. (IV) THE AO HAS NOWHERE BEEN ABLE TO POINT OUT A SINGLE DEFECT IN THE BOOKS OF ACCOUNT. THE ONLY REASON FOR MAKING TH E ADDITIONS IS GIVEN AS NON-SERVICE OF NOTICES BY AO ON SUPPLIE R. THE SALES, PURCHASES AND TRADE RESULTS SHOWN BY THE ASSESSEE HAVE BEEN ACCEPTED BY THE AO WITHOUT QUESTION. IT CANNOT BE I MPLIED THAT THE SUPPLIERS OF THESE GOODS FROM THESE SUPPLIERS W ERE NOT RECEIVED AND HENCE THE BALANCES APPEARING IN THESE ACCOUNTS AS ON 31 ST MARCH OF EACH YEAR ARE EXPLAINED MONEY OF THE ASSE SSEE. 7.11. RELIANCE IS PLACED ON HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF CIT VS. ORISSA CORPORATION (P) LTD. (1986) 159 ITR 78 (SC) FOR THE PROPOSITION THAT IF THE AO HAS ISSUED SUMMONS U/S 1 33(6) IT IS HIS DUTY TO BRING THE PROCESS TO A LOGICAL CONCLUSION AND NON- RESPONSE BY SUCH PERSON CANNOT BE HELD AGAINST THE ASSESSEE. THE JUDGMENT I S SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE. CONSEQUENT TO NON-COMPLIA NCE OF SUMMONS U/S ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 35 133(6), ASSESSEE AGAIN PRODUCED CURRENT BILLS OF PU RCHASES FROM SOME OF THE SAME SUPPLIERS TO INDICATE THAT THEY WERE IN EXIST ENCE AT THE ADDRESS. 7.12. RELIANCE IS PLACED ON FOLLOWING CASE LAWS: (A) CIT VS. PANCHAM DASS JAIN (2006) 205 CTR (ALL.) 444 (B) YFC PROJECTS (P) LTD. VS. DCIT (DEL) 134 TTJ 167 (C) ACIT VS. HAN SINGAR GUTKHA (P) LTD. (2008) 9 DTR 604(TRIB.) (D) JCIT VS. MATHURA DASS ASHOK KUMAR (2006) 101 TTJ (A LL) 810. (E) CIT VS. SMT. P.K. NOORJEHAN (1999) 237 ITR 570. 7.13. APROPOS DIFFERENCE IN BALANCES OF ASSESSEE AN D SUPPLIER, THE SAME CANNOT BE ADDED U/S 68 AS THE EXISTENCE OF ASSESSEE , SUPPLIER AND PURCHASES ARE ADMITTED. THE DIFFERENCE IN ACCOUNTS MAY BE DUE TO VARIOUS REASONS INCLUDING DISCOUNT, GOODS RETURNS; QUALITY, DIFFERE NCES, REBATES AND SO MANY OTHER BUSINESS EXIGENCIES. SUCH DIFFERENCES CANNOT LEAD TO ADDITION U/S 68/69C. AT THE MOST, IF THE DIFFERENCES REMAIN UNRE SOLVED FOR NUMBER OF YEARS, THE AO MAY PROCEED TO 41(1), BUT NOT U/S 68 OR 69C. SUPPLIERS EXISTENCE AND TRANSACTIONS HAVING BEEN ACCEPTED, TH E DIFFERENCE THUS CANNOT BE ADDED AS INCOME. THE ASSESSEE FURNISHED RECONCIL IATION, IF THE SAME WERE WRONG, IT WAS THE BURDEN OF AO TO DEMONSTRATE THAT IT WAS NOT PROPER. IF AO FAILS TO DISCHARGE HIS ONUS, IT WILL BE INAPPROPRIA TE TO PUNISH ASSESSEE FOR THE SAME. ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 36 7.14. BECAUSE SUMMONS COULD NOT BE SERVED U/S 133(6 ) OR THE RECONCILIATION WERE NOT CONFIRMED BY THIRD PARTIES, THE ASSESSEE C ANNOT BE SADDLED WITH ADDITIONS AS LONG AS IT HAS DISCHARGED ITS BURDEN C AST BY THE I.T. ACT. IT IS PLEADED THAT ADDITIONS IN THIS BEHALF IN A.Y. 2003- 04 & 2005-06 MAY BE DELETED. 8. LEARNED DR IS HEARD, WHO RELIES ON THE ORDERS OF AO AND CONTENDS THAT THE I.T. ACT CAST A BURDEN ON THE ASSESSEE TO PROVE IDENTIFY, GENUINENESS AND CREDITWORTHINESS OF THE CREDITORS. CIT(A) HAS PROPERLY RELIED ON THE PUNJAB & HARYANA HIGH COURT JUDGMENT IN THE CASE OF UPLAKSH METAL INDUSTRIES (SUPRA). SINCE THE ASSESSE ES SUPPLIERS FAILED TO RESPOND TO SUMMONS U/S 133(6),IT IMPLIED THAT THEY WERE NOT GENUINE, THE ADDITIONS AS MADE BY AO ARE JUSTIFIED. 9. LEARNED COUNSEL FOR THE ASSESSEE IN REJOINDER CO NTENDS THAT THE LIABILITY IN THE FIRST PLACE U/S 68 IS NOT APPLICAB LE TO TRADE CREDITORS WHOSE PURCHASES ARE ACCEPTED. SAME SUPPLIERS HAVE BEEN AC CEPTED IN OTHER YEARS, DIFFERENCE IN ACCOUNTING BALANCES WHICH HAVE BEEN R ECONCILED BY THE ASSESSEE AND THIRD PARTY RESPONSE TO SUMMONS U/S 13 3(6) IS NOT THE BURDEN OF THE ASSESSEE. SINCE THE SUMMONS REMAINED UNCOMPLIED WITH, THERE IS NO NEGATIVE CONFIRMATION, THE STATUTORY PROCESS WHICH IS WITHIN THE POWER OF AO REMAINED UNFULFILLED, THERE IS NO SHIFTING OF ON US ON THE ASSESSEE. IN ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 37 THESE CIRCUMSTANCES, NO ADDITION CAN BE MADE U/S 68 . BESIDES, THE ASSESSEES BOOKS OF ACCOUNT ARE ACCEPTED; ALL THE CREDIT PURCH ASES ARE VOUCHED; PAYMENTS ARE REALIZED THROUGH BANK STATEMENTS, WHIC H ARE PRODUCED; THE STOCK REGISTER, PURCHASE DETAILS, CONSUMPTION OF RA W MATERIAL, YIELD, SALES AND TRADE DEBTORS HAVING BEEN ACCEPTED, THESE CREDI T BALANCES CANNOT BE ADDED U/S 68. 10. WE HAVE HEARD RIVAL SUBMISSIONS ON THIS ISSUE. AS FAR AS NON- ADMISSION OF ADDITIONAL EVIDENCE IN A.Y. 2003-04 IS CONCERNED, THE FIRST INCUMBENT CIT(A) IN A.Y. 2003-04 HAD SENT THE ADDIT IONAL EVIDENCE FOR THE COMMENTS OF AO WHO SUBMITTED A PROPER REMAND REPORT WHICH WAS DULY REJOINED BY THE ASSESSEE. IT CLEARLY EMERGES FROM R ECORD THAT DURING THE ASSESSMENT PROCEEDING THE SPECIFIC QUERIES WERE RAI SED AT THE FAG END AND THE ASSESSEE WAS NOT GIVEN SUFFICIENT TIME FOR SPEC IFIC COMPLIANCE. THE DOCUMENTS/ RECORDS IN POSSESSION OF THE ASSESSEE WE RE DULY SUPPLIED TO THE AO AND NO ADVERSE COMMENTS HAVE BEEN MADE IN THIS B EHALF. WE FIND MERIT IN THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSE SSEE THAT FOR 133(6) COMPLIANCE IT HAD NO CONTROL OVER THIRD PARTIES. IN OUR VIEW, ONCE THE AO ISSUED SUMMONS U/S 133(6), AS HELD BY HONBLE SUPRE ME COURT IN THE CASE OF CIT V. ORISSA CORPORATION (P) LTD. (SUPRA), IT I S HIS DUTY TO ENSURE THAT THE PROESS OF ISSUE OF SUMMONS IS BROUGHT TO A LOGICAL CONCLUSION BY ENFORCING ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 38 SUMMONS. THE ENFORCEMENT CAN BE ACHIEVED IN MANY WA YS INCLUDING TAKING ACTION ON UNCOMPLIED SUMMONED PERSONS, BY APPOINTIN G COMMISSION ON THE INCOME-TAX AUTHORITIES HAVING JURISDICTION OVER THE M AND GETTING THE VERIFICATION FROM THEIR RETURNS OR ACCOUNTS. IN THE SE CASES NEITHER AO NOR CIT(A) ADOPTED THIS COURSE AS LAID DOWN BY LAW. 10.1. FURTHER, ON SAME FACTS AND CIRCUMSTANCES, CIT (A) PARTLY ADMITTED THE ADDITIONAL EVIDENCE IN SUBSEQUENT YEAR I.E. A.Y. 20 05-06. IN OUR VIEW IF THE SPECIFIC QUERIES ARE RAISED AT THE END OF ASSESSMEN T PROCEEDINGS AND THE SUMMONS ARE NOT SERVED OR REPLIED, IN THAT CASE ASS ESSEE DESERVES AN OPPORTUNITY TO BE HEARD IN APPEAL. IF A PROPER APPL ICATION FOR ADMISSION OF ADDITIONAL EVIDENCE IS FILED ALONG WITH REASONS, TH E SAME SHALL BE ADMITTED. IN VIEW THEREOF, WE SEE NO JUSTIFICATION IN REFUSAL OF ADMISSION OF ADDITIONAL EVIDENCE IN A.Y. 2003-04, MORE SO WHEN IN A.Y. 2005 -06 CIT(A) AGAIN PARTLY ADMITS THE ADDITIONAL EVIDENCE. CONSEQUENTLY , THE EVIDENCE FILED BY THE ASSESSEE IS ADMITTED. 10.2. NOW, ADVERTING TO THE MERITS OF THE CASE, THE ASSESSEE MADE VARIOUS PURCHASES FROM THESE PARTIES NOT ONLY IN THIS YEAR BUT IN SOME CASE IN EARLIER OR SUBSEQUENT YEARS ALSO. THE ASSESSEE HAS FURNIS HED A DETAILED COMPARATIVE CHART OF EACH PURCHASE IN A.Y. 2003-04, 2004-05, 20 05-06, 2006-07 & 2007-08 ON RECORD. THE ASSESSEES PURCHASE TRANSACT IONS WITH THESE PARTIES IS ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 39 REPEATED ONE OR OTHER IN THESE YEARS AND THE ACTUA L CREDIT PURCHASES THEREFROM HAVE BEEN ACCEPTED EITHER BY THE AO OR CI T(A) ON ONE GROUND OR THE OTHER. IT IS NOT THE CASE OF AO THAT THE PURCHA SES WERE BOGUS OR THE PURCHASES ARE NOT EFFECTED. THIS IS EVIDENT FROM TH E FACT THAT ALL THE PURCHASES OF THE ASSESSEE, STOCK REGISTER, YIELD, S ALES, SUNDRY DEBTORS REMAIN ACCEPTED IN ALL THESE YEARS. CONSEQUENTLY, IT CANNO T BE HELD THAT SUCH SUPPLIERS WERE NOT GENUINE ONLY BECAUSE SUMMONS U/ S 133(6) WERE NOT SERVED. 10.3. WHAT IS BEING ADDED BY THE AO IS THE CREDIT B ALANCES OF SUPPLIERS AS ON THE END OF EACH YEAR, WHICH, IN OUR VIEW, CANNOT BE DONE U/S 68, AS LONG AS THE PURCHASE IS ADMITTED BY THE DEPARTMENT. IN T HIS CASE ASSESSEES APPEAL WAS DISMISSED BY UPHOLDING THE FOLLOWING FINDING OF THE ITAT: HOWEVER, IN OUR OPINION THE OBSERVATION OF THE ASS ESSING OFFICER THAT THE ASSESSEE WAS PRIMA FACIE REQUIRED TO PROVE THE GENUINENESS OF THE TRANSACTION AND IDENTITY OF THE CREDITORS IS NOT MISPLACED BECAUSE THERE IS NO DISTINCTION LAID BETWEEN THE TRADE CREDITOR AND THE NON-TRADE CREDITOR AND WE AR E FURTHER OF THE OPINION THAT IN CASE THE ASSESSEE CLAIMS LIABIL ITY OF PAYMENT TO THE TRADE CREDITORS SHOWN IN THE BALANCE-SHEET, THE ASSESSEE IS DEFINITELY REQUIRED TO PRIMA FACIE PROVE THE IDENTI TY OF THE TRADE CREDITORS AS WELL AS THE GENUINENESS OF THE TRANSAC TION. IN THIS CASE, ADMITTEDLY THE ASSESSEE HAS NEITHER BEEN ABLE TO DISCLOSE THE COMPLETE ADDRESSES OF THE TRADE CREDITORS NOR I S ABLE TO GIVE THE COMPLETE ADDRESSES OF THE CONSIGNORS NOR THE NA ME HAS BEEN MENTIONED ON THE CHALLAN FORMS, SO THE VERIFICATION OF THE SAME BY THE ASSESSING OFFICER BECAME TOTALLY IMPRACTICAB LE ON ACCOUNT OF LACK OF THIS COMPLETE INFORMATION SUPPLI ED BY THE ASSESSEE. IT MEANS THAT THE ASSESSEE FAILED IN EST ABLISHING THE ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 40 GENUINENESS OF THE SO CALLED TRADE CREDITORS APPEA RING IN ITS BOOKS OF ACCOUNT . WE ARE FURTHER OF THE OPINION TH AT SINCE IN THE INSTANT CASE OF THE ASSESSEE, THE POINT UNDER C ONSIDERATION BEFORE US IS REGARDING THE GENUINENESS OF THE LIABI LITY AMOUNTING TO RS. 1,75,26,586/- SHOWN BY THE ASSESSE E IN ITS BALANCE-SHEET AS TRADE CREDITORS, SO IT WA NOT RELE VANT FOR US TO CONSIDER AS TO WHETHER THE PURCHASES MADE BY THE AS SESSEE WERE GENUINE OR NOT OR TO WHETHER THE ASSESSEE HAS INFLA TED THOSE PURCHASES OR NOT. IT IS ALSO NOT MATERIAL TO CONSID ER WHETHER THE GRS FROM SALES-TAX DEPARTMENT WERE VERIFIED OR NOT, SO, THE CIT(A) ON CONSIDERING THESE POINTS WAS NOT JUSTIFIE D IN DELETING THE IMPUGNED ADDITION WITHOUT DISCUSSING AS TO WHET HER THE LIABILITY OF TRADE CREDITORS SHOWN BY THE ASSESSEE IN THE ABSENCE OF FURNISHING COMPLETE ADDRESSES OF TRADE CREDITORS / CONSIGNORS AND THE PAYMENT VOUCHERS WAS GENUINE OR NOT. 10.4. THE CASE IS NOT APPLICABLE TO ASSESSEES CASE INASMUCH AS THE IDENTITY OF THE SUPPLIER AND ASSESSEES TRADING RESULTS HAVE BEEN ACCEPTED BY THE DEPARTMENT IN ONE YEAR OR THE OTHER. IN VIEW THEREO F, WE HOLD THAT THE ADDITIONS MADE IN THE CASE OF THE ASSESSEE U/S 68 O F THE ACT OUGHT TO BE DELETED IN ALL THESE YEARS. IN OUR VIEW THE I.T. AC T DOES NOT CAST ABSOLUTE BURDEN ON THE ASSESSEE, SEC. 68 CAST A PRELIMINARY BURDEN, WHICH, IN OUR VIEW, HAS BEEN DULY DISCHARGED BY THE ASSESSEE BY F ILING THE CONFIRMATIONS, BANK STATEMENTS, INVOICES AND TRANSPORT DETAILS OF SUPPLIES AND GOODS. THE IDENTITY OF THE PURCHASER IS ACCEPTED BY THE DEPART MENT IN ONE YEAR OR THE OTHER SUBSEQUENT YEAR. THE GENUINENESS OF THE PURCH ASES EMERGE FROM THE FACT THAT ALL THE GOODS PURCHASED BY THE ASSESSEE O N CREDIT. PURCHASES HAVE NOT BEEN DISPUTED BY THE DEPARTMENT IN P&L A/C BY A LLOWING SAME AS ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 41 EXPENDITURE TO THE ASSESSEE. THEREFORE, ASSESSEE HA S DISCHARGED ITS ONUS TO FILE EVIDENCE FOR GENUINENESS OF SUPPLIERS. THE ISS UE OF CREDITWORTHINESS WILL NOT BE APPLICABLE IN THIS CASE AS THE CREDIT BALANC ES ARE DUE TO PURCHASES MADE BY THE ASSESSEE FROM THESE SUPPLIERS. THEREFOR E, THE DISCHARGE OF BURDEN OF CREDITWORTHINESS IS IMPLICIT FROM THESE F ACTS. LOOKING FROM ANY ANGLE, THE ASSESSEE CANNOT BE HELD TO BE LIABLE FOR ANY NON-DISCHARGE OF ONUS. IN THESE CIRCUMSTANCES, THE ADDITIONS CANNOT BE MAD E ONLY BECAUSE THE DEPARTMENTAL AUTHORITIES FAILED TO EXERCISE THEIR P OWER AND DUTIES FOR SERVING AND ENFORCING THE SUMMONS. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND THE EVIDENCE PRODUCED BY THE ASSESSEE, THE ADDITIONS MADE U/S 68 ON ACCOUNT DIFFERENCE IN BALANCES OR NON-RECEIPT OF REPLY TO SUMMONS ETC. CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. ALL TH ESE ADDITIONS IN THE YEARS BEFORE US ARE DELETED. CORRESPONDING ASSESSEES GRO UNDS IN A.Y. 2003-04 AND 2005-06 ARE ALLOWED AND THAT OF REVENUE DISMIS SED. 11. OTHER GROUND RAISED BY ASSESSEE IN A.Y. 2003-04 IS IN RESPECT OF DISALLOWANCE OF EXPENDITURE OF RS. 4,72,452/-. 12. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT ASSESSMENT ORDER HAS BEEN PASSED ON 27-3-2006. THE LAST SPECIFIC NOTICE U/S 142(1) WAS ISSUED ON 16-2-2006 WHICH DOES NOT CONTAIN ANY QUERY ABOUT TH E PRIOR PERIOD EXPENSES. CONSEQUENTLY, QUERY, IF ANY, WAS RAISED B Y AO AFTER 16-2-2006. ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 42 REFERENCE IS INVITED TO THE ASSESSEES LETTER DATED 24-3-2006 IN WHICH COPIES OF DEBIT NOTES IN RESPECT OF TECHNICAL FEE AND REIM BURSEMENT MADE TO CONTINENTAL CARBON CO. USA, WAS FILED. LEANED COUNS EL CONTENDS THAT THE AO RAISED A QUERY AT THE FAG END OF THE ASSESSMENT YEAR. ASSESSEE ORALLY EXPLAINED THAT IT WAS THE AMOUNT PAYABLE ON ACCOUNT OF CONSULTANCY SERVICES TO CONTINENTAL CARBON CO. USA. THAT BEING INTERNATI ONAL COMPANY, THEY HAVE A PROCEDURE FOR ISSUING THE DEBIT NOTE. ASSESS EE DULY EXPLAINED THAT WHEN THESE BILLS WERE RECEIVED BY THE ASSESSEE, THE LIABILITY CRYSTALLIZED. IT HAS NOT BEEN DISPUTED THAT THE SERVICES WERE RENDE RED AND THERE IS NO ADVERSE FINDING ABOUT THE BILLS OR THE LIABILITY HA VING BEEN COMMUNICATED TO THE ASSESSEE EARLIER. IT IS FURTHER EVIDENT FROM TH E RECORD THAT PART OF THE BILL WAS APRIL 2002 AND THE BALANCE WAS IN MARCH 2003. T HE ASSESSEE RECEIVED THE BILLS IN MARCH 2003 AND BY GENERAL ENTRY ENTERE D THE LIABILITY. SINCE THE CONSULTANCY REPORT WAS COMPLETED IN MARCH 2003, THE REFORE, IT IS PROPERLY RECORDED. IT IS EVIDENT THAT THE CONSULTANCY BILLS WERE RAISED BY WAY OF TWO BILLS I.E. APRIL 2002 AND MARCH 2003. THERE IS NO D ISPUTE ABOUT THE RENDERING OF SERVICE AND THE LAST BILL DRAWN BY CONTINENTAL C ARBON CO. USA BEING MARCH 2003. THE LIABILITY HAS CRYSTALLIZED IN THIS YEAR AND CANNOT BE CALLED AS RELATING TO EARLIER YEAR AND IS ALLOWABLE EXPEND ITURE. IN VIEW THEREOF, WE DELETE THE ADDITION. ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 43 13. ONLY OTHER GROUND RAISED BY THE ASSESSEE FOR A. Y. 2005-06 IS IN RESPECT OF DISALLOWANCE OF RS. 1,23,000/- ON ACCO UNT OF EXPENSES FOR ANNUAL CHAMBER MEMBERSHIP FEE PAID TO TAJ MAHAL HOTELS. 13.1. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THA T THE AMOUNT IS ALLOWABLE REVENUE EXPENDITURE AS THE ASSESSEE AVAIL ED THE MEMBERSHIP OFFERED BY TAJ MAHAL HOTELS WHICH WAS ECONOMICAL, P ROVIDING THE FACILITY TO USE THE CHAMBER AT ANY TIME DURING THE YEAR FOR ME ETINGS OF CLIENTS AND OFFICERS. IT IS A BUSINESS DECISION FOR AVOIDING RO OM RENT EXPENSES, THE SAME IS ALLOWABLE. 13.2. LEARNED DR IS HEARD. 13.3. WE SEE NO JUSTIFICATION FOR THIS ADDITION AS THE SAME WAS INCURRED BY THE ASSESSEE FOR BUSINESS PURPOSES AND IS SUPPORTED BY PROPER VOUCHERS. THIS ADDITION IS DELETED. 14. COMING TO THE REVENUES APPEAL FOR A.Y. 2003-04 , IN RESPECT OF WORKING U/S 115JB BOTH THE PARTIES AGREED THAT IN V IEW OF RETROSPECTIVE AMENDMENT MADE BY FINANCE ACT, 2009 IN SEC. 115JB, APPLICABLE W.E.F. 1-4- 2001, THE DEDUCTION IN RESPECT OF LEAVE ENCASHMENT IS TO BE ALLOWED IN FAVOUR OF THE ASSESSEE AND BALANCE TWO DISALLOWANCE S IN RESPECT OF BAD DEBTS AND OBSOLETE/ NON-MOVING STORES WILL BE IN FAVOUR O F THE DEPARTMENT. THE ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 44 AO WILL RECOMPUTED THE DEDUCTION. THIS GROUND OF RE VENUE IS PARTLY ALLOWED. 15. NOW WE COME TO THE REVENUES APPEAL FOR A.Y. 20 05-06. DEPARTMENT HAS CHALLENGED THE ALLOWANCE OF 60% DEPRECIATION ON COMPUTER PERIPHERALS. THE ISSUE IS NOT SETTLED BY THE HONBLE DELHI HIGH COURT, UPHOLDING THAT 60% DEPRECIATION IS TO BE ALLOWED ON COMPUTER PERIP HERALS. THIS GROUND OF REVENUE IS DISMISSED. 16. COMING TO THE SECOND REVENUES GROUND I.E. ALLO WING DEPRECIATION OF RS. 10,97,974/- ON CAPITAL STORES ON THE GROUND TH AT THESE STORES WERE NOT PUT TO USE OF THE BUSINESS OF THE ASSESSEE. WE SEE NO I NFIRMITY IN THE ORDER OF CIT(A) WHO HAS ALLOWED THE DEPRECIATION ON THE BASI S OF ACCOUNTING STANDARD AS-10 AND HONBLE DELHI HIGH COURTS JUDGM ENT IN THE CASE OF CIT VS. INSILCO LTD. 320 ITR 322, HOLDING AS UNDER: IN VIEW OF THE RATIO OF THE JUDGMENTS REFERRED TO HEREINABOVE WE ARE OF THE CONSIDERED OPINION THAT THE EXPRESSIO N USED FOR THE PURPOSES OF BUSINESS APPEARING IN SECTION 32 OF THE ACT ALSO TAKES INTO ACCOUNT EMERGENCY SPARES WHICH EVEN THOU GH READY FOR USE ARE NOT AS A MATTER OF FACT CONSUMED OR US ED DURING THE RELEVANT PERIOD, AS THESE ARE SPARES SPECIFIC TO A FIXED ASSET AND WILL IN ALL PROBABILITY BE USELESS ONCE THE ASSET I S DISCARDED. IN THAT SENSE, THE CONCEPT OF PASSIVE USER WHICH IS AP PLIED BY THE AFOREMENTIONED CASES TO STANDBY MACHINERY WILL BE A PPLICABLE TO EMERGENCY/ INSURANCE SPARES. THIS GROUND OF REVENUE IS DISMISSED ACCORDINGLY. ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 45 17. ASSESSEES APPEAL FOR A.Y. 2007-08 : FACTS AND CIRCUMSTANCES OF THE ASSESSEES APPEAL IN RESPECT OF ADDITIONS U/S 68 WH ICH ARE MENTIONED ABOVE, ARE SIMILAR TO A.Y. 2003-04 & 2005-06. THE FACTS AN D CIRCUMSTANCES BEING THE SAME, THE ADDITIONS U/S 68 FOR THIS YEAR ALSO A RE DELETED. 18. IN THE RESULT, REVENUES APPEAL FOR A.Y. 2003-0 4 IS PARTLY ALLOWED AND THAT FOR A.Y. 2005-06 IS DISMISSED. ASSESSEES APPE ALS FOR ALL THE THREE ASSESSMENT YEARS I.E. 2003-04, 2005-06 & 2007-08 AR E ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 31-10-2011. SD/- SD/- (K.D. RANJAN ) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31-10-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 5269, 5270, 5271, 5242 & 5513/D/10 CONTINENTAL CARBON INDIA LTD. 46