CANNON INDUSTRIES LTD, MUMBAI V. DCIT 1(1), MUMBAI

ITA 5410/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8105 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 14-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 20-07-2011
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained cash credit; Loose papers; Principle of natural justice; Opportunity of cross examination; Rule of consistency; Corroborative evidences
• Section: 43B; 40A(3); 133A; 234B; 145; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; JH FOT; IKY JKO U;KF;D LNL; ,OA ,OA ,OA ,OA JH JH JH JH UJSUNZ DQEKJ FCYYS;K UJSUNZ DQEKJ FCYYS;K UJSUNZ DQEKJ FCYYS;K UJSUNZ DQEKJ FCYYS;K] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER VK;DJ VIHY LA[;K / ITA NO.5410/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2006-07 VK;DJ VIHY LA[;K / ITA NO.5411/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2007-08 VK;DJ VIHY LA[;K / ITA NO.5512/MUM/2012 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2008-09 M/S CANNON INDUSTRIES PVT. LTD 109, CHURCHGATE CHAMBERS, 5, NEW MARINE LINES, MUMBAI 20 VS. DCIT 1(1) MUMBAI. PAN:- AAACC 2189 D APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED AG AINST THREE SEPARATE ORDERS OF CIT(A) FOR A.Y. 2006-07, 2007-08 AND 2008 -09 RESPECTIVELY. FOR THE A.Y. 2006-07, THE ASSESSEE HAS RAISED FOLLOWIG CONCISE G ROUNDS:- ASSESSEE BY / FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS FU/KKZFJRH DH VKSJ LS SHRI. V.K. TULSIAN REVENUE BY/ JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS JKTLO DH VKSJ LS SHRI A.C. TEJPAL DATE OF HEARING 11.09.2014 DATE OF PRONOUNCEMENT 17.10.2014 M/S CANNON INDUSTRIES PVT. LTD 2 | P A G E 1THAT WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONF IRMING ASSESSMENT ORDER WITHOUT EVEN AFFORDING PROPER OPPORTUNITY OR APPRECIATING T HE SUBMISSION/EVIDENCE OF THE APPELLANT. 2. THAT WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONF IRMING ASSESSMENT ORDER CONFIRMING ADDITIONS OF RS.24,73,000784/- TOWARDS PU RCHASES FROM 11 PARTIES AS NON - GENUINE EVEN WHEN :- A) THERE WAS NO DISPUTE IN THE QUANTITATIVE FIGURE OF PURCHASE AND SALE B) NON-PROVIDING ANY OPPORTUNITY TO CROSS - EXAMINE TO THE WITNESS OF THE DEPARTMENT. C)NOT A SINGLE DIFFERENCE IN STOCK RECORDS D) NO DISPUTE ON THE AUDITED FINANCIAL STATEMENTS E) NOT AN IOTA OF EVIDENCE WAS FOUND/IMPOUNDED DURI NG SURVEY EITHER IN THE PREMISES OF THE APPELLANT'S OR IN THE PREMISES OF T HE THE SUPPLIER'S PLACE. F) NO DISPUTE ABOUT PAYMENT BY THE BANKING CHANNEL G) NO REJECTION OF BOOKS OF ACCOUNT . 3. THAT WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CON FIRMING ADDITION OF RS. 40 LACS AS A BOGUS PURCHASE,EVEN WHEN THERE WERE NO PURCHASES FROM THE ALLEGED PARTIES, JUST BASED ON NOT SPECIFICALLY TAKEN IN GROUNDS EVEN THO UGH IT WAS TAKEN IN THE SUBMISSION. 4. THAT WHETHER THE LD. CIT(A) WAS JUSTIFIED BY RES TORING BACK TO A.O. THEADDITION OF RS.16782274/- ON ACCOUNT OF DEPB LICENSE EVEN THOUG H THEEVIDENCE WAS FULLY EXPLAINED. 5. THAT WHETHER THE LD. CIT(A) WAS JUSTIFIED BY C ONFIRMING THE ADDITION OF RS. 14097079/- MADE U/S 40A(3) EVEN WHEN THE SECTION WA S NOT APPLICABLE TO THE EXCEPTIONAL CIRCUMSTANCES 6. WHETHER THE LD. CIT(A) WAS JUSTIFIED INI CONFIR MING THE DISALLOWANCE OFRS. 35000/- U/S 43B FOR PF & ESI WITHOUT APPRECIATING T HE EVIDENCE ON RECORD. 2. GROUND NO. 1 IS GENERAL IN NATURE AND THE SAME I S NOT PRESSED BY THE ASSESSEE. ACCORDINGLY NO FINDING IS REQUIRED IN RES PECT OF GROUND NO. 1 AND THE SAME IS DISMISSED AS NOT PRESSED. M/S CANNON INDUSTRIES PVT. LTD 3 | P A G E 3. GROUND NOS. 2 AND 3 ARE REGARDING ADDITION ON AC COUNT OF BOGUS PURCHASES FROM ELELVEN PARTIES. 3.1 THE ASSESSEE IS AN EXPORT HOUSE EXPORTING HOSIERY GOODS, WOOLENS, SYNTEHICS AND READY-MADE TO CIS COUNTRIES AND MIDDLE EAST. A SURVEY U/S 133 WAS CONDUCTED IN THE CASE OF ASSESSEE GROUP AND OTHER P ARTIES ON 31.03.2006, WHEREIN THE STATEMENT OF SOME OF THE PARTIES(SUPPLIERS) WER E RECORDED. THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 24,73,00,784/- OUT OF THE TOTAL PURCHASE OF RS. 2,20,57,67,965/- ON THE BASIS OF THE STATEMENTS GI VEN BY FOUR PERSONS DURING THE COURSE OF SURVEY PROCEEDINGS ON 31.03.2006 AS WELL AS SUPPLEMENTARY STATEMENTS RECORDED ON 12/13.04.2006. THE MAIN BASIS FOR DISAL LOWANCE OF PURCHASES BY THE ASSESSING OFFICER, IS THE STATEMENT GIVEN BY THESE FOUR PERSONS THAT THEY ARE ENGAGED GIVING ACCOMODATION BILLS TO THE PARTIES AN D RETURNING CASH AFTER CHARGING THEIR COMMISSION AT THE SPECIFIED RATES. T HE ASSESSING OFFICER STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE FAILED TO JU STIFY THESE PURCHASES TO HIS SATISFACTION AND ONLY AT THE FAG END OF THE ASSESSM ENT PROCEEDINGS ASKED FOR CROSS EXAMINATION OF THESE FOUR PARTIES WHOSE STATEMENTS WERE RECORDED. THUS THE ASSESSING OFFICER UNDER THESE CIRCUMSTANCES, HELD T HE PURCHASES OF RS. 24,73,00,784/- AS BOGUS PURCHASES AND ADDED THE SA ME TO THE TOTAL INCOME OF THE ASSESSEE. 3.2 BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE ASSESSEE WAS NOT GIVEN PROPER TIME AND OPPORTUNITY FOR FILING THE DETAILS AND PROOFS AND TO CROSS M/S CANNON INDUSTRIES PVT. LTD 4 | P A G E EXAMINE THESE PARTIES. THE CIT(A) ISSUED A REMAND O RDER DIRECTING THE ASSESSING OFFICER TO GRANT AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE FOUR PARTIES AND THEN SUBMIT HIS REPORT. THE ASSESSING OFFICER S UBMITTED THE REMAND REPORT ON 12.01.2011 AND STATED THAT SUMMONS ISSUED TO FOUR P ARTIES FOR CROSS EXAMINATION DURING THE REMAND PROCEEDINGS, WERE RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK LEFT/NO SUCH PERSONS AND ACCORDINGLY THE ASSESSEE COULD NOT BE ALLOWED THE OPPORTUNITY FOR CROSS EXAMINATION . AFTER CONSIDERING THE REMAND REPORT, THE CIT(A) CONFIRMED THE ADDITION MADE BY A SSESSING OFFICER. 3.3 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE TOTAL SALE OF THE ASSESSEE COMPRISING MORE THAN 92% FROM EXPORTS AND THE REMAINING 8% IS DOMESTIC SALE. THE ASSESSEE IS PROPERLY MAINTAINING BOOKS OF ACCOUNTS WHICH WERE DULY AUDITED AS PER THE PROVISI ONS OF THE COMPANIES ACT AND TAX AUDIT. THERE WERE NO QUALIFICATIONS IN THE AUDI TORS REPORTS NOR WAS DEFECT POINTED OUT BY THE AUDITORS. EVEN THE AUTHORITIES B ELOW HAVE ACCEPTED THE ACCOUNTS OF THE ASSESSEE AND MADE THE ADDITION MERE LY ON THE PRESUMPTIONS AND ASSUMPTIONS ON THE BASIS OF THE STATEMENT RECORDED FROM FOR PERSONS DURING THE SURVEY. THE ADDITON MADE ON THE BASIS ON THIRD PAR TY STATEMENT WITHOUT GIVING AN OPPORTUNITY FOR CROSS EXAMINATION TO THE ASSESSEE I S NOT SUSTAINABLE. HE HAS FURTHER SUBMITTED THAT EVEN IN THE STATEMENTS RECOR DED U/S 133A, IT HAS NOT BEEN STATED BY ANY OF THE FOUR PERSONS THAT THEY HAVE GI VEN ACCOMODATION ENTRIES TO THE ASSESSEE. THE STATEMENT IS VAGUE AND GENERAL AND NO SPECIFIC ALLEGATION AGAINST THE ASSESSEE HAS BEEN MADE. ON THE SAME DATE A SURV EY WAS CARRIED OUT AT THE PLACE OF THE ASSESSEE AND THE STATEMENT WERE RECORD ED, WHEREIN, THE ASSESSEE STATED AND CLEARLY SHOWN THE RECORD THAT THE SUPPLY WERE MADE BY THESE PARTIES M/S CANNON INDUSTRIES PVT. LTD 5 | P A G E AND THERE WAS NO INCRIMINATING DOCUMENTS FOUND DURI NG THE SURVEY TO SUGGEST BOGUS TRANSACTION. THE ASSESSEE CATEGORICALLY DENIE D THE ALLEGATIONS VIDE ITS LETTER DATED 25.12.2008 AND 27.12.2008. THE LD. AUTHORIZED REPRESENTATIVE HAS REFERRED THE STATEMENT OF ONE SHRI CHAND GULATI RE CORDED ON THE DATE OF SURVEY AND SUBMITTED THAT HE HAS STATED IN THE STATEMENT R EGARDING ACCOMODATION BILL AND ENTRIES DURING THE PERIOD JULY 2004 TO OCTOBER 2004 AND NOT FOR THE A.Y. UNDER CONSIDERATION. THE LD. AUTHORIZED REPRESENTA TIVE HAS FORCEFULLY CONTENDED THAT THE STATEMENT RECORDED DURING THE COURSE OF SU RVEY WITHOUT ANY DOCUMENTARY EVIDENCE CANNOT BE RELIED UPON FOR THE PURPOSE OF MAKING ADDITION WHEN THE ASSESSEE HAS PRODUCED ALL EVIDENCE IN SUPP ORT OF HIS CLAIM OF GENUINE PURCHASES. IN SUPPORT OF HIS CONTENTION HE HAS RELI ED UPON THE DECISION OF HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. KHADER KHAN SON.(300 ITR 157) AND SUBMITTED THAT THE SAID DECISION OF HONBLE HIGH CO URT HAS BEEN CONFIRMED BY THE HON'BLE SUPREME COURT VIDE ( 210 TAXMANN 248) . THEREFORE, THE STATEMENT RECORDED U/S 133A HAS NO EVIDENTIARY VALUE AND SUCH STATEMENT CANNOT BE MADE BASIS OF ADDITION. THE LD. AUTHORIZED REPRESENTATIV E HAS FURTHER CONTENDED THAT WHEN THE EXPORT SALE CONSTITUTE MORE THAN 92% OF TH E TOTAL SALE AND THE REVENUE HAS NOT DISPUTED THE SALE OF THE ASSESSEE THEN THE CORRESPONDING PURCHASES CANNOT BE TREATED AS BOGUS IN VIEW OF THE FACT THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS AND SUPPORTING EVIDENCE. HE HAS REFERRE D THE PURCHASE BILLS, DETAILS OF EXPORT AS WELL AS DOMESTIC SALES, BANK STATEMENT SH OWING THE PAYMENT MADE TO THE SUPPLIERS. ALL THE REQUISITE INFORMATION AND DE TAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER IN RESPECT OF 45 PARTIES AS MENT IONED BY THE ASSESSING OFFICER AT PAGE NO. 2 OF THE ASSESSMENT ORDER. WHEN THE ASSESS ING OFFICER HAS ACCEPTED THE SALE, CORRESPONDING PURCHASE CANNOT BE DIENIED. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF M/S CANNON INDUSTRIES PVT. LTD 6 | P A G E TAMIL NADU DAIRY DEVELOPMENT CORPORATION LTD (216 I TR 171) HE HAS ALSO RELIED UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BHOLANATH POLY FAB PVT LTD (355 ITR 290) AND SUBMITTED THAT WITHOUT GRANTING AN OPPORTUNITY OF CROSS EXAMINATION, THE S TATEMENT RECORDED AT THE BACK OF THE ASSESSEE CANNOT BE THE BASIS OF ADDITION . T HE LD. AUTHORIZED REPRESENTATIVE HAS ALSO POINTED OUT THAT FOR THE A. Y. 2005-06, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT ON 28.12.2007, SUBSEQUENT TO THE SURVEY TOOK PLACE ON 31.03.2006 AND ACCEPTED THE PURCHASES FROM THESE PARTIES. THEREFORE, WHEN THE ASSESSING OFFICER HAS ACCEPTED THE PURCHASES IN RESPECT OF OF THESE PARTIES FOR THE A.Y. 2005-06 THEN THE PURCHAS E CANNOT BE DENIED MERELY ON THE BASIS OF STATEMENT RECORDED IN SURVEY WITHOUT S PECIFIC ALLEGATION OF ANY ACCOMODATING ENTRIES AND BILLS BY THESE PARTIES TO THE ASSESSEE. HE HAS REFERRED THE STATEMENT OF THESE FOUR PARTIES AND STATED THAT ALL THE STATEMENTS ARE STEREO TYPE WHICH IS NOT POSSIBLE BECAUSE ALL THESE PARTIE S WERE NOT AT SINGLE PLACE BUT AT DIFFERENT PLACES . THE ASSESSEE ALREADY SUBMITTED T HE QUANTITATIVE DETAILS OF EXPORT UNIT PLACED AT PAGE NO. 44 AND 45 OF THE PAPER BOOK , THERE WAS NO DISCREPANCY FOUND IN THE QUANTITITATIVE DETAILS FILED BY THE AS SESSEE AND ALSO RECORDED IN THE BOOKS OF ACCOUNTS, THEREFORE, WHEN ALL THE DETAILS OF MANUFACTURING UNIT ARE MATCHING ALONG WITH OPENING AND CLOSING STOCK THEN THE PURCHASES CANNOT BE TREATED AS BOGUS. 3.4 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE ASSESSING OFFICER HAS RECORDED IN THE ASSESSMENT ORDER THAT CROSS EXAMINA TION WAS DEMANDED BY THE ASSESSEE AT THE FAG END OF THE ASSESSMENT PROCEEDIN GS AND, THEREFORE, IT WAS NOT POSSIBLE FOR THE ASSESSING OFFICER TO ALLOW THE AS SESSEE OPPORTUNITY FOR CROSS M/S CANNON INDUSTRIES PVT. LTD 7 | P A G E EXAMINATION OF THE PARTIES. HE HAS REFERRED THE IM PUGNED ORDER OF CIT(A) AND SUBMITTED THAT THE ASSESSEE DID NOT COMPLY WITH TH E REQUIREMENTS OF THE REMAND PROCEEDINGS AS THE ASSESSEE HAS NOT FUNISHED THE C OMPLETE DETAILS BEFORE THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS. TH E ASSESSING OFFICER ISSUED LETTER DATED 19.08.2010 ASKING FOR CERTAIN DETAILS WITH REGARD TO THIS MATTER FOR ITS COMPLIANCE AS PER THE ORDER OF CIT(A) TO FIND O UT THE FACTUAL POSITION OF GOODS PURCHASED AND CALLED FOR CASH BOOK, PARTY LEDGERS, INWARD AND OUTWARD REGISTERS, STOCK REGISERS, TRANSPORT RECEIPTS, GOODS LOADING A ND UNLOADING EXPENSES ETC. THE ASSESSEE DID NOT COMPLY WITH THE REQUIREMENTS OF TH E LETTER ISSUED BY THE ASSESSING OFFICER, THEREFORE, WHEN THE ASSESSEE HAS NOT FURNISHED THE REQUISITE DETAILS AND EVIDENCE AND FAILED TO EXPLAIN THE GENU INENESS OF THE PURCHASES, THE CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION MAD E BY ASSESSING OFFICER. THE LD. DR HAS RELIED UPON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF MRIGANKA MOHAN SUR VS COMMISSIONER OF INCOME-TAX, ( 120 ITR 529) AND SUBMITTED THAT THE CIRCUMSTANTIAL EVIDENCE WAS SUFFICIENT TO MAKE THE ADDITION APART FROM THE STATEMENTS RECORDED DURING THE SURVEY. HE HAS ALSO RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 3.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RE LEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER MADE THE ADDITION IN QUESTION BY TREATING THE PURCHASES OF RS. 24,73,00,784/- AS BOGUS PURCHASE, BASED ON THE FOUR STATEMENTS RECRODED DURING THE SURVEY PROCEEDINGS U/S 133A. AS PER THES E FOUR STATEMENTS THE PARTIES HAVE STATED THAT THEY ARE UNDER PRACTICE OF GIVING ACCOMODATION ENTRIES AND BILLS AGAINS THE CASH AFTER DEDUCTING THE COMMISSIONS CAS H IS REFUNDED TO THE PARTIES. ACCORDINGLY, THE ADDITION IN QUESTION IS MADE BY TH E ASSESSING OFFICER SOLELY ON M/S CANNON INDUSTRIES PVT. LTD 8 | P A G E THE BASIS OF THESE FOUR STATEMENTS RECORDED DURING THE SURVEY. THE ASSESSEE DEMANDED THE OPPORTUNITY FOR CROSS EXAMINATION OF T HESE PARTES DURING THE ASSESSMENT PROCEEDINGS WHICH WAS DENIED BY THE ASSE SSING OFFICER ON THE GROUND THAT IT WAS NOT POSSIBLE AT THE FAG END OF THE ASSE SSMENT PROCEEDINGS. ON APPEAL, THE CIT(A) ISSUED A REMAND ORDER WITH THE DIRECTION TO THE ASSESSING OFFICER TO GRANT AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMI NE AND THEN SUBMIT HIS REPORT ON THE ADDITION OF PURCHASES IN PARA 6.4 AS UNDER: DURING THE COURSE OF APPELLATE PROCEEDINGS, THE A/ R. OF THE APPELLANT MADE A SUBMISSION ON 6.03.2010 STATING THAT OPPORTUNITY TO CROSS EXAMINE THOSE 4 PARTIES ON WHOSE STATEMENTS THE ENTIRE ADDITIONS IS BASED HAS NOT BEEN GRANTED AND THE A/R CITED VARIOUS CASE LAWS ON THE SUBJECT WHEREIN IT HAS BEEN HELD THAT ASSESSMENT FRAMED BY IGNORING THE PR INCIPLES OF NATURAL JUSTICE OR BY RELYING ON ANY STATEMENT OR DOCUMENT FOR WHIC H THE APPELLANT HAS NOT BEEN GIVEN AN OPPORTUNITY TO CROSS EXAMINE IS BAD I N LAW. AFTER CONSIDERING THE SUBMISSIONS OF THE A.R., I CALLED UPON THE A.O TO GRANT AN OPPORTUNITY TO THE APPELLANT FOR CROSS EXAMINATION AND THEN SUBMIT HIS REMAND REPORT ON THE ADDITION OF PURCHASE OF RS. 24,73,00,784/- AND THE DISALLOWANCE OF RS. 1,40,97,079/- U/S 40A(3) OF THE INCOME TAX ACT. THE R EMAND REPORT WAS CALLED ON 18.05.2010 AND THE SAME WAS SUBMITTED BY THE A.O. ON 12.01.2011. 3.6 THUS IT IS CLEAR THAT THE CIT(A) ACCEPTED THE C ONTENTION OF THE ASSESSEE THAT OPPORTUNITY FOR CROSS EXAMINATION SHOULD HAVE BEEN GRANTED TO THE ASSESSEE AND IN THE ABSENCE OF THE CROSS EXAMINATION, THE STATEM ENT OF THESE PARTIES RECORDED U/S 133A AMOUNTS VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. ONCE THE CIT(A) FOUND THAT IT IS PROPER TO GRANT OPPORTUNITY FOR CROSS EX AMINATION THEN NON GRANT OF OPPORTUNITY TO THE ASSESSEE IN THE REMAND PROCEEDIN GS ON THE GROUND THAT THE SUMMONS ISSUED TO THE PARTIES WERE RECEIVED BACK WI TH THE POSTAL REMARKS LEFT/NO SUCH PERSONS WOULD NOT OBLITERATE THE NECESSITY OF CROSS EXAMINA TION. IT IS NOT THE CASE OF THE REVENUE THAT THESE PARTIE S WERE NOT IN EXISTENCE BECAUSE M/S CANNON INDUSTRIES PVT. LTD 9 | P A G E THE REVENUE ITSELF RECORDED THE STATEMENT OF THESE FOUR PARTIES DURING THE SURVEY AND FURTHER ALL THE FOUR PARTIES WERE ASSESSED TO I NCOME TAX AND THEIR PARTICULARS WERE VERY WELL WITH THE DEPARTMENT, THEREFORE, THE STATEMENTS RECORDED U/S 133A CANNOT BE USED AGAINST THE ASSESSEE WITHOUT AFFORDI NG THE OPPORTUNITY FOR CROSS EXAMINATION AS IT IS REQUIRED BY THE PRINCIPLE OF N ATURAL JUSTICE. FURTHER THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MAT ERIAL EITHER FOUND DURING THE SURVEY OR DURING THE ASSESSMENT PROCEEDINGS WHICH S HOWS THAT THE PURCHASE IN QUESTION ARE BOGUS AND NOT GENUINE. THE ADDITION WA S MADE PURELY ON THE BASIS OF STATEMENT RECORDED U/S 133A. IT IS PERTINENT TO NOT E THAT THE STATEMENT RECORDED U/S 133A WITHOUT CORROBORATIVE EVIDENCE HAS NO EVI DENTIARY VALUE AS HELD BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KH ADER KHAN (SUPRA), WHICH HAS BEEN CONFIRMED BY THE HON'BLE SUPREME COURT IN ( 21 0 TAXMAN 248). FURTHER WE NOTE THAT THE ASSESSING OFFICER HAS NOT DISPUTED TH E SALES OF THE ASSESSEE AND OUT OF THE TOTAL SALE, EXPORT SALE CONSTITUTES 92%. APA RT FROM THE SALES, THE ASSESSING OFFICER HAS ALSO NOT DISPUTED THE QUANTITATIVE FIGU RES REGARDING OPENING STOCK, PURCHASES AND CLOSING STOCK AS WELL AS SALES. THERE FORE, WHEN THERE WAS NO DISPUTE OR DISCREPANCY IN THE QUANTITATIVE FIGURE O F PURCHASE, STOCK, SALES INCLUDING CLOSING STOCK THEN THE PURCHASES CANNOT B E TREATED AS BOGUS AS THE CORRESPONDING SALE IS ACCEPTED AND ALSO THE PURCHAS ES FROM THE SAME PARTIES WERE ACCEPTED BY THE ASSESSING OFFICER FOR THE A.Y. 2005 -06 COMPLETED ON 28.12.2007 AFTER SURVEY ON 31.03.2006. IN THE IMPUGNED ORDER T HE CIT(A) WITHOUT APPRECIATING THE FACT THAT NO OPPORTUNITY WAS AFFOR DED TO THE ASSESSEE TO CROSS EXAMINE DESPITE DIRECTION AND HAS HEAVILY RELIED UP ON THE REMAND REPORT OF THE ASSESSING OFFICER WHICH IS NOT AS PER ITS DIRECTION . THEREFORE, IN THE ABSENCE OF CROSS EXAMINATION OF THESE FOUR PARTIES THE REMAND REPORT CANNOT BE TREATED AS A PROPER AND COMPLETE REPORT ON THE MATTER. MUCH STRE SS HAS BEEN GIVEN BY THE M/S CANNON INDUSTRIES PVT. LTD 10 | P A G E ASSESSING OFFICER IN THE REMAND REPORT AS WELL AS B Y THE CIT(A) THAT THE ASSESSEE FAILED TO PRODUCE THE PROOF OF TRANSPORTATION OF GO ODS, DELIVERY CHALLAN ETC. WE NOTE THAT THE ASSESSEE HAS EXPLAINED BEFORE AUTHORI TIES BELOW THAT THE DELIVERY OF GOODS WERE DIRECTLY MADE BY THE SUPPLIERS AT THE PO RT FOR THE PURPOSE OF EXPORT, THEREFORE, THERE WAS NO QUESTION OF PAYMENT OF TRAN SPORT CHARGES SEPARATELY BY THE ASSESSEE. WE NOTE THAT THE ASSESSEE HAS PLACED ON RECORD THE DETAILS AND SHOWN FROM THE PURCHASE BILLS THAT PURCHASES ARE MA TCHED WITH THE EXPORT SALE IN THE CASE OF THE TRADING OF GOODS FOR THE PURPOSE OF EXPORT AND THEREFORE, THERE IS NO SCOPE OF ANY DOUBT ABOUT THE PURCHASES WHICH ARE DIRECTLY MATCHING TO THE SALE (EXPORT). EVEN OTHERWISE, WHEN THE SALES AND ALL OT HER QUANTITATIVE DETAILS AND FIGURE REGARDING STOCK ARE ACCEPTED BY THE ASSESSIN G OFFICER THEN IN THE ABSENCE OF ANY DIRECT EVIDENCE SHOWING THE NON GENUINENESS OF PURCHASES IN QUESTION, THE ADDITION IS NOT SUSTAINABLE ON THE BASIS OF ASSUMPT ION AND CONJECTURES RELYING ON THE FOUR STATEMETNS RECORDED U/S 133A AND THAT TOO WITHOUT AFFORDING AN OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. I N VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION TH AT THE ADDITION IN QUESITON ON ACCOUNT OF BOGUS PURCHAES IS NOT SUSTAINABLE AND AC CORDINGLY THE SAME IS DELETED. 4. GROUND NO 4 IS REGARDING ADDITION ON ACCOUNT OF DEPB LICENSE. 4.1 SOME LOOSE PAPERS WERE IMPOUNDED DURING THE COU RSE OF SURVEY PROCEEDINGS. THE ASSESSING OFFICER ISSUED A SHOW-C AUSE NOTICE ASKING THE ASSESSEE TO SHOW CAUSE AS TO WHY AN AMOUNT OF RS. 1 ,67,82,274/- SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY DISALL OWING THE SAME AMOUNT OR PURCHASES BY TREATING THE SAME AS BOGUS PURCHASES. IN REPLY THE ASSESSEE SUBMITTED THAT THESE PAGES ARE REPRESENTING THE TOT AL AMOUNT OF DEPB IN DIFFERENT M/S CANNON INDUSTRIES PVT. LTD 11 | P A G E CONCERNS. IN SUPPORT OF ITS CONTENTION, THE ASSESSE E HAS ENCLOSED COPIES OF DEPB LICENSES. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND TREATED THE SAID AMOUNT AS BOGUS PURCHASES AND ADDE D TO THE TOTAL INCOME OF THE ASSESSEE. 4.2 BEFORE THE CIT(A) THE ASSESSEE FILED THE COPIES OF LETTER DATED 26.12.2008 ADDRESSED TO THE ASSESSING OFFICER ALONG WITH COPIE S OF DEPB LICENSES, COPIES OF THE IMPOUNDED LOOSE PAPERS. THE ASSESSEE SUBMITTED THAT LOOSE PAPERS SHOWS WORKING FOR RECEIPT OF DEPB LICENSES FOR VARIOUS GR OUP CONCERNS OF THE ASSESSEE. THE CIT(A) ACCORDINGLY ASKED THE ASSESSING OFFICER TO VERIFY ALL THESE FACTS AND DETAILS AND IF THESE DETAILS ARE FOUND CORRECT, ADD ITION BE DELETED. 4.3 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT TILL DATE NO ORDER HAS BEEN PASSED BY THE ASSE SSING OFFICER AS PER THE DIRECTION OF THE CIT(A). HOWEVER, WHEN THE ASSESSEE HAS PRODUCED ALL THE DETAILS OF DEPB LICENSES WHICH ARE IN CONFORMITY WITHT THE WORKING DONE ON THESE LOOSE PAPERS IMPOUNDED DURING THE SURVEY, THE CIT(A) OUGH T TO HAVE DELETED THE ADDITION INSTEADING OF REMADING THE ISSUE BACK TO T HE ASSESSING OFFICER. HE HAS REFERRED THE CHART FOUND DURING THE SURVEY AT PAGE NO. 206 AND 207 AS WELL AS THE DETAILS OF LICENSES SOLD DURING THE YEAR AT PAGE NO . 208 TO 220 AND SUBMITTED THAT THE ASSESSEE HAS EXPLAINED THE ENTIRE DETAILS AND L EGAL DOCUMENTS IN RESPECT OF THE DEPB LICENSES SOLD DURING THE YEAR AND RECEIPT OF DUTY BACK FROM THE CUSTOM AUTHORITIES THEN IT DOES NOT REQUIRE ANY VERIFICATI ON. M/S CANNON INDUSTRIES PVT. LTD 12 | P A G E 4.4 ON THE OTHER HAND, THE LD. DR HAD RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 4.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RE LEVANT MATERIAL ON RECORD. THE ASSESSEE PRODUCED THE DETAILS OF DEPB LICENSES AS WELL AS THE DETAILS OF DEPB OF GROUP COMPANIES. THE ASSESSING OFFICER WITHOUT V ERIFICATION OF THE RECORD HAS MADE THE ADDITION OF THE AMOUNT BY TREATING THE SAM E AS BOGUS PURCHASES. IT IS PERTINENT TO NOTE THAT WHEN THE ASSESSEE FILED ALL THE RELEVANT DETAILS AS WELL AS EVIDENCE OF DUTY DRAWBACK RECEIVED FROM THE CUSTOM AUTHORITIES THEN PRIMA FACIE THE ASSESSEE HAS PROVED ITS CLAIM OF RECEIPTS. ONCE THE ASSESSEE HAS DISCHARGED ITS ONUS BY PRODUCING THE NECESSARY EVIDENCE, THE BURDE N IS SHIFTED TO THE ASSESSING OFFICER TO DISAPPROVE THE EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT OF HIS CLAIM. EVEN OTHERWISE THE EVIDENCE PRODUCED BY THE ASSESSEE ARE THE DOCUMENTS ISSUED BY THE CUSTOM AUTHORITIES AND, THEREFORE, TH ERE IS NO SCOPE OF ANY MANIPULATION OR MANUFACTURING OF EVIDENCE. ACCORDIN GLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE ASSESSEE HAS CLE ARLY MADE OUT HIS CASE THAT THE AMOUNTS RECORDED IN THE CHARTS FOUND DURING THE SURVEY WAS RELATED TO THE DEPB LICENSES AND THE DETAILS SHOW THE ITEMS, AMOUN T AND THE LICENSE NUMBSERS, THEREFORE, IN THE ABSENCE OF ANY MATERIAL TO PROVE THE CONTRARY, THE EVIDENCE PRODUCED BY THE ASSESSEE IS SUFFICIENT TO PROVE THE CLAIM OF THE ASSESSEE. ACCORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE SATISFIED THAT THE ASSESSEE HAS ESTABLISHED ITS CLAIM THAT THE AMOUNT IN QUESTION IS REPRESENTING THE SALE OF DEPB LICENSES DURING THE YEAR. ACCORDINGLY THE ADDITION IN QUESTION IS DELETED. M/S CANNON INDUSTRIES PVT. LTD 13 | P A G E 5. GROUND NO. 5 IS REGARDING DISALLOWANCE MADE U/S 40A (3). 5.1 THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS. 1,40,97,079/- U/S 40A(3) ON ACCOUNT OF CASH PURCHASES. THIS DISALLOWA NCE WAS MADE BY THE ASSESSING OFFICER AT 20% OF THE TOTAL CASH PURCHASE S FROM DIFFERENT PARTIES. THE ASSESSEE CONTENDED BEFORE THE ASSESSING OFFICER THA T NO PAYMENT WAS IN EXCESS OF RS. 20,000/- TO SINGLE PARTY AT A TIME. THE ASSESS ING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT NO DO CUMENTARY PROOF HAS BEEN FILED BY THE ASSESSEE TO PROVE THAT THE PAYMENT IS LESS THAN 20,000/- EACH TIME. 5.2 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE CASH PAYMENT WAS MADE BY THE ASSESSEE AS P ER THE NEED OF THE BUSINESS AND FULLY COVERED UNDER THE EXCEPTIONAL CIRCUMSTANC ES. THE PAYMENTS WERE MADE IN CASH WAS LESS THAN 20,000/- . THE PAYMENT WAS NO T IN DISPUTE AS THE PARTIES IN THEIR STATEMENTS HAVE ACCEPTED THE CASH PAYMENTS, C HEQUE PAYMENTS AND PAYMENTS BY WAY OF TRANSFER, THEREFORE, WHEN THE GE NUINENESS OF THE PAYMENT IS NOT DOUBTED BY THE ASSESSING OFFICER THEN THE CASH PAYMENT OF LESS THAN RS. 20,000/- CANNOT BE DISALLOWED BY INVOKING THE PROVI SIONS OF SECTION 40A(3). THE ASSESSING OFFICER MADE THE DOUBLE ADDITION IN RESPE CT OF THESE AMOUNTS AS IT WAS ALSO THE PART OF THE BOGUS PURCHASES ADDED BY THE A SSESSING OFFICER. FURTHER THE DISALLOWANCE OF 3% MADE BY THE ASSESSING OFFICER IN THE A.Y. 2005-06 ON ACCOUNT OF CASH PURCHASE WAS DELETED BY THE CIT(A) VIDE ORD ER DATED 11.03.2010. THUS THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT TH E ASSESSING OFFICER SHOULD FOLLOW THE RULE OF CONSISTENCY ON THIS POINT THAT W HEN THE CASH PURCHASES WERE M/S CANNON INDUSTRIES PVT. LTD 14 | P A G E ACCEPTED FOR THE A.Y. 2005-06 BY THE REVENUE AS THE CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER THEN NO ADDITION CAN BE MADE FOR THE A.Y. UNDER CONSIDERATION. HE HAS REFERRED THE DETAI LS OF THE PARTIES AS WELL AS THE PAYMENTS AND SUBMITTED THAT THE PAYMENT WAS MADE FO R EMBROIDERY AND FABRICATION WORK OF THE GARMENTS THROUGH M/S ROSE E NTERPRISES AND EACH PAYMENT IS LESS THAN RS. 20,000/- 5.3 ON THE OTHER HAND, THE LD. DR HAS RELIED UPON T HE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT EXCEPT THE LEDGER ACCOUNT, THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SHOW THAT EACH PAYMENT IS LESS THAN RS. 20,000/-. IT APPEARS THAT THE ASSESSEE HAS DIVIDED THE PAYMENT T O SHOW EACH PAYMENT IS LESS THAN RS. 20,000/- TO CIRCUMVENT THE PROVISIONS OF S ECTION 40A(3). 5.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RE LEVANT MATERIAL ON RECORD. AS PER THE DETAILS FILED BY THE ASSESSEE PRIMA FACIE IT APPEARS THAT EACH PAYMENT MADE IS LESS THAN RS. 20,000/-. FURTHER THE AUTHORI TIES BELOW HAVE NOT VERIFIED AND EXAMINED THIS FACT THAT WHETHER THIS PAYMENT WA S MADE FOR WORK OF EMBROIDERY AND FABRICATION OF GARMENTS. FOR THE YE AR UNDER CONSIDERATION IF EACH PAYMENT IS LESS THAN RS. 20,000/- THEN PROVISIONS O F SECTION 40A(3) IS NOT APPLICABLE. THE AMENDMENT BROUGHT TO THIS SECTION V IDE FINANCE ACT 2008 W.E.F 01.04.2009, IS NOT APPLICABLE TO THIS YEAR AND IF E ACH PAYMENT IS REPRESENTING FOR A SEAPARATE WORK OR PIECE OF WORK THEN THE PAYMENT B ELOW RS. 20,000/- CANNOT BE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40 A(3) AS APPLICABLE FOR THE A.Y. UNDER CONSIDERATION. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE M/S CANNON INDUSTRIES PVT. LTD 15 | P A G E SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR PROPER VERIFICATION AND EXAMINAITON OF FACTS AND DECIDE IN TERMS OF ABO VE OBSERVATION. 6. GROUND NO. 6 IS REGARDING DISALLOWANCE MADE U/S 43B IN RESPECT OF PF & ESI. 6.1 THE ASSESSING OFFICER HAS DISALLOWED A SUM OF R S. 35,000/- TOWARDS LIABILITY OF EMPLOYEES PF AND ESIC DUE TO BELATED PAYMENT. 6.2 WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. WHILE DISALLOWING THIS AMOUNT O N ACCOUNT OF DELAYED PAYMENT, THE ASSESSING OFFICER CONSIDERED THE TIME PERIOD ALLOWED UNDER THE RESPECTIVE ACTS AND NOT AS PER THE PROVISIONS OF SE CTION 43B. WE FIND THAT ALL THE PAYMENTS WERE MADE BY THE ASSESSEE BEFORE THE DATE OF FILING OF RETURN U/S 139(1) OF THE INCOME TAX ACT, ACCORDINGLY, THE PAYM ENT MADE ON OR BEFORE THE DUE DATE OF FURNISHING THE RETURN OF INCOME U/S 139 (1) IS ALLOWABLE AS PROVIDED UNDER THE PROVISO TO SECTION 43B. AND ACCORDINGLY THE DISALLOWANCE I S NOT SUSTAINABLE HENCE, DELETED. 7. GROUND NO. 7 IS REGARDING DISALLOWANCE OF INTERE ST U/S 234A, 234B & 234C. 7.1 THE LEVY OF INTEREST U/S 234A, 234B AND 234C I S MANDATORY AND CONSEQUENTIAL AND NO SEPARATE FINDING IN THIS REGAR D IS REQUIRED. M/S CANNON INDUSTRIES PVT. LTD 16 | P A G E 8. FOR A.Y. 2007-08, THE ASSESSEE HAS RAISED FOLLOW ING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ID. CIT (A) HAS GROSSLY ERRED IN SUSTAINING THE LEGALITY AND PROPRIETY OF THE IMP UGNED ASSESSMENT IN TOTAL DISREGARD OF THE STAND OF THE ASSESSEE THAT ASSESSM ENT TAKEN UP TOWARDS THE CLOSE OF THE LIMITATION HAS BEEN HASTILY MADE BY TH E AO WITHOUT AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE AND VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. THE IMPUGNED ASSESSMENT IS THEREFORE ILLEGA L AND DESERVES TO BE QUASHED. 2. THE LEARNED CIT (A), WHILE ENDORSING THE VARIOUS A DDITIONS IN THE TRADING ACCOUNT IN THE IMPUGNED ASSESSMENT ,HAS REGRETTABLY IGNORED THE CALLOUS AND CAVALIER APPROACH ADOPTED BY THE AO IN MAKING A HIG HLY OVER PITCHED ASSESSMENT ON TOTAL INCOME OF RS 148.7 CRORES ON TH E BASIS OF SURMISES AND CONJECTURES WHEN THE TOTAL TURNOVER SHOWN AND ACCEP TED BY REVENUE IS RS 222.5 CRORES AND THE TRADING ACCOUNT OF THE ASSESSE E SUPPORTED BY STOCK RECORD, HAS NOT BEEN REJECTED BY INVOKING SECTION 1 45 (3) OF THE ACT .IT IS RESPECTFULLY PRAYED WITH PAIN AND ANGUISH THAT THE ORDERS OF THE REVENUE AUTHORITIES BELOW, VITIATED WITH PERVERSITY OF FACT AND LAW, MAY BE QUASHED 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE I D. CIT (A) HAS MISDIRECTED HIMSELF ON FACTS AND LAW IN SUSTAINING THE VARIOUS ADDITIONS MADE BY THE A.O. IN COMPLETE DISREGARD OF THE UNDISPUTED FACTS THAT THE ACCOUNTS OF THE ASSESSEE REGULARLY MAINTAINED ARE AUDITED UNDER THE COMPANIE S ACT AS WELL AS ULS 44AB OF THE IT ACT AND COMPLETE STOCK RECORDS ACCOUN TING FOR THE PRODUCTION AND CONSUMPTION HAVE BEEN MAINTAINED FROM YEAR TO Y EAR. 4. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE T HE ID. CIT (A) HAS ERRONEOUSLY SUSTAINED THE DISALLOWANCE OF RS. 22,36 ,05,346/- OUT OF MANUFACTURING EXPENSES ON GROUNDS WHICH ARE FACTUAL LY INCORRECT, IRRELEVANT AND CONTRADICTORY. 5. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE T HE ID. CIT (A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 29,98,81,013/- O N ACCOUNT OF TRANSFER ENTRIES MADE IN THE BOOKS OF ACCOUNTS, AS REPRODUCE D VIDE PARA 4.2 OF THE IMPUGNED APPELLATE ORDER, WITHOUT APPRECIATING THAT THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS IN THE ACCOUNTS OF THESE SEVEN PA RTIES ARE GENUINE AND MADE M/S CANNON INDUSTRIES PVT. LTD 17 | P A G E DURING THE REGULAR COURSE OF BUSINESS AND SUPPORTED BY COGENT FACTS AND EVIDENCE PLACED ON RECORDS WHICH HAVE BEEN IGNORED BY THE AUTHORITIES BELOW. 6. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE TH E ID. CIT (A) HAS GROSSLY ERRED IN SUSTAINING THE ADDITION OF RS. 93,70,32,60 1/- ON ACCOUNT OF UNEXPLAINED PURCHASES IN TOTAL DISREGARD OF THE FAC TS AND EVIDENCE PLACED ON RECORD AND BY CITING REASONS WHICH ARE INCORRECT, I RRELEVANT AND INADMISSIBLE. 7. (A) ON THE FACTS AND IN CIRCUMSTANCES OF THE CAS E ID. CIT (A) HAS ERRONEOUSLY SUSTAINED THE DISALLOWANCE OF RS. 2,38,11,081/- UND ER THE HEAD 'BOGUS PURCHASES OF EARLIER YEARS' IGNORING THE FACTS THAT THE AMOUNT REPRESENTS THE OUTSTANDING CREDIT BALANCE IN THE ACCOUNT FOR JUPIT ER OVERSEAS BROUGHT FORWARD FROM THE PREVIOUS YEAR AND CREDITS MADE IN THE ACCOUNT IN THE PRECEDING ASSESSMENT YEAR 2006-07 ON ACCOUNT OF PUR CHASES HAVE ALREADY BEEN DISALLOWED BY THE A.O. AND SUSTAINED BY THE CI T (A) IN THE PRECEDING YEAR. (B) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE T HE ACTION OF THE ID. CIT (A) IN SUSTAINING THE IMPUGNED DISALLOWANCE OF RS. 2,38 ,11,081/- AS PER GROUND NO. 6 ABOVE IS VITIATED BY SERIOUS CONTRADICTION IN AS MUCH AS A FURTHER ADDITION OF RS. 5.00 LACS MADE BY THE A.O. UNDER TH E HEAD CASH PURCHASES RELATING TO THE SAME PARTY NAMELY JUPITER OVERSEAS HAS BEEN DELETED BY THE CIT (A) FOR 'LACK OF ANY SPECIFIC REASON' 8. THE ID. CIT (A) HAS ERRED IN FAILING TO DELETE THE LEVY OF INTEREST ULS 234A, 234B AND 234C. 9 GROUND NO. 1 TO 3 ARE GENERAL IN NATURE AND DOES NOT REQUIRED ANY SPECIFYING FINDING OR ADJUDICATION . 10. GROUND NO. 4 IS REGARDING DISALLOWANCE OF MANUF ACTURING EXPENSES. 10.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE SEPARATE TRADING ACCOUN TS OF TRADING GOODS AS WELL AS M/S CANNON INDUSTRIES PVT. LTD 18 | P A G E MANUFACTURING GOODS. THE ASSESSEE SUBMITTED THAT TH E ASSESSEE DID NOT CLAIM ANY EXPORT DEDUCTION AND HAD NOT MAINTAINED SEPARATE BO OKS OF ACCOUNTS. THE PURCHASE AND OTHER EXPENSES WERE BOOKED COMMONLY AN D SOLD FROM THE COMMON STOCK. THE ASSESSEE SHOWN MANUFACTURING EXPENSES TO THE TUNE OF RS. 54 CRORES. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE MONTHLY DETAILS OF MANUFACTURING EXPENSES WHICH WAS SUBMITTED BY THE A SSESSEE. FROM THE DETAIL SUBMITTED BY THE ASSESSEE, THE ASSESSING OFFICER NO TED THAT THE ASSESSEE HAS SHOWN THE MANUFACTURING EXPENSES AMOUNTING TO RS. 2 8,68,96,446/- IN THE MONTH OF MARCH WHICH IS ABNORMALLY HIGH IN COMPARISON TO THE OTHER MONTHS EXPENSES. ACCORDINGLY THE ASSESSEE WAS ASKED TO EXPLAIN THE M AJOR PART OF MANUFACTURING EXPENSES INCURRED IN THE MONTH OF MARCH. IN COMPLIA NCE TO THE SAID QUERY THE ASSESSEE SUBMITTED THE REVISED MONTHLY DETAILS WITH OUT GIVING THE BREAK UP OF THE UNITS. IN THE REVISED STATEMENTS, THE EXPENSES FOR THE MONTH OF MARCH WAS SHOWN AT RS. 6,3291,100/-. FINDING THE DISCREPANCY IN THE TWO SET OF DETAILS FILED BY ASSESSEE, THE ASSESSING OFFICER MADE ADDITION OF DI FFERENCE BETWEEN THE FIGURES OF MANUFACTURING EXPENSES FOR THE MONTH OF MARCH IN TH E TWO SET OF DETAILS AMOUNTING TO RS. 22,36,05,346/-. THE ASSESSEE CHALL ENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE CIT(A) BUT COULD NOT S UCCEED. 10.2 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE O F THE ASSESSEE HAS SUBMITTED THAT THE MANUFACTURING EXPENSES WERE INCURRED ON MA NUFACTURE OF T-SHIRTS, LADIES DRESS ETC. ALL THESE GOODS WERE RECORDED IN THE STOCK REGISTER. THE STOCK REGISTER INCLUDING THE DETAILS OF THE MONTH OF FEBR UARY AND MARCH WAS GIVEN TO THE ASSESSING OFFICER ALONG WITH LETTER DATED 05.0 9.2009. HE HAS REFERRED THE SAID LETTER AND DETAILS AT PAGE NOS. 6 AND 7 OF THE PAPE R BOOK AND SUBMITTED THAT THE M/S CANNON INDUSTRIES PVT. LTD 19 | P A G E ASSESSING OFFICER HAS MADE THE ADDITION ONLY ON THE BASIS OF THE DIFFERENCE OF THE MANUFACTURING EXPENSES FOR THE MONTH OF MARCH WHERE AS THERE WAS NO DIFFERENCE IN THE DETAILS FILED BY THE ASSESSEE AS REGARDS THE TOTAL MANUFACTURING EXPENSES DURING THE YEAR. THE ORIGINAL DETAILS FURNISHED BY THE ASSESSEE WERE BASED ON THE BILLS RECEIVED BY THE ASSESSEE FROM THE PARTIES, TH OUGH THE MANUFACTURING EXPENSES WERE RELATING TO THE EARLIER PERIOD OF THE YEAR. SINCE MOST OF THE BILLS WERE RECEIVED IN THE MONTH OF MARCH, THEREFORE, IN THE ORIGINAL DETAILS FILED BY THE ASSESSEE, THE EXPENSES WERE SHOWN MUCH HIGHER IN TH E MONTH OF MARCH. THUS NO DIFFERENCE IN THE TOTAL EXPENSES CLAIMED BY THE ASS ESSEE AND IT WAS ONLY THE SEGREGATION OF MONTH WISE EXPENSES AND THERE WAS MI STAKE IN PREPARING THE DETAILS. THE CORRECT REVISED STATEMENT WAS FILED BY THE ASSESSEE SHOWING THE CORRECT DETAILS OF MONTHWISE EXPENSES AND THE ASSES SING OFFICER ACCEPTED THE SAME. WHEN THE EXPENSES WERE ACCEPTED BY THE ASSESS ING OFFICER THEN THE DIFFERENCE OF THE MONTH OF MARCH DUE TO THE REASONS EXPLAINED BY THE ASSESSEE CANNOT BE THE BASIS FOR DISALLOWANCE OF MANUFACTURI NG EXPENSES. 10.3 ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THERE IS A HUGE DISCREPANC Y IN THE DETAILS OF THE EXPENSES PRODUCED BY THE ASSESSEE FOR THE MONTH OF MARCH. 10.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND R ELEVANT MATERIAL ON RECORD. THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFF ICER BY CONSIDERING THE DIFFERENCE OF THE AMOUNT OF MONTH WISE MANUFACTURIN G EXPENSES RELATING TO THE MONTH OF MARCH 2007. WE FIND THAT IN THE ORIGINAL D ETAILS FILED BY THE ASSESSEE AS M/S CANNON INDUSTRIES PVT. LTD 20 | P A G E WELL AS IN THE REVISED DETAILS, THERE WAS NO DIFFER ENCE IN THE TOTAL MANUFACTURING EXPENSES. IN THE REVISED DETAILS, THE ASSESSEE HAS GIVEN THE CORRECT DETAILS OF MANUFACTURING EXPENSES OF ALL TWELVE MONTHS WHEREAS IN THE FIRST SET OF DETAILS , THE EXPENSES ARE SHOWN AS PER THE MONTH IN WHICH TH E BILLS WERE RECEIVED FROM PARTIES. IT IS A CASE OF GARMENTS MANUFACTURED ON J OB WORK BASIS AND, THEREFORE, THERE IS A POSSIBILITY OF RECEIVING THE BILL AT THE END OF THE FINANCIAL YEAR FROM THE PARTIES. WHEN THE ASSESSEE HAS EXPLAINED THE REASON S FOR DIFFERENCE THE ASSESSING OFFICER OUGHT TO HAVE EXAMINED THE EXPLANATION AND OTHER RELEVANT RECORD. FURTHER WITHOUT DISPUTING THE DIFFERENCE OF THE EXP ENSES IN THE TWO SET OF DETAILS IN RESPECT OF OTHER ELEVEN MONTHS, THE ASSESSING O FFICER TOOK THE FIGURE OF DIFFERENCE ONLY IN RESPECT OF MONTH OF MARCH DESPIT E THE FACT THAT THE SAID DIFFERENCE WAS DISTRIBUTED FOR THE OTHER ELEVEN MON THS. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE THAT WE ARE OF THE OP INION THAT THIS ISSUE HAS NOT BEEN PROPERLY EXAMINED BY THE ASSESSING OFFICER. AC CORDINGLY WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR PR OPER VERIFICATION OF THE FACT AND CONSIDERATION OF EXPLANATION OF THE ASSESSEE AND TH EN DECIDE THE SAME AS PER LAW. 11. GROUND NO. 5 IS REGARDING DISALLOWANCE OF TRANS FER ENTRIES MADE IN THE BOOKS OF ACCOUNTS. 11.1 THE ASSESSING OFFICER NOTED THAT THERE IS A LO NG LIST OF SUNDRY CREDITORS IN THE BALANCE SHEET. THE ASSESSEE WAS ASKED TO FURNIS H THE COPIES OF LEDGER ACCOUNTS OF THE SUNDRY CREDITORS. THE ASSESSING OFFICER FOUN D THAT VARIOUS DEBIT AND CREDIT ENTRIES WERE ONLY TRANSFER ENTRIES RUNNING INTO CRO RE OF RUPEES. SINCE THE ASSESSEE M/S CANNON INDUSTRIES PVT. LTD 21 | P A G E HAS NOT COMPLIED WITH THE NOTICE ISSUED BY THE ASSE SSING OFFICER BY PRODUCING THE CORRECT NATURE OF ENTRIES AND DETAILS OF SUCH TRANS ACTION OF TRANSFER ENTRIES, THEREFORE, THE ASSESSING OFFICER HELD THAT HE HAD N O ALTERNATIVE BUT TO CONSIDER THE TRANSFER ENTRIES AS UNEXPLAINED CASH CREDIT IN RESP ECT OF FOLLOWING PARTIES:- SL. NO. NAME DATE AMOUNT 1. MCM INTERNATIONAL 05.05.2006 61,21,000 2. NEW APEX 28.05.2007 6,58,51,720 3. RADHAKRISHNA ENTERPRISE 28.02.2007 942,94,864 4. SHIRDI OVERSEAS IMPORTS AND EXPORTS 03.06.2006 31,40,000 5. KAPUR AUTOMOTIVE 28.02.2007 2,77,80,485 6. KAPUR AUTOMOTIVE 28.02.2007 7,22,20,400 7. SPS ENTERPRISES 28.02.2007 3,04,72,544 TOTAL 29,98,81,013 11.2 ON APPEAL, THE ASSESSEE FILED DETAILS AND WRIT TEN SUBMISSIONS IN RESPECT OF HIS CLAIM AND SUBMITTED THAT THE ASSESSEE IS HAVING ACCOUNTS OF ITS GROUP CONCERN WHICH ARE IN NATURE OF CURRENT ACCOUNT AND DURING T HE YEAR THERE WERE VARIOUS DEBIT AND CREDIT TRANSACTION ON ACCOUNT OF PURCHASE , SALES, PAYMENTS RECEIPTS ETC. THUS THERE ARE CERTAIN ACCOUNTING TRANSACTIONS THRO UGH BOOK ENTRIES ON ACCOUNT OF TRANSFER OF BALANCE FROM FROM ONE ACCOUNT TO AN OTHER AS PER THE INSTRUCTION OF THOSE CONCERNS. THE CIT(A) CALLED FOR THE REMAND R EPORT OF THE ASSESSING OFFICER AND AFTER CONSIDERING THE REMAND REPORT CONFIRMED T HE ADDITION MADE BY THE ASSESSING OFFICER. M/S CANNON INDUSTRIES PVT. LTD 22 | P A G E 11.3 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE O F THE ASSESSEE HAS REFERRED THE DETAILS OF THE SUNDRY CREDITORS AT PAGE 161 OF THE PAPER BOOK AND SUBMITTED THAT OUT OF THE VARIOUS CREDITORS, THE ASSESSING OF FICER PICKED UP ONLY SEVEN PARTIES WHERE THE OUTSTANDING BALANCE IS VERY HIGH. HE HAS SUBMITTED THAT THERE IS NO CASH CREDIT AS ALLEGED BY THE AUTHORITIES BEL OW. IN FACT, ALL THE PARTIES ARE SUNDRY CREDITORS OF WHOM THE CURRENT ACCOUNTS ARE M AINTAINED FOR BUSINESS TRANSACTION OF PURCHASE AND SALE. PAYMENTS MADE TO CONCERN A BY CONCERN C ON COMPANYS DIRECTION AND ON ITS BEHALF BECAUSE OF N ECESSITY OF MAKING THE PAYMENT ARE BEING MADE. THESE TRANSFER ENTRIES ARE EITHER BY WAY OF CHEQUES OR TRANSFER OF GOODS TO EACH OTHER. THERE IS NO ILLEG ALITY IN SUCH KIND OF TRANSFER. ALL THESE PARTIES ARE INCOME TAX ASSESSEES, FILING THEI R INCOME TAX RETURNS, HAVING THEIR PERMANENT ADDRESS AND PANS. THE ASSESSEE FILE D ALL DETAILS AND EXPLANATION BEFORE THE ASSESSING OFFICER DURING THE REMAND PROC EEDINGS. WHEN THERE WAS NO CASH CREDIT EXCEPT ON CURRENT ACCOUNT PAYMENTS RECE IVED WHICH WERE SETTLED IN THE NEXT YEAR BY WAY OF GOODS SOLD. PAYMENTS WERE M ADE TO PARTIES BY WAY OF CROSS CHEQUE/ TRANSFER MODE OF PAYMENT. THESE HAVE ALREADY BEEN VERIFIED IN THE SUBSEQUENT ASSESSMENT YEAR I.E. 2008-09 AND 200 9-10, THEREFORE, NO ADDITION CAN BE MADE WHEN THE PAYMENT IS ACCEPTED IN THE SUB SEQUENT YEARS. 11.4 ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE FAILED TO DIS CHARGE ITS ONUS TO EXPLAIN THE CASH CREDIT IN THE BOOKS OF ACCOUNTS. THUS THE AUTH ORITIES BELOW ARE JUSTIFIED IN MAKING THE ADDITION ON ACCOUNT OF UNEXPLAINED CREDI T TO THE SUM IN QUESTION. M/S CANNON INDUSTRIES PVT. LTD 23 | P A G E 11.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WE LL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER MADE THE ADDITION OF UNEXPLAINED CASH CREDIT AS THE ASSESSEE FAILED TO EXPLAIN AND FILE THE DETAILS REG ARDING THE SEVEN CREDITORS SELECTED BY THE ASSESSING OFFICER HAVING OUTSTANDIN G IN THEIR NAMES AND THEIR LEDGER ACCOUNT SHOWS THE INTER TRANSFER ENTRIES BET WEEN PARTIES. ON APPEAL, THE ASSESSEE FURNISHED THE DETAILS AS WELL AS EXPLANATI ON BEFORE THE CIT(A). THE ASSESSEE HAS ALSO FURNISHED THE LEDGER ACCOUNTS AND COPIES OF INSTRUCTION LETTERS FROM SOME OF THE CONCERNED TO SUPPORT ACCOUNTS JOUR NAL ENTRIES I.E. DEBIT AND CREDIT IN THESE ACCOUNTS. THE ADDITION HAS BEEN CON FIRMED BY THE CIT(A) ON THE BASIS OF REMAND REPORT WHEREIN THE ASSESSING OFFICE R HAS COMMENTED THAT THE ASSESSEE HAS FAILED TO GIVE FULL ADDRESS AND PERMAN ENT ACCOUNT NUMBERS (PAN) OF THE PARTIES AND, THEREFORE, THE REQUIRED DETAILS A ND INFORMATION WAS NOT FURNISHED BY THE ASSESSEE. ON THE CONTRARY, THE CIT(A) HAS RE CORDED IN PARA 6.5 THAT THE ASSESSEE FURNISHED THE LEDGER ACCOUNT OF THESE PART IES AND COPIES OF INSTRUCTION LETTERS TO SUPPORT THE ACCOUNTING JOURNAL ENTRIES I N THE BOOKS, WHEREAS, THE ASSESSING OFFICER COMMENTED IN THE REMAND REPORT TH AT THE ASSESSEE FAILED TO PRODUCE THE COMPLETE DETAILS OF THE PARTIES. THE LD . AUTHORIZED REPRESENTATIVE HAS SUBMITTED BEFORE US THAT ALL THESE PARTIES ARE ASSESSED TO TAX AND HAVING PERMANENT ACCOUNT NUMEBERS (PAN) AND ALSO FILED RET URN OF INCOME SHOWING ALL THESE ENTRIES IN THEIR BOOKS OF ACCOUNTS. FURTHER T HE OUTSTANDING PAYMENTS HAVE BEEN SETTLED IN THE SUBSEQUENT YEARS AND ACCEPTED B Y THE REVENUE, THEREFORE, THE ADDITION IS NOT JUSTIFIED. WE FIND SUBSTANCE IN THE ARGUMENTS OF THE LD. AUTHORIZED REPRESENTATIVE THAT WHEN THESE PARTIES CAN BE EXAMI NED AS ALL THE PARTIES ARE ASSESSED TO TAX AND HAVING PERMANENT ACCOUNT NUMBER S (PAN) AND FURTHER THE M/S CANNON INDUSTRIES PVT. LTD 24 | P A G E ASSESSEE HAS SETTLED THESE ACCOUNTS IN SUBSEQUENT Y EAR BY MAKING PAYMENTS OR BY WAY OF SUPPLY OF GOODS THEN THIS ISSUE REQUIRES A P ROPER CONSIDERATION AND EXAMINATION. WE FURTHER NOTE THAT THERE IS NO CASH CREDIT IN THE BOOKS OF THE ASSESSEE BUT THE BALANCE ARE SHOWN AS OUTSTANDING P AYABLE BY THE ASSESSEE TO THE SUNDRY CREDITORS. THEREFORE, THE ADDITION MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDIT WITHOUT GIVING T HE FINDING WHETHER THESE ENTRIES ARE IN THE NATURE OF CASH CREDIT OR NOT. AC CORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE REMAND THIS ISSUE TO THE ASSESSING OFFICER TO CONSIDER ALL THE FACTS AND CIRCUMSTANCES AS WELL AS RE-PAYMENT AND SETTLEMENT OF THE ACCOUNTS BY THE ASSESSEE IN THE SUBSEQUENT YEAR S WHICH HAS BEEN ACCEPTED BY THE DEPARTMETN. FURTHER WHETHER THERE IS A CASH CR EDIT APPEARING IN THE LEDGER ACCOUNT OF THESE PARTIES OR WHETHER THESE ARE ONLY OUTSTANDING BALANCES TO BE PAID BY THE ASSESSEE, THEREFORE, THE ASSESSING OFFI CER HAS TO DECIDE THIS ISSUE ON PROPER EXAMINATION AND CONSIDERATION OF ALL THE REL EVANT FACTS. 12. GROUND NO. 6 IS REGARDING ADDITION ON ACCOUNT O F UNEXPLAINED PURCHASES. 12.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF SUNDRY CREDITORS ALONG WITH COPIES OF LEDGER ACCOUNTS OF THE SELECTED PARTIES. THE ASSESSEE VIDE LETTER DATED 19 .11.2009 SUBMITTED THE LEDGER ACCOUNTS OF THOSE PARTIES. THE ASSESSING OFFICER NO TED THAT THE ENTRIES REVEALS ONLY PURCHASES RIGHT FROM APRIL, 2006 TO MARCH, 2007. N O SINGLE PAYMENT WAS MADE. ACCORDINGLY THE ASSESSING OFFICER TREATED THE BALAN CE IN RESPECT OF FIVE PARTIES AS BOGUS PURCHASE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE . M/S CANNON INDUSTRIES PVT. LTD 25 | P A G E 12.2 THE ASSESSEE CHALLENGED THE ACTION OF ASSESSIN G OFFICER BEFORE CIT(A) BUT COULD NOT SUCCEED AS THE CIT(A) RELIED UPON THE ORD ER FOR THE A.Y. 2006-07 IN RESPECT OF OF ADDITION ON ACCOUNT OF BOGUS PURCHA SES. 12.3 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE O F THE ASSESSEE HAS SUBMITTED THAT THE PURCHASES AND SALE AS WELL AS CLOSING STOC K ARE DULY REFLECTED IN THE BOOKS OF ACCOUNTS AND THERE IS NO DISCREPANCY IN RESPECT OF THE QUANTITATIVE DETAILS. THE ASSESSING OFFICER HAS MADE THE ADDITION ONLY ON THE GROUND THAT THESE ARE CREDIT PURCHASES AND THE ASSESSEE HAS NOT MADE THE PAYMENT . THE ADDITION IS MAINLY BASED ON THE SURVEY IN THE CASES OF SUPPLIER AND ST ATEMENTS RECORDED DURING THE SURVEY WHEREAS THERE IS NO CONNECTION OF THOSE STAT EMETNS OR SURVEYED PARTIES WITH THE INFORMATION REQUIRED U/S 133(6). THERE WAS NO REPLY AND THE ASSESSING OFFICER TOOK AN ADVERSE VIEW WHICH IS NOT PERMISSIB LE. THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT OUT OF THE FIVE P ARTIES SOME OF THE PARTIES HAVE SUBMITTED THEIR ACCOUNT COPIES CONFIRMING THE PURCH ASES MADE. ALL THESE SUPPLIERS ARE REGULAR INCOME TAX ASSESSEES HAVING T HEIR PANS. DUE TO FUND CONSTRAINTS, THE PAYMENT WAS TO BE MADE ONLY AFTER REALIZATION OF SALE PROCEEDS. THESE CREDITORS HAVE ALREADY BEEN PAID IN THE SUBSE QUENT YEARS BY ACCOUNT PAYEE CHEQUES WHICH WAS DULY EXAMINED BY THE ASSESSING OF FICER AND ACCEPTED FOR THE A.Y. 2008-09 AND 2009-10. HE HAS ALSO REITEREATED H IS CONTENTION AS MADE ON THE ISSUE OF BOGUS PURCHASES FOR THE A.Y. 2006-07. M/S CANNON INDUSTRIES PVT. LTD 26 | P A G E 12.4 ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN A FINDING THAT THE ASSESSEE HAS MADE HUGE PURCHASES FROM THESE PARTIES WITHOUT MAKING PAYMENT. 12.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND R ELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER MADE THE ADDITION BY SUSPECTI NG THE PURCHASES ON THE GROUND THAT THE ASSESSEE HAS SHOWN THE PURCHASES FR OM THESE PARTIES WITHOUT MAKING ANY PAYMENT DURING THE YEAR. THE CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER BY FOLLOWING THE ORDE R FOR THE A.Y. 2006-07. THOUGH THE IMPUGNED ORDER OF CIT(A) IS NOT SUSTAINABLE BEC AUSE WE HAVE ALREADY GIVEN THE FINDING ON THE ISSUE OF BOGUS PURCHASES FOR THE A.Y. 2006-07, WHEREBY, THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES HAS BEE N DELETED, HOWEVER, IN THE FACTS OF CASE EXCEPT ONE PARTY WHICH IS COMMON FOR BOTH THE A.YS NAMELLY SPS ENTERPRISES AND OTHER PARTIES ARE NOT SUBJECT MATTE R FOR THE A.Y. 2006-07. WE FIND THAT TREATING THE PURCHASES FROM THESE PARTIES AS BOGUS WITHOUT DISPUTING THE QUANTITATIVE DETAILS AND PURCHASES, STOCK AND SALES IS NOT JUSTIFIED. ACCORDINGLY, IN VIEW OF OUR FINDING FOR A.Y. 2006-07, WE DECIDE THI S ISSUE IN FAVOUR OF THE ASSESSEE. 13. GROUND NO. 7 IS REGARDING DISALLOWANCE ON ACCOU NT OF BOGUS PURCHAES OF THE EARLIER YEARS. 13.1 THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 2,38,11,081/- ON ACCOUNT OF BOGUS PURCHASES FROM JUPITER OVERSEAS ON THE GROUND THAT THE PURCHAES FROM THE M/S CANNON INDUSTRIES PVT. LTD 27 | P A G E SAID PARTY WAS DISALLOWED FOR A.Y. 2006-07 BEING BO GUS PURCHASES. THE CIT(A) CONFIRMED THE DISALLOWANCE BY FOLLOWING THE ORDER F OR A.Y. 2006-07. 13.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND R ELEVANT MATERIAL ON RECORD. SINCE THE ISSUE FOR A.Y. 2006-07 HAS BEEN DECIDED I N FAVOUR OF THE ASSESSEE, THEREFORE, THE DISALLOWANCE MADE BY AUTHORITIES BEL OW RELYING UPON THE ORDERS FOR A.Y. 2006-07 IS NOT SUSTAINABLE AND ACCORDINGLY DEL ETED. 14. GROUND NO. 8 IS REGARDING DISALLOWANCE OF INTER EST U/S 234A, 234B & 234C. 14.1 THE LEVY OF INTEREST U/S 234A, 234B AND 234C IS MANDATORY AND CONSEQUENTIAL AND NO SEPARATE FINDING IN THIS REGAR D IS REQUIRED. 15. FOR THE A.Y. 2008-09 THE ASSESSEE HAS RAISED FO LLOWING GROUNDS:- 1. WHETHER THE LD.CIT(A) WAS JUSTIFIED BY PASSING TH E SUO MOTU EX-PARTE ORDER DT. 28.03.12 NOT ON THE DATE OF NON- COMPLIANCE I.E . 09.03.12 AS STATED IN THE ORDER BUT LATER ON A DIFFERENT DATE I.E. AFTER A GA P OF 20 DAYS. 2.WHETHER THE LD.CIT(A) WAS JUSTIFIED BY NOT AFFORDI NG A REASONABLE OPPORTUNITY BEFORE PASSING THE EX - PARTE ORDER. 3.WHETHER THE LD.CIT(A) WAS JUSTIFIED BY UPHOLDING T HE ASSESSMENT ORDER, WHICH WRONGLY MADE ADDITION OF 10% OF GP ARBITRARIL Y BY DOUBTING THE GENUINENESS OF THE BUSINESS TRANSACTION, HURRIEDLY TO PASS AN ORDER EVEN IN THE ABSENCE OF RECORD WHICH IS NOTHING BUT PUTTING AN E NDORSEMENT WITHOUT EVEN APPLICATION OF JUDICIAL MIND. M/S CANNON INDUSTRIES PVT. LTD 28 | P A G E 4. WHETHER THE LD.CIT(A) WAS JUSTIFIED BY UPHOLDING THE AO'S ACTION IN PRESUMING 10% GROSS PROFIT DESPITE THE FACT THAT TH ERE WAS NO ORDER FOR REJECTION OF THE AUDITED BOOKS OF ACCOUNTS. 5. WHETHER THE LD.CIT(A) WAS JUSTIFIED WHILE PASSING THE EX - PARTE ORDER BY MENTIONING THAT THE ADDITIONS WERE MADE JUST BECAUS E OF DISCREPANCY WHEN THERE WAS NO DISCREPANCY POINTED OUT ANYWHERE IN TH E ASSESSMENT ORDER. THE ADDITIONS WERE MADE BY NOT APPRECIATING THE EXPLANA TIONS AND BIASED BY PREVIOUS YEARS' OBSERVATION 16. THE ASSESSING OFFICER HAS COMPLETED THE ASSESSM ENT BY ESTIMATING THE GP AT 10% OF THE TOTAL SALE AND CONSEQUENTLY THE TOTAL IN COME OF THE ASSESSEE WAS ASSESSED TO RS. 19,35,16,560/- AGAINST THE RETURN O F INCOME OF RS. 1,54,37,360/-. 16.1 THE ASSESSEE CHALLENGED THE ACTION OF ASSESSIN G OFFICER BEFORE CIT(A). SINCE THE ASSESSEE DID NOT APPEAR BEFORE THE CIT(A), THE APPEAL OF THE ASSESSEE WAS DISMISSED EX PARTE. 16.2 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE O F THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS DECLARED THE TOTAL INCOME AT RS. 1,54,37,360/- WHICH IS THE NET PROFIT AT 0.07% OF THE SALES. THE ASSESSEE PAR TICIPATED IN THE ASSESSMENT PROCEEDINGS AND PRODUCED ALL THE BOOKS OF ACCOUNTS INCLUDING CASH BOOKS, LEDGER AS WELL AS INVOICES. THE ASSESSING OFFICER EXAMINED THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS. THE ADDITIONS WERE MADE BY THE ASS ESSING OFFICER JUST BY INCREASING THE GP TO 10% WITHOUT ANY REASON FOR DIS ALLOWANCE OF GP DECLARED BY THE ASSESSEE. ASSESSING OFFICER HAS NOT POINTED AN Y MISTAKE IN THE BOOKS OF ACCOUNTS OR ANY OTHER RECORD WHICH HAS BEEN DULY AU DITED. THE LD. AUTHORIZED REPRESENTATIVE HAS REFERRED THE GP AND NET PROFIT P ERCENTAGE OF THE EARLIER YEARS M/S CANNON INDUSTRIES PVT. LTD 29 | P A G E AND SUBMITTED THAT THE 10% GP ADOPTED BY THE ASSESS ING OFFICER HAS NO BASIS. FURTHER THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMI TTED THAT THE CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE WITHOUT GIVING ANY JUSTIFICATION. 16.3 ON THE OTHER HAND, THE LD. DR HAS RELIED UPON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE ASSESSEE HAS FAIL ED TO APPEAR BEFORE THE CIT(A) DESPITE REPEATED NOTICES THEN THE CIT(A) IS JUSTIFIED IN UPHOLDING THE ACTION OF ASSESSING OFFICER. 16.4 HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. WE NOTE THAT EVEN IF THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE BOOK RESULTS OF THE ASSESSEE, THE ADOPTION OF GP AT 10% AS AGAINST THE GP OF THE ASSESSEE FOR THE EARLIER YEARS AT 2.3% IS NOT JUSTI FIED. WE FIND THAT THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY COMPARABLE OR PREVA ILING GP IN THE TRADE FOR ADOPTING THE TP AT 10%. FURTHER THE ASSESSING OFFIC ER HAS COMPLETELY OVER LOOKED THE RELEVANT FACT OF GP FOR ALL OTHER AYS OF THE AS SESSEE. ACCORDINGLY THE ISSUE IS REQUIRED TO BE CONSIDERED BY THE CIT(A) ON MERITS B Y CONSIDERING ALL THESE ASPECTS, THOUGH THE ASSESSEE DID NOT APPEAR BEFORE THE CIT(A), HOWEVER, THE IMPUGNED ORDER OF CIT(A) IS VERY CRYPTIC AND WITHO UT EXAMINATION OF ANY FACT OR RELEVANT ASPECT OF THE MATTER. IN THE FACTS AND CIR CUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE, WE SET ASIDE THE IMPUGNED ORDE R OF CIT(A) AND REMIT THE MATTER TO THE RECORD OF CIT(A) FOR DECIDING THE SAM E AFRESH BY CONSIDERING ALL THE RELEVANT FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE . THE ASSESSEE IS DIRECTED TO CO-OPERATE IN THE PROCEEDINGS BEFORE THE CIT(A). M/S CANNON INDUSTRIES PVT. LTD 30 | P A G E 17. IN THE RESULT APPEALS OF THE ASSESSEE ARE PARTL Y ALLOWED FOR STATISTICAL PURPOSES.. ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 1 7-10 - 2014 SD/- SD/- ( N.K. BILLAIYA ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 17-10 -2014 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI 0BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI M/S CANNON INDUSTRIES PVT. LTD 31 | P A G E S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 7.10.2014 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 9-10-2014 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT -10-2014 SR. PS/PS 7 FILE SENT TO BENCH CLERK -10-2014 SR. PS/ PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER