DCIT CIR 3(1), MUMBAI V. D D COTTON P. LTD, MUMBAI

ITA 5968/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3840 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: misc
• Appeal Filed On: 09-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B SENTHIL
• Keywords: Bogus purchase
• Section: 14A; 131; 154

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A.NO. 5407/MUM/2009 ASSESSMENT YEAR : 2006-07 M/S. D.D. COTTON PVT. LTD., C/O. SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BUILDING, 265 PRINCES STREET, MUMBAI 400 002. PAN: AAACD 4819 K VS. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(1), MUMBAI. (APPELLANT) (RESPONDENT) I.T.A.NO. 5968/MUM/2009 ASSESSMENT YEAR : 2006-07 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(1), MUMBAI. VS. M/S. D.D. COTTON PVT. LTD., C/O. SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BUILDING, 265 PRINCES STREET, MUMBAI 400 002. PAN: AAACD 4819 K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.L. JAIN REVENUE BY : DR. B. SENTHIL O R D E R PER N.V. VASUDEVAN, JM: ITA NO. 5407/MUM/2009 IS AN APPEAL BY THE ASSESSEE WHILE ITA NO. 5968/MUM/2009 IS AN APPEAL BY THE REVENUE. BOTH THE SE APPEALS ARE DIRECTED AGAINST THE ORDER DATED 20.08.2009 OF THE COMMISSIO NER OF INCOME-TAX (APPEALS)- XXVIII, MUMBAI FOR THE ASSESSMENT YEAR 2006-07. 2. WE SHALL FIRST TAKE UP FOR CONSIDERATION THE APPEAL IN ITA NO. 5407/MUM/2009 FILED BY THE ASSESSEE. 3. THE SOLE GROUND RAISED BY THE ASSESSEE READS AS FOL LOWS: THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) HAS E RRED IN CONFIRMING THE DISALLOWANCE OF RS.2,63,236/- UNDER THE PROVISIONS OF SEC,.14A WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND LAW APPLICABLE THERETO. ITA NOS.5407 - 5968/M/09 D.D. COTTON PVT. LTD. 2 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE IS A COMPANY ENGAGED IN THE BUSINESS OF COTTON GINNING, PRESSING AND OIL MI LLS. DURING THE PREVIOUS YEAR ASSESSEE EARNED EXEMPT DIVIDEND INCOME AMOUNTING TO ` 3,77,342/-. THE A.O. INVOKING THE PROVISIONS OF RULE 8D OF THE INCOME-TA X RULES READ WITH SECTION 14A OF THE ACT DISALLOWED A SUM OF ` 2,63,861/- AS EXPENSES INCURRED IN EARNED THE INCOME WHICH IS NOT CHARGEABLE TO TAX. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFI RMED THE ORDER OF THE A.O. AGGRIEVED BY THE ORDER OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE HONBLE BOMBAY HIGH COURT IN INCOME TAX APPEAL NO.626 OF 2010 IN THE CASE OF GODREJ & BOYCE MFG.CO.LTD. MUMBAI. VS. DY. COMMISSIONER OF INCOME TAX, RANGE 1 0(2), MUMBAI & ANR. AND W.P. 758/10 GODREJ & BOYCE MFG.CO.LTD. MUMBAI. VS.DY. COMMISSIO NER OF INCOME TAX RANGE 10(2), MUMBAI & ORS. BY JUDGMENT DATED 12 -8-2010 HAS DEALT WITH THE DISALLOWANCE THAT CAN BE MADE U/S.14-A OF THE ACT. THE HONBLE COURT ALSO DEALT WITH THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THE CASE OF DAGA CAPITAL MANAGEMENT PVT. LTD. 117 ITD 169 (MUM) (SB) AND HAS LAID DOWN THE FOLLOWING PROPOSITION: I) DIVIDEND INCOME AND INCOME FROM MUTUAL FUNDS F ALLING WITHIN THE AMBIT OF SECTION 10(33) OF THE INCOME TAX ACT 1961, AS WAS A PPLICABLE FOR ASSESSMENT YEAR 2002-03 IS NOT INCLUDIBLE IN COMPUT ING THE TOTAL INCOME OF THE ASSESSEE. CONSEQUENTLY, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, BY VIRTUE O F THE PROVISIONS OF SECTION 14A(1); II) THE PAYMENT BY A DOMESTIC COMPANY UNDER SECTIO N 115O(1) OF ADDITIONAL INCOME TAX ON PROFITS DECLARED, DISTRIBUTED OR PAID IS A CHARGE ON A COMPONENT OF THE PROFITS OF THE COMPANY. THE COMPAN Y IS CHARGEABLE TO TAX ON ITS PROFITS AS A DISTINCT TAXABLE ENTITY AND IT PAYS TAX IN DISCHARGE OF ITS OWN LIABILITY AND NOT ON BEHALF OF OR AS AN AGE NT FOR ITS SHAREHOLDERS. ITA NOS.5407 - 5968/M/09 D.D. COTTON PVT. LTD. 3 IN THE HANDS OF THE SHAREHOLDER AS THE RECIPIENT OF DIVIDEND, INCOME BY WAY OF DIVIDEND DOES NOT FORM PART OF THE TOTAL INC OME BY VIRTUE OF THE PROVISIONS OF SECTION 10(33). INCOME FROM MUTUAL FU NDS STANDS ON THE SAME BASIS; III) THE PROVISIONS OF SUB SECTIONS (2) AND (3) OF SECTION 14A OF THE INCOME TAX ACT 1961 ARE CONSTITUTIONALLY VALID; IV) THE PROVISIONS OF RULE 8D OF THE INCOME TAX RUL ES AS INSERTED BY THE INCOME TAX (FIFTH AMENDMENT) RULES 2008 ARE NOT ULT RA VIRES THE PROVISIONS OF SECTION 14A, MORE PARTICULARLY SUB SE CTION (2) AND DO NOT OFFEND ARTICLE 14 OF THE CONSTITUTION; V) THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULE S WHICH HAVE BEEN NOTIFIED WITH EFFECT FROM 24 MARCH 2008 SHALL APPLY WITH EFFECT FROM ASSESSMENT YEAR 2008-09; VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN RUL E 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE TH E PROVISIONS OF SUB SECTION (1) OF SECTION 14A. FOR THAT PURPOSE, THE A SSESSING OFFICER IS DUTY BOUND TO DETERMINE THE EXPENDITURE WHICH HAS BEEN I NCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC OME UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMST ANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD; VII) THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 SH ALL STAND REMANDED BACK TO THE ASSESSING OFFICER. THE ASSESSING OFFICER SHA LL DETERMINE AS TO WHETHER THE ASSESSEE HAS INCURRED ANY EXPENDITURE ( DIRECT OR INDIRECT) IN RELATION TO DIVIDEND INCOME / INCOME FROM MUTUAL FU NDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECTION 14A. THE ASSESSING OFFICER CAN ADOPT A REASONABLE BASIS FOR EFFECTING THE APPORTIONMENT. WHILE MAKING THAT DETERMINATION, THE ASSESSING OFFICER SHALL PROVIDE A REASONABLE OPPORTUNITY TO THE ASSES SEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HI GH COURT, HOLDING THAT THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES WHICH HAVE BEEN NOTIFIED WITH EFFECT ITA NOS.5407 - 5968/M/09 D.D. COTTON PVT. LTD. 4 FROM 24 MARCH 2008 SHALL APPLY WITH EFFECT FROM ASS ESSMENT YEAR 2008-09 AND THAT IN RESPECT OF DISALLOWANCE U/S.14-A OF THE ACT, PRI OR TO ASSESSMENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFI CER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FA CTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECORD. IN THE CIRCUMSTANCES, WE DEEM IT FIT A ND PROPER TO SET ASIDE THE ORDER OF THE CIT(A) AND REMAND THE ISSUE TO THE AO FOR FRESH CONSIDERATION. THIS IS BECAUSE, THE AO AND THE CIT(A) WHILE MAKING THE IMPUGNED DIS ALLOWANCE HAD APPLIED RULE-8D OF THE INCOME TAX RULES, 1962. WE ACCORDINGLY SET ASIDE THE ORDER OF CIT(A) AND REMAND THE ISSUE TO THE AO FOR FRESH CONSIDERATION AS ABOVE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. NOW WE TAKE UP THE APPEAL OF THE REVENUE IN ITA NO. 5968/M/2009. THE ONLY GROUND TAKEN BY THE REVENUE READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A .O. U/S.69C OF THE INCOME-TAX ACT, 1961 OF RS.10,24,96,004/- ON ACCOUN T OF NOTICES U/S.133(6) RETURNED BACK BY POSTAL DEPARTMENT, ADDITION OF RS. 58,87,535/- ON ACCOUNT OF REPLIES NOT RECEIVED FROM PURCHASE PARTIES AND A DDITION OF RS. 2,63,210/- ON ACCOUNT OF DISCREPANCY FUND IN THE AMOUNT OF PUR CHASES SHOWN BY THE ASSESSEE AND THE PURCHASE PARTY. 9. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D SHOWN TOTAL PURCHASES AMOUNTING TO RS. 15,46,96,231/-. THE A.O. CALLED UP ON THE ASSESSEE TO FURNISH THE PARTYWISE PURCHASES GIVING NAME AND ADDRESS. THE A. O.TO VERIFY THE GENUINENESS OF THESE PURCHASE TRANSACTIONS ISSUED A NOTICE U/S.133 (6) OF THE ACT TO SOME OF THE PARTIES FROM WHOM THE ASSESSEE CLAIMED TO HAVE MADE PURCHASES. THE RESULT OF THE ENQUIRY MADE BY THE A.O. CAN BE CATEGORIES INTO 3. (I) DISCREPANCY IN THE AMOUNT OF PURCHASES SHOWN BY THE ASSESSEE AND THAT SHOWN THE PARTIES FROM WHOM THE ASSESSEE MADE PURCHASES, (II) LETTERS SENT TO SOME OF THE PARTIES WHICH WERE RECEIVED BACK UNSERVED AND (III) LETTERS SENT TO SO ME OF THE PARTIES ON WHOM THE ITA NOS.5407 - 5968/M/09 D.D. COTTON PVT. LTD. 5 NOTICES WERE SERVED BUT THERE WAS NO RESPONSE FROM THEM. THE DETAILS IN THIS REGARD WERE AS FOLLOWS: SR.NO. NAME OF THE PARTY AMOUNT SHOWN BY THE ASSESSEE AMOUNT SHOWN BY THE PARTY ADDITION TO BE MADE 1 LAXMI CHAND LILADHAR 2,969,706.14 2,706,496.00 263 ,210 TOTAL 263,210 LIST OF PURCHASE PARTIES IN RESPECT OF WHOM REPLIES HAVE NOT BEEN RECEIVED SR.NO. NAME OF THE PARTY AMOUNT SHOWN BY THE ASSESSEE AMOUNT SHOWN BY THE PARTY DIFFERENCE / REMARKS ADDITION TO BE MADE 1 DARHSN LAL CHETAN KUMAR 1,295,723 - REPLY NOT RECEIVED. 1,295,723 2 LAKH RAJ SATIA & SONS 3,353,846 - REPLY NOT RECEIVED 3,353,846 3 SIDANA TRADERS 1,237,965 - REPLY NOT RECEIVED. 1,237,965 GRAND TOTAL 5,887,535 5,887,535 LIST OF PURCHASE PARTIES IN RESPECT OF WHOM LETTERS WERE RETURNED BACK BY POSTAL DEPARTMENT: SR.NO. NAME OF THE PARTY AMOUNT SHOWN BY THE ASSESSEE AMOUNT SHOWN BY THE PARTY DIFFERENCE / REMARKS ADDITION TO BE MADE 1 ZIMIDARA TRADERS 102,496,004.00 - - 102, 496,004 GRAND TOTAL 102,496,004.00 102,496,004 10. THE A.O. VIDE LETTER DATED 24.12.2008 CALLED U PON THE ASSESSEE TO RECONCILE THE ABOVE DISCREPANCIES AND HAS ALSO CALL ED UPON THE ASSESSEE TO PRODUCE THE PARTIES REFERRED IN THE NOTICE FOR EXAMINATION ALONG WITH THE BOOKS OF ACCOUNT. THE A.O. ALSO MENTIONED IN THE SAID NOTICE THAT FAI LURE TO COMPLY WITH THE NOTICE WILL RESULT IN THE PURCHASES BEING CONSIDERED AS UNEXPLA INED AND ADDITION MADE TO THE TOTAL INCOME OF THE ASSESSEE. THE DATE OF COMPLIANC E WAS GIVEN BY THE A.O. AS 26.12.2008. THE ASSESSEE VIDE LETTER DATED 27.12.20 08 SUBMITTED THAT AS FAR AS THE NOTICE SENT TO ZIMIDARA TRADERS IS CONCERNED THE AD DRESS WAS NOT PROPER AND THE ASSESSEE FURNISHED THE CORRECT ADDRESS OF THE AFORE SAID PARTY. IN RESPECT OF THE 3 PARTIES ON WHOM THE NOTICES WERE SERVED BUT NO REPL Y WAS RECEIVED BY THE A.O. , THE ASSESSEE SUBMITTED THAT THE A.O. CAN ISSUE SUMMONS U/S.131 OF THE ACT TO THEM AND ALSO BROUGHT TO THE NOTICE OF THE A.O. THAT THE PAN OF THE AFORESAID PARTIES HAVE ITA NOS.5407 - 5968/M/09 D.D. COTTON PVT. LTD. 6 BEEN FURNISHED IN THE LIST OF PERSONS FROM WHOM THE ASSESSEE MADE PURCHASES, ALREADY FILED BEFORE THE A.O. IN THE CASE OF THE PU RCHASES MADE FROM LAXMI CHAND LILADHAR THE ASSESSEE POINTED OUT THAT IT WAS UNABL E TO RECONCILE THE DIFFERENCE WITHOUT HAVING THE COPY OF ACCOUNTS OF THE ASSESSEE AS APPEARED IN THE BOOKS OF LAXMI CHAND LILADHAR. THE A.O. ISSUED ANOTHER LETTE R DATED 29.12.2008 AGAIN CALLING UPON THE ASSESSEE TO PRODUCE THE PARTIES FOR EXAMIN ATION. THE DATE OF COMPLIANCE WAS FIXED ON 31.12.2008. THE ASSESSEE BY LETTER DAT ED 30.12.2008 EXPLAINED THE DISCREPANCY IN THE ACCOUNTS OF M/S. LAXMI CHAND LIL ADHAR AND FURTHER SUBMITTED CONFIRMATION FROM DARSHANLAL KUMAR, LAKH RAJ SATIA & SONS AND SIDANA TRADERS. THE ASSESSEE ALSO OBTAINED A CONFIRMATION OF ACCOUNT FR OM ZIMIDAR TRADERS. ALL THESE DOCUMENTS WERE FILED BEFORE THE A.O. ON 30.12.2008. THE A.O.HOWEVER, HELD THAT ENOUGH OPPORTUNITIES WERE GIVEN TO THE ASSESSEE BUT THE ASSESSEE FAILED TO DISCHARGE THE ONUS OF PROVING THE GENUINENESS OF TH E PURCHASES. ASSESSING OFFICER ACCORDINGLY MADE THE FOLLOWING ADDITION TO THE TOTA L INCOME OF THE ASSESSEE: I) DISCREPANCY IN THE AMOUNT OF PURCHASES SHOWN BY THE ASSESSEE AND THE PURCHASE PARTY RS. 263,210 II) DISCREPANCY IN PURCHASE PARTIES IN RESPECT OF WHOM REPLY NOT RECEIVED RS. 5,887,535 III) DISCREPANCY IN PURCHASE PARTIES IN RESPECT OF WHOM LETTERS WERE RETURNED BACK RS.102,496,004 ----- --------------- TOTAL RS.10,8 6,46,749 ===== ===== 11. ON APPEAL BY THE ASSESSEE, THE CIT(A) DELETED T HE ADDITION MADE BY THE A.O. FOR THE FOLLOWING REASONS: REGARDING ADDITION MADE PERTAINING TO ZIMIDARA TRA DERS, IT WAS SUBMITTED BY THE APPELLANT THAT VIDE LETTER DATED 27.12.2008 THE RE VISED ADDRESS OF THE SAID PARTY WAS SUBMITTED TO THE A.O. VIDE LETTER DATED 27.12.2 008. THE NEW ADDRESS OF THE PARTY WAS GIVEN AS M/S.ZIMIDARA TRADERS (PAN AAAFS 0404G), HAKITKARI CHOWK, CIRCULAR ROAD, ABOHAR, PUNJAB. HOWEVER THE A.O.DID NOT SEND ANY FURTHER NOTICE TO THE CHANGED ADDRESS, FURTHER, VIDE LETTER DATED 30. 12.2008 IT WAS BROUGHT TO THE NOTICE OF THE AO THAT THE PURCHASES FROM M/S. ZIMID ARA TRADERS WAS ONLY RS. 10,24,960/- AND NOT RS. 10,.24,96,004/-. FROM THE D ETAILS OF THE PURCHASES SUBMITTED BY THE APPELLANT THE PURCHASES MADE FROM THIS PARTY WERE AT RS.10,24,960/-. FURTHER THE APPELLANT FILED THE CON FIRMATION FROM THE PARTY VIDE HIS LETTER DATED 30.12.2008, I.E. ON THE VERY DATE OF A SSESSMENT. THE COPY OF SUCH CONFIRMATION FILED DURING THE APPELLATE PROCEEDINGS ALSO. REGARDING ADDITION MADE BY THE AO OF RS. 58,87,535/ - ON THE GRUND THAT THE REPLIES WERE NOT RECEIVED FROM THREE PARTIES. THE APPELLANT FILED THE CONFIRMATION DURING ITA NOS.5407 - 5968/M/09 D.D. COTTON PVT. LTD. 7 THE ASSESSMENT PROCEEDINGS. COPY OF WHICH WERE SUBM ITTED DURING THE APPELLANT PROCEEDINGS ALSO. THE PAN NO. OF THE ABOVE THREE PA RTIES ARE AS UNDER: 1. DARSHANLAL CHETANKUMAR AAA FD6769P 2. LAKHRAJ SATIA & SONS AIEPS9369J 3. SIDANA TRADERS AIAPS5210N ALL THESE PURCHASES ARE RECORDED IN THE BOOKS OF AC COUNT AND THE PAYMENTS ARE MADE THROUGH CHEQUE. REGARDING THE ADDITION MADE BY THE AO OF RS.2,63,21 0/- (BEING THE DIFFERENCE BETWEEN AMOUNT SHOWN BY APPELLANT OF RS.29,69,706/- AND AMOUNT SHOWN BY THE PARTY RS.27,06,496/-) PERTAINING TO THE PARTY LAXMI CHAND LILADHAR IT WAS SUBMITTED THAT THE PURCHASES EFFECTED WERE ONLY RS. 26,96,706 /- AND NOT RS.29,69 ,706/- ADOPTED BY THE AO. THUS, THE DIFFERENCE IS ONLY RS. 9,790/- AND NOT RS.2,63,210/-. THIS FACT WAS SUBMITTED TO THE AO VIDE LETTER DATED 30.12.2008, AGAIN ON THE VERY SAME DATE OF THE ASSESSMENT. THE APPELLANT SUBMITTED ALL THE RELEVANT DETAILS FU RNISHED THE CONFIRMATIONS FROM THE PURCHASE PARTIES, GIVEN THE DETAILS OF PAN, VAT NUMBER AND PAYMENTS ARE MADE BY CHEQUE AND BILLS ARE RECORDED IN THE BOOKS OF ACCOUNT WHICH WERE SUBJECTED TO TAX AUDIT. THE AO CAN NOT MAKE ADDITIO N MERELY ON THE GROUND THAT THE PARTIES HAVE NOT RESPONDED TO THE NOTICES ISSUE D/NOTICES WERE NOT SERVED/WERE RETURNED BACK BY POSTAL DEPARTMENT. IN THIS REGARD, IT IS PERTINENT TO MENTKION THT THE HONBLE I.T.A.T, MUMBAI IN THE CASE OF KASHUKHA TRADING & SERVICING PVT. LTD. V. ITO (MUM) 26 SOT 388 HELD THAT: IN THE INSTANT CASE, THE MAIN GRIEVANCES OF THE AO W AS THA THE PARTIES HAD FAILED TO COMPLY WITH SUMMONS UNDER SECTION 131 AND NOTICES U /S.133(6), THEREFORE THE TRANSACTIONS WERE NON-GENUINE. IT IS WELL SETTLED TH AST MERELY ON ACCOUNT OF NON- COMPLIANCE OF SUMMON AND NOTICE IT CANNOT BE HELD T HAT THE ASSESSEE HAS FAILED TO DISCHARGE HIS BURDEN. FURTHER, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ITO VS. HYLAN SECURITIES & FINANCE P.LTD. 178 TAXMAN 317 (GUJ.) HELD THAT THE ADDITION CANNOT BE MADE MERELY ON THE NON PRODUCTION OF CREDITORS WHEN THE EXPENSES ARE SUPPORTED BY BOOKS OF ACCOUNT AND ARE VERIFIABLE FROM THE RECORD MAINTAINED BY THE ASSESSEE. IN VIEW OF THE FACT THAT THE CREDITORS HAVE FILED CO NFIRMATION OF PURCHASES, THE APPELLANT MADE THE PAYMENTS THROUGH CHEUQES AND TRA NSACTIONS ARE SUPPORTED BY BILLS/VOUCHERS AND THE REGULAR BOOKS OF ACCOUNT WHI CH IS SUBJECTED TO TAX AUDIT, I SEE NO MERIT IN THE ADDITION MADE BY THE AO AND THE SAME IS DELETED. 12. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE WHO RELIED ON THE ORDER OF THE A.O. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). 13. WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A ) DOES NOT CALL FOR ANY INTERFERENCE. ADMITTEDLY, THE PURCHASES MADE BY THE ASSESSEE FROM ZIMIDARA TRADERS WERE ONLY RS. 10,24,960/- WHEREAS THE A.O. CONSIDER ED THE PURCHASE AT 10,24,96,004/-. THIS MISTAKE WAS ALSO POINTED OUT B Y THE ASSESSEE TO THE AO BY FILING AN APPLICATION UNDER SECTION 154 OF THE ACT DATED 3.01.2009, WHICH APPLICATION ITA NOS.5407 - 5968/M/09 D.D. COTTON PVT. LTD. 8 IS STILL PENDING BEFORE THE AO FOR CONSIDERATION. I N RESPECT OF THIS PARTY, ADMITTEDLY A CONFIRMATION WAS FILED DISCLOSING THE PAN AND OTHER DETAILS. THE A.O. DID NOT CHOOSE TO MAKE ANY FURTHER ENQUIRY AND MADE THE IMPUGNED A DDITION WITHOUT ANY BASIS. AS FAR AS THE AMOUNTS ADDED AS UNEXPLAINED PURCHASES F ROM DARSHAN LAL CHETAN KUMAR, LAKH RAJ SATIA & SONS, SIDANA TRADERS, IT IS CLEAR THAT A CONFIRMATION WAS FILED BEFORE THE A.O. AND THE A.O. HAD CONVENIENTLY CHOSEN TO IGNORE THE SAME. THE CONFIRMATION CONTAINED ALL THE PARTICULARS INCLUDIN G THE PAN NUMBERS. WITHOUT BRINGING ANY MATERIAL ON RECORD, THE A.O. WAS NOT J USTIFIED IN TREATING THE SAME AS BOGUS PURCHASES. AS FAR AS THE PURCHASES FROM LAXMI CHAND LILADHAR IS CONCERNED, THE ACTUAL AMOUNT OF PURCHASES WERE ONLY RS.26,96,7 03/- AND NOT RS.29,69,706/-. THUS THE DISCREPANCY BETWEEN THE BOOKS OF THE ASSES SEE AND THAT OF LAXMI CHAND LILADHAR WAS ONLY 9790/-. THIS FACT WAS DULY BROUGH T TO THE NOTICE OF THE A.O. BY THE ASSESSEE VIDE ITS LETTER DATED 30.12.2008 WHICH AGA IN HAS BEEN TOTALLY IGNORED BY THE A.O. WE AGREE WITH THE OPINION OF THE CIT(A) TH AT WHEN ALL THE DETAILS WERE FURNISHED ALONG WITH CONFIRMATION, PAN AND THE PURC HASES ARE SUPPORTED BY BILLS AND DULY RECORDED IN THE BOOK OF ACCOUNT AND THE PAYMEN TS HAVE BEEN MADE BY CHEQUES AND WHEN THE BOOKS ACCOUNT WERE DULY AUDITED, THE A O CANNOT MAKE ADDITION TREATING THE PURCHASES AS BOGUS MERELY ON THE GROUN D THAT THE PARTIES DID NOT RESPONDED TO THE NOTICES ISSUED OR THE NOTICED WERE RETURNED BACK UNSERVED. IN THAT VIEW OF THE MATTER, WE UPHOLD THE ORDER OF THE CIT( A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 14. IN THE RESULT, THE APPEAL BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF NOVEMBER, 2010. SD. SD. (PRAMOD KUMAR) (N.V. VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED THE 19 TH NOVEMBER, 2010. KN ITA NOS.5407 - 5968/M/09 D.D. COTTON PVT. LTD. 9 COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT-3, MUMBAI 4. THE CIT(A)-XXVIII MUMBAI 5. THE DR C BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI