Smt. Ketkiben Nandkishor Parekh, Surat V. The Income tax Officer, Ward-3(1), Surat

ITA 606/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5777 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-05-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 08-02-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJEEV KASHYAP SRDR
• Assessee Lawyers: R N VEPARI
• Keywords: Unexplained cash credit; Additional evidence
• Section: 234B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : A HMEDABAD CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON'BLE SH RI D.C. AGRAWAL , A.M.) I.T.A. NO. 606/AHD./2007 ASSESSMENT YEAR : 2003-2004 DATE OF HEARING:20.5.10 DRAFTED:25.5.10 SHRI NANDKISHOR PAREKH L/H. OF LATE KETKIBENNANDKISHOR PREKH, 504, J.K. TOWER, RING ROAD, SURAT PAN NO.ABGPP6054L V/S . INCOME TAX OFFICER, WARD- 3(1), SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI R.N. VEPARI, AR RESPONDENT BY:- SHRI SANJEEV KASHYAP,SR-DR O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER:- THIS APPEAL IS FILED BY ASSESSEE RAISING FOLLOWING GROUNDS:- (I) UNEXPLAINED CREDIT U/S.68 OF THE ACT: (1) THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) ERR ED IN MAKING ADDITION UNDER SECTION 68 OF THE ACT OF AMOUNT OF RS.801,334 CONSISTING OF SALE PROCEEDS RECEIVED OF RS.605,186 AND RS.196,148 AS OUTSTANDIN G DEBTORS. (2) THE APPELLANT SUBMITS THAT THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) HAS MISCONSTRUED THE PROVISIONS OF SECTION 618 BY W RONGLY INVOKING IT WHEN THE 2 ITA NO. 606/AHD/2007 SAID PROCEEDS HAVE BEEN SHOWN TO HAVE BEEN RECEIVED AND CREDITED IN THE BOOKS OF ACCOUNTS. (3) THE APPELLANT FURTHER SUBMITS THAT THE LEARNED COMM ISSIONER OF INCOME- TAX(APPEALS) WAS NOT JUSTIFIED IN REPLYING ON THE S TATEMENT OF SMT. URVASHIBEN JITENDRA JARIWALA WHEN SHE HAS BEEN CHANGING HER ST ATEMENT AND GIVING INCORRECT STATEMENT UNDER OATH. (4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADD ITION HAS BEEN WRONGLY MADE AND CONFIRMED AND IS REQUIRED TO BE DELETED. (II) MISCELLANEOUS: (1) THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN NO T DELETING INTEREST U/S.234A (2) THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN NO T DELETING INTEREST U/S.234B (3) THE APPELLANT CRAVES LEAVE TO ADD, ALTER O VARY ANY OF THE GROUNDS OF APPEAL. 2. THE FACTS OF THE CASE RELATING TO ADDITION OF RS .8,01,334/- MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT ARE THAT ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING OF YARN. DURING THE YEAR, ASSESSEE CLAIMED PURCHASE OF YARN FROM FOLLOWING PARTIES:- (I) C.B. TEXTILES : RS.4,00,195 (II) M/S. DARSHANA SYNTEX : RS.1,77,185 (III) S.G. TEXTILES : RS.1,85,558 DURING THE COURSE OF EXAMINATION OF ABOVE THREE PAR TIES, THE ASSESSING OFFICER FOUND THAT GOODS WERE NOT PURCHASED FROM S.G. TEXTILES. IT ACTED ONL Y AS BROKER AND MIGHT HAVE BEEN PURCHASED FROM M/S PARTH ENTERPRISE, M/S PARTH ENTERPRISE IS AUTHORIZED DEALER OF RELIANCE INDUSTRIES M/S. S.G. TEXTILES INFORMED TO THE ASSESSING OFFICER THA T IT IS SIMPLY ACTING AS A BROKER AND HAS FINANCED THE PURCHASES. IT WAS THUS STATED BY M/S. S.G. TEXTILES THAT M/S. PARTH ENTERPRISE HAD DIRECTLY MADE THE DELIVERY OF GOODS TO THE CONCERNE D PERSONS AND RECEIVED THE PAYMENT FROM THE PARTIES WHO FINANCED THE BILLS. IN FACT, AS PER M/S . S.G. TEXTILES ASSESSEE IS THE PERSON FINANCED THE PURCHASES OF SOME OTHER PARTIES ALSO. FROM THI S ASSESSING OFFICER INFERRED THAT ASSESSEE HAS NOT MADE ANY PURCHASE. IT IS IN FACT M/S. PARTH EN TERPRISE WHICH HAS MADE PURCHASES AND 3 ITA NO. 606/AHD/2007 ASSESSEE HAS ONLY CHARGED @ 2% PER MONTH ON THE BIL LS FINANCED BY HIM. FURTHER, IT WAS ALSO INFORMED TO AO THAT ASSESSEE MIGHT HAVE TRANSFERRED THIS FINANCE TO SOME OTHER PERSONS BY MAKING A PROFIT OF 2% THEREON. FROM THIS ENTIRE DI SCUSSION WITH M/S. S.G. TEXTILES, AO INFERRED THAT THERE ARE NO PURCHASES MADE BY THE ASSESSEE. HE FOUND SIMILAR POSITION WITH RESPECT TO M/S. DARSHAN SYNTEX AND M/S. C.B. TEXTILES. THUS, FINAL LY HE HAS HELD THAT NO PURCHASE ARE MADE BY THE ASSESSEE. THE AO PROVIDED COPIES OF STATEMENT R ECORDED BY HIM DURING THE COURSE OF INVESTIGATION TO THE ASSESSEE AND ALLOWED CROSS-EXA MINATION OF THE PARTIES. ONE WITNESS, SMT. URVASHI JARIWALA, PROPRIETOR OF M/S. SAI CORPORATIO N TO WHOM ALLEGED GOODS WERE SOLD BY THE ASSESSEE STATED THAT SHE HAS NOT MADE ANY SUCH PURC HASE FROM ASSESSEE OR FROM M/S. PARTH ENTERPRISE. SHE FURTHER STATED TO AO THAT SHE DOES NOT KNOW PARTIES WITH WHOM ASSESSEE HAS CLAIMED THAT IT HAD MADE TRANSACTIONS. SHE CATEGOR ICALLY DENIED ANY BUSINESS RELATION WITH ASSESSEE OR ANY OF THE PARTIES FOR WHOM ASSESSEE MA DE FINANCE. FROM THIS, AO INFERRED THAT WHATEVER IS BEING DEBITED TO M/S.SAI CORPORATION IS NOT CORRECT. ACCORDING TO HIM, TOTAL MONEY INTRODUCED IN SUCH TRANSACTION WAS RS.8,01,334/- WH ICH IS SHOWN AS SUNDRY DEBTORS. IT WAS, IN FACT ASSESSEES OWN MONEY. HE ACCORDINGLY, MADE TH E ADDITION OF THIS AMOUNT U/S.68 OF THE ACT. 3. LD. CIT(APPEALS) CONFIRMED THE ADDITION AS ACCOR DINGLY TO HIM NEITHER PURCHASES NOR SALES ARE PROVED. THE ASSESSING OFFICER HAS PROVED THAT PURCHASES ARE BOGUS AND SO THE SALES. IN THIS REGARD, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED IN PARA 6 TO 6.4 AT PAGES 5 TO 8 OF HIS ORDER AS UNDER :- 6. I HAVE CAREFULLY CONSIDERED THE VIEW TAKEN BY T HE A.O. AS WELL AS THE SUBMISSIONS OF THE AR. THE ENTIRE ARGUMENT OF THE ASSESSEE AND THE AR IS BASED ON THE SO-CALLED MODUS OPERANDI OF THE TEXTILE MARKET. ACCORDING TO THE AR, AS PER THE ESTABLISHED PRACTICE, THE BILLS ARE RAISED BY THE SELLER OR THE FINANCIER BUT, THE GOODS ARE DELIVERED TO THE ACTUAL BUYER. THE FINANCIER RAISES A BILL ON TH E BUYER AT A HIGHER PRICE AND THEREBY EARNS A PROFIT. THIS PROFIT IS IN LIEU OF THE INTER EST FOR THE CREDIT PERIOD GRANTED TO THE BUYER FOR MAKING THE PAYMENT. IF THIS IS TO BE ACCE PTED AS TRUE, AND IT M/S PARTH ENTERPRISES WAS THE ACTUAL SELLER THEN, THE BILLS S HOULD HAVE BEEN RAISED BY M/S. PARTH ENTERPRISES IN THE NAME OF THE ASSESSEE SINCE, AS C LAIMED BY THE PROPRIETOR OF M/S. 5, C. TEXTILES AND M/S. C. B. TEXTILES, SHRI GOVINDBHAI A DHVARYU, HE WAS ONLY A BROKER. THIS HAS ALSO BEEN CLAIMED BY THE AR IN HIS WRITTEN SUBM ISSIONS. IN SUCH A SITUATION, THERE IS NO REASON WHY, FIRSTLY, THAT THE ASSESSEE SHOULD HA VE SHOWN TO HAVE MADE PURCHASES FORM. M/S. C. B. TEXTILES, M/S. DARSHAN SYNTEX AND M/S. S. G. TEXTILES, TOTALLING RS 7,62,939. THE BILLS WOULD HAVE BEEN RAISED BY M/S. PARTH ENTERPRISES, WHICH WAS NOT THE CASE. EVEN THE BILLS RAISED BY M/S. DARSHAN SYNTEX DID NOT HAVE THE NAME OF THE ASSESSEE. MOREOVER, THERE WAS NO EVIDENCE OF ANY OCTROI HAVIN G BEEN PAID ON SUCH PURCHASES. THIS CLEARLY ESTABLISHED THE FACT THAT TH 1 ' PURCHASES WERE BOGUS. 4 ITA NO. 606/AHD/2007 6.1. IT THUS APPEARS THAT THE MODUS OPERAND! AS CLA IMED BY THE ASSESSEE AND THE AE, IS NOT REALLY IN PRACTICE, I HAVE HAD OCCASION TO E XAMINE SUCH TRANSACTIONS IN SOME OTHER CASES AND 1 HAVE ROUND THAT THE FINANCIER'S ROLE IS CONFINED TO FINANCING THE PURCHASE ON BEHALF OF THE BUYER. THE BILLS ARE HOWEVER RAISED B Y THE SELLER IN THE NAME OF THE BUYER AND THE GOODS ARE ALSO DELIVERED DIRECTLY TO THE BU YER. IN THE CASE CITED BY THE AR, THE ASSESSEE'S ROLE DOES NOT REMAIN AS THAT OF A FINANC IER SINCE, HE IS INVOLVED IN THE PURCHASE ON ONE HAND, AND THE SALE ON THE OTHER, WHICH MEANS THAT HE WAS ONLY A TRADER WHO EARNED A PROFIT THROUGH SUCH TRANSACTIONS. IF HE WA S A TRADER, THE BILL .SHOULD HAVE BEEN RAISED IN THE NAME OF THE ASSESSEE WHO SHOULD HAVE ALSO MADE THE PAYMENT TO THE SELLER IN THIS CASE, IT IS NOT ONLY NOT CLEAR AS TO WHO WA S THE ACTUAL SELLER, WHETHER IT WAS M/S. PARTH ENTERPRISE OR IT WAS THE THREE CONCERNS MENTI ONED ABOVE. ON THE OTHER HAND, THERE WAS ABSOLUTELY NO EVIDENCE OF THE ASSESSEE HAVING M ADE ANY PAYMENT FOR THE PURCHASES THAT WAS CLAIMED TO HAVE BEEN MADE SHRI GOVINDBHAI STATED THAT THE ASSESSEE WAS ONLY A FINANCIER WHO CHARGED INTEREST AT 2% PER MONTH. THI S STATEMENT OF SHRI GOVINDBHAI CONTRADICTED THE SUBMISSIONS OF THE ASSESSEE BEFORE THE AO AS REPRODUCED ABOVE, AS ALSO THE SUBMISSIONS MADE BY THE AR IN APPELLATE PROCEED INGS. IN THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AO VIDE LETTER DID. 14/11/2005, EXCERPTS FROM WHICH HAVE BEEN REPRODUCED ABOVE, A CLOSE EXAMINATION OF THE SAME W OULD SHOW THAT IN THE EXAMPLE CITED BY THE ASSESSES, M/S. C. B. TEXTILES AND M/S. S. G. TEXTILES HAVE BEEN SHOWN AS BUYERS, WHO HAD BEEN FINANCED BY THE ASSESSEE. THIS WAS IN TOTAL CONTRADICTION TO THE ASSESSEE'S CLAIM THAT PURCHASES HAD BEEN MADE FROM THE SAID CO NCERNS. IN OTHER WORDS, THEY WERE SELLERS. 6.2. ALONG WITH THE WRITTEN SUBMISSIONS, THE AR HA S FURNISHED AN AFFIDAVIT DTD. 13/5/2006 FROM M/S. PARTH ENTERPRISES, THIS AFFIDAV IT IS SIGNED BY ONE OF THE PARTNERS OF THE SAID FIRM. THERE ARE TWO ASPECTS TO IT. FIRSTLY , THIS AFFIDAVIT FURTHER COMPOUNDS THE CONFUSION AS TO WHO WAS THE ACTUAL SELLER SINCE, M/ S. S. G. TEXTILES, M/S, C. B, TEXTILES AND M/S. DARSHAN SYNTEX WERE ALSO CLAIMED TO BE SEL LERS. SECONDLY, THIS AFFIDAVIT CANNOT BE ADMITTED AS EVIDENCE IN APPELLATE PROCEEDINGS. T HIS IS BECAUSE, THE ASSESSEE HAD MORE THAN SUFFICIENT OPPORTUNITIES, IN COURSE OF THE ASS ESSMENT PROCEEDINGS, TO PRODUCE NECESSARY EVIDENCE. THE AK HAS NOT EXPLAINED AS TO WHAT PREVENTED HIM FROM PRODUCING THIS AFFIDAVIT BEFORE THE AO. THIS MEANS THAT THE A SSESSEE'S CASE IS NOT COVERED BY ANY OF THE EXCEPTIONS PROVIDED UNDER RULE 46A(1) OF THE 1. T. RULES. THEREFORE, THIS AFFIDAVIT IS NOT ADMITTED AS ADDITIONAL EVIDENCE. 6.3 AS REGARDS THE SALES, THE ASSESSES CLAIMED TO HAVE SOLD THE SAME GOODS TO M/S. SAI CORPORATION. HOWEVER, SMT, URVASHI JHARIWALA, THE P ROPRIETOR OF M/S. SAI CORPORATION, CLEARLY STATED IN HER STATEMENT DTD. 8/8/2005 THAT SHE HAD MADE NO PURCHASES FROM THE ASSESSEE, NOR HAD SHE MADE ANY PAYMENT AND THAT, SH E DID NOT HAVE ANY BUSINESS DEALINGS WITH THE ASSESSEE. THE ASSESSEE'S BANK ACC OUNT ALSO DID NOT REFLECT THE RECEIPT OF ANY SUCH PAYMENT. THE AR HAS CLAIMED THAT IN HER ST ATEMENT RECORDED ON 08.08.2005, SMT. JHARIWALA HAD CLAIMED THAT SHE KNEW THE ASSESS EE AND HER FAMILY BUT, US RECORDED BY HE AO, SMT. JHARIWALA HAD COMPLETELY DENIED TO H AVE ENTERED INTO ANY TRANSACTION WITH THE ASSESSEE. THIS WAS REITERATED BY HER DURIN G HER CROSS-EXAMINATION ON 16/3/2006. THE AR'S CLAIM OF SMT. JHARIWALA BEING UNRELIABLE I S THEREFORE, WITHOUT ANY BASIS SINCE, SHE WAS CONSISTENT IN DENYING ANY BUSINESS DEALINGS WITH THE ASSESSEE, ON BOTH THE OCCASIONS. 6.3. FURTHER, EVEN THOUGH THE ASSESSEE CLAIMED TO HAVE MADE THE SALES TO M/S. SAI CORPORATION, IT IS SEEN THAT PAYMENTS WERE RECEIVED AGAINST SUCH SALES FROM DIFFERENT 5 ITA NO. 606/AHD/2007 PARTIES OTHER THAN M/S. SAI CORPORATION. THE AR'S C LAIM THAT THESE PARTIES BELONGED TO THE SAME GROUP OF CONCERNS AS M/S. SAI CORPORATION, IS NOT BORNE OUT BY ARTY EVIDENCE ON RECORD. HIS FURTHER CONTENTION THAT M/S. SAI CORPOR ATION HAD DENIED PURCHASES MADE FROM THE ASSESSEE BECAUSE IT HAD NOT ACCOUNTED FOR SUCH PURCHASES IN HER BOOKS, IS ALSO NOT SUBSTANTIATED. THEREFORE, NOT ONLY WERE THE PUR CHASES MADE BY THE ASSESSEE NOT BACKED UP BY ANY EVIDENCE, THE SALES WERE ALSO PROV ED TO BE COMPLETELY BOGUS. IT HAS BEEN ARGUED BY THE AR THAT THE PURCHASES WERE NOT D ENIED. THIS IS NOT CORRECT, AS SEEN NOT ONLY IN THE DISCUSSION ABOVE, BUT ALSO FROM A P ERUSAL OF THE ASSESSMENT ORDER. THE AO FIRST ESTABLISHED THAT THE PURCHASES WERE BOGUS AND ONLY THEN DID HE PROCEED TO EXAMINE THE SALES, WHICH ALSO TURNED OUT TO BE BOGUS. THE A R HAS ARGUED THAT SINCE THE PURCHASES WERE NOT DOUBTED, THE QUESTION OF DOUBTING THE SALE S, DID NOT ARISE MILS IS NOT ACCEPTABLE. THE AR HAS FAILED TO APPRECIATE THAT THE CONVERSE W OULD ALSO BE TRUE, I.E. WITHOUT PURCHASES, THERE CANNOT BE ANY SALES. IN ANY CASE, THE AO NOT ONLY PROVED THAT THE PURCHASES WERE BOGUS BUT HE ALSO SUCCEEDED IN PROVI NG THAT NO SALES HAD TAKEN PLACE AT ALL THIS LED TO THE INEVITABLE CONCLUSION THAT THE SUM CREDITED IN THE BOOKS OF ACCOUNT IN THE FORM OF SALE PROCEEDS, REPRESENTED UNEXPLAINED CASH CREDITS. THE ASSESSEE DID NOT SUCCEED, EITHER IN COURSE OF THE ASSESSMENT PROCEED INGS, OR EVEN NOW IN APPELLATE PROCEEDINGS, TO PROVE THAT THE SALES WERE GENUINE. 6.4. THUS, TAKING INTO ACCOUNT THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, AS THEY EMERGE FROM THE ASSESSMENT ORDER ON ONE HAN D, AND FROM THE SUBMISSIONS OF THE AR ON THE OTHER, IT IS HELD THAT THE AO WAS FULLY J USTIFIED IN TREATING THE SALES TOTALING TO RS. 8,01,334, AS UNEXPLAINED CASH CREDITS, UNDER TH E PROVISIONS OF SECTION 68 OF THE I. T. ACT THE ADDITION OF THE SAID SUM IS THEREFORE, CONF IRMED. 4. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF A SSESSEE SHRI R.N. VEPARI, LD. COUNSEL APPEARED AND DREW OUR ATTENTION TO THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT ROLE OF TH E ASSESSEE IS LIMITED TO BILL DISCOUNTING. THE DETAILED SUBMISSIONS ARE REPRODUCED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN PARA 4.4. OF HIS IMPUGNED ORDER. THE LD. COUNSEL OF THE ASSESSEE CONTENDED THAT THE ASSESSEE HAS SHOWN SALES AS WELL AS PURCHASES. THE SALES ARE SHO WN AS INCOME, THEREFORE, THERE IS NO QUESTION OF MAKING ANY FURTHER ADDITION. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT SHE (THE ASSESSEE) COULD NOT FURNISH CONFIRMATION OF SALES M ADE TO M/S. SAI CORPORATION BECAUSE THE BOOKS OF THE SAI CORPORATION WAS SEIZED BY THE GOVE RNMENT AUTHORITIES. M/S. SAI CORPORATION WAS THE MAIN GROUP CONCERN OF THAT FAMILY WHICH HAS BEEN DELIVERED GOODS, HOWEVER, THEY HAVE TAKEN PURCHASES IN NAMES OF VARIOUS FAMILY CONCERNS LIKE HARSHA TEXTILES, ETC., WHICH ASSESSEE WOULD NOT KNOW BECAUSE ALL GOODS ARE DELIVERED AT S AI CORPORATION ONLY. THE LD. COUNSEL OF THE ASSESSEE FURTHER DREW OUR ATTENTION TO THE SUBMISSI ONS MADE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), WHEREIN IT WAS STATED THAT THE GOODS WERE SOLD BY M/S. PARTH ENTERPRISES AND WAS DELIVERED TO M/S. SAI CORPORATION. THE ASSE SSEE WAS ONLY A FINANCIER WHO PAYS THE SELLER 6 ITA NO. 606/AHD/2007 AND THEN SELLS THE SAME GOODS TO THE BUYER AT A HIG HER PRICE AND GIVES CREDIT AT THE SAME TIME. THE DIFFERENCE BETWEEN THE TWO PRICES IS THE PROFIT TO THE FINANCIER AND REPRESENTS THE INTEREST THAT IS CHARGEABLE FOR THE CREDIT PERIOD. THE LD. COUNSE L OF THE ASSESSEE FURTHER SUBMITTED THAT SMT. JHARIWALA HAD EARLIER STATED IN HER STATEMENT RECOR DED ON 8.8.2005 THAT SHE KNEW THE ASSESSEE AND HER FAMILY MEMBERS. HOWEVER, AT THE TIME OF CROSS E XAMINATION ON 16.3.2006, SHE SUDDENTLY CHANGED HER STATEMENT AND SAID THAT SHE DID NOT KNO W THE ASSESSEE. THEREFORE, PRIMA FACIE IT APPEARS THAT M/S. SAI CORPORATION HAD NOT ACCOUNTED FOR THE PURCHASES MADE. THE MERE FACT THAT THE PURCHASES WERE NOT RECORDED, THAT CANNOT BE A G ROUND TO DISBELIEVE THE ASSESSEE AND MADE THE ADDITION. CONTINUING HIS ARGUMENT, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED ONLY REAL INCOME TAX AND NOT ENTIRE SALE PROCEEDS. TO SUM UP, THE LD. CO UNSEL OF THE ASSESSEE POINTED OUT THAT ENTIRE ADDITION HAS BEEN MADE ON DOUBTS AND SUSPICION AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE SAM E. THE LD. COUNSEL FURTHER POINTED OUT THAT IN QUANTUM APPEAL, THE SAME LEARNED COMMISSIONER OF IN COME TAX(APPEALS) CONFIRMED THE ADDITION OF RS.8,01,334/- MADE UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. HOWEVER, IN PENALTY APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HIMSELF CANCELLED THE PENALTY HOLDING THAT THERE IS ONLY A DIFFERENT OF O PINION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER, WHEREIN THE ENTIRE SALES HAS BEEN TREATED AS CREDIT UNDER SECTION 68 OF THE INCOME TAX ACT. 5. ON THE OTHER HAND, SHRI SANJEEV KASHYAP, SR. D.R . APPEARING ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX(APPEALS). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 14.10.2005, THE ASSESSEE SUBMITTED THAT HER ROLE WAS LIMITED TO BILL DISCOUNTING. THE MODUS OPERANDI OF THE SAME IS AS UNDER :- MY CLIENT AGREES THAT WHAT HAS ACTUALLY HAPPENED I S WHAT IS KNOWN IN PARLANCE IN SURAT AS BILL DISCOUNTING. WHEN PARTY A WANTS TO PURCHASE GOODS FROM PARTY B AND DOES NOT HAVE FUNDS TO MAKE PAYMENT IN RESP ECT OF PURCHASES MADE BY PARTY A TO FINALISE THE TRANSACTION WITH PARTY B , PARTY A APPROACHES PARTY F TO MAKE PAYMENT TO PARTY B. NOW PARTY F APP ARENTLY PURCHASES THE GOODS WITH PARTY B ISSUING BILLS IN FAVOUR OF PARTY F AND RECEIVING COST OF PURCHASE. PARTY F IN TURN SELLS HIS GOODS BY ISSUE OF SALE BILL TO PARTY A WHERE THE PAYMENT IS TO BE MADE AFTER SOME TIME. IN THIS ARRA NGEMENT FUNDS OF PARTY F GET INVESTED FOR SOMETIME AND, THEREFORE, IT CHARGES WH AT IS KNOWN AS DISCOUNT REFLECTED IN THE DIFFERENCE BETWEEN THE PURCHASE AN D SALE PRICE. EVENTUALLY, PARTY 7 ITA NO. 606/AHD/2007 B GETS PAYMENT IMMEDIATELY. PARTY A GETS GOODS IMMEDIATELY AND GETS TIME FOR PAYMENT OF PARTY F FOR RENDERING THIS SERVICE GET S SOME DISCOUNTING. THIS IS THE PRACTICE WHICH IS COMMON EVERYWHERE AND ALSO QUITE PREVALENT IN SURAT WHERE THE BILL DISCOUNTING IS DONE IN THIS FASHION. IN THIS CASE YOU HAVE TO PLACE C.B. TEXTILES AND S. G. TEXTILES AS PARTY A AND MY CLIENT AS PARTY F AND THE DISCOUNT HAS BEEN RECEI VED AND SHOWN IN THE FORM OF DIFFERENCE BETWEEN PURCHASES AND SALE. IN THIS WHOL E TRANSACTION IT IS ONLY A MANNER OF SHOWING TRANSACTION BUT THERE IS NO EVASI ON AT ALL. I TRUST YOU WILL APPRECIATE THE REALITIES OF THE SI TUATION AS PREVAIL. I COULD NOT FURNISH CONFIRMATION FOR THE SALE MAKE TO SAI CORPORATION BECAUSE BOOKS OF SAI CORPORATION WERE SEIZED FROM GOVT. AUT HORITIES. SAI CORPORATION IS THE MAIN GROUP CONCERN OF THAT FAMILY WHICH HAS BEE N DELIVERED GOODS, HOWEVER, THEY HAVE TAKEN PURCHASE IN NAMES OF VARIOUS FAMILY CONCERNS LIKE HARSHA TEXTILES, ETC. WHICH ASSESSEE WOULD NOT KNOW BECAUS E ALL GOODS ARE DELIVERED AT SAI CORPORATION ONLY. AS REGARDS PROPOSED ADDITION OF SALES PROCEEDS AS I NTRODUCTION OF MY CLIENTS OWN MONEY, THE ASSESSEE HAS ALREADY SHOWN THE SALES AMO UNT AS HER INCOME AND, THEREFORE, THERE IS NO QUESTION OF MAKING ANY FURTH ER ADDITION. IN THE END WHEN A HOLISTIC VIEW IS TAKEN, IT WOULD BE ABUNDANTLY CLEAR THAT MY CLIENT HAS SHOWN PURCHASES AND THE GOODS PURCHASED AND ALSO SHOWN TO BE SOLD. IF THE PURCHASES HAD NOT BEEN MADE, SHE COULD NOT HAVE SOLD THE GOODS, THEREFORE, TAKING ANY VIEW OF THE MATTER IN THE FACTS AND CIRC UMSTANCES OF THE CASE, THERE IS NO QUESTION OF MAKING ANY ADDITION ON ANY COUNT IN THIS REGARD. 6.1. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER REJECTED THE AFORESAID EXPLANATION OF THE ASSESSEE MERELY RELYING ON THE STATEMENT OF SMT. JH ARIWALA, WHO HAD STATED THAT SHE HAD NOT MADE ANY PURCHASES EITHER FROM M/S. PARESH ENTERPRISES O R M/S. PARTH ENTERPRISES. PRIMA FACIE, IT APPEARS THAT THE ASSESSEE HAS RECORDED THE SALES AS WELL AS PURCHASES IN THE BOOKS OF ACCOUNTS. BE THAT AS IT MAY, IN OUR OPINION, THIS CANNOT BE A GR OUND TO DISBELIEVE THE ASSESSEE AND TREAT THE ENTIRE SALES AMOUNT AS HER INCOME. IT IS AN WELL SE TTLED LAW THAT ONLY REAL INCOME IS TAXABLE. THE REAL INCOME HAS BEEN DULY DISCLOSED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS OF THE PROPRIETORSHIP CONCERN IN THE NAME AND STYLE OF M/S . PARTH ENTERPRISES. SINCE THE ASSESSEE HAS RECORDED SALES AS WELL AS PURCHASES IN THE BOOKS OF ACCOUNTS, THE MERE FACT THAT THE ASSESSING OFFICER FOUND THE SAME UNVERIFIABLE FROM THE PURCHA SERS, IS NO GROUND TO HOLD THAT THE TRANSACTIONS WERE NOT GENUINE. WHATEVER PROFIT THE ASSESSEE HAS EARNED HAS BEEN DULY DISCLOSED IN THE RETURN OF INCOME. IN OUR CONSIDERED OPINION, THERE IS NO JUSTIFICATION WHATSOEVER FOR MAKING THE ADDITION OF RS.8,01,334/- BY INVOKING TH E PROVISIONS CONTAINED IN SECTION 68 OF THE 8 ITA NO. 606/AHD/2007 INCOME TAX ACT, 1961. THEREFORE, THE ADDITION OF RS .8,01,334/- MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER IS DELETED. RESULTANTLY, GROUND NO. I OF THIS APPEAL I S ALLOWED. 7. THE ONLY OTHER ISSUE IS AGAINST LEVY OF INTEREST UNDER SECTION 234A & 234B OF THE I.T. ACT. LEVY OF INTEREST UNDER BOTH THESE SECTIONS IS MANDATORY. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO ALLOW CONSEQUENTIAL RELIEF IN LEVY O F INTEREST UNDER BOTH THESE SECTIONS. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 25 /06/2010 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) DATED : 25 /06 /2010 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. (2) THE RESPONDENT, (3) THE CIT(APPEALS)-II, SURAT 4. THE CIT CONCERNS. (5) THE DR, ITAT, AHMEDABAD , (6) GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR, ITAT, AHMEDABAD LAHA/SR. P.S.