M/S. NARENDRA IMPEX, MUBMAI V. THE ACIT 24(3), MUMBAI

ITA 6357/MUM/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48875 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 15-10-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS ASHIMA GUPTA
• Assessee Lawyers: SUBHASH SHETTY
• Keywords: Unexplained cash credit; Opportunity of being heard; Additional evidence
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, PRESIDENT AND SHRI T.R. SOOD, ACCOUNTANT MEMBER I.T.A. NO.6357/MUM/2007 (ASSESSMENT YEAR : 2004-05) M/S. NARENDRA IMPEX, 3, VAKIL INDUSTRIAL ESTATE, VALLABHAI ROAD, GOREGAON(E), MUMBAI-400 063. PAN:AACFN0055A VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, 24(3), MUMBAI. (APPELLANT) (RESPONDENT) & I.T.A. NO.6505/MUM/2007 (ASSESSMENT YEAR : 2004-05) THE ASSISTANT COMMISSIONER OF INCOME TAX, 24(3), MUMBAI. VS. M/S. NARENDRA IMPEX, 3, VAKIL INDUSTRIAL ESTATE, VALLABHAI ROAD, GOREGAON(E), MUMBAI-400 063. PAN:AACFN0055A (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. SUBHASH SHETTY REVENUE BY : MRS. ASHIMA GUPTA, DR O R D E R PER R.V.EASWAR, PRESIDENT: THESE ARE CROSS APPEALS RELATING TO THE ASSESSMENT YEAR 2004-05. THE ASSESSEE IS A PART NERSHIP FIRM MANUFACTURING PLASTIC BAGS AND ROLLS. THE APP EALS ARISE OUT OF THE ASSESSMENT ORDER PASSED ON 21.12.2006 UN DER SECTION 143(3) OF THE ACT. 2. WE MAY FIRST TAKE UP ITA NO.6357/MUM/2007 WHICH IS THE APPEAL FILED BY THE ASSESSEE. THE FIRST TWO GRO UNDS ARE DIRECTED AGAINST THE ADDITION ON ACCOUNT OF THE NET PROFIT OF THE BUSINESS. THESE GROUNDS ARE CONNECTED TO GROUND NO. 1 IN THE DEPARTMENTS APPEAL IN ITA NO.6505/MUM/2007 AND ACCORDINGLY ALL THE GROUNDS ARE DEALT WITH TOGETHER . ITA NOS.6357 & 6505/MUM/07 2 3. FROM THE DETAILS FILED BY THE ASSESSEE ALONG WIT H THE RETURN THE ASSESSING OFFICER FOUND THAT THE NET PRO FIT AND GROSS PROFIT POSITION FOR THE YEAR UNDER APPEAL AS WELL A S THE THREE ASSESSMENT YEARS PRIOR THERETO IS AS UNDER:- A.Y SALES GROSS PROFIT % OF GROSS PROFIT NET PROFIT % OF NET PROFIT 2004-05 21,11,79,274 1,16,24,791 5.50 38,63,210 1.83 2003-04 18,62,36,880 2,12,31,900 11.40 1,42,94,238 6.73 2002-03 7,15,11,240 45,69,509 6.43 6,85,720 - 2001-02 2,99,00,891 38,46,341 12.86 17,48,173 5.85 FROM THE ABOVE TABLE, THE ASSESSING OFFICER NOTED THAT THERE WAS A FALL IN THE GROSS PROFIT COMPARED TO THE ASSE SSMENT YEAR 2003-04 AS ALSO IN THE NET PROFIT. HE CALLED UPON T HE ASSESSEE TO EXPLAIN THE SAME. THE ASSESSEE EXPLAINED THAT THE F IGURE OF GROSS PROFIT VARIES WIDELY FROM 5.50% TO 12.86% AND EVEN THE NET PROFIT PERCENTAGE VARIED WIDELY. IT WAS SUBMIT TED THAT FOR THE ASSESSMENT YEAR 2002-03 THERE WAS A NET LOSS O F RS.6,85,720/-. IT WAS THUS POINTED OUT THAT THE PRO FIT FIGURES DEPEND ON THE FACTS FOR EACH YEAR AND WERE NOT REAL LY COMPARABLE. IT WAS STATED THAT THE PRICING PATTERN VARIES ACCORDING TO THE INTERNATIONAL PRICES OF PLASTIC GR ANULES WHICH ARE HIGHLY VOLATILE. IT WAS SUBMITTED THAT THE BOOK S ARE AUDITED UNDER SECTION 44AB AND THEREFORE THE BOOK RESULTS S HOULD BE ACCEPTED. 4. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSE ES EXPLANATION. ACCORDING TO HIM, THE ASSESSEE WAS EN JOYING EXEMPTION UNDER SECTION 80IB UPTO THE ASSESSMENT YE AR 2003- 04 AND THAT WAS THE REASON WHY A HIGH GROSS PROFIT OF 11.40% WAS SHOWN AND WHEN THE EXEMPTION WAS NO LONGER AVAI LABLE, THE ASSESSEE STARTED REDUCING THE PROFIT FIGURES. HE THEREFORE PROCEEDED TO ADOPT THE GROSS PROFIT RATE FOR THE Y EAR UNDER APPEAL ALSO AT 11.40% AS IN THE ASSESSMENT YEAR 20 03-04 AS AGAINST 5.50% SHOWN BY THE ASSESSEE. THIS RESULTED IN THE GROSS PROFIT BEING CALCULATED AT RS.2,40,74,437/- A S AGAINST ITA NOS.6357 & 6505/MUM/07 3 RS.1,16,24,791/- DECLARED BY THE ASSESSEE . THIS RE SULTED IN AN ADDITION OF RS.1,24,49,646/-. 5. ON APPEAL, THE CIT(A) CONSIDERED THE FACTS. HE OBSERVED THAT FOR THE YEAR UNDER APPEAL, THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT BECAUSE THEY WERE DAMAGED HEAV ILY DUE TO THE FLOODS IN MUMBAI ON 26.07.2005. HE THEREFORE AG REED WITH THE ASSESSING OFFICER THAT THE FINANCIAL RESULTS SH OWN BY THE ASSESSEE CANNOT BE CROSS CHECKED WITH THE BOOKS OF ACCOUNT. HE ACCORDINGLY PROCEEDED TO EXAMINE THE REASONABLENESS OF THE BOOK RESULTS. HE FOUND THAT NEITHER THE ASSESSEE NO R THE ASSESSING OFFICER HAD POINTED OUT ANY COMPARABLE CA SE IN SUPPORT OF THEIR RIVAL POSITIONS. HE ACCEPTED THAT THE PROFIT RATE DEPENDS ON NUMEROUS FACTORS WHICH ARE NOT STATIC AN D A WIDER SPAN WOULD GIVE A BETTER BASIS. HE THUS NOTED THAT THE AVERAGE OF THE LAST THREE YEARS RATES OF PROFIT WOULD HAVE BEEN A FAIRER BASIS FOR ESTIMATING THE PROFIT. HE OBSERVED THAT I NSTEAD OF ESTIMATING THE GROSS PROFIT IT WOULD BE BETTER TO E STIMATE THE NET PROFIT BECAUSE NONE OF THE ITEMS OF EXPENDITURE IN THE MANUFACTURING ACCOUNT OR THE PROFIT AND LOSS ACCOUN T WAS CAPABLE OF BEING VERIFIED WITH THE BOOKS OF ACCOUNT . HE ADOPTED THE AVERAGE NET PROFIT FOR THE LAST THREE YEARS WHI CH ACCORDING TO HIM CAME TO 4.2%, AND IN DOING SO TOOK THE PERCENTA GE OF NET PROFIT FOR THE ASSESSMENT YEAR 2002-03 AT ZERO PERC ENTAGE THOUGH IN THAT YEAR THERE WAS A NET LOSS OF RS.6,85 ,720/-. THUS EFFECTIVELY HE TOOK THE AVERAGE OF THE NET PROFIT R ATES FOR THE ASSESSMENT YEARS 2003-04 AND 2001-02 WHICH CAME TO 4.2%. HE HOWEVER ADOPTED THE NET PROFIT RATE AT 5% OF THE SALES AND THIS CAME TO RS.1,05,58,963/-. THE NET PROFIT SHOWN BY THE ASSESSEE WAS RS.38,63,210/- AND THEREFORE THE ADDIT ION CAME TO RS.66,95,753/-. THIS MUCH WAS CONFIRMED BY THE CIT( A) AND THE BALANCE OF RS.57,53,893/- WAS DELETED. ITA NOS.6357 & 6505/MUM/07 4 6. THE ASSESSEE HAS COME IN APPEAL AGAINST THE ADDI TION OF RS.66,95,753/- SUSTAINED BY THE CIT(A) AND THE REVE NUE IN GROUND NO.1 OF ITS APPEAL HAS QUESTIONED THE DECISI ON OF THE CIT(A) TO ADOPT THE NET PROFIT AT 5% AS AGAINST TH E GROSS PROFIT ESTIMATED AT 11.4% BY THE ASSESSING OFFICER. WE HAV E ACCORDINGLY CONSIDERED THE FACTS AND THE RIVAL CONT ENTIONS. IT IS SEEN THAT WHEREAS THE ASSESSING OFFICER WHILE MAKIN G THE ADDITION HAS GONE ON THE BASIS OF THE GROSS PROFIT RATE AND HAS ADOPTED 11.4% AS THE GROSS PROFIT RATE FOR THE YEAR UNDER APPEAL AS WAS ADOPTED IN THE ASSESSMENT YEAR 2003-04, THE CIT(A) HAS CHANGED THE BASIS FOR THE ADDITION FROM GROSS PROFI T RATE TO NET PROFIT RATE. HE HAS DONE THIS BECAUSE NONE OF THE ITEMS OF EXPENDITURE IN THE MANUFACTURING ACCOUNT OR PROFIT AND LOSS ACCOUNT PREPARED BY THE ASSESSEE CAN ADMIT OF ANY V ERIFICATION IN THE ABSENCE OF THE BOOKS OF ACCOUNT. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT DISPUTE THAT THE BOOKS COULD N OT BE PRODUCED BEFORE THE ASSESSING OFFICER AS THEY WERE DESTROYED ON ACCOUNT OF DELUGE IN MUMBAI ON 26.07.2005 BUT SUBMI TTED THAT THE CIT(A) OVERLOOKED THAT THE ASSESSEE SUFFERED A NET LOSS OF RS.6,85,720/- IN THE ASSESSMENT YEAR 2002-03 AND TH IS FACT HAS NOT BEEN GIVEN ADEQUATE WEIGHTAGE WHILE ADOPTING TH E AVERAGE NET PROFIT FOR THE LAST THREE YEARS. HE SUBMITTED T HAT THE NET PROFIT FOR THE ASSESSMENT YEAR 2002-03 WAS WRONGLY TAKEN AS ZERO BY THE CIT(A) AND THAT HE SHOULD HAVE TAKEN IT AT THE APPROPRIATE NEGATIVE PERCENTAGE. THE OBJECTION OF THE DEPARTMENT IS THAT THE CIT(A) SHOULD NOT HAVE CHANG ED THE BASIS OF THE ADDITION FROM THE RATE OF GROSS PROFIT AS ADOPTED BY THE ASSESSING OFFICER TO THE RATE OF NET PROFIT. I N OUR VIEW, THE REASON GIVEN BY THE CIT(A) TO CHANGE THE BASIS IS S OUND BECAUSE IT IS WELL SETTLED THAT IN THE ABSENCE OF THE BOOKS OF ACCOUNT, VOUCHERS ETC. BEING PRODUCED BEFORE THE ASSESSING O FFICER, THE REVENUE AUTHORITIES ARE ENTITLED TO APPLY AN AVERAG E RATE OF PROFIT FOR THE PURPOSE OF ASSESSMENT BASED ON A FAIR PERCE NTAGE OF THE ITA NOS.6357 & 6505/MUM/07 5 TURNOVER/SALES. THE CIT(A) IS ALSO CORRECT IN SAYI NG THAT THE EXPENDITURE DEBITED TO THE MANUFACTURING AND PROFIT AND LOSS ACCOUNT WHICH ARE TO BE DEDUCTED FROM THE ESTIMATE OF GROSS PROFIT, ARE NOT CAPABLE OF VERIFICATION AND THEREFO RE IT WOULD BE MORE APPROPRIATE TO ESTIMATE THE NET PROFIT ITSELF. WE AGREE WITH THE REASONING OF THE CIT(A). SO FAR AS THE RATE OF NET PROFIT IS CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE SUB MITTED THAT IN THE ASSESSMENT YEAR 2005-06, THE NET PROFIT HAS BEEN TAKEN AT 3.91% OF THE TURNOVER AND ACCORDINGLY A REASONAB LE PERCENTAGE OF NET PROFIT CONSISTENT WITH THE ASSESS MENT YEAR 2005-06, MAY BE ADOPTED. HAVING CONSIDERED THE MATT ER CAREFULLY IT SEEMS TO US THAT THE RATE OF 4% AS NET PROFIT ON THE TURNOVER OF RS.21,11,79,274/- WOULD BE REASONABLE A ND FAIR AND MEET THE REQUIREMENTS OF THE CASE. THIS COMES TO RS.84,47,170/-. THE ASSESSING OFFICER IS DIRECTED T O ASSESS THIS FIGURE AS THE NET PROFIT FOR THE YEAR UNDER APPEAL IN THE PLACE OF RS.1,24,49,646/-. THUS GROUND NOS.1 & 2 IN THE ASSE SSEES APPEAL AND GROUND NO.1 IN THE DEPARTMENTS APPEAL A RE PARTLY ALLOWED. 7. GROUND NOS.3 TO 5 IN THE ASSESSEES APPEAL ARE D IRECTED AGAINST THE ADDITION OF RS.10,43,681/- SUSTAINED BY THE CIT(A) ON ACCOUNT OF UNEXPLAINED CASH CREDITS. THESE GROUN DS ARE CONNECTED TO GROUND NO.2 IN THE DEPARTMENTS APPEAL WHICH IS THAT THE CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT. THE BRIEF FACTS IN THIS CONNECTION ARE THAT THE ASSESSING OFFICER ASKED THE ASSESSEE TO FU RNISH COPIES OF THE BANK STATEMENT FOR THE RELEVANT PREVIOUS YEA R AND THESE WERE SUBMITTED BY THE ASSESSEE. THE ASSESSING OFFIC ER NOTED THAT THERE WERE CASH DEPOSITS IN THE BANK ACCOUNT O F ORIENTAL BANK OF COMMERCE, BHARAT CO-OPERATIVE BANK LTD. AND ICICI BANK LTD. AGGREGATING TO RS.14,29,48,331/-. THE BAN K-WISE BREAKUP IS GIVEN IN PARA 4 OF THE ASSESSMENT ORDER. THE ITA NOS.6357 & 6505/MUM/07 6 ASSESSING OFFICER CALLED UPON THE ASSESSEE TO SUBST ANTIATE THE CASH DEPOSITS. ACCORDING TO THE ASSESSEE THE CASH D EPOSITS REPRESENTED MAINLY CASH SALES AND CASH WITHDRAWALS FROM THE BANK. THE ASSESSEE WAS ASKED TO FURNISH THE BIFURC ATION AS TO HOW MUCH OF THE CASH SALES WAS DEPOSITED IN THE BAN K ACCOUNT AND HOW THE ASSESSEE UTILIZED THE CASH WITHDRAWALS FOR CASH PAYMENTS. THESE DETAILS COULD NOT BE FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER THEREFORE ADDED THE ENTIRE CASH DEPOSITS AS UNEXPLAINED CASH CREDITS ARISING OUT OF THE UNDISCLOSED SOURCES OF THE ASSES SEE. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE DEPOSIT S COULD NOT HAVE COME OUT OF THE CASH SALES BECAUSE THEY REPRES ENTED 67.69% OF THE TURNOVER. FURTHER SUCH HUGE CASH CANN OT BE GENERATED IN A PLACE SUCH AS DAMAN AND THEN SHIFTED TO MUMBAI FOR BEING DEPOSITED. ACCORDING TO THE ASSESS ING OFFICER THE ASSESSEE WAS NOT CARRYING ON BUSINESS IN FAST M OVING CONSUMER GOODS OR RETAIL HOUSEHOLD ITEMS IN WHICH C ASH TURNOVER IS HUGE. HE THEREFORE HELD THAT THE STORY OF CASH SALES REMAINS UNREVEALED. 8. ON APPEAL THE ASSESSEE FURNISHED COMPLETE DETAIL S OF THE BANK ACCOUNTS BEFORE THE CIT(A) AS PER THE DIRECTIO NS OF THE CIT(A). SUCH DETAILS INCLUDED THE FOLLOWING:- (I) P/L ACCOUNT AND ASSESSMENT ORDER OF LAST 3 ASSESSMENT YEARS 2001-02, 2002-03 & 2003-04. (II) NAMES OF PRODUCTS MANUFACTURED DURING THE RELEVANT YEAR AND LAST 3 YEARS. (III) MONTH-WISE CHART GIVEN TO THE ASSESSING OFFICER IN RESPECT OF BANK DEPOSITS AND WITHDRAWALS. (IV) EVIDENCE OF ACCEPTANCE OF SALES BY EXCISE DEPARTMENT AND SALES TAX DEPARTMENT. (V) BANK STATEMENT AND STATE BANK OF MAURITIUS FOR RELEVANT PREVIOUS YEAR. ITA NOS.6357 & 6505/MUM/07 7 (VI) DATE-WISE STATEMENT OF DEPOSITS IN CASH AND CHEQUES IN ALL 4 BANKS DURING THE RELEVANT PREVIOUS YEAR. IN ADDITION TO THE ABOVE, THE ASSESSEE ALSO FILED T RANSCTION-WISE DETAILS OF ALL THE BANK ACCOUNTS. THE SUBMISSION WA S THAT THERE WERE SEVERAL AMOUNTS WHICH REPRESENTED RETURN OF LO ANS TAKEN BY FOUR SISTER CONCERNS AND THAT THE DETAILS OF SUC H LOANS GIVEN AND RETURNED FOUND MENTION IN THE TAX AUDIT REPORT UNDER SECTION 44AB. THE CIT(A) ALSO CALLED FOR THE COPY O F THE AUDIT REPORTS OF THE SISTER CONCERNS AND ALL OF THEM WERE FURNISHED AND IT WAS EXPLAINED AS TO HOW THE LOANS WERE GIVE N AND RETURNED. SUCH EXPLANATION WAS GIVEN BY THE ASSESSE E BEFORE THE CIT(A) IN WRITING. THE SAME FINDS MENTION IN PARA 5 .3.2 OF THE ORDER OF THE CIT(A). 9. AFTER CONSIDERING THE FACTS AND SUBMISSIONS AND EXAMINING THE VARIOUS DETAILS AND DOCUMENTS FILED D URING THE APPELLATE PROCEEDINGS, THE CIT(A) RECORDED THE FOLL OWING FINDINGS:- (A) THE COMPUTATION OF THE AVAILABLE CASH AT RS.14,85,88,766/- BY THE ASSESSEE FOR BEING DEPOSIT ED IN THE BANK ACCOUNTS CANNOT BE ACCEPTED BECAUSE THE COMPUTATION IS NOT BASED ON ANY MATERIAL OR DOCUMENTS AVAILABLE ON RECORD. (B) THE CASH AVAILABLE CAN BE COMPUTED ONLY WITH REFERENCE TO AUDITED ACCOUNTS, AUDIT REPORT AND THE BANK STATEMENTS. (C) IT IS NECESSARY TO FIND OUT THE TRADING RECEIPTS AC TUALLY RECEIVED BY THE ASSESSEE DURING THE YEAR BOTH IN CHEQUES AND CASH AND THIS CAN BE DONE BY ADJUSTING THE TOTAL TURNOVER WITH THE DIFFERENCE BETWEEN THE OPENING AND CLOSING DEBTORS AS SHOWN IN THE BALANCE SHEETS. ITA NOS.6357 & 6505/MUM/07 8 (D) THE REASON WHY CHEQUES WERE DEPOSITED CAN BE VERIFI ED FROM THE AUDIT REPORT AND BALANCE SHEETS AND WILL S HOW WHETHER THEY ARE RETURN OF LOANS, CAPITAL INTRODUCE D BY THE PARTNERS ETC. (E) AFTER DEDUCTING SUCH CHEQUES REPRESENTING RETURN OF LOANS AND CAPITAL INTRODUCED THE BALANCE CHEQUES WOULD REPRESENT TRADING RECEIPTS. (F) FROM THE TOTAL TURNOVER FIGURE, CHEQUE RECEIPTS CAN BE DEDUCTED TO FIND OUT THE TRADING RECEIPTS IN CASH. AGAINST SUCH CASH RECEIPTS, CASH WITHDRAWN FROM THE BANKS, DIFFERENCE BETWEEN THE OPENING AND CLOSING CASH BALANCE ETC. SHOULD BE ADJUSTED IN ORDER TO A RRIVE AT THE CASH AVAILABLE FOR BEING DEPOSITED IN THE BA NK. THE CIT(A) PROCEEDED TO DETERMINE THE AMOUNT OF CAS H AVAILABLE WITH THE ASSESSEE AND THE AMOUNT OF CASH DEPOSITS I N THE BANKS IN ACCORDANCE WITH THE ABOVE STEPS AND HIS COMPUTAT ION IS EXHIBITED IN PAGES 14 TO 17 OF THE IMPUGNED ORDER. THE STEPS ADOPTED BY THE CIT(A) AND THE FIGURES MENTIONED BY HIM IN THESE PAGES TO FIND OUT THE CASH AVAILABLE WITH THE ASSESSEE FOR BEING DEPOSITED IN THE BANKS HAVE NOT BEEN QUESTION ED BEFORE US. THE COMPUTATION OF THE CIT(A) SHOWED THAT THE A SSESSEE WAS LEFT WITH CASH OF RS.14,11,01,706/- AND HE HELD THA T THERE WAS NO REASON WHY THE CASH DEPOSITS IN THE BANK ACCOUNT S COULD NOT HAVE COME FROM THE AVAILABLE CASH. THE TOTAL AMOUNT OF CASH DEPOSITS IN THE BANK ACCOUNTS WAS COMPUTED BY HIM A T RS.14,21,45,387/- AS AGAINST THE COMPUTATION OF RS.14,29,48,331/- MADE BY THE ASSESSING OFFICER. AP PARENTLY THE COMPUTATION MADE BY THE ASSESSING OFFICER CONTA INED SOME MISTAKES WHICH WERE CORRECTED BY THE CIT(A). OUT OF THE TOTAL CASH DEPOSITS IN THE BANK OF RS.14,21,45,387/-, A S UM OF RS.14,11,01,706/- CAME FROM THE CASH AVAILABLE WITH THE ASSESSEE WHICH WAS COMPUTED BY THE CIT(A) ON THE BA SIS OF THE BALANCE SHEETS, BANK STATEMENTS, TAX AUDIT REPORTS IN PAGES 14 ITA NOS.6357 & 6505/MUM/07 9 TO 17 OF HIS ORDER. DIFFERENCE OF RS.10,43,681/- WA S SUSTAINED AND THE REMAINING ADDITION OF RS.14,19,04,650/- WAS DELETED. 10. THE ASSESSEE HAS COME IN APPEAL QUESTIONING THE ADDITION OF RS.10,43,681/- SUSTAINED BY THE CIT(A) AND IT IS HIS CONTENTION THAT THERE WERE CERTAIN INTER-BANK TRANS FERS WHICH WERE NOT TAKEN NOTE OF BY THE CIT(A) BECAUSE THE AS SESSEE COULD NOT SUBMIT THE BANK STATEMENTS FOR THAT PERIOD. DET AILS OF SUCH BANK ACCOUNTS HAVE BEEN FILED BEFORE US ALONG WITH THE COPIES OF BANK STATEMENTS, UNDER COVER OF AN APPLICATION DATE D 22.06.2009 SEEKING ADMISSION OF THESE ADDITIONAL EV IDENCE UNDER RULE 29 OF THE ITAT RULES. IT IS SUBMITTED TH AT THESE STATEMENTS MAY BE EXAMINED BY THE ASSESSING OFFICER AND IF THE ASSESSEES CLAIM THAT THERE WERE INTER-BANK TRANSFE RS WHICH WOULD EXPLAIN THE ADDITION OF RS.10,43,681/- IS FOU ND CORRECT, THEN THE ENTIRE DEPOSITS IN THE BANK WOULD HAVE BEE N EXPLAINED. THE DEPARTMENT DID NOT SERIOUSLY OBJECT TO THE ADMI SSION OF THE ADDITIONAL EVIDENCE BUT THE CONTENTION WAS THAT THE ASSESSING OFFICER SHOULD BE GIVEN AN OPPORTUNITY TO EXAMINE T HE SAME. AS REGARDS THE DEPARTMENTS GROUND NO.2 IN ITS APPEAL QUESTIONING THE RELIEF OF RS.14,19,04,650/- ALLOWED BY THE CIT( A), STRONG RELIANCE WAS PLACED ON THE ASSESSMENT ORDER, WITHOU T ANY FURTHER ARGUMENTS BEING ADVANCED BEFORE US. ON A C AREFUL CONSIDERATION OF THE FACTS AND THE RIVAL SUBMISSION S AND AFTER GOING THROUGH THE DETAILED ORDER OF THE CIT(A), INC LUDING HIS CALCULATION OF THE CASH AVAILABLE WITH THE ASSESSEE IN PAGES 14 TO 17 OF HIS ORDER, WE ARE UNABLE TO FIND FAULT WIT H HIS DECISION TO DELETE THE ADDITION OF RS.14,19,04,650/-. IT IS TRUE THAT IT IS THE ASSESSEES BURDEN TO EXPLAIN THE CASH DEPOSITS IN THE FOUR BANK ACCOUNTS. SINCE THE BOOKS OF ACCOUNTS WERE NOT AVAILABLE AS THEY WERE DAMAGED DURING THE FLOODS IN MUMBAI ON 26.07.2005, THE CIT(A) TOOK RECOURSE TO A MOST FAIR AND REASONABLE BASIS OF COMPUTING THE CASH AVAILABLE WI TH THE ITA NOS.6357 & 6505/MUM/07 10 ASSESSEE ON THE BASIS OF THE BANK STATEMENTS, AUDIT REPORTS AND THE AUDITED PROFIT AND LOSS ACCOUNT AND BALANCE SHE ET. THE METHOD ADOPTED BY HIM, WHICH WE HAVE OUTLINED EARLI ER, IS SOUND AND IS PERHAPS THE ONLY METHOD AVAILABLE FOR FINDING OUT THE AMOUNT OF CASH AVAILABLE WITH THE ASSESSEE FOR BEING DEPOSITED WITH THE BANK IN THE ABSENCE OF THE BOOKS OF ACCOUNT. THE REVENUE HAS NOT BEEN ABLE TO POINT OUT ANY FLAW IN THE METHOD ADOPTED BY THE CIT(A). IN THIS SITUATION, WE UPHOLD THE DECISION OF THE CIT(A) TO DELETE THE ADDITION OF RS.14,19,04,650/- AS UNEXPLAINED DEPOSITS IN CASH I N THE BANK ACCOUNTS. 11. AS REGARDS THE ASSESSEES APPLICATION FOR ADMIS SION OF THE ADDITIONAL EVIDENCE, WE ACCEPT THE SAME AND RESTORE THE MATTER REGARDING THE ADDITION OF RS.10,43,681/- SUSTAINED BY THE CIT(A) TO THE ASSESSING OFFICER TO ENABLE HIM TO VE RIFY WHETHER ANY CREDIT CAN BE GIVEN TO THE INTER-BANK DEPOSITS AS CONSTITUTING THE SOURCES FOR THE DEPOSIT OF RS.10,4 3,681/-. THE ASSESSING OFFICER WILL TAKE A FRESH DECISION WITH R ESPECT TO THE ABOVE ADDITION IN ACCORDANCE WITH THE LAW AND AFTER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD . THUS GROUND NOS.3 TO 5 IN THE ASSESSEES APPEAL ARE TREA TED AS ALLOWED FOR STATISTICAL PURPOSES AND GROUND NO.2 IN THE DEPARTMENTS APPEAL IS DISMISSED. 12. GROUND NOS. 6 & 7 IN THE ASSESSEES APPEAL RELA TE TO THE DEDUCTION OF RS.1,55,900/- UNDER SECTION 80IB ON AC COUNT OF PERFORMANCE COMMISSION RECEIVED FROM THE SUPPLIER O F RAW MATERIAL. WHILE EXAMINING THE TDS CERTIFICATES FILE D WITH THE RETURN, THE ASSESSING OFFICER NOTED THAT TAX HAD BE EN DEDUCTED FROM THE COMMISSION INCOME OF RS.1,55,900/- RECEIVE D BY THE ASSESSEE FROM M/S. POLYMER ENTERPRISES (I) PVT. LTD . HE CALLED UPON THE ASSESSEE TO SHOW CAUSE WHY THE SAID INCOME WAS NOT ITA NOS.6357 & 6505/MUM/07 11 REFLECTED IN THE PROFIT AND LOSS ACCOUNT AND THUS N OT OFFERED TO TAX. THE ASSESSEE SUBMITTED IN WRITING THAT THE COM MISSION REPRESENTED INCENTIVE RECEIVED ON ACCOUNT OF ACHIEV ING CERTAIN QUANTITIES OF PURCHASE OF RAW MATERIALS FROM M/S. P OLYMER ENTERPRISES AND THE SAME HAS BEEN ADJUSTED AGAINST THE PURCHASE OF RAW MATERIAL ACCOUNT IN THE PROFIT AND LOSS ACCOUNT, INSTEAD OF SHOWING SEPARATELY IN THE PROFIT AND LOS S ACCOUNT. THE ASSESSING OFFICER THEREUPON HELD THAT THE EARNING O F THE COMMISSION OR THE INCENTIVE WAS IN NO WAY CONCERNED WITH THE MANUFACTURING ACTIVITY OF THE ASSESSEE AND THEREFOR E NO DEDUCTION UNDER SECTION 80IB WAS AVAILABLE THEREON. HE ACCORDINGLY DID NOT ALLOW THE DEDUCTION UNDER SECTI ON 80IB IN RESPECT OF THE AMOUNT OF RS.1,55,900/-. 13. ON APPEAL THE CIT(A) AGREED WITH THE CIT(A) THA T THE SAID AMOUNT WAS NOT DERIVED FROM THE INDUSTRIAL UNDERTAK ING. HENCE THE PRESENT GROUNDS. 14. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR A TTENTION TO THE CREDIT NOTES ISSUED BY M/S. POLYMER ENTERPRISES WHICH ARE THREE IN NUMBER AND WHICH AGGREGATE TO RS.1,55,900/ - AND SUBMITTED THAT IT WAS WRONG TO DESCRIBE THE AMOUNT AS COMMISSION AND IT REPRESENTED AN INCENTIVE OR A SOR T OF DISCOUNT GIVEN TO THE ASSESSEE FOR EXCEEDING CERTAIN TARGETE D AMOUNT OF PURCHASES FROM M/S.POLYMER ENTERPRISES. HE SUBMITTE D THAT THAT WAS THE REASON WHY THE ASSESSEE DEDUCTED THE A MOUNT FROM THE PURCHASE ACCOUNT INSTEAD OF SHOWING IT SEP ARATELY AS INCOME IN THE PROFIT AND LOSS ACCOUNT. HE ACCORDIN GLY PLEADED THAT THE AMOUNT MERELY REPRESENTED A DISCOUNT OFFER ED ON THE PURCHASES MADE BY THE ASSESSEE AND SHOULD BE TAKEN AS PROFIT DERIVED FROM THE INDUSTRIAL UNDERTAKING. 15. ON GOING THROUGH THE COPIES OF THE CREDIT NOTES ISSUED BY M/S. POLYMER ENTERPRISES, IT IS SEEN THAT THE AMOUN T IS ITA NOS.6357 & 6505/MUM/07 12 DESCRIBED AS ADDITIONAL INCENTIVE THEREIN. THE CRED IT NOTES ALSO GIVE THE PERIOD TO WHICH THE INCENTIVE RELATES, THE QUANTITY PURCHASED BY THE ASSESSEE ETC. HOWEVER, WE ARE OF T HE VIEW THAT THE INCENTIVE HAS TO BE VERIFIED AND MATCHED WITH T HE ACTUAL BILLS WHICH M/S. POLYMER ENTERPRISES WOULD HAVE ISS UED TO THE ASSESSEE FOR THE PURPOSE OF VERIFYING WHETHER THE I NCENTIVE IS RELATED TO THE PURCHASES OR IS GIVEN FOR OTHER REAS ONS. MOREOVER THE COPIES OF THE CREDIT NOTES HAVE NOT BEEN SUBMIT TED BY THE ASSESSEE TO THE DEPARTMENTAL AUTHORITIES. WE ADMIT THEM AS ADDITIONAL EVIDENCE BUT RESTORE THE MATTER TO THE F ILE OF THE ASSESSING OFFICER TO ENABLE HIM TO CARRY OUT THE NE CESSARY VERIFICATION AND MATCHING AS STATED ABOVE AND TAKE A FRESH DECISION AS TO THE ALLOWABILITY OF THE DEDUCTION UN DER SECTION 80IB IN RESPECT OF THE SAME, IN ACCORDANCE WITH THE LAW AND AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, THESE TWO GROUNDS OF THE ASSESSEES APPEAL AR E ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, ITA NO.6357/MUM/07 IS PARTLY ALL OWED AND ITA NO.6505/MUM/07 IS ALSO PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF MAY, 2011. SD/- ( T.R. SOOD ) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER PRESIDENT MUMBAI, DATED 25 TH MAY, 2011. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT- 24, MUMBAI. 4. THE CIT(A)-XXIV & CIT(A)-VII MUMBAI 5. THE DR B BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI