ROCHEM SEPARATION SYSTEMS (I) PVT.LTD., MUMBAI V. ACIT, CENTRAL CIRCLE-10, MUMBAI

ITA 6598/MUM/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48735 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 14-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRISENTHIL KUMAR
• Keywords: Bogus purchase; Business expenditure; Document seized; Deemed to accrue or arise in india; Documents seized
• Section: 142(1); 133A; 153A; 37(1); 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI R.S. PADVEKAR, J.M. AND SHRI B. RAMAKOT AIAH, A.M. ITA NO.6932/MUM/2008 TO 6938/MUM/2008 (ASSESSMENT YEAR : 2000-01 TO 2006-07) ACIT-C.C.10, C. RG-2, 8 TH FLOOR, OLD CGO BLDG. ANNEXE, M.K. ROAD,MUMBAI-400 020 VS. M/S. ROCHEM SEPARATION SYSTEMS (I) P. LTD. 101, DHEERAJARMA, ANANTKANEKARMARG, BANDRA (E), MUMBAI-400 051 PAN NO: AABCR1955P (APPELLANT) (RESPONDENT) & ITA NO.6593/MUM/2008 TO 6598/MUM/2008 (ASSESSMENT YEAR : 2001-02 TO 2006-07) M/S. ROCHEM SEPARATION SYSTEMS (I) P. LTD. 101, DHEERAJARMA, ANANTKANEKARMARG, BANDRA (E), MUMBAI-400 051 PAN NO: AABCR1955P VS. ACIT-C.C.10, C. RG-2, 8 TH FLOOR, OLD CGO BLDG. ANNEXE, M.K. ROAD,MUMBAI-400 020 (APPELLANT) (RESPONDENT) & ITA NO. 2935/MUM/2008 (ASSESSMENT YEAR : 2005-06) 2 M/S. PRERAKGOEL C/O. ROCEHM SEPARATION SYSTEMS (I) PVT. LTD. 101, DHEERAJARMA, ANANTKANEKARMARG, MUMBAI PAN NO: AAKPG8954B VS. ACIT-C.C.10, C. RG-2, 8 TH FLOOR, OLD CGO BLDG. ANNEXE, M.K. ROAD,MUMBAI-400 020 (APPELLANT) (RESPONDENT) REVENUE BY : SHRISENTHIL KUMAR ASSESSEE BY : SHRIVINOD KUMAR BINDAL& SHRIGAURAVBANSAL O R D E R PER BENCH. THESE APPEALS ARE FILED BY REVENUE AND ASSESSEE COM PANY, AGAINST WHICH COMMON ORDER PASSED BY THE LD. CIT(A)CENTRAL II, MUMBAI DATED 16.09.2008. 2. THE VARIOUS GROUNDS ARE RAISED BY ASSESSEE COMPA NYAND REVENUE WHICH ARE CONSIDERED IN THIS COMMON ORDER. ONE APPE AL BY THE INDIVIDUAL M/S. PRERAKGOEL IS ALSO CONNECTED TO OTHER APPEALS, THEREFORE, DEALT WITH IN THIS ORDER ITSELF. M/S. ROCHEM SEPARATION SYSTEMS (I) P. LTD. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF MEMBRANE BASED WATER SEPARATION SYSTEMS AND WASTEWATER PURIFICATION SYSTEM. THERE WAS A SEARCH ACTION U/S. 132 OF THE INCOME TAX ACT ON 10.08.2005 IN THE BUSINESS PREMISES OF VARIOUS G ROUP COMPANIES OF THIS ROCHEM GROUP AND THE RESIDENTIAL PREMISES OF THE DI RECTORS OF THE ROCHEM GROUP OF COMPANIES. SIMULTANEOUSLY, SURVEY ACTION I N VARIOUS PREMISES WAS ALSO CONDUCTED. DURING THE COURSE OF SEARCH AND SUR VEY OPERATION AT VARIOUS 3 PREMISES, SEVERAL INCRIMINATING DOCUMENTS WERE FOUN D/SEIZED/IMPOUNDED. THE ASSESSEE COMPANY FILED THE RETURNS OF INCOME OR IGINALLY U/S.139(1) FOR RESPECTIVE YEARS. SUBSEQUENTLY, IN RESPONSE TO THE NOTICE ISSUED U/S.153A OF THE ACT, THE COMPANY FILED THE RETURNS OF INCOME DE CLARING TOTAL INCOME AS PER THE DETAILS BELOW:- ASSTT. YEAR ORIGINAL RETURNS FILED U/S.139(1) RETURNED INCOME AS PER RETURN FILED U/S.139(1) DATE OF FILING OF RETURN U/S.153A TOTAL INCOME DECLARED IN THE RETURN U/S.153A 2000-01 24/11/2000 17,58,440/- 26/12/2005 55,07,103 /- 2001-02 19/10/2001 58,15,534/- 26/12/2005 1,19,22,9 38/- 2002-03 29/10/2002 49,18,670/- 26/12/2005 77,05,198 /- 2003-04 7/11/2003 1,02,14,770/- 26/12/2005 1,29,91, 000/- 2004-05 24/11/2000 17,58,440/- 26/12/2005 55,07,103 /- 2005-06 NOT FILED N.A. 26/12/2005 8,50,18,070/- 2006-07 NOT FILED N.A. 23/11/2005 9,05,53,041/- THE ASSESSMENT IN ALL THESE CASES HAVE BEEN COMPLET ED BY THE ASSESSING OFFICER VIDE HIS ORDERS DATED 31.12.2007. THE DETAI LEDASSESSMENT ORDER U/S.153A WAS MADE BY THE ASSESSING OFFICER FOR THE A.Y 2000-01 WHICH WAS FOLLOWED IN ALL OTHER YEARS MENTIONING THAT PAGE NO S. 2 TO 31 OF THE ASSESSMENT ORDER FOR THE ASSTT. YEAR 2000-2001 SHOULD ALSO BE TAKEN AS PART AND PARCEL OF THE ASSESSMENT ORDERS U/S.153A FOR ALL THE OTHER AS STT. YEARS FROM 2001-02 TO 2006-07. SINCE MANY ISSUES ARE COMMON IN RESPECT OF ALL THE ORDERS, THEY ARE DISPOSED OFF BY THIS COMMON ORDER. 4. THE LD. CIT(A) AFTER OBTAINING SECOND REMAND REP ORT FROM THE AO DISCUSSED THE ISSUE ELABORATELY IN HIS 105 PAGE ORD ER AND GAVE SUBSEQUENTLY RELIEF TO THE ASSESSEE ON SOME OF THE ISSUES. THE REVENUE IS AGGRIEVED.ON THE ISSUES WHICH ARE CONFIRMED, THE ASSESSEE IS AGGRIEVED. 5. WE HAVE HEARD THE LD. COUNSEL SHRI V.K. BINDAL A ND THE LD. CIT(A) SHRISENTHIL KUMAR, IN DETAIL. THERE WERE NINE VOLUM ES OF SPIRAL BOUND PAPER BOOKS FROM PG. NOS. 1 TO 3138 AND ALSO LOOSE VOLUME HAVING PG. NOS. UPTO 4 3292. THE LD. COUNSEL ALSO PLACED ON RECORD THE SUM MARY OF HIS CONTENTIONS BY REFERRING TO VARIOUS PAGE NUMBERS AND ALSO WRITT EN SUBMISSIONS ON SOME OF THE ISSUES. ISSUE NO.1: PAYMENT OF COMMISSION 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON THE BASIS OF THE SEIZED DOCUMENTS, THE AO ASKED THE ASSESSEE TO EXPLAIN THE COMMISSION PAYMENTS MADE TO VARIOUS PARTIES. FROM THE FINANCIAL YEARS 1 998-99 TO 2005-06, THE ASSESSEE PAID TOTAL COMMISSION OF RS.8,38,91,115/- FOR VARIOUS FINANCIAL YEARS. THE AMOUNT OF RS.39,96,837/- PAID IN A.Y. 19 99-2000 WAS OUT OF THE SCOPE OF SECTION 153A OF THE ACT. THEREFORE, THE AO ENQUIRED ABOUTBALANCE PAYMENT IN THIS PERIOD OUT OF WHICH THE AMOUNT OF R S.1,38,93,186/- PERTAINS TO COMMISSION PAID TO M/S. BUNIYAD CHEMICA LS LTD WHICH IS DEALT SEPARATELY. APART FROM THE ABOVE AMOUNT, THE AMOUNT S PAID TO 23 PARTIES AS PER LIST A OF THE AO ORDER WAS DISALLOWED IN V ARIOUS ASSESSMENT YEARS AS UNDER :- ASSTT. YEAR AMOUNT RS 2000-01 1976520 2001-02 2790561 2002-03 1931793 2003-04 6987125 2004-05 4446633 2005-06 18400844 2006-07 992133 TOTAL: 3,75,25,609 7. APART FROM THE ABOVE AMOUNT, THE AO ALSO DISALLO WED COMMISSION PAID AS PER LIST B TOTALING TO AN AMOUNT OF RS.74,77,5 83/-, ON THE PRETEXT THAT NO DETAILS WERE FILED. THE ASSESSEE CONTESTED THE SAME BEFORE THE LD. CIT(A), AND THE LD. CIT(A) AFTER EXAMINING THE PAPER BOOKS FILE D, WHICH WERE ALSO FILED BEFORE THE AO AND THE REMAND REPORTS OF THE AO ON T HE ISSUES AND THE 5 EXPLANATIONS SUBMITTED BY THE ASSESSEE, DELETED THE ADDITIONS SO MADE BY THE AO BY GIVING FOLLOWING FINDINGS :- 1.3.0. I HAVE CONSIDERED THE SUBMISSION OF THE APPE LLANT. THE GIST OF THE OBJECTIONS OF THE ASSESSEES REPRESENTATIVE ARE AS FOLLOWS :- 1. ALL DETAILS, BANK ACCOUNTS/TDS CERTIFICATES, 197 CERTIFICATES/DEBIT NOTES/CONFIRMATIONS, PAN NOS. ET C. WERE FILED. 2. THOUGH THE COMMISSION WAS PAID TO M/S. SMITH EN TERPRISES TO THE EXTENT OF APPROXIMATELY RS.1.87 CRORES, TH E ASSESSING OFFICER ACCEPTED THE SAID COMMISSION PAYM ENT BECAUSE OF THE FACT THAT IN THE SURVEY U/S.133A CON DUCTED IN THE CASE OF THE SAID M/S. SMITH ENTERPRISES THEY HAVE CONFIRMED THE SAID PAYMENTS. NO DISALLOWANCE HAS BE EN MADE BY THE ASSESSING OFFICER. 3. NO DIRECT ENQUIRY WAS DONE BY THE ASSESSING OFFI CER DESPITE SPECIFIC REQUEST-VIDE THE ARS LETTERS DATED 24/09/ 2007 & 26/09/2007. 4. THE ASSESSMENT ORDER SAYS NO DETAILS WERE FILED BUT IN THE REMAND REPORT, THE ASSESSING OFFICER HAS STATED THAT DETAILS WERE FILED BY THE ASSESSEE. 5. ONLY IN THREE CASES, THE ASSESSING OFFICER COULD NOT VERIFY THE PAN WITH THE RECORDS. 6. THE EXISTENCE OF CUSTOMARY PRACTICES OF GIVING C OMMISSION FOR MARKETING THE PRODUCTS MANUFACTURED. 7. COMMERCIAL NECESSITY FOR GIVING COMMISSION FOR T HE SALE OF CAPITAL GOODS (WATER TREATMENT PLANT) MANUFACTURED BY THE ASSESSEE. 8. COMPARATIVE CASES- IN TWO CASES OF THE SIMILAR C APITAL GOODS-ION EXCHANGE &THERMAX BOILERS, COMMISSION HAS BEEN PAID. 9. SUPPORTING DOCUMENTS AND CORRESPONDENCES BETWEEN THE APPELLANT COMPANY AND THE PARTIES TO WHOM COMMISSIO N WAS PAID (SAMPLES SUBMITTED). 1.3.1. THE ASSESSEE IS ENGAGED IN THE MANUFACTURING AND SALE OF CAPITAL EQUIPMENT NAMELY MEMBRANE BASED WATER SEPAR ATION SYSTEMS AND WASTEWATER PURIFICATION PLANTS AND SUPP LYING TO VARIOUS DEPARTMENTS LIKE THE NAVY, COAST GUARDS ETC . AND OTHER COMPANIES. IN THIS HIGHLY COMPETITIVE WORLD OF TRAD ING OF GOODS IN THIS CAPITAL INTENSIVE NATURE, THE COMMISSION IS AL WAYS A PART OF THE TRADING PROCESS FOR THE SERVICE RENDERED BY OTHER P ARTIES SO AS TO PROCURE THE ORDERS FOR THE SUPPLY OF MACHINERY MANU FACTURED BY THE ASSESSEE. THESE SERVICES ARE IN THE NATURE OF IDENT IFICATION OF THE CLIENTS, PERSUADING THEM TO PURCHASE THE MACHINERY FROM THE ASSESSEE, LIASIONING WITH THE VARIOUS TECHNICAL EXP ERTS AND OTHER FOLLOW-UP ACTION REGARDING THE SALE OF THE MACHINER Y BY THE 6 ASSESSEE AND ENSURING THE PAYMENT FROM THOSE PARTIE S TO WHOM THE ASSESSEE HAVE SOLD THIS. COMMISSION FOR SUCH SERVIC E IS RECOGNIZED IN EVERY CONTRACT OF MAJOR INTENSIVE CAPITAL EQUIPM ENT SALE. IN FACT, THE PAYMENT OF COMMISSION HAS BEEN RECOGNIZED EVEN IN THE DOUBLE TAXATION AGREEMENT DEALING WITH THE COMMISSION PAYA BLE AS PER VARIOUS BILATERAL AGREEMENTS. THUS, THIS ASSESSEE T OO HAS MADE THE PAYMENTS TO VARIOUS PARTIES AS STATED INTHE LIST A IN RESPECT OF WHOM THE ASSESSEE HAD ALREADY FURNISHED THE DETAILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS THEMSELVES; AND IN RESPECT OF LIST B IT FURNISHED THE INFORMATION DURING THE CO URSE OF 271(1)(C) PROCEEDINGS AS WELL AS IN THE COURSE OF APPELLATE P ROCEEDINGS. THOUGH, THE ASSESSING OFFICER HAD STATED IN THE ASS ESSMENT ORDER THAT THE ASSESSEE DID NOT FURNISH ANY DETAILS REGAR DING THIS, YET IN THE REMAND REPORT HE HAS ACCEPTED THAT THE ASSESSEE HAS FURNISHED DETAILS AS CONTAINED IN THE 8 PAPER BOOKS FILED BEF ORE THE APPELLATE PROCEEDINGS. HE HAS STATED THAT THESE WERE THERE IN THE ASSESSMENT PROCEEDINGS THEMSELVES. IN THE PAPER BOOKS THE ASSE SSEE HAD FILED CONFIRMATIONS LETTERS FROM VARIOUS PARTIES, DEBIT N OTES ISSUED BY THEM AND THEIR ASSESSMENT PARTICULARS IN WHICH THE PARTIES HAD ALSO CHARGED SERVICE TAX AND THE ASSESSEE HAS ALSO DEDUCTED TDS IN RESPECT OF THOSE COMMISSION PAYMENTS. THE PAYMEN TS ALSO HAVE BEEN MADE ONLY BY WAY OF ACCOUNT PAYEE CHEQUE TO THOSE PARTIES. THE DETAILS FURNISHED BY THEM IN RESPECT OF THESE P ARTIES BY THE ASSESSEE ARE ENCLOSED HEREWITH THIS ORDER AS ANNEXU RE A. IN ONE CASE NAMELY M/S. SMITH ENTERPRISES, TO WHOM THE COM MISSION WAS PAID SUBSTANTIALLY TO THE EXTENT OF RS.1.87 CRORES, IT WAS SURVEYED BY THE INVESTIGATION UNIT THEMSELVES; AND FOUND THA T THE SAID SMITH ENTERPRISES, DELHI REALLY RENDERED SERVICES. IN RES PECT OF THIS PARTY, NO DISALLOWANCE HAS BEEN MADE IN THE ASSESSMENT ORD ER. SIMILARLY, ALL THE OTHER PEOPLE HAVE ALSO CONFIRMED THE RENDERING OF SERVICES AND RECEIPT OF MONEY FROM THE ASSESSEE. VIDE PARA 1.3.2, THE LD. CIT(A) LISTED OUT VARIOUS CASE LAW RELIED UPON WITH REFERENCE TO ALLOWING THE COMMISSION PAYMENTS AND IN PARA 1.3.3 RELIEF WAS GIVEN AS UNDER :- 1.3.3. EXCEPT IN THE CASE OF M/S. BUNIYAD CHEMICALS LTD. , ALL THE OTHER PERSONS HAVE CONFIRMED THE RECEIPT FOR THE CO MMISSION AND THE SERVICES RENDERED BY THEM. ONLY IN THE CASE OF M/S. BUNIYADCEHMICALS LTD. SHRI M.M. CHOKSHI, DIRECTOR O F THE SAID COMPANY HAS DENIED ANY SERVICES RENDERED BY THEM. T HEREFORE, THE DISALLOWANCES MADE IN RESPECT OF ALL THE OTHER CASE S WHERE THE PARTIES HAVE ALREADY CONFIRMED, ARE DELETED AS FOLL OWS: 2000-01 RS.1976520/- 2001-02 RS.2790561/- 2002-03 RS.1931793/- 7 2003-04 RS.6987125/- 2004-05 RS.10864448/- 2005-06 RS.19342780/- (RS.3,32,35,976 MINUS RS.1,38,93,196) 2006-07 RS.1109965/- TOTAL : RS.4,50,03,192/- BUT IN SO FAR AS THE PAYMENTS OF RS.1,38,93,196/- P AID TO M/S. BUNIYAD CHEMICALS LTD., IT IS NOT ALLOWED AND HENCE THE DISALLOWANCE IS CONFIRMED AS PER THE DISCUSSION UND ER ISSUE NO.2. 8. THE LD. DR SUBMITTED THAT THERE WAS SEIZED MATER IAL INDICATING THE NON RECEIPT OF COMMISSIONS AND THUS BASED ON THIS, THE AO DISALLOWED THE COMMISSION. HE REFERRED TO THE ORDER OF THE AO AND THE BASIS FOR DISALLOWING THE COMMISSION PAYMENTS. THE LD. COUNSEL IN REPLY R EFERRED TO THE VARIOUS PAPERS FILED BEFORE THE AO INCLUDING THAT OF LIST B CASES WHERE THE DETAILS WERE NOT FURNISHED BEFORETHE AO. IT WAS HIS SUBMISS ION THAT CIT(A) ERRED IN ALLOWING COMMISSION PAYMENTS WITH OUT PROVING THE S ERVICES TO THE SATISFACTION OF AO. THE LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE DETAILS WERE FILED BEFORE THE AO AND REFERRED TO THE REMAND REPORT AND RELIED ON THE FINDINGS OF THE LD. CIT(A) TO SUBMIT THAT THE ASSES SEE WAS PAYING COMMISSION TO VARIOUS PARTIES REGULARLY IN THE COURSE OF BUSIN ESS. HE REFERRED TO THE DOCUMENTS PLACED ON RECORD AND SUBMISSIONS BEFORE T HE AUTHORITIES IN PROVING THE GENUINENESS OF THE COMMISSION PAYMENTS. WITH RE FERENCE TO THE AOS OBSERVATIONS THAT COMMISSION WAS RECEIVED BACK, IT WAS SUBMITTED THAT COMMISSION WAS PAID ONLY WHEN THE RELEVANT PAYMENTS WERE RECEIVED FROM THE PARTIES AND THE NOTING IN THE SEIZED PAPERS ARE NOT HING BUT THE PAYMENTS TO BE RECEIVABLE FROM THE PARTIES ON WHICH COMMISSION WAS CLAIMED BUT NOT PAID. HE COUNTERED THE ALLEGATIONS OF THE AO TO SUBMIT THAT THE COMMISSION WAS PAID IN THE COURSE OF DAY TO DAY BUSINESS OPERATIONS AND TH ERE WAS NO INCRIMINATING MATERIAL WITH REFERENCE TO THE COMMISSION PAYMENTS. 9. WE HAVE CONSIDERED THE ARGUMENTS AND EXAMINED TH E RECORD. AS RIGHTLY OBSERVED BY THE LD. CIT(A) THE DETAILS OF BANK ACC OUNTS/TDS CERTIFICATES, SEC.197 CERTIFICATES/DEBIT NOTES/CONFIRMATIONS, PAN NOS. ETC. AND ACCOUNTS COPIESWERE FILED BEFORE THE AO. IT WAS ON RECORD TH AT COMMISSION TO THE EXTENT 8 OF 1.87 CRORES PAID TO M/S. SMITH ENTERPRISES WAS A CCEPTED BY THE AO HAVING BEEN CONFIRMED BY THE SAID PARTY IN THE COURSE OF S URVEY U/S.133A.THERE WAS NO DISALLOWANCE OF THE COMMISSION PAID TO THE ABOVE PARTY. IT WAS ALSO ON RECORD THAT THERE WAS NO SEIZED MATERIAL WITH REFER ENCE TO THE BOGUS PAYMENTS OF COMMISSION AND THE ASSESSEE WAS ABLE TO FURNISH THE CONTEMPORANEOUS DOCUMENTS TO SUBMIT THAT COMMISSION WAS PAID IN THE COURSE OF DAY TO DAY BUSINESS. EXCEPT IN THE CASE OF M/S. BUNIYAD CHEMIC ALS LTD., IN WHICH THE PARTY DENIED THE COMMISSION, SEPARATELY CONSIDERED BY THE LD. CIT(A) AND CONTESTED BY THE ASSESSEE IN ANOTHER GROUND, THAT T HERE WAS NOTHING ON RECORD TO SUPPORT THE STAND OF AO THAT THE COMMISSION PAID BY THE ASSESSEE IN THE COURSE OF DAY TO DAY BUSINESS WAS NOT GENUINE. IN V IEW OF THIS, WE ARE AFFIRMING THE ORDER OF THE LD. CIT(A) IN GIVING REL IEF TO THE EXTENT OF RS.4,50,03,192/- IN VARIOUS A.Y.S FROM A.Y. 2000-0 1 TO 2006-07. THE REVENUES GROUND NO.1 IN ALL THE REVENUE APPEALS ON THE ABOVE COMMISSION PAYMENT IS THUS STAND REJECTED. ISSUE NO.2: COMMISSION PAID TO M/S. BUNIYAD CHEMI CALS LTD. 10. THIS ISSUE IS CONTESTED BY THE ASSESSEE IN ITA NO.6597 FOR A.Y. 2005-06. THE ASSESSEE CLAIMED PAYMENTS OF RS.1,38,93,196/- T O THE ABOVE SAID CONCERN. M/S. BUNIYAD CHEMICALS LTD. TO WHOM COMMIS SION WAS CLAIMED TO HAVE BEEN PAID WAS SURVEYED U/S. 133A OF THE ACT AN D A STATEMENT WAS RECORDED FROM ITS DIRECTOR SHRI M. M. CHOKSHI, U/S. 131 OF THE ACT ON 26.10.2005. SOME POINTS INTHE STATEMENT ASHAVE BEEN DISCUSSED BY THE AO IN THE ASSESSMENT ORDER ARE AS UNDER :- ONE OF THE PARTIES, KNOWN AS M/S. BUNIYAD CHEMICALS LTD., WAS COVERED U/S.133A OF THE I.T.ACT, 1961 AND HIS DIREC TOR SHRI M.M. CHOKSHI WAS EXAMINED U/S.131 OF THE I.T. ACT, 1961 ON 26.10.2005. HE HAS STATED AS UNDER :- 1. HE IS A C.A. BY PROFESSION, AND PROPRIETOR OF M/S. MUKESH M. CHOKSHI& CO. C. AS. 2. M/S. BUNIYAD CHEMICALS LTD. WAS FORMED IN 1996 AND IMMEDIATELY A PUBLIC ISSUE OF SHARE OF THE COMPANY WAS MADE. 9 3. AGAINST PUBLIC ISSUE OF RS.3,25,00,000/- ONLY AN AM OUNT OF RS.35,500/- WAS RECEIVED. 4. M/S. BUNIYAD CHEMICALS LTD., REMAINED A DEFUNCT COM PANY EVER SINCE ITS INCORPORATION IN 1996 HAVING NO TRAN SACTIONS OF WHATSOEVER NATURE WITH ANY COMPANY OR CONCERN. 5. IN JULY, 2005 ONE OF HIS FRIEND SHRI SURESH JAIN HA D APPROACHED HIM WITH A REQUEST PROVIDE BOGUS COMMISS ION ENTRY TO M/S. ROCHEM SEPARATION SYSTEMS (I) P. LTD. FOR CONSIDERATION OF 1% OF THE COMMISSION AMOUNT. 6. M/S. BUNIYAD CHEMICALS LTD. WAS GOT REGISTERED WITH SERVICE TAX DEPARTMENT FOR GIVING BOGUS COMMISSION ENTRY TO M/S. ROCHEM SEPARATION SYSTEMS (I) P. LTD. 7. BOGUS COMMISSION DEBIT NOTES OF M/S. BUNIYAD CHEMIC ALS LTD. BUT WERE PREPARED BY MR. SURESH JAIN AND THAT HE MERELY SIGNED THE SAME. 8. NO SERVICES OF WHATSOEVER NATURE WAS PROVIDED BY M/ S. BUNIYAD CHEMICALS LTD. TO M/S. ROCEHM SEPARATION SY STEMS (I) P. LTD. 9. HE DOES NOT KNOW EITHER NATURE OF BUSINESS OR ANY O F THE DIRECTOR OF M/S. ROCEHM SEPARATION SYSTEMS (I) P. L TD. 10. NO BOOKS OF ACCOUNTS OF M/S. BUNIYAD CHEMICALS LTD. HAS BEEN MAINTAINED. 11. NO SERVICE TAX HAS BEEN PAID ON THE COMMISSION. 12. THE CHEQUE FOR COMMISSION AMOUNT HAVE NOT BEEN RECE IVED FROM M/S. ROCEHM SEPARATION SYSTEMS (I) P. LTD. 13. HE DID NOT RECEIVED ANY COMMISSION ON THE BOGUS DEB IT NOTES AS WAS PROMISED TO HIM BY SHRI SURESH JAIN. 11. THEREAFTER, OPPORTUNITY WAS GIVEN TO THE ASSESS EE TO CROSS EXAMINE ON 08.11.2005. IT WAS ALLEGATION OF THE ASSESSEE THAT CROSS EXAMINATION WAS NOT ALLOWED TO BE CONTINUED BY THE AO AND, THEREFORE TH ERE IS NO PURPOSE IN CROSS EXAMINING SHRI M.M. CHOKSHI. THE AO HOWEVER, DID NO T AGREE WITH THE CONTENTIONS AND DISALLOWED THE COMMISSION PAID TO M /S. BUNIYAD CHEMICALS LTD., STATING THAT THE PAYMENTS WERE NOT GENUINE AN D THERE WERE NO SERVICES RENDERED TO THE ASSESSEE. IN THE COURSE OF REMAND P ROCEEDINGS, THE BANK ACCOUNT THAT WAS COLLECTED FROM THE BANK OF M/S. BU NIYAD CHEMICALS LTD. ALONG WITH THE STATEMENTS WERE DIRECTED TO BE FURNI SHED TO THE ASSESSEE BY THE LD. CIT(A), AND FURTHER GIVING AN OPPORTUNITY IN T HE SECOND REMAND REPORT, THE LD. CIT(A) EXTRACTED THE SUBMISSIONS AND THE AR GUMENTS VIDE PARA 2.3.0 AS UNDER :- 10 2.3.0. I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPELLANT. THE MAIN ARGUMENTS OF THE ASSESSEE ARE SUMMED-UP AS BEL OW:- (I) SHRICHOKSHI HAD STATED IN THE ORIGINAL STATEMENT DA TED 26.10.2005 THAT M/S. BUNIYAD CHEMICALS DID NOT HAVE A BANK ACCOUNT BUT CONTRARY TO THAT THE ASSESSING OFFICER HIMSELF HAD OBTAINED THE COPY OF THE BANK ACCOUNT OF M/S. BUNIYAD CHEMICALS WITH RAIGADSAHAKARI BANK LTD. VIDE BANKS LETTER DATED 22.10.2007 FOR THE PERIOD FROM 07.01.2002 TO 31.03.2006 WHICH CONTAINED SEVERAL CRORES OF TRANSACTIONS WHICH ITSELF SHOWS THAT THE STATEMENT OF SHRICHOKSHI THAT HE DID NOT HAVE ANY BANK ACCOUNT WAS NOT RELIABLE. (II) IN THE ORIGINAL STATEMENT HE HAD STATED THAT HE HAS NOT RECEIVED THE COMMISSION FROM M/S. ROCHEM SEPARATION SYSTEMS (I) P. LTD. (IN SHORT RSSIPL) BUT IN THE SA ID BANK ACCOUNT THERE ARE CLEAR CUT ENTRIES THAT THE CHEQUES ISSUED BY THE ASSESSEE HAD BEEN ENCASHED THROUGH THIS BANK ACCOUNT. THEREFORE, THE ORIGINAL STATEMENT OF MR. CHOKSHI IS NOT RELIABLE. (III) M/S. BUNIYAD CHEMICALS THEMSELVES HAD ISSUED THE DEBIT NOTES FOR THE SAID COMMISSION PAYMENTS. BEING A STATUTORILY CREATED COMPANY, THE ISSUE OF DEBIT NOT ES BY THEM COULD NOT BE DENIED AT ALL. (THE ASSESSEE HAS FURNISHED THE COPIES OF THE DEBIT NOTES BEFORE ME). (IV) THE ASSESSEE HAS DEDUCTED TDS ONTHE COMMISSION PAID AS PER THE TDS CERTIFICATE ISSUED TO M/S. BUNI YAD CHEMICALS BY THE ASSESSEE. (V) M/S. BUNIYAD CHEMICALS HAD FURNISHED CERTIFICATE U/S.197 FOR LESS DEDUCTION OF TAX. (VI) THE COMMISSION THAT M/S. BUNIYAD CHEMICALS ALSO HAD SERVICE TAX REGISTRATION. (VII) M/S. BUNIYAD CHEMICALS ALSO HAD OBTAINED COPY OF TH E PAN ACCOUNT NO. (VIII) SHRICHOKSHI IS A PRACTICING CA, THEREFORE, HE IS EXPECTED TO KNOW THAT THE CONSEQUENCES OF THE STATEMENTS MADE BY HIM U/S.131 OF THE ACT, YET HE H AS FURNISHED WRONG PARTICULARS AT THE TIME OF ORIGINAL STATEMENT ON 26.10.2005 CONTRARY TO WHAT HAS BEEN FOUND SUBSEQUENTLY AND, THEREFORE, NO CREDENCE OF A NY SORT SHOULD BE GIVEN TO HIS STATEMENT AND THE COMMISSION PAID TO HIM SHOULD BE DISALLOWED. 2.3.1 ON GOING THROUGH THE DETAILS FURNISHED BY TH E ASSESSEE AND THE DEBIT NOTES ETC., IT IS FOUND THAT THE PAYMENT HAS BEEN MADE BY THE ASSESSEE AND HAS BEEN RECEIVED BY M/S. BUNIYAD CHEMICALS LTD. REFLECTED INTHE COPY OF THE BANK ACCOUNT OF M/ S. BUNIYAD 11 CHEMICALS LTD. WITH RAIGADSAHAKARI BANK BRANCH. THE REFORE, IN SO FAR AS THE RECEIPT OF THE PAYMENT IS CONCERNED, IT IS AN ESTABLISHED FACT. AS RIGHTLY POINTED OUT BY THE AR THAT THE STA TEMENT OF SHRICHOKSHI, A PRACTICING CA, WHO IS A DIRECTOR OF M/S. BUNIYAD CHEMICALS LTD. THAT HE DID NOT RECEIVE THE PAYMENTS ITSELF IS INCORRECT, AS BORNE OUT BY THIS BANK ACCOUNT; AND F URTHER M/S. BUNIYAD CHEMICALS HAD ITSELF ISSUED THE DEBIT NOTES TO THE APPELLANT FOR THE COMMISSION. 2.3.2. YET THE FUNDAMENTAL REQUIREMENT FOR THE ALLO WANCE OF THE COMMISSION OF RENDERING OF THE SERVICE IS MISSING H ERE. UNLIKE OTHER PARTIES AS DISCUSSED IN PARA 1.2.0 TO 1.3.1 WHO HAV E CONFIRMED THE RENDERING OF SERVICE AS WELL AS THE RECEIPT OF THE COMMISSION, THIS PARTY M/S. BUNIYAD CHEMICALS LTD. HAS CATEGORICALLY DENIED IN THE ORIGINAL STATEMENT AS WELL AS INTHE CROSS-EXAMINATI ON THAT THEY HAVE NOT RENDERED ANY SERVICE AND THIS WAS ONLY A B OGUS COMMISSION ARRANGEMENT ARRANGED THROUGH ONE SHRI SU RESH JAIN. THEREAFTER, THE LD. CIT(A) DISCUSSED THE VARIOUS LE GAL PROPOSITIONS AND CONFIRMED THE DISALLOWANCE MADE BY THE AO OF COMMIS SION PAID TO M/S. BUNIYAD CHEMICALS LTD ON THE REASON THAT THE SERVIC ES WERE NOT RENDERED AND THE DIRECTOR OF THE COMPANY CATEGORICALLY DENIED HA VING BEING RECEIVED ANY COMMISSION. 12. LISTING OUT THE OBJECTIONS AS STATED BEFORE THE LD. CIT(A) (EXTRACTED IN PARA ABOVE), THE LEARNED COUNSEL SUBMITTED THAT SH RICHOKSHI STATED THAT THEY DID NOT HAVE ANY BANK ACCOUNT, WHEREAS THE COPY OBT AINED FROM THE AO ITSELF INDICATE THAT THERE WAS A BANK ACCOUNT IN RAIGADSAH AKARI BANK LTD. FROM 07.01.2002, WHICH CONTAINED SEVERAL CRORESWORTH OF TRANSACTIONS.IT WAS FURTHER SUBMITTED THAT SHRICHOKSHISTATED THAT HE HA S NOT RECEIVED ANY COMMISSION, WHEREAS THERE ARE ENTRIES THAT THE CHEQ UES ISSUED BY THE ASSESSEE COMPANY HAD BEEN ENCASHED THROUGH THIS BAN K ACCOUNT. THEREFORE, THE STATEMENT OF SHRICHOKSHI WAS NOT RELIABLE. IT W AS FURTHER SUBMITTED THAT THE COMPANY HAS ITSELF ISSUED DEBIT NOTES AND THE ASSESSEE COMPANY HAD PAID COMMISSION AFTER DEDUCTING TDS. IT WAS FURTHER SUBM ITTED THAT LESS DEDUCTION CERTIFICATE WAS OBTAINED FROM THE AO WHICH INDICATE S THAT THE COMMISSION RECEIVED WAS TO BE ACCOUNTED FOR AND THE LD. CIT(A) IGNORED THE ABOVE FACTUAL SUBMISSIONS AND DISALLOWED THE COMMISSION, SOLELY O N THE REASON THAT SHRICHOKSHI HAS CONFIRMED THE BOGUS PAYMENTS AND TH AT NO SERVICES WERE 12 RENDERED. IT WAS THE ASSESSEES SUBMISSION THAT THE PAYMENTS WERE MADE IN THE COURSE OF DAY TO DAY BUSINESS AND THE AMOUNT WA S TO BE ALLOWED. 13. THE LD. DR IN HIS REPLY CONTESTED THE SUBMISSIO NS OF THE LD. COUNSEL. HE REFERRED TO THE VARIOUS DOCUMENTS PLACED ON RECO RD AND THE FINDINGS OF THE AO AND THE LD. CIT(A) THAT SHRICHOKSHI, DIRECTOR OF THE COMPANY ADMITTED THAT BOGUS COMMISSION BILLS WERE ISSUED AND ALSO AD MITTED THAT THE MONEY WAS WITHDRAWN BY THE REPRESENTATIVES OF THE ASSESSE E COMPANY, AND FURTHER SUBMITTED THAT NO SERVICES WERE RENDERED AS FAR AS THIS ASSESSEE IS CONCERNED. HE RELIED ON THE ORDERS OF THE AO AND THE LD. CIT(A ) TO SUBMIT THAT THE PAYMENTS OF COMMISSION WAS NOT GENUINE. THE LD. CIT (A) COUNSEL IN HIS COUNTER REPLY SUBMITTED THAT THE OBSERVATION OF THE AO THAT THE COMPANY DID NOT HAVING ANY BUSINESS IS NOT CORRECT AND PLACED O N RECORD ORDER OF THE ITAT IN THE CASE OF MRS. RAJNIDEVI A CHOWDHARY IN ITA NO . 6455/M/07 TO SUBMIT THAT THE TRANSACTIONS OF SHARES OF THE ABOVE COMPAN Y WAS HELD GENUINE TRANSACTIONS BY THE ITAT ON THE FACT THAT THE SHARE S WERE QUOTED IN STOCK EXCHANGE REGULARLY, THEREFORE, IT CANNOT BE SAID TH AT COMPANY WAS NOT EXISTING. IT WAS FURTHER SUBMITTED THAT SHRICHOKSHI WAS A PRA CTICING C.A. AND THE PAYMENT OF COMMISSION FROM THE ASSESSEE CANNOT BE D ENIED. IT WAS SUBMITTED THAT THE COMMISSION WAS PAID IN THE COURSE OF REGUL AR BUSINESS AND INFACT ONE PAYMENT WAS MADE EVEN AFTER THE SEARCH TO INDICATE THAT THE COMMISSION WAS GENUINE PAYMENT. 14. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE RECORD, THE AO SOLELY RELIED ON THE STATEMENT OF SHRICHOKSHI DENYING THE COMMISSION PAYMENT. IT IS ALSO SEEN THAT SOME OF THE QUESTION BEING ASKED BY THE ASSESSEES DIRECTOR IN CROSS EXAMINATION WAS NOT ALLOWED OR NOT ANSWERED B Y SHRICHOKSHI AS THAT WOULD INCRIMINATE THE SAID PERSON. IT IS ALSO ON RE CORD THAT THE BANK ACCOUNT OF RAIGADSAHAKARI BANK LTD. WAS EXCLUSIVELY OPERATE D BY THE DIRECTOR OF THE M/S. BUNIYAD CHEMICALS LTD. AND AS STATED,FOR THE T RANSACTIONSTHOSEWERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. HOWEVER, THE AO DID NOT VERIFY THE RETURNS OF M/S. BUNIYAD CHEMICALS LTD., WHETHER THE SAID CO MMISSION WAS RECORDED OR NOT,AS RECEIPT IN THEIR BOOKS OF ACCOUNTS. IT IS ALSO NOT VERIFIED WHETHER THAT 13 COMPANYADMITTED THE FULL COMMISSION OR PERCENTAGE O F COMMISSION IN ITS RETURNS. AS SUBMITTED BY THE LD. COUNSEL THAT THE P AYMENTS WERE MADE BY THE ASSESSEE BY WAY OF CHEQUES AND THE AO ALSO ISSUED A LESS DEDUCTION CERTIFICATES ON THE BASIS OF WHICH ASSESSEE DEDUCTE D THE TDS AT 0.3 % ONLY. THESE ASPECTS REQUIRE EXAMINATION FROM THE AO. 15. AS SEEN FROM THE PAPER BOOK FILED BEFORE THE AO , IN VOL-1, PG. NO.10 THERE WAS AN ACCOUNT COPY FROM 01.03.2005 TO 31.03. 2005 OF M/S. BUNIYADCHEMICALS LTD IN ASSESSEE BOOKS. THE ENTRY O N 01.03.2005 INDICATES THAT THE TOTAL COMMISSION OF RS.72,44,732/- WAS DEB ITED WITH SERVICE TAX OF 10%, EDUCATION CESS 2% AND TDS ON COMMISSION AT 0.3 36%, TOTALING TO AN AMOUNT OF RS.79,59,310. ANOTHER ENTRY WAS MADE ON 3 1.03.2005 FOR COMMISSION EXPENSES OF RS.51,04,150/- AND INCLUDING THE TDS, SERVICE TAX AND THE EDUCATIONCESS AT A TOTAL AMOUNT OF RS.59,33 ,886/- ,TOTAL COMMISSION BEING RS.1,38,93,196/-. IT WAS THE ALLEGATION OF TH E AO THAT THE COMMISSION PAID ON THE SAME SALE TO MORE THAN ONE PARTY. HOWEV ER, THIS ASPECT HAS NOT BEEN COMPLETELY EXAMINED WITH REFERENCE TO THE VARI OUS DEBIT VOUCHERS RAISED. AS SEEN FROM THE DEBIT VOUCHERS PLACED IN THE PAPER BOOK FROM PG.1298 TO 1307, ALL THE DEBIT NOTES WERE DATED 15.03.2005 BY THE SAID M/S. BUNIYAD CHEMICALS LTD. EVEN THOUGH THAT DEBIT NOTES WERE O F 15.03.2005, AS PER THE ACCOUNT PLACED ON RECORD AT PG.9 AND 10 OF THE PAPE R BOOK, THE ASSESSEE ACCOUNTED FOR THE COMMISSION ON 01.03.2005 TO THE E XTENT OF RS.79,59,310/- AND ON 31.03.2005 TO THE EXTENT OF RS.59,33,886/-. THIS MEANS THAT THE COMMISSION WAS ACCOUNTED FOR EVEN BEFORE THE DEBIT NOTES WEREISSUED. 16. ANOTHER ASPECT WAS WITH REFERENCE TO THE PAYMEN TS MADE TO M/S. BUNIYAD CHEMICALS LTD., THE ASSESSEE HAS ISSUED A C HEQUE OF RS.40 LAKH ON 02.03.2005 AND RS.36,38,964/- ON 07.03.2005 AND RS. 3,20,346/- ON 30.03.2005 DEDUCTING TAX AT 0.3%, EVEN BEFORE THE T DS FOR LESSER DEDUCTION WAS ISSUED BY THE AO ON 30.03.2005. IT GIVES SOME D OUBT ABOUT THE ACTUAL DATES ON WHICH THESE WERE ACCOUNTED OR UNDERTAKEN, AS THE SAID PAYMENTS WERE CLEARED AFTER 31.03.2005 IN THE BANK. THESE AS PECTS ALONG WITH THE 14 SERVICES RENDERED TO THE ASSESSEE COMPANY, ACCORDIN G TO THE TERMS AND CONDITIONS REQUIREDETAILED EXAMINATION. 17. EVEN THE AFFAIRS OF M/S BUNIYAD CHEMICALS LTD W ERE NOT EXAMINED. AS ALLEGED BY THE ASSESSEE, THE ACCOUNT WAS OPENED SOM ETIME IN 2002, WHEREAS THE ASSESSEES TRANSACTIONS OCCURED IN MARCH, 2005. THE ENQUIRES CONDUCTED IN THE CASE OF M/S. BUNIYAD CHEMICALS LTD., MAY HAV E A BEARING ON THE CLAIM OF THE ASSESSEE OF THE COMMISSION AND SERVICES REND ERED.THE ROLE OF SHRI SURESH JAIN ALSO REQUIRE EXAMINATION. THE LD. COUNS EL RAISED AN OBJECTION THAT THE REVENUE HAS NOT ENQUIRED ABOUT THE ROLE OF SHRI S.P. JAIN, WHO WAS SUPPOSED TO HAVE ACTED AS A MIDDLE MAN AS PER THE S TATEMENT OF SHRICHOKSHI AND THIS ASPECT ALSO REQUIRE EXAMINATION. IT WAS SU BMITTED THAT THE COMPANY PAID COMMISSION WHICH WAS ENCASHED AFTER THE SEARCH . THIS CONTENTION ALSO REQUIRE EXAMINATION AS ISSUANCE OFCHEQUES WERE BEF ORE THE SEARCH. 18. IN VIEW OF THESE, WE ARE OF THE OPINION THAT TH E ISSUE WITH REFERENCE TO THE COMMISSION PAID TO M/S. BUNIYAD CHEMICALS LTD. CANNOT BE DECIDED ON LEGAL PRINCIPLES ALONE, WITHOUT EXAMINING THE FACTS AND BOTH THE ASSESSEE AND THE DIRECTOR OF THE SAID COMPANY SHOULD BE GIVEN AN OTHER OPPORTUNITY TO PLACE THE EVIDENCE ON RECORD ABOUT THE GENUINENESS OF THE COMMISSION SO PAID AND CLAIMED. IN VIEW OF THIS, THE GROUND PERTAINING TO THE COMMISSION PAID TO M/S. BUNIYAD CHEMICALS LTD BY THE ASSESSEE IS RESTORED T O THE FILE OF THE AO FOR FRESH EXAMINATION, AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. WITH THESE DIRECTIONS, THE ISSUE IS RESTORED TO THE FILE OF TH E AO. THE GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ISSUE NO.3: ADDITION ON ACCOUNT OF BOGUS PURCHASE S 19. DURING THE COURSE OF SEARCH PROCEEDINGS, AND ON THE BASIS OF SEIZED MATERIAL STATEMENT FROMSHRI K.K. GOEL ONE OF THE DI RECTOR OF THE ASSESSEE COMPANY WAS RECORDED, WHO ADMITTED THAT THEY HAVE R ECORDED CERTAIN PURCHASES FROM THE VARIOUS CONCERNS BY WAY OF BOGUS INVOICES. THE ASSESSEES DIRECTOR HAS GIVEN A LIST OF 46 COMPANIES FROM WHOM THEY HAVE MADE BOGUS 15 PURCHASES TOTALING TO AN AMOUNT OF RS.7,76,12,467/- . HOWEVER, SUBSEQUENTLY THE ASSESSEE RETRACTED THE DECLARATION IN THE CASE OF 10 PARTIES WHICH WAS STATED TO BE GENUINE PURCHASES. AT THE TIME OF FILI NG THE RETURN, THE ASSESSEE DISCLOSED BOGUS PURCHASES TOTALING TO RS.6,43,81,70 9/-. THE AO ENQUIRED ABOUT THE PURCHASES MADE FROM VARIOUS PERSONS STATE D THERE, INCLUDING THE 10 CASES WHICH ARE WITHDRAWN BY THE ASSESSEE. OUT OF T HE 10 CONCERNS, WHICH THE AO ENQUIRED, THE ASSESSEE COULD NOT FURNISH ANY EVI DENCE WITH REFERENCE TO TWO COMPANIES NAMELY M/S. PARAS TRADING CO. AND M/S . RAJ JYOTHIMETAILS THE PURCHASES TO THE EXTENT OF RS.3,45,058/- WAS DISALL OWED IN A.Y. 2005-06 AND RS.5,89,201/- WAS DISALLOWED IN A.Y. 2006-07. IN AD DITION TO THAT, THE AO DISALLOWED THE PURCHASES ACCOUNTED FROM M/S ARIHANT METAL CORPORATION, BHARAT TRADING CO., SHREE GANESH METALS AND PARMOD METAL CORPORATION AND DISALLOWED THE PURCHASES MADE IN THEIR NAMES. 20. THE LD. CIT(A) GIVING AN OPPORTUNITY TO THE ASS ESSEE AND AO IN TWO REMAND REPORTS AND TAKING THE OBJECTIONS OF THE ASS ESSEE ON RECORD CAME TO A CONCLUSION THAT THE ASSESSEE COULD HAVE PURCHASED M ETALS FROM SOME WHERE, IF NOTFROM THE ABOVE PARTIES AND CONSIDERED THAT ASSES SEE MUST HAVE PURCHASED FROM OUTSIDE THROUGH UNAUTHORIZED DEALERS WHERE THE COST WOULD BE LESS. THE LD. CIT(A) CONSIDERED THAT 90% OF THE VALUE OF THE PURCHASES COULD BE ALLOWED AND 10% OF PURCHASE COULD BE DISALLOWED AS BOGUS PU RCHASES. THEREFORE, ON THE DISALLOWANCES OF PURCHASES MADE BY THE AO IN VA RIOUS NAMES, HE RESTRICTED THE DISALLOWANCE TO 10% OF THE AMOUNT. T HUS, THE REVENUE IS AGGRIEVED WITH GROUND NO. 2 & 3 IN VARIOUS YEARS ON THE ALLOWANCE OF PURCHASES TO THE EXTENT OF 90%, WHEREAS THE ASSESSE E IS AGGRIEVED ON THE DISALLOWANCE OF 10% MADE BY THE CIT(A) AS BOGUS PU RCHASES. 21. THE LD. DR DRAWING OUR ATTENTION TO THE ORDER O F THE AO SUBMITTED THAT ON THE BASIS OF SEIZED MATERIAL DURING THE COURSE O F SEARCH, THE ASSESSEE DIRECTOR SHRI K.K. GOEL ADMITTED ABOUT 8 CRORES OF BOGUS PURCHASES IN VARIOUS ASSESSMENT YEARS AND THE AMOUNT PERTAINS TO A.Y. 19 99-2000 COULD NOT BE BROUGHT TO TAX AS IT WAS OUTSIDE THE PERIODFOR WHIC H NOTICE COULD NOT BE ISSUED.WITH REFERENCE TO THE 46 CASES AS LISTED OUT BY THE AO IN THE 16 ASSESSMENT ORDER, THE ASSESSEE RETRACTED THE DECLAR ATION IN ABOUT 7 CASES BEFORE THE INVESTIGATION WING AND 3 CASES WHILE FIL ING THE RETURN. OUT OF THESE CASES, THE PURCHASES WITH REFERENCE TO M/S. M.R. SA LES CORP. OF RS.8,84,191/- AND M/S. RAJ JYOTHI METALS OF RS.5,49,734/- WERE OR IGINALLY ADMITTED AS BOGUS PURCHASES IN THE COURSE OF SEARCH PROCEEDINGS AND I N THE ASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT FURNISH ANY EVIDEN CE NOR PRODUCED THE PARTIES, THEREFORE, THE AO DISALLOWED THESE AMOUNTS . INSTEAD OF ENQUIRING ABOUT THE GENUINENESS OF THE PURCHASES, THE LD. CIT (A) WITHOUT ANY DISCUSSIONS ALLOWED 90%, WHICH IS NOT CORRECT. WITH REFERENCE TO THE OTHER 5 ITEMS OUT OF THE 7 WITHDRAWN, IT WAS SUBMITTED THAT THE AO DID NOT MAKE DISALLOWANCE. HOWEVER, HE VERIFIED ABOUT THE OTHER CONCERNS LIKE UNITED METALS, BHARAT TRADING CO. AND ARIHANT METAL CORP. WITH REFERENCE TO UNITED METALS, THE ASSESSEE DISCLOSED THE PART OF IT AND T HE AMOUNT OF RS.8,841 ADDED BY THE AO AND THAT WAS NOT CONTESTED. WITH REFERENC E TO M/S. BHARAT TRADING CO. THERE WAS A MISTAKE ON THE PART OF THE AO IN TA KING THE SALES MADE BY M/S. BHARAT TRADING CORPORATION AND MAKING THE DISA LLOWANCES WHICH THE LD. CIT(A) DELETED AS DOUBLE DISALLOWANCE. THE ONLY DIS ALLOWANCE CONTESTED WAS A SMALL AMOUNT OF RS.21,080/-. WITH REFERENCE TO ARIH ANT METAL CORP., HE REFERRED TO THE STATEMENT MADE AND ENQUIRIES CONDUC TED WITH REFERENCE TO THE TRANSPORTATION OF GOODS WHICH WAS FOUND ON ENQUIRY THAT THE VEHICLE MENTIONED WERE HERO HONDA MOTOR CYCLE AND MARUTI CA R WHICH CANNOT BE USED FOR TRANSPORTATION OF GOODS. THEREFORE, THE PU RCHASES FROM ARIHANT METAL CORP. ON WHICH THE DISALLOWANCE WAS MADE AT RS.36,6 2,439/- WAS DISALLOWED CORRECTLY. THE LD. CIT(A) WAS NOT CORRECT IN GRANT ING 90% OF PURCHASES AS GENUINE. 22. IT WAS FURTHER SUBMITTED BY THE DR THAT EVEN TH OUGH THE ASSESSEE DID NOT DISCLOSE THE PURCHASES FROM SHREE GANESH METALS AND PARMOD METAL CORPORATION, THE INVESTIGATION WING ENQUIRY REVEALE D THAT THEY THEMSELVES PURCHASED GOODS ON ACCOMMODATION BILLS FROM VARIOUS PARTIES AND THEY IN TURN PROVIDED ACCOMMODATION BILLS TO THE ASSESSEE A ND REFERRED TO THE DISCUSSION MADE BY THE AO FROM PARA 6.4 ONWARDS INC LUDING THE STATEMENTS 17 RECORDED FROM THE PROPRIETOR SHRIKIYARAMBISHNOI AND SHRIRAGHUNATHBISHNOI TO SUBMIT THAT THEY HAVE ADMITTED ACCOMMODATING THE BOGUS BILLS TO THE ASSESSEE, THEREFORE, THE QUESTION OF ALLOWING THE S AME AS GENUINE PURCHASES CANNOT BE ACCEPTED. 23. THE LD. COUNSEL IN REPLY SUBMITTED THAT THE A SSESSEE RETRACTED THE STATEMENT OF 7 PARTIES WHICH THE AO ACCEPTED ABOUT 5 PARTIES AND DISALLOWED ONLY OF 2 PARTIES WHICH ARE NOT PRODUCED BEFORE HI M. WITH REFERENCE TO THE OTHER CASES, IT WAS THE SUBMISSION THAT THE ASSESSE E HAS FURNISHED ALL DETAILS LIKE PURCHASE BILLS, TRANSPORTATION INVOICES, INCOM E TAX RETURNS, PAYMENTS MADE THROUGH BANK CHEQUES AND THE EVIDENCE WITH REF ERENCE TO THE USE OF THE MATERIAL IN THE PRODUCTION PROCESS OF THE ASSESSEE COMPANY. HE REFERRED TO THE VARIOUS VOLUMES PLACED IN THE PAPER BOOK TO SUBMIT THAT THE DETAILS WERE ENQUIRED BY THE AO AND THE LD. CIT(A) AND, THEREFOR E, EVEN THOUGH DIRECT PURCHASES WERE MADE FROM THESE PARTIES, THE LD. CIT (A) WAS WRONG IN SUSTAINING 10% OF THE AMOUNT WITHOUT ANY BASIS. HE SPECIALLY REFERRED TO THE STATEMENTS RECORDED FROM VARIOUS PEOPLES TO SUBMIT THAT IN THE STATEMENT RECORDED ORIGINALLY FROM THE RESPECTIVE PARTIES, TH EY HAVE CONFIRMED PROVIDING GOODS TO THE ASSESSEE, BUT INVESTIGATION AUTHORITIE S CONFRONTED BY MAKING FURTHER ENQUIRES ON THEIR PURCHASES AND TAKING COER CIVE STATEMENTS SO AS TO FORCE THE ABOVE PARTIES IN DENYING THE SALES MADE T O THE ASSESSEE COMPANY. REFERRING TO THE SUBMISSIONS MADE BEFORE THE LD. CI T(A) IT WAS THE SUBMISSION OF THE LD. COUNSEL THAT THE PURCHASES FR OM THE ABOVE PARTIES ARE GENUINE, AND SO DISALLOWANCE OF 10% SHOULD NOT ARIS E. HE OBJECTED TO THE GROUNDS RAISED BY THE REVENUE AND SUPPORTED THE ASS ESSEES GROUNDS AGAINST THE CONFIRMATION MADE BY THE LD. CIT(A) TO THE EXTE NT OF 10%. 24. WE HAVE CONSIDERED THE ARGUMENTS OF THE LD. COU NSEL AND PERUSED THE RECORD. AS ALREADY STATED EARLIER, THERE WERE ENQUI RIES WITH REFERENCE TO THE PURCHASES MADE BY THE ASSESSEE FROM SOME GROUP OF C ONCERNS.IN THE COURSE OF SEARCH PROCEEDINGS THE ASSESSEE COMPANY DIRECTOR AD MITTED BOGUS PURCHASES FROM ABOUT 46 PARTIES TOTALING TO ABOUT 8 CRORES. S UBSEQUENTLY,THE AMOUNT WAS REVISED AND AT THE TIME OF FILING THE RETURN, T HE ASSESSEE DISCLOSED BOGUS 18 PURCHASES TOTALING TO RS.6,43,81,709/- EXCLUDING TH E AMOUNT PERTAINING TO A.Y. 1999-2000. OUT OF THESE 46 PARTIES LISTED OUT BY THE AO IN PAGE 3 AND 4 OF THE ASSESSMENT ORDER, THE ASSESSEE RETRACTED THE DECLARATION OUT OF 7 PARTIES RETRACTED BEFORE THE DDI WHICH ARE AS UNDER :- 1. ARBEE ENTERPRISES RS.425184/- 2. ASHWIN ENTERPRISES RS.549560/- 3. HAMANT TRADING CO. RS.201830/- 4. PARAS TRADING CO. RS.384527/- 5. A.J. ENTERPRISES RS.434473/- 6. M. R. SALES CORPORATION RS.884191/- 7. RAJ JYOTH METALS RS.549732/- IN ADDITION TO THE ABOVE 7 PARTIES, THE AO ENQUIRED WITH REFERENCE TO ANOTHER 3 PARTIES WHOSE PURCHASES WERE ALSO STATED TO BE GENU INE AT THE TIME OF FILING RETURN NAMELY, UNITED METALS, BHARAT TRADING CO. AN D ARIHANT METAL CORP. OUT OF THE TOTAL 10 CONCERNS FIRMS, THE ASSESSEE CO ULD NOT PRODUCE ANY PARTIES NOR AO COULD ENQUIRE ABOUT M/S. PARAS TRADING CO. A ND M/S. RAJ JYOTHI METALS. EVEN BEFORE THE LD. CIT(A), THE ASSESSEE HA S ONLY FURNISHED THE ACCOUNT COPIES BUT NO ENQUIRES WERE MADE. 25. IN VIEW OF THESE, ACCEPTING 90% OF THE SAID VAL UE BY THE LD. CIT(A) WITHOUT ANY DISCUSSION AS WAS DONE BY HIM IN PARA 4 .3.0 RELYING ON THE DISCUSSION ABOUT OTHER CONCERNS WHICH WERE NOT PART OF DISCLOSURE MADE, IN OUR VIEW IS NOT PROPER. THEREFORE, IN THE INTEREST OF JUSTICE ONE MORE OPPORTUNITY IS GIVEN TO THE ASSESSEE TO FURNISH THE NECESSARY EVIDENCE WITH REFERENCE TO THE PURCHASES FROM THESE TWO CONCERNS AS GENUINE. THEREFORE, THE VERIFICATION OF PURCHASES IN THE CASE OF M/S. PARAS TRADING CO. AND M/S. RAJ JYOTHIMETAILS ARE RESTORED TO THE FILE OF AO FOR FR ESH EXAMINATION.TO THAT EXTENT REVENUE GROUND IN A.Y.S 2005-06 AND 2006-07 AND AS SESSEES GROUNDS ON THE 10% CONFIRMATION IN RESPECT OF THE ABOVE ASSESSMENT YEARS ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 26. WITH REFERENCE TO THE UNITED METALS ENQUIRED BY THE AO, THERE WAS NO APPEAL. WITH REFERENCE TO THE BHARAT TRADING CO ENQ UIRED AND DISALLOWED, THE LD. CIT(A) DELETED THE ADDITION AS DOUBLE DISALLOWA NCE AS THE AO CONFUSED THAT WITH M/S BHARAT TRADING CORPORATION WHICH WAS A DIF FERENT CONCERN AND, 19 THEREFORE, WE DO NOT INTEND TO DIFFER FROM THE FIND INGS OF THE LD. CIT(A). EVEN THE STATEMENT RECORDED FROM BHARAT TRADING CO. EXT RACTED IN PAGE 9 OF THE ASSESSMENT ORDER DO INDICATE THAT THE SAID COMPANY HAD DENIED THE BILLS AS DOES NOT BELONG TO THEIR CONCERN. THE AO ALSO ACCEP TED THE PURCHASES FROM BHARAT TRADING CO IN LATER YEARS. WE ARE OF THE OPI NION THAT THE SMALL DISALLOWANCE OF RS. 21,080 IS NOT WARRANTED. THEREF ORE, THE REVENUES GROUNDS ON THIS ISSUE ARE TO BE REJECTED AND ASSESSEES ALL OWED. 27. WITH REFERENCE TO M/S ARIHANT METAL CORP, THE A O DISCUSSED THE ISSUE IN PARA 6.3.(III) IN PAGE 10 OF THE ASSESSMENT ORDER A ND DISALLOWED THE AMOUNT OF RS.35,62,439/-. THE LD. CIT(A) DISCUSSED THE SAME I N PARA 4.1.1 AND STATES THAT THE ASSESSEE DID NOT ADMIT THE AMOUNT AT THE F ILING OF RETURN, EVEN THOUGH HAD ADMITTED IN THE STATEMENT U/S 132(4). WE ARE NO T IN A POSITION TO UPHOLD THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE. AS SE EN FROM THE RECORD THE ASSESSEE DID ADMIT THE ABOVE IN THE LIST OF BOGUS P URCHASES AT LIST 43 AND LATER WITHDREW ON THE STRENGTH OF ENQUIRY CONDUCTED BY IN VESTIGATION WING WHEREIN THE SAID PARTY CONFIRMED AS GENUINE SALES AND SUPPO RTED BY BOOKS OF ACCOUNT. LATER THE INVESTIGATION WAS PERUSED AND FOUND THAT THE GOODS WERE SUPPOSED TO HAVE BEEN TRANSPORTED BY VEHICLES OF PERSONAL US E. THAT LED TO FURTHER STATEMENTS AND DENIAL BY THE SAID PARTY. ASSESSEE F URNISHED EVIDENCE WITH HIM TO SUPPORT THE PURCHASES. THE AO ALSO DID NOT MAKE ANY ENQUIRY BUT RELIED ON THE STATEMENTS MADE BY INVESTIGATIVE WING. IT WAS S UBMISSION OF ASSESSEE THAT THE STATEMENTS ARE NOT GENUINE AND TAKEN COERCIVELY . THE EVIDENCE ON RECORD PLACED WAS NOT DISPUTED BUT DISBELIEVED ON A REASON THAT TRANSPORTATION OF GOODS WAS NOT PROVED. THIS ISSUE IS SIMILAR TO THE NEXT ADDITION MADE BY THE AO WHICH WE CONSIDER HEREIN AFTER. 28. THE MAJOR ADDITION MADE BY THE AO WITH REFERENC E TO THE PURCHASES FROM SHREE GANESH METALS AND PARMOD METAL CORPORATI ON LOCATED AT 46/48, 4 TH KUMBHARWADA LANE, MUMBAI-400 004, THESE ARE PROPRIE TORY CONCERNS OF SHRIKIYARAMBISHNOI AND SHRIRAGHUNATHBISHNOI RESPEC TIVELY. THE ASSESSEE WAS PURCHASING VARIOUS STEELS AND MATERIALS FROM F. Y. 2001-02 ONWARDS AND 20 FROM F.Y.S 2004-05 AND 2005-06 ONWARDS THE PURCHAS ES ARE FROM SHREE GANESH METALS. IN THE COURSE OF SEARCH PROCEEDINGS, THERE IS NO INCRIMINATING MATERIAL WITH REFERENCE TO THE ABOVE PARTIES. SURV EY WAS CONDUCTED U/S.133A OF THE I.T. ACT AT THE ABOVE BUSINESS PREMISES OF T HE PARTIES, WHEREIN INITIALLY THE STATEMENTS WERE GIVEN THAT THEY WERE SUPPLYING MATERIALS TO THE ASSESSEE COMPANY FOR A LONG PERIOD OF TIME. HOWEVER, THE INV ESTIGATIONS FURTHER WERE CONDUCTED WITH REFERENCE TO THE SUPPLIERS OF THESE PARTIES AND ON THE BASIS OF THEIR STATEMENTS, FURTHER STATEMENTS WERE RECORDED FROM THE ABOVE PERSONS. IN ALL, THERE ARE 3 STATEMENTS, EXTRACTED BY THE AO IN THE ASSESSMENT ORDER, WHICH INDICATE THAT THE ABOVE NAMED CONCERN AFFIRME D THE SUPPLIES OF THE GOODS IN THE FIRST TWO STATEMENTS AND RETRACTED AND STATED THAT THEY ARE BOGUS PURCHASES IN THE LAST STATEMENT. IT WAS THE SUBMISS ION OF THE ASSSESSEE THAT THESE TWO PARTIES ARE REGULARLY SUPPLYING SPECIALIZ ED MATERIAL REQUIRED IN ITS MANUFACTURING ACTIVITY AND THERE WERE REGULAR INVO ICES, TRANSPORTATION OF GOODS, EXCISE RECORDS AND THIRD PARTY EVIDENCES THA T THE GOODS WERE RECEIVED BY THE ASSESSEE COMPANY, AND WERE USED IN THE MANUF ACTURING PROCESS. THE ASSESSEE ALSO OBTAINED AFFIDAVITS FROM THE ABOVE TW O NAMED PERSONS AND PLACED BEFORE THE AO DURING THE COURSE OF ASSESSMEN T PROCEEDINGS THAT THE LAST STATEMENT BY THE INVESTIGATION WING WAS NOT CO RRECT AND OBTAINED ON COERCION. THE ASSESSEE ALSO PRODUCED THESE PARTIES BEFORE THE AO FOR EXAMINATION, HOWEVER RELYING ON THE STATEMENTS TAKE N BY THE INVESTIGATION WING, THE AO IGNORED THE FINDINGS PLACED ON RECORD BY THE ASSESSEE, AND TREATED THE PURCHASES AS BOGUS AND MADE DISALLOWANC E OF THE FOLLOWING AMOUNTS IN THE RESPECTIVE ASSESSMENT YEARS. SR. NO. NAME OF THE PURCHASE PARTIES 2000- 01 A.Y. 2001-02 A.Y. 2002-03 A.Y. 2003-04 A.Y. 2004-05 A.Y. 2005-06 A.Y. 2006-07 A.Y. 1. PARMOD METAL CORPORATION -- 3,48,314 2,23,272 6,21,597 26,08,847 -- -- 2. SHREE GANESH METALS -- -- -- -- -- 1,12,17,480 87,28,986 21 29. THE AO ALSO DID NOT RELY ON THE ABOVE SUBMISSIO NS FULLY AND GAVEA FINDING THAT THESE PARTIES WERE CHANGING THE STATEM ENTS WHICH CAN NOT BE RELIED. HOWEVER, RELYING ON THE LAST STATEMENT AND THE STATEMENTS OF THE VARIOUS PARTIES WHO DENIED SUPPLY OF GOODS TO SHREE GANESH METALS AND PARMOD METAL CORPORATION, THE AO CAME TO A CONCLUSI ON THAT THE PURCHASES OFASSESSEE COMPANY BY THE TWO NAMED CONCERNS ARE BO GUS/HAWALA AND, THEREFORE, DISALLOWED ENTIRE PURCHASES. 30. BEFORE THE LD. CIT(A) THE ASSESSEE PLACED EVIDE NCE AS FILED BEFORE THE AO WITH REFERENCE TO THE PURCHASES OVER A PERIOD OF TI ME FROM THE ABOVE CONCERNS AND ALSO PLACED VARIOUS OTHER EVIDENCES, AS EXTRACT ED BY THE LD. CIT(A) IN PARA 3.3 AT PG NO. 49 IN HIS ORDER. THE SUM ANDSUBSTANCE OF THE ASSESSEES ARGUMENTS WAS SUMMED-UP BY THE LD. CIT(A) IN PARA 3 .3.0 WHICH AS UNDER :- I. THOUGHT THE PROPRIETORS OF SHREE GANESH METALS AND PARMOD METAL CORPORATION HAD INITIALLY SUBMITTED IN TWO OF THEIR EARLIER SWORN STATEMENTS BEFORE THE INVESTIGATION U NIT OFFICERS THEY CONFIRMED THAT THEY HAD SUPPLIED THE MATERIALS TO THE APPELLANT COMPANY. HOWEVER, ON PERSISTENT EN QUIRY AND COERCION BY THE DEPARTMENT THEY HAD STATED IN T HEIR THIRD STATEMENT THAT THEY HAD NOT SUPPLIED THESE MATERIAL S. II. SUBSEQUENTLY, THE TWO PROPRIETORS NAMELY SHRIKHIYARAMBISHNOI AND SHRIRAGHUNATHBISHNOI HAD FI LED AFFIDAVIT THAT THE STATEMENTS WERE OBTAINED FROM TH EM UNDER DURESS. III. BOTH THE PROPRIETORS SHRIKHIYARAMBISHNOI AND SHRIRAGHUNATHBISHNOI WERE PRODUCED BEFORE THE ASSES SING OFFICER SEVERAL TIMES FOR VERIFICATION OF THEIR SUB SEQUENT AFFIDAVITS WHEREIN THEY HAVE ALLEGED SUCH OBTAINING OF THE STATEMENT UNDER DURESS. THE ASSESSING OFFICER HAD N OT RECORDED ANY STATEMENT FROM THEM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IV. THE ASSESSEE HAS PRODUCED EVIDENCES FROM ITS OWN RE CORDS:- (A) EVIDENCES FOR TRANSPORTATION. (B) EVIDENCES FOR CONSUMPTION OF RAW MATERIALS. (C) ENTRIES MADE INT EH STOCK BOOK, EXCISE GATE PASS FO R ENTRY OF RAW MATERIALS. (D) EXCISE GATE PASS FOR EXIT OF RAW MATERIALS NAMELY S TEEL FOR PROCESSING AND FABRICATION OF THE PARTS FROM OUTSID E PARTIES. (E) PROCESSING CHARGES PAID BY THE ASSESSEE IN RESPECT OF THE MATERIAL PURCHASED WHICH WERE PROCESSED AND FABRICA TED 22 IN SAME PARTS WHICH WERE AGAIN UTILIZED IN THE MANUFACTURING OF WATER PURIFICATION SYSTEM. (F) OTHER DOCUMENTS OF THE SAID TWO PARTIES SHREE GANES METALS AND PARMOD METAL CORP. LIKE BANK ACCOUNTS, BALANCE SHEET, P & L ACCOUNT, COPY OF THE ACCOUNT W HICH WERE PRODUCED BEFORE THE ASSESSING OFFICER. AND THE SE BOOKS OF ACCOUNTS OF THE SUPPLIERS WERE IMPOUNDED D URING THE COURSE OF SURVEY U/S.133A WHICH THEMSELVES EVIDENCED THE SUPPLY OF MATERIALS TO THE ASSESSEE. V. THE ASSESSING OFFICER DID NOT VERIFY THOSE BOOKS OF ACCOUNTS FROM THE RESPECTIVE ASSESSING OFFICERS OF THE TWO SUPPLIERS SHREE GANESH METALS AND PARMOD METAL CORPORATION IN SPITEOF SPECIFIC REQUEST MADE BY THE WITNESSES AS WELL AS B Y THE ASSESSEE VIDE LETTER DATED 20 TH DECEMBER, 2007. 31. THEREAFTER, THE LD. CIT(A) CAME TO A CONCLUSION THAT ASSESSEE MUST HAVE PURCHASED THE MATERIALS AND SINCE THE CONSUMPTION O F THE RAW MATERIALS WAS NOT QUESTIONED, AND ON THE PRESENCE OF EVIDENCE OF DOCUMENTS IN THE INTERNAL ACCOUNT OF THE ASSESSEE SHOWS THAT THE MATERIALS HA VE COME TO THE POSSESSION OF THE ASSESSEE AS EVIDENCED BY THE GATE PASS FOR E NTRY AND EXIT AND AS PER THE EVIDENCE IN STOCK REGISTER, THE LD. CIT(A) ACCEPTS THAT ASSESSEE COULD HAVE PURCHASED THESE MATERIALS, IF NOT, FROM THE ABOVE C ONCERN BUT FROM OUTSIDE, AND ALLOWS 90% OF THE SAME WHILE DISALLOWING 10% AS INFLATION OF THE VALUE OF COST OF PURCHASES. 32. WE ARE NOT IN A POSITION TO ACCEPT THE DECISION OF THE LD. CIT(A) IN ALLOWING ONLY 90% OF THE PURCHASES. FIRST OF ALL TH E RECORD AS FURNISHED BY THE ASSESSEE IN 5 PARTS IN VOLUME-8 PERTAIN TO COMPLET E TRANSACTIONS OF THE ABOVE NAMED CONCERNS OVER A PERIOD OF TIME WHICH DID INDI CATE THAT ASSESSEE WAS REGULARLY PURCHASING MATERIAL IN THE COURSE OF DAY TO DAY BUSINESS. AS SUBMITTED BY THE PROPRIETORS OF THE ABOVE NAMED CON CERNS SHRIKIYARAMBISHNOI AND SHRIRAGHUNATHBISHNOI THAT TR ANSPORTATION IS NOT THEIR RESPONSIBILITY AND ASSESSEE COMPANY TAKES THE RESPONSIBILITY OF TRANSPORTING GOODS TO ITS FACTORY. THEREFORE, THE C ONTENTION OF THE AO THAT THE INVOICES DOES NOT CONTAIN MODE OF TRANSPORTATION CA N NOT BE A BASIS FOR DISBELIEVING THE PURCHASES TOTALLY. FURTHER, IF THO SE CONCERNS OBTAINED SOME MATERIAL FROM THIRD PARTIES WHICH COULD NOT BE VERI FIED, THE RECEIPT OF MATERIAL 23 EVIDENCED BY THE INWARD REGISTER AND EXCISE REGISTE R ANDACCEPTED BY THE LD. CIT(A) AS SUCH, CANNOT BE DOUBTED IN THE ASSESSEES HAND. INFACT THE LD. CIT(A) GOES ON GIVING THE FINDING AS UNDER :- 3.3.3. HOWEVER, ONE CRUCIAL FACTOR THAT HAS TO BE BEEN TAKEN INTO ACCOUNT IS THAT THE ASSESSEE HAS CONSUMED THE MATER IALS AND THEY WERE UTILIZED IN THE MANUFACTURING OF WATER SEPARAT ION SYSTEM AND WASTEWATER PURIFICATION PLANT ETC. AND THEY WERE AL SO USED INTHE REPROCESSING FABRICATION WHICH THE ASSESSEE HAS GOT IT DONE FROM THE OUTSIDE PARTIES FOR WHICH THE ASSESSEE HAS PAID PROCESSING CHARGES WHICH WAS ACCEPTED BY THE ASSESSING OFFICER . AND WITHOUT THESE MATERIALS SUCH PRODUCTION IS NOT POSSIBLE. 33. CONSIDERING THE EVIDENCES PLACED ON RECORD AND ALSO THE FACT THAT THERE WAS NO INCRIMINATING MATERIAL AT THE TIME OF SEARCH ABOUT THESE PARTIES AND PURCHASES FROM THESE PARTIES WERE NOT INCLUDED IN T HE LIST OF CONCERNS WHERE THE ASSESSEE ADMITTED AS BOGUS PURCHASES, WE ARE OF THE OPINION THAT THE PRESUMPTION MADE BY THE CIT(A) ABOUT THIRD PARTY PU RCHASES IS NOT CORRECT. SINCE THE SAID PARTIES ADMITTED HAVING SUPPLIED THE MATERIAL IN THEIR STATEMENTS MADE INITIALLY AND SINCE THE INTERNAL RE CORDS AS FURNISHED BY THE ASSESSEE HAD INDICATED THAT RELEVANT MATERIAL HAS C AME INTO THE FACTORY FOR ITS USAGE, THE FACT OF WHICH WAS ACCEPTED BY THE LD. CI T(A) ,WE ARE OF THE OPINION THAT THE ENTIRE PURCHASES MADE FROM THESE CONCERNS ARE TO BE ACCEPTED, AS SUCH. WE SEE NO REASON TO DISBELIEVE THE PURCHASES ON THE BASIS OF EVIDENCE PLACED ON RECORD. THE AO ALSO ACCEPTED PURCHASES MA DE FROM FIVE PARTIES WHICH ARE ORIGINALLY STATED BY THE ASSESSEE AS BOGU S IN THE COURSE OF SEARCH BUT RETRACTED LATER. SIMILAR FACTS EXIST FOR M/S AR IHANTCORPORATION AND M/S SHREE GANESH AND M/S PARMOD CORPORATION. THEREFORE, THE AO IS DIRECTED TO ALLOW THE ENTIRE PURCHASE FROM THESE CONCERNS. THE REVENUES GROUNDS RAISED ON 90% ALLOWANCE BY THE LD. CIT(A) ARE REJECTED AND ASSESSEES GROUNDS REGARDING CLAIM FOR THE 10% OF THE AMOUNT DISALLOWE D BY THE LD. CIT(A) ARE ALLOWED. 34. THE OTHER GROUNDS RAISED BY THE ASSESSEE ARE WI TH REFERENCE TO HIGHER EDUCATION EXPENSES, OPERATION AND MAINTENANCE EXPEN SES AND BUSINESS PROMOTION EXPENSES. THESE GROUNDS ARE RAISED IN A.Y .S 2002-03 & 2003-04 AS 24 FAR AS HIGHER EDUCATION EXPENSES ARE CONCERNED AND OTHER EXPENSES OF OPERATION AND MAINTENANCE ANDBUSINESS EXPENSES ARE FOR A.Y. 2005-06. ISSUE NO 4: HIGHER EDUCATION EXPENSES 35. THE AO MADE AN ADDITION OF RS.6,69,142/- FOR A. Y. 2002-03 AND RS.8,53,286/- FOR A.Y. 2003-04 VIDE PARA 13.1 TO 13 .3. FOREIGN EDUCATION EXPENSES WERE INCURRED ON SHRIPRERAKGOEL FOR THE TR AINING OF THE MBM COURSE AT MANILA. THE AO DISALLOWED THE EXPENDITURE AS SHR IPRERAKGOEL WAS NEITHER THE DIRECTOR NOR THE EMPLOYEE OF THE ASSESSEE COMPA NY. THE ASSESSEE SUPPORTED THE CLAIM ON THE BASIS OF THE RESOLUTION PASSED ON 15.03.2001 FOR PROVIDING THE EDUCATION EXPENSES, SO THAT SHRIPRERA KGOEL SERVE THE COMPANY FOR A PERIOD OF 5 YEARS AND IN CASE OF HIS REMOVAL INDEMNIFYING THE COMPANY, THEREFORE, IT WAS SUBMITTED THAT THE EXPENSES INCUR RED WERE FOR THE PURPOSE OF BUSINESS. BUT AO DID NOT ACCEPT THE SAME AND BEFORE THE LD. CIT(A) THE ASSESSEE MADE DETAILED SUBMISSIONS THAT WERE EXTRAC TED BY THE LD. CIT(A) IN PARA 8.2.0. AFTER CONSIDERING THE SUBMISSIONS, THE LD. CIT(A) AGREED WITH THE OPINION OF THE AO THAT THE AMOUNT CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. HE ALSO RELIED ON THE ORDER PASSED IN THE CASE OF S HRIPRERAKGOEL IN HIS ASSESSMENT, WHERE THIS EXPENDITURE WAS TREATED AS I NCOME UNDER 2(24)(IV) OF THE I. T. ACT. EXTRACTING THOSE FINDINGS, THE LD. C IT(A) CONCLUDED THAT THE EXPENSES ON FOREIGN EDUCATION OF SHRIPRERAKGOEL WAS A PERSONAL EXPENDITURE OF DIRECTOR AND THE EXPENDITURE INCURRED BY THE ASS ESSEE COMPANY WAS NOT FOR THE PURPOSE OF BUSINESS. HE ALSO RELIED ON VARIOUS CASE LAW WHICH WERE DISCUSSED IN THE ORDER. BEFORE US, THE LD. COUNSEL REITERATED THE SAME ARGUMENTS AS MADE BEFORE THE LD. CIT(A), WHEREAS TH E LD. DR SUPPORTED THE ORDERS OF THE AO AND THE LD. CIT(A). 36. AFTER EXAMINING THE RECORD AND THE RESOLUTION AND THE SUBMISSIONS MADE BY RIVAL PARTIES, WE ARE OF THE OPINION THAT THE FI NDINGS OF THE AUTHORITIES ARE CORRECT, BOTH ON FACTS AS WELL AS ON LAW. AS RIGHTL Y CONSIDERED SHRIPRERAKGOEL IS SON OF THE DIRECTOR AND AT THAT TIME HE WAS NOT A DIRECTOR OR OTHERWISE ASSOCIATED WITH THE ASSESSEE COMPANY AS AN EMPLOYEE OF THE ASSESSEE 25 COMPANY.NO OTHER PERSON WAS SELECTED FOR THE SPECIF IC COURSE AND SINCE THIS BENEFIT WAS EXTENDED TO THE SAID SHRIPRERAKGOEL, BE ING SON OF THE DIRECTOR, THE EXPENDITURE INCURRED CANNOT BE ALLOWED AS BUSINESS EXPENDITURE U/S. 37(1) OF THE ACT, THEREFORE, THE DISALLOWANCES MADE BY THE A O STANDS CONFIRMED.SINCE THE LD. CIT(A) ELABORATELY CONSIDERED THE FACTS AS WELL AS THE CASE LAW, WE DO NOT INTEND TO REPEAT THE SAME IN THIS ORDER.ASSESSE ES GROUNDS IN RESPECTIVE ASSESSMENT YEARS ON THIS ISSUE STANDS REJECTED. ISSUE NO 5: BUSINESS PROMOTION EXPENDITURE 37. THE AMOUNT OF RS.5,99,985/- WAS DISALLOWED IN T HE A.Y. 2005-06 WHICH WAS STATED TO HAVE BEEN SPENT FOR THE PURPOSE OF RE CEPTION AFTER THE MARRIAGE OF SHRIPRERAKGOEL.THE BASIS FOR THE DISALLOWANCES W AS THAT THERE WAS A SEIZED DOCUMENT IN ANNEXURE A1 PAGE 4 OF THE PANCHANAMA DA TED 10.08.2005 DRAWN AT THE RESIDENCE OF SHRIJEETENDRA S. MANJREKAR IN H ANDWRITTEN NOTING OF RS.5 LAKH AS EXPENDITURE WHICH WAS INCURRED AS PAYMENT MADE TO HOTEL GRAND HYATT. THE ASSESSEE COMPANY CLAIMED THE ABOVE PAYME NT UNDER THE HEAD SALES PROMOTION EXPENSES FOR THE A.Y. 2005-06. TH E ASSESSEE COMPANY WAS ASKED TO SHOW CAUSE WHY THE SAID CLAIM CAN NOT BE D ISALLOWED AS PERSONAL EXPENSES. THE ASSESSEE SUBMITTED THAT THERE WERE OT HER EXPENDITURES INCURRED ON BEHALF OF THE MARRIAGE AND FILED EVIDENCES OF EX PENDITURE INCURRED BY THE DIRECTOR AND SHRI P.GOEL, BROTHER AND OTHER DETAILS SO AS TO SUBMIT THAT THIS EXPENDITURE WAS ON BUSINESS PROMOTION MEETING AND N OT BECAUSE OF MARRIAGE RECEPTION. THE AO DID NOT ACCEPT ON THE FACT THAT T HE ADVANCES WERE PAID INITIALLY FROM THE DIRECTORS ACCOUNT AND THE EXPEND ITURE WAS REIMBURSED AS BUSINESS EXPENDITURE AND SAID AMOUNT WAS DISALLOWED AS PERSONAL EXPENDITURE OF SHRIPRERAKGOEL BUT NOT THE BUSINESS EXPENDITURE OF THE ASSESSEE COMPANY. THE ASSESSEE MADE DETAILED SUBMIS SIONS BEFORE THE LD. CIT(A) WHICH WAS EXTRACTED IN PARA 9.2.0.IN THIS AL SO THE LD. CIT(A) FOLLOWING HIS FINDINGS GIVEN IN THE CASE OF SHRIPRERAKGOELIN HIS INDIVIDUAL CASE AFFIRMED THE SAME,INCONFORMITY WITH THE SAID CONCLUSION THAT THE EXPENDITURE ON THE MARRIAGE RECEPTION OF SHRIPRERAKGOEL WAS PERSONAL IN NATURE. BEFORE US, THE LD. COUNSEL REFERRED TO THE DETAILS OF EXPENDITURE INCURRED BY THE FATHER OF THE 26 SHRIPRERAKGOEL AND SUBMITTED THAT THIS WAS BUSINES S MEETING AND A SEPARATE EXPENDITURE WAS INCURRED FOR RECEPTION. THIS EXPEND ITURE IS TO BE ALLOWED AS EXPENDITURE OF THE COMPANY. THE LD. DR HOWEVER, REI TERATED THE FACTS AS STATED BY THE AO AND THE LD. CIT(A). 38. WE HAVE CONSIDERED THE ISSUE. WE AGREE WITH THE FINDINGS OF THE AO AND THE LD. CIT(A) THAT THIS CLAIM CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. FIRST OF ALL THERE IS A SEIZED PAPER AT3 RD PARTY PREMISES WHICH INDICATED THAT THE EXPENDITURE WAS FOR THE PURPOSE OF MARRIAGE RECEPTI ON OF SHRIPRERAKGOEL. THE ASSESSEE HAS NOT PLACED ON RECORD ANY OTHER INDEPEN DENT EVIDENCE THAT THERE WAS A SEPARATE RECEPTION CALLED FOR BY THE FATHER O F SHRIPRERAKGOEL AT A SEPARATE PREMISES AND THIS WAS A SIMPLE BUSINESS ME ETING, LIKE COPIES OF INVITATION OR LETTERS SENT FOR THE MEETING. EXCEPT MAKING SUBMISSIONS, NO EVIDENCES WERE PLACED TO COUNTER THE STATEMENT OF S HRIJEETENDRA S. MANJREKARBASED ON THE SEIZED MATERIAL. AS SEEN FROM THE RECORD ALSO THERE WAS NO OTHER BUSINESS MEETING WITH THE DEALERS IN ANY O THER YEARS EXCEPT ON THE OCCASION OF MARRIAGE OF SHRIPRERAKGOEL, WHICH WAS C LAIMED IN THE COMPANYS ACCOUNTS. CONSIDERING THE FACTS ON RECORD, WE ARE O F THE OPINION THAT THE ORDER OF THE LD. CIT(A) IS TO BE UPHELD. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS REJECTED. ISSUE NO 6: OPERATION AND MAINTENANCE EXPENSES 39. THE ASSESSING OFFICER FOUND AT THE TIME OF ASSE SSMENT PROCEEDINGS THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.87,12,863/ - AS ON-SITE MAINTENANCE EXPENSES FROMTHE INCOME DECLARED FOR THE ASSTT. YEA R 2005-06. HE HAD ALSO FOUND THAT THESE EXPENSES WERE NOT DEBITED IN THE B OOKS OF ACCOUNTS OF THE ASSESSEE. IT WAS SUBMITTED BEFORE HIM THAT THE ASSE SSEE HAD TO MAINTAIN VARIOUS SITES DURING THE TESTING AS WELL AS GUARANT EE PERIOD, DURING THE COURSE OF WHICH SOME EXPENSES WERE INCURRED BY THE OPERATI ONAL AND MAINTENANCE MANAGERS AS AND WHEN NECESSARY ON SITES, WHICH WERE PAID IN CASH. THEREFORE, THEY WERE GENUINE EXPENSES AND IT SHOULD BE ALLOWED . THEY HAVE ALSO FILED AN AFFIDAVIT OF MR. R. K. AHLUWALIA, GENERAL MANAGER-( DESIGN AND INDUSTRIAL SERVICING) OF THE ASSESSEE COMPANY, VIDE ARS LETTE R DATED 14.12.2007 WHERE IN 27 SHRIAHLUWALIA HAD AFFIRMED THAT THE SAME EXPENSES W ERE INCURRED ON PROCUREMENT OF SERVICES AND MATERIALS LOCALLY AS AN D WHEN DESIRED IN SMALL QUANTITY AS TRANSPORTING THE SAME FROM THE FACTORY OF THE SAID COMPANY WOULD HAVE DELAYED THE INSTALLATION AND COMMISSIONING AND EFFICIENT OPERATION OF THE PLANTS. BUT THE ASSESSING OFFICER DID NOT ACCEPT TH E CONTENTIONS OF THE APPELLANT. HE HAD HELD THAT ONCE THE BOOKS OF ACCOU NTS WERE AUDITED UNDER THE COMPANIES ACT AS WELL AS UNDER THE INCOME TAX A CT U/S.44 AB OF THE ACT, THE EXPENDITURE WHICH WERE SAID TO HAVE BEEN INCURR ED SHOULD HAVE BEEN TAKEN INTO ACCOUNT WHILE FINALIZING THE ACCOUNTS WH ICH THE ASSESSEE HAD NOT DONE SO. AND AS SUCH, THESE EXPENSES WENT OUTSIDE T HE PURVIEW OF THE AUDIT OR THE STATUTORY AUDIT UNDER THE COMPANIES ACT. THEREF ORE, HE DID NOT ALLOW THIS AMOUNT IN COMPUTING THE INCOME OF THE ASSESSEE. 40. FURTHER, CONSIDERING THE ASSESSEES SUBMISSIONS , THE LD. CIT(A) DISALLOWED THE SAME BY HOLDING AS UNDER :- 10.3.0 I HAVE CONSIDERED THE SUBMISSIONS OF THE AP PELLANT. AFTER GOING THROUGHTHE SUBMISSIONS OF THE APPELLANT AND THE FACTS OF THE ISSUE, IT IS SEEN THAT THESE EXPENSES ARE NOT I N THE NATURE TO BE ALLOWED FOR THE FOLLOWING REASONS:- (I) THESE EXPENSES WERE NOT DEBITED TO P & L ACCOUNT. (II) IT WAS CLAIMED BY THE ASSESSEE ONLY IN THE COMPUTAT ION OF INCOME STATEMENT FILED ALONG WITH THE ORIGINAL RETU RN OF INCOME. (III) NO INDEPENDENT SIMULTANEOUS SUPPORTING DOCUMENTS WE RE PRODUCED EITHER AT THE TIME OF ASSESSMENT PROCEEDIN GS OR AT THE TIME OF APPELLATE HEARING WERE PRODUCED BEFORE ME. (IV) THE ASSESSEE FILED INTERNAL VOUCHERS AT PAGE 675 TO 705 AT PAPER BOOK VOL. III. THEY WERE ONLY DETAILS, THEY W ERE NOT SUBJECTED TO AUDIT UNDER COMPANIES ACT AS WELL AS U NDER THE INCOME TAX ACT. (V) ONE IMPORTANT FACT HERE IS THAT THESE DETAILS WERE SUBMITTED BY MR. R. K. AHLUWALIA, GENERAL MANAGER ONLY AFTER THE DATE OF SEARCH I.E. AFTER 10/8/2005 AND NOT BEFORE THAT. THESE WERE NOT FOUND AT THE TIME OF SEARCH ALSO. THEREFOR E, NO CREDENCE CAN BE ATTACHED TO THESE BILLS. (VI) NORMALLY WHEN AUDIT IS UNDERTAKEN, VOUCHERS ETC. WH ICH COULD NOT BE OBTAINED DURING THE F.Y., THEY HAVE TO BE BROUGHT IN AT THE TIME OF FINALIZING THE ACCOUNTS AND HAVE TO BE INCORPORATED IN THE FINAL ACCOUNTS UNDER THE COMPAN IES ACT. 28 SOMETIMES, EVENTS OCCURRING BEYOND THE BALANCE-SHEE T PERIOD, IF THEY HAVE GOT ANY BEARING ON THE PERFORM ANCE OF THE COMPANY FOR THE RELEVANT F.Y., MAY HAVE TO BE BROUG HT IN AND EFFECT HAS TO BE GIVEN IN THE FINAL ACCOUNTS WITH A CLEAR CUT DISCLOSURE OF THE SAME INTHE NOTES ON THE ACCOUNTS. BUT THIS HAS NOT BEEN DONE SO. THE FINANCIAL YEAR FOR THIS A SSTT. YEAR ENDED ON 31.03.2005. IN THIS ELECTRONIC AGE OF INFO RMATION HIGH WAY WITH SPEEDIER COMMUNICATION CHANNELS THESE VOUCHERS, IF THEY WERE GENUINE, COULD HAVE BEEN BRO UGHT ON RECORD WITHIN FEW WEEKS TIMES. BUT THE ASSESSEE HAS NOT DONE SO. THIS IS HIGHLY UNUSUAL AND UNTHINKABLE IN RESPECT OF A CORPORATE ENTITY LIKE THE APPELLANT. THESE ARE ON LY UNSUBSTANTIATED FRESH CLAIMS WITHOUT ANY IOTA OF EV IDENCE TO SUBSTANTIATE THEM. (VII) AND THE MERE PASSIVE ASSERTION OF MR. R. K. AHLUWAL IA, GM IN THE AFFIDAVIT (PAGE 672-673 OF PAPER BOOK- VOL.III) CANNOT BE ACCEPTED WITHOUT ANY CONTEMPORANEOUS CLINCHING DOCUMENTARY EVIDENCES. HENCE, IN VIEW OF THE ABOVE, I DO CONCUR WITH THE A SSESSING OFFICER THAT THESE EXPENSES CLAIMED IN THE STATEMENT OF INC OME CANNOT BE ALLOWED AS A DEDUCTION FOR THE ASSTT. YEAR 2005-06 AS IT REMAINS UNSUBSTANTIATED AND UNESTABLISHED. THEREFORE, I CON FIRM THE DISALLOWANCE OF RS.87,12,863/-. THE ASSESSEE FAILS ON THIS GROUND OF APPEAL. 41. WE HAVE CONSIDERED THE ARGUMENTS OF RIVAL PART IES AND EXAMINED THE RECORD. WE AGREE WITH THE FINDINGS OF REVENUE AUTHO RITIES. THERE IS NO EVIDENCE OF SUCH EXPENDITURE EITHER DURING SEARCH OR IMMEDIA TELY THEREAFTER. THE ASSESSEE ALSO HAS NOT RECORDED SUCH EXPENDITURE IN THE BOOKS OF ACCOUNTS INDICATING THAT THE SAME WAS NOT INCURRED AT THE RE LEVANT POINT OF TIME. THE CASH FLOW ON THE BASIS OF WHICH SUCH EXPENDITURE WA S INCURRED WAS ALSO NOT PLACED ON RECORD. IF THE EXPENDITURE WAS GENUINE AN D SPENT FOR THE PURPOSES OF BUSINESS, NO ONE PREVENTED THE ASSESSEE TO RECORD T HE SAME IN THE BOOKS OF ACCOUNTS. THE CLAIM WAS MADE FOR THE FIRST TIME DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE BASIS OF AN AFFIDAVIT OF A MANAGER. THE DETAILS OF SO CALLED EXPENDITURE ALSO DOES NOT CONTAIN ANY DATE OF EXPENDITURE AND THE NATURE OF EXPENDITURE AND BY WHOM IT WAS SPENT. THE RELEVANT CASH FLOW FROM THE BOOKS WAS ALSO NOT EXPLAINED. THE ASSESSEE COUL D HAVE MADE ENTRIES IN THE BOOKS OF ACCOUNT IN FINANCIAL YEAR 2005-06 AFTER TH E SEARCH ON 10-08-05 IF THE EXPENDITURE WAS INCURRED FOR THE PURPOSES OF BUSINE SS. IT CHOOSES TO CLAIM FOR 29 AY 2005-06, THE RATIONALE OF WHICH WAS NOT EXPLAINE D. THE JUSTIFICATION FOR THE SAID EXPENDITURE FIGURES ONLY IN EXPLAINING THE DIS CLOSURE MADE BY WAY OF BOGUS PURCHASES AND ITS UTILIZATION TALLYING WITH I NVESTMENTS, EXPENDITURES AND CASH AVAILABLE. WE ARE OF THE OPINION THAT THER E IS NO NEED TO ALLOW THE EXPENDITURE WHICH WAS UNSUBSTANTIATED AND UNESTABLI SHED. SIMILAR CLAIMS OF EXPENDITURE ON O & M OF SITES WERE ALSO NOT THERE I N ANY OTHER YEAR. THEREFORE, WE CONCUR WITH THE FINDINGS OF THE AUTHORITIES WHO RIGHTLY REJECTED THE CLAIM. THE GROUND IS REJECTED. ITA NO. 2935/MUM/2008(A.Y. 2005-06) M/S. PRERAKGOEL 42. THE ISSUE IN ITA NO. 2935/MUM/2008 IS WITH REF ERENCE TO ADDITION OF RS.6,00,000/- AS DEEMED INCOME UNDER SECTION 2(24)( IV) IN RESPECT OF EXPENSES INCURRED BY ROCHEM SEPARATION SYSTEMS (INDIA) PVT. LTD. ON A BUSINESS PARTY THROWN BY THE SAID COMPANY AFTER THE MARRIAGE OF TH E ASSESSEE IN A.Y. 2005- 06. THIS APPEAL WAS ORIGINALLY DECIDED AGAINST ASSE SSEE VIDE ORDER DT.10.08.09. THE ASSESSEE SUBSEQUENTLY FILED MISCELLANEOUS APPLI CATION AGAINST THE COMMON ORDER PASSED FOR OTHER YEARS AS WELL ON THE GROUND THAT THE ASSESSEE AT THE TIME OF HEARING HAD RELIED ON THE DECISION O F THE TRIBUNAL IN THE CASE OF MRS BAKTAVAR V DUBASH REPORTED IN 2009 TIOL 288-ITA T-MUM WHICH HAD NOT BEEN CONSIDERED. THE SAID CONTENTION WAS ACCEPTED A ND THE ORDER WAS RECALLED. THE PRESENT PROCEEDING HAS ARISEN CONSEQUENT TO THE SAID ORDER OF RECALL DT. 30-07-2010. TRIBUNAL IN ITA 2932 AND 2936/M/2008 DT 12.11.2010 IN AY 2002-03 AND 2003-04 HAS CONSIDERED THE ISSUE OF ADD ITION OF EDUCATION EXPENSES AS INCOME AND ALSO THE OBJECTION RAISED ON THE DECISION QUOTED AND AGAIN UPHELD THE ADDITIONS SO MADE DISMISSING THE A PPEALS. 43. BRIEFLY STATED THE FACTS ARE THAT BASED ON ANN EXURE A PAGE 4 DRAWN AT THE RESIDENCE OF SHRIJEETENDRA S. MANJREKAR THE EXPENDI TURE INCURRED IN HOTEL GRAND HYATT ON BUSINESS PARTY WAS CONSIDERED AS EXP ENSE INCURRED ON MARRIAGE RECEPTION OF SHRIPRERAKGOEL AND INVOKING P ROVISIONS OF SECTION 30 2(24)(IV) THE AMOUNT OF RS.6,00,000/- WAS TREATED A INCOME OF THE ASSESSEE FOR A.Y. 05-06.THE CIT(A), AFTER ELABORATELY DISCUSSING THE LEGAL ISSUES WITH REFERENCE TO INVOKING THE PROVISIONS OF SECTION 2(2 4)(IV) AS WELL AS THE FACTS OF THE CASE, UPHELD THE ORDER OF THE A.O. HENCE ASSESS EESAPPEAL ON THE ISSUE. 44. THE LEARNEDCOUNSEL SUBMITTED THAT NO OPPORTUN ITY WAS GIVEN TO EXPLAIN AND THE ASSESSEE HAS SPENT THE AMOUNTS ON HIS OWN F OR A MARRIAGE RECEPTION GIVEN AT ANOTHER HOTEL ON 15.01.2005 AND THE FUNCTI ON WHICH WAS HELD WAS NOT RELATED TO THE MARRIAGE BUT RELATED TO THE COMPANY S BUSINESS OF HOLDING CONFERENCE WITH THE DEALERS. 45. THE LEARNED D.R. IN REPLY SUBMITTED THAT PAGE 9 OF THE PAPER BOOK INDICATES THE BREAK UP OF THE EXPENDITURE AND REFER RED TO THE PROVISIONS OF SECTION 2(24)(IV) WHERE THE AMOUNTS SPENT ON THE RE LATIVE OF THE DIRECTOR WAS ALSO CONSIDERED AS DEEMED INCOME AND ACCORDINGLY TH E PROVISIONS ARE INVOKED CORRECTLY BY THE A.O. HEFURTHER REFERRED TO THE ORD ER OF THE LEARNED CIT(A) WHEREIN THE CIT(A) HAS RELIED ON THE TWO RULING OF THE COURTS IN SUSTAINING THE ADDITIONIE.IN THE CASE OF SUDHABURMAN VS. CIT 209 C TR (DEL.) 278 AND CIT VS. SMT. SUREKHA P. KOTHARI 267 ITR 406. HE RELIED ON COORDINATE BENCH DECISION IN OTHER YEARS TO SUPPORT THE CONTENTIONS. 46. WE HAVE PERUSED THE ORDERS OF THE AUTHORITI ES AND CAREFULLY CONSIDERED THE ARGUMENTS OF THE LEARNED COUNSEL AND LEARNED D. R. AS MENTIONED BY THE A.O. AND CONFIRMED BY THE LEARNED CIT(A) THE ADDITI ON HAS BEEN MADE ON THE BASIS OF THE SEIZED MATERIAL WHICH CAME TO THE KNOW LEDGE OF THE DEPARTMENT IN THE PROCEEDINGS UNDER SECTION 132. THIS WAS ALSO BA SED ON THE FACT THAT DURING THE COURSE OF SEARCH IN THE PREMISES OF SHRI JEETENDRA S. MANJREKAR, VIDE A-1 PAGE 4 OF PANCHANAMA DATED 10.08.2005, EVI DENCES OF PAYMENT OF RS.6,00,000/- TO HOTEL GRAND HYATT WAS FOUND AND IT WAS EXPLAINED THAT THE MARRIAGE RECEPTION OF SHRIPRERAKGOEL, DIRECTOR OF R OCHEM SEPARATION SYSTEMS (I) PVT. LTD. WAS HELD IN THIS HOTEL. IT WAS SUBMIT TED THAT SHRIPRAYASGOEL HAS MADE THE ADVANCE FROM HIS ACCOUNT OF RS.1,00,000/- AND THE BALANCE AMOUNT WAS PAID BY THE COMPANY DIRECTLY TO THE SAID HOTEL WHILE REIMBURSING THE 31 ADVANCE OF RS.1,00,000/-. THE SAID AMOUNT WAS DISAL LOWED IN THE HANDS OF THE SAID COMPANY AS A NON-ALLOWABLE EXPENDITURE IN THE BUSINESS AND THE SAME WAS ALSO TREATED AS INCOME IN THE HANDS OF THE ASSE SSEE UNDER THE PROVISIONS OF SECTION 2(24)(IV). IT WAS THE CONTENTION OF THE ASSESSEE THAT HE WAS NEVER GIVEN AN OPPORTUNITY TO EXPLAIN AND THE DISALLOWANC E WAS MADE IN THE HANDS OF THE SAID COMPANY, WHICH IN TURN WAS ADOPTED IN A SSESSEES HANDS. AS SEEN FROM THE ORDER OF THE A.O. THERE WERE NOTICES UNDER SECTION 143(2) AND 142(1) AND THE ISSUE WAS ALSO DISCUSSED WITH AR AS MENTION ED BY THE A.O. IN PARA 4 OF THE ORDER. THE SAME CONTENTIONS WERE ALSO RAISED BEFORE THE LEARNED CIT(A). SINCE THERE IS NO EVIDENCE TO THE CONTRARY THAT THE A.O. HAS NOT GIVEN OPPORTUNITY BUT THE ORDER DO INDICATE THAT THE ASSE SSEE WAS GIVEN OPPORTUNITY TO EXPLAIN VIDE NOTICES UNDER SECTION 143(2) AND 14 2(1)AS STATED IN PARA 4 AND THE ONLY ADDITION MADE IN THE ORDER WAS THE TREATME NT GIVEN TO MARRIAGE EXPENSES, WE ARE OF THE VIEW THAT THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO EXPLAIN AND HENCE THE CONTENTION THAT HE WAS NOT GI VEN OPPORTUNITY DURING THE ASSESSMENT PROCEEDINGS CANNOT BE ACCEPTED. THERE WA S A COPY OF EXPLANATION FILED IN THE PAPER BOOK, WHICH WAS REFERRED TO BY T HE LEARNED D.R., WHICH THE LEARNED COUNSEL SUBMITS THAT IT WAS FURNISHED IN TH E COURSE OF COMPANYS ASSESSMENT. HOWEVER, THE FACTS INDICATE THAT THE AS SESSEE WAS GIVEN AN OPPORTUNITY AND THE ISSUE WAS ACCORDINGLY MADE AS A N ADDITION IN THE ASSESSMENT. THIS CONTENTION OF THE LEARNED COUNSEL IS, THEREFORE, REJECTED.COMING TO THE ISSUE OF MARRIAGE EXPENSES, THERE IS NO DOUBT THAT THE PROVISIONS OF SECTION 2(24)(IV) WILL APPLY. THIS WA S DISCUSSED BY THE LEARNED CIT(A) ELABORATELY WHICH WAS ALSO EXTRACTED IN THE EARLIER PARAGRAPHS. THE ITAT IN THE EARLIER ORDER WAS ALSO OF THE OPINION T HAT THE AMOUNT WAS TO BE TREATED AS INCOME AND INVOKING PROVISIONS OF SECTIO N 2(24)(IV) WAS UPHELD. 47. THE LEARNED COUNSEL OBJECTION WAS THAT THE RE WAS NO BENEFIT OR ADVANTAGE TO THE ASSESSEE AS THE SAID AMOUNT WAS EX PENDITURE BY THE COMPANY. THE QUESTION IS WHETHER THE EXPENDITURE IN CURRED BY THE COMPANY IS AN OBLIGATION MADE BY THE COMPANY ON BEHALF OF THE ASSESSEE. EVEN THOUGH THE ASSESSEE CONTESTED THAT THERE WAS A SEPARATE PA RTY ON 15.01.2005, WHICH 32 WAS HELD IN ANOTHER FIVE STAR HOTEL FOR WHICH THERE WERE EVIDENCES THAT THE AMOUNTS WERE PAID BY THE ASSESSEE, IT CANNOT BE OUT OF PLACE TO STATE THAT ANOTHER RECEPTION WAS ALSO ORGANISED IN HOTEL GRAND HYATT FOR WHICH THE ARRANGEMENTS HAVE BEEN MADE SIMULTANEOUSLY. THE BOA RD RESOLUTION DATED 03-12-2004 AUTHORISING THE ASSESSEE FOR A PARTY IN HOTEL GRAND HYATT, WHICH WAS PLACED ON RECORD, ONLY INDICATE THAT THE MANAGE MENT CONTROLLED BY THE FAMILY MEMBERS OF THE ASSESSEE HAS CONSIDERED THE R ECEPTION ON THAT DATE WHEREAS THE MARRIAGE WAS SUPPOSED TO BE HELD ON 15. 01.2005 AND ANOTHER RECEPTION WAS ARRANGED IN ITC GRAND MARATHA SHRETON . THE LEARNED COUNSEL SUBMITTED THAT THERE CAN BE MORE THAN ONE RECEPTION , HOWEVER, THIS WAS A BUSINESS PARTY WHERE ALL THE DEALERS WERE INVITED F OR HEALTHY BUSINESS RELATIONS. THIS CANNOT BE ACCEPTED AS A PROPER EXPL ANATION. THE OCCASION IS THE DINNER HOSTED ON THE MARRIAGE OF SHRIPRARAKGOEL BY GIVING COLOUR OF BUSINESS MEET. THE STATEMENT GIVEN BY THE COMPANY PERSONNEL DURING THE COURSE OF SEARCH DO INDICATE THAT THIS RECEPTION WAS ALSO HEL D TOWARDS MARRIAGE RECEPTION OF THE ASSESSEE AND ACCORDINGLY WE ARE OF THE OPINION THAT THE OBLIGATION ON THE PART OF THE ASSESSEE WAS MADE BY THE COMPANY WHICH IS IN THE NATURE OF DEEMED INCOME AS PER THE PROVISIONS O F SECTION 2(24)(IV) OF THE I.T. ACT. IT IS ALSO TO BE NOTED THAT INITIAL BOOKI NG WAS DONE BY SHRIPRAYASGOEL AND THIS AMOUNT WAS REIMBURSED ON 8 TH DECEMBER 2004 TO SHRIPRAYASGOEL ACCORDING TO THE JOURNAL COPY FILED. THIS ALSO INDI CATES THAT THE INITIAL BOOKING WAS DONE AT A PERSONAL LEVEL TOWARDS MARRIAGE RECEP TION, WHICH WAS LATER CONVERTED INTO A COMPANYS OBLIGATION BY PASSING A RESOLUTION. CONSIDERING THIS FACT WE AGREE WITH THE FINDINGS OF THE LEARNED CIT(A). THE LEARNED CIT(A) DREW SUPPORT FROM THE ORDERS OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SMT. I SUREKHA P. KOTHARI 267 ITR 406 FOR T HE PROPOSITION THAT WHERE THERE IS NO OFFICIAL CONNECTION WITH THE COMPANY GR ATUITOUS PAYMENT BY THE COMPANY, THE EXPENDITURE CAN BE TREATED AS INCOME U NDER SECTION 2(24)(IV). LIKEWISE HE ALSO RELIED ON THE HON'BLE DELHI HIGH C OURT DECISION IN THE CASE OF SUDHABURMAN VS. CIT 209 CTR (DEL) 278. 33 48. THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDERS DT 12-11-2010(SUPRA) HAS CONSIDERED THE OBJECTION THAT COORDINATE BENCH DECI SION IN THE CASE OF MRSBAKTAVAR V DUBASH REPORTED IN 2009 TIOL 288-ITAT -MUM WAS NOT CONSIDERED AND HELD AS IN VIEW OF THESE JUDGEMENTS WHICH ARE DIRECTLY ON T HE ISSUE, THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MRS BAKTAVARPDUBASH (SUPRA) CAN NOT BE FOLLOWED . TRIBUNAL FURTHER HELD THAT THE EXPENDITURE INCURRED BY THE COMPANY FOLLOWING THE JUDGEMENTS OF HIGH COURTS (SUPRA) HAS TO BE ASSESSED AS INCOME IN THE CASE OF ASSESSEE UNDER SECTION 2(24)(IV) . THE CASE OF ASSESSEE IS IDENTICAL. IN THIS CASE T HE COMPANY IN WHICH ASSESSEE AND HIS FAMILY WERE DIRECTORS BORNE THE EX PENDITURE OF ASSESSEE ON RECEPTION WHICH IS OF PERSONAL NATURE. HAD THE EXPE NDITURE NOT BEEN MET BY THE COMPANY, THE AMOUNT COULD HAVE BEEN PAID BY THE ASSESSEE OR HIS OTHER FAMILY MEMBERS. CONSEQUENTLY, SINCE THE FACTS OF TH E CASE FALL WITHIN THE AFORESAID JUDICIAL PRINCIPLES, WE UPHOLD THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, THIS APPEAL IS DISMISSED. 49. IN THE RESULT, APPEALS OF REVENUE AND ASSESSE E COMPANY ARE DECIDED AS UNDER: ASST YEAR REVENUE ASSESSEE 2000-01 DISMISSED ---- 2001-02 DISMISSED ALLOWED 2002-03 DISMISSED PARTLY ALLOWED 2003-04 DISMISSED PARTLY ALLOWED 2004-05 DISMISSED PARTLY ALLOWED 2005-06 PARTLY AL LOWED PARTLY ALLOWED 2006-07 PARTLY ALL OWED PARTLY ALLOWED 50. THE APPEALOF THE ASSESSEE SHRIPRERAKGOEL IN ITA 2935/M/08 IS DISMISSED. ORDER PRONOUNCED ON THIS 16 TH DAY OF MAY, 2011. SD/- (R.S. PADVEKAR) SD/- (B. RAMAKOTAIAH) 34 JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED :16 TH MAY 2011. COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, D - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI