ACIT, New Delhi V. M/s. Goel Jewellers Overseas Corporation, New Delhi

ITA 6757/DEL/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4421 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 12-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHEMA NEB
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Business expenditure; Income from undisclosed sources; Period of limitation
• Section: 40A(3); 143(3); 131; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMB ER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6260/DEL/2014 ASSESSMENT YEAR: 2011-12 GOEL JEWELLERS OVERSEAS CORP. C/O. M/S. RRA TAXINDIA, D-28, SOUTH EXTENSION, PART-I NEW DELHI PAN : AAGFG6440E VS. JCI T RANGE-33 NEW DELHI ITA NO.6757/DEL/2014 ASSESSMENT YEAR: ACIT CIRCLE-51(1) NEW DELHI VS. GOEL JEWELLERS OVERSEAS CORPORATION 2213, GURUDWARA ROAD, KAROL BAGH NEW DELHI PAN : AAGFG6440E APPELLANT RESPONDENT REVENUE BY : MS. ASHEMA NEB, SR. DR ASSESSEE BY : SH. ASHWANI TANE JA, ADV. DATE OF HEARING : 23.07. 2018 DATE OF PRONOUNCEMENT : 22.10.2018 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : ITA NO. 6260/DEL/2014 IS THE ASSESSEES APPEAL PREF ERRED AGAINST ORDER DATED 23.09.2014 PASSED BY THE LD.CIT (APPEALS)- ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 2 XXVI, NEW DELHI FOR ASSESSMENT YEAR 2011-12. ITA NO . 6757/DEL/2014 IS THE DEPARTMENTS CROSS APPEAL FOR THE SAME YEAR. 2.0 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A FIRM ENGAGED IN BUSINESS OF MANUFACTURING, EXPORT AND RE TAIL SALE OF GOLD JEWELLERY (STUDDED & PLAIN) AND SILVER ARTICLE S. THE RETURN OF INCOME WAS FILED DECLARING AN INCOME OF RS. 28,84,0 76/-. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 196 1 (HEREINAFTER CALLED AS THE ACT) AT AN INCOME OF R S. 9,87,13,512/- AFTER MAKING THE FOLLOWING ADDITIONS/ DISALLOWANCES - I. ADDITION ON ACCOUNT OF SUPPRESSION AND UNDER VA LUATION OF STOCK RS. 9,00,01,050/- II. ADDITION ON ACCOUNT OF UNACCOUNTED SALES OF DIA MOND JEWELLERY RS. 43,938/- III. DISALLOWANCE OF SALARY OF PARTNERS RS. 6,00,000/- IV. DISALLOWANCE OUT OF TRAVELLING EXPENSES RS. 2,41,242/- V. DISALLOWANCE OF BUSINESS PROMOTION AND SALES PR OMOTION EXPENSES RS. 3,27,356/- VI. SUNDRY CREDITORS ADDED BACK RS. 4 6,15,850/- 2.1 THE ABOVE MENTIONED ADDITIONS WERE MADE BY THE AO IN LIGHT OF THE FOLLOWING CIRCUMSTANCES: 2.1.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON EXAMINATION OF STOCK STATEMENT, THE AO NOTICED THAT THE ASSESSEE HAD DECLARED A CLOSING STOCK OF 50676.819 GMS GOLD VALUED AT THE RATE OF RS. 1700.40 PER GM AS ON 31.03.2011. HOWEVE R, THE AO OBSERVED THAT THE ASSESSEE HAD NOT MENTIONED THE EX ACT ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 3 QUANTITATIVE DETAILS OF 24 CARAT AND 22 CARAT GOLD JEWELLERY, THE SPECIFICATIONS AND THE CORRECT RATES OF VALUATION. THE AO ALSO OBSERVED THAT THE ASSESSEE HAD APPLIED THE SAME RAT E OF VALUATION FOR 24 CARAT GOLD AS WELL AS FOR 22 CARAT GOLD. THE AO ALSO NOTED THAT ON EXAMINATION OF ASSESSEES BOOKS OF ACCOUNTS IT WAS REVEALED THAT THE ASSESSEE DID NOT MAINTAIN ANY ACT UAL RECORD OF STOCK AND FURTHER THERE WAS NO GOODS INWARDS REGIST ER OR GOODS OUTWARD REGISTER. THEREAFTER, THE AO ISSUED SUMMONS U/S 131 OF THE ACT TO THE STATE BANK OF INDIA, OVERSEAS BRANCH , NEW DELHI REQUIRING THEM TO FURNISH STATEMENT OF STOCK AS SUB MITTED BY THE ASSESSEE TO THEM ON 31.03.2011 AS WELL AS REQUIRED THE ASSESSEE TO SUBMIT A CERTIFIED COPY OF STOCK STATEMENT ON 31 .03.2011. ON COMPARING THE STOCK REPORTED AS PER THE TAX AUDIT R EPORT AND THE STATEMENT OF STOCK AS SUBMITTED BY THE ASSESSEE TO THE SBI, OVERSEAS BRANCH, NEW DELHI, THE AO CONCLUDED THAT T HERE WERE GLARING DISCREPANCIES BETWEEN THE STOCK AS PER THE AUDIT REPORT AND THE STOCK STATEMENT AS SUBMITTED TO THE BANK. T HE DISCREPANCY WAS TABULATED BY THE ASSESSING OFFICER IN THE FORM OF FOLLOWING TABLES:- ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 4 A. ITEM: GOLD PARTICULARS STOCK AS ON 31.03.2011 SUBMITTED TO SBI OVERSEAS BANK STOCK AS ON 31.03.2011 AS PER AUDIT REPORT QUANTITY RATE VALUE QUANTITY RATE VALUE 24CARATGOLD 3132 GMS 1679/G 5,25,96,719/- 50676.82 1700/GM 86172890/- 22 CARAT GOLD JEWELLERY (PURE) 75630GMS 64114GMS (PURE) 1679/GM 107648954/- -- -- -- DEALER 24 CARATS 5222.7GM 4804 GMS (PURE) 1679/GM 80,67,461/- -- -- -- INFIX GOLD FROM NOVA SCOTIA 22000GMS 2150/GMS 47300000/- -- --- --- B ITEM: DIAMOND PARTICULARS STOCK AS ON 31.03.2011 SUBMITTED TO SBI OVERSEAS BANK STOCK AS ON 31.03.2011 AS PER AUDIT REPORT QUANTITY RATE VALUE QUANTITY RATE VALUE DIAMOND JEWELLERY (CTS) 3410.41 10152/- 34622482/- 3510 10514/- 36910593/- C ITEM: DIAMOND PARTICULARS STOCK AS ON 31.03.2011 SUBMITTED TO SBI OVERSEAS BANK STOCK AS ON 31.03.2011 AS PER AUDIT REPORT QUANTITY RATE VALUE QUANTITY RATE VALUE PR. STONE -- -- -- 14382 77.65 11,16,821/- ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 5 D ITEM: DIAMOND PARTICULARS STOCK AS ON 31.03.2011 SUBMITTED TO SBI OVERSEAS BANK STOCK AS ON 31.03.2011 AS PER AUDIT REPORT QUANTITY RATE VALUE QUANTITY RATE VALUE 33829 40.43 13,67,720/- 2.1.2 THE AO OBSERVED THAT THE ASSESSEE HAD DECLAR ED STOCK OF GOLD UNDER FOUR DIFFERENT CATEGORIES, NAMELY, (I) 24 CARAT GOLD BAR (RAW GOLD), (II) FINISHED GOLD (22 CARAT), (III) ST OCK IN STORE/DEALERS GOLD AND, (IV) 22000 GMS UNFIXED GOLD FROM NOVA SCO TIA. THE AO WAS OF THE OPINION THAT THE STOCK STATEMENT SUBMITT ED TO THE BANK WAS MORE COMPREHENSIVE AND WAS IN CONTINUATION OF THE RECORD OF STOCK BEING SUBMITTED BY THE ASSESSEE ITS ELF ON MONTHLY BASIS TO THE BANK. THIS WAS HAVING MORE EVIDENTIALL Y VALUE. THE AO ALSO OBSERVED THAT THE ASSESSEE HAD FAILED TO PR ODUCE ACTUAL RECORD OF STOCK MAINTAINED BY HIM AND THAT FURTHER THE VERY EXISTENCE OF TWO VARYING STOCK STATEMENTS WOULD LEA D TO THE CONCLUSION THAT THE CLOSING STOCK DECLARED BY THE A SSESSEE IN ITS TRADING ACCOUNT AND BALANCE SHEET CANNOT BE RELIED UPON. 2.1.3 THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE DIFFERENCE BETWEEN THE TWO STATEMENTS SHOULD NOT BE ADDED BACK ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 6 AS UNDISCLOSED AND UNACCOUNTED INCOME ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK. 2.1.4 IN RESPONSE, THE ASSESSEE SUBMITTED THAT TH E 22,000 GMS OF GOLD WHICH WAS SHOWN AS RECEIVED FROM BANK OF NO VA SCOTIA AS UNFIXED GOLD FOR MANUFACTURE AND EXPORT PURPOSE H AD BEEN RECEIVED AGAINST ISSUE OF LETTER OF CREDIT OF RS. 5 CRORES BY THE STATE BANK OF INDIA, OVERSEAS BRANCH AND NO FINANCI AL ENTRY OF VALUE OF THIS STOCK WAS RECORDED IN THE BOOKS OF AC COUNTS OF THE ASSESSEE AS NO PROVISIONAL PRICE WAS PROVIDED BY TH E BANK TO THE ASSESSEE IN RESPECT OF THIS GOLD. HOWEVER, THE RECE IPT OF GOLD WAS DULY ENTERED IN THE STOCK REGISTER MAINTAINED BY TH E ASSESSEE BUT THE STOCK VALUE WAS CALCULATED BY THE ASSESSEE ONLY AS PER THE FINANCIAL BOOKS AFTER EXCLUDING 22,00 THIS 0 GMS OF GOLD RECEIVED UNDER THE LETTER OF CREDIT. IT WAS FURTHER SUBMITTE D THAT IF THIS QUANTITY TO 22,000 GMS IS ADDED TO THE STOCK QUANTI TY OF 50,676.82 GMS, THE AGGREGATE WILL BE 72,676.82 GMS WHICH WOULD APPROXIMATELY TALLY WITH THE STOCK STATEMENT SUBMIT TED TO THE STATE BANK OF INDIA WHEREIN THE QUANTITY WAS SHOWN AT 72,052.49 GMS AND THE DIFFERENCE WOULD ONLY BE 624. 33 GMS. THE ASSESSEE ALSO SUBMITTED THAT WHILE SUBMITTING THE D ETAILS TO THE BANK, THE QUANTITY OF 22,000 GMS WAS INADVERTENTLY ADDED TO THE ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 7 STOCK INSTEAD OF REDUCING THE SAME FROM THE TOTAL G OLD STOCK IN POSSESSION OF THE ASSESSEE FIRM. IT WAS ALSO SUBMIT TED THAT THE VALUATION OF THIS UNFIXED GOLD WAS REDUCED IN VALUA TION BY RS. 5 CRORES FROM THE STOCK INVENTORY AND THIS RESULTED I N EXCESS VALUATION OF STOCK BY RS. 4.73 CRORES BEFORE THE BA NK. 2.1.5 HOWEVER, THE AO WAS OF THE OPINION THAT THE ASSESSEES CONTENTION THAT IN SUBMITTING THE DETAILS TO THE BA NK A QUANTITY OF 22,000 GMS HAD BEEN INADVERTENTLY ADDED RATHER T HAN BEING REDUCED WAS NOT TO BE BELIEVED AND THE SAME WAS MER ELY AN AFTER-THOUGHT. THE AO ALSO OBSERVED THAT THIS ERROR , AS CLAIMED BY THE ASSESSEE, WAS NOWHERE RECTIFIED BY THE ASSESSEE IN THE SUBSEQUENT STATEMENT/S SUBMITTED TO THE BANK AND TH AT THE VERY STOCK STATEMENTS FORMED THE BASIS FOR AVAILING CRED IT FACILITY FROM THE BANK. THE AO ALSO NOTED THAT AS PER THE STATEME NT FILED WITH THE BANK, THE ASSESSEE HAD 72050 GMS OF GOLD APART FROM 22,000 GMS OF UNFIXED GOLD FROM BANK OF NOVA SCOTIA, THUS, TAKING THE TOTAL STOCK TO 94050 GMS OF GOLD AS ON 31.03.2011 W HEREAS ONLY 50676 GMS OF GOLD WERE SHOWN IN THE AUDIT REPORT AN D, THUS, THERE WAS A SUPPRESSION OF CLOSING STOCK OF GOLD BY 43374 GMS. BY APPLYING THE RATE OF RS. 2075 PER GM, THE AO ARR IVED AT A ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 8 FIGURE OF RS. 9,00,01,050/- WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK OF GOLD. 2.2 THE SECOND ADDITION OF RS. 43,938/- WAS MADE BY APPLYING GROSS PROFIT RATE AT THE RATE OF 4.328% ON ALLEGED UNACCOUNTED SALE OF DIAMOND JEWELLERY WORTH RS. 10,15,200/- WHI CH WAS ALSO CALCULATED BY THE AO BY CONSIDERING THE DIFFERENCE BETWEEN THE STOCK STATEMENT SUBMITTED BEFORE THE BANK AND THE S TOCK DECLARED IN THE AUDIT REPORT ACCORDING TO WHICH THE RE WAS A DIFFERENCE AND DEFICIT OF 100 CTS OF DIAMOND JEWELL ERY. 2.3 APART FROM THIS, THE AO NOTED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 12,00,000/- UNDER THE HEAD SALARY TO PARTNERS AND REQUIRED THE ASSESSEE TO SUBMIT THE LEDGER ACCO UNT OF THE SAME. ON PERUSAL OF THE LEDGER ACCOUNT, THE AO NOTE D THAT THERE WERE 24 INSTANCES WHERE THE PARTNERS HAD BEEN PAID CASH IN EXCESS OF RS. 20,000/-. THE AO WAS OF THE OPINION THAT PROVISIONS OF SECTION 40(A)(3) OF THE ACT HAD BEEN AND, THEREFORE, PROCEEDED TO DISALLOW AN AMOUNT OF RS. 6,00,000/- O UT OF THE SALARY PAID TO PARTNERS U/S 40(A)(3) OF THE ACT. 2.4 APART FROM THIS, THE AO ALSO NOTICED THAT THE A SSESSEE HAD DEBITED TRAVELLING EXPENSES OF RS. 9,57,874/- IN IT S PROFIT & LOSS ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 9 ACCOUNT AND THE AO REQUIRED TO ASSESSEE TO FILE REL EVANT DETAILS. FROM PERUSAL OF THE DETAILS FILED BY THE ASSESSEE, THE AO REACHED THE CONCLUSION THAT SOME EXPENSES PERTAINED TO PERS ONAL TRIP/S OF THE FAMILY MEMBERS OF THE PARTNERS AND IN SOME CASE S, THERE WERE NO EVIDENCES OF EXPENDITURE INCURRED AS NO VOU CHERS AND BILLS WERE PRODUCED. THE AO PROCEEDED TO DISALLOW A N AMOUNT OF RS. 2,41,242/- UNDER THIS HEAD AND ADDED THE SAME T O THE INCOME OF THE ASSESSEE. 2.5 SIMILARLY, ON EXAMINATION OF THE BUSINESS PROMO TION AND SALES PROMOTION EXPENSES, THE AO NOTED THAT THE ASS ESSEE HAD DEBITED EXPENDITURE OF RS. 1,67,356/- ON ACCOUNT OF PAYMENT TO MAHINDRA HOLIDAYS AND RESORTS WHICH WAS NOT DULY SUPPORTED BY ANY BILL OR VOUCHERS. THE ASSESSEE ALSO COULD NO T SUBSTANTIATE THAT THIS EXPENDITURE WAS RELATED TO THE BUSINESS O F THE ASSESSEE. SIMILARLY, WHILE EXAMINING THE LEDGER ACCOUNT OF SA LES PROMOTION, THE AO NOTED THAT THE ASSESSEE HAD DEBITED AN AMOUN T OF RS. 1,60,000/- ON ACCOUNT OF PAYMENT FOR COMMONWEALTH G AMES TICKETS FOR CUSTOMERS BUT NO BILL OR VOUCHER PERTAI NING TO THE SAME WAS PRODUCED BY THE ASSESSEE AND NOR COULD THE ASSESSEE ESTABLISH THAT THE SAID EXPENDITURE WAS IN ANY WAY RELATED TO THE BUSINESS OF THE ASSESSEE. ACCORDINGLY, THE AO PROCE EDED TO MAKE ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 10 AN ADDITION OF RS. 3,27,356/- BY ADDING THESE TWO I TEMS TO THE INCOME OF THE ASSESSEE. 2.6 FURTHER, THE AO NOTICED THAT THE BALANCE SHEET OF THE ASSESSEE SHOWS SUNDRY CREDITORS TOTALLING RS. 1,77, 90,014/- AND THE ASSESSEE WAS REQUIRED TO FILE COMPLETE NAMES, A DDRESSES, PANS AND CONFIRMATION OF ALL CREDITORS WITH OUTSTAN DING BALANCES OF MORE THAN RS. 50,000/- AS ON 31.03.2011. THEREAF TER, ON RECEIVING THE DETAILS FROM THE ASSESSEE, THE AO ISS UED SUMMONS U/S 131 TO MANY PARTIES AND OUT OF THESE PARTIES S UMMONS WERE EITHER RECEIVED BACK UN-SERVED OR NO RESPONSE WAS R ECEIVED IN CASE OF SEVEN PARTIES. THE TOTAL OUTSTANDING SHOWN AS PAYABLE BY THE ASSESSEE IN RESPECT OF THESE SEVEN PARTIES AMOU NTED TO RS. 46,15,850/- AND THE AO WAS OF THE OPINION THAT THE ASSESSEE WAS UNABLE TO PROVE THE IDENTITY, GENUINENESS AS WELL A S THE CREDIT WORTHINESS OF THE LIABILITIES PERTAINING TO THESE S EVEN PARTIES. THE AO PROCEEDED TO ADD OF RS. 46,15,850/- TO THE INCOM E OF THE ASSESSEE. 2.7 AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE APPROACHED THE LD. FIRST APPELLATE AUTHORITY. THE L D. CIT (APPEALS) PARTLY ALLOWED THE ASSESSEES APPEAL BY A DJUDICATING THE ISSUES BEFORE HIM AS UNDER:- ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 11 (I) THE ADDITION OF RS. 9,00,01,050/- ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK WAS DELETED BY THE LD. CIT (A) ON THE GROUND THAT THE DISCREPANCY IN STOCK WOULD HAVE BEEN FROM EARLI ER ASSESSMENT YEARS AND THE DISCREPANCY DID NOT ARISE IN THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION. THE L D. CIT (A) ALSO RECOMMENDED THAT THE AO MAY CONSIDER TAKING SU ITABLE CORRECTIVE ACTION IN PRECEDING YEARS. (II) WITH RESPECT TO THE ADDITION OF RS. 43,938/- O N ACCOUNT OF GROSS PROFIT OF UNACCOUNTED SALE OF DIAMOND JEWELLE RY THE LD. CIT (A) HELD THAT IN THIS CASE ALSO THE DIFFERENCE IN T HE STOCK CONTINUED FROM THE PRECEDING YEAR AND, THEREFORE, T HE ADDITION WOULD NOT HAVE BEEN MADE IN THE YEAR UNDER CONSIDER ATION. (III) WITH RESPECT TO THE DISALLOWANCE OF PARTNERS SALARY AMOUNTING TO RS. 6 LAKHS U/S 40(A)(3) OF THE ACT, T HE LD. CIT (A) WAS OF THE VIEW THAT THE PROVISIONS OF SECTION 40(A )(3) WERE ATTRACTED IN THIS CASE AND THE DISALLOWANCE WAS SUS TAINED. (IV) WITH RESPECT TO THE DISALLOWANCE IN RESPECT OF TRAVELLING EXPENSES AMOUNTING TO RS. 2,41,242/-, THE LD. CIT(A ) HELD THAT THE TOTALITY OF THE CIRCUMSTANCES WOULD HAVE TO BE LOOKED INTO AND WHERE DIRECT EVIDENCES WERE NOT AVAILABLE, SUB STANTIAL ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 12 EVIDENCES WOULD BE TREATED AS SUFFICIENT FOR DECID ING THE CASE. THE LD. CIT (A) HELD THAT THE AO HAD FAILED TO SUBS TANTIATE, WITH REASONING, THE DISALLOWANCE AND DIRECTED THE DELETI ON OF THIS ADDITION. (V) WITH RESPECT TO BUSINESS PROMOTION EXPENSES OF RS. 1,67,356/- THE LD. CIT (A) HELD THAT THE ASSESSEE H AD FAILED TO DEMONSTRATE HOW THE PAYMENTS MADE TO MAHINDRA HOLID AY AND RESORT WAS INCURRED WHOLLY AND EXCLUSIVELY FOR BUSI NESS PURPOSES AND, THEREFORE, THE DISALLOWANCE WAS HELD TO BE JUS TIFIED. (VI) WITH RESPECT TO THE DISALLOWANCE OF RS. 160,0 00/- OUT OF SALES PROMOTION EXPENSES, THE LD. CIT (A) AGAIN HEL D THAT THE ASSESSEE HAD FAILED TO DEMONSTRATE AS TO HOW THE PA YMENTS MADE FOR PURCHASING TICKETS OF COMMONWEALTH GAMES WAS IN CURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES. T HE LD. CIT (A) SUSTAINED THIS ADDITION ALSO. (VII) WITH RESPECT TO THE ADDITION MADE IN RESPECT OF SUNDRY CREDITORS TOTALLING TO RS. 46,15,850/- THE LD. CIT (A) ANALYZED THE LEDGER ACCOUNTS OF ALL THE SEVEN PARTIES AND ALSO G AVE DUE CONSIDERATION TO THE SUBMISSIONS OF THE ASSESSEE IN THIS REGARD AND DIRECTED THE ENTIRE ADDITION TO BE DELETED. ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 13 2.8 AGGRIEVED WITH THE FINDINGS OF THE LD. CIT (A), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT IN ITA NO. 6260/DEL/20 14 AND HAS RAISED THE FOLLOWING GROUNDS :- 1.THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. C1T (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING DISALLOWA NCE OF RS.6,00,000/- ON ACCOUNT OF SALARY PAID TO PARTNER U/S 40A(3) OF THE ACT AND THAT TOO BY RECORDING INCORRE CT FACTS AND FINDINGS AND WITHOUT CONSIDERING THE SUBMISSION S OF THE ASSESSEE. 2.THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. AO IN MAKING DISALLOWANCE OF RS. 1,67,356/- UNDER THE HEAD BUSINESS PROMOTION EXPENS ES. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING THE ACTION OF LD. AO IN MAKING DISALLOWANCE OF RS. 1,60,000/- UNDER THE HEAD SALES PROMOTION EXPENSES. 4. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN MA KING VARIOUS DISALLOWANCES AS DISCUSSED ABOVE WHICH IS CONTRARY TO LAW AND FACTS, VOID AB INITIO, AND WITH OUT GIVING ADEQUATE OPPORTUNITY OF HEARING, BY RECORDING INCOR RECT FACTS AND FINDINGS AND THE SAME IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS. ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 14 2.9 SIMILARLY THE DEPARTMENT IS ALSO AGGRIEVED BY T HE ORDER OF THE LD. CIT(A) AND IS IN APPEAL BEFORE THE ITAT IN ITA NO. 6757/DEL/2014 AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT (A) HAS ERRED IN DELETING THE ADD ITION OF RS. 9,00,01,050/- WITHOUT APPRECIATING THE FACT THAT TH E ASSESSEE FAILED TO PRODUCE ACTUAL PHYSICAL STOCK ST ATEMENT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AS SESSEE MAINTAINED TWO DIFFERENT STOCK STATEMENTS I.E. ONE WAS GIVEN WITH THE AUDIT REPORT AND ANOTHER WAS GIVEN TO BANK AUTHORITIES WHEREAS THE ASSESSEE CANNOT MAINTAIN TW O DIFFERENT STOCK STATE IF MENTS IN THE SAME FINANCIA L YEAR 2010-11 RELEVANT TO AY 2011-12.ORDER IS NOT ACCEP' .E ON THE MERITS IN THE ASSESSMENT YEAR 2008-09. 2. THE LD. CIT(A) HAS DELETED ADDITION OF RS. 4 3,938/- ON ACCOUNT OF UNACCOUNTED SALE OF DIAMOND JEWELLERY. 3.THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS.46,15,850/- WITHOUT CONSIDERING THE FACT THAT NO COMPLIANCE WAS MADE FROM SUNDRY CREDITOR IN RESPONS E TO THE NOTICES ISSUED. 4.THE LD CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF P ,41,242/- WITHOUT CONSIDERING THE FACT THAT THE ASS ESSEE DID NOT PRODUCE ANY BILLS/VOUCHER WITH REGARD TO THE SA ME. 3.0 AT THE OUTSET, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PRAYED THAT THE DEPARTMENTS APPEAL MAY BE TAKE UP FIRST BECAUSE IT INVOLVED A SUBSTANTIAL ISSUE IN TERMS OF DELETIO N OF ADDITION OF ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 15 RS. 9,00,01,050/- WHICH WAS MADE BY THE AO ON ACCOU NT OF DIFFERENCE IN THE STOCK OF GOLD. THE LD. AUTHORISED REPRESENTATIVE HAD NO OBJECTION TO DEPARTMENTS PRAYER FOR TAKING UP THE DEPARTMENTS APPEAL FIRST. ACCORDINGLY WE PROCEED T O HEAR THE DEPARTMENTS APPEAL FIRST. 4.0.0 THE LD. SR. DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT THERE WERE GLARING DISCREPANCIES IN THE STOCK AND S HE REFERRED TO THE OBSERVATIONS OF ASSESSING OFFICER AS CONTAINED IN PAGES 1,2 AND 3 OF THE ASSESSMENT ORDER AND ALSO REFERRED TO THE TABLE/S PRODUCE BY THE AO IN THIS REGARD. THE LD. SR. DEPAR TMENTAL REPRESENTATIVE ALSO REFERRED TO THE SUBMISSIONS MAD E BY THE ASSESSEE BEFORE THE AO IN THIS REGARD WHICH HAVE BE EN REPRODUCED BY THE AO ON PAGES 4 AND 5 OF THE ASSESS MENT ORDER AND, THEREAFTER, DREW OUR ATTENTION TO THE FINDINGS OF THE AO AS CONTAINED IN PAGES 5, 6 AND 7 OF THE ASSESSMENT ORD ER. THE LD. SR. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE STOCK STATEMENT SUBMITTED BEFORE THE BANK CLEARLY MENTION ED OPENING STOCK, STOCK-IN, STOCK-OUT AS WELL AS THE CLOSING S TOCK OF EACH ITEM OF INVENTORY AND, THEREFORE, THERE WAS NO AMBI GUITY IN THIS REGARD AND THE ASSESSES PLEA OF INADVERTENT/CLERIC AL ERROR HAD NO BASIS. IT WAS FURTHER SUBMITTED THAT AS PER THE ADM ITTANCE OF THE ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 16 ASSESSEE ITSELF THERE WAS AN ADDITIONAL STOCK OF 22 ,000 GMS OF GOLD WHICH HAD BEEN RECEIVED FROM BANK OF NOVA SCOT IA AS UNFIXED GOLD FOR MANUFACTURE AND EXPORT PURPOSE AGA INST ISSUE OF LETTER OF CREDIT OF RS. 5 CRORES BY THE STATE BANK OF INDIA AND, THEREFORE, THERE WAS ABSOLUTELY NO JUSTIFICATION FO R NOT ENTERING THE SAME IN THE BOOKS OF ACCOUNTS. SHE SUBMITTED TH AT THE ASSESSEES CLAIM, THAT THIS STOCK OF GOLD WAS ALSO ENTERED INTO THE STOCK REGISTER, WAS FACTUALLY INCORRECT AS THE SAME IS NEITHER MENTIONED IN THE STOCK STATEMENT FILED ALONG WITH T HE AUDIT REPORT FOR ASSESSMENT YEAR 2011-12 AND NOR IS MENTI ONED IN THE DETAILS ACCOMPANYING THE BALANCE SHEET. IT WAS ALSO SUBMITTED THAT THERE WAS NO DOUBT THAT THIS GOLD WAS THE STOC K OF THE ASSESSEE BUT THE ASSESSEE HAD FAILED TO RECORD THE SAME IN ITS BOOKS OF ACCOUNTS. IT WAS ALSO SUBMITTED THAT THE A SSESSEES CONTENTION THAT, WHILE SUBMITTING DETAILS TO THE BA NK, THE QUANTITY OF 22,000 GMS HAD BEEN INADVERTENTLY ADDED RATHER THAN REDUCING IT WAS ABSOLUTELY FALSE AS THE ASSESSEE HA D SUBMITTED A COMPLETE SEPARATE ACCOUNT OF GOLD FROM NOVA SCOTIA IN THE STATEMENT SUBMITTED TO THE BANK. IT WAS ALSO SUBMIT TED THAT IT IS UNDISPUTED FACT THAT THE ASSESSEE HAD NOT BEEN MAIN TAINING STOCK REGISTER IN THIS REGARD AND, THEREFORE, APPAR ENTLY THE BOOKS ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 17 OF ACCOUNTS WERE NOT TO BE TRUSTED. IT WAS ALSO SU BMITTED THAT THE ASSESSEES CLAIM THAT THERE WAS AN INADVERTENT MISTAKE, WHICH HAD BEEN CONTINUING FROM PRECEDING ASSESSMENT YEARS, WAS NOT TO BE BELIEVED AS A MISTAKE COULD NOT HAVE BEEN PERPETRATED MONTH AFTER MONTH WITHOUT THE SAME BEIN G DETECTED WHEN THE STOCK STATEMENT WAS BEING SUBMITTED TO THE BANK EVERY MONTH. IT WAS FURTHER SUBMITTED THAT THE LD. CIT (A ) HAD GROSSLY ERRED IN DELETING THE ADDITION BY GIVING A FINDING THAT THE MISTAKE WAS RELATABLE TO EARLIER ASSESSMENT YEARS AND, THER EFORE, NO ADDITION COULD HAVE BEEN MADE IN THE YEAR UNDER CON SIDERATION. THE LD. SR. DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE LD. CIT (A) HAD NOT RECONCILED THE STOCK BUT HAD SIMPLY ACCEPTED THE SUBMISSIONS OF THE ASSESSEE WITHOUT DULY VERIFYING AND EXAMINING THE FACTS. THE LD. SR. DEPARTMENTAL REPRE SENTATIVE ALSO SUBMITTED THAT EVEN IF THE EXPLANATION OF THE ASSESSEE REGARDING INADVERTENT ERROR IN ADDING THE STOCK RAT HER THAN REDUCING IT WAS TO BE ACCEPTED, EVEN THEN THERE WAS A DIFFERENCE OF 624.33 GMS WHICH WAS A HUGE DIFFERENCE AND LOOKI NG INTO THE ASSESSEES TRADE IT WOULD BE IMPROBABLE THAT SUCH A DIFFERENCE COULD HAVE GONE UN-NOTICED. ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 18 4.0.1 THE LD. SR. DEPARTMENTAL REPRESENTATIVE ALSO DREW OUR ATTENTION TO PAGE 598 OF THE PAPER BOOK FILED BY TH E ASSESSEE WHICH CONTAINED MONTH WISE SUMMARY OF THE DIFFERENC E BETWEEN STOCK AS PER THE STOCK STATEMENT AND THE STOCK SUBM ITTED TO THE BANK. IN THIS REGARD IT WAS SUBMITTED THAT SINCE NO STOCK REGISTER WAS PRODUCED BEFORE THE ASSESSING OFFICER OR THE LD . CIT (A), THE VERACITY OF THIS RECONCILIATION WAS NOT PROVEN. THE LD. SR. DEPARTMENTAL REPRESENTATIVE ALSO SUBMITTED THAT ONC E A DEFECT WAS POINTED OUT BY THE ASSESSING OFFICER IN THE STO CK MAINTAINED BY THE ASSESSEE, THE ONUS WAS ON THE ASSESSEE TO SA TISFACTORILY EXPLAIN THE DISCREPANCY WHICH THE ASSESSEE HAD FAIL ED TO DO. 4.0.2 IT WAS ALSO SUBMITTED THAT THE ASSESSEE H AS CLAIMED RELIEF ON ACCOUNT OF OPENING STOCK BUT SINCE NO STOCK REGI STER WAS PRODUCED EITHER DURING THE ASSESSMENT PROCEEDINGS O R FIRST- APPELLATE PROCEEDINGS, NO CREDENCE CAN BE LENT TO T HE OPENING STOCK FIGURES. THE LD. SR. DEPARTMENTAL REPRESENTAT IVE VEHEMENTLY ARGUED THAT THERE WAS NO EVIDENCE IN SUP PORT OF ASSESSEES CLAIM THAT THE OPENING STOCK CONTAINED T HE AFORESAID DIFFERENCE. 4.0.3 THE LD. SR. DEPARTMENTAL REPRESENTATIVE ALS O NEGATED THE ASSESSEES CLAIM THAT THE DIFFERENCE IN STOCK AS PE R THE BOOKS WAS ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 19 RECONCILED WITH STOCK AS PER STATEMENT IN SUBSEQUEN T ASSESSMENT YEAR AND AS SUBMITTED IN PAGE 14 OF THE ASSESSEES WRITTEN SUBMISSION. IT WAS SUBMITTED THAT THE SAID RECONCIL IATION CLEARLY SHOWED THAT THE DIFFERENCE WAS NOT MERELY ON ACCOUN T OF GOLD RECEIVED ON LOAN BUT ALSO INCLUDED STOCK GIVEN TO KARIGARS . 4.0.4 THE LD. SR. DEPARTMENTAL REPRESENTATIVE SUB MITTED THAT THE AO HAD RIGHTLY MADE THE ADDITION ON ACCOUNT OF SUPPRESSED STOCK AND PRAYED THAT THE ORDER OF THE AO MAY BE RE STORED IN THIS REGARD. 4.1 WITH RESPECT TO THE GROUND NO. 2 OF THE DEPARTM ENTS APPEAL WHICH CHALLENGED THE ACTION OF THE LD. CIT (A) IN D ELETING THE ADDITION OF RS. 43,938/- ON ACCOUNT OF GROSS PROFIT EARNED ON UNACCOUNTED SALE OF DIAMOND, IT WAS SUBMITTED THAT HERE ALSO THE LD. CIT (A) HAD ACCEPTED THE ASSESSEES THEORY THAT THE DIFFERENCE IN STOCK PERTAINED TO EARLIER ASSESSMENT YEARS AND, THEREFORE, NO ADDITION COULD HAVE BEEN MADE DURING THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED THAT, AGAIN, THIS F INDING OF THE LD. CIT (A) WAS WITHOUT ANY COGENT REASONING AND TH E ARGUMENTS RAISED BY HER IN RESPECT OF GROUND NO.1 WOULD APPLY FOR THIS GROUND ALSO. ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 20 4.2 WITH RESPECT TO GROUND NO. 3 OF THE DEPARTMENT S APPEAL WHICH CHALLENGED THE ACTION OF THE LD. CIT (A) IN D ELETING THE ADDITION OF RS. 46,15,850/-, IT WAS SUBMITTED THAT SINCE THE SUNDRY CREDITORS HAD FAILED TO COMPLY TO THE SUMMON S ISSUED BY THE AO AND/OR THE SUMMONS HAD BEEN RETURNED UN-SERV ED, THE IDENTITY OF THE CREDITORS AND THEIR CREDIT-WORTHINE SS AT THAT POINT OF TIME REMAINED UNPROVED. THE LD. SR. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT SUBSEQUENT PA YMENT/S BY THE ASSESSEE AGAINST THE OUTSTANDING LIABILITY DID NOT PROVE THE GENUINENESS OF THE TRANSACTION AT THAT PARTICULAR T IME. 4.3 WITH RESPECT TO THE GROUND NO. 4 OF THE DEPARTM ENTS APPEAL CHALLENGING THE DELETION OF ADDITION OF RS. 2,41,24 2/- RELATING TO TRAVELLING OF EXPENSES, THE LD. SR. DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT NO DETAILS HAD BEEN SUBMITTED BEFORE THE AO BY THE ASSESSEE AND THE LD. CIT (A ) HAD REACHED A WRO NG CONCLUSION THAT THE SURROUNDING CIRCUMSTANCES CAN BE LOOKED IN TO JUSTIFY THE INCURRENCE OF EXPENDITURE. THE LD. DEPARTMENTAL REP RESENTATIVE PRAYED THAT THE DEPARTMENTS APPEAL BE ALLOWED IN T OTALITY BY SETTING ASIDE THE ORDER OF THE LD. CIT (A). 5.0.0 IN RESPONSE TO ARGUMENTS OF THE LD. SR. DEPA RTMENTAL REPRESENTATIVE, THE LD. AUTHORISED REPRESENTATIVE W ITH RESPECT TO ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 21 GROUND NO. 1 OF THE DEPARTMENTS APPEAL SUBMITTED T HAT THE IMPUGNED STOCK OF GOLD WAS TAKEN ON LOAN FROM THE B ANK OF NOVA SCOTIA AND THE ASSESSEE WAS ONLY A CUSTODIAN OF THE GOLD TILL IT WAS READY FOR EXPORT. THE LD. AUTHORISED REPRESENTA TIVE ALSO DREW OUR ATTENTION TO VOLUMINOUS DOCUMENT/S SUBMITT ED BEFORE THE LD. CIT (A), WITH REGARD TO THE INADVERTENT ERR OR IN SUBMITTING STOCK DETAILS TO THE BANK, WHICH HAVE BEEN MENTIONE D BY THE LD. CIT (A) IN PAGES 9 AND 10 OF THE IMPUGNED ORDER. 5.0.1 THE LD. AUTHORISED REPRESENTATIVE ALSO PLAC ED ON RECORD A COPY OF THE ASSESSMENT ORDER PASSED U/S 143(3)/147 OF THE ACT DATED 07.03.2016 FOR ASSESSMENT YEAR 2010-11 AND SU BMITTED THAT SUBSEQUENT TO THE DIRECTIONS OF THE LD. CIT (A ) THAT THE STOCK DISCREPANCY SHOULD BE EXAMINED BY THE AO IN EARLIER ASSESSMENT YEARS, THE ASSESSING OFFICER, IN THE REASSESSMENT P ROCEEDINGS, HAD DULY EXAMINED THE ALLEGED DIFFERENCE OF STOCK AS PE R BOOKS AND THE STATEMENT GIVEN TO THE BANK AS ON 31.03.2010 AN D NOTHING WAS FOUND TO BE LACKING ON THE PART OF THE ASSESSEE . IT WAS SUBMITTED THAT NO DIFFERENCE WAS FOUND TO BE EXISTI NG AND NO ADDITION WAS MADE BY THE AO IN THIS REGARD WITH THE AO GIVING AN EXPLICIT FINDING THAT THE DIFFERENCE WAS ON ACCOUNT OF CLERICAL ERROR. ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 22 5.0.2 IT WAS ALSO SUBMITTED THAT IT IS NOT THE DE PARTMENTS CASE THAT THE ASSESSEE HAD NOT GIVEN THE EXPLANATION BEF ORE THE AO REGARDING THE DISCREPANCY HAVING BEEN RECTIFIED IN SUBSEQUENT ASSESSMENT YEAR. IT WAS SUBMITTED THAT THIS SUBMISS ION OF THE ASSESSEE BEFORE THE AO WAS DULY SUPPORTED BY AN AFF IDAVIT THAT A CLERICAL ERROR HAD OCCURRED WHILE FILING THE STOCK STATEMENT WITH THE BANK WHICH WAS RECTIFIED SUBSEQUENTLY IN DUE CO URSE. HE DREW OUR ATTENTION TO THE COPY OF STOCK STATEMENT S UBMITTED TO THE BANK AS ON 31.07.2011 WHERE NO SUCH STOCK OF UN FIXED GOLD WAS MENTIONED. IT WAS SUBMITTED THAT THIS IMPUGNED CLERICAL ERROR WAS RECTIFIED AND, THEREFORE, THERE WAS NO BA SIS TO MAKE ANY ADDITION. 5.0.3 IT WAS ALSO SUBMITTED THAT SINCE THE DIFFER ENCE, IF AT ALL, WAS ON ACCOUNT OF DIFFERENCE IN OPENING STOCK, THER EFORE, THE SAME COULD NOT HAVE BEEN THE SUBJECT-MATTER OF ADDI TION IN THE IMPUGNED YEAR. RELIANCE WAS PLACED ON THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CAP ITAL TYRES MANUFACTURING UNIT REPORTED IN 305 ITR 199 (DELHI) FOR THE PREPOSITION THAT ADDITION COULD NOT BE MADE IF THE DIFFERENCE PERTAINED TO A DIFFERENT ASSESSMENT YEAR. ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 23 5.0.4 THE LD. AUTHORISED REPRESENTATIVE ALSO DREW OUR ATTENTION TO THE SUBMISSIONS OF THE ASSESSEE MADE BEFORE THE LD. CIT (A), THE RECONCILIATION STATEMENT PLACED BEFORE THE LD. CIT (A) AND THE VARIOUS DETAILS SUBMITTED BEFORE THE LD. CIT (A) AN D PLACED AT PAGES 513 TO 568 OF THE PAPER BOOK AND IT WAS SUBMI TTED THAT THE LD. CIT (A) HAD GIVEN THE IMPUGNED RELIEF AFTER DUL Y CONSIDERING THE VARIOUS DOCUMENTARY EVIDENCES SUBMITTED IN THIS REGARD. 5.0.5 THE LD. AUTHORISED REPRESENTATIVE ALSO SUBMI TTED THAT THE ASSESSEES CASE WAS THAT OF HYPOTHECATION OF ST OCK AND NOT OF PLEDGING OF STOCK AND, THEREFORE, THE ADDITION COUL D NOT HAVE BEEN MADE ON THAT ACCOUNT. RELIANCE WAS PLACED ON THE JU DGMENT OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. BALBI R SINGH MAINI REPORTED IN (2017) 86 TAXMANN.COM 94 (SC) FOR THE P REPOSITION THAT THERE WAS NO ACCRUAL OF INCOME TO THE ASSESSEE WHEN GOLD HAD BEEN RECEIVED AS LOAN FROM NOVA SCOTIA BANK. TH E LD. AUTHORISED REPRESENTATIVE ALSO VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT (A) ON THIS ISSUE AND SUBMITTED THAT THE ORDER OF THE LD. CIT (A) ON THE ISSUE BE UPHELD. 5.1 WITH RESPECT TO GROUND NO. 2 OF THE DEPARTMEN TS APPEAL WHICH CHALLENGED THE ACTION OF THE LD. CIT (A) IN D ELETING THE ADDITION OF RS. 43,938/- BEING GROSS PROFIT EARNED ON ACCOUNT OF ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 24 ALLEGED UNACCOUNTED SALES, THE LD. AUTHORISED REPRE SENTATIVE SUBMITTED THAT HERE ALSO THERE WAS CATEGORICAL FIND ING BY THE LD. CIT (A) THAT THE DISCREPANCY PERTAINED TO EARLIER A SSESSMENT YEARS AND, THEREFORE, THE SAME COULD NOT HAVE BEEN MADE T HE SUBJECT MATTER OF ADDITION IN THIS YEAR. THE LD. AUTHORISED REPRESENTATIVE AGAIN PLACED RELIANCE ON THE ORDER OF THE LD. CIT ( A) IN THIS REGARD. 5.2 WITH RESPECT TO GROUND NO. 3 OF THE DEPARTMENT S APPEAL CHALLENGING THE ACTION OF THE LD. CIT (A) IN DELETI NG THE ADDITION OF RS. 46,15,850/- ON ACCOUNT OF SUNDRY CREDITORS, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ADDITI ON HAD BEEN DELETED BY THE LD. CIT (A) AFTER DULY CONSIDERING T HE EXPLANATION OF THE ASSESSEE IN THIS REGARD AND AFTER DULY APPRE CIATING THE FACT THAT THE OUTSTANDING PAYMENT/S TO THE CREDITORS HAD BEEN MADE IN SUBSEQUENT ASSESSMENT YEARS AND, THEREFORE, THER E WAS NO REASON TO DIFFER WITH THE FINDINGS OF THE LD. CIT ( A) IN THIS REGARD. IT WAS ALSO SUBMITTED THAT NO ADDITION COULD BE MAD E U/S 41(1) OF THE ACT EVEN IF THE SUNDRY CREDITORS ARE TREATED AS NON-GENUINE BY THE AO. 5.3 WITH RESPECT TO GROUND NO. 4 OF THE DEPARTMENT S APPEAL CHALLENGING THE ACTION OF THE LD. CIT (A) IN DELETI NG THE ADDITION OF ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 25 RS. 2,41,242/- MADE OUT OF TRAVELLING EXPENSES, REL IANCE WAS PLACED ON THE ORDER OF THE LD. CIT (A). 5.4 THE LD. AUTHORISED REPRESENTATIVE PRAYED THAT THE DEPARTMENTS APPEAL DESERVED TO BE DISMISSED. 6.0 IN REJOINDER, THE LD. SR. DEPARTMENTAL REPRESEN TATIVE, WITH RESPECT TO GROUND NO. 1 OF THE DEPARTMENTS APPEAL, SUBMITTED THAT IT WAS UNBELIEVABLE THAT THE ASSESSEE HAD NOT MAINTAINED THE STOCK REGISTER AS JEWELLERS, DUE TO THE NATURE OF THEIR TRADE AND THE VALUE OF THE ITEMS, INVARIABLY MAINTAINED A DAILY RECORD OF STOCK. THE LD. SR. DEPARTMENTAL REPRESENTATIVE A LSO SUBMITTED THAT THE VERACITY OF THE RECONCILIATION STATEMENT A S SUBMITTED AND PLACED ON THE PAPER BOOK PAGE 598 WAS ALSO NOT ESTA BLISHED. IT WAS ALSO SUBMITTED THAT THE CASE LAWS RELIED UPON T HE ASSESSEE WERE DISTINGUISHABLE ON FACTS. 7.0 ARGUING FOR THE ASSESSEES APPEAL, THE LD. AUTH ORISED REPRESENTATIVE SUBMITTED THAT GROUND NO. 1 RELATED TO DISALLOWANCE OF RS. 6,00,000/- MADE BY THE AO U/S 4 0A(3) OF THE ACT. IT WAS SUBMITTED THAT THIS DISALLOWANCE WAS B AD IN LAW AS THE WITHDRAWAL MADE BY THE PARTNERS WAS NOT ON ACCO UNT OF PAYMENT OF ANY EXPENDITURE BUT WHAT SIMPLY A WITHDR AWAL ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 26 AGAINST BALANCE AVAILABLE IN THEIR ACCOUNTS. IT WAS FURTHER SUBMITTED THAT NONE OF THE AMOUNTS DISALLOWED U/S 4 0A (3) WERE DEBITED IN THE PROFIT & LOSS ACCOUNT AS EXPENDITURE AND WERE RATHER ENTRIES ON ACCOUNT OF CAPITAL ACCOUNT. 7.1 WITH RESPECT TO GROUND NO. 2 OF THE ASSESSEES APPEAL CHALLENGING THE DISALLOWANCE OF RS. 1,67,356/- MADE BY THE AO ON ACCOUNT OF BUSINESS PROMOTION EXPENSES, IT WAS S UBMITTED THAT THE SAID EXPENDITURE WAS INCURRED FOR PURCHASE OF MEMBERSHIP OF MAHINDRA HOLIDAY RESORT ON TIME-SHARE BASIS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. HOWEVER, I T WAS FAIRLY ACCEPTED THAT THERE WAS ABSENCE OF BILLS AND SPECIF IC DETAILS AS THE RECORD WAS VERY OLD. RELIANCE WAS PLACED ON ASS ESSEES SUBMISSIONS BEFORE THE LD. CIT (A) IN THIS REGARD A ND IT WAS SUBMITTED THAT THE LD. CIT (A) HAD NOT CONSIDERED T HE SUBMISSIONS OF THE ASSESSEE IN PROPER PERSPECTIVE. 7.2 WITH RESPECT TO GROUND NO. 3 RELATING TO DISALL OWANCE OF RS. 160000/- ON ACCOUNT OF SALES PROMOTION EXPENSES, IT WAS SUBMITTED THAT THE ASSESSEE HAS PURCHASED TICKETS F OR ITS CUSTOMERS FOR COMMONWEALTH GAMES IN ORDER TO PROMOT E ITS BUSINESS PROSPECTS. IT WAS SUBMITTED THAT DETAILS H AD BEEN SUBMITTED BEFORE THE LD. CIT (A) IN THIS REGARD ALO NG WITH WRITTEN ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 27 SUBMISSIONS. HOWEVER, THE LD. CIT (A) HAD BRUSHED A SIDE THE SUBMISSIONS AND UPHELD THE ADDITION. IT WAS SUBMITT ED THAT THE DISALLOWANCE WAS UNJUSTIFIED AND THE SAME SHOULD BE DIRECTED TO BE DELETED. 8.0 IN RESPONSE TO THE ARGUMENTS ADVANCED BY THE LD . AUTHORISED REPRESENTATIVE IN ASSESSEES APPEAL, THE LD. SR. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT AS FAR A S GROUND NO. 1 WAS CONCERNED, IT WAS NOT ESTABLISHED THAT WHETHE R THE CASH WITHDRAWALS PERTAINED TO EXPENDITURE DEBITED TO PRO FIT & LOSS ACCOUNT OR PERTAINED TO CAPITAL ACCOUNT. THE LD. SR . DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT UNDER TH E INCOME TAX LAW THE PARTNERS AND THE PARTNERSHIP FIRM ARE S EPARATE LEGAL ENTITIES AND, THEREFORE, THE ADDITION ON THIS ACCOU NT WAS JUSTIFIED. 8.1 WITH RESPECT TO GROUND NOS. 2 AND 3 OF THE ASSE SSEES APPEAL, THE LD. SR. DEPARTMENTAL REPRESENTATIVE PLA CED RELIANCE ON THE ORDER OF THE LD. CIT (A) AND SUBMITTED THAT THE DISALLOWANCES / ADDITIONS HAD BEEN RIGHTLY SUSTAINE D. 9.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE AL SO PERUSED THE MATERIAL ON RECORD. WE TAKE UP THE DEPARTMENTS APPEAL BEARING ITA NO. 6757/DEL/2014 FOR DISPOSAL FIRST. ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 28 9.1 GROUND NO. 1 OF THE DEPARTMENTS APPEAL CHALL ENGES THE ACTION OF THE LD. CIT (A) IN DELETING THE ADDITION OF RS. 9,00,01,050/- WITH RESPECT TO DIFFERENCE IN STOCK W HICH CAME TO THE KNOWLEDGE OF THE AO BY COMPARING THE STOCK STAT EMENTS SUBMITTED BY THE ASSESSEE TO THE STATE BANK OF INDI A, OVERSEAS BRANCH WITH THE STOCK AS PER THE TAX AUDIT REPORT O N 31.03.2011. IT IS AN ADMITTED FACT THAT IN THE TAX AUDIT REPORT , THE ASSESSEE HAS DECLARED A CLOSING STOCK OF 50676.819 GMS OF GO LD VALUED AT RS. 1700.40 PER GRAM AS ON 31.03. 2011 WHEREAS TH E ASSESSEE HAS SUBMITTED STOCK STATEMENT TO THE BANK FROM, WHO M THE LOAN/S WERE OBTAINED SHOWING GOLD STOCK OF 72052.49 GMS. THEREFORE, THE VAST DISCREPANCY IN THE QUANTITY OF GOLD SHOWN TO THE BANKERS FOR THE PURPOSE OF AVAILING THE LOAN AN D THE QUANTITY SHOWN IN THE BOOKS FOR THE TAX PURPOSES RESULTED IN AN ADDITION IN THE HANDS OF THE ASSESSEE. THE ASSESSING OFFICE R STATED THAT THE STOCK STATEMENT SUBMITTED TO THE BANK CLEARLY S HOWS THE OPENING STOCK, STOCK-IN, STOCK-OUT AND FINAL CLOSIN G STOCK OF EACH ITEM SEPARATELY. THEREFORE, THERE CANNOT BE ANY CL ERICAL ERROR. HOWEVER, THE ASSESSEE EXPLAINED BEFORE THE AO THAT 22,000 GMS OF GOLD WHICH WAS RECEIVED FROM BANK OF NOVA SCOTIA WAS UN- FIXED GOLD FOR MANUFACTURE AND EXPORT PURPOSES AGAI NST ISSUE OF ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 29 LETTER OF CREDIT OF RS. 5 CRORES BY STATE BANK OF I NDIA, NEW DELHI. IT WAS CONTENDED BEFORE THE AO THAT, THEREFORE, THE STOCK WAS AN UNPAID STOCK AND DID NOT BELONG TO THE ASSESSEE BUT BY ERROR IT HAD BEEN INCLUDED IN THE STOCK STATEMENT SUBMITTED TO THE BANK. IT WAS FURTHER SUBMITTED BEFORE THE AO THAT AS IT W AS NOT PAID STOCK IT HAD CORRECTLY NOT BEEN INCLUDED IN THE INV ENTORY WHILE PREPARING THE PROFIT AND LOSS ACCOUNT AND BALANCE S HEET FOR THE YEAR ALTHOUGH IT SHOULD NOT HAVE BEEN INCLUDED IN T HE STOCK STATEMENT SUBMITTED TO THE BANK ALSO . THE ASSESSING OFFICER HELD THAT THERE WAS NO BASIS AT ALL TO SUBSTANTIATE THAT IT WAS A CLERICAL ERROR. THE ASSESSING OFFICER OBSERVED STATED THAT THE UNFIXED STOCK WAS NOT INCLUDED AND ACCOUNTED FOR IN THE BOO KS OF THE ACCOUNTS. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE HAD NOT RECTIFIED THE ABOVE SO-CALLED CLERICAL ERROR IN THE SUBSEQUENT STATEMENT SUBMITTED TO THE BANK. FOR THIS REASON, THE ADDITION OF RS. 9,00,01,050/- WAS MADE FOR SUPPRESSION OF CLOSI NG STOCK OF GOLD BY THE ASSESSING OFFICER. 9.1.1 ON APPEAL BEFORE THE LEARNED CIT (APPEALS), THE ADDITION WAS DELETED. THE LEARNED COMMISSIONER (APPEALS) HE LD THAT THE GOODS WERE HYPOTHECATED AND NOT PLEDGED WITH THE BA NK AND, THEREFORE, THE CUSTODY OF THE GOLD WAS NOT WITH THE BANK, BUT WITH ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 30 THE ASSESSEE. HENCE, IT CANNOT BE SAID THAT ASSESS EE WAS HAVING EXCESS GOLD OF THE DIFFERENTIAL QUANTITY. HE FURTH ER HELD THAT AS THE ASSESSING OFFICER HAD TREATED THE STOCK STATEME NT SUBMITTED BY THE ASSESSEE TO THE STATE BANK OF INDIA AT THE E ND OF THE YEAR AS COMPLETE AND CORRECT, THEREFORE, THE COROLLARY W AS THAT THE STOCK STATEMENTS SUBMITTED BY THE ASSESSEE TO THE S TATE BANK OF INDIA FOR EVERY MONTH WERE ALSO COMPLETE CORRECT AN D SACROSANCT. HE, THEREFORE, HELD THAT THE STOCK STATEMENT SUBMIT TED BY THE ASSESSEE TO THE STATE BANK OF INDIA FOR THE MONTH E NDING ON 31/3/2010 (OPENING STOCK) WAS ALSO BOUND TO BE CO MPLETE, CORRECT AND SACROSANCT. THEREFORE, HE HELD THAT AS THE OPENING STOCK SHOWN TO THE BANK WAS 99420.685 GMS WHEREAS T HE OPENING STOCK AS PER THE BOOKS OF ACCOUNT WAS 55606 .051 GMS, THERE WAS A DIFFERENCE OF 43811.792 G IN THE OPENIN G STOCK. THEREFORE, ACCORDING TO HIM, THE DIFFERENCE IN THE STOCK WAS RELATING TO A PERIOD EARLIER THAN THE COMMENCEMENT OF THE YEAR UNDER CONSIDERATION AND NO DIFFERENCE HAS ARISEN DU RING THE YEAR. HE, THEREFORE, HELD THAT THE DIFFERENCE IN STOCK AS PER THE STATEMENT SUBMITTED BY THE ASSESSEE TO THE BANK HAD NOT ARISEN IN THE RELEVANT ASSESSMENT YEAR AND THE ENTIRE ADDI TION OF RS. 9,00,01,050/ WAS DELETED. ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 31 9.1.2 ON CAREFUL READING OF THE ORDER OF THE LEARNE D COMMISSIONER (APPEALS), IT IS APPARENT THAT HE HAS PRESUMED WHAT THE ASSESSING OFFICER HAS NOT STATED. THE BAS IC FALLACY IN THE ORDER OF THE LD. COMMISSIONER (APPEALS) IS HIS STAT ING THAT AS THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE DIFFERENCE IN STOCK AS PER THE STOCK STATEMENT SUBMITTED TO THE BANKERS AND THE STOCK SHOWN IN THE PROFIT AND L OSS ACCOUNT FOR THE TAX PURPOSES HAS BEEN TAKEN FOR THE PURPOSE OF ADDITION THEREFORE, THE ASSESSING OFFICER HAS PRESUMED THAT THE OPENING STOCK STATEMENT SUBMITTED TO THE BANK AND THE OPENI NG STOCK SHOWN BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCOUN T ARE ALSO SACROSANCT. WE DO NOT FIND ANY SUCH OBSERVATION IN THE ORDER OF THE ASSESSING OFFICER. THUS, THE LEARNED CIT (APPE ALS), FOR DELETING THE ABOVE ADDITION, HAS PRESUMED WHAT THE ASSESSING OFFICER HAS NOT STATED. FURTHER, IT CANNOT BE SAID THAT WHEN THERE IS A DIFFERENCE IN THE OPENING STOCK SUBMITTED TO T HE BANK AND THE OPENING STOCK SHOWN IN THE BOOKS OF ACCOUNTS AN D THERE IS ALSO DIFFERENCE IN THE CLOSING STOCK SUBMITTED TO T HE BANK AND THE CLOSING STOCK SHOWN IN THE PROFIT AND LOSS ACCOUNT AT THE END OF THE YEAR, THE ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. WE ALSO DO NOT FIND ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 32 ANY REASON TO UPHOLD THE VIEW OF THE LD. COMMISSION ER (APPEALS) THAT IF THE DIFFERENCE IS COMING FROM EARLIER YEARS , NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE IN THE YEAR IN WHICH THE DIFFERENCE IS DETECTED. THE LEARNED COMMISSIONER ( APPEALS) ALSO FAILED TO APPRECIATE THE DISTINCTION BETWEEN THE JU DGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT CITED BEFORE HI M IN THE CASE OF SHEENA EXPORTS AND THIS CASE BECAUSE IN THA T PARTICULAR CASE, NO DIFFERENCE WAS THERE IN THE QUANTITATIVE D ETAILS AND THE ONLY DIFFERENCE WAS IN THE VALUE OF THE CLOSING STO CK. HERE, HOWEVER, THE DIFFERENCES, AS INDICATED BY THE ASSES SING OFFICER, PERTAIN TO QUANTITATIVE DETAILS. IN THE CASE OF SH EENA EXPORTS, IT WAS CLAIMED THAT THE STATEMENT SUBMITTED TO THE BAN K WAS MERELY A FIGURE NOT SUPPORTED BY ANY QUANTITATIVE D ETAILS. HOWEVER, IN THE PRESENT CASE, THE ASSESSEE HAS SUBM ITTED THE QUANTITATIVE DETAILS DULY BIFURCATED. FURTHERMORE, BEFORE US THE ASSESSEE HAS SUBMITTED THE RECONCILIATION OF THE ST OCK, WHICH IS ALSO NOT COMPLETELY RECONCILED. IF THE VIEW OF THE LEARNED COMMISSIONER (APPEALS) IS ACCEPTED THAT IF THE DIFF ERENCE IS FOUND IN THE OPENING STOCK AS WELL AS THE CLOSING STOCK A LSO, THEN NO ADDITION CAN BE MADE DURING THE YEAR, THEN SECTIONS 69 TO 69B OF THE ACT WILL BE RENDERED REDUNDANT. WE NOTE THAT E VEN TO SUPPORT ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 33 HIS CONTENTION, THE LEARNED COMMISSIONER (APPEALS) HAS NOT CARRIED OUT ANY EXERCISE TO DETERMINE AS TO IN WHIC H YEAR THE DIFFERENCE HAD ARISEN AND AS TO IN WHICH YEAR, TH E ADDITION WAS REQUIRED TO BE MADE. IN OUR OPINION, HE WAS DUTY BOUND TO DO SO AS PER THE PROVISIONS OF SECTION 150 OF THE ACT. THEREFORE, ACCORDING TO US, THE LEARNED COMMISSIONER (APPEALS) HAS GROSSLY ERRED IN DELETING THE ADDITION OF RS. 9,00,01,050/- MERELY ON A PRESUMPTION AND ON MIS-APPRECIATION OF THE FACTS OF THE CASE . HOWEVER, THE AS THE LEARNED AUTHORISED REPRESENTATI VE HAS ALSO SUBMITTED BEFORE US A DETAILED RECONCILIATION OF TH E STOCK, IN FAIRNESS THIS RECONCILIATION NEEDS TO BE VERIFIED B Y THE ASSESSING OFFICER PROPERLY. WE NOTE THAT EVEN AFTER CONSIDER ING THE RECONCILIATION SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE, THERE REMAINS A DIFFERENCE OF 624.3 3 GMS IN THE QUANTITY OF THE GOLD WHICH ALSO NEEDS TO BE EXPLAIN ED AND RECONCILED. THEREFORE, IN THE INTEREST OF JUSTICE, THE ISSUE IS SENT BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DI RECTION TO THE ASSESSEE TO PRODUCE BEFORE THE ASSESSING OFFICER TH E STOCK REGISTER MAINTAINED BY THE ASSESSEE ALONG WITH THE MONTH WIS E STOCK STATEMENTS SUBMITTED TO THE BANKERS AND TO DEMONSTR ATE THAT THE DIFFERENCE IN EACH MONTH IS ON ACCOUNT OF UNFIXED G OLD ONLY. THE ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 34 ASSESSING OFFICER IS ALSO DIRECTED TO VERIFY THE AB OVE DETAILS, IF PRODUCED BY THE ASSESSEE, AND DECIDE THE ISSUE IN A CCORDANCE WITH THE LAW AFTER GIVING PROPER OPPORTUNITY OF HEA RING. IN THE RESULT GROUND NUMBER 1 OF THE APPEAL OF THE REVENUE IS ALLOWED WITH ABOVE DIRECTION. 9.2.0 GROUND NO. 2 OF THE DEPARTMENTS APPEAL CH ALLENGES THE ACTION OF THE LD. CIT(A) IN DELETING ADDITION OF RS . 43,938/- WHICH WAS ARRIVED AT BY APPLYING THE GROSS PROFIT RATE OF 4.328% ON ALLEGED UNACCOUNTED SALES OF RS. 10,15,200/- PERT AINING TO DIAMOND JEWELLERY. GROUND NO. 2 IS IDENTICAL TO THE GROUND NO. 1 OF THE DEPARTMENTS APPEAL AND IN VIEW OUR DETAILED FINDINGS AS CONTAINED IN THE PRECEDING PARAGRAPHS WITH RESPECT TO GROUND NO. 1, THIS GROUND IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING THE ISSUE AFRESH IN LIGHT THE EVIDENC ES WHICH THE ASSESSEE MAY SUBMIT IN THIS REGARD AND AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE BEFORE DECIDING THE ISS UE AS PER LAW. ACCORDINGLY THIS GROUND ALSO STANDS ALLOWED FOR STA TISTICAL PURPOSES. 9.3.0 COMING TO GROUND NO. 3 OF THE DEPARTMENTS A PPEAL WHICH CHALLENGES THE ACTION OF THE LD. CIT (A) IN D ELETING THE ADDITION OF RS. 46,15,850/- WHICH WAS ADDED ON ACCO UNT OF ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 35 SUNDRY CREDITORS WHO HAD NOT RESPONDED TO THE SUMMO NS ISSUED U/S 131 OF THE ACT, IT IS SEEN THAT THE LD. CIT (A) HAS EXAMINED THE ISSUE IN DETAIL ON PAGES 29 TO 37 OF THE IMPUGN ED ORDER AND EACH THE CASE OF THE SEVEN PARTIES HAS BEEN EXAMINE D AT LENGTH BY THE LD. CIT(A). THE FINDINGS OF THE LD. CIT (A) ARE CONTAINED IN PARA 9.1 OF THE IMPUGNED ORDER AND THE SAME IS REPR ODUCED HERE IN UNDER FOR A READY REFERENCE:- 9.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND PERUSED MATERIAL AVAILABLE ON THE RECORD. THE APPELLANT FILED THE CONFIRMATION/PROOF OF THE LIABI LITIES OF CHUNILAL LUNIA (BO), RS. 22,66,200/- AND RS. 19,66,918/- (RAJASTHAN) - DURING THE ASSESSMENT PROCEEDINGS. THE LIABILITY OF RS. 19,66,918/- IS IN RESPECT OF PURCHASES OF THE PRECEDING YEAR. THE PURCHASES FROM CHUNILAL LUNIA WERE NOT DOUBTED BY THE AO. THE AO'S INFERENCE REVOLVES AROUND HER LOGI C THAT IN CASE THE PAYMENTS WOULD HAD BEEN DONE IN TH E RELEVANT AY THEN THE SAME WOULD BE GENUINE OTHER WISE NOT, IF SUMMON SENT TO THE PARTY RETURNED UNSERVED. THIS LOGIC WITHOUT BRINGING FURTHER MATER IAL ON THE RECORD IS HELD IMPROPER PARTICULARLY IN VIEW OF THE FACT THAT THE APPELLANT HAS FILED CONFIRMATIONS FROM THE PARTY WHOSE CREDIT BALANCE OF RS.42,33,118/- HA S BEEN DOUBTED. THE APPELLANT DEMONSTRATED PAYMENTS MADE TO CHUNILAL LUNIA BY BANKING CHANNEL IN THE ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 36 SUBSEQUENT YEARS. THE PURCHASES FROM CHUNILIAL LUNI A WERE BEING MADE FROM EARLIER YEARS AND WERE CONTINUED IN THE SUBSEQUENT YEARS. IN VIEW OF ABOVE SUBMISSIONS, DETAILS/DOCUMENTS FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE JUDICIAL PRECEDENTS, I AM OF THE OPINION THAT THE CREDITOR CHUNILAL LUNIA) APPEARS TO BE GENUINE. IT IS NOT A CASE WHERE THE PROVISIONS OF SECTION 41(1) WERE INVOKED AS IT IS NOT A CASE OF REMISSION OR CESSATION OF THE L IABILITY. THE EXPIRY OF THE PERIOD OF LIMITATION PRESCRIBED U NDER THE LIMITATION ACT HAS NOT EXTINGUISHED. THE LD. COUNSELS DEMONSTRATED THAT THE APPELLANT HAD FILED CONFIRMATIONS OF CHUNILAL LUNIA AND MR. VIJAY KUMAR CHALLA DURING THE ASSESSMENT PROCEEDINGS VIDE ITS SUBMISSION DATED 03.12.2013. ON WHICH THE AO FAILED TO GIVE ANY ADVERSE COMMENT. HERE, IT IS EVIDENT FR OM THE SUBMISSION OF THE LD. COUNSELS THAT TWO OF THE CREDITORS UNDER REFERENCE ARE ITS KARIGARS. ONE OF THE LIABILITY OF RS.30,000/- IS IN RESPECT OF PURCHASES . AGAINST WHICH THE APPELLANT SOLD JEWELLERY IN THE SUBSEQUENT YEAR. THE SUBSEQUENT PAYMENTS/SALE ALSO PROVES THAT THE LIABILITIES EXIST GENUINELY. THE APPELLANT, WITH THE HELP OF ABOVE SUBMISSION AND ENCLOSURES OF THE SUBMISSION EXPLAINED AND REBUT TH E FINDING OF THE AO. THESE LIABILITIES WERE NOT QUITE OLD. FURTHER, IT IS ALSO FOUND THAT THESE LIABILITIES WE RE LIQUIDATED SUBSEQUENTLY IN SHORT SPAN OF TIME; THEREFORE, THE GENUINENESS OF THESE LIABILITIES GET S ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 37 ESTABLISHED AS THE GENUINE LIABILITY CANNOT LIE UNCLAIMED FOR A LONG PERIOD. ACCORDINGLY, IT IS HEL D THAT THE AO HAS ERRED IN TREATING SUNDRY CREDITORS AGGREGATING TO RS.46,15,850/- AS UNEXPLAINED. CONSEQUENTIALLY, THE ADDITION OF RS.46,15,850/- IS DELETED. THE APPELLANT GETS RELIEF OF RS.46,15,850/ -. 9.3.1 ALTHOUGH, THE LD. SR. DEPARTMENTAL REPRESENT ATIVE HAS ARGUED AT LENGTH THAT THE LD. CIT (A) HAS ERRED IN DELETING THESE ADDITIONS, NO FACTUAL INFIRMITY OR CONTRADICTION CO ULD BE POINTED OUT BY HER IN THIS REGARD. WE FIND THAT THE LD. CIT (A) HAS REACHED A LOGICAL CONCLUSION IN THIS REGARD AND THE SE FACTUAL FINDINGS REMAIN UN-CONTRADICTED. ACCORDINGLY, WE FI ND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) O N THIS ISSUE AND WE DISMISS GROUND NO. 3 OF THE DEPARTMENTS APPEAL. 9.4 GROUND NO. 4 OF THE DEPARTMENTS APPEAL CHALL ENGES THE DELETION OF ADDITION OF RS. 2,41,242/- OUT OF TRAVE LLING EXPENSES. IN THIS REGARD, IT IS SEEN THAT THE LD. CIT (A) HAS DELETED THE ADDITION WHILE OBSERVING THAT ALTHOUGH EVIDENCE BEY OND REASONABLE DOUBT IS NOT AVAILABLE, THE TOTALITY OF CIRCUMSTANCES HAS TO BE LOOKED INTO AND TO EVOLVE A PROCESS WHICH WOULD ADAPT TO A SITUATION IN PURSUIT OF TRUTH AND JUSTICE. THE LD. CIT (A) ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 38 FURTHER OBSERVED THAT WHERE DIRECT EVIDENCES WERE N OT AVAILABLE, SUBSTANTIAL EVIDENCES COULD BE TREATED AS SUFFICIEN T FOR DECIDING THE ISSUE. THEREAFTER THE LD. CIT (A) HAS CONCLUDED IN PARA 6.1 OF THE IMPUGNED ORDER THAT IN HIS OPINION THE TRAVELLI NG EXPENSES WERE INCURRED FOR BUSINESS PURPOSES AND THERE WAS N O ELEMENT OF PERSONAL/NON-BUSINESS EXPENDITURE EMBEDDED THEREIN. HOWEVER, THE LD. CIT (A) HAS NOT INDICATED THE CIRCUMSTANCES ON WHICH HE RELIED UPON TO REACH SUCH A CONCLUSION. IT IS UNDIS PUTED THAT THE ASSESSEE FAILED TO PRODUCE DOCUMENTARY EVIDENCES IN RESPECT OF THESE EXPENSES BEFORE BOTH THE LOWER AUTHORITIES AN D NOR COULD JUSTIFY ITS CLAIM THAT THE EXPENSES HAS BEEN INCURR ED FOR PURELY BUSINESS PURPOSES. THE LD. CIT (A) HAS APPARENTLY A CCEPTED THE CONTENTIONS OF THE ASSESSEE WITHOUT EXAMINING THE V ERACITY OF THE CLAIM IN DETAIL. THIS SHOULD NOT HAVE BEEN DONE. HO WEVER, IN INTEREST OF JUSTICE, WE DEEM IT APPROPRIATE TO REST ORE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICER TO EXAMIN E THE ISSUE AFRESH AND DIRECT THE ASSESSEE TO ESTABLISH BEYOND REASONABLE DOUBT THAT THESE EXPENSES WERE FOR BUSINESS PURPOSE S. THE AO SHALL AFFORD PROPER OPPORTUNITY TO THE ASSESSEE BEF ORE ADJUDICATING THIS ISSUE AS PER LAW. ACCORDINGLY GRO UND NO. 4 STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 39 9.5 GROUND NO. 5 IS GENERAL IN NATURE AND DOES NOT CALL FOR ANY ADJUDICATION. 9.6 IN THE RESULT, THE APPEAL OF THE DEPARTMENT STA NDS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN TERMS OF OUR OB SERVATIONS CONTAINED IN THE PRECEDING PARAGRAPHS. 10.0 WE NOW TAKE UP THE ASSESSEES APPEAL BEARING ITA NO. 6062/DEL/2014. THE FIRST GROUND TAKEN BY THE ASSESS EE CHALLENGES THE ACTION OF THE LD. CIT (A) SUSTAINING DISALLOWANCE OF RS. 6,00,000/- U/S 40(3) ON ACCOUNT OF SALARY PAID TO PARTNERS. THE MAIN THRUST OF THE ARGUMENT OF THE LD. AUTHORIS ED REPRESENTATIVE HAS BEEN THAT THE SUBMISSIONS OF THE ASSESSEE WERE NOT PROPERLY CONSIDERED BY THE LOWER AUTHORITI ES IN THIS REGARD. THE AUTHORISED REPRESENTATIVE HAS DRAWN OUR ATTENTION TO THE SUBMISSIONS/DOCUMENTS WHICH HAVE BEEN FILED BY THE ASSESSEE TO SUPPORT THE CLAIM THAT THE IMPUGNED PAY MENTS WERE NOT AGAINST PAYMENT OF SALARY BUT WERE RATHER DEBIT ED TO THE CAPITAL ACCOUNT AND WERE WITHDRAWALS OF THE PARTNER S. APPARENTLY BOTH THE LOWER AUTHORITIES HAVE NOT CONSIDERED THIS ASPECT OF THE ASSESSEES SUBMISSION. ACCORDINGLY, IN INTEREST OF JUSTICE, WE DEEM IT FIT TO RESTORE THIS ISSUE TO THE FILE OF TH E LD. CIT (A) TO VERIFY THE CLAIM OF THE ASSESSEE WITH THE BOOKS OF ACCOUNTS THAT ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 40 THE IMPUGNED PAYMENTS WERE DEBITS TO THE CAPITAL AC COUNTS OF THE PARTNERS AND WERE NOT PAYMENTS AGAINST SALARY T O THE PARTNERS. THE LD. CIT (A) IS DIRECTED TO DECIDE THI S ISSUE AFRESH AFTER TAKING IN DUE CONSIDERATION THE SUBMISSIONS T O THE ASSESSEE AS WELL AS THE EVIDENCES ON WHICH IT SEEKS TO RELY UPON AND, THEREAFTER, PASS THE ORDER IN ACCORDANCE WITH LAW A FTER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. IN THE RESULT THIS GROUND STANDS ALLOWED FOR STATISTICAL PURPOSES. 10.1 COMING TO GROUND NO. 2 OF THE ASSESSES APP EAL WHICH CHALLENGES THE ACTION OF THE LD. CIT (A) IN SUSTAI NING DISALLOWANCE OF RS. 1,67,356/- UNDER THE HEAD BUSI NESS PROMOTION EXPENSES, IT IS SEEN THAT THE AO HAD DIS ALLOWED THIS AMOUNT BECAUSE THIS PAYMENT TO MAHINDRA HOLIDAYS AN D RESORT WAS NOT SUPPORTED BY ANY BILL OR VOUCHER AND NOR WA S THE ASSESSEE ABLE TO ESTABLISH THAT THIS EXPENDITURE RE LATED TO ASSESSEES BUSINESS. THE LD. CIT (A) ALSO SUSTAINED THE DISALLOWANCE BY OBSERVING THAT THE ASSESSEE HAD FAI LED TO DEMONSTRATE AS TO HOW THIS PAYMENT WAS INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. THE LD. AUTHORISED REPRESENTATIVE HAS DRAWN OUR ATTENTION T O THE SUBMISSIONS MADE BEFORE THE LD. CIT (A) IN THIS REG ARD AND HAS ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 41 SUBMITTED THAT THE SUBMISSIONS WERE NOT PROPERLY CO NSIDERED BY THE LD. CIT (A). A PERUSAL OF THE ORDER OF THE LD. CIT (A) ALSO SHOWS THAT THE SUBMISSIONS OF THE ASSESSEE HAVE NOT BEEN DISCUSSED BY THE LD. CIT (A) WHILE DISMISSING THE G ROUND. IT IS OUR CONSIDERED OPINION THAT INTEREST OF JUSTICE WOU LD BE SERVED IF THIS ISSUE IS RE-EXAMINED BY THE LD. CIT (A) AFTER DULY CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE IN THIS REGARD AND AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY. THUS, GROUN D NO. 2 ALSO STANDS ALLOWED FOR STATISTICAL PURPOSES. 10.2 GROUND NO. 3 OF THE ASSESSEES APPEAL CHALLE NGES THE ACTION OF THE LD. CIT (A) IN SUSTAINING DISALLOWANC E OF RS. 1,60,000/- PERTAINING TO SALES PROMOTION EXPENSES. THESE EXPENSES WERE INCURRED FOR PURCHASING TICKETS FOR C OMMONWEALTH GAMES AND THE ASSESSEE HAD CLAIMED THAT THIS WOULD RESULT IN EXPANSION OF THE CLIENT BASE. HOWEVER, THE ASSESSEE WAS NOT ABLE TO ESTABLISH THAT THESE EXPENSES WERE FOR BUSINESS PURPOSES. THE LD. CIT (A) ALSO DISMISSED THE ASSESSEES GROUND FO R THE REASON THAT EVIDENCE BEYOND REASONABLE DOUBT WAS NOT AVAIL ABLE FOR ESTABLISHING THAT THESE EXPENSES WERE FOR BUSINESS PURPOSES. IN THIS REGARD ALSO THE LD. AUTHORISED REPRESENTATIVE HAS DRAWN OUR ATTENTION TO THE DETAILED SUBMISSIONS MADE BEFORE T HE LD. CIT (A) ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 42 AND IT IS EVIDENT THAT THE LD. CIT (A) HAS DISMISSE D THE ASSESSEES GROUND WITHOUT PROPERLY CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE. ACCORDINGLY, IN OUR CONSIDERED VIEW, THIS ISSUE ALSO NEEDS TO BE RESTORED TO THE FILE OF THE LD. CIT (A) FOR FRESH ADJUDICATION. ACCORDINGLY, WE RESTORE THIS ISSUE AL SO TO THE FILE OF THE LD. CIT (A) FOR BEING ADJUDICATED AFRESH AFTER DULY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THIS REGARD AND AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS C ASE. THUS, THIS GROUND ALSO STANDS ALLOWED FOR STATISTICAL PURPOSES . 10.3 GROUND NOS. 4 AND 5 ARE GENERAL IN NATURE AN D DO NOT REQUIRE ANY ADJUDICATION. 11. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS A LLOWED FOR STATISTICAL PURPOSES. 12. IN THE FINAL RESULT, THE APPEAL OF THE DEPARTME NT STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE APPEAL OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND OCTOBER, 2018 . SD/- SD/- (PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBE R ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 43 *BR* DATED: 22 ND OCTOBER, 2018 COPY FORWARDED TO: - 1) APPELLANT 2) RESPONDENT 3) CIT(A) 4) CIT 5) DR TRUE COPY BY ORDER ASSTT. REGISTRAR ITA NO. 6260/DEL/2014 ITA NO. 6757/DEL/2014 44 DATE OF DICTATION 22.10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22.10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 22.10.2018 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS 22.10.2018 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 22.10.2018 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 30.10.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 30.10.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER