Maharashtra Solvent Extraction P. Ltd., Jalgaon V. Jt. CIT, Jalgaon

ITA 73/PUN/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7691 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 07-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK AGGARWAL
• Keywords: Unexplained investment; Additional evidence; Revenue expenditure; Capital expenditure
• Section: 69C; 143(3); 133(6); 37(1); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 73 /P U N/201 3 / ASSESSMENT YEAR : 20 09 - 10 MAHARASHTRA SOLVENT EXTRACTION PVT. LTD., C/O S.K. OIL INDUSTRIES COMPOUND, SHIVAJI NAGAR, JALGAON 425001 . / APPELLANT PAN: AADCM8466G VS. THE JT. COMMISSIONER OF INCOME TAX, RANGE 2, JALGAON . / RESPONDENT . / ITA NO. 6 06 /P U N/201 3 / ASSESSMENT YEAR : 20 09 - 10 THE JT. COMMISSIONER OF INCOME TAX, RANGE 2, JALGAON . / APPELLANT VS. MAHARASHTRA SOLV ENT EXTRACTION PVT. LTD., C/O S.K. OIL INDUSTRIES COMPOUND, SHIVAJI NAGAR, JALGAON 425001 . / RESPONDENT PAN: AADCM8466G ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI VIVEK AGGARWAL / DATE OF HEARING : 2 7 .0 7 . 2017 / DATE OF PRONOUNCEMENT: 16 . 0 8 .201 7 ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 2 / ORDER PER SUSHMA CHOWLA, J M : TH E CROSS APPEAL S FILED BY THE ASSESSEE AND THE REVENUE ARE AGAINST THE ORDER OF CIT (A) - I I, NASHIK , DATED 1 7 . 12 .201 2 RELATING TO ASSESSMENT YEAR 20 09 - 1 0 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO. 73 /PUN/201 3 HAS RAISED THE FOLLOWING GROUND OF APPEAL : - 1) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.8,80,047/ - ON ACCOUNT OF COMMISSION PAID TO SANJAY AGRAWAL - HUF. 2) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING ADDITION TO THE EXTENT OF RS.5,00,000/ - ON ACCOUNT OF DISALLOWANCE OF PART OF THE SALARY PAID TO SMT. SANTOSH SANJAY AGRAWAL. 3) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING ADDITION TO THE EXTENT OF RS.8,9 0,327/ - ON ACCOUNT OF DISALLOWANCE OF PART OF THE SALARY AND COMMISSION PAID TO SHRI RAVI SANJAY AGRAWAL. 4) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING ADDI T ION T O THE EXTENT OF RS.44,85,927/ - ON ACCOUNT OF DISALLOWANCE OF PART OF THE TRA N SACTION WITH RELATED PARTY I.E. S.K. AGROTECH. 5) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING ADDITION TO THE EXTENT OF RS.2,27,595/ - ON ACCOUNT OF DISALLOWANCE OF PART OF THE INTEREST U/S.36( 1 )(III) ON ADVANCES TOWARDS MACHINERY AND BUILDI NG MATERIAL. 6) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING ADDITION TO THE EXTENT OF RS.1,55,000 / - ON ACCOUNT OF DISALLOWANCE OF PART OF THE INTEREST U/S.36( 1 )(III) ON AMOUNT ADVANCED TO VINOD D. AGRAWAL. ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 3 7) ON THE FACTS AND IN LAW THE CI T(A) HAS ERRED IN CONFIRMING ADDITION TO THE EXTENT OF RS.5,65,625/ - ON ACCOUNT OF DISALLOWANCE OF PART OF THE INTEREST U/S.36( 1 )(I II ) ON AMOUNT ADVANCED TO S.K. OIL INDUSTRIES. 8) ON THE FACTS AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING ADDITION TO THE EXTENT OF RS.97,757/ - ON ACCOUNT OF DISALLOWANCE OF PART OF THE ELECTRICITY EXPENSES. 4. THE REVENUE IN ITA NO.606/PUN/2013 HAS FILED REVISED GROUNDS OF APPEAL , WHICH READ AS UNDER : - 1. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN NOT REJECTING BOOK RE SULTS BY APPLYING PROVISIONS OF SECTION 145(3) OF THE: ACT IN FACE OF VARIOUS DISCREPANCIES POINTED OUT BY THE AO IN HIS ORDER. 2. ON FACTS AND IN LAW THE LD. CIT(A) HAS ERRED IN NOT ACCEPTING THE STRONG CIRCUMSTANTIAL EVIDENCE OF SUPPRESSED PRODUCTION AND RELYING ON ONLY DIRECT EVIDENCE OF SUPPRESSION. 3. THE CIT(A) ERRED IN DELETING THE ENTIRE ADDITION STATING THAT ADDITION WAS MADE ON GUESSWORK WITHOUT CONSIDERING THAT IN SUCH CASES, DIRECT EVIDENCES IS USUALLY HARD TO COME BY AND NOT APPRECIATED THE ST RONG CIRCUMSTANTIAL EVIDENCE BROUGHT BY THE AO. 4. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.17,774/ - ON ACCOUNT OF DISALLOWANCE OF ELECTRICAL AND TURBINE EXPENSES TREATING THE SAME AS REVENUE EXPENDITURE. 5. ON FACTS AND I N LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,77,606/ - ON ACCOUNT OF DISALLOWANCE OUT OF GENERAL MATERIAL SPARES. 6. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING PARTLY ADDITION OF RS. 4,60,000/ - ON ACCOUNT OF DISALLOWANCE OF SA LARY TO SMT. SANTOSH SANJAY AGRAWAL. 7. ON THE FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING PARTLY ADDITION OF RS.2,40,000/ - ON ACCOUNT OF DISALLOWANCE OUT OF SALARY AND COMMISSION TO SHRI.RAVI SANJAY AGRAWAL (MBA). 8. ON FACTS AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING PARTIAL DISALLOWANCE OF RS. 3,00,000/ - ON ACCOUNT OF TRANSACTIONS WITH RELATED PARTY. 9. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING PARTIAL DISALLOWANCE OF RS. 2,27,595/ ON ACCOUNT OF ADVANCES AGAINST MACHINERY B UILDING MATERIAL. 10. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING PARTIAL DISALLOWANCE OF RS. 1,60,000/ - AND RS. 5,65,625/ - OUT OF UNSECURED LOAN DEBIT BALANCES. ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 4 11. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING ADDITION OF RS.55,64, 596/ - ON ACCOUNT OF EXTRA PROFIT. 12. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING ADDITION U/S 69 OF RS.26,89,248/ - OUT OF MANUFACTURING ACCOUNT BEING ELECTRICITY CONSUMED IN THE NAME OF S.K. AGROTECH. 13. ON FACTS AND IN LAW THE LD.CIT(A) HAS E RRED IN DELETING ADDITION OF RS.5,97,243/ - OUT OF ELECTRICITY EXPENSES UTILIZED FOR CONSTRUCTION WORK CAPITALIZED. 14. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING ADDITION U/S 69C OF RS.2,70,661/ - ON ACCOUNT OF EXCESS CONSUMPTION OF COAL. 1 5. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING ADDITION U/S 69C OF RS.67,435/ - ON ACCOUNT OF PURCHASE OF COAL.: 16. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING ADDITION OF RS.60,255/ - OUT OF BALANCE U/S 133(6) OF THE INCOME TAX A CT, 1961. 5. THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE INVOLVES S IMILAR GROUNDS OF APPEAL ON THE SAME ISSUE, WHEREIN PART RELIEF HAS BEEN GIVEN BY THE CIT(A) AND CONSEQUENTLY, BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL AGAINST THE ORDER OF CIT(A). WE PROCEED TO TAKE UP THE GROUNDS OF APPEAL ACCORDINGLY. 6. THE FIRST ISSUE RAISED BY THE ASSESSEE VIDE GROUND OF APPEAL NO.1 IS AGAINST DISALLOWANCE OF COMMISSION OF RS. 8,80,047/ - PAID TO SANJAY AGRAWAL - HUF. 7. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN RUNNING A SOLVENT EXTRACTION PLANT. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.3,89,05,630/ - . THE CASE OF ASSESSEE WAS TAKEN UP FOR SCRUTINY AND VARIOUS ADDITIONS WERE MADE BY THE ASSESSING OFFICER. IN APPEAL, THE CIT(A) ALLOWED CERTAIN CLAIMS OF ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 5 ASSESSEE AND DISALLOW ED CERTAIN CLAIMS AND IN RESPECT OF CERTAIN EXPENDITURE, THE CLAIM WAS ALLOWED PARTLY. 8. BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US. 9. THE FIRST GROUND OF APPEAL DEALS WITH THE DISALLOWANCE OF COMMISSION PAID TO SANJAY AGRAWAL - HUF. THE PLEA OF ASSESSEE IN THIS REGARD WAS THAT THE COMMISSION WAS PAID TO SAID HUF FOR ARRANGING LOCAL PURCHASE OF SOYA SEEDS ON CREDIT. THE ASS ESSING OFFICER DISALLOWED THE CLAIM AS HUF WAS IN REPRESENTATIVE CAPACITY AND ALSO APPLIED THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THE CIT(A) CONFIRMED THE DISALLOWANCE OF ENTIRE COMMISSION PAID ON THE GROUND THAT THE ASSESSEE WAS UNABLE TO PROVE THAT THE SERVICES WERE RENDERED BY THE ASSESSEE. 10. THE PLEA OF THE ASSESSEE BEFORE US WAS THAT THE SIMILAR COMMISSION WAS BEING PAID TO HUF IN EARLIER YEARS AND NO DISALLOWANCE WAS MADE IN ANY OF THE YEARS. FURTHER, THE SAID HUF HAD INCLUDED THE COMM ISSION INCOME IN ITS HANDS AND HAD PAID TAXES AS PER COPY OF RETURN FILED, WHICH ARE PLACED AT PAGES 159 AND 160 OF THE PAPER BOOK. HE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD . (2009) 310 ITR 306 (BOM) AND STATED THAT NO DISALLOWANCE WAS WARRANTED. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE RECORD. THE ISSUE RAISED IS AGAINST THE CLAIM OF COMMISSION PAID TO SANJAY AGRAWAL - HUF WHO WAS ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 6 ARRANGING PURCHASE OF SOYA SEEDS ON BEHALF OF THE ASSESSEE. THE TOTAL COMMISSION PAID TO THE SAID HUF WAS RS.8,80,047/ - . THE FIRST ISSUE WHICH IS RAI SED AGAINST THE ASSESSEE IS THAT IT HAD NOT PROVED SERVICES RENDERED BY THE HUF. HOWEVER, WE FIND THAT SIMILAR SERVICES WERE AVAILED BY THE ASSESSEE IN EARLIER YEARS AND NO DISALLOWANCE WAS MADE OUT OF COMMISSION PAID TO HIM . IN SUCH CIRCUMSTANCES, IT CO ULD NOT BE SAID THAT THE SAID PERSON HAS NOT RENDERED ANY SERVICES TO THE ASSESSEE. 13. THE OTHER ASPECT OF THE ISSUE IS THAT THE COMMISSION PAID TO HUF HAS BEEN INCLUDED IN ITS RETURN OF INCOME AND CONSEQUENTLY, THERE IS NO LEAKAGE OF REVENUE. IN SUCH SCENARIO, THE EXPENDITURE MERITS TO BE ALLOWED IN THE HANDS OF ASSESSEE IN LINE WITH THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD. (SUPRA). WE HOLD SO. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.8,80,047/ - . 14. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS AGAINST DISALLOWANCE OF SALARY PAID TO SMT. SANTOSH S. AGARWAL OF RS.5 LAKHS. THE REVENUE VIDE GROUND OF APPEAL NO.6 IS AGGRIEVED BY DELETION OF RS.4,60,000 / - IN RESPECT OF SALARY PAID TO SMT. SANTOSH S. AGARWAL. 15. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD PAID SALARY OF RS.9,60,000/ - TO SMT. SANTOSH S. AGARWAL , WHO ADMITTEDLY, WAS A SPECIFIED PERSON UNDER SECTION 40A(2)(B) OF THE ACT. T HE CLAIM OF ASSESSEE WAS THAT SHE WAS ATTENDING OFFICE AND DOING INTERNAL CHECKING OF BUSINESS TRANSACTIONS AND WAS ALSO LOOKING AFTER OTHER ADMINISTRATIVE WORK OF ASSESSEE COMPANY. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE OF RS.9,60,000/ - ON THE GROUND ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 7 THAT THE SAID LADY WAS NOT QUALIFIED AND EVEN THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT WERE APPLICABLE. THE CIT(A) NOTED THAT IN EARLIER YEAR, SUM OF RS.4 LAKHS WAS PAID AS SALARY TO THE LADY AND HE ACCORDINGLY, CONSIDERED SALARY OF RS.4,60,0 00/ - AS REASONABLE AND THE BALANCE SUM OF RS.5 LAKHS WAS DISALLOWED. 16. BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL AGAINST THE SAME. 17. ON CONSIDERING THE TOTAL FACTS AND CIRCUMSTANCES OF THE CASE , WE FIND NO MERIT IN THE CLAIM OF ASSESSEE, WHER EIN AS AGAINST SALARY PAID OF RS.4 LAKHS IN THE PRECEDING YEAR, FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS PAID SALARY OF RS.9,60,000/ - . THE ASSESSEE HAS FAILED TO BRING ON RECORD THE NECESSARY EVIDENCE OF HER HAVING REQUISITE QUALIFICATIONS TO CAR RY OUT THE WORK AND IN ANY CASE IN THE PRECEDING YEAR, SALARY TO THE TUNE OF RS.4 LAKHS WAS ONLY PAID. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN ALLOWING THE SALARY CLAIMED AT RS.4,60,000/ - AND DISALLOWING BALANCE SUM OF RS.5 LAKHS. THE PLEA OF ASSES SEE HAVING PAID THE TAXES AND HENCE, NO DISALLOWANCE IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD. (SUPRA), DOES NOT STAND SINCE THE RATE OF TAXES ON THE INCOME DISCLOSED BY THE ASSESSEE I S ON LOWER END. ACCORDINGLY, THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE AND GROUND OF APPEAL NO.6 RAISED BY THE REVENUE ARE DISMISSED. 18. THE ISSUE IN GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS AGAINST DISALLOWANCE OF SALARY PAID TO RAVI AGAR WAL OF RS.8,90,327/ - . THE REVENUE BY WAY OF GROUND OF APPEAL NO.7 HAS RAISED THE ISSUE AGAINST ALLOWANCE OF SALARY OF RS.2,40,000/ - PAID TO RAVI AGARWAL. ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 8 19. IN THE FACTS RELATING TO THE ISSUE, THE ASSESSEE HAD PAID SALARY OF RS. 9,60,000/ - TO RAVI AGARWA L AND FURTHER PAID COMMISSION OF RS.8,90,327/ - , TOTALING RS.18,50,327/ - . THE ASSESSEE EXPLAINED THAT RAVI AGARWAL WAS AN MBA AND WAS HANDLING TOTAL EXPORT AND LOGISTICS BUSINESS OF THE ASSESSEE COMPANY. HE WAS ALSO AWARDED YOUNG ENTREPRENEUR OF THE YEAR OF OIL INDIA CONFERENCE . THE ASSESSING OFFICER ALLOWED AN AMOUNT OF RS.7,20,000/ - AND DISALLOWED BALANCE SUM OF RS.11,30,327/ - . 20. THE CIT(A) ON THE OTHER HAND, ALLOWED TOTAL SALARY CLAIM OF RS.9,60,000/ - BUT CONFIRMED THE DISALLOWANCE OF COMMISSION OF RS.8,90,327/ - . 21. THE ASSESSEE POINTS OUT THAT THE COMMISSION HAS BEEN PAID TO SAID RAVI AGARWAL BECAUSE OF HIS HANDLING THE ENTIRE EXPORTS OF THE ASSESSEE COMPANY. THE NEXT LIMB OF ARGUMENT IS THAT SHRI RAVI AGARWAL HAS INCLUDED THE SAID AMOUNT AS PA RT OF HIS INCOME AND PAID TAXES AT THE HIGHEST RATE AS IN THE CASE OF ASSESSEE COMPANY. IN THIS REGARD, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD. (SUPRA) AND IT WAS POINTE D OUT THAT THERE WAS NO MERIT IN MAKING ANY DISALLOWANCE ON THIS COUNT. 22. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAD ENGAGED THE SERVICES OF RAVI AGARWAL, WHO WAS AN MBA, WAS LOOKING AFTER THE EXPORT BUSINESS. FOR THE YEAR UNDER CONSIDERATION, THE ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 9 ASSESSEE HAD CLAIMED DEDUCTION OF RS.18,50,327/ - , WHICH COMPRISED OF SALARY OF RS.9,60,000/ - AND COMMISSION OF RS.8,90,327/ - . THE ASSESSING OFFICER HAD ALLOWED ONLY SALARY TO THE EXTENT OF RS.7,20,000/ - AND THE CIT(A) HAD ALLOWED TOTAL SALARY OF RS.9,60,000/ - . BOTH THE AUTHORITIES BELOW DISALLOWED THE CLAIM OF COMMISSION PAID OF RS.8,90,327/ - . WE FIND THAT WHER E THE ASSESSEE HAS ESTABLISHED THE SERVICES RENDERED BY THE SAID PERSON AND SINCE THE SALARY PAID TO RAVI AGARWAL HAS BEEN ALLOWED AS DEDUCTION IN THE COMPUTATION OF INCOME, HENCE ITS STANDS ESTABLISHED THAT RAVI AGARWAL HAS CONTRIBUTED HIS SERVICES TO THE ASSESSEE COMPANY. 24 . NOW, THE QUESTION WHICH ARISES IS WHETHER THE COMMISSION PAID TO RAVI AGARWAL BY THE ASSESSEE COMPANY MERITS TO BE ALLOWED OR NOT? IN THE FIRST INSTANCE, THE ASSESSING OFFICER HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO ESTABLI SH THAT THE CLAIM OF COMMISSION PAID BY THE ASSESSEE IS NOT CORRECT. THE ASSESSEE IS THE BEST JUDGE OF ITS AFFAIRS AND ONCE IT HA D AGREED TO PAY THE COMMISSION TO A PERSON WHO IS PROVIDING HIS SERVICES TO THE ASSESSEE COMPANY, THEN UNLESS OTHERWISE, IT IS NOT ALLOWABLE BECAUSE OF ANY RESTRICTIONS PUT UNDER THE SECTION, THE EXPENDITURE AS SUCH IS ALLOWABLE IN ENTIRETY UNDER SECTION 37(1) OF THE ACT. ACCORDINGLY, WE HOLD SO. 2 5 . THE SECOND ASPECT OF THE RECIPIENT HAVING INCLUDED THE SAID INCOME IN ITS RETU RN OF INCOME AND PAYING TAXES AND THERE BEING NO LOSSES TO THE EXCHEQUER, SINCE THE RATE OF TAXES PAID ARE SAME IN THE HANDS OF ASSESSEE AND THE RECIPIENT AND APPLYING THE PRINCIPLE LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. INDO SAUDI SERVICES (TRAVEL) PVT. LTD. (SUPRA), WE HOLD THAT THE EXPENDITURE IS TO BE ALLOWED IN ENTIRETY IN THE HANDS OF ASSESSEE. ACCORDINGLY, ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 10 THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS ALLOWED AND THE GROUND OF APPEAL NO.7 RAISED BY THE REVENUE IS DISMISSED. 2 6 . THE NEXT ISSUE BY WAY OF GROUND OF APPEAL NO.4 IS IN RESPECT OF ADDITION OF RS. 44,85,927/ - IN RESPECT OF TRANSACTIONS WITH S.K. AGROTECH. 2 7 . BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE DURING THE YEAR HAD SOLD GOODS TO S.K. AGROTECH OF RS.41 .04 CRORES AND HAD PURCHASED THE SAID GOODS FROM THE SAID PARTY FOR RS.41.52 CRORES. THE ASSESSING OFFICER HAD HELD THE SAID TRANSACTION TO BE NON - GENUINE AND THE DIFFERENCE BETWEEN SELLING PRICE AND PURCHASE PRICE OF RS.47,85,927/ - WAS ADDED AS INCOME OF THE ASSESSEE. THE CIT(A) CONFIRMED THE FINDINGS OF ASSESSING OFFICER. HOWEVER, HE HELD THAT THE ASSESSEE HAD USED THE GODOWN OF S.K. AGROTECH FOR KEEPING THE STOCK AND HENCE, AN AMOUNT OF RS.3 LAKHS WAS CONSIDERED AS GODOWN RENT AND THE BALANCE SUM OF R S.44.85 LAKHS WAS CONFIRMED IN THE HANDS OF ASSESSEE. THE CIT(A) PARTLY ALLOWED THE CLAIM OF ASSESSEE. THE REVENUE VIDE GROUNDS OF APPEAL NO. 8 IS IN APPEAL AGAINST THE RELIEF GRANT ED BY THE CIT(A) ON THIS COUNT. 2 8 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DURING THE COURSE OF HEARING DID NOT PRESS THE SAID GROUND OF APPEAL. HENCE, THE ADDITION OF RS.44,85,927/ - ON ACCOUNT OF ALLEGED TRANSACTION WITH S.K. AGROTECH STANDS CONFIRMED IN THE HANDS OF ASSESSEE. HENCE, THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE IS DISMISSED . FURTHER, THERE IS NO MERIT IN GROUND OF APPEAL RAISED BY THE REVENUE AS AMOUNT IS HELD TO BE PAID AS RENT. T HE GROUND OF APPEAL NO. 9 RAISED BY THE REVENUE IS ALSO DISMISSED. ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 11 29 . THE ISSUES IN GROUNDS OF APPEAL NO.5 TO 7 AND RAISED BY THE ASSESSEE ARE AGAINST THE DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD ADVANCED INTEREST BEARING FUNDS, INTEREST FREE AND HENCE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE MERITS TO BE DISALLOWED . THE REVENUE IS IN APPEAL AGAINST RELIEF ALLOWED BY CIT(A) VIDE GROUNDS OF APPEAL NO.9 AND 10. 3 0 . BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD MADE CERTAIN ADVANCES. FIRST SUCH ADVANCE WAS TOWARDS PURCHASE OF MACHINERY AND BUILDING MATERIAL TOTALING RS.30,34,597/ - . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID ADVANCES ARE MADE OUT OF INTEREST BEARING FUNDS AND HENCE, INTEREST EXPENDITURE MERITS TO BE DISALLOWED @ 15% ON THE ADVANCE OF RS.30,34,597/ - , RESULTING IN AD DITION OF RS.4,55,190/ - . THE ASSESSEE CONTENDED BEFORE THE CIT(A) THAT IT HAD SUFFICIENT NON - INTEREST BEARING FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES. THE CIT(A) ACCEPTED THE PLEA OF ASSESSEE OF AVAILABILITY OF SURPLUS FUNDS; HOWEVER, SINCE SUFFI CIENT FUNDS WERE NOT AVAILABLE, HE SUSTAINED THE DISALLOWANCE TO THE TUNE OF 50% OF ADDITION MADE BY THE ASSESSING OFFICER. 3 1 . THE NEXT ISSUE WAS THE ADVANCES TO VINOD AGARWAL TO THE TUNE OF RS.22 LAKHS AND ADVANCE OF RS.60 LAKHS, WITH OPENING BALANCE AND RS.20 LAKHS GIVEN ON 24.06.2008 TO S.K. OIL INDUSTRIES. THE ASSESSING OFFICER DISALLOWED SUM OF RS.4,55,190/ - ON ACCOUNT OF ADVANCES TOWARDS MACHINERY AND TOWARDS BUILDING MATERIAL. HE FURTHER DISALLOWED SUM OF RS.3,10,000/ - ON THE ADVANCE OF RS.22 L AKHS TO VINOD AGARWAL AND RS. 11,31,250/ - ON ACCOUNT OF DISALLOWANCE OF INTEREST ON ADVANCE OF RS.60 LAKHS PLUS RS.20 LAKHS TO S.K. OIL INDUSTRIES. THE ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 12 CIT(A) RESTRICTED THE ADDITION TO 50% OF TOTAL DISALLOWANCE MADE BY THE ASSESSING OFFICER AS THE ASSESSE E HAD BOTH OWN FUNDS AND INTEREST FREE FUNDS. 3 2 . THE ARGUMENT OF ASSESSEE IN RESPECT OF SAID ADVANCEMENT OF LOANS ON INTEREST FREE IS THAT IT HAD SUFFICIENT NON - INTEREST BEARING FUNDS AVAILABLE TO IT IN THE FORM OF RESERVES AND SURPLUS AND RELYING ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. RELIANCE UTILITIES AND POWER LTD. (2009) 313 ITR 340 (BOM) AND IT WAS PROPOUNDED THAT NO DISALLOWANCE OF INTEREST IS WARRANTED. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE DREW OUR AT TENTION TO THE BALANCE SHEET PLACED AT PAGE 73 OF PAPER BOOK AND POINTED OUT THAT IT HAD SUFFICIENT RESERVES AND SURPLUS BEING ABOUT RS.11 CRORES AS OPENING BALANCE , WHICH WAS UTILIZED FOR MAKING THOSE INTEREST FREE ADVANCES AND HENCE, THERE WAS NO MERIT I N DISALLOWING ANY PART OF THE INTEREST EXPENDITURE. 3 3 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 3 4 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE IS SUE OF DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT AND WHETHER THE SAME IS MERITED OR NOT IS TO BE ADJUDICATED KEEPING IN MIND THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AND IN CASE THEY ARE SO AVAILABLE, THEN NO DISALLOWANCE IS WARRANTED UND ER SECTION 36(1)(III) OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS REFERRED TO THE BALANCE SHEET ALONG WITH ANNEXURE WHICH ARE PLACED AT PAGES 73 ONWARDS. THE PERUSAL OF SAID DETAILS REFLECT THAT THE INTEREST FREE FUNDS AVAILABL E TO THE ASSESSEE I.E. IN THE FORM OF RESERVES AND SURPLUS WITH OPENING BALA NCE TO THE TUNE OF RS.11 ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 13 CRORES. THE CASE OF ASSESSEE THAT IT HAD SUFFICIENT NON - INTEREST BEARING FUNDS , WHICH COULD TAKE CARE OF ADVANCES MADE INTEREST FREE BY THE ASSESSEE , IS C ORRECT . WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. RELIANCE UTILITIES AND POWER LTD. (SUPRA) IN THIS REGARD. ACCORDINGLY, WE HOLD THAT THERE IS NO MERIT IN DISALLOWING ANY PART OF INTEREST EXPENDITURE UNDER SECTI ON 36(1)(III) OF THE ACT. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF ASSESSEE IN ENTIRETY VIS - - VIS GROUNDS OF APPEAL NO.5, 6 AND 7 RAISED BY THE ASSESSEE ARE ALLOWED AND GROUNDS OF APPEAL NO.9 AND 10 RAISED BY THE REVENUE ARE DISM ISSED. 3 5 . THE GROUND OF APPEAL NO.8 RAISED BY THE ASSESSEE IS AGAINST DISALLOWANCE OF ELECTRICITY EXPENSES OF RS.97,757/ - . THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION IN ADDITION TO CARRYING ON ITS BUSINESS ACTIVITY, WAS CARRYING ON CONSTRUCTION AC TIVITY OF ITS BUILDING. THE ASSESSING OFFICER BIFURCATED THE ELECTRICITY EXPENSES AND DISALLOWED SUM OF RS.6,95,000/ - ON THE GROUND THAT THE ELECTRICITY WAS ALSO CONSUMED FOR CONSTRUCTION ACTIVITY. THE CIT(A) ESTIMATED THE DISALLOWANCE @ 7.5% OF CONSTRUC TION COST. 3 6 . THE ASSESSEE IS IN APPEAL BY WAY OF GROUND OF APPEAL NO.8 AND THE REVENUE IS ALSO IN APPEAL VIDE GROUND OF APPEAL NO.13. 3 7 . WE FIND NO MERIT IN THE STAND OF AUTHORITIES BELOW, WHERE THE ASSESSEE IS ADMITTEDLY ENGAGED IN THE BUSINESS ACT IVITY FOR THE PAST SEVERAL YEARS AND IN CASE ANY CONSTRUCTION ACTIVITY OF ITS FACTORY OR SHED IS BEING CARRIED OUT, THEN THE SAME IS ALSO IN LINE OF ITS BUSINESS AND THE EXPENDITURE ON ELECTRICITY CANNOT BE BIFURCATED ON THIS GROUND. ACCORDINGLY, WE DIREC T THE ASSESSING OFFICER TO ALLOW THE CLAIM OF ASSESSEE IN ENTIRETY. THE GROUND OF APPEAL NO.8 RAISED BY THE ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 14 ASSESSEE IS THUS ALLOWED AND THE GROUND OF APPEAL NO.13 RAISED BY THE REVENUE IS DISMISSED. THIS TAKES CARE OF ALL THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE. HOWEVER, THE REVENUE IS IN APPEAL AGAINST CERTAIN OTHER ISSUES AND WE PROCEED TO DEAL WITH THE SAME. 38 . THE GROUNDS OF APPEAL NO.1 TO 3 RAISED BY THE REVENUE ARE AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY THE ASSESSING O FFICER ON ACCOUNT OF SUPPRESSED PRODUCTION AFTER REJECTING THE BOOKS OF ACCOUNT AND ALSO MAKING ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENTS FOR THE SAID SUPPRESSED PRODUCTION. THE REVENUE HAS ALSO RAISED GROUNDS OF APPEAL NO.11 AND 12 AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITION ON ACCOUNT OF EXTRA PROFIT WHICH WAS MADE BY THE ASSESSING OFFICER ON THE SALE OF AFORESAID SUPPRESSED PRODUCTION. 39 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED HEAVY RELIANCE ON THE ORDER OF ASSESS ING OFFICER WITH REFERENCE TO PARA 12 AT PAGES 10 TO 12 OF THE ASSESSMENT ORDER. 4 0 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ON THE OTHER HAND, POINTED OUT THAT THE ISSUE RAISED IS SQUARELY COVERED BY THE ORDER S OF PUNE BENCH OF TRIBUNAL IN SERIES OF CASES OF STEEL GROUP. HE FURTHER POINTED OUT THAT THERE WAS NO SEARCH CARRIED OUT BY ANY OF THE AUTHORITY NOR ANY INVESTIGATION WAS MADE BY EITHER THE ASSESSING OFFICER OR ANY OTHER AUTHORITY. FURTHER, NO EVIDENCE OF CLANDESTINE REMOVAL OF GOO DS WAS FOUND OR DETECTED BY THE ASSESSING OFFICER OR ANY OTHER AUTHORITY AND ALSO THERE WAS NO BASIS FOR ESTIMATION OF CONSUMPTION OF ELECTRICITY WHICH WAS APPLIED BY THE ASSESSING OFFICER TO ESTIMATE THE TURNOVER IN THE HANDS OF ASSESSEE. ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 15 4 1 . WE HAVE HEA RD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF SOLVENT EXTRACTION PLANT AND ONE OF THE COMPONENTS WAS THE ELECTRICITY CONSUMPTION. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE WAS NOT MAINTAINING DAY - TO - DA Y RECORD OF PRODUCTION AND ALSO THAT THE CONSUMPTION OF ELECTRICITY WAS VARYING VERY MUCH. THE ASSESSING OFFICER CONSIDERED THE CONSUMPTION OF ELECTRICITY ON VARIOUS DATES IN DIFFERENT MONTHS BY THE ASSESSEE AND THE CORRESPONDING PRODUCTION. HE ALSO TABU LATED MONTH - WISE DETAILS OF ELECTRICITY CONSUMPTION PER UNIT ON DAY - TO - DAY BASIS OF LOWEST AND HIGHEST AS SHOWN BY THE ASSESSEE. THE ASSESSING OFFICER REJECTING THE EXPLANATION OF ASSESSEE WAS OF THE VIEW THAT THE ASSESSEE HAD SUPPRESSED PRODUCTION IN ITS BOOKS OF ACCOUNT. THUS, THE ASSESSING OFFICER APPLYING THE PROVISIONS OF SECTION 145(3) OF THE ACT , REJECTED THE BOOKS OF ACCOUNT AND TOOK THE PROCESSING PER METRIC TONNE @ 30 UNITS AS AGAINST PRODUCTION OF 25 UNITS CONSUMED BY THE ASSESSEE AFTER ALLOWIN G VARIOUS MARGINS AND FURTHER CONSUMPTION OF ELECTRICITY @ 550 UNITS PER DAY FOR OTHER WORK WAS WORKED . ON THIS BASIS, THE ASSESSING OFFICER WORKED OUT THE PRODUCTION AT 130804.01 MT , A S AGAINST PROCESSING OF 101604.40 MT SHOWN BY THE ASSESSEE. THE ASSES SING OFFICER ON THIS BASIS COMPUTED EXTRA PROFIT OF RS.5,86,65,483/ - WHICH WAS ADDED IN THE HANDS OF ASSESSEE. THE ASSESSING OFFICER ALSO MADE AN ADDITION OF PEAK PURCHASE INVESTMENT OF RS. 2,65,95,969/ - UNDER SECTION 69 OF THE ACT. 4 2 . THE CIT(A) OBSERVE D THAT WHERE THE ASSESSEE HAD NOT GIVEN ANY COMPARABLE CASE FOR ESTIMATING 30 ELECTRIC UNITS FOR PROCESSING ONE MT OF SOYA SEED AND ALSO ON ACCOUNT OF THE FACT THAT NO ADDITION WAS MADE IN ANY OTHER YEAR, HELD THAT THE ADDITION WAS NOT JUSTIFIED IN THE HAN DS OF ASSESSEE. HE ALSO ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 16 REFERRED TO THE COMPARABLE CASE OF M/S. RAMA PHOSPHATE WHEREIN THE UNITS CONSUMED FOR PROCESSING ONE MT OF SOYA SEED W ERE SIMILAR TO THE CONSUMPTION OF ASSESSEE. SINCE THE ASSESSEE HAD MAINTAINED PROPER DETAILS, THE CIT(A) FOUND N O MERIT IN THE REJECTION OF BOOKS OF ACCOUNT. HE ALSO PLACED RELIANCE ON THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN OM ROLLING MILLS (P) LTD. IN ITA NOS.975 TO 981/PN/2008, ORDER DATED 30.11.2010 AND DELETED THE ADDITION OF RS.5.86 CRORES. HE A LSO DELETED CONSEQUENT ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT FOR THE ALLEGED PRODUCTION UNDER SECTION 69 OF THE ACT OF RS.2.65 CRORES. HE ALSO DELETED THE ADDITION ON ACCOUNT OF SUPPRESSED PRODUCTION OF RS.55,64,596/ - AND EXTRA ELECTRICITY CO NSUMPTION OF RS.26,89,248/ - . 4 3 . THE ISSUE ARISING BY WAY OF GROUNDS OF APPEAL NO.1 TO 3 AND 11 AND 12 RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION MADE ON ACCOUNT OF SUPPRESSED PRODUCTION. THE SOLE BASIS FOR MAKING THE SAID ADDITION IN THE HANDS OF ASSESSEE WAS THE CONCLUSION OF ASSESSING OFFICER ON THE BASIS OF ELECTRICITY CONSUMPTION THAT BECAUSE OF ERRATIC CONSUMPTION OF ELECTRICITY BY THE ASSESSEE IN ITS PRODUCTION, THE ASSESSEE HAS NOT SHOWN EXTRA PRODUCTION AND CLANDESTINE LY REMOV ED GO ODS. ADMITTEDLY, THE ASSUMPTION OF ASSESSING OFFICER WAS ON THE BASIS OF EXERCISE CARRIED OUT BY HIM THAT 30 UNITS OF ELECTRICITY WE RE REQUIRED FOR PRODUCTION OF ONE MT. ON THE BASIS OF ELECTRICITY UNITS CONSUMED, THE ASSESSING OFFICER EXTRAPOLATED THE P RODUCTION IN THE HANDS OF ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND MADE ADDITION. THERE WAS NO SEARCH OR ANY OTHER INVESTIGATION WAS CARRIED OUT IN THE CASE OF ASSESSEE TO ESTABLISH THE STAND OF REVENUE. THERE WAS NO BASIS FOR COMING TO FINDING THAT THERE WAS CLANDESTINE REMOVAL OF GOODS MANUFACTURED BY THE ASSESSEE. FURTHER, THERE WAS NO BASIS FOR ESTIMATING UNEXPLAINED INVESTMENT IN RAW MATERIAL FOR SUCH ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 17 PRODUCTION UNDER SECTION 69 OF THE ACT. IN VIEW OF THE SAME , THE ISSUE WHICH ARISES IN THE PR ESENT APPEAL VIDE GROUND OF APPEAL RAISED BY THE REVENUE IS WHETHER ANY ADDITION IS WARRANTED IN THE HANDS OF ASSESSEE. 4 4 . WE FIND THAT THE TRIBUNAL IN THE CASE OF RE - ROLLING MILLS I.E. SHREE OM ROLLING MILLS PVT. LTD. VS. ADDL. CIT IN ITA NOS.125 & 12 7/PN/2012 AND CROSS APPEALS IN ITA NOS.430 & 431/PN/2012, RELATING TO ASSESSMENT YEARS 2007 - 08 & 2008 - 09 VIDE ORDER DATED 15.07.2015 HAD CONSIDERED THE ISSUE AT LENGTH VIDE PARAS 54 TO 87 AND VIDE PARAS 88 AND 89, THE TRIBUNAL HAD DELETED THE ADDITION ON B OTH COUNTS I.E. ADDITION MADE ON ACCOUNT OF SUPPRESSED PRODUCTION AND ALLEGED INVESTMENT IN PURCHASES, WHICH READ AS UNDER: - 88. IN THE ENTIRETY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE HOLD THAT NO EXTRAPOLATION OF SALES FOR 300 DAYS CAN BE MADE IN THE HANDS OF THE ASSESSEE ON THE BASIS OF THE EVIDENCE FOUND FOR CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY FOR FEW DAYS, WHICH IN TURN, HAS BEEN ADMITTED BY THE ASSESSEE BY WAY OF FILING PETITION BEFORE THE SETTLEMENT COMMISSION, WHIC H IN TURN, HAS ALSO BEEN ACCEPTED BY THE SETTLEMENT COMMISSION. MERELY BECAUSE THE SETTLEMENT COMMISSION ACCEPTED THE CLAIM OF THE ASSESSEE OF ADDITIONAL EXCISE DUTY PAYABLE ON THE SAID CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY DOES N OT ESTABLISH THE CASE OF THE REVENUE THAT THE SAID FIGURES OF ADDITIONAL PRODUCTION SHOULD BE UTILIZED FOR EXTRAPOLATING THE SALES IN THE HANDS OF THE ASSESSEE FOR THE ENTIRE YEAR. ADMITTEDLY, THE ASSESSEE HAD OFFERED ADDITIONAL INCOME ON THE SAID CLANDES TINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, WHICH IS TO BE ADDED AS INCOME IN THE HANDS OF THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY ADMITTED THAT IN CASE THE SAID ADDITIONAL INCOME HAS NOT BEEN ADDED WHILE C OMPUTING THE INCOME IN THE HANDS OF THE ASSESSEE FOR THE RESPECTIVE YEARS, THE SAME MAY BE DIRECTED TO BE ADDED IN THE HANDS OF THE RESPECTIVE ASSESSEE IN RESPECTIVE YEARS. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO VERIFY FROM THE RECORDS FOR THE RE SPECTIVE YEARS AND INCLUDE THE ADDITIONAL INCOME ON ACCOUNT OF SUCH ADMITTED CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, BY THE ASSESSEE EITHER BEFORE THE SETTLEMENT COMMISSION OR BEFORE THE EXCISE AUTHORITIES, IN THE HANDS OF THE ASSES SEE. WE HAVE HEARD BUNCH OF APPEALS AND IN SOME YEARS, THERE IS NO ADMISSION OF CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY AND IN THOSE YEARS IN THE ABSENCE OF ANY EVIDENCE AND / OR ANY INVESTIGATION OR INQUIRY MADE BY THE ASSESSING OF FICER AND WHERE THE ASSESSING OFFICER HAS FAILED TO COLLECT ADDITIONAL EVIDENCE, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE, BY WAY OF EXTRAPOLATION OF SALES FOR 300 DAYS ON ACCOUNT OF ANY EVIDENCE FOUND IN ANY PRECEDING OR SUCCEEDING YEARS. FUR THER, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE, WHERE NO PETITION HAS BEEN FILED BY THE ASSESSEE BEFORE THE SETTLEMENT COMMISSION IN ANY OF THE RESPECTIVE YEARS OR BEFORE THE EXCISE AUTHORITIES. ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 18 89. SINCE WE HAVE DELETED THE ADDITION IN THE HA NDS OF ASSESSEE ON BOTH ACCOUNTS I.E. ADDITION MADE ON ACCOUNT OF ERRATIC CONSUMPTION OF ELECTRICITY AND ADDITION PROPOSED ON THE BASIS OF EVIDENCE FOUND FOR THE PART OF THE YEAR OF CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, NEXT ADDIT ION MADE IN THE HANDS OF THE ASSESSEE I.E. ALLEGED INVESTMENT IN THE PURCHASES FOR EFFECTING SUCH SALES WHICH GOODS HAVE BEEN CLANDESTINELY REMOVED, IS NOT SUSTAINABLE. ACCORDINGLY, WE HOLD THAT NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE ON ACCO UNT OF ALLEGED INVESTMENT IN PURCHASES UNDER SECTION 69C OF THE ACT. 4 5 . THEREAFTER, CORRIGENDUM ORDER WAS PASSED BY THE TRIBUNAL SUBSTITUTING PARA 88 OF THE TRIBUNAL VIDE ORDER DATED 17.02.2016 AND IT WAS HELD AS UNDER: - 3. ON PERUSAL OF THE RECORD, W E FIND THAT BY AN ERROR, THE FINDINGS OF THE TRIBUNAL IN PARA 88 WITH SPECIAL REFERENCE TO FROM LINE 17 TO 22, NEEDS CORRECTION TO THE EXTENT THAT THE ADDITIONAL INCOME TO BE ADDED IN THE HANDS OF THE ASSESSEE IS EQUIVALENT TO PROFITS ON SUPPRESSED PRODUCT ION @ 4% OR ACTUAL GP RATE DECLARED BY THE ASSESSEE WHICHEVER WAS HIGHER. IN VIEW THEREOF, WE PASS THIS CORRIGENDUM ORDER AND THE PARA 88 I.E. FROM LINE 17 TO 22 WOULD NOW BE SUBSTITUTED BY FOLLOWING PARA. 88. ADMITTEDLY, THE ASSESSEE HAD OFFERED ADD ITIONAL INCOME ON THE SAID CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, WHICH IS TO BE ADDED AS INCOME IN THE HANDS OF THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY ADMITTED THAT IN CASE THE SAID ADDITIONAL INCOME HAS NOT BEEN ADDED WHILE COMPUTING THE INCOME IN THE HANDS OF THE ASSESSEE FOR THE RESPECTIVE YEARS, THE SAME MAY BE DIRECTED TO BE ADDED IN THE HANDS OF THE RESPECTIVE ASSESSEE IN RESPECTIVE YEARS. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO VERIFY FROM THE RECORDS FOR THE RESPECTIVE YEARS AND INCLUDE THE ADDITIONAL INCOME ON ACCOUNT OF SUCH ADMITTED CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, BY THE ASSESSEE EITHER BEFORE THE SETTLEMENT COMMISSION OR BEFORE THE EXCISE AUTH ORITIES, IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO VERIFY FROM THE RECORDS FOR THE RESPECTIVE YEARS AND INCLUDE IN THE HANDS OF ASSESSEE, THE ADDITIONAL INCOME @ 4% OR ACTUAL G.P. RATE DECLARED BY THE ASSESSEE FOR THAT YEAR, WHICHEVER IS HIGHER, ON VALUE OF SUCH ADMITTED CLANDESTINE REMOVAL OF MATERIAL WITHOUT PAYMENT OF EXCISE DUTY, BY THE ASSESSEE BEFORE THE EXCISE AUTHORITIES. THUS, THE ASSESSEE IS DIRECTED TO FILE THE REQUISITE DETAILS OF PROCEEDINGS BEFORE THE EXCI SE AUTHORITIES, BEFORE THE ASSESSING OFFICER IN ORDER TO COMPUTE THE ADDITIONAL INCOME IN THE HANDS OF ASSESSEE IN THE RESPECTIVE YEARS. 4 6 . SINCE THE FACTS AND ISSUE ARISING IN THE PRESENT GROUND OF APPEAL ARE IDENTICAL TO THE FACTS BEFORE THE TRIBUNAL IN BUNCH OF APPEALS AND APPLYING THE SAME, WE HOLD THAT NO ADDITION IS WARRANTED IN THE HANDS OF ASSESSEE. UPHOLDING THE ORDER OF CIT(A) IN THIS REGARD ON ACCOUNT OF DELETION OF ADDITION MADE ON ACCOUNT OF SUPPRESSED PRODUCTION AND UNEXPLAINED INVESTMENT IN ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 19 PRODUCTION UNDER SECTION 69 OF THE ACT AND THE ALLEGED PROFIT ON THE SAID TRANSACTION AND GROUNDS OF APPEAL NO.1 TO 3 AND 11 AND 12 RAISED BY THE REVENUE ARE DISMISSED. 4 7 . THE ASSESSING OFFICER HAD FURTHER MADE ADDITION OF RS.2,70,661/ - ON ACCOUNT OF EXCESS CONSUMPTION OF COAL , RS.67,435/ - ON ACCOUNT OF PURCHASE OF COAL AND THE CIT(A) HAD DELETED THE SAID ADDITION BEING MADE ON ESTIMATE BASIS AND WITHOUT ANY CORROBORATIVE EVIDENCE. 48 . THE REVENUE IS IN APPEAL VIDE GROUNDS OF APPEAL NO.14 AND 15 IN TH IS REGARD AND THE ISSUE BEING LINKED TO THE ABOVE ISSUE DECIDED BY US , WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE GROUNDS OF APPEAL NO.14 AND 15 RAISED BY THE REVENUE. 49 . THE BALANCE GROUND S OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: - 4. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.17,774/ - ON ACCOUNT OF DISALLOWANCE OF ELECTRICAL AND TURBINE EXPENSES TREATING THE SAME AS REVENUE EXPENDITURE. 5. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .1,77,606/ - ON ACCOUNT OF DISALLOWANCE OUT OF GENERAL MATERIAL SPARES. 16. ON FACTS AND IN LAW THE LD.CIT(A) HAS ERRED IN DELETING ADDITION OF RS.60,255/ - OUT OF BALANCE U/S 133(6) OF THE INCOME TAX ACT, 1961. 5 0 . THE REVENUE IS IN APPEAL AGAINST T HE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS.17,774/ - BY WAY OF GROUND OF APPEAL NO.4. THE ASSESSEE HAD CLAIMED ELECTRICITY REPAIR EXPENSES OF RS.52,676/ - WHICH INCLUDED PURCHASE OF ELECTRICAL MATERIAL OF RS.19,748/ - . THE ASSESSING OFFICER HAD DISAL LOWED THE SAME BEING CAPITAL EXPENDITURE. THE CIT(A) IN PARA 9 AT PAGE 20 HAD HELD THE ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 20 SAID EXPENDITURE TO BE REVENUE IN NATURE AND DELETED THE ADDITION. WE FIND NO MERIT IN THE GROUND OF APPEAL NO.4 RAISED BY THE REVENUE IN THIS REGARD, SINCE THE EXPEND ITURE INCURRED BY THE ASSESSEE IS OF REVENUE IN NATURE, HENCE, THE SAME IS DISMISSED. 5 1 . THE ISSUE IN GROUND OF APPEAL NO.5 RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.1,77,606/ - WHICH WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF D ISALLOWANCE OUT OF GENERAL MATERIAL SUPPLIED. THE ASSESSEE HAD INCURRED THE SAID EXPENDITURE FOR SERVICING AND OVERHAULING OF KVA ENGINES I.E. PLANT & MACHINERY OWNED BY THE ASSESSEE BEING CAPITAL IN NATURE. THE CASE OF ASSESSEE WAS THAT THE TOTAL COST O F MACHINERY WAS TO THE TUNE OF ABOUT RS.11 CRORES AND THIS WAS PAID FOR GENERAL MATERIAL SUPPLIES PURCHASED FOR SERVICING AND OVERHAULING KVA. THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE , AGAINST WHICH THE REVENUE IS IN APPEAL. WE FIND NO MERIT IN THE CLAIM OF REVENUE, HENCE THE GROUND OF APPEAL NO.5 RAISED BY THE REVENUE IS DISMISSED. 5 2 . THE ISSUE IN GROUND OF APPEAL NO.16 RAISED BY THE REVENUE IS AGAINST DELETION OF ADDITION OF RS.60,255/ - . THE SAID ADDITION WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON - RECONCILIATION OF BALANCES IN ASSESSEES BOOK AND THE PARTIES BOOKS OF ACCOUNT. BEFORE THE CIT(A), THE ASSESSEE EXPLAINED THAT THE DIFFERENCE WAS IN RESPECT OF ALLEGED NON - RECORDING OF EXPENDITURE ON CREDIT AND HENCE THE ADDITION CANNOT BE MADE IN RESPECT OF BHUSAHN LOGISTICS, MUMBAI. THE ASSESSEE POINTED OUT THAT IT HAD EXPLAINED BEFORE THE ASSESSING OFFICER THAT SUM OF RS.55,500/ - WAS NOT RECORDED BECAUSE OF CERTAIN DISPUTES. THE CIT(A) HELD THAT THE SAID UNRECORDED EXPENDITURE ON CREDIT COULD N OT BE ADDED TO THE INCOME UNDER THE PROVISIONS OF THE ACT AND ITA NO. 73 /P U N/20 13 ITA NO.606/PUN/2013 MAH SOLVENT EXTRACTION P LTD. 21 CONSEQUENTLY, DELETED THE ADDITION OF RS.60,255/ - . IN VIEW OF THE FINDINGS OF CIT(A), WE FIND NO MERIT IN THE GROUND OF APPEAL NO.16 RAISED BY THE REVENUE. 5 3 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 16 TH DAY OF AUGUST , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 16 TH AUGUST , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I I , NASHIK ; 4. / THE CIT - II , NASHIK ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDE R , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE