THE ACIT, CIRCLE- 1(2), RAIPUR (CG) V. M/S. BALAJEE STRUCTURALS (INDIA) PVT. LTD., RAIPUR (CG)

ITA 80/BIL/2013

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8932 (ITAT-RAIPUR)
• Duration Of Justice: 4 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 14-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABHISHEK MALOO JAINP C MALOO
• Keywords: Gross profit estimation; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.80/RPR/2013 ASSESSMENT YEAR : 2010-2011 ACIT, CIRLCE-1(2), CENTRAL AVENUE BUILDING, CIVIL LINES, RAIPUR (CG) VS. BALAJEE STRUCTURAL (INDIA) PVT.LTD., RING ROAD NO.2, TELIBANDHA, RAIPUR (CG) PAN/GIR NO.AABCB7575P (APPELLANT ) .. ( RESPONDENT ) REVENUE BY : SHRI AJIT KUMAR LASKAR, DR ASSESSEE BY : ABHISHEK MALOO JAIN/P.C.MALOO, AR DATE OF HEARING : 09/01/ 2018 DATE OF PRONOUNCEMENT : 11 /01/ 2018 O R D E R PER PAVAN KUMAR GADALE, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE O RDER OF THE CIT(A)- RAIPUR, DATED 23.5.2013 FOR THE ASSESSMENT YEAR 2010-20 11. 2. THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,10,12,267/- MADE BY THE AO ON ACCOUNT OF DIRECT EXPENSES BY INVOKING PROVISIONS OF SECTION 145(3) OF THE I.T.ACT, 1961. 2 ITA NO.80/RPR/2013 ASSESSMENT YEAR : 2010-2011 2. WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE , THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1 8,86,815/- MADE BY THE AO ON ACCOUNT OF INDIRECT EXPENSES BY INVOKI NG PROVISIONS OF SECTION 145(3) OF THE I.T.ACT, 1961. 3. WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE , THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.3,69,635/- MADE BY THE AO ON ACCOUNT OF DEPRECIATION ON CRANE. 3. AT THE OUTSET, LD A.R. OF THE ASSESSEE CONTENDED THAT THE CIT(A) HAS NOT UPHELD THE ACTION OF THE ASSESSING OFFICER IN REJECTIN G BOOKS OF ACCOUNT U/SX.145(3) OF THE ACT ON THE GROUND THAT MERELY BECAU SE THE QUANTITY OF RAW MATERIAL CONSUMED AND FINISHED GOODS PRODUCED HAVE BEEN QUANTIFIED WITH SOME DEGREE OF ESTIMATION, THE BOOKS OF ACCOUNT CANN OT BE SAID TO BE UNRELIABLE OR PRONE TO REJECTION. AGAINST THE ABOVE FINDINGS OF THE CITA), THE DEPARTMENT HAS COME UP IN APPEAL. HE SUBMITTED THAT W HEN THE CIT(A) HAS CONSIDERED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE IS CORRECT , THERE SHOULD NOT BE ANY ESTIMATION TO THE INCOME IS NOT TENABLE BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE CIT(A) HAS PROPERLY APPRECIATED THE FACTS AND DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER. 4. LD D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER., 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE OR DERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIN D FORCE IN THE SUBMISSION OF LD A.R. OF THE ASSESSEE THAT WHEN REJECTION O F BOOKS OF 3 ITA NO.80/RPR/2013 ASSESSMENT YEAR : 2010-2011 ACCOUNT BY THE ASSESSING OFFICER U/S.145(3) IS NOT SUSTAINE D BY THE CIT(A), THERE IS NO GROUND TO ESTIMATE THE INCOME BY THE ASSESSIN G OFFICER. WE FIND THAT THE CIT(A) HAS DISCUSSED AND DECIDED THE ISSUES AS UNDE R: I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND WRITTEN SUBMISSIONS OF THE APPELLANT AS ALSO THE CASE LAWS CITED ABOVE. THE REJECTION OF BOOKS OF ACCOUNT IS BASED ON LOW GROSS PROFIT, CONSTANT YIEL D AND MAINTENANCE OF QUANTITATIVE RECORDS IN RESPECT OF ISSUE OF RAW MAT ERIAL, PRODUCTION AND BURNING LOSS WHICH IS NOT ON THE BASIS OF ACTUAL WE IGHMENT. THE APPELLANT HAS RIGHTLY POINTED OUT THAT WORKING OF GROSS PROFI T, IN RESPECT OF CORE BUSINESS BY THE AO IS INCORRECT. THE GROSS PROFIT OF CORE BUSINESS SHOULD HAVE BEEN WORKED OUT BY THE AO AFTER EXCLUDING COMM ISSION INCOME ALSO. AS PER WORKING FURNISHED BY THE APPELLANT, THE GROSS P ROFIT FROM CORE BUSINESS AFTER EXCLUDING COMMISSION INCOME, IS 0.39% AS AGAI NST GROSS LOSS OF 0.67% OF IMMEDIATELY PRECEDING YEAR AND THUS, IT IS BETTE R. SECONDLY, THE APPELLANT HAS MAINTAINED QUANTITATIVE DETAILS AS REQUIRED UND ER EXCISE RULES. MONTHLY RETURNS ARE ALSO SUBMITTED TO THE EXCISE AUTHORITIE S AND NO DISCREPANCY WAS NOTICED SO AS TO ESTABLISH THAT THE YIELD SHOWN BY THE APPELLANT IS UNREASONABLE OR ON LOWER SIDE IN COMPARISON TO YIEL D PREVAILING IN THIS LINE OF INDUSTRY. THE YIELD SHOWN BY THE APPELLANT IN RESPE CT OF FURNACE DIVISION IS 81% AS AGAINST 76% OF THE IMMEDIATELY PRECEDING YEA R AND IN RESPECT OF ROLLING MILL DIVISION IT IS 93% WHICH IS AT PAR WIT H THAT OF IMMEDIATELY PRECEDING YEAR. IN THE IMMEDIATELY PRECEDING YEAR, IN SCRUTINY ASSESSMENT, THE DEPARTMENT HAS ACCEPTED THE BOOKS OF ACCOUNTS O N THE BASIS OF YIELD OF FURNACE DIVISION AT 76% AND 93% OF ROLLING MILL DIV ISION. IN THE CASE OF DY. CIT V. ALIDHARA TEXPRO ENGINEERS PVT. LTD. (2011) 4 3 SOT 1 (AHD.), IT WAS HELD THAT WHERE IN THE ASSESSEE'S CASE ALL ITEMS WE RE EXCISABLE AND THE A.O HAD NOT POINTED OUT ANY DEFECT IN THE EXCISE REGIST ERS OR OTHER RECORDS OF ASSESSEE WHICH WERE MAINTAINED IN THE SAME PATTERN AS MAINTAINED IN THE EARLIER YEARS, THERE WAS NO JUSTIFICATION ON PART O F AO TO REJECT BOOK RESULTS OF ASSESSEE AND MAKE ADDITION ON ACCOUNT OF LOW NET PR OFIT, HI THE CASE OF CIT VS. SMT POONAM RANI (2010) 41 DTR (DEL) 194 ; (2010 ) 326 1TR 223 : (2010) 192 TAXMAN 167, IT WAS HELD THAT THE AO HAS NOT POINTED OUT ANY PARTICULAR DEFECT OR DISCREPANCY IN THE BOOKS OF AC COUNT MAINTAINED BY THE ASSESSEE CIT(A) WAS SATISFIED THAT THE APPELLANT HA D FURNISHED COMPLETE DETAILS, INCLUDING QUANTITATIVE DATA IN RESPECT OF PURCHASE OF RAW MATERIAL, MANUFACTURE OF COPPER WIRE AND SALE OF FINISHED PRO DUCTS. THUS, THE ACCOUNTS MAINTAINED BY THE ASSESSEE CANNOT BE SAID TO BE INC OMPLETE OR INACCURATE. 6.1 IT IS A MATTER ON RECORD THAT THE APPELLANT HAS MAINTAINED QUANTITATIVE RECORDS OF RAW MATERIAL CONSUMED AND FINISHED PRODU CT PRODUCED. THE BOOKS OF ACCOUNTS WERE SUBJECT TO TAX AUDIT WHICH WAS PRO DUCED BEFORE THE A.O. 4 ITA NO.80/RPR/2013 ASSESSMENT YEAR : 2010-2011 TOGETHER WITH BILLS AND VOUCHERS AND THE SAME WAS E XAMINED BY TEST CHECK. THE A.O. HAS NOT COME ACROSS ANY MATERIAL DEFECT IN ACCOUNT SO AS TO HOLD THAT ANY PROFIT HAS BEEN SUPPRESSED. THE APPELLANT HAS SATISFACTORILY EXPLAINED THAT THERE WAS NO DECLINE IN GP RATE AS A LLEGED BY THE A.O AND THE YIELD WAS ALSO BETTER. THE A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD TO DISBELIEVE THE BOOK RESULT SHOWN BY THE APPELLANT. IF THERE IS NO SUPPRESSION OF MATERIAL FACTS, THE AUTHORITY CANNOT EMBARK UPON A SPECULATIVE LENT OF NOTIONAL PROFITS. THE ASSESSMENT SHOULD BE BASED ON COGENT FACTS AND THERE SUFFICIENT REASONS MUST BE GIVEN TO INDICATE THAT T HEY ARE UNRELIABLE-MERE DISPARITY IN CONSUMPTION OF ELECTRICITY IN CERTAIN MONTHS CANNOT BE THE REASON FOR REJECTION OF ACCOUNTS-SUCH VARIATION CAN BE DUE TO VARIOUS FACTORS BEYOND THE CONTROL OF ASSESSEE-REJECTION, THEREFORE, NOT J USTIFIED. THE A.O EXAMINED THE AUDITED BOOKS OF ACCOUNT BUT HAD NOT POINTED OU T ANY SPECIFIC DISCREPANCY NOR HAS HE DETECTED ANY SUPPRESSION IN SALES OR INFLATION IN PURCHASES/EXPENSES. NO EVIDENCE WHATSOEVER WAS BROU GHT ON RECORD TO PROVE THAT, THE APPELLANT, IN FACT, EARNED MORE THA N THAT RETURNED AS PER THE BOOKS OF ACCOUNT KEPT IN THE REGULAR COURSE OF BUSI NESS. THE ASSESSMENT ORDER IS EVIDENCE TO THE FACT THAT THERE WAS NO SPE CIFIC FINDING GIVEN BY THE A.O TO THE EFFECT THAT THE METHOD EMPLOYED BY THE A PPELLANT WAS SUCH THAT CORRECT PROFITS COULD NOT BE DEDUCED THERE FROM. IT IS ALSO NOT THE CASE OF THE APPELLANT THAT IT HAS NOT FOLLOWED THE MERCANTILE S YSTEM OF ACCOUNTING. IT IS ALSO NOT THE CASE OF THE APPELLANT THAT IT HAS NOT FOLLOWED ANY PARTICULAR ACCOUNTING STANDARDS WHICH ARE NOTIFIED BY THE CENT RAL GOVERNMENT. 6.3 IT IS ALSO NOT IN DISPUTE THAT THE APPELLANT HA S MAINTAINED BOOKS OF ACCOUNT REGULARLY AND THESE ARE DULY AUDITED U/S 44 AB OF THE I.T. ACT AND THE QUANTITATIVE DETAILS WERE PREPARED AND WERE DULY AU DITED. THE VARIATION IN PERCENTAGE OF GP/NP OR PAYMENTS IN CASH, IN THE ABS ENCE ANY COGENT REASONS COULD NOT, BY ITSELF, HAVE BEEN A GROUND TO HOLD TH AT PROPER INCOME OF THE APPELLANT CANNOT BE DEDUCED FROM THE ACCOUNTS MAINT AINED BY IT AND CONSEQUENTLY, COULD NOT HAVE BEEN A GROUND TO REJEC T THE ACCOUNTS INVOKING SECTION 145(3) OF THE ACT. THERE IS NO FINDING IN T HE ASSESSMENT ORDER OF THE A.O THAT THE ACTUAL COST OF FINISHED GOODS PURCHASE D BY THE APPELLANT WAS LESS THAN WHAT WAS DECLARED IN THE ACCOUNT BOOKS. T HERE IS NO FINDING BY THE A.O THAT ACTUAL QUANTITY OF FINISHED GOODS SOLD BY THE APPELLANT WAS MORE THAN WHAT IT WAS SHOWN IN THE ACCOUNTS BOOKS. THERE IS NO FINDING BY THE A.O THAT THE FINISHED GOODS WERE SOLD BY THE APPELLANT AT A PRICE HIGHER THAN WHAT WAS DECLARED IN THE ACCOUNT BOOKS. FROM THE TA X AUDIT REPORT, IT IS DISCERNIBLE THAT THE APPELLANT DID MAINTAIN STOCK R ECORDS AND THE A.O HAS NOT POINTED OUT ANY INCORRECTNESS IN THE SAME, I AM OF THE CONSIDERED OPINION THAT MERELY BECAUSE THE QUANTITY OF RAW MATERIAL CO NSUMED AND FINISHED GOODS PRODUCED HAVE BEEN QUANTIFIED WITH SOME DEGRE E OF ESTIMATION THE BOOKS OF ACCOUNT CANNOT BE SAID TO BE UNRELIABLE OR PRONE TO REJECTION. 6.4 AS ASSESSMENT HAS TO BE COMPLETED ON THE BASIS OF RECORDS AND MATERIAL AVAILABLE BEFORE THE AO AND PERSONAL KNOWLEDGE AND EXCITEMENT ON EVENTS 5 ITA NO.80/RPR/2013 ASSESSMENT YEAR : 2010-2011 AND EXTRANEOUS FACTS SHOULD NOT LEAD THE AO TO A ST ATE OF AFFAIRS WHERE THE SALIENT/PRIMARY/DIRECT EVIDENCES ARE OVERLOOKED AND SHOULD NOT INFLUENCE THE AO FOR RESORTING TO ADHOC ADDITIONS/DISALLOWANCES. 6.5 IN A CASE WHERE THE TRANSACTIONS OF THE APPELLA NT HAVE BEEN ACCOUNTED, DOCUMENTED AND SUPPORTED BY THE MATERIAL EVIDENCES FOR DERIVING LOGICAL CONCLUSIONS, WITHOUT PROVING FALSITY OF THE SAME, A DHOC ADDITIONS/DISALLOWANCES SHOULD NOT BE MADE BY THE A O IN A ROUTINE MANNER MERELY ON PRESUMPTION, PROBABILITIES, SUSPICION AND SURMISES SINCE THE SAME ACTION OF THE AO DEGENERATES THE SPIRIT FOR WHICH T HE QUALITY ASSESSMENTS WERE EMPHASIZED BY THE BOARD. (MUKESH R MAROLIA V. ADDL. CIT [2006] 6 SOT 247 MUMBAI). 6.6 IF GENERAL/CASUAL/ROUTINE OBSERVATIONS OF THE A O ARE TO BE CONSIDERED AS MATERIAL EVIDENCE FOR THE PURPOSE OF FRAMING AN ASS ESSMENT, THE AO SHALL HAVE BLANKET AND ARBITRARY POWERS TO DISPOSE OF THE SCRUTINY ASSESSMENTS ACCORDING TO HIS WHIMS AND FANCIES WHICH IS NOT THE SPIRIT OF THE CIRCULARS ISSUED BY THE BOARD ON SCRUTINY ASSESSMENT. AN ASSE SSMENT CANNOT BE MADE ARBITRARILY AND IN ORDER THAT AN ASSESSMENT CAN BE SUSTAINED, IT MUST HAVE NEXUS TO THE MATERIAL ON RECORD. (CIT V. MAHESH CHA ND [1983] 199 ITR 247,249 (ALL.). 6.7 IT IS THE SETTLED POSITION THAT, THOUGH THE AO HAS VERY WIDE POWERS AND IS NOT FETTERED BY TECHNICAL RULES OF EVIDENCE AND PLE ADINGS, THERE IS ONE OVER- RIDING RESTRICTION ON HIS JUDGEMENT AND THAT IS, TH AT, HE MUST ACT HONESTLY AND DILIGENTLY ON THE MATERIAL, HOWSOEVER, INADEQUA TE IT WAS, AND NOT VINDICTIVELY, CAPRICIOUSLY OR ARBITRARILY. 'PROBABI LITY CANNOT BE CONSTRUED AS MATERIAL EVIDENCE TO FORM AN OPINION BY THE AO TO C ONCLUDE AN ASSESSMENT AND FOR DRAWING ADVERSE INFERENCE AGAINST THE APPEL LANT UNLESS THERE IS EVIDENCE TO SUBSTANTIATE SUCH PROBABLE INFERENCE.' 6.8 ASSESSMENT HAS TO BE MADE BASED ON THE REAL IN COME THEORY, I.E., INCOME TO BE DETERMINED FOR TAXATION MUST INVARIABL Y BE PROVED TO HAVE BEEN THE CORRECT QUANTUM OF GROUND THAT THE ITEM WISE ST OCK REGISTER WAS NOT MAINTAINED, AND, THEREFORE, THE ACCOUNTS WERE SOUGH T TO BE REJECTED, WAS ABSOLUTELY PERVERSE AND COULD NOT BE SUSTAINED IN T HE ABSENCE OF ANY OPINION EXPRESSED OR ANY FINDING ARRIVED AT TO THE EFFECT T HAT THE ACCOUNTS MAINTAINED WERE INCORRECT OR THAT THE METHOD OF ACCOUNTING APP LIED WAS SUCH THAT THE INCOME COULD NOT BE DEDUCED. IN THE ABSENCE ANY SUC H FINDING, THE ACCOUNT BOOKS COULD NOT BE REJECTED MERELY ON THE GROUND TH AT ITEM WISE STOCK WAS NOT MAINTAINED IN THE STOCK REGISTER. THUS THE REJE CTION OF ACCOUNT BOOKS WAS NOT JUSTIFIED. IN ITO V. BOTHRA INTERNATIONAL [2008 ] 117 TTJ (JD.) 672 IT WAS HELD THAT WHERE THE A.O LAID NO MATERIAL ON RECORD TO SUGGEST THAT THERE HAD BEEN ANY SUPPRESSION OF INCOME NOR THAT THE APPELLA NT CARRIED ANY ACTIVITY OUTSIDE THE BOOKS, MERELY BECAUSE OF DECLINE IN GP RATE, BOOKS OF ACCOUNT COULD NOT BE REJECTED. IN DELHI SECURITIES PRINTERS V. DY. CIT [2007] 15 SOT 6 ITA NO.80/RPR/2013 ASSESSMENT YEAR : 2010-2011 353 (DELHI) IT WAS HELD THAT REJECTION OF BOOKS OF ACCOUNT MERELY BECAUSE APPELLANT HAS NOT MAINTAINED STOCK REGISTER, WITHOU T POINTING OUT ANY SPECIFIC DEFECTS IN BOOKS OF ACCOUNT OF ANY NATURE WHATSOEVE R, COULD NOT BE SAID TO BE JUSTIFIED. SUCH ADHOC ADDITION IS ALSO UNSUSTAINABL E IN VIEW OF THE DECISION OF THE HON'BLE HIGH COURT OF GUJARAT IN CIT VS. SANJAY OH CAKE INDUSTRIES (2005) 197 CTR (GUJ) 520 WHEREIN IT WAS HELD THAT T HE A.O HAVING NOT POINTED OUT ANY SPECIFIC OMISSION OR SUPPRESSION IN THE ASSESSEE'S BOOKS OF ACCOUNT NOR THE EXCISE OR SALES TAX AUTHORITIES HAV ING FOUND ANY DISCREPANCY OR IRREGULARITY IN THE MAINTENANCE OF STOCK AND REC ORDS, ADDITION MADE ON ACCOUNT OF SUPPRESSED PRODUCTION AND SALES COULD NO T BE SUSTAINED. 6.11 IT IS GATHERED THAT THE DISALLOWANCE OUT OF DI RECT EXPENSE I.E., RAW MATERIALS AND MANUFACTURING EXPENSE WAS MADE BY THE AO CONSIDERING IT EXCESSIVE IN COMPARISON TO THE SALES. THE VERY BASI S OF DISALLOWANCE IS INCORRECT. AS RIGHTLY CONTENDED BY THE APPELLANT, T HE RAW MATERIAL AND MANUFACTURING EXPENSES IS RELATED TO PRODUCTION AND NOT WITH SALE. THE PRODUCTION HAS INCREASE FROM 43309 MT TO 46058 MT W HEREAS THE EXPENSES ON ACCOUNT OF RAW MATERIALS AND MANUFACTURING EXPEN SES HAVE REDUCED IN COMPARISON TO THE IMMEDIATELY PRECEDING YEAR. THE A VERAGE COST OF RAW MATERIAL HAS DECREASED BY RS.6504/- PER MT AND MANU FACTURING EXPENSES HAS BEEN DECREASED BY RS.340/- PER MT. IT IS NOT TH E CASE OF THE AO THAT THE PURCHASE OF RAW MATERIAL AND MANUFACTURING EXPENSES LIKE PURCHASE OF COAL, FURNACE OIL AND ELECTRICITY EXPENSES ARE NOT FULLY SUPPORTED BY BILLS AND VOUCHERS. THE AO HAS NOT POINTED OUT ANY INSTANCE TO PROVE THAT THE EXPENSES ARE OVERSTATED OR UNVERIFIABLE. THE DISALL OWANCE HAS BEEN TO INCREASE AND ASSESS THE GROSS PROFIT AT PAR WITH TH AT OF THE IMMEDIATELY PRECEDING YEAR. AS DISCUSSED ABOVE, THE GROSS PROFI T HAS NOT DECREASED, RATHER, THERE IS BETTER GROSS PROFIT FROM CORE BUSI NESS. THUS, THE DISALLOWANCE HAS BEEN MADE UNDER MISCONCEPTION. HAD THE FACTS BE EN CONSIDERED IN PROPER PERSPECTIVE BY THE AO, THERE WOULD HAVE BEEN NO DISALLOWANCE ON THESE GROUNDS. IN THE CASE OF LAKSHMI UDYOG MANDIR PVT. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX (2011) 12 ITR 36 (CHD) ( TRIB), IT WAS HELD THAT AO COMPARING EXPENSES OF RAW MATERIALS AND OTHER DI RECT EXPENSES IN THE SOME RATIO AS THESE WERE INCURRED BY THE ASSESSEE I N THE PRECEDING YEAR, MADE ADDITION OF RS.4,01,010/- ON ACCOUNT OF DISALL OWANCE OUT OF RAW MATERIAL CONSUMPTION AND RS.73,362/- OUT OF DIRECT EXPENSES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WHO WAS CARR YING ON ITS MANUFACTURING ACTIVITIES OF GLASS SYRINGES, HAD STO PPED ACTIVITIES DUE TO CHANGE IN TREND IN THE MARKET THERE IS NO MERIT IN COMPARING THE RAW MATERIAL CONSUMPTION AND OTHER DIRECT MANUFACTURING EXPENDITURE WITH ONLY THE SALES MADE DURING THE YEAR. ADDITIONS NOT JUSTI FIED. 6.12 IN VIEW OF THE FACT THAT THERE IS NO CASE OF R EJECTION AND ESTIMATION OF INCOME, THE GROSS PROFIT IS NOT ON LOWER SIDE, THE DIRECT EXPENSES ARE NOT EXCESSIVE AND ARE VERIFIABLE AND ALSO AFTER CONSIDE RING THE JUDGEMENTS 7 ITA NO.80/RPR/2013 ASSESSMENT YEAR : 2010-2011 DISCUSSED ABOVE, THE DISALLOWANCE OF RS.2,10,12,267 /- MADE BY THE AO, BEING PURELY ARBITRARY, CANNOT BE SUSTAINED. 6.13 AS REGARDS INDIRECT EXPENSES, THE AO HAS MADE THE DISALLOWANCE FOR THE REASON THAT CASH PAYMENT HAS BEEN MADE BY THE APPEL LANT IN RESPECT OF TRANSPORTATION/FREIGHT CHARGES, LABOUR EXPENSES, VE HICLE RUNNING MAINTENANCE, CRANE RUNNING AND MAINTENANCE, ADVERTI SEMENT, PUBLICITY, PRINTING, OFFICE EXPENSES AND CANTEEN EXPENSES. SAL ARY EXPENSES AND COMMISSION EXPENSES WERE DISPROPORTIONATELY INCREAS ED. THE AO HAS NOT COME ACROSS ANY SINGLE INSTANCE WHERE THE EXPENDITU RE CLAIMED IN CASH IS UNVERIFIABLE OR OVERSTATED. IT IS A PREVAILING PRAC TICE IN THE BUSINESS TO MAKE PAYMENT IN CASH ON ACCOUNT OF VARIOUS EXPENSES OF P ETTY AMOUNT. IN MY CONSIDERED VIEW, PAYMENT OF CASH FOR BUSINESS EXPEN DITURE AND DISPROPORTIONATE INCREASE IN EXPENSES CANNOT BE THE GROUND IN ITSELF FOR MAKING DISALLOWANCES. INCREASE IN SALARY OR COMMISS ION ALSO CANNOT BE A GROUND FOR ITS DISALLOWANCE, UNLESS IT IS PROVED TH AT THOSE EXPENSES WERE NOT FOR THE PURPOSE OF THE BUSINESS. THE INCREASE IN EX PENSES MAY PROVOKE ENQUIRIES BUT CANNOT BE A REASON FOR DISALLOWANCE. IN THE CASE OF SUSEE AUTO PLAZA PVT. LTD. VS. ADDL. CIT (2010) 3 ITR (TRIB.) 166 (CHENNAI), IT WAS HELD THAT DISALLOWANCE OF ADMINISTRATIVE EXPENSES BASED ON WORKING OF PERCENTAGE AND COMPARISON WITH OTHER ASSESSMENT YEARS, WAS NOT A VALID METHOD FOR MAKING DISALLOWANCE WITHOUT SEEKING ANY FARTHER ENQ UIRY. IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. RAMA KISHA N VERMA (2012) 147 TTJ (JP)(UO) 1, IT WAS HELD THAT DISALLOWANCE CANNOT BE MADE ON THE GROUND THAT PAYMENTS WERE MADE IN CASH. NO EVIDENCE IS COL LECTED TO SUGGEST THAT PAYMENTS WERE NOT GENUINE. THE AO COULD HAVE EXAMIN ED THE PERSON WHO MADE THE PAYMENT AND VERIFIED THE VOUCHERS. WE FEEL THAT THE C1T(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE. 6.14 CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, AS ALSO DECISIONS RELIED UPON BY THE APPELLANT AND THOSE CITED ABOVE, I AM OF THE VIEW THAT THERE WAS NO FINDING TO THE EXTENT THAT THE ACCOUNT S WERE NOT CORRECT AND COMPLETE OR THAT THE A.O WAS OF THE OPINION THAT TH E INCOME COULD NOT BE DEDUCED FROM THE ACCOUNTS MAINTAINED BY THE APPELLA NT. IN THE ABSENCE OF SUCH CONCLUSIONS, SUCH ESTIMATED ADDITION, PARTICUL ARLY WITHOUT BRINGING ON RECORD ANY INSTANCE OF UNDERVALUATION OF CLOSING ST OCK OR SUPPRESSION IN SALES OR INFLATION IN PURCHASES OR EXPENSES, CANNOT BE MA DE TO THE INCOME RETURNED BASED ON AUDITED ACCOUNT, HENCE, THE ESTIM ATED DISALLOWANCES- BEING WITHOUT ANY EVIDENCE- ARE DELETED . 8 ITA NO.80/RPR/2013 ASSESSMENT YEAR : 2010-2011 AS REGARDS TO DELETION OF RS.3,69,635/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION, THE A.O HAS DEALT TILLS ISSUE IN PAR A 7 AT PAGE 5 OF THE ASSESSMENT ORDER. IT WAS STATED THAT TWO CRANES WER E PURCHASED AND CAPITALIZED IN THE MONTH OF MAY 2009 AND ON 29.03.2 010. DEPRECIATION ON BOTH THE CRANES WERE DISALLOWED BY THE AO FOR THE R EASON THAT THERE IS NO EVIDENCE REGARDING PAYMENT OF TRANSPORTATION CHARGE S FOR THE CRANE PURCHASED IN MAY 2009 AND THE TRANSPORT CHARGES FOR PURCHASE OF CRANE IN MAR-2010 WERE SHOWN AS PAYABLE TO CLAIM DEPRECIATIO N. THE APPELLANT HAS SUBMITTED THAT THE ASSESSEE HAD P URCHASED CRANES FROM ESCORTS CONSTRUCTION EQUIPMENT LIMITED, BALLABGARH, HARIYANA WHO HAS PAID THE FREIGHT CHARGES OF RS.29,500/- FOR EACH CRANE A ND CHARGED THE SAME IN THE TAX INVOICE RAISED FOR CRANE. THE CRANE PURCHAS ED IN THE MONTH OF MAY WAS RECEIVED AND PUT IN TO USE ON 08.05.2009 AND AN OTHER CRANE WAS RECEIVED AND PUT IN TO USE ON 29.03.2010. THESE CRA NES WERE DISPATCHED BY THE SUPPLIER ON 30.04.2009 AND 20.03.2010 RESPECTIV ELY. PART PAYMENT AGAINST CRANE WAS MADE IN ADVANCE AND THE BALANCE P AYMENT WAS MADE ON DISPATCH OF THE GOODS. COPY OF TAX INVOICE AND LEDG ER ACCOUNT OF SUPPLIER WAS ALSO FILED BEFORE ME. ACCORDINGLY, THE APPELLANT CL AIMED THAT DEPRECIATION ON CRANE IS FULLY ALLOWABLE. 11. 1 HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DER AND SUBMISSIONS OF THE APPELLANT. PERUSAL OF TAX INVOICE REVEALS THAT THE TRANSPORT CHARGES HAVE BEEN SEPARATELY CHARGED ALONG WITH THE PRICE OF CRA NE BY THE SUPPLIER. PAYMENTS TO THE SUPPLIER WERE MADE IN ADVANCE AND B EFORE DELIVERY OF THE CRANE. THE FIRST CRANE WAS PURCHASED IN MAY AND ANO THER ONE WAS IN MARCH AND BOTH HAD REACHED BEFORE THE END OF THE PREVIOUS YEAR AND WERE PUT TO USE AND, THEREFORE, DEPRECIATION CLAIMED THEREON AR E ALLOWABLE. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO AMOUNTING TO RS.3,6 9,635/- IS HEREBY DELETED. 6. BEFORE US, EXCEPT RELYING ON THE ORDER OF THE ASSESSI NG OFFICER, LD D.,R. COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ABOVE QUO TED ORDER OF THE LD CIT(A). HENCE, WE DO NOT FIND ANY GOOD REASON TO INT ERFERE WITH THE ORDER OF THE LD CIT(A), WHICH IS HEREBY CONFIRMED AND THE GROUN DS OF THE REVENUE ARE REJECTED. 9 ITA NO.80/RPR/2013 ASSESSMENT YEAR : 2010-2011 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 11 /01/2018. SD/- SD/- (N.S SAINI) ( PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIALMEMBER RAIPUR; DATED 11 /01/2018 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, RAIPUR 1. THE APPELLANT : ACIT, CIRLCE- 1(2), CENTRAL AVENUE BUILDING, CIVIL LINES, RAIPUR (CG) 2. THE RESPONDENT. BALAJEE STRUCTURAL (INDIA) PVT.LTD.,RINGROADNO.2,TELIBANDHA, RAIPUR (CG) 3. THE CIT(A)- RAIPUR 4. PR.CIT- RAIPUR 5. DR, ITAT, RAIPUR 6. GUARD FILE. //TRUE COPY//