Assistant Commissioner of Income-tax, V. Chaudhary Cars Pvt. Ltd., Jalgaon

ITA 957/PUN/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9374 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-08-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 06-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Loose papers; Document seized; Additional evidence; Deemed dividend; Documents seized
• Section: 2(22)(e); 132

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.957/PUN/2016 / ASSESSMENT YEAR : 2012-13 THE ASST.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2, NASHIK. . / APPELLANT V/S CHAUDHARY CARS PVT. LIMITED, 11, SWED BINDU, SHANTI NAGAR, YAWAL ROAD, BHUSAWAL, DIST. JALGAON. PAN : AADCC7960R. . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK. REVENUE BY : SHRI SUDHENDU DAS. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE OR DER OF COMMISSIONER OF INCOME TAX (A) 12, PUNE DT.25.02.2016 FOR THE ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A COMPANY STATED TO BE A DEALER IN TOYATO CARS. A SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT WAS COND UCTED IN CHAUDHARI GROUP OF CASES ON 04.10.2011. THE ASSESSEE I S A PART OF CHAUDHARI GROUP OF CASES. ASSESSEE FILED ITS RETURN OF IN COME FOR A.Y. / DATE OF HEARING : 04.02.2019 / DATE OF PRONOUNCEMENT: 04.04.2019 2 ITA NO.957/PUN/2016 2012-13 ON 26.09.2012 DECLARING TOTAL INCOME AT RS. NIL. THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS FRAMED U/S 14 3(3) R.W.S. 153B OF THE ACT VIDE ORDER DT.19.03.2014 AND THE TOTAL I NCOME WAS DETERMINED AT RS.1,53,89,690/-. AGGRIEVED BY THE ORDER O F AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.25.0 2.2016 (IN APPEAL NO.PN/CIT(A)-12/790,791/2014-15) GRANTED SUBSTAN TIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENU E IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE , W HETHER THE LD.CIT ( A ) IS JUSTIFIED IN DELETING THE AD D IT IO N OF RS.67,903 / - MADE BY THE AO ON ACCOUNT OF RECONCILIATION OF DIFFERENCE IN CASH BAL ANCE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE , WHETHER THE LD.CIT ( A ) I S JUSTIFIED IN DELETING THE ADDITI O N AMOUNTING TO RS.25,00,000/- MADE ON ACCOUNT OF SEIZED MATERIAL FOUND AN D ' FAI L ED TO J USTIFY THE TRANSACTION. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE LD. CIT(A) IS JU S TIFIED IN DELETING THE ADDITION AMOUNTING TO RS.3,0 5 , 060/- MADE ON ACCOUNT O F DIFFERENCE IN CASH AVAI L ABLE AND RECORDED IN BOOKS OF ACCOUNTS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE , W HETHER THE LD. CIT(A) I S JUSTIFIED IN RESTRICTING THE ADDITION OF RS.6 , 71 , 338 / - TO RS.1 , 47 , 964 / - B Y ALLO W ING R E LI EF TO THE EXTENT OF R S . 5 , 23,644 / - 5. ON THE FACTS AND CIRCUMSTANCES O F TH E CASE WHETHER THE LD . CIT(A) IS JUSTIFIED IN DELETING THE ADDITION AMOUNTING TO RS. 1 , 06 , 00 , 000/- ON ACCOUNT OF DEEM E D DI V IDEND U/S 2(22)(E) OF THE I-T ACT. 6. ON THE FACTS AND CIRCUMS T A N CES O F T H E CASE, WHETHER THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS . 2 , 45,388 / - MADE BY THE AO ON ACCOUNT O F UNPRO V ED CREDITORS. 3. FIRST GROUND IS WITH RESPECT TO DELETING THE ADDITI ON OF RS.67,903/- ON ACCOUNT OF RECONCILIATION OF DIFFER ENCE IN CASH BALANCE. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOT ICED THAT THE CASH BALANCE AS PER CASH BOOK FOR A.Y. 2011-12 WAS RS.8 ,09,803/- BUT FOR A.Y. 2012-13 THE OPENING CASH BALANCE WAS SHOWN AS R S.7,41,900/-. THE ASSESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE IN CASH BALANCE. THE 3 ITA NO.957/PUN/2016 ASSESSEE FURNISHED EXPLANATION WHICH WAS NOT FOUND ACCEPT ABLE TO THE AO. AO THEREFORE ADDED RS.67,903/- TO THE TOTAL INCOME O F ASSESSEE BEING THE DIFFERENCE IN CASH BALANCE. AGGRIEVED BY THE OR DER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO DELETED THE ADDITION BY OBSERVING AS UNDER : 12.2 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS FILED BY THE APPELLANT. BRIEF FACTS ARE THAT AO NOTED THAT AS PER CASH BOOK FOR A.Y. 2011-12, THE CLOSING CASH BALANCE WAS OF RS.8,09,80 3/- WHEREAS OPENING CASH BALANCE FOR AY 2012-13 WAS OF RS.7,41,900/-. BEFORE THE AO NO EXPLANATION WAS FURNISHED TO RECONCILE THE DIFFEREN CE. HOWEVER, DURING THE COURSE OF APPELLATE PROCEEDINGS IT WAS SUBMITTED TH AT AS ON 31.03.2011 AS PER AUDITED BOOKS OF ACCOUNTS APPELLANT HAD CLOSING CASH BALANCE OF RS.8,09,8031 - AS PER THE MAIN CASH BOOK AND OF RS.1 , 96,2161 - AS PER THE WORKSHOP CASH BOOK AND TOTAL CASH BA L ANCE AS ON 31 . 03.2011 WAS RS.10,06 , 019/- AND NOT RS.8,09 , 803 / - . COPY OF AUDITED BALANCE SHEET WHICH WAS ALSO FURNISHED BEFORE THE AO ALSO REFLECTED CLO SING CASH BALANCE OF RS . 10 , 06 , 019/-. OPENING CASH BALANCE OF 01 . 04 . 201 1 MATCHED WITH THE CLOSING BALANCE . WITHOUT GOING INTO THE CORRECTNESS OF T HE R ECONCILIATION FILED BEFORE ME , THE FACT REMAINS THAT THE AO HAD NOT DOUBTED T H E CLOSING BALANCE OF CASH AS ON 31.03 . 2011 . THE LESSER OPENING CASH BALANCE AS ON 01.04 . 2011 DOES NOT CALL FOR ANY ADDITION DURING THE YEAR UNDER CONSIDERATION AS NO UNEXPLAINED CASH WAS INTRODUCED IN THE BOOKS OF ACCOUNTS. THEREFORE, ADDITION MADE BY THE AO OF RS. 67, 903/- IS DELETED AND GROUND RA I SED BY THE APPELLANT IS ALLOWED. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APP EAL BEFORE US. 4. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF AO. LD.A.R. O N THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A). HE FURTHER SUBMITTED THAT ASSESSEE HAD MAINTAINED TWO CASH BOOKS ONE MAIN CASH BOOK AND ANOTHER CASH BOOK FOR WORKSHOP. HE POINTED TO THE BALANCE OF THE CASH BOOKS FOR MAIN AND WORK-SHOP W HICH WERE PLACED AT PAGE 99 AND 100 OF THE PAPER BOOK. HE SUBM ITTED THAT IN NEXT YEAR THOUGH THERE WAS DIFFERENCE IN THE BALANCE BETWEE N MAIN CASH BOOK AND WORK-SHOP CASH BOOK BUT OVER-ALL THERE WAS N O DIFFERENCE IN CASH BALANCE AND IN SUPPORT OF WHICH, HE POINTED TO THE SUMMARY OF CASH BOOK PLACED IN PAPER BOOK. HE THEREFORE SUBMITTED THAT THE 4 ITA NO.957/PUN/2016 ASSESSEE HAS EXPLAINED THE DISCREPANCIES AND THUS NO INTERFERENCE TO THE ORDER OF LD.CIT(A) IS CALLED FOR. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO DISCREPANCIES IN CASH BALANCE. WE FIND THAT LD.CIT(A) WHILE DECIDING THE ISSU E HAS NOTED THAT AFTER CONSIDERING THE AUDITED BALANCE-SHEET, O PENING BALANCE AND CLOSING BALANCE, AO HAD NOT DOUBTED THE CLOSING BALANC E CASH AS ON 31.03.2011. BEFORE US, ASSESSEE HAS POINTED OUT THAT OV ER ALL CASH BALANCE HAS REMAINED THE SAME. THE SUBMISSION OF THE AS SESSEE HAS NOT BEEN CONTROVERTED BY REVENUE. FURTHER, NO FALLACY IN THE FINDINGS OF LD.CIT(A) HAS BEEN POINTED BY REVENUE. IN SUCH A SITUA TION, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). THUS, THE GROUND NO.1 OF REVENUE IS DISMISSED. 6. 2 ND GROUND IS WITH RESPECT TO DENIAL OF ADDITION OF RS .25 LAKH. 6.1. DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMI SES OF SHRI GIRISH B. CHAUDHARI, DOCUMENTS AS PER ANNEXURE-A1 PAGES 6 AND 7 CONTAINING CERTAIN TRANSACTIONS WERE SEIZED. THE ASSESSE E WAS ASKED TO EXPLAIN THE TRANSACTIONS RECORDED IN THOSE DOCUMENTS. A O NOTED THAT SINCE ASSESSEE HAS NOT EXPLAINED THE TRANSACTIONS WITH REGARD TO THE PAYMENT MADE TO PALAI SAHEB IN CASH, HE MADE ADDITION OF RS.25 LAKH SHOWN IN THE SEIZED DOCUMENTS. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO DELETED THE ADDITIO N AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND THE REMAND R EPORT RECEIVED FROM AO BY OBSERVING THAT ALL THE TRANSACTIONS FOUND ON T HE SEIZED LOOSE PAPERS WERE REFLECTED IN THE BANK STATEMENT OF BHAGWA T NARAYAN 5 ITA NO.957/PUN/2016 CHAUDHARY (B.N. CHAUDHARY) AND THE CASH WAS WITHDRAWN FRO M THE ACCOUNT OF B.N. CHAUDHARY. HE HAS FURTHER NOTED THAT ASSESSEE HAD RECEIVED RS.25 LAKH BY WAY OF CASH TRANSFER WHICH WAS RET URNED BACK BY BANK TRANSFERS. HE THEREFORE HELD THAT THE ADDITION MAD E BY THE AO ON ACCOUNT OF CASH PAID OF RS.25 LAKH TO MR. PALAI IN THE HAND S OF ASSESSEE WAS NOT JUSTIFIED. HE ACCORDINGLY DELETED THE ADDITION. 7. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF AO. LD.A.R. O N THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A) AND SUBMITTED THAT THE ENTIRE TRANSACTION WAS EXPLAINED AND THERE WAS NO BASIS FOR MAKING ADDITION. HE THUS SUPPORTED THE ORDER OF LD.CIT(A ). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO ADDITION OF RS.25 LAKH. WE FIND THAT LD.CIT(A) AFTER CONSIDERING THE SUB MISSIONS OF ASSESSEE, REMAND REPORT RECEIVED FROM THE AO HAS NOTED THAT CREDIT OF RS.25 LAKH FROM M/S. PAVITRA TRADERS WAS RECEIVED BY B.N. C HAUDHARY AND ASSESSEE HAS NOTHING TO DO WITH AND SIMILARLY THE CA SH WAS WITHDRAWN FROM THE BANK ACCOUNT. AO HAS NOT CARRIED OU T ANY VERIFICATION FROM M/S. PAVITRA TRADERS TO DISPROVE THE CON TENTION OF THE ASSESSEE. WE FURTHER FIND THAT WHILE DECIDING THE ISSUE, LD.C IT(A) HAS GIVEN A FINDING THAT ASSESSEE HAS RECEIVED RS.25 LAKH BY WAY OF BANK TRANSFER OF B.N. CHAUDHARY ON 16.07.2011 WHICH WAS RET URNED IN TWO INSTALLMENTS THROUGH BANKS. HE THEREFORE HELD THAT ADDITIO N MADE BY THE AO ON ACCOUNT OF CASH PAID TO MR. PALAI WAS NOT CALLE D FOR IN THE CASE OF ASSESSEE. BEFORE US, REVENUE HAS NOT POINTED OU T ANY FALLACY IN THE FINDINGS OF LD.CIT(A). WE THEREFORE FIND NO REASON TO INTE RFERE WITH 6 ITA NO.957/PUN/2016 THE ORDER OF LD.CIT(A) AND THUS, THE GROUND NO.2 OF REVENUE IS DISMISSED. 9. GROUND NO.3 IS WITH RESPECT TO DELETION OF ADDITION OF RS.3,05,060/-. 9.1. DURING THE COURSE OF SEARCH ACTION AT THE ASSESSEE S PREMISES AT JALGAON, CASH OF RS.1,810/- WAS FOUND AGAINST WHICH CASH AS PER CASH BOOK WAS RS.2,81,543/- RESULTING IN DIFFERENCE OF RS.2,79,733/-. IT WAS EXPLAINED THAT CASH WAS TAKEN BY THE DIRECTOR TO HIS HO ME. DURING THE COURSE OF SEARCH AT THE RESIDENCE OF B.N. CHAUDHARY CASH OF RS.2,38,950/- WAS FOUND. THUS, THERE WAS STILL SHORTAGE OF RS .40,783/-, FOR WHICH THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE DES CRAPANCY. ON THE BASIS OF DETAILS FURNISHED BY THE ASSESSEE, IT WAS NO TICED THAT CASH BALANCE AS PER MAIN CASH BOOK AS ON 04.10.2011 I.E., THE DA TE OF SEARCH WAS RS.96,942/- AND AS PER THE WORK-SHOP CASH BOOK, TH E OPENING CASH BALANCE WAS RS.4,48,878/-. THE AGGREGATE CASH AS PER CA SH BOOKS WAS RS.5,45,820/- AGAINST WHICH ACTUAL CASH OF RS.2,40,760/- (RS.2,38,950/- + RS.1,810/-) WAS FOUND. THE SUBMISSIONS MADE BY THE ASSESSEE ABOUT THE DIFFERENCE OF CASH WERE NOT FOUND ACC EPTABLE TO THE AO. AO THEREFORE TREATED THE DIFFERENCE IN CASH OF RS.3,05,5 60/- TO BE NOT PROPERLY EXPLAINED AND THEREFORE MADE ITS ADDITION. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD .CIT(A), WHO DELETED THE ADDITION BY OBSERVING AS UNDER : 14.2 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS FILED BY THE APPELLANT. BRIEF FACTS ARE THAT AS PER BOOKS OF ACCOUNT PREPARED CASH BALANCE AS PER CASH BOOKS (MAIN CASH BOOK AND WORKSHOP CASH BOOK) ON DATE OF SEARCH WAS NOTED BY THE AO AT RS.5,45,820/- AS AGAINST THAT PHYSICAL CASH OF RS.2 ,40, 760/ - WAS FOUND DURING THE SEARCH. THE AO SOUGHT EXPLANATION REGARDING THE 7 ITA NO.957/PUN/2016 SHORTAGE OF CASH. IT WAS SUBMITTED BEFORE HIM THAT BOOKS OF ACCOUNTS WERE NOT COMPLETED AND MANY VOUCHERS OF PETTY EXPEN SES WERE TO BE ENTERED IN CASH BOOK AND REMAINING CASH WAS TAKEN B Y MD MR. MAHESH CHAUDHARY. THE AO DID NOT ACCEPT THE EXPLAN ATION AND ADDED THE SHORTAGE OF RS.3,05,060/- AS INCOME OF TH E APPELLANT. IN THE CASE OF SHORTAGE OF CASH, NO ADDITION WAS JUSTIFIED AS APPELLANT HAD WITHDRAWN THE EXPLAINED MONEY AND MIGHT HAVE SPENT THE SAME WITHOUT CLAIMING ANY EXPENDITURE IN THE P & L ACCOUN T. IT WAS NOT THE CASE OF EXCESS CASH FOUND PHYSICALLY OR THERE WAS U NEXPLAINED CASH FOUND RECORDED IN THE CASH BOOK. THEREFORE, ADDITIO N MADE OF RS.3,05,060/ - WAS NOT CALLED FOR AND STANDS DELETE D. GROUND RAISED BY THE APPELLANT IS ALLOWED. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APP EAL BEFORE US. 10. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A) AND FURTHER SUBMITTED THAT ON THE DATE OF SEARCH, BOOKS OF ACCOUNTS WERE NOT COMPLETED AND MANY VOUCHERS WERE STILL TO BE ENTERED IN CASH BOOK AND THE REMAINING CASH WAS TAKEN BY M.D. MR. MAHESH CHAUDHARY. HE FURTHER SUBMITTED THAT IT WAS NOT THE C ASE OF EXCESS CASH FOUND PHYSICALLY OR UNEXPLAINED CASH FOUND. HE THUS SUPPORTED THE ORDER OF LD.CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO ADDITION OF RS.3,05,060/-. LD.CIT(A) WHILE GRANTING RELIEF HAS NOTED THAT IT WAS NOT THE CASE OF EXCESS CASH FOUND OR THERE WAS UNEXPLAINED CASH FOUND RECORDED IN THE CASH BOOKS. HE FURTHER HELD THAT IN CAS E OF SHORTAGE OF CASH, NO ADDITION WAS JUSTIFIED AS ASSESSEE HAS WITHDRAWN THE MONEY AND MIGHT HAVE SPENT THE SAME WITHOUT CLAIMING ANY EXPEN DITURE. HE ACCORDINGLY DELETED THE ADDITION. BEFORE US, REVENUE HAS NOT POINTED OUT ANY FALLACY IN THE FINDINGS OF LD.CIT(A). THUS, THE GROUND NO.3 OF THE REVENUE IS DISMISSED. 8 ITA NO.957/PUN/2016 12. GROUND NO.4 IS WITH RESPECT TO RESTRICTING THE ADD ITION OF RS.6,71,338/- TO RS.1,47,964/-. 12.1. DURING THE COURSE OF SURVEY, AT THE ASSESSEES PR EMISES AT JALNA STOCK OF SPARE PARTS OF RS.49,61,203/- WAS INVENTORIED. CO NSIDERING THE GP RATE OF 22% THE COST OF SUCH STOCK WAS WORKED OUT AT RS.38,69,739/- AS AGAINST WHICH THE BOOK STOCK WAS RS.45,41,377/-. AO T HUS WORKED OUT THE PHYSICAL SHORTAGE OF STOCK OF RS.6,71,338/- AND C ONCLUDED THAT THE GOODS WERE SOLD OUT OF THE BOOKS. HE ACCORDINGLY MADE ADDITION OF RS.6,71,338/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CAR RIED THE MATTER BEFORE LD.CIT(A), WHO GRANTED PARTIAL RELIEF BY OBSER VING AS UNDER : 1 5 . 2 I HAVE GONE THROUGH T HE ASSESSMENT ORDER AND SUBMISSIONS FILED B Y THE APPELLANT . BRIEF FACTS ARE THAT DURING THE COURSE OF SURVEY AT THE BUSINESS PR EMISE OF THE APPELLANT , STOCK OF SPARES WAS INVENTORISED W I TH THE HELP OF CEO S H RI SHANKAR BANA I AT RS . 49 , 61 , 203/- . FOR WORKING OUT COST OF THE SPARES , GP OF 2 2 % WAS REDUCED AND THE COST OF PHYSICAL STOCK WAS WORKED OUT AT R S . 3 8, 69 , 739 /- WHEREAS BOOK STOCK WAS RS . 45 , 41 , 377/-- . IN TH I S MANNER , T HER E WAS SHOR T AGE OF PHYSICA L STOCK BY RS.6 , 7 1 , 338 / - AND ACCORD I NG T O AO GOODS C OS TI NG RS . 6 , 71 , 338 / - WERE SOLD OUTSIDE THE BOOKS. ON THE OT H E R H AN D , APPE LL ANT CONTENDED THAT SPARE PARTS STOCK WAS REPORTED TO THE CONSIG N O R T OYOTA COMPANY THROUGH AUTOMATED ACCOUNTING SYSTEM PROVIDED B Y THEM . T HERE WAS NO QUESTION OF ANY DIFFERENCE IN STOCK. HOWEVER , AO DID NOT ACCEPT T H E EXP L ANAT I ON AND ADDED ENT I RE SHO R TAGE OF STOCK O F RS . 6 , 7 1, 338 / - AS I NC OME O F T H E APPEL L ANT . DU RI NG TH E COURSE O F APPE LL ATE P ROCEED I NGS , AP PE L LAN T CONTENDED THAT THERE COULD NOT BE ANY DIFFERENCE IN STOCK AS SAME WAS M A I NTAINED ON TOYOTA SOFTWARE. WITHOUT PREJUDICE TO IT , IT WAS SUBMITTED THAT TH E AO HAD WRONGLY ADOPTED GP AT 22% FOR WORKING OUT THE COST OF THE STOCK WHEREAS GP FOR THE AY 2012-13 COMES TO 17 .91 % AND IF THE GP WAS ADOPTED AT 1 7 . 91% , THE SHORTAGE WOULD BE OF RS . 4,68 , 726/-. IT WAS ALSO CON T ENDED THAT I N C ASE OF SHORTAGE OF STOCK ONLY GROSS PROFIT MARGIN WAS TO BE TAXED AND ACCORDINGLY , MAXIMUM ADDITION OF RS.83 , 948/ - CAN BE SUSTAINED . I FIND CONTENT I ON OF THE APPELLANT PARTLY ACCEPTABLE. THE AO HAD ADOPTED GP RATE OF 22% AS FOUND AT THE TIME OF SURVEY ON THE BASIS OF GP OF PERIOD UPTO DATE OF . SURVEY. THE GP OF PRECEDING YEAR AS WELL AS FOR THE PERIOD 01 . 04.2011 TO THE DATE OF SURVEY WAS RE L EVANT FOR WORKING OUT COST OF STOCK WHEREAS APPELLANT IS C ONS I DER I NG GP OF PERIOD SUBSEQUENT TO DATE OF SURVEY. THEREFORE , GP OF 22 % ADOPTED BY THE AO I S J USTIFIED . HOWEVER , I AGREE WITH THE APPELLANT THA T I N CASE OF SHORTAGE OF STOCK , COST OF SHORTAGE OF STOCK HAS TO BE REPLACED WITH SA L E PROCEEDS WH I CH WAS NOT BOOKED BY THE APPELLANT MEANING THEREBY THAT ONLY G ROSS PROFIT RATE ON STOCK SOLD OUTSIDE THE BOOKS HAS TO BE TAXED. ACCOR DINGLY , UNRECORDED PROFIT WOULD WORK OUT AT RS.1 , 47,694/ - ( 6 , 71 , 338/ - X 0 . 22 ) . ADD I TION TO 9 ITA NO.957/PUN/2016 THE EXTENT OF RS.1 , 47 , 694/ - IS UPHELD AND APPELLANT GETS RE LI EF OF RS. 5 , 23 , 644/ -. GROUND RAISED BY THE APPELLANT IS PARTLY AL LOWED . AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APP EAL BEFORE US. 13. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A) AND FURTHER SUBMITTED THAT ON THE ADDITION THAT HAS BEE N UPHELD BY LD.CIT(A) ASSESSEE IS NOT IN APPEAL. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPECT TO ADDITION ON ACCOUNT OF ALLEGED SHORTAGE OF PHYSICAL STOCK OF GOODS. AO MADE ADDITION BY WORKING OUT THE G.P. AT 22% BEING THE G.P. RATE UPTO THE DATE OF SURVEY. LD.CIT(A) HAS NOTED THAT FOR WORKING OUT COST OF THE SPARE PARTS, AO HAD ADOPTED THE GP RATE OF 22% AS FOUN D AT THE TIME OF SURVEY ON THE BASIS OF GP PERIOD UPTO THE DATE OF SURVE Y. LD.CIT(A) OBSERVED THAT IN CASE OF SHORTAGE OF STOCK, THE GROSS PROFIT RATIO ON THE STOCK SOLD OUTSIDE THE BOOKS HAS TO BE TAXED. HE WORK ED OUT THE UNRECORDED PROFITS AT RS.1,47,964/- AND UPHELD THE ADDIT ION TO THAT EXTENT. BEFORE US, REVENUE HAS NOT POINTED OUT ANY FALLAC Y IN THE FINDINGS OF LD.CIT(A). WE THEREFORE FIND NO REASON TO INTERFER E WITH THE ORDER OF LD.CIT(A). THUS, THE GROUND OF THE REVENUE IS DISMISSED. 15. 5 TH GROUND IS WITH RESPECT TO THE DELETION OF ADDITION OF RS.1,06,00,000/- ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 10 ITA NO.957/PUN/2016 15.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NO TICED THAT ASSESSEE HAD RECEIVED LOAN OF RS.1,06,00,000/- FROM ASSOCIAT E COMPANY NAMELY M/S. BNC POWER PROJECTS LTD. AND SHRI B.N. CHAUD HARY WAS THE BENEFICIAL SHARE HOLDER TO THE EXTENT OF 98% BENEFICIAL H OLDING IN THE ASSESSEES COMPANY. AO ALSO NOTED THAT BNC POWER PRO JECTS LTD., HAS ACCUMULATED PROFIT OF RS.1125.7 LAC AFTER REDUCING THE DEEME D DIVIDEND OF RS.368.27 LAC TAXED IN A.Y. 2011-12. HE ALSO NOTED THAT A LOAN OF RS.1,06,00,000/- WAS ADVANCED BY B.N. CHAUDHARY TO ASSESS EE DURING THE RELEVANT ACCOUNTING PERIOD. HE HELD THAT SINCE B.N. C HAUDHARY BENEFICIAL SHAREHOLDER WAS THE LENDER OF THE COMPANY PROVIS IONS OF SEC.2(22)(E) OF THE ACT WERE APPLICABLE. HE ACCORDINGLY MADE ADDITION OF RS.1,06,00,000/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD.CIT(A), WHO AFTER RELYING ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE REPOR TED IN 324 ITR 263, CIT VS. IMPACT CONTAINERS PVT. LTD., REPORTED IN 367 ITR 346 AND CIT VS. JIGNESH P. SHAH REPORTED IN (2015) 372 ITR 03 92, GAVE A FINDING THAT SINCE ASSESSEE DID NOT HELD THE BENEFICIAL SHAR ES IN THE LENDING COMPANY, PROVISIONS OF SEC.2(22)(E) OF THE ACT WERE NOT APPLICABLE. HE ACCORDINGLY DELETED THE ADDITION MADE BY TH E AO. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 16. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A) AND FURTHER SUBMITTED THAT SINCE ASSESSEE DID NOT HELD A NY BENEFICIAL SHARES IN BNC POWER PROJECTS LTD., PROVISIONS OF SEC.2(22)(E) OF THE ACT ARE NOT APPLICABLE. HE THUS SUPPORTED THE ORDER OF LD.CIT(A). 11 ITA NO.957/PUN/2016 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO ADDITION OF RS.1,06,00,000/- U/S 2(22)(E) OF THE ACT. AO HELD THAT SINCE B.N. CHAUDHARY WAS THE BENEFICIAL SHARE HOLDER OF THE LENDING CO MPANY I.E., BNC POWER PROJECTS LTD., AND HAD SUBSEQUENTLY SHARE H OLDING IN THE ASSESSEES COMPANY, PROVISIONS OF SEC.2(22)(E) OF THE ACT A RE APPLICABLE. WE FIND THAT LD.CIT(A) AFTER RELYING ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE (SUPRA) HAS H ELD THAT THE PAYMENT CANNOT BE TAXED IN THE HANDS OF ASSESSEE AND ASSESSEE DID NOT HELD ANY BENEFICIAL SHARES IN THE LENDING COMPANY. BEFORE US , REVENUE HAS NOT POINTED ANY CONTRARY DECISION IN ITS SUPPORT NOR HAS POI NTED ANY FALLACY IN THE FINDINGS OF LD.CIT(A). WE THEREFORE FIND NO REAS ON TO INTERFERE WITH THE ORDER OF LD.CIT(A). THUS, THE GROUND OF REVENUE IS DISMISSED. 18. GROUND NO.6 IS WITH RESPECT TO ADDITION OF RS.2,45 ,388/- ON ACCOUNT OF UNPROVED SUNDRY CREDITORS. 18.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSES SEE WAS ASKED TO FILE CONFIRMATIONS FOR RS.1,11,678/- FROM M/S. DHANARA J AUTO PAINT AND RS.1,33,710/- FROM M/S. PLANNERS, MUMBAI. AO NOTED THAT SINCE ASSESSEE DID NOT FURNISH ANY CONFIRMATIONS, AO TREAT ED THE AGGREGATE BALANCE OF RS.2,45,388/- AS UNPROVED SUNDRY CR EDITORS AND MADE ITS ADDITION. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A) WHO DELETED THE ADDITION. 18.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS FILED BY THE APPELLANT. IN VIEW OF THE FACTS THAT APPELLA NT DID NOT GET SUFFICIENT TIME TO OBTAIN CONFIRMATIONS FROM THE TRADE CREDITO RS, THE CONFIRMATIONS FILED ARE ADMITTED AS ADDITIONAL EVIDENCE IN THE IN TEREST OF SUBSTANTIVE 12 ITA NO.957/PUN/2016 JUSTICE. PERUSAL OF THE LEDGER ACCOUNT AND THE CONF IRMATION FILED BY THE CREDITOR M/S. DHANRAJ AUTO PAINT REVEALED THAT IT HAD OPENING CREDIT BALANCE OF RS.1,45,433/- AND SOLD MATERIAL TO THE APPELLANT DURING THE YEAR AND ALSO RECEIVED PAYMENTS DURING THE YEAR RES ULTING IN CLOSING CREDIT BALANCE OF RS.1,19,965/-. SIMILARLY, CONFIRM ATION FILED BY THE OTHER CREDITOR M/S.PLANNERS, MUMBAI REVEALED THAT CREDITO R HAD GIVEN CONSULTANCY AND BILL OF RS.3,58,475/- WAS RAISED. T HE APPELLANT DEDUCTED THE TAX AT SOURCE OF RS.37,138/- AND MADE PAYMENTS OF RS.1,87,627/- DURING THE YEAR THROUGH BANKING CHANNEL WHICH RESUL TED IN CLOSING CREDIT BALANCE OF RS.1,33,710/-. THE AO HAD NOT DOUBTED TH E PURCHASES MADE AND CONSULTANCY GIVEN DURING THE YEAR. SIMILARLY, P AYMENTS MADE TO THESE PARTIES WERE NOT DISPUTED. THE AO HAS ACCEPTE D ALL OTHER TRANSACTIONS BUT HELD CLOSING BALANCE AS UNPROVED. IT WAS ALSO NOT THE CASE OF THE AO THAT LIABILITIES AT THE YEAREND HAD CEASED TO EXIST. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO HOLD THAT EI THER PARTIES WERE NONEXISTENT OR MATERIAL SERVICES WERE NOT SUPPLIED. FACTS OF THE ISSUE INVOLVED AND CONTENTIONS RAISED ARE IDENTICAL TO TH E FACTS OF THE GROUND NO.3 OF APPEAL FOR AY 2011-12. HENCE, IN VIEW OF DE TAILED DISCUSSION AT PARA 5.5 THEREIN, THE ADDITION MADE BY THE AO OF RS .2,45,388/- IS DELETED AND GROUND RAISED BY THE APPELLANT IS ALLOWED. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPE AL BEFORE US. 19. BEFORE US, LD.D.R. SUPPORTED THE ORDER OF AO. LD.A.R. ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD.CIT(A). 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUND IS WITH RESPEC T TO ADDITION OF RS.2,45,388/- ON ACCOUNT OF UNPROVED SUNDRY CREDITORS. W E FIND THAT LD.CIT(A) AFTER CONSIDERING THE SUBMISSIONS HAS GIVEN A FINDIN G THAT DURING THE YEAR THERE WERE TRANSACTIONS WITH THE AFORES AID PARTIES. AO HAD NOT DOUBTED THE PURCHASES MADE AND CONSULTANCY G IVEN AND THE PAYMENTS MADE WERE ALSO NOT DISPUTED AND THAT AO HAD ACCEPTED ALL OTHER TRANSACTIONS BUT HELD CLOSING BALANCE AS UNPROVED. HE HAS FURTHER GIVEN A FINDING THAT REVENUE HAS NOT PROVED THAT THE PARTIES WERE NOT IN EXISTENCE OR MATERIAL OR SERVICES WERE NOT S UPPLIED. HE THEREFORE DELETED THE ADDITION. BEFORE US, REVENUE HAS NO T POINTED OUT 13 ITA NO.957/PUN/2016 ANY FALLACY IN THE FINDINGS OF LD.CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). THUS, THE GROUND OF THE REVENUE IS DISMISSED. 21. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 4 TH DAY OF APRIL, 2019. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 4 TH APRIL, 2019. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-12, PUNE. PR. CIT, CENTRAL, NAGPUR. '#$ %%&',) &', / DR, ITAT, B PUNE; $*+,/ GUARD FILE. / BY ORDER // TRUE COPY // -./%0&1 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.