Shree Yamuna Pulses, Dahod V. The ACIT.,Cent.Circle-1, Baroda

ITSSA 233/AHD/2010

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8317 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-07-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 11-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KATARSINGH
• Keywords: Depreciation; Retrospective amendment; Bad and doubtful debts

Judgement Text

, , , , A, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, A BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ %& %& %& %& , , , , &' ( & &' ( & &' ( & &' ( & ' ' ' ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND TEJ RAM MEENA, ACCOUNTANT MEMBER) IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 [ASSTT.YEAR : 2001-2002, 2002-2003, 2003-2004, 200 4-2005, 2005-2006, 2006-2007 AND 2007-2008] SHREE YAMUNA PULSES 5858, CHAKALIA ROAD DAHOD. PAN : AAGFS 0733 A /VS. ACIT, CENT.CIR.1 BARODA. ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) .% / 0 &/ ASSESSEE BY : SHRI SAKAR SHARMA ( / 0 &/ REVENUE BY : SHRI KATARSINGH 2 / %3'/ DATE OF HEARING : 31 ST JULY, 2012 456 / %3'/ DATE OF PRONOUNCEMENT : 07-08-2012 &7 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE SEVEN APPEALS BY THE ASSESSEE FOR THE ASSTT.YEAR : 2001-2002, 2002-2003, 2003- 2004, 2004-2005, 2005-2006, 2006-2007 AND 2007-2008 ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV, AHMEDA BAD. THESE ARE BEING DECIDED WITH THIS CONSOLIDATED ORDER. IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -2 IT(SS)A.NO.233/AHD/2010 (ASSTT.YEAR : 2001-2002) 2. THE GROUND NO.1 OF THE ASSESSEES APPEAL READS A S UNDER: 1. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF INTEREST OF RS.1,55,297/- U/S.40A(2 )(B) OF THE ACT. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE SIMILAR RATE OF INTEREST IS ALLOWED BY THE AO IN THE EARLIE R YEARS, THOUGH, THE ORDER OF THE ASSESSMENT WAS FRAMED UNDER SECTION 14 3(1) OF THE ACT. HE SUBMITTED THAT DURING THE RELEVANT PERIOD, THE H IGHEST RATE OF INTEREST PAID TO OUTSIDE PARTIES AS WELL AS RELATED PARTIES WAS 18% PER ANNUM, AND THEREFORE NO CASE OF DISALLOWANCE COULD BE MADE OUT BY THE DEPARTMENT. THE LEARNED CIT-DR HAS RELIED ON T HE ORDERS OF THE AO AND THE CIT(A). 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ASSESSEE W AS PAYING THE INTEREST TO OUTSIDERS AT DIFFERENT RATES OF INTERES T RANGING FROM 12% TO 18% PER ANNUM. THE ASSESSEE HAS PAID THE RATE OF I NTEREST TO THE RELATED PARTIES AT 18% PER ANNUM. THE AO HAS INVOK ED PROVISIONS OF SECTION 40A(2)(B) OF THE ACT AND HAS DISALLOWED THE INTEREST TO THE RELATED PARTIES AT THE RATE OF 3% PER ANNUM, AND MA DE DISALLOWANCE AT RS.1,55,297/-. WE FIND THAT IN ORDER TO INVOKE PRO VISION OF SECTION 40A(2)(B) OF THE ACT, IT HAS TO BE SHOWN THAT THE P AYMENT WAS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET RATE PREVAILING IN THE MARKET. THE ASSESSEE ITSELF HAS PAID INTEREST TO OUTSIDERS AT THE RATE RANGING FROM 12 TO 18% AND NO REASON HAS BEEN ASSIGNED BY THE CIT(A) WHILE UPHOLDING THE FAIR MAR KET RATE OF INTEREST AT 15% DURING THE PERIOD. IN OUR CONSIDER ED VIEW, THE RATE OF IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -3 INTEREST AT 18% PER ANNUM COULD NOT BE SAID TO BE E XCESSIVE OR UNREASONABLE, AND ACCORDINGLY, WE HOLD THAT NO CASE FOR MAKING ANY DISALLOWANCE OF INTEREST UNDER SECTION 40A(2)(B) OF THE ACT COULD BE MADE OUT BY THE DEPARTMENT, AND ACCORDINGLY THE DIS ALLOWANCE IS DELETED AND THE GROUND NO.1 OF THE ASSESSEES APPEA L IS ALLOWED. 5. GROUND NO.2 OF THE ASSESSEES APPEAL IS AS UNDER : 2. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF RS.67,960/- ON ACCOUNT OF BAD DEBTS WITHOUT APPRECIATING SUBMISSIONS AND EXPLANATIONS OF THE AP PELLANT. 6. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED T HAT THE ISSUE IN THE GROUND OF THE APPEAL REGARDING BAD DEBTS IS COV ERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF THE HONBLE SUPRE ME COURT IN THE CASE OF T.R.F. LTD. VS. CIT, 323 ITR 397 (SC). THE LEARNED DR HAS RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). THE ASSESSEE HAS WRITTEN OF F THE AMOUNT OF RS.67,960/- AS BAD DEBTS IN ITS ACCOUNT FOR THE REL EVANT PERIOD AND THE ISSUE IS COVERED WITH THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. CIT( SUPRA), A ND ACCORDINGLY IT IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE GROUND NO .2 OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE IT(SS)A.NO.233/AHD/2010 OF TH E ASSESSEE IS ALLOWED. IT(SS)A.NO.234/AHD/2010 (ASSTT.YEAR : 2002-2003) THE GROUND NO.1 OF THE APPEAL OF THE ASSESSEE READ S AS UNDER: IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -4 1. THE LD.CIT(A) ERRED ON FACTS AN DIN LAW IN CONF IRMING DISALLOWANCE OF INTEREST U/S.1,98,521/- U/S.40A(2)( B) OF THE ACT. 9. BOTH THE PARTIES BEFORE US HAS SUBMITTED THAT TH E ISSUE OF DISALLOWANCE OF INTEREST U/S.40A(2)(B) OF THE ACT I S IDENTICAL WITH THE ISSUE IN THE ASSESSEES APPEAL FOR THE ASSTT.YEAR 2 001-2002 IN IT(SS)A NO.233/AHD/2010 WITH THE ONLY DIFFERENCE IS THAT DU RING THIS YEAR THE HIGHEST RATE OF INTEREST PAID TO OUTSIDE PARTY WAS 17% AS AGAINST 18% PAID TO RELATED PARTIES. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS. FOR THE REASONS RECORDED WHILE DISPOSING OF GROUND NO.1 IN THE ASSE SSEES APPEAL FOR THE EARLIER ASSESSMENT YEAR 2001-2002 IN IT(SS)A NO .233/AHD/2010, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND T HE GROUND NO.1 IS ALLOWED. 11. THE GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UNDER: 2. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF RS.2,01,513/- ON ACCOUNT OF BAD DEB TS WITHOUT APPRECIATING SUBMISSIONS AND EXPLANATIONS OF THE AP PELLANT. 12. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE IN THIS CASE REGARDING ALLOWANCE OF BAD DEBTS IS SIMILAR WITH TH E ISSUE IN THE GROUND NO.2 OF THE ASSESSEES APPEAL OF EARLIER ASS ESSMENT YEAR 2001- 2002 IN IT(SS)A.NO.233/AHD/2010. 13. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSING OF THE GROUND NO.2 OF EARLIER ASSES SMENT YEAR 2001- 2002 IN IT(SS)A.NO.233/AHD/2010, THE ISSUE OF ALLOW ANCE OF BAD DEBT IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE GROUND NO.2 OF THE ASSESSEES APPEAL IS ALLOWED. IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -5 14. IN THE RESULT, IT(SS)A.NO.234/AHD/2010 IS ALLOW ED. IT(SS)A.NO.235/AHD/2010 (ASSTT.YEAR : 2003-2004) 1. THE LD.CIT(A) ERRED ON FACTS AN DIN LAW IN CONF IRMING DISALLOWANCE OF INTEREST U/S.27,253/- U/S.40A(2)(B) OF THE ACT. 15. BOTH THE PARTIES BEFORE US HAS SUBMITTED THAT T HE ISSUE OF DISALLOWANCE OF INTEREST U/S.40A(2)(B) OF THE ACT I S IDENTICAL WITH THE ISSUE IN THE ASSESSEES APPEAL FOR THE ASSTT.YEAR 2 001-2002 IN IT(SS)A NO.233/AHD/2010 WITH THE ONLY DIFFERENCE IS THAT DU RING THIS YEAR THE HIGHEST RATE OF INTEREST PAID TO OUTSIDE PARTY WAS 15% AS AGAINST 18% PAID TO ONE RELATED PARTY. 16. WE HAVE HEARD RIVAL SUBMISSIONS. FOR THE REASO NS RECORDED WHILE DISPOSING OF GROUND NO.1 IN THE ASSESSEES AP PEAL FOR THE EARLIER ASSESSMENT YEAR 2001-2002 IN IT(SS)A NO.233/AHD/201 0, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE GROUND NO.1 IS ALLOWED. 17. THE GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UNDER: 2. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING ADDITION OF RS.55,000/- ON ACCOUNT OF UNACCOUNTED A DVANCE GIVEN TO SHRI RAM DULARE MISTRY WITHOUT APPRECIATIN G SUBMISSIONS AND EXPLANATIONS F THE APPELLANT. 18. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF SHR I HARSHAD M. SHAH, PARTNER OF THE ASSESSEE-FIRM, SOME PAPERS WERE FOUN D AND SEIZED WHICH SHOWED THAT THE ASSESSEE HAS LENT RS.50,000/- AND RS.5,000/- TO ONE SHRI RAM DULARE MISTRI FOR THE PURPOSE OF MARRI AGE AND CONSTRUCTION OF HOUSE RESPECTIVELY. HE SUBMITTED T HAT THE ASSESSEE HAS SUBMITTED A DETAILED EXPLANATION TO THE QUERY OF TH E AO, A COPY OF WHICH HAS BEEN FILED IN THE PAPER BOOK FILED BEFORE THE TRIBUNAL. HE IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -6 SUBMITTED THAT THE PAPERS PERTAINED TO THE ASSTT.YE AR 2007-208 AND NOT TO THE YEAR UNDER CONSIDERATION, AND THEREFORE NO A DDITION SHOULD BE MADE IN RELEVANT ASSTT.YEAR 2003-2004. A COPY OF S HRI RAM DULARE MISTRIS ACCOUNTS HAS BEEN FILED AT PAGE NO.363 TO 368 OF THE PAPER BOOK FILED BY THE ASSESSEE. THE LEARNED DR REFERRE D TO THE RELEVANT PORTIONS OF THE ASSESSMENT ORDER AND THE ORDER OF T HE CIT(A) IN SUPPORT OF THE CASE OF THE REVENUE THAT THE ASSESSE E HAS BEEN TAKING INCONSISTENT STAND IN THIS REGARD AND IN SPITE OF O PPORTUNITY, THE ASSESSEE HAS NOT GIVEN ANY SATISFACTORY EXPLANATION REGARDING THE SOURCE OF THE AMOUNT LENT OUT TO SHRI RAM DULARE MI STRI WHO WAS EMPLOYEE OF THE ASSESSEE-FIRM DURING THE RELEVANT P ERIOD. 19. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE P ERUSED THE ORDERS OF THE AO AND THE CIT(A) AND ALSO COPIES OF THE EXPLANATION OF THE ASSESSEE AND COPY OF THE ACCOUNT OF SHRI RAM DU LARE MISTRI IN THE BOOKS OF THE ASSESSEE. WE FIND THAT THE FACT THAT THE ASSESSEE HAS GIVEN RS.50,000/- AND RS.5,000/-TO ONE SHRI RAM DUL ARE MISTRI COULD NOT BE CONTROVERTED ON BEHALF OF THE ASSESSEE. SHR I RAM DULARE MISTRI WAS EMPLOYEE OF THE ASSESSEE-FIRM AND THE ASSESSEE WAS GIVEN SPECIFIC OPPORTUNITY IN THIS REGARD BY THE AO DURING THE COU RSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE COULD NOT PROVE WITH EVI DENCE THAT THE AMOUNT PERTAINED TO THE LATER ASSESSMENT YEAR 2007- 2008. SHRI RAM DULARE MISTRI HAS SIGNED VOUCHER OF THE ASSESSEE-FI RM ON REVENUE STAMP. THE PREPONDERANCE OF PROBABILITIES ARE IN F AVOUR OF THE REVENUE. IN THESE FACTS OF THE CASE, WE CONFIRM TH E ORDER OF THE CIT(A) IN MAKING THE ADDITION OF RS.55,000/- IN THE HANDS OF THE ASSESSEE AND THE GROUND NO.2 OF THE ASSESSEES APPE AL IS DISMISSED. 20. THE GROUND NO.3 OF THE ASSESSEES APPEAL READS AS UNDER: IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -7 2. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF RS.10,83,745/- ON ACCOUNT OF BAD DE BTS WITHOUT APPRECIATING SUBMISSIONS AND EXPLANATIONS OF THE AP PELLANT. 21. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE IN THIS CASE REGARDING ALLOWANCE OF BAD DEBTS IS SIMILAR WITH TH E ISSUE IN THE GROUND NO.2 OF THE ASSESSEES APPEAL OF EARLIER ASS ESSMENT YEAR 2001- 2002 IN IT(SS)A.NO.233/AHD/2010. 22. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSING OF THE GROUND NO.2 OF EARLIER ASSES SMENT YEAR 2001- 2002 IN IT(SS)A.NO.233/AHD/2010, THE ISSUE OF ALLOW ANCE OF BAD DEBT IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE G ROUND NO.2 OF THE ASSESSEES APPEAL IS ALLOWED. 23. IN THE RESULT, IT(SS)A.NO.235/AHD/2010 IS PARTL Y ALLOWED. IT(SS)A.NO.236/AHD/2010 (ASSTT.YEAR : 2004-2005) 1. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF DEPRECIATION OF RS.83,769/- WITHOUT APPRECIATING THAT THE DEPRECATION CLAIMED IN RETURN FURNISHED U/S.139 WAS IN ACCORDANCE WITH THE PROVISIONS OF TH E ACT AND AS SUCH THERE WAS NO CLAIM OF EXCESS DEPRECIATION. TH E CLAIM OF DEPRECIATION HAS BEEN DENIED MERELY BECAUSE APPELLA NT CLAIMED DEPRECIATION IN RETURN FILED U/S.139 AT A LOWER FIG URE. 24. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GENUINENESS OF THE CLAIM OF THE ASSESSEE FOR DEPREC IATION HAS NOT BEEN DOUBTED BY THE REVENUE. THE ONLY REASON ADVANCED B Y THE REVENUE FOR DISALLOWANCE OF CLAIM OF DEPRECIATION MADE BY T HE ASSESSEE WAS THAT THE CLAIM WAS NOT MADE IN THE ORIGINAL RETURN OF INCOME, AND THEREFORE COULD NOT BE CONSIDERED WHILE COMPUTING T HE INCOME OF THE ASSESSEE ON THE BASIS OF THE RETURN UNDER SECTION 1 53A OF THE ACT. HE IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -8 SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE WITH THE DECISION OF MUMBAI TRIBUNAL IN DCIT VS. EVERSMILE C ONSTRUCTIONS CO. P. LTD., 143 TTJ 322. THE LEARNED CIT-DR REFER RED TO THE RELEVANT PORTIONS OF THE ORDER OF THE AO AND THE CI T(A) IN SUPPORT OF THE CASE OF THE REVENUE. HE HAS RELIED ON THE ORDE RS OF THE AO AND THE CIT(A). 25. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE CLAIM OF T HE DEPRECIATION WAS MADE BY THE ASSESSEE IN THE RETURN FILED UNDER SECTION 153A. WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE WITH THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. EVERSMILE CONSTRUCTIONS CO. P. LTD. (SUPRA) WHEREIN IT WAS HE LD THAT THE AO HAS TO COMPUTE TOTAL INCOME OF THE ASSESSEE ON THE BASI S OF THE RETURN FILED AND THERE WAS NO SCOPE FOR ARGUING THAT THE ASSESSE E HAS BEEN RENDERED POWERLESS TO EVEN LODGE A CLAIM IN RESPECT OF WHICH DEDUCTION WAS NOT ALLOWED EARLIER. WE BEING IN AGREEMENT WITH THE DE CISION OF THE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. EVERSMILE C ONSTRUCTION CO. P. LTD. (SUPRA) AND AS THE REVENUE HAS NOT DOUBTED THE GENUINENESS OF THE CLAIM OF THE ASSESSEE FOR ALLOWANCE OF THE D EPRECIATION, DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND ALLOW THE G ROUND NO.1 OF THE ASSESSEES APPEAL. 26. THE GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UNDER: 2. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF RS.1,03,890/- ON ACCOUNT OF BAD DEB TS WITHOUT APPRECIATING SUBMISSIONS AND EXPLANATIONS OF THE AP PELLANT. 27. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE IN THIS CASE REGARDING ALLOWANCE OF BAD DEBTS IS SIMILAR WITH TH E ISSUE IN THE IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -9 GROUND NO.2 OF THE ASSESSEES APPEAL OF EARLIER ASS ESSMENT YEAR 2001- 2002 IN IT(SS)A.NO.233/AHD/2010. 28. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSING OF THE GROUND NO.2 OF EARLIER ASSES SMENT YEAR 2001- 2002 IN IT(SS)A.NO.233/AHD/2010, THE ISSUE OF ALLOW ANCE OF BAD DEBT IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE G ROUND NO.2 OF THE ASSESSEES APPEAL IS ALLOWED. 29. IN THE RESULT, IT(SS)A.NO.236/AHD/2010 IS ALLOW ED. IT(SS)A.NO.237/AHD/2010 (ASSTT.YEAR : 2005-2006) 30. THE ONLY GROUND IN THIS APPEAL OF THE ASSESSEE IS AS UNDER: 1. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING DISALLOWANCE OF RS.6,93,292/- ON ACCOUNT OF BAD DEB TS WITHOUT APPRECIATING SUBMISSIONS AND EXPLANATIONS OF THE AP PELLANT. 31. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE IN THIS CASE REGARDING ALLOWANCE OF BAD DEBTS IS SIMILAR WITH TH E ISSUE IN THE GROUND NO.2 OF THE ASSESSEES APPEAL OF EARLIER ASS ESSMENT YEAR 2001- 2002 IN IT(SS)A.NO.233/AHD/2010. 32. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSING OF THE GROUND NO.2 OF EARLIER ASSES SMENT YEAR 2001- 2002 IN IT(SS)A.NO.233/AHD/2010, THE ISSUE OF ALLOW ANCE OF BAD DEBT IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE G ROUND NO.1 OF THIS APPEAL OF THE ASSESSEE IS ALLOWED. 33. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. IT(SS)A.NO.238/AHD/2010 (ASSTT.YEAR : 2006-2007) IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -10 34. THE GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UNDER: 1. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING ACTION OF AO MAKING ASSESSMENT ON THE BASIS OF RETU RN FURNISHED U/S.139 INSTEAD OF MAKING ASSESSMENT ON T HE BASIS OF VALID RETURN FURNISHED U/S.153A OF THE ACT. 35. THE LEARNED COUNSEL FOR THE ASSESSEE HAS WITHDR AWN THIS GROUND OF THE ASSESSEE, WHICH IS ACCORDINGLY DISMISSED. 36. THE GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UNDER: 2. THE LD.CIT(A) ERRED ON FACTS AND N LAW IN CONFI RMING DISALLOWANCE OF DEPRECIATION OF RS.68/- WITHOUT APP RECIATING THAT THE DEPRECIATION CLAIMED IN RETURN FURNISHED U /S.139 WAS IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND AS SU CH THERE WAS NO CLAIM OF EXCESS DEPRECIATION. THE CLAIM OF DEPR ECIATION HAS BEEN DENIED MERELY BECAUSE APPELLANT CLAIMED DEPREC IATION IN RETURN FILED U/S.139 AT A LOWER FIGURE. 37. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE REGARDING CLAIM OF DEPRECIATION IS IDENTICAL WITH THE GROUND NO.1 IN THE ASSESSEES APPEAL FOR A.Y.2004-2005 IN IT(SS)A.NO.2 37/AHD/2010. 38. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE OF CLAIM OF DEPRECIATION IS IDENTICAL WITH THE DECI SION IN THE ASSESSEES APPEAL FOR A.Y.2004-2005 IN GROUND NO.1 THEREOF. FOR THE REASONS RECORDED WHILE DISPOSING OF GROUND NO.1 OF THE ASSE SSEE FOR A.Y.2004-2005 IN IT(SS)A.NO.236/AHD/2010 IN THE FOR EGOING PARAGRAPHS OF THIS ORDER, WE DECIDE THIS ISSUE IN F AVOUR OF THE ASSESSEE AND GROUND NO.2 OF THE ASSESSEES APPEAL IS ALLOWED . 39. THE GROUND NO.3 OF THE ASSESSEES APPEAL READS AS UNDER: 3. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING ACTION OF THE AO IN DISALLOWING DEDUCTION CLAIMED U /S.40(A)(IA) ON PAYMENT BASIS AMOUNTING TO RS.5,13,093/- WITHOUT IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -11 APPRECIATING THAT THE SAID AMOUNT WAS DISALLOWED IN COMPUTATION OF INCOME FOR AY 2005-06 DUE TO DELAY I N MAKING PAYMENT OF TDS. ALTERNATIVELY, THE LD.CIT(A) OUGHT TO HAVE ALLOWED DEDUCTION OF THIS AMOUNT IN A.Y.2005-06 DUE TO RETROSPECTIVE AMENDMENT IN THE ACT ITSELF. 40. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PAYMENT IN QUESTION WAS COVERED BY THE PROVISIONS OF SECTIO N 40(A)(IA) OF THE ACT AND WERE ACCORDINGLY DISALLOWED IN THE EARLIER ASSESSMENT YEAR 2005-2006, AND THEREFORE, THE CLAIM IS ALLOWABLE ON PAYMENT BASIS IN THE RELEVANT ASSESSMENT YEAR 2006-2007. HE SUBMITT ED THAT THE RATIO OF THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. EVERSMILE CONSTRUCTIONS CO. P. LTD., 143 TTJ 322 (M UM) APPLIES TO THIS PROPOSITION ALSO. THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED STATEMENT OF COMPUTATION OF INCOME OF EARLIER ASSES SMENT YEAR 2005- 2006 AT PAGE NO.383 OF THE COMPILATION BEFORE US TO ESTABLISH THAT AMOUNT OF RS.5,13,093/- WAS ADDED BACK AS INCOME DU RING THE ASSESSMENT YEAR 2005-2006. THE LEARNED CIT-DR HAS RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 41. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT IN THE STATEMENT OF COMPUTATION OF INCOME FOR THE EARLIER ASSESSMENT YEAR 2005-2006 FILED AT PAGE NO.383 OF THE COMPILATION B EFORE US, THE ASSESSEE HAS ADDED BACK THE AMOUNT OF RS.5,13,093/- AS INCOME FOR THE A.Y.2005-2006, AND THEREFORE THE DEDUCTION ON P AYMENT BASIS SHOULD HAVE BEEN ALLOWED DURING THE RELEVANT ASSESS MENT YEAR 2006- 2007. THE DECISION OF THE MUMBAI TRIBUNAL IN DCIT VS. EVERSMILE CONSTRUCTIONS CO. P. LTD. (SUPRA) APPLIES TO THE IS SUE BEFORE US. IN THESE FACTS OF THE CASE, WE HOLD THAT THE CLAIM OF DEDUCTION OF RS.5,13,093/- ON ACTUAL PAYMENT BASIS FOR THE RELEV ANT ASSESSMENT YEAR 2006-2007 IS ALLOWABLE SUBJECT TO VERIFICATION BY T HE AO THAT THE IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -12 AMOUNT HAS IN FACT BEEN PAID DURING THE PERIOD RELE VANT TO THE ASSTT.YEAR 2006-2007. ACCORDINGLY, SUBJECT TO THE VERIFICATION BY THE AO, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE A ND DIRECT THE AO ACCORDINGLY AND THE GROUND OF NO.3 OF THE ASSESSEE S APPEAL IS DISPOSED OF ACCORDINGLY. 42. IN THE RESULT, IT(SS)A.NO.238/AHD/2010 IS PARTL Y ALLOWED. IT(SS)A.NO.239/AHD/2010 (ASSTT.YEAR : 2007-2008) 43. THE GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UNDER: 1. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING ADDITION OF RS.63,274/- ON ACCOUNT OF DEFICIT IN ST OCK AT THE TIME OF SEARCH PROCEEDINGS. 44. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION ON ACCOUNT OF DEFICIT IN STOCK AT THE TIME OF SEARC H PROCEEDINGS AMOUNTING TO RS.63,274/- WAS MERELY ON THE BASIS OF SUSPICION AND HAS BEEN MADE WITHOUT ANY BASIS. HE SUBMITTED THAT OVERALL YIELD IS HIGHER THAN THE EARLIER YEARS AND SHORTAGE WAS DUE TO AD HOC MEASUREMENT OF QUANTITY OF STOCK ON THE DATE OF SEA RCH. HE CATEGORICALLY STATED THAT NO ACTUAL WEIGHMENT WAS D ONE BY THE DEPARTMENT AT THE TIME OF SEARCH. HE SUBMITTED THE GP AND NP RATE IS BETTER THAN THE EARLIER ASSESSMENT YEARS AND NO DEF ECTS IN THE ACCOUNTS OF THE ASSESSEE WERE POINTED OUT BY THE DEPARTMENT. THE LEARNED CIT- DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 45. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT OVERALL YIELD OF THE ASSESSEE IS BETTER THAN THE EARLIER YE ARS AND LIKEWISE THE GP AND NP RATE WERE ALSO BETTER THAN THE EARLIER YE ARS. THERE IS A FORCE IN THE LEARNED COUNSEL FOR THE ASSESSEE THAT NO ACTUAL WEIGHMENT IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -13 WAS DONE AND IT WAS ONLY WAY OF AD HOC MEASUREMENT OF QUANTITY OF STOCK ON THE DATE OF SEARCH. WE FIND THAT THE DIFF ERENCE IN THE VALUE OF STOCK AT RS.63,274/- IS ONLY MARGINAL, AND THEREFOR E NO CASE OF ADDITION COULD BE MADE OUT BY THE DEPARTMENT ON THI S ISSUE, AND ACCORDINGLY THE ADDITION MADE IS DELETED AND THE GR OUND NO.1 OF THE ASSESSEES APPEAL IS ALLOWED. 46. THE GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UNDER: 2. THE LD.CIT9A) ERRED ON FACTS AND IN LAW IN CONF IRMING ADDITION OF RS.22,95,264/- ON ACCOUNT OF NOTING FOU ND IN LOOSE PAPER DIARY IN THE COURSE OF SEARCH. 47. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO ADDITION ON ACCOUNT OF LOOSE PAPER/DIARY FOUND AT THE TIME O F SEARCH, SHOULD HAVE BEEN MADE BY THE DEPARTMENT. THE ONLY FIGURE OF RS.17.25 LAKHS AS TUVAR DAL AND RS.5.69 LAKHS AS CHURI DAL HAS BEEN MENTIONED IN THE DIARY WITHOUT ANY NARRATION OR ANY DETAILS T O WHOM THESE WERE SOLD ETC. ARE MENTIONED THEREIN. HE SUBMITTED THAT A DETAILED EXPLANATION IN THIS REGARD HAS BEEN FILED BY THE AS SESSEE, A COPY OF WHICH HAS BEEN FILED IN THE COMPILATION BY THE ASSE SSEE. HE SUBMITTED THAT DURING SEARCH OPERATION, NO QUESTION ON THIS I SSUE WAS ASKED TO THE ASSESSEE AND ADDITION HAS BEEN MADE MERELY ON S USPICION AND CONJECTURES AND THERE IS NO BASIS FOR THE ADDITION MADE BY THE DEPARTMENT. THE LEARNED CIT-DR HAS OPPOSED THE SUB MISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. HE SUBMITTED THA T DIARY WAS SEIZED AT THE TIME OF SEARCH AT THE PREMISES OF THE ASSESS EE AND THE ONUS IS ON THE ASSESSEE TO EXPLAIN THE NATURE OF WRITING OF AM OUNTS AGAINST TUVAR DAL AND CHURI DAL. HE SUBMITTED THAT THE ADDITIONS WERE RIGHTLY MADE BY THE DEPARTMENT. HE SUBMITTED THAT MERELY B ECAUSE OVERALL YIELD AND GP AND NP RATES WERE BETTER THAN THE LAST YEAR, THERE IS NO IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -14 GROUND FOR NOT ADDING THE AMOUNT TO THE INCOME OF T HE ASSESSEE. HE RELIED ON THE ORDERS OF THE AO AND THE CIT(A). 48. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A) AND COPIES OF THE DETAILED EX PLANATION FILED BY THE ASSESSEE AND ALSO COPIES OF THE SEIZED PAPER/DI ARY FILED BY THE ASSESSEE BEFORE US. WE FIND THAT THE FACT THAT THE PAPER IN QUESTION WAS PART OF THE DIARY WHICH WERE SEIZED BY THE DEPA RTMENT AT THE TIME OF SEARCH FROM THE ASSESSEE, COULD NOT BE CONTROVER TED IN BEHALF OF THE ASSESSEE. MERELY BECAUSE NO QUESTION ON THIS ISSUE WAS ASKED AT THE TIME OF SEARCH PROCEEDINGS AND THAT THE OVERALL YIE LD, GP AND NP RATES OF THE ASSESSEE IS HIGHER THAN THE EARLIER ASSESSME NT YEAR, IS NOT GROUND TO SAY THAT NO ADDITION COULD BE MADE. THE ASSESSEE ON THESE PAPERS HAS MENTIONED THE FIGURE OF RS.17.25 LAKHS A S TUVAR DAL AND RS.5.69 LAKHS AS CHURI DAL. THE ASSESSEE COULD NOT EXPLAIN THAT TO WHOM THESE WERE SOLD AND WHERE THE ENTRIES WERE MAD E IN ITS ACCOUNTS. IN THESE FACTS OF THE CASE, WE ARE OF TH E CONSIDERED OPINION THAT THE SALE FIGURE OF RS.17.25 LAKHS AND RS.5.69 LAKHS MAKING THE TOTAL OF RS.22.94 LAKHS SEEMS TO BE UNACCOUNTED SAL ES FOR WHICH THE PROFIT ELEMENT AS WELL AS INVESTMENT ELEMENT IS ADD ABLE AS INCOME OF THE ASSESSEE. WE FIND THAT IT WOULD NOT BE REASONA BLE TO ADD THE ENTIRE AMOUNT OF RS.22.94 LAKHS TAKING THE UNACCOUNTED SAL ES AS UNDISCLOSED INCOME OF THE ASSESSEE. IN THIS VIEW OF THE MATTER , WE HOLD THAT IT SHALL BE REASONABLE TO ADD THE NET PROFIT ELEMENT A T THE RATE OF 5% OF THE TOTAL SALE AND ALSO 5% ON ACCOUNT OF INVESTMENT ELEMENT IN THE UNACCOUNTED SALES OF DAL TOTALING TO RS.22.94 LAKHS, AND ACCORDINGLY, WE SUSTAIN THE ADDITION OF RS.2.30 LAKHS REPRESENTI NG THE NET PROFIT AND THE INVESTMENT ELEMENT IN THE UNACCOUNTED SALES OF THE DAL OUT OF TOTAL IT(SS)A NO.233, 234, 235, 236, 237, 238 AND 239/AHD /2010 -15 ADDITION TO RS.22,95,264/- MADE BY THE AO, AND ACCO RDINGLY, THE GROUND NO.2 OF THE ASSESSEES APPEAL IS PARTLY ALLO WED. 49. THE GROUND NO.3 OF THE ASSESSEES APPEAL READS AS UNDER: 3. THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN CONF IRMING ADDITION OF RS.1,65,719/- ON ACCOUNT OF BAD DEBTS. 50. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE I SSUE IN THIS CASE REGARDING ALLOWANCE OF BAD DEBTS IS SIMILAR WITH TH E ISSUE IN THE GROUND NO.2 OF THE ASSESSEES APPEAL OF EARLIER ASS ESSMENT YEAR 2001- 2002 IN IT(SS)A.NO.233/AHD/2010. 51. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSING OF THE GROUND NO.2 OF EARLIER ASSES SMENT YEAR 2001- 2002 IN IT(SS)A.NO.233/AHD/2010, THE ISSUE OF ALLOW ANCE OF BAD DEBT IS DECIDED IN FAVOUR OF THE ASSESSEE AND THE G ROUND NO.3 OF THIS APPEAL OF THE ASSESSEE IS ALLOWED. 52. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 53. IN THE COMBINED RESULT, IT(SS)A.NO.233, 234, 23 6, 237/AHD/2010 ARE ALLOWED AND IT(SS).A.NO.235, 238 A ND 239/AHD/ 2010 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %& %& %& %& / TEJ RAM MEENA) &' ( &' ( &' ( &' ( /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A)