COSMIC TEXTILES (P) LTD, SURAT V. ITO, SURAT

ITSSA 5/SRT/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1892 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-07-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-06-2022
• Assessment Year: misc
• Appeal Filed On: 24-06-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Document seized; Additional evidence; Reasonable cause; Documents seized; Set aside
• Section: 132; 274; 13; 158BD; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./IT(SS)A No.05/SRT/2020 Block Period: (1996-97 to 2001-02) (Physical Court Hearing) Cosmic Textiles Pvt. Ltd., P-770, New GIDC, Katargam Road, Surat-395007. Vs. The DCIT, Circle-1, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAACC9403A (Assessee) (Respondent) आयकर अपील सं./IT(SS)A No.08/SRT/2020 Block Period: (1996-97 to 2001-02 & upto 13.07.2002) (Physical Court Hearing) The DCIT, Circle-1(1)(1), Surat. Vs. Cosmic Textiles Pvt. Ltd., P-770, New GIDC, Katargam Road, Surat-395007. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAACC9403A (Revenue)/(Assessee) (Assessee)/(Respondent) Assessee by Shri Kiran K. Shah, CA Respondent by Shri H. P. Meena, CIT(DR) Date of Hearing 23/06/2022 Date of Pronouncement 15/07/2022 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned two appeals filed by the Assessee and Revenue, pertaining to Block Periods 1996-97 to 2001-02 and 1996-97 to 2001-02 & upto 13.06.2002, are directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-1, Surat [in short “the ld. CIT(A)”] in Appeal No. CIT(A), Surat- 1/10145/2014-15, dated 31.03.2020 which in turn arise out of an assessment order passed by the Assessing Officer under section 158BD r.w.s 144 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 25.09.2006. Page | 2 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. 2. First, we shall take Revenue’s appeal in IT(SS)A No.08/SRT/2020, wherein the grounds of appeal raised by the Revenue are as follows: “(i) Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deciding the appeal partly, in favour of the assessee after admitting additional evidences, even if no such exception was found as required under Rule 46A of I.T. Rules, which allows the admission of additional evidences, without appreciating that the Ld CIT(A) himself has dismissed the grounds of appeal no 1 & 2 of the assessee holding that there was no sufficient and reasonable cause for the assessee for not filing the reply or submitting the supporting documents before the A.O during the assessment proceedings against the statutory notices issued and therefore, the decision of Ld CIT(A) in considering additional evidence is contrary to his own decision in respect of ground No. 1&2 ? (ii) Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deciding the appeal partly, in favour of the assessee after admitting additional evidences and thereby de hors the Rule 46A of the I.T. Rules and ignored the ratio of decision in the case of JCIT Vs Venus Financial Services (2012) 21 taxmann.com436 of ITAT Delhi and CIT Vs Ranjit kumar Chaudhary (2007)(162 taxmann 257) of Guwahati High Court, which would squarely apply in this case? Without prejudice to the ground no.(i)&(ii) above, the following grounds of appeal is taken on merit:- (iii) Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the addition of Rs.1,06,43,422/- made by the assessing officer on account of import of colour chemicals by relying upon seized register bearing BS-3/1 & BS-3/2 as assessee has failed to produce any evidence to prove that the transactions reflected in the seized document are accounted transactions"? (iv) Whether, on the facts and circumstances of the case and in law, the ld. CIT(A) is ought to have enhanced the addition by making addition of Rs.80,29,085/- on account of alleged payment made for CIF purchase for which the custom duty of Rs.53,21,411/- was calculated as assessee has failed to submit any documentary evidence to establish that the CIF purchase value as per the seized document is accounted transaction during the course of assessment proceedings or at the time of remand proceedings and holding that, no custom duty was payable on the same ? (v) Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the addition of Rs.7,56,60,039/- made by the assessing officer on account of import of chemicals and custom duty paid on the same on the basis of remand report without appreciating the fact that the A.O has not given a clear and categorical finding in the remand report, where he merely made a re-conciliation without verifying the authenticity of the entry in the books of account vis-a-vis the additional evidence ? (vi) Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the addition of Rs.30,52,695/- made by the assessing officer on account of undisclosed stock wherein dispute is not with respect to the quantity of the stock and addition was made on account of valuation of stock and also the Page | 3 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. Ld. CIT(A) has failed to mention any cogent reason in his order as to why the value adopted by the assesses is found correct according to him"? (vii) Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the addition of Rs.9,22,544/- made by the assessing officer on account of P& L Account abstract as the same was not established before the assessing officer that the assessee has accounted the same in its regular books of accounts" ?. (viii) Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the addition of Rs.6,04,89,891/- made by the assessing officer on account of unaccounted purchase and profit on sale on the basis of remand report without appreciating the fact that the A.O has not given a clear and categorical finding in the remand report, wherein he merely made a re-conciliation without verifying the authenticity of the entry in the books of account vis-a-vis the additional evidences ? (ix) Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the addition of Rs.61,99,306/- made by the assessing officer on account of purported export and its related expenditure of Rs. 46,000/- as the assessee has failed to prove the entire sales as genuine and accounted duly in its books of accounts before the assessing officer during assessment proceedings as well as during the remand proceedings also the Ld. CIT(A) while relying on his predecessor's decision in the first round ignored the fact that ,the Hon'ble ITAT Bench has remanded back this issue for denovo consideration? (x) Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the addition of Rs.5,38,507/- made by the assessing officer partly out of the total addition of Rs.12,07,014/- made on account of unexplained custom duty and penalties as the assessee has failed to submit any evidences during the assessment proceedings as well as remand proceedings regarding the source of payment of custom duty and related penalties" ? (xi) It is, therefore, prayed that the order of the Ld.CIT(A) may be set aside and that of Assessing Officer may be restored to the above extent. (xii) The assessee craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 3. Now, we shall take ground nos. 1 and 2 raised by the Revenue which relate to violation of provisions of Rule 46A of the Income Tax Act, 1961. 4. The Ld. Counsel for the assessee submitted that during the appellate proceedings, the ld. CIT(A) has took Remand Report viz. Remand Report dated 09.09.2016 which is placed at paper book page no.9 and the Remand Report dated 07.03.2018 which is placed at paper book page no.15. The Ld. Counsel submitted Page | 4 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. that Assessing officer has not objected to admit additional evidence which is placed at paper book page no. 9. In Para No.7 of the Remand Report dated 09.09.2016 which is placed at paper book page no.9 wherein Assessing Officer stated that contention of the assessee appears to be correct. The para no.7 of remand report is reproduced below: “7. The contention of the assessee appears to be found correct. From the seized register it is seen that page No.1 and 2 of BS-3/1 reflects purchase of raw materials with name of the product, quantity, CIF Value Duty and bill of entry number. The total of CIF value as appearing in the register works out of Rs.80,29,085/- and duty of Rs.53,21,411/-. Whereas the page number 3 to 10 of BS-3/1 contains the details raw materials issued for consumption, and the total of CIF value of page no.3 to 10 comes to Rs.80,29,085/-, and duty of Rs.53,21,411/-. The details appearing in the additional evidences vis a vis in the seized register are examined. From the perusal of the same, it is noticed that there was indeed duplication while making addition in respect BS-3/1. This duplication of addition was accepted by the then AO in his remand report submitted on 01/07/2009. In the remand dated 01/07/2009, it was stated by the AO that evidence in respect of high sea purchases amounting to Rs.53,21,411/- was not filed by the assessee and also on failure to prove that the custom duty are related to accounted transactions and also custom duty is not payable on such transactions.” 5. Thereafter, Ld. Counsel took us through paper book page no.15 wherein the Remand Report dated 07.03.2018 is placed. The Ld. Counsel contended that ld. CIT(A) can direct the Assessing Officer under section 250(4) of the Act to the Assessing Officer to examine the additional evidence and report him. Therefore, Ld. Counsel argued that during the remand proceedings, Assessing Officer has not objected the additional evidence filed before the ld. CIT(A) and the ld. CIT(A) after getting the Remand Report from the Assessing Officer and after providing an opportunity of rebuttal to the assessee in respect of the Remand Report, has framed the appellate order which cannot be challenged. Therefore, Ld. Counsel contended that there is no violation of Rule 46A of the Income Tax, Rules. Whatever, additional evidence submitted by the assessee has been remitted back by the Ld. CIT(A) to the Assessing Officer for his examination. Therefore, there is no violation of Rule 46A of the I.T. Tax Rules. 6. However, Ld. DR for the Revenue submitted that in the Remand Report dated 01.07.2009, vide Para 1 of the said Remand Report, the Assessing Officer has Page | 5 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. objected stating that instead of numerous opportunities granted at the assessment stage which can be verified from the perusal of the assessment order, the assessee failed to furnish the evidences which he now seeks to furnish at the appellate stage. Therefore, Ld. DR contended that Assessing Officer during the Remand Proceeding objected about additional evidences furnished by the assessee. The Ld. DR thus pointed out that sufficient opportunity was given to the assessee during the assessment stage to furnish the evidences, however he did not furnish the evidences during the assessment stage but during appellate stage, he furnished the evidence which were remanded back to the Assessing Officer by the ld. CIT(A) for his examination. Therefore, assessee has not explained that what was prevented him to furnish these evidences before the Assessing Officer. 7. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that in the Remand Report dated 01.07.2009 although the Assessing Officer has objected stating that instead of giving sufficient opportunity to the assessee to furnish the evidence during the assessment stage, however assessee could not furnish the evidence and assessee has not demonstrated that what was the reason not to submit these evidences during the assessment stage. However, we note that in the Remand Report dated 01.07.2009, the Assessing Officer has examined the additional evidences and submitted its report to the ld. CIT(A). Therefore, in the first para of the Remand Report, there was only a passing remark by the Assessing Officer that assessee has not explained reasons of non-submissions of these evidences during the assessment stage. However, whatever additional evidence remitted back by the ld. CIT(A) to the Assessing Officer for his examination, have been verified by the Assessing Officer and report has been furnished to the ld. CIT(A). Therefore, we note that there is no violation of the provisions of Rule 46A of the Income Tax Rules, 1962. We note that Assessing Officer called the Remand Report dated 01.07.2009 and Remand Report dated 09.09.2016. The ld. CIT(A) also took Remand Report dated 07.03.2018 which is placed at paper book page nos. 15 to 17 and in all the Remand Page | 6 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. Reports, the Assessing Officer, has examined the additional evidences and submitted his findings to the ld. CIT(A). The ld. CIT(A) after getting the Remand Report from the Assessing Officer has provided the opportunity to the assessee for rebuttal and after hearing both sides the ld. CIT(A) has adjudicated various issues involved in the assessee’s appeal, therefore we note that there is no violation of provisions of Rule 46A of the Income Tax Rules, 1962. Therefore, we dismiss ground no.1 and ground no.2 raised by the Revenue. 8. In the result, ground nos. 1 and 2 raised by Revenue are dismissed. 9. Now, we shall take ground no. 3 and 4 raised by Revenue which relate to addition of Rs.1,06,43,422/- and 50% addition of Rs.1,06,43,422/-. 10. This ground of Revenue relates to addition of Rs.1,06,43,422/- made on account of unaccounted import of chemicals and custom duty paid on the same as per Sr.No.1 and 2 of BS-3 seized during search. Brief facts qua the issue are that during a search action u/s 132 of the Act on assessee i.e. Malpani group, Surat, the premises of shree Ramnarayan Dyg & Ptg Mills, palsana, surat was also covered which was used by the assessee as a processing house for rent. The various documents and papers were seized and out of them certain documents are listed as Sr No.01 to 08 of BS-3. On verification of Sr. No. 01and 02 it was noted by assessing officer that these are related with import of colour chemicals. The page wise total of CIF value and duty have been worked out and tabulated as follows: Page No CIF Value Duty 1&2 80,29,085/- 53,21,411/- 3 14,54,323/- 9,75,653/- 4 5,21,123/- 3,49,602/- 5 24,18,014/- 16,18,603/- 6 5,22,080/- 3,50,245/- 7 15,53,178/- 10,41,970/- 8 9,66,504/- 6,07,583/- 9 6,01,863/- 3,78,355/- 10 - - 1,90,66,170/- 1,06,43,422/- The exact nature and contents have not been explained by the assessee. It has also not been explained that contents were duly accounted for and reflected in the regular Page | 7 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. books of account. As the assessee has not attended the entire assessment proceedings the assessment was finalized u/s 144 of the Act. So. the contents of Sr. No. 1 & 2 remains unexplained. Thus, the total of Rs.1,06,43,422/- was treated by assessing officer as undisclosed income and added back to the total income of the assessee company. 11. On appeal, ld CIT(A) deleted the addition. During appellate proceedings, the assessee submitted that assessing officer has taken receipt figure twice while calculating the CIF value and its duty charges. The assessee further submitted that the assessing officer has accepted this matter vide his remand report. During the course of appellate proceedings, remand report was called for. The assessing officer in his remand report submitted before the Ld. CIT(A) stated that addition of Rs.1,06,43,422/- were related with the custom duty imported, CIF, Custom duty etc. As the assessee is a 100% EOU [exported oriented Unit] there is no requirement to pay any import duty. The Ld. CIT(A) has observed that the additions of Rs.1,06,43,422/- is related with import of color and chemicals. It was observed by CIT(A) that assessee has made high sea purchase, hence there is no need for payment of custom duty, maintenance of register is compulsory in view of excise/custom department. It is also observed that assessing officer in his remand report has already examined and satisfied with the explanation given by the assessee. The main finding of the assessing officer was that assessee is an EOU and hence no need of payment of excise duty. In view of the remand report and the explanation of the assessee the addition was deleted by the Ld CIT(A). Aggrieved, by the order of ld CIT(A), the Revenue is in appeal before us. 12. Learned DR for the Revenue argued that ld. CIT(A) has failed to appreciate the fact that assessee has failed to establish that the CIF values and custom duty on import of color chemicals were accounted in its regular books of accounts. It is bogus transaction therefore findings of the assessing officer needs to be upheld. 13. On the other hand, ld Counsel for the assessee defended the order passed by the Commissioner of Income Tax (Appeals). Page | 8 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. 14. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. The ld Counsel submits before us that seized record BS-3/1 and 2 is a prescribed register to be maintained for receipt and issue of imported colour chemical used in the manufacturing by EOU unit. The learned assessing officer made additions on the base of figures lying on page 1 to 10 of BS-3/1 & 2 in column of custom duty for Rs.1,06,43,422/-. During the appellate proceedings, the assessee submitted that assessee-company had cleared the high sea purchase (imported colour chemical) on EOU certificate and, therefore, no custom duty was ever paid. The assessee stated that no such custom duty is debited in books of accounts and claimed. During the appellate stage, it was submitted that page 1 & 2 are receipt part of the register and page 3 to 10 are issue part of the register and, therefore, the figures lying on page 1 & 2 is again reflected on page 3 to 10. Hence there was duplication of additions and the same was accepted by the assessing officer in his first remand report and accordingly 50% of addition of Rs.1,06,43,422/- being Rs.53,21,711/- was deleted. We note that assessee-company filed the copies of bills and other relevant documents which is placed on page no. 1 to 16 of the paper book. The assessee-company has also filed copy of contract for some bills which is placed on page no. 303 to 316 of paper book. The assessee- company has filed details of purchase in respect of BS-3/1 & BS-3/3 on page 255 to 261 and reconciliation of purchase of colour chemical as per accounts with seized records on page 274 to 286 of paper book. The assessee-company has filed copy of bill of entry which gives details of same quantity and quality of colour chemical and other details and bill of lading with high sea purchase contract (Page No. 446 to 468 of Paper Book -2). We note that colour and chemicals were purchased on highseas from a Domestic seller, however since it is imported material the register as per prescribed format is maintained for requirement of Central Excise & Customs Rules. The assessee being export oriented unit (EOU), it need not have to pay any custom duty. The addition is made by the assessing officer only on the basis of register without verifying whether the custom duty is actually paid or not. Besides, Page | 9 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. 50% addition of Rs.1,06,43,422/-, that is, Rs. 53,21,711/- was mere duplication and the same fact was accepted by assessing officer in the first remand report dated 01.07.2009. The contention of the assessee was accepted by the assessing officer for the balance 50% in the remand report dated 09.09.2016 ( para 7/page 9 of paper book). Therefore, ld CIT(A) noted that addition was made by the assessing officer without any base. Based on these facts, ld CIT(A) noted that no addition should be made in respect of CIF value for import of raw material which was purchased as high sea purchase. Therefore, we do not find any infirmity in the order of ld CIT(A), hence we confirm and approve the findings of ld CIT(A). 15. In the result, ground No. 3 and 4 raised by the Revenue are dismissed. 16. Ground No.5 raised by the Revenue relates to deletion of addition of Rs.7,56,60,039/- made by the assessing officer on account of import of chemicals and custom duty paid on the same. 17. Succinct facts qua ground No.5 are that on verification of Sr. No 03 of BS-3 seized material, the assessing officer observed that these papers are related with import of colour and chemicals. Therefore, during the assessment stage, the assessing officer asked assessee to explain the transaction. In response, the assessee did not explain the transaction. However, in remand proceedings, the assessee explained the said transaction. During the assessment proceedings, the assessing officer noted that it has not been explained by assessee that contents were duly accounted for and reflected in the regular books of account. So as per assessing officer, the CIF value and its related duty paid remains unexplained, therefore assessing officer made addition to the tune of Rs.7,56,60,039/- and treated the same as undisclosed income and added back to the total income of the assessee company. 18. On appeal, ld CIT(A) deleted the addition. During the course of appellate proceedings, remand report was called for by ld CIT(A). The assessing officer in his remand report, (submitted on 09.09.2016 to the Ld. CIT(A), stated that addition of Rs.7,56,60,039/- were related with the custom duty on import, CIF, and duty etc. As the assessee is a 100% EOU [ 100% export-oriented unit] hence, there is no Page | 10 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. requirement to pay any import duty. The ld CIT(A) has gone through the remand report and asked the assessee to file rebuttal. Considering both sides, and based on the findings in the remand report, the ld CIT(A) deleted the addition of Rs.7,56,60,039/-.Aggrieved by the order of ld CIT(A), the Revenue is in appeal before us. 19. Learned DR for the Revenue pleads that during the remand proceedings, the issue has been examined by the assessing officer and submitted the remand report. However, from the report it is found that assessing officer has not given any categorical finding on the issue under consideration rather made a simple re- conciliation based on the loose paper seized with the books of accounts, without verifying the authenticity of the entry in the books of account vis-a-vis the additional evidence. Therefore, in the facts and circumstances of the case, the order of ld CIT(A) should be reversed and order passed by the assessing officer may be upheld. 20. On the other hand, ld Counsel for the assessee argued that ld CIT(A) has gone through the remand report of the assessing officer and noted that assessing officer made reconciliation and did not find any mistake in the documents and explanation submitted by the assessee, and based of such remand report the addition was deleted by ld CIT(A). 21. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee. We note that learned assessing officer made additions on the base of details of seized material, vide page no. 1 to 22 of BS-3/3. The details of the registers have been mentioned on page no. 5 of the assessment order, which is reproduced, (as summary), below: Page No. Weight in Kgs. CIF Value Value of Duty Amount of custom duty Aggregate - 4,26,79,815 (A) - 3,29,80,224 (B) (A) + (B) = Rs. 7,56,60,039/- Therefore, addition of Rs. 7,56,60,039/-was made by assessing officer on account of alleged payment of CIF value and custom duty both. The ld Counsel submits that in Page | 11 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. BS-3/3 of seized documents, there are similar details like date of receipt, quantity, quality, CIF value and assessable custom duty of colour and chemical and there are details like receipts and issue of colour chemical. Therefore, BS-3/1 is for FY. 2000- 01 and BS-3/3 is for the F. Y. 2000-01 and 2001-02. The assessee submitted during appellate proceedings that like BS-3/1, in the seized records BS-3/3, 50 % of the amount is mere duplication because the issue part is repetition of receipt part. The same is evident in the assessment order because there are additions for two items on one page. The assessee submitted that duplication of addition was accepted in the case of register BS-3/1 and accordingly the same ought to be accepted for BS-3/3 therefore, 50% of addition being Rs.3,78,30,020/- (1/2 of Rs.7,56,60,039/-) ought to be deleted on the ground of duplication of addition. About balance 50%, the assessee submitted during appellate proceedings that so far as addition on account of custom duty is concerned, the same is not again justified as no such custom duty was ever paid and debited and claimed in the profit and loss account. That is, assessee- company submitted during appellate stage that assessee is 100% EOU unit, therefore it is not liable for custom duty for imported goods purchased for own consumption. The sum of Rs.3,29,80,224/-, which is in fact duplication of the amount and actual amount is of Rs. 1,64,90,112/- which is not required to be added as no such custom duty was paid. 22. It was submitted by the assessee during the appellate proceedings that assessee-company buys high sea import of colour, chemical from the party who has imported it. The assessee-company enters into contract with the seller and on the base of contract, it clears the imported colour, chemical without payment of custom duty as assessee has 100% EOU license. Since assessee has imported raw material of colour, chemical which is to be used for manufacturing, the assessee is required to maintain the register in specified form for verification by the Excise Authorities. The register has two parts, on one part, there is receipt of raw material and there are details like quantity, quality, the CIF value and custom duty as per the bill of entry. The assessee submits that, though register requires the details of bill of entry including value of custom duty, however, no such custom duty is ever paid because Page | 12 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. it is cleared under the 100% EOU license. The ld Counsel therefore submits before us that the high sea purchase of imported raw material is accounted for as per the invoice issued by the seller. It is not concerned about the details of bill of entry i.e. CIF value and custom duty as the purchase is accounted for on the base of invoice issued by the party who originally imported. In short, the register is maintained for verification of actual consumption of raw material. During the appellate proceeding, assessee had filed complete details of actual purchase of raw material and got tallied with the same quantity and quality in the register (consumption register as per the format) which was seized in the search proceedings. The assessee filed the complete reconciliation of details found in the seized records and the details as per accounts and other evidence ( vide Page No. 255 to 261 & 274 to 286 of the paper book).We note that no addition should be made in respect of CIF value for import of raw material which was purchased as high sea purchase. The assessee furnished evidences showing the import of colour and chemical as per seized records with actual high sea purchase, and for that assessee has filed copy of bill of entry which gives details of same quantity and quality of colour, chemical and other details and bill of lading with high sea purchase contract ( vide Page No. 287 to 445 of Paper Book ). Having examined these facts, the assessing officer in second remand report has accepted the contention of the assessee. Based on these facts, the ld CIT(A) deleted the addition, therefore we do not find any error in the order of ld CIT(A), hence we approve and confirm the findings of ld CIT(A). 23. In the result, ground No.5 raised by the Revenue is dismissed. 24. Ground No. 6 raised by the Revenue relates to deletion of addition of Rs.30,52,695/- made by Assessing Officer on account of undisclosed stocks. 25. Brief facts qua the issue are that during the assessment proceedings the assessing officer examined Sr. No-06 of BS-3 seized material, wherein the details of stock register were found. During the assessment stage, the nature and source have Page | 13 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. not been explained by the assessee, therefore, assessing officer has examined the investment/ expenditure in stock and has worked out the disallowance at Rs. 30,52,695/-. 26. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer. The Ld. CIT(A) deleted the addition of Rs.30,52,695/- made on account of closing stock on the ground that quantity wise there was no difference, however, the difference was in respect of valuation. The assessing officer has taken value of entire stock @20/- per meter, whereas assessee has valued it @ Rs.36 per meter for finished cloth and Rs.5 per meter for rejected cloth. The Ld. CIT(A) held that since the entire stock is accounted in the books of the assessee, no addition is called for on this point and therefore deleted the addition. Aggrieved by the order of ld CIT(A), the Revenue is in appeal before us. 27. Learned DR for the Revenue submits before the Bench that in respect of deletion of addition of Rs.30,52,695/- made on account of opening and closing stock, the assessee has filed only bifurcation of stock and claimed that same is tallied with seized records. No documentary evidences were filed to support its claim, therefore addition made by the assessing officer may be sustained. 28. We have heard both the parties. We note that value of closing stock is part of closing stock shown in the profit and loss account and the balance sheet as on 31 - 03-2002. The assessee furnished bifurcation of stock (vide Page 61 of paper book) and the same is tallied with the stock as per the seized records. Finished stock 112892 meters Rejection / wastage 39742 meters Total 152634 meters The ld Counsel submits that this is part of regular books of accounts, therefore no addition is called for. There is no difference both as per accounts as well as the seized records so far as quantity of closing stock is concerned. The assessing officer had estimated Rs.20/- per meter in respect of entire goods whereas the assessee had Page | 14 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. account of Rs.36/- per meter in respect of finished goods and Rs.5/- for wastage and therefore, the stock as per accounts is duly accounted for, therefore ld CIT(A) held that no addition is justified. Based on this factual position, we note that ld CIT(A) has rightly deleted the addition. 29. In the result, Ground No.6 raised by Revenue is dismissed. 30. Ground no.7 raised by the Revenue relates to deletion of addition of Rs.9,22,544/- made by the Assessing Officer on account of profit and loss account abstract. 31. Brief facts qua the issue are that during the assessment proceedings, the assessing officer observed that at Sr. No-07 of BS-3 of seized documents, PLA abstract register was inventorised. It was noticed by AO that this register contains the records of amounts involving entries of credits and debits of Rs.8,87,423/- and Rs.9,22,544/- lacs respectively. The exact nature and contents have not been explained by the assessee, therefore, assessing officer made addition of Rs.9,22,544/-. 32. On appeal, ld CIT(A) deleted the addition, therefore, Revenue is in appeal before us. The Ld DR reiterated the findings of assessing officer. However, ld Counsel defended the order passed by the ld CIT(A). We have heard both the parties. We note that during the appellate proceedings, Ld CIT(A) held that as regards the PLA register, it is maintained for verification of the excise authorities and excise is leviable only on domestic/local sale and not on export. Copy of ledger account of excise paid and challans are provided by the assessee and the same was tallied with PLA register. Hence, this addition was also made beyond any base by the assessing officer. We have gone through the findings of ld CIT(A) and note that there is no infirmity in his findings, therefore we confirm the findings of ld CIT(A) and dismiss ground no.7 raised by the Revenue. Page | 15 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. 33. Ground No. 8 raised by the Revenue relates to deletion of addition of Rs.6,06,81,106/- made by the assessing officer on account of unaccounted purchase and profit on sale. 34. Brief facts qua the issue are that during the assessment proceedings, the assessing officer observed that seized papers at Sr. No-08 of BS-3 is a file containing 42 loose papers which were inventoried and on perusal of the loose paper file at Sr.No-8, the total value was worked out at Rs.6,06,81,106/- (pertains to F.Y.2000-01 to 31.03.2001). It was noted by assessing officer that how the sale of cloth of Rs.6,06,81,106/- was duly accounted it in the regular books of account, is not explained. In absence of the details, the assessing officer has worked out the cost of purchase plus profit on sale and treated the same undisclosed income of the assessee and added Rs.6,06,81,106/-, to the total income of the assessee company. 35. On appeal, ld CIT(A) deleted the addition. During the course of appellate proceedings, remand report was called for by ld CIT(A). The assessing officer in his remand report has also submitted that on verification of the addition made by the then assessing officer on account of unaccounted sales of Rs.6,06,81,106/- it was observed from the seized materials as well as the books of accounts, that there is only slight difference of Rs.1,91,215/-. After considering the submission of the assessee and the remand report, the Ld. CIT(A) observed that as regards the unaccounted sales of Rs. 6,06,81,106/-, the assessee has produced the entire sales register along with invoices. The assessee has also admitted that there is a slight difference of Rs.1,91,575/- in sales reported in Profit and Loss account and seized records. It is due to exchange rate difference in the bills and the exchange rate as per the seized record. Further the Ld CIT(A) held that during the remand proceedings, the assessing officer has verified this issue thoroughly and also compared seized sale register with the regular books of accounts and found to be matched. The assessing officer has found difference of only Rs.1,91,215/- . Hence, the Ld. CIT(A) has restricted the addition up to Rs.1,91,215/-. Aggrieved, by the order of ld CIT(A), the Revenue is in appeal before us. Page | 16 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. 36. Learned DR for the Revenue, pleads before us that during the remand proceedings, the issue has been examined by the assessing officer and submitted the remand report, however, from the report it is noted that assessing officer has not given any categorical finding on the issue under consideration rather made a simple re-conciliation based on the seized paper with the books of accounts, without verifying the authenticity of the entry in the books of account vis-a-vis the additional evidence. Therefore, ld DR prays the Bench that order of assessing officer may be upheld. 37. On the other hand, ld Counsel relied on the findings of the ld CIT(A). 38. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that ld. CIT(A), has deleted the addition made by the Assessing Officer observing as follows: “8.4 Ground No. 5 -pertaining addition of Rs.6,06,81,106/- on account sales as per seized register BS 3/8. On perusal it is evident that the impugned seized register shows invoice wise details of sales. The ld. assessing officer treated it as unexplained because the assessee or AR did not appear or explain during the assessment proceedings. In the remand proceedings, the ld. assessing officer was asked to verily if the sales are accounted in books. In response, the ld. assessing officer furnished his report dated 07.03.2018, wherein the sales as per BS 3/8 were verified & cross checked with the regular books of account and found to be matching but for a minor difference of Rs. 1,91,215/-. The findings of the ld. assessing officer is in para 6.3 to 6.5 of remand report dated 07.03.2018 reproduced above in para 7.4 above. In view of this finding by ld. assessing officer, there is no justification to treat the sales in register BS 3/8 as unaccounted. Hence, the addition is restricted to Rs. 1,91,215/-being the sale which is not accounted in books of account. The ground no. 5 is hence decided partly in favour of assessee.” 39. The ld Counsel submits before us that assessing officer had totaled up the sales of entire register on page no. 1 to 42 of BS-3/8 for an amount of Rs.6,06,81,106/-. The assessing officer assumed that the sales are also not accounted for and, therefore, it was treated as undisclosed income. The assessee furnished relevant copies of sales register and invoices thereof on Page No. 87 to 209 of the Page | 17 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. paper book. The assessing officer justified the additions in the remand report merely because there is minor difference in the turnover of Rs.1,91,215/- as found in the seized records and as shown in the profit and loss account by assessee. The ld Counsel submitted before us details of sales as follows: 1) Sales as per the sales register (Pg. 87 & 88 of the paper book-1) Rs.6,04,84,615/- 2) Sale as per assessment order (Pg. 8 of the assessment order) Rs. 6,06,81,106/- 3) Sales reconciliation as per the seized records (Pg. 89 of the paper book-1) Rs.6,06,76,190/- The assessee had reconciled the above said figures on page 89 of the paper book. The ld Counsel submits that invoice number, quality, quantity etc. are in absolute agreement. The difference of Rs.1,91,575/- was on account of exchange rate difference in the bill and the exchange rate as per the seized record. It is submitted by ld Counsel that said exchange difference is the amount of exchange difference at the time of realization of bills and the same should not be tallied with the difference of Rs.1,91,575/- as worked out in the paper book Page. 89. Therefore, ld Counsel prays that exchange rate difference of Rs.1,91,575/- should also be deleted as the seized register contains details of particular quantity, quality and bill number and the same tallies with the sale invoice and the sale register. However, we have gone through the above mentioned findings of ld CIT(A) and noted that ld CIT(A) passed reasoned and speaking order, therefore, we confirm the findings of ld CIT(A) and dismiss the ground no.8 raised by the Revenue. 40. In the result, ground No. 8 raised by the Revenue is dismissed. 41. Ground no. 9 raised by the Revenue relates to deletion of addition of Rs.61,99,306/-, made by the assessing officer in respect of sales of two export bills. 42. Brief facts qua the issue are that during the assessment proceedings, the assessing officer observed that assessee had not explained the details of fabrics of1,60,050 meters sold in the market under the grab of purported export. Hence, the Page | 18 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. value of the same was calculated as Rs.61,99,306/- and added to the income of the assessee as undisclosed income of the assessee. 43. It was also observed by the assessing officer that assessee has claimed Rs.46,000/-, as incurred for the purported export sale, however the same was also disallowed by assessing officer, as there was no export. 44. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing Officer observing as follows: “8.5 Ground no. 6 & 7 pertain to addition of Rs. 62,45,306/- on account of (i) export sales of Rs. 61,99,306/- & (ii) unexplained expenditure related export sales Rs.46,000/-. The ld. assessing officer has discussed this addition in para 30 of his assessment order. As in other additions, even this addition has been made because the issue was not explained before the ld.assessing officer during assessment proceedings. The Id. CIT(A) in appeal order dated 16.11.2009, has verified the issue and deleted the addition with following observation: 4.3 I have considered the submission made by the assessee and the observation of the assessing officer. The assessing officer stated that the export value as per bills, copy of which are in the paper book, comes to Rs 62,37,000/- and the realisation as per credit invoice comes to Rs. 61,76,769/-. The quantity mentioned in the invoices is 167500 meters including funn rejects. The assessing officer stated that since neither the quantity nor the value is tallying with figure mentioned in the seized paper, it can be conclude that the assessee has failed to substantiate its claim. The assessee has stated the assessing officer has taken the fresh quantity in these two bills which is 160050 meters. If the rejected quantity will amount to 167500 meters. The assessee has sold both fresh and rejected quantities. The assessee further stated that the value taken by the assessing officer is per export promotion copy (P. 12 and P. 217 of the paper book) which total to Rs.6237000/-. The assessee stated, that it has taken the realisation value as per the excise bill. The contention of the assessee is acceptable in view of the noting on these pages. Hence, this addition is deleted and this ground of appeal is allowed. 5. Ground No. 7: This is regarding addition of Rs.4600/- in respect of expenditure incurred in the course of business. In para 13 of the assessment order, the assessing officer has stated, that the assessee has claimed an expenditure of Rs.4600/- incurred for the export of Rs.6799306/-. Since there is no export, he disallowed the expenditure. In the remand report also, the assessing officer simply stated that since the assessee has not made any such export, the expenditure claimed, should be disallowed. The assessee has in its submission dated 27.08.2019 stated that as explained in ground No. 6 above; the expenditure should be allowed. I have considered the submission Page | 19 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. of the assessee and observation of AO. This is consequence of Ground no. 6 and hence the addition is deleted, and this ground of appeal is allowed. Since facts & circumstances remains unchanged the conclusion of ld. CIT(A) that the above two items are part of regular books of account remains unchallenged. The revenue contested the conclusion of Id. CIT(A) before Hon'ble ITAT, however the Hon'ble ITAT has not given any finding on the same as matter was set aside. In view of this, I see no reason to interfere with the conclusion arrived at by ld. CTT(A) based on remand report of the ld. assessing officer. Respectfully following the same, the ground no. 6 &7 are allowed.” 45. Aggrieved, by the order of ld CIT(A), the Revenue is in appeal before us. The ld DR for the revenue, relied on the findings of the assessing officer and prays the Bench that order of assessing officer may be upheld. On the other hand, ld Counsel relied on the findings of the ld CIT(A). 46. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee. As regards, the value of fabrics sold in the local market, the assessee has claimed that these sales are not local sales but actually related to export to Bangladesh. All relevant documents were produced before the Ld. CIT (A). As regards, the addition on account of unexplained expenditure of Rs.46,000/- the assessee explained that these expenses were incurred in export business and the same was deleted by the Id. CIT(A) in his first order. The predecessor of Ld. CIT(A) has deleted these two additions in the first round of appeal vide order dated 16.11.2009, as the Appellate authority has found that the contention of the assessee was right. The above sales are also accounted by the assessee. Further the Ld.CIT(A) held that since the facts and circumstances remains unchanged the conclusion of Ld CIT(A) that the above two items are part of regular books of account remains unchanged. In view of the same, the Ld CIT(A) held that there is no reason to interfere with the conclusion arrived at by the then Ld CIT(A) based on remand report of the then A.O and accordingly deleted both the additions. We have gone through the findings of ld CIT(A) and observed that there is no infirmity in the order of ld CIT(A), therefore, we confirm the conclusion reached by ld CIT(A) and dismiss ground No.9 raised by the Revenue. 47. In the result, Ground No.9 raised by the Revenue is dismissed. Page | 20 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. 48. Ground No.10 raised by the Revenue relates to deletion of addition of Rs.5,38,507/- made by the assessing officer partly out of the total addition of Rs.12,07,014/- made on account of unexplained custom duty and penalties. 49. Succinct facts qua the issue are that during the assessment proceedings, it was observed by the assessing officer that assessee has paid custom duty and penalties of Rs.12,07,014/- and the assessee has not provided the source of these payments. Hence, the same was treated as assessee’s undisclosed income and added to the total income of the assessee company to the tune of Rs.12,07,014/-. 50. On appeal, ld CIT(A) deleted the addition, therefore the Revenue is in appeal before us. The Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. On the other hand, the Ld. Counsel for the assessee defended the order passed by the ld. CIT(A). We have heard both the parties and noted that during the appellate proceedings, Ld. CIT(A) has observed that out of Rs.12,07,014/-, the assessee has paid Rs.5,38,507/-as custom duty which is accounted in books of accounts. However, the remaining amount of Rs.6,68,507/- belongs to several penalties and fines. The Assessee has not given sufficient reply in this regard. Hence, this addition is restricted to Rs.6,68,507/-. In this regard, the conclusion reached by ld CIT(A) is reproduced below: “Ground no. 9 - pertains to addition on account of custom duty and for an aggregate amount of Rs.12,07,014/-. The ld. assessing officer has discussed the issue in para 15 of the assessment order. It is seen that ld. assessing officer has not given breakup of the above amount. So, the show cause notice was examined; even there, no breakup has been given. However, the AR has given the breakup of the same as custom duty paid is Rs.5,38,507/- and fines & various penalties Rs.6,68,507/-. He further demonstrated that the custom duty payment of Rs.5,38,507 is made in cheque & duly accounted in books of account. I have examined the same and I find that prima-facie the AR is correct as per details on records. The ld. assessing officer has not given any adverse findings on this issue. Hence, there is no justification of addition of Rs.5,38,507/- being custom duly paid. However for the balance amount, the AR was not able to provide any credible explanation or evidence. In view of this, the addition is restricted to Rs.6,68,507/- on this ground. This ground is partly allowed.” Page | 21 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. 51. We have gone through the above detailed findings of ld CIT(A) and noted that ld CIT(A) has passed speaking and reasoned order. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 52. In the result, ground No.10 raised by the Revenue is dismissed. 53. Now, we shall take assessee’s appeal in IT(SS)A No. 05/SRT/2020, wherein the grounds of appeal raised by the assessee are as follows: “1. The learned CIT(A) grossly erred in confirming the addition of value of imported yarn of Rs.9,82,000/- as discussed in para 8.7 of the CIT(A) order. 2. The learned CIT(A) grossly erred in confirming the addition in respect of custom duty and penalty for Rs.6,68,507/- out of gross amount of Rs.12,07,014/- as discussed para 8.8 of the CIT(A). 3. The learned CIT(A) grossly erred in confirming the addition for Rs.14,60,000/- on account of excess stock of fabrics of 73,000 meters valued at Rs.20/- per meter as discussed in para 8.9 of the CIT(A) order. 4. The assessee reserves right to add, alter and withdraw grounds of appeal.” 54. Now, we shall take ground no.1 raised by the assessee which relates to addition sustained by the ld. CIT(A) to the tune of Rs.9,82,000/- in respect of value of imported yarn. 55. We have heard both the parties and gone through the order of ld. CIT(A). Learned Dr for the Revenue relied on the findings of assessing officer whereas ld Counsel for the assessee submits that addition sustained by ld CIT(A) may be deleted. The assessing officer discussed this issue in para No. 14 of assessment order. The value of seized imported yarns is Rs.9,82,800/- and redemption fine is Rs.1,00,000/-. However, assessing officer has not given any reference for the same, no order of the Customs Department is mentioned. On the other hand, assessee has co-related the same with order of adjudication of Commissioner of Customs (Appeals) Ahmedabad, wherein redemption penalty has been deleted and Rs.9,82,000/- is sustained ( Vide F.No.3/49, 20-CUS/Ahd/2004 dated 26.04.2004). Page | 22 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. Based on these facts, ld CIT(A) observed that explanation of the assessee for the imported yarns valued of Rs.9,82,000/- is not verifiable. The ld CIT(A) also noted that since Rs.1,00,000/- fine is not levied on assessee, hence no addition should be made. Therefore, ld CIT(A) restricted the addition to the tune of Rs.9,82,000/-. We do not find any infirmity in the order of ld CIT(A) on this issue, therefore we confirm the action of ld CIT(A) and dismiss ground No.1 raised by the assessee. 56. In the result, ground no.1 raised by the assessee is dismissed. 57. Now, coming to ground no.2 raised by the assessee which relates to addition in respect of Custom Duty and penalty of Rs.6,68,507/- out of gross amount of Rs.12,07,014/-. 58. While adjudicating Revenue’s appeal on this issue, we have already adjudicated this issue in para Nos. 50 and 51 of this order. Our above findings are mutatis mutandis applicable to ground no.2 raised by the assessee. Therefore, we dismiss ground no.2 raised by the assessee. 59. Now, coming to the ground no.3 raised by the assessee, which relates to addition of Rs.14,60,000/- on account of excess stock of fabrics of 73,000 meters valued at Rs.20/- per meter. 60. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee. Learned Dr for the Revenue relied on the findings of assessing officer whereas ld Counsel for the assessee submits that addition sustained by ld CIT(A) may be deleted. The main grievance of ld Counsel is that assessing officer has erred in making addition in respect of alleged excess stock of Rs. 14,60,000/- as per para 16 of the assessment order. The ld Counsel submits that said stock was explained as belonging to Shree Narayan Dyeing & Printing Mills and the same was accepted in that case. The copy of relevant submission is filed on page No. 231 to 232 of the paper book. However, ld CIT(A) observed that letter written does not clearly mention that its stock is placed with the assessee. That is, submission filed in the case of Shree Ramnarayan Dyeing & Page | 23 IT(SS)A 05 & 08/SRT/2020/BP1996-97 to 2001-02 Cosmic Textiles Pvt. Ltd. Printing Mills (P) Ltd, does not bear any stamp or signature on receiving copy. We have gone through para no. 8.9 of the order of ld. CIT(A) and noted that there is no infirmity in the order of ld. CIT(A), hence, we confirm the findings of the ld. CIT(A), therefore ground No.3 raised by the assessee is dismissed. 61. In the result, ground no.3 raised by the assessee is dismissed. 62. In the combined result, appeal filed by the assessee, in IT(SS)A No. 05/SRT/2020 is dismissed and appeal filed by Revenue in IT(SS) No. 08/SRT/2020 is also dismissed. Registry is directed to place one copy of this order in all appeals folder / case file(s). Order is pronounced in the open court on 15/07/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 15/07/2022 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat