World Trade Impex Ltd.,, Baroda v. The Income tax Officer, Ward-4(1),, Baroda

ITA 1154/AHD/2006 | 2002-2003
Pronouncement Date: 24-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 115420514 RSA 2006
Assessee PAN AAACW2072K
Bench Ahmedabad
Appeal Number ITA 1154/AHD/2006
Duration Of Justice 4 year(s) 7 month(s) 16 day(s)
Appellant World Trade Impex Ltd.,, Baroda
Respondent The Income tax Officer, Ward-4(1),, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 24-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 24-12-2010
Date Of Final Hearing 09-12-2010
Next Hearing Date 09-12-2010
Assessment Year 2002-2003
Appeal Filed On 08-05-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI G.D. AGRAWAL V.P. (AZ) & HON 'BLE SHRI T.K. SHARMA J.M. ) I.T.A. NO. 1154/AHD./2006 ASSESSMENT YEAR : 2002-2003 M/S. WORLD TRADE IMPEX LTD. BARODA -VS.- INCOME T AX OFFICER WARD-4(1) BARODA (PAN : AAACW 2072 K) (APPELLANT) (RESP ONDENT) APPELLANT BY : SHRI M.K. PATEL RESPONDENT BY : SHRI K. MADHUSUDAN SR. D.R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 27.02.2006 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-III BARODA FO R THE ASSESSMENT YEAR 2002-03. 2. GROUND NO. 1 OF THIS APPEAL IS AGAINST CONFIRMIN G THE DISALLOWANCE OF RS.14 500/- OUT OF THE PURCHASES MADE FROM RAJ PETRO PROJECTS PVT. LTD . BRIEF FACTS RELATING TO THE CONTROVERSY INVOLVED IN THIS GROUND OF APPEAL ARE THAT THE ASSE SSEE PURCHASED 5 MT OF POLYSTROL-4761 IN THE MONTH OF APRIL 2001 AT RS.48 720/- PER MT FROM ITS ASSOCIATE CONCERN M/S. RAJ PROJECTS PVT. LTD. BARODA. IN THE ASSESSMENT ORDER THE ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE HAD ALSO PURCHASED THE SAME ITEM FROM AN INDEPENDENT PARTY V IZ. BASF STYRENICS LTD. IN JULY AND AUGUST 2001 AT RS.45 820/- PER MT. ON BEING ENQUIR EID BY THE ASSESSING OFFICER REGARDING VARIATION IN RATE THE ASSESSEE SUBMITTED THAT THE PRICES OF PETROLEUM PRODUCTS ARE VOLATILE AND ARE GOVERNED BY INTERNATIONAL PRICES. THEREFORE NO COM PARISON CAN BE MADE. THE ASSESSING OFFICER HOWEVER NOTED THAT THE GOODS PURCHASED FROM M/S. R AJ PETRO PRODUCTS WERE SOLD TO M/S. MITTAL ENTERPRISES AT RS.45 750/- PER MT IN MAY 2001 AND THUS THE ASSESSEE HAD SHOWN TO HAVE SOLD THE GOODS AT LOSS. ON THIS BASIS HE CONCLUDED THAT THE ASSESSEE HAD PURCHASED THE GOODS AT ABOVE THE MARKET PRICE. HE INVOKED THE PROVISIONS OF SECT ION 40A(2)(B) OF THE ACT HOLDING THAT THE ASSESSEE MADE EXCESS PAYMENT OF RS.2 900/- PER MT ( RS.48 720/- MINUS RS.45 820/-). THUS HE DISALLOWED RS.14 500/- (RS.2 900/- X 5) UNDER SECTI ON 40A(2) OF THE ACT. 2 ITA NO. 1154-AHD-2006 3. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) IN THE STATEMENT OF FACTS NOTHING WAS STATED. IT APPEARS THAT THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) PASSED THE IMPUGNED ORDER EX-PARTE QUO ASSESSEE. ON THE BASIS OF MATERIAL AVAILABLE ON RECORD THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER CONFIRMED THE SAID ADDITION FOR THE DETAILED REASONS GIVEN IN PARA 4.2 WHICH IS AS UNDER :- 4.2. I HAVE CONSIDERED THE FACTS OF THE CASE. THE ASSESSING OFFICER HAS CLEARLY BROUGHT OUT ON RECORD THAT POLYSTROL-4761 PURCHASED BY THE ASSESSEE FROM THE ASSOCIATE CONCERN IN APRIL 2001 WAS AT A RATE HIGHER THAN TH E MARKET RATE. ON THE BASIS OF INFORMATION FURNISHED BY THE ASSESSEE THE ASSESSIN G OFFICER HAS POINTED OUT THAT THE SAME ITEM WHICH WAS PURCHASED IN APRIL WAS SOLD IN MAY 2001 TO AN INDEPENDENT PARTY AT RS.45 750/- PER M.T AS AGAINST THE PURCHASE PRICE O F RS.48 720/- EVEN IN THE MONTH OF JULY AND AUGUST 2001 THE PRICE OF THE COMMODITY W AS RS.45 820/- PER M T THUS APPARENTLY THE ASSESSEE HAD PAID A MUCH HIGHER PRI CE TO ITS ASSOCIATE CONCERN. BEFORE THE ASSESSING OFFICER THE ASSESSEE GAVE A VERY GEN ERAL TEXTBOOK EXPLANATION REGARDING THE HIGHER RATE PAID TO THE ASSOCIATE CONCERN. IT C OULD NOT LEAD ANY EVIDENCE BEFORE THE ASSESSING OFFICER TO SHOW THAT THE RATE OF RS.48 72 0/- PER M.T WAS THE CORRECT MARKET RATE IN APRIL 2001. IT HAS BEEN HELD BY THE HON'BL E BOMBAY HIGH COURT IN THE CASE OF CIT V. SHATRUNJAY DIAMONDS 261 ITR 258 (BOM) THAT F OR THE PURPOSE OF APPLICABILITY OF SECTION 40A(2) THE BURDEN IS ON THE ASSESSEE TO PR OVE THAT THE PRICE PAID TO THE SPECIFIED CATEGORY OF PERSON IS REASONABLE. IN THE PRESENT C ASE THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE PRICE PAID BY IT TO ITS ASSOCIATE CO NCERN WAS REASONABLE HAVING REGARD TO THE MARKET VALUE OF THE GOODS. ON THE CONTRARY THE ASSESSING OFFICER ON THE BASIS OF SCRUTINY OF PURCHASE AND SALE BILLS HAS BEEN ABLE T O SHOW THAT THE PRICE OF POLYSTROL WAS BETWEEN RS.45 750/- -RS.45 820/- BETWEEN APRIL-AUGU ST 2001 AND THE PRICE OF RS.48 720/-PAID BY THE ASSESSEE WAS UNREASONABLE. T HE DISALLOWANCE OF RS.L4 500/- U/S.40A(2)(B) OF THE ACT IS CONFIRMED. AGGRIEVED WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US SHRI M.K. PATE L LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. HE SUBMITTED THAT THE PRICES ARE FLUCTUATING AND THIS WAS DULY EXPLAINED TO ASSESSING OFFICER. THE LD. COUNSEL FURTHER DREW OUR ATTENTION TO PAGE 103 OF THE PAPER BOOK AN D CONTENDED THAT NO PURCHASES WERE MADE FROM OUTSIDE THEREFORE THE ADDITION OF RS.14 500/ - MADE BY THE ASSESSING OFFICER ON DOUBTS AND SUSPICION BE DELETED. 5. ON THE OTHER HAND SHRI K. MADHUSUDAN LD. SR. D.R. APPEARING ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW . THE LD. D.R. POINTED OUT THAT IT WAS FOR THE ASSESSEE TO PRODUCE NECESSARY EVIDENCE OF PRICES PR EVAILING ON THE DATE OF PURCHASES MADE FROM 3 ITA NO. 1154-AHD-2006 RAJ PETRO PRODUCTS PVT. LTD. THIS WAS NOT PRODUCED WHEREAS IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS MADE A COMPARISON OF PURCHASE S FROM NON-ASSOCIATE CONCERNS AND MADE THE ADDITION OF RS.14 500/- THEREFORE THE ADDITIO N MADE BE SUSTAINED. 6. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT FROM THE OWN-RECORD OF THE ASSESSEE THE ASSESSING OFFICER MADE THE COMPAR ISON AND CAME TO THE CONCLUSION THAT THE ASSESSEE AFTER MAKING THE PURCHASES FROM SISTER/ AS SOCIATE CONCERN SOLD THE SAME GOODS AT A LOSS. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE WE ARE OF THE VIEW THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS GIV EN COGENT REASON FOR CONFIRMING THE ADDITION OF RS.14 500/-. WE THEREFORE DECLINE TO INTERFERE. RESULTANTLY THIS GROUND OF APPEAL IS REJECTED. 7. GROUND NO. 2 IS AGAINST CONFIRMING THE ADDITION OF RS.12 11 000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUPPRESSION OF SALES IN RESPE CT OF SALES MADE TO ASSOCIATE CONCERN SHRINATH PLASTOPACK PVT. LTD. 7.1. BRIEF FACTS RELATING TO THE CONTROVERSY INVOLV ED IN THIS GROUND OF APPEAL ARE THAT THE ASSESSEE MADE SALES OF 3460 MT OF LDPE TO ASSOCIATE CONCERN VIZ. M/S. SHREENATH PLASTOPACK PVT. LTD. AT RS.46 080/- PER MT DURING SEPTEMBER 2 001 TO FEBRUARY 2002. THESE GOODS WERE PURCHASED AT AVERAGE RATE OF RS.46 135/- PER AN NUM FROM M/S. BUCH CHEMICALS PVT. LTD. AND M/S. RAJ PETRO PRODUCTS PVT. LTD. THE ASSESSING OFF ICER NOTICED THAT SIMILAR GOODS WERE SOLD TO OTHER PARTIES AT RS.46 430/-. THUS THE ASSESSEE SOL D THE GOODS TO ASSOCIATE CONCERN AT A LOWER RATE. BEFORE THE ASSESSING OFFICER THE ASSESSEE EX PLAINED THAT THE PRICES OF PETROLEUM PRODUCTS ARE VOLATILE AND ARE GOVERNED BY INTERNATIONAL PRIC ES. NOT BEING CONVINCED WITH THE EXPLANATION THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESS EE HAD SOLD THE GOODS AT LOWER THAN THE PURCHASE COST AND ALSO LOWER THAN THE RATE AT WHICH GOODS WERE SOLD TO OTHER PARTIES. HE ACCORDINGLY INVOKED THE PROVISIONS CONTAINED IN SEC TION 145(3) OF THE ACT AND ADOPTED THE SALE PRICE OF GOODS SOLD TO M/S. SHREENATH PLASTOPACK PV T. LTD. AT RS.46 430/- PER MT. THE DIFFERENCE OF RS.350/- PER MT (RS.46 430/- MINUS RS.46 080/-) AMOUNTING TO RS.12 11 000/- (RS.350/- PER MT X 3460 MT) WAS TREATED AS SUPPRESSED SALE PRICE. IN THE STATEMENT OF FACTS BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) NO FAC TS WERE MENTIONED. NONE APPEARED 4 ITA NO. 1154-AHD-2006 BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) TO EXPLAIN THE CASE. THEREFORE AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE ADDITION OF RS.12 11 000/- FOR THE DE TAILED REASONS GIVEN IN PARA 5.2 WHICH READS AS UNDER :- 5.2. I HAVE CONSIDERED THE FACTS OF THE CASE. TH E ASSESSEE HAS SOLD GOODS TO ITS ASSOCIATE CONCERN AT A PRICE LOWER THAN THE COST PR ICE AND ALSO MUCH LOWER THAN THE PRICE AT WHICH THE GOODS WERE SOLD TO INDEPENDENT PARTIES . BEFORE THE ASSESSING OFFICER THE ASSESSEE HAS GIVEN A VERY GENERAL EXPLANATION REGAR DING THE RATE CHARGED FROM THE ASSOCIATE CONCERN I HAVE ALSO VERIFIED THE ASSESSM ENT RECORDS. THE ASSESSEE COULD NOT ADDUCE ANY EVIDENCE BEFORE THE ASSESSING OFFICER TH AT THE RATE CHARGED FROM THE ASSOCIATE CONCERN WAS THE PREVAILING MARKET RATE. T HE ASSESSEE'S OWN RECORDS ALSO SHOW THAT THE AVERAGE SALE PRICE CHARGED FROM OTHER PART IES WAS MUCH HIGHER THAN THE PRICE CHARGED FROM THE ASSOCIATE CONCERN. IN THE STATEMEN T OF FACTS ALSO THE APPELLANT HAS NOT GIVEN ANY EXPLANATION OR ENCLOSED ANY DOCUMENTS IN SUPPORT OF ITS CLAIM THAT THE SALE PRICE CHARGED FROM THE ASSOCIATE CONCERN WAS THE PR EVALENT MARKET PRICE. IT HAS BEEN HELD BY THE HON'BTE GUJARAT HIGH COURT IN THE CASE OF PATEL CHEMICAL WORKS 265 ITR 273 THAT WHERE SALES WERE MADE TO SISTER CONCERNS A T PRICES LOWER THAN THE MARKET PRICES THE ASSESSING OFFICER WAS JUSTIFIED IN HOLDING THAT THE PAYMENT OF TAX WAS AVOIDED. THE ADDITION MADE BY THE A.O. WAS CONFIRMED BY THE HON' BLE HIGH COURT. RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE ]URISDICTIONAL HI GH COURT WHICH IS SQUARELY APPLICABLE TO THE CASE OF THE APPELLANT THE ADDITION OF RS.12 11 000/- MADE BY THE ASSESSING OFFICER IS CONFIRMED. AGGRIEVED WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. AT THE TIME OF HEARING THE LD. COUNSEL OF THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. HE POINTED OUT THAT T HE ASSESSEE HAS NOT SOLD THE GOODS BELOW COST PRICE THEREFORE THERE IS NO JUSTIFICATION WHATSOE VER FOR MAKING THE ADDITION. IT WAS FURTHER CLAIMED THAT THE GOODS SOLD BEING PETROLEUM PRODUCT S ARE SUBJECT TO INTERNATIONAL PRICES FLUCTUATION THEREFORE THE ADDITION OF RS.12 11 00 0/- MADE BE DELETED. ALTERNATIVELY THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ONLY DIFFERE NCE BETWEEN THE COST AND SALE PRICES CAN BE ADDED. THE LD. D.R. SUPPORTED THE ORDER OF ASSESSIN G OFFICER. THE LD. D.R. POINTED OUT THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS CLEARLY MENTIONED THAT THE ASSESSEE HAS SOLD THE GOODS BELOW THE COST PRICE ALSO THEREFORE THE ADD ITION MADE IN THIS REGARD BE CONFIRMED. 9. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUT HORITIES BELOW. KEEPING IN VIEW THE PECULIAR FACTS MENTIONED BY THE ASSESSING OFFICER WE ARE OF THE VIEW THAT THE ADDITION ON THIS ACCOUNT CAN BE MADE. HOWEVER THE ADDITION ON THIS ACCOUNT CAN BE MADE IF THE ASSESSEE HAS SOLD THE GOODS BELOW THE COST PRICE. THIS ASPECT WAS NOT PROPERLY EXAMINED BY ANY OF THE 5 ITA NO. 1154-AHD-2006 DEPARTMENTAL AUTHORITIES BELOW. WE THEREFORE SET ASIDE THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE AND RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSEE SHOULD FURNISH THE COMPLETE DETAILS OF PURCHASES AND SALES MADE. THE ASSESSING OFFICER MAY VERIFY THE SAME AND RESTRICT THE ADDITION IF ANY TO THE DIFFERENCE BETWEEN COST AND SALE PRICES AS STATED A BOVE. RESULTANTLY THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 10. GROUND NO. 3 IS AGAINST CONFIRMING THE ADDITION OF RS.20 99 048/- MADE BY THE ASSESSING OFFICER IN RESPECT OF PURCHASES MADE FROM VARSHA PO LY PRODUCTS LTD. BRIEF FACTS RELATING TO THE CONTROVERSY INVOLVED IN THIS GROUND OF APPEAL ARE T HAT THE ASSESSEE HAD SHOWN PURCHASES OF RS.20 99 048/- FROM M/S. VARSHA POLYPRODUCTS LTD. T HE ASSESSING OFFICER ISSUED A LETTER UNDER SECTION 133(6) OF THE ACT TO M/S. VARSHA POLYPRODUC TS LTD. IN RESPONSE M/S. VARSHA POLYPRODUCTS LTD. FURNISHED A COPY OF ACCOUNT OF TH E ASSESSEE-COMPANY FOR THE PERIOD 1.4.2001 TO 31.3.2002. THE COPY OF ACCOUNT IS REPRODUCED BY THE ASSESSING OFFICER ON PAGE 6 OF THE ASSESSMENT ORDER. AFTER GOING THROUGH THIS COPY OF ACCOUNT THE ASSESSING OFFICER NOTICED THAT M/S. VARSHA POLYPRODUCTS LTD. HAD NOT SHOWN ANY SAL ES TO THE ASSESSEE-COMPANY WHEREAS THE ASSESSEE HAD CLAIMED PURCHASES OF RS.20 99 048/- FR OM THIS PARTY. THE ASSESSEE EXPLAINED TO THE ASSESSING OFFICER THAT IT PURCHASED GOODS WORTH RS. 34 24 750/- VIDE BILL NO. HS/5/2000-2001 DATED 22.3.2001 ON HIGH SEAS. REGARDING THE DIFFERE NCE IN THE ACCOUNT AS PER ASSESSEES BOOK AND AS PER THE COPY OF ACCOUNT FURNISHED BY M/S. VA RSHA POLYPRODUCTS LTD. THE ASSESSEE STATED THAT THE MATTER BEING VERY OLD IT IS TRYING TO LOC ATE THE DIFFERENCE. ON CLOSER EXAMINATION OF ACCOUNTS THE ASSESSING OFFICER NOTED THAT THE ASSE SSEE HAD SHOWN PURCHASES OF RS.20 99 048/- VIDE VOUCHER NO. 2002 (WITH DATE OF POSTING AS ON 3 .9.2001) AND AT THE END OF THE YEAR THE CLOSING BALANCE WAS SHOWN AT RS.25 98 798/- WHEREAS M/S. VARSHA POLYPRODUCTS LTD. DID NOT RECORD SUCH SALE. THE ASSESSING OFFICER FURTHER NOT ICED THAT M/S. VARSHA POLYPRODUCTS LTD. HAD SHOWN THE CLOSING BALANCE AT RS.4 99 750/- AS ON 31 .3.2002. KEEPING IN VIEW THESE FACTS THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE FAILE D TO GIVE ANY CONVINCING EXPLANATION REGARDING PURCHASE OF RS.20 99 048/- FROM M/S. VARS HA POLYPRODUCTS LTD. AND THE DIFFERENCE IN ACCOUNT AND HELD THAT THE ASSESSEE HAD CLAIMED EXCE SS AMOUNT OF PURCHASES IN ITS BOOKS OF ACCOUNTS. HE ACCORDINGLY MADE AN ADDITION OF RS.20 99 048/-. 6 ITA NO. 1154-AHD-2006 11. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) IN THE IMPUGNED ORDER CONFIRMED THE AFORESAID ADDITION OF RS.20 99 048/- FOR THE DE TAILED REASONS GIVEN IN PARA 6.1 WHICH READS AS UNDER :- 6.1. THE APPELLANT HAS NOT APPEARED BEFORE_ME DES PITE SEVERAL OPPORTUNITIES GRANTED. IT APPEARS THAT THE APPELLANT STILL DOES NOT HAVE SATI SFACTORY EXPLANATION REGARDING THE DISCREPANCIES NOTED BY THE ASSESSING OFFICER. I HAVE CONSIDERED THE FACTS OF THE CASE AND HAVE ALSO PERUSED THE ASSESSMENT RECORDS. FROM THE STATE MENT OF ACCOUNT FURNISHED BY M/S VARSHA POLYPRODUCTS LTD IT IS SEEN THAT THE SAID PARTY DI D NOT SELL ANY GOODS TO THE ASSESSEE DURING THE F.Y 2001-02. HOWEVER THE ASSESSEE IN ITS BOOKS OF ACCOUNTS HAS SHOWN PURCHASE OF RS.20 99 048/- FROM THIS PARTY. PERUSAL OF ASSESSME NT RECORDS SHOWS THAT IN RESPONSE TO ASSESSING OFFICER'S QUERY REGARDING PURCHASES EXCEE DING RS 1 LAKH THE ASSESSEE VIDE LETTER FILED ON 24-12-2004 FURNISHED THE DETAILS WHEREIN PURCHA SES OF RS.20 99 048/- WERE SHOWN FROM M/S.VARSHA POLYPRODUCTS LTD. THE NAME OF M/S.VARSHA POLYPRODUCTS LTD. ALSO APPEARS IN THE LIST OF SUNDRY CREDITORS FOR GOODS AND AN AMOUNT OF RS.2 5 98 798/- IS SHOWN DUE TO THE PARTY. IT CAN THUS BE SAID THAT THE ASSESSEE DEBITED BOGUS PURCH ASES OF RS.20 99 048/- FROM M/S.VARSHA POLYPRODUCTS LTD. AND THUS INFLATED EXPENDITURE. I T IS PERHAPS BECAUSE OF THIS REASON THAT NO PAYMENT WAS ALSO MADE TO M/S.VARSHA POLYPRODUCTS LT D. BEFORE THE ASSESSING OFFICER ALSO THE ASSESSEE COULD NOT RECONCILE THE DIFFERENCE IN THE OUTSTANDING BALANCE IN THE NAME OF M/S VARSHA POLYPRODUCTS LTD. AND COULD NOT EXPLAIN AS TO WHY S O-CALLED PURCHASES FROM M/S.VARSHA POLYPRODUCTS LTD. WERE NOT SHOWN IN THE CONFIRMATIO N LETTER SENT BY M/S.VARSHA POLYPRODUCTS LTD. THE ASSSSSEE ALSO COULD NOT FURNISH ANY DOCUME NTS REGARDING DELIVERY OF SO-CALLED GOODS FROM M/S VARSHA POLYPRODUCTS LTD. SINCE THE PASSING OF THE ASSESSMENT ORDER ON 24-3-2005 ENOUGH TIME HAS PASSED. BUT TILL NOW THE ASSESSEE COULD NOT EXPLAIN THE DISCREPANCY. I AM THEREFORE IN AGREEMENT WITH THE ASSESSING OFFICER THAT ASSESSEE HAD DEBITED NON-GENUINE PURCHASE OF RS.20 99 048/- FROM M/S.VARSHA POLYPROD UCTS LTD AND THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE CLAIM OF SUCH PURCHASE S. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFIRMED. BEING AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE T HE TRIBUNAL. 12. BEFORE US THE LD. COUNSEL OF THE ASSESSEE SUBM ITTED THAT THIS AMOUNT REPRESENTS CUSTOM DUTY PAID ON PURCHASES MADE IN PRECEDING YEAR. IN S UPPORT OF THIS HE SUBMITTED FEW DOCUMENTS WHICH ARE APPEARING AT PAGES 52 TO 70 OF THE PAPER BOOK. IT WAS ALSO CLAIMED THAT THESE DOCUMENTS WERE FILED BEFORE THE ASSESSING OFFICER. HE ACCORDINGLY SUBMITTED THAT THIS MATTER BE RESTORED TO THE FILE OF ASSESSING OFFICER FOR VERIF ICATION AND BE RE-ADJUDICATED IN ACCORDANCE WITH LAW. 13. ON THE OTHER HAND THE LD. D.R. FOR THE REVENUE STRONGLY OBJECTED TO THE AFORESAID SUBMISSIONS MADE BY THE LD. COUNSEL OF THE ASSESSEE . HE POINTED OUT THAT BEFORE THE ASSESSING OFFICER THE ASSESSEE NEVER POINTED OUT THIS FACT. THEREFORE AT THIS STAGE THIS PLEA CANNOT BE ENTERTAINED. 14. RIVAL SUBMISSIONS WERE CONSIDERED. BEFORE US T HE ASSESSEE HAS FURNISHED A COPY OF PAPER BOOK WHICH WAS SUBMITTED BEFORE THE LEARNED COMMIS SIONER OF INCOME TAX(APPEALS). IT IS 7 ITA NO. 1154-AHD-2006 POINTED OUT THAT THE PAGES 42 TO 70 OF THE PAPER BO OK CONTAINED SUPPORTING DOCUMENTS IN RESPECT OF PAYMENT OF CUSTOM DUTY FOR GOODS IMPORTED IN THE EARLIER YEARS. IT IS NOT KNOW HOW THESE EXPENSES ARE DEBITED UNDER THE HEAD PURCHASES MAD E FROM M/S. VARSHA POLYPRODUCTS LTD. BEFORE THE ASSESSING OFFICER IT WAS CONTENDED THAT THE MATTER IS VERY OLD AND THE ASSESSEE IS TRYING TO LOCATE THE DIFFERENCE. BE THAT IT MAY BE IN OUR OPINION IT WILL MEET THE END OF JUSTICE IF THIS ISSUE IS RESTORED TO THE FILE OF ASSESSING OFF ICER WITH THE DIRECTION THAT THE ASSESSEE SHALL FURNISH THE COMPLETE DETAILS. IF THE ASSESSING OFFI CER IS SATISFIED ON VERIFICATION ABOUT THE CORRECTNESS OF CLAIM AND IN CASE THE EXPENDITURE IN QUESTION IS LEGALLY ALLOWABLE IN THAT EVENT ASSESSING OFFICER MAY CONSIDER ALLOWABILITY OF THE SAME IN ACCORDANCE WITH LAW. 15. GROUND NO. 4 IS AGAINST CONFIRMING THE DISALLOW ANCE OF RS.1 82 831/- OUT OF BUSINESS PROMOTION EXPENSES AND IN GROUND NO. 5 CONFIRMING T HE DISALLOWANCE OF RS.12 500/- OUT OF TELEPHONE EXPENSES. 15.1. IN RESPECT OF BOTH THE DISALLOWANCES THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT AS PER THE RATIO OF JUDGMENT OF THE HON'BLE GUJARAT HIGH C OURT IN THE CASE OF SAYAJI IRON & ENGG. CO. VS.- CIT REPORTED IN 253 ITR 749 (GUJ.) THE EXPENSE S INCURRED BY THE DIRECTOR ON HIS CREDIT CARD FOR BUSINESS OF THE COMPANY AND DISALLOWANCE FOR PE RSONAL USE CANNOT BE MADE. THEREFORE BOTH THESE DISALLOWANCES ARE DELETED. ON THE OTHER HAND THE LD. D.R. POINTED OUT THAT THE EXPENSES INCURRED BY THE DIRECTOR ON HIS CREDIT CARD CANNOT BE ALLOWED BECAUSE NO DETAIL OF EXPENSES WAS FURNISHED. HE ACCORDINGLY SUBMITTED THAT THE ADDITI ON OF RS.1 82 831/- BE CONFIRMED AND THE DISALLOWANCE OF RS.12 500/- MAY BE DELETED. 16. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTH ORITIES BELOW. IT IS PERTINENT TO NOTE THAT NEITHER BEFORE BOTH THE DEPARTMENTAL AUTHORITIES BE LOW NOR BEFORE US THE ASSESSEE HAS FURNISHED DETAILS OF EXPENSES INCURRED BY THE DIRECTOR ON HIS CREDIT CARD THEREFORE IT CANNOT BE SAID THAT THESE EXPENSES WERE INCURRED FOR THE PURPOSE OF BUS INESS. THE ADDITION OF RS.1 82 831/- IS THEREFORE CONFIRMED. IN RESPECT OF TELEPHONE EXPEN SES WE ARE OF THE VIEW THAT THE ASSESSEE BEING A COMPANY IT CANNOT BE DISALLOWED KEEPING IN VIEW THE RATION OF JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENG G. CO.(SUPRA). THE DISALLOWANCE OF RS.12 500/- OUT OF TELEPHONE EXPENSES IS ACCORDINGL Y DELETED. RESULTANTLY GROUND NO. 4 IS REJECTED AND GROUND NO. 5 IS ALLOWED. 8 ITA NO. 1154-AHD-2006 17. THE LAST GROUND OF APPEAL IS AGAINST CONFIRMING THE DISALLOWANCE OF RS.93 417/- BEING BAD DEBTS. IN THE ASSESSMENT ORDER THE ASSESSING O FFICER HAS MENTIONED THAT THE BAD DEBTS AS PER ACCOUNTS ARE RS.6 52 690/- WHEREAS THE AMOUNT OF B AD DEBTS CLAIMED WAS RS.6 87 047/-. THEREFORE THE ASSESSING OFFICER DISALLOWED THE DIF FERENCE OF RS.34 357/-. THE ASSESSING OFFICER ALSO NOTICED THAT BAD DEBTS AMOUNT INCLUDED BAD DEB TS OF TENDER DEPOSIT OF RS.59 060/- AND HELD THAT THIS AMOUNT DOES NOT PERTAIN TO INCOME TO WHIC H IT HAS OFFERED TO TAX IN EARLIER YEARS. THE NATURE OF THE SAME IS OF ADVANCED AND DEPOSIT NOT A LLOWABLE. THIS RESULTED IN TOTAL DISALLOWANCE OF RS.93 417/- (RS.34 357/- PLUS RS.59 060/-). 18. ON APPEAL THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) CONFIRMED BOTH THE AFORESAID DISALLOWANCE AMOUNTING TO RS.93 417/- FOR THE DETAILED REASONS GIVEN IN PARA 9.1 WHICH READS AS UNDER :- 9.1. I HAVE CONSIDERED THE FACTS OF THE CASE. NEI THER BEFORE THE ASSESSING OFFICER NOR BEFORE ME THE ASSESSEE COULD EXPLAIN THE DISCREPAN CY RS.34 357/- IN THE BAD DEBT ACCOUNT . THE DISALLOWANCE OF RS.34 357/- WAS THER EFORE JUSTIFIED. AS REGARDS BAD DEBT OF RS.59 060/- THE WRITE OFF OF THIS AMOUNT IS NOT IN THE NATURE OF BAD DEBT AS THIS AMOUNT WAS NOT TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR OR OF AN EARLIER PREVIOUS YEAR NOR DOES IT REPRESEN T MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF BANKING OR MONEY LENDING. THIS AMOUNT C AN ALSO NOT BE CONSIDERED AS BUSINESS LOSS AS THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE AS TO UNDER WHAT CIRCUMSTANCES THE DEPOSIT BECOME NON-REFUNDABLE OR BAD. THE ASSESSING OFFICER'S ACTION IS THEREFORE CONFIRMED. BEING AGGRIEVED THE ASSESSEE IS IN APPEAL. 19. AT THE TIME OF HEARING IT WAS CONTENDED BY THE LD. COUNSEL OF THE ASSESSEE THAT THE DETAILS OF BAD DEBTS IS AVAILABLE ON PAGES 141 TO 144 OF TH E PAPER BOOK FILED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). ALL THE EXPENS ES ARE ALLOWABLE EITHER AS A TRADING LOSS OR BAD DEBTS. IN SUPPORT OF THIS HE RELIED ON THE JUD GMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF TRF LIMITED REPORTED IN 322 ITR 397 (SC). 20. ON THE OTHER HAND THE LD. D.R. POINTED OUT THA T THE ASSESSEE HAS NOT FURNISHED THE COPY OF RELEVANT ACCOUNTS AND NATURE OF BAD DEBTS. SINCE BE FORE THE ASSESSING OFFICER NO CLARIFICATION WAS FURNISHED THE ADDITION OF RS.34 357/- WAS RIGH TLY MADE. WITH REGARD TO BAD DEBTS OF TENDER DEPOSIT OF RS.59 060/- THE LD. D.R. POINTED OUT TH AT THIS AMOUNT IS NOT IN THE NATURE OF BAD DEBTS AS THIS WAS NOT TAKEN AS INCOME IN EARLIER YEARS T HEREFORE IS RIGHTLY CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 9 ITA NO. 1154-AHD-2006 21. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTH ORITIES BELOW. THE CLAIM OF THE ASSESSEE ON ALLOWABILITY OF BAD DEBTS AMOUNTING TO RS.34 357 /- IS REQUIRED TO BE SENT BACK TO THE FILE OF ASSESSING OFFICER FOR ADJUDICATING THE SAME AS PER THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA). WE ACCORDINGLY DIRECT THE ASSESSEE TO FURNISH THE DETAILS OF BAD DEBTS ASSESSING OFFICER WILL EXAMINE THE SAME AND RE-ADJUDICATE THE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.34 357/- AFRESH IN ACCORDANCE WITH LAW. 21.1 WITH REGARD TO ALLEGED BAD DEBTS OF TENDER DEP OSIT OF RS.59 060/- WE DIRECT THE ASSESSEE TO FURNISH THE COMPLETE NAMES AND ADDRESSES DATE ETC. WHEN THE DEPOSIT OF RS.59 060/- WAS MADE. ASSESSING OFFICER WILL EXAMINE THE SAME AND I F REQUIRED HE WILL MAKE CROSS VERIFICATION FROM THE CONCERNED PARTY IN ORDER TO ASCERTAIN WHET HER THE AMOUNT IN QUESTION IS STILL OUTSTANDING. IN CASE IT IS IRRECOVERABLE AND DEPOSIT WAS MADE F OR THE PURPOSE OF BUSINESS IN THAT EVENT ASSESSING OFFICER WILL ALLOW THE SAME AS BUSINESS L OSS. THIS GROUND IS PARTLY ALLOWED. 22. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. THE ORDER WAS PRONOUNCED IN THE COURT ON 24.12.20 10 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 24/ 12 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGIS TRAR ITAT AHMEDABAD LAHA/SR.P.S.