Sri. SURENDRA KUMAR GARG, MUMBAI v. DCIT (INV.) CIR. 7(2), MUMBAI

ITA 1184/MUM/2007 | 1981-1982
Pronouncement Date: 26-03-2010 | Result: Allowed

Appeal Details

RSA Number 118419914 RSA 2007
Assessee PAN MARCH1981O
Bench Mumbai
Appeal Number ITA 1184/MUM/2007
Duration Of Justice 3 year(s) 1 month(s) 17 day(s)
Appellant Sri. SURENDRA KUMAR GARG, MUMBAI
Respondent DCIT (INV.) CIR. 7(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 26-03-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 26-03-2010
Assessment Year 1981-1982
Appeal Filed On 08-02-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI J.SUDHAKAR REDDY AM AND SHRI V.D. RAO JM. S.NO. I.T.A. NO. ASSTT. YEAR. 1. 1184/MUM/2007 1981-82. 2. 1185/MUM/2007 1982-83. 3. 1186/MUM/2007 1983-84. 4. 1187/MUM/2007 1984-85. 5. 1188/MUM/2007 1985-86. SHRI SURENDRA KUMAR GARG DY. C OMMISSIONER OF C/O KARNAVAT & CO. VS. INCOME TAX 2A KITAB MAHAL (INV.) CIRCLE-7(2) MUMBAI. 192 DR. D. RAOROJI ROAD FORT MUMBAI 400 001. PANAAFPG5586Q (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI Y.P.TRIVEDI PANKAJ TOPRANI. SUNIL HIRAWAT. RESPONDENT BY : MRS. VANDANA SAGAR. O R D E R PER J. SUDHAKAR REDDY A.M. : ALL THESE APPEALS ARE FILED BY THE ASSESSEE AND A RE DIRECTED AGAINST THE COMMON ORDER OF THE CIT(APPEAL S)XVI MUMBAI DATED 27-11-2006 FOR THE ASSESSMENT YEARS 1981-82 TO 1985-86. 2. AS THE ISSUES ARISING IN ALL THESE APPEALS ARE COMMON FOR THE SAKE OF CONVENIENCE THEY ARE HERD TOGETHER AND DISPOSED OF BY WAY OF THIS COMMON ORDER AS DONE BY THE FIRST APPELLAT E AUTHORITY. 3. THIS CASE HAS A CHECKERED HISTORY. THE ASSESSEE IS AN INDIVIDUAL AND WAS ENGAGED IN THE BUSINESS OF IMPOR TS OF VARIOUS GOODS 2 THE NAME OF 14 CONCERNS WHICH WERE FLOATED BY HIM IN THE NAMES OF HIS FAMILY MEMBERS FRIENDS AND RELATIVES. THERE WAS A SEARCH ACTION U/S 132 ON 05-02-1985. DURING THE SEARCH THE ASSESSEE A CCEPTED THE FACT THAT ALL THE 14 CONCERNS MENTIONED IN PAGE 2 OF TH E CIT(APPEALS) ORDER BELONG TO HIM. HE CLAIMED THAT HE SOLD GOODS ON HIG H SEAS AND THAT HE HAD ARRANGED FINANCE FOR THESE IMPORTS. THE ASSESS EE HAD FILED ITS RETURNS OF INCOME FOR THE ASSESSMENT YEARS 1981-82 TO 1985-86. THE AO PASSED ASSESSMENT ORDER U/S 144 ON 19-02-1986. T HE ASSESSEES CLAIM IS THAT IT WAS A BANKING AGENT WHO USED TO OPEN LETTER OF CREDITS (L.CS.) AT THE INSTANCE OF OTHER PARTIES. HE CLAIMS THAT HE WAS HAVING INCOME BY WAY OF SUNDRY BROKERAGE AND COMMISSION A S BANKING AGENTS. THE ASSESSEE STATES THAT HE USED TO OPEN L ETTER OF CREDITS EITHER IN VIJYA BANK GAMADEVI BRANCH MUMBAI OR IN M/S INDIAN OVERSEAS BANK BANDRA BRANCH FOR AND ON BEHALF OF THE OTHER PARTIES WHO WERE THE ACTUAL USERS OF THE IMPORTED RAW MATER IAL. THE ASSESSEE CLAIMS THAT THESE PARTIES WHO ARE ACTUAL USERS OF I MPORTED RAW MATERIAL WERE ARRANGING FUNDS FOR THE PURPOSE OF OPENING THE L.CS. AS WELL AS FOR THE PURPOSE OF RETIRING THE BANK DOCUMENTS. THE BAN KS AFTER RECEIVING THE PAYMENT USED TO MAKE AN ENDORSEMENT ON THE DOC UMENTS AS PAYMENT RECEIVED AND THEREAFTER THE SAID DOCUMENTS WERE BEING HANDED OVER BY THE ASSESSEE EITHER TO THE AGENTS OF THE PARTIES ON WHOSE BEHALF THE ASSESSEE HAS OPENED L.CS. OR THEI R NOMINATED CLEARING AGENTS FOR THE PURPOSE OF CLEARING IMPORT ED GOODS FROM THE CUSTOMS DEPARTMENT. THE ASSESSEE CLAIMS THAT HE NEV ER ENGAGED ANY CLEARING AGENT NOR HAD HE PAID ANY CLEARING CHARGE S TO ANY ONE. IT IS HIS CASE THAT THE PARTIES TO WHOM GOODS WERE SOLD IN HI GH SEAS WHO USED TO IMPORT THE GOODS BY ENGAGING THE CLEARING AGENTS AND AFTER PAYING THE CUSTOMS DUTY USED TO TAKE DELIVERY OF THE GOOD S. 4. THE DEPARTMENTS CASE IS THAT THE ASSESSEE WAS A REAL USER OF THE IMPORTED GOODS. THE DEPARTMENT CAME TO A CONCLUSION THAT 3 THE ASSESSEE HAD IMPORTED THE GOODS PAID THE CUSTO MS DUTY AND TAKEN DELIVERY OF THE SAME AND THEREAFTER SOLD THE SAME. IN THE SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT CONDUCTED ON TH E ASSESSEE ON 05-12- 1985 A LARGE NUMBER OF DOCUMENTS WERE SEIZED. IT I S ALSO FOUND THAT THE ASSESSEE WAS OPERATING IN THE NAME OF 14 CONCER NS. THE ASSESSEE EXPLAINS THAT THE BRANCH MANAGER OF A BANK HAD NO P OWER TO GRANT L.CS. BEYOND THE LIMIT OF RS. 3 LAKHS FOR EACH CONC ERN AND HENCE THE MULTIPLICITY OF THE CONCERNS. IN ANY EVENT FOR TH E REASONS MENTIONED IN THE ASSESSMENT ORDER THE AO COMPLETED THE ORIGINA L ASSESSMENTS U/S 144 AND TREATED THE ENTIRE IMPORTS AS INCOME OF THE ASSESSEE. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE FIRST APPELLATE AUTHORITY. THE FIRST APPELLATE AUTHORITY VIDE ITS ORDER DATED 12- 11-1987 OBSERVED AS FOLLOWS : I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY SHRI S.S. KARNAVAT C.A. AND SHRI SURENDRAKUMAR GARG AP PELLANT AND ALSO GONE THROUGH THE ASSESSMENT ORDER PASSED B Y THE I.T.O. IT APPEARS THAT THE ASSESSMENT HAS BEEN FRAMED IN A HURRY WITHOUT ALLOWING PROPER OPPORTUNITY TO THE APPELLA NT TO EXPLAIN HIS POSITION AND WITHOUT APPRECIATING THE EXACT NATURE OF THE BUSINESS CONDUCTED BY THE APPELLANT. THE I.T.O. HAS TREATED THE APPELLANT AS AN IMPORTER OF GOODS IN THE NAME OF 14 CONCERNS WHICH ARE BEING CONTROLLED BY HIM. WHILE THE CLAIM OF THE APP ELLANT IS THAT HE IS ONLY A BANKING AGENT AND THESE 14 CONCERNS WERE SIMPLY CREATED AS THE BRANCH MANAGER OF THE BANK HAD POWER S TO OPEN L.C. IN ONE NAME ONLY UPTO RS.3 00 000/-. THESE 14 CONCERNS WERE HAVING DIFFERENT DIRECTORS / PROPRIETORS / PAR TNERS BUT THESE WERE IN FACT CONTROLLED BY THE APPELLANT. IN THE A. Y. 1981-82 THERE IS ONLY ONE L.C. OPENED BY THE APPELLANT FOR RS.50 000/- FOR THE IMPORT OF VANILINE WHICH WAS SOLD AT HIGH SEAS SALE S BASIS TO M/S MERI FOOD PRODUCTS SECUNDERABAD AND THE L.C. WAS OPENED ON THE INSTRUCTIONS OF ONE SHRI S.B. SOLANKI. THE I.T. O. COULD HAVE VERIFIED WHETHER THE GOODS HAVE ACTUALLY BEEN SOLD BY THE APPELLANT TO M/S MERI FOOD PRODUCTS BY ISSUING SUMM ONS TO M/S MARY FOOD PRODUCTS AS WELL AS TO SHRI S.B. SOLANKI AND FIND OUT WHO ACTUALLY MADE THE PAYMENT FOR CUSTOMS DUTY AND CLEARING CHARGES AND WHETHER THE CLAIM OF APPELLANT THAT HE IS ONLY A BANKING AGENT IS CORRECT OR NOT WHICH THE I.T.O. FA ILED TO DO. IN THE FACTS AND CIRCUMSTANCES OF THE CASE I AM OF THE CO NSIDERED OPINION THAT TO MEET THE END OF JUSTICE THE ASSESS MENT HAS TO BE 4 SET ASIDE TO THE FILE OF THE I.T.O. WITH THE DIRECT ION THAT HE SHOULD SUMMON THE PARTIES ON WHOSE INSTRUCTIONS L.C. WAS O PENED AND TO WHOM THE GOODS WERE SOLD. IF NEED BE THE I.T.O. MAY DEPUTE THE INSPECTOR TO THE CUSTOMS DEPT. FOR ASCERTAINING AS TO WHO WAS THE ACTUAL USER ON WHOSE BEHALF THE CLEARING AG ENT GOT THE GOODS CLEARED WHO HAD MADE THE PAYMENT OF CUSTOM D UTY AND WHO HAD ACTUALLY GOT THE DELIVERY OF GOODS. THE ASSESSMENT MAY BE REFRAMED AFTER MAKING PROPER ENQUIRIES AND AFTER CONFRONTING THE APPELLANT WITH THE RESULT OF THOSE ENQUIRIES. T HE ASSESSMENT IS SET ASIDE AND THE APPEAL IS ALLOWED FOR STATISTI CAL PURPOSE. 5. BY OBSERVING AS ABOVE THE FIRST APPELLATE AUT HORITY IN THE FIRST ROUND OF APPELLATE PROCEEDINGS SET ASIDE THE ASSESSMENT. 6. THE AO AGAIN COMPLETED THE 2 ND ASSESSMENT ON 26-3- 1990. ON APPEAL THE LEARNED CIT(APPEALS)-IX MUMBA I BY HIS ORDER DATED 4-2-1992 SET ASIDE THE MATTER ONCE AGAIN TO T HE FILE OF THE AO WITH A SPECIFIC DIRECTION THAT THE DIRECTIONS OF THE CIT (APPEALS) IN THE FIRST APPELLATE ORDER SHOULD BE FOLLOWED BY THE AO. A THI RD ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 250 WAS PASSED BY THE AO ON 31-3-1994. THE AO ONCE AGAIN REPEATED THE ADDITIONS MADE IN TH E ORIGINAL ASSESSMENT ORDER. ON APPEAL IN THE THIRD ROUND OF APPELLATE PROCEEDINGS THE CIT(APPEALS)-IX MUMBAI GRANTED PA RT RELIEF. BOTH THE ASSESSEE AND THE REVENUE FILED APPEALS BEFORE THE I TAT BENCH MUMBAI. AT THIS STAGE WE DEEM IT FIT TO EXTRACT E XTENSIVELY THE FINDINGS OF THE ITAT FOR READY REFERENCE : 2. THE ASSESSEE IS A RESIDENT INDIVIDUAL AND IS EN GAGED IN THE BUSINESS OF IMPORT OF VARIOUS GOODS IN THE NAMES OF 14 CONCERNS WHICH WERE FLOATED BY THE ASSESSEE IN THE NAMES OF HIS FAMILY MEMBERS FRIENDS AND RELATIVES. THERE WAS SEARCH AN D SEIZURE ACTION ON 5.2.1985. IN THE COURSE OF SUCH PROCEEDIN GS CERTAIN STATEMENTS WERE RECORDED FROM THE ASSESSEE. THE ASS ESSEE HAS ACCEPTED THAT ALL THE 14 CONCERNS IN WHOSE NAMES T HE BUSINESS IS DONE BELONG TO HIM OR EXIST FOR HIS BENEFIT. FO R THE ASSESSMENT YEAR 1981-82 A RETURN OF INCOME WAS FILED DISCLOSI NG AN INCOME OF RS.2 000/-. THE ASSESSMENT WAS FIRST COMPLETED U NDER SECTION 144 ON 19.2.1986 ON TOTAL INCOME OF RS.1 02 360/-. THIS ASSESSMENT WAS SET ASIDE BY THE ORDER DATED 12.11.8 7 OF THE 5 COMMISSIONER OF INCOME TAX (APPEALS) (SHRI R.K. BAL I). CERTAIN DIRECTIONS WERE PASSED BY THE CIT(APPEALS) TO THE A SSESSING OFFICER WHILE SETTING ASIDE THE ASSESSMENT ORDER. T HE ASSESSING OFFICER PROCEEDED TO FRAME THE ASSESSMENT IN ACCORD ANCE WITH THE DIRECTIONS OF THE CIT(APPEALS). BUT ACCORDING TO THE ASSESSING OFFICER THERE WAS NON-CO-OPERATION ON TH E PART OF THE ASSESSEE WHICH AGAIN RESULTED IN THE COMPLETION OF THE ASSESSMENT ORDER UNDER SECTION 144 ON26.3.1990. IN THAT ORDER THE INCOME WAS COMPUTED AT RS.1 02 360/-. THIS ASSE SSMENT AGAIN WAS SET ASIDE FOR THE SECOND TIME BY THE CIT( APPEALS) (SHRI G.P. PRABHU) ON 4.2.1992. THE ASSESSMENTS WERE TAKE N UP IN PURSUANCE OF THE ORDER OF THE CIT(APPEALS). THE ASS ESSING OFFICER HAS FRAMED THE PRESENT ASSESSMENTS UNDER SE CTION 143(1) READ WITH SECTION 250 OF THE INCOME TAX ACT 1961. IN HIS ORDER FOR THE ASSESSMENT YEAR 1985-86 HE DEALS WITH THE ISSU E OF VARIOUS NOTICES AND LETTERS WHICH WERE ACCORDING TO HIM IN PURSUANCE OF THE DIRECTIONS OF THE CIT(APPEALS). ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE HAD OPENED ONE L.C. IN THE N AME OF SWADESHI SYNTHETICS PVT. LTD. BY DEPOSITING RS.50 0 00/-. HOWEVER THE ASSESSEE CONTENDED BEFORE THE ASSESSIN G OFFICER THAT M/S SWADESHI SYNTHETICS PVT. LTD. OPENED L.C. FOR RS.50 000/- DURING THE FINANCIAL YEAR 1980-81 WITH APPROXIMATE DATE OF CLEARANCE 18.3.1981 AND THE GOODS WERE SOLD TO M/S MERRY FOOD PRODUCTS SECUNDERABAD. THE ASSESSING OF FICER ASKED THE ASSESSEE TO FURNISH CONFIRMATION LETTER F ROM THE PARTY ALLEGED TO BE PURCHASER OF THE GOODS. ON FAILURE OF THE ASSESSEE TO FURNISH THE SAME THE ASSESSING OFFICER HELD THA T THE NAME OF THE PURCHASER WAS FICTITIOUS AND CONCLUDED THAT THE ASSESSEE MUST HAVE SOLD THE GOODS IMPORTED IN THE OPEN MARKE T ON PREMIUM. THE ASSESSING OFFICER FURTHER HELD THAT TH E ASSESSEE HAD NOT EXPLAINED THE DEPOSIT OF RS.50 000/- FOR OP ENING THE L.C. THE ASSESSING OFFICER TREATED THE ABOVE AMOUNT AS H AVING BEEN FINANCED FROM THE UNDISCLOSED SOURCES AND THE NET P ROFIT ON THE SALE OF GOODS IMPORTED ON THIS L.C. WAS FURTHER EST IMATED AT RS.25 000/- AND THE SUM OF RS.75 000/- WAS ADDED TO THE DECLARED INCOME. FURTHER FOR THE DETAILED REASONS DISCUSSED IN THE ORIGINAL ASSESSMENT ORDER DATED 10.2.1986 AND I N THE ORDER DATED 26.3.1990 THE INCOME COMPUTED AT RS.24 359/- IN THE NAME OF M/S. SWADESHI SYNTHETICS PVT. LTD. WAS HELD TO BE ASSESSABLE IN THE HANDS OF THE ASSESSEE. THE ASSESS EE TOOK UP THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INC OME TAX (APPEALS) AND CONTENDED THAT HE WAS NOT CARRYING ON ANY REGULAR BUSINESS AND IN THE ASSESSMENT YEAR 1981-82 HIS MAI N SOURCE OF INCOME WAS MISCELLANEOUS BROKERAGE INCOME AND DURIN G THAT YEAR THE ASSESSEE STARTED BUSINESS OF OPENING L.CS. ON BEHALF OF 6 OTHER PARTIES. THE ASSESSEES SUBMISSION REGARDING THE OPENING OF L.C. WAS AS UNDER : ONLY ONE L.C. WAS OPENED WITH THE INDIAN OVERSEAS BANK BANDRA BOMBAY-50 IN FAVOUR OF M/S MONSANTO SINGAPORE CO. (PVT.) LTD. FOR US $ 5242.33 ON AN APPLICATION MADE BY M/S SWADESHI SYNTHETICS LTD. AN D ON BEHALF OF M/S MERI FOOD PRODUCTS 16.1.486 SAIDABA D HYDERABAD (A.P.) IN THE ACCOUNT PERIOD RELEVANT TO THE A.Y. 1981-82. 1.2(A) DURING THE COURSE OF THE ASSESSMENT PROCEEDING THE LEARNED ASSESSING OFFICER WAS DULY INFORMED THAT ONE SHRI SUNARMAL SOLANKI RESIDING AT HIRA PANNA BLDG. HAJI ALI BOMBAY ACTING AS A BROKER OF M/S MERI FOOD PRODUCTS 16.1.486 SAIDABD HYDERABAD (A .P.) APPROACHED THE APPELLANT ON 2.2.1981 FOR OPENING TH E L.C. FOR THE IMPORT OF VANILLIN (AN AROMATIC CHEMICAL) O F THE C.I.F. VALUE OF US $ 5000 (APPROX.). THE IDENTITY FOR THE IMPORT OF THE SAID ITEM WAS ISSUED BY M/S MINDIA CHEMICALS BOMBAY (NOW KNOWN AS M/S POLYELEFINS INDUSTRIES LTD . ) AND THE SAID CHEMICAL WAS TO BE IMPORTED FROM M/S MONSANTO SINGAPORE & CO. (P) LTD. SINGAPORE. 1.2(B) THE LEARNED ASSESSING OFFICER WAS ALSO INFORMED THAT SHRI SUNARMAL SOLANKI WAS THE ONLY LI NK OF THE APPELLANT WITH THE SAID M/S MERI FOOD PRODUCTS AND THAT THE APPELLANT WAS NOT PERSONALLY KNOWING THE SAID M/S M ERI FOOD PRODUCTS. THE LEARNED ASSESSING OFFICER WAS FU RTHER INFORMED THAT AS TO WHETHER THE SAID SHRI SUNARMAL SOLANKI WAS ACTING ON HIS OWN OR AS THE AGENT OF SOME OTHE R MIDDLE MAN IS NOT EXACTLY HE APPROACHED THE APPELL ANT FOR OPENING THE SAID L.C. ON BEHALF OF THE SAID M/S MER I FOOD PRODUCTS BECAUSE THE APPELLANT WAS INFORMED THAT IT WAS THE SAID M/S MERI FOOD PRODUCTS WHICH WILL PAY FOR THE COST OF THE SAID L.C. CUSTOMS DUTY ETC. AND IT WAS ALSO HE (I.E. SHRI SUNARMAL SOLANKI) WHO BROUGHT THE SAID INDENT FOR THE IMPORT OF THE SAID VANILLIN OF THE C.I.F. VALUE OF ABOUT US $ 5000. IT WAS ALSO EXPLAINED THAT IT WAS THE SAID MR . SUNARMAL SOLANKI WHO BROUGHT THE NECESSARY PAY ORD ER FOR THE PURPOSE OF RETIRING THE DOCUMENTS IN FAVOUR OF THE SAID M/S. MERI FOOD PRODUCTS AFTER THE SAID DOCUMENTS W ERE RECEIVED BY THE SAID INDIAN OVERSEAS BANK BANDRA F ROM SINGAPORE. IN THIS CASE THE SAID BANK RECEIVED THE SAID PAY ORDER ON OR BEFORE 31 ST JULY 1981 AND THE DOCUMENTS WERE RETIRED IN FAOVUR OF THE SAID M/S. MERI FOOD PRODUC TS ON 7 1.8.1981. THIS RETIRING OF THE DOCUMENTS IN FAVOUR OF THE ACTUAL USER OF THE GOODS OR IN FAVOUR OF SOMEBODY A LSO ACTING ON BEHALF OF THE ACTUAL USER IS KNOWN IN THE MARKET AS SALE ON HIGH SEAS BASIS BECAUSE AT THAT TIME THE CONSIGNMENT IS STILL IN THE SEA AND HAS NOT YET BEE N CLEARED FROM THE CUSTOMS. THIS IS ONLY A SALE BY THE TRANSF ER OF DOCUMENTS WITHOUT ACTUAL DELIVERY OF THE GOODS GIVE N OR TAKEN. IT WAS THE SAID SHRI SUNARMAL SOLANKI WHO HA D GOT THE SAID DOCUMENTS RETIRED IN FAVOUR OF THE SAID M/ S MERI FOOD PRODUCTS OF HYDERABAD AND IT WAS HE WHO GOT T HE SAID GOODS CLEARLY THROUGH M/S JOHN T. GONSALVES & SONS (CLEARING SHIPPING TRANSPORTING AGENT) AFTER PAYIN G THE NECESSARY CUSTOMS DUTY ON BEHALF OF THE SAID M/S M ERI FOOD PRODUCTS AND IT WAS HE WHO WAS RESPONSIBLE FOR THE TRANSPORTATION OF THE SAID GOODS FROM THE BOMBAY PO RT TO HYDERABAD. SO FAR AS THE APPELLANT WAS CONCERNED T HE ONLY ROLE OF THE APPELLANT IN THIS TRANSACTION WAS THE GETTING OF THE SAID LETTER OF CREDIT OPENED IN FAVOUR OF TH E SAID SINGAPORE BASED COMPANY AND UPTO THE STAGE OF RETIR EMENT OF THE DOCUMENTS BY THE BANK IN FAVOUR OF THE SAID M/S MERI FOOD PRODUCTS AND TO SOME EXTENT EXTENDING HIS COOPERATION IN THE MATTER OF CLEARANCE OF THE SAID IMPORTED CONSIGNMENT IF NEED BE. THE APPELLANT WAS NOT CONC ERNED AT ALL IN SO FAR AS THE PAYMENT OF THE CUSTOMS DU TY AND THE TAKING OF THE DELIVERY OF THE GOODS WERE CONCER NED. EVEN NORMALLY THE CUSTOMS DUTY IS PAID ONLY BY THE PERSON FROM THE CUSTOMS. AS SUCH SO FAR AS THIS WHO LE TRANSACTION WAS CONCERNED THE APPELLANT WAS ONLY A KIND OF BANKING AGENT FOR WHICH THE APPELLANT CHARGED ONLY 3% COMMISSION OF THE CIF VALUE WHICH WORKED OUT AT RS.1 614.54 (3% OF RS.53 792/-). IN SUPPORT THERETO THE ASSESSEE RELIED UPON : (A) AGREEMENT DATED 2 ND FEBRUARY 1981 BETWEEN THE ASSESSEE AND M/S MERI FOOD PRODUCTS; (B) APPLICATION DATED 21 ST FEBRUARY 1981 MADE TO INDIAN OVERSEAS BANK BANDRA BOMBAY FOR OPENING THE L.C. ; (C) COPY OF THE L.C. DATED 18 TH MARCH 1981 OPENED BY THE SAID INDIAN OVERSEAS BANK; (D) COPY OF THE INVOICE DATED 26 TH MAY 1981 WITH REGARD TO SHIPMENT OF THE MATERIAL; (E) COPIES OF THE LETTERS DATED 28 TH JULY 1981 AND 30 TH JULY 1981 ADDRESSED TO THE INSPECTOR OCTROI DEPARTMENT BOMB AY INFORMING HIM THAT THE SALE OF THE IMPORTED GOODS H AS BEEN 8 MADE ON HIGH SEAS BASIS AND CLAIMING THE CLEARANCE OF THE GOODS WITHOUT PAYMENT OF THE OCTROI. (F) A COPY OF THE BILL DATED 1 ST AUGUST 1981 FROM THE CLEARING AGENT M/S JOHN T. GONSALVES & SONS TO THE EFFECT THAT THE SAID SHIPMENT HAD BEEN CLEARED ON THE ACCOUNT OF M/ S MERI FOOD PRODUCTS. THE FINDING OF THE LEARNED CIT(APPEALS) ON THIS ARE IN PARAGRAPHS 21 TO 27 OF HIS ORDER THE LEARNED CIT(APPEALS) CON CLUDED THAT ALL THESE DOCUMENTS WERE IN THE NATURE OF ADDITIONAL EV IDENCE AND THEREFORE DECLINED TO ADMIT THE SAME IN ACCORDANCE WITH RULE 46A OF THE INCOME TAX RULES. THE LEARNED CIT(APPEALS) F URTHER POSED HIMSELF WITH A QUESTION AS TO WHETHER THE ASSESSING OFFICER HAS CARRIED OUT THE DIRECTIONS GIVEN BY HIS PREDECESSOR S WHILE FRAMING THE ASSESSMENT ORDERS. THE FINDINGS OF THE CIT(APPE ALS) WHICH WOULD BE RELEVANT ARE IN PARAGRAPHS 28 AND 29 OF H IS ORDER. THE SAME ARE REPRODUCED AS UNDER FOR THE PURPOSE OF COM PLETING THE RECORDS:- 28. THE NEXT MATTER TO BE EXAMINED IS WHETHER THE ASSESSING OFFICER HAS NOT CARRIED OUT THE DIRECTION S GIVEN BY MY PREDECESSORS WHILE FRAMING THE ASSESSMENT ORDER. THE FIRST DIRECTION IN THIS REGARD WAS THAT THE ASSESSI NG OFFICER WOULD SUMMON THE PARTY ON WHOSE INSTRUCTIONS L.C. W AS OPENED AND TO WHOM THE GOODS WERE SOLD. THE APPELLA NT HAD STATED BEFORE THE ASSESSING OFFICER THAT THE L. C. HAD BEEN OPENED ON BEHALF OF M/S MERI FOOD PRODUCTS ON INSTRUCTIONS FROM SHRI SUNARMAL SOLANKI. I FIND FRO M THE ASSESSMENT ORDER OF THE ASSESSING OFFICER FOR THE A .Y. 85- 86 THAT HE MADE EVERY POSSIBLE EFFORTS TO TRACE OUT SHRI SUNBARMAL SOLANKI AND HE ALSO EXAMINED HIM ON OATH. SHRI SUNARMAL SOLANKI STATED BEFORE THE ASSESSING OFFICE R IN CLEAR TERMS THAT HE HAD NOTHING TO DO WITH THE TRAN SACTIONS MADE BY THE APPELLANT OR BY THE CONCERNS OWNED BY T HE APPELLANT. THE APPELLANT NEVER APPEARED BEFORE THE ASSESSING OFFICER TO CROSS-EXAMINE SHRI SUNARMAL SO LANKI AND IN FACT HE DID EVERYTHING TO AVOID HIM. THE ASS ESSING OFFICER ALSO CONFRONTED THE APPELLANT WITH THE SUBS TANCE OF THE STATEMENT OF SHRI SUNARMAL SOLANKI AND HAD GIVE N AMPLE OPPORTUNITY TO OFFER HIS COMMENTS ON THE STAT EMENT OF SHRI SUNARMAL SOLANKI. THE APPELLANT HAD STATED THAT THE L.C. WAS OPENED ON BEHALF OF M/S HARI FOOD PRODUCTS AND THEREFORE THE BURDEN WAS ON THE APPELLANT TO PROVE THIS STATEMENT. THE APPELLANT COULD NOT EVEN FILE A CONF IRMATION AND NO EVIDENCE WAS PRODUCED BY THE APPELLANT TO SH OW THAT THE L.C. WAS OPENED ON BEHALF OF M/S MERI FOOD 9 PRODUCTS. THUS I HOLD THAT THE ASSESSING OFFICER H AS CARRIED OUT THE DIRECTIONS GIVEN BY MY PREDECESSORS REGARDI NG INVESTIGATION IN THE MATTER OF OPENING OF L.C. THE OTHER DIRECTION OF MY PREDECESSOR WAS TO MAKE ENQUIRIES F ROM THE CUSTOMS DEPARTMENT REGARDING PAYMENT OF CUSTOMS DUTY ETC. IN THIS CONNECTION ALSO THE ASSESSING OFF ICER IN HIS ASSESSMENT ORDER FOR THE A.Y. 85-86 IN PAR 13 H AS MENTIONED AS UNDER : INQUIRIES HAVE BEEN MADE WITH THE CUSTOMS DEPARTMENT AND IT HAS BEEN REPORTED BY THE CIRCLE INSPECTOR THAT REGARDING NAME AND ADDRESS OF THE PERSONS WHO WAS THE ACTUAL USER ON WHOSE BEHALF THE CLEARING AGENT GOT THE GOODS CLEARED WHO HAD MADE THE PAYMENT OF CUSTOMS DUTY AND WHO HAD ACTUALLY GET THE DELIVERY OF GOODS IT IS REPORTED THAT THE INFORMATION COULD NOT BE AVAILABLE SINCE CUSTOM S DEPARTMENT REQUIRES COMPLETE DETAILS OF BILL OF ENT RY CASH NO. & DATE WHICH HAD NOT BEEN FURNISHED BY THE ASSESSEE SINCE IT WAS IN HIS POSSESSION ONLY. THUS IT CAN BE SEEN THAT INQUIRIES AS FAR AS POSSI BLE HAD BEEN MADE IN THE LIGHT OF THE DIRECTION CONTAIN ED IN THE TWO APPELLATE ORDERS QUOTED ABOVE. 29. THUS IT IS VERY CLEAR THAT THE ASSESSING OFFICE R TRIED TO MAKE ENQUIRIES EVEN FROM THE CUSTOMS DEPARTMENT TO THE BEST OF HIS CAPACITY BUT NO FACTS COULD BE GATHERED FROM THE CUSTOMS DEPARTMENT BECAUSE THE APPELLANT FAILED TO GIVEN THE NECESSARY DETAILS WHICH WERE IN HIS POSSESSION. THEREFORE I HOLD THAT THE ASSESSING OFFICER CARRIE D OUT ALL THE DIRECTIONS OF MY PREDECESSORS WHILE FRAMING THE PRESENT ASSESSMENT ORDER AND THE ASSESSMENT ORDER CANNOT BE FAULTED ON THIS COUNT. THEN THE CIT(APPEALS) DEALS WITH THE MERITS OF THE ADDITION AND UPHOLD THE ORDER OF THE ASSESSING OFFICER. THE ASSE SSEE IS AGGRIEVED. 2.1 AS REGARDS THE OTHER YEARS THE FACTS ARE MORE OR LESS IDENTICAL TO THE FACTS FOR THE ASSESSMENT YEAR 1981 -82. HOWEVER IN THE OTHER YEARS THE COMMON CONCLUSION OF THE ASS ESSING OFFICER WAS THAT THE ASSESSEE OPENED THE L.CS. IN T HE BENAMI NAMES BY DEPOSITING UNACCOUNTED MONEY BY WAY OF PAY ORDERS FROM FICTITIOUS PARTIES. THE ASSESSEE HAD ALSO FAIL ED TO ADDUCE ANY EVIDENCE THAT THE CUSTOMS DUTY FOR RELEASE OF T HESE GOODS WAS PAID BY OTHERS AND THAT THE DELIVERY OF THE GOO DS WAS TAKEN 10 BY HIM BY PAYING THE CUSTOMS DUTY AND THEREFORE T HE AMOUNT OF CUSTOMS DUTY AND CLEARING CHARGES PAID ALSO REPRESE NT UNACCOUNTED MONEY OF THE ASSESSEE. APART FROM THIS IT WAS FURTHER HELD THAT THE GOODS IMPORTED HAVE BEEN SOLD IN THE OPEN MARKET ON HIGH PREMIUM AND CERTAIN ESTIMATION OF TH E GROSS PROFIT WAS MADE. THIS IS HOW THE HUGE ADDITIONS CAME TO BE MADE IN ALL THE OTHER ASSESSMENT YEARS AS WELL. IN THE HANDS OF THE CIT(APPELS) IN THE OTHER YEARS THE ADDITION IN RE SPECT OF THE UNEXPLAINED INVESTMENT UTILIZED FOR PAYING THE CUST OMS DUTY WAS DELETED. THE REVENUES APPEALS ARISE OUT OF THIS AC TION OF THE CIT(APPEALS). THE ASSESSEES APPEALS RELATE TO THE ADDITIONS CONFIRMED. THEREAFTER AT PAGE 11 THE TRIBUNAL OBSERVED AS FOLL OWS : THE CONTENTION OF THE ASSESSEE THAT ALL THESE DOC UMENTS WERE BEFORE THE FIRST ASSESSING OFFICER MR. K.M. LA L APPEARS TO BE CORRECT. AT LEAST THERE IS NO CONTROVERSY ON THIS F ROM THE SIDE OF THE DEPARTMENT. IN OUR VIEW THEREFORE THE COMMISSI ONER OF INCOME TAX (APPEAL) WAS NOT JUSTIFIED IN REJECTING THE MATERIAL WHICH HAW GOT BEARING FOR DECIDING THE ISSUE BEFORE HIM AS FRESH EVIDENCE. 7. THEREAFTER THE TRIBUNAL OBSERVED AS FOLLOWS : IN THE ASSESSMENT YEAR 1981-82 THE CIT(APPEALS) HAS FOUND THAT THE ASSESSMENT WAS FRAMED IN A HURRY WIT HOUT ALLOWING PROPER OPPORTUNITY TO THE ASSESSEE TO EXPLAIN HIS P OSITION AND WITHOUT APPRECIATING THE EXAC6 NATURE OF THE BUSINE SS CONDUCTED BY THE ASSESSEE. THE ASSESSING OFFICER WAS DIRECTED TO ISSUE SUMMONS TO ALL THE PARTIES ON WHOSE INSTRUCTIONS L. CS. WERE OPENED AND TO WHOM THE GOODS WERE SOLD WITH A FURTH ER DIRECTION THAT THE ASSESSING OFFICER MAY DEPUTE HIS INSPECTOR TO THE CUSTOMS DEPARTMENT FOR ASCERTAINING AS TO WHO WAS T HE ACTUAL USER ON WHOSE BEHALF THE CLEARING AGENT GOT THE GOO DS CLEARED WHO HAD PAID THE CUSTOMS DUTY AND WHO HAD ACTUALLY GOT THE DELIVERY OF THE GOODS. THESE WERE THE DIRECTIONS BY THE FIRST ORDER OF THE CIT(APPEALS) (SHRI R.K. BALI). WHEN THE MATT ERS CAME ON SECOND ROUND THE CIT(A) FOUND THAT SUFFICIENT ENQU IRIES WERE NOT CONDUCTED BEFORE PASSING THE IMPUGNED ORDERS AND AL L THE DIRECTIONS OF HIS PREDECESSOR WERE NOT CARRIED OUT AND THE ASSESSMENT WAS SET ASIDE FOR CARRYING OUT THOSE DIR ECTIONS BY THE CIT(APPEAL) (SHRI G.P. PRABHU). ON GOING THROUGH TH E ORDERS OF THE ASSESSING OFFICER FOR ALL THESE YEARS WE ARE N OT CONVINCED THAT THE ASSESSING OFFICER HAS CARRIED OUT ALL THE DIRECTIONS OF THE TWO COMMISSIONERS OF INCOME-TAX (APPEALS) IN FRAMIN G THE 11 IMPUGNED ASSESSMENTS. ALTHOUGH THE ASSESSING OFFICE R EXAMINED SUNARMAL SOLANKI NO OPPORTUNITY WAS PROVI DED TO THE ASSESSEE TO CROSS EXAMINE RESULTING IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. IT MUST BE BORNE IN MIND THAT THE DEPARTMENT HAS ACCEPTED THE EARLIER TWO ORDERS OF THE CIT(APPEALS) . JUDICIAL DISCIPLINE REQUIRES THAT THE AUTHORITIES FRAMING TH E ASSESSMENTS MUST FOLLOW THE DIRECTIONS OF THE APPELLATE AUTHORI TIES. THEREAFTER IT SET ASIDE THE ORDERS TO THE FILE OF THE AO FOR FRESH ADJUDICATION AND TO COMPLY WITH THE DIRECTIONS OF T HE CIT(APPEALS) IN THE FIRST TWO APPELLATE ORDERS AND ALSO DIRECTED THE AS SESSEE TO IMMEDIATELY FURNISH THE COMPLETE DETAILS OF BILLS OF ENTRY CAS H NO. AND DATE AND SUCH OTHER RELEVANT DETAILS WHICH MAY BE REQUIRED BY THE AO IN CONNECTION WITH THE ENQUIRY. THE ASSESSEE WAS DIRECTED TO EXTE ND ALL COOPERATION. THEREAFTER THE FOURTH ASSESSMENT ORDER HAS BEEN PAS SED WHICH IS THE IMPUGNED ASSESSMENT ORDER BEFORE US. HERE AGAIN THE AO REPEATED THE EARLIER ADDITIONS AND ALLEGED THAT THE ASSESSEE HAD NOT COOPERATED BY FURNISHING NECESSARY DETAILS. HE FURTHER SUBMITTED THAT ON ENQUIRY THE CUSTOMS DEPARTMENT HAS MENTIONED THAT THIS IS A VER Y OLD MATTER PERTAINING TO FINANCIAL YEAR 1980-81 TO 1984-85 AND THE DETAILS OF WHICH ARE NOT READILY AVAILABLE. THUS HE REPEATED THE ADD ITIONS. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FI RST APPELLATE AUTHORITY WITHOUT SUCCESS. FURTHER AGGRIEVED THE ASSESSEE IS BEFORE US ON THE FOLLOWING GROUNDS : 1(A) ON THE FACTS AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITIONS MADE BY THE ASSESSING OFFICER WITHOUT CONSIDERING ANY ENQUIRY AND WITHOUT BRINGING ANY MATERIAL/EVIDENCE ON RECORD. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER HE OUGHT NOT TO HAVE CONFIRMED THE ADDITIONS MADE BY THE ASSESSING OFFIC ER. 1(B) ON THE FACTS AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPE CT OF THE NON- EXISTING L/CS. CUSTOM DUTY AND PROFIT ON THE SALE O F GOODS EVEN THOUGH THE SAME HAS BEEN BROUGHT TO ITS NOTICE OF THE ASSE SSING OFFICER AND THE CIT(A). UNDER THE FACTS AND CIRCUMSTANCES OF TH E MATTER HE OUGHT NOT TO HAVE CONFIRMED THE SAID ADDITION. 12 2. ON THE FACTS AND IN LAW THE LEARNED CIT(A) ERRE D IN DISMISSING THE APPEAL OF THE APPELLANT WITHOUT CONSIDERING THE VAR IOUS ORAL/WRITTEN SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). UNDER T HE FACTS AND CIRCUMSTANCES OF THE MATTER HE OUGHT NOT TO HAVE D ISMISSED THE APPEAL OF THE APPELLANT. 3. ON THE FACTS AND IN LAW THE LEARNED CIT(A) FAIL ED TO APPRECIATE THAT SO FAR AS THE ADDITION TO THE TOTAL INCOME ON ACCOU NT OF OPENING OF L/C PAYMENT OF CUSTOMS DUTY AND PROFIT ON SALE OF GOODS IS CONCERNED THE SAME HAS BEEN MADE BY THE ASSESSING OFFICER WITHOUT BRINGING ANY EVID4ENCE ON RECORD. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER HE OUGHT NOT TO HAVE C ONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F THE AFORESAID ACTIVITIES WHICH DOES NOT BELONG TO THE APPELLANT. 4. ON FACTS AND IN LAW THE LEARNED CIT(A) FAILED T O APPRECIATE THAT THE ONUS TO PROVE THAT THE APPELLANT WAS THE BENEFICIAR Y OF THE L/CS OPENING AND GOODS IMPORTED HAS NOT BEEN DISCHARGED BY THE ASSESSING OFFICER AND ANY ORDER BASED THEREON IS BA D-IN-LAW AND WHICH OUGHT TO HAVE BEEN QUASHED. 5. ON FACTS AND IN LAW THE LEARNED CIT(A) FAILED T O APPRECIATE THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER CO NSISTING OF VARIOUS ADDITIONS MADE TO THE TOTAL INCOME I TOTA L VIOLATION OF PRINCIPLES OF NATURAL JUSTICE SUCH AS BY NOT GIVING THE COPIES OF THE STATEMENTS RECORDED BY THE ASSESSING OFFICER/OTHER OFFICERS OF I.T. DEPARTMENT INCLUDING THE STATEMENTS OF THE APPELLAN T HIMSELF; AND NOT ALLOWING THE APPELLANT TO EXAMINE/CROSS-EXAMINE THE PERSONS WHOSE STATEMENTS HAVE BEEN RECORDED BY THE ASSESSIN G OFFICER/OTHER OFFICERS OF I.T. DEPARTMENT. UNDER TH E FACTS AND CIRCUMSTANCES OF THE MATTER THE VARIOUS ADDITIONS MADE IN THE TOTAL INCOME OF THE APPELLANT ARE NOT SUSTAINABLE IN THE EYES OF LAW. 6. ON THE FACTS AND IN LAW THE LEARNED CIT(A) FAIL ED TO APPRECIATE THAT THE ASSESSMENT ORDER WAS PASSED BY THE ASSESSING OF FICER WITHOUT FOLLOWING THE DIRECTIONS GIVEN BY THE LEARNED CIT(A )S AND HONBLE ITAT HENCE ORDER PASSED WITHOUT FOLLOWING THE DIRE CTIONS OF THE HIGHER AUTHORITIES IS BAD-IN-LAW AND OUGHT TO HAVE BEEN QUASHED. 7. THE APPELLANT PRAYS THAT THE APPELLANT SHOULD BE AWARDED SUITABLE COST BY THE HONBLE I.T.A.T. AS PER THE PROVISIONS OF SECTION 254(2)(B) AS THE APPELLANT HAS BEEN PUSHED INTO END LESS LITIGATION BY THE DEPARTMENT. 8. THE LD. SENIOR COUNSEL OF THE ASSESSEE SUBMITTE D THAT THE AO HAS NOT CARRIED OUT THE DIRECTIONS OF THE I.T.A. T. DESPITE THE SPECIFIC ORDERS OF THE TRIBUNAL TO DO SO. HE VEHEMENTLY CONT ENDED THAT THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF IMPORTI NG GOODS FROM ABROAD AND THE ASSUMPTION OF THE AO IS TOTALLY INCO RRECT. HE SUBMITTED 13 THAT THE OBSERVATIONS AND ASSUMPTIONS MADE BY THE A O IN THE FIRST ASSESSMENT ORDER ON 19-2-1996 HAVE BEEN REPEATED I N ALL THE SUBSEQUENT ORDERS DESPITE THE FACT THAT THAT THE A PPELLATE AUTHORITIES REPEATEDLY REFUSED TO UPHOLD THESE ASSUMPTIONS AND OBSERVATIONS AND HAD SET ASIDE THE MATTER FOR FURTHER INVESTIGATION. HE SUBMITTED THAT THE ASSESSEE ALWAYS BEEN PLEADING THAT HE WAS ONLY REN DERING SERVICES TO THE ACTUAL USERS OF THE IMPORTED RAW MATERIALS AND IT WAS THESE IMPORTERS OR THEIR AGENTS WHO USED TO APPROACH THE ASSESSEE TO OPEN THE L.CS. EXPLAINING THE MODUS OPERANDI MR. Y.P. T RIVEDI SUBMITTED THAT THE ASSESSEE WAS OPENING L.CS. BY DEPOSITING M ARGIN MONEYS OF 10% TO 15% AND THE BANKS AFTER DEPOSIT OF THE BALAN CE AMOUNT WERE HANDING OVER THE SHIPPING DOCUMENTS. HE SUBMITTED T HAT IT WAS ONLY THE ACTUAL IMPORTERS WHO WERE DEPOSITING THE AMOUNTS I NTO THE BANK AND THE ASSESSEE WAS ONLY CHARGING SERVICE CHARGES OF C OMMISSION WHICH USED TO VARY BETWEEN 3% TO 5% OF THE L.CS. IT WAS S UBMITTED THAT IT WAS NOT NECESSARY FOR THE ASSESSEE TO KEEP COPIES OF TH E DOCUMENTS BECAUSE THE ASSESSEE WAS NOT THE ACTUAL IMPORTER OF GOODS. HE SUBMITTED THAT THE ASSESSEE WAS NEITHER ENGAGED IN MANUFACTURING ACTIVITY NOR IN TRADING ACTIVITY. HE SUBMITTED THAT IF THE ASSESSEE CARRIED OUT ANY SALE TRANSACTION IT WAS ONLY ON HIGH SEAS SALE BASIS I.E. SALE THROUGH TRANSFER OF DOCUMENTS AND NOT BY ACTUAL DEL IVERY OF GOODS. HE POINTED OUT THAT THE FACTUAL POSITION IS THAT THE A SSESSEE DOES NOT HAVE FACTORY PREMISES OR GODOWN. HE SUBMITTED THAT IT IS PERTINENT TO NOTE THAT DURING THE SEARCH OPERATION U/S 132 OF THE ACT ON 5 -2-1985 THE AUTHORIZED OFFICER DID NOT FIND ANY FACTORY PREMIS ES OR GODOWN OR STOCK- IN-TRADE WITH THE ASSESSEE. HE ALSO POINTED OUT THA T ALL THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE VARIOUS CONCERNS UN DER WHOSE NAME THE ASSESSEE USED TO OPEN L.CS. WITH THE BANKS WER E LYING WITH THE DEPARTMENT AND A PERUSAL OF BOOKS WOULD CLEARLY DEM ONSTRATE THAT THE ASSESSEE WAS ONLY A BANKING AGENT WHO USED TO ASSIS T THE ACTUAL USERS IN IMPORTING THE RAW MATERIAL FROM ABROAD BY OFFERI NG ITS SERVICES IN THE 14 FORM OF OPENING OF L.CS. HE POINTED OUT THAT IF AN Y NON USER OF A RAW MATERIAL IMPORTED SUCH RAW MATERIAL FROM ABROAD T HE CUSTOMS DEPARTMENT WOULD NOT HAVE GIVEN DELIVERY OF SUCH MA TERIAL TO NON USERS. HE PLEADED THAT THERE IS NO JUSTIFICATION IN THE AO ASSUMING THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF IMPORT OF GOODS FROM ABROAD ON HIS OWN BEHALF AND HAD TAKEN DELIVERY OF THE GOODS AFTER PAYING THE CUSTOMS DUTY AND THEN SOLD THE SAID GOOD S IN THE OPEN MARKET AT A HIGH PREMIUM BECAUSE THERE IS NO DOCUM ENTARY EVIDENCE IN SUPPORT OF THE ASSUMPTION. HE VEHEMENTLY CONTEND ED THAT THE ADDITION HAS BEEN MADE WITHOUT ANY EVIDENCE. HE FUR THER POINTED OUT THAT DURING THE COURSE OF SEARCH NO EVIDENCE OF HU GE CASH OR ASSET OR DOCUMENTS WERE FOUND TO SUBSTANTIATE THE CLAIM OF T HE REVENUE THAT THE ASSESSEE HAD ACTUALLY IMPORTED THE GOODS ON ITS OWN BEHALF AND HAD EARNED CRORES OF RUPEES. HE CONTENDS THAT ALL RECOR DS INCLUDING COPIES OF BILLS OF ENTRIES ETC. WERE READILY AVAILABLE WIT H THE RELEVANT BRANCH OF BANK AND THE CUSTOMS DEPARTMENT AND THE AO HAS NOT MADE ANY ENQUIRY AS TO WHO IS THE ACTUAL IMPORTER OF THE GOO DS. HE POINTED OUT THAT NO ENQUIRY HAS BEEN MADE EVEN FROM THE CLEARIN G AGENT. HE POINTED OUT THAT THE FIRST APPELLATE AUTHORITY IN H IS ORDER DATED 19-2-1986 SPECIFICALLY HELD THAT THE ITO COULD HAVE VERIFIED WHETHER THE GOODS HAVE ACTUALLY BEEN SOLD BY THE ASSESSEE TO M/S MERI FOOD PRODUCTS BY ISSUING SUMMONS TO THEM AND ALSO TO FIND OUT AS TO WHO PAID THE CUSTOMS DUTY AND THE CLEARING CHARGES ETC. HE CONTE NDED THAT THE AO HAS NOT FOLLOWED ANY OF THE DIRECTIONS NOR MADE ANY ENQUIRIES AND IN FACT TOOK UP THE ASSESSMENT AT THE FAG END OF THE A SSESSMENT YEAR. HE CONTENDED THAT THOUGH THE ASSESSEE FURNISHED VOLUME S OF EVIDENCE AND DOCUMENTS THE AO HAD NOT CARED TO VERIFY ANY OF TH E DOCUMENTS FILED BY THE ASSESSEE. HE SUBMITTED THAT THE AO WHO HAS M ADE THE PRESENT ORDER NOW IN APPEAL HAS NOT BOTHERED TO WRITE EVEN A SINGLE SENTENCE ABOUT 100S OF DOCUMENTS FILED BEFORE HIM. HE SUBMIT TED THAT THE AO WAS IN EARLIER PROCEEDINGS CALLED UPON TO CLARIFY T HE DEPARTMENTAL 15 POSITION IN THIS REGARD BY THE ITAT AND HE HAD AD MITTED IN WRITING THAT ALL THE DIRECTIONS HAD NOT BEEN CARRIED OUT. IN FAC T IN THE WRITTEN SUBMISSIONS SENT THROUGH HIS RANGE D.C. THE AO HAD SUBMITTED THAT IT MAY BE IN THE INTEREST OF REVENUE TO SET ASIDE THE ASSESSMENTS FOR VERIFICATION. HE SUBMITTED THAT THE ASSESSEE HAD SU BMITTED ALL POSSIBLE INFORMATION THAT WAS IN HIS POSSESSION AND IT WAS U NFAIR ON THE PART OF THE AO IN ASKING FOR DETAILS AND INFORMATION WHICH WERE NOT IN HIS POSSESSION AND WHICH HAD TO BE OBTAINED FROM VARIOU S AGENCIES. HE POINTED OUT THAT THE AO HAS MENTIONED IN HIS ORDER THAT THE CUSTOMS DEPARTMENT HAS STATED THAT THESE WERE 20 YEARS OLD RECORDS AND THE SAME CANNOT BE TRACED. HE SUBMITS THAT THE BURDEN O F PROOF LIES ON THE DEPARTMENT AS IT IS THE DEPARTMENT WHICH ALLEGES TH AT THE ASSESSEE HAD IMPORTED CERTAIN GOODS. HE POINTED OUT THAT EXCEPT FOR STATING THAT THE ASSESSEE HAD NOT PROVIDED CERTAIN DETAILS THE AO H AS NOT COLLECTED ANY EVIDENCE TO PROVE HIS ALLEGATION THAT THE ASSESSEE WAS ACTUALLY AN IMPORTER OF GOODS. HE SUMMARIZED HIS ARGUMENTS AS F OLLOWS : A) THE AO HAS NOT EXAMINED ANY EVIDENCE FURNISHED B EFORE HIM AS WELL AS BEFORE THE HIGHER AUTHORITIES WHICH WERE ADMITTED AND SENT BACK TO HIM FOR FRESH ADJUDICATIO N. B) THE AO HAS NOT DISCHARGED THE ONUS OF PROVING TH AT THE APPARENT IS NOT REAL. HE RELIED ON THE DECISION OF SUPREME COURT IN THE CASE OF CIT VS. DAULATRAM RAWATMULL 87 ITR 349 (SC). C) THE AO DISREGARDED THE DIRECTIONS OF THE CIT(APP EALS) AND THE TRIBUNAL ON THE REMAND AND HENCE THE AMOUNT IS BAD IN LAW. HE RELIED ON THE FOLLOWING CASE LAWS : CAMELLA INDUSTRIES LTD. VS. STATE OF U.P. 108 ITR 3 45 (ALL.) TOBACCO MANUFACTURERS (INDIA) LTD. VS. COMMISSIONER OF SALES TAX AIR 1961 SC 402. D) THE AO OUGHT TO HAVE ISSUED SUMMONS TO THE PARTI ES ON WHOSE BEHALF THE ASSESSED OPENED L.CS. HE RELIED ON THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF NAT HURAM PREMCHAND VS. CIT 49 ITR 561 (ALL.) AND ANIS AHMED VS. CIT 277 ITR 270 (ALL.) 16 E) THAT THE AO RELIED ON INFORMATION COLLECTED FROM BANK WITHOUT FURNISHING COPY THEREOF TO THE ASSESSEE AND HENCE THE ORDER IS VITIATED. HE RELIED ON THE DECISION OF SUPREME COURT IN THE CASE OF KISHENCHAND CHELLARM VS. CIT 1 25 ITR 713 (SC) AND BHOPAL SUGAR INDUSTRIES LTD. VS. ITO 4 0 ITR 618 (SC). F) THAT IN THE ACCOUNTS PREPARED BY THE ASSESSEE H E IS ONLY SHOWN AS A BROKER AND COMMISSION HAS BEEN SHOWN AS HIS INCOME RECEIVED FROM THE PRINCIPALS AND THERE IS A PRESUMPTION OF CORRECTNESS OF ACCOUNTS. HE RELIED O N THE DECISION OF TOLARAM DAGA VS. CIT 59 ITR 632. G) THAT THE RECORDED STATEMENTS HAVE NOT BEEN GIVEN AND REQUEST STATUS TO THE AO FOR SUMMONING PARTIES CUS TOMS AUTHORITIES ETC. NOT ACCEPTED. H) DURING THE COURSE OF SEARCH NO VALUABLE ASSET WA S FOUND AND AS NO CORROBORATIVE EVIDENCE IN THE FORM OF ASSETS/VALUABLES HAVE BEEN FOUND THE PRESUMPTION I S THAT THE ASSESSEE HAS NOT EARNED THE STATED INCOME. I) AFTER THE LAPSE OF 25 YEARS THE ASSESSEE SHOULD NOT BE CALLED TO AGAIN EXPLAIN THE ENTIRE TRANSACTION IN R ESPECT OF WHICH THE DEPARTMENT HAS NOT MADE ANY EFFORTS. HE R ELIED ON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF HASTIMAL VS. CIT 49 ITR 273 (MAD.). J) THAT CLIENTS PURCHASES CANNOT BE TAKEN AS THAT OF THE AGENT. 9. ACCORDINGLY THE LEARNED COUNSEL FOR THE ASSESS EE PRAYED THAT AS IT MAKES NO SENSE TO SET ASIDE THE MATTER AFTER SUCH A LONG TIME AS THE AO FAILED TO CARRY OUT THE DIRECTIONS OF THE APPELLATE AUTHORITIES THE ASSESSMENTS MAY BE QUASHED. 10. THE LEARNED DR MRS. VANDANA SAGAR ON THE OTHE R HAND SUBMITTED THAT THE ASSESSEE DURING THE COURSE OF SE ARCH SUBMITTED THAT HE IS CARRYING ON BUSINESS IN THE NAME OF 14 DIFFER ENT CONCERNS THOUGH THESE CONCERNS WERE IN DIFFERENT NAMES OF FAMILY ME MBERS AND RELATIVES. SHE POINTED OUT PARA 2.3 OF THE CIT(APPE ALS) ORDER AND SUBMITTED THAT THE ASSESSEE HAS ADMITTED THAT HE IS THE ACTUAL OWNER OF ALL THESE CONCERNS AND THE RELATIVES AND FAMILY MEM BERS ARE MERE NAME LENDERS. SHE RELIED HEAVILY ON THE ORDER OF TH E FIRST APPELLATE AUTHORITY AND SUBMITTED THAT THE BURDEN OF PROOF I S ON THE ASSESSEE. SHE ARGUED THAT THE ASSESSEE HAD CLAIMED THAT HE MA DE HIGH SEAS 17 SALES AND IT WAS THOSE PARTIES WHICH HAVE PURCHASED GOODS IN THE HIGH SEAS THAT ACTUALLY IMPORTED THE GOODS BY PAYING NOT ONLY THE CUSTOMS DUTY BUT ALSO THE CHARGES OF THE CLEARING AGENTS AS WELL AS THE MONEYS REQUIRED FOR CLEARING THE BANK L.CS. AND THEREAFTER OBTAINING DELIVERY OF THE GOODS. SHE POINTED OUT THAT WITHOUT ANY DETAILS THE AO COULD NOT DO ANYTHING AND WAS NOT IN A POSITION TO CARRY OUT THE DIRECTIONS OF THE APPELLATE AUTHORITIES. SHE SUBMITTED THAT IN THE CA SE OF ONE OR TWO PARTIES THEY HAVE BEEN EXAMINED BY THE AO AND THEY HAVE DEPOSED AGAINST THE ASSESSEE. THE ASSESSEE HAS NOT CROSSED EXAMINED THESE WITNESSES NOR FURNISHED ANY DOCUMENTARY PROOF THAT THE STATEMENTS OF THESE TWO WITNESSES WERE WRONG. ON THE ALLEGATION O F THE ASSESSEE THAT THE AO HAS NOT GRANTED SUFFICIENT OPPORTUNITY AND H AS NOT TAKEN UP THE CASE FOR HEARING EXCEPT AT THE FAG END OF 2001 THE LEARNED DR SUBMITTED THAT SHE WOULD FILE A STATEMENT OF FACTS AFTER VERIFYING THE SAME FROM THE AO. THOUGH THE CASE WAS FIRST TAKEN A S HEARD AS THE LEARNED DR HAD NOT FILED THE STATEMENT OF FACTS AS WELL AS THE OTHER DETAILS AS TO THE DATES OF HEARING THE BENCH RELEA SED THE MATTER FOR FRESH HEARING FOR GIVING THE DEPARTMENT AN OPPORTUN ITY TO FILE THE DOCUMENTS AS IT DESIRED. ON 21 ST JANUARY 2010 THE SENIOR AUTHORISED REPRESENTATIVE OF THE REVENUE SUBMITTED COPIES OF T HE ORDER-SHEET ENTRIES AS OBTAINED BY HER FROM THE INCOME-TAX OFFI CER. DURING THE COURSE OF HEARING SHE SUBMITTED THAT FROM THE COPY OF THE ORDER-SHEET ENTRIES IT IS CLEAR THAT THE AO HAD GRANTED ONLY A COUPLE OF HEARINGS TO THE ASSESSEE. SHE SUBMITTED THAT THOUGH SHE ARGUES OTHERWISE THE RECORD SPEAKS FOR ITSELF AND UNDER THESE CIRCUMSTAN CES THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO FOR FRESH ADJUDI CATION. 11. RIVAL CONTENTIONS HEARD. WE HAVE PERUSED THE P APERS ON RECORD ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMS TANCES OF THE CASE 18 AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDER S OF THE AUTHORITIES BELOW AS WELL AS THE CASE LAWS CITED WE HOLD AS FO LLOWS. 12. THE B-BENCH OF THE TRIBUNAL IN FIRST ROUND OF APPELLATE PROCEEDINGS IN ITA NOS. 4886/BOM/95 TO 4890/BOM/95 AND IN ITA NO. 4466/BOM/95 4467/BOM/95 4929/BOM/95 AND 4930/MOM/ 95 ORDER DATED 1 ST JANUARY 1996 HAS DIRECTED THE AO TO FOLLOW THE D IRECTIONS GIVEN BY THE CIT(APPEALS) (SHRIG.P. PRABHU) AS WELL AS THE DIRECTIONS OF THE CIT(APPEALS) (SHRI R.K. BALI) AND COMPLETE THE ASSESSMENT. THE ASSESSEE WAS ALSO DIRECTED TO FURNISH THE NECESSARY EVIDENCES. THOUGH THE TRIBUNAL HAS SET ASIDE THE ASSESSMENT ON 01-01- 1996 THE AO STARTED REASSESSMENT PROCEEDINGS ONLY IN NOVEMBER/D ECEMBER 1997. THE ASSESSEE CLAIMS TO HAVE FURNISHED ALL THE DETAI LS AVAILABLE WITH HIM IN JUNE 1997 BEFORE THE AO THOUGH NO NOTICE WAS ISSUED TO HIM AS HE WANTED TO COOPERATE WITH THE ASSESSEE AND AS HE WAS ANTICIPATING A NOTICE. IT WAS CLAIMED THAT THE AO HAD NOT ACTED ON THESE DETAILS FOR 5 TO 6 MONTHS. AN ORDER OF ASSESSMENT WAS PASSED IN MARC H 1998.THIS ORDER WAS SET ASIDE BY THE CIT(APPEALS) VIDE HIS OR DER DATED 31-12- 1998. FROM 31-12-1998 THE AO HAS NOT STARTED ANY P ROCEEDINGS. ONLY ON 15-01-2001 HE ISSUED NOTICE U/S 143(1) AND 143(2 ) REQUIRING THE ASSESSEES PRESENCE ON 18-01-2001. ONLY THREE HEARI NGS WERE CARRIED OUT ON 18-01-2001 24-01-2001 AND 14-02-2001. THERE AFTER AS THE CASE WAS GETTING TIME BARRED ORDERS WERE PASSED ON 31-3 -2001. IN ALL THE APPELLATE ORDERS A REFERENCE HAS BEEN MADE TO THE NUMEROUS DOCUMENTS FILED BY THE ASSESSEE AS EVIDENCES AND TH E AO WAS DIRECTED SPECIFICALLY TO VERIFY THESE EVIDENCES. IN THE ASSE SSMENT ORDER NO REFERENCE WHATSOEVER HAS BEEN MADE TO ANY OF THE DO CUMENTS MENTIONED IN THE APPELLATE ORDERS. THE ASSESSEE EVE N CLAIMS THAT THE AO HAD RELIED ON THE STATEMENTS OF VARIOUS PARTIES I.E. SHRI MAHENDRA SHETH SHRI PREMJI J.JOSHI SHRI SUMERMAL SOLANKI A ND SHRI RAJENDRAKUMAR GUPTA AND THAT COPIES OF THE STATEMEN T RECORDED WAS 19 NOT GIVEN TO HIM. IT IS ALSO ALLEGED THAT THE ASSES SEE HAD NOT OPENED CERTAIN L.CS. AT ALL AND THAT HE HAD MADE ONLY CERT AIN APPLICATIONS FOR GRANT OF L.CS. AND THAT THE APPLICATIONS WERE NEVE R PROCESSED NOR L.CS. GRANTED AND EVEN IN SUCH CASES ADDITIONS WERE MADE. 13. THE AO IS OF THE OPINION THAT THE ASSESSEE HAS NOT FURNISHED THE DETAILS REQUIRED BY HIM AS PER THE DI RECTIONS OF THE ITAT AND THE SUBSEQUENT CIT(APPEALS) ORDER. HE CONCLUDE S THAT IT IS NOT POSSIBLE FOR HIM TO VERIFY THE GENUINENESS OF THE TRANSACTION. HE ALSO MAKES THE FACTUAL STATEMENTS THAT THE CUSTOMS DEPAR TMENT EXPRESSED ITS INABILITY TO FURNISH THE DETAILS. ON THESE FACT UAL MATRIX WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSMENT SHOULD BE SE T ASIDE TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. THE AO IS SPECIFICALLY DIRECTED TO ISSUE NOTICE TO THE ASSESS EE IMMEDIATELY ON RECEIPT OF THE TRIBUNAL ORDER AND NOT TO DRAG THE M ATTER TILL THE FAG END OF THE TIME BARRING PERIOD. HE SHALL TAKE INTO CONSIDE RATION EACH AND EVERY DOCUMENT FILED BY THE ASSESSEE AND CONDUCT INDEPEND ENT ENQUIRIES AND ARRIVE AT CONCLUSIONS ON THESE DOCUMENTS. IT IS WEL L SETTLED THAT THE PARTY WHICH ALLEGES THAT A PARTICULAR TRANSACTION I S A BENAMI TRANSACTION THE BURDEN LIES ON THAT PARTY TO PROVE THE SAME. FO R THIS PROPOSITION WE DRAW STRENGTH ON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF MADURA KNITTING COMPANY. VS. CIT 30 ITR 764 (MAD) AT PAGE 788. ON AN ANALYSIS OF THE TRANSACTIONS WE ARE OF THE HUMBLE OPINION THAT AS FAR AS THE MARGIN MONEY PAID INTO BANK FOR THE PURPOSES OF OBTAINING L.CS. IS CONCERNED IT IS FOR THE ASSESSE E TO PROVE THE SOURCE OF THIS MARGIN MONEY AS IT IS THE ASSESSEE WHO HAS OBTAINED THE LETTER OF CREDITS. IN CASE THE ASSESSEE DOES NOT PROVE THE SOURCE FOR THE MARGIN MONEY THE AO MAY CONSIDER MAKING AN ADDITIO N AS UNEXPLAINED MONEY. AS THESE ARE REPEATED TRANSACTIONS THE CLAI M OF THE ASSESSEE THAT THIS IS CIRCULATION OF THE SAME MONEYS CANNOT BE DENIED AND HENCE IN SUCH A SITUATION IT IS BUT NECESSARY FOR THE REV ENUE TO ASCERTAIN THE 20 PEAK OF SUCH INVESTMENT AND RESTRICT THE ADDITION T O THE PEAK. THE BURDEN WOULD BE ON THE ASSESSEE TO FURNISH NECESSAR Y DETAILS AS TO WHAT WOULD BE THE PEAK INVESTMENT IN MARGIN MONEY. AS FAR AS HIGH SEAS SALES IS CONCERNED IF THE ASSESSEE FURNISHES THE DOCUMENTS AS SUGGESTED BY THE APPELLATE AUTHORITIES DURING VARIO US EARLIER PROCEEDINGS THE AO SHALL CONDUCT NECESSARY ENQUIRI ES. IF THE BILL OF LADING HAS BEEN FILED BY THE ASSESSEE THE FACT OF IMPORT BY THE PARTY IN WHOSE NAME THE BILL OF LADING IS THERE IS TO BE AC CEPTED AS THE PARTY WHICH IMPORTED THE GOODS. THIS FACT SHOULD BE ACCE PTED. IN ALL SUCH CASES IT SHOULD BE TAKEN THAT THE L.CS. HAVE BEEN C LEARED BY THE IMPORTERS WHO PURCHASED THE GOODS IN HIGH SEAS AND NOT THE ASSESSEE. IN CASES WHERE THE JOINT NAMES OF ASSESSEE AND ANOT HER PARTY ARE INVOLVED THE ASSESSEE IS TO EXPLAIN THE SOURCE OF CLEARING L.CS. IN SUCH CASES ALSO ONLY THE PEAK HAS TO BE ADDED. IF IT IS THE CASE OF THE A.O. THAT THE PARTICULAR GOODS HAS BEEN IMPORTED BY THE ASSESSEE ONLY AND THE ASSESSEE HAD PAID THE CLEARING CHARGES AND THE CUSTOMS DUTY THEN WE DIRECT THE AO TO COLLECT THE COPY OF BILL OF LAD ING FROM THE BANKS OR OTHER SOURCES. IT IS FOR THE AO WHO ALLEGES IMPORT S TO PROVE WITH EVIDENCE THAT THE CUSTOMS DUTIES ETC. HAVE ACTUALLY BEEN PAID BY THE ASSESSEE. THE ASSESSEE CANNOT PROVE THE NEGATIVE. W HEN THE ASSESSEE CLAIMS THAT IT HAD NOT PAID THE CUSTOMS DU TY IT WOULD BE UNREALISTIC TO EXPECT THAT THE ASSESSEE SHOULD PROD UCE EVIDENCE THAT IT HAD NOT PAID CUSTOMS DUTY OR HAD NOT PAID THE CLEAR ING AGENTS. NO ONE CAN GIVE THE EVIDENCE OF THE NEGATIVE. ON THE ISSUE OF ADDITION MADE IN REGARD TO CLAIM OF HIGH SEAS SALES MADE BY THE ASSE SSEE THE UNDISPUTED FACT IS THAT THE ASSESSEE HAD RECEIVED C ERTAIN CONSIDERATION ON EFFECTING SALES IN THE HIGH SEAS OR IN THE ALTE RNATIVE THE SECOND POSSIBILITY IS THAT THE PARTY HAS PAID THE BALANCE AMOUNT TO THE BANK WHICH REQUIRED FOR CLEARING THE L.CS. DIRECTLY TO T HE BANK AND GOT DELIVERY OF THE GOODS OR OTHERWISE THE THIRD POSSIB ILITY IS THAT THE ASSESSEE SOLD THE GOODS AND FROM THE SALE PROCEEDS AND FROM HIS OWN 21 SOURCES HE CLEARED THE L.CS. I.E. THE DUES TO BANK . IN ANY EVENT CREDIT SHOULD BE GIVEN TO THE PROCEEDS FROM SALE OF GOODS. AMOUNT PAID TO BANK FROM SALE PROCEEDS CANNOT BE ADDED AS UNEXPLA INED. WHEN SALE PROCEEDS ARE USED FOR CLEARING AND CLOSING L.CS. IN OUR HUMBLE OPINION THE SOURCE OF THE L.C. SHOULD BE TAKEN AS EXPLAINED. ONLY IN CASES WHERE IT IS FOUND THAT THE ASSESSEE HAD INVES TED ITS OWN MONEY FOR CLEARING THE L.CS. THEN AN ADDITION CAN BE MAD E IN THE ASSESSEES HANDS AND IN SUCH CASES ALSO ONLY THE PEAK CAN BE A DDED. 14. EVEN OTHERWISE WE FIND THAT THE ADDITION IN Q UESTION HAS BEEN MADE U/S 69C AS IT IS THE REVENUES CASE THAT THE ASSESSEE HAS INCURRED EXPENDITURE ON CUSTOMS DUTY AND CLEARING H OUSE CHARGES PURCHASES ETC. AND HAS NOT ACCOUNTED FOR THE SAME. EVEN IF THIS IS TAKEN AS CORRECT POSITION OF FACT AS THE ASSESSMENT YEAR S INVOLVED ARE PRIOR TO INSERTION OF THE PROVISO TO SECTION 69C AN EQUAL AMOUNT OF EXPENDITURE HAS TO BE ALLOWED. THE NET RESULT WOULD BE NO ADDIT ION CAN REMAIN. THIS IS THE POSITION IN LAW. SIMILARLY WHEN SALES ARE BR OUGHT TO TAX CORRESPONDING PURCHASES HAVE TO BE ALLOWED AS A DED UCTION. THIS IS THE SETTLED POSITION OF LAW AND THE AO CANNOT DO OTHERW ISE. HE IS BOUND TO GIVE DEDUCTION OF THOSE AMOUNTS. UNDER THESE CIRCU MSTANCES WHAT CAN BE BROUGHT TO TAX IS ONLY THE PEAK INVESTMENT IN TH E BUSINESS AND THE NET PROFIT MARGINS AND WE DIRECT THE AO TO ASSESS A CCORDINGLY. THE ENTIRE TURNOVER CANNOT BE BROUGHT TO TAX. IF THE AS SESSEE HAS DECLARED A PARTICULAR GROSS PROFIT PERCENTAGE OR COMMISSION AS HE CALLS IT THE AO CANNOT SUBSTITUTE THE SAME WITHOUT ANY EVIDENCE. IF THE AO HAS THE EVIDENCE OF PURCHASE RATE/PRICE AND THE SALE RATE/P RICE HE MAY CONFRONT THE ASSESSEE WITH SUCH EVIDENCE AND THEN ONLY MAKE AN ADDITION. ASSESSMENTS SHALL BE FRAMED ON THE ABOVE LINES. THE AO IS DIRECTED ONLY TO MAKE ADDITION ON PEAK INVESTMENTS ONLY. THE AO SHALL ALSO CONSIDER THE CLAIM OF THE ASSESSEE THAT WHEN NO L.C . WHATSOEVER WAS OPENED OR SANCTIONED STILL AN ADDITION HAS BEEN MA DE DUE TO NON APPRECIATION OF FACTS. THE AO SHOULD VERIFY AS TO W HAT IS THE ACTUAL 22 FIGURE AND WHAT IS THE ACTUAL QUANTITY FOR WHICH TH E L.C. HAS BEEN OPENED AND RESTRICT HIS ENQUIRY TO SUCH L.CS. WHEN MERE APPLICATIONS HAVE BEEN MADE FOR GRANT OF L.CS. AND WHEN SUCH APP LICATIONS HAVE NOT BEEN ACTED UPON BY THE BANKS NO ADDITION CAN BE MA DE. 15. AS REGARDS THE SUBMISSION OF THE LEARNED COUNS EL FOR THE ASSESSEE THAT THE FAILURE OF THE AO TO CARRY OUT TH E DIRECTIONS OF THE APPELLATE AUTHORITIES WOULD RENDER THE ASSESSMENT B AD IN LAW WE FIND THAT THE APPELLATE AUTHORITY HAS ALSO DIRECTED THE ASSESSEE TO FURNISH CERTAIN INFORMATION AND THOUGH THE ASSESSEE CLAIMS TO HAVE FURNISHED THE INFORMATION THERE IS NO COMMENT BY THE AO ON T HE SAME AND UNDER THOSE CIRCUMSTANCES WE ARE UNABLE TO HOLD THAT THE ASSESSMENT IS BAD IN LAW AND HENCE THE SAME SHOULD BE QUASHED. WE ARE OF THE HUMBLE OPINION THAT ENDS OF JUSTICE WOULD BE SERVED IF TH E MATTER IS SET ASIDE TO THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LA W INSTEAD OF QUASHING THE ASSESSMENT ON THE GROUND THAT THE AO H AS NOT CARRIED OUT THE DIRECTIONS OF THE APPELLATE AUTHORITIES. THUS THIS PRAYER OF THE LEARNED COUNSEL FOR THE ASSESSEE IS REJECTED. 16. HENCE IN VIEW OF THE ABOVE DISCUSSION WE SET ASIDE THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. WE SPECIFICALLY DIRECT HIM TO FOLLOW IN LETTER AND SPIRIT THE DIRECTIONS OF THE APPELLATE AUTHORITIES AT DIFFERENT POINTS OF TI ME. THE ASSESSEE SHALL ALSO COOPERATE WITH THE REVENUE AND FURNISH ALL THE INFORMATION AND DOCUMENTS WHICH ARE IN HIS POSSESSION FOR ENABLING APPROPRIATE ASSESSMENTS IN THIS CASE. 23 17. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 26 TH DAY OF MARCH 2010. SD/- SD/- (V.D. RAO) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER MUMBAI DT: 26 TH MARCH 2010. WAKODE COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR E-BENCH. (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT MUMBAI BENCHES