M/s Lucky Coke Pvt Ltd, Dhanbad v. ACIT,

ITA 16/RAN/2011 | misc
Pronouncement Date: 23-02-2012 | Result: Allowed

Appeal Details

RSA Number 1625114 RSA 2011
Assessee PAN AABCL2899N
Bench Ranchi
Appeal Number ITA 16/RAN/2011
Duration Of Justice 3 month(s) 15 day(s)
Appellant M/s Lucky Coke Pvt Ltd, Dhanbad
Respondent ACIT,
Appeal Type Income Tax Appeal
Pronouncement Date 23-02-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 23-02-2012
Assessment Year misc
Appeal Filed On 08-11-2011
Judgment Text
ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 1 IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI CIRCUIT BENCH RANCHI BEFORE: SHRI B.R. MITTAL JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO. 16 / RANCHI / 20 11 ASSESSMENT YEAR : 200 9 - 1 0 M/S. LUCKY COKE PRIVATE LTD DHANBAD VS. ACIT CENTRAL CIRCLE DHANBAD (APPELLANT) (RESPONDENT) PAN NO. AABCL 2899N ITA NO.30/RANCHI/2011 ASSESSMENT YEAR : 2009 - 10 ACIT CENTRAL CIRCLE DHANBAD VS. M/S. LUCKY COKE PRIVATE LTD DURGAPUR (APPELLANT) (RESPONDENT) CO NO.03/RANCH I/2012 (ARISING OUT OF ITA NO.30/RANCHI/2011) ASSESSMENT YEAR : 2009 - 10 M/S. LUCKY COKE PRIVATE LTD DURGAPUR VS. ACIT CENTRAL CIRCLE DHANBAD (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.K. PODDAR ADOVCATE WITH SHRI M.K. CHOUDHURY ADVOCATE RESPO NDENT BY: SHRI DEEPAK ROUSHAN SR.S.C. DATE OF HEAR I NG: 1 6 .02.2012 DATE OF PRONOUNCEMENT: 23 .02.2012 ORDER PER B.R. MITTAL JUDICIAL MEMBER:- THESE CROSS APPEALS ARE FILED BY THE ASSESSEE AND THE DEPARTMENT AGAINST ORDER OF LD. CIT(A) DATED 15.9.2011 FOR ASS ESSMENT YEAR 2009-10. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION IN THE APPEAL OF THE DEPARTMENT. IN THE CROSS OBJECTION ASSESSEE HAS STATED THAT TH ERE IS NO MERIT IN THE GROUND TAKEN BY THE DEPARTMENT AND NO ADDITION ON E STIMATE IS CALLED FOR. IN FACT CROSS OBJECTIONS OF THE ASSESSEE ARE CONNECTED WITH GROUND NOS.4 & 5 OF THE APPEAL OF THE ASSESSEE. ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 2 2. FIRSTLY WE TAKE UP THE APPEAL OF THE ASSESSEE BE ING ITA NO.16/RANCHI/2011 FOR OUR CONSIDERATION. 3. IN GROUND NOS.1 TO 3 OF THE APPEAL THE ASSESSEE HAS DISPUTED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.1 45 00 000/- OUT OF RS.2 CRORES MADE BY THE ASSESSING OFFICER ON ACCOUN T OF SHARE APPLICATION MONEY RECEIVED. 4. THE RELEVANT FACTS ARE THAT IN THE ASSESSMENT YE AR UNDER CONSIDERATION ASSESSEE RECEIVED FRESH SHARE APPLIC ATION MONEY OF RS.2 CRORES. THE ASSESSING OFFICER HAS CONSIDERED THE S AID SHARE APPLICATION MONEY AS UNDISCLOSED INCOME OF THE ASSESSEE UNDER S ECTION 68 OF THE ACT AND RELEVANT PART OF HIS ORDER READS AS UNDER: DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CO MPANY CLAIMED TO HAVE RECEIVED FURTHER SHARE APPLICATION MONEY OF RS.2 00 00 000/-. THE ASSESSEE WAS SPECIFICALLY REQUESTED VIDE THIS OFFIC E LETTER DATED 23.11.2010 TO FURNISH CONFIRMATION WITH PRESENT COMPLETE ADDRESS MODE OF RECEIPT PAN PRESENT A.O. CHARGE WHERE RETURN OF INCOME ARE BEIN G FILED IN RESPECT OF EACH OF THOSE PERSONS FROM WHOM THE ALLEGED SHARE APPLIC ATION MONEY HAVE BEEN RECEIVED. THERE IS NO REPLY FROM THE PART OF THE A SSESSEE IN THIS REGARD TILL THE DATE OF PASSING OF THIS ORDER. IT IS CLEAR THAT THE ASSESS EE HAS NO INTENTION TO DIVULGE THE SOURCE OF SHARE APPLICATIO N MONEY BEFORE THE AUTHORITY. IN VIEW OF THIS FACT THE SHARE APPLICAT ION MONEY OF RS.2 00 00 000/- IS CONSIDERED AS ASSESSEES OWN MO NEY EARNED FROM UNDISCLOSED SOURCE AND WHICH IS ACCORDINGLY BEING A DDED TO THE INCOME OF THE ASSESSEE U/S 68 OF THE ACT. BEING AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE F IRST APPELLATE AUTHORITY. 5. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED THAT THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY OF RS.2.10 CRORES AND NOT RS.2 CRORES AS MENTIONED BY THE ASSESSING OFFICER. IT IS OBSERVED THAT THE ASSESSEE FILED DETAILS OF SHARE APPLICANTS BEFORE LD. CIT(A). THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER WITH A DIR ECTION TO EXAMINE THE SUBMISSIONS OF THE ASSESSEE. IT IS OBSERVED THAT T HE ASSESSING OFFICER GAVE HIS REMAND REPORT DATED 5.9.2011 AND STATED THAT VE RIFICATION WAS MADE BY ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 3 HIM FROM THE 16 PERSONS FROM WHOM SHARE APPLICATION MONEY HAD BEEN TAKEN. THE NAMES OF THE PERSONS AMOUNT OF SHARE A PPLICATION MONEY CLAIMED TO HAVE BEEN COLLECTED AND THE OUTCOME OF V ERIFICATION ARE SUMMARISED IN THE TABLE OF THE IMPUGNED ORDER OF TH E LD. CIT(A) AT PAGES 2&3 AS UNDER: SL.NO. NAME OF THE COMPANY AMOUNT OF SHARE APPLICATION MONEY CLAIMED TO HAVE BEEN COLLECTED OUTCOME OF VERIFICATION 1. M/S. SATBICHAR COMMERCIAL PVT. LTD. 15 00 000/ - LETTER RETURNED WITH REMARK REFUSED 2. M/S. VDR CONSULTANTS PVT. LTD. 1 5 00 000/ - LETTER RETURNED WITH REMARK NOT KNOWN 3. M/S. AVILAX EXPORTS PVT. LTD. 10 00 000/ - CONFIRMED THE INVESTMENT 4. MUKUL MILLS PVT. LTD. 10 00 000/ - CONFIRMED THE INVESTMENT 5. M/S. RISHIVANSH VINIYOG PVT. LTD. 10 00 000/ - REPLY NOT YET SENT 6. SRIRAM TOWERS PVT. LTD. 10 00 000/ - REPLY NOT YET SENT 7. M/S. SANFLOWER BARTER PVT. LTD. 30 00 000/ - REPLY NOT YET SENT 8. GOLDMOON FISCAL SERVICES LTD. 15 00 000/ - REPLY NOT YET SENT 9. PARIJAT COMMODEAL PVT. LTD. 10 00 000/ - LETTER RETURNED WITH REMARK NOT KNOWN 10. GAJESHWAR SALES PVT. LTD. 15 00 000/ - LETTER RETURNED WITH REMARK NOT KNOWN 11. TRIKUTA COMMERCIAL PVT. LTD. 10 00 000/ - CONFIRMED THE INVESTMENT 12. MAHADHAN VYAPAR PVT. LTD. 15 00 000/ - LETTER RETURNED WITH REMARK NOT KNOWN 13 . LONGLIFE AGRO PVT. LTD. 10 00 000/ - LETTER RETURNED WITH REMARK LEFT 14. MUPNAR TREXIM PVT. LTD. 15 00 000/ - CONFIRMED THE INVESTMENT 15. NAVREKHA COMMOTRADE PVT. LTD. 10 00 000/ - CONFIRMED THE INVESTMENT 16. MATRIBHUMI COMMODITIES PVT. LTD. 10 00 000 / - CONFIRMED THE INVESTMENT 6. THE ASSESSEE IN THE REJOINDER TO THE SAID REMAND REPORT SUBMITTED BEFORE LD. CIT(A) THAT THE ASSESSEE PRODUCED DOCUME NTS TO PROVE IDENTITY OF THE PERSONS MAKING THE SHARE APPLICATION MONEY. FU RTHER GENUINENESS OF THE TRANSACTION WAS PROVED THAT ALL THE PAYMENTS WE RE RECEIVED BY CHEQUES AND WERE CLEARED THROUGH BANK ACCOUNTS. THAT THE P ERMANENT ACCOUNT ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 4 NUMBER OF THE SHARE APPLICANTS WAS FILED ALONG WIT H THEIR BALANCE SHEETS BANK ACCOUNT MEMORANDUM OF ASSOCIATION OF SHARE AP PLICANTS AND APPLICATIONS WERE ALSO PRODUCED AND NOTHING ADVERS E WAS FOUND. IT WAS CONTENDED THAT MERELY BECAUSE SOME OF THE ENQUIRY L ETTERS WERE RETURNED WITH THE POSTAL REMARK NOT KNOWN DOES NOT MAKE TH E TRANSACTION AS BOGUS AND FIT TO BE ADDED. IT WAS ALSO CONTENDED THAT SH ARE APPLICATION MONEY WAS MADE IN THE FINANCIAL YEAR 2008-09 AND IT IS POSSIB LE THAT THE COMPANIES MAKING THE SHARE APPLICATION HAVE SHIFTED FROM THE ADDRESS WHICH WAS THERE 3 YEARS BACK. THE ASSESSEE PLACED RELIANCE ON DECI SION OF HONBLE JHARKHAND HIGH COURT IN THE CASE OF CIT VS. CHHINMASTIKA COKE INDUSTRIES LIMITED DATED 1.9.2010 WHEREIN THEIR LORDSHIP OBSERVED AS U NDER: HOWEVER WHERE THE SHARE APPLICANT IS A FICTITIOUS OR BOGUS PERSON WHOSE IDENTITY CANNOT BE TRACED IN SUCH AN EVENT THE AM OUNT OF APPLICATION MONEY MAY BE ADDED AS UNDISCLOSED INCOME OF THE COMPANY P ARTICULARLY WHERE SUCH AN INVESTMENT IS MADE IN CASH. (COPY FILED BEFORE US AT THE TIME OF HEARING TAX CASE NO.09 OF 1999(R) DATED 1.9.2010) 7. IT WAS ALSO CONTENDED THAT THE SHARE APPLICANTS BEING LIMITED COMPANIES DULY INCORPORATED HAVING AUDITED ACCOUNTS MEMORANDUM AND ARTICLE OF ASSOCIATION CANNOT BE CONSIDERED AS BOGU S MERELY BECAUSE A LETTER SENT ON THE ADDRESS WHICH EXISTED 3 YEARS BACK RETU RNED BACK AS NOT KNOWN CANNOT SUGGEST THAT IDENTITY OF THE PERSON CANNOT B E TRACED. THE LD. CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND STAT ED THAT IT IS THE ASSESSEE WHO HAS TAKEN SUBSTANTIAL CREDITS FROM THOSE COMPAN IES AND IT WAS REQUIRED TO DISCHARGE ITS INITIAL BURDEN OF PROOF. THE ASSE SSEE COULD GET THE VERIFICATION OF AN AMOUNT OF ONLY RS.65 LAKHS. IF SAID COMPANIES HAD CHANGED THEIR ADDRESSES IT WAS THE DUTY OF THE ASSESSEE TO COLLECT SUCH ADDRESSES AND INFORMED THE ASSESSING OFFICER ACCORDINGLY TO D ISCHARGE ITS INITIAL BURDEN OF PROOF. THE LD. CIT(A) HAS STATED THAT SINCE REP LIES OF LETTERS ISSUED BY THE ASSESSING OFFICER HAVE NOT BEEN SENT BY THOSE COMPA NIES OR THE LETTERS HAVE NOT BEEN ACCEPTED OR THE COMPANIES COULD NOT BE FOU ND AT THE GIVEN ADDRESSES IT CANNOT BE ACCEPTED THAT THEIR IDENTIT Y EXISTENCE AND GENUINENESS OF THE TRANSACTION STANDS PROVED. ACCO RDINGLY THE LD. CIT(A) HELD THAT THE ASSESSEE HAS FAILED TO DISCHARGE BURD EN IN RESPECT OF BALANCE ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 5 SUM OF RS.1 45 00 000/- AND ACCORDINGLY TREATED THE SAID AMOUNT OF RS.1 45 00 000/- AS UNDISCLOSED CASH CREDIT IN THE BOOKS OF THE ASSESSEE U/S 68 OF THE INCOME-TAX ACT. HENCE THE ASSESSEE IS I N FURTHER APPEAL BEFORE THE TRIBUNAL. 8. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED THAT ASSESSEE FILED COPIES OF THE FOLLOWING BEFORE THE ASSESSING OFFICER WHEN LD. CIT(A) CALLED FOR REMAND REPORT FROM HIM I.E. (I) MEMORANDUM AND ARTI CLES OF ASSOCIATION OF ALL THE 16 SHARE APPLICANTS FROM WHOM ASSESSEE RECEIVED SHARE APPLICATION MONEY (II) COPY OF SHARE APPLICATION MADE BY THE SA ID SHARE APPLICANT COMPANIES (III) CONFIRMATION LETTERS FROM ALL THE S HARE APPLICANT COMPANIES (IV) EVIDENCE OF PAYMENT AND THE APPLICATION MONEY BY ACCOUNT PAYEE CHEQUES (V) COPY OF BANK ACCOUNT OF ASSESSEE COMPAN Y SHOWING CREDIT OF SHARE APPLICATION MONEY RECEIVED BY CHEQUES (VI) CO PY OF ACKNOWLEDGEMENT FOR FILING OF RETURN BY SHARE APPLICANTS. THE LD. A.R. SUBMITTED THAT IN SOME CASES AUDITED PROFIT AND LOSS ACCOUNT BALANCE SHEE T OF THE COMPANIES SHOWING SHARE APPLICATION MADE IN SCHEDULE OF ASSET S WERE ALSO FURNISHED BEFORE THE ASSESSING OFFICER. THE LD. A.R. SUBMITTE D THAT DURING THE REMAND PROCEEDING ASSESSING OFFICER SENT A QUERY LETTER T O ALL COMPANIES ON THEIR LAST KNOWN ADDRESSES IN FINANCIAL YEAR 2008-09 AND SOME LETTERS RETURNED WITH POSTAL MARK LEFT AND FOR SOME LETTERS NO REPLY WA S RECEIVED. HE SUBMITTED THAT LD. CIT(A) ACCEPTED INVESTMENT OF RS.65 LAKHS OUT OF RS.2 10 00 000/- AS GENUINE SHARE APPLICATION MONEY ON THE BASIS OF CON FIRMATION OF INVESTMENT BY THOSE SHARE APPLICANTS. THE LD. A.R. SUBMITTED THAT AS FAR AS ASSESSEE IS CONCERNED HE ESTABLISHED THE IDENTITY OF THE SHARE APPLICANTS BY FURNISHING MEMORANDUM AND ARTICLE OF ASSOCIATION AND ALSO ACKN OWLEDGEMENT FOR FILING OF RETURNS BY THEM. HE FURTHER SUBMITTED THAT ASSE SSEE RECEIVED SHARE APPLICATION MONEY BY ACCOUNT PAYEE CHEQUES AND THER EFORE NOT ONLY THE GENUINENESS OF THE RECEIPT OF SHARE APPLICATION MON EY BUT ALSO THE CREDITWORTHINESS IS PROVED BECAUSE IT IS NOT THE CO NTENTION OF THE DEPARTMENT THAT THE ASSESSEE HAS GIVEN THE AMOUNT IN CASH TO T HOSE SHARE APPLICANTS WHICH HAS BEEN RECEIVED BACK BY THE ASSESSEE FROM T HOSE SHARE APPLICANTS BY WAY OF ACCOUNT PAYEE CHEQUES. THE LD. A.R. SUBMITT ED THAT THE HONBLE HIGH COURT OF JHARKHAND IN THE CASE OF CIT VS. CHHINMAST IKA COKE INDUSTRIES ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 6 LIMITED (SUPRA) BY ITS ORDER DATED 1.9.2010 CONFIRM ED THE ORDER OF THE TRIBUNAL AND OBSERVED THAT PLACING OF BURDEN UPON T HE ASSESSEE COMPANY TO TRACE THE SOURCE AND CREDITWORTHINESS OF THE SHARE APPLICANTS WOULD BE ALMOST AN IMPOSSIBLE TASK ESPECIALLY FOR LARGE COM PANIES HAVING LARGE SHARE CAPITAL. LD. A.R. FURTHER SUBMITTED THAT IT WAS AL SO OBSERVED BY THEIR LORDSHIPS THAT WHERE SHARE APPLICANT IS ACTUALLY AN EXISTING PERSON AND NOT THE BOGUS PERSON AND IF THE CREDITWORTHINESS OR THE CAPACITY TO INVESTMENT IN THE SHARE IS NOT ESTABLISHED IT WOULD BE FOR THE D EPARTMENT TO PROCEED AGAINST SUCH PERSON WHO HAD APPLIED FOR SHARES WITH OUT HAVING SUCH CAPACITY. HOWEVER WHERE THE SHARE APPLICANT IS A FICTITIOUS OR BOGUS PERSON WHOSE IDENTITY CANNOT BE TRACED IN SUCH AN EVENT THE AM OUNT OF APPLICATION MONEY MAY BE ADDED AS UNDISCLOSED INCOME OF THE COMPANY P ARTICULARLY WHERE SUCH AN INVESTMENT IS MADE IN CASH. THE LD. A.R. SUBMIT TED THAT IN THE SAID CASE THEIR LORDSHIP STATED THAT THE EXISTENCE OF SHARE A PPLICANTS WAS NOT DISBELIEVED AND THEREFORE HELD THAT ADDITION OF THE AMOUNT FROM THE ALLEGED UNDISCLOSED INCOME OF THE COMPANY IS CORRECT. THE LD. A.R. SUBMITTED THAT ASSESSEE HAS PROVED THE IDENTITY AND EXISTENCE OF T HE SHARE APPLICANTS AND IN VIEW OF ABOVE DECISION OF HONBLE JURISDICTIONAL HI GH COURT NO ADDITION COULD BE MADE. 9. ON THE OTHER HAND THE LD. D.R. SUBMITTED THAT HE RELIES ON THE ORDER OF THE LD. CIT(A) AS THE ASSESSEE FAILED TO PRODUCE T HE SAID SHARE APPLICANTS BEFORE THE ASSESSING OFFICER WHEN THE LETTERS ISSUE D TO THEM BY THE ASSESSING OFFICER COULD NOT BE SERVED. 10. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW AND THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE P ARTY. WE HAVE ALSO CONSIDERED THE RELEVANT PAGES OF THE PAPER BOOK PLA CED AT PAGE 1 TO 40 IN RESPECT OF 10 SHARE HOLDERS WHO HAVE APPLIED FOR SH ARES IN THE ASSESSEES COMPANY AGGREGATING RS.1 45 00 000/- AND THE DETAIL S OF WHICH ARE AS UNDER: ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 7 SL.NO. NAM E OF APPLICANT COPIES OF DOCUMENTS PAGE NOS. AMOUNT (RS.) I) M/S. SATBICHAR COMMERCIAL PVT. LTD. (A) APPLICATION TO APPLY FOR SHARES (B) COPY OF RESOLUTION PASSED BY BOARD OF DIRECTORS (C) CONFIRMATION LETTER ALONG WITH PAN NO. (D) COPY OF ACKNOWLEDGEMENT OF FILING OF RETURN 1 4 15 00 000/ - II) M/S. VDR CONSULTANTS PVT. LTD. (A) APPLICATION TO APPLY FOR SHARES (B) COPY OF RESOLUTION PASSED BY BOARD OF DIRECTORS (C) COPY OF CONFIRMATION LETTER ALONG WITH PAN NO. (D) COPY OF ACKNOWLEDGEMENT FILING OF RETURN 5 8 15 00 000/ - III) M/S. RISHIVANSH VINIYOG PVT. LTD. (A) COPY OF APPLICATION (B) CONFIRMATION LETTERS ALONG WITH PAN NO. (C) COPY OF ACKNOWLEDGEMENT OF FILING OF RETURN 9 12 10 00 000/ - IV) M/S. MAHADHAN VYAPAR PVT. LTD. (A) COPY OF APPLICATIO N (B) CONFIRMATION LETTER ALONG WITH PAN NO. (C) ACKNOWLEDGEMENT OF FILING OF RETURN 13 16 15 00 000/ - V) M/S. GAJESHWAR SALES PVT. LTD. (A) COPY OF APPLICATION (B) COPY OF BOARD RESOLUTION (C) CONFIRMATION LETTER ALONG WITH PAN NO. (D) ACKNOWLEDGEMENT OF FILING OF RETURN 17 20 15 00 000/ - VI) M/S. GOLDMOON FISCAL SERVICES LTD. (A) COPY OF APPLICATION FORM (B) COPY OF BOARD RESOLUTION (C) COPY OF CONFIRMATION WITH PAN NO. 21 24 15 00 000/ - VII) M/S. PARIJAT COMMODEAL PVT. LTD. (A) COPY OF APPLICA TION FORM (B) COPY OF BOARD RESOLUTION (C) COPY OF CONFIRMATION LETTER ALONG WITH PAN NO. (D) COPY OF ACKNOWLEDGEMENT OF FILING OF RETURN 25 28 10 00 000/ - ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 8 VIII) M/S. SRIRAM TOWERS PVT. LTD. (A) COPY OF APPLICATION (B) COPY OF BOARD RESOLUTION (C) COPY OF CONFIRMATION LETTER ALONG WITH PAN NO. 29 31 10 00 000/ - IX) M/S. SUNFLOWER BARTER PVT. LTD. (A) COPY OF APPLICATION (B) COPY OF BOARD RESOLUTION (C) COPY OF CONFIRMATION LETTER ALONG WITH PAN NO. (D) COPY OF ACKNOWLEDGEMENT OF FILING OF RETURN 3 2 36 30 00 000/ - X) M/S. LONGLIFE AGRO PVT. LTD. (A) COPY OF APPLICATION (B) COPY OF BOARD RESOLUTION (C) COPY OF CONFIRMATION LETTER ALONG WITH PAN NO. (D) COPY OF ACKNOWLEDGEMENT OF FILING OF RETURN 37 40 10 00 000/ - 11. ON PERUSAL OF AFORESAID DETAILS WE OBSERVE TH AT ALL THE ABOVE 10 SHARE APPLICANTS ARE COMPANIES INCORPORATED UNDER THE COM PANIES ACT AND ARE ASSESSED TO INCOME-TAX FOR WHICH ASSESSEE FURNISHED THEIR PAN NOS. IT IS OBSERVED THAT WHEN THE ASSESSING OFFICER SENT LETTE RS TO THE SAID 10 SHARE APPLICANTS FOR VERIFICATION/CONFIRMATION TO ASCERTA IN THE GENUINENESS OF THE SHARE APPLICANTS AND THE LETTERS WERE RECEIVED BACK THE ASSESSING OFFICER DID NOT MAKE ANY ENQUIRY THOUGH THE ASSESSEES FURNISHED COPIES OF MEMORANDUM AND ARTICLES OF ASSOCIATION OF THOSE COMPANIES FROM WHOM THE SHARE APPLICATION MONEY IS STATED TO HAVE BEEN RECEIVED N OR HE ASCERTAINED FROM THE OFFICE OF THE REGISTRAR OF COMPANIES AS TO WHET HER THOSE APPLICANTS ARE GENUINE OR NOT. ON THE OTHER HAND WE OBSERVE THA T THE ASSESSEE FILED CONFIRMATION LETTERS AS WELL AS ACKNOWLEDGEMENT OF FILING OF RETURN FROM ALL THE ABOVE 10 SHARE APPLICANTS EXCEPT THE SHARE APPL ICANTS MENTIONED AT SL.NOS.(VI) & (VIII) NAMELY M/S. GOLD MOON FISCAL S ERVICES LIMITED AND SHRIRAM TOWERS PRIVATE LIMITED RESPECTIVELY. HOWEVER IN T HOSE 2 CASES WE OBSERVE THAT PAN NO. OF APPLICANTS ARE GIVEN. THEREFORE W HEN ALL THE SHARE APPLICANTS ARE REGISTERED COMPANIES HAVING PAN NOS. AND ARE ALSO ASSESSED TO INCOME TAX IT PROVES THAT THE ASSESSEE HAS ESTA BLISHED THE IDENTITY OF THOSE SHARE APPLICANTS BUT THE ASSESSING OFFICER HA S DOUBTED THEIR EXISTENCE MERELY BECAUSE THE LETTERS SENT BY THE ASSESSING OF FICER WAS REVISED IN ONE CASE AND IN 4 CASES NO REPLY WAS RECEIVED FROM THEM AND WHEREAS IN THE ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 9 REMAINING 5 CASES LETTERS RETURNED WITH THE REMARK `NOT KNOWN/LEFT. WE HAVE OBSERVED THAT THE ASSESSEE FURNISHED THE DETAI LS OF THE CHEQUE VIDE WHICH THE ABOVE NAMED APPLICANTS APPLIED FOR SHARES IN THE ASSESSEE COMPANY. CONSIDERING THE ABOVE EVIDENCES ON RECORD WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS NOT ONLY PROV ED IDENTITY OF SHARE APPLICANTS BUT HAS ALSO ESTABLISHED THE GENUINENESS OF THE TRANSACTIONS AND THEIR CREDITWORTHINESS. 12. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DWARKADISH FINANCIAL SERVICES (2005) 148 TAXMAN 54 HAS HELD TH AT WHEN THE ASSESSING OFFICER NOTED THAT ALL SHARE APPLICANTS ARE ASSESSE D TO TAX IT COULD NOT BE PRESUMED THAT SHARE HOLDERS WHO ARE ASSESSED TO TAX ARE NOT IN EXISTENCE PARTICULARLY WHEN ASSESSEE HAS PRODUCED ALL RELEVAN T EVIDENCES TO ESTABLISH THAT ALL SHARE APPLICATION MONEY RECEIVED WAS A RES ULT OF GENUINE TRANSACTION. HONBLE GUJARAT HIGH COURT HAS ALSO HELD IN THE CAS E OF DCIT VS. ROHINI BUILDERS [2002] 256 ITR 360 (GUJ) THAT THE ASSESSEE COULD BE ASKED TO PROVE ONLY SOURCE OF CREDITS IN ITS BOOKS OF ACCOUNTS IT CANNOT BE REQUIRED TO EXPLAIN THE SOURCE OF CREDIT. IT WAS ALSO OBSERVED BY THEIR LORDSHIPS THAT MERELY BECAUSE THE ASSESSING OFFICER CONSIDERED THE CREDITORS EXPLANATION WITH REGARD TO THE DEPOSITS IN THEIR BANK ACCOUNTS UNSATISFACTORY NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE BY TREATIN G THE CREDITS AS NON- GENUINE. FURTHER HONBLE RAJASTHAN HIGH COURT HAS HELD IN THE CASE OF BARKHA SYNTHETICS LTD. VS. ACIT [2005] 197 CTR 432 (RAJ) THAT THE PRINCIPLE RELATING TO BURDEN OF PROOF CONCERNING ASSESSEE IS THAT WHETHER THE MATTER CONCERNS THE MONEY RECEIPTS BY WAY OF SHARE APPLICA TION FROM INVESTORS THROUGH BANKING CHANNELS ASSESSEE HAS TO PROVE EXI STENCE OF PERSONS IN WHOSE NAME THE SHARE APPLICATION IS RECEIVED. ONCE THE EXISTENCE OF INVESTOR IS PROVED IT IS NO FURTHER BURDEN OF THE ASSESSEE TO PROVE WHETHER THAT PERSON ITSELF HAS INVESTED THE SAID MONEY OR SOME O THER PERSON MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURDEN THEN SHIFTS ON REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM ASSESS EE COMPANY ITSELF. IN THE CASE BEFORE US THE DEPARTMENTS CONTENTION IS THAT MONEY DOES NOT BELONG TO ABOVE NAMED SHARE APPLICANTS BUT THE SAME HAS BEEN BROUGHT BY THE ASSESSEE AS HIS UNDISCLOSED MONEY. HOWEVER NO EVIDENCE HAS BEEN ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 10 BROUGHT ON RECORD BY THE DEPARTMENT THAT THE SHARE APPLICATION MONEY HAS BEEN BROUGHT IN THE NAME OF THE SHARE APPLICANT BY THE ASSESSEE COMPANY. HONBLE APEX COURT IN THE CASE OF CIT VS. DAULAT RA M RAWATMULL [1973] 87 ITR 349 (SC) HAS HELD THAT ONUS TO PROVE THAT THE A PPARENT IS NOT THE REAL IS ON THE PERSON WHO CLAIMS IT TO BE SO. THEREFORE T HE ONUS IS ON THE DEPARTMENT TO PROVE THAT THE SHARE APPLICATION MONE Y SUBSCRIBED TO THE SHARE CAPITAL OF THE ASSESSEE COMPANY BY THE ABOVE NAMED SHARE APPLICANT IS NOT THE MONEY OF THE SHARE APPLICANT BUT OF THE ASS ESSEE COMPANY IS ON THE DEPARTMENT. HOWEVER THE DEPARTMENT HAS NOT BROUGH T ANY MATERIAL ON RECORD TO ESTABLISH THE SAME. WE ARE OF THE CONSID ERED VIEW THAT THE ASSESSING OFFICER DOUBTED THE GENUINENESS OF THE SH ARE APPLICATION MONEY ON SURMISES AND CONJECTURE AND HAS NOT BROUGHT ANY ALL OTMENT OF SHARES. THIRD MEMBER DECISION OF ITAT JODHPUR BENCH IN THE CASE O F UMA POLYMERS (P) LTD. VS. DCIT 111 TTJ 112 HAS HELD THAT IN RESPECT OF SH ARE APPLICATION MONEY THE ASSESSEE COMPANY HAS TO PROVE EXISTENCE OF PERS ONS IN WHOSE NAME SHARE APPLICATION IS RECEIVED. NO BURDEN IS CAST O N THE ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED OR SOME OT HER PERSON HAS MADE INVESTMENT IN HIS NAME. THE BURDEN TO PROVE THAT T HE MONEY DID NOT BELONG TO HIM BUT TO SOME BODY ELSE IS ON THE REVENUE. IT WAS FURTHER HELD THAT IF ANY OF THE SHARE HOLDER IS FOUND TO HAVE MADE UNEXP LAINED INVESTMENT THEN ADDITION OF SUCH INVESTMENT IS REQUIRED TO BE MADE IN THE HANDS OF THE SHARE HOLDERS AND NOT IN THE HANDS OF THE ASSESSEE. ACCO RDINGLY IT WAS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE INVESTMENT MADE BY THE 10 SHARE HOLDERS IN THE ASSESSEE COMPANY AS BOGUS A ND TO MAKE ADDITION U/S 68 OF THE ACT. THE HONBLE APEX COURT HAS HELD IN THE CASE OF M/S. LOVELY EXPORTS (P) LTD. 216 CTR 195 AS UNDER:- CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDI SCLOSED INCOME UNDER SECTION 68 OF INCOME TAX ACT? WE FIND NO MERIT IN THIS SPECIAL LEAVE PETITION FOR THE SIMPLE REASON T HAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPA NY FROM ALLEGED BOGUS SHARE HOLDERS WHOSE NAMES ARE GIVEN T O THE A.O. THEN THE DEPARTMENT IS FREE TO PROCEED TO RE-OPEN T HEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 11 13. WE ALSO OBSERVE THAT THE HONBLE JURISDICTIONAL HIGH COURT HAS ALSO HELD THAT IN THE CASE OF CIT VS. CHHINMASTIKA COKE INDUSTRIES LIMITED (SUPRA) THAT IF THE SHARE APPLICANT IS AN E XISTING PERSON AND NOT A BOGUS PERSON THE AMOUNT OF APPLICANT MONEY CANNO T BE ADDED IN THE CASE OF THE COMPANY AS UNDISCLOSED INCOME. IN VIEW OF THE ABOVE FACTS AND THE DECISIONS CITED (SUPRA) WE ARE OF THE CONS IDERED VIEW THAT LD. CIT(A) IS NOT JUSTIFIED TO MAKE THE SAID ADDITION OF RS.1 45 00 000/- AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE AC T. HENCE WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW BY ALLOWING G ROUND NOS.1 TO 3 OF THE APPEAL OF THE ASSESSEE. 14. GROUND NOS.4 AND 5 OF THE APPEAL OF THE ASSESSE E IS CONNECTED WITH GROUND OF APPEAL OF THE DEPARTMENT AS WELL AS CROSS OBJECTION FILED BY THE ASSESSEE. WE CONSIDER IT RELEVANT TO STATE THE SAID GROUNDS IN THE ASSESSEES APPEAL I.E. GROUND NOS.4 AND 5 AND T HE ONLY GROUND OF APPEAL TAKEN BY THE DEPARTMENT WHICH ARE AS UNDER: GROUNDS FROM ASSESSEES APPEAL: GROUND NO.4:- FOR THAT LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING ADDITION OF RS.14 05 393/- UNDER THE HEAD `TRADING ACCOUNT. T HE APPELLANT MADE SUBMISSIONS TO SUGGEST THAT NO DEFECT WHATSOEVER WA S FOUND IN MAINTENANCE OF THE BOOKS OF ACCOUNT. MERELY BECAUS E PROFIT DISCLOSED WAS LESS PERCENTAGE-WISE COMPARED TO THE EARLIER YE AR ADDITION IS NOT CALLED FOR. LD. CIT(A) HAS ACCEPTED THE SUBMISSION THAT EARLIER YEAR CANNOT BE COMPARED WITH THE YEAR UNDER CONSIDERATIO N. THE ADDITION SUSTAINED BY LD. CIT(A) IS THEREFORE UNJUSTIFIED AND ARBITRARY. GROUND NO.5:- FOR THAT THE OBSERVATION OF LD. CIT(A) THAT APPELL ANT COULD NOT FULLY SATISFY THE ASSESSING OFFICER REGARDING THE C ORRECTNESS OF THE BOOKS OF ACCOUNT IS UNFOUNDED. THE LD. ASSESSING OFFICER FAILED TO BRING ON RECORD ANY REASON OR BASIS TO SUGGEST THAT THE BOOK S OF ACCOUNT MAINTAINED WERE NOT CORRECT AND PROVISION OF SECTIO N 145(3) CAN BE APPLIED. THE ADDITION MADE THEREFORE IS ILLEGAL UNJUSTIFIED AND FIT TO BE DELETED. GROUND FROM DEPARTMENTS APPEAL: THE LD. CIT(A) HAS ERRED IN APPLYING THE G.P. RATE OF OTHER CONCERN OF THE GROUP IN THE CASE OF PRESENT ASSESSE E COMPANY. OTHER THAN PRESENT ASSESSEE COMPANY ALL OTHER CONCERNS OF THE GROUP ARE ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 12 ENGAGED IN MANUFACTURING OF HARD COKE WHERE AS THE PRESENT ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING OF PIG IRON. S O THERE IS NO REASON BEHIND APPLICATION OF G.P. RATE OF THOSE OTH ER CONCERNS IN THE CASE OF PRESENT ASSESSEE COMPANY. 15. THE RELEVANT FACTS ARE THAT THE ASSESSEE HAD TA KEN ON LEASE IN FEB08 AN INDUSTRY TO SET UP FOR MANUFACTURING OF P IG IRON. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER ASKED THE ASSESSEE COMPANY TO COMPLY WITH THE FOLLOWING QUERI ES: (I) DESCRIBE THE PROCESS OF THE MANUFACTURING RAW M ATERIALS AND STORES CONSUME IN PRODUCTION ITEM PRODUCED AND RESIDUE IF ANY. (II) NAME PRESENT COMPLETE ADDRESS AND AMOUNT IN RESPEC T OF ALL THE SUNDRY CREDITORS. (III) TO PRODUCE ALL THE TAX INVOICE CUM EXCISE INVOICE C UM CHALLANS IN SUPPORT OF TOTAL SALE. (IV) NAME AND PRESENT COMPLETE ADDRESS AND COST OF GOODS SUPPLIED IN RESPECT OF PRINCIPAL SUPPLIER OF (I) ST ORES AND CONSUMABLES (II) RAW MATERIALS. (V) MONTHWISE BREAKUP OF POWER & FUEL. (VI) DETAIL BREAK UP OF OTHER EXPENSES ETC. 16. SINCE THERE WAS NO COMPLIANCE FROM THE ASSESSEE IN RESPECT OF ABOVE QUERIES THE ASSESSING OFFICER CONSIDERED THA T THE GROSS PROFIT MARGIN IN THE ASSESSMENT YEAR 2008-09 WAS 55.09% ON SALES BUT IN THE ASSESSMENT YEAR UNDER CONSIDERATION THE GROSS PROF IT MARGIN OF SALE HAD BEEN SHOWN AT 7.40% ON SALE THE ASSESSING OFFI CE APPLIED THE SAME GROSS PROFIT MARGIN ON SALE AS IN ASSESSMENT Y EAR 2008-09 IN THE ASSESSMENT YEAR UNDER CONSIDERATION ON SALE WHICH C OMES TO RS.7 03 72 500/- AS AGAINST GROSS PROFIT OF RS.94 5 3 355/- SHOWN BY THE ASSESSEE. THUS THE ASSESSING OFFICER MADE THE ADD ITION OF THE DIFFERENCE OF RS.6 09 19 145/- (RS.7 03 72 500 94 53 355/-) TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED THE ASSES SEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 17. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED THA T THERE WAS NO QUESTION OF MAKING AN ESTIMATE OF GROSS PROFIT AS T HE ASSESSEE HAD MAINTAINED VERIFIABLE BOOKS OF ACCOUNTS THE SALES DISCLOSED ARE FULLY VERIFIABLE WITH EXCISE DEPARTMENT THAT THE EXPENSES INCURRED FOR ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 13 PRODUCTION ARE FULLY VERIFIABLE AND COMPARED WITH T HE SALES. IT WAS ALSO CONTENDED THAT THE ASSESSEE HAD TAKEN OVER THE BUSI NESS FROM FEB08 AS SUCH LAST YEAR ACCOUNTS WERE ONLY FOR 2 MONTHS AND THERE WAS ALMOST NO PRODUCTION. THE PURCHASES WERE CLOSING S TOCK. THE GROSS PROFIT OF THE YEAR COULD NOT BE A GUIDE TO MAKE AN ESTIMATE. IT IS RELEVANT TO STATE THAT THE LD. CIT(A) HAS SUMMARIZE D THE SUBMISSION OF THE ASSESSEE IN PARA-9 OF THE IMPUGNED ORDER WHICH IS AS UNDER: IN THE APPEAL PROCEEDINGS IT WAS SUBMITTED THAT TH E APPELLANT HAD TAKEN THIS PLANT WHICH WAS LYING CLOSED ON A LE ASE OF RS.5.50 LACS PER MONTH WITH A VIEW TO REVIVE THE SAME AND VENTUR E INTO A NEW BUSINESS. IN THE PRECEDING ASSESSMENT YEAR I.E. A .Y. 2008-09 THERE WAS NEGLIGIBLE MANUFACTURING ACTIVITY AND FOR THE 2 MONTHS OF THE FINANCIAL YEAR THERE WAS SOME TRADING ACTIVITY AND SALES OF ONLY RS.20 66 321/- WERE MADE. IN THE A.Y. 2009-10 THE PLANT WAS RUN FOR THE ENTIRE YEAR AND A TURNOVER OF RS.12 77 49 971/- WAS ACHIEVED. IN THE NEXT ASSESSMENT YEAR I.E. A.Y. 2010-11 THE PLA NT REMAINED WITH THE APPELLANT FOR ONLY 3 MONTHS AND THEREAFTER THE LEA SE WAS TERMINATED AND THE APPELLANT EXITED FROM THE BUSINESS AS THE S AME WAS NOT FOUND VIABLE AND PROFIT MAKING. IT IS THE SUBMISSION OF THE APPELLANT THAT COMPLETE AUDITED BOOKS AND VOUCHERS ARE AVAILABLE A ND THERE IS NO CASE FOR MAKING ANY ADDITION ON ACCOUNT OF G.P. RATE. I T WAS FURTHER SUBMITTED THAT EVEN A.Y. 2008-09 CALCULATION OF G. P. RATE AT 55.09% IS INCORRECT. THE SAME WAS ONLY 22.32%. THAT TOO CAN NOT BE APPLIED IN THE YEAR UNDER CONSIDERATION AS THERE WAS NEGLIGIBL E MANUFACTURING IN THIS ASSESSMENT YEAR AND SOME TRADING ACTIVITY WAS THERE IN THE LAST TWO MONTHS OF THE FINANCIAL YEAR. REMAND REPORT WAS CA LLED FOR FROM THE A.O. WHICH WAS SUBMITTED BY HIM VIDE LETTER DATED 5 .9.2011. IT WAS ADMITTED BY THE A.O. THAT THE G.P. RATE IN THE PREC EDING ASSESSMENT YEAR WAS 22.32% ONLY AS AGAINST 55.09% TAKEN. THE A.O. HAS SUBMITTED THAT THE G.P. RATE OF 22.32% MAY BE APPLI ED IN THIS YEAR ALSO. 18. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE REMAND REPORT SOUGHT BY HIM HAS STATED THA T IT WOULD MEET THE ENDS OF JUSTICE IF A GROSS PROFIT RATE OF 8.5% IS A PPLIED AND THUS SUSTAINED THE ADDITION OF RS.14 05 393/- VIDE PARA 10 OF THE IMPUGNED ORDER WHICH IS AS UNDER: I HAVE CONSIDERED THE ABOVE ISSUE. IT IS SEEN THAT IT WAS A NEW VENTURE UNDERTAKEN BY THE APPELLANT AND A PLANT WHI CH WAS LYING CLOSED WAS REVIVED. THE SAME WAS CLOSED AFTER 17 MONTHS A S THE BUSINESS WAS NOT FOUND VIABLE. IT IS THE CLAIM OF THE APPEL LANT THAT BOOKS OF ACCOUNTS HAVE BEEN DULY MAINTAINED WHICH WERE AUDIT ED ALSO. FURTHER IN ASSESSMENT YEAR 2008-09 THE TURNOVER OF THE APP ELLANT WAS ONLY RS.20 66 321/- AS AGAINST TURNOVER OF RS.12 77 49 9 71/- IN THIS YEAR. ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 14 MOREOVER IN THE PRECEDING YEAR THERE WAS TRADING ACTIVITY FOR TWO MONTHS WHEREAS IN THIS YEAR MANUFACTURING ACTIVITY WAS CARRIED OUT FOR THE FULL YEAR. IN MY CONSIDERED VIEW A PROPER CAS E OF REJECTION OF BOOKS OF ACCOUNT AND APPLICATION OF G.P. RATE HAS N OT BEEN MADE OUT AGAINST THE APPELLANT. EVEN IF A G.P. RATE IS TO B E APPLIED IT WILL BE HIGHLY ERRONEOUS TO CONSIDER THE PRECEDING ASSESSME NT YEAR I.E. A.Y. 2008-09 AS ANY KIND OF PRECEDENT. CONSIDERING THAT THE PLANT WAS LYING CLOSED AND IT WAS A NEW VENTURE UNDERTAKEN BY THE A PPELLANT AND CONSIDERING THE FACT THAT IN OTHER MANUFACTURING CO NCERNS OF THE APPELLANT. G.P. RATE OF 8.34% TO 12.50% HAS BEEN A PPLIED IN DIFFERENT ASSESSMENT YEARS AND THE APPELLANT COULD NOT FULLY SATISFY THE A.O. REGARDING THE CORRECTNESS OF THE BOOKS OF ACCOUNT. IT WOULD MEET THE ENDS OF JUSTICE IF A GROSS PROFIT RATE OF 8.5% IS A PPLIED IN THIS YEAR WHICH WILL RESULT IN ADDITION OF RS.1 08 58 748 (-) RS.94 53 355/- = RS.14 05 393/-. BALANCE ADDITION IS DELETED. HENCE THE ASSESSEE IS IN FURTHER APPEAL BEFORE TH E TRIBUNAL. 19. DURING THE COURSE OF HEARING LD. A.R. SUBMITTE D THAT THE ASSESSEE HAS TAKEN ON LEASE AN INDUSTRY IN FEB08 F OR MANUFACTURING OF PIG IRON AND THERE WAS NO MANUFACTURING ACTIVITY IN THE ASSESSMENT YEAR 2008-09 AND ONLY TRADING WAS DONE. HE FURTHER SUBM ITTED THAT IN THE ASSESSMENT YEAR 2009-10 MANUFACTURING PROCESS WAS CARRIED OUT AND SALES WERE EFFECTED. SINCE PLANT WAS NOT RUNNING S MOOTHLY DUE TO ADVERSE MARKET CONDITION LEASE WAS SURRENDERED IN JUNE09 AND NO MANUFACTURING ACTIVITY WAS CARRIED OUT THERE AFTER. HE SUBMITTED THAT IF THE ASSESSEE HAD BEEN MAKING PROFIT OF 55% AS CONSI DERED BY THE ASSESSING OFFICER THERE WAS NO QUESTION OF SURREND ERING THE LEASE JUST AFTER 3 MONTHS AFTER THE CLOSE OF THE FINANCIAL YEA R UNDER CONSIDERATION. HE FURTHER SUBMITTED THAT THE ORDER OF THE LD. CIT( A) IS ON THE ONE HAND TO SAY THAT THE ASSESSING OFFICER HAS NOT MADE OUT A PROPER CASE FOR REJECTION OF BOOKS OF ACCOUNTS AND APPLICATION OF GROSS PROFIT RATE AND ON THE OTHER HAND HE HAS ALSO ESTIMATED GROSS P ROFIT TO MAKE THE ADDITION OF RS.14 05 393/-. THE LD. A.R. SUBMITTED THAT NO DEFECT HAS BEEN POINTED OUT REGARDING MAINTENANCE OF BOOKS OF ACCOUNTS AND THEREFORE THE BOOK RESULTS AS DISCLOSED BY THE ASS ESSEE SHOULD BE ACCEPTED AND THE ADDITION AS SUSTAINED BY LD. CIT(A ) SHOULD BE DELETED. ON THE OTHER HAND THE LD. D.R. RELIED ON THE ORDER S OF THE AUTHORITIES BELOW. HE FURTHER SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 15 OFFICER IS JUSTIFIED AND THE LD. CIT(A) HAS CONSIDE RED THE GROSS PROFIT RATE OF 8.5% BY CONSIDERING OTHER MANUFACTURING UNI T OF THE ASSESSEE THOUGH THEY ARE NOT IN THE BUSINESS OF MANUFACTURIN G OF PIG IRON BUT ARE ENGAGED IN MANUFACTURING OF HARDCORE. HE SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY CONSIDERED RESULTS OF THE ASSESSMENT YEAR 2008-09 TO MAKE THE ADDITION. 20. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW AND THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF T HE PARTIES. 21. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESS EE HAS TAKEN ON LEASE AN INDUSTRY FOR MANUFACTURING OF PIG IRON. I T IS ALSO NOT DISPUTED THAT THERE WAS NO MANUFACTURING ACTIVITY IN THE ASS ESSMENT YEAR 2008- 09 AND ONLY TRADING WAS DONE. IT IS ALSO NOT IN DI SPUTE THAT THE LEASE WAS SURRENDERED IN JUNE 2009 I.E. JUST 3 MONTHS AF TER THE CLOSE OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDE R CONSIDERATION. CONSIDERING THE ABOVE FACTS WE AGREE WITH THE LD. A.R. THAT THE RESULTS FOR THE ASSESSMENT YEAR 2008-09 COULD NOT BE A BASE TO COMPARE THE GROSS PROFIT RATE OF THE ASSESSMENT YEAR UNDER CONS IDERATION WHEN THE ASSESSMENT YEAR UNDER CONSIDERATION IS THE ONLY ASS ESSMENT YEAR IN WHICH THE ASSESSEE CARRIED ON MANUFACTURING PROCESS . WE OBSERVE THAT THE LD. D.R. HAS NOT DISPUTED THE OBSERVATION OF TH E LD. CIT(A) WHICH IS MENTIONED IN PARA-10 AS UNDER: MOREOVER IN THE PRECEDING YEAR THERE WAS TRADING AC TIVITY FOR 2 MONTHS WHEREAS IN THIS YEAR MANUFACTURING ACTIVIT Y WAS CARRIED OUT FOR THE FULL YEAR. IN MY CONSIDERED VIEW A PROPER CAS E OF REJECTION OF BOOKS OF ACCOUNTS AND APPLICATION OF GROSS PROFIT R ATE HAS NOT BEEN MADE OUT AGAINST THE APPELLANT. THE LD. D.R. HAS NOT DISPUTED THE CONTENTION OF TH E LD. A.R. THAT NO DEFECT WAS FOUND REGARDING MAINTENANCE OF BOOKS OF ACCOUNTS BY THE ASSESSEE. 22. CONSIDERING ABOVE FACTS WE ARE OF THE CONSIDER ED VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFIED NOT TO ACCEPT BOOK RES ULTS OF THE ASSESSEE PARTICULARLY WHEN NO DEFECTS IN THE BOOKS OF ACCOUN TS MAINTAINED BY THE ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 16 ASSESSEE HAVE BEEN POINTED OUT. THIRD MEMBER ITAT AHMEDABAD BENCH HAS HELD IN THE CASE OF ACIT VS. R. TAHLIRAM THAT REJECTION OF BOOKS OF ACCOUNTS DOES NOT GIVE ANY UNFETTERED POWE R TO ESTIMATE THE INCOME. THERE MUST BE SOMETHING TO SUPPORT THE EST IMATE AND THERE SHOULD BE MORE THAN MERE SUSPICION. THE HONBLE AP EX COURT HAS ALSO HELD IN THE CASE OF STATE OF KERALA VS. C. VELU KUT TY 60 ITR 239 AFTER REFERRING TO THE DECISION OF PREVI COUNSEL IN CIT V S. LAXMI NARAYAN BADRIDAS 5 ITR 170 THAT THE JUDGEMENT IS A FACULTY TO DECIDE MATTERS WITH WISDOM TRULY AND LEGAL. THE JUDGEMENT DOES NO T DEPEND UPON THE ARBITRARY CAPRICE OF A JUDGEMENT BUT ON SETTLED AND UNVERIFIABLE PRINCIPLES OF JUSTICE. HENCE WE HOLD THAT LD. CIT( A) ON THE FACTS OF THE CASE WAS NOT JUSTIFIED NOT TO ACCEPT BOOKS OF ACCO UNTS OF THE ASSESSEE AND TO APPLY GROSS PROFIT RATE WHEN NO DEFECTS IN BOOKS OF ACCOUNTS MAINTAINED BY ASSESSEE ARE POINTED OUT. 23. HENCE WE ALLOW GROUND NOS.4&5 OF THE APPEAL OF THE ASSESSEE AND CONSEQUENTLY GROUND OF APPEAL TAKEN BY THE DEPA RTMENT IS REJECTED. 24. SINCE IN THE CROSS OBJECTION FILED BY THE ASSE SSEE NO NEW GROUND HAS BEEN TAKEN THE CROSS OBJECTIONS HAVE BECOME IN FRUCTUOUS AND SAME ARE DISMISSED. 25. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D. WHEREAS APPEAL OF THE DEPARTMENT AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER P RONOUNCED ON 23 RD FEBRUARY 2012 SD/ - SD/ - ( SHAMIM YAH Y A ) ( B.R. MIT TAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS RANCHI DATED 23 RD FEBRUARY 2012 ITA NO.16/RANCHI/2011 M./S LUCKY COKE PVT. LTD. DH ANBAD 17 COPY TO 1 M/S. LUCKY COKE PRIVATE LTD. RATANJI ROAD PURANA BAZAR DHANBAD 2 ACIT CENTRAL CIRCLE DHANBAD 3 CIT DHANBAD (JHARKHAND) 4 THE CIT (A) DHANBAD (JHARKHAND) 5 THE DR ITAT DHANBAD 6 GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PATNA