THE ITO 16(2)(4), MUMBAI v. SHRI KETAN PHARMA, MUMBAI

ITA 1613/MUM/2008 | 2003-2004
Pronouncement Date: 16-12-2010 | Result: Dismissed

Appeal Details

RSA Number 161319914 RSA 2008
Assessee PAN AAAFP2741B
Bench Mumbai
Appeal Number ITA 1613/MUM/2008
Duration Of Justice 2 year(s) 9 month(s) 11 day(s)
Appellant THE ITO 16(2)(4), MUMBAI
Respondent SHRI KETAN PHARMA, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 16-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Date Of Final Hearing 22-04-2010
Next Hearing Date 22-04-2010
Assessment Year 2003-2004
Appeal Filed On 05-03-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A : MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI PRAMOD KUMAR ACCOUNTANT MEMBER ITA. NO. 1613/MUM/2008 ASSESSMENT YEAR 2003-2004 ITO 16 (2) (4) MUMBAI VS. M/S. KETAN PHARMA MUMBAI 400 002 PAN AAAFP2741B (APPELLANT) (RESPONDENT) ITA. NO. 1668/MUM/2008 ASSESSMENT YEAR 2003-2004 M/S. KETAN PHARMA MUMBAI 400 002 PAN AAAFP2741B VS. ITO 16 (2) (4) MUMBAI (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI SHRAVAN KUMAR FOR ASSESSEE : SHRI REEPAL TRALSHAWALA ORDER PER D. MANMOHAN V.P. 1. THESE CROSS-APPEALS ARE DIRECTED AGAINST THE OR DER DATED 31/12/2007 AND THEY PERTAIN TO THE ASSESSMENT YEAR 2003-2004. THE FOLLOWING GROUNDS WERE URGED IN THE APPEAL FILED BY THE REVENUE. 1. THE LEARNED CIT(A) HAS ERRED IN FACT AND LAW IN DELETING THE ADDITION OF RS.3 42 808/- MADE ON ACCOUNT OF SUPPRESSION OF GROSS PROFIT BY ASSESSEE IGNORING THE FACT THAT THE ASSESSEE HAS NOT JUSTIFI ED THE FALL IN G.P. TO THE SATISFACTION OF THE ASSESSI NG OFFICER IN THE SCRUTINY ASSESSMENT PROCEEDINGS. 2. THE LEARNED CIT(A) HAS ERRED IN FACT AND LAW IN DELETING THE ADDITION OF RS.8 13 748/- MADE ON ACCOUNT OF DISALLOWANCE OF BAD DEBTS CLAIMED BY 2 ASSESSEE IGNORING THE FACT THAT THE CLAIM OF BAD DEBT IS WITHOUT FULFILLING THE BASIC REQUIREMENT OF ESTABLISHING. THAT DEBT HAS BECOME BAD AS REQUIRED U/S. 36(2)(VII) OF THE I.T.ACT 1961. 2. WE HAVE HEARD THE LEARNED DR AS WELL AS THE LEA RNED COUNSEL APPEARING ON BEHALF OF THE ASSESSEE AND CA REFULLY PERUSED THE RECORD. 3. FACTS CONCERNING GROUND NO.1 ARE STATED IN BRIE F. THE ASSESSEE WHO IS THE DEALER IN DRUGS PHARMACEUTICA LS AROMATIC CHEMICALS ETC. DECLARED INCOME OF RS.1 49 350/- ON A TURNOVER OF RS.6 85 61 668/-. GROSS PROFIT RATE WITH REFERENCE TO SALES WORKS OUT TO 7.47%. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE ASSESSING OFFICER NOTICED THAT IN THE IMMEDIATELY PRECEDING Y EARS G.P. RATE WAS SLIGHTLY HIGHER I.E. 7.83% IN 2002-2003 AND 9.48% IN THE ASSESSMENT YEAR 2001-2002. AS THERE WAS FALL IN THE G.P. DECLA RED BY THE ASSESSEE THE ASSESSING OFFICER MADE AN ADDITION OF RS.3 42 808/- ON THE GROUND THAT FALL IN G.P. RATE AS COMPARED TO T HE IMMEDIATELY PRECEDING YEAR WORKS OUT TO AROUND 0.5% AND TO THA T EXTENT ADDITION REQUIRES TO BE MADE. 4. AGGRIEVED ASSESSEE CONTENDED BEFORE THE CIT(A) THAT IT WAS DEALING IN BULK DRUGS AND MAINTAINING BOOKS OF ACCOUNTS STOCK RECORDS ETC. WHICH WERE DULY AUDITED. IN THE ABSEN CE OF POINTING OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS MERE MARGINAL FALL IN THE G.P. RATE SHOULD NOT BE THE SOLE CRITERIA FOR MAKIN G AN ADHOC ADDITION. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER : 1.3. IT IS FOUND THAT THE ASSESSING OFFICER HAS NO T REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT ON ACCOUNT OF FINDING OF ANY DEFECT THEREIN. THE FACT OF MARGINAL FALL IN GROSS PROFIT RATE OF 0.36% AS 3 AGAINST INCREASE OF SALES OF 126.66% WAS AVAILABLE WITH THE ASSESSING OFFICER. EVEN IF THE APPELLANT DID NOT OFFER ANY SPECIFIC EXPLANATION AS TO THE QUERY RAISED DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE AFORESAID ADDITION WITHOUT FINDING ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS WITHOUT INVOKING THE PROVISIONS OF SECTION 145 (3) AND WITHOUT APPRECIATING THE SHARP RISE IN SALES. IN VIEW OF TH IS THE AFORESAID ADDITION OF RS.3 42 808/- IS DELETED AND GROUND NO. 1 IS ALLOWED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A) REVENUE I S IN APPEAL BEFORE US. LEARNED DR STRONGLY RELIED UPON THE ORD ER PASSED BY THE ASSESSING OFFICER AND SUBMITTED THAT DESPITE A TURN OVER OF RS.6.85 CRORES THE GP RATE DECLARED BY THE ASSESSEE AS WELL AS THE NET INCOME DECLARED THEREON IS TOO LOW AND THUS THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE IMPUGNED ADDITION. 6. ON THE OTHER HAND LEARNED COUNSEL STRONGLY RELI ED UPON THE ORDER PASSED BY THE LEARNED CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. ADMITTEDLY ASSESSEE MAINTAINED STOCK REGISTER AND THE BOOKS WERE DULY AUDITED. NO SPECIFIC DEFECT WAS POINTED OUT BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. UNDER THESE CIRCUMSTANCES MERELY ON ACCOUNT OF A MARGINA L DIFFERENCE OF 0.36% IN THE G.P. RATE BOOKS RESULTS CANNOT BE REJ ECTED. UNDER THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS JUSTIFIED IN CANCELLING THE ADDITION. ACCORDINGLY GROUND NO. 1 IS REJECTED. 8. FACTS CONCERNING GROUND NO. 2 ARE THAT THE ASSE SSING OFFICER DISALLOWED A CLAIM OF DEDUCTION TOWARDS BAD DEBTS ON THE GROUND THAT THE ASSESSEE HAS NOT FURNISHED DETAILS I.E. FROM WHEN THE 4 DEBT WAS OUTSTANDING AND EFFORTS MADE TO RECOVER TH E AMOUNT. AGGRIEVED ASSESSEE CONTENDED BEFORE THE CIT(A) THA T MERE WRITE-OFF OF AN AMOUNT AS BAD DEBT IS SUFFICIENT TO CLAIM DEDUCT ION UNDER SECTION 36(1)(VII) OF THE ACT. IT WAS FURTHER CONTENDED WI TH SUPPORTING DOCUMENTS THAT CARRIED FORWARD BALANCES COULD NOT BE RECOVERED AND THUS THE ASSESSEE HAD DECIDED TO WRITE-OFF THE SAME AS BAD DEBT; BECAUSE THE PARTIES HAD BECOME COMMERCIALLY INSOLVE NT. IT WAS ALSO CONTENDED THAT THERE WAS NO CHANCE OF RECOVERY OF D UES FROM THE PARTIES AND HENCE FILING OF LEGAL SUIT WOULD HAVE R ESULTED IN ADDITIONAL LOSS ON ACCOUNT OF LEGAL FEE STAMP DUTY ETC. AND THUS THE WRITE-OFF WAS JUSTIFIED. 9. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE AN D ALLOWED CLAIM OF DEDUCTION OF RS.8 13 748/- BY OBSERVING IN PARA 2.3 AS UNDER : 2.3. IT IS FOUND THAT THE APPELLANT HAD SUBMITTED NECESSARY DETAILS OF THE ACCOUNTS OF THESE TWO PARTIES BEFORE THE ASSESSING OFFICER SPECIFYING THE TRANSACTIONS MADE WITH THEM. THE APPELLANT HAD ALSO WRITTEN OFF THOSE AMOUNTS AS IRRECOVERABLE IN ITS ACCOUNTS MAINTAINED FOR THE RELEVANT PREVIOUS YEAR. IT HAD ALSO GIVEN THE REASONS FOR WRITING-OFF THE SAID AMOUNTS AS IRRECOVERABLE. THE PROVISIONS OF SECTION 36(1)(VII) DO NOT REQUIRE THE APPELLANT TO EXPLAIN THE EFFORTS MADE TO RECOVER THE DEBT DUE. 10. LEARNED DR STRONGLY RELIED UPON THE ORDER OF T HE ASSESSING OFFICER AND ALSO PLACED BEFORE US A COPY OF THE ORDER OF THE ITAT A BENCH MUMBAI IN THE CASE OF LEAK PROOF IN DIA PVT. LTD. ITA. NO. 7126/MUM/2008 DATED 30 TH OCTOBER 2009 TO SUBMIT THAT EVENAFTER THE DECISION OF THE JURISDICTIONAL HIGH C OURT IN THE CASE OF OMEN INTERNATIONAL 313 ITR 128 THE INITIAL ONUS IS UPON THE ASSESSEE 5 TO PROVE THAT IT WAS A BONAFIDE CLAIM WHEREAS IN THE INSTANT CASE BONAFIDES OF THE CLAIM WERE NOT PROVED. 11. ON THE OTHER HAND LEARNED COUNSEL RELIED UPO N THE ORDER OF THE SUPREME COURT IN THE CASE OF TRF LIMIT ED 323 ITR 397 TO SUBMIT THAT MERE WRITE-OFF IS SUFFICIENT TO CLAIM D EDUCTION UNDER SECTION 36(1)(VII) OF THE ACT. IT WAS FURTHER CONTE NDED THAT LEARNED CIT(A) HAS CONSIDERED THE BONAFIDES OF THE CLAIM AN D THUS THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO FURTHER E XPLAIN THE EFFORTS MADE TO RECOVER THE DEBTS DUE. IN OTHER WORDS THE INITIAL ONUS PLACED UPON THE ASSESSEE HAVING BEEN DISCHARGED IT IS NOT FOR THE ASSESSEE TO PROVE THAT THE DEBT HAS REALLY BECOME BAD. HE THUS STRONGLY RELIED UPON THE ORDER PASSED BY THE LEARNED CIT(A). 12. HAVING REGARD TO THE RIVAL SUBMISSIONS AND IN THE LIGHT OF DECISION OF THE HONBLE SUPREME COURT IN THE CASE C ITED (SUPRA) WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE LEARNE D CIT(A) DOES NOT CALL FOR INTERFERENCE PARTICULARLY IN VIEW OF THE FACT THAT THE CONTENTION OF THE ASSESSEE WITH REGARD TO CIRCUMSTANCES UNDER WHICH AMOUNT WAS WRITTEN OFF WAS NOTICED BY THE LEARNED CIT(A). 13. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISMISSED. 14. ITA. NO. 1668/MUM/2008 : IN THIS APPEAL THE ASSESSEE RAISED AS MANY AS 11 GROUNDS CHALLENGING THE ORDER OF THE LEARNED CIT(A). IN ADDITION THERETO ASSESSEE HAS ALSO RAIS ED THE FOLLOWING ADDITIONAL GROUND : 1. THE LEARNED CIT(A) ERRED IN ENHANCING THE DISALLOWANCE OUT OF COMMISSION EXPENSES WITHOUT APPRECIATING THAT THE ORDER PASSED ENHANCING THE DISALLOWANCE WITHOUT ISSUING ANY ENHANCEMENT NOTICE AND WITHOUT GIVING ANY OPPORTUNITY AGAINST SUCH ENHANCEMENT MADE AND HENCE THE 6 ENHANCEMENT OF DISALLOWANCE MADE OUT OF COMMISSION EXPENSES IS UNJUSTIFIED BAD IN LAW AND LIABLE TO BE QUASHED. 15. SINCE THE GROUNDS ARE INTERCONNECTED THE FACTS NECESSARY FOR THE DISPOSAL OF THESE GROUNDS ARE SET OUT IN BR IEF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER NOTICED THAT ASSESSEE PAID A TOTAL COMMISSION OF RS.30 47 473/- TO VARIOUS PARTIES. FROM THE DETAILS OF COMMISSION AND BROKERAGE PAYMEN TS THE ASSESSING OFFICER ARRIVED AT A CONCLUSION THAT THEY WERE NOT TALLYING WITH THE FIGURES SHOWN IN THE P & L ACCOUNT. IT MAY BE NOTICED THAT THERE IS A DEBIT NOTE OF RS. 9 LAKHS BEING SERVICE AND COMMISSION CHARGES PAYABLE TO ORSAN CHEMICALS & PVT. LTD. SINC E THE ASSESSEE HAS NOT FURNISHED DETAILS WITH REGARD TO AFOREMENTI ONED DEBIT NOTE A NOTICE UNDER SECTION 133 (6) OF THE ACT WAS ISSUED IN THE NAME OF M/S. ORSAN CHEMICALS WHICH WAS RETURNED BY THE POSTAL AU THORITY. CONSIDERING THE OVERALL CIRCUMSTANCES THE ASSESSIN G OFFICER CONCLUDED THAT THE COMMISSION PAID IS NOT VERIFIABL E AND HENCE HE PROCEEDED TO MAKE A ROUND SUM ADDITION/DISALLOWANCE OF RS.10 LAKHS OUT OF CLAIM OF COMMISSION AND BROKERAGE PAYMENTS. 16. AGGRIEVED ASSESSEE CONTENDED BEFORE THE CIT(A ) THAT THE DISALLOWANCE OF RS. 10 LAKHS IS NOT IN ACCORDANCE W ITH LAW INASMUCH AS THE ASSESSING OFFICER HAS NOT GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD AND ALSO CONTENDED THAT MERELY BECAUSE A NOTICE ISSUED UNDER SECTION 133(6) WAS RETURNED UNSERVED THE ASSE SSING OFFICER SHOULD NOT HAVE ASSUMED THAT THE PAYMENT WAS BOGUS. THE ENTIRE COMMISSION WAS PAID BY ACCOUNT PAYEE CHEQUES AND NO NE OF THE RECIPIENTS WERE RELATIVES OF THE ASSESSEE. SINCE TH E PAYMENTS WERE MADE FOR THE PURPOSE OF BUSINESS NO PART OF THE CLA IM IS DISALLOWABLE UNDER THE ACT. 17. HAVING REGARD TO THE CLAIM MADE BY THE ASSESSE E THE LEARNED CIT(A) CALLED FOR THE REMAND REPORT FROM TH E ASSESSING OFFICER. 7 IT IS NECESSARY TO NOTICE HERE THAT PURSUANT TO THE DIRECTION OF THE CIT(A) THE ASSESSING OFFICER HAS GIVEN THE ASSESSE E AN OPPORTUNITY OF BEING HEARD AND FURTHER DIRECTED THE ASSESSEE TO FU RNISH DETAILS OF COMMISSION AND BROKERAGE PAYMENTS VIS--VIS PAYMENT S ABOVE RS.5000/-. AS COULD BE NOTICED FROM PAGES 38 39 AN D 58 OF THE PAPER BOOK THE ASSESSEE FURNISHED ALL THE DETAILS CALLED FOR BY THE ASSESSING OFFICER. HE HAS ALSO FURNISHED A CONFIRMATION LETTE R TO PROVE THAT COMMISSION WAS PAYABLE TO ORSAN CHEMICALS PVT. LTD. WHEREVER SPECIFIC DETAILS WERE CALLED FOR THE ASSESSEE FURN ISHED SUCH DETAILS ALONG WITH SUPPORTING EVIDENCE. 18. BASED UPON THE DETAILS FILED BY THE ASSESSEE THE ASSESSING OFFICER SUBMITTED HIS REMAND REPORT WHERE IN HE HAS NOT MADE ANY COMMENT WITH REGARD TO COMMISSION PAYABLE TO M/S. ORSAN CHEMICALS PVT. LTD. AS REGARDS THE COMMISSION PAYME NTS TO OTHER PARTIES THE ASSESSING OFFICER MADE CERTAIN COMMENT S TO INDICATE THAT TOTAL UNVERIFIABLE COMMISSION WORKS OUT TO RS.5 95 021/- ONLY. THE LEARNED CIT(A) HAS PROVIDED A COPY OF THE REMAND RE PORT TO THE ASSESSEE AND IN RESPONSE THERETO THE ASSESSEE FILED A DETAILED REPLY DATED 23-11-2007 AT THE TIME OF HEARING ON 27-12-20 07. 19. LEARNED CIT(A) OBSERVED THAT THOUGH THE REMAND REPORT OF THE ASSESSING OFFICER IS SILENT ON THE GENUINENESS AND CORRECTNESS OF THE PAYMENT OF COMMISSION TO ORSAN CHEMICALS PVT. L TD. IT CANNOT BE CONCLUDED THAT THE ASSESSING OFFICER HAD SPECIFICAL LY LOOKED INTO THE MATTER AND FOUND THE PAYMENT OF COMMISSION AS ACCEP TABLE. HE ALSO OBSERVED THAT THE ASSESSING OFFICER OBSERVED SPECIF IC DEFICIENCY WITH REGARD TO PAYMENT OF COMMISSION OF RS. 5.89 LAKHS W HICH SHOULD BE CONSIDERED SEPARATELY AS ADDITION IN THE PLACE OF G ENERAL DEFICIENCY WHICH WARRANTED ADHOC DISALLOWANCE OF RS.1 LAKH AT THE INITIAL STAGE I.E. RS. 9 LAKHS REFERABLE TO M/S. ORSAN CHEMICALS PVT. LTD. + RS. 1 LAKH TOWARDS GENERAL DEFICIENCY. THUS HE SUSTAINED ADDITION OF RS. 9 LAKHS AND ALSO SUSTAINED A FURTHER ADDITION OF RS.5 89 275/- TOWARDS UNVERIFIABLE COMMISSION PAYMENTS NOTICED BY THE ASS ESSING OFFICER IN 8 THE REMAND REPORT. THUS AS AGAINST ADHOC DISALLOWA NCE OF RS.10 00 000/- IN THE ORIGINAL ASSESSMENT ORDER TH E LEARNED CIT(A) MADE AN ADDITION OF RS.14 89 275/- RESULTING IN ENH ANCEMENT OF ASSESSMENT. FURTHER AGGRIEVED ASSESSEE IS IN APPEA L BEFORE US. 20. LEARNED COUNSEL APPEARING ON BEHALF OF THE AS SESSEE SUBMITTED THAT THERE WAS ENHANCEMENT OF INCOME WITH OUT GIVING PROPER OPPORTUNITY OF BEING HEARD WHICH IS NOT PER MISSIBLE UNDER LAW. IT WAS FURTHER SUBMITTED THAT THE IMPUGNED ADD ITIONS SOME OF WHICH WERE SUBJECT MATTER OF CHALLENGE VIDE GROUND NOS. 1 TO 7 ARE ALSO NOT IN ACCORDANCE WITH LAW. AS REGARDS THE DIS ALLOWANCE OF COMMISSION PAID TO M/S. ORSAN CHEMICALS PVT. LTD. ( RS. 9 LAKHS) IT WAS SUBMITTED BEFORE US THAT THE IMPUGNED SUM WAS N OT SPECIFICALLY ADDED IN THE ASSESSMENT ORDER AND EVEN DURING THE C OURSE OF REMAND REPORT THE ASSESSING OFFICER HAS NOT SPECIFICALLY C ALLED FOR THE INFORMATION. ADVERTING OUR ATTENTION TO PAGES 38 3 9 58 AS WELL AS PAGES 28 AND 29 OF THE PAPER BOOK LEARNED COUNSEL SUBMITTED THAT THE ASSESSING OFFICER PURSUANT TO THE REMAND ORDER BY THE LEARNED CIT(A) ASKED THE ASSESSEE TO FURNISH NAMES AND ADD RESSES OF THE PARTIES TO WHOM COMMISSION IS PAID IN EXCESS OF RS. 5000/-AND ACCORDINGLY SUCH INFORMATION WAS FURNISHED BY THE A SSESSEE AND THEREAFTER THE ASSESSING OFFICER HAD NEVER CALLED FOR ANY FURTHER INFORMATION AND DESPITE THAT THE ASSESSEE FILED CON FIRMATION LETTER FROM M/S. ORSAN CHEMICALS. IN THE REMAND REPORT THE ASSESSING OFFICER WAS SILENT ABOUT THE ISSUE CONCERNING THE COMMISSION PAYABLE TO M/S. ORSAN CHEMICALS PVT. LTD. IT WAS ALSO STATE D THAT THE COMMISSION WAS PAID BY ACCOUNT PAYEE CHEQUE. PRESUM ABLY BECAUSE THE ASSESSING OFFICER WAS SATISFIED HE HAS NOT ADV ERSELY COMMENTED UPON THE SAID MATTER IN THE REMAND REPORT SUBMITTED TO THE CIT(A). HOWEVER STRANGELY THE LEARNED CIT(A) ASSUMED THAT THE SILENCE ON THE PART OF THE ASSESSING OFFICER REGARDING THE GEN UINENESS AND CORRECTNESS OF THE PAYMENT OF COMMISSION TO M/S. OR SAN CHEMICALS PVT. LTD. DOES NOT IMPLY THAT THE ASSESSING OFFICER HAD SPECIFICALLY 9 LOOKED INTO THIS MATTER AND ACCORDINGLY SOUGHT TO M AKE A SPECIFIC ADDITION OF RS. 9 LAKHS DESPITE THE FACT THAT THERE WAS NO SUCH SPECIFIC ADDITION IN THE ASSESSMENT ORDER; THE ADDITION MADE IN THE ORIGINAL ASSESSMENT ORDER BEING A ROUND SUM ADDITION OF RS. 10 LAKHS WITHOUT SPECIFYING AS TO WHETHER WHICH PART OF RS. 10 LAKHS IS REFERABLE TO ANY SPECIFIC COMMISSION PAYMENT CLAIMED. HE THUS STRONG LY CONTENDED THAT THERE IS NO CASE FOR MAKING AN ADDITION OF RS. 9 LAKHS. AS REGARDS THE OTHER DISALLOWANCES TOTALLING TO RS. 5 89 275/- IT WAS CONTENDED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS T HE ASSESSING OFFICER HAS NOT ISSUED SUMMONS TO ANY PARTIES EXCEP T TO M/S. ORSAN CHEMICALS PVT. LTD. AND THUS THE ADDITION MADE BY T HE ASSESSING OFFICER WAS CONTRARY TO LAW. WHEN THE SAME WAS PUT TO THE LEARNED CIT(A) A REMAND REPORT WAS CALLED FOR AND AT THAT STAGE THOUGH THE ASSESSEE WAS WILLING TO FURNISH DETAILS THE ASSESSI NG OFFICER HAS MERELY ASKED FOR INFORMATION CONCERNING PAYMENTS AB OVE RS.5000/- WHEREAS MOST OF THE PAYMENTS WERE BELOW RS. 5000/- AND THUS THE ASSESSEE HAD NO OPPORTUNITY TO FURNISH INFORMATION. HOWEVER BASED UPON THE REMAND REPORT WHEN THE LEARNED CIT(A) CALL ED FOR THE EXPLANATION OF THE ASSESSEE RELEVANT MATERIAL WAS FURNISHED AT THAT STAGE TO CLARIFY THE POSITION BUT THE LEARNED CIT(A ) AGAIN ASSUMED THAT IT WOULD AMOUNT TO TAKING ADDITIONAL EVIDENCE WHIC H IS NOT PERMISSIBLE IN LAW. IT WAS CONTENDED THAT THE FIRST APPELLATE AUTHORITY PASSED THE ORDER IN GROSS VIOLATION OF THE PRINCIPL ES OF NATURAL JUSTICE OVERLOOKING THE CIRCUMSTANCES UNDER WHICH THE ASSES SEE COULD NOT FURNISH INFORMATION EVEN DURING THE COURSE OF REMAN D PROCEEDINGS. 21. LEARNED DR ON THE OTHER HAND RELIED UPON THE O RDER PASSED BY THE LEARNED CIT(A). 22. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE RECORD. AT THE OUT SET IT MAY BE NOTIC ED THAT IT WAS NOT A CASE OF ENHANCEMENT OF INCOME AS COULD BE NOTICED F ROM THE FACT THAT THE ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF R S.27 22 210/- OUT OF WHICH THE LEARNED CIT(A) DELETED DISALLOWANC E OF RS.3 42 808/- 10 AND RS.8 13 748/- TOTALLING TO RS.11 56 556/-; THUS DESPITE MAKING AN ADDITION OF RS.14 89 275/- AS AGAINST RS. 10 LAK HS ADDITION MADE IN THE ASSESSMENT ORDER THE DIFFERENTIAL ADDITION WORKS OUT ONLY RS.4 89 275/- WHICH IS LESS THAN THE RELIEF GRANTED BY THE LEARNED CIT(A). IN OTHER WORDS THERE WAS NO ENHANCEMENT OF INCOME BUT THE ORDER OF THE LEARNED CIT(A) RESULTED IN REDUCTION O F THE INCOME ASSESSED TO TAX. THUS IT CANNOT BE SAID TO BE A CA SE OF ENHANCEMENT OF INCOME. 23. HOWEVER THE FACT REMAINS THAT THE LEARNED CIT (A) HAS INFORMED THE ASSESSEE ABOUT HIS VIEW AFTER OBTAINI NG THE REMAND REPORT FROM THE ASSESSING OFFICER WHICH AMOUNTS TO GIVING A FORMAL OPPORTUNITY TO THE ASSESSEE. 24. IN OUR CONSIDERED OPINION IT IS NOT NECESSARY TO DWELL INTO THE LEGAL ASPECTS IN THE INSTANT CASE FOR THE SIMPL E REASON THAT THE ASSESSING OFFICER HAS NOT MADE A SPECIFIC ADDITION OF RS. 9 LAKHS REFERABLE TO COMMISSION PAYABLE TO M/S. ORSAN CHEMI CALS PVT. LTD. AND EVEN IN THE REMAND REPORT THOUGH THE ASSESSEE HAS FURNISHED CONFIRMATION LETTER AND STATED THAT THE PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUE NO ADVERSE FINDING WAS GIVEN BY THE A SSESSING OFFICER PRESUMABLY ON ACCOUNT OF THE FACT THAT HE WAS SATIS FIED. BUT THE LEARNED CIT(A) HAS ARBITRARILY TAKEN INTO CONSIDERA TION THE SAID PAYMENT AS UNEXPLAINED COMMISSION PAYMENT WHICH IS IN OUR OPINION IS CONTRARY TO LAW FACTS AND CIRCUMSTANCE S OF THIS CASE. WE THEREFORE CANCEL THE ADDITION OF RS. 9 LAKHS REFER ABLE TO THE COMMISSION PAID TO M/S. ORSAN CHEMICALS PVT. LTD. 25. AS REGARDS THE BALANCE ADDITION OF RS. 5 89 27 5/- WHICH WAS CHALLENGED VIDE GROUND NOS. 2 TO 7 WE ARE OF THE OPINION THAT IN THE PECULIAR CIRCUMSTANCES OF THE CASE THE ASSESSEE WAS JUSTIFIED IN FURNISHING RELEVANT DETAILS AT THE FIRST AVAILABLE STAGE BEFORE THE CIT(A) AND IN THE INTEREST OF SUBSTANTIAL JUSTICE HE OUGHT TO HAVE ADMITTED THE ADDITIONAL EVIDENCE TO CONSIDER THE ISSUE FROM THE CORRECT 11 PERSPECTIVE. SINCE THE LEARNED CIT(A) HAS ERRED IN LAW IN NOT ADMITTING THE ADDITIONAL EVIDENCE IN THE INTEREST OF SUBSTAN TIAL JUSTICE WE SET ASIDE THE ISSUES CONCERNING GROUND NOS. 2 TO 7 AND DIRECT THE ASSESSING OFFICER TO RECONSIDER THE ISSUE IN ACCORD ANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEI NG HEARD. 26. GROUND NOS. 8 AND 9 ARE NOT PRESSED BY THE ASS ESSEE AND ACCORDINGLY THEY ARE REJECTED. 27. GROUND NO. 10 IS CONSEQUENTIAL IN NATURE AND H ENCE NEED NOT BE CONSIDERED AT THIS STAGE. SINCE MAIN IS SUE IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER HE IS DIRECTED T O RE-COMPUTE THE INTEREST CHARGEABLE UNDER SECTION 234B AND 234C OF THE ACT IN ACCORDANCE WITH LAW. 28. GROUND NO. 11 IS GENERAL IN NATURE AND HENCE D O NOT REQUIRE INDEPENDENT CONSIDERATION. 29. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DECEMBER 2010. SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER SD/- (D. MANMOHAN) VICE PRESIDENT DATED : 16 TH DECEMBER 2010 VBP/- COPY TO : 1. KETAN PHARMA 646 LAXMI PLAZA LAXMI INDUSTRIAL ESTATE NEW LINK ROAD ANDHERI (WEST) MUMBAI 400 053. PAN AAAFP2741 B 2. ITO 16 (2) (4) 2 ND FLOOR MATRU MANDIR TARDEO MUMBAI-400 034. 3. CIT(A)-XVI MUMBAI 4. CIT CITY-XVI MUMBAI 5. DR A BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI 12 DATE INITIALS 1. DRAFT DICTATED ON: 15-12-10 SR. PS 2. DRAFT PLACED BEFORE AUTHOR: 15-12-10 SR. PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER : V.P. 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS 6. ORDER PRONOUNCED ON: SR. PS 7. ORDER COME BACK TO SR.PS SR. PS 8. FILE SENT TO THE BENCH CLERK: SR. PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: 10. DATE OF DISPATCH OF ORDER: