Smt. Jayshreeben Deepakkumar Jariwala, Surat v. The Income tax Officer,Ward-2(1),, Surat

ITA 1688/AHD/2009 | 2005-2006
Pronouncement Date: 25-11-2011 | Result: Allowed

Appeal Details

RSA Number 168820514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 1688/AHD/2009
Duration Of Justice 2 year(s) 6 month(s) 3 day(s)
Appellant Smt. Jayshreeben Deepakkumar Jariwala, Surat
Respondent The Income tax Officer,Ward-2(1),, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 25-11-2011
Date Of Final Hearing 02-11-2011
Next Hearing Date 02-11-2011
Assessment Year 2005-2006
Appeal Filed On 22-05-2009
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI D.K.TYAGI JM AND A. MOHAN ALANKAMON Y AM. SMT. JAYSHREEBEN D. JARIWALA PROP. M/S J.D. TEXTILES A/10-11 ROAD NO.3 UDHNA SURAT. VS. INCOME-TAX OFFICER WARD 291) SURAT. (APPELLANT) .. (RESPONDENT) AND INCOME-TAX OFFICER WARD 2(1) SURAT. VS. SMT. JAYSHREEBEN D. JARIWALA PROP. M/S J.D. TEXTILES A/10- 11 ROAD NO.3 UDHNA SURAT. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI HARDIK VORA AR REVENUE BY:- SHRI SAMIR TEKRIWAL SR.DR DATE OF HEARING : 2/11/2011 DATE OF PRONOUNCEMENT : 25-11-11 O R D E R PER D. K. TYAGI JUDICIAL MEMBER . ITA NO.1688/AHD/2009 ASST. YEAR :2005-06 ITA NO.1710/AHD/2009 ASST. YEAR :2005-06 ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 2 THESE ARE TWO CROSS APPEALS ONE FILED BY THE ASS ESSEE AND THE OTHER BY THE REVENUE AGAINST THE ORDER OF LD. CIT ( A) DATED 26/02/2009 FOR ASST. YEAR 2005-06. ITA NO.1688/AHD/2009 ASST. YEAR 2005-06 (ASSESSEES APPEAL): 2. THE ASSESSEE HAS RAISED FOLLOWING GROUND IN HER APPEAL :- (1) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT THE LD. CIT (A)-II SURAT HAS ERRED IN PARTLY CONFIRMING THE ADDITION OF RS.10 35 377/- ON ACCOUN T OF SUNDRY CREDITORS WITHOUT APPRECIATING THE FACT THAT THE CR EDITORS WERE IN EXISTENCE AND LIABILITY TOWARDS THEM WERE NOT CEASE D TO EXIST AND THEY WERE DULY PAID OFF IN SUBSEQUENT YEARS. TH E LD. CIT(A)-II SURAT FAILED TO APPRECIATE THE FACTS AND EVIDENCES IN RIGHT PERSPECTIVE. ITA NO.1710/AHD/2009 ASST. YEAR 2005-06 (REVENUES APPEAL): 3. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL :- (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT (A) HAS ERRED. A) IN DELETING THE ADDITION MADE BY THE AO OF RS.10 36 426/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE AC T. B) IN DELETING THE DISALLOWANCE MADE BY AO OF RS.10 45 362/- ON ACCOUNT OF SUNDRY CREDITORS. C) IN DELETING THE DISALLOWANCE OF RS.5 80 362/- MADE BY THE AO ON ACCOUNT OF CLAIMED VARIOUS EXPENSES. 4. THE ONLY GROUND IN ASSESSEES APPEAL AND GROUND NO.1(B) OF REVENUES APPEAL ARE COMMON RELATING TO ADDITION OF A SUM OF RS.20 80 739/- BEING UNEXPLAINED SUNDRY CREDITORS. THE AO OBSERVED THAT EVEN THOUGH IN HER LETTER DTD.26.11.2007 THE ASSESS EE HAD FURNISHED A PART ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 3 OF THE DETAILS AND EVIDENCES PERTAINING TO THE UNSE CURED LOANS YET NO DETAIL OR ANY EVIDENCE PERTAINING TO THE SUNDRY CRE DITORS TOTALING RS.20 80 739/- WAS FURNISHED. THE AO THEREFORE TRE ATED THE SAID SUM AS BOGUS AND UNEXPLAINED AND CONSEQUENTLY HE ADDED THE SAME TO ASSESSEES TOTAL INCOME. IN REMAND REPORT IT HAS BEEN STATED B Y THE AO THAT IN COURSE OF THE REMAND PROCEEDINGS THE ASSESSEE HAD FURNISH ED CONFIRMATIONS FROM ONLY SEVEN PARTIES AS PER THE DETAILS SHOWN HEREUND ER :- SL. NO. NAME OF THE CREDITORS DR.BALANCE AS PER CONFIRMATION DR. BALANCE AS PER AUDIT REPORT REMARKS 1. LAXMAN INDUSTRIES 87 000 87 000 -- 2 RATHI ENTERPRISE 5 26 826 1 44 121 NOT TALLIED 3 SHREE RADHEY GOVIND POLYSTER 40 530 34 484 NOT TALLIED 4 SHRI GOVINDRAJ TRADING CO. 95 923 1 03 910 NOT TALLIED 5 SHRIPAL TEXTURISERS P. LTD. 1 78 394 1 73 633 NOT TALLIED 6 TEJAS RAYONS 4 14 194 4 13 784 NOT TALLIED 7 YOGI TEXTILES 89 670 88 430 NOT TALLIED HOWEVER THE ASSESSEE WAS UNABLE TO RECONCILE THE C LOSING BALANCES OF THE PARTIES AT SL.NO.2 TO 7 ABOVE IN THE BOOKS OF THE ASSESSEE AND THE BALANCES SHOWN IN THEIR BOOKS AS PER THE CONFIRMATI ONS FURNISHED BY THEM. AS FOR THE REMAINING FIFTEEN CREDITORS THE A SSESSEE HAD FURNISHED ONLY THEIR NAMES AND ADDRESSES AND NO OTHER EVIDENC E INCLUDING CONTRA- CONFIRMATIONS WAS FURNISHED. THE AO ALSO PROVIDED A N OPPORTUNITY TO THE ASSESSEE TO SHOW THE PAYMENTS MADE TO SUCH CREDITOR S IN THE SUBSEQUENT MONTHS/YEARS. FROM THE BANK STATEMENT OF THE ASSESS EE THE AO FOUND THAT ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 4 THE PAYMENTS SHOWN THEREIN TO SOME PARTIES DID NOT TALLY WITH THE DETAILS OF PAYMENT FURNISHED BY THE ASSESSEE. THE AO HAD FU RTHER BROUGHT TO NOTICE THE OBSERVATIONS OF THE AUDITORS IN THE AUDI T REPORT UNDER THE HEAD NOTES ON ACCOUNTS THAT THE BALANCE OF SUNDRY CRED ITORS WERE SUBJECT TO CONFIRMATIONS. IT WAS THUS ARGUED BY THE AO THAT EV EN THE CONFIRMATIONS FURNISHED DURING THE REMAND PROCEEDINGS WERE NOT VE RIFIABLE AND DID NOT SUPPORT THE ASSESSEES CLAIM. 5. IN APPEAL BEFORE LD. CIT (A) THROUGH WRITTEN SUB MISSIONS IT WAS SUBMITTED BY THE ASSESSEE THAT VARIOUS DETAILS AND CONFIRMATION LETTERS FROM THE CREDITORS HAD BEEN FILED BEFORE THE AO IN COURSE OF REMAND PROCEEDINGS. WITH REGARD TO THE DIFFERENCES BETWEEN THE ACCOUNTS OF THE CREDITORS IN THE BOOKS OF ASSESSEE AND THE ACCOUNTS CONFIRMED BY THE SEVEN CREDITORS IT WAS SUBMITTED THAT THEY WERE ON LY MINOR DIFFERENCES WHICH WERE ATTRIBUTABLE TO VATAV KASAR AND LATE PAY MENT CHARGES. THE CONFIRMATIONS HOWEVER PROVED THE EXISTENCE OF SUCH CREDITORS AND THE EXISTENCE OF LIABILITY OF THE ASSESSEE. THE MAJOR D IFFERENCE WAS HOWEVER IN THE CASE OF RATHI ENTERPRISE; IT WAS EXPLAINED B EFORE THE AO THAT THE SAID CONCERN WAS A DEALER OF GARDEN SILK MILLS AND THEY HAD PAID A SUM OF RS.3 82 370/- ON BEHALF OF THE ASSESSEE AGAINST THE DUES OUTSTANDING. IF THIS AMOUNT WAS TAKEN OUT THEN THERE WOULD BE NO DI FFERENCE IN THE CLOSING BALANCES. COPIES OF LETTERS DATED 24.10.200 8 AND 21.01.2009 WERE ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 5 FURNISHED IN SUPPORT OF ASSESSEES CLAIM. IT WAS FU RTHER SUBMITTED THAT IN THE ORIGINAL SUBMISSION THE ASSESSEE HAD SHOWN FUL L DETAILS OF SUBSEQUENT PAYMENTS MADE TO THE CREDITORS AND THEREFORE THER E COULD NOT BE ANY CASE OF CESSATION OF LIABILITY AS THE CREDITORS WERE IN EXISTENCE. THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION WITHOUT CONDUC TING INDEPENDENT ENQUIRIES. WITH REGARD TO THE DISCREPANCIES IN THE PAYMENTS MADE IT WAS ARGUED THAT THE AO DID NOT POINT OUT ANY DETAIL IN THIS REGARD. 6. AFTER CONSIDERING THE CONTENTIONS OF BOTH THE SI DES THE LD. CIT(A) DECIDING THE ISSUE GIVING PART RELIEF TO THE ASSESS EE OF RS.10 45 362/- OUT OF ADDITION OF RS.20 80 739/- WITH THE FOLLOWING OB SERVATIONS: 14. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS . WHAT THE ASSESSEE AND THE ARS SHOULD NOT FORGET AND OVERLOOK THAT TH E MATTER WAS REMANDED ONLY TO PROVIDE FURTHER OPPORTUNITY TO THE ASSESSEE TO PRESENT HER CASE. THIS WAS DONE IN THE INTEREST OF NATURAL JUSTICE AND FAIRPLAY. THE ONUS THEREFORE WAS ENTIRELY ON THE ASSESSEE AND THE ARS TO PRODUCE ALL RELEVANT DETAILS IN SUPPORT OF THEIR CLAIM. THE AO COULD NOT BE EXPECTED TO CONDUCT ANY FURTHER ENQUIRY WITH REGARD TO THE S UBMISSIONS MADE AND THE EVIDENCES PRODUCED IN REMAND PROCEEDINGS. TO BE GIN WITH THERE WAS ABSOLUTELY NO CASE FOR PROVIDING ANY SUCH OPPORTUNI TY OR ADMITTING ANY ADDITIONAL EVIDENCE. SIMPLY BECAUSE THE ASSESSEE HA D SUFFERED LOSSES IN BUSINESS IT COULD NOT BE HELD AND TREATED AS A REA SONABLE AND SUFFICIENT CAUSE FOR NOT COMPLYING WITH THE LETTERS AND NOTICE S ISSUED BY THE AO AND NOT FURNISHING COMPLETE DETAILS DURING THE ASST. PR OCEEDINGS. IT WAS CLAIMED THAT THE BOOKS WERE LOST IT WAS HOWEVER NO T CLARIFIED HOW THE BOOKS WERE LOST NOR WAS ANY EVIDENCE FURNISHED TO SUPPORT SUCH A CLAIM. THEREFORE THE FURTHER OPPORTUNITY PROVIDED TO THE ASSESSEE BY REMANDING THE MATTER IS TO BE TREATED AS THE FINAL OPPORTUNIT Y AND NO CLAIM OR COUNTERCLAIM CAN BE MADE AFTER THE AO HAS PROVIDED HIS FINDINGS ON THE CONCLUSION OF SUCH PROCEEDINGS. ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 6 15. COMING TO THE SPECIFICS OUT OF THE TWENTY TWO ALLEGED CREDITORS THE ASSESSEE WAS ABLE TO PRODUCE CONFIRMATIONS FROM ONL Y EIGHT CREDITORS. ONLY IN ONE CASE THE BALANCES TALLIED. IN THE REMAI NING SIX CASES THE BALANCES DID NOT TALLY. IT HAS BEEN CONTENDED THAT THE MINOR DIFFERENCES WERE ON ACCOUNT OF VATAV KASAR AND LATE PAYMENT CHA RGES WHICH IS ACCEPTED. WITH REGARD TO THE DIFFERENCE OF RS.3 82 370/- IN THE CASE OF RATHI ENTERPRISE THE CONFIRMATION FURNISHED BY THE ASSESSEE FROM THE SAID CONCERN REGARDING THEY HAVING PAID THE SAID SUM ON BEHALF OF THE ASSESSEE SUPPORTS THE CLAIM OF THE ARS. THEREFORE THE OUTSTANDING CREDITS SHOWN IN THE NAMES OF SAID SEVEN CREDITORS TOTALING RS.10 45 362/- IS HELD TO BE SATISFACTORILY EXPLAINED. WITH REGARD TO THE REMAINING 15 ALLEGED CREDITORS AGAINST WHOM CREDITS TOTALING TO RS.10 3 5 377/- WERE SHOWN TO BE OUTSTANDING THE ONLY SUPPORT OF THE ASSESSEE AN D THE ARS IS THE NAMES AND THE ADDRESSES OF SUCH CREDITORS WHICH WERE FURN ISHED IN REMAND PROCEEDINGS. AS ALREADY HELD THE ONUS WAS ONLY AND SOLELY ON THE ASSESSEE TO PRODUCE CONTRA-CONFIRMATIONS AND OTHER EVIDENCES FROM THE SAID CREDITORS. SINCE SHE FAILED TO DISCHARGE SUCH ONUS THE SUNDRY CREDITORS TOTALING RS.10 35 377/- IS HELD TO HAVE C EASED IN TERMS OF SEC.40(1) OF THE IT ACT. THEREFORE OUT OF THE TOTA L ADDITION OF RS.20 80 739/- ADDITION TO THE EXTENT OF RS.10 35 3 77/- IS SUSTAINED. THE ASSESSEE HOWEVER WILL GET RELIEF TO THE EXTENT OF R S.10 45 362/-. AGGRIEVED BY THIS ORDER OF THE LD. CIT (A) THE ASSE SSEE IS IN APPEAL AGAINST CONFIRMATION OF ADDITION OF RS.10 35 377/- AND THE REVENUE IS IN APPEAL AGAINST GIVING RELIEF OF RS.10 45 362/- TO T HE ASSESSEE. 7. BEFORE US THE LD. COUNSEL OF THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND SUBMITTED THA T FULL DETAILS OF SUBSEQUENT PAYMENTS MADE TO THE CREDITORS WERE SHOW N BEFORE THE AO HENCE THERE COULD NOT BE ANY CASE OF CESSATION OF L IABILITY AS THE CREDITORS WERE IN EXISTENCE. THE AO WAS NOT JUSTIFIED IN MAKI NG THE ADDITION AND THE LD. CIT (A) WAS NOT JUSTIFIED IN GIVING PART RE LIEF. THE LD. CIT (A) ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 7 SHOULD HAVE DELETED THE ENTIRE ADDITION. THEREFORE HE SUBMITTED THAT THE ORDER OF LD. CIT (A) BE SET ASIDE AND ENTIRE ADDITI ON BE DELETED. 8. ON THE OTHER HAND THE LD. DR SUPPORTED THE ORDE R OF AO AND SUBMITTED THAT THE LD. CIT (A) HAS NOT PROPERLY APP RECIATED THE FACTS OF THE CASE AND GIVEN PART RELIEF TO THE ASSESSEE. HIS ORDER BE SET ASIDE AND THAT OF THE AO BE RESTORED. 9. HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WE FIND THAT A.O. HAS MADE ADDITION OF RS.20 80 739/- BEING UNEXPLAIN ED SUNDRY CREDITORS IN THE ABSENCE OF ANY DETAILS OR EVIDENCE IN SUPPOR T OF SUCH CLAIM. BEFORE THE LD. CIT (A) ASSESSEE FURNISHED CONFIRMATIONS FR OM EIGHT CREDITORS WHICH WERE SENT BY HIM TO THE A.O. FOR VERIFICATION . AFTER OBTAINING THE REPORT OF THE A.O. THE LD. CIT (A) HAS GIVEN PARTI AL RELIEF OF RS.10 35 377/- IN RESPECT OF SEVEN CREDITORS TO THE ASSESSEE AS HE FOUND THIS MUCH AMOUNT TO BE SATISFACTORILY EXPLAINED W HICH IN OUR CONSIDERED OPINION IS PROPER AND DOES NOT REQUIRE ANY INTERFER ENCE ON OUR PART. 10. AS REGARDS REMAINING 15 CREDITORS AGAINST WHOM CREDITS TOTALING RS.10 35 377/- WERE SHOWN TO BE OUTSTANDING THE AS SESSEE ONLY FURNISHED THE NAMES AND ADDRESSES OF SUCH CREDITORS WHICH WER E FURNISHED IN REMAND PROCEEDINGS. THOUGH ONUS WAS ON THE ASSESSEE TO PRODUCE CONTRA- CONFIRMATIONS AND OTHER EVIDENCES FROM THE SAID CRE DITORS THE ASSESSEE HAD REITERATED THE SUBMISSIONS MADE BEFORE LOWER AU THORITIES THAT IN ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 8 ORIGINAL SUBMISSIONS THE ASSESSEE HAD SHOWN FULL DE TAILS OF SUBSEQUENT PAYMENTS MADE TO THE CREDITORS AND THEREFORE AS TH E CREDITORS WERE IN EXISTENCE THE SAME CAN BE VERIFIED BY THE AO. WE AR E OF THE VIEW THAT THIS SUBMISSION OF ASSESSEE REQUIRES VERIFICATION BY THE AO. THEREFORE WE SET ASIDE THIS PART OF THE ORDER OF LD. CIT (A) AND RES TORE THE MATTER TO THE FILE OF AO FOR DECIDING THE ISSUE AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GR OUND OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES AND REVE NUES GROUND NO. 1(B) IS DISMISSED. 10.1 GROUND NO. 1(A) OF REVENUES APPEAL IS RELATIN G TO ADDITION OF RS.10 36 426/- U/S 68 OF THE IT ACT 1961 BEING UNE XPLAINED CASH CREDITS. FROM THE AUDIT REPORT THE AO NOTICED THAT THE ASSE SSEE HAD TAKEN UNSECURED LOANS FROM EIGHT PARTIES TOTALING TO RS.2 1 19 043/-. SHE HAD ALSO INTRODUCED CAPITAL OF RS.7 595/-. ON A REQUEST MADE BY THE AO TO FURNISH VARIOUS DOCUMENTARY EVIDENCES REGARDING SUC H LOANS THE ASSESSEE FILED CONTRA-CONFIRMATIONS FROM ROSHNI FASHION MAN HARLAL AGARWAL AND MANSI FASHION FROM WHOM LOANS TOTALING RS.1 82 501 + RS.40 000 + RS.8 67 711 = RS.10 90 212/-HAD BEEN SHOWN. NO EVID ENCE HOWEVER WAS FURNISHED WITH REGARD TO THE REMAINING FIVE LOANS O R EVEN THE CAPITAL INTRODUCED. THE AO THEREFORE ACCEPTED THE GENUINENE SS OF THE LOANS FROM THE SAID THREE PARTIES AND TREATED THE BALANCE LOAN S TOTALING RS.10 28 831/- ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 9 SHOWN FROM FIVE PARTIES + THE CAPITAL INTRODUCED OF RS.7 595/- TOTALING RS.10 36 426/- AS UNEXPLAINED CASH CREDITS IN TERMS OF SEC.68 OF THE IT ACT. 11. THE ASSESSEE WENT IN APPEAL BEFORE LD. CIT (A). AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE THE LD. CIT (A) CALLED FOR A REMAND REPORT FROM THE AO. IN REMAND REPORT THE AO STATED THAT OP PORTUNITY WAS PROVIDED TO THE ASSESSEE DURING THE REMAND PROCEEDI NGS TO FURNISH THE RELEVANT DOCUMENTARY EVIDENCES IN RESPECT OF REMAIN ING FIVE CREDITORS. HOWEVER NONE WAS FURNISHED. IT WAS ALSO SUBMITTED BY THE AO THAT THE ASSESSEE WAS NOT PREVENTED BY ANY REASON FROM PRODU CING THE REQUISITE EVIDENCE IN SUPPORT OF HER CLAIMS DURING THE ASSESS MENT PROCEEDINGS AND THEREFORE THERE WAS NO GROUND FOR ADMITTING ANY FR ESH EVIDENCE IN APPELLATE PROCEEDINGS. THE ASSESSEE VIDE HER WRITTE N SUBMISSION HAD SUBMITTED AS UNDER :- NAME & ADDRESS CLOSING BALANCE AS ON 31.3.2004 CLOSING BALANCE AS ON 31.5.05 REMARKS B. R. BARFIWALA 501 ASHWIN MEHTA PARK PARLE POINT SURAT 70 000 70 000 OLD LOAN TAKEN ON 27.8.2002 BARFIWALA 501 ASHWIN MEHTA PARK PARLE POINT SURAT 1 75 000 1 75 000 OLD LOAN TAKEN ON 27.8.2002 DEEP TEX PLOT NO.A- 10/11 ROAD NO.3 UDHYOGNAGAR UDHNA SURAT. 3 11 525 3 39 831 OLD LOAN LOAN CONFIRMATION GIVEN IN ASSESSMENT PROCEEDINGS VIDE LETTER DATED 26.11.07 RAMESHCHANDRA A BARFIWALA 501 ASHWIN MEHTA PARK 1 44 000 1 44 000 OLD LOAN TAKEN ON 27.08.2002 ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 10 PARLE POINT SURAT UDHYOG GROUP WEAVERS ASSOCIATION D-116 UDHNA SANKUL ROAD NO.10 CENTRAL ROAD UDHNA SURAT. 3 00 000 3 00 000 LOAN CONFIRMATION GIVEN IN ASSESSMENT PROCEEDINGS VIDE LETTER DATED 26.11.07 THE LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT AND SUBMISSIONS OF ASSESSEE DELETED THE ADDITION OF RS.10 36 426/- BY OBSERVING AS UNDER :- 9. I HAVE DISCUSSED THE MATTER WITH THE AO. HE HAS CONFIRMED THAT WHAT HAS BEEN STATED BY THE ASSESSEE ABOVE IS FACTU ALLY CORRECT. LOAN CONFIRMATIONS HAD ACTUALLY BEEN FURNISHED FROM M/S DEEP TEX AND M/S UDHYOG GROUP WEAVERS ASSOCIATION WHICH HAD REMAINED TO BE TAKEN INTO CONSIDERATION. THIS HAS ALSO BEEN ADMITTED BY THE A O IN HIS REMAND REPORT. REST OF THE LOANS AS MAY BE SEEN FROM THE CHART ABOVE WERE ALL BROUGHT-FORWARD FROM THE EARLIER YEAR AND THEREFOR E COULD NOT BE TREATED AS THE UNEXPLAINED INCOME OF THE ASSESSEE F OR THE YEAR UNDER CONSIDERATION. THIS MEANS THAT THE AO HAS ACCEPTED THE FACT THAT PURSUANT TO THE REMAND PROCEEDINGS ALL THE UNSECURED LOANS STAND SATISFACTORILY EXPLAINED. HE IS THEREFORE DIRECTED TO DELETE THE ADDITION OF THE SUM OF RS.10 36 426/-. AGAINST THIS ORDER OF THE LD. CIT(A) THE REVENUE HA S COME IN APPEAL BEFORE US. 12. HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AND WE FIND THAT LD. CIT (A) HAS GIVEN RELIEF TO THE ASSESSEE BY OBTAINI NG THE REMAND REPORT OF THE A.O. ON THE SUBMISSIONS MADE BY THE ASSESSEE BE FORE HIM AND THEREFORE WE ARE NOT INCLINED TO INTERFERE WITH TH E ORDER PASSED BY THE LD. CIT (A) AND THE SAME IS CONFIRMED. THIS GROUND OF T HE REVENUE IS DISMISSED. ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 11 13. GROUND NO.1(C) OF REVENUES APPEAL IS REGARDING ADDITION OF RS.5 80 362/- BEING THE 20% DISALLOWANCE OUT OF VAR IOUS EXPENSES DEBITED TO THE TRADING ACCOUNT AND P & L ACCOUNT. T HE AO HAD LISTED OUT ALL THE EXPENSES DEBITED TO THE TRADING ACCOUNT AND TO THE P & L ACCOUNT IN PARA-7 PAGE 4 OF THE ASSESSMENT ORDER. SINCE TH E ASSESSEE WAS UNABLE TO FURNISH ANY EXPLANATION OR ANY EVIDENCE IN SUPPO RT OF ALL SUCH EXPENSES THE AO AFTER PLACING RELIANCE ON SEVERAL CASE-LAWS DISALLOWED 20% OF ALL SUCH EXPENSES AND MADE THE ADDITION OF T HE SUM OF RS.5 80 362/- TO ASSESSEES TOTAL INCOME. 14. THE ASSESSEE WENT IN APPEAL BEFORE LD. CIT (A). AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE THE LD. CIT (A) ASKED THE AO FOR A REMAND REPORT. IT SEEMS THAT NO FURTHER EVIDENCE OR EXPLAN ATION WAS FURNISHED BEFORE THE AO DURING REMAND PROCEEDINGS. IN THE WRI TTEN SUBMISSIONS IT WAS SUBMITTED THAT THE AO HAD FAILED TO APPRECIATE THE REASONS WHY THE ASSESSEE HAD NOT SUCCEEDED IN PRODUCING EITHER THE BOOKS OF ACCOUNT OR ANY OTHER RECORD OR DETAIL. SINCE ALL THE BOOKS OF ACCOUNT AND OTHER RECORDS HAD BEEN DESTROYED IN THE FLOOD IT WAS IMP OSSIBLE FOR THE ASSESSEE TO PRODUCE ANYTHING BEFORE THE AO. GIVEN S UCH FACTS AND CIRCUMSTANCES THERE WAS NO REASON FOR THE AO TO MA KE ANY DISALLOWANCE ON AD HOC BASIS. THE ASSESSEE FURNISHED A TABLE COM PARING THE EXPENSES CLAIMED IN THE YEAR UNDER CONSIDERATION WITH THE EX PENSES CLAIMED IN THE ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 12 IMMEDIATELY PRECEDING YEAR. IT WAS CLAIMED THAT THE EXPENSES DEBITED TO THE TRADING ACCOUNT HAD REDUCED TO RS.24 80 148 AS COMPARED TO RS.41 53 463 IN THE IMMEDIATELY PRECEDING YEAR EVEN THOUGH THE GROSS PROFIT RATIO HAD INCREASED TO 3.12% AS COMPARED TO 2.29% IN THE PRECEDING YEAR. THE EXPENSES DEBITED TO THE P & L A CCOUNT HAD INCREASED FROM RS.3 91 190/- IN THE PRECEDING YEAR TO RS.4 21 660/- DURING THE YEAR UNDER CONSIDERATION. AT THE SAME TIME THE NET PROF IT RATIO HAD INCREASED FROM 1.10% TO 1.30% DURING THE CURRENT YEAR. IT WAS THEREFORE ARGUED THAT THE OVERALL PROFITABILITY HAD GONE UP BOTH IN TERMS OF THE GROSS PROFIT AS WELL AS THE NET PROFIT. THIS IN TURN SHOWED THAT TH E EXPENSES CLAIMED WERE MOST REASONABLE AND THAT NO BOGUS EXPENSES HAD BEEN CLAIMED. 15. THE LD. CIT (A) AFTER CONSIDERING THE FACTS OF THE CASE AND CONTENTIONS OF BOTH THE PARTIES DELETED THE ADDITIO N WITH THE FOLLOWING OBSERVATIONS :- 19. I HAVE CAREFULLY CONSIDERED THE MATTER. GIVEN THE FACTS BROUGHT OUT BY THE ARS WHERE IT HAS BEEN SHOWN THAT EVEN THOUGH THE EXPENSES CLAIMED IN THE TRADING ACCOUNT HAD GONE DOWN BY 40. 28% AS COMPARED TO THE PRECEDING YEAR THE GROSS PROFIT RATION HAD INC REASED BY 0.83% ON A TURNOVER WHICH HAD ALSO REDUCED. ON THE OTHER HAND THE EXPENSES DEBITED TO THE P & L ACCOUNT HAD GONE UP ONLY MARGI NALLY BY 7.78% AND YET THE NET PROFIT RATIO WENT UP BY 0.20%. GIVEN S UCH FACTS IF ANY AD HOC DISALLOWANCE AT A FIXED PERCENTAGE OUT OF BOTH THE TRADING AND P & L ACCOUNTS IS ALLOWED TO BE SUSTAINED IT WOULD RESUL T IN GROSS MISCARRIAGE OF JUSTICE. I WOULD THEREFORE DIRECT THE AO TO DELE TE THE ADDITION OF THE SUM OF RS.5 80 362/- ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 13 AGGRIEVED BY THIS ORDER OF LD. CIT (A) THE REVENUE IS IN APPEAL BEFORE US. 16. THE LD. DR SUPPORTED THE ORDER OF AO AND SUBMIT TED THAT SINCE THE ASSESSEE COULD NOT PRODUCE ANY VOUCHER OR EVIDENCE NOR GAVE ANY SATISFACTORY EXPLANATION THE AO WAS JUSTIFIED IN D ISALLOWING 20% OF ALL SUCH EXPENSES AND MAKING ADDITION OF RS.5 80 362/-. THE LD. CIT (A) WITHOUT APPRECIATING THE FACTS OF THE CASE HAS DELE TED THE ADDITION WHICH IS NOT CORRECT IN THE EYES OF LAW. THE ORDER OF LD. CIT (A) MAY KINDLY BE SET ASIDE AND THAT OF THE AO BE RESTORED. 17. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSES SEE RELIED ON THE ORDER OF LD. CIT (A). 18. HEARD BOTH THE PARTIES AND PERUSED RECORDS. WE FIND THAT THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS COULD NO T FURNISH ANY EXPLANATION OR ANY EVIDENCE IN SUPPORT OF HER CLAIM OF ALL THESE EXPENSES. THE ASSESSEE HAD SUBMITTED THAT BOOKS OF ACCOUNTS A ND OTHER RECORDS WERE DESTROYED IN THE FLOOD AND THEREFORE IT WAS NOT POS SIBLE FOR HER TO PRODUCE ANY EVIDENCE IN SUPPORT OF ALL THESE EXPENSES. IN T HE ABSENCE OF ANY VOUCHER OR EVIDENCE AND THE SATISFACTORY EXPLANATIO N FOR THE SAME DISALLOWANCE OF 20% OF THESE EXPENSES WERE MADE BY THE A.O. THE LD. CIT (A) HAS DELETED THE ADDITION BY ACCEPTING THE S UBMISSIONS OF THE ASSESSEE WHICH IN OUR OPINION WAS NOT PROPER. IN OU R CONSIDERED OPINION ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 14 IT WILL MEET THE ENDS OF JUSTICE IF THE DISALLOWANC E OF SUCH EXPENSES IS RESTRICTED TO 10% INSTEAD OF 20%.. WE ORDER ACCORDI NGLY. THIS GROUND OF THE REVENUE IS PARTLY ALLOWED. 19. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE AND REVENUES APPEAL IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 25-11-11. SD/- SD/- (A. MOHAN ALANKAMONY) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD ITA NOS.1688 & 1710/AHD/2009 ASST. YEAR 2005-06 15 1.DATE OF DICTATION 2/11/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 8/11/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 22-11-11. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..