Arihant Aluminium Corporation, Bangalore v. ACIT, Bangalore

ITA 180/BANG/2010 | 2007-2008
Pronouncement Date: 30-07-2010 | Result: Dismissed

Appeal Details

RSA Number 18021114 RSA 2010
Assessee PAN INING1143P
Bench Bangalore
Appeal Number ITA 180/BANG/2010
Duration Of Justice 5 month(s) 11 day(s)
Appellant Arihant Aluminium Corporation, Bangalore
Respondent ACIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 30-07-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-07-2010
Date Of Final Hearing 26-07-2010
Next Hearing Date 26-07-2010
Assessment Year 2007-2008
Appeal Filed On 17-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE GEORGE GEORGE K. JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO. 174 TO 180/BANG/2010 ASSESSMENT YEARS : 2001-02 TO 2007-08 ARIHANT ALUMINIUM CORPORATION NO.91 N.R. ROAD BANGALORE 560 002. : APPELLANT VS. THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2(2) BANGALORE. : RESPONDENT ITA NO. 373/BANG/2010 ASSESSMENT YEAR : 2007-08 THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2(2) BANGALORE. : APPELLANT VS. ARIHANT ALUMINIUM CORPORATION NO.91 N.R. ROAD BANGALORE 560 002. : RESPONDENT ASSESSEE BY : SHRI H.N. KHINCHA C.A. REVENUE BY : SHRI KUMAR AJEET JT. CIT(DR) ITA NO.174/BANG/10 PAGE 2 OF 20 O R D E R PER BENCH THESE EIGHT APPEALS (I) SEVEN APPEALS PREFERRED BY THE ASSESSEE COMPANY FOR THE AYS 2001-02 TO 2007-08 AND (II) ONE APPEAL OF THE REVENUE FOR THE AY 2007-08 ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD. CIT (A) VI BANGALORE IN ITA NOS: 299 30 0 301 302 303 304 AND 396/AC CC 2(2)/CIT(A)-VI/2008-09 DATED: 15.1.2 010. I. ITA NO: 174/10 - A.Y. 2001-02: THE ASSESSEE COMPANY [ THE ASSESSEE IN SHORT ] HAS RAISED SEVEN GROUNDS OUT OF WHICH GROUND NOS: 1 AND 7 BEING GEN ERAL AND NO SPECIFIC ISSUES INVOLVED THEY HAVE BECOME NON-CONSEQUENTIAL . IN THE REMAINING GROUNDS THE ISSUES RAISED ARE REFORMULATED FOR TH E SAKE OF CONVENIENCE AND PROPER UNDERSTANDING IN A CONCISE MANNER AS U NDER: (I) THE CIT (A) ERRED IN CONFIRMING THE ORDER PASSED U/ S 143(3) RWS 153C OF THE ACT WHICH WAS NOT IN ACCORDANCE WITH TH E PROVISIONS OF THE ACT AND BAD IN LAW AND THUS LIABLE TO BE Q UASHED; (II) WITHOUT PREJUDICE THE LOWER AUTHORITIES HAVE ERRED IN CONSIDERING THE PROFIT RATIO AT 7% AS AGAINST 6% ON UNDISCLOSED SALES; (III) THE AUTHORITIES BELOW HAVE ERRED IN ADDITION RS.20. 53 LAKHS BEING HIGHEST PEAK CREDIT IN THE BANK ACCOUNTS AS U NDISCLOSED INVESTMENT U/S 69 OF THE ACT; - THE CIT(A) ERRED IN NOT PROPERLY APPRECIATING THE SUBMISSIONS AND DRAWN A CONCLUSION THAT THE PEAK CR EDIT WAS TO BE ADDED U/S 69 OF THE ACT; & (IV) THE ASSESSEE DENIES THE LIABILITY OF INTEREST LEVIE D U/S 234B 234C AND 234D OF THE ACT. ITA NO.174/BANG/10 PAGE 3 OF 20 II. ITA NOS: 175 & 176/10 - A.YS. 2002-03 & 03-04 : THE ASSESSEE HAS RAISED SIX IDENTICAL GROUNDS FOR THESE TWO AYS OUT OF WHICH GROUND NOS: 1 AND 6 BEING GENERAL THEY HA VE BEEN CONSIDERED AS NON-CONSEQUENTIAL. IN THE REMAINING GROUNDS THE I SSUES RAISED ARE REFORMULATED IN A CONCISE MANNER AS UNDER: (I) THE CIT (A) ERRED IN CONFIRMING THE ORDER PASSED U/ S 143(3) RWS 153C OF THE ACT PARTIALLY WHICH WAS NOT IN ACCORDAN CE WITH THE PROVISIONS OF THE ACT AND BAD IN LAW AND THUS LIA BLE TO BE QUASHED; (II) WITHOUT PREJUDICE THE LOWER AUTHORITIES HAVE ERRED IN CONSIDERING THE PROFIT RATIO AT 7% AS AGAINST 6% ON UNDISCLOSED SALES; (III) THE ASSESSEE HAS GOT THE BENEFIT OF DELETION OF TH E ADDITION FOR PEAK CREDITS FOR THE YEAR AS THE SAME GET SUBSUMED IN THE EARLIER YEARS PEAK CREDIT AND HENCE THE CONFIRMATION BY THE CIT(A) OF THE THEORY OF PEAK CREDIT WAS APPLICABLE TO THE FAC TS OF THE CASE WAS WRONG SINCE THE CREDITS IN THE BANK ACCOUNTS WE RE OUT OF TURNOVER ON WHICH % OF PROFIT WAS SEPARATELY TAXED; & (IV) THE ASSESSEE DENIES THE LIABILITY OF INTEREST LEVIE D U/S 234B AND 234D OF THE ACT. III. ITA NO: 177/10 - A.Y. 2004-05: THE ASSESSEE HAS RAISED SIX GROUNDS OUT OF WH ICH GROUND NOS: 1 AND 6 BEING GENERAL THEY HAVE BEEN CONSIDERED AS N ON-CONSEQUENTIAL. IN THE REMAINING GROUNDS THE ISSUES RAISED ARE REFORM ULATED IN A CONCISE MANNER AS UNDER: (I) THE CIT (A) ERRED IN CONFIRMING THE ORDER PASSED U/ S 143(3) RWS 153C OF THE ACT PARTIALLY WHICH WAS NOT IN ACCORDAN CE WITH THE PROVISIONS OF THE ACT AND BAD IN LAW AND THUS LIA BLE TO BE QUASHED; (II) WITHOUT PREJUDICE THE LOWER AUTHORITIES HAVE ERRED IN CONSIDERING THE PROFIT RATIO AT 7% AS AGAINST 6% ON UNDISCLOSED SALES; ITA NO.174/BANG/10 PAGE 4 OF 20 (III) THE ASSESSEE HAS GOT THE BENEFIT OF DELETION OF TH E ADDITION FOR PEAK CREDITS FOR THE YEAR AS THE SAME GET SUBSUMED IN THE EARLIER YEARS PEAK CREDIT AND HENCE THE CONFIRMATION BY THE CIT(A) OF THE THEORY OF PEAK CREDIT WAS APPLICABLE TO THE FAC TS OF THE CASE WAS WRONG SINCE THE CREDITS IN THE BANK ACCOUNTS WE RE OUT OF TURNOVER ON WHICH % OF PROFIT WAS SEPARATELY TAXED; & (IV) THE ASSESSEE DENIES THE LIABILITY OF INTEREST LEVIE D U/S 234B 234C AND 234D OF THE ACT. III. ITA NO: 178/10 - A.Y. 2005-06: SIMILARLY THE ASSESSEE HAS RAISED SIX GROUNDS IN WHICH GROUND NOS: 1 AND 6 BEING GENERAL THEY HAVE BECOME NON-CONSEQUENTIAL . IN THE REMAINING GROUNDS THE ISSUES RAISED ARE AS UNDER: (I) THE CIT (A) ERRED IN CONFIRMING THE ORDER PASSED U/ S 143(3) RWS 153C OF THE ACT PARTIALLY WHICH WAS NOT IN ACCORDAN CE WITH THE PROVISIONS OF THE ACT AND BAD IN LAW AND THUS LIA BLE TO BE QUASHED; (II) WITHOUT PREJUDICE THE LOWER AUTHORITIES HAVE ERRED IN CONSIDERING THE PROFIT RATIO AT 7% AS AGAINST 6% ON UNDISCLOSED SALES; (III) THE ASSESSEE HAS GOT THE BENEFIT OF DELETION OF TH E ADDITION FOR PEAK CREDITS FOR THE YEAR AS THE SAME GET SUBSUMED IN THE EARLIER YEARS PEAK CREDIT AND HENCE THE CONFIRMATION BY THE CIT(A) OF THE THEORY OF PEAK CREDIT WAS APPLICABLE TO THE FAC TS OF THE CASE WAS WRONG SINCE THE CREDITS IN THE BANK ACCOUNTS WE RE OUT OF TURNOVER ON WHICH % OF PROFIT WAS SEPARATELY TAXED; & (IV) THE ASSESSEE DENIES THE LIABILITY OF INTEREST LEVIE D U/S 234B OF THE ACT. IV. ITA NO: 179 /10- A.Y. 2006-07 : FOR THIS AY THE ASSESSEE HAS RAISED EIGHT G ROUNDS IN WHICH GROUND NOS: 1 AND 8 BEING GENERAL AND NO SPECIFIC I SSUES INVOLVED THEY ITA NO.174/BANG/10 PAGE 5 OF 20 HAVE NATURALLY BECOME NON-CONSEQUENTIAL. IN THE R EMAINING GROUNDS THE ISSUES RAISED ARE LISTED OUT AS UNDER: (I) THE CIT (A) ERRED IN CONFIRMING THE ORDER PASSED U/ S 143(3) RWS 153C OF THE ACT PARTIALLY WHICH WAS NOT IN ACCORDAN CE WITH THE PROVISIONS OF THE ACT AND BAD IN LAW AND THUS LIA BLE TO BE QUASHED; (II) WITHOUT PREJUDICE THE LOWER AUTHORITIES HAVE ERRED IN CONSIDERING THE PROFIT RATIO AT 7% AS AGAINST 6% ON UNDISCLOSED SALES; (III) THE ASSESSEE HAS GOT THE BENEFIT OF DELETION OF TH E ADDITION FOR PEAK CREDITS FOR THE YEAR AS THE SAME GET SUBSUMED IN THE EARLIER YEARS PEAK CREDIT AND HENCE THE CONFIRMATION BY THE CIT(A) OF THE THEORY OF PEAK CREDIT WAS APPLICABLE TO THE FAC TS OF THE CASE WAS WRONG SINCE THE CREDITS IN THE BANK ACCOUNTS WE RE OUT OF TURNOVER ON WHICH % OF PROFIT WAS SEPARATELY TAXED; (IV) WITHOUT PREJUDICE THE AUTHORITIES BELOW ERRED IN H OLDING THAT THE FIGURES OF DEBTORS AND CASH RECEIPTS AS ADDITIO NAL TURNOVER OVER AND IN CALCULATING PROFITS THEREON AND THUS A DDITIONS OF RS.4.77 LAKHS AND RS.2.63 LAKHS ARE LIABLE TO BE DE LETED.& (V) THE ASSESSEE DENIES THE LIABILITY OF INTEREST LEVIE D U/S 234B AND 234C OF THE ACT. V. ITA NO: 180/10 - A.Y. 2007-08 : FOR THIS AY ALSO THE ASSESSEE HAS RAISED EIGH T GROUNDS OUT OF WHICH GROUND NOS: 1 AND 8 BEING GENERAL AND NO SPEC IFIC ISSUES INVOLVED THEY HAVE NATURALLY BECOME NON-CONSEQUENTIAL. IN THE REMAINING GROUNDS THE ISSUES RAISED ARE LISTED OUT AS UNDER: (I) THE CIT (A) ERRED IN CONFIRMING THE ORDER PASSED U/ S 143(3) OF THE ACT PARTIALLY WHICH WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND BAD IN LAW AND THUS LIA BLE TO BE QUASHED; (II) WITHOUT PREJUDICE THE LOWER AUTHORITIES HAVE ERRED IN CONSIDERING THE PROFIT RATIO AT 7% AS AGAINST 6% ON UNDISCLOSED SALES; ITA NO.174/BANG/10 PAGE 6 OF 20 (III) WITHOUT PREJUDICE THE AUTHORITIES BELOW ERRED IN H OLDING THAT THE FIGURES OF DEBTORS AND CASH RECEIPTS AS ADDITIO NAL TURNOVER OVER AND IN CALCULATING PROFITS THEREON AND THUS ADDITIONS OF RS.1.22 LAKHS AND RS.0.83 LAKH ARE LIABLE TO BE DEL ETED; (IV) THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING AN ADDITION OF RS.31.64 LAKHS AS UNEXPLAINED CASH U /S 69A OF THE ACT; & (V) THE ASSESSEE DENIES THE LIABILITY OF INTEREST LEVI ED U/S 234B AND 234C OF THE ACT. VI. ITA NO: 373 /10- A.Y. 2007-08 : IN ITS LONE APPEAL EVEN THOUGH THE REVENUE HA S RAISED FIVE GROUNDS THE CRUX OF THE ISSUE IS CONFINED TO THAT THE CIT (A) HAD FAILED TO REASON THAT THE ADDITION OF RS.6.98 LAKHS WAS MADE AS DEFICIT STOCK BEING THE DIFFERENCE IN T HE TRADING ACCOUNT AND PHYSICAL STOCK AS ON THE DATE OF SURVEY BY HOLD ING IT AS UNEXPLAINED INVESTMENT. COMMON ORDER: 2. AS THE ISSUES RAISED BY THE ASSESSEE IN THESE APPEALS WERE MORE OR LESS IDENTICAL AND INTER-LINKED AND ALSO THE REVENU ES LONE APPEAL WAS ALSO CONCERNING THE SAME ASSESSEE THEY WERE HEARD CONS IDERED TOGETHER AND DISPOSED OFF FOR THE SAKE OF CONVENIENCE AND CLARI TY IN THIS COMMON ORDER. 3. LET US NOW TAKE UP THE ASSESSEES APPEALS FO R CONSIDERATION. 4. DURING THE COURSE OF HEARING THE LD. A.R REIT ERATED MORE OR LESS WHAT WAS PUT-FORTH BEFORE THE FIRST APPELLATE AUTHORITY. IN FURTHERANCE IT WAS URGED THAT - ITA NO.174/BANG/10 PAGE 7 OF 20 (I) THE INCREASE IN PERCENTAGE AS WAS DONE BY THE AO HA D NO BASIS THAT THE PROFITS AS DECLARED BY THE ASSESSEE BEING REASONABLE THE SAME SHOULD HAVE BEEN ACCEPTED; (II) THE LOWER AUTHORITIES HAVE ERRED IN ADDING RS.20.53 LAKHS BEING HIGHEST PEAK CREDIT IN THE BANK ACCOUNTS AS UNDISCL OSED INVESTMENTS U/S 69 OF THE ACT. THERE WAS NO UNEXPL AINED INVESTMENT/CONCEALED INVESTMENT AT ALL; - ON PROPER APPRECIATION OF FACTS AND EVIDENCE AVAILA BLE THE ADDITION BEING CONTRARY TO THE FACTS OF THE CASE AN D LAW APPLICABLE AND IN FACT AMOUNTING TO TAXING OF TURNO VER BEING AGAINST THE LAW; - THE FIRST APPELLATE AUTHORITY ERRED IN NOT PROPERLY APPRECIATING THE SUBMISSIONS MADE AND DRAWN A CONCLUSION THAT TH E PEAK CREDIT WAS TO BE ADDED AS UN-EXPLAINED INVESTMENTS U/S 69 OF THE ACT; (III) (FOR THE AYS 2006-07 & 07-08) THE LOWER AUTHORITIES HAVE ERRED IN HOLDING THAT THE FIGURES OF DEBTORS AND CASH RECEIP TS AS ADDITIONAL TURNOVER AND IN CALCULATING PROFITS THEREON. IN FA CT THE DEBTORS AND CASH RECEIPTS WERE THE FALL OUT OF THE UNACCOUN TED TURNOVER ON WHICH THE PROFITS WERE ALREADY TAXED AND THE ADDITI ONS MADE ON THESE COUNTS WERE TOTALLY WRONG AND ON INCORRECT AP PRECIATION OF FACTS. THESE ADDITIONS IN FACT AMOUNT TO DOUBLE ADDITION; (IV) (FOR THE AY 2007-08) THE ADDITION OF RS.31.64 LAKHS AS UNEXPLAINED CASH U/S 69A OF THE ACT HOLDING THAT TH E CASH FOUND ON SEARCH WAS NOT EXPLAINED ETC WAS TOTALLY WRONG A S THE CASH WAS FULLY EXPLAINED AND AS SUCH THERE WAS NO UNEXPL AINED CASH AT ALL; & (V) THE ASSESSEE DENIES THE LIABILITY TO PAY INTEREST U /S 234B 234C AND 234D OF THE ACT. AS THE INTERESTS HAVING BEEN LEVIED ERRONEOUSLY THEY REQUIRE TO BE DELETED IN TOTO. 4.1. BUTTRESS HIS ARGUMENTS THE LD A R FURNISHED A VOLU MINOUS PAPER BOOK CONTAINING 1 143 PAGES CONSIST OF AMONG OTHE RS COPIES OF (I) CORRESPONDENCE WITH THE AIT (INV); (II) GROSS PROFI T AND NET PROFIT CHARTS FOR THE AY 1995-96 TO 06-07; (III) PEAK CREDITS CHART F OR THE AYS 2001-02 TO 06- 07 ETC. ITA NO.174/BANG/10 PAGE 8 OF 20 4.2. ON THE OTHER HAND THE LD. D R WAS VERY E MPHATIC IN HIS/HER URGE THAT THERE WAS A SEARCH AND SEIZURE OPERATION U/S 1 32 OF THE ACT IN THE CASE OF SHRI BABULAL NAGORI AND GROUP OF CASES ON 2 0.4.2006 WHICH WAS FOLLOWED BY SURVEY U/S 133A OF THE ACT IN THE CASE OF THE ABOVE ASSESSEE ITS PARTNERS AND THEIR FAMILY MEMBERS WHICH CULMINA TED IN THE CONCLUSION OF THE ASSESSMENTS FOR THE AYS UNDER DISPUTE. THE ASS ESSMENT ORDERS IN QUESTION HAVE BEEN CONCLUDED AFTER ANALYZING THE IS SUES AT DEPTH AND ALSO TAKING INTO ACCOUNT THE FACTS WHICH CROPPED UP DURI NG THE SEARCH OPERATION. AS THE LD. CIT (A) HAD ALSO GIVEN HIS FINDINGS IN A JUDICIOUS MANNER IT WAS PLEADED THAT THE ORDER OF THE FIRST APPELLATE AUTHO RITY REQUIRES TO BE SUSTAINED. 5. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS DILIGENTLY PERUSED THE RELEVANT CASE RECORDS AND ALSO THE DOCUMENTARY EVID ENCES ADVANCED BY EITHER PARTY IN THE SHAPE OF PAPER BOOK CASE LAW E TC. 5.1. THE FIRST GROUND BEING COMMON FOR ALL THE A YS UNDER DISPUTE [EXCEPT FOR THE AY 2007-08 WHEREIN THE ASSESSMENT WAS CONCL UDED U/S 143(3) OF THE ACT] THAT THE CIT (A) ERRED IN CONFIRMING THE O RDERS PASSED U/S 143(3) RWS 153C OF THE ACT WHICH WERE NOT IN ACCORDANCE WI TH THE PROVISIONS OF THE ACT AND BAD IN LAW AND THUS LIABLE TO BE QUAS HED ETC. 5.1.1. HOWEVER THE ASSESSEE HAD NOT COME UP WITH ANY CREDIBLE DOCUMENTARY EVIDENCE TO SUBSTANTIATE ITS CLAIM THAT THE ASSESSMENT ORDERS UNDER DISPUTE HAVE NOT BEEN PASSED IN ACCORDANCE WI TH THE PROVISIONS OF THE ACT. ON THE OTHER HAND THE STAND OF THE AUTHO RITIES BELOW ON THIS SCORE WAS IN CONFORMITY WITH THE PROVISIONS OF THE ACT AN D THUS WE ARE OF THE FIRM ITA NO.174/BANG/10 PAGE 9 OF 20 VIEW THAT THERE IS NO CASE FOR THE ASSESSEE TO AGIT ATE ON THIS COUNT. THIS GROUND IS ACCORDINGLY DISMISSED FOR ALL THE AYS U NDER DISPUTE INCLUDING FOR THE AY 2007-08. 6. THE NEXT GROUND ALSO BEING IDENTICAL FOR AL L THE ASSESSMENT YEARS UNDER APPEAL WHEREIN IT WAS CONTESTED BY THE ASSESS EE THAT THE AO HAD GROSSLY ERRED IN ADOPTING THE PROFIT RATE AT 7% AS AGAINST 6% DISCLOSED BY THE ASSESSEE ON UNDISCLOSED SALES. 6.1. ON A GLANCE OF THE IMPUGNED ORDERS OF THE A O WE FIND THAT THE AO HAD ESTIMATED THE GP AT 7% ON THE UNACCOUNTED SALES AS RIGHTLY HIGHLIGHTED BY THE LD. CIT(A) THE PROCEEDS OF SUCH UNACCOUNTED SALES WERE CLANDESTINELY DEPOSITED IN THE UNACCOUNTED BAN K ACCOUNTS OF THE PARTNERS OF THE ASSESSEE AND THEIR FAMILY MEMBERS. SUCH ADDITIONS MADE BY THE AO FOR THE AYS 2001-02 TO 06-07 WERE IN THE RANGE OF RS.61194/- 17171/- 31 130/- 29 640/- 38 036/- AND 1217/- RE SPECTIVELY. 6.1.1. AFTER CAREFUL CONSIDERATION OF THE ASSESS EES AVERMENT PERUSAL OF THE ASSESSMENT ORDERS UNDER DISPUTE AND ALSO THE RE ASONING OF THE LD. CIT (A) WE FIND THAT THERE WAS NO CREDIBLE EVIDENCE TO BACK THE ASSESSEES CONTENTION THAT THE NET PROFIT AT 6% ADMITTED BY IT WAS HIGHER. AS RIGHTLY BROUGHT ON RECORD BY THE CIT(A) THAT THE ASSESSEE I TSELF HAD DECLARED THE GP AT 8.6% AND 6.7% FOR THE AYS. 2005-06 AND 06-07 RESPECTIVELY IN ITS REGULAR RETURNS OF INCOME. SUCH BEING THE GROUND REALITY HOW COULD THE ASSESSEE NOW COME UP WITH A THEORY THAT ADOPTING OF NET PROFIT AT 7% BEING ON THE HIGHER-SIDE? AS A MATTER OF FACT THE AO HA D TAKEN A LEAF OUT OF THE ASSESSEES SHELF TO COUNTER ITS ARGUMENT THAT THE A O HAD NOT COME UP WITH A COMPARABLE CASE TO QUOTE. THE ASSESSEE ITSELF HA D UNWITTINGLY ADMITTED ITA NO.174/BANG/10 PAGE 10 OF 20 THE GP AT 8.6% AND 6.7% IN ITS REGULAR RETURNS OF I NCOME WHICH CANNOT BE BRUSHED ASIDE. ON THE OTHER HAND THE ASSESSEE HAD NOT COME UP WITH ANY FACTS AND FIGURES OR LEAST ANY COMPARABLE CASES IN THIS LINE OF BUSINESS TO REFUTE THE AOS ESTIMATION. 6.1.2. IN AN OVER ALL CONSIDERATION OF THE F ACTS WE FIND THAT THE AO WAS QUITE REASONABLE IN ADOPTING THE GP AT 7% WHICH REQ UIRES TO BE SUSTAINED. IT IS ORDERED ACCORDINGLY. 7. THE OTHER GROUND CONCERNING THE ADDIT ION OF RS.20 53 169/- FOR THE AY 2001-02 BEING HIGHEST PEAK CREDIT IN THE BAN K ACCOUNTS AS UNDISCLOSED INVESTMENTS U/S 69 OF THE ACT. 7.1. THE ASSESSEES ARGUMENT IN BRIEF WAS TH AT (I) IT WOULD PURCHASE AND SELL GOODS WHICH WERE NOT REF LECTED IN ITS REGULAR BOOKS OF ACCOUNT. SUCH SALES WOULD BE BOTH ON CREDIT ACCOUNT/CASH ACCOUNT. THE PAYMENTS FOR SUCH SALES MADE ON CREDIT BASIS WOULD ALSO COME THROUGH DDS/CHEQUES. FOR THESE DDS/CHEQUES SEPARATE BANK ACCOUNTS WERE MAINTAINED . THESE DDS/CHEQUES WERE DEPOSITED IN SUCH BANK ACCOUNTS AN D WHENEVER NECESSARY AND REQUIRED THE BALANCES IN THESE BANK A CCOUNTS WERE USED FOR FURTHER PURCHASE OF MATERIALS. THUS THE FUNDS IN BANK ACCOUNTS WERE MOSTLY THE PROCEEDS FOR SALE WERE ROTATED IN BUSINESS FOR BUYING AND SELLING OF GOODS WHICH WERE NOT DISCLOSED IN THE REGULAR BOOKS OF ACCOUNTS. THUS THE CREDIT S IN TRANSACTIONS INCLUDING THE PEAK CREDITS WERE ONLY OUT OF THE PRO CEEDS OF THE SALE; (II) THE ASSESSEE IS IN THIS LINE OF BUSINESS SINCE SEVE RAL YEARS AND IT COULD GET THE GOODS ON CREDIT BASIS AND THUS VERY L ITTLE INITIAL INVESTMENTS FOR PURCHASE OF GOODS; (III) THAT ADDITIONS IF ANY ON ACCOUNT OF POSSIBLY IN SUCH SUBSEQUENT YEAR WHERE THERE WAS A HUGE INCREASE IN PURCHASES. AS THE ASSESSEE HAD STARTED IS BUSINESS LONG BACK AND MUCH BEFORE THE FIRST YEAR FOR WHICH THE POST SURVEY ASSESSMENT WAS BEING DONE AND HENCE NO ADDITION FOR INITIAL INVESTMENT WAS CALLED FOR; ITA NO.174/BANG/10 PAGE 11 OF 20 7.1.1. AFTER DUE CONSIDERATION OF THE ASSESSEE S ARGUMENTS AND ALSO THE PERUSAL OF THE ASSESSMENT ORDER THE LD. CIT (A) HA D OBSERVED THAT 2.3.3IT IS EVIDENT FROM THE FACTS ON RECOR D THAT IN THE FIRST YEAR I.E. 2001.02 IN WHICH THE UNACCOUNTED T RADING WAS MADE BY THE APPELLANT BY USING SUCH BANK ACCOUNTS THE PEAK CREDITS IN THE ACCOUNTS ACCORDING TO THE APPELLANT ITSELF IS RS.24 81 550/- OUT OF WHICH THE ASSESSING OFFICER REDUCED PROFIT @ 7% EST IMATED BY HIM FOR THE ASSESSMENT YEAR OF RS.4 28 381/-. THEN ALSO TH E APPELLANT HAS TO EXPLAIN THE SOURCE OF THE INVESTMENT IN THE BANK ACCOUNTS TO THE EXTENT OF RS.20 53 169/- THE APPELLANT ONLY ARGUED THAT TH E PEAK CREDITS WERE ONLY OUT OF THE SALE PROCEEDS BUT FAILED TO SUBSTA NTIATE THAT THE CREDIT IN THE BANK ACCOUNTS DOES NOT REPRESENTS UNACCOUNTE D INVESTMENTS BY THE APPELLANT. EVEN IN THE CASE OF THE SALE PROCEE DS THE APPELLANT NEED TO EXPLAIN THE SOURCE OF THE INVESTMENT IN PURCHASE S THE SALE PROCEED OF WHICH CLAIMED TO HAVE BEEN DEPOSITED IN THE BANK ACCOUNTS. THE APPELLANTS ARGUMENTS THAT THE GOODS CAN BE PURCHAS ED ON CREDIT IS NOT TENABLE IN VIEW OF THE FACT THAT NO EVIDENCE TO PRO VE SUCH ARGUMENT WAS PRODUCED BEFORE THE ASSESSING OFFICER. IT IS ALSO EVIDENT THAT NO SUCH EVIDENCE WAS FOUND DURING THE COURSE OF THE SEARCH. THE ARGUMENT THAT SUCH UNACCOUNTED BUSINESS WERE CARRIED OUT SIN CE LONG IF THERE IS ANY INVESTMENT IN THE PURCHASES IT IS COMING FROM T HE EARLIER YEARS IS NOT ACCEPTABLE AS NO SUCH EVIDENCE HAS BEEN FOUND D URING THE COURSE OF THE SEARCH. FURTHER THE APPELLANT ALSO FAILED TO PRODUCE ANY SUCH EVIDENCE IN THE ASSESSMENT PROCEEDINGS OR APPELLATE PROCEEDING. HOWEVER THERE IS A SUBSTANCE IN THE ARGUMENT OF TH E APPELLANT THAT HAVING ARRIVED AT HIGHEST PEAK IN THE ASSESSMENT YE AR 2001-02 THERE WAS NO NEED TO ADD THE SUBSEQUENT YEAR PEAK WHICH A RE ALL LESS THAN THE HIGHEST PEAK FOR AY 2001-02 BECAUSE AS PER THE PRIN CIPLES OF CALCULATING THE PEAK OF TELESCOPING THE HIGHEST PEA K SUBSUMES ALL OTHER LOWER PEAKS. IT IS EVIDENT FROM THE RECORD THAT IN THE SUBSEQUEN T YEAR THE PEAK CREDITS IN THE BANK ACCOUNTS ARE MUCH LESS THAN THE PEAK CREDITS OF RS.24 81 550/- FOR AY 2001-02 INCLUDING THE UNACCOUNTED PROFITS OF THAT YEAR. THEREFORE THERE IS NO DOUBT THAT THE PEAK CREDIT FOR AY 2001-02 OF RS.24 81 550/- (AFTER REDUCING PR OFIT OF RS.4 28 381/- ASSESSED ON SUCH TRANSACTIONS) ARE TO BE ADDED TO THE INCOME OF THE APPELLANT FOR AY 2001-02 UNDER SECTIO N 69 OF THE INCOME TAX ACT. 7.1.2. WE HAVE CAREFULLY CONSIDERED THE IMP UGNED ORDER OF THE AO AND ALSO THE REASONING OF THE LD. CIT (A) IN CONFIR MING THE ADDITION MADE ITA NO.174/BANG/10 PAGE 12 OF 20 BY THE AO. THE ASSESSEE HAD NOT BROUGHT ANY EVIDEN CE TO REFUTE THE FINDINGS OF THE AUTHORITIES BELOW. THE SUBMISSION BEFORE US WAS THAT THERE IS NO UNEXPLAINED INVESTMENT/CONCEALED INVEST MENT AT ALL. ON PROPER APPRECIATION OF FACTS AND EVIDENCE AVAILABLE THE A DDITION BEING CONTRARY TO THE FACTS OF THE CASE AND LAW APPLICABLE AND IN FAC T AMOUNTING TO TAXING OF TURNOVER BEING AGAINST LAW IS TO BE DELETED. 7.1.3. IN AN OVER ALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PAR AGRAPHS AND ALSO DILIGENTLY CONSIDERING THE REASONING OF THE LD. CIT (A) WE ARE OF THE FIRM VIEW THAT THE AUTHORITIES BELOW WERE JUSTIFIED IN A DDING RS.20 53 169/- AS UNEXPLAINED INVESTMENTS U/S 69 OF THE ACT. IT IS O RDERED ACCORDINGLY. 8. THE NEXT ISSUE BEING COMMON FOR THE AYS 2003-04 04-05 AND 05-06 WHEREIN THE ASSESSEE HAS SUBMITTED THAT THOUGH THE APPELLANT HAS GOT THE BENEFIT OF DELETION OF THE ADDITION FOR PEA K CREDITS FOR THE YEAR ON THE GROUND THAT THE SAME GET SUBSUMED IN THE EARLIER YE ARS PEAK CREDIT THE APPELLANT SUBMITS THAT THE CONFIRMATION BY THE CIT( A) OF THE THEORY OF PEAK CREDIT IS APPLICABLE TO THE FACTS OF THE CASE IS WR ONG SINCE THE CREDITS IN THE BANK ACCOUNTS ARE OUT OF TURNOVER ON WHICH % OF PRO FIT IS SEPARATELY TAXED. 8.1. ON A CAREFUL READING OF THE WORDINGS WE F IND THAT THE ASSESSEE HAD CONCEDED THAT IT HAD GOT THE BENEFIT OF DELETION OF THE ADDITIONS FOR PEAK CREDITS FOR THE AYS MENTIONED SUPRA ON THE GROUND T HAT THE SAME GOT SUBSUMED IN THE EARLIER YEARS PEAK CREDIT. THUS THE ASSESSEE HAS NO GRIEVANCE ON THE ISSUE. FURTHER SUBMISSION OF THE ASSESSEE ON THE STAND ITA NO.174/BANG/10 PAGE 13 OF 20 OF THE CIT (A) WAS RATHER CLARIFICATORY WHICH IN O UR CONSIDERED VIEW REQUIRES NO ADJUDICATION. IT IS ORDERED ACCORDI NGLY. 8.1.1. HOWEVER FOR THE AYS 2006-07 AND 07-08 THE ASSESSEE HAS AGITATED THAT - THE LOWER AUTHORITIES HAVE ERRED IN HOLDING THAT TH E FIGURES OF DEBTORS AND CASH RECEIPTS AS ADDITIONAL TURNOVER AND IN CALCULA TING PROFITS THEREON. IN FACT THE DEBTORS AND CASH RECEIPTS WERE THE FALL O UT OF THE UNACCOUNTED TURNOVER ON WHICH THE PROFITS WERE ALREADY TAXED. ASSESSMENT YEAR ADDITIONS 2006-07 RS.477321/- & RS.263019/- 2007-08 RS.122840/- & RS. 83567/- IT WAS CONTENDED THAT THE ADDITIONS MADE ON THESE C OUNTS WERE TOTALLY WRONG AND ON INCORRECT APPRECIATION OF FACTS. THESE ADDI TIONS IN FACT AMOUNT TO DOUBLE ADDITION; 8.1.2. WITH REGARD TO UNACCOUNTED DEBTORS FOR THE AYS 06-07 & 07-08 AFTER DUE CONSIDERATION OF THE ASSESSEES LENGTHY C ONTENTIONS THE AO HAD OBSERVED THAT (A) (III) THE ASSESSEES CONTENTION THAT THE CREDIT E NTRIES IN THE SAID (UNDISCLOSED) BANK ACCOUNTS (OF THE PARTNERS I.E. ) INCLUDE PAYMENTS/REALIZATIONS AGAINST THE UNACCOUNTED DEBTO RS IN QUESTION ON WHICH 6% PROFIT IS OFFERED IS NOT BORNE OUT BY ANY EVIDE NCE EVEN THOUGH IT IS NOT IN THE REALMS OF IMPOSSIBILITY. BUT SINCE THE ON US LIES WITH THE ASSESSEE TO PROVE IT ENTRY AND TRANSACTION-WISE AND IT HAS FAIL ED TO DO SO THE CREDIT SALES (SINCE THE DEBTORS ARE NOTHING BUT THE OPPOSITE ENT RY OF CREDIT SALES) AMOUNTING TO RS.3757412 AND RS.1754851 FOR THE AYS 06-07 & 07-08 RESPECTIVELY ARE BROUGHT TO TAX @ 7% APPLYING THE S AME PARAMETERS OF TURNOVER-PROFIT RATIO AS DISCUSSED ELSEWHERE IN THI S ORDER. THE CONCEALED COMPONENTS FOR AYS 06-07 AND 07-08 ARE THEREFORE C OMPUTED AS UNDER: AY 06-07: 7% OF RS.3757412 = RS.263019 & AY 07-08: 7% OF RS.1754851 =RS. 122840 ITA NO.174/BANG/10 PAGE 14 OF 20 8.1.3. IN RESPECT OF PROFIT COMPONENT ON CASH RE CEIPTS TAKING INTO ACCOUNT THE AVERMENT OF THE ONE OF THE PARTNERS OF THE ASSE SSEE THE AO HAD OBSERVED THAT (B) SINCE THE AVERAGE OF THOSE TWO YEARS IS 7 .65%. IT IS ONLY FAIR TO CONCLUDE THAT THE RATE ADOPTED BY THE ASSESSEE IS SLIGHTLY LESS THAN THE AVERAGE. IN VIEW OF THIS AND TAKING A VER Y REASONABLE VIEW OF THE MATTER THE GP RATIO TO BE ADOPTED ON THOSE TWO CAS H RECEIPTS I.E. RS.4 77 32 130 AND RS.83 56 695 IS TAKEN TO BE 7%. AS A RESULT THE ADDITIONAL 1% WHICH HAS BEEN LEFT OUT OF THE CALCUL ATION IS NOW APPLIED ON THESE AMOUNTS AS DETAILED BELOW: AY 06-07 1% OF RS.4 77 32 130 RS.477321-/- & AY 07-08 1% OF RS.83 56 695 RS.83567 8.1.4. WHEN THESE ISSUES WENT BEFORE THE LD. CIT (A) WHO AFTER CONSIDERING THE ASSESSEES FORCEFUL CONTENTIONS AS SET-OUT IN THE IMPUGNED ORDER WHICH IS UNDER DISPUTE HAD REASONED THUS 2.4.3. THE ARGUMENT OF THE APPELLANT THAT THE DE BTOR LIST REPRESENTS THE SALES WHICH HAS ALREADY BEEN INCLUDED IN THE UN ACCOUNTED TURNOVER COVERED IN THE CREDITS IN THE BANK ACCOUNT IS NOT F OUND ACCEPTABLE IN VIEW OF THE REASONS THAT THE APPELLANT FAILED TO SU BSTANTIATE THAT THE AMOUNT RECOVERED FROM THE DEBTORS HAS BEEN RECEIVED THROUGH THE CHEQUES OR THE DRAFTS WHICH HAVE BEEN CREDITED IN T HE BANK ACCOUNTS. THE QUESTION OF DOUBLE ADDITION WILL ARISE ONLY WHE N THE AMOUNT RECOVERED FROM THE DEBTORS HAS BEEN CREDITED TO THE BANK ACCOUNT BUT THERE IS NO EVIDENCE TO PROVE THE SAME. THE STATEM ENTS AS WELL AS THE REPLIES REPRODUCED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ALSO PROVES THAT THE DEBTORS AMOUNTING TO RS.375741 2/- AND RS.1754851/- RESPECTIVELY FOR AY 2006-07 AND 07-08 REPRESENTS THE UNACCOUNTED SALES. THEREFORE THE ASSESSING OFFICE R WAS CORRECT IN ESTIMATING THE PROFIT @ 7% ON SUCH SALES OF RS.2630 19/- FOR AY 2006- 07 AND RS.122840/- FOR AY 2007-08 THE SAME IS ACCOR DINGLY UPHELD. THE GROUND REGARDING TO TAKING OF ADDITION TURNOVER ON ACCOUNT OF CASH RECEIPTS OF RS.47732130/- AND RS.8356695/- FOR AY 2006-07 AND FOR AY 07-08 RESPECTIVELY IS ON WRONG ASSUMPTION I T IS EVIDENT FROM THE FINDING GIVEN BY THE ASSESSING OFFICER IN PARA (B) OF THE ASSESSMENT ORDER THAT APPELLANT HIMSELF (SIC) ITSELF OFFERED NET PROFIT @ 6% ON SUCH RECEIPTS ADMITTING THE SAME AS UNACCOUNTED SA LES. THE AO ITA NO.174/BANG/10 PAGE 15 OF 20 INSTEAD OF 6% TAKEN NET PROFIT @ 7% AFTER COMPARING THE GP DISCLOSED BY THE APPELLANT ITSELF FOR AY 2005-06 AND AY 2006- 07. THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED ON THE S IMILAR REASONING GIVEN IN PARA 2.3.3. OF THE ORDER IN REGARD TO UNAC COUNTED SALES MADE THROUGH UNACCOUNTED BANK ACCOUNT AND ACCORDINGLY AD DITION OF RS.4 77 321/- AND RS.83 567/- MADE RESPECTIVELY FOR AY 200-07 AND AY 2007-08 IS UPHELD. 8.1.5 WE HAVE CONSCIENTIOUSLY CONSIDERED THE ARG UMENT OF THE ASSESSEE AND ALSO PERUSED THE RELEVANT RECORDS. AFTER PERUS ING THE REASONING OF THE LD. CIT (A) WHO UNHESITATINGLY AGREED WITH THE STAN D OF THE AO ON THIS COUNT WE FIND NO FLAW ON THE FINDING OF THE FIRST APPELLATE AUTHORITY WHICH REQUIRES OUR INTERVENTION. ON THE OTHER HAND THE ASSESSEE HAS NOT BROUGHT ANY TANGIBLE DOCUMENTARY EVIDENCE ON RECORD EVEN AT THIS STAGE TO REBUT OR TO SUGGEST THAT THE FINDINGS OF THE AUTHORITIES BEL OW WERE AT FAULT. IN THESE CIRCUMSTANCES WE ARE IN TOTAL AGREEMENT WITH THE L D. CIT (A). 8.1.6. WITH REGARD TO THE ASSESSEES APPREHENSIO N THAT THESE ADDITIONS AMOUNT TO DOUBLE ADDITION THE QUESTION OF DOUBLE A DDITION WILL ARISE AS RIGHTLY REMARKED BY THE LD. CIT(A) ONLY WHEN THE A MOUNTS RECOVERED FROM THE ALLEGED DEBTORS HAVE BEEN CREDITED TO THE BANK ACCOUNTS HOWEVER THERE WAS NO TANGIBLE EVIDENCE TO PROVE TH E SAME. AS SUCH THE APPREHENSION OF THE ASSESSEE THAT THESE ADDITIONS L ED TO DOUBLE ADDITION IS UNFOUNDED AND RATHER HYPOTHETICAL. 9. FOR THE ASSESSMENT YEAR 2007-08 THE ASSESS EE HAS A GROUND THAT T HE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING AN ADDITION OF RS.31.64 LAKHS AS UNEXPLAINED CASH U/S 69A OF THE ACT. ITA NO.174/BANG/10 PAGE 16 OF 20 9.1. IT WAS ARGUED BY THE LD. A R THAT THE A O ERRED IN MAKING THE ADDITION OF RS.31.64 LAKHS AS UNEXPLAINED CASH U/S 69A OF THE ACT HOLDING THAT THE CASH FOUND ON SEARCH WAS NOT EXPLAINED. I T WAS FURTHER CONTENDED THAT THE CASH WAS FULLY EXPLAINED AND THE RE WAS NO UNEXPLAINED CASH AS SUCH. IT WAS VOCIFEROUSLY ARGUED THAT THE ADDITION HAVING BEEN MADE ON WRONG AND IMPROPER APPRECIATION OF FACTS AN D ALSO DETAILS FILED REQUIRES TO BE DELETED IN ENTIRETY. 9.1.1. ON A PERUSAL OF THE RECORDS IT IS SEEN THAT THE ASSESSEE ARGUED BEFORE THE CIT (A) THAT THE CASH FOUND DURING THE S EARCH HAS ALSO EMERGED FROM THE UNACCOUNTED TRANSACTIONS. THE PROFITS ON SUCH UNACCOUNTED TRANSACTIONS WERE TAXED IN THE RESPECTIVE YEARS. T HEREFORE IT WAS CONTENDED THAT AGAIN TAXING THE INVESTMENTS OUT OF THE INCOME AMOUNTS TO DOUBLE ADDITION WHICH REQUIRES TO BE DELETED. 9.1.2. AFTER TAKING INTO ACCOUNT THE ARG UMENTS OF THE ASSESSEE THE LD. CIT (A) TOOK A DIVERGENT VIEW THUS 2.5.3. THE ABOVE ARGUMENTS OF THE APPELLANT IS N OT FOUND ACCEPTABLE IN VIEW OF THE FACT THAT IN THE STATEMENT RECORDED DUR ING THE COURSE OF THE SEARCH IT IS ADMITTED THAT (BY) THE PARTNER THAT RS .30 50 000/- IS UNACCOUNTED CASH. FURTHER WHEN THE ASSESSEE WAS ASKED TO EXPL AIN HOW THE CASH HAS BEEN ACCOUNTED IN THE RETURN OF INCOME FOR AY 2007- 08 THE PARTNER OF THE APPELLANT FIRM COULD NOT PROPERLY EXPLAIN BUT STATE D THAT THE ABOVE INCOME IS OFFERED TO TAX IN THE HANDS OF M/S.ARIHANT ALUMI NIUM CORPORATION. IT IS SUBMITTED THAT THE TOTAL ASSET FOUND VIZ. EXCESS C ASH AND DEBTORS ARE RS.8773801/- (RS.3050000 + RS.5723801) WHEREAS THE INCOME COMPUTED ABOVE IS ONLY RS.4436000/- THIS IS BECAUSE OF THE F ACT THAT THE INCOME ACCUMULATION OF THE PERIOD PRIOR TO 1.4.2000. HOWEVER THE APPELLANT FAILED TO FURNISH ANY EVIDENCE TO PROVE THAT THE UNACCOUNT ED CASH FOUND IS GENERATED PRIOR TO 1.4.2000. THE SECTION 69A OF TH E INCOME TAX ACT PROVIDES THAT WHERE IN ANY FINANCIAL YEAR THE ASSE SSEE IS FOUND TO BE OWNER OF ANY MONEY WHICH IS NOT RECORDED IN ANY BOOKS OF ACCOUNTS AND THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT FOUND SA TISFACTORY IN THE OPINION OF ITA NO.174/BANG/10 PAGE 17 OF 20 THE ASSESSING OFFICER THE SAME SHALL BE DEEMED TO BE INCOME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. IN THE CASE OF THE APPELLA NT IS CLEAR THAT FOR THE CASH OF RS.30 50 000/- AND RS.1 14 507/- FOUND DURING TH E COURSE OF THE SEARCH THE APPELLANT FAILED TO FURNISH THE SATISFACTORY EX PLANATION ALONG WITH THE SUPPORTING EVIDENCES THEREFORE THE ASSESSING OFFI CER WAS RIGHT IN MAKING THE SAID ADDITION UNDER SECTION 69A OF THE INCOME T AX ACT. 9.1.3. WE HAVE DULY CONSIDERED THE ASSESSEES SUBMISSION AS WELL AS THE REASONING OF THE LD. CIT(A) IN TURNING DOWN THE ASSESSEES ARGUMENTS AND CONFIRMING THE ACTION OF THE AO. CAREFUL PERSU ASION OF THE CIT(A) WE ARE OF THE FIRM VIEW THAT THE ASSESSEE HAD FAILED T O FURNISH ANY CLINCHING EVIDENCE TO SUGGEST THAT THE UNACCOUNTED CASH UNEAR THED DURING THE COURSE OF SEARCH WAS IN FACT GENERATED PRIOR TO 1 .4.2000. IN VIEW OF THE ABOVE POSITION THE AO WAS WITHIN HIS REALM TO INVO KE THE PROVISIONS OF S.69A OF THE ACT WHICH MAKES IT EXPLICIT THAT - WHERE IN ANY FINANCIAL YEAR THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ART ICLE AND SUCH MONEY BULLION JEWELLERY OR VALUABLE ARTICLE IS NO T RECORDED IN THE BOOKS OF ACCOUNT IF ANY MAINTAINED BY HIM FOR ANY SOURCE OF INCOME AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NA TURE AND SOURCE OF ACQUISITION OF THE MONEY BULLION JEWELLERY OR OTH ER VALUABLE ARTICLE OR THE EXPLANATION OFFERED BY HIM IS NOT IN THE OP INION OF THE ASSESSING OFFICER SATISFACTORY THE MONEY AND THE VALUE OF THE BULLION JEWELLERY OR OTHER VALUABLE ARTICLE MAY BE DEEMED TO BE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. 9.1.4. IN VIEW OF THE ABOVE WE ARE OF THE CONS IDERED VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE FINDINGS OF THE A UTHORITIES BELOW. IT IS ORDERED ACCORDINGLY. 10. FINALLY THE ASSESSEE HAS AGITATED OV ER THE CHARGING OF INTEREST UNDER SECTIONS 234B 234C AND 234D OF THE ACT. ITA NO.174/BANG/10 PAGE 18 OF 20 10.1. IN THIS CONNECTION WE WOULD LIKE TO PO INT OUT THAT CHARGING OF INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT AR E MANDATORY AND CONSEQUENTIAL IN NATURE AND THEREFORE THESE GROU NDS ARE SUMMARILY REJECTED AS NOT MAINTAINABLE. 10.1.1. HOWEVER CHARGING OF INTEREST UNDER SE CTION 234D OF THE ACT CAN BE RESORTED INTO ONLY FROM THE ASSESSMENT YEAR 2004 -05 ONWARDS AS THE SECTION ITSELF WAS INSERTED BY THE FINANCE ACT 2003 W.E.F. 1.6.2003. THEREFORE INTEREST CHARGED UNDER THIS SECTION FOR THE AYS 2001-02 2002- 03 AND 2003-04 IN THE ASSESSEES CASE IS NOT IN ACC ORDANCE WITH THE PROVISIONS OF THE ACT. OUR VIEW IS IN CONFORMITY W ITH THE FINDING OF THE HONBLE DELHI E SPECIAL BENCH IN THE CASE OF ITO V. EKTA PROMOTERS P. LTD. REPORTED IN 305 ITR 1 (DEL)(AT) (SB) . IT IS ORDERED ACCORDINGLY. 11. LET US NOW DEAL WITH THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2007-08. 12. THE LONE GROUND RAISED BY THE REVENUE IS THAT THE CIT (A) HAD FAILED TO REASON THAT THE ADDITION OF RS.6.98 LAKHS WAS MADE AS DEFICIT STOCK BEING THE DIFFERENCE IN THE TRADING ACCOUNT AND PHY SICAL STOCK AS ON THE DATE OF SURVEY BY HOLDING IT AS UNEXPLAINED INVESTMENT. DURING THE COURSE OF HEARING IT WAS SUBMITTED THAT THE ASSESSEE VIDE IT S REPLY DATED: 11.3.2008 HAD ADMITTED TO SHORTAGE OF STOCK TO THE EXTENT OF RS.6.98 LAKHS AND HAD ATTRIBUTED THE SAME TO UNACCOUNTED SALES. THUS IT WAS SUBMITTED THAT THE LD. CIT (A) ERRED IN DELETING THE ADDITION BY HOLDI NG THAT ADDITION CANNOT BE MADE AS UNEXPLAINED INVESTMENT AS DEFICIT STOCK DOE S NOT AMOUNT TO ITA NO.174/BANG/10 PAGE 19 OF 20 INVESTMENT. IN CONCLUSION THE LD. D RS PLEA WAS THAT THE ADDITION OF RS.6.98 LAKHS REQUIRES TO BE SUSTAINED. 12.1. ON THE OTHER HAND THE LD. A R WAS VEHEMEN T IN HIS URGE THAT AFTER CONSIDERING THE ASSESSEES EXPLANATION THE CIT(A) TOOK A JUDICIOUS VIEW IN DELETING THE ADDITION AND THEREFORE PLEADED THAT THE STAND OF THE CIT(A) BE SUSTAINED. 12.1.1. THE CIT(A) HAD REASONED THAT 2.6.3. ON PERUSAL OF THE FINDING GIVEN IN THE ASSESSMENT ORDER IT IS EVIDEN T THAT THE APPELLANT IN THE REPLY DATED: 15.10.2007 STATED THAT THE BOOK ST OCK AT THE TIME OF THE SURVEY WAS ARRIVED AT ON THE BASIS OF THE APPLICATI ON OF THE GP RATIO OF THE PRECEDING YEAR WHICH IS NOT FULL PROOF. AS THE STOCK AS PER THE BOOKS OF ACCOUNTS WAS WORKED OUT ON THE APPLICATION OF TH E GP OF THE PRECEDING YEAR IT CANNOT BE SAID TO BE CORRECT WORKING. FUR THER EVEN IF THE WORKING IS TAKEN TO BE CORRECT NO ADDITION CANNOT ( SIC) CAN BE MADE AS UNEXPLAINED INVESTMENT AS DEFICIT OF THE STOCK DOES NOT AMOUNT TO INVESTMENT. THE ADDITION MADE ON THIS ACCOUNT IS A CCORDINGLY DELETED. 12.1.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO THE FINDING OF THE CIT (A) ON THE ISSUE. WHILE DELETING THE ADDIT ION PERHAPS THE CIT(A) HAS OVERLOOKED THAT THE SHORTAGE OF STOCK IS ON ACC OUNT OF UNACCOUNTED SALES AND THE PROFIT ELEMENT ON THE UNACCOUNTED SAL ES ARE TO BE ADDED TO THE INCOME. THEREFORE SEVEN PER CENT ADOPTED BY T HE AO IS TO BE CALCULATED ON THE DEFICIT OF STOCK OF RS.6.98 LAKHS . TO FACILITATE THE AO TO CARRY OUT THE DIRECTION OF THIS BENCH THIS ISSUE I S REMITTED BACK ON THE FILE OF THE AO. THE AO SHALL HOWEVER AFFORD AN OPPORTU NITY TO THE ASSESSEE OF ITA NO.174/BANG/10 PAGE 20 OF 20 BEING HEARD WHILE CARRYING OUT THE ABOVE DIRECTION. IT IS ORDERED ACCORDINGLY. 13. IN THE RESULT: (I) ASSESSEES APPEALS FOR - - THE A.YS 2001-02 2002-03 AND 2003-04 ARE PARTLY ALLOWED ; & - THE A.YS 2004-05 2005-06 2006-07 AND 2007-08 ARE DISMISSED. (II) REVENUES APPEAL FOR - - THE A.Y 2007-08 IS PARTLY ALLOWED . PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF JULY 2010. SD/- SD/- (A. MOHAN ALANKAMONY ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED THE 30 TH JULY 2010. DS/- COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.