M/s Askash Namkin Pvt. Ltd., v. The ACIT,,

ITA 20/IND/2005 | 2001-2002
Pronouncement Date: 22-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 2022714 RSA 2005
Bench Indore
Appeal Number ITA 20/IND/2005
Duration Of Justice 5 year(s) 15 day(s)
Appellant M/s Askash Namkin Pvt. Ltd.,
Respondent The ACIT,,
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 22-01-2010
Date Of Final Hearing 08-01-2010
Next Hearing Date 08-01-2010
Assessment Year 2001-2002
Appeal Filed On 07-01-2005
Judgment Text
PAGE 1 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER PAN NO. : N.A. I.T.A.NO.77/IND/2005 A.Y. : 2001-02 ACIT M/S. AAKASH NAMKEENS PVT.LTD. 4(1) VS 2 JAWAHAR MARG INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : N.A. I.T.A.NO.20/IND/2005 A.Y. : 2001-02 M/S. AAKASH NAMKEENS PVT.LTD. ACIT 2 JAWAHAR MARG VS 4(1) INDORE. INDORE. APPELLANT RESPONDENT DEPARTMENT BY : SMT. APARNA KARAN SR. DR ASSESSEE BY : SHRI MANOJ MUNSHI ADV. DATE OF HEARING : 08.01.2010 O R D E R PER V.K. GUPTA A.M. THESE CROSS APPEALS ARISE OUT OF THE ORDER OF THE L D. CIT(A) DATED 2.11.2004 FOR THE ASSESSMENT YEAR 2001-02. PAGE 2 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE 2. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 3. FIRST WE SHALL TAKE UP REVENUES APPEAL IN I.T.A.N O. 77/IND/2005. 4. GROUND NO. (I) READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.21 55 750/- MADE ON ACCOUNT OF EXCESS STOCK. 5. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGA GED IN THE MANUFACTURING OF NAMKEEN AND SWEETS. THERE WAS A SU RVEY ACTION AGAINST THE ASSESSEE U/S 133A OF THE ACT AT THE BUSINESS PR EMISES OF THE ASSESSEE ON 19.10.2000. THE A.O. NOTED THAT IN THE COURSE OF SUCH SURVEY THE EXCESS CASH OF RS. 3 42 462/- AND EXCESS STOCK WORT H RS. 21 55 790/- WERE FOUND. THE MANAGING DIRECTOR OF THE ASSESSEE C OMPANY WAS PRESENT DURING THE COURSE OF SURVEY AND HE VOLUNTARILY SURR ENDERED A SUM OF RS. 25 LAKHS AS ADDITIONAL INCOME OF THE ASSESSEE COMPA NY FOR THE IMPUGNED ASSESSMENT YEAR AS HE COULD NOT GIVE ANY SATISFACTO RY EXPLANATION IN REGARD TO SUCH EXCESS CASH AND EXCESS STOCK. HOWEVE R IN THE RETURN FILED ON 31.10.2001 AFTER ONE YEAR FROM THE DATE OF SURVE Y THE ASSESSEE DID NOT DISCLOSE THE SURRENDERED AMOUNT IN THE RETURN OF IN COME. AS REGARDS TO EXCESS CASH THE ASSESSEE STATED THAT IT HAD BEEN D ISCLOSED AS MISC. INCOME PAGE 3 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE IN THE PROFIT AND LOSS ACCOUNT. HOWEVER AS REGARDS TO EXCESS STOCK IT WAS SUBMITTED THAT TENTATIVE TRADING ACCOUNT PREPARED I N THE COURSE OF SURVEY FOR THE PERIOD FROM 1 ST APRIL 2000 TO 18 TH OCTOBER 2000 CONSIDERING THE CLOSING STOCK AT RS. 76 88 607/- WHICH WAS VALUED ON THE BASIS OF M.R.P. PRINTED ON THE PACKETS AT RS. 98 44 397/-. H OWEVER THERE WERE NO DISCREPANCIES IN THE QUANTITY. HENCE DIFFERENCE OF RS. 21 55 790/- IN THE FINANCIAL STATEMENT FOR FULL YEAR HAD TAKEN INTO C ONSIDERATION AS THE CLOSING STOCK AS ON THE DATE OF SURVEY HAD BECOME O PENING STOCK OF NEXT DATE AND SINCE THERE WAS NO DIFFERENCE/IMPACT ON TH E PROFIT AND LOSS ACCOUNT FOR THE YEAR AS A WHOLE THE SURRENDER MADE ORIGINALLY WAS FACTUALLY INCORRECT. THE A.O. HOWEVER HELD THAT T HE ASSESSEE HAD HIMSELF ACCEPTED THE ADDITIONAL INCOME AND THE SUBSEQUENT S TORY WAS AN AFTER THOUGHT TO REDUCE THE TAX LIABILITY HENCE NOT ACC EPTABLE. ACCORDINGLY HE MADE AN ADDITION OF RS. 21 57 538/- U/S 69B ON ACCO UNT OF UNDISCLOSED INVESTMENT NOT RECORDED IN THE BOOKS OF ACCOUNT. TH EREAFTER THE A.O. ADDED A SUM OF RS. 1 748/- DIFFERENCE BETWEEN THIS AMOUNT AND EXCESS STOCK OF RS. 21 55 790/- FOUND DURING THE COURSE OF SURVEY AS INCOME FROM OTHER SOURCES. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHEREIN IT WAS CONTEN DED THAT THERE WAS NO DIFFERENCE AS TO QUANTITY AND ENTIRE STOCK WAS RECO NCILED AND TALLIED WITH THE BOOKS OF ACCOUNT AND SUCH EXCESS STOCK WAS ARRI VED DUE TO CHANGE IN PAGE 4 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE THE METHOD OF VALUATION. IT WAS ALSO SUBMITTED THAT IN THE TENTATIVE TRADING ACCOUNT PREPARED AT THE TIME OF SURVEY GROSS PROF IT @ 27.54 % WAS SHOWN AND THERE WAS ALSO A DISCREPANCY IN THE VALUE OF OPENING STOCK WHICH WAS TAKEN AT RS. 83.13 LAKHS AS AGAINST RS. 8 7.38 LAKHS AS PER THE AUDITED BOOKS OF ACCOUNT. THE ASSESSEE ALSO SUBMITT ED VARIOUS PERMUTATIONS AND COMBINATIONS OF CLOSING STOCK FIGU RE FOR THE PROPOSITION THAT ULTIMATELY THERE WOULD NOT BE ANY IMPACT ON TH E TRADING RESULT FOR THE WHOLE YEAR BECAUSE THE CLOSING STOCK AS ON 18.10.2 000 WOULD BECOME OPENING STOCK AS ON 19.10.2000. THE LD. CIT(A) AGRE EING WITH THIS CONTENTION OF THE ASSESSEE DELETED THE ADDITION. T HE RELEVANT FINDINGS OF THE LD. CIT(A) ARE AS UNDER :- 1.3 AFTER CAREFULLY CONSIDERING THE RIVAL ARGUMENT S I AM OF THE OPINION THAT THE A.O. WAS NOT JUSTIFIED IN M AKING ADDITION MERELY ON ACCOUNT OF THE FACT THAT THERE W AS APPARENT VARIATION IN THE VALUE OF THE STOCK AS STA TED BY THE APPELLANT AND AS MADE BY THE SURVEY PARTY. THERE I S NO DISPUTE OF THE FACT THAT NO DIFFERENCE WAS NOTICED SO FAR AS QUANTITY OF THE STOCK WAS CONCERNED. THE DIFFERENCE NOTICED WAS IN THE VALUATION WHICH STANDS EXPLAINED BY ALL COUNTS. IN MY CONSIDERED OPINION THERE WAS NO GROUND FOR AN A DDITION PAGE 5 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE ON THIS COUNT. THEREFORE THE ADDITION OF RS. 21 55 790/- CANNOT BE SUSTAINED. THE SAME IS ACCORDINGLY DELE TED. 6. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE FA CTS DREW OUR ATTENTION TO THE RELEVANT PAGES OF THE ASSESSME NT ORDER AND PLACED STRONG RELIANCE ON THE ORDER OF THE A.O. APART FROM THIS SHE ALSO CONTENDED THAT STATEMENT GIVEN BY THE ASSESSEE IN T HE COURSE OF SURVEY HAD NOT BEEN RETRACTED IMMEDIATELY AND ONLY IN THE RETURN OF INCOME OF SUCH ADDITIONAL INCOME HAD NOT BEEN OFFERED HENCE THE SAME WAS LIABLE TO BE REJECTED. IT WAS ALSO EMPHASIZED BY HER THAT STOCK RECORDS WERE NOT MAINTAINED HENCE HOW THE PHYSICAL STOCK COULD TAL LY WITH THE BOOKS OF ACCOUNT AND THEREFORE THE RELEVANT FINDINGS OF TH E LD. CIT(A) WERE NOT CORRECT. AS REGARDS DIFFERENCE IN VALUATION METHODO LOGY SHE SUBMITTED THAT THE STOCKS WERE VALUED AT THE RATE SUGGESTED B Y THE ASSESSEE AND WERE NOT NECESSARILY MARKET RATES. IN THIS REGARD SHE D REW OUR ATTENTION TO RELEVANT PAGES OF THE PAPER BOOK TO SHOW THAT INVEN TORY PREPARED AT THE TIME OF SURVEY COMPRISED OF NOT ONLY OF FINISHED GO ODS BUT ALSO OF RAW MATERIAL AND PACKING MATERIAL WHICH WAS VALUED ONL Y AT COST HENCE THESE CONTENTIONS OF THE ASSESSEE WERE ALSO NOT COR RECT. SHE FURTHER PLACED RELIANCE ON THE DECISION OF THE HON'BLE HIMACHAL PR ADESH HIGH COURT IN THE CASE OF HIRA SINGH AND CO. VS. CIT AS REPORTED IN 230 ITR 791 FOR PAGE 6 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE THE PROPOSITION THAT THE ADDITION COULD BE MADE ON THE BASIS OF ADMISSION ONLY. SHE ALSO PLACED ON THE DECISION OF THE TRIBUN AL IN THE CASE OF CARPENTERS CLASSICS (P) LIMITED VS. DY. CIT AS REP ORTED IN 108 ITD 142 WHEREIN IT WAS HELD THAT IF THE ASSESSEE CLAIMED TO HAVE GIVEN STATEMENT UNDER MIS-CONCEPTION OF FACTS THEN IT WAS THE DUT Y OF THE ASSESSEE TO PROVE THE FACT THAT ASSESSEE REALLY COMMITTED A MIS TAKE OF FACTS AND IF IT COULD NOT BE PROVED SO THEN THE ADDITION BASED ON THE STATEMENT OF THE ASSESSEE WAS LIABLE TO BE SUSTAINED. SHE FURTHER CO NTENDED THAT IT WAS A UNIQUE CASE WHERE THE ASSESSEE HAD INFLATED THE STO CK VALUE WITHOUT PAYING ANY TAX HENCE SUCH ACTION OF THE ASSESSEE WAS NOT CORRECT IN LAW. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WITHOUT ASSESSING ON THE ASPECT OF DIFFERENCE IN THE VALUAT ION METHODOLOGY HE COULD PROVE HIS CASE HENCE COPIES OF SALE BILLS SU BMITTED AS PER AVAILABLE RECORDS AS DESIRED BY THE BENCH WERE REALLY NOT R EQUIRED. HE THEREAFTER POINTED OUT THE FACTUAL MISTAKE OCCURRED IN TAKING FIGURE OF OPENING STOCK AT RS. 83.13 LAKHS AS AGAINST RS. 87.38 LAKHS WHIL E PREPARING TENTATIVE TRADING ACCOUNT AS ON 18.10.2000. AT THIS STAGE TH E BENCH REQUIRED THE ASSESSEE HOW THIS MISTAKE COULD OCCUR. THE LEARNED COUNSEL SUBMITTED THAT AS PER AUDITED ACCOUNTS THE FIGURE WAS RS. 87 .38 LAKHS AND THEREFORE THE SAME WAS TO BE TAKEN. THE LD. DEPART MENTAL REPRESENTATIVE AT THIS STAGE SUBMITTED THAT THE RETURN FOR ASSESS MENT YEAR 2000-01 WAS PAGE 7 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE FILED AFTER THE DATE OF SURVEY I.E. 19.10.2000 AND THEREFORE THE ASSESSEE ARRIVED AT A DIFFERENT FIGURE OF OPENING STOCK JUST TO SHOW THAT THE TRADING ACCOUNT PREPARED BY THE SURVEY TEAM WAS NOT CORRECT . HOWEVER THE FACT WHICH WAS CRUCIAL WAS THAT THE TRADING ACCOUNT HAD ALSO BEEN PREPARED BY THE ASSESSEES STAFF UNDER THE PRESENCE OF MANAGING DIRECTOR. THE BENCH ALSO REQUIRED THE ASSESSEE TO EXPLAIN THIS ASPECT A S THE BIFURCATION OF GROSS STOCK ALSO DIFFERED. THE LEARNED COUNSEL TRIED TO E XPLAIN THE SAME FROM THE FINANCIAL STATEMENTS PREPARED AS ON 31.3.2001. HOWEVER ON BEING ASKED BY THE BENCH TO GIVE A COPY OF TAX AUDIT REP ORT ALSO AND BALANCE SHEET OF EARLIER YEARS HE SHOWED HIS INABILITY AND CONTENDED THAT ALL THESE DOCUMENTS WERE ALREADY ON RECORD WITH THE DEPARTMEN T. THEREAFTER HE CONTENDED THAT IN THE TRADING ACCOUNT PREPARED BY T HE ASSESSEE AND TAKEN AS BASIS FOR MAKING THE IMPUGNED ADDITION THE CLOS ING STOCK OF RS. 76 88 607/- WAS THE BALANCING FIGURE WHICH HAD BEEN ARRIVED AT BY ADOPTING THE GROSS PROFIT RATE OF 27.54 % OF SALES FOR THAT PERIOD. HE HOWEVER ACCEPTED THAT AS FAR AS THE VALUE OF PURCH ASES AND SALES WERE CONCERNED THERE WAS NO DISPUTE. HE FURTHER CONTEND ED THAT IF THE OPENING STOCK WAS TAKEN AT RS. 87.38 LAKHS AND CLOSING STOC K WAS TAKEN AT RS. 98.44 LAKHS THEN THE GROSS PROFIT RATE WOULD BE 38 .6 % OF THE SALES ON THE BALANCING FIGURE GROSS PROFIT AND IF SALES TAX OF R S. 6.38 LAKHS WAS ALSO CONSIDERED THEN GROSS PROFIT RATE OF 38.60 % WOUL D BE REDUCED TO 34.53 PAGE 8 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE %. IT WAS ALSO SUBMITTED THAT THE GROSS PROFIT RATI O WAS HIGHER AS COMPARED TO THE GROSS PROFIT RATIO OF THE PREVIOUS YEAR. AT THIS STAGE A QUERY WAS RAISED AS TO WHAT COULD BE THE CORRECT GR OSS PROFIT RATIO IF THE OPENING STOCK WAS CONSIDERED AT RS. 87.38 LAKHS. TH E LEARNED COUNSEL SUBMITTED A WORKING SHOWING SUCH GROSS PROFIT AT 24 .83 %. 9. THE LD. DEPARTMENTAL REPRESENTATIVE IN THE REJOIND ER DREW OUR ATTENTION OF THE BENCH TO THE GROSS PROFIT RATIO OF ASSESSMENT YEAR 1998-99 TO 2001-02 WHICH WERE SHOWN BY THE ASSESSEE @ 24.7 5 % 26.22 % 29.13 % AND 31.25 % RESPECTIVELY AND CONTENDED THAT AS AGAINST THESE GROSS PROFIT RATIOS THE RATIO OF 27.54 % HAD BEEN ADOPTED AND THEREAFTER CLOSING STOCK WAS WORKED OUT AND THEREFORE ASSESS EES CONTENTION REGARDING 38.60 % GROSS PROFIT BASED ON REVERSE WOR KING OF SUCH RATIO BY TAKING THE CLOSING STOCK AS PER THE PHYSICAL QUANTI TY AS THE BASIS WAS ENTIRELY MIS-CONCEIVED AND INCORRECT. SHE FURTHER S UBMITTED THAT IN CASE WHERE STOCK RECORDS WERE NOT MAINTAINED IT WAS ON ESTABLISHED METHODOLOGY TO ADOPT GROSS PROFIT RATE BASED UPON P AST YEARS RESULT TO WORK OUT THE PROBABLE QUANTITY OF CLOSING STOCK WH ICH COULD BE AVAILABLE WITH THE ASSESSEE AT A PARTICULAR POINT OF TIME. HE NCE UNDISCLOSED INVESTMENT IN THE STOCK WAS CORRECTLY WORKED OUT BY COMPARING THE FIGURE OF CLOSING STOCK WORKED OUT ON THE BASIS OF SUCH ME THODOLOGY AND PHYSICAL QUANTITY OF CLOSING STOCK FOUND DURING THE COURSE OF SURVEY. THE PAGE 9 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE LEARNED COUNSEL WITH THE PERMISSION OF THE BENCH AGAIN CONTENDED THAT COMPARISON BETWEEN COMPARABLES HAD TO BE DONE AND O N A QUERY FROM THE BENCH CLARIFIED THAT GROSS PROFIT RATES AS POINTE D OUT BY THE LD. DEPARTMENTAL REPRESENTATIVE WERE ARRIVED AT AFTER T AKING INTO CONSIDERATION THE MANUFACTURING COST WHEREAS IN TH E TRADING ACCOUNT PREPARED FOR THE PERIOD FROM 1.4.2000 TO 18.10.2000 SUCH COSTS WERE NOT CONSIDERED. THE LEARNED COUNSEL THEREAFTER SUBMIT TED THAT NEITHER THE A.O. NOR THE LEARNED COUNSEL HAD BEEN ABLE TO POINT OUT THE FACT THAT WHERE FROM CLOSING STOCK OF RS. 76 88 607/- HAD BEE N FOUND. 10. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH TH E SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 11. IT IS NOTED THAT THE ASSESSEE IS ENGAGED IN THE MAN UFACTURING OF NAMKEEN AND SWEETS. IT IS ALSO NOTED THAT DURING TH E COURSE OF SURVEY U/S 133A TENTATIVE TRADING ACCOUNT WAS PREPARED FOR TH E PERIOD FROM 1.4.2000 TO 18.10.2000. IN THE SAID TRADING ACCOUNT THE VALUE OF CLOSING STOCK WAS ARRIVED AT RS. 76 88 607/- BY CALCULATING GROSS PROFIT @ 27.54 % OF THE SALES. IT IS FURTHER NOTED THAT THE PHYSIC AL INVENTORY OF THE STOCK AS ON THAT DATE WAS VALUED AT RS. 98.45 LAKHS. IT I S FURTHER NOTED THAT THE ASSESSEE DECLARED AN ADDITIONAL INCOME OF RS. 25 LA KHS ON ACCOUNT OF EXCESS CASH AND EXCESS STOCK. HOWEVER THE ASSESSEE SUBSEQUENTLY DID NOT MAKE ANY DISCLOSURE OF RETURN OF INCOME ON ACCOUNT OF EXCESS STOCK. THE PAGE 10 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE A.O. AFTER REJECTING THE CONTENTIONS OF THE ASSESSE E HELD THAT THE ASSESSEE HAD MADE UNDISCLOSED INVESTMENT TO THE TUNE OF RS. 21 57 538/- LESS EXCESS STOCK TREATED AS INCOME FROM OTHER SOURCES A MOUNTING ON RS. 1758/-. IT IS FURTHER NOTED THAT THE ASSESSEE IS NO T MAINTAINING ANY STOCK RECORDS FOR RAW MATERIALS CONSUMPTION AND PRODUCTI ON. THE LEARNED COUNSEL IN THE COURSE OF HEARING BEFORE US HAS AL SO NOT DISPUTED THE VALUATION OF PHYSICAL INVENTORY MADE DURING THE COU RSE OF SURVEY. IN THIS FACTUAL BACKGROUND THE SHORT QUESTION FOR OUR ADJU DICATION IS HOW TO ARRIVE THE VALUE OF CLOSING STOCK AS ON THE DATE OF SURVEY I.E. WHETHER BY APPLYING GROSS PROFIT RATE BASED UPON PAST YEARS R ATES OR PHYSICAL STOCK FOUND DURING THE COURSE OF SURVEY SHOULD BE TAKEN A S A BASE TO ARRIVE AT THE FIGURE OF GROSS PROFIT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ADVOCATED FOR THE SECOND OPTION BUT IN OUR VIEW IF THAT BE THE CASE THEN IN NO SITUATION THERE WOULD BE ANY EXCESS STOCK B ECAUSE THE EXCESS STOCK SO FOUND WOULD GENERALLY RESULT INTO HIGHER RATE OF GROSS PROFIT AS COMPARED TO EARLIER YEARS RATE OF GROSS PROFIT WHEN OTHER FACTORS WHICH COULD AFFECT THE GROSS PROFIT HAVE NOT CHANGED MATE RIALLY. HAVING STATED SO HOWEVER WHEN QUANTITATIVE RECORDS WERE NOT MAI NTAINED THEN IT IS AN ESTABLISHED PRACTICE DULY APPROVED BY THE JUDICIAL INSTITUTIONS TO ARRIVE AT THE TRADING RESULTS BY ADOPTING GROSS PROFIT RATES AND NET PROFITS OF PAST YEARS AS WELL AS SUBSEQUENT YEARS TO COMPUTE THE TO TAL INCOME OR PAGE 11 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE UNDISCLOSED INVESTMENT IN THE STOCK HENCE WE REJE CT THE CONTENTIONS OF THE ASSESSEE IN THIS REGARD. 12. THE OTHER CONTENTION OF THE ASSESSEE IS THAT VALUE OF OPENING STOCK WAS SHOWN AT LESSER AMOUNT I.E. OPENING STOCK WAS SHOWN AT RS. 83.13 LAKHS INSTEAD OF 87.38 LAKHS AS PER THE AUDIT ED ACCOUNTS. IN PRINCIPLE THIS MAY BE ACCEPTED. HOWEVER HAVING RE GARD TO THE FACT THAT IN THE TRADING ACCOUNT PREPARED DURING THE COURSE OF S URVEY MANUFACTURING COSTS WERE NOT ALL CONSIDERED RESULTING INTO HIGHER QUANTUM OF GROSS PROFIT WHICH EVENTUALLY LOWERED THE VALUE OF CLOSING STOCK AS ON THAT DATE AND CONSEQUENTLY LESSER QUANTUM OF EXCESS STOCK. FURTH ER IF THE MANUFACTURING COST ARE CONSIDERED TO ARRIVE AT THE GROSS PROFIT THEN THE VALUE OF CLOSING STOCK IN SUCH TRADING ACCOUNT WOUL D CERTAINLY BE LESS THAN RS. 76.88 LAKHS AS GROSS PROFIT IN EARLIER YEA RS AFTER CONSIDERING THE MANUFACTURING COST IS 24.75 % 26.22 % ALSO. HOWEVE R SINCE THE A.O. HAS TAKEN A FIGURE OF 27.54 % WITHOUT CONSIDERING T HE MANUFACTURING COST HENCE AT THIS STAGE THAT METHODOLOGY CANNOT BE DIS TURBED BUT CERTAINLY THE ASSESSEE CANNOT BE GIVEN FURTHER BENEFIT FOR AL LEGED WRONG FIGURE OF OPENING STOCK PARTICULARLY WHEN THE FIGURE OF OPEN ING STOCK WAS ALSO PROVIDED BY THE ASSESSEE ITSELF. IN VIEW OF THESE F ACTS AND ABOVE DISCUSSIONS WE HOLD THAT THE ORDER OF THE LD. CIT( A) IS NOT CORRECT IN LAW. HENCE WE REVERSE THE SAME AND RESTORE THAT OF THE A.O. PAGE 12 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE BEFORE PARTING WE MAY ALSO ADD THAT THE LD. CIT(A) S FINDING THAT PHYSICAL QUANTITY WAS TALLIED WITH THE BOOKS OF ACC OUNT IS ALSO FACTUALLY INCORRECT BECAUSE AS PER THE ADMISSION OF THE ASSE SSEE ITSELF NO QUANTITATIVE RECORDS OF CONSUMPTION AND PRODUCTION HAVE BEEN MAINTAINED. THUS THIS GROUND OF THE REVENUE STANDS ALLOWED. 13. GROUND NOS. (II) & (III) READ AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE GROSS PROFIT ADDIT ION OF RS. 10 60 095/-. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE A.O. HAS NOT B EEN ABLE TO CONCEIVE A CASE FIT FOR APPLICATION OF THE PROVI SIONS OF SECTION 145. 14. THE FACTS IN BRIEF ARE THAT DUE TO DISCREPANCIES NOTED IN THE COURSE OF SURVEY THE A.O. REJECTED THE BOOK RESULT U/S 145(3). THE A.O. THEREAFTER ESTIMATED THE SALES AT RS. 2 50 00 000/ - AND APPLIED THE RATE OF 33.01 % THEREON TO WORK OUT THE GROSS PROFIT AT RS. 82 52 500/- AS AGAINST RS. 71 92 405/- DECLARED BY THE ASSESSEE AND MADE A N ADDITION OF RS. 10 60 095/-. AGGRIEVED BY THIS THE ASSESSEE CARRIE D THE MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHEREIN IT WAS CONTENDED THA T THE BOOKS OF ACCOUNT WERE PROPERLY MAINTAINED AND RECONCILIATION OF DISC REPANCIES NOTED PAGE 13 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE DURING THE COURSE OF SURVEY WAS ALSO DONE IN THE C OURSE OF ASSESSMENT PROCEEDINGS. IT WAS FURTHER CONTENDED THAT THE A.O. DID NOT POINT OUT EVEN A SINGLE DEFECT IN THE BOOKS OF ACCOUNT HENCE HIS ACTION OF REJECTION OF BOOKS OF ACCOUNT AS WELL AS ESTIMATION OF GROSS PRO FIT/SALES WAS NOT CORRECT IN LAW. THE ASSESSEE ALSO PLACED RELIANCE O N VARIOUS JUDICIAL DECISIONS TO SUPPORT ITS SUCH CONTENTION. THE LD. C IT(A) HELD THAT BOOKS WERE AUDITED AND NO DISCREPANCIES IN THE BOOKS OF A CCOUNT WERE POINTED OUT HENCE THE ACTION OF THE A.O. IN REJECTING THE BOOKS OF ACCOUNT AS WELL AS ESTIMATION OF GROSS PROFIT WAS NOT CORRECT IN LA W. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE US. 15. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT EXCESS CASH WAS FOUND DURING THE COURSE OF SURVEY AND EXCESS ST OCK WAS ALSO FOUND. HENCE THESE FACTS BY ITSELF INDICATED THAT THE AS SESSEE WAS ENGAGED IN THE SALE OUTSIDE THE BOOKS. IT WAS FURTHER CONTENDED TH AT EVEN THE STOCK RECORDS WERE NOT MAINTAINED. HENCE THE ACTION OF A.O. BOTH IN REGARD TO REJECTION OF BOOK RESULT AS WELL AS ESTIMATION OF S ALES AND GROSS PROFIT WAS CORRECT IN LAW. 16. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND BESIDES PLACING RELIANCE ON THE ORDER OF THE LD. CIT(A) SU BMITTED THAT THE TRADING RESULTS OF THE YEAR UNDER CONSIDERATION WERE BETTE R THAN EARLIER YEARS. HENCE NO JUSTIFICATION EXISTED FOR INVOKING PROVIS IONS OF SECTION 145(3) PAGE 14 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE FOR ESTIMATION OF GROSS PROFIT. HE FURTHER PLACED R ELIANCE ON THE ORDER OF THE LD. CIT(A). 17. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 18. IT IS NOTED THAT AS FAR AS THE ISSUE OF REJECTION O F BOOKS OF ACCOUNT IS CONCERNED WE ARE OF THE VIEW THAT NON-M AINTENANCE OF STOCK RECORDS AS WELL AS OTHER FACTS FOUND DURING THE COU RSE OF SURVEY DULY JUSTIFY THE SAID ACTION OF A.O. ACCORDINGLY GROUND NO.(III) OF THE REVENUE IS ACCEPTED. AS FAR AS THE ESTIMATION OF SA LES AND GROSS PROFIT THEREON AT HIGHER RATE IS CONCERNED IT IS NOTEWORT HY THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SURVEY TO S HOW THAT THE ASSESSEE WAS ENGAGED IN THE SALES OUTSIDE THE BOOKS. WE ARE FURTHER OF THE VIEW THAT ADDITION ON ACCOUNT OF EXCESS PHYSICAL STOCK H AS BEEN SUSTAINED BY US MAINLY BECAUSE SUCH STOCK COMPRISED OF RAW MATERIAL S AND EXCESS CONSUMPTION BEING SHOWN BY THE ASSESSEE CAN REDUC E THE PROFITS AND THEREFORE OUR SUCH DECISION CANNOT RESULT INTO AN INFERENCE THAT ASSESSEE WAS ENGAGED INTO SALES OUTSIDE THE BOOKS. WE FURTHE R FIND THAT TRADING RESULTS ARE BETTER AS COMPARED TO EARLIER YEARS AND WHICH FACT CAN ALSO NOT BE IGNORED. HENCE IN OUR VIEW THE LD. CIT(A) HAS RIGHTLY DELETED THE IMPUGNED ADDITION. ACCORDINGLY GROUND NO.2 OF THE REVENUE IS DISMISSED. PAGE 15 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE 19. IN THE RESULT THE APPEAL FILED BY THE REVENUE STA NDS PARTLY ALLOWED. 20. NOW WE SHALL TAKE UP ASSESSEES APPEAL IN I.T.A.NO.20/IND/2005. 21. GROUND NO.1 READS AS UNDER :- IN THE FACTS AND IN THE CIRCUMSTANCES THE LD. CIT (A) HAS ERRED IN LAW IN CONFIRMING THE DISALLOWANCES OF THE EXPENSES OF RS. 30 000/- UNDER THE HEAD OFFICE EXPENSES LA BOUR WELFARE MISC. EXPENSES BROKERAGE AND COMMISSION A ND TELEPHONE EXPENSES DESPITE THE FACT THAT LD. A.O. DID NOT FIND ANY DISCREPANCIES IN VOUCHERS AND BOOKS OF ACC OUNT OF THE ASSESSEE ON VERIFICATION. 22. THE FACTS IN BRIEF ARE THAT THE A.O. DISALLOWED A SUM OF RS. 30 000/- ON AD HOC BASIS OUT OF VARIOUS EXPENSES CL AIMED BY THE ASSESSEE FOR THE REASON THAT SUCH EXPENSES WERE NOT DULY SUB STANTIATED THROUGH SUPPORTING VOUCHERS. ON APPEAL BY THE ASSESSEE THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. FOR THE REASON THA T THERE WAS A POSSIBILITY THAT NON BUSINESS EXPENDITURE HAD BEEN CLAIMED UNDER THESE HEADS. AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL BEFORE US. 23. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT WAS NOT THE CASE OF THE A.O. THAT NON-BUSINESS EXPENDITURE HAD BEEN CLAIMED PAGE 16 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE UNDER THESE HEADS. THE LD. CIT(A) ON HIS OWN GAVE T HIS FINDING AND THAT TOO WITHOUT SUBSTANTIATING THE SAME BY BRINGING REL EVANT FACTS/MATERIAL ON RECORD. HENCE SUCH ACTION OF THE LD. CIT(A) WAS NO T CORRECT IN LAW. 24. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND PLACED STRONG RELIANCE ON THE ORDERS OF THE REVENUE AUTHOR ITIES. 25. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 26. IT IS NOTED THAT THE A.O. HAS MADE THESE DISALLOWAN CES FOR WANT OF VERIFICATION WHEREAS THE LD. CIT(A) HAS ADDED TH E ELEMENT OF NON- BUSINESS PURPOSES IN CONFIRMING THE SAME ALTHOUGH HE HAS NOT BROUGHT ANY MATERIAL TO SUBSTANTIATE THIS FINDING. IT IS FU RTHER NOTED THAT THE ASSESSEES ACCOUNTS ARE AUDITED AND NO SPECIFIC DEF ECTS HAVE BEEN POINTED OUT BY BOTH THE REVENUE AUTHORITIES HENCE IN OUR VIEW THE DISALLOWANCE MADE IN SUCH MANNER CANNOT BE JUSTIFIED IN LAW. ACC ORDINGLY WE ACCEPT THIS GROUND OF THE ASSESSEE AND DIRECT THE A.O. TO ALLOW THESE EXPENSES AS CLAIMED BY THE ASSESSEE. 27. GROUND NOS. 2 & 3 READ AS UNDER :- 2. IN THE FACTS AND IN THE CIRCUMSTANCES THE LD. CIT( A) HAS ERRED IN LAW IN CONFIRMING THE DISALLOWANCE RS. 20 000/- FROM THE VEHICLE EXPENSES DESPITE THE FAC T PAGE 17 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE THAT THE ASSESSEE WAS MAINTAINING COMMERCIAL VEHICLES. 3. IN THE FACTS AND IN THE CIRCUMSTANCES THE LD. CIT( A) HAS ERRED IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 13 000/- FROM THE DEPRECIATION CLAIMED BY THE ASSES SEE ON COMMERCIAL VEHICLE. 28. THE FACTS IN BRIEF ARE THAT THE A.O. DISALLOWED A SUM OF RS. 20 000/- OUT OF VEHICLE EXPENSES ON RS. 1 55 353/- HAS INCURRED FOR NON- BUSINESS PURPOSES. ON APPEAL THE LD. CIT(A) ALSO C ONFIRMED ON THE LINES OF THE DECISION IN REGARD TO CONFIRMATION OF DISALL OWANCE OF RS. 30 000/- OUT OF VARIOUS EXPENSES. THE A.O. ALSO DISALLOWED D EPRECIATION TO THE EXTENT OF RS. 20 000/- FOR THE SAME REASONS WHICH WAS REDUCED BY THE CIT(A) TO RS. 13 000/-. AGGRIEVED BY THIS THE ASSE SSEE IS IN APPEAL BEFORE US. 29. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT BOTH THE REVENUE AUTHORITIES FAILED TO QUOTE OR ADDUCE EVEN A SINGLE EVIDENCE DEPICTING THE FACT THAT SOME OF THESE EXPENSES WERE OF NON-BUSINESS IN NATURE. HE FURTHER CONTENDED THAT THE ASSESSEE BEIN G A COMPANY AND HENCE THERE COULD NOT BE ANY PERSONAL EXPENDITURE AND FOR THIS PROPOSITION HE PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL IN THE CASE PAGE 18 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE OF JCIT VS. KISAN EXTRUSIONS LIMITED AS REPORTED IN 9 ITJ 124 (I.T.A.T. INDORE.). 30. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 31. IT IS NOTED THAT NO EXPLANATION HAS BEEN TAKEN BY T HE REVENUE AUTHORITIES FROM THE ASSESSEE AS REGARD TO ACTUAL N ATURE OF THESE EXPENSES. FURTHER IN OUR OPINION THESE DISALLOWANCES HAVE B EEN MADE/CONFIRMED WITHOUT BRINGING THE REQUIRED MATERIAL ON RECORD TO JUSTIFY THE SAME. ACCORDINGLY WE DELETE BOTH THESE DISALLOWANCES ALS O. THUS BOTH THESE GROUNDS OF THE ASSESSEE STAND ALLOWED. 32. GROUND NO. 4 READS AS UNDER :- IN THE FACTS AND CIRCUMSTANCES THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCES OF INTEREST OF RS. 45 079/- U/S 40A(2)(A) OF THE INCOME-TAX ACT 1961 IGNORING THE DEFINITION OF RELATIVE AS PROVIDED U/S 2(41) OF THE ACT. 33. THE FACTS IN BRIEF ARE THAT THE A.O. FOUND THAT T HE INTEREST ON AGENCY DEPOSIT TO SPECIFIED PERSONS HAD BEEN PAID @ 18 % AS AGAINST INTEREST @ 12 % PAID TO OTHERS. THEREFORE THE A.O. DISALLOWED THE INTEREST PAID TO SPECIFIED PERSONS IN EXCESS OF NOR MAL RATE OF 12 % AND WORKED OUT THE QUANTUM THEREOF AT RS. 45 079/-. AGG RIEVED BY THIS THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHO ALSO PAGE 19 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE CONFIRMED THE ACTION OF THE A.O. AGREEING WITH THE REASONING OF A.O.HIS FINDINGS. 34. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE U S. 35. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED THE F ACTS AND ARGUED THE MATTER AT LENGTH AND CONTENDED THAT IT W AS NOT CLEAR AS ON WHAT BASIS BOTH THE REVENUE AUTHORITIES HAD HELD THAT M/ S.VITTHALDAS HIRALAL & COMPANY AND M/S. RAJESH PALODI ENTERPRISES WERE TO BE TREATED AS SPECIFIED PERSONS. IT WAS ALSO SUBMITTED THAT FOR T HE PURPOSES OF COMMISSION PAID TO M/S.RAJESH FOOD AGENCIES THE LD . CIT(A) HAS HELD THAT THIS ENTITY WAS NOT A SPECIFIED PERSON WHEREA S FOR DISALLOWING THE INTEREST ON AGENCY DEPOSIT IT WAS CONSIDERED AS OF THE CATEGORY OF SPECIFIED PERSON. HENCE THE ACTION OF THE LD. CIT( A) WAS NOT CORRECT IN LAW. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OT HER HAND PREFERRED TO RELY ON THE ORDERS OF REVENUE AUTHORITIES. 36. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 37. IT IS NOTED THAT THE ASSESSEE HAS PAID INTEREST ON AGENCY DEPOSITS OF DIFFERENT PARTIES AT DIFFERENT RATES. THE REVENU E AUTHORITIES HAVE DISALLOWED INTEREST PAID AT EXCESS RATE TO SPECIFIE D PARTIES U/S 40A(2). HOWEVER AS PER THE CONTENTIONS RAISED BY THE ASSES SEE NOW IT IS APPARENT THAT M/S. RAJESH FOOD AGENCIES IS NOT OF T HE CATEGORY OF PAGE 20 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE SPECIFIED PERSON HENCE INTEREST ON DEPOSIT OF SUC H PARTY CAN NOT BE DISALLOWED. AS REGARDS TO OTHER PARTIES THE ASSESS EE HAS NOT SUBSTANTIATED ITS CLAIM FOR ALLOWANCE OF INTEREST ON AGENCY DEPOS IT AT HIGHER SALE AS COMPARED TO INTEREST PAID TO UNRELATED PARTIES HEN CE SUCH DISALLOWANCE IS LIABLE TO BE CONFIRMED. ACCORDINGLY THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. 38. GROUND NO. 5 READS AS UNDER :- IN THE FACTS AND CIRCUMSTANCES THE LD. A.O. WAS N OT JUSTIFIED IN DISALLOWING SALES COMMISSION BEYOND 8 % ON THE AMOUNT OF RS. 2 80 029/- AND RS. 68 632/- PAID TO M /S. VITTHALDAS HIRALAL & CO (HOWEVER ) AND M/S. VITHALD AS HIRALAL & COMPANY ( BRANCH ) RESPECTIVELY. 39. THE FACTS IN BRIEF ARE THAT THE A.O. ANALYZED TH E RATE OF SALES COMMISSION IN RESPECT OF SPECIFIED PERSONS AS WELL AS OTHER PERSONS. THE A.O. REJECTED THE CONTENTION OF THE ASSESSEE THAT R ATE OF COMMISSION DEPENDED UPON THE RISK AND RESPONSIBILITY TAKEN BY THE BUYER AND ALSO ON VOLUME OF BUSINESS AND DISALLOWED COMMISSION IN EXC ESS OF 4 % AND MADE AN ADDITION OF RS. 4 00 036/-. AGGRIEVED BY TH IS THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A ) WHO HELD THAT M/S. RAJESH FOOD AGENCIES WAS NOT A SPECIFIED PERSON. HE NCE HE DELETED THE DISALLOWANCE OF COMMISSION MADE ON THIS ACCOUNT. AS REGARDS TO RATE OF PAGE 21 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE COMMISSION OF 4 % ADOPTED BY THE ASSESSING OFFICER FOR MAKING THE DISALLOWANCE THE LD. CIT(A) ADOPTED A RATE OF 8 % AND THUS GAVE PART RELIEF TO THE ASSESSEE. 40. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 41. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS FAR AS M/S. VITTHALDAS HIRALAL & COMPANY WAS CONCERNED IT WAS THE WHOLESALER FOR THE PRODUCTS OF THE ASSESSEE AND THEREFORE IT WAS RESPONSIBLE FOR THE LOSSES DUE TO BAD DEBTS OBSOLESCENCE AND HAD TO BE AR THE EXPENSES RELATING TO DEVELOPMENT OF RETAIL CHANGE AND AS AGA INST THIS C & F AGENT HAD A LIMITED ROLE AND THEREFORE COMMISSION GIVEN TO C & F AGENT COULD NOT BE MADE AS A BASIS FOR GIVING COMMISSION TO DIR ECT SELLING AGENT. THE LEARNED COUNSEL ACCORDINGLY CONTENDED THAT THE BA SIS FOR DISALLOWANCE WAS ITSELF NOT CORRECT AND IN THAT CIRCUMSTANCES NO DISALLOWANCE COULD BE MADE U/S 40A(2)(A) OF THE ACT. HE FURTHER PLACED RELIANCE ON THE FOLLOWING JUDICIAL DECISIONS :- (I) GUJARAT GUARDIAN LIMITED VS. JCIT (2008) TTJ 556 ( I.T.A.T. DELHI) (II) ITO VS. BANSILAL GUPTA (2008) 113 TTJ 898 ( I.T.A.T. AMRITSAR) (III) TT PRIVATE LIMITED VS. ITO (1980) 121 ITR 551. (IV) CIT VS. KUMAR ENGINEERS (1989) 178 ITR 630 ( P & H) PAGE 22 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE (IV) ITO VS. BALSARA HYGIENE PRODUCTS 12 ITD 335 ( BOM ) (V) CIT VS. UDHOJI SHRIKRISHNDAS (1983) 139 ITR 827 (MP) (VI) DCIT VS. LAB INDIA INSTRUMENTS PVT.LTD. 93 ITD 120 ( PUNE ) 42. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED STRONG R ELIANCE ON THE ORDERS OF THE REVENUE AUTHORITIES. 43. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 44. IT IS NOTED THAT THERE ASSESSEE BEFORE THE A.O. SUB MITTED THAT THE NATURE OF AGREEMENT WITH M/S. VITTHALDAS & CO. WAS ALTOGETHER DIFFERENT FROM THAT OF THE PARTY BASED AT KANPUR. HENCE RATE OF COMMISSION PAID TO THAT PARTY COULD NOT BE A PROPER BASIS FOR MAKING S UCH DISALLOWANCE. THE A.O. HAS NOT GIVEN ANY SPECIFIC REASONS IN NOT ACCE PTING THIS CONTENTION OF THE ASSESSEE NOR HE HAS BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT SUCH CONTENTIONS OF THE ASSESSEE ARE NOT CORRECT ON FACTS. HAVING STATED SO ONCE THE NATURE OF BUSINESS ARRANGEMENT IS DIFFEREN T HENCE BOTH TYPES OF SITUATION ARE NOT COMPARABLE WITH EACH OTHER AND T HEREFORE DISALLOWANCE MADE ON THAT BASIS CANNOT BE JUSTIFIED. WE FURTHER FIND THAT THE LD. CIT(A) HAS ENHANCED THE BASE TO 8 %. HOWEVER HE HA S ALSO NOT GIVEN PAGE 23 OF 23 - I.T.A.NOS. 77 & 20/IND/2005. AAKASH NAMKEEN INDORE ANY BASIS FOR DOING SO. IN OUR VIEW SUCH ACTION OF THE LD. CIT(A) IS ALSO NOT CORRECT IN LAW. ACCORDINGLY WE ACCEPT THIS GRO UND OF THE ASSESSEE AND DIRECT THE A.O. TO ALLOW THE COMMISSION PAID TO ALL THE PARTIES AS CLAIMED BY THE ASSESSEE. THUS THIS GROUND OF THE ASSESSEE IS ALSO ALLOWED. 45. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. 46. TO SUM UP BOTH REVENUE AS WELL AS ASSESSEES APPEA LS STAND PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22 ND JANUARY 2010. CPU* 12D15