The ACIT, Circle-8,, Ahmedabad v. Synpol Products Pvt.Ltd.,, Ahmedabad

ITA 3903/AHD/2008 | 2005-2006
Pronouncement Date: 21-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 390320514 RSA 2008
Assessee PAN AADCS9255P
Bench Ahmedabad
Appeal Number ITA 3903/AHD/2008
Duration Of Justice 2 year(s) 1 month(s) 23 day(s)
Appellant The ACIT, Circle-8,, Ahmedabad
Respondent Synpol Products Pvt.Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 21-01-2011
Date Of Final Hearing 11-01-2011
Next Hearing Date 11-01-2011
Assessment Year 2005-2006
Appeal Filed On 28-11-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH C CC C BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER DATE OF HEARING :11-1-11 DRAFTED ON:11-1-11. ITA NO. 3903 /AHD/ 2008 ASSESSMENT YEAR :2005-06 ASSISTANT COMMISSIONER OF INCOME TAX (OSD) CIRCLE-8 4 TH FLOOR AJANTA COMMERCIAL CENTRE ASHRAM ROAD AHMEDABAD. VS. SYNPOL PRODUCTS PVT. LTD. 77 G.V.M.M.S. AUDYOGIK VASAHAT LTD. ODHAV AHMEDABAD. PAN/GIR NO. : AADCS 9255P (A PPELLANT ) .. ( RESPONDE NT ) APPELLANT BY : SHRI DILEEPKUMAR SR.D.R. RESPONDENT BY: SHRI S.N. SOPARKAR SR.ADVOCATE WITH SHRI VIJAY L. SHAH. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XIV AHMEDABAD DATED 10-9-2008. 2. IN THIS APPEAL THE REVENUE HAS TAKEN FOLLOWING GROU NDS OF APPEAL:- GROUND NO.1 OF THE APPEAL READS AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF `.2 72 798/- MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF THE EXCESSIVE CLAIM OF DEPRECIATION ON TWO CARS WHICH A RE NOT OWNED BY THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER FOLLOWING THE ASSESSMENT ORDER OF ASSESSMENT YEAR 2004-05 DISALLO WED DEPRECIATION OF `.2 72 798/- ON TWO CARS WHICH WERE NOT OWNED BY TH E ASSESSEE AND WERE REGISTERED WITH RTO IN THE NAMES OF DIRECTORS. PAGE 2 OF 21 4. IN APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING THE ORDER OF HIS PREDECESSOR IN ASSESSMENT YEAR 200 4-05 HELD THAT AS THE CARS WERE USED BY THE ASSESSEE IN ITS BUSINESS THE DISAL LOWANCE OF DEPRECIATION WAS DELETED. 5. AT THE TIME OF HEARING BEFORE US BOTH THE PARTIE S AGREED THAT THE ISSUE STANDS COVERED IN FAVOR OF THE ASSESSEE BY THE DECI SION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 VID E ORDER DATED 11-1-2008 IN ITA NO.2851/AHD/2007. WE FIND THAT THE TRIBUNAL IN ASSESSMENT YEAR 2004- 05 HELD AS UNDER:- 7. WE HAVE HEARD THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE RELEVANT FACTS STAND BORNE OUT BY THE RECORD AS WELL AS DELINEATED BY THE ASSESSEE IN ITS STATEMENT OF FACTS BEFORE THE FIRST APPELLATE AUTHORITY. THE BENEFICIAL OR THE DE FACTO OWNERSHIP OF THE MOTOR CARS IN VIEW OF THE SAME IS OF THE ASSESSEE-COMPANY ONLY EVEN AS THE RELEVANT INVOICE/BILL (S); THE REGISTRATION BEING IN THE IND IVIDUAL NAME OF THE DIRECTORS WOULD ONLY BE IN THEIR NAME SO THAT THE Y HOLD THE TITULAR OWNERSHIP OF THE SAID ASSETS AND WHICH HOWEVER W OULD BE OF LITTLE MOMENT. THE ASSESSEE HAS BEEN ALLOWED FULL EXPENDIT URE (I.E. NET OF THE CHARGES ASCRIBED TO AND CLAIMED FROM THE DIRECTORS) IN RESPECT OF THE RUNNING AND MAINTENANCE OF THE SAID CARS SO THAT T HE SAME ARE BEING USED ONLY FOR ITS BUSINESS PURPOSES. UNDER THE CIRC UMSTANCES WE DO NOT THINK THE REVENUES OBJECTION TO ITS CLAIM FOR DEPR ECIATION UNDER SECTION 32 OF THE ACT THEREON AS VALID. THE THEORY OF UNJUS T AND ENRICHMENT; THE ASSESSEE-COMPANY HAVING DEPRIVED THE STATE OF ITS D UES IN RESPECT OF REGISTRATION FEE ON THE SAID VEHICLES BEING PURCHA SED BY AND FOR THE PURPOSE OF THE ASSESSEE-COMPANY AND WHICH THE REVE NUE PRESSES TO ADVANCE ITS CASE WE DO NOT CONSIDER WOULD HAVE ANY IMPACT OR OPERATE TO DENY THE ASSESSEE ITS CLAIM FOR DEPRECIATION ALL OWANCE WHICH HAS TO BE CONSIDERED ONLY IN TERMS OF THE PROVISIONS OF TH E LAW SO THAT WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS)ON THIS GROUND. WE DECIDE ACCOR DINGLY. 6. IN THE INSTANT CASE BOTH THE PARTIES AGREE THAT THE DEPRECIATION DISALLOWED ARE THE VERY SAME VEHICLES ON WHICH THE DEPRECIATION WAS DISALLOWED IN THE IMMEDIATELY PRECEDING YEAR 2004-0 5. THEREFORE THE ABOVE QUOTED DECISION OF THE TRIBUNAL IS SQUARELY APPLICA BLE TO THE FACTS OF THE ASSESSEES CASE IN THE YEAR UNDER APPEAL ALSO. THER EFORE RESPECTFULLY FOLLOWING THE ABOVE QUOTED ORDER OF THE TRIBUNAL WE CONFIRM T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISSED THIS GROUND OF APPEAL OF THE REVENUE. PAGE 3 OF 21 7. GROUND NO.2 READS AS UNDER:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF `.19 32 26 3/- MADE BY THE LEARNED ASSESSING OFFICER UNDER THE HEAD KEYMAN IN SURANCE. 8. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE CLAIMED DEDUCTION OF INSURANCE PREMIUM OF `.23 19 521/- UNDER THE HEAD KEYMAN INSURANCE. THE DETAILS OF PREMIUM PAID ON TWO INSURANCE POLICIES ARE FOLLOWS:- SR.NO . NAME DT. OF COMMENCEMENT AMOUNT OF PREMIUM . 1. MR. PARAG JOSHI 29.12.2004 ` . 11 63 788/- 2. MR. JESAL KOTHARI 03-03-2005 ` . 11 55 733/- TOTAL `. 23 19 521/- -------------------- THE LEARNED ASSESSING OFFICER OBSERVED THAT PART OF PREMIUM WAS PAID FOR SUCCEEDING FINANCIAL YEAR AND THEREFORE DISALLOWED AN AMOUNT OF `.19 32 263/- AS PREPAID INSURANCE EXPENSES NOT PERTAINING TO ASS ESSMENT YEAR 2005-06. 9. IN APPEAL THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE EXPENDITURE INCURRED MUST BE ALL OWED IN ITS ENTIRETY IN THE YEAR IN WHICH IT IS INCURRED. THE SAME CANNOT BE AP PORTIONED ON PERIOD OR TIME BASIS. THE APPELLANT STATED THAT UNDER THE MERCANTI LE SYSTEM OF ACCOUNTING THE AMOUNT OF PREMIUM PAID IS FULLY DEDUCTIBLE IN THE Y EAR IN WHICH THE PREMIUM IS PAID. SINCE LIABILITY WAS INCURRED ON THE DATE WHEN PREMIUM BECAME DUE IT WAS AN ASCERTAINED AND ACCRUED LIABILITY WHICH IS F ULLY ALLOWABLE. THE ASSESSEE SUBMITTED THAT THE RISK UNDER KEYMAN POLICIES START S ON THE COMMENCEMENT OF THE POLICIES AND THEREFORE THE AMOUNTS OF PREMIUMS PAID BECOME FULLY ALLOWABLE AND THE ASSESSING OFFICER HAS FAILED TO N OTICE THAT THE PREMIUM PAID IS FULLY ALLOWABLE AS PER PARA 14.4 OF CBDT CIRCULA R REFERRED IN 230 ITR 21 (ST.). THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESS EE RELIED UPON FOLLOWING DECISIONS:- 1. SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD. 2 13 ITR-523(GUJ.) 2. CIT VS. BRILLIANT TUTORIALS (P) LTD. 292 ITR 39 9 (MAD.) 3. CIT VS. H.M.T. LTD. 203 ITR 820 (KER.) 4. CIT VS. GEMINI ARTS (P) LTD. 254 ITR 201 (MAD) PAGE 4 OF 21 10. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNE D AUTHORISED REPRESENTATIVE OF THE ASSESSEE THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) HAS OBSERVED AS UNDER :- 4.2. I HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE C AREFULLY. RELYING ON THE CBDT CIRCULAR AND THE CASE LAWS CITED SUPRA AS THE LIABILITY IN QUESTION IS DETERMINED AND HAS CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION THE EXPENDITURE IS HELD TO BE ALLOWA BLE AND IT CANNOT BE APPORTIONED PERIOD-WISE. ACCORDINGLY THE DISALLOWA NCE OF `.19 32 263/- IS DELETED. 11 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAS PAID A SUM OF RS.23 19 521/- AS PREMIUM AGAINST KEYMANS INSURANCE POLICY WHICH BECAME DUE ON 29-12-2004 RS.11 63 788/- AND ON 03-03-2005 RS.11 55 733/- AS PER THE TERMS OF THE POLICY. AS PER THE TERMS OF POLICY SUCH PREMIUM IS PAYABLE ANNUALLY. ACCORDING TO THE LEARNED ASSESSING OFFICER THE ASSESSEE FOLLO WS MERCANTILE SYSTEM OF ACCOUNTING AND THE KEYMANS INSURANCE PREMIUM PAID IN DECEMBER 2004 AND MARCH 2005 AND THE NEXT PREMIUM WILL BE DUE IN DEC EMBER NEXT AND MARCH NEXT AND THEREFORE THE PREMIUM PAID COVERS PERIOD F ROM 29-12-2004 TO 28-12- 2004 AND 03-03-2005 TO 02-03-2005. THEREFORE THE L EARNED ASSESSING OFFICER TREATED PROPORTIONATE AMOUNT OF RS.3 87 258/- ONLY AS ALLOWABLE DURING THE RELEVANT ASSESSMENT YEAR AND TREATED THE REMAINING AMOUNT OF RS.19 32 263/- AS RELATING TO THE PERIOD WITH EFFECT FROM 01-04-20 05 AND ALLOWABLE AS DEDUCTION IN SUBSEQUENT YEAR AND THEREFORE PREPAID EXPENSES OF THE YEAR UNDER CONSIDERATION. ON APPEAL THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) OBSERVING THAT THE LIABILITY TO PAY PREMI UM OF RS.23 19 521/- CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AN D CONSEQUENTLY DELETED THE DISALLOWANCE OF RS.19 32 263/-. 12 THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDER OF THE LEARNED ASSESSING OFFICER AND THE LEARNED AUTHORISE D REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) AND ALSO SUBMITTED THAT THE SIMILAR AMOUN T OF PREMIUM OF KEYMANS PAGE 5 OF 21 INSURANCE WAS ALLOWED AS DEDUCTION IN THE EARLIER Y EAR AS WELL AS IN THE SUBSEQUENT YEAR TO THE ASSESSEE IN THE YEAR OF PAYM ENT. 13 WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASSES SEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. AS PER THIS SYSTEM OF ACCOUNT ING AN AMOUNT IS RECOGNIZED AS INCOME OF THE YEAR IN WHICH RIGHT TO RECEIVE ACCRUES TO THE ASSESSEE AND AN AMOUNT IS RECOGNIZED AS EXPENDITURE IN THE YEAR IN WHICH LIABILITY CRYSTALLIZES SO AS A CORRESPONDING RIGHT TO RECEIVE GETS VESTED IN SOME OTHER PERSON. FURTHER WE FIND THAT IT IS NOT IN DI SPUTE THAT KEYMANS INSURANCE PREMIUM PAID BY THE ASSESSEE WAS REVENUE IN NATURE AND AS PER THE TERMS OF THE POLICY THE LIABILITY TO PAY ENTIRE PREMIUM OF R S.23 19 521/- CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. THUS WE DO NO T FIND ANY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) . FURTHER WE FIND THAT NO MATERIAL COULD BE BROUGHT ON RECORD BEFORE US BY TH E REVENUE TO SHOW THAT THE ASSESSEE HAD ANY RIGHT TO RECEIVE RS.19 32 263/- FR OM THE INSURANCE COMPANY AS AT THE END OF THE RELEVANT PREVIOUS YEAR WHICH C AN BE TREATED AS REAL EXISTING ASSET OF THE ASSESSEE AS ON THE BALANCE SH EET DATE WHICH WAS NOT RECOGNIZED BY THE ASSESSEE IN ITS FINANCIAL STATEME NT. THUS WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 14 GROUND NO.3 OF THE APPEAL READS AS UNDER:- THE LD. LEARNED COMMISSIONER OF INCOME TAX (APPE ALS)-XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS ON ACCOUNT OF INFLATION OF PURCHASES OF RS.14 77 700/- AND ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT OF RS.2 84 867/- . THE FACTS OF THE CASE ARE THAT THE LEARNED ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE HAD SHOWN PURCHASES OF RS.15 73 020/- FROM VENUS PETROCHEMICALS (BOMBAY) PVT. LTD. IN ORDER TO VERIFY THE GENUINENE SS OF PURCHASES THE AO CALLED FOR COPY OF ACCOUNT OF THE ASSESSEE FROM THE PARTY BY ISSUING NOTICE U/S 133(6) OF THE ACT. AS PER LETTER OF VENUS PETROCHEM ICALS (BOMBAY) PVT. LTD. THE TOTAL SALES MADE BY THE SAID PARTY TO THE ASSESSEE WERE OF RS.91 320/- AS AGAINST CLAIM OF PURCHASES OF RS.15 73 020/- FROM V ENUS PETROCHEMICALS (BOMBAY) PVT. LTD. SO THE LEARNED ASSESSING OFFICER CONCLUDED THAT THE PAGE 6 OF 21 ASSESSEE HAD SHOWN INFLATED PURCHASE FOR THE DIFFER ENCE AMOUNT OF RS.14 77 000/-. FURTHER THE ASSESSEE HAD SHOWN CRED IT BALANCE OF RS.2 84 867/- IN THE NAME OF VENUS PETROCHEMICALS (BOMBAY) PVT. L TD. WHEREAS AS PER THE CONTRA ACCOUNT FILED BY THE LATTER THERE WAS NO SUC H CREDIT BALANCE. HENCE THE LEARNED ASSESSING OFFICER TREATED THE SAID AMOUNT A S UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND MADE ADDITION. 15. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ABOVE ADDITIONS HAD BEEN MADE FOR THE SAKE OF MAKING ADDITION AND MAKING HIGH-PITCH ASSESSMENT IGNORING THE BASIC PRINCIPLES WHICH GOVE RN THE VERIFICATION OF CROSS ACCOUNTS AND THE LIKE. THE LEARNED ASSESSING OFFICE R STATED THAT THE LEARNED ASSESSING OFFICER HAD MADE THIS ADDITION WITHOUT GI VING ADEQUATE OPPORTUNITY AND WITHOUT ISSUING ANY SHOW CAUSE NOTICE FOR ALLEG ED INFLATED PURCHASES OF RS.14 77 700/- AND FOR ALLEGED UNEXPLAINED CASH CRE DIT OF RS.2 84 867/- AND AS A RESULT NATURAL JUSTICE WAS DENIED. WHILE VERIFYIN G THE PURCHASES MADE BY THE ASSESSEE FROM VENUS PETROCHEMICALS (BOMBAY) PVT. LT D. (REFERRED TO AS VENUS) IT WAS POINTED OUT THAT THE ASSESSEE IS HAVING TWO SEPARATE AND INDEPENDENT UNITS VIZ. (I) SYNTHETICS & POLYMER INDUSTRIES / AND OR SYNPOL PRO DUCTS (P) LTD. (REFERRED TO AS DOMESTIC UNIT) (II) SYNPOL INTERNATIONAL (REFERRED TO AS E.O.U. UNIT) THE ASSESSEE EXPLAINED THIS FACT IN ITS LETTER DATE D 10-12-2007 AND FILED SEPARATE COPY OF ACCOUNT OF VENUS FOR PURCHASES MAD E BY DOMESTIC UNIT AS WELL AS BY E.O.U. UNIT. THE TRANSACTIONS WITH VENUS AS PER COPY OF ACCOUNT FILED FROM THE BOOKS OF DOMESTIC UNIT ARE SUMMARIZED AS UNDER:- DEBIT CREDIT 1 OPENING BALANCE NIL 2 AGGREGATE AMOUNT OF VARIOUS PURCHASES 1573020 3 AGGREGATE AMOUNT OF VARIOUS PURCHASES 1288153 MADE BY ACCOUNT PAYEE CHEQUES 4 CLOSING CREDIT BALANCE SHOWN IN BALANCE- 2848867 SHEET AS SUNDRY CREDITORS FOR GOODS PAGE 7 OF 21 -------------- ---------------- TOTAL RS. 1573020 1573020 THE TRANSACTIONS WITH VENUS AS PER THE COPY OF ACCO UNT FILED FROM THE BOOKS OF E.O.U. UNIT ARE SUMMARIZED AS UNDER:- DEBIT CREDIT 1 OPENING BALANCE NIL 2 AGGREGATE AMOUNT OF VARIOUS PURCHASES 95320 3 AGGREGATE AMOUNT OF PAYMENTS MADE BY ACCOUNT PAYEE CHEQUES 95320 4 BALANCE NIL ------------ -------------- TOTAL RS. 95320 95320 THE LEARNED ASSESSING OFFICER WHILE CALLING FOR COP Y OF ACCOUNT FROM VENUS U/S 133(6) THE A.O. WHILE CALLING FOR COPY OF ACCOUNT FROM VEN US U/S. 133(6) HAD RECEIVED THE COPY OF ACCOUNT OF APPELLANT FOR INTERNATIONAL UNIT ONLY AND NOT FOR DOMESTIC UNIT. THEREFORE THE PURCHASES OF RS.95 320 /- AS SHOWN WERE FULLY TALLIED WITH THE COPY OF ACCOUNT OF INTERNATIONAL U NIT OBTAINED FROM VENUS. THIS FACT WAS STATED BY THE ASSESSEE IN ITS LETTER DATED 10-12-2007. REGARDING PURCHASES OF RS.1573020/- MADE BY THE DOMESTIC UNIT IT WAS EXPLAINED THAT THE SAME CANNOT BE COMPARED UNLESS COPY OF ACCOUNT OF DOMESTIC UNIT WAS CALLED FOR FROM VENUS. UNDER THE CIRCUMSTANCES THE ASSESSEE HAS FULLY DISCHARGED HIS ONUS. IT WAS SUBMITTED THAT THE A.O. HOWEVER CHOSE TO REMAIN SILENT AND WITHOUT CALLING FOR SUCH COPY OF ACCOUNT AND WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD PROCEEDED IN MAKING THES E ADDITIONS. THE ASSESSEE HAS ALREADY RECEIVED THE LETTER DATED 5-1-2008 FROM VENUS EXPLAINING THE FACT AND ENCLOSING THE COPIES OF ACCOUNTS OF BOTH THE UN ITS COPIES OF WHICH HAVE BEEN FILED AT PAGE NO. 119 TO 125 OF THE PAPER BOOK . IT WAS SUBMITTED THAT THE APPELLANT DISCHARGED ITS ONUS AND FULLY EXPLAINED T HE PURCHASES. THEY HAVE BEEN DULY RECORDED IN ITS BOOKS. THEY HAVE BEEN UTI LIZED IN THE PRODUCTION PROCESS AND UNUTILIZED PORTION IF ANY HAS BEEN REFL ECTED IN STOCK. THAT APART THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES AN D OUTSTANDING BALANCE OF RS.2 84 867/- IS REFLECTED IN THE AMOUNT OF CREDITORS FOR GOODS. NOT A SINGLE PAYMENT IS MADE BY CASH. ALL THE TRANSACTION S ARE THUS VERIFIABLE. THE PAGE 8 OF 21 A.O. HAS TAKEN NO PAINS AT ALL TO VERIFY THESE TRAN SACTIONS WHICH HAVE BEEN FULLY REFLECTED IN THE ACCOUNTS OF THE PARTIES. THE REJEC TION OF BOOK RESULTS BY INVOKING PROVISIONS OF SECTION 145(3) IS THEREFORE UNJUSTIFIED. THEREFORE THE A.R. PLEADED THAT THE IMPUGNED ADDITIONS OF RS.14 77 700 /- AND RS.2 84 867/-SHOULD THEREFORE BE DELETED. THE A.R. RELIED UPON THE DECI SION OF HON'BLE GUJARAT HIGH COURT IN CASE OF CIT VS. M. K. BROTHERS 163 ITR 249 (GUJ) IN SUPPORT OF THE CONTENTION THAT IMPUGNED ADDITION IS WHOLLY UNJUSTI FIED. 16. AFTER THE ASSESSMENT WAS COMPLETED THE ASSESSE E OBTAINED A CLARIFICATION FROM THE PARTY VENUS PETROCHEMICALS ( BOMBAY) PVT. LTD. VIDE THE LATTER'S LETTER DATED 5-01-2008 ENCLOSING COPIES OF ACCOUNTS OF THE APPELLANT'S DOMESTIC UNIT AND EXPORT UNIT AND SUBMITTED THAT TH E PURCHASES OF RS.15 73 020/- MADE BY DOMESTIC UNIT FULLY TALLIED. THE ASSESSEE THEREFORE REQUESTED THAT THE SAID STATEMENTS BE ADMITTED AS A DDITIONAL EVIDENCE UNDER RULE 46A OF I.T. RULES. ACCORDINGLY THE SAME WAS FO RWARDED TO THE A.O. CALLING FOR HIS COMMENTS. THE A.O. SUBMITTED A REPORT DATED 24-04-2008 STATING THAT PAPERS NOW SUBMITTED SHOULD NOT BE ADMITTED AND THA T ANY PAPERS SUBMITTED AFTER THE ASSESSMENT STATED TO BE ITS EVIDENCES SHO ULD NOT BE ENTERTAINED AND HE RELIED UPON THE DECISION OF HON'BLE SUPREME COUR T IN GOETZ INDIA LTD.284 ITR 323 TO CONTEND THAT ASSESSEE CANNOT RAISE SUCH GROUND AT APPELLATE STAGE WHICH HAS BEEN DECIDED AGAINST THE ASSESSEE. 17. IN REBUTTAL TO THE SAID REMAND REPORT THE A.R. REPLIED THAT AS PER THE COPY OF ACCOUNT OF DOMESTIC UNIT OF THE APPELLANT FROM T HE BOOKS OF VENUS PETROCHEMICALS (BOMBAY) PVT. LTD. RECEIVED VIDE LET TER DATED 5-01-2008 THE PURCHASES OF RS.15 73 020/- IN DOMESTIC UNIT TALLY. THE DECISION RELIED UPON BY THE A.O. OF GOETZ INDIA WAS IN DIFFERENT CONTEXT AN D IT WAS WITH REGARD TO CLAIM OF DEDUCTION AFTER FILING OF RETURN OF INCOME. 18 AFTER CONSIDERING THE AFORESAID SUBMISSIONS MADE BY THE ASSESSEE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DE CIDED THE ISSUE IN THE FOLLOWING TERMS:- 5.4 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE A.R. CAREFULLY. I DO NOT AGREE WITH THE COMMENTS OF THE A.O. THAT ADDITIONAL EVIDENCE CANNOT BE ENTERTAINED IF THAT BE THE LAW THEN PROVISIONS OF RULE 46 A WOULD BE REDUNDANT AND THE APPELLANT WOULD HAVE N O OPPORTUNITY TO FILE ANY EVIDENCE ONCE THE ASSESSMENT IS COMPLETED. FROM THE COPY OF ACCOUNT PAGE 9 OF 21 OF DOMESTIC UNIT OF THE APPELLANT SENT BY VENUS PET ROCHEMICALS (BOMBAY) PVT. LTD. AND FILED AT PAGES 119 TO 125OF THE PAPER BOOK SUBMITTED BY THE A.R. IT IS SEEN THAT THE TOTAL PURCHASES FROM VENU S PETROCHEMICALS (BOMBAY) PVT. LTD. ARE OF RS.15 73 020/- AND THAT ACCOUNT CO PY SHOWS THE OUTSTANDING AMOUNT AS ON 31.03.2005 AS BEING OF RS.2 84 867/-. IN VIEW OF THE ABOVE FACTS AS THE ACCOUNTS TALLY AND THERE IS NO INFLATI ON OF PURCHASES I AM OF THE CONCLUSION THAT THERE IS NO JUSTIFICATION FOR ADDIT ION ON ACCOUNT OF INFLATION OF PURCHASES AND UNEXPLAINED CASH CREDIT. HENCE THE TW O ADDITIONS ON ACCOUNT OF INFLATED PURCHASES OF RS.14 77 700/- AND UNEXPLA INED CASH CREDIT OF RS.2 84 867/- ARE DELETED. 19 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. THE LEARNED ASSESSING OFFICER OBSERVED FROM THE DETAILS OF PURCHASES FILE D BY THE ASSESSEE THAT THE ASSESSEE CLAIMED TO HAVE PURCHASED GOODS WORTH RS.1 5 73 020/- DURING THE YEAR FROM VENUS PETROCHEMICALS (B) PVT. LTD. AND OU T OF THE SAME RS.2 84 867/- WAS STILL PAYABLE BY THE ASSESSEE TO VENUS PETROCHE MICALS (B) PVT. LTD. AS AT THE END OF THE RELEVANT PREVIOUS YEAR. THE LEARNED ASSESSING OFFICER SOUGHT INFORMATION U/S 133(6) FROM VENUS PETROCHEMICALS (B ) PVT. LTD. WHO IN TURN SUPPLIED COPY OF LEDGER ACCOUNT OF M/S SYNPOL INTER NATIONAL WHICH IS AN EOU OF THE ASSESSEE AND AS PER SAID LEDGER THE TOTAL SALES BY VENUS PETROCHEMICALS (B) PVT. LTD. WAS 91 320/- ONLY AND THERE WAS NO BALANC E AS AT THE END OF THE RELEVANT PREVIOUS YEAR. ON BEING POINTED OUT THIS D ISCREPANCY THE ASSESSEE EXPLAINED TO THE LEARNED ASSESSING OFFICER THAT THE COPY OF LEDGER ACCOUNT WAS SENT IN RESPECT OF INTERNATIONAL DIVISION ONLY AND TRANSACTION OF DOMESTIC DIVISION WAS NOT REFLECTED THEREIN. HOWEVER THE LE ARNED ASSESSING OFFICER NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE ON THE GRO UND THAT NO CONFIRMATION WAS FILED FROM VENUS PETROCHEMICALS (B) PVT. LTD. A ND THEREFORE TREATED RS.14 77 700/- AS INFLATION OF PURCHASES AND RS.2 8 4 867/- AS UNEXPLAINED CASH CREDIT AND ADDED BOTH THE AMOUNTS TO THE INCOME OF THE ASSESSEE. 20 BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) THE ASSESSEE FILED CONFIRMATION FROM VENUS PETROCHEMICALS (B) PV T. LTD. WHICH TALLIED WITH THE DETAILS FURNISHED BY THE ASSESSEE BEFORE THE LEARNE D ASSESSING OFFICER. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AFTER CALLING A REMAND REPORT FROM THE LEARNED ASSESSING OFFICER AND CONSIDERING THE CONFIRMATION FILED BY THE ASSESSEE OBSERVED THAT THE LEARNED ASSESSING O FFICER COULD NOT POINT OUT ANY DISCREPANCY IN THE CONFIRMATION OF VENUS PETROC HEMICALS (B) PVT. LTD. AND THEREFORE DELETED THE ADDITION OF RS.14 77 700/- AN D RS.2 84 867/-. PAGE 10 OF 21 21 THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED U PON THE ORDER OF THE LEARNED ASSESSING OFFICER AND COULD NOT POINT OUT A NY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). WE FI ND THAT THE LEARNED ASSESSING OFFICER SIMPLY ON THE BASIS OF AN INFORMA TION RECEIVED FROM VENUS PETROCHEMICALS (B) PVT. LTD. TREATED THE PURCHASES AND OUTSTANDING SHOWN BY THE ASSESSEE AS BOGUS WITHOUT GENUINELY GOING DEEP INTO THE MATTER AND WITHOUT TRYING TO ARRIVE AT A CORRECT CONCLUSION. T HE LEARNED ASSESSING OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE ON THE GRO UND THAT THE ASSESSEE COULD NOT FILE A CONFIRMATION FROM VENUS PETROCHEMICALS ( B) PVT. LTD. BUT THE REVENUE COULD NOT SHOW ANY MATERIAL TO ESTABLISH THAT LEARN ED ASSESSING OFFICER EVER CALLED UPON THE ASSESSEE TO FILE SUCH A CONFIRMATIO N. FURTHER THE LEARNED ASSESSING OFFICER COULD NOT ESTABLISH THAT THE ASSE SSEE COULD NOT PRODUCE INVOICES IN RESPECT OF PURCHASES OF RS.14 77 700/- AND / OR THE PAYMENT OF RS.11 92 833/- MADE BY THE ASSESSEE AGAINST PURCHAS ES OF RS.14 77 700/- WAS NOT VERIFIABLE OR WERE NOT MADE THROUGH BANKING CHA NNEL. IN ABSENCE OF ANY SUCH MATERIAL IT COULD NOT BE GATHERED THAT HOW THE LEARNED ASSESSING OFFICER CONCLUDED THAT THERE WAS NO ERROR IN THE INFORMATIO N SUPPLIED BY VENUS PETROCHEMICALS (B) PVT. LTD. AND THERE WAS ANY ERRO R IN THE INFORMATION SUPPLIED BY THE ASSESSEE. THUS CONSIDERING ALL THE FACTS AN D CIRCUMSTANCES OF THE CASE WE FIND THAT THE REVENUE COULD NOT BRING ANY MATERI AL ON RECORD ON THE BASIS OF WHICH IT CAN BE CONCLUDED THAT THE ASSESSEE HAS INF LATED THE PURCHASES BYRS.14 77 700/- OR THE ASSESSEE HAS SHOWN BOGUS CR EDIT OF RS.2 84 867/-. WE THEREFORE CONFIRM THE ORDER OF THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) AND DISMISS THIS GROUND OF REVENUE. 22 GROUND NO.4 IN THE APPEAL READS AS UNDER:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS OF RS.35 81 152/ - MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF LOW G.P. THE FACTS OF THE CASE ARE THAT LEARNED ASSESSING OF FICER OBSERVED THAT THE ASSESSEE HAD SHOWN GP RATE OF 30.23% IN THE YEAR UN DER CONSIDERATION WHEREAS GP WAS 33.26% IN THE PRECEDING YEAR. THE A. O. ASKED THE ASSESSEE TO EXPLAIN THE REASONS FOR FALL HI GP. AFTER CONSIDERI NG THE REPLY OF THE ASSESSEE PAGE 11 OF 21 THE A.O. OBSERVED THAT THE ASSESSEE HAD NOT PRODUCE D ANY EVIDENCE TO PROVE THAT COST OF PRODUCTION HAD GONE UP DUE TO INCREASE HI RATES OF RAW MATERIALS AND THAT THE ASSESSEE HAD DEBITED NON GENUINE PURCH ASES AS DISCUSSED IN THE PREVIOUS PARA HENCE HE CONCLUDED THAT BOOKS OF ACC OUNTS WERE DEFECTIVE AND NOT RELIABLE SO HE REJECTED THE BOOKS OF ACCOUNTS BY INVOKING PROVISIONS OF SECTION 145 OF THE I.T. ACT AND ESTIMATED GP ON THE BASIS OF GP RATE OF A.Y. 2004-05 AND MADE ADDITION OF RS.35 81 152/-. 23 ON APPEAL THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) HAS DECIDED THE ISSUE WITH THE FOLLOWING OBSERVATIONS: 6.1 BEFORE ME THE A.R. SUBMITTED THAT THE REASONS MENTIONED BY THE A.O. IN THE ASSESSMENT ORDER FOR REJECTING THE BOOK RESULT OF THE APPELLANT ARE NOT LEGALLY SUSTAINABLE AND DO NOT IN ANY WAY WARRANT FOR REJECTION OF THE BOOK RESULTS BY INVOKING PROVISION S OF SECTION 145(3) OF THE ACT AND AS A CONSEQUENCE THE CONCLUSION DRAWN B Y A.O. TO MAKE THE ADDITION ON ACCOUNT OF ESTIMATED G.P. STANDS VITIAT ED. IT WAS FURTHER SUBMITTED THAT THE ACCOUNTS OF THE APPELLANT ARE AU DITED BY THE COMPANY AUDITORS UNDER THE COMPANY LAW AS WELL AS B Y THE TAX AUDITORS UNDER THE INCOME TAX ACT. THEY HAVE NOT FO UND ANY DEFECTS IN THE METHOD AND MANNER IN WHICH THE ACCOUNTS HAVE BE EN MAINTAINED. ON THE CONTRARY BOTH THE AUDITORS HAVE CERTIFIED T HAT THE ACCOUNTS AS MAINTAINED BY THE APPELLANT ARE FULL AND TRUE IN RE GARD TO THE MATERIAL PARTICULARS WHICH WOULD GO TO SHOW THAT THE ACCOUNT S HAVE BEEN MAINTAINED AS PER THE ACCEPTED ACCOUNTANCY STANDARD S AS PRESCRIBED BY THE ACT. THE APPELLANT DEALS IN VARIOUS ITEMS WHICH ARE LIABLE TO EXCISE DUTY. THEREFORE THE ENTIRE PRODUCTION PROCESS IS S UBJECT TO VERIFICATION BY THE EXCISE AUTHORITIES WHICH IS AGAIN SUBJECT TO AU DIT BY A.G. OFFICE. THESE AUTHORITIES HAVE NOT FOUND ANY DEFECT IN THE REGISTER AS MAINTAINED BY THE APPELLANT. THUS THE A.O. WAS NOT IN DISPUTE WITH THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT OR COMPLIANCE OF ACCOUNTING STANDARDS PRESCRIBED UNDER THE INCOME TAX ACT. THE ONLY DISPUTE WHICH MADE HIM TO INVOKE SECTION 145(3) WAS THE ASSUMPTIO N OF NON GENUINE PURCHASES FROM VENUS PETROCHEMICALS (BOMBAY) PVT. L TD. MUMBAI. HOWEVER THIS ASSUMPTION ACCORDING TO THE A.R. IS ME RELY FIGMENT OF IMAGINATION AND AS STATED IN PARA 4.1 TO 4.11 CAN N OT BE SUSTAINED ON THE FACTS OF THE CASE AND THE ATTEMPT OF A.O. TO PROJEC T THIS ISSUE AS THE REASON FOR REJECTION OF BOOKS AND MAKING NOTIONAL A DDITION ON ACCOUNT OF ESTIMATED G.P. IS WHOLLY UNJUSTIFIED AND UNCALLED F OR. 6.2 THE A.R. FURTHER SUBMITTED AS UNDER; 'THE ID. A.O. DID NOT FIND ANY FAULT WITH THE BOOKS OF ACCOUNTS AND THE METHOD OF ACCOUNTING EMPLOYED BY THE APPELLANT. THEREFORE REJECTION OF BOOK RESULTS BY INVOKING PROVISIONS OF SEC. 145(3) IS NOT SUSTAINABLE ON FACTS AS WELL AS LAW. ON FOLLOWI NG FACTS BOOKS OF ACCOUNTS CANNOT BE REJECTED. PAGE 12 OF 21 A) ACCOUNTS ARE AUDITED UNDER THE COMPANIES ACT AND UN DER THE INCOME TAX ACT. B) NO FAULT FOUND WITH BOOKS OF ACCOUNTS OR METHOD OF ACCOUNTING. C) LIABLE TO EXCISE - SUBJECT TO AUDIT BY A.G. OFFICE. D) ACCOUNTS ARE MAINTAINED AS PER ACCEPTED ACCOUNTING STANDARDS AS PRESCRIBED BY THE ACT. E) THE ACCOUNT OF BOTH THE UNITS FOLLY TALLIED WITH TH E ACCOUNT OF VENUS AND THERE ARE NO DISCREPANCIES. 5.7 ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY FOLLO WING DECISIONS: A) ITO V. GIRISH M. MEHTA 294TTR (AT) 125 (RAJKOT) IT WAS HELD AS UNDER: ACCOUNTING-REJECTION OF ACCOUNTS-BURDEN OF PROOF-RE VENUE MUST PROVE BOOKS OF ACCOUNT NOT RELIABLE-ACCOUNTS AUDITED-PROF ITS OF EVERY TRANSACTION CORRECTLY GIVEN-FACT THAT RATE OF PROFI T IS LOW-NOT A GROUND FOR REJECTING ACCOUNTS-INCOME TAXACT 1961 S.!45. B) PYARELALMITTALV.ASSTTC.LT 291 ITR 214 (GAU) IT WAS HELD AS UNDER: : ACCOUNTING-REJECTION OF ACC OUNTS-ESTIMATE OF INCOME-NO FAULT FOUND WITH BOOKS OF ACCOUNT OR METH OD OF ACCOUNTING- NO SUPPRESSION OF MATERIAL FACTS-REJECTION OF ACCOU NTS AND ESTIMATE OF INCOME-NOT JUSTIFIED-INCOME TAX ACT 1961. C) VISHAL INFRASTRUCTURE LTD. 104 ITD 537 (HYD) PAGE 1 50 IT WAS HELD AS UNDER: SECTION 145 OF THE INCOME TAX ACT 1961 - METHOD OF ACCOUNTING - REJECTION OF ACCOUNTS- ASSESSMENT YEAR 2001-02 - WH ETHER ACCOUNTS REGULARLY MAINTAINED IN COURSE OF BUSINESS HAVE TO BE TAKEN AS CORRECT UNLESS THERE ARE STRONG AND SUFFICIENT REASONS TO I NDICATE THAT THEY ARE UNRELIABLE AND INCORRECT- HELD YES. D) SENZO ENGINEERING (P) LTD. 18 SOT 577 (MUM)' 6.3 AS REGARDS ADDITION TO GP THE A.R SUBMITTED AS UNDER 'THE IMPUGNED ADDITION IS BASED SOLELY ON THE ASSUM PTION OF NON- GENUINE PURCHASES FROM VENUS AND THEREBY REJECTION OF BOOK RESULTS OF THE APPELLANT. HOWEVER AS STATED IN PARA 4.1 TO PAR A 4.11 AND PARA 5.1 TO PARA 5.5 THESE ASSUMPTIONS CAN NOT BE SUSTAINED ON FACTS AS WELL AS ON LAW AND AS A CONSEQUENCE THE G.P. ADDITION IS AUTOM ATICALLY REQUIRED TO BE DELETED AND CAN NOT BE SUSTAINED. PAGE 13 OF 21 IT IS PERTINENT TO STATE THAT THE ID. A.O. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS CALLED FOR FOIL QUANTITATIVE DETAILS OF PURCHASES CONSUMPTION PRODUCTION SALES STOCKS ETC. WHICH T HE APPELLANT FURNISHED VIDE THEIR LETTERS DATED 25-9-2007 AND 5-10-2007. T HESE DETAILS WERE VERIFIED WITH THE RECORDS OF THE ASSESSEE AND FULLY TALLIED. FURTHER DETAILS OF STORES CONSUMPTION PACKING MATERIALS POWER AND FUEL WERE ALSO CALLED SUBMITTED AND VERIFIED. APART FROM THIS THE ID. A.O. CALLED FOR CONTRA COPIES OF ACCOUNTS FROM VARIOUS PARTIES U/S. 133(6) AND TALLIED THE SAME WITH THE ACCOUNTS OF THE ASSESSEE. 6.3 REGARDI NG FALL IN G.P. RATE THE APPELLANT SUBMITTED EXPLANATION VIDE ITS LETTER DATED 20-12-2007 SUPPORTED BY COMPARATIVE STATEMENTS WHICH ALONG WIT H VARIOUS QUANTITATIVE DETAILS ALREADY ON RECORD COULD EASILY EXPLAIN THAT THE COST OF RAW MATERIALS FUEL AND PACKING MATERIAL INCREA SED WHEREAS THERE WAS NO CORRESPONDING INCREASE IN SALE PRICE. THE ID. A. O. WITHOUT APPRECIATING THE SUBMISSIONS AND WITHOUT VERIFYING THE FACTS ON RECORD HAS ERRONEOUSLY GIVEN A FINDING THAT APPELLANT HAD FAIL ED TO SUBMIT ANY EVIDENCE REGARDING FALL IN G.P. RATE. THE ABOVE FIN DINGS OF ID. A.O. IS PREJUDICIAL AND CONTRARY TO FACTS ON RECORD. IN VIEW OF ABOVE FACTS THE ADDITION ON ACCOUNT OF G P. RS.35 81 152/- IS WHOLLY UNJUSTIFIED AND THEREFORE BE DELETED. ON FOLLOWING FACTS G.P. ADDITION CAN NOT BE SUSTAIN ED. A) EXPLANATION FOR FALL IN G.P. RATE WITH SUPPORTIN G EVIDENCES. (PAGE- 153 TO 162 OF PAPER BOOK) I) INCREASE IN THE AVERAGE COST OF RAW MATERIALS SUPPO RTED BY EVIDENCES II) NO CORRESPONDING INCREASE IN AVERAGE SALE PRICE SUP PORTED BY EVIDENCES. III) INCREASE IN THE COST OF FUEL OIL AND PACKING M ATERIAL SUPPORTED BY EVIDENCES. PAGE 155 TO 157 (B) DETAILS OF OPENING STOCK CLOSING STOCK CONSUM PTION PRODUCTION SALES PURCHASES ETC. IN TERMS OF QUANTITY AND VALUE OBTAI NED AND TALLIED.PAGE- 163 TO 173 C) DETAILS OF STORES CONSUMPTION AND PACKING MATERI AL CHARGES OF BOTH THE UNIT WITH COPIES OF ACCOUNTS OBTAINED AND VERIFIED. PAGE-174 TO 189 D) DETAILS OF ELECTRIC POWER CHARGES AND FUEL EXPEN SES OF BOTH THE UNITS WITH COPIES OF ACCOUNTS OBTAINED AND VERIFIED PAGE- 190 TO 201' 6.4 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE ABOVE SUBMISSIONS OF THE A.R. CAREFULLY. AS THE PURCHASES OF RS.L5 73 0207- FROM VENUS PETROCHEMICALS (BOMBAY) PVT. LTD HAVE BEEN HELD TO BE GENUINE IN THE PRECEDING PARA BY ME AFTER RECONCILIATION BY THE A. R. AND AS NO OTHER DEFECT FROM BOOKS OF ACCOUNTS HAS BEEN FOUND BY THE A.O. AND AS FALL IN GP RATE ALONE CANNOT BE A GROUND FOR REJECTION OF B OOKS OF ACCOUNTS RELYING ON THE CASE LAWS CITED BY THE A.R. I HOLD THAT THE REJECTION OF BOOKS OF ACCOUNTS IS NOT JUSTIFIED ESPECIALLY WHEN THE APPELLANT HAS EXPLAINED FALL IN GP WITH SUFFICIENT EVIDENCES . AC CORDINGLY I ALSO HOLD THAT PAGE 14 OF 21 THE ADDITION TO GP OF RS. 35 81 152/- IS NOT JUSTIF IED AND HENCE THE SAME IS DELETED. 24 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE GROSS PROFIT RATE DISCLOS ED BY THE ASSESSEE DURING THE YEAR COMES TO 30.23% WHEREAS IN THE IMMEDIATELY PRE CEDING YEAR THE GROSS PROFIT RATE WAS 33.26%. THE LEARNED ASSESSING OFFIC ER FURTHER OBSERVED THAT THE REASON FOR DECLINE IN THE GROSS PROFIT RATE WAS EXPLAINED BY THE ASSESSEE AS INCREASE IN THE PRICES OF RAW MATERIALS WITHOUT ANY INCREASE IN THE SALE PRICES OF FINISHED GOODS COULD NOT BE SUBSTANTIATED BY THE A SSESSEE BY BRINGING ANY MATERIAL. THE LEARNED ASSESSING OFFICER THEREFORE R EJECTED THE EXPLANATION OF THE ASSESSEE AND ESTIMATED THE GROSS PROFIT AT THE RATE OF 33.26% FOR THE YEAR UNDER CONSIDERATION AND THEREAFTER MADE ADDITION OF RS.35 81 152/-. 25 ON APPEAL THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) DELETED THE ADDITION FINDING THAT NO DEFECT IN THE REGULARL Y MAINTAINED BOOKS OF ACCOUNT OF THE ASSESSEE COULD BE POINTED OUT BY THE LEARNED ASSESSING OFFICER. 26 BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATI VE SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICER WHEREAS THE LEARNE D AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS REL IED UPON THE DECISIONS WHICH WERE CITED BEFORE THE CIT(A) AND QUOTED IN TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 27 WE FIND THAT THE ASSESSEES TRADING ACCOUNT IS S UPPORTED BY THE BOOKS OF ACCOUNT ON VERIFICATION OF WHICH NO SPECIFIC DEFECT S AS TO ITS COMPLETENESS OR CORRECTNESS COULD BE POINTED OUT BY THE REVENUE. NO DEFECTS IN THE QUANTITATIVE DETAILS FURNISHED IN THE TAX AUDIT REP ORT SUPPORTED BY THE STOCK REGISTER COULD ALSO BE POINTED OUT BY THE REVENUE. IN ABSENCE OF ANY SPECIFIC DEFECT BEING POINTED OUT BY THE REVENUE IN THE REGU LARLY MAINTAINED BOOKS OF ACCOUNT WHICH WERE ALSO SUBJECT TO AUDIT BY A QUALI FIED CHARTERED ACCOUNTANT IN OUR CONSIDERED OPINION IT WAS NOT OPEN TO THE L EARNED ASSESSING OFFICER TO DEVIATE FROM THE RESULTS REFLECTED BY SUCH BOOKS OF ACCOUNTS MERELY BECAUSE PAGE 15 OF 21 THERE WAS A DECLINE IN THE RATE OF GROSS PROFIT WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS). IT IS CONFIRMED THE GROUND OF APPEAL FILED BY THE REVENUE IS DISMISSED. 28 GROUND NO.6 IN THE APPEAL READS AS UNDER:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT IONS OF RS.11 31 243/- M MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF COMMISSION EXPENSES. THE FACTS OF THE CASE ARE THAT THE LEARNED ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE HAD DEBITED COMMISSION EXPENSES OF RS.11.3 1 LAKHS AND THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE OF SERVICES RENDERED B Y THE PERSONS FOR WHICH THE COMMISSION HAS BEEN PAID SO HE DISALLOWED THE COMM ISSION EXPENSES. 29 ON APPEAL THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) HAS DECIDED THE ISSUE AS UNDER:- 7.1 BEFORE ME THE A.R. SUBMITTED THAT THE A.O. HAS DISALLOWED THE ENTIRE COMMISSION EXPENSES OF RS.11 31 243/- WITHOU T GIVING ADEQUATE OPPORTUNITY AND AS A RESULT NATURAL JUSTICE IS DENI ED. IT WAS FURTHER SUBMITTED THE APPELLANT HAD SUBMITTED VIDE THEIR LE TTER DATED 5-10-2007 AND 20-12-2007 FULL DETAILS OF COMMISSION EXPENSES FROM TIME TO TIME WHICH ARE PART OF ASSESSMENT RECORDS. THE FOLLOWING EVIDENCES WERE PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDING S:- A). COPY OF ACCOUNT OF COMMISSION EXPENSE B) COPIES OF ACCOUNTS OF THE PARTIES TO WHOM COMMIS SION WAS PAID. THE COPIES OF ACCOUNT OF PARTIES WERE SHOWING COMPL ETE DETAILS OF COMMISSION CREDITED PAYMENTS MADE BY ACCOUNT PAYEE CHEQUES TAXES DEDUCTED ETC. C) NAMES ADDRESSES AND PANO. OF THE PARTIES TO WHO M COMMISSION WAS PAID. D) DETAILS OF NATURE OF SERVICES RENDERED BY THE COMMI SSION AGENTS. ACCORDING TO THE A.R. THE ABOVE FACTS CLEARLY REVEA LED THE GENUINENESS OF COMMISSION EXPENSES AND THE A.O. ERRED IN MAKING EN TIRE DISALLOWANCE WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD. IT WAS FURTHER SUBMITTED THAT THE A.O. FURTHER FAILED TO NOTICE FOLLOWING VI TAL FACTS AS PER PAGES NO.226 TO 229 & PAGE NO.340 OF THE PAPER BOOK AND T HE DISALLOWANCE CANNOT BE MADE ON FOLLOWING FACTS: PAGE 16 OF 21 A) THE EXPENDITURE IN QUESTION WAS WHOLLY AND EXCLU SIVELY FOR THE PURPOSES OF BUSINESS. B) THE EXPENDITURE IN QUESTION WAS NOT EXCESSIVE. C) THE APPELLANT IS PAYING SUCH COMMISSION SINCE TH E LAST SEVERAL YEARS FOR LEGITIMATE BUSINESS NEEDS. D) THE COMMISSION EXPENSES WERE FOLLY ALLOWED BY EA RLIER ASSESSING OFFICER IN RESPECT OF PAST YEARS THAT HAVE COME FOR SCRUTINY. E) ALL THE PAYMENTS ARE MADE BY ACCOUNT PAYEE CHEQU ES. F) EXPENSES ARE SUPPORTED BY DEBIT NOTES. G) SERVICE TAX IS PAID SEPARATELY FOR WHICH CREDIT IS TAKEN AS CENVAT. H) TAXES ARE REGULARLY DEDUCTED AND PAID TO GOVERNM ENT. I) IDENTITY OF COMMISSION AGENTS AND GENUINENESS OF EXPENSES FOLLY ESTABLISHED. IT WAS FURTHER SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY FOLLOWING DECISIONS: A) RITZ HOTELS (MYSORE) LTD. V. CIT 196 ITR 614 (KAR). IT WAS HELD AS UNDER: BUSINESS EXPENDITURE - COMMISSION - BURDEN OF PROOF - PAYMENT OF COMMISSION ALLOWED IN PRIOR YEARS - BURDEN OF PROVI NG THAT COMMISSION WAS NOT PAID FOR BUSINESS CONSIDERATIONS IN RELEVAN T YEAR WAS ON REVENUE - NO EVIDENCE TO SHOW THAT COMMISSION WAS NOT PAID FOR BUSINESS CONSIDERATIONS - COMMISSION DEDUCTIBLE. B) SWASTIK TEXTILE CP. PVT. LTD. V. CIT 150 ITR 155(GU J). IT WAS HELD AS UNDER: BUSINESS EXPENDITURE-COMMISSION FOR SERVICES-NO EVI DENCE TO SUPPORT FINDING OF TRIBUNAL THAT SERVICES WERE NOT RENDERED COMMISSION DEDUCTIBLE. C) MEHSANA DIST. CO-OP. PRODUCERS UNION LTD. V. CIT. 2 03 ITR 601 (GUJ). IT WAS HELD AS UNDER: IF ANY EXPENDITURE IS WHOLLY OR EXCLUSIVELY INCURRE D BY AN ASSESSEE WITH A VIEW TO PRESERVING AND AUGMENTING HIS BUSINESS PROS PECTS IN FUTURE SUCH EXPENDITURE WOULD BE ALLOWABLE EXPENDITURE UNDER SE CTION 37 OF THE INCOME TAX ACT 1961. WHILE CONSIDERING WHETHER AN EXPENDITURE CAN BE SAID TO BE PROPER EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ONE'S BUSINESS ONE HAS TO TAKE IN TO CONSIDERATION QUESTIONS OF COMMERCIAL EXPEDIENCY AN D THE PRINCIPLES OF ORDINARY COMMERCIAL TRADING. IT WOULD NOT BE PROPER TO REJECT A CLAIM FOR DEDUCTION ONLY ON THE GROUND THAT THE ASSESSEE HAD NOT MADE A SPECIFIC CLAIM IN THAT BEHALF BY REFERENCE TO SECTION 37 (SE E PP.611H 612A-C 613C). D) SASOON J. DEVID AND CO. (P) LTD. V CIT 118ITR 16 1 (SC). PAGE 17 OF 21 'ORDINARILY IT IS FOR THE ASSESSEE TO DECIDE WHETH ER ANY EXPENDITURE SHOULD BE INCURRED IN THE COURSE OF HIS OR ITS BUSI NESS.' E) CIT V. A AND A BAKERY P. LTD. 302 ITR 51 (DEL) 'BUSINESS EXPENDITURE PAYMENT BY ACCOUNT PAYEE CH EQUE TO SUBSIDIARY OF GOVERNMENT UNDERTAKING - NO PROOF THA T BILL RAISED BY COMPANY UNREASONABLE OR FRAUD INVOLVED - DEDUCTION ALLOWABLE - INCOME TAX ACT 1961 S.37. 7.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE SUBMISSIONS AS ADVANCED BY THE A.R. OF THE APPELLANT. I FIND TH AT THE APPELLANT HAS PAID COMMISSION IN THE PAST YEARS ALSO AND THE SAME HAVE BEEN ALLOWED BY THE A.O. IN THE PAST YEARS .THE APPELLANT HAS DE DUCTED TDS FORM COMMISSION PAYMENTS THE COPIES OF AGREEMENTS FOR_T HE_SALES REPRESENTATIVES WERE CALLED FOR AND PERUSED BY ME . THE APPELLANT WAS ASKED TO GIVE COPIES OF DEBIT NOTES FOR THREE MAJOR PARTIES I.E. RUPANI BROTHERS AND CO. V.L. NATRAJAN AND SAHYADRI ENTER PRISES THE APPELLANT ALSO FURNISHED DETAILS OF SALES ARRANGED THROUGH TH ESE PARTIES AND THE COMMISSION RATE HAS BEEN 2 TO 2.5% OF NET SALE VALU E . THE SALES REPRESENTATIVES ARE TO PROPAGATE FOR THE PRODUCTS A ND TO CONTACT CUSTOMERS AND TO PROCURE INDENTS IN THE NAME OF THE APPELLANT COMPANY AND THEY ARE ALSO RESPONSIBLE FOR PAYMENTS DUE FROM CUSTOMERS. CONSIDERING THESE FACTS AND THE SUBMISSIONS OF THE A.R. I DO NOT FIND ANY JUSTIFICATION FOR DISALLOWANCE OF COMMISSION. ACCOR DINGLY I DELETE THE DISALLOWANCE OF COMMISSION OF RS. 11 31 2437-. 30 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE HAS CLAIMED COMMISSION PAYMENT OF RS.11.31 LACS. THE LEARNED AS SESSING OFFICER OBSERVED THAT THE ASSESSEE WAS ASKED TO FURNISH NAMES AND AD DRESSES OF THE RECIPIENTS OF SUCH COMMISSION ALONG WITH THE EVIDENCES OF SERV ICES RENDERED BY THEM VIDE NOTICE DATED 12-09-2007 AND AGAIN BY ORDER SHE ET ENTRY DATED 17-10- 2007. THE ASSESSEE FINALLY SUBMITTED THE NAMES AND ADDRESSES OF THE RECIPIENTS ON 20-12-2007 I.E. THE DATE ON WHICH THE ORDER OF ASSESSMENT WAS PASSED BY THE LEARNED ASSESSING OFFICER WITHOUT GIV ING ANY MATERIAL IN RESPECT OF SERVICES RENDERED BY THE RECIPIENTS OF COMMISSIO N. THE LEARNED ASSESSING OFFICER THEREFORE DISALLOWED THE COMMISSION OF RS.1 1.31 LACS. 31 ON APPEAL THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) DELETED THE ABOVE ADDITION BY OBSERVING AS UNDER:- 7.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSIONS AS ADVANCED BY THE A.R. OF THE APPELLANT. I FIND TH AT THE APPELLANT HAS PAID COMMISSION IN THE PAST YEARS ALSO AND THE SAME HAVE BEEN ALLOWED PAGE 18 OF 21 BY THE A.O. IN THE PAST YEARS .THE APPELLANT HAS DE DUCTED TDS FORM COMMISSION PAYMENTS THE COPIES OF AGREEMENTS FOR_T HE_SALES REPRESENTATIVES WERE CALLED FOR AND PERUSED BY ME . THE APPELLANT WAS ASKED TO GIVE COPIES OF DEBIT NOTES FOR THREE MAJOR PARTIES I.E. RUPANI BROTHERS AND CO. V.L. NATRAJAN AND SAHYADRI ENTER PRISES THE APPELLANT ALSO FURNISHED DETAILS OF SALES ARRANGED THROUGH TH ESE PARTIES AND THE COMMISSION RATE HAS BEEN 2 TO 2.5% OF NET SALE VALU E . THE SALES REPRESENTATIVES ARE TO PROPAGATE FOR THE PRODUCTS A ND TO CONTACT CUSTOMERS AND TO PROCURE INDENTS IN THE NAME OF THE APPELLANT COMPANY AND THEY ARE ALSO RESPONSIBLE FOR PAYMENTS DUE FROM CUSTOMERS. CONSIDERING THESE FACTS AND THE SUBMISSIONS OF THE A.R. I DO NOT FIND ANY JUSTIFICATION FOR DISALLOWANCE OF COMMISSION. ACCOR DINGLY I DELETE THE DISALLOWANCE OF COMMISSION OF RS. 11 31 2437-. 32 WE FIND THAT THE NAMES AND ADDRESSES OF THE RECI PIENTS OF COMMISSION WERE FURNISHED BY THE ASSESSEE AT THE FAG END OF TH E ASSESSMENT PROCEEDINGS AND THEREFORE THE LEARNED ASSESSING OFFICER COULD N OT VERIFY THE SAME. FURTHER IT IS OBSERVED THAT THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) DELETED THE ADDITION BY RELYING UPON THE DOCUMENTS FURNISHE D BY THE ASSESSEE WITHOUT VERIFYING THE GENUINENESS OF PAYMENTS FROM THE RECI PIENTS. CONSIDERING THE FULL FACTS AND CIRCUMSTANCES OF THE CASE IN OUR CONSIDE RED OPINION IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THE ISSUE BACK TO TH E FILE OF THE LEARNED ASSESSING OFFICER FOR ADJUDICATION AFRESH AFTER PROPER VERIFI CATION AND AFTER ALLOWING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE ORDER ACCORDINGLY. THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STAT ISTICAL PURPOSE. 33 GROUND NO.6 IN THE APPEAL READS AS UNDER:- THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -XIV AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDIT IONS OF RS.2 55 831/- MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF BAD DEBTS CLAIM OF THE ASSESSEE. THE FACTS OF THE CASE ARE THAT THE LEARNED ASSESSIN G OFFICER OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO PROVE THA T THE DEBT HAS BECOME BAD DURING THE PREVIOUS YEAR AND IT HAS NOT PRODUCE D ANY EVIDENCE TO PROVE THAT THE CONDITIONS LAID DOWN IN SECTION 3-6(1 )(VI I) ARE FULFILLED . HE RELIED ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE C ASE OF DHALL ENTERPRISES AND ENGINEERS (P.) LTD. AND DISALLOWED THE BAD DEBT. 34 ON APPEAL THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) HAS DECIDED THE ISSUE IN THE FOLLOWING TERMS:- PAGE 19 OF 21 8.1 BEFORE ME THE A.R. SUBMITTED THAT DURING THE Y EAR UNDER ASSESSMENT THE APPELLANT HAD WRITTEN OFF THE OUTSTA NDING AMOUNT DUE FROM TWO DEBTORS WHICH BECAME BAD AND IRRECOVERABLE . IT WAS FURTHER SUBMITTED THAT AS THE AMOUNTS IN QUESTION WERE NON RECOVERABLE AND BECAME BAD THE SAME WERE WRITTEN OFF IN THE ACCOUNT S. THE COPIES OF ACCOUNTS OF BOTH THE PARTIES VIZ. MATCHWELL INKS (P ) LTD. AND SHRI SHAKTI INKS SHOWED THAT THE CHEQUES OF THE PARTIES BOUNCED SEVERAL TIMES AND THE DEBTS BECAME IRRECOVERABLE. IT WAS SUBMITTED TH AT ON THE FOLLOWING FACTS THE CLAIM OF THE APPELLANT CAN NOT BE DISALLO WED. A) BAD DEBT ACTUALLY WRITTEN OFF IN PRO FIT AND LOSS A CCOUNT. PAGE-235. B) COPY OF ACCOUNT OF MATCHWELL INK PVT. LTD. SHOWING BOUNCED CHEQUES IN THE YEARS 2001-02 AND 2002-03 BALANCE OUTSTANDIN G SINCE 2002-03 RS.2377477-WRITTEN OFF IN 2004-05. PAGE-237 AND 238 . C) COPY OF ACCOUNT OF SHREE SHAKTI INKS SHOWING BOUNCE D CHEQUES IN THE YEAR 2002-03 BALANCE OUTSTANDING RS.18064/-WRITTEN OFF IN 2004-05. PAGE-241 AND 242. 8.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R. C AREFULLY. AS THE CHEQUES OF THE TWO PARTIES BOUNCED SEVERAL TIMES AN D THE AMOUNTS WERE RIOT RECOVERABLE THE APPELLANT HAS WRITTEN OFF THE SAID AMOUNTS. IN CASE OF DHALL ENTERPRISES AND ENGINEERS (P.) LTD. THE FACTS WERE DIFFERENT AS IN THAT CASE THE DEBTORS WERE READY TO SETTLE THE AMOU NTS . CONSIDERING THESE FACTS I HOLD THAT THE BAD DEBT IS ALLOWABLE ACCORDINGLY I DELETE THE DISALLOWANCE. 35 THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDER OF THE LEARNED ASSESSING OFFICER. 36 THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T. R. F. LTD. V. COMMISSIONER OF INCOME- TAX (2010) 323 ITR 397 (SC) WHEREIN IT WAS HELD AS UNDER:- AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE I NCOME-TAX ACT 1961 WITH EFFECT FROM APRIL 1 1989 IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT HAS BECOME IRRECOVERABLE : IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSE E. THE SUPREME COURT ACCORDINGLY REMANDED THE MATTER T O THE ASSESSING OFFICER TO EXAMINE SOLELY TO THE EXTENT OF WRITE O FF WHETHER THE DEBT OR PART THEREOF WAS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. PAGE 20 OF 21 37 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. IN THE INSTANT CASE THE LEARNED ASSESSING OFFICER DISALLOWED THE CLAIM FOR DEDUCTION OF BAD DEBT OF RS.2 55 831/- OF THE ASSES SEE FOR THE REASON THAT THE ASSESSEE FAILED TO PROVE THAT THE DEBT HAD BECOME B AD DURING THE RELEVANT PREVIOUS YEAR BY RELYING UPON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISES AND ENGINEERS (P) LTD. VS . CIT (2007) 207 CTR 729 (GUJ). IN APPEAL THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) DELETED THE DISALLOWANCE FOR THE REASON THAT THE FACTS OF T HE CASE IN DHALL ENTERPRISES AND ENGINEERS (P) LTD. WERE DIFFERENT FROM THE FACT S OF THE ASSESSEES CASE. WE FIND THAT THE HONBLE SUPREME COURT IN THE T R F LT D. (SUPRA) HAS HELD THAT FOR ALLOWING THE CLAIM OF BAD DEBT TO THE ASSESSEE AFTE R THE AMENDMENT MADE IN THE ACT WITH EFFECT FROM 1 ST APRIL 1989 IN SECTION 36(1)(VII) ONLY WRITE OFF O F DEBT IN THE BOOKS OF ACCOUNT BY THE ASSESSEE WAS SUFFICI ENT AND THE ASSESSEE NEED NOT TO PROVE THAT THE DEBT HAS ACTUALLY BECOME BAD. FURTHER IT IS NOT IN DISPUTE THAT THE DEBT IN QUESTION HAVE BEEN WRITTEN OFF BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THEREFORE RESPECTFULLY FOLLOWING THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF T R F LTD. (SUPRA) WE CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISS TH E GROUND RAISED BY THE REVENUE. 38 IN THE RESULT THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 21 ST DAY OF JANUARY 2011. SD/- SD/- ( MAHAVIR SINGH) (N.S. S AINI) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED: AHMEDABAD 21 ST DAY OF JANUARY 2011. COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. PAGE 21 OF 21 BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON --------------- -------- ----------- 2. DRAFT PLACED BEFORE AUTHORITY --------------- ------------------- 3. DRAFT PROPOSED & PLACED --------------- ----- -------------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED --------------- ---- --------------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S ---------------- -- ------------------ 6. KEPT FOR PRONOUNCEMENT ON ---------------- --- ----------------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------