M/s Kalyani CAshew & Tin Industries, Koraput v. ITO, Jeypore

ITA 398/CTK/2010 | 2006-2007
Pronouncement Date: 25-02-2011

Appeal Details

RSA Number 39822114 RSA 2010
Assessee PAN AAHFK3852B
Bench Cuttack
Appeal Number ITA 398/CTK/2010
Duration Of Justice 3 month(s) 17 day(s)
Appellant M/s Kalyani CAshew & Tin Industries, Koraput
Respondent ITO, Jeypore
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2011
Appeal Filed By Assessee
Bench Allotted DB
Date Of Final Hearing 21-02-2011
Next Hearing Date 21-02-2011
Assessment Year 2006-2007
Appeal Filed On 08-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK ( ) BEFORE . . HONBLE SHRI K.K.GUPTA ACCOUNTANT MEMBER. /AND . . . S HRI K.S.S.PRASAD RAO JUDICIAL MEMBER / I.T.A.NO. 398/CTK/2010 / ASSESSMENT YEAR 2006 - 07 M/S. KALYANI CASHEW AND TIN INDUSTRIES TELLIGUDA JEYPORE DIST.KORAPUT PAN AAHFK 3852 B. - - - VERSUS - INCOME - TAX OFFICER WARD 1 JEYPORE. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI N.ANAND RAO AR / FOR THE RESPONDENT: / SHRI S.K.DASH DR / ORDER . . SHRI K.K.GUPTA ACCOU NTANT MEMBER. THIS APPEAL BY THE ASSESSEE AGITATES THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) WHO ON THE BASIS OF VARIOUS ADDITIONS AND DISALLOWANCES FRAMED BY THE ASSESSING OFFICER HAS DELIBERATED UPON AND PARTLY ALLOWED THE ASSESSES CONTENTION WHICH WE ALSO PROPOSE TO ADJUDICATE GROUND - WISE SERIALLY ON THE BASIS OF CONTENTIONS OF THE RIVAL PARTIES PRESENT HEREIN BEFORE US. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESSEE IS A SMALL SCALE INDUSTRIES HAVING A CA SHEW PROCESSING UNIT AND HAS OBTAINED CASH CREDIT LIMIT FROM THE STATE BANK OF INDIA FOR TRADING IN CASHEW KERNELS AND MANUFACTURING THE EDIBLE PORTION ATTRACTING THE PROVISIONS OF SALES TAX. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDIN GS U/S.143(3) REQUIRED TO THE ASSESSEE FILE THE DETAILS OF PURCHASES SALES AND CONFIRMATIONS FROM DEBTORS AND CREDITORS AND EXAMINED THE FINANCIAL STATEMENTS BY INVITING CONFIRMATION FOR EVIDENCES BY ISSUING NOTICES I.T.A.NO. 398/CTK/2010 2 U/S.133(6). HE MADE ADDITIONS UNDER VA RIOUS HEADS WHICH WE PROPOSE TO ADJUDICATE SERIALLY AS WERE ARGUED BEFORE US BY THE RIVAL PARTIES. HE MADE ADDITIONS TO THE EXTENT RETURNED INCOME OF 56 760 WAS ASSESSED AT 40 33 670. THE LEARNED CIT(A) GAVE PART RELIEF WHICH PART SUSTENANCE IS CONSIDERE D HERE IN BALOW. 3. THE FIRST GROUND RELATES TO BRINGING TO TAX AN AMOUNT OF EXPENDITURE BEING FEES PAID TO MARKET REGULATED COMMITTEE ON PURCHASES OF CASHEW NUTS AMOUNTING TO 3 10 000 AT 1%. SIMILARLY FREIGHT ON THE SAID PURCHASES AMOUNTING TO 7 037 W AS ALSO NOT CLAIMED. THE ASSESSING OFFICER SOUGHT TO VERIFY THAT THESE TWO ITEMS OF EXPENDITURES TO BE NECESSARILY INCURRED WERE NEITHER CLAIMED IN THE PROFIT & LOSS ACCOUNT AS WAS MANDATORY WERE THEREFORE BROUGHT TO TAX BY THE LEARNED ASSESSING OFFICER AN D CONFIRMED BY THE LEARNED CIT(A) ON THE PREMISE THAT THE EXPENDITURE HAD BEEN MADE BUT NOT RECORDED IN THE BOOKS OF ACCOUNT. THE LEARNED COUNSEL SUBMITTED THAT THE CLAIM OF EXPENDITURE WHICH HAS BEEN BORNE BY THE PARTNER OF THE ASSESSEE AND IS A LEGITIMAT E CLAIM OF EXPENDITURE NOT CLAIMED IN THE PROFIT & LOSS ACCOUNT CANNOT BE BROUGHT TO TAX AS INCOME UNDER THE PROVISIONS OF SECTION 69C INSOFAR AS IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE AMOUNT HAS BEEN SPENT BY THE ASSESSEE. IT IS MERELY A PRE SUMPTION IN THE MIND OF THE ASSESSING OFFICER THAT BOTH THESE ITEMS OF EXPENDITURES WERE INCURRED WHICH WAS NOT THE CASE AS SUBMITTED BY THE ASSESSEE BEFORE THE APPELLATE AUTHORITY AS WELL. THE LEARNED DR HOWEVER SUBMITTED THAT SINCE THE BOOKS OF ACCOUNT S WERE NOT ACCEPTED BY THE ASSESSING OFFICER THE EVIDENCE OF VERIFYING THE WAY BILL AND THE FACT THAT THE GOODS WERE FERRIED FROM BALIGUDA TO JEYPORE REQUIRE INCURRING OF SUCH EXPENDITURE WHEN THE GOODS PASSED THROUGH THE BARRIER FOR I.T.A.NO. 398/CTK/2010 3 A FEES TO BE BORNE AND PAID TO MARKETING REGULATED COMMITTEE WAS ALSO ABSENT . 3.1. HAVING HEARD BOTH THE CONTENTIONS AND CONSIDERING THE FACTS AND CIRCUMSTANCES WE FIND FORCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT ONCE THE ASSESSEE HAD DENIED OF HAVIN G INCURRED SUCH EXPENDITURES WHEN THE BILLS DRAWN ARE INCLUDING FREIGHT FOR GOODS TO BE DELIVERED AT THE FACTORY GATE THE REQUIREMENT FOR CLAIMING OF MARKETING REGULATED COMMITTEE FEES AT 1% AND FREIGHT WAS TO BE BORNE BY THE SELLER WHICH FACT HAS NOT BEE N CONTROVERTED BY BOTH THE AUTHORITIES BELOW. THIS IS WHY THE AMOUNT WAS NEVER CLAIMED IN THE PROFIT & LOSS ACCOUNT WHICH THE ASSESSING OFFICER INSISTED WAS TO BE TAXED UNDER THE PROVISIONS OF SECTION69C WHICH WE ARE UNABLE TO ACCEPT. THESE AMOUNTS ARE T HEREFORE DIRECTED TO BE DELETED FROM THE INCOME SO ASSESSED. 4. THE NEXT GROUND AGITATED BY THE ASSESSEE IS WITH RESPECT TO ADDITION OF 2 77 075 WHICH WAS BROUGHT TO TAX BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 68 AS HE OBSERVED THAT TH E SUNDRY CREDITORS OUTSTANDING AS ON 31.3.2006 WAS 3 26 438 AND SHRI J.RAVI KUMAR A PARTNER HAD A DEBIT BALANCE OF 13 78 650 WHO USE D TO MAKE PAYMENTS ON BEHALF OF THE FIRM TO THE CREDITORS. THE PAYMENTS WERE TO BE MADE TO 17 DIFFERENT SMALL CULTIVATORS BEING VILLAGERS WAS VERIFIED BY THE ASSESSING OFFICER REQUISITIONING THE INFORMATION U/S.133 ( 6) WHEN HE SOUGHT TO TAX 2 77 075 AS BOGUS WHEN A SUM OF 50 000 WAS ACCEPTED BY HIM WAS FROM A FINANCER. THE LEARNED COUNSEL OF THE ASSESSEE ARGUED THAT THE AS SESSEE IS A SMALL SCALE INDUSTRY AND PURCHASES AGRICULTURAL PRODUCE FROM CULTIVATORS AND SMALL TRADERS AND THE PAYMENTS WERE MADE BY THE PARTNER OF THE FIRM SHRIJ.RAVI KUMAR OUT OF I.T.A.NO. 398/CTK/2010 4 THE ADVANCE TAKEN FROM THE FIRM. THE PARTNER OWED THE SUM OF 13 78 650 AS ON THE DATE THE SUNDRY CREDITORS WERE TO BE PAID COULD NOT CORRELATE WHETHER THE SAID CREDITORS HA D OUTSTANDING ON THE LAST DAY OF THE YEAR WERE ACTUALLY PAID BY THE PARTNER OR NOT. THE AO AND THE LEARNED CIT(A) HAVE THEREFORE ONLY ON PRESUMPTION AND ASSU MPTION HE LD THAT THE PURCHASES WERE MADE IN JULY AND AUGUSTU 2005 WHETHER COULD REMAIN OUTSTANDING ON 30.3.2006 WAS UNDER NO CIRCUMSTANCES BE CONSIDERED U/S.68. THE LEARNED CIT(A) IN ORDER TO ESTABLISH THE FACT THAT THE CREDITORS REMAINED UNPAID WERE THER EFORE BOGUS TRIED TO CORRELATE THE SAME TO THE FACT THAT THE CREDIT SHOULD HAVE BEEN GIVEN TO THE PARTNER WHO HAD WITHDRAWN THE AMOUNT FROM THE FIRM FOR REPAYING THE SAME WAS THEREFORE NOT PROPERLY RECORDED IN THE BOOKS OF ACCOUNT AND CONFIRMED THE SAME A S SHAM TRANSACTIONS. 4.1. WE HAVE CONSIDERED THE CONTENT IONS OF THE RIVAL PARTIES AND FI ND THAT THERE WAS NO OCCASION TO ESTABLISH THAT THE SUNDRY CREDITORS REMAIN ED UNPAID OR BOGUS TO THE EXTENT THAT THE PARTNER HAD TAKEN THE ADVANCE FROM THE FIRM AMOUNT ING TO 13 78 650 AND HAD PAID TO VARIOUS CULTIVATORS DULY ACCOUNTED FOR THEREFORE WAS TO BE VERIFIED INTER SE AND NOT ON THE BASIS OF FACT THAT THE CREDITORS WHO HAD BEEN IDENTIFIED AS BOGUS AND SHAM ARE NOT TO BE ALLOWED TO BE TAX ED U/S.68. THE BALANCING OF AD VANCE GIVEN TO THE PARTNERS AND THE SUNDRY CREDITORS ON THE LAST DAY OF THE YEAR COULD NOT BE ASSUMED AND PRESUMED TO THE DETRIMENT OF THE BUSINESS TRANSACTIONS INSOFAR AS IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE PARTNER IS ENJOYING THE FUNDS OBTAINED FROM THE FIRM WITHOUT ADHERING OF THE PAYMENT SCHEDULE WHICH IN TURN WILL RENDER THE CREDITORS AS SHAM AND BOGUS. THE RESPONSIBILITY OF PAYMENT TO THE CREDITORS WAS OF THE PARTNER WHEN HE UNDERTOOK THE PURCHASE TO THE MAGNITUDE OF 13 LAKHS PARTICULARLY IDENTIFIED CREDITORS OF 2 77 000 ON THE I.T.A.NO. 398/CTK/2010 5 BASIS OF BILLS RAISED ON THE FIRM BY THE VILLAGERS AND OTHER SMALL CULTIVATORS. WE SEE NO GROUND OR JUSTIFICATION IN UPHOLDING THE ADDITION U/S.68 AMOUNTING TO 2 77 075 AS CONSIDERED BY THE A UTHORITIES BELOW. THE SAME IS DIRECTED TO BE DELETED. 5. THE NEXT GROUND RELATES TO THE FREIGHT CHARGES AMOUNTING TO 2 40 000 SOUGHT TO BE TAXED BY THE ASSESSING OFFICER ON THE PREMISE THAT THE ASSESSEE HAD PURCHASE CASHEW NUTS FROM KERALA MUJEEB CASHEW INDUSTRIES FOR A SUM OF 13 21 710 WEIGHING 51.343 MTS WHEN HE SOUGHT TO VERIFY WHETHER FREIGHT HAD BEEN INCURRED AND PAID THEREON. HE ASSUMED THAT THE FREIGHT CHARGES FROM KOLAM TO THE ASSESSEES FACTORY GATE WOULD BE 80 000 PER TRUC K TO TAX THE SAME U /S.69C AT 2 40 .000 BEING THE QUANTITY OF FREIGHT THE ASSESSEE OUGHT TO HAVE INCURRED BUT NOT DISCLOSED IN THE BOOKS OF ACCOUNT. THE LEARNED CIT(A) CONFIRMED THE SAME BY HOLDING THAT THE ASSESSEE COULD NOT PRODUCE THE COPY OF AGREEMENT IF ANY BETWEEN MUJ EEB CASHEW INDUSTRIES TO STATE THAT THE COST OF GOODS FERRIED INCLUDED THE FREIGHT CHARGES. 5.1. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE FREIGHT CHARGES ARE BORNE BY THE SELLERS WHEN THE BUSINESS TRANSACTIONS IN THE CASHEW INDUST RIES IS AT COST AND FREIGHT PLUS INSURANCE. THE BILLS HAVE BEEN DRAWN INCLUDING THE FREIGHT AMOUNT THEREFORE COULD NOT BE ISOLATED ON ASSUMPTION THAT THE THREE TRUCKS WHERE NUMBERS WAS NOTED BY THE ASSESSING OFFICER REQUIRED PAYMENT OF FREIGHT FROM THE A SSESSEE ONLY. THE LEARNED CIT(A) FAILED TO APPRECIATE THE INBUILT AGREEMENT FOR SUCH SALES FROM GROWERS AND CULTIVATORS OF CASHEW NUTS BEING A PERISHABLE COMMODITY HAD TO BE INCURRED BY THE SELLERS WHICH GOODS ARE PACKED AND TRANSPORTED AGAINST PURCHASES A T THE FACTORY GATE OF THEPURCHASER . THE LEARNED DR HOWEVER I.T.A.NO. 398/CTK/2010 6 SUBMITTED THAT THE GOODS REQUIRED DELIVERY NOT AT THE FACTORY GATE WHICH GATE PASS WAS NOT PRODUCED THEREFORE RIGHTLY BROUGHT TO TAX BY THE ASSESSING OFFICER. 5.2. ON HEARING THE RIVAL CONTEN TIONS AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE ARE INCLINED TO HOLD THAT THE ASSUMPTION AND PRESUMPTION IN THE MIND OF THE ASSESSING AUTHORITIES DOES NOT HOLD GOOD TO THE EXTENT THAT THE FACTS RELATE TO PURCHASES HAVING TAKEN PLACE FOR GOODS WHICH HAVE BEEN BOUGHT IN ITS ENTIRETY THEREFORE ONLY INDICATE THAT NO CLAIM FOR SEPARATE FREIGHT WAS MAE BY THE TRUCK OWNERS OR TRANSPORTERS. IN THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE HAS PURCHASED GOODS WO RTH 89 LAKHS ON WHICH FREIGHT I NWARDS HAS BEEN CLAIMED AT 97 281 ONLY. THIS CLEARLY INDICATES THAT THE TRADE PRACTICE OF RAISING BILLS BY SELLERS INCLUDES FREIGHT WHICH BECOMES THE COST OF PURCHASES THEREFORE CANNOT BE SEGREGATED TO BE DISALLOWED U/S.69C . FINDING NO INFIRMITY IN THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE WE DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. 6. THE NEXT GROUND RELATES TO THE SALE OF CASHEW KERNELS AMOUNTING TO 2 78 7560 WHICH THE AUTHORITIES BELOW CONSIDERED AS A SALE TO A PARTY IN DELHI BUT WHO REFUSED TO ACCEPT THE SAME AND INSTEAD WAS NOT RECORDED IN THE BOOKS OF ACCOUNT WAS BROUGHT TO TAX AS INCOME FROM OTHER SOURCES REMAINING UNDISCLOSED. BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED THAT AS PARTY AT DELHI R EFUSED TO ACCEPT THE GOODS BEING OF INFERIOR QUALITY THE SAME WAS SOLD IN PART TO LOCAL DEALERS OF CASHEW NUTS WHICH WAS INCORPORATED IN THE BOOKS OF ACCOUNT ACCORDINGLY NECESSITATE D THE RECORDING OF THE SALES RETURN FROM M/S. VALLABH ENTERPRISES BUT MISC ONSTRUED ON THE BASIS OF INFORMATION RECEIVED BY THE ASSESSING OFFICER U/S.133(6) FROM M/S. VALLABH I.T.A.NO. 398/CTK/2010 7 ENTERPRISES AS THEM HAVING DENIED PURCHASED ANY GOODS FROM THE ASSESSEE AGAINST CASH DEPOSITS IN THE MONTHS OF SEPTEMBER 2005 AND JANUARY 2006. THE LEARNE D COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAD NO CASE TO BRING TO TAX THE SAID SUM INSOFAR AS IT HAPPEN ED WHEN THE QUALITY OF CASHEW NUTS DIFFERS AND IS DENIED ACCEPTANCE AFTER T HE GOODS REACH THE CUSTOMERS BEING OF PERISHABLE NATU RE IT WAS BENEFICIAL TO DISPOSE OFF THE SAME AT WHATEVER RATE AVAILABLE IN THE LOCAL MARKET INSTEAD OF INVITING TENDERS OR AUCTION AGAIN. THE GOODS HAVING REACHED DELHI WERE SOLD TO VARIOUS PARTIES WHO IMMEDIATELY PAID CASH AND WERE RECORDED IN THE BOOKS OF ACCOUNT AND THEREFORE COULD NOT BE SUBJECTED TAX UNDER ANY PROVISIONS OF LAW WHICH THE AUTHORITIES BELOW HAVE FAILED TO BRING ON RECORD. IT WAS ONLY ON PRESUMPTION AND ASSUMPTION IN THE MIND OF THE LEARNED CIT(A) THAT SOUGHT TO CHALLENGE PRUDENCE OF A C OMMON BUSINESS MAN AS SALES OF THESE GOODS HAVE BEEN RETURNED TO TAX. HE SUBMITTED THAT THE QUALITY AND QUANTITY OF GOODS REQUIRE IMMEDIATE ACTION AND WAS PROPERLY RECORDED IN THE BOOKS OF ACCOUNT THEREFORE CALL FOR NO OTHER INTERFERENCE. THE LEARNED DR HOWEVER SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BY INDICATING THAT THE BOOKS OF ACCOUNT DID NOT DISCLOSE SUCH IDENTIFICATION OF THE VERY GOODS OF HAVING BEEN SOLD IN CASH WHEN THE PROPER WAY BILL HAS BEEN RAISED FOR TRANSPORTING THE GOODS TO DELHI. 6.1. ON THE BASIS OF FACTS AS NARRATED WE ARE INCLINED TO HOLD THAT THE AMOUNT SOUGHT TO BE TAXED BY THE ASSESSING OFFICER IS UNCALLED FOR AS SALES WERE RECORDED AGAINST THE BILL RAISED IN THE NAME OF M/S. VALLABH ENTERPRISES BUT WAS NOT SOLD TO THEM TO RECORD GOODS RETURN ED BUT SOLD IN THE LOCAL MARKET PAID FOR IN CASH. THEREFORE THERE WILL BE NO EFFECT EVEN IF THE GOODS HAVING BEEN DISPATCHED WHICH FACT ALONE THE AUTHORITIES NOTED WERE ENCASHED EITHER FROM M/S.VALLABH ENTERPRISES O R LOCAL PARTIES BE COMES I.T.A.NO. 398/CTK/2010 8 IMMATERIAL . NO CONTROVERTING MATERIAL TO CONFIRM ADDITION THEREOF AS WELL AS NOT RECORDED AS SALES IN THE BOOKS HAS BEEN BROUGHT ON RECORD BY THE AUTHORITIES BELOW. THE ADDITION OF THIS AMOUNT THEREFORE WAS UNJUSTIFIED INSOFAR AS A DEBTOR WAS CONVERT ED IN CASH AND NOT ON ACCOUNT OF SALES TO M/S.VALLABH ENTERPRISES WHO HAD DENIED U/S.133(6). THE SAME IS THEREFORE DIRECTED TO BE DELETED. 7. THE NEXT DISALLOWANCE IS WITH RESPECT TO THE ADDITION U/S.68 WHEN SEVEN DRAFTS AMOUNTING TO 40 000 EACH HAVE BEEN ACCOUNTED FOR BY THE ASSESSEE AGAINST THE CREDIT PURCHASES MADE BY M/S.AHUJA STORES MENTIONING THE NAME OF THE PARTIES SEPARATELY AS PE R THE COPY OF THE ACCOUNTS FURNISHED IN THE PAPER BOOK BEING M.B.ENTERPRISES INDORE AJHUJA STORES CHANDRAPUR AND VINAYAK TRADING CO. RAIPUR. IT WAS EXPLAINED BY THE ASSESSEE THAT THESE DRAFTS HAVE BEEN RECEIVED FROM AHUJA STORES WERE WRONGLY CREDITED TO M/S.M.B.ENTERPRISES AND AN EXCESS CREDIT AMOUNT WAS SQUARED OFF BY PAYMENT FROM SHRI J.RAVI KUMAR WHO HELD THE ADVANCE ON BEHALF OF THE FIRM TO BE PAID FOR PURCHASES. THE SUM OF 3 7 600 THEREFORE WAS SQUARED OFF IN THE ACCOUNT OF AHUJA SORES WHEN THE AMOUNT WAS RECEIVED BUT WRONGLY CREDITED TO VINAYAK TRADING CO. RAIPUR. ALL THESE DEPOSITS HAVE BEEN SHOWN DULY CR EDITED IN THE CASH CREDIT ACCOUNT OF THE BANK WHICH EXCEEDS THE PURCHASES ON ACCOUNT OF SALES WHEN THE LIMIT IS REDUCED. THE THREE DRAFTS RECEIVED FROM AJHUJA STORES THEREFORE WERE WRONGLY POSTED IN THE ACCOUNT OF M.B. ENTERPRISES WHICH WERE TREATED BY TH E ASSESSING AUTHORITIES AS INTRODUCTION OF CASH FROM UNDISCLOSED SOURCES. THE LEARNED COUNSEL HAS ARGUED BY SUPPORTING HIS SUBMISSIONS BY ENCLOSING THE COPIES OF VARIOUS PARTIES ACCOUNTS THAT THE PAYMENTS RECEIVED AGAINST SALES MADE TO THE RESPECTIVE PARTI ES AGAINST WHOM INDIVIDUALLY NO CONTROVERTING MATERIAL HAS I.T.A.NO. 398/CTK/2010 9 BEEN BROUGHT ON RECORD EITHER BY THE LEARNED ASSESSING OFFICER OR THE LEARNED CIT(A). THE ADVANCE HELD BY BY J.RAVI KUMAR WAS THE RESIDUAL BALANCE TO BE ADJUSTED AGAINST AHUJA STORES CHANDARPUR W AS DUE TO A GENUINE MISTAKE ON THE PART OF THE ACCOUNTANT TO NOTE THAT ANOTHER DRAFT OF 40 000 WAS TO BE ADJUSTED AGANST THE TOTAL SALE BILLS RAISED TO AHUIJA STORES WAS 2 42 400. M/S.AHUJA STORES CONTINUED TO PAY BY DRAFTS OF RS.40 000 EACH AT THE END OF FEBRUARY 2006 CANNOT BE HELD AGAINST THE ASSESSEE INSOFAR AS THE ASSESSING OFFICER ON THE SAID SET OF FACTS HAS SOUGHT TO ADD 37 600 IN THE HANDS OF THE FIRM 40 000 BEING AMOUNT OWED TO M/S.AHUJA STORES SEPARATELY AND CREDIT GIVEN TO M/S.M.B.ENTTERPRISES WRONGLY OF 1 60 000 SEPARATELY WHICH WERE PART OF THE VERY DEMAND DRAFTS ISSUED BY M/S.AHUJA STORES IN SQUARING OFF WAS A DEBIT BALANCE. HE PERUSED THE ORDER OF THE LEARNED CIT(A) INDICATING THAT THE WRONG ENTRIES IN THE BOOKS OF ACCOUNT HA VE BEEN HELD AGAINST THE ASSESSEE INSPITE OF THE LEARNED CIT(A) CLEARLY NOTING THAT THERE WAS NO REASON FOR THE ASSESSEE REQUIRING INTRODUCTION OF HIS OWN CASH IN THE FORM OF DRAFT S . THE LEARNED DR PERUSED THE ORDER OF THE LEARNED CIT(A) INDICATING THAT THE ACCOUNT BOOKS WERE NOT PROPERTY DRAWN WHICH REQUIRED THE LEARNED CIT(A) TO ADMIT CONTENTION OF THE ASSESSEE AS NOTED BY HIM IN PAGES 13 14 AND 15 WHICH ONLY INDICATE THAT IT WAS NOT THE DRAFTS BELONGING TO M/S.AHUJA STORES TO CONFIRM THE SAME. 7.1. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD AND ALSO GONE THROUGH THE LEDGER COPY OF THE VARIOU S PARTIES ACCOUNTS WHICH SUMUP THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE SUM OF 2 80 000 WAS ON THE BASIS OF SALES MADE TO AHUJA STORES WHO ON PAYMENT CHOSE TO SQUARE OFF THE ACCOUNT BUT WRONGLY GIVEN CREDIT BY THE ACCOUNTANT OF THE FIRM TO TWO DIFFERENT PARTIES INCLUDING SHRI J.RAVI KUMAR PARTNER OF THE ASSESSEE I.T.A.NO. 398/CTK/2010 10 WHO WANTED TO PAY FROM CASH AVAILABLE TO HIM TAKEN AS ADVANCE FOR PAYMENT TO THE CREDITORS IN RESPECT OF THESE VERY DEBTORS AND NOT CREDITORS AGAINST PURCHASES. BOTH THE AUTHORITIES BELOW HAVE MIS - INTER PRETED THE FACTS REGARDING ERRONEOUS CREDIT GIVEN TO THREE DIFFERENT PARTIES FOR THE SAME SET OF DRAFTS THEREFORE COULD NOT BE ESTABLISHED AGAINST THE ASSESSEE OF CONVERTING CASH TO DRAFTS AGAINST BOGUS SALES. IN ANY CASE THERE IS NO OCCASION FOR THE AUTHOR ITIES BELOW TO ASSUME THAT THE PAYMENTS RECEIVED BY WAY OF DRAFTS WAS DULY ACKNOWLEDGED BY THEIR BANK WHO WOULD ADJUST THE AMOUNT OF BILLS DRAWN ON THESE DEBTORS TO ESTABLISH THE LIMIT OF DRAWING POWER WHICH THE ASSESSEE COULD UTILISE AGAINST THE DEPLETIO N OF STOCK. THE LEARNED COUNSEL HAS SUBMITTED THAT THE STOCK RECORDS INDICATE THAT THE GOODS HAD BEEN SOLD AGAINST WHICH PAYMENTS HAVE BEEN RECEIVED THEREFORE WAS TO BE ACCEPTED TO THE EXTENT THAT NO ACCOUNTING CREDIT GIVEN ERRONEOUSLY TO OTHER PARTIES HAD TO BE RECONCILED AGAINST THE DEBT RAISED AGAINST ONE FROM THE SAME PARTY WHICH THE AUTHORITIES BELOW FAILED TO CORRELATE BY CONFINING THEMSELVES TO ONE ASPECT OF THE CONTROVERSY . IN THIS VIEW OF THE MATTER THE ADDITION AMOUNTING TO 37 620 40 000 ANDRS.1 60 000 IS DIRECTED TO BE DELETED. 8. ON THE NEXT GROUND WHICH RELATE TO BANK DEPOSIT S OF 6 90 000 IT WAS CONTENDED THAT THE DETAILS OF DEPOSITS WERE EXPLAINED AS NOTED BY TH E ASSESSING OFFICER ON PAGE 15 OF HIS ORDER WHICH WERE RECEIVED FROM VINAYAK TRADING CO. RAIPUR. DEPOSITS OUT OF CASH WERE FROM AHUJA STORES AND M.B.ENTERPRISES. WHEN THESE THREE AMOUNTS ARE TAKEN TOGETHER IT WOULD BE CLEAR THAT THE RECEIPTS WERE AGAINST THE GOODS SOLD AND NOT CASH AS INTRODUCED AGAINST THEIR NAMES WITHOUT ACTUAL SALES. THE AUTHORITIES BELOW HAVE ONLY CONSIDERED ONE ASPECT OF THE SALE WHEN THEY NOTED THAT THE CASH WAS DEPOSIT ED BY THE DEBTORS IN THE BANK DIRECTLY EXCEPT A SUM OF 2 LAKHS I.T.A.NO. 398/CTK/2010 11 WHICH CASH WAS DEPOSITED BY THE ASSESSEE IN THE BANK ON 19.12.2005 BUT RECORDED ON 17.12.2005 BY THE BANK. HE SUBMITTED THAT THERE WAS NO REASON FOR THE ASSESSING OFFICER TO NOT CORRELATE THIS AMOUNT RECEIVED IN BANK BY THE ASSESSEE ON RECEIPT OF AMOUNTS OWED BY THE DEBTORS AGAINST SALES WHICH HAD BEEN PROPERLY RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THE LEARNED CIT(A) ON THE OTHER HAND TRIED TO DEVIATE FROM THE ISSUE BY HOLDING THAT ONCE IN AN EARLIER OCCASION WHEN THE ASSESSEE EXPLAINED THE DRAFTS HAVING BEEN RECEIVED AND CREDITED IN M/S.M.B.ENTERPRISES ACCOUNTS THERE WAS NO REASON FOR THE DEBTOR TO DEPOSIT CASH DIRECTLY IN THE BANK. HE POINTED OUT THAT IT IS A QUESTION OF FACT FINDING THAT DRAFTS NOT BELONGING TO M.B.ENTERPRISES WAS RECOR DED AND GIVEN CREDIT TO M.B.ENTERPRISES WAS TO BE ON THE BASIS OF ERRONEOUS MISTAKE BY THE ACCOUNTANT WHEN THE CASH DEPOSITED BY M.B.ENTERPRISES WERE MADE KNOWN TO THE ACCOUNTANT WHEN THESE ENTRIES HAVE BEEN PROPERLY RECORDED . THEREFORE NO DEBTOR WOULD MA KE PAYMENTS ON SALES ABOVE WHAT HE OWES TO THE ASSESSEE WAS CONSIDERED ADVERSELY AGAINST THE ASSESSEE BY THE AUTHORITIES BELOW. 8.1. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART SUBMISSIONS. 8.2. WE HAVE CONSIDERED THE ISSUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE ARE INCLINED TO HOLD THAT THE VERIFICATION OF THE BANK STATEMENT OF THE ASSESSEE CLEARLY INDICATED THAT THE CASH DEPOSITS WERE MADE NOT BY THE ASSESSEE BUT BY THE PARTIES WHO OWED AMOUNTS TO THE ASSESSEE ON THE BASIS OF SALE WHICH INFORMATION WAS AVAILABLE TO THE EXTENT THAT THE ASSESSEE LATTER COULD NOT CORRELATE TO ANY ERROR COMMITTED BY THE ACCOUNTANT ON THE EARLIER OCCASION WHEN THE DRAFTS WAS PAID BY AHUJA STORES WAS ERRONEOUSLY CREDITED I.T.A.NO. 398/CTK/2010 12 WITH M/S.M.B.ENT ERPRISES. THE LEDGER ACCOUNTS OF THESE PARTIES CLEARLY INDICATE THAT THE ERRORS HAVE BEEN RECTIFIED COULD NOT BE FURTHER SUBJECTED TO TAX AS BOGUS SALES OR OTHERWISE. WE THEREFORE DIRECT THE DELETION OF 6 90 000 AS CREDITS IN THE BANK HELD AS NOT BROU GHT TO TAX ON THE BASIS OF RECEIPTS FROM THE PARTIES ON ACCOUNT OF BOGUS SALES . 8.3. ON THE ISSUE OF ADDITION OF 2 LAKHS BEING AVAILABLE TILL 17TH DECEMBER 2005 BUT NOTED ON 19TH DECEMBER 2005 WE FIND THAT THE ASSESSEE WAS HAVING A BALANCE OF 4 LAKHS THEREFORE WOULD NOT HAVE DISTURBED THE POSITION AS CONSIDERED BY THE LEARNED ASSESSING OFFICER AND CIT(A) THAT THE ERROR IN NOTING THE DATE OF DEPOSIT BY THE ASSESSEE ON 19 TH SHOULD CORRESPOND TO THE DATE AS NOTED BY THE BANK AS 19TH DECEMBER 2 005. IT IS PURELY AN ERROR OF NOTING DATES WITHOUT HOLDING ADVERSELY AS NON - AVAILABILITY OF CASH THEREFORE COULD NOT BE TAXED AS UNDISCLOSED CASH AVAILABLE. 9. ON THE LAST GROUND AGITATED REGARDING CLAIM OF ELECTRICITY CHARGE S OF 69 443 IT HAS BEEN SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE FUNCTIONS FROM THE PREMISES OWNED BY THE FATHER OF THE PARTNER OF THE ASSESSEE WHO IS VERY METICULOUS IN MAKING PAYMENT TO THE ELECTRICITY DEPARTMENT FOR THE BILLS RAISED ON HIM AND CONSIDERS THIS AC TION ON THE ASSESSEE AS SMALL CONTRIBUTION TO MORALLY SUPPORT CLINCHED BY THE FACT THAT THE ASSESSEE HAS NOT CLAIMED ELECTRICITY EXPENSES BY CREDITING THE PARTNERS FATHER AGAINST THE CLAIM. HE PERUSED THE BALA NCE SHEET AND PROFIT & LOSS ACCO UNT WHICH DOE S NOT WHISPER ABOUT A CLAIM OF ELECTRICITY CHARGES OVER AND ABOVE WHAT HAS BEEN PAID BY THE PARTNERS FATHER. THE AUTHORITIES BELOW SOUGHT TO THRUST THE SAME AS A LEGITIMATE CLAIM U/S.37 WHICH HAS BEEN MADE AS INCOME OF THE ASSESSEE. THE LEARNED DR SUPPORT ED THE ORDERS OF THE AUTHORITIES BELOW BY STATING THAT THE PAYMENT HAS BEEN MADE FOR THE YEAR I.T.A.NO. 398/CTK/2010 13 AND WAS NOT SHOWN IN THE ACCOUNTS OF THE ASSESSEE WAS THEREFORE RIGHTLY BROUGHT TO TAX AS EXPENDITURE UNDER THE PROVISIONS OF SECTION 69C. 9.1. AFTER HEARING THE RIVAL CONTENTIONS AND PERUSING THE FINANCIAL STATEMENT AND ON THE BASIS OF SUBMISSIONS OF THE LEARNED COUNSEL OF THE ASSESSEE WE HAVE NO HESITATION TO HOLD THAT IT WAS NOT A CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE OUGHT TO HAVE CLAIM ED THE SAME IN THE PROFIT & LOSS ACCOUNT AND REDUCE INCOME INSPITE OF HAVING INCURRED THE SAME IN ACCORDANCE WITH THE MANUFACTURING PROCESS OF THE ASSESSEE WHEN THE KERNELS ARE BROUGHT AND DRIED AFTER DUE PROCESS OF SOFTENING THEM BUT WAS PAID FOR BY THE FATHER OF THE PARTNER OF THE FIRM. THEREFORE BRINGING TO TAX AN AMOUNT OF EXPENSES THAT HAS BEEN BORNE BY THE FATHER OF THE PARTNER OF THE ASSESSEE FIRM COULD NOT BE HELD AGAINST THE ASSESSEE FOR TAXATION U/S.69C WHEN THE FACTS CLEARLY DEMONSTRATE THAT THE ASSESSEE HA S CHOSEN NOT TO CLAIM THE SAME IN THE PROFIT & LOSS ACCOUNT ALTHOUGH INCIDENTAL TO THE ASSESSEES BUSINESS UNLESS OF COURSE SUCH AMOUNT HAS BEEN CLAIMED AS EXPENSE BY SHRI K . J.PANDURANGA WHICH WOULD ONLY INDICATE THAT THE EXPENSES HA D NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT. IT WAS NOT THE CASE OF THE ASSESSEE TO COMPENSATE SHRI K. J. PANDURANGA THEREFORE CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. THE SAME IS THEREFORE DIRECTED TO BE DELETED. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 25 TH FEBRUARY 2011 SD/ - SD/ - ( . . . ) ( K.S.S.PRASAD RAO) JUDICIAL MEMBER ( . . ) (K.K.GUPTA) ACCOUNTANT MEMBER. ( ) DATE: 25 TH FEBRUARY 2011 ( ) ( H.K.PADHEE ) SENIOR.PRIVATE SECRETARY. I.T.A.NO. 398/CTK/2010 14 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : M/S. KALYANI CASHEW AND TIN INDUSTRIES TELLIGUDA JEYPORE DIST.KORAPUT 2 / THE RESPONDENT: INCOME - TAX OFFICER WARD 1 JEYPORE. 3 . / THE CIT 4 . ( )/ THE CIT(A) 5 . / DR CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY / BY ORDER [ ] SENIOR PRIVATE SECRETARY