THE ITO WD 1(4), v. M/S. JAGDISCHANDRA PASARI,

ITA 4136/MUM/2004 | 1997-1998
Pronouncement Date: 28-01-2011 | Result: Dismissed

Appeal Details

RSA Number 413619914 RSA 2004
Bench Mumbai
Appeal Number ITA 4136/MUM/2004
Duration Of Justice 6 year(s) 8 month(s) 7 day(s)
Appellant THE ITO WD 1(4),
Respondent M/S. JAGDISCHANDRA PASARI,
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 28-01-2011
Date Of Final Hearing 13-12-2010
Next Hearing Date 13-12-2010
Assessment Year 1997-1998
Appeal Filed On 21-05-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI J. SUDHAKAR REDDY (AM) AND SMT ASHA VIJAYARAGHAVAN (JM) ITA NO. 4136/MUM/2004 (ASSESSMENT YEAR-1997-98) THE ITO WARD 1(4) WAGLE ESTATE THANE-400 602 VS. SHRI JAGDISHCHANDRA PASARI 503 SANTUR APT. LOKPURAM POKHARA ROAD- II THANE-400 602 PAN-AAGPP 0103M (APPELLANT) (RESPONDENT) ITA NO. 4187/MUM/2004 (ASSESSMENT YEAR-1997-98) SHRI JAGDISHCHANDRA PASARI 503 SANTUR APT. LOKPURAM POKHARA ROAD-II THANE-400 602 PAN-AAGPP 0103M VS. THE ITO WARD 1(4) WAGLE ESTATE THANE-400 602 (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI M. SUBRAMANIAN DEPARTMENT BY: SHRI A.K. NAYAK O R D E R PER ASHA VIJAYARAGHAVAN (JM) THESE ARE CROSS APPEALS ONE FILED BY THE REVENUE AND THE OTHER FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF THE LD. CIT(A)-1 MUMBAI DATED 23.3.2004 FOR THE A.Y. 1997-98. ITA NO. 4136/M/04- REVENUES APPEAL 2. THE FIRST GROUND OF APPEAL BY THE REVENUE IS AGA INST THE DELETION OF ADDITION OF RS.15 52 124/- MADE BY THE AO ON ACCOUN T OF ESTIMATED GP RATIO. THE ORDER OF ASSESSMENT WAS MADE PURSUANT T O THE ORDER U/S.263 SETTING ASIDE THE ASSESSMENT ORDER IN RELATION TO C ERTAIN ITEMS WHICH HAVE JAGDISH CHANDRA PASARI. 2 NOT BEEN ENQUIRED INTO BY THE AO. THE TRIBUNAL IN ITA 4316/M/03 DT.22.5.09 HAD APPROVED OF THE CIT EXERCISING JURIS DICTION U/S.263 OF THE ACT. THE AO WHILE GIVING EFFECT TO THE ORDER OF TH E COMMISSIONER HAS ANALYSED THE VARIOUS EXPENSES. THE ASSESSEE DID NO T PRODUCE THE BOOKS OF ACCOUNTS WITHIN THE TIME STIPULATED BY THE AO AND T HE AO ESTIMATED THE GP AT 20% AND 30% IN RESPECT OF FIBER AND YARN RESPECT IVELY AS AGAINST 8.35% AND 24.49% OFFERED BY THE ASSESSEE. ACCORDINGLY H E HAS ADDED RS.15 52 124/- TOWARDS LOW GP. 3. ON APPEAL BEFORE THE LEARNED CIT(A) THE ASSESSE E CONTENDED THAT THEY HAVE MAINTAINED REGULAR BOOKS OF ACCOUNTS. THE ACCO UNTANTS HAD ALSO FURNISHED TAX REPORT DT.22.8.97 AFTER EXAMINING TH E CASH BOOK LEDGER SALES/STOCK PURCHASE REGISTER AND STOCK REGISTER ET C. THE AO HAD VERIFIED THE BOOKS OF ACCOUNTS DURING THE ORIGINAL ASSESSMEN T. THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD MISPLACED THE BOOKS AND HENCE COULD NOT PRODUCE THE BOOKS IN THE CURRENT ASSESSMENT PROCEED INGS PURSUANT TO THE ORDER U/S.263. THE PURCHASE AND SALES OF YARN AND F ABRIC HAD BEEN CERTIFIED IN THE TAX AUDIT REPORT AND HENCE THE AO ERRED IN A DOPTING A DIFFERENT GP RATE. 4. DURING THE APPELLATE PROCEEDINGS BEFORE THE LEAR NED CIT(A) ASSESSEE HAD FURNISHED THE SUBMISSION DATED 31.7.2003 ALONG WITH COPY OF TAX AUDIT REPORT AND CERTAIN LOAN CONFIRMATIONS. THE LEARNED CIT(A) SENT ASSESSEES SUBMISSION ALONG WITH ADDITIONAL EVIDENCE TO THE AO FOR HIS COMMENTS VIDE LETTER DT.25.8.2003. ITO WARD 1(4) THANE HAS SEN T THE REMAND REPORT DATED 26.8.2003. COPY OF REMAND REPORT DATED 25.8.2003 W AS GIVEN TO THE ASSESSEE ON 3.9.2003. THE ASSESSEE FILED ITS COMME NTS VIDE LETTER DATED 10.09.2003. THE AO WAS AGAIN DIRECTED TO SUBMIT HI S REPORT AFTER DUE VERIFICATION AND SCRUTINY VIDE LETTER DATED 9.10.20 03. ITO WARD 1(4) THANE HAS SENT THE SECOND REMAND REPORT DATED 23.12.2003. THE ASSESSEE WAS GIVEN COPY OF SECOND REMAND REPORT ON 14.01.2004. THE ASSESSEE HAS GIVEN ITS FURTHER SUBMISSION DATED 23.01.2004. FURTHER W RITTEN SUBMISSION WAS GIVEN ON 12.03.2004. JAGDISH CHANDRA PASARI. 3 5. IN THE REMAND REPORT THE AO HAS POINTED OUT THA T ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITIES FOR PRODUCING BOOKS OF ACC OUNTS ALONG WITH BILLS AND VOUCHERS. ASSESSEE HOWEVER DID NOT PRODUCE BOOKS OF ACCOUNTS DURING THE YEAR. AO HAS POINTED OUT THAT HONBLE CIT HAD DIRE CTED THE AO TO VERIFY ALL THE CLAIMS OF THE ASSESSEE VIS-A-VIS BOOKS OF ACCOU NTS MAINTAINED AND SUBSIDIARY RECORDS WHILE MAKING THE REVISED ASSESSM ENT. THE AO HAS CONTENDED THAT ASSESSEE HAS NOT ADDUCED ANY FURTHER EVIDENCE REQUIRING VERIFICATION BY THE AO. 6. ON THE BASIS OF THE ARGUMENTS OF THE ASSESSEE AN D THE REMAND REPORT OF THE AO THE LEARNED CIT(A) DELETED THE ADDITION ON ACCOUNT OF LOW GP OBSERVING AS UNDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE S UBMISSION MADE DURING THE APPELLATE PROCEEDINGS ALONG WITH THE REM AND REPORT. IT IS SEEN THAT AO HAS MADE ADDITION OF RS.15 52 124/- ON ACCOUNT OF LOW GP DECLARED DURING THE YEAR. IT IS SEEN THAT APPEL LANT IS TRADING IN FIBRE AND YARN THROUGH ITS PROPRIETARY CONCERN M/S. VENCO ENTERPRISES. APPELLANT HAD SHOWN GP% OF 8.36% IN RESPECT OF FIBR E TRADING AND GP% OF 24.50% IN YARN TRADING BUSINESS. AO HAS ESTIMAT ED GP @ 20% IN THE FIBRE TRADING BUSINESS AND GP% OF 24.50% IN YARN TR ADING BUSINESS. AO HAS ESTIMATED GP @ 20% IN THE FIBRE TRADING BUSI NESS AND GP% OF 30% IN YARN TRADING BUSINESS DURING THE YEAR. I HA VE ALSO GONE THROUGH THE ORIGINAL ASSESSMENT ORDER BY ITO WARD 20(2) M UMBAI DATED 18.02.2000. IN PARA 3 OF THE ORIGINAL ASSESSMENT O RDER IT HAS BEEN MENTIONED THAT APPELLANT HAD PRODUCED BOOKS OF ACCO UNTS AND NECESSARY DETAILS. IN THE ORIGINAL ASSESSMENT ORDE R THERE WAS NO ADDITION ON ACCOUNT OF LOW GP DURING THE YEAR. IN THE REASSESSMENT ORDER ALSO AO HAS NOT POINTED OUT ANY SPECIFIC DEF ECT OR DEFICIENCY IN THE BOOK RESULT DECLARED BY THE APPELLANT DURING TH E YEAR. IT IS SEEN THAT BOOKS OF ACCOUNTS OF THE APPELLANT ARE DULY TA X AUDITED. TAX AUDIT REPORT HAS BEEN FILED ALONG WITH THE RETURN. BOOKS OF ACCOUNTS WERE PRODUCED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS . APPELLANT HAS CLAIMED THAT BOOKS OF ACCOUNTS WERE SUBSEQUENTLY MI SPLACED. APPELLANT THUS COULD NOT PRODUCE REGULAR BOOKS OF A CCOUNTS DURING THE RE-ASSESSMENT PROCEEDINGS. HOWEVER AO HAS NOT MAD E ANY ENQUIRIES FROM THE PARTIES FROM WHOM PURCHASES/SALES WERE MAD E DURING THE YEAR. AO HAS NOT GIVEN ANY COMPARABLE CASE TO ESTI MATE GP @ 20% IN THE FIBRE TRADING BUSINESS. AO HAS NOT GIVEN ANY C OMPARABLE CASE TO ESTIMATE GP % AT 30% IN YARN TRADING BUSINESS. REF ERENCE IS MADE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F DHAKESHWARI COTTON MILLS VS. CIT REPORTED IN 26 ITR 775. IN TH IS DECISION IT WAS HELD THAT ITO IS NOT ENTITLED TO MAKE A PURE GUESS AND M AKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE. IT WAS FURTHER HELD THAT THERE MUST JAGDISH CHANDRA PASARI. 4 BE SOMETHING MORE THAN BARE SUSPICION TO SUPPORT AN ASSESSMENT. IN THE PRESENT CASE GP IN FIBER TRADING @ 20% HAS BEE N ESTIMATED WITHOUT ANY MATERIAL ON RECORD. GP% IN THE YARN TRADING BU SINESS HAVE BEEN ESTIMATED AT 30% AGAINST 24.50% DECLARED BY THE APP ELLANT WITHOUT ANY MATERIAL ON RECORD. AO HAS NOT GIVEN ANY COMPA RABLE CASE OR COMPARISON WITH PAST RESULT OF THE APPELLANT IN THI S BUSINESS. ADDITION HAS BEEN MADE ON THE BASIS OF SUSPICION WHICH IS NO T SUPPORTED BY MATERIAL ON RECORD. THE ORIGINAL BOOKS OF ACCOUNTS WERE ALSO PRODUCED BEFORE THE AO DURING THE ORIGINAL ASSESSMENT PROCEE DINGS. THESE BOOKS OF ACCOUNTS WERE SUBSEQUENTLY MISPLACED. HOWEVER TAX AUDIT REPORT FILED ALONG WITH RETURN OF INCOME IS ALREADY WITH T HE DEPARTMENT. TAX AUDITOR HAS NOT POINTED OUT ANY MAJOR DEFECT OR DEF ICIENCY IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT FOR THE YEA R. IN VIEW OF THESE FACTS I HEREBY DELETE THE ADDITION ON ACCOUNT OF L OW GP AT RS.15 52 124/- DURING THE YEAR. 7. AGGRIEVED THE REVENUE IS ON APPEAL. THE AO HAD SUBMITTED THAT THEY HAVE MISPLACED THE BOOKS OF ACCOUNTS AND THEREFORE COULD NOT PRODUCE THE SAME BEFORE THE AO IN THE ASSESSMENT PROCEEDINGS PU RSUANT TO ORDER U/S.263. THERE HAS BEEN NO SERIOUS OBJECTION BY TH E DEPARTMENT AT THE ASSESSEES EXPLANATION THAT THEY HAVE MISPLACED THE RECORDS WAS NOT GENUINE. FURTHER IN THE CASE OF GP AS POINTED OU T BY THE ASSESSEE THE SALES FIGURE AND THE PURCHASE FIGURE HAVE BEEN AUDI TED BY THE AUDITORS WHO HAD CERTIFIED THE SAME IN THE CERTIFICATE ISSUED U/ S.44 AB. FURTHER EVEN THE AO WHILE ADOPTING THE HIGHER GP HAS APPLIED THE REV ISED PERCENTAGES ON THE SALES FIGURE FURNISHED BY THE ASSESSEE. THE AO HAS NOT INDICATED THE BASIS OF HIS ARRIVING AT A HIGHER GP RATE. IN THE REMAND REPORT ALSO THE AO HAS NOT JUSTIFIED THE ADOPTION OF THE HIGHER GP RATE OF 20% AND 24.5% IN FIBER TRADING AND YARN TRADING BUSINESS. IN THE CIRCUMST ANCES WE ARE OF THE OPINION THAT THE ADDITION OF GP BY THE AO IS WITHOU T ANY BASIS AND WE AGREE WITH THE CIT(A) IN DELETING THE ADDITION MADE BY TH E AO ON ACCOUNT OF LOW GP. THE REVENUES APPEAL ON THIS ISSUE IS DISMISSE D. 8. THE NEXT GROUND OF APPEAL IS AGAINST THE DELETIO N OF ADDITION OF RS.73 39 539/- AS UNEXPLAINED INVESTMENT. DURING T HE COURSE OF SCRUTINY PROCEEDINGS THE AO WAS FURNISHED CONFIRMATION LETTE RS FROM 15 CREDITORS LISTED IN THE ORDER OF ASSESSMENT. THE AO SENT LETT ERS TO THE ABOVE PARTIES AT THE ADDRESS GIVEN IN THE CONFIRMATION LETTERS AND O NLY 3 PARTIES SUBMITTED THEIR REPLY. MR DAMODARPRASAD R. SABOO WHO HAD REP LIED MADE ON JAGDISH CHANDRA PASARI. 5 RS.6 90 595/- AS SHOWN BY THE ASSESSEE HAD STATED T HAT NO TRANSACTION HAD TAKEN PLACE WITH THE ASSESSEE. THE OTHER TWO PARTI ES HAD SUBMITTED THEIR CONFIRMATION. THEREFORE THE AO HAD ADDED BACK THE REPAYMENT OF LOAN TO THE EXTENT OF RS.73 39 539/-. THE ASSESSEE SUBMITT ED THAT THE ADDITIONS HAVE BEEN MADE ON ACCOUNT OF REPAYMENT OF LOAN WITH OUT TAKING INTO ACCOUNT THE LOAN LIABILITY. MERE NON-COMPLIANCE OF 11 PARTIES CANNOT BE THE SOURCE FOR MAKING THE ADDITION. THE APPELLANT ALSO SUBMITTED THAT THE LETTERS ISSUED BY THE AO WAS NOT RETURNED BACK BUT WERE RECEIVED BY THE PARTIES. THEREFORE THE PARTIES DID NOT COMPLY THE AO SHOULD HAVE ISSUED SUMMONS FOR THEIR APPEARANCE. FURTHER THEY SUBMIT TED THAT ITO HAD GONE BEYOND THE DIRECTION GIVEN BY THE CIT(A). IN HIS O RDER THE LEARNED CIT(A) DIRECTED THE ITO TO VERIFY ALL THE LOANS DISCLOSED. AS THE APPELLANT HAD FILED THE CONFIRMATION LETTERS FROM ALL THE PARTIES AND I TO ACCEPTING THE GENUINENESS OF THE LOAN AND NO SUMMONS WERE ISSUED TO THEIR PARTIES FOR THEIR ADDITION AND NO ADDITION WAS MADE ON ACCOUNT OF UNDISCLOSED CREDITS. THE AO HAS MADE AN ADDITION FOR REPAYMENT AND THESE PAYMENTS CONFIRMED PART OF THE CASH FLOW OF THE ASSESSEE AND THE ACCOU NTS OF THE ASSESSEE HAS NOT BEEN REJECTED BY THE AO IN THE ORIGINAL ASSESSM ENT PROCEEDINGS. THEREFORE PROVISIONS OF SECTION 69 OF THE I.T. ACT WERE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. 9. THE LEARNED CIT(A) CALLED FOR A REMAND REPORT ON THE SUBMISSIONS MADE BY THE ASSESSEE VIDE HIS LETTER DT.25.8.03. T HE AO GAVE HIS REMAND REPORT DT.26.8.03 AND THE ASSESSEE FILED THEIR COMM ENTS ON THE REMAND REPORT VIDE THEIR SUBMISSIONS DT.10.9.03. THE AO I N HIS REMAND REPORT HAS STATED SUMMONS WAS ISSUED TO ALL THE PERSONS WHO HA D GIVEN CONFIRMATION LETTERS. OUT OF 15 ONLY 3 PARTIES RESPONDED TO THE SUMMONS. ONE OF THE PARTIES HAS STATED THAT THERE WAS NO TRANSACTION AN D IN ANOTHER CASE THERE WAS A DIFFERENCE IN THE AMOUNT CONFIRMED BY ANOTHER PARTY. CONSIDERING THESE FACTS THE AO ADDED RS.73 39 539/- ON THE GRO UND THAT THE ASSESSEE HAD NOT EXPLAINED THE SOURCES FOR PAYMENT OF THIS A MOUNT. 10. THE LEARNED CIT(A) VIDE HIS LETTER DT.9.10.03 A GAIN DIRECTED THE AO TO REPORT AFTER DUE VERIFICATION AND SCRUTINY OF THE V ARIOUS CONFIRMATION LETTERS JAGDISH CHANDRA PASARI. 6 FILED DURING THE APPELLATE PROCEEDINGS. THE AO VID E HIS SECOND REMAND REPORT DT.23.12.03 STATED THAT SUMMONS WERE ISSUED TO SHRI AJAY KUMAR MAHESWARI BUT HE DID NOT APPEAR BEFORE THE AO. FUR THER IN THE ABSENCE OF ACCOUNTS THE AO COULD NOT VERIFY THE SOURCE OF REP AYMENT AND HENCE THE AO IN HIS REMAND REPORT SOUGHT CONFIRMATION OF THESE A DDITIONS. 11. THE LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASS ESSEE BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE S UBMISSIONS MADE DURING THE APPELLATE PROCEEDINGS. I HAVE ALSO GONE THROUGH THE REMAND REPORT DATED 25.08.2003 AND THE SECOND REMAN D REPORT DT.23.12.2003. IT IS SEEN THAT AO HAS ADDED A SUM OF RS.73 39 539/- ON ACCOUNT OF REPAYMENT OF LOAN LIABILITY AS PER CO NFIRMATION LETTER. AO HAS POINTED OUT THAT APPELLANT HAD FILED LOAN CONFI RMATION FROM 15 PARTIES. AO HAD ISSUED LETTER TO THESE 15 PARTIES. OUT OF THAT ONLY THREE PARTIES SUBMITTED THE DETAILS. OUT OF THIS SHRI DAMODARPRASAD R. SABOO HAD MENTIONED IN HIS LETTER DT.11.12.2003 THA T HE DID NOT HAVE ANY TRANSACTION WITH SHRI JAGDISH PASARI. OTHER T WO PARTIES VIZ. M/S. VENKATESH CLEARING AGENCY AND M/S. VENCO OPTICS SUB MITTED THEIR CONFIRMATIONS. BOTH THESE PARTIES WERE FOUND TO BE SISTER CONCERNS OF THE APPELLANT. AO NOTED THAT IN THE CASE OF M/S. V ENKATESH CLEARING AGENCY LOAN WAS OUTSTANDING AT RS.7 99 662/- AS PE R CONFIRMATION LETTER. HOWEVER AS PER TAX AUDIT REPORT IN THE CA SE OF M/S. VENCO OPTICS REPAYMENT WAS SHOWN AT RS.4 09 500/- AGAINS T FIGURE OF RS.7 34 500/- IN THE CONFIRMATION LETTER. IN VIEW OF THESE DISCREPANCIES AND IN THE ABSENCE OF BOOKS OF ACCOUNTS AO ADDED T HE REPAYMENT OF THESE LOANS AT RS.73 39 539/- AS UNEXPLAINED INVEST MENT U/S.69 OF IT ACT 1961. DURING THE APPELLATE PROCEEDINGS THE A PPELLANT HAD POINTED OUT THAT THERE WAS CERTAIN TYPOGRAPHICAL ERROR IN S OME OF THE LOAN AMOUNT SHOWN IN THE TAX AUDIT REPORT. IT WAS FURTH ER POINTED OUT THAT AO HAS TAKEN THE FIGURE OF MAXIMUM LOAN OUTSTANDING IN THE TAX AUDIT REPORT AS THE AMOUNT OF LOAN REPAYMENT MADE DURING THE YEAR. IT HAS BEEN FURTHER POINTED OUT THAT AO HAS ACCEPTED THE G ENUINENESS OF LOANS. REPAYMENT AMOUNTS WERE ADDED AS UNEXPLAINED INVESTMENT U/S.69 OF THE I.T.ACT 1961. THE APPELLANT HAD POI NTED OUT THESE TYPOGRAPHICAL ERRORS AND THE OTHER MISTAKE DURING T HE ASSESSMENT PROCEEDINGS. APPELLANT HAD ALSO FILED CONFIRMATION LETTERS FROM THESE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THESE C ONFIRMATION LETTERS WERE ALSO SENT TO THE AO DURING THE REMAND PROCEEDI NGS FOR VERIFICATION. IT IS SEEN THAT REPAYMENT OF LOAN AS MENTIONED IN T HE CONFIRMATION LETTERS HAVE ALREADY BEEN SHOWN IN THE BOOKS OF ACC OUNTS OF THE APPELLANT. THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE TAX AUDITED. THE APPELLANT HAD PRODUCED BOOKS OF ACCOUNTS DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. LATER ON THESE BOOKS OF AC COUNTS WERE STATED JAGDISH CHANDRA PASARI. 7 TO BE MISPLACED. IT IS HOWEVER SEEN THAT APPELLA NT HAD GIVEN COMPLETE TAX AUDIT REPORT ALONG WITH THE ORIGINAL RETURN. I HAVE ALSO GONE THROUGH THE COPY OF TAX AUDIT REPORT FILED ALONG WITH THE R ETURN. IT IS SEEN THAT THERE WAS TYPOGRAPHICAL ERROR IN THE CASE OF M/S. L AXMINARAYAN CORPORATION IN RESPECT OF MAXIMUM AMOUNT OUTSTANDIN G AT RS.5 28 898/-. ACTUAL FIGURE WAS AT RS.5 20 898/-. IT IS FURTHER SEEN THAT MAXIMUM AMOUNT OUTSTANDING FROM M/S. VENCO OPT ICS WAS RS.4 09 500/-. THIS FIGURE IS NOT THE AMOUNT OF RE PAYMENT OF LOAN BUT THE MAXIMUM LOAN OUTSTANDING DURING THE YEAR. ACTU AL LOAN REPAYMENT TO M/S. VENCO OPTICS IS AT RS.7 34 500/-. SIMILARL Y IN THE CASE OF SHRI LAXMINARAYAN PRAHLADAS MAXIMUM AMOUNT OUTSTANDING HAS BEEN WRONGLY MENTIONED AS RS.22 000/- INSTEAD OF CORRECT FIGURE AT RS.22 42 000/-. THIS WAS TYPOGRAPHICAL ERROR. THI S IS ALSO CLEAR FROM THE CONFIRMATION LETTER GIVEN BY SHRI LAXMINARAYAN PRAHLADAS DURING THE ASSESSMENT PROCEEDINGS. ONCE THE APPELLANT HAD GIVEN THE CONFIRMATION LETTERS SIGNED BY THESE PARTIES IT WA S FOR THE AO TO MAKE NECESSARY ENQUIRIES TO ASCERTAIN THE TRUTH. ALL TH ESE PARTIES WERE AVAILABLE AT THE GIVEN ADDRESS. AO COULD HAVE ISSU ED SUMMONS TO THESE PARTIES TO ASCERTAIN THE TRUTH. IT IS SEEN T HAT IN THE CASE OF SHRI DAMODARPRASAD R SABOO THERE WAS OUTSTANDING LOAN O F RS.6 90 595/-. THIS WAS REPAID DURING THE YEAR. THIS HAS BEEN CON FIRMED BY CONFIRMATION LETTER OF SHRI DAMODARPRASAD R. SABOO DURING THE ASSESSMENT PROCEEDINGS. THE AO DID NOT VERIFY THES E TRANSACTION EVEN DURING THE REMAND PROCEEDINGS. IT IS FURTHER NOTED THAT AO HAS ACCEPTED THE GENUIN ENESS OF OPENING BALANCE OF LOANS AND ALSO THE NEW LOANS TAK EN DURING THE YEAR. THE REPAYMENT OF THESE LOANS ARE THUS FROM THE KNOW N SOURCES. THERE IS NO REPAYMENT WHICH IS NOT SHOWN IN THE REGULAR B OOKS OF ACCOUNTS DURING THE YEAR. AO HAS NOT POINTED OUT ANY SPECIF IC DEFECT OR MISTAKE IN THE CONFIRMATION LETTERS FILED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS OR DURING THE REMAND PROCEEDINGS. ALL THESE REPAYMENTS ARE DULY REFLECTED IN THE CONFIRMATION LETTERS AND ALSO IN THE TAX AUDIT REPORT. IN VIEW OF THESE FACTS I HEREBY DELETE TH E ADDITION OF RS.73 39 539/- ON ACCOUNT OF REPAYMENT OF LOAN LIAB ILITY U/S.69 OF IT ACT 1961. 12. AGGRIEVED THE REVENUE IS ON APPEAL BEFORE US. AS POINTED OUT BY THE LEARNED CIT(A) THE BOOKS OF ACCOUNTS OF THE ASSESSE E WERE TAX AUDITED AND BOOKS WERE PRODUCED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. THE CIT(A) HAVE ALSO POINTED OUT VARIOUS TYPOGRAPHICAL MISTAKES IN THE FIGURES. THE AO HAS ACCEPTED THE GENUINENESS OF THE OPENING BALANCE OF LOAN AND ALSO THE NEW LOANS TAKEN DURING THE YEAR. HE HAS N OT DISALLOWED THESE LOANS AS UNEXPLAINED CREDITS EVEN THOUGH HE COULD NOT PR OCURE THE PRESENCE OF THESE CREDITORS. HE MERELY ADDED THE REPAYMENTS MA DE TO THESE CREDITORS ON JAGDISH CHANDRA PASARI. 8 THE GROUND THAT THE SOURCE OF PAYMENT COULD NOT BE VERIFIED. ONCE THE CREDITORS HAVE NOT BEEN DOUBTED AND THE CREDITS HAV E BEEN ACCEPTED THE CREDITS THEMSELVES WILL CONSTITUTE THE SOURCE FOR R EPAYMENT OF THE LOANS. EVEN OTHERWISE THESE PAYMENTS HAVE BEEN BY CHEQUE AND HAVE BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS. THESE PART ICULARS HAVE BEEN FURNISHED BEFORE THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS. THAT BEING SO WE CANNOT ACCEPT THE ARGUMENT OF THE AO THAT HE COULD NOT VERIFY THE SOURCE OF PAYMENT OF THESE PAYMENTS. IN THE CIRCUM STANCES WE ACCEPT AND CONCUR WITH THE DECISION OF THE CIT(A) DELETING THE ADDITION OF RS.73 39 539/- U/S 69 OF THE I.T. ACT ON ACCOUNT O F REPAYMENT OF LOAN LIABILITY AND DISMISS THE REVENUES APPEAL ON THIS ISSUE. 13. THE NEXT ISSUE IS AGAINST THE ADDITION OF RS.9 72 719/- ON ACCOUNT OF CASH CREDITS U/S.68 OF I.T. ACT. DURING THE ASSESSM ENT PROCEEDINGS AO NOTED THAT THERE WAS OUTSTANDING LOAN IN CASE OF M/ S. COUNTRYWIDE FINANCE SERVICES BOMBAY AND M/S. VENKATESH CLEARING AGENCY AT RS.1 73 057/- AND RS.7 99 662/- RESPECTIVELY. THE AO NOTED THAT THESE OUTSTANDING LOANS COULD NOT BE VERIFIED IN THE ABSENCE OF BOOKS OF AC COUNTS. AO THEREFORE ADDED THE SUM OF RS.9 72 719/- (1 73 057 + 7 99 662 ) ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF IT ACT 1961. 14. DURING THE APPELLATE PROCEEDINGS ASSESSEE HAS OBJECTED TO THE ADDITION OF RS.9 72 719/- ON ACCOUNT OF CASH CREDIT U/S.68 OF IT ACT 1961. THE ASSESSEE HAS CONTENDED THAT AO MADE AN ADDITION OF RS.9 72 719/- FROM THE TWO PARTIES OUT OF 15 PARTIES REFERRED IN PARA 5.1 U/S.68 OF IT ACT 1961. ASSESSEE HAS CONTENDED THAT IN THE CASE OF M /S. VENKATESH CLEARING AGENCY LOAN OUTSTANDING AS ON 1.4.96 IS AT RS.7 30 000/-. TO THIS AMOUNT A FURTHER SUM OF RS.69 662/- WAS CREDITED AS INTERE ST FOR THE YEAR. THIS MADE TOTAL CLOSING BALANCE AT RS.7 99 662/-. THE A SSESSEE HAS CONTENDED THAT THE TAX AUDITOR HAS ALSO CERTIFIED THAT NO LOA N WAS BORROWED IN HUNDI DURING THE YEAR. TAX AUDITOR ALSO POINTED OUT THAT THIS LOAN WAS NOT SQUARED UP DURING THE YEAR. TAX AUDITOR HAS ALSO P OINTED OUT THAT MAXIMUM LOAN OUTSTANDING DURING THE YEAR WAS AT RS. 7 99 662/-. THE ASSESSEE HAS CONTENDED THAT THIS IS ALSO CONFIRMED BY LOAN CONFIRMATION JAGDISH CHANDRA PASARI. 9 FROM M/S. VENKATESH CLEARING AGENCY WHICH WAS FILED DURING THE ASSESSMENT PROCEEDINGS. ASSESSEE HAS CONTENDED THA T IN THE CASE OF COUNTRYWIDE FINANCE SERVICES OPENING BALANCE WAS A T RS.1 78 779/-. DURING THE YEAR INTEREST AMOUNT OF RS.28 260/- WAS CREDITED IN THIS ACCOUNT. THE ASSESSEE HAD REPAID SUM OF RS.68 736/ - IN THIS ACCOUNT. THERE WAS CLOSING BALANCE AT RS.1 38 303/- AS ON 31 .3.97. THE ASSESSEE HAS CONTENDED THAT EVEN TAX AUDITOR HAS CERTIFIED T HAT THIS LOAN WAS NOT TAKEN IN HUNDI. IT HAS BEEN CERTIFIED THAT THIS LO AN WAS NOT SQUARED UP DURING THE YEAR. TAX AUDITOR ALSO POINTED OUT THAT MAXIMUM AMOUNT OUTSTANDING IN THIS ACCOUNT WAS AT RS.1 73 057/-. ASSESSEE HAS CONTENDED THAT LEARNED ITO HAS MADE AN ADDITION OF RS.1 73 05 7/- ON THIS ACCOUNT. ASSESSEE HAS CONTENDED THAT ITO WAS NOT JUSTIFIED I N MAKING ADDITION FROM THE CONFIRMATION LETTER FILED BY THE PARTY. ASSESS EE HAS CONTENDED THAT THIS ADDITION OF RS.9 72 719/- SHOULD BE DELETED. 15. THE AO WAS ASKED TO GIVE HIS REPLY TO THE ASSES SEES CONTENTION. IN HIS REMAND REPORT DT.28.5.03 THE AO POINTED OUT THA T HE COULD NOT VERIFY THE OUTSTANDING LOAN FROM VENKATESH CLEARING AGENCY AND COUNTRYWIDE FINANCE SERVICES IN THE ABSENCE OF BOOKS OF ACCOUNTS. 16. THE LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASS ESSEE BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE S UBMISSIONS MADE DURING THE APPELLATE PROCEEDINGS. I HAVE ALSO GONE THROUGH THE REMAND REPORT OF THE AO. IT IS SEEN THAT THERE WAS OUTSTA NDING BALANCE OF RS.1 38 303/- IN THE CASE OF COUNTRYWIDE FINANCE SE RVICES AGAINST THE OPENING CREDIT BALANCE OF RS.1 78 779/-. SIMILARLY IN THE CASE OF M/S. VENKATESH CLEARING AGENCY THERE WAS CLOSING CREDIT BALANCE OF RS.7 99 662/- AGAINST THE OPENING CREDIT BALANCE OF RS.7 30 000/-. IT IS SEEN THAT ONLY A SUM OF RS.69 662/- WAS CREDITED AS INTEREST IN THIS ACCOUNT. IT IS SEEN THAT M/S. VENKATESH CLEARING A GENCY HAD FILED CONFIRMATION LETTER DURING THE ASSESSMENT PROCEEDIN GS. M/S. VENKATESH CLEARING AGENCY IS REGULARLY ASSESSED TO TAX. IN T HE CASE OF M/S. COUNTRYWIDE FINANCE SERVICES CLOSING CREDIT BALANC E IS LESSOR THAN OPENING CREDIT BALANCE. OPENING CREDIT BALANCE IN THESE TWO ACCOUNTS HAVE ALREADY BEEN ACCEPTED BY THE DEPARTMENT IN THE EARLIER ASSESSMENT YEARS. AO HAS NOT POINTED OUT ANY MISTA KE IN THE CONFIRMATION LETTERS FILED DURING THE ASSESSMENT PR OCEEDINGS. IN VIEW OF JAGDISH CHANDRA PASARI. 10 THESE FACTS I HEREBY DELETE THE ADDITION OF RS.9 7 2 719/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF IT ACT. 17. AGGRIEVED THE REVENUE IS ON APPEAL BEFORE US. AS POINTED OUT BY THE CIT(A) THAT IN THE CASE OF VENKATESH CLEARING AGENC Y THE ONLY ADDITION TO THE ACCOUNT DURING THE YEAR WAS OF RS.69 662/- TOWA RDS INTEREST. THIS PARTY HAD FILED CONFIRMATION LETTER AND WAS BEING REGULAR LY ASSESSED TO TAX. IN THE CASE OF COUNTRYWIDE FINANCE SERVICES THE CLOSING C REDIT BALANCE IS LESSER THAN THE OPENING CREDIT BALANCE. IN THE CIRCUMSTAN CES HAVING ACCEPTED THE LOAN AMOUNTS IN RESPECT OF THESE TWO PARTIES FOR TH E EARLIER YEARS IT IS NOT CLEAR HOW THE AO CAME TO THE CONCLUSION THAT THE OU TSTANDING AMOUNTS IN RESPECT OF THESE TWO PARTIES AT THE END OF THE YEAR WHICH IS LOWER THAN THE AMOUNTS OUTSTANDING AS AT THE BEGINNING OF THE YEAR CAN BE CONSIDERED AS UNEXPLAINED CASH CREDIT U/S.68 OF I.T. ACT. WE THE REFORE AGREE AND CONCUR TO THE CONCLUSION OF CIT(A) IN DELETING THE ADDITIO N OF RS. 9 72 719/- AS UNEXPLAINED CASH CREDIT AND DISMISS THE REVENUES A PPEAL ON THIS ISSUE. 18. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO. 4187/M/04 ASSESSEES APPEAL 19. THE FIRST ISSUE ON ASSESSEES APPEAL IS AGAINST THE ASSUMPTION OF A HIGHER FIGURE FOR NET PROFIT TO THE TUNE OF RS.15 0 08/-. THE AO IN PARA-9 OF HIS ORDER HAS HELD THAT THE ASSESSEE HAS SHOWN A NE T PROFIT @ 1.16% AND IN THE ABSENCE OF BOOKS THE AO HAS ESTIMATED THE NET P ROFIT AT 3%. 20. AGGRIEVED THE ASSESSEE IS ON APPEAL. IN THE CA SE OF REVENUES APPEAL FOR THE SAME YEAR WE HAVE DELETED THE ADDITION ON A CCOUNT OF AO ESTIMATING THE GP AT 20% AND 30% IN RESPECT OF FIBER AND YARN AS AGAINST THE GP @ 8.35% AND 24.49% RETURN BY THE ASSESSEE. APPLYING THE SAME RATIO WE FIND THAT THERE IS NO BASIS FOR THE AO TO HIKE THE NET P ROFIT FROM 1.16% AS RETURNED TO THE ESTIMATED 3%. IN THE CIRCUMSTANCES WE HOLD THAT THE INCREASE IN PERCENTAGE OF NET PROFIT HAS NO BASIS A ND THEREFORE DELETE THE ADDITION MADE BY THE AO ON ACCOUNT OF HIGHER ESTIMA TE OF NET PROFIT. THE ASSESSEES APPEAL ON THIS GROUND IS ALLOWED. JAGDISH CHANDRA PASARI. 11 21. THE NEXT ISSUE IS REGARDING THE DISALLOWANCE OF INTEREST PAYMENT OF RS.83 507/- MADE BY THE ASSESSEE. AS CAN BE SEEN F ROM THE AO AND THE ORDER OF CIT(A) THE INTEREST OF RS.83 507/- ON BOR ROWINGS WAS NOT CLAIMED AS PART OF THE TOTAL AMOUNT OF INTEREST PAID AMOUNT ING TO RS.1 53 574/-. THE LEARNED CIT(A) FOUND THAT THE ASSESSEE HAD RECE IVED A TOTAL INTEREST OF RS.1 04 577/- AND HAD MADE INTEREST PAYMENT OF RS.4 8 997/-. THE ASSESSEE HAD CLAIMED NET INTEREST PAYMENT OF RS.48 997/- IN ITS PROFIT & LOSS ACCOUNT. THE ASSESSEE HAD CLAIMED FURTHER INTEREST OF RS.83 507/- ON ACCOUNT OF INTEREST PAID. THE ASSESSEE WAS NOT ABL E TO FURNISH JUSTIFICATION FOR THIS CLAIM. THE ASSESSEE HAD MERELY MENTIONED THAT THE CLAIM WAS MADE SEPARATELY BY MISTAKE. AS THE ASSESSEE COULD NOT E XPLAIN THE BASIS ON WHICH THIS ADDITIONAL INTEREST WAS CLAIMED THE AMOUNT WA S ADDED BACK BY THE AO AND CONFIRMED BY THE CIT(A). 22. AGGRIEVED THE ASSESSEE IS ON APPEAL BEFORE US. WE FIND THAT THERE IS NO EXPLANATION FORTHCOMING FROM THE ASSESSEE TO SHO W WHY THIS INTEREST OF RS.83 507/- WAS CLAIMED SEPARATELY NOR THE PARTICUL ARS OF THE LOAN ON WHICH THIS INTEREST WAS BEING PAID. WE FIND THAT THE DIS ALLOWANCE OF THIS AMOUNT OF RS.83 507/- BY THE LOWER AUTHORITIES FOR LACK OF EVIDENCE IS TO BE SUSTAINED. 23. IN THE RESULT THE GROUND RAISED BY THE ASSESSE E ON THIS ISSUE IS DISMISSED. 24. THE NEXT GROUND OF APPEAL IS REGARDING THE ADDI TION OF RS.8 00 000/- MADE FROM THE CAPITAL ACCOUNT OF ASSESSEE U/S.68 OF I.T. ACT. AT THE BEGINNING OF THE YEAR THE ASSESSEES CAPITAL AMOUNT SHOWED A DEBIT BALANCE OF RS.74 444/-. AS ON 31.3.1997 THE CAPITAL ACCOUN TS SHOWED A CREDIT OF RS.7 47 944/-. DURING THE YEAR THERE WAS A TOTAL CR EDIT INTRODUCED AT RS.12 82 757/-. THE AO FOUND THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS INADEQUATE AND ADDED THE ENTIRE AMOUNT AS UNEXP LAINED CREDITS. ON APPEAL THE CIT(A) FOUND THAT DURING THE YEAR THE N ET PROFIT OF RS.1 60 232/- WAS AVAILABLE IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR. THE EXPLANATION BY THE ASSESSEE THAT INTRODUCTION OF CAPITAL TO THE EX TENT OF RS.5 85 762/- FROM HIS OWN SOURCE COULD NOT BE ACCEPTED. THEREFORE TH ERE WAS AN UNEXPLAINED JAGDISH CHANDRA PASARI. 12 NET CREDIT TO THE CAPITAL ACCOUNT OF RS.11 26 525/- (RS.12 82 757 THE PROFIT FOR THE YEAR OF RS.1 60 232/-). HOWEVER THE CIT(A ) RESTRICTED THE ADDITION TO RS.8 00 000/-. 25. AGGRIEVED THE ASSESSEE IS ON APPEAL BEFORE US. WE FIND THAT THE ADDITION HAS BEEN MADE IN RESPECT OF CREDIT BALANCE IN THE CAPITAL ACCOUNT BECAUSE THE ASSESSEE COULD NOT FURNISH ANY PROOF FO R THE SOURCE OF THIS ADDITIONAL CREDIT. THE ONLY AMOUNT AVAILABLE FOR T HE CREDIT TO THE CAPITAL ACCOUNT IS THE PROFIT MADE DURING THE YEAR. THAT B EING SO WE AGREE WITH THE LOWER AUTHORITIES THAT THEY HAVE NO OTHER OPTION BU T TO ADD THE AMOUNT CREDITED TO THE CAPITAL ACCOUNT WHICH CANNOT BE OTH ERWISE EXPLAINED. THE CIT(A) RESTRICTED THE ADDITION ON ACCOUNT OF UNEXPL AINED CREDITS TO RS.8 00 000 /- AS AGAINST RS.12 82 757/- MADE BY TH E AO. WE FIND THIS ADDITION IS REASONABLE AND ON ACCOUNT OF WANT OF FU RTHER EVIDENCE WE SUSTAIN THE SAME. THE ASSESSEES APPEAL ON THIS IS SUE IS DISMISSED. 26. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED ON THIS 28 TH DAY OF JANUARY 2011 SD/- SD/- (J. SUDHAKAR REDDY) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 28 TH JANUARY 2011. RJ COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CENTRAL - I CONCERNED 5. THE DR G BENCH TRUE COPY BY ORDER ASST. REGISTRAR I.T.A.T MUMBAI JAGDISH CHANDRA PASARI. 13 DATE INITIALS 1 DRAFT DICTATED ON: 17.01.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 19.01.2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: ______ SR. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: ______ 9 DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER: ______