Diwan Chand Garg (HUF), Bhubaneswar v. ACIT, Bhubaneswar

ITA 427/CTK/2011 | 2003-2004
Pronouncement Date: 18-11-2011

Appeal Details

RSA Number 42722114 RSA 2011
Assessee PAN AABHD6390R
Bench Cuttack
Appeal Number ITA 427/CTK/2011
Duration Of Justice 1 month(s) 1 day(s)
Appellant Diwan Chand Garg (HUF), Bhubaneswar
Respondent ACIT, Bhubaneswar
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 18-11-2011
Date Of Final Hearing 16-11-2011
Next Hearing Date 16-11-2011
Assessment Year 2003-2004
Appeal Filed On 17-10-2011
Judgment Text
IN THE INC O ME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE : SHRI K.K.GUPTA AM AND SHRI K.S.S.PRASAD RAO JM ITA NO. 427 428 AND 429/CTK/2011 (ASSESSMENT YEAR 2003 - 04 2004 - 05AND 2007 - 08) DIWAN CHAND GARG (HUF) PROP.GARG TRADINGCO. OLD STA TIN BAZAR BHUBANESWAR 751 006. AN: AABHD 6390 R VERSUS ASST.COMMISSIONER OF INCOME - TAX CIRCLE 1(2) BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI D.K.SETH/M.SETH ARS FOR THE RESPONDENT SMT. PARAMITA TRIPATHY DR DATE OF HEARING : 16.11.2011 DATE OF PRONOUNCEMENT : 18.11.2011 ORDER SHRI K.K.GUPTA AM : THESE THREE APPEALS BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2003 - 04 2004 - 05AND 2007 - 08 ARE BEFORE US FOR HEARING O N THE ORDERS OF THE LEARNED COMMISSIONER OF INCO ME - TAX (APPEALS) HAVING CONFIRMED CERTAIN DISALLOWANCES AND ADDITIONS COMPUTED BY THE ASSESSING OFFICER IN HIS ORDERS U/S.143(3) R.W.S. 153A OF THE INCOME - TAX ACT 1961. 2. COMMON ISSUES HAVE BEEN RAISED FOR THE AYS 2003 - 04 AND 2004 - 05 WITH RESPECT TO THE ADDITIONS/DISALLOWANCE WHICH WILL BE TAKEN UP TOGETHER AND A ISSUE COMMON THEREIN IS ALSO ON THE SOLITARY ISSUE RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08 WHICH ISSUE HAS BEEN POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE AS COVERED IN F AVOUR OF THE ASSESSEE AS PER THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS 2001 - 02 AND 2002 - 03. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WAS CONDUCTING BUSINESS AS SOLE PROPRIETOR OF M/S.GARG TRADING CO. DEALING IN TRADING IN SA NITARY WARES AND BUILDING MATERIALS. ON 29.11.2005 A SEARCH U/S.132 WAS CARRIED OUT WHEN THE ASSESSMENTS U/S.143(3)/153A WERE COMPLETED N 31.12.2007. THE ASSESSEE MEANWHILE HAD MOVED A PETITION BEFORE THE 2 HONBLE ORISSA HIGH COURT O N THE GROUND THAT THE X EROX COPIES OF THE SEIZED MATERIALS WHICH WERE SUPPLIED TO THE ASSESSEE WERE NOT LEGIBLE AND THEREFORE THE ASSESSEE COULD NOT EXPLAIN THE SEARCH MATERIAL A T THE TIME OF ASSESSMENT TO DEFEND ITSELF RESULTING IN HIGH COURT ANNULLING THE ASSESSMENT ORDERS WI TH THE DIRECTION TO THE ASSESSING OFFICER TO COMPUTE THE ASSESSMENT AGAIN AFTER GIVING LEGIBLE COPIES OF THE SEIZED MATERIAL. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAVING TAKEN COGNIZANCE OF THE DIRECTION OF THE HON BLE HIGH COURT PROCEEDED TO REFRAME THE ASSESSMENT WHEN HE HAD THE ACCESS OF THE SEIZED MATERIAL IN ORIGINAL AND THEREFORE HAD NOT MADE ADDITIONS OR DISALLOWANCE AS OF NOW INSOFAR AS THE ADDITIONS THAT HAVE BEEN MADE AFTER THE HONBLE HIGH COURTS DIRECTIO N HAVE RESULTED IN HIGH PITCHED ADDITIONS ON THE MATERIAL AVAILABLE TO THE ASSESSING OFFICER ON THE ISSUES WHICH OUGHT TO HAVE BEEN CONSIDERED BY WAY OF REGULAR ASSESSMENT. FOR EXAMPLE HE SUBMITTED FOR THE ASSESSMENT YEAR 2003 - 04 THE ASSESSMENT HAD BEEN C OMPLETED U/S.143(3)/153A BY COMPUTING A TOTAL INCOME OF 8 14 623 WHICH HAS BEEN ENHANCED TO 25 16 460 NOW WHICH INTER ALIA IS THE ADDITION ON ACCOUNT OF PURPORTED SUPPRESSION OF SALES SUNDRY CREDITORS BALANCES AS BALANCE INSCRIBED ON THE BASIS OF A ROUGH CALCULATION SHEET VIS - - VIS AS WRITTEN IN THE AUDIT ED FINANCIAL STATEMENTS BY THE ASSESSEE DISALLOWANCE OF EXPENSES RELATING TO FREIGHT INWARDS WHICH IS PART AND PARCEL OF THE PURCHASES OF SANITARY WARES AND BUILDING MATERIALS BY THE ASSESSEE FOR TRADING WHICH ISSUE WAS ALSO DELIBERATED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING TWO AYS WHEN THE TRIBUNAL WAS PL EASED TO DELETE THE DISALLOWANCE MERELY BECAUSE THE ASSESSING OFFICER COULD NOT SUBSTANTIATE THE BASIS OF HOLDING IT AS BOGUS. THE ASSESSEE HAD BEEN SUBMITTING THE LORRY REC EIPTS WHICH LORRY NUMBERS WERE MENTIONED IN THE PURCHASE BILLS THEREFORE 3 DID NOT REQUIRE FURTHER LINKING THE INCURRING OF EXPENSES TO BE DISALLOWED WHOLLY FOR WANT OF LINKING B Y THE ASSESSEE FOR THE ASSESSING OFFICER. THE BUSINESS OF THE ASSESSEE IN TRADIN G OF THESE ITEMS HAS INCREASED SUBSTANTIALLY OVER A PERIOD OF THESE YEARS THEREFORE CORRESPONDING TO THE INCREASE THE AMOUNT OF DIRECT COST BEING THE FREIGHT INWARDS WAS INCURRED BY THE ASSESSEE WHICH DETAILS WERE FURNISHED BY THE ASSESSEE TO THE ASSESSIN G OFFICER BUT FOR WANT OF SPECIFIC LINKING OF THE EXPENDITURE INCURRED WERE CLAIMED AS GOODS EXPENSES WERE TOTALLY DISALLOWED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS NOT DISALLOWED ANY OF THE PURCHASES THEREFORE CLINCHES THE ISS UE IN FAVOUR OF THE ASSESSEE IN SOFAR AS THE ISSUE WAS SQUARELY DEALT WITH BY THE ITAT WHICH COPY IS PLACED ON RECORD. HE SUBMITTED THAT BOTH THE AUTHORITIES BELOW TRIED TO OPINE ABOUT THE INCURRING OF SUCH EXPENSES BY FINDING TO INVOKE THE PROVISIONS OF SECTIONS 40A(3) OR 40(A)(IA) BUT HAVING SATISFIED THEMSELVES ON THIS SCORE LEFT THE DISALLOWANCE TO BE CONTINUE CLAIMED AS BOGUS VIS - - VIS THE ORDER OF THE TRIBUNAL. 5. THE NEXT GROUND COMMON TO THE AYS 2003 - 04 AND 20040 - 05 IS WITH RESPECT TO THE DISALLOWANCE OF UNSECURED L OANS AND THE CORRESPONDING INTEREST PAID THEREON FOR WANT OF CONFIRMATIONS AND OTHER EXPLANATION IN PURSUANCE TO REQUIREMENT U/S.68. WITH RESPECT TO ASSESSMENT YEAR 2004 - 05 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AN ADDITIONAL ISSUE IN RESPECT OF DISALLOWANCE OF COMMISSION AND CONTRACT RECEIPTS HAS ALSO BEEN RAISED WHICH ISSUE WAS NOT CONSIDERED BY THE ASSESSING OFFICER AND NOTED BY THE LEARNED CIT(A) IN ITS RIGHT PERCEPTIVE. HE POINTED OUT THAT THE LEARNED ASSESSING OFFICER HAS OBSERVED IN HIS ORDER THAT A SUM OF 1 69 272 WAS FOUND TO HAVE BEEN PAID TO THE ASSESSEE AS PER THE TAX DEDUCTION AT SOURCE CERTIFICATES OBTAINED FROM THE CONTRACTEES. HE REQUIRED THE ASSESSEE TO EXPLAIN ITS NON - MENTIONING IN THE FINANCIAL STATEMENTS WHEN THE ASSESSEE 4 E XPLAINED THAT THE CONTRACTS ENTERED INTO BY THE ASSESSEE AGAINST THE BILLS RAISED SQUARED UP THE RECEIPTS IN ITS TRADING ACCOUNT THEREFORE DID NOT REQUIRE ANY SEPARATE CLAIM OF INCOME AS COMMISSION OR CONTRACT RECEIPTS. THE LEARNED CIT(A) AGREED TO THE SUB MISSIONS OF THE ASSESSEE APPELLANT BEFORE HIM AND HELD THAT THE ASSESSING OFFICER OUGHT TO HAVE VERIFIED THE SAME WHICH ISSUE THEREFORE REQUIRES CONSIDERATION BY THE ASSESSING OFFICER IN ITS CONCEPTUAL RECORDING AS SUBMITTED BY THE ASSESSEE. A SUITABLE DI RECTION THEREON MAY KINDLY BE GIVEN . 6. INITI ATI NG HIS ARGUMENT ON THE FIRST ISSUE THE LEARNED AR OF THE ASSESSEE ARGUED THAT THE SUPPRESSION OPF SALES AS POINTED OUT BY THE ASSESSING OFFICER WAS IN FACT A NOTING BY THE SALES TAX INSPECTOR RESULTING IN SA LES TAX ASSESSMENT BY THE ASST.COMMISSIONER OF SALES TAX WHEN ON A PARTICULAR DATES SALES MISSING HE CHOSE TO TAX SIX TIMES THE SAME AMOUNT ON THE DAY WHICH THE ASSESSING OFFICER CONSIDERED AS TOTAL SALES NOT INCORPORATED IN THE BOOKS OF ACCOUNT FOR THE A SSESSMENT YEAR 2003 - 04. SIMILARLY SUPPRESSION OF SALES IN THE ASSESSMENT YEAR 2004 - 05 WERE SUBJECTED TO 12 TIMES OF THE MISSING SALES WHICH CANNOT BE ON ASSUMPTION AND PRESUMPTION BROUGHT O N RECORD BY THE ASSESSING OFFICER IN VIEW OF THE FACT THAT THE SALE S TAX AUTHORITIES TRIED TO CONSIDER THE PURCHASE AND SALES ALONG WITH THE STOCK HELD BY THE ASSESSEE ON A PARTICULAR DATE COULD NOT BE SUBJECTED TO TAX FOR THE YEARS SALE AMOUNT BY THE I.T.AUTHORITIES IN VIEW OF THE FACT THAT THE SALES TAX AUTHORITIES ARE CONCERNED WITH THE SALES TAX AND THE I.T. AUTHORITIES SHOULD HAVE BEEN CONCERNED WITH THE INCOME PORTION OF THE SALES WHICH WERE PURPORTEDLY HELD AS SUPPRESSED BY THE SALES TAX AUTHORITIES. HE POINTED OUT THAT THE GROSS MARGIN DECLARED BY THE ASSESSEE IS ABOUT 4.5% THEREFORE OUGHT TO HAVE BEEN CHARGED ON THE SPECIFIC SALES FOUND BY THE SALES TAX AUTHORITIES MISSING WHICH THE ASSESSING AUTHORITIES HAVE HOLD 5 TO BE BY WAY OF PENALTY FOR ACCEPTED AT 6 AND 12 TIMES RESPECTIVELY FOR THE ASSESSEE TO PAY 4% SALES TAX ON THE SANITARY ITEMS. IN OTHER WORDS THE LEARNED COUNSEL ARGUED THAT IT WAS NOBODYS CONTENTION THAT THE SALES TAX AUTHORITIES ARE CHARGING THE SALES TAX OF THE VERY MARGIN WHICH THE ASSESSEE EARNS WHEN HE TRADES THE ITEMS AND HAS THE STOCK AVAILABLE WHEN NO GOODS ARE SOLD. HE PRAYED THAT THE ADDITIONS SO CONFIRMED AT 1 97 763 FOR THE ASSESSMENT YEAR 2003 - 04 3 00 120 FOR THE ASSESSMENT YEAR 2004 - 05 MAY KINDLY BE DIRECTED TO BE DELETED OR ALTERNATIVELY THE GROSS MARGIN OF 4.5% ON 3 2 894 AND @ 4 .5% ON 25 100 FOR THE ASSESSMENT YEAR 2004 - 0 5 MAY KINDLY BE DIRECTED TO BE TAKEN AS INCOME IN VIEW OF THE FACT THAT THE ASSESSEE HAS BEEN ASSESSED U/S.143(3) R.W.S. 153A WHEN THE ASSESSING OFFICER HAS TAKEN COGNIZANCE TO THE FACT THAT THE SEARCH MATERIAL BROUGHT ON RECORD WAS THE SALES TAX ASSESSMEN T ORDER FOR THESE ASSESSMENT YEARS . 7. WITH RESPECT TO THE NEXT ISSUE RELATING TO THE DISALLOWANCE OF SUNDRY CREDITORS THE LEARNED COUNSEL FOR THE ASSESSEE POINTED O UT THAT THE ADDITION SO MADE ARE ARBITRARY AND UNJUST IN VIEW OF THE FACT THAT THE ASSESSE ES BALANCE SHEET IN DICATED THE AMOUNT WHICH WAS OW ED BY THE ASSESSEE TO THE SUNDRY CREDITORS. IN A ROUGH CALCULATION SHEET FOUND AT THE TIME OF SEARCH THE AMOUNTS INDICATED THEREIN SHOWED A HIGHER BALANCE WHICH HAS BEEN TAKEN UP BY THE ASSESSING OFFICER AS THE BALANCE OUGHT TO HAVE BEEN SHOWN BY THE ASSESSEE UNDER THE PROVISIONS OF SECTION 153A AND THEREFORE BROUGHT TO TAX THE SUM OF 44 715 IN THE ASSESSMENT YEAR 2003 - 04 AND 4 66 179 IN THE ASSESSMENT YEAR 2004 - 05. BOTH THESE AMOUNTS CANNOT BE RECONCILED IN VIEW OF THE FACT THAT THE PURPORTED RECONCILIATION HAVE BEEN FORMULAT ED AND GIVEN TO THE CREDITORS IN ORDER TO SHOW T HE CORRECT BALANCE OWED BY THE ASSESSEE TO THE CREDITORS. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH THAT RECONCILIATION WHICH WAS NOT SUBMITTED AS PER NOTING BY THE ASSESSING OFFICER 6 WHICH ALSO R ESULTED IN FURTHER ADDITIONS WITH RESPECT TO THE UNSECURED LOANS WHICH WILL BE DEALT WITH LATER. HE POINTED OUT THAT THESE AMOUNTS ARE SUNDRY CREDITORS FOR EXPENSES WHICH THE ASSESSING OFFICER NOTED AS DISCREPANCY. HE VERIFIED ALL THE PURCHASES AND WITH TH E INCREASE IN TURNOVER THE PURCHASES WERE DULY AUDITED BY THE CA UNDER THE PROVISIONS OF SECTION 44AB WHEN EXPENSES INCURRED FOR INWARD FREIGHT WHICH WERE REPORTED BY THE CA TO SUBSTANTIATE THE CLAIM OF GOODS EXPENSES. THE ASSESSING OFFICER WANTED TO CLARI FY THE BALANCE BETWEEN THE SEIZED DOCUMENTS AND THE AUDITED FINANCIAL STATEMENTS DISCLOSING THESE SUNDRY CREDITORS BALANCES NOW RECTIFIED IN VIEW OF THE MAGNITUDE OF THE PURCHASES MADE THERE FROM AND HAD INCORPORATED THE VARIOUS COMMISSION AND DISCOUNTS GI VEN BY THE MANUFACTURERS OF SANITARY ITEMS. THE ASSESSEE THEREFORE COULD NOT EXPLAIN THE DISCREPANCY INSOFAR AS IT WAS THE SEARCH DOCUMENTS WERE ONLY A ROUGH CALCULATION BY THE ACCOUNTANT AND NOT A DOCUMENT TO BE RECONCILED WHICH CAN BE CONSIDERED FOR REC ONCIL ATION INSOFAR AS ONLY THOSE ITEMS CAN BE RECONCILED WHEN THE CREDITORS NAMELY EID PARRY INDIA LTD AND SUSHILA INDUSTRIES SPECIFICALLY POINT OUT THAT THEY WANT MORE THAN WHAT HAS BEEN SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THE ASSESSEE THEREFOR E WAS NOT ABLE TO RECONCILE THE SAME WHICH CREDITORS FOR EXPENSES CANNOT BE DISALLOWED FOR ADDITION. HE POINTED OUT THAT MERE PRESUMPTION AND ASSUMPTION CANNOT BE TAXED AS INCOME FROM UNDISCLOSED SOURCES. 8. WITH RESPECT TO NEXT GROUND RELATING TO THE GOO DS EXPENSES AS MENTIONED ABOVE THE LEARNED COUNSEL SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL INSOFAR AS THE ASSESSING AUTHORITIES HAVE TRIED TO CONTINUE TO TAKE THE STAND TAKEN BY THEM FOR THE 2001 - 02 AND 2002 - 03 WHEN TH EY REQUIRE THE ASSESSEE TO MATCH THE INCURRING OF EXPENSES FOR INWARD FREIGHT PAID BY THE ASSESSEE ON THE GOODS PURCHASED BY THEM SENT 7 BY LORRY FROM AP AND RAJSTAHAN WHICH LORRIES WERE PAID IN CASH ON A PARTICULAR DATE WITHOUT ANY FORMALITY OF ENTERING IN TO CONTRACT AND AS PER THE DIRECTION OF THE MANUFACTURERS. THE INCREASING OF INWARD FREIGHT EXPENSES INCIDENTAL TO THE PURCHASES THAT HAD INCREASED FROM 9 0 LAKHS TO 6 CRRES IN THE IMPUGNED ASSESSMENT YEAR THEREFORE REQUIRES NO VERIFICATION IN THE LINE AS REQUIRED BY THE ASSESSING OFFICER BY LINKING THE PURCHASES TO THE FREIGHT PAID. THE AUDITORS HAVE VERIFIED THE EXPENSES AND THAT IS THE REASON THE AS SESSING OFFICER WAS ABLE TO RELATE THE EXPENSES PAID TO THE TRUCK DRIVERS ON THE DELIVERY OF THE GOODS. THERE WAS NO REQUIREMENT FOR FURTHER VOUCHERS FOR THE CASH PAID WHICH HAS BEEN HELD AGAINST THE ASSESSEE BY THE AUTHORITIES BELOW AS SELF - MADE VOUCHERS ARE BOGUS . THE LORRY RECEIPTS INSCRIBE THE FREIGHT TO BE PAID BY THE ASSESSEE AS DIRECTED BY THE MANUFACTURERS OF THE GOODS DEALT WITH BY THE ASSESSEE. THEREFORE IT WAS NOBODYS CASE THAT THE DISALLOWANCE COULD BE MADE EITHER UNDER THE PROVISIONS OF SECTIO N 40A(3) OR U/S.40(A)(IA). THE CULMINATION OF DISALLOWANCE THEREFORE HAS BEEN ONLY ON HOLDING THE SAME AS BOGUS . THEREFORE THE ISSUE REMAINS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2001 - 02 AND 2002 - 03 WHICH COPY HAS BEEN PLACED ON RECORD. HE PRAYED THAT THE DISALLOWANCE OF 3 66 088 IN THE ASSESSMENT YEAR 2003 - 04 9 11 520 IN THE ASSESSMENT YEAR 2004 - 05 AND 50.88.438 IN THE ASSESSMENT YEAR 2007 - 08 MAY KINDLY BE DIRECTED TO BE DELETED. 9. THE LAST ISSUE WHICH IS COMMON TO THE AYS 2003 - 04 AND 2004 - 05 RELATES TO THE UNSECU RED LOAN DISALLOWED BY THE ASSESSING OFFICER ALONG WITH THE CONSEQUENT INTEREST PAID THEREON IN THE IMPUGNED AYS. THE LEARNED COUNSEL SUBMITTED THAT AN INTERESTING CORRESPONDENCE TOOK PLACE BETWEEN THE LEARNED CIT(A) AND THE ASSESSING OFFICER INSOFAR AS TH E LEARNED CIT(A) REQUIRED THE AO BY WAY OF REMAND AS TO HOW THE 7 UNSECURED LOAN CREDITORS 8 WHO ARE ASSESSED BY THE ASSESSING OFFICER COULD NOT BE VERIFIED BY HIM WHEN THE ASSESSEE WAS NOT COOPERATING TO FURNISH THE REQUIRED DETAILS BY THE ASSESSING OFFICE R WANTING THEIR IDENTITY GENUINENESS AND CREDITWORTHINESS AND WHEN THE ASSESSEE HAS FURNISHED THE DETAILS OF THEIR LEDGER COPIES OF ACCOUNTS AND BANK PASS BOOKS IT REQUIRED TO ESTABLISH THE GENUINENESS INSOFAR AS THE SOURCE OF SOURCE OF THE CREDITS IN THE LOAN CREDITORS ACCOUNTS WAS ALREADY AVAILABLE TO IT. IN REPLY TO THE SAME THE ASSESSING OFFICER CONCEDED THAT THE CASH TRANSACTIONS OF UNSECURED LOANS APPEAR TO BE CORRECT AS BECAUSE THE AMOUNT IS SUBSTANTIATED BY THE COPY OF THE RESPECTIVE BANK ACCOUNT BUT STILL INSISTED ON VERIFYING THE CREDITWORTHINESS . THE LEARNED CIT(A) TOOK COGNIZANCE THEREOF AND CONFIRMED THE DISALLOWANCE WITHOUT INDICATING AS TO HOW THE REMAND REPORT OR THE SUBMISSION OF THE ASSESSEE DID NOT SATISFY THE REQUIREMENT OF LAW BUT JUS T BECAUSE THE ASSESSEE WAS DULY AFFORDED OPPORTUNITY TO ESTABLISH THE GENUINENESS AND CREDITWORTHINESS OF THE CREDITORS BEFORE THE ASSESSING OFFICER HE WOULD NOT NOW ACCEPT THE SAME EVEN SO THE ASSESSING OFFICER CONFIRMS THE SAME. 10. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE MATERIALS SUPPLIED TO THE ASSESSING OFFICER O N THE BASIS OF REMAND WERE IN ITSELF COMPLETE TO THE EXTENT THE REQUISITION OF IDENTITY GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDITORS HAD BEEN COMPLETE MORE SO BECAUSE OUT OF CREDITORS 7 WERE ASSESSED BY THE SAME ASSESSING OFFICER AND THREE REMAINING WERE ASSESSED ELSEWHERE WHICH CO P Y OF THE ASSESSMENT ORDERS AND ACCOUNTS INDICATING THEIR SOURCE OF INCOME INCORPORATED IN THE BANK WAS TO BE CONSIDERED FOR ISSUE OF ADVANCE TO THE ASSESSEE WERE SELF SUFFICIENT TO ESTABLISH THE REQUI REMENT OF SECTION 68. THE ONUS WAS DULY DISCHARGED BY THE ASSESSEE. IT WAS THEREFORE A DENIAL BY BOTH THE AUTHORITIES BELOW WITHOUT ASSIGNING ANY REASON WHICH MAY KINDLY BE CONSIDERED IN ITS ENTI RETY. THE 9 CONSEQUENT INTEREST PAID THEREFORE HAS TO BE ALLOWED INSOFAR AS NO DISALLOWANCE HAS BEEN MADE BY THE ASSESSING AUTHORITIES UNDER ANY OTHER PROVISIONS OF THE I.T.ACT. 11. CONCLUDING HIS ARGUMENT HE SUBMITTED THAT THE FOR THE ASSESSMENT YEAR 2007 - 08 THE SOLITARY ISSUE REGARDING DISALLOWANCE OF GOODS EXPENSES BEING THE FREIGHT CHARGES PAID ON PURCHASES IS COVERED BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR THE AYS MENTIONED EARLIER. 12. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITI ES BELOW. SHE POINTED OUT THE SUPPRESSED SALES HA VE TO BE TAXED TOTALLY AS EXPENDITURE THEREON HAD ALREADY BEEN ALLOWED TO THE ASSESSEE WHEN THE PURCHASES HAVE BEEN ACCEPTED. THE SALES TAX AUTHORITIES THEREFORE RIGHTLY NOTED THAT AS A SAMPLE WHEN THE ASSES SEE HAS SOLD OUTSIDE THE BOOKS OF ACCOUNT OUGHT TO HAVE SOLD THE LIKE AMOUNT SPREAD OVER THE FULL FINANCIAL YEAR WHICH WAS BROUGHT TO TAX BY THE ASSESSING OFFICER AS PER THE FINDING OF THE SALES TAX AUTHORITIES. THE LEARNED COUNSELS SUBMISSION FOR TAXING ONLY THE INCOME PORTION THEREON IS UNTENABLE INSOFAR AS THE PURCHASES HAVE ALREADY BEEN ALLOWED AS EXPENDITURE THEREFORE THE SALES SUPPRESSED SHOULD BE TAXED IN ITS ENTIRETY. 13. WITH RESPECT TO THE ASSESSEES INABILITY TO RECONCILE THE DIFFERENCE BETWEEN THE BALANCES SHOWN IN THE SUNDRY CREDITORS ACCOUNT VIS - A - VIS THE AMOUNT SHOWN IN THE BALANCE SHEET THE ASSESSEE OUGHT TO HAVE EXPLAIN ED THE MISSING CREDIT WHICH THE ASSESSING OFFICER VERIFIED FROM THE SEARCHED DOCUMENT. THEREFORE ON ASSESSEES NON - COOPE RATION THE ASS ESSING OFFICER TRIED TO BRING TO TAX THE MISSING CREDITS OF THE SUNDRY CREDITORS. WITH RESPECT TO THE DISALLOWANCE OF EXPENSES BEING FREIGHT EXPENSES ON PURCHASES SHE SUBMITTED THAT THE ASSESSEE WAS REQUIRED TO FURNISH THE FREIGHT INCURRED F OR THE PARTICULAR PURCHASE HAS NOT BEEN DONE AS OF NOW WAS RIGHTLY CONFIRMED BY 10 THE LEARNED CIT(A) FOR WANT OF EVIDENCE OF INCURRING THE EXPENDITURE. ON THE ISSUE WITH RESPECT TO THE DISALLOWANCE OF UNSECURED LOANS AND THE CONSEQUENT INTEREST PAID TO THEM IN THE IMPUGNED AYS SHE SUBMITTED THAT IT WAS THE DUTY OF THE ASSESSEE TO EXPLAIN THE NATURE OF LOAN BY ESTABLISHING THE IDENTITY GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDITORS WHEN BY WAY OF REMAND REPORT THE ASSESSING OFFICER MERELY OPINED THA T HAVING FURNISHED THE DOCUMENTS THE CREDITWORTHINESS OF THE LOAN CREDITORS HAD NOT BEEN ESTABLISHED. THE LEARNED CIT(A) RIGHTLY CONSIDERED THAT THE ASSESSEE HAD NOT BEEN ABLE TO FURNISH THE REQUITE DETAILS THEREFORE WAS RIPE FOR ADDITION U/S.143(34)/153A . SHE SUBMITTED THAT EVEN ON THE REASSESSMENT AFTER THE HONBLE HIGH COURT HAD ANNULLED THE EARLIER ASSESSMENTS THE ASSESSING OFFICER WAS WITHIN HIS RIGHT TO COMPUTE THE INCOME HAVING ESCAPED ASSESSMENT U/S.153A WHICH REQUIRES NO DELIBERATION ON THE LEG AL ISSUE AS TO HOW THE SEARCH MATERIAL HAS NOT BEEN TAKEN INTO COGNIZANCE POST HONBLE HIGH COURTS DIRECTION. SHE THEREFORE SUBMITTED THAT THE ORDERS OF THE AUTHORITIES BELOW BE CONFIRMED. WITH RESPECT TO THE ISSUE OF COMMISSION AND CONTRACT RECEIPT THE LEARNED CIT(A) REQUIRED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE WHICH MAY KINDLY BE DIRECTED TO THE ASSESSING OFFICER FOR ADJUDICATION ACCORDINGLY. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES WE ARE INCLINED TO HOLD THAT THE ISSUE WITH RESPECT OF DISALLOWANCE OF GOODS EXPENSES REQUIRES NO FURTHER DELIBERATION BEING THE ISSUE COMMON TO THREE AYS INSOFAR AS THE ISSUE STANDS COVERED BY THE DEC ISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AS MENTIONED EARLIER. THE FREIGHT INWARDS HAVE BEEN CLAIMED AS GOODS EXPENSES ARE DIRECT COST TO PURCHASES WHICH HAVE INCREASED OVER THE IMPUGNED AYS. THE INCREASE HAS BEEN HELD AS BOGUS AS 11 CONFIRMED BY THE LEAR NED CIT(A) IS WITHOUT ANY BASIS. HAVING TRIED TO DISALLOW THE SAME EITHER UNDER THE PROVISIONS OF SECTION 40A(3) OR SECTION 40(A)(IA) THE FACTS BROUGHT ON RECORD STOPPED THE AUTHORITIES FROM MAKING THE DISALLOWANCE UNDER THESE SECTIONS CLINCHES THE ISSUE I N FAVOUR OF THE ASSESSEE THAT THE EXPENSES CANNOT BE DISALLOWED AS BOGUS. IN FACT THE AUTHORITIES HAVE VERIFIED THAT THE EXPENSES HAVE BEEN INCURRED AS HAVE BEEN MENTIONED IN THE LORRY RECEIPTS WHICH PURCHASES ARE THE BILLS OF MANUFACTURERS HAVE BEEN INCOR PORATED IN THE BOOKS OF ACCOUNT. THE AUDITORS HAD BIFURCATED THE FREIGHT AS PER THE REQUIREMENT OF THE DISCLOSURE IN THE BOOKS OF ACCOUNT WHEN THEY HAVE TO DISCLOSE THE NUMBER OF ITEMS OF GOODS TRADED BY THE ASSESSEE. THE CLOSING STOCK THEREFORE JUSTIFIES THE INCURRING OF EXPENSES INSOFAR AS IT ALSO SIGNIFIES THAT THE SUPPRESSION OF SALES CANNOT BE AS PENALIZED ADDING 6 AND 12 TIMES THEREOF R ESPECTIVELY FOR THE TWO AYS. ASSUMING SALES BEING SUPPRESSED AS A PRACTICE OVER A PERIOD TO THE FULL TERM OF FINANCIA L YEAR THE SALES TAX AUTHORITIES ARE ONLY CONCERNED WITH THE AMOUNT OF SALES TAX WHICH THEY REQUIRE THE ASSESSEE TO PAY TO THE GOVERNMENT TREASURY AND NOT BECAUSE THE ASSESSEE HAS NOT DISCLOSED THOSE SALES FOR THE REMAINING PERIODS. THE INCREASE IN STOCK THEREFORE WOULD HAVE TO BE CONSIDERED BY THE I.T. AUTHORITIES IN THE SUBSEQUENT YEAR WHICH FACT HAS TO BE TAKEN ACTION BY ALLOWING THE EXPENDITURE WHICH HAS NOT BEEN DONE BY THE AUTHORITIES BELOW. IN THIS VIEW OF THE MATER THE LEARNED COUNSELS AGREEING T O THE ALTERNATIVE PROPOSAL OF TAXING THE GROSS MARGIN EMBODIED IN THE SPECIFIC SUPPRESSED SALES FOR THE TWO AYS IS DIRECTED TO BE BROUGHT TO TAX AT 4.5% ON 32 894 IN T HE ASSESSMENT YEAR 2003 - 04 25 100 IN THE AY 2004 - 05. THIS GROUND RAISED BY THE ASSES SEE IS THEREFORE PARTLY ALLOWED. 15. WITH RESPECT TO THE ADDITION OF SUNDRY CREDITORS FOR EXPENSES WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE WAS REQUIRED TO RECONCILE BALANCES 12 WHICH ARE NOT EXIST ING . RECONCILIATION CAN ONLY BE BETWEEN TWO BALANCES W HICH ARE NOTED BY A DEBTOR OR CREDITOR. A BANK IS RECONCILED WHEN THE BALANCE IS DIFFERENT THAN THE BANK BALANCE SHOWN BY AN ASSESSEE AND A CREDITOR IS RECONCILED WHEN THE CREDITS SHOWN BY THE ASSESSEE IS DIFFERENT THAN AS SHOWN BY THE CREDITOR . HERE THE A SSESSEE HAS HIMSELF SHOWN A HIGHER AMOUNT AS FOUND BY THE ASSESSING AUTHORITIES IN THE SEARCH DOCUMENTS WAS A WORKING SHEET OF THE ACCOUNTANT THEREFORE CANNOT BE RECONCILED BY THE ASSESSEE. THESE RESULTS IN AN EXERCISE OF TRYING TO BRING TO TAX AN AMOUNT U /S.153A AN AMOUNT WHICH DOES NOT EXIST ANYWHERE. INABILITY OF THE ASSESSEE TO RECONCILE THEREFORE OUGHT NOT TO BE THE BASIS OF CONFIRMATION THEREOF. THE MANUFACTURERS OR THE SUNDRY CREDITORS FOR EXPENSES AT THE CLOSE OF THE FINANCIAL YEAR ALLOW CERTAIN DE DUCTIONS/COMMISSIONS FOR BREAKAGES PILFERAGE ETC. WHICH ARE INCORPORATED IN ACCOUNTING OF EXPENDITURE OR INCOME HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THEREFORE WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE WAS NOT REQUIRED TO EXPLAIN THE DIF FERENCE BETWEEN THE SEARCH MATERIAL AND THE I.T.RETURN INSCRIBING THE ACTUAL BALANCES IN THE BALANCE SHEETS AS IT WOULD RESULT IN A FUTILE EXERCISE. IN THIS VIEW OF THE MATER THE ADDITION AS SUNDRY CREDITORS IS DIRECTED TO BE DELETED. 16. WITH RESPECT TO THE GOODS EXPENSES ISSUE WE HAVE ADJUDICATED THEREUPON AS PER THE TRIBUNALS ORDER IS DIRECTED TO BE DELETED. 17. WITH RESPECT TO THE COMMISSION AND CONTRACT RECEIPTS WE FIND THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THA T IT REQUIRES VERIFICATION BY THE ASSESSING OFFICER AS OBSERVED BY THE LEARNED CIT(A). WE UPHOLD THE SAME AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM AS BROUGHT ON RECORD BY THE ASSESSEE . 18. THE LAST ISSUE ON ACCOUNT OF CASH CREDIT U/S.68 AND TH E CONSEQUENT INTEREST CLAIMED THEREON REQUIRES NO FURTHER VERIFICATION AS PER OUR 13 OBSERVATION OF THE NOTINGS BY THE ASSESSING OFFICER IN HIS REMAND REPORT AND THE ORDER OF THE LEARNED CIT(A) WAS AFTER HAVING PERUSED THE FACTS AND EXPLANATION OFFERED BY TH E ASSESSEE TO THE ASSESSING OFFICER O N THE REQUISITION OF THE REMAND REPORT THE ASSESSING OFFICER OPINED THAT THE CREDITWORTHINESS COULD NOT BE ESTABLISHED THERE FROM WE ARE UNABLE TO SATISFY OURSELVES TO THESE NOTINGS OF THE AUTHORITIES BELOW WHEN THE ON US HAS B EEN DISCHARGED BY THE ASSESSEE O N THE REQUIREMENT OF THE PROVISIONS OF SECTION 68. THE MERE OPINION BETWEEN TWO TAXING AUTHORITIES CANNOT CONFO RM OTHERWISE AS PER THE REQUIREMENT OF LAW FOR THE ASSESSEE . THE LEARNED DR HAS NOT BEEN ABLE TO POINT OU T AS TO WHAT WAS FURTHER REQUIRE D FROM THE ASSESSEE TO EXPLAIN WHEN WHATEVER WAS AVAILABLE TO THE ASSESSEE WAS SUBMITTED BEFORE THE AUTHORITIES EARLIER JUSTIFYING THE LOAN CREDITORS AND THE PAYMENT OF INTEREST THEREOF. FINDING NO JUSTIFICATION IN CONFIRMIN G THE SAME BY CIT(A) WE DIRECT THE DELETION OF THE ADDITION OF 14 25 000 IN THE ASSESSMENT YEAR 2003 - 04 19 40 830 IN THE ASSESSMENT YEAR 2004 - 05 AND THE CONSEQUENT INTEREST CLAIMED AND DISALLOWED THEREON AMOUNTING TO 87 144 IN ASSESSMENT YEAR 2003 - 04 1 51 419 IN THE ASSESSMENT YEAR 2004 - 05 AND 40 739 BEING THE INTEREST ON THE LOAN CREDITORS OF 2003 - 04 ARE DELETED. 19. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 18 TH NOVEMBER 2011 H.K.PADHEE SENIOR PRIVATE SECRETARY. 14 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: DIWAN CHAND GARG (HUF) PROP.GARG TRADINGCO. OLD STATIN BAZAR BHUBA NESWAR 751 006. 2. THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX CIRCLE 1(2) BHUBANESWAR. 3. THE CIT 4. THE CIT(A) 5. THE DR CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY.