Income Tax Appellate Tribunal - Ahmedabad
Mahendra D.Desai, Ahmedabad vs Assessee on 8 August, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
" C " BENCH, AHMEDABAD
Before Shri A. K. GARODIA, ACCOUNTANT MEMBER
and Shri KUL BHARAT, JUDICIAL MEMBER
I.T.A. No. 2835/ Ahd/2008
I.T.A.No. 2937/Ahd/2009
(Assessment year 2005-06 & 2006-07)
Mahendra D Desai, Vs. DCIT, Circle 9,
Prop. M/s. Bhagwati Associates, Ahmedabad
2nd Floor, Om Complex,
32, Swastik Society,
C.G.Road, Ahmedabad
PAN/GIR No. : AAJPD4857H
I.T.A.No. 2896/Ahd/2008
I.T.A.No. 3025/Ahd/2009
(assessment year 2005-06 & 2006-07)
DCIT, Circle 9, Vs. Mahendra D Desai,
Ahmedabad Prop. M/s. Bhagwati Associates,
2nd Floor, Om Complex,
32, Swastik Society,
C.G.Road, Ahmedabad
(APPELLANT) .. (RESPONDENT)
Appellant by: Shri S N Soparkar, AR
Respondent by: Shri D K Singh, Sr. DR
Date of hearing: 08.08.2012
Date of pronouncement: 21.09.2012
ORDER
PER SHRI A. K. GARODIA, AM:-
These are cross appeals field by the assessee and the revenue for the assessment years 2005-06 & 2006-07 and these appeals are directed against two separate orders of Ld. CIT(A) XV, Ahmedabad dated 2 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 12.06.2008 for assessment year 2005-06 and dated 04.09.2009 for assessment year 2006-07.
2. First, we take up the appeal of the assessee in I.T.A.No. 2835/Ahd/2008 assessment year 2005-06.
2.1 Ground No.1 is as under:
"1. The order of the Hon'ble CIT(A) not accepting ^he submission of your appellant and upholding the action of AO relating to rejection of the books of accounts of the appellant is bad in law and also on facts."
2.1.1 The brief facts of the case are that the assessee deals in trading of coal, coke, lignite and commission agent. There was a survey conducted u/s 133A of the Income tax Act, 1961 on 26.09.2007 and in the course of this survey, it was noted by the department that for lignite, the assessee had paid the costs in advance to GMDC and, therefore, the liability shown by the assessee in the balance sheet as on 31.03.2003, 31.03.2004 and 31.03.2005 on account of lignite freight to the extent of Rs.165.51 lacs Rs.175.76 lacs and Rs.302.59 lacs respectively are fictitious and / or not correctly shown. The A.O. has also noted on page 6 of the assessment order that in reply to question 9, it was stated by the assessee that he is only a link between the prospective purchasers and sellers of lignite. He also submitted that he used to raise debit notes for lignite payment, truck freight, octroi and service charges. A copy of debit note was also produced. He also submitted that method of accounting of the debit note is that the customer account is debited with the aggregate value of services provided and corresponding credit is made to unpaid freight account towards freight charges and octroi shown in the debit note, service charges account towards the amount to be charged for services rendered and GMDC account towards lignite cost. He further submitted 3 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 that service charges is the income of the assessee which is transferred to P & L account whereas the account of GMDC and unpaid freight account is shown in the balance sheet on liability side and the account of customers is shown in the balance at sundry debtors on assets side. It was also explained that when the amount was received from the customers, parties account is credited and the amount is deposited into bank and, thereafter, the payment is made to transport company by withdrawing the amount from the bank and the unpaid freight account is debited. It was also explained that this method of accounting is being followed consistently and there is no change in this method of accounting followed in earlier years. The A.O. also observed on page 7 of the assessment order in para 6 that after going through these facts, he is of the considered opinion that the assessee did not maintain proper books of accounts and the A.O. rejected the books of accounts by invoking the provisions of section 145(2) for the assessment years 1996-97 and 1997-98 also and the modus oprandi of the assessee in those years and in the current year have not been changed. He also observed that the assessee is paying huge amount of cash and accepting cash also and the vouchers are self made and therefore, correct profit cannot be arrived at from the books of account maintained by the assessee. By making these observations, he rejected the books of accounts in the present year also by invoking the provisions of Section 145(2) of the Income tax Act, 1961. This action of the A.O. was upheld by Ld. CIT(A) and now, the assessee is in appeal before us. 2.2 Grounds No.2 & 3 are as under:
"2. Ld. CIT(A) erred in not accepting the submission of your appellant and upholding addition on account of GP amounting to Rs. 12,27,096 estimated @ 17% by the AO. it is, therefore, requested to please delete the entire addition of Rs. 12,27,096/-.4 I.T.A.No. 2835,2896 /Ahd/2008
I.T.A.No. 2937, 3026/Ahd/2009
3. Ld. CIT(A) erred in not holding that freight liability is the liability of the customers and not that of the appellant, and it does not affect trading results. Ld. CIT(A) also erred in confirming addition on account of fictitious Freight Liability amounting to Rs. 12,66,045/-. It is, therefore, requested to please delete the entire addition of Rs. 12,66,045/-."
2.2.1 These grounds are also interconnected with ground No.1 because ground No.2 is regarding making addition of Rs.12,27,096/- on account of G.P. addition by applying the G.P. rate of 17% and hence, if rejection of books of accounts is not found to be correct than GP addition cannot survive. Ground No.3 is also connected because the main basis of rejection of books of account is this that the assessee is showing very high amount of freight liability which the assessee could not substantiate as per the A.O. and the addition of Rs.24,.93,141/- was made by the A.O. on this basis that 20% of freight liability is bogus. The A.O. came to the conclusion that G.P. addition confirmed by him ofRs.12,27,096/- should be reduced from this addition out of freight liability of Rs.24,93,141/- and hence, he confirmed balance addition on this account of Rs.12,66,045/-. Now, the assessee has raised these grounds in its appeal. 2.2.2 It was submitted by the Ld. A.R. before us that separate registers are maintained for party wise details in respect of freight liability and in the facts of the present case, neither the rejection of books of accounts is proper nor the addition made by the A.O. on account of GP addition or on account of any bogus amount out of freight liability. He further submitted that regarding the tribunal order in assessee's own case for assessment year 1998-99, the tribunal order in revenue's appeal for this year in I.T.A.No. 757/Ahd/2002 dated 20.10.2006 is available on pages 131-133 of the paper book and the tribunal order for the same assessment year in assessee's appeal in I.T.A.No. 412/Ahd/2002 dated 10.03.2006 is 5 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 available on pages 134-135 of the paper book. He submitted that as per these two tribunal orders, in those years, although G.P. addition was confirmed partly by adopting G.P. rate of 15% but because of the same, the addition made in that year of R.32.82 lacs u/s 40A(3) was deleted. He further pointed out that G.P. addition made by the A.O. in that year by adopting G.P. rate of 17% was only of Rs.57,000/- and hence, the tribunal order in that year cannot be the basis to confirm the addition in the present year of such a huge amount because due to smallness of G.P. addition, the same was not seriously contested in those years particularly when huge addition of Rs.38.92 lacs was not maintainable once books are rejected. Reliance was placed on the tribunal decision in the case of DCIT Vs Associated Petroleum Corporation in I.T.A.No. 2308 and 2333/Ahd /2008 dated 31.08.2010. He submitted a copy of this tribunal order and he pointed out that in that case, it was held by the tribunal that the defects pointed out by the A.O. in the books of accounts are not fit to reject the books of accounts. He submitted that in the present case also, some defects are pointed out by the A.O. in the books of accounts but even if those defects are accepted as correct then also they are not sufficient for rejection of books of accounts. He also pointed out that it is noted by the tribunal on page 10 of the tribunal order that the provisions of section 145(3) can be invoked for rejection of books of accounts if the A.O. gives a finding that (i) assessee is not following regularly any accounting standard notified by the Central Government in accordance with Section 145(2) and (ii) the A.O. is not satisfied about the correctness and completeness of accounts and (iii) where the assessee is not following any method of accounting regularly. The tribunal has also held that if no such finding is given then income chargeable under the head profits & gains of business has to be computed in accordance with 6 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 the books of accounts regularly maintained by the assessee and method of accounting regularly employed by the assessee.
2.2.3 As against his, Ld. D.R. submitted that the rejection of books is proper because freight charges is not a balance sheet item as has been taken by the assessee. He drew our attention to para 14 on page 10 of the assessment order where it is noted by the A.O. that outstanding freight liability shown by the assessee has increased to Rs.302.59 lacs in the present year as against Rs.177.76 lacs in assessment year 2004-05 and Rs.156.51 in assessment year 2003-04. He submitted that liability shown in assessment year 2005-06 is almost double to the liability shown in the assessment year 2003-04 and, therefore, the A.O. was right in coming to the conclusion that the part of liability must have been bogus and the same is income form undisclosed sources. He also pointed out that in that case, the survey took place on 31.08.2007 and the assessee made disclosure of Rs.66,11,451/- and the freight liability as on that date was Rs.2,78,17,669/- and on the basis of these two figures, he worked out the percentage of disclosed amount for outstanding freight liability amount which was worked out at 23.72% and by applying this percentage, he worked out the disallowance of the present year at Rs.43,05,770/- by adopting the average liability for assessment year 2003-04, 2004-05 and 2005-06 at Rs.2,15,28,876/-. Regarding the G.P. addition, he submitted that when the books are properly rejected then the GP estimation is also reasonable.
2.2.4 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. First, we discuss about the rejection of books of accounts done by the A.O. We find that the main basis of the A.O. for rejection of books of accounts is 7 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 this that the assessee did not brought full and complete details of freight payable along with names of persons to whom payments were to be made. The second objection is that the assessee has also accepted cash deposits exceeding Rs.20,000/- and the 3rd objection is regarding high amount of freight liability. On this basis, the A.O. came to the conclusion that the assessee was not maintaining proper books of accounts but as per the tribunal order in the case of DCIT Vs Associated Petroleum Corporation (supra), the provisions of Section 145(3) can be invoked for rejection of books of accounts if the A.O. gives a finding (i) assessee is not followings regularly any accounting standard notified by the central Government in accordance with section 145(2), (ii) the A.O. is not satisfied about the correctness and completeness of accounts and (iii) when the assessee is not following any method of accounting regularly. When we examine the objection of the A.O. in the present case, we find that this is not the case of the A.O. that the assessee is not following regularly any accounting standard notified by the Central Government in accordance with section 145(2) of the Act. This is also not the objection of the A.O. that the assessee is not following any method of accounting regularly. Regarding the third aspect also that the A.O. is not satisfied about the correctness and completeness of accounts, we find that this is not the objection of the A.O. in the present case and even if it is accepted that this is an objection of the A.O., we are of the considered opinion that in the facts of the present case, this objection is not correct. The assessee has duly submitted copies of debit notes to the survey team and also explained the basis of passing entries in the books of accounts. It was submitted that the debit note is raised which includes lignite payment, truck freight, octroi and service charges. It was pointed out that the total amount is debited to the customers and the cost of lignite is credited to 8 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 GMDC, truck freight and octroi is credited to outstanding freight liability and service charges is considered as income which is taken to P & L account. No defect is pointed out by the A.O. in assessment order in this submission of the assessee. It is not the case of the A.O. that the entries are not made in the books of accounts. If entries are shown in the books of accounts then it cannot be said that the books of accounts are not correct and complete. There may be some other methods of accounting also but this method of accounting cannot be said to be defective in our opinion. Generally, when a person is acting as organizer and taking care of payments to suppliers, payment to truck operators and octroi payment also and charges for all these services, then the income of the assessee is only the service charges + any extra recovery by the assessee form the customers on account of freight etc, if any. This is not the case of the A.O. that the assessee is recovering any extra mount on account of freight, octroi etc. and not declaring the same as income. The objection of the A.O. is this that the freight liability shown by the assessee is bogus. But this is not coming out from the assessment order as to what is the basis of this objection that the freight liability is bogus. Only because this amount is high, one cannot come to the conclusion that the liability is bogus unless such objection is supported by some other cogent evidence. The A.O.'s objection is this that at the time of survey, carried out on 26.09.2007, the assessee has made a disclosure of Rs.66,11,451/- on the basis of this disclosure in assessment year 2008-09, the A.O. is drawing analogy in the present year also that in the present year also similar percentage of outstanding freight liability is bogus. We fail to understand this logic of the A.O. because in para 14 of the assessment order on page 10, the A.O. has stated that it appears that since long back liability is carried forward from year to year. If this be so, then the liability for 9 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 assessment year 2005-06 is also carried forward in assessment year 2008- 09 i.e. the year of survey and in that year, assessee has disclosed an amount of Rs.66,11,451/- and hence, no further addition can be made in the present year on the basis of this objection that part of freight liability is bogus because even if some bogus freight liability is there, the same was taken care of in the disclosure in assessment year 2008-09 as is the stand of the A.O. that the freight liability is carried forward from year to year. Similarly, we do not find any merit in G.P. addition also because as per the year wise G.P. chart submitted by the assessee, we find that the assessee has furnished item wise G.P. preparing chart from assessment year 1997-98 to assessment year 2005-06. For steam coal, G.P. of the present year is 32.46% which is highest in all these years. In assessment year 2004-05, the same was 16.16% and in assessment year 1997-98, it was 13.21%. Similarly, for white coal, G.P. declared of the present year is 16.01% which was 16.13% in assessment year 2004-05. For GNSP paid, G.P. in the present year is 17.02% and for charcoal it is 20.84% and in both these items, G.P. in the present year is better than the preceding year. There is no G.P. declared in lignite because the assessee is not dealing in lignite but acting as commission agent only for lignite. ON the basis of the objection regarding some inconsistency in accounting of freight liability, GP addition cannot be made for other items without pointing out any defect in respect of those items particularly when lignite is not an item in which assessee is trading because the assessee is only commission agent for lignite.
2.2.5 In view of the above discussion, we are of the considered opinion that in the facts of the present case, even the rejection of books of account is not proper and even if rejection of the books of accounts is accepted, the addition made by the A.O. on account of G.P. addition and 10 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 disallowance made by the A.O. on account of bogus freight liability cannot be sustained. We, therefore allow all these three grounds of the assessee.
2.3 Grounds No.4, 5, 6 & 7 are interconnected which read as under:
"4. Ld. CIT(A) erred in confirming the addition of Rs. 35000/- by holding that the deposit given by Deepal M. Desai HUF of the said amount to your appellant, is bogus deposit U/s 68. it is, therefore, requested to please delete the addition of Rs. 35,000/-.
5. Ld. CIT(A) erred in confirming the addition of Rs. 35000/- by holding that the deposit given by Tejal M. Desai HUF of the said amount to your appellant, is bogus deposit U/s 68. It is, therefore, requested to please delete the addition of Rs. 35,000/-.
6. Ld. CIT(A) erred in confirming the addition of Rs. 33000/- by holding that the deposit given by Jayantilal Et Co. of the said amount to your appellant, is bogus deposit U/s 68. It is, therefore, requested to please delete the addition of Rs. 33,000/-.
7. Ld, CST(A) erred in upholding addition of Rs. 4,798/- on account of interest paid to Deepal M. Desai HUF and Tejal M. Desai HUF. It is, therefore, requested to please delete the addition of Rs. 4,798/-."
2.3.1 Brief facts of the case are that it is noted by the A.O. in para 11 & 12 of the assessment order that various deposits were accepted by the assessee in the present year and the assessee was asked to file confirmation giving mode of payment and capacity of depositors to lend money. The A.O. has also noted that total deposits of Rs.47,14,900/- was accepted by the assessee from 8 persons in the present year. He further noted that the assesses did not file confirmation of the depositors giving their names, age, occupation, capacity to lend money and whether they are regularly filing income tax returns. By making these observations, A.O. made addition of this entire amount of Rs.47,14,900/- u/s 68 in addition to the addition made of Rs.3,93,947/- on account of interest paid by the assessee on these deposits. Being aggrieved, the assessee carried 11 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 the matter in appeal before Ld. CIT(A) who has partly confirmed this addition of Rs.35,000/- each in respect of deposits by Deepal Desai (HUF) and Tejal M Desai and also confirmed the deposits of Rs.33,000/- by J. Lal & Co. and also confirmed disallowance of interest of Rs.4,798/- on account of interest paid to Deepal Desai and Tejal Desai etc. Now, the assessee is in further appeal before us.
2.3.2 It was submitted by the Ld. A.R. that all the confirmations are duly submitted before Ld. CIT(A) except of J. Lal & Co. from whom deposit of Rs.33,000/- was accepted in the present year. He also submitted that Ld. CIT(A) has duly obtained remand report form the A.O. and the position as per remand report is noted by Ld. CIT(A) on pages 12-15 of his order. He further submitted that Ld. CIT(A) has made deletion on the basis of remand report but he has confirmed the addition on account of Deepal Desai (HUF) in respect of Rs.35,000/- on this basis that creditworthiness and genuineness has not been proved. Similarly, for Tejal Desai also, part addition of Rs.35,000/- was confirmed on similar basis that creditworthiness could not be established. Regarding J. Lal & Co., it is noted by Ld. CIT(A) that Rs.33,000/- was not confirmed in the remand proceedings also and A.O.'s information was that the details regarding this party was not furnished in remand proceedings also. He fairly conceded that the addition of Rs.33,000/- in respect of J Lal & Co. may be confirmed because the assessee could not produce the confirmation of this party but all the remaining additions should be deleted because confirmations are duly furnished form Deepal Desai (HUF) and Tejal Desai (HUF) and these two persons made withdrawal from Bhagwati Aviation by cheque on 01.10.2004 and have given loan to the assessee on 07.01.2004. This cheque transaction was accepted by Ld. CIT(A) but similar transaction for which cash was received from loan 12 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 creditor in the same period i.e. Bhagwati Aviation is not accepted and, therefore, the same should also be accepted.
2.3.3 Ld. D.R. supported the orders of authorities below. 2.3.4 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. Regarding Deepal Desai (HUF), we find that it is noted by Ld. CIT(A) on page 12 of his order that a cash loan of Rs.17,000/-was given to the assessee on 01.11.2004 while this person received this amount in cash form Bhagwati Aviation on 15.02.2005. Regarding the second loan of Rs.18,000/- in cash given to the assessee on 01.07.2004, it was submitted that source of this was agricultural income but the same was not supported by convincing explanation. It was also noted that agricultural income has not been reflected in any of the income tax returns filed in individual capacity and HUF is not filing any return. In our considered opinion, the loan of Rs.17,000/- given on 01.11.2004 cannot be accepted as explained out of receipt of cash from Bhagwati Aviation on 15.02.2005 but the second loan of Rs.18,000/-received on 01.07.2004 for which it was explained that agricultural income is the source, cannot be rejected merely on this basis that HUF is not filing any income tax return. Hence, we uphold this addition of Rs.17,000/- regarding loan taken form Deepal Desai (HUF) and delete the addition of Rs.18,000/- regarding loan from this person. Similarly, regarding deposits taken form Tejal Desai (HUF), we find that one loan is taken on 01.11.2004 of Rs.17,000/- in cash whereas the source is explained to be cash from Bhagwati Aviation on 15.02.2005. Addition on this account is upheld because for a loan on 01.11.2004, withdrawal on 15.02.2005 cannot be accepted as the source. The 2nd loan of Rs.18,000/- in cash on 01.07.2004 has been explained that the source is agricultural income. It is stated by Ld. CIT(A) that as per 13 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 7/12 extract, this party is having only very small piece of land on which jawar is grown and no sale bill or other evidence was filed to justify this agricultural income. We are of the considered opinion that when the assessee is holding a land in which some crop is also grown, then for this small amount of Rs.18,000/-, source should be accepted and hence, we delete this addition of Rs.18,000/- regarding deposit from Tejal Desai (HUF) also. Regarding addition of Rs.33,000/- in respect of deposit by J. Lal & Co., we uphold the entire addition because no explanation could be furnished with regard to this deposit. Regarding disallowance of interest, we direct the A.O. to allow relief with regard to 2nd loan of Rs.18,000/- each, which is from Deepal Desai and Tejal Desai (HUF) for which additions are deleted by us. Accordingly, grounds No.4, 5 & 7 are partly allowed whereas ground No.6 is rejected.
2.4 Ground No.8 is as under:
"8. Ld. CIT(A) instead of deleting entire addition of Rs. 2,02S840 out of Moor and Jakat expenses erred in upholding addition of Rs. 2,02,840/- considering that 10% out of the said expenses would not be got verified, it is, therefore, requested to please delete the addition of Rs. 2,02,840/-."
2.4.1 Brief facts of this issue are that it is noted by the A.O. on page 12 of the assessment order that the assessee has claimed Noor Jakat of Rs.20,28,473/-. He further noted that in the course of assessment proceedings, the assessee was asked to furnish full and complete details because assessee did not file complete details of these expenses and, therefore, reasonable estimate of 10% of each expenses is to be disallowed. On this basis, he made disallowance of Rs.2,02,840/-. Being aggrieved, the assessee carried the matter in appeal before Ld. CIT(A) but without success and now, the assessee is in further appeal before us.
14 I.T.A.No. 2835,2896 /Ahd/2008I.T.A.No. 2937, 3026/Ahd/2009 2.4.2 It is submitted by the Ld. A.R. that although the A.O. has discussed for this disallowance on page 12 of the assessment order but while computing the income on page 13 of the assessment order, no actual addition was made on this account of Rs.2,02,840/-. It was also submitted by the Ld. A.R. that no detail was called for by the A.O. and, therefore, this disallowance is not justified. Ld. D.R. supported the assessment order.
2.4.3 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that it is noted by the A.O. on page 12 of the assessment order that the assessee was asked to furnish full and complete details but it is not specified as to what were those details which were called for. This is not the case of the A.O. that payment of noor jakat expenses is excessive or unreasonable as compared to earlier years. It is also not mentioned that what type of details were called for and moreover, no actual addition was made by the A.O. in the computation of income in page 13 of the assessment order and it has not brought on record to show that the mistake was rectified u/s 154 within the time allowed under that section. Even if this has been rectified then also we feel that such ad-hoc disallowance without pointing out as to what was the details called for which were not submitted, is not justified. We, therefore, delete this disallowance. This ground is allowed.
2.5 In the result, appeal of the assessee is partly allowed.
3. Now, we take up the revenue's appeal for the assessment year 2005-06 i.e. I.T.A.No. 2896/Ahd/2008. The grounds raised by the revenue are as under:
"1. The Id. Commissioner of Income-tax (A)-XV, Ahmedabad has erred in law and on facts in deleting the addition made by the 15 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 Assessing Officer u/s 68 to the tune of Rs.46,38,900/-. The depositors are fictitious and the amount of deposit needs to be taxed u/s 68.
2. The Id. Commissioner of Income-tax (A)-XV, Ahmedabad has erred in law and on k facts in deleting the addition of interest to the tune of Rs.3,89,149/- made by the Assessing Officer.
3. The Id. Commissioner of Income-tax (A)-XV, Ahmedabad has erred in law and on facts in deleting the addition of freight 'liability to the tune of Rs.30,39,725/-made by the Assessing Officer.
4. On the facts and in the circumstances of the case, the Id. Commissioner of | Income-tax (A)-XV, Ahmedabad ought to have upheld the order of the Assessing Officer.
5. It is therefore prayed that the order of the Id. Commissioner of Income-tax (A)-XV, Ahmedabad may be set-aside and that of the Assessing Officer be restored."
3.1 Ld. D.R. supported the assessment order whereas Ld. A.R. supported the order of Ld. CIT(A) for all the issues.
3.1.1 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. Regarding the 1stground, we find that the A.O. has made addition regarding total amount of deposit received during the present year of Rs.47,14,900/- and regarding ground No.2, we find that the A.O. made disallowance of total amount of interest part on these deposits of Rs.3,93,947/-. This addition was made by the A.O. on this basis that the assessee did not file confirmations. In appellate proceedings, assessee filed confirmations and other requirements. Ld. CIT(A) also obtained remand report form the A.O. and after considering the remand report of the A.O., he deleted this part addition of Rs.46,38,900/- out of total addition of Rs.47,14,900/- made by the A.O. u/s68 and also deleted the consequential disallowance of interest. Ld. CIT(A) deleted this addition on this basis that the assessee has duly furnished confirmations and could establish the 16 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 identity, creditworthiness of the creditor and genuineness of the transaction. Ld. D.R. could not controvert this finding of Ld. CIT(A) and hence, we do not find any reason to interfere in the order of Ld. CIT(A) on this issue regarding deletion of part addition made by the A.O. u/s 68. Deletion of part interest is consequential. These grounds No.1 & 2 are rejected.
3.2 Ground No.3 is interconnected with ground No.3 of the assessee's appeal and while deciding the assessee's appeal, we have already held that no addition is called for in the present case regarding the freight liability and, therefore, there is no merit in ground No.3 raised by the revenue. The same is also rejected.
3.3 In the result, this appeal of the revenue is rejected.
4. Now, we take up the assessee's appeal for assessment year 2006-07 i.e. I.T.A.No. 2937/Ahd/2009. The grounds raised by the assessee are as under:
"The Ld. CIT Appeals XV Ahmedabad has erred in law and on facts in passing appellate order dated 04/09/2009 for Asst. Year 2006-07 in the case of appellant by confirming the G. P. addition of Rs. 48, 54. 881/- .
2 The Ld. CIT Appeals erred in law and on facts in confirming the addition of Rs 14,12,759/- u/s. 68 as unproved freight liability. (Though the addition made is Rs. 62,67,640/- but it gets telescoped with G.P. addition of Rs. 48,54,881/- and the balance Rs. 14,12.759/- is added here.
3. The appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal on or before of the final hearing of appeal."
4.1 Regarding ground No.2, it was agreed by both the sides that this issue is interconnected with ground No.3 of the assessee's appeal in assessment year 2005-06. In that year, we have decided this issue in favour of the assessee and it was held that no addition is justified out of 17 I.T.A.No. 2835,2896 /Ahd/2008 I.T.A.No. 2937, 3026/Ahd/2009 outstanding freight liability and on similar lines, in this year also, we hold that no addition is justified out of outstanding freight liability. Ground No.2 is allowed.
4.2 Regarding ground No.1 also, it was submitted that his issue is similar to ground No.2 raised in assessment year 2005-06. In that year, we have decided this issue in favour of the assessee and accordingly in the present year also, this issue is decided in favour of the assessee. This ground is also allowed.
4.3 In the result, appeal of the assessee is allowed.
5. Now, we take up the revenue's appeal for the assessment year 2006-07 in I.T.A.No. 3025/Ahd/2009. The grounds raised by the revenue are as under:
"1) The Ld. CIT(A) has erred in law and on facts in granting relief of Rs.52,54,781/- out of addition of fictitious liabilities.
2) The Ld. CIT(A) has erred in law and on facts in allowing telescoping of the addition made out of fictitious liability against the addition made by rejecting of books and estimation of gross profit.
3) On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the A.O.
4) It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the A.O. be restored."
5.1 It was agreed by both the sides that this issue is similar to ground No.3 raised by the revenue in assessment year 2005-06. Both the sides agreed that this issue can be decided on similar lines as in assessment year 2005-06 wherein we have decided this issue in favour of the assessee as per para 2.2.5 above and accordingly, in the present year also, this issue is decided in favour of the assessee.
5.2 In the result, this appeal of the revenue is dismissed.
18 I.T.A.No. 2835,2896 /Ahd/2008I.T.A.No. 2937, 3026/Ahd/2009
6. In the combined result, appeal of the assessee for the assessment year 2005-06 is partly allowed and for the assessment year 2006-07 is allowed and both the appeals of the revenue are dismissed.
7. Order pronounced in the open court on the date mentioned hereinabove.
Sd./- Sd./-
(KUL BHARAT) (A. K. GARODIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Sp
Copy of the Order forwarded to:
1. The applicant
2. The Respondent
3. The CIT Concerned
4. The Ld. CIT (Appeals)
5. The DR, Ahmedabad By order
6. The Guard File
AR,ITAT,Ahmedabad
1. Date of dictation......04/09/2012
2. Date on which the typed draft is placed before the Dictating Member...12/09/2012 Other Member ............
3. Date on which the approved draft comes to the Sr. P.S./P.S.
4. Date on which the fair order is placed before the Dictating Member for pronouncement ...21/09/2012
5. Date on which the fair order comes back to the Sr. P.S./P.S.21/9/12
6. Date on which the file goes to the Bench Clerk .........21/09/2012
7. Date on which the file goes to the Head Clerk .......................
8. The date on which the file goes to the Assistant Registrar for signature on the order .........................
9. Date of Despatch of the order. ......................