TaxTMI 
TaxTMI 
2011 (9) TMI 1228
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....ld not furnish any satisfactory explanation with regard to such payment. 4) That the ld. CIT (A) has erred in law as well on the facts and circumstances of the case in deleting the disallowance of reimbursement of freight expenses of Rs. 6,94,186/- ignoring the fact that the assessee did not deliver scrap on FOR basis and the freight was borned by the purchaser parties. 2. In Cross Objection the assessee is objecting in confirming the action of the AO in issuing notice under section 148. 3. The brief facts of the case are that the assessee is a limited company engaged in manufacturing of LPG cylinders. The assessee filed its return of income for the relevant period declaring income, which was assessed u/s 143(3) of the Act after proper scrutiny and a detailed reasoned order was passed vide order dated 28.03.2003 . The income was assessed at Rs. 26932932/- as against the declared income of Rs. 2,63,05,760/- . A survey u/s 133A of the Act was carried out at the business premises of appellant at Bhiwadi and Head Office at Delhi on 22-11-2004 by the Investigation Wing, Jaipur. During the course of survey certain loose papers, bills of purchases of goods were found which ....
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....Rs. 3,22,897/- 21.4.2000 Rs. 3,41,279/- 21.4.2000 Rs. 2,85,527/- 21.4.2000 Rs. 2,84,416/- Rs. 24,35,022/- Closing balance - Nil "As per above working the inflated purchases shown in the current year comes at Rs. 24,35,022-11,74,751= Rs. 12,60,271/-. In the reasons recorded inflated purchases have been shown from Laxmi Steel, Faridabad of Rs. 16,78,191/- which is not correct and accordingly the figure of Rs. 12,60,271/- is being taken. 4.1.2 M/s Laxmi Steels, Delhi-Rs. 2,85,400/- 4.1.3 M/s R. K. Steels Trading Corpn., Delhi-Rs. 18,282/- 4.1.4 M/s R. K. Steels, Delhi - Rs. 1, 33,522.95/-. Total purchases shown from the above parties comes to Rs. 16, 97,475/- In respect of the above purchases shown the assessee has submitted that the purchases are actual and the observations as mentioned in the reasons are not correct." 7. Detailed submissions were filed before ld. CIT (A) which has been tabulated at pages 10 to 13. After considering the submissions and perusing the material on record, the ld. CIT (A) found that the AO was not justified in making the addition of Rs. 16,97,475/- on account ....
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.... the authority has to give reasonable opportunity on it which has not been complied by the AO. Purchase for Rs. 3,22,897/- dated 20.04.2000 , for which the AR submitted the photocopy of the purchase bills where all the formalities of other law has been met by the assessee. Further the assessee also produced the photocopy of bills for purchase of Rs. 2,85,400/- (2,85,800/-) in case of Laxmi Steel Delhi and Rs. 18,282/- in case of R.K. Steel Trading Corporation, Delhi which has all authenticated ingredient. The ld. AO even have added 1,33,522.95 in case of R.K.Steel, Delhi which includes cancellation of cheque for Rs. 55,045.05, double addition of purchase for Rs. 18,282/- by the AO. This account only contains remaining four bills of purchase of spare parts for Rs. 60,195/- for which the ld. AR produced the photocopy of purchase bills and confirmation from the party before the AO at the time of re-assessment which had not been considered by the ld. AO at the time of framing re-assessment. The same has also been verified by me and found that all the payments were made through account payee cheques. It appears that the ld. AO had not applied his mind at the time of re-framing the asses....
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.... confirm the order of ld. CIT (A). 12. Second issue is in respect of deleting the addition of Rs. 1,12,82,308/- and Rs. 5,61,198/- made on account of suppression of sale of scrap and on account of under valuation of closing stock of scrap respectively. 13. The AO made the impugned addition by recording the following reasons :- "In this case it was found that the assessee company has shown sales of Scrap amounting to Rs. 137,60,422/-. It was also observed that in the preceding year i.e 1999-2000 scrap of 779.989 MT was sold @ 5800/- PMT as against market rate of Rs. 10700 PMT and the balance amount thereof was taken in cash as was done in past also. During the course of survey operation on 22-11-2004 certain loose paper were found and impounded wherein it was found that the assessee company is selling scrap at higher rate but the billing was made at the lower rate. The difference in the billing price and actual price was taken in cash. Similar entries were also found in subsequent year i.e. FY 2003-04 and 2004-05 which clearly indicates that the assessee company is following the practice of under invoicing the scrap sold and receiving cash which not recorded in regula....
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....by him that During the course of original assessment proceedings the Assessee has submitted comprehensive details and records in respect of sale of scrap which are as follows: a) Vide para 3 of the quarry letter dated 2.01.2003 the learned AO has asked the details of scrap , commission paid on scrap . Same was examined in details and the particulars were furnished to him in respect of generation of scrap , sale of scrap alongwith the bills raised on the parties , closing stock of scrap and valuation thereof . The copy of account confirmation of the parties were also submitted alongwith their PAN , address for test check , which were as follows : 1. Om Engg Indsutries 2. Raby Castings Pvt Limited 3. Seth Alloys Pvt Limited b) During reassessment proceedings for AY 1999-2000, the assessee has submitted the bills of various other scrap generating and selling units and also produced the scrap trader for deposition before AO in remand proceedings . The attention was also drawn at rates of scrap prevailing which were quoted in economic times . Copy of those bills in which rates charged are lower or equal to the Company were placed on record in....
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....e of Rs. 6673.35 per MT , by dividing the figure of 15365480/- by quantity of 2302.512 MT , But while making the assessment he has taken the rate of 5800/- for the reasons referred for AY 1999-2000. The AO's action is not justifiable as to the facts while working out the figure of Rs. 11282308/- .It shows not applying the mind by AO. Moreover he has not come out with any supporting evidence of assessee selling the scrap @ Rs. 10700/- per MT. he has not kept in mind that sale is subject to supervision of excise authorities and levy of excise duty. The bills for sale of scrap contain excise duty and sales tax as well . It would be pertinent to quote the finding of learned CIT Appeal in the case of assessee for the assessment year 1999-2000 which are as follows : " para 9.1 During the assessment proceedings the AO noted that the appellant had sold 779.898 MT scrap at the rate of 5800/- PM. He observed that the market rate of scrap during the relevant period was at 10700/- PMT. Therefore, he concluded that the appellant collected Rs. 36,65,948/- outside the books of accounts. The AO also observed that a similar addition was made in the A.Y. 2002-2003 on the bassi....
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....e case and submissions of the AR of the appellant carefully in A.Y. 1999- 2000 Honh'ble ITAT Jaipur ITA No. 513/JP/2007 order dated 26.10.2007 on the same issue, has upheld the order of the CIT(A), Alwar. The AO, while estimating market rate of Rs. 10700/- PMT has not brought on record any evidence to show that how he arrived at that figure. This is a case of survey during the course of which a number of incriminating documents pertaining to appellant's business were impounded. The AO has failed to bring on record references to any document wherein sales of scrap has been worked out by the appellant at Rs. 10,700/- during the relevant period. The AO has referred that certain loose papers were found and impounded on which entries were found for A.Y. 2003-2004 and 2004-2005 in this regard. However, he has failed to bring any material or record to show that how the notings made on the papers pertaining to financial year 2003-2004 and 2004-2005 are relevant to assessment year under reference. The AO has not brought on any material to justify the addition under this head in the remand report also. Therefore, under these circumstances it is clear that the AO made the addition under ....
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..... CIT (A) in respect to both the additions deleted by him. The ld. CIT (A) has deleted the addition of Rs. 1.12 crores or odd on account of suppression of sale of scrap following the order of Tribunal for earlier year i.e. 1999-2000 where similar additions were made by the AO. The finding of ld. CIT (A) are based on the finding of Tribunal for earlier year, therefore, we see no reason to interfere with this finding. 19. Regarding deletion of Rs. 5,61,198/-, again ld. CIT (A) has deleted the addition by giving a finding of fact which remained uncontroverted, therefore, we confirm the order of ld. CIT (A) in this respect also. 20. Next issue relates to deleting the addition of Rs. 4,60,502/- on account of disallowance of commission expenses. 21. The AO made the addition by observing as under :- " Commission expenses: In the assessee's case it is found that it has claimed commission expenses @ Rs. 200 PMT on scrap sold. During the year under consideration the assessee has shown scrap sale of Rs. 2302.512 MT on which commission of Rs. 460502 has been claimed. It is found that the assessee could not furnish any satisfactory explanation with regard to payment of commiss....
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....dition was made in earlier year and the Tribunal has deleted the addition. Accordingly he deleted this addition also. Finding of ld. CIT (A) have been recorded in para 10.3 at page 21 of his order are as under :- " 10.3 I have considered the finding of learned AO and submissions of learned AR Carefully when actual freight charges for different destinations and are supported with GR of the transporters and copy of bills of scrap also contain the mode of transport and truck No. etc. which were produced before the AO for verification at the time assessment but the ld. AO has not taken pain to verify the facts. This issue was also involved in A.Y. 1999-2000. The Hon'ble ITAT has deleted the addition made on this issue. Under the facts and circumstances the action of AO for addition of an amount of Rs. 694186/- is not justified and deleted . Accordingly the ground of appeal is allowed." 27. After considering the orders of AO and ld. CIT (A) again we find no infirmity in the finding of ld. CIT (A) as he has deleted the addition following the order of Tribunal for earlier year where similar addition was made. Accordingly we confirm the order of ld. CIT (A) on this issue a....