ACIT, CIRCLE - 1, ASANSOL, ASANSOL vs. BURNPUR CEMENT LTD., ASANSOL

IN THE INCOME TAX APPELLATE TRIBUNAL “B”, BENCH KOLKATA BEFORE SHRI M. BALAGANESH, AM & SHRI K. NARASIMHA CHARY, JM आयकर अपील सं./ITA No.28/Kol/2012 ("नधा"रण वष" / Assessment Year :2010-2011) ACIT, Circle-I, Lower Vs. Brunpur Cement Ltd., 141, Chelidanga, Asansol-4 Cement House, Saradapally, Ashok Nagar, Asansol, District-Burdwan- 713304 "थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AACCA 1999 B .. (अपीलाथ" /Appellant) (""यथ" / Respondent) राज"व क" ओर से /Revenue by : Shri Niraj Kumar CIT DR "नधा"रती क" ओर से /Assessee by : Shri S.M.Surana Advocate सुनवाई क" तार"ख / Date of Hearing : 26/08/2016 घोषणा क" तार"ख/Date of Pronouncement 19/10/2016 आदेश / O R D E R PER M.BALAGANESH, AM This appeal of the assessee arises out of the order of Learned CIT(A), Asansol, in Appeal No.296/CIT(A)/Asl/R-I/Asl/10-11 dated 31.10.2011 passed against the order of assessment framed u/s.144 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

2.1. The brief facts of this issue is that the assessee is engaged mainly in the business of manufacturing cement, besides engaged in the business of trading of clinker (raw material of cement). One of its unit is BCL Developers, which was engaged in the business of constructing flats in Asansol. The ld AO during the course of assessment proceedings observed the Gross Profit (GP ) for the year under appeal had reduced and asked for the reasons for such reduction. The GP declared in Asst Year 2007-08 was 29.87% as against that reported in the year under appeal at 26.45%. The assessee submitted that the reason for decrease in rate of GP is on account of increase in cost of manufacturing during the year under including increase in carriage inward, without proportionate increase in sale price. It was submitted that the assessee plant is a mini plant ie. a grinding unit, wherein , there is a huge competition in the market of cement with large companies as well as local manufacturers. It was specifically submitted that the freight inwards had increased substantially on account of purchase of raw materials from Rajasthan and Andhrapradesh during the year under appeal and whereas in Asst Year 2007-08, purchase of raw materials were mainly from Andhrapradesh. It was submitted that all the expenses debited in the profit and loss account are fully vouched and verifiable. The ld AO observed that the assessee had produced only the subjective reasons for fall in GP.

2.2. The ld AO compared the percentage yield of the assessee in two assessment years as below:- AY 07-08 AY 08-09 Clinker, Clag, Gypsum consumed (in MTS) 67997.345 90480.471 Cement produced (in bags) 1236700 1531809 Percentage Yield 90.94% 84.65%

It was submitted that the yield of the product depends on quality of the raw materials, moisture contents in the raw materials, condition of machine and supervision of the workers. Materials has been purchased from different parties at different point of time which also affects yield.

2.3. The ld AO observed that the quantity of clinker sold together with its rate in both the years and tabulated the same as below:-

AY Qty Sale Unit Purchase Unit In MTs Amount Sale Amount(Rs) Purchase(Rs)

08-09 4153.69 1,67,56,498 4034.12 89,76,398 2161.066 07-08 19769.19 3,97,13,893 2009 2,33,65,677 1181.92 the absolute price of Rs. 4034.12 in the year under appeal in the market as compared to relatively low quality clinker in the Asst Year 2007-08 as it had fetched only Rs. 2009. Accordingly he rejected the argument of the assessee that the clinker is of poor quality yield and also observed that the percentage yield of the assessee should increase in the year under appeal. He observed that the clinker had been purchased from Rajasthan from Shree Cements Ltd and in the last year, the clinker had been purchased from Rajasthan as well as Hyderabad (M/s Orient Cement). He observed that the raw material from Rajasthan had good yield as it contains less moisture as compared to clinker from Hyderabad.

2.4. The ld AO observed that the investment in plant and machinery and lab equipments in Asst Year 2008-09 is much more than the corresponding figures in the Asst Year 2006-07 indicating that a lot of investment had been made in plant and machinery. The ld AO stated that the assessee had own lab where the quality of the raw materials are constantly checked so as to achieve desird results and it is an ongoing process throughout the year. He stated that it is difficult to comprehend that the yield had decreased because of poor quality of raw material , if that would been true, the assessee would had taken the mid course corrective action as the assessee is purchasing the clinker throughout the year.

2.5. The ld AO observed that the repairs and maintenance charges debited in the profit and loss account was Rs. 7,43,654/- as compared to Rs. 2,30,523/- in the earlier year indicating that the machines had been kept in good condition throughout the year. So the assessee’s argument that the yield depends upon the condition of the machine does not hold indicates something else.

2.6. He observed that the factory wages had increased to Rs. 20,27,198/- from Rs. 13,62,979/-. The rise in wages and wages with respect to the cost indicates that contended utilization of human resources in the production.

2.7. He observed from the annual report for the immediately preceding year that the company was in the process of implementing its strategic backward integration project at Jharkhand to manufacture clinker the main raw material for cement, and also manufacture cement of all varieties i.e PPC, PSC and OPC. The manufacture of clinker would help the company to operate its machinery at its full capacity and also decrease the cost of production thereby improving the bottom lines. The financial closure for debt component of Rs 80.60 crores has been made and an agreement for common rupee loan for the above has been executed with the banks. The company ahs entered into an agreement for purchase of major plant and machinery on turnkey basis with Thyssenkrupp Industries, a German company, which is one of the leading company in the world. Based on this, he observed that it indicated that the assessee is keeping the knowledge of the latest technology in the field so as to improve the quality of its product. The enforecementof the yardsticks regarding yield, efficiency of the plant and other production parameters are the continuous process and not that these are measured at the end of financial year. He further observed that the assessee has a good technical team to address the reduction of the yield. Accordingly, he rejected the subjective arguments of the assessee regarding the low yield.

2.8. The ld AO directed the assessee to justify the increase of freight inward in the manufacturing account to Rs. 4,40,54,708/- from Rs. 2,14,39,585/-. The assessee submitted that the freight paid on account of at the relevant point of time and the quantity purchased. It was submitted that during the year , quantity of raw materials purchased was 95065.80 MT as agasint 69917.10 MT in the immediately preceding year. Thus there was increase in the quantity of purchase in the year under appeal by 35.96%. Moreover the cinker, the main raw material, has been purchased mainly from two states i.e Andhrapradesh and Rajasthan. In the last year, the clinker was purchased mainly from Hyderabad. Freight has been charged by the company in the invoices raised by them. Sample invoices for freight were given to the ld AO and was submitted that carriage inward rate from Andhrapradesh was 655.9, 1072.6 and 671.7 as per invoice dated 29.4.2006, 31.5.2006 and 27.9.2006 , while in the year under appeal, the same was 1110.4 and 1370.4 vide invices dated 13.8.2007 and 27.1.2008 respectively. Cost of carriage inward also depends upon the mode of transport i.e whether it was by rail or by truck. There has been increase in the cost of diesel during the year under appeal. Cost of diesel has increased by 4.65% (Rs 45.91 minus Rs 43.87) . It was submitted that all the expenses debited are fully vouched and verifiable. The ld AO observed that the predominant mode of transportation of clinker was by rail. The assessee’s work is at Palasdiha Gram, Kanyapur, Asansol. There is not much difference between the distance between Rajasthan (Beawar) to Asansol (AY 08-09) and the distance between Adilabad to Asansol (AY 07-08). The freight borne by the assessee for unit ton of clinker was tabulated by the ld AO as below:-

AY Quantity (MT) Freight (Rs) Per Unit Freight 08-09 95065.80 4,40,54,708 463.41 07-08 69917.10 2,14,39,585 306.64

The ld AO observed that the above table clearly indicated that the per MT freight in absolute term had raised by Rs. 156.77 o/e 51% increase which discussed above. Similarly the ratio between the freight inward and purchase had increased from 40.067% (Rs 2,14,39,585 / Rs 5,35,08,902) in AY 07-08 to 53% (Rs 4,40,54,708 / 8,25,39104) in AY 08-09. Accordingly he concluded that there was debiting of unjustified freight in the manufacturing account.

2.9. The ld AO observed that electric consumption pattern for the whole year as depicted below:-

AY Total Electricity Total Cement Electricity Charges (Rs) Produced in Consumed per Bags Bag (Rs)

08-09 2,88,88,862 15,31,809 18.85 07-08 2,30,80,682 12,36,700 18.66

The assessee submitted that there has been marginal increase in cost per bag which can be attributed to increase in cost per unit of electricity charged by the service provider. The ld AO observed that the assessee had conveniently forgotten that it had not supplied ‘monthwise electricity consumed and monthwise production of cement.’ The average rate of unit production of cement gives distorted picture unless the monthwise consumption v/s production and the reasons for the variation is known, which assessee had not produced in spite of repeated opportunities given.

2.10. Based on the cumulative effect of the aforesaid elements of manufacturing account, the ld AO adopted the GP rate of 30.06% (Rs. 7,84,94,425 / Rs 26,10,65,769) to the year under appeal and reworked the GP for the year and made trading addition of Rs. 1,08,47,603/- (30,04,87,637 * 3.61%) and added to the total income of the assessee. In support of this working, the ld AO placed reliance on the following decisions :- (a) Hon’ble Calcutta High Court in the case of Dabross Industrial Co. (P) Ltd vs CIT reported in 108 ITR 424 (Cal) (b) Hon’ble Delhi High Court in the case of Action Electrical vs DCIT reported in 258 ITR 188 (Del)

2.11. The assessee submitted that all the bills and vouchers evidencing the expenditure was submitted before the ld AO and reiterated the during the year, its raw material purchase had increased leading to higher cost of freight and that the ld AO’s calculation of the GP was wrong. The GP rates for last several years were submitted as below:-

AY GP Rate (%) 2002-03 24.89 2003-04 23.79 2004-05 17.21 2005-06 23.78 2006-07 16.98 2007-08 30.06 2008-09 26.45 (year under appeal)

2.12. It was further submitted that the net profit for the year was higher than in the previous year , that the ld AO had not specifically rejected its books of accounts u/s 145 of the Act. It was also submitted that it is a settled principle that a lower GP rate does not warrant rejection of accounts without having pointed out any defects in the said books. The assessee relied on the following decisions :- Pandit Bros vs CIT reported in 26 ITR 159 (P&H) S Veeriah Reddiar vs CIT reported in 38 ITR 152 (Ker) International Forest Co vs CIT reported in 101 ITR 721 (J&K) Ratna Café vs State of Madras reported in 33 STC 39 (Mad) M Durairaj vs CIT reported in 83 ITR 484 (Ker) Jhandu Mal Tara Chand Rice Mills vs CIT reported in 73 ITR 192 (P&H) ITO vs Girish M Mehta reported in 296 ITR (AT) 125 (Rajkot) CIT vs Smt Poonam Rani reported in 326 ITR 223 (Del) CIT vs Paradise Holidays reported in 325 ITR 13 (Del) Gamdiwal Dairy vs ACIT reported in 7 ITR (Tribunal) 114 CIT vs Jas Jack Elegance Exports reported in 324 ITR 95 (Del) Anoj Kumar Aggarwalla reported in 74 TTJ (Gau) 573 2.13. The ld CITA observed that the decision relied upon by the ld AO on Hon’ble Calcutta High Court in 108 ITR 424 , the ld AO had found that proper accounts were not available and had estimated the profit of the assessee which addition was sustained to a reduced amount by the tribunal. The issue before that court was whether there was any evidence or material before the tribunal to estimate the profits. In the case of Hon’ble Delhi High Court, there was a search and the court held that non maintenance of stock register coupled with the fact that unaccounted sales were detected during the course of search were relevant factors to sustain the view of the ld AO that the accounts should be rejected. He held that in the assessee’s case, the issue of rejection of books itself is under challenge as audited books were available , whereas in the case before the Hon’ble Calcutta High Court , no proper books of accounts were available and the issue was whether there was any material to estimate the profits. In the case before the Hon’ble Delhi High Court, there had been a search and unaccounted sales were discovered during the course of such search. He held that the reliance on those two decisions would be misplaced. He accordingly held that there was no justifiable reason to reject the books of the assessee.

2.14. He held that the 6% reduction in yield and electricity consumption per bag has gone up by Rs 0.19, which are only minor variations and do not justify rejection of book results. He held that the GP rate has been fluctuating year to year and the GP disclosed in the year under appeal is seen to be the 2nd highest over the past several years. He held that in any case that the GP rate can only be an indicator that an assessee’s accounts are not proper but to derive a conclusion merely on the basis of an indication cannot be held to be justified. He held that nothing prevented the ld AO to make necessary enquiries with regard to the assessee’s claim of expenses, which were admittedly not done by the ld AO in the instant case. He further held that in the scheme of taxation, what is taxed is not the gross profit but the net profit. The ld CITA overlooked by the ld AO. In the various decisions relied upon by the ld AR, it were held uniformly that lower gross profit or lower yield may warrant deeper examination of books of accounts but cannot , by itself, justify rejection of book results without finding specific defects in them which would make such books unreliable. These decisions are squarely applicable to the assessee’s case. He held that the ld AO had not brought on record any specific defects in the books of the assessee which would render them unreliable. Based on these observations and findings, he deleted the addition made on account of gross profit by the ld AO. Aggrieved, the revenue is in appeal before us on the following ground:- On Account of Gross Profit. (I) Deleted amount Rs. 1,08,47,603/- Ground NO.-3. Ld. C.I.T.(A) has directed to delete on account of gross profit of company. The assessee had not submitted the evidenced reasons to explain the fall in the yield. It is observed that the percentage filed of the raw materials have gone down in the present year, freight expenses has gone up, and no details of electricity consumption vis-a-vis month wise production had been supplied. The average rate of the unit production of cement gives distorted picture unless the month wise consumption Vis production and the reason for the variation is known, which the assessee had not produced in spite of the repeated opportunities given. Further appeal is therefore suggested on this issue.

2.15. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR argued that the entire details were filed before the ld AO by the assessee and had practically appeared before him over 15 times and filed details running into over 1000 pages. He drew the attention of the bench by referring to the relevant pages of the paper book wherein the entire details were filed by the assessee before the ld AO. It was specifically pointed out that the electricity consumption vis a vis production details for two years were filed before the ld AO on 14.12.2010 which could be evident from the paper book and hence the ld AO’s given was factually incorrect and shows the perverse mind of the ld AO. He specifically pointed to the increase in purchase price and sale price during the year as compared to that of the earlier year. The repairs and maintenance expenses had actually increased during the year due to frequent machinery breakdown and there is no basis brought down by the ld AO to prove that the machinery was in good condition. Production had increased by 24%; expenses had increased by 50% and specifically freight had increased by 100% as compared to that of the earlier year. The assessee had produced all the freight bills before the ld AO which were not denied by the ld AO. Moreover, the freight bills are charged by the parties in the purchase bills itself which have been separately accounted by the assessee as freight inwards. He stated that the reason for increase in electricity charges is due to increase in electricity rate per unit during the year under appeal. He stated that the assessee had maintained day to day records , stock registers and books of assessee were not rejected by the ld AO. The quantity particulars mentioned in the Annual report had not been disputed by the ld AO. The products manufactured by the assessee are subjected to payment of excise duty and excise registers were properly maintained by the assessee and no discrepancies were pointed out by the excise department in that regard. Absolutely no defects were found in the books of accounts , stock registers and excise registers by the ld AO or by any other regulatory body. The ld AR argued that the assessee had filed the gross profit rates from the Asst Years 2002-03 to 2008-09 and the average of such gross profit worked out to 22.785% as against 26.45% reported by the assessee in the year under appeal. In these circumstances, there is no need to resort to make estimation of gross profit by applying the earlier year rate on the turnover of the year under appeal and making an addition of Rs. 1,08,47,603/- on account of gross profit. 2.16. We have heard the rival submissions and perused the materials available on record including the paper book filed in that regard . The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. We find that the aforesaid elaborate discussion would prove that the assessee had filed the entire details before the ld AO. We find from the paper book that the assessee had duly filed the following details before the ld AO :-

10.3.2010 – The details with respect to details of directors, registration certificates from different agencies, bank details, sources of cash deposits, details of securities mortgaged, details of increase in share capital, ledger of commission and handling, employees salary and directors salary, statement of GP and NP, details of immovable and addition to fixed assets were filed.

21.7.2010 – Details of monthwise sales, ledger of commission & handling, freight outward and salary were furnished.

23.7.2010 – Further details of commission and handling charges , details of major deposits and withdrawals in bank with explanation and return of allotment of shares dated 1.11.2007 were filed

28.7.2010 – Further details of equity share issue, confirmations of parties, address of bank providing unsecured loan, details of capital work in progress, liabilities for goods and expenses, further details for addition in plant and machinery were filed.

6.8.2010 – ledger copy of car running expenses, ledger of gratuity and provision of gratuity, ledger of Shree Cement Ltd and cement sold in bags were filed.

23.8.2010 – details of statutory liabilities and its payment u/s 43B , valuation report of a registered valuer for Patratu cement plant construction, details of deposit received from distributors, confirmation from Mittal Polypack Pvt Ltd , as asked for, were filed.

31.8.2010 – ledger copy of all bank accounts maintained by the company , further details of fixed assets, full details of allottes above RS 1 lakh for increase in share capital were filed.

6.9.2010 – Explanation for increase in expenditure disproportionate to sales, confirmation of three shareholdrs as asked for, new address of one allotte namely Bharat Cement Ltd along with Form No. 18 , ledger of for different expenses.

13.9.2010 – Explanation for commission paid to R.L.Distributors , explanation for increase in freight expenses, further explanation for increase in share capital and sundry creditors, bills for additions in plant and machinery, audited accounts of BCL Developers , details of payloader hire charges were furnished.

15.9.2010 – Confirmation from purchasers who had paid advances for 8.11.2010- bank statement along with balance sheets of share applicants Bharat Cement Pvt Ltd, Midwest Exim Pvt Ltd , Bharosa Distributors Pvt Ltd were filed.

19.11.2010 – Statement for purchase and sale of clinker and gross profit and net profit for earlier years.

14.12.2010 – Electricity vis a vis production details for two years were furnished along with explanation of gross profit rate.

2.16.1. From the above, it could be seen that the assessee had filed all the details called for by the ld AO on various occasions from time to time and moreover, we find that the assessment has been completed by the ld AO u/s 144 of the Act. We find from the order sheet entries which are enclosed in the paper book that the ld AO had also duly acknowledged the receipt of the aforesaid details filed by the assessee. We hold that having obtained all the details called for , the ld AO ought not to have framed any assessment u/s 144 of the Act. This itself goes to prove that the ld AO had proceeded with the issue with a pre-conceived notion in order to reach a pre-decided destination of making additions on an estimated basis.

2.16.2. We find from the GP rate chart furnished from Asst Years 2002-03 onwards, that it has been fluctuating year to year and the GP disclosed in the year under appeal is seen to be the 2nd highest over the past several years. We find that in any case, if the ld AO had any apprehension available before him. The various details filed by the assessee which has been duly acknowledged by recording the same in the order sheet cannot be brushed aside under the carpet conveniently. Without making the necessary enquiries on the claim of expenses inspite of having unfettered powers , the ld AO ought not to have proceeded to make an estimation of gross profit without rejection of books of accounts by pointing out specific defects.

2.16.3. It is not in dispute that the assessee had maintained day to day records, stock registers and proper books and the quantity particulars mentioned thereon as well as in the annual report has not been disputed by the ld AO. We find considerable force in the arguments of the ld AR that the products manufactured by the assessee are subjected to excise duty and excise department insist for day to day maintenance of stock registers and quantity particulars and admittedly no discrepancies were pointed out by them or by any other regulatory body. Even the income tax department had not pointed out any discrepancies in the books and registers maintained by the assessee.

2.16.4. We find that what is taxable is only the net profit of the assessee as rightly pointed out by the ld CITA. We find that the net profit for the year under appeal was higher than in the previous year. We also find that the ld AO had not specifically rejected the books of accounts u/s 145(3) of the Act by pointing out any defects in the said books. It was also submitted that it is a settled principle that a lower GP rate does not warrant rejection of accounts without having pointed out any defects in the said books. In this regard, the various decisions relied upon by the ld AR are very well founded and the same are not discussed herein for the sake of brevity. 2.16.5. Considering the totality of the facts and circumstances, we find that the entire addition on account of gross profit has been made by the ld AO in a haphazard manner and hence we find no infirmity in the order of the ld CITA deleting the said addition. Accordingly, the Ground No. I raised by the revenue is dismissed.

3.1. The brief facts of this issue is that the ld AO observed that the assessee had debited commission and handling charges of Rs. 21,13,856/- to M/s R.L.Distributors and Brokerage charges of Rs. 5,21,500/- to others in its profit and loss account. He observed that the commission and handling charges are of Rs. 8,00,482/- and Rs. 13,13,374/- which are debited to M/s R.L.Distributors (total Rs. 21,13,856/-) respectively. The transactions of M/s R.L.Distributors with the assessee are on account of (i) Commision ; (ii) Handling charges ; (iii) Rent ; (iv) Security deposit with M/s R.L.Distributors and (v) C & F Agent of M/s Burnpur Cements Ltd . The ld AO issued a detailed questionnaire along with the notice u/s 133(6) of the Act to M/s R.L.Distributors. The ld AO observed that the said party filed only the ledger copy and did not file a reply to the questionnaire. With regard to commission of Rs. 8,00,482/- and handling charges of Rs. 13,13,374/- paid to M/s R.L.Distributors, it was submitted as below:-

"Commission and handling charges debited in P&L a/cs have been paid to Messrs R.L Distributors. There is no office of the company at Gaya. M/s R.L Distributors is looking after handling of cement dispatched from company's plant at Asansol to Gaya by Rail/Road. From perusal of bills, it will be clear that full details of goods handled have been given along with bills raised by the handling agent. Rate of handling charges is RS.160/- per Metric Ton. Similarly, all sales are done by the said agent, for which rate of commission paid to the agent, godown rent is also being paid for storage of company's cement bags. The duties and services of handling agent are unloading of goods from Railways/Trucks as the case may be and carrying of goods to godown and unloading there for their safe custody. They also obtain orders of sale from customers, make delivery of goods, realise dues from customers/debtors and send the proceeds to the company and if there is any bad debt, the agent has to bear the loss. The area of work was Gaya and Nawada Regions of Bihar. Due to their efforts, sales in that region have increased to RS.3.02 Crores against sole figures of RS.93.23 Lacs in the immediately preceding year. In respect of payment to the agent, tax at appropriate rates has been deducted u/s 194C and 194H of Income Tax Act 1961 on payment/credit of handling charges & commission respectively.

3.2. The assessee submitted the copy of agreement with M/s R.L.Distributors (Annexure C1 to C4 of Paper Book) ; Details of sales made in the district of Gaya and Nawada in preceding and succeeding years (Annexure C5 of Paper Book) ; Copy of bills of M/s R.L.Distributors together with its summary (Annexure C 6 to C 36 of Paper Book) ; Copy of ledger of assessee in the books of M/s R.L.Distributors (Annexure C 37 to C 39 of Paper Book) ; Copy of ledger account of Brokerage and Commission as appearing in the books of the assessee (Annexure D1 to D2 of Paper Book) and Copy of bills and credit notes issued by parties for commission payments (Annexure D3 to D118 of Paper Book) . The ld AO ignoring the aforesaid documents observed that the assessee had not expenditure incurred on M/s R.L.Distributors and other commission agents. He also observed that the assessee had tried to impart the colour of genuineness to the payment made deducting tax at source but it is well know fact that deduction of TDS does not impart / vouch the real nature of the transaction. The ld AO concluded that the commission has been effected for extra commercial puproses and it is not expended wholly and exclusively for the purpose of business. He observed further that the commission had been effected just to compensate M/s R.L.Distributors who is also the stockiest and from whom the company had taken the security deposit also. Accordingly, he disallowed a sum of Rs. 8,00,482/- towards commission to M/s R.L.Distributors and added to the total income of the assessee.

3.3. The ld AO observed that similarly the assessee had debited brokerage and commission to the tune of Rs. 5,21,500/- as paid to Portland Trading Co.; Maa Sarda Enterprises ; Swapan Das ; Amar Saha & Co. and Dolphin Enterprises. The ld AO observed that the assessee in these cases had not justified how and for what services the commission had been given to these parties. He held that assessee could not link which persons services had been taken for affecting the sales at different regions and accordingly disallowed a sum of Rs. 5,21,500/- thereon. The ld AO relied on the following decisions in support of his action :- (i) Hon’ble Delhi High Court in the case of Precision Instrument Manufacturing Co vs CIT reported in 137 ITR 5 (Del) (ii) Hon’ble Calcutta High Court in the case of Indian Press Exchange Ltd vs CIT reported in 138 ITR 594 (Cal) (iii) Hon’ble Madhyapradesh High Court in the case of Anant Jyoti Printers Pvt Ltd vs CIT reported in 165 ITR 771 (MP) (iv) Hon’ble Madhyapradesh High Court in the case of CIT vs Ramdass Ramlal reported in 149 ITR 256 (MP) (v) Hon’ble Madras High Court in the case of Indian Manufacturers (Madras) vs CIT reported in 155 ITR 174 (Mad)

3.4. The assessee submitted that the agent had been appointed to penetrate a new market that its transactions with that agent have been compensating the agent. It was submitted that the relations with the said agent are purely commercial and no other transactions other than commercial ones have been carried on with the said party. It was submitted that perusal of the assessment order reveals that the identity of the party alleged to have received the commission is not in dispute. The ld CITA observed that though the ld AO had mentioned that the payment has been made to compensate the said party for other transactions , no such transaction have been pointed out by him. The ld CITA also placed reliance on the decision of the Hon’ble Apex Court in the case of S.A.Buiilders Ltd vs CIT reported in 288 ITR 1 (SC) wherein it was held that the ld AO cannot dictate what would be reasonable expenditure once it is established that there is a nexus between the expenditure and the purpose of the business. It is not in dispute that the said agent is also seen to be the stockiest of the assessee and hence the ld AO himself had admitted the commercial relationship to exist between the assessee and the agent. The ld CITA held that neither the genuinity of the party, nor the genuinity of the payment nor the fact that there is a commercial relationship between the assesse and the said agent is in doubt. Accordingly he deleted the disallowance of commission in the sum of Rs. 8,00,482/-.

3.5. With regard to the commission payment to other parties , the assessee submitted that the details of all payments had been submitted before the ld AO and perusal of the assessment order reveals that there is no dispute on this point. The ld CITA by placing similar reliance on the aforesaid apex court decision , held that no case has been made out by the ld AO that the relationship between the assessee and the recipients were anything but commercial. Accordingly the disallowance made in the sum of Rs. 5,21,500/- was deleted. 3.6. Aggrieved , the revenue is in appeal before us on the following ground:- (II) Brokerage and commission. Deleted amount Rs. 13,21,982/- Addition was made by the A. O. on account of Brokerage and commission. The assessee had not produced any verifiable evidence to substantiate the role played by the agents for getting brokerage & commission income from M/s Burnpur Cement Ltd.

3.7. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR argued that sales have been made through all these parties and all these parties are stockiests and hence the commercial relationship stands clearly established. The entire documents in the form of bills and credit notes as detailed hereinabove goes to prove that the services rendered by those parties are also proved beyond doubt. There is no extra commercial purpose that has been established on record by the ld AO. The ld AR proceeded to distinguish the case law relied upon by the ld AO as under:- (i) 137 ITR 5 (Del) – Genuinity of expenses was disputed which is not the case before us in the instant case. (ii) 138 ITR 594 (Cal) – Payee was relative and he was minor. In the instant case, none of the payees are relatives to assessee. Hence factually distinguishable. (iii) 165 ITR 771 (MP) – Payee was related party to major shareholder of the company. In the instant case, none of the payees are relatives to assessee. Hence factually distinguishable. (iv) 149 ITR 256 (MP) – Partner’s son was paid commission. In the instant case, none of the payees are relatives to assessee. Hence factually distinguishable. (v) 155 ITR 174 (Mad) – Payment not made for business consideration. In the instant case, the commercial relationship between the assessee and the agents who also acted as stockiest is proved beyond doubt. Hence factually distinguishable. 3.8. We have heard the rival submissions and perused the materials available on record including the paper book filed in that regard. The details filed by the assessee before the lower authorities as listed hereinabove are not reiterated for the sake of brevity. It is not in dispute that the said documents were not furnished before the ld AO. We find that the ld AO could have verified the nature of claim of the assessee towards payments made to M/s R.L.Distributors by issuing summons to the said party u/s 131 of the Act. We also find that the said party though had not replied in the format called for by the ld AO in his questionnaire, but had duly replied all the queries by filing a single ledger account which explains all the transactions the assessee had with them. All the transactions have been duly subjected to deduction of tax at source and TDS compliance made properly by the assessee. There is absolutely no basis for the ld AO to conclude that the commission had been effected for extra commercial purposes without bringing any material evidences on record and without specifying what is meant by ‘extra commercial purposes’. The nature of services rendered by the said parties are not in dispute as could be evident from the agreements entered into, capacity to handle the same and the copies of invoices raised by the parties on the assessee. All these transactions are duly reflected in the ledger accounts of both the parties and there is no reason brought on record to dispute the same. We find that all the case laws relied upon by the ld AO in his order were factually distinguished by the ld AR as stated above. Hence we hold that the brokerage and commission in the sum of Rs. 13,21,982/- has been incurred wholly and exclusively for the purpose of business of the assessee. In these circumstances, we do not find any justifiable reason to interfere with the order of the ld CITA in this regard. Accordingly the Ground II raised by the revenue is dismissed.

4.1. The brief facts of this issue is that the assessee company, being a listed company listed in Bombay and National Stock Exchange , raised share capital of Rs. 31,83,55,630/- towards share capital out of public issue and a sum of Rs. 6,36,71,126/- towards share premium from various parties out of pubic issue. Out of this, the ld AO sought to verify the receipt of share capital of Rs. 9,92,51,000/- together with share premium of Rs. 1,98,50,200/- from 5 parties alone. The shares were allotted at Rs 12 per share including premium of Rs 2 per share to the following parties:- S. Date of Name of Address & No of Value Premium Total No allotment allottee in full occupation of equity allottee shares allotted 1 1.11.07 Bharat 4, Farrlie 19,16,667 1,91,66,670 38,33,334 2,30,00,004 Cements Ltd Palace Room No.106, Kolkata- 700012, Business 2. 1.11.07 Goyal Auto Sardapally 18,08,333 1,80,83,330 36,16,666 2,16,99,996 Distributors Ashok Nagar, Asansol- 713304 3. 1.11.07 Midwest Tiwari House, 6,00,000 60,00,000 12,00,000 72,00,000 Exims Pvt. Seal Danga, Ltd. Kulti Burdwan- 713343 Business 4. 1.11.07 Octal 5, Ramani 10,00,000 1,00,00,000 20,00,000 1,20,00,000 Mercantile Ltd. Chatterjee Street Kolkata- 700029 Business 5. 1.11.07 Tarkeshwar A 07, Kalyani 2,00,000 20,00,000 4,00,000 24,00,000 Tiwari apartment Sector 6, Vasundhara, Ghaziabad 201012

4.2. The ld AO issued notice u/s 133(6) of the Act to Bharat Cement Ltd and Goyal Auto Distributors Pvt Ltd. In respect of other three parties, the assessee was asked to file the confirmation and evidence of creditworthiness of those parties. All the details called for by the ld AO were filed before him by the assessee as well as by the parties in response to notice u/s 133(6) of the Act except Shri Tarkeshwar Tiwari. and balance sheet together with their income tax assessment particulars. The ld AO however observed that the said parties did not possess sufficient creditworthiness to advance monies to the assessee and accordingly concluded that all the three ingredients of section 68 of the Act viz identity of the share subscriber ; genuineness of transactions and creditworthiness of share subscriber is not proved in the instant case. Accordingly, he proceeded to make addition u/s 68 of the Act in the sum of Rs. 6,63,00,000/- in the assessment.

4.3. The ld CITA observed that the details regarding the applicants addresses, accounts as well as assessment details had been submitted before the ld AO. The investment in share capital had been duly reflected in their respective balance sheets. The ld CITA placed reliance on the decision of the Hon’ble Supreme Court in the case of Lovely Exports reported in 216 CTR 195 (SC) and also on several other decisions of this tribunal and deleted the addition u/s 68 of the Act in the sum of Rs. 6,63,00,000/-.

4.4. Aggrieved, the revenue is in appeal before us on the following ground:- (Ill) Genuineness of transaction Deleted amount Rs. 6,63,00,000/- The investors had no credit worthiness of invest in the share capital of the assessee company and the assessee company had taken only accommodation entries only from them. S. Name of the alleged investor Amount No invested in (Rs.) 1 M/s Bharat Cements ltd 2,30,00,004.00 2. M/s Goyal Auto Distributors ltd 2,16,99,996.00 3. M/s Midwest Exim Pvt. Ltd. 72,00,000.00 4. M/s Octal Mercantile Pvt. Ltd. 1,20,00,000.00 5. Tatkeshwar Tiwari 24,00,000.00 Total 6,63,00,000.00

It is for assessee to prove the identity of capital subscribers their credit worthiness and the genuineness of the transaction, were furnishing of the particulars is not though, were payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. Further appeal is suggested on this issue.

4.5. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR argued that the share capital was raised at Rs 12 per share including premium of Rs 2 per share in IPO as assessee is a listed company. The ld AO had chosen to examine the five parties out of huge sums received from several subscribers. Out of five parties, the details of four parties had been filed either by the assessee or by the parties directly u/s 133(6) of the Act providing all the details called for by the ld AO. This fact is also acknowledged by the ld AO in his order. The case laws relied upon by the ld AO actually is in assessee’s favour as the identity of the subscribers in the instant case have been duly proved. He also placed reliance on the following decisions :-

(i) Hon’ble Gujarat High Court in the case of CIT vs Chartered Speed (P) Ltd reported in 2015 TaxPub(DT) 1656 (Guj-HC) dated 3.3.2015 (ii) Hon’ble Calcutta High Court in the case of CIT vs Dataware Private Limited in ITAT No. 263 of 2011 in GA No. 2856 of 2011 dated 21.9.2011 (iii) Hon’ble Delhi High Court in the case of CIT vs Five Vision Promoters Pvt Ltd in ITA 234 & 235 /2015 dated 27.11.2015 (iv) Hon’ble Supreme Court in the case of CIT vs Lovely Exports (P) Ltd reported in (2008) 216 CTR 195 (SC) (v) Hon’ble Delhi High Court in the case of CIT vs Divine Leasing and Finance Ltd reported in 299 ITR 268 (Del) (vi) Hon’ble Calcutta High Court in the case of CIT vs Roseberry Mercantile (P) Ltd dated 10.1.2011 (vii) Hon’ble Delhi High Court in the case of CIT vs Vrindavan Farms (P) Ltd in ITA No. 71, 72 & 84 /2015 dated 12.8.2015 (viii) Hon’ble Calcutta High Court in the case of CIT vs Nishan Indo Commerce Ltd reported in (2014) 101 DTR 413 (Cal) dated 2.12.2013

4.6. We have heard the rival submissions and perused the materials available on record including the paper book filed in that regard. We find from the annual report of the assessee company for the year ended 31.3.2008 that the shares of the assessee company got listed in Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) and the said company had come out with Initial Public Offer (IPO) on 3.1.2008. The from Jan to Mar 2008 in BSE ranging from Rs 55.60 to Rs 28.75 and in NSE ranging from Rs. 57.65 to Rs 28.65. The share price was at its low from Jan to Mar 2008 in BSE ranging from Rs 17.80 to Rs 19.10 and in NSE ranging from Rs 15 to Rs. 19.50. From the paper book, we find that the assessee had filed the following details from the share subscribers in the paper book (Annexure E1 to E61 of Paper Book) :- (a) PAN of the parties (b) Confirmation for having invested in share capital with premium in the assessee company (c) Balance sheet and profit and loss account of the respective period reflecting the investments made in the assessee company together with the respective sources for the same (d) Income tax return acknowledgements together with the income tax assessment particulars. (e) Relevant pages of the bank statements of the share subscribers

4.6.1. We find from the details filed hereinabove that the investment in share capital had been duly reflected in their respective balance sheets. Moreover, the assessee company is a listed company was in receipt of huge share capital and share premium from several share subscribers. Admittedly the monies were raised out of public issue.

4.6.2. In respect of amounts invested by Bharat Cement Pvt Ltd ; Goyal Auto Distributors Pvt Ltd ; Midwest Exim Pvt Ltd and Octal Mercantile Pvt Ltd, it is seen from their bank statement that there were certain clearing cheques that were credited in their bank accounts which were in turn utilized for making investment in share capital in the assessee company in public issue. In respect of amount invested by Mr Tarkeshwar Tiwari, it was stated that the said person was an employee of Steel Authority of India Ltd (SAIL) who had invested in shares of assessee company out of his retirement benefit of Rs. 33,49,057/- received on 6.1.2006 vide Cheque No. 635266 drawn on HDFC Bank Ltd New Delhi which is found duly credited in his bank statement. The necessary correspondences from SAIL is part of the paper book filed by the assessee. We also find from the bank statement of Mr Tarkeshwar Tiwari, that the retirement benefit had originally been utilized for investments in various mutual funds by the assessee and those mutual funds got redeemed between 9.7.2007 and 13.7.2007 and out of the said proceeds, a sum of Rs. 24,00,000/- was invested in the share capital of the assessee company on 20.7.2007. These facts are staring on us from the bank statement of Mr Tarkeshwar Tiwari. Hence we hold that the creditworthiness of the party is proved beyond doubt. We find all the three ingredients of section 68 of the Act were fully satisfied by the assessee in the instant case.

4.6.3. We find that the reliance placed on the decision of the Hon’ble Calcutta High Court in the case of CIT vs Precision Finance Pvt Ltd reported in (1994) 208 ITR 465 (Cal) is in favour of the assessee. The head notes in the said case is reproduced below:- Income – cash credits – Genuineness – Assessee allowed opportunities for 7 ½ years to prove genuineness of credits – Enquiries conducted through Inspector revealed that no such income tax files as mentioned by assessee existed and creditors not found on the addresses given – Identity of the creditors, therefore, not established – Burden is on the assessee – Mere payment by cheques does not prove genuineness of credits – Addition justified

In the instant case, the identity of the subscribers are proved beyond doubt and they are all income tax assessees and identiy of the subscribers were not even disputed by the ld AO.

4.6.4. We find that the reliance placed on the decision of the Hon’ble Orissa High Court in the case of CIT vs Baishnab Charan Mohanty reported in (1995) 212 ITR 199 (Ori) is in favour of the assessee. The head notes in the said case is reproduced below:- Cash credit – Genuineness – Tribunal relying upon confirmation letters as well as other relevant materials recorded the finding that the transactions are genuine – Finding not perverse – Tribunal justified in holding that the transactions are genuine – Directions to delete the addition tenable – CIT vs S.P.Jain 1972 CTR (SC) 443 : (1973 ) 87 ITR 370 (SC) : TC42R.1422#1 applied

4.6.5. We find that the various decisions relied upon by the ld AR supra are squarely applicable to the facts of the instant case. The same are not dealt with herein for the sake of brevity.

4.6.6. In view of the aforesaid facts and findings and respectfully following the judicial precedents relied upon hereinabove including that of the Hon’ble Supreme Court in the case of Lovely Exports supra , we find no justifiable reason to interfere with the order of the ld CITA in this regard. Accordingly, the Ground III raised by the revenue is dismissed.

5.1. The brief facts of this issue is that the ld AO sought to verify the veracity of the sundry creditors in respect of the following three parties u/s 133(6) of the Act:- (i) Mittal Polypacks Pvt Ltd 19,86,046 (ii) Janki Devi Bathwal – Sundry creditor for expense 2,35,956 (iii) Shree Cements – Sundry creditor for goods 2,98,360 -------------- 25,20,362 -------------- The ld AO observed that the assessee filed confirmation from Mittal Polypacks Pvt Ltd. But since no reply was received from the said party in response to notice u/s 133(6) of the Act, the ld AO asked assessee to file the evidence of creditworthiness of M/s Mittal Polypack Pvt Ltd. Since nothing was filed by the assessee, he treated the balance outstanding with the said sundry creditor as bogus and added to the total income of the assessee. In respect of notice u/s 133(6) of the Act issued to Janki Devi Bathwal, since no compliance was made thereon by the party, the ld AO added the balance outstanding in the sum of Rs. 2,35,956/- as bogus creditor. In respect of notice u/s 133(6) of the Act issued to Shree Cements, the reply was received at the fag end of the assessment confirming the balance outstanding of Rs. 2,98,360/- and accordingly the ld AO treated the same as bogus creditor and added to the total income of the assessee.

5.2. The assessee submitted that it had purchased bags from M/s Mittal Polypacks Pvt Ltd for the purpose of packing cement. It had furnished details of purchases, copy of bills including confirmation and details of addresses and PAN of the said party before the ld AO. The assessee placed reliance on the decision of the Hon’ble Supreme Court in the case of CIT vs Orissa Corporation (P) Ltd reported in (1986) 159 ITR 78 (SC) to asset that no addition can be made merely on the ground that a creditor had failed to reply to a notice u/s 133(6) of the Act. The ld CITA held that the payments made to M/s Mittal Polypacks Pvt Ltd to the tune of Rs. 75,21,785/- has been accepted by the ld AO and thereby the identity and genuinity of the creditors has been established. The addition has been made only on the ground that the trade creditor did not give any evidence of its creditworthiness. He held that if the ld AO was not satisfied about the creditworthiness of trade creditor, then the same could have been ascertained through enquiries, whereas in the instant case, no such enquiries were done by the ld AO. With regard to balance outstanding in the name of Shree Cements, the said party is actually a supplier of goods and the assessee had submitted details of advances for supply of goods along with reconciliation thereof. The ld CITA verified the reconciliation and observed that the explanation is valid. With regard to balance outstanding in the name of Janki Devi Bathwal, the ld CITA observed that the assessee had hired office space from the said party and had shown the liability towards rent payable as on 31.3.2008. He also observed that said party’s name and therefore the said amount was appearing on both sides of its balance sheet. The ld CITA verified the copy of the rent agreement thereon and also found that due tax was deducted at source on the said payment. Accordingly , he deleted the addition made on account of sundry creditors.

5.3. Aggrieved, the revenue is in appeal before us on the following ground:- (IV) On account of non-filing of evidence of the credit worthiness. Deleted amount Rs. 25,20,362/- Addition was made by the A. O. on account of creditors for the fact that the creditworthiness of the said creditors were not established. Reply to the query made by the A. O. in terms of Section 133(6) has not been received. Ld. C.I.!.(A) has directed to delete the said addition on the grounds that the Identity and existence of the creditors not under doubt and no such enquiries have been done by the AO. Further appeal is therefore suggested on this issue,

5.4. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR referred to the relevant pages of the paper book which were relied upon heavily by the ld CITA and prayed for non-interference of the order of the ld CITA in this regard.

5.5. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee in that regard. In respect of Mittal Polypacks Pvt Ltd, we find that the purchase of bags made from such party had not been disputed by the assessee either in quantity or in value. During the year transactions had been accepted by the ld AO and only the balance outstanding has been added as income for want of reply by the said party u/s 133(6) of the Act. We find that the decision relied upon by the ld AR on the Hon’ble Apex Court supra squarely applies to the instant case. closing balance thereon. We are convinced with the explanation given thereon. In respect of balance outstanding in the name of Janki Devi Bathwal, the finding given by the ld CITA is convincing.

In view of the aforesaid findings, we do not find any justifiable reason to interfere with the order of the ld CITA in this regard. Accordingly , Ground IV raised by the revenue is dismissed.

6.1. The brief facts of this issue is that the ld AO observed that the assessee had made an investment of Rs. 65,52,448/- towards building at Pataratu Industrial Area, Ramgarh, Jharkhand in Asst Year 2008-09 as part of constructing second cement plant. This investment was referred to the District Valuation Officer (DVO) but the report of the ld DVO was not received by the ld AO before the completion of assessment. The ld AO held that investment in this building out of books cannot be ruled out and accordingly made an estimated addition of 20% of Rs. 65,52,448/- and made an addition of Rs. 13,10,490/- thereon in the assessment.

6.2. Before the ld CITA, the assessee was confronted with the ld DVO’s report who had valued the same at Rs. 1,55,53,400/- as against Rs. 65,52,448/- disclosed by the assessee. The assessee submitted that the ld DVO had valued the property by presuming that the entire construction took place in Asst Year 2008-09 , whereas, construction on the said property had started during financial year 2006-07. A bill for purchase of generator during the financial year 2009-10 was also submitted evidencing that the same not purchased during financial year 2007-08 as held by the ld DVO. The assessee further submitted that if the costs of constructing the boundary wall and the generator were taken out of the ld DVO’s valuation, then the investment disclosed by it would be more than what the ld DVO had shown in his valuation report. The ld CITA observed that on perusal of annual report of the assessee as on 31.3.2007. capital work in progress has been shown at Rs. 5,87,36,356/- whereas the corresponding figure as on 31.3.2006 was Rs. 22,46,045/-. The same figure for 31.3.2008 was Rs. 23,83,08,371/-. The schedules reveal that for the financial year 2007-08 the major component of addition was in respect of plant and machinery amounting to Rs. 14,25,31,362/-, Building and civil works and land and site development expenses as on 31.3.2007 show that the total capital work in progress on these heads is Rs. 4,95,33,120/- whereas the corresponding figure for 31.3.2008 show an accretion of Rs. 51,72,387/- only. The ld CITA deleted the addition by observing as under:- This is supported by the appellant's annual report for the financial year 2006-07 which shows that it had started civil work on the land allotted by the Jharkhand Government during that year. The said report also specifically talks about the erection of the boundary wall, which is seen to be the major component of expenditure as per the DVO's report. Therefore, prima facie, there is material on record to infer that, contrary to the DVO's assumption that the entire construction had taken place in financial year 2007-08, construction, and therefore, investment in the plant at Patratu, Jharkhand had taken place in financial year 2006-07 as well. There is, therefore, material on record in support of the appellant's contention that, the DVO's presumption of construction having been done only in financial year 2007-08 is wrong. I may add that there is a contradiction inherent in the DVO's comments given in Annexure-VI of his report. As per that, he has raised questions against the Registered Valuer's figure of Rs.5,46,95,499/- for the project cost claiming that fictitious buildings and structures have been valued by the said registered valuer. Therefore, the issue, as per his report, appears to be that excess valuation has been shown by the registered valuer and hence by the appellant. It is seen from Annexure-III in of the DVO's report that complete accounts and copy of the Registered Valuer's report had been submitted before him. The said Registered Valuer's report is seen to have computed the total capital cost including land at Rs.5,46,95,499/- for two financial years, being Rs.4,81,46,701/- for financial year 2006-07 and Rs.65,48,798/- for financial year 2007- 08. Paradoxically, no comments on these aspects are seen in the DVO's comments. If he is challenging the valuation done by the registered valuer, I do not see how these features could have escaped his attention yet, perusal of Annexure-VI does not reveal any comment on the vital aspect of construction having been carried out over two years, when such information is seen to have been placed before the DVO and runs counter to his presumption that construction has taken place only in financial year 2007-08. I do not see how without negating the appellant's claim in this regard can the DVO justify the presumption he has made. As such also, no justification for this presumption is seen in his report. In my opinion, therefore, the DVO's report is erroneous and, under the circumstances, the value of investment estimated by him cannot be taken to be an objective figure. Furthermore, as stated above, if the value of the boundary wall is subtracted from the figure estimated by the DVO then the investment shown by the appellant is higher than what has been estimated by the DVO. As discussed above, there is material to hold that the said construction had been done in the previous year. Therefore, I do not see any ground for fresh addition based on the DVO's report. The addition initially made by the AO was 20% of the declared investment of Rs.65,48,798/-. No justification for this percentage has been given by the AO in his order, neither are there any enquiries evident to justify the basis for this addition. This addition is therefore, directed to be deleted. This ground of appeal is allowed.

6.3. Aggrieved, the revenue is in appeal before us on the following ground:- (V) Investments towards building at Pataratu, Jharkhand. Deleted amount Rs.13,10,490/-. Ld. CIT(A) was not justified in deleting the enhancement of investment towards building at Pataratu, Jharkhand estimated by Departmental Valuation Cell. Before making report assessee was heard by the cell several times and after considering all aspects as the cell thought fit, the report was made. Further appeal is therefore suggested on this issue.

6.4. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR vehemently relied on the order of the ld CITA. He argued that the ld AO even for adopting the figures given by the ld DVO, should first reject the books of accounts of the assessee , which has not been done in the instant case. Hence the addition deserves to be deleted. 6.5. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee in that regard. We find that the ld CITA had elaborately dealt with this issue and none of those findings have been controverted by the revenue before us. We do not find any justifiable reason to interfere with the order of the ld CITA in this regard. Accordingly, the Ground V raised by the revenue is dismissed.

7.1. The brief facts of this issue is that the ld AO observed that the expenditure on account of car running expenses, repairs and maintenance , telephone expenses and security expenses had increased. The ld AO observed that most of the expenditure had been incurred in cash , making them difficult to verify. Further, expenditures which had been incurred in cash , the element of excessiveness cannot be ruled out. Further, the element of personal use in the expenditure debited like telephone and motor car cannot be ruled out. Accordingly in order to protect the interest of the revenue, he made an adhoc disallowance of Rs.1,00,000/- in the assessment.

7.2. The ld CITA deleted the disallowance by observing as under:- As per the assessment order it is seen that the A.0. has made these disallowances because he felt that these expenses were difficult to verify amount of excessiveness in these expenditures could not be ruled out and also because there was a possibility of personal use of vehicle which also could not be ruled out. I do not find it to be the A.O.'s case that details were called for and were not submitted or that there were discrepancies therein. I also do not find any enquiry to have been made by the AO to challenge the veracity of the appellant's assertions. it is also seen that the AO has made a lump- sum disallowance. I do not think that without enquiry in the matter and disproving the appellant's claims of expenditures the A.O. is justified in making a lump-sum disallowance. No material has been brought on record by the A.O. to negate the appellant's claims. The addition is seen to have been made on surmises which the A. O. has not supported with evidence. Furthermore, as per page 19 of the assessment order the A.O. is seen to draw a correlation of these expenditures with sales. However, the type of expense considered by the A.O. cannot be said to have direct correlation with sales. In my opinion, the very premise of the A.O. 's analysis therefore appears to be flawed. Further, the A.O. has relied on the decision of the Hon'ble Supreme Court in the case of Calcutta Agencies Ltd. [19 ITR 191] in support of his stand. However, I find that the facts in that case concerned disallowance of payment of decretal amount which was the result of certain misfeasance committed by the assessee's directors. The facts in the appellant's case are different and that, in my view, precludes the said decision of the Hon'ble Supreme Court from being applicable here. This addition is therefore directed to be deleted. This ground of appeal is allowed.

7.3. Aggrieved, the revenue is in appeal before us on the following ground:- (VI) Abnormal increase in expenditure. Deleted amount Rs. 1,00,000/- The Assessee has not put forth any agreement with evidence why there is disproportionate increase in expenditure in the way of nominal increase in sale. Further appeal is suggested on this issue also.

7.4. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR vehemently relied on the order of the ld CITA. 7.5. We have heard the rival submissions. We find that the ld CITA had elaborately dealt with this issue and none of those findings have been controverted by the revenue before us. We do not find any justifiable reason to interfere with the order of the ld CITA in this regard. Accordingly, the Ground VI raised by the revenue is dismissed. 8. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on this 19/10/ 2016. (NARASIMHA CHARY) (M.BALAGANESH) "या"यक सद"य / JUDICIAL MEMBER लेखा सद"य / ACCOUNTANT MEMBER कोलकाता /Kolkata; "दनांक Dated 19/10/2016 "काश "म"ा/Prakash Mishra,"न.स/ PS आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant 2. ""यथ" / The Respondent. 3. आयकर आयु"त(अपील) / The CIT(A), Kolkata. 4. आयकर आयु"त / CIT "वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, कोलकाता / DR, ITAT, Kolkata 5. 6. गाड" फाईल / Guard file. स"या"पत ""त //// आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Asstt.