ACIT, HARIDWAR vs. M/S. DEV BHOOMI STEELS PVT. LTD., HARIDWAR

but effectively contesting the deletion of addition of Rs 17,00,296/- on account of fake cash sales. b. For AY 2009-10 Assessee field return of income on 30.9.2009 for Rs 10260/- after claiming deduction u/s 80. IC of Rs 7170850/-. During that year assessee has clocked sales of Rs. 32,22,43,737/- out of which cash sales is Rs. 4,69,00,467/-. During the course of assessment, AO asked for the details of cash sales made by the assessee such as names and address of the parties. However, Assessee submitted only the figure of cash sales but did not furnish Page 2 of 7. ACIT V Dev Bhoomi Steels Private Limited & 6333 /Del/2013 A Y 2008-09 and 2009-10 the names and address of the parties. In absence of these details, AO made addition of Rs 12,00,652/- being 2.56 % of the cash sales as net profit of the assessee based on comparison with other parties. Assessee aggrieved with the order of AO preferred appeal before CIT (A) who deleted the addition relying on the order in case of assessee for AY 2008-09. Against this revenue is in appeal before us.

3. Before us, the Ld. DR submitted that AO has conclusively found that for Ay 2008-09 some of the parties to whom cash sales have been made are not in existence or are of small means and not having any business dealing with the assessee. Therefore AO has worked out a comparable Net profit earned by the assessee of Rs 17,00,296/- and denied the benefit of deduction u/s 80 IC on that amount. He further justified that addition u/s 68 of that amount is rightly made by AO. He also submitted that CIT (A) has erred in deleting the addition without appreciating the facts of the cash such as non-existence of some of the parties and denial by them of having any business connection with the assessee. He further submitted that excise and sales tax departments are not concerned with the booking of sales in cash and therefore there verification does not justify the deletion of the addition. Therefore, he submitted that order of AO be restored.

4. In response to this Ld AR submitted that for AY 2008-09 books of accounts were produced before AO along with the voucher and bills and those were examined. Those books were also produced before CIT (A) at his direction for verification. Further original assessment for that year was also completed u/s 143(3) of the act where in 133 (6) inquiry letters were sent to other parties also and in that proceedings the books of accounts were produced. None of the authorities could find any defect in the books of accounts. Further, he submitted that when the purchases quantity is accepted by AO then sales of that quantity could not be disputed merely because the sales have taken place in cash. Further AO himselfhas accepted the overall book results but estimated profit on cash sale only, which is incorrect when overall books of accounts are accepted. He also submitted that at para no 5 of the assessment order AO has accepted the income declared by the assessee of Rs. 82,73,371/- and also granted deduction u/s 80 IC of the same amount and then making an addition of Rs 17,00,296/- being N P on cash sales when cash sales is already part of the profit shown by the assessee. He further submitted that AO has estimated the Page 3 of 7 ACIT V Dev Bhoomi Steels Private Limited & 6333 /Del/2013 A Y 2008-09 and 2009-10 net profit on cash sales and made addition u/s 68 of the act where the salesis already credited to the profit and loss account. He also submitted that CIT (A) hasseen the daily sales and position of stock and held that there is no discrepancy in the details and therefore addition has been rightly deleted. He further submitted that facts of the case for AY 2009-10 are also on similar lines.

5. Ld. DR in rejoinder submitted that it is a common practice to identify the comparable for the comparison of net profit and regarding addition of gross profit he submitted that if there is an error made by AO, it may be corrected by the tribunal.

6. We have carefully considered the rival submission and orders of lower authorities. Assessee is a companyengaged in manufacturing of M S Ingots at Haridwar and undisputedly eligible for deduction u/s 80 IC of the act. While going through orders of lower authorities we have come to an understanding that the facts of the case for both the years are not similar however, the manner of making additions is similar. In this background we are deciding the issue for both the years separately as under.

7. For AY 2008-09, Company recorded sales of Rs. 31,03,42,972/- out of which Rs 6,25,10,899/- is recorded as cash sales. On inquiry in original assessment, one Shri Navin Jain buyer of the goods in cash “refused to accept” the inquiry letter and thereforesubsequently further inquiries were made and based on that it is alleged that Shri Navin Jain has denied the transactions with the assessee.Further, in case of second party M/s Malhotra Stampings such party was not available at the given address. In case of other parties, ShreeGanapati Steels Industries and Ganapati Steel Mills assessee expressed its inability to produce details called for. However, assessee produced before AO CST Registration forms as well as C forms made available by the purchasers. Therefore it is not in dispute that for AY 2008-09 , assessee has submitted the complete details available with it such as names, address, details of sales tax registration, copies of C forms submitted by the purchasers, sales bills showing the quantity sold, rates and amount received etc. Assessee is manufacturer of the goods and after manufacturing;these goods have been sold either in cash or cheque or on credit. The manufacturing details in quantity and in value have been furnished to excise authorities, amount of sales along with the C Forms etc. is submitted to sales tax authorities by assessee, and it was not disputed. Further CIT (A) has also held that assessee has maintained daily sales and position of stock in the stock register and the cash received recorded in the cashbook. Further, he held that Page 4 of 7 ACIT V Dev Bhoomi Steels Private Limited & 6333 /Del/2013 A Y 2008-09 and 2009-10 assessee’s own evidence such as sales voucher mentioning truck numbers, weight, rates etc. is also produced before AO as well as before CIT (A). It is also not alleged by the revenue that rates mentioned in those sales are not comparable or the goods have not moved out of the factory of assessee. Merely because some of the persons who have purchased goods from the asseseee in cash and issued sales tax forms to the assessee, have not responded to the queries or refuses the transactions cannotbe the sole basis for the making of this kind of addition particularly when the sales on credit or through cheques and purchases and production of the goods is accepted. Further AO has also not examined these parties by issuing summons u/s 131 of the act and then confronting the assessee by giving an opportunity of cross-examination.It may be possible that those parties will not have recorded these transactions.Unless It is proved that goods have not moved out of the factory, sale prices mentioned in the sales invoices are not contemporary and quantity is not borne out from records of the manufacturing activities of the assessee, merely because the parties who have purchased from assessee in cash by giving proper sales tax C Forms are not traceable, no adverse inference can be drawn against the assessee. It is alsointeresting that though assessee has credited the full sales realised in cash in the profit and loss account as cash sales still AO has made an addition u/s 68 of the act of only Net profit earned by the assessee. In fact, net profit is not sum credited in the books of the assessee but it is a result of trading transactions of sales, purchases, and expenses and to ourmind, provisions of section 68 does not ally to net profit but to sum credited in the books of accounts.Therefore, for AY 2008-09, we confirm the order of CIT (A) in deleting the addition of Rs.17,00,296/- being N P on cash sales. We dismiss the appeal of the revenue for AY 2008-09.

8. For AY 2009-10, assessee company has recorded gross sales of Rs 32,22,43,737/- out of which cash sales is Rs. 4,69,00,467/-. AO has made addition of Rs 12,00,562/- being net profit on cash sales adopting the comparable cases. In assessment, assessee has not produced any details of cash sales except the amount of cash sales despite relevant details repeatedly asked by AO. Therefore, in AY 2009-10 assessee has not provided any relevant details on which AO could have made any inquiry of cash sales in contradistinction to facts of AY 2008-09 where assessee has provided the relevant details available with it including C forms issued by the parties. Therefore, for this year AO was handicapped in absence of any details and made addition of net profit of Page 5 of 7 ACIT V Dev Bhoomi Steels Private Limited & 6333 /Del/2013 A Y 2008-09 and 2009-10 Rs 12,00,652/- u/s 68. Ld CIT (A) has deleted the addition based on his order for AY 2008-09 without appreciating that as compared to AY 2008-09 where assessee has furnished relevant details in AY 2009-10 assessee has not furnished any details except the amount of cash sales. Further, in this year there is no finding whether even CIT (A) has examined the sales and verified the books as he has done in AY 2008- 09.Therefore, in our opinion, CIT (A) has committed an error in deleting the addition for AY 2009-10 following his order in case of assessee for AY 2008-09 in absence of any details of cash sales and in absence of any inquiry made by CIT (A).Therefore, in the interest of justice, we set aside the appeal of AY 2009-10 back to the file ofAO with a direction to inquire, verify, and deal with cash sales recorded by the assessee in accordance with law after affording sufficient and necessary opportunity of hearing to the assessee.Thus, appeal of the revenue is allowed for statistical purposes.