ORDER
G.D. Agarwal, Accountant Member.
These cross appeals are directed against the order of the Commissioner (Appeals)-II, Baroda for assessment year 1988-89. They are being disposed of by this common order for the sake of convenience.
2. The first ground in the revenue’s appeal reads as under:
On the facts and in the circumstances of the case and in law the learned Commissioner (Appeals) erred in reducing the disallowance in respect of claim of commission payments to M/s. P.M.P. Auto Industries and M/s. Shivshanker & Co. by a sum of Rs. 5,68,622.”
3. In the assessee’s appeal, five grounds are raised. They are all against the sustenance of disallowance of commission paid to P.M.P. Auto Industries Ltd. and M/s. Shivshanker & Co., which is partly sustained by the CIT(A).
4. The facts of the case are that the assessee derives income from manufacturing of plastic utensils such as bucket, etc. The assessee is importing raw material and the part of the imported raw material is sold on high-seas basis. On the above, high-seas sale of raw material, the assessee paid commission to the following two parties:
Rs.
(a)
M/s. P.M.P. Auto Industries Ltd.
Rs. 4,21,246.50
(b)
M/s. Shivshanker & Co.
Rs. 3,04,496.00
Total
Rs. 7,25,742.50
5. The assessing officer disallowed the above commission while the Commissioner (Appeals) reduced the disallowance to Rs. 67,370 for commission paid to M/s. P.M.P. Auto Industries Ltd. and Rs. 84,750 for the commission paid to M/s. Shivshanker & Co. Both the parties aggrieved with the order of the Commissioner (Appeals) are in appeal before us.
6. At the time of hearing before us, the learned counsel for the assessee argued at length. He stated that the assessee was importing the raw material primarily for using the same in the manufacturing process. The assessee was permitted to sell part of the raw material which was not immediately required for the manufacturing purpose. However, the sale of imported raw material can be made only to a person for utilization in the manufacturing of plastic goods. Therefore, if the assessee wanted to sell the raw material while the goods are in transit on high-seas basis, if needed information of the prospective buyers. The assessee had appointed M/s. P.M.P. Auto Industries Ltd. and M/s. Shivshanker & Co. as Commission Agents so as to supply the authentic information about the prospective buyers of the imported raw materials. Those Commission Agents supplied the information about the creditworthiness of such buyers and relying upon those information supplied by the Commission Agents. The assessee made the sales on high-seas basis. The assessee has produced the confirmations and also the income-tax details of the above Commission Agents. The assessing officer wanted those Commission Agents to be produced before him. The assessee could not produce one Commission Agent i.e., M/s. Shivshanker & Co. because he was not available at the relevant time. While the authorised representative of M/s. P.M.P. Auto Industries Ltd. was produced before the assessing officer and he has affirmed having received the commission by M/s. P.M.P. Auto Industries Ltd. The learned counsel vehemently stated that the assessing officer disallowed the commission mainly on the ground that the Commission Agents were not produced before him. He contended that the Commission Agents are situated at Mumbai which is more than 300 kms. from Baroda. Therefore, as per Civil Procedure Code, they could not be asked to appear as witnesses from a distance of more than 300 kms. The assessing officer if considered their examination essential, he could have issued commission to the income-tax authorities at Mumbai for examining the above Commission Agents. He submitted that the commission paid by the assessee on high-seas sale is allowed in the preceding years. He also submitted that the payments of commission have been made by cheques in the subsequent years. Both the Commission Agents are assessed to income-tax. They have confirmed having received the commission. There is no evidence on record that the payment of commission by the assessee has been received back by the assessee. In view of above it is contended by the learned counsel that the Commissioner (Appeals) was not justified in sustaining the disallowance partly. He pointed out that the assessing officer has verified certain sale instances. Some of the buyer parties were not found available at the time of verification by the assessing officer and therefore, the assessing officer disbelieved such high-seas sales. The Commissioner (Appeals) has sustained the disallowance of commission in respect of sale to those parties who were not found at the addresses given by the assessee at the time of verification by the assessing officer. It is submitted by the learned counsel that the enquiries Were made by the assessing officer after several years of sales by the assessee. Therefore, merely because the parties were not found at the addresses given, does not prove that no sale was made by the assessee or no services were rendered by the Commission Agents with regard to those sales. He submitted that the addition made for those unverifiable sales was also deleted by the Commissioner (Appeals) and, therefore, there was no justification for sustenance of part of disallowance of commission by the Commissioner (Appeals). In support of his contentions, he relied upon the following decisions.
(1) J.R. Patel & Sons Ltd. v. CIT (1968) 69 ITR 782 (Guj.)
(2) Holtamp Transformers (P) Ltd. v. CIT (1981) 129 ITR 105 (Guj.)
(3) Mather & Platt (India) Ltd. v. CIT (1987) 168 ITR 493 (Cal.)
(4) Swastic Textile Co. (P) Ltd. v. CIT (1984) 150 ITR 155 (Guj.)
(5) VIP Industries Ltd. v. Inspecting Asstt. Commissioner (1991) 36 ITD 70 (Bom.)(TM)
(6) CIT v. Orissa Corpn. (P) Ltd, (1986) 159 ITR 78 (SC)
(7) Dy. CIT v. Rohini Builders (2002) 256 ITR 360 (Guj.)
7. The learned departmental Representative, on the other hand, submitted that it is a settled law that the burden is upon the assessee to prove that expenditure was incurred for the purpose of business. When the assessee is claiming the deduction for payment of commission the burden is upon the assessee to establish that the commission was paid for the services rendered by the Commission Agents. In this case the assessing officer time and again asked the assessee to produce the documentary evidence for the services rendered. The assessee admitted that the relevant records are destroyed. In the above circumstances, the assessing officer asked the assessee to produce the Commission Agents so as to verify the correctness of’ the assessee’s claim that the Commission Agents have rendered the services to the assessee. However, the Commission Agents were not produced, Therefore, the assessee produced neither the documentary evidence nor oral evidence to support its claim for the payment of: commission. The assessee had claimed before the Commissioner (Appeals) that there was agreement with the Commission Agents. However, no such agreement was produced either before the assessing officer or not even before the Tribunal in the paper book. That no payment of commission was made to the Commission Agents during the year under consideration. On the other hand, the entire amount remained credited to their accounts. The assessee has filed the so called income-tax details of M/s. Shivshanker & Co. at pages 29 to 32 of the assessee’s paper book. However, in those details there is no mention about the receipt of any commission from the assessee. The so called copy of assessment order which is at pages 31 and 32 of the assessee’s paper book, is in the name of Bishwanath Prakashkumar HUF While there is no such Commission Agent, moreover, the assessed income is a loss. In view of above he submitted that the assessee has not produced best evidence which could be in the possession of the assessee. Therefore, the disallowance of entire commission as made by the assessing officer should be sustained. In support of his contentions he relied upon the following decisions :
(1) CIT v. Mussadilal Rain Bharose (1987) 165 ITR 14 (SC)
(2) Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR (SC)
(3) CIT v. Smt. Krishnaveni Ammal (1986) 158 ITR 826 (Mad.)
(4) CIT v. Durga Prasad More (1971) 82 ITR 540 (SC)
(5) CIT v. Transport Corpn. of India Ltd. (1996) 221 ITR 127 (AP)
(6) CIT v. Transport Corpn. of India Ltd. (2002) 256 ITR 701 (AP)
(7) Precision Instrument Mfg. Co. v. CIT (1981) 137 ITR 5 (Del)
(8) CIT v. Ramdas Ramlal (1984) 149 ITR 256 (AP)
8. We have carefully considered the rival contentions and perused the material placed before us. The Hon’ble jurisdictional High Court in the case of J.R. Patel & Sons Ltd. (supra) laid down the principle that should be followed to consider whether any payment was made for the purpose of business. Their Lordships held as under
“In deciding whether a payment was made for purposes of business, the correct approach would be to see whether it was made on grounds of commercial expediency for the ultimate benefit of the business. Whether that benefit is to accrue immediately or after a lapse of time and whether directlv or indirectly is immaterial.”
9. Similar view was expressed by Their Lordships of the Hon’ble Andhra Pradesh High Court in the case of Transport Corpn. of India (supra) wherein Their Lordships held that the assessee is not entitled to the deduction of expenditure unless the same was proved to be paid for commercial consideration. Therefore, the moot point to be examined is whether the payment of commission by the assessee was on the ground of commercial expediency for the benefit of business or not. It is also settled law that when the assessee claims deduction for any expenditure, the burden is upon the assessee to establish that the expenditure was incurred for commercial consideration. Let us examine the facts of the case under consideration before us so as to arrive at the conclusion whether the payment of commission was for commercial consideration or not? The assessee is deriving income from manufacturing of plastic utensils. It is importing raw material. Part of the raw material is sold on high-seas basis. It is claimed by the assessee’s counsel that the commission was paid for the information supplied by the Commission Agents with regard to prospective buyers. The assessee has claimed to have agreement with the Commission Agents but no such agreement was produced before any of the lower authorities or before us. The assessee has also not produced any evidence with regard to alleged information, if any, supplied by the Commission Agents. At page 7 in para 5.1 of the assessment order the assessing officer has reproduced the assessee’s explanation with regard to payment of commission. The assessee has admitted “The original record relevant to the period ended on 30-6-1987, being old are presently not available”. In para 5.3 at page 9 of the assessment order the assessing officer has again recorded that the assessee has admitted to have destroyed the original records relating to the payment of commission to its secret agents. In the absence of any documentary evidence being brought on record by the assessee, the assessing officer asked the assessee to produce the concerned Agents. Admittedly M/s. Shivshanker & Co. was not produced. on behalf of M/s. P.M.P. Auto Industries Ltd., Shri Manoj R. Gandhi, CA appeared before the assessing officer and he stated that Shri U.G. Bhonsle – Executive Director of M/s. P.M.P. Auto Industries Ltd. has told him to confirm the commission received by the company. From the above, it is evident that Shri Manoj R. Gandhi was only the messenger to convey the receipt of commission by M/s. P.M.P. Auto Industries Ltd. However, what were the services rendered by M/s. P.M.P. Auto Industries Ltd. and whether the payment of commission was for business expediency, has not been established by appearance of Mr. Gandhi. The assessee has also claimed to have furnished the assessment records of the Commission Agents from pages 29 onwards of the assessee’s paper book. We find that at page 29 is Balance Sheet of M/s. Shivshanker & Co. as on 31-3-1989. In the Balance Sheet of the company, the name of the assessee is not appearing. At page 30 there is a P&L Account of M/s Shivshanker & Co, for 31-3-1989 and we find that there was no receipt of commission and as per the P&L Account there was net loss of Rs. 25,419. Moreover, the relevant assessment year under consideration before us is assessment year 1988-89. Therefore, the above P&L Account and Balance Sheet of the period 31-3-1989 does not support in any way the claim of the assessee that there was any payment of commission to M/s. Shivshanker & Co. and it was for the commercial expediency. At pages 31, 32 and 33 the assessment order of Bishwanath Prakash kumar HUF under section 143(1)(a) for assessment years 1989-90 and 1990-91 are submitted. We find that the Commission Agent of the assessee is M/S. Shivshanker & Co., then how the assessment order of Bishwanath Prakash kumar HUF is relevant in this regard, is not explained. Moreover, there is no assessment order for the relevant year, i.e., assessment year 1988-89. In the Demand Notice for assessment year 1987-88 there is no mention about the income assessed. In assessment year 1989-90 the income assessed is loss of Rs. 4,179. While in assessment year 1990-91 the income assessed is Rs. 11,250. Thus from any of the above documents produced by the assessee it is not proved that the assessee has paid the commission of Rs. 3,04,496 to M/s. Shivshanker & Co. Moreover, the main question is whether the above commission was paid for the purpose of business expediency. The assessee has not brought on record any evidence either documentary or oral to establish that any services were rendered by the Commission Agents. It is claimed by the assessee that the Commission Agents were supplying the information with regard to the prospective buyers. However, the above claim has not been substantiated with any evidence in this regard. If the assessee has paid the commission of several lakhs of rupees for getting such information, the information must have been in writing containing important information about the prospective buyers. The assessee should have produced such information or any correspondence with the Commission Agents. No such information claimed to have been supplied by the Commission Agents or any correspondence with the Commission Agents is produced. There is no agreement with the Commission Agents. The Commission Agents have also not been produced before the assessing officer. In the above circumstances, we hold that the assessee has not been able to establish that the payment of commission was for commercial expediency. We may mention that the learned counsel for the assessee has relied upon various decisions. However, the facts are different in all those cases.
10. In the case of J.R. Patel & Sons Ltd. (supra) the Hon’ble jurisdictional High Court found that the commission was paid to the Managing Director of the managing agency company for the services rendered by the Managing Director to the managed company. Thus, there was clear evidence of the services being rendered by the Managing Director to whom the commission was paid. In the case of Voltamp Transformers (P) Ltd. (supra) the commission was paid by the assessee to the sole-selling agent. There was evidence on record that the sales have increased due to efforts of the agent and the commission was received. Thus, in that case also, there was evidence of services being rendered by the agent. In the case of Mather & Platt (India) Ltd. (supra) it was found that the assessee had entered into the business transactions through the commission agent. The assessee has also produced the correspondence with the agent. The payment was made by cheque. Considering the totality of the facts of the case, it was held by the Hon’ble Calcutta High Court that the assessee has discharged its primary onus. However, in the case under consideration before us it has not been proved that the transactions of sales have taken place through the Commission Agents. No correspondence with the Commission Agents have been produced. In the case of Swastic Textile Co (P) Ltd (supra) there is evidence that the Commission Agent had brought the two parties to whom the goods were sold by the assessee. While in the case under consideration before us there is no evidence that the Commission Agents brought any party to whom the sale was made. In the case of V.I.P. Industries Ltd (supra) there is evidence that the Commission Agent had obtained orders from the Canteen Store department and Government departments. Thus, the facts were different before the ITAT in the case of V.I.P. Industries Ltd. (supra), than the facts in the case under consideration before us. The decisions in the cases of Orissa Corpn. Ltd (supra) and Rohini Builders (supra) relied upon by the learned counsel for the assessee were with regard to the cash credits. That there arc different parameters for allowability of commission and acceptance of cash credits. The deduction for claim of commission can be allowed only if there is evidence of services having been rendered by the commission agent. While in the case of cash credit the criteria for acceptance of the cash credit are different. Therefore, the above two decisions relied upon by the learned counsel would not be applicable for adjudicating the allowability of claim of commission.
11. In view of above, we hold that the assessee has not been able to prove that the commission was paid to M/s. Shivshanker & Co. and M/s. P.M.P Auto Industries Ltd. for services rendered by them. Accordingly, we reverse the order of the Commissioner (Appeals) in this regard and uphold the order of the assessing officer, i.e., the commission paid to them, is disallowed fully.
12. The second and third grounds in the revenue’s appeal read as under:-
2. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in deleting the addition of Rs. 29,37,339 on account of estimated premium earned on alleged sale of imported material to the 29 parties who were untraceable.
3. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in deleting the addition of Rs. 168,498, being the estimated premium earned on alleged sales to (1) M/s. Nakoda Industrial Corporation and (2) Shreeji Polypropylene Industries, who denied to have made any purchases from the assessee.
13. At the time of hearing before us, it is submitted by the learned DR that during the year under consideration the assessee has claimed to have sold certain imported raw material on high-seas basis. That the assessing officer to verify the correctness of the assessee’s claim asked the assessee to furnish the list of sales above Rs. 50,000. Thereafter, the assessing officer issued notice under section 133 of the Act to those parties. In the case of 29 parties, the list of which is given from pages 17 to 19 of the assessment order, the letters were returned unserved. Two parties, viz. M/s. Nakoda Industrial Corporation and Shreeji Polypropylene Industries, denied to have purchased the material from the assessee. Therefore, the assessing officer asked the assessee to produce those parties. However, the assesses could not produce a single party. Moreover, no evidence is produced by the assessee to prove that the goods were actually sold by the assessee on high-seas basis to the above parties. Therefore, the assessing officer rightly inferred that those goods were sold by the assessee in the open market at premium. At the relevant time there was shortage of the imported raw material and, therefore, the premium of 20% estimated by the assessing officer on sale is quite fair and reasonable. He submitted that the Commissioner (Appeals) wrongly deleted the addition without appreciating the correct facts in this regard. Therefore, the order of the Commissioner (Appeals) should be reversed and that of the assessing officer should be restored.
14. The learned counsel for the assessee, on the other hand, relied upon the order of the Commissioner (Appeals). He submitted that the assessee sold the goods on high-seas basis to various parties. Sale to those parties are evident from several documentary evidences, viz., contract for sale, letters issued to the Assistant Collector of Customs authorizing the buyers to take delivery of imported raw material, invoice of C&F Agent who got the goods cleared from the Customs on behalf of the buyers, Indemnity Bond issued by the buyers. That the payments for sale of goods were received by cheques. That merely because after several years of the transactions, if some buyers were not found at their original address, it does not mean that the sale to those parties were non-genuine. He further submitted that the assessing officer not only estimated the profit on the sale of goods but he also presumed that the goods were got cleared from the Customs Authorities by the assessee by payment of Customs Duty at the rate of 135% and thereafter he worked out the cost of the imported goods and estimated the profit at 20%. From the above profit he has even not reduced the profit disclosed by the assessee on the sale of high-seas goods. The learned counsel vehemently contended that there is no iota of evidence that the goods were got cleared from the Customs by the assessee. The assessing officer though presumed the Customs Duty to have been paid by the assessee, but he has not made any addition for source of investment in the payment of Customs Duty. That the assessing officer was not justified in presuming that the Customs Duty was paid by the assessee without bringing on record any evidence in this regard. He has also submitted that on the sale of goods on high-seas basis, only a nominal margin is earned because the assessee has only imported raw material and when the raw material was in transit, the entire shipment was sold. On such high-seas sale of raw material, the profit margin is normally negligible. He has also pointed out that similar addition made by the assessing officer in assessee’s own case for assessment year 1992-93 is deleted by the Tribunal vide ITA No. 2984/Ahd./96. He further submitted that the revenue has accepted the above order of the Tribunal on this ground though they filed reference application in respect of other grounds.
15. We have carefully considered the arguments of both the parties and perused the material placed before us. We find that the identical issue is considered by the Tribunal in the assessee’s own case for assessment year 1992-93, wherein the assessing officer had made the addition of Rs. 13,78,575. On appeal, the Commissioner (Appeals) deleted the addition. The revenue filed the appeal before the Tribunal. However, the Tribunal vide order dated 7-5-1997 in ITA No. 3129/Ahd./96 upheld the order of the Commissioner (Appeals). The relevant facts and the findings of the Tribunal contained in paras 25 to 27 of the order are reproduced herein below for ready reference :
“25. As regards the last ground raised by the revenue relating to the deletion of addition of Rs. 13,78,575 on account of understated profit of high-sea sales we find that the assessee sold raw material of 3,26,000 kgs. out of the total import of 4,98,378 kgs. The CIF cost of 3,26,000 kgs. of raw material was Rs. 67,98,657 and the same was sold for Rs. 68,92,875. The sale was made on high-sea. The custom duty and other expenses on landing port were paid by the purchaser but all the expenses incurred on bringing the material up to high-sea were borne by the assessee. According to the assessing officer, such expenses include bank charges, interest on Letter of Credit, L C opening charges, telephone/telex charges, service charges, other administrative expenses, etc. pertaining to import. According to the assessing officer, use of its staff, stationery, office and other convenience for importing the raw material is not ruled out. Further, according to the assessing officer, if all such expenses are estimated at 10% of CIF cost then cost of such material to the assessee would come to Rs. 74,78,522 and in the process the assessee would have suffered a loss of Rs. 5,85,647. The assessing officer has also referred to various individual transactions where CIF cost is alleged to be more than the sale price. The assessing officer also noted that during the same period the assessee purchased similar raw material from local market at higher rate. The assessee when confronted explained that the imported material was sold considering business exigencies and prevailing market price. The assessing officer has further noted the following facts :-
(i) The assessee claimed to have sold 16,000 kgs. of PP to Textplast Engineering (P.) Ltd., Thane and on enquiry it was stated by the said company that they had not made purchase of any material from the assessee during financial year 1991-92.
(ii) The assessee alleged to have sold raw material to Saru Plastics, Amba Pack, Kuppiam Oddapam, Plastifills whose proprietor was Devi Dayal Plastic Industries, Halo. A registered letter sent to this party returned unserved by postal authorities. The assessee failed to state the place of delivery of material to these parties and also to submit their accounts.
(iii) The sister concern Vikram Plastics also sold goods on high-seas earning a gross profit rate of 10.75 per cent during the year.
(iv) Another sister concern M/s. Ishwar Arts also sold imported raw material earning gross profit rate of 10.6%.
(v) The raw material during the year was in scarcity and was fetching high premium in the market. The only domestic manufacturer of plastic granules was I.P.C. L. and probably it was not manufacturing HDPE which the assessee sold on high-seas at a price lower then the CIF cost.
The assessing officer on these facts held the view that the assessee received premium on such sale at 20 per cent on CIF cost and the same was worked out at Rs. 13,78,575. The assessing officer therefore, made an addition of Rs. 13,78,575 in the total income.
26. On appeal, it was submitted on behalf of the assessee that all the transactions made in the cases of high-sea sale were genuine and they were supported by proper documents. The written submissions made before the FAA were forwarded to the assessing officer for comments and thereon the assessing officer on making further enquiry reported to the FAA in his letter dated 23-1-1996 that the transactions made by the assessee with Devi Dayal Plastic Industries have been confirmed by the said party. Textplast Engineering (P) Ltd. has also confirmed the transactions with the assessee. The FAA observed that various concerns of the assessee group had shown different GP rate on high-sea sales. Some of them have shown gross profit of about 10 per cent and that has been accepted by the assessing officer. The transactions made with other parties by the assessee have been confirmed. The FAA on these facts held the view that there was no reason to doubt the genuineness of the transactions entered into by the assessee and addition made by the assessing officer on account of profit on high-sea sale was directed to be deleted.
27. We have heard the representatives of the revenue as well as the assessee and also considered the facts and material on record. We find that the assessee along with its sister concerns imported plastic material of various varieties such as PP, HDPE, LDPE, etc. under OGL Scheme and they sold part of the material imported on high-seas when not immediately required in its manufacturing and also made purchases of the raw material from the local market as and when there is deficiency in imported raw material. We also find that the assessee according to the assessing officer purchased the said raw material weighing 3,26,000 kgs. for Rs. 67,98,657 (CIF Cost) whereas the same was sold on high-sea for a consideration of Rs. 68,92,875. The assessee thus earned a profit of about Rs. 94,000. We further find that the custom authorities were duly informed by the assessee about the sales made on high-seas and the purchasing parties had confirmed having purchased the goods to the custom authorities and they also made undertaking for payment of custom duty and other related expenses. Necessary documents in this respect are placed at pages 155 to 257 of the compilation. As per enquiry made by the assessing officer the said parties have also confirmed having purchased the said goods on high-scas. The sales made by the assessee on high-seas to the said parties are thus genuine. We also find that all the manufacturing concerns of this group had imported raw material and part of the same was sold on high-seas. Vikram Plastics and Ishwar Arts earned gross profit at about 10 percent on such high-sea sales whereas Ishwar Ashish Plastics P. Ltd. has shown a gross profit rate at 2.59 per cent on high-sea sale whereas in the case of the assessee the GP rate comes to 1.37 per cent.The gross profit rate would vary depending upon the market conditions and the nature of the material sold. Moreover the transactions of sale being genuine and there being no evidence brought on record to prove that the assessee charged over and above that shown in the books of account and in the absence of any such material the finding given by the assessing officer that the sales were made on premium is not held justified and valid. In this view of the matter, we see no infirmity in the order of the FAA and the same is upheld.”
16. The facts of the year under consideration are more or less similar. In that year also the assessing officer found that the assessee has sold goods on high-sea basis. On enquiry by the assessing officer one party viz. TextPlast Engineering (P) Ltd. denied to have purchased such goods and letters sent to several other parties were returned unserved. On the above facts the assessing officer presumed that the assessee sold the material by earning the premium of 20 per cent. Similarly in the year under consideration before us two parties have denied to have purchased the goods while the letters sent to several parties were returned unserved. However, in that case the Commissioner (Appeals) forwarded the assessee’s written submissions before the assessing officer and asked him to send his report after making further enquiry, On further enquiry by the assessing officer, some of the parties confirmed the sale made by the assessee. The only difference in the year under consideration is that the Commissioner (Appeals) deleted the addition accepting the genuineness of the sale on the basis of material produced by the assessee without asking any further enquiry to be conducted by the assessing officer. The matter is almost 20 years old and no useful purpose will be served if at this stage any further enquiry is directed to be conducted. But the fact remains that in the subsequent year, i.e., assessment year 1992-93 on almost identical facts the Tribunal accepted the sales to be genuine. Moreover, it has been Pointed out by the learned counsel that before the assessing officer the assessee has produced several documentary evidences to prove the genuineness of sale made by the assessee. Each buyer has written a separate letter to the Assistant Collector of Customs confirming the purchase of the goods on high-sea basis along with a declaration that they are actual user of the raw material purchased by them. In such certificate the address of their Industrial Undertaking and the Registration number under the Sales-Tax Act is given. The assessee has also produced the bills issued by the clearing and forwarding agents in the names of the buyers of the goods, as an evidence of the clearance of the goods from the Customs Authorities by the buyers. The assessing officer has not doubted the correctness of the above evidences produced by the assessee. The assessing officer has presumed that the goods have not been sold by the assessee on high sea basis but have been got cleared from the Customs authorities by payment of Customs Duty and then the goods were sold in the open market by charging premium. However, no evidence is brought on record by the revenue of the payment of Customs Duty by the assessee on such goods. The assessing officer himself has not made any addition for unexplained investment in the payment of Customs Duty by the assessee. The payment of Customs Duty is on the record of the Customs Authorities. Therefore, if assessing officer had any doubt about payment of custom duty by the assessee and not by the buyer, he could have obtained information from Customs Authorities. In the absence of any evidence brought on record, in our opinion, the assessing officer was not justified in presuming that the Customs Duty were paid by the assessee on the clearance of above goods. On the other hand, the assessee has produced the letters written by the buyers to the Assistant Collector of Customs and has also produced the bills issued by the clearing and forwarding agents in the names of the buyers. The above documentary evidences support the case of the assessee to the extent that the goods were got cleared from the Customs Authorities by the buyers and not by the assessee. That if the buyer is not found at the address given, the assessing officer has every right to doubt the genuineness of sale to those parties but that by itself would not be sufficient to conclude that the sale was not made on high-sea basis and further presume that the goods were got cleared from the Customs Authorities on payment of Custom Duty and the same were sold by the assessee in open market on premium. No evidence of payment of Custom Duty or getting the goods cleared from the Customs Authorities is brought on record by the revenue. Moreover, there is no evidence of sale of goods in the open market by the assessee. In the assessment year 1992-93 on identical allegations the addition was made which was deleted by the Commissioner (Appeals) which is upheld by the Tribunal. In the said order the Tribunal has also noticed that similar sale is being made by the assessee and other group concerns in other years. The Tribunal has also observed that one of the sister concerns Ishwar Ashish Plastics (P) Ltd. has shown the GP rate of 2.59 per cent. The assessee in assessment year 1992-93 has shown the GP rate of 1.37 per cent which is accepted by the Tribunal. It has been pointed by the learned counsel for the assessee that the GP in the year under consideration is 4.4 per cent. The trading account produced by the assessee in this respect is reproduced as under
Trading Account of High-Seas Sales effected to 29 Parties
Particulars
Amt. Rs.
Particulars
Amt. Rs.
To Purchases
55,74,627
By Sales
61,87,956
(674.22 MT)
To Commission on Sales
3,37,110
(674.22 X Rs. 500 per MT)
To Profit (4.4%)
2,76,219
Total,
61,87,956
Total
61,87,956
17. However, the assessee’s claim for payment of commission to the Commission Agents have been disallowed by the assessing officer and the same has been sustained by us. Therefore after excluding the commission, the GP would be Rs. 6,13,329 (Rs. 2,76,219 + Rs. 3,37,110), which is approximately 10 per cent of the sales made by the assessee on high-seas basis. The GP disclosed by the assessee is much better than the GP accepted by the Tribunal in assessee’s own case for assessment year 1992-93 and in the case of Ishwar Ashish Plastics (P) Ltd.
18. In view of above, even if it is held that technically proviso to section 145 is applicable due to non- availability of buyer at the address given, since the profit disclosed by the assessee is quite reasonable, no addition on this account can be sustained. We, therefore, find no merit in Ground Nos. 2 and 3 of the revenue’s appeal. The same are rejected.
19. In the result, the assessee’s appeal is dismissed while the revenue’s appeal is partly allowed.