M/s. Star Wire (India) Ltd., New Delhi V. ACIT, Faridabad

CO 342/DEL/2011

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0227 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 22-05-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 13-10-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P D MITTAL
• Assessee Lawyers: RAMESH CHANDRA
• Keywords: Reopening of assessment; Business expenditure; Search and seizure; Document seized; Documents seized
• Section: 131; 68; 132

Judgement Text

ITA 4023/DEL/2011 CO 342/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO. 4023/DEL/2011 ASSESSMENT Y EAR: 2009-10 ASSTT.COMMISSIONER OF INCOME TAX, VS M/S STAR WIRE (INDIA) LTD., CENTRAL CIRCLE-I, FARIDABAD. 35, LINK ROAD, 2 ND FLOOR, LAJPAT NAGAR-III, NEW DELHI-110024 C.O. NO. 342/DEL/2011 ( IN ITA NO. 4023/DEL/2011) ASSESSMENT YE AR: 2009-10 M/S STAR WIRE (INDIA) LTD., VS A CIT, FARIDABAD. 35, LINK ROAD, 2 ND FLOOR, LAJPAT NAGAR-III, NEW DELHI-110024 (APPELLANT) (R ESPONDENT) APPELLANT BY: SHRI RAMESH CHANDRA, CIT DR RESPONDENT BY: SHRI P.D. MITTAL, FCA O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THE ABOVE CAPTIONED APPEAL OF THE REVENUE AS WELL AS CO OF THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORDER OF T HE CIT(A)-I, LUDHIANA DATED 23.6.2011 IN APPEAL NO. 66/IT/CIT-I/LDH/2010- 11 FOR AY 2009-10. ITA 4023/DEL/2011 CO 342/DEL/2011 2 THESE APPEALS ARE BEING CLUBBED AND DISPOSED OF TOG ETHER FOR THE SAKE OF BREVITY AND CONVENIENCE. ITA NO. 4023/DEL/2011 OF THE REVENUE 2. EFFECTIVELY, THE REVENUE HAS RAISED FOLLOWING TW O GROUNDS IN THIS APPEAL:- I) THE L D. CIT (A) HAS ERRED BOTH IN LAW AND ON FACTS OF TH E CASE IN DELETING THE ADD I TION O F RS. 82 LACS MADE BY T H E A . O. RELYING ON INCORRECT FACTS AND WITHOUT A PP RE C I ATING THAT A. RS. 82 LACS WERE FOUND AND SEIZED FROM THE RESIDENCE OF SH . S . K . G OYAL WHO COULD NOT FUR N ISH AN Y EXPLANATION REGARDING SOURCE OF CASH FOUND AND HAD SURRENDERED TH IS AMOUNT AS UNDISCLOSED INCOME DURING THE COURSE OF SEARCH ON 2 9 TH JANUAR Y 2009 AND IT WAS ONLY ON 21 . 4 . 2009 THAT HE HAD CHANGED HIS STAND BY F IL I N G AN AFFIDA V IT DATED 19 . 02 . 2009 SAYING THAT THIS AMOUNT BELONGED TO THE STAR WI RE (INDIA) LTD. B. THI S AMOUNT WAS NEVER INCLUDED IN THE SURRENDERED AMOUNT O F RS. 7 CRORE MADE BY THE STAR W I RE (INDIA) L TD. AS DECLARED U/S 132( 4 ) DURING THE COURSE OF SEARCH AS AN ADDITIONAL INCO ME OVER AND ABOVE THE REGULAR INCOME AND IT WAS ONLY O N 21 . 4 . 2009 THAT THE COMPANY FILED AN AFFIDAVIT DATED 19.0 2.2009 SAYING THAT THIS A MOUNT WAS EARLIER GIVEN TO SHRI GOYAL AND THEN WRONGLY ADDED THE SAME IN A LREAD Y DECLARED UNDISCLOSED INCOME. C. I T W AS ONL Y AS AN AFTERTHOUGHT THAT THE ASSESSEE COM P ANY ADDED THIS AMOUNT ALSO A ND WRONGL Y PRE S ENTED THE SAME AS DE C LARED UNDISCLOSE D INCOME . ITA 4023/DEL/2011 CO 342/DEL/2011 3 D. AS THE ASSESSEE COMPANY HAD NEVER DECLARED THIS AMOUNT AS UNDISCLOSED INCOME DU RING THE COU R SE OF SEARCH AND SUCH DECLARATION WAS MADE ONLY ON 21 . 4 . 2009 THIS CA N N OT B E TREAT E D A S A DECLARATION U/S 132 (4) OF THE I T ACT . II) THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN DELETING ADDITION OF RS. 60 LACS MADE ON TH E BASIS OF DOCUMENT FOUND DURING SEARCH OPERATION WHICH WAS AN AGREEMENT TO SALE LAND AND IGNORING THE FACT THAT II. III. A. THE PURCHASER HAS UNEQUIVOCALLY DENIED HAVING PAID IN CASH OF RS.60 LACS , IN THE STATEMENT U/S 131 BEFORE THE A 0 , WHO HAD DULY INFORMED THIS FACT TO THE ASSESSEE DUR ING THE ASSESSMENT PROCEEDINGS. B. IN THE AGREEMENT THE ENTRY OF RS. 60 LACS RECEIVED AS CASH WAS INSERTED IN INK . C. AS PER AGREEMENT, EARNEST MONEY WAS SHOWN AT R S. 75 LACS BUT THE ASSESSEE COMPANY CLAIMED THAT ONLY RS. 15 L ACS, RECEIVED IN CHEQUE WAS RETURNED AND CASH OF RS.60 L ACS WAS FORFEITED. D. THE FORFEITURE OF ONLY CASH AMOUNT , AND NOT THE CHEQUE AMOUNT, WHICH IS NOT AS PER THE AGREEMENT , D EFIES LOGIC AND FURTHER THE CANCELLATION AGREEMENT DATED 19.01 . 2011 FILED BEFORE CIT (APPEALS) , APPEARS TO BE AN AFTERTHOUGHT . 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT A SEARCH AND SEIZURE OPERATION WAS CARRIED ON AT THE BUSINESS PR EMISES OF THE ASSESSEE COMPANY AT 21/4, MATHURA ROAD, BALLABHGARH, FARIDAB AD AND ITS REGISTERED ITA 4023/DEL/2011 CO 342/DEL/2011 4 OFFICE AT 35 LINK ROAD, LAJPAT NAGAR-III, NEW DELHI ON 29.1.2009. SEARCH OPERATION U/S 132(1) OF THE INCOME TACT ACT, 1961 ( FOR SHORT THE ACT) WAS ALSO CARRIED OUT AT THE RESIDENTIAL PREMISES OF THE DIRECTORS OF THE COMPANY AND OTHER PREMISES OF THE STAR WIRE (INDIA) LTD. GR OUP OF CASES SIMULTANEOUSLY. DURING THE SEARCH AND SEIZURE OPER ATION, CASH JEWELLERY, DOCUMENTS AND BOOKS OF ACCOUNTS WERE SEIZED AND IMP OUNDED IN THE COURSE OF SEARCH OPERATION FROM THE BUSINESS PREMISES OF THE ASSESSEE AND RESIDENTIAL PREMISES OF THE DIRECTORS OF THE COMPAN Y. ASSESSMENT JURISDICTION OVER THE ASSESSEE HAS SINCE BEEN TRANS FERRED TO CENTRAL CIRCLE-I, FARIDABAD BY THE ORDER OF CIT, KOLKATA DATED 26.3.2 009 PASSED U/S 127 OF THE ACT. THE SEIZED DOCUMENTS AND THE APPRAISAL RE PORT IN THE GROUP WERE RECEIVED BY THE AO ON 10.6.2010 AFTER AFFORDING DUE OPPORTUNITY OF HEARING. THE AO MADE ADDITION OF RS. 82 LAKH ON ACCOUNT OF C ASH SEIZED FROM SHRI S.K. GOYAL, SECOND ADDITION OF RS. 60 LAKH ON THE B ASIS OF DOCUMENT. DURING THE SEARCH OPERATION AND THIRD ADDITION OF R S.10,48,319 ON ACCOUNT OF DIFFERENCE FOUND IN THE STOCK OF THE ASSESSEE. 4. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL WHICH WAS PARTLY ALLOWED BY DELETING FIRST AND SECOND ADDITION BUT THE CIT(A ) UPHELD PART ADDITION OF RS. 4 LAKH ON ACCOUNT OF DIFFERENCE IN STOCK OF THE ASSESSEE. NOW, THE REVENUE HAS FILED PRESENT APPEAL AGAINST THE IMPUGN ED ORDER OF DELETION OF ITA 4023/DEL/2011 CO 342/DEL/2011 5 FIRST AND SECOND ADDITION. AT THE SAME TIME, THE A SSESSEE HAS ALSO PREFERRED CROSS OBJECTION AGAINST PART CONFIRMATION OF ADDITI ON PERTAINING TO DIFFERENCE IN STOCK. GROUND NO. 1 OF THE REVENUE 5. APROPOS GROUND NO. 1 OF THE REVENUE LD. DR SUBM ITTED THAT THE CASH AMOUNT OF RS. 82 LAKH WAS FOUND AND SEIZED FROM TH E RESIDENCE OF SHRI S.K. GOYAL WHO COULD NOT FURNISH ANY EXPLANATION REGARDI NG SOURCE OF CASH AND HAD SURRENDERED THIS AMOUNT AS UNDISCLOSED INCOME D URING THE COURSE OF SEARCH ON 29.1.2009 AND IT WAS ONLY ON 21.4.2009 TH AT SHRI S.K. GOYAL CHANGED HIS STAND BY FILING AN AFFIDAVIT DATED 19.2 .2009 SAYING THAT THIS AMOUNT BELONGED TO STAR WIRE INDIA LTD. I.E. ASSESS EE COMPANY. LD. DR FURTHER SUBMTITD THAT THIS AMOUNT WAS NEVER INCLUDE D IN THE SURRENDERED AMOUNT OF RS. 7 LAKH BY THE ASSESSEE AS DECLARED U/ S 132(4) OF THE ACT DURING THE COURSE OF SEARCH AS AN ADDITIONAL INCOME OVER A ND ABOVE THE REGULAR INCOME. THE DR VEHEMENTLY CONTENDED THAT IT WAS ON LY ON 21.4.2009 ON WHICH THE COMPANY FILED AN AFFIDAVIT DATED 19.2.200 9 SAYING THAT THIS AMOUNT WAS EARLIER GIVEN TO SHRI S.K. GOYAL AND THE N WRONGLY ADDED THE SAME IN ALREADY DECLARED UNDISCLOSED INCOME. THE D R ALSO CONTENDED THAT THE STAND OF THE SSESSEE COMPANY WAS AN AFTERTHOUGH T THAT THE ASSESSEE ITA 4023/DEL/2011 CO 342/DEL/2011 6 COMPANY HAD ADDED THIS AMOUNT IN THE DECLARED AMOUN T OF UNDISCLOSED INCOME OF RS. 7 CRORES AS THE ASSESSEE COMPANY HAD NEVER DECLARED THIS AMOUNT AS UNDISCLOSED INCOME DURING THE COURSE OF S EARCH AND SEIZURE OPERATION AND SUCH DECLARATION WAS MADE ONLY ON 21. 4.2009 WHICH CANNOT BE TREATED IN DECLARATION U/S 134 OF THE ACT. 6. REPLYING TO THE ABOVE, THE AR REITERATED SUBMISS IONS AND CONTENTIONS OF THE ASSESSEE WHICH WERE PLACED BEFORE THE CIT(A) DURING THE FIRST APPELLATE PROCEEDINGS. THE SUBMISSIONS AND CONTENT IONS OF THE ASSESSEE BEFORE THE CIT(A) WERE AS UNDER:- I. 'IT IS TRUE AND ADMITTED THAT A SUM OF RS.82,00,000/- WAS FOUND IN THE POSSESSION OF DR SK GOEL, CEO OF THE ASSESSEE COMPANY AT THE TIME OF SEARCH O N 29 JANUARY 2009 AND OUT OF THE SAID AMOUNT, A SUM OF RS.81,00,000/- WAS SEIZED BY THE INCOME TAX DEPARTM ENT ON THE SAID DATE. II. THE ASSESSEE COMPANY HAS ADMITTED BEFORE THE ASSISTANT DIRECTOR OF INSPECTION (INVESTIGATION), F ARIDABAD THAT THE ABOVE AMOUNT OF RS.82,00,000/- BELONG TO T HE ASSESSEE COMPANY AND WILL FORM PART OF THE DECLARED INCOME / INCOME SURRENDERED. III. THAT ACCORDINGLY THE ASSESSEE COMPANY HAS ACCOUNTED FOR THE ABOVE AMOUNT UNDER THE HEAD MISCELLANEOUS INCOME VIDE SCHEDULE PL-8 AND IN THIS MANNER FORM PART OF THE DECLARED INCOME OF RS.16,93,55,210/-. ITA 4023/DEL/2011 CO 342/DEL/2011 7 IV. THAT IN SUPPORT OF ABOVE CONTENTION THE ASSESSE E COMPANY HEREBY RELY UPON THE ANNUAL ACCOUNTS FOR TH E YEAR ENDING 31ST MARCH 2009 READ WITH DETAILS OF MISCELLANEOUS INCOME: EXTRACT OF THE DAY BOOK SHOWI NG THE ACCOUNTING OF THE ABOVE AMOUNT IN THE BOOKS OF THE ASSESSEE COMPANY V. THAT FURTHER RELIANCE IS ALSO PLACED ON THE AFF IDAVIT OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY SH RI MAHANDER KUMAR GUPTA DATED 19 TH FEBRUARY 2009 WHEREIN THE ABOVE AMOUNT WAS ADMITTED IN THE INCOME OF THE ASSESSEE COMPANY. FURTHER RELIANCE IS ALSO PLAC ED ON THE AFFIDAVIT OF DR S K GOEL DATED 19TH FEBRUARY 20 09 WHEREIN DR GOEL HAS ALSO SUPPORTED THE ABOVE FACTS. VI. THAT IN THE MANNER AFORESAID IT IS CLEARLY ESTABLISHED THAT THE SUM OF RS.82,00,000/- (IN QUES TION) HAS ALREADY BEEN INCLUDED IN THE DECLARED INCOME OF THE ASSESSEE COMPANY AND THE ADDITION THEREOF MADE BY T HE LEARNED A.O. IS APPARENTLY AND PRIMARILY THE DUPLIC ATION OF SAID AMOUNT. THAT IT MAY BE ADDED HERE THAT THE ASSESSEE COMPANY HAS MADE DISCLOSURE / SURRENDER OF INCOME OF RS.700.00 LACS INITIALLY IN RESPECT OF CASH FOUND, OTHER AMOUNTS D UE FOR DEBTORS AND ALSO AN ACCOUNTED BUSINESS EXPENDITURE FOUND RECORDED IN THE SEIZED MATERIAL. TO BE SPECIFIC THE ASSESSEE COMPANY HAS SURRENDERED RS.630.00 LACS CONSISTING RS.240.00 LACS IN RESPECT OF CASH FOUND AND SEIZED, PLUS RS.390.00 LACS IN RESPECT OF SUNDRY DEBTORS AND BAL ANCE RS.70.00 LACS IN RESPECT OF THE AN ACCOUNTED BUSINE SS EXPENSES. THUS IN THIS MANNER THE ASSESSEE COMPANY HAS MADE A SURRENDER OF RS.700.00 LACS PLUS RS.82.00 LA CS ITA 4023/DEL/2011 CO 342/DEL/2011 8 AGGREGATE RS.782.00 LACS. THE ENTIRE AMOUNT HAS BEE N ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS.' 7. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS AN D CONTENTIONS OF BOTH THE PARTIES, WE OBSERVE THAT THE AO MADE THIS IMPUGNED ADDITION WITH FOLLOWING OBSERVATIONS AND FINDINGS:- 20. THIS SHOWS THAT THE ABOVE AMOUNT OF RS. 82 LAK HS GIVEN TO SH. S.K. GOEL REPRESENTS TO THE UNDISCLOSED INCOME OF M/S STAR WIRE INDIA LTD. THUS THE TOTAL AMOUNT OF SURRENDER IN THE HANDS OF M/S SWIL HAS BEEN INCREASED FROM RS. 7.00 CRORES TO RS. 7.82 CRORES. 21. SH. S.K. GOEL HAS ALSO FILED AN AFFIDAVIT DATED 19-02-2009 SUBMITTING THEREIN THAT DURING THE COURSE OF SEARCH OPERATION A SURRENDER OF RS. 102 LAKHS WAS MADE AND THE SAME MA Y BE CONSIDERED TO BE MODIFIED AND THE SURRENDER MAY BE TREATED AT RS. 20 LKAHS. IN VIEW OF THE ABOVE FACTS OF THE CAS E IT IS FOUND THAT THE ASSESSEE HAS DECLARED TOTAL DISCLOSURE OF RS. 7 .82 CRORES. 22. FROM THE ABOVE FACTS OF THE CASE IT IS NOTICED THAT THE ASSESSEE HAS NOT DECLARED ABOVE RS. 82,00,000/- ADM ITTED AS UNDISCLOSED INCOME ON BEHALF OF . SH. S.K. GOYAL, T HEREFORE, THIS AMOUNT OF RS. 82,00,000/- IS ADDED BACK IN THE TAXABLE INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271 (1)(C) ARE SEPARATELY INITIATED AS THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS TAXABLE INCOME. FURTHER, I AM SA TISFIED THAT THE ASSESSEE HAS NOT SUBSTANTIATE THE MANNER IN WHI CH THE UNDISCLOSED INCOME WAS DERIVED. THEREFORE, PENALTY PROCEEDINGS U/S 271AAA ARE INITIATED SEPARATE IN TH IS CASE. ITA 4023/DEL/2011 CO 342/DEL/2011 9 8. DURING THE FIRST APPELLATE PROCEEDINGS BEFORE T HE CIT(A), THE CIT(A) DELETED THE ABOVE ADDITION WITH FOLLOWING CONCLUSIO N:- 5. I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT ON THE ISSUE AND AO'S OBSERVATION IN THIS REGARD. I T IS CLEAR FROM THE DETAILS INCLUDED UNDER THE HEAD MISCELLANE OUS INCOME THAT THE AMOUNT OF RS . 82 LAKHS HAS BEEN ADDED ON ACCOUNT OF THE CASH SEIZED FROM THE RESIDENCE OF S.K. GOYAL AND THE CUMULATIVE AMOUNT OF RS. 7,83,76,699/- AFTER DEDUCT ION OF RS. 70 LAKHS ON ACCOUNT OF UNEXPLAINED EXPENSES WHICH H AVE SEPARATELY BEEN DISCLOSED IN FOUR ASSESSMENT YEARS, HAS BEEN CREDITED IN THE PROFIT AND LOSS ACCOUNT. AS SUCH TH E EXPLANATION OF THE AR IN THIS REGARD IS ACTUALLY CORRECT AND TH E AO HAS COMPLETELY MISREAD THE ACCOUNTS TO COME TO THE CONC LUSION THAT THE DISCLOSED AMOUNT OF RS. 82 LAKHS DID NOT F ORM PART OF THE TOTAL INCOME. THEREFORE THIS ADDITION IS DELETE D. 9. ON CAREFUL CONSIDERATION OF ABOVE CONTENTIONS AN D SUBMISSIONS OF BOTH THE PARTIES AND ON CAREFUL PERUSAL OF RECORD P LACED BEFORE US, WE OBSERVE THAT AS PER LEDGER ACCOUNT, DAY BOOK AND GE NERAL REGISTER OF THE ASSESSEE (PB PAGE NO. 25-27), WE OBSERVE THAT THE C ASH AMOUNT SEIZED FROM THE RESIDENCE AND BANK LOCKER OF SHRI S.K. GOYAL HA S BEEN DECLARED UNDER AFFIDAVIT MADE ON 19.2.2009 (PAPER BOOK PAGE NO. 36 -37) BY SHRI M.K. GUPTA, THE MANAGING DIRECTOR OF THE ASSESSEE COMPAN Y WHICH WAS FILED ONLY ON 21.4.2009. THE MAIN CONTENTION OF THE AO WHILE MAKING THIS ADDITION IS ITA 4023/DEL/2011 CO 342/DEL/2011 10 THAT THE ASSESSEE HAS NOT DECLARED IMPUGNED AMOUNT AS UNDISCLOSED INCOME. THE EXPLANATION OF THE ASSESSEE IS TWOFOLD VIZ. FIR ST THAT THE SAID AMOUNT BELONGS TO ASSESSEE COMPANY AND WILL FORM PART OF D ECLARED INCOME OF SURRENDERED INCOME; SECONDLY, THE ASSESSEE COMPANY HAS ACCOUNTED ABOVE AMOUNT UNDER THE HEAD MISCELLANEOUS INCOME VIDE SCH EDULE PL-8 AND IN THIS MANNER FORM PART OF THE DECLARED INCOME OF RS.16,93 ,55,210 AND THE SAME CONTENTIONS WERE RAISED BEFORE CIT(A). BUT THESE D ETAILS ARE NOT CONFIRMATORY WITH THE DOCUMENTS SUBMITTED BY THE AS SESSEE BEFORE THE AUTHORITIES BELOW AND BEFORE THIS TRIBUNAL AS THE S TATEMENT OF INCOME SUBMITTED ALONG WITH RETURN OF AY 2009-10 DOES NOT REVEAL SAME FACTS. FROM IMPUGNED ORDER OF CIT(A) WE NOTE THAT THE FIRS T APPELLATE AUTHORITY HAS SIMPLY DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE BY HOLDING THAT THE AMOUNT OF RS.82 LAC HAS BEEN ADDED ON ACCOUNT OF TH E CASH SEIZED FROM SHRI S.K. GOYAL AND THE CUMULATIVE AMOUNT OF RS.7,83,76, 699 AFTER DEDUCTION OF RS.70 LAC ON ACCOUNT OF UNEXPLAINED EXPENSES INSTEA D OF ADJUDICATING THE ISSUE IN THE LINE OF AOS ALLEGATION MAKING THE ADD ITION AND ASSESSEES SUBMISSIONS, AS REPRODUCED HEREINABOVE IN PARA 6 OF THIS ORDER. WE ARE UNABLE TO SEE ANY DOCUMENT OR COMPUTATION SUPPORTIN G THE INTENTIONS OF THE ASSESSEE AND WE ARE ALSO UNABLE TO SEE ANY JUSTIFIC ATION TO SUPPORT OBSERVATIONS AND CONCLUSIONS OF THE CIT(A). WE FUR THER NOTE THAT THERE IS NO ITA 4023/DEL/2011 CO 342/DEL/2011 11 MENTION OF ANY FACT IN THE STATEMENT OF SHRI M.K. G UPTA RECORDED U/S 132(4) OF THE ACT ON THIS ISSUE AND THE AFFIDAVIT DATED 19 .2.2009 FILED ON 21.4.2009 CANNOT BE SAID AS STATEMENT RECORDED ON OATH U/S 13 2(4) OF THE ACT. 10. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, WE A RE OF THE CONSIDERED OPINION THAT THE SAME FACTS PERTAINING TO THE BASIS ADOPTED BY THE AO FOR MAKING ADDITION AND EXPLANATION AND CONTENTIONS OF THE ASSESSEE ON FACTUAL MATRIX REQUIRES EXAMINATION AND VERIFICATION AT THE END OF THE AO. HENCE, WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF AO FOR LIMITED PURPOSE AS TO WHETHER THE IMPUGNED AMOUNT OF RS. 82 LAC ADMITT ED ON BEHALF OF SHRI S.K. GOYAL HAS NOT BEEN DECLARED BY THE ASSESSEE IN ITS COMPUTATION AND RETURN OF INCOME FOR AY 2009-10. THE IMPUGNED ORDE R IS SET ASIDE AND THE ISSUE IS RESTORED TO THE FILE OF THE AO WITH A DIRE CTION THAT THE ASSESSEE SHOULD BE ALLOWED DUE OPPORTUNITY OF HEARING. ACCO RDINGLY, GROUND NO. 1 OF THE REVENUE IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES AS INDICATED ABOVE. GROUND NO.2 11. APROPOS GROUND NO. 2, LD. DR SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN LAW AND ON FACTS OF THE CASE IN DELETI NG THE ADDITION OF RS. 60 LAKH MADE BY THE AO ON THE BASIS OF DOCUMENT FOUND DURING THE SEARCH ITA 4023/DEL/2011 CO 342/DEL/2011 12 OPERATION WHICH THE AGREEMENT TO SALE OF LAND. LD. DR FURTHER CONTENDED THAT THE CIT(A) HAS IGNORED THE FACT THAT THE PURCH ASER HAS UNEQUIVOCALLY DENIED HAVING PAID RS. 60 LAKH TO THE ASSESSEE IN T HE STATEMENT RECORDED U/S 131 OF THE ACT. THE DR ALSO CONTENDED THAT THE ENT RY OF RS. 60 LAKH WAS MADE AND INSERTED IN INK LATER WHILE OTHER RECITALS OF THE AGREEMENT WAS TYPED ON ORIGINAL SCRIPT. 12. LD. DR VEHEMENTLY CONTENDED THAT THE FORFEITURE OF ONLY CASH AMOUNT OF RS. 60 LAKH AND NOT CHEQUE AMOUNT OF RS. 15 LAKH DEFIES LOGIC AND FURTHER CANCELLATION OF AGREEMENT DATED 19.1.2011 APPEARS T O BE AN AFTERTHOUGHT BECAUSE THE AGREEMENT WAS NEVER ACTED UPON AND FORF EITURE OF ONLY CASH AMOUNT OF RS. 60 LAKH CANNOT BE SAID AS PER TERMS A ND CONDITIONS OF THE AGREEMENT. THE DR PRAYED THAT IMPUGNED ORDER MAY B E SET ASIDE BY RESTORING THAT OF THE AO. 13. LD. AR REPLIED THAT THE AO HAS ADDED IMPUGNED A MOUNT OF RS. 60 LAKH TO THE INCOME OF THE SSESSEE COMPANY TREATING THE SAME AS ASSESSEES OWN UNDISCLOSED INCOME WHICH WAS LATER INTRODUCED I N THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE AR FURTHER POINTED O UT THAT PRIMARILY AMOUNT IN QUESTION WAS RECEIVED IN CASH FROM SMT. GAYATRI AGARWAL AND OTHERS AS AN ADVANCE AGAINST AGREEMENT TO SALE OF PLOT MEASURING 8611 SQ YARDS SITUATED ITA 4023/DEL/2011 CO 342/DEL/2011 13 AT SECTOR 58, FARIDABAD. THE AR FURTHER HAS DRAWN OUR ATTENTION TOWARDS PAPER BOOK PAGE NO. 42 TO 44 WHICH CONSISTS OF THE PHOTOCOPY OF THE AGREEMENT TO SALE OF LAND DATED 27.8.2007 AND SUBMI TTED THAT THE PHOTOCOPY OF THE AGREEMENT AS WELL AS RECEIPT DATED 27.8.2008 WAS FOUND AND SEIZED AT THE OFFICE PREMISES OF THE ASSESSEE COMPANY DURING THE SEARCH AND SEIZURE OPERATION VIDE ANNEXURE A-1. THE AR FURTHER POINTE D OUT THAT THERE WAS NO WAY THAT THE ASSESSEE COULD HAVE ANTICIPATED AND AT TRIBUTED THE SEARCH OPERATION AND THEREFORE MADE ALLEGED INTERPOLATION WITH THE AGREEMENT TO SALE IN THE ORDER TO EXPLAIN ANY CASH THAT COULD HA VE BEEN FOUND DURING THE SEARCH AND SEIZURE OPERATION. THE AR VEHEMENTLY CO NTENDED THAT THE AO WAS NOT LOGICAL IN DRAWING A CONCLUSION AND MAKING A DOUBLE ADDITION OF RS. 60 LAKH, FIRSTLY IN THE FORM OF CASH SEIZED WHICH A HS BEEN DECLARED U/S 132(4) OF THE ACT BUY THE ASSESSEE COMPANY AND SECONDLY, A GAIN IN THE FORM OF UNACCOUNTED CASH AS PER THE DOCUMENT I.E. AGREEMENT TO SALE OF LAND DATED 27.8.2008. 14. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS, AT THE OUTSET, WE OBSERVE THAT THE AO MADE IMPUGNED ADDITION OF RS. 6 0 LAKH ON ACCOUNT OF UNDISCLOSED INCOME OF THE ASSESSEE WITH FOLLOWING C ONCLUSION:- FROM THE ABOVE FACTS, IT CLEARLY EMERGES THAT THE CASH OF RS.60 LAKHS WHICH WAS INSERTED IN THE DOCUMENT LATE R ON BY ITA 4023/DEL/2011 CO 342/DEL/2011 14 THE ASSESSEE IS ITS OWN UNDISCLOSED INCOME OF THE A SSESSEE WHICH IS INTRODUCED IN ITS BOOKS OF ACCOUNTS. CONSIDERING THE ABOVE FACTS OF THE CASE, THIS AMOUN T OF RS.60 LAKHS WRONGLY CREDITED IN THE BOOKS OF ACCOUN T IS ADDED BACK IN THE TAXABLE INCOME OF THE ASSESSEE U/ S 68 OF THE LT. ACT. ASSESSEE HAS FURNISHED INACCURATE PART ICULARS OF ITS TAXABLE INCOME, THEREFORE PENALTY PROCEEDINGS U /S 271(1)(C) OF THE LT.ACT, 1961 ARE INITIATED SEPARAT ELY. FURTHER, I AM SATISFIED THAT THE ASSESSEE HAS NOT S UBSTANTIATE THE MANNER IN WHICH SURRENDER OF UNDISCLOSED INCOME WAS MADE, THEREFORE, PENALTY PROCEEDINGS U/S 271AAA OF THE ACT, ARE ALSO INITIATED ON THIS ISSUE. 15. DURING THE FIRST APPELLATE PROCEEDINGS, THE ASS ESSEE COMPANY SUBMITTED FOLLOWING ARGUMENTS AND CONTENTIONS:- 8. DURING THE COURSE OF APPELLATE PROCEEDINGS THE AR OF THE APPELLANT SUBMITTED HIS ARGUMENTS:- THAT THE LEARNED ASSESSING OFFICER HAS RS.60,00,000 /- TO THE INCOME OF THE ASSESSEE COMPANY VIDE DISCUSSI ONS CONTAIN IN PARA 23 (INTERNAL PAGE 12) OF THE ASSESS MENT ORDER ONWARD UPTO PARA 25 (INTERNAL PAGE 16). PRIMARILY T HE AMOUNT IN QUESTION WAS RECEIVED IN CASH FROM SMT GAYATRI A GGARWAL & OTHERS AS EARNEST MONEY FOR THE TRANSFER OF PLOT BEARING NUMBER 219, 220, 236 & 237 MEASURING 8611 SQ. YARDS SITUATED AT SECTOR 58, FARIDABAD. THE TOTAL SALE CO NSIDERATION AGREED UPON IN THE SAID AGREEMENT WAS RS.6,99,90,00 0/-. THE PHOTOCOPY OF THE ABOVE AGREEMENT DATED 27TH AUGUST 2008 AS WELL AS THE PHOTOCOPY OF THE RECEIPT DATED 27TH AUG UST 2008 WAS FOUND AT THE OFFICE PREMISES OF THE ASSESSEE CO MPANY SITUATED AT 35, LINK ROAD, LAJPAT NAGAR-III, NEW DE LHI, AND LYING SEIZED VIDE ANNEXURE A-I. THE PHOTOCOPY BOTH THESE DOCUMENTS ARE ALSO ATTACHED HEREWITH FOR YOUR READY PERUSAL. ITA 4023/DEL/2011 CO 342/DEL/2011 15 THAT THE PERUSAL OF THE ASSESSMENT ORDER SPECIFICAL LY PARA 23 OF THE ASSESSMENT ORDER SHOW THAT THE STATE MENT U/S 131 OF ONE OF THE PURCHASER SHRI KAILASH CHAND AGAR WAL WAS RECORDED ON 26TH NOVEMBER 2010 ON THE BACK OF THE A SSESSEE COMPANY. IN THE SAID STATEMENT ONE OF THE PURCHASER SHRI KAILASH CHAND AGARWAL HAS DENIED OF ANY PAYMENT IN CASH IN THE SAID TRANSACTION. THE ABOVE STATEMENT WAS NEVER BROUGHT TO THE NOTICE OF THE ASSESSEE COMPANY, FURTHERMORE NO OPPORTUNITY EVEN FOR NAMESAKE WAS GRANTED TO THE AS SESSEE COMPANY TO CROSS-EXAMINE THE SAID WITNESS. THAT THE ABOVE AGREEMENT WAS NEVER ACTED UPON AND WAS ULTIMATELY CANCELLED ON 19TH JANUARY 2011. IT I S SUBMITTED THAT THE SUM OF RS.60,00,000/- AS ABOVE RECEIVED AS EARNEST MONEY WAS FORFEITED. THAT THE LEGAL PRESUMPTION IN TERMS OF SECTION 132 (4A) IS THAT THE DOCUMENTS FOUND AND SEIZED AND THE CONT ENTS THEREOF ARE TRUE. THE PRESUMPTION FALL IN THE CATEG ORY MAY PRESUME UNDER THE EVIDENCE ACT. THAT IN THE ABOVE MATTER THE AGREEMENT TO SELL DATE D 27- 8-2008 CREATES PRESUMPTION THAT THE CONTENT THEREOF ARE TRUE. FURTHERMORE AND TO BE SPECIFIC THE TRANSACTION OF T HE RECEIPT OF RS.60,00,000/- IN CASH MENTIONED IN THE SAID AGREEM ENT WILL BE PRESUMED TO BE TRUE. AND MERE DENY WILL NOT DISPROV E THE CONTENTS OF THE DOCUMENT. ITA 4023/DEL/2011 CO 342/DEL/2011 16 IN VIEW OF THE ABOVE LEGAL POSITION IT IS HUMBLY S UBMITTED THAT THE ADDITION OF RS.60,00,000/- MAY KINDLY BE D ELETED. HOWEVER INCASE ANYTHING IN THIS REGARD IS FOUND UNE XPLAINED OR UNPROVED THE ASSESSEE COMPANY IS READY TO EXPLAI N AND TO PROVE THE SAME AT YOUR CONVENIENCE. IT IS PRAYED TH AT WHILE DISPOSING OF THIS APPEAL THE EVIDENCE IN THE FORM O F THE STATEMENT OF SHRI KAILASH CHAND AGGARWAL RECORDED U /S 131 MAY KINDLY BE IGNORED AS THE SAME WAS NEVER CONFRON TED TO THE ASSESSEE COMPANY. FURTHERMORE THE SAID STATEMENT CA NNOT RELIED UPON ON THE FACE OF IT ON THE GROUND THAT TH E DENIAL IS NOT BASED ON ANY EVIDENCE EVEN FOR NAMESAKE. 16. FROM THE IMPUGNED ORDER, WE OBSERVE THAT THE CI T(A) DELETED THE ADDITION MADE BY THE AO WHILE GRANTING RELIEF FOR T HE ASSESSEE WITH FOLLOWING OBSERVATIONS AND FINDINGS:- 10. I HAVE CONSIDERED BASIS OF ADDITION MADE BY TH E AO AND THE ARGUMENTS OF THE AR ON THE ISSUE. IT IS CLEAR THAT THE DOCUMENT OF AGREEMENT TO SELL WAS FOUND AND SEI ZED DURING THE COURSE OF SEARCH OPERATION WHEREIN THE RECORDIN GS OF HAVING RECEIVED RS. 60 LAKHS CASH HAD BEEN MADE AND THE ASSESSEE DURING HIS STATEMENT RECORDED AT THE TIME OF SEARCH OPERATION IN RESPONSE TO QUESTION NO. 8 WHEN CONFRO NTED WITH THE SAID DOCUMENT CLEARLY ADMITTED TO HAVE RECEIVED THE CASH IN PURSUANCE OF AGREEMENT TO SELL AND IT WAS STATED THAT THE CASH FOUND AT THE TIME OF SEARCH INCLUDED THE CASH RECEIVED AS RECORDED ON THE SAID PAPER. IT IS NOT UNDERSTOOD AS TO ON WHAT BASIS THE AO HAS PREFERRED TO RELY UPON THE STATEME NT OF SH. KAILASH CHAND AGGARWAL AS AGAINST THE DOCUMENT FOUN D AND SEIZED DURING THE COURSE OF SEARCH OPERATION. IT IS NORMALLY EXPECTED THAT THE BUYER OF PROPERTY WHO HAS PAID CA SH AND HAS ITA 4023/DEL/2011 CO 342/DEL/2011 17 NOT BEEN SEARCHED BY THE DEPARTMENT WOULD HAVE THE OPPORTUNITY TO DENY HAVING PAID ANY CASH IN PURSUAN CE OF THE AGREEMENT TO SELL. HOWEVER IN SUCH MATTERS THE EVID ENTIARY VALUE OF DOCUMENT FOUND AND SEIZED DURING THE COURS E OF SEARCH OPERATION IS SUBSTANTIALLY HIGHER THEN THE S TATEMENT OF THE BUYER RECORDED U/S 131 ALMOST ONE YEAR AND TEN MONTHS AFTER THE DATE OF SEARCH. THERE IS NO WAY THAT THE ASSESSEE COULD HAVE ATTRIBUTED THE SEARCH OPERATION AND THER EFORE MADE ALLEGED INTERPOLATION ON THE AGREEMENT TO SELL IN O RDER TO EXPLAIN ANY CASH THAT COULD HAVE BEEN FOUND. THIS A CTION ATTRIBUTED BY THE AO TO THE ASSESSEE DEFIES ANY LOG ICAL EXPLANATION. AS AGAINST THIS THE BUYER HAS ALL THE REASONS TO DISOWN THE CASH PAID IN ORDER TO AVOID THE CONSEQUE NCES IN TERMS OF REOPENING OF ASSESSMENT U/S 153C. THE NORM AL COURSE OF ACTION IN THIS CASE FOR THE AO SHOULD HAVE BEEN TO PROCEED AGAINST THE BUYER ON THE BASIS OF EVIDENCE FOUND IN THE CASE OF THE ASSESSEE COMPANY/ITS MANAGING DIRECTOR. THE ONLY ISSUE THAT COULD RAISE EYEBROWS IN THIS REGARD IS THAT AS SESSEE FORFEITED ONLY THE CASH AMOUNT BUT NOT THE CHEQUE A MOUNT, BUT THIS CAN APPARENTLY BE ATTRIBUTED TO MUTUAL AGREEME NT BETWEEN THE TWO PARTIES. AS SUCH I FIND NO LOGIC IN AO'S CO NCLUSION IN MAKING A DOUBLE ADDITION OF RS. 60 LAKHS ONCE IN TH E FORM OF CASH SEIZED WHICH HAS BEEN DECLARED U/S 132(4) AND SECONDLY IN THE FORM OF UNACCOUNTED CASH AS PER THE DOCUMENT . THEREFORE ADDITION SO MADE IS DELETED. 17. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS A ND PERUSAL OF RECORD, INTER ALIA ASSESSMENT ORDER AS WELL AS IMPUGNED ORD ER OF THE CIT(A), WE OBSERVE THAT THE AO HELD THAT THE CASH OF RS. 60 LA KH WHICH WAS INSERTED IN THE DOCUMENT LATER ON BY THE ASSESSEE AS ITS OWN UN DISCLOSED INCOME OF THE ASSESSEE. THE AO HELD THAT THE ACTION OF THE ASSE SSEE IS AN AFTERTHOUGHT TO ITA 4023/DEL/2011 CO 342/DEL/2011 18 INTRODUCE RS. 60 LAKH IN ITS BOOKS OF ACCOUNTS AND THE AO HELD THAT THE SAME AMOUNT WAS WRONGLY CREDITED IN THE BOOKS OF ACCOUNT S AND THE AO MADE AN ADDITION IN THIS REGARD U/S 68 OF THE ACT. IN THE IMPUGNED ORDER, PARA 7 OF PAGE 6, WE OBSERVE THAT THE CIT(A) CONSIDERED THE F ACT THAT THE AO HAS NOT ACCEPTED THE FACT THAT THE ASSESSEE HAS ENTERED INT O AN AGREEMENT TO SELL FOR SALE OF LAND MEASURING 8611 SQ YARDS FOR A TOTAL CO NSIDERATION OF RS. 6,99,900 WITH SMT. GAYATRI DEVI, SHRI KAILASH CHAND AGGARWAL AND SHRI P.C. GUPTA ON 27.7.2008 FOR WHICH AN ADVANCE OF RS. 75 LAKH WAS RECEIVED BY THE ASSESSEE FORM THE ABOVE MENTIONED PERSONS. HOWEVER, THE ASSESSING OFFICER MADE ADDITION BY HOLDING THAT THE ASSESSEE INSERTED THE DOCUMENT SUBSEQUENTLY TO JUSTIFY ITS OWN UNDISCLOSED INCOME AND THE AO MADE AN ADDITION OF RS. 60 LAKH UNDER SECTION 68 OF THE ACT . PER CONTRA, THE CIT(A) ALLOWED RELIEF FOR THE ASSESSEE BY HOLDING THAT THE RE IS NO LOGIC IN MAKING A DOUBLE ADDITION ONCE IN THE FORM OF CASH SEIZED AND SECONDLY IN THE FORM OF UNACCOUNTED CASH AS PER DOCUMENT. 18. ON CAREFUL PERUSAL OF ASSESSMENT ORDER, IMPUGNE D ORDER AND OTHER RELEVANT RECORD PLACED BEFORE US, AT THE OUTSET, WE OBSERVE THAT ADMITTEDLY THE DOCUMENT OF AGREEMENT TO SALE DATED 27.8.2007 W AS FOUND SEIZED DURING THE COURSE OF SEARCH OPERATION CONDUCTED ON 29.1.20 09 ON THE ASSESSEE COMPANY. WE ALSO OBSERVE THAT IN THE STATEMENT OF O ATH UNDER SECTION 132(4) ITA 4023/DEL/2011 CO 342/DEL/2011 19 OF THE ACT, SHRI MAHINDER KUMAR GUPTA, MD OF ASSESS EE COMPANY IN RESPONSE TO QUESTION NO. 8 ADMITTED TO HAVE RECEIVE D THE CASH OF RS. 60 LAKH IN PURSUANCE TO AGREEMENT TO SALE AND STATED THAT T HE CASH FOUND AT THE TIME OF SEARCH INCLUDED THE CASH RECEIVED AS RECORDED ON THE SAID DOCUMENT I.E. AGREEMENT TO SALE DATED 27.8.2008. THE CIT(A) RIGHT LY HELD THAT THE BUYER OF THE PROPERTY WHO HAS PAID CASH AND HAS NOT BEEN SEA RCHED BY THE DEPARTMENT WOULD HAVE THE OPPORTUNITY TO DENY HAVING PAID ANY CASH IN PURSUANCE TO THE AGREEMENT TO SALE, THEREFORE THE ASSESSING OFFICER WAS WRONG IN RELYING UPON THE STATEMENT OF SHRI KAILASH CHAND AGGARWAL. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE ALSO IN CLINED TO HOLD THAT IT CANNOT BE PRESUMED THAT THE ASSESSEE COULD HAVE ANT ICIPATED A SEARCH AND SEIZURE OPERATION AND THEREFORE, THE ASSESSEE COMPA NY MADE ALLEGED INTERPOLATION BY INK FOR INSERTING CASH RECEIPT OF RS. 60 LAKH ON THE AGREEMENT TO SALE DATED 27.8.2008 IN ORDER TO EXPLA IN ANY CASH THAT COULD HAVE BEEN FOUND DURING THE SEARCH AND SEIZURE OPERA TION. ACCORDINGLY, WE HOLD THAT THE ASSESSING OFFICER WAS NOT ON LOGICAL FOOTING IN MAKING DOUBLE ADDITION OF RS. 60 LAKH ONCE IN THE FORM OF CASH SE IZED WHICH WAS DECLARED BY THE ASSESSEE COMPANY AS ITS UNDISCLOSED INCOME U NDER SECTION 132(4) OF THE ACT AND SECOND TIME IN THE FORM OF UNACCOUNTED CASH AS PER DOCUMENT SEIZED DURING THE SEARCH OPERATION. IN VIEW OF FORE GOING DISCUSSION, WE ITA 4023/DEL/2011 CO 342/DEL/2011 20 REACH TO A CONCLUSION THAT THE ASSESSING OFFICER MA DE ADDITION WITHOUT ANY BASIS AND LOGIC WHICH WAS RIGHTLY DELETED BY THE CI T(A) ON PROPER APPRECIATION OF FACTS AND CIRCUMSTANCES AND WE ARE UNABLE TO SEE ANY DISCREPANCY, AMBIGUITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A). ACCORDINGLY, GROUND NO. 2 O F THE REVENUE IS ALSO DISMISSED. C.O.NO.342/DEL/11 19. THE ASSESSEE COMPANY HAS RAISED FOLLOWING CROSS OBJECTIONS PERTAINING TO THE PART CONFIRMATION OF ADDITION OF RS. 4 LAKH ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERATION:- '1. THE ID. ASSESSING OFFICER AS WELL AS ID. CIT(A) HAVE ERRED WHILE ADDING RS. 4,00,000/- ON THE GROUND OF ALLEGE D EXCESS STOCK FOUND AT THE TIME OF SEARCH IN SPITE OF THE F ACT THAT THE ENTIRE STOCK FOUND TALLY WITH THE EXCISE RECORDS MA INTAINED BY THE ASSESSEE COMPANY. 2. THE ID. ASSESSING OFFICER AS WELL AS LD. CIT(A) IS WRONG WHILE ACCEPTING THE STOCK INVENTORY PREPARED BY THE SURVEY TEAM OF THE INCOME TAX DEPARTMENT ON ESTIMATE BASIS AND NOT ON ACTUAL WEIGHMENT BASIS. ITA 4023/DEL/2011 CO 342/DEL/2011 21 3. THAT THE ADDITION OF RS. 4, 00, 000/- ON ACCOUNT OF ALLEGED EXCESS STOCK AT OUR MANDI GOBINDGARH OFFICE IS ILLE GAL, UNJUST AGAINST THE FACTS AS WELL AS AGAINST THE LAW. 20. LD. AR SUBMITTED THAT THE VALUE APPLIED BY THE SEARCH TEAM ABOUT THE EXCESS STOCK FOUND DURING THE SEARCH OPERATION WAS NOT CORRECT PRICE OF THE GOODS/STOCK FOUND. THE AR FURTHER CONTENDED THAT TH E CORRECT COST PRICE OF THE STOCK FOUND AT THE TIME OF SEARCH AND SEIZURE O PERATION WAS RS.1,89,53,888 AND THE ASSESSEE COMPANY HAD DECLARE D THE COST OF STOCK FOUND AT RS.1,93,34,313. THUS, IN THIS SITUATION, N O ADVERSE INFERENCE CAN BE TAKEN. THE AR FURTHER SUBMITTED THAT THE SEARCH TEA M INVENTORISED THE STOCK OF THE ASSESSEE COMPANY CONSISTING 728.815 M.T. IN THE FORM OF STEEL INGOT/BILLET ETC. AND THE SAID STOCK WAS VALUED AT RS.2,03,82,636/- WHICH GIVES AN AVERAGE OF RS.27,96,666.82 PER 100 M.T. TH E AR VEHEMENTLY CONTENDED THAT THERE WAS NO BASIS BEFORE THE SEARCH TEM WHILE APPLYING THIS AVERAGE RATE AND IN FACT, THE RATE APPLIED BY THE S EARCH TEM WAS THE SALE RATE OF GOODS ESTIMATED ON THE BASIS OF COST PLUS EXPEC TED PROFIT MARKUP DURING THAT PERIOD WHICH CANNOT BE APPLIED FOR VALUING STO CK/GOODS FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERATION. 21. REPLYING TO THE ABOVE, THE DR SUBMITTED THAT TH E BASIS OF VALUATION AND COST/RATE ADOPTED BY THE SEARCH TERN CAN BE DIF FERENT AND THERE MAY BE MULTIPLE MODE OF VALUATION OF GOODS/CLOSING STOCK B UT THE ASSESSEE COULD ITA 4023/DEL/2011 CO 342/DEL/2011 22 NOT GIVE ANY EXPLANATION ABOUT THE PHYSICAL EXCESS STOCK OF ABOUT 16 M.T. FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERA TION. THE DR, THEREFORE, SUBMITTED THAT THE CIT(A) RIGHTLY CONFIRMED A PART OF ADDITION IN THIS REGARD BY VALUING THE EXCESS STOCK OF 16 M.T. AT THE RATE OF 25,000 M.T. ON REASONABLE BASIS WHICH CANNOT BE SAID TO BE HIGH AN D EXCESSIVE. 22. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS A ND CONTENTIONS, WE OBSERVE THAT THE ASSESSING OFFICER MADE IMPUGNED AD DITION WITH FOLLOWING OBSERVATIONS AND FINDINGS:- '27. THE SUBMISSION OFFERED BY THE ASSESSEE IS NOT FOUND TO BE SATISFACTORY ON THE GROUNDS THAT ON THE DATE OF SURVEY INVENTORY WAS PREPARED IN THE PRESENT CAPITAL EXPEN DITURE OF SHRI KISHAN GUPTA DIRECTOR OF MRS. MAHAWAR IRON STO RES PVT. LTD. WHO IS ALSO LOOKING AFTER THE BUSINESS AFFAIRS OF M/S STAR WIRE (1) LTD. SHRI KISHAN GUPTA DURING HIS STATEMEN T COULD NOT PRODUCE ANY EVIDENCE LIKE PURCHASE AND SALE BIL LS TO VERIFY THE DIFFERENCE IN MARKET PRICE. THE ASSESSEE ALSO F AILED TO SUBSTANTIATE HIS ABOVE REPLY REGARDING DIFFERENCE F OUND IN STOCK. THEREFORE, THE STOCK FOUND IN STOCK OF RS.10 ,48,319/- IS ADDED BACK IN THE TAXABLE INCOME OF THE ASSESSEE. 23. DURING THE FIRST APPELLATE PROCEEDINGS, THE CIT (A) DELETED THE PART ADDITION AND CONFIRMED THE PART ADDITION OF RS. 4 L AKH WITH FOLLOWING OBSERVATIONS AND CONCLUSION:- '14. I HAVE CONSIDERED THE BASIS OF THE ADDITION MA DE BY THE ASSESSING OFFICER AND THE ARGUMENTS OF THE AR ON TH E ISSUE. ITA 4023/DEL/2011 CO 342/DEL/2011 23 THE PERUSAL OF INVENTORY PREPARED AT THE TIME OF SU RVEY OPERATION SHOWS THAT STOCK WEIGHING 728.8 M.T. WAS INVENTORISED. WHEREAS THE STOCK AS PER BOOKS OF ACC OUNTS WAS ONLY 712.1 M.T.S. THE APPELLANT HAS BEEN ABLE TO EX PLAIN THE DIFFERENCE IN RATES APPLIED BY THE SURVEY TEAM AND THE ACTUAL RATES AS PER THE PURCHASE BILLS. THE SURVEY TEAM HA S APPLIED AVERAGE RATE OF RS.28,000 PER M.T. AND RS. 27,600 P ER M.T. WHEREAS THE RATES AS PER THE PURCHASE INVOICES VERY FROM RS. 22,933 TO RS. 28, 400 AND THEREFORE, THE ACTUAL RAT ES AS APPLIED BY THE APPELLANT ON THE BASIS OF PURCHASE INVOICES IS CORRECT WAY OF VALUING THE STOCK. HOWEVER THERE IS A PHYSIC AL EXCESS STOCK OF ABOUT 16 M. T. FOR WHICH THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION DURING THE ASSESSMENT PROCEEDINGS AND D URING THE APPELLATE PROCEEDINGS IT HAS BEEN CONTENDED THAT TH IS ISSUE HAD NOT BEEN RAISED BY THE ASSESSING OFFICER PRESUMABLY ON THE GROUND THAT THE WEIGHMENT WAS DONE ON AD HOC BASIS. I DO NOT AGREE WITH THE EXPLANATION GIVEN BY THE ASSESSEE FO R THE EXCESS STOCK FOUND AS THERE IS NO EVIDENCE TO BACK THE CON TENTION OF AD HOC WEIGHMENT. THEREFORE AN ADDITION OF RS. 4 LA KH IS CONFIRMED. ( 16 M. T. X RS. 25,000 PER M. T.). ' 24. FROM BARE READING OF ABOVE OBSERVATIONS OF THE ASSESSING OFFICER AND CIT(A), WE COME TO A CONCLUSION THAT THE SEARCH TEA M FOUND EXCESS STOCK OF ABOUT 16 M.T. FOR WHICH ASSESSEE HAS NOT GIVEN ANY COGENT, JUSTIFIED AND ACCEPTABLE EXPLANATION DURING THE ASSESSMENT AND AP PELLATE PROCEEDINGS. THE CIT(A) RIGHTLY HELD THAT THERE WAS NO EVIDENCE TO S UPPORT THE CONTENTION OF AD HOC WEIGHMENT AS ADVANCED BY THE ASSESSEE. THERE FORE, THE CIT(A) WAS RIGHT IN TAKING EXCESS PHYSICAL STOCK INTO CONSIDER ATION AND VALUING THE SAME ITA 4023/DEL/2011 CO 342/DEL/2011 24 @RS.25,000 PER M.T. AS VALUATION OF EXCESS STOCK HA S TO BE MADE ON THE SAME METHOD WHICH ASSESSEE IS FOLLOWING REGULARLY. WE, THEREFORE, ARE OF THE OPINION THAT THE CIT(A) RIGHTLY CONFIRMED THE ADDITION OF RS. 4 LAKH BY REASONABLY ESTIMATING THE VALUE OF EXCESS STOCK OF 16 M.T. AT RS. 25,000 PER M.T. FINALLY, WE HOLD THAT THE CROSS OBJECTIONS RA ISED BY THE COMPANY ARE DEVOID OF MERIT AS THE ONUS WAS ON THE ASSESSEE TO EXPLAIN EXCESS STOCK OF 16 M.T. FOUND AT THE TIME OF SEARCH WHICH WAS NOT DISC HARGED. THE CIT(A) WAS ALSO JUSTIFIED IN TAKING AVERAGE RATE OF RS. 25,000 PER M.T. AS THIS SEEMS TO BE REASONABLE AND NEAR TO THE AVERAGE COST OF STOCK. IN VIEW OF ABOVE, WE HOLD THAT THE FINDINGS AND CONCLUSION OF THE CIT(A) ARE JUSTIFIED AND WE HAVE NO VALID REASON TO INTERFERE WITH THE SAME. ACCORDINGL Y, COS OF THE ASSESSEE BEING DEVOID OF MERITS ARE DISMISSED. 25. IN THE RESULT, THE APPEAL OF THE REVENUE IS DEE MED TO BE PARTLY ALLOWED ON GROUND NO. 1 FOR STATISTICAL PURPOSES AND APPEAL OF THE REVENUE ON GROUND NO. 2 AS WELL AS CROSS OBJECTIONS OF THE ASSESSEE A RE DISMISSED. ITA 4023/DEL/2011 CO 342/DEL/2011 25 ORDER PRONOUNCED IN THE OPEN COURT ON 30.01.2015. SD/- SD/- (S.V. MEHROTRA) (CHANDRAMOHANGARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 30TH JANUARY 2015 'GS' COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR