M/s. M. B. Chemicals, Malegaon V. Income-tax Officer,

CO 38/PUN/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9485 (ITAT-PUNE)
• Duration Of Justice: 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Unexplained investment; Depreciation; Search and seizure; Document seized; Revised return; Documents seized
• Section: 40A(3); 153A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NOS.1380 TO 1383, 1822 TO 1824/PN/2012 (A.YS. 2004-05 TO 2010-11) ITO (CENTRAL)-I, NASHIK APPELLANT VS. M/S. M.B. CHEMICALS, LODHA BHAVAN, MAHAVIR NAGAR MARG, NEAR GOVT. HOSPITAL, SATANA ROAD, MALEGAON, NASHIK PAN: AAFFM1698D RESPONDENT CO NOS.36 TO 42/PN/2014 (A.YS. 2004-05 TO 2010-11) M/S. M.B. CHEMICALS LODHA BHAVAN, MAHAVIR NAGAR MARG, NEAR GOVT. HOSPITAL, SATANA ROAD, MALEGAON, NASHIK PAN: AAFFM1698D CROSS OBJECTOR VS. ITO (CENTRAL)-I, NASHIK RESPONDENT ITA NOS.1374 TO 1378, 1397 & 1379/PN/2012 (A.YS. 2004-05 TO 2010-11) ITO (CENTRAL)-I, NASHIK APPELLANT VS. M/S. M.B. SUGAR & PHARMACEUTICALS LTD, LODHA BHAVAN, MAHAVIR NAGAR MARG, NEAR GOVT. HOSPITAL, SATANA ROAD, MALEGAON, NASHIK PAN: AABCM2351A RESPONDENT 2 CO NOS.25 TO 31/PN/2014 (A.YS. 2004-05 TO 2010-11) M/S. M.B. SUGAR & PHARMACEUTICALS LTD, LODHA BHAVAN, MAHAVIR NAGAR MARG, NEAR GOVT. HOSPITAL, SATANA ROAD, MALEGAON, NASHIK PAN: AABCM2351A CROSS OBJECTOR VS. ITO (CENTRAL)-I, NASHIK RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE DEPARTMENT BY : SHRI S.P. WALIMBE DATE OF HEARING : 12.03.2014 DATE OF ORDER : 21.03.2014 ORDER PER BENCH: ALL THE APPEALS FILED BY THE REVENUE AND CORRESPON DING CROSS OBJECTIONS FILED BY THE ASSESSEE PERTAIN TO THE SAM E GROUP FOR DIFFERENT ASSESSMENT YEARS. SO THESE WERE HEARD TO GETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. THE ITA NOS.1380, 1381, 1382, 1383, 1 822, 1823 AND 1824/PN/2012 FOR A.YS. 2004-05 TO 2010-11 PERTAIN T O M/S. M.B. CHEMICALS. 2. IN ITA NO.1380/PN/2012 FOR A.Y. 2004-05, THE REV ENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDIT ION ON ACCOUNT OF BOILER WOOD EXPENSES AT RS. 2,89,102/-. 3 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDIT ION MADE UNDER SECTION 40 A(3) OF THE ACT ON ACCOUNT OF LABO UR EXPENSES OF RS 4,35,138 WHICH HAS BEEN WRONGLY TAKEN OF RS 7,13,344 BY THE CIT(A) AND TRANSPORTATION EXPENSES OF 17,800 /- RESPECTIVELY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADD ITION ON ACCOUNT OF DISALLOWANCE OF MANUFACTURING PROCE SS LOSS AT RS 63,18,137/-. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDIT ION ON ACCOUNT OF SALE OF GUNNY BAGS AT RS. 14,67,617/-. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN GIVING FINDING THA T ADDITION CANNOT BE MADE UNDER SECTION 153A IN THE ABSENCE OF INCRIMINATING MATERIAL, WITHOUT APPRECIATING THAT, AS PER PROVISION OF THIS SECTION THE ASSESSING OFFICER CAN ASSESS AND REASSESS THE INCOME OF THE ASSESSEE. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN IGNORING THE EVID ENCE ON RECORD IN THE FORM OF INCRIMINATING MATERIALS ON TH E BASIS OF WHICH THE VARIOUS ADDITIONS WERE MADE, THUS RENDERI NG THE DECISION PERVERSE AND CONTRARY TO THE EVIDENCE ON R ECORD. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY, D ELETE AMEND ANY OF THE GROUNDS, AS PER THE CIRCUMSTANCES OF THE CASE. 8. THE APPELLANT PRAYS LEAVE TO ADDUCE SUCH FURTHER EV IDENCE TO SUBSTANTIATE ITS CASE AS THE OCCASION MAY DEMAND . 3. THE ASSESSEE IS A REGISTERED PARTNERSHIP FIRM CA RRYING ON THE BUSINESS OF MANUFACTURING OF CANDY SUGAR, ETC. THE ASSESSEE IS REGULARLY ASSESSED TO INCOME TAX. THE ORIGINAL RET URN OF INCOME FOR THE YEAR UNDER APPEAL WAS FILED BY THE ASSESSEE ON 31.10.2004 DECLARING TOTAL LOSS OF 18,72,240/-. THE ASSESSMENT FOR THE YEAR UNDER APPEAL WAS COMPLETED U/S.143(3) OF I.T ACT AT (-) 15,52,760/-. THERE WAS A SEARCH ACTION U/S.132(1) ON 21.05.2009 AT THE OFFICES AS WELL AS MANUFACTURING PREMISES OF THE ASSESSEE AND 4 RESIDENTIAL PREMISES OF ALL THE DIRECTORS AND SOME OF THE EMPLOYEES OF THE ASSESSEE. IN RESPONSE TO NOTICE U/S 153A, T HE ASSESSEE FILED A RETURN OF INCOME DECLARING TOTAL LOSS OF 18,72,240/- ON 11.05.2011. THEREAFTER, THE REASSESSMENT U/S. 143(3 ) R.W.S. 153A WAS COMPLETED ON THE TOTAL INCOME AT 69,75,034/- AS AGAINST RETURNED LOSS OF 18,72,240/-. THE ISSUES WITH REGARD TO THE VARIATION IN THE RETURNED INCOME AND ASSESSED TOTAL INCOME WERE DISALLOWANCE ON ACCOUNT OF BOILER WOOD EXPENSES, AD DITION ON ACCOUNT OF PROCESS LOSS, ADDITION ON ACCOUNT OF SAL E OF EMPTY GUNNY BAGS AND DISALLOWANCE U/S. 40A(3) IN RESPECT OF CON TRACT LABOUR EXPENSES AND TRANSPORTATION CHARGES. ALL THE ISSUE S ARE BEING DEALT IN THE PRECEDING PARA. 4. THE FIRST MAIN ISSUE IS WITH REGARD TO DISALLOWA NCE OF BOILER WOOD EXPENSES OF 2,89,102/- FOR THE MAIN REASON THAT THE DELIVERY CHALLANS OF THE DELIVERY OF GOODS, PAN OF THE SUPPL IERS, ETC. ARE NOT FURNISHED BY THE ASSESSEE. 4.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AS DETAILED IN PARA 6.1 OF ORDER OF CIT(A). THE CI T(A) HAVING CONSIDERED THE SAME, DELETED THE ADDITION IN QUESTI ON. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, IN TER ALIA SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELE TING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BOILER WOOD EXPENSES OF 2,89,102/-. ACCORDINGLY, THE ORDER OF CIT(A) BE S ET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED ON THE ISSUE. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUP PORTED THE ORDER OF CIT(A). 4.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE IMPUGNED DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THE BASIS OF VOUCHERS OF EXPEN SES MAINTAINED 5 IN THE NORMAL COURSE OF BUSINESS IN SUPPORT OF THE EXPENSES PURCHASE OF BOILERWOOD. THE ORIGINAL ASSESSMENT WA S COMPLETED U/S.143(3), THE ADDITION OR DISALLOWANCE COULD NOT BE MADE IN THE PROCEEDINGS INITIATED PURSUANT TO NOTICE ISSUED U/S .153A UNLESS SOME INCRIMINATING MATERIAL IS FOUND DURING THE SEA RCH ACTION OR GATHERED AS A RESULT OF A SEARCH ACTION. IN THE INS TANT CASE, THE VOUCHERS MAINTAINED IN THE NORMAL COURSE OF BUSINES S COULD NOT BE REGARDED AS INCRIMINATING EVIDENCE. AS REGARDS THE BOOK OF MR. DEEPAK AHIRE, SEIZED DURING THE COURSE OF SEARCH AC TION, AS HEAVILY RELIED ON BY THE ASSESSING OFFICER, IN FACT, NO ANY DISALLOWANCE IS MADE BY THE ASSESSING OFFICER IN RESPECT OF PURCHAS ES OF BOILERWOOD BY THE ASSESSEE FROM MR. DEEPAK AHIRE. THEREFORE, WHEN THE ASSESSING OFFICER HIMSELF HAS ACCEPTED ALL THE PURC HASES OF BOILERWOOD MADE FROM MR. DEEPAK AHIRE AS GENUINE, T HE ASSESSING OFFICER WAS NOT JUSTIFIED IN DOUBTING THE SAME IN T HE ASSESSMENT ORDER FOR MAKING THE IMPUGNED DISALLOWANCE IN RESPE CT OF PURCHASES OF BOILERWOOD FROM OTHER PARTIES, I.E. NA IRN KHAN, ETC. THE SAID BILL BOOK IN THE PREMISES OF ASSOCIATE CON CERN AS EXPLAINED DURING THE COURSE OF SEARCH ACTION ITSELF AND ALSO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HAVE NOT BEEN FOUND UNTR UE. THE AFFIDAVITS OF MR. SURESH KHAIRNAR AS WELL AS MR. DE EPAK AHIRE WERE ALSO NOT REBUTTED OR FOUND FALSE BY THE ASSESSING O FFICER. THEREFORE, THE IMPUGNED DISALLOWANCE IS MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE IN QUESTIO N IN THE ABSENCE OF ANY MATERIAL ON RECORD TO THAT EFFECT. SECONDLY , CONSIDERING THE FACT OF THE UNORGANIZED NATURE OF THE FIREWOOD BUSI NESS, THE DOCUMENTARY EVIDENCES IN THE FORM OF WEIGHBRIDGE SL IP, CRN AND VOUCHERS MAINTAINED BY THE ASSESSEE WERE FOUND REAS ONABLE BY CIT(A). ALL THE VOUCHERS WITH ORIGINAL WEIGHBRIDGE SLIPS AS WELL AS GRNS OF 7 YEARS WERE PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FURNISHING OF THE AFFIDAVITS OF FIREWO OD (I.E. BOILER WOOD) SUPPLIERS CATEGORICALLY CONFIRMING WITH COMPLETE DE TAILS OF HAVING SUPPLIED THE BOILER WOOD TO THE ASSESSEE. THEY GAV E POSITIVE REPLIES 6 WHICH WERE NOT REJECTED BY THE ASSESSING OFFICER IN ANY MANNER IN THE ASSESSMENT ORDER, MEANING THEREBY, HE HAS NOT P OINTED OUT ANY DEFECT THEREIN. THE PAYMENT FOR IMPUGNED PURCHASES OF BOILER WOOD WAS APPEARING IN THE MANUAL CASH BOOK MAINTAINED BY THE CASHIER OF THE ASSESSEE AND FOUND AND SEIZED DURING THE SEA RCH ACTION (REF : A-L/21 TO A-L/30). IN VIEW OF ABOVE, THE CIT(A) WA S JUSTIFIED IN DELETING THE DISALLOWANCE OF 2,89,102/-. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPH OLD THE SAME. 4.3 A SIMILAR ISSUE AROSE IN THE CASE OF THIS ASSES SEE M/S. M.B. CHEMICALS IN A.Y. 5006-06 AND 2007-08. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING, WE ARE NOT INCLINED T O INTERFERE WITH THE FINDING OF CIT(A), WHEREBY, HE RIGHTLY DELETED THE ADDITION MADE BY WAY OF DISALLOWANCE OF 2,02,175/- AND 16,19,323/- RESPECTIVELY FOR A.Y. 2005-06 AND 2007-08. WE UPHOLD THE SAME. 5. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF LABOUR EXPENSES OF 7,13,344/- AND OF TRANSPORTATION OF 17,800/- BY INVOKING THE PROVISIONS OF SEC. 40(A)(3). ON VERIF ICATION OF THE BOOKS OF ACCOUNTS OF ASSESSEE, THE ASSESSING OFFICER ASSU MING THE CLAIM OF EXPENDITURE ON ACCOUNT OF CONTRACT LABOUR TO BE BOG US, DISALLOWED THE SAME. 5.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AS REPRODUCED IN PARA 7.2 OF ORDER OF CIT(A), WHO H AVING CONSIDERED THE SAME, GRANTED RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADDITION MADE U/S. 40(A)(3) OF ACT ON ACCOUNT OF LABOUR EXPENSES OF 4,35,138/- [(WRONGLY TAKEN AS 7,13,344/- BY CIT(A)] AND TRANSPORTATION EXPENSES O F 17,800/- RESPECTIVELY. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAN D, THE LEARNED 7 AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CI T(A) ON THE ISSUE. 5.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT INITIALLY THE ASSESSING OFFICE R WAS OF THE VIEW THAT THE IMPUGNED EXPENDITURE OF LABOUR CHARGES AS BOGUS. HOWEVER, WHEN THE GENUINENESS OF THE SAID EXPENDITU RE WAS ESTABLISHED BY ON BEHALF OF ASSESSEE, THE ASSESSING OFFICER MADE THE IMPUGNED DISALLOWANCE OF LABOUR CHARGES BY INVOKING THE PROVISIONS OF SECTION 40A(3) WITHOUT CONFRONTING THE SAME TO T HE ASSESSEE. BEFORE DECIDING THE ISSUE, IT WAS NECESSARY TO UNDE RSTAND THE EXACT NATURE OF THE EXPENSES. THE ASSESSEE HAS APPOINTED THE LABORERS NAMELY CONTRACT LABOUR TO CARRY OUT THE DAY TO DAY WORK IN THE FACTORY. SOME OF THE DETAILS OR TYPES OF SUCH WORKS (OF ABOUT 142 TYPES OF WORK) CARRIED OUT BY THE SAID CONTRACT WOR KERS WERE FURNISHED TO THE ASSESSING OFFICER DURING THE COURS E OF ASSESSMENT PROCEEDINGS. THE CARRYING ON OF THE SAID WORK WAS N OT DISPUTED BY THE ASSESSING OFFICER. THERE WAS ONE SUPERVISOR FO R EVERY 10 TO 15 SUCH LABORERS WHO WAS REGARDED AS CONTRACTOR. ALL THE LABORERS WERE SEPARATE EMPLOYEES OF THE ASSESSEE BECAUSE THE ASSESSEE HAS MAINTAINED ATTENDANCE OF ALL SUCH LABORERS. THE AS SESSEE HAS TAKEN INDIVIDUAL APPLICATION FOR EMPLOYMENT IN WRIT ING FROM ALL THE SUCH LABORERS AND THE ASSESSEE HAS ALSO OBTAINED TH E SIGNATURE ON STAMP IN RESPECT OF PAYMENTS MADE TO INDIVIDUAL LAB ORERS FROM TIME TO TIME. HOWEVER, IN THE BOOKS OF ACCOUNT THE PAYME NT OF THE SAID TEAM WAS SHOWN IN THE NAME OF SUPERVISOR I.E. CONTR ACTOR MAINLY BECAUSE IT WAS NOT POSSIBLE TO INCORPORATE THE NAME S OF SUCH LABORERS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE PA RTICULARLY WHEN SEPARATE CONCLUSIVE RECORD IS MAINTAINED BY THE ASS ESSEE WHICH IS NOT IN DISPUTE. THE LIST OF SUCH PAYMENTS GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS OF THOSE SUPERVI SORS I.E. CONTRACTORS AND NOT OF THE INDIVIDUAL LABORERS. HO WEVER THE ASSESSING OFFICER WRONGLY ASSUMED THE SAME TO BE IN DIVIDUAL 8 LABORERS. THIS ASSUMPTION WAS NOT JUSTIFIED AND CON TRARY TO THE FACTS ON RECORD WHICH WAS PRODUCED BEFORE HIM. THE ASSESSING OFFICER ALSO IMPROPERLY APPLIED THE PROVISION OF SE CTION 40(A)(3). MOREOVER, SUCH ADDITIONS IN THE ABSENCE OF ANY MATE RIAL, IS NOT JUSTIFIED IN THE CASE OF SEARCH BECAUSE RECORD MAIN TAINED BY THE ASSESSEE THAT EACH PAYMENT TO THE LABORER IS NOT MO RE THAN 2500. THEREFORE, IN VIEW OF ABOVE FACTS, THE IMPUGNED DIS ALLOWANCE MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 40(A)(3) WAS NOT JUSTIFIED AND THE SAME WAS RIGHTLY DELETED BY THE CIT(A). THIS TAKES CARE OF DISALLOWANCE OF TRANSPO RTATION CHARGES OF 17,800/-. WE UPHOLD THE SAME. 5.3 A SIMILAR ISSUE AROSE IN A.Y. 2005-06, WHEREIN THE ADDITION ON THIS ACCOUNT WAS MADE OF 1,54,614/-, WHICH WAS DELETED BY CIT(A) ON SIMILAR LINE. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WITH TH E FINDING OF CIT(A), WHO HAS RIGHTLY DELETED THE SIMILAR IMPUGNED ADDITI ON BY COGENT REASONING. WE UPHOLD THE SAME. 6. THE NEXT ISSUE IS WITH REGARD TO ADDITION ON ACC OUNT OF PROCESS LOSS OF 63,18,137/-. THE PROCESS LOSS CLAIMED BY THE ASSE SSEE WAS DISBELIEVED BY THE ASSESSING OFFICER FOR THE RE ASON THAT THE PROCESS OF MANUFACTURE CARRIED ON BY THE ASSESSEE I S SIMPLE MECHANISM PROCESS AND THE DAY TO DAY RECORD OF PROC ESS LOSS WAS NOT MAINTAINED BY THE ASSESSEE. THEREFORE, THE ASS ESSING OFFICER APPLIED THE AVERAGE COST OF CLOSING STOCK AS DISCLO SED IN THE FINANCIAL STATEMENTS AND WORKED OUT THE COST OF PRO CESS LOSS AT 63,16,137/- AND ACCORDINGLY, MADE THE ADDITION THER EFORE. 6.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AND CIT(A) HAVING CONSIDERED THE SAME, HAS GRANTED RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON B EHALF OF 9 REVENUE, INTER ALIA SUBMITTED THAT THE CIT(A) WAS N OT JUSTIFIED IN DELETING THE ADDITION IN QUESTION. ACCORDINGLY, TH E ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTO RED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE SUPPORT ED THE ORDER OF CIT(A) ON THE ISSUE. 6.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT NOTHING INCRIMINATING HAS BEEN FOUND DURING THE COURSE OF SEARCH ACTION TO SUPPORT THE STAND OF THE ASSESSING OFFICER IN RESPECT OF ADDITION ON ACCOUNT OF PROCES S LOSS. THE OBSERVATION MADE BY THE ASSESSING OFFICER IN RESPEC T OF CERTAIN DISCREPANCIES IN THE STOCK RECORD OF THE ASSESSEE A S WELL AS RECORD AS PER EXCISE LAW WERE RECONCILED BY THE ASSESSEE. THIS CONTENTION OF THE ASSESSEE WAS NOT DISPUTED BY THE ASSESSING O FFICER. IT IS ALSO UNDISPUTED THAT THE ASSESSMENTS UP TO A.Y. 2006-07 OF THE ASSESSEE WERE COMPLETED U/S.143(3). IN THE SAID ASS ESSMENTS, EXCEPT FOR A.Y. 2005-06, THE PROCESS LOSSES AS DISC LOSED BY THE ASSESSEE HAVE BEEN ACCEPTED BY THE ASSESSING OFFICE R. AS REGARDS THE A.Y. 2005-06 THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SIMILAR GROUND I.E. SUPPRESSED SALE DUE TO PROCESS LOSS WAS DELETED BY THE COMMISSIONER OF INCOME TAX (APPE ALS) AND THE SAID DECISION WAS CONFIRMED BY THE ITAT, PUNE BENCH IN ITA NO. 537/PN/2009 DATED 29.07.2011 WHICH HAS ALSO NOT BEE N DISPUTED BEFORE US. THE CLAIM OF THE AUTHORIZED REPRESENTATI VE THAT THE SAID ASSESSMENT ORDERS WERE ALSO SUBJECTED TO REVIEW BY THE CIT WAS ALSO NOT FOUND UNTRUE. THEREFORE, THE IMPUGNED DISA LLOWANCE MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. THE AS SESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION WHEN THERE IS NO IOTA OF EVIDENCE FOUND DURING THE COURSE OF SEARCH FOR JUST IFYING THE ADDITION IN QUESTION. THE ASSESSING OFFICER NOT JU STIFIED SUMMARILY REJECTING THE RELATED CERTIFICATE PRODUCED IN THIS REGARD FROM 'VASANTDADA SUGAR INSTITUTE PARTICULARLY WHEN ONE O F THE CERTIFICATE IS ELABORATE AND CONCLUSIVE ON THE ISSUE. IT IS NO T THE CASE OF THE 10 ASSESSING OFFICER THAT THE ASSESSEE HAS MADE ANY UN ACCOUNTED SALE BY SHOWING PROCESS LOSS. ON THE CONTRARY, HE HAS MA DE ADDITION OF THE COST OF THE PROCESS LOSS AND NOT SALE VALUE OF THE PROCESS LOSS. NO EVIDENCE WAS FOUND AS A RESULT OF SEARCH ACTION THAT THE ASSESSEE HAS INDULGED IN SALE OUTSIDE THE BOOKS OF ACCOUNTS. THE BOOKS OF ACCOUNT ARE AUDITED ONE. THE EXCISE DEPART MENT HAS ALSO ACCEPTED THE PRODUCTION FIGURE AS PER AUDITED RECOR D OF ASSESSEE. MOREOVER, DURING THE COURSE OF SEARCH ACTION, MANY PAGES WERE FOUND CONTAINING TIME TO TIME WORKING OF SALE, ETC. THERE WAS NEITHER ANY EVIDENCE WHICH COULD LEAD TO ANY SALE O UTSIDE THE BOOKS OF ACCOUNTS NOR IT WAS CASE OF ASSESSING OFFICER TH AT THE ASSESSEE IS HAVING ANY UNRECORDED SALES. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF MANUFACTURING PROCESS LOSS AMOUNTING TO 63,18,387/- WAS NOT FOUND JUSTIFIED BY CIT(A) AND THE SAME WAS RIGHTLY DELETED BY HIM BY REASONED FACTUAL FINDING AS DISCUSSED ABO VE. WE UPHOLD THE SAME. 6.3 A SIMILAR ADDITION ON ACCOUNT OF DISALLOWANCE O F MANUFACTURE PROCESS LOSS WERE MADE IN A.YS. 2005-06, 2006-07, 2 007-08, 2008- 09, 2009-10 AND 2010-11 FOR 57,44,026/-, 20,01,846/-, 14,74,644/-, 7,40,753/-, 14,27,514/- AND 7,90,773/- RESPECTIVELY. THE FACTS BEING SIMILAR, SO FOLLOWING THE SAME REAS ONING, THE CIT(A) HAS DELETED THE SAME ON THE LINE OF A.Y. 2004-05. A S WE HAVE APPROVED THE SIMILAR DELETION IN A.Y. 2004-05, ON T HE SAME REASONING, THE SIMILAR DELETION IN REMAINING YEARS ALSO IS UPHELD. 7. THE NEXT ISSUE RELATES TO THE ADDITION OF SALE O F EMPTY GUNNY BAGS OF 14,67,617/-. THE ASSESSING OFFICER HAD CALCULATED THE TOTAL NUMBER OF BAGS OF SUGAR PURCHASED AND HELD TH AT THE SAID EMPTY GUNNY BAGS SHOULD HAVE BEEN ACCOUNTED AS PER CLOSING STOCK OR SHOULD HAVE BEEN SHOWN AS SALE OF EMPTY GUNNY BA GS. HE CALLED FOR THE RATES OF EMPTY GUNNY BAGS FROM SUGAR FACTOR IES AND 11 ACCORDINGLY, MADE ADDITION OF 14,67,617/- I.E. 77,243/- BAGS @ 19 PER BAG. 7.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE, WHEREIN, THE CIT(A) HAVING CONSIDERED THE SAME, HAS GRANTED THE RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA SUBMITTED THAT THE CI T(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF SALE OF GUNNY B AGS AT 14,67,617/-. 7.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THERE IS NOTHING INCRIMINATING HAS BEEN FOUND DURING THE COURSE OF SEARCH ACTION TO SUPPORT THE S TAND OF THE ASSESSING OFFICER IN RESPECT OF ANY UNACCOUNTED SAL E OF EMPTY GUNNY BAGS. IT IS UNDISPUTED THAT THE ASSESSMENTS UP TO A.Y. 2006-07 OF THE ASSESSEE WERE COMPLETED U/S. 143(3). IN THE SAID ASSESSMENTS, NO ADDITION WAS MADE ON THE ISSUE OF A NY UNACCOUNTED SALE OF EMPTY GUNNY BAGS. THE CLAIM OF THE AUTHORIZED REPRESENTATIVE THAT THE SAID ASSESSMENT ORDERS WERE ALSO SUBJECTED TO REVIEW BY THE COMMISSIONERS OF INCOME TAX WERE N OT FOUND UNTRUE. THEREFORE, THE IMPUGNED DISALLOWANCE MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF SALE OF EMPTY GUNNY BAGS WAS NOT JUSTIFIED, STATED ON BEHALF OF ASSESSEE. THE CONTE NTION OF THE ASSESSEE THAT EARLIER THE ASSESSING OFFICER PROPOSE D THE IMPUGNED ADDITION ON ACCOUNT OF UNACCOUNTED SALE OF EMPTY GU NNY BAGS AND WHEN THE FACT WAS BROUGHT TO HIS NOTICE THAT NO EVI DENCE WAS FOUND IN RESPECT OF THE SAID ALLEGATION, THEN THE ASSESSI NG OFFICER CHANGED HIS STAND PROPOSING TO MAKE ADDITION ON THE BASIS T HAT THOUGH THE SAID EMPTY BAGS WERE NOT SOLD BUT THE SAME ARE MONE Y WORTH AND IF SOLD IN THE MARKET THAT WOULD FETCH A PRICE. THE AS SESSING OFFICER AGAIN CHANGED HIS STAND AND ULTIMATELY MADE AN ADDI TION ON ACCOUNT OF SALE OF EMPTY GUNNY BAGS. THE REASONS GI VEN BY THE 12 ASSESSING OFFICER FOR THE IMPUGNED ADDITION ARE THA T THE AFFIDAVITS OF THE EMPLOYEES WERE NOT RELIABLE AS THEY ARE PAID EM PLOYEES OF THE ASSESSEE. IT COULD NOT BE BELIEVED THAT THE ASSESS EE SHALL NOT MAKE COMMERCIAL USE OF EMPTY GUNNY BAGS HAVING INHERENT VALUE IN THE MARKET. THE ASSESSING OFFICER HAS NOT ESTABLISHED T HAT THE AFFIDAVITS MADE OF THE SUPERVISORS AS WELL AS CONTRACTOR OF TH E ASSESSEE INTER ALIA DEPOSING THEREON THE USE OF EMPTY GUNNY BAGS F OR MAINTENANCE, CONSTRUCTION AND BY EMPLOYEES, WITHOUT CONFRONTING THEM AND TO THE DEPONENT. THIS ADHOC APPROACH OF A SSESSING OFFICER IS NOT JUSTIFIED. IT IS A WELL SETTLED POS ITION THAT THE CONTENTS OF THE AFFIDAVIT CAN BE REJECTED ONLY BY CONFRONTIN G THE SAME TO THE DEPONENT, WHICH HAS NOT BEEN DONE IN THIS CASE. TH E ASSESSING OFFICER ALSO IGNORED THE VITAL EVIDENCE I.E. PAGE N O. 70 OF ANNEXURE A-1/1 SEIZED DURING THE SEARCH ACTION WHICH CLEARLY ESTABLISHED THE CONTENTIONS OF THE ASSESSEE THAT THE SAID BAGS WERE USED IN FACTORY AS WELL AS GIVEN TO LABORERS, ETC. THERE IS NEITHER ANYTHING ON RECORD TO SUGGEST UNACCOUNT SALE OF EMPTY GUNNY BAGS NOR T HERE WAS ANY STOCK OF THE SAME DURING THE RELEVANT YEAR THAT TOO IN THE SEARCH. ON CONTRARY, THE ASSESSEE HIMSELF HAS SHOWN THE SAL E OF SUCH EMPTY GUNNY BAGS DURING THE A.Y. 2007-08 & A.Y. 200 8-09. IN THIS BACKGROUND, THE CONTENTION OF THE ASSESSEE THAT WHE NEVER THERE IS A SALE OF EMPTY GUNNY BAGS, THE SAME WAS ACCOUNTED FO R. THE MANUAL CASH BOOKS MAINTAINED BY THE CASHIER, WHICH CONTAINS THE COMPLETE DETAILS OF DAY TO DAY CASH TRANSACTIONS CA RRIED OUT BY THE ASSESSEE ALSO NEGATES ANY SUCH UNACCOUNTED SALE OF EMPTY GUNNY BAGS. THEREFORE THE IMPUGNED ADDITION MADE BY THE A SSESSING OFFICER ON ACCOUNT OF SALE OF EMPTY GUNNY BAGS AMOU NTING TO 14,67,617/- THAT TOO IN THE SEARCH ACTION WAS NOT F OUND JUSTIFIED BY CIT(A) AND THE SAME WAS RIGHTLY DELETED BY HIM BY T HE REASONED FINDING. WE UPHOLD THE SAME. 7.3 A SIMILAR ISSUE AROSE IN A.YS.2005-06, 2006-07, 2007-08 AND 2008-09, WHEREIN THE ADDITION OF 24,96,688/-, 27,73,260/-, 13 23,69,574/- AND 18,95,356/- WERE MADE BY THE ASSESS ING OFFICER, WHICH WERE DELETED BY CIT(A). FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WI TH THE FINDING OF CIT(A) WHO HAS DELETED THE SIMILAR ADDITION IN A.Y. 2005-06, 2006- 07, 2007-08 AND 2008-09 AS WELL. WE UPHOLD THE SAM E. 8. THE ISSUE WHICH PERTAINS ONLY TO A.Y. 2010-11 IS WITH REGARD TO THE ADDITION OF 21,52,194/- ON ACCOUNT OF EXCESS STOCK OF FINISHED GOODS, SEMI-FINISHED GOODS, BOILER-WOOD AN D DIESEL FOUND DURING THE COURSE OF SEARCH ACTION. THE FACTS OF T HE ISSUE ARE THAT DURING THE COURSE OF SEARCH ACTION, THE PHYSICAL ST OCK OF FINISHED GOODS, SEMI-FINISHED GOODS, BOILER-WOOD AND DIESEL WAS TAKEN BY THE DEPT. ACCORDINGLY, THE FOLLOWING EXCESS STOCK WAS ARRIVED BY THE SEARCH PARTLY. S.NO. PARTICULARS OF ITEM QUANTITY AMOUNT PER UNIT TOTAL AMOUNT (RS.) 1 FINISHED GOODS 18 QTLS 4606.33 82,914/ - 2 SEMI FINISHED GOODS I.E. RAW MATERIAL 416 QTLS 3180 13,22,880/ - 3 BOILER WOOD 510 TONNES 1400 7,14,000/ - 4 DIESEL 810 LTRS 40 32,400/ - TOTAL RS. 21,52,194/ - THE ASSESSING OFFICER CALCULATED THE DIFFERENCE OF EXCESS STOCK FOUND AT 18 QTLS. AS REGARDS THE OTHER ITEMS I.E. S EMI-FINISHED GOODS, BOILER-WOOD AND DIESEL, THE STOCK SHOWN TO B E FOUND DURING THE COURSE OF SEARCH ACTION WAS TREATED BY THE ASSE SSING OFFICER AS EXCESS STOCK AND THE VALUE OF THE SAME AS CALCULATE D IN ABOVE TABLE WAS ADDED TO TOTAL INCOME BY THE ASSESSING OFFICER AS UNEXPLAINED INVESTMENT. 8.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE, THE CIT(A) HAVING CONSIDERED THE SAME, DELETED THE ADDITION IN 14 QUESTION. THE SAME HAS BEEN OPPOSED BEFORE US ON B EHALF OF REVENUE, INTER ALIA, SUBMITTED THAT THE ORDER OF CI T(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 8.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS BASE D HIS ADDITION ON THE BASIS OF STOCK AS SHOWN TO BE FOUND DURING THE COURSE OF SEARCH ACTION AS WELL AS THE RECORD AS MAINTAINED UNDER EX CISE LAW. THE ASSESSEE HAS FILED THE COPY OF THE PANCHNAMA, IN WH ICH THERE WAS NO MENTION OF ANY STOCK INVENTORY PREPARED DURING T HE COURSE OF SEARCH ACTION. THE ADDITION COULD NOT BE MADE SOLE LY ON THE STATEMENTS OF THE EMPLOYEES PARTICULARLY WHEN THE S AID EMPLOYEE IS NOT HAVING SUFFICIENT KNOWLEDGE OF THE RELEVANT FAC TS. IN THE CASE OF FINISHED GOODS AS PER CALCULATION OF ASSESSING OFFI CER, THERE WAS IN FACT SHORTAGE OF 19 QTLS I.E. THE STOCK SHOWN TO BE FOUND WAS 1297 QTLS AND THE STOCK AS PER RG-1 REGISTER WAS 1316 QT LS. HOWEVER, THE ASSESSING OFFICER HAS TREATED THE SAME AS EXCES S STOCK OF 18 QTLS. FURTHER, THE DISCLOSURE OF STOCK OF SEMI-FINI SHED GOODS AND BOILER WOOD IN THE AUDITED FINANCIAL ACCOUNTS WAS N OT IN DISPUTE. THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ASSUMING THE SAME TO BE NOT DISCLOSED. THE FIGURES OF CLOSING ST OCK WERE ALSO ROUGHLY CALCULATED DURING THE SEARCH ACTION AND WHI CH WERE MADE BASIS FOR CALCULATION OF THE DIFFERENCE IN STOCK FO UND AND STOCK AS PER RECORD. THE CONTENTION OF THE AUTHORIZED REPRES ENTATIVE OF THE ASSESSEE AS REGARDS THE STOCK OF DIESEL WAS ALSO FO UND CORRECT BY CIT(A) BECAUSE THERE WAS NO REVENUE LOSS BY NOT SHO WING THE MEAGER AMOUNT OF STOCK OF DIESEL. THE STOCK OF DIES EL IS NOT AT ALL UNDISCLOSED WHEN THE ENTIRE PURCHASE OF DIESEL IS D ULY ACCOUNTED IN THE BOOKS OF ACCOUNT. THERE IS NO IOTA OF EVIDENCE FOUND, DURING THE COURSE OF SEARCH ACTION IN RESPECT OF ANY UNDISCLOS ED SALE EFFECTED BY THE ASSESSEE. THE MANUAL CASH BOOK MAINTAINED B Y THE 15 ASSESSEE WHICH CONTAINS COMPLETE DETAILS OF THE DAY TO DAY CASH TRANSACTIONS ALSO NEGATES OF ANY UNRECORDED SALE DU RING ANY OF THE YEAR. THEREFORE, IN THIS BACKGROUND, THE ADDITION WAS HELD NOT JUSTIFIED AND THE SAME WAS RIGHTLY DELETED BY THE C IT(A), WHICH NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 8.3 THE CORRESPONDING CROSS OBJECTIONS FILED BY THE ASSESSEE WERE NOT PRESSED, SO SAME ARE DISMISSED AS NOT PRESSED. 9. IN THE RESULT, ALL THE APPEALS FILED BY REVENUE AS WELL AS CORRESPONDING CROSS OBJECTIONS IN THE CASE OF M/S. M.B. CHEMICALS FILED BY ASSESSEE ARE DISMISSED AS DISCUSSED ABOVE. THE ITA NOS.1374, 1375, 1376, 1377, 1378, 1397 AN D 1379/PN/2012 FOR A.YS. PERTAIN TO M/S. M.B. SUGAR & PHARMACEUTICALS LTD. 10. IN ITA NO.1374/PN/2012, THE REVENUE HAS FILED T HE APPEAL ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDIT ION ON ACCOUNT OF EXPENDITURE IN RESPECT OF PURCHASE BOILE R WOOD AT RS.45,256/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDIT ION ON ACCOUNT OF EXCESSIVE EXPENDITURE CLAIMED IN RESPECT CONSUMPTION OF BOILER WOOD AMOUNTING TO RS.19,06,83 3/-. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDIT ION ON ACCOUNT OF DISALLOWANCES MANUFACTURING PROCESS LOSS AMOUNTING TO RS.86,93, 556/- 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDIT ION ON ACCOUNT OF SALE OF GUNNY BAGS AT RS.16,32,555/-. 16 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDIT ION MADE UNDER SECTION 40A(3) OF THE ACT ON ACCOUNT OF LABOU R EXPENSES OF RS.7,13,344/-. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN GIVING FINDING THA T ADDITION CANNOT BE MADE UNDER SECTION 153A IN THE ABSENCE OF INCRIMINATING MATERIAL, WITHOUT APPRECIATING THAT, AS PER PROVISION OF THIS SECTION THE ASSESSING OFFICER CAN ASSESS AND REASSESS THE INCOME OF THE ASSESSEE. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN IGNORING THE EVIDE NCE ON RECORD IN THE FORM OF INCRIMINATING MATERIALS ON TH E BASIS OF WHICH THE VARIOUS ADDITIONS WERE MADE, THUS REND ERING THE DECISION PERVERSE AND CONTRARY TO THE EVIDENCE ON RECORD. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY, D ELETE AMEND ANY OF THE GROUNDS, AS PER THE CIRCUMSTANCES OF THE CASE. 9. THE APPELLANT PRAYS LEAVE TO ADDUCE SUCH FURTHER EV IDENCE TO SUBSTANTIATE ITS CASE AS THE OCCASION MAY DEMAND . 11. THE ASSESSEE IS A COMPANY CARRYING ON THE BUSIN ESS OF MANUFACTURING OF PHARMA GRADE SUGAR, ETC. THE ASSE SSEE IS REGULARLY ASSESSED TO INCOME TAX. THE ORIGINAL RETU RN OF INCOME FOR THE YEAR UNDER CONSIDERATION REVIEW WAS FILED BY TH E ASSESSEE ON 30.10.2004 DECLARING TOTAL INCOME AT 33,92,300/-. THE ASSESSMENT FOR THE YEAR UNDER APPEAL WAS COMPLETED U/S.143(3) OF THE ACT AT 34,65,120/-. AS DISCUSSED ABOVE, IN THIS GROUP THE RE WAS A SEARCH ACTION U/S. 132(1) ON 21.05.2009 AT TH E OFFICE AS WELL AS MANUFACTURING PREMISES OF THE ASSESSEE AND ALSO AT RESIDENTIAL PREMISES OF ALL THE DIRECTORS AND SOME OF THE EMPLO YEES OF THE ASSESSEE. IN RESPONSE TO THE NOTICE U/S 153A, THE A SSESSEE FILED A RETURN OF INCOME ON 11.05.2011 DECLARING TOTAL INCO ME AT 33,92,300/-. THEREAFTER, THE REASSESSMENT U/S.143( 3) R.W.S.153A WAS COMPLETED ON THE TOTAL INCOME AT 1,24,63,380/- AS AGAINST 17 RETURNED INCOME OF 33,92,300/-. THE ISSUES WITH REGARD TO VARIATION IN THE RETURNED INCOME AND ASSESSED TOTAL INCOME WERE DISALLOWANCE ON ACCOUNT OF BOILER WOOD EXPENSES AND CONSUMPTION, ADDITION ON ACCOUNT OF PROCESS LOSS, ADDITION ON AC COUNT OF SALE OF EMPTY GUNNY BAGS AND DISALLOWANCE U/S. 40A(3) IN RE SPECT OF CONTRACT LABOUR EXPENSES. 12. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF BOILER WOOD EXPENSES OF 45,256/- FOR THE REASON THAT THE DELIVERY CHALLANS OF THE DELIVERY OF GOODS, PAN OF THE SUPPLIERS, ETC. C OULD NOT FURNISHED BY THE ASSESSEE. 12.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AND CIT(A) CALLED FOR REMAND REPORT AND HAVING CONS IDERED THE COMMENTS THEREON ON BEHALF OF ASSESSEE, THE CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE. 12.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT A SIMILAR DISALLOWANCE MADE IN THE CASE OF M.B. CHEMICALS WHICH WAS DELETED BY CIT(A) AND WE H AVE UPHELD THE SAME VIDE PARA 2 OF THIS ORDER. FACTS BEING SI MILAR, SO FOLLOWING THE SAME REASONING, WE ARE NOT INCLINED TO INTERFER E WITH THE FINDING OF CIT(A), WHO HAS DELETED THE ADDITION OF 45,256/- MADE ON ACCOUNT OF DISALLOWANCE OF BOILER WOOD EXPENSES. W E UPHOLD THE SAME. 12.3 A SIMILAR ISSUE AROSE IN A.YS.2005-06, 2006-0 7 AND 2007-08 WHEREIN ADDITIONS OF 14,07,316/-, 26,79,009/- AND 17,307/- RESPECTIVELY WERE MADE BY THE ASSESSING OF FICER IN RESPECTIVE YEARS WERE DELETED BY CIT(A). FACTS BEI NG SIMILAR, SO 18 FOLLOWING THE SAME REASONING, THE ORDER OF CIT(A) O N THIS ISSUE NEEDS NO INTERFERENCE FROM OUR SIDE. 13. THE NEXT ISSUE IS WITH REGARD TO ADDITION ON AC COUNT OF DISALLOWANCE OF EXCESS CLAIM OF BOILER WOOD EXPENSE S OF 19,06,833/-. THE ASSESSING OFFICER COMPARED THE BO ILER WOOD CONSUMPTION PER QUINTAL OF THE ASSESSEE WITH ITS SI STER CONCERN M/S. M.B. CHEMICALS. THE ASSESSING OFFICER CALCULA TED THE TOTAL OF BOILER WOOD CONSUMPTION AS WELL AS PRODUCTION IN QU INTALS OF FIVE YEARS I.E. FROM F.Y. 2003-04 TO F.Y. 2007-08 OF BOT H THE CONCERNS AND ARRIVED AT THE CONSUMPTION OF BOILER WOOD OF TH E ASSESSEE AT 88.13 PER QUINTAL, WHEREAS THE CONSUMPTION OF BOILE R WOOD IN THE CASE OF SISTER CONCERN M/S. M.B. CHEMICALS WAS ARRI VED AT BY HIM AT 52.28 PER QUINTAL. THEREFORE, HE ARRIVED AT THE EX CESS CONSUMPTION OF BOILER WOOD BY MULTIPLYING THE SAID DIFFERENCE OF 35.85 WITH THE QUANTITY IN QUINTAL PRODUCED DURING THE YEAR UNDER REVIEW I.E. 53,189.20 QTLS. THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER FOR THE YEAR UNDER REVIEW COMES T O 19,06,833/-, WHICH WAS ADDED TO THE ASSESSEES INCOME. 13.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AND CIT(A) HAVING CALLED FOR REMAND REPORT FROM THE CONCERNED ASSESSING OFFICER AND COMMENTS OF ASSESSEE ON SAME, THE CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE BY OBSERVING AS IN PARA 7.3 OF ITS ORDER. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHA LF OF REVENUE INTER ALIA SUBMITTED THAT THE CIT(A) ERRED IN DELET ING THE ADDITION ON ACCOUNT OF EXCESSIVE EXPENDITURE CLAIMED IN RESPECT CONSUMPTION OF BOILER WOOD AMOUNTING TO 19,06,833/-. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER B E RESTORED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATI VE HAS SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 19 13.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT NOTHING INCRIMINATING HAS B EEN FOUND DURING THE COURSE OF SEARCH WITH REGARD TO THE EXCE SS CLAIM OF BOILER WOOD EXPENSES IN THE SEARCH. IT IS ALSO UNDISPUTED THAT THE ASSESSMENTS UP TO A.Y. 2006-07 OF BOTH THE CONCERNE D I.E. THE ASSESSEE AS WELL AS M/S. M.B. CHEMICALS WERE COMPLE TED U/S.143(3). IN THE SAID ASSESSMENTS, THE CONSUMPTI ON OF BOILER WOOD AS DISCLOSED BY THE ASSESSEE AS WELL AS BY M/S . M.B. CHEMICALS HAS BEEN ACCEPTED BY THE REVENUE AUTHORIT IES. THE ASSESSMENT ORDERS WERE ALSO SUBJECTED TO REVIEW BY THE CONCERNED COMMISSIONER OF INCOME TAX, WHICH WAS DROPPED AS NO THING WRONG WAS FOUND THEREIN. IN THIS BACKGROUND, THE STAND O F THE ASSESSEE HAS BEEN THAT THE IMPUGNED DISALLOWANCE MADE BY THE ASSESSING OFFICER CONSIDERING THE ABOVE FACTUAL ASPECT WAS NO T JUSTIFIED. THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER EVEN THOUGH THE BOILER WOOD CONSUMPTION IN THE CASE OF ASSESSEE IS MORE THAN THE BOILER WOOD CONSUMPTION IN THE CASE OF M/S. M.B . CHEMICALS. THE PROFIT OF THE ASSESSEE IS FAR MORE THAN M/S. M. B. CHEMICALS. BASICALLY THIS ASPECT ESTABLISHED BEYOND DOUBT THAT THERE IS DIFFERENT NATURE OF BOTH THE UNITS. EVEN THE TECHNI CAL DIFFERENCE OF THE BOILER OWNED BY THE ASSESSEE AS WELL AS THE BOI LER OWNED BY M/S. M.B. CHEMICALS, ARE NOT IN DISPUTE. THE DIFFE RENT NATURE OF MANUFACTURING PROCESS AS WELL AS DIFFERENT PRODUCTS OF BOTH THE UNITS ARE ALSO NOT IN DISPUTE. THE REASONS GIVEN BY THE ASSESSING OFFICER FOR THE IMPUGNED DISALLOWANCE ARE NOT JUSTI FIED BECAUSE HE HAS REJECTED THE CERTIFICATE ISSUED BY THE INSTITUT E CHEMICAL TECHNOLOGY' ON THE BASIS OF VAGUE REASONS WHICH IS NOT JUSTIFIED. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFEC T IN THE SAID CERTIFICATE. THE ACCOUNTS IN THIS REGARD HAVE ALSO NOT BEEN NEGATED BY THE ASSESSING OFFICER WHICH ARE BEING MAINTAINED UNDER DIFFERENT STATUTES I.E. INCOME TAX ACT, MAHARASHTRA VALUE ADD ED TAX, CENTRAL SALES TAX ACT, CENTRAL EXCISE ACT, MUNICIPAL LAW, F OOD & ADULTERATION RULES, COMPANIES ACT, ETC. THE COMMER CIAL 20 EXPEDIENCY HAS TO BE LOOKED WITH THE ANGLE OF TAX P AYERS. IN THIS BACKGROUND, ESPECIALLY IN CASE OF SEARCH, THE CIT(A ) WAS JUSTIFIED IN DELETING ADDITION OF 19,06,833/- MADE ON ACCOUNT OF EXCESSIVE CLAIM OF EXPENDITURE OF FIREWOOD. THIS REASONED FI NDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 13.3 A SIMILAR ISSUE AROSE IN A.YS.2005-06, 2006-0 7, 2007-08 AND 2008-09 OF 21,17,270/-, 20,99,112/-, 23,50,021 AND 22,87,728/- RESPECTIVELY, WHEREIN, THE ADDITIONS MA DE BY THE ASSESSING OFFICER WERE ALSO DELETED BY CIT(A). FAC TS BEING SIMILAR TO THAT OF A.Y. 2004-05, SO FOLLOWING THE SAME REASONI NG, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF CIT(A), W HO HAS GIVEN RELIEF IN ALL THESE YEARS ON THIS ACCOUNT. SAME IS UPHELD . 14. THE NEXT ISSUE IS WITH REGARD TO THE ADDITION ON ACCOUNT OF PROCESS LOSS OF 86,93,556/-. THE PROCESS LOSS CLAIMED BY THE ASSESSEE WAS DISBELIEVED BY THE ASSESSING OFFICER F OR THE REASON THAT THE PROCESS OF MANUFACTURE CARRIED ON BY THE A SSESSEE WAS SIMPLE MECHANICAL PROCESS AND THE DAY TO DAY RECORD OF PROCESS LOSS WAS NOT MAINTAINED BY THE ASSESSEE. THEREFORE, HE APPLIED THE AVERAGE COST OF THE CLOSING STOCK AS DISCLOSED IN T HE FINANCIAL STATEMENTS AND WORKED OUT THE COST OF THE PROCESS L OSS AT 86,93,556/- AND, ACCORDINGLY, MADE AN ADDITION THER EOF. 14.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE, WHEREIN AS DETAILED IN PARA 8.1 OF ORDER OF THE CIT (A). THE SAME WERE SENT FOR COMMENTS OF ASSESSING OFFICER AND HAV ING CONSIDERED THE COMMENTS OF ASSESSING OFFICER AND REPLY FROM TH E ASSESSEE THEREON, THE CIT(A) HAS GRANTED RELIEF TO THE ASSES SEE BY OBSERVING AS IN PARA 8.3 OF ITS ORDER. THE SAME HAS BEEN OPP OSED BEFORE US ON BEHALF OF REVENUE INTER ALIA SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCES M ANUFACTURING 21 PROCESS LOSS AMOUNTING TO 86,93,556/-. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER B E RESTORED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATI VE HAS SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 14.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND IT IS UNDISPUTED THAT NOTHING IN CRIMINATING HAS BEEN FOUND DURING THE COURSE OF SEARCH ACTION TO SU PPORT THE STAND OF THE ASSESSING OFFICER IN RESPECT OF ADDITION ON ACCOUNT OF PROCESS LOSS. ACCORDING TO THE ASSESSING OFFICER, THERE IS CERTAIN DISCREPANCY IN THE STOCK RECORD OF THE ASSESSEE AS WELL AS RECO RD AS PER EXCISE LAW. THE ASSESSEE HAS RECONCILED THE DISCREPANCY O F THE RECORD OF ASSESSEE AS WELL AS THE RECORD AS PER EXCISE LAW AS POINTED OUT BY THE ASSESSING OFFICER ON THE ISSUE. THE ASSESSMENT S UP TO A.Y. 2006-07 OF ASSESSEE WERE COMPLETED U/S. 143(3). IN THE SAID ASSESSMENTS, EXCEPT FOR A.Y. 2005-06, THE PROCESS L OSSES AS DISCLOSED BY THE ASSESSEE HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER. AS REGARDS THE A.Y. 2005-06 THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SIMILAR GROUND I.E. SUPPRESSED SALE DUE TO PROCESS LOSS WAS DELETED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE SAID DECISION WAS CONFIRMED BY TH E INCOME TAX APPELLATE TRIBUNAL, PUNE BENCH (ITA NO. 1041/PN/200 8 DATED 29 TH JULY, 2011) WHICH HAS NOT BEEN DISPUTED ON BEHALF O F REVENUE. FURTHER, THE STAND OF THE ASSESSEE HAS BEEN THAT TH E SAID ASSESSMENT ORDERS WERE ALSO SUBJECTED TO REVIEW BY THE CIT U/S. 263 WHICH WAS NOT FOUND UNTRUE. THIS FACT HAS ALSO NOT BEEN DISPUTED BY REVENUE. IN VIEW OF THIS, THE IMPUGNED DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED, ES PECIALLY WHEN THERE IS NO IOTA OF EVIDENCE ON RECORD WITH REGARD TO BOGUS PROCESS LOSS CLAIMED BY THE ASSESSEE IN SPITE OF SEARCH. T HE ASSESSING OFFICER WAS ALSO NOT JUSTIFIED TO REJECT THE CERTIF ICATE ISSUED BY 'THE INSTITUTE CHEMICAL TECHNOLOGY AS WELL AS VASANTDADA SUGAR INSTITUTE IN A SUMMARY MANNER. IT IS ALSO NOT THE CASE OF ASSESSING 22 OFFICER THAT THE ASSESSEE HAS MADE ANY UNACCOUNTED SALE BY SHOWING PROCESS LOSS. ON THE CONTRARY, HE HAS MADE ADDITION OF THE COST OF THE PROCESS LOSS AND NOT SALE VALUE OF THE PROCESS LOSS WHICH IS EVIDENT FROM THE NOTICE OF THE ASSESSING OFFICER WHICH MENTIONED DISALLOWANCE OF PROCESS LOSS. THERE IS NO EVIDENCE ON RECORD AS A RESULT OF SEARCH ACTION THAT THE ASSESSEE HAS INDUL GED IN ANY SALE OUTSIDE THE BOOKS OF ACCOUNT. THE BOOKS OF ACCOUNT ARE AUDITED. THE EXCISE DEPT. HAS ALSO ACCEPTED THE PRODUCTION F IGURES AS PER AUDITED RECORD OF THE ASSESSEE. ON CONTRARY, DURIN G THE COURSE OF SEARCH ACTION MANY PAGES WERE FOUND CONTAINING TIME TO TIME WORKING OF SALES, ETC. BUT THERE IS NEITHER ANY EVI DENCE THAT MAY LEAD TO ANY SALE OUTSIDE THE BOOKS OF ACCOUNTS NOR IT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE IS HAVING ANY U NRECORDED SALES. THERE IS ALSO NO INSTANCE OF ANY UNRECORDED SALES E NTERED IN THE MANUAL CASH BOOK AS REFERRED HEREINABOVE AND SEIZED DURING THE SEARCH ACTION AND WHICH CONTAINS COMPETE DAY TO DAY RECORD OF CASH TRANSACTIONS OF THE ASSESSEE. THEREFORE, ASSE SSING OFFICER WAS NOT JUSTIFIED IN MAKING DISALLOWANCE ON ACCOUNT OF MANUFACTURING PROCESS LOSS AMOUNTING TO 86,93,556/-. THE SAME WAS RIGHTLY DELETED BY THE CIT(A) BY THE ABOVE REASONED FINDING , WHICH NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 14.3 A SIMILAR ISSUE AROSE IN A.YS.2005-06, 2006-0 7, 2007-08, 2008-09, 2009-10 AND 2010-11, WHEREIN THE ADDITIONS ON THIS ACCOUNT WERE MADE OF 48,33,518/-, 75,96,604/-, 91,79,204/-, 2,07,95,335/-, 1,67,47,438/- AND 1,38,84,826/- RESPECTIVELY, WHICH HAS BEEN DELETED BY CIT(A) IN ALL THESE YEARS . FACTS BEING SIMILAR TO THAT OF A.Y. 2004-05, SO FOLLOWING THE S AME REASONING, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF C IT(A) WHO HAS RIGHTLY DELETED THE ADDITIONS TOWARDS DISALLOWANCE OF MANUFACTURING PROCESS LOSS BY REASONED FINDING. WE UPHOLD THE SA ME. ACCORDINGLY, THE ORDERS OF CIT(A) ON THIS IN ALL TH ESE YEARS ARE UPHELD. 23 15. THE NEXT ISSUE RELATES TO THE ADDITION ON ACCO UNT OF SALE OF EMPTY GUNNY BAGS OF 16,32,555/-. THE FACT OF THE ISSUE IS THAT THE ASSESSING OFFICER CALCULATED THE TOTAL NUMBER O F BAGS OF SUGAR PURCHASED AND HELD THAT THE SAID EMPTY GUNNY BAGS S HOULD HAVE BEEN ACCOUNTED FOR AS CLOSING STOCK OR SHOULD HAVE BEEN SHOWN AS SALE OF EMPTY GUNNY BAGS. HE CALLED FOR THE RATES OF EMPTY GUNNY BAGS FROM SOME SUGAR FACTORIES AND ACCORDINGLY, HE MADE AN ADDITION OF 16,32,555/- I.E. 56,295 BAGS @ 29 PER BAG. 15.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AND THE SAME WERE SENT TO THE CONCERNED ASSESSING O FFICER AND HAVING CONSIDERED THE SAME AND COMMENTS THEREON ON BEHALF OF ASSESSEE, THE CIT(A) GRANTED THE RELIEF TO THE ASSE SSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, IN TER ALIA SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADD ITION ON ACCOUNT OF SALE OF GUNNY BAGS AT 16,32,555/-. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER B E RESTORED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATI VE HAS SUPPORTED THE ORDER OF CIT(A). 15.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT THERE IS NOTHING INCRIMINAT ING FOUND DURING THE COURSE OF SEARCH ACTION TO SUPPORT THE STAND OF THE ASSESSING OFFICER IN RESPECT OF ANY UNACCOUNTED SALE OF EMPTY GUNNY BAGS. THE ASSESSMENTS UP TO A.Y. 2006-07 OF THE ASSESSEE WERE COMPLETED U/S.143(3). IN THE SAID ASSESSMENTS NO ADDITION WA S MADE ON THE ISSUE ANY UNACCOUNTED SALE OF EMPTY GUNNY BAGS. TH E SAID ASSESSMENT ORDERS WERE ALSO SUBJECTED TO REVIEW BY THE COMMISSIONERS OF INCOME TAX U/S. 263 OF ACT WAS NOT FOUND UNTRUE. THEREFORE, THE IMPUGNED DISALLOWANCE MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF SALE OF EMPTY GUNNY BAGS WAS NOT JUSTIFIED. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTING THE 24 DEPOSITION BY WAY OF AFFIDAVITS OF THE EMPLOYEES BE ING NOT RELIABLE AS THEY ARE PAID EMPLOYEES OF THE ASSESSEE. IT COULD NOT BE BELIEVED THAT THE ASSESSEE SHALL NOT MAKE COMMERCIAL USE OF EMPTY GUNNY BAGS HAVING INHERENT VALUE IN THE MARKET. IT IS A S ETTLED LEGAL POSITION THAT THE CONTENTS OF THE AFFIDAVIT HAS TO BE REJECTED BY CONFRONTING THE CONTENTS OF THE SAME TO THE DEPONEN T, SO THE ASSESSING OFFICER WAS NOT JUSTIFIED IN BRUSHING ASI DE THE AFFIDAVITS OF SUPERVISORS AS WELL AS CONTRACTOR OF THE ASSE SSEE WHEREIN THE USE OF EMPTY GUNNY BAGS WERE CLAIMED TO BE USED FOR MAINTENANCE, CONSTRUCTION AND USED BY EMPLOYEES. EVEN THE VITAL EVIDENCE I.E. PAGE NO.70 OF ANNEXURE A-L/1 SEIZED DURING THE SEAR CH ACTION REVEALS THE CONTENTIONS OF THE ASSESSEE THAT THE SA ID BAGS WERE USED IN FACTORY AS WELL AS GIVEN TO LABORERS, ETC. THERE WAS NEITHER DETECTION OF ANY UNACCOUNTED SALE OF EMPTY GUNNY BA GS NOR THERE WAS ANY STOCK OF THE SAME DURING THE RELEVANT YEAR IN-SPITE OF SEARCH. AS REGARDS THE SALE OF SUCH GUNNY BAGS DUR ING THE A.Y. 2007-08 AND 2008-09, THE CONTENTION OF ASSESSEE HAS BEEN THAT WHENEVER THERE IS SALE OF EMPTY GUNNY BAGS, THE SAM E WAS ACCOUNTED FOR. THE MANUAL CASH BOOKS MAINTAINED BY THE CASHIER, WHICH CONTAINS THE COMPLETE DETAILS OF DAY TO DAY C ASH TRANSACTIONS CARRIED OUT BY THE ASSESSEE ALSO INDICATE ANY SUCH UNACCOUNTED SALE OF GUNNY BAGS. THEREFORE, THE IMPUGNED ADDITI ON MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALE OF GUNNY BAGS AMOUNTING TO 16,32,555/- WAS NOT FOUND JUSTIFIED BY THE CIT(A) A ND THE SAME WAS DELETED BY HIM. THIS REASONED FINDING OF CIT(A) NE EDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 15.3 A SIMILAR ISSUE AROSE IN A.YS. 2005-06, 2006- 07, 2007-08 AND 2008-09, WHEREIN, THE ASSESSING OFFICER MADE DI SALLOWANCE ON THIS ACCOUNT OF 24,96,688/-, 27,73,260/-, 24,54,333/- AND 16,64,294/- RESPECTIVELY, WHICH WERE DELETED BY CIT (A) IN ALL THESE YEARS. FACTS BEING SIMILAR TO THAT OF A.Y. 2004-05 , SO FOLLOWING THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WI TH THE FINDING OF 25 CIT(A) WHO HAS RIGHTLY DELETED THE ADDITIONS MADE O N ACCOUNT OF SALE OF GUNNY BAGS IN ALL THESE YEARS. WE UPHOLD T HE SAME. 16. THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF LABOUR EXPENDITURE OF 7,13,344/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(3) OF I.T ACT. THE FACT OF THE ISSUE IS THAT ON VERIFICATION OF THE ACCOUNTS OF THE ASSESSEE, THE ASSESSING OFFICER ASS UMING THE CLAIM OF EXPENDITURE ON ACCOUNT OF CONTRACT LABOUR TO BE BOGUS, ACCORDINGLY, TO DISALLOW THE SAME. 16.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE AND CIT(A) HAVING CALLED FOR REMAND REPORT AND COMM ENTS THEREON OF ASSESSEE, HAS GRANTED RELIEF TO THE ASSESSEE. T HE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADDITION MADE U/S. 40(A)(3) ON ACCOUNT OF LABOUR EXPENSES OF 7,13,344/-. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICE R BE RESTORED. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATI VE HAS SUPPORTED THE ORDER OF CIT(A). 16.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT INITIALLY THE ASSESSING OFF ICER THOUGHT THE IMPUGNED EXPENDITURE AS BOGUS. HOWEVER, WHEN THE G ENUINENESS OF THE EXPENDITURE WAS ESTABLISHED BY THE ASSESSEE, THE ASSESSING OFFICER MADE THE IMPUGNED DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 40A(3) WITHOUT CONFRONTING THE SAME TO T HE ASSESSEE. BEFORE DECIDING THE ISSUE, IT WAS NECESSARY TO UNDE RSTAND THE EXACT NATURE OF THE EXPENSES. THE ASSESSEE HAS APPOINTED THE LABORERS NAMELY CONTRACT LABOUR TO CARRY OUT THE DAY TO DAY WORK IN THE FACTORY. SOME OF THE DETAILS OR TYPES OF SUCH WORK S (OF ABOUT 142 TYPES OF WORKS) CARRIED OUT BY THE SAID CONTRACT WO RKERS WERE FURNISHED TO THE ASSESSING OFFICER DURING THE ASSES SMENT 26 PROCEEDINGS. THE SAID WORK WAS NOT DISPUTED BY THE ASSESSING OFFICER. AS A MATTER OF FACT, THERE WAS ONE SUPERV ISOR FOR EVERY 10 TO 15 SUCH LABORERS WHO WAS REGARDED AS CONTRACTOR. W ITHOUT PREJUDICE TO THE ABOVE, ALL THE LABORERS WERE SEPAR ATE EMPLOYEES OF THE ASSESSEE BECAUSE THE ASSESSEE HAS MAINTAINED AT TENDANCE OF ALL SUCH LABORERS. THE ASSESSEE HAS TAKEN INDIVIDUAL A PPLICATION FOR EMPLOYMENT IN WRITING FROM ALL THE SUCH LABORERS AN D THE ASSESSEE HAS ALSO OBTAINED THE SIGNATURE ON STAMP IN RESPECT OF PAYMENTS MADE TO INDIVIDUAL LABORERS FROM TIME TO TIME. HOW EVER, IN THE BOOKS OF ACCOUNT THE PAYMENT OF THE SAID TEAM WAS S HOWN IN THE NAME OF SUPERVISOR I.E. CONTRACTOR MAINLY BECAUSE I T WAS NOT POSSIBLE TO INCORPORATE THE NAMES OF SUCH LABORERS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE PARTICULARLY WHEN SEPARATE CONCLUSIVE RECORD WAS MAINTAINED BY THE ASSESSEE AS DISCUSSED ABOVE. THE LIST OF SUCH PAYMENTS GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS OF THOSE SUPERVISORS I.E. CONTRACTORS AND NOT OF THE INDIVIDUAL LABORERS. THE ASSESSING OFFICER MISTAKE NLY ASSUMED THE SAME TO BE INDIVIDUAL LABORERS. THIS ASSUMPTION OF THE ASSESSING OFFICER WAS NOT JUSTIFIED. THE IMPUGNED DISALLOWAN CE SEEMS TO BE MADE BY THE ASSESSING OFFICER BY ASSUMING THAT THE ASSESSEE HAS PURPOSELY REDUCED EACH PAYMENT TO LESS THAN 20,000/-. THIS ASSUMPTION OF THE ASSESSING OFFICER WAS NOT WELL FO UNDED BECAUSE THE UNDISPUTED RECORD SHOWS THAT EACH PAYMENT TO LA BORERS IS EVEN NOT MORE THAN 2,500/-. IN VIEW OF ABOVE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF 7,13,344/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(3), THE SA ME WAS RIGHTY DELETED BY CIT(A), WHICH NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 16.3 A SIMILAR ISSUE AROSE IN A.Y. 2005-06, WHEREI N THE DISALLOWANCE OF 2,79,128/- WAS MADE BY ASSESSING OFFICER, WAS DELETED BY THE CIT(A) FOLLOWING THE SAME REASONING. FACTS BEING SIMILAR TO THAT OF A.Y. 2004-05, SO FOLLOWING THE S AME REASONING, WE 27 ARE NOT INCLINED TO INTERFERE WITH THE FINDING OF C IT(A) ON THE ISSUE. WE UPHOLD THE SAME. 17. THE NEXT ISSUE PERTAINS TO A.Y. 2007-08 IS WIT H REGARD TO THE ADDITION ON ACCOUNT OF DIFFERENCE IN GROSS PROF IT. THE ASSESSING OFFICER MADE THE ADDITION OF 20,65,606/- ON ACCOUNT OF DIFFERENCE IN GROSS PROFIT SHOWN IN AUDITED PROFIT AND LOSS AC COUNT AND COPY OF UNAUDITED PROFIT AND LOSS ACCOUNT FOUND AND SEIZED DURING THE COURSE OF SEARCH ACTION. THE FACT OF THE ISSUE IS THAT DURING THE COURSE OF SEARCH ACTION, PROFIT AND LOSS ACCOUNT (R EF. PAGE NOS.38 TO 40 OF ANNEXURE NO.A-3/11) FOR PERIOD RELATED TO YEA R UNDER APPEAL WAS FOUND AND SEIZED. IN THE SAID PROFIT AND LOSS ACCOUNT, GROSS PROFIT WAS DISCLOSED AT 3,92,11,935/- WHEREAS THE GROSS PROFIT AS PER AUDITED PROFIT AND LOSS ACCOUNT IS 3,35,30,168/-. FURTHER, THE NET PROFIT AS PER PAPER SEIZED WAS DISCLOSED AT 2,16,06,882/- WHEREAS THE NET PROFIT AS PER AUDITED PROFIT AND LO SS ACCOUNT IS 1,76,42,354/-. HENCE THERE WAS DIFFERENCE IN GROSS PROFIT AND NET PROFIT OF 56,81,767/- AND 39,64,528/- RESPECTIVELY AS PER PROFIT AND LOSS ACCOUNT SEIZED AND AS PER AUDITED PROFIT A ND LOSS ACCOUNT. IT WAS POINTED OUT ON BEHALF OF THE ASSESSEE TO THE ASSESSING OFFICER THAT THE PROFIT AND LOSS ACCOUNT SEIZED DURING THE SEARCH ACTION WAS UNAUDITED AND THE SAME WAS PREPARED BEFORE FINA LIZATION OF ACCOUNT AS SUCH MANY ENTRIES IN THE SAME WERE MISSI NG. WHILE FINALIZING THE ACCOUNTS THE GROUPINGS OF EXPENSES IN GENERAL OR INDIVIDUAL WERE ALSO CHANGED I.E. TRANSFER OF SOME EXPENSES FROM INDIRECT EXPENSES TO DIRECT EXPENSES. HOWEVER THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF DIFFERENCE IN GROSS PRO FIT NOT RECONCILED WHICH COMES TO 20,65,606/- WHICH WAS AGITATED BEFORE FIRST APPELLATE AUTHORITY BY WAY OF VARIOUS SUBMISSIONS. 17.1 THE CIT(A) HAVING CALLED FOR REMAND REPORT ON THE SAME FROM THE CONCERNED ASSESSING OFFICER AND COMMENTS O F ASSESSEE AND HAVING CONSIDERED THE SAME, HAS GRANTED RELIEF TO THE ASSESSEE. 28 THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF RE VENUE, INTER ALIA SUBMITTED THAT THE CIT(A) ERRED IN DELETING TH E ADDITION ON ACCOUNT OF DIFFERENCE IN GROSS PROFIT SHOWN IN AUDI TED P & L ACCOUNT AND INCRIMINATING EVIDENCE IN THE FORM OF P & L ACCOUNT FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTIO N AMOUNTING TO 20,65,606/-. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHE R HAND, THE LEARNED AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 17.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT PROFIT AND LOSS ACCOUNT SEI ZED DURING THE COURSE OF SEARCH ACTION WAS UNAUDITED ONE AND THERE FORE NOT FINAL. THE SAME HAS BEEN ACCEPTED BY THE ASSESSING OFFICER HIMSELF BECAUSE HE ACCEPTED THE MISTAKE AS POINTED OUT BY A UTHORIZED REPRESENTATIVE IN THE SAID SEIZED DOCUMENTS AT THE RELEVANT POINT OF TIME AND REDUCED THE GROSS PROFIT ACCORDINGLY, WHIL E MAKING THE ADDITION ON ACCOUNT OF GROSS PROFIT. THE CONTENTIO N OF ASSESSEE THAT THE GROSS PROFIT IS ALSO CHANGED DUE TO CHANGE IN G ROUPING WAS ALSO ACCEPTED BECAUSE THE DIFFERENCE IN THE GROSS PROFIT AS PER SEIZED DOCUMENT AND AUDITED ACCOUNTS WAS 56,81,767/- AND THE DIFFERENCE IN NET PROFIT OF THE SAME DOCUMENTS IS 39,64,528/-. THE REDUCTION IN THE DIFFERENCE OF NET PROFIT AS CO MPARED WITH THE DIFFERENCE IN THE GROSS PROFIT PROVES THAT CERTAIN ELEMENT OF INDIRECT EXPENSES AS SHOWN IN THE SEIZED DOCUMENT WAS SHIFTE D TO DIRECT EXPENSES IN THE AUDITED PROFIT AND LOSS ACCOUNTS. THE ASSESSING OFFICER FAILED TO APPRECIATE THIS ACCOUNTING METHOD . THERE IS ELEMENT OF HUMAN INABILITY TO RECONCILE EACH AND EV ERY DIFFERENCE IN BOTH THE STATEMENTS BECAUSE OF CORRECTION OF TYPOGR APHICAL MISTAKES. LOCATING THESE TYPES OF CORRECTIONS WAS PRACTICALLY IMPOSSIBLE IN ITS FACTS AND CIRCUMSTANCES. IN ADDI TION TO ABOVE, THE ATTENTION OF THE CIT(A) WAS ALSO DRAWN TO SOME OF T HE DIFFERENCES AS 29 PER SEIZED DOCUMENT AS WELL AS AUDITED PROFIT AND L OSS ACCOUNT AS UNDER: PARTICULARS AS PER SEIZED DOCUMENT AS PER AUDITED PROFIT AND LOSS ACCOUNT DEPRECIATION NIL 34,62,058/- AUDIT FEES NIL 15,152/- PRELIMINARY EXPENSES NIL 76,147/- SALES RETURN NIL 22,70,626/- TOTAL RS. 58,23,983/- THE ABOVE LIST IS AN EXAMPLE OF SOME OF THE MISTAKE S WHICH ARE APPARENT, BUT THERE ARE MANY CORRECTIONS AND CHANGE IN GROUPINGS. THE ASSESSING OFFICER SHOULD NOT HAVE ACCEPTED THE ROUGH AND INCOMPLETE NATURE OF THE DOCUMENT FOUND AND HE SHOU LD HAVE GIVEN MORE THRUST ON THE AUDITED STATEMENT OF ACCOUNT PAR TICULARLY WHEN IT WAS UNDISPUTED FACT THAT THE SEIZED DOCUMENT WAS NOT CONCLUSIVE ON THE ISSUE. THE ASSESSING OFFICER HIMSELF HAS CO MMENTED ON THE CASUAL ATTITUDE OF THE ASSESSEE ON THE ISSUE. IT C LEARLY REVEALS THAT THE IMPUGNED ADDITION WAS MADE BY THE ASSESSING OFF ICER JUST FOR THE REASONS THAT THE DIFFERENCE IN PROFIT AND LOSS ACCOUNT WAS NOT RECONCILED BY THE ASSESSEE AT RELEVANT POINT OF TIM E AND CERTAINLY IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE GROSS PROFIT AS PER SEIZED DOCUMENT WAS CORRECT PROFIT OF THE ASSESSEE. THE ASSESSING OFFICER HAS IGNORED THAT THE QUANTUM OF RECONCILIAT ION, WHICH IS ALLOWED BY HIM TO BE REDUCED FROM GROSS PROFIT, IF ALSO REDUCED FROM THE NET PROFIT THEN THERE WOULD BE PRACTICALLY NO D IFFERENCE IN NET PROFIT AS PER SEIZED RECORD AS WELL AS AUDITED PROF IT AND LOSS ACCOUNT. THEREFORE, CONSIDERING THE TOTALITY OF TH E CASE AND PROFIT AND LOSS ACCOUNT AS SEIZED DURING SEARCH ACTION WAS A ROUGH DOCUMENT AND THE SAME COULD NOT BE RELIED UPON. HE NCE, THE ADDITION OF 20,65,606/- MADE ON THE BASIS OF SAME IGNORING THE AUDITED PROFIT AND LOSS ACCOUNT WAS RIGHTLY DELETED BY CIT(A) BY THE 30 REASONED FINDING AS DISCUSSED ABOVE. WE ARE NOT IN CLINED TO INTERFERE WITH THE FINDING OF CIT(A). WE UPHOLD TH E SAME. 18. THE NEXT ISSUE RELATES TO THE ADDITION OF 54,66,515/- ON ACCOUNT OF EXCESS STOCK FOUND DURING THE SEARCH ACT ION AND PERTAINS TO A.Y. 2010-11 ONLY. DURING THE SEARCH A CTION, THE PHYSICAL STOCK OF FINISHED, SEMI-FINISHED SUGAR CUB ES AND RAW MATERIAL WERE TAKEN BY THE DEPARTMENT. ON THE BASI S OF RG-1 REGISTER AND THE CERTAIN STOCK RECORDS, THE ASSESSI NG OFFICER ARRIVED AT THE EXCESS STOCK FOUND DURING SEARCH ACTION OVER AND ABOVE THE STOCK AS PER RECORD AS ON DATE OF SEARCH ACTION AND ACCORDINGLY, MADE ADDITION OF 54,66,515/-. THE ASSESSING OFFICER STATED THAT DIFFERENCE IN STOCK IS NEVER RECONCILED BY THE ASSE SSEE. THE STAND OF THE ASSESSEE HAS BEEN THAT THERE WAS NO DIFFERENCE IN STOCK. THE ASSESSING OFFICER HAS RELIED ON THE FIGURES COLLECT ED BY THE DEPARTMENT AT THE TIME OF SEARCH ACTION WITHOUT VER IFYING THE EVIDENCING VALUE OF THE SAME I.E. EXCISE RETURN FOR THE MONTH OF MARCH, 2009 WAS REVISED BY THE ASSESSEE PRIOR TO DA TE OF SEARCH ACTION TO RECTIFY CERTAIN MISTAKES THEREIN. HOWEVE R THE CORRECTION WERE REMAINED TO BE CARRIED TO THE EXCISE RECORD. THE EXCISE RECORD WAS REMAINED TO BE UPDATED. THE STOCK OF RAW MATER IAL WAS MIXED WITH THE STOCK OF FINISHED PRODUCTS, ETC. THE STAN D OF THE ASSESSEE HAS BEEN THAT COMPLETE RECONCILIATION OF THE STOCK WAS FILED TO THE ASSESSING OFFICER BUT HE HAS NOT CONSIDERED THE SAM E AND MADE IMPUGNED ADDITION. 18.1 THE SAID ADDITION WAS AGITATED BEFORE THE FIR ST APPELLATE AUTHORITY ON BEHALF OF ASSESSEE AND IN RESPONSE TO THE REMAND REPORT FROM THE CONCERNED ASSESSING OFFICER AND HAV ING CONSIDERED THE COMMENTS THEREON OF AUTHORIZED REPRESENTATIVE, THE CIT(A) GRANTED RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA, SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF 54,66,515/- ON ACCOUNT OF DIFFERENCE IN 31 STOCK AS PER BOOKS AND STOCK FOUND DURING THE SEARC H ACTION. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND T HAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, THE LEARNE D AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 18.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS IN THE MANU FACTURING OF PHARMA GRADE SUGAR OF DIFFERENT VARIETIES. THE PRIM ARY RAW MATERIAL FOR SAME IS SUGAR. THROUGH THE PROCESS, THE SAME I S CONVERTED AND MANUFACTURED INTO PHARMA GRADE SUGAR. THE PRODUCTIO N IS ENTERED IN THE EXCISE RECORD KNOWN AS RG-1 REGISTER. THIS R EGISTER IS SUBJECTED TO CHECK BY CENTRAL EXCISE DEPARTMENT OF THE CENTRAL GOVERNMENT AT REGULAR INTERVALS. THE ASSESSEE IS RE QUIRED TO FILE PRODUCTION DETAILS IN THE SAID REGISTER AND SUBMIT THE SAME TO THE CENTRAL EXCISE AUTHORITIES IN THE FORM OF A RETURN. DURING THE SEARCH, THE POSITION OF STOCK OF RAW MATERIAL AND F INISHED PRODUCTS WAS TAKEN BY THE TEAM OF REVENUE AUTHORITIES. THE STATEMENTS OF TWO INDIVIDUALS SHRI BHAGWAN JADHAV AND SHRI NANAJI BAC HAV WERE TAKEN. THEY WERE RECORDED AT RELEVANT POINT OF TIM E. WHILE TAKING THE STOCK AND RECORDING THE STATEMENTS OF THESE TWO PERSONS, THE AUTHORISED OFFICERS HAVE COMPILED VARIOUS ROUGH NOT INGS MAINTAINED BY THESE TWO PERSONS AND CALCULATED THE QUANTITY AND VALUE OF THE STOCK. THE STAND OF THE ASSESSEE HAS BEEN THAT WHILE DOING THIS EXERCISE THE AUTHORISED OFFICERS HAVE NO T CONSIDERED THE RELEVANT EXCISE REGISTERS AND THE RETURN FILED UNDE R THE CENTRAL EXCISE LAW IN THE MONTH OF MARCH, 2009. THE STOCK O F THE SUGAR CUBE WAS MAINTAINED IN BOXES, WHEREAS THE AUTHORISE D OFFICERS HAVE TAKEN THE SAME AS QUINTALS. THIS HAS RESULTED IN INCORRECT REPRESENTATION OF THE STOCK. THE ASSESSEE HAS CLAR IFIED THIS POSITION WITHIN 20 DAYS OF THE SEARCH BY FILING THE SWORN AF FIDAVITS OF SHRI BHAGWAN JADHAV AND SHRI NANAJI BACHHAV ON 10.06.200 9, INTER ALIA, CLARIFIED THAT THE DIFFERENCE IN THE RG-1 REG ISTER HAS ARISEN DUE TO CONTINUOUS MANUFACTURING PROCESS AND NECESSARY C ORRECTIONS 32 WERE CARRIED OUT AT THE END OF EACH MONTH. THE SEA RCH ACTION AS DISCUSSED ABOVE U/S.132 WAS TAKEN ON 21.05.2009 AND WAS FINALLY CONCLUDED ON 09.07.2009, THEREFORE, THE ASSESSEE HA S CLARIFIED THE POSITION OF STOCK AND THE RELEVANCE OF RG-1 REGISTE R BY FILING AFFIDAVITS ON 10.06.2009, WHICH WAS BEFORE THE SEAR CH WAS FINALLY CONCLUDED. THESE AFFIDAVITS AND THE CLARIFICATION H AVE BEEN COMPLETELY BRUSHED ASIDE BY THE ASSESSING OFFICER W HICH LAID HIM ON WRONG CONCLUSION. IT IS A SETTLED LEGAL POSITIO N THAT THE CONTENTS OF AFFIDAVIT HAVE TO BE REJECTED ONLY BY CONFRONTIN G THE CONTENTS OF THE SAME TO THE DEPONENT. THE ASSESSING OFFICER HA S LIGHTLY BRUSHED ASIDE RG-1 REGISTER AND THE RETURN FILED BY THE ASSESSEE UNDER THE CENTRAL EXCISE LAW IN THE MONTH OF MARCH 2009 WHICH WAS PRIOR TO THE SEARCH WHICH IS NOT JUSTIFIED. THE ASSESSING OFFICER HAS BASED HIS ADDITION ON THE BASIS OF STOCK AS SHO WN TO BE FOUND DURING THE COURSE OF SEARCH ACTION AS WELL AS THE S TOCK RECORD AS MAINTAINED AS ON THE DATE OF THE SEARCH ACTION. THE CLAIM OF THE ASSESSEE HAS BEEN THAT IT HAS FILED A RETURN IN MAR CH, 2009 UNDER THE EXCISE LAW HAS BEEN IGNORED BY THE ASSESSING OF FICER. THE LEARNED AUTHORIZED REPRESENTATIVE PRODUCED BEFORE T HE CIT(A) A COPY OF THE REVISED RETURN FILED UNDER THE EXCISE L AW, WHEREIN, THE ASSESSEE EXPLAINED THE STOCK POSITION AT THE RELEVA NT POINT OF TIME. THE ADDITION SHOULD NOT BE MADE MERELY ON THE BASIS OF STATEMENTS OF THE EMPLOYEES, PARTICULARLY WHEN THE SAME WAS WI THDRAWN BY WAY OF MAKING AFFIDAVITS THAT TOO BEFORE THE SEARCH WAS FINALLY CONCLUDED. THE ASSESSING OFFICER HAS ERRED IN COMPA RING THE PRODUCTION REPORTS WITH THE PACKING REGISTER AND AR RIVED AT THE DIFFERENCES, WHEN BOTH THE REGISTERS ARE NOT COMPAR ABLE. IN THE PRODUCTION REPORT, THE DETAILS OF PRODUCTION SHALL BE RECORDED WHILE IN PACKING REGISTER THE DETAILS OF GOODS PACKED SHA LL BE RECORDED. THE FIGURES OF CLOSING STOCK ARE ALSO ROUGHLY CALCU LATED DURING THE SEARCH ACTION WHICH WERE MADE BASIS FOR CALCULATION OF THE DIFFERENCE IN STOCK FOUND AND STOCK AS PER RECORD ( REF. PAGE NO. 104 ANNEXURE A-9, WHICH WAS PREPARED DURING THE COURSE OF SEARCH 33 ACTION AND SHOWN TO BE FOUND AND SEIZED DURING THE COURSE OF SAID SEARCH ACTION AS APPEARED FROM THE PAGE ITSELF AS P REPARED BY THE AUTHORISED OFFICER ON 21.05.2009). IN THE CASE OF SUGAR CUBES, THE BOXES FOUND WERE CONSIDERED AS QUINTALS. THE ASSESS ING OFFICER HAS NEITHER REBUTTED THE DETAILED RECONCILIATION STATEM ENT OF THE STOCK FURNISHED TO HIM DURING THE COURSE OF ASSESSMENT PR OCEEDINGS NOR IN THE REPORT CALLED BY THE CIT(A). THE ASSESSING O FFICER HAS NOT POINTED OUT ANY MISTAKES THEREIN. THE SAID RECONCIL IATION STATEMENT WAS PREPARED BY THE ASSESSEE ON THE BASIS OF OPENIN G BALANCE OF STOCK AS PER EXCISE RECORD AND THE SAME WAS CO-RELA TED WITH THE EXCISE RECORD. THE CONTENTION OF THE ASSESSEE HAS B EEN THAT IT IS DEALING WITH THE BIG COMPANIES MOSTLY LISTED COMPAN IES AND THE PRODUCT OF THE ASSESSEE COULD NOT BE EASILY SOLD IN THE LOCAL OR OPEN MARKET WAS ALSO NOT FOUND FALSE BY THE ASSESSING OF FICER. THE CIT(A) ON EXAMINATION OF THE RELEVANT RECORD FOUND THAT THERE WAS NOT AN IOTA OF EVIDENCE FOUND DURING THE COURSE OF SEARCH ACTION IN RESPECT OF ANY UNDISCLOSED SALE EFFECTED BY THE ASS ESSEE. IN FACT THE MANUAL CASH BOOK MAINTAINED BY THE ASSESSEE, WHICH CONTAINS COMPLETE DETAILS OF THE DAY TO DAY CASH TRANSACTION S DO NOT INDICATE ANY UNRECORDED SALES DURING ANY OF THE YEAR. CONSI DERING THE ABOVE FACTS THE RECONCILIATION STATEMENTS FILED BY THE AS SESSEE WHICH IS AS PER EXCISE RECORD AND NON REBUTTAL OF THE SAME BY A SSESSING OFFICER, NON CONSIDERATION OF REVISED RETURN FILED BY THE AS SESSEE UNDER EXCISE LAW, ABSENCE OF EVIDENCE OF ANY SALE OUTSIDE THE BOOKS OF ACCOUNT, ETC., THE CIT(A) HELD THAT THERE IS NO DIF FERENCE IN THE STOCK OF RAW MATERIAL OR FINISHED PRODUCTS. THE PHYSICAL STOCK, TALLIES WITH REFERENCE TO THE RG-1 REGISTER, THE RETURN FIL ED UNDER THE CENTRAL EXCISE IN MARCH 2009 AND THE BALANCE SHEET AS ON 31.03.2009. ACCORDINGLY, THE IMPUGNED ADDITION ON ACCOUNT OF EXCESS STOCK AMOUNTING TO 54,66,515/- WAS NOT FOUND JUSTIFIED AND THE SAME WAS RIGHTLY DELETED BY CIT(A) BY THE R EASONED FINDING AS DISCUSSED ABOVE, WHICH NEEDS NO INTERFERENCE FRO M OUR SIDE. WE UPHOLD THE SAME. 34 19. THE RESPECTIVE CROSS OBJECTIONS HAVE BEEN FILE D BY ASSESSEES. HOWEVER, THE SAME WERE NOT PRESSED ON B EHALF OF ASSESSEES, SO THEY ARE DISMISSED AS NOT PRESSED. 20. IN THE RESULT, ALL THE APPEALS FILED BY THE RE VENUE AND CORRESPONDING CROSS OBJECTIONS FILED BY THE ASSESSE E ARE DISMISSED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 21 ST DAY OF MARCH, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 21 ST MARCH, 2014 GCVSR COPY TO:- 1. DEPARTMENT 2. ASSESSEE 3. THE CIT(A)-I, NASHIK 4. THE CIT-I, NASHIK 5. THE DR, B BENCH, I.T.A.T., PUNE. 6. GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE