Ghatge Patil Industries Ltd., V. Deputy Commissioner of Income-tax,

ITA 1070/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7955 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-08-2018
• Assessment Year: 2006-2007
• Appeal Filed On: 20-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHEI
• Keywords: Unexplained investment; Depreciation; Income from undisclosed sources; Search and seizure; Loose papers; Valuation report; Retraction
• Section: 143(3); 133A; 153A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NOS.1281 TO 1284/PUN/2016 / ASSESSMENT YEARS: 2006-07 TO 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, (CENTRAL) CIRCLE, KOLHAPUR ....... / APPELLANT / V/S. GHATGE PATIL INDUSTRIES LIMITED. AT POST:- UCHAGAON, TAL. KARVEER, DIST.- KOLHAPUR. PIN-416 005. PAN :AAACG6595R / RESPONDENT . / ITA NOS.1070 TO 1072/PUN/2016 / ASSESSMENT YEARS: 2006-07 TO 2008-09 GHATGE PATIL INDUSTRIES LIMITED. AT POST:- UCHAGAON, TAL. KARVEER, DIST.- KOLHAPUR. PIN-416 005. PAN :AAACG6595R ....... / APPELLANT / V/S. THE DEPUTY COMMISSIONER OF INCOME TAX, (CENTRAL) CIRCLE, KOLHAPUR / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI SANJEEV GHEI / DATE OF HEARING : 11.09.2018 / DATE OF PRONOUNCEMENT : 19.09.2018 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE 4 APPEALS FILED BY THE REVENUE INVOLVING ASSESSM ENT YEARS 2006-07 TO 2009-10 AND 3 APPEALS FILED BY THE ASSESSEE INVOLVING ASSESSMENT YEARS 2006-07 TO 2008-09. THEY ARE FILED AGA INST THE CONSOLIDATED ORDER OF CIT(A)-11, PUNE, DATED 30-03-2016. WE SHALL TAKE UP THE APPEALS OF THE REVENUE FIRST. 2 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED ITA NOS. 1281 TO 1284/PUN/2016 BY REVENUE A.YRS. 2006-07 TO 2009-10 2. GROUNDS RAISED BY THE REVENUE FOR THE A.Y. 2006-07 A RE EXTRACTED HERE AS UNDER : 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON SALE OF SCRAP MADE BY THE AO AMOUNTING TO RS.7,02,58,930/- FOR THE YEARS 2003-04 TO 2009-10 T REATING THE STATEMENT OF MD OF THE ASSESSEE COMPANY AS UNRELIABLE IN THE ABS ENCE OF ANY EVIDENCE SUPPORTING/CONFIRMING THE MODUS OPERANDI FOR SALE O F SCRAP. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE RATIO DECIDENDI IN THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF SURJEET SINGH CHHABRA VS. UOI (1986). 3. THE ORDER OF THE LD. CIT(A) MAY BE VACATED AND T HAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. REVENUE RAISED SIMILAR GROUNDS IN THE REST OF THE APPEALS AND THE ISSUE RAISED IN ALL THESE 4 APPEALS RELATES TO THE RELIEF GR ANTED BY THE CIT(A) IN RESPECT OF DISALLOWANCE ON ACCOUNT OF SALE OF SCRAP VIS --VIS THE DISCLOSURE MADE BY MD OF THE COMPANY DURING THE SEARCH AND SEIZURE ACTION. 3. BRIEFLY STATED RELEVANT FACTS OF THE ASSESSEE ARE THA T THE ASSESSEE IS A COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURING OF G REY IRON CASTINGS, GATE VALVES, MECHANICAL INDUSTRIAL CLUTCHES, ETC. A SSESSEE COMPANY IS ONE OF THE SISTER CONCERN OF KIRAN PATIL GROUP . ASSESSEE COMPANY FILED THE RETURN OF INCOME FOR THESE YEARS AND TH E DETAILS, RETURN OF INCOME, THE ADDITIONS, ASSESSED INCOME, ETC. ARE AS FOLLOWS : 3 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED SL.NO. A.Y. RETURNED INCOME ADDITION ON ACCOUNT OF SCRAP ASSESSED INCOME 1 2006-07 13,21,09,292 99,22,718 15,35,02,810 2 2007-08 10,99,63,460 1,91,39,800 13,11,58,310 3 2008-09 15,26,23,353 1,94,95,055 17,28,01,170 4 2009-10 15,15,25,993 1,75,79,193 16,91,05,190 4. IN THE ASSESSMENT, AO MADE COMMON ADDITION ON ACCOU NT OF SALE OF SCRAP. THIS ISSUE HAS A GENESIS IN THE ACTION U/S.132 OF T HE ACT ON THE ASSESSEE. THERE WAS SEARCH AND SEIZURE ACTION U/S.132/ 133A OF THE ACT AND SEIZED CERTAIN LOOSE PAPERS INDICATING CASH SLIPS/VOU CHERS FROM THE CABINS OF THE CASHIERS, MANAGER FINANCE AND THE MD OF TH E COMPANY. THESE DOCUMENTS RELATE TO THE SCRAP GENERATED IN THE PROCESS OF DAY TO DAY PRODUCTION IN THE FOUNDRY OF THE COMPANY AND THE SALE OF SCRAP OUTSIDE THE BOOKS OF THE ASSESSEE. THESE DOCUMENTS RUN INTO HUNDR EDS. THE EMPLOYEES AS WELL AS THE MD WERE CONFRONTED WITH THE SEIZ ED DOCUMENTS. DURING THE RECORDING OF STATEMENT U/S.132(4) OF THE ACT, M R. KIRAN PATIL, MD OF THE COMPANY, ADMITTED THE GENERATION OF INCOME OU TSIDE THE BOOKS OF ACCOUNT ON ACCOUNT OF SALE OF SCRAP. EVENTUALLY, A SU M OF RS.8 CRORES WAS OFFERED AS UNACCOUNTED INCOME OF THE ASSESSEE @ RS. 2 CRORES PER YEAR FOR A.YRS. 2006-07 TO 2009-10. THIS DISCLOSURE IS OVER AND ABOVE THE REGULAR INCOME OF THE ASSESSEE. DESPITE THE SAME, ASSES SEE FILED THE RETURNS OF INCOME OFFERING THE REDUCED UNDISCLOSED INCOME A ND RESTRICTED THE UNDISCLOSED INCOME TO THE EXTENT APPEARING ON THE S EIZED PAPERS ONLY. DURING THE ASSESSMENT PROCEEDINGS, AO NOTED THAT THE A SSESSEE DID NOT OFFER ENTIRE AMOUNT SO DISCLOSED IN THE RETURN OF INCOME. D ETAILS OF THE OFFER OF UNDISCLOSED INCOME ON ASSESSMENT YEAR WISE IS GIVEN BELOW : 4 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED SL.NO. A.Y. ADDITIONAL INCOME DISCLOSED INCOME OFFERED U/S.153A OF THE ACT ADDITION ON ACCOUNT OF SCRAP 1 2006-07 2,00,00,000 1,00,77,282 99,22,718 2 2007-08 2,00,00,000 8,60,200 1,91,39,800 3 2008-09 2,00,00,000 5,04,945 1,94,95,055 4 2009-10 2,00,00,000 24,20,807 1,75,79,193 EVENTUALLY, THE AO REJECTED THE EXPLANATION OF THE ASSE SSEE AS WELL AS UNDISCLOSED INCOME RETURNED BY THE ASSESSEE AND PROCEE DED TO MAKE THE ADDITION OF DIFFERENTIAL AMOUNTS AS DEPICTED ABOVE. AO RELIED ON THE CONTENTS OF PARA NO.5 OF THE ASSESSMENT ORDER WHICH DEA LS WITH THIS ISSUE AND THE RELEVANT EXTRACT FOR THE A.Y. 2006-07 IS GIVEN BELOW : 5.1 ON VERIFICATION OF RETURNS OF INCOME FOR THE ABOVE ASSESSMENT YEARS, IT IS SEEN THAT THE ASSESSEE HAS OFFERED ADDITIONAL IN COME ON ACCOUNT OF ABOVE PARTIALLY AS AGAINST ADMITTED INCOME OF RS.2 CRORES . IT HAS OFFERED THE INCOME ONLY TO THE EXTENT OF SEIZED CHITS/SLIPS/VOUCHERS. 5.2 THE ASSESSEE COMPANY VIDE THIS OFFICE LETTER (QUEST IONNAIRE) DATED WAS REQUESTED TO SHOW CAUSE AS TO WHY THE DIFFERENCE BE TWEEN ADMITTED INCOME OF RS.2 CRORES AND ADDITIONAL INCOME ACTUALLY OFFER ED IN RESPECTIVE RETURN OF INCOME SHOULD NOT BE ADDED. 5.3 THE ASSESSEE COMPANY HAS FILED ITS SUBMISSION O N ALL THE POINTS INCLUDING THAT OF LESS DECLARATION. THE VERBATIM SU BMISSION OF THE ASSESSEE ON PARTIAL OFFERING OF ADDITIONAL INCOME IS 'DURING THE COURSE OF SEARCH PROCEEDINGS, THE DEPT., HAD FOUND CERTAIN PAPER SLI PS CONTAINING INDICATION OF SALE OF SCRAP AND DISPOSALS AMOUNTING TO RS.5,11,85 4/-PERTAINING TO ASST. YEAR 06-07. SIMILARLY, THE DEPT HAD FOUND CASH PAYM ENT VOUCHERS AMOUNTING TO RS.95,65,428/- PERTAINING TO THE ABOVE ASST. YEA R. THE SLIPS INDICATING CASH SALE OF SCRAP AND DISPOSABLES WAS NOT INCLUDED IN THE TOTAL INCOME AS IT IS STILL NOT CERTAIN WHETHER THE SALE IS ACTUALLY M ATERIALIZED OR NOT. AS REGARDS PAYMENTS VOUCHERS, THE SAME ARE MOSTLY OF IOU NATUR ES WHICH HAVE BEEN REFUNDED BY THE RESPECTED PERSON. HOWEVER, THESE VO UCHERS HAVE NO BEARING ON THE INCOME OR PROFIT OF THE ASSESSEE. BOTH THE D OCUMENTS ARE PERTAINING TO DISPOSALS AS WELL AS PAYMENT VOUCHERS WHICH HAVE NO T BEEN RECORDED IN THE BOOKS OF ACCOUNT. THESE PAYMENT VOUCHERS COULD NOT BE RECORDED IN THE BOOKS OF ACCOUNT BECAUSE NO SUPPORTING WERE AVAILAB LE FOR THE VOUCHERS THOUGH THE EXPENDITURE WAS INCURRED STRICTLY FOR BU SINESS PURPOSES. TECHNICALLY, ONLY THE PAYMENT VOUCHERS OF RS.95,65, 428/- REMAINS TO BE EXPLAINED FOR THE ABOVE ASST. YEAR. HOWEVER, THE AS SESSEE ON ITS OWN VOLITION HAS COME FORWARD AND INCLUDED IN THE RETURN THE TOT AL OF RECEIPTS OF RS.5,11,854/- AS WELL AS TOTAL OF PAYMENT VOUCHERS OF RS.95,65,428/- AND ADDED THE SAME AS ADDITIONAL INCOME. 5.4 THEY HAVE FILED A LETTER DT.15/10/2009. IN THIS SUBMISSION FILED, THE COMPANY HAS NARRATED THE EVENTS. IN PARA NO.3 OF TH E LETTER, IT HAS STATED THAT THE SEARCH PARTY HAS RECORDED STATEMENTS OF CE RTAIN STAFF AND MD OF THE COMPANY. IT PLEADED THAT UPON RECEIPT OF COPIES OF THE STATEMENTS, ALL THE STAFF AS WELL AS MD HAD EMPATHETICALLY REFUSED THE CONTENTS OF THE STATEMENTS. IN PARA NO.4 IT -STATED THAT THE DEPT H AS FOUND CERTAIN PAPER 5 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED SLIPS CONTAINING INDICATION OF SALE OF SCRAP OF RS. 5,11,854/- PERTAINING TO THIS ASSESSMENT YEAR. SIMILARLY THE DEPT. HAS ALSO FOUND CASH PAYMENT VOUCHERS OF RS.95,65,428/-. THE ASSESSEE HAS OFFERED THE ABO VE RS.1,00,77,282/- AS ADDITIONAL INCOME. 5.5 IN THE SECOND AND FINAL SUBMISSION DT.15/11/201 0, THE COMPANY REITERATED ITS EARLIER PLEA. 5.6 THE ASSESSEE'S CONTENTIONS ARE CAREFULLY CONSID ERED. FROM THE ANALYSIS OF THE SEIZED MATERIAL AND THE STATEMENT RECORDED UNDE R OATH, THE FOLLOWING ISSUES EMERGE: THE ASSESSEE IS ADMITTING THAT DURING THE COURSE OF SEARCH PROCEEDINGS, THE DEPT. HAD FOUND CERTAIN PAPER SLIP S. IT INDICATES SALE OF SCRAP AND DISPOSALS THE DEPT., ALSO FOUND CASH PAYMENT VOUCHERS. THE ASSESSEE HAS ADMITTED IN ITS STATEMENT RECORDE D U/S. 132(4) THAT CASH SALE OF SCRAP AND DISPOSABLES WAS NOT INCLUDED IN THE TOTAL INCOME. THE ASSESSEE COMPANY CATEGORICALLY ACCEPTS THAT 'BO TH THE DOCUMENTS ARE PERTAINING TO DISPOSALS AS WELL AS PAYMENT VOUC HERS HAVE NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT'. THESE WERE NOT RECORDED IN THE ABSENCE OF SUPPORTIN G VOUCHERS. 5.7 IN SPITE OF ACCEPTING THE ABOVE FACTS, FOR WHIC H REASON THE M.D OF THE COMPANY HAS DECLARED RS. 2 CRORES EACH FOR 4 A.YS, DECLARATION IS HONOURED ONLY TO THE EXTENT OF PROOF SEIZED DURING THE COURS E OF SEARCH. 5.8 THE ASSESSEE COMPANY'S CLAIM THAT ADDITIONS CAN BE MADE ONLY ON THE BASIS OF CASH SLIPS/CHITS/VOUCHERS OF CONCERNED YEA R. THE ARGUMENTS OF THE ASSESSEE ARE CAREFULLY PERUSED AND ARE NOT ACCEPTAB LE. INFERENCES ARE OUGHT TO BE DRAWN BASED ON THE ACCEPTED MODUS OPERA NDI OF THE PERSON . THE ASSESSEE IS ACCEPTING THAT IT HAS NOT ACCOUNT ED THE SALE OF SCRAP WHICH IS DEPICTED IN THE SEIZED PAPERS. BECAUSE, TH ERE IS NO OTHER OPTION FOR THE COMPANY. THE VOUCHERS ARE SIGNED BY SRI KIRAN P ATIL, MD, SRI J.H.KULKARNI, FIN.CONTROLLER, CASHIER, DEPTL. AUTHO RITY. THESE VOUCHERS CANNOT BE BRUSHED ASIDE WITHOUT ANY REASON. THE EVIDENCES FOUND AND SEIZED DURING THE COURSE OF SEARCH ARE ONLY INDICATIVE EVI DENCES. THE OFFERING OF INCOME BY THE ASSESSEE ONLY TO THAT EXT ENT IS NOT AT ALL ACCEPTABLE. BECAUSE OF SEARCH OPERATIONS, THESE EVI DENCES HAVE COME TO THE KNOWLEDGE OF DEPARTMENT. IT CLEARLY PROVES T HAT ASSESSEE IS INDULGING IN SUPPRESSION OF SALE OF SCRAP. IT IS BU T NATURAL THAT NOBODY WILL KEEP PROOF OF ONE'S UNACCOUNTED BOOKS. FOR ALL THESE REASONS AND AFTER CONSIDERING THE FACTUAL MATRIX TH E M.D. SHRI KIRAN PATIL HAS DECLARED RS.2 CRORES AS ITS ADDITIONAL IN COME ON ACCOUNT OF UNACCOUNTED SALE OF SCRAP AND UNACCOUNTED RECEIVED BY HIM THROUGH EMPLOYEES OF THE ASSESSEE COMPANY. 5.8 THE STATEMENT RECORDED U/S.132(4) OF VARIOUS EM PLOYEES AND THAT OF MANAGING PERSON SHRI KIRAN PATIL IS HAVING EVIDENTI ARY VALUE. EVEN THE APEX COURT HELD THAT THE STATEMENT U/S.132(4) IS HAVING EVIDENTIARY VALUE IF IT IS CORROBORATED WITH THE EVIDENCES. IN THIS CASE, THE EVIDENCES IN THE FORM OF CHITS, VOUCHERS, SLIPS WHICH ARE IN HUNDREDS ARE OF PRIMARY NATURE. THE M.D. OF THE COMPANY IS ALSO ACCEPTING THESE FACTS. 5.9 THERE IS A FUNDAMENTAL DIFFERENCE BETWEEN ACCE PTABLE TAX MITIGATION AND UNACCEPTABLE TAX AVOIDANCE. THE FORMER ARE CASE IN WHICH THE TAX-PAYER TAKES ADVANTAGE OF THE LAW TO PLAN HIS AFFAIRS SO A S TO MINIMIZE THE INCIDENCE 6 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED OF TAX. 'UNACCEPTABLE TAX AVOIDANCE TYPICALLY INVOL VES THE CREATION OF COMPLEX ARTIFICIAL STRUCTURES IN CASE OF KHOPADE KISANRAO V S ACIT, 2000- (074)-ITD - 0025T-TPUN, THE HON'BLE PUNE TRIBUNAL HAS OPINED AS UNDER :- THE PROCESS OF ASSESSMENT UNDER S. 158BC R/W S.158B B IS NOT MERELY COMPUTATION OF INCOME BUT A PROCESS OF EVALUATION O F EVIDENCE AND MATERIAL FOUND DURING THE COURSE OF THE SEARCH AND DERIVED F ROM THE BOOKS OF ACCOUNT, DOCUMENTS AND OTHER INFORMATION. THERE IS NO DOUBT THAT THE AO DOES NOT HAVE THE POWER TO MAKE AN ARBITRARY ASSESSMENT. HE CANNOT BASE HIS ASSESSMENT MERELY ON SUSPICION, CONJECTURES OR GUES SWORK OR ON IRRELEVANT OR INADMISSIBLE MATERIAL. THE LANGUAGE OF S. 143(3) AS ALSO S. 158BB MAKES IT ABUNDANTLY CLEAR THAT THE ASSESSMENT TO BE MADE BY THE AO SHOULD BE BASED ON EVIDENCE BEFORE THE OFFICER. THE WORD 'EVIDENCE' HAS TO BE CONSTRUED IN A COMPREHENSIVE SENSE AND IT INCLUDES CIRCUMSTANTIAL EVIDENCE. IT IS WELL SETTLED PRINCIPLE OF LAW THAT THE MATERIAL OR EVIDE NCE ON WHICH THE TAXING AUTHORITIES MAY BASE THE ASSESSMENT IS NOT CONFINED TO DIRECT TESTIMONY BY WITNESSES. IT MAY BE REITERATED THAT THE WORD USED IN S. 143/ S. 158BB IS EVIDENCE. HOWEVER, IN MAKING ASSESSMENT THE AO DOES NOT ACT MERELY ON WHAT IS TECHNICALLY DESCRIBED AS EVIDENCE IN THE INDIAN EVI DENCE ACT. IT IS OBSERVED FROM S. 143(3) THAT THE AO CAN BASE HIS ASSESSMENT NOT ONLY ON THE EVIDENCE FOUND DURING THE COURSE OF THE SEARCH BUT ALSO ON THE MATERIAL GATHERED BY HIM. IT IS NOW WELL SETTLED THAT THE AO IS NOT FETTERED BY TECHNICAL RULES OF EVIDENCE AND THE LIKE AND THAT H E MAY ACT ON MATERIAL WHICH MAY NOT STRICTLY SPEAKING BE ACCEPTED AS EVID ENCE IN A COURT OF LAW. SUCH EVIDENCE NEED NOT NECESSARILY BE DIRECT EVIDEN CE. IT MAY BE CIRCUMSTANTIAL EVIDENCE OR ASSESSMENT BASED ON PREP ONDERANCE OF PROBABILITIES JUDGED BY HUMAN CONDUCT. FOR INSTANCE , THE PAST HISTORY OF THE CASE, LIVING STYLE OF THE ASSESSEE AND GENERAL COND ITIONS OF THE MARKET IN THE PARTICULAR TRADE WILL CONSTITUTE RELEVANT MATERIAL FOR THE PURPOSES OF ASSESSMENT..THE POWER OF THE AO TO MAK E AN ASSESSMENT BASED ON RELEVANT MATERIAL IS ALSO ENSHRINED IN S. 143(3). IF THERE IS MATERIAL ON RECORD TO ESTABLISH THAT THE ASSESSEE H AS CHARGED ON MONEY IN REGARD TO LAND DEALS WHICH IS NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT, IT IS PERMISSIBLE FOR THE AO TO MAKE AN ASSESSMENT ON THE BASIS OF SUCH MATERIAL. THE AO MIGHT NOT GET THE ENTIRE MATERIAL IN REGARD TO THE UNDISCLOSED TRANSACTIONS, IN SUCH CASES THERE IS NOTHING WRONG IN ESTIMATING THE UNDISCLOSED INCOME IN RESPECT OF SUCH TRANSACTI ONS WHICH ARE NOT RECORDED IN THE DIARIES, DOCUMENTS OR OTHER PAPERS. THE PRINCIPLE IS SUPPORTED BY THE DECISION. OF THE SUPREME COURT IN THE CASE OF H.M. ESUFALI H.M.ABDULALI (SUPRA). IN THIS CASE THE AO HAD DETEC TED SALES FOR 19 DAYS AS NOT HAVING BEEN ENTERED IN THE BOOKS OF ACCOUNT. TH E AO ESTIMATED THE TURNOVER FOR THE ENTIRE YEAR BASED ON THE UNDISCLOS ED SALES FOR THE PERIOD OF 19 DAYS. THEIR LORDSHIPS OF THE SUPREME COURT UPHELD T HE ESTIMATION OF INCOME AS COMPETENT. SIMILARLY, IN THE CASE OF OVER SEAS CHINESE CUISINE (SUPRA) THE BOMBAY BENCH OF THE TRIBUNAL HELD THAT WHEN THERE WAS EVIDENCE OF SUPPRESSED SALES FOR THREE MONTHS, THE AO WAS EN TITLED TO ADOPT THE BASIS OF UNACCOUNTED SALES THROUGHOUT THE YEAR ON THE BAS IS OF SUCH MATERIAL. THE TRIBUNAL FURTHER HELD THAT THE SAID MATERIAL COULD BE UTILIZED FOR ESTIMATION OF UNACCOUNTED SALES IN EARLIER YEARS AS WELL AS IN SU BSEQUENT ASSESSMENT YEARS. 5.10 DURING THE COURSE OF SEARCH THE MD OF THE COMP ANY HAS DULY CONSIDERED THE EVIDENCES FOUND. HE IS THE ONLY PERSONS TO WHO KNOWS THE ACTUAL FACTS OF THE BUSINESS. AFTER THOUGHTFUL CONSIDERATION OF FAC TS HE HIMSELF HAS DECLARED RS.2 CRORES FOR EACH A.YS.FROM 2006-07 TO 2009-10. THIS HAS BEEN CATEGORICALLY ADMITTED BY HIM IN HIS STATEMENT UNDER OATH RECORDED DURING THE COURSE OF SEARCH U/S.132(4) OF THE I.T.ACT. SUC H STATEMENT HAS EVIDENTIARY VALUE AS STATED IN SECTION 132(4) ITSEL F. THE RETRACTION BY THE 7 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED ASSESSEE IS AN AFTERTHOUGHT AND NOT ACCEPTABLE. UND ER THE ABOVE CIRCUMSTANCES AN AMOUNT OF RS.99,22,718/- BEING THE DIFFERENCE BETWEEN DECLARED INCOME IN STATEMENT U/S.132(4) OF RS.2 CRO RE & THE AMOUNT OF RS.1,00,77,282/- DISCLOSED IN THE RETURN IS ADDED T O THE TOTAL INCOME OF THE ASSESSEE COMPANY. IN THIS CONNECTION, I AM ALSO SAT ISFIED THAT THE COMPANY HAS CONCEALED ITS INCOME BY FURNISHING INACCURATE P ARTICULARS. THIS SQUARELY ATTRACTS PENALTY U/S.271(1)(C) OF THE ACT. THE SAME IS INITIATED SEPARATELY. 5. AGGRIEVED WITH THE ABOVE ADDITION BY THE AO ON THIS A CCOUNT, THE ASSESSEE FILED THE APPEALS BEFORE THE CIT(A) FOR THE YEARS UNDER CONSIDERATION. CIT(A) EXAMINED THIS ISSUE AT LENGTH AND ANA LYSED VARIOUS DECISIONS AND EVENTUALLY DELETED THE ADDITION GIVING THE FOLLOWING REAS ONS : 3.30 IN THE APPELLANT'S CASE THE SEIZED PAPERS DO NOT REVEAL ANY PATTERN OF SCRAP SOLD OUTSIDE THE BOOKS. THERE IS NO CORRELATI ON BETWEEN THE SCRAP SOLD OUTSIDE THE BOOKS AND THE SCRAP SALES ACCOUNTED FOR IN THE BOOKS. THE AO IN ASST YEAR 2003-04, 2004-05 AND 2005-06 HAS ESTIMATE D TOTAL SALE' OF SCRAP TO BE ABOUT 1% OF THE TURNOVER. IN THE ASST YEAR 20 05-06 AS THE SCRAP SALES EXCEEDED 1% OF THE TURNOVER, NO FURTHER ADDITION WA S MADE. IN THE ASST YEARS 2006-07 TO 2009-10 THE APPELLANT HAS CONSISTENTLY S HOWN SCRAP SALE @ MORE THAN 1% OF THE TURNOVER. THE AO HAS GIVEN NO REASON S AS TO WHY HE HAS ESTIMATED THE SCRAP SALE OF THESE ASST YEARS AT MOR E THAN TWICE THE ESTIMATE FOR THE EARLIER YEARS. IF THE AO FOLLOWS THE SAME R ATE OF 1% OF TOTAL TURNOVER, THE SCRAP SALES ACCOUNTED FOR IN THESE ASST YEARS A RE MUCH BETTER THAN THAT AND NO ADDITION WOULD BE REQUIRED EVEN ON ESTIMATE BASIS. 3.31 EVEN IF ESTIMATE OF INCOME IS JUSTIFIED IN A PARTIC ULAR CASE, THE QUANTUM OF ESTIMATE CANNOT BE ARBITRARY. THE QUANTUM SHOULD BE BASED ON RELEVANT FACTS. IN THE APPELLANT'S CASE THE AO HAS BASED THE ASST ON A RETRACTED STATEMENT WHICH IS NOT THE SAME AS AN ASSESSMENT BA SED ON THE AO'S ESTIMATION. FURTHER THE AO HAS NOT JUSTIFIED THE QU ANTUM OF THE ADDITIONS MADE FROM ANY ANGLE OTHER THAN THE 132(4) STATEMENT . THE BOOKS OF THE APPELLANT COMPANY ARE DULY AUDITED AND HAVE BEEN AC CEPTED BY THE AO IN ALL THE ASST YEARS. NO DEFECT HAS BEEN POINTED OUT IN THE BOOKS OR IN THE MANUFACTURING RECORDS OF THE APPELLANT. THERE IS NO JUSTIFICATION OR SUPPORT FOR THE ADDITIONS MADE FROM THE TECHNICAL POINT OF VIEW I.E. THERE IS NO ALLEGATION THAT THE SCRAP SALES SHOWN BY THE APPELL ANT IN HIS BOOKS WERE LESS THAN THE INDUSTRY NORMS ETC. THE AO HIMSELF HAS EST IMATED THE SCARP SALES TO BE 1% OF THE TURNOVER IN THE ASST YEARS 2002- 03 TO 2005-06. THE SCRAP SALES SHOWN BY THE APPELLANT IN ASST YEARS 2006-07 TO 200 9-10 ARE BETTER THAN 1%, HENCE NO FURTHER ADDITION ON ESTIMATE BASIS SHO ULD BE MADE IN THESE ASST YEARS. THUS THE ADDITIONS MADE IN ASST YEARS 2 006-07 TO 2009-10 CANNOT BE SUSTAINED ON ESTIMATE BASIS ALSO. 3.32 TO SUM UP, I HOLD THAT THE ADDITIONS MADE IN T HE APPELLANT'S CASE IN ASST YEARS 2006-07 TO 2009-10, RELYING EXCL USIVELY ON THE RETRACTED STATEMENT ARE NOT CORRECT IN LAW OR ON TH E FACTS OF THE CASE. THERE IS NO CORROBORATIVE ADDITION TO SUPPORT SUCH ADDITIONS. THE ADDITIONS AS FOLLOWING ARE THEREFORE REQUIRED TO BE DELETED. 8 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED 6. ALTHOUGH PARA NO.3 OF HIS ORDER DEALS WITH THIS ISSUE PA RA NO.3.27 DEALS WITH SPECIFIC ISSUE OF CORRECTNESS OF MAKING ADDITION ON ESTIMATION BASIS OUTSIDE THE SEIZED MATERIAL AND THE SAME IS EXTRACTED BELOW : 3.27 THE NEXT ASPECT OF THE CONTROVERSY IS WHETHER THE INCOME FROM UNACCOUNTED SALE OF SCRAP SHOULD BE ESTIMATED OVER AND ABOVE WHAT IS RECORDED IN THE SEIZED MATERIAL, AND THUS THE ADDIT ION MADE BY THE AO CAN BE JUSTIFIED ON THIS GROUND. 3.27.1 I HAVE CONSIDERED THE FACTS OF THE CASE. I FIND THAT SUCH A COURSE OF ACTION IS NOT FEASIBLE OR JUSTIFIED IN THE FACTS OF THE CASE. FIRST THE MAJORITY OF THE IMPUGNED SEIZED PAPERS ARE CASH VOUCHERS PERTAI NING TO THE CASH PAID TO THE MD OR OTHER EMPLOYEES OF THE ASSESSEE COMPANY. THE SOURCE OF SUCH CASH PAYMENTS HAS BEEN ADMITTED TO BE UNACCOUNTED I N THE ABSENCE OF SUPPORTING VOUCHERS ETC. THE CASH WAS ADMITTEDLY P AID TO MEET WITH URGENT REQUIREMENTS SUCH AS TRAVELLING EXPENSES ETC. FULL DETAILS REGARDING THE PURPOSE FOR WHICH THE CASH WAS PAID IS NOT KNOWN. THE SEIZED VOUCHERS ARE FOR DIFFERENT DATES AND THE DATES ARE NOT CONTINUOU S. IN A FEW CASES THERE ARE MANY VOUCHERS ALTOGETHER FOR MANY DAYS IN BETWE EN. FROM THE SEIZED VOUCHERS NO PRESUMPTION CAN BE MADE ABOUT PERIODICI TY OF CASH PAYMENTS. 3.27.2 THE SOURCE OF THE CASH PAID AS PER THESE VOU CHERS CAN BE PRESUMED TO BE OUT OF UNACCOUNTED SALE OF SCRAP. IN SUCH A SCE NARIO, WHATEVER CASH WAS GENERATED AND PAID TO THE MD OR OTHER EMPLOYEES AS PER THE SEIZED VOUCHERS HAS BEEN DISCLOSED IN THE RETURNS. 3.27.3 FURTHER THERE ARE A FEW CHITS SHOWING SCRAP SALES WHICH IS NOT ACCOUNTED IN THE BOOKS. THE APPELLANT HAS OFFERED THE TOTAL SUM OF SLIPS AND CASH VOUCHERS AS HIS ADDITIONAL INCOME IN THE RETUR NS FILED IN RESPONSE TO THE 153A NOTICE. THUS UNACCOUNTED SCRAP SALES ARE TOTA LLY DISCLOSED AND OFFERED TO TAX. THERE IS NOTHING IN THE SEIZED MATERIAL OR ON THE RECORDS TO SHOW THAT CERTAIN AMOUNT OF SCRAP MUST HAVE BEEN SOLD EVERY D AY OUTSIDE THE BOOKS. FURTHER THE APPELLANT HAS SHOWN SUBSTANTIAL SALE OF SCRAP IN THE REGULAR BOOKS OF ACCOUNTS. THE SCRAP SALES SHOWN BY THE AP PELLANT IN HIS BOOKS IN DIFFERENT YEARS ARE AS UNDER : SR.NO. FIN YEAR TURNOVER IN LAKHS SCRAP SALES IN LAKHS % 1 1998-99 5982.52 55.84 0.93 2 1999-00 6427.21 107.66 1.68 3 2000-01 6367.36 59.43 0.93 4 2001-02 6642.05 37.23 0.56 5 2002-03 6930.16 68.03 0.98 6 2003-04 11020.02 70.24 0.64 7 2004-05 17707.21 178.24 1.01 8 2005-06 22147.47 179.76 1.01 9 2006-07 26959.32 342.05 1.54 10 2007-08 29700.71 568.35 2.11 11 2008-09 23265.74 595.20 2 12 2009-10 33943.35 402.02 1.73 13 2010-11 42821.37 802.55 2.36 14 2011-12 40875.50 1004.92 2.35 15 2012-13 897.00 2.19 9 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED 3.27.4 NO PATTERN OF UNDERSTATEMENT OF SCRAP SALES CAN BE PERCEIVED IN THE DETAILS AS ABOVE. THE AO HAS MADE ADDITION IN THE YEARS IN WHICH THE SALE OF SCRAP AS % OF TURNOVER IS RATHER BETTER THAN EAR LIER YEARS. MAXIMUM ADDITION IS MADE IN ASST. YEAR 2008-09 (FY 2007-08) IN WHICH YEAR THE % OF SCRAP SALE TO TOTAL TURNOVER IS 2.11%. THUS THE AD DITIONS MADE BY THE AO HAVE NO RELATIONSHIP WITH THE SCRAP SALE SHOWN IN T HE BOOKS. 3.27.5 IT IS SEEN FROM THE RECORDS THAT THE APPELLA NT HAD FILED DETAILS OF SCRAP SALES AND BURNING LOSS ETC BEFORE THE AO. A COPY O F SUCH LETTER FILED IN ASST. YEAR 2006-07 IN THE OFFICE OF THE AON ON 15-11-2010 HAS BEEN PRODUCED ALONG WITH APPEAL SUBMISSIONS. IT IS SEEN THAT THE BURNING LOSS SHOWN BY THE APPELLANT IN ASST. YEAR 2006-07 WAS 5.51% WHICH WENT DOWN GRADUALLY IN THE SUBSEQUENT YEARS. IN THE APPELLANTS OWN CA SE THE ITAT HAS HELD IN ASST. YEAR 2001-02 AND 2002-03 THAT BURNING LOSS UP TO 8.5% SHOULD BE ACCEPTED AS WITHIN ADMISSIBLE LIMITS. THE AO HAS A LSO NOT POINTED OUT ANY DEFECT IN THE APPELLANTS MANUFACTURING ACCOUNT. T HE BOOKS WHICH ARE AUDITED AND ACCEPTED BY THE AO AND A MANUFACTURING RECORD SUBJECT TO EXCISE VERIFICATION CANNOT BE DISREGARDED WITHOUT S OUND AND COGENT EVIDENCE. 3.27.6 THE SEIZED MATERIAL ALSO DO NOT POINT OUT AN Y SYSTEMATIC SUPPRESSION OF SCRAP SALES SUCH AS SAY EVERY THIRD SALE BILL BE ING KEPT OUTSIDE THE BOOKS ETC. THERE IS NOTHING ON THE RECORD TO CONTRADICT THE APPELLANTS CLAIM THAT WHATEVER SCRAP SALE WAS KEPT OUTSIDE THE BOOKS, HAS BEEN FOUND RECORDED THE SEIZED SLIPS. NO UNEXPLAINED INVESTMENTS OR EXP ENDITURE HAVE BEEN FOUND DURING THE SEARCH. THEREFORE, IN TOTALITY OF FACTS NO EXTRAPOLATION OF SCRAP SALE IS REQUIRED OR PRACTICAL ON THE BASIS OF FEW SLIPS SEIZED INDICATING UNACCOUNTED SALES. 7. AGGRIEVED WITH THE ABOVE RELIEF GRANTED BY THE CIT(A) ON THIS ISSUE, THE REVENUE IS IN APPEAL FOR THE 4 ASSESSMENT YEARS UND ER CONSIDERATION RAISING THE AFORESAID GROUNDS. 8. BEFORE US, LD. DR FOR THE REVENUE BROUGHT OUR ATTENT ION TO THE FACTS OF THE CASE AS WELL AS THE DECISIONS OF AO/CIT(A) AND SUBM ITTED THAT THE ASSESSEE OFFERED THE ADDITIONAL INCOME OF RS.2 CRORES PER Y EAR FOR ALL THE 4 ASSESSMENT YEARS AND READ OUT THE RELEVANT QUESTIONS AND ANSWERS IN THIS REGARD. HE ALSO SUBMITTED THAT THE RELIEF GRANTED BY THE CIT(A) IS REQUIRED TO BE REVERSED. 9. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE FURNIS HED THE FOLLOWING WRITTEN SUBMISSIONS : 10 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED 3] ACCORDING TO THE LEARNED A.O., THE ASSESSEE SHO ULD HAVE ADHERED TO THE DECLARATION MADE AT THE TIME OF SEARCH AND IRRESPEC TIVE OF THE ACTUAL EVIDENCES FOUND, HE HAS HELD THAT THE ASSESSEE SHOU LD HAVE OFFERED RS.2 CRS EACH FOR A.YS. 2006-07 TO 2009-10. THUS, THE LEARNE D A.O. HAS MADE THE ADDITION BY CONSIDERING THE DECLARATION MADE OF RS. 2 CRS. AND AFTER REDUCING THE INCOME ON ACCOUNT OF LOOSE PAPERS I VOUCHERS OF FERED BY THE ASSESSEE IN ITS RETURN FILED U/S. 153A. IN NUTSHELL, THE LEARNE D A.O. HAS HELD THAT THE ADDITION IS WARRANTED ON THE BASIS OF THE STATEMENT OF SHRI KIRAN PATIL. 4] THE LEARNED CIT(A) HAS DISCUSSED THIS ISSUE IN P ARA 3 TO 3.32 OF HIS ORDER. ACCORDING TO HIM, THERE IS NO DISPUTE THAT THE ASSE SSEE-HAS OFFERED INCOME TO TAX ON THE BASIS OF THE ACTUAL EVIDENCES FOUND AS A RESULT OF SEARCH. HE HAS HELD THAT THE ADDITION CANNOT BE MADE ON THE BASIS OF THE STATEMENT WHICH HAS BEEN SUBSEQUENTLY RETRACTED AND PARTICULARLY BE CAUSE, THE ASSESSEE HAS ' OFFERED THE INCOME TO TAX ON THE BASIS OF THE EVIDE NCES FOUND. THE LEARNED CIT(A) HAS REFERRED VARIOUS DECISIONS WHEREIN IT HA S BEEN HELD THAT THE ADDITION CANNOT BE MADE SOLELY ON THE BASIS OF THE STATEMENT RECORDED. 5] IT IS ALSO TO BE NOTED THAT THE LEARNED A.O . HAS MADE AN ADDITION FOR A.YS.2003-04 AND 2004-05 BY CONSIDERING THE REALIZA TION OF SCRAP @ 1 % OF THE TURNOVER. SINCE FOR A.Y.2005-06, THE REALIZATIO N OF SCRAP DULY ACCOUNTED IN THE BOOKS WAS MORE THAN 1%, NO ADDITION WAS MADE BY THE LEARNED A.O . FOR THAT YEAR. THE LEARNED CIT(A) HAS NOTED ON PAGE 43 OF HIS ORDER THAT THE REALIZATION OF SCRAP FOR A.YS.2006 - 07 TO 2009 - 10 IS MUCH MORE THAN 1 % OF THE TURNOVER. IN FACT, ON PAGE 44 OF THE PAPER BOOK , THE ASSESSEE HAS GIVEN A CHART TO DEMONSTRATE THE PERCENTAGE OF SCRAP SALE T O TOTAL TURNOVER AFTER INCLUDING THE ADDITIONAL INCOME DECLARED IN THE RET URN FURNISHED U/S.153A. FOR A.YS., 2006- 07 TO 2009-10 , THE PERCENTAGE OF SCRAP SALE IS MUCH HIGHER AS COMPARED TO A.Y. 2005 -06 FOR WHICH NO ADDITION HAS BEEN MADE BY THE LEARNED A.O . 6] CONSIDERING THE ABOVE FACTS, THE ' ASSESSEE SUBMITS THAT THE ADDITION HAS BEEN RIGHTLY DELETED BY THE LEARNED CIT(A). IT IS S UBMITTED THAT THE STATEMENT MADE BY SHRI KIRAN PATIL WAS ON AN AD-HOC B A SI S AND THERE WAS NO CORROBORATIVE EVIDENCE FOUND AS A RESULT OF SEARCH TO INDICATE THAT THE ASSESSEE HAD GENERATED UNDISCLOSED INCOME ON SALE O F SCRAP TO THE TUNE OF RS.2 CRS FOR EACH OF THE FOUR ASST. YEARS. THE ASSE SSEE PLACES RELIANCE ON THE FOLLOWING DECISIONS WHEREIN THE ADDITION MADE SOLEL Y ON THE BASIS OF THE STATEMENT RECORDED HAS BEEN HELD TO BE INVALID IN L AW A. PULLANGODE RUBBER PRODUCE CO. LTD. V. STATE OF KERA LA & OTHER [91 ITR 18 (SC)] B. KAILASHBEN MANHARLAL CHOKSHI V. CIT [328 ITR 411(GU J H . C.)] C. DHANVARSHA BUILDERS & DEVELOPERS P. LTD. V. DCIT [102 ITD 375 (PUNE TRIB)] D. CIT V. ASHOK KUMAR SONI [166 TAXMANN 371 (RAJ H.C.) ] E. M. NARAYANAN & BROS V. ACIT [339 ITR 192 MAD H.C.)] F. ACIT V. JANAK RAJ CHAUHAN [102 TTJ 316 (ASR TRIB)] G. MAHESHWARI INDUSTRIES V. ACIT [81 TTJ 914 (JODH TRI B)] H. JYOTIBHAICHAND BHAICHAND SARAF & SONS P. LTD. V. DC IT [139 ITD 10 (PUNE TRIB.)] I. M/S. AVISHKAR INFRASTRUCTURE PVT. LTD. V. DCIT [716 5/MUM./2011] 7. IN VIEW OF THE ABOVE DECISIONS AND THE FACTS OF THE CASE, THE ASSESSEE SUBMITS THAT THE LEARNED CIT(A) IS JUSTIFIED IN DEL ETING THE ADDITION MADE BY THE LEARNED A.O. 11 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED 9.1 FURTHER, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT TO THE EXTENT THE SEIZED MATERIAL IS AVAILABLE, ASSESSEE DULY OFFERED THE UNDISCLOSED INCOME. REGARDING THE DISCLOSURE OF RS.2 CRORES PER YEAR, LD. COUNSEL SUBMITTED THAT THE SAID DISCLOSURE IS GIVEN WHEN THERE IS NO SPECIFIC MATERIAL AND THE DISCLOSURE IS GIVEN ON ESTIMATION BASIS. SU CH ESTIMATIONS IN EITHER WAY IS NOT BONAFIDE. THEREFORE, THE ADDITION MADE BY THE AO SINCERELY RELYING ON THE STATEMENT OF ASSESSEE GIVEN U/ S.132(4) OF THE ACT IS UNSUSTAINABLE. IN SUPPORT OF THE SAID RETRACTION OF THE S TATEMENT OF ASSESSEE, LD. COUNSEL RELIED ON VARIOUS DECISIONS INCLUDING TH E DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. AVISH KAR INFRASTRUCTURE PVT. LTD. VS. DCIT ITA NO.7165/MUM/201 1, DATED 17-06-2015. HE BROUGHT OUR ATTENTION TO PARA NO.6.1 TO 6.3 OF THE ORDER OF TRIBUNAL AND SUBMITTED THAT THE RETRACTION GIVEN BY THE ASSESSEE IN THE ABSENCE OF CORROBORATIVE EVIDENCE IN SUPPORT OF THE ADDIT IONAL INCOME OFFERED DURING THE SEARCH CANNOT BE ADDED AND SUCH ST ATEMENTS ARE NOT SACROSANCT. 10. WE HEARD BOTH THE PARTIES ON THIS LIMITED ISSUE AND R ELIEF GRANTED BY THE CIT(A) ON ACCOUNT OF SCRAP SALES. THERE IS NO DISPUTE ON THE FACT THAT ASSESSEE OFFERED RS.2 CRORES PER YEAR FOR ALL THE 4 ASSES SMENT YEARS UNDER CONSIDERATION DURING THE SEARCH AND SEIZURE ACTION. WE P ROCEED TO EXTRACT THE RELEVANT QUESTION AND ANSWERS ON THIS SPECIFIC ISSUE A ND THE SAME READS AS UNDER : QUESTION NO. 8. IN THE COURSE OF SEARCH ACTION AT YOUR BUSINESS PR EMISES EVIDENCES RELATING TO CASH SALE OF SCRAP HAVE BEEN FOUND AND SEIZED. THESE CASH RECEIPT AGAINST SALE OF SCRAP IN THE RELEVANT FINANCIAL YEARS ARE NOT FOUND RECORDED IN THE REGULAR BOOK OF ACCOUNTS, HEN CE REMAINS UNACCOUNTED. THE DETAILS OF SUCH UNACCOUNTED CASH RECEIPTS ARE C ONFRONTED IN THE STATEMENT RECORDED ON OATH OF SHRI BASHIS PATIL, CASHIER, SHRI SANJAY BHALCHANDRA VARPE , JR. SUPDT. AT FOUNDRY, SHRI MUKUND LAXMAN SHINDE, 12 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED VICE PRESIDENT, FINANCE DURING SEARCH ON 11/09/08, THESE EXECUTIVES AND EMPLOYEES HAVE CATEGORICALLY CONFESSED THAT THE CAS H RECEIPTS PERTAIN TO SALE OF SCRAP OUTSIDE THE BOOKS. WHAT YOU HAVE TO SAY AS REGARDS THESE UNACCOUNTED CASH RECEIPTS NOT FOUND RECORDED IN BOO KS? ANSWER: I HAVE BEEN MADE AWARE ABOUT THE CONTENTS OF THE STATEMENTS OF THE EXECUTIVES & EMPLOYEES RECORDED U/S.132(4) ON 1 1/09/08 AT MY OFFICE PREMISES. I STATE THAT SOME OF THE ANSWERS GIVEN AR E NOT FULLY RELIABLE. HOWEVER, I ADMIT THAT THERE ARE SOME RECEIPTS GENER ATED OUT OF SCRAP SALES, WHICH CANNOT BE EXPLAINED AS NO SUPPORTING ARE AVAI LABLE. THEREFORE, I OFFER RS. EIGHT CRORES (RS.8,00,00,000/-) AS MY ADDITIONA L UNACCOUNTED INCOME IN EQUAL PROPORTION FOR THE FINANCIAL YEAR 2005-06, 20 06-07, 2007-08 AND CURRENT FINANCIAL YEAR 2008-09, OVER AND ABOVE MY R EGULAR INCOME. QUESTION NO. 9 : PLEASE GIVE THE DETAILS OF INVESTMENT IN BUNGALO W AND LAND AT RAJARAM TALAV WHERE YOU ARE RESIDING WITH YOUR F AMILY. ANSWER : THE LAND WAS PURCHASED BY COMPANY IN 1998 AND BU NGALOW WAS CONSTRUCTED IN THE YEAR 2007-08. THE COST OF CONSTR UCTION IS RS.83,60,561/- AND THE DETAILS OF INVESTMENT IN THE LAND WILL BE S UBMITTED LATERON. QUESTION NO. 10 : I AM SHOWING YOU THE P & L ACCOUNT OF GHATGE PAT IL INDUSTRIES LTD. AS ON 31/3/2008 ANNEXED AT PAGE NO. 8 OF BUNDLE NO. A-8, SHOWING THE NET PROFIT OF RS.11,25,14,273.29. PLEAS E CONFIRM THE SAME. ANSWER : YES, I DO CONFIRM THE SAME AND THE SAME WILL BE OFFERED FOR TAXATION AS MAY REGULAR INCOME FOR AY 2008-09 SUBJE CT TO COMPUTATION OF INCOME. I ALSO CONFIRM THAT THE ADDITIONAL INCOME O F RS.2,00,00,000/- ( RS. TWO CRORE) OVER AND ABOVE MY REGULAR INCOME FOR AY 2008-09. QUESTION NO. 11 : I AM SHOWING YOU THE INCOME AND EXPENDITURE STAT EMENT OF GHATGE PATIL INDUSTRIES LTD. FOR THE PERIOD 1/4/ 08 TO 12/09/08 SHOWING THE PROFIT AT RS.4,61,69,920.13 ANNEXED AT PAGE NO. 27 AT BUNDLE NO. A-7. PLEASE CONFIRM THE SAME. ANSWER : YES I DO CONFIRM THE SAME AND THE PROFIT WILL BE OFFERED FOR TAXATION FOR AY. 2009-10 SUBJECT TO COMPUTATION OF INCOME. I ALSO CONFIRM THAT THE ADDITIONAL INCOME OF RS.2,00,00,000/- ( RS.TWO CROR E) OVER AND ABOVE MY REGULAR INCOME FOR AY 2009-2010. QUESTION NO.12 : IN YOUR STATEMENT VIDE REPLY TO QUESTION NO.8 YOU HAVE OFFERED ADDITIONAL UNACCOUNTED INCOME OF RS.8,00,00 ,000/- ( RS. EIGHT CRORE ONLY) AS UNDER: F.Y ADDITIONAL INCOME OFFERED ( IN RS.) 2005-06 RS.2,00,00,000/- 2006-07 RS.2,00,00,000/- 2007-08 RS.2,00,00,000/- 2008-09 RS.2,00,00,000/- ---------- ------------------------------------ -- TOTAL RS.8,00,00,000/- ----------------------------------------------- - PLEASE STATE AS TO HOW DO YOU PURPOSE TO PAY TAXES ON THE ADDITIONAL UNDISCLOSED OFFERED FOR TAXATION. ANSWER: I WILL PAY THE TAX ON THE ADDITIONAL UNDISCLOSED IN COME ADMITTED OF RS.8,00,00,000/- ( RS. EIGHT CRORES ONLY) IN DUE CO URSE. 13 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED QUESTION NO. 13 : DO YOU WANT TO SAY ANYTHING ELSE? ANSWER: YES, THE ADDITIONAL UNDISCLOSED INCOME OFFERED PERT AINS TO THE ENTRIES OF CASH SALES OF SCRAP AND AFTER OMISSION A ND FINDING DURING THE SEARCH PROCEEDINGS IN THIS REGARD. WHATEVER STATED ABOVE IS TRUE TO THE MY BEST KNOWLE DGE AND BELIEF. I HAVE GIVEN THIS STATEMENT VOLUNTARILY WITHOUT ANY F EAR AND IN A SOUND STATE OF MIND. THE ABOVE EXTRACT SHOWS THAT THE OFFER OF THE UNDISCLOSE D INCOME OF RS.8 CRORES IS NOT CORROBORATED WITH THE SEIZED MATERIAL IN ITS E NTIRETY. 10.1 WE HAVE ALSO PERUSED THE ORDER OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. AVISHKAR INFRASTRUCTURE PVT. LTD. AND TH E FINDING GIVEN BY THE TRIBUNAL IN PARA NOS. 6.1 TO 6.3 OF THE ORDER READS AS UNDER : 6.1 UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE WE HAVE TO EXAM ME THAT WHETHER SUSTENANCE OF IMPUGNED ADDITION IS IN ACCORDANCE WITH LAW OR NOT. THE LAW IN THIS REGARD HAS ALREADY BEEN DESCRI BED IN THE ABOVE PART OF THIS ORDER AND REFERENCE CAN BE MADE TO THE DECISIO N OF HON'BLE TELANGANA & ANDHRA PRADESH HIGH COURT IN THE CASE OF GAJJAM CHI NNA YELLAPA VS. ITO (SUPRA), WHERE THEIR LORDSHIPS HAVE OBSERVED THAT I N CASE STATEMENT IS RETRACTED THEN TOTALLY DIFFERENT CONSIDERATION ALTO GETHER WILL ENSUE AND THE SITUATION WOULD RESEMBLE TO SECTION 164 OF THE CODE OF CRIMINAL PROCEDURE. THE EVIDENTIARY VALUE OF RETRACTED STATEMENT BECOME DILUTED AND IT LOSES ITS STRENGTH TO STAND ON ITS OWN. IN THAT CASE ASSESSIN G AUTHORITY HAS TO GARNER SOME SUPPORT TO THE STATEMENT [OR PASSING AN ORDER OF ASSESSMENT. IT. IS ALSO HELD THAT RETRACTED STATEMENT WOULD NOT PUT AN END TO THE PROCEDURE, THEN THE AO IS UNDER AN OBLIGATION TO SUPPORT HIS FINDINGS O N THE BASIS OF OTHER MATERIALS AND IF HE DOES NOT HAVE SUCH MATERIAL THE N IT WOULD REFLECT UPON THE VERY PERFUNCTORY NATURE OF THE SURVEY. FOR HOLD ING SO THEIR LORDSHIPS HAVE REFERRED TO THE AFOREMENTIONED CIRCULAR DATED 10/3/2003, WHEREIN CBDT HAS CLEARLY GIVEN THE MANDATE TO THE OFFICERS THAT DURING THE COURSE OF SEARCH, SEIZURES AND SURVEY NO ATTEMPT SHOULD BE MA DE TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INCOME AND SUCH INSTRUCTIONS TO CBDT WERE APPLICABLE WHEN THE SEARCH AND SEIZURE WAS MADE AND ASSESSMENT WAS FRAMED. CBDT HAS FURTHER MANDATED THAT IN RESPECT OF PENDING ASS ESSMENT ALSO AO SHOULD RELY UPON THE EVIDENCES/MATERIALS GATHERED DURING T HE COURSE OF SEARCH/SURVEY OPERATIONS OR THEREAFTER WHILE FRAMIN G RELEVANT ASSESSMENT ORDER. THE ADDITION MADE IN THE PRESENT CASE IS CON TRARY TO THE AFOREMENTIONED DECISION OF HON'BLE TELANGANA & ANDH RA PRADESH HIGH COURT AS WELL AS AFOREMENTIONED CIRCULAR OF CBDT AS THE A SSESSMENT IS ENTIRELY BASED UPON THE STATEMENT RECORDED DURING THE COURSE OF SEARCH AND NO INDEPENDENT MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO TO SHOW THAT THE INCOME RETURNED WAS INCORRECT. 6.2 THE OTHER DECISIONS WHICH HAVE BEEN RELIED UPON BY LD. AR ALSO SUPPORTS SIMILAR PROPOSITION AND THESE HAVE BEEN DISCUSSED I N THE ABOVE PART OF THIS ORDER AND FOR THE SAKE OF BREVITY THEY ARE NOT REPE ATED. 14 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED 6.3 SO FAR AS IT RELATES TO FINDINGS RECORDED BY L D. CIT(A), ONE OF THE FINDING IS THAT BY MAKING ADMISSION UNDER SECTION 132(4) TH E ASSESSEE HAS ALTERED THE POSITION OF THE DEPARTMENT BECAUSE OF WHICH THE DEPARTMENT DID NOT PURSUE THE MATTER FURTHER AND DID NOT VISIT THE SAI D ACME CENTRE AT AHMEDABAD. IT MAY BE MENTIONED THAT SUCH OPINION OF LD. CIT(A) WOULD BE CONTRARY TO THE AFOREMENTIONED CIRCULAR ISSUED BY C BDT, WHERE THE CLEAR MANDATE HAS BEEN GIVEN TO THE INCOME TAX AUTHORITIE S WORKING UNDER THE CBDT THAT WHILE RECORDING THE STATEMENT DURING THE COURSE OF SEARCH/SURVEY NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION OF T HE UNDISCLOSED INCOME AND ANY SUCH ACTION WOULD BE VIEWED ADVERSELY. RECO GNIZING SUCH POSITION THEIR LORDSHIPS OF TELANGANA & ANDHRA PRADESH HIGH COURT HAVE ALREADY OBSERVED THAT IF ADDITION IS MADE SIMPLY ON THE BAS IS OF STATEMENT RECORDED UNDER SECTION 132(4) AND NO MATERIAL IS BROUGH T ON RECORD BY THE REVENUE AUTHORITIES THEN IT WOULD REFLECT UPON VERY PERFUNC TORY NATURE OF THE SURVEY/SEARCH ACTION OF THE DEPARTMENT. THEREFORE, IN ABSENCE OF SUPPORTING MATERIAL, THE ADDITION SIMPLY ON THE BASIS OF STATE MENT CANNOT BE UPHELD. THE OTHER FINDINGS OF LD. CIT(A) DO NOT SUPPORT THE ADD ITION AS THEY ARE ONLY BASED UPON THE ADMISSION OF THE ASSESSEE. ACCORDING , TO THE FACTS OF THE CASE, THE ASSESSEE HAD FURNISHED ALL REQUIRED PARTI CULARS REGARDING SALE AND EXPENDITURE INCURRED ON THE IMPUGNED PROJECT AND AO COULD NOT POINT OUT ANY DEFECT IN THOSE PARTICULARS SUBMITTED BY THE ASSESS EE. THUS, THE ADDITION IS MADE SIMPLY ON THE BASIS OF STATEMENT RECORDED D URING THE COURSE OF SEARCH AND IS NOT SUPPORTED BY ANY MATERIAL. IN VIEW OF CASE LAW RELIED UPON BY LD. AR, THE ADDITION IS NOT SUSTAINA BLE AND IS DELETED. THE ABOVE EXTRACT FROM THE TRIBUNAL SUPPORTS THE VIEW THAT THE STATEMENT RECORDED DURING THE SEARCH AND SEIZURE ACTIO N IN THE ABSENCE OF ANY INDEPENDENT AND CORROBORATING/INCRIMINATING MATERIAL IS NOT TO BE RELIED UPON. ASSESSEE OFFERED THE UNDISCLOSED INCOME TO TH E EXTENT THE CORROBORATING EVIDENCES WERE SEIZED. IT IS NOT THE CASE OF THE AO THAT TOTAL SUM OF RS.8 CRORES IS BACKED UP BY SUCH INCRIMINATING MATE RIAL. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT FACTUALL Y THE ASSESSEE OFFERED THE INCOME TO THE EXTENT THE SEIZED MATERIAL WAS AVAILABLE AND NOT OTHERWISE. AOS ATTEMPT TO MAKE THE DIFFERENTIAL AMOUNTS OF UNDISCLOSED STRICTLY RELYING ON THE SWORN STATEMENT OF MR. KIRAN PAT IL, MD OF THE COMPANY IS UNSUSTAINABLE CONSIDERING THE WRITTEN SUBMISSION OF THE ASSESSEE AND THE ORDER OF THE TRIBUNAL IN THE CASE OF M/ S. AVISHKAR INFRASTRUCTURE PVT. LD. (SUPRA). THEREFORE, WE HOLD THAT T HE RELIEF GRANTED BY THE CIT(A) IN HIS ORDER IS FAIR AND REASONABLE AND IT DOE S NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE COMMON GROUND RAISED BY T HE REVENUE IN 15 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED THE GROUNDS OF APPEAL HAS TO BE DECIDED AGAINST THE REV ENUE AND IN FAVOUR OF THE ASSESSEE. 11. IN THE RESULT, ALL THE 4 APPEALS OF THE REVENUE ARE DISMISSED. ITA NOS. 1070 TO 1072/PUN/2016 BY ASSESSEE A.YRS. 2006-07 TO 2008-09 12. IN ALL THE 3 APPEALS BY THE ASSESSEE, COUPLE OF ISSUES ARE RAISED (I) RELATING TO ADDITION BASED ON DVOS REPORT; AND (II) THE ALLOWA BILITY OF DEPRECIATION ON THE BUILDING OCCUPIED BY MR. KIRAN PATIL, MD OF THE COMPANY. THE FIRST ISSUE IS COMMON IN ALL THE 3 APPEALS AN D THIS IS THE SOLITARY GROUND RAISED IN THE TWO APPEALS FOR THE A.YRS. 2 006-07 AND 2007- 08. IN ADDITION, IN THE A.Y. 2008-09, THERE IS A GROUND RE LATING TO DEPRECIATION. THEREFORE, THE GROUNDS RAISED BY THE ASSE SSEE FOR THE A.Y. 2008-09 ARE EXTRACTED HERE AS UNDER : 1. THE ORDER OF THE LEARNED CIT(APPEALS) IS BAD IN LAW AND OPPOSED TO THE FACTS. 2. THE LEARNED CIT (APPEALS) HAS ERRED IN UPHOLDING AD DITION OF RS.2,03,646 MADE BY THE DCIT AS DIFFERENCE BETWEEN COST OF CONS TRUCTION AS PER BOOKS AND VALUE AS PER THE VALUATION REPORT OF DVO. HE ER RED IN SIMPLY FOLLOWING THE ORDER OF CIT(A) KOLHAPUR FOR AY 2005-06 AND CON FIRMED THE ADDITION. HE FAILED TO APPRECIATE THAT ENTIRE COST OF CONSTRUCTI ON HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT OF THE APPELLANT FROM YEAR TO YEAR , IGNORING THE EXTRACT OF LEDGER OF AUDITED ACCOUNTS PLACED ON THE RECORDS WH ICH CONTAINED COMPLETE NARRATION FOR EACH ENTRY DATE-WISE, AND FAILED TO A PPRECIATE THAT THE REPORT OF DVO WAS A PERSONAL JUDGMENT DEVOID OF ANY EVIDENCE. THE ADDITION OF RS.2,03,646 MAY KINDLY BE DELETED. 3. THE LEARNED CIT (APPEALS) HAS ERRED IN UPHOLDING ADDITION OF RS.4,29,120/- MADE BY DCIT ON ACCOUNT OF DISALLOWAN CE OF DEPRECIATION ON ABOVE REFERRED BUILDING. HE FAILED TO APPRECIATE TH AT THE MD WAS OCCUPYING THE BUILDING ONLY TEMPORARILY FOR HIS RESIDENCE WHE RE MANY BUSINESS MEETINGS WERE HELD. HE FAILED TO APPRECIATE THAT OC CUPATION OF BUILDING BY MD CONSTITUTES USE OF THE ASSET FOR BUSINESS PURPOS ES AND DEPRECIATION SHOULD HAVE BEEN ALLOWED. THE ADDITION OF RS.4,29,1 20/- MAY KINDLY BE DELETED. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. 16 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED 13. REGARDING THE ISSUE RELATING TO THE DVOS-REPORT LINKE D ADDITION, RELEVANT FACTS ARE THAT THE ASSESSEE CONSTRUCTED A BU NGALOW AND THE INVESTMENT IN THE LAND AND THE SAID BUILDING WAS AN AREA OF ENQUIRY DURING THE SEARCH AND SEIZURE ACTION. THE STATEMENT FROM MR. K IRAN PATIL, MD OF THE COMPANY WAS RECORDED. FACTS RELATING TO THIS BUILDIN G AGREEMENT INCLUDE THAT THE SAID LAND WAS PURCHASED IN 1998 AND THE BUILDING THEREON WAS CONSTRUCTED IN 2007-08. THE COST OF CONSTRUCTION O F THE BUILDING IS RS.83,60,568/-. ASSESSEE PROMISED TO FURNISH THE COST OF PURCHASE OF LAND AND THE SAME NEVER HAPPENED. ACCORDINGLY, THE PROPERT Y WAS REFERRED TO THE DVO FOR VALUATION U/S.142A OF THE ACT. DVO SUBMITTED THE REPORT AND ESTIMATED THE COST OF CONSTRUCTION AT RS.94,84,215/- AND THE DIFFERENCE WORKS OUT TO RS.11,23,557/-. WHEN THE SAID DIFFERENTIAL AM OUNT WAS APPORTIONED AMONG THE ASSESSMENT YEARS 2004-05 TO 20 09-10 U/S.69B OF THE ACT, THE A SUM OF RS.3,20,011/- PERTAINS TO THE YEAR UNDER CONSIDERATION, RS.2,63,550/- FOR THE A.Y. 2007-08 AND RS.2,0 3,646/- FOR THE A.Y. 2008-09. RELYING ON THE SAID ESTIMATION OF THE DVO, THE AO INVOKED THE PROVISIONS OF SECTION 69 OF THE ACT AND ADDE D THE SAID AMOUNT AS UNDISCLOSED INCOME OF THE ASSESSEE. 14. BEFORE US, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE FIGURES AND SUBMITTED THAT THE ESTIMATED COST OF CONSTRU CTION OF RS.94,84,215/- AGAINST THE DISCLOSED SUM OF RS.83,60,568/- CO NSTITUTES THE DIFFERENCE WHICH WORKS OUT TO MERELY 13.43%. IN THIS REGARD, LD. COUNSEL FOR THE ASSESSEE RELIED ON VARIOUS DECISIONS TO D EMONSTRATE THAT THE DIFFERENCE IN ESTIMATIONS NEED TO BE IGNORED WHEN TH E DIFFERENCE MERELY WORKS OUT TO LESS THAN 15% OF THE ACCOUNTED VALUES. LD. COUNSEL RELIED ON THE ORDER OF TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.1069/PUN/2016 17 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED AND CONNECTED APPEALS FOR THE A.YR.2004-05 DECIDED ON 31 -08-2018. FURTHER, LD. COUNSEL FILED THE FOLLOWING WRITTEN SUBMISSIONS ON THIS ISSUE : ADDITION OF RS.3,20,011/- FOR A.Y. 2006-07, RS.2,6 3,550/- FOR A.Y. 2007-08 AND RS.2,03,646/- FOR A.Y. 2008-09 1.1 THE ASSESSEE HAD CONSTRUCTED A BUNGALOW AND THE TOTAL COST OF CONSTRUCTION ACCOUNTED IN THE BOOKS WAS RS.83,60 , 568/-. IN THE COURSE OF SEARCH, NO INCRIMINATING EVIDENCE WAS FOUND RELATIN G TO THE CONSTRUCTION OF BUNGALOW. DURING THE COURSE OF ASST. PROCEEDINGS, T HE LEARNED A.O . REFERRED THE VALUATION OF THE SAID BUNGALOW TO THE DVO WHO V ALUED THE COST OF CONSTRUCTION AT RS . 94,84,215/- AS AGAINST RS.83,60,568/- ACCOUNTED BY THE ASSESSEE SINCE THE ASSESSEE HAD CONSTRUCTED THE BUN GALOW OVER THE YEARS FROM A.YS. 2004 - 05 TO 2008 - 09 , THE DIFFERENCE OF RS.11,23,557/- HAS BEEN TAXED BY THE A.O . TOWARDS THE YEARS ON THE BASIS OF THE YEAR WISE INV ESTMENT SHOWN BY THE ASSESSEE. ACCORDINGLY, IN THIS YEAR, T HE A.O. HAS MADE AN ADDITION OF RS.3,20,011/- U/S, 69B OF THE ACT. THE LEARNED CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE A . O. 1.2 THE ASSESSEE SUBMITS THAT SIMILAR ADDITION HAS B EEN MADE FOR A.Y . 2005 - 06. HON'BLE ITAT HAS DELETED THE SAID ADDITI ON ON THE GROUND THAT THE DIFFERENCE BETWEEN THE COST SHOWN BY THE ASSESSEE A ND THE AMOUNT WORKED OUT BY THE DVO WAS MERE 13.43%. HON'BLE ITAT HAS AL SO NOTED THAT THE DVO HAS APPLIED CPWD RATES AS AGAINST PRESCRIBED PWD RA TES . ACCORDINGLY, THE ADDITION HAS BEEN DELETED. THE COPY OF THE ORDER OF HON'BLE IT AT IS ENCLOSED ON PAGES 1 - 7 OF THE PAPER BOOK. FURTHER, FOR A.Y. 2004 - 05, SIMILAR ADDITION HAS BEEN DELETED AND THE COPY OF THE ORDER IS ENCLO SED HEREWITH. ACCORDINGLY, THE ADDITION MADE MAY KINDLY BE DELETED. 15. WE HEARD BOTH THE PARTIES ON THIS ISSUE OF COST OF C ONSTRUCTION OF BUNGALOW ON THE BASIS OF DVOS REPORT. WE HAVE ALSO PE RUSED THE ORDER OF TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA NO.1069/PUN/2 016 FOR THE A.Y. 2004-05 WHERE SIMILAR WAS ALLOWED IN FAVOUR OF THE ASSESSE E RELYING ON THE ORDER OF TRIBUNAL FOR THE A.Y. 2005-06. WE PROCEED TO EX TRACT THE FINDING GIVEN BY THE TRIBUNAL HERE AS UNDER : 19. BOTH SIDES HEARD. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN APPEAL IS AGAINST CONFIRMING ADDITION OF RS.28,621/ - ON A CCOUNT OF DIFFERENCE BETWEEN COST OF CONSTRUCTION OF BUNGALOW AS DECLARE D BY ASSESSEE AND VALUE AS DETERMINED BY THE DVO. WE FIND THAT IDENTICAL IS SUE WAS RAISED BY THE ASSESSEE IN ITA NO. 1332/PUN/2014 FOR ASSESSMENT YE AR 2005-06 BEFORE THE TRIBUNAL. THE TRIBUNAL DELETED THE ADDITION BY OBSERVING AS UNDER: 18 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED 10. THE FIRST ISSUE WHICH ARISES IN THE PRESENT AP PEAL IS JURISDICTIONAL ISSUE THAT IN THE CASE OF SEARCH PRO CEEDINGS WHERE NO INCRIMINATING DOCUMENTS WERE FOUND, CAN THE ADDITION BE MADE IN RESPECT OF ASSESSMENT PROCEEDINGS, WHICH HAD NOT AB ATED. THE SECOND ISSUE WHICH IS ARISING IS THAT WHERE THE DIFFERENCE IN THE VALUATION IS ABOUT APPROXIMATELY OF RS.11 LAKHS WHICH WORKS OUT TO 13.43% AND WHERE THE DVO HAS FAILED TO GIVE THE BENEFIT OF DED UCTION UNDER SELF SUPERVISION AND HAD ALSO APPLIED CPWD RATES AS AGAI NST THE PRESCRIBED RATES OF PWD RATES, CAN ANY ADDITION BE MADE IN THE HANDS OF ASSESSEE. WE FIND MERIT IN THE PLEA OF ASSESSEE IN THIS REGARD. THE TOTAL ADDITION MADE IN THE INSTANT ASSESSMENT YEAR WAS ONLY RS. 85,988/ - AND DIFFERENCE SHALL STAND REDUCED IN CAS E THE RATES OF PWD FOR CONSTRUCTION ARE APPLIED AS AGAINST THE DVO APP LYING THE RATES OF CPWD AND FURTHER, THE ASSESSEE IS ENTITLED TO THE D EDUCTION IN VALUE ON ACCOUNT OF SELF SUPERVISION. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES AND IN VIEW OF THE DIFFERENCE BEI NG ABOUT 13.43%, WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN UPHOLDING THE ABOVE ADDITION MADE IN THE HANDS OF ASSESSEE. ACCOR DINGLY, WE DELETE THE ADDITION OF RS. 85,988/ -, IN VIEW OF OUR DECID ING THE ISSUE ON MERITS, WE ARE NOT GOING INTO THE JURISDICTIONAL AS PECT OF THE ISSUE RAISED BY THE LEANED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE, WHICH BECOMES ACADEMIC IN NATURE. ACCORDINGLY, WE HOLD SO. THE PROPERTY IN QUESTION IN THE ASSESSMENT YEAR UND ER APPEAL IS THE SAME WHICH WAS SUBJECT MATTER OF VALUATION IN THE ASSESS MENT YEAR 2005-06. NO MATERIAL HAS BEEN PLACED BEFORE US BY THE REVENUE C ONTROVERTING THE FINDINGS OF THE CO-ORDINATE BENCH. FOLLOWING THE DECISION O F TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY SUCCEEDING ASSESSMENT YE AR, WE DELETE THE ADDITION FOR SIMILAR REASONS. ACCORDINGLY, APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 IS ALLOWED. CONSIDERING THE ABOVE SETTLED LEGAL POSITION, WE ARE OF TH E OPINION THAT THE ADDITION MADE BY THE AO ON ACCOUNT OF INVESTME NT IN THE LAND AT UJAIWADI IS NOT SUSTAINABLE IN VIEW OF THE SAID DECISION. AC CORDINGLY, THIS COMMON ISSUE RAISED FOR THE TWO ASSESSMENT YEARS 2006- 07 AND 2007-08 STANDS ALLOWED. 16. GROUND NO.2 IN A.Y. 2008-09 RELATES TO ADDITION OF RS.4,29 ,120/- RELATING TO DEPRECIATION MADE BY THE ASSESSEE U/S.32 OF THE ACT. 17. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSESSEE OWNS BUNGALOW NAMED AS GHATGE PATIL LOCATED AT 85/1, NEAR RAJARAM TAL AV, UJALAIWADI, KOLHAPUR. MR. KIRAN PATIL, MD OF THE COMPANY IS STAYING IN TH E SAID BUNGALOW WITH HIS FAMILY MEMBERS. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE REPORTED EXPENDITURE ON THE SAID CONSTRUCTION AT RS.85,82,400/- 19 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED WAS CAPITALIZED AND CLAIMED DEPRECIATION OF RS.4,29,120/- ON T HE SAME U/S.32 OF THE ACT. AO DISALLOWED THE SAID CLAIM STATING THAT NEITHER THERE IS NO AGREEMENT BETWEEN THE COMPANY AND MR. KIRAN PATIL NOR THERE IS ANY BOARD RESOLUTION. IN THE FIRST APPELLATE PROCEEDINGS ALS O, THE CIT(A) CONFIRMED THE SAME. 18. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T THE SAID BUILDING WAS OCCUPIED BY MR. KIRAN PATIL, MD OF THE COMPANY AND IT IS A PERQUISITE VALUE. THE SAID PERQUISITE VALUE WAS OFFERED BY MR . KIRAN PATIL IN HIS RETURN OF INCOME THAT MAKES THE ASSESSMENT AS BU SINESS ASSET ELIGIBLE FOR CLAIM OF DEPRECIATION U/S.32 OF THE ACT. IN THIS R EGARD, LD. COUNSEL FILED THE FOLLOWING WRITTEN SUBMISSIONS. 19. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED ON THE ORDERS OF TH E AO/CIT(A). 20. WE HEARD BOTH THE PARTIES ON THE ISSUE OF CLAIM OF DEP RECIATION U/S.32 OF THE ACT IN RESPECT OF BUILDING WHICH IS OCCUPIED BY MR. KIRAN PATIL, MD OF THE COMPANY. IT IS UNDISPUTED THAT THE ASSET IS OWNED BY THE ASSESSEE AND THE PRESENTLY OCCUPIED BY MD OF THE COMP ANY. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSET HAS A PERQUISITE VALUE AN D THE OCCUPANT OF THE PROPERTY OFFERED TO TAX. IN SUCH CIRCUMSTANCES, IT IS ONLY INFERENCE THAT THE ASSET IS PUT TO USE BY THE ASSESSEE FOR THE BUSINE SS PURPOSES OF THE ASSESSEE. THEREFORE, IN OUR VIEW, THE CLAIM OF THE ASSESSEE IS FAIR AND REASONABLE. WE REVERSE THE FINDING OF AO/CIT(A) ON THIS ISSU E MAKING ASSESSEE ELIGIBLE FOR CLAIM OF DEPRECIATION ON THIS ASSET. ACC ORDINGLY, GROUND NO.2 RAISED BY THE ASSESSEE IN A.Y. 2008-09 IS ALLOWED. 20 ITA NOS.1281 TO 1284/PUN/2016 ITA NOS. 1070 TO 1072/PUN/2016 GHATGE PATIL INDUSTRIES LIMITED 21. IN THE RESULT, ALL THE 3 APPEALS OF THE ASSESSEE ARE ALLOWED. 22. TO SUM UP, ALL THE 4 APPEALS FILED BY THE REVENUE ARE D ISMISSED AND ALL THE 3 APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON 19 TH DAY OF SEPTEMBER, 2018. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 19 TH SEPTEMBER, 2018. SATISH $ % ' $ % ' $ % ' $ % ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS), PUNE-11. 4. THE PR. CIT, CENTRAL, PUNE. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. ' / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.