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

ITA 1103/DEL/2012

• Counselvise Citation: 110320114 RSA 2012
• Duration Of Justice: 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 02-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRANJAN KOULI
• Assessee Lawyers: ADITYA KUMAR CAS
• Keywords: Business income; Business expenditure; Search and seizure; Loose papers; Assessment record; Documents seized
• Section: 69C; 143(3); 153A; 131; 68; 69; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.1103/DEL/2012 ASSESSMENT YEAR : 2009-10 STAR WIRE (INDIA) LTD., 21/4, MATHURA ROAD, BALLABHGARH, FARIDABAD. PAN : AAECS1124Q VS. ACIT, CENTRAL CIRCLE-I, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI ASHWANI KUMAR & ADITYA KUMAR, CAS REVENUE BY : SHRI NIRANJAN KOULI, CIT, DR ORDER PER A.D. JAIN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2009-10 AGAINST THE ORDER DATED 31.01.2012 PASSED BY T HE LD. CIT (CENTRAL), GURGAON. THE ASSESSEE HAS TAKEN THE FOLLOWI NG GROUNDS OF APPEAL:- 1. THAT ORDER PASSED U/S 263 OF THE INCOME TAX ACT, 1 961 BY THE LD. COMMISSIONER OF INCOME TAX (CENTRAL), GURGAON IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH HE WAS NO T JUSTIFIED TO HOLD THAT THE ASSESSMENT ORDER DATED 31.12.2010 PASSED U/S 143(3) R.W.S. 153B(1)(B) OF THE INCOME TAX ACT, 1961 BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- I, FARIDABAD IS ERRONEOUS IN SO FAR AS IT IS PREJUDICI AL TO THE INTERESTS OF THE REVENUE. 2. THAT THE LD. COMMISSIONER OF INCOME TAX FAILED TO APPRECIATE THE IMPORT OF DETAILED SUBMISSIONS MADE BO TH DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE LD. AS SESSING OFFICER AS WELL AS IN RESPONSE TO NOTICE U/S 263 OF TH E INCOME ITA NO.1103/DEL/2012 2 TAX ACT, 1961 AND THE FACTS AND CIRCUMSTANCES OF THE CAS E WHILE ARRIVING AT A CONCLUSION THAT THE SAID ASSESSMENT ORDER PASSED BY THE LD. ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 3. THAT THE LD. COMMISSIONER OF INCOME TAX GRAVELY ERRED IN DIRECTING THE LD. ASSESSING OFFICER TO MAKE AN ADDITION OF RS.3,01,69,000/- ON ACCOUNT OF ALLEGED EXCESS STOCK B Y SIMPLY IGNORING THE ENTIRE GAMUT OF INVESTIGATIONS AND ENQUIRI ES CARRIED OUT BY THE INVESTIGATION WING AND THE LD. ASSESSING OFFI CER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE DE TAILED WRITTEN SUBMISSIONS MADE ON BEHALF OF THE APPELLANT CO MPANY. 4. THAT THE COMMISSIONER OF INCOME TAX WAS FURTHER NOT JUSTIFIED TO ARBITRARILY PROPOSE AN ADDITION OF RS.3,90 ,00,000/- ON ACCOUNT OF INTRODUCTION OF CASH AS ALLEGED UNEXPLAINE D CASH DEPOSIT U/S 68 OF THE INCOME TAX ACT, 1961 BY IGNORING THE FACT THAT THE SAME HAD ALREADY BEEN DULY VOLUNTARILY SURREND ERED DURING THE INVESTIGATION PROCEEDINGS DURING THE COURSE OF SEARCH U/S 132 OF THE INCOME TAX ACT, 1961 AND OFFERED AS AD DITIONAL INCOME THEREBY LEADING TO DOUBLE TAXATION OF THE SAME. 5. THAT THE LD. COMMISSIONER OF INCOME TAX GRAVELY ERRED IN PROPOSING THE ABOVE MENTIONED TWO ADDITIONS WHEREAS IN PARA 5 OF THE SHOW CAUSE NOTICE, HE HAS OBSERVED THAT THE LD. ASSESSING OFFICER DID NOT MAKE ENQUIRY OR INVESTIGATION ON THE S AID TWO ISSUES. 2. GROUND NOS.1 AND 2 ARE GENERAL. 3. APROPOS GROUND NOS.3 AND 5, THE FACTS AS PER THE REL EVANT ORDERS ARE THAT THE BUSINESS OF THE ASSESSEE COMPANY IS TO CONVERT STEEL SCRAP INTO INGOTS OF SPRING STEEL/ALLOY STEEL AND LIQUID META L FOR ITS CASTING DIVISION. THE INGOTS ARE FURTHER ROLLED BY THE ROLLI NG MILLS TO BECOME SALEABLE PRODUCTS LIKE ORDINARY STEEL ITEMS, FLAT BARS, RODS AND SPECIAL STEEL ITEMS. DURING THE COURSE OF SEARCH AND SEIZURE OP ERATION IN THE FACTORY PREMISES AT 21/4, MATHURA ROAD, BALLABGARH, F ARIDABAD WHICH IS A MANUFACTURING UNIT OF THE COMPANY, M/S STAR WIRE (INDIA) LTD., A TRADING ACCOUNT AS ON 02.02.2009 WAS PREPARED BY THE ASSESSEE COMPANY WHICH DEPICTED THE STOCK AS PER THE BOOKS OF A CCOUNT. AFTER DRAWING THE INVENTORY OF STOCK BY THE SEARCH TEAM, IT WAS FOUND THAT THE VALUE OF STOCK OF SCRAP WAS ` 5,45,40,000/-, INSTEAD OF ` ITA NO.1103/DEL/2012 3 2,43,71,000/- SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUN T. THUS, THE EXCESS STOCK OF SCRAP TO THE TUNE OF ` 3,01,69,000/- WAS WORKED OUT. THIS FACT WAS CONFRONTED TO SHRI MOHINDER KUMAR GUPTA , DIRECTOR OF THE COMPANY AT THE TIME OF THE SEARCH OPERATION. THE RE LEVANT EXTRACT OF HIS STATEMENT IS REPRODUCED BELOW:- Q.6 ON PHYSICAL VERIFICATION OF STOCK OF MS SCRAP L YING IN YOUR FACTORY PREMISES, IT IS SEEN THAT THE SAME IS LYING AT THREE DIFF ERENT QUANTITIES/VOLUMES. FOR THE PURPOSE OF VALUING THE SAM E, AN INVENTORY HAS TO BE DRAWN SHOWING TOTAL QUANTITY OF SCRAP AT DIFFER ENT PLACES. IN THIS CONNECTION, ONE CUBIC METER OF SCRAP IN LOOSE CO NDITION HAS BEEN WEIGHTED BY YOUR EMPLOYEE SHRI R.D. SAINI IN THE PRE SENCE OF YOURSELF AND SHRI H.R. GOEL (EO). ACCORDING TO IT, THE WEIGHT P ER CUBIC METER APP. COMES TO 628 KGS. ON THE BASIS OF SAME, THE TOTAL QUANTITY OF SCRAP COMES TO 2727 MT AND BY APPLYING THE RATE OF RS. 20000/- PMT, THE VALUE OF THE SCRAP COMES TO RS.5,45,40,000/-. THU S, THERE IS EXCESS STOCK TO THE TUNE OF RS.301.69 LACS. WHAT DO YOU HAVE TO SAY IN THIS REGARD. A. THIS IS A MATTER OF FACT BASED ON THE CALCULATION MADE A T THE SITE AND I HAVE NO COMMENTS FOR THE SAME. HOWEVER, THE EX CESS VALUE SO ARRIVED AT IS AND WILL FORM PART OF MY SURRENDER OF I NCOME ALREADY MADE ON 30.01.2009. EVEN THOUGH THE EXCESS STOCK OF SCRAPS WAS FOUND AT THE TIME OF SEARCH AND THIS FACT WAS ACCEPTED BY THE EMPLOYEE, EO A ND MD OF THE COMPANY STATING THAT THIS WAS PART OF SURRENDER MADE AT TH E TIME OF SEARCH, THIS WAS NOT INCLUDED IN THE RETURN FILED BY TH E ASSESSEE. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSEE COMPANY FILED A REPLY CLAIMING THAT WEIGHT OF SCRAP WA S RE-EXAMINED BY THEM PHYSICALLY AND THE WEIGHT OF SCRAP OF ONE CUBI C METER IN THE SCRAP MIX WAS 250 KG. IN THIS WAY, THE ASSESSEE WORK ED OUT TOTAL WEIGHT OF SCRAP AT 1230 MT AS AGAINST THE 2727 MT CALCU LATED DURING THE SEARCH OPERATION. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ACCEPTING THIS STAND OF THE ASSESSEE AS NARRATED BELOW:- (I) WHILE COMPLETING THE ASSESSMENT PROCEEDINGS, THE ASSES SING OFFICER COULD NOT CONSIDER THE FACT THAT SURRENDER OF RS .301.69 LACS HAD ALREADY BEEN MADE BUT THE ASSESSEE HAD NOT SHOWN THIS A MOUNT IN THE RETURN OF INCOME. (II) THE ASSESSING OFFICER ALSO COULD NOT CONSIDER THE FAC T THAT THE VALUE OF STOCK ON THE DATE OF SEARCH WAS PREPARED BY S H. R.D. SAINI AN EMPLOYEE OF THE COMPANY WHO WAS STORE IN CHARGE AND TH IS WAS DONE IN THE PRESENCE OF MANAGING DIRECTOR AND SHRI H.R. GO YAL (EO). ITA NO.1103/DEL/2012 4 (III) THE ASSESSING OFFICER FURTHER FORGOT TO CONSIDER THAT THE MD OF THE ASSESSEE COMPANY HAD ADMITTED THE EXCESS VALUE ON TH E DATE OF STOCK TAKING OF SCRAP AND ANY RE-EXAMINATION F SCRAP BY THE ASSESSEE ON ITS OWN AT A LATER DATE WAS CLEARLY AN AFTERTHOUGHT AN D THE WEIGHT OF SCRAP IN LOOSE CONDITION WAS CALCULATED BY EMPLOYEE OF THE ASSESSEE COMPANY HIMSELF IN THE PRESENCE OF DIRECTOR & EO. IN THIS MANNER, THE EXCESS STOCK OF ` 301.69 LACS WAS NOT BROUGHT WITHIN THE AMBIT OF TAX BY THE ASSESSING OFFICER. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE A SSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE AMOUNT OF ` 3,90,00,000/- IN CASH DEPOSITED IN ITS BANK ACCOUNT SHOULD NOT BE TREATED AS INCOME IN ADDITION TO THE INCOME DECLARED IN THE RETURN. THE ASSESSEE STATED THAT THIS AMOUNT WAS RECEIVED FROM DIFFERENT DEBTORS BUT IT WAS NOT IN A POSITION TO GIVE THE NAMES AND ADDRESSES OF THE PERSONS FROM WHOM THE CASH WAS RECEIVED. IT STATED THAT THIS AMOUNT WAS PART OF THE AMOUNT SURRENDERED AT THE TIME OF SEARCH. IT FURTHE R STATED, THE ABOVE OFFER OF UNDISCLOSED INCOME BY THE ASSESSEE COMPANY WAS ACCEPTED WITHOUT PUTTING ANY FURTHER CONDITION BY T HE LD. ADDL. DIRECTOR. ACCORDING TO THE ABOVE LETTER OF OFFER T HE ASSESSEE COMPANY IS ENTITLED TO RAISE SUNDRY DEBTORS WITH ` 3,90,00,000/- WITHOUT MAINTAINING ANY NAME OR ADDRESS OR IDENTIFICATION. F URTHER, ON REALIZATION, THE SAID DEBTOR IS TO BE CREDITED AND CA SH IS DEBITED. FOLLOWING THE TERMS AND CONDITIONS AS ABOVE, THE ASSESSEE COMPANY HAS ACCOUNTED FOR THE UNDISCLOSED INCOME BY DEBITING SU NDRY DEBTORS. ON REALIZATION OF SUNDRY DEBTORS THE CASH WAS RECEIVED AND DEBTORS WERE CREDITED. FINALLY, CASH RECEIVED WAS DEPOSITED I N THE BANK. 5. VIDE THE IMPUGNED ORDER, PASSED U/S 263 OF THE IT A CT, THE LD. CIT HELD THAT THE ASSESSMENT ORDER WAS ERRONEOUS IN SO FAR AS I T WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, SINCE THE CASH DEPOSITS OF ` 390 LACS IN THE BANK ACCOUNT OF THE ASSESSEE COMPANY REM AINED UNEXPLAINED AND WERE NOT BROUGHT TO TAX DURING ASSESSM ENT YEAR 2009-10. THE LD. CIT, THUS, DIRECTED THE ASSESSING OFFI CER TO MAKE AN ITA NO.1103/DEL/2012 5 ADDITION OF ` 3,01,69,000/- ON ACCOUNT OF THE ALLEGED EXCESS STOCK. AGGRIEVED THEREBY, THE ASSESSEE IS IN APPEAL BEFORE US. 6. CHALLENGING THE IMPUGNED ORDER, THE LD. COUNSEL F OR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT WAS NOT JUSTIFIED IN HO LDING THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INT ERESTS OF THE REVENUE; THAT WHILE DOING SO, THE LD. CIT FAILED T O APPRECIATE THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE BOTH BEFORE THE A SSESSING OFFICER AS WELL AS IN RESPONSE TO THE NOTICE U/S 263 OF THE ACT; THAT THE LD. CIT FURTHER FAILED TO TAKE INTO CONSIDERATION TH E FACTS AND CIRCUMSTANCES OF THE CASE AND IGNORED THE DETAILED INV ESTIGATIONS AND INQUIRIES LEGALLY CARRIED OUT BY THE INVESTIGATION WI NG OF THE DEPARTMENT AND BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS; THAT THE LD. CIT ALSO FAILED TO CONSIDER THE DETAILED WRITTEN SUBMISSIONS FILED ON BEHALF OF THE ASSESSEE COMPANY; THAT THE LD. CIT WAS NOT JUSTIFIED IN PROPOSING THE ADDITION OF ` 390 LACS ON ACCOUNT OF INTRODUCTION OF CASH AS ALLEGED UNEXPLAINED CASH DEPO SIT U/S 68 OF THE ACT; THAT IN DOING SO, THE LD. CIT ILLEGALLY IGNORED THE FACT THAT THIS AMOUNT HAD BEEN ALREADY VOLUNTARILY SURRENDERED DURI NG THE INVESTIGATION PROCEEDINGS, DURING THE SEARCH CONDUCED AND HAD BEEN OFFERED AS ADDITIONAL INCOME; THAT THE ACTION OF THE LD. CIT HAS LED TO DOUBLE TAXATION OF THE AMOUNT. THE LD. COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE SHOW CAUSE NOTICE DATED 28 .10.2010 ISSUED BY THE ASSESSING OFFICER TO THE ASSESSEE. A COPY THEREOF H AS BEEN FILED BEFORE US AND HAS BEEN PLACED AT PAGES 21-35 OF THE ASSE SSEES PAPER BOOK (APB, FOR SHORT). POINTED REFERENCE HAS BEEN MADE TO QUESTION NO.4, AS CONTAINED AT PAGE 27 OF THE APB, DEALING WI TH INVENTORY OF SCRAP FOUND AT THREE DIFFERENT PLACES. IT WAS STATED B Y THE A.O. THAT THE WEIGHT/CUBIC METRE OF THE SCRAP WAS TAKEN AS TOLD BY T HE EMPLOYEES OF THE ASSESSEE COMPANY. IT WAS FURTHER STATED THAT FROM TH E PURCHASE BILLS, IT WAS EVIDENT THAT MOST OF THE SCRAP ITEMS WERE PURCHASED FOR ITA NO.1103/DEL/2012 6 MORE THAN THE VALUE TAKEN IN THE INVENTORY. THE ASSE SSEE WAS ASKED TO EXPLAIN THE BASIS ON WHICH THE RATE OF SCRAP WAS DEC IDED. THE ASSESSEE WAS ALSO ASKED TO PRODUCE THE RELEVANT BOOKS OF AC COUNT ALONG WITH PURCHASE BILLS OF SCRAP TO VERIFY THE ACTU AL POSITION OF THE STOCK OF SCRAP. THEN, ATTENTION HAS BEEN INVITED TO TH E ASSESSEES REPLY TO THE AFORESAID QUESTION, A COPY WHEREOF HAS BEEN FIL ED AT APB 33-35. THE ANSWER TO THE AFORESAID QUESTION NO.4 IS IN PARA NO .22 OF THE SID REPLY, AT APB 47 AND 48. IT HAS BEEN ARGUED THAT TH E ASSESSEE GAVE A DETAILED REPLY, GIVING THE COMPLETE FACTS REGARDING THE STOCK, STATING, INTER ALIA, THAT ON 02.02.2009, THE ADI VISITED THE ASSESSEES FACTORY PREMISES, BUT COULD NOT WEIGH THE STOCK OF SCRAP LYING THEREAT; THAT, HOWEVER, SO AS TO ASCERTAIN THE QUANTITY OF STOCK, HE R ECORDED THE STATEMENT OF SHRI R.D. SAINI, STORE INCHARGE; THAT THIS STATEMENT WAS RECORDED AT A TIME WHEN THE PERSON HAVING THE KNOWLE DGE OF SCRAP STOCK, WAS NOT AVAILABLE; THAT SHRI SAINI WAS A STORE INCHARGE AND HE NEVER HANDLED SCRAP STOCKS; THAT SUBSEQUENTLY, IT CAME TO NOTICE THAT SHRI SAINI HAD MADE A WRONG STATEMENT ABOUT THE FACT S OF THE SCRAP STOCKS AND THEIR WEIGHT PER CUBIC METRE; THAT ACCORDI NGLY, THE MD OF THE ASSESSEE COMPANY SHRI M.K. GUPTA SUBMITTED WRITTEN SU BMISSIONS ON 06.02.2009 TO THE ADI, EXPLAINING AND CLARIFYING THE CORRECT FACTS, AND SUBMITTING ALONG THEREWITH, A CERTIFICATE FROM A SR. ENGINEER OF THE ASSESSEE COMPANY; THAT THE COMPUTATION OF THE STOCK OF SCRAP AT 2727 MT WAS INCORRECT, BASED ON WRONG CALCULATION; THAT IF THE CORRECT FACTOR OF 250 KG/CUBIC METRE WERE APPLIED, THE QUANTITY WO ULD WORK OUT TO 1230 MT, WHILE THE STOCK AS PER THE BOOKS CAME TO 1229 .27 MT; THAT THEREFORE, IT CLEARLY STOOD ESTABLISHED THAT THE AVERA GE STOCK PER CUBIC METRE COULD NEVER EXCEED 250 KG/SQ. METRE; AND THAT THE ASSESSEE COMPANY WAS VALUING THE STOCK OF SCRAP ON THE WEIGHTED AVERAGE VALUE METHOD CONSISTENTLY, SINCE LONG AND THE WEIGHTED AVERAGE VALUE FOR THE PERIOD UNDER REFERENCE CAME TO ` 2050.82/MT. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ALONG WITH THIS REPLY, THE ASSESSEE ITA NO.1103/DEL/2012 7 HAD SUBMITTED COPIES OF THE LETTER DATED 06.02.2009 WRITTEN BY THE MD OF THE ASSESSEE COMPANY TO THE ADI, THE RELEVANT EXCISE RECORD, SHEET SHOWING THE WEIGHTED AVERAGE VALUE OF THE STOCK OF SC RAP FOR THE PERIOD UNDER CONSIDERATION AND THE SCRAP PURCHASE REGI STER ALONG WITH PURCHASE VOUCHERS. REFERENCE HAS THEN BEEN MADE TO TH E AFOREMENTIONED STATEMENT OF SHRI R.D. SAINI, STOREKE EPER OF THE ASSESSEE COMPANY, WHICH WAS RECORDED BY THE ASSESSING OFFICE R EVEN PRIOR TO THE ISSUANCE OF THE SHOW CAUSE NOTICE I.E., O N 19.10.2010. FURTHER, REFERENCE HAS BEEN MADE TO APB 150-154 WHIC H IS A COPY OF THE STATEMENT OF SHRI AMARENDERA JHA, RECORDED BY TH E ASSESSING OFFICER ON 22.10.2010 AND TO APB 155-157, WHICH IS A COPY OF THE STATEMENT OF SHRI VED PRAKASH KHICHUKA, RECORDED BY THE ASSESSING OFFICER ON 28.10.2010. THEN, ATTENTION HAS BEEN INV ITED TO APB 146, WHICH IS A COPY OF CERTIFICATE DATED 19.12.2010 ISSUED BY SHRI A.K. TANEJA, FORMER CHAIRMAN & MD, MISHRA DHATU NIGAM LT D., HYDERABAD. HE HAS CERTIFIED THAT ONE CUBIC METRE MELTING SCRAP I N SCRAP MIX WOULD WEIGH ABOUT 235 KG. WITH A VARIATION OF ABOUT 10% P LUS OR MINUS, ACCORDING TO THE THICKNESS/THINNESS OF SCRAP AND CHANGE IN THE VARIETY AND CHARGE MIX. THE LD. COUNSEL FOR THE ASSESSEE HAS CON TENDED THAT IN SPITE OF ALL THESE DETAILED AND IN-DEPTH INQUIRIES, THE LD. CIT IN THE REVISIONAL ORDER, HAS WRONGLY OBSERVED THAT NO INQUIRY WAS CONDUCED AT THE ASSESSMENT STAGE. WE HAVE BEEN TAKEN THROUGH APB 1- 3, WHICH IS A COPY OF THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE U/S 263 OF THE ACT. IT HAS BEEN STRESSED THAT THE LD. CIT HAS WRONGLY STATED IN THE NOTICE THAT WHILE FINALIZING THE ASSESSMENT ORDER, TH E ASSESSING OFFICER DID NOT CONSIDER THE FACTUAL POSITION AND DID NOT MAKE INQUIRY OR INVESTIGATION ON ABOVE MENTIONED ISSUE (S). FAILURE TO MAKE SUCH INQUIRY, RESULTING IN UNDUE BENEFIT TO THE ASSESSEE, HAS MADE THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE. WE HAVE THEN BEEN TAKEN THROUGH APB 4-19 , WHICH CONSTITUTE A COPY OF THE ASSESSEES REPLY TO THE AFORESAID SHOW CAUSE ITA NO.1103/DEL/2012 8 NOTICE ISSUED U/S 263 OF THE ACT. IT HAS BEEN POINTED OUT THAT COMPLETE DETAILS IN SUPPORT OF THE ASSESSMENT ORDER WERE GIVEN, SHO WING AS TO HOW THE ASSESSING OFFICER HAD MADE DUE DETAILED IN-DEPT H INQUIRIES INTO THE MATTER, WHICH WAS WHY THE ASSESSMENT ORDER WAS N EITHER ERRONEOUS, NOR PREJUDICIAL TO THE INTERESTS OF THE REV ENUE. THEN, ATTENTION HAS ALSO BEEN DRAWN TO APB-20, WHICH IS A CO PY OF THE ASSESSEES SECOND REPLY DATED 12.01.2012. ALONG WITH THI S REPLY, THE ASSESSEE HAD FILED PHOTO COPIES OF LETTER DATED 30.01.20 09 SURRENDERING ` 22 CRORES AS UNDISCLOSED INCOME, DECLARATION SIGNED BY ALL THE DECLARANTS, SURRENDERING ` 2200 LACS AS UNDISCLOSED INCOME IN VARIOUS HEADS, ORDER OF THE CIT (A) FOR THE YEAR UNDE R CONSIDERATION AND THE AFORESAID CERTIFICATE ISSUED BY SHRI A.K. TANE JA. 7. SO FAR AS REGARDS THE OBSERVATIONS MADE BY THE LD. C IT IN THE ORDER UNDER APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THEREIN, ONLY THE STATEMENT OF SHRI R.D. SAINI, STOREKEEPER OF THE ASSESSEE COMPANY, RECORDED BY THE ADI HAS BEEN REFERRED TO AND THERE IS NO MENTION OF THE STATEMENTS RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS. IT HAS FURTHER BEEN ARGUED T HAT THE ORDER UNDER APPEAL IS ALSO NOT SUSTAINABLE INASMUCH AS IN ONE BREATH, THE LD. CIT SAYS THAT THERE WAS NO INQUIRY CONDUCTED BY THE ASSE SSING OFFICER, WHEREAS AT THE SAME TIME, IN PARA 6, SUB-PARAS (V) AND (VI), THE LD. CIT GIVES A JUDGEMENT OVER THE ASSESSING OFFICERS JUDGEMENT. REGARDING THE CIT (A)S OBSERVATIONS, IT HAS BEEN SUBMITTED THAT THE AMOUNT OF ` 22 CRORES WAS DULY SURRENDERED BY THE ASSESSEE AND THE LD. CIT HAS GONE WRONG IN OBSERVING THAT NO DECLARATION THEREOF WAS GIVEN. OUR ATTENTION, IN THIS REGARD, HAS BEEN INVITED TO APB 90 -96, WHICH IS A COPY OF THE STATEMENT OF SHRI M.K. GUPTA, MANAGING DIRECT OR OF THE ASSESSEE COMPANY, RECORDED ON 02.02.2009, UNDER OATH, AS ALSO REPRODUCED BY THE LD. CIT IN THE IMPUGNED ORDER. THE LD. COUNSEL FOR THE ASSESSEE, THEN, HAS REFERRED TO THE CASE LAWS RELIED ON, COPIES W HEREOF HAVE ITA NO.1103/DEL/2012 9 BEEN FILED BY WAY OF A SEPARATE COMPILATION OF JUDGE MENTS, AND WHICH WILL BE DEALT WITH AT THE APPROPRIATE STAGE, IN THE SUCCEEDING PORTION OF THE ORDER. 8. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT THERE WAS A SURRENDER OF ` 3.90 CRORES BEFORE THE ASSESSING OFFICER; THAT THIS WAS SHOWN IN THE ASSESSEES INCOME AND WAS INTRODUCED IN T HE ASSESSEES BANK ACCOUNT; AND THAT AS SUCH, THIS AMOUNT CAN NOT BE TAXED TWICE IN THE SAME YEAR. ATTENTION HAS BEEN DRA WN TO APB 70, WHICH IS A SCHEDULE OF THE ASSESSEES. OTHER INCOME. WE H AVE, THEN BEEN TAKEN TO APB-81, WHICH CONTAINS THE DETAILS OF THE ASSESSEES MISCELLANEOUS INCOME. IT HAS BEEN CONTENDED THAT THIS IS A SUMMARY OF THE CLOSING BALANCE OF ` 713,76,699.66, WHEREIN THE AMOUNT OF ` 7 CRORES STANDS INCLUDED, WHICH, IN TURN, INCLUDES THE AF ORESAID AMOUNT OF ` 3.90 CRORES. IT HAS BEEN AVERRED THAT IF AN AMOUNT IS SURRENDERED AND THAT AMOUNT IS INTRODUCED IN THE BOOKS/BANK ACCOU NT OF THE ASSESSEE, IT CANNOT BE TAXED TWICE IN THE SAME YEAR. IT HAS THEN BEEN ARGUED, REFERRING TO APB-26, QUESTION NOS.1 AND 2, FO RMING PART OF THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER TO THE A SSESSEE U/S 153A/142 (1) READ WITH SECTION 143 (3) OF THE ACT, THAT THIS ISSUE WAS DULY CONSIDERED BY THE ASSESSING OFFICER. WE HAVE ALSO B EEN TAKEN TO THE ASSESSEES REPLY TO THESE QUERIES. THE SAME IS CONTAINE D AT APB- 45, PARA 20 (C). IT HAS BEEN POINTED OUT THAT AT APB -46, IN SUB-PARA (E), THE COMPLETE BIFURCATION OF THE AMOUNT OF ` 782.00 LACS HAS BEEN DELINEATED. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTEND ED THAT AS SUCH, ON BOTH THE ISSUES, DETAILED INCISIVE ENQUIRIES WER E CARRIED OUT BY THE ASSESSING OFFICER. IT HAS BEEN SUBMITTED THAT WITH R EGARD TO THE ISSUE OF ALLEGED EXCESS STOCK, THE ASSESSING OFFICERS VIEW I S A PLAUSIBLE VIEW, WHEREAS APROPOS THE ALLEGED INTRODUCTI ON OF CASH AS ALLEGED UNEXPLAINED CASH DEPOSIT OF THE ASSESSEE, THE VIE W TAKEN BY THE ASSESSING OFFICER IS THE ONLY POSSIBLE VIEW. ITA NO.1103/DEL/2012 10 9. IN RESPONSE, THE LD. DR HAS STRONGLY SUPPORTED THE IM PUGNED ORDER. IT HAS BEEN CONTENDED THAT THE ASSESSING OFFICER WRONGLY ACCEPTED THE ASSESSEES SUBMISSIONS ONE LONG YEAR AFTER TH E SEARCH WAS CONDUCTED; THAT THE WEIGHT OF 628 KG. WAS TAKEN I N THE PRESENCE OF EVERYBODY; THAT THERE WAS NO INQUIRY WHATSOEVER CO NDUCTED BY THE ASSESSING OFFICER, AS A RESULT OF WHICH, THE REVENUE WAS VISITED WITH A HUGE LOSS. 10. THE LD. DR HAS SOUGHT TO PLACE RELIANCE ON THE DE CISION IN THE CASE OF MALABAR INDUSTRIAL COM LTD. VS. CIT, 243 IT R 83 (SC) AND THAT IN THE CASE OF CIT VS. DEEPAK KUMAR GARG, 249 ITR 4 35 (MP). IT HAS BEEN SUBMITTED THAT THE ISSUE OF INTRODUCTION OF CASH A S UNEXPLAINED CASH DEPOSIT WAS NEVER AS MUCH AS EVEN EXAMINED BY THE A SSESSING OFFICER; THAT THERE WAS ONLY A DISCLOSURE ON THE BASIS O F UNDISCLOSED DEBTORS. ATTENTION HAS BEEN INVITED TO THE IMPUGNED O RDER, FROM PAGE 7, SUB-PARA (VII), TO PAGE 8. THE LD. DR HAS CONTEN DED THAT AS SUCH, THE ORDER PASSED BY THE LD. CIT IS A WELL VERSED ORDER, WHICH REQUIRES NO INTERFERENCE AT OUR HANDS AND WHICH NEEDS TO BE C ONFIRMED WHILE DISMISSING THE APPEAL FILED BY THE ASSESSEE. 11. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MA TERIAL ON RECORD. TO BEGIN WITH, IT WOULD BE APPROPRIATE TO REPRODUCE HEREUNDER, THE NOTICE ISSUED TO THE ASSESSEE BY THE LD. CIT ON 9/11. 11.2011, U/S 263 OF THE IT ACT. A COPY THEREOF HAS BEEN APPENDED AT PAGES 1-3 OF THE APB:- TO M/S STAR WIRE (INDIA) LTD. 21/4, MATHURA ROAD, BALLABHGARH, FARIDABAD. SUB: PROCEEDINGS U/S 263 OF THE I. T. ACT, 1961 IN THE CASE OF M/S STAR WIRE (INDIA) LTD, FOR THE A. Y. 2009-10 AND ASS ESSMENT ORDER DATED 31.12.2010(PAN-AAECS1124Q) **'***** ITA NO.1103/DEL/2012 11 THE EXAMINATION OF THE INCOME TAX ASSESSMENT RECORDS OF ABOVE MENTIONED ASSESSEE FOR A.Y 2009-10 REVEALS THA T:- A) DURING THE COURSE OF SEARCH AND SEIZURE OPERATION IN THE FACTORY PREMISES AT 21/4, MATHURA ' ROAD BALLABGARH, F ARIDABAD WHICH IS A MANUFACTURING UNIT OF THE COMPANY M/S STAR WIRE (INDIA) LTD., A TRADING ACCOUNT AS ON 02.02.2009 WAS P REPARED BY THE ASSESSEE COMPANY WHICH DEPICTED THE STOCK AS PER B OOKS OF ACCOUNT. AFTER DRAWING THE INVENTORY OF STOCK BY THE SEAR CH TEAM, IT WAS FOUND THAT THE VALUE OF STOCK OF SCRAP WAS RS. 5,45,40,000/- INSTEAD OF RS. 2,43.71,000/- SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. THUS, THE EXCESS STO CK OF SCRAP TO THE TUNE OF RS. 3,01,69,000/- WAS WORKED OUT. THIS FACT WAS CONFRONTED WITH SH. MOHINDER KUMAR GUPTA DIRECTOR OF THE COMPANY AT THE TIME OF SEARCH OPERATION . THE RELEVANT EXTRACT OF HIS STATEMENT IS REPRODUCED BELOW:- Q.6 ON PHYSICAL VERIFICATION OF STOCK OF MS SCRAP LY ING IN YOUR FACTORY PREMISES, IT IS SEEN THAT THE SAME IS LYING AT THR EE DIFFERENT QUANTITIES/VOLUMES. FOR THE PURPOSE OF VALU ING THE SAME, AN INVENTORY HAS TO BE DRAWN SHOWING TOTAL QUANTITY OF SCRAP AT DIFFERENT PLACES. IN THIS CONNECTION, ONE CU BIC METER OF SCRAP IN LOOSE CONDITION HAS BEEN WEIGHTED BY YOUR EMPLOYEE SHRI R. D. SAINI IN THE PRESENCE OF YOURSELF AND SHR I H R GOEL, (EO). ACCORDING TO IT, THE WEIGHT PER CUBIC METER APP. COMES TO 628 KGS. ON THE BASIS OF SAME, THE TOTAL QUANTITY OF SCRA P COMES TO 2727 MT AND BY APPLYING THE RATE OF RS. 20000/- PMT , THE VALUE OF THE SCRAP COMES TO RS. 5,45,40,000/-. THUS, THERE IS EXCESS STOCK TO THE TUNE OF RS. 301.69 LACS. WHAT DO YOU HAVE TO SAY IN THIS REGARD? A. THIS IS A MATTER OF FACT BASED ON THE CALCULATION MAD E AT THE SIDE AND I HAVE NO COMMENTS FOR THE SAME. HOWEVER, THE EXCESS VALUE SO ARRIVED AT IS AND WILL FORM PART OF MY SURR ENDER OF INCOME ALREADY MADE ON 30.01.2009. ' B) HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSEE COMPANY FILED A REPLY CLAIMING THAT WEIGH T OF SCRAP WAS RE-EXAMINED BY THEM PHYSICALLY AND THE WEIGHT OF SCRAP OF ONE CUBIC METER IN THE SCRAP MIX WAS 250 KG. IN THIS WAY, THE ASSESSEE WORKED OUT TOTAL WEIGHT OF SCRAP AT 1230 MT AS AGAINST THE 2727 MT CALCULATED DURING THE SEARCH OPERAT ION. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ACCEPTING THI S STAND OF THE ASSESSEE. 2. WHILE COMPLETING THE ASSESSMENT PROCEEDING THE ASS ESSING OFFICER COULD NOT CONSIDER THE FACT THAT SURRENDER OF RS . 301.69IACS HAD ALREADY BEEN MADE BUT THE ASSESSEE HA D NOT SHOWN THIS AMOUNT IN THE RETURN OF INCOME. THE ASSESSIN G OFFICER ALSO COULD NOT CONSIDER THE FACT THAT THE VALUE O F STOCK ON THE DATE OF SEARCH WAS PREPARED BY SH. R D SAINI AN E MPLOYEE OF ITA NO.1103/DEL/2012 12 THE COMPANY WHO WAS STORE IN CHARGE AND THIS WAS DONE IN THE PRESENCE OF MANAGING DIRECTOR AND SH. H.R. GOYAL (EO ). THE ASSESSING OFFICER FURTHER FORGOT TO CONSIDER THAT THE MD OF THE ASSESSEE COMPANY HAD ADMITTED THE EXCESS VALUE ON THE D ATE OF STOCK TAKING OF SCRAP AND ANY RE-EXAMINATION OF SCRAP BY THE ASSESSEE ON ITS OWN AT A LATER DATE WAS CLEAR1Y AN AFTE RTHOUGHT AND THE WEIGHT OF SCRAP IN LOOSE CONDITION WAS CALCUL ATED BY EMPLOYEE OF THE ASSESSEE COMPANY HIMSELF IN THE PRES ENCE OF DIRECTOR & E.O. IN THIS MANNER, THE EXCESS STOCK OF RS. 301.69 LACS WAS NOT BROUGHT WITHIN THE AMBIT OF TAX BY THE ASSESS ING OFFICER. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE WAS ASKED TO EXPLAIN AS TO WHY THE AMOUNT OF RS.3,90,00 ,000/- IN CASH DEPOSITED IN YOUR BANK ACCOUNT SHOULD NOT BE TREATED AS INCOME IN ADDITION TO THE INCOME DECLARED BY YOU. THE ASSESSEE STATED IT WAS THAT NOT IN A POSITION TO GIVE THE NAMES AND ADDRESSES OF PERSONS FROM WHOM CASH WAS RECEIVED. I N THE REPLY , VIDE LETTER DATED 08.12.2010, IT SUBMITTED THAT 'THE AMOU NT IS TO BE CREDITED TO THE MISCELLANEOUS INCOME AND CORRESP ONDINGLY DEBITED TO CASH LYING SEIZED WITH THE INCOME TAX DEPART MENT ACCOUNT, IN THE BOOKS OF M/S STAR WIRE (INDIA) LTD., W ITH RS. 2,40,00,000/- AND SUNDRY DEBTORS WITH RS.3,90,00,000/ - ''THE ABOVE OFFER OF UNDISCLOSED INCOME BY THE ASSESSEE CO MPANY WAS ACCEPTED WITHOUT PUTTING ANY FURTHER CONDITION BY THE L D. ADDL. DIRECTOR. ACCORDING TO THE ABOVE LETTER OF OFFER THE ASSESSEE COMPANY IS ENTITLED TO RAISE SUNDRY DEBTORS W ITH RS.3,90,00,000/- WITHOUT MAINTAINING ANY NAME OR ADDRE SS OR IDENTIFICATION. FURTHER ON REALIZATION THE SAID DEBTOR IS TO BE CREDITED AND CASH IS DEBITED. FOLLOWING THE TERMS AND C ONDITIONS AS ABOVE THE ASSESSEE COMPANY HAS ACCOUNTED FOR THE UNDISCLOSED INCOME BY DEBITING SUNDRY DEBTORS. ON REA LIZATION OF SUNDRY DEBTORS THE CASH WAS RECEIVED AND DEBTORS WERE CREDITED. FINALLY, CASH RECEIVED WAS DEPOSITED IN THE BANK.' 4. THE ASSESSING OFFICER COULD NOT MAKE ANY FURTHER E NQUIRY REGARDING THE SOURCE OF CASH DEPOSIT MADE IN THE BANK ACCOUNT, CLAIMED TO HAVE BEEN RECEIVED FROM THE DEBTORS BUT THEIR , IDENTITIES WERE NOT GIVEN. THIS SHOWS THAT SOURCE OF DE POSITS OF CASH OF RS. 3,90,00,000/- REMAINED UNEXPLAINED AND THIS AMOUNT WAS REQUIRED TO BE ADDED TO THE INCOME OF THE COMPANY U /S 68 OF THE I. T. ACT. THIS COULD NOT BE DONE BY THE ASSESSI NG OFFICER. , 5. THE ABOVE MENTIONED FACTS, ARISING FROM EXAMINATION OF ASSESSMENT RECORDS, INDICATE THAT WHILE FINALIZING THE ASSESSMENT ORDER, THE ASSESSING OFFICER DID NOT CONSID ER THE FACTUAL POSITION AND DID NOT MAKE INQUIRY OR INVESTIG ATION ON ABOVE MENTIONED ISSUE(S). FAILURE TO MAKE SUCH INQUI RY, RESULTING IN UNDUE BENEFIT TO THE ASSESSEE, HAS MADE THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF THE REVENUE. ITA NO.1103/DEL/2012 13 6. I HAVE EXAMINED THE ASSESSMENT RECORDS AND HAVE CONCLUDED THAT THE FACTS MENTIONED ABOVE CLEARLY INDICA TE THAT THE ASSESSMENT ORDER OF THE ASSESSEE APPEARS TO BE ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREF ORE, I AM OF THE OPINION THAT THIS IS A FIT CASE WHERE PROVISIONS OF SECTION 263 OF THE I. T. ACT, 1961 ARE REQUIRED TO BE INVOKED AND THE ASSESSMENT ORDER SHOULD BE REVISED. 4. IF YOU HAVE ANY OBJECTIONS TO THE PROPOSED REVISION IN THE ASSESSMENT ORDER ON THE LINES MENTIONED ABOVE, YOU MA Y SUBMIT THE SAME BEFORE ME, EITHER IN PERSON OR THROUGH YOUR AUTHORIZED REPRESENTATIVE, AT 11:30A.M. ON 30.11.2011. 5. YOU MAY PLEASE NOTE THAT IN CASE NO REPLY IS REC EIVED, IT MAY BE PRESUMED THAT YOU HAVE NOTHING TO SAY IN THIS MATT ER AND THE ASSESSMENT ORDER WILL BE REVISED U/S 263 ON TH E BASIS OF MATERIALS AVAILABLE BEFORE ME. . YOURS FAITHFULLY, SD/- (AMARENDRA K. TEWARY) COMMISSIONER OF INCOME TAX (CENTRAL) GURGAON 12. THUS, THE FIRST ISSUE ON WHICH THE SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE BY THE LD. CIT WAS THAT OF EXCESS STOCK OF SCRAP, AMOUNTING TO ` 3,01,69,000/-. THE ONLY OTHER ISSUE WAS THAT OF UNEXPLAINED DEPOSIT OF ` 390 LACS IN CASH IN THE ASSESSEES BANK ACCOUNT. 13. THE ASSESSEE COMPANY, AS PER THE CONCERNED ORDERS, WA S, DURING THE YEAR, ENGAGED IN CONVERTING STEEL SCRAP INTO INGO TS OF SPRING STEEL/ALLOY STEEL AND LIQUID METAL, FOR ITS CASTING DIV ISION. THE INGOTS WERE FURTHER ROLLED BY THE ROLLING MILLS TO BECOME SA LEABLE PRODUCTS LIKE ORDINARY STEEL ITEMS, FLAT BARS/RODS AND SPECIAL STEEL IT EMS. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON THE ASSESSEE ON 29 .01.2009 AT ITS BUSINESS PREMISES IN FARIDABAD, ITS REGISTERED OFFIC E IN NEW DELHI, THE RESIDENTIAL PREMISES OF THE DIRECTORS OF THE COMPAN Y AND OTHER PREMISES OF THE STAR WIRE INDIA LTD. GROUP, SIMULTANEO USLY. CASH, JEWELLERY AND DOCUMENTS/BOOKS WERE SEIZED AND IMPOUNDE D FROM THE ITA NO.1103/DEL/2012 14 BUSINESS PREMISES OF THE COMPANY AND FROM THE RESIDENTIAL PREMISES OF ITS DIRECTORS. 14. APROPOS THE FIRST ISSUE, I.E., OF EXCESS STOCK FO SCRAP OF ` 3,01,69,000/-, A TRADING ACCOUNT AS ON 02.02.2009 WA S PREPARED BY THE ASSESSEE COMPANY. THIS DEPICTED THE STOCK AS PER THE BOOK S OF ACCOUNT OF THE ASSESSEE. THE SEARCH TEAM DREW THE INVE NTORY OF STOCK, FINDING THAT THE VALUE OF THE STOCK OF SCRAP WAS ` 5,45,40,000/- AS AGAINST THAT OF ` 2,43,71,000/- SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THERE WAS, THUS, FOUND TO BE AN EXCESS STOCK O F SCRAP TO THE TUNE OF ` 3,01,69,000/-. SHRI MOHINDER KUMAR GUPTA, THE MD OF THE ASSESSEE COMPANY, WAS CONFRONTED WITH THIS POSITION AT THE TIME OF THE SEARCH. IN HIS STATEMENT, SHRI GUPTA SUBMITTED THAT T HIS WAS A MATTER OF FACT BASED ON THE CALCULATION MADE AT THE SITE; TH AT HE DID NOT HAVE ANY COMMENT TO OFFER FOR THE SAME; AND THAT HOWEVER, THE EXCESS VALUE SO ARRIVED AT WOULD FORM PART OF HIS SURRENDER O F INCOME ALREADY MADE ON 30.01.2009. 15. IN THE ASSESSMENT PROCEEDINGS, HOWEVER, IN ITS REPLY FILED BEFORE THE ASSESSING OFFICER, THE ASSESSEE CLAIMED THAT THE WEIGHT OF THE SCRAP WAS RE-EXAMINED BY THEM PHYSICALLY, IN WHICH RE- EXAMINATION, IT HAD BEEN FOUND THAT THE WEIGHT OF SCRAP OF 1 CUBIC M ETRE IN THE SCRAP MIX WAS 250 KG., WORKING OUT TO A TOTAL WEIGHT OF SCR AP OF 1230 MT, AS AGAINST THAT OF 2727 MT CALCULATED DURING THE SEARCH OPERATION. THE ASSESSING OFFICER ACCEPTED THIS STAND OF THE ASSESSEE AND NO ADDITION WAS MADE ON THIS COUNT IN THE ASSESSMENT ORDER. 16. BEFORE THE LD. CIT, IN THE REPLY FILED BY THE A SSESSEE COMPANY IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED U/S 263 OF THE AC T, VIDE REPLY DATED 06.01.2012 (COPY AT APB 4-19), THE ASSESSEE CONTE NDED, INTER ALIA, THAT AS PER THE EXCISE RECORDS, THE TOTAL QUANTI TY OF SCRAP SHOWED ITA NO.1103/DEL/2012 15 1227 MT AND NOT 2727 MT, AS CALCULATED DURING THE SEA RCH OPERATION; THAT THE ASSESSMENT ORDER DATED 31.12.2010 HAD MERGED W ITH THE ORDER DATED 23.06.2011 PASSED BY THE LD. CIT (A) AND IT COULD NOT BE REVISED; THAT EXTENSIVE INQUIRIES HAD BEEN CONDUCTED B Y THE INVESTIGATION WING OF THE DEPARTMENT BEFORE REVOKING THE ORDERS U/S 132 (3) OF THE ACT AND SO, IT COULD NOT BE SAID THAT THERE WAS LACK OF INQUIRY; THAT BEFORE CONCLUDING THAT THERE WAS EXCESS STOCK OF MELTING SCRAP AS ON THE DATE OF SEARCH ON THE ASSESSEE, THE ASSESSING OFFICER HAD ALSO MADE EXTENSIVE INQUIRIES INTO THE MATTER; THA T THE STATEMENT OF SHRI MOHINDER KUMAR GUPTA, MD OF THE ASSESSEE COMPAN Y, RECORDED BY THE ADI AT THE TIME OF SEARCH, SHOWED THAT SHRI GU PTA COULD NOT RECONCILE THE POSITION OF EXCESS STOCK; THAT THE ASSESSEE COMPANY, SUBSEQUENTLY, HAD FILED A LETTER, IN WHICH IT WAS SUBMI TTED THAT WHILE COMPUTING THE TOTAL STOCK OF SCRAP AT 2700 (SIC. 2727) , THE BASIS TAKEN WAS THE MEASUREMENT UNDERTAKEN IN TERMS OF CUBIC METRE S AT SITE; THAT THE CONVERSION OF CUBIC METRES INTO WEIGHT WAS DONE ON THE BASIS OF THE OPINION OF ONE MR. R.D. SAINI, AN EMPLOYEE OF T HE ASSESSEE COMPANY, WHO WAS PRACTICALLY A STOREKEEPER IN CHARGE , RATHER THAN A QUALIFIED ENGINEER, IN THE ABSENCE OF ANY OTHER QUAL IFIED PERSON TO ASCERTAIN THE CORRECT FORMULA; THAT THE ASSESSEE HAD CON SULTED THEIR GM-STEEL MELTING SHOP, SHRI A. JHA, A QUALIFIED MET ALLURGIST OF INDUSTRIES; THAT ACCORDING TO SHRI JHA, THE FORMULA T O CALCULATE THE STOCK WAS VOLUME X DENSITY = WEIGHT; THAT ACCORDING TO HI M, HOWEVER, PACKING DENSITY WOULD BE VERY DIFFERENT WHEN SCRAP WA S STORED IN A CUBIC METRE AREA, DEPENDING PURELY ON THE SHAPE, SIZE AND CONFIGURATION OF THE SCRAP; THAT HE HAD ALSO OPINED T HAT IT WOULD ALSO DEPEND ON HOW THE SCRAP WAS STORED; THAT AS SUCH, THE CO MPANY HAD PHYSICALLY RE-EXAMINED THE WEIGHT OF THE SCRAP OF ONE CUBIC METRE IN THE SCRAP MIX AVAILABLE AT THE ASSESSEES WORKS AND IT HAD BEEN FOUND THAT THE PACKING DENSITY VARIED APPROXIMATELY ABUT 0 .25 GM/CC, I.E., ONE CUBIC METRE 0.25 = 250 KG; THAT IF THIS CALCULAT ION WERE TO BE ITA NO.1103/DEL/2012 16 APPLIED, THE TOTAL WEIGHT OF THE SCRAP WOULD COME TO 1230 MT; THAT AS SUCH, THE ALLEGATION THAT THE STOCK OF SCRAP ACTUALLY FOUND LYING WAS MORE THAN THE QUANTITY THEREOF AVAILABLE IN THE BOO KS OF ACCOUNT OF THE ASSESSEE, BE WITHDRAWN; THAT THE ASSESSEE WAS READY TO PROD UCE SUCH OTHER EVIDENCE OR EXPLANATION, AS MIGHT BE FURTHER R EQUIRED; THAT THE ASSESSEE COMPANY WAS ALSO FILING A CERTIFICATE, IN THIS RE GARD, FROM AMRENDRA JHA, GENERAL MANAGER, STEEL MELTING SHOP O F THE ASSESSEE COMPANY; THAT THIS CERTIFICATE ALSO TOOK NOTE OF THE FACT THAT THE ASSESSEE COMPANY HAD FILED A CERTIFICATE DATED 06.02.20 09 FROM SHRI VED PRAKASH KHICHUKA, CHARTERED ENGINEER, THE INSTIT UTE OF ENGINEERS (INDIA), NEW DELHI, CERTIFYING THAT ON THE BASIS OF H IS (SHRI KHICHUKAS) EXAMINATION OF DOCUMENTS, INSPECTION AND EXPLANATION S RECEIVED BY HIM ON THE SUBJECT, THE APPROXIMATE DENSITY OF THE SCR AP IN QUESTION VARIED BETWEEN 0.15 G/C TO 0.35 G/CC, AVERAGING TO APPROXIMATELY 0.25 G/C AND, ACCORDINGLY, ONE CUBIC METRE OF SUCH SCRAP W EIGHED APPROXIMATELY 250 KG.; THAT IT WAS IN VIEW OF THIS LE TTER ADDRESSED BY THE ASSESSEE TO THE ADI, THAT THE RESTRAINT ORDER DATED 30.01.2009, PASSED U/S 132 (3) OF THE ACT, RESTRAINING THE ASSESSEE COM PANY FROM REMOVING, PARTING WITH, OR OTHERWISE DEALING WITH AN Y GOODS/MATERIAL, ETC., FROM ITS PREMISES, WITHOUT THE SPECIFIC WRITTEN P ERMISSION OF THE AUTHORIZED OFFICER, WAS REVOKED BY THE ADI ON 02.02. 2009, WITHOUT IMPOSING ANY FURTHER CONDITION, BEING SATISFIED ABOUT THE STOCK POSITION AS EXPLAINED BY THE ASSESSEE; THAT THEREAFTER, A DETAILE D STATEMENT OF THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY, SHRI MOH INDER KUMAR GUPTA, WAS RECORDED, A COPY WHEREOF WAS BEING FILED; THAT THE STATEMENT CATEGORICALLY EXPLAINED AS TO HOW THE PROCE SS COULD BE SET IN MOTION AND THE CORRECT VALUES COMPUTED; THAT THE NECESSARY VOLUMINOUS DATA WITH REGARD THERETO HAD ALSO BEEN SUBM ITTED BEFORE THE INVESTIGATION WING OF THE DEPARTMENT AND NO DISC REPANCY OR IRREGULARITY WAS FOUND THEREIN; THAT BASED ON THE SAID DATA, A TRADING AND MANUFACTURING ACCOUNT HAD ALSO BEEN PREPARED AND HANDED OVER ITA NO.1103/DEL/2012 17 TO THE INVESTIGATION WING OF THE DEPARTMENT; THAT IN THE CASE OF MELTING SCRAP, PHYSICAL INVENTORY THEREOF WAS NOT POSS IBLE TO BE PREPARED IN THE SHORT TIME AVAILABLE WITH THE INVESTI GATION WING DURING THE SEARCH; THAT IT WAS, THEREFORE, THAT THE INVESTIGA TION WING THOUGHT IT FIT TO ESTIMATE THE QUANTITY OF SCRAP APPLYING THE FORMULA SUGGESTED BY SHRI R.D. SAINI, STORE INCHARGE; THAT HOWEVER, SPE CIFICALLY, THE ASSESSEE COMPANY HAD ESTABLISHED THAT THERE WAS NO EXCESS ST OCK, AS OPINED BY SHRI AMRENDRA JHA, THE GM, STEEL MELTING SHOP OF THE ASSESSEE COMPANY AND SHRI VED PRAKASH KHICHUKA, CHARTERE D ENGINEER, THE INSTITUTION OF ENGINEERS (INDIA); THAT THIS SHOWED THAT THE INVESTIGATION WING WAS SATISFIED WITH THE EXPLANATION O FFERED AND THE EVIDENCE ADDUCED BY THE ASSESSEE REGARDING THERE BEING NO EXCESS STOCK; THAT THE FACT THAT NEITHER ANY DISCLOSURE OF I NCOME ON ACCOUNT OF UNDER VALUATION OF STOCK OF MELTING SCRAP WAS OBTAINED , NOR ANY VERIFICATION WAS CONDUCED, SHOWED THE SATISFACTION OF T HE INVESTIGATION WING IN THIS REGARD; THAT SO FAR AS REGARDS THE ASSESSING O FFICER, HE, AT HIS END, MADE EFFORTS TO OBTAIN FURTHER EXPERT OPINIO N IN THE MATTER; THAT SUCH EXPERT OPINION WAS SOUGHT BY THE ASSESSING OFFI CER FROM SHRI A.K. TANEJA, FORMER CHAIRMAN & MD OF MISHRA DHATU NI GAM LTD., HYDERABAD, A PUBLIC SECTOR UNDERTAKING UNDER THE MI NISTRY OF DEFENCE; THAT SHRI A.K. TANEJA WAS A RETIRED GOVERNMENT OFFIC ER HAVING EXTENSIVE EXPERIENCE AND HIGH QUALIFICATION IN THE F IELD OF METALLURGY AND HAVING NEVER REMAINED ATTACHED WITH THE ASSESSEE CO MPANY, EITHER DIRECTLY, OR INDIRECTLY, IN ANY MANNER; THAT FURTHER, VIDE QUESTIONNAIRE DATED 28.10.2010, BY WAY OF QUESTION NO .4, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE BASIS ON WHICH THE RATE OF SCRAP WAS DECIDED AND TO PRODUCE THE RELEVANT BOOKS ALONG WITH PURCHASE BILLS OF SCRAP, TO VERIFY THE ACTUAL POSI TION OF THE STOCK OF SCRAP; THAT VIDE REPLY DATED 22.11.2010, HAD CLARIFI ED THE POSITION AS ABOVE AND HAD STATED, INTER ALIA, THAT: ITA NO.1103/DEL/2012 18 (I) THE MONTHLY STOCK OF SCRAP HELD BY THE ASSESSEE COMPANY DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 2009-10 IS IN THE RANGE OF 1052.520 MT AND 1856.181 MT. THE MONTH WISE POSITION OF STOCK HELD BY THE ASSESSEE COMPANY ALSO SHOWING PURCHASES MONTH WISE, INTERNAL ACCRUALS MONTH WISE AND CONSUMPTION MONTH WISE. PERUSAL OF THIS STATEMENT SHOWS THAT THE ASSESSEE COMPANY IS MAKING PURCHASES TO THE TUNE OF 1246.800 MT ON AN AVERAGE PER MONTH. SIMILARLY, THE ASSESSEE COMPANY IS CONSUMING SCRAP TO THE TUNE OF 1227.515 MT ON AN AVERAGE PER MONTH. THUS THE AVERAGE MONTHLY STOCK, AVERAGE MONTHLY PURCHASE, AVERAGE MONTHLY CONSUMPTION IS VERY MUCH IN CONFORMITY TO EACH OTHER. THUS, THE FIGURE WORK OUT BY THE LEARNE D ADI DOES NOT FIT WITHIN THE CHART (II) THAT THE ASSESSEE COMPANY IS MAKING PURCHASES FROM BONA FIDE FACTORIES AND THAT IS WHY THE MAJORITY OF T HE PURCHASES SAY 95% IS FROM THE PERSONS WHO ARE REGISTERED IN THE EXCISE DEPARTMENT. AS A RESULT OF THI S OUR 95% PERSONS ARE DUTY PAID PURCHASES AND MODVAT IS CLAIMED IN THIS RESPECT. (III) THAT WE HAVE ALSO PREPARED AVERAGE MONTHLY FIGURES FO R THE SUBSEQUENT PERIOD WHICH ARE ALSO IN CONFORMITY TO THE FIGURE OF STOCK SHOWN AND WORKED OUT BY US. (IV) THAT WE HAVE ALSO PREPARED A STATEMENT FOR THE MONTH OF JANUARY 2009 I.E., THE MONTH F SEARCH WHEREIN WE HAVE WORKED OUT QUANTITY PER CUBIC METRE FOR EACH INWARD TRANSACTION (IN RESPECT OF ONLY STANDARD CONTAINER). THESE FIGURES ALSO SHOW AND SUPPORT THE CONTENTION OF ASSESSEE COMPANY. ITA NO.1103/DEL/2012 19 (V) THAT OUR BANKERS I.E., STATE BANK OF INDIA HAS ALSO UNDERTAKEN STOCK AUDIT IN RESPECT OF OUR UNIT AND AT NO POINT OF TIME ANY DISCREPANCY WAS FOUND OR REPORTED. A COPY OF THE REPORT OF THE AUDITOR IS ALSO AVAILABLE A ND SAME IS ALSO ATTACHED HEREWITH. THE ASSESSEE FURTHER STATED THAT THE ASSESSEE COMPANY WAS VALUING THE STOCK OF SCRAP ON THE WEIGHTED AVERAGE VALUE METH OD CONSISTENTLY SINCE LONG AND THE WEIGHTED AVERAGE VALUE FOR THE PE RIOD UNDER REFERENCE CAME TO ` 20,506.82 PER MT; THAT A SHEET SHOWING THIS CALCULATION WAS BEING FILED; THAT THE ASSESSEE HAD ALSO P RODUCED THE SCRAP PURCHASE REGISTER ALONG WITH PURCHASE VOUCHERS, AS DESIRED BY THE ASSESSING OFFICER THAT A COPY OF THE AFORESAID REPLY DATED 22.11.2010 TO THE ASSESSING OFFICER WAS BEING FILED ALON G WITH THE RELEVANT ANNEXURES; THAT THE ASSESSING OFFICER HAD FURT HER RAISED QUERIES IN THIS REGARD VIDE SL. NO.8 OF THE ORDER SHEET ENTRY; THAT THE REPLY THERETO HAD BEEN SUBMITTED BY THE ASSESSEE VIDE LE TTER DATED 03.12.2010, A COPY WHEREOF WAS BEING FILED; THAT THE ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS, HAD ALSO EXAMINED SHRI AMRENDRA JHA AND SHRI VED PRAKASH KHICHUKA; THAT FURTHER, THE ASSESSEE HAD PREPARED A MONTHLY CHART OF MELTING SCRAP AS PER THE STATUTORY RECORD, I.E., FORM-IV MAINTAINED UNDER THE CENTRAL EXCISE LA W; THAT AS PER THE SAID MONTHLY CHART FOR THE PERIOD UNDER ASSESSMENT AS WE LL AS FOR THE SUBSEQUENT ASSESSMENT, I.E., A.Y. 2010-11, THE ASSESSEE CO MPANY WAS HOLDING THE STOCKS OF MELTING SCRAP IN THE RANGE OF 1052.520 MT (AS ON 30.4.2008) AND 1856.181 MT (AS ON 30.6.2008); THAT SIMILARLY, THE ASSESSEE COMPANY WAS HOLDING THE STOCK OF MELTING SC RAP DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 2010-11 IN THE R ANGE OF 1191.946 MT (AS ON 31.5.2009) AND 2268.998 MT (AS ON 28.2.2010); THAT IN VIEW OF THE SAID RANGE, THE PHYSICAL STOCK ESTI MATED AT 2727 MT BY THE SEARCH AND SEIZURE TEAM ON THE DATE OF THE SEAR CH DID NOT FALL ITA NO.1103/DEL/2012 20 WITHIN THE RANGE AND THUS, IT COULD SAFELY BE SAID THA T THE ESTIMATE WAS NOT CORRECT; THAT THE ASSESSEE HAD ALSO PREPARED A STATE MENT OF SCRAP PURCHASES IN THE CLASSIFIED FORM FOR THE FY 2008-09 AND 2009-10 AND THE COPY OF THE SAME WAS ATTACHED THEREWITH; THAT PER USAL OF THESE STATEMENTS OF PURCHASES SHOWED THAT THE 80% PURCHASE OF SC RAP WAS FROM THE INDUSTRIAL UNIT DULY COVERED UNDER THE EXCI SE LAW AND THE ASSESSEE COMPANY HAD PURCHASED THE SCRAP AFTER PAYING THE EXCISE DUTY TO THAT EXTENT; THAT THIS STATEMENT ALSO SHOWED T HAT THE ASSESSEE COMPANY HAD NEVER PURCHASED ANY SCRAP FROM ANY UN-REG ISTERED DEALERS, OR OTHERWISE, IN CASH; THAT ALL THE PURCHASES HAD BEEN MADE THROUGH BANK PAYMENTS ONLY AND FROM DULY REGISTERED D EALERS UNDER THE VAT ACT; THAT THUS, THE ASSESSEE COMPANY HAD ENJOYED MODVAT IN RESPECT OF CENTRAL EXCISE PAID AND VAT PAID; THAT THE RE WAS NO EXCEPTION TO THIS PROPOSITION IN BOTH THE ASSESSMENT YEAR S; THAT THE PROPOSITION OF EXCESS STOCK OF MELTING SCRAP, PRESUPPOSED THAT THE PURCHASES HAD BEEN MADE FROM UNREGISTERED DEALERS AND T HAT TOO, IN CASH; THAT THE PROPOSITION ITSELF DID NOT STAND THE TEST OF JUSTIFICATION IN VIEW OF THE FACTS MENTIONED; THAT THE ASSESSEE COMPANY COULD NOT BE EXPECTED TO MAKE PURCHASES WITHOUT ENJOYING THE BENEF IT OF MODVAT IN RESPECT OF CENTRAL EXCISE, AND BENEFIT OF VAT IN R ESPECT OF THE VAT ACT; AND THAT THIS BENEFIT WAS NOT A SMALL BENEFIT, I T WAS AROUND 8-16% CENTRAL EXCISE AND 4% IN THE VAT ACT. 17. THE LD. CIT, HOWEVER, COMPLETELY DISREGARDED THE AFORESAID POSITION AS EXPLAINED BY THE ASSESSEE, ALONG WITH DOCUME NTARY EVIDENCE, AS DISCUSSED. HE OBSERVED, INTER ALIA, THAT: (I) WHILE COMPLETING THE ASSESSMENT PROCEEDINGS, THE ASSES SING OFFICER COULD NOT CONSIDER THE FACT THAT SURRENDER OF RS .301.69 LACS HAD ALREADY BEEN MADE BUT THE ASSESSEE HAD NOT SH OWN THIS AMOUNT IN THE RETURN OF INCOME. ITA NO.1103/DEL/2012 21 (II) THE ASSESSING OFFICER ALSO COULD NOT CONSIDER THE FAC T THAT THE VALUE OF STOCK ON THE DATE OF SEARCH WAS PREPARED BY S H. R.D. SAINI AN EMPLOYEE OF THE COMPANY WHO WAS STORE IN CHA RGE AND THIS WAS DONE IN THE PRESENCE OF MANAGING DIRECTOR AND SHRI H.R. GOYAL (EO). (III) THE ASSESSING OFFICER FURTHER FORGOT TO CONSIDER THAT THE MD OF THE ASSESSEE COMPANY HAD ADMITTED THE EXCESS VALUE ON TH E DATE OF STOCK TAKING OF SCRAP AND ANY RE-EXAMINATION F SCRAP BY THE ASSESSEE ON ITS OWN AT A LATER DATE WAS CLEARLY AN AFTERTHOUGHT AND THE WEIGHT OF SCRAP IN LOOSE CONDITION W AS CALCULATED BY EMPLOYEE OF THE ASSESSEE COMPANY HIMSEL F IN THE PRESENCE OF DIRECTOR & EO. IN THIS MANNER, THE EXCESS STOCK OF ` 301.69 LACS WAS NOT BROUGHT WITHIN THE AMBIT OF TAX BY TH E ASSESSING OFFICER. 18. THE LD. CIT FURTHER OBSERVED THAT ON 20.02.2009, THE ASSESSEE HAD FILED A CHART (INFRA) BEFORE THE DEPARTMENT, WH EREIN AN AMOUNT OF ` 7 CRORES HAD BEEN SHOWN TO HAVE BEEN DECLARED/SURRENDE RED WITH REGARD TO THE YEAR UNDER CONSIDERATION, UNDER THE HE AD BUSINESS INOCME, TO BE ACCOUNTED FOR AS CREDITED TO THE MISCE LLANEOUS INCOME OF THE ASSESSEE AND CORRESPONDINGLY DEBITED TO CASH LYING SEIZED WITH THE INCOME-TAX DEPARTMENT ACCOUNT, IN THE BOOKS OF T HE ASSESSEE, THAT ` 240 LACS AND SUNDRY DEBTORS WITH ` 390 LAC; AND THAT IT HAD ALSO BEEN SHOWN IN THE CHART THAT THE FURTHER VARIOUS BUSINESS EXP ENSES ACCOUNT HAD BEEN DEBITED, AS PER THE SEIZED RECORD AND CORRESP ONDINGLY, MISCELLANEOUS INCOME CREDITED WITH ` 70 LAC AND ALSO C OVERING OTHER TRANSACTIONS FOUND IN THE SEIZED MATERIAL. THE LD. C IT FURTHER OBSERVED THAT WHEN THE ASSESSEES REPRESENTATIVE APPEARED BEFORE HIM AND SUBMITTED THAT HE HAD FILED A SURRENDER LETTER DATED 06.02.2009, WHICH WAS IN ADDITION TO THE FIRST LETTER DATED 30.01.2009, HE (THE CIT) ASKED HIM TO PRODUCE THE SAME ON 12.01.2012; THAT HOWEVER, ON THAT DATE, THE AR ONLY PRODUCED THE AFOREMENTIONED CHART DATED 20.02.2009 AND COULD NOT PRODUCE ANY LETTER DATED 06.02.2009; THAT THERE WAS NO LETTER OF ANY SURRENDER IN ADDITION TO THE FIRST LETT ER DATED 30.01.2009, EITHER WITH THE ASSESSEE, OR IN THE ASSESSMENT RECORD; THAT SUCH CHART ITA NO.1103/DEL/2012 22 DATED 20.02.2009 HAD NO RELEVANCE, SINCE THE ASSESSEE CO ULD NOT CHANGE THE FACT BY FURNISHING A MARGINAL SOURCE OF IN COME TO EXPLAIN THE SURRENDER MADE ON THE DATE OF SEARCH; THAT THE ASSE SSEE ALSO COULD NOT DICTATE TERMS ON HOW A SURRENDERED AMOUNT WAS TO B E ACCOUNTED FOR; THAT THESE WERE MATTERS OF FACT AND HAD TO BE T AKEN AS THEY EXISTED ON THE DATE OF SEARCH; THAT THE ASSESSEE HAD TO D ISCLOSE THE SOURCE AND MANNER OF EARNING THE DISCLOSED INCOME AND SUCH INCOME WOULD BE ACCOUNTED FOR IN ACCORDANCE WITH THE ACCOU NTING PRACTICE RELATING TO THE SOURCE OF INCOME; THAT SO FAR AS REGAR DS THE EXCESS STOCK OF SCRAP, THIS WAS A MATTER OF FACT AND ITS OMISSION IN THE CHART FURNISHED ON 20.02.2009 WOULD NOT ALTER THE POSITION; THAT THE CERTIFICATE GIVEN BY A PRIVATE PERSON AFTER MORE THA N ONE YEAR OF SEARCH HAD NO MEANING AT ALL; AND THAT SUCH CERTIFICA TE, RELIED ON BY THE ASSESSING OFFICER, COULD NOT BE CONSIDERED AS AN ALTE RNATIVE TO THE VALUATION OF STOCK DONE ON THE DATE OF SEARCH, AS PER THE FORMULA SUGGESTED BY THE STORE INCHARGE OF THE ASSESSEE COMPANY. 19. FOR READY REFERENCE, IT WOULD BE APPROPRIATE T O REPRODUCE HEREUNDER THE EXACT OBSERVATIONS MADE BY THE LD. CIT: - D. SUBSEQUENTLY, A CHART WAS FURNISHED ON 20 TH FEBRUARY, 2009 TO THE DEPARTMENT, MENTIONING THE FOLLOWING IN RESP ECT OF THE COMPANY: S. NO. PARTICULARS OF ASSESSEE DECLARING THE INCOME AMOUNT OF INCOME DECLARED /SURRENDERED A.Y. TO WHICH INCOM E RELATE S HEAD OF INCOME PARTICULAR SOURCE OF INCOME, IF ANY HOW TO BE ACCOUNTED FOR 1. STAR WIRE (INDIA) LTD., 35, LINK ROAD, LAJPAT NAGAR- III, NEW DELHI- 24, PAN NO.AAECS112 4Q 7,00,00,000/- (RUPEES SEVEN CRORES ONLY) 2009- 10 BUSINESS INCOME THE ASSESSEE COMPANY HAS EARNED THIS MONEY BY WAY OF UNDERTAKING TRANSACTIONS OF PURCHASE & SALES OF LAND/AGRICULTURE LANDS. IN ALL SUCH CASES WRITTEN THE AMOUNT IS TO BE CREDITED TO THE MISCELLANEOUS INCOME AND CORRESPONDINGLY DEBITED TO CASH LYING SEIZED WITH THE INCOME TAX DEPARTMENT ACCOUNT. IN THE BOOKS OF M/S ITA NO.1103/DEL/2012 23 DOCUMENTS ARE NOT AVAILABLE. FURTHERMORE, THE ENTIRE TRANSACTION WAS IN CASH. THE MODUS OPERANDI NORMALLY EMPLOYED WAS TO ENTER INTO AN AGREEMENT FOR PURCHASE AND EVEN BEFORE THE FINAL EXECUTION OF THE DOCUMENT TRANSFER THE LAND BY WAY OF DIRECT AGREEMENT BETWEEN THE ORIGINAL SELLER AND THE PURCHASER. AND THE DIFFERENCE ON THESE FACTS IS TAKEN AS INCOME. STAR WIRE (INDIA) LTD. WITH RS.2,40,00,000/- AND SUNDRY DEBTORS WITH RS.3,90,00,000/- . FURTHER VARIOUS BUSINESS EXPENSES ACCOUNT DEBITED (AS PER SEIZED RECORD) AND CORRESPONDINGLY MISCELLANEOUS INCOME CREDITED WITH RS.70,00,000/- AND ALSO COVERING OTHER TRANSACTIONS FOUND IN SEIZED MATERIAL. E. WHEN THE ASSESSEES REPRESENTATIVE APPEARED BEFORE ME AND SUBMITTED THAT HE HAD FILED A SURRENDER LETTER DATED 6.2 .2009, WHICH WAS IN ADDITION TO THE FIRST LETTER DATED 30.01.200 9, I ASKED HIM TO PRODUCE THE SAME. THE CASE WAS FIXED FO R ON 12.01.2012. ON THAT DATE HE PRODUCED ONLY THE CHART SIG NED ON 20.02.2009 AS MENTIONED ABOVE. HE COULD NOT PRODUCE ANY LETTER DATED 06.02.2009. THERE IS NO LETTER OF ANY SU RRENDER IN ADDITION TO THE FIRST LETTER DATED 30.01.2009 EITHER WITH TH E ASSESSEE OR IN THE ASSESSMENT RECORDS. 6. THE FACTUAL POSITION MAKES IT CLEAR THAT:- (I) (II) .. (III) .. (IV) . (V) THE CERTIFICATE GIVEN BY PRIVATE PERSON AFTER MORE THAN ONE YEAR OF SEARCH HAS NO MEANING AT ALL. SUCH CERTI FICATE, RELIED UPON BY THE ASSESSING OFFICER, CANNOT BE CONSI DERED AS AN ALTERNATIVE TO THE VALUATION OF STOCK DONE ON THE DATE OF SEARCH, AS PER THE FORMULA SUGGESTED BY THE STORE IN CHARGE OF THE COMPANY. ITA NO.1103/DEL/2012 24 (VI) THE CHART GIVEN ON 20.02.2009 HAS NO RELEVANCE BECAU SE THE ASSESSEE CANNOT CHANGE THE FACTS BY FURNISHING AN IMAGINARY SOURCE OF INCOME TO EXPLAIN THE SURRENDER M ADE ON THE DATE OF SEARCH. AT THE SAME TIME THE ASSESSEE CANNOT DICTATE TERMS ON HOW THE SURRENDERED AMOUNT WAS TO BE ACCOUNTED FOR. THESE ARE MATTER OF FACTS AND HAVE TO BE TAKEN AS THEY EXIST ON THE DATE OF SEARCH. THE ASSESSEE HAS TO DISCLOSE THE SOURCE AND MANNER OF EARNING DISCLOSED INCOME AND SUCH INCOME WILL BE ACCOUNTED FOR IN ACCORDANCE WITH THE ACCOUNTING PRACTICE RELATING TO THE SOURCE OF INCOME. A S REGARDS THE EXCESS STOCK OF SCRAP, THIS IS A MATTER OF FACT AND I TS OMISSION IN THE CHART FURNISHED ON 20.02.2009 WILL N OT ALTER THE POSITION. 20. IT WAS ON THE BASIS OF THE ABOVE, THAT THE LD. CIT OPINED THAT EXCESS STOCK VALUED AT ` 3,01,69,000/- WAS NOT BROUGHT TO TAX DURING THE YEAR, I.E., A.Y. 2009-10, AS A RESULT OF WHICH, T HE ASSESSMENT ORDER HAD BECOME ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 21. IT IS, THUS, SEEN THAT THE EFFECTIVE OBJECTIONS REC ORDED BY THE LD. CIT TO HOLD THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUD ICIAL TO THE INTERESTS OF THE REVENUE ON THE ISSUE OF EXCESS STOCK OF SCRAP, AMOUNTING TO ` 3,01,69,000/-, ARE AS FOLLOWS:- (I) THAT THE AO DID NOT CONSIDER THE FACT THAT THE VALUE OF STOCK OF SCRAP ON THE DATE OF SEARCH WAS PREPARED BY SHRI R. D. SAINI, AN EMPLOYEE - STORE INCHARGE OF THE ASSESSEE COMPANY, IN THE PRESENCE OF THE MD OF THE ASSESSEE COMPANY, I.E., SHRI H.R. GOEL (EO III). (II) THAT THE AO DID NOT CONSIDER THE FACT THAT THE MD OF THE ASSESSEE COMPANY HAD ADMITTED THE EXCESS VALUE ON THE DAT E OF STOCK TAKING OF SCRAP AND ANY RE-EXAMINATION OF T HE SCRAP BY THE ASSESSEE ON ITS OWN ON A LATER DATE WAS CLEARLY A N AFTERTHOUGHT AND THE WEIGHT OF SCRAP IN LOOSE CONDITI ON WAS CALCULATED BY THE EMPLOYEE OF THE ASSESSEE COMPANY ITSEL F, IN THE PRESENCE OF ITS DIRECTOR AND EO. ITA NO.1103/DEL/2012 25 (III) THAT THERE WAS NO SURRENDER LETTER DATED 06.02.2009 I N ADDITION TO THE SURRENDER LETTER DATED 30.01.2009, E ITHER WITH THE ASSESSEE, OR IN THE ASSESSMENT RECORD. (IV) THAT THE CHART GIVEN BY THE ASSESSEE ON 20.02.2009 WAS N OT RELEVANT AS IT FURNISHED AN IMAGINARY SOURCE OF INCOME TO EXPLAIN SURRENDER MADE ON THE DATE OF SEARCH AND IT A DMITTED TO TELL AS TO HOW A SURRENDERED AMOUNT WAS TO BE ACCOU NTED FOR AND THE EXCESS STOCK OF SCRAP WAS OMITTED IN THE CH ART. (V) THAT THE CERTIFICATE GIVEN BY A PRIVATE PERSON (SHRI AMRENDRA JHA, GM, STEEL MELTING SHOP OF THE ASSESSEE) AFTER MOR E THAN ONE YEAR OF THE SEARCH HAD WRONGLY BEEN RELIED ON BY THE AO. 22. SO FAR AS REGARDS THE FIRST OBJECTION OF THE LD. C IT, THAT THE AO DID NOT CONSIDER THAT THE STOCK VALUATION WAS DONE BY SHRI R.D. SAINI, STORE INCHARGE OF THE ASSESSEE COMPANY ITSELF, IN THE PRESENCE OF ITS MANAGING DIRECTOR AND SHRI H.R. GOEL (EO),IT IS FOUN D THAT THIS OBJECTION IS NOT CORRECT. VIDE NOTICE DATED 28.10.2010 (APB 21 -35), ISSUED UNDER SECTIONS 153A/152(1) READ WITH SECTION 143(3) OF THE IT ACT, THE AO HAD PUT QUESTION NO.4 (APB 27) TO THE ASSESSEE. THIS QUE STION RUNS AS FOLLOWS:- Q.4 DURING THE COURSE OF SEARCH AND SEIZURE OPERATIO N CONDUCTED AT THE FACTORY PREMISES AT 21/4, MATHURA ROAD, BALLABHGARH, FARIDABAD, INVENTORY OF SCRAP FOUND AT THREE DIFFERENT PLACES WAS PREPARED AS UNDER:- S.NO. AREA/ LOCATION VOLUME OF SCRAP IN M 3 QUANTITY (IN MT) RATE (RS.) TOTAL VALUE 1. SCRAP GOWDOWN 3160 1984.48 20,000 3,96,89,600 2. OPEN GOWDOWN 700 439.60 20,000 87,92,000 3. OPEN GOWDOWN 482.35 302.92 20,000 60,58,400 TOTAL VALUE 4342.35 2727.00 20,000 5,45,40,000 THE TOTAL VALUE OF ABOVE STOCK FOUND AT THE FACTORY OF AB OVE CONCERNS OF M.S. SCRAP WAS VALUED AT RS.5,45,40,000/ -. THE ITA NO.1103/DEL/2012 26 INVENTORY PREPARED WAS DULY ADMITTED BY THE EMPLOYEES W HO WERE PRESENT THERE AS EVIDENT FROM THE COPY OF INVENTOR Y PLACED ON RECORD WHICH IS DULY SINGED BY DIFFERENT FIVE PER SONS INCLUDING THE AUTHORIZED OFFICER. THE WEIGHT PER CUBIC METER WA S TAKEN AS TOLD BY THE EMPLOYEES OF THE COMPANY. FURTHER, FROM THE PERUSAL OF PURCHASE BILLS IT IS ALSO EVIDENT THAT MOST OF THE SCRAP ITEMS WERE PURCHASED MORE THAN THE VALUE TAKEN IN THE INVENTORY THEREFORE YOU ARE REQUESTED TO EXPLAIN THE BA SIS ON WHICH THE RATE OF SCRAP WAS DECIDED. YOU ARE FURTHER ASKED TO PRODUCE THE RELEVANT BOOKS OF ACCOUNT ALONG WITH PURCHASE BILLS OF SCRAP TO VERIFY THE ACTUAL POSITION OF STOCK OF SCRAPS. 23. THIS QUESTION SPECIFICALLY FINDS MENTION, THAT THE WEIGHT PER CUBIC METRE WAS TAKEN AS TOLD BY THE EMPLOYEES OF THE COMPANY . FROM THIS, IT IS EVIDENT THAT THE AO DID CONSIDER SUCH FACT. IT IS ENTIRELY ANOTHER MATTER THAT THE ASSESSEE, IN ITS REPLY DATED 22. 11.2010 (APB 36-53), IN RESPONSE TO QUESTION NO.4, SUBMITTED IN PARA 22 (APB 47- 48), AS REPRODUCED HEREINABOVE, THAT FOR THE ASSERTION S MADE THEREIN, THE AVERAGE STOCK PER CUBIC METRE COULD NOT EXCEED 2 50 KG PER CUBIC METRE. IT WAS MADE OUT THAT THE STOREKEEPER, SHRI R.D. SAINI HAD NEVER HANDLED THE STOCKS OF SCRAP AND HAD GIVEN A WRO NG STATEMENT. IT WAS STATED THAT THE CORRECT FACTS AND RELEVANT FACTORS WERE CLARIFIED BEFORE THE ADI VIDE WRITTEN SUBMISSIONS DATED 06.02.20 09 OF THE MD OF THE ASSESSEE COMPANY, SHRI M.K. GUPTA. IT WAS FURTHER ST ATED THAT A CERTIFICATE FROM THE SR. ENGINEER OF THE ASSESSEE COMPA NY HAD ALSO BEEN FILED WITH THE ADI. IT WAS, THUS, EXPLAINED THA T THE QUANTITY BY STOCK OF SCRAP, TAKEN AT 2727 MT AT THE TIME OF SEARCH , WAS INCORRECT, BASED ON A WRONG CALCULATION IN RESPECT OF VOLUME OF SCRAP PER CUBIC METRE, WHEREAS IT WAS 1230 MT, AS AGAINST THAT SHOWN AT 1229.27 MT IN THE EXCISE RECORD OF THE ASSESSEE. 24. IN THE STATEMENT (APB 147-149) RECORDED U/S 131 O F THE ACT ON 19.10.2010, I.E., EVEN PRIOR TO THE ISSUANCE OF THE SH OW CAUSE NOTICE ITA NO.1103/DEL/2012 27 DATED 28.10.2010 (SUPRA), SHRI R.D. SAINI WAS, INTER ALIA, PUT THE FOLLOWING QUESTION, TO WHICH HE GAVE THE SUCCEEDING R EPLY:- Q. ACCORDING TO YOU THE WEIGHT OF ONE CUBIC METRE LIME IS 650 TO 700 KGS AND AS PER GENERAL RULE LIME IS LIGHT ER THAN STEEL, THEN HOW YOU COMPARED THE WEIGHT OF SCRAP WITH THE WEIGH T OF LIME? WHAT WAS THE BASE OF ESTIMATING THE WEIGHT OF 628 KGS PER CUBIC OF SCRAP LYING IN THE YARD? ANS. IT WAS A LATE NIGHT STATEMENT ABOVE 11.00 OCLOCK. THERE WAS NO PERSONS AVAILABLE IN THE FACTORY, WHO CAN GUID E OR TELL THE CORRECT FACTS IN THIS REGARD AND I WAS THE ONLY MA N WHO WAS LOOKING AFTER STORES AND THUS CONSIDERED MORE APPROPRI ATE BY IT TEAM TO MAKE THE STATEMENT. THERE WAS NO OTHER ALTERNATIVE WITH ME EXCEPT TO MEASURE THE WEIGHT OF SCRAP ON THE BASI S OF METHOD UTILIZED BY ME TO MEASURE THE WEIGHT OF LIME. 25. IT IS EVIDENT FROM THE ABOVE THAT SHRI SAINI MAD E IT CLEAR THAT IN THE OBTAINING CIRCUMSTANCE OF THERE BEING NO PERSON A VAILABLE TO TELL THE CORRECT METHOD OF WEIGHING THE SCRAP OF STEEL LYI NG AT SITE, HE (SHRI SAINI) WAS LEFT WITH NO ALTERNATIVE, BUT TO MEASURE T HE SCRAP OF STEEL ON THE BASIS OF THE METHOD UTILIZED BY HIM TO MEASURE TH E WEIGHT OF LIME, EVEN THOUGH AS PER THE QUESTION ASKED OF HIM, AS A GENE RAL RULE, LIME IS LIGHTER THAN STEEL. 26. IT IS, THUS, EVIDENT FROM THE RECORD THAT THE AO DID TAKE INTO CONSIDERATION THE CONCERNED FACTS. IT WAS, BEING SATISF IED FROM THE RECORD AS PRODUCED AND AVERMENTS AS MADE ON BEHALF OF THE ASSESSEE, INCLUDING THE AFORESAID STATEMENT OF SHRI R.D. SAINI, THAT THE AO DID NOT MAKE THE ADDITION IN QUESTION. 27. NOW, THE OBJECTION OF THE LD. CIT IS NOT THAT T HE AO HAS NOT MADE ANY INQUIRY INTO THE MATTER, GIVING RISE TO AN ERRO NEOUS ORDER WHICH WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. RATH ER, THE OBJECTION OF THE LD. CIT IS THAT THE AO DID NOT TAKE INTO CONSIDE RATION THE FACT THAT THE VALUE OF STOCK WAS PREPARED BY SHRI R.D. SAINI IN THE PRESENCE OF ITA NO.1103/DEL/2012 28 THE MD OF THE ASSESSEE COMPANY AND SHRI H.R. GOEL, EO OF THE COMPANY. THIS, IN OUR OPINION, DOES NOT LIE IN THE P URVIEW OF REVISION OF AN ORDER, U/S 263 OF THE ACT, THOUGH IT MAY WELL LIE IN A REGULAR APPEAL BEFORE THE LD. CIT (A), WHICH IS NOT THE CASE HERE. 28. SO FAR AS REGARDS THE COMMISSIONERS OBJECTION THAT THE AO DID NOT CONSIDER THAT THE MD OF THE ASSESSEE COMPANY HAD ADM ITTED THE EXCESS VALUE OF THE STOCK AND THAT ANY RE-EXAMINATION OF THE STOCK LATER WAS ONLY AN AFTERTHOUGHT, FIRST OF ALL, IT IS SEE N THAT IN HIS STATEMENT RECORDED AT THE TIME OF SEARCH, SHRI MOHIND ER KUMAR GUPTA, MD OF THE ASSESSEE COMPANY STATED THAT: THIS IS A MATTER OF FACT BASED ON THE CALCULATION MADE AT THE SITE AND I HAVE NO COMMENTS FOR THE SAME. HOWEVER, THE EXCESS VALUE WAS ARRIVED AT IS A ND WILL FORM PART OF MY SURRENDER OF INCOME ALREADY MADE ON 30.01 .2009. 29. THIS DEPOSITION OF THE MD OF THE ASSESSEE COMPANY CLE ARLY SHOWS THAT HE DID NOT HAVE ANY COMMENT TO OFFER ON THE VA LUE ARRIVED AT AT THE TIME OF SEARCH. HE STATED THAT IT WAS A MATTER OF FACT BASED ON THE VALUATION MADE AT THE SITE. THUS, IT CANNOT BE SAID T HAT HE ADMITTED THE EXCESS VALUE OF THE STOCK AS AT THE TIME OF SEARCH. HIS STATEMENT THAT THE EXCESS VALUE SO ARRIVED AT WOULD FORM PART OF THE SURRENDER ALSO DOES NOT INCULPATE THE MD. FURTHER, SO FAR AS REG ARDS THE COMMISSIONERS OBJECTION THAT THE LATER RE-EXAMINATION OF THE SCRAP BY THE ASSESSEE WAS AN AFTERTHOUGHT, THIS IS NOT A MATTER OPE N TO THE COMMISSIONER IN PROCEEDINGS U/S 263 OF THE ACT. THIS MA TTER WOULD LIE BEFORE THE COMMISSIONER (APPEALS) IN A REGULAR APPEAL FILED. 30. MOREOVER, AS RIGHTLY CONTENDED ON BEHALF OF THE ASSESSEE, IT IS ONLY THE STATEMENT OF SHRI R.D. SAINI, STOREKEEPER/S TORE INCHARGE OF THE ASSESSEE COMPANY, WHICH HAS BEEN TAKEN INTO CONSIDERATIO N BY THE LD. CIT. THE STATEMENT OF SHRI AMRENDER JHA AND SHRI VE D PRAKASH ITA NO.1103/DEL/2012 29 KHICHUKA DO NOT EVEN FIND SO MUCH AS A MENTION IN THE IMPUGNED ORDER, RENDERING THE ORDER UNDER APPEAL TO BE AN O RDER PASSED AS A RESULT OF NON-READING OF MATERIAL EVIDENCE BROUGHT O N RECORD BY THE ASSESSEE. 31. FURTHER, SHRI VED PRAKASH KHICHUKA, IN HIS STATEME NT (APB 155- 157), RECORDED ON 28.10.2010, IN RESPONSE TO QUESTION NO.7, CONFIRMED HAVING GIVEN A CERTIFICATE RELATING TO WEIGHT AND V OLUME OF SCRAP TO THE ASSESSEE COMPANY. IN RESPONSE TO QUESTION NO.10, SHRI KHI CHUKA STATED THAT IT WAS CORRECT THAT IN THE CERTIFICATE GI VEN BY HIM, HE HAD ESTIMATED 250 KG PER CUBIC METRE AS THE WEIGHT OF LI GHT COMMERCIAL SCRAP. HE STATED THAT ONE TRUCK WITH A VOLUME OF APP ROXIMATELY 25 CUBIC METRES CAPACITY CONTAINS ABOUT SIX TONS MAXIMUM OF SCRAP AND THAT THIS FACT COULD BE VERIFIED FROM ANY SCRAP TRADE R. 32. THESE STATEMENTS ARE A MATTER OF RECORD. IN FACT, THESE WERE STATEMENTS RECORDED ON OATH U/S 131 OF THE ACT, IN THE COURSE OF ASSESSMENT PROCEEDINGS, AMPLY DEMONSTRATING THE ELABORATE INQUIRY CARRIED OUT BY THE ASSESSING OFFICER INTO THE MATTER. IT WAS ON DULY TAKING INTO CONSIDERATION THESE STATEMENTS ALONG WITH T HE VOLUMINOUS OTHER EVIDENCE PRODUCED BY THE ASSESSEE, THAT THE ASSESSING OFFICER FOUND HIMSELF TO BE SATISFIED WITH REGARD TO THE ISSUE A ND IT WAS HENCE, THAT NO ADDITION WAS MADE. 33. COMING TO THE FOURTH OBJECTION RAISED BY THE LD. CIT, HE HAS OBSERVED THAT THE CHART GIVEN BY THE ASSESSEE ON 20.02.2 009 WAS NOT RELEVANT, SINCE THE ASSESSEE COULD NOT CHANGE THE FACTS O F THE CASE BY FURNISHING AN IMAGINARY SOURCE OF INCOME TO EXPLAIN T HE SURRENDER MADE ON THE DATE OF SEARCH AND THAT THE ASSESSEE COULD N OT DICTATE AS TO HOW THE SURRENDERED AMOUNT WAS TO BE ACCOUNTED FO R. NOW, THIS, AGAIN, IS A MATTER LYING OUTSIDE THE PURVIEW OF PROCE EDINGS U/S 263 OF ITA NO.1103/DEL/2012 30 THE ACT. IT IS OBVIOUS THAT THE SAID CHART, SUBMITTED ON 20.02.2009, WAS SUBMITTED BEFORE THE ASSESSING OFFICER, BEFORE THE PA SSING OF THE ASSESSMENT ORDER, WHICH IS DATED 30.01.2009. IT CANNOT BE GAINSAID THAT THE LD. CIT CANNOT SIT IN JUDGEMENT OVER THAT O F THE ASSESSING OFFICER. BESIDES, WHEREAS IN ONE BREATH THE LD. CIT ST ATES THAT NO INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER, IN THE SA ME BREATH, HE SPEAKS OF TAKING COGNIZANCE OF THE CHART AND PASSES JUD GEMENT OVER THE VALIDITY THEREOF, AS IF HE WERE EXERCISING THE PO WERS OF THE CIT(A). THIS IS ELOQUENT FROM THE FOLLOWING OBSERVATIONS OF THE CIT, WHICH, OBVIOUSLY, HE COULD NOT MAKE IN A REVISION:- (VI) THE CHART GIVEN ON 20.02.2009 HAS NO RELEVANC E BECAUSE THE ASSESSEE CANNOT CHANGE THE FACTS BY FURNISHING AN IMAGINARY SOURCE OF INCOME TO EXPLAIN THE SURRENDER M ADE ON THE DATE OF SEARCH. AT THE SAME TIME THE ASSESSEE CANNOT DICTATE TERMS ON HOW THE SURRENDERED AMOUNT WAS TO BE ACCOUNTED FOR. THESE ARE MATTER OF FACTS AND HAVE TO BE TAKEN AS THEY EXIST ON THE DATE OF SEARCH. THE ASSESSEE HAS TO DISCLOSE THE SOURCE AND MANNER OF EARNING DISCLOSED INCOME AND SUCH INCOME WILL BE ACCOUNTED FOR IN ACCORDANCE WITH THE ACCOUNTING PRACTICE RELATING TO THE SOURCE OF INCOME. A S REGARDS THE EXCESS STOCK OF SCRAP, THIS IS A MATTER OF FACT AND I TS OMISSION IN THE CHART FURNISHED ON 20.02.2009 WILL N OT ALTER THE POSITION. 34. THE FIFTH AND LAST OBJECTION RAISED BY THE LD. CI T IS THAT THE CERTIFICATE GIVEN BY A PRIVATE PERSON, I.E., SHRI AM RENDERA JHA, WHICH TOOK INTO CONSIDERATION THE CERTIFICATE GIVEN BY SHR I VED PRAKASH KHICHUKA. HERE TOO, THE LD. CIT IS PRONOUNCING JUDG EMENT OVER THE ASSESSMENT ORDER, WHICH DOES NOT LIE WITHIN HIS DOMAIN UN DER HIS REVISIONAL POWERS. 35. IT IS, THUS, SEEN THAT SO FAR AS REGARDS THE ISSUE OF EXCESS STOCK, THE ASSESSING OFFICER HAS CARRIED OUT EXTENSIVE INQUIRY. BESIDES THE EVIDENCE PRODUCED BY THE ASSESSEE, THE STATEMENT OF THE MD OF THE COMPANY, THE DATA PROVIDED BY THE ASSESSEE BEFORE THE INVESTIGATION WING, THE TRADING AND MANUFACTURING ACCOUNT FURNISHE D BEFORE THE ITA NO.1103/DEL/2012 31 INVESTIGATION WING, THE STATEMENT OF SHRI AMRENDER JH A, THE GENERAL MANAGER, STEEL MELTING SHOP OF THE ASSESSEE COMPANY AN D THE OPINION OF SHRI VED PRAKASH KHICHUKA, CHARTERED ENGINEER, A S PRODUCED BEFORE THE INVESTIGATION WING, WERE CONSIDERED IN DEPTH BY T HE ASSESSING OFFICER. FURTHER, THE ASSESSING OFFICER HIMSELF CALLED FOR AND EXAMINED SHRI A.K. TANEJA, FORMER CHAIRMAN AND MANAGING DIRE CTOR OF A PUBLIC SECTOR UNDERTAKING UNDER THE MINISTRY OF DEFENCE, I. E., MISHRA DHATU NIGAM LTD., HYDERABAD, A RETIRED GOVERNMENT OFFICER HAVING EXTENSIVE EXPERIENCE AND HIGH QUALIFICATION IN THE FIELD OF M ETALLURGY. SHRI TANEJA HAD, IN NO MANNER, EVER REMAINED CONNECTED WITH THE ASSESSEE COMPANY, EITHER DIRECTLY OR INDIRECTLY. THE OPINIO N OF SHRI TANEJA ALSO WENT IN FAVOUR OF THE ASSESSEE. IN THE QUESTIONNAIRE DA TED 28.10.2010 ISSUED TO THE ASSESSEE, DETAILED SPECIFIC QUESTIONS WERE RAI SED, TO WHICH, THE ASSESSEE GAVE ELABORATE POINTED REPLIES TO EST ABLISH ITS CASE, AS DISCUSSED HEREINBEFORE. THE ASSESSEE ALSO PRODUCED BEFORE THE ASSESSING OFFICER SCRAP PURCHASE REGISTER AND PURCHASE VOUCHERS, AS REQUIRED BY THE ASSESSING OFFICER, BESIDES THE REPORT O F THE AUDITOR CONCERNING STOCK AUDIT CONDUCTED BY THE STATE BANK O F INDIA IN RESPECT OF THE ASSESSEES UNIT, WHEREIN NO DISCREPANCY WAS FOUND. A STATEMENT FOR THE MONTH OF SEARCH, I.E., JANUARY, 2009 WAS FILE D BEFORE THE ASSESSING OFFICER. THEREIN, QUANTITY PER CUBIC METRE F OR EACH INWARD TRANSACTION, WAS DEPICTED. THEN, THE ASSESSEE ALSO FURNISH ED BEFORE THE ASSESSING OFFICER, AVERAGE MONTHLY FIGURES FOR THE P ERIOD SUBSEQUENT TO THE SEARCH. THESE FIGURES WERE ENTIRELY I N CONFORMITY WITH THE FIGURE OF STOCK AS WORKED OUT AND SHOWN BY TH E ASSESSEE. THE MONTH-WISE POSITION OF STOCK HELD BY THE ASSESSEE COMPANY, SHOWING PURCHASE MONTH-WISE, INTERNAL ACCRUALS MONTHWISE AND CO NSUMPTION MONTHWISE, WAS GIVEN. AS PER THE STATEMENT, THE ASSESSEE C OMPANY WAS MAKING PURCHASES TO THE TUNE OF 1246.800 MT ON AN AVERAGE PER MENSEM. LIKEWISE, THE ASSESSEE WAS CONSUMING SCRAP TO THE T UNE OF 1227.515 MT PER MONTH, ON AN AVERAGE. THEREFORE, OV ER THE MONTHLY ITA NO.1103/DEL/2012 32 STOCK, THE AVERAGE MONTHLY PURCHASE AND THE AVERAGE M ONTHLY CONSUMPTION OF THE ASSESSEE WAS ENTIRELY IN CONFORMITY IN TER SE. 36. ALL THIS WAS DULY TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER WHILE DECIDING NOT TO MAKE THE ADDITION. A LL THIS EVIDENCE WAS PRODUCED ALSO BEFORE THE LD. CIT. THE LD. CIT, HOWE VER, DID NOT DEEM IT FIT TO EVEN SO MUCH AS MAKE A MENTION THEREOF IN THE ORDER UNDER APPEAL, RENDERING THE IMPUGNED ORDER LIABLE TO BE SE T ASIDE ON THIS SCORE. 37. IN MALABAR INDUSTRIAL COMPANY LTD. VS. CIT, 243 ITR 83 (SC), IT HAS, INTER ALIA, BEEN HELD THAT WHEN AN ASSESSING OFFICE R ADOPTS ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LO SS OF REVENUE, AND WHERE THE COMMISSIONER DOES NOT AGREE WITH SUCH VIE W OF THE ITO, THE ASSESSMENT ORDER CANNOT BE TREATED AS AN ERRONEOUS OR DER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. IN THE PRESENT CASE, AS WOULD BE EVIDENT FROM THE FOREGOING DISCUSSION, THE ASSESSING O FFICER DECIDED NOT TO MAKE THE ADDITION ON ACCOUNT OF EXCE SS STOCK OF SCRAP, AFTER DUE DETAILED INQUIRY INTO THE MATTER AND ON B EING FULLY SATISFIED THAT THERE WAS NO EXCESS STOCK OF SCRAP. THIS VIEW OF TH E ASSESSING OFFICER CANNOT AT ALL BE SAID TO BE A VIEW UNSUSTAINAB LE IN LAW. THE ASSESSING OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW, THUS, NOT MAKING THE ADDITION ON SATISFYING HIMSELF THAT NO ADDITION WAS CALLED FOR IN THE ATTENDING FACTS AND CIRCUMSTANCES. THEREFORE, IN KEEPING WITH MALABAR INDUSTRIAL COMPANY (SUPRA), TH E LD. CIT IS WRONG IN HOLDING THE ASSESSMENT ORDER TO BE ERRONEOUS A ND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 38. IN CIT VS. GABRIEL INDIA LTD., 203 ITR 108 (B OM) IT HAS BEEN HELD THAT MERELY BECAUSE THE COMMISSIONER DIFFERS WITH THE CONCLUSION ITA NO.1103/DEL/2012 33 ARRIVED AT BY THE ASSESSING OFFICER, HE WOULD NOT REVI SE THE ASSESSMENT ORDER. HEREIN, AS DISCUSSED ELABORATELY, THE COMMISSIONER HAS MERELY DIFFERED WITH THE ASSESSING OFFICERS CONCLUSION. THIS, OBVIOUSLY, CANNOT ENTITLE HIM TO REVISE THE ASSESSMENT ORDER. 39. IN CIT VS. SUNBEAM AUTO LTD., 332 ITR 157 (DEL ), IT HAS BEEN HELD THAT WHERE THERE IS NO MATERIAL BEFORE THE COMM ISSIONER TO VARY THE OPINION OF THE ASSESSING OFFICER, THE ASSESSMENT ORDER IS NOT PREJUDICIAL TO THE REVENUE. IN THE PRESENT CASE, AS SEEN, THERE WAS NO MATERIAL WHATSOEVER WITH THE LD. CIT TO DISTINGUISH T HE OPINION HELD BY THE ASSESSING OFFICER. 40. IN CIT VS. ANIL KUMAR SHARMA, 335 ITR 83 (DEL ), THE FINDINGS OF THE TRIBUNAL THAT THE ASSESSING OFFICER HAD MADE INQUIR Y AND THAT THE COMMISSIONER WAS NOT ABLE TO POINT OUT ANY ERROR IN HI S ORDER, WAS UPHELD, HOLDING THE ORDER OF REVISION TO BE NOT VALI D. IN THE PRESENT CASE TOO, WE FIND NOTHING IN THE IMPUGNED ORDER TO P OINT OUT ANY ERROR IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER, AS DISCU SSED, HAS MADE DUE DETAILED INQUIRY BEFORE DECIDING NOT TO MA KE THE ADDITION. 41. IN CIT VS. MEHROTRA BROTHERS, 270 ITR 157 (MP), IT WAS HELD THAT WHEN THE ASSESSING OFFICER CONSIDERS THE RECORDS BEFORE H IM AND COMPLETES THE ASSESSMENT AFTER CONSIDERING THE EVIDENCE F ILED AND BEING SATISFIED THEREWITH, THE ORDER OF REVISION ON TH E GROUND THAT THE ASSESSING OFFICER DID NOT MAKE PROPER INQUIRY IS NOT VA LID. IN THE PRESENT CASE, AS CONSIDERED, THE ASSESSING OFFICER HAS DULY TAKEN INTO CONSIDERATION THE RECORDS BEFORE HIM AND THE EVIDENCE FILED AND IT WAS ONLY THEREAFTER THAT HE GOT SATISFIED THAT NO ADDITIO N WAS TO BE MADE. HE ALSO CARRIED OUT INVESTIGATION INTO THE MATTER OF HIS OWN ACCORD BY SEEKING THE EXPERT OPINION OF SHRI A.K. TANEJA, FORM ER CHAIRMAN AND ITA NO.1103/DEL/2012 34 MD OF MISHRA DHATU NIGAM LTD., HYDERABAD, A PUBLIC S ECTOR UNDERTAKING UNDER THE MINISTRY OF DEFENCE. 42. IN CIT VS. ARVIND JEWELLERS, 259 ITR 502 (GUJ) , IT WAS HELD THAT SINCE MATERIAL WAS THERE ON RECORD AND THE SAID MATER IAL WAS CONSIDERED BY THE ASSESSING OFFICER AND A PARTICULAR VIE W WAS TAKEN, THE MERE FACT THAT A DIFFERENT VIEW CAN BE TAKEN, SH OULD NOT BE THE BASIS FOR ACTION U/S 263 OF THE ACT. THE PRESENT IS A C ASE IN AN EXACTLY SIMILAR SITUATION. HERE, THERE WAS MATERIAL ON RECORD . THE SAID MATERIAL WAS CONSIDERED BY THE ASSESSING OFFICER AND THER EAFTER, A PARTICULAR VIEW WAS TAKEN, I.E., NO ADDITION WAS MADE . THE IMPUGNED ORDER JUST EXPRESSES A VIEW DIFFERENT FROM THAT OF THE ASSESSING OFFICER. SUCH EXPRESSION DOES NOT ENTITLE INVOCATION OF POWERS U /S 263 OF THE ACT. 43. IN CIT, DELHI-IV VS. INTERNATIONAL TRAVEL HOUSE LTD, THE HONBLE DELHI HIGH COURT, IN ITA, NO.94/2010 (COPY AT PAGES 41-42 OF THE CASE LAWS PAPER BOOK FILED BY THE ASSESSEE), CONFIRMED THE TR IBUNALS ORDER WHEREIN IT WAS HELD BY THE TRIBUNAL THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS AFTER PROPER ALLOCATION OF AMOUNT AND THE ASSESSING OFFICER HAD CONSIDERED THE DETAILS AND THE EXPL ANATION FILED BY THE ASSESSEE AND, THEREFORE, THE ORDER PASSED BY THE A SSESSING OFFICER U/S 143 (3) OF THE ACT WAS NEITHER ERRONEOUS N OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS FINDING OF THE TRI BUNAL WAS UPHELD BY THE HONBLE HIGH COURT. HERE TOO, AS DISCUSSED, THE SIT UATION IS ENTIRELY SIMILAR. IT WAS AFTER PROPER ELABORATE ENQUIRY, THAT THE ASSESSING OFFICER DECIDED NOT TO MAKE THE ADDITION. NO ERROR OR PREJUDICE TO THE INTERESTS OF THE REVENUE CAN, THUS, BE SAID TO BE EXISTI NG IN THE ASSESSMENT ORDER. ITA NO.1103/DEL/2012 35 44. IN SAW PIPES LTD. VS. ADDL. CIT 3 SOT 237 (DEL) , IT WAS HELD THAT MERELY BECAUSE PROPER INQUIRY WAS NOT CONDUCTED BY TH E ASSESSING OFFICER, THE ASSESSMENT ORDER WOULD NOT BECOME PREJUDI CIAL TO THE INTERESTS OF THE REVENUE. IN THE PRESENT CASE, AS SEEN, PROPER INQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER AND SO, THE LD. CIT WAS IN ERROR IN HOLDING THE ASSESSMENT ORDER PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. 45. IN ADDL. CIT, RANGE-I, GHAZIABAD VS. SHIPRA ESTA TE LTD. 35 SOT 256 (DEL), IT WAS HELD WHERE ACTING IN ACCORDANCE W ITH THE LAW, THE ASSESSING OFFICER FRAMED AN ASSESSMENT ORDER, THE SAME CANN OT BE BRANDED AS ERRONEOUS, SIMPLY BECAUSE ACCORDING TO THE C OMMISSIONER, THE ASSESSMENT ORDER SHOULD BE WRITTEN MORE ELABORATELY. THOUGH IN THE PRESENT CASE, THE ASSESSMENT ORDER DOES NOT ELABORATE THE REASONS FOR NOT MAKING THE ADDITION, FIRSTLY, AS HELD IN SHI PRA ESTATE (SUPRA), THIS BY ITSELF, DOES NOT RENDER THE ASSESSMENT ORDER ERRO NEOUS. ALSO, IT IS NOT IN THE HANDS OF THE ASSESSEE AS TO HOW THE ASSESSMENT O RDER IS WRITTEN. MOREOVER, AS DISCUSSED, THE VOLUMINOUS EVIDENC E HIMSELF RECORDED BY THE ASSESSING OFFICER HIMSELF, BESIDE THE EVI DENCE PRODUCED BY THE ASSESSEE, HAS BEEN DULY TAKEN INTO ACCOU NT BY THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER. THEREF ORE, THE ASSESSMENT ORDER CAN NEITHER BE SAID TO BE ERRONEOUS, NO R PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 46. IN VIEW OF THE ABOVE, FINDING FORCE IN THE GRIE VANCE RAISED BY THE ASSESSEE IN THIS REGARD, GROUND NO.3 IS ACCEPTED. 47. SO FAR AS THE ONLY OTHER ISSUE ON WHICH THE LD. CI T HAS HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IN THE SHOW CAUSE NOTICE, THE LD. CIT OB SERVED AS FOLLOWS:- ITA NO.1103/DEL/2012 36 B). DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE AMOUNT OF RS.3,90,00 ,000/- IN CASH DEPOSITED IN YOUR BANK ACCOUNT SHOULD NOT BE TREATED AS INCOME IN ADDITION TO THE INCOME DECLARED BY YOU. THE ASSESSEE STATED THAT THIS AMOUNT WAS RECEIVED FROM DIFFERENT DEBTORS BUT IT WAS NOT IN A POSITION TO GIVE THE NAMES AND ADDRESSE S OF PERSONS FROM WHOM CASH WAS RECEIVED. IT STATED THAT THIS AMOUNT WAS PART OF AMOUNT SURRENDERED AT THE TIME OF SEA RCH. IT FURTHER STATED, THE ABOVE OFFER OF UNDISCLOSED INCOME BY THE ASSESSEE COMPANY WAS ACCEPTED WITHOUT PUTTING ANY FURTHE R CONDITION BY THE LD. ADDL. DIRECTOR. ACCORDING TO THE AB OVE LETTER OF OFFER THE ASSESSEE COMPANY IS ENTITLED TO RAISE SU NDRY DEBTORS WITH RS.3,90,00,000/- WITHOUT MAINTAINING ANY NAME OR A DDRESS OR IDENTIFICATION. FURTHER ON REALIZATION THE SAID DEB TOR IS TO BE CREDITED AND CASH IS DEBITED. FOLLOWING THE TERMS AND C ONDITIONS AS ABOVE THE ASSESSEE COMPANY HAS ACCOUNTED FOR THE UNDISCLOSED INCOME BY DEBITING SUNDRY DEBTORS. ON REA LIZATION OF SUNDRY DEBTORS THE CASH WAS RECEIVED AND DEBTORS WERE CREDITED. FINALLY, CASH RECEIVED WAS DEPOSITED IN THE BANK.' 48. THE ASSESSEE, IN RESPONSE, SUBMITTED THAT IT HAD DEPO SITED ` 390 LAC IN CASH WITH THE STATE BANK OF INDIA, PATIALA, P UNJAB, DURING THE PERIOD FROM 03.03.2009 TO 16.03.2009; THAT THIS AMOU NT REPRESENTED INCOME DECLARED BY THE ASSESSEE AND FORMED PART OF THE DISCLOSURE OF ` 22 CRORES MADE BY THE GROUP COMPANIES OF STAR WIRE IN DIA LTD., THE ASSESSEE COMPANY. IT WAS SUBMITTED THAT SHRI M.K. GUPTA , IN HIS STATEMENT DATED 20.02.2009, RECORDED U/S 132 OF THE ACT, IN RESPONSE TO A SPECIFIC QUESTION, HAD STATED THAT THE TRANSACTION S RECORDED IN ANNEXURES A-1 AND A-2 WERE SETTLED TRANSACTIONS AND NO NE OF THEM WAS PENDING; AND THAT SINCE THE ADVANCES GIVEN IN THE THREE CONCERNED CASES COULD NOT BE ESTABLISHED, THESE ADVANCE S HAD BEEN SURRENDERED AS THE ASSESSEES INCOME AND WOULD BE ACCOUNTE D FOR AS AND WHEN RECEIVED. A DECLARATION CHART WAS FURNISHE D AND IT WAS SUBMITTED THAT IT CLEARLY ESTABLISHED THAT THE INCOME SURRENDERED BY THE ASSESSEE WAS AVAILABLE WITH THE ASSESSEE IN THE FORM OF ADVANCES GIVEN, THOUGH SUCH ADVANCES COULD NOT BE EXPLAINED. IT WAS ALSO EXPLAINED THAT THE ASSESSING OFFICER HAD MADE EXTENSIVE INQUIRIES INTO ITA NO.1103/DEL/2012 37 THE MATTER, BY WAY OF QUESTION NOS. 1 AND 2 OF THE ASSE SSING OFFICERS QUESTIONNAIRE DATED 28.10.2010. IT WAS SUBMITTED THAT THE ASSESSEE HAD GIVEN DETAILED REPLIES TO SUCH QUESTIONS RAISED BY T HE ASSESSING OFFICER, WHEREIN IT HAD BEEN EXPLAINED THAT OUT OF THE DISCLOSURE MADE BY THE ASSESSEE, A SUM OF ` 390 LACS REPRESENTED SUNDRY DEB TORS, ARISING ON ACCOUNT OF PROPERTY TRANSACTION FOUND ENTE RED IN NEEL KAMAL DIARY; AND THAT THE ASSESSEE HAD PREPARED A MEMORANDUM ACCOUNT, CONSISTING OF CASH ACCOUNT, INCOME ACCOUNT, SUPPLIER ACCOUNT, CUSTOMER ACCOUNT, SALE AND PURCHASE ACCOUNT, ETC., WHI CH WAS FILED BEFORE THE ASSESSING OFFICER, EXPLAINING AS TO HOW THE U NDISCLOSED INCOME WAS COMPUTED, GENERATED AND UTILIZED, THE UND ISCLOSED INCOME HAVING BEEN ACCOUNTED FOR IN THE ASSESSEES BOOKS OF ACCO UNT FOR ASSESSMENT YEAR 2009-10, SHOWING IT AS INCOME IN THE ANNU AL ACCOUNT UNDER SALES AND MISCELLANEOUS INCOME, THE BALANCE UN DISCLOSED INCOME HAVING BEEN DECLARED IN THE COMPUTATION OF I NCOME FOR ASSESSMENT YEARS 2007-08 TO 2009-10. IT WAS, FURTHER, EX PLAINED BEFORE THE LD. CIT, IN THE REPLY FILED BY THE ASSESSEE, THAT THE INCOME SURRENDERED, I.E., OF ` 390 LACS, HAD NOT BEEN REPRESE NTED IN THE FORM OF ASSETS IN ANY WAY OR IN ANY MANNER; THAT THE INCOME BASED NEITHER ON ANY DOCUMENT OR ANY REAL ESTATE, CANNOT BE SAID TO BE REAL INCOME AND CANNOT BE BROUGHT TO TAX; THAT IT WOULD BECOME REAL INCOME ONLY AS AND WHEN THE DEBTOR GETS REALIZED AND THE REALIZED CASH IS DEPOSITED IN THE BANK ACCOUNT; THAT SO, THE ASSESSMENT OF ` 390 LACS REPRESENTED THE INCOME DEPOSITED INTO THE BANK ACCOUN T IN THE MONTH OF MARCH, 2009, IN THE FORM OF CASH, NOT ATTRACTING THE PROVISIONS OF SECTION 68 OF THE ACT AT ALL; AND THAT IF THE ASSESSEE S STAND ON DEBTOR WERE TO BE DISBELIEVED, THE SURRENDER OF INCOME ITSELF WOULD NOT FALL FOR ASSESSMENT UNDER SECTIONS 68 OR 69 OR 69A OR 69B OR 69C OR 69D OF THE ACT. ITA NO.1103/DEL/2012 38 49. THE LD. CIT, HOWEVER, DID NOT AGREE WITH THE EX PLANATION OFFERED BY THE ASSESSEE AND HE DECLARED THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON TH IS SCORE ALSO. WHILE DOING SO, IT WAS HELD AS FOLLOWS:- 9. I HAVE GONE THROUGH THE ASSESSMENT RECORDS CAREFULLY. THE RELEVANT FACTS ARE AS UNDER:- I. THE SURRENDER OF INCOME WAS MADE BY THE ASSESSEE ONLY, I.E. ON 30.01.2009, IN THE FORM OF A LETTER REPRODUCED ABOVE IN PARAGRAPH 4(A). II. IN THE SURRENDER LETTER DATED 30.01.2009 THE MANNER OF EARNING INCOME WAS NOT MENTIONED AT ALL. THIS IS ONE OF THE MANDATORY INGREDIENTS FOR MAKING SURRENDER U/S 132(4) OF THE ACT. IT IS NOT OPEN FOR THE ASSESSEE TO FURNISH IMAGINARY SOURCE OF INCOME. III. IN THE CHART SUBMITTED ON 20.02.2009 IN THE VTH COLUMN THE ASSESSEE HAS GIVEN SOURCE OF INCOME AND IN THE VI COLUMN IT HAS GIVEN 'HOW TO BE ACCOUNTED FOR'. THE VI COLUMN HAS NO MEANING AT ALL. THE SOURCE AND MANNER OF EARNING INCOME HAS TO BE RELATED TO THE TRANSACTION OF PURCHASE AND SALE OF LAND IN CASH, AS MENTIONED HERE. IV. IF THE SOURCE OF INCOME IS AMOUNT RECOVERED/RECOVERABLE FROM DEBTORS, SUCH SOURCE MUST BE MENTIONED. NO SUCH MENTION HAS BEEN MADE IN THE SURRENDER LETTER DATED 30.01.2009. IN THIS LETTER IT WAS NOT MENTIONED THAT SURRENDER WAS BEING MADE ON ACCOUNT OF RECEIVABLES FROM DEBTORS. THE SURRENDER WAS MADE ON ACCOUNT OF CASH, JEWELLERY, LOOSE PAPERS AND DOCUMENTS SEIZED. NOWHERE IN ANY DOCUMENTS THERE IS MENTION OF ANY DEBTOR. IT IS ONLY AN AFTERTHOUGHT OF THE ASSESSEE COMPANY IN ORDER TO LAUNDER UNACCOUNTED CASH IN ITS POSSESSION WHICH WAS NOT FOUND AND SEIZED AT THE TIME OF SEARCH. IT WAS SUCH CASH WHICH WAS DEPOSITED IN BANK ACCOUNT AND THE SOURCE OF WHICH IS NOT BEING DISCLOSED. ITA NO.1103/DEL/2012 39 V. EVEN IN THE CHART FURNISHED ON 20.02.2009, NO DETAIL OF ANY DEBTOR HAS BEEN GIVEN. VI. W HEN THE AO ASKED THE ASSESSEE TO FURNISH THE NAMES OF DEBTORS, IT WAS NOT GIVEN. VII. THE ASSESSEE DID NOT FURNISH THE NAME EVEN AFTER CASH, STATED TO BE RECEIVED FROM DEBTORS, WAS DEPOSITED IN BANK ACCOUNT. VIII. VIII. THE DEPOSIT OF CASH IN BANK ACCOUNT IN MARCH, 2009 AND SURRENDER MADE BY LETTER DATED 30.01.2009 HAS NO RELATION AT ALL. SURRENDER MADE BY THE ASSESSEE DOES NOT GIVE ANY RIGHT TO THE ASSESSEE TO CREDIT CASH IN ITS ACCOUNT WITHOUT GIVING SOURCE AND SATISFACTORY EXPLANATION. IX. A S REGARD DEPOSIT OF CASH OF RS.3,90,00,000/- IN BANK IN MARCH, 2009 THE ASSESSEE HAS TO FURNISH EXPLANATION REGARDING THE SOURCE OF DEPOSITS. IT HAS NOT GIVEN ANY EXPLANATION TAKING SHELTER BEHIND THE CHART FURNISHED ON 20.02.20-09 THAT IT HAD MENTIONED THAT IT WAS ENTITLED TO RAISE SUNDRY DEBTORS FOR 3.90 CRORE. NO SUCH ENTITLEMENT IS PROVIDED TO ANY ASSESSEE UNDER ANY PROVISIONS OF THE ACT. THE ASSESSEE CANNOT LAUNDER BLACK MONEY IN THE GARB OF SURRENDER MADE ON THE DATE OF SEARCH. THE SIMPLE FACT IS THAT THE ASSESSEE DEPOSITED CASH IN THE BANK ACCOUNT IN MARCH, 2009 AND SOURCE OF SUCH DEPOSITS REMAIN UNEXPLAINED. THE ASSESSEE IS REFUSING TO EXPLAIN THE SOURCE. SUCH UNEXPLAINED CASH DEPOSITS ARE COVERED U/S 68 OF THE I. T. ACT. THE ASSESSING OFFICER FAILED TO BRING THIS TO TAX AND, ACCORDINGLY, THE ASSESSMENT ORDER BECOMES ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. X. BASED ON ABOVE, I AM OF THE OPINION THAT CASH DEPOSITS OF RS. 3,90,00,000 IN THE BANK ACCOUNT OF THE ASSESSEE COMPANY REMAIN UNEXPLAINED AND HAS NOT BEEN BROUGHT TO TAX DURING THE ASSESSMENT YEAR 2009-10, AS A RESULT OF WHICH THE ASSESSMENT ORDER HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ITA NO.1103/DEL/2012 40 10. THE ASSESSING OFFICER IS DIRECTED TO REFRAME THE ASSESSMENT ORDER IN VIEW OF THE CONCLUSION ARRIVED AT IN PARAGRAPH 6 AND 9 ABOVE AND ALSO INITIATE PENALTY PROC EED INGS FOR CONCEALMENT OF INCOME. 50. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE HAS C ONTENDED THAT HERE ALSO, THE LD. CIT HAS ERRED IN PROPOSING AD DITION OF ` 390 LAC ON ACCOUNT OF INTRODUCTION OF CASH AS UNEXPLAINED CA SH DEPOSIT U/S 68 OF THE IT ACT; THAT THE LD. CIT ILLEGALLY IGNORED T HE FACT THAT THIS AMOUNT HAD ALREADY BEEN VOLUNTARILY SURRENDERED BY THE ASSE SSEE DURING THE INVESTIGATION PROCEEDINGS IN THE COURSE OF THE SEARCH C ONDUCTED ON THE ASSESSEE AND IT WAS OFFERED AS ADDITIONAL INCOME; THAT T HE ACTION OF THE LD. CIT HAS LED TO DOUBLE TAXATION OF THE AMOUNT, CA USING PREJUDICE TO THE ASSESSEE NO END; THAT THE ASSESSEE HAD SHOWN THIS AMOUNT AS THE ASSESSEES INCOME; AND THAT IT WAS INTRODUCED IN THE ASSESSEE S BANK ACCOUNT. ATTENTION HAS BEEN DRAWN TO APB 70, WHICH I S A SCHEDULE OF OTHER INCOME OF THE ASSESSEE. ATTENTION HAS BEEN DRAW N TO APB 81, WHICH IS THE SUMMARY OF ` 713 LACS SHOWN AS MISCELLANEOUS INCOME IN THE LEDGER ACCOUNT OF THE ASSESSEE FOR THE PERIOD FROM 01.04.2008 TO 31.03.2009, WHEREIN THE AMOUNT OF ` 390 LACS STANDS IN CLUDED. IT HAS BEEN CONTENDED THAT IT IS WELL SETTLED THAT IF AN AMO UNT IS SURRENDERED AND THAT AMOUNT IS INTRODUCED IN THE BOOKS OF THE ASSESSE E OR DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE, IT CANNOT BE TAXED TWICE IN THE SAME YEAR. ATTENTION HAS BEEN DRAWN TO APB 26 TO 27, WHICH CONTAIN QUESTION NOS.1 AND 2 RAISED BY THE ASSESSING OFFICER IN THE NOTICE DATED 28.10.2010 ISSUED UNDER SECTIONS 153A /142(1) READ WITH SECTION 143 (3) OF THE IT ACT (APB 21-35). IT HAS BEEN ARGUED THAT THIS SHOWS THAT THE ISSUE WAS ACTIVELY CONSIDERED BY THE A SSESSING OFFICER, MAKING EXTENSIVE INQUIRIES INTO IT. ATTENTI ON HAS BEEN DRAWN TO APB-45, WHICH IS A PART OF THE ASSESSEES REPLY TO THE AF ORESAID NOTICE ISSUED BY THE ASSESSING OFFICER. THIS REPLY IS CONTAINED A T APB 36-53. IT HAS BEEN POINTED OUT THAT IN PARA 20(C) AT APB 45 , THE ASSESSEE HAS ITA NO.1103/DEL/2012 41 GIVEN A SPECIFIC REPLY TO THE QUERY RAISED BY THE ASSESSI NG OFFICER BY WAY OF QUESTION NOS.1 AND 2 OF HIS QUESTIONNAIRE. IT H AS BEEN POINTED OUT THAT AT APB-46, IN SUB-PARA (E) TO PARA 20, A CO MPLETE BIFURCATION OF THE AMOUNT HAS BEEN GIVEN. 51. ON THE OTHER HAND, THE LD. DR HAS STRONGLY SUPPORT ED THE IMPUGNED ORDER IN THIS REGARD. IT HAS BEEN CONTENDED THAT THE ISSUE WAS NEVER EXAMINED BY THE ASSESSING OFFICER AND THAT ON LY THE DISCLOSURE ON THE BASIS OF UNDISCLOSED DEBTORS WAS ACCEPTE D, WHICH HAS RIGHTLY BEEN CALLED INTO QUESTION BY THE LD. CIT. 52. IN THIS REGARD, IT IS SEEN, THAT THE AMOUNT OF ` 3 90 LAC REPRESENTED SUNDRY DEBTORS ARISING ON ACCOUNT OF PROPE RTY TRANSACTION ENTERED IN THE NEELKAMAL DIARY FOUND IN THE COURSE O F SEARCH. SINCE AS PER THE ASSESSEE, THE AMOUNT COULD NOT BE EXPLAINED, IT WAS DISCLOSED BY WAY OF SURRENDER. THE ASSESSING OFFICER, IN HIS QUESTI ONNAIRE PUT SPECIFIC QUERIES IN THIS REGARD TO THE ASSESSEE, THEREBY E VINCING HIS HAVING MADE DUE INQUIRY INTO THE MATTER. THE ASSESSEE G AVE SPECIFIC REPLY TO THE QUESTIONS ASKED BY THE ASSESSING OFFICER. U PON SURRENDER, THE AMOUNT WAS BROUGHT TO TAX. THE ASSESSEE PAID THE TA X. NOW, AS CORRECTLY CONTENDED, IF AN AMOUNT IS SURRENDERED AND IT IS INTRODUCED EITHER IN THE BOOKS OF ACCOUNT OR IN THE ASSESSEES BANK ACCOUNT, IT CANNOT BE TAXED TWICE IN THE SAME YEAR. IN THE REPL Y FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, A COMPLETE BIFURCATI ON OF THE AMOUNT OF ` 7.82 CRORES WAS GIVEN. THIS INCLUDED THE AMOUNT OF ` 3.90 CRORES, I.E., UNDISCLOSED INCOME LYING WITH SUNDRY DEBT ORS. 53. THE LD. CIT HAS NOT BROUGHT ANYTHING ON RECORD CONTRARY TO THE AFORE-DISCUSSED FACTS. THE ASSESSING OFFICER, ON THE OTHER HAND, HAD CONDUCTED PROPER INQUIRY INTO THE MATTER. THEREFOR E, IT WAS NOT FOR THE COMMISSIONER TO TERM THE ASSESSMENT ORDER IN THIS REGARD AS ITA NO.1103/DEL/2012 42 ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVE NUE, IN THE ABSENCE OF ANY ADVERSE MATERIAL AND THEREBY, TO IMPOSE DOUBLE TAXATION ON THE AMOUNT. HERE ALSO, IT IS ONLY THAT T HE LD. CIT WANTS TO HOLD AN OPINION DIFFERENT FROM THAT OF THE ASSESSING OF FICER, WHICH IS IMPERMISSIBLE WHILE EXERCISING POWERS U/S 263 OF THE ACT . 54. THUS, IN VIEW OF THE ABOVE DISCUSSION, WITH REGARD TO THIS ISSUE ALSO, WE HOLD THAT THE ASSESSMENT ORDER IS NEITHER ERRONE OUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND THE L D. CIT HAS ERRED IN HOLDING TO THE CONTRARY. 55. THE ASSESSEES GRIEVANCE IN THIS REGARD, BY WAY OF GROUND NO.4 IS, HENCE, ALSO ACCEPTED. 56. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS AL LOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 23.11.20 12. SD/- SD/- [G.D. AGRAWAL] [A.D. JAIN] VICE PRESIDENT JUDICIAL MEMBER DATED, 23.11.2012. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR, ITAT, DELHI BENCHES