Dy.CIT,Cir.3, (1), Kolhapur, V. J.D.Thote Dairies, Sangli,

ITA 115/PUN/2000

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49830 (ITAT-PUNE)
• Duration Of Justice: 11 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-04-2011
• Assessment Year: misc
• Appeal Filed On: 17-02-2000
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Block assessment; Onus to prove
• Section: 143(3); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO.115/PN/2000 (BLOCK ASSTT. YEARS: 1987-88 TO 97-98) AND I.T.A. NO.286/PN/2000 (ASSTT. YEAR: 1996-97) DY. COMMISSIONER OF INCOME-TAX, .. APPE LLANT CIR.3(1), KOLHAPUR VS. M/S J.D. THOTE DAIRIES, .. RESPONDENT A/P ASHTA, TAL. WALVA, SANGLI ASSESSEE: SHRI NIKHIL PATHAK DEPARTMENT BY: SHRI RAMINDER KAUSHAL ORDER PER G.S. PANNU, AM THE CAPTIONED APPEALS RELATE TO ONE AND SAME ASSES SEE AND, THEREFORE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMPOSITE ORDER FOR THE SAKE OF BREVITY. 2. WE SHALL FIRST TAKE UP ITA NO 115/PN/2000 FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME-TAX (APPEALS) DATED 15.12.1999 WHICH, IN TURN, HAS ARISEN FROM THE BLOC K ASSESSMENT ORDER DATED 22.02.1999 PASSED BY THE ASSESSING OFFICER UNDER SE CTION 158BC OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO T HE BLOCK PERIOD 13.11.1985 TO 5.2.1997. 3. THE MAIN DISPUTE INVOLVED IN THIS APPEAL REVOLVE S AROUND THE DELETION OF THE ADDITION OF RS 39,39,315/- MADE BY THE ASSESSIN G OFFICER AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK ASSESSMENT YEA RS 1987-88 TO 1997-98 (PART). THE FACTS LEADING TO THE DISPUTE UNDER CONS IDERATION ARE THAT THE ASSESSEE FIRM IS ENGAGED IN DAIRY BUSINESS HAVING OPERATIONS AT ASTHA, PUNE AND MUMBAI. 2 THE BUSINESS OF THE ASSESSEE INVOLVES COLLECTION, P ROCESSING AND SALE OF MILK AND MILK PRODUCTS LIKE BUTTER, GHEE, CHAKKA, SHRIKH AND ETC. THERE WAS A SEARCH ACTION IN THE CASE OF THE ASSESSEE FIRM ON 5.2.1997 DURING THE COURSE OF WHICH CERTAIN DOCUMENTS, REGISTERS, CASH BOOK ETC. WERE S EIZED. THESE INCLUDED CERTAIN MEMO BOOKS AND MEMO FILES. THE ASSESSING OFFICER NO TED THAT MATERIAL SEIZED FROM MUMBAI INCLUDED MEMO-SLIPS THAT APPARENTLY CON TAINED DETAILS OF MILK RECEIVED AND SOLD ON A DAY TO DAY BASIS. ACCORDING TO THE ASSESSING OFFICER, CASH GENERATED THROUGH SALES ADMITTEDLY MADE AT MUM BAI AND RECORDED IN THE SEIZED MEMO-SLIPS WAS BEING SENT FROM MUMBAI TO ASH TA SOMETIMES THROUGH DRIVERS OF TANKERS BY WAY OF TAPAL ROKH AND SOMETIM ES THROUGH DD ETC. THE ASSESSING OFFICER FOUND THAT TOTAL DISPATCH OF SALE PROCEEDS FROM MUMBAI TO ASHTA DURING THE ACCOUNTING YEAR RELEVANT TO THE AS SESSMENT YEAR 1996-97 CAME TO RS 8,77,58,675/- AS PER THE DETAILS GIVEN I N PARA 3 OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ORDER. AS PER THE ASSESSIN G OFFICER AGAINST THE ABOVE- SAID AMOUNT OF RS 8,77,58,675/- THE ASSESSEE HAD AC TUALLY DEPOSITED A TOTAL SUM OF RS 6,66,68,000/- IN ITS BANK ACCOUNT FOR THE ACC OUNTING YEAR 1995-96. AS SUCH, THE ASSESSING OFFICER INFERRED THAT A SUM OF RS 2,1 0,90,685/- (BEING THE DIFFERENCE OF RS 8,77,58,675/- AND RS 6,66,68,000/- ) REPRESENTED THE AMOUNT OF CASH SALES THAT SHOULD HAVE BEEN CREDITED TO THE SA LES ACCOUNT OF THE ASSESSEE DURING THE ACCOUNTING YEAR 1995-96. ON GOING THROUG H THE SALES ACCOUNT AS APPEARING IN THE COMPUTERIZED BOOKS OF ACCOUNT, THE ASSESSING OFFICER FOUND THAT AGAINST THE ABOVE CREDITABLE MUMBAI CASH SALES OF RS 2,10,90,685/-, THE ASSESSEE HAD CREDITED A HIGHER AMOUNT OF RS 2,50,30 ,000/- IN IT BOOKS OF ACCOUNT FOR THE ACCOUNTING YEAR 1995-96. FROM THESE FACTS, THE ASSESSING OFFICER CONCLUDED THAT THE DIFFERENCE OF RS 39,30,315/- (RS 2,50,30,000/- (MINUS) RS 2,10,90,685/-) REPRESENTED UNACCOUNTED MONEY CREDIT ED IN THE ASSESSEES BOOKS UNDER THE GUISE OF MONEY SENT FROM MUMBAI THROUGH TAPAL. 4. ON BEING CONFRONTED IN THIS REGARD, IT WAS PLEAD ED BY THE ASSESSEE THAT THE DIFFERENCE, IF ANY, WAS DUE TO THE FACT THAT EN TRIES MADE IN THE MEMO-BOOKS DID NOT REFLECT THE CORRECT PICTURE; THAT MEMO-BOOK S WERE WRITTEN IN A MANNER AS 3 IF THE ENTIRE SALE PROCEEDS HAD BEEN RECOVERED IMME DIATELY, BUT THIS WAS NOT THE CASE AND THE PROCEEDS OF CREDIT SALES WERE ALWAYS B EING RECOVERED AFTER SOME GAP; THAT QUITE OFTEN SHRI J D THOTE HAD CARRIED CA SH FROM MUMBAI TO ASHTA AND THESE AMOUNTS WERE NOT RECORDED IN THE MEMO-BOOKS. THE ASSESSING OFFICER REJECTED THE EXPLANATION PUT-FORTH BY THE ASSESSEE, AS IT COULD NOT SUBSTANTIATE THE SAME BY FURNISHING PARTY-WISE DETAILS TOGETHER WITH CASH CARRIED BY SHRI J D THOTE ON VARIOUS OCCASIONS. THE ASSESSING OFFICER A CCORDINGLY HELD THAT THE SAID CREDIT OF RS 39,39,315/- WAS ASSESSABLE IN THE ASSE SSES HANDS AS ITS UNDISCLOSED INCOME OF THE BLOCK PERIOD AND CONSEQUE NTLY ASSESSED THE SAME IN THE BLOCK ASSESSMENT ORDER AGAINST WHICH THE ASSESS EE APPEALED TO THE FIRST APPELLATE AUTHORITY. 5. AFTER HEARING THE ASSESSEE AS WELL AS THE ASSESS ING OFFICER AND AFTER THOROUGHLY EXAMINING THE BOOKS OF ACCOUNT AND THE R ELEVANT MEMO-BOOKS, THE COMMISSIONER OF INCOME-TAX (APPEALS) OBSERVED THAT IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE FIGURE OF SALES RECORDED IN THE MEMO-BOOKS WAS HIGHER THAN THAT RECORDED IN THE COMPUTERIZED BOOKS ON ACCOUNT OF SALES MADE AT MUMBAI. ACCORDING TO THE COMMISSIONER OF INCOME-TAX (APPEALS), IT IF WERE SO, CERTAINLY THE ASSESSING OFFICER WOULD HAVE BEEN JUS TIFIED IN TREATING THE DIFFERENCE AS UNDISCLOSED INCOME OF THE ASSESSEE, BUT THE FACT WAS THAT THE PROCEEDS OF SALE AT MUMBAI WERE LOWER IN THOTE DAIRIES MUMBAI A/C IN COMPARISON TO THAT SHOWN IN THE COMPUTERIZED BOOKS OF ACCOUNT BY RS 39 ,39,315/-. AS PER THE COMMISSIONER OF INCOME-TAX (APPEALS), IT WAS INCUMB ENT UPON THE ASSESSING OFFICER TO SHOW THAT THE AMOUNT OF RS 39,39,315/- W AS NOT PART OF ASSESSEES TURNOVER BUT REPRESENTED UNDISCLOSED CASH. THE COMM ISSIONER OF INCOME-TAX (APPEALS) FURTHER OBSERVED THAT SINCE THE UNEXPLAIN ED CASH DEPOSIT OF RS 30,30,315/- HAS ALREADY BEEN ASSESSED TO TAX IN REG ULAR ASSESSMENT IN THE ASSESSEES CASE BY WAY OF TURNOVER DISCLOSED IN BOO KS OF ACCOUNT, THE ASSESSING OFFICER COULD NOT HAVE TREATED THE SAME AS UNDISCLO SED INCOME FOR THE PURPOSE OF THE BLOCK ASSESSMENT. THE COMMISSIONER OF INCOME -TAX (APPEALS) ULTIMATELY HELD THAT THE AMOUNT OF RS 39,39,315/- WAS WRONGLY TAXED AS ASSESSEES 4 UNDISCLOSED INCOME AS IT WAS ALREADY INCLUDED IN TH E ASSESSEES TURNOVER AND HAD BEEN ALREADY CONSIDERED IN THE ASSESSEES HANDS . HE ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO DELETE THE SAID SUM FROM T HE COMPUTATION OF UNDISCLOSED INCOME OF THE ASSESSEE. BEING AGGRIEVED WITH THE DE CISION OF THE COMMISSIONER OF INCOME-TAX (APPEALS), REVENUE HAS TAKEN UP THE D ISPUTE IN FURTHER APPEAL BEFORE US. 6. THE NEXT ISSUE INVOLVED IN THIS APPEAL RELATES T O THE UNDISCLOSED INCOME OF RS 7,33,400/- BEING UNACCOUNTED SALES OF BUTTER, GH EE AND SHREEKHAND ETC. RECORDED IN THE SEIZED REGISTER A-8 OF THE PANCHNAM A DATED 6.2.1997. DURING THE COURSE OF SEARCH ACTION, A REGISTER GIVING DETAILS OF MILK PRODUCTS WAS FOUND AND SEIZED VIDE SR. NO. 8 OF ANNEXURE A TO THE PANCHANA MA DATED 6.2.1997. IT WAS EXPLAINED BEFORE THE ASSESSING OFFICER THAT WHENEVE R THERE WAS ANY SURPLUS MILK AVAILABLE WITH M/S J D THOTE DAIRIES AT MUMBAI, THE ASSESSEE USED TO PREPARE BUTTER, GHEE, CHAKKA AND SHREEKHAND OUT OF IT AND S OLD. THE SALES OF THESE PRODUCTS WERE NOT SEPARATELY RECORDED IN THE COMPUT ERISED/MANUAL BOOKS OF ACCOUNT. THE SAME WERE ALSO NOT RECORDED IN THE MEM OS. THE ASSESSEE FURTHER CLAIMED THAT SINCE THE ENTIRE MILK WAS SOLD AND ACC OUNTED FOR AS SALE OF MILK, THERE WAS NO SEPARATE SALE OF THE ABOVE MILK PRODUC TS RECORDED ANYWHERE. HOWEVER, THE ASSESSEE ALSO COULD NOT SHOW ANY EVIDE NCE OF PAYMENT OF SALES- TAX ON THESE ITEMS. THE ASSESSING OFFICER OBSERVED THAT THE SEIZED REGISTER DID NOT COVER THE FULL PERIOD. HE ACCORDINGLY HELD THAT THE ASSESSEE FIRM SUPPRESSED SALES FOR ASSESSMENT YEAR 1996-97 TO THE EXTENT OF RS 25,80,045/- AND FOR ASSESSMENT YEAR 1997-98 TO THE EXTENT OF RS 7,33,40 0/-. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAD MADE ALL NECESS ARY ARRANGEMENTS WITH PROPER PRE-PLANNING AND WITH SUITABLE INSTRUCTIONS TO THE EMPLOYEES NOT TO INCLUDE THE ABOVE ITEMS IN THE MEMOS AT MUMBAI AND PUNE AND , THUS, BOTH THESE ITEMS FORMED PART OF UNDISCLOSED INCOME. HOWEVER, FOR THE ASSESSMENT YEAR 1996-97, THE ASSESSING OFFICER DID NOT MAKE ANY SEPARATE ADD ITION OF RS 25,80,045/- AS HE HAD TREATED THE AMOUNT OF RS 39,39,315/- AS UNDISCL OSED INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1996-97. THE ASSESSING OFFI CER FURTHER HELD THAT FOR THE 5 ASSESSMENT YEAR 1997-98, THE SUPPRESSED SALES OF MI LK PRODUCTS OF RS 7,33,400/- CONSTITUTED UNDISCLOSED INCOME OF THE AS SESSEE, WHICH WAS BROUGHT TO TAX AS SUCH. 7. IN APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEA LS) FOUND FORCE IN THE ASSESSEES CLAIM THAT THERE WAS NO EVIDENCE TO SUGG EST THAT THE SEIZED REGISTER (BEARING SR NO.8) OF ANNEXURE A OF THE PANCHNAMA DT 6.2.1999 ACTUALLY BELONGED TO THE ASSESSEE AND NOT TO ANY OTHER PERSO N. FURTHER ACCORDING TO HIM, THERE WAS NO BASIS IN THE ASSERTION OF THE ASSESSIN G OFFICER THAT SALE OF MILK PRODUCTS SHOULD HAVE BEEN RECORDED IN A SEPARATE LE DGER ACCOUNT. AS PER THE COMMISSIONER OF INCOME-TAX (APPEALS), THERE WAS NO FIXED RULE AS TO HOW AN ASSESSEE SHOULD RECORD SALES OF DIFFERENT MERCHANDI SE IN ITS BOOKS OF ACCOUNT AND, THEREFORE, NO FAULT COULD BE FOUND WITH THE AS SESSEE FOR NOT HAVING RECORDED SALE OF MILK AND MILK PRODUCTS SEPARATELY. THE COM MISSIONER OF INCOME-TAX (APPEALS) ACCORDINGLY CONCLUDED THAT ON THE BASIS O F THE MATERIAL AVAILABLE ON RECORD, THE UNDISCLOSED INCOME OF THE ASSESSEE FROM ALLEGED UNACCOUNTED SALES OF MILK PRODUCTS RECORDED IN THE SEIZED REGISTER A- 8 HAS TO BE TAKEN AT RS 78,900/-. IN THIS VIEW OF THE MATTER, HE SCALED DOW N THE ADDITION OF RS 7,33,400/- TO RS 78,900/-, THUS GRANTING A RELIEF OF RS 6,54,5 00/- AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 8. IN THIS BACKGROUND, THE RIVAL COUNSELS HAVE MADE THEIR SUBMISSIONS. THE LD CIT-DEPARTMENTAL REPRESENTATIVE, APPEARING FOR T HE REVENUE STRONGLY CONTENDED THAT THE COMMISSIONER OF INCOME-TAX (APPE ALS) ERRED IN ACCEPTING AT FACE VALUE THE ASSESSEES CONTENTION HAT THE PARTNE R SHRI J D THOTTE CARRIED HUGE AMOUNTS OF CASH FROM MUMBAI BRANCH WITH NO ENTRY WH ATSOEVER IN ANY BOOK, AND DEPOSITED THE SAME AT ASHTA BRANCH, PARTICULARLY IN VIEW OF THE METICULOUS ACCOUNTING PRACTICES OF THE ASSESSEE, WHICH WERE FO UND DURING THE COURSE OF SEARCH WHEREIN RECORD OF MILK SALES AND PURCHASES T O THE LAST LITRE HAVE BEEN MAINTAINED. ACCORDING TO HIM, THE COMMISSIONER OF I NCOME-TAX (APPEALS) ERRED IN NOT APPRECIATING THAT AT LEAST ON THE DATES WHEN THE CASH WAS TAKEN AWAY TO 6 ASHTA BY THE PARTNER AN ENTRY TO THIS EFFECT SHOULD HAVE BEEN MADE IN THE NORMAL COURSE IN THE MEMO AT LEAST TO RECORD THE SALES OF THE DAY AND TALLY THE SAME WITH FINAL TOTAL SALES OF THE YEAR OF ALL THE BRANCHES. IT IS ALSO SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN ACCEP TING THE CONTENTION OF THE ASSESSEE THAT THE EXCESS OF RS 39,39,315/- HAS BEEN CREDITED TO THE SALE ACCOUNT. THE LEARNED CIT-DEPARTMENTAL REPRESENTATIV E ALSO VEHEMENTLY CONTENDED THAT THE COMMISSIONER OF INCOME-TAX (APPE ALS) WHILE DELETING THE ADDITION ON ACCOUNT OF EXCESS CASH CREDITED OF RS 3 9,39,315/- IN THE ACCOUNT BOOKS, FAILED TO APPRECIATE THAT THE SUPPRESSED SAL ES OF MILK PRODUCTS TO THE EXTENT OF RS 25,80,045/- HAD NOT BEEN SEPARATELY AD DED BY THE ASSESSING OFFICER HOLDING THAT THE SUM OF RS 25,80,045/- WAS SUBSUMED IN THE UNACCOUNTED CASH OF RS 39,39,315/-. IN THIS MANNER, ACCORDING TO HIM , THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS GIVEN A FURTHER BENEFIT OF THE DELETION OF ADDITION IN RESPECT OF UNDISCLOSED SALES OF MILK PRODUCTS TO TH E EXTENT OF RS 25,80,045/- WHEN FACTUALLY THE SALE OF MILK PRODUCTS HAS NOT BE EN CREDITED TO THE SALES ACCOUNT. IN THIS CONNECTION, THE LEARNED CIT-DEPART MENTAL REPRESENTATIVE SUBMITTED THAT THERE WAS NO JUSTIFICATION FOR THE C OMMISSIONER OF INCOME-TAX (APPEALS) TO HAVE ACCEPTED THE CONTENTION OF THE AS SESSEE THAT THE SALE OF MILK PRODUCTS WAS RECORDED AS MILK SALES IN THE ACCOUNT BOOKS. EVEN WITH REGARD TO THE ADDITION OF RS 6,54,500/- DELETED ON ACCOUNT OF UNDISCLOSED SALES OF MILK PRODUCTS FOR THE ASSESSMENT YEAR 1997-98, THE LEARN ED CIT-DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE COMMISSIONER OF I NCOME-TAX (APPEALS) WAS NOT CORRECT BECAUSE IN TERMS OF SECTION 132(4A) OF THE ACT THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE SEIZED MATERIAL DID NOT BELONG TO THE ASSESSEE. ACCORDING TO THE LEARNED CIT-DEPARTMENTAL REPRESENT ATIVE, THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE SEIZ ED REGISTER WAS NOT PROVED BY THE ASSESSING OFFICER TO BE BELONGING TO THE ASSESS EE AND, THEREFORE, HE DELETED THE ADDITION. AS PER THE CIT-DEPARTMENTAL REPRESENT ATIVE, THE STAND OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IS PARTICULARL Y IN CONTRAST TO THE PROVISIONS OF SECTION 132(4A) OF THE ACT, WHICH PROVIDE A PRES UMPTION THAT THE MATERIAL 7 FOUND ON A PERSON BELONGS TO HIM UNLESS IT IS PROVE D OTHERWISE BY THE SAID PERSON. THEREFORE, THE ONUS TO PROVE THAT THE SEIZ ED REGISTER SHOWING UNACCOUNTED SALES OF MILK PRODUCT DID NOT BELONG TO THE ASSESSEE, THE BURDEN WAS ON THE ASSESSEE WHICH HAS NOT BEEN DISCHARGED. IN THIS MANNER, THE RELIEF ALLOWED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS BEEN SOUGHT TO BE ASSAILED. 9. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE R ESPONDENT-ASSESSEE HAS DEFENDED THE ACTION OF THE COMMISSIONER OF INCOME-T AX (APPEALS) BY POINTING OUT THAT IT IS NOT THE CASE OF THE ASSESSING OFFICER TH AT THE FIGURES OF SALES RECORDED IN THE MEMO BOOKS IS HIGHER THAN THAT RECORDED IN THE REGULAR COMPUTERIZED BOOKS OF ACCOUNT ON ACCOUNT OF SALES MADE AT MUMBAI. ON THE CONTRARY, THE ASSESSEE HAS CREDITED A HIGHER AMOUNT OF SALES IN ITS REGULA R BOOKS OF ACCOUNT IN COMPARISON TO THE CASH SAID TO HAVE BEEN TRANSFERRE D FROM MUMBAI AS PER THE MEMO BOOKS. THEREFORE, THERE WAS NO JUSTIFICATION F OR THE ASSESSING OFFICER TO MAKE A SEPARATE ADDITION OF RS 39,39,315/- AS UNDIS CLOSED CASH, WHEN IT IS CLEARLY ESTABLISHED THAT THE SALES HAVE BEEN RECORD ED AT A HIGHER FIGURE. FOR THE ABOVE REASONS, IT HAS ALSO BEEN SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) CORRECTLY DID NOT MAKE ANY SEPARATE ADDIT ION ON ACCOUNT OF THE SALE OF MILK PRODUCTS AS IT WAS SUBSUMED IN THE EXCESS SALE S FOUND RECORDED IN THE REGULAR ACCOUNT BOOKS AS MILK SALES FOR THE ASSESSM ENT YEAR 1996-97. SIMILARLY IN THE ASSESSMENT YEAR 1997-98 THE ASSESSEE WAS FOU ND TO HAVE CREDITED CASH SALE IN THE COMPUTERIZED BOOKS IN EXCESS BY A SUM O F RS 6,54,500/- AND THE UNACCOUNTED SALES OF MILK PRODUCTS WAS FOUND TO BE RS 7,33,400/ AND IN THIS MANNER THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS JUSTIFIED IN RETAINING AN ADDITION OF RS 78,900/- ONLY AS UNDISCLOSED SALES O F MILK PRODUCTS FOR THE ASSESSMENT YEAR 1997-98. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN ORDER TO ADDRESS THE CONTROVERSY, A BRIEF RECAPITULATION OF THE MANN ER OF CARRYING ON OF THE BUSINESS BY THE ASSESSEE IS RELEVANT. THE ASSESSEE FIRM IS ENGAGED IN DIARY BUSINESS HAVING OPERATIONS AT ASHTA, PUNE AND MUMBA I. THE MERCHANDISE SOLD 8 BY THE ASSESSEE INCLUDES MILK AND MILK PRODUCTS LIK E BUTTER, GHEE, SHREEKHAND ETC. AND THE BUSINESS INVOLVES COLLECTION, PROCESSI NG AND THE SALE OF AFORE-STATED PRODUCTS. IT HAS ALSO BEEN EXPLAINED BEFORE US BY T HE COUNSEL OF THE RESPONDENT THAT THE MERCHANDISE IS INTER ALIA SUPPLIED TO MUMB AI FOR EFFECTING SALES. THE SALE PROCEEDS FROM MUMBAI ARE REMITTED TO ASHTA IN CASH, WHICH WAS EVIDENCED BY THE MEMO BOOKS AND OTHER REGISTERS FOUND DURING THE COURSE OF SEARCH ON 5.2.1997. THE BONE OF CONTENTION IS THAT THE CASH F OUND TO HAVE BEEN REMITTED ON THE BASIS OF MEMO BOOKS DID NOT TALLY WITH THE SALE S CREDITED IN THE REGULAR COMPUTERIZED BOOKS OF ACCOUNT MAINTAINED BY THE ASS ESSEE FOR THE SALES EFFECTED AT MUMBAI. IN FACT, FOR THE ASSESSMENT YEA R 1996-97 COMPRISED IN THE BLOCK PERIOD, THE AMOUNT OF SALES CREDITED IN THE R EGULAR COMPUTERIZED ACCOUNT BOOKS WAS IN EXCESS OF THE FIGURES APPEARING IN THE MEMO BOOKS BY A SUM OF RS 39,39,315/-. THIS AMOUNT HAS BEEN ADDED BY THE ASSE SSING OFFICER AS UNACCOUNTED MONEY CREDITED IN THE ACCOUNT BOOKS AS SALES UNDER THE GUISE OF THE MONEY REMITTED FROM MUMBAI AS PER THE MEMO BOOK S. THE ASSESSEE HAD OFFERED AN EXPLANATION IN THIS REGARD WHICH HAS SIN CE BEEN ACCEPTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). IT WAS EXPLAI NED THAT THE SAID SUM WAS INDEED SALES EFFECTED BY THE ASSESSEE, BUT THE AMOU NTS WERE NOT REFLECTED IN THE MEMO BOOKS SINCE SOMETIMES THE PARTNER PERSONALLY C ARRIED CASH FROM MUMBAI TO ASHTA AND THEREFORE THE SAME WAS NOT RECORDED IN THE MEMO BOOKS AND, IN ANY CASE, MEMO BOOKS WERE NOT THE BASIS TO MAINTAIN THE ACCOUNT BOOKS, BUT IT WAS ONLY A ROUGH RECORD. 11. WE HAVE CAREFULLY EXAMINED THE RIVAL POSITIONS ON THIS ASPECT AND FIND THAT THE ASSESSING OFFICER HAS MIS-DIRECTED HIMSELF IN A PPRECIATING THE MEMO BOOKS SEIZED DURING THE COURSE OF SEARCH. THE SALES INCOR PORATED IN THE REGULAR ACCOUNT BOOKS IS HIGHER THAN THOSE COMPUTED ON THE BASIS OF THE MEMO BOOKS. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE SALES CO MPUTED ON THE BASIS OF MEMO BOOKS ARE OVER AND ABOVE THOSE RECORDED IN THE REGU LAR COMPUTERIZED ACCOUNT BOOKS. IN FACT, THERE IS NO EVIDENCE FOUND DURING SEARCH OR REFERRED BY THE ASSESSING OFFICER TO SUGGEST THAT THE TRANSACTIONS IN MEMO BOOKS ARE OVER AND 9 ABOVE THE SALES RECORDED IN THE REGULAR ACCOUNT BOO KS. MOREOVER, THE MEMO BOOKS IS PRIMARILY A ROUGH RECORD MAINTAINED BY THE ASSESSEE SHOWING THE TRANSFER OF CASH SALE PROCEEDS FROM MUMBAI TO ASHTA . IT IS ALSO CLEAR FROM RECORD THAT SUCH MEMO BOOKS HAVE NOT FORMED THE BASIS TO C OMPUTE THE ULTIMATE INCOME INASMUCH AS SUCH MEMO BOOKS HAVE NOT BEEN MA INTAINED IN THE MANNER OF MAINTENANCE OF REGULAR BOOKS OF ACCOUNT. IT IS A LSO NOT AN INCRIMINATING DOCUMENT BELYING THE REGULAR ACCOUNT BOOKS MAINTAIN ED BY THE ASSESSEE SINCE THE ASSESSING OFFICER ACCEPTS THAT IT DOES NOT REFL ECT TRANSACTIONS OVER AND ABOVE THOSE REFLECTED IN THE REGULAR ACCOUNT BOOKS. THERE FORE, TO SAY THAT THE SALES RECORDED IN THE REGULAR BOOKS OF ACCOUNT TO THE EXT ENT OF RS 39,39,315/- WAS NOT IN THE NATURE OF SALES BUT AN UNDISCLOSED CASH DEPO SIT MERELY BECAUSE THE SALES COMPUTED ON THE BASIS OF SEIZED MEMO BOOKS IS LOWER , IS NOT JUSTIFIED. THEREFORE, THE ACTION OF THE ASSESSING OFFICER IN TREATING THE IMPUGNED SALES CREDITED IN THE REGULAR COMPUTERIZED BOOKS AT RS 39.39,315/- FOR TH E ASSESSMENT YEAR 1996-97 AS UNDISCLOSED INCOME OF THE ASSESSEE IS NOT JUSTIF IED AND WE FIND NO ERROR IN THE APPROACH OF THE COMMISSIONER OF INCOME-TAX (APPEALS ) ON THIS ASPECT. 12. SO, HOWEVER, THE OTHER ASPECT OF THE CASE MADE OUT BY THE ASSESSING OFFICER REGARDING NON-RECORDING OF SALE OF MILK PRO DUCTS IN THE REGULAR COMPUTERIZED ACCOUNT BOOKS, HAS BEEN GLOSSED OVER B Y THE COMMISSIONER OF INCOME-TAX (APPEALS). PERTINENTLY, IN THE REGULAR C OMPUTERIZED ACCOUNT BOOKS ONLY THE SALE OF MILK HAS BEEN FOUND TO BE RECORDED . WHEREAS THE SEIZED MATERIAL SHOWED THAT THE SALES EFFECTED BY THE ASSESSEE ALSO COMPRISED OF VARIOUS MILK PRODUCTS NAMELY, BUTTER, GHEE, SHREEKHAND ETC. SUCH SALES HAVE BEEN IDENTIFIED ON THE BASIS OF THE SEIZED MATERIAL AT RS 25,80,045 /- AND RS 7,33,400/- FOR THE ASSESSMENT YEARS 1996-97 AND 1997-98 RESPECTIVELY. IN THE COURSE OF THE HEARING BEFORE US, THE LEARNED COUNSEL CONTENDED TH AT SINCE THE SALES CREDITED IN THE ACCOUNT BOOKS WAS OF A HIGHER AMOUNT THOUGH IT DID NOT INCLUDE THE SALE OF MILK PRODUCTS, NO SEPARATE ADDITION WAS WARRANTED, INASMUCH AS IT CAN BE UNDERSTOOD THAT THE SALE OF MILK PRODUCT HAVE ALSO BEEN RECORDED IN THE ACCOUNT BOOKS AS SALE OF MILK. IN OUR CONSIDERED OPINION, W E FIND NO JUSTIFICATION FOR THE 10 AFORESAID PROPOSITION SOUGHT TO BE MADE OUT BY THE ASSESSEE INASMUCH AS THE SEIZED MATERIAL ITSELF SHOWS THE SALE OF MILK PRODU CTS SEPARATELY THAN THE SALE OF MILK. THEREFORE, THE ONLY INFERENCE LIABLE TO BE DE DUCED ON THIS ASPECT IS THAT THE SALES OF MILK PRODUCTS REFLECTED BY THE SEIZED MATE RIAL ARE OVER AND ABOVE THE SALE RECORDED IN THE REGULAR BOOKS WHICH CONTAIN ON LY THE SALES OF MILK. ON BEING CONFRONTED ON THIS ASPECT, THE LEARNED COUNSEL FOR THE RESPONDENT-ASSESSEE STRONGLY ARGUED THAT THE ADDITION IF ANY ON THIS SC ORE IS MAINTAINABLE ONLY WITH RESPECT TO THE UNRECORDED GROSS PROFIT AND NOT THE GROSS AMOUNT OF SALES. IN OTHER WORDS, AS PER THE LEARNED REPRESENTATIVE FOR THE AS SESSEE, THE AMOUNT OF UNRECORDED SALES DETECTED ARE NOT TO BE ASSESSED AS SUCH, BUT ONLY THE PROFIT ELEMENT ON SUCH SALE IS LIABLE TO BE ASSESSED AS UN DISCLOSED INCOME. IT HAS BEEN EXPLAINED THAT IF THE GROSS AMOUNT OF SUCH SAL E ARE ASSESSED, THEN THE PROFIT RATE WILL GO VERY HIGH WHICH IS NOT AN ACCEP TABLE POSITION. IN SUPPORT OF THE AFORESAID PROPOSITION, THE LEARNED REPRESENTATIVE H AS REFERRED TO THE FOLLOWING: I) CIT V PRESIDENT INDUSTRIES 258 ITR 654 (GUJ.), II) CIT V BALCHAND AJIT KUMAR 263 ITR 610 (MP), THE LEARNED CIT-DEPARTMENTAL REPRESENTATIVE HAS SUP PORTED THE ADDITION ON THIS POINT IN PRINCIPLE, BUT HAS NOT SERIOUSLY DISPUTED THE PLEA OF THE ASSESSEE THAT THE ADDITION BE CONFINED TO THE PROFIT IN RESPECT OF SU PPRESSED SALES. 13. HAVING CONSIDERED THE RIVAL STANDS AS WELL AS T HE ENTIRE FACTS AND CONSPECTUS OF THE CASE, IN OUR OPINION, THE SALES OF MILK PRODUCTS HAS BEEN PROVED TO BE EFFECTED OUT BY THE ASSESSEE OUTSIDE T HE ACCOUNT BOOKS ON THE BASIS OF THE SEIZED MATERIAL. THE ADDITION OF UNDIS CLOSED INCOME ON THIS SCORE, IS THEREFORE, WARRANTED. IN SO FAR AS THE QUANTUM OF A DDITION IS CONCERNED, WE ARE INCLINED TO ACCEPT THE PLEA OF THE ASSESSEE THAT TH E UNDISCLOSED INCOME BE LIMITED TO THE PROFIT ELEMENT ON SUCH UNRECORDED SA LES. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO CONSIDER THE HIGHER OF THE GRO SS PROFIT RATE DETERMINED BY THE ASSESSING OFFICER IN THE REGULAR ASSESSMENTS FOR TH E ASSESSMENT YEARS 1996-97 AND 1997-98; AND, THEN COMPUTE THE UNDISCLOSED INCO ME ON THE SALES OF RS 11 25,80,045/- AND RS 7,33,400/- FOR THE ASSESSMENT YE ARS 1996-97 AND 1997-98 RESPECTIVELY BY APPLYING SUCH GROSS PROFIT RATE. 14. BEFORE PARTING, WE MAY ALSO STATE THAT THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS) WITH REGARD TO THE ADDITION SU STAINED OF RS 78,900/- INSTEAD OF RS 7,33,400/- FOR THE ASSESSMENT YEAR 1997-98 IS ALSO SET ASIDE AND THE UNDISCLOSED INCOME ASSESSABLE SHALL BE IN TERMS OF OUR AFORESAID DIRECTION. 15. IN THE FINAL ANALYSIS, THE APPEAL OF THE REVENU E IS PARTLY ALLOWED. ITA NO 286/PN/2000 16. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) DATED 07.01.20 00 WHICH, IN TURN, HAS ARISEN FROM THE ORDER DATED 12.02.1999 PASSED BY TH E ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT, PERTAINING TO THE ASSES SMENT YEAR 1996-97. 17. THE MAIN GRIEVANCE OF THE REVENUE IN THIS APPEA L IS THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JUSTIF IED IN DELETING THE ADDITION OF RS 25,80,045/- MADE ON ACCOUNT OF SUPPRESSED SA LES OF MILK PRODUCT. AS ALREADY DISCUSSED IN THE FOREGOING PARAGRAPHS, DURI NG THE COURSE OF SEARCH ACTION UNDER SECTION 132 IN THE BUSINESS PREMISES O F THE ASSESSEE FIRM AND AT THE RESIDENCES OF ITS PARTNERS ON 5.2.1997, CERTAIN BOOKS OF ACCOUNT, DOCUMENTS, MEMOS ETC. WERE SEIZED. THE ASSESSING OFFICER NOTIC ED THAT THE SEIZED REGISTER (BEARING SL. NO. 8) CONTAINED DETAILS OF UNACCOUNTE D SALE OF MILK PRODUCTS OF THE ORDER OF RS 25,80,045/- MADE AT MUMBAI. FOR THE VAR IOUS DEFECTS POINTED OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, HE C ONCLUDED THAT THE ESTIMATED SALE CONSIDERATION OF RS 25,80,045/- APPARENTLY REC EIVED DURING THE FINANCIAL YEAR 1995-96 BY THE ASSESSEE FROM SALE OF MILK PRODUCTS MENTIONED IN THE SEIZED REGISTER HAD NOT BEEN DECLARED IN THE ASSESSEES BO OKS OF ACCOUNT. ACCORDING TO THE ASSESSING OFFICER, THE MILK PRODUCTS, SALE WHER EOF WAS INDICATED BY THE SEIZED REGISTER. AS PER THE ASSESSING OFFICER, ASSE SSEE OBTAINED SUBSTANTIAL QUANTITIES OF BUTTER, ARISING THROUGH THE PROCESS O F NATURAL SEPARATION AND THIS SEPARATION OF BUTTER HAD TAKEN PLACE DUE TO AUTOMAT IC CHURNING OF MILK INSIDE 12 TANKERS, TRANSPORTING MILK FROM ASHTA TO MUMBAI. IN HIS OPINION, THE ASSESSEE HAD KEPT THE ENTIRE PROCESS OF OBTAINING OF THE MIL K PRODUCTS AND THEIR EVENTUAL SALE FROM OUT OF THE PURVIEW OF THE ENTRIES MADE IN ITS BOOKS OF ACCOUNT. AS SUCH, THE ASSESSING OFFICER ADDED AN EQUIVALENT AMOUNT IN THE COMPUTATION OF INCOME OF THE ASSESSEE. 18. IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), BOTH THE ASSESSEE AS WELL AS REVENUE MADE DETAILED SUBMISSIO NS IN SUPPORT OF THEIR RESPECTIVE STANDS. AFTER CAREFULLY CONSIDERING THE SUBMISSIONS, THE COMMISSIONER OF INCOME-TAX (APPEALS) OBSERVED THAT BY HIS OWN AD MISSION THE ASSESSING OFFICER WAS OF THE CONFIRMED OPINION THAT THE ALLEG ED UNACCOUNTED SALE OF MILK PRODUCTS OF RS 25,80,045/- WAS CLEARLY COVERED BY E XCESS CASH SALES/CREDITS OF RS 35,35,315/-,APPEARING IN THE ASSESSEES BOOKS IN M/S J D THOTE DAIRIES MUMBAI ACCOUNT. AS SUCH, IT WAS OBVIOUS THAT THERE WAS NO REASON FOR THE SAID UNDISCLOSED CASH SALES OF RS 25,80,045/- TO HAVE BE EN CONSIDERED FOR SEPARATE ADDITION IN THE ASSESSEES HANDS IN THE REGULAR ASS ESSMENT. THE COMMISSIONER OF INCOME-TAX (APPEAL) FURTHER OBSERVED THAT THE IM PUGNED ASSESSMENT ORDER UNDER SECTION 143(3) OF THE ACT WAS PASSED FIRST AN D THE BLOCK ASSESSMENT WAS MADE SUBSEQUENTLY AND THEREFORE, THE INFERENCE ABOU T ENTRIES OF SALE MADE IN THE SEIZED REGISTER, AS DRAWN BY THE ASSESSING OFFI CER IN THE IMPUGNED ASSESSMENT, RAN CONTRARY TO A MORE CATEGORICAL VIEW TAKEN BY HIM SUBSEQUENTLY IN THE BLOCK ASSESSMENT. AS SUCH, THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS OF THE OPINION THAT THE VIEW TAKEN IN BLOCK ASS ESSMENT MUST PREVAIL, WHICH MEANS THAT THE UNDISCLOSED SALE OF MILK PRODUCTS, I F ANY, EVIDENT FROM THE ENTRIES MADE IN THE SEIZED REGISTER SHOULD BE TREATED AS CO VERED BY EXCESS CASH SALE/CREDIT APPEARING IN M/S J D THOTE DAIRIES MUMB AI A/C IN THE ASSESSEES BOOKS. HE FURTHER STATED THAT THE SEIZED COMPUTERIZ ED BOOKS SHOWED THE SAID EXCESS CREDITS HAVE EVENTUALLY BEEN TRANSFERRED TO THE SALES ACCOUNT AND FORMED PART OF THE ASSESSEES OVERALL TURNOVER OF RS 12,09 ,34,255/-, ON THE BASIS OF WHICH NET PROFIT OF RS 4,68,231/- WAS DISCLOSED IN THE ASSESSEES PROFIT AND LOSS ACCOUNT. IN THE VIEW OF THE COMMISSIONER OF INCOME- TAX (APPEALS), THEREFORE, ON 13 FACTS THERE WAS NO CASE FOR THE IMPUGNED ADDITION O F RS 25,80,045/- AND EVEN OTHERWISE, IN LAW THE IMPUGNED ADDITION COULD HAVE ONLY BEEN MADE IN THE BLOCK ASSESSMENT OF THE ASSESSEE AND NOT UNDER REGULAR AS SESSMENT. HE ACCORDINGLY DELETED THE ADDITION OF RS 25,80,045/- MADE BY THE ASSESSING OFFICER. AGAINST THIS DECISION, THE REVENUE IS IN APPEAL BEFORE US. 19. BEFORE US, THE LEARNED CIT-DEPARTMENTAL REPRESE NTATIVE APPEARING FOR THE REVENUE HAS CONTENDED THAT THE COMMISSIONER OF INCO ME-TAX (APPEALS) ERRED IN DELETING THE ADDITION OF RS 25,80,045/- ON ACCOUNT OF SUPPRESSED SALES OF MILK PRODUCTS WHEN THE ASSESSING OFFICER HAD CLEARLY PRO VED THAT SUCH SALES WERE NOT RECORDED IN THE REGULAR ACCOUNT BOOKS. THE LEARNED CIT-DEPARTMENTAL REPRESENTATIVE ALSO ASSAILED THE ACTION OF THE COMM ISSIONER OF INCOME-TAX (APPEALS) IN DELETING THE ADDITION ON ACCOUNT OF SU PPRESSED SALE IN BOTH THE ASSESSMENTS, NAMELY, IN THE BLOCK ASSESSMENT DATED 22.2.1999 AS WELL AS IN THE REGULAR ASSESSMENT FOR ASSESSMENT YEAR 1996-97 MADE UNDER SECTION 143(3) DATED 12.2.1999. IT HAS BEEN POINTED OUT THAT IN T HE TWO ORDERS PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) 15.12.1999 AND 7.1.2000, BOTH ADDITIONS HAVE BEEN DELETED. IN THE IMPUGNED ORDER DT 7.1.200 0 AGAINST THE REGULAR ASSESSMENT UNDER SECTION 143(3) THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS DELETED THE ADDITION OF RS 25,80-545/- HOLDING IT T O BE INCLUDED IN THE ADDITION OF RS 39,39,315/- MADE BY THE ASSESSING OFFICER IN THE BLOCK ASSESSMENT ORDER DT 22.2.99 ON ACCOUNT OF UNEXPLAINED CASH WHEREAS THE COMMISSIONER OF INCOME- TAX (APPEALS) DELETED THE SAID ADDITION OF RS 39,39 ,315/- VIDE HIS ORDER DT 15.12.99. UNDER THESE CIRCUMSTANCES, THE ORDER OF T HE COMMISSIONER OF INCOME- TAX (APPEALS) IS SOUGHT TO BE ASSAILED. 20. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE RESPONDENT-ASSESSEE VEHEMENTLY ARGUED THAT THE COMMISSIONER OF INCOME-T AX (APPEALS) MADE NO MISTAKE IN DELETING THE ADDITION INASMUCH AS THE SA ID AMOUNT HAS BEEN CONSIDERED BY THE ASSESSING OFFICER IN THE BLOCK AS SESSMENT AND, THEREFORE, NO ADDITION IS WARRANTED IN THE IMPUGNED ASSESSMENT. 14 21. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IT IS EVIDENT THAT THE UNACCOUNTED SALE OF MILK PRODUCTS OF RS 25,80,045/- FOR THE ASSESSMENT YEAR 1996-97 STANDS PROVED ON THE BASIS OF THE SEIZED MA TERIAL. THE AFORESAID STAND OF THE ASSESSING OFFICER HAS ALSO BEEN AFFIRMED BY US IN THE EARLIER PARAGRAPHS OF THIS ORDER, WHILE DEALING WITH THE APPEAL IN ITA NO 115/PN/ (SUPRA) ARISING OUT OF THE BLOCK ASSESSMENT ORDER DATED 22.2.1999 PASSED B Y THE ASSESSING OFFICER UNDER SECTION 158BC OF THE ACT. IT HAS ALSO BEEN DI RECTED BY US THAT ADDITION AS UNDISCLOSED INCOME IS ALSO REQUIRED TO BE MADE ON A CCOUNT OF SUCH UNRECORDED SALE OF MILK PRODUCTS FOUND AS A RESULT OF THE SEAR CH. IT IS IN THIS BACKGROUND THAT ONE HAS TO CONSIDER AS TO WHETHER THE ADDITION ON A CCOUNT OF THE VERY SAME AMOUNT IS PERMISSIBLE IN THE IMPUGNED REGULAR ASSES SMENT MADE BY THE ASSESSING OFFICER IN PURSUANCE TO THE PROVISIONS OF SECTION 143(3) OF THE ACT. THE FOLLOWING DISCUSSION CONTAINED IN PARA 17 OF THE IM PUGNED ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IS WORTHY OF N OTICE: 17. FROM THE ABOVE, IT IS MORE THAN EVIDENT THAT B Y HIS OWN ADMISSION THE AO WAS OF THE CONFIRMED OPINION THAT THE ALLEGED UNACCOUNTED SALE OF MILK PRODUCTS OF RS 25,80,045/- WAS CLEARLY COVERED BY EXCESS CASH SALE S/CREDITS OF RS 35,35,315/-, APPEARING N THE APPELLANTS BOOKS IN M/S J D THOTE DAIRIES MUMBAI A/C. AS SUCH, IT IS OBVIOUS THAT THERE WAS NO REASON FOR THE SAID ALLEG ED UNDISCLOSED CASH SALES OF RS 25,80,045/- TO HAVE BEEN CONSIDERED FOR SEPARATE AD DITION IN THE APPELLANTS HANDS IN THE REGULAR ASSESSMENT THAT WAS BEING MADE UNDER SECTIO N 143(3). THE IMPUGNED ASSESSMENT ORDER WAS PASSED FIRST AND THE BLOCK ASS ESSMENT WAS MADE SUBSEQUENTLY. THEREFORE, THE INFERENCE ABOUT ENTRIES OF SALE MADE IN THE SEIZED REGISTER, AS DRAWN BY THE AO IN THE IMPUGNED ASSESSMENT RUNS CONTRARY TO A MORE CATEGORICAL VIEW TAKEN BY HIM SUBSEQUENTLY N THE AFORESAID BLOCK ASSESSMENT. AS SUCH, I HAVE NO HESITATION IN HOLDING THAT THE VIEW TAKEN IN BLOCK ASSESSMENT MU ST PREVAIL. THAT IS, UNDISCLOSED SALE OF MILK PRODUCTS, IF ANY, EVIDENT FROM THE ENTRIES MADE IN THE SEIZED REGISTER, SHOULD BE TREATED AS COVERED BY EXCESS CASH SALE/CREDIT APPEA RING IN M/S J D THOTE DAIRIES MUMBAI A/C IN THE APPELLANTS BOOKS. THE SEIZED COM PUTERIZED BOOKS SHOW THAT THE SAID EXCESS CREDITS HAVE EVENTUALLY BEEN TRANSFERRED TO THE SALES ACCOUNT AND FORM PART OF THE APPELLANTS OVERALL TURNOVER OF RS 12,09,34,255/-, ON THE BASIS OF WHICH NET PROFIT OF RS 4,68,231/- HAS BEEN DISCLOSED IN THE APPELLANTS PR OFIT AND LOSS ACCOUNT. AS SUCH, IT IS OBVIOUS THAT ON FACTS THERE IS NO CASE FOR THE IMPU GNED ADDITION OF RS 25,80,045/-. EVEN OTHERWISE, IN LAW THE IMPUGNED ADDITION COULD HAVE ONLY BEEN MADE IN THE BLOCK ASSESSMENT OF THE APPELLANT AND NOT UNDER REGULAR A SSESSMENT. AS SUCH, THE IMPUGNED ADDITION OF RS 25,80,045/- IS HEREBY DELETED. THE A O IS DIRECTED TO RECOMPUTE THE APPELLANTS TOTAL INCOME ACCORDINGLY. 22. CLEARLY, WE ARE IN AGREEMENT WITH THE STAND OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE SUPPRESSED SALE OF M ILK PRODUCTS HAS BEEN FOUND ON THE BASIS OF THE EVIDENCE UNEARTHED AS A RESULT OF THE SEARCH AND, THEREFORE, THE INCOME THEREFROM IS LIABLE TO BE INCLUDED UNDER THE PROVISIONS OF CHAPTER XIVB OF THE ACT IN THE BLOCK ASSESSMENT. ONCE SUCH INCOME HAS BEEN ASSESSED AS A PART OF THE BLOCK ASSESSMENT, THE VERY SAME IN COME, IN OUR VIEW, CANNOT BE 15 TAXED AS A PART OF REGULAR ASSESSMENT. THEREFORE, T HE ULTIMATE CONCLUSION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ASPECT , AS MANIFESTED IN THE ABOVE EXTRACT FROM HIS ORDER, IS UPHELD. AS A RESUL T, ON THIS ASPECT, THE REVENUE FAILS. 23. THE NEXT ISSUE RAISED IN THE REVENUES APPEAL I S THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN SETTING ASIDE THE ISS UE OF DETERMINATION OF GROSS PROFIT RATE ON THE LIMITED POINT OF DETERMINATION OF ADEQUACY OF GROSS PROFIT RATE SHOWN BY THE ASSESSEE IN THE LIGHT OF MATERIAL ALRE ADY AVAILABLE, INCLUDING THAT REGARDING SHORTAGE OF MILK SHOWN TO HAVE OCCURRED I N TRANSIT. 24. HAVING CONSIDERED THE RIVAL STANDS AS WELL AS A FTER GOING THROUGH THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), WE FIN D NO INFIRMITY IN THE FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ISSUE. IN THIS REGARD, THE FOLLOWING DISCUSSION CONTAINED IN PARA 27 OF THE IM PUGNED ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IS WORTHY OF N OTICE: 27. THE ABOVE SAID REPORT OF 20.9.1999 MADE BY THE PRESENT AO SHOWS THAT THERE IS SOME SCOPE FOR CONCERTED INQUIRY TO LOOK AT MONTH-W ISE DETAILS OF SHORTAGE ETC. AND TO DETERMINE IF THE SHORTAGE SHOWN BY THE APPELLANT IS WITHIN PERMISSIBLE LIMITS. ALSO, THE AO SHOULD APPLY HER MIND TO THE APPELLANTS CONTENTION AS REFLECTED THROUGH THE COMPARISON CHART OF GROSS PROFIT BROUGHT OUT IN THE ABOVE SAID ANNEXURE D TO THE STATEMENT OF FACTS. IN THIS VIEW OF THINGS, THE ASSESSMENT IS PARTIALLY SET ASIDE ON THE LIMITED POINT OF DETERMINATION OF ADEQUACY OF GROSS PROFIT RATE SHOW N BY THE APPELLANT IN THE LIGHT OF MATERIAL ALREADY AVAILABLE, INCLUDING THAT REGARDIN G SHORTAGE OF MILK SHOWN TO HAVE OCCURRED IN TRANSIT. FROM THE AFORESAID FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS), IT IS CLEAR THAT THE FIRST APPELLATE AUTHORITY HAS SET AS IDE THE ISSUE RELATING TO DETERMINATION OF GROSS PROFIT RATE TO THE FILE OF T HE ASSESSING OFFICER WITH CERTAIN DIRECTIONS. WE DO NOT FIND ANYTHING WRONG IN SUCH A CTION OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND ACCORDINGLY AFFIRM HIS DEC ISION. REVENUE FAILS ON THIS GROUND OF APPEAL. 25 THE NEXT ISSUE RAISED IN THE APPEAL BY THE REVEN UE RELATES TO THE DELETION OF THE ADDITION OF RS 53,380/- MADE ON ACCOUNT OF A DVERTISEMENT EXPENSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER OBSERVED THAT ASSESSEE HAD PAID AN AMOUNT OF RS 53,380/- TO JAI SHREE PUBLICITY OF SANGLI TOWARDS ADVERTISEMENTS IN LOCAL DAILIES. HE ALSO N OTICED THAT THIS AMOUNT WAS 16 INCLUSIVE OF A SUM OF RS 30,500/- PERTAINING TO AN ITEM OF GOOD WISHES PUBLISHED IN LOCAL NEWS PAPERS ON THE OCCASION OF THE 67 TH BIRTHDAY OF SHRI J D THOTE. ACCORDING TO THE ASSESSING OFFICER, THIS EXPENDITUR E DID NOT IN ANY WAY FURTHER THE ASSESSEES BUSINESS. THE ASSESSING OFFICER ACCO RDINGLY HELD THE SAME TO BE DISALLOWABLE. IN APPEAL, THE COMMISSIONER OF INCOME -TAX (APPEALS) RESTRICTED THE DISALLOWANCE TO RS 30,500/- OUT OF TOTAL DISALLOWAN CE OF RS 80,880/-. 26. AS REGARDS THE DELETION OF THE ADDITION OF RS 53,380/- RELATING TO ADVERTISEMENT EXPENSES, WE HAVE GONE THROUGH THE IM PUGNED ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND DO NOT FIN D ANY REASON TO INTERFERE WITH HIS FINDINGS ON THIS ASPECT. OUT OF A TOTAL D ISALLOWANCE OF RS 80,880/-, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS RESTRICTED THE DISALLOWANCE TO RS 30,500/-. FINDING NO FAULT WITH THIS DECISION OF TH E COMMISSIONER OF INCOME-TAX (APPEALS), WE AFFIRM HIS DECISION. REVENUE FAILS ON THIS GROUND OF APPEAL. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON THIS 31ST DAY OF MA Y, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED: 31 ST MAY, 2011 B COPY TO:- 1) ASSESSEE 2) DCIT,CIR. 3(1) KOLHAPUR 3) THE CIT (A), KOLHAPUR 4) THE CIT, KOLHAPUR 5) THE DR, B BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER TRUE COPY ASST. REGISTRAR, I.T.A.T., PUNE