Sh. Bharat Bhushan Prop., Moga V. The Assistant Commissioner of Income tax, Moga

ITA 118/ASR/2013

• Counselvise Citation: 11820914 RSA 2013
• Duration Of Justice: 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-11-2013
• Assessment Year: 2010-2011
• Appeal Filed On: 26-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SSH AJAY VOHRA; ROHIT JAIN S
• Keywords: Unexplained investment; Unexplained expenditure; Depreciation; Search and seizure; Opportunity of being heard; Principle of natural justice; Opportunity of cross examination; Bad and doubtful debts; Third party statement; Assessment record; Block assessment; Onus to prove; Reassessment proceedings
• Section: 69C; 143(3); 153A; 234B; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.118(ASR)/2013 ASSESSMENT YEAR:2010-11 PAN :AASPB0439L SH. BHARAT BHUSHAN PROP. VS. ASSTT. COMMR. OF INCOM E TAX, M/S. KHUBI RAM JOHRI LAL, CIRCLE, MOGA. 336, OLD GRAIN MARKET, MOGA. (APPELLANT) (RESPONDENT) APPELLANT BY:S/SH. AJAY VOHRA & ROHIT JAIN ADVOC ATES RESPONDENT BY:SH.TARSEM LAL, DR DATE OF HEARING: 25/11/2013 DATE OF PRONOUNCEMENT:29/11/2013 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A)-1, LUDHIANA, DATED 11.01.2013 FOR THE ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN NOT HOLDING THE ASSESSMENT ORDER PASSED U/S 145(3) R.W.S. 153A OF THE INCOME TAX ACT, 1961 ( THE ACT) AS ILLEGAL AND BAD IN LAW. 1.1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLD ING THE VALIDITY OF THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 153A 2 OF THE ACT, WHEREIN THE ASSESSING OFFICER HAD RELIE D UPON EX- PARTE MATERIAL/STATEMENT COLLECTED/RECORDED BEHIND THE BACK OF THE ASSESSEE, WITHOUT FOLLOWING THE PRINCIPLES OF N ATURAL JUSTICE. 1.2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT GROUNDS OF APPEAL NOS 1 TO 3 WERE GENERAL IN NATURE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN ASSESSING THE INCOME OF THE ASSESSEE AT RS.28,01,48,030/- AGAIN ST INCOME OF RS.1,36,79,960 DECLARED BY THE ASSESSEE IN THE RE TURN OF INCOME. 3. THAT THE CIT(A) ERRED ON THE FACTS AND CIRCUMST ANCES OF THE CASE AND IN LAW IN UPHOLDING THE ACTION OF THE AO IN MAKING ADDITION OF RS.23,99,72,176 U/S 69 OF THE ACT ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN PURCHASE OF SUG AR. 3.1 THAT THE CIT(A) ERRED ON THE FACTS AND CIRCUMSTANCE S OF THE CASE AND IN LAW IN UPHOLDING ADDITION OF RS.23,99,7 2,176/- UNDER SECTION 69 OF THE ACT ON ACCOUNT OF ALLEGED I NVESTMENT OF UNACCOUNTED AND UNDISCLOSED FUNDS FOR PURCHASE OF S UGAR, WITHOUT APPRECIATING THAT THE SAID SECTION WAS NOT AT ALL APPLICABLE. 3.2 THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CO NFIRMING THE ACTION OF THE AO IN HOLDING THAT THE CONTENTION OF THE ASSESSEE OF HAVING PURCHASED SUGAR FROM 45 PARTIES IN AUGUST , 2009, WAS INCORRECT AND FAR FROM TRUTH. 3.3 THAT THE CIT(A) ERRED ON THE FACTS AND IN LAW IN N OT SETTING ASIDE VARIOUS FALSE/BASELESS ALLEGATIONS LEVELED BY THE AO TO HOLD THAT THE ASSESSEE HAD PURCHASED SUGAR OUT OF U NDISCLOSED FUNDS AND NOT FROM THE PARTIES AS SHOWN IN THE REGU LAR BOOKS OF ACCOUNTS. 3.4 THAT THE CIT(A) ERRED ON THE FACTS AND IN LAW IN N OT DELETING THE ADDITION MADE BY THE AO BY RELYING UPON VARIOUS EX-PARTE STATEMENTS, WITHOUT AFFORDING OPPORTUNITY OF CROSS- EXAMINATION TO THE APPELLANT. 3.5 THAT THE CIT(A) ERRED ON THE FACTS AND IN LAW IN N OT SETTING ASIDE THE ACTION OF THE AO IN RELYING UPON VARIOUS DOCUMENTS COLLECTED FROM THIRD PARTIES, LIKE LETTER DATED 30 TH NOV., 2009 3 RECEIVED FROM M/S. EDIBLES PRIVATE LIMITED WITHOUT CONFRONTING THE SAME TO THE APPELLANT AND ALSO WITHOUT ALLOWING OPPORTUNITY OF CROSS-EXAMINATION OF SUCH PARTY(IES) TO TEST THE VERACITY OF SUCH DOCUMENT/MATERIAL. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) GROSSLY ERRED IN HOLDING THAT THE APPELLANT HAD, IN HIS STATEMENT RECORDED BY THE FOOD & CIVIL SUPPLY DEPAR TMENT ON 17.09.2009 ADMITTED THAT THE SUGAR LYING IN THE GOD OWN ON THE DATE OF SEARCH WAS OWNED BY HIM. 4.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) GROSSLY ERRED IN NOT CONSIDERING THE REPLY FILED BEFORE HIM, WHEREIN, THE APPELLANT HAD SPECIFICALLY SUBMIT TED CLARIFICATION REGARDING THE AFORESAID STATEMENT GIV EN TO FOOD & SUPPLY DEPARTMENT ON 17.09.2009. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) GROSSLY ERRED IN UPHOLDING THE ACTION OF THE A.O. IN MAKING ADDITION OF RS.2,64,95,897/- ON ACCOUNT OF A LLEGED GROSS PROFIT EARNED BY THE ASSESSEE ON CANCELLED SA LES AGGREGATING TO RS.17,22,72,217/-. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) GROSSLY ERRED IN UPHOLDING THE ACTION OF THE A.O. IN HOLDING THAT THERE WAS NO JUSTIFICATION FOR CANCELL ATION OF SALES OF RS.17,22,72,217/- RESULTING IN REDUCTION OF PROF IT ALREADY SHOWN IN THE BOOKS OF ACCOUNT. 7. WITHOUT PREJUDICE, THE CIT(A) GROSSLY ERRED ON FAC TS OF THE CASE AND IN LAW IN NOT CONSIDERING THE ALTERNATE GR OUND OF ASSESSEE, CHALLENGING THE ACTION OF THE AO IN NOT A LLOWING LOSS SUFFERED BY THE ASSESSEE ON ACCOUNT OF NON-REALIZAT ION OF SALE PROCEEDS AND/OR SEIZURE OF SUGAR AS BAD DEBT/LOSS I NCIDENTAL TO BUSINESS U/S 28/36/37 OF THE ACT. 8. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN NOT SE TTING ASIDE THE ACTION OF THE AO IN CHARGING INTEREST UNDER SEC TION 234B AND 234D AND IN WITHDRAWING INTEREST GRANTED U/S 24 4A OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE DEPARTM ENT OF FOOD AND CIVIL SUPPLIES CONDUCTED A RAID ON 17.09.2009 ON THE GOD OWN OF THE ASSESSEE AT LUDHIANA. DURING THE RAID, SUGAR WEIGHING APPROXIMA TELY 97,500 QUINTALS 4 WAS FOUND. THE GODOWN WAS SEALED BY THE FOOD AND C IVIL SUPPLY DEPARTMENT U/S 7 OF THE ESSENTIAL COMMODITIES ACT, 1955. FOLLOWING THIS, A CRIMINAL CASE WAS REGISTERED AT JODHEWAL BASTI POLI CE STATION,LUDHIANA. COGNIZANCE OF THIS INCIDENT WAS TAKEN BY THE INCOME TAX DEPARTMENT AND INVESTIGATIONS WERE CONDUCTED BY THE INVESTIGATION WING OF THE DEPARTMENT OF LUDHIANA. REQUISITION U/S 132A OF THE ACT WAS IS SUED BY THE DIT (INV.) LUDIANA AND THE MATTER WAS DEALT WITH BY THE THEN D DIT (INV.)-1, LUDHIANA. 2.1. THE AO VIDE PARA 1.1 OF HIS ORDER OBSERVED THA T THE ASSESSEE ALONGWITH SH. JAGJIWAN LAL, COUNSEL ATTENDED THE A SSESSMENT PROCEEDINGS FROM TIME TO TIME. THE NECESSARY INFORMATION/DETAIL S AS CALLED FOR HAVE BEEN FILED. BOOKS OF ACCOUNTS/DOCUMENTS WERE PRODUCED AN D EXAMINED. THE INFORMATION RELATING TO VARIOUS ASPECTS OF THE CASE WAS COLLECTED. THE DDIT (INV.) EXAMINED THE ASSESSEE ON OATH AND ALSO EXAMI NED VARIOUS PARTIES INVOLVED WITH THE MATTER. AS A RESULT OF THESE, THE FOLLOWING SALIENT FEATURES, CHRONOLOGICALLY IN BACKWARD ORDER, WERE NOTICED BY THE AO (REPRODUCED FROM AOS ORDER PAGE 2 & 3). I. THE ASSESSEE HAD SHOWN TO HAVE SOLD MAJOR PORT ION OF THE SUGAR TO 53 PARTIES BEFORE THE DATE OF RAID. HOWEVER, IT WAS CLAIMED THAT THE SOLD COMMODITY WAS YET TO BE LIFTED BY THE PARTIES THAT THE RAID TOOK PLACE. NO PAYMENT HAD BEEN MADE BY ANY OF THESE PA RTIES TO THE ASSESSEE. THE LIST OF THESE PARTIES ALONGWITH DETA ILS OF SALES MADE TO THEM IS AS PER ANNEXURE. II. ABOUT A MONTH BEFORE THE ABOVE SALE, IN THE FI RST WEEK OF AUGUST, 2009 THE ASSESSEE HAD CLAIMED TO HAVE PURC HASED THE MATERIAL 5 FROM ABOUT 45 PARTIES. MAJORITY OF THE PARTIES WE RE THE SAME, TO WHOM THE ABOVE REFERRED SALES HAD BEEN MADE. THE A SSESSEE MADE NO PAYMENTS TO THESE PARTIES. THE LIST OF THESE PARTI ES ALONGWITH DETAILS OF PURCHASES MADE FROM THEM IS AS PER ANNEXURE. III) AT THE TIME OF ALLEGED PURCHASE BY THE ASSESS EE, THE SUGAR WAS ALREADY LYING IN THE GODOWN AT LUDHIANA. THE ASSES SEE TOOK THE DELIVERY OF THE SUGAR LYING, THEREFROM ALL THE 45 PARTIES. IV) ALL THE PARTIES, FROM WHOM THE ASSESSEE PURCHASED T HE SUGAR AS ABOVE, HAD PURCHASED THE SAME FROM A SINGLE PARTY I .E. M/S. S.M. EDIBLES PVT. LTD. AGAIN THE DELIVERY WAS CLAIMED TO HAVE BEEN TAKEN BY THEM AT THE GODOWN ITSELF AS THE SUGAR WAS CLAIM ED TO BE ALREADY LYING IN THIS GODOWN. NO PAYMENT WAS MADE BY THESE PARTIES TO M/S. S.M. EDIBLES PVT. LTD. IN RESPECT OF THESE PURCHAS ES. THE REASON MENTIONED WAS THAT AS THE PARTY TO WHOM THEY HAD MA DE THE SALE DID NOT MAKE THE PAYMENT TO THEM. THEY DID NOT MAKE TH E PAYMENT TO IT. V) TOWARDS THE END OF THE YEAR I.E. MARCH 2010, THE AS SESSEE CANCELLED THE SALE BILLS ISSUED TO VARIOUS PARTIES IN THE MONTH OF SEPTEMBER, 2009. THE REASON FOR THE SAME WAS CITED TO BE THE FACT THAT THE SUGAR WAS CONFISCATED BY THE FOOD & SUPPLY DEPARTMENT AND THE ASSESSEE COULD NOT GIVE THE DELIVERY TO THE BUY ERS. HENCE, IT WAS CANCELLED. AS ALL THESE HAPPENINGS DID NOT APPEAL TO THE SENSE S AND APPARENTLY SEEMED TO BE BEYOND THE HUMAN PROBABILTY, FURTHER P ROBE WAS MADE. THE ASSESSEE WAS ASKED TO PRODUCE M/S. GITANSH INTE RNATIONAL LIMITED TO BE EXAMINED ON OATH. HOWEVER, THE ASSESSEE STATE D THAT HE WAS UNABLE TO DO SO AS THE PARTY IS NOT READY TO ATTEND THE PROCEEDINGS AT HIS REQUEST. ACCORDINGLY, SUMMONS U/S 131(1) WERE I SSUED TO THE PARTY ON 24.11.2001 ASKING IT TO ATTEND THE OFFICE ON 01. 12.2011. IN RESPONSE, SH. VISHAL GUPTA, MANAGER OF THE COMPANY ATTENDED ALONGWITH SH. ANIL KHANNA, CA, COUNSEL OF THE PART Y. WRITTEN REPLY WAS FILED ALONGWITH DETAILS. HIS STATEMENT WAS RECO RDED ON OATH IN THE PRESENCE OF THE ASSESSEE AND HIS COUNSEL. 2.2. THE STATEMENT OF SH. VISHAL GUPTA IS AVAILABLE AT PAGE 3 & 4 OF AOS ORDER. THE ASSESSEE AND HIS COUNSEL WERE AFFORDED T HE OPPORTUNITY TO CROSS 6 EXAMINE SH. VISHAL GUPTA. HOWEVER, THEY DECLINED TO DO SO. THE SALIENT FEATURE OF THE DEPOSITION BY SH. VISHAL GUPTA IS TH AT DURING THE PERIOD OF IST APRIL, 2009 TO 31 ST JULY, 2009, THE GODOWNS LET OUT TO THE ASSESSEE WE RE VACANT. THE CASE WAS FIXED FOR HEARING ON 05.12.201 1. ON THAT DATE, SH. JAGJIWAN LAL, CA COUNSEL FOR THE ASSESSEE ATTENDED THE PROCEEDINGS. IT WAS STATED, VIDE WRITTEN REPLY THAT THE DETAILS FILED B Y M/S. GITANSH INTERNATIONAL LTD AND THE WRITTEN REPLY, THAT THE DETAILS FILED B Y M/S. GITANSH INTERNATIONAL LTD. AND THE STATEMENT OF SH. VISHAL GUPTA WERE CON TRADICTORY AND THE STATEMENT GIVEN BY HIM WAS WRONG. IN SUPPORT OF THI S CLAIM, THE RENT RECEIPTS CLAIMED TO BE ISSUED BY M/S. GITANSH INTERNATIONAL LIMITED TO VARIOUS PARTIES FOR THE PERIOD APRIL 2009 TO JULY 2009 WERE FURNISH ED. IT WAS REQUESTED THAT M/S. GITANSH INTERNATIONAL LIMITED MAY BE SUMMONED AGAIN AND THIS TIME THE ATTENDANCE OF THE MANAGING DIRECTOR BE ENSURED. ACCORDINGLY, SUMMONS U/S 131(1) WERE ISSUED AGAIN ON 20.12.2011 TO SH. V ISHAL GUPTA AND M/S. GITANSH INTERNATIONAL LIMITED FOR ATTENDANCE ON 13. 12.2011. ON THAT DATE, THE CASE WAS ATTENDED BY SH. VISHAL GUPTA MANAGER A ND SH. KAMAL KISHORE GOYAL COUNSEL. THEY FILED A WRITTEN REPLY ALONGWITH WHICH THEY FILED THE COPIES OF STOCK REGISTER. THEIR STATEMENTS WERE RE CORDED ON OATH. ALTHOUGH THE ASSESSEE AND HIS COUNSEL HAD COME TO THE OFFICE , HOWEVER, THEY DID NOT ATTEND THE PROCEEDINGS AS IT WAS CLAIMED THAT HIS C OUNSEL SH. JAGJIWAN LAL 7 CA SUDDENLY FELL UNWELL AND HAD TO BE TAKEN TO HOSP ITAL. ACCORDINGLY, THE PROCEEDINGS HAD TO BE TAKEN IN THEIR ABSENCE. 2.3. THE STATEMENTS OF THE MANAGER AND MANAGING DIR ECTOR ARE AVAILABLE AT PAGE 5,6 & 7 OF AOS ORDER. THE STATEMENT OF SH. VI SHAL GUPTA RECORDED BY THE AO IS AVAILABLE AT PAGE 7 & 8 OF AOS ORDER. TH E AO ISSUED LETTER, WHICH IS AVAILABLE AT PAGE 8 & 9 OF AOS ORDER TO E XPLAIN THE STORY MADE OUT AND WHY THE SAME MAY NOT BE TREATED AS FALSE AND WH Y SUGAR FOUND IN ASSESSEES POSSESSION AT THE TIME OF RAID BY THE FO OD & CIVIL SUPPLIES DEPARTMENT MAY NOT BE DEEMED TO BE THE UNEXPLAINED INVESTMENT MADE BY ASSESSEE AND ASSESSED AS INCOME FOR THE IMPUGNED Y EAR. SOME PARTIES WERE EXAMINED BY THE AO, WHOSE STATEMENTS ARE ON RECORD IN AOS ORDER AT PAGES 10 TO 24. THE AO SUMMED UP THE PROCEEDINGS VIDE PAR A 1.9 AT PAGES 24 TO 26 WHICH FOR THE SAKE OF CLARITY IS REPRODUCED AS U NDER: 1.9 THE WHOLE PROCEEDINGS CAN BE SUMMED UP AS BEL OW: I. ALL THE INSTANCE OF THE ASSESSEE, SUMMON ARE ISSUED TO M/S. GITANSH INTERNATIONAL LTD. FOR 01.12.2011, THESE AR E COMPLIED WITH BY THEM, THE ASSESSEE AND HIS COUNSEL ALSO ARE PRESENT DURING THE PROCEEDING. HOWEVER, THEY DECLINE TO CRO SS EXAMINE THE MANAGER OF THE COMPANY. II. AT THE NEXT WORKING DAY THEY FILED OBJECTION TO THE STATEMENTS OF THE MANAGER AND REQUESTED HIM TO BE SUMMONED AGA IN ALONGWITH DIRECTOR OR MANAGING DIRECTOR OF THE COMP ANY. ACCEDING TO THEIR REQUEST SUMMON U/S 131(1) ARE ISS UED TO THESE PARTIES FOR 13.12.2011. THESE ARE ALSO DULY COMPLIE D WITH. HOWEVER, DESPITE HAVING COME TO THE OFFICE, THE ASS ESSEE AND 8 HIS COUNSEL DO NOT ATTEND THE PROCEEDING. ACCORDING LY, THE STATEMENTS OF THESE PERSONS ARE RECORDED IN THE AB SENCE OF THE ASSESSEE. THE COPIES OF THE SAME ARE PROVIDED TO TH E ASSESSEE. III. AGAIN SOME DEFECTS AND CONTRADICTION IN THE STATEME NTS ARE POINTED OUT. IT IS STATED THAT THE STATEMENTS WERE RECORDED AT THE BACK OF THE ASSESSEE IGNORING THE FACT THAT THE ASS ESSEE HIMSELF TURNED HIS BACK ON THE PROCEEDINGS. HOWEVER, THE AS SESSEE DOES NOT ATTEND THE PROCEEDING DESPITE BEING SPECIFICALL Y ASKED FOR. EVEN THE PARTIES FROM/TO WHOM THE ASSESSEE HAS MADE PURCHASES/SALES OF SUGAR WERE NOT PRODUCED. IV. THE ASSESSEE SUDDENLY DISAPPEARS AND IS CLAIMED TO BE INACCESSIBLE TO EVEN HIS COUNSELS. AFTER BEING FORC ED TO ATTEND THE PROCEEDINGS, HE STATS THAT WAS AWAY TO DELHI IN CONNECTION WITH HIS BUSINESS AFFAIRS. IT IS ALSO CLAIMED THAT HIS MOBILE HAD BEEN LOST. THE ASSESSEE WAS TO BE BELIEVED THAT HE DID NOT CONTACT HIS COUNSELS FOR A WEED DESPITE KNOWING IT WELL THAT SUCH AN IMPORTANT MATTER WAS GOING ON AND DAY TO DA Y PROCEEDINGS ARE GOING ON. V. ON 26.12.2011, THE COUNSEL FOR THE ASSESSEE STATES THAT HE IS AWAY TO DELHI DUE TO SOME CASUALITY IN THE FAMILY O F HIS IN- LAWS. HOWEVER, ON 27.12.2011, THE ASSESSEE STATES T HAT HE WENT TO DELHI AS THE BROTHER OF HIS FRIEND WAS SERIOUS A ND UNFORTUNATELY EXPIRED BEFORE THEY REACHED THERE. TH E CONTRADICTION BETWEEN THE VERSIONS OF THE ASSESSEE AND HIS COUNSEL SHOW THAT THE ASSESSEE INTENTIONALLY AVOIDE D ATTENDING THE PROCEEDINGS. VI. THE PARTIES PURCHASED SUGAR FROM M/S. S.M. EDIBLES LTD. WITHOUT VISITING THE GODOWN AND ON THE BASIS OF WOR D FROM ANOTHER PARTY. THEY DO NOT CARE TO ASCERTAIN THE C ORRECT LOCATION OF THE GODOWN. HOW THEY WOULD GIVE THE DELIVERY O N SALE IS BEYOND UNDERSTANDING. VII. ALTHOUGH THE STATEMENTS ON BEHALF OF M/S. GITASH IN TERNATIONAL LIMITED ARE CONFUSED AND CONTRADICTORY, ONE THING I S COMING OUT AGAIN AND AGAIN THAT THE GODOWN WAS EMPTY ON 01 .08.2011, WHEN IT WAS GIVEN TO THE ASSESSEE. 9 VIII. ORIGINALLY THE ASSESSEE ASKS FOR ISSUING SUMMONS TO M/S. GITANSH INTERNATIONAL LIMITED WITHOUT SPECIFYING A NYBODY. ON SECOND OCCASION, ATTENDANCE OF DIRECTOR OR MANAGING DIRECTOR IS DESIRED AGAIN WITHOUT SPECIFYING A PARTICULAR NA ME. ON 23.12.2011, THE COUNSEL FOR THE ASSESSEE ASKS FOR S UMMONING SH. PAWAN KUMAR AS HE WAS CLAIMED TO BE LOOKING AF TER THE AFFAIRS OF THE GODOWN. IT IS NOTEWORTHY THAT THE AS SESSEE WAS CLAIMED TO BE OUT OF TOUCH WITH THEM FOR ABOUT 5 DA YS. IN THAT CASE, HOW THE COUNSEL CAME TO KNOW THAT PAWAN KUMA R USED TO LOOK AFTER THE AFFAIRS OF THE GODOWN IS ANOTHER MYS TERY. IX. FROM THE STATEMENTS OF THE PARTIES RECORDED ON 26.1 2.2011, IT IS OBSERVED THAT IN THE SUGAR TRADE, THE PURCHASES AND SALES ARE MADE ON THE BASIS OF INSTANT PAYMENT OR AT THE MOST CREDIT OF A SHORT PERIOD OF 15 TO 30 DAYS. THIS FACT IS VISIBLE FROM THE COPIES OF ACCOUNT OF VARIOUS PARTIES IN THE BOOKS O F ACCOUNT OF THE ASSESSEE, WHICH ARE A PART OF ASSESSMENT RECORD S. HOWEVER, IN THE INSTANT CASE, THE PAYMENTS WERE NOT MADE BY THE 45 PARTIES TO M/S. S.M. EDIBLE P.LTD. FOR ABOUT ONE YE AR . SIMILARLY, THE ASSESSEE DOES NOT MAKE PAYMENTS TO I TS SELLERS FOR ABOUT 8 MONTHS. IN MARCH, 2010, THE ASSESSEE ARRANG ES FUNDS FROM M/S. S.M. EDIBLES P.LTD OR THROUGH THEM AND MA KES PAYMENTS TO THE PARTIES, WHO IN TURN MAKE PAYMENTS TO M/S. S.M. EDIBLES P. LTD. X. THE PARTIES STATED THAT THEY MADE CREDIT SALES TO T HE ASSESSEE ON THE SURETY OF M/S. S.. EDIBLES P. LTD. THIS COMPANY ITSELF IS A BIG TRADER OF SUGAR WHY IT WOULD FACILITATE THE SALE OF OTHER PARTIES AND WOULD NOT ITSELF SELL TO THE ASSESSEE IS BEYOND UNDERSTANDING. XI. THE ASSESSEE STATES THAT HE HAS NO RELATION WITH M/ S. S.M.EDIBLES P. LTD. HOWEVER, DURING QUESTIONING, HE GRADUALLY ADMITS THAT THE COMPANY APPLIED FOR VAT NO. IN HIS NAME AND THEN, AFTER BEING FURTHER CONFRONTED ADMITTED THAT HE HAD ENTERED INTO THE AGREEMENT WITH M/S. GITANSH INTERNATIONAL LIMITED ON BEHALF OF M/S. S.M. EDIBLES P. LTD. ALTHOUGH THIS H AS NO DIRECT CONNECTION WITH THE CASE, BUT IT SHOWS THAT THE ASS ESSEE IS CONTINUOUSLY CONCEDING THE TRUTH AND TELLING LIES. 10 XII. THE ASSESSEE DOES NOT ATTEND HIS CASE ON 22.12.2011 , 23.12.2011 AND 26.12.2011. ON 27.12.2011, WHEN HE U LTIMATELY ATTENDS THE CASE, HE IS ASKED THE REASONS FOR THE S AME, IT IS STATED THAT HE HAD GONE TO DELHI IN CONNECTION WITH BUSINE SS. HIS MOBILE HAD BEEN LOST AND AS SUCH WAS NOT REACHABLE. ON 26.12.2011 AGAIN HE HAD GONE TO DELHI. WHEREAS THE COPY OF AIR TICKET AND BOARDING PASSES DATED 26.12.2011 WERE FU RNISHED AS EVIDENCE, NO EVIDENCE OF GOING TO DELHI AND LOSS OF MOBILE HAS BEEN FILED. XIII. THE PARTIES TO WHOM THE ASSESSEE MADE SALES IN SEPT . 2009 HAVE STATED THAT AFTER THE SALE, THEY BECME THE OW NERS OF THE SUGAR BOUGHT BY THEM THEY DID NOT LIFT THE SAME, AS IT WAS NOT CONVENIENT AND DESIRABLE BY THEM. THE RELEVANT EXT RACT FROM THE STATEMENT OF SH. PARDEEEP KUMAR OF M/S. RIKHI R AM PARDEEP KUMAR, FARIDKOT IS AGAIN REPRODUCED AS BELO W: QUE. WHAT WERE TERMS OF PAYMENT AND LIFTING OF SU GAR? ANS. WE HAD AGREED TO LIFT IN ONE OR TWO MONTHS, D EPENDING ON RISE IN RATES. THE PAYMENT WAS TO BE MADE AFTER LI FTING THE SUGAR. THE PURCHASE WAS MADE ABOUT ONE WEEK BEFORE THE DA TES OF THE BILL. QUE. COULD YOU LIFT THE SUGAR ON THE SAME DAY ALSO ? ANS. YES, AS THE DEAL HAD BEEN MADE, WE COULD LIFT IF ANY TIME AS WE BECAME ITS OWNERS AFTER THE BILLS WERE ISSUE D. NO GODOWN RENT WAS PAID AS IT WAS TO BE PAID WHEN THE SUGAR WAS TO BE LIFTED. THEY EVEN PAID RENT ALSO TO THE ASSESSEE. IN THESE CIRCUMSTANCES, WHEN RAID TOOK PLACE, THE SUGAR BELONGED TO THESE P ARTIES AND IT WAS THEIR LOSS. THE ASSESSEE HAS FAILED TO EXPLAIN AS T O WHY HE CANCELLED THE SALE. THE QUERRIES PUT TO HIM ON 27.12.2011 AND HIS ANSWER TO THE SAME ARE AGAIN REPRODUCED AS BELOW: (15) QUE. YOU HAVE CLAIMED THAT THIS SUGAR, PURCH ASED IN AUG.,2009 WAS SOLD TO VARIOUS PARTIES IN SEPT.,200 9. PLEASE INTIMATE HOW THESE PARTIES WERE CONTACTED AND WHAT WERE THE TERMS OF PAYMENT AND LIFTING OF SUGAR. 11 ANS. THESE PARTIES WERE IN TELEPHONIC CONTACT WITH ME. IT WAS AGREED THAT THEY WOULD LIFT THE SUGAR WITHIN ONE M ONTH. IN THE MEAN TIME THE RAID WAS CONDUCTED AND THIS SUGAR WA S SEALED. (16) QUE. IT IS ALSO SEE THAT IN MARCH 2010, YOU H AVE CANCELLED ALL THESE SALES. PLEASE EXPLAIN THE REASON FOR THE SAME. ANS. AS THE SUGAR WAS SEALED I COULD NOT GIVE THE DELIVERY. ACCORDINGLY, THE SALE HAD TO BE CANCELLED. (17) QUE. WHAT WAS THE TREND OF MOVEMENT OF PRICE DURING THIS PERIOD? ANS. THERE WAS RISE OF RATE BY RS.30 PER QUINTAL I N THE FIRST ONE MONTH FROM SEPT., TO OCTO., 2009 AND FURTHER RISE OF RS.100 PER QUINTAL DURING THE NEXT TWO MONTHS I.E. FROM OCT. TO DEC. 2009. (18) QUE: DID THESE PARTIES NOT CLAIM THIS CLAIM O F PROFIT FROM YOU ? ANS. THE PARTIES ASKED FOR COMPENSATION FOR THIS L OSS. I DID NOT PAY IT TO THEM AND TOLD THEM THAT THE SUGAR HAS BE EN SEIZED AND IT WOULD BE DELIVERED TO THEM WHEN IT IS RELEASED . (19) QUE: ON 26.12.2001, STATEMENTS OF SOME PARTIE S, WITH WHOM YOU HAD HAD THE DEALINGS IN 2009-10 WERE RECO RDED IN THE PRESENCE OF YOUR COUNSELS. THEY STATED THAT A FTER PURCHASE IN SEPTEMBER FROM YOU, THEY WERE THE OWNERS OF THE SUGAR. THEY DID NOT LIFT THE SUGAR AS IT WAS NOT CONVENIE NT TO THEM. IN THESE CIRCUMSTANCES, IT WAS THEIR SUGAR, WHICH WAS CONFISCATED. THEN WHY DID YOU CANCEL HE SALE ? ANS. AS THE SUGAR HAD BEEN SEIZED, THE SALE WAS CA NCELLED BY MUTUAL UNDERSTANDING. XIV) EVEN IF THEORETICALLY, THE ABOVE LOGIC IS ACCEPTED, THERE WAS A RISE IN PRICES AFTER SUGAR WAS SOLD BY THE AS SESSEE TO THESE PARTIES. AS STATED BY THEM THE PURCHASES W ERE MADE BY THEM AS THEY EXPECTED SUCH RISE. HOWEVER, T HEY SIMPLY CANCELLED THE SALES, WITHOUT ASKING THE ASSE SSEE TO COMPENSATE THEM FOR LOSS OF THIS POTENTIAL PROFIT, IT WAS NOT CLAIMED BY EVEN A SINGLE PARTY. ADMITTEDLY THEY HAD 12 NO DEALINGS WITH THE ASSESSEE PRIOR TO THAT. THIS I S SOMETHING TOTALLY UNIMAGINABLE. XV) AS PER LETTER DATED 30.11.2009 FILED BY M/S. S.M. E DIBLES P. LTD. BEFORE THE DDIT (INV.)-1 LUDHIANA, IT HAD V ACATED ITS GODOWNS AT VILL. SEEHRA BY MARCH, 2009. 2.4. THE SAID LETTER IS AVAILABLE AT PAGE 28 & 29 O F AOS ORDER. FINALLY, THE A.O. OBSERVED THAT THE STORY MADE BY THE ASSESSEE T HAT SUGAR WAS ALREADY LYING IN THE GODOWN AND HAD BEEN PURCHASED ON CREDI T, STANDS REFUTED. FROM THE LETTER ANEXURE-1 IT IS CLEAR THAT M/S. S.M. EDI BLES P. LTD. HAD VACATED THE GODOWNS BY MARCH, 2009. IN HIS ORIGINAL STATEMENT D ATED 01.12.2011, SH. VISHAL GUPA HAD TOLD THE TRUTH THAT THE GODOWN WAS EMPTY DURING THE PERIOD 01.04.2009 TO 31.07.2009. HE WAS NOT AWARE THAT SOM E MANIPULATIONS HAD BEEN MADE IN THE RECORDS TO FACILITATE THE ASSESSEE . THE LATTER SUBMISSIONS THAT A GODOWN KEEPER WAS HIRED AND SALARY WAS PAID TO HIM IS ONLY TO JUSTIFY THE FALSIFIED RECORDS. THE STATEMENTS OF THE BUYIN G AND SELLING PARTIES ARE NOT DEPENDABLE DUE TO REASONS STATED ABOVE. SIMPLY BEC AUSE SOME RATHER MANY PARTIES HAVE ISSUED AND ACCEPTED BILLS, IT D OES NOT MEAN THAT THESE ARE GENUINE. ONE OR TWO REASONS MAY ACT AGAINST THE NOR MAL CONVENTIONS OF THE TRADE FOR TYPICAL REASONS BUT THE WHOLE TRADING CO MMUNITY IS NOT EXPECTED TO BEHAVE IN A QUEER MANNER. THIS BEHAVIOUR IS BEYOND THE PREPONDERANCE OF HUMAN PROBABILITIES. THE CASE OF THE ASSESSEE FAILS THE TEST OF HUMAN 13 PROBABILITIES AND THE RATIO OF JUDGMENTS OF THE HON BLE SUPREME COURT OF INDIA IN THE FOLLOWING CASES SQUARELY APPLIES TO TH E CASE: SUMATI DAYAL VS. CIT 214 ITS 801 (SC) (1985) CIT VS. DURGA PARSHAD MORE 82 ITR 540(SC)(1971) THE STORY OF THE ASSESSEE THAT THE SUGAR WAS PURCH ASED ON CREDIT FROM 45 DIFFERENT PARTIES FAILS. FROM WHERE AND HOW THE SUG AR WAS ACTUALLY PURCHASED HAS NOT BEEN DISCLOSED. THE ONLY INESCAPABLE CONCLU SION IS THAT IT WAS PURCHASED BY INVESTING UNACCOUNTED AND UNDISCLOSED FUNDS. AS SUCH THE AMOUNT OF INVESTMENT IS LIABLE TO BE THE INCOME OF THE ASSESSEE U/S 69 OF THE INCOME TAX ACT, 1961. AS PER THE DETAILS FURNISHED BY THE ASSESSEE, HE PURCHASED THIS SUGAR FOR RS.23,99,72,176/-. IN THE ABSENCE OF ANY FURTHER INFORMATION, THIS AMOUNT WAS TAKEN TO BE AMOUNT OF UNEXPLAINED INVESTMENT U/S 69 AND ADDED TO ASSESSEES INCOME. PENALTY PROC EEDINGS FOR FILING INACCURATE PARTICULARS OF THIS INCOME ARE BEING INI TIATED SEPARATELY. AS MENTIONED IN THE ABOVE DISCUSSION, THE SUGAR HAD BE EN SOLD BY THE ASSESSEE DURING THE PERIOD 03.09.2009 TO 10.09.2009 TO 53 PA RTIES. THE AMOUNT OF THESE SALES WAS RS.28,36,29,250/-. HOWEVER, OUT OF THESE SALES, SALES AMOUNTING TO RS.17,22,72,217/- WERE CANCELLED BY TH E ASSESSEE ON 31.03.2010 ON THE GROUND THAT DELIVERY COULD NOT BE GIVEN TO THESE PARTIES. THE ISSUE HAS BEEN DISCUSSED IN DETAIL ABOVE. THERE WAS NO JUSTIFICATION FOR 14 CANCELLATION OF THIS SALE AND REDUCTION OF PROFIT A LREADY SHOWN IN THE BOOKS OF ACCOUNT. THE PROFIT ON THESE SALES IS LIABLE TO BE ASSESSED IN THE HANDS OF THE ASSESSEE AND BROUGHT TO TAX. ON THE BASIS OF AV ERAGE RATE OF GROSS PROFIT ON THE ABOVE SALES, THE GROSS PROFIT ON THESE SALES OF RS.17,22,72,217/- COMES TO RS.2,64,95,897/-. THIS AMOUNT OF RS.2,64,9 5,897/- WAS ALSO ADDED TO THE INCOME OF THE ASSESSEE. 3. BEFORE, THE LD. CIT(A), THE ASSESSEE MADE THE SU BMISSIONS AND AFTER CONSIDERING THE SAME, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. 4. THE LD. COUNSEL FOR THE ASSESSEE, MR. AJAY VOHRA , ADVOCATE APPEARED AND FILED WRITTEN SUBMISSIONS, WHICH FOR THE SAKE O F CONVENIENCE ARE REPRODUCED AS UNDER: THE APPELLANT IS AN INDIVIDUAL, ENGAGED IN THE BU SINESS OF TRADING IN SUGAR, GHEE, AND OTHER ITEMS THROUGH HIS PROPRIETARY CONCERN M/S. KHUBI RAM JOHRI LAL. FOR THE RELEVANT ASSESSME NT YEAR, THE APPELLANT FILED RETURN OF INCOME ON 13.10.2010 DECL ARING TAXABLE INCOME OF RS.1,36,79,960/- UNDER THE NORMAL PROVISI ONS OF THE INCOME TAX ACT, 1961 (THE ACT). ON 17.09.2009, THE DEPARTMENT OF FOOD AND CIVIL SU PPLIES CONDUCTED SEARCH AT ONE OF THE GODOWNS OF THE APPEL LANT AT LUDHIANA AND SEIZED SUGAR WEIGHING 97,500 QUINTALS. PURCHAS E OF THE ENTIRE SUGAR SO SEIZED WAS FULLY AND APPROPRIATELY RECORDE D BY THE APPELLANT IN THE REGULAR BOOKS OF ACCOUNTS. ON THE DATE OF SE IZURE, SUGAR HAD ALREADY BEEN SOLD BY THE APPELLANT TO VARIOUS PARTI ES. SUBSEQUENTLY, ON ACCOUNT OF SEIZURE OF THE SUGAR, THE APPELLANT AGRE ED TO REVERSE THE SALES SO MADE TO VARIOUS PARTIES. 15 TAKING COGNIZANCE OF THE ABOVE SEARCH, REQUISITION U/S 132A OF THE ACT WAS ISSUED IN THE CASE OF THE APPELLANT. TH EREAFTER, ASSESSMENT OF THE APPELLANT FOR THE ASSESSMENT YEAR 2010-11 WA S TAKEN UP U/S 143(3) READ WITH SECTION 153A OF THE ACT. UNDISPUTED FACTS: BRIEFLY STARTED, THE UNDISPUTED FACTS ARE AS FOLLOW S: DURING THE RELEVANT ASSESSMENT YEAR, THE APPELLANT PURCHASED 1,07,314 QTLS. OF SUGAR FROM 45 DIFFERENT AND INDEPENDENT PA RTIES IN AUGUST, 2009 FOR AMOUNT AGGREGATING TO RS.23,99,72,176. SUC H 45 PARTIES HAD, IN TURN, IT IS SUBMITTED, PURCHASED THE SAID SUGAR FROM M/S. S.M. EDIBLES PRIVATE LIMITED. THE SAID SUGAR, AT THE TIM E OF ITS PURCHASE, WAS STORED BY THE SAID 45 PARTIES IN A GODOWN AT LU DHIANA, WHICH WAS TAKEN ON RENT BY THE 45 PARTIES FROM ITS LANDLORD M /S. GITANSH INTERNATIONAL LIMITED. IT WAS DECIDED BETWEEN THE APPELLANT AND THE SAID 4 5 PARTIES THAT THE DELIVERY OF THE SUGAR ON AS IS WHERE IS BASIS, TH AT IS AT THE GODOWN ITSELF WHERE THE SAME WAS STORED, BY TAKING THE SA ID GODOWN, ON RENT WITH THE CONSENT OF THE LANDOWNER. THE APPELLANT, A CCORDINGLY, TOOK THE GODOWN ON RENT FROM ITS LANDLORD M/S. GITANSH I NTERNATIONAL LIMITED., IN AUGUST, 2009 AND TOOK DELIVERY OF THE SUGAR BY TAKING POSSESSION OF THE GODOWN. OUT OF THE AFORESAID SUGAR, 97,500 QTLS OF SUGAR WA S SUBSEQUENTLY SOLD BY THE APPELLANT ON VARIOUS DATES IN SEPTEMBER, 200 9 TO AROUND 53 DIFFERENT PARTIES FOR AMOUNT AGGREGATING TO RS.28,3 6,29,250 AND THE BALANCE 9,400 QTLS WAS SOLD TO OTHER PARTIES. AS A MATTER OF CONVENIENCE, IT WAS AGREED BETWEEN THE APPELLANT AN D THE SAID 53 PARTIES (PURCHASERS) TO WHOM 97,500 QTLS OF SUGAR W AS SOLD THAT THE PURCHASERS WOULD LIFT THE SUGAR FROM THE GODOWN WIT HIN ONE MONTH. IN THE MEANWHILE, ON 17.09.2009, RAID WAS CONDUCTED AT THE GODOWN OF THE APPELLANT BY THE DEPARTMENT OF FOOD AND CIVI L SUPPLIES AND THE ENTIRE SUGAR WEIGHING 97,500 QTLS, LYING THERE (WHI CH WAS SOLD TO 53 PARTIES), WAS SEIZED. THE GODOWN WAS SEALED BY THE DEPARTMENT AND CONSEQUENTLY, THE APPELLANT WAS UNABLE TO DELIVER S UGAR TO THE 53 PARTIES WHO HAD PURCHASED SUGAR FROM THE APPELLANT. 16 SINCE THE PARTIES INSISTED ON DELIVERY OF SUGAR AN D THE APPELLANT WAS UNABLE TO GIVE DELIVERY PURSUANT TO SEALING OF THE GODOWN, SALES AGGREGATING TO RS.17,22,72,217/-, OUT OF SALES OF R S.28,36,29,250/- HAD TO BE CANCELLED. IN THE MEANWHILE, SINCE THE 4 5 PARTIES, FROM WHOM THE APPELLANT HAD PURCHASED SUGAR, WERE CONTIN UOUSLY INSISTING ON RECEIVING PAYMENT FOR THE GOODS SOLD, THE APPELL ANT ARRANGED FUNDS TO MAKE PAYMENT TO THE SAID 45 PARTIES IN MARCH, 2 010. CASE OF AO/CIT(A) GODOWN WAS VACANT ON 01.08.2009 IN THE IMPUGNED ORDER, THE CIT(A), WHILE AFFIRMING THE ASSESSMENT ORDER, HAS DOUBTED THE ENTIRE TRANSACTION OF PURCHA SE OF SUGAR BY THE APPELLANT FROM 45 PARTIES AND THEREAFTER, SALE TO T HE 53 PARTIES, PRIOR TO SEIZURE BY THE DEPARTMENT OF FOOD AND CIVIL SUPPLIE S IN SEPT.,2009. TO COME TO THE AFORESAID CONCLUSION, IT IS FUNDAMEN TALLY THE CASE OF THE LOWER AUTHORITIES AND HAS HELD THAT THE GODOWN, WHICH WAS TAKEN ON RENT BY THE APPELLANT IN AUGUST, 2009, WAS LYING VACANT FROM 10.04.2009 TO 31.07.2009 AND HENCE, THERE WAS NO S UGAR LYING THEREIN AT THE TIME OF POSSESSION OF GODOWN ON RENT BY APPE LLANT IN AUGUST, 2009. THIS CONCLUSION, IT IS FURTHER SUBMITTED, IS PRIMARILY BASED ON STATEMENT OF ONE MR. VISHAL GUPTA, WHO WAS WORKING AS MANAGER OF M/S. GITANSH INTERNATIONAL LIMITED. ON THE BASIS OF THE AFORESAID, IT HAS BEEN HELD THE AMOUNT AT WHICH THE APPELLANT CLAIMED TO HAVE PURCHASED SUGAR I.E. RS.2 3,99,72,176/- WAS ASSESSABLE AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. THE AFORESAID ACTION OF THE AO/CIT(A) IS NOT BASED ON CORRECT APPRECIATION OF FACTS AND POSITION IN LAW AND CALLS FOR BEING DELETED FOR THE REASONS ELABORATED HEREUNDER: PURCHASE OF SUGAR CONTEMPORANEOUS EVIDENCES PLACE D ON RECORD IT IS, AT THE OUTSET, RESPECTFULLY SUBMITTED THAT T HERE IS NO DISPUTED THAT THE 45 PARTIES, FROM WHOM THE APPELLANT PURCHASED S UGAR HAD IN TURN PURCHASED SUGAR FROM M/S. S.M. EDIBLE P. LTD. FURT HER, IT IS THE CONSISTENT STAND OF THE SAID 45 PARTIES AND THE APP ELLANT THAT AT THE TIME OF PURCHASE OF SUGAR, THE ENTIRE SUGAR WAS LYING IN A GODOWN AT 17 LUDHIANA, WHICH WAS TAKEN ON RENT FROM M/S. GITANSH INTERNATIONAL LIMITED.. INITIALLY, THE GODOWN WAS TAKEN ON RENT BY M/S. S.M . EDIBLES PVT. LTD. THEREAFTER, THE 45 PARTIES TOOK THE GODOWN ON RENT IN APRIL, 2009 PURSUANT TO PURCHASE OF SUGAR FROM M/S. S.M. EDIBL E PVT. LTD. AND THEREAFTER, THE APPELLANT TOOK THE GODOWN ON RENT I N AUGUST, 2009, WHEN THE 45 PARTIES SOLD THE SUGAR LYING THEREIN TO THE APPELLANT. IT IS RESPECTFULLY SUBMITTED THAT THE APPELLANT HAS PLACED ON RECORD SUBSTANTIAL UNREBUTTED DOCUMENTARY EVIDENCES TO SUB STANTIATE NOT ONLY PURCHASE OF SUGAR BUT ALSO THE FACT THAT THE ENTIRE PURCHASE WAS FULLY RECORDED IN THE REGULAR BOOKS OF THE APPELLANT, WHI CH ARE SUMMARIZED AS UNDER: S.NO. PARTICULARS PG.NO. REMARKS 1 LIST OF PARTIES FROM WHOM PURCHASE MADE 1-3 2 PURCHASE BILLS ISSUED BY THE SELLERS 4-71 PURCHASE BILLS CONTAIN COMPLETE POSTAL ADDRESS OF ALL THE PARTIES. ALL THE PARTIES ARE REGULAR/ESTABLISHED TRADERS DULY REGISTERED WITH THE SALES TAX AUTHORITIES. FURTHER, TIN OF ALL THE PARTIES IS ALSO MENTIONED IN THE BILLS ISSUED. 3 VAT RETURN FILED BY THE APPELLANT 78-80 PURCHASES DECLARED BY APPELLANT BEFORE VAT AUTHORITIES, WHICH HAS BEEN DULY ACCEPTED. 4 INSURANCE DOCUMENTS RELATING TO STOCK OF THE APPELLANT LYING AT THE GODOWN 119- 121 5 STATEMENTS OF VARIOUS VENDORS RECORDED BY THE DDIT(INV.) IN NOVEMBER/DECEMBER, 178- 330 IN THEIR RESPECTIVE STATEMENTS RECORDED BEHIND THE BACK OF THE APPELLANT BY THE INVESTIGATION 18 2009 DEPARTMENT, ALL THE PARTIES CONFIRMED HAVING SOLD SUGAR TO THE APPELLANT. THE AFORESAID PARTIES ALSO SUBMITTED, INTER ALIA, THE FOLLOWING DOCUMENTARY EVIDENCES(PART OF THE DOCUMENTS HAVE BEEN SUPPLIED TO THE DEPARTMENT) A. CONFIRMATION THAT SUGAR WAS SOLD TO APPELLANT. B. COPY OF ACCOUNT OF THE APPELLANT IN THEIR BOOKS. 6. DOCUMENTS IN SUPPORT OF SALES MADE BY THE FOLLOWING VENDORS TO THE APPELLANT FILED DURING THE INVESTIGATION PROCEEDINGS: A. SHIVAM ENTERPRISES B. GUPTA TRADING CO. C. R.K.ENTERPRISES D. DELHI TRADERS E. SUKHWINDER KUMAR GUPTA F. SUNRISE ENTERPRISES 334- 335 339 343- 344 349- 350 353 357 ALL THE VENDORS CONFIRMED THAT THEY HAD SOLD SUGAR TO APPELLANT AND THE SAME WAS STORED IN THE GODOWN TAKEN ON LEASE FROM M/S. GITANSH INTERNATIONAL LIMITED. IN THIS RESPECT, FOLLOWING DOCUMENTS/EVIDENCES WERE SUBMITTED. (A) CONFIRMATIONS (B) RENT RECEIPT ISSUED BY M/S. GITANSH INTERNATIONAL LIMITED. TO SAID VENDORS. (C) LEDGER ACCOUNT OF APPELLANT IN THE BOOKS OF SAID VENDORS. 7. STATEMENTS OF THE FOLLOWING VENDORS RECORDED ON 26.12.2011 BY THE A.O. THE VENDORS NOT ONLY CONFIRMED THE SALE TO THE APPELLANT BUT ALSO SUBMITTED THE DETAILS OF THEIR RESPECTIVE PURCHASES 19 1. SHRI ABHINANDAN GUPTA PROP. M/S. MADAN MOHNAN & SONS. 2. SHRI RAKESH KUMAR MANAGER, M/S. PREM KUMAR KRISHAN KUMAR 3. SH. PAWAN KUMAR, PARTNER, M/S. JAGDISH LAL RAJ KUMAR AND M/S. SUKHINDER KUMAR GUPTA 4. PRADEEP BANSAL, PARTNER, M/S. RIKHI RAM PRADEEP KUMAR. 138- 139 135- 137 140- 143 132- 134 OUT OF WHICH SUGAR WAS SOLD TO THE APPELLANT. 8. STATEMENT OF THE APPELLANT RECORDED ON 27.12.2011 122- 126 ON PERUSAL OF THE AFORESAID, IT WILL KINDLY BE APP RECIATED THAT THE DOCUMENTARY EVIDENCES PLACED ON RECORD NOT ONLY CONTAINS THE DOCUMENTS FILED BY THE APPELLANT IN SUPPORT OF THE PURCHASES BUT ALSO INCLUDE UN-REBUTTED/UNCONTROVERTED INDEPENDENT/THIR D PARTY EVIDENCES IN THE FORM OF. (A) PURCHASE BILLS, VAT RETURN AND INSURANCE DOCUMENTS (B) EX-PARTE STATEMENTS OF VENDORS RECORDED BY THE INVE STIGATION DEPARTMENT WHEREIN THE VENDORS CATEGORICALLY CONF IRMED HAVING SOLD SUGAR TO THE APPELLANT; (C) DOCUMENTS IN SUPPORT OF SALES BY VENDOR TO THE APP ELLANT SUBMITTED BY VENDORS DIRECTLY TO THE INVESTIGATION DEPARTMENT (NOT PROVIDED TO THE APPELLANT) (D) STATEMENTS OF VENDORS RECORDED BY THE ASSESSING OFF ICER. 20 IT IS FURTHER RESPECTFULLY SUBMITTED THAT THE APPEL LANT ALSO POINTED OUT TO THE CIT(A) VIDE SUPPLEMENTARY SUBMISSIONS DATED 29.12.2012 THAT THE APPELLANT HAS ONLY PLACED ON RECORD DOCUMENTARY EVIDENCES MADE AVAILABLE TO IT DURING INSPECTION. IT WAS FURTHER S UBMITTED THAT THE APPELLANT, HOWEVER, UNDERSTAND THAT THE VENDORS SUB MITTED SUBSTANTIAL DOCUMENTARY EVIDENCES BEFORE THE INVESTIGATION DEPA RTMENT (WHICH HAS NOT BEEN PROVIDED TO THE APPELLANT). THE APPELL ANT THEREFORE, REQUESTED THE CIT(A) TO SUMMON THE ENTIRE RECORDS F ILED DURING INVESTIGATION PROCEEDINGS BY VARIOUS VENDORS. THERE IS NO DISCUSSION/COMMENT IN THE IMPUGNED ORDE R EITHER ABOUT THE FILE OF THE INVESTIGATION DEPARTMENT BEING SUMM ONED BY THE CIT(A) OR ON THE AFORESAID VOLUMINOUS DOCUMENTARY E VIDENCES PLACED ON RECORD BY THE APPELLANT. NONE OF THE DOCUMENTARY EVIDENCES PLACED ON RECORD BY THE APPELLANT HAVE EITHER BEEN REBUTTE D/QUESTIONED BY ANY OF THE LOWER AUTHORITIES. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT PURCHASE OF SUGAR BY THE APPELLANT IS CLEARLY ESTABLISHED BEYOND ANY REASON ABLE DOUBT BY UNCONTROVERTED/DOCUMENTARY EVIDENCES AVAILABLE ON R ECORD. IT IS ALSO OF UTMOST IMPORTANCE TO NOTE THAT THERE IS ALSO NO DISPUTE THAT ON 17.09.2009, WHEN RAID WAS CONDUCTED AT THE GODOW N OF THE APPELLANT BY DEPARTMENT OF FOOD & SUPPLIES, SUGAR W EIGHING 97,600 QTLS. WAS FOUND TO BE LYING THERE AND WAS SEIZED. IN THE LIGHT OF THE AFORESAID UNCONTROVERTED/UNREBU TTED DOCUMENTARY EVIDENCES AVAILABLE ON RECORD, THE APPELLANT FAILS TO APPRECIATE AS TO HOW THE CIT(A) SIMPLY PROCEEDED TO AFFIRM THE ACTIO N OF THE AO IN HOLDING THAT THE APPELLANT PURCHASED SUGAR OUTSIDE THE REGULAR BOOKS IN AUGUST, 2009 WHICH WAS FOUND LYING IN THE GODOWN AT THE TIME OF RAID. RE: STATEMENT OF MR. VISHAL GUPTA. AS STATED ABOVE, IT IS SUBMITTED THAT THE ERRONEOUS CONCLUSION OF THE CIT(A)/AO IS PRIMARILY BASED ON STATEMENT OF ONE MR . VISAL GUPTA, WHO WAS WORKING AS MANAGER OF M/S. GITANSH INTERNAT IONAL LIMITED. THE COMPANY OWNING THE GODOWN. 21 STATEMENT OF MR. VISHAL GUPTA, MANAGER OF THE GODOW N WAS RECORDED TWICE BY THE AO ON 01.12.2011 AND 13.12.2011. THE A O IN THE ASSESSMENT ORDER HIMSELF DOUBTED THE VERACITY/RELIA BILITY OF THE STATEMENTS GIVEN BY THE AO, AS DISCUSSED HEREUNDER: IN THE FIRST STATEMENT RECORDED ON 01.12.2011, MR. GUPTA STATED THAT THE GODOWN WAS LYING VACANT FOR THE PERIOD FROM 01. 04.2009 TO 31.07.2009. THE RELEVANT EXTRACTS OF THE STATEMENT GIVEN BY MR. VISHAL GUPTA ON 01.12.2011 ARE REPRODUCED HEREUNDER : QUE. WHAT THE SYSTEM OF LETTING OUT THE GODOWN? ANS. THE GODOWNS ARE LET OUT IN TOTAL TO THE DESI RING PARTY. ALL OTHER JOBS ARE DONE BY THEM AND THE KEY IS ALSO WITH THE HIRI NG PARTY. WE DO NOT OPERATE THE GODOWN IN RETAIL STORE KEEPING. QUE. PLEASE INTIMATE THE GODOWN WISE AND PERIOD WA S DETAIL OF LETTING OUT OF VARIOUS GODOWN DURING THE F.Y.2008-09. ANS. ONE GODOWN OF 25000 SQ. FEET LET OUT TO M/S. DHAMPUR SUGAR MILL FOR THE WHOLE YEAR 2008-09. SECOND GODOWN OF 2 5000 SQ. FEET TO M/S. S.M. EDIBLE PVT. LTD. FOR WHOLE YEAR 2008-09. THIRD GODOWN OF 8500 SQ. FEET TO M/S. GOINDWALA SAHIB VANASPATI MILL FROM AP RIL, 2008. THE OTHER TWO GODOWNS REMAINED VACANT FOR WHOLE YEAR AND THE GODOWN OF 8500 SQ. FEET REMAINED VACANT FROM NOV., 2008 TO MARCH 2009 . QUE. DID YOU LET OUT ANY GODOWN TO M/S. KHUBI RAM J OHRI LAL DURING THE F.Y.2008-09? ANS. NO. QUE. IS THERE ANY INSTANCE THAT SOME OTHER PARTY H AD SUBLET ANY GODOWN TO M/S. KHUBI RAM JOHRI LAL? ANS. NO. THEIR OWN MATERIAL WAS KEPT STOCKED DUR ING THE PERIOD MENTIONED ABOVE. QUE. PLEASE FURNISH THE DETAILS OF LETTING OUT OF GODOWN DURING THE F.Y.2008-09 ANS. THE FIRST GODOWN OF 25000 SQ. FEET WAS LET OU T AS UNDER: AUG, 2009 TO MARCH 2010- M/S. KASHIPUR SUGAR MILL SECOND GODOWN OF 25000 SQ. FT WAS LET OUT AS UNDE R: APRIL 2009 TO AUGUST 2009 M/S. DHAMPUR SUGAR MI LL. 22 SEPT 2009 TO MARCH 2010- M/S. YASKI INTERNATIONAL THIRD GODOWN OF 25000 SQ. FEET WAS LET OUT AS UND ER: AUGUST, 2009 TO OCT.,2009 M/S. KHUBI RAM JOHRI LAL, MOGA THE GODOWN OF 9000 SQ. FEET WAS LET OUT AS UNDER: JUNE 2009 TO JULY 2009 M/S. ASMOLI SUGAR MILL AUGUST,2009 TO OCT., 2009 M/S. KHUBI RAM JOHRI LAL THE GODOWN OF 8500 SQ. FEET WAS LET OUT AS UNDER: AUGUST 2009 TO OCT., 2009 M/S. KHUBI RAM JOHRI LAL I KNOW REMEMBER THAT THERE IS ANOTHER SHED OF 8000 SQ. FEET WHICH WAS LET OUT TO M/S. GOINDWAL VANASPATI MILL FROM AUG.,2009 TO OCT.,2009. FOR THE PERIOD OTHER THAN SPECIFIED ABOVE, THE RES PECTIVE GODOWN WERE VACANT. QUE. DO YOU ENTER ANY WRITTEN AGREEMENT OF THE TIM E OF LETTING OUT THE GODOWN TO ANY PARTY? ANS.YES, WRITTEN AGREEMENT IS MAD IN EACH AND EVER Y CASE. WE HAVE RETAINED THE COPIES AND SAME CAN BE PRODUCED WHEN ASKED FOR? ON PERUSAL OF THE AFORESAID STATEMENT, IT MAY KINDL Y BE NOTICED THAT MR. VISHAL GUPTA HAD CONFIRMED THAT IN AUGUST, 2009 , THE GODOWN WAS ACTUALLY LET OUT TO THE APPELLANT. HOWEVER, WHI LE GIVING THE DETAILS OF THE PERIODS FOR WHICH VARIOUS GODOWNS WERE LET O UT DURING THE FINANCIAL YEAR 2009-10. MR. VISHAL GUPTA, AFTER PO INTING OUT THE RELEVANT DETAILS, IN THE LAST LINE STATED FOR THE PERIOD OTHER THAN SPECIFIED ABOVE, THE RESPECTIVE GODOWNS WERE VACAN T. THE SAID LINE HAS BEEN RELIED UPON BY THE AO IN THE ASSESSMENT OR DER TO COME TO THE CONCLUSION THAT THE GODOWN WHICH WAS SUBSEQUENTLY T AKEN ON RENT BY THE APPELLANT, WAS LYING VACANT FROM 01.04.2009 TO 31.07.2009. IT IS SUBMITTED THAT THE STATEMENT OF MR. VISHAL GU PTA DATED 01.12.2011 WHICH HAS BEEN RELIED UPON BY THE AO, BY RELYING ON PART OF THE STATEMENT, IGNORING THE OTHER PART OF THE ST ATEMENT, IS ALSO CONTRADICTORY TO HIS SUBSEQUENT STATEMENT DATED 13. 2.2011 AS ALSO TO THE STATEMENT IN THE MANAGING DIRECTOR OF THE COMPA NY OWNING THE 23 GODOWN, WHO HAD CATEGORICALLY CONFIRMED THAT THE G ODOWN WAS ACTUALLY GIVEN ON RENT TO THE 45 PARTIES FOR THE PE RIOD FROM 01.04.2009 TO 31.07.2009. THE RELEVANT EXTRACTS OF THE STATEMENT OF MR. VISH AL GUPTA RECORDED ON 13.12.2011 ARE REPRODUCED HEREUNDER: QUE. YOU MUST BE REMEMBERING THAT YOU ATTENDED MY OFFICE ON 01.12.2011 IN CONNECTION WITH THE SAME CASE AND HAD GIVEN YOUR STATEMENT UNDER OATH. AT THAT TIME YOU STATED THAT ONLY FULL/ COMPLETE GODOWN ARE LET OUT BY THE COMPANY AND NOT IN PARTS. ON THE SAME DA TE A REPLY WAS FURNISHED WHICH CONTAINS A COPY OF AN A/C TITLED R ECENT RECEIVED A/C. THIS CONTAINS SMALL AMOUNT OF RENT RECEIVED FROM VARIOUS PARTIES ON DIFFERENT DATES. PLEASE ILLUCIDATE THIS A/C. ANS. ON THAT DATE I GOT CONFUSED. THESE ARE THE AMO UNTS OF GODOWN RENT RECEIVED FROM VARIOUS PARTIES IN RESPECT OF PART OF GODOWN LET OUT FROM TIME TO TIME. THIS IS FOR THE PERIOD 01.04.2009 TO 31.07.2009. DURING THAT PERIOD A GODOWN KEEPER WAS EMPLOYED FOR THIS PURPO SE WHO CONTROLLED THE MOVEMENT OF THESE STOCKS. A STOCK REGISTER WAS ALSO MAINTAINED. PHOTOCOPIES OF THE SAME ARE BEING SUBMITTED ALONGWI TH REPLY DATED 13.12.011. QUE. DID THESE PARTIES VACATE THESE GODOWNS ON 31.0 7.2009. ANS. YES, THESE GODOWNS WERE VACATED BY THESE PARTI ES ON 31.07.2009, WE TOOK POSITION OF THE VACANT GODOWNS AND IT WAS L ET OUT SUBSEQUENTLY TO THE OTHER PARTIES AS PER DETAILS GIVEN. THESE GODOW NS WERE LET OUT TO OTHER PARTIES W.E.F. 01.08.2009 IN VACANT POSITION. THESE WERE LET OUT IN FULL AND FURTHER CONTROL WERE EXERCISED BY THOSE PARTIES. TH E KEYS WERE ALSO. (EMPHASIS SUPPLIED) ON PERUSAL OF THE AFORESAID STATEMENT, IT MAY KINDL Y BE NOTICED THAT MR. VISHAL GUPTA STATED THAT WHILE GIVING HIS FIRST ST ATEMENT ON 01.12.2011, HE GOT CONFUSED AND HAD ERRONEOUSLY STATED THAT THE GODOWN WAS LYING VACANT FROM 01.04.2009 TO 31.07.2009. IN ADDITION, HE FURTHER S TATED THAT THE GODOWN WAS GIVEN ON RENT TO VARIOUS PARTIES FROM TIME TO TIME DURING THE PERIOD 01.04.2009 TO 31.07.2009. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT MR. VISH AL GUPTA GAVE CONTRADICTORY STATEMENTS DURING THE ASSESSMENT PROC EEDINGS. WHILE, IN THE FIRST STATEMENT HE STATED THAT THE GODOWN WAS LYING VACAN T, BUT IN THE SECOND STATEMENT HE STATED THAT THE GODOWN WAS GIVEN ON RENT TO VARI OUS PARTIES, WHICH WERE, IN FACT, THE SAME PARTIES FROM WHOM THE APPELLANT HAD PURCHASED SUGAR IN AUGUST, 24 2009. THUS, THE STATEMENT OF MR. VISHAL GUPTA, WAS APART FROM BEING CONTRADICTORY, TOTALLY UNRELIABLE AS HE HIMSELF SAI D IN HIS SECOND STATEMENT THAT HE GOT CONFUSED WHILE GIVING HIS FIRST STATEMENT. IN VIEW OF THE AFORESAID, IT IS SUBMITTED THAT STAT EMENT OF MR. VISHAL GUPTA COULD NOT HAVE BEEN THE BASIS TO HOLD THAT THE GODO WN WAS LYING VACANT FROM 01.04.2009 TO 31.07.2009 SINCE HIS STATEMENTS WERE CONTRADICTORY AND UNRELIABLE. IN FACT, THE AO, WHILE STATING HIS CONCLUSION ON PA GE 27 OF THE ASSTT. ORDER HAS ALSO OBSERVED THAT THE STATEMENTS GIVEN ON BEHALF O F M/S. GITANSH INTERNATIONAL LIMITED, THE COMPANY THAT OWNS THE GODOWN, WERE CON FUSED AND CONTRADICTORY. THE STATEMENT OF MR. VISHAL GUPTA, IT IS SUBMITTED ONLY SUPPORTS THE CASE OF THE APPELLANT INASMUCH AS MR. GUPTA CONFIRMED TH AT THE GODOWN WAS ACTUALLY TAKEN ON RENT BY THE VENDORS, FROM WHOM THE APPELLA NT HAD PURCHASED SUGAR, DURING THE PERIOD FROM 01.04.2009 TO 31.07.2009. ON THE CONTRARY, THE STATEMENT OF MR. VISHAL GUPTA, IN NO WAY, SUPPORTS THE CASE O F THE LOWER AUTHORITIES THAT THE GODOWN WAS LYING VACANT DURING THAT PERIOD. THAT APART, IT IS FURTHER SUBMITTED THAT THE AO GRO SSLY ERRED IN RELYING UPON THE EX-PARTE STATEMENT OF MR. VISHAL GUPTA, WITHOUT ALLOWING OPPORTUNITY OF CROSS-EXAMINATION TO THE APPELLANT EVEN THOUGH THE APPELLANT REQUESTED FOR THE SAME VIDE LETTERS DATED 17.12.2011 ( FILED ON 19.12 .2011) AND 22.12.2011. THE AO HAD DIRECTED MR. VISHAL GUPTA TO APPEAR ON 2 3.12.2011 AND ON 27.12.2011 AND ON BOTH THE DATES, MR. GUPTA DID NOT APPEAR. UNDER SUCH CIRCUMSTANCES THE AO, IT IS SUBMITTED, OUGHT TO HA VE EXCLUDED THE EX-PARTE STATEMENT OF MR. VISHAL GUPTA FROM CONSIDERATION RA THER THAN RELYING UPON THE SAME TO COME TO AN ADVERSE CONCLUSION. IN FACT, THE ACTION OF THE AO IN CONSIDERING MR. VISHAL GUPTAS EX-PARTE STATEMENTS AND SEEKING TO RELY ON THE AVERMENTS THEREIN, IS CONTRARY TO LAW. KIND ATTENTION, IN THIS REGARD, IS INVITED TO THE F OLLOWING CASES LAYING DOWN THE BINDING LEGAL PRINCIPLE ON THE NECESSITY OF CRO SS-EXAMINATION, BEFORE RELYING UPON ANY THIRD PARTY MATERIAL/STATEMENT. IN STATE OF KERALA VS. K.T. SHADULI: 39 STC 478, 48 7, 490 (SC), THEIR LORDSHIPS OF THE SUPREME COURT OBSERVED AS UNDER: THERE CAN BE NO DOUBT THAT THE PRINCIPLE THAT AS T HE TAX PROCEEDINGS ARE OF QUASI-JUDICIAL NATURE, THE SALES TAX AUTHORITIES AR E NOT STRICTLY BOUND BY THE RULES OF EVIDENCE WHICH MEANS THAT WHAT THE AUTHOR ITIES HAVE TO CONSIDER IS MERELY THE PROBATIVE VALUE OF THE MATERIALS PROD UCED BEFORE THEM. THIS IS QUITE DIFFERENT FROM SAYING THAT EVEN THE RULES OF NATURAL JUSTICE DO NOT APPLY TO SUCH PROCEEDINGS SO AS TO DENY THE RIGHT OF CROSS-EXAMINATION TO THE ASSESSEE WHERE THE CIRCUMSTANCES CLEARLY JUSTIF Y SUCH A COURSE AND FORM ONE OF THE INTEGRAL PARTS OF THE MATERIALS ON THE BASIS OF WHICH THE 25 ORDER OF THE TAXING AUTHORITIES CAN BE PASSED. THE ADMISSIBILITY OF A DOCUMENT OR A MATERIAL IN EVIDENCE IS QUITE DIFFERE NT FROM THE VALUE WHICH THE AUTHORITY WOULD ATTACH TO SUCH MATERIAL. THE PR IVACY COUNCIL HAS HELD THAT THE TAXING AUTHORITIES CAN EVEN BASE THEIR CON CLUSION ON THEIR PRIVATE OPINION OR ASSESSMENT PROVIDED THE SAME IS FULLY DI SCLOSED TO THE ASSESSEE AND HE IS GIVEN AN OPPORTUNITY TO REBUT THE SAME. I N THESE CIRCUMSTANCES, THEREFORE, WE DO NOT AGREE WITH MR. GUPTE THAT MERE LY BECAUSE THE TECHNICAL RULES OF EVIDENCE DO NOT STRICTLY APPLY, THE RIGHT OF CROSS- EXAMINATION CANNOT BE DEMANDED BY THE ASSESSEE IN A PROPER CASE GOVERNED BY A PARTICULAR STATUTE. . IN VIEW OF THE EXPRESS PROVISION OF THE SECOND PART OF THE PROVISO, WE ARE FULLY SATISFIED THAT THE RESPONDENTS HAD THE UNDOUB TED RIGHT TO CROSS- EXAMINE THE WHOLESALE DEALERS ON THE BASIS OF WHOSE ACCOUNTS THE RETURNS OF THE ASSESSES WERE HELD TO BE INCORRECT AND INCOM PLETE. WE ARE FORTIFIED IN OUR VIEW BY A DECISION OF THIS COURT IN C. VASAN TLAL AND CO. V. CIT, BOMBAY CITY: 45 ITR 206 & 209, WHERE THIS COURT OBS ERVED AS FOLLOWS: THE INCOME TAX OFFICER IS NOT BOUND BY ANY TECHNIC AL RULES OF THE LAW OF EVIDENCE. IT IS OPEN TO HIM TO COLLECT MATERIALS TO FACILITATE ASSESSMENT EVEN BY PRIVATE ENQUIRY. BUT IF HE DESIRES TO USE T HE MATERIAL SO COLLECTED, THE ASSESSEE MUST BE INFORMED OF THE MATERIAL AND M UST BE GIVEN AN ADEQUATE OPPORTUNITY OF EXPLAINING IT. IT WILL BE NOTICED THAT IF THE SALES TAX AUTHORITIE S REFUSED THE PRAYER OF THE ASSESSEE TO CROSS-EXAMINE THE WHOLESALE DEALERS, TH EN SUCH A REFUSAL WOULD NOT AMOUNT TO AN ADEQUATE OPPORTUNITY OF EXPLAINING THE MATERIAL COLLECTED BY THE ASSESSING AUTHORITY. (EMPHASIS SUPPLIED). THE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLA RAM V. CIT [1980] 125 ITR 713 HELD THAT NO RELIANCE COULD BE PLACED U PON THE EVIDENCE NOT SHOWN TO THE ASSESSEE. THE COURT OBSERVED AS UNDER: THE SOLE QUESTION WHICH ARISES FOR DETERMINATION I N THIS APPEAL IS WHETHER THERE WAS ANY MATERIAL EVIDENCE TO JUSTIFY THE FINDINGS OF THE TRIBUNAL THAT THE AMOUNT OF RS. 1,07,350 SAID T O HAVE BEEN REMITTED BY TILOK CHAND FROM MADRAS REPRESENTED THE UNDISCLOSED INCOME OF THE ASSESSEE. THE ONLY EVIDENCE ON WHICH THE TRIBUNAL COULD RELY FOR THE PURPOSE OF ARRIVING AT THIS FIND ING WAS THE LETTER DATED 18TH FEBRUARY, 1955, SAID TO HAVE BEEN ADDRES SED BY THE MANAGER OF THE PUNJAB NATIONAL BANK LTD. TO THE ITO . NOW, IT IS DIFFICULT TO SEE HOW THIS LETTER COULD AT ALL BE RE LIED UPON BY THE TRIBUNAL AS A MATERIAL PIECE OF EVIDENCE SUPPORTIVE OF ITS FINDING. IN 26 THE FIRST PLACE, THIS LETTER WAS NOT DISCLOSED TO T HE ASSESSEE BY THE ITO AND EVEN THOUGH THE AAC REPRODUCED AN EXTRACT F ROM IT IN HIS ORDER, HE DID NOT CARE TO PRODUCE IT BEFORE THE ASS ESSEE OR GIVE A COPY OF IT TO THE ASSESSEE. THE SAME POSITION OBTAI NED ALSO BEFORE THE TRIBUNAL AND THE HIGH COURT AND IT WAS ONLY WHE N A SUPPLEMENTAL STATEMENT OF THE CASE WAS CALLED FOR B Y THIS COURT BY ITS ORDER DATED 16TH AUGUST, 1979, THAT, ACCORDING TO THE ITO, THIS LETTER WAS TRACED BY HIM AND EVEN THEN IT WAS NOT S HOWN BY HIM TO THE ASSESSEE BUT IT WAS FORWARDED TO THE TRIBUNAL A ND IT WAS FOR THE FIRST TIME AT THE HEARING BEFORE THE TRIBUNAL IN RE GARD TO THE PREPARATION OF THE SUPPLEMENTAL STATEMENT OF THE CA SE THAT THIS LETTER WAS SHOWN TO THE ASSESSEE. IT WILL, THEREFOR E, BE SEEN THAT, EVEN IF WE ASSUME THAT THIS LETTER WAS IN FACT ADDR ESSED BY THE MANAGER OF THE PUNJAB NATIONAL BANK LTD. TO THE ITO , NO RELIANCE COULD BE PLACED UPON IT, SINCE IT WAS NOT SHOWN TO THE ASSESSEE UNTIL AT THE STAGE OF PREPARATION OF THE SUPPLEMENT AL STATEMENT OF THE CASE AND NO OPPORTUNITY TO CROSS EXAMINE THE MA NAGER OF THE BANK COULD IN THE CIRCUMSTANCES BE SOUGHT OR AVAILE D OF BY THE ASSESSEE. IT IS TRUE THAT THE PROCEEDINGS UNDER THE INCOME TAX LAW ARE NOT GOVERNED BY THE STRICT RULES OF EVIDENCE AN D, THEREFORE, IT MIGHT BE SAID THAT EVEN WITHOUT CALLING THE MANAGER OF THE BANK IN EVIDENCE TO PROVE THIS LETTER, IT COULD BE TAKEN IN TO ACCOUNT AS EVIDENCE. BUT BEFORE THE I.T. AUTHORITIES COULD REL Y UPON IT, THEY WERE BOUND TO PRODUCE IT BEFORE THE ASSESSEE SO THA T THE ASSESSEE COULD CONTROVERT THE STATEMENTS CONTAINED IN IT BY ASKING FOR AN OPPORTUNITY TO CROSS EXAMINE THE MANAGER OF THE BAN K WITH REFERENCE TO THE STATEMENTS MADE BY HIM.'(EMPHASI S SUPPLIED) IN SARASWATI INDUSTRIAL SYNDICATE LTD. VS. CIT 213 ITR 1, THE SUPREME COURT OBSERVED: THE ASSESSEE FILED IN SUPPORT OF ITS CASE THE OPIN ION OF AN EXPERT. THE INCOME-TAX OFFICER REJECTED THE ASSESSEES CLAIM OF HIGHER DEPRECIATION AT THE RATE OF 15 PERCENT ON SUCH MACHINERY. HE DECLIN ED TO CONSIDER THE EXPERT OPINION ON THE GROUND THAT THE ASSESSEE WAS UNABLE TO PRODUCE THE EXPERT FOR CROSS-EXAMINATION . . . WE CAN UNDERSTAND THAT THE AUTHORITIES, DECLINED TO RELY UPON THE EXPERTS OPINION BECAUSE HE WAS NOT PRODUCED FOR CROSS-EXAMI NATION.. (EMPHASIS SUPPLIED). THE FOLLOWING PERTINENT OBSERVATIONS OF THEIR LORDS HIPS OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. EASTERN COMMERCIAL : 210 ITR 103, 110 BRIEFLY 27 SUMMARISE THE LEGAL POSITION RELATING TO NECESSITY OF CROSS-EXAMINATION OF A WITNESS: .. AS A MATTER OF FACT, THE RIGHT TO CROSS EXAMINE A W ITNESS ADVERSE TO THE ASSESSEE IS AN INDISPENSABLE RIGHT A ND THE OPPORTUNITY OF SUCH CROSS EXAMINATION IS ONE OF THE CORNER STONES OF NATURAL JUSTICE. HERE SHRI SUKLA IS THE WITNESS OF THE DEPARTMENT. THEREF ORE, THE DEPARTMENT CANNOT CUT SHORT THE PROCESS OF TAKING ORAL EVIDENC E BY MERELY HAVING THE EXAMINATION IN CHIEF. IT IS THE NECESSARY REQUIREME NT OF THE PROCESS OF TAKING EVIDENCE THAT THE EXAMINATION IN CHIEF IS FO LLOWED BY CROSS EXAMINATION AND RE EXAMINATION, IF NECESSARY. IT IS NOT JUST A QUESTION OF FORM OR A QUESTION OF GIVING AN ADVERSE PARTY ITS PRIVILEGE BUT A NECESSITY OF THE PROCESS OF TESTING THE TRUTH OF ORAL EVIDENCE OF A WITNESS. WITHOUT THE TRUTH BEING TEST ED NO ORAL EVIDENCE CAN BE ADMISSIBLE EVIDENCE AND COULD NOT FORM THE BASIS OF ANY INFERENCE AGAINST THE ADVERSE PARTIES.. LEARNED COUNSEL TH EN CITED A HOST OF DECISIONS TO BRING HOME THE POINT THAT NO EVIDENCE OR DOCUMENT CAN BE RELIED UPON UNLESS IT IS SHOWN TO THE ASSESSEE. KIS HANCHAND CHELLARAM V. CIT [1980] 125 ITR 713 (SC). SIMILARLY, THE REQUIRE MENT OF CROSS EXAMINATION AS THE REQUIREMENT OF THE RULES OF NATU RAL JUSTICE HAS BEEN UNDERLINED BY THE BOMBAY HIGH COURT IN VASANJI GHEL A AND CO. V. CST [1977] 40 STC 544. IT IS TRITE LAW THAT CROSS EXAMI NATION IS THE SINE QUA NON OF DUE PROCESS OF TAKING EVIDENCE AND NO ADVERS E INFERENCE CAN BE DRAWN AGAINST A PARTY UNLESS THE PARTY IS PUT ON NO TICE OF THE CASE MADE OUT AGAINST HIM. HE MUST BE SUPPLIED THE CONTENTS O F ALL SUCH EVIDENCE, BOTH ORAL AND DOCUMENTARY, SO THAT HE CAN PREPARE T O MEET THE CASE AGAINST HIM. THIS NECESSARILY ALSO POSTULATES THAT HE SHOULD CROSS EXAMINE THE WITNESS HOSTILE TO HIM. IN P.S. ABDUL MAJEED VS. AGRICULTURAL I. TAX & STO: 209 ITR 821, 823, THE KERALA HIGH COURT OBSERVED AS UNDER: . HE ALSO PRAYED FOR AN OPPORTUNITY TO CROSS EXAMINE THE AUCTIONEERS. WHEN SUCH A REQUEST WAS MADE IT WAS IN CUMBENT ON THE OFFICER TO AFFORD OPPORTUNITY TO THE ASSESSEE TO CR OSS EXAMINE THE AUTHORS OF THOSE BOOKS AS WAS LAID DOWN BY THIS COURT IN K. T. SHADULI V. STATE OF KERALA [1972] 29 STC 44, WHICH WAS CONFIRMED BY THE SUPREME COURT IN STATE OF KERALA V. K. T. SHADULI YUSUFF [1977] 39 S TC 478. FAILURE TO ACCEDE TO THE PETITIONER'S REQUEST TO CROSS EXAMINE THE AUCTIONEERS IS DENIAL OF REASONABLE OPPORTUNITY TO THE PETITIONER TO PUT FORWARD AND PROVE HIS CASE, WHICH IS THE DESIDERATUM OF A QUASI JUDIC IAL ENQUIRY WHICH AN ASSESSING AUTHORITY IS EXPECTED TO HOLD. THE PETITI ONER HAS THUS BEEN DENIED THE REASONABLE OPPORTUNITY WHICH WAS DUE IN LAW, IN RELATION TO THE 28 ASSESSMENT, AND THAT IS SUFFICIENT TO VITIATE THE O RDER, EXHIBIT P-4, WHICH IS BASED MERELY ON THE AUCTIONEERS' RECORDS. THE CONFI RMATION THEREOF BY EXHIBITS P-7 AND P-9 DOES NOT HAVE ANY SANCTITY SIN CE CONFIRMATION OF A NULLITY AS EXHIBIT P-4, AN ORDER PASSED IN VIOLATIO N OF THE PRINCIPLES OF NATURAL JUSTICE, IS ONLY A NULLITY. EXHIBITS P-4, P -7 AND P-9 ARE THEREFORE LIABLE TO BE QUASHED ON THIS SOLE GROUND. I DO SO. (EMPHASIS SUPPLIED) IN SONA ELECTRIC COMPANY VS. CIT 152 ITR 507, THE D ELHI HIGH COURT OBSERVED AS UNDER: THEN, THERE IS, FINALLY, THE THIRD QUESTION WHICH R EQUIRES TO BE EXAMINED. THE STATEMENT OF SHRI SARDARI LAL WAS RECORDED ON 2 3RD AUGUST, 1969, IN THE ABSENCE OF THE ASSESSEE. ON THAT DATE, A LETTER HAD BEEN SUBMITTED ON BEHALF OF THE ASSESSEE TO STATE THAT THE GRANDMOTHE R OF SHRI MADAN MOHAN GUPTA, MANAGING PARTNER OF THE ASSESSEE, HAD DIED A ND SOME OTHER DATE AFTER A FORTNIGHT SHOULD BE FIXED. IT SEEMS THAT TH E ITO RECORD ED THE STATEMENT IN THE ABSENCE OF THE ASSESSEE THUS EXCLU DING CROSS EXAMINATION BY THE ASSESSEE. THIS SHOWS THAT THE ST ATEMENT OF SHRI SARDARI LAL HAS TO BE EXCLUDED FROM CONSIDERATION. SIGNIFICANTLY, ONE OF THE QUESTIONS PUT TO SHRI SARDARI LAL BY THE ITO WAS AS TO WHAT WAS THE EXPLANATION FOR ALL OTHER PAYMENTS BEING MADE EITHE R BY AN ACCOUNT PAYEE CHEQUE OR AGAINST RECEIPTED VOUCHERS AND EVEN AGAIN ST A BEARER CHEQUE, A SIGNATURE HAD BEEN TAKEN ON THE COUNTERFOIL. THE WITNESS WAS UNABLE TO EXPLAIN WHY THE ASSESSEE HAD BEEN TREATED DIFFERENT LY. IF THE SO-CALLED RECEIPT SIGNED BY SHRI BRIJ MOHAN AND THE STATEMENT OF SHRI SARDARI LAL AS WELL AS THE CHEQUE DATED 27TH JULY, 1967, ARE EXCLUDED FROM CONSIDERATION, WE WOULD BE LEFT WITH A CASE W ITH NO EVIDENCE. (EMPHASIS SUPPLIED) A REFERENCE MAY ALSO IN THIS REGARD BE MADE TO THE DECISION OF THE ORISSA HIGH COURT IN THE CASE OF CIT VS. BIJU PATNAIK: 190 ITR 396. IN THE CASE OF CIT VS. SHAM LAL (PUNJAB & HARYANA) 127 ITR 816, RE- ASSESSMENT PROCEEDINGS WERE INITIATED BY THE AO AND COMPLETED ON THE BASIS OF CERTAIN PIECES OF EVIDENCE NOT PUT TO THE ASSESSEE. THEIR LORDSHIPS OF THE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT AFFIRMIN G THE ORDER OF THE TRIBUNAL IN ANNULLING THE ASSESSMENT OBSERVED AS UNDER: THE AAC, AFTER EXAMINING THE WHOLE MATERIAL ON THE RECORD AND ADJUDGING THE MERITS OF THE CASE, RECORDED A CATEGO RICAL FINDING THAT SHRI SHAM LAL WAS NEVER THE PARTNER IN THE FIRM AND THAT SHRI BHIM SINGH AND 29 DWARAKA DASS HAD IMPLICATED HIM AND HAD SHOWN HIM A S A PARTNER IN ORDER TO REDUCE THEIR TAX LIABILITY DURING THE SETT LEMENT. THE AAC, THEREFORE, CAME TO THE CONCLUSION ON MERITS THAT SHRI SHAM LAL COULD NOT BE TREATED AS A PARTNER IN THE FIRM. THIS FINDING OF FACT WAS AFFIRMED BY THE TRIBUNAL. THE TRIBUNAL HELD THAT, APART FROM THE FACT THAT TH ESE ASSESSMENTS ARE AGAINST THE PRINCIPLES OF NATURAL JUSTICE, AT THE S AME TIME THEY ARE BASED ON NO FACTS AND MATERIAL. IT WOULD THUS BE SEEN THA T, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE TRIBUNAL DID NO T THINK IT PROPER TO SET ASIDE THE ASSESSMENTS AND TO ORDER REASSESSMENT ON REMAND. THE FINDING OF THE TRIBUNAL THAT THE REVENUE COULD NOT PLACE RE LIANCE ON THE MATERIAL WHICH WAS BROUGHT ON THE RECORD AT THE BACK OF THE ASSESSEE IS ALSO UNEXCEPTIONAL. THE ASSESSEE IS, IN LAW, ENTITLED TO REBUT THE MAT ERIAL PLACED BEFORE HIM IF HE SO CHOOSES AND ANY MATERIAL PLACED ON THE RECORD WITHOUT NOTICE TO THE ASSESSEE CANNOT BE RELIED UPO N BY THE REVENUE. (EMPHASIS SUPPLIED) THEIR LORDSHIPS OF THE DELHI HIGH COURT IN THE CASE OF CIT V. PRADEEP KUMAR GUPTA: 303 ITR 95 HELD LIKEWISE. IN THAT CAS E, THE AO REOPENED THE ASSESSMENT PROCEEDINGS OF THE ASSESSE E ON THE GROUND THAT THE AGRICULTURAL INCOME DECLARED IN THE RETURN OF INCOME WAS BOGUS ON THE BASIS OF CERTAIN THIRD PARTY STATEMENT S. SUCH STATEMENTS WERE RELIED UPON IN THE ASSESSMENT ORDER WITHOUT A LLOWING CROSS- EXAMINATION TO THE ASSESSEE AND THE AGRICULTURAL IN COME WAS HELD TO BE IN THE NATURE OF MERE ACCOMMODATION ENTRY. THE ADDI TION MADE BY THE AO WAS DELETED BY THE TRIBUNAL, WHICH HAS SUBSEQUEN TLY BEEN CONFIRMED BY THE DELHI HIGH COURT. THEIR LORDSHIPS OBSERVED THAT FAILURE OF THE REVEN UE TO PRODUCE THE PERSON, ON WHOSE STATEMENT THE AO RELIED UPON FOR M AKING THE ADDITION, FOR CROSS EXAMINATION BY THE ASSESSEE ASS UMED FATAL CONSEQUENCES. THE RELEVANT OBSERVATIONS OF THEIR LO RDSHIPS READ AS UNDER: THIS IS WHERE THE FAILURE OF THE REVENUE TO PRODUC E SHRI ANAND PRAKASH FOR CROSS-EXAMINATION BY THE ASSESSEE , ASSUMES FATAL CONSEQUENCES. REASSESSMENT PROCEEDINGS HAVE B EEN INITIATED AFTER SEVERAL YEARS OF THE ACCEPTANCE OF THE RETURN UNDER SECTION 143(10 OF THE I.T. ACT. THE ASSESSEE HAVE THEMSELVES RELIED ON THE BANKING TRANSACTIONS BETWE EN THEMSELVES AND SHRI ANAND PRAKASH; SECONDLY ON BILL S ISSUED BY THEM TO SHRI ANAND PRAKASH AND ON THE UNASSAILE D PAYMENT OF RENT TO SHRI MOOL CHAND. IT IS TRUE THAT THE ASS ESSEES 30 FAUILURE TO PRODUCE SH. KISHAN CHAND HAD THE CONSEQ UENCE OF NOT PROVING THAT THE SAID PERSON WAS TILLING THE LA ND ON THEIR BEHALF. THIS FAILURE CANNOT INEXORABLY LEAD TO THE CONCLUSION THAT NO AGRICULTURAL INCOME HAD BEEN GENERATED BY T HE ASSESSEE. SUCH AN INFERENCE CAN ONLY BE DRAWN FROM THE STATEMENT OF SHRI ANAND PRAKASH TO THE EFFECT THAT THE TRANSACTIONS BETWEEN HIM AND THE ASSESSES WERE BOGU S. THEREFORE, IT WAS MANDATORY FOR THE REVENUE TO PROD UCE SHRI ANAND PRAKASH FOR CROSS-EXAMINATION BY THE ASSESSES ON THEIR SPECIFIC DEMAND IN THIS REGARD. THE FACTS ON WHICH THE DECISION TO INVOKE S. 147/148 IS PREDICATED MAY IN SOME CASES BE SUFFICIENT BOTH FOR DECISION TO CARRY OUT A REAS SESSMENT AS WELL TO JUSTIFY OR SUSTAIN THE FRESH ASSESSMENT. HO WEVER, THERE MAY WELL BE INSTANCES WHERE THE FORMER SAID REOPENI NG MAY PASS MUSTER IN THE LIGHT OF SOME FACTS, BUT THOSE F ACTS BY THEMSELVES MAY TURN OUT TO BE INSUFFICIENT TO PRESE RVE THE ASSESSMENT ITSELF. ONCE SS. 147 AND 148 ARE RESORTED TO THE A.O. MUST FIRST DISCHARGE THE BURDEN OF SHOWING THA T INCOME HAS ESCAPED ASSESSMENT. IT IS ONLY THEREAFTER THAT THE ASSESSEE HAS TO PROVIDE ALL THE ANSWERS. WE FIND NO REASON W HY THE INITIAL BURDEN OF PROOF SHOULD NOT REST IN THE A.O. EVEN WHERE THE ASSESSMENT HAS GONE THROUGH UNDER S. 143(1) OF THE ACT. THE TRIBUNAL HAS, THEREFORE, ARRIVED AT THE CORRECT CONCLUSION. (EMPHASIS SUPPLIED) IT HAS BEEN SIMILARLY HELD BY THE DELHI HIGH COURT IN THE CASE OF CIT V. M/S DHARAM PAL PREM CHAND LTD: 295 ITR 105( DEL) AND CIT V. ASHWANI GUPTA: 191 TAXMAN 51 (DEL.) AND CIT V. SMC SHARE BROKERS LIMITED : 288 ITR 345 (DEL.) IN THE LIGHT OF THE AFORESAID SETTLED LEGAL POSITI ON, IT IS RESPECTFULLY SUBMITTED THAT APART FROM THE FACT THA T STATEMENT OF SH. VISHAL GUPTA DOES NOT SUPPORT THE CASE OF THE REVEN UE, EVEN OTHERWISE, IN THE ABSENCE OF CROSS-EXAMINATION OF M R. VISHAL GUPTA BEING ALLOWED TO THE APPELLANT, HIS EX-PARTE STATEM ENT COULD NOT HAVE BEEN RELIED UPON TO DRAW ANY ADVERSE INFERENCE/CONC LUSION. THE SAID STATEMENTS SHOULD, THEREFORE, BE EXCLUDED FROM CONS IDERATION. 31 IN THE IMPUGNED ORDER, THE CIT(A) HAS, IT IS RESPE CTFULLY SUBMITTED NOT EVEN DISCUSSED THE AFORESAID CONTENTIONS OF THE APP ELLANT AND SIMPLY PROCEEDED TO AFFIRM THE FINDINGS OF THE ASSESSING O FFICER. THE ORDER OF THE CIT(A) AFFIRMING THE ADDITIONS/FINDINGS OF THE ASSESSING OFFICER IS THEREFORE, IT IS SUBMITTED, FACTUALLY AND LEGALLY U NSUSTAINABLE. RE: LETTER OF M/S. SM EDIBLES APART FROM THE AFORESAID, THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, HAD ALSO RELIED UPON EX-PARTE LETTER DATED 3 0.11.2009 FILED BY M/S SM EDIBLES PRIVATE LIMITED BEFORE THE DDIT(INVE STIGATION)-I, LUDHIANA, WHEREIN THE SAID PARTY HAD APPARENTLY MEN TIONED THAT THE GODOWN IN LUDHIANA WAS VACATED BY THEM BY MARCH, 20 09. THE SAID LETTER HAS BEEN RELIED UPON BY THE ASSESSING OFFICE R TO COME TO THE CONCLUSION THAT THE EX-PARTE STATEMENT OF MR. VISHA L GUPTA, TO THE EFFECT THAT THE GODOWN WAS EMPTY DURING THE PERIOD FROM 01.04.2009 TO 31.07.2009, STOOD CONFIRMED. IN REBUTTAL TO THE AFORESAID, IT IS, AT THE OUTSET , RESPECTFULLY SUBMITTED THAT SINCE THE AFORESAID LETTER WAS NEVER CONFRONTE D TO THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE SA ME COULD NOT HAVE BEEN RELIED UPON AND SHOULD HAVE BEEN EXCLUDED FROM CONSIDERATION IN VIEW OF THE LEGAL POSITION DISCUSSING SUPRA. THIS A SPECT WAS DULY BROUGHT TO THE ATTENTION OF THE CIT(A) BY THE APPEL LANT. THAT APART, IT IS FURTHER SUBMITTED THAT THE AFORES AID LETTER COULD NOT HAVE BEEN RELIED UPON TO DRAW ADVERSE CONCLUSION AG AINST THE APPELLANT, FOR MORE THAN ONE REASON STATED HEREUNDE R: (A) THE APPELLANT HAD PURCHASES SUGAR FROM VARIOUS INDE PENDENT PARTIES, WHO, IN TURN, HAD PURCHASED SUGAR FROM M/S . SM EDIBLES PRIVATE LIMITED. THE LETTER FURNISHED BY M/S S.M. EDIBLES PRIVATE LI MITED, THEREFORE, HAD NOTHING TO DO WITH THE PURCHASE OF SUGAR BY THE APPELLANT IN AUGUST, 2009 AND THEREFORE, THE SAID LETTER COULD N OT HAVE BEEN THE BASIS TO MAKE ADDITION ON ACCOUNT OF ALLEGED UNEXPL AINED INVESTMENT IN THE HANDS OF THE APPELLANT. 32 (B) M/S S.M. EDIBLES PRIVATE LIMITED HAD APPARENTLY SOL D THE SUGAR IN APRIL, 2009. THIS MAY PROBABLY BE THE REASON OF THE SAID CONCERN HAVING FILED THE AFORESAID LETTER STATING THAT THEY HAD VACATED THE PREMISES BY MARCH, 2009. IN VIEW OF THE AFORESAID, IT IS RESPECTFULLY SUBMI TTED THAT THE LETTER FILED BY M/S S.M. EDIBLES PRIVATE LIMITED COULD NOT HAVE BEEN THE BASIS TO DOUBT THE PURCHASE OF SUGAR BY THE APPELLANT. IN VIEW OF THE AFORESAID, IT IS RESPECTFULLY SUBMIT TED THAT RELIANCE PLACED BY THE ASSESSING OFFICER ON THE STATEMENT OF MR. VISHAL GUPTA AND THE LETTER FURNISHED BY M/S S.M. EDIBLES PRIVAT E LIMITED TO HOLD THAT THE GODOWN WAS LYING VACANT FROM 01.04.2009 TO 31.07.2009 AND, TO FURTHER HOLD THAT THE APPELLANT HAD MADE UNEXPLA INED INVESTMENT IN PURCHASE OF SUGAR IS CONTRARY TO THE FACTS OF THE C ASE, AS IS SUPPORTED BY THE UNDISPUTED/UNCONTROVERTED EVIDENCES AVAILABL E ON RECORD AS ALSO THE POSITION IN LAW. WITHOUT PREJUDICE, IT IS RESPECTFULLY REITERATED TH AT IN CASE STATEMENT OF MR. VISHAL GUPTA AND LETTER OF M/S SM EDIBLES (P) L IMITED WERE TO BE RELIED UPON, THE APPELLANT SHOULD, FIRST, BE ALLOWE D OPPORTUNITY OF CROSS-EXAMINATION OF THE SAID PERSONS. RE: STATEMENT OF APPELLANT ON THE DATE OF SEARCH THE CIT(A), IN THE IMPUGNED ORDER, HAS, WHILE COMI NG TO THE CONCLUSION THAT PURCHASE MADE BY THE APPELLANT WERE NO GENUINE, ALSO RELIED UPON THE STATEMENT OF THE APPELLANT RECORDED ON THE DATE OF SEARCH BY THE DEPARTMENT OF FOOD AND CIVIL SUPPLIES . THE STATEMENT OF THE APPELLANT ON 17.09.2009 BY TH E DEPARTMENT OF FOOD AND CIVIL SUPPLIES IS REPRODUCED AS UNDER: STATEMENT OF SH. BHARAT BHUSHAN S/O SH. MANGAT RAI RESIDENT OF H. NO. 1108, STREET NO. 3, JAWAHAR NAGA R, MOGA. 33 TODAY ON 17.09.2009 IN OUR GODOWN WHICH HAS BEEN TAKEN ON RENT FROM INTERNATIONAL LTD., ROHON ROAD, VILLAGE SEERHA, OUTSIDE OCTROI LUDHIANA COPY OF LEA SE DEED IS ATTACHED. IN THIS GODOWN, THE OFFICIALS OF FOOD AND SUPPLIES DEPARTMENT LUDHIANA CONDUCTED INSPECTI ON OF SUGAR BAGS IN MY PRESENCE ON 17.09.2009. AT THE TIME OF INSPECTION THERE ARE 97,500/- BAGS OF SUGAR IN T HE GODOWN. WE WERE NOT IN THE KNOWLEDGE THAT AT ONE TI ME THERE IS NO PERMISSION FROM GOVERNMENT OF INDIA/PUN JAB GOVT. TO STORE MORE THAN 2000 SUGAR BAGS AT ONE TIM E. THIS SUGAR WAS STORED BY US BY PURCHASING THE SAME FROM DIFFERENT BUSINESSMEN OF PUNJAB AND IN THIS REGARD WE HAVE ALL THE BILLS/DOCUMENTS WITH US. WE SHALL PROD UCE THE SAME AS AND WHEN REQUIRED BY THE DEPARTMENT. I HAVE NO BILL AT THE MOMENT. I HAVE READ OVER AND I SIGN THE SAME BEING ADMITTIN G THE STATEMENT IS CORRECT. STAMP SD/- BARAT BHUSHAN 17.09.09 THE CIT(A) HAS HELD THAT SINCE THE APPELLANT HIMSEL F, IN THE AFORESAID STATEMENT HAD ADMITTED THAT THE SUGAR WEIGHING 97,5 00/- QUINTALS LYING IN THE GODOWN ON THE DATE OF SEARCH WAS OWNED BY HI M, ESTABLISHES THAT THE SAID SUGAR WAS, AT THAT TIME, NOT SOLD TO VARIOUS PARTIES, AS CLAIMED BY THE APPELLANT SUBSEQUENTLY. THE AFORESAID OBSERVATION OF THE CIT(A) IS, IT IS SUBMITTED, INCORRECT FOR THE REASONS STATED HEREUNDER: ON PERUSAL OF THE AFORESAID STATEMENT OF THE APPELL ANT, IT WILL KINDLY BE NOTICED THAT THE SAME IS A RUNNING STATEMENT WHEREI N THE APPELLANT HAD MERELY STATED CERTAIN BASIC FACTS REGARDING 97,500 BAGS OF SUGAR LYING IN THE GODOWN. SINCE THE FOOD & SUPPLY DEPARTMENT WAS PRIMARILY CONCERNED WITH SUCH LARGE QUANTITY OF SUGAR LYING I N THE GODOWN, THE 34 APPELLANT MERELY STATED THAT THERE IS NO PERMISSION FROM THE GOVERNMENT OF INDIA/PUNJAB GOVERNMENT TO STORE MORE THAN 2,000/- SUGAR BAGS AT ONE TIME. IT IS ALSO PERTINENT TO MENTION THAT IN THE ABOVE S TATEMENT, THE APPELLANT CATEGORICALLY STATED THAT HE HAS ALL THE BILLS AND DOCUMENTS AVAILABLE WITH HIM IN SUPPORT OF THE PURCHASE OF SU GAR WHICH WAS LYING IN THE GODOWN AND THE SAME CAN BE PRODUCED AS AND WHEN REQUIRED BY THE DEPARTMENT. IT WILL THUS KINDLY BE APPRECIATED THAT IN THE STATEMENT, THE APPELLANT BASICALLY STATED ABOUT THE PURCHASE AND STORAGE OF THE SUGAR LYING IN THE GODOWN. THIS WAS FOR THE REASON THAT THE SAID DEPARTMENT WAS PRIMARILY CONCERNED WITH ST ORAGE OF SUCH LARGE QUANTITY OF SUGAR LYING IN THE GODOWN. IT IS PERTINENT TO NOTE THAT THE AFORESAID STATEMEN T IS A RUNNING STATEMENT AND IS NOT IN RESPONSE TO ANY SPECIFIC QU ESTION PUT TO THE APPELLANT BY THE CONCERNED OFFICER WHILE RECORDING THE AFORESAID STATEMENT. IT WILL ALSO KINDLY BE APPRECIATED THAT THE AFORESAID STATEMENT RECORDED BY THE CONCERNED OFFICER IS VERY SHORT AND CRYPTIC. THE CONTENTS OF THE STATEMENT ALSO MAKE IT CLEAR TH AT THE SAME MERELY CONTAINED CERTAIN FACTS STATED ABOUT THE PROCUREMEN T/STORAGE OF SUGAR AND DOES NOT ADDRESS THE ISSUE OF DISPOSAL THEREOF, SINCE, AGAIN, NO SPECIFIC QUERY WAS RAISED RELATING THERETO. THE APPELLANT EXPRESSED SURPRISE ON BEING TOLD THA T MORE THAN 2,000/- BAGS OF SUGAR COULD NOT BE STORED AT ONE PLACE, CON SIDERING THAT THE SUGAR STORED IN GODOWN BELONGED TO SEVERAL PARTIES. FROM THE READING OF THE STATEMENT, IT WILL KINDLY BE APPRECIATED THA T THE EMPHASIS OF THE FOOD AND SUPPLY DEPARTMENT WAS MORE ON THE FACTUM O F STORAGE OF MORE THAN 2000 BAGS OF SUGAR IN ONE GODOWN AND THE OFFICIALS OF THE SAID DEPARTMENT WERE NOT IN ANY WAY CONCERNED WITH THE ACQUISITION AND DISPOSAL OF SUCH STOCK. THE OFFICIALS OF FOOD A ND SUPPLY DEPARTMENT DID NOT QUESTION THE APPELLANT REGARDING THE MANNER OF ACQUISITION OF STOCK, THE DISPOSAL THEREOF, THE OWN ERSHIP OF THE GOODS LYING IN STOCK ON THE DATE OF RECORDING THE STATEME NT, ETC. IN THAT VIEW OF THE MATTER, THE AFORESAID STATEMEN T, IT IS SUBMITTED, MUST BE READ IN ITS CONTEST. THERE WAS NO OCCASION FOR THE APPELLANT TO STATE ANY FACT ABOUT THE SALE OF SUGAR MADE TO VARIOUS PERSONS. 35 IN THE AFORESAID CIRCUMSTANCES, IT IS RESPECTFULLY SUBMITTED THAT MUCH HAS BEEN, WITHOUT ANY REASON, READ INTO THE STATEME NT OF THE APPELLANT RECORDED ON 17.09.2009 BY THE FOOD & SUPPLIES OFFIC ER BY THE CIT(A) TO DRAW ERRONEOUS ADVERSE INFERENCE ABOUT SA LE OF SUGAR BY THE APPELLANT TO VARIOUS PERSONS. IT IS FURTHER PERTINENT TO NOTE THAT THE FACT THAT SUGAR LYING IN THE GODOWN HAD ALREADY BEEN SOLD TO VARIOUS PARTIES WAS MENTIONED IN THE LETTER DATED 22.09.2009, FILED BY THE APPELLANT BEF ORE DFSC, LUDHIANA ALONG WITH LIST OF PARTIES. THEREAFTER, ANOTHER LET TER DATED 01.10.2009 WAS FILED BEFORE THE DEPUTY COMMISSIONER/DISTRICT M AGISTRATE, LUDHIANA, WHEREIN TOO, THE APPELLANT HAD GIVEN THE COMPLETE LIST OF PARTIES TO WHOM SUGAR WAS SOLD BY THE APPELLANT. IT WILL THUS KINDLY BE APPRECIATED THAT BARELY WITH IN FIVE DAYS FROM THE RECORDING OF STATEMENT ON 17.09.2009, THE APPELLANT FURNISHED THE COMPLETE PARTICULARS/LIST OF THE PARTIES TO WHOM SU GAR LYING IN THE GODOWN HAD BEEN SOLD. IT IS FURTHER RESPECTFULLY SUBMITTED THAT THE APPEL LANT HAD PLACED ON RECORD SUBSTANTIAL DOCUMENTARY EVIDENCES TO SUBSTAN TIATE NOT ONLY PURCHASE OF SUGAR BUT ALSO THE FACT THAT THE ENTIRE PURCHASE WAS FULLY RECORDED IN THE REGULAR BOOKS OF THE APPELLANT. THE FACT THAT THE SUGAR SO PURCHASES WAS SUBSEQUENTLY SOLD TO VARIOUS PARTI ES OR NOT IS, IN OUR RESPECTFUL SUBMISSION, NOT OF MUCH RELEVANCE IN SO FAR AS THE ADDITION OF RS. 23.99 CRORES MADE ON ACCOUNT OF ALLEGED UNEX PLAINED INVESTMENT. WHAT IS SOUGHT TO BE EMPHASIZED THAT EVEN IF ONE WE RE TO DRAW AN ADVERSE INFERENCE FROM THE AFORESAID STATEMENT OF T HE APPELLANT RECORDED ON 17.09.2009 THAT THE SUGAR LYING IN THE GODOWN ON THE DATE OF SEARCH HAD NOT BEEN SOLD TO VARIOUS PARTIES (AS IS THE SUBMISSION OF THE APPELLANT), EVEN THEN NO ADDITION COULD HAVE BE EN MADE ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN SUGAR. THIS IS FOR THE SIMPLE REASON THAT IRRESPECTIVE OF THE FACT WHETHER SUGAR ON THE DATE OF SEARCH SUGAR WAS OWNED BY THE APPELLANT OR BY VARIOUS PARTIES TO WHOM THE APPELLANT HAD SOLD THE SUGAR (A S IS THE CASE OF THE APPELLANT), THERE COULD BE NO BASIS TO HOLD PUR CHASE OF SUGAR 36 TO BE UNEXPLAINED SO AS TO WARRANT ANY ADDITION UND ER SECTION 69 OF THE ACT. FURTHERMORE, IF ONE WERE TO INFER FROM THE STATEMEN T THAT THE APPELLANT HAD ACTUALLY NOT SOLD THE SUGAR TO VARIOUS PARTIES, THEN, THE SAME WOULD, IN FACT, SUPPORT THE APPELLANTS CHALLENGE T O THE ADDITION MADE ON ACCOUNT OF CANCELLATION OF SALES. THIS IS FOR TH E REASONS THAT IF THE APPELLANT HAD NOT SOLD THE SUGAR TO VARIOUS PARTIES , THERE WOULD BE NO QUESTION OF MAKING ANY ADDITION ON ACCOUNT OF PROFI T ON CANCELLED SALES. IN THAT VIEW OF THE MATTER, IT IS RESPECTFULLY SUB MITTED THAT- A) THERE IS, FIRSTLY, NO WARRANT TO DRAW ANY ADVERSE I NFERENCE ON THE BASIS OF THE STATEMENT OF THE APPELLANT RECORDED ON 17.09.2009 THAT SUGAR HAD NOT BEEN SOLD TO VARIOUS STATE PARTIES; A ND B) ANY SUCH ADVERSE INFERENCE WOULD, FAR FROM SUPPORTI NG THE CASE OF THE REVENUE, IN FACT, SUPPORT THE CASE OF THE APPEL LANT. THEREFORE, IN VIEW OF THE AFORESAID, IT IS SUBMITTE D THAT, THE RELIANCE PLACED ON THE STATEMENT OF APPELLANT IN COMING TO T HE CONCLUSION THAT APPELLANTS PURCHASE TRANSACTION WAS NOT GENUINE, I S ERRONEOUS, ILLEGAL AND BAD IN LAW, WHICH CALLS FOR BEING IGNORED/REVER SED. TO SUMMARIZE: A) AFORESAID STATEMENT MERELY CONTAINS BASIC FACTS STA TED BY THE APPELLANT ABOUT THE PROCUREMENT/PURCHASE OF SUGAR L YING IN THE GODOWN. B) NOTHING WAS STATED BY THE APPELLANT ABOUT THE SALE OF SUGAR SINCE THE SEARCH PARTY WAS PRIMARILY CONCERNED WITH LARGE QUA NTITY OF SUGAR PURCHASED AND LYING IN THE GODOWN. C) NO SPECIFIC QUESTION WAS PUT TO THE APPELLANT ABOUT THE OWNERSHIP OF THE SUGAR LYING IN THE GODOWN ON THE DATE OF SEARCH . 37 D) BARELY WITHIN FIVE DAYS FROM THE RECORDING OF STATE MENT ON 17.09.2009, THE APPELLANT VIDE LETTER DATED 22.09.2 009, FURNISHED THE COMPLETE LIST OF PARTIES TO WHOM SUGAR HAD ALREADY BEEN SOLD BY THE APPELLANT. E) ANOTHER LETTER DATED 01.10.2009, WAS ALSO FILED ALO NG WITH LIST OF THE PARTIES TO WHOM SUGAR HAD BEEN SOLD. F) ISSUE OF SUBSEQUENT SALE OF SUGAR BY THE APPELLANT IS NOT RELEVANT FOR THE PURPOSE OF DETERMINING THE TAXABILITY OF ADDITI ON OF ALLEGED UNDISCLOSED INVESTMENT MADE UNDER SECTION 69 OF THE ACT. IN VIEW OF THE AFORESAID, IT IS EMPHATICALLY REITE RATED THAT THERE WAS NO REASON/WARRANT FOR THE CIT(A) TO DRAW ADVERSE INFE RENCE ON THE BASIS OF THE STATEMENT OF THE APPELLANT RECORDED ON 17.0 9.2009. RE: PURCHASE WRONGLY ALLEGED AS UNACCOUNTED IT IS EMPHATICALLY REITERATED THAT THE LOWER AUTHOR ITIES, ON THE BASIS OF THE AFORESAID ERRED IN CONCLUDING THAT THE APPELLAN T DID NOT PURCHASE SUGAR FROM VARIOUS PARTIES, AS CLAIMED IN THE REGUL AR BOOKS OF ACCOUNTS. THERE IS, IT IS SUBMITTED NO BASIS, WHATS OEVER, FOR THE LOWER AUTHORITIES TO CONCLUDE THAT SUGAR WAS ACTUALLY PUR CHASES BY THE APPELLANT BY INVESTING UNACCOUNTED AND UNDISCLOSED FUNDS, WHICH IS LIABLE TO BE TAXED UNDER SECTION 69 OF THE ACT. THE SAID CONCLUSION, IT IS SUBMITTED, IS WITHOUT ANY FACTUAL AND LEGAL BASI S AND IS UNSUSTAINABLE: AT THE COST OF DUPLICITY, IT IS REITERATED THAT TH ERE WAS NO REASON, WHATSOEVER, TO DOUBT THE PURCHASE OF SUGAR BY THE A PPELLANT FROM VARIOUS PARTIES IN AUGUST, 2009 INASMUCH AS THERE I S UNCONTROVERTED/CONTEMPORANEOUS EVIDENCE ON RECORD T O SUPPORT THE PURCHASE MADE BY THE APPELLANT. AS STATED ABOVE, PURCHASES MADE BY THE APPELLANT IS DULY SUPPORTED BY, INTER ALIA, THE FOLLOWING DOCUMENTARY EVIDENCES PLACED ON RECORD: (I) PURCHASE BILLS ISSUED BY THE SELLERS, WHICH CONTAI NS COMPLETE POSTAL ADDRESSES OF ALL THE PARTIES, WHO ARE REGULA R/ESTABLISHED TRADERS DULY REGISTERED WITH THE SALES TAX AUTHORIT IES. FURTHER, TIN OF ALL THE PARTIES IS ALSO MENTIONED IN THE BILLS I SSUED. 38 (II) CONFIRMATION/STATEMENTS SUBMITTED BY THE SELLERS BE FORE THE DDIT(INVESTIGATION), DURING INVESTIGATION PROCEEDIN GS; (III) STATEMENTS OF THE FOLLOWING PARTIES RECORDED BY THE ASSESSING OFFICER ON 26.12.2011 WHEREIN THE VENDORS CATEGORIC ALLY CONFIRMED HAVING SOLD SUGAR TO THE APPELLANT [STATE MENTS HAVE ALSO BEEN REPRODUCED ON PAGES 10 TO 19 OF THE ASSES SMENT ORDER (REFER PARA 1.7)]: - SHRI ABHINANDAN GUPTA, PROPRIETOR M/S MADAN MOHAN & SON - SHRI RAKESH KUMAR, MANAGER, M/S. PREM KUMAR KRISH AN KUMAR - SHRI PAWAN KUMAR, PARTNER, M/S JAGDISH LAL RAJ KUM AR AND M/S SUKHHINDER KUMAR GUPTA - PRADEEP BANSAL, PARTNER M/S RIKHI RAM PRADEEP KUM AR (IV) STATEMENT OF THE APPELLANT RECORDED ON 27.12.2011. ALL THE VENDORS, IT IS ALSO EMPHASIZED, ARE UNRELA TED THIRD PARTIES, WHO ARE REGULAR/ESTABLISHED TRADERS IN THE BUSINESS OF SUGAR AND ARE DULY REGISTERED WITH THE SALES TAX AUTHORITIES. THEIR CO MPLETE POSTAL ADDRESSES AS WELL AS THEIR REGISTRATION NUMBER ARE MENTIONED IN THEIR RESPECTIVE BILLS/CONFIRMATION ALREADY AVAILABLE ON RECORD. IT IS ALSO PERTINENT TO MENTION HERE THAT THOUGH IN THE ASSESSMENT ORDER, STATEMENTS OF THE VENDORS HAVE BEEN REFERRED /REPRODUCED BY THE ASSESSING OFFICER, WHILE DRAWING THE ULTIMAT E CONCLUSION, THE SAME HAVE NOT BEEN DEALT WITH AT ALL EITHER BY THE ASSESSING OFFICER OR BY THE CIT(A). APART FROM THE CONTENTS O F THE STATEMENTS BEING REPRODUCED, THERE IS, IN FACT, NO WHISPER WHY THE STATEMENTS OF THE VENDORS HAVE NOT BEEN TAKEN INTO CONSIDERATION. THE STATEMENTS OF THE VENDORS, THUS, REMAIN UNCONTROVERTED/UNDISPUTED AND HENCE SUPPORTS THE CA SE OF THE APPELLANT. 39 IN VIEW OF THE AFORESAID, THE ONLY CONCLUSION WHIC H FOLLOWS IS THAT PURCHASE OF SUGAR BY THE APPELLANT FROM VARIOUS PA RTIES/VENDORS IS NOT AT ALL DISPUTED. BEING SO, IT IS SUBMITTED THAT THE APPELLANT FAILS TO APPRECIATE AS TO HOW THE PURCHASE OF SUGAR, WHICH WAS FULLY RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OF THE APPELLANT COULD AT ALL BE REGAR DED AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT, THAT TOO, IN VIEW OF THE LEGAL POSITION DISCUSSED HEREUNDER: RE: SECTION 69- NOT APPLICABLE SECTION 69 OF THE ACT READS AS UNDER: WHERE IN THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR THE ASSESSEE HAD MADE INVESTMENTS WHICH ARE NOT RCORDED IN THE BOOKS OF ACCOUNT. IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOU T THE NATURE AND SOURCE OF THE INVESTMENTS OR THE EXPLANATION OFFERE D BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE VALUE OF THE INVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE A SSESSEE OF SUCH FINANCIAL YEAR. (EMPHASIS SUPPLIED) IN TERMS OF THE AFORESAID, IT IS SUBMITTED THAT TH E PROVISIONS OF SECTION 69 OF THE ACT ARE APPLICABLE ONLY TO A CASE WHERE I N ANY FINANCIAL YEAR THE FOLLOWING CONDITIONS ARE SATISFIED:- A) WHERE IN ANY FINANCIAL YEAR, THE ASSESSEE HAS MADE INVESTMENT, AND B) SUCH INVESTMENT IS NOT RECORDED IN THE BOOKS OF ACC OUNT; AND C) THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH INVESTMENT, OR THE EXPLANATION OFFERED BY HIM IS NO T SATISFACTORY. ON A CONJOINT READING OF THE AFORESAID PROVISIONS, IT WOULD BE APPRECIATED THAT PROVISIONS OF SECTION 69 OF THE AC T ARE APPLICABLE WHEN THE ASSESSING OFFICER COMES TO A FINDING THAT THE ASSESSEE HAS MADE SOME INVESTMENT, WHICH IS NOT RECORDED IN THE BOOKS AND SOURCE OF WHICH IS NOT EXPLAINED. IN OTHER WORDS, IN ORDER TO INVOKE THE 40 PROVISIONS OF SECTION 69 OF THE ACT, THE ASSESSING OFFICER MUST BE SATISFIED THAT THE APPELLANT HAD MADE INVESTMENT WH ICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT. IN THE PRESENT CASE, IT WILL KINDLY BE NOTICED THAT PURCHASE OF SUGAR WAS FULLY RECORDED IN THE BOOKS OF ACCOUNTS A ND, THEREFORE, SECTION 69 OF THE ACT WAS NOT AT ALL APPLICABLE. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION O F THE DELHI HIGH COURT IN THE CASE OF CIT VS. RADHIKA CREATION: 2010 -TIOL-314- HIGH COURT-DEL , WHEREIN IT WAS OBSERVED THAT WHERE THE EXPENDITURE HAD BEEN RECORDED IN THE BOOKS IN FULL, IT COULD NOT BE SAID THAT THE SOURCE OF SUCH EXPENDITURE WAS UNEXPLAINED ; CONSEQUENTLY, IN SUCH A SITUATION, SECTION 69C OF THE ACT WAS NOT AP PLICABLE. THE RELEVANT OBSERVATIONS ARE AS UNDER: 4. THE CASE BEFORE US HAS TWO DIMENSIONS. THE FIRS T BEING AS TO WHETHER THE ASSESSING OFFICER WAS RIGHT IN TREATING THE SAID SUM OF RS 44,38,997/- AS UNEXPLAINED EXPENDITURE UNDER SECTIO N 69C OF THE SAID ACT. THE SECOND ASPECT IS WHETHER THE SAID ADDITION COULD LEGITIMATELY HAVE BEEN MADE IN THE COURSE OF A BLOCK ASSESSMENT. 5. INSOFAR AS THE FIRST ASPECT OF THE MATTER IS CON CERNED, WE FIND THAT SECTION 69C CLEARLY STIPULATES THAT WHERE, IN ANY F INANCIAL YEAR, THE ASSESSEE HAS INCURRED AN EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THERE OF , OR THE EXPLANATION, IF IT IS OFFERED BY HIM, IS NOT, IN TH E OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF, AS THE CASE MAY BE, MA Y BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. THUS, THE FOCUS OF SECTION 69C IS ON THE 'SOURCE' OF SUCH EXPENDITURE AND NOT ON THE AUTHENTICITY OF THE EXPENDITURE ITSELF. IT IS AN ADMITTED POSITION THAT THE EXPENDITURE WAS SHOWN BY THE ASSESSEE IN ITS RE GULAR BOOKS OF ACCOUNTS AND IT IS BECAUSE OF THIS REASON THAT THE INCOME-TAX APPELLATE TRIBUNAL HAD OBSERVED :- 'AS THE EXPENDITURE WAS ACCOUNTED IN THE REGULAR BO OKS, THE SOURCE IS OBVIOUSLY EXPLAINED. THE PROVISIONS OF SE CTION 69C ARE NOT APPLICABLE AS THERE WAS NO UNACCOUNTED EXPE NDITURE.' (UNDERLINING ADDED) 41 6. WHAT THE ASSESSING OFFICER ATTEMPTED TO DO WAS T O GO INTO THE AUTHENTICITY OF THE EXPENDITURE AND HE RETURNED A F INDING THAT THE EXPENDITURE WAS NOT AUTHENTICATED BY VOUCHERS AND C ONSEQUENTLY, HE ADDED THE SAID EXPENDITURE AS UNEXPLAINED EXPENDITU RE UNDER SECTION 69C. WE ARE IN AGREEMENT WITH THE OBSERVATIONS AND FINDI NGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AS WELL AS THA T OF THE INCOME-TAX APPELLATE TRIBUNAL THAT THIS IS NOT A CA SE WHICH FALLS UNDER SECTION 69C. CLEARLY, SECTION 69C REFERS TO T HE SOURCE OF THE EXPENDITURE AND NOT TO THE EXPENDITURE ITSELF. CONSEQUENTLY, T HE ASSESSING OFFICER WAS CLEARLY WRONG IN TREATING THE SAID EXPENDITURE AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE SAID ACT AND THE LOWER APPELLATE AUTHORITIES WERE RIGHT IN THEIR CONCLUSIONS IN DELETING THE SAID ADDITION. THE CASE OF THE APPELLANT IS, IT IS RESPECTFULLY S UBMITTED, SQUARELY COVERED BY THE AFORESAID DECISION OF THE DELHI HIG H COURT. IN THE CASE OF THE APPELLANT, TOO, THE ENTIRE PURC HASES ARE, UNDISPUTEDLY, FULLY DISCLOSED IN THE REGULAR BOOKS OF ACCOUNTS OF THE APPELLANT. KIND ATTENTION , IN THIS REGARD, IS INVITED TO THE AUDITED PROFIT AND LOSS ON ACCOUNT OF THE APPELLANT FOR THE YEAR E NDED 31 ST MARCH, 2010 I.E. THE YEAR UNDER CONSIDERATION. ON PERUSAL OF THE SAME, IT WILL KINDLY BE NOTICED THAT PURCHASES OF RS.32.19 CRORES HAVE BEEN RECORDED, WHICH INCLUDES PURCHASES OF RS.23.99 CROR ES ADDED BY THE AO U/S 69 OF THE ACT ( REFER PAGES 362-379 @ 382 OF THE PAPER BOOK). IN VIEW OF THE AFORESAID, IT IS RESPECTFULLY SUBMI TTED THAT THE QUESTION OF APPLICATION OF SECTION 69 OF THE ACT, W HICH ONLY APPLIES TO INVESTMENT MADE OUTSIDE THE REGULAR BOOKS, AND EXP ENDITURE, SOURCE OF WHICH IS NOT EXPLAINED, DOES NOT ARISE AT ALL. THE CASE OF THE APPELLANT IS ALSO SQUARELY COVERED IN APPELLANTS FAVOUR BY THE DECISION OF MUMBAI BENCH OF TRIBUNAL IN THE CASE OF RUPEE FINANCE AND MANAGEMENT (P) LTD. VS. ACIT 310 ITR 403(AT), WHEREIN IT WAS HELD AS UNDER: 42 IT IS ALSO NOT DISPUTED THAT ALL THESE INVESTMENTS WERE RECORDED IN THE BOOKS OF ACCOUNT. UNDER SECTION 69 ONLY SUC H VALUE OF THE INVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR THE FINANCIAL YEAR, IF THEY ARE NOT RECORDED IN TH E BOOKS OF ACCOUNT. THUS, SECTION 69 IS NOT APPLICABLE IN THI S CASE. (EMPHASIS SUPPLIED). REFERENCE, IN THIS REGARD, MAY ALSO BE MADE TO THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MOUNTAI N TOUCH BUILDERS (P) LTD. IN ITA NO.4441/DEL/2010 WHEREIN THE TRIBU NAL AFFIRMED THE ORDER OF THE CIT(A)HOLDING THAT ADDITION U/S 69A( W HICH IS PARI MATERIAL TO SECTION 69C) OF THE ACT ON ACCOUNT OF UNEXPLAINED MONEY COULD NOT HAVE BEEN MADE SINCE THE TRANSACTIONS WER E ROUTED THROUGH BOOKS OF ACCOUNT BY PROPER ACCOUNTING ENTRIES. IN VIEW OF THE AFORESAID, IT IS RESPECTFULLY SUBMI TTED THAT ADDITION MADE ON ACCOUNT OF ALLEGED UNEXPLAINED INV ESTMENT IN PURCHASE OF SUGAR UNDER SECTION 69 OF THE ACT, EVEN THOUGH THE ENTIRE PURCHASE HAD BEEN FULLY RECORDED BY THE APPELLANT I N THE BOOKS OF ACCOUNTS, IS LEGALLY UNSUSTAINABLE AND LIABLE TO BE DELETED. RE: OTHER ALLEGATIONS OF AO- FALLACIOUS IN THE ASSESSMENT ORDER, MUCH EMPHASIS HAS BEEN GIV EN TO THE FACT THAT THE SUGAR, WHICH WAS PURCHASED BY THE APPELLANT ON CREDIT, KEPT LYING AT THE GODOWN DURING THE ENTIRE TRANSACTION AND THA T THERE WAS DELAY IN MAKING PAYMENT BY THE APPELLANT TO THE 45 PARTIES A ND IN ALSO RECEIVING PAYMENT FROM THE 53 PARTIES. IN THESE CIR CUMSTANCES, THE ASSESSING OFFICER HAS ALLEGED THAT THE PURCHASES SH OWN BY THE APPELLANT, MADE ON CREDIT, WERE NOT GENUINE. IN RESPONSE TO THE AFORESAID, IT IS RESPECTFULLY SU BMITTED THAT THE AFORESAID ALLEGATION HAS BEEN MADE BY THE ASSESSING OFFICER WITHOUT JUDICIOUSLY APPRECIATING THE BUSINESS REALITIES AND THE NATURE OF THE TRANSACTION. THE ASSESSING OFFICER FAILED TO APPRECIATE THAT IT IS FOR THE ASSESSEE TO DECIDE THE MODE AND MANNER OF DOING THE BUSINESS. T HE ASSESSEE AND OTHER PARTIES ENGAGED IN THE TRANSACTION PURCHASES/ SOLD SUGAR AS TRADERS AND EACH PARTY WAS TRYING TO TAKE COMMERCIA L ADVANTAGE OF THE 43 INCREASE IN THE PRICE OF SUGAR AND CONSIDERING THE QUANTITY OF SUGAR INVOLVED, DECIDED TO STORE THE SUGAR AT THE SAME PL ACE. THERE WAS NOTHING UNUSUAL IN THE ENTIRE BUSINESS TRANSACTION. IT IS OF UTMOST IMPORTANCE TO NOTE THAT: (A) THE FACT REMAINS THAT SUGAR WAS ACTUALLY FOUND AND SEIZED ON THE DATE OF SEARCH IN SEPTEMBER, 2009; (B) THE ENTIRE PURCHASES STOOD FULLY RECORDED IN THE RE GULAR BOOKS OF ACCOUNTS OF THE APPELLANT; (C) THOUGH THE PURCHASES WERE ORIGINALLY MADE ON CREDIT , SUBSEQUENTLY PAYMENTS WERE MADE TO THE PARTIES (I.E . SELLERS); (D) THE UNDISPUTED FACT IS THAT ALL THE SELLERS OF SUGA R HAVE CONFIRMED HAVING SOLD SUGAR TO THE APPELLANT, WHICH IS ALSO ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER (REFER PARA 2 ON PAGE 30 OF THE AO); (E) THERE IS NO EVIDENCE WHATSOEVER, AVAILABLE ON RECORD TO EVEN SUSPECT, LEAVE ASIDE SUBSTANTIATING THE FACT THAT THE APPELLANT HAD MADE ANY PURCHASES OUTSIDE THE REGU LAR BOOKS OF ACCOUNT. IT WILL KINDLY BE APPRECIATED THAT THE AO HAS, APA RT FROM MERELY DOUBTING THE TRANSACTION OF PURCHASES MADE BY THE A PPELLANT, NO BROUGHT ANY MATERIAL/EVIDENCE ON RECORD ABOUT THE SOURCE OF SUGAR PURCHASED AND PHYSICALLY FOUND IN THE COURSE OF RAI D IN SEPT.,2009. IT WILL ALSO BE APPRECIATED THAT THE CASE OF THE AO I S ABSOLUTELY FALLACIOUS INASMUCH AS IF THE THEORY OF UNACCOUNTED PURCHASES OF THE AO WERE TO BE ACCEPTED, THEN, THE FOLLOWING QUESTIO NS ARISE: - FROM WHOM AND FROM WHERE THE ALLEGED PURCHASE OF SU GAR WAS EFFECTED? - WHAT HAPPENED TO THE SUGAR PURCHASED BY THE APPELLA NT FROM THE SELLERS WHO CONFIRMED HAVING SOLD SUGAR? - WHY WOULD THE SELLERS CONFIRM HAVING SOLD SUGAR TO THE APPELLANT AND PAY TAX THEREON, IF NO SUCH SUGAR WAS ACTUALLY SOLD? - WHAT WAS THE NATURE OF PAYMENT MADE BY THE APPELLAN T TO THE SELLERS OF SUGAR? 44 IT WILL THUS, KINDLY BE APPRECIATED THAT THE THEORY OF UNACCOUNTED PURCHASES PROPOUNDED BY THE LOWER AUTHORITIES HAS N O LEGS TO STAND. THE ENTIRE CASE OF THE AO IS, IT IS SUBMITTED MEREL Y BASED ON WRONG INFERENCES DRAWN FROM THE EX-PARTE UNRELIABLE STATE MENT OF THE MANAGER OF THE GODOWN (ELABORATELY DISCUSSED SUPRA) WHICH IS NOT ONLY CONTRARY TO RECORD BUT AT VARIANCE WITH SUBS EQUENT STATEMENT. THE AO HAS NOT AT ALL BROUGHT ON RECORD ANY EVIDENC E TO SUBSTANTIATE THE ALLEGATION OF UNACCOUNTED PURCHASES BEING MADE BY THE APPELLANT. IT WILL ALSO KINDLY BE APPRECIATED THAT APART FROM THE TRANSACTIONS OF PURCHASE AND SALE CONDUCTED BY THE APPELLANT BEING DOUBTED, THE INCOME-TAX DEPTT HAS, THE APPELLANT UN DERSTANDS, NOT AT ALL DOUBTED/DISTURBED THE: - THE SALES RECORDED AND DISCLOSED BY THE RESPECTIVE SELLERS TO THE APPELLANT. - - PURCHASE RECORDED BY THE PURCHASERS OF SUGAR FROM T HE APPELLANT; - - SALE OF SUGAR BY M/S. S.M. EDIBLE OIL TO VARIOUS SE LLERS FROM WHOM THE APPELLANT PURCHASED SUGAR. THE APPELLANT, IT IS RESPECTFULLY SUBMITTED, FAILS TO APPRECIATE AS TO HOW PURCHASES MADE BY THE APPELLANT ALONE COULD BE DOUBTED/DISREGARD BY THE INCOME-TAX DEPARTMENT, WHI LE ACCEPTING THE SALES DISCLOSED BY THE PURCHASERS FROM WHOM THE APP ELLANT CLAIMS TO HAVE MADE PURCHASES. THE AFORESAID FACTS, IT IS RESPECTFULLY SUBMITTED, CLEARLY ESTABLISH THAT THERE IS NO MERIT IN THE ADDITION MADE ON ACCOUNT O F ALLEGED UNACCOUNTED PURCHASES. THE ENTIRE ADDITION IS MADE ON MERE SUSPICION, WHICH IS NOT BACKED BY ANY DOCUMENTARY E VIDENCE BEING BROUGHT ON RECORD. FURTHER, IF THE THEORY OF UNACCO UNTED PURCHASES, AS ALLEGED, WERE TO BE ACCEPTED, THEN THE SAME LEADS T O ABSURD FACTUALLY POSITION/CONCLUSION, LEAVING LOT MANY QUESTIONS UNA NSWERED, AS ELABORATELY DISCUSSED SUPRA. FOR THE AFORESAID CUMULATIVE REASONS, THE ACTION OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.23,99,72,176/- MADE B Y THE AO ON 45 ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN SUGAR IS WITHOUT ANY BASIS AND THEREFORE, THE SAME CALLS FOR BEING DELET ED. REF: GROUNDS OF APPEAL NOS. 5 & 6 :PROFIT ON ACCOUNT OF CANCELLED SALES. THE AO FURTHER HELD THAT ONCE THE APPELLANT HAD SOL D SUGAR TO 53 PARTIES, O THE DATE ON WHICH SUGAR WAS SEIZED BY TH E DEPARTMENT OF FOOD & CIVIL SUPPLIES, SUGAR BELONGED TO SAID PURCH ASERS AND NOT THE APPELLANT. THERE WAS, THUS, ACCORDING TO THE AO, N O JUSTIFICATION FOR CANCELING SALES OF RS.17,22,72,217/-. ACCORDINGLY, THE AO HELD THAT GROSS PROFIT ON SUCH SALE OF RS.17,22,72,217/-, WHI CH COMES TO RS.2,64,95,897, WAS ALSO TAXABLE AS PROFIT AND MADE ADDITION IN RESPECT OF THE SAME TO THE TAXABLE INCOME OF THE AP PELLANT, WHICH HAS BEEN CONFIRMED BY THE CIT(A). THE AFORESAID FINDINGS/CONCLUSIONS ARE NOT CORRECT AND ARE LEGALLY UNSUSTAINABLE, FOR THE REASONS STATED HEREUNDER: THE APPELLANT HAD, WHILE SELLING THE SUGAR TO VARIO US PARTIES IN SEPT.,2009 AGREED TO HAND OVER THE PHYSICAL POSSESS ION OF SUGAR. HOWEVER, ON ACCOUNT OF SEIZURE OF THE ENTIRE SUGAR, IN THE MEANWHILE, BY THE DEPARTMENT OF FOOD & CIVIL SUPPLIES, THE APP ELLANT WAS UNABLE TO FULFIL ITS COMMITMENT OF PHYSICAL DELIVERY OF TH E SUGAR. THE PARTIES TO WHOM THE SUGAR HAD BEEN SOLD BY THE APPELLANT WE RE INSISTING ON THE APPELLANT TO PHYSICALLY HAND OVER THE SUGAR OR IN THE ALTERNATIVE CANCEL THE SALE MADE TO THEM. IN THE AFORESAID COMPELLING CIRCUMSTANCE, THE APPEL LANT FINDING IT DIFFICULT TO OFFER DELIVERY OF SUGAR TO THE PURCHAS ERS HAD NO CHOICE BUT TO CANCEL THE SALE OF SUGAR. CANCELLATION OF SALE O F SUGAR IS FULLY SUPPORTED BY THE DOCUMENTARY EVIDENCES IN THE FORM OF WRITTEN COMMUNICATION/LETTERS RECEIVED FROM THE PURCHASERS. IN THE AFORESAID CIRCUMSTANCES, THE APPELLANT, IT I S RESPECTFULLY SUBMITTED, FAILS TO UNDERSTAND AS TO HOW ADDITION C OULD BE MADE ON ACCOUNT OF PROFIT ON SALE WHICH ALREADY STOOD CANCE LLED IN THE BOOKS OF ACCOUNT. IT IS SETTLED LEGAL POSITION THAT TAX CANN OT BE LEVIED BY REVENUE AUTHORITIES MERELY ON THE BASIS OF BOOK ENT RY PASSED IN THE BOOKS OF ACCOUNTS. IN FACT, THE REVENUE AUTHORITIES ARE REQUIRED TO EXAMINED THE SUBSTANCE OF THE TRANSACTION AND IF, T HE ASSESSEE HAS, IN 46 SUBSTANCE, EARNED INCOME FROM SUCH TRANSACTION, IT IS ONLY SUCH INCOME WHICH IS LIABLE TO BE TAXED. HOWEVER, LEAVING THAT DISCUSSION APART, IT IS SUBMI TTED THAT IN THE PRESENT MATTER, EVEN THE BOOK ENTRY DOES NOT STAND IN THE BOOKS OF ACCOUNT OF APPELLANT AS, BY VIRTUE OF SEIZURE OF SU GAR BY THE DEPARTMENT OF FOOD & CIVIL SUPPLIES, THE APPELLANT WAS FORCED TO CANCEL THE SALES MADE TO VARIOUS PARTIES, NOT BEING IN A POSITION TO PHYSICALLY DELIVER THE GODS SOLD TO SUCH PARTIES. I N CASE, THE APPELLANT HAD NOT CANCELLED THE SALE CONTRACT, THE PURCHASERS COULD HAVE SUED THE APPELLANT FOR RECOVERY OF COMPENSATION/DAMAGES FOR BREACH OF CONTRACT, DUE TO NON-DELIVERY OF SUGAR, ON THE PART OF THE APPELLANT, LEADING TO GREATER LOSS. THE APPELLANT WISELY IN OR DER TO AVOID SUCH A SITUATION, CANCELLED/WAS FORCED TO CANCEL THE AFORE SAID SALE CONTRACTS. THE CIT(/AO , WITHOUT APPRECIATING THE AFORESAID FA CTS OF THE CASE AND WITHOUT ANALYZING THE SITUATION ON HAND, MERELY ON THE BASIS OF SURMISES AND CONJECTURES, MADE/CONFIRMED THE NOTION AL ADDITION OF RS.2,64,95,897/- TO THE INCOME OF THE APPELLANT, H OLDING THE SAME TO BE GROSS PROFIT ON SALE CONTRACTS CANCELLED BY THE APPELLANT. THE AO, IT IS SUBMITTED HAS MADE NOTIONAL ADDITION OF INCOME, WHICH IT IS SUBMITTED, IS IMPERMISSIBLE IN LAW. THE POSITION OF LAW, IN THIS REGARD, IS WELL CLEAR THAT THE ASSESSEE HAS TO BE TAXED ON INCOME ACTUALLY EARNED AND NOT INCOM E THAT COULD HAVE BEEN EARNED ON THE BASIS OF ALLEGED SALES, WHICH NE VER TOOK PLACE. REFERENCE IN THIS REGARD CAN BE MADE TO THE DECISIO N OF APEX COURT IN THE CASE OF CIT VS. A.RAMAN AND COMPANY: 67 ITR 11 WHEREIN IT WAS HELD THAT THE INCOME WHICH ACTUALLY ACCRUES TO A TR ADER IS TAXABLE IN HIS HANDS HOWEVER, NOTIONAL INCOME WHICH HE COULD HAVE, BUT HAS NOT EARNED, CANNOT BE MADE TAXABLE AS INCOME ACCRUED TO HIM. IT FOLLOWS FROM THE AFORESAID, THAT NO TAX CAN BE L EVIED ON ACCOUNT OF HYPOTHETICAL/ILLUSIONARY SALES, WHICH COULD HAVE BE EN MADE BUT NEVER, TOOK PLACED IN REAL TERMS. THE AFORESAID DECISION, IT IS RESPECTFULLY SUBMITTE D, IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE TOO, SINCE THE SALES UNDER CONSIDERATION WERE CANCELLED BY THE APPELLANT, BEING LEFT WITH NO OTHER OPTION, IN ORDER TO AVOID PENALTY/DAMAGES FOR 47 BREACH OF CONTRACT. THE CIT(A)/AO, IT IS SUBMITTED HAVE NOT DOUBTED CANCELLATION OF SALES BY THE APPELLANT. IN THAT VIE W OF THE MATTER, THE NOTIONAL PROFIT HELD BY THE CIT(A)/AO AS TAXABLE IN THE HANDS OF APPELLANT, NEVER ACCRUED TO APPELLANT AT ALL. ACCORDINGLY, IT IS RESPECTFULLY SUBMITTED THAT ADDI TION OF PROFIT OF RS.2,64,95,897/- TO THE TAXABLE INCOME OF THE APPEL LANT FOR THE RELEVANT ASSESSMENT YEAR, ON ACCOUNT OF NOTIONAL SA LES, IS NOT BASED ON CORRECT APPRECIATION OF FACTS AND THE POSITION IN L AW AND, HENCE, CALLS FOR BEING DELETED. REF. GROUND NO.7 - DEDUCTION OF BAD DEBT, SEIZURE OF SUGAR AND LOSS OF PROFITS. WITHOUT PREJUDICE TO THE AFORESAID, IT IS SUBMITTED THAT DURING THE RELEVANT ASSESSMENT YEAR, THE APPELLANT SUFFERED LO SS INCIDENTAL TO BUSINESS ON ACCOUNT OF THE FOLLOWING: (A) NON-RECEIPT OF CONSIDERATION FROM VARIOUS PARTIES T O WHOM SUGAR WAS SOLD IN SEPTEMBER, 2009 ( I.E. BOTH CANCE LLED AND NON-CANCELLED SALES) RESULTING IN BAD DEBT/LOSS INC IDENTAL TO BUSINESS; (B) SEIZURE OF ENTIRE SUGAR RESULTING IN LOSS INCIDENTA L TO BUSINESS; IN VIEW OF THE ABOVE, IT NEEDS TO BE APPRECIATE THA T THE APPELLANT SUFFERED SUBSTANTIAL LOSSES ON ACCOUNT OF SEIZURE O F SUGAR AND SUBSEQUENT CANCELLATION/NON RECOVERY OF SALE PROCEE DS FROM SALE OF SUGAR RESULTING IN BAD DEBTS. IN FACT, THE SUBSTAN CE, THE APPELLANT HAD NOT EARNED ANYTHING FROM THE ENTIRE TRANSACTION OF PURCHASE AND SALE OF SUGAR. THE PROFIT, IF ANY, REPORTED IN THE SAID ENT IRE TRANSACTION, WAS, THUS, ONLY NOTIONAL AND NOT THE REAL PROFIT. SUCH N OTIONAL PROFIT COULD NOT BE REALIZED IN THE CIRCUMSTANCES EXPLAINED HERE INBEFORE AND IF ADDITION OF SUCH NOTIONAL PROFIT IS TO BE UPHELD, T HEN THE APPELLANT SHOULD BE ALLOWED DEDUCTION FOR THE AMOUNTS NOT REC OVERED AS BAD DEBTS/LOSS INCIDENTAL TO BUSINESS. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT LOSS SUF FERED BY THE APPELLANT IN THE AFORESAID CIRCUMSTANCES, VIZ. SEIZURE OF SUG AR, BAD DEBTS ON ACCOUNT OF NON RECOVERY OF SALE PROCEEDS AND LOSS O F NOTIONAL PROFIT IS ALLOWABLE DEDUCTION AS BAD DEBT/LOSS INCIDENTAL TO BUSINESS, 48 SUBSEQUENT TO WHICH, THERE WOULD NO RESULTANT TAXAB LE INCOME IN THE HANDS OF THE APPELLANT ON THE SAID TRANSACTION OF P URCHASE/SALE OF SUGAR. FOR THE AFORESAID REASON AS WELL, THE ADDITIONS CON FIRMED / MADE TO TAXABLE INCOME OF THE APPELLANT ARE NOT BASED ON CO RRECT APPRECIATION OF THE FACTS AND CALL FOR BEING DELETED. 5. THE LD. DR (DCIT), MR. TARSEM LAL, ON THE OTHER HAND, SUBMITTED THE WRITTEN SUBMISSIONS, WHICH FOR THE SAKE OF CONV ENIENCE ARE REPRODUCED AS UNDER:- BRIEFLY STATED THE FACTUAL MATRIX OF THIS CASE IS LIKE THAT A RAID UNDER SECTION 7 OF THE ESSENTIAL COMMODITIES ACT, 1955 W AS CONDUCTED AT THE ASSEESSEES GODOWNS ON 17.09.2009 SITUATED AT VILLAGE SEEHRA IN LUDHIANA DISTRICT BY THE DEPARTMENT OF FOOD AND CI VIL SUPPLY AND DURING THE RAID SUGAR WEIGHING 97,500 QUINTALS WAS FOUND AND SEIZED WHICH WAS LATER SOLD IN AUCTION BY DISTRICT COLLEC TOR, LUDHIANA VIDE HIS ORDER DATED 20.11.2009 ( COPY ENCLOSED MARKED AS ANNEXURE A) AND THE SALE REALIZATIONS ARE PRESENTLY LYING WITH DFSO, LUDHIANA IN THE FORM OF FDRS WITH STATE BANK OF PATIALA. 2 AT THE TIME OF RAID, A STATEMENT OF THE ASSESSEE WAS RECORDED AS APPEARING AT PAGE NO.417 OF THE ASSESSEES PAPER B OOK ( HEREINAFTER CALLED AS APB) WHICH READS AS UNDER AS PER THE ENG LISH TRANSLATION FILED :- TODAY ON 17.09.2009 IN OUR GODOWN W HICH HAS BEEN TAKEN ON RENT FROM GITANSH INTERNATIONAL LTD RAHON ROAD, VILLAGE SEERHA OUTSIDE OCTROI LUDHIANA, COPY OF LEASE DEED IS ATTACHED. IN THIS GODOWN, THE OFFICIALS OF FOOD AND SUPPLIES DEPARTMENT, LUDHIANA CONDUCTED INSPECTION OF SUGAR BAGS IN MY P RESENCE ON 17.09.2009. AT THE TIME OF INSPECTION THERE ARE 97,500 BAGS OF SUGAR IN THE GODOWN. WE WERE NOT IN THE KNOWLEDG E THAT AT ONE TIME THERE IS NO PERMISSION FROM GOVT.OF INDIA/ PUNJAB GOVT. TO STORE MORE THAN 2000 SUGAR BAGS AT ONE TIM E. THIS SUGAR WAS STORED BY US BY PURCHASING THE SAME FROM DIFFERENT 49 BUSINESSMEN OF PUNJAB AND IN THIS REGARD WE HAVE AL L THE BILLS/DOCUMENTS WITH US. WE SHALL PRODUCE THE SAME AS AND WHEN REQUIRED BY THE DEPARTMENT. I HAVE NO BILL AT THE MOMENT. IT IS PERTINENT TO MENTION HERE THAT THE CENTRAL G OVERNMENT IN EXERCISE OF THE POWER CONFERRED BY SECTION 3 OF THE ESSENTIAL COMMODITIES ACT, 1955 READ WITH CLAUSE 5 OF SUGAR ( CONTROL) ORDER 1966 HAD ISSUED AN ORDER DATED 16.07.2009 PROVIDIN G THAT NO RECOGNIZED DEALER SHALL STORE SUGAR MORE THAN 2000 QUINTALS AND SHALL NOT HOLD ANY STOCK FOR A PERIOD EXCEEDING 30 DAYS F ROM THE DATE OF RECEIPT BY HIM OF SUCH STOCK. ( P.436 APB). 3. SINCE THE ASSESSEE WAS FOUND TO HAVE STORED SUGA R MORE THAN 2000 QUINTALS, THE ASSTT. FOOD & SUPPLIES OFFICER, LUDHIANA HAD SENT A LETTER TO THE SHO, BASTIJODHEWAL, LUDHIANA DATED 17.09.2009 (PAGE 467 OF APB) AND THEREAFTER INVESTIGATION WAS CARRI ED OUT BY THE POLICE AT THE GODOWN SITUATED IN VILLAGE SEEHRA AND IT WAS REPORTED BY THE SHO THAT THE SITUATION WAS FOUND TO BE CORRECT AND AN OFFENCE UNDER 7 OF EC ACT WAS FOUND TO BE PROVED AND ACCORD INGLY AN APPLICATION FOR REGISTRATION OF CASE AGAINST THE AS SESEE WAS SENT AND FIR WAS REGISTERED AT THE AFOREMENTIONED POLICE STA TION AT 6.30 PM ON 18.9.2009 (P.468 OF APB). 4. IT IS FURTHER SUBMITTED THAT THE ASSESSEE HAD AD MITTED BEFORE THE POLICE THAT THE BILLS OF PURCHASE OF SUGAR MEASURING 97,500 QUINTAL S AND LEDGER BOOK AND STOCK REGISTER SUBJECT MATTER O F CASE, HAVE BEEN KEPT SECRETLY IN THE HOUSE OF MY SISTER KANTA RANI AT HISSAR (HARYANA) REGARDING WHICH HE ALONE HAD THE KNOWLEDGE AND HE C OULD GET THE SAME RECOVERED AFTER IDENTIFICATION. (P.474 OF APB) YET THROUGH ANOTHER STATEMENT BEFORE THE POLICE, THE ASSESSEE A DMITTED THAT THE BILLS OF PURCHASE OF SUGAR MEASURING 97,500 QUINTAL S AND LEDGER BOOK AND STOCK REGISTER SUBJECT MATTER OF CASE, HAVE BEE N KEPT SECRETLY IN THEIR SHOP AT MOGA REGARDING WHICH HE ALONE HAVE TH E KNOWLEDGE AND HE CAN GET THE SAME RECOVERED AFTER IDENTIFICATION. (P 475 OF APB). 5. SHRI SURINDER KUMAR BERRY, ASSISTANT FOOD AND SU PPLIES OFFICER, LUDHIANA HAS IN A STATEMENT RECORDED ON 18 .09.2009 TESTIFIED THAT THE CASE WAS REGISTERED AGAINST THE ASSESSEE A FTER SPOT VERIFICATION. (P477 OF APB). THERE IS YET ANOTHER S TATEMENT OF SHRI 50 VINOD JAIN IN THE OFFICE OF FOOD AND SUPPLIES, LUDH IANA TESTIFYING THE FACTUM OF INQUIRY/INVESTIGATION AND REGISTRATION OF CASE (P 478 APB) 6. IT IS PERTINENT TO MENTION HERE THAT AT THE TIM E OF RAID, THE ASSESEE HAD NOT CLAIMED THAT THE SUGAR STACKED IN T HE SAID GODOWN HAD BEEN SOLD. HE ALLEGEDLY WROTE A LETTER ON 22.0 9.2009 WHICH THOUGH IS WHOLLY UNCLEAR BUT SEEMS TO SUGGEST THAT THE ASSESSEE CLAIMED THAT HE HAD SOLD THE GOODS. ( P.487 OF APB) . IT IS PERTINENT TO MENTION HERE THAT AFTER MAKING INVESTIGATION THE PO LICE HAD FOUND THE ASSESSEE GUILTY OF VIOLATION OF THE PROVISIONS OF S ECTION 7 OF THE ESSENTIAL COMMODITIES ACT, 1955 AND AFTER REGISTERI NG FIR HAD ARRESTED HIM ON 25.09.2009. CLEARLY, THIS CLAIM OF THE ASSESEE THAT THE GOODS HAD BEEN SOLD HAD NOT BEEN FOUND TO BE TENABL E OTHERWISE THE POLICE WOULD NOT HAVE REGISTERED THE FIR AND ARREST ED HIM WHICH WAS DONE AFTER DUE INVESTIGATION AS DILATED ABOVE. IN T HE LATER CONFISCATION OF SUGAR AND AUCTION BY THE DISTRICT COLLECTOR, LUD HIANA, THE ASSESSEES CLAIM THAT THE SAID SUGAR HAD BEEN SOLD WAS NOT FOUND TO BE TENABLE AND EVEN THE CLAIM LODGED BY THE SAID PARTI ES WAS NOT ENTERTAINED BY SHRI VIKAS GARG, DISTRICT COLLECTOR, LUDHIANA. IT IS PERTINENT TO MENTION HERE THAT THE DISTRICT COLLECT OR RECORDS IN HIS ORDER THAT THOUGH IT IS IN PUBLIC INTEREST TO SELL THE SUGAR BUT THE PROVISIONS OF SECTION 6A MAKE IT MANDATORY TO GIVE AN OPPORTUNITY OF BEING HEARD TO ONE WHO CLAIMS OWNERSHIP OF THE SUGA R. IN ORDER TO MAKE COMPLIANCE TO THIS PROVISION OF LAW, THE DISTR ICT CONTROLLER, FOOD & CIVIL SUPPLY AND CONSUMER AFFAIRS, LUDHIANA HAD BEEN DIRECTED THAT BY WAY OF PERSONAL LETTER AND THROUGH ADVERTISEMENT IN THE REPUTED NEWSPAPER HE SHOULD ISSUE SHOW CAUSE NO TICE TO M/S.KHUBI RAM JAUHRI MAL AND IN COMPLIANCE TO THIS ORDER, THE DISTRICT CONTROLLER HAD GOT PUBLISHED SHOW NOTICE I N TWO DAILIES I.E. IN AJIT ON 02.10.2009 AND ON 3.10.2009 IN PUNJABI TRIB UNE AND ENGLISH TRIBUNE AND A SHOW CAUSE NOTICE WAS ALSO PERSONALLY SERVED UPON THE REPRESENTATIVE OF THE ASSESSEE ON 30.09.2009. BUT I N COMPLIANCE TO SHOW CAUSE TO THESE NOTICES, NO CLARIFICATION WAS G IVEN TO HIM WHICH MAKES IT CLEAR THAT THE FIRM HAS NO PROOF TO PROVE ITS (LEGAL ) OWNERSHIP OF THE SUGAR. IT HAS FURTHER BEEN MENTION ED IN THE SAID ORDER THAT SOME FIRMS CAME FORWARD TO MAKE A CLAIM ON THE SAID SUGAR BUT THEIR CLAIM WAS DISREGARDED BY THE DISTRICT COL LECTOR, LUDHIANA ON THE GROUND THAT THE ASSESSEE HAD STATED IN HIS STATEMENT RECORDED ON 17.09.2009 THAT THE WHOLE OF THE SUGAR BELONGS T O HIS FIRM AND HAS STORED THE SUGAR THERE AFTER BUYING FROM DIFFERENT TRADERS OF PUNJAB. 51 7. THE SUGAR WAS ACCORDINGLY PUT ON AUCTION VIDE PU BLIC NOTICE (ANNEXURE B) AND THE SUGAR WAS SOLD AND THE SALE RE ALIZATIONS INVESTED IN FDR WITH THE STATE BANK OF PATIALA, LUD HIANA. 8. THE AFOREMENTIONED ORDER (ANNEXURE A) WAS CHALLE NGED BY THE ASSESSEE BEFORE THE DISTRICT & SESSIONS JUDGE, LUDH IANA BUT THE HONBLE SESSIONS JUDGE UPHELD THE ORDER OF THE DIST RICT COLLECTOR VIDE HIS ORDER DATED 26.02.2010. THE ASSESSEE HAS REPORT EDLY FILED AN APPEAL AGAINST THE ORDER OF THE DISTRICT & SESSIONS JUDGE IN REVISION PETITION NO.789 OF 2010 TITLED AS BHARAT BHUSHAN VS . STATE OF PUNJAB IN THE HONBLE PUNJAB & HARYANA HIGH COURT ( KINDLY REFER TO LAST LINE OF PAGE 449. 9. IN VIEW OF THE ABOVE DISCUSSION, IT IS CLEAR TH AT THE ASSESSEE HAD INVESTED HUGE MONEY IN THE PURCHASE OF SUGAR FROM S OURCES NOT DISCLOSED TO THE DEPARTMENT. ON THE DATE OF RAID, THE ASSESSEE HAD STATED THAT HE HAD ALSO THE BILLS/DOCUMENTS BUT SUC H SET OF BOOKS OF ACCOUNT WERE CLEARLY NOT MAINTAINED IN THE REGULAR COURSE OF BUSINESS FOR MAKING COMPLIANCE TO THE TAX LAWS BUT RUN HIS B USINESS CLANDESTINELY AS IS EMINENTLY CLEAR FROM THE ASSESS EES TWO STATEMENTS WHERE IN ONE (P.474 OF APB) HE STATED THAT THE LEDG ER BOOK AND STOCK REGISTER HAVE BEEN KEPT SECRETLY IN THE HOUSE OF MY SISTER KANTA RANI AT HISSAR (HARYANA) AND THE OTHER STATEMENT (P.475 OF APB) IT WAS STATED THAT THE LEDGER BOOK AND STOCK REGISTER HAVE BEEN KEPT SECRETLY IN THEIR SHOP AT MOGA. 10. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE FACT UM OF HAVING MADE INVESTMENT IN THE PURCHASE OF 97,500 QUINTALS OF SU GAR FROM SOURCES NOT DISCLOSED TO THE DEPARTMENT HAS BEEN ESTABLISHE D BEYOND A SHRED OF DOUBT AS THE CONCOCTED STORY AND FAKE CLAIM OF T HE PARTIES TO THE SUGAR WERE TRASHED BY THE DISTRICT COLLECTOR, LUDHI ANA WHICH ACTION HAS BEEN UPHELD BY THE DISTRICT & SESSIONS JUDGE, L UDHIANA THOUGH THE SAME IS UNDER CHALLENGE BEFORE THE HONBLE PUNJ AB & HARYANA HIGH COURT IN REVISION PETITION NO.789 OF 2010. IT IS, THEREFORE, PRAYED THAT THE ASSESSEES APPEAL MAY KINDLY BE REJ ECTED IN TOTO OR ALTERNATIVELY, THE HEARING IN THIS CASE MAY BE BLOC KED TILL THE OUTCOME OF THE ASSESSEE REVISION PETITION NO.789 OF 2010 AS THE HONBLE BENCH HEARING AND DECIDING THE APPEAL WOULD AMOUNT TO NEGATING THE JUDGEMENT OF THE HONBLE DISTRICT & SESSIONS JUDGE, LUDHIANA IF THE ASSESSEES APPEAL GETS ALLOWED AND WOULD ALSO BE FO UND TO BE GOING 52 PARALLEL WITH THE HONBLE PUNJAB & HARYANA HIGH COU RT AND IN WHICH EVENT THE PROCEEDINGS BEFORE THE HONBLE TRIB UNAL OUGHT TO ABATE TILL THE OUTCOME OF THE HONBLE HIGH COURTS DECISION. ASSESSEES CONCOCTED STORY: 11. IT IS PERTINENT TO MENTION HERE THAT WHILE ARGU ING THE APPEAL ON 15.10.2013 SHRI AJAY VOHRA DID NOT TOUCH THE AFOREM ENTIONED VITAL ASPECT OF THE CASE AND HE HAD ONLY BEEN HARPING ON THE STORTY CONCOCTED BY ENGAGING SOME BRILLIANT BRAINS OF FIR STLY CREATED THE FAADE OF HAVING MADE PURCHASES OF SUGAR FROM 45 PA RTIES AND THEN SELLING THE SAME TO 54 PARTIES. BUT HOWSOEVER INTEL LIGENTLY ONE MAY WEAVE A STORY YET NO ONE HAS EVER BEEN ABLE TO PROV IDE FOUNDATION OF TRUTH TO SUCH FABRICATION. BEFORE, THE INHERENT CO NTRADICTION IN THIS STORY ARE ELABORATED AND PROVED ON THE TEST OF HUMA N PROBABILITY THAT THE ASSESSEES CLAIM OF HAVING SOLD THE SUGAR IS NO THING BUT A PIECE OF CONCOCTION, IT IS CONSIDERED FIT TO DISCUSS BRIEFLY THE STORY AS WOVEN BY THE ASSESSEE AND AS CANVASSED BY THE LEARNED COUNS EL BEFORE THE HONBLE BENCH ON 15.10.2013. 12. THE CONCOCTION, AS ASSIDUOUSLY BUILT BY THE AS SESSEE, IS THAT HE HAD PURCHASED SUGAR FROM 45 PARTIES AS PER LIST APP EARING AT PAGES 1- 3 OF APB AND SOLD THE SAME TO 53 PARTIES AS PER LIS T APPEARING AT PAGES 72-73 OF APB. SINCE THE ASSESSEE HAD SOLD SUG AR TO 53 PARTIES AS SUCH THE OWNERSHIP VESTED IN THOSE PARTIES TO WH OM SUGAR WAS SOLD ON AS IS WHERE IS BASIS IN THE SAME MANNER AS IT WA S PURCHASED FROM 45 PARTIES ON AS IS WHERE IS BASIS. THEREFORE, THE ASSESSEE CLAIMS THAT THERE IS NOTHING WHICH HE HAD CONCEALED AS SUCH PURCHASE AND SALE OF SUGAR HAD BEEN REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. WITHOUT PREJUDICE TO THE ABOVE, IF THE HONBLE BEN CH WANTS US TO MAKE SUBMISSIONS ON MERIT, IN ADDITION TO THE ABOV E SUBMISSION, IT IS SUBMITTED THAT THE ASSESSEES IS WHOLLY A CONCOCTE D STORY WHICH HAS SEVERAL CONTRADICTIONS AND IMPROBABILITIES WHICH A RE DISCUSSED HEREUNDER:- INHERENT CONTRADICTIONS & IMPROBABILITIES IN ASSESSEES CONCOCTION. MOTIVE OF CONCTION: THE IMMEDIATE AND PRIMARY MOTI VE TO CONCOCT THIS STORY WHICH HAS BEEN AIDED AND ABETTED BY MANY FIRMS WAS TO WRIGGLE OUT OF THE CHARGE OF HAVING COMMITTED TH E OFFENCE OF STORING MORE THAN 2000 QUINTALS OF SUGAR IN VIOLATION OF OR DER OF THE MINISTRY OF 53 CONSUMER AFFAIRS DATED 16.07.2009 (PAGE 455 OF THE APB) AND FOR STOCKING THE SAME FOR A PERIOD BEYOND 30 DAYS. SIN CE THE ASSESSEE HAD BEEN FOUND TO BE IN POSSESSION OF 97,500 QUINTALS O F SUGAR, IT WAS REQUIRED THAT HE SHOULD SHOW SALE OF SUGAR WEIGHING LESS THAN 2000 QUINTALS TO MAXIMUM NUMBER OF SELLERS. IF SUGAR SOL D IS SHOWN AT 2000 QUINTALS PER PARTY, THE NUMBER OF PARTIES COULD BE 49 ( 97,500/2000=48.75) BUT SINCE THE SALE OF SUGAR HAD TO BE SHOWN LESSER THAN 2000 QUINTALS TO ESCAPE THE WRATH OF THE AFORE MENTIONED ORDER, THE ASSESSEE HAD TO SHOW SALE TO 50 ABOVE PARTIES. THUS , IT SHOWED SALE TO 53 PARTIES. FURTHER SINCE RETENTION PERIOD OF STOC K HAD TO BE RESTRICTED TO LESS THAN 30 DAYS, THE PURCHASES AND SALES WERE SHOWN IN PERIOD LESS THAN 30 DAYS. THE PURCHASES WERE SHOWN TO HAVE BEEN MADE WITHIN A SPAN OF 16 DAYS I.E. 03.08.2009 TO 18.08.2009 AND SALES WERE SHOWN AND SALES WERE SHOWN TO HAVE BEEN EFFECTED ON OR BE FORE 11.09.2009 I.E. WELL WITHIN 30 DAYS. THUS, THE PLOT HAD BEEN ENACTE D PERFECTLY WELL SQUARELY WITH A VIEW TO ESCAPING THE WRATH OF ORDER OF MINISTRY OF CONSUMER AFFAIRS DATED 16.07.2009 (SUPRA). IMPROBABILITIES: THERE ARE MYRIAD IMPROBABILITIES IN THE PLOT WOVEN SO ASSIDUOUSLY BY THE ASSESSEE WHICH ARE DILATED HEREUNDER:- IMPROBABILITIES REGARDING PURCHASES: A) THE MOST STRIKING IMPROBABILITY IS THAT 45 PARTIES SHOULD HAVE THEIR STOCK OF SUGAR AT ONE GODOWN SITUATED IN VILL AGE SEEHRA IN LUDHIANA DISTRICT AND ALL OF THEM SHOULD SELL SUGAR ON AS IS WHERE IS BASIS TO ONE BUYER ONLY I.E. THE ASSESSEE. SUGAR HAS BEEN SHOWN TO HAVE BEEN SOLD IN SUCH A SHORT PERIOD OF JUST 16 DA YS. B) IT IS IMPROBABLE THAT ALL THE 45 PARTIES SHOULD PU RCHASE SUGAR FROM ONE PARTY NAMELY M/S.S.M.EDIBLE PVT LTD AND TH AT TOO WITHOUT MAKING ANY PAYMENT AND AGAIN ON AS IS WHERE IS BASI S AS LYING IN THE SAME GODOWN. C) THE ASSESSEE HAS ALLEGEDLY MADE PURCHASES OF SUGAR FROM 45 PARTIES WITHIN A PERIOD OF JUST 16 DAYS MORE THAN 1 LAC QUINTALS WHICH IS AN IMPROBABILITY. THE ASSESSEE CANNOT DENY THAT HE HAS NEVER PURCHASED SUCH A HUGE AMOUNT OF SUGAR IN SUCH A SHO RT TIME. EACH OF THE 45 PURCHASES SHOWN IS IN THE BRACKET OF 1500-20 00 QUINTALS AS THE SELLER COULD BE CHARGED FOR HAVING STACKED MORE THA N 2000 QUINTALS OF SUGAR. 54 D) THE ASSESSEE HAD NOT PAID EVEN A SINGLE PENNY TO A NY OF THE SELLER WHICH IS AN IMPROBABILITY IN ANY TRADE; PA RTICULARLY IN THE TRADE OF SUGAR. E) NO ADVANCE HAD BEEN MADE BY THE ASSEESSEE TO ANY O F THE PARTY WHICH IS GENERALLY THE PRACTICE IN THIS TRADE AS SU GAR HAS READY BUILT MARKET. F) IT IS NOT IMAGINABLE THAT AS MANY AS 45 PARTIES SP READ OVER STATIONED AT KAPURTHALA, SUNAM, BATHINDA, FARIDKOT, AMRITSAR & MOGA SHOULD PURCHASE SUGAR ON AS IS WHERE IS BASIS STACKED IN SEERAH VILLAGE OF LUDHIANA DISTRICT. G) THE PURCHASES OF SUGAR TO SUCH A HUGE EXTENT HAVE NEVER BEEN MADE BY THE ASSESSEE AS IS CLEAR FROM THE FOLLOWING PURCHASES YEAR WISE: AY 2005-06 2,16,26,006 AY 2006-07 2,78,08,109 AY 2007-08 2,80,96,830 AY 2008-09 MIXED TRADING ACCOUNT FILED. AY 2009-10 2,79,51,562 AY 2010-11 32,11,38,205(AY UNDER CONSIDERATION) CLEARLY THIS IS HIGHLY IMPROBABLE. H) THE ASSESSEE CLAIMS THAT HE HAD PURCHASED SUGAR FROM 45 PARTIES ON AS IS WHERE IS BASIS WHICH WAS ALREADY L YING IN THE SAID GODOWN BUT THE MANAGER OF M/S. GITANSH INTERNATIONA L LTD WHICH COMPANY IS THE OWNER OF THE SAID GODOWN, HAS STATED IN HIS STATEMENT RECORDED ON 13.12.2011 WHEREIN HE CATEGORICALLY STA TED THAT THE GODOWNS WERE VACATED BY THE PARTIES EARLIER OCCUPYING THE G ODOWN ON 31.07.2009 AND THEY THE COMPANY HAD TAKEN POSSESSION OF THE VA CANT GODOWN AND IT WAS LET OUT SUBSEQUENTLY TO THE OTHER PARTIES AS PE R DETAILS GIVEN. (P.129 OF APB). FURTHER, SHRI VISHAL GUPTA HAS GIVEN GRAPH IC DETAIL OF THE OCCUPANCY OF GODOWN AT VILLAGE SEERAH IN HIS STATEM ENT RECORDED ON 01.12.2011 AND HAS GIVEN CATEGORICAL ANSWER THAT FO R THE PERIOD OTHER THAN SPECIFIED IN THE STATEMENT, THE RESPECTIVE GOD OWNS WERE VACANT. ( KINDLY REFER TO PAGE 3 & 4 OF THE ASSESSMENT ORDER) . THIS STATEMENT WAS GIVEN BY SHRI VISHAL GUPTA IN THE PRESENCE OF SHRI ANIL KHANNA, SHRI 55 VISHAL GUPTAS COUNSEL, THE ASSESSEE AND HIS COUNS EL SHRI JAGJIWAN LAL, CA. SINCE THESE STATEMENTS OF SHRI VISHAL GUPTA HAD CLEARLY EXPLODED THE WHOLE CONCOCTION OF THE ASSESSEE, THE ASSESSEE AND HIS COUNSEL DECLINED TO CROSS EXAMINE SHRI VISHAL GUPTA WHEN THEY WERE A FFORDED AN OPPORTUNITY BY THE AO TO DO SO. THIS FACTUM IS WELL RECORDED AT PARA 1.2 OF PAGE 4 OF THE ASSESSMENT ORDER. THESE TWO STATEM ENTS TAKE WHOLE OF THE WIND FROM THE SAILS OF THE ASSESSEES ARGUMENT THAT HE HAD PURCHASED SUGAR ON AS IS WHERE IS BASIS. I) THE ASSESSEE AFTER REALIZING THAT HIS REFUSAL TO CROSS EXAMINE SHRI VISHAL GUPTA WILL GO AGAINST HIM, HE DEMANDED SUMMO NING OF SHRI KAMAL KISHORE GOYAL, MD OF M/S.GITANSH INTERNATIONA L LTD. THE ASSESSEES REQUEST WAS ACCEDED TO. SHRI KAMAL KISHO RE GOYAL, MD OF THE COMPANY WAS RECORDED ON 13.12.20011 (PAGE 5 OF ASSE SSMENT ORDER) BUT SHRI GOYAL ALSO CONFIRMED THAT THE GODOWNS WERE VAC ATED ON 31.7.2009 AND POSSESSION OF THE VACANT GODOWNS WAS TAKEN BY T HEM AND THE SAME WERE SUBSEQUENTLY LET TO OTHER PARTIES AS PER DETAI LS GIVEN. IT WAS FURTHER STATED THAT AT THE TIME OF LETTING THESE GODOWNS TO OTHER PARTIES, THESE WERE VACANT. BUT THE ASSESSEE HAD NOT ATTENDED AT T HE TIME OF RECORDING THE STATEMENT. ON 13.12.2011 AGAIN STATEMENT OF SHR I VISHAL GUPTA WAS RECORDED AND HE AGAIN HAD STATED THAT THE GODOWNS W ERE VACATED BY THE PARTIES ON 31.7.2009 AND THAT THEY HAD TAKEN POSSES SION OF THE VACANT GODOWNS AND IT WAS LET OUT SUBSEQUENTLY TO THE OTHE R PARTIES AS PER DETAILS GIVEN WHICH WERE LET OUT W.E.F.1.8.2009 (PA GE 6 & 7 OF ASSESSMENT ORDER )BUT THE ASSESSEE HAD NOT ATTENDED THE PROCEE DINGS. THE ASSESSEE WAS AGAIN EXASPERATED AND HE AGAIN DEMANDED AN OPPO RTUNITY OF CROSS EXAMINATION OF SHRI KAMAL KISHORE GOYAL AND SHRI VI SHAL GUPTA AND YET AGAIN THE ASSESSEE FAILED TO ATTEND ON 22.12.2011 AND AGAIN ON THE REQUEST OF THE COUNSELS OF THE ASSESSEE, SUMMONS WE RE ISSUED FOR 23.12.2011 BUT THE ASSESSEE AGAIN FAILED TO ATTEND FOR REASONS BEST KNOWN TO THE ASSESSEE. AGAIN ON 26.12.2011 SUMMONS WERE ISSUED BUT THE ASSESSEE AGAIN DID NOT ATTEND THE PROCEEDINGS. ( KI NDLY REFER PAGE 9 OF THE ASSESSMENT ORDER). ON 26.12.2011, THE ASSESSEE WAS PROVIDED WITH COPIES OF STATEMENTS/DOCUMENTS FOR WHICH REQUEST HA D BEEN MADE ON 26.12.2011 AND THE CASE WAS FINALLY ADJOURNED TO 28 .12.2011. ON 28.12.2011, THE ASSESSEE DEMANDED SETTING UP A COMM ISSION TO CROSS EXAMINE SHRI VISHAL GUPTA AND SHRI KAMAL KISHORE GO YAL AND SHRI PAWAN KUMAR KNOWING WELL THAT TWO WITNESSES WERE OU T OF STATION AND SINCE HE HAS NOT AVAILED CROSS EXAMINATION ON EARLI ER OCCASION DELIBERATELY, THE AO HAD NOT FOUND ANY MERIT IN THE REQUEST OF THE 56 ASSESSEE MADE JUST THREE DAYS BEFORE THE DATE OF CO MPLETION OF ASSESSMENT. IT IS PERTINENT TO MENTION HERE THAT ON 1.12.2011 WHEN STATEMENT OF SHRI VISHAL GUPTA AND SHRI KAMAL KISHO RE GOYAL WERE RECORDED, THE ASSESSEE WAS OFFERED AN OPPORTUNITY T O CROSS-EXAMINE THEM WHICH THE ASSESSEE HAD REFUSED TO AVAIL. THUS, HE H AD FORFEITED HIS RIGHT TO CLAIM ANY FURTHER OPPORTUNITY. J) IT IS FURTHER PERTINENT TO NOTE THAT WHEN IT IS CL AIMED THAT M/S. S.M.EDIBLES P LTD HAD SOLD SUGAR TO 45 PARTIES ON A S IS WHERE IS BASIS AT SEERAH VILLAGE GODOWN, THIS WAS DENIED BY M/S. S.M.EDIBLES P LTD IN THEIR LETTER DATED 30.11.2009 WHERE IT IS STATED THAT THEY HAD VACATED THE SAID GODOWN BY MARCH, 2009.(KINDLY REFE R P. 25 OF THE ASSESSMENT ORDER) K) THE ASSESSEE HAS CLAIMED IN HIS BRIEF SYNPOSIS (PA GE 1) FILED BEFORE THE HONBLE BENCH THAT THE ENTIRE SUGA R SO SEIZED WAS FULLY AND APPROPRIATELY RECORDED BY THE ASSESSEE IN THE REGULAR BOOKS OF ACCOUNT. IT IS FURTHER STATED THAT ON THE DATE O F SEIZURE, SUGAR HAD ALREADY BEEN SOLD BY THE ASSESSEE TO VARIOUS PARTIE S AND SUBSEQUENTLY ON ACCOUNT OF SEIZURE OF THE SUGAR, THE ASSESSEE HA D REVERSED THE SALES MADE TO VARIOUS PARTIES. THIS IS CONTRARY TO THE FA CTS AS ADMITTED BY THE ASSESSEE AS THE ASSESSEE IN HIS STATEMENT RECOR DED AT THE TIME OF RAID AND AT PAGE P.475 OF APB HE CONFESSED THAT THE LEDGER BOOK AND STOCK REGISTER HAD BEEN KEPT SECRETLY IN THE HOUSE OF HIS SISTER KANTA RANI AT HISSAR (HARYANA) REGARDING WHICH HE ALONE H AS THE KNOWLEDGE AND FURTHER IN HIS STATEMENT (P.475 OF AP B) THAT THE LEDGER BOOK AND STOCK REGISTER HAD BEEN KEPT SECRETLY IN H IS SHOP AT MOGA. THE SECRETLY KEEPING THE LEDGER BOOK AND STOCK REGI STER IN RESPECT OF SEIZED SUGAR WAS CLEAR PROOF OF THE FACT THAT THE S UGAR SO SEIZED WAS NOT RECORDED BY THE ASSESSEE IN HIS REGULAR BOOKS O F ACCOUNT. IT IS FURTHER NOT UNDERSTANDABLE THAT IF THE ASSESSEE HAD REALLY SOLD THE SUGAR TO 53 PARTIES THEN WHY DID HE OWN THE SAME ON 28.09.2011 AS AFTER HAVING ALLEGEDLY SOLD THE SUGAR, HE WAS NO MO RE IN THE PICTURE. THIS PROVES THE FALSITY OF THE CLAIM AND PROVES THA T NO SALE HAD BEEN MADE AND ONLY FICTITIOUS SALES WERE SHOWN. L) WHEN THE SALES HAD BEEN MADE AND THE POSSESSION OF THE SUGAR HAD BEEN TAKEN OVER BY THE PURCHASING PARTIES ON AS IS WHERE IS BASIS THEN HOW COULD THE ASSESSEE LATER ON CANCEL T HE SALES. FURTHER, HOW IT IS SO THAT THE ASSESSEE CANCELLED SALES ONLY TO THE EXTENT OF RS.17,22,72,217/- ON 31.3.2010 WHEREAS THE TOTAL SA LES MADE TO 53 PARTIES WERE TO THE EXTENT OF RS.28,36,29,250/-. 57 M) THE ASSESSEE HAS CLAIMED AT PAGE 4 OF THE BRIEF SY NPOSIS THAT INITIALLY THE GODOWN WAS TAKEN ON RENT BY M/S. S.M. EDIBLE (P)LIMITED AND THEREAFTER 45 PARTIES TOOK THE GODOW N ON RENT IN APRIL, 2009 PURSUANT TO PURCHASE OF SUGAR FROM M/S. S.M.ED IBLE (P)LTD. THIS REMAINS HIGHLY UNSUBSTANTIATED. THE ASSESSEE HAS MA NEUVERED TO CREATE A FAADE OF GENUINE OF PURCHASES. THE ASSESS EE CONTACTED SUCH PARTIES WHO HAD EARLIER TAKEN GODOWN AT VILLAGE SEE RAH ON RENT AND MANAGED TO RECEIVE FICTITIOUS SALE BILLS FROM THEM. IT IS NO WONDER THAT THE ASSESEE HAS APPENDED AS MANY AS 23 GODOWN RECEI PTS ISSUED BY GITANSH INTERNATIONAL P LTD. (PAGES 96 TO 118) BUT THE SAME ARE FICTITIOUS AS THE RECEIPTS DO NO CONFORM WITH THE S TATEMENT OF SHRI VISHAL GUPTA WHO HAS GIVE GRAPHIC DETAILS OF OCCUPA NCY OF THE GODOWNS IN HIS STATEMENT DATED 1.12.2011 (PAGE 3 OF THE ASSESSMENT ORDER ). WITHOUT PREJUDICE TO THIS., IT MAY BE SUBM ITTED THAT OUT OF 23 GODOWN RECEIPTS ONLY SEVEN PARTIES RENT RECEIPT IS FOR THE MONTH ENDING 31.7.2009 WHICH APPEAR AT PAGES 96, 101, 1 04, 108,111, 115 & 118. THE ASSESSEE HAS MANAGED TO SECURE FICTITIO US PURCHASE BILLS AND THE RENT RECEIPTS HAVE ALSO BEEN MANAGED OR ARE FICTITIOUS. THE PARTIES IN RESPECT OF RENT RECEIPT FOR 31.7.2009 HA S BEEN FILED ARE LISTED AS UNDER:- 1. M/S. BABU RAM OM PARKASH, FARIDKOT AT S.NO.4 OF LI ST AT PAGE 1 OF APB. 2. M/S.CHAMAN OIL & FLOUR INDS.,FARIDKOT AT SNO.6 3. M/S. GUPTA TRADING CO.FARIDKOT AT S.NO.13 4. M/S. JAGDSIH LAL RAJ KUMAR, FARIDKOT AT S.NO.21 5. M/S. PREM KUMAR KRISHAN KUMAR, FARIDKOT AT S.NO.32 6. M/S.RIKHI RAM PARDEEP KUMAR, FARIDKOT AT S.NO.36 7. M/S. SUKHJINDER KUMAR GUPTA, FARIDKOT AT S.NO.42 WHEN THE ASSESEE COULD FILE GODOWN RENT RECEIPTS (S UPPOSING THESE ARE GENUINE RECEIPTS) IN RESPECT OF 7 PARTIES FOR THE MONTH OF JULY, 2009 WHY HE COULD NOT OBTAIN AND FILE GODOWN RENT R ECEIPT IN RESPECT OF REMAINING 38 PARTIES. THE REASON IS QUITE SIMPLE THE GODOWN OWNER DID NOT OBLIGE THE ASSESSEE TO SUCH LEVELS. AS SUB MITTED, IT WAS A POST RAID OPERATION OF THE ASSESSEE TO CREATE EVIDENCE T O PROVE THAT HE HAS NOT VIOLATED THE ORDER OF THE MINISTRY OF CONSUMER AFFAIRS THAT HE OBTAINED FICTITIOUS PURCHASE BILLS FROM 45 PARTIES BUT HE COULD MANAGE RENT RECEIPTS BILLS FROM ABOVE SEVEN PARTIES ONLY. IT IS SUBMITTED THAT THE PRIMARY IMPERATIVE OF THE GENUINENESS OF THE PU RCHASES IS TO PROVE 58 THAT THE SUGAR WAS PURCHASED BY THE ASSESSEE ON AS IS WHERE IS BASIS AS CLAIMED. IF THIS CLAIM THE ASSESSEE FAILS TO PROVE, HIS CONTENTION THAT HE HAD FILED VAT RETURN OR GOT INSU RANCE POLICY CAN ONLY BE SEEN AS AN ATTEMPT OF A SHREWD BUSINESSMAN. AS REGARDS VAT RETURN, NO EVIDENCE HAS BEEN FILED IN TOKEN OF FILE D THE RETURN WITH THE SALES TAX DEPARTMENT AND AS SUCH ITS GENUINENESS CA NNOT BE ACCEPTED. AS REGARDS INSURANCE POLICY TAKEN, IT MAY BE MENTIO NED THAT THE ASSESSEE COULD NOT AFFORD TO PUT SUCH A HUGE QUANTI TY OF SUGAR VALUED AT ABOUT RS.25 CRORE AND HE HAD TO BUY POLICY TO S ECURE SUCH A HUGE LOSS. THIS INTENTION OF THE ASSESSEE IS MANIFESTED IN THE FACT THAT AGAINST BURGLARY POLICY HAS BEEN TAKEN FOR WHOLE OF THE YEAR BUT FOR FIRE IT IS ONLY FOR THREE MONTHS. THEREFORE, NO COG NIZANCE OF VAT RETURN AND INSURANCE DOCUMENTS CAN BE TAKEN UNLESS THE ASSESSEE PROVES THAT THE SUGAR HAD BEEN TAKEN INTO HIS POSSE SSION BY THE ASSESSEE ON AS IS WHERE IS BASIS AND IF HE FAILS TO PROVE THAT THE SUGAR WAS ALREADY STACKED, IT BECOMES CLEAR THAT TH E ASSESSEE PURCHASED THE SUGAR FROM UNDISCLOSED SOURCES . THE WHOLE CASE CLINCHES HERE. N) IT MAY BE MENTIONED HERE THAT THE ASSESSEE HAS FUR NISHED RENT RECEIPTS IN RESPECT OF SEVEN PARTIES AS LISTED ABOV E. IT COULD BE THAT THESE RECEIPTS ARE GENUINE AND SHRI VISHAL GUPTA IN HIS STATEMENT RECORDED ON 1.12.2011 HAD MISSED THIS FACT BUT WHIC H HE LATER ADMITTED IN HIS STATEMENT RECORDED ON 13.12.2011 (P AGE 6 OF AO) BUT IN THIS STATEMENT HE STUCK TO HIS EARLIER POSITION THAT THE GODOWNS WERE VACATED BY THESE PARTIES ON 31.7.2009 AND THAT THEY HAD TAKEN POSSESSION OF THE VACANT GODOWNS WHICH WERE LET OUT SUBSEQUENTLY TO OTHER PARTIES AS PER DETAILS GIVEN W.E.F.1.8.2009. THUS, THERE IS NO CONTRADICTION IN THE STATEMENT OF SHRI VISHAL GUPTA WHICH THE ASSESSEES COUNSEL IS TRYING TO STRESS UPON. O) IT IS WRONG TO SAY THAT THE ASSESSEE WAS NOT AFFOR DED AN OPPORTUNITY OF CROSS EXAMINING OF SHRI VISHAL GUPTA . THE ASSESSEE IN FACT HAD DECLINED TO CROSS EXAMINE AS HAS BEEN RECO RDED BY THE AO IN HIS ORDER AND WHEN THE ASSESSEE LATER DEMANDED CROS S EXAMINATION HE HIMSELF DID NOT ATTEND FOR ONE EXCUSE OR THE OTHER. HE WANTED CROSS EXAMINATION ON 28.12.2011 WHEN HE KNEW WELL THAT TH E WITNESSES ARE OUT OF STATION. LIKEWISE, IT IS WRONG TO DERIVE AD VERSE INFERENCE WHEN THE ASSESSEE HAD HIMSELF DECLINED TO CROSS EXAMINE SHRI VISHAL GUPTA ON 1.12.2011. ( PARA 1.2 PAGE 4 OF ASSESSMENT ORDER ) 59 P) THE ASSESSEE HAS RAISED OBJECTION TO THE RELIANCE PLACED BY THE AO ON M/S. S.M.EDIBLES PVT LTD LETTER DATED 30.11.2 009 AT PAGE 25 OF THE ASSESSMENT ORDER CLAIMING THAT THE SAID LETTER WAS NOT CONFRONTED TO THE ASSESSEE. IN THIS REGARD, IT IS SUBMITTED TH AT SALES TAX NO. OF M/S. S.M.EDIBLE (P) LTD HAS BEEN TAKEN IN THE NAME OF TH E ASSESSEE AND THE ASSESSEE HAD BEEN MADE AUTHORIZED SIGNATORY FOR THI S PURPOSE BY THE COMPANY. THE AGREEMENT WAS SIGNED ON BEHALF OF THE COMPANY BY THE ASSESSEE AS THEIR AUTHORIZED SIGNATORY. (KINDLY REF ER TO ANSWER TO QUESTION NO.21 AT PAGE 20 OF THE ASSESSMENT ORDER.) IN THE LIGHT OF THE FACT THAT THE ASSESSEE IS THE AUTHORIZED SIGNATORY OF THE COMPANY, IT DOES NOT LIE WITH THE ASSESEE THAT HE HAD NOT BEEN CONFRONTED WITH THE SAID LETTER. THIS AMOUNTS TO AS IF ONE IS DEMANDING CROSS EXAMIN ATION OF THE SELF. Q) HOW FAR ASSESSEES RELYING UPON PAGES 178-330 OF T HE APB IS RELEVANT WOULD BE DISCUSSED ORALLY. HERE SUFFICE IT TO SAY THAT THESE PARTIES ARE THOSE SEVEN PARTIES AS DISCUSSED ABOVE AND THE REMAINING ARE ONES WHICH ADMITTEDLY HAD NEVER DONE ANY BUSINE SS DEALING WITH EITHER M/S. S.M.EDIBLES PVT LTD AND ALSO THE ASSESS EE AND IT IS NOT UNDERSTANDABLE THAT HOW COULD M/S. S.M.EDIBLE PVT. LTD COULD AFFORD TO SELL SUGAR TO THEM ON CREDIT AND HOW COULD SUCH PARTIES SELL SUGAR TO THE ASSESSEE WITHOUT CHARGING ANY PENNY. THIS IS THE MOST TRANSPARENT MYSTERY OF THIS CASE. R) THE ASSESSEE CLAIMS THAT IT HAS BEEN WRONGLY ALLEG ED THAT THE PURCHASES ARE UNACCOUNTED. HE CLAIMS THAT THE STATE MENTS OF PARTIES RECORDED CLEARLY SHOW THAT THE PURCHASES HAD BEEN D ULY RECORDED IN THE BOOKS OF ACCOUNT. THIS IS TOTALLY FALSE AS THE PURCHASE BILLS HAVE ONLY BEEN MANAGED AND BROUGHT INTO THE BOOKS OF ACC OUNT ONLY AFTER THE DATE OF RAID. THEREFORE, THE SALE BILLS OR CON FIRMATIONS BY THE PARTIES ARE ONLY FAKE AND UNSUBSTANTIATED AND IT CA NNOT BE SAID THAT THE ASSESSEE HAD RECORDED THE PURCHASES IN THE REGU LAR COURSE OF BUSINESS. THE INHERENT CONTRADICTION AND OTHER MISS AVERMENTS IN THE STATEMENTS OF EACH OF THE PARTIES WILL BE DILATED O RALLY. SINCE THE ASSESSEE HAD PURCHASED SUGAR FROM SOURCES NOT DISCL OSED TO THE DEPARTMENT, IT WAS CLEARLY COVERED BY THE PROVISION S OF SECTION 69A OF THE INCOME TAX ACT, 1961. IT IS PERTINENT TO MENTIO N HERE THAT THE PROVISIONS OF SECTION 69A ARE CLEARLY APPLICABLE IN THIS CASE AS THE SAID SECTION ENVISAGES THAT WHERE IN ANY FINANCIAL YEAR THE ASSESSEE IS FOUND TO BE THE OWNER OF ANY BULLION, JEWELLERY OR VALUABLE ARTICLE IS NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINT AINED BY HIM FOR ANY SOURCE OF INCOME AND THE EXPLANATION IS NOT SAT ISFACTORY, THE 60 MONEY AND THE VALUE OF THE BULLION, JEWELLERY OR OT HER VALUABLE ARTICLE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. HERE IN THIS CASE, THE ASSESSEE HAD FOUND TO BE THE OWNER OF 95,500 QUINTALS OF SUGAR STACKED IN A GODOWN TAKEN ON RENT IN VILLAGE SEERAH IN LUDHIANA DISTRICT BUT THE SAID SUGAR NOT BEEN RECORDED IN THE REGULAR BOOKS OF ACCOUNT BUT IN THE BOOKS OF AC COUNT WHICH HAD BEEN KEPT SECRETLY AT ASSESSEES SISTERS HOUSE AT HISAR (HARYANA) OR SOME WHERE ELSE AS THE ASSESSEE MAY BE KNOWING BETT ER BUT THE SAME WERE CERTAINLY NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND AS SUCH ON THE DATE OF SEARCH, THE ASSESSEE WAS FOUND TO BE VIOLATING THE PROVISIONS OF SECTION 69A AND AS SUCH THE AO HAD CO RRECTLY INVOKED THE PROVISIONS OF SECTION 69A IN THIS CASE AND THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE ARE TOTALLY OFF TH E TANGENT AND PREPOSTEROUS. THE ASSESSEE HAS CONTENDED AT PAGE 29 OF THE BRIEF SYNPOSIS THAT THE SOURCE OF SUGAR PURCHASED HAS NOT BEEN BROUGHT ON RECORD AND IT HAS NOT BEEN BROUGHT ON RECORD AS TO FROM WHOM AND FROM WHERE THE ALLEGED PURCHASE OF SUGAR HAD BEEN EFFECTED AND WHA T HAPPENED TO THE SUGAR PURCHASED BY THE APPELLANT FROM THE SELLERS W HO CONFIRMED HAVING SOLD SUGAR AND SOME OTHER IRRELEVANT QUESTIO NS HAVE BEEN RAISED IN THIS REGARD. IT MAY BE MENTIONED IN REJOI NDER THAT THE FACTUM OF THE ASSESSEES BEING FOUND IN POSSESSION OF SUGA R IS WELL- ESTABLISHED AND WHEREFROM AND WHAT SOURCES HE PURCH ASED THE SAID SUGAR ONLY THE ASSESSEE CAN BE PRIVY TO THAT AND IT IS NOT ENJOINED IN LAW UPON THE DEPARTMENT TO PROVE THE SOURCE OF INVE STMENT MADE OUT OF SOURCES NOT DISCLOSED TO THE DEPARTMENT. WHEN A SOURCE IS NOT DISCLOSED TO THE DEPARTMENT, HOW CAN THE DEPARTMENT COMMENT AS TO WHEREFROM THE SAID INVESTMENT HADE BEEN MADE. S) THE ASSESSEE HAS CONTENDED THAT THE STATEMENT OF T HE ASSESSEE RECORDED ON THE DATE OF RAID WAS A RUNNING STATEMEN T WHEREIN THE ASSESSEE HAD MERELY STATED CERTAIN BASIC FACTS AND THE STATEMENT HAD BEEN RECORDED IN THE CONTEXT OF STACKING OF MORE TH AN 2000 QUINTALS OF SUGAR IN VIOLATION OF THE ORDER OF THE MINISTRY OF CONSUMER AFFAIRS (SUPRA) AND THERE WAS NO OCCASION FOR THE ASSESSEE TO STATE ANY FACT ABOUT THE SALE OF SUGAR MADE TO VARIOUS PERSONS. T HIS IS SELF- DEFEATING CONTENTION. IF THE ASSESSEE HAD ALREADY S OLD THE SAID SUGAR TO 53 PARTIES AS IS BEING ALLEGED THEN WHERE WAS TH E OCCASION TO MAKE A STATEMENT AND WHY DID HE NOT RESCUE HIMSELF FROM THE RAID SAYING 61 THAT THE SUGAR STACKED THERE DOES NOT BELONG TO HIM AND THAT HE HAS NOTHING TO DO WITH THE SUGAR STACKED THERE. IF THE FACTUM OF SALE OF SUGAR TO 53 PARTIES WAS TRUE, IT WOULD HAVE SAVED HIM FROM POLICE ACTION, SEIZURE AND AUCTION OF SUGAR AND ALSO HIS A RREST ON 25.9.2009. FURTHER, IF THE ASSESSEE HAD SOLD THE SUGAR TO 53 P ARTIES WHERE WAS THE NEED FOR HIM TO SAY THAT THE LEDGER BOOK AND STOCK REGISTER WAS LYING AT HIS SISTERS HOUSE OR HIS SHOP AT MOGA KEPT SECR ETLY THERE. THERE IS NO A WHISPER OF DENIAL OF THIS STATEMENT GIVE BY TH E ASSESSEE AS DISCUSSED ABOVE. IMPROBABILITY REGARDING SALES : A) THE FIRST IMPROBABILITY IS THE COINCIDENCE THAT THE SUGAR HAD BEEN SOLD TO AS MANY AS 54 PARTIES WEIGHING IN THE BRACK ET (1900-2000 QUINTALS) WHICH WAS CLEARLY MEANT TO CIRCUMVENT THE ORDER OF THE MINISTRY OF CONSUMER AFFAIRS (SUPRA) SO THAT NO OTH ER PARTY IS FOUND TO BE VIOLATING THE SAID ORDER AS THE SUGAR H AD ALLEGEDLY BEEN SOLD ON AS IS WHERE IS BASIS. B) SALES HAVE BEEN SHOWN TO HAVE BEEN EFFECTED JUST WI THIN 30 THIRTY DAYS WHICH WAS WITH A VIEW TO ESCAPING WRATH OF THE AFOREMENTIONED ORDER AGAIN. C) SALE REALIZATION HAS NOT BEEN RECEIVED FROM ANY PAR TY WHICH IS AN IMPOSSIBILITY IN A TRADE; MORE SO IN THE TRADE OF S UGAR WHERE GENERALLY ADVANCE IS TAKEN. D) ALL THE SALES HAVE BEEN SHOWN TO PARTIES LOCATED IN DIFFERENT CITIES OF PUNJAB I.E. SUNAM, SULTANPUR, FARIDKOT, LOHRIA, MANDIGOBINDGARH, AMRITSAR, JALANDHAR, JAITU, KHANNA AND SULTANPURLODHI. THESE SALES HAVE BEEN SHOWN TO HAVE BEEN MADE ON AS IS WHERE IS BASIS WHICH IS AGAIN HIGHLY IMPRO BABLE. E) VERY PECULIAR IMPROBABILITY WHICH WORTH TAKING SERI OUS NOTE OF IS THAT SUGAR OF THE VALUE OF ABOUT RS.25 CRORE IS SOL D BY M/S.S.M.EDIBLEPVT.LTD TO 45 PARTIES FROM WHOM NO SA LE PRICE IS REALIZED BY THE SAID COMPANY. THE SAID 45 COMPANIES SOLD THE SUGAR TO THE ASSESSEE WITHOUT RECEIVING ANY SALE PR ICE AND IN TURN THE ASSESSEE SELLS THE SUGAR AGAIN TO 53 PARTIES WI THOUT RECEIVING ANY SALE PRICE AND FURTHER SUGAR HAS EXCHANGED HAND S ON PAPER ON AS IS WHERE IS BASIS. THIS CLEARLY AND POSITIVELY I NDICATES THAT THE SUGAR STACKED AT THE SAID GODOWN WAS THE ASSESS EES OWN SUGAR PURCHASED OUT OF SOURCES NOT DISCLOSED TO THE DEPAR TMENT. 62 F) THE ASSESSEE CLAIMS THAT HE CANCELLED THE SALE BILL S ISSUED TO VARIOUS PARTIES IN THE MONTH OF MARCH, 2010 AS THE SUGAR WAS CONFISCATED BY THE FOOD AND CIVIL DEPARTMENT AND HE COULD NOT GIVE THE DELIVERY TO THE BUFICTIOUS SALE BILLS WERE ISSUE TO ESCAPE THE WRATH OF THE ORDER OF THE MINISTRY OF CONSUMER AFFAIRS (SUPRA). THUS, CONTRADICTION REVEALS THE WHOLE TRUTH THAT TH E SUGAR HAD BEEN PURCHASED BY THE ASSESSEE OUT OF SOURCES NOT D ISCLOSED TO THE DEPARTMENT. (G) IT IS NOT UNDERSTANDABLE AS TO WHY THE ASSESS EE CHOSE TO CANCEL SALES AGGREGATING TO RS.17,22,72,217/- OUT OF TOTA L SALE OF RS.28,36,29,250/-. THE ASSESSEE WAS NOT IN A POSIT ION TO SUPPLY SUGAR TO THE REMAINING PARTIES ALSO IN RESPECT OF WHOM H E DID NOT CANCEL THE SALE BILLS. WHY THE ASSESSEE CHOSE NOT TO CANCEL S ALE OF THE OTHER PARTIES ONLY REVEALS THAT THE PARTIES IN RESPECT O F WHICH SALES WERE CANCELLED SEEMED TO HAVE DECIDED TO GO WITH THE AS SESSEE THIS FAR ONLY AND THEY DID NOT WANT TO CONTINUE ;TO SUPPORT THE ASSESSEE TO SAVE HIM FROM THE WRATH OF THE ORDER OF THE MINISTRY OF CON SUMER AFFAIRS (SUPRA). (H) IT IS TAKING SERIOUS NOTE THAT WHEN SU GAR WAS SOLD TO 53 PARTIES ON AS IS WHERE IS BASIS THEN ALL THOSE 53 PARTIES MUST HAVE SHOWN TO HAVE TAKEN GODOWN ON RENT. BUT IT IS SEEN THAT NOT A SINGLE PARTY HAS BEEN SHOWN TO HAVE TAKEN GODOWN O N RENT. THE ASSESSEE CAN ARGUE THAT THEY WOULD HAVE LIFTED SUG AR SHORTLY WILL NOT IMBIBE CONFIDENCE AS WHAT WAS NOT TRUE OF THE ASSE SSEE HIMSELF WHEN HE ALLEGEDLY PURCHASED SUGAR FROM 45 PARTIES AND H AD TO HIRE GODOWN HOW IT COULD BE NOT THE SAME CASE IN RESPECT OF 53 PARTIES ? (I) THE CONTRAST BETWEEN THE STATEMENT RE CORDED ON 17.09.2009 AND THE LETTER OF THE ASSESSEE DATED 1.10.2009 (P AGES 488-489) CLEARLY SHOWS THAT THE LATTER IS AN AFTER THOUGHT. (J) IT IS PERTINENT TO TAKE COGNIZANCE OF THE FACT THAT THE ASSESSEE HAD BEEN MAKING PETTY PURCHASES FROM M/S.S.M.EDIB LES PVT LTD BUT WHEN HE WAS CAUGHT IN POSSESSION OF SUCH HUGE STO CK, HE MANAGED PURCHASES FROM THIS COMPANY AT ENORMOUSLY HIGH FIG URE AS IS EVIDENT FROM THE BILLS ISSUED NUMBERING 14 ENCLOSE D HEREWITH MARKED AS ANNEXURE C. 63 (K) IT MAY BE MENTIONED THAT THE ASSESSEE HA S WITHDRAWN ITS PETITION FILED BEFORE THE HONBLE HIGH COURT WHEREI N HE HAD PRAYED THE HONBLE COURT TO QUASH THE FIR ON THE GROUND TH AT SUGAR BELONGED TO OTHER PARTIES AND NOT TO HIM. SINCE THE PETITION HAS BEEN DISMISSED BY THE HONBLE HIGH COURT AS WITHDRAWN. T HIS CLEARLY PROVES THAT THE ASSESSE HAS RETRACTED FROM HIS STAN CE THAT HE SOLD THE SUGAR TO 53 PARTIES. COPY OF THE HONBLE HIGH COURT S ORDER IS ENCLOSED HEREWITH MARKED AS ANNEXURE D. IT IS SUBMITTED THAT OTHER ISSUES EMANATING DURIN G THE COURSE OF HEARING WOULD BE ARGUED ORALLY. IN VIEW OF THE ABOVE SUBMISSIONS, IT IS PRAYED TH AT THE APPEAL OF THE ASSESSEE MAY KINDLY BE DISMISSED. 6. THE LD. COUNSEL FOR THE ASSESSEE, MR. AJAY VOHRA , ADVOCATE ARGUED ON THE SIMILAR LINES AS WRITTEN SUBMISSIONS PLACED ON RECORD AND ALSO THE LD. DR. MR. TARSEM LAL, ARGUED ON THE SIMILAR LINES AS WRITTEN SUBMISSIONS PLACED ON RECORD. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSEE HAS RAISED AS MANY AS 8 GROUNDS OF APP EAL. THERE ARE TWO ISSUES IN THE SAID GROUNDS WHICH HAVE TO BE ANSWERED BY TH IS BENCH. FIRSTLY, WITH REGARD TO THE ADDITION OF RS.23,99,72,176/- ON ACC OUNT OF UNEXPLAINED INVESTMENT IN PURCHASE OF SUGAR UNDER SECTION 69 O F THE ACT, SECONDLY THE ADDITION OF RS.2,64,95,897/- ON ACCOUNT OF PROFIT I N RESPECT OF SALES AMOUNTING TO RS.17,22,72,217/- CANCELLED BY THE ASS ESSEE ON 31.03.2010. 64 7.1. THERE WAS A RAID ON 17.09.2009 BY THE DEPARTME NT OF FOOD & CIVIL SUPPLIES AT ONE OF THE GODOWNS OF THE ASSESSEE AT L UDHIANA WHERE THE SAID DEPARTMENT SEIZED SUGAR WEIGHING 97,500 QUINTALS. T HE CLAIM OF THE REVENUE AND AS PER THE WRITTEN SUBMISSIONS BY THE LD. DR AN D ARGUMENT MADE BY THE LD. DR IS THAT THE CENTRAL GOVERNMENT IN EXERCISE O F THE POWER CONFERRED BY SECTION 3 OF THE ESSENTIAL COMMODITIES ACT, 1955 RE AD WITH CLAUSE 5 OF SUGAR (CONTROL) ORDER 1966 HAD ISSUED AN ORDER DATE D 16.07.2009 PROVIDING THAT NO RECOGNIZED DEALER SHALL STORE SUGAR MORE TH AN 2000 QTLS AND SHALL NOT HOLD ANY STOCK FOR A PERIOD EXCEEDING 30 DAYS FROM THE DATE OF RECEIPT BY HIM OF SUCH STOCK. COPY OF THE SAID ORDER WAS AVA ILABLE AT ASSESSEES PB 436. ON THE INFORMATION OF THE FOOD & CIVL SUPPLIES DEPARTMENT, THE S.H.O. LUDHIANA CARRIED OUT THE INVESTIGATION AND CONFIRMED THE POSSESSION. AS REGARDS THE AVAILABILITY OF THE BILLS FOR THE P URCHASE OF 97,500 QTLS. IT WAS CLAIMED BY THE ASSESSEE THAT THE SAID BILLS HAVE BE EN KEPT SECRETLY IN ONE STATEMENT WITH THE SISTER OF THE ASSESSEE AND IN OT HER STATEMENT AT SOME OTHER PLACE. IT WAS ALSO THE CLAIM OF THE LD. DR THAT AT THE TIME OF RAID, THE ASSESSEE HAS NOT CLAIMED THAT THE SUGAR HAS BEEN SO LD AND SUBSEQUENT LETTER DATED 22.09.2009 THAT THE ASSESSEE HAS SOLD THE GOO DS, WAS NOT BELIEVABLE. THE LD. DR ALSO INVITED OUR ATTENTION THAT THE FIR HAS BEEN LODGED AGAINST THE ASSESSEE AND HE WAS ARRESTED ON 25.09.2009 AND ACCORDINGLY THE LD. DR 65 ALSO STRONGLY ARGUED THAT THE CLAIM OF THE ASSESSEE THAT THE GOODS HAVE BEEN SOLD IS NOT TENABLE. ACCORDINGLY, SUGAR WAS PUT ON SALE BY THE PUBLIC NOTICE BY THE FOOD & CIVIL SUPPLIES DEPARTMENT AND THE SAI D DEPARTMENT INVESTED THE SAID AMOUNT WITH STATE GOVERNMENT IN STATE BANK OF PATIALA, LUDHIANA IN THE FORM OF FDRS. THE AFORESAID ORDER WAS UPHELD BY THE SESSION JUDGE, LUDHIANA FOR WHICH REVISION PETITION HAS BEEN FILED BEFORE THE HONBLE PUNJAB & HARYANA HIGH COURT. THE LD. DR ACCORDINGLY DREW A CONCLUSION TO THE ABOVE SAID ARGUMENT THAT THE ASSESSEE HAD IN VESTED HUGE MONEY IN THE PURCHASE OF SUGAR FROM SOURCES NOT DISCLOSED TO THE INCOME TAX DEPARTMENT FOR WHICH THE ASSESSEE HAD CLAIMED BILLS AND DOCUME NTS BUT SUCH BOOKS OF ACCOUNT WERE NOT MAINTAINED BY THE ASSESSEE. 7.2. THE LD. DR ALSO SUBMITTED THAT THE ASSESSEE HA S CONCOCTED THE STORY BY ENGAGING SOME BRILLIANT BRAIN BY CREATING FAADE OF HAVING MADE PURCHASES OF SUGAR FROM 45 PARTIES AND SELLING THE SAME TO 53 PARTIES WHICH IS A STORY WOVEN BY THE ASSESSEE, HAS NO FOUNDATION OF TRUTH TO SUCH FABRICATION. THE LD. DR MADE OUT A CASE OF HUMAN PR OBABILITY THAT ASSESSEE CLAIMED OF HAVING SOLD SUGAR IS NOTHING BUT A PIECE OF CONCOCTION WOVEN BY THE ASSESSEE. THE LD. DR HAS LISTED OUT CERTAIN IMP ROBABILITIES REGARDING PURCHASES AT PAGES 6 TO 13 OF HIS WRITTEN SUBMISSIO NS AND SIMILARLY IMPROBABILITIES REGARDING SALES AT PAGES 13 TO 15 A ND HAS SUBMITTED A COPY OF 66 THE ORDER OF ZILA COLLECTOR, LUDHIANA, PUBLIC NOTIC E OF ZILA COLLECTOR AT ANNEXURE-1 AND ORDER OF THE HONBLE PUNJAB & HARYAN A HIGH COURT AT CHANDIGARH, WHERE THE PETITIONER, THE ASSESSEE HAS BEEN ALLOWED TO WITHDRAW THE INSTANT PETITION WHICH WAS DISMISSED AS WITHDRA WN ON 15.01.2013. 8. AT THE OUTSET, WITH REGARD TO THE PRAYER OF THE LD. DR THAT THE PRESENT PROCEEDINGS BE STAYED TILL THE DECISION OF THE HON BLE PUNJAB & HARYANA HIGH COURT, IN VIEW OF THE ARGUMENTS AND THE WRITTE N SUBMISSIONS MADE HEREINABOVE. IN THIS REGARD, WE ARE OF THE VIEW THA T THE PRESENT INCOME TAX PROCEEDINGS ARE NOT STAYED BY THE HONBLE PUNJAB & HARYANA HIGH COURT AND THEREFORE, WE ARE BOUND TO DECIDE THE ISSUES I N APPEAL BEFORE US WHICH ARISE FROM THE ORDER OF THE CIT(A)-1, LUDHIANA DATE D 11.01.2013 UNDER THE INCOME TAX ACT, 1961. THERE IS NO DISPUTE TO THE FA CT THAT A SEARCH WAS CONDUCTED BY THE DEPARTMENT OF FOOD & CIVIL SUPPLIE S ON THE GODOWN OF THE ASSESSEE AT LUDHIANA ON 17.09.2009 WHERE THE SA ID DEPARTMENT SEIZED SUGAR WEIGHING 97,500 QUINTALS. THE UNDISPUTED FACT IS THAT THE SUGAR SO SEIZED HAS BEEN DULY RECORDED BY THE ASSESSEE IN IT S REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE BOOKS OF ACCOUNT AR E AUDITED BY THE AUDITORS AS REQUIRED UNDER THE INCOME TAX ACT,1961 . THE ASSESSEE HAS DECLARED THE PURCHASE OF THE SAID SUGAR FROM DIFFER ENT 45 PARTIES IN AUGUST, 2009 WHO HAVE CONFIRMED TO HAVE SOLD THE SUGAR TO THE ASSESSEE ON AS IS 67 WHERE IS BASIS FOR AN AMOUNT AGGREGATING TO RS.2 3,99,72,176/-. THIS IS AN UNDISPUTED FACT AND NO ADVERSE FINDINGS HAVE BEEN GIVEN BY ANY OF THE AUTHORITIES BELOW IN THIS REGARD. THE ONLY ADVERSE FINDINGS BY THE AUTHORITIES BELOW ARE THAT THE BILLS ETC. WERE NOT SHOWN TO TH E RAIDING PARTY I.E. DEPARTMENT OF FOOD & CIVIL SUPPLIES, WHICH WAS STAT ED BY THE ASSESSEE TO HAVE BEEN KEPT WITH ASSESSEES SISTER IN ONE STATEM ENT AND AT SOME OTHER PLACE IN SECOND STATEMENT. NOW THE QUESTION ARISES WHETHER THE STATEMENT SO GIVEN BEFORE THE DEPARTMENT OF FOOD & CIVIL SUPPLIE S DURING THE COURSE OF SEARCH BY THE SAID ASSESSEE WILL HAVE ANY APPLICABI LITY FOR DECIDING THE ISSUE IN HAND. THE ANSWER, TO OUR VIEW IS NO FOR THE RE ASON, THE STATEMENT HAD BEEN GIVEN BY THE ASSESSEE AS ARGUED BY THE LD. COU NSEL FOR THE ASSESSEE IN THE CIRCUMSTANCES OF THE SEARCH BY THE DEPARTMENT O F FOOD & SUPPLIES, WHERE THERE MAY BE SO MANY REASONS TO GIVE A RIGHT OR WRONG STATEMENT BUT SUCH STATEMENTS CANNOT BE BINDING ON THE ASSESSEE A ND CANNOT BE TAKEN AS A CONCLUSIVE EVIDENCE ADVERSE TO THE ASSESSEE. THE AS SESSEE HAD CLAIMED THAT THE SAID 45 PARTIES HAVE CONFIRMED TO HAVE PURCHA SED SUGAR, IN TURN, FROM M/S. S.M. EDIBLES PVT. LTD; AND THE SAID SUGAR AT T HE TIME OF PURCHASE WAS STORED BY THE 45 PARTIES IN A GODOWN AT LUDHIANA TAKEN ON RENT BY THE SAID 45 PARTIES FROM ITS LANDLORD M/S. GITANSH INTERNATI ONAL LIMITED. IT WAS DECIDED BETWEEN THE ASSESSEE AND THE SAID 45 DIFFER ENT PARTIES, AS MENTIONED 68 HEREINABOVE THAT THE DELIVERY OF SUGAR IS TAKEN ON AS IS WHERE IS BASIS AT THE GODOWN ITSELF WHERE THE SAME WAS STORED, BY TAKING THE SAID GODOWN ON RENT WITH THE CONSENT OF THE LANDLORD M/S. GITAN SH INTERNATIONAL LIMITED, IN AUGUST, 2009. THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSEE HAD TAKEN THE DELIVERY OF SUGAR BY TAKING POSSESSION OF THE GODO WN ITSELF. 9. AS REGARDS THE POSSESSION OF THE GODOWN BY THE A SSESSEE FROM 01.08.2009, THE ARGUMENT OF THE REVENUE IS THAT TH E MANAGER, MR. VISHAL GUPTA OF M/S. GITANSH INTERNATIONAL LIMITED, WAS EX AMINED, THE DETAILS IN THE STATEMENT DATED 01.12.2011 WHERE HE SUBMITTED T HE DETAILS THAT VARIOUS GODOWNS WERE LET OUT TO VARIOUS PERSONS. THE SAID S TATEMENT IS AVAILABLE IN AOS ORDER AT PAGE 3 & 4. WE HAVE PERUSED THE SAID STATEMENT WHERE THE MANAGER, MR. VISHAL GUPTA AFTER ANSWERING TO THE QU ESTION WHILE GIVING DETAILS OF THE LET OUT OF THE VARIOUS GODOWNS, A NSWERED THAT FOR THE PERIOD OTHER THAN SPECIFIED ABOVE, THE RESPECTIVE GODOWNS WERE VACANT. IT IS THIS STATEMENT WHERE MR. VISHAL GUPTA, MANAGER HAS STAT ED THAT RESPECTIVE GODOWNS WERE VACANT OTHER THAN SPECIFIED BY THE AS SESSEE, WERE INTERPRETED BY THE REVENUE THAT THE GODOWNS WERE VACANT BEFORE THE SEARCH BY THE DEPARTMENT OF FOOD & SUPPLIES, WAS CONDUCTED ON 17. 09.2009 AND IT IS A CONCOCTED STORY BY THE ASSESSEE BY SHOWING THE PUR CHASES FROM 45 PARTIES AND AGAIN CONCOCTED THE STORY WITH RESPECT TO THE S ALE TO THE 53 PARTIES. 69 10. IN THIS REGARD, WE HAVE FOUND THAT THE STATEMEN T OF MR. VISHAL GUPTA, MANAGER OF THE GODOWN OWNED BY M/S. GITANSH INTERN ATIONAL LIMITED, WAS RECORDED TWICE ON 01.12.2011 AND 13.12.2011 THE AO IN HIS ORDER, HIMSELF HAS DOUBTED THE VERACITY AND RELIABILITY OF THE STA TEMENTS GIVEN BEFORE THE AO, AS MENTIONED HEREINABOVE. MR. VISHAL GUPTA, MAN AGER, IN HIS STATEMENT RECORDED ON 01.12.2011 HAS STATED THAT THE GODOWN W AS LYING VACANT FOR THE PERIOD OTHER THAN SPECIFIED IN THE EARLIER ANSWER TO THE QUESTION, WHICH WAS INTERPRETED BY THE AO AS GODOWN WAS LYING VACANT FR OM 01.04.2009 TO 31.07.2009. THE STATEMENT OF MR. VISHAL GUPTA, MANA GER WAS ALSO RECORDED ON 13.12.2011 BY THE AO WHERE HE CATEGORICALLY SAI D TO THE QUESTION OF THE AO THAT HE GOT CONFUSED. HE CLARIFIED THAT THE AMOU NTS OF GODOWN RENT RECEIVED FROM VARIOUS PARTIES IN RESPECT OF PART OF GODOWN LET OUT FROM TIME TO TIME FOR THE PERIOD FROM 1.4.2009 TO 31.7.2009 A ND GODOWN-KEEPER WAS EMPLOYED FOR THIS PURPOSE WHO CONTROLLED THE MOVEME NT OF THE STOCKS. A STOCK REGISTER WAS ALSO MAINTAINED AND COPIES OF TH E SAME WAS SUBMITTED ALONGWITH STATEMENT DATED 13.12.2011. 10.1. AS REGARDS THE VACANT GODOWNS ON 31.07.2009 B EING A QUESTION PUT BY THE AO, MR. VISHAL GUPTA, RECORDED ANSWER THAT THES E GODOWNS WERE VACATED BY THESE PARTIES ON 31.07.2009 FOR WHICH PO SSESSION WAS TAKEN OF THE VACANT GODOWNS BY M/S. GITANSH INTERNATIONAL LI MITED AND THESE 70 GODOWNS WERE LET OUT TO OTHER PARTIES FROM 01.08.20 09, WHICH THE ASSESSEE LET OUT IN FULL AND FURTHER CONTROL WERE EXERCISED TO THESE PARTIES ALONGWITH KEYS. 11. FIRST OF ALL, IN REGARD TO THE STATEMENT OF MR. VISHAL GUPTA, WHO RECTIFIED HIS STATEMENT ON 13.12.2011, THERE MAY B E A VIEW THAT THE GODOWNS WERE LET OUT TO THE SAID DIFFERENT 45 PARTIES AND OTHERS FROM 01.04.2009 TO 31.07.2009 AND THEREAFTER THE GODOWNS WERE HANDED O VER TO THE ASSESSEE. THE OTHER VIEW CAN BE THAT MR. VISHAL GUPTA HAS GIV EN CONTRADICTORY STATEMENTS DURING THE ASSESSMENT PROCEEDINGS AND SU CH STATEMENTS ARE TOTALLY UNRELIABLE AND CANNOT BE RELIED UPON. THE A O ALSO OBSERVED AT PAGE 25 OF HIS ORDER THAT THE STATEMENTS OF MR. VISHAL G UPTA WHO HAS GIVEN THE STATEMENTS ON BEHALF OF M/S. GITANSH INTERNATIONAL LIMITED ARE CONFUSING AND CONTRADICTORY. IN OUR VIEW, SUCH STATEMENTS CANNOT BE RELIED UPON WHILE DECIDING THE ISSUE IN HAND, THOUGH MUCH RELIANCE H AS BEEN PLACED BY THE REVENUE ON SUCH STATEMENTS OF MR. VISHAL GUPTA AND CASE HAS BEEN BUILT ON HUMAN PROBABILITIES IGNORING ALL THE E VIDENCE WHICH HAVE NOT BEEN NEGATED BY ANY OF THE AUTHORITIES BELOW OR BY THE LD. DR. IN ADDITION, THE STATEMENT OF MR. VISHAL GUPTA CANNOT BE RELIED UPON SINCE THE SAME HAS NOT BEEN CONFRONTED TO THE ASSESSEE, INSPI TE OF THE FACT, THE CONFRONTATION WAS DEMANDED BY THE ASSESSEE AT DIFFE RENT TIMES. THE 71 ARGUMENT MADE BY THE LD. DR IN HIS WRITTEN SUBMISSI ON AND VERBALLY BEFORE THE BENCH, AS MENTIONED HEREINABOVE, CANNOT HELP TH E REVENUE TO BUILD THE CASE ON HUMAN PROBABILITIES ADVERSE TO THE ASSESSEE . 12. THE RELIANCE IS PLACED ON THE DECISION OF VARI OUS COURTS OF LAW, AS MENTIONED HEREINBELOW: I) STATE OF KERALA VS. K.T. SHADULI: 39 STC 478, 4 87, 490 (SC) II) KISHINCHAND CHELLARAM V. CIT (1980) 125 ITR 71 3 (SC) III) SARASWATI INDUSTRIAL SYNDICATE LTD. VS. CIT 2 37 ITR 1(SC) IV) CIT VS EASTERN COMMERCIAL 210 ITR 103, 110 (C AL) V) P.S.ABDUL MAJEED VS. AGRICULTURAL I. TAX & STO: 209 ITR 821, 823 (KER.) VI) SONA ELECTRIC VS. CIT 152 ITR 507 (DEL) VII) CIT VS. BIJU PATNAIK 190 ITR 396 (P&H) VIII) CIT VS. SHAM LAL 127 ITR 816 (P&H) IX) CIT VS. PRADEEP KUMAR GUPTA 303 ITR 95 X) CIT VS. DHARAM PAL PREM CHAND LTD. 295 ITR 105 (DEL ) XI) CIT VS. ASHWANI GUPTA 191 TAXMAN 51 (DEL.) XII) CIT VS. SMC SHARE BROKERS LIMITED 288 ITR 345 (DEL. ) 13. AS REGARDS THE LETTER FROM M/S. S.M. EDIBLES PV T. LTD, WHICH HAS NOT BEEN CONFRONTED TO THE ASSESSEE WHICH IS DATED 30.1 1.2009 FILED BEFORE THE 72 DDIT (INV.)-1, LUDHIANA, WHEREIN THE SAID PARTY HAD MENTIONED THAT THE GODOWN IN LUDHIANA WAS VACATED BY THEM BY MARCH, 2 009. IN THIS REGARD, SUCH EX-PARTE LETTER, WHICH HAS NOT BEEN CONFRONTE D TO THE ASSESSEE, CANNOT GO TO CONFIRM OR TO PRESUME THAT THE GODOWNS FROM 0 1.04.2009 TO 31.07.2009 WERE EMPTY. THIS CONCLUSION OF THE AO IS WITHOUT ANY BASIS AND CANNOT BE USED ADVERSE TO THE ASSESSEE, SINCE THE L ETTER FURNISHED BY M/S. S.M. EDIBLES PVT. LTD. HAS NOTHING TO DO WITH THE PURCHASE OF SUGAR BY THE ASSESSEE, AS DECLARED IN THE BOOKS OF ACCOUNT, IN A UGUST, 2009. ACCORDINGLY, THE STATEMENT OR LETTER FURNISHED BY M/S. S.M. EDIB LES PVT. LTD. CANNOT HELP THE REVENUE THAT THE ASSESSEE HAD MADE UNEXPLAINED INVESTMENT IN THE PURCHASE OF SUGAR OF 97,500 QTLS. 14. AS REGARDS THE CLAIM OF THE ASSESSEE THAT THE S ALE OF SUGAR HAD BEEN MADE ON AS IS WHERE IS BASIS, THE REVENUE HAS CLAIM ED THAT THE ASSESSEE HIMSELF HAS STATED BEFORE THE DEPARTMENT O F FOOD & CIVIL SUPPLIES ON 17.09.2009 THAT AT THE TIME OF INSPECTION THERE WERE 97,500 QTLS. OF SUGAR IN THE GODOWNS AND THE ASSESSEE WAS NOT IN THE KNOW LEDGE THAT AT THE TIME THERE WAS NO PERMISSION FROM GOVERNMENT OF INDIA/P UNJAB GOVERNMENT TO STORE MORE THAN 2000 QTLS SUGAR AT ONE TIME. THIS S UGAR WAS STORED BY THE ASSESSEE BY PURCHASING THE SAME FROM DIFFERENT BUS INESSMEN OF PUNJAB AND IN THIS REGARD, THE ASSESSEE WAS ALSO HAVING ALL T HE BILLS AND DOCUMENTS, 73 WHICH WAS STATED WILL BE PRODUCED AS AND WHEN REQUI RED BY THE SAID DEPARTMENT BUT THE SAID BILLS WERE NOT AVAILABLE AT THAT MOMENT. THE INTERPRETATION OF THE AUTHORITIES BELOW AND THE REV ENUE CANNOT BE THE BASIS TO DOUBT THE PURCHASE OF SUGAR BY THE ASSESSEE AND THE ALLEGATION OF THE AUTHORITIES BELOW ESPECIALLY, THE LD. CIT(A) WHO OB SERVED THAT THE AFORESAID STATEMENT OF THE ASSESSEE BEFORE THE DEPARTMENT OF FOOD & CIVIL SUPPLIES ESTABLISHES THAT THE SUGAR WAS NOT SOLD TO VARIOUS PARTIES. 15. IN THIS REGARD, SUCH INTERPRETATION IS WITHOUT ANY BASIS AND HAS NO LEGS TO STAND, CANNOT HELP THE REVENUE FOR THE REASON THAT THE ASSESSEE HAD SOLD SUGAR ON AS IS WHERE IS BASIS AND ALL THE PARTIES HAVE CONFIRMED TO HAVE PURCHASED SUGAR ON AS IS WHERE IS BASIS. 16. AS REGARDS THE STORAGE OF SUGAR OF MORE THAN 20 00 QTLSS AT ONE TIME, THE ASSESSEE EXPRESSED ITS SURPRISE ON BEING TOLD T HAT MORE THAN 2000 BAGS OF SUGAR COULD NOT BE STORED AT ONE PLACE. THE CASE OF THE FOOD & CIVIL SUPPLIES DEPARTMENT WAS MORE ON THE FACTUM OF STORA GE OF MORE THAN 2000 QTLS OF SUGAR IN ONE GODOWN. 17. THE SAID DEPARTMENT DID NOT QUESTION THE ASSES SEE, THE MANNER IN WHICH THE SAID SUGAR STOCK HAS BEEN ACQUIRED/PURCHA SED OR DISPOSED OF OR SOLD THEREAFTER. SUCH STATEMENT HAS TO BE READ IN T OTO IN THAT CONTEXT AND CANNOT BE DOUBTED AS PER THE WHIMS AND FANCIES OF THE REVENUE. IT IS ALSO 74 PERTINENT TO MENTION THAT THE ASSESSEE HAS SUBMITTE D A LETTER DATED 22.09.2009 IMMEDIATELY AFTER THE SEARCH BY THE DEPARTMENT OF F OOD & CIVIL SUPPLIES ON 17.09.2009 THAT SUGAR LYING IN GODOWN HAS ALREADY BEEN SOLD TO VARIOUS PARTIES, AS MENTIONED IN THE LETTER DATED 22.09.200 9 AT PB 487. ANOTHER LETTER DATED 01.10.2009 WAS FILED BEFORE THE DEPUTY COMMISSIONER/DISTRICT MAGISTRATE, LUDHIANA, WHEREIN TOO, THE ASSESSEE HAD GIVEN THE COMPLETE LIST OF PARTIES WITH REGARD TO THE SUGAR SOLD, WHICH I S AT PB 488 & 489. THIS FACT IS UNDISPUTED. THE ALLEGATION BY THE REVENUE THAT THESE ARE AFTER-THOUGHT CANNOT BE SUSTAINED AND IS WITHOUT ANY BASIS AND CA NNOT HELP THE REVENUE TO CONCLUDE THAT THE INVESTMENTS ARE UNEXPLAINED TO T HE EXTENT OF RS.23.99 CRORES I.E. 97,500 QTLS. OF SUGAR. IN THIS REGARD, FOR A MOMENT, IF THE STAND OF THE REVENUE IS ACCEPTED THAT SUGAR HAS NOT BEEN SO LD TO VARIOUS PARTIES, WHETHER THERE CAN BE UNDISCLOSED INVESTMENT AND CAN BE ADDITION UNDER SECTION 69 OF THE ACT, THE ANSWER IS NO. WHEREAS THE SAID 53 PARTIES TO WHOM GOODS HAVE ALREADY BEEN SOLD HAVE ALREADY CONF IRMED THE PURCHASE MADE BY THEM FROM THE ASSESSEE. 18. AS REGARDS THE ARGUMENT MADE BY THE LD. DR THAT PURCHASES OF 97,500 QTLS. OF SUGAR IS UNACCOUNTED, IS WITHOUT ANY BASIS , SINCE THE SAID PURCHASES ARE DULY SUPPORTED BY PURCHASE BILLS ISSUED BY THE SELLER, WHICH IS HAVING COMPLETE POSTAL ADDRESSES OF THE PARTIES, WHO ARE R EGULAR TRADERS DULY 75 REGISTERED WITH THE SALES TAX AUTHORITIES, HAVE MEN TIONED IN THE BILLS, SO ISSUED, THE CONFIRMATIONS/STATEMENTS SUBMITTED BY THE SELLERS BEFORE THE DDIT (INV.) DURING INVESTIGATION PROCEEDINGS ITSELF , STATEMENTS OF VARIOUS PARTIES RECORDED BY THE A.O. ON 26.12.2011 WHEREIN THE SELLERS CONFORMED OF HAVING SOLD SUGAR TO THE ASSESSEE I.E. SHRI ABHIN ANDAN GUPTA PROP. M/S. MADAN MOHAN & SONS PB 138-19, SH. RAKESH KUMAR, M ANAGER M/S. PREM KUMAR KRISHAN KUMAR PB 135-137, SH. PAWAN KUMAR, PA TNER, M/S. JAGDISH LAL RAJ KUMAR AND M/S. SUKHINDER KUMAR GUPTA PB 140 TO 143, SH. PRADEEP BANSAL, PARTNER M/S. RIKHI RAM PRADEEP KUMA R PB 132-134 AND FINALLY STATEMENT OF THE ASSESSEE RECORDED ON 27.12 .2011 PB 122-126, WHICH GO TO PROVE THAT THE ASSESSEE HAS PURCHASED SUGAR. IT HAS BEEN STATED THAT ALL THE PARTIES ARE UNRELATED PARTIES AND ALL THE BILLS AND CONFIRMATIONS HAVE ALREADY BEEN PLACED ON RECORD. THE AUTHORITIES BELO W HAVE NOT DEALT WITH THE STATEMENTS OF THE VENDORS, WHICH HAS BEEN REFERRED TO OR REPRODUCED BY THE AO WHILE DRAWING THE CONCLUSION. THE AUTHORITIES BE LOW HAVE PICKED UP ONLY THOSE PARTS TO DRAW THE CONCLUSION AS SUITS TH EM TO MAKE OUT A CASE OF HUMAN PROBABILITIES TO CONCLUDE THE UNACCOUNTED INV ESTMENT MADE BY THE ASSESSEE. AS A MATTER OF FACT, THE INVESTMENT BY T HE AO HAS BEEN TREATED AS UNACCOUNTED UNDER SECTION 69 OF THE ACT. WITH REGA RD TO SECTION 69, THE SAME IS APPLICABLE WHERE IN ANY FINANCIAL YEAR, THE ASSESSEE HAS MADE 76 INVESTMENT AND SUCH INVESTMENT IS NOT RECORDED IN T HE BOOKS OF ACCOUNT AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE INVESTMENTS OR THE EXPLANATION OFFERED BY HIM IS NO T SATISFACTORY. ON THE READING OF SUCH SECTION, THE SAME CAN BE APPLICABLE ONLY WHEN THE ASSESSE HAS MADE SOME INVESTMENTS AND SOURCE OF WHICH IS NO T EXPLAINED AND THE AO IS SATISFIED THAT THE ASSESSEE HAS MADE INVESTME NT WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT. WHEREAS IN THE PRESENT CAS E, PURCHASE OF SUGAR HAS BEEN FULLY RECORDED IN THE BOOKS OF ACCOUNT, AS PE R FINDINGS GIVEN HEREINABOVE. THEREFORE, THE PROVISIONS OF SECTION 6 9 ARE NOT APPLICABLE IN THE PRESENT CASE. 19. THE RELIANCE IS PLACED ON THE FOLLOWING DECISIO NS: I) CIT VS. RADHIKA CREATION: 2010-TIOL-314-HC-DEL II) RUPEE FINANCE AND MANAGEMENT (P) LTD. VS. ACIT 310 ITR 403 (AT) (MUMBAI BENCH) III) MOUNTAIN TOUCH BUILDERS (P) LTD. IN ITA NO.44 41/DEL/2010 20. IT IS ALSO PERTINENT TO MENTION THAT PURCHASES ORIGINALLY WERE MADE ON CREDIT WHICH WERE SUBSEQUENTLY PAID TO THE VARIOUS PARTIES IS A MATTER OF RECORD. THERE IS NOTHING ON RECORD THAT THE ASSESSE E HAS MADE PURCHASES OUTSIDE THE REGULAR BOOKS OF ACCOUNT. THE REVENUE H AS NOT BROUGHT OUT ANY MATERIAL/EVIDENCE ON RECORD THAT SUGAR WAS PURCHASE D OUTSIDE THE BOOKS OF ACCOUNT, WHICH WAS PHYSICALLY FOUND DURING THE COUR SE OF SEARCH BY THE 77 DEPARTMENT OF FOOD AND SUPPLIES. THE DEPARTMENT CAN NOT BLOW HOT AND COLD IN THE SAME BREATH I.E. ON ONE HAND, THE DEPA RTMENT IS ARGUING THAT THERE WAS NO SUGAR LYING IN THE GODOWNS BEFORE THE DATE O F SEARCH OF FOOD & CIVIL SUPPLIES DEPARTMENT AND ON THE OTHER HAND SUGAR OF 97,500 QTLS. WAS FOUND DURING THE COURSE OF SEARCH BY THE SAID DEPARTMENT. SECONDLY, THE STATEMENT OF MR. VISHAL GUPTA DATED 01.12.2011 IS BEING MIS-I NTERPRETED AND AFTER THE STATEMENT OF 13.12.2011 OF THE SAID MR. VISHAL GUPT A, THE AO HAS GIVEN THE FINDING THAT THE STATEMENTS OF SH. VISHAL GUPTA ARE CONFUSING ON ONE HAND WHEREAS ON THE OTHER HAND, THE AO AND THE LD. CIT(A ) AND THE LD. DR ARE RELYING UPON SUCH STATEMENTS TO BUILD UP A CASE ON THE HUMAN PROBABILITIES THAT EVERYTHING HAS BEEN DONE AFTER-THOUGHT. THE LE TTER OF M/S. S.M. EDIBLES PVT. LTD FOR VACATING THE GODOWN IN MARCH, 2009 HAS BEEN MIS-INTERPRETED BY THE DEPARTMENT THAT THERE WAS NO SUGAR IN THE GO DOWN BETWEEN 01.04.2009 TO 31.07.2009 WHEREAS ON THE OTHER HAND, SUGAR HAS BEEN FOUND BY THE DEPARTMENT OF FOOD & CIVIL SUPPLIES ON THE D ATE OF RAID. THE CLAIM OF THE REVENUE THAT THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT AND HAS MADE THE PURCHASES OUTSIDE THE BOOKS OF ACCOUNT AND HAS NOT ENTERED THE SUGAR SO PURCHASED WEIGHING 97,500 QTLS. ON ONE HAN D. WHEREAS ON THE OTHER HAND, THE DEPARTMENT HAS ACCEPTED THE BOOKS OF ACCO UNT OF THE ASSESSEE MAINTAINED, WHICH ARE DULY AUDITED AND NO ADVERSE C OMMENT HAS BEEN MADE 78 BY ANY OF THE AUTHORITIES BELOW AND THIS FACT IS UN DISPUTED AND NO BOOKS OF ACCOUNT HAS BEEN REJECTED BY ANY OF THE AUTHORITIES BELOW. 21. ONE PERTINENT POINT ABOUT THE ARGUMENTS MADE BY THE LD. DR IS THAT THROUGHOUT THE ARGUMENTS AND WRITTEN SUBMISSIONS, W HICH HAVE BEEN REPRODUCED HEREINABOVE, THE INVESTMENTS HAVE BEEN T AKEN AS UNEXPLAINED U/S 69A, WHICH SPEAKS WHERE IN ANY FINANCIAL YEAR THE A SSESSEE IS FOUND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE AND SUCH MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE IS NO T RECORDED IN THE BOOKS OF ACCOUNT WHEREAS UNDER SECTION 69 OF THE ACT SPEAKS OF THE INVESTMENTS MADE WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. WHE N IN THE REJOINDER, MR. AJAY VOHRA, ADVOCATE, THE LD. COUNSEL FOR THE ASSES SEE, POINTED OUT , THE LD. DR ANSWERED THAT SECTIONS 69 & 69A OF THE ACT ARE IDENTICALLY WORDED AND THERE IS NO DIFFERENCE BETWEEN THESE TWO SECTIONS O N ONE HAND AND ON THE SECOND ARGUMENT, HE REGRETTED THAT THERE SHOULD HAV E BEEN SECTION 69 INSTEAD OF SECTION 69A, AS SUBMITTED IN THE WRITTEN SUBMISS IONS AND IN THE ARGUMENTS. IT APPEARS THAT THE LD. DR HAD ARGUED TH E MATTER, TO BRING THE ISSUES IN HAND UNDER SECTION 69 OR SECTION 69A ONLY ON PROBABILITIES. THIS APPROACH OF THE LD. DR IS NOT ACCEPTED. HOWEVER, WE HAVE DEALT WITH THE SAID MATTER UNDER SECTION 69 OF THE ACT, WHICH IS A CORRECT SECTION, AS REFERRED TO BY THE AUTHORITIES BELOW AND BY THE LD. COUNSEL FOR THE ASSESSEE. 79 22. FOR THE PURPOSE OF REPETITION, THE PURCHASES DE CLARED BY THE ASSESSEE ARE ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT M AINTAINED, WHICH ARE DULY AUDITED WHICH IS ON RECORD AND IS UNDISPUTED AND SA LES HAVE BEEN MADE BY THE ASSESSEE AS CLAIMED. THERE IS NO ADVERSE MATERI AL, WHICH HAS BEEN BROUGHT ON RECORD BY THE DEPARTMENT. THERE IS ALSO NOTHING ON RECORD THAT ANY OTHER QUANTITY OF SUGAR HAS BEEN PURCHASED AND SOLD BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT.. NO ADVERSE MATERIAL IS THERE ON RECORD EITHER BROUGHT BY THE AUTHORITIES BELOW OR BY THE REVENUE IN THE ARGUMENTS MADE BEFORE US. ACCORDINGLY, THE LD. CIT(A) IS NOT JUSTI FIED IN CONFIRMING THE ADDITION OF RS.23,92,72,176/-, WHICH IS DIRECTED TO BE DELETED. ACCORDINGLY GROUNDS NO. 1 TO 4.1 OF THE ASSESSEE ARE ALLOWED. 23. AS REGARDS GROUND NO. 5 & 6, THE AO HAS HELD TH AT ONCE THE ASSESSEE HAS SOLD SUGAR TO 53 PARTIES ON THE DATE ON WHIC H SUGAR WAS SEIZED BY THE DEPARTMENT OF FOOD & CIVIL SUPPLIES, SUGAR BELONGED TO SAID PURCHASERS AND NOT TO THE ASSESSEE. AND THEREFORE, THERE WAS N O JUSTIFICATION FOR THE ASSESSEE TO CANCEL THE SALES OF RS.17,22,72,217/- AND ACCORDINGLY, THE AO HELD THAT GROSS PROFIT OF SUCH SALES AT RS.2,64,95, 897/- WAS TAXABLE AS PROFIT WHICH WAS CONFIRMED BY THE LD. CIT(A). 23.1. IN THIS REGARD, IT WAS EXPLAINED BEFORE THE AUTHORITIES BELOW AND ARGUED BEFORE US THAT ON ACCOUNT OF SEIZURE OF THE ENTIRE SUGAR, IN THE 80 MEANWHILE, BY THE DEPARTMENT OF FOOD & CIVIL SUPPLI ES, A SEARCH WAS CONDUCTED AND SUGAR WAS SEIZED AND THE ASSESSEE WAS UNABLE TO FULFIL ITS COMMITMENT OF PHYSICAL DELIVERY OF THE SUGAR. THE P ARTIES TO WHOM THE SUGAR HAD BEEN SOLD BY THE ASSESSEE WERE INSISTING ON TH E ASSESSEE TO PHYSICALLY HAND OVER THE SUGAR OR IN THE ALTERNATIVE CANCEL TH E SALES MADE TO THEM. THE ASSESSEE HAD NO CHOICE BUT TO CANCEL THE SALE OF SU GAR. IT WAS DONE AS A PRUDENT BUSINESSMAN AND THE SALE WAS REVERSED, WHIC H IS FULLY SUPPORTED BY DOCUMENTARY EVIDENCES AND WRITTEN COMMUNICATION/LET TERS RECEIVED FROM THE PURCHASERS WHICH ARE ON RECORD. THE ASSESSEE HAS DE CLARED SUCH CANCELLED SALES AS STOCK IN HAND, WHICH IS CREDITED TO THE PR OFIT & LOSS ACCOUNT. IN THIS REGARD, A QUESTION ARISES WHETHER THE REVENUE AUTHO RITIES CAN TAX THE ASSESSEE MERELY ON THE BASIS OF BOOK ENTRY WITH REGARD TO SUCH SALES CANCELLED AND THERE IS NO REAL SALE MADE AND ULTIMA TELY THE SALE HAS BEEN CANCELLED. ACCORDING TO US, THE ANSWER SHALL BE N O. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF CIT VS. RAMAN AND COMPANY: 67 ITR 11 (S C), WHERE NOTIONAL INCOME WHICH HAS NOT BEEN EARNED BY THE ASSESSEE TH E SAME CANNOT BE MADE TAXABLE AS INCOME ACCRUED TO ASSESSEE. THE AO IN T HE PRESENT CASE, CANNOT TREAT NOTIONAL ADDITION OF RS.2,64,95,897/- AS INCO ME ACCRUED TO THE ASSESSEE. 81 THE SAME IS DIRECTED TO BE DELETED. ACCORDINGLY, GR OUNDS NO. 5 & 6 OF THE ASSESSEE ARE ALLOWED. 24. AS REGARDS GROUND NO.7, SINCE THE ISSUES HAVE B EEN DECIDED IN FAVOUR OF THE ASSESSEE IN GROUNDS NO. 5 & 6 AND IN OTHER G ROUNDS, THEREFORE, THIS ISSUE DOES NOT ARISE FROM THE ORDER OF THE LD. CIT( A) AND THEREFORE, DO NOT REQUIRE ANY ADJUDICATION. 25. GROUND NO.8 IS CONSEQUENTIAL AND MANDATORY IN N ATURE. 26. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.118(ASR)/2013 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29TH NOVEMBER., 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29TH NOVEMBER, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: SH.BHARAT BHUSHAN PROP. M/S. KHUBI RA M JOHRI LAL, MOGA. 2. THE ACIT, CIRCLE, MOGA. 3. THE CIT(A), 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.