M/S Agew Steel Manufactures P Ltd, Ahmedabad V. The D C I Tinv Co Cir 7(1), Ahmedabad

ITA 1186/AHD/2000

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67701 (ITAT-AHMEDABAD)
• Duration Of Justice: 13 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-07-2013
• Assessment Year: 1994-1995
• Appeal Filed On: 03-05-2000
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Assessee Lawyers: LD A R MS URVASHI; S N SOPARKAR
• Keywords: Income from undisclosed sources; Search and seizure; Question of law; Fair market value; Retraction
• Section: 143(3); 133A; 69; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO. 2929/AHD/1996(A.Y.93-94) THE ACIT CENTRAL CIRCLE 2(3), AHMEDABAD M/S. PREMANI PRODUCTS. NR. AJOD DAIRY, RAKHIAL ROAD, AHMEDABAD. APPELLANT RESPONDENT ITA NO. 2930/AHD/1996(A.Y.93-94) THE ACIT CENTRAL CIRCLE 2(3), AHMEDABAD AGEW STEEL MANUFACTURING PVT. LTD., AHMEDABAD. 552/1, OUTSIDE PANCHKUVA GATE, AHMEDABAD. APPELLANT RESPONDENT ITA NO. 1147/AHD/2000(A.Y.94-95) THE DCIT (INVESTIGATION) COMPANY CIRCLE 7(1), AHMEDABAD AGEW STEEL MANUFACTURING PVT. LTD., AHMEDABAD. 552/1, OUTSIDE PANCHKUVA GATE, AHMEDABAD. APPELLANT RESPONDENT ITA NO. 1186/AHD/2000 (A.Y.94-95) AGEW STEEL MANUFACTURING PVT. LTD., AHMEDABAD. 552/1, OUTSIDE PANCHKUVA GATE, AHMEDABAD. THE DCIT (INVESTIGATION) COMPANY CIRCLE 7(1), AHMEDABAD APPELLANT RESPONDENT ITA NO. 1778/AHD/2003(A.Y94-95) P.P. INDUSTRIES, 552/1, 0/S PANCHKUVA GATE, AHMEDABAD ACIT CENTRAL CIRCLE-2(3), AHMEDABAD. APPELLANT RESPONDENT ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 2 - REVENUE BY : SHRI O.P. VAISHNAV, CIT-DR ASSESSEE(S) BY : SRI S.N. SOPARKAR, SENIOR ADVOCATE AND LD.A.R.MS. URVASHI SODHAN. / DATE OF HEARING : 03/07/2013 / DATE OF PRONOUNCEMENT: 30/09/2013 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE APPEALS ARE CONNECTED WITH EACH OTHER; HENCE , CONSOLIDATED AND HEREBY DECIDED BY THIS COMMON ORDER. A. AGEWSTEEL ( ITA.1147/AHD/2000),(A.Y.94-95)(REVENUESAPPEAL): 2. THE MAIN GROUND CONTESTED BEFORE US IS REPR ODUCED BELOW: THE LEARNED CIT(A)/DY. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.34,53,226/- MADE ON ACCOUNT OF EXCES S STOCK U/S 69A/69B O F THE IT ACT. FACTS : 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ORDER PASSED U/S. 143(3) DATED 27.3.1997 WERE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF PRODUCTION OF WINDOWS, DOORS, AND DOOR FRAMES OF IRON AND STEEL. THE ASSESSEE IS ALSO A TRADER OF IRON AND STEEL ITEMS. THERE WAS A SURVEY U/S. 133A ON 11.5.1993 AT THE BUSINESS PREMISES OF THE ASSESSEE. THE SURVEY ACTION WAS SUB SEQUENTLY CONVERTED INTO SEARCH AND SEIZURE. IT WAS NOTED BY THE AO THAT DURING THE COURSE OF SEARCH A PHYSICAL VERIFICATION OF STOCK WAS CONDUCT ED. AN EXCESS STOCK OF 19,563 KG FOR A VALUE OF RS.30,01,984/- WAS FOUND. IT WAS ALSO NOTED ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 3 - THAT A MANAGING DIRECTOR SHRI BABUBHAI P. SHAH HAD DISCLOSED AN INCOME OF RS.30 LACS ON ACCOUNT OF EXCESS STOCK AS PER HIS STATEMENT RECORDED U/S 132(4) OF IT ACT. AO HAS ALSO NOTED THAT AS PER THE SAID STATEMENT MR. SHAH HAS ADMITTED THAT THE DISCLOSED AMOUNT REPRESE NTED THE UNACCOUNTED INCOME FOR THE FINANCIAL YEAR 1992-93. THEREAFTER, THERE IS A REFERENCE OF A RETRACTION PETITION DATED 15 TH JUNE, 1993 . IN THE SAID RETRACTION PETITION IT WAS ALLEGED THAT THE PHYSICAL VERIFICAT ION OF THE STOCK WAS NOT PROPERLY DONE. AO HAS ALSO NOTED THAT THE SAID AMOU NT WHICH WAS DISCLOSED OF RS.30 LAC WAS NOT DISCLOSED IN THE RET URN FILED FOR A.Y. 1993- 94. FOR A.Y. 1993-94, THE AO HAS WORKED OUT THE VALUE OF THE EXCESS STOCK AT RS. 34,53,226/- WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE FOR THAT INCOME YEAR ON PROTECTIVE BASIS. HOWEVER, IT WAS HELD THAT THE SEARCH WAS CARRIED OUT ON 11.5.1993, THEREFORE, THE EXCESS STOCK WAS TAXABLE IN A.Y. 1994-95, SUBSTANTIVELY , AS PER THE PROVISION OF SECTION 69A/69B OF IT ACT. 3.1 FOR THE YEAR UNDER CONSIDERATION THE AO HAS ISS UED A SHOW CAUSE NOTICE AS TO WHY THE EXCESS STOCK OF RS.34,53,226/- SHOULD NOT BE ASSESSED FOR THE ASSESSMENT YEAR 1994-95 WHICH WAS TAXED ON PROTECTIVE BASIS IN A.Y. 1993-94. IN COMPLIANCE THE ASSESSEE H AS GIVEN A REPLY TO THE AO AS FOLLOWS: IN THE FIRST 4 DAYS WITH THE HELP OF 396 MAN HOURS (REFER EXHIBIT-II) THE SEARCH PARTY WAS ABLE TO WEIGH 239144 KG OUT OF WHICH 6557 4 KG WAS SENT OUTSIDE IN TRUCKS FOR WEIGHMENT I.E. BY MANUAL METHODS THEY WE RE ABLE TO WEIGHT ONLY 173570 KGS IN 4 DAYS AND WITH THE HELP OF 396 MAN H OURS I.E. THEY WERE ABLE TO WEIGH ONLY 603 KG/MAN HOURS. HOWEVER, ON 15.5.1993 WEIGHMENT WITH THE HELP OF 13 PERSONS IN 8 HOURS WORKING (104 MAN HOURS) IS SH OWN TO BE 306419/KG. OUT OF WHICH 14720 KGS. WAS SENT OUT FOR WEIGHMENT N TRUCK S AND 291699 KG CLAIMED TO BE WEIGHED MANUALLY. THIS COMES TO 2946 KGS MAN HOU R WHICH IS FIVE TIMES THE AVERAGE RECORDED FOR THE FIRST 4 DAYS WITH NO DIFFE RENT METHOD ADOPTED THAN THE ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 4 - EARLIER 4 DAYS. HOWEVER, IF THE COMPANYS CONTENTIO N THAT ONLY 91516 KGS WAS WEIGHED IS ACCEPTED, THE STATISTICS READ AS FOLLOWS :- 880 KGS/MAN/HOUR WHICH NEARLY MATCHES WITH THE AVER AGE OF THE FIRST 4 DAYS. WE ARE ALSO ENCLOSING HEREWITH THE DETAILED CHART S HOWING NUMBER OF PERSONS EMPLOYED, WORKING HOURS OF SEARCH, MATERIAL WEIGHED BY IN HOUSE SCALE, MATERIAL SENT FOR WEIGHMENT BY TRUCK, AVERAGE MATERIAL WEIGH ED/MAN/HOUR ETC. THE ABOVE CHART IS ENCLOSED AS PER EXHIBIT-II. THE INSPECTOR WISE CHART SUBMITTED (EXHIBIT V DATED 18.3.1997) ALSO SHOWS WEIGHMENT OF 91516 KGS. (91.5 TONS). THERE IS NO EV IDENCE EITHER IN THE WORKING PAPERS OR ANYWHERE ELSE AS TO WHO WEIGHED THE BALAN CE 214 TONS. HERE ON 15.51993 AS PER ANNEXURES DATD 15.5.1993. ROUGH WO RKING PAPERS/WEIGHMENT SHEETS AVAILABLE ARE ALSO FOR AROUND 91 TONS OF MAT ERIAL. FOR BALANCE 214 TONS, THERE ARE NO WORKING PAPERS AVAILABLE. HERE POINT T O BE NOTED IS THAT FOR FIRST 4 DAYS I.E. 11/5/1993 TO 14.5.1993, DETAILED WORKING PAPERS WERE PREPARED AND MAD AVAILABLE TO THE ASSESSEE COMPANY. SIMILARLY, ON 15 .5.1993 DETAILED WORKING PAPERS WERE PREPARED AND MADE AVAILABLE FOR AROUND 91 TONS OF MATERIAL ONLY. FOR BALANCE 214 TONES NO SUCH PAPERS WERE PREPARED OR MADE AVAILABLE. 3.2 IN THE ASSESSMENT ORDER IT HAS ALSO BEEN DISCUS SED THAT A STATEMENT OF SHRI BABUBHAI P. SHAH WAS RECORDED U/S. 132(4) O F IT ACT AT 2:00 AM ON 13.5.1993 AT HIS RESIDENCE. ACCORDING TO ASSESSEE AT THAT TIME THE STOCK WEIGHMENT WAS CARRIED OUT FOR 137.9 TONNES ON LY. MR. SHAH WAS NOT PERMITTED TO VISIT THE FACTORY BEFORE HIS DISCLOSUR E STATEMENT WAS RECORDED. THE ALLEGATION OF THE ASSESSEE BEFORE THE AO WAS THAT FIRST A DISCLOSURE STATEMENT WAS RECORDED AND LATER ON A ST OCK WAS MANIPULATED TO MATCH WITH THE SAID DISCLOSURE AMOUNT. IN THE AS SESSMENT ORDER THERE IS A REFERENCE OF OTHER TWO FIRMS, NAMELY, MS. PRIMANI PRODUCTS AND M/S P.P. INDUSTRIES. THE ALLEGATION OF THE ASSESSEE WAS THAT THE SIMILAR PROCEDURE WAS ADOPTED IN THOSE CONCERNS ALSO. ACCOR DING TO ASSESSEE NO INCRIMINATING DOCUMENTS OR PAPERS WERE FOUND TO EST ABLISH THE UNACCOUNTED PURCHASES OR SALES. THE ASSESSEE HAS FI LED RETRACTION PETITION DATED 15 TH JUNE, 1993 THROUGH WHICH RETRACTED THE DISCLOSURE OF RS. 1 ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 5 - CRORE WHICH WAS MADE FOR THE ENTIRE GROUP. THE ASSE SSEE HAS ALSO ALLEGED AS UNDER: STOCK TAKING OF FINISHED PRODUCTS WAS ALREADY COMP LETED ON 12.05.1993 AND NOTING WAS MADE BY THE CONCERNED PERSON AS FINAL STOCK OF FINISHED PRODUCTS. THERE WAS NO FINISHED PRODUCTS STOCK TAKING CARRIED OUT ON 13 TH OR 14 TH . HOWEVER, ON 15 TH ONE SIGNLE ENTRY OF 2400 NOS. WEIGHING 52800 KGS. OR FINISHED PRODUCTS WERE SHOWN IN CUTTING SECTION OF THE FACTORY WHICH IS SITUATED AT THE OTHER END OF THE FACTORY AND ALSO THE FACT THAT THE SAME CANNOT BE ACCOMMODATED IN THE SHOWN SPACE. THE COPY OF THE SAME IS ATTACHED HEREWITH. I T IS STRAGNED TO NOTE THAT NOT A SINGLE WORKING PAPER PREPARED TO SUBSTANTIATE THE A FORESAID STOCK VERIFICATION. WHEREAS FOR 11 TH & 12 TH , 12 PAGES OF WORKING PAPERS ARE AVAILABLE FOR FINI SHED STOCK VERIFICATION. WEIGHMENT OF PRESS STEEL DEPARTMENT WAS COMPLETED O N 12.05.1993 WITH THE QUANTITY OF 6780 KG (35 ITEMS). WORKING PAPERS FOR THE AFORESAID VERIFICATION WAS PREPARED AND MADE AVAILABLE. HOWEVER, ON THE 15 TH THERE IS AN ENTRY OF 19500 KGS. OF PRESS STEEL PRODUCTS FOR WHICH NOT A SINGLE WORKING PAPER WAS PREPARED AND MADE AVAILABLE. TOTAL AREA OF SECTION CUTTING DEPARTMENT IS 1895 SQ . FT. OUT OF WHICH ARE OCCUPIED BY MACHINES IS 513 SQ. FTS. THERE ARE ABOUT 25 PERS ONS WORKING IN THE DEPARTMENT WHO NEED SPACE FOR MOVEMENT AS WELL AS FOR WORKING. THE DEPARTMENT IS ALREADY HAVING 5141 KGS. OF MATERIAL AS PER ANNEXURE 2-2 PA GE 7 ENTRY NO.1 TO 16, 2400 WINDOWS HAVING 22 KGS. AVERAGE WEIGHT AS SHOWN WOUL D OCCUPY AN AREA OF NOT LESS THAN 1390 SQ. FTS. EVEN IF PLACED NECK TO NECK WITHOUT CONSIDERING OBSTRUCTION OF MACHINES, STORAGE DRUMS ETC. ALSO THE FINISHED P RODUCT GODOWN IS LYING AT THE OTHER END OF THE FACTORY, STOCK TAKING FOR WHICH WA S COMPLETED N 11 TH AND 12 TH . THE FIGURES SHOW AT LEAST 3588 WINDOWS LYING IN AREA OF 5142 SQ. FT. (5000 SQ. MTRS.). THE SAID FINISHED PRODUCTS LYING IN THE CUTTING SEC TION OF THE FACTORY (WHIOCH IS THE BEGINNING OF THE WINDOW SECTION LINE) HAVE NO PURPO SE TO BE LYING THERE AS FINISHED PRODUCT GODOWN IS AT OTHER END OF THE FACT ORY. ALSO THE COMPANY FOLLOWS, A STRAIGHT LING METHOD PRODUCTION WHEREIN RAW-MATER IAL IS FED AT ONE END AND FIND PRODUCT COMES OUT AT THE OTHER END. FOR YOUR HONOURS REFERENCE WE ARE ALSO ENCLOSING P LAN FOR SECTION CUTTING DEPARTMENT AS PER EXHIBIT-IV. 3.3 THE ASSESSEES CONTENTION WAS THAT THE STOCK WH ICH WAS HELD AS EXCESS STOCK WAS INCORRECT BECAUSE OF THE REASON TH AT THE SAID STOCK COULD NOT BE STORED AT THE FACTORY PREMISES DUE TO SHORTAGE OF SPACE. THE ASSESSEE HAS PLEADED THAT THE ENTRY OF 2,400 NUMBERS WEIGHING 52,800 KG OF FINISHED PRODUCT AS WORKED OUT BY THE SEARCH PAR TY WAS AN ARBITRARY ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 6 - WEIGHT. IN THE ASSESSEMENT ORDER THERE IS AN ANOTHE R MENTION, REPRODUCED ONLY FOR THE PURPOSE OF COMPLETENESS AS FOLLOWS: IT IS ALSO TO BE TAKEN NOTE THAT IN OTHER GROUP CO NCERN M/S PREMANI PRODUCTS, THE ADIT IN CHARGE HAS SPECIFICALLY MANIP ULATED AND FABRICATED THE PHYSICAL STOCK INVENTORY BY HIS OWN HANDWRITING FOR WHICH THE ASSESSEE HAS OBTAINED OPINION OF HANDWRITING EXPERT AND THE CRIM INAL PROCEEDINGS HAVE BEEN LAUNCHED AGAINST THE ADIT IN THE COURT AND COU RT HAS DIRECTED THE CBI TO INVESTIGATE THE MATTER. 3.4 THE AO WAS NOT CONVINCED. HE HAS EXAMINED THE N UMBER OF INVENTORIES AND RECORDED THE WEIGHT IN KGS, RESPECT IVELY. HE HAS MADE AN OBSERVATION THAT THE INVENTORIES WERE PREPARED ONLY ON THE BASIS OF THE PHYSICAL VERIFICATION. THE SEARCH PARTY HAS COUNTED THE FINISHED AND SEMI- FINISHED WINDOWS, DOORS AND OTHER ITEMS AND THEREAF TER WEIGHT OF ONE PIECE WAS ASCERTAINED. THE STOCK OF GOODS WHICH COU LD NOT BE ASCERTAINED FROM THE ABOVE METHOD THEN THE SAME WAS SENT FOR WE IGHMENT OUTSIDE THE FACTORY. TRUCK LOADS OF STOCK ITEMS WERE SENT OUTSI DE THE FACTORY FOR WEIGHMENT. SINCE, THE WEIGHT OF ONE PIECE OF AN ITE M WAS AVAILABLE WITH THE SEARCH PARTY, THEREFORE, ON THAT BASIS THE COUN TING OF OTHER ITEMS HAVE ALSO BEEN WORKED OUT. IN THAT MANNER THE STOCK TAKI NG WAS DONE BY THE SEARCH PARTY. THE ALLEGATION OF FABRICATION WAS WRO NG ON THE PART OF THE ASSESSEE. THE AO HAS NARRATED CERTAIN FACTS AS UND ER: REGARDING ASSESSEES CONTENTION THAT SOME ENTRIES APPEARING IN THE INVENTORY DATED 15.5.1993 ARE FABRICATED AS NO WORKING PAPERS ARE AVAILABLE OR THE SAME. IT IS SEEN THAT INVENTORY PREPARED ON PHYSICAL VERIFIC ATION AS PER ANNEXURE-2, PAGE 1 TO 10. THE ITEMS WERE COUNTED IN RESPECT OF FINIS HED AND SEMI-FINISHED WINDOWS, DOORS AND OTHER ITEMS AND WEIGHT OF ONE PIECE WAS A SCERTAINED BY THE SEARCH PARTY WHICH WAS MULTIPLIED WITH THE NUMBER OF PIECE S. STOCK OF GOODS WHICH WAS NOT ASCERTAINABLE FROM THE ABOVE MENTIONED METHOD W AS SENT FOR WEIGHMENT OUTSIDE FACTORY. THIS METHOD OF PHYSICAL VERIFICATI ON OF STOCK WAS REPORTED BY THE ADIT TO THE DIT (INVESTIGATION) VIDE NO. ADIT/S&S/A GEW 93-94 DATED 22.7.1993. THE ASSESSEE HAS ALSO ADMITTED THAT ON THE DATES PR IOR TO 15.5.1993, TRUCK LOADS OF ITEMS MENTIONED IN THE INVENTORY WAS SENT OUTSIDE T HE FACTORY FOR WEIGHMENT. SINCE THE WEIGHT OF ONE PIECE OF ITEM WAS AVAILABLE WITH THE SEARCH PARTY, ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 7 - THEREFORE COUNTING OF PARTICULAR ITEM WAS DONE ON 1 5.5.1993 AND THE TOTAL NUMBER WAS MULTIPLIED BY WEIGHT OF ONE SINGLE ITEM. THIS W AY TH STOCK TAKING WAS DONE. THE FACT THAT THE WEIGHMENT WAS MADE OUT-SIDE THE F ACTORY IN TRUCK LOADS ON 15.5.1993, WILL METHOD OF PHYSICAL VERIFICATION OF STOCK I.E. MULTIPLYING NO. OF PIECES BY WEIGHT OF ONE SINGLE PIECE, THOSE ITEMS O F STOCK WHOSE VALUE CAN BE ASCERTAINED BY THE ABOVE METHOD WERE NOT SENT OUTSI DE FACTORY FOR WEIGHMENT. THEREFORE, THE ASSESSEES ALLEGATION THAT INVENTORY WAS FABRICATED IN ORDER TO ADJUST THE DISCLOSURE OF RS.30 LAKHS MADE BY SHRI B ABUBHAI P. SHAH, MANAGING DIRECTOR OF THE COMPANY SEEMS TO BE INCORRECT AND U NFOUNDED. SINCE, THE DISCLOSURE WAS MADE BY SHRI BABUBHAI P.SHAH ON 13.5 .1993 IF ANY MANIPULATION WAS TO BE MADE AND THE ALLEGED INFLATED FIGURES OF EXCESS STOCK AND FABRICATED FIGURES WAS TO BE INTRODUCED, THE SAME COULD HAVE B EEN DONE ON 13 TH ITSELF, INSTEAD OF CONTINUING STOCK TAKING FOR TWO SUBSEQUE NT DAYS. 3.5 THERE WAS A CONTENTION OF THE ASSESSEE THAT THE AO WHO HAD SIGNED THE INVENTORY FOR FIRST FOUR DAYS HAVE NOT SIGNED T HE INVENTORY ON THE FINAL DAY. IN THIS CONNECTION, IT WAS NOTED IN THE ASSESS MENT ORDER THAT THERE WERE OTHER AUTHORIZED OFFICER AND ANY ONE OF THEM W AS AUTHORIZED TO PUT A SIGNATURE ON THE INVENTORY, PANCHNAMA OR THE STAT EMENT. THERE WAS NO IRREGULARITY IN THE SIGNATURE OF ONE OF SUCH AUTHOR IZED OFFICER. IN RESPECT OF AN INVENTORY OF 52,800 KG OF FINISHED PRODUCT TH E AO HAS OBSERVED THE ADIT (INVESTIGATION) HAS REPORTED THAT 2,400 WINDOW S PIECES WERE FOUND LYING IN THE FACTORY. WEIGHT OF ONE WINDOW WAS FOUN D 22 KG. THE WINDOW FRAMES WERE KEPT IN LOTS. AN INVENTORY WAS M ADE BY THE INSPECTORS. THE STOCKS WHICH WERE RECORDED AT PAGES 6 TO 10 WERE PHYSICALLY VERIFIED ON 15.5.1993. THE GROUP OF INSP ECTORS HAVE BEEN DEPUTED TO PREPARE THE INVENTORIES. THE SEARCH PROC EEDINGS WERE CONTINUED FOR 14 HOURS ON 15.5.1993. ACCORDING TO A O, THERE WAS NO MANIPULATION IN THE PREPARATION OF THE INVENTORY. A O HAS ALSO NOTED THAT THE VERIFICATION OF THE STOCK WAS CARRIED OUT FROM 11 TO 14 MAY, 1993 IN THE PRESENCE OF THE ASSESSEES SUPERVISOR AND MANAG ER. ON 15 TH MAY, 1993 THE STOCK VERIFICATION WAS MADE IN THE PRESENC E OF SRI MANUBHAI P. ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 8 - SHAH, |MANAGING DIRECTOR, AS WELL AS IN THE PRESENC E OF SRI PALLAV D. SHAH, THE DIRECTOR. ACCORDING TO AO, THERE WAS WRON G ALLEGATION THAT THE DIRECTORS OF THE COMPANY WERE NOT ALLOWED TO BE PRESENT FOR PHYSICAL VERIFICATION OF STOCK. AT THE TIME WHEN THE ASSESSM ENT WAS MADE THE SAID INVESTIGATION OF CBI AS PER THE DIRECTION OF THE HI GH COURT WAS SUBJUDICE, THEREFORE, THE AO HAS RECORDED THAT NO FINDING OF S UCH INVESTIGATION WAS RECEIVED BY HIM. HE HAS THEREFORE CONCLUDED THAT TH E INVENTORY DRAWN AT THE TIME OF SEARCH WAS IN THE PRESENCE OF TWO INDEP ENDENT WITNESSES WHICH WAS SIGNED IN THE PRESENCE OF THE ASSESSEE AN D ALSO IN THE PRESENCE OF THE AUTHORIZED OFFICERS. THAT INVENTORY WAS CORR ECT AND THE ASSESSEE HAS NOT PROTESTED AT THE TIME OF SIGNING THOSE INVE NTORIES. ACCORDING TO AO THE ASSESSEE HAS ACCEPTED THE CORRECTNESS OF THE METHOD OF STOCK TAKING AS ALSO THE COMPLETENESS OF THE STOCK INVENT ORY PREPARED AT THE TIME OF THE SEARCH THEREFORE HE HAD SIGNED THOSE IN VENTORIES WITHOUT ANY PROTEST. 3.6 AS PER AO THE SAID DISCLOSURE OF RS.30 LAC WAS MADE BY SRI BABUBHAI P. SHAH, MANAGING DIRECTOR, BECAUSE HE WAS AWARE OF THE FACT THAT THERE WAS EXCESS STOCK LYING AT THE PREMISES. THE BURDEN WAS ON THE ASSESSEE TO PROVE THAT THE DISCLOSURE WAS OBTAIN UN DER COERCION. THE AO HAS PLACED RELIANCE ON V. KUNHAMBU & SONS 219 ITR 235 (KER) AND RAMESH CHANDRA & CO. 168 ITR 375 (BOM) . THE INVENTORY OF THE STOCK WHICH WAS FOUND BY THE SEARCH PARTY WAS SUMMA RIZED AS UNDER: DESCRIPTION OF ITEM QUANTITY A. FINISHED GOODS 1,16,974 KGS B. SEMI FINISHED GOODS 1,33,139 KGS C. RAW MATERIALS 2,48,328 KGS D. SCRAP 49,122 KGS ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 9 - E. STORES VALUED AT RS. 10,02,737/- F. ELECTRICAL ITEMS VALUED AT RS. 31,311/- G. TOOLS AND SPARES VALUED AT RS. 3,10,000/- 3.7 AS PER THE ASSESSEE THE STOCK AS PER BOOKS ON T HE DATE OF SEARCH WAS AS UNDER: A. FINISHED GOODS 63,968 KGS B. SEMI-FINISHED GOODS 78,469 KGS C. RAW MATERIAL (STEAL) 1,85,096 KGS D. OTHER RAW MATERIALS 11,019 KGS E. STORES VALUED AT RS. 3,34,263/- 3.8 THE EXCESS STOCK WAS WORKED OUT AS UNDER : QUANTITY RATE AMOUNT A. FINISHED GOODS 53906 17.898 948701 B. SEMI-FINISHED GOODS 54670 17.898 97848 4 C. RAW MATERIAL (STEAL) 110354 13.761 1519358 D. STORES (INCLUDING OTHER RAW MATERIAL AND ELECTRICAL ITMES. 6686 3453226 3.9 THE AO HAS CONCLUDED THAT THE ABOVE STOCK WAS T AXABLE IN A.Y. 1994-95 U/S 69A/ 69B OF IT ACT. ACCORDINGLY THE SAM E WAS TAXED IN THE HANDS OF THE ASSESSEE. BEING AGGRIEVED THE MATTER W AS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. FIRST APPELLATE AUTHORITY : 4. THE ASSESSEE HAS CONTESTED IN FIRST APPEAL THE A DDITION OF 34,53,226/- MADE U/S 69A/69B ON ACCOUNT OF EXCESS STOCK. IN THIS REGARD THE FIRST CONTENTIOIN OF THE ASSESSEE WAS TH AT THE SAID DISCLOSURE OF EXCESS STOCK OF RS.30 LAC WAS ON LUMP SUM BASIS WHI CH WAS MADE AT THE TIME WHEN THE PHYSICAL VERIFICATION OF STOCK AT THE FACTORY PREMISES WAS ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 10 - EVEN NOT COMPLETED. THEREAFTER, ON 15 TH JUNE, 1993, ON 28.7.1993 AND ALSO ON 10.8.1993 THE ASSESSEE HAS RETRACTED THE SA ID OFFER. THE AFORESAID DISCLOSURE MADE BY THE M.D. SHRI BABUBHAI P. SHAH U /S 132(4). THE ASSESSEE HAD HIGHLIGHTED BEFORE LEARNED CIT(A) THE ISSUE OF IMPROPER PHYSICAL VERIFICATION OF STOCK AND MANIPULATION IN THE WORKING PAPERS OF PHYSICAL INVENTORY OF THE STOCK PREPARED BY THE SEA RCH PARTY. BEFORE LEARNED CIT(A), THE ASSESSEE HAS ALSO HIGHLIGHTED A N OBSERVATION OF COMMISSIONER OF INCOME TAX (CENTRAL), AHMEDABAD AS UNDER: THE COMMISSIONER OF INCOME-TAX (CENTRAL), AHMEDABA D, IN HIS ORDER UNDER SECTION 132(12) OF THE INCOME TAX ACT DATED 28.3.19 95 HAD MADE THE FOLLOWING OBSERVATIONS WITH REGARD TO THE AFORESAID PLEA OF T HE APPELLANT: HOWEVER, THE CONTENTION OF THE ASSESSEE THAT IT WAS NOT POSSIBLE FOR THE NUMBER OF PERSONS COMPRISING THE SEARCH PARTY ON 15 .5.1993 TO PHYSICALLY VERIFY THE STOCK OF 306419 KGS. HAS SOME FORCE. THE ASSESSING OFFICER WILL LOOK INTO THIS ASPECT. HE WILL ALSO BE AT LIBERTY TO EXA MINE SOME OF THE OTHER ISSUES RAISED BY THE ASSESSEE WHICH MAY STILL BE RELEVANT DURING THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS. 4.1 AN ANOTHER FACT HAS ALSO BEEN BROUGHT BEFORE LE ARNED CIT(A) THAT AN ASSESSMENT FOR A.Y. 1993-94 WAS MADE ON PROTECTI VE BASIS AND THE ADDITION IN RESPECT OF THE EXCESS STOCK WAS MADE ON SUBSTANTIVE BASIS FOR A.Y. 1994-95. HOWEVER FOR A.Y. 1993-94 , LEARNED CIT(A) VIDE AN ORDER 6.5.1996 HAD DELETED THE SAID ADDITION IN THE FOLLO WING MANNER: FROM THE ABOVE MENTIONED ARGUMENTS AND THE OBSERVA TIONS OF CIT(CENTRAL), AHMEDABAD, IT IS EVIDENT THAT THE CORRUPTION OF ITS STOCK IS NOT FREE FROM DOUBT. THE PLEAS RAISED BY THE REPRESENTATIVE OF THE APPEL LANT CANNOT BE BRUSHED ASIDE WITHOUT GIVING PROPER THOUGHT. THE ADDITION OF UNDE R SECTION 69 OF THE INCOME- TAX ACT CAN BE MADE WHICH ARE NOT RECORDED IN THE B OOKS OF ACCOUNT. WITH ALL THE DEFECTS IN THE SHEETS, CALLED TO BE THE INVENTORY S TATEMENT AS POINTED OUT BY THE REPRESENTATIVE OF THE APPELLANT, NO ADDITION CAN BE MADE UNLESS SUPPORTED BY OTHER INDEPENDENT EVIDENCES AND ONLY AFTER REPLYING TO ALL THE PLEAS RAISED BY THE APPELLANT. HOWEVER, AS THE ADDITION DURING THIS YEA R HAS BEEN MADE ONLY ON THE BASIS OF DISCLOSURE STATEMENT, IN VIEW OF THE DISCU SSION ABOVE, IT IS HELD THAT NO ADDITION ON ACCOUNT OF THOSE STATEMENTS CAN BE MADE . THEREFORE, I AM OF THE VIEW THAT NO ADDITION IN THE ASSESSMENT ORDER UNDER CONS IDERATION CAN BE MADE EITHER ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 11 - ON PROTECTIVE BASIS OR ON SUBSTANTIVE BASIS AS HAS BEEN MADE IN THE CASE OF THE APPELLANT AND IN THE CASE OF M/S PREMANI PRODUCTS R ESPECTIVELY. IN THE RESULT, THE ADDITION OF RS.34,53,226/- IS DELETED AND THE APPEA L ON THIS GROUND IS ALLOWED. 4.2 IT HAS ALSO BEEN CONTESTED THAT THE WEIGHT OF T HE STOCK PREPARED BY THE SEARCH PARTY AS ON 15.5.1993 WAS NOT SUPPORTED BY ANY EVIDENCE AND IT WAS NOT KNOWN AS TO WHICH OFFICER OF THE REVENUE DEPARTMENT HAD PHYSICALLY VERIFIED THE WEIGHT OF THE STOCK. ACCORD ING TO THE ASSESSEE, IT WAS NOT PHYSICALLY POSSIBLE TO VERIFY THE STOCK OF RS.306,419/ ON 15.5.1993. 4.3 IT WAS CONTENDED THAT THERE WAS DOUBT IN RESPEC T OF A SINGLE ENTRY OF 2,400 NUMBER OF WINDOWS WEIGHING 52,800 IS MADE ON PAGE 6 OF ANNEXURE-Z-2 AS PER THE PANCHNAMA DRAWN ON 15.5.199 3. IT WAS ARGUED THAT THE WEIGHT OF 2,400 FINISHED WINDOWS WAS ADDED ARBITRARILY. THE ASSESSEE HAS FURNISHED A REPORT OF A CHARTERED ENGI NEER TO THE EFFECT THAT 2,400 WINDOWS COULD NOT BE STORED IN THE CUTTING SE CTION PREMISES OF THE FACTORY. THERE WERE NO DETAILS OF WORKING PAPER IN THE RECORD OF THE REVENUE DEPARTMENT IN RESPECT OF THE SAID SINGLE EN TRY OF 2,400 NUMBER OF WINDOWS. 4.4 THE ASSESSEE HAS ALSO OBJECTED THE WORKING OF T HE ITEMS FOUND IN THE PRESSED STEEL SECTION AND THE INVENTORY MADE IN RESPECT OF THE RAW MATERIAL, SCRAP ITEMS. ON DUE EXAMINATION OF THE F ACTS LEARNED CIT(A) HAS GRANTED RELIEF AND RELEVANT FINDINGS ARE AS UND ER: I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSESSIN G OFFICER AS ALSO THE CONTENTIONS OF THE APPELLANT. THE ASSESSING OFFICER HAS MADE THE ADDITION OF ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 12 - RS.34,53,226/- TO THE TOTAL INCOME OF THE APPELLANT , ON ACCOUNT OF THE VALUE OF EXCESS STOCK FOUND AT THE TIME OF SEARCH, UNDER SEC TION 69A/69B OF THE INCOME TAX ACT. THE DETAILS OF THE WORKING OF THE ADDITION ARE GIVEN IN PARA 3.12 OF THE ASSESSMENT ORDER. THE BASIS OF THE AFORESAID AD DITION WAS THE INVENTORY OF THE STOCK PREPARED BY THE SEARCH PARTY OF THE STOCK LYING AT THE PREMISES OF THE APPELLANT AT THE TIME OF SEARCH. THE ASSESSING OFFI CER HAS STATED THE FACT REGARDING THE EXCESS STOCK AVAILABLE WITH THE APPEL LANT IS SUPPORTED BY THE STATEMENT OF ITS MANAGING DIRECTOR, MADE UNDER SECT ION 132(4) OF THE INCOME TAX ACT. THE ASSESSING OFFICER HAS STATED THAT THE AFORESAID STATEMENT WAS MADE VOLUNTARILY BY THE MANAGING DIRECTOR OF THE AP PELLANT COMPANY AS THERE WAS NO SUGGESTION OF THREAT OR INTIMDATION OF SHRI BABUBHAI P. SHAH BY THE OFFICERS OF THE INCOME TAX DEPARTMENT. THE ASSE SSING OFFICER REJECTED THE CONTENTION OF THE APPELLANT THAT NO ADDITION COULD HAVE BEEN MADE IN RESPECT OF CERTAIN ITEMS OF STOCK, STATED TO HAVE BEEN FOUN D AT THE TIME OF SEARCH, FOR WHICH NO WORKING PAPER OR WEIGHMENT SLIPS OR ANY OT HER EVIDENCE WAS AVAILABLE. HE OBSERVED THAT THE ITEMS OF STOCK IN R ESPECT OF FINISHED AND SEMI- FINISHED GOODS WERE COUNTED AND THEIR WEIGHT WAS WO RKED OUT BY MULTIPLYING THE WEIGHT OF ONE SUCH PIECE WITH THE TOTAL NUMBER OF SUCH ITEMS. HE OBSERVED THAT THE SEARCH PARTY HAD GAINED ENOUGH EXPERIENCE DURING THE FIRST FOUR DAYS OF THE SEARCH TO HAVE ADOPTED THE AFORESAID OBSERVA TIONS, THE ASSESSING OFFICER HAS TRIED TO MEET THE APPELLANTS ARGUMENT THAT IT WAS NOT POSSIBLE FOR THE NUMBER OF PERSONS COMPRISING THE SEARCH PARTY O N 15.5.1993 TO PHYSICALLY VERIFY THE STOCK OF 3,06,419 KGS WHEREAS THE SEARCH PARTY HAD MADE WEIGHMENT OF THE STOCK WEIGHING 2,39,144 KGS D URING THE FIRST FOUR DAYS OF THE SEARCH OPERATION. THE APPELLANT HAD ARGUED THAT DURING THE FIRST FOUR DAYS, THE STOCK WEIGHT WAS 603 KGS PER MAN HOU R WHEREAS ON THE FIFTH DAY OF THE SEARCH, THE STOCK WEIGHED WAS 2946 KGS P ER MAN HOUR. WITH REGARD TO THE EXCESS STOCK OF RAW MATERIAL AND SCRAP, STAT ED TO HAVE BEEN FOUND AT THE PREMISES OF THE APPELLANT, THE ASSESSING OFFICER HA S OBSERVED THAT THE QUANTITY OF STOCK OF GOODS WHICH COULD NOT BE WORKED OUT BY MULTIPLYING THE WEIGHT OF ONE ITEM BY ALL THE ITEMS COMPRISED IN THE LOT THER EOF, HAD BEEN SENT OUT OF THE FACTORY PREMISES FOR THE PURPOSE OF WEIGHMENT. HE H AS ALSO STATED THAT WITH REGARD TO THE STOCK OF RAW MATERIAL AND SCRAP, THE APPELLANT HAD RAISED OBJECTION WITH REGARD TO ENTRIES APPEARING AT SR. N OS. 27 TO 35 (ON PAGES 2-3 OF THE ANNEXURE Z-2), ON THE GROUND THAT NO DETAILS REGARDING THE NUMBER OF PIECES AND THE WEIGHT PER PRICE HAD BEEN GIVEN IN T HEM. HOWEVER, THE APPELLANT HAD NOT RAISED ANY OBJECTION WITH REGARD TO ENTRIES AT SR.NOS. 22 TO 26 (ON PAGE 2 OF THE ANNEXURE A-2), WHEREIN ALSO DE TAILS REGARDING THE NUMBER OF PIECES AND THE WEIGHT OF EACH PIECE WERE NOT THERE. HE OBSERVED THAT THE APPELLANT DISPUTED ONLY THOSE ITEMS WHICH SUITED IT. HE FURTHER OBSERVED THAT THE APPELLANT COULD NOT EXERCISE ITS DISCRETION IN DISPUTING ONLY A FEW ITEMS OUT OF VARIOUS ITEMS OF THE STOCK INVEN TORY PREPARED BY THE SEARCH PARTY BY ADOPTING A PARTICULAR METHOD. THE AFORESAI D OBSERVATIONS OF THE ASSESSING OFFICER HAVE BEEN EXAMINED BY ME, IN THE LIGHT OF THE DETAILED EXPLANATION GIVEN BY THE APPELLANT. WITH REGARD TO THE ENTRY BEARING SR.NO.17 ON PAGE 6 OF THE ANNEXURE Z-2, OF 2400 WINDOWS WEIG HING 52800 KGS, ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 13 - (AVERAGE WEIGHT PER WINDOW TAKEN AT 22 KGS.) THE AS SESSING OFFICER HAS NOT BEEN ABLE TO REBUT THE APPELLANTS CONTENTION THAT THERE WAS NO MATERIAL EVIDENCE FOR THE AFORESAID ITEM OF STOCK. THIS IS I NSPITE OF THE FACT THAT THE DAILY PRODUCTION REPORTS AND THE PURCHASE RECORDS O F THE APPELLANT COMPANY FROM 1.4.1993 TO 10.5.1993 WERE AVAILABLE WITH HIM. THE PRESENT ASSESSING OFFICER HAS ALSO NOT GIVEN ANY COMMENTS ON THE AFOR ESAID CONTENTION OF THE APPELLANT. THE APPELLANT HAD FURTHER CONTENDED THAT FOR THE 16 ITEMS WEIGHING 5141 KGS. APPEARING ON PAGE 6 OF THE ANNEXURE Z-2, FOUND IN THE CUTTING SECTION OF THE FASTEN WORKING PAPERS HAD BEEN MADE AVAILABLE TO IT. HOWEVER, FOR THE 17 TH ITEM I.E. 2400 WINDOWS WEIGHING 52800 KGS, NETWORK ING PAPERS HA BEEN PREPARED BY THE SEARCH PARTY. THE ASSESSING OF FICER HAS ALSO NOT REBUTTED THE CONTENTION OF THE APPELLANT THAT 2400 WINDOWS COULD NOT FIT INTO THE CUTTING SECTION OF THE FACTORY. HE HAS ALSO NOT BEEN ABLE TO REBUT AS TO HOW THE AVERAGE WEIGHT PER WINDOW OF 22 KGS. HAD BEEN W ORKED OUT. IN THE INVENTORY OF THE FINISHED PRODUCTS, PREPARED ON 12. 5.1993, THERE WERE 184 ENTRIES FOR WINDOWS AND THE WEIGHT OF THE INDIVIDUA L WINDOW VARIED FROM 4 KGS TO 40 KGS. THE AVERAGE WEIGHT OF WINDOWS, ON TH E BASIS OF THE 184 ENTRIES, WORKED OUT TO 18 KGS. WITH REGARD TO THE STOCK OF SEMI-FINISHED GOODS, THE APPELLANT HAS RAISED OBJECTION TO THE STOCK OF FRAM ES, PUNCH SECTIONS AND PRESSED BEND SECTIONS AND DOOR UNITS WEIGHING 54876 KGS. ENTRY NOS. 25 TO 27 ON PAGE 9 OF THE ANNEXURE Z-2 REFER. THE APPELLA NT HAS STATED THAT THE INVENTORY OF SEMI FINISHED GOODS LYING THE IN THE P RESSED STEEL SECTION, HAD BEEN PREPARED ON 12.5.1993, WHICH INCLUDED 35 ITEMS WEIGHING 6780 KGS. SUMMARY SHEET AS WELL AS THE WORKING PAPERS (FOR WO RKING OUT THE WEIGHMENT) WERE MADE AVAILABLE TO THE APPELLANT. HO WEVER, IN RESPECT OF THE 3 ENTRIES (SR. NOS. 25 TO 27) APPEARING ON PAGE 9 O F ANNEXURE Z-2 OF THE PANCHNAMA DATED 15.5.1993 OF SEMI-FIUNISHED GOODS W EIGHING 54876 KGS., NO WORKING PAPERS IN RESPECT OF THEIR WEIGHMENT WERE M ADE AVAILABLE TO IT. THE ASSESSING OFFICER HAS NOT GIVEN ANY BASIS AS TO HOW THE AVERAGE WEIGHT OF A DOOR UNIT HAD BEEN TAKEN AT 33.13 KGS, IN RESPECT O F ENTRY NO.27 REGARDING 452 DOOR UNITS WEIGHING 14976 KGS. THE ASSESSING OF FICER HAS NOT BEEN ABLE TO BRING ANY MATERIAL ON RECORD TO SUPPORT THE ENTR IES IN RESPECT OF 3 ITEMS OF SEMI-FINISHED GOODS WEIGHING 54876 KGS, IN SPITE OF THE AVAILABILITY WITH THE DEPARTMENT OF THE DAILY PRODUCTION REPORTS FROM 1.4 .1993 TO 10.5.1993 AND THE PURCHASE RECORDS FOR THIS PERIOD WITH REGARD TO THE STOCK OF RAW MATERIAL WEIGHING 70827 KGS., AS PER ENTRY NOS. 27 TO 35 ON PAGE 2-3 OF ANNEXURE Z-2 DATED 15.5.1993, THE APPELLANT HAD ONCE AGAIN TAKEN THE PLEA THAT NO WORKING PAPERS (WITH REGARD TO WEIGHMENT) IN RESPECT THEREO F WERE MADE AVAILABLE TO IT. THE APPELLANT CONTENDED THAT THE METHOD OF WEIG HT OF ONE PIECE MULTIPLIED BY THE TOTAL NUMBER OF PIECES COULD NOT BE APPLIED TO WORK OUT THE WEIGHT OF ITEMS OF RAW MATERIAL. THE PRESENT ASSESSING OFFICE R HAS ALSO NOT GIVEN ANY BASIS FOR THE AFORESAID ENTRIES. THE APPELLANT HAD FURNISHED PHOTOGRAPHS OF THE VARIOUS ITEMS OF RAW MATERIAL SUCH AS BARS, FLA TS, ROUNDS, SECTIONS, ETC. DUIRING THE COURSE OF THE ASSESSMENT PROCEEDINGS, I N SUPPORT OF ITS CONTENTION THAT THESE ITEMS WERE REQUIRED TO BE TAKEN OUTSIDE THE FACTORY PREMISES FOR WEIGHMENT ON WEIGH BRIDGE. COPIES OF SUCH PHOTOGRAP HS WERE ALSO FURNISHED ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 14 - DURING THE COURSE OF THE APPELLATE PROCEEDINGS. I A GREE WITH THE APPELLANT THAT THE WEIGHT OF THESE ITEMS COULD NOT BE WORKED OUT B Y MULTIPLYING THE TOTAL NUMBER OF PIECES BY THE WEIGHT OF ONE PIECE. THE AS SESSING OFFICER HAS OBSERVED THAT THE APPELLANT HAD DISPUTED ONLY SOME OF THE ENTRIES WHERE THE NUMBER OF PIECES AND WEIGHT PER PIECE HAD NOT BEEN GIVEN. HE STATED THAT THE APPELLANT HAD NOT DISPUTED ENTRIES APPEARING AT SR. NOS. 22 TO 26 ON PAGE 2 OF THE ANNEXURE Z-2, WHEREIN THE NUMBER OF PIECES AND WEIGHT PER PIECE HAD NOT GIVEN. THE APPELLANT HAD EXPLAINED THAT THE WORKING PAPERS WITH REGARD TO THEIR WEIGHMENT WERE AVAILABLE. COPIES OF SUCH WORK ING PAPERS HAD BEEN FURNISHED TO THE ASSESSING OFFICER BY THE APPELLANT IN ITS LETTER DATED 18-3- 1997. THE APPELLANT STATED THAT NOT ONLY WITH REGARD TO T HE ENTRIES ON PAGE 2 OF ANNEXURE Z-2 BUT ALSO WITH REGARD TO THE ENTRY NOS. 21 TO 24 ON PAGE 9 OF ANNEXURE Z-2, HE HAD NOT RAISED THE OBJECTION BECAU SE WEIGHMENT SLIP WITH REGARD TO THE LATTER ENTRIES WERE MADE AVAILABLE TO THE APPELLANT. COPIES OF SUCH WEIGHMENT SLIPS HAD BEEN FURNISHED TO THE ASSE SSING OFFICER ON 18-3- 1997. SIMILARLY, WITH REGARD TO THE ENTRIES OF SCRAP WEIGHING 36840 KGS. , APPEARING AT SR. NOS. 20 AND 28 TO 31 ON PAGE 9 OF ANNEXURE Z-2, THE APPELLANT HAD CONTENDED THAT NO WORKING PAPERS WERE MADE AVAILABLE TO THE APPELLANT. THE ASSESSING OFFICER WAS UNABLE TO SUBS TANTIATE, THE AFORESAID ENTRIES IN THE ABSENCE OF ANY MATERIAL EVIDENCE, (E .G. WORKING PAPERS IN RESPECT OF WEIGHMENT GIVING THE TOTAL NUMBER OF PIE CES AND WEIGHT PER PIECE, WEIGHMENT SLIPS OF A WEIGH BRIDGE, ETC.). HIS THEOR Y OF WORKING OUT THE WEIGHT BY MULTIPLYING THE WEIGHT OF ONE PIECE BY THE TOTAL NUMBER OF PIECES CAN NOT APPLY TO THE STOCK OF SCRAP AS FT CONSISTS OF VARIO US ITEMS AND SIZES. IN VIEW OF THE ABOVE, I AGREE WITH THE EXPLANATION GIVEN BY TH E APPELLANT THAT NO ADDITION COULD HAVE BEEN MADE BY THE ASSESSING OFFI CER, ON ACCOUNT OF THE VALUE OF THE QUANTITY OF EXCESS STOCK, IN THE ABSEN CE OF ANY MATERIAL EVIDENCE TO SUBSTANTIATE THE EXISTENCE OF THE EXCESS STOCK. THE STATEMENT MADE BY SHRI BABUBHAI P. SHAH, MANAGING DIRECTOR OF THE APPELLAN T COMPANY UNDER SECTION 132(4) OF THE INCOME TAX ACT DISCLOSING AN AMOUNT OF RS.30,00,000/- ON ACCOUNT OF THE EXCESS STOCK, HAD BEEN REFRACTED BY HIM ON 15-6-1993. IN THE SAID STATEMENT, HE HAD MADE THE DISCLOSURE ON A CCOUNT OF EXCESS STOCK FOR THE F. Y. 1992-93 RELEVANT TO A. Y. 1993-94. THE AD DITION MADE ON ACCOUNT OF THE EXCESS STOCK OF RS.34,53,226/-, ON PROTECTIVE B ASIS, FOR A. Y. 1993-94 HAS BEEN DELETED BY MY PREDECESSOR VIDE HIS ORDER DATED 6-5-1996. IN PARA 2.2 OF THE APPELLATE ORDER, HE HAS OBSERVED THAT THE COMPUTATION OF DIFFERENCE IN THE STOCK WAS NOT FREE FROM DOUBT. THE ADDITION FOR DIF FERENCE IN STOCK COULD BE MADE ONLY UNDER SECTION 69 OF THE INCOME-TAX ACT. W ITH ALL THE DEFECTS IN THE INVENTORY STATEMENT, AS POINTED OUT BY THE REPRESEN TATIVE OF THE APPELLANT, NO ADDITION COULD BE MADE UNLESS SUPPORTED BY OTHER IN DEPENDENT EVIDENCE, HE HAS OBSERVED. HE HAS STATED THAT THE ADDITION FOR T HE YEAR UNDER CONSIDERATION (A. Y. 1993-94) HAD BEEN MADE ONLY ON THE BASIS OF THE DISCLOSURE STATEMENT OF THE MANAGING DIRECTOR OF THE APPELLANT COMPANY. HOWEVER , IN VIEW OF THE DEFECTS POINTED OUT BY HIM, HE HELD THAT NO ADDITION ON THE BASIS OF THE STATEMENT ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 15 - COULD BE MADE, EITHER ON PROTECTIVE BASIS OR ON SUB STANTIVE BASIS. THE APPELLANT FURTHER CONTENDED THAT THE RETRACTION PET ITION. THE APPELLANT FURTHER CONTENDED THAT THE REFRACTION PETITION WITH REGARD TO THE DISCLOSURE ON ACCOUNT OF EXCESS STOCK HAD BEEN FURNISHED BY IT ON 15-6-1993 I.E. BEFORE THE RESTRAINT ORDERS UNDER SECTION 132(3) OF THE INCOME -TAX ACT WAS REVOKED. IN VIEW OF THE AFORESAID OBSERVATIONS OF MY PREDECESSO R, WITH WHICH I AGREE, THE ADDITION MADE ON ACCOUNT OF THE EXCESS STOCK, CAN A LSO NOT BE SUSTAINED ON THE BASIS OF THE STATEMENT OF THE MANAGING DIRECTOR OF THE APPELLANT COMPANY. THE APPELLANT HAS ALSO EXPLAINED THE DISCREPANCIES WHICH HAD CREPT INTO THE WORKING OF THE VALUE OF THE QUANTITY OF THE EXCESS STOCK MADE BY THE ASSESSING OFFICER IN PARA 3.12 OF THE ASSESSMENT ORDER. THE A PPELLANTS EXPLANATION IN THIS REGARD HAS BEEN DISCUSSED BY ME IN PARA 2.2.5 OF THIS ORDER. FOR THE REASONS GIVEN THEREIN, I AGREE WITH THE EXPLANATION OF THE APPELLANT. IN VIEW OF THE AFORESAID, THE ADDITION MADE OF RS.34,53,226/- ON ACCOUNT OF THE VALUE OF THE QUANTITY OF EXCESS STOCK IS DELETED. ( EMPHASIZED BY HIGHLIGHTING ) 4.5 FROM THE SIDE OF THE REVENUE THE FIRST LEGAL CO NTENTION OF LEARNED CIT-DR. MR. O.P. VAISHNAV WAS THAT THE STATEMENT RE CORDED U/S.132(4) WAS A VALID STATEMENT THEREFORE IT HAD EVIDENTIARY VALUE. FOR THIS LEGAL PROPOSITION, RELIANCE IS PLACED ON A DECISION OF HO NBLE KERALA HIGH COURT PRONOUNCED IN THE CASE OF V. KUNHAMBU & SONS VS. COMMISSIONER OF INCOME TAX, 219 ITR 235 (KER). AS PER THIS ORDER IF A STATEMENT WAS MADE VOLUNTARILY AND THERE WAS NO C OERCION OR THERE WAS NO ALLEGATION OF COERCION BY THE WITNESSES WHO HAVE SIGNED WHEN THE STATEMENT WAS RECORDED, THEN THE STATEMENT MADE ON THE BASIS OF THE SAID STATEMENT WAS HELD AS JUSTIFIED. 4.6 THE NEXT PLEA OF THE CIT-DR IS THAT THE RETRACT ION AFTER FEW MONTHS WAS NOTHING BUT AN AFTERTHOUGHT. HE HAS PLACED RELI ANCE ON VIDEO MASTER, 83 ITD 102 (MUM), WHEREIN A STATEMENT U/S 132(4) WAS MADE AND A RETRACTION WAS FILED AFTER ABOUT A MONTH. TH E RESPECTED COORDINATE BENCH HAS HELD THAT THE BURDEN OF PROVING COERCION WAS ON THE ASSESSEE ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 16 - WHICH WAS NOT DISCHARGED. THE SAID RETRACTION WAS M ADE ONLY TO COVER THE UNDISCLOSED INCOME WHICH WAS AN AFTERTHOUGHT HE NCE THE SAID RETRACTION WAS REJECTED. IN SUPPORT OF THIS ARGUMEN T, LEARNED DR HAS ALSO PLACED RELIANCE ON HIRA LAL MANGAL LAL & CO., 96 ITD 113 (MUM) . LEARNED DR HAS ALSO PLACED RELIANCE ON A DECISION O F MANHARLAL KASTURCHAND CHOKSI VS. ACIT, 61 ITD 55 (AHMEDABAD T RIBUNAL). AT THE OUTSET, LEARNED AR MR. SOPARKAR HAS INFORMED THAT THE SAID ORDER WAS REVERSED IN THE GROUP CASE, NAMELY, KAILASHBEN MANHARLAL CHOKSHI VS. COMMISSIONER OF INCOME TAX, 220 CTR (GU J) 138. STILL LEARNED DR HAS PLEADED THAT THE TRIBUNAL HAD MADE A RELEVANT OBSERVATION THAT THE ASSESSEE HAD FAILED TO PROVE O R NOT ESTABLISHED THAT HE WAS TORTURED BY THE SEARCHING PARTY. NONETHELESS TH E ASSESSEE HAD RETRACTED FROM THE EARLIER STATEMENT AND UPON RETRA CTION THE ASSESSEE HAD RENDERED HIMSELF UNTRUSTWORTHY AND UNRELIABLE IN TH E EYES OF LAW. FEW OTHER DECISIONS HAVE ALSO BEEN CITED, ALTHOUGH THE FULL EXTRACT OF THOSE PRECEDENTS HAVE NOT BEEN PLACED BEFORE US, BUT FOR THE SAKE OF COMPLETENESS THOSE DECISIONS ARE ALSO LISTED BELOW WHICH HAVE BEEN DULY CONSIDERED BY US:- (A). HOTEL KIRAN VS. ACIT, 82 ITD 453 (PUNE) , WHEREIN IT IS HELD THAT WHETHER WHERE STATEMENT U/S 132(4) WAS VOLUNTARILY MADE AND THERE WAS NO COERCION OR THREAT WHATSOEVER, THE SAME WOULD BE BINDING ON ASS ESSEE EVEN IF IT WAS SUBSEQUENTLY RETRACTED. (B). PRASANCHAND SURANA VS. ACIT, 71 TTJ 466 (HYD TRI), AN ADMISSION, IF CLEARLY UNEQUIVOCALLY MADE IS THE BEST EVIDENCE AGA INST THE PARTY UNTIL THE SAME IS EFFECTIVELY REBUTTED WITH SOME CONCLUSIVE EVIDENCE. STATEMENT RECORDED U/S.132(4) CONSTITUTES A MATERIA L INFORMATION AS GATHERED DURING SEARCH ON THE BASIS OF WHICH INCOME CAN BE C OMPUTED. (C) PARAM ANAND BUILDERS (P) LTD. VS. ACIT, 59 ITD 29 ( BOM TRI) , EVEN IF A STATEMENT RECORDED AT THE TIME OF SEARCH IS RETRACT ED, ITS VALIDITY CANNOT BE TAKEN TO BE NULL & VOID. ADDITIONS CAN STILL BE MADE. (D) SURJEETSINGH CHABRA, AIR 1997/2560, STATEMENT R ECORDED BEFORE CUSTOM OFFICIALS EVEN IF RETRACTED SUBSEQUENTLY HAS EVIDEN TIARY VALUE. ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 17 - (E) RAJNIK & CO. VS. ACIT, 251 ITR 561 (AP) , SWORN STATEMENT OF PARTNER THAT ASSESSEE PRACTICED SUPPRESSION OF SALES. HELD THAT ESTIMATION OF UNDISCLOSED INCOME FOR BLOCK PERIOD ON THE BASIS OF MATERIAL ON RECORD AND STATEMENT OF PARTNER WAS VALID. (F) DR. S.C. GUPTA VS. ACIT, 248 ITR 782 (ALL), ADDITION ON THE BASIS OF STATEMENT RECORDED DURING SURVEY JUSTIFIED. BURDEN IS ON ASSESSEE TO ESTABLISH THAT STATEMENT WAS WRONG. ADMISSION IS EXTREMELY IMPORTA NT PIECE OF EVIDENCE THOUGH NOT CONCLUSIVE. (G) DHURU JOHN VS. RETURNING OFFICER, AIR 1977 SC 1 724, PARTYS ADMISSION IS SUBSTANTIVE EVIDENCE AND IS THE BEST EVIDENCE AGAIN ST THE PARTY MAKING IT THOUGH NOT CONCLUSIVE. IT WAS FURTHER HELD THAT WHAT A PAR TY HIMSELF ADMITS TO BE TRUE, MAY REASONABLE BE PRESUMED TO BE SO AND UNTIL THE P RESUMPTION IS REBUTTED THE FACT ADMITTED MUST BE TAKEN TO BE ESSENTIAL. 5. FROM THE SIDE OF THE ASSESSEE LEARNED AR. MR. S. N. SOPARKAR APPEARED AND INFORMED THAT THERE ARE THREE MAIN DIR ECTORS OF THE ASSESSEE. A SEARCH WAS CONDUCTED ON 11.5.1993 AND THE STATEME NT OF ONE DIRECTOR SHRI BABUBHAI P. SHAH WAS RECORDED AT HIS RESIDENCE . HE WAS NOT ALLOWED TO GO OUT OF THE RESIDENCE, THEREFORE, HE WAS NOT A WARE ABOUT THE PROGRESS OF THE SEARCH, BEING SIMULTANEOUSLY CONDUCTED AT TH E FACTORY PREMISES. THE SEARCH PARTY WAS AT THE FACTORY/PLANT PREMISES VERIFYING THE POSITION OF THE STOCK. ACCORDING TO HIM, INTERESTIN GLY THE WITNESS OF THE REVENUE DEPARTMENT WERE A TEA WALA AND CYCLE REPAI RER HAVING NO EDUCATIONAL CALIBER TO UNDERSTAND THE SEARCH PROCEE DINGS. THERE WAS NO INDEPENDENT RESPECTABLE WITNESS OF THE LOCALITY. HE HAS FURTHER INFORMED THAT AFTER UNDUE PRESSURE OF MORE THAN 24 HOURS STA RTING FROM 11.5.1993 THE STATEMENT WAS RECORDED ON 13.5.1993 AND THE SAI D DISCLOSURE WAS OBTAINED AT 2 OCLOCK IN THE NIGHT. THE ASSESSEE HA D NOT SLEPT THE WHOLE NIGHT OF 12.5.1993 AND THE SAID STATEMENT WAS RECOR DED DURING EARLY MORNING HOURS BETWEEN 2 AM TO 4 AM ON 13.5.1993 AT THE RESIDENTIAL PREMISES. THE SAID DIRECTOR HAD MADE A DISCLOSURE O F LUMP SUM AMOUNT OF RS. 1 CRORE. SHRI BABUBHAI P. SHAH WAS AGED ABOU T 65 YEARS AT THAT ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 18 - TIME HAVING SEVERAL PHYSICAL AILMENTS. THE SAID DIS CLOSURE WAS THEREAFTER DISCRETELY WORKED OUT AS UNEXPLAINED ASSETS IN THE FOLLOWING MANNER: NAME OF DIRECTORS/ IDENTIFICATION OF ASSETS AGAINS T DISCLOSURE CONCERNS WORKED OUT BY THE AUTHORIZED OFFICERS. ------------------------------------------------ --- GOLD ORNAMENTS CASH SHARES OTHER STOCK TOTAL JEWELLERY & VALUABLES SILVER ARTICLES ------------------------------------------------ -------- 1. MANUBHAI P. SHAH 1841927 125000 1 25000 200000 -------- 2366927 2. BABUBHAI P. SHAH 343000 35000 200000 200000 -------- 778000 3. MANEKLAL P. SHAH 1555948 200000 200000 151000 -------- 2131648 +24700 52,76,575 4. AGEW STEEL MFG. 3000000 3000000 PVT. LTD. 5. PREMANI PRODUCTS 1250000 1250000 6. P.P. INDUSTRIES 350000 350000 3740875 360000 6247000 551000 4600000 9876575 7. SHARES SEIZED FROM OFFICE PREMISES OF AGEW. PREMANI & P.P.IND. 258160 TOTAL 10134735 5.1 MR. SOPARKAR HAS THEREFORE EMPHASIZED THAT THE DISCLOSURE IN RESPECT OF THE STOCK WAS IN ROUND FIGURES HENCE MER ELY ON ESTIMATION. LEARNED AR HAS ALSO POINTED OUT THAT THE INVENTORY MADE BY THE REVENUE DEPARTMENT WAS PARTLY ON THE BASIS OF THE WORKING S HEETS, BUT PARTLY A ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 19 - ROUND FIGURE WAS ABRUPTLY ADDED IN THE INVENTORY. H E HAS POINTED OUT THAT FOR E.G. IN THE LIST OF FINISHED GOODS ITEM THERE W AS A FIGURE OF WEIGHT 52,800 KG WHICH WAS ADDED ON 15.5.1993. THIS FIGURE WAS UNDISPUTEDLY A ROUND FIGURE WHICH WAS ADDED IN THE LIST OF THE FIN ISHED GOOD ALTHOUGH IT WAS NOT FOUND AT THE FACTORY PREMISES. FURTHER HE H AS EMPHASIZED THAT THE WINDOWS WERE ESTIMATED BY A FIGURE OF 2400 AND THE WEIGHT WAS ESTIMATE 52,800 KG WHICH WAS NOT FOUND AT THE FACTORY. THAT WAS ADDED IN THE LIST AT THE BOTTOM IN ROUND FIGURE THEREFORE CASTED SERI OUS DOUBT ABOUT THE CORRECTNESS OF THE INVENTORY. HE HAS ALSO RAISED DO UBT IN RESPECT OF THE WEIGHT OF THE SCRAP WHICH WAS ALSO IN ROUND FIGURE. HE HAS, THEREFORE, PLEADED THAT THE ENTIRE EXERCISE OF PREPARATION OF INVENTORY WAS UNDERTAKEN TO MATCH THE DISCLOSURE OF THE STOCK MAD E BY ONE OF THE DIRECTOR. HE HAS REPEATED THAT THE SEARCH WAS START ED ON 11.5.1993 AND THE STATEMENT WAS RECORDED ON 13.5.1993 BUT THE INV ENTORY WAS FINALIZED ON 15.5.1993. IN FACT THE STATEMENT IN RESPECT OF T HE STOCK SHOULD HAVE BEEN MADE, IF FOUND IN EXCESS, ONLY AT THE COMPLETI ON OF THE PHYSICAL VERIFICATION OF THE STOCK. HOWEVER, THE SEARCH-PART Y HAD FIRST TAKEN THE STATEMENT & THEN BY ADDING THE ROUND FIGURES OF WEI GHT IN THE INVENTORY, ENHANCED ARBITRARILY THE VALUE OF THE STOCK. 5.2 LEARNED AR HAS DRAWN OUR ATTENTION THAT STOCK T AKING OF FINISHED PRODUCTS WAS ALREADY COMPLETED ON 12.05.1993 AND NO THING WAS INFORMED TO THE CONCERNED PERSON AS FINAL STOCK OF FINISHED PRODUCTS. THERE WAS NO FINISHED PRODUCTS STOCK TAKING CARRIED OUT ON 13 TH OR 14 TH . HOWEVER ON 15 TH ONE SINGLE ENTRY OF 2400 NOS. OF FINISHED PRODUCTS WERE SHOWN IN CUTTING SECTION OF THE FACTORY. THAT IS AL SO THE FACT THAT THE SAME ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 20 - CANNOT BE ACCOMMODATED IN THE SHOWN SPACE. IT IS ST RANGE TO NOTE THAT NOT A SINGLE WORKING PAPER WAS PREPARED TO SUBSTANTIATE THE AFORESAID STOCK VERIFICATION. WHEREAS FOR 11 TH & 12 TH DATES, THERE WERE 12 PAGES OF WORKING PAPERS AVAILABLE FOR FINISHED STOCK VERIFIC ATION. LIKE WISE, HE HAS ALSO INFORMED THAT THE WEIGHMENT OF PRESS STEEL DEPARTMENT WAS COMPLETED ON 12.05.2003 WITH THE QUANTITY OF 6780 K G. (35 ITEMS). WORKING PAPERS FOR THE AFORESAID VERIFICATION WAS P REPARED AND AVAILABLE. HOWEVER, ON THE 15 TH THERE IS AN ENTRY OF 19500 KGS. OF PRESS STEEL PRODUCTS FOR WHICH NOT A SINGLE WORKING PAPER WAS P REPARED AND MADE AVAILABLE. 5.3 LEARNED AR MR. S.N. SOPARKAR HAS EMPHASIZED THA T THE ASSESSEE HAS FURNISHED PROPER RECONCILIATION IN RESPECT OF R AW MATERIAL, SEMI- FINISHED GOODS AND FINISHED GOODS. IN SUPPORT HE HA S DRAWN OUR ATTENTION AT PAGES 389, 390 AND 391 OF THE PAPER BOOK. WE SHA LL DISCUSS THESE CHARTS IN RESPECT OF THE STOCK POSITION IN THE FOLL OWING PARAGRAPHS. LEARNED AR HAS ALSO DRAWN OUR ATTENTION AT PAGES 21 5 TO 417 OF PAPER BOOK II AND ARGUED THAT THE SEARCH PARTY HAS NOT PL ACED ON RECORD THE BASIS ON WHICH THOSE STOCKS WERE CALCULATED. ACCORD ING TO LEARNED AR THERE WERE NEITHER WEIGHMENT SLIPS NOR ANY WORKING PAPER WAS AVAILABLE IN THE RECORD OF THE REVENUE DEPARTMENT. IN SUPPORT OF THIS CONTENTION, HE HAS PLACED RELIANCE ON THE DECISION OF CIT VS. BANSAL HIGHCARBONS, 233 CTR 179 (DEL), WHEREIN AN OBSERVATION OF THE COURT WAS THAT THE TRIBUNAL RIGHTLY CAME TO THE CONCLUSION THAT IT WOU LD HAVE BEEN APPROPRIATE IF THE NUMBER OF BUNDLES AND THE AVERAG E WEIGHT WAS WORKED OUT ON SOME EMPIRICAL BASIS RATHER THAN THROUGH MER E GUESSWORK, IT ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 21 - APPEARS THAT DURING THE SEARCH, THE NUMBER OF BUNDL ES AND WEIGHT ESTIMATE IN RESPECT OF HALF A DOZEN BUSINESS CONCER NS WERE MADE WITHIN A FEW HOURS. THE SEARCH PARTY EITHER DID NOT HAVE THE NECESSARY TIME OR DID NOT HAVE THE NECESSARY EXPERTISE TO CORRECTLY ASSES S THE STOCK POSITION. AS SHORT-CUT APPEARS TO HAVE BEEN TAKEN BY THE SEARCH PARTY WHICH CAME TO A CERTAIN CONCLUSION ON AN ESTIMATE BASIS. IN LAW, AS IN LIFE, A SHORT-CUT IS OFTEN A WRONG CUT. THE MERE FACT THAT SOME EMPLOYEE OF THE ASSESSEE SIGNED THE PANCHNAMA DOES NOT MEAN THAT THEY CERTIF IED THE CORRECTNESS OF THE NUMBER OF BUNDLES OR THE AVERAGE WEIGHT OF E ACH BUNDLE. THEY ONLY CERTIFIED THAT THEY WERE WITNESSES TO THE PROCEEDIN GS. WHAT CONCLUSIONS HAVE TO BE DRAWN FROM THE PANCHNAMA IS OF NO CONCER N TO THOSE EMPLOYEES. OF COURSE, THE BEST METHOD OF DETERMININ G THE NUMBER OF BUNDLES AND THEIR AVERAGE WEIGHT WOULD BE TO ACTUAL LY COUNT THE BUNDLES AND USE MACHINES/CRANES FOR WEIGHING EACH BUNDLE. T HIS IS NO DOUBT A TEDIOUS EXERCISE BUT WHERE A LIABILITY IS SOUGHT TO BE FOISTED EXERCISING POWERS CONFERRED UPON IT UNDER THE ACT. MERE GUESS- WORK OR AN ESTIMATE CANNOT BE AN ADEQUATE SUBSTITUTE FOR A SCIENTIFIC I NVESTIGATION OR CARRYING OUT SOME EMPIRICAL STUDY. THE OFFICERS WHO CONDUCTE D THE SEARCH DID NOT WANT TO TAKE THE NECESSARY TROUBLE WHICH OF COURSE WOULD HAVE BEEN TIME CONSUMING, BUT THE IMPACT OF MAKING A GUESS ESTIMAT E CAN BE QUITE DAMAGING INSOFAR AS THE ASSESSEE IS CONCERNED. THE ASSESSEE CANNOT BE MADE TO SUFFER THE CONSEQUENCES OF LETHARGY ON THE PART OF THE OFFICERS OF THE REVENUE. UNDER THESE CIRCUMSTANCES, THE TRIBUNA L RIGHTLY CAME TO THE CONLUSION THAT THE ALLEGED EXCESS STOCK CALCULATED BY THE REVENUE NEEDS TO BE DELETED. NO SUBSTANTIAL QUESTION OF LAW ARISE S. ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 22 - 5.4 RELIANCE HAS ALSO BEEN PLACED ON BANSAL STRIPS (P) LTD. 99 ITD 177 (DEL) . DECISION : 6. BEFORE WE PRONOUNCE OUR VERDICT IT IS WORTH TO M ENTION AT THIS JUNCTURE THAT THESE GROUP OF APPEALS WERE PENDING I N THE TRIBUNAL SINCE PAST SO MANY YEARS BECAUSE OF THE MAIN REASON THAT A LEGAL MATTER WAS PENDING BEFORE THE CIVIL COURT AND AN ENQUIRY FROM CBI DEPARTMENT WAS RECOMMENDED BY A COURT ORDER. BUT AFTER A LAPSE OF A DECADE NO PROGRESS WAS STATED. WE CAN NOT KEEP THESE APPEALS PENDING A NY MORE. IT IS NOT JUSTIFIABLE. HEREINAFTER WE PROCEED TO DECIDE THE I SSUES RAISED BEFORE US BUT SUBJECT TO A RIDER THAT THE OUT-COME OF THE SAI D LEGAL MATTER CAN BE APPLIED ON THIS APPEAL IF LEGALLY REQUIRED AND THAT OUR VIEW SHALL NOT EFFECT THOSE PROCEEDINGS IN ANY MANNER. SUBJECT TO THIS OBSERVATION, WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES. CERTA IN POINTS RAISED BEFORE US FROM BOTH THE SIDES ARE DEALT WITH AS UNDER. A) THE YEAR OF ASSESSMENT ? : 6.1 AS FAR AS THE QUESTION OF ASSESSMENT FO R THE YEAR UNDER CONSIDERATION IS CONCERNED SINCE THE SEARCH WAS CON DUCTED ON 11.5.1993 THEREFORE THE CONNECTED ACCOUNTING PERIOD HAS ENDED ON 31 ST MARCH, 1994, RELEVANT FOR THE ASSESSMENT YEAR 1994-95. THE REFORE, THE POSITION OF THE EXCESS STOCK WAS RIGHTLY CONSIDERED IN THE A SSESSMENT YEAR 1994- 95. ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 23 - B) LEGAL POSITION OF A STATEMENT RECORDED U/S 132(4): 6.2 FROM THE SIDE OF THE REVENUE, A VEHEMENT RELIA NCE HAS BEEN PLACED ON THE STATEMENT RECORDED U/S 132(4) OF IT A CT. WE HAVE EXAMINED THE CIRCUMSTANCES UNDER WHICH THE SAID STA TEMENT WAS RECORDED. THE SATID STATEMENT OF MR.BABUBHAI P.SHAH , DIRECTOR, WAS RECORDED AT HIS RESIDENCE ON 13.5.1993 STATED TO BE AT THE WEE-HOURS I.E. AT AROUND 2:00 AM TO 3:AM IN THE MORNING. THE ASSES SEES STRONG OBJECTION BEFORE US IS THAT FROM 11 TH MAY ONWARDS AND UP TILL THE TIME THE STATEMENT WAS RECORDED THE ASSESSEE WAS UNDER MENTA L STRESS THEREFORE THAT STATEMENT CANNOT BE SAID TO BE MADE IN A PROPE R STATE OF MIND. THE SAID HAD NOT SLEPT PROPERLY. AN ANOTHER OBJECTION O F THE ASSESSEE IS THAT THE DISCLOSURE IN RESPECT OF THE EXCESS STOCK OF RS .30 LACS WAS MERELY ON AN ESTIMATION BECAUSE THE INVENTORY OF THE STOCK CO ULD NOT BE COMPLETED BY THAT TIME. THE ASSESSEE HAS DEMONSTRATED THAT TH E INVENTORY OF THE STOCK WAS CARRIED OUT UPTO 15.05.1993. THIS IS ALSO AN ADMITTED REALTY. A STATEMENT IN RESPECT OF THE DISCLOSURE ABOUT THE ST OCK, THEREFORE, SHOULD HAVE BEEN MADE AFTER THE COMPLETION OF THE INVENTOR Y ON 15.05.1993. IT HAS ALSO BEEN BROUGHT TO OUR NOTICE THAT IMMEDIATEL Y THEREAFTER THE SAID STATEMENT WAS RETRACTED ON 15 TH JUNE, 1993 . THE ASSESSEE HAS ALSO MADE RETRACTION STATEMENT/PETITIONS ON 28.7.1993 AND 10. 8.1993. IN THIS CONNECTION CITED A DECISION OF HONBLE JURISDICTION AL HIGH COURT PRONOUNCED IN THE CASE OF KAILASBEN MANOHAR LAL CHOKSHI, 328 ITR 411 (220 CTR 138) (GUJ ). IN THE SAID CASE, A STATEMENT U/S 132(4) WAS RECORDED AT THE MIDNIGHT ON THE DATE OF THE SEARCH AND THAT STATEMENT WAS RETRACTED BY THE ASSESSEE AFTER TWO MONTHS. THE AO HAS NOT CONSIDERED ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 24 - THE RETRACTION ON THE GROUND THAT THE SAME WAS MADE AFTER A DELAY OF TWO MONTHS. ACCORDING TO THE HONBLE COURT, IT WAS TOO MUCH TO GIVE ANY CREDIT TO A STATEMENT RECORDED AT MIDNIGHT WHEN A P ERSON WOULD NOT BE IN A POSITION TO MAKE A CORRECT DISCLOSURE. FURTHER TH AT STATEMENT SHOULD BE VIEWED IN THE LIGHT OF THE EVIDENCES FOUND AT THE TIME OF SEARCH. IN THAT CASE, IT WAS FOUND THAT THERE WAS NO EVIDENCE BROUG HT ON RECORD BY THE REVENUE IN SUPPORT OF THE DISCLOSURE. WE ARE ALSO O F THE VIEW THAT IN A SITUATION WHEN THE EXERCISE OF VALUATION OF THE STO CK WAS UNDER PROGRESS AND THAT WAS NOT COMPLETED THEN THE STATEMENT OUGHT TO HAVE BEEN RECORDED AFTER THE COMPLETION OF THE PREPARATION OF THE STOCK INVENTORY. FROM THE SIDE OF THE REVENUE, THE DECISION OF V. KUNHAMBU & SONS VS. CIT,219 ITR 235(KER) (SUPRA) HAS BEEN CITED BUT THE FACTS OF THAT PRECEDENT HAVE REVEALED THAT ONE OF THE PARTNER OF THE FIRM HAD COME FORWARD TO DISCLOSE ABOUT THE NON ENTRY OF THE EXCE SS STOCK IN THE REGISTER FOUND DURING THE COURSE OF SEARCH. THEN IT WAS HELD THAT THERE WAS NO REASON WHY THE ITO SHOULD NOT MAKE USE OF THE STATE MENT. ANOTHER OBSERVATION OF THE HONBLE COURT WAS THAT THERE WAS NOTHING IN THE EVIDENCE TO SHOW THAT THE ITO HAD INTIMIDATED/THREA TENED THE ASSESSEE IN GIVING THE SAID STATEMENT IN THE COURSE OF SEARCH. ON THE OTHER HAND, IN THIS APPEAL, WHILE RECORDING THE STATEMENT THERE WA S NO EVIDENCE/ MATERIAL PLACED BEFORE THE SAID DIRECTOR TO INFORM HIM THAT UNACCOUNTED STOCK WAS UNEARTHED AS PER THE DETAILS PREPARED HEN CE HE HAD NO OPTION BUT TO MAKE A DISCLOSURE. IN THE LIGHT OF THE ABOVE DISCUSSION IT CAN BE CONCLUDED THAT A STATEMENT RECORDED U/S 132(4) IS A PIECE OF EVIDENCE, IF IT IS NOT A BALD STATEMENT; I.E. DULY SUPPORTED BY A C ORROBORATIVE EVIDENCE. SO THE CONCLUSION IS THAT WHEN CERTAIN GLARING EVID ENCES ARE IN POSSESSION ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 25 - OF THE REVENUE DEPARTMENT AND THOSE EVIDENCE ARE SH OWN TO THE ASSESSEE, THEREUPON IF AN OFFER IS MADE, THEN IT I S UNDERSTANDABLE THAT SUCH A DISCLOSURE HAS TO BE ACCEPTED BEING CORROBOR ATED BY A COGENT EVIDENCE. IF THESE INGREDIENTS ARE ABSENT THEN AN O FFER ON ESTIMATION IS NOT VERY MUCH RELIABLE. THE MANNER IN WHICH THE IMPUGN ED STATEMENT WAS RECORDED WHICH WAS ALSO RETRACTED IMMEDIATELY AND T HE WAY IN WHICH THE DEPONENT HAD MADE ESTIMATED DISCLOSURE OF THE ALLEG ED UNACCOUNTED STOCK HAD THUS RAISED FEW DOUBTS. IN SUCH PECULIAR CIRCUM STANCES OF THIS CASE IT IS NOT JUSTIFIABLE TO TREAT SUCH STATEMENT AS A CON CLUSIVE EVIDENCE, TO BE USED AGAINST THE ASSESSEE. C) LEGAL POSITION ABOUT RETRACTION : 6.2.1 WE HAVE EXAMINED THE DECISION OF VIDEO MASTER 83 ITD 102 (SUPRA), CITED BY LEARNED DR, WHEREIN A RETRACTION WAS FILED AFTER ABOUT A MONTH AND THAT RETRACTION WAS REJECTED. IN FACT, TH E SAID RETRACTION WAS MADE WITHOUT ANY BASIS HENCE IT WAS HELD THAT THE R ETRACTION WAS NOTHING BUT AN AFTERTHOUGHT TO COVER UP UNDISCLOSED INCOME. CONTRARY TO THAT, IN THIS APPEAL WE HAVE NOTED THAT, IN THE RETRACTION I N QUESTION, THERE WAS AN ALLEGATION OF THE DURESS AND MENTAL PRESSURE ON THE DIRECTOR. THE EVIDENCE WAS THE TIME ITSELF (I.E. 2:00 TO 3:00 AM AT NIGHT) WHEN THE IMPUGNED STATEMENT WAS RECORDED. IT WAS QUITE AN OD D TIME TO RECORD A STATEMENT. IN ADDITION TO THIS, THE MAIN REASON GIV EN FOR THE RETRACTION WAS THAT THE WEIGHMENT MADE BY THE SEARCH PARTY WAS NOT PRACTICALLY POSSIBLE WITHIN THAT PERIOD. THEREFORE IT CAN BE ASSUMED THA T THE RETRACTION WAS NOT WITHOUT ANY BASIS. RATHER THROUGH THE SAID RETRACTI ON CERTAIN SERIOUS ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 26 - QUESTIONS HAVE BEEN RAISED ABOUT THE CORRECTNESS OF THE PROCEDURE. IDENTICAL WAS THE SITUATION IN THE DECISION OF HIRA LAL MANGAL LAL, 96 ITD 113 (SUPRA); BECAUSE THE ADMISSION WAS MADE ON THE BASIS OF THE INVENTORY OF THE UNACCOUNTED STOCK FOUND AT THE TIM E OF SEARCH. SO THE CONCLUSION IS THAT WHEN CERTAIN GLARING EVIDENCES A RE IN POSSESSION OF THE REVENUE DEPARTMENT AND THOSE EVIDENCE ARE SHOWN TO THE ASSESSEE, THEREUPON IF AN OFFER IS MADE, THEN IT IS UNDERSTAN DABLE THAT SUCH A DISCLOSURE HAS TO BE ACCEPTED BEING CORROBORATED BY A COGENT EVIDENCE. IF THESE INGREDIENTS ARE ABSENT THEN AN OFFER ON ESTIM ATION IS NOT VERY MUCH RELIABLE. ALTHOUGH THE GENERAL RULE IS THAT A STATE MENT MADE BEFORE AN AUTHORITY CAN NOT BE CHANGED, BUT IF THERE IS NO MA TERIAL TO PROVE THAT THE EARLIER STATEMENT WAS NOT FREE FROM DOUBT, THEN THA T EARLIER STATEMENT BECOME UNBELIEVABLE, THUS CAN BE RETRACTED. THE STA TEMENT RELIED UPON AND TREATED AS AN EVIDENCE BY THE REVENUE DEPTT THU S DEVOID MERIT DUE TO THE FACT THAT THE SAME REMAINED UN-CORROBORATED. SUCH A STATEMENT CAN BE RETRACTED AND THAT RETRACTION IS LEGALLY PERMISS IBLE D) DOUBTS ABOUT THE INVENTORIES OF THE STOCK ? : 6.3 FROM THE SIDE OF THE REVENUE, LEARNED DR HA S VEHEMENTLY OBJECTED THAT IT IS WRONG ON THE PART OF THE ASSESS EE TO OBJECT THE CORRECTNESS OF THE INVENTORIES PREPARED BY THE SEAR CH PARTY SPECIALLY WHEN THOSE ENTRIES WERE MADE IN THE PRESENCE OF THE INDEPENDENT WITNESSES, WHO WERE PRESENT THROUGH-OUT. AT THAT PO INT OF TIME THERE WAS NO ALLEGATION THAT SOME IRREGULARITY WAS MADE BY TH E REVENUE AUTHORITIES, LD. DR HAS EMPHASIZED. ACCORDING TO DR THERE WAS ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 27 - SUFFICIENT MAN POWER TO MANUALLY EXAMINE THE STOCK. HOWEVER, THESE ARGUMENTS OF LEARNED DR WERE VERY STRONGLY CONTRADI CTED FROM THE SIDE OF THE RESPONDENT ASSESSEE. FACTS OF THE CASE HAVE REVEALED THAT IN FIRST FOUR DAYS WITH THE HELP OF 396 MAN HOURS THE SEARCH PARTY WAS ABLE TO WEIGH ONLY 2,39,144 KG . OUT OF WHICH, 65,574 KG WAS SENT OUTSIDE IN TRUCKS FOR THE PURPOSE OF WEIGHMENT. MEANING THEREBY, BY ADOPTING MANUAL METH OD THE SEARCH PARTY WAS ABLE TO WEIGH ONLY 1,73,570 KG IN FIRST F OUR DAYS OF THE SEARCH. HOWEVER, ON 15.5.1993 , IT WAS FOUND THAT WITH THE HELP 13 PERSONS IN 8 HOURS THE WEIGHMENT OF 3,06,419 KG WAS CONDUCTED. WE HAVE BEEN INFORMED THAT OUT OF WHICH 14,720 KG WAS SENT OUTSI DE FOR WEIGHMENT IN TRUCKS. MEANING THEREBY, 2,91,699 KG WAS CLAIMED TO HAVE BEEN WEIGHED MANUALLY BY THE SEARCH PARTY ON A SINGLE DAY I.E. O N 15.5.1993. AS PER THE CALCULATION FURNISHED THE AVERAGE WEIGHMENT WAS 2,9 46 KG /MAN/HOUR, WHICH WAS FIVE TIMES THE AVERAGE RECORDED IN FIRST FOUR DAYS AT 603 KG PER / MAN / HOUR. ON HEARING BOTH THE SIDES AND ON DUE CONSIDERATION OF THE NATURE OF INVESTIGATION IT APPEARS THAT AN ARDUOUS TASK WAS UNDERTAKEN BY THE REVENUE DEPARTMENT TO PREPARE AN INVENTORY OF T HE STOCK OF IRON ARTICLES FOR WHICH PROPER WEIGHING SCALE WAS REQUIR ED. FOR FIRST TWO DAYS THE LIST/INVENTORY APPEARS TO BE METHODICAL, BUT ON THE CONCLUDING DAY THERE WAS SOME QUALM IN THE WEIGHTS OF THE ARTICLES RECORDED. FIRST AND FOREMOST DISQUIET PERTAINED TO THE WEIGHT OF THE ST OCK BEING NOTED IN THE ROUND FIGURES, WHICH WAS AN IMPOSSIBILITY. NEXT RES ERVATION IS THAT THERE WERE NO WORKING SHEETS AVAILABLE IN RESPECT OF TH E STOCK VALUED ON THE LAST DAY OF THE SEARCH. ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 28 - SO, WHATEVER WAS THE CONTROVERSY ABO UT THE DEPLOYMENT OF THE SEARCH OFFICERS BUT ONE THING WAS AT AMISS THAT THE WORKING SHEETS OF THE ENTIRE STOCK-WEIGHT-WISE-VALUATION WAS NOT ON EMPIR ICAL BASIS. THE WORKING SHEETS OF INITIAL DAYS WERE STATED TO BE AV AILABLE, BUT THE WORKING SHEETS OF THE FINAL DAY WERE NOT COMPLETE IN ALL RE SPECT. THEREFORE, THE OBJECTION RAISED BY THE ASSESSEE CANNOT BE RULED OU T OR REJECTED ON THE FACE OF IT. THIS IS THE MAIN CONTROVERSY THROUGH WH ICH THE ASSESSEE HAS OBJECTED THE MANNER IN WHICH THE UNACCOUNTED STOCKS WAS CALCULATED. STILL IN THE FOLLOWING PARAGRAPHS WE SHALL TRY TO E XAMINE THE CORRECTNESS OF THE INVENTORIES TO ASSESS THE VERACITY OF THE AL LEGATION. 6.4 IN THIS CONNECTION, WE HAVE EXAMINED THE DECISI ON OF BANSAL HIGHCARBONS 233CTR179(DEL.) (SUPRA), RELEVANT PORTION EXTRACTED FROM THE ORDER. IN A SITUATION, WHEN A SEARCH PARTY DID NOT HAVE THE NECESSARY TIME TO CORRECTLY ASSESS THE STOCK POSITI ON THEN THE SHORTCUT METHOD IF ADOPTED MUST NOT BE APPRECIATED. THE HON BLE COURT HAS THEREFORE COMMENTED, A SHORTCUT IS OFTEN A WRONG C UT. WE HAVE EXAMINED CERTAIN ANNEXURES AND HAVE NOTED THAT CERT AIN FIGURES WERE ADDED IN THE LIST AND THOSE FIGURES APPEARS TO BE I N THE ROUND FIGURES. THE ASSESSEE HAS OBJECTED ONLY THOSE FIGURES WHICH WERE ADDED IN ROUND FIGURES. THE OBJECTION IS THAT SIMPLY AN ESTIMATION WAS MADE AND THE VALUE OF THE STOCK WAS INFLATED. RATHER, THE ASSESS EES CONTENTION IS THAT THERE WAS NO SUCH STOCK FOUND AT THE FACTORY PREMIS ES AND THOSE ROUND FIGURES WERE ADDED TO INFLATE THE VALUE OF THE STOC K SO THAT THE ALLEGED UNACCOUNTED STOCK WOULD MATCH WITH THE DISCLOSURE E XTRACTED FROM THE DIRECTOR. AT THIS JUNCTURE, WE WANT TO MAKE IT CLEA R TO BOTH THE SIDES AND ESPECIALLY THE RESPONDENT ASSESSEE THAT THE TRIBUNA L IS NOT AN ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 29 - ADMINISTRATIVE AUTHORITY BUT A JUDICIAL AUTHORITY. THEREFORE, WE HAVE NO RIGHT OR POWER TO COMMENT IN ANY MANNER ABOUT THE A DMINISTRATIVE FUNCTIONING OF THE REVENUE DEPARTMENT. WE HAVE TO E XAMINE THE CORRECTNESS OF THE EVIDENCES PLACED BEFORE US AND A LSO TO ARRIVE AT A FAIR AND JUSTIFIABLE RESULT. WE HAVE BEEN INFORMED THAT THE ASSESSEE HAD MADE A COMPLAINT AND THE RESULT OF THE SAME IS STILL AWAITED. WE HAV E ALSO BEEN INFORMED THAT DUE TO THE PENDENCY OF THE SAID COMPLAINT FOR MORE THAN 10 YEARS THESE APPEALS WERE NOT TAKEN ON ONE PRETEXT OR THE OTHER. HOWEVER, AS PER THE NOTING OF THE ORDER SHEET ON NUMBER OF OCCASION S IN THE PAST THE RESPECTED BENCHES HAVE MADE CERTAIN STRONG OBSERVAT IONS THAT THESE APPEALS SHOULD BE DECIDED BEING VERY OLD APPEALS AN D THAT THERE WAS NO NECESSITY TO AWAIT FOR THE OUTCOME OF THE PENDING L ITIGATION. RATHER, AS PER THE ORDER SHEET DATED 12 TH OF MARCH, 2013 AFTER CONSIDERING THE FACTS OF THE CASE IT WAS HELD BY THE BENCH THAT THESE CAS ES SHOULD BE HEARD WITHOUT FURTHER WAITING FOR THE OUTCOME OF THE LITI GATION HENCE, TWO DAYS ARE BLOCKED FOR THE HEARING AND DISPOSAL OF THESE C ASES. RATHER, IT WAS DIRECTED TO BOTH THE SIDES NOT TO SEEK ADJOURNMENT. MEANING THEREBY, THE LITIGATION, IF ANY INVOLVED, IN RESPECT OF THE PROC EDURE FOLLOWED BY THE REVENUE DEPARTMENT REMAINED PENDING FOR MORE THAN A DECADE WITHOUT ANY RESULT THUS HAS NO SUBSTANTIAL BEARING ON THE F ACTUM OF THE CASE. 6.5 WE HAVE EXAMINED SOME OF THE SUMMARY OF STOCK VALUATION FILED BEFORE US, WHICH ARE IN RESPECT OF RAW MATERI AL, SEMI-FINISHED GOODS AND FINISHED GOODS. AS ON 15.5.1993 THE POSITION AS RECORDED BY THE DEPTT. WAS AS UNDER : ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 30 - SUMMARY OF STOCK VALUATION ITEM WEIGHT VALUE 1 FINISHED 12.05.93 63968 13.05.93 0 14.05.93 206 15.05.93 52800 116974 KGS RS. 19 00827 @ 16.25 2 SEMI FINSHED INCLUDING FIXTURES & FITTINGS 12.05.93 6780 13.05.93 39096 14.05.93 29267 15.05.93 57996 133139M KGS RS. 2163508 @ 16.25 3 RAW MATERIALS 12.05.93 67190 13.05.93 0 14.05.93 31625 15.05.93 147513 246328 KGS RS. 3079100 @12.50 4 SCRAP 12.05.93 0 13.05.93 0 14.05.93 1012 15.05.93 48110 49122 KGS RS. 221049 @ 4.50 5 TOOLS & SPARES . 5,45,563 RS. 310000 RS. 7674484 STOCK & ELECTRICAL ITEM AS 6 PER STATEMENTS PAGE 13 RS. 1034048 GRAND TOTAL RS. 8708532 6.5.1 THE ASSESSEE HAS PLACED ON RECORD AN EXHIB IT-II TO DEMONSTRATE THAT ON THE FINAL DAY OF 15.5.93 THE WEIGHT WAS NOT ACTUALLY MEASURED. ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 31 - ACCORDING TO ASSESSEE IT WAS NOT PRACTICALLY POSSIB LE TO WEIGH THE IRON/STEEL ITEMS OF FINISHED, SEMI FINISHED, RAW MA TERAIL ETC WEIGHING IN TOTAL 3,06,419 KG IN A DAY. HAD IT BEEN DONE THE RE OUGHT TO BE WORKING SHEETS OF THE CALCULATION. THERE WAS NO WORKING SHE ET IN RESPECT OF 2,14,903 KG OF STOCK, WE HAVE BEEN INFORMED. THE PO SITION IN FIGURES WAS AS UNDER :- EXHIBIT II DATE NO. OF PERSONS HOURS WORKING TOTAL QTY . MATERIAL MATERIAL MANIPULATED/ AVERAGE AVERAGE WORKING EMPLOYED OF HOURS OF WEIGHED WEIGHED FABRICATE D MATERIAL MATERIAL SHEETS SEARCH OF PHYSICAL BY TRUCK BY IN STOCK BY WEIGHED WEIGHED AVAILABLE PHYSICAL STOCK HOUSE SEARCH PART Y PER MAN PER HOUR FOR ACTUAL VERIFICA- SC ALE HOUR MATERIAL TION WEIGHED 11 11 36 HRS 9HRS 137938 KG 33949 103989 KG --- 528 7 663 KG 137938 KG & 12 TH 15 9 HRS 13 10 6 HRS 5 HRS 39096 KG - 39096 KG -- 781 7819 39096 K G 14 16 8 HRS 7 HRS 62110 KG 31625 KG 30485 KG -- 554 8873 62110 KG 15 13 14 HRS 8 HRS 3 06419 KG 14720 76796 KG 214903 2946 38302 91516 KG -------------- ---------- ------- ---- 5455 63 330660 KG ACTUAL COUNTING OF STOCK DONE BY THE SEARCH PARTY O N THE 15 TH 15 TH 13 14 HRS 9 HRS 91516 -- -- -- 880 11439 WORKING SHEET FOR ACTUAL WEIGHMENT 214903 KG NOT AVAILABLE ----------- TOTAL WT. 545563 KG 6.5.2 SO, THE ASSESSEES RECONCILIATION WAS AS UNDER : EXHIBIT-VII A RECONCILITAION STATEMENT BETWEEN PHYSICAL STOCK NOT ED BY THE SEARCH PARTY AND BOOK STOCK. --------------------------------------------------- --------------------------------------------------- ---------- I) PHYSICAL STOCK TAKEN AND NOTED BY THE SEARCH PARTY FROM 11.05.93 TO 14.05.93 ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 32 - 11TH &12 TH 137938 KGS 13TH 39036 KGS 14 TH 62110 KGS 239.1 TONNES ------------------------- II) PHYSICAL STOCK TAKEN AND NOTED BY THE SEARCH PARTY ON 15.05.93 91.5 TO NNES III) PHYSICAL STOCK MANIPULATED AND FABRICATED BY THE SEARCH PARTY ON 15.05.93 214.5 TONNES 545.1 TONNES LESS: PHYSICAL STOCK MANIPULATED AND FABRICATED ON 15.05.93 AND WORKING SHEET FOR ACTUAL WEIGHMENT NOT AVAILABLE TILL DATE [MARKED/HIGHLIGHTED ENTRIES ALREADY SUBMITTED TO VARIOUS AUTHORITES] 214.5 TONNES 330.6 TONNES LESS: STOCK POSITION AS PER BOOKS AS ON 10.05.93 338.6 TONNES (-) 8.0 TONNES ADD: STOCKS OF EXCISABLE ITEM STORED IN THE BONDED STORES NOT PHYSICALLY VERIFIED/NOTED BY THE SEARCH PARTY. 3.0 TONNES DIFFERENCE/ MINOR DISCREPANCY WHICH MAY BE DUE TO NON OBSERVANTS OF PROPER PLACEMENT OF MATERIALS ON WEIGHING SCALE AND OTHER FACTORS. (-) 5.0 TONNES 6.6 DESPITE THE FACT THAT A TEDIOUS EXERCISE WAS UN DER TAKEN BY THE REVENUE OFFICERS BUT WHERE A RESPONSIBILITY IS FOIS TED AND POWERS ARE CONFERRED THEN MERE GUESS-WORK OR AN ESTIMATION IS NOT AN ADEQUATE SUBSTITUTE. IT IS EXPECTED THAT A SCIENTIFIC AS ALS O A METHODICAL INVESTIGATION IS EXPECTED TO BE CARRIED OUT BY THE TEAM OF REVENUE OFFICERS, WHO ARE THE EXPERTS OF THE SUBJECT. IT IS TRUE THAT ON SOME ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 33 - OCCASION IT IS A TIME CONSUMING EXERCISE, BUT MUST NOT BE REPLACED WITH A SUPPOSITION. AT LEAST A TAX PAYER MUST NOT SUFFER B ECAUSE OF ANY SUCH LAPSES. SIMULTANEOUSLY, IT IS ALSO NOT EXPECTED NOR IT CAN BE DEMANDED BY THE ASSESSEE THAT EACH AND EVERY ITEM, SPECIALLY HE AVY ARTICLES, ARE TO BE WEIGHED BY THE REVENUE TO ITS LAST DECIMAL POINT. A PRACTICALLY FEASIBLE APPROACH IS REQUIRED TO BE ADOPTED. AN ARBITRARINES S IS TO BE AVOIDED. A METHOD, SO ADOPTED, MUST APPEAL TO THE COMMON SENSE . 6.7 FROM THE ABOVE DETAILS A CALCULATION EMERGE S THAT THE WEIGHT OF ALL THE ITEMS IN TOTAL WAS 5,45,563 KG. { FINISHED 1, 16,974 KG; SEMI FINISHED -1,33,139 KG.; RAW MATERIAL- 2,46,328 KG; & SCRAP- 49,122 KG.}. OUT OF WHICH THE WEIGHT WHICH WAS MEASURED BY THE SEARCH PARTY ON 15.5.93 WAS 3,06,419 KG. { FINISHED 52,800 KG; SEMI FINISHED 57,996 KG.; RAW MATERIAL-1,47,513 KG.; SCRAP-48,110 KG.}. IT WAS FOUND THAT 91.5 TONNES WAS PHYSICALLY VERIFIED ON 15.5.93 . THEREFORE THE DISPUTE, IN FACT, WAS IN RESPECT OF THE 214.5 TONNE S { 3,06,419 KG 91500 KG }. PRESENTLY, AFTER MORE THAN 10 YEARS, IT IS NO T POSSIBLE TO RE-VERIFY ALL THOSE WORKING SHEETS. WE HAVE NO ALTERNATIVE BUT TO RELY UPON THE STATEMENTS/ ARGUMENTS MADE BEFORE US. WE HAVE BEEN INFORMED THAT THE POSITION OF THE STOCK AS ON 31.3.93 WAS AS UNDER : DETAILS OF STOCK POSITION AS ON 31/03/93. KGS. KGS. OPENING STOCK : RAW MATERIAL 331017 SEMI FINISHED GOODS 24662 FINISHED GOODS 27834 ------------ ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 34 - 383513 ADD : PURCHASES : RAW MATERIAL (STEEL) 2648081 ------------ 3031594 LESS : RAW MATERIAL SALES 1592012 FINISHED GOODS SALES 1081018 --------- 2673030 --------- CLOSING STOCK : (A) 358564 --------- PHYSICAL STOCK AS ON 31/03/93 RAW MATERIALS 191500 SEMI FINISHED GOODS 105500 FINISHED GOODS 46700 -------- 343700 -------- BURNING LOSS (B) 343700 DIFF OF A - B SALES 14864 SALES 1081018 @ 1.35% DETAILS OF STOCK POSITION ON THE DATE OF SEARCH KGS . OP. STOCK 343700 ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 35 - ADD : PURCHASES RAW MATERIAL (STEEL) 133430 ---------- 477130 LESS : FINISED GOODS SALES 136620 ---------- CLOSING STOCK AS PER BOOKS (A) 3405 10 ------------- ---------- PHYSICAL STOCK AS ON THE DATE OF SEARCH : ----------------------------------------- RAW MATERIALS 185096 SEMI FINISHED 78469 FINISHED GOODS 63968 OTHERS 11019 ------- ----------- (B) 338552 ----------- WORKING FOR % OF BURNING LOSS. DIFF. OF A - B 1958 SALES + 136620 138578 @ 1.41 % 6.8 AS PER THE ABOVE CHART THE CLOSING STOCK AS P ER BOOKS WAS STATED TO BE 3,58,564 KG. TO MATCH THIS FIGURE THE ASSESSEE I S GIVING AN EXCUSE OF BURNING-LOSS. BUT THERE WAS NO BURNING IN THE PRO CESS. NEITHER THERE ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 36 - WAS ANY FURNACE NOR IT WAS DEMONSTRATED PRACTICALLY . WE CAN NOT THEREFORE ENDORSE THIS ARGUMENT. THE WEIGHT OF THE STOCK AS PER THE BOOKS MUST BE MADE THE BASIS FOR THE CALCULATION OF THE D ISCREPANCY IN STOCK, IF ANY. HENCE WE HEREBY REPLACE THE WEIGHT OF THE OP.S TOCK AS ON 1.4.93 AS UNDER AND THEN ARRIVE AT THE AVAILABLE WEIGHT AS ON THE DATE OF SEARCH :- I] OPENING STOCK . .. 3,58,568 KG. II] ADD; PURCHASES(STEEL-RAW MATERIAL). .1,33,430 KG 4,91,998 KG III]LESS; SALE ( FINISHED GOODS). 1, 36,620 KG IV] CLOSING STOCK AS PER BOOKS 3,5 5,378 KG 6.9 IN THE RECONCILIATION, AS REPRODUCED ABOVE, THE ASSESSEE HAS ARRIVED AT THE FIGURE OF STOCK AT 330.6 KG, AFTER REDUCING 214.5 KG. AS AGAINST THAT WEIGHT OF STOCK WHICH WAS CALCULATED IN THE LIGHT O F THE WHEIGHMENT DONE BY THE REVENUE DEPTT., THE WEIGHT AS PER BOOKS WAS 355.3. WHICH MEANS THERE WAS A DISCREPANCY OF 24.7 TONNES ( 355.3 TON NES 330.6 TONNES.). WE ARE NOT ALLEGING THAT EITHER IT WAS UNACCOUNTED PURCHASE OF STEEL OR IT WAS ON ACCOUNT OF SALES MADE OUT SIDE THE BOOKS OF ACCOUNTS, BUT WE ARE ON THE POINT THAT THERE WAS AN INCONGRUITY FOR WHIC H AN ADDITION IS QUITE REASONABLE. OWING TO THIS CALCULATION ANY LEAKAGE I S COVERED UP. AN AVERAGE RATE OF FINISHED, SEMI-FINISHED AND RAW-MAT ERIAL IS 16.49/KG. THIS IS TO BE APPLIED ON 24700 KG. IN TERMS OF AMOU NT THE VALUE COMES TO RS. 4,07,303/-. THE ADDITION AS MADE BY THE A.O. IS RESTRICTED TO THIS FIGURE AND THE ORDER OF LD. CIT(A) IS MODIFIED ACCO RDINGLY. RESULTANTLY, GROUND OF THE REVENUE IS PARTLY ALLOWED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 37 - B. AGEW STEEL MFG. ( 1186/AHD/2000,A.Y.1994-95)(ASSESSEES APPEAL): 8. THE ONLY GROUND RAISED BY THE ASSESSEE IS IN RES PECT OF CONFIRMATION OF DISALLOWANCE OF RS.32,425/- PERTAINING TO COMMISSION PAYMENT TO M/S,. RAJ CO. AND M/S. AGEW CASEMENT. 9. IT WAS NOTED THAT THE ASSESSEE HAD PAID COMMISSI ON TO THE SAID TWO PARTIES, WHICH WERE STATED TO BE COVERED U/S 40A (2 )(B) OF IT ACT. THE OBSERVATION OF THE AO IS REPRODUCED BELOW: IT IS FOUND THAT THE ASSESSEE HAS PAID COMMISSION I NTER ALIA TO M/S. AGEW CASEMENT AND M/S. RAJ CORPORATION DURING THE YEAR U NDER CONSIDERATION. THESE TWO FIRMS ARE PERSONS COVERED BY U/S 40(2)(B) . AT THE TIME OF ASSESSMENT OF M/S. AGEW CASEMENTS, IT WAS FOUND THAT THE ASSES SEE HAD PAID COMMISSION TO AGEW CASEMENTS AT THE RATE OF 7.5% IN RESPECT OF SALES TO GANNON DUNKERLEY AND CO. THE COMMISSION RECEIVED BY AGEW C ASEMENT FROM THE ASSESSEE WAS AT RS.7,693/- AT THE RATE OF 7.5% ON S ALES OF RS.1,02,579/-. M/S. GANNON DUNKERLEY & CO. IN ITS REPLY STATED THAT IT MADE PURCHASES FROM THE ASSESSEE COMPANY DIRECTLY AND NO INTERMEDIARY WAS I NVOLVED. SIMILARLY, THE ASSESSEE HAS PAID ANOTHER SUM OF RS. 14,636/- TO M/S. AGEW CASEMENT IN RESPECT OF SALES MADE TO M/S. AMIT SPIN NING INDUSTRIES LTD. WHO HAVE INFORMED THAT THEY HAD MADE PURCHASES DIRECTLY FROM THE ASSESSEE NOT THROUGH AGEW CASEMENTS. TOTAL COMMISSION PAID BY TH E ASSESSEE THUS COMES TO RS.7,693/- + 14,636/- TOTALING RS.22,329/-. 10. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST AP PELLATE AUTHORITY, CHALLENGING THE ADDITION, IT WAS HELD THAT IN THE A BSENCE OF ANY SATISFACTORY EXPLANATION FROM THE SIDE OF THE ASSES SEE, THE ADDITION WAS CORRECTLY MADE BY THE AO. HOWEVER, A PART RELIEF WA S GRANTED. 11. LEARNED AR HAS MADE A STATEMENT BEFORE US THAT THIS ISSUE IS COVERED MAINLY BECAUSE OF THE REASON THAT THE IMPUG NED ADDITION WAS NOT ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 38 - IN CONSEQUENCE OF THE SEARCH BUT A ROUTINE ADDITION HAS BEEN MADE BY THE AO BY SIMPLY INVOKING THE PROVISION OF SEC. 40A (1) OF IT ACT. HE HAS ALSO INFORMED THAT IN ASSESSEES OWN CASE ITAT B BENCH AHMEDABAD IN ITA 4448/AHD/1995 FOR A.Y. 1992-93, ORDER DATED 12. 9.2001 TITLED AS THE ACIT VS. AGEW STEEL MANUFACTURING PRIVATE LI MITED, HAS DECIDED THIS ISSUE IN ASSESSEES FAVOUR IN THE FOLL OWING MANNER: THE LEARNED CIT(A) OBSERVED THAT THE COMMISSION PA YMENTS WERE MADE TO THESE TWO SISTER CONCERNS AS PER AGREEMENT DATED 7. 7.1975. SUCH COMMISSION PAID AT THE RATE OF 7.5% TO BOTH THESE FIRMS HAVE B EEN ALLOWED IN ALL THE PAST ASSESSMENTS. THESE TWO CONCERNS ARE VERY OLD CONCER NS AND HAVE BEEN DOING BUSINESS EVEN PRIOR TO THE EXISTENCE OF THE APPELLA NT COMPANY. THE CIT(A) AFTER RECORDING THESE FACTS DIRECTED THE AO TO DELE TE THE DISALLOWANCE MADE OUT OF COMMISSION PAYMENTS MADE TO THEM . THE CORRE CTNESS OF THE FACTS RECORDED IN THE ORDER OF THE CIT(A) HAVE NOT BEEN D ISPUTED BY THE LEARNED SENIOR DR BEFORE US. SINCE THE COMMISSION PAYMENTS MADE AT THE SAME RATE TO AFORESAID TWO PARTIES ARE IN ACCORDANCE WITH THE AG REEMENT EXECUTED ON 7.7.1975 AND HAVE ALWAYS BEEN ALLOWED IN PAST, THER E IS NO JUSTIFICATION FOR MAKING ANY DISALLOWANCE OUT OF SUCH COMMISSION PAYM ENTS. THE AO HAS BROUGHT NO MATERIAL ON RECORD TO PROVE THAT THE COM MISSION PAID TO THESE PARTIES WAS UNREASONABLE OR EXCESSIVE HAVING REGARD TO THE FAIR MARKET VALUE OF SERVICES RENDERED BY THEM OR HAVING REGARD TO TH E FAIR MARKET VALUE OF SERVICES RENDERED BY THEM OR HAVING REGARD TO THE O THER FACTORS MENTIONED IN SECTION 40A(2). WE DO NOT FIND ANY MERIT IN GROUND NO.(2) RAISED BY THE REVENUE. 12. CONSIDERING THE DECISION CITED HEREINABOVE, WE ARE OF THE VIEW THAT THE FACTS UNDER YEAR CONSIDERATION ARE NOT IDENTICA L. THE RESPECTED CO- ORDINATE BENCH HAS TAKEN THE VIEW ON THE BASIS THAT THE AO HAD NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THAT THE CO MMISSION PAID WAS UNREASONABLE AS AGAINST THAT FOR THE YEAR UNDER CON SIDERATION AFTER SEARCH IT WAS FOUND BY THE AO THAT THE PARTIES INVOLVED HA VE BEEN DIRECTLY CONTACTED AND TRANSACTION WAS PERFORMED THEREFORE T HERE WAS NO INTERMEDIARY WAS INVOLVED. IN RESPECT OF BOTH THE P ARTIES, A SPECIFIC FINDING HAS BEEN GIVEN BY THE AO THAT ON INQUIRY FR OM THOSE PARTIES IT ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 39 - WAS FOUND THAT THE TRANSACTION WAS MADE DIRECTLY AN D NOT THROUGH THESE TWO PERSONS. WE ARE ALSO NOT IN AGREEMENT WITH TH E ARGUMENT OF LEARNED AR THAT THE IMPUGNED ADDITION WAS NOT THE R ESULT OF THE SEARCH OPERATION. THE ADMITTED FACTUAL POSITION IS THAT FO R THE YEAR UNDER CONSIDERATION I.E. A.Y. 1994-95 THE IMPUGNED ASSESS MENT ORDER WAS MADE U/S 143(3) OF IT ACT. THEREFORE, THE AO WAS FU LLY EMPOWERED NOT ONLY TO INVOKE THE PROVISIONS OF SECTION 40A OF THE IT ACT BUT ALSO EMPOWERED TO INVESTIGATE ABOUT THE CORRECTNESS OF A NY CLAIM. WE HAVE NOTICED THAT THE LEARNED CIT(A) HAS APPRECIATED CER TAIN OTHER FACTS AND GRANTED PART RELIEF. NO INTERFERENCE IS REQUIRED IN THE FINDING OF THE LEARNED CIT(A). GROUND OF THE ASSESSEE IS HEREBY DI SMISSED. 13. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS H EREBY DISMISSED. C. AGEW STEEL MFG. ( .2930/AHD/1996)(A.Y.93-94)(REVENUES APPEAL): 14. REVENUE HAS FILED THIS APPEAL AGAINST THE ORDER OF LEARNED CIT(A)- VI, AHMEDABAD, DATED 6.5.1996. GROUNDS RAISED ARE H EREBY DECIDED AS FOLLOWS: GROUND NO. 1 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION AMOUNTING TO RS.34,53,226/- O N ACCOUNT OF EXCESS STOCK DIFFERENCE. 15. FACTS OF THE CASE AS EMERGED FROM THE ASSESSMEN T ORDER PASSED UNDER SECTION 143(3), DATED 29 TH MARCH, 1996 FOR A.Y. 1993-94 WERE THAT ON THE BASIS OF THE SEARCH CONDUCTED ON 11.5.1993 T HE AO HAS MADE THE IMPUGNED ADDITION OF RS.34,53,226/- ON PROTECTIVE BASIS IN RESPECT OF UNACCOUNTED STOCK. WHILE DECIDING THE APPEAL OF THE ASSESSEE FOR A.Y. ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 40 - 1994-95 (SUPRA), WE HAVE NOTED THAT THE EXCESS AMOUNT WAS TAXED ON SUBSTANTIVE BASIS. WHILE DECIDING THIS ISSUE, LEARNED CIT(A) HAS GIVE N HIS VERDICT THAT NO ADDITION COULD BE MADE FOR A.Y. 1993-94 ON PROTECTIVE BASIS. WE HEREBY CONFIRM THE SAID FINDINGS OF LEARN ED CIT(A). THE MERITS OF THIS ADDITION HAVE ALREADY BEEN CONSIDERED BY US WHILE DECIDING THE ASSESSEES APPEAL FOR A.Y. 1994-95. WE THEREFORE DI SMISS THIS GROUND OF THE REVENUE. 16. GROUND NO. 2 IS REPRODUCED BELOW: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION AMOUNTING TO RS. 2,33,932/- ON ACCOUNT OF TRADING W ITH SISTER CONCERN. 17. IT WAS NOTED BY THE AO THAT THE ASSESSEE WAS IN VOLVED IN TRADING WITH ITS SISTER CONCERN AND DIVERTED THE INCOME. A SUM OF RS. 2,33,932/- WAS TAXED. WHEN THE MATTER WAS CARRIED BEFORE THE F IRST APPELLATE AUTHORITY, LEARNED CIT(A) HAS HELD THAT THIS ISSUE WAS ALREADY DECIDED IN ASSESSEES FAVOUR IN THE CASE OF AGEW STEEL MANUFAC TURING PVT. LTD., RELEVANT PORTION IS REPRODUCED BELOW: THE ASSESSING OFFICER AS DISCUSSED IN PARA 8 OF TH E ASSESSMENT ORDER HAS DISALLOWED THE SUM OF RS. 2,33,932/- ON ACCOUNT OF TRADING WITH SISTER CONCERN NAMELY, VIPUL CORPORATION AND M/S. PREETI CORPORATI ON.. THIS ISSUE HAS BEEN DISCUSSED IN MY ORDER NO.90/95-96 DATED 24.8.1995 I N THE CASE OF AGEW STEEL MANUFACTURING PVT. LTD. IN GROUND NO.(III). FOLLOWI NG THE SAME REASONING, THE APPEAL ON THIS GROUND IS ALLOWED. THE ADDITION OF R S.2,33,932 IS DELETED. 18. IN THE ABSENCE OF ANY CONTRARY MATERIAL AGAINST THE VIEW TAKEN BY LEARNED CIT(A); AS ALSO PERTAINING TO THE DECISION ALREADY TAKEN BY LEARNED CIT(A) IN THE CONNECTED CASE; FROM THE SIDE OF THE REVENUE, WE FIND NO FORCE IN THIS GROUND OF THE REVENUE HENCE D ISMISSED. ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 41 - 19. GROUND NO.3, 4 AND 5 ARE REPRODUCED BELOW: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.82,089/- ON ACCOUNT OF KASAR DISCOUNT PAYMENT. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,834/- ON ACCOUNT OF COMMISSION. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,500/- MADE U/S. 69 OF THE ACT. 20. IN RESPECT OF ABOVE REPRODUCED THREE GROUNDS, T HE QUANTUM BEING PETTY IN NATURE, WE DEEM IT PROPER NOT TO INTERFERE WITH THE FACTUAL FINDINGS OF LEARNED CIT(A). OTHERWISE ALSO PARTIES APPEARING BEFORE US HAVE ALSO STATED THAT THESE GROUNDS ARE TRIFLE IN N ATURE. IN THE RESULT WE FIND NO FORCE IN THESE GROUNDS OF THE REVENUE HENCE DISMISSED. 21. THE FINAL OUTCOME IS THAT THE APPEAL OF THE REV ENUE IS DISMISSED. D. PREMANIPRODUCTS ( 2929/AHD/1996),(REVENUESAPPEAL)(1993-94); 22. GROUND RAISED BY THE REVENUE IS HEREBY REPRODUCED B ELOW: THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.12,50,00/- ON ACCOUNT OF UNACCOUNTED INCOME. 23. FACTS OF THE CASE AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDER PASSED UNDER SECTION 143(3), DATED 26 TH MARCH, 1996 FOR A.Y. 1993-94 WERE THAT IN THE GROUP CASES A SEARCH WAS C ONDUCTED ON 11.5.1993. THE CONNECTED FACTS PERTAINING TO THE SE ARCH OPERATION HAVE ALREADY BEEN DISCUSSED ABOVE. IN THIS CASE, A STATE MENT OF SRI SANDEEP M. SHAH, PARTNER, WAS RECORDED ON 14.5.1993 U/S 132 (4 ) OF IT ACT. HE HAS ADMITTED AN EXCESS STOCK OF RS.12,50,000/- . THEREAFTER ON 15.06.1993 A RETRACTION WAS MADE. IN THE SAID RETRACTION, IT WAS STATED THAT THERE WAS NO EXCESS STOCK. AN ALTERNATE PLEA HAS ALSO BEEN MADE THAT NO EXCESS STOCK, ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 42 - IF AT ALL, IS TO BE TAXED FOR A.Y. 1993-94 AND THE SAME PERTAINED TO A.Y. 1994-95. THE AO HAS NOTED THAT THERE WAS DISCREPANC Y IN RESPECT OF THE DISPATCH OF GOODS. THE GOODS DISPATCHED WAS AROUND 75 METRIC TONNE, WHEREAS THE PHYSICAL STOCK WORKED OUT BY THE SEARCH PARTY AT RS. 22,43,720/-. THE AO HAS ALSO NOTED THAT 11TH AND 12 TH OF MAY, 1993 THE VERIFICATION OF THE STOCK WAS MADE IN THE PRESENCE OF THE PARTNER AND HIS SON. THE AO HAS ALSO NOTED THAT ANOTHER STATEMENT U /S 132(4) WAS RECORDED OF SRI SANDEE N.SHAH ON 14.5.1993 AT THE F ACTORY PREMISES. IN THAT STATEMENT ALSO HE HAD CONFIRMED THE PRESENCE O F THE EXCESS STOCK AND MADE THE DISCLOSURE. THE AO HAS ALSO NOTED THAT THE PHYSICAL VERIFICATION OF THE STOCK WAS MADE IN THE PRESENCE OF PANCHAS. THE AO HAS ALSO TAKEN THE COGNIZANCE OF THE ALLEGATION OF ALTERATIO N IN THE STOCK LIST WHICH WAS REPORTED TO THE CITY SPECIAL JUDGE AHMEDABAD WH O HAD PROPOSED A CBI INQUIRY WHICH WAS PENDING AT THE TIME OF ASSESS MENT. THE AO HAS TAKEN A DECISION THAT THE ANNEXURES WERE PREPARED I N THE PRESENCE OF THE PANCHAS AND A PANCHNAMA WAS PREPARED THEREFORE TH OSE WITNESSES AND THE STATEMENTS WERE CORRECT UNLESS AND UNTIL A CONT RARY DECISION WOULD COME OUT AFTER THE INQUIRY. AS FAR AS THE CALCULATI ON OF THE EXCESS STOCK WAS CONCERNED THE SAME WAS MADE BY THE AO AS UNDER: IN VIEW OF ABOVE DISCUSSION IT IS CLEAR THAT VARIO US ARGUMENTS TAKEN BY THE ASSESSEE IN RESPECT OF INVENTORY STOCK FOUND AT FAC TORY PREMISES ARE NOT TENABLE AND STOCK IS TO BE TAKEN AS PER INVENTORY P REPARED BY THE SEARCH PARTY. THE STOCK FOUND AS PER THE INVENTORY VALUED AT RS. 22,43,720/-. HOWEVER, IT IS NOTED THAT RATES HAVE NOT BEEN TAKEN CORRECTLY IN R ESPECT OF SOME ITEMS. RATES FOR VALUING PIPES (RAW MATERIAL) HAS BEEN TAKEN AT RS.19,65/- (ON AN AVERAGE) WHEREAS AS PER ASSESSEES VALUATION RATE (FOR VALUI NG STOCK AS ON 31.3.1993) WORKS OUT TO RS.20.21/- ON AN AVERAGE. IN RESPECT O F BRASS PIPE, VALUATION MADE BY SEARCH PARTY IS AT THE RATE OF RS.110/- KG AS AGAINST RS.90.28 KG. AS PER RATES ADOPTED BY ASSESSEE. IN RESPECT OF BRASS BAR RATE HAS ALSO BEEN AT RS.110/- PER KG, INSTEAD OF CORRECT RATE OF ABOUT R S.130/- PER KG. AFTER MAKING ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 43 - CORRECTIONS FOR THESE ERRORS, VALUATION OF PHYSICAL STOCK COMES TO RS.22,87,276/-. IT IS ALSO OBSERVED THAT BOOK STOCK STATED AT THE T IME OF SEARCH (VALUED AT RS.10,13,085/-) WAS NOT CORRECT. DURING THE COURSE OF U/S.132(5) ASSESSEE GAVE STOCK POSITION AS PER BOOKS WHICH WAS CONFIRME D DURING THE ASSESSMENT PROCEEDINGS AND VERIFIED. AS PER THIS STATEMENT, ST OCK AS PER BOOKS ON DATE OF SEARCH COMES TO 53775.8KGS OF STEEL, 2199.14 KGS OF BRASS AND 15756.34 MTS OF PIPES. AT THE RATE OF VALUATION ADOPTED BY ASSES SEE ITSELF FOR VALUATION OF STOCK ON 31.3.1993 (WHICH ARE BASED ON COST) VALUE OF TIS STOCK ALONGWITH STORES COMES TO 1481315/-. THIS TAKES CARE OF ONE OBJECTION OF ASSE SSEE THAT WHEN STOCK OF STORES WAS INCLUDED IN INVENTORY OF P HYSICAL STOCK, IT WAS NOT CONSIDERED FOR PURPOSE OF VALUING BOOK STOCK. 24. ON THE BASIS OF THE ABOVE CALCULATION, THE DIFF ERENCE IN THE STOCK WAS RS.8,05,961/- WHICH WAS THE EXCESS STOCK, HOWEV ER, AS PER THE STATEMENT THE ASSESSEE HAD ADMITTED RS.12,50,000/- AS UNACCOUNTED INCOME. THE AO HAS THEREFORE ASSESSED THE OFFERED A MOUNT OF RS.12,50,000/- AS UNACCOUNTED INCOME OF THE ASSESSE E WHICH ACCORDING TO HIM HAD COVERED THE EXCESS STOCK OF RS.8,05,961/ -. THE AO HAS ALSO REJECTED THE ALTERNATE PLEA THAT THE IMPUGNED AMOUN T IF AT ALL TO BE TAXED THEN THE SAME SHOULD BE CONSIDERED IN A.Y. 1994-95. THE AO HAS GIVEN A REASONING THAT THE SEARCH TOOK PLACE ON 11.5.1993 A ND IT COULD NOT BE POSSIBLE TO EARN SO MUCH OF UNACCOUNTED INCOME IN A PERIOD OF ONE AND A HALF MONTH OF EARLY F.Y. 1993-94 FOR THE INVESTMENT IN THE UNACCOUNTED STOCK. ON PREPONDERANCE OF PROBABILITY THE EXCESS S TOCK WOULD HAVE REPRESENTED THE UNACCOUNTED INCOME OF THE IMMEDIATE PRECEDING F.Y. 1992-93, HELD BY THE AO. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 25. LEARNED CIT(A) IN A CRYPTIC MANNER HAS HELD AS UNDER: THE ADDITION OF RS.12,50,000/- HAS BEEN MADE ON THE SIMILAR GROUND AS DISCUSSED IN GROUND (I) OF MY ORDER NO.18/96-97 IN THE CASE OF AGEW STEEL ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 44 - MANUFACTURE PVT. LTD. FOLLOWING THE SAME REASONING, THE APPEAL ON THIS GROUND IS ALLOWED AND THE ADDITION OF RS.12,50,000/ - IS DELETED. 25.1 AFTER HEARING BOTH THE SIDES, WE HER EBY HOLD THAT ON THE BASIC PRINCIPLE OF ASSESSABILITY OF THE UNACCOUNTED STOCK DETECTED AT THE TIME OF SEARCH CONDUCTED ON 11.5.1993 PERTAINING TO F.Y. 19 93-94; THE SAME IS ASSESSABLE FOR A.Y. 1994-95 AND NOT FOR A.Y. 1993-9 4. THE DELETION IS AFFIRMED. A DISCUSSION HAS ALREADY BEEN MADE IN THE FOREGOING PARAGRAPH. RESULTANTLY, THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 26. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. E. P.P.INDUSTRIES(1778/AHD/2003)(A.Y.94-95)(ASSESSEES APPEAL); 27. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATI NG FROM THE ORDER OF LEARNED CIT(A)-VII, DATED 28.3.2003. THE ONLY GROUN D IS IN RESPECT OF CONFIRMATION OF ADDITION OF EXCESS STOCK OF RS.1,69 ,243/-. VIDE AN ORDER U/S 143(3), DATED 10TH MARCH, 1997, THE AO HAD TAKE N THE COGNIZANCE OF THE SEARCH OPERATION U/S 132 DATED 11.5.1993 AND TH EREUPON HELD THAT THERE WAS EXCESS STOCK OF RS.1,69,243/-. THE OBSERV ATION OF THE AO IN THIS REGARD WAS AS UNDER: I HAVE CONSIDERED CAREFULLY THE EXPLANATION AND SUB MISSION OF THE ASSESSEE. AS DISCUSSED ABOVE, IT WAS SPECIFICALLY ADMITTED BY ONE OF THE PARTNERS THAT THERE WAS NO DISPUTE WHATSOEVER WITH REGARD TO THE INVENTORY 28. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST AP PELLATE AUTHORITY, IT WAS OBSERVED BY LEARNED CIT(A) THAT ONE MR. PALLAV M. SHAH HAS CONFIRMED THE CORRECTNESS OF THE EXCESS STOCK. HE H AS NOT DISPUTED THE ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 45 - STOCK INVENTORY PREPARED AT THE TIME OF SEARCH. THE LEARNED CIT(A) HAS MENTIONED THAT ON THE BASIS OF CERTAIN ALLEGATIONS MADE IN THE CASE OF AGEW STEEL THE ASSESSEE HAS PLEADED TO DELETE THE A DDITION. THE ASSESSEE HAS FURNISHED THE POSITION OF THE STOCK AS ON THE D ATE OF SEARCH AT RS.4,87,395/- BUT AS PER THE INVENTORY MADE BY THE SEARCH PARTY WAS AT RS.6,56,638/-. LEARNED CIT(A) HAS NOTED THAT THERE WAS DIFFERENCE IN FACTS OF THE ASSESSEE WITH THE FACTS OF M/S. AGEW S TEEL MANUFACTURING COMPANY, SOME OF THEM ARE AS UNDER: I HAVE CAREFULLY GONE THROUGH THE FACTS AND CIRCUM STANCES OF THE CASE, THE REASONS MENTIONED BY THE ASSESSING OFFICER WHILE MA KING THE ADDITION OF RS.1,69,243/-, WRITTEN SUBMISSIONS AND VARIOUS PAPE RS PLACED IN THE PAPER BOOK. I AM, HOWEVER, UNABLE TO AGREE WITH THE CONTE NTIONS RAISED ON BEHALF OF THE APPELLANT IN VIEW OF THE REASONS GIVEN BELOW AN D FURTHER KEEPING IN VIEW THE FACT THAT THE FACTS OF M/S. AGEW STEEL MANUFACT URING PVT. LTD. AND PREMANI PRODUCTS WHERE ADDITIONS MADE ON ACCOUNT OF EXCESSS STOCK WERE DELETED, ARE DIFFERENT:- (A) PAGE 1 OF THE PAPER BOOK IS THE PANCHNAMA IN THE CA SE OF THE APPELLANT FIRM DATED 12.5.1993. THIS PANCHNAMA WAS PREPARED; AT THE FACTORY PREMISES OF THE APPELLANT FIRM AT SUKHRAMNAGAR, AHM EDABAD AND DURING THE COURSE OF SEARCH, SHRI HIREN DALAL, SON OF ONE OF THE PARTNERS OF THE APPELLANT FIRM WAS PRESENT. THIS PANCHNAMA IS SIGNE D BY TWO INDEPENDENT WITNESSES VIZ. D.S. KOKHAWALA DN SHIR P.J. SHAH. DU RING THE COURSE OF SEARCH, INVENTORY OF STOCK FOUND AT THE FACTORY PRE MISES WAS PREPARED AS PER ANNEXURE F TO THE PANCHNAMA DATED 12.5.1993 AND INVENTORY IN THE FORM OF ANNEXURE F(PAGES 1,4,5,6,7 AND 8) ARE SIGNE D BY THE AUTHORISED OFFICER SHRI M. B. PARMAR, ITO, SURVEY-CUM-CIB, HIR EN DALAL, SON OF ONE OF THE PARTNERS AND THE TWO WITNESSES SHRI KOKHAWAL A AND SHRI SHAH. A PERUSAL OF INVENTORY OF STOCK SHOWS THAT HE SAME WA S PREPARED VERY INETICULOUSLY AND SEPARATELY UNDER THE HEAD FINISHE D GOODS (SIZE-WISE); DAMAGED GOODS; UNDER PROCESS, IRON ITEMS; PLASTIC I TEMS; MISCELLANEOUS ITEMS AND ALUMINIUM RAW MATERIALS/SCRAP. (B) PAGE 2 OF THE PAPER BOOK IS THE PANCHNAMA DATE 13.5 .1993 PREPARED IN THE CASE OF THE APPELLANT FIRM AT SUKHRAMNAGAR, AHM EDABAD AND ON THIS DATE ALSO, INVENTORY OF STOCK WAS TAKEN AS PER ANNE XURE F TO THE PANCHNAMA DATED 13.5.1993. THE INVENTORY OF STOCK T AKEN ON 13.5.1993 APPEARS ON PAGES 9 TO 12 OF THE PAPER BOOK. IT IS S IGNIFICANT TO NOTE THAT THIS LATTER PANCHANAMA IS SIGNED BY SHRI PALLAV SHA H, PARTNER OF THE APPELLANT FIRM IN WHOSE PRESENCE THE INVENTORY OF S TOCK AS PER ANNEXURE F (PAGE 9 OF THE PAPER BOOK) WAS PREPARED. IT IS FURT HER NOTED THAT THIS STOCK TAKING WAS DONE IN THE PRESENCE OF TWO INDEPENDENT WITNESSES SHRI ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 46 - RAJENDRA K SHAH AND SHRI KANTILAL M. MODI (BOTH OF WHOM ARE WITNESSES DIFFERENT FROM THOSE ON THE FIRST DAY OF SEARCH). N EEDLESS TO STATE THAT BOTH THE PANCHNAMA AND THE INVENTORY OF STOCK HAD BEEN S IGNED BY THOSE TWO WITNESSES AS WELL AS SHRI PALLAV SHAH, PARTNER OF T HE APPELLANT FIRM. (C) DURING THE COURSE OF HIS STATEMENT RECORDED UNDER S ECTION 132 (4) SHRI PALLAV SHAH NOT ONLY CONFIRMED THE STOCK T AKING MADE BY THE SEARCH PARTY ON THE FIRST DAY OF SEARCH IN THE PRES ENCE OF HIREN DALAL BUT ALSO MADE A DISCLOSURE OF EXCESS, STOCK OF THE EXTE NT OF RS.351923/- IN HIS STATEMENT RECORDED ON OATH UNDER SECTION 132(4). (D) THOUGH THE CORRECTNESS OF THE INVENTORY OF STOCK TA KEN BY THE SEARCH PARTY WAS CONFIRMED TO BE CORRECT DURING THE COURSE OF SE ARCH IN THE STATEMENT RECORDED ON OATH, YET THE CONTENTION THAT SUCH STOC K TAKING WAS NOT CORRECT HAS BEEN SIMPLY MADE BY WAY OF LETTERS ADDRESSED TO VARIOUS DEPARTMENTAL AUTHORITIES. NO SPECIFIC INSTANCES OF MISTAKES IN T HE INVENTORY MADE BY THE SEARCH PARTY HAD BEEN POINTED OUT. APPELLATE ORDER SOUGHT TO BE RELIED ON BY THE APPELLANTS A.R. IN THE CASE OF M/S. AGEW ST EEL MANUFACTURERS PVT. LTD. ARE NOT APPLICABLE SINCE IN THAT CASE, THE APP ELLANT FIRM HAD POINTED OUT SPECIFIC DEFECTS IN THE INVENTORY PREPARED AT T HE TIME OF SEARCH AND HAD ALSO FURNISHED AFFIDAVITS OF THE WITNESSES TO T HAT SEARCH THESE WITNESSES BEING TEA LARRYWALA, CYCLE REPAIRERS. 28.1 LEARNED CIT(A) HAS AFFIRMED THE ADDITION; NOW CHALLENGED BEFORE US. 29. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE HEREBY AFFIRM THE FACTUAL AS WELL AS LEGAL FINDING OF THE AUTHORI TIES BELOW. THE DISTINCTION WHICH WAS NOTED BY LEARNED CIT(A) IS CO RRECT, THEREFORE, THIS CASE PER SE IS NOT AT PAR ON FACTS WITH THE CASE OF M/S. AGEW STEEL MANUFACTURING CO. THE DISTINCTION DRAWN BY THE LEAR NED CIT(A) IS HEREBY AFFIRMED. WE ARE NOT INCLINED TO INTERFERE W ITH THOSE FINDINGS. IN THE RESULT, WE FIND NO FORCE IN THE GROUNDS OF THE ASSESSEE. HENCE DISMISSED. 30. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ITA NOS.2929, 2930/AHD/1996 AND 1147, 1186/AH D/2000 AND 1178/AHD/2003 AGEW STEEL, PREMANI PRODUCTS AND P.P. INDUSTRIES AYS 1993-94 AND 1994-95 - 47 - 31. TO SUM UP, REVENUES APPEALS BEARING ITA NO.2 929/AHD/1996 & ITA NO.2930/AHD/1996 AND ASSESSEES APPEALS BEARING ITA NO.1186/AHD/2000 & ITA NO. 1178/AHD/2003 ARE DISMIS SED. REVENUES APPEAL BEARING ITA NO. 1147/AHD/2000 IS PARTLY ALLO WED. SD/- SD/- (ANIL CHATURVEDI) (MUKUL KR. S HRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/09/2013 PRABHAT KR. KESARWANI, SR.P.S. TRUE COPY COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A)-III, AHMEDABAD 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, (DY./ASSTT.REGISTRAR) ITAT, AHMEDABAD