ACIT, Pune V. Dhariwal Industries Ltd, Pune

ITA 1409/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1968 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K GAUTAM; I T A; B ITA NOS TO PN
• Assessee Lawyers: SUNIL PATHAK; SANJAY N KAP ADIA
• Keywords: Unexplained investment; Unexplained expenditure; Depreciation; Income from undisclosed sources; Loose papers; Document seized; Principle of natural justice; Opportunity of cross examination; Additional depreciation; Earning of tax free income; Additional evidence; Question of law; Difference of opinion; Corroborative evidences; Third party statement; Non compliance; Block assessment; Capital receipt; Retraction; Documents seized
• Section: 92C; 11A; 14A; 37(1); 131; 132; 92

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.1318 TO 1324/PN/2013 #& & / ASSESSMENT YEARS : 2004 -05 TO 2010-11 DHARIWAL INDUSTRIES LIMITED, MANIKCHAND HOUSE, PLOT NO.100/101, D. KENNEDY ROAD, BEHIND HOTEL LE-MERIDIAN, PUNE -411001 PAN NO.AAACD5896L . / APPELLANT V/S ACIT CENTRAL CIRCLE-1(1), PUNE . / RESPONDENT . / ITA NOS.1389 TO 1391 AND ITA NOS.1408 TO 1410/PN/2013 #& & / ASSESSMENT YEARS : 2004 -05 TO 2008-09 AND 2010-11 ACIT CENTRAL CIRCLE-1(1), PUNE . / APPELLANT V/S DHARIWAL INDUSTRIES LIMITED, MANIKCHAND HOUSE, PLOT NO.100/101, D. KENNEDY ROAD, BEHIND HOTEL LE-MERIDIAN, PUNE -411001 PAN NO.AAACD5896L . / RESPONDENT / ASSESSEE BY : SHRI SUNIL PATHAK & / SANJAY N. KAPADIA / DEPARTMENT BY : SHRI M.K. GAUTAM & B 2 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 / ORDER PER R.K. PANDA, AM : ITA NOS. 1318 TO 1324/PN/2013 FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 29-03-2013 OF THE CIT(A)- II, PUNE RELATING TO ASSESSMENT YEARS 2004-05 TO 2010- 11. ITA NOS. 1389 TO 1391/PN/2013 AND ITA NOS. 1408 TO 1410/PN/20 13 FILED BY THE REVENUE ARE DIRECTED AGAINST SEPARATE ORDERS D ATED 29-03- 2013 OF THE CIT(A)-II, PUNE RELATING TO ASSESSMENT YEARS 2004-05 TO 2008-09 AND 2010-11. FOR THE SAKE OF CONVENIENCE, ALL THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP APPEALS FILED BY THE ASSESSEE AND TH E REVENUE FOR ASSESSMENT YEAR 2004-05 AS THE LEAD CASE. ABRIDGED GROUNDS OF APPEAL BY THE ASSESSEE IN ITA NO.1318/PN/201 3 FOR A.Y. 2004-05 ARE AS UNDER: THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER - ON FACTS AND IN LAW, 1. THE LD.CIT(A) ERRED IN SUSTAINING THE ADDITION OF UNDISCLOSED INCOME BASED ON THE PAPERS FOUND WITH SHRI MITHULAL J AIN AND NOT WITH THE APPELLANT COMPANY DURING THE COURSE OF SEARCH AND HENCE, SUCH ADDITION MADE IS NOT JUSTIFIED IN THE ASST. COMPLETED U /S. 153A. 2. THE LD CIT(A) ERRED IN SUSTAINING AN ADDITION OF RS.20,78,41,250/- ON THE BASIS OF THE PAPERS FOUND DURING THE COURSE OF SEARCH AT THE PREMISES OF SHRI MITHULAL JAIN AND WHICH BELONGED TO SHRI SOHANRAJ MEHTA AND NOT THE APPELLANT COMPANY. 3. THE LD CIT(A) FAILED TO APPRECIATE THAT THERE WAS NO INCRIMINATING EVIDENCE FOUND AT THE APPELLANT'S PREM ISES DURING THE COURSE OF SEARCH NOR WAS THERE ANY CORROBORATIVE EVIDE NCE AS REGARDS UNACCOUNTED PRODUCTION IN THE FACTORY OF THE APPELL ANT AND THEREFORE, THE ADDITIONS BASED ON SOME NOTINGS BY SHRI SOHANRAJ ME HTA IS NOT JUSTIFIED IN THE HANDS OF THE APPELLANT. / DATE OF HEARING : 03.02.2016 / DATE OF PRONOUNCEMENT: 02.05.2016 3 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 4. WITHOUT PREJUDICE, THE ID CIT(A) ERRED IN ADO PTING THE PROFIT PERCENTAGE @ 30% ON THE ESTIMATED UNACCOUNTED TURNOV ER BASED ON THE PAPERS FOUND DURING THE SEARCH AT THE PREMISES OF S HRI MITHULAL JAIN WHICH BELONGED TO SHRI SOHANRAJ MEHTA. 5. THE ID CIT(A) ERRED IN HOLDING THAT THE SALES TAX SUBSIDY RECEIVED OF RS. 10,02,61,664/- WAS A REVENUE RECEIPT CHARGEABLE TO TAX WITHOUT APPRECIATING THAT THE SUBSIDY RECEIVED BY THE APPELLANT COMPANY WAS CAPITAL IN NATURE AND HENCE, NOT TAXABLE AT ALL. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. GROUNDS OF APPEAL BY THE REVENUE IN ITA NO.1389/PN/2 013 FOR A.Y. 2004-05 ARE AS UNDER : 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE L D . CIT(A) ERRED IN ADOPTING ARBITRARY GP @ 30 % IN RESPECT OF UNACCOUNTED TURNOVER OF GUTKHA BY ASSESSEE AND ERRED IN GRANTING CONSEQUENTIAL RELIEF T O THE ASSESSEE TO THE TUNE OF RS . 102 CRORES , AS THE SA I D QUANTIFICATION OF G . P. @ 30% IS NEITHER BASED ON PROPER APPRECIATION OF FACTS NOR OF LAW NOR ON ANY SOUND LOGIC . 2 . ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD . CIT(A) ERRED IN DECIDING THAT GP ADOPTED BY A.O. @ 60% IS NOT CORRE CT , ALTHOUGH G . P . ADOPTED BY A.O . IS BASED ON CORRECT SCIENTIFIC ANALYSIS OF MATERIAL AVAI LABLE ON RECORDS. 3 . ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD . CIT(A) ERRED IN DECIDING THAT SINCE GP WAS ESTIMATED IN THIS CASE (TO AR RIVE AT UNACCOUNTED INCOME EARNED OUT OF UNACCOUNTED SALE OF GUTKHA ) AND SINCE ENTIRE GP WAS ADDED , NOTHING FURTHER REMAINED TO BE CONSIDERED FOR D I SALLOWANCE , THEREFORE, PAYMENT OF BRIBE AT RS . 60 LAKHS REQUIRES NO FURTHER DISALLOWANCE, IGNOR I NG THE FACT THAT ALTHOUGH IT IS AN EXPENDITURE BUT I S NOT ALLOWABLE AS THE SAME IS INCURRED IN CONTRAVENTION OF EXPLANATION TO SECTION 37(1) OF THE ACT. 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE L D . CIT(A) ERRED IN ALLOWING THE CLAIM OF ASSESSEE THAT EMPLOYEE ' S CONTRIBUTION OF RS . 4 , 96 , 738/- TO PF AND ESI U/S . 36 ( 1 )( VA ) OF THE ACT , ALTHOUGH THE SAME WAS NOT PAID WITHIN DUE DATE PRESCRIBED WITHIN SECTION 36 ( 1)(VA) OF THE ACT. 5 . ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD . CIT(A) ERRED IN ALLOWING THE CLAIM OF ASSESSEE THAT EMPLOYEE ' S CONTRIBUTION OF RS . 4,96 , 738/- TO PF AND ESI U/S . 36(1)(VA) OF THE ACT , RELYING ON THE DECISION OF THE APEX COURT IN THE CASE OF ALOM EXTRUSI ONS LTD , ALTHOUGH THE SAME IS NOT APPLICABLE IN PRESENT FACTS OF THE CASE . 6 . ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD . CIT(A) ERRED IN ALLOWING THE CLAIM OF DEPRECIATION ON ASSETS OF HYDERA BAD DIVISION , ALTHOUGH BLOCK OF ASSETS INSTALLED IN HYDERABAD DIVISION , WERE NOT USED IN PREVIOUS YEAR , CURRENT YEAR AND SUBSEQUENT YEARS . 7. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND A ND MODIFY ANY OF THE ABOVE GROUNDS. 4. GROUNDS OF APPEAL NO.1 TO 4 BY THE ASSESSEE AND GRO UNDS OF APPEAL NO. 1 AND 2 BY THE REVENUE RELATE TO PART RELIEF G IVEN BY THE CIT(A) BY SUSTAINING AN AMOUNT OF RS.20,78,41,250/- OUT OF TH E ADDITION OF RS.40,88,32,514/-. 5. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED THE ORIGINAL RETURN OF INCOME ON 28-10-2004 DISCLOSING TOTAL LOSS OF RS.4,09,43,385/-. A SEARCH ACTION U/S.132 OF THE I.T. ACT W AS CONDUCTED IN THE RMD GUTKHA GROUP OF CASES ON 20-01-2 010. IN RESPONSE TO THE NOTICE U/S.153A THE ASSESSEE FILED THE R ETURN OF INCOME ON 15-10-2010 DISCLOSING TOTAL LOSS OF RS.4,09,43,385/- WHICH IS THE SAME LOSS AS DISCLOSED IN THE ORIGINAL RETURN O F INCOME. THE AO ISSUED A QUESTIONNAIRE DATED 08-09-2011 ALONG WIT H NOTICE U/S.142(1) OF THE I.T. ACT IN RESPONSE TO WHICH THE ASSES SEE SUBMITTED THE REQUISITE DETAILS. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT A SEARCH ACTION U/S.132 OF THE I.T. ACT WAS CONDUC TED AT THE RESIDENCE OF SHRI SOHANRAJ MEHTA, C&F AGENT OF M/S. DHARI WAL INDUSTRIES LIMITED (IN SHORT M/S. DIL) AS WELL AS ON THE PREMISES OF M/S. MEHTA ASSOCIATES, NO.104/1, GROUND FLOOR, 7 TH MAIN, 3 RD BLOCK, 4 TH STAGE, BASAVESHWAR NAGAR, BANGALORE ON 10-10-2009. SH RI SOHANRAJ MEHTA HAD STATED THAT HE IS PARTNER IN M/S. MEHTA ASSOCIATES ALONG WITH SHRI CHETAN KUMAR MEHTA AND SHR I VIKAS MEHTA. HE HAD FURTHER STATED THAT HIS FIRM IS SOLE C&F AG ENT FOR PAN MASALA AND GUTKHA PRODUCT OF THE ASSESSEE COMPAN Y M/S. DIL FOR THE STATE OF KARNATAKA. SEVERAL INCRIMINATING DOCUMENT S, LOOSE SHEETS ETC WERE SEIZED DURING THE COURSE OF SEARCH PRO CEEDINGS FROM 5 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE PREMISES OF SHRI SOHANRAJ MEHTA. SEARCH ACTION WAS ALSO CONDUCTED IN THE CASE OF SHRI MITHULAL ON 09-10-2009 DURIN G WHICH VARIOUS DOCUMENTS WERE FOUND AND SEIZED FROM HIS RESIDEN CE AT #219,68 TH CROSS, 5 TH BOCK, RAJAJINAGAR, BANGALORE. THE DOCUMENTS WERE STATED TO BE BELONGING TO SHRI SOHANRAJ MEHTA. 7. THE AO NOTED THAT DURING THE COURSE OF SEARCH AND POST SEARCH PROCEEDINGS SHRI SOHANRAJ MEHTA HAD STATED THA T THE SEIZED DOCUMENTS, LOOSE SHEETS, ETC. SEIZED IN THE PREMISES OF MR. MITHULAL WERE ACTUALLY BELONGING TO THE BUSINESS OF C&F AGENCY WI TH M/S. DIL AND WERE WRITTEN BY MR. MITHULAL IN HIS HANDWRITING IN MA RVARI LANGUAGE. FURTHER CROSS EXAMINATION OF THE SAID DOCUMENT S BY THE INVESTIGATION WING OF BANGALORE REVEALED THAT SHRI SOHANRA J MEHTA, C&F AGENT OF RMD GUTKHA GROUP FOR KARNATAKA REGION USE D TO MAINTAIN DETAILED DAY TO DAY ACCOUNT OF THE TRANSACTIONS OF SALE OF GUTKHA AND ALSO OF THE DEPLOYMENT OF THE SAID SALE PROCE EDS. FROM THE DAY TO DAY ACCOUNTS HE USED TO DRAW A MONTHLY S UMMARY GIVING INFORMATION OF THE SALE PROCEEDS RECEIVED, AND ITS DEPLOYMEN T DURING A PARTICULAR MONTH. FINALLY FROM THE MONTHLY SUMMARY HE USED TO PREPARE A CONSOLIDATED SUMMARY FOR THE ENTIRE PERIOD. A S PER THE CONSOLIDATED SUMMARY MARKED AS PAGE 34 A/M/08 SEIZED V IDE PANCHANAMA DATED 09-10-2009, THE TOTAL UNACCOUNTED SA LES OF M/S.DIL FOR THE PERIOD APRIL 2003 TO AUGUST 2006 WAS RS .218 CRORES APPROXIMATELY. FURTHER, THE TOTAL UNACCOUNTED SALES FOR THE PERIOD SEPTEMBER 2006 TO FEBRUARY, 2008 AS COMPUTED FORM THE SEIZED PAGES WAS RS.127.72 CRORES APPROXIMATELY. THUS, AS PER THE SAID SEIZED DOCUMENTS, THE TOTAL UNACCOUNTED SALES EFFECTED BY SHRI SOHANRAJ MEHTA, C&F AGENT OF RMD GUTKHA ON BEHALF OF M/S . DIL 6 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 FOR THE PERIOD APRIL 2003 TO FEBRUARY 2008 WAS RS.345.72 CRORES APPROXIMATELY. 8. THE AO FURTHER NOTED THAT SHRI SOHANRAJ MEHTA HAD PROVIDED ENGLISH TRANSLATION OF THE BOOKS WRITTEN IN MARVARI LANGUAG E WORKING AND QUANTIFYING THE UNACCOUNTED TURNOVER OF M/S .DIL FOR VARIOUS YEARS. FURTHER, HE HAS DECLARED THAT HE HAS EA RNED COMMISSION FROM SALE OF GUTKHA FOR VARIOUS YEARS AND OFFERE D THE INCOME BEFORE ADIT (INVESTIGATION). THE AO ALSO NOTED THAT SHRI SOHANRAJ MEHTA HAS EXPLAINED THE ENTIRE UNACCOUNTED BU SINESS CHAIN REGARDING UNACCOUNTED PURCHASES, UNACCOUNTED MAN UFACTURE, UNACCOUNTED PACKING, UNACCOUNTED PRINTING, CLANDESTINE REM OVAL OF GOODS, UNACCOUNTED SALE AND UTILIZATION OF THE SALE PROCEED S WHICH HE HAS ADMITTED TO HAVE DONE FOR AND ON BEHALF OF M/S.DIL BETWEEN 2003 TO 2008. 9. THE AO ALSO NOTED THAT THE SEIZED BOOKS AND DOCUME NTS REVEALED THE ENTIRE FACTS ABOUT UNACCOUNTED BUSINESS O F M/S. DIL WHICH HE SUMMARIZED AS UNDER : A) THE SEIZED MATERIAL CONTAINS THE DAILY, MONTHLY A ND YEARLY SUMMARY OF UNACCOUNTED SALES OF GUTKA LIKE SMALL, BIG & MINI PACKETS . FURTHER, IT ALSO SUBSTANTIATES THE VALUE OF GUTKHA (I . E . PRICE PER PACK) . DURING THE SEARCH PROCEEDINGS , ONLY STOCK OF M/S. DIL WAS FOUND WITH SHRI. SOHANRAJ MEHTA AND NO STOCK, WHATSOEVER, OF ANY OTHER COMPANY/BRAND WAS FOUND . B) THE SUMMARY OF SALES AND APPORTIONMENT OF UNACCOUNT ED SALES OF GUTKHA IS AVAILABLE ON A/M/08 OF PAGE NO. 34 AND MONTHLY CASH BOOK SUMMARY (REGARDING SALE OF GUTKHA AND APPORTIONMENT OF FUNDS) IS AVAILABLE IN VARIOUS PAGES OF A/M/08 (PAGE NO . 39 TO 58). C) FOR CARRYING OUT UNACCOUNTED SALES, THERE ARE MATC HING UNACCOUNTED PURCHASES OF RAW MATERIALS LIKE BETEL NU T (SHRI . MALLIKARJUN, SHIMOGA), EDIBLE PERFUMES (FROM SHRI P. C . JAIN OF MUMBAI), CARDAMOM (FROM SHRI VIMAL NAHAR/JAIN OF HYDERABAD), MENTHOL (FROM M/S SWATHI MENTHOL), SUPARI (FROM SHRI KISHEN KUMAR G UPTA/MIS BHOLENATH RADHAKISHEN OF DELHI), CHEM I CALS (FROM SHRI MUKESH GARG/M/S PREM BROTHERS OF DELHI) ETC. FURTHER , FOR PACKING THE UNACCOUNTED GOODS , THE ASSESSEE HAS PAID UNACCOUNTED CONSIDERATION TO M/S . CHAMPION PACKAGING WHICH IS ALSO REFLECTED IN THE SEIZ ED MATERIAL . 7 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 TO PRINT ON THE POUCHES OF UNACCOUNTED GOODS, THE ASSESSE E HAD PAID UNACCOUNTED CONSIDERATION TO PRINTER M/S. RAJHANS ENT ERPRISES. D) THE UNACCOUNTED SALE PROCEEDS HAVE BEEN INVESTED IN REAL ESTATE AND ASSESSEE HAS PAID ON MONEY TO VARIOUS PARTIES. IT IS PE RTINENT TO NOTE THAT THESE ARE THE SAME PARTIES WITH WHOM ASSESSEE HA S ACCOUNTED BUSINESS RELATIONSHIP AND ASSESSEE HAS PAID ACCOUNTED CONSIDE RATION THROUGH BANKING CHANNELS . SOME OF SUCH PERSONS ARE SHRI . SEETHARAMAIH MLA , MIS . TEJASWINI BUILDERS AND M/S . MANTRI DEVELOPERS. FURTHER , THE ASSESSEE HAS ALSO PAID COMMISSION (SHRI . J.K . REDDY WHO IS A BROKER ) AND ALSO PAID FOR THE LEGAL OPINION ( SHRI. CHANDRAM OULI) . E) THE UNACCOUNTED SALE PROCEEDS HAVE BEEN PAID TO ASSE SSEE'S EMPLOYEE'S LIKE SHRI . JEEVAN SANCHETHI AND OTHERS WHO WERE AUTHORIZED TO COLLECT THE AMOUNTS. F) THE UNACCOUNTED SALE PROCEEDS HAVE BEEN PAID BY SH RI SOHANRAJ MEHTA TO ASSESSEE, SHRI . RASIKLAL M DHARIWAL ( FOR THE SAKE OF BREVITY, HEREAFTER REFERRED TO AS 'RMD'), HIS SON SHRI . PRAKASH DHARIWAL (( FOR THE SAKE OF BREVITY, HEREAFTER REFERRED TO AS PRD) & TO OTHERS, WHICH IS REFLECTED IN THE SEIZED MATERIAL A/M/29 & FURTHER RE FLECTED IN A/M/08 OF PAGE NO. 34 . G) THE C&F AGENT HAS AGREED AND OFFERED UNACCOUNTED COMMISSION RECEIVED ON BEHALF OF UNACCOUNTED SALES AND FURTHER, THERE IS A REFLECTION OF SALES TAX MAMUL PAID TO SALES TAX AUTHORITIES FOR CAR RYING OUT THIS MODUS OPERANDI OF UNACCOUNTED SALES . H) PACKING MATERIALS AND UNACCOUNTED PAYMENT OF FREI GHT AND TEMPO AND HAMALI CHARGES ARE ALSO REFLECTED. ALL THESE EVIDENCES PROVE BEYOND REASONABLE DOUBT THAT ENTIRE UNACCOUNTED BUSIN ESS CHAIN HAS BEEN ESTABLISHED IN THIS CASE REGARDING UNACCOUNTED PUR CHASE, UNACCOUNTED MANUFACTURE, UNACCOUNTED PACKING, UNACC OUNTED PRINTING, CLANDESTINE REMOVAL OF GOODS, UNACCOUNTED SALE AND UTI LIZATION OF THE SALE PROCEEDS ETC. THIS EVIDENCE IS NOT MORE THAN ENOU GH TO BRING THE SAID UNDISCLOSED INCOME TO TAX. 10. THE AO FURTHER NOTED THAT THE FOLLOWING FACTS PROVE T HAT THE SEIZED DOCUMENTS BELONG TO THE ASSESSEE COMPANY : THE SAID DOCUMENTS SEIZED BY THE INVESTIGATION WING OF BANGALORE HAVE DETAILS OF THE ACCOUNTED DISPATCHES AND ALSO THE UNACCOUNTED DISPATCHES MADE BY M/S DHARIWAL INDUSTRIES L TD . TO SHRI SOHANRAJ MEHTA . THE UNACCOUNTED DISPATCHES APPARENTLY HAVE LETTER 'A' MENTIONED BEFORE THEM AND THE ACCOU NTED DISPATCHES HAVE 'DIL' MENTIONED BEFORE THEM . INVESTIGATIONS REVEALED THAT THE ACCOUNTED DISPATCHES ARE DULY REFL ECTED IN THE BOOKS OF M/S DHARIWAL INDUSTRIES LTD. . SINCE SHRI SOHANRAJ MEHTA HAS ACCEPTED THAT THE TRANSACTIONS WITH LETTER 'A' M ENTIONED BEFORE THEM ARE IN RESPECT OF THE UNACCOUNTED DISPATC HES THE NAMES OF BRANDS DEALT NAMELY BIG, MINI, 2 GMS ARE BELONGING TO M/S . DIL . THE PRICES QUOTED IN THE UNACCOUNTED BOOKS AND ALSO UNACCOUNTED TURNOVER OF SHRI . SOHANRAJ MEHTA ON BEHALF OF M/S . DIL ALSO MATCH WITH THAT OF PRICES OF M/S . DIL. 8 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE SALE PROCEEDS OF UNACCOUNTED TURNOVER OF GUTKA HA S BEEN APPLIED/UTILIZED BY SHRI . SOHANRAJ MEHTA ON BEHALF OF M/S . DIL . THE PARTIES WHO ARE APPEARING IN RIGHT SIDE OF A/M/08 OF PAGE 34 ARE PARTIES HAVING TRANSACTION WITH M/S. DIL OR DIRECT ORS. THE TRANSACTIONS ARE EITHER BEING SUPPLIERS, SELLERS OF PROP ERTY, PEOPLE ON THEIR PAY ROLES (SALES TAX DEPARTMENT), C&F AGENT (SOHANRAJ MEHTA), LEGAL ADVISORS, ETC. THOUGH, THE PA RTIES ON THE RIGHT SIDE HAVE NOT ACCEPTED TO HAVE RECEIVED THE UN ACCOUNTED CONSIDERATION IN FULL, THEY HAVE ACCEPTED FOR HAVING TRANSACTED WITH M/S . DIL AND HAVE REFLECTED THE TRANSACTIONS OF M/S . DIL TO THE EXTENT OF ACCOUNTED ENTRIES . DURING THE SEARCH PROCEEDINGS , ONLY STOCK OF M/S . DIL WAS FOUND AT THE PREMISES OF M/S . MEHTA ASSOCIATES, A CONCERN OF SHRI SOHANRAJ MEHTA WH I CH WAS C&F AGENT OF M/S. DIL . THE PR I CE OF VARIOUS TYPES OF GUTKA LIKE BIG, MINI & 2 GMS A RE BRANDS OF M/S . DIL AND THE PRICE GIVEN IN THE WORKING OF UNACCOUNTED TURNOVER IS CORRESPONDING TO THE PRICE OF M/S . DIL BRANDS . THE C&F AGENT SHRI . SOHANRAJ MEHTA ALL THE WAY DURING SEARCH , POST - SEARCH AND ASSESSMENT PROCEEDINGS CLAIMED THAT HE HAS SO LD GUTKA OF M/S . DIL . HE HAS ALSO DECLARED THE COMMISSION EARNED BY HIM OUT OF UNACCOUNTED SALE OF GUTKAS AS C&F AGENT . SHRI . SOHANRAJ MEHTA IN HIS CAPACITY AS PARTNER OF M/S MEHT A ASSOCIATES HAD UNDERTAKEN BOTH ACCOUNTED AS WELL AS UNACCOUNTED SALES OF GUTKA BELONGING TO M/S . DIL . UNACCOUNTED SALES WERE NOT REFLECTED IN THE BOOKS OF M/S DIL OR M/S . MEHTA ASSOCIATES OR IN HANDS OF SHRI . SOHANRAJ MEHTA. MOREOVER, SHRI . SOHANRAJ MEHTA HAS ACTED IN CAPACITY OF C&F AGENT . THE SALE PROCEEDS OF GUTKA ARE APPORTIONED TO SELLERS OF IMMOVABLE PROPERTY O R SUPPLIERS OF RAW MATERIALS OF GUTKA OR TO PEOPLE WHO HAVE TRANSACTED WITH M/S . DIL ETC . MOREOVER, AS PER SEIZED MATERIAL A/M/29, THERE ARE RECEIPTS SIGNED BY SHRI . RASIKLAL M . DHARIWAL OR BY HIS SON SHRI . PRAKASH DHARIWAL OR BY OTHERS ON HIS BEHALF FOR HAVING RECEIVED UNACCOUNTED SALE PROCEEDS WHICH WERE SENT TO THEM . ALL THIRD PARTIES APPEARING IN A/M/08 OF PAGE NO. 34 HAVE STATED THAT THEY HAD TRANSACTIONS ONLY WITH M/S . DIL, MOST OF THEM DENYING FOR HAVING EVEN KNOWN SHRI . SOHANRAJ MEHTA. O T HE R SUPPO R TING DOCU ME NTS AVAI LABLE I N T HE SEI ZED M AT ER IAL LI KE A/ M/01 S HOW S THE DAILY SALES OF GUTKA BELONGING TO M/S . DI L , A/M/0 7 C ON TA INS LEDGER EXTRACT O F UNACCOUNT E D CONSIDERATIONS PAID TO VAR I OUS PART I ES . F URT H ER , MOST OF T HE PA RTIE S BELON GI NG TO BANG A LO R E WH I CH A RE APP EA R I NG O N R I GH T SI D E O F THE PAGE 34 OF A/M/0 8 WER E EX A MI N E D O N OAT H BY THE OCI T C EN TR A L C I RC LE 2 (2 ) , BANGALO R E AND T HEY HAVE 9 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 CLARI F IED TH A T T H EY HAD TRANSAC T I ONS O NL Y W I TH M/S . DIL OR SOME ENTITY BELONGING T O T HE M B U T NO T WI T H SH RI . SOHA NR AJ MEHTA. TH I S SUBSTANTIATES THE FACT THAT ALL THE THIRD PARTIES WHO A R E APPEARING IN THE SEIZED MATERIAL NAMELY A/M/08 OF PAG E N O . 34 ARE H AVING T R ANS A CTIONS ONLY WITH M/ S . DIL . S I MILARLY , SOME OF THE OTHE R P A R TI E S W H ICH ARE APPEARING ON RIG HT SIDE OF TH E PAGE 34 OF A/M/08 AND ARE PRESENTLY B EI NG ASSESSED IN T HIS OFFIC E, WERE ALSO EXAMINED I N THIS REGARD. THE VARIOUS DETAILS SUBM I TTED BY THE THIRD PARTIES WERE VERIFIED AND IT WAS FOUND THAT MOST OF THE THIRD PARTIES WE R E EVEN NOT AWARE OF SHRI . SOHANRAJ MEHTA . SOME OF THE PARTIES WHO KNEW SH RI . SOHANRAJ MEHTA WE R E THE EMPLOYEE ' S L I K E SH RI . JEEVAN SANCHETHI AND S HRI . PRAS H ANT BAFNA. 11. IN THE LIGHT OF THE ABOVE THE AO WAS OF THE OPINION THAT THE UNACCOUNTED INCOME AMOUNTING TO RS.345.72 CORES HAS TO BE TAXED ONLY IN THE HANDS OF M/S.DIL. 12. THE AO FURTHER NOTED THAT SHRI SOHANRAJ MEHTA, AUT HOR OF THE SEIZED DOCUMENT IN HIS STATEMENT RECORDED U/S.132(4) ON 1 0-10- 2009 DATED 15-10-2009 EXPLAINED THE TRUE IMPORT OF THE CONTENTS OF THE SEIZED DOCUMENTS AND ALSO THE FACT THAT THE SAID SE IZED DOCUMENTS BELONG TO M/S.DIL. ACCORDING TO THE AO THE S AID STATEMENTS HAVE IMMENSE EVIDENTIARY VALUE. HE NOTED THA T DURING THE COURSE OF SEARCH U/S.132 AND DURING THE POST SEAR CH ENQUIRIES BY THE INVESTIGATION WING OF PUNE THE SAID DOCUMENTS SEIZ ED BY THE INVESTIGATION WING, BANGALORE WERE CONFRONTED BOTH TO SH RI RASIKLAL M.DHARIWAL AND HIS SON PRAKASH RASIKLAL DHARIWAL. BOTH THE SE PERSONS ACCEPTED THAT THE SAID CHITS GIVING INSTRUCTIONS EITHER TO SHRI SOHANRAJ MEHTA OR JEEVAN SANCHETHI, WHICH ARE PART OF LOOSE PAPER BUNDLE NO. A/M/29 SEIZED VIDE PANCHANAMA DATED 0 9-10- 2009, BEAR EITHER OF THEIR SIGNATURES. 13. HE NOTED THAT AS PER THE SAID DOCUMENTS SEIZED BY THE INVESTIGATION WING O F BANG A LORE , AN AMOUNT OF RS.14.35 CRORES WAS ADVANCED BY RMD GUTKHA GROUP TO SHR I S . BALAN DURING THE PERIOD 10 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 FROM THE YEAR 2003 TO 2008 . ALONGWITH THE SEA R CH A C T ION IN T HE CASE OF RMD GU T KHA GROUP , SHRI S. BALAN OF PUNE WAS ALSO COVERED FO R TH E P URPOSE OF CROSS VER I F I CATION . IN COURS E OF TH E SEARCH ACTION , I T WAS ACCEPTED BY SH RI S . BA L AN THA T T H E SAID AMOUNT OF RS . 14 . 35 C R O R ES WAS KEPT BY RMD GUTKHA G R O U P WI T H HI M FO R SAFE CUSTODY . 14. THE AO NOTED THAT AS PER THE SA I D DOCUMENTS SEIZED BY THE INVESTIGATION W I N G OF BA N GALORE , AN AMOUNT OF RS . 46 . 56 CRO R ES WAS DEPLOYED BY RMD GUTKHA GROUP TO SHRI MALIKARJUNA OF SHIMO GA DURING THE PERIOD 2003 TO 2008 . ALONGWITH THE SEARCH ACTION IN THE CASE OF RMD GUTKHA GROUP , SHRI MALLIKARJUN OF SHIMOGA WAS ALSO COVERED FOR THE PURPOSE OF CROSS VERIFICATION . IN TH E COURSE OF THE SEARCH ACTION, IT WAS ACCEPTED BY SHR I MAL L IKARJUN OF SHIMOGA THAT THE SAID AM O UNT OF RS . 46 . 56 CRORES REPRESENTS SALES WHICH ARE OUTSIDE THE REGULAR BOOKS OF ACCOUNTS. 15. THE AO ALSO NOTED THAT IN THE COURSE OF THE SEAR CH ACTION ON 20/01/2010 , STATEMEN T S O N OATH WE R E ALSO R ECORDED OF SHRI SHITAL B . PATIL , AREA SALES MANAGE R OF KA R NA T AKA REG I ON FOR RMD GUTKHA GROUP . IN COURS E O F THE STATEMENT ON OATH, IT WAS ADMITTED BY HI M THA T THE ACCOUNTED AS WELL AS TH E U N ACCOUNTED STOCK OF M/S DHAR I WAL INDUS T RIES LTD . I S CARR I ED O U T T HROUGH MR . SOHANRAJ MEHTA , C&F T HROUGH THE NETWORK OF DEA L ERS/D I ST RI BUTORS ACROSS KAR N ATAKA . T HI S S T ATEME N T O N OATH OF SH RI SHITA L B. PAT I L WAS A L SO CON FIR MED BY SHRI K.A . RAGHUNA TH, S AL ES SUPERVISO R OF M/S DHARIWAL INDUST RI ES L T D . 16. THE AO FURTHER NOTED THAT THE ANALYSIS OF THE SEIZE D DOCUMENTS REVEAL THAT THE ASSESSEE HAS RESORTED TO T HE FOLLOWING MODUS OPERANDI : 11 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 I) THE ASSESSEE COMPANY CARRIES OUT A PARALLEL PRODUCTI ON OF ITS ACCOUNTED PRODUCTION AND ALSO ITS UNACCOUNTED PRODUCTION IN ITS FACTORY AT BANGALORE . FOR ITS ACCOUNTED AS WELL AS ITS UNACCOUNTED PRODUCTION , THE PURCHASES OF MAJOR RAW MATERIALS LIKE EDIBLE PERFUMES, BETEL NUT, ELLAICHI, KATTHA ETC, ARE PURCHASED FROM THE SAME SUPPLIERS. THIS IS TO ENSURE THAT THE QUALITY OF ITS PRODUCTS, BOTH ACCOUNTED AS WELL AS UNACCOUNTED, IS MAI NTAINED . IN THE BOOKS OF THE SUPPLIERS , AND ALSO RMD GUTKHA GROUP THE SUPPLIES MADE FOR THE ACCOUNTED PRODUCTION OF RMD GUTKHA GROUP ARE DU LY REFLECTED IN THE BOOKS BUT THE SUPPLIES MADE FOR THE UNACCOUNTED PRODUC TION AT BANGALORE ARE KEPT OUT OF THE REGULAR BOOKS . II) FOR THE PURPOSE OF DISTRIBUTION AND MARKETING OF ITS PRODUCTS, ASSESSEE COMPANY HAS APPOINTED A NUMBER OF C & F AGENTS . SRI SOHANRAJ MEHTA IS ONE OF C & F AGENTS WHO IS A CLOSE CONFIDANTE OF PROMOTERS OF ASSESSEE COMPANY . SRI SOHANRAJ MEHTA USED TO MAINTAIN ACCOUNTS OF THE U NACCOUNTED SALES, EXPENSES I NCURRED ETC DURING THE RELEVANT PERIOD. FURTHER, HE USED TO REMIT THE . UNACCOUNTED CASH SO GENERATED TO THE PROMOTERS OF ASSESSEE COMPANY AND ALSO USED TO MAKE PAYMENTS TO THE SUPPLIERS OF RAW M ATERIAL ETC, FOR THE UNACCOUNTED PRODUCTION AS PER THE INSTRUCTIONS OF PRO MOTERS OF ASSESSEE COMPANY NAMELY SHRI RASIKLAL DHARIWAL AND HIS SON SHRI PRAKASH RASIKLAL DHARIWAL . 17. THE AO CATEGORIZED THE SEIZED DOCUMENTS IN THE HAN D WRITING OF SHRI SOHANRAJ MEHTA AS FOLLOWS : A. DAY BOOKS GIVING DETAILS OF THE TRANSACTIONS FOR THE MO NTHS OF JANUARY 2003 TO DECEMBER 2003. B. DAY BOOKS GIVING DETAILS OF THE TRANSACTIONS FOR THE MO NTHS OF OCTOBER 2006 TO FEBRUARY 2008. C. BOOKS GIVING DAY-WISE, MONTH-WISE DETAILS OF THE TRANSAC TIONS FOR ALMOST THE ENTIRE PERIOD STARTING FROM APRIL 2003 TO JANUARY 2008. D. COPIES OF CHITS SIGNED EITHER BY SHRI RASIKLAL M.DHARIW AL OR SHRI PRAKASH R. DHARIWAL GIVING INSTRUCTIONS TO SHRI SOHANR AJ MEHTA TO HANDOVER CASH TO THE PERSON WHOSE NAME IS SPECIFIED IN T HE CHIT OR TO THE BEARER OF THE CHIT. 18. IN THE LIGHT OF THE ABOVE, THE AO ISSUED A DETAILED SH OW CAUSE NOTICE REQUESTING THE ASSESSEE TO SHOW CAUSE AS TO WHY UNACCOU NTED INCOME WORKED OUT BASED ON THE AFORESAID SEIZED DOCUMEN TS SHOULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE COMPANY. T HE ASSESSEE VIDE HIS SUBMISSIONS ON VARIOUS DATES OBJECTED TO SUCH U NACCOUNTED INCOME IN ITS HANDS, THE GIST OF WHICH HAS BEEN SUMMARIZED BY THE AO AT PARA 3.3.1 OF HIS ORDER AND WHICH READ AS UNDER : 12 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 A) THOUGH THE SEIZED DOCUMENTS BEAR SIGNATURE OF SHRI RAS IKLAL DHARIWAL AND/OR SHRI PRAKASH R DHARIWAL , THE AMOUNTS MENTIONED THEREIN ARE NOT IN THE CODE FORM AS EXPLAINED BY SHR I SOHANRAJ MEHTA U/S 132(4) OF THE I , T . ACT . B) THOUGH THE ACCOUNTED TRANSACTIONS APPEARING IN SEI ZED DOCUMENTS BELONG TO THE ASSESSEE COMPANY, THE UNACCOUNTE D TRANSACTIONS APPEARING IN IMPUGNED SEIZED DOCUMENTS HAV E NOTHING TO DO WITH THE ASSESEE COMPANY. C) THE SEIZED DOCUMENTS SIGNED BY THE DIRECTORS OF ASSE SSEE COMPANY SHRI RASIKLAL DHARIWAL AND/OR SHRI PRAKASH R DHARIWAL, RELATE TO RECOVERY OF CERTAIN ADVANCES/REFUNDS DUE FROM SHRI SOHANRAJ MEHTA. D) THE SEIZED DOCUMENTS HAVE NOT BEEN SEIZED FROM THE ASS ESSEE AND HAVE NOTHING TO DO WITH DHARIWAL INDUSTRIES LTD , RASIKLAL MANIKCHAND DHARIWAL AND THEIR GROUP CONCERNS. E) UNACCOUNTED ASSETS COMMENSURATE WITH THE UNACCOUNTED INCOME GENERATED THROUGH SUPPRESSED SALES WERE NOT FOUND BY THE DEPARTMENT . F) NO EVIDENCE OF SUPPRESSION OF TURNOVER/INCOME WERE FOU ND BY GOVERNMENT AGENCIES LIKE CENTRAL EXCISE DEPT , SALES TAX DEPT, ETC . G) NO EVIDENCE OF UNACCOUNTED PURCHASES WERE FOUND. H) THE SEIZED DOCUMENTS RELATE TO SHRI SOHANRAJ MEHTA'S UNACCOUNTED BUSINESS IN SOME OTHER BRANDS OF GUTKHA. I) CROSS EXAMINATION OF SHRI SOHANRAJ MEHTA SHOULD BE AL LOWED. J) SHRI.SOHANRAJ MEHTA, SHRI. MALLIKARJUNA, SHRI SHITA L PATIL , SHRI K . RAGHUNATH AND SHRI. S. BALAN ON WHOSE STATEMENTS DEPAR TMENT IS PLACING RELIANCE, HAD RETRACTED THEIR RESPECTIVE STAT EMENTS. 19. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THAT DURING THE COURSE OF SEARCH U/S.132 AND DURING POST SEARCH ENQUIRIES BY THE INVESTIGA TION WING OF PUNE THE SAID DOCUMENTS SEIZED BY THE INVESTIGATION W ING OF BANGALORE WERE CONFRONTED BOTH TO SHRI RASIKLAL M. DHARIWA L AND SON SHRI PRAKASH R. DHARIWAL. BOTH OF THEM HAVE ADMITTE D U/S.132(4) THAT THE SAID SEIZED CHITS GIVING INSTRUCTIONS EIT HER TO SHRI SOHANRAJ MEHTA, C&F AGENT OF RMD GUTKHA GROUP FOR KARNATAKA REGION OR SHRI JEEVAN SANCHETHI, BANGALORE FACTO RY INCHARGE OF RMD GUTKHA GROUP WHICH ARE PART OF LOOSE PAPER BUNDLE 13 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 NO.A/M/29 SEIZED VIDE PANCHANAMA DATED 09-10-2009 BEAR EITHER OF THEIR SIGNATURES. THOUGH THEY REFUSED TO ACCEPT THE DECODING EXPLAINED BY SHRI SOHANRAJ MEHTA THAT THE AMOUNTS MENT IONED IN LAKHS ACTUALLY STAND FOR CRORES OF RUPEES AND THE W ORK PACKET STANDS FOR A LAKH OF RUPEES, BOTH SHRI RASIKLAL M. DHARIWAL AND HIS SON SHRI PRAKASH R. DHARIWAL STATED THAT THESE ARE SHO RT TERM ADVANCES GIVEN BY THEM TO THEIR FRIENDS AND BUSINESS ASS OCIATES. HOWEVER, THE AO NOTED THAT NEITHER MR. RASIKLAL M. DHARIWA L OR MR. PRAKASH R. DHARIWAL COULD SUPPORT THE ABOVE CLAIM WITH A NY COGENT OR SUPPORTING EVIDENCE. 20. THE AO NOTED THAT THOUGH AS PER ANSWER TO QUEST ION NO 9 OF HIS STATEMENT RECORDED ON 03/02/2010, SHRI . RMD HAD COMMITTED TO REPLY TO THE QUESTION AS TO WHAT AMOUNT WAS BLOCKE D WITH MR . SOHANRAJ WHICH BELONGED TO HIM AND SINCE WHEN IT WAS BLOC KED AND AS TO HOW CAN THE SAID AMOUNTS WERE TO BE RECOVERED THROUGH THE CHIT CONTA I N I NG W R ITTEN INSTRUCTIONS AFTER VERIFYING THE BOOKS OF ACCOUNTS AND ON DISCUSSION WITH T H E CONCERNED RELEVANT PEOPLE, HOWEVER , NO EXPLANATION HAS YET BEEN GIVEN IN THESE 23 MONTHS, EITHER BY RMD/PRD/DIL ON THIS ISSUE THOUGH SCRUTINY ASS ESSMENTS WERE IN PROGRESS AND MORE THAN 4 SHOW CAUSE NOTICES W ERE ISSUED ON THE ISSUE OF SAID SEIZED DOCUMENTS CITING ABOVE MENTION ED ADMISSION OF SIGNATURES ON CHITS BY RMD/PRD. THE ONLY R EASON WHY SUC H AN EXPLANA T ION WAS N OT GIVE N BY RMD ACCORDING TO THE AO IS THE F ACT THAT THE SAID C L A I M WAS UN T RUE A N D T HE DECODING EXPLA I NED B Y SH RI . SOHANRA J MEHTA W AS ABSOLUTE L Y COR R EC T , WHICH A L SO GE T S SUPPORT FR OM T H E SEIZED DOCU M EN TS THEMSELVES . 14 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 21. THE AO INFERRED THAT ON THE BASIS OF THE INSTRUCTION S GIVEN IN THE SAID SIGNED CHITS EITHER BY SHRI RASIKLAL M. DHARIWAL OR SHRI PRAKASH R . DHARIWAL, SHRI SOHANRAJ MEHTA USED TO MAKE PAYMENTS TO THE PARTIES WHOSE NAMES WERE MENTIONED ON THE SAID CHITS . IN MANY INSTANCES , THESE PAYMENTS WERE SPREAD OVER MORE THAN ONE INSTALLMENT . THE DAY BOOKS MAINTAINED BY SHRI SOHANRAJ MEHTA HAVE A DETAILED NARRATION OF THE VARIOUS INSTALLMENT PAYMENTS FOR THE AMOUNTS MENTIONED IN THE S I GNED CHITS . AT MANY PLACES , IN THE DAY BOOKS THE AMOUNTS HAVE BEEN MENTIONED IN DE-CODED FORM . 22. THE AO DISCUSSED SOME OF THE INSTANCES AS WELL AS TH E STATEMENT GIVEN BY SHRI RASIKLAL M. DHARIWAL AND THE VARIOU S EVIDENCES GATHERED DURING THE SEARCH AND POST SEARCH ENQUIRIES. THE AO REJECTED THE CONTENTION OF THE ASSESSEE THAT T HE DECODING EXPLAINED BY SHRI SOHANRAJ MEHTA THAT THE AMOUNTS MENT IONED IN THE SEIZED DOCUMENTS NAMELY A/M/29 IN LAKHS ACTUALLY STAND FOR CRORES OF RUPEES AND THE WORD PACKET STANDS FOR A LAKH OF RUPEES IS WRONG. 23. AS REGARDS THE CONTENTION OF THE ASSESSEE REGARDIN G ACCOUNTED AS WELL AS UNACCOUNTED TRANSACTION APPEARING IN THE SEIZE D DOCUMENTS IS CONCERNED, THE AO NOTED THAT THE DOCUMEN TS SEIZED DURING SEARCH IN BANGALORE HAVE DETAILS OF THE ACCOUNTED D ESPATCHES AND ALSO THE UNACCOUNTED DESPATCHES MADE BY M/S. DIL THROUGH SHRI SOHANRAJ MEHTA. THE UNACCOUNTED DESPATCHES APPA RENTLY HAVE LETTER A MENTIONED BEFORE THEM AND THE ACCOUNTED DES PATCHES HAVE DIL MENTIONED BEFORE THEM. HE NOTED THAT AS PER THE INVESTIGATIONS THE ACCOUNTED DESPATCHES ARE DULY REFLECTED IN THE BO OKS OF M/S. DHARIWAL INDUSTRIES LTD. SHRI SOHANRAJ MEHTA HAS ACCEPTED TH AT THE TRANSACTIONS WITH LETTER A MENTIONED BEFORE THEM ARE IN RESPECT OF 15 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE UNACCOUNTED DESPATCHES. SINCE THE SAME DOCUMENT HAS BOTH ACCOUNTED AS WELL AS UNACCOUNTED DESPATCHES AND ACCOU NTED DESPATCHES TALLY WITH THE BOOKS OF ACCOUNT OF ASSESSEE COMPANY, THE AO HELD THAT THE UNACCOUNTED DESPATCHES ALSO BELONG TO M/S.DIL ONLY. 24. HE OBSERVED THAT THOUGH THE ASSESSEE IS OWNING UP ACCOUNTED PORTION, HOWEVER HE IS NOT ACCEPTING THE UNACCOUNTED PO RTION WRITTEN IN THE SAME DOCUMENT . ACCORDING TO THE AO, SEIZED DOCUMENT CANNOT BE HALF TRUE. MOST IMPORTANTLY, IN BOTH A CCOUNTED AS WELL AS UNCOUNTED DISPATCHES IT IS WRITTEN 'BADA', 'MINI ' AND '2 GM' . THIS DESCRIPTION TALLIES EXACTLY WITH THE PRODUCTS SOLD BY THE ASSESSEE COMPANY. THE PRICE OF THE SAID ACCOUNTED AS W ELL UNACCOUNTED 'BADA', 'MINI' AND '2 GM' POUCHES MENTIONED IN THE SEIZED DOCUMENTS PERFECTLY MATCHES WITH THE ACTUAL PRIC E OF THE 'BADA', 'MINI' AND '2 GM' POUCHES SOLD BY THE ASSESSEE C OMPANY. THIS PROVES BEYOND DOUBT THAT BOTH ACCOUNTED AS WELL AS U NACCOUNTED DISPATCHES APPEARING THE SEIZED DOCUMENTS BELONG TO THE ASSESSEE COMPANY. THE ABOVE EVIDENCES ACCORDING TO THE AO PROV E BEYOND DOUBT THAT THE CONTENTION OF THE ASSESSEE IN THIS REGAR D LACKS SUBSTANCE. 25. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE SEIZED DOCUMENTS SIGNED BY THE DIRECTORS OF ASSESSEE COMPANY RELATE TO RECOVERY OF CERTAIN ADVANCES/REFUNDS DUE FROM SHRI SOHAN RAJ MEHTA THE AO REJECTED THE SAME IN ABSENCE OF ANY PLAUSIBLE EXP LANATION AND COGENT EVIDENCE. 26. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT TH IRD PARTY EVIDENCES DO NOT HAVE ANY EVIDENTIARY VALUE IS CONCERNED , THE AO HELD THAT IF THE ARGUMENT OF THE ASSESSEE IS ACCEPTED, T HE PROVISIONS 16 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 OF EVIDENCE ACT AND SEC.147, 158BD AND 153C OF INCOME TA X ACT, 1961 BECOME REDUNDANT. ACCORDING TO HIM, IT IS TRUE THAT THE STRICT RULES OF EVIDENCE ARE INAPPLICABLE TO THE PROCEEDINGS UNDER THE I.T.ACT, 1961. HOWEVER THAT DOES NOT MEAN THAT THE PRIN CIPLES OF EVIDENCE ACT ARE INAPPLICABLE TO THE PROCEEDINGS UNDER TH E I.T.ACT. HE NOTED THAT IN THE INSTANT CASE, SHRI SOHANRAJ MEHTA IS A BUSINESS ASSOCIATE OF ASSESSEE. THE SEIZED DOCUMENTS ARE IN THE H ANDWRITING OF SHRI SOHARAJ MEHTA HIMSELF. SIGNATURES OF SHRI RASIKLAL DHAR IWAL AND SHRI PRAKASH DHARIWAL ARE AVAILABLE IN THE SAID SEIZE D DOCUMENTS AND DULY ADMITTED BY BOTH OF THEM AND THE S AID DOCUMENTS CONTAIN BOTH ACCOUNTED AS WELL AS UNACCOUNTE D TRANSACTIONS OF THE ASSESSEE COMPANY. THUS, IF THE RATIO DE CIDENDI OF VC SHUKLA CASE IS APPLIED TO THE FACTS OF THE CASE, IT BECO MES VERY CLEAR THAT ASSESSEE COMPANY CAN BE TAXED BASED ON EN TRIES IN THE DOCUMENTS SEIZED FROM BANGALORE. HE ACCORDINGLY REJECTED THE AVERMENT OF THE ASSESSEE THAT THIRD PARTY EVIDENCE CAN NOT BE USED AGAINST IT. HE ALSO REJECTED THE CONTENTION OF THE ASSES SEE THAT UNACCOUNTED ASSETS COMMENSURATE WITH THE UNACCOUNTED INCOME GENERATED THROUGH SUPPRESSED SALES WERE NOT FOUND BY THE DEPARTMENT. 27. AS REGARDS THE CONTENTION THAT NO EVIDENCES OF SUP PRESSION WERE FOUND BY OTHER GOVERNMENT AGENCIES IS CONCERNED T HE AO REJECTED THE SAME BY OBSERVING THAT FINDING OF EVIDENCES WITH OTHER GOVERNMENT AGENCIES IS NOT AT ALL RELEVANT TO THE ISSUE U NDER CONSIDERATION IN VIEW OF COMPELLING EVIDENCES OF SUPPRESSION OF TURNOVER BY THE ASSESSEE. HE FURTHER NOTED THAT THE SEIZED DOCUMENTS CONTAIN DETAILS OF PAYMENT OF BRIBES TO SALES TA X DEPARTMENT BY THE ASSESSEE RUNNING INTO CRORES @ RS.5 LAKHS PER 17 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 MONTH. THIS EVIDENCE PROVES THAT ASSESSEE IS MANAGING SA LES TAX DEPARTMENT THROUGH REGULAR AND SYSTEMATIC PAYMENT OF BRIBES. FURTHER, ASSESSEE IS FIGHTING MANY CASES WITH CENTRAL EXCI SE AND SALES TAX DEPARTMENT, WHICH INDICATES SUPPRESSION OF TURNOVER. 28. AS REGARDS THE CONTENTIONS OF THE ASSESSEE THAT N O EVIDENCE OF UNACCOUNTED PURCHASES WAS FOUND IS CONCERNED, THE AO N OTED THAT THE UNACCOUNTED SALES APPEARING IN THE SEIZED DOCUMENTS HAS MATCHING UNACCOUNTED PURCHASES OF RAW MATERIALS LIKE BETE L NUT (SHRI. MALLIKARJUN, SHIMOGA), EDIBLE PERFUMES (FROM SHRI P.C.JAIN OF MUMBAI), CARDAMOM (FROM SHRI VIMAL NAHAR/JAIN OF HYDERABAD), MENTHOL (FROM M/S SWATHI MENTHOL), SUPARI (FROM SHRI KISHEN KUMAR GUPTA/M/S. BHOLENATH RADHAKISHEN OF DELHI), CHEMICALS (FROM SHRI MUKESH GARG/M/S PREM BROTHERS OF DELHI) ETC. FUR THER, FOR PACKING THE UNACCOUNTED GOODS, THE ASSESSEE HAS PA ID UNACCOUNTED CONSIDERATION TO M/S. CHAMPION PACKAGING WHIC H IS ALSO REFLECTED IN THE SEIZED MATERIAL. TO PRINT ON THE POUCHE S OF UNACCOUNTED GOODS, THE ASSESSEE HAD PAID UNACCOUNTED CONSIDERATION TO PRINTER M/S. RAJHANS ENTERPRISES. HE NOTED THAT AN AMOUNT OF RS.46.56 CRORES WAS DEPLOYED BY RMD GUTKH A GROUP TO SHRI MALIKARJUNA OF SHIMOGA DURING THE PERIOD FROM THE Y EAR 2003 TO 2008 IN THE FORM OF PAYMENT FOR UNACCOUNTED RAW MATERIAL SUPPLIES (ARECANUT/SUPARI). THEREFORE, ALONGWITH THE SEARCH A CTION IN THE CASE OF RMD GUTKHA GROUP, SHRI MALLIKARJUN OF SHIMOG A WAS ALSO COVERED FOR THE PURPOSE OF CROSS VERIFICATION. IN THE . COURSE OF THE SEARCH ACTION, IT WAS ACCEPTED BY SHRI MALLIKARJUN OF S HIMOGA THAT THE SAID AMOUNT OF RS.46.56 CRORES REPRESENTS SALES WHICH ARE OUTSIDE THE REGULAR BOOKS OF ACCOUNTS. HE ALSO MADE A DIS CLOSURE OF RS. 3.026 CRORES BEING THE INCOME @ 6.5% ON THE SAID UN DISCLOSED TURNOVER OF RS. 46.56 CRORES. HOWEVER, LATER ON, VIDE HIS LETTER DATED 18 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 23-01-2010 FILED BEFORE THE INVESTIGATION WING OF BANGALORE, SHRI MALLIKARJUN OF SHIMOGA HAS RETRACTED HIS ADMISSION MADE U/S.132(4) OF THE I.T. ACT. THIS RETRACTION, ACCORDING TO T HE AO IS UNSUBSTANTIATED AND THE CIRCUMSTANTIAL EVIDENCE FOUND AT THE TIME OF REVOCATION OF THE PROHIBITORY ORDER FROM THE SEARCHED PREMISES OF SHRI MALLIKARJUN OF SHIMOGA BRINGS OUT FOLLOWING PECULIAR FACTS : (1) SHRI MALLIKARJUN IS HAVING A BRANCH OFFICE AT B ANGALORE LOCATED AT 799/6, SHOP NO.2, ANEKAL ROAD, CHANDAPUR , BANGALORE WHICH IS IN CLOSE PROXIMITY TO THE BANGALORE FACTORY OF RMD GUTKHA GROUP. (2) THE ENTIRE TURNOVER OF THIS BRANCH OFFICE AT BA NGALORE IS IN CASH AND IS AROUND RS . 50 . 28 CRORES FOR THE PERIOD STARTING FROM THE FINANCIAL YEAR 2006-07 TO 2008-09 . (3) THE BRANCH OFFICE HAS NO EVIDENCES IN THE FORM OF NAMES, ADDRESSES, ETC .OF THE PARTIES TO WHOM SALES HAVE B EEN EFFECTED . (4) THOUGH IT HAS BEEN CLAIMED THAT THEY ARE CARRYI NG OUT RETAIL SALES FROM THIS B R ANCH OFFICE, SURPRISINGLY FOR EACH TRUCK EXACTLY 65 BILLS ARE RAISED. IT IS A HEIGHT OF COINCIDENCE THAT FOR EACH TRUCK LOAD OF BETEL NUT WHICH ARRIVES AT BANGALORE FROM SHIMOGA, EVERY TIME EXACTLY 65 SALE BILLS ARE RAISE D. (5) THE BRANCH OFFICE AT BANGALORE IS NOT EVEN IN POSSESSION OF ANY EVIDENCES TO SUGGEST UNLOADING OF THE TRUCKS, I TS WEIGHMENT ETC. 29. THE AO OBSERVED THAT THE FACTUAL POSITION AS NOTED ABOVE RELATED TO THE DEVELOPMENTS AT THE TIME OF THE SEARCH A CTION AND ALSO POST SEARCH ACTION, PROVIDES CLEAR EVIDENCE WHICH SU GGESTS THE AUTHENTICITY OF THE DOCUMENTS SEIZED BY THE INVESTIGATION WING OF BANGALORE PERTAINING TO THE UNACCOUNTED SALES CARRIED OU T BY MR. SOHANRAJ MEHTA, C&F OF RMD GUTKHA GROUP FOR KARNATAKA REGION. IT ALSO PROVIDES THE EVIDENCE THAT SHRI MALLIKARJUN OF SHIMO GA WAS CARRYING OUT UNACCOUNTED SALE OF SUPARI TO RMD GUTKHA G ROUP AND ALSO THAT ITS CASH SALES FROM ITS BRANCH OFFICE AT BANG ALORE WERE ACTUALLY BEING DIVERTED TO RMD GUTKHA GROUP, WHICH IN TURN HAS BEEN USED FOR THE UNACCOUNTED PRODUCTION AND SUBS EQUENT 19 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 SALE. THEREFORE, THE CONTENTS OF SEIZED DOCUMENTS IRREFUTA BLY PROVE UNACCOUNTED PURCHASES OF THE ASSESSEE ALSO. IN FACT THE SEIZED DOCUMENTS ARE BOOKS OF ACCOUNT FOR UNACCOUNTED TRANSA CTIONS OF THE ASSESSEE. IN VIEW OF THE ABOVE THE AO REJECTED THE ARGUMENT OF THE ASSESSEE THAT NO EVIDENCE OF UNACCOUNTED PURCHASES WAS FOUND DURING THE SEARCH . 30. THE AO ALSO REJECTED THE CONTENTION OF THE ASSESSE E THAT THE UNACCOUNTED TURNOVER BELONGS TO SHRI SOHANRAJ MEHTA O N ACCOUNT OF THE FOLLOWING REASONS : 1. DURING THE SEARCH PROCEEDINGS, ONLY STOCK OF M/ S . DIL WAS FOUND WITH SHRI . SOHANRAJ MEHTA AND NO STOCK , WHATSOEVER, OF ANY OTHER COMPANY/BRAND WAS FOUND. 2. IN THE SAID SEIZED DOCUMENTS A COMMISSION INCOME OF SHRI SOHANRAJ MEHTA IS CLEARLY WRITTEN @RS . 65 PER CARTON OF UNACCOUNTED SALES . HOWEVER , NO ONE DOING BUSINESS ON HIS OWN BEHALF WOULD DERIVE COMMISSION AS STATED IN THE SAID SEIZED DOCU MENTS. 3. AS PER SEIZED BUNDLE NO . A/M/29 SHRI SOHANRAJ MEHTA USE TO HANDOVER MONEY TO THE PERSONS WHOSE NAMES APPEARED ON THE CHITS GIVEN TO HIM AS PER DIRECTIONS OF SHRI RMD/PRD . IF THIS UNACCOUNTED SALES OF GUTKHA WAS CARRIED OUT BY SHRI SOHANRAJ ME HTA IN HIS OWN CAPACITY, WHY HE WOULD ACT ON THE DIRECTIONS OF SHRI RMD/PRD AS REGARDS THE UTILIZATION OF THIS UNACCOUNTED SALE PR OCEEDS . EVEN, SHRI RMD/PRD VIDE THEIR 132(4) STATEMENTS, HAVE ADMITTED THAT THEY HAVE SIGNED THE SAID CHITS INSTRUCTING THE SAID PAY MENTS TO THE SAID PARTIES BY SHRI SOHANRAJ MEHTA ON THEIR BEHALF . 4. ALL THE THIRD PARTIES SUCH AS RAW MATERIAL SUPPL IERS OF M/S DIL, EMPLOYEES OF DIL , FRIENDS AND BUSINESS ASSOCIATES OF SHRI RMD/DIL , WHOSE NAMES APPEAR IN THE SAID SEIZED PAGES AS RECI PIENTS OF UNACCOUNTED SALE PROCEEDS HAVE CATEGORICALLY ACC EPTED THAT THEY KNOW M/S DIL/RMD AND THEY TRANSACT BUSINESS ONLY WI TH M/S DIL/RMD AND NOT WITH SHRI SOHANRAJ MEHTA . 5. IT IS AN UNDISPUTED FACT THAT SHRI SOHANRAJ MEHT A , THROUGH HIS FIRM MIS MEHTA ASSOCIATES, ACTS AS C & F AGENT OF M/S DIL FOR KARNATAKA REGION. 6. FOR MAKING SUCH A CLAIM IN HIS RETRACTION LETTER DATED 23/12/2009 , SHRI . SOHANRAJ MEHTA HAS NEITHER POINTED OUT NOR SUBMITTED ANY PROOF WHATSOEVER , IN SUPPORT OF HIS CONTENTION THAT THE SAID SEIZED DOCUMENTS RELATE TO HIS UNACCOUNTED BUSINESS IN SOME OTHER BRANDS OF GUTKHA . EVEN THE ASSESSEE COMPANY WHO IS 20 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 MAINLY RELYING ON THIS CONTENTION IN ITS DEFENSE TH AT SHRI . SOHANRAJ MEHTA WAS DOING UNACCOUNTED BUSINESS IN SOME OTHER BRANDS OF GUTKHA, COULD NOT FURNISH ANY EVIDENCE WHATSOEVER I N THIS REGARD. THIS INABILITY OF THE ASSESSEE TO SUBSTANTIATE THE ABOVE CONTENTION WHICH IS THE MOST IMPORTANT PLANK OF ITS DEFENSE ON THE MATTER INVOLVED CAN BE SEEN FROM THE ANSWER OF CHAIRMAN OF THE ASSESSEE COMPANY SHRI RMD IN RESPONSE TO SPECIFIC QUERY IN T HIS REGARD. 31. THE AO OBSERVED THAT JUST LIKE ASSESSEE DEMANDS P ROOF FROM DEPARTMENT TO PROVE THE GENUINENESS OF INFORMATION CONT AINED IN THE SAID SEIZED DOCUMENTS, EQUAL, RATHER MORE RESPONSIBILITY IS CAST ON THE ASSESSEE TO PROVE THAT WHATEVER STATED THERE IN IS NOT CORRECT, BY VIRTUE OF PRESUMPTION U/S.132(4A) AND ASSESSEE CANT J UST BRUSH ASIDE THIS RESPONSIBILITY BY SAYING THAT SO FAR AS THE ISS UE OF PARALLEL BUSINESS CARRIED ON BY SHRI SOHANRAJ IS CONCERNED , I DO NOT HAVE ANY EVIDENCE TO PROVE THE SAME AND AT THE SAME TIME, EXPECT DEPARTMENT NOT TO DRAW ANY ADVERSE INFERENCE OUT OF TH IS IRREFUTABLE EVIDENCE REGARDING ASSESSEES UNLAWFUL ACTIVITIES. 32. AS REGARDS THE QUESTION OF OPPORTUNITY OF CROSS EX AMINATION IS CONCERNED, THE AO NOTED THAT THE A SSESSEE SOUGHT OPPORTUNITY TO CROSS EXAMINE SHRI SOHANRAJ MEHTA ON 23/11/2011 FOR T HE FIRST TIME. ASSESSEE WAS AFFORDED THE SAID OPPORTUNITY VIDE LETTE R DATED 1/12/2011 AS PER WHICH ASSESSEE WAS REQUESTED TO PRE SENT HIMSELF BETWEEN 12 TH ' TO 15 TH DECEMBER, 2011, IN THE OFFICE OF DCIT, CENTRAL CIRCLE, 2(2), BANGALORE, WHO HAS CONDUCTED EXAMINATION- IN- CH IEF OF THE WITNESS SOUGHT TO BE CROSS EXAMINED BY THE ASSESS EE NAMELY SHRI SOHANRAJ MEHTA. HOWEVER, ASSESSEE CHOSE NOT TO AV AIL THE SAID OPPORTUNITY AND INSTEAD REQUESTED THAT THE SAID CROSS EXAMINATION BE CONDUCTED AT PUNE. ACCORDING TO THE AO, THE COURT O F LAW IN WHICH EXAMINATION- IN-CHIEF IS CONDUCTED CAN ONLY CONDUCT CROSS- EXAMINATION OR RE-EXAMINATION, AS THE CASE MAY BE . SINCE, THE EXAMINATION-IN-CHIEF OF SHRI SOHANRAJ MEHTA IN THE FORM OF 21 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 STATEMENT DATED 10/08/2011 WAS CONDUCTED BY DCIT , CENTRAL CIRCLE, 2(2), BANGALORE, THE CROSS EXAMINATION HAS TO BE NEC ESSARILY CONDUCTED BY THE SAME OFFICER. THEREFORE, THE AO HELD THAT REQUEST OF ASSESSEE TO CONDUCT THE SAID CROSS EXAMINATION OF SHR I SOHANRAJ MEHTA AT PUNE WAS UNTENABLE ON THIS VERY COUNT. THE AO FURTHER OBSERVED THAT AS PER THE CODE OF CIVIL PROCEDURE, SUMMON S CAN BE ISSUED TO A PERSON ONLY IF HE IS WITHIN 500 KMS OF THE DIST ANCE FROM THE ISSUING AUTHORITY. WHERE THE PERSON/WITNESS IS MORE T HAN 500 KM AWAY FROM THE SUMMONS ISSUING AUTHORITY, COMMISSION HAS TO BE ISSUED BY SUCH AUTHORITY, AUTHORIZING OTHER AUTHORITY TO CAUSE/CARRY OUT SUCH NECESSARY EXAMINATION/CROSS-EXAM INATION/RE- EXAMINATION, ON HIS BEHALF. HE OBSERVED THAT IN THE INSTANT CASE, THE PERSON M/S DHARIWAL INDUSTRIES LTD., SHRI. RASIKLAL M. DHARIWAL WISH TO CROSS-EXAMINE, NAMELY SHRI. SOHANRAJ MEHTA, A RES IDENT OF BANGALORE AND AS SUCH, THE AO AT PUNE IS NOT EMPOWERED TO ISSUE SUMMONS TO HIM SO AS TO ACCORD AN OPPORTUNITY OF CROSS EXAMINATION TO M/S. DHARIWAL INDUSTRIES LTD., SHRI RASIKLAL M. DHARIWAL. THEREFORE, THE AO HAD ISSUED COMMISSION ON 01/12/2011 TO DEPARTMENTAL OFFICER IN BANGALORE TO GRANT M/S. DHARIWAL INDUSTRIES LTD., SHRI RASIKLAL M. DHJARIWAL AN OPPO RTUNITY OF CROSS EXAMINING SHRI SOHANRAJ MEHTA. THIS OPPORTUNITY OF CROSS EXAMINATION WAS NOT AVAILED BY THE ASSESSEE. IN THE INTE REST OF JUSTICE ONE MORE OPPORTUNITY WAS AFFORDED VIDE OFFICER LETTE R TO ASSESSEE DATED 23/12/2011. THIS TIME ALSO, ASSESSEE CHO SE NOT TO AVAIL THE OPPORTUNITY TO CROSS EXAMINE SHRI SOHANRAJ MEH TA. HE THEREFORE CONCLUDED THAT ASSESSEE WAS AFFORDED SUFFICIENT OPPORTUNITY TO CROSS EXAMINE SHRI SOHANRAJ MEHTA 22 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 33. AS REGARDS SUBMISSION OF THE ASSESSEE THAT SHRI.SOH ANRAJ MEHTA, SHRI. MALLIKARJUNA, SHRI SHITAL PATIL, SHRI K. RAGHUNATH AN D SHRI. S. BALAN ON WHOSE STATEMENTS DEPARTMENT IS PLACING R ELIANCE, HAD RETRACTED THEIR RESPECTIVE STATEMENTS IS CONCERNED , THE AO ALSO REJECTED THE SAME. HE OBSERVED THAT ALL THESE INDIVIDUA LS, THOUGH UNDER DIRECT INFLUENCE AND CONTROL OF THE ASSESSEE, HAVE, IN FIRST INSTANCE, ADMITTED AND SUBSTANTIATED THE STATEMENT OF SH RI SOHANRAJ MEHTA U/S 132(4} EXPLAINING THE SAID SEIZED PAGES, THOUGH THE PUNE SEARCH ACTION WAS CONDUCTED AFTER 3 MONTHS O F DISCOVERY OF THE SAID EVIDENCE IN BANGALORE. THIS PROVES THAT THESE INDIVIDUALS HAVE SPOKEN ONLY TRUTH IN THEIR RESPECTIVE STATEMENTS U/S 132(4) AS IT COMES WITH AN ELEMENT OF SURPRISE. HAVING TOLD THE TRUTH IN FIRST PLACE, THESE INDIVIDUALS LIKE SHRI.SOHANRAJ MEHTA (C & F AGENT ), SHRI. MALLIKARJUNA (RAW MATERIAL SUPPLIER), SHRI SHITAL PATIL & S HRI K. RAGHUNATH (EMPLOYEES) AND SHRI. S. BALAN (FRIEND AND BUSINES S ASSOCIATE ) WERE AND ARE STILL UNDER THE INFLUENCE AND CON TROL OF THE ASSESSEE COMPANY FOR THE OBVIOUS REASON THAT THEY ARE DEPENDENT ON THE ASSESSEE FOR THEIR EXISTENCE/BUSINESS LIVELIHOOD AND AS SUCH, THEY ALL HAVE RETRACTED SUBSEQUENTLY AS PER THE DIKTAT S OF THE ASSESSEE COMPANY. 34. THE AO EXAMINED THE EVIDENTIARY VALUE OF STATEMENT U /S 132(4) OF THE INCOME TAX ACT AND NOTED THAT SECTION 132 (4) OF THE INCOME TAX ACT ENABLES THE AUTHORISED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION CAN BE USED AS EVIDENCE UNDER THE INCOME T AX ACT. PROVISIONS OF SECTION 136 OF THE INCOME-TAX ACT, 1961 DE EM PROCEEDINGS BEFORE AN INCOME-TAX AUTHORITY TO BE JUDICIAL PROCEEDINGS. IN THE STATEMENT U/S 132(4) THE EVIDENCES FO UND AT THE TIME OF SEARCH ARE EXAMINED ON THE SPOT. WHEN STATEMENT IS 23 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 RECORDED FROM THE ASSESSEE U/S 132(4) ON THE DATE OF SE ARCH, SURPRISE ELEMENT IS INVOLVED. IN THE STATEMENT U/S 132(4), ASSESSEE IS CONFRONTED WITH THE EVIDENCES FOUND AT THE TIME OF SEA RCH FOR THE FIRST TIME AND RESPONSE OF THE ASSESSEE IS ELICITED ON THE SPOT. IN VIEW OF THE NATURAL HUMAN TENDENCY, FIRST RESPONSE OF THE ASSESSEE WOULD BE TRUE. WHATEVER IS STATED LATER WOULD BE NORMALLY AFTER A LOT OF THOUGHT , CALCULATION , MANIPULATION AND TUTORING BY CA'S/ADVOCATES, THEREFORE , STATEMENT U/S 132(4) IS A VIRGIN AND CONTEMPORANEOUS EVIDENCE WITH IMMENSE VALUE . 35. HE OBSERVED THAT IN THE PRESENT CASE, THE RETRACT ION IS MOST DEFINITELY NEITHER IMMEDIATE NOR IS IT CORROBORATED WITH ANY EVIDENCE. ADMISSION IS A VERY IMPORTANT PIECE OF EVIDENCE AN D TO BRUSH IT ASIDE WHIMSICALLY WOULD DISTORT THE WHOLE PURPOSE OF THE PROVISIONS, IN ORDER TO ALLOW A WITHDRAWAL OR A RETRACTION OF THE SAME CONCLUSIVELY, THERE MUST BE MITIGATING CIRCUMSTANCES MAKING OUT A CASE FOR SUCH RETRACTION, A FACT WHICH IS COMPLETELY ABSENT IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. TO ALLOW A RETRACTION WITHOUT ANY COGENT MATERIAL WOULD AMOUNT TO M AKING A MOCKERY AND TRAVESTY OF THE SEARCH AND . SEIZURE OPERA TIONS. THE ASSESSEE HAVING ESTOPPED THE REVENUE BY THE ADMISSION CANNOT BE ALLOWED TO GO BACK ON ITS 'PROMISE' HELD OUT BY HIM. THE 'PROMISE' HERE WOULD MEAN THE SURRENDER MADE AT THE TIME OF SEAR CH. ANY RETRACTION AT A LATER STAGE WOULD VIOLATE THE PRINCIPLES OF PROMISSORY ESTOPPEL AND HAVE VERY GRAVE AND SERIOUS CONSEQUENCES AND RAMIFICATIONS. FURTHER, WHEN STATEMENT WAS MADE VOLUNTAR ILY AND WAS NOT ALLEGED TO HAVE BEEN OBTAINED UNDER THREAT OR COERCION, ONUS WAS ON ASSESSEE TO PROVE THAT SAID DECLARATION WA S MADE UNDER ANY MISCONCEPTION OF FACTS - SINCE ASSESSEE HAD NO T TAKEN ANY STEPS TO RECTIFY ITS DECLARATION BEFORE AUTHORITIES BE FORE WHOM 24 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 SUCH DECLARATION WAS MADE, THERE WAS NO VALID REASON FOR RETRACTION OF SAME AFTER A GAP OF ABOUT TWO AND A HALF MONTHS. 36. THE AO FURTHER NOTED THAT SHRI SOHANRAJ MEHTA, C&F AGENT OF M/S.DIL VIDE HIS SUCCESSIVE STATEMENTS ON OATH DATED 10 -10-2009, 15-10-2009 , 21-10-2009 AND 12-08-2011 HAS EXPLAINED T HE ENTIRE UNACCOUNTED BUSINESS CHAIN REGARDING UNACCOUNTED PURCH ASES, UNACCOUNTED MANUFACTURE, UNACCOUNTED PACKING, UNACCOUNT ED PRINTING, CLANDESTINE REMOVAL OF GOODS, UNACCOUNTED SALE AND UTILIZATION OF THE SALE PROCEEDS WHICH HE HAS ADMITTED TO HAVE DONE FOR AND ON BEHALF OF M/S.DIL BETWEEN 2003 TO 2008. THE ASSESSEE HAS HEAVILY RELIED UPON THE RETRACTIONS OF SHRI SOHANRAJ MEHTA VIDE LETTERS DATED 23-12-2009 AND 03-12-2011. THE AO NOTE D THAT THE LETTER OF SHRI SOHANRAJ MEHTA DATED 03-12-2011 IS BASIC ALLY A REQUEST TO CONSIDER HIS 23-12-2009 LETTER AS CORRECT A ND TRUE NARRATION OF FACTS REGARDING THE SAID SEIZED DOCUMENTS. H OWEVER, THE SAID RETRACTION DATED 23-12-2009 WAS FULL OF CONTRAD ICTIONS. ALL THESE CONTRADICTIONS WERE EXPOSED BY THE DCIT, CENTRAL CIRCLE-2(2), BANGALORE BY RECORDING THE STATEMENT OF SHRI SOHANRAJ M EHTA U/S.131 ON 10-08-2011 AND AGAIN ON 16-12-2011. 37. HE OBSERVED THAT VIDE HIS STATEMENT RECORDED ON O ATH U/S.131 ON 10-08-2011 SHRI SOHANRAJ MEHTA HAS CORROBORATED H IS STATEMENT RECORDED U/S.132(4) WHICH CARRY THE HIGHEST EVIDENTIARY V ALUE. HE FURTHER OBSERVED THAT IN HIS STATEMENT U/S.131 DATED 10 -08-2011 SHRI SOHANRAJ MEHTA HAS MADE IT CLEAR THAT THE SAID RET RACTION VIDE HIS LETTER DATED 23-12-2009 WAS MADE BY HIM AT THE BEH EST OF M/S.DIL. THUS, THE AO NOTED THAT SHRI SOHANRAJ MEHTA H AS NOT ONLY AGREED THAT HE HAD EARNED COMMISSION ON THE SAID UNACCOUNTED SALE @ RS.65/- PER CARTON BUT ALSO FILED THE RETURNS 25 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 U/S.153A BY OFFERING THIS COMMISSION INCOME TO TAX. THIS FAC T OF EARNING COMMISSION ON THE SAID UNACCOUNTED SALES @ RS.65 /- PER CARTON IS ALSO AS PER THE ENTRIES IN THE SAID SEIZED PAGE S WHERE THERE IS MENTION OF SUCH COMMISSION INCOME OF SHRI SOHANRAJ MEHTA AMOUNTING TO RS.1,52,83,320/-. 38. SO FAR AS THE SECOND RETRACTION VIDE LETTER DATED 0 3-12-2011 IS CONCERNED THE AO NOTED THAT THE SAID LETTER BEARS ONE ADDRESS (OLD ONE) ON ITS TOP AND HAS DIFFERENT ADDRESS ON THE ENVELOPE . FURTHER, THE FACT THAT THE LETTER OF THIS OFFICE, SENT ON THE OLD ADD RESS OF SHRI. SOHANRAJ MEHTA, WAS RETURNED UNSERVED WITH COMMENT OF THE POSTAL STAFFS COMMENT DATED 08-12-2011 ADDRESS LEFT, ALSO PROV ES THAT THE SAID ADDRESS IS NO MORE IN USE. HOWEVER, SURPRISINGLY AND FOR REASONS BEST KNOWN TO HIM, SHRI SOHANRAJ MEHTA HAS PUT THE OLD ADDRESS ON A VERY RECENT LETTER OF RETRACTION DATED 0 3-12-2011, UNMINDFUL OF THE FACT THAT THE ENVELOPE CARRYING THIS VERY LETTER CARRIES A DIFFERENT ADDRESS OUTSIDE. HE FURTHER NOTED THA T THE ASSESSEE INTUITIVELY QUOTED THIS LETTER OF SHRI SOHANRAJ MEHTA DATED 03-12-2011 IN HIS LETTER DATED 08-12-2011. HOWEVER, IN TH E ENVELOPE ENCLOSED TO THE PETITION SUBMITTED BEFORE THE DEPARTMENT FOR GRANT OF OPPORTUNITY OF CROSS- EXAMINATION, THE SAID LETTER OF SHR I SOHANRAJ MEHTA DATED 03-12-2011 WAS ACTUALLY RECEIVED BY THE A SSESSEE ON 09-12-2011 AT 13.15 HRS. THEREFORE, HE DOUBTED AS HO W THE ASSESSEE QUOTED IN ITS LETTER ADDRESSED TO THE AO ON 0 8-12-2011. THE AO FURTHER NOTED THAT HIS OFFICE COULD NOT COMMUNICATE TO SHRI SOHANRAJ MEHTA TILL 03-12-2011, REGARDING THE ISSUE OF H IS PROPOSED CROSS-EXAMINATION AT BANGALORE BY M/S DHARIWAL INDUSTRI ES LTD/ SHRI RASIKLAL M. DHARIWAL. 26 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 39. HOWEVER, THE AO NOTED THAT THE CONTENTS OF THE SA ID LETTER OF SHRI SOHANRAJ MEHTA DATED 03-12-20111 ARE SURPRISINGLY MATCHING WITH THE PETITIONS OF M/S. DHARIWAL INDUSTRIES LTD./SHRI RAS IKLAL M. DHARIWAL DATED 26-11-2011 & 29-11-2011 FOR ALLOWING CRO SS- EXAMINATION OF SHRI MEHTA AT PUNE INSTEAD OF BANGALORE ON THE GROUND OF HEALTH OF SHRI RASIKLAL M . DHARIWAL . HE ACCORDINGLY CONCLUDED THAT THE RETRACTION LETTER DATED 03-12-2011 PURPORTED TO BE WRITTEN BY SHRI SOHANRAJ MEHTA IS NOT ACTUALLY WRITTE N BY HIM BUT IT WAS DRAFTED AND SUPPLIED TO HIM BY SOMEBODY ELSE AND CIRCUMSTANTIAL EVIDENCE STRONGLY POINTS OUT THAT IT WAS D ONE BY/AT THE BEHEST OF THE ASSESSEE GROUP. HE FURTHER NOTED T HAT SHRI SOHANRAJ MEHTA IN HIS STATEMENT BEFORE THE DCIT, CENTRA L CIRCLE-2, BANGALORE RECORDED U/S.131 ON 16-12-2011 COULD NOT ANS WER THE SPECIFIC AND POINT-WISE QUESTIONS REGARDING RETRACTION BY H IM AND REMAINED ABSOLUTELY SILENT ON MOST OF THESE QUESTIONS. 40. SO FAR AS RETRACTION OF SHRI MALLIKARJUN OF SHIMOGA IS CONCERNED THE AO NOTED THAT ARECANUT AND SUPARI SUP PLIER OF THE ASSESSEE HAS CONFIRMED THE CONTENTS OF THE SEIZED DOCU MENTS AND ADMITTED TO HAVE MADE UNACCOUNTED RAW MATERIAL SUPPLIES TO M/S.DIL IN HIS STATEMENT U/S.132(4). HOWEVER, VIDE HIS LETTER DATED 23-01-2010 FILED BEFORE THE INVESTIGATION WING OF BANGALORE SHRI MALLIKARJUN HAS RETRACTED HIS STATEMENT MADE U/S.132(4). ACCORDING TO THE AO, THIS RETRACTION IS UNSUBSTANTIATED AND THE CIRCUMSTANTIAL EVIDENCE FOUND AT THE TIME OF REVOCATION OF T HE PROHIBITORY ORDER FROM THE SEARCHED PREMISES OF SHRI MALLIKA RJUN OF SHIMOGA BRINGS OUT FOLLOWING PECULIAR FACTS : 27 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 (I) SHRI MALLIKARJUN IS HAVING A BRANCH OFFICE AT BANG ALORE LOCATED AT 799/6, SHOP NO.2, ANEKAL ROAD, CHANDAPUR, BANGAL ORE WHICH IS IN CLOSE PROXIMITY TO THE BANGALORE FACTORY O RMD GUTKHA GROUP. (II) THE ENTIRE TURNOVER OF THIS BRANCH OFFICE AT BANGALO RE IS IN CASH AND IS AROUND RS.50.28 CRORES FOR THE PERIOD STARTING F ROM THE FINANCIAL YEAR 2006-07 TO 2008-09. (III) THE BRANCH OFFICE HAS NOT EVIDENCES IN THE FORM OF N AMES, ADDRESSES, ETC. OF THE PARTIES TO WHOM SALES HAVE BEEN EF FECTED. (IV) THOUGH IT HAS BEEN CLAIMED THAT THEY ARE CARRYING OU T RETAIL SALES FROM THE BRANCH OFFICE, SURPRISINGLY FOR EACH TRUCK E XACTLY 65 BILLS ARE RAISED. IT IS A HEIGHT OF COINCIDENCE THAT FOR EACH TRUCK LOAD OF BETEL NUT WHICH ARRIVES AT BANGALORE FROM SH IMOGA, EVERY TIME EXACTLY 65 SALE BILLS ARE RAISED. (V) THE BRANCH OFFICE AT BANGALORE IS NOT EVEN IN POSSESSION OF ANY EVIDENCES TO SUGGEST UNLOADING OF THE TRUCKS, ITS WEIGHM ENT ETC. 41. FROM THE ABOVE HE NOTED THAT THE DEVELOPMENTS A T THE TIME OF SEARCH ACTION AND ALSO POST SEARCH ACTION PROVIDES CLEAR EVIDENCE WHICH SUGGESTS THE AUTHENTICITY OF THE DOCUMENTS SEIZED BY THE INVESTIGATION WING OF BANGALORE PERTAINING TO THE UNACCOU NTED SALES CARRIED OUT BY SHRI SOHANRAJ MEHTA, C&F AGENT OF RMD GUTKHA FOR KARNATAKA REGION. IT ALSO PROVIDES THE EVIDENCE THAT S HRI MALLIKARJUN WAS CARRYING OUT UNACCOUNTED SALE OF SUPARI TO RMD GUTKHA GROUP AND THAT ITS CASH SALES FROM ITS BRANCH OFFIC E AT BANGALORE WERE ACTUALLY BEING DIVERTED TO RMD GUTKHA GR OUP WHICH IN TURN HAS BEEN USED FOR THE UNACCOUNTED PRODUCTION A ND SUBSEQUENT SALE. 42. SO FAR AS RETRACTION OF MR.S. BALAN IS CONCERNED, THE AO NOTED THAT SHRI S. BALAN IS A CLOSE FAMILY FRIEND AND BUSINESS ASS OCIATE OF SHRI RASIKLAL M. DHARIWAL/M/S. DIL. HE HAD ADMITTED ON 20-0 1- 2010 VIDE HIS STATEMENT ON OATH THAT HE WAS A CUSTODIA N OF ABOUT RS.14 CRORES MONEY OF DHARIWAL AND THE SAID SEIZED DOCUM ENTS ALSO DEPICT THAT ABOUT RS.14.35 CRORES MONEY WAS HANDED OVE R BY SHRI 28 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 SOHANRAJ MEHTA TO SHRI S. BALAN/HIS REPRESENTATIVES ON T HE DIRECTIONS OF RMD/PRD. SHRI S. BALAN HAS RETRACTED LATER O N 25-11- 2011 BY FILING AN AFFIDAVIT STATING THAT THE ADMISSION MADE BY HIM DURING SEARCH ACTION WAS NOT ACTUALLY MADE BY HIM AND H E HAS NOT STATED ANY SUCH FACT DURING THE SEARCH. HOWEVER, SHRI S . BALAN HAS ADMITTED THE SAID STATEMENT BEARS HIS SIGNATURE ONLY. MOREOVER, THE RETRACTION OF SHRI BALAN IS NOT MADE IMMEDIATELY AFTER THE SEARCH AND IT WAS MADE ALMOST AFTER 22 MONTHS AFTER THE SEARC H. FURTHER, THERE WAS NO ELEMENT OF ANY THREAT OR COERCION WHILE REC ORDING THE STATEMENT U/S.132(4). HE OBSERVED THAT THOUGH THE SAID RETRACTION OF SHRI S. BALAN HAS COME ONLY ON 25-11-2011, M/S DIL CO ULD INTUITIVELY ANTICIPATE AND COULD QUOTE THE SAID RETRACTION IN ITS WRITTEN SUBMISSION AS EARLY AS DATED 01-09-2011. IT PRO VES THAT THE SAID RETRACTION WAS MADE BY SHRI S. BALAN ONLY AT THE B EHEST OF M/S DIL AND IS A FEEBLE ATTEMPT TO KEEP M/S DIL AWAY FROM THE IRREFUTABLE EVIDENCES CONTAINED IN THE SAID SEIZED DOCUMENT S AND TO SAVE M/S DIL FROM THE LAWFUL CONSEQUENCES OF THIS UNLAWFUL ACT . 43. AS REGARDS THE RETRACTION OF SHRI SHITAL PATIL AND SHR I K. RAGHUNATH ARE CONCERNED, THE AO NOTED THAT THEY MANAGE SALES OF GUTKHA OF M/S DIL IN THEIR RESPECTIVE CAPACITIES OF AREA S ALES MANAGER AND SALES EXECUTIVE. THEY HAVE CONFIRMED THE FAC T OF UNACCOUNTED SALE OF GUTKHA OF M/S DIL THROUGH SHRI SOHA NRAJ MEHTA. THERE WAS NO REASON FOR THESE EMPLOYEES, WHO ARE UNDER DIRECT INFLUENCE AND CONTROL OF M/S DIL, TO HAVE STATED TH AT SHRI SOHANRAJ MEHTA HAS CARRIED OUT UNACCOUNTED SALES OF GU TKHA ON BEHALF OF THEIR EMPLOYER M/S DIL, IF I T WAS NOT TRUE . BOTH THESE INDIVIDUALS, ARE STILL ENJOYING THE FAITH OF THEIR EMPLOYER M/S DIL AND STILL ON THE PAYROLL OF M/S DIL . THEREFORE, NOTWITHSTANDING THEIR 29 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 UNSUBSTANTIATED AND UNCORROBORATED RETRACTION LATER ON , WHICH IS AT THE BEHEST OF THEIR EMPLOYER M/S DIL, UNDER WHOSE INFLUENC E AND CONTROL THEY STILL REMAIN , THE STATEMENTS U/S 132(4) MADE BY BOTH THESE INDIVIDUALS ADMITTING THE FACTS OF UNACCOUNTED SALES O F GUTKHA BY THEIR EMPLOYER M/S DIL THROUGH SHRI SOHANRAJ MEHTA , CARRY A VERY HIGH EVIDENTIARY VALUE IN THE EYES OF LAW . 44. IN VIEW OF THE ABOVE THE AO HELD THAT THE STATEME NTS UNDER SECTION 132(4) WERE RETRACTED IN LETTER ONLY AND NOT IN S PIRIT. THE RETRACTION IS SUPERFICIAL AND IS NOT BASED ON ANY EVIDENCE WHATSOEVER. MOREOVER, NO THREAT OR COERCION IS PROVED IN ANY OF THE RETRACTIONS. THEREFORE, IT CAN BE CONCLUDED THAT ALL THE A BOVESAID STATEMENTS WERE RETRACTED BY RESPECTIVE PERSONS AT T HE BEHEST OF ASSESSEE COMPANY, ON WHICH THESE PERSONS ARE DEPENDEN T. IT CAN FURTHER BE CONCLUDED THAT THE STATEMENTS U/S 132(4) HAVE NOT BEEN RETRACTED SUCCESSFULLY. THUS, NOTWITHSTANDING THE SUBSEQ UENT UNSUCCESSFUL RETRACTIONS, THE STATEMENTS U/S 132(4) DISCUSSED ABOVE, STILL COMMAND IMMENSE EVIDENTIARY VALUE. 45. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS ARGUED BY THE ASSESSEE THAT THE UNDISCLOSED INCOME SHOULD NOT BE ASSESSED IN THE HANDS OF M/S DIL. HOWEVER, THE AO REJECTED SUCH ARGUMENT AS BASELESS ON ACCOUNT OF THE FOLLOWING REASONS : THE NAMES OF B R ANDS DEA L T NAMELY BIG, MINI, 2 GMS ARE BELONGING T O M/S . DIL . T HE PR I CES QUOTED IN THE UNACCOU N TED BOO K S A N D ALSO UNACCOU N TE D TU R NOVER O F SHRI . SOHA N RA J MEHTA O N BEHALF OF M/S . DIL ALSO M ATCH WITH THAT O F PR I CES OF M/S . DIL . THE SALE PROCEEDS OF UNACCOUNTED TURNOVER OF GUTKA HA S BEEN APPLIED/UTILIZED BY SHRI . SOHANRAJ MEHTA ON BEHA L F OF M/S . DIL . THE PARTIES WHO ARE APPEARING IN RIGHT SIDE OF A/M/08 OF PAGE 34 ARE PARTIES HAV I NG TRANSACTION W I TH M/S . DIL OR D I RECTORS . THE TRANSACT I ONS ARE EITHER BEING SUPPLIERS , SELLERS OF P R OPE R TY , PEOPLE O N THEIR PAY ROLES ( SA L ES TAX DEPARTMENT) , C& F AGEN T ( SOHAN R AJ M EHTA ), L EGA L ADVISORS , ETC . 30 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THOUGH , THE PARTIES ON THE RIGHT SIDE HAVE NOT ACCEPTED TO HA VE RECEIVED THE UNACCOUNTED CONSIDERATION IN FULL , THEY HAVE ACCEPT E D FOR HAVING TRANSACTED WITH M/S . DIL AND HAVE REFLECTED THE TRANSACTIONS OF M/S . DIL TO THE EXTENT OF ACCOUNTED ENT R IES. DUR I NG THE SEARC H P R OCEED I NGS , ONLY STOCK OF M/S . DI L WAS FOUND A T T H E PR EMISES OF M/S . MEHTA ASSOC I ATES , A CONCE R N OF SHR I . SOHANRA J MEHTA WH I C H WAS C&F AGENT OF M/S. DI L . THE PRICE OF VARIOUS TYPES OF GUTKA LIKE BIG, MINI & 2 GMS ARE BRANDS OF M/S . DIL AND THE PRICE GIVEN IN THE WORKING OF UNACCOUNT ED TURNOVER I S CORRESPONDING TO THE P RI CE OF M/S . DIL B R ANDS . THE C&F AGENT SH R I. SOHANRAJ MEHTA ALL THE WAY DUR I NG SEARCH , POST- SEARCH AND ASSESSMENT PROCEEDINGS CLAIMED THAT HE HAS SOLD GUTKA OF M/S . DIL . HE HAS ALSO DECLARED THE COMMISSION EARNED BY HIM OUT O F UNACCOUNTED SALE OF GUTKAS AS C&F AGENT . SHRI . SOHANRAJ MEHTA HAD IN HIS LETTER DT: 23 . 12 . 2009 ADMIT T ED SOME DISALLOWAB L E EXPENSES OF M/S . DIL AND THIS AMOUNT HAS TO BE ADDED BACK IN THE CASE OF M/S . DIL DURING THE ASSESSMENT PROCEEDINGS IN THAT CASE AND THE STATEMENT OF SRI . SOHANRAJ MEHTA DATED 10.08.2011 (Q . NO 6) HAS TO BE REFERRED IN THIS REGARD . SHRI . SOHANRAJ MEHTA IN HIS CAPACITY AS PARTNER OF M/S MEHTA ASSOCIATES HAD UNDERTAKEN BOTH ACCOUNTED AS WELL AS UNACCOUNTED SALES OF GUTKA BELONGING TO M/S . DIL . UNACCOUNTED SALES WERE NOT REFLECTED I N M/S. MEHTA ASSOCIATES OR IN HANDS OF SHRI. SOHANRAJ MEHTA . MOREOVER , SHRI . SOHANRAJ MEHTA HAS ACTED IN CAPACITY OF C&F AGENT . THE SALE PROCEEDS OF GUTKA ARE APPORTIONED TO SELLERS O F IMMOVABLE PROPERTY OR SUPPLIERS OF RAW MATERIALS OF GUTKA OR TO PEOPLE WHO HAVE TRANSACTED WITH M/S . DIL ETC . MOREOVER, AS PER SEIZED MATERIAL A/M/29, THERE ARE RECEIPTS SIGNED BY SHRI . RASIKLAL M. DHARIWAL OR BY HIS SON SHRI . PRAKASH DHARIWAL OR BY OTHERS ON HIS BEHALF FOR HAVING RECEIVED UNACCOUNTED SALE PROCEEDS WHICH WERE SENT TO THEM. ALL THIRD PARTIES APPEARING IN A/M/08 OF PAGE NO. 34 HAVE STATED THAT THEY HAD TRANSACTIONS ONLY WITH M/S. DIL, MOST OF THEM DENYING FOR HAVING EVEN KNOWN SHRI . SOHANRAJ MEHTA . OTHER SUPPORTING DOCUMENTS AVAILABLE IN THE SEIZED MAT ERIAL LIKE A/M/01 SHOWS THE DAILY SALES OF GUTKA BELONGING TO M/S . DIL, A/M/07 CONTAINS LEDGER EXTRACT OF UNACCOUNTED CONSIDERATIONS PAID TO VARIOUS PARTIES. FURTHER, MOST OF THE PARTIES BELONGING TO BANGALORE W HICH ARE APPEARING ON RIGHT SIDE OF THE PAGE 34 OF A/M/08 WER E EXAMINED ON OATH BY THE DCIT CENTRAL CIRCLE 2(2), BANGALORE AND THEY HAVE CLARIFIED THAT THEY HAD TRANSACTIONS ONLY WITH M/S. DIL OR SOME E NTITY BELONGING TO THEM BUT NOT WITH SHRI . SOHANRAJ MEHTA . THIS SUBSTANTIATES THE FACT THAT ALL THE THIRD PARTIES WHO ARE ENTERING IN THE SE IZED MATERIAL NAMELY A/M/08 OF PAGE NO . 34 ARE HAVING TRANSACTIONS ONLY WITH M/S. DIL . SIMILARLY, SOME OF THE OTHER PARTIES WHICH ARE APPEAR ING ON RIGHT SIDE OF THE PAGE 34 OF A/M/08 AND ARE PRESENTLY BEING ASSESSED I N THIS OFFICE, WERE ALSO EXAMINED IN THIS REGARD. THE VARIOUS DETAILS SUBMITTED BY THE THIRD PARTIES WERE VERIFIED AND IT WAS FOUND THAT MOST OF THE THIRD PARTIES WERE EVEN NOT AWARE OF SHRI . SOHANRAJ MEHTA. SOME OF THE PARTIES WHO KNEW SHRI . SOHANRAJ MEHTA 31 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 WERE THE EMPLOYEE'S LIKE SHRI . JEEVAN SANCHETHI AND SHRI . PRASHANT BAFNA . 46. RELYING ON VARIOUS DECISIONS THE AO HELD THAT THE SE IZED DOCUMENTS SHOULD BE READ AS A WHOLE. HOWEVER, THE ASSE SSEE IN THE INSTANT CASE IS ACCEPTING A PART OF THE SEIZED DOCUMENT AND DISOWNING THAT PART OF THE SEIZED DOCUMENT WHICH IS INCONV ENIENT TO THE ASSESSEE. THEREFORE, IF THE SAID SEIZED DOCUMENT READ AS A WHOLE IT LEADS TO STRONG INFERENCE THAT THE SAID SEIZED DOCUME NTS INDEED BELONG TO THE ASSESSEE AND THEY DEPICT UNACCOUNTED SA LE OF GUTKHA CARRIED OUT BY THE ASSESSEE. 47. THE AO OBSERVED THAT PAN MASALA AND GUTKHA ARE C ONSIDERED TO BE MOST (EXCISE DUTY) EVASION PRONE COMMODITIES AND FO R THIS REASON, GOVT OF INDIA TRIED TO PLUG THIS EVASION BY USHER ING IN A REGIME OF MANDATORY COMPOUNDED LEVY OF EXCISE ON PAN MA SALA AND GUTKHA SCHEME W.E . F . 1-7-2008. AS A RESULT OF THIS SHIFT IN EXCISE DUTY REGIME, THE EXCISE DUTY LIABILITY OF ASSESSEE CO MPANY FOR AY 2009-10 FOR ITS BANGALORE FACTORY HAS RISEN FROM RS. 43 .70 CRORES AS ACTUALLY INCURRED IN AY 2008-09, TO RS. 606 CRORE FOR A Y 2009-10 AS IS EVIDENT FROM THE SHOW CAUSE NOTICE ISSUED BY EXCISE DEPARTMENT TO THE ASSESSEE FOR ITS BANGALORE FACTORY . 48. EVEN, ON SCIENTIFIC ANALYSIS OF THE PROBABLE PRODUCTION AT BANGALORE FACTORY, BASED ON THE INSTALLED CAPACITY OF THE P ACKING MACHINES, WORKING HOURS AND LOAD FACTOR AS DERIVED FROM BA RODA FACTORY OF THE ASSESSEE, IT BECOMES EVIDENT THAT THE BAN GALORE FACTORY OF THE ASSESSEE, WHICH IS SET UP NEWLY (AY 2004-0 5 BEING THE FIRST YEAR), OUGHT TO RUN ATLEAST AT THE SAME LOAD FACTOR AS THAT OF BARODA FACTORY OF THE ASSESSEE, WHICH IN FACT IS AN OLD FAC TORY AND 32 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE ACTUAL/PROBABLE QUANTUM OF PRODUCTION OF GUTKHA @ BA NGALORE HAS TO BE NECESSARILY ARRIVED AT BY ADOPTING SUCH A SC IENTIFIC WORKING ONLY I.E. AT THE LEAST BY ADOPTING BARODA LOAD FACT OR TO BANGALORE INSTALLED CAPACITY . WHEN, SUCH AN ANALYSIS IS MADE, IT COMES OUT THAT THE BANGALORE FACTORY HAS ACCOUNTED P R ODUCTION @ LOAD FAC T OR OF 29 . 81 % O N LY WHEREAS I F ACCO U NTED AS WELL AS UNACCO U N TE D P R ODUCTION AS GATHERED FRO M SA I D S EI ZED DO C U M ENTS I S TAKEN T OGETHE R, T HE N THE L OAD FACTOR OF BANGALORE FAC T ORY'S PROD U CTION C O M ES T O 62 . 39 % WHICH I S COMPARAB L E WIT H ASSESSEE'S OWN FACTO R Y A T BARODA WHICH SHOWS AVERAGE LOAD FACTOR AT 53.13% FOR THE RELEVANT PERIOD . BARODA FACTORY: ACCOUNTED ONLY ASSESSMENT YEAR ESTIMATE OF MACHINE BASED PRODUCTION BASED ON INSTALLED CAPACITY ACTUAL - ACCOUNTED ( QTY.) ACCOUNTED SALES LOAD FACTOR PRODUCTION ACCOUNTED SALES (KG) (KG) (KG) (RS.) . 2004-05 3,144,960 1,580,640 1,540,842 1,430,0 54,430 0.5026 2005-06 3,144,960 1,785,894 1,742,338 1,613,588 ,052 0.5679 2006-07 3,144,960 1,484,182 1,516,674 1,485,618 ,362 0.4719 2007-08 3,144,960 1,671,249 1,668,445 1,617,466 ,480 0.5314 2008-09 3,144,960 1,832,888 1,822,016 1,857,488,286 0.5828 TOTAL 15,724,800 8,354,853 8,290,315 8,004,215,610 0.5313 (NOTES : ESTIMATED PRODUCTION IS ARRIVED AT IN KGS . BY CONSIDERING MACHINE PACKING CAPACITY OF 60 POUCHES/MIN, WORKING HOURS OF 8 HRS /DAY, WORKING DAYS OF 25 DAYS/MONTH AND CONSIDERING ACTUAL NO. OF MACHINES (146) FOR BARODA FACTORY FOR THE RELEVANT PERIOD) 49. THE AO OBSERVED THAT IF ACCOUNTED AS WELL AS UNACC OUNTED PRODUCTION, AS GATHERED FROM SAID SEIZED DOCUMENTS IS CON SIDERED FOR BANGALORE FACTORY AS MENTIONED IN TABLE BELOW, THE AVERA GE LOAD FACTOR BECOMES COMPARABLE WITH BARODA FACTORY OF THE ASSESSEE. 33 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 BANGALORE FACTORY: ACCOUNTED PLUS UNACCOUNTED PRODU CTION CONSIDERED ASSESSMENT YEAR ESTIMATE OF ACCOUNTED UNACCOUNTED PRODUCTION L I TOTAL ACTUAL LOAD FACTOR MACHINE PRODUCTION TURNOVER OF M/S. DIL BASED PRODUCTION AT BASED ON BASED ON SEIZED DOCUMENTS BANGALORE ACCOUNTED PRODUCTION MAINTAINED BY SHRI SOHANRAJ FACTORY: PLUS BASED ON MEHTA ACCOUNTED UNACCOUNTED INSTALLED PRODUCTION D PRODUCTION CAPACITY PLUS UNACCOUNTED SALE (KG) (KG) (VALUE IN RS.) (QTY IN KG.) (KG) 2004-05 1,848,960 319,678 692,804,168 602,131 921,809 0.4986 2005-06 1,848,960 448,799 532,277,170 461,540 910,339 0.4924 2006-07 1,848,960 470,654 638,417,650 556,147 1,026,08 01 0.5553 2007-08 1,848,960 716,906 835,368,165 732,324 1,449,23 0 0.7838 2008-09 1,848,960 800,184 758,371,888 659,419 1,459,60 3 0.7894 TOTAL 9,244,800 2,756,221 3,457,239,041 3,011,561 5,767,78 2 0.6239 HE NOTED THAT THE ABOVEMENTIONED SCIENTIFIC ANALYSIS OF PRODUCTION CAPACITY BASED ON AVAILABILITY OF MACHINERY AND WORKING HOURS PROVE THAT THE BANGALORE FACTORY OF THE A SSESSEE WAS ENGAGED IN NOT ONLY ACCOUNTED GENERATION BUT ALSO UNACCOUNTED GENERATION OF GUTKHA . 50. IN VIEW OF THE ABOVE THE AO HELD THAT IT IS PROVED B EYOND DOUBT THAT THE ASSESSEE COMPANY HAS SUPPRESSED TURN OVER DURING THE RELEVANT YEAR. THE SUPPRESSION OF TURNOVER OF M/S D HARIWAL INDUSTRIES LTD. FOR THE PERIOD APRIL, 2003 TO FEB, 2008 IS OF RS. 345.72 CRORES. HOWEVER, ENTIRE TURNOVER CANNOT BE INCOME . HE NOTED THAT THE SEIZED DOCUMENTS CONTAIN DETAILS OF UNACCOUNTED EXPENDITURE SUCH AS PAYMENTS TO VARIOUS RAW MATERIAL SU PPLIERS LIKE SHRI MALLIKARJUNA (SUPARI/BETELNUT/ARECANUT), SHRI. P C JAIN (ED IBLE PERFUME) , SHRI. VIMAL KUMAR NAHAR (CARDAMON), M/S SWATI MENTHOL (METHOL) ETC. AS WELL AS OTHER INCIDENTAL EXPENSES LIKE 34 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 PACKAGING (M/S CHAMPION PACKAGING), TRANSPORT CHARGES, HAM ALI AS WELL AS UNLAWFUL PAYMENTS LIKE SALES TAX MAMUL ETC. THEREFORE, THE GROSS PROFIT EARNED BY THE ASSESSEE OUT OF SUCH UNACCO UNTED TURNOVER HAS TO BE ESTIMATED. HE NOTED THAT THE ASSE SSEE HAS NOT PAID ANY EXCISE DUTY ON THE SAID UNACCOUNTED TURNOVER. INFACT, ONE OF THE MAIN REASONS FOR SUPPRESSION OF TURNOVER IN THE FIELD OF GUTKHA IS HIGH CENTRAL EXCISE DUTY. IN VIEW OF THE ABOVE, THE AO HELD THAT THE GP RATIO HAS TO BE COMPUTED BY EXCLUDING THE EXCISE DUTY PAYMENT AS ASSESSEE COMPANY HAS NOT INCURRED ANY EXC ISE DUTY EXPENSE ON THE SAID UNACCOUNTED SALES OF GUTKHA. THEREFOR E, APPLYING THE 'GROSS- PROFIT RATIO EXCLUDING THE EXCISE DU TY PAYMENT' TO BANGALORE FACTORY OF THE ASSESSEE COMPANY, THE AO CA LCULATED THE TAXABLE PROFIT FOR THE RELEVANT YEARS, ATTRIBUTABLE TO SAID UNACCOUNTED SALE OF GUTKHA AS UNDER: ASST.YEAR ACCOUNTED SALES EXCISE DUTY PAID GP NORMAL EXCISE DUTY AS A % OF TURNOVER GP EXCLUDING THE EXPENSE OF EXCISE CITY UNACCOUNTED TURNOVER GP EXCLUDI NG THE EXPENS E OF EXCISE DUTY TAXABLE PROFIT OF UNACCOUNTED SALES (1) (2) (3) (4) (4) (5) (6) (7) (8) 2 004 - 05 3 4 ,96 , 64 , 955 13,17,93 , 150 21 . 32 37 . 69 59 . 01 69 , 28,04 , 168 0 . 59 40,88,32,514 2005-06 48,4377,240 19,33,22,849 21.93 39 . 91 61.84 53,22,77 , 170 0.62 32,91,68,875 2006-07 53 , 77 , 31,832 21,99,87,873 20 . 28 40 . 91 61 . 19 63,84 , 17 , 650 0 . 61 39,06,49,874 2007-08 84 , 00 , 95,315 34 , 25 , 56 , 039 15 . 67 40 . 78 56 . 45 83,53 , 68 , 165 0 . 56 47,15,30,695 2008-09 94 , 25,24 , 178 43,72 , 29,103 13.86 46 . 39 60 . 25 75 , 83,71 , 88 8 0 . 60 45 , 69,12 , 736 315,43,93,520 132,48,89,014 345,72 , 39 , 041 205,70,94,693 51. IN VIEW OF THE ABOVE CALCULATION THE AO COMPUTED YEA R WISE BREAK UP OF UNDISCLOSED INCOME EARNED THROUGH SUPPRESSIO N OF TURNOVER AS UNDER : 35 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 A.Y. TAXABLE PROFIT OF UNACCOUNTED SALES (RS.) 2004-05 40,88,32,514 2005-06 32,91,68,875 2006 - 07 39,06,49,874 2007-08 47,15,30,695 2008-09 45,69,12,736 TOTAL 205,70 , 94,693 52. THE AO THUS MADE ADDITION OF RS.40,88,32,514/- TO THE TOTAL INCOME OF THE ASSESSEE AS HIS UNDISCLOSED INCOME FOR THE A.Y. 2004-05. SIMILAR ADDITION HAS BEEN MADE TO THE TOTAL INCOME OF THE ASSESSEE FOR VARIOUS ASSESSMENT YEARS AS PER TH E TABLE ABOVE AS UNDISCLOSED INCOME OF THE RELEVANT ASSESSMENT YEARS. 53. THE AO FURTHER HELD THAT SINCE UNDISCLOSED INCOME O F THE ASSESSEE IS COMPUTED BY ESTIMATING GP, THEREFORE, IT IS DEEMED THAT ALL THE EXPENSES INCURRED FOR EARNING THE UND ISCLOSED INCOME HAVE BEEN ALLOWED AS DEDUCTION. HENCE, ANY EXPENDI TURE NOT ALLOWABLE AS PER PROVISIONS OF THE ACT, HAS TO BE NECE SSARILY DISALLOWED. HE NOTED FROM THE SAID SEIZED DOCUMENTS TH AT M/S DIL HAS MADE CERTAIN UNLAWFUL PAYMENTS TO CERTAIN GOVERNMENT AGENCIES SUCH AS SALES TAX DEPARTMENT, SO AS TO FACILITAT E AS WELL AS TO KEEP ITS BUSINESS OF UNACCOUNTED SALE OF GUTKHA, UNDER WRAPS. HE NOTED THAT BUNDLE NO A/M/8 GIVES MONTHLY SU MMARY OF UNACCOUNTED SALES AND ITS DEPLOYMENT FOR THE ENTIRE PE RIOD, WHEREIN ST MAMUL PAYMENT @ RS . 5,00,000/- IS MENTIONED PER MONTH, FOR MOST OF THE MONTHS. ALL THESE UNLAWFUL PAYMENTS WHICH ARE BASICALLY IN THE NATURE OF BRIBE, ARE NOT ALLOWA BLE AS EXPENSE, AS PER EXPLANATION 1 TO SECTION 37 OF THE I.T A CT . HE THEREFORE DISALLOWED THE FOL L OW I NG UN L A W FUL EXPENSES AS UNEARTHED FROM TH E SEI ZED DOCUMENTS U/S.37 OF THE I.T. ACT 36 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 AND ADDED BACK TO THE INCOME OF THE ASSESSEE FOR TH E RELEVANT ASSESSMENT YEARS : AY DISALLOWANCE U/S 37 (ST MAMUL) (AMT IN RS . ) 2004 - 05 60,00,000 2005 - 06 60,00 , 000 2006 - 07 60 , 00 , 000 2007 - 08 52 , 25 , 000 2008 - 09 82,10 , 000 TOTAL 3,14,35,000 54. FOR THE AY 2004-05, THE AO DISALLOWED RS.60,00,000/- U /S.37 OF THE I.T. ACT, 1961. 55. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE ADDITIO N OF RS.40,38,32,514/- MADE BY THE AO AS UNDISCLOSED INCOME FROM UNACCOUNTED SALES OF GUTKHA IS PURELY BASED ON STATEME NT AND SEIZED MATERIALS BELONGING AND FOUND FROM SHRI SOHANRAJ ME HTA WITHOUT THERE BEING ANY OTHER CORROBORATIVE AND CONFIRMIN G EVIDENCES. FURTHER, THE STATEMENT OF SHRI SOHANRAJ MEH TA IS INCONSISTENT AND HAS BEEN RETRACTED. IT WAS SUBMITTED THAT THE AO HAS FAILED TO PRODUCE APPROPRIATE AND REASONABLE OPPORTU NITY TO CROSS EXAMINE SHRI SOHANRAJ MEHTA. RELYING ON VARIOUS D ECISIONS IT WAS SUBMITTED THAT THE MATERIAL SEIZED FROM THIRD PARTIES AND STATEMENT OF THIRD PARTY DO NOT CARRY ANY EVIDENTIARY VALUE IN THE EYES OF LAW, IF THE SAME IS NOT CORROBORATED WITH OTHER J USTIFIABLE EVIDENCES. IT WAS SUBMITTED THAT THE CHAIRMAN OF THE C OMPANY OF M/S. DIL, SHRI R.M. DHARIWAL HAS REPEATEDLY SUBMITTED THA T THE SEIZED DOCUMENTS FOUND FROM THE PLACE OF SHRI SOHANRAJ ME HTA ARE FORGED AND INTENTIONALLY CREATED TO MISLEAD. IT WAS SUBMIT TED THAT THE MATERIAL SEIZED FROM THE PLACE OF SHRI SONRAJ MEHTA LA CKS AUTHENTICITY AND HAS NO RELEVANCE WITH THE ASSESSEE. 37 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 56. AS REGARDS THE OBSERVATION OF THE AO THAT THE SA LE PROCEEDS OF UNACCOUNTED TURNOVER OF GUTKHA HAS BEEN APPLIED/UTILIZED BY SHRI SOHANRAJ MEHTA ON BEHALF OF M/S. DIL, IN RESPECT OF PARTIES WHO ARE APPEARING IN THE RIGHT SIDE OF A/M/08 OF PAGE NO.34 WERE P ARTIES HAVING TRANSACTIONS WITH M/S. DIL OR ITS DIRECTORS IS CONC ERNED, IT WAS SUBMITTED THAT SHRI SOHANRAJ MEHTA HAS PREPARED FO RGED DOCUMENTS WITH AN INTENTION TO MAKE BELIEF THAT THE ENTIRE UNACCOUNTED BUSINESS ACTIVITY HAS BEEN CARRIED OUT ON B EHALF OF THE ASSESSEE INTENTIONALLY MADE TO WRITE THE DETAILS OF HIS PAR ALLEL UNACCOUNTED BUSINESS IN THE SAID SEIZED MATERIAL. IT WAS SUBMITTED THAT THE AO HAS MISERABLY FAILED TO PROVIDE A SINGLE CONFI RMATION FROM THE ALLEGED RECIPIENTS OF THE MONEY FROM SHRI SOHANRA J MEHTA AS IS APPEARING ON RIGHT SIDE OF THE SEIZED DOCUMENT BEA RING PAGE NO.34 OF A/M/08. 57. AS REGARDS THE STATEMENT OF SHRI S.BALAN IS CONCERNE D IT WAS SUBMITTED THAT SHRI S. BALAN HAD FILED A RETRACTION AFFIDAVIT. IT WAS SUBMITTED THAT THE ASSESSEE COMPANY HAD REQUESTED FOR CROSS EXAMINATION OF SHRI S. BALAN WHICH WAS NOT OFFERED AND IN ITS ABSENCE IT WOULD BE IMPROBABLE TO RELY ON HIS STATEMENT. IT WAS SUBMITTED THAT SHRI M.B. MALLIKARJUN ALSO RETRACTED HIS STAT EMENT VIDE LETTER DATED 23-01-2010 AND THEREFORE THE ORIGINAL S TATEMENT RECORDED DURING THE SEARCH PROCEEDINGS SEIZED TO HAVE ANY EVIDENTIARY VALUE. IT WAS SUBMITTED THAT THE RELIANCE ON THE STATEMENT OF SHRI SHITAL B. PATIL, AREA SALES MANAGER OF RMD FOR KARNATAKA REGION AND AFFIRMED BY SHRI K.A. RAGHUNATH, SALES SUPERVISOR OF M/S. DIL HAS NO EVIDENTIARY VALUE SINCE BOTH OF THEM HAVE RETRACTED THEIR STATEMENTS SUBSEQUENTLY. 38 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 58. AS REGARDS THE MODUS OPERANDI ANALYSED BY THE AO IS CONCERNED, IT WAS SUBMITTED THAT THE CHAIRMAN OF THE ASS ESSEE COMPANY SHRI R.M. DHARIWAL HAS SUBMITTED THAT THE IMPUGNE D DOCUMENTS ARE FORGED AND INTENTIONALLY CREATED TO MISLEAD THE PERSONS AND THE AO WHILE DECIPHERING THE IMPUGNED SEIZED MATERIAL HAD FAILED TO ESTABLISH WITH CORROBORATIVE AND JUSTIFIABLE DOCUMENTARY EVIDENCE THAT THE ASSESSEE COMPANY HAD IN FACT CARRIED OUT THE ENTIRE BUSINESS FROM PROCUREMENT OF RAW MATER IAL AND MAKING PRODUCT AND SALES THEREOF. THE AO FAILED TO PRODUC E CONFIRMATION OR OTHER RELATED EVIDENCE IN RESPECT OF THE A LLEGED SUPPLY OF RAW MATERIAL FOR CARRYING OUT ALLEGED UNACCOUNTE D TURNOVER. 59. AS REGARDS THE DECODING OF THE FIGURES IN THE CHITS IS CONCERNED IT WAS ARGUED THAT WHEREVER INSTRUCTIONS WER E GIVEN BY SHRI R.M.DHARIWAL AND HIS SON SHRI PRAKASH M. DHARIWAL AS P ER THE CHITS SIGNED BY THEM THE AMOUNTS ARE MENTIONED IN THE C HITS AND FIGURES ARE SAME AND THERE IS NO OTHER MEANING OR REQUIR EMENT OF DECODING THE SAME TO READ IT FOR AN AMOUNT BEYOND WHICH IT HAS BEEN MENTIONED ON THOSE CHITS. 60. AS REGARDS THE UTILIZATION OF THIRD PARTY EVIDENCE AG AINST THE ASSESSEE IS CONCERNED, IT WAS SUBMITTED THAT THE DEPART MENT HAS TO FIRST ESTABLISH EVIDENCES AGAINST SHRI SOHANRAJ MEHTA IN CO MMON CONSPIRACY AND THEREAFTER ESTABLISH THAT THE ASSESSEE IS A CO- CONSPIRATOR TO DESIGN THE COMMON THEORY FOR EFFECTING UNA CCOUNTED TURNOVER. THE AO HAS COMPLETELY FAILED TO ESTABLISH ANY OF THE ALLEGATIONS. 39 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 61. IT WAS SUBMITTED THAT THE AO IS MAKING ROUTINE AND UNSUBSTANTIATED STATEMENT WITH REGARD TO THE CASES WIT H THE CENTRAL EXCISE AND SALES TAX DEPARTMENT INDICATING SUPPRESSION OF TURNOVER. IT WAS ARGUED THAT IN A HUGE BUSINESS LIKE TH AT OF THE ASSESSEE THERE HAPPENS TO BE A FEWER OCCASIONS WHERE DIFFERENCE OF OPINION WITH REGARD TO THE INTERPRETATION OF PROVISION OF LAW FOR WHICH REPRESENTATION HAS BEEN MADE BY THE ASSESSEE CO MPANY. HOWEVER, NONE OF THE CASE PERTAIN TO UNACCOUNTED SUPPR ESSION OF PRODUCTION, CLANDESTINE REMOVAL OR UNACCOUNTED TURNOVER. 62. AS REGARDS THE ALLEGATION OF THE AO ON THE ISSUE OF UNACCOUNTED PURCHASE IS CONCERNED, IT WAS SUBMITTED THA T NONE OF THE SUPPLIERS HAVE CONFIRMED OF HAVING RECEIVED ANY CONSIDE RATION IN EXCESS OF WHAT HAS BEEN RECORDED IN THE BOOKS OF ACCOU NT OF THE ASSESSEE COMPANY. THE ASSESSEE AGAIN REITERATED THE RE TRACTION MADE BY SHRI MALLIKARJUN OF SHIMOGA AND ALSO THE SUBSEQUE NT DENIALS MADE BY SHRI JEEVAN SANCHETI FOR HAVING MADE ANY P AYMENT TO THE SAID PARTY THROUGH SHRI SOHANRAJ MEHTA IN HIS STATEMENT RECORDED ON 21-01-2010. IT WAS SUBMITTED THAT THE PR OVISIONS OF SECTION 132(4A) R.W.S. 292C OF THE ACT PROVIDES THAT WHERE ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS ETC ARE FOUND IN THE POSSESSION OF ANY PERSON, IN THE COURSE OF SEARCH, IT MAY BE PRESUME D THAT SUCH BOOKS, DOCUMENTS ETC. BELONG TO SUCH PERSON. THE CHAIRMAN OF THE ASSESSEE COMPANY SHRI R.M. DHARIWAL HAS REPEATEDL Y SUBMITTED THAT THE IMPUGNED SEIZED DOCUMENTS ARE FORGED AND INTENTIONALLY CREATED TO MISLEAD NOT ONLY THE ASSESSEE C OMPANY BUT ALL OTHERS WHO REFER TO THESE DOCUMENTS AND THEREFORE T HE MATERIAL SEIZED AND OWNED UP BY SHRI SOHANRAJ MEHTA HAS NO RELE VANCE AT ALL WITH THE ASSESSEE COMPANY. IT WAS SUBMITTED THAT SINCE THE AO HAS 40 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 PLACED RELIANCE ON THE SEIZED MATERIAL OF SHRI SOHANRAJ MEH TA AND MADE IT A BASE FOR MAKING THE ADDITION, IT IS THE PRIMARY RESPONSIBILITY AND ONUS ON THE AO TO JUSTIFY THROUGH COR ROBORATIVE EVIDENCES THAT THE ALLEGATION OF UNACCOUNTED TURNOVER AR E TRUE AND CORRECT. HOWEVER, NO EFFORT HAS BEEN CARRIED OUT BY THE AO AND ONLY THE STATEMENTS AND SEIZED MATERIAL OF SHRI SOHANRAJ MEHT A HAS BEEN SOLELY RELIED UPON FOR MAKING SUCH HUGE ESTIMATED ADDITION. FURTHER, DESPITE REPEATED REQUESTS FOR GIVING OPPORTUNITY TO CROSS EXAMINE SHRI SOHANRAJ MEHTA THE SAME WAS NOT GRANTED AND THEREFORE ITS NON COMPLIANCE TANTAMOUNTS TO CONTRAVENTIO N OF LAW. IT WAS ARGUED THAT THE SEIZED MATERIAL FOUND FROM SHRI MIT TULAL JAIN AND OWNED UP BY SHRI SOHANRAJ MEHTA DOES NOT HAVE AN Y LINKAGE TO THE ASSESSEE AND ABSOLUTELY CONTRARY TO THE PROVISIONS OF SECTION 132(4). THE PRINCIPLE OF ESTOPPEL AS APPLICABLE TO THE STATEM ENT OF SHRI SOHANRAJ MEHTA AND ITS SUBSEQUENT RETRACTION CAN BE MADE APPLICABLE ONLY TO HIM AND NEVER BE MADE APPLICABLE TO A T HIRD PARTY. IN ABSENCE OF ANY CORROBORATIVE EVIDENCE THE A O CANNOT MAKE HUGE ADDITIONS IN THE HANDS OF THE ASSESSEE ON THE BASIS OF THE SOLE AND EXCLUSIVE STATEMENT OF SHRI SOHANRAJ MEHTA. 63. IT WAS FURTHER ARGUED THAT THE SEIZED DOCUMENT RE LATED TO SHRI SOHANRAJ MEHTAS UNACCOUNTED BUSINESS IN SOME OTHER B RANDS OF GUTKHA. FURTHER, THE SEIZED DOCUMENTS HAVE NOT BEEN S EIZED FROM THE ASSESSEE AND HAVE NOTHING TO DO WITH M/S. DIL, SHRI R.M. DHARIWAL OR THEIR GROUP CONCERN. FURTHER, NO UNACCOUNT ED ASSETS COMMENSURATE WITH THE UNACCOUNTED INCOME GENERATED TH ROUGH SUCH SUPPRESSED SALES WERE FOUND FROM THE PREMISES OF T HE ASSESSEE. NO EVIDENCE OF SUPPRESSION OF INCOME OR TURNOV ER WAS FOUND BY ANY OF THE GOVERNMENT AGENCY SUCH AS EXCISE, SALES TAX, INCOME TAX ETC. RELYING ON VARIOUS DECISIONS IT WAS SUB MITTED THAT 41 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE ADDITION MADE BY THE AO IN THE INSTANT CASE IS INCORRECT. 64. THE ASSESSEE WITHOUT PREJUDICE TO THE ABOVE FURTHE R SUBMITTED THAT THE AO HAS ERRONEOUSLY DETERMINED THE UNACCOUNT ED SALES IN SUM TOTAL FOR THE BLOCK OF ASSESSMENT YEARS AT RS.345.72 CRORES INSPITE OF THERE BEING NO COMPLETE RECORDS. FURTHER, THE ADOPTION OF THE GROSS PROFIT RATIO OF AROUND 60% BASED ON THE PRESU MPTION ON PREPOSITIONS OF SAVING OF EXCISE DUTY ON THE UNACCOUNTED SALES AND NOT RESTRICTING IT TO THE COMPARABLE BOOK RESULTS ON YEA R TO YEAR BASIS ON HYPOTHETICAL FORMULA BASED ESTIMATION OF SUPPRESSIO N OF PRODUCTION WITHOUT ANY CORROBORATIVE AND CLINCHING EVIDENC ES IS ALSO INCORRECT. 65. IT WAS ARGUED THAT THE SEIZED MATERIAL FOUND AND OW NED UP BY SHRI SOHANRAJ MEHTA OF BANGALORE HAVE NOT EVEN REMOTEL Y PROVED TO HAVE ANY LINKS WITH THE ASSESSEE COMPANY AND THERE IS NO JUSTIFIABLE CORROBORATIVE AND RELIABLE EVIDENCE. THEREFORE, THE ENTIRE A DDITION MADE IS ONLY ON THE BASIS OF CONJECTURES AND SURMISES. THE APPROACH ADOPTED BY THE AO IN APPLYING THE HYPOTHETICA L GROSS PROFIT RATIO BY FACTORING IN EXCISE DUTY PERCENTAGE TO THE ALLEGED UNACCOUNTED TURNOVER AMOUNTS TO PRESUMPTION ON PRESU MPTION AND THAT TOO WITHOUT ANY BASIS WHICH IS AGAINST THE PRINC IPLES OF NATURAL JUSTICE AND EQUITY. IT WAS ARGUED THAT THE AO HAS DETERMINED THE IMPUGNED ADDITIONS IN EACH OF THE ASSESSME NT YEAR BY APPLYING EXCISE DUTY PERCENTAGE AND AS MUCH AS 55 TO 60% OF GROSS PROFIT MARGIN IS CONSIDERED WHILE DETERMINING THE UNACCOUNTED INCOME OF THE RESPECTIVE ASSESSMENT YEARS. IT WAS ARGUED THAT RESORTING TO ENHANCING THE GROSS PROFIT RAT IO BY PERCENTAGE OF EXCISE DUTY AND APPLYING THE SAME TO THE UNDISCLOSED SALES IS ABSOLUTELY INCORRECT. THE ENTIRE ADDITION MADE B Y THE AO IS 42 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 A BLATANT ACT OF CONTORTION CREATED BY THE AO WITHOUT R EALIZING THE RESPONSIBILITIES AND DUTIES THAT THE AO HAS TO DETERMINE T HE REAL INCOME ON WHICH TAX SHOULD BE LEVIED AND COLLECTED AND NOT ON HYPOTHETICAL ESTIMATED AND UNJUSTIFIED COMPUTATION OF INCOME . RELYING ON VARIOUS DECISIONS IT WAS ARGUED THAT THE APPR OACH OF THE AO IN RESORTING TO HYPOTHETICAL ADOPTION OF GROSS PROFIT RA TIO IS UNHEARD OF. IT WAS ARGUED THAT GROSS PROFIT RATIO, IF AT ALL TO BE ADOPTED, HAS TO BE ADOPTED AT THE RATE AT WHICH THE R EGULARLY MAINTAINED BOOKS OF ACCOUNT SHOW. IT WAS SUBMITTED THAT IN THE PAST THE AO IN THE SAME JURISDICTION WHILE ESTIMATING THE UNACCOUNTED INCOME ON THE SAME IMPUGNED SEIZED MATERIAL ADOPTED THE GROSS PROFIT RATIO AS WORKED FROM THE REGULARLY MAINT AINED BOOKS OF ACCOUNT OF ASSESSEE COMPANY WITHOUT CONSIDERING ANY ENHANCEMENT OF THE EXCISE DUTY PERCENTAGE INTO THE GRO SS PROFIT RATIO. HOWEVER, THE SAID ORDER HAS BEEN THE SUBJECT MATTER OF 263 PROCEEDINGS AND THE APPEAL IS PENDING BEFORE THE TRIBUNAL. IT WAS FURTHER SUBMITTED THAT ESTIMATION OF UNACCOUNTED INCOME FO R A.Y. 1992-93 WAS MADE ON THE BASIS OF THE GROSS PROFIT RATIO AS WORKED OUT ON THE BOOKS OF ACCOUNT ADOPTED BY THE AO. IT WA S ACCORDINGLY ARGUED THAT THE ADDITION MADE BY THE AO BE DELETED. 66. HOWEVER, THE LD.CIT(A) ALSO WAS NOT FULLY CONVINCED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. HE OBSERVED THA T THE ASSESSEE FOR THE FIRST TIME SOUGHT OPPORTUNITY TO CROSS- EXAMINE SHRI SOHANRAJ MEHTA ON 23-11-2011 AND THE ASSESSEE WAS O FFERED THE SAID OPPORTUNITY VIDE LETTER DATED 01-12-2011 AS PER W HICH THE ASSESSEE WAS REQUESTED TO BE PRESENT BETWEEN 12 TH TO 15 TH DECEMBER, 2011 IN THE OFFICE OF THE DCIT, CENTRAL CIRCLE-2(2) BANGALORE WHO HAD CONDUCTED EXAMINATION-IN-CHIEF OF THE W ITNESS SOUGHT TO BE CROSS EXAMINED BY THE ASSESSEE NAMELY S HRI SOHANRAJ 43 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 MEHTA. HOWEVER, THE ASSESSEE CHOSE NOT TO AVAIL THE S AID OPPORTUNITY AND INSTEAD REQUESTED THAT THE SAID CROSS EXAMINATION BE CONDUCTED AT PUNE. THEREAFTER THE ASSESSEE WAS AG AIN OFFERED ANOTHER OPPORTUNITY VIDE LETTER DATED 23-12-2011. HOWE VER, THE ASSESSEE AGAIN CHOSE NOT TO AVAIL OF THE OPPORTUNITY TO CROSS EXAMINE SHRI SOHANRAJ MEHTA. THE AO HAS ALSO POINTED OU T THE LEGAL IMPEDIMENT AS PER THE CODE OF CIVIL PROCEDURE THAT SUMMONS COULD BE ISSUED TO A PERSON ONLY IF HE IS WITHIN 500 KMS O F THE DISTANCE FROM THE ISSUING AUTHORITY AND IF THE WITNESS/PERS ON CONCERNED IS 500 KMS AWAY, COMMISSION TO BE ISSUED AUTHO RIZING THE OTHER AUTHORITY TO CAUSE AND CARRY OUT NECESSARY EXAMINATION ON HIS BEHALF. SINCE THE ASSESSEE WISHED TO CROSS EXAMIN E SHRI SOHANRAJ MEHTA, A RESIDENT OF BANGALORE AND SINCE THE AO AT PUNE WAS NOT EMPOWERED TO ISSUE SUMMONS AND FORCE HIS ATTEN DANCE AT PUNE, THEREFORE, COMMISSION WAS RIGHTLY ISSUED BY THE AO. HOWEVER, THE ASSESSEE DID NOT AVAIL THE OPPORTUNITY PRO VIDED TO HIM. IN THE REMAND PROCEEDINGS THE AO HAS REITERATED S IMILAR FACTS AS BROUGHT OUT IN THE ASSESSMENT ORDER. ACCORDING TO LD.CIT(A), CROSS EXAMINATION IS A PROCESS BY WHICH TRUTH IS ELICITED A ND WHERE THE ASSESSEE ASKED FOR CROSS EXAMINATION AND IT WAS NO T ACCEDED TO AND THE ASSESSMENT ORDER WAS PASSED, ONE MIGHT HAVE E XPECTED TO CONSIDER THIS A VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. HOW EVER, IN THE INSTANT CASE THE ASSESSEE WAS PROVIDED OPPORTUNITY TO CROSS EXAMINE TWICE, THEREFORE, THE ARGUMENT OF THE ASSESSEE TH AT NO OPPORTUNITY OF CROSS EXAMINATION OF SHRI SOHANRAJ MEHTA W AS GRANTED FOR WHICH THERE IS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE IS INCORRECT. 44 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 67. THE CIT(A) FURTHER NOTED THAT SEARCH AND SURVEY A CTION U/S.132 TOOK PLACE IN THE CASE OF SHRI SOHANRAJ MEHTA ON 10-10- 2009 WHEREAS THE SEARCH TOOK PLACE IN THE CASE OF THE ASSESSEE ON 20-01-2010. DURING THE COURSE OF SEARCH AND SURVEY AC TION CARRIED OUT IN THE CASE OF THE ASSESSEE HE WAS CONFRONTED ON T HE FINDINGS OF THE STATEMENTS GIVEN BY SHRI SOHANRAJ MEHTA. THUS, THE ASSESSEE WAS ALWAYS IN KNOWLEDGE OF THE ENTIRE TRANSACTION AND A LSO ADMITTED TO HAVE GIVEN SIGNED CHITS FOR THE DEPLOYMENT OF THE MONE Y ALLEGEDLY EARNED OUT OF UNACCOUNTED SALES. THE SEARCH ACTION HAD CLEARLY REVEALED THAT THE SEIZED DOCUMENTS WERE NOT DUMB DOC UMENTS AND PROVED BEYOND REASONABLE DOUBT THE ENTIRE UNACCOUNTED BUSINESS CHAIN OF M/S. DIL. THEREFORE, THE GRIEVANCE OF THE ASSESS EE OF NOT PROVIDING THE CROSS EXAMINATION OF SHRI SOHANRAJ MEHTA IS NOT A VALID GROUND. IN VIEW OF THE ABOVE FACTS AND RELYING ON V ARIOUS DECISIONS THE CIT(A) REJECTED THE GROUND RELATING TO NOT GIVING OF OPPORTUNITY OF CROSS EXAMINATION. 68. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT AD DITIONS WERE MADE ON THE BASIS OF STATEMENT AND SEIZED MATERIAL BELONG ING AND FOUND FROM SHRI SOHANRAJ MEHTA AND THAT TOO WITHOUT ANY CORROBORATIVE AND CONFIRMING EVIDENCES IS CONCERNED, HE HE LD THAT DURING THE COURSE OF SEARCH ACTION U/S.132 AND THE POST SEARCH ENQUIRIES AND THE STATEMENT RECORDED U/S.132(4) AND 131 OF THE ACT, SHRI SOHANRAJ MEHTA, BEING THE AUTHOR OF THE SEIZED DOC UMENTS, HAD ADMITTED TO HAVE WRITTEN THE DOCUMENTS IN HIS OWN HAND WRITING. A SEIZED DOCUMENT HAS MUCH MORE GREATER VALUE THAN WHA T IT WOULD HAVE BEEN OTHERWISE. SHRI SOHANRAJ MEHTA HAS EXPLAINED THE ENTIRE MODUS OPERANDI OF THE BUSINESS NOTINGS AND ALSO THE DETA ILS MADE ON THE SEIZED DOCUMENT WRITTEN IN MARVARI LANGUAGE BY HIM MAKES 45 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE DOCUMENT A SPEAKING ONE AND THE ENTRIES CONTAINED THEREIN DOES NOT BY WAY OF ANY STRETCH OF IMAGINATION BE CALLED A DUMB DOCUMENT. 69. THE LD.CIT(A) ALSO REJECTED THE CONTENTION OF THE ASS ESSEE THAT THE SEIZED DOCUMENT RELATED TO SHRI SOHANRAJ MEHTAS U NACCOUNTED BUSINESS IN SOME OTHER BRANDS OF GUTKHA. ACCORDING TO H IM THE AO HAS STATED THAT DURING THE SEARCH ACTION STOCK OF ONLY M/S. DIL WAS FOUND WITH NO STOCK OF ANY OTHER BRAND AND WHICH COULD B E RELATED TO SHRI SOHANRAJ MEHTA. SHRI SOHANRAJ MEHTA HAD RECEIV ED COMMISSION INCOME ON SALES OF GUTKHA @ RS.65/- PER CARTON OF UNACCOUNTED SALES AND THE ENTIRE WORKING OF THE COMMISSIO N EARNED BY HIM HAS BEEN RECORDED IN THE SEIZED DOCUMENT. ACCOR DING TO HIM, NO ONE DOING BUSINESS ON HIS BEHALF WOULD DERIVE COMMIS SION. FURTHER, SHRI SOHANRAJ MEHTA USED TO HAND OVER MONEY TO THE PERSONS WHOSE NAMES APPEAR ON THE CHITS GIVEN AS PER THE DIRECTIONS OF SHRI R.M. DHARIWAL/PRAKASH R. DHARIWAL WHICH LEA DS TO THE INFERENCE THAT THE UNACCOUNTED BUSINESS OF GUTKH A WAS CARRIED OUT AS PER THE DIRECTION OF DHARIWAL. FURTHER, BO TH SHRI R.M. DHARIWAL AND HIS SON PRAKASH R. DHARIWAL IN THEIR STA TEMENT RECORDED U/S.132(4) HAVE ADMITTED TO HAVE SIGNED THE SAID CHIT INSTRUCTING THE PAYMENT TO THE PARTIES ON THEIR BEHALF. F URTHER, IT IS AN UNDISPUTED FACT THAT SHRI SOHANRAJ MEHTA, THROUGH HIS FIRM MEHTA ASSOCIATES, ACTED AS C&F AGENT OF M/S DIL FOR THE ENTIRE KARNATAKA REGION. THE RAW MATERIAL SUPPLIERS OF M/S. DIL , EMPLOYEES OF DIL AND WHOSE NAMES APPEAR ON THE SEIZED DOCUMENT HAVE CATEGORICALLY ACCEPTED THAT THEY KNEW DIL OR SHR I R.M. DHARIWAL AND NOT SHRI SOHANRAJ MEHTA. THESE FACTUAL FINDING S CLEARLY INDICATE THAT THE ENTIRE UNACCOUNTED TURNOVER A S RECORDED IN THE SEIZED DOCUMENT CANNOT PERTAIN TO SHRI MEHTA. HE A CCORDINGLY 46 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 REJECTED THE CONTENTION OF THE ASSESSEE. 70. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT NO UNACCOUNTED PURCHASES WERE FOUND THE CIT(A) OBSERVED T HAT THE AO HAS BROUGHT ON RECORD SUBSTANTIVE MATERIAL WHICH INDICATE THAT THE UNACCOUNTED SALES HAD MATCHING PURCHASES OF RAW MATERIA L LIKE BETELNUT FROM SHRI MALLIKARJUN OF SHIMOGA, EDIBLE PERFURMES FROM SHRI P.C. JAIN, MUMBAI, CARDMON FROM SHRI VIMAL, NAHAR/JAIN OF HYDERABAD, MENTHOL FROM SWATI MENTHOL, SUPARI FROM KISHEN KUMAR GUPTA AND BHOLENATH RADHAKISHEN OF DELHI, CHEMICAL FR OM ANKUSH GARG/PREM BROTHERS OF DELHI. SIMILARLY, FOR PACKING T HE UNACCOUNTED GOODS THE ASSESSEE HAD PAID UNACCOUNTED CONSIDERATION TO M/S. CHAMPION PACKAGING WHICH IS REFLECT ED IN THE SEIZED MATERIAL. FOR PRINTING CHARGES THE PAYMENT H AS BEEN MADE TO M/S. RAJHANS ENTERPRISES. THEREFORE, THE EVI DENCES GATHERED DURING THE COURSE OF SEARCH OVERWHELMINGLY POIN T TOWARDS UTILISATION OF UNACCOUNTED PURCHASE FOR UNACCOUNTED PRODU CTION AND SUBSEQUENT SALES. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT NO CORRESPONDING PROOF OF UNACCOUNTED PURCHASES WAS FOUND IS HARD TO BE BELIEVED AND THEREFORE HE JUSTIFIED THE ACTION OF THE AO IN REJECTING THE SAME. 71. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT TH E SEIZED DOCUMENTS HAVE NOT BEEN SEIZED FROM HIM AND HAVE NOTHIN G TO DO WITH M/S. DIL, SHRI R.M. DHARIWAL AND OTHER GROUP CONCERN IS CONCERNED, HE HELD THAT THE SEIZED DOCUMENTS, WHICH HAVE BEEN ADMITTEDLY WRITTEN IN THE HAND WRITING OF SHRI SOHANRAJ ME HTA ON WHICH THE SIGNATURES OF BOTH SHRI R.M. DHARIWAL AND HIS SO N SHRI PRAKASH R. DHARIWAL ARE AVAILABLE AND ALSO ADMITTED BY THEM REVEAL BOTH THE UNACCOUNTED SALES AND UNACCOUNTED TRANSACTIONS. 47 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 72. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT UN ACCOUNTED ASSET COMMENSURATE WITH THE UNACCOUNTED INCOME GENERA TED THROUGH SUPPRESSED SALES WERE NOT FOUND HE UPHELD THE OBSERVATION OF THE AO THAT IF GENERATION OF INCOME IS PROVED THE CORRE SPONDING ASSET OR EXPENSES NEED NOT BE PROVED. ACCORDING TO H IM, SINCE THE SEARCH ACTION AT BANGALORE WAS CONDUCTED ON 10-10-200 9 AND THE SEARCH ACTION IN THE CASE OF THE ASSESSEE GROUP TOOK P LACE ON 20-01- 2010, I.E. AFTER A GAP OF NEARLY 3 MONTHS, THEREFORE, THE AS SESSEE BEING ON AN ALERT COULD HAVE SHIFTED THE MOVABLE ASSETS. FURTHER THE AO NOTED THAT SUCH UNACCOUNTED MONEY HAS BEEN D EPLOYED IN REAL ESTATE BUSINESS OF REPUTED BUILDERS. FURTHER, THE A SSESSEE HAS ALSO PAID AN AMOUNT OF RS.32.89 CRORES AS ON-MONEY FOR PU RCHASE OF SHARES OF M/S. CC CONSTRUCTIONS FROM SHRI SITARAMAIAH, MLA . THEREFORE, HE HELD THAT IT IS NOT NECESSARY THAT MATCHING UNACCOUNTED ASSETS OR EXPENSES SHOULD BE FOUND FOR GEN ERATION OF SUCH HUGE INCOME. 73. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT NO EVIDENCE OF SUPPRESSION OF INCOME/TURNOVER WERE FOUND BY OTHER GOV ERNMENT AGENCY SUCH AS EXCISE, INCOME TAX IS CONCERNED, HE OBSE RVED THAT THE SEIZED DOCUMENT DO INDICATE PAYMENT OF RS.5 LAKHS PER MONTH BY THE ASSESSEE TO THE SALES TAX DEPARTMENT WHICH PRIM A-FACIE INDICATE THE ASSESSEE MANAGING THE SALES TAX DEPARTMENT THROUGH SYSTEMATIC PAYMENT OF BRIBE SO AS TO CONCEAL THE UNACCO UNTED SALES THEREBY SUPPRESSING THE TURNOVER. 74. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT TH E STATEMENTS GIVEN BY VARIOUS PERSONS WERE RETRACTED IS CONCERNED, H E OBSERVED THAT IN THE FIRST INSTANCE THE SAID PERSONS ADMITTED AND SUBSTANTIATED THE STATEMENT OF SHRI SOHANRAJ MEHTA U/S .132(4) 48 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 EXPLAINING THE SEIZED DOCUMENT AND AFTER HAVING BEEN SAID THE TRUTH IN THEIR 132(4) STATEMENTS THE AFORESAID PERSONS, WHO WERE STILL UNDER THE INFLUENCE AND CONTROL OF THE ASSESSEE, FOR OBVIOU S REASONS DEPENDING FOR THEIR LIVELIHOOD AND BUSINESS RETRACTED THEIR STATEMENTS. 75. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT NO EVIDENCE HAS BEEN FOUND TO SHOW THAT THE TRANSACTIONS WERE CAR RIED OUT BY HIM AND THAT THE AO HAS ASSUMED THE AMOUNTS REFLECTED TO BE THE INCOME OF THE ASSESSEE IS CONCERNED, HE HELD THE SAME TO BE NOT ACCEPTABLE. ACCORDING TO HIM, THERE ARE CLEAR NOTINGS AND ADMISSION OF ITS AUTHOR EXPLAINING EACH AND EVERY NOTING RECORDED O N THE SEIZED DOCUMENTS AND ALSO EXPLAINING THE MODUS OPERANDI O F THE BUSINESS AND THE MANNER IN WHICH THE AMOUNTS WERE GIVEN TO THE PERSONS INCLUDING THE ASSESSEE CANNOT BE REGARDED AS DUMB DOCUMENT. ACCORDING TO HIM, NO ADDITION CAN BE MADE ON T HE BASIS OF DUMB DOCUMENT. HOWEVER, IN THE PRESENT CASE THE DOC UMENT FOUND AND SEIZED ARE NOT DUMB DOCUMENTS AS THEY CONFIRM SPECIFIC DETAILS OF THE SALES MADE BY SHRI SOHANRAJ MEHTA, C&F AGE NT OF DHARIWAL GROUP AND ALSO DEPLOYMENT OF MONEY AS PER THE INSTRUCTION OF SHRI R. M. DHARIWAL AND HIS SON SHRI PRAKASH R. DHARIWAL. HE ALSO REJECTED THE CONTENTION OF THE ASSESS EE THAT DOCUMENTS SEIZED CANNOT BE THE BASIS FOR ADDITION AND TH E PRESUMPTIONS CANNOT BE USED AGAINST IT. 76. SO FAR AS THE ARGUMENT OF THE ASSESSEE REGARDING T HE MANNER OF ESTIMATION OF THE UNACCOUNTED SALES AND ADOPTION OF GRO SS PROFIT IS CONCERNED, THE LD.CIT(A) DIRECTED THE AO TO ADOPT THE PROFIT RATE OF 30% ON THE UNACCOUNTED SALES BY OBSERVING AS UNDER : 49 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 5.6 IN THE LIGHT OF THE LAW STATED ABOVE, LET US NO W EXAMINE AND EVALUATE, THE EVIDENCE PRODUCED BY THE ASSESSEE, EVIDEN CE REQUIRED BY THE AO , RELEVANT MATERIAL WHICH THE AD HAS GATHERED, WHILE MAKING ASSESSMENT OF THE TOTAL INCOME OF THE ASSESSEE AS REQUIRED U NDER SECTION 143(3)(II) OF THE ACT . LET US FIRST SEE HOW EXCISE DUTY COMES INTO PLAY. CENTRAL EXCISE DUTY IS AN INDIRECT TAX LEVIED O N THOSE GOODS WHICH ARE MANUFACTURED IN INDIA AND ARE MEANT FOR HOME CO NSUMPTION. THE TAXABLE , EVENT IS 'MANUFACTURE' AND THE LIABILITY OF CENTRAL EXCISE DUTY ARISES AS SOON AS THE GOODS ARE MANUFACTURED. IT IS A TAX ON MANUFACTURING, WHICH IS PAID BY A MANUFACTURER, WHO PASSES ITS INCIDENCE ON TO THE CUSTOMERS. AS INCIDENCE OF EXCISE D UTY ARISES ON PRODUCTION OR MANUFACTURE OF GOODS, THE LAW DOES NOT REQUIRE THE SALE OF GOODS FROM PLACE OF MANUFACTURE, AS A MANDATORY RE QUIREMENT . NORMALLY, DUTY IS PAYABLE ON 'REMOVAL' OF GOODS. THE CENTRAL EXCISE RULES PROVIDE THAT EVERY PERSON WHO PRODUCES OR MANUF ACTURES ANY 'EXCISABLE GOODS', OR WHO STORES SUCH GOODS IN A WAREHOUSE , SHALL PAY THE DUTY LEVIABLE ON SUCH GOODS IN THE MANNER PROVID ED IN RULES OR UNDER ANY OTHER LAW. NO EXISABLE GOODS, ON WHICH ANY DUTY IS PAYABLE, SHALL BE 'REMOVED' WITHOUT PAYMENT OF DUTY FROM ANY PLACE, WHERE THEY ARE PRODUCED OR MANUFACTURED, OR FROM A WAREHOUSE, U NLESS OTHERWISE PROVIDED. 5.6.1 IT IS, THEREFORE, CLEAR THAT THE EXCISE DUTY BE COMES PAYABLE ON REMOVAL OF GOODS FOR SALE. EVEN WHERE THE GOODS ARE CL ANDESTINELY REMOVED, THE OBLIGATION TO PAY THE EXCISE DUTY DOES NOT GET EXTINGUISHED . WHEN THE DETECTION OF THE CLANDESTINELY REMOVED GOOD S TAKES PLACE, THE CONCERN OF THE EXCISE DEPARTMENT IS RESTRICTED TO THE COLLECTION OF THE EXCISE DUTY EVADED AND ITS CONSEQUEN CES THEREOF ON REMOVAL OF SUCH GOODS. ON THE OTHER HAND, THE CONCERN OF THE INCOME TAX DEPARTMENT IS RESTRICTED TO THE COLLECTION OF INCOME TAX EVADED AND ITS CONSEQUENCES THEREOF ON SALE OF SUCH GOODS. THE ROLE OF EACH OF THE DEPARTMENTS VARIES. UNDER THE ACT, THE EXCISE DUTY COL LECTED ON GOODS SOLD UNDER THE EXCISE LAWS IS ALLOWABLE, IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY THE EXCISE DUTY WAS INC URRED, IN COMPUTING THE INCOME OF THAT PREVIOUS YEAR IN WHICH SUCH EXCISE DUTY IS ACTUALLY PAID, AS PER SECTION 43B(A) OF THE ACT . BUT IT IS TO BE REMEMBERED THAT THE COLLECTION OF EXCISE DUTY ON SALE OF GOODS IS THE SINE QUA NON TO ALLOW EXCISE DUTY WHEN ACTUALLY PAID. THEREFORE, WHEN EXCISE DUTY IS NOT SHOWN AS A PART IN THE SALES, WHETHER MADE IN A CLANDESTINE MANNER OR NOT, THERE CANNOT BE A QUESTION FOR ITS CONSIDERATION IN COMPUTATION OF INCOME. THAT BEING T HE LAW, THE AMOUNT OF SALES BY ITSELF CANNOT REPRESENT THE INCOME OF THE A SSESSEE WHO HAS NOT DISCLOSED THE SALES, AND FURTHERMORE, UNLESS THERE I S A FINDING TO THE EFFECT THAT INVESTMENT BY WAY OF INCURRING COST IN AC QUIRING GOODS WHICH HAVE BEEN SOLD BY THE ASSESSEE AND THAT TOO HAS NOT BEEN DISCLOSED. THEREFORE, ONLY A NET RATE OF PROFIT CAN BE APPLIED IN RESPECT OF THE GOODS SOLD OUTSIDE THE BOOKS OF ACCOUNT . THIS IS THE VIEW EXPRESSED BY THE COURTS, PRESIDENT INDUSTRIES (2002) 258 ITR 654 (GUJ); SAMBHAV TEXTILES LTD. (2010) 328 ITR 444 (P&H) AND OTHER JUD ICIAL AUTHORITIES. THE GUJARAT HIGH COURT IN THE CASE OF CIT VS PRESIDENT INDUSTRIES . (SUPRA) HAS HELD AS UNDER: 'IN THE ABSENCE OF ANY FINDING OR MATERIAL THAT THERE WAS SUPPRESSION OF INVESTMENT IN ACQUIRING THE GOODS WHICH ARE SUBJECT OF UNDISCLOSED SALES, TRIBUNAL WAS JUSTIFIED IN HOLDIN G THAT ENTIRE UNDISCLOSED SALES COULD NOT BE ADDED AS INCOME OF A SSESSEE BUT 50 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 ADDITION COULD BE MADE ONLY TO THE EXTENT OF ESTIMA TED PROFITS EMBEDDED IN SALES FOR WHICH NET PROFIT RATE WAS ADO PTED; NO REFERABLE QUESTION OF LAW ARISES.' 5.6.2 IN VIEW OF THE ESTABLISHED LAW, THE MANDATE IS T HAT ONLY A NET RATE OF PROFIT CAN BE APPLIED IN RESPECT OF THE GOODS SOLD OUTSIDE THE BOOKS OF ACCOUNT . THEREFORE, IT IS OBVIOUS THAT IN THE LIGHT OF THE MAT ERIAL ON RECORD THE ASSESSING OFFICER'S APPROACH IN ARRIVING AT T HE GROSS PROFIT RATIO IN THE PRESENT CASE IS NOT PROPER AND CORRECT . EVEN IN THE CASE OF SUPPRESSION OF SALES AND EVASION OF EXCISE DUTY DETECTED I N THE CASE OF CHETNA ZARDA COMPANY VS DCIT (2012) 144 TT J 401 (MU M) , THE ADDITION WAS MADE ONLY OF GROSS PROFIT, APART FROM THE FACT THAT SALES WERE KEPT OUTSIDE THE BOOKS BY UNLAWFUL MEANS. IN THE CASE OF CIT VS GURBACHAN SINGH J. JUNEJA (2008) 302 ITR 63 (GUJ.), WHEREIN UNDISCLOSED SALES HAVE BEEN NOTICED THE ISSUE WAS WHETHER THE ENTIRE SALES SO NOTICED IN THE LOOSE PAPERS FOUND DURING SEARCH OR ONLY GROSS PROFIT COULD BE ADDED ON SUCH SALES . IT WAS HELD THAT SINCE NO UNDISCLOSED INVESTMENTS OVER AND ABOVE THE INCOME ESTIMA TED BY GROSS PROFIT METHOD WAS FOUND, THE ORDER OF THE TRIBUNAL L IMITING THE ESTIMATE OF PROFITS ON SUCH SALES WAS UPHELD. THE ASSESSING OFFICER B Y INCREASING THE GROSS PROFIT RATE IN ESSENCE HAS ADDED THE EXCISE DUT Y ALLEGEDLY EVADED BY THE APPELLANT COMPANY WHICH CANNOT BE DON E BY WAY OF ADDITION TO THE GROSS PROFIT . UNDER THE ACT THE EXCISE DUTY UNPAID CAN BE ADDED ONLY U/S 43B. IN THE CASE OF V R TEXTILE (2011) 11 ITR (TRIB) 476 (AHD), THE GUJARAT HIGH COURT DID NOT DISPUTE INCOME AS , WELL AS SALES MADE OUTSIDE THE BOOKS OF ACCOUNT AND AS THE ASSESSEE HAD PAID EXCISE DUTY ON THE UNACCOUNTED SALES, IT WAS HELD THAT ONLY G ROSS PROFIT ADDITION COULD BE MADE. IN THE CASE OF RISHABH POLYM ERS (P) LTD, IT(SS)A NO . 43/HYD/05 ORDER DATED 10-12-2010, THE ITAT, HYDERAB AD HELD THAT THE ASSESSEE COULD NOT BE CONSIDERED TO HAVE E ARNED PROFIT EQUAL TO THE UNDISCLOSED SALE PROCEEDS AND THE CIT(APPE ALS) IS JUSTIFIED - IN CONSIDERING A PROFIT OF 11 % ON UNACCOUNTED SALES A S UNDISCLOSED INCOME. 5.7 THUS THE A.O'S APPROACH IN ARRIVING AT THE GROSS PROFIT RATIO IS NOT PROPER AND CORRECT IN VIEW OF THE FACTS AND THE LAW AS IT STANDS. THE CASES RELIED BY THE APPELLANT AND ALSO THE DISCUSSION THA T FOLLOWED REFLECTING CONSISTENT APPROACH OF COURTS AND TRIBUNALS IN ADOPTING GROSS PROFIT RATIO OF THE BOOK RESULTS WITHOUT CONSIDERING T HE EVASION OF EXCISE DUTY HAS TO BE KEPT IN MIND IN DECIDING THE ISSUE OF G .P. DURING THE COURSE OF THE SEARCH AND, THEREAFTER, NO EVIDENCE AGA INST THE APPELLANT OF EVASION OF EXCISE DUTY HAS BEEN FOUND. THE EXCISE DE PARTMENT HAS NOT PASSED ON ANY INFORMATION OF ADVERSE NATURE. IN THE EA RLIER SEARCH ACTIONS AGAINST THE APPELLANT, THE ADDITIONS ON ACCOUN T OF UNACCOUNTED SALES/INVESTMENT WAS MADE BUT THE FACT THAT THE ASSESSEE WA S EVADING EXCISE DUTY COULD NOT BE ESTABLISHED. EVEN IN THE PRESE NT SEARCH ACTION CONDUCTED AT MUMBAI, HYDERABAD, BANGALORE, PUNE, VA DODARA ETC NO EVIDENCE OR ANY MATERIAL DOCUMENT HAVE BEEN FOUND W HICH COULD REMOTELY INDICATE THE EVASION OF EXCISE DUTY BY THE A PPELLANT . THE CONCLUSION DRAWN BY THE ASSESSING OFFICER IN DETERMINING G.P. BY FACTORING IN EXCISE DUTY ELEMENT IS NOT UNDERSTANDABLE AND R IN ANY CASE HAS REMAINED UNSUBSTANTIATED THAT THE ASSESSEE IS INDULGIN G IN EVASION OF EXCISE DUTY . 5.8 I AM CONVINCED THAT . THE ESTIMATION OF GROSS PROFIT MARGIN IS TO BE BASED ON THE EVIDENCES AVAILABLE WITH REGARD TO THE GROSS PROFIT EARNED BY THE APPELLANT . HOWEVER, THE SAID ESTIMATION CAN BE INCREASED OR REDUCED ON THE BASIS OF JUSTIFIABLE EVIDENCES AVAILABLE TO GIVE EFFECT TO 51 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 SUCH INCREASE OR REDUCTION AND IN ITS ABSENCE THE GROSS P ROFIT RESULT AS ARRIVED AT YEAR AFTER YEAR IN THE SAME SET OF FACT SH OULD BE MADE A BASIS OF ESTIMATION OF UNACCOUNTED INCOME. IN THE PRESENT C ASE AS THE APPELLANT IS MANUFACTURING GOODS WHICH HAVE BEEN ACCO UNTED FOR IN ITS BOOKS OF ACCOUNT AS ALSO MANUFACTURING GOODS WHICH ARE SOLD OUTSIDE THE BOOKS OF ACCOUNT, THE G.P. RATE OUGHT TO BE INCR EASED FURTHER ON THE GROUND THAT THE MARGIN OF THE PROFIT IN THE UNACCOU NTED SALES IS LIKELY TO BE HIGHER AS THE RISK FACTOR IS HIGHER . THE EXPENSES DIRECTLY RELATED TO THE UNACCOUNTED SALES WHICH ARE MATCHING IN SCALE WITH THE ACCOUNTED SALES HAVE ALREADY BEEN CLAIMED BY THE APPELLANT . THE PURCHASE INVOICES WERE IN CASH AND UNVERIFIABLE. THERE WAS NO OCCASION T O EXAMINE OVERVALUATION OF OPENING STOCK OR UNDERVALUATION OF CLOSING STOCK. HENCE IT IS A CASE OF APPLYING A HIGHER G.P. RATE. TH E PROFIT ARISING OUT OF THE UNACCOUNTED SALES NEEDS TO BE TAXED ALONG WITH THE INITIAL INVESTMENT MADE FOR THE SAID TRANSACTION . IF THE G.P. ALONE IS TAXED, THE INITIAL INVESTMENT WILL REMAIN UNTAXED. THE YEAR-WISE DETAILS ARE AS UNDER: 5.9 THE AVERAGE G . P. SHOWN BY THE APPELLANT FOR THESE YEARS IS 17.89% HIGHEST BEING 21.93% AND THE LOWEST BEING 13.86%. THE ITEMS SOLD BEING GUTKHA AS A SALE WITH A HIGHER MARGIN OF PROFIT IS WITHOUT DISPUTE. TO MEET THE ENDS OF JUSTICE IT IS THOUGHT TO RATIONAL IZE THE G.P. RATE AT THE UPPER LEVEL BY INCREASING THE NORMAL G.P. REFLECTED BY THE APPELLANT IN THE RESPECTIVE YEAR(S). THE ASSESSING OFFICER IS DIRECTE D TO COMPUTE THE UNACCOUNTED INCOME BY APPLYING THE GROSS PROFIT AT 30 % ON THE UNACCOUNTED SALES FOR ALL THE ASSESSMENT YEARS. 77. AGGRIEVED WITH SUCH PART RELIEF GRANTED BY THE CIT(A) BOTH THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 78. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HERE WAS A SEARCH ON THE PREMISES OF SHRI MITHULAL JAIN AT BENGALURU ON 09 TH OCTOBER, 2009 WHEREIN CERTAIN LOOSE PAPERS [SAMPLES ON P AGES 41 TO 106 AND 33 TO 37 IN PB IV] WERE FOUND. HE WAS SEARCH ED ALONG WITH SHRI. SOHANRAJ MEHTA, BENGALURU, WHO WAS THE C & F A GENT OF THE ASSESSEE COMPANY FOR KARNATAKA REGION. REFERRING T O PAGE NOS.30 TO 47 OF THE PAPER BOOK, VOLUME-I, HE SUBMITTED TH AT SHRI SR. NO. A.Y. GP PERCENTAGE AS PER BOOKS ACCOUNTED SALES UNACCOUNTED SALES 1. 2004-05 21.32 34,96,64,955 69,28,04,168 2. 2005-06 21.93 48,43,77,240 53,22,77,170 3. 2006-07 20.28 53,77,31,832 63,84,17,650 4. 2007-08 15.67 84,00,95,315 83,53,68,165 5. 2008 - 09 13.86 94,25,24,178 75,83,71,888 52 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 MEHTA, IN THE COURSE OF SEARCH, OWNED UP ALL THESE PAPER S AS BELONGING TO HIM AND HE GAVE STATEMENT U/S 132(4) ACCEPT ING THE OWNERSHIP OF THESE PAPERS. AT THAT TIME HE STATED THAT THESE PAPERS REFLECT THE TRANSACTIONS OF CASH GIVEN TO VARIOUS PERSONS AS PER THE INSTRUCTIONS OF SHRI. PRAKASH R DHARIWAL AND SHRI RASIKLAL DHARIWAL, DIRECTORS OF THE ASSESSEE COMPANY. HE FURTHER S TATED THAT THESE PAPERS ARE IN HIS HANDWRITING WHEREIN THE RECEIPTS OF GUTKHA CONSIGNMENTS ARE WRITTEN AND THE PAYMENTS MENTIONED TH EREIN ARE AS PER THE INSTRUCTIONS FROM DHARIWAL. 79. HE SUBMITTED THAT A SEARCH U/S.132 OF THE I.T. ACT WAS CONDUCTED ON THE ASSESSEE ON 20-01-2010 AND NO INCRI MINATING DOCUMENTS WERE FOUND. NO UNACCOUNTED STOCK OR UNACCOU NTED PURCHASES/EXPENSES /SALES WERE FOUND. THERE WAS NOT A SINGLE UNACCOUNTED SALE/PURCHASE VOUCHER FOUND DURING THE SEA RCH. THUS, DURING BOTH THE SEARCHES I.E. AT MEHTA'S PLACE AND THE ASSESSEE'S PLACE, THERE WAS NO DIRECT EVIDENCE FOUND IN THE FORM OF ANY UNACCOUNTED VOUCHER OR ANY UNACCOUNTED SALE RECE IPT OR ANY UNACCOUNTED STOCK. WHAT WAS FOUND WERE THE INCRIMINATING PAPERS WRITTEN AND MAINTAINED BY SHRI MEHTA AND THAT TOO, THEY WERE FOUND DURING THE SEARCH ON MEHTA AND NOTHING WAS FOUND DURING THE SEARCH ON THE ASSESSEE. 80. REFERRING TO PAGE NOS. 53 TO 85 OF THE PAPER BOOK VOLUME-IV HE SUBMITTED THAT SHRI RASIKLAL M DHARIWAL, CHAIRMAN OF THE ASSESSEE COMPANY, WAS ASKED DURING THE COURSE OF SEARC H AT HIS PREMISES ABOUT THE PAPERS FOUND WITH MR. MEHTA. IN THAT CONTEXT HE CLEARLY STATED THAT THE LETTERS WERE WRITTEN BY HIM TO MR. MEHTA FOR GIVING CERTAIN SUMS TO VARIOUS PERSONS BUT HE DID NOT AC CEPT THE DECODING DONE BY MEHTA IN HIS LOOSE PAPERS BY ADDING TWO ZEROS TO 53 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE FIGURES IN THIS LETTERS AND FURTHER HE DID NOT ACCEPT THE ACCOUNTS MAINTAINED BY MEHTA AS BELONGING TO THE ASSESSEE. REFERR ING TO PAGE NO.40 OF PAPER BOOK VOLUME-IV HE SUBMITTED THAT TH E LETTERS WRITTEN BY DHARIWALS TO MR. SOHANRAJ MEHTA WERE DURING THE PERIOD JUNE 2006 TO OCT. 2007 AND THE TOTAL SUM OF THE AMOU NTS TO BE GIVEN TO VARIOUS PERSONS AS PER THESE PAPERS AMOUNTED TO RS.61,04,816/- ONLY. REFERRING TO PAGE 115 OF THE PAPER B OOK VOLUME-II HE SUBMITTED THAT MR. DHARIWAL HAD ALSO DEMAN DED THE CROSS EXAMINATION OF MR. SOHANRAJ MEHTA. 81. REFERRING TO THE COPY OF THE ASSESSMENT ORDER HE S UBMITTED THAT THE AO HAS HELD THAT ALL THESE PAPERS REFLECT THE U NACCOUNTED SALES MADE BY THE ASSESSEE COMPANY THROUGH MEHTA FOR THE PERIOD FROM 2003 TO 2008. HE ESTIMATED THE UNACCOUNTED SALES FO R ALL THESE YEARS I.E. STARTING FROM A.Y. 2004 - 05 TO A.Y. 2008 - 09 AND TAXED THE G.P. THEREON AS PER PAGE 73 OF HIS ASST. ORDER FOR A Y. 2007 - 08. ROUGHLY, HE ESTIMATED THE G.P. AROUND 60% OF THE SALES. 82. REFERRING TO THE ORDER OF THE LD.CIT(A), HE SUBMITTED T HAT THE CIT(A) HELD THAT THESE SALES AS PER THE PAPERS FOUND WITH MEHTA WERE MADE BY THE ASSESSEE COMPANY AS STATED BY MEHT A. HOWEVER, HE REDUCED THE PERCENTAGE OF G.P. FOR ALL THESE YEARS TO 30% (PAGE 107 OF CIT(A) ORDER FOR A.Y. 2007 - 08 AND ACCORDINGLY, RE DUCED THE ADDITION MADE BY THE A.O. 83. REFERRING TO PARA NO.3.4 ON PAGE NOS. 62 TO 66 OF TH E ORDER THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF T HE BENCH TO THE IMPORTANT FINDINGS GIVEN BY THE AO FOR HOLDING THAT THE SEIZED PAPERS CONTAIN UNACCOUNTED SUPPRESSED TURNOVER OF GUT KHA BELONG TO THE ASSESSEE COMPANY. REFERRING TO STATEMENT OF MR. SOHANRAJ MEHTA, PLACED IN THE PAPER BOOK HE SUBMITTED THAT THE STATEMENT 54 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 OF MR. SOHANRAJ MEHTA THAT THESE PAPERS REFLECT TRANSAC TIONS OF THE ASSESSEE IS NOT BELIEVABLE FOR THE FOLLOWING REASONS (AS PER WRITTEN SUBMISSION FILED) : A. ON PAGES 15, 16, 17, 18, ETC, ETC OF P.B. I, HE STATES THAT THE TRANSACTIONS NOTED IN THE SEIZED PAPERS RELATE TO THE A SSESSEE. ON PAGE 18, HE STATES THAT HE HAS TO HAND OVER THE AMOUNT WRIT TEN IN THE SLIPS TO THE BEARER OF THE SLIPS AND HE DOES NOT KNOW THE PERSO N WHO IS THE BEARER OF THE CHIT. THE CHITS ARE THE EVIDENCES FOR THE PAYMENTS MADE BY HIM OUT OF THE UNACCOUNTED INCOME OF THE ASSESSEE AN D THESE CHITS ARE RECEIVED FROM THE DIRECTORS OF THE ASSESSEE. ON PAGE 18, HE STATES THAT HE GETS THE COMMISSION OF RS.50/- PER BOX OF GUTK HA SOLD FROM THE ASSESSEE. HE ADMITS THAT THE PAPERS ARE WRITTEN BY HIM. O N PAGE 43, HE ADMITS THAT HE HAS GIVEN LOANS TO VARIOUS PERSONS ON INT EREST AND SUCH INTEREST INCOME IS NOT DISCLOSED BY HIM IN THE RETURN. FURTHER, IN THE STATEMENT HE DISCLOSED AN ADDITIONAL INCOME OF RS. 2 CRS ON ACCOUNT OF THE UNACCOUNTED TURNOVER OF THE ASSESSEE COMPANY FOR ALL THESE YEARS (PAGE 19 PB I). ON ONE SIDE, IN THE SEARCH ON TH E ASSESSEE, NO UNACCOUNTED INVESTMENT, INCOME WAS FOUND TO BE PERTAI NING TO THE ASSESSEE BUT ON THE OTHER HAND, MEHTA DISCLOSED ADDITIONA L INCOME AND ADMITTED UNACCOUNTED INVESTMENT. DOES IT MEAN THAT A LL THESE TRANSACTIONS ARE OF MEHTA AND IN ORDER TO GET AWAY FR OM HUGE TAX LIABILITY, HE FLOATED THE STORY THAT THE PAPERS INDIC ATE THE TRANSACTIONS OF THE ASSESSEE. ON PAGE 48 TO 52, HE GIVES A RETRACTIO N ON PAGE 49 WHEREIN HE MAKES A REQUEST THAT HIS STATEMENTS SHOULD BE IGNORED AND FURTHER HE STATES THAT HE HAD GIVEN THE PAPERS TO MIT HULAL FOR SECRECY AND CONSOLIDATION. B. AGAIN ON 10.08.2011, ON PAGE 53 TO 58, HE STATES T HAT THE PAPERS PERTAINED TO ASSESSEE. ON 03.12.2011, ON PAGE 59, HE STA TES THAT HE RETRACTS FROM ALL HIS EARLIER STATEMENTS AND FURTHER T HAT HE IS PREPARED TO APPEAR BEFORE THE A.O. AT PUNE. C. THE ASSESSEE ASKED FOR CROSS EXAMINATION OF MEHTA AT PU NE (PAGE NO. 115 & 116 OF P.B. II) AS THE ASSESSEE'S CHAIRMA N SHRI RASIKLAL DHARIWAL WAS NOT ABLE TO TRAVEL OUT OF PUNE BECAUSE H E WAS UNWELL. SECONDLY, MRS. K. R. DHARIWAL WAS ALSO HOSPITALISED AND SHE EXPIRED IN DECEMBER, 2011. (REFER PAGE 41 & 42 OF PB II). DESPI TE, THESE FACTS THE A.O. DID NOT GIVE THE CROSS EXAMINATION OPPORTUNITY A T PUNE BUT INSTEAD, HE ASKED THE ASSESSEE TO TAKE MEHTA'S CROSS EXAMIN ATION AT BENGALURU. IN VIEW OF HIS ABOVE RETRACTION AND DESPIT E THE FACT THAT HE HAS OFFERED TO ATTEND AT PUNE FOR CROSS EXAMINATION, T HE A.O. HAVING NOT CALLED HIM AT PUNE, HIS EARLIER STATEMENTS CANNOT BE M ADE USE OF AGAINST THE ASSESSEE. SECONDLY, IF MEHTA CHANGES HIS STATE MENT FROM TIME TO TIME, THE ASSESSEE SUBMITS THAT HIS STATEMENTS ARE N OT RELIABLE AND THEY CANNOT BE RELIED UPON AGAINST THE ASSESSEE BY THE DEPT. 84. REFERRING TO STATEMENT OF MR. DHARIWAL, COPIES OF WHICH ARE PLACED AT PAPER BOOK PAGES 60 TO 134 OF PAPER BOOK VO LUME-I HE SUBMITTED THAT SHRI RASIKLAL M. DHARIWAL, CHAIRMAN OF THE ASS ESSEE COMPANY OWNED UP THE CHITS SENT BY HIM OR SHRI PRAKASH DHARIWAL 55 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 TO MEHTA FROM TIME TO TIME ABOUT MAKING PAYMENTS TO VAR IOUS PERSONS (PAGE 61) BUT ON PAGE 62, HE COMPLETELY DENIES THE DECODING OF THE FIGURES IN THE CHITS AS ALLEGED BY MEHTA. HE CONFIRMED THAT MEHTA WAS A CHEAT. AGAIN HE WAS ASKED ABOUT THE DECO DING ALLEGED BY MEHTA AND HE DENIED IT CONSISTENTLY IN HIS STATEMENT (PAGE 64, 67, 70, 72, 73, 74, ETC. PB I) HE CONFIRMS THAT HIS RELATIONS WITH MEHTA ARE BAD (62, 65, 82, ETC. PB I). ACCORDINGLY, SHRI DHA RIWAL CONSTANTLY DENIED THE DECODING AND OTHER LOOSE PAPERS FOUND WITH MEHTA AND RIGHT FROM THE SEARCH, HE CONFIRMED THAT HIS RE LATIONS WITH MEHTA WERE BAD. AFTER THE SEARCH, THE ASSESSEE CAN CELLED THE C & F AGENCY OF MR. MEHTA (PAGE NO. III AND 112 OF PAPER BOOK IV). THE ASSESSEE EXPLAINED THAT THE REASONS WHY THE CHITS WERE SENT TO MR.MEHTA FOR MAKING PAYMENTS TO VARIOUS PERSONS WAS T HAT SUBSTANTIAL SALES TAX REFUNDS OF THE ASSESSEE WERE RECEIV ED BY MEHTA AND HE WAS NOT MAKING THE PAYMENTS TO THE ASSESSEE. S ECONDLY, SOME PERSONS KNOWN TO THE ASSESSEE REQUIRED SMALL AMOU NTS AT BENGALURU AND THAT IS WHY THE ASSESSEE ASKED MEHTA TO MAKE THESE PAYMENTS. MEHTA COULD NOT PRODUCE ANY EVIDENCE TO SUPP ORT HIS INTERPRETATION OF THE PAPERS WRITTEN BY THE ASSESSEE TO HIM THAT ALL THESE FIGURES WERE CODED FIGURES. NO EVIDENCE WAS FOUND D URING THE SEARCHES TO SUPPORT MEHTA'S CONTENTION THAT ASSESSEE ASKED HIM TO ADVANCE SUCH LARGE AMOUNTS (CODED) TO VARIOUS PERSONS. T HUS, THE ASSESSEE RIGHT FROM BEGINNING REFUTED MEHTA'S STORY. 85. AS REGARDS THE STATEMENTS OF THIRD PARTIES ARE CON CERNED THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PAGES 138,141,15 3 AND 176 ETC. OF PAPER BOOK VOLUME-I SUBMITTED THAT SOME OF THE PERSONS WHOSE NAMES FIGURED IN THE LOOSE PAPERS WERE INTERROGATE D BY THE DEPT. SUCH AS SHEETAL PATIL, K. RAGHUNATH, MALLIKARJUN AND BA LAN. THEY WERE SEARCHED AND UNDER TENSION THEY ADMITTED TH E NOTINGS IN 56 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE PAPERS BUT LATER ON, THEY ALL RETRACTED AND SUBMITTE D THAT THE PAPERS DO NOT REVEAL ANY UNACCOUNTED MONEY OF THE ASS ESSEE. SIMILARLY, NO EVIDENCE WAS FOUND WITH THEM THAT THE ASSESS EE ADVANCED SUCH LARGE AMOUNTS TO THEM. THUS, THEY CANNOT BE CONSIDERED TO BE WITNESSES FOR THE DEPT. AGAINST THE AS SESSEE IN VIEW OF THE ABOVE FACTS. REFERRING TO PAGES 181 AND 184 OF PA PER BOOK VOLUME-I HE SUBMITTED THAT SOME OF THE THIRD PARTIES, WH OSE NAMES FIGURED IN THE LOOSE PAPERS, IN THEIR STATEMENTS HAVE CONS ISTENTLY DENIED THAT THEY HAVE RECEIVED ANY MONEY FROM THE ASSE SSEE AS PER THE LOOSE PAPERS. REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SAIF ALI KHAN MANSURALI VS. ACIT REPORTED IN 30CCH 0509 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT NO ADDITION CAN BE MADE IN THE HAN DS OF THE ASSESSEE ON THE BASIS OF A PIECE OF PAPER FOUND AND SEIZE D DURING THE COURSE OF SEARCH AT THE PREMISES OF THIRD PARTY AND ON THE BASIS OF STATEMENT OF DIRECTOR OF THE SEARCH PARTY WHICH CONTA IN MANY CONTRADICTIONS. 86. HE SUBMITTED THAT DURING THE SEARCHES, NO EVIDENCE O F UNACCOUNTED SALES, UNACCOUNTED PURCHASES OR UNACCOUNT ED STOCK WAS FOUND AT THE ASSESSEE'S PREMISES. EVEN DURING THE S EARCH, ON MEHTA, NOT A SINGLE UNACCOUNTED BILL FOR PURCHASES, SALES MA DE BY THE ASSESSEE WAS FOUND AT HIS PREMISES. IN CASE, THE ASS ESSEE HAS BEEN MAKING UNACCOUNTED SALES OF RS.300 CRS APPROXIMATE LY AS ESTIMATED BY THE A.O., SOME EVIDENCE SHOULD HAVE BEEN FOUND DURING THE SEARCHES. THE FACT THAT NOT A SINGLE UNACCOUN TED PURCHASE VOUCHER / SALE VOUCHER WAS NOTICED IS SUFFICIENT INDICATION THAT NO SUCH UNACCOUNTED BUSINESS WAS MADE BY THE AS SESSEE. NO TRANSPORTATION RECEIPT / BILL WAS FOUND INDICATING TRANSPOR TATION OF UNACCOUNTED STOCK. FOR EFFECTING THESE UNACCOUNTED SALES AND 57 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 PURCHASES, THE ASSESSEE WOULD HAVE BEEN REQUIRED TO EN GAGE AT LEAST 700 TO 800 TRUCKS IN THIS PERIOD BUT NOT A SINGLE UNACC OUNTED BILL / VOUCHER OR RECEIPT WAS FOUND DURING THE SEARCHES FOR S UCH TRUCK BOOKING. NO RECORD OF UNACCOUNTED PRODUCTION WAS FOUND FO R ANY DAY FOR FACTORY AT BENGALURU. NO EVIDENCE FOR TRANSPORTING SUCH HUGE CASH FROM MEHTA TO VARIOUS PERSONS IS FOUND. NO EVIDENCE ABOUT MEHTA REPORTING UNACCOUNTED SALES / PRODUCTION TO THE ASSESSEE WAS FOUND DURING THE SEARCHES. THE ASSESSEE'S PRODUCT GUTKHA IS SOLD IN SMALL PACKETS. IT IS NOT GIVEN IN LOOSE FORM. NO RECO RD OF ANY UNACCOUNTED PURCHASES OF PACKING MATERIAL WAS FOUND. 87. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE NORMALLY SELLS PRODUCTION FROM BANGALORE FACTORY TO VARIOUS C & F AGENTS IN TAMILNADU, ANDHRA PRADESH, KERALA, SOUTH MAHARA SHTRA. NO RECORD ABOUT THESE AGENTS TAKING THE STOCK FROM ME HTA WAS FOUND. NO PROOF THAT THESE PERSONS PAID MONEY TO THE AS SESSEE OR MEHTA WAS FOUND. HE SUBMITTED THAT IF ALL THESE SALES ARE MADE THROUGH MEHTA IN THESE TERRITORIES, THE ABOVE C & F AGE NTS WOULD HAVE OBJECTED. SECONDLY, NO EVIDENCE THAT MEHTA MAINTAI NED THE WARE HOUSES IN VARIOUS STATES WAS FOUND. THUS, IF WHAT M EHTA SAYS IS CORRECT, THESE UNACCOUNTED SALES CAN BE MADE BY MEH TA ONLY AND THAT TOO, IN HIS REGION I.E. KARNATAKA. ANY OTHER PRESUMPT ION IS NOT POSSIBLE. HE SUBMITTED THAT THE ASSESSEE PAYS COMMISSION TO MEHTA ON SALES MADE BY HIM IN KARNATAKA. WHY SHOULD HE MAKE COMMISSION PAYMENT TO HIM ON SALES AS PER THE LOOSE PAPE RS. THERE IS NO REASON. IF THE SALES ARE MADE IN OTHER STATES, THE ASSESSEE WOULD MAKE PAYMENT OF COMMISSION TO OTHER C & F AGENTS AND NOT TO MEHTA. ACCORDINGLY, MEHTA'S CONTENTION THAT HE RECEIV ED COMMISSION ON ALL THESE SALES OF MORE THAN RS.300 CRS AS P ER THE LOOSE PAPERS IS NOT CORRECT AND SECONDLY, THERE IS NO R EASON FOR THE 58 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 ASSESSEE TO ASK MEHTA TO MAKE THESE SALES TO OTHER STATES. ASSESSEE COULD HAVE MADE THESE SALES DIRECTLY TO THE RESPECTIVE C & F AGENTS. HENCE, MEHTA'S CONTENTION IS NOT CORRECT. HE SUBMITTED T HAT THE ACCOUNTED SALES IN KARNATAKA ARE MUCH LESSER THAN THES E PRESUMED SALES AND IT IS BEYOND LOGIC THAT THE ASSESSEE WOULD BE S ELLING SO MUCH OF STOCK IN KARNATAKA ONLY. HE ACCORDINGLY SUBMITT ED THAT IT IS DIFFICULT TO PRESUME THAT THE ASSESSEE SELLS UNACCOUNTED STOCK ONLY IN KARNATAKA AND NOT IN ANY OTHER STATE IN THE COUNTRY. 88. REFERRING TO COPY OF THE ORDER OF THE TRIBUNAL IN THE CASE OF MR. VINIT RANAWAT HE SUBMITTED THAT SOME OF THE PERSONS LIKE RANAWAT WERE SEARCHED AND NO INCRIMINATING EVIDENCE WAS FOUND AGA INST THE ASSESSEE OR SUCH PERSONS DURING THE SEARCH. IF ASSESSE E HAD GIVEN A SUM OF RS.21 CRS. TO RANAWAT, SOME EVIDENCE COULD HAVE BEEN FOUND DURING THE SEARCH AT HIS PLACE THAT HE MADE SOME UNACC OUNTED INVESTMENT OR HE HAS GIVEN SUCH BIG AMOUNTS TO THIRD PA RTIES. AS NOTHING WAS FOUND, IT IMPLIES THAT RANAWAT DID NOT GET A S UM OF RS.21 CRS FROM MEHTA. HE SUBMITTED THAT IF ASSESSEE HAS GIVEN SUCH LARGE AMOUNTS TO THESE PERSONS AS LOANS SINCE EVIDENCE OF CHARGING ANY INTEREST, OR TAKING ANY GUARANTEE, SECURITY SHOULD HA VE BEEN FOUND. HOWEVER, NO SUCH EVIDENCE WAS FOUND. THEREFORE, IT IS DIFFICULT TO IMAGINE THAT SUCH LARGE AMOUNTS ARE GIVEN BY TH E ASSESSEE AS LOANS WITHOUT CHARGING ANY INTEREST OR WITHO UT TAKING ANY SECURITIES FROM THESE PERSONS. HE SUBMITTED THAT NO EVIDENCE OF ANY REQUEST LETTER FROM THESE PERSONS, NO INVESTMENTS O R NO RECORD OF ANY REPAYMENT WAS FOUND FROM THE VARIOUS PERSONS TO WHOM THE ALLEGED FUNDS HAVE BEEN GIVEN. HE SUBMITTED THAT IF ASSES SEE WANTED TO GIVE SUCH LARGE AMOUNTS TO PEOPLE LIKE RANAWAT , PRADEEP RUNWAL OR BALAN WHO ARE IN MUMBAI OR PUNE, HE WOULD HAVE GIVEN THEM FROM PUNE INSTEAD OF ASKING THEM TO TAKE MONEY FROM 59 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 BENGALURU. SOME OF THE PARTIES WHO NAME APPEAR ON THES E PAPERS HAVE NO BUSINESS RELATION WITH THE ASSESSEE. IT IS DIFFICULT T O ACCEPT THE CONTENTION THAT THESE PERSONS HAD TO PICK UP THE CASH ALL THE WAY FROM BANGALORE. AS IT IS, THE LOOSE PAPERS INDICATE MON EY GIVEN BY MEHTA TO DHARIWAL. HE COULD HAVE GIVEN OUT OF SUCH A MOUNTS TO THESE PERSONS. HENCE, THE STORY OF SHRI MEHTA DOES NOT FIT IN WELL WHEN THE THEORY OF PROBABILITY IS APPLIED. 89. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL NO TINGS IN MEHTA'S PAPERS ARE IN ROUND FIGURES. IF THEY REFLECT UNACC OUNTED PURCHASES, THEY WOULD HAVE BEEN IN SOME ODD AMOUNTS ALS O. THE ACCOUNTS WRITTEN BY MEHTA ARE WRITTEN FOR THE PERIOD FRO M JAN. 2003 TO FEB. 2008. HOWEVER THE PAYMENT CHITS WRITTEN BY THE ASSESSEE TO MEHTA ARE FOR THE PERIOD JUNE 2006 TO OCT. 2007. NO LETTE RS FOR THE BALANCE PERIOD WERE FOUND DURING THE SEARCHES. WHAT IS NO T FOUND IS PRESUMED TO BE NOT THERE. HENCE, MEHTA HAS NOT CORROB ORATED THAT THE ASSESSEE HAS VERIFIED ALL THESE LOOSE PAPERS FOUND WITH HIM. 90. HE SUBMITTED THAT NO EVIDENCE WAS FOUND THAT THE FIGU RES MENTIONED BY THE ASSESSEE IN HIS LETTERS TO MEHTA ARE C ODED FIGURES. NO EVIDENCE WAS FOUND THAT THE ASSESSEE HAS CHECKED, S IGNED AND OKAYED THE NOTINGS OF MEHTA. THUS, MEHTA HAS NOT MAINTAIN ED THESE FIGURES FOR THE PURPOSES OF REPORTING TO THE ASSESSEE OR FOR PURPOSES OF GIVING ACCOUNT OF UNACCOUNTED TRANSACTIONS TO THE AS SESSEE. HE SUBMITTED THAT MEHTA'S PAPERS ARE FOR THE PERIOD FROM JA N. 2003 TO FEB. 2008. THE SEARCH ON MEHTA WAS CONDUCTED ON 09.10.2 009. FOR THE PERIOD FROM MARCH 2008 TILL THE DATE OF SEARCH, NO SUC H LOOSE PAPERS ARE FOUND. NO REASON WAS ATTRIBUTED. IF ASSESSEE WAS HAVING SUCH ROARING UNACCOUNTED BUSINESS, THERE IS NO REASON T HAT IT HAS SUDDENLY STOPPED DOING THIS BUSINESS FROM MARCH 2008 O NWARDS. 60 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 SECONDLY, IF THE INFERENCE IS THAT MEHTA HAS ALREADY GIVEN THE ACCOUNT FOR THIS PERIOD TO THE ASSESSEE AND THEREFORE, H E DESTROYED THE PAPERS, THERE IS NO REASON AS TO WHY HE SHOULD HAV E MAINTAINED THE PAPERS FOR THE OLD PERIOD. THIS DEFIES LOGIC. 91. REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL REPORTED IN 214 ITR 801 AND DURGA PRAS AD MORE REPORTED IN 82 ITR 540 WHERE IT HAS BEEN HELD THAT TAX ING AUTHORITY SHOULD LOOK INTO SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE T EST OF HUMAN PROBABILITIES, HE SUBMITTED THAT IN VIEW OF THE ABOVE CONTEN TIONS, THE NOTINGS IN THE PAPERS MAINTAINED BY MEHTA DO NOT APPEAR TO BE PERTAINING TO THE TRANSACTIONS OF THE ASSESSEE. 92. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PAPER B OOK PAGE NOS. 195 TO 203 OF PAPER BOOK VOLUME-I DREW THE ATTENT ION OF THE BENCH TO LETTERS RECEIVED FROM VARIOUS PARTIES THAT DUP LICATE PRODUCTS UNDER THE BRAND NAME OF THE ASSESSEE'S ARE SOLD IN THE MARKET. REFERRING TO PAGES NOS. 232 TO 270 OF PAPER BOOK VOLUM E-I HE SUBMITTED THAT THE ASSESSEE HAS WRITTEN LETTERS TO GOVT AUTHORITIES ABOUT THE DUPLICATE PRODUCTS SOLD UNDER THE ASSESSEE'S BRAND NAME. HE ACCORDINGLY SUBMITTED THAT THE PAPERS FOUND WITH MEHTA MAY BE REFLECTING SUCH UNACCOUNTED SALES BY MEHT A OF GUTKHA UNDER THE ASSESSEE'S BRAND NAME AND IN ORDER TO THROW THE BURDEN OF FINANCIAL LIABILITY ON THE ASSESSEE, HE STATED THAT THESE TRANSACTIONS ARE OF THE ASSESSEE. 93. THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PAGE NOS. 204 AND 208 OF PAPER BOOK VOLUME-I WHICH ARE THE SUMMARIZED STATEMENTS OF RECEIPTS AND PAYMENTS FOR THE PARTICULAR PERIOD. HE SUBMITTED THAT ACCORDING TO MR. MEH TA PAGE 61 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 204 IS THE STATEMENT FOR THE PERIOD 02.04.2003 TO 31.08.20 06. HOWEVER, THERE IS NO SIGNATURE OF CONFIRMATION BY THE ASS ESSEE ON THIS PAPER. IF THIS PAPER WAS WRITTEN BY MEHTA FOR THE BE NEFIT OF THE ASSESSEE, SO AS TO GIVE HIM THE DETAILS OF HIS ACCOUNT, HE SHOULD HAVE OBTAINED THE ASSESSEES SIGNATURE ON THIS PAPER A S A TOKEN OF CONFIRMATION. THUS, THERE IS NO EVIDENCE THAT THE LOOSE PA PERS BELONGED TO THE ASSESSEE. 94. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS LIABLE TO PAY EXCISE DUTY ON ITS PRODUCTION IN THE FACTOR Y AT BENGALURU. IT HAD MAINTAINED QUANTITATIVE STOCK ACCOUNT, R G 1 REGISTER FOR THE PRODUCTION AND TILL THE DATE OF SEARCH, NO DISCREPANC Y WAS NOTICED BY EXCISE DEPT. THUS, THERE BEING NO DISCREPA NCY NOTED BY THE EXCISE DEPT. IN THE PRODUCTION RECORD OF THE ASSE SSEE, NO ADDITION ON THE BASIS OF SUCH UNACCOUNTED ESTIMATED SALE S CAN BE MADE IN THE HANDS OF THE ASSESSEE. REFERRING TO PAGE NO . 124 OF PAPER BOOK VOLUME-IV, HE SUBMITTED THAT THE ASSESSEE H AS GIVEN THE LIST OF THE DATES ON WHICH THE EXCISE OFFICERS VISITED THE FAC TORY AT BENGALURU AND NO DISCREPANCY WAS NOTICED BY THEM. 94.1 REFERRING TO THE DECISION OF THE COMMISSIONER, CENTRAL EXCIZE, DATED 31-12-2015 HE SUBMITTED THAT THE COMMISSIONER HA S GIVEN A FINDING THAT THERE IS NO SIGN OF EXCESS CONSUMPTION OF RAW MATERIAL OR PACKING MATERIAL OR EXCESS USE OF MACHINE OR EXCESS MANUFACTURING OF GUTKHA. THEREFORE, ONCE THERE IS NO UNAC COUNTED PRODUCTION, THE QUESTION OF UNACCOUNTED SALE DOES NOT AR ISE. HE SUBMITTED THAT IF THE GOODS MANUFACTURED ARE EXCISABLE AN D THE EXCISE AUTHORITY HAS NOT FOUND ANY DISCREPANCY AND THE ASSESSEE HAS MAINTAINED THE RECORDS, NO ADDITION CAN BE MADE ON A CCOUNT OF UNACCOUNTED PRODUCTION / SALES IN THE HANDS OF THE ASSE SSEE, FOR 62 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE ABOVE PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS : CIT V. MASCOT TOOLS ALLAHABAD H.C. - PAGE 166 CIT V . SANJAY OIL CAKE INDUSTRIES GUJARAT H.C. - PAGE 174 HINDUSTAN POLY AMIDES, IT AT MUMBAI - PAGE 188 95. REFERRING TO THE FOLLOWING DECISIONS HE SUBMITTED THAT PRESUMPTION U/S L32( 4A) APPLIES TO THE PERSON WHO IS SEARCHED AND IN WHOSE CUSTODY THE PAPERS ARE FOUND. THUS, LOOSE PAPER S FOUND WITH MEHTA CANNOT BE PRESUMED TO BE BELONGING TO THE A SSESSEE OR REFLECTING THE BUSINESS TRANSACTIONS OF THE ASSESSEE. ADDL. CIT V . LATA MANGESHKAR [97 ITR 696 (BOM)] PRARTHANA CONSTRUCTION V. DCIT [70 TTJ 122] STRAPTEX (INDIA) P . LTD. V. DC IT [84 ITD 320] AMARJ IT SINGH BAKSHI V. ACIT [86 ITD 13 (TM)] ACIT V. THAKKAR DEVELOPERS [ITA NO. 581 1 PN / 08 (PUNE)] ACIT V. KISHORLAL BALWANTRAI AND OTHERS [17 SOT 380 ( CHD)] 96. REFERRING TO THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI VINEET RANAWAT HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT THE PERSONS WHOSE NAMES FIGURED IN MEHTA' S PAPERS, NO ADDITION COULD BE MADE IN THEIR HANDS ON THE BASIS OF T HE PAPERS FOUND WITH MEHTA. SIMILARLY, ON THE SAME LOGIC, NO ADDITION CAN BE SUSTAINED IN THE HANDS OF THE ASSESSEE ON THE BASIS OF T HE PAPERS FOUND WITH MEHTA. 97. THE LD. COUNSEL FURTHER SUBMITTED THAT THERE IS NO CORROBORATIVE EVIDENCE FOUND TO INDICATE THAT THE TRANSA CTIONS AS PER THE LOOSE PAPERS WITH MEHTA WERE OF THE ASSESSEE. THEREFO RE, ADDITION CANNOT BE SUSTAINED ON THE BASIS OF THESE LOOSE PAPERS IN THE HANDS OF THE ASSESSEE. FOR THE ABOVE PROPOSITION H E RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF S.P. GOEL V. DCI T REPORTED IN 82 ITD 85 (TM). HE ACCORDINGLY SUBMITTED THA T THE ADDITION SUSTAINED BY THE CIT(A) SHOULD BE DELETED. 63 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 98. SO FAR AS THE DEPARTMENTAL APPEAL ON THIS ISSUE IS CO NCERNED, HE SUBMITTED THAT THE CIT(A) HAS GIVEN VARIOUS CASE LAWS IN PARA 5.3 TO 5.9 OF HIS ORDER TO SUPPORT THAT THE G.P. RATIO HAS TO BE ADOPTED AS PER THE BOOKS ON THE UNACCOUNTED SALES. HE SUBMITTED T HAT THE ASSESSEE RELIES ON THOSE CASE LAWS TO SUPPORT THE CONT ENTION THAT IF AT ALL, GP IS TO BE ESTIMATED ON THE UNACCOUNTED SALES, IT MUST BE AT THE RATE WHICH IS AS PER BOOKS ON ACCOUNTED SALES. CIT(A ) HAS ALSO STATED THAT THERE IS NO EVIDENCE FOUND IN THE PAPERS O F SHRI MEHTA THAT THE ASSESSEE WAS COLLECTING THE EXCISE DUTY ON THE SALES MENTIONED THEREIN. THUS, THERE BEING NO EVIDENCE THAT THE ASSESSEE COLLECTED EXCISE DUTY ON THE UNACCOUNTED SALES, THE G.P. AROUND 60% ADOPTED BY THE A.O. IS NOT JUSTIFIED. HE SUBMITTED THA T WITHOUT PREJUDICE TO THE ASSESSEE'S MAIN CONTENTION IN ITS APPEA L THAT NO ADDITION IS WARRANTED ON ACCOUNT OF UNACCOUNTED PROFITS B ASED ON THE PAPERS FOUND WITH MEHTA, THE ASSESSEE SUBMITS THAT IF AT ALL, ADDITION IS MADE, THE GP SHOULD BE TAKEN AS PER BOOKS AN D NOT AS PER THE ESTIMATE MADE BY THE A.O. 99. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE AO. HE SUBMITTED THA T SHRI SOHANRAJ MEHTA IS A C&F AGENT OF THE ASSESSEE COMPANY FOR THE STATE OF KARNATAKA. THE INITIAL ADMISSION OF SHRI SOHANRAJ MEHTA THAT SEIZED DOCUMENTS BELONGED TO THE APPELLANT COMPANY , IS IMPORTANT BECAUSE SAME IS DULY WITNESSED BY THE PANCHA S DURING THE COURSE OF SEARCH. FIRST RESPONSE ON SPOT WOULD ALWA YS BE TRUE. REFERRING TO THE DECISION IN THE CASE OF KANTILAL C SHAH V S. ACIT REPORTED IN 14 TAXMANN.COM 108 HE SUBMITTED THAT THE T RIBUNAL IN THE SAID DECISION HAS HELD THAT STATEMENT RECORDED U/S. 132(4A) IS AN EVIDENCE BY ITSELF AND ANY RETRACTION SHOULD BE SUPPOR TED BY 64 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 STRONG EVIDENCE TO SHOW THAT THERE WAS COERCION OR UN DUE FORCE. THIS VIEW IS ALSO SUPPORTED BY FOLLOWING DECISIONS: (I) CARPENTERS CLASSICS (EXIM) PVT. LTD VS. DCIT (108 ITD 14 2) (BANGALORE ITAT) (II) HIRALAL MAGANLAL & CO. VS. DCIT (96 ITD 113) (MUMBAI ITAT) 100. REFERRING TO THE DECISION IN THE CASE OF HOTEL KIRAN REPORTED IN 82 ITD 453 (PUNE ITAT) HE SUBMITTED THAT THE TRIBUNA L IN THE SAID DECISION HAS HELD THAT WHERE DURING THE COURSE OF SE ARCH, ASSESSEE MADE SOME ADMISSION, HE DEBARS THE AUTHORIZED OFFICERS FROM MAKING FURTHER INVESTIGATION. THEREFORE, IN THEIR WISDOM T HE LEGISLATURE HAS PROVIDED THAT SUCH STATEMENT CAN BE US ED AS EVIDENCE AND THE ASSESSMENT CAN BE MADE ON THAT BASIS. 101. REFERRING TO THE DECISION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF SURJEET SINGH CHHABRA VS. UNION OF INDIA HE S UBMITTED THAT THE HONBLE APEX COURT HAS HELD THAT THE REVENUE OFFICIALS ARE NOT POLICE OFFICERS AND THE CONFESSION, THOUGH RETRACTED, IS AN ADMISSION AND WOULD BIND THE PETITIONER. 102. REFERRING TO THE DECISION IN THE CASE OF T.S. KUMAR ASAMY VS. ACIT REPORTED IN 65 ITD 188 (MADRAS), HE SUBMITTED THAT THE TRIBUNAL HAS HELD THAT ITOS ARE NOT POLICE OFFICERS, THEY DO NOT USE UNFAIR MEANS OR THIRD DEGREE METHODS IN RECORDING STATEM ENT ON OATH. THEREFORE SUCH STATEMENTS AND OATHS CANNOT BE R ETRACTED UNLESS IT IS PROVED BY LEGALLY ACCEPTABLE EVIDENCE THAT SU CH ADMISSION/CONFESSION OR OATH WAS NOT VOLUNTARILY TENDERED OR WAS UNDER COERCION OR DURESS. IN THE PRESENT CASE NO SUCH EVIDENCE HAS BEEN PRODUCED OR EVEN SHOWN TO HAVE EXISTED. 65 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 103. REFERRING TO THE DECISION OF HONBLE PUNJAB AND HA RYANA HIGH COURT IN THE CASE OF RAKESH MAHAJAN VS. CIT REPORTED IN 214 CTR 218 HE SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD T HAT 'IT IS WELL SETTLED THAT ADMISSIONS CONSTITUTE BEST PIECE OF EVIDEN CE BECAUSE ADMISSION ARE SELF-HARMING STATEMENTS MADE BY T HE MAKER BELIEVING IT TO BE BASED ON TRUTH. IT IS WELL KNOWN THAT NO ONE WILL TELL A LIE ESPECIALLY HARMING ONE'S OWN INTEREST UNLESS SUCH A STATEMENT IS TRUE.' 104. HE SUBMITTED THAT THE RETRACTION OF SOHANRAJ MEHT A DATED 23.12.2009 WAS CONTRADICTORY. NOWHERE HE HAS BEEN ABLE T O PROVE THAT CONFESSION U/S 132(4A) WAS GIVEN UNDER DURESS OR TH REAT, OR HE WAS DISTURBED OR NOT IN PROPER STATE OF MIND. HIS VERSION THAT HE WAS DEALING IN OTHER BRANDS WAS SIMPLY AN EYE-WASH. HE D ID NOT FURNISH THE NAMES OF VENDORS TO WHOM THE INCOME IN QUEST ION WAS PASSED ON. IN THE SECOND LAST PARAGRAPH OF HIS LETTER DA TED 23.12.2009, HE REACHED AN INFERENCE THAT OWING TO THE NAT URE OF TRADE AND NOT BEING SURE OF SAID BUSINESS ASSOCIATES WHO SE NAMES ARE FOUND IN SEIZED RECORDS, IT IS DIFFICULT TO SAY THAT WHO IS LIABLE TO BE TAXED IN RESPECT OF SEIZED DOCUMENTS. 105. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IN RESPONSE TO SUMMONS ISSUED BY DCIT, CENTRAL CIRCLE-2(2), T HE STATEMENT OF MR. SOHANRAJ MEHTA WAS RECORDED ON 10-08 -2011 WHERE HE AGAIN CONFIRMED THAT HE HAD RETRACTED AT THE BEHEST OF DHARIWAL INDUSTRIES LTD. AND WHAT HE HAD SAID DURING THE COURSE OF SEARCH WAS TRUE. IN RESPONSE TO NOTICE U/S. 153A, HE H AS DULY OFFERED TO TAX COMMISSION INCOME OF RS.1,52,83,320/- IN HIS RE TURN OF INCOME. MOREOVER DOCUMENTARY EVIDENCE IS VALUABLE AS PER SECTION 91 & 92 OF INDIAN EVIDENCE ACT AS COMPARED TO ORAL EVIDE NCE. FOR 66 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE ABOVE PROPOSITION HE RELIED ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PARAMJIT SINGH VS. ITO REPORTED IN 323 ITR 588. HE SUBMITTED THAT THE HON'BLE BOMBAY HIG H COURT IN CASE OF CIT VS. OMPRAKASH JAIN REPORTED IN 24 DTR 157 HAS OBSERVED THAT THE TEST OF EVIDENTIARY VALUE OF THE ORAL EVIDENCE HAS TO BE BORNE IN MIND AND DOCUMENTARY EVIDENCE IF GENUINE MUST PREVAIL OVER THE ORAL STATEMENT. 106. THE LD. DEPARTMENTAL REPRESENTATIVE REFERRING TO TH E SEIZED DOCUMENTS SUBMITTED THAT THESE ARE DAY TO DAY ACCOUN TS FOR SALE OF GUTKA AS WELL AS APPROPRIATION OF FUNDS. FROM THESE DAY TO DAY ACCOUNTS, MONTHLY SUMMARY WAS DRAWN. THEREAFTER THESE ARE SUMMARIZED FOR THE ENTIRE YEARS (APRIL,2003 TO AUGUST,2006 TOTAL UNRECORDED SALES 218 CRORES). FURTHER FOR THE PERIOD I.E. SEPTEMBER,2006 TO FEBRUARY,2008, TOTAL UNRECORDED SALES WERE SHOWN AT RS.12 7.72 CRORES. SOHANRAJ MEHTA HAS EXPLAIN ED THE ENTIRE MODUS OPERANDI OF THIS UNACCOUNTED BUSINESS. 107. HE SUBMITTED THAT THERE IS NO EVIDENCE THAT HE WA S DOING SOME DUPLICATE/PARALLEL BUSINESS OF GUTKA/PAN MASALA. HE HAS NO SETUP OR INFRASTRUCTURE TO MANUFACTURE THE SAME. HE DOE S NOT HAVE FINANCIAL CAPACITY TO CARRY OUT SUCH BUSINESS. THE SEIZED DOCUMENTS FOUND TO BE IN HIS OWN HANDWRITING CONTAIN UNRECORDED SALE S AND UNRECORDED PAYMENTS. THE SEIZED DOCUMENTS CAN BE ANAL YZED IN TWO WAYS. THE CHITS A/M/29 FOR MAKING PAYMENTS TO VARIOUS PE RSONS NAMELY MALLIKARJUN FOR BETELNUTS, P C JAIN FOR PERFUMES, VIMAL NAHAR FOR CARDAMOM, M/S SWATHI MENTHOL FOR MENTHOL, K K GU PTA FOR SUPARI, M/S CHAMPION PACKAGING FOR PACKING ETC. IT IS N OT IN DISPUTE THAT THESE CHITS ARE SIGNED BY PRAKASH RASIKLAL DHARIWAL (PRD) OR RASIKLAL MANEKCHAND DHARIWAL (RMD). THESE PERSONS H AVE 67 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 SUPPLIED GOODS TO THE ASSESSEE COMPANY FOR ITS BANGALORE UNIT SO THERE ARE MATCHING PURCHASES. THE MONEY IS ALSO PAID FOR REAL ESTATE INVESTMENT FOUND RECORDED IN THE BOOKS OF THE ASSESSEE COMPANY AND EMPLOYEES LIKE JEEVAN SANCHETI. AS PER SEIZED DOCUME NTS (A/M/08 PAGE 34) MONEY IS ALSO PAID TO PRAKASH RASIKLAL DHA RIWAL (PRD) OR RASIKLAL MANEKCHAND DHARIWAL (RMD). SOHANRAJ MEHTA HAS BEEN PAID COMMISSION ON THESE UNRECORDED SALES. THERE AR E MONTHLY PAYMENTS TO SALES TAX OFFICIALS FOR THESE UNRECORDED SALES (A/M/8). THAT IS WHY THEY HAVE NOT DRAWN AN ADVERSE INFERENCE A GAINST THE APPELLANT. EVEN THE BRANDS BIG, MINI AND 2 GM POUCHES AND THEIR PRICES MATCH WITH THE VALUE SHOWN IN THE BOOKS OF ACCOUN T OF THE APPELLANT COMPANY. THE AO HAS DEALT WITH THIS ISSUE ON PAG E 27 OF THE ASSESSMENT ORDER. 108. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE QUANTUM OF PAYMENTS AS PER THESE CHITS AFTER DECODING IS RS.72.02 CRORES (TWO ZEROS HAVE TO PUT UP AFTER EACH FIGURE). THE AO HAS DEALT WITH THIS ISSUE OF DECODING ON PAGES 19 TO 25 OF THE ASSE SSMENT ORDER. THESE FIGURES ARE THEN CARRIED FORWARD TO PAGE 34 OF A/M/08. IT IS NOT IN DISPUTE THAT THESE PAGES SHOW RECORDED SALES AS SHOWN IN THE BOOKS OF ACCOUNT (MENTIONED AS DIL). THE UNRECORDED SALES OF RS.345.72 CRORES ARE NOT FOUND RECORDED ANYWHERE (MENTIO NED AS 'A'). THERE CAN'T BE ANY CONTRA CONFIRMATION OF THE UNR ECORDED SALES OR EXPENSES FOR MUTUAL BENEFIT. 109. HE SUBMITTED THAT IT CAN'T BE SAID THAT THE APPE LLANT WAS NOT PROVIDED ANY OPPORTUNITY TO CROSS-EXAMINE SOHANRAJ MEH TA. THE AO HAD ALLOWED TWO OPPORTUNITIES I.E. ON 01.12.2011 & 23.12.2011 . IT COULD NOT TAKE PLACE DUE TO ABSENCE OF RASIKLAL MANEKCHAN D DHARIWAL. THE DEPARTMENT CAN'T BE BLAMED FOR SUCH LAPSE ON THE 68 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 PART OF THE ASSESSEE. EVEN OTHERWISE, THE OPPORTUNITY TO CROSS- EXAMINE WILL DEPEND ON THE FACTS OF A GIVEN CASE AND MAY N OT BE NECESSARY. FOR THE ABOVE PROPOSITION HE RELIED ON THE D ECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. K D BALI REPORTED IN 10 TAXMANN.COM 215 AND THE DECISION OF P UNJAB & HARYANA HIGH COURT IN THE CASE OF SMT. KUSUM LATA THUK RAL REPORTED IN 327 ITR 424. 110. HE SUBMITTED THAT THESE SEIZED DOCUMENTS DO SHOW THAT BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE COMPANY DO NOT S HOW TRUE STATE OF AFFAIRS OR ACTUAL PROFITS. THE FACT THAT SUCH TYPE OF EVIDENCES WERE NOT FOUND AT THE TIME OF SEARCH IN THE CASE OF ASSE SSEE COMPANY ON 21.01.10 DO NOT MITIGATE THEIR EVIDENTIARY VALUE . HE SUBMITTED THAT THERE IS NO EVIDENCE THAT PAYMENTS AS P ER CHITS WERE TO BE MADE FROM SALES TAX REFUND (QUESTION 9 OF STATEMEN T OF RMD ON 03.02.2010 PAGE 16 OF THE ASSESSMENT ORDER). EVEN THE AMOUNT AS PER CHITS IS NOT FOUND RECORDED IN THE BOOKS OF THE ASSESSEE COMPANY. 111. HE SUBMITTED THAT THE DOCUMENTS SEIZED FROM THE T HIRD PARTY CAN BE USED AGAINST THE PERSON TO WHOM THESE BELONG A S EVIDENT FROM THE PROVISIONS OF LAW I.E.158 BD, 153A, 148 ETC. FOR THE ABOVE PROPOSITION, HE RELIED ON THE THIRD MEMBER DECISION OF PUNE ITAT IN THE CASE OF DHUNJIBHOY STUD AND AGRICULTURAL FARM VS. DCI T REPORTED IN 82 ITD 0018 (TM PUNE ITAT). 112. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KHOPADE KISANRAO MANIKRAO VS. ACIT REPORTED IN 74 IT D 25 (TM PUNE BENCH) HE SUBMITTED THAT THE TRIBUNAL HAS HELD THAT IF EVIDENCE OF UNDISCLOSED INCOME IS FOUND THEN CORRESPONDING ASSETS/EXPENSES NEED NOT BE PROVED. HE SUBMITTED TH AT SEIZED 69 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 DOCUMENTS HAVE TO BE READ AS A WHOLE. IF A PART OF THE DOCUMENT IS FOUND TO BE TRUE (CHITS SIGNED BY RMD AND PRD ADMITTED B Y THEM) THEN WHOLE HAS TO BE CONSTRUED AS TRUE. FOR THE ABO VE PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS : GLASS LINES EQUIPMENT CO. VS. ACIT (253 ITR 454) (GUJAR AT HC) CHANDRA MOHAN MEHTA VS. ACIT (71 ITD 245) NAVJIVAN OIL MILLS VS. CIT (252 ITR 417) (GUJARAT HC) 113. HE SUBMITTED THAT THE ASSESSEE IS NOT ENTITLED TO GRANT OF BENEFIT OF TELESCOPING AS IT HAS NOT OWNED UP THE SEIZED D OCUMENTS IN QUESTION. UNLESS SAME IS DONE, THE APPELLANT CANNOT CLAIM THAT MONEY RECEIVED FROM UNRECORDED SALES WAS AVAILABLE FOR MAK ING SURRENDER IN THE PERSONAL HANDS OF SHRI RASIKLAL MANEKCHAN D DHARIWAL (RMD). FOR THE ABOVE PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS : 1. ANANTHARAM VEERASINGHAIAH & CO. VS. CIT REPORTED IN 123 ITR 457 (SC), 2. CIT VS. NABADWIP CHANDRA DEY REPORTED IN 190 ITR 133 (GAUHATI HC), 3. CIT VS. KULWANT KAUR REPORTED IN 121 ITR 914 (DEL HI HC). 114. HE SUBMITTED THAT THE PROVISIONS OF SECTION 132(4A)/2 92C HAVE BEEN RIGHTLY INVOKED. IT IS NOT IN DISPUTE THAT CHITS ARE SIGNED BY PRAKASH DHARIWAL OR RASIKLAL DHARIWAL FOR MAKING PAYMEN TS TO VARIOUS SUPPLIERS. THE ENTRIES WERE MADE AT THE INSTANCE O F RASIKLAL DHARIWAL/ PRAKASH DHARIWAL. THERE IS NO EVIDENCE FOR DUPLIC ATE BUSINESS BEING CARRIED BY SOHANRAJ MEHTA ( QUESTION 4 OF STATEMENT OF RMD ON 03.02.2010 PAGE 29 AND 45 OF THE ASSESSMENT O RDER). DURING THE SEARCH, ONLY STOCK OF DHARIWAL INDUSTRIES LIMIT ED WAS FOUND IN THE PREMISES OF SOHANRAJ MEHTA. IF SOHANRAJ ME HTA WAS DOING SOME DUPLICATE/PARALLEL BUSINESS WHY WOULD HE GIVE 70 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 COMMISSION @ 65 PER CARTON ON UNRECORDED SALES TO HIM. ALL THE SUPPLIERS ADMITTED THAT THEY WERE SUPPLYING GOODS TO DI L AND NOT TO SOHANRAJ MEHTA. 115. HE SUBMITTED THAT THE AO HAS APPLIED GP OF 60% WHIC H IS CORRECT IN THE FACTS & CIRCUMSTANCES OF THE CASE. THE AP PELLANT COMPANY HAS ITSELF SHOWN GP OF ALMOST 20% IN ITS REGULAR BO OKS OF ACCOUNT. WHEN SALES ARE NOT DULY RECORDED AND MADE OUT OF BOOKS OF ACCOUNT, THERE WILL BE SAVING ON ACCOUNT OF LOCAL TAXES SUC H AS SALES TAX/EXCISE DUTY. IN THIS CASE, THE ELEMENT OF EXCISE DUTY WAS ITSELF 40 %. IF THESE TWO ARE COMBINED, IT WILL YIELD GP OF 60% AS RIGHTLY ESTIMATED BY THE AO ( PAGE 73 OF THE ASSESSMENT ORDER). HIS METHOD WAS SCIENTIFIC. FOR THE ABOVE PROPOSITION HE RELIED ON THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF VIJAY PRO TEINS LTD. REPORTED IN 58 ITD 428. 116. HE SUBMITTED THAT THE FACT THAT THE ASSESSEE COM PANY DID NOT OWN UP THESE DOCUMENTS WILL NOT MITIGATE THEIR EVIDENTIARY VALUE. FOR THE OBVIOUS REASONS, RASIKLAL DHARIWAL MADE SURRENDER OF 38 CRORES IN PERSONAL CAPACITY AS IT WOULD HAVE LANDED THE A PPELLANT COMPANY IN SERIOUS TROUBLE WITH EXCISE DEPARTMENT & OTHE R GOVT. AUTHORITIES. 117. SO FAR AS THE DECISIONS RELIED ON BY THE LD. COUNSE L FOR THE ASSESSEE ARE CONCERNED, HE SUBMITTED THAT ALL THOSE DEC ISIONS ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 118. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND T HE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDE RED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND A SEARCH U/S.132 OF THE 71 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 I.T. ACT WAS CARRIED OUT IN THE CASE OF THE ASSESSEE ON 20-01-2010. THE AO WHILE COMPLETING THE ASSESSMENT U/S.143(3) R.W.S.153 A REFERRED TO THE SEARCH CONDUCTED AT THE RESIDENCE OF S HRI SOHANRAJ MEHTA, C&F AGENT OF M/S. DHARIWAL INDUSTRIES LTD. FOR KAR NATAKA REGION AS WELL AS ON THE PREMISES OF MEHTA ASSOCIATES AT BANGALORE ON 10-10-2009 AND THE SEARCH ACTION CONDUCTED IN THE CASE OF SHRI MITHULAL OF BENGALURU ON 09-10-2009. VARIOUS INCRIMINATING DOCUMENTS NAMELY A/M/01 TO A/M/29 WERE FOUND AND SEIZ ED AT SHRI MITHULALS RESIDENCE. SHRI SOHANRAJ MEHTA IN HIS STATE MENT RECORDED U/S.132(4) HAD OWNED UP ALL THESE PAPERS AS BELO NGING TO HIM. AT THAT TIME, HE HAD STATED THAT THESE PAPERS RE FLECT THE TRANSACTIONS OF CASH GIVEN TO VARIOUS PERSONS AS PER TH E INSTRUCTIONS OF SHRI RASIKLAL M. DHARIWAL AND SRI PRAKASH R. DHARIWAL, DIRECTOR OF THE ASSESSEE COMPANY. HE HAD ALSO STATED THAT THESE PAPERS ARE IN HIS OWN HANDWRITING WHEREIN THE RECEIPTS O F GUTKHA CONSIGNMENTS ARE WRITTEN AND THE PAYMENTS MENT IONED THEREIN ARE AS PER THE INSTRUCTIONS FROM SHRI R.M. DHARIWA L AND SHRI PRAKASH R. DHARIWAL. DURING THE COURSE OF SEARCH IN THE CASE OF THE ASSESSEE, HE WAS CONFRONTED ABOUT THESE FACTS. A FTER CONSIDERING THE VARIOUS SUBMISSIONS FILED BY THE ASSESSEE FR OM TIME TO TIME AND CONSIDERING THE SEIZED MATERIALS FROM SHRI MITH ULAL WHICH WERE OWNED UP BY SHRI SOHANRAJ MEHTA, THE AO HELD THAT ALL THESE PAPERS REFLECT THE UNACCOUNTED SALES MADE BY THE ASSESSEE COMPANY THROUGH SHRI SOHANRAJ MEHTA FOR THE PERIOD FROM 2003 TO 2009. AFTER ANALYZING THE PAPERS, THE AO CAME TO THE FO LLOWING CONCLUSION : A. THE SEIZED PAPERS CONTAINED DAILY, MONTHLY AND Y EARLY SUMMARY OF UNACCOUNTED SALES OF GUTKHA. B. THERE ARE MATCHING UNACCOUNTED PURCHASES OF RAW MATERIAL NOTED ON THE PAPERS. 72 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 C. THE UNACCOUNTED SALE PROCEEDS HAVE BEEN INVESTED IN THE REAL ESTATE AND THE ASSESSEE HAS PAID MONEY TO VARIOUS PARTIES. D. THE PAPERS INDICATE THAT THE UNACCOUNTED SALE PR OCEEDS HAVE BEEN PAID TO ASSESSEE'S EMPLOYEES, SHRI RASIKLAL DHARIWAL AND SHRI PRAKASH DHARIWAL. E. SHRI MEHTA HAS OFFERED COMMISSION ON UNACCOUNTED SALES AS INCOME IN HIS HANDS. F. THE PACKING MATERIAL, FREIGHT, HAMALI ARE ALSO REFLECTED IN THE SEIZED PAPERS FOUND WITH MEHTA. G. THESE UNACCOUNTED SALE PROCEEDS ARE PAID TO VARIOU S PERSONS ON BEHALF OF ASSESSEE LIKE SUPPLIERS, C & F AGENTS, LEGAL ADV ISERS, ETC. ALTHOUGH THEY HAVE NOT ACCEPTED THE RECEIPTS OF SUCH AMOUNTS, THEY HAVE ACCEPTED HAVING TRANSACTED WITH THE ASSESSEE. H. MEHTA HAS ACCEPTED THAT THE PAPERS REVEAL THE SALE PROCEEDS OF GUTKHA BY ASSESSEE. THE PAPERS CONTAINED ACCOUNTED AND U NACCOUNTED TRANSACTIONS OF THE ASSESSEE. I. THE VARIOUS PERSONS WHOSE NAMES FIGURED IN THE SEIZ ED PAPERS ADMITTED TRANSACTIONS WITH THE ASSESSEE BUT NOT WITH MEHT A. 119. THE AO FURTHER NOTED THAT ACCOUNTED PRODUCTION LOAD FACTO R OF BANGALORE FACTORY IS 29.81% AS AGAINST SUCH LOAD FACTOR OF 53.13% OF BARODA FACTORY. THE MACHINERIES OF BARODA FACTORY ARE OLD WHEREAS THAT OF THE BANGALORE FACTORY ARE NEW. FURTHER , THE ASSESSEE HAS SAVED THE EXCISE DUTY SINCE THE PRODUCT IS SOLD OUTSIDE THE BOOKS OF ACCOUNT. HE, THEREFORE, COMPUTED THE SUPPR ESSED PRODUCTION AND SALE THEREOF AND APPLYING THE GP RATE OF 60% ON SUCH SUPPRESSED TURNOVER DETERMINED THE UNDISCLOSED INC OME FOR THE BLOCK PERIOD, THE DETAILS OF WHICH ARE ALREADY GIVEN AT PARA 50 AND 51 OF THIS ORDER. 120. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSES SEE THAT DURING THE COURSE OF SEARCH NO UNACCOUNTED STOCK OR UNACCOUNTED PURCHASE/EXPENSES/SALES/TRANSPORTATION RECEIPTS WERE FO UND FROM THE PREMISES OF THE ASSESSEE. NOT A SINGLE UNACCOUNTED SALE/PURCHASE VOUCHER WAS FOUND. SIMILARLY, DURING THE SE ARCH AT SHRI SOHANRAJ MEHTAS PLACE ALSO THERE WAS NO DIRECT EV IDENCE FOUND 73 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 IN THE FORM OF ANY UNACCOUNTED VOUCHER OR ANY UNACCOUN TED SALE RECEIPTS OR ANY UNACCOUNTED STOCK. FROM THE VERY BEG INNING, SHRI R.M. DHARIWAL WAS DISPUTING THE AUTHENTICITY OF SUCH PAPERS AND THE DECODING OF FIGURES WRITTEN IN THE SEIZED DOCUMENTS. W HEN THE AMOUNTS ARE WRITTEN IN FIGURES AND WORDS, THE DEPARTMENT WITHOUT ANY CORROBORATIVE EVIDENCE HAS CONSIDERED THE SAME TO BE IN CRORES. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSES SEE THAT SHRI SOHANRAJ MEHTA AND VARIOUS OTHER PERSONS HAVE RE TRACTED THEIR STATEMENTS GIVEN EARLIER. FURTHER, SHRI SOHANRAJ MEHTA C OULD NOT PRODUCE ANY EVIDENCE TO SUPPORT HIS INTERPRETATION OF TH E PAPERS WRITTEN BY THE ASSESSEE TO HIM THAT ALL THESE FIGURES WER E IN CODED FIGURES. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR T HE ASSESSEE THAT WHENEVER ADDITIONS HAVE BEEN MADE IN THE HANDS OF DIFFERENT PERSONS ON ACCOUNT OF RECEIPT OF MONEY FROM SHR I SOHANRAJ MEHTA ON THE BASIS OF CHITS OF SHRI R.M.DHARIWAL/SHRI PRAKA SH R. DHARIWAL, THE DIFFERENT BENCHES OF THE TRIBUNAL HAVE DELETE D SUCH ADDITION STATING THAT THE SAID CHITS ARE NOT RELIABLE. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IF THE ASSESSEE COULD HAVE GIVEN SUCH HUGE AMOUNTS TO VARIOUS PERSONS OUT OF THE UNACCOUNTED PROFIT OF THE SUPPRESSED TURNOVER, THEN ATLE AST SOME SORT OF RECEIPTS, ACKNOWLEDGEMENTS, SECURITY, BLANK CHEQUE ETC. COULD HAVE BEEN FOUND FROM THE PLACE OF EITHER THE ASSES SEE OR SHRI SOHANRAJ MEHTA OR SHRI MITHULAL. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ON THE BASIS OF THE INFO RMATION PROVIDED BY THE INCOME-TAX DEPARTMENT TO CENTRAL EXCIS E DEPARTMENT, THEY HAVE CONDUCTED EXTENSIVE INVESTIGATIONS . THE COMMISSIONER, CENTRAL EXCISE ON THE BASIS OF THE DIRECTIONS ISSUED BY THE CESTAT HAS HELD THAT THE ASSESSEE HAS NOT INDU LGED IN ANY UNACCOUNTED PRODUCTION. THEREFORE, IT IS THE SUBMISSION OF THE LD. 74 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 COUNSEL FOR THE ASSESSEE THAT NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF UNDISCLOSED PROFIT ON SUPPR ESSED TURNOVER. 121. IT IS THE SUBMISSION OF THE LD. DEPARTMENTAL REPRES ENTATIVE THAT THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH ACTION IN THE CASE OF SHRI SOHANRAJ MEHTA AND SHRI MITHULAL UNEQUIVOCALLY SHOW THAT THEY REFLECT THE UNACCOUNTED TRANSACTION OF GUTKHA BUSINESS OF THE ASSESSEE. THEY CONTAIN METICULOUSLY THE DEPLOYMENT OF FUNDS GENERATED OUT OF SUCH UNACCOUNTED TURNOVER WHICH HAV E BEEN GIVEN TO VARIOUS PERSONS AS PER THE DIRECTION OF THE DIRECTOR S OF THE ASSESSEE COMPANY. MERELY BECAUSE THOSE PERSONS HAVE SUBSEQUENTLY RETRACTED FROM THEIR STATEMENTS, THE SAME CANNOT BE BELIEVED SINCE THEY ARE UNDER THE INFLUENCE AND CONTROL OF THE ASSESSEE AS THEIR LIVELIHOOD DEPENDS ON THE ASSESSEE. T HEREFORE, THEIR RETRACTION CANNOT BE BELIEVED AND THE STATEMENT G IVEN INITIALLY WHICH WAS WITHOUT ANY THREAT OR COERCION SHOULD BE HELD AS GENUINE AND THE TRUE STATE OF AFFAIRS OF THE ASSESSEE. THEREFORE , THE ACTION OF THE AO SHOULD BE UPHELD AND THE RELIEF GRANTED BY THE CI T(A) SHOULD BE REVERSED. 122. IN THIS BACKGROUND, WE HAVE TO DECIDE THE AMOUNT OF ADDITION, IF ANY, THAT HAS TO BE MADE IN THE HANDS OF THE ASSESSEE. 123. IT IS AN ADMITTED FACT THAT SEARCH IN THE CASE OF S HRI MITHULAL JAIN OF BANGALORE TOOK PLACE ON 09-10-2009 AND SEARCH AC TION IN CASE OF SHRI SOHANRAJ MEHTA WAS CONDUCTED ON 10-10-20 09. HOWEVER, THE SEARCH IN THE CASE OF THE ASSESSEE TOOK P LACE ON 20- 01-2010, I.E. AFTER A GAP OF MORE THAN 3 MONTHS FROM THE D ATE OF SEARCH AT BANGALORE. IT IS NOT UNDERSTOOD WHY THERE W AS SUCH A 75 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 GAP. DURING THE COURSE OF SEARCH, NO INCRIMINATING DOCUMEN TS WHATSOEVER WAS FOUND FROM THE PREMISES OF THE ASSESSEE. NO UNACCOUNTED STOCK OR UNACCOUNTED PURCHASE/EXPENSES/SALES/TRANSPORT RECEIPTS WERE FOUND. NO UNACCOUNTED SALE/PURCHASE VOUCHER WAS FOUND DURING THE SEARCH FROM THE PREMISES OF SHRI SOHANRAJ MEHTA ALSO. WE FIND AFTE R THE SEARCH WAS CONDUCTED AND THE DEPARTMENT INFORMED THE EXCISE AUTHORITIES REGARDING THE EVASION OF EXCISE DUTY FOR WHIC H THE EXCISE DEPARTMENT SWUNG INTO ACTION. THEY OBTAINED RECORDS FRO M THE INCOME-TAX DEPARTMENT AND CONDUCTED EXTENSIVE ENQUIRIE S AND DEMANDS WERE RAISED. THE MATTER TRAVELLED UPTO CESTAT W HO RESTORED THE ISSUE TO THE FILE OF THE COMMISSIONER, CENTRAL EXCISE AND CUSTOMS FOR DECIDING THE ISSUE AFRESH. WE FIND THE COMMISSIONER, CENTRAL EXCISE AND CUSTOMS IN HIS ORDER DATE D 31- 12-2015 HELD THAT THERE IS NO SIGN OF EXCESS CONSUMPTIO N OF RAW MATERIAL OR PACKING MATERIALS BY THE ASSESSEE AND THERE WAS NO TANGIBLE EVIDENCE ON RECORD TO DEMONSTRATE THAT THERE WAS EXCESS USE OF MACHINES OR EXCESS MANUFACTURING OF GUTKHA WAS DONE. 124. THE PRELIMINARY PARAGRAPHS OF THE COMMISSIONER, CENTR AL EXCISE AND CUSTOMS GIVES THE BACKGROUND OF THE CASE : 3.1 THE RELEVANT RECORDS WERE OBTAINED FROM THE I NCOME TAX DEPARTMENT. PERUSAL OF THE ' ASSESSMENT PROCEEDINGS OF THE ASSESSEES, REVEALED THAT THE CASE AGAINST M/S. DHARIWAL INDUSTRIE S LIMITED ORIGINATED ON ACCOUNT OF THE SEARCH CARRIED BY THE I NCOME TAX AUTHORITIES AT THE PREMISES OF AN INDIVIDUAL AT BANGAL ORE WHEREFROM DOCUMENTS/RECORDS RELATING TO UNACCOUNTED SALE OF GUTK HA WERE RECOVERED. THE SAID INCRIMINATING DOCUMENTS WERE ALLE GEDLY BELONGING TO AN INDIVIDUAL BY NAME SHRI . SOHANRAJ MEHTA . THE INVESTIGATION FOCUSED ON THE ACTIVITIES OF SHRI. SOHANRAJ MEHTA WHO WAS FOU ND TO BE DEALING IN THE BUSINESS OF GUTKHA AND WAS SOLE C&F AGENT OF DHARIW AL INDUSTRIES LIMITED IN KARNATAKA. FURTHER ENQUIRY OF THE SAID I NDIVIDUAL RESULTED IN UNEARTHING OF IL L EGAL AND UNACCOUNTED TRANSACTION OF GUTKHA DEA L T BY HIM PURPORTEDLY BELONGING TO M/S. DHARIWAL INDUSTRIE S LIMITED. SCRUTINY OF THE DOCUMENTS SEIZED BY INCOME TAX REVEAL ED THE DETAILS OF UNACCOUNTED TRANSACTION DEALT BY HIM DURING THE PERI OD FROM 2003-04 76 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 TO 2007-08 CAUSING HUGE LOSS TO THE GOVERNMENT REVENUE . ACCORDINGLY, SEARCH ASSESSMENT P ROCEE D INGS I N RESPECT O F TH E IN D IVI D UAL SHRI . SOHANRAJ MEHTA COMPLETED BY THE INCOME TAX DEPARTME NT WERE ALSO OBTAINED FOR INITIATING FURTHER NECESSARY ACTION. SCRUTINY OF THE SEARCH ASSESSMENT PROCEEDINGS OF THE INCOME TAX DEPARTMEN T PERTAINING TO M/S.DHARIWAL INDUSTRIES LIMITED AND THA T OF SHRI . SOHANRAJ MEHTA, APPEARED TO REVEAL THAT THE ASSESSEES HAD EVADED EXCISE DUTY BY CLANDESTINELY CLEARING THE GOODS MANUFACTURED WITHOUT PAYMENT OF EXCISE DUTY. ACCORDINGLY, INVESTIGATION WAS INITIATED AGAINST M/S . DHARIWAL INDUSTRIES L I MITED, SINGASANDRA, BANGALORE. 3.2 FROM 01 . 07.2008 , THE ASSESSEES ARE WORKING UNDER 'PAN MASALA PACKING MACHINES (CAPACITY DETERMINATION AND COLLECT ION OF DUTY) RU L ES, 2008' AS PER WHICH DUTY IS DETERMINED BASED ON THE NUMBER OF MACHINES OPERATED. FURTHER, THE CASE MADE BY INCOME T AX DEPARTMENT AND EVIDENCES COLLECTED BY THEM PERTA I N TO PERIOD UPTO FEBRUARY, 2008 . 4.1 INCOME TAX DEPARTMENT HAD CARRIED OUT EXTENSIVE SEARCH OPERATIONS COVERING THE NETWORK OF C&F AGENT'S PREMISE S, MAJOR SUPPLIERS OF THE ASSESSEES, MAJOR DEALERS OF THE ASSES SEES AND RECORDED STATEMENTS OF THE KEY PERSONNEL AND INDIVIDUALS WHO A PPEARED TO BE L I NKED TO THE UNACCOUNTED TRANSACTION OF GU T KHA . A LETTER NO. IV/6/29/2012-HPU I DATED 17.05 . 2012 WAS WRITTEN TO INCOME TAX AUTHORITIES SEEKING FOR COPIES OF ALL THE SEIZED DOCUME NTS, NOTE BOOKS, LOOSE SLIPS OF PAPERS, BOOKS OF ACCOUNTS ; ETC . IN ORDER TO RECOVER ADDITIONAL EVIDENCES, SEARCH OPERATIONS WERE CARRIED O UT . BY THE OFFICERS OF THE CENTRAL EXCISE COMMISSIONERATE, BANGALO RE-I ON 17.05.2012 AND 18.05.2012 AT THE MAIN FACTORY PREMI SES OF M/S . DHARIWAL INDUSTRIES LIMITED LOCATED AT SINGASANDRA, H OSUR ROAD , BAN - GALORE APART FROM OTHER IMPORTANT AND CONNECTED BUSI NESS PREMISES SUBSEQUENTLY AS ; DETAILED BELOW : I) M/S. DHARIWAL INDUSTRIES LIMITED, NO.2, 3, & 4, SINGAS ANDRA, HOSUR ROAD , BANGALORE ENGAGED IN MANUFACTURE OF GUTKHA . II) M/S. CHAMPION PACKAGING INDUSTRIES PRIVATE L IM ITED. NO.274 D, BOMMASANDRA INDUSTRIAL AREA, BANGALORE-560 099 WHO AR E SUPPLIERS OF LAMINATED ROLLS (POUCHES) FOR DHARIWAL INDUSTRIES LIMIT ED. III) M/S. RAJHANS ENTERPRISES, 134, 4TH MAIN ROAD, IN DUSTRIAL TOWN, RAJAJINAQAR, BANGALORE-560044 WHO ARE SUPPLIERS OF PA CKING CARTONS FOR DHARIWAL INDUSTRIES LIM I TED . IV) RESIDENTIAL PREMISES OF SOHANRAJ MEHTA AT NO . 776/1, IST FLOOR, 3RD STAGE , III BLOCK, BASAVESHWARANAGAR, BANGALORE-560079 WHO WA S C & F AGENT OF M/S. DHARIWAL INDUSTRIES LIMITED. V) M/S . STUTI ENTERPRISES, NO.52/1 , 2ND FLOOR, LALBAGH ROAD, BANGALORE - 560027 WHO ARE APPOINTED AS AUTHORIZED DISTR I BUTORS OF DHARIWAL INDUSTRIES LIMITED . 4 . 2 LATER, ON 01 . 06 . 2012 THE PREMISES OF M/S . GAJANANA ARECANUT AGENCIES, NO . 799/6 , SHOP NO . 2, ANEKAL ROAD, CHANDAPURA, BANGALORE - 560 081 WHO ARE SUPPLIERS OF SUPARI/ARECANUT TO M/S. DHARIWAL INDUSTRIES LIMITED WAS ALSO ' VISITED BY THE TEAM OF OFFICERS. . 77 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 4.3 DURING THE SEARCH OPERATIONS CONDUCTED AT THE AB OVE MENTIONED PREMISES ON 17.05.2012 AND 18 . 05 . 2012, CERTAIN INCRIMINATING RECORDS AND DOCUMENTS LIKE STOCK REGISTERS, SALES INVOICES, PURCH ASE INVOICES, LEDGER EXTRACTS, CORRESPONDENCES, ETC . , WERE RECOVERED FOR FURTHER INVESTIGATION IN CONNECTION WITH THE CASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124.1 WE FIND AFTER ELABORATE DISCUSSION, THE LD. COMMISSIONER OF CENTRAL EXCISE HAS GIVEN HIS FINDINGS WHICH READ AS UNDER : DISCUSSIONS AND FINDINGS: 46 . I HAVE CAREFULLY PERUSED THE CASE RECORDS, THE FINAL O RDER NO.21956- 21964/2014 DATED 20.10.2014 OF THE HON'BLE CESTAT , BANGALORE, AND . WRITTEN AS WELL AS ORAL SUBMISSIONS MADE BY THE NOTICEES . 46.1 THE PRESENT PROCEEDINGS ARE INITIATED IN PURSUANC E TO THE FINAL ORDER NO . 21956 - 21964/2014 DATED 20.10 . 2014 ISSUED BY THE HON'BLE CESTAT, BANGALORE W I TH REGARD THE ORDER-IN - ORIGINAL NO . 45/2013 DATED 22.07 . 2013 ISSUED BY THE COMMISSIONE R OF CENTRAL EXCISE, BANGALORE-I COMMISSIONERATE, WHEREIN THE DEMAND OF DU TY MADE IN THE SCN DATED 01 . 08.2012, WAS CONFIRMED ALONG WITH INTEREST AND CONSEQUENTIA L PENALTIES. 46.2 I FIND FROM THE ABOVE MENTIONED ORDER OF THE C ESTAT, THE MATTER HAS BEEN REMANDED WITH THE OBSERVATION THAT THE FOLLO WING IMPORTANT POINTS HAVE NOT BEEN DISCUSSED AND NOT CONSIDERED, VIZ : . (I) SEIZURE OR INTERCEPTION OF ANY CONSIGNMENT WHIL E CLEARING WITHOUT PAYMENT OF DUTY. ( I I) EXCESS USE OF MACHINES, USE OF EXTRA LABOUR AND ADDI TIONAL SHIFTS OF WORK DONE BY THE APPELLANTS DURING THE RELEVANT P ERIOD . (III) EXCESS CONSUMPTION OF RAW MATERIALS OR MIS-DECLA RATION OF CONSUMPTION BY THE PARTY. (IV) EVIDENCE TO SHOW THE MEANING OF CODES ' A AND 'DIL' ON GUTKHA PACKAGE AND SALE OF OTHER BRAND OF GUTKHA BY SHRI . SOHANRAJ MEHTA . (V) SURPRISE VISITS OF THE OFFICERS AND THE SUPERVISION /CONTROL EXERC I SED BY THE DEPARTMENT AND HOW ASSESSEE COULD PRODUCE EXC ESS QUANTITY IN SPITE OF SUCH INTENSE SUPERVISION. (VI) RETRACTION OF THE STATEMENT OF SHRI . SOHANRAJ MEHTA. (VII) CROSS EXAMINATION OF SHRI . S OHANRAJ MEHTA. THE CESTAT HAS DIRECTED THAT THE ADJUDICATING AUTHOR ITY HAS TO NECESSARILY TAKE UP DETAILED CONSIDERATION OF THE ABOV E MENTIONED POINTS WHILE DECIDING THE CASE IN DENOVO PROCEEDINGS A ND WITH THE 78 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 AVAILABLE EVIDENCE DECIDE WHETHER A CASE CAN BE MADE OUT . IN ADDITION, IT IS THE DIRECTION OF THE HON'BLE TRIBUNAL THAT THE COMMISSIONER TO WHOM THE MATTER IS BEING REMANDED SHOULD CONSIDER EACH AND EVERY POINT THAT MAY BE SUBMITTED BY THE APPELLANTS, RECORD THE OBSERVATIONS AND CONSIDER DETAILS OF EVIDENCE GATHERED AND WHY SUB MISSIONS OF THE APPELLANTS ARE NOT ACCEPTABLE. THE SUBMISSION MADE BY THE NOTICEE I N THE DENOVO PROCEEDINGS HAVE BEEN ENUMERATED IN PARA 45 . 10 SUPRA. ACCORDINGLY, TAKING INTO ACCOUNT THE OBSERVATIONS OF THE CESTAT AN T SUBMISSIONS MADE BY T HE NOTICEE, I PROCEED TO EXAMINE THE CASE IN DETAIL . 47. SEIZURE OR INTERCEPTION OF ANY CONSIGNMENT WHILE CLEARING WITHOUT PAYMENT OF DUTY : 47 . 1 ON THE QUESTION WHETHER THERE WAS ANY SEIZURE OR INT ERCEPTION OF ANY CONSIGNMENT OF GUTKHA WHICH WAS ALLEGEDLY CLEARED FROM THE ASSESSEE'S FACTORY WITHOUT PAYMENT OF DUTY, I FIND FROM THE RECORDS OF THE CASE THAT THE OFFICERS WHO HAD VISITED THE ASSESSEE'S F ACTORY PREMISES AND CONDUCTED THE INVESTIGATION, HAVE ' NOT FOUND ANY CONSIGNMENT OF UNACCOUNTED GUTKHA LYING IN THE FACTO RY - PREMISES DEMONSTRATING CLANDESTINE MANUFACTURE OF GUTKHA . FURTHER, NO SEIZURE OF UNACCOUNTED GUTKHA HAS BEEN MADE FROM ANY PREMISES INCLUDING THE PREMISES OF THE ASSESSEE OR THAT OF THE C&F AGENTS OR THE BUYERS. THERE IS ALSO NO INSTANCE OF UNACCOUNTED GUTKHA BEING INTERC EPTED BY THE DEPARTMENT . THE CASE OF CLANDESTINE CLEARANCE OF GUTKHA IS MADE OU T BY THE DEPARTMENT ON THE BASIS OF LOOSE SLIPS BELONGING TO SHRI.SOHANRA J MEHTA, SEIZED BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT FROM THE RESIDENTIAL PREMISES OF ONE SHRI . MANOJ MITULAL AND THE STATEMENT DATED 21 . 10.2009 OF SHRI . SOHANRAJ MEHTA , RECORDED BY INVESTIGATING AGENCY OF INCOME TAX AND STATEMENT DATE D 05.06 . 2012 GIVEN BEFORE CENTRAL EXCISE AUTHORITIES . THE ALLEGAT I ON MADE IN THE IMPUGNED NOTICE IS ENTIRELY BASED ON THE LOOSE SHEETS, N OTE BOOKS, RECORDS, SEIZED FROM SHRI . SOHANRAJ MEHTA. DURING INVESTIGATION A FEW RECORDS HAVE BEEN RECOVERED FROM THE PREMISES OF THE ASSESSEE UNDER MAHAZAR DATED 17 . 05.2012 BUT THE INVESTIGATION HAS NOT MADE A CASE OF CLANDESTINE CLEARANCE BASED ON THESE RECORDS. IN THE AB SENCE OF EVEN A SINGLE CONSIGNMENT OF UNACCOUNTED GUTKHA BEING SEIZED OR I NTERCEPTED BY THE INVESTIGATION, I FIND THAT THE ALLEGAT I ON OF CLANDESTINE CLEARANCE OF GUTKHA MADE AGAINST THE ASSESSEE IS NOT CORROBORATED. A C ASE OF CLANDESTINE CLEARANCE CANNOT BE JUSTIFIED ONLY BASED O N A STATEMENT OF C&F AGENT OF THE ASSESSEE WITHOUT CORROBORAT I NG THE SAME WITH ANY MATERIAL EVIDENCE. IN SUPPORT OF THESE VIEWS, I PLACE RELIANCE ON THE DECISIONS OF THE TRIBUNAL IN THE CASE OF RHINO RUBBERS PVT . LTD., VS. COMMISSIONER OF CENTRAL EXCISE REPORTED IN 1996 (85) E LT 260 (TRI . ) AND KOTHARI SYNTHETIC INDUSTRIES VS. COMMISSIONER OF CE NTRAL EXCISE REPORTED I N 2002 (141) ELT 558 (TRI). WHEREIN IT IS HELD THAT DEMAND BASED ON RECORDS OF THIRD PARTIES, WITHOUT CONSIDERING OTHER PARAMETERS IS NOT SUSTAINABLE . 48. EXCESS USE OF MACHINES, USE OF EXTRA LABOUR AND ADD ITIONAL SHIFTS OF WORK DONE BY THE APPELLANTS DURING THE RELEVANT P ERIOD . 48 . 1 THE HON'BLE TRIBUNAL ' HAS OBSERVED ' THAT NO EVIDENCE HAS BEEN GATHERED TO SHOW THAT THE R E WAS EXCESS USE OF MACHINES OR ADDITIONAL SHIFTS OF WORK DONE BY THE ASSESSEE DURING THE RELEVANT P ERIOD . ON PERUSAL OF THE CASE RECORDS , IT IS SEEN THAT THE ASSESSEE I N THEIR STATUTORY 79 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 RETURNS FILED BEFORE THE DEPARTMENT HAVE DECLARED TH E QUANTITIES OF GUTKHA THAT HAS BEEN MANUFACTURED AND CLEARED BY THE M DURING THE RELEVANT PERIOD. FOR THE CHARGES MADE THAT THE ASSESSEE HAD CLEARED LARGE QUANTITIES OF UNACCOUNTED GUTKHA, I FIND THAT THE INVESTIGATION HAS NOT PLACED ON RECORD ANY EVIDENCE TO SHOW AS TO HOW SU CH UNACCOUNTED GUTKHA WAS MANUFACTURED. IT IS ALLEGED THAT 57085 ' CARTONS OF R.M.D. GUTKHA VALUED AT RS.78,17,87 , 500/- HAS BEEN CLEARED BY THE ASSESSEE . THE INVESTIGATION HAS NOT SUBSTANTIATED WITH DOCUMENTAR Y PROOF THE CHARGES THAT THE ASSESSEE MANUFACTURED SUCH LARGE QUANTIT IES OF GUTKHA . THE INVESTIGATION HAS NOT PROVED THAT THE ASSESSEE USED AD DITIONAL MACHINES OR THE FACTORY HAD RUN EXTRA SHIFTS TO MANUFA CTURE SUCH LARGE QUANTITIES. I ALSO TAKE NOTE OF THE SUBMISSION MADE BY THE NOTICEE BEFORE THE ' TRIBUNAL THAT FOR CLEARANCE OF 57085 CARTONS OF GUTK HA, AROUND 900 TRUCKS ARE REQUIRED. THIS SUBMISSION WAS DEM ONSTRATED BEFORE THE TRIBUNAL BY SHOWING THE TRIBUNAL ONE SAMPL E CARTON BOX. I FIND THAT THE OFFICERS HAVE NOT CARRIED OUT THE ANY INVESTIGATION IN THIS DIRECTION AND NOT A SINGLE TRUCK CARRYING THE UNACC OUNTED GUTKHA HAS BEEN INTERCEPTED . THERE IS ALSO NO EVIDENCE TO SUGGEST THAT THE ASSESSEE EMPLOYED EXTRA LABOUR FOR THE MANUFACTURE OF UNACCO UNTED GUTKHA. IN THE ABSENCE OF EVIDENCES TO SHOW THAT THE ASSESSEE HAD USED EXTRA MACHINES, EMPLOYED EXTRA LABOUR OR OPERATED ADDITION AL SH I FTS AT THE FACTORY TO MANUFACTURE THE ALLEGED LARGE QUANTITIES OF , UNACCOUNTED GUTKHA , I AM CONSTRAINED TO HOLD THAT THE CHARGES OF CLANDEST INE MANUFACTURE AND CLEARANCE OF GUTKHA IS NOT DEMONSTRAT ED IN THIS CASE . 49. EXCESS CONSUMPTION OF RAW MATERIALS / MIS - DECLARATION OF CONSUMPTION BY THE PARTY : 49 . 1 AS REGARDS THE CONSUMPTION OF RAW MATERIAL, THE PRE VENTIVE OFFICERS HAD CONDUCTED . INVESTIGATION TO EXAMINE THE SAME. A ' STATEMENT OF SHRI . M . B . MALLIKARJUNA WAS RECORDED ON 07 . 06 . 2012 BEFORE THE SUPERINTENDENT OF CENTRAL EXCISE (PREVENT I VE) , BANGLAORE-I COMMISSIONERATE WHEREIN HE HAS INTERALIA STATED THAT TH EY SUPPLY ARECANUT TO THE ASSESSEE FOR MANUFACTURE OF GUTKHA UNDE R SALE BILLS FOR THE PURPOSE OF TRANSPORTATION AND E-SUGAM DOCUMENTS AS PER THE STATE VAT AND APMC PERMIT. HE HAS FURTHER STATED THAT PAYME NTS FOR SUPPLY OF ARECANUT WAS RECEIVED THROUGH DEMAND DRAFTS FROM T HE HEADQUARTERS OF THE ASSESSEE AT PUNE AND THAT ABOUT . 5 YEARS BACK THEY USED TO GET PAYMENTS THROUGH DEMAND DRAFT FROM M/S.MEHTA ASSOCIATES ON BEHALF OF THE ASSESSEE . AT NO POINT OF TIME SHR I . MALLIKARJUNA HAS STATED ' BEFORE THE CENTRAL EXCISE AUTHORITIES, THAT HE HAD SUPPL I ED UNACCOUNTED GUTKHA TO THE ASSESSEE OR THAT HE HAD RECEIVED AMOUNTS IN CASH F ROM SHRI . SOHANRAJ OF M/S.MEHTA ASSOCIATES . NEITHER HAS HE ADMITTED TO THE SUPPLY OF UNACCOUNTED ARECANUT TO THE ASSESSEE . THE SCN ALLEGES THAT THE MAIN SUPPLIER OF ARECANUT, WHICH IS THE PRINCIPLE RAW MATERIAL FOR MANUFACTURE OF GUTKHA, WAS SHRI . M . B . MALLIKARJUNA MANAGING PARTNER OF SHRI . GAJANANA ARECANUT AGENCIES, SHIMOGA AND SHRI GAJANA ARECANUT TRADES, SHIMOGA , WHO HAD SUPPLIED 504350 KQS OF SUPAR I VALUED AT RS.7 . 81 CRORES DURING 2007-08 AND HAS BEEN DEALING IN ACCO UNTED AS WELL AS UNACCOUNTED SALE OF GUTKHA I N CLOSE CONTACT WITH SHRI . SOHANRAJ MEHTA AND HAS RECEIVED HUGE SUMS OF MONEY FROM SHRI . SOHANRAJ MEHTA TOWARDS SUPPLY OF UNACCOUNTED ARECA NUT, OUT OF SALE P ROCEEDS OF UNACCOUNTED GUTKHA . 49.2 THE . ALLEGATION IN THE SCN IS SOLELY BASED ON THE STATEMENT OF SHR I . M.B.MAIL I KARJUNA, GIVEN BEFORE THE INCOME TAX AUTHORITIES ON 20 . 01 . 2010, WHE R EIN HE HAD ADMITTED THAT HE HAD SOLD UNACCOUNTED ARECANUT TO THE ASSESSEE AND HAD RECE I VED AMOUNTS TOWA R DS SUCH SALES 80 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 WHICH WERE OUTS I DE THE REGULAR BOOKS OF ACCOUNTS . THE ASSESSEE HAS HOWEVER PLACED ON RECORD A LETTER DATED 23 . 12 . 2010 OF SHRI . MALLIKARJUNA ADDRESSED TO THE ASSISTANT DIRECTOR OF INCOME TAX (INVEST IGATION), WHEREIN HE HAS RETRACTED HIS STATEMENT DATED 20 . 01.2010 GIVEN BEFORE THE INCOME TAX AU T HORITIES STATING THAT HE HAS NOT DONE ANY UNACCOUNTED SALES TO M/S.DHARIWAL INDUSTRIES LTD. , AND HAS DENIED HAVING RECEIVED ' ANY CASH FROM SHRI SOHANRAJ FOR ANY UNACCOUNTED SALES . IN THE INSTANT CASE, I FIND THAT THE SCN HAS PLACED HE AVY RELIANCE ON THE RETRACTED STATEMENT OF SHRI . MALLIKARJUNA GIVEN BEFORE THE INCOME TAX AUTHORITIES WITHOUT BRINGING FORTH ANY TANGIBLE EVID ENCE TO DEMONSTRATE SALE OF UNACCOUNTED ARECANUT BY SHRI MALL IKARJUNA TO THE ASSESSEE . THEREFORE, I FIND THAT THE ALLEGATIONS ARE BASELESS MO RE SO WHEN THE . INVESTIGATION HAS ALSO FAILED TO PROVE THAT HE HAD SUPP LIED UNACCOUNTED ARECANUT TO THE ASSESSEE AND NOT EVEN A SIN GLE CONSIGNMENT OF UNACCOUNTED ARECANUT HAS BEEN SEIZED IN THE CASE. THUS, IN THE ABSENCE OF EVIDENCE, I CANNOT ACCEPT THE CHAR GES MADE IN THE NOTICE THAT SHRI MALLIKARJUNA HAS SUPPLIED UNACCOUNTE D ARECANUT TO THE ASSESSEE AND HAD RECEIVED PAYMENTS FOR THE SAME THROUGH S HRI SOHANRAJ MEHTA. 49.3 FURTHER, INVESTIGATION WAS ALSO CONDUCTED ON THE SUPPLIER OF LAMINATION ROLLS VIZ., M/S.CHAMPION PACKAGING INDUSTRI ES PVT . LTD . , BANGALORE. A STATEMENT DATED 14.06.2012 OF SHRI RAJE SH BACHHAWAT, D I RECTOR OF M/S.CHAMPION PACKAGING INDUSTRIES PVT. LTD., BANGALORE (CPI' FOR SHORT), WAS RECORDED BY THE SUPERINTENDENT OF CENTRAL EXCISE (PREVENTIVE) . BANGLAORE-I COMMISSIONERATE . IN THE SAID STATEMENT SHR I RAJESH HAS INTERALIA STATED THAT THEY ALWAYS RECEIVED PAYMENTS FROM BANGALORE FACTORY OF THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES FAVOURING CPI . ON SHOWING THE SUMMARY OF RECORDS WHICH INDICATED THAT SHRI . SOHARAJ MEHTA HAD PAID RS . 9,05,00,000/- TO CPI DURING SEPTEMBER 2006 TO MARCH 2007, SHRI RAJESH HAS STATED THAT AS PER THEIR RECORDS THEY HAVE RECEIVED THE PAYMENTS BY CHEQUE FOR SUPPLIES MADE DURING THE RELEVANT PERIOD AND HE IS NOT AWARE ABOUT THE AM OUNT MENTIONED IN THE EXTRACT SHOWN TO HIM . HE HAS FURTHER STATED THAT THEY HAVE NOT SUPPLIED ANY GOODS OTHER THAN PACKING MATERIAL TO M/S. DHARIWAL INDUSTRIES LTD . HE HAS ALSO STATED THAT NONE OF THE OFFICIAL OF CPI HA D ANY CONTACT WITH SHRI SOHANRAJ MEHTA AND THEREFORE HE D OES NOT KNOW ABOUT THE TRANSACTIONS DEALT BY SHRI . SOHANRAJ MEHTA AND THE VARIOUS ENTRIES OF PAYMENTS MADE IN THE DOCUMENTS SHOWN TO HIM. 49 . 4 THE NOTICE HAS ALLEGED THAT IN THE SEIZED RECORDS TH E : NAME OF SHRI . SHRINIVAS OF CPI, IS MENTIONED FOR HAVING RECEIVED AM OUNTS OUT OF SALE - PROCEEDS OF UNACCOUNTED GUTKHA. THEREFORE, IT IS ALLE GED THAT CPI HAVE PLAYED ACTIVE ROLE INCLANDESTINE ACTIVITY OF TH E ASSESSEE BY SUPPLYING UNACCOUNTED LAMINATING ROLL AND REALISED LA RGE SUMS FOR SUPPLY OF SUCH UNACCOUNTED ROLLS. HOWEVER, ;, FROM THE STATEMENT DATED 14 . 06 . 2012 OF SHRI RAJESH BACHHAWAT, DIRECTOR OF CPI GIVEN BEFORE THE SUPERINTENDENT OF CENTRAL EXCISE (PREVENTIVE), BANGA LORE - I COMMISSIONERATE, I FIND THAT HE HAS STATED THAT HE IS NO T AWARE ABOUT THE AMOUNT MENTIONED IN THE EXTRACT SHOWN TO HIM . NO STATEMENT OF SHRI SRINIVAS, ACCOUNTANT OF CPI, WHOSE NAME I S MENTIONED IN THE LOOSE SLIPS RECOVERED FROM SHRI.SOHANRAJ MEHTA, ALLEGEDLY I NDICATING THAT THE SAID AMOUNTS WERE PAID TO HIM, IS RECORDED IN THE CASE . THUS, I FIND THAT THE I NVESTIGATION IN THE CASE IS INCOMPLETE AND I AM OF THE OPINION THAT NO CASE OF CLANDESTINE SUPPLY OF PACKING MATERIALS BY C PI TO THE ASSESSEE CAN BE MADE BASED ON THIS P I ECE OF EVIDENCE. IN THIS CASE, THERE IS ALSO ABSENCE OF EVIDENCE . TO SHOW THAT CPI WERE CLANDESTINELY REMOVING THE PACKING MATERIALS TO THE ASSESSEE AS NOTHING 81 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 INCRIMINATING WAS RECOVERED FROM CPI OR THE ASSESSEE TO EVEN FAINTLY SUGGEST THAT PACKING MATERIALS WERE BEING CLANDESTINELY SUPPLIED BY CPI OR WERE BEING RECEIVED BY THE ASSESSEE. I FIND FROM THE RECORDS OF THE CASE THAT THERE IS NO SEIZURE OF ANY UNACCOUNTED PACKI NG MATERIALS I.E . , PLASTIC ROLLS EITHER FROM THE . PREMISES OF CPI OR THE ASSESSEE . IT IS ALSO SEEN FROM THE STATEMENT DATED . 14 . 06 . 2012 OF SHRI . RAJESH BACHAVATH, DIRECTOR OF CPI, THAT HE HAS NOT ADMITTED THAT UNACC OUNTED ROLLS WERE BEING SUPPLIED TO THE ASSESSEE . I T IS THEREFORE NOT ESTABLISHED IN THE CASE THAT UNACCOUNTED ROLLS WERE BEING SUPPLIED BY CPI TO THE ASSESSEE AS THESE ALLEGATIONS ARE LOOSELY BASED ON ONLY THE SLIPS R ECOVERED FROM SHRI . SOHANRAJ MEHTA WHEREIN THE NAME OF SHRI . SR I NIVASA, ACCOUNTANT OF CPI I S MENTIONED AND CERTAIN AMOUNTS ARE MENTIONED AGAINST HIS NAME . THERE IS NO INVESTIGATION CARR I ED OUT AGAINST THE SAID SHR I .S RIN I VASA AND HE HAS NOT BEEN EXAMINED TO ASCERTAIN THE FACTS AND RE ASONS AS TO WHY THESE AMOUNTS WERE PAID TO HIM, IF AT ALL THEY WERE P AID TO HIM . IN THE ABSENCE OF INVESTIGATION ON THIS POINT, I AM FORCED TO HOLD THAT THE INVESTIGATION HAS ONLY PRESUMED THAT THE IMPUGNED AMOU NTS MENTIONED AGAINST THE NAME OF SHRI S R INIVASA, ACCOUNTANT OF CPI , WERE PAID TO (PI WHO IN TURN HAVE SUPPLIED UNACCOUNTED LAM I NATION ROLLS TO THE ASSESSEE F OR PACKING OF UNACCOUNTED GUTKHA. THUS, IN THE ABSENCE O F CONCRETE DOCUMENTARY EVIDENCE. I AM NOT INCLINED TO ACCEPT T HE CHARGES MADE IN THE NOTICE THAT CPI HAVE SUPPLIED UNACCOUNTED LAMINA TION ROLLS TO THE ASSESSEE. 49 . 5 DURING THE INVESTIGATION, IT WAS OBSERVED THAT M/S.R AJHANS ENTERPRISES, BANGALORE WERE SUPPLYING CARTON BOXES TO THE ASSESSEE WHO WERE USING THE SAME FOR PACKING GUTKHA POUCHES. HE NCE , A STATEMENT DATED 15.06.2012 OF SHRI . RAVINDRANATH . MANAGING PARTNER OF M/S.RAJHANS ENTERPRISES, BANGALORE, WAS RECORDED BY THE SUPERINTENDENT OF CENTRAL EXCISE (PREVENTIVE) . BANGALORE-I COMMISSIONERATE. SHRI.RAVINDRANATH, IN HIS STATEMENT HA D INTERALIA STATED THAT THEY SUPPLY CARTON BOXES FOR PACKING OF GU TKHA POUCHES ; THAT THEY R ECEIVE PAYMENT ONLY THROUGH DEMAND DRAFT FROM THEIR BANGALORE FACTORY AGAINST THE SALES MADE TO THEM , WHICH IN THE NORMAL COURSE IS COLLECTED BY THEIR PERSON FROM THEIR FACTORY AT THE TIME OF DELIVER OF THE GOODS; THAT HE IS NOT CONNECTED TO SOHANRAJ MEHTA IN ANY WAY AT ANY GIVEN POINT OF TIME AND THAT HE HAS NOT RECEIVED ANY AMOUNT FROM SOHANRAJ MEHTA AT ANY GIVEN POINT OF TIME. IT IS SEE N FROM THE RECORDS OF THE CASE THAT THERE I S NO SEIZURE OF UNACCOUNTED . CARTON BOXES EITHER AT THE PREMISES OF THE ASSESSEE OR AT THE PREMISES OF M/S.RAJHA NS ENTERPRISES. THERE IS ALSO NO DOCUMENTARY EVIDENCE TO SHOW THAT M/S.RAJHANS ENTERPRISES HAD SUPPLIED UNACCOUNTED CARTON BOXES TO THE ASSESSEE. IN VIEW OF THESE FACTS, I FIND THAT THE ALLEGAT IONS THAT M/S . RAJHANS ENTERPRISES, BANGALORE HAVE SUPPLIED UNACCOUNTE D CARTON BOXES TO THE ASSESSEE AND HAD RECEIVED AN AMOUNT OF RS . 97 LAKHS ON VARIOUS DATES FOR SUCH SUPPLY, OUT OF THE FUNDS GENERATE D BY SALE OF UNACCOUNTED GUTKHA IS NOT AT ALL SUPPORTED BY ANY . CORROBORATIVE EVIDENCE . 50 . IN MY VIEW, THE CHARGES OF CLANDESTINE REMOVAL SHOULD BE ESTABLISHED BY PRODUC I NG COGENT , CONVINCING AND TANGIBLE EVIDENCE AND CHARGE OF CLANDESTINE REMOVAL WITHOUT ANY EVIDENCE T O SHOW EXCESS RECEIPT OF RAW MATER I AL, EXCESS CONSUMPTION OF ELECTRICITY, EXCESS RECEIPT OF PACKING MATERIALS, EXCESS EMPLOYMENT OF LABOUR, ETC . , IS NOT SUSTAINABLE. IN THE INSTANT CASE , THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAD RECEIVED EXCESS RAW MATERIALS OR PACKING MATE RIALS FROM THEIR SUPPLIERS. THERE IS ALSO NO EVIDENCE TO SHOW THAT THE ASSESSEE HAD EMPLOYED EXTRA LABOUR OR MACHINERY OR HAD RUN EXTRA SHIFTS FOR THE 82 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 MANUFACTURE OF LARGE QUANTITIES OF GUTKHA AS ALLEGED BY THE DEPARTMENT. IN SUPPORT OF MY FINDINGS, I PLACE RELIANCE IN THE CA SE OF KALVERI FOODS VS. CCE, MUMBAI REPORTED IN 2003 (152) ELT 131 (TRI. ), WHEREIN IT IS HELD THAT, 'IT IS WELL SETTLED THAT THE CHARGE OF C LANDESTINE REMOVAL/ MANUFACTURE OF THE GOODS BY THE ASSESSEE HAS TO BE ESTABLI SHED BY THE DEPARTMENT BY PRODUCING COGENT, CONVINCING ' AND TANGIBLE EVIDENCE AND SUCH A CHARGE CANNOT BE BASED ON ASSUMPTIONS AND P RESUMPTIONS.' FURTHER, IN THE CASE OF CCE, KANPUR VS. S.C . MANUFACTURERS REPORTED IN 2005 (179) ELT 193 (TRI.), THE HON'BLE' TRIBUNAL OB SERVED THAT, THE DUTY DEMAND WAS RAISED ON THE ALLEGATIONS OF CLANDESTIN E REMOVAL OF THE GOODS AFTER VISIT OF THE CENTRAL EXCISE OFFICERS TO THE FACTORY PREMISES OF THE APPELLANTS WHO TOOK INTO POSSESSION CERTAI N TORN PIECES OF PAPER AND OTHER DOCUMENTS . BUT, NEITHER ANY SHORTAGE NOR EXCESS OF THE RAW MATERIAL AS WELL AS OF THE FINISHED GOODS, WAS F OUND BY THE CENTRAL EXCISE OFFICERS IN THE FACTORY PREMISES OF THE RESPONDENTS . IT IS ALSO EVIDENT THAT SHRI SODHI, THE THEN PARTNER OF TH E RESPONDENTS (NOW DECEASED) NEVER ADMITTED CATEGORICALLY IN HIS STATEMEN T ABOUT THE CLANDESTINE MANUFACTURE AND REMOVAL OF THE FINISHED G OODS BY HIS FIRM. THE BALD TESTIMONY OF D . K . BAJPAI, AUTHORISED SIGNATORY OF THE RESPONDENTS FIRM ALSO DID NOT ADVANCE THE CASE OF THE D EPARTMENT AS NONE OF THE CONSIGNEES NAMED IN THE ALLEGED PARALLEL INVOICES ADMITTED THE RECEIPT OF THE GOODS FROM THE RESPONDENT'S FIRM , NO EVIDENCE REGARDING THE EXCESS USE OF THE RAW MATERIAL OR CONSUMP TION OF ELECTRICITY BY THE RESPONDENTS HAD BEEN BROUGHT ON RE CORD. THEREFORE, CHARGE OF CLANDESTINE REMOVAL OF THE GOODS WITHOUT PA YMENT OF DUTY BY . THE RESPONDENTS, DID NOT STAND PROVED.' IN THE CASE OF MELTON INDIA (P) LTD . , VS. CCE, NOIDA REPORTED IN 2005 (181) ELT 129 (TRI . DELHI) IT WAS OBSERVED BY THE HON'BLE TRIBUNAL THAT 'CHARGE OF CLA NDESTINE REMOVAL CANNOT BE BASED ON ASSUMPTIONS AND PRESUMPTIONS OR ON A SIMPLE BANK RECORD PREPARED BY ASSESSEE SHOWING INFLATED PRODUCTION FIGURES - 58 INVOICES SEIZED FROM FACTORY PREM I SES ; PLEADED BY ASSESSEE AS PREPARED FOR GETTING FINANCIAL ASSISTANCE FROM BANK - NO ADMISSION OF ANY OF APPELLANTS AND NO EVIDENCE TO PROVE ACTUAL CLEARANCE OF GOODS THROUGH INVOICES - IN-QUESTION ON A CLANDESTINE MANNER - NONE OF CONSIGN EE NAMED IN INVOICES ADMITTED RECEIPT OF GOODS - NO EVIDENCE OF EXCESS RECEIPT OF RAW MATERIAL/, CONSUMPTION OF ELECTRICITY OR EMPLOYMENT OF LABOUR BY ASSESSEE FOR MANUFACTURE OF EXTRA FINISHED GOO DS.' FURTHERMORE, I AM OF THE VIEW THAT THE CHARGE OF CL ANDEST I NE REMOVAL WHICH I S A SERIOUS CHARGE IS REQUIRED TO BE PROVED BEYOND DOUB T ON THE BASIS OF AFFIRMATIVE EVIDENCE AND NOT ON INFERENCES. F OR MY ABOVE VIEWS, 1 DRAW SUPPORT FROM THE DECISION IN THE CASE OF CCE, S HILLONG VS . SHREE NAROTTAM UDYOG (P) . LTD . , R EPORTED IN 2003 (158) ELT 40 (TRI . KOL) WHEREIN IT IS OBSERVED BY THE TRIBUNAL THAT' CHA RGE OF CLANDESTINE REMOVAL BEING A SERIOUS CHARGE, REQUIRED TO BE PROVED BEYOND DOUBT ON ' THE BASIS OF AFFIRMATIVE EVIDENCES' . ALSO, IN THE CASE OF DURGA TRADING CO. VS. CCE, LUCKNOW REPORTED IN 2002 (148) ELT 967 (TRI . DEL) IT IS HELD THAT 'IN ABSENCE OF ANY CORROBORATIVE EVID ENCE LIKE CONSUMPTION OF EXCESS ELECTRICITY OR STATEMENTS OF BUYER S, IT COULD NOT ALSO BE SAID THAT NOTICEE COMPANY CLANDESTINELY REMOVE D GOODS MANUFACTURED FROM STOCK FOUND SHORT'. 51 . EVIDENCE TO SHOW MEANING OF CODES 'A' AND 'DIL' ON GU TKHA PACKAGE AND SALE OF OTHER BRAND OF GUTKHA BY SHRI SO HANRAJ MEHTA. 51 . 1 IT IS ALLEGED IN THE CASE THAT ENTRIES FOR ACCOUNTED SALES IN THE LOOSE SLIPS ARE SUFFIXED WITH LETTERS OF 'DIL' AND THE UNACCO UNTED SALES ARE SUFFIXED WITH LETTER 'A' AND THAT IT WAS EXPLAINED BY SHRI . SOHANRAJ MEHTA THAT THE LETTER 'A' REFERRED TO UNACCOUNTED SALES . OTHER THAN THE 83 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 STATEMENT OF SHRI . SOHANRAJ MEHTA, THERE ARE NO EVIDENCES WHICH CORROBORATE THAT THE ENTRIES IN THE IMPUGNED SLIPS SUFF IXED WITH LETTER A ACTUALLY RELATE TO THE SALE OF UNACCOUNTED GUTKH A MANUFACTURED BY THE ASSESSEE. THUS, I FIND THAT THE ALLEGATION THAT THE LETTER 'A' REPRESENTS CLEARANCE OF UNACCOUNTED GUTKHA MANUFACTURED BY THE ASSESSEE IS NOT CORROBORATED. FURTHER , DURING THE PROCEEDINGS INITIATED BY INCOME TAX AUTHORITIES AGAINST SHRI . SOHANRAJ MEHTA, I T IS SEEN THAT SHRI . SOHANRAJ MEHTA HAD STATED THAT HE IS DEALING W I TH GUTKHA MANUFACTURED BY THE ASSESSEE AS WELL AS ' OTHER BRANDS OF GUTKHA. FROM THE RECORDS OF THE CASE, IT IS SEEN THAT THERE IS NO INVESTIGAT I ON CONDUCTED TO ASCERTAIN WHETHER SHRI.SOHANRAJ MEHTA WAS DEALING WITH OTHER BRANDS OF GUTKHA . IN . THE ABSENCE OF ANY INVESTIGATION ON THIS ASPECT, I T CANNOT BE CONCLUDED THAT THE ENTRIES MADE IN THE IMPUGNED SLIPS BY SUFFIXING WITH LETTER 'A' RELATE TO UNACCOUNTED GUTKHA MANUFACTURE D AND CLANDESTINELY CLEARED BY THE ASSESSEE AND THAT SHRI . SOHANRAJ MEHTA HAD NOT DEALT WITH OTHER BRANDS OF GUTKHA. I ALSO FIND THAT THE PROCEEDI NGS INITIATED BY THE INCOME TAX AUTHORITIES ON THE IMPUGNED SLIPS HAVE BEEN DROPPED BY THE COMMISSIONER OF INCOME TAX (APPEALS)- VI, BANGALOR E VIDE ORDER ITA NOS.229,230,231 , 232,233,234, & 235/CDIT/CC 2(2) B'LORE/CIT (A) - VI /2011-12 ' DATED 05 . 09.2012. THUS, I HOLD THAT THIS ALLEGATION IS NOT SUBSTANTIATED IN THE CASE. 52 . SURPRISE VISITS OF THE OFFICERS AND THE SUPERVISION/CONTROL EXERCISED BY THE , DEPARTMENT AND HOW ASSESSEE COULD PRODUCE EXCESS QUANTIT Y IN SPITE OF SUCH INTENSE SUPERVISION . 52.1 THE HONBLE TRIBUNAL WHILE REMANDING THE CASE F OR DENOVO ADJUDICATION HAS MADE AN OBSERVATION THAT IN THE ORDE R-IN-ORIGINAL NO . 45/2013 DATED 22.07.2013 PASSED BY THE COMMISSIONER, BA NGALORE- I COMMISSIONERATE, THERE IS NO MENTION OF SURPRISE VISITS OF THE OFFICERS AND THE SUPERVISION/CONTROL EXERCISED BY THE DEPARTMEN T AND HOW THE ASSESSEE COULD PRODUCE EXCESS QUANTITY IN SPITE OF SUCH INT ENSE SUPERVISION . FROM THE SUBMISSIONS MADE BY THE ASSESSEE, I F I ND THAT THE SUPERINTENDENT OF CENTRAL EXCISE, ELECTRONIC CITY RA NGE HAD VISITED THE UNIT ON 11.09.2007, 24.10.2007 AND 08.11 . 2007. FURTHER, THE SA I D OFFICER HAD VISITED THE UNIT ALONGWITH THE ASS I STANT COMMISSIONER, BANGALORE - 1I1 DIVISION, BANGALORE-I COMMISSIONERATE ON 29 . 09 . 2007, 15.10 . 2007, 18.10 . 2007 : 30.10.2007, 15.11 . 2007, 29.11 . 2007, 17.12.2007, 31 . 12 . 2007, 14 . 01 . 2008, 31 . 01 . 2008, 18.02.2008, 28.02 . 2008 AND 18.03.2008. FURTHERMORE, THE UNIT HAS ALSO BEEN AUDIT ED BY THE INTERNAL AUDIT PARTY OF THE DEPARTMENT ON 21 ST , 23 RD, 24TH AND 25 TH OF JULY 2008 . I F I ND THAT THE COMMISSIONER IN HIS 010 DATED 22.07 . 2013 HAD NOT CONSIDERED THESE ASPECTS WHILE DECIDING THE CASE. THE DEPARTMENT WHILE CONDUCTING THE I NVESTIGATION HAS NOT MADE ANY OBSERVATION AS TO HOW CLANDESTINE MANUFACTURE OF UNACCOUNTED GUTKHA CO ULD HAVE TAKEN PLACE UNDER SUCH INTENSE SUPERVISION BY THE DEPARTMENT . ON PERUSAL OF THE REPORTS SUBMITTED BY THE OFFICERS WHO HAD VISITED T HE ASSESSEE'S . FACTORY, I FIND THAT THERE IS NO MENTION ABOUT ANY SH ORTAGE OR EXCESS OF RAW MATERIALS OR THE FINISHED GOODS NOTICED DURING THE IR MANY VISITS. THERE IS A L SO NO MENT I ON ABOUT ADDITIONAL MACHINES EMPLOYED BY THE ASSESSEE. APART FROM TH I S, I FIND THAT THE OFFICERS WHO HAD VISITED THE ASSESSEE ' S FACTORY PREMISES DURING . THE SEARCH . PROCEEDINGS HAVE ALSO NOT NOTICED ANY SHORTAGE OR EXCESS OF RAW MATERIALS OR FINISHED GOODS OR . EVEN THE PACKING MATERIALS. I AM THEREFORE OF THE VI EW THAT THE CLANDESTINE MANUFACTURE AND REMOVAL OF GUTKHA CANNOT BE ESTABLISHED ONLY ON THE BASIS OF LOOSE SLIPS RECOVERED FROM THE PREM ISES OF THE C&F AGENT OF THE . ASSESSEE AND THE STATEMENT OF SHRI . SOHANRAJ MEHTA , THE C&F AGENT, WHEN NO EVIDENCE TO SHOW THAT EXCESS RAW MA TERIAL OR 84 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 FINISHED GOODS OR PACKING MATERIALS WERE FOUND IN THE ASSESSEE'S FACTORY . IN THIS REGARD, I RELY ON THE DECISION OF THE TRIBUNA L IN THE CASE OF NEW INDIA DYEING & FINISHING MILLS VS . CCE, CHANDIGARH REPORTED IN 2004 (165) ELT 316 (TRI . CALCUTTA) AND R.K . PATEL & CO . VS . CCE, NASHIK REPORTED IN 2008 (227) ELT 558 (TRI . MUMBAI) WHERE I N I T IS HELD THAT UNACCOUNTED PRODUCTION OR CLANDESTINE CLEARANCE NOT FOUND DESPITE SEVERAL SURPRISE CHECKS BY THE DEPARTMENT AND THEREFORE CLANDESTINE MANUFACTURE AND CLEARANCE NOT PROVED. I FIND THAT T HE ABOVE DECISIONS ARE SQUARELY APPLICABLE TO THE CASE ON HAND. 53 . RETRACTION OF THE STATEMENT OF SHRI . SOHANRAJ MEHTA. 53 .1 THE ALLEGATIONS OF CLEARANCE OF UNACCOUNTED G UTKHA BY THE ASSESSEE IN THE INSTANT CASE ARE BASED ON THE STATEMENT DAT ED 21 . 10.2009 OF SHRI . SOHANRAJ MEHTA GIVEN BEFORE THE INCOME TAX AUTHORITIES AND HIS STATEMENT DATED 05.06 . 2012 GIVEN BEFORE THE SUPERINTENDENT OF CENTRAL EXCISE (PREVENTIVE), BANGA LORE-I COMMISSIONERATE. HOWEVER, SHRI . SOHANRAJ MEHTA , VIDE HIS LETTER DATED 23 . 12.2009 ADDRESSED T O THE ASSISTANT DIRECTOR OF INCOME TAX (INVESTIGATION), BANGALORE HAD CLARIFIED THAT THE NO TINGS IN THE SLIPS REVEAL THE HANDLING OF VARIOUS PRODUCTS IN A CONSOLID ATED MANNER WITHOUT INDICATION OF SPEC I FIC BRANDS AND MOVEMENT OF SALE PROCEEDS. HE HAS ALSO STATED THAT THIS WAS PRECISELY FOR THE REASON THAT HE WANTED TO MAINTAIN CONFIDENTIALITY IN THE MATTER OF HANDLI NG OTHER LOCAL PRODUCTS AS OTHERWISE THERE WAS AN IMMINENT THREAT OF L OSING MARKETING OF PREMIUM PRODUCTS AND FOR THE REASON, THE DETAILS OF OTHER PRODUCTS HAVE NOT BEEN MENTIONED IN THE SAID BOOKS. HE HAS ADDED THAT SINCE AN ELEMENT OF SECRECY WAS REQUIRED TO BE MAINTAI NED IN THE TRANSACTION OF VARIOUS BRANDS, LEST THE DEALING OF VARI OUS OTHER BRANDS WOULD COME TO THE NOTICE OF MAIN SUPPLIER NAMELY DHA R I WAL INDUSTRIES LTD. , THE NAME OF OTHER VENDORS/SUPPLIERS WERE NOT MENTIONED IN THE BOOKS/NOTING . HE HAS ALSO STATED THAT IN ALL THESE STATEMENTS IT IS STA TED THAT THE TRANSACTIONS BELONG TO THE PRODUCTS OF DHARIW AL INDUSTRIES, THE PREMIUM PRODUCT MARKETED BY HIM AND ' THAT THIS WAS PROMPTED BY A SENSE OF APPREHENSION THAT IF DETAILS COME TO LIGHT, TH ERE WAS EVERY POSSIBILITY OF LOSING THE BUSINESS OF THE MAIN PRODUCT. H OWEVER, WHEN A STATEMENT OF SHRI . SOHANRAJ MEHTA WAS RECORDED BY THE SUPERINTENDENT (PREVENTIVE) ON 05.06.2012 , I FIND THAT THERE IS NO QUESTION POSED TO HIM ON H I S LETTER DATED 23 . 12 . 2009 ADDRESSED TO ASSISTANT DIRECTOR OF INCOME TAX (INVESTIGATION) , RETRACTING HIS STATEMENT DATED 21 . 10 . 2009 . FURTHER, TO A SPECIFIC QUESTION AS TO WHETHER HE IS DEA LING WITH ANY COMMODITY OF HIS OWN OR BELONGING TO OTHER MANUFACT URERS/DEALERS, ETC . , SHRI . SOHANRAJ MEHTA HAS REPL I ED THAT HE WAS NOT DEALING WITH THE PRODUCTS OF HIS OWN EXCEPT THE PRODUCTS OF DHAR I WAL INDUSTRIES AND THAT HE DID NOT HAVE FACTORY FOR MANUFACTURE OF GUTKHA . I FIND THAT THERE IS CATEGORICAL DENIAL BY SHR I . SOHANRAJ MEHTA IN HIS STATEMENT DATED 05 . 06.2012 BEFORE THE CENTRAL EXCISE AUTHORITIES , THAT HE WAS DEALING WITH OTHER BRANDS OF GUTKHA OR GUTKHA MANUFACTURED B Y OTHER MANUFACTURERS . IT IS ALSO SEEN THAT HE WAS NOT QUESTIONED WHETHER HE HAD RECEIVED GUTKHA FROM DHARIWAL INDUSTRIES WITHOUT INVOICE. ALL HE HAS STATED IS THAT GUTKHA WAS RECEIVED COVERED BY INVOI CE AND THE GOODS RECEIVED WERE ACCOUNTED IN THE STOCK REGISTER . HE HAS NOT STATED THAT HE ALSO RECEIVED GUTKHA WITHOUT INVOICE AND I FIN D THAT NO QUESTION IS ' PUT TO H I M TO ELIC I T THIS INFORMATION . FURTHER, THERE IS ALSO NO INVESTIGATION REGA R DING HOW THE TRANSFER OF SALE PROCEEDS IN CONNECTION W ITH THE SALE OF UNACCOUNTED GUTKHA, FROM SHRI SOHANRAJ MEHTA TO THE ASSESSEE TOOK PLACE. 85 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 54. CROSS EXAMINATION OF SHRI . SOHANRAJ MEHTA . 54.1 THE CESTAT WHILE REMANDING THE CASE BACK FOR DE NOVO ADJUDICATION , HAS OBSERVED THAT THE APPELLANTS HAD ASKED FOR C R OSS- EXAM I NATION OF ONLY TH R EE . PERSONS AND ONLY ONE HAS BEEN ' ALLOWED AND NO REASONS HAVE BEEN GIVEN FOR DENYING THE CROSS EXAMIN ATION OF OTHERS AND THAT THIS NEEDS RECONSIDERATION. THE ASSESSEE FILED A REQUEST TO ALLOW CROSS-EXAMINATION OF SHRI . SOHANRAJ MEHTA, PARTNER OF M/S.MEHTA ASSOC I ATES, SHRI . D . SRINIVAS OF M/S . CHAMPION PACKAGING INDUSTRIES PVT . LTD. AND THE OFFICERS WHO HAD CONDUCTED SURVEY AND VI SITED THE ASSESSEE AND ALSO THE INVESTIGATING OFFICERS . IT WAS INFORMED TO THE ASSESSEE UNDER LETTER DATED 03 . 06.2015 THAT IN THE LIGHT OF THE DECISION OF THE HON ' BLE SUPREME COURT IN THE ' CASE OF CCE, MUMBAI VS. KALVERT FOODS INDIA PVT. LTD., CROSS-EXAMINATION I S NOT MANDATORY AND THAT AS PER THE DECISION OF HON'BLE HIGH COURT OF MADRAS IN THE CASE O F THILAGARATHINAM MATCH WORKS [2013(295) ELT 195 (MADRAS) , PERSONS WHO GAVE STATEMENTS AND WHO ARE WITNESSES ALONE ARE LIABLE TO BE CROSS-EXAMINED AND THAT CROSS-EXAMINATION IS NOT NECESSARY IN THE CASE . 54 . 2 IN RESPONSE TO THIS LETTER, THE ASSESSEE FILED A WRIT P ETITION NO.23627/2015 BEFORE THE HON'BLE HIGH COURT OF KARN ATAKA, WHICH STAYED FURTHER PROCEEDINGS IN THE CASE VIDE ITS INTERIM ORDER DATED 10 . 06.2015. LATER, THE HON'BLE HIGH COURT OF KARNATAKA IN ITS FINAL ORDER DATED 25.06.2015, DISPOSED OFF THE WRIT PETITIO N NO.23627/2015 AND ORDERED THAT SHRI . SOHANRAJ MEHTA SHOULD BE TENDERED FOR CROSS EXAMINATION BY THE ASSESSEE . THE HIGH COURT ALSO OBSERVED THAT THERE IS NO JUST I FICATION BY THE ASSESSEE TO CROSS-EXAMINE SHRI . SRINIVASA, ACCOUNTANT OF M/S . CHAMPION PACKAGING PVT. LTD., BANGALORE AND THE OFFICERS WHO HAD CONDUCTED SURPRISE CHECKS AT THE ASSESSEE 'S FACTORY PREMISES AS THESE PERSONS HAVE ' NOT BEEN EXAMINED IN THE CASE. ACCORDINGLY, THE ASSESSEE'S REQUEST TO CROSS - EXAMINE . SHRI . SOHANRAJ MEHTA, PARTNER OF M/S.MEHTA ASSOCIATES, WAS CONSIDERED A ND SHRI . SOHANRAJ MEHTA WAS ASKED TO ' APPEAR BEFORE THE ADJUDICATING AUTHORITY FOR CROSS EXAMINATION BY THE ASSESSEE ON 03 . 09 . 2015, 12.10.2015 AND 03.11 . 2015 ; HOWEVER, SHRI . SOHANRAJ MEHTA FAILED TO APPEAR FOR CROSS EXAMINATION ON ALL THE THREE OCCASION S . SHRI . SUJAY KANTAWALA, ADVOCATE REPRESENTING THE ASSESSEE WAS PRESENT ON ALL THE THREE DATES . ON 03.11.2015, WHEN SHRI.SOHANRAJ MEHTA FAILED TO A PPEAR FOR THE THIRD TIME, SHRI . KANTAWALA SUBMITTED THAT HIS STATEMENT/TESTIMONY NOT HAVING BEING TESTED IN CROSS- EXAMINATION IS UNRELIABLE, WHICH WAS SPECIFICALLY PERMITTED BY THE H ON'BLE HIGH COURT. HE ALSO STATED THAT THE STATEMENT OF SHRI S OHANRAJ THUS DESERVES TO BE DISCARDED AND THERE IS NO OTHER CREDIBLE OR INDEPENDE NT EVIDENCE AVAILABLE ON RECORD TO SUSTAIN THE CHARGE OF CLANDESTI NE REMOVAL IN THE SCN. HE FURTHER STATED THAT THE DENOVO ADJUDICATION CAN BE PROCEEDED WITH TO ANALYZE THE CHARGES IN THE SCN BY DISREGARDIN G THE TESTIMONY OF SHRI.SOHANRAJ MEHTA . 54.3 AS PER THE ABOVE REFERRED ORDER OF THE HON'BLE HIGH COURT, IT IS BINDING ON ME TO ALLOW CROSS-EXAMINATION OF SHRI . SOHANRAJ MEHTA WHOSE STATEMENT IS HEAVILY RELIED TO CHARGE THE ASSESSEE OF CLANDESTINE REMOVAL OF GUTKHA. BUT, SHRI.SOHANRAJ MEHTA FAILED TO APPEAR FOR CROSS- EXAMINATION EVEN AFTER GIVING THREE OPPORTUNITIES TH EREBY RENDERING IT DOUBTFUL THAT HE WAS DEALING WITH ONLY THE GUTKHA MA NUFACTURED BY THE ASSESSEE AND NOT DEALING W I TH OTHER BRANDS ALSO. THUS, THE CONTENTION OF THE NOT I CEE . THAT SHRI . 5OHANRAJ MEHTA WAS DEALING WITH OTHER BRANDS OF 86 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 GUTKHA IS NOT FREE FROM DOUBT AND NO RELIANCE CAN BE PLACED ON HIS STATEMENT GIVEN BEFORE THE SUPERINTENDENT OF CENTRAL EXCISE (PREVENTIVE) . IN SUPPORT OF THIS, I PLACE RELIANCE ON THE DECISION I N THE CASE OF NU-TREND BUSINESS MACHINES (P) LTD. VS. CCE, CHEN NAI - 2002 (141) ELT 119 (TRI.) . WHEREIN IT IS HELD THAT 'WHEN A PERSON DOES NOT TURN UP FOR CROSS-EXAMINATION, HIS STATEMENT CANNOT BE ACCEPTED AND ON THE BASIS OF THAT STATEMENT DEMANDS CANNOT BE CONFIRMED ' : 55 . I HAVE FURTHER EXAMINED THE CASE BASED ON THE ADDITIO NAL WRITTEN SUBMISSIONS DATED 30.11.2015 MADE BY THE ASSESSEE ALONG WI TH THE CASE RECORDS AND MY FINDINGS ARE DETAILED IN THE BELOW PAR AGRAPHS . 55.1 IN THE INSTANT CASE, I FIND THAT THERE IS ALSO NO EV I DENCE ON RECORD TO SHOW THAT THE ASSESSEE MANUFACTURED AND CLEARED THE SAID UNACCOUNTED GUTKHA TO THE C&F AGENTS . FURTHER, NOT EVEN A SINGLE BUYER OF THE ALLEGED UNACCOUNTED GUTKHA HAS BEEN INQUIRED IN THE CASE , EVEN THOUGH SOME OF THE NAMES OF BUYERS ARE SAID TO BE FOUND ON THE LOOSE SL IPS, NO EFFORT IS MADE TO CONTACT THE PURCHASERS - OF SUCH UNACCOUNTED GUTKHA. THERE IS NO CROSS VERIFICATION OF THE ENTRIES IN THE SAID LOOSE SLIPS TO FIND OUT WHETHER THESE PERSONS HAVE R ECEIVED THE SAID GUTKHA OR NOT, WHICH IS AN IMPORTANT MATERIAL TO SUBSTANTIATE THE CASE OF THE DEP ARTMENT. THUS, I FIND THAT THERE IS NO EVIDENCE TO SHOW THAT THE SAID G UTKHA WAS SOLD TO THE PERSONS WHOSE NAMES WERE MENTIONED IN THE IMPUGNED LOOSE SLIPS. WITH REGARD TO THE INVESTIGATION CONDUCTED ON THE FL OW BACK OF SALE PROCEEDS OF SUCH UNACCOUNTED GUTKHA, NO CLINCHING EVI DENCE IS MADE AVAILABLE IN THE CASE , WHICH EVEN FAINTLY SUGGESTS THAT . THE ASSESSEE HAD RECEIVED MONEY AGAINST SUCH SALE OF UNACCOUNTED GUTKHA . 55 . 2 FURTHERMORE, ON THE QUESTION AS TO WHETHER THESE LOO SE SLIPS RECOVERED FROM SHRI . SOHANRAJ MEHTA CAN FORM A STRONG BASIS FOR ALLEGING CLANDESTINE CLEARANCE OF GUTKHA BY THE ASSESSEE, I FIND THAT SHRI.SOHANRAJ MEHTA IS ONLY AN INDEPENDENT C&F AGENT OF THE ASSESSEE W ORKING FOR THE COMMISSION HE RECEIVES FROM THE ASSESSEE AND IS NOT AT ALL RELATED TO THE BUSINESS CARRIED OUT BY THE ASSESSEE. I AM OF THE VIEW THA T THE ENTRIES MADE IN THE LOOSE SLIPS BY SHRI SOHANRAJ MEHTA CANNOT BE ACCEPTED AS CONCLUS I VE PROOF OF CLEARANCE OF UNACCOUNTED GUTKHA BY THE ASSESSEE. WHEN IT IS ALLEGED THAT THE ASSESSEE HAVE MANUFACTURED AND CLANDESTINELY C L EARED UNACCOUNTED GUTKHA THROUGH SHRI . SOHANRAJ MEHTA, CLINCHING EVIDENCE TO DEMONSTRATE THESE ALLEGATIONS SHO ULD HAVE BEEN MADE AVAILABLE. AT LEAST EVIDENCE IN THE FORM OF ADD ITIONAL MACHINES USED OR EXCESS ELECTRICITY CONSUMED OR EXCESS RAW MATERIA LS CONSUMED, EXCESS PACKING MATERIALS USED OR EXTRA LABOUR EMPLOYED , SHOULD HAVE BEEN MADE AVAILABLE TO ADVOCATE EXCESS PRODUCTION OF GUTKHA. FURTHER, WHEN IT IS ALLEGED THAT THE UNACCOUNTED GUTKHA WAS TR ANSPORTED FROM THE FACTORY OF THE ASSESSEE TO THE PREMISES OF C&F AGENTS, I FIND THAT THERE IS NO INVESTIGATION CONDUCTED AS TO HOW SUCH LARG E QUANTITIES OF GUTKHA WERE TRANSPORTED FROM THE FACTORY TO THE C&F AGENT . ALSO, WHEN IT IS ALLEGED THAT THE UNACCOUNTED GUTKHA WAS SOLD FR OM THE C&F AGENTS TO THE DEALERS/CUSTOMERS, THE OFFICERS HAVE NOT INVESTIG ATED TO IDENTIFY SUCH BUYERS OF UNACCOUNTED GUTKHA . NONE OF THE BUYERS OF GUTKHA HAVE BEEN EXAMINED AND NO STATEMENT OF ANY BUYERS OF IMPUG NED UNACCOUNTED GUKTHA IS RECORDED . THUS, IN MY VIEW, A DEMAND BASED ON RECORDS OF THIRD PARTIES, WITHOUT CONSIDERING OTHER PA RAMETERS LIKE POWER CONSUMPTION, PROCUREMENT OF RAW MATERIALS, USAGE OF ADDITIONAL MACHINERY, DEPLOYMENT OF EXTRA LABOUR, ETC . , IS NOT SUSTAINABLE. IN SUPPORT OF MY VIEWS , I PLACE RELIANCE ON THE DECISIONS IN THE CASE OF RH I NO RUBBERS PVT . LTD. VS. CCE, REPORTED I N 1996 (85) ELT 260 (TRI . ) WHERE IT IS HELD THAT 'IT IS NOT SAFE TO RELY ONLY ON THE THIRD PARTY'S 87 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 RECORDS EVIDENCE WHEN NO DIRECT LINKS OF THE TRANSACT IONS ESTABLISHED - OTHER PARAMETERS LIKE ELECTRICITY CONSUMPTION ETC. SHO ULD HAVE BEEN CONSIDERED BEFORE DEMANDING DUTY ON THE ALLEGED CLAN DESTINE MANUFACTURE AND REMOVAL OF GOODS' AND KOTHARI SYNTHE TIC INDUSTRIES VS. CCE, REPORTED IN 2002 (14) ELT 558 (TRI . ) WHEREIN IT I S OBSERVED THAT 'NO STATEMENT OF ANY BUYER TO WHOM THE APPELLANTS ALL EGEDLY SOLD THE PROCESSED FABRICS HAD BEEN RECORDED NOR ANY DOCUMENTS SH OWING THE CLEARANCE OF SUCH FABRICS BY THEM, IN A CLANDESTINE MA NNER; HAD BEEN PLACED ON RECORD. IT IS WELL SETTLED THAT THE CHARGE OF CLANDESTINE REMOVAL OF THE GOODS HAS TO BE ESTABLISHED BY ADDUCING POSITIVE EVIDENCE AND THAT THE SAME CANNOT BE BASED ON ASSUMPTIO NS AND PRESUMPTIONS'. 55.3 BESIDES, THE INVESTIGATIONS CARRIED OUT I N THE CASE HAS FAILED TO SHOW HOW SUCH LARGE QUANTITIES OF UNACCOUNTED GUTKHA W AS TRANSPORTED FROM THE FACTORY OF THE ASSESSEE TO THE PREMISES OF C&F AGENTS. THERE IS NO CORROBORATIVE EVIDENCE TO SHOW THE MOVEMENT OF GO ODS . IN FACT THIS PART HAS NOT AT ALL BEEN - INVESTIGATED. IAM THEREFORE OF THE VIEW THAT THE DEMAND CANNOT BE RAISED ON THE BASIS OF RECORDS RECOVERED FROM TH I RD PARTIES WITHOUT ANY CORROBORATIVE EVIDENCE TO SHOW TH AT THE MOVEMENT OF GOODS FROM THE PREMISES OF A MANUFACTURER HAS TAKEN PLACE. IN THIS REGARD, RELIANCE IS PLACED ON THE DECISIONS IN THE CASE OF RAMA SHYAMA PAPERS VS. CCE REPORTED IN 2004 (168) ELT 494 (TRI . ) WHEREIN IT IS HELD BY THE HON'BLE TRIBUNAL THAT ' RECORDS SEIZED FROM THIRD PARTY - NO EVIDENCE PRODUCED TO SHOW MOVEMENT OF GOODS FROM PREM ISES OF ASSESSEE TO THAT PARTY AND NO ENQUIRY MADE AS TO WHO ULT IMATELY RECEIVED THOSE GOODS. FURTHER, IN THE CASE OF RUTVI S TEEL VS. CCE REPORTED IN 2009 (243) ELT 154 (TRI . ), IT WAS OBSERVED THAT 'AS REGARDS THE CONFIRMATION OF DEMAND OF DUTY OF RS.1,21,290/ - , WE FIND THAT THE SAME STANDS CONFIRMED ON THE FINDINGS OF THE CLANDESTINE REMOVAL , WHICH IN TURN ARE BASED UPON THE SOLE STATEMENT OF SHR I MANHARLAL VIRADIA OF M/S . PATEL ROLLING MILLS AND M/S. MARUTI CEMENT. THERE IS NO OTHER EVIDENCE ON RECORD ESTABLISHING ANY CLANDESTINE REMOVAL . THE FINAL PRODUCTS WERE FOUND TO BE TALLYING WITH THE RE CORDED BALANCE IN RG-23A PART-I AT THE TIME OF VISIT OF THE OFFICERS. I T DOES NOT REQUIRE . THE SUPPORT OF PRECEDENT DECISIONS TO HOLD THAT THE CHARGE S OF CLANDESTINE REMOVAL ARE REQUIRED TO BE ESTABLISHED BY PRODUCTION OF SUFFICIENT AND POSITIVE EVIDENCE LEADING TO INEVITABLE CONCLUSION AN D THE SAME CANNOT BE UPHELD ON THE BASIS OF THE ENTRIES MADE IN A DIARY RECOVERED FROM THE THIRD PARTY'S PREMISES AND THE STATEMENT OF THE AUTHORI ZED REPRESENTATIVE OF THAT PARTY. WE ARE, ACCORDINGLY, O F THE VIEW THAT THE FINDINGS OF CLANDESTINE REMOVAL ARE UNSUSTAINABLE'. IN THE CASE OF CCE VS. RAJAGURU SPINNING MILLS PVT . LTD. REPORTED IN 2009 (243) ELT 280 (TRI . ) , IT WAS HELD THAT' WE FIND THAT CHARGE OF EVASION CANN OT BE FOUND SOLELY ON THE BASIS OF RECORDS OF THIRD PARTY'. I FIND THAT THE RATIO OF THE ABOVE DECISIONS IS SQUARELY APPLICABLE TO THE INSTANT CA SE. 55 . 4 THE HON ' BLE TRIBUNAL WHILE REMANDING THE CASE BACK TO THE OR I GINAL AUTHORITY HAD OBSERVED THAT' WHAT IS REQUIRED T O BE PROVED BY THE DEPARTMENT IS PREPONDERANCE OF PROBABILITY'. TH ERE IS NO DOUBT THAT THE DEPARTMENT NEED NOT ESTABLISH AN OFFENCE CASE WITH MATHEMATICAL PRECISION AS REQUIRED IN A CRIMINAL CASE BUT PREPONDERANCE OF PROBABILITY IS ALSO SUFFICIENT IN A DEPARTMENT'S CASE. IN THE PRESENT PROCEEDINGS THERE IS NO EVIDENCE RECOVERED FROM THE FACTORY PREMISES OF THE ASSESSEE POINTING TOWARDS A LL EGED CLANDESTINE CLEARANCE OF GUTKHA. ' NOT A SINGLE POUCH OF ILLICITLY CLEARED GUTKHA IS SEIZED IN THE CASE EITHER I N THE FACTORY PREMISES OR AT THE PREMISES OF THE C&F AGENTS. ALSO, NO GUTKHA THAT IS ALLEGED TO HAV E BEEN 88 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 MANUFACTURED AND CLEARED CLANDESTINELY IS SEIZED FROM THE DEALER OR DISTRIBUTORS OR EVEN THE BUYERS OF THE SAID GOODS. WHEN IT IS ALLEGED THAT EXCESS PRODUCTION OF GU TKH A H APPENE D A T TH E F ACTORY PREMISES OF THE ASSESSEE AND THAT THE GOODS WERE CLEARED FROM THE FACTOR Y TO THE C&F AGENTS, NO INSTANCE OF TRANSPORTATION OF THE SAID UNACC OUNTED GUTKHA HAS BEEN ESTABLISHED. IN TH I S REGARD; THE INVESTIGATION HAS NOT IDENTIFIED EVEN A SINGLE TRANSPORTER OF IMPUGNED GOODS. TO MAKE A CASE ON THE BASIS OF PR I NCIPLES OF PREPONDERANCE OF PROBABILITY, AT LEAST ON E PIECE OF EVIDENCE SUGGESTING MANUFACTURE OR CLEARANCE OR TRANSP ORTATION OF GUTKHA FROM THE ASSESSEE'S PREMISES IS REQUIRED TO BE AVAIL ABLE . IN THE ABSENCE OF ANY SUCH INDICATORS, I FIND THAT THE INVESTI GATION HAS FAILED TO ESTABL I SH A CASE BASED ON THE PRINCIPLES OF PREPONDERANCE OF PROBABILITY. THE ONLY EVIDENCE PUT FORTH BY THE INV ESTIGATION IN TH I S CASE IS THE LOOSE SLIPS RECOVERED FROM SHRI . SOHANRAJ MEHTA WHERE HE HAS CLAIMED THAT SOME OF THE ENTRIES RELATE TO UNACCOUNTE D GUTKHA RECEIVED FROM THE ASSESSEE. EVEN IF IT IS ACCEPTED THAT THESE ENTR IES RELATE TO THE SALE OF UNACCOUNTED GUTKHA, THERE IS NO EVIDENCE WHAT SOEVER TO SUGGEST THAT THE SAID UNACCOUNTED GUTKHA BELONGED TO THE ASSESSE E. IN THE ABSENCE OF ANY EVIDENCE, THE ONLY WAY TO ASCERTAIN TH AT THE UNACCOUNTED GUTKHA BELONGED TO THE ASSESSEE WAS BY WAY OF CROSS EXAMI NATION OF SHRI . SOHANRAJ MEHTA . THE HON'BLE HIGH COURT OF KARNATAKA IN ITS ORDER DATED 25.06 . 2015 HAD SPECIFICALLY DIRECTED THE ADJUDICATING AUT HORITY TO ALLOW CROSS EXAMINATION OF SHR I . SOHANRAJ MEHTA AND HAD REJECTED THE ASSESSEE'S PLEA TO ALLOW CROSS-EXAMINATION OF OTHERS. EVE N AFTER SEVERAL OPPORTUNITIES BEING GIVEN TO SHRI . SOHANRAJ MEHTA TO APPEAR FOR CROSS- EXAMINATION, HE FAILED TO APPEAR BEFORE THE ADJUDIC ATING AUTHORITY AND THUS HE COULD NOT BE CROSS - EXAMINED BY THE ASSESSEE. THEREFORE, PLACING RELIANCE SOLELY ON HIS STATEMENT THAT THE ENTRIES IN T HE LOOSE SLIPS SUFFIXED WITH THE LETTER 'A' RELATE TO UNACCOUNTED G UTKHA, WITHOUT ANY OTHER CORROBORATIVE EVIDENCE, WOULD BE UNJUSTIFIED. AS PER THE INVESTIGATION, THE ABOVE EVIDENCE I S SUFFICIENT TO SUSTAIN THE CHARGES AGAINST THE ASSESSEE. AT FIRST B R USH, IT MAY APPEAR TO BE SUFFIC I ENT. HOWEVER, A PROPER EXAMINATION OF THE FACTS OF THE CA SE PROVE OTHERWISE. I FIND THAT THE ABOVE EVIDENCE I S NOT CREDIBLE MATERIAL AND NOT SUFFICIENT TO ESTABLISH THE CASE AGAINST THE ASSESSEE EVEN APPLYING THE TEST OF PREPONDERANCE OF PROBABILITY. 56. IN VIEW OF MY FINDINGS RECORDED ABOVE, IT IS EVID ENT THAT THERE IS NO SIGN OF EXCESS CONSUMPTION OF RAW MATERIALS OR PACKIN G MATERIALS BY THE ASSESSEE IN THE INSTANT CASE. THERE IS NO TANGIBLE EVI DENCE ON RECORD TO DEMONSTRATE THAT THERE WAS EXCESS U S E OF MACHI N ES . O R . EXCESS MANUFACTURING OF GUTKHA WAS . DONE IN A DDITIONAL SHIFTS OF WORK BY THE ASSESSEE DURING THE RELEVANT PERIOD. ALSO , NOT A SINGLE CONSIGNMENT OF UNACCOUNTED GUTKHA HAS BEEN SEIZED OR INTERCEPTED WH I LE BEING ALLEGEDLY CLEARED WITHOUT PAYMENT OF DUTY . I FIND THAT THE ONLY EVIDENCE AVAILABLE IS THE STATEMENT OF SHRI . SOHANRAJ MEHTA, WHICH IS NOT AT ALL CORROBORATED BY ANY OTHER EVIDENCE. 57. I FIND THAT THERE IS FAILURE ON PART OF THE I NVESTIGATION TO GATHER CORROBORATIVE EVIDENCES IN THE CASE, WHICH HAS RESULTED IN THE I NVESTIGATION BEING INCONCLUSIVE. AS POINTED OUT THE HO N ' BLE CESTAT IN ITS FINAL ORDER DATED 20 . 10.2014, MANY CRUCIAL ASPECTS HAVE NOT BEEN VERIFIED BY THE INVESTIGATING TEAM . BASED ON SUCH INCOMPLETE INVESTIGATION, NO DEFINITE CONCLUSION CAN BE ARRIVED AT . IN MY VIEW, INCOMPLETE INVESTIGATION CANNOT AND COULD NOT CONSTIT UTE THE GROUNDS FOR ANY ALLEGATION. AS A RESULT OF THIS, IT CANNOT BE ALLEGED THAT THE STAMPS OF THE CHECK POST, SEEN ON THE TRANSPORT DOCUMENT S, ARE FAKE . 89 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 HENCE, I AM COMPELLED TO HOLD THAT NO CASE OF CLANDE STINE MANUFACTURE AND CLEARANCE OF GUTKHA HAS BEEN ESTABLISHED AGAINST TH E ASSESSEE. 58. IN V I EW OF THE ABOVE, I HOLD THAT THE TOTAL DEMAND OF RS.26,57,29,571/- MADE AGAINST THE ASSESSEE IN THE SHOW C AUSE NOTICE SI . NO.163/2012 DATED 01 . 08.2012, IN TERMS OF PROVISO TO SECTION 11A(1)/SECTION 11A OF CENTRAL EXCISE ACT, 1944, ALLE GING CLANDESTINE CLEARANCE OF GUTKHA DURING THE PERIOD FROM JULY 200 7 TO FEBRUARY 2008 , IS NOT SUSTA I NABLE . I ALSO HOLD THE DEMAND OF INTEREST IN TERMS OF SECTIO N 11AB/SECTION 11AA OF THE CENTRAL EXCISE ACT, 1944 IS ALSO NOT SUSTAINABLE. FOR THE ABOVE MENTIONED REASONS , THERE IS NO JUSTIFICATION TO HOLD 57085 CARTONS OF R . M.D.GUTKHA AS LIABLE FOR CONFISCATION. I ALSO HOLD THAT THE PENALTY PROPOSED TO BE IMPOSED ON THE A SSESSEE UNDER SECTION 11AC OF CENTRAL EXCISE ACT, 1944 AND RULE 25 OF CENTRAL EXCISE RULES, 2002 IS NOT SUSTAINABLE . 58.1 FURTHER, BASED ON MY FINDING THAT THE DEMAND ON THE MAIN NOTICEE IS NOT SUSTAINABLE AND BASED ON THE WRITTEN SUBMISSIONS MAD E BY THE CO-NOTICEES IN THE CASE,1 ALSO HOLD THAT THE PENALTIES PROPOSED UNDER RU L E 26 OF CENTRAL EXCISE RULES, 2002 AGAINST (I)SHRI.RA SIKLAL M.DHARIWAL, CHAIRMAN OF M/S . DHARIWAL INDUSTRIES LIMITED, BANGALORE, (II)SHRI . PRAKASH R.DHARIWAL, MANAGING DIRECTOR OF M/S.DHARIWAL INDUSTRIES LIMITED , BANGALORE, (III)SHRI . 5OHANRAJ MEHTA, . PARTNER OF M/S . MEHTA ASSOCIATES, BANGALORE , (IV)SHRI . PRASHANTH S . BAFNA, CEO[PRODUCTION] OF M/S . DHARIWAL INDUSTRIES LIMITED, BANGALORE, (V) SHRI . JEEVAN B.SANCHETI, CEO[ACCOUNTS] OF M/S . DHARIWAL INDUSTRIES LIMITED, BANGALORE, (VI)SHRI . PAVAN KUMAR MEHTA, PROPRIETOR OF M/S . STUTI ENTERPRISES , BANGALORE, (VII)SHRI.M . B.MALL I KARJUNA OF SRI GAJANANA ARECANUT TRADERS/AGENCIES, SHIMOGA (VIII) M/ S . CHAMPION PACKAGING INDUSTRIES PVT. LTD., BANGALORE AND (IX)M/S . RAJHANS ENTERPRISES, BANGALORE , IS NOT LIABLE TO BE IMPOSED ON THEM AS THE SAME IS UNSUS T AINABLE IN VIEW OF MY ABOVE FINDINGS, I PASS THE FOLLOWING ORD ER. I DROP THE PROCEEDINGS INITIATED AGAINST M/S.DHARIWAL INDUSTRIES LIMITED., NO.2, 3 & 4, SINGASANDRA, HOSUR ROAD, BANGA LORE - 560 068 UNDER SHOW CAUSE NOTICE SL.NO.163/2012 DATED 01.08.20 12 ISSUED FROM FILE C.NO.V/24/15/154/2012C1 ISSUED BY THE COMMISSIONE R OF CENTRAL EXCISE, BANGALORE-I COMMISSIONERATE, BANGALORE. I ALSO DROP TH E PROCEEDINGS INITIATED AGAINST SHRI . RASIKLAL M.DHARIWAL, SHRI.PRAKASH R.DHARIWAL, SHRI . SOHANRAJ MEHTA, SHRI . PRASHANTH S. BAFNA, SHRI . JEEVAN B. SANCHETI, SHRI . PAVAN KUMAR MEHTA , SHR I . M.B . MALLIKARJUNA, MIS . CHAMPION PACKAGING INDUSTRIES PVT . LTD . , BANGALORE AND M/S.RAJHANS ENTERPRISES. BANGALORE, IN THE SAID NOTICE. 125. WE FIND THE AO IN THE INSTANT CASE WHILE ESTIMATING TH E ESTIMATED PRODUCTION AND TURNOVER OF THE BANGALORE FACTORY HAS ALSO BASED HIS CALCULATION ON THE BASIS OF THE PRODUCTION OF THE BARODA UNIT OF THE ASSESSEE COMPANY. HOWEVER, SINCE THE COMM ISSIONER, CENTRAL EXCISE AFTER THOROUGH INVESTIGATION BY THE EXCISE 90 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 DEPARTMENT HAS COME TO A CONCLUSION THAT THERE IS NO S UPPRESSED PRODUCTION OR EXCESS CONSUMPTION OF RAW MATERIALS OR PAC KING MATERIALS BY THE ASSESSEE OR EXCESS USE OF MACHINES OR EXCESS MANUFACTURING OF GUTKHA DONE IN ADDITIONAL SHIFTS WORKED BY THE ASSESSEE DURING THE RELEVANT PERIOD, THEREFORE, THE HUGE SUPPRESSED TURNOVER DETERMINED BY THE AO AND UPHELD BY THE CIT(A) IN OUR OPINION IS NOT JUSTIFIED. 126. WE FIND, THE ASSESSEE IS LIABLE TO PAY EXCISE DUTY ON ITS PRODUCTION IN THE FACTORY AT BANGALORE. IT HAD MAINTAINE D QUANTITATIVE STOCK ACCOUNT, RG1 REGISTER FOR THE PRODUC TION AND TILL THE DATE OF SEARCH NO DISCREPANCY WAS NOTICED BY THE E XCISE DEPARTMENT. ON PAGE 124 OF THE PAPER BOOK THE ASSESS EE HAS GIVEN THE DETAILS OF DATES ON WHICH THE EXCISE OFFICIALS HAVE VISITE D THE FACTORY PREMISES AND NO DISCREPANCY WAS NOTICED BY THEM. IT IS ALSO AN ADMITTED FACT THAT WHILE SOME EVIDENCE OF PAYMENT OF BRIBES TO SALES TAX PERSONNEL ARE MENTIONED IN THE DOCUMENTS S EIZED FROM MR. SOHANRAJ MEHTA, HOWEVER, NO SUCH EVIDENCE OF BRIBES P AID TO EXCISE PEOPLE ARE MENTIONED. HAD THERE BEEN ANY EXCESS PRODUCTION OF SUCH HUGE QUANTITY AS COMPUTED BY THE AO, SOME EVIDE NCE OF MANAGING THE EXCISE PEOPLE COULD HAVE BEEN FOUND. HOWEVE R, IT IS NOT THE CASE HERE. THEREFORE, THE COMPUTATION OF SUPPR ESSED PRODUCTION BY THE AO AND UPHELD BY THE CIT(A) IN OUR OPIN ION UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE CANNOT BE RELIED UPON. 127. WE FIND THE HONBLE ALLAHABAD HIGH COURT IN THE CASE O F CIT VS. MASCOT (INDIA) PVT. LTD. AND FORGINGS PVT. LTD. HAS HELD THAT WHEN THE SALES DECLARED BY THE ASSESSEE ARE ALL EXCISABLE GOODS, PERIODICALLY CHECKED BY EXCISE AUTHORITIES AND ALSO DULY AUDITED BY 91 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE AUDITORS, IT IS BEYOND COMPREHENSION THAT ANY ADDITION ON ACCOUNT OF ALLEGED SUPPRESSED SALES CAN BE MADE WITHOUT ANY VALID BASIS WHATSOEVER ON RECORD. THE RELEVANT OBSERVATION O F THE HONBLE HIGH COURT READS AS UNDER : 6. THE MA I N CONTROVERSY IS WITH REGARD TO THE ADDITION OF RS . 15 , 99,158 MADE BY THE ASSESSING A UTHORIT Y ON ACCOUNT OF ALLEGED SUPPRESSION IN THE DOMESTIC S ALES; REJECTION OF BOOK RESULTS AND APPL Y ING A NET PROFIT RATE OF 22 PER CENT BY THE ASSES S ING AUTHORIT Y AND DISALLOWANCE OF RS . 5 , 71,832 PAID B Y THE ASSESSEE AS COMMISSION ON INDIRECT EXPORT SALES. 7. TH E TRIBUNAL WHIL E D E LETING THE ADDITION OF RS. 15, 9 9 ,1 58 MADE BY THE AO ON ACCOUNT OF ALLEGED SUPPR E SSION IN DOMESTIC SALES HAS DEALT WITH EACH AND EVERY ASPECT OF THE MATTER AND ALSO MET TH E R E A S ONIN G OF THE AO AND WAS OF THE OPINION THAT THE ADDITION OF R S. 15,99,158 MADE BY THE AO ON ACCOUNT OF ALLEGED SUPPRESSION IN DOMESTI C SALES WAS UNJUSTIFIED . THE ASSESSEE HAD CLAIMED COMMISSION AND DISCOUNT OF RS . 11 , 80 , 488 . THIS COMMISSION AND DISCOUNT WAS RANGING BETWEEN 1 AND 7 PER CENT IN THE CASE OF DIFFERENT PARTI E S . THE ASSESSEE EXPLAINED THAT ON LOCAL S ALE , CASH D I SCOUNT O F 1 PER CENT IS ALLOWED TO THE CUSTOMERS AND 3 PER CENT AGENCY COMMISSION IS ALLOWED TO THE AGENT. ON EXPORT SALES , AGENCY COMMISSION WAS 5 PER CENT EXCEPT IN THE CASE OF M/ S KAJRIWAL E NTERPRI S ES TO WHOM COMMISSION AT 7 ' L 1 ER CENT WAS ALLOWED. THE AO HAD ALSO NOTED THE COMPLETE DETAILS O F THE COMMISSION PAID BY ASSESSEE. THE DETAILS OF DOMESTIC SALES , COMMIS S ION AND DISCOUNT PAID THEREON WAS FURNISHED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES . THE ENTIRE SALES MADE BY THE ASSESSEE ARE ' OF EXCISABLE GOODS. WHILE DELETING THE ADDITION OF RS . 15 , 99 , 158 MADE BY THE AO THE TRIBUNAL , INTER ALIA , HA S OBSERVED AS FOLLOWS: 'IT IS BE Y OND COMPREHENSION THAT THE CHARGE OF ALLEGED SUPPRESSI ON OF SALES HAS BEEN CONFIRMED B Y THE CIT(A) WITHOUT APPLYING HIS MIND ON SUCH ELABORATE WRITTEN SUBMISSION AND C OMPREHEN S IVE DETAILS S UBMITTED BEFORE HIM BY THE ASSESSEE . THE AO HAS BROUGHT NO MATERIAL OR E V IDENCE ON RECORDS TO PROVE THE EXISTENCE OF ANY UNACC OUNTED LOCAL SALES HAVING BEEN MADE B Y TH E A SS E SS EE . T H E SALE S DE C LARED B Y THE ASSESSEE ARE OF EXCISABLE GOODS . THE CORRECTNESS OF DECLARED SALES IS S UPPORTED BY REGULAR BOOKS OF ACCOUNT WHICH HAVE DULY BEEN AUDITED BY THE AUDITORS AS REQUIRED B Y VARIOUS PROVISIONS OF THE COMPANIES ACT AND THE IT ACT. THE AUDITOR S HAVE GIVEN UNQUALIFIED REPORT. THE EXCISE AUTHORITIES HAVE NOT DOUBTED THE CORRECTNESS OF THE DE CLARED SALES. THE SALES RECORDED IN THE BOOKS OF ACCOUNT ARE SUPPORTED BY VARIOUS EXCISE REGISTERS , WHICH ARE PERIODICALLY CHECKED AND VERIFIED B Y THE EXCISE AUTHORITIES . IT IS BEYOND COMPREHENSION THAT AN Y ADDITION ON ACCOUNT OF ALLEGED SUPPRESSED SALES CAN BE MADE WITHOUT ANY V ALID BASIS WHATSOEVER ON RECORD. WE, ARE , THEREFORE , OF THE CONSIDER E D OPINION THAT THE ADDITION OF RS. 15 , 99 , 158 MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(A) ON ACCOUNT OF ALLEGED SUPPRESSION OF DO MESTIC SALES IS PATENTLY WRONG . THE SAME IS , THEREFORE , DELETED.' 8. THE FINDING S RECORDED B Y THE TRIBUNAL ARE BASED ON APPRECIATION OF FACT AND MAT E RIAL AVAILABLE ON RECORD. WE DO NOT FIND ANY ILLEGA LITY OR INFIRMITY M THE ORDER PASSED BY THE TRIBUNAL ON THE A FORESAID ISSUE. 92 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 128. WE FIND THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SANJAY OIL CAKE INDUSTRIES REPORTED IN 197 CTR 520 HAS HELD AS UNDER : 8. THE TRIBUNAL H A S UPHELD THE FINDINGS RECORDED BY C IT(A) FOR DELETING THE ADDITIONS ON ACCOUNT OF U ND I SCLOSED INCOME ON ACCOUNT OF SUPPRESSED S ALES OF OIL AND OIL-CAKES. IT HAS BEEN FOUND B Y THE TRIBUNAL THAT IT IS AN UNDISPUTED FACT THAT R E GULAR BOOK S OF ACCOUNT HA V E BE E N MAINTAINED B Y THE AS S E SSE E ALONG W ITH RECORDS OF STOCK AS REQUIRED UNDER THE PROVISIONS OF THE EXCISE LAW. THAT CO R R E CTN ESS O F BOOK RE S ULT S RELATING TO PRODUCTION OF O IL AND OIL - C A KES HAS BEEN ACCEPTED BY THE IT A UTHORITI ES IN THE PAST . THE PRODUCTION OF OIL AND OIL-CAKES AS W ELL AS S TOCK RECORDS HAVE BEEN E XAMINED B Y THE EXCISE DEPARTMENT AND THE SALES-TAX DEPARTMENT AND NEITHER OF THOSE A UTHORITIES , W HO A RE AL S O REVENUE AUTHORITIES , HAVE FOUND AN Y DISCREPANCY IN THE RECORDS MAINTAINED B Y THE ASSESSEE. SIMILARLY , THE TRIBUNAL HAS T A KEN COGNIZANCE OF THE FACT THAT THE SURPRISE V ISIT S BY THE O F FICIALS OF CI V IL SUPPLIES DEPARTM E NT HA VE RE V EAL E D THAT THERE WERE NO IRREGULARITI E S IN TH E MAINTENANCE OF STOCK , AND THE PH Y SICAL STOCK AND THE STOCK R ECORDS TALLIED AND W ERE FOUND IN ORDER . THE TRIBUNAL HAS ALSO FOUND THAT PERCENTAGE OF YIELD OF OIL AND OIL-CAKES WOULD DEPEN D ON THE QUALITY OF GROUNDNUT AND THE QUALITY OF GROUNDNUT WAS LIKELY TO FLUCTUATE / VA R Y ON THE BA S IS OF VARIOUS FACTORS LIKE THE SEASON DURING WHICH PURC HASES WERE MADE , TH E A R EA F ROM W HERE THE PURCHASES WERE MADE , THE EXTENT OF MOISTURE CONTENT IN THE GROUNDNUT WHICH IN TURN W OULD DEPEND UPON THE EXTENT OF RAIN, AND ALSO TECHNICAL E F FICIENCY OF THE CRUSHING PROC E SS IN EACH CA S E. THE TRIBUNAL HAS FURTHER FOUND THAT TH E AO HAS NOT POINTED OUT ANY SPECIFIC OMISSION OR SUPPRESSION IN THE BOOKS OF ACCOUNT MAINTAINED B Y THE ASS E SS E E . NOR HA S TH E REVENUE DISPUTED THE FACT THAT IN CASE OF VARIOUS E THER OIL MILLS , THE PERCENT A GE OF PRODUCTION OF OIL AND OIL-C A KES DURIN G THE Y EAR UNDER CONSIDERATION IS LESS WHEN COMPARED TO THE PERCENTAGE O F PRODUCTION IN CASE OF TH E ASSESSEE. ON THE BASIS OF THESE FACTORS , THE TRIBUNAL HA S CAME TO THE CONCLUSION THAT THE CIT(A) WAS JUSTIFIED IN DELETIN G THE ADDITIONS ON A CCOUNT OF A LLEGED SUPPRESSION OF UNACCOUNTED SALES OF OIL AND OIL-CAKES OF RS. 54 , 23 , 457 AND RS. 12 , 44 , 130 , RESPECTIVEL Y. 9. THE AFORES A ID FINDINGS RECORDED BY THE TRIBUNAL ARE SUPPORTED B Y THE EVIDENCE WHICH IS AVAILABLE IN THE PAPER BOOK AND NO MATERIAL HAS BEEN POINTED OUT SO AS TO TAKE A DIFFERENT VIEW OF THE MA TTER . THE TRIBUNAL H AS TAKEN INTO CONSIDERATION ALL R E LEVANT FA CT S FOR THE PURPOS E OF A DJUDIC A TING THE I SS UE A S TO WHETHER THERE WAS ANY SUPPRE S SED PRODUCTION OF OIL AND OIL-C A K E S RESULTING IN SALES OUTSIDE BOOKS AND CONSEQUENTLY UNDISCLOSED INCOME. IN THE RESULT, IT IS NOT NECESSARY TO REITERATE THE REASONS AND THE FACTORS WHICH HAVE WEIG HED WITH THE TRIBUNAL WHILE DELETING THE ADDITIONS ON THIS COUNT AND THERE BEING NO INFIRMITY IN THE ORDER OF THE TRIBUNAL IN RELATION TO THIS ISSUE, NO INTERFERENCE IS CALLED FOR. 10. THE QUESTION REFERRED AT THE INSTANCE OF THE REVENUE IS, THEREFORE, ANSWERED IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE A SSESSEE AND AGAINST THE REVENUE HOLDING THAT THE TRIBUNAL WAS RIGHT IN LAW I N DELETING THE ADDITION OF RS. 54,23,457 MADE ON ACCOUNT OF SUPPRESSE D PRODUCTION OF 28,284 TINS OF OIL AND ALSO RS.12,44,130 ON ACCOUNT OF SUPPRESSED PRODUCTION OF 678 TONS OF OIL-CAKES. 93 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 11. COMING TO THE REFERENCE AT THE INSTANCE OF THE ASSESSEE, THOUGH AS MANY AS SIX QUESTIONS HAVE BEEN REFERRED, THE ISSUE IS WHE THER THE ASSESSEE HAD MANUFACTURED 28,284 TINS AND FAILED TO SHOW THE SAID PRODUCTION IN THE ACCOUNTS MAINTAINED BY THE ASSESSEE. 129. WE FIND THE ASSESSEE FROM THE VERY BEGINNING WAS ST ATING THAT SHRI SOHANRAJ MEHTA MIGHT BE INDULGING IN PARALLEL BUSINESS S INCE THE PRODUCT OF THE COMPANY WAS A BRANDED PRODUCT. HE MIGHT BE INDULGING IN CLANDESTINE MANUFACTURING OF GUTKHA AND PAN MAS ALA. HOWEVER, THE REVENUE AUTHORITIES HAVE REJECTED THE ABO VE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THERE W AS NO OTHER STOCK FOUND ON THE DATE OF SEARCH OTHER THAN THAT OF M/S. DIL FROM THE PREMISES OF SHRI SOHANRAJ MEHTA. FURTHER, NO OTHER EVIDENCE WAS GIVEN BY THE ASSESSEE TO SUBSTANTIATE SUCH CLAIM. A T THE INSTANCE OF THE BENCH, THE ASSESSEE HAS FILED CERTAIN EVIDE NCES IN THE FORM OF COMPLAINT TO THE POLICE DEPARTMENT, NEWSPAPER ARTICLES PUBLISHED IN VARIOUS NEWSPAPERS REGARDING SPURIOUS MARKET ING OF GUTKHA OF THE ASSESSEE COMPANY ETC. AND ALSO COPY OF T HE CIVIL COURT, CHENNAI. WE FIND FROM THE VARIOUS EVIDENCES FURNISHED THAT THE ASSESSEE VIDE LETTER DATED 09-10-1996 HAS ADDRESS ED A LETTER TO THE POLICE INSPECTOR, VP ROAD, GIRGAON, BOMBAY ON 09-10-1 996 REGARDING SUPPLY OF COUNTERFEIT MANIKCHAND GUTKHA. A NEW SPAPER REPORT PUBLISHED IN MALAI MALLAR (TAMIL DAILY) DATED 11-10-199 7 SHOWS THE MANUFACTURING OF DUPLICATE PAN MASALA AND TEA D UST FOR WHICH 3 PERSONS WERE ARRESTED. SIMILARLY, ANOTHER NEWS ARTICLE PUBLISHED ON 11-10-1997 IN VIKATAN NEWSPAPER (TAMIL) SHOW S SEIZURE OF 20 BOXES OF SPURIOUS PAN MASALA AND GUTKHA B Y THE POLICE. THE VARIOUS FIR COPIES FILED SHOW SALE OF SPURIOUS P AN MASALA AND GUTKHA OF THE ASSESSEES BRAND AT HYDERABA D, JAISINGHPUR, TIRUCHY, KANPUR, MAHABUBNAGAR ETC. ALTHOUGH NO FIR COPY HAS BEEN FILED AT BANGALORE OR IN THE STATE OF KARNA TAKA, THE 94 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 SUBMISSION OF THE LD. COUNSEL THAT SPURIOUS PAN MASALA AN D GUTKHA UNDER THE BRAND NAME OF THE ASSESSEE COMPANY WAS BEING PRODUCED AND SOLD IN THE MARKET CANNOT BE SIMPLY BRUSHED ASIDE. 130. SO FAR AS THE FINDING OF THE REVENUE AUTHORITIES THAT THE PROFIT GENERATED FROM SUPPRESSED PRODUCTION AND SALE WAS DIVER TED TO VARIOUS PERSONS WHOSE NAMES APPEAR IN THE SEIZED DOCU MENTS IS CONCERNED, WE FIND THE DIFFERENT BENCHES OF THE TRIBUNAL HAV E DELETED SUCH ADDITION MADE IN THEIR HANDS. WE FIND THE BAN GALORE BENCH OF THE TRIBUNAL IN THE CASE OF CIT VS. H.S. CHANDRAMOULI VIDE ITA NO.1551/BANG/2012 ORDER DATED 20-08-2013 HAS UPH ELD THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.22,75,000/- WHICH WAS ADDED BY THE AO ON ACCOUNT OF RECEIPT OF THE ABOV E SUM FROM SHRI SOHANRAJ MEHTA, C&F AGENT OF M/S. DIL FOR KARNATAKA REGION. THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF MOHD. Y AKUB PERFUMERS PVT. LTD. VIDE ITA NO.388/LKW/2013 ORDER DATED 10-12- 2014 HAS UPHELD THE ORDER OF THE CIT(A) IN DELETING THE AD DITION OF RS.50 LAKHS WHICH WAS ADDED BY THE AO ON ACCOUNT OF ENT RY FOUND IN THE DOCUMENTS OF SHRI SOHANRAJ MEHTA, C&F AGENT OF RM D GROUP AT BANGALORE. THE LUCKNOW BENCH OF THE TRIBU NAL IN THE CASE OF DCIT VS. PAVAN KUMAR AGARWAL VIDE ITA NO.413/LK W/2012 AND CO NO.70/LKW/2012 ORDER DATED 16-02-2015 HAS UP HELD THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.1,13,40,000/- MADE BY THE AO ON ACCOUNT OF ADDITION ON THE BASIS OF S EIZED DOCUMENT OF SHRI SOHANRAJ MEHTA. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. BHOLANATH RADHAKRISHNA VIDE ITA NO.5149/DEL/2012 ORDER DATED 15-04-2013 HAS UPHELD THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.9 CRORES MADE BY THE AO ON THE BASIS OF ENTRIES FOUND IN THE BOOKS OF SHRI SOHANRAJ MEHTA, C&F 95 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 AGENT FOR KARNATAKA REGION OF RMD GROUP. THE PUNE BENC H OF THE TRIBUNAL IN THE CASE OF PRADEEP ARUN RUNWAL REPORTED IN 1 49 ITR 548 HAS ALSO DELETED THE ADDITION MADE BY THE AO AND UP HELD BY THE CIT(A) ON ACCOUNT OF ADDITIONS MADE ON THE BASIS OF TH E SEIZED PAPERS FROM SHRI SOHANRAJ MEHTA, C&F AGENT OF RMD GROUP. 131. BASED ON THE ABOVE DECISIONS, THE PUNE BENCH OF TH E TRIBUNAL IN THE CASE OF SHRI VINIT RANAWAT VIDE ACIT VIDE ITA NOS. 1105 AND 1106/PN/2013 ORDER DATED 12-06-2015 FOR A.YRS. 2006-07 AND 2007-08 HAS DELETED THE ADDITION OF RS.21 CRORES MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH IN THE CASE OF SHRI SOHANRAJ MEHTA, C&F AGENT OF M/S. DIL FOR KARNATAKA REGION. THUS, WE FIND SOME FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE D IFFERENT BENCHES OF THE TRIBUNAL HAVE DELETED THE ADDITIONS MADE I N THEIR HANDS ON THE BASIS OF SO CALLED DEPLOYMENT OF FUNDS BY THE ASSESSEE COMPANY OUT OF THE GENERATION OF UNACCOUNTED INCOME OUT OF SUPPRESSED TURNOVER. 132. AS MENTIONED EARLIER, NO INCRIMINATING DOCUMENTS IN SHA PE OF ANY UNACCOUNTED PURCHASE, UNACCOUNTED SALE, UNACCOUNT ED TRANSPORT RECEIPT WAS FOUND EITHER DURING THE COURSE O F SEARCH AT THE PLACE OF SHRI SOHANRAJ MEHTA/SHRI MITHULAL OR AT THE P REMISES OF THE ASSESSEE. IF THE EXTENT OF UNACCOUNTED PRODUCTIO N AND UNACCOUNTED TURNOVER AS COMPUTED BY THE AO IS BELIEVED , THEN ATLEAST 700 TO 800 TRUCKS ARE REQUIRED, A FINDING GIVEN BY THE COMMISSIONER, CENTRAL EXCISE. THEREFORE, WE FIND FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IF THE ASSESSEE WAS INDULGING IN THE CLANDESTINE MANUFACTURING OF GUTKHA, THE N ATLEAST SOME EVIDENCE COULD HAVE BEEN FOUND WHICH IS NOT IN THE 96 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 INSTANT CASE. EVEN THE COMMISSIONER, CENTRAL EXCISE HAS ALSO GIVEN HIS FINDINGS THAT THERE WAS NO UNACCOUNTED PRODUCTION. I N OUR OPINION, THE QUESTION OF UNACCOUNTED TURNOVER WILL ARISE ONL Y WHEN THERE IS UNACCOUNTED PRODUCTION. SINCE ONE GOVERNMENT AUTHORITY, AFTER THOROUGH INVESTIGATION, HAS GIVEN A FINDING THAT THERE IS NO UNACCOUNTED PRODUCTION AND CLEARANCE OF SUCH UNACCOUN TED GUTKHA TO THE C&F AGENT, THEREFORE, ESTIMATION OF HUGE UNACCOUNTED PRODUCUCTION AND SALE THEREOF AS DETERMINED BY THE AO IN THE BODY OF THE ASSESSMENT ORDER AND UPHELD BY THE CIT(A), IN OUR OPINION IS UNCALLED FOR. 133. THERE IS ANOTHER ASPECT WHICH WE HAVE NOTICED IS R EGARDING DECODING OF THE FIGURES. WE FIND THERE ARE CERTAIN CHITS WH ICH ARE FOUND DURING THE COURSE OF SEARCH IN THE PLACE OF SHRI SOH ANRAJ MEHTA/SHRI MITHULAL, COPIES OF WHICH ARE PLACED AT PAPER BO OK PAGES 41 TO 102 OF THE PAPER BOOK. THESE CHITS SHOW A MOUNTS WRITTEN BOTH IN WORDS AS WELL AS IN FIGURES. THEREFORE, WHEN THE CHITS CONTAIN THE AMOUNTS WRITTEN BOTH IN WORDS AND FIGUR ES, THEREFORE, IN ABSENCE OF ANY COGENT EVIDENCE IN THE HAND S OF THE DEPARTMENT, IT IS NOT PROPER TO DECODE THE SAME BY ADD ING TWO MORE ZEROS. 134. SO FAR AS THE STATEMENT OF VARIOUS PERSONS RECORD ED DURING THE COURSE OF SEARCH IN THE CASE OF SHRI SOHANRAJ MEHT A ARE CONCERNED, THE PRESUMPTIONS U/S.132(4A) WILL APPLY TO THE P ERSON WHO IS SEARCHED AND IN WHOSE CUSTODY THE PAPERS ARE FO UND. THEREFORE, WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT LOOSE PAPERS FOUND WITH SHRI SOHANRA J MEHTA CANNOT BE PRESUMED TO BE BELONGING TO THE ASSESSEE OR REFLECTING THE BUSINESS TRANSACTION OF THE ASSESSEE. IT HAS BEEN HELD IN VARIOUS 97 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 DECISIONS THAT THE PRESUMPTION U/S.132(4A) IS APPLICABLE ONLY AGAINST THE PERSON FROM WHOSE POSSESSION THE BOOKS O F ACCOUNT OR OTHER DOCUMENTS WERE FOUND AND NOT AGAINST ANY OTHER PERSON. IT HAS BEEN HELD THAT AS PER SECTION 132(4A) WHERE ANY BOO KS OF ACCOUNT OR DOCUMENT IS FOUND IN THE POSSESSION AND CONT ROL OF ANY PERSON IN THE COURSE OF THE SEARCH, IT IS TO BE PRESUME D THAT THEY BELONG TO SUCH PERSON. THUS, CLEARLY THE PRESUMPTION IS IN RESPECT OF THE PERSON FROM WHOM THEY WERE FOUND. IN THE INSTANT CASE, SUCH INCRIMINATING DOCUMENTS WERE FOUND FROM THE POSSESSIO N OF SHRI SOHANRAJ MEHTA/SHRI MITHULAL. THEREFORE, WE FIND FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT PRESU MPTION U/S.132(4A) WILL BE APPLICABLE TO SHRI SOHANRAJ MEHTA AND NOT TO THE ASSESSEE COMPANY. 135. ANOTHER ASPECT TO BE CONSIDERED IS NON-FINDING OF AN Y UNACCOUNTED CASH OR ASSET OR INVESTMENT OF SUCH HUGE AMOUNTS FROM GENERATION OF SUCH HUGE UNACCOUNTED MONEY. NO DOU BT THE COURTS HAVE HELD THAT IF EVIDENCE OF UNDISCLOSED INCOME IS FOUND THEN CORRESPONDING ASSET/EXPENSES NEED NOT BE PROVED . HOWEVER, IF SUCH UNDISCLOSED INCOME IS DETERMINED ON THE BASIS OF ESTI MATION, AS IN THE INSTANT CASE, THEN FINDING OF SUCH CORRESPONDING ASSET COULD HAVE GIVEN SOME CREDENCE TO SUCH ESTIMATED INCOM E. HOWEVER, THE SAME IS NOT THERE IN THE INSTANT CASE. 136. WE ALSO FIND FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT PAPERS FOUND FROM SHRI SOHANRAJ MEHT A IS FOR THE PERIOD FROM JANUARY 2003 TO FEBRUARY, 2008. THE SEARCH TOOK PLACE ON 09-10-2009 AT SHRI MEHTAS PLACE. HOWEVER, FOR THE PERIOD FROM MARCH 2008 TILL THE DATE OF SEARCH, NO LOOSE PAPERS WERE FOUND. THEREFORE, IF THE ASSESSEE WAS HAVING SUCH ROARING UNACC OUNTED 98 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 BUSINESS, THERE WAS NO REASON TO STOP SUCH LUCRATIVE BU SINESS FROM MARCH 2008 ONWARDS. SECONDLY, IF THE INFERENCE IS THAT SH RI SOHANRAJ MEHTA HAS ALREADY GIVEN THE ACCOUNT FOR THIS P ERIOD TO THE ASSESSEE AND THEREFORE HE HAS DESTROYED THE PAPERS, THERE IS NO REASON AS TO WHY HE SHOULD HAVE MAINTAINED THE PAPERS FOR THE OLD PERIOD. THIS DEFIES LOGIC. 137. ANOTHER ASPECT WHICH THE LD. COUNSEL FOR THE ASSES SEE HAS ARGUED AND WHICH IN OUR OPINION FINDS FORCE IS THAT THERE IS NO SIGNATURE OF CONFIRMATION BY THE ASSESSEE IN THE STATEMEN TS. FOR EXAMPLE PAGE NO.204 OF THE PAPER BOOK IS THE STATEMENT FOR THE PERIOD 02-04-2003 TO 31-08-2006. THERE IS NO SIGNATUR E OF CONFIRMATION BY THE ASSESSEE ON THIS PAPER. IF THE PAPER WAS WRITTEN BY SHRI SOHANRAJ MEHTA FOR THE BENEFIT OF THE ASS ESSEE SO AS TO GIVE HIM DETAILS OF HIS ACCOUNT, HE SHOULD HAVE OBTAINED THE SIGNATURE OF THE ASSESSEE ON THIS PAPER AS A TOKEN OF C ONFIRMATION. THUS, WE FIND FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR T HE ASSESSEE THAT THERE IS NO EVIDENCE THAT THE LOOSE PAPE RS BELONG TO THE ASSESSEE. 138. WE ALSO FIND MERIT IN THE ARGUMENTS OF THE LD. COUNSE L FOR THE ASSESSEE THAT THE ASSESSEE NORMALLY SELLS ITS PRODUCT FR OM BANGALORE FACTORY TO VARIOUS C&F AGENTS IN TAMILNADU, ANDH RA PRADESH, KERALA, SOUTH MAHARASHTRA ETC. NO PROOF THAT THESE AGENTS HAVE TAKEN THE STOCK FROM SHRI SOHANRAJ MEHTA AND PAID MONEY TO THE ASSESSEE OR MR. MEHTA WAS FOUND. IF ALL THE SE SALES ARE MADE THROUGH SHRI SOHANRAJ MEHTA IN THESE TERRITOR IES, THE ABOVE C&F AGENTS WOULD HAVE OBJECTED. SECONDLY, NO EV IDENCE THAT SHRI SOHANRAJ MEHTA MAINTAINED THE WAREHOUSES IN VARIOUS STATES WAS FOUND. THUS, IF WHAT SHRI SOHANRAJ MEHTA SAYS IS CORR ECT, 99 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THESE UNACCOUNTED SALES CAN BE MADE BY SHRI SOHANRAJ MEHTA AND THAT TOO IN HIS REGION, I.E. KARNATAKA AND ANY OTHER PRESU MPTION IS NOT POSSIBLE. 139. WE FURTHER FIND THAT THE ACCOUNTS WRITTEN BY SHRI S OHANRAJ MEHTA ARE WRITTEN FOR THE PERIOD FROM JANUARY 2003 TO F EBRUARY 2008 WHEREAS THE PAYMENT CHITS WRITTEN BY THE ASSESSE E TO SHRI SOHANRAJ MEHTA ARE FOR THE PERIOD FROM JUNE 2006 TO OCT OBER 2007. NO LETTERS FOR THE BALANCE PERIOD ARE FOUND DURING THE S EARCHES. WE THEREFORE FIND FORCE IN THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE THAT WHAT IS NOT FOUND IS PRESUMED TO BE NOT THERE AND THEREFORE SHRI SOHANRAJ MEHTA HAS NOT CORROBORATED TH AT THE ASSESSEE HAS VERIFIED ALL THESE LOOSE PAPERS FOUND WITH HIM . FURTHER, NO EVIDENCE WAS FOUND WITH THE FIGURES MENTIONED BY THE ASSESSEE IN HIS LETTERS TO SHRI SOHANRAJ MEHTA ARE IN CO DED FIGURES. NO EVIDENCE WAS FOUND THAT THE ASSESSEE HAS CHECKED A ND OKAYED THE NOTINGS OF SHRI SOHANRAJ MEHTA. WE THEREFORE FIND SOM E FORCE IN THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE THAT SHRI SOHANRAJ MEHTA HAS NOT MAINTAINED THESE ACCOUNTS/DETA ILS FOR THE PURPOSE OF REPORTING TO THE ASSESSEE OR FOR THE PURPOS E OF GIVING ACCOUNT OF UNACCOUNTED TRANSACTIONS TO THE ASSESSEE. MERELY BECAUSE SHRI SOHANRAJ MEHTA FILED HIS RETURN DISCLOSING SOM E COMMISSION AS HIS ADDITIONAL UNDISCLOSED INCOME AND THE DEPARTMENT ACCEPTED THE SAME WITHOUT EVEN MAKING PRO TECTIVE ADDITION IN HIS HANDS THE SAME IN OUR OPINION CANNOT BE TH E BASIS TO COMPUTE HUGE SUPPRESSED TURNOVER TO THE TUNE OF A BOUT RS.340 CRORES AS ASSESSEES UNACCOUNTED TURNOVER ESPECIALLY WHEN NOT A SINGLE PIECE OF UNACCOUNTED PURCHASE OR SALES VOUCHER OR TRANSPORT RECEIPT OR UNACCOUNTED PURCHASE RECEIPT WAS FOUND. THIS IN OUR 100 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 OPINION IS ALSO AN INDICATOR THAT NO SUCH UNACCOUNTED BUS INESS WAS CARRIED OUT BY THE ASSESSEE AS ALLEGED BY THE AO AND U PHELD BY THE CIT(A). EVEN UNDER THE THEORY OF PROBABILITY ALSO NO SUCH UNACCOUNTED BUSINESS IS POSSIBLE UNDER THE FACTS AND CIRCUMSTANCES DISCUSSED ABOVE. 140. IN VIEW OF THE ABOVE, IT HAS TO BE HELD THAT THE HU GE SUPPRESSED PRODUCTION AND SUPPRESSED TURNOVER AND TH EREBY GENERATION OF HUGE UNACCOUNTED INCOME AS DETERMINED BY THE AO, IN OUR OPINION, IS INCORRECT. THEREFORE, THE ADDITION MADE BY THE AO AND PARTLY SUSTAINED BY THE CIT(A) ON ACCOUNT OF UNACCO UNTED PROFIT ON SUPPRESSED PRODUCTION AND SALE THEREOF IS DIRECTED TO BE DELETE D. 140.1 AT THE SAME TIME, IT IS ALSO AN ADMITTED FACT THAT CER TAIN CHITS DULY SIGNED BY THE ASSESSEE WERE FOUND FROM THE POSSE SSION OF SHRI SOHRANRAJ MEHTA DURING THE COURSE OF SEARCH ON 10-10-2009. THO SE CHITS WERE IN THE HAND WRITING OF THE ASSESSEE FOR DIFFERENT YEARS. IT IS NOT KNOWN AS TO WHY AND FOR WHAT PURPOSE THE ASSES SEE USED TO GIVE SUCH CHITS IN HIS HAND WRITING. FURTHER, THE AMOUNT O F SUCH CHITS ACCORDING TO THE ASSESSEE IS ABOUT RS.61 LAKHS WHE REAS THE REVENUE HAS CONSIDERED THE SAME AT ABOUT RS.61 CRORES BY ADDING TWO ZEROS TO THE FIGURES. WE HAVE ALREADY HELD AT PARA NO.133 OF THIS ORDER THAT IN ABSENCE OF ANY COGENT EVIDENCE IN THE HANDS OF THE REVENUE, IT IS NOT PROPER TO DECODE THE SAME BY AD DING TWO ZEROS. THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT CERTAIN SALES TAX REFUNDS WERE DUE TO BE RECEIVED BY S HRI SOHANRAJ MEHTA FOR WHICH HE HAS ISSUED CHITS TO BE HANDED OVER T O THEM IS NOT BORNE OUT OF RECORDS. CONSIDERING THE TOTALITY OF TH E FACTS OF THE CASE, IN OUR OPINION, ADDITION OF AN AMOUNT OF RS.20 CRORES FOR THE A.YRS. 2004-05 TO 2008-09 WILL MEET THE ENDS OF JUSTICE UN DER THE 101 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 FACTS AND CIRCUMSTANCES OF THE CASE. WE THEREFORE DIREC T ADDITION OF RS.20 CRORES FOR THE PERIOD FROM A.YRS. 2004-05 TO 2008-0 9 TO BE SPREAD OVER EQUALLY. WE HOLD AND DIRECT ACCORDINGLY. TH US, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED AND THE G ROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 141. IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSE E AS WELL AS THE REVENUE IN A.Y. 2005-06 TO A.Y. 2008-09. IN VIEW OF O UR ABOVE FINDINGS, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED AND THE GROUNDS RAISED BY THE REVENUE IN THESE APPEALS ARE DISMISSED. 142. GROUND OF APPEAL NO.5 BY THE ASSESSEE RELATES TO T REATMENT OF SALES TAX SUBSIDY RECEIVED OF RS.10,02,61,664/- AS REVENUE RECEIPT AS AGAINST CAPITAL RECEIPT TREATED BY THE ASSESSEE. 143. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO NOTED D URING THE COURSE OF ASSESSMENT PROCEEDINGS THAT IN THE ASSESSMEN T ORDER PASSED U/S.143(3) ON 29-12-2006, SALES TAX SUBSIDY OF RS.10,02,61,664/- WAS TREATED AS REVENUE RECEIPT AS AGAIN ST CAPITAL RECEIPT CLAIMED BY THE ASSESSEE. DURING THE COURSE OF AS SESSMENT PROCEEDINGS HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME DISALLOWANCE/ADDITION SHOULD NOT BE MADE FOR THE SAME REAS ONS AS MENTIONED IN ASSESSMENT ORDER U/S.143(3) DATED 29-12-200 6. THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS MADE DURING THE EARLIER ASSESSMENT PROCEEDINGS. IT WAS FURTHER SUBMITTED THAT THE SAME IS PENDING BEFORE THE APPELLATE AUTHORITIES. THE AO ACCORDINGLY CONSIDERED THE SALES TAX SUBSIDY RECEIVED A T RS.10,02,61,664/- AS REVENUE IN NATURE AND BROUGHT THE S AME TO TAX. 102 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 144. IN APPEAL THE LD.CIT(A) FOLLOWING THE ORDER OF HIS PREDE CESSOR IN ASSESSEES OWN CASE FOR EARLIER YEAR AND THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF THE SISTER CONCERN NAMELY RASIKLAL M. DHARIWAL (HUF) VIDE ITA NOS. 575/PN/2007 AND 150/PN/2008 ORDER DATED 31-03-2011 HELD THAT THE AMO UNTS RECEIVED ON TRANSFER OF THE SALES TAX INCENTIVE IS REVENUE IN NATURE. 145. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 146. AFTER HEARING BOTH THE SIDES, WE FIND THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.YRS. 2003-04 TO 2005-06 VIDE ITA NOS. 485, 1559 AND 1560/PN/2007 ORDER DATED 29-05-2015 HA S DECIDED THE ISSUE AND HELD THAT THE SALES TAX SUBSIDY RECEIVED B Y THE ASSESSEE IN THE INSTANT CASE WAS IN THE COURSE OF CARRY ING OF ITS TRADE MORE PROFITABLY FOR WHICH IT CANNOT BE HELD AS CAPIT AL RECEIPT AND THE ORDER OF THE CIT(A) TREATING THE SAME AS REVENU E RECEIPT HAS BEEN UPHELD. THE LD. AUTHORISED REPRESENTATIVE ALSO CONCE DED THAT THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE. IN VIEW OF THE DECISION O F THE TRIBUNAL IN ASSESSEES OWN CASE THIS GROUND BY THE ASSE SSEE IS DISMISSED. 147. IDENTICAL GROUND HAS BEEN RAISED BY THE ASSESSEE IN A.Y. 2005-06, 2006-07, 2007-08, 2008-09 AND 2009-10. FOLLOWING THE REASONS GIVEN IN THE PRECEDING PARAGRAPHS, THIS ISSUE BY THE ASSESSEE IN THE ABOVE YEARS IS DISMISSED. 148. IN GROUND OF APPEAL NO.3 THE REVENUE HAS CHALLENGE D THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.60 LAKHS MADE BY THE AO UNDER EXPLANATION TO SECTION 37(1) OF THE I.T. ACT. 103 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 149. AFTER HEARING BOTH THE SIDES, WE FIND THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTED FROM THE SEIZED DOCUMEN TS THAT M/S. DIL HAD MADE CERTAIN UNLAWFUL PAYMENTS TO OFFICIALS OF T HE SALES TAX DEPARTMENT. THE SAID NOTINGS WAS FOUND IN BUN DLE NO.A/M/08 WHICH GIVES MONTHLY SUMMARY OF UNACCOUNTED SA LES AND ITS DEPLOYMENT FOR THE ENTIRE PERIOD WHEREIN ST MAMUL PAYMENT OF RS.5 LAKHS PER MONTH IS MENTIONED FOR MOST OF THE MONTHS. ACCORDING TO THE AO MOST OF THESE PAYMENTS WE RE IN THE NATURE OF BRIBE AND NOT AN ALLOWABLE EXPENDITURE AS PER E XPLANATION (1) OF SECTION 37 OF THE ACT. HE FURTHER NOTED THAT THE E NTIRE UNDISCLOSED INCOME OF THE ASSESSEE WAS COMPUTED BY ESTIM ATING THE GP AND THEREFORE IT IS DEEMED THAT ALL THE EXPENSES INCU RRED FOR EARNING THE UNDISCLOSED INCOME HAVE BEEN ALLOWED AS DEDU CTION. HOWEVER, ANY EXPENDITURE NOT ALLOWABLE AS PER THE ACT HA S TO BE DISALLOWED. HE ACCORDINGLY MADE ADDITION OF RS.60 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE. 150. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE DISALLO WANCE MADE BY THE AO OF AN EXPENDITURE WHICH HAS NOT BEEN C LAIMED AS ALLOWABLE AND ALSO DOES NOT FORM PART OF THE REGULARLY MAI NTAINED BOOKS OF ACCOUNT. THE DISALLOWANCE BY THE AO U/S.37 OF THE ACT IS BASED ON WRONG FACTS. BASED ON THE ARGUMENTS ADVANCE D BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION MADE BY THE A O ON THE GROUND THAT THE AO IN THE INSTANT CASE HAS MADE THE ADDITION OF THE UNACCOUNTED INCOME BY APPLYING THE GP RATIO AND CONSIDE RED AS ADDED THE ENTIRE GP AND TAXED, THEREFORE, NOTHING FURTHE R REMAINS TO BE CONSIDERED FOR DISALLOWANCE AS THE ENTIRE EXPENSES ARE DEEMED TO HAVE BEEN DISALLOWED AND HELD TO BE PART OF THE ADDITION OF UNACCOUNTED INCOME, THEREFORE, IT CANNOT BE ADDED ONCE AGAIN. 104 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 151. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 152. FIRST OF ALL WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) HOLDING THE VIEW THAT WHEN THE AO HAS ESTIMATED TH E UNACCOUNTED INCOME BY APPLYING THE GP RATIO AND SINCE T HE ENTIRE GP HAS BEEN ADDED BY HIM AND TAXED, THEREFORE, NOTHING FU RTHER REMAINS TO BE ADDED. SECONDLY WHILE DECIDING THE ISSUE OF ADDITION OF UNACCOUNTED PRODUCTION AND SUPPRESSED TURNOVER, WE HAVE ALREADY HELD THAT THERE IS NO SUPPRESSED PRODUCTION OR SALE THEREOF. THEREFORE, THIS GROUND BY THE REVENUE BECOME INFRUCTUOUS AND ACCORDINGLY DISMISSED. 153. IDENTICAL GROUND HAS BEEN RAISED BY THE REVENUE IN A.YRS. 2005-06 TO 2008-09. FOLLOWING SIMILAR REASONINGS, THE GROUN D RAISED BY THE REVENUE ON THIS ISSUE IS DISMISSED. 154. GROUNDS OF APPEAL NO. 4 AND 5 BY THE REVENUE READ AS UNDER : 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD . CIT(A) ERRED IN ALLOWING THE CLAIM OF ASSESSEE THAT EMPLOYEE ' S CONTRIBUTION OF RS . 4,96,738/- TO PF AND ESI U/S . 36 ( 1 )( VA ) OF THE ACT , ALTHOUGH THE SAME WAS NOT PAID WITHIN DUE DATE PRESCRIBED WITHIN S ECTION 36 ( 1)(VA) OF THE ACT. 5 . ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD . CIT(A) ERRED IN ALLOWING THE CLAIM OF ASSESSEE THAT EMPLOYEE ' S CONTRIBUTION OF RS . 4,96 , 738/- TO PF AND ESI U/S . 36(1)(VA) OF THE ACT , RELYING ON THE DECISION OF THE APEX COURT IN THE CASE OF ALOM EX TRUSIONS LTD , ALTHOUGH THE SAME IS NOT APPLICABLE IN PRESENT FACTS OF THE CASE . 155. FACTS IN BRIEF ARE THAT THE AO PASSED THE ASSESSME NT ORDER U/S.143(3) ON 29-12-2006 FOR A.Y. 2004-05 AND MADE DISALLOW ANCE OF RS.4,96,738/- U/S.36(1)(VA) ON ACCOUNT OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF AND ESI. BEFORE CIT(A) IT WAS SUBMITTED THAT THE PAYMENTS OF PF AND ESI CONTRIBUTION WERE MADE BEFORE DUE DATE OF FILING OF RETURNS. THE CIT(A) FOLLOWING THE D ECISION 105 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALOM EXT RUSIONS LTD. REPORTED IN 319 ITR 306 DELETED THE DISALLOWANCE. 156. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF THE CIT(A). ADMITTEDLY, THE ASSESSEE HAS DE POSITED THE EMPLOYEES CONTRIBUTION TO PF AND ESI BEFORE THE DUE DATE OF FILING OF THE RETURN. THE COORDINATE BENCHES OF THE TRIBUNAL ARE TAKING THE CONSISTENT VIEW THAT IF THE ASSESSEE HAS DEPOSITED THE E MPLOYEES CONTRIBUTION TO PF AND ESI BEFORE THE DUE DATE OF FILING OF THE RETURN THEN NO DISALLOWANCE IS CALLED FOR. SINCE THE ASSESSEE IN T HE INSTANT CASE HAS ADMITTEDLY DEPOSITED THE AMOUNTS BEFORE THE D UE DATE OF FILING OF THE RETURN, A FINDING GIVEN BY THE CIT(A) AND NOT CONTROVERTED BY THE REVENUE, THEREFORE, WE DO NOT FIND A NY INFIRMITY IN HIS ORDER. GROUNDS OF APPEAL NO.4 AND 5 BY THE REVENU E ARE ACCORDINGLY DISMISSED. 157. IDENTICAL GROUNDS HAVE BEEN RAISED BY THE REVENUE IN A.YRS. 2005-06 TO 2008-09. FOLLOWING SIMILAR REASONINGS THE GROU NDS RAISED BY THE REVENUE ON THIS ISSUE IN THE ABOVE APPEALS ARE DISMISSED. 158. IN GROUND OF APPEAL NO. 6 REVENUE HAS CHALLENGED THE ORDER OF CIT(A) IN ALLOWING THE CLAIM OF DEPRECIATION ON ASSETS OF HYD ERABAD DIVISION, ALTHOUGH BLOCK OF ASSETS INSTALLED IN HYDERABAD DIV ISION, WERE NOT USED IN PREVIOUS YEAR, CURRENT YEAR AND SUBSEQUENT Y EARS. 159. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO BASED ON THE ORIGINAL ASSESSMENT ORDER PASSED U/S.143(3) ON 29-12-2006 DISALLOWED DEPRECIATION OF HYDERABAD DIVISION OF GUTKHA AMOUN TING TO RS.18,98,807/- ON THE GROUND THAT THE SAID UNIT IS NON FUNCTIONAL DURING THE YEAR. IN APPEAL THE LD.CIT(A) FOLLOWING THE DECISIO N OF 106 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 HONBLE BOMBAY HIGH COURT IN THE CASE OF G.R. SHIPPING LTD. DELETED THE DISALLOWANCE OF DEPRECIATION IN RESPECT OF HYDER ABAD DIVISION (GUTKHA). 160. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US 161. AFTER HEARING BOTH THE SIDES, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). THE AO HAD DISALLOWED THE DEPRECIATION ON TH E GROUND THAT THE ASSESSEE HAS NOT USED THE ASSETS DU RING THE YEAR AS THE UNIT WAS NON FUNCTIONAL. WE FIND THE ISSUE HAS BEEN D ECIDED IN FAOVUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF G.R. SHIPPING LTD.(SUPRA). IN THAT CASE THE ASSESSEE WAS ENGAGED IN SHIPPING BUSINESS AND OWNED A B ARGE WHICH WAS INCLUDED IN THE BLOCK OF ASSETS. THE BARGE MET WITH AN ACCIDENT AND SUNK ON 06-03-2000, I.E. RELEVANT TO A.Y. 2000 -01. AS THE EFFORTS TO RETRIEVE THE BARGE WAS UNECONOMICAL THE BARGE WAS SOLD ON AS IS WHERE IS BASIS FOR RS.55 LAKHS IN THE MONTH OF MAY 2001 RELEVANT TO A.Y. 2002-03. AS THE BARGE WAS NON OP ERATIONAL AND NOT USED FOR BUSINESS AT A LATER DATE IN A.Y. 2001-02 THE AO DENIED DEPRECIATION. THE TRIBUNAL HELD THAT AFTER THE CON CEPT OF BLOCK OF ASSET W.E.F. 01-04-1988, INDIVIDUAL ASSETS HAD LOST THEIR IDENTITY ONCE IT ENTERED WITH THE BLOCK OF ASSETS AND ONL Y THE BLOCK OF ASSETS HAD TO BE CONSIDERED. IT WAS HELD THAT THE T EST OF USER HAD TO BE APPLIED UPON THE BLOCK OF ASSETS AS A WHOLE AND NO T ON INDIVIDUAL ASSETS. ON APPEAL BY THE REVENUE, THE HONBLE H IGH COURT DISMISSED THE APPEAL FILED BY THE REVENUE. THEREFORE , SINCE THE LD.CIT(A) IN THE INSTANT CASE HAS ALLOWED THE CLAIM OF DEPRECIATION ON THE BLOCK OF ASSETS INSTALLED AT HYDERABA D DIVISION WHICH WERE NOT USED DURING THE IMPUGNED ASSESSMENT YEA R BY 107 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT, THEREFOR E, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). GROUND RAISED B Y THE REVENUE IS ACCORDINGLY DISMISSED. 162. IDENTICAL GROUNDS HAVE BEEN RAISED BY THE REVENUE IN A.YRS. 2005-06 TO 2007-08. FOLLOWING SIMILAR REASONINGS THE GROUN DS ON THIS ISSUE RAISED BY THE REVENUE FOR THE ABOVE YEARS ARE DISMISSED. 163. GROUND OF APPEAL NO.6 BY THE ASSESSEE AND GROUND OF AP PEAL NO.5 BY THE REVENUE FOR A.Y. 2007-08 READ AS UNDER : BY ASSESSEE : 6 . THE I D CIT(A) ERRED IN CONF I RM I NG THE D I SALLOWA N CE OF RS . 5 , 00,000 / - MADE U/ S . 1 4A OF T H E AC T W IT HOU T APPREC I AT I NG THAT T HE D I SAL L OWANCE MADE WAS ON A N ADHOC BAS I S AND H ENCE , T HE S A I D D IS ALLOWANCE MADE MAY K I N D L Y BE DE L ETED . BY REVENUE : 5 . ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD . CIT(A) ERRED IN ADOPTING ARBITRARY DISALLOWANCE U/S.14A AND ERRED IN GRANTING CONSEQUENTIAL RELIEF TO THE ASSESSEE TO THE TUN E OF RS.3.64 LAKHS, AS THE SAID QUANTIFICATION OF DISALLOWANCE U/S.14 A IS NEITHER BASED ON PROPER APPRECIATION OF FACTS NOR OF LAW NOR ON ANY SOUND LOGIC . 164. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO FOLLOWING THE ORDER PASSED U/S.143(3) ON 22-12-2009 WHEREIN DISALLOWANCE OF RS.8,64,152/- WAS MADE U/S.14A OF THE ACT MADE THE SAME DISALLOWANCE. BEFORE CIT(A) THE ASSESSEE RELYING ON VARIOU S DECISIONS SUBMITTED THAT NO DISALLOWANCE IS CALLED FOR U/S.14A R.W.RULE 8D. 165. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E THE LD.CIT(A) SUSTAINED AN AMOUNT OF RS.3,64,152/- OUT OF RS.8,64,152/- MADE BY THE AO. WHILE DOING SO, HE HELD THAT IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. VS. CIT REPORTED IN 234 CT R 1 108 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 PROVISIONS OF RULE 8D IS NOT APPLICABLE. HE NOTED THAT THE DIVIDEND INCOME OF RS.1,33,45,117/- HAS BEEN RECEIVED ON A NUMBER OF SHARES AND MUTUAL FUNDS WHEREIN INVESTMENTS HAVE BEEN MADE BY IT AND THE SAME HAS BEEN CLAIMED AS EXEMPT U/S.10(34) OF THE ACT. SINCE THE AO HAS ALREADY HELD THAT ASSESSEE WAS HAVING SUBSTANTIAL OWN FUNDS FOR WHICH DISALLOWANCE OF INTEREST IS NOT WARRAN TED. HOWEVER, HE HAS DISALLOWED CERTAIN EXPENSES BY APPLYING R ULE 8D(2)(III) AT 0.5% OF THE AVERAGE INVESTMENT OF RS.17.28 CRORES WHICH WORKED OUT TO RS.8,64,152/-. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE THE CIT(A) GAVE RELIEF OF RS.5 LAKHS AND SUSTAINE D THE DISALLOWANCE OF RS.3,64,152/- FOR WHICH THE ASSESSEE AS WELL A S THE REVENUE ARE IN APPEAL BEFORE US. 166. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SU BMITTED THAT THE ENTIRE DIVIDEND IS RECEIVED FROM MUTUAL FUNDS WHERE THE DIRECTORS ONLY TAKE THE DECISIONS FOR WHICH NO EXPENSES HAVE BEEN INCURRED, THEREFORE, DISALLOWANCE OF THE ABOVE AMOUNT IS HIGH AND EXCESSIVE. 167. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 168. AFTER HEARING BOTH THE SIDES, WE FIND THE AO DISALLOWED RS.8,64,152/- BEING ADMINISTRATIVE EXPENSES INCURRED FOR EAR NING THE EXEMPT INCOME. WE FIND THE LD.CIT(A) CONSIDERING THE TO TALITY OF THE FACTS OF THE CASE HAS RESTRICTED SUCH DISALLOWANCE T O RS.3,50,000/- WHICH IN OUR OPINION IS A REASONED ONE. WE UP HOLD THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUNDS RAIS ED BY THE ASSESSEE AS WELL AS THE REVENUE ON THIS ISSUE ARE DISMISSED. 109 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 168.1 THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GRO UND OF APPEAL NO.7 REGARDING DISALLOWANCE OF RS.50,000/- IN RESPEC T OF SALES PROMOTION EXPENSES BECAUSE OF SMALLNESS OF THE AM OUNT. THEREFORE, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 169. THE NEXT ISSUE THAT ARISES IN A.Y. 2008-09 BY THE AS SESSEE IS REGARDING DISALLOWANCE OF RS.26,42,480/- U.S.14A R.W.RULE 8D. GROUND OF APPEAL NO.6 ON THIS ISSUE READ AS UNDER : 6. THE LD CIT(A) ERRED IN CONFIRMING THE DISALLOWAN CE OF RS.26,42,480/- MADE U/S. 14A R.W.R. 8D IGNORING THE W RITTEN SUBMISSIONS FILED AND WITHOUT APPRECIATING THE FACT THA T THE LEARNED AO HAS NOT PROVIDED ANY BASIS OR WORKING OF DISALLOWANCE M ADE AND HENCE, THE SAID DISALLOWANCE MADE MAY KINDLY BE DELETED. 170. FACTS OF THE CASE IN BRIEF, ARE THAT THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS C LAIMED EXEMPT INCOME OF RS.3,43,74,993/-. HOWEVER, THE ASSESSEE HAS NOT ATTRIBUTED ANY AMOUNT AS EXPENDITURE TOWARDS EARNING O F SUCH EXEMPT INCOME. ACCORDING TO THE AO, IT IS DIFFICULT TO ACCEPT THE PROPOSITION THAT ALL THE TAX FREE INCOME EARNED BY THE AS SESSEE HAS BEEN EARNED WITHOUT INCURRING ANY EXPENDITURE. THEREFOR E, HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY EXPENDITURE RE LATABLE TO EXEMPT INCOME SHOULD NOT BE DISALLOWED UNDER THE PROVISIO NS OF SECTION 14A R.W. RULE 8D. IT WAS EXPLAINED BY THE ASSE SSEE THAT IT HAS RECEIVED DIVIDEND INCOME OF RS.3,39,95,312/- AND THE AS SESSEE HAS OFFERED AN AMOUNT OF RS.34,268/- TOWARDS DISALLOWANCE U/S.14A OF THE I.T. ACT. IT WAS ACCORDINGLY REQUESTED N OT TO DISALLOW ANY FURTHER EXPENDITURE. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM, THE RE IS ALWAYS AN ELEMENT OF INDIRECT EXPENDITURE FOR EARNING SUCH EXEMPT INCOME. APPLYING THE PROVISIONS OF SECTION 14A, HE DISALLOWED AN AMOUNT OF RS.26,42,480/- AND ADDED THE SAME TO THE TOTA L INCOME 110 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 OF THE ASSESSEE. 171. IN APPEAL THE LD.CIT(A) UPHELD THE ACTION OF THE AO. HE OBSERVED THAT THE ASSESSEE HAS NOT BROUGHT ANY MATE RIAL SO AS TO PROVE ANYTHING CONTRARY TO THE FINDINGS OF THE AO. THE A SSESSEE HAS MERELY STATED THAT THE ASSESSEE OWNED HUGE INTEREST FREE FUNDS IN COMPARISON TO THE INVESTMENT IN SHARES AND MUTUAL FUNDS. HOWEVER, THE ACTUAL CASH FLOW STATEMENT WAS NOT FILED WHICH COULD DEMONSTRATE THE CONTENTION RAISED BY THE ASSESSEE. IT WAS NOT PROVED THAT THE INVESTMENT HAS BEEN MADE FROM THE CAP ITAL ACCOUNT WHICH OWNED TAX FREE FUNDS. THE DETAILS OF OTHER INVESTMEN TS MADE HAS NOT BEEN BROUGHT ON RECORD SO AS TO JUSTIFY THE CLAIM. THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH NEXUS OF EXPENDITURE/INVESTMENT WITH THAT OF THE INTEREST FREE FUND S AVAILABLE WITH IT. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE AS SESSEE AND DISTINGUISHING THE DECISIONS CITED BEFORE HIM THE CIT(A) UPHELD THE DISALLOWANCE MADE BY THE AO. HE FURTHER OBSERVED THAT W HEN ASSESSEE IS PAYING INTEREST ON BORROWING AND THE ASSES SEE IS NOT ABLE TO SHOW THAT INVESTMENT IN SHARES ARE OUT OF INTERN AL ACCRUALS OR NON INTEREST BEARING FUNDS DISALLOWANCE U/S.14A CAN BE MADE. 172. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 173. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO BORROWINGS HAVE BEEN MADE FOR INVESTMENT IN EXEMPT INCOM E AND WHATEVER BORROWINGS WERE MADE WERE SPECIFICALLY FOR THE W INDMILL. REFERRING TO PAGE 10 OF VOLUME-I OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO TH E FOLLOWING CHART : 111 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 A.Y. DISALLOWANCE OUT OF INTEREST EXPENSES U/S.14A R.W.R8D(II) DISALLOWANCE OUT OF ADMN. EXPENSES U/S.14A R.W. R8D(II) TOTAL DISALLOWANCE U/S.14A 2008 - 09 14,69,688 11,72,792 26,42,480 2009 - 10 12,32,112 18,01,966 30,34,078 2010 - 11 7,84,674 22,26,799 30,11,473 HE SUBMITTED THAT THE MUTUAL FUND HOUSES PROVIDE DOOR S TEP SERVICES FOR INVESTMENT AND ARE ALSO CHARGING ENTRY LOAD OF 0.5% TO 2.5% FOR ADMINISTRATIVE EXPENSES WHICH FORMS PART OF COST O F INVESTMENTS. THEREFORE, NO SEPARATE DISALLOWANCE IS WARRAN TED. FURTHER, THE DECISIONS FOR INVESTMENTS ARE TAKEN BY THE DIRECTORS OF THE ASSESSEE COMPANY WHO ARE NOT DRAWING ANY SALARY FR OM THE ASSESSEE COMPANY AND THE IMPLEMENTATION OF THE DECISIONS DOES NOT REQUIRE INCURRING OF ANY EXPENDITURE. HE SUBMITTED THAT IN TEREST ON TERM LOANS CANNOT BE CONSIDERED FOR DISALLOWANCE SINCE THE SAME HAVE BEEN UTILIZED FOR SPECIFIC PURPOSES FOR WHICH THE SAME WAS OBTAINED. FURTHER, THE AO HAS ALSO NOT BROUGHT ANY COG ENT REASONS FOR DISALLOWING EXPENDITURE U/S.14A R.W. RULE 8D. HE ACCORDIN GLY SUBMITTED THAT NO DISALLOWANCE COULD BE MADE. 174. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 175. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND THE AO IN THE INSTANT CA SE HAS MADE DISALLOWANCE OF RS.26,42,480/- U/S.14A R.W.RULE 8D. SIN CE THE ASSESSMENT YEAR INVOLVED IN THE INSTANT CASE IS A.Y. 2 008-09, THEREFORE, PROVISIONS OF SECTION 14A R.W. RULE 8D ARE APPLICA BLE. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IT HAS 112 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 SUFFICIENT OWN CAPITAL AND FREE RESERVES WHICH IS MORE THAN THE INVESTMENT IN SHARES/MUTUAL FUNDS, THE INCOME OF WHICH IS EX EMPT. THE BORROWINGS IN THE SHAPE OF TERM LOAN WHICH ARE MET S PECIFICALLY FOR ACQUIRING WINDMILL HAS NOT BEEN GENERATED FOR INVESTMENT IN SHARES/MUTUAL FUNDS, THE INCOME OF WHICH IS EXEMPT. IT HA S BEEN HELD IN VARIOUS DECISIONS INCLUDING THE DECISION OF HONBLE BO MBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. VIDE WRIT PETITION NO.1753/2016 ORDER DATED 25-02-2016 THAT NO DISALLOWANC E OF INTEREST CAN BE MADE U/S.14A R.W. RULE 8D IF THE ASSESSEE HAS SUFFICIENT OWN CAPITAL AND FREE RESERVES WHICH IS MORE THAN THE INVESTMENT IN SHARES/MUTUAL FUNDS, THE INCOME OF WHICH IS EX EMPT. HOWEVER, THE SAME IS NOT BORNE OUT OF THE RECORDS IN TH E INSTANT CASE. WE THEREFORE RESTORE THIS ISSUE RELATING TO DISALLOWA NCE OF THE INTEREST PART TO THE FILE OF THE AO WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE THAT THE OWN CAPITAL AND INTEREST FREE FUNDS ARE MORE THAN THE INVESTMENT IN SHAR ES/MUTUAL FUNDS, THE INCOME OF WHICH IS EXEMPT. THE AO SHALL DECIDE T HE ISSUE ACCORDINGLY IN THE LIGHT OF THE DECISION OF HONBLE BOM BAY HIGH COURT IN THE CASE OF HDFC BANK LTD. CITED (SUPRA). IF THE OWN CAPITAL AND FREE RESERVES ARE MORE THAN THE INVESTMENTS IN SHARES AND MUTUAL FUNDS, THE INCOME OF WHICH IS EXEMPT, IN THAT CAS E, NO DISALLOWANCE U/S.14A R.W. RULE 8D IS WARRANTED ON ACCOUNT OF INTEREST EXPENDITURE. 176. SO FAR AS DISALLOWANCE OF ADMINISTRATIVE EXPENSES IS CONCERNED, WE FIND THE AO HAS DISALLOWED AN AMOUNT OF RS.11,72,792/- WHICH HAS BEEN UPHELD BY THE CIT(A). DISALLOWA NCE OF SUCH EXPENSES IN OUR OPINION IS HIGHLY EXCESSIVE AND UNREASONABLE UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE. WE 113 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 FIND FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSES SEE THAT THE MUTUAL FUNDS ARE CHARGING ENTRY LOAD VARYING FROM 0.5% TO 2.5%. FURTHER, THE DIRECTORS ARE ALSO NOT DRAWING ANY SA LARY WHO ARE IMPLEMENTING THE DECISION OF INVESTMENT IN MUTUAL FUNDS E TC. AT THE SAME TIME, INCURRING OF SOME ADMINISTRATIVE EXPENSE S FOR EARNING SUCH HUGE TAX FREE INCOME CANNOT BE RULED OUT. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE REST RICT THE DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPENSES AT RS.2 LAKHS EACH FOR A.YRS. 2008-09, 2009-20 AND 2010-11 RESPECTIVEL Y. GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 177. IDENTICAL GROUNDS RAISED BY THE ASSESSEE IN A.YRS. 2 009-10 AND 2010-11. FOLLOWING OUR DIRECTIONS GIVEN IN THE PRECED ING PARAGRAPHS THE ISSUE RELATING TO DISALLOWANCE OF INTEREST EXPENDITURE IS RESTORED TO THE FILE OF THE AO WHO SHALL DEC IDE THE ISSUE IN THE LIGHT OF THE DIRECTIONS GIVEN IN THE PRECEDING PARAGRAPHS. SO FAR AS THE DISALLOWANCE OF ADMINISTRATIVE EX PENSES IS CONCERNED, WE HAVE ALREADY DIRECTED TO DISALLOW RS.2 LAKH S EACH FOR A.YRS. 2009-10 AND 2010-11 RESPECTIVELY. GROUND RAIS ED BY THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY ALLOWED FOR STATISTICA L PURPOSES. 178. GROUNDS OF APPEAL NO. 1 & 2 BY THE REVENUE FOR A.Y . 2010-11 ARE AS UNDER : 1. THE LD.CIT(A) ERRED IN DECIDING THAT POWER GEN ERATION FROM WINDMILL IS MANUFACTURING ACTIVITY OF ARTICLE OR THI NGS. 2. THE LD.CIT(A ) ERRED IN DECIDING THAT ASSESSEE CAN CLAIM ADDITIONAL DEPRECIATION ON WINDMILL IF ASSESSEE IS ENGA GED IN MANUFACTURING ACTIVITIES ALTHOUGH WINDMILL HAS NO CON NECTION WITH ITS MANUFACTURING BUSINESS. 114 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 179. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE DUR ING THE IMPUGNED ASSESSMENT YEAR HAS INSTALLED 10 WINDMILLS/WIND TURBINE GENERATORS (WTGS) CONSISTING OF 6 WTGS 2.1 M.W. AND 4 WTGS OF 1.5 M.W. CAPACITY AT JAISALMER, RAJASTHAN. THE ASSES SEE HAS CLAIMED ADDITIONAL DEPRECIATION AS PER PROVISIONS OF SEC TION 32(1)(IIA) OF THE I.T. ACT. ALL THESE 10 WTGS WERE INSTALLED DURING THE YEAR UNDER CONSIDERATION. THE AO FURTHER NOTED THAT TH E ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATION @10% ON SUCH WINDMILLS SIN CE THE ASSETS HAVE BEEN PUT TO USE FOR LESS THAN 180 DAY S AND SUCH CLAIM OF ADDITIONAL DEPRECIATION U/S.32(1)(IIA) AMOUNTS TO RS.9,15,52,187/-. HOWEVER, ACCORDING TO THE AO, POWER GEN ERATION ACTIVITY AS SUCH DOES NOT AMOUNT TO MANUFACTURE OF AR TICLE OR THING AS MANDATED U/S.32(1)(IIA) OF THE I.T. ACT TO MAKE THE ASSESSEE ELIGIBLE FOR CLAIM OF ADDITIONAL DEPRECIATION UNDER TH AT SECTION. HE, THEREFORE, ASKED THE ASSESSEE TO JUSTIFY ITS CLAIM OF ADDITIONAL DEPRECIATION ON WINDMILL, SINCE WIND MILLS ARE NOT ENGAGED IN PRODUCTION OF AN ARTICLE OR THING. THE ASSESSE E IN HIS WRITTEN SUBMISSIONS FILED BEFORE THE AO JUSTIFIED IN CLAIMING SU CH ADDITIONAL DEPRECIATION ON WTGS FOR TWO REASONS, I.E. (A) ELECTR ICITY PRODUCED BY WAY OF WINDMILL IS ALSO AN ARTICLE OR THING AND (B ) ADDITIONAL DEPRECIATION IS ALLOWABLE TO AN ASSESSEE WHICH IS E NGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTIC LE OR THING. EVEN OTHERWISE ASSESSEE IS ENGAGED IN THE BUSINESS OF MA NUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. 180. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATIO N GIVEN BY THE ASSESSEE AND HELD THAT PROVISIONS OF SECTION 32(1)(IIA ) OF THE ACT ARE NOT APPLICABLE TO THE NEWLY INSTALLED WINDMILLS SINCE THOSE 115 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 DO NOT FALL IN THE CATEGORY OF MACHINERY OR PLANT FOR THE BUSINESS OF MANUFACTURING OR PRODUCTION OF ARTICLE OR THING AND SETTIN G UP OF THESE WINDMILLS HAS ABSOLUTELY NO ACTION WITH THE ASSESSEE S BUSINESS OF MANUFACTURE WHICH IN THE INSTANT CASE IS MANU FACTURE OF GUTKHA. THE AO HELD THAT ASSESSEE DOES NOT HAVE TO PAY ANY EXCISE DUTY ON THE SO CALLED PRODUCTION OF THE ELECTRICITY. HAD IT BEEN A MANUFACTURE OR PRODUCTION OF ARTICLE OR THING IT WO ULD HAVE BEEN COVERED BY THE PROVISIONS OF THE EXCISE ACT. RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESC ORTS LTD. WHERE THE HONBLE APEX COURT HAS UNDERSCORED THE PHILO SOPHY OF DISCOURAGING DOUBLE BENEFIT THE AO DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION ON WINDMILLS AMOUNTING TO RS.9,15,52,187/- 181. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT THE CLAIM OF ADDITIONAL DEPRECIATION IS ADMISSIBLE IF THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE O R THING. IT WAS SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF MANUFACTURE OF PAN MASALA AND GUTKHA AND IS ALSO IN THE B USINESS OF GENERATION OF POWER WHICH HAS BEEN JUDICIALLY HELD TO BE EQUIVALENT TO MANUFACTURE OF ARTICLE OR THING. RELYING ON V ARIOUS DECISIONS IT WAS SUBMITTED THAT IF THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING, ADDITIONAL DEPRECIATION HAS TO B E ALLOWED. 182. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND REL YING ON THE DECISIONS OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. M/S. HITECH ARAI LTD. REPORTED IN 377, ITR 477, THE DEC ISION IN THE CASE OF TEXMO PRECISION CASTINGS REPORTED IN 321 ITR 485 AND THE DECISION IN THE CASE OF CIT VS. VTM LTD. REPORTED IN 319 ITR 336 AND VARIOUS OTHER DECISIONS THE LD.CIT(A) ALLOWED THE CLAIM O F 116 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 ADDITIONAL DEPRECIATION ON WINDMILLS. 183. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 184. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. IN THE INSTANT CASE, THERE IS N O DISPUTE TO THE FACT THAT THE ASSESSEE DURING THE IMPUGNED ASSESSM ENT YEAR HAS INSTALLED WINDMILLS WHICH HAS BEEN PUT TO USE FOR A PERIOD OF LESS THAN 180 DAYS. THE ONLY DISPUTE IS REGARDING ADMISSIBILITY OF ADDITIONAL DEPRECIATION ON SUCH WINDMILLS. IT IS THE CLAIM OF TH E ASSESSEE THAT ELECTRICITY PRODUCED BY WAY OF WINDMILL IS ALSO AN ARTICLE OR THING AND THEREFORE ADDITIONAL DEPRECIATION IS ALLOW ABLE TO THE ASSESSEE SINCE IT IS ENGAGED IN THE BUSINESS OF MANU FACTURE OR PRODUCTION OF ANY ARTICLE OR THING. WE FIND THE AO REJECTE D THE ABOVE CONTENTION OF THE ASSESSEE AND DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION ON THE GROUND THAT ASSESSEE DOES NOT HAVE TO PAY ANY EXCISE DUTY ON THE SO CALLED PRODUCTION OF TH E ELECTRICITY. HAD IT BEEN A MANUFACTURE OR PRODUCTION OF ARTICLE OR TH ING IT WOULD HAVE BEEN COVERED BY THE PROVISIONS OF THE EXCISE ACT. THE AO ACCORDINGLY REJECTED THE CLAIM OF ADDITIONAL DEPRECIATION. W HILE DOING SO, HE FURTHER HELD THAT SETTING UP OF THESE WINDMILLS HAS ABSOLUTELY NO CONNECTION WITH THE ASSESSEES BUSINESS O F MANUFACTURE OF GUTKHA. WE FIND THE LD.CIT(A) BASED ON VARIO US DECISIONS ALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION ON WIND MILLS. THE RELEVANT OPERATIVE PORTION OF THE LD.CIT(A) AT PARA 3 .4 AND 3.5 OF THE ORDER READS AS UNDER : 117 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 3.4 THE ASSESSING OFFICER HAS NOT DISPUTED THE INSTALLAT ION OF THE NEW PLANT AND MACHINERY IN THE FORM OF WINDMILL . THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF ADDITIONAL DEPRECIATION T O THE APPELLANT ON THE GROUND THAT THE SAME IS AVAILABLE ON ANY PLANT A ND MACHINERY ACQUIRED OR INSTALLED BY THE ASSESSEE ENGAGED IN THE BU SINESS OF MANUFACTURE OR PRODUCTION OF ARTICLE OR THING AND T HE APPELLANT WAS NOT ENGAGED IN SUCH BUSINESS AND THAT THE WINDMILL IS CLASSIFI ED AS RENEWED ENERGY DEVICE AND IN THE GENERATION OF POWER WHICH IS NOT AN ARTICLE OR THING. THE APPELLANT HAS BROUGHT TO NOTICE OF THE UN DERSIGNED AND ALSO FILED A COPY OF THE DECISION IN THE CASE OF NTPL VS DC IT CITED SUPRA , WHEREIN THE DELHI BENCH OF THE ITAT HAS HELD AS UNDER : 'ON DUE CONSIDERATION OF SETTLED JUDICIAL DECISIONS , IT IS IMPLICITLY CLEAR THAT THE SUPREME COURT HAS EXPLAINED THE MEANI NG OF ELECTRICITY , THE COURT HAS CONSIDERED THE DEFINITION OF GOODS AS GIVEN IN ARTICLE 366(12) OF THE CONSTITUTION OF INDI A . IT ALSO TOOK INTO CONSIDERATION THE SALES TAX ACT OF THE STATE OF A NDHRA PRADESH AS WELL AS MADHYA PRADESH AND ALSO CONSIDERED THE DICTIONARY MEANING. THEREAFTER THE COURT HAS OBSERVED THAT GOODS MEANS, ALL KIND OF MOVEABLE PROPERTIES. THE TERM S MOVEABLE PROPERTY WHEN CONSIDERED WITH REFERENCE TO GOODS AS DEFINED FOR THE PURPOSE OF SALES-TAX CANNOT BE TAKEN I N A NARROW SENSE AND MERELY BECAUSE ELECTRIC ENERGY IS NOT A TANGI BLE OR CANNOT BE MOVED OR TOUCHED LIKE , FOR INSTANCE, A PIECE OF WOOD OR A BOOK IT CANNOT CEASE TO BE MOVEABLE PROPERTY WHEN IT HAS ALL THE ATTRIBUTES OF SUCH PROPERTIES. IT IS CAPABLE OF ABST RACTION , CONSUMPTION AND USE OF WHICH IF DONE DISHONESTLY IS PUNI SHABLE UNDER SEC. 39 OF THE INDIAN ELECTRICITY ACT . IF THERE CAN BE SALES AND PURCHASE OF ELECTRIC ENERGY LIKE ANY MOVEABLE OB JECT THAN THERE WAS NO DIFFICULTY IN HOLDING THAT ELECTRIC ENE RGY WAS INTENDED TO BE COVERED BY THE DEFINITION OF GOODS ; THE EXPRESSION 'ARTICLE, THING OR GOODS' ARE NOT DEFIN ED IN THE INCOME-TAX ACT , 1961 . THE COMMISSIONER WHILE TREATING THE ELECTRICITY AS NOT AN ARTICLE OR THING HAS NOT MADE REFERENCE TO ANY PROVISIONS OF THE INCOME-TAX ACT, 1961, HE SIMPLY CONSTRUED THE MEANING OF ELECTRICITY AS NOT ARTICLE OR THING O N THE BASIS OF HIS OWN INFERENCE DRAWN FROM THE NATURE OF THIS ITEM BUT IF WE EVALUATE THE CONCLUSION DRAWN BY THE COMMISSIONER IN THE LIGHT OF THE DECISION OF THE SUPREME COURT GIVEN IN THE CA SE OF INDIAN CINE AGENCY , CST VS . M . P . ELECTRICITY BOARD AND STATE OF MADHYA PRADESH VS . NTPC THEN IT WOULD SUGGEST THAT ELECTRIC ENERGY HAS ALL TRAPPINGS OF AN ARTICLE OR GOODS. THE PROCESS OF I TS GENERATION IS ALSO AKIN TO MANUFACTURE OR PRODUCTION OF AN ARTIC LE OR THING. I T IS BEING GENERATED IN HUGE PLANTS THOUGH SCIENTIFICALL Y ONE MAY SAY IT IS TRANSFORMATION OF ONE SOURCE OF ENERGY INTO T HE OTHER . BUT ALL THESE ASPECTS HAVE BEEN CONSIDERED IN THESE THR EE JUDGMENTS O F THE SUPREME COURT WHEREIN THE COURT HAS EXPLAINED WHAT IS MANUFACTURE OR PRODUCTION AND WHAT IS ELECTRICITY ; THUS , TAKING INTO CONSIDERATION ALL THESE ASPECTS , WE ARE OF THE VIEW THAT ADMISSIBIL I TY OF ADDITIONAL DEPRECIATION CANNOT BE DENIED TO THE ASSESSEE MERELY ON THE GROUND THAT ELECT RICITY IS NOT AN ARTICLE OR THING . THE ORDER OF THE CIT (APPEALS) IS REVERSED TO THIS EXTENT AND THE DISALLOWANCE I S DELETED. ' 118 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 3.4.1 IN THE CASE OF CIT VS HI TECH ARAI LTD SUPRA TH E MADRAS HIGH COURT HAS HELD AS UNDER : ' SEC 32(1 )(IIA) DOES NOT STATE THAT THE SETTING UP A NEW MACHINERY OR A PLANT , WHICH WAS ACQUIRED OR INSTALLED UPTO 31 ST MARCH 2002 , SHOULD HAVE ANY OPERATIONAL CONNECTIVITY TO THE ARTICLE OR A THING THAT WAS ALREADY BEING MANUFACTUR ED BY THE ASSESSEE . THEREFORE THE CONTENTION THAT THE SETTING UP OF A WINDMILL HAD NOTHING TO DO WITH THE POWER INDUSTRY, NAMELY MANUFACTURE OF OIL SEEDS ETC, WAS TOTALLY NOT GERMANE TO THE SPECIFIC PROVISION CONTAINED IN SEC 32(1 )(IIA). IT C OULD NOT ALSO BE SAID THAT SETTING UP OF A WINDMILL NOT FALL WITHIN THE EXPRESSION SETTING UP OF A NEW MACHINERY OR A PLANT . HENCE, THE ASSESSEE WAS ENTITLED TO ADDITIONAL DEPRECIATION.' THE AFORESAID DECISION OF THE MADRAS HIGH COURT IS SEEN TO HAVE BEEN FOLLOWED BY THE JAIPUR ITAT IN THE CASE OF FASHION SU ITS PVT. LTD VS DCIT IN ITA NO. 142/JOD/2011 DATED 16-12-2011. 3.4.2 IN THE CASE OF ACIT VS M. SATISHKUMAR (2012) 19 1 ITR (TRIB) 646 (CHENNAI) IT WAS HELD THAT THE GENERATION OF ELECTRI CITY IS A MANUFACTURING ACTIVITY . THE ASSESSEE WAS INVOLVED IN THE MANUFACTURING ACTIVITY AND FULFILLED THE CONDITIONS AS LAID DOWN U /S 32(1)(IIA). THE BENCH FURTHER HELD THAT THE GOVT . VIDE FINANCE ACT 2012 HAS AMENDED THE PROVISIONS OF SEC. 32(1)(IIA) TO INCLUDE THE BUSINE SS OF GENERATION AND DISTRIBUTION OF POWER, ELIGIBLE FOR BENEFIT U/S 3 2(1)(IIA) AND THAT ALTHOUGH THE SAID AMENDMENT IS W.E . F. 1-4-2012 IT GIVES IMPETUS TO THE VIEW THAT GENERATION OF ELECTRICITY IS A MANUFACTURI NG PROCESS AND QUALIFIES FOR THE BENEFIT U/S 32(I)(IIA). THE AFORESAI D CASE WAS RELATED TO AN ASSESSEE ENGAGED IN THE BUSINESS OF GENERATION OF ELECT RICITY THROUGH WINDMILLS AND CLAIMED 100% DEPRECIATION IN RESPECT OF THE WINDMILL INSTALLED AS PER THE PROVISIONS OF SEC 32(1) AND ITEM (X III) OF NEW APPENDIX I READ WITH RULE 5 . 3.4.3 IN THE CASE OF VTM LTD ., 319 ITR 336 (MAD), THE ITAT CHENNAI CITED THE CBDT CIRCULAR DATED 03.10 . 2001 VIDE F . NO . 178/28/2001-ITA- I, IN THE CONTEXT OF SECT I ON 80IA OF THE ACT . IN ACCORDANCE WITH THIS CIRCULAR , THE GENERATION OF POWER BY CAPTIVE POWER PLANT WAS TO BE CONSIDERED FOR DEDUCTION U/S 80IA . THE TRIBUNAL THEREFORE HELD THAT THE DEPARTMENT HAD, THEREFORE, ACCEPTED THE VIEW THA T SUCH POWER WAS AN 'ARTICLE' OR 'THING', AND HENCE, THE CONTENTION OF THE AUTHORITIES BELOW WAS NOT SUSTAINABLE. AS THE ONLY OBJECTION OF THE A . O. WAS REGARDING THE POWER GENERATED BY THE WINDMILL NOT BEING 'ARTICLE' OR 'THING' , THE TRIBUNAL ALLOWED THE ASSESSEE'S GROUND IN THAT CASE BASED ON THE BOARD'S CIRCULAR AS WELL AS THE DECISION OF THE DELHI H IGH COURT IN THE CASE OF CIT VS . DCM SRIRAM CONSOLIDATED LTD . (2009) 176 TAXMAN 49 (DEL . ) ; AND SOME EARLIER DECISIONS OF THE ITAT CHENNAI BENCH . FURTHER, THE APPELLANT HAS ALSO CITED THE FACTS OF THE CASE OF MIS HI TECH ARAI LTD. (SUPRA), IN WHICH ALSO IT WAS HELD THAT THE APPELLANT WAS ENTITLED FOR CLAIM OF ADDITIONAL DEPRECIATION U/S 32( )(IIA) IN R ESPECT OF WINDMILL UNITS FOR GENERATION OF POWER, WHERE THE POWER GENER ATED WAS CAPTIVELY USED FOR ITS UNITS . IN THAT CASE , THE A . O. HAD NOT ALLOWED THE CLAIM ON THE GROUND THAT GENERATION OF POWER WAS NOT A BUSINESS OF THE ASSESSEE , AND THE POWER GENERATED THROUGH WINDMILL WAS USED FO R CAPTIVE CONSUMPTION . HOWEVER, CIT(APPEALS) HAD ALLOWED THE CLAIM ON THE BASIS THAT THE ASSESSEE WAS ENGAGED IN 'MANUFACTURE ' AND 'PRODUCTION' OF 'ARTICLE' OR 'THING ' , AS REQUIRED BY LAW. THE TRIBUNAL HELD THAT SINCE THE ASSESSEE WAS GENERATING ELECTRICITY BY WIN DMILLS, THE CONDITION FOR GRANTING ADDITIONAL DEPRECIATION WAS F ULFILLED EVEN IF IT 119 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 WAS USED FOR CAPTIVE CONSUMPTION. AGAIN THE TRIBUNAL R ELIED UPON THE SAME CBDT CIRCULAR AS STATED ABOVE. THE APPELLANT HAS T HUS EMPHASISED THAT THESE TWO WERE DIRECT DECISIONS OF ITAT CHENNAI O N THIS PARTICULAR ISSUE OF ALLOWING ADDITIONAL DEPRECIATION ULS 32(1 )(I IA), WHICH HAVE ALSO BEEN SEPARATELY UPHELD BY THE MADRAS HIGH COURT I N THE CASES CITED ABOVE, AND THEREFORE, THE APPELLANT ' S CLAIM WAS ACCEPTABLE. 3.5 IN VIEW OF THE FACTS BROUGHT ON RECORD AND THE RATIO OF THE DECISIONS CITED ABOVE , IT BECOMES APPARENT THAT THE APPELLANT IS ENTITLED TO THE CLAIM OF ADDITIONAL DEPRECIATION . THUS THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS. 9 , 15,52,187/- IS DIRECTED TO BE DELETED AND THE GROUND OF APPEAL NO 1 RAISED BY THE APPELLANT IS LIABLE TO BE ALLOWED. 185. SINCE THE LD.CIT(A) WHILE ALLOWING THE CLAIM OF ADDITIONAL DEPRECIATION HAS RELIED ON VARIOUS DECISIONS INCLUDING THE DECISIONS OF HONBLE MADRAS HIGH COURT IN THE CASE OF VTM LTD. (SUP RA) AND M/S. HITECH ARAI LTD. (SUPRA) AND SINCE NOTHING CONTRARY WA S BROUGHT TO OUR NOTICE AGAINST THE ABOVE DECISIONS, THERE FORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) ALLOWING THE CLAIM OF ADDITIONAL DEPRECIATION ON WINDMILLS INSTALLED BY THE ASSESSE E DURING THE YEAR. GROUNDS OF APPEAL NO.1 AND 2 BY THE RE VENUE ARE ACCORDINGLY DISMISSED. 186. GROUND OF APPEAL NO. 3 BY THE REVENUE FOR A.Y. 2010 -11 READS AS UNDER : 3. THE LD.CIT(A) ERRED IN DECIDING THAT ADDITION O F RS.2,05,000/- WAS MADE ON THE DOCUMENTS PERTAINED TO DHARIWAL AND D OSHI PVT. LTD. AND THEREFORE IT HAS TO BE CONSIDERED IN THE CASE OF D HARIWAL AND DOSHI PVT. LTD. AND NOT IN THE ASSESSEE EVEN THOUGH THE ASSESSEE HAS UTILIZED IT FOR OWN BUSINESS PURPOSE. 187. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DURING T HE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT PAGE NO.4 OF BUNDLE NO.4 (A- 15) WAS SEIZED DURING THE COURSE OF SEARCH ACTION ON 20- 01-2010 AT OFFICE PREMISES OF THE ASSESSEE AT BARODA SHOWS QUANTITY WISE DETAILS OF PET JARS AND NOTE BOOKS AS UNDER : 120 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 SR.NO. ITEM NAME QUANTITY 1 PET JAR - 250G 1,700 2 PET JAR - 500G 6,400 3 PET JAR - 1KG 2,900 4 NOTE BOOK (PARIMAL) 30,000 188. HE FURTHER NOTED THAT DURING THE SEARCH OPERATION SHRI AJIT JAIN, CHIEF EXECUTIVE OF M/S. DHARIWAL INDUSTRIES LTD. AT BARO DA IN HIS STATEMENT RECORDED U/S.132(4) HAD REPLIED TO QUESTION NO.10 AS UNDER : THE ITEMS SHOWN AT SR.NO.1, 2, & 3 ARE QUANTITIES OF PET JAR OF VARIOUS SIZES WHICH ARE NO MORE IN USE FOR TEA DIVISION. WE HA VE UTILIZED THEM FOR SALES PROMOTION OF OUR PRODUCTS (PAN MASALA & GUTK HA). SR.NO.4 ARE NOTE BOOKS OF TEA-DIVISION WHICH WERE ALSO DISTRIBUTED FREE ALONG WITH PAN MASALA CASES. APPROXIMATE VALUE OF ALL THESE FOUR ITEMS IS RS.2,05,000/- WHICH IS NOT SHOWN IN OUR BOOKS OF ACCOU NTS. THE AO THEREFORE ASKED THE ASSESSEE TO EXPLAIN AS TO W HY THIS AMOUNT OF RS.2,05,000/- SHOULD NOT BE TREATED AS THE UND ISCLOSED INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR . THE ASSESSEE IN ITS REPLY SUBMITTED THAT THE SAID PAGE IS TIT LED DDIPL, I.E. DHARIWAL AND DOSHI INDUSTRIES PVT. LTD. AND THEREFORE IT DOES NOT BELONG TO THE ASSESSEE COMPANY. IT WAS FURTHER SUBMITT ED THAT NECESSARY EXPLANATION IN THIS REGARD SHALL BE FURNISHED BY THE SAID COMPANY IN ITS INDEPENDENT SUBMISSION. 189. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATIO N GIVEN BY THE ASSESSEE. ACCORDING TO HIM, THE ADMISSION MADE BY THE KEY PERSON OF THE ASSESSEE COMPANY SHRI AJIT JAIN IS THAT TH E SAID UNACCOUNTED EXPENSES BELONG TO THE ASSESSEE COMPANY. SHRI AJIT JAIN IS THE CHIEF EXECUTIVE OFFICER OF ITS BARODA FACTORY AND MANAGES ALL THE AFFAIRS OF THE BARODA FACTORY. THEREFORE, H IS STATEMENT RECORDED ON OATH U/S.132(4) OF THE I.T. ACT CA RRIES HIGH EVIDENTIARY VALUE IN THE EYES OF LAW. THE AO ACCORDINGLY M ADE 121 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 ADDITION OF RS.2,05,000/- TO THE TOTAL INCOME OF THE ASSESS EE AS ITS UNACCOUNTED EXPENSES. 190. BEFORE CIT(A) IT WAS SUBMITTED THAT THE SAID DOCUMEN T ITSELF IS TITLED DHARIWAL AND DOSHI INDUSTRIES PVT. LTD. (IN SHORT DD IPL) AND THE ASSESSEE HAS NOTHING TO DO WITH THE SAID PAGE. BA SED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETE D THE ADDITION BY OBSERVING AS UNDER : 5.2 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPE LLANT AND PERUSED MATERIAL ON RECORD. THE NOTINGS MADE ON PAGE 4 AND SEIZED FROM THE OFFICE PREMISES OF THE APPELLANT AT VADODARA RECORDS THE DETAILS OF THE PET JARS WHICH IS ACTUA L LY UTILIZED BY M/S DDIPL WHICH IS ENGAGED IN THE TEA BUSINESS. IN THE STATEMENT RECORDED U/S 132(4) OF SHRI . AJIT JAIN THIS FACT HAS BEEN EXPLAINED BY HIM AND HE HAS STATED THAT THE PET JARS AT S . NO 2 & 3 WERE UTILIZED FOR SALES PROMOTION OF THE PRODUCT OF M/S DIL I . E. FOR GUTKHA AND PAN MASALA AND THE NOTE BOOKS MENTIONED AT S.NO 4 WERE ALSO DISTRIBUTED FREE ALONG WITH PAN MASALA CASE . THE ASSESSING OFFICER HAS NOT CONSIDERED THE STATEMENT OF SHRI . JAIN IN THIS REGARD AND HELD THE EXPENSES TO BE UNACCO UNTED IN THE CASE OF M/S DIL . THE LOOSE PAPER INDICATING THE ITEMS IN ANY CASE RELAT ED TO M/S DDIPL AND THE SAME HAS BEEN UTILIZED BY THE APPEL LANT IS NOT DISPUTED BY THE ASSESSING OFFICER AND, THEREFORE , THE ADDITION IF ANY HAS TO BE CONSIDERED IN THE CASE OF DDIPL IF THE SAME HAS B EEN FOUND TO BE UNACCOUNTED OR NOT RECORDED IN THE BOOKS OF ACCOUNTS . THE ASSESSING OFFICER HAS NOT APPARENTLY CARRIED OUT ANY VERIFICAT ION AS IS EVIDENT FROM THE ASSESSMENT ORDER AND IS ALSO NOT SUPPORTED BY ANY INDEPENDENT EVIDENCE. THE RELIANCE PLACED BY THE ASSE SSING OFFICER ON THE STATEMENT OF SHRI . JAIN ALSO DO NOT INDICATE THE ITEMS IN QUESTION TO BE BELONGING TO THE APPELLANT COMPANY AND IN THE GI VEN SET OF FACT AND CIRCUMSTANCES OF THE CASE THE ADD I TION MADE BY THE ASSESSING OFFICER IS LIABLE TO BE DELETED AND GROUND OF APPEAL NO.3 RAISE D BY THE APPELLANT IS LIABLE TO BE ALLOWED. 191. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 192. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF THE CIT(A). THE FINDINGS GIVEN BY THE CIT(A) T HAT THE NOTINGS MADE ON PAGE NO.4 SEIZED FROM THE PREMISES OF THE ASSESSEE AT BARODA RECORDS THE DETAILS OF THE PET JARS WHICH IS A CTUALLY UTILIZED BY DDIPL WHICH IS ENGAGED IN THE TEA BUSINESS COU LD NOT BE 122 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. W E FIND THE AO IN THE INSTANT CASE MADE THE ADDITION BASED MAINLY ON THE STATEMENT OF SHRI AJIT JAIN WITHOUT ANY VERIFICATION AND HIS FINDING IS ALSO NOT SUPPORTED BY ANY INDEPENDENT EVIDENCE. THE ASS ESSEE HAS ALREADY EXPLAINED DURING THE COURSE OF ASSESSMENT PROCEE DINGS ITSELF THAT SINCE THE SAID PAGE ITSELF IS TITLED DDIPL, ADDITION IF ANY , CAN BE MADE IN THE HANDS OF DDIPL AND CANNOT BE MADE IN THE H ANDS OF THE ASSESSEE. IN ABSENCE OF ANY INDEPENDENT EVIDENCE TH AT THE SAID PAGE BELONGS TO THE ASSESSEE COMPANY, WE ARE OF THE C ONSIDERED OPINION THAT ADDITION CANNOT BE MADE MERELY ON THE BASIS OF THE STATEMENT OF SHRI AJIT JAIN. THE LD.CIT(A) IN THE INSTANT CASE HAS GIVEN JUSTIFIABLE REASONS FOR DELETING THE ADDITION. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE FA CTUAL FINDING GIVEN BY THE LD.CIT(A). WE ACCORDINGLY UPHOLD THE OR DER OF THE CIT(A) ON THIS ISSUE. THE GROUND RAISED BY THE REVE NUE ON THIS ISSUE IS ACCORDINGLY DISMISSED. 193. GROUND OF APPEAL NO.1 BY THE ASSESSEE FOR A.Y. 2010- 11 READS AS UNDER ; 1 ] T HE LD CIT(A) E R RED IN SUS T AINING THE ADDITION TOWARDS THE ALLEGED DIFFERENCE I N STOC K O F PACK I NG MA T ERIA L OF RS. 1,75 , 66 , 534/- DISREGARDING THE STOCK OF PACK I NG M ATE RI A L L Y IN G ON FACTORY FLOOR AND EVEN THE DEPARTMENT CONS I DE R ED BY THE DEPARTMENT I TSELF I N THE PROCESS OF PHYSICAL VER I FICAT I ON DUR I NG THE COURSE OF S EARCH PROCEEDINGS . 194. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO NOTED T HAT DURING THE COURSE OF SURVEY ACTION U/S.133A OF THE I.T. ACT CA RRIED OUT ON 20-01-2010 AT THE FACTORY PREMISES OF M/S. DHARIWAL INDU STRIES LTD. AT GUT NO.1524/2, 1526 AND 1528, VILLAGE SARADWADI, TAL. SH IRUR, PUNE, WHICH WAS LATER ON CONVERTED INTO A SEARCH OPERATION U/S.1 32, STOCK OF RAW MATERIAL, I.E. POLYESTER, METALIZED POLYESTER, M ETALIZED BOPP, POLY ETC., WERE FOUND AMOUNTING TO RS.4,47,87,898/-. AS PER 123 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE STOCK REGISTER MAINTAINED BY THE ASSESSEE COMPANY STOCK WAS SHOWN AT RS.2,72,21,364/-. THUS, THERE WAS A STOCK DIFFEREN CE OF ABOUT RS.1,75,66,534/- BETWEEN THE STOCK AS PER STOCK R EGISTER MAINTAINED BY THE ASSESSEE COMPANY AND THE PHYSICAL STO CK TAKEN BY THE DEPARTMENT. HE FURTHER NOTED THAT WHILE RECORDIN G THE STATEMENT U/S.131 OF THE I.T. ACT, SHRI ARUN SETH, CHIEF EXECUTIVE ON 20-01-2010 HE WAS SPECIFICALLY ASKED TO EXPLAIN THE DI FFERENCE. HOWEVER, HE COULD NOT EXPLAIN THE SAME PROPERLY. ON THE BASIS OF THE ABOVE FINDINGS, WHILE RECORDING THE STATEMENT U/S.132(4) OF THE I.T. ACT A SPECIFIC QUESTION NO.3 WAS ASKED TO SHRI MADHUS UDAN BRAHME, WHO WAS THE FACTORY MANAGER OF M/S. MANIKCHAN D PACKAGING VIDE WHICH HE WAS ASKED TO RECONCILE THE DIFFEREN CE BETWEEN PHYSICAL STOCK AND THE STOCK AS PER BOOKS POIN TED OUT DURING THE COURSE OF SURVEY PROCEEDINGS ON 20-01-2010. HE HAD CLARIFIED THAT THE BOOK STOCK HAD BEEN PROVIDED VARIETY W ISE WHEREAS PHYSICAL STOCK WAS TAKEN ON VARIETY OF PACKAGING MATERIALS AS AVAILABLE ON THE RACK WITH NO DIFFERENTIATION MADE AS TO THE QUALITY OF THE PACKING MATERIAL CONTAINED THEREIN. HENCE, IT WAS NO T IMMEDIATELY POSSIBLE TO RECONCILE PHYSICAL STOCK WITH THE S TOCK AS PER BOOKS. HE HAD HOWEVER STATED THAT THE DIFFERENCE IN STOCK WITH REGARD TO QUALITY AND QUANTITY WOULD BE WORKED OUT AND THE SAME WOULD BE SUBMITTED WITHIN A WEEK. HOWEVER, THE SAME WAS NOT SUBMITTED. IN VIEW OF THE ABOVE, THE AO ISSUED A SHOW CA USE NOTICE TO THE ASSESSEE AND GAVE FURTHER OPPORTUNITY TO RECON CILE AND EXPLAIN WITH PROPER EVIDENCE REGARDING THE STOCK DIFFERENCE OF ABOUT RS.1,75,66,534/-. IN ABSENCE OF ANY RECONCILIATION OF THE DIFFE RENCE THE AO MADE ADDITION OF RS.1,75,66,534/-. 124 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 195. BEFORE CIT(A) APART FROM REITERATING THE SUBMISSIONS M ADE BEFORE THE AO, IT WAS FURTHER SUBMITTED THAT THE STOCK FO UND ON PHYSICAL VERIFICATION DURING THE SEARCH ACTION COMPRISED OF S TOCK FOUND IN THE STOCK ROOM AND ON THE FLOOR OF THE FACTORY O UTSIDE THE STORE ROOM WHEREAS THE FIGURE OF STOCK AS PER STOCK RE GISTER COMPRISE OF STOCK INSIDE THE STORE ROOM ONLY AND NOT TH OSE LYING ON THE FACTORY FLOOR. IT WAS SUBMITTED THAT THE AO WITHOUT POINTING OUT OR IDENTIFYING EVEN A SINGLE MISTAKE HAD MADE THE IMPUGNE D ADDITION. 196. HOWEVER, THE CIT(A) WAS NOT SATISFIED WITH THE EXPLANA TION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE AO B Y OBSERVING AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND PERUSED MATERIAL ON RECORD. IT IS NOTI CED THAT THE DIFFERENCE OF STOCK OF RS.1,75,66,534/- DURING THE SEA RCH ACTION WAS ALSO BROUGHT TO THE NOTICE OF THE CHIEF EXECUTIVE OF THE APPELLANT COMPANY SHRI ARUN SETH AND WHOSE STATEMENT U/S.131 WAS ALSO RECORDED ON 20-01-2010 AND HE WAS SPECIFICALLY ASKED T O EXPLAIN THE AFORESAID DIFFERENCE, HOWEVER THE CEO OF THE APPELLA NT COMPANY, SHRI ARUN SHETH COULD NOT EXPLAIN THE DIFFERENCE. IT IS ALSO SEEN THAT THE STATEMENT RECORDED U/S.132(4) OF SHRI MADHUSUDHAN BRAH ME, FACTORY MANAGER OF M/S. MANIKCHAND PACKAGING ALSO FAILED TO R ECONCILE THE DIFFERENCE BETWEEN THE PHYSICAL STOCK AND THE STOCK AS PER BOOKS THOUGH HE HAD STATED THAT THE DIFFERENCE IN STOCK WI TH REGARD TO THE QUALITY AND QUANTITY WOULD BE WORKED OUT AND SUBMITT ED WITHIN A WEEK WHICH WAS NEVER SUBMITTED. THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS ALSO COULD NOT RECONCILE THE STOCK DIFFERE NCE WITH THE ASSESSMENT PROCEEDINGS ALSO COULD NOT RECONCILE THE STOCK DIFFERENCE WITH THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY WAY OF COGENT PROOF AND EVIDENCES AND THE EXPLANATION FURNISHED WAS FOUND TO BE NOT SATISFACTORY. THE APEX COURT IN THE CASE OF CIT VS. MU SSADILAL RAM BHAROSE (1983) 165 ITR 14 HELD THAT THE BURDEN PLACE D UPON THE ASSESSEE IS NOT DISCHARGED BY ANY FANTASTIC EXPLANATION NO R IS IF LAW THAT ANY AND EVERY NARRATION BY THE ASSESSEE MUST BE ACCEPTAB LE. IT MUST BE AN EXPLANATION ACCEPTABLE TO THE FACT FINDING BODY. THUS THE MATERIAL BROUGHT ON RECORD CLEARLY INDICATE THAT NO REASONABL E EXPLANATION HAS BEEN FURNISHED BY THE APPELLANT AND, THEREFORE, ADDI TION MADE BY THE ASSESSING OFFICER IS JUSTIFIED AND UPHELD. 197. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESS EE IS IN APPEAL BEFORE US. 125 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 198. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGED THE O RDER OF THE CIT(A). REFERRING TO PAGE 6 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE RECONCILIAT ION DONE BY HIM AND SUBMITTED THAT AS PER THE SAID RECONCILIA TION THE DIFFERENCE COMES TO ONLY RS.15,11,132/-. HE SUBMITTED THAT THE DIFFERENCE WAS DUE TO VALUATION DONE BY THE INCOME TAX D EPARTMENT ON AN AVERAGE RATE. BECAUSE OF THE FAULTY METHOD OF VA LUATION THE DISCREPANCY HAD AROSE. HE SUBMITTED THAT IN THE INTERES T OF JUSTICE, THE MATTER MAY BE RESTORED TO THE FILE OF THE AO WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO SUBSTANTIATE BEFORE HIM REG ARDING THE DIFFERENCE BETWEEN THE STOCK FOUND DURING THE COURSE OF SURVEY/SEARCH AND THE STOCK AS PER BOOKS. HE SUBMITT ED THAT ALL THESE DETAILS WERE AVAILABLE BEFORE THE AO AND THE CIT(A). HOWEVER, THEY HAVE NOT PROPERLY APPRECIATED AND DUE TO WRONG APPLICATION OF AVERAGE RATE BY THE DEPARTMENT AS AGAINST THE ACTUAL RATE THE HUGE DIFFERENCE AROSE. 199. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED T HAT DESPITE OPPORTUNITIES GIVEN BY THE AO AND CIT(A) THE ASSESSEE WAS UNABLE T O RECONCILE THE DIFFERENCE. THEREFORE, NO FURTHER OPPORTUNITY SHOULD BE GIVEN AND THE ORDER OF CIT(A) BE UPHELD. 200. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND T HE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO IN THE INSTANT CASE HAS MADE ADDITION OF RS.1,75,66,534/- TO THE TOTAL INC OME OF THE ASSESSEE BEING THE DIFFERENCE IN VALUE OF STOCK FOUND DURING THE COURSE OF SURVEY/SEARCH AND THE STOCK AS PER BOOKS. WE FIND THE LD.CIT(A) HAS UPHELD THE ADDITION MADE BY THE AO IN ABSENC E OF ANY 126 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 SATISFACTORY RECONCILIATION OF SUCH DIFFERENCE. IT IS THE SUBM ISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT INSTEAD OF TAKING THE ACTUAL RATES THE SEARCH/SURVEY PARTY HAS APPLIED AVERAGE RA TE FOR WHICH THIS HUGE DIFFERENCE HAS AROSE. IT IS ALSO THE SUBMISSION O F THE LD. COUNSEL FOR THE ASSESSEE THAT THE MAXIMUM DIFFERENCE WILL BE RS.15,11,132/- IF THE CORRECT VALUATION AS PER ACTUAL INVOICE IS MADE. ACCORDING TO HIM, ALTHOUGH THE RECONCILIATION STATEME NT WAS GIVEN TO THE AO AND CIT(A), HOWEVER, THEY HAVE NOT APPRE CIATED THE SAME. FROM THE ORDER OF THE AO AS WELL AS THE SUBMISSION OF THE ASSESSEE IT IS NOT VERIFIABLE AS TO WHAT METHOD OF ACCOUNT ING FOR VALUATION OF STOCK WAS BEING ADOPTED BY THE ASSESSEE. I F THE VALUATION IS BEING MADE AS PER ACTUAL INVOICE PRICE, THEN T AKING AVERAGE PRICE WILL GIVE A DISTORTED FIGURE. IN VIEW OF THE AB OVE DISCUSSION AND KEEPING IN MIND THE INTEREST OF JUSTICE, WE D EEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANT IATE WITH EVIDENCE TO HIS SATISFACTION REGARDING THE DIFFERENCE BETWEE N PHYSICAL STOCK AND THE STOCK AS PER BOOKS. GROUND RAIS ED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 201. GROUND OF APPEAL NO.2 BY THE ASSESSEE FOR A.Y. 2010- 11 READS AS UNDER : 2 . T H E I D C IT (A) ERRED IN ADDIT I ON OF RS. 1,04,84,609/- MERE L Y CONS I DER I NG TH E STATEME NT O F ONE THE EMP L OYEE OF THE APPELLANT COMPANY . 202. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING THE ASSE SSMENT PROCEEDINGS THE AO NOTED THAT THE SEIZED DOCUMENT OF P AGE NO.10 OF BUNDLE NO.4 OF A-15 IS ANNEXURE SEIZED FROM THE OFFICE PREMIS ES OF M/S. DIL. THE ASSESSEE COMPANY AT VADODARA RECORDED THE WORKING 127 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 OF EXPENSES TOTALING TO RS.1,04,84,609/-. DURING THE COURSE OF SEARCH ACTION IN THE STATEMENT RECORDED ON 21-01-2010 U/S.132(4), THE CHIEF EXECUTIVE OF M/S. DIL MR. AJIT JAIN HAD EXPLAINED EXPENSES TO BE RELATING TO DELHI OFFICE TO HAVE BEEN SANC TIONED AND PAID AS PER SHRI RASIKLAL M. DHARIWAL AND THE SAID EXPENSES WERE ALSO STATED TO HAVE NOT BEEN REFLECTED IN THE BOOKS OF THE ASSESSEE. THE AO, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO W HY THE ABOVE AMOUNT SHOULD NOT BE TREATED AS UNDISCLOSED INCOME OF TH E ASSESSEE. IT WAS SUBMITTED BY THE ASSESSEE THAT THE SAID PAGE IS A DUMB DOCUMENT SINCE IT DOES NOT HAVE NAME OF ANY PERSON/FIRM/COMPANY, DATE, PERIOD TO WHICH IT BELONGS, NATUR E OF RELEVANCE TO ANY PERSON/FIRM/COMPANY, SIGNATURE OF THE PE RSON WHO HAS PREPARED IT. FURTHER, IT WAS SUBMITTED THAT THE SAM E IS NOT EVEN IDENTIFIED OR ACCEPTED OF HAVING BEEN PREPARED BY ANY OF T HE DIRECTORS/EMPLOYEES OF THE ASSESSEE COMPANY. IT WAS FUR THER SUBMITTED THAT THE DETAILS MENTIONED ON THE SAID PAGE IS NOWHERE CONNECTED TO THE ASSESSEE OR ANY GROUP CONCERN. IT WAS SUBMITTED THAT THE STATEMENT OF SHRI AJIT JAIN IS ABSOLUTELY BASELESS AND NOT JUSTIFIABLE. FURTHER SAME IS NOT BINDING ON THE ASSESSEE S INCE HE IS IN NO WAY RESPONSIBLE FOR INTERPRETING SUCH DUMB DOCUMENT WHICH DOES NOT BELONG TO THE COMPANY. FURTHER, THE STATEMEN T MADE BY HIM DURING THE COURSE OF SEARCH PROCEEDING WAS UNDER ST RESS AND THE SAME WAS NOT EVEN CORROBORATED BY ANY INDEPENDEN T DOCUMENTARY OR OTHER EVIDENCE. 203. WITHOUT PREJUDICE AND WITHOUT ADMITTING FOR ANY OF TH E CONTENTS IN THE SAID PAPER WHATSOEVER, IT WAS SUBMITTED THAT THE SAID PAPER MAY BE CONSIDERED IN THE ASSESSMENT PROCEE DINGS OF SHRI R.M. DHARIWAL AND NOT IN THE PROCEEDINGS OF THE ASSESSEE COMPANY SINCE THERE ARE NO CLINCHING, SUBSTANTIVE, CORROBORATIVE EV IDENCE ON 128 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 THE SUBJECT MATTER. IT WAS FURTHER ARGUED THAT ADDITIO N ON THE BASIS OF ANY DUMB DOCUMENT IS ABSOLUTELY IMPROPER AND ILLEGAL AND BAD IN LAW. 204. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATIO N GIVEN BY THE ASSESSEE AND FOUND THE SAME TO BE NOT ACCEPTA BLE. ACCORDING TO HIM, THE ADMISSION MADE BY THE KEY PERSON OF THE ASSE SSEE COMPANY SHRI AJIT JAIN THAT THE SAID UNACCOUNTED EXPENSE S BELONG TO ASSESSEE COMPANY CARRIES HIGHER EVIDENTIARY VALUE IN T HE EYES OF LAW SINCE THE STATEMENT WAS RECORDED ON OATH U/S.132(4) OF THE I.T. ACT. HE ACCORDINGLY MADE ADDITION OF RS.1,04,84,609/-. 205. BEFORE CIT(A) IT WAS SUBMITTED THAT THE ADDITION IS BA SED ON A SINGLE PAGE WHICH IS JUST A DUMB DOCUMENT AS IT DOES NOT CONTAIN THE NAME OF THE PERSON, DATE AND PLACE, HIS SIGNATURE AND RELEVANCE TO ANY PERSON AND DOES NOT CONTAIN ANY SIGNATURE OF TH E PERSON WHO PREPARED IT. THE SAME HAS NOT EVEN BEEN IDENTIFIED OR AC CEPTED OF HAVING BEEN PREPARED BY ANY OF THE DIRECTORS/EMPLOYEES OF THE COMPANY. THE SAID PAPER IS IN NO WAY CONNECTED TO THE ASSESSEE COMPANY. RELYING ON VARIOUS DECISIONS IT WAS SUBMITTED TH AT ADDITION BASED ON A DUMB DOCUMENT IS NOT SUSTAINABLE. 206. HOWEVER, THE LD.CIT(A) WAS ALSO NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 6.2 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPEL LANT AND PERUSED MATERIAL ON RECORD. THE SEIZED DOCUMENT FROM THE OFFICE PREMISES OF THE APPELLANT AT VADODARA RECORDS THE DETA ILS OF THE EXPENSES AMOUNTING TO RS.1,04,84,609/- WRITTEN UNDER D IFFERENT HEADS AS UNDER : 129 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 SR.NO. DETAIL A MOUNT (RS.) 1 CASH 5845000 2 VOUCHERS 1511909 3 TRANSPORTATION 721550 4 SAMPLING AND CC BOYS 392877 5 FREE POUCHES 1670984 TOTAL 10142320 THE ENTRIES CONTAINED THEREIN HAS BEEN EXPLAINED BY T HE PERSON MANAGING THE OFFICE OF THE APPELLANT CO AT VADODARA A ND , TH E REFORE, IT WILL BE WRONG TO CONCLUDE THAT THE SAID DOCUMENT IS A DUMB DOCUM E NT O R A MEANINGLESS PAPER AS THE DETAIL OF EACH AMOUNT MEN TIONED UNDER EACH HEAD HAS BEEN EXPLAINED AND WHICH INDICATES THE LINK TO THE APPELLANT'S BUSINESS UNDER SEC 292C . THERE IS ' A PRESUMPTION AGAINST THE APPELLANT THAT SUCH LOOSE PAPERS OR DOCUMENTS FOUND FROM HIS POSSESSION BELONG TO HIM AND ITS CONTENTS ARE CORRECT, TH OUGH SUCH PRESUMPTION IS A REBUTTABLE PRESUMPTION. THE ASSESSING OFF ICER HAS BEEN ABLE TO ESTABLISH THAT THE DETAIL MENTIONED ON T HE LOOSE PAPERS ARE RELATING TO UNDISCLOSED INCOME OF THE APPELLANT AND T HE CLEAR ADMISSION AND EXPLANATION FURNISHED BY THE CHIEF EXECUTIVE HAS EXPLAINED THE NATURE OF TRANSACTION RECORDED IN IT AND, THEREFORE, THERE IS NO GUESS WORK INVOLVED . THE ENTIRE EXPENSES AS RECORDED FROM THE STATEMENT U/S 132(4) OF SHRI . JAIN RECORDED THAT IT RELATES TO THE DELHI OFFICE OF THE APPELLANT COMPANY WHICH HAS NOT BEEN RECORDED IN THE REGULAR BOOKS OF ACCOUNT . IT HAS BEEN EXPLAINED BY SHRI JAIN THAT THE CASH AMOU NTING TO RS. 58 , 45,000/- APPEARING AT SR . NO. 1 WAS EXPENSES INCURRED ON SPEED MONEY TO VARIOUS PERSONS AND LIKEWISE HAS EXPLAINED THE EXPENSES UNDER OTHER HEADS AS APPEARING IN THE SEIZED DOCUMENT IN HIS . ANSWER TO QUESTION NO . 9 OF HIS STATEMENT RECORDED ON 21.01 . 2010 U/S 132(4) OF THE ACT IN THE CASE OF P R PATEL VS DCIT (2001) 73 TT J 262 (MUM) HELD ON THE EVIDENTIARY VALUE OF INCRIMINATING MATERIAL FOUND DURING SEARCH COULD BE USED AGAINST THE ASSESSEE EVEN WITHOUT REFERENCE TO THE PROVISIONS OF SEC 132 (4A) PROVIDED SUCH EVIDENCE WAS RE LEVANT AND MATERIAL FOR ASSESSEE'S ASSESSMENT AND PUT TO HIM BEFORE USE AGAINST HIM IN THE ASSESSMENT PROCEEDINGS. 6.3 SIMILAR VIEW WAS TAKEN BY THE PUNE ITAT IN THE CASE OF DHANVARSHA BUILDERS AND DEVELOPERS (P) LTD VS DCIT (200 7) 2891TR (AT) 50 PUNE) THAT IT CANNOT BE SAID THAT THE DOCUME NT IS A DUMB DOCUMENT EVEN THOUGH IT DOES NOT CONTAIN ASSESSEE'S NAME AND THAT THE STATEMENT RECORDED U/S 132(4) CAN BE USED IN EVIDENCE IN BLOCK ASSESSMENT IN THE CONTEXT OF FACT FOUND IN THE SEARCH . LOOSE PAPERS UNLIKE BOUND BOOKS ARE GENERALLY NOT TO BE A BASIS FOR READY INFERENCE OF CONCEALMENT OF FIGUR E S FOUND IN THEM , BUT IT CANNOT BE SAID THAT THEY ARE TOTALLY IRRELEVANT, IF THEY HAVE SOMETHING TO CONNEC T THEM WITH THE ASSESSEES BUSINESS. THE INFERENCE DRAWN IN THE CASE IS ON F ACT. SEC.132(4A) WHICH RAISES A PRESUMPTION OF LEGALITY OF DOCUMENTS FOUND, WOULD MEAN THAT THEY CANNOT BE TOTALLY IGNORED. 6.4 IN VIEW OF THE ABOVE FACT THE ADDITION MADE BY THE ASSESSING OFFICER IS UPHELD AND THE GROUNDS OF APPEAL NO.4 RAISE D BY THE APPELLANT IS LIABLE TO BE DISMISSED. 207. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 130 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 208. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE DU RING THE COURSE OF SEARCH ACTION AT THE BARODA OFFICE PREMISES OF T HE COMPANY SEIZED DOCUMENT APPEARING ON PAGE 10 OF BUNDLE NO.4 OF A-15 WAS SEIZED WHICH CONTAIN CERTAIN EXPENSES TOTALING T O RS.1,04,84,609. DURING THE COURSE OF SEARCH THE STATEMENT OF SHRI AJIT JAIN, CHIEF EXECUTIVE OF M/S.DIL WAS RECORDED ON OATH U/S.13(4) WHEREIN HE HAD STATED THAT THESE EXPENSES RELA TE TO DELHI OFFICE WHICH WERE SANCTIONED AND PAID AS PER SHRI RASIKLAL M. DHARIWAL AND THE SAID EXPENSES WERE NOT REFLECTED IN THE BOOKS OF ACCOUNT. SINCE THE ASSESSEE WAS UNABLE TO GIVE ANY SAT ISFACTORY EXPLANATION BEFORE THE AO, THE AO MADE THE ADDITION AS UNDISCLOSED INCOME OF THE ASSESSEE. WHILE DOING SO, HE REJECTED THE S UBMISSION OF THE ASSESSEE THAT THESE ARE DUMB DOCUMENTS WITHOU T HAVING ANY NAME OF ANY PERSON, FIRM OR COMPANY OR DATE OR PERIOD ET C. HE ALSO REJECTED THE SUBMISSION OF THE ASSESSEE THAT THE STATE MENT OF SHRI AJITH JAIN IS NOT BINDING ON THE ASSESSEE. WE FIND IN APPEA L THE LD.CIT(A) UPHELD THE ACTION OF THE AO ON THE GROUND THAT T HE ENTRIES CONTAINED IN THE SAID SEIZED DOCUMENT WAS EXPLAINED BY T HE PERSON MANAGING THE OFFICE OF THE ASSESSEE COMPANY AT BARODA AN D THEREFORE IT CANNOT BE SAID TO BE A DUMB DOCUMENT OR A MEANINGLESS PAPER. HE FURTHER NOTED THAT DETAILS OF EACH AMOUNTS ME NTIONED UNDER EACH HEAD WAS EXPENDITURE WHICH INDICATES THE LINK TO THE ASSESSEES BUSINESS U/S.292C OF THE I.T. ACT. RELYING ON VARIOUS DECISIONS THE CIT(A) HELD THAT THE SAID DOCUMENT IS NOT A DUMB DOCUMENT EVEN THOUGH IT CONTAINS THE ASSESSEES NAME. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. S INCE THE 131 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 PAPER WAS FOUND FROM THE BARODA OFFICE OF THE ASSESSEE CO MPANY AND THE CHIEF EXECUTIVE MANAGING THE AFFAIRS OF THE ASSESSE E COMPANY HAD EXPLAINED THE NATURE OF EACH AND EVERY ITE M, THEREFORE, MERELY BECAUSE THE NAME OF THE ASSESSEE COM PANY WAS NOT MENTIONED IN THE SEIZED PAPER, IT CANNOT BE SAID THAT IT DOES NOT BELONG TO THE ASSESSEE COMPANY. FURTHER, THE FIGURES ME NTIONED IN THE SAID SEIZED DOCUMENT ARE NOT ROUND FIGURES. OUT OF THE 5 ENTRIES 4 ENTRIES ARE IN ODD FIGURES. THEREFORE, IT ALSO CANNOT BE SAID THAT THESE ARE BASELESS OR SOME ESTIMATES ETC. SINCE THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF GUTKHA AND ONE O F THE ITEM OF THE SEIZED DOCUMENT SHOW FREE POUCHES, THEREFORE, TH ERE IS A STRONG INDICATION THAT THE SAME RELATES TO THE BUSINESS OF THE ASSESSEE. SINCE THE STATEMENT OF THE CHIEF EXECUTIVE OF T HE ASSESSEE COMPANY SHRI AJITH JAIN WAS RECORDED ON OATH U /S.132(4) OF THE I.T. ACT WHEREIN HE HAS STATED THAT THESE EXPEN SES RELATE TO THE DELHI OFFICE OF THE ASSESSEE COMPANY WHICH ARE NOT REC ORDED IN THE REGULAR BOOKS OF ACCOUNT, THEREFORE, THE PRESUMPTION WILL BE AGAINST THE ASSESSEE ESPECIALLY WHEN THE PAPER IS SEIZE D FROM THE OFFICE PREMISES OF THE ASSESSEE. WE FURTHER FIND THE CIT(A) WHILE UPHOLDING THE ADDITION MADE BY THE AO HAS RELIED ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF DHANVARSHA BUILDERS AND DEVELOPERS PVT. LTD. (SUPRA). THE LD. COUNSEL FOR THE A SSESSEE COULD NOT GIVE ANY SATISFACTORY EXPLANATION TO CONTROVERT THE FINDINGS GIVEN BY THE CIT(A) OR THE DECISION RELIED UPON BY HIM. SINCE THE ORDER OF THE CIT(A) IN OUR OPINION IS JUSTIFIED UND ER THE FACTS AND CIRCUMSTANCES OF THE CASE, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN HIS ORDER. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS DISMISSED. 132 ITA NOS.1318 TO 1324/PN/13 AND ITA NOS. 1389 TO 1 391 AND 1408 TO 1410/PN/13 209. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE AR E DISMISSED AND THE ALL THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02-05-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED :02 ND MAY, 2016 ) *#,! -! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) , / THE CIT(A)-II, PUNE 4. % / THE CIT-II, PUNE 5 . 6. ( ++,, ,, / DR, ITAT, B PUNE; 0 / GUARD FILE. / BY ORDER , ( + //TRUE COPY // // ( + //TRUE COPY // 23 + , / SR. PRIVATE SECRETARY ,, / ITAT, PUNE