ITO 8(3)(4), MUMBAI V. WESTERN INDIA PACKAGING P.LTD, MUMBAI

ITA 1528/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4025 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 05-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 05-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: K K TIWARI
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence; Capital receipt
• Section: 69C; 143(3); 133(6); 147; 144; 68

Judgement Text

G BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 1528 /MUM/2012 ( / ASSESSMENT YEAR : 2005-06) ./ I.T.A. NO. 2179 /MUM/2012 ( / ASSESSMENT YEAR : 2005-06) INCOME TAX OFFICER 8(3)(4), ROOM NO. 202, 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. / V. WESTERN INDIA PACKAGING PRIVATE LIMITED 305, B ARENA, LOKHANDWALA COMPLEX, ANDHERI (W) , MUMBAI 400053 ./ PAN : AAACW 4258R ( / APPELLANT ) .. ( / RESPONDENT ) INCOME TAX OFFICER 8(3)(4), ROOM NO. 202, 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020. / V. WESTERN INDIA PACKAGING PRIVATE LIMITED 305, B ARENA, LOKHANDWALA COMPLEX, ANDHERI (W) , MUMBAI 400053 ./ PAN : AAACW 4258R ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY : SHRI RAJESH OJHA ASSESSEE BY : SHRI K.K. TIWARI / DATE OF HEARING : 05-11-2015 / DATE OF PRONOUNCEMENT : 02-02-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAI NST THE TWO SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS), MUMBAI (HEREINAFTER CALLED THE CIT(A)) DATED 09-12-2011 AND 30-01-2012 PERTAINING TO THE ASSESSMENT YEAR 2005-06. ITA 1528/MUM/2012 & 2179/MUM/2012 2 2. THE GROUNDS RAISED BY THE REVENUE IN ITA NO. 152 8/MUM/2012 IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL READ AS UNDE R:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) ERRED IN GRANTING RELIEF TO THE ASSESSEE WI THOUT APPRECIATING THAT THE ASSESSEE HAD FAILED TO PRODUCE EITHER BEFORE T HE ASSESSING OFFICER OR BEFORE THE LD. CIT(A) ANY SUPPORTING MAT ERIAL TO DISPROVE THE DISCREPANCY FOUND BY THE ASSESSING OFFICER, ON THE B ASIS OF PURCHASE AND SALE BILLS SUBMITTED BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT BY ESTIMATING THE ASSESEE'S UNACCOUNTED TRANSACTIONS OF SALES, PURCHASE AND CON SEQUENT INCOME, IN EFFECT, THE ASSESSING OFFICER HAD INVOKED THE PR OVISIONS OF SEC. 145(3), USING THE INFORMATION SUPPLIED BY THE ASSESS EE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT HE HAS HIM SELF IN A.Y.2007-08 IN THE ASSESSEE'S OWN CASE FOUND THAT THE ASSESSEE H AD MADE UNACCOUNTED PURCHASES OF RS.13,50,000 AND ACCORDING LY CONFIRMED THE SAID ADDITION U/ S.69C OF THE ACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN NOT CONSIDERING THE LACK OF CREDI TWORTHINESS OF THE ALLEGED SHAREHOLDERS/ APPLICANTS AND INSTEAD DELETIN G THE ADDITION OF RS.31,68,000/- U/S 68 OF THE ACT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.31,6 8,000/- U/S 68 OF THE ACT ON ACCOUNT OF SHARE CAPITAL, WITHOUT APPRECIATING THAT THE ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE SHARE TRANS ACTIONS AS THE ASSESSEE HAD FURNISHED TWO CONTRADICTORY STATEMENTS OF SHAREHOLDING. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.31,68 ,000 U/S.68 OF THE ACT ON ACCOUNT OF SHARE CAPITAL, WITHOUT APPRECIATING THAT THE ASSESSEE HAD FAILED TO PROVE THE SOURCE OF THE CASH CREDITS BEFO RE THE ASSESSING OFFICER AS WELL AS THE CIT(A) BY NOT FURNISHING SUP PORTING EVIDENCE BY WAY OF THE BANK STATEMENTS OF THE CREDITORS AND IN SIMP LY ACCEPTING THE ASSESSEE'S CLAIM THAT THE INVESTMENT WAS MADE BY THE CR EDITORS BY ACCOUNT PAYEE CHEQUE / DRAFTS. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE A BOVE GROUNDS TO BE SET ASIDE AND THAT OF THE ITO/ AC/DCIT BE RESTORE D. ITA 1528/MUM/2012 & 2179/MUM/2012 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANYS CASE WAS SELECTED FOR SCRUTINY AND DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT ) READ WITH SECTION 143(2) OF THE ACT , IT WAS STATED BY T HE ASSESSEE COMPANY THAT IT IS IN THE BUSINESS OF MANUFACTURING OF WOODEN CRATE S, PALLETS AND TRADING IN PLYWOOD IN WHOLESALE. THE WOODEN CRATES/PALLETS ARE SUPPLIED TO GLASS AND PAPER MANUFACTURERS AND THE ASSESSEE COMPANY HAS SO LD PLYWOOD TO RETAIL DEALERS IN CHENNAI AND MUMBAI. THE LEARNED ASSESSIN G OFFICER (HEREINAFTER CALLED THE A.O.) OBSERVED THAT THE ASSESSEE COMP ANY HAS MADE PROFITS IN THE PLYWOOD TRADING BUSINESS WHILE IT HAS INCURRED LOSSES IN THE MANUFACTURING ACTIVITY. THE ASSESSEE COMPANY SUBMI TTED THAT IT HAS IDENTIFIED THE BUYER OF WOODEN CRATES FOR PACKAGING OF FLOAT-GLASS NAMELY SAINT GOBAIN GLASS INDIA LTD. (IN SHORT SGGI) IN NOVEMB ER, 2003 AT THE RATE OF RS. 400/- PER CRATE. A QUANTITY OF 8878 CRATES WERE SU PPLIED TO SGGI FROM 1-11- 2003 TO 31-3-2004. THE BREAKEVEN POINT WAS ACHIEVED BY THE ASSESSEE COMPANY ON THE SUPPLY OF 8878 CRATES AND THE AUDITE D P&L ACCOUNT FOR THE PERIOD ENDING 31-3-2004 SHOWED A MEAGER PROFIT OF R S. 42,546/-. IN NOVEMBER, 2004 , THE ASSESSEE COMPANY DECIDED TO RA ISE THE SHARE CAPITAL BY RS. 35,00,000/- AND PLYWOOD TRADING WAS ACCELERATED AND A SALES TURNOVER OF RS. 2,35,00,000/- WAS ACHIEVED FROM 1-11-2004 TO 31 -3-2005. IN NOVEMBER 2004, THE SGGI INVITED THE ASSESSEE COMPANY TO RESU ME SUPPLIES OF WOODEN CRATES AT THE RATE OF RS. 412/- PER CRATE AND SGGI AGREED TO PLACE ORDERS FOR 30,000 CRATES FOR SUPPLIES BEFORE 31-3-2005. SINCE THE YIELD OF SAWN TIMBER WAS POOR AND ALSO VERY DIFFICULT TO PROCURE TIMBER IN THE SHORT PERIOD, THE ASSESSEE COMPANY WAS COMPELLED TO IMPORT TIMBER, TH E ASSESSEE COMPANY INCURRED LOSS ON PROCUREMENT OF TIMBER WHICH RESULT ED IN HIGH COST OF PRODUCTION. SINCE NO MANUFACTURING FACILITIES WERE AVAILABLE AT SRIPERUMBUDUR , WOODEN CRATES WERE MANUFACTURED ON JOB RATE BASIS , THIS ALSO RESULTED IN HIGH COST OF PRODUCTION. THE ASSE SSEE COMPANY INCURRED HEAVY LOSSES ON SUPPLIES OF 28544 CRATES AND ACCORD INGLY THE ASSESSEE ITA 1528/MUM/2012 & 2179/MUM/2012 4 COMPANY DECIDED TO STOP NEW SUPPLIES TO SGGI. IN T HE SUBSEQUENT YEAR, THE RATES PER CRATE WAS REVISED FROM RS. 412/- TO 529/- PER CRATE AND THE ASSESSEE COMPANY ENGAGED CASUAL WORKERS FOR MANUFAC TURING ON PIECE RATE BASIS AND REDUCED THE WAGES COST FROM RS. 204/- TO RS. 78/- PER CRATE AND IN THIS WAY THE ASSESSEE COMPANY WAS SUCCESSFUL IN RED UCING THE LOSS OF RS. 467/- TO RS. 63/- PER CRATE. THE ASSESSEE COMPANY S UBMITTED THAT M/S PREMIER WOOD PACKERS (CHENNAI) PVT. LTD. WAS THE LE ADING SUPPLIER OF WOODEN CRATES TO SGGI AND THIS COMPANY INCURRED HEAVY LOSS ES AND HAS GONE INTO LIQUIDATION. THE A.O. OBSERVED THAT THE ASSESSEE CO MPANY HAS INCURRED HEAVY LOSSES AND THE AO ASKED THE ASSESSEE COMPANY TO FI LE DETAILED EXPLANATIONS JUSTIFYING THE ACTION AS TO WHY THE ASSESSEE COMPAN Y SOLD THE CRATES TO SGGI AT AN AVERAGE PRICE OF RS. 412/- PER CRATE AS AGAIN ST THE COST OF PRODUCTION INCURRED BY THE ASSESSEE COMPANY AT RS. 879/- PER C RATE ALONG WITH OTHER DETAILS TO ESTABLISH GENUINENESS OF THE LOSSES INCU RRED. A NOTICE U/S 133(6) OF THE ACT WAS ALSO ISSUED TO SGGI REQUESTING TO FURNI SH CERTAIN INFORMATION CONCERNED AND RELATED TO THE TRADE WITH THE ASSESSE E COMPANY , AGAINST WHICH NO REPLY WAS RECEIVED BY THE AO. THE ASSESSEE COMPA NY EXPLAINED THAT IT HAS ACCEPTED THE ORDERS FOR SUPPLY OF 28,544 CRATES IN VIEW OF THE GROWTH OF THE COMPANY AND ENTER INTO THE COMPETITION IN THE PREVA ILING MARKET. AS SGGI IS A 500 FORTUNE COMPANY AND IS A LEADING MANUFACTURER OF THE FLOAT GLASS IN THE WORLD AND REQUIREMENT OF SGGI WAS 1200 CRATES PER D AY AND THE SGGI HAS MADE HUGE EXPANSION FROM 600 TONS TO 1400 TONS PER DAY, THE ASSESSEE COMPANY HAS ACCEPTED THE ORDERS BELOW THE MANUFACTU RING COST IN ANTICIPATION OF THE LARGE BUSINESS, UTILIZATION OF THE INFRASTRUCTURE, TO BUILD IMAGE IN THE MARKET FOR PROCUREMENT OF ORDERS FROM OTHER LEADING MANUFACTURERS. THE ASSESSEE COMPANY HAS SUBMITTED THE COPIES OF PURCHASE BILLS OF WOODS ALONG WITH QUANTITATIVE DESCRIPTION OF THE TIMBER IN MANUFACTURING OF WOODEN CRATES BEING 58828.19 CU.FE ET(AFTER WASTAGE) TO MANUFACTURE 28544 CRATES . THE ASSESSEE COMPANY SU BMITTED THAT IT WAS NOT POSSIBLE TO SUBMIT QUANTITATIVE DETAILS IN RESPECT OF THE MATERIAL CONSUMED IN ITA 1528/MUM/2012 & 2179/MUM/2012 5 MANUFACTURE OF ONE CRATE BECAUSE EACH CRATE WAS OF DIFFERENT SIZE, THICKNESS ETC. THE ASSESSEE COMPANY SUBMITTED THE COPIES OF THE BILLS RAISED ON SGGI AND SUBMITTED THAT THE ASSESSEE COMPANY BILLED SGGI ON THE BASIS OF CUBIC FEETS AND NOT ON NUMBER OF CRATES. THE A.O. ANALYS ED THE TRADING/MANUFACTURING ACCOUNT FOR YEAR ENDING 31-03 -2005 OF THE ASSESSEE COMPANY AND THE SAME IS DETAILED BELOW:- PARTICULARS QTY (C.FT) AMOUNT PARTICULARS QTY (C.FT ) AMOUNT OP. STOCK 13,147.42 2245756.65 SALES TO SGGI 58,828 .19 11703082.00 PURCHASES (WITH DUTY & FREIGHT) AND SHARES 49,302.92 17453053.49 CL. STOCK 2,545.16 416692.37 JOB WORK CHARGES 5821620.00 WASTAGE 1077.00 0.00 TO G. PROFIT GROSS LOSS 13400655.77 62,450.34 25520430.14 62,450.34 25520430.14 THE ASSESSEE COMPANY ALSO SUBMITTED THE DETAILS OF THE SALES (DATE-WISE) .THE ASSESSEE COMPANY ALSO SUBMITTED MONTH WISE SUMMARY OF SALE IS AS UNDER:- GRUJAN WOOD RUBBER WOOD QUANTITY AMOUNT QUANTITY AMOUNT SEPTEMBER 3441.41 714,091.17 5,500.35 753549.60 OCTOBER 4,093.61 849,423.72 5,526.93 757,189.56 NOVEMBER 4,508.75 935,563.58 7,834.37 1,072,807.61 DECEMBER 5,561.87 1,153,788.47 8,790.49 1,204,296.9 JANUARY 4,099.73 850,694.42 5,810.13 795,986.58 FEBRUARY 2,908.69 603,558.8 4,913.99 672,717.33 MARCH 2,334.26 496,809.59 3,825.44 524,085.21 TOTAL 26,948.32 5,603,929.75 42201.70 5,780,632.79 THUS IT WAS OBSERVED BY THE AO THAT IT CAN BE SEEN THAT THE ASSESSEE COMPANY HAS SOLD TOTAL QUANTITY OF GURJAN AND RUBBE R WOOD TO SGGI OF 69150.02 CUBIC FEET AND THE NET QUANTITY OF WOOD IN THE SALES OF MANUFACTURED CRATES ACCOUNTED FOR IN ITS BOOKS IS O NLY 58828.19 CUBIC FEET. THE ASSESSEE COMPANY SUBMITTED THAT SGGI ALLOWS IT NET TOLERANCE OF 15% ITA 1528/MUM/2012 & 2179/MUM/2012 6 AND HENCE ACTUAL CONSUMPTION OF TIMBERS FOR CRATES IS ONLY 58828 CUBIC FT. WHICH MEANS THAT THE ASSESSEE COMPANY IS BILLING SG GI FOR AN ADDITIONAL 8824 CUBIC FEET AND RS. 207.50 PER CUBIC FT., THE E XTRA AMOUNT THAT THE ASSESSEE COMPANY GETS FROM SGGI IS RS. 18,30,980/-. THUS, THE A.O. OBSERVED THAT THE ABOVE STAND OF THE ASSESSEE COMPA NY IS NOT VERIFIABLE IN THE ABSENCE OF CONFIRMATION FROM SGGI. ACCORDINGLY, TH E A.O. REJECTED THE CONTENTION OF THE ASSESSEE COMPANY AND HELD THAT TH E SALES OF RUBBER WOOD SHOWS THAT DURING THE YEAR UNDER CONSIDERATION , TH E ASSESSEE COMPANY HAS SOLD TO SGGI 42201.70 CUB. FT. RUBBER WOOD FOR AN A MOUNT OF RS. 5780632.79. THE A.O. OBSERVED THAT THE ASSESSEE CO MPANY HAD MADE PURCHASES OF RUBBER WOOD IN THE MONTH OF FEBRUARY A ND MARCH, 2005 AND THE TOTAL RUBBER WOOD PURCHASED BY THE ASSESSEE COMPANY DURING THE SAID TWO MONTHS IS 3,305.20 CUBIC FT. THE A.O. FURTHER OBSER VED THAT AS PER THE CONTENTIONS OF THE ASSESSEE COMPANY, IT DID NOT HAV E ANY STOCK OF RUBBER WOOD WHICH REVEALED THAT THE ASSESSEE COMPANY HAS S OLD CRATES OF RUBBER WOOD, BUT IT IS ALSO A FACT THAT THE ASSESSEE COMPA NY DID NOT HAVE ANY STOCK OF RUBBER WOOD TILL 1-2-2005. THE AO HELD THAT THE ASSESSEE COMPANY IS SHOWING SALE OF RUBBER WOOD @RS 137 PER CUBIC FT I N-SPITE OF SELLING GURJAN WOOD WHICH IS SOLD @RS 207.50 PER CUBIC FT. AND ACT UAL EXCESS STOCK OF GURJAN WOOD IS SOLD OUTSIDE BOOKS AT RATE WHICH IS HIGHER THAN ITS COST PRICE , THUS MAKING PROFITS WHICH IS NOT ROUTED THROUGH THE BOOKS OF ACCOUNTS. THE A.O. HELD THAT THE ASSESSEE COMPANY HAS MADE UNACCO UNTED PURCHASES OF RUBBER WOOD AND MANUFACTURED THE CRATES AND SOLD TH E SAME THROUGH BOOKS. THE A.O. ACCORDINGLY WORKS OUT THE TOTAL AMOUNT INV ESTED FOR MAKING UNACCOUNTED PURCHASES BY THE ASSESSEE COMPANY AT RS . 35,00,685/-. THE A.O. FURTHER OBSERVED FROM THE QUANTITATIVE DETAILS OF OPENING STOCK, PURCHASE, SALE AND CLOSING STOCK OF GURJAN WOOD SUB MITTED BY THE ASSESSEE COMPANY, THE FOLLOWING DISCREPANCIES WAS FOUND BY T HE AO:- PARTICULARS QTY (C.FT.) PARTICULARS QTY (C.FT.) OP. STOCK 13,147.42 SALES TO SGGI 26,948.42 ITA 1528/MUM/2012 & 2179/MUM/2012 7 PURCHASES (WITH DUTY & FREIGHT) 45,997.72 CL. STOCK REPORTED 2,545.16 WASTAGE REPORTED 1077.00 59,145.14 30,570.58 THE ABOVE FIGURES SHOW THAT THE ASSESSEE COMPANY SH OULD HAVE CLOSING STOCK OF 31119.82 CUBIC FT. OF GURJAN WOOD. HOWEVER, THE ASSESSEE COMPANY SHOWED IN ITS AUDITED TRADING & PROFIT AND LOSS AC COUNT A CLOSING STOCK OF 2545.16 CUBIC FT. OF GURJAN WOOD. THUS THE A.O. OB SERVED THAT THE STOCK OF GURJAN WOOD WHICH IS NOT REFLECTED IN THE BOOKS AS ON 31-3-2005 , IS SOLD OUT OF THE BOOKS. THUS , THE A.O. WORKED OUT THE TOTAL OUT OF BOOKS SALE OF GURJAN WOOD AT RS. 1,40,03,919/-. THUS THE AO HELD THAT I F THE OUT OF BOOKS TRANSACTION WERE PROPERLY ACCOUNTED FOR BY THE ASSE SSEE COMPANY IN ITS BOOKS, THE TRUE AND FAIR FIGURES WOULD APPEAR AS UN DER:- TRADING & MANUFACTURING A/C PARTICULARS AMOUNT PARTICULARS AMOUNT OP. STOCK 2245756.65 SALES 35638978.53 PURCHASES (WITH DUTY & FREIGHT 26956885.49 CL. STOCK 416692.37 JOB WORK CHARGES 5821620.00 OUT OF BOOKS SALE AS DISCUSSED IN THE ORDER 14003919.00 UNRECORDED PURCHASE AS DISCUSSED IN THE ORDER 3500685.00 GROSS PROFIT 11534642.76 50059589.90 50059589.90 PROFIT & LOSS ACCOUNT PARTICULARS AMOUNT PARTICULARS AMOUNT EXPENSES DEBITED TO P&L A/C. 997308.37 GROSS PROFIT 11534642.76 NET PROFIT 10537334.39 11534642.76 11534642.76 ITA 1528/MUM/2012 & 2179/MUM/2012 8 THUS, THE A.O. RECOMPUTED THE NET PROFIT OF THE ASS ESSEE COMPANY AT RS. 1,05,37,334.39 IN PLACE OF RS. 34100.39 , THUS RESU LTING IN AN ADDITION OF RS. 1,05,03,234/- TO THE TOTAL INCOME OF THE ASSESSEE C OMPANY VIDE ORDERS DATED 28.12.2007. 4. AGGRIEVED BY THE ORDERS DATED 28.12.2007 OF THE A.O., THE ASSESSEE COMPANY HAS PREFERRED AN APPEAL BEFORE THE CIT(A). 5. BEFORE THE CIT(A), THE ASSESSEE COMPANY REITERAT ED THE SUBMISSION WHAT WAS MADE BEFORE THE A.O. THE ASSESSEE COMPANY EXPLAINED THE MANUFACTURING PROCESS OF THE INDUSTRY BEFORE THE C IT(A) AND SUBMITTED THAT THE A.O. HAS FAILED TO UNDERSTAND THE VERY PROCESS OF MANUFACTURE OF WOODEN CRATES. THE ASSESSEE COMPANY SUBMITTED THAT NO ERR OR IN THE BOOKS OF ACCOUNT WAS DETECTED BY THE A.O. AND THE A.O. HAS N OT REJECTED THE BOOKS OF ACCOUNT AND MADE THE ADDITION WHICH IS NOT SUSTAINA BLE IN LAW. THE ASSESSEE COMPANYS BOOKS OF ACCOUNT WERE DULY AUDITED UNDER THE COMPANIES ACT, 1956 AND ALSO AUDITED UNDER THE PROVISIONS OF SECTI ON 44AB OF THE ACT. THE ASSESSEE COMPANY CONTENDED THAT THE PROVISIONS OF T HE ACT DOES NOT GIVE SCOPE FOR IMAGINATION AND NO ADDITION COULD BE MADE TO ANY INCOME BY MERE IMAGINATION. THE ASSESSEE COMPANY SUBMITTED THAT T HE ADDITION MADE TO ITS INCOME ON THE BASIS OF AN IMAGINARY PROFIT AND LOSS ACCOUNT DRAWN BY THE A.O. BASED ON THE IMAGINARY PURCHASES AND IMAGINARY SALES. THE ASSESSEE COMPANY IS ALSO REGISTERED WITH THE SALES TAX AUTHO RITIES AND BOOKS WERE SUBJECTED TO AUDIT BY SALES TAX AUTHORITIES AND FOR THE MOVEMENT OF WOOD, A VALID PERMIT ISSUED BY THE FOREST DEPARTMENT IS REQ UIRED FOR EVERY MOVEMENT/TRANSPORTATION OF WOODS FROM ONE PLACE TO ANOTHER PLACE FAILING WHICH IS A NON BAILABLE OFFENCE , ARREST AND IMPRIS ONMENT SHALL BE INVITED. THE ASSESSEE COMPANY HAS NEITHER APPLIED NOR OBTAIN ED ANY PERMIT FOR TRANSPORTATION OF WOOD FROM HIS FACTORY. THE CIT(A) REMANDED THE MATTER TO THE A.O. FOR HIS COMMENTS. ITA 1528/MUM/2012 & 2179/MUM/2012 9 THE A.O. IN HIS REMAND REPORT SUBMITTED THAT THE AS SESSEE COMPANY HAS NOT PRODUCED THE BOOKS OF ACCOUNT FOR EXAMINATION O F THE A.O. THERE HAS BEEN MASSIVE DISCREPANCIES IN THE STATEMENT OF ACCOUNT FURNISHED BY THE ASSESSEE COMPANY . SGGI HAS NOT REPLIED TO THE NOTICE ISSUED U/S 133(6) OF THE ACT. IT IS NOT CORRECT THAT NO ERROR OR OMISSION HAS BE EN NOTICED. THE DIFFERENCE/ERRORS NOTICED IN THE PURCH ASE AND SALES FIGURES HAVE BEEN BROUGHT IN THE ORDER AND HAVE LED TO THE ENHAN CEMENT OF INCOME. THE ASSESSEE COMPANYS SUBMISSION THAT THE LOSS IS AROU ND 25 TO 40% ON CONVERSION OF LOGS INTO TIMBER WHICH REQUIRES TO BE EMPHASIZED THAT THE A.O. HAD NOT RECALCULATED THE WASTAGE ON MANUFACTURING P ROCESS WHEREAS THE WASTAGE FILED BY THE ASSESSEE COMPANY HAS BEEN ACCE PTED AND IN FACT THE QUANTITATIVE DETAILS OF PURCHASE AND SALE SUPPLIED BY THE ASSESSEE COMPANY DURING THE ASSESSMENT PROCEEDINGS WERE COMPARED WIT H ITS FINANCIAL STATEMENTS FILED WITH THE RETURN OF INCOME. THE ASS ESSEE COMPANY IN ITS AUDIT REPORT SUBMITTED THAT THE WASTAGE GENERATED COMES T O 1.79% BUT THE ASSESSEE COMPANY NOW CONTENDED THAT ITS LOSS OR WASTAGE IS A ROUND 25 TO 40% WHICH CLEARLY IS AN INDICATION THAT THE ASSESSEE COMPANY IS NOT SUBMITTING THE TRUE AND CORRECT FIGURES. THE ASSESSEE COMPANYS CONTENT ION THAT THE USE OF GURJAN WOOD IN PLACE OF RUBBER WOOD WAS PERMITTED B Y SGGI VIDE THEIR LETTER DATED 20 TH MAY, 2006 WHICH CANNOT BE ADMITTED AS AN EVIDENCE IN VIEW OF THE FACT THAT SGGI DID NOT RESPOND TO THE NOTICE ISSUED U/S 133(6) OF THE ACT. THE ASSESSEE COMPANYS CONTENTION THAT THE RUBBER WOOD IS USED TO MEET THE SHORT FALL IS AN AFTERTHOUGHT TO MISLEAD THE CITA). THE ASSESSEE COMPANY HAS NOT PRODUCED THE BOOKS OF ACCOUNT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO IN THE REMAND PROCEEDINGS. TH E A.O. PREPARED THE FOLLOWING DETAILS TO PROVE THAT IMAGINED FIGURES NO R PRESUMED EVENTS AND CIRCUMSTANCES TO COMPLETE THE ASSESSMENT:- SR NO. QUANTITY IN CUBIC FEET AMOUNT IN RUPEES REMARKS 1 OPENING STOCK GURJAN 13147.00 2245757 AS PER P&L & EXH A TO THE ASS. ORDER. AS CERTIFIED BY THE ITA 1528/MUM/2012 & 2179/MUM/2012 10 AUDITORS (EXH B & C TO THE ASS. ORDER. 2 OPENING STOCK RUBBER NIL NIL AS CERTIFIED BY THE AUDITORS (EXH B& C TO THE ASS. ORDER. 3 PURCHASES OF RUBBER WOOD 3305.20 296033 AS PER BILL SUBMITTED BY THE ASSESSEE AND THE PROFITS AND LOSS ACCOUNT. 4 PURCHASES OF GURJAN WOOD 45997.77 17453053 AS PER BILL SUBMITTED BY THE ASSESSEE AND THE PROFIT AND LOSS ACCOUNT. 5 WASTAGES 1077.00 NIL AS PER P&L A/C & EXH A TO AS S ORDER. AS CERTIFIED BY THE AUDITORS (EXH B & C TO ASS. ORDER). 6 CLOSING STOCK OF GURJAN WOOD 2545.16 AS PER P&L ACCOUNT & EXH A TO ASS. ORDER. AS CERTIFIED BY THE AUDITORS (EXH B & C TO THE ASS. ORDER) 7 SALES GURJAN WOOD 26948.42 5603930 AS PER THE COP IES OF BILLS AND EXH CI SUBMITTED BY THE ASSESSEE DURING THE COURSES OF THE ASSESSMENT PROCEEDINGS. EXH D SUMMARY OF SALES BILLS IN TABULATED FORM. 8 SALES RUBBER 42201.70 5780633 AS PER THE COPIES O F BILLS AND EXH CI SUBMITTED BY THE ASSESSEE DURING THE COURSES OF THE ASSESSMENT PROCEEDING. EXH D SUMMARY OF SALES BILLS IN TABULATED FORM. THE A.O. SUBMITTED THAT FROM THE ABOVE, IT IS BEYON D DOUBT THAT THE FIGURES ARE ADOPTED FROM THE DOCUMENTS SUBMITTED BY THE ASS ESSEE COMPANY ITSELF. THE ASSESSEE COMPANYS CONTENTION THAT ASSESSEE COM PANY HAD PROCURED THE RUBBER WOOD TO FILL IN THE SHORT FALL IN GURJAN WOO D, THE PROCESS/UTILIZATION WOULD REFLECT THE FOLLOWING:- PARTICULARS QUANTITY IN CUBIC FEET PARTICULARS QUANTITY IN CUBIC FEET OPENING STOCK GURJAN 13147.00 SALES GURJAN WOOD 26948.42 OPENING STOCK OF RUBBER 00.00 SALES RUBBER WOOD 42201.70 PURCHASES OF RUBBER WOOD 3305.20 WASTAGES 1077.00 PURCHASE OF GURJAN WOOD 45997.72 CLOSING STOCK GURJAN WOOD 2545.16 UNDISCLOSED PURCHASES 10322.36 ITA 1528/MUM/2012 & 2179/MUM/2012 11 72772.28 72,772.28 FROM THE ABOVE,THE AO SUBMITTED BY WRITTEN SUBMISSI ONS BEFORE THE CIT(A) THAT IT IS CLEAR THAT THE ASSESSEE COMPANY HAD SOLD MORE CUBIC FEET OF WOOD THAN IT HAS ACTUALLY PURCHASED , WHICH CLEARLY SHOW S THAT THE ASSESSEE COMPANY HAS MADE PURCHASES OUT OF BOOKS. THE ASSESSEE COMPANY MADE ITS SUBMISSIONS AGAINST T HE REMAND REPORT WHEREIN THE ASSESSEE COMPANY HAS REITERATED THE SUB MISSIONS WHAT HAS BEEN MADE BEFORE THE CIT(A) EARLIER. IN NUTSHELL, THE A SSESSEE COMPANY SUBMITTED THAT THE A.O. HAS NOT BASED HIS ASSESSMENT ORDER BA SED ON THE EVIDENCES BUT ON SURMISES, CONJECTURES , ASSUMPTIONS AND PRESUMPT IONS WITHOUT BRINING ANY COGENT MATERIAL ON RECORD. THE BOOKS OF ACCOUN T HAS NOT BEEN REJECTED U/S 144 OF THE ACT BEFORE THE ASSESSMENT WHICH IS A MANDATORY REQUIREMENT UNDER THE PROVISIONS OF LAW. THE ASSESSEE COMPANY SUBMITTED THAT THE A.O. IS NOT AWARE OF THE BUSINESS PROCESSES AND SPECIAL FEATURES OF EACH BUSINESS. THE ASSESSEE COMPANY HAS ALSO PRODUCED A VIDEO PRES ENTATION OF THE MANUFACTURING PROCESS OF WOODEN CRATES, WHICH CLEAR LY GOES TO ESTABLISH THAT, THE WOOD WASTAGE ARISING DURING THE PROCESS OF SAWI NG AND CUTTING AND SLICING THE WOODEN LOGS, ARE CONVERTED AND USED BACK FOR US E IN THE MANUFACTURE OF LIDS FOR THE WOODEN CONTAINERS MANUFACTURED FOR SGG I AND THE ASSESSEE COMPANY HAD BEEN PERMITTED TO USE ANY ALTERNATE WOO D IN PLACE OF RUBBER WOOD FOR THE LIDS, THEREBY THE ASSESSEE COMPANY IN FACT SAVED FURTHER LOSSES, AND THE A.O. DID NOT RECOGNIZE THE FACT THAT THE WA STAGES ARISING DURING THE PROCESS OF WOOD SAWING, SLICING & CUTTING WOULD HAV E NOT BEEN FIT FOR ANY OTHER USE OTHER THAN FOR USE AS A FIREWOOD, AND THE PRICE FOR FIRE WOOD IS AS EVERYONE IS AWARE A PITTANCE OR NEGLIGIBLE AND WHIC H IS EVEN LESS THAT THE SCRAP VALUE. THE ASSESSEE COMPANY SUBMITTED THAT TH E A.O. WAS NOT FAMILIAR AND/ OR AWARE OF THE PRODUCTION PROCESS AND THE CON SEQUENT PRODUCTION ITA 1528/MUM/2012 & 2179/MUM/2012 12 WASTAGES, AND THIS HAS LED TO MAKING SUCH DISPROPOR TIONATE AND IMAGINATIVE ADDITIONS BASED ON PRESUMPTIONS AND ASSUMPTIONS. THE MATTER WAS AGAIN REMANDED BY THE CIT(A) TO THE A.O. ALONG WITH THE SUBMISSIONS OF THE ASSESSEE COMPANY. THE A.O. IN H IS REMAND REPORT SUBMITTED THAT THE CONTENTIONS OF THE ASSESSEE COMP ANY CANNOT BE ACCEPTED AND THE CIT(A) MAY DECIDE THE ISSUES ON THE BASIS O F MERITS OF THE CASE. HOWEVER, THE ASSESSEE COMPANY REITERATED THE SUBMIS SIONS AGAIN WHAT HAS BEEN MADE BEFORE THE A.O. AS WELL AS THE CIT(A), IN RESPONSE TO THE REMAND REPORT SUBMITTED BY THE AO. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE COMPANY AND THE REPORT OF THE A.O. DELETED THE ADDITION MADE BY THE A.O. VIDE ORDERS DATED 09- 12-2011 , BY HOLDING AS UNDER:- 2. I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. CO UNSEL AND THE CASE LAWS CITED AND RELIED UPON BY HIM - AS WELL AS THE COMMENTS OF THE A.O. IN THE REMAND REPORT AND FURTHER COMMENTS IN RESPON SE TO THE REPLY OF THE APPELLANT AND FURTHER REPLIES OF THE APPELLANT. IN THIS APPEAL, THE MAIN ISSUE IS WHETHER THE APPEL LANT PURCHASED 'ANY' WOOD OUTSIDE THE BOOKS OF ACCOUNTS AND CONSEQUENTIA LLY MADE 'SALES OF WOOD' OUTSIDE THE BOOKS OF ACCOUNTS AS ALLEGED BY THE A.O. ON THE BASIS OF THE FACT OF 15% SHORTAGE BEING ALLOWED TO THE AP PELLANT BY THE PURCHASER - M/S. SAINT GOBAIN GLASS INDIA LTD. THE FOLLOWING CONTENTIONS OF THE APPELLANT - CLEARL Y SHOWS THAT THE APPELLANT COULD NEITHER HAVE PURCHASED 'ANY' WOOD O UTSIDE THE BOOKS OF ACCOUNT NOR COULD HAVE MADE 'SALES OF OF WOOD' OUTS IDE THE BOOKS OF ACCOUNTS:- (I) THE PROCESS OF MANUFACTURE OF WOODEN PACKAGING BOXES INVOLVED IN PURCHASE OF WOODEN LOGS, SLICING OF WOO DEN LOGS INTO THE PRE-DETERMINED REQUIRED SIZES AS PER DRAWINGS F URNISHED BY THE SAID PURCHASER. ITA 1528/MUM/2012 & 2179/MUM/2012 13 (II) M/S SAINT GOBAIN GLASS INDIA LTD PAID HIGHER R ATES IN RESPECT OF THICKER SIZES WHERE WIPPL WAS MANDATORILY WAS RE QUIRED TO USE EITHER THE 'PINE OR GURJA ' WOOD, AND PAID THE RATE OF 'RUBBER' WOOD IN RESPECT OF 'THIN' SIZES, WHEREIN T HE WIPL WAS PERMITTED TO USE ANY ORDINARY WOOD. (III) THE WOODEN PACKAGING BOXES MAINLY REQUIRED 2 DIFFERENT SIZES - ONE WITH THICK SIZE AND ONE WITH VERY THIN SIZE. AS PER THE STANDARDS FIXED, WIPPL WAS REQUIRED TO USE ONLY 'GU JAN WOOD' OR 'PINE WOOD' FOR THE THICK SIZES AND WIPL WAS PER MITTED TO USE ANY ORDINARY WOOD FOR THE 'THIN' SIZES. THE THI CK SIZES WERE USED FOR MANUFACTURING THE FRAME OF THE BOXES, WHIC H WOULD ULTIMATELY CARRY THE WEIGHT OF THE GLASS, AND THE ' THIN' SIZE WOOD WAS TO BE USED FOR MANUFACTURE OF TOP AND BOTTOM LI DS FOR THE SAID FRAME, WHICH WAS NECESSARY ONLY FOR PURPOSE OF EASY TRANSPORTATION, AND HAD NO OTHER PURPOSE OR USE, RE SULTING IN LOW RATES. (IV) M/S SAINT GOBAIN ALSO PERMITTED 15% OF WASTAGE WHILE COMPUTING THE QUANTITY OF 'GURJAN OR PINE' TOWARDS LOSS IN SLICING, SAWING, OF 'GURJAN OR PINE LOGS', AND FURT HER ON ACCOUNT OF THE FACT, THAT A VERY LOW RATE IS PAID I N RESPECT OF WOOD USED FOR MANUFACTURE OF THIN SIZES, AS M/S SAINT GO BAIN WAS WELL AWARE THAT THE MANUFACTURERS WOULD USE THE RET RIEVED MATERIAL FROM THE WASTE RESULTING WHILE SLICING AND SAWING OF TIMBER LOGS. (V) LIKE ANY SHREWD BUSINESS ENTERPRISE, M/S WIPPL ALSO, USED TO USE THE WASTE WOOD RESULTING FROM THE SAWING AND SLICING OF THE 'GURJAN / PINE LOGS' FOR THE PURPOSE OF MANUFAC TURE OF THE 'THIN' SIZES USED IN THE MANUFACTURE OF TOP AND BOTTOM COVERS FOR THE BOXES. (VI) THIN SIZES OF WOOD IS RECOVERED OUT OF SUCH WA STAGES RESULTING FROM ABOVE OPERATION OF SAWING, SLICING & CUTTING OF LOGS WHICH ARE THEN USED FOR MANUFACTURE OF TOP AND BOTTOM LIDS, WHICH DID NOT PRESCRIBE USE OF ANY PARTICULAR TYPE OF WOOD, THEREBY SAVING SUBSTANTIAL COSTS, WHICH WERE FACTOR ED WHILE FIXING THE RATES ON ACCOUNT OF COMPETITION. (VII) THE A.O. CALLED FOR COPIES OF SALES BILLS RAI SED AND AS WELL AS COPIES OF PURCHASE BILLS IN RESPECT OF PURCHASE OF WOOD MADE ITA 1528/MUM/2012 & 2179/MUM/2012 14 BY WIPPL. THE ASSESSEE HAD PURCHASED WOOD IN LOGS A ND SALES WERE ACCOUNTED IN NUMBERS ALONG WITH THE DETAILS OF QUANTITY SHOWN IN CUBIC FT. FURTHER THE ASSESSEE HAD SHOWN S EPARATE QUANTITY COLUMNS IN HIS SALES BILLS AS PER THE REQU IREMENT OF SAINT GOBAIN GLASS INDIA LTD., WHEREIN HE WAS REQUI RED TO SHOW BOTH THE QUANTITIES RELATING TO THE FRAME ( WHERE O NLY GURJAN / PINE WAS TO BE USED) AND THE TOP & BOTTOM FRAMES ( WHEREIN HE WAS PERMITTED TO USED ANY WOOD BUT THE RATES OF RUB BER WOOD ONLY WOULD BE PAID) , AND ACCORDINGLY THE ASSESSEE HAD GROUPED THEM AS 'GURJAN' AND 'RUBBER' FOR PURPOSES OF CALCU LATION OF RATES ONLY AND DID NOT REFLECT THE TYPE OF WOOD USE D IN SO FAR AS THE COLUMN RELATING TO 'RUBBER' WAS CONCERNED. (VIII) THE A.O. EVEN REFUSED TO ACCEPT THE FACT THA T, ASSESSEE WAS PERMITTED TO FACTOR 15% OF WASTAGE WHILE COMPUTING THE QUANTITY RELATING TO FRAMES MADE OUT OF GURJAN/PINE WOOD. TH E LEARNED A.O. DID NOT UNDERSTAND AND / APPRECIATE THE FACT T HAT, M/S SAINT GOBAIN PERMITTED FOR BILLING OF THIS WASTAGE ON ACC OUNT OF THE REASON THAT, THEY PAID A VERY LOW RATE IN SO FAR AS IT RELATED TO THE QUANTITY OF WOOD USED IN THE MANUFACTURE OF TOP AND BOTTOM COVERS, WHEREIN THEY PAID ONLY THE RATES OF RUBBER WOOD, SINCE M/S SAINT GOBAIN WERE AWARE THAT, EVERY MANUFACTURE R WOULD USE THE SAME WOOD RECOVERED FROM THE WASTAGE, WHICH OTHERWISE COULD BE PUT USE ONLY AS FIRE WOOD AND SOLD AS SCRA P. (IX) TO COLLATE AND TABULATE A STATEMENT WITHOUT UN DERSTANDING THE BASIC BILLING METHOD, HAS LED TO PRESUMPTION AN D ASSUMPTION THAT THE ASSESSEE HAS SOLD OFF HIS GURJAN WOOD AND FURTHER HAS PURCHASED RUBBER WOOD FOR MANUFACTURING THE CONTAIN ERS AS PER THE SPECIFICATION OF SIZE, AND HENCE TABULATED AS P ER STATISTICAL DATA, WITHOUT EVEN FINDING ONE SINGLE OMISSION AND OR COMMISSIONS, AND IGNORING THE VERY FACT THAT, SUCH MOVEMENTS OF WOOD WOULD CALL FOR VERIFICATION BY VARIOUS GOVERNM ENT AUTHORITIES NAMELY THE CENTRAL EXCISE DEPARTMENT WH ICH IS AGAIN A CENTRAL GOVERNMENT BODY, AND THE FOREST DEPARTMEN T AND AS 'WELL AS THE LOCAL SALES TAX DEPARTMENT ( BOTH BELO NGING TO THE LOCAL STATE GOVERNMENT OF TAMIL NADU). MERELY BECAUSE NO CONFIRMATION OF ACCOUNTS WAS RECE IVED FROM M/S. SAINT GOBAIN GLASS INDIA LTD. - IT COULD NOT R ESULT IN SUCH A HUGE ADDITION/DISALLOWANCE ESPECIALLY WHEN NO INCRIMINAT ING MATERIAL/EVIDENCE WAS IN THE POSSESSION OF THE A.O. IN THE FORM OF UNACCOUNTED PURCHASE BILLS OR IN THE FORM OF UNRECO RDED SALE BILLS BUT ITA 1528/MUM/2012 & 2179/MUM/2012 15 BASED UPON A HYPOTHETICAL WORKING - HENCE THE ADDIT IONS/DISALLOWANCES ARE UNWARRANTED. ALL THE ABOVE CLEARLY SHOWS THAT IT WAS ONLY A HYPO THETICAL WORKING AND MERE POSSIBILITY THAT PROMPTED THE A.O. TO MAKE THE ABOVE ADDITION/DISALLOWANCE - WHEN THERE WAS NO CONCRETE EVIDENCE OR HARD FACTS ADVERSE TO THE ASSESSEE - AVAILABLE WITH THE A.O, OR ON RECORD -, ESPECIALLY WHEN THE ACCOUNTS OF THE ASSESSEE ARE AU DITED U/S 44AB OF I.T. ACT AND THERE IS A REPORT OF THE AUDITOR IN FO RM NO. 3CD - IN WHICH THERE ARE NO ADVERSE COMMENTS BY THE AUDITOR TO WAR RANT ANY INFERENCE OF THE SORT MADE BY THE A.O. HENCE, THE PRINCIPLE OF LAW THAT 'SUSPICION HOWEVER GRAVE CANNOT TAKE THE PLACE OF PROOF COMES INTO PLAY AND THE HYP OTHETICAL WORKING OF THE A.O. CANNOT BE SUSTAINED BECAUSE THE REASONS ME NTIONED ABOVE CLEARLY SHOW THAT THE WASTAGE OF 15%, - HAS VERY CL EARLY AND CONVINCINGLY BEEN EXPLAINED BY THE APPELLANT AND IT CANNOT LEAD TO THE PRESUMPTION - THAT THE APPELLANT MUST, AS OF NECESS ITY HAVE INDULGED IN MAKING PURCHASES OUTSIDE THE BOOKS OF ACCOUNT- WHEN ON RECORD THERE IS NO SUCH EVIDENCE OR CONCRETE PROOF OF ANY SUCH M ALPRACTICE. SIMILARLY, IN THE ABSENCE OF ANY CONCRETE PROOF OF SALES OUTSIDE THE BOOKS OF ACCOUNTS - NO PRESUMPTION COULD HAVE BEEN DRAWN THAT THE APPELLANT MUST HAVE MADE SALES OUTSIDE THE BOOKS OF ACCOUNTS- ESPECIALLY WHEN THE A.O. COULD NOT WITH CERTAINTY S HOW ANY BILL OR TRANSACTION WHICH WOULD HAVE A TENDENCY TO IMPLICAT E THE APPELLANT FOR HAVING MADE SALES OUTSIDE THE BOOKS OF ACCOUNTS. IN THE ABSENCE OF SUCH EVIDENCE THIS ADDITION MADE BY THE A.O. IS WIT HOUT ANY BASIS AND THE APPELLANT HAVING SUCCESSFULLY EXPLAINED THE NAT URE AND FACT OF 15% SHORTAGE - ITS CONSUMPTION 'AND USAGE ETC. ESPECIAL LY DURING THE COURSE OF REMAND PROCEEDINGS - NO ADVERSE INFERENCE CAN BE DRAWN AT ALL. HENCE, THE ADDITION MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED PURCHASE OF RS.35,00,685/- AND UNEXPLAINED SALES OF RS. 1,40,03,919/- IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. HENCE, THIS GROUND OF APPEAL IS ALLOWED. DURING THE COURSE OF THE APPELLATE PROCEEDINGS THE ADD. CIT-8(3) VIDE LETTER DATED 10.08.2009 STATED THAT THE PURCHA SES OF RS. 35,00.685/- SHOULD NOT BE ALLOWED AS A DEDUCTION IN VIEW OF THE PROVISIONS OF SECTION 69C AND TO THIS EXTENT THE AS SESSMENT DESERVES TO BE ENHANCED. ITA 1528/MUM/2012 & 2179/MUM/2012 16 HOWEVER, SINCE I HAVE ALREADY HELD ABOVE THAT THE P URCHASES AND SALES ARE FULLY EXPLAINED AND ACCORDINGLY, NO ADDIT ION/DISALLOWANCE CAN BE MADE OF THE SAME. HENCE, LOGICALLY AND CONSEQUEN TIALLY - THERE CAN BE NO QUESTION OF ANY DISALLOWANCE U/S 69C ALSO - H ENCE THIS PLEA OF THE ADDI.CIT-8(3) IS DECLINED AND THEREBY REJECTED. 6.AGGRIEVED BY THE ORDERS DATED 09-12-2011 OF THE C IT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LD. D.R. SUBMITTED THAT THERE IS UNACCOUNTED TRANSACTIONS OF SALE AND PURCHASES MADE BY THE ASSESSEE COMPANY AND THE A.O. HAS RIGHTLY MADE THE ADDITIONS VIDE ASSESSMENT ORDERS DATED 28.12.20 07 PASSED U/S 143(3) OF THE ACT. THE BOOKS OF ACCOUNT OF THE ASSESSEE COMP ANY WERE ALSO NOT PRODUCED BY THE ASSESSEE COMPANY BEFORE THE AO EVEN DURING REMAND PROCEEDINGS DESPITE BEING POINTED OUT BY THE AO AND MAJOR DISCREPANCIES HAVE BEEN NOTICED BY THE AO IN THE SALE/PURCHASE AN D STOCK OF THE ASSESSEE COMPANY. THE LD. D.R. FURTHER RELIED UPON THE ORDER OF THE A.O. 8. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE COMPANY SUBMITTED THAT IT WAS ALLEGED BY THE A.O. THAT THERE IS SALE/ PURCHASE OUT OF THE BOOKS OF ACCOUNT MADE BY THE ASSESSEE COMPANY AND THE ADDITI ONS HAVE BEEN MADE WITHOUT ANY COGENT MATERIAL BROUGHT ON RECORD. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PACKAGI NG MATERIAL OF WOODEN, PLASTIC AND OTHER RELATED MATERIALS. THE ASSESSEE COMPANY IS PROCURING GURJAN WOOD/RUBBER WOOD WHICH IS USED FOR MANUFACTU RING OF CRATES WHICH IS MAINLY SUPPLIED TO SGGI. THE ASSESSEE COMPANY REITE RATED ITS SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW AND RELIED UPON T HE ORDERS OF THE CIT(A). SGGI IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF FLOAT GLASS AND THESE CRATES ARE USED FOR PACKAGING THE SAME. THE LD. CO UNSEL SUBMITTED THAT THE PROCESS OF SAWING AND CUTTING I.E. CONVERSION OF LO GS INTO TIMBER RESULTS IN A WASTAGE OF 25 TO 40%. THE A.O. HAS NOT CONSIDERED THE WASTAGE/LOSSES INCURRED BY THE ASSESSEE COMPANY. HOWEVER, THE SGG I HAS ALLOWED AND / OR ITA 1528/MUM/2012 & 2179/MUM/2012 17 PERMITTED A WASTAGE OF 15% TO BE INCLUDED IN THE QU ANTITY OF WOOD SUPPLIED. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE COMPANY IS ALSO REGISTERED WITH THE SALES TAX AUTHORITIES , EXCISE AUTHORITIES AND THE MOVEMENT OF WOOD, A VALID PERMIT ISSUED BY THE FOREST DEPARTMENT IS REQ UIRED FOR EVERY MOVEMENT/TRANSPORTATION OF WOODS FROM ONE PLACE TO ANOTHER PLACE FAILING WHICH RESULTS INTO A NON BAIL-ABLE ARREST AND IMPRI SONMENT. THE ASSESSEE COMPANY HAS NEITHER APPLIED NOR OBTAINED ANY PERMIT FOR TRANSPORTATION OF WOOD FROM HIS FACTORY. THE ASSESSEE COMPANY SUBMIT TED THAT THE A.O. WAS NOT FAMILIAR AND / OR AWARE OF THE PRODUCTION PROCE SS AND THE CONSEQUENT PRODUCTION WASTAGES, AND THIS HAS LED TO MAKING SUC H DISPROPORTIONATE AND IMAGINATIVE ADDITIONS BASED ON PRESUMPTIONS AND ASS UMPTIONS. THE ASSESSEE COMPANY SUBMITTED THAT FOR THE SUBSEQUENT ASSESSMEN T YEAR 2007-08 IN CROSS APPEALS IN ASSESSEE COMPANYS OWN CASE IN ITA NO.6784/MUM/2011 AND ITA NO. 6809/MUM/ 2011 VIDE ORDERS DATED 08-05- 2013 , THE TRIBUNAL HAS ACCEPTED CLAIM OF WASTAGE OF THE WOOD IN MANUFA CTURE OF CRATES AND FOR UN-ACCOUNTED PURCHASES MADE IN CASH , THE TRIBUNAL HAS CONFIRMED THE ADDITION OF RS.2.7 LACS TO MEET THE END OF JUSTICE THE ASSESSEE COMPANY CONTENDED THAT THE CIT(A) HAS RIGHTLY ALLOWED THE A PPEAL OF THE ASSESSEE COMPANY AND PRAYED THAT THE SAME MAY BE UPHELD. 9. THE LD. D.R., IN THE REJOINDER, SUBMITTED THAT T HE TOLERATION OF 15% AS ALLOWED BY THE SGGI VIDE DOCUMENT FILED DURING THE COURSE OF HEARING AS CONTENDED BY THE ASSESSEE COMPANY IS NOT EVIDENCED ON THE RECORD AND THIS IS A NEW FACT AND AN ADDITIONAL EVIDENCE BROUGHT ON RE CORD BY THE ASSESSEE COMPANY WHICH NEED TO BE VERIFIED BY THE AO AND THE MATTER NEED TO BE SET ASIDE TO THE FILE OF THE AO. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND AL SO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASS ESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF WOODEN CRATES, PALLETS AND TRADING IN ITA 1528/MUM/2012 & 2179/MUM/2012 18 PLYWOOD . WOODEN CRATES/PALLETS ARE SUPPLIED TO GLA SS AND PAPER MANUFACTURERS , MAINLY TO SGGI. THE ASSESSEE COMPAN Y HAS INCURRED HEAVY LOSSES IN THE BUSINESS OF MANUFACTURING OF WOODEN C RATES AND HAS EARNED PROFITS IN THE BUSINESS OF TRADING OF PLYWOOD. THE A.O. HAS ASKED THE ASSESSEE COMPANY TO PRODUCE THE BOOKS OF ACCOUNT WH ICH REVENUE IS CONTENDING THAT THE ASSESSEE COMPANY DID NOT PRODUC E EVEN DURING THE REMAND PROCEEDINGS. THE ASSESSEE COMPANY HAS SUBMI TTED THE STATEMENTS OF PURCHASES/SALES MADE BY THE ASSESSEE COMPANY BUT HA S NOT CO-RELATED THE CONSUMPTION OF MATERIAL TO THE PRODUCTION OF WOODEN CRATES AND THERE ARE MISMATCHES IN THE SAID STATEMENTS IN SALES, PURCHAS ES AND STOCK AS CONTENDED BY THE REVENUE. AS CONTENDED BY THE REVE NUE, THE ASSESSEE COMPANY HAS NOT PRODUCED THE BOOKS OF ACCOUNT DURIN G THE ASSESSMENT NOR DURING THE FIRST APPELLATE PROCEEDINGS. THE MATTER WAS ALSO REMANDED BY THE CIT(A) BACK TO THE A.O. TWICE AND THE ASSESSEE COMP ANY WAS GIVEN OPPORTUNITY TO PRODUCE THE BOOKS OF ACCOUNT TO JUST IFY THE CLAIM OF LOSSES INCURRED BY THE ASSESSEE BUT DESPITE THAT THE ASSES SEE COMPANY FAILED TO DO SO. THE ASSESSEE COMPANY HAS HOWEVER PRODUCED AUD ITED FINANCIAL STATEMENTS WHICH WERE AUDITED BOTH UNDER THE COMPAN IES ACT,1956 AND ALSO U/S 44AB OF THE ACT. WE HAVE NOTED THAT THE ASSESSE E COMPANY IS DULY REGISTERED UNDER THE VAT, EXCISE DEPARTMENT . WE H AVE ALSO NOTED THAT WOOD MOVEMENT IS RESTRICTED BY THE FOREST DEPARTMENT WHE REBY PERMISSION IS REQUIRED FOR THE TRANSPORTATION/MOVEMENT BY THE FOR EST DEPARTMENT. THE A.O. HAS ALSO NOTED DISCREPANCIES AND MISMATCHES IN THE STATEMENTS FOR THE PURCHASE/SALE/CONSUMPTION OF WOOD , SALE OF CRATES AND STOCK SUBMITTED BY THE ASSESSEE COMPANY AND IT WAS INCUMBENT ON THE AS SESSEE COMPANY TO RECONCILE THE SAME AS PRIMARY AND INITIAL ONUS IS O N THE ASSESSEE COMPANY AS THE ENTRIES ARE APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY. THERE WAS ALSO MISMATCH IN THE SALE OF RUBBER WOOD AS THE REVENUE HAS CONTENDED THAT THE ASSESSEE COMPANY HAS SOLD RUBBER WOOD DURING THE PREVIOUS YEAR FROM APRIL 2004 TO MARCH 2005 BUT THE PURCHASES OF RUBBER ITA 1528/MUM/2012 & 2179/MUM/2012 19 WOOD WAS MADE ONLY W.E.F. 01-02-2005 TILL 31-03-200 5 , WHEREBY SALE OF RUBBER WOOD IS 42201.70 CUB. FT. AND THE TOTAL RUBB ER WOOD PURCHASED BY THE ASSESSEE COMPANY IS 3,305.20 CUBIC FT WHILE THE OP ENING STOCK AND PURCHASE DURING THE YEAR OF GURJAN WOOD WAS 59145.45 CU. FE ET AND THE SALE SHOWN WAS 26948.42 CU.FEET AND CLOSING STOCK SHOWN WAS O NLY 2545.16 CU. FEET,WHICH IN THE VIEW OF REVENUE REFLECT MISMATCH AND MORE SO WHEN THE PRICE OF GURJAN WOOD IS EXPENSIVE/COSTLIER VIS--VI S RUBBER WOOD WHICH POSSIBLY MIGHT BE THE REASONS FOR HUGE LOSS TO THE ASSESSEE COMPANY . THUS KEEPING IN VIEW ALL THESE FACTUAL MATRIX OF THE CAS E AND IN THE INTEREST OF JUSTICE, WE DEEM IT FIT AND PROPER TO SET ASIDE THE MATTER BACK TO THE FILE OF THE A.O. TO DECIDE AFRESH THIS ISSUE DE-NOVO AFTER CON SIDERING THE BOOKS OF ACCOUNT AND OTHER EVIDENCES PRODUCED BY THE ASSESSE E COMPANY BEFORE THE A.O. WE ALSO WANT TO CLARIFY THAT THE AO SHALL DECI DE THE ISSUE AFRESH ON MERITS UN-INFLUENCED BY OUR OBSERVATIONS IN THIS OR DER. NEEDLESS TO SAY THE ASSESSEE COMPANY MAY BE GRANTED PROPER AND SUFFICI ENT OF BEING HEARD BY THE AO AND BE ALLOWED TO PRODUCE COGENT MATERIAL AN D EVIDENCES WHICH SHALL BE ADMITTED BY THE AO ALONG WITH THE BOOKS OF ACCOU NTS IN SUPPORT OF ITS CONTENTIONS IN ITS DEFENSE . WE ORDER ACCORDINGLY. 12. REGARDING THE SECOND ISSUE, THE A.O. NOTED DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE COMPANY HA S INCREASED LIABILITY ON ACCOUNT OF SHARE APPLICATION MONEY FROM RS.7,45,000 /- TO RS.11 ,58,000/- . THE ASSESSEE COMPANY HAS ALSO INCREASED ITS EQUITY SHARE CAPITAL FROM RS.8,16,000/- TO RS. 37,71,000/-. THUS, THERE WAS A N INCREASE OF RS. 4,13,000/- ON ACCOUNT OF SHARE APPLICATION MONEY AN D AN INCREASE OF RS.29,55,000/- ON ACCOUNT OF SHARE CAPITAL. THE ASS ESSEE COMPANY WAS CALLED UPON BY THE AO TO FURNISH DETAILS OF FRESH CAPITAL RECEIPT WITH NAMES AND ADDRESSES OF THE SHAREHOLDERS/APPLICANTS ALONG WITH THEIR CONFIRMATION. IN RESPONSE , THE ASSESSEE COMPANY SUBMITTED LETTER DA TED 25.9.2006 ENCLOSING LIST OF SHAREHOLDERS AS ON 31/03/2005, AND CONFIRMA TIONS FROM THE ITA 1528/MUM/2012 & 2179/MUM/2012 20 SHAREHOLDERS CONFIRMING THEIR SHARE HOLDING IN THE ASSESSEE COMPANY'S SHARE CAPITAL. IN ALL THE ASSESSEE COMPANY ENCLOSED 30 CO NFIRMATIONS FROM INDIVIDUALS I.E. MORE PARTICULARLY FROM ALL THE SHA REHOLDERS TO WHOM FRESH SHARES AMOUNTING TO RS.29,55,000/- WERE ISSUED. THE ASSESSEE COMPANY WAS THEN ISSUED A NOTICE U/S.142(1) OF THE ACT REQUESTI NG DETAILS ALONG-WITH NAME, ADDRESS, COPY OF SHARE APPLICATION FORM, PROOF OF I DENTITY OF THE APPLICANTS AND MODE OF RECEIPT OF MONEY IN RESPECT OF THE SHARES A MOUNTING TO RS. 29,55,000/-. THE ASSESSEE COMPANY VIDE ITS LETTER D ATED 15.10.2007 SUBMITTED THE NAMES AND ADDRESSES OF SHAREHOLDERS, COPIES OF SHARE APPLICATION FORMS & COPIES OF THEIR PAN CARD. THE A SSESSEE COMPANY ALSO STATED THAT ALL THE SHAREHOLDERS ARE RELATIVES AND FRIENDS OF THE DIRECTORS OF THE COMPANY. THE LIST OF SHAREHOLDERS AS ON 31.03.2 005 WAS ENCLOSED WITH THE LETTER DATED 15.10.2007. ON COMPARING THE CONFI RMED LIST OF SHAREHOLDERS SUBMITTED ON 15.10.2007 WITH THE LIST SUBMITTED BY THE ASSESSEE COMPANY VIDE LETTER DATED 25.9.2006 , IT WAS SEEN BY THE AO THAT THOUGH THE TOTAL NUMBER OF SHARES ISSUED BY THE ASSESSEE COMPANY IN BOTH THE LISTS WERE IDENTICAL I.E. 3,77,100 ( 81600 + 295500 ), THE NAM ES OF 13 SHAREHOLDERS HOLDING 72100 SHARES AS ON 31.03.2005 WERE REPLACED BY 5 DIFFERENT SHAREHOLDERS HOLDING IDENTICAL 72100 SHARES. THUS, DESPITE THERE BEING A CHANGE IN THE NUMBER AND THE NAME OF THE SHAREHOLDE RS, THE TOTAL NUMBER OF SHARES ISSUED BY THE ASSESSEE COMPANY REMAINED THE SAME. THIS FACT WAS POINTED OUT TO THE ASSESSEE COMPANY BY THE AO. THE ASSESSEE COMPANY SUBMITTED THAT IT WAS AN APPARENT MISTAKE ON THE PA RT OF THE ACCOUNTANT OF THE ASSESSEE COMPANY. THE AO OBSERVED THAT THE ASSE SSEE COMPANY HAS NOT SUBMITTED THE PROOF OF CREDITWORTHINESS AND GENUINE NESS OF THE TRANSACTION. THE AO OBSERVED NO BANK PASS BOOK /BANK STATEMENT W AS SUBMITTED OF THE SHAREHOLDERS . THE ASSESSEE COMPANY HAD NOT SUBMITT ED ANY OTHER EVIDENCE IN SUPPORT OF THE CREDITWORTHINESS OF THE SHAREHOLD ERS. SINCE THE ASSESSEE COMPANY HAD NOT FULLY ESTABLISHED THE GENUINENESS O F THE CAPITAL INTRODUCED, THE ASSESSEE COMPANY WAS INFORMED BY THE AO THAT IT HAD NEITHER ESTABLISHED ITA 1528/MUM/2012 & 2179/MUM/2012 21 THAT THE CAPITAL INTRODUCED WAS GENUINE NOR HAD IT PROVIDED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION , IN RESPECT OF THE PERSON WHO INTRODUCED THE CAPITAL. IN RESPONSE , THE ASSESSEE COMPANY SUBMITTED EVIDEN CE OF PAYMENT MADE BY ITS DIRECTORS SHRI N.K.SHAH AMOUNTING TO RS.1,00,00 0/- AND THAT OF SMT.PRABHA SHAH AMOUNTING TO RS.1,00,000/-. EXCEPT FOR THESE TWO EVIDENCES, THE ASSESSEE COMPANY DID NOT FURNISH ANY OTHER EVIDENCE IN SUPPORT OF ITS STAND THAT THE CAPITAL INTRODUCED IN THE FORM OF SHARE CAPITAL AND SHARE APPLICATION MONEY IS GENUINE. FROM THE AB OVE , THE AO CONCLUDED THAT THE ASSESSEE COMPANY HAS FAILED TO DISCHARGE I TS ONUS OF ESTABLISHING, NOT ONLY THAT THE GENUINENESS OF THE TRANSACTION OF INTRODUCTION OF SHARE CAPITAL, BUT ALSO THAT OF ESTABLISHING OF THE IDENT ITY, AND CREDITWORTHINESS OF THE SHARE APPLICANTS. THE ASSESSEE COMPANY HAS, DUR ING THE COURSE OF THE ASSESSMENT PROCEEDINGS SUBMITTED TWO LIST CARRYING DIFFERENT SET OF NAMES STATED TO BE SHAREHOLDERS OF THE ASSESSEE COMPANY. THE AO OBSERVED THAT THE DIFFERENCE WAS BROUGHT TO THE NOTICE OF THE ASSESSE E COMPANY AND ON CLOSER VERIFICATION OF THE SAME, WAS VERY CLEAR THAT THE A SSESSEE COMPANY, HAS PROJECTED NAMES OF TWO DIFFERENT SETS OF PEOPLE AS ITS SHARE HOLDERS. THIS ONLY LEADS ONE TO THE MOST LOGICAL CONCLUSION, VIZ. THE ASSESSEE COMPANY IS TRYING TO HIDE TRUE FACTS FROM THE REVENUE AND GIVING EVAS IVE REPLIES TO COVER UP IT TRACKS. THE A.O. ACCORDINGLY TREATED THE RECEIPTS T OTALING RS. 31,68,000/- AS INCOME OF THE ASSESSEE COMPANY FROM UNDISCLOSED SOU RCES AND BROUGHT TO TAX U/S 68 OF THE ACT, VIDE ORDERS DATED 28.12.2007. 13. AGGRIEVED BY THE ASSESSMENT ORDERS DATED 28.12. 2007 PASSED BY THE AO, THE ASSESSEE COMPANY CARRIED THE MATTER IN APPEAL B EFORE THE CIT(A). 14. THE ASSESSEE COMPANY REITERATED THE SUBMISSION WHAT HAS BEEN MADE BEFORE THE A.O. AND SUBMITTED THAT THE ASSESSEE COM PANY FURNISHED THE ITA 1528/MUM/2012 & 2179/MUM/2012 22 COMPLETE DETAILS OF ITS SHAREHOLDERS WHO HAD PAID T HE MONEY, AND ALSO GAVE THE DETAILS OF THEIR ADDRESSES AND THE DETAILS OF T HEIR PAN NUMBER ETC. . THE ASSESSEE COMPANY SUBMITTED THAT IT HAS KEPT THE RE CORDS UNDER THE SAFE CUSTODY. THE ACCOUNTANT OF THE ASSESSEE COMPANY MA DE THE MISTAKE IN GIVING WRONG LIST OF SHAREHOLDERS INITIALLY WHICH W AS CORRECTED ON COMING TO KNOW OF THE MISTAKE BY SUBMITTING CORRECT LIST OF S HAREHOLDERS. THE PAYMENT FOR THE SHARE SUBSCRIPTION WERE RECEIVED THROUGH BA NKING CHANNEL. THE ASSESSEE COMPANY HAS DULY FURNISHED THE LIST OF CON FIRMATIONS PHYSICALLY AS DESIRED BY THE A.O. . THE A.O. HAS WRONGLY MADE THE ADDITION. THE MATTER WAS REMANDED BACK TO THE A.O. AND IN REPLY THE ASSESSEE COMPANY REITERATED THE SAME SUBMISSIONS WHAT HAS BEEN MADE EARLIER. THE A SSESSEE COMPANY SUBMITTED THAT IN FACT TWO OF THE SAID SUBSCRIBERS WERE ALSO THE DIRECTORS OF THE ASSESSEE COMPANY AND ALSO WERE ASSESSED WITH TH E VERY SAME AO , AND THEY HAD ALREADY DISCLOSED THEIR INVESTMENT IN THEI R RETURNS OF INCOME FILED. THE ASSESSEE COMPANY SUBMITTED THAT THERE WERE SOME MISTAKES IN THE ORIGINAL DETAILS FILED BY THE ACCOUNTANT, AND THOUG H THE MANAGING DIRECTOR HAD SIGNED THE SAME, HE HAD NO TIME TO VERIFY THE S AME WITH BOOKS OF ACCOUNTS, AS HE WAS TRAVELLING THE SAME DAY, AND TH ESE DETAILS WERE TO BE FILED IMMEDIATELY. ONLY ON ACCOUNT OF THIS, THE DETAILS F URNISHED COULD NOT BE VERIFIED BY THE MANAGING DIRECTOR THOUGH HE HAD SIG NED. THE CIT (A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND HELD THAT THE DE CLARATION IN FORM NO.2 IS BEFORE AN INDEPENDENT AUTHORITY WHICH CLEARLY SHOW S THAT IN CASE THERE WAS ANY DOUBT THE SAME COULD HAVE BEEN CROSS VERIFIED W ITH THE DETAILS FILED BY THE ASSESSEE COMPANY IN FORM NO.2 WITH THE ROC AND THE ISSUE COULD EASILY HAVE BEEN RESOLVED SINCE ALL PAYMENTS WERE RECEIVED BY T HE CHEQUES/DRAFTS. HENCE, IN VIEW OF THE ABOVE FACTORS NO ADDITION/DISALLOWAN CE ON ACCOUNT OF THE EARLIER MISTAKE COULD HAVE BEEN MADE BY THE A.O.THUS, THE C IT(A) VIDE ORDERS DATED 09.12.2011 DELETED THE ADDITIONS AS MADE BY THE AO. ITA 1528/MUM/2012 & 2179/MUM/2012 23 15.AGGRIEVED BY THE ORDERS DATED 09-12-2011, THE RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL. 16. THE LD. D.R. SUBMITTED THAT THERE IS AN ADDITIO N OF RS. 31,68,000/- BEING MADE ON ACCOUNT OF DISALLOWANCE U/S 68 OF THE ACT. THE CAPITAL RECEIVED BY THE ASSESSEE COMPANY FOR WHICH IDENTITY , CREDITWORTHINESS AND GENUINENESS HAS TO BE PROVED BY THE ASSESSEE COMPAN Y AS PER MANDATE OF SECTION 68 OF THE ACT AND THE ASSESSEE COMPANY HAS FAILED TO DO SO. THE LD DR SUBMITTED THAT COMPLETE CONFIRMATIONS HAS NOT BEEN SUBMITTED IN RESPECT OF ALL THE SHAREHOLDERS . LD DR SUBMITTED THAT THE BAN K STATEMENTS OF THE SHAREHOLDERS WERE ALSO NOT SUBMITTED. THE LD. D.R. SUBMITTED THAT THE A.O. HAS RIGHTLY MADE THE ADDITIONS AND HE RELIED UPON T HE ORDERS OF THE AO, 17. THE LD. COUNSEL FOR THE ASSESSEE COMPANY SUBMIT TED THAT ALL THE DETAILS WITH RESPECT TO THE NAMES, ADDRESSES AND OCCUPATION OF THE ALLOTTEES OF THE SHARES HAVE GIVEN AND THE SAME HAS BEEN PLACED VID E PAPER BOOK PAGE 76 TO 83 SHOWING NAMES OF THE ALLOTTEE, ADDRESSES AND OC CUPATION ETC. . HE REITERATED THE SUBMISSIONS AS MADE BEFORE THE AUTHO RITIES BELOW. THE LD. COUNSEL OF THE ASSESSEE COMPANY RELIED UPON THE ORD ERS OF THE CIT(A). 18. WE HAVE CONSIDERED THE RIVAL CONTENTION AND PER USED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASS ESSEE COMPANY HAS INCREASED ITS LIABILITY ON ACCOUNT OF SHARE APPLICA TION MONEY FROM RS. 7,45,000/- TO RS. 11,58,000/- AND EQUITY SHARE CAPI TAL WAS ALSO INCREASED FROM RS.8,16,000/- TO RS.37,71,000/- . THE ASSESSE E COMPANY HAS GIVEN LIST OF SHAREHOLDERS AT THE INITIAL STAGE ALONG WITH CO NFIRMATIONS FROM THE SHAREHOLDERS. THE ASSESSEE COMPANY HAS SUBMITTED T HE REVISED LIST OF SHAREHOLDERS AS THERE WERE ERRORS IN THE ORIGINAL L IST BUT NO CONFIRMATIONS WERE SUBMITTED IN THE REVISED LIST BUT WE HAVE OBS ERVED THAT THE ASSESSEE COMPANY HAS SUBMITTED CONFIRMATIONS FROM THE SHAREH OLDERS ALONG WITH THE ITA 1528/MUM/2012 & 2179/MUM/2012 24 LIST OF SHAREHOLDERS INITIALLY WHICH WAS REVISED LA TER ON AND SOME OF THE SHAREHOLDERS ARE SAME/COMMON IN BOTH THE LIST AND THERE IS NO ERROR IN BOTH THE LIST WITH RESPECT TO SOME OF THESE SHAREHOLDERS . THE ASSESSEE COMPANY HAS ALSO GIVEN PAN, ADDRESS AND MODE OF PAYMENT ETC . OF SHAREHOLDERS TO WHOM SHARES WERE ALLOTTED . THE ASSESSEE COMPANY HA S ALSO SUBMITTED FORM NO 2 FILED WITH REGISTRAR OF COMPANIES WHEREBY THE DETAILS OF SHAREHOLDERS TO WHOM SHARES WERE ALLOTTED WAS DULY GIVEN. HOWEVER, THE BANK STATEMENTS AND TAX RETURNS OF THE SHAREHOLDERS WERE NOT GIVEN BY T HE ASSESSEE COMPANY TO PROVE CREDITWORTHINESS AND GENUINENESS OF THE TRANS ACTION AS PER MANDATE OF SECTION 68 OF THE ACT , EXCEPT WITH RESPECT TO THE SHAREHOLDERS NAMELY SH N K SHAH AND MRS PRABHA SHAH FOR WHICH NO ADDITIONS HAV E BEEN MADE BY THE AO. IT IS PERTINENT TO MENTION HERE THAT U/S 68 OF THE ACT, THE PRIMARY ONUS IS ON THE ASSESSEE COMPANY TO PROVE THE IDENTITY, CRED ITWORTHINESS AND GENUINENESS OF THE TRANSACTION . THE ASSESSEE COMPA NY SUBMITTED DOCUMENTS RELATING TO SH N K SHAH AND SMT. PRABHA SHAH AND T HE AO HAS NOT MADE ADDITIONS WITH RESPECT TO THESE SHAREHOLDERS , WHIL E THE BANK STATEMENTS TO VERIFY THE TRANSACTION HAS NOT BEEN SUBMITTED AS AL SO COMPLETE CONFIRMATIONS AND TAX RETURNS WERE NOT SUBMITTED WITH RESPECT TO OTHER SHAREHOLDERS. IN OUR CONSIDERED VIEW AND IN THE INTEREST OF JUSTICE, TH E ASSESSEE COMPANY HAS NOT COMPLETELY DISCHARGED THE INITIAL AND PRIMARY ONUS AS CASTE BY SECTION 68 OF THE ACT WITH RESPECT TO CASH CREDIT APPEARING IN TH E BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY WITH RESPECT TO RAISING OF SHARE C APITAL/SHARE APPLICATION MONEY DURING THE PREVIOUS YEAR . THUS, IN OUR CONS IDERED VIEW AND THE INTEREST OF JUSTICE WILL BE BEST SERVED IF THE MATT ER IS SET ASIDE TO THE FILE OF THE AO FOR FRESH CONSIDERATION OF THE ISSUE DE-NOVO AS PER MANDATE OF SECTION 68 OF THE ACT AFTER CONSIDERING THE DETAILS AND EVIDE NCES SUBMITTED BY THE ASSESSEE COMPANY IN ORDER TO PROVE THE IDENTITY, CR EDITWORTHINESS AND GENUINENESS OF THE TRANSACTION TO SATISFY THE MANDA TE OF SECTION 68 OF THE ACT, AND SUCH EVIDENCES SUBMITTED BY THE ASSESSEE COMPAN Y IN DE-NOVO PROCEEDINGS SHALL BE ADMITTED BY THE AO. THE ASSES SEE COMPANY IS DIRECTED ITA 1528/MUM/2012 & 2179/MUM/2012 25 TO PRODUCE ALL THE DETAILS AND EVIDENCES BEFORE THE A.O. TO SATISFY THE INGREDIENTS OF SECTION 68 OF THE ACT , IN SUPPORT O F ITS CONTENTIONS AND SUCH EVIDENCES WHICH ARE SUBMITTED BY THE ASSESSEE COMPA NY IN DE-NOVO PROCEEDINGS SHALL BE ADMITTED BY THE AO . THE ASSES SEE COMPANY SHALL BE GIVEN SUFFICIENT OPPORTUNITY OF BEING HEARD BY THE AO IN ACCORDANCE WITH THE PRINCIPLES OF NATURAL JUSTICE IN ACCORDANCE WITH LA W. WE ORDER ACCORDINGLY. ITA NO. 2149/MUM/12 19. IN THIS APPEAL, THE ORIGINAL ASSESSMENT WAS F RAMED U/S 143(3) OF THE ACT VIDE ORDER DATED 28.12.2007 WHEREBY THE A.O. HA S MADE ADDITION OF RS. 1,05,03,234/- ON ACCOUNT OF PROFIT EARNED ON THE MA NUFACTURING OF WOODEN CRATES WHICH WAS DELETED BY THE CIT(A) VIDE ORDERS DATED 09-12-2011 , WHICH WE HAVE ALREADY ADJUDICATED AND DEALT IN DETAIL IN ITA NO. 1528/M/12 WHEREBY WE HAVE SET ASIDE THE MATTER TO THE FILE OF THE AO FOR DE-NOVO ADJUDICATION , VIDE THIS ORDER. THE A.O. HAS ALLEG ED THAT THERE WAS UNACCOUNTED PURCHASE OF RS.35,00,685/- ON ACCOUNT O F DIFFERENCE IN THE GURJAN WOOD PURCHASED BY THE ASSESSEE COMPANY OUT O F BOOKS BUT NO ADDITION WAS MADE IN THE ORIGINAL ASSESSMENT ORDER DATED 28.12.2007 PASSED U/S 143(3) OF THE ACT , DUE TO OVERSIGHT AND THE SA ID EXPENDITURE WAS ALLOWED TO THE ASSESSEE COMPANY IN THE ORIGINAL ASSESSMENT ORDER WHILE AS PER THE AO, THE SAME SHOULD NOT HAVE BEEN ALLOWED TO THE AS SESSEE COMPANY IN VIEW OF PROVISIONS OF SECTION 69C OF THE ACT. THE REVEN UE HAS INITIATED THE PROCEEDING U/S 147 OF THE ACT WITHIN FOUR YEARS FRO M THE END OF THE ASSESSMENT YEAR AS THE INCOME HAS ESCAPED ASSESSMEN T, WHEREBY ADDITIONS OF RS. 35,00.685/- HAVE BEEN MADE ON ACCOUNT OF OUT OF BOOKS PURCHASES U/S 69C OF THE ACT , WHICH HAS BEEN DELETED BY THE CIT( A) VIDE ORDERS DATED 30.01.2012 FOLLOWING THE ORDERS OF THE CIT(A) DATED 09-12-2011 W.R.T. APPELLATE PROCEEDINGS AGAINST THE ORIGINAL ASSESSME NT ORDER U/S 143(3) OF THE ACT. CONSIDERING THE FACTS AND THE DECISION OF THE CIT(A) DATED 09-12-2011 AGAINST THE ORIGINAL ASSESSMENT ORDER U/S 143(3) DA TED 28.12.07 , WE HAVE ITA 1528/MUM/2012 & 2179/MUM/2012 26 ALREADY ADJUDICATED THE APPEAL NO ITA NO. 1528/MUM/ 2012 WHEREBY WE HAVE SET ASIDE THE ISSUES TO THE FILE OF THE A.O. FOR D E-NOVO DETERMINATION OF THE ISSUE AFTER GIVING OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE COMPANY. THE SAME DECISION SHALL APPLY TO THIS APPEAL ALSO AND W E SET ASIDE THE ISSUE IN THIS APPEAL ALSO TO THE FILE OF A.O. FOR FRESH CONS IDERATION AND DE-NOVO ADJUDICATION AS INDICATED IN THE APPEAL IN ITA NO. 1528/MUM/12, AS THE ISSUE IN THIS APPEAL IS ALSO ARISING FROM THE SAME MATTER RELATED TO THE ALLEGED UN-ACCOUNTED PURCHASES AND SALES MADE BY THE ASSESS EE COMPANY. 20. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND FEBRUARY, 2016. # $% &' 02-02-2016 ( ) SD/- SD/- (AMIT SHUKLA) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 02-02-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI