Appeal Details
Counselvise Citation
15620714 RSA 2012
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
6 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-12-2012
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Assessment Year
2005-2006
Appeal Filed On
08-06-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, ALLAHABAD BENCH, ALLAHABAD BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 156 TO 160/A/2012 ASSTT. YEAR : 2005-06 TO 2009-10 A.C.I.T., CENTRAL CIRCLE, VS. M/S. CARPET INTERN ATIONAL, VARANASI. HARIAUN BYE-PASS ROAD, BHADOHI. (PAN : AABFC 5618 B) ITA NO. 91 & 90/A/2012 ASSTT. YEAR : 2008-09 & 2009-10 M/S. CARPET INTERNATIONAL, VS. A.C.I.T., CENTRAL CIRCLE, HARIAUN BYE-PASS ROAD, VARANASI. BHADOHI. ITA NO. 175 & 176/A/2012 ASSTT. YEAR : 2008-09 & 2009-10 A.C.I.T., CENTRAL CIRCLE, VS. SMT. RADHIKA DEVI B ARANWAL, VARANASI. C/O M/S. CARPET INTERNATIONAL, HARIAUN BYE-PASS ROAD, BHADOHI. (PAN : AFRPD 1719 D) ITA NO. 177, 178 & 179/A/2012 ASSTT. YEAR : 2007-08, 2008-09 & 2009-10 A.C.I.T., CENTRAL CIRCLE, VS. SHRI PRAMOD KUMAR B ARANWAL, VARANASI. C/O M/S. CARPET INTERNATIONAL, HARIAUN BYE-PASS ROAD, BHADOHI. (PAN : ACEPB 0741 M) ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 2 ITA NO. 89/A/2012 ASSTT. YEAR : 2007-08 SHRI PRAMOD KUMAR BARANWAL, VS. A.C.I.T., CENTRAL CIRCLE, C/O M/S. CARPET INTERNATIONAL, VARANASI. HARIAUN BYE-PASS ROAD, BHADOHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI ABHAY KUMAR THAKUR, SR. D.R. RESPONDENT BY : SHRI S.K. GARG, ADVOATE DATE OF HEARING : 05.11.2012 DATE OF PRONOUNCEMENT OF ORDER : 14.12.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS ORDER SHALL DISPOSE OF ALL THE ABOVE APPEALS OF THE REVENUE AND ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 TO 2009-10 . 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL AVAILABLE ON RECORD. FOR THE SAKE OF CONVENIENCE, THE APPEALS ARE DECIDE D AS UNDER : ITA NO. 156, 157 & 158/A/2012 (A.Y. 2005-06, 2006-0 7 & 2007-08): (M/S. CARPET INTERNATIONAL): ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 3 3. ALL THESE DEPARTMENTAL APPEALS ARE FILED AGAINST DIFFERENT ORDERS OF THE LD. CIT(A), VARANASI DATED 21.03.2012 FOR THE ASSESSMEN T YEARS 2005-06, 2006-07 AND 2007-08 RESPECTIVELY. 4. IN ASSESSMENT YEAR 2005-06, THE REVENUE CHALLENG ED THE ORDER OF THE LD. CIT(A) IN HOLDING THAT THE BOOK RESULTS OF THE ASSE SSEE ARE NOT LIABLE TO BE REJECTED U/S. 145(3) OF THE IT ACT AND IN DELETING THE ADDIT ION OF RS.4,35,51,668/- MADE BY THE AO ON ACCOUNT OF ENHANCEMENT OF G.P. BY 20%. 5. IN ASSESSMENT YEAR 2006-07, THE REVENUE SIMILARL Y CHALLENGED THE ORDER OF THE LD. CIT(A) IN HOLDING THAT THE BOOK RESULTS OF THE ASSESSEE WERE NOT LIABLE TO BE REJECTED U/S. 145(3) OF THE IT ACT AND IN DELETING THE ADDITION OF RS.2,71,87,628/- MADE BY THE AO ON ACCOUNT OF ENHANCEMENT OF G.P. BY 20%. 6. IN ASSESSMENT YEAR 2007-08, THE REVENUE SIMILARL Y CHALLENGED THE ORDER OF THE LD. CIT(A) IN HOLDING THAT THE BOOK RESULTS OF THE ASSESSEE WERE NOT LIABLE TO BE REJECTED U/S. 145(3) OF THE IT ACT AND IN DELETING THE ADDITION OF RS.8,14,65,422/- MADE BY THE AO ON ACCOUNT OF ENHANCEMENT OF G.P. BY 20%. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 4 7. THE LD. REPRESENTATIVES OF BOTH THE PARTIES SUBM ITTED THAT THE ISSUE IS SAME IN ALL THE APPEALS AND MADE COMMON SUBMISSIONS IN ALL THE APPEALS. THEREFORE, FOR THE PURPOSE OF DISPOSAL OF ALL THE DEPARTMENTAL APPEALS ON SAME ISSUE, THE FACTS ARE TAKEN FROM ITA NO. 156/A/2012 FOR THE ASSESSMENT YE AR 2005-06. ITA NO. 156/A/2012 ( CARPET INTERNATIONAL - A.Y. 20 05-06): 8. THE AO PASSED ASSESSMENT ORDER ON 30.12.2010 U/S . 153A READ WITH SECTION 143(3) OF THE IT ACT. IN THE SAID ASSESSMENT ORDER, THE AO HAS COMPLETED THE ASSESSMENT PROCEEDINGS DETERMINING TOTAL INCOME AT RS.20,86,45,170/- AS AGAINST RS.16,50,93,497/- DISCLOSED BY THE ASSESSEE. THE VA RIATION OF RS.4,35,51,668/- WAS ADDED TO THE INCOME OF THE ASSESSEE, BEING SOLELY A TTRIBUTABLE TO GROSS PROFIT ADDITION, WHICH IS UNDER CHALLENGE IN THE DEPARTMEN TAL APPEAL. THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE THE LD. CI T(A) AND SUBMITTED DETAILED WRITTEN SUBMISSIONS, ON WHICH THE LD. CIT(A) CALLED FOR THE REMAND REPORT FROM THE AO. THE ASSESSEE ALSO FILED REJOINDER TO THE REMAND REPORT OF THE AO, DISPUTING THE ADDITION MADE BY THE AO. 9. THE FACTS IN BRIEF ARE THAT THE ASSESSEE, WHICH IS A PARTNERSHIP FIRM CAME INTO EXISTENCE ON 1.05.1996 AND SINCE ITS INCEPTION, IT WAS CONSTITUTED BY THE FAMILY MEMBERS OF TWO BROTHERS NAMELY SRI PRADEEP KUMAR BA RANWAL AND SRI PRAMOD ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 5 KUMAR BARANWAL. THE FIRM WHICH REMAINED SO CONSTIT UTED UP TO THE ASSESSMENT YEAR 2008-09 WAS REGULARLY ASSESSED TO TAX AND AT T HE RELEVANT TIME, JURISDICTION IN ITS CASE LIED WITH ACIT, RANGE-I, VARANASI. WITH EF FECT FROM 1.4.2008 (RELEVANT FOR THE ASSESSMENT YEAR 2009-10), THERE HAS BEEN A PART ITION IN THE GROUP AND THE ASSESSEE FIRM CAME UNDER EXCLUSIVE CONTROL AND MANA GEMENT OF THE FAMILY OF SRI PRAMOD KUMAR BARANWAL. THE ASSESSEE KEPT THE DEPAR TMENT FULLY INFORMED ABOUT SUCH CHANGE IN CONSTITUTION SOON AFTER THE SAME TOO K PLACE. 9.1 ON 11.2.2009 SEARCH AND SEIZURE ACTION UNDER SE CTION 132(1) WAS CARRIED OUT IN THE GROUP HEADED BY SRI PRAMOD KUMAR BARANWAL (A ND SO ALSO IN THE GROUP OF SRI PRADEEP KUMAR BARANWAL). AS FAR AS GROUP HEADE D BY SRI PRAMOD KUMAR BARANWAL IS CONCERNED, THE SEARCH AND SEIZURE ACTIO N AS AFORESAID COVERED THE FOLLOWING PERSONS, (AS PER INFORMATION GATHERED FRO M THE PACHNAMA PREPARED BY THE AUTHORISED OFFICERS): SL. NO. PANCHNAMA IN THE NAME OF PLACE OF SEARCH INCOME-TAX AUTHORITY ISSUING THE WARRANTS OF AUTHORIZATION (I) SHRI PRAMOD KUMAR BARANAWAL SMT. RADHIKA BARANWAL PRANAV BARANWAL HIG PHASE I, RAJ PURA COLONY, HOUSE OF SHRI C.P. SINGH LANDLORD. JT. DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION) (AUTHORIZATION DATED 11.02.2009) ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 6 (II) SHRI PRAMOD KUMAR BARANWAL PRADEEP KUMAR BARANWAL SH. PRAMOD KUMAR BARANWAL G-3, UPASNA APARTMENT, HALI ROAD C.P.N. DELHI ADDITIONAL DIRECTOR OF INCOME TAX (INVESTIGATION) VARANASI (AUTHORIZATION DATED 11.02.2009) (III) M/S CARPET INTERNATIONAL M/S CHAMPA DYING PVT LTD M/S CARPET INTERNATIONAL PVT LTD BHADOHI M/S BARANWAL CARPET SUPPLIERS PVT LTD CARPET INTERNATIONAL HARYAN BY PASS ROAD BHADOHI PHONE NO. 225812 DIRECTOR OF INCOME-TAX (INV.), KANPUR (AUTHORIZATION DATED 03.02.2009) (IV) M/S CARPET INTERNATIONAL, BHADOHI PREMISES BEHIND GYANPUR ROAD, BHADOHI OF M/S CARPET INTERNATIONAL BEHIND GYANPUR ROAD, BHADOHI DIRECTOR OF INCOME-TAX (INV.), KANPUR (AUTHORIZATION DATED 3.2.2009) 9.2 CONSEQUENT UPON SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) AS PER PARTICULARS GIVEN ABOVE, THE CASES OF THE GROUP AS A WHOLE WERE CENTRALIZED WITH THE ACIT, CENTRAL CIRCLE, VARANASI VIDE ORDER DATED 5.5 .2009 PASSED BY THE CIT, VARANASI UNDER SECTION 127 OF THE ACT. BECAUSE OF SUCH A CHANGE, THE ACIT, CENTRAL CIRCLE, VARANASI ISSUED NOTICES UNDER SECTI ON 153A IN THE NAMES OF VARIOUS PERSONS (SO FAR AS THE PRAMOD KUMAR BARANWAL GROUP IS CONCERNED) AS PER PARTICULARS GIVEN HEREIN BELOW:- SL. NO. NAME OF THE PERSON PA NO. DATES OF ISSUANCE OF NOTICE UNDER SECTION 153A(A) ASSESSMENT YEARS INVOLVED (I) SRI PRAMOD KUMAR BARNWAL (INDV.) ACEPB0741M 2003-04 TO 2008-09 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 7 (II) PRAMOD KUMAR BARNWAL (HUF) AAFHP3900B 2003-04 TO 2008-09 (III) SMT. RADHIKA DEVI W/O SRI PRAMOD KUMAR BARANWAL AFRPD1719D 2003-04 TO 2008-09 (IV) SRI PRASHANT BARANWAL, S/O SRI PRAMOD KUMAR BARANWAL (INDV.) AQBPB9951G 2003-04 TO 2008-09 (V) CARPET INTERNATIONAL AABFC5618B 2003-04 TO 200 8-09 (VI) BANKAT RUGS PVT. LTD. AACCB7697R 2003-04 TO 2008-09 9.3 AS FAR AS CARPET INTERNATIONAL IS CONCERNED, AT THE TIME OF SEARCH AND SEIZURE ACTION AS AFORESAID, IT STOOD CONSTITUTED BY SRI PR AMOD KUMAR BARANWAL AND HIS FAMILY MEMBERS AS PER PARTICULARS GIVEN HEREIN BELO W:- PROFIT /LOSS SHARING RATIO SL. NO. NAME OF THE PARTNERS PROFIT LOSS (I) PRAMOD KUMAR BARANWAL 50% 65% (II) SMT. RADHIKA DEVI BARANWAL, WIFE OF SRI PRAMOD KUMAR BARANWAL. 20% 20% (III) PRASHANT BARANWAL (ATTAINED MAJORITY ON 23.04.2008), SON OF SRI PRAMOD KUMAR BARANWAL 15% 15% (IV) PRANAV BARANWAL, MINOR ADMITTED TO THE BENEFITS OF PARTNERSHIP, SON OF SRI PRAMOD KUMAR BARANWAL. 15% - SUCH RECONSTITUTION HAS BEEN EFFECTIVE FROM 1.4.200 8, RELEVANT TO THE ASSESSMENT YEAR 2009-10. 9.4 IN COMPLIANCE WITH THE ABOVE REFERRED NOTICE IS SUED UNDER SECTION 153A, THE ASSESSEE FIRM FILED RETURNS RIGHT FROM THE ASSESSME NT YEARS 2003-04 TO 2008-09 AND SO FAR AS THE ASSESSMENT YEAR 2009-10 IS CONCERNED (YEAR OF SEARCH), THE RETURN WAS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 8 FILED IN DUE COURSE. IN THE RETURNS SO FILED FOR T HE ASSESSMENT YEARS 2003-04 TO 2008-09 (IN COMPLIANCE WITH THE NOTICES UNDER SECTI ON 153A), THE ASSESSEE DID NOT DISCLOSE ANY ADDITIONAL INCOME AS ACCORDING TO IT T HE SEARCH AND SEIZURE ACTION AS AFORESAID DID NOT LEAD TO THE RECOVERY OF ANY SUCH INCOME WHICH CAN BE HELD TO BE ASSESSABLE AS UNDISCLOSED INCOME UNDER SECTION 15 3A OF THE ACT. IT IS RELEVANT TO MENTION HERE THAT AT THE TIME OF SEARCH AND SEIZURE ACTION ALL SUCH RETURNS WERE ON RECORD AND IN RELATION TO THE RETURNS SO FILED THE APPELLANT HAD BEEN SUBJECTED TO ASSESSMENT ALSO AS PER PARTICULARS GIVEN BELOW:- SL. NO. ASSESSMENT YEAR RETURN FILED ON ASSESSED INCOME ORDER PASSED UNDER SECTION INCOME SHOWN IN THE RETURN FILED UNDER SECTION 153A (I) 2005-06 30.10.2005 16,50,93,500 143(1) 16,50,93,500 (II) 2006-07 27.10.2006 8,26,20,150 143(1) 8,26,20,150 (III) 2007-08 22.10.2007 21,24,99,460 143(1) 21,24,99,460 (IV) 2008-09 08.07.2008 16,85,67,230 143(1) 16,85,67,230 9.5 AS PER PARA 2 OF THE ASSESSMENT ORDER DATED 30. 12.2010 FOR THE ASSESSMENT YEAR 2005-06, WHICH IS THE SUBJECT MATTER OF HEARIN G, ASSESSMENT RELATED PROCEEDINGS WERE INITIATED IN THE FOLLOWING MANNER: - 2. THEREAFTER, NOTICE UNDER SECTION 153A(A) OF THE I.T. ACT, 1961, DATED 07/07/2009 REQUIRING THE ASSESSEE TO FURNISH THE RETURN OF INCOME WAS ISSUED AND DULY SERVED FOR COMPLIANCE BY 24.07.2009. IN RESPONSE TO THE NOTICE THE ASSESSEE FILED RETURN OF INCOME ON 02/09/2009 DECLARING TOTAL INCOME AT RS.16,50,93,49 7/-. SUBSEQUENTLY, NOTICE U/S 143(2) R.W.S. 153A & 153C(1) OF THE I.T. ACT, DATED 08/09/2009 WERE ISSUED DULY SERVED UPON THE ASSESSE E FOR COMPLIANCE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 9 ON 09/10/2009. SUBSEQUENTLY, NOTICE U/S 142(1) WAS ISSUED ON 14/10/2010 AND SERVED UPON THE ASSESSEE FOR COMPLIA NCE ON 21/10/2010. FURTHER, QUESTIONNAIRE WAS ISSUED ON 09 /11/2010 FOR COMPLIANCE ON 19/11/2010. THEREAFTER, IN THE SAID ASSESSMENT ORDER THE ASSES SING OFFICER, AFTER DETAILED DISCUSSIONS HELD THAT PROPER BOOKS OF ACCOUNT HAD N OT BEEN MAINTAINED AND FINALLY AFTER REFERRING TO VARIOUS CASE LAWS, HE ENHANCED T HE GROSS PROFIT RATE BY 20%, FROM 22.40% (AS DISCLOSED BY THE APPELLANT) TO 26.8 8% ON THE TURNOVER DISCLOSED BY THE APPELLANT. NECESSARY DISCUSSIONS APPEAR IN PARAS 5.4 TO 5.8 WHICH ARE REPRODUCED HEREUNDER:- 5.4 IF AT ALL, FOR THE SAKE OF DISCUSSION, IT IS A CCEPTED THAT THE ASSESSEE MAINTAINS REGULAR BOOKS OF ACCOUNT, THE SA ME CANNOT BE RELIED UPON, SIMPLY BECAUSE BASIC DOCUMENTS ARE NOT AVAILABLE TO SUPPORT THE ENTRIES MADE THEREIN. THESE ENTRIES, TH EREFORE, REMAIN UNVERIFIABLE. IF THE ASSESSEE-FIRM HAS DEBITED THE AFORESAID EXPENSES RELATING TO MANUFACTURING OF CARPETS, THE ONUS WAS SQUARELY ON IT TO PRODUCE THE VOUCHERS IN SUPPORT OF SUCH EXPENSES DE BITED TO ITS P & L ACCOUNT. ENTRIES IN BOOKS OF ACCOUNT HAVE NO EVIDEN TIARY VALUE WHATSOEVER IN THE ABSENCE OF SUPPORTING VOUCHERS/BI LLS/DOCUMENTS. IN THE LIGHT OF NON-MAINTENANCE AND FAILURE TO PRODUCE PROPER VOUCHERS RELATING TO BOOKS OF ACCOUNT PRODUCED BY THE ASSESS EE (WHICH WERE NEITHER FOUND DURING THE COURSE OF SEARCH OPERATION NOR ANY REASON GIVEN FOR THE SAME) THE SO CALLED BOOKS CANNOT BE T REATED TO BE GENUINE OR RELIABLE. 5.5 THE ASSESSEES CONTENTION HAS BEEN CAREFULLY CO NSIDERED BUT IS UNACCEPTABLE IN THE LIGHT OF THE FACTS DISCUSSED AB OVE AND PARTICULARLY CONSIDERING THE FOLLOWING:- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 10 (I) NO BOOKS OF ACCOUNT WERE FOUND OR PRODUCED DURING T HE SEARCH AND SEIZURE OPERATIONS AT THE VARIOUS PREMIS ES OF THE ASSESSEE. (II) NO BOOKS OF ACCOUNT OR DOCUMENT WAS PRODUCED DURING THE POST SEARCH ENQUIRIES. (III) AS DISCUSSED, THE SO CALLED BOOKS OF ACCOUNT THAT W ERE PRODUCED LACK EVIDENTIARY VALUE IN THE ABSENCE OF BILLS/VOUCHERS/BASIC DOCUMENTS ON THE BASIS OF WHIC H THE BOOKS OF ACCOUNTS ARE GENERALLY PREPARED. (IV) MOREOVER, THE ASSESSEE FAILED TO ESTABLISH ANY CORR ELATION BETWEEN CARPET MANUFACTURED BY IT AND THE MANUFACTURING EXPENSES CLAIMED. THE ASSESSEE PRODUC ES HUNDREDS OF VARIETIES OF CARPETS AND UTILIZES VARIO US QUALITIES OF RAW WOOLS/COTTON YARNS, WHOSE RATES HA VE SUBSTANTIAL VARIATIONS. IT IS A WELL KNOWN FACT THA T CARPETS ARE MANUFACTURED BY THE WEAVERS AT THEIR RESIDENCES AND THEY OBTAIN WOOL AND OTHER RAW MATERIALS FROM THE EXPORTERS/CONTRACTORS AND AFTER WEAVING THE CARPETS THEY RETURN BACK THE SAME TO THE EXPORTERS/CONTRACTORS. ON ANY DATE, PARTICULARLY ON 31 ST MARCH OF EACH YEAR THERE SHOULD BE AVAILABILITY OF RAW WOOL/SEMI FINISHED/HA LF WOVEN CARPETS. NO SUCH STOCK HAS BEEN SHOWN IN THE AUDIT REPORT AND PROFIT AND LOSS ACCOUNT OF THE ASS ESSEE- FIRM FOR THE RELEVANT ASSESSMENT YEAR. IN THE LIGHT OF THESE FACTS, IT IS MANIFEST THAT THE ASSESSEE FIRM HAS SU PPRESSED ITS CLOSING STOCK. IT HAS BEEN SETTLED IN NUMEROUS JUDICIAL PRONOUNCEMENTS THAT SUPPRESSION OF CLOSING STOCK IN ITSELF CONSTITUTES A SUFFICIENT GROUND FOR REJECTION OF BO OKS OF ACCOUNT. (V) THE CONTENTION OF THE ASSESSEE THAT QUANTITATIVE/QUALITATIVE STOCK ARE AVAILABLE AND TH E SAME HAS ALREADY BEEN FURNISHED BEFORE THE UNDERSIGNED I S ABSOLUTELY INCORRECT BECAUSE WHATEVER DETAILS HAVE BEEN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 11 SUBMITTED REGARDING THE DETAILS OF STOCK, REMAINED WITHOUT ANY SUPPORT OF DOCUMENTARY EVIDENCE. (VI) IT IS ALSO VERY IMPORTANT TO MENTION THAT, NUMEROUS LETTERS WRITTEN TO THE WEAVERS/CONTRACTORS AND CREDITORS U/ S 133(6) OF THE ACT, FOR FURNISHING INFORMATION REGAR DING THE WORK/SUPPLIES DONE FOR THE ASSESSEE, BUT SURPRI SINGLY MOST OF THEM RETURNED EITHER UNSERVED OR REMAINED UNCOMPLIED WITH. (VII) AS FAR AS ARGUMENT OF DEDUCTION OF TDS @2% OF THE PAYMENT TO THE WEAVERS/CONTRACTORS IS CONCERNED, TH E SAME CANNOT BE SAID TO BE CONCLUSIVE EVIDENCE FOR CORRECTNESS OF THE DEBIT SIDE OF THE P & L ACCOUNT. IF THE SAME IS ACCEPTED TO BE THE ONLY PARAMETER FOR CORRE CTNESS OF SOME PAYMENT, ANY BUSINESS CONCERNED CAN VERY EA SILY DEDUCT 2% OF THE TOTAL BOGUS EXPENSES AND DEBIT THE SAME TO THE P & L ACCOUNT AND WALK SCOT-FREE EVADING PAY MENT OF TAX @ 30%. (VIII) IN AWADHESH PRATAP SINGH ABDUL REHMAN & BROS. VS. CIT (1994) 76 TAXMAN 106(ALLD), THE ALLAHABAD HIGH COURT OBSERVES WHERE ABSENCE OF A STOCK REGISTER, CASH MEMOS ETC., IF COUPLED WITH OTHER FACTORS LIKE ABSE NCE OF VOUCHERS IN SUPPORT OF THE EXPENSES AND PURCHASES A ND EXISTENCE OF LOW PROFIT, MAY GIVE RISE TO A LEGITIM ATE INFERENCE THAT ALL IS NOT WELL WITH THE BOOKS AND T HE SAME CANNOT BE RELIED UPON TO ASSESS THE INCOME, PROFITS OR GAINS OF AN ASSESSEE, THE AUTHORITIES WOULD BE JUST IFIED IN REJECTING THE ACCOUNT BOOKS UNDER SECTION 145(2) AN D IN MAKING THE ASSESSMENT IN THE MANNER CONTEMPLATED IN THAT PROVISION. (IX) ALSO IN S.N. NAMASIVAYAM CHETTIAR VS. CIT (1960) 38 ITR 579 (SC), THE APEX COURT SAYS KEEPING OF A STO CK REGISTER IS OF GREAT IMPORTANCE BECAUSE THAT IS A M EANS OF VERIFYING THE ASSESSEES ACCOUNTS BY HAVING A QUANTITATIVE TALLY, IF, AFTER TAKING INTO ACCOUNT ALL THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 12 MATERIALS INCLUDING THE WANT OF A STOCK REGISTER, I T IS FOUND THAT FROM THE METHOD OF ACCOUNTING THE CORREC T PROFITS OF THE BUSINESS ARE NOT DEDUCTIBLE, THE OPE RATION OF SECTION 145(3) OF THE ACT WOULD BE ATTRACTED. (X) THE ASSESSEE SUPPRESSES CLOSING STOCK TO DEFLATE PR OFITS. THIS ACT PREVENTS THE DEDUCTION OF CORRECT PROFITS FROM THE BOOKS OF ACCOUNTS AND OBFUSCATES THE TRUE PICTURE O F THE BUSINESS OF THE ASSESSEE. THIS IS ALSO A SETTLED LA W THAT THE CORRECT DECLARATION OF CLOSING STOCK IS A SINE QUA NON FOR ARRIVING AT THE CORRECT PROFIT. IN P.M. MOHAMMA D MEERAKHAN VS. CIT (1969) 73 ITR 735 (SC), THE APEX COURT HAS OPINED THAT STOCK-IN-TRADE MUST BE VALUED FOR ASCERTAINMENT OF PROFITS. FURTHER, IN A.L.A. FIRM V S. CIT (1991)189 ITR 285 (SC); CIT VS. BRITISH PAINTS INDI A LTD. (1991 188 ITR 44 (SC), THE APEX COURT ONCE AGA IN OBSERVES THAT IT IS SETTLED LAW THAT THE TRUE TRADI NG RESULTS OF A BUSINESS FOR AN ACCOUNTING PERIOD CANNOT BE ASCERTAINED WITHOUT TAKING INTO ACCOUNT THE VALUE O F THE STOCK-IN-TRADE REMAINING AT THE END OF THE PERIOD. 5.6 IN THE ABOVE MENTIONED CIRCUMSTANCES, I AM SATI SFIED THAT THE GROSS PROFIT AS SHOWN BY THE ASSESSEE IS NOT AT ALL RELIABLE AND CORRECT INCOME CANNOT BE DEDUCED THEREFROM. THEREFORE, THE BOOKS OF ACCOUNT PRODUCED ARE HEREBY REJECTED BY INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT. RELIANCE IS PLACED ON THE CASE DECIDED BY THE HONBLE DELHI HIGH COURT IN GOODYEAR INDIA LTD. VS. COMMISS IONER OF INCOME TAX (246 ITR 116) WHEREIN IT HAS BEEN HELD THAT MER ELY BECAUSE AN AUDIT REPORT IS AVAILABLE THERE IS NO FETTER ON THE POWER OF THE INCOME TAX OFFICER TO REQUIRE THE ASSESSEE TO JUSTIFY ITS CLAIM BY PRODUCING THE REQUISITE BILLS, VOUCHERS, RECORDS, MATERIALS A ND EVIDENCE AND WHERE THE ASSESSEE FAILED TO PRODUCE THE SAME, THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE CLAIM MADE BY THE ASSESSEE. RELIANCE IS ALSO PLACE DON THE FOLLOWING DECISIONS: (I) OMAX SHOE FACTORY VS. THE CIT (148 TAXMAN 517), ALLAHABAD HIGH COURT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 13 (II) RAZA TEXTILES LTD. VS. CIT (86 ITR 673) ALLAHABAD H IGH COURT (III) BHARAT MILK PRODUCTS VS. CIT (128 ITR 682) ALLAHABA D HIGH COURT (IV) ARYA CONFECTIONARY WORKS VS. CIT (143 ITR 814) MADHYA PRADESH HIGH COURT (V) BASTIRAM NARAYAN DAS MAHESHWARI VS. CIT (210 ITR 438) BOMBAY HIGH COURT (VI) COMMISSIONER OF SALES TAX, U.P. LUCKNOW VS. GIRJA SHANKAR AWANISH KUMAR (11 SCC 648) SUPREME COURT. 5.7 IT IS CLEAR THAT THE ASSESSEE HAS DELIBERATELY OPTED NOT TO MAINTAIN OR PRODUCE THE PROPER DOCUMENTS RELEVANT T O ITS BUSINESS BEFORE THE ASSESSING OFFICER WHICH IT IS LEGALLY OB LIGED TO, IN THE COURSE OF SCRUTINY PROCEEDINGS. THE ONLY LOGICAL RE ASON FOR THIS WOULD BE TO THWART THE VERIFICATION OF ITS ACCOUNTS AND T O PREVENT THE DETERMINATION OF ITS TRUE INCOME WHICH WOULD BE SIG NIFICANTLY HIGHER THAN WHAT HAS BEEN DECLARED IN THE RETURN OF INCOME UNDER CONSIDERATION. IN FACE OF THE INTRANSIGENCE SHOWN B Y THE ASSESSEE, THE TRUE PROFITS FOR THE FINANCIAL YEAR UNDER CONSIDERA TION HAVE TO BE ESTIMATED. 5.8 AFTER CONSIDERING THE MATERIAL AVAILABLE ON REC ORD AND IN THE LIGHT OF THE SUBSTANTIAL INFIRMITIES AS DISCUSSED A BOVE, THE G.P. OF THE ASSESSEE FIRM IS REASONABLE IF INCREASED BY 20% OF THE G.P. WHICH HAS BEEN DECLARED BY THE ASSESSEE. IT IS WELL SETTLED THAT THERE IS NO MATHEMATICAL FORMULA FOR DOING SO AND IN EVERY CASE OF BEST JUDGMENT, AN ELEMENT OF GUESS WORK CANNOT BE ELIMINATED (VIDE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS VS. JOINT COMMISSIONER OF INCOME TAX, JAIPUR RECODED IN 158 T AXMAN 71). HOWEVER, ENHANCEMENT OF INCOME BY 20% OF G.P. SHOWN BY THE ASSESSEE IS BEING DONE ON THE BASIS OF GP SHOWN BY THE OTHER COMPARABLE CASES OF THE SAME GROUP ENGAGED IN THE S IMILAR TRADE IN THE SAME LOCALITY, WHICH COMES TO 26.88% (22.40% + 20% OF 22.40%) AMOUNT OF ADDITION IS WORKED OUT AS UNDER:-. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 14 TOTAL TURNOVER 97,22,17,788 G.P. @ 26.88% 26,13,32,141 LESS: G.P. SHOWN BY THE ASSESSEE @ 22.40% 21,77,80,473 DIFFERENCE 4,35,51, 668 THUS, RS. 4,35,51,668/- IS ADDED TO THE TOTAL INCOM E OF THE ASSESSEE. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C)OF THE A CT ARE INITIATED FOR CONCEALMENT OF INCOME (ADDITION OF RS. 4,35,51,668/-) 10. THE ASSESSEE CHALLENGED THE ABOVE ADDITION ON T HE GROUND THAT THERE EXISTS NO MATERIAL WHICH COULD LEAD TO THE FORMATION OF RE QUISITE REASON TO BELIEVE AND ACCORDINGLY SEARCH AND SEIZURE ACTION ITSELF WAS IL LEGAL. THE AO ARBITRARILY ENHANCED THE GROSS PROFIT BY 20%. FOR MAKING SUCH E NHANCEMENT, THE AO RECORDED THE FINDINGS, MAKING A REFERENCE TO VARIOUS CASE LA WS, WHICH ARE NOT APPLICABLE. THE ASSESSEE IN ITS WRITTEN SUBMISSIONS, FILED COMP ILATION TO DISTINGUISH ALL THE CASE LAWS RELIED UPON BY THE AO AND SUBMITTED THAT SEARC H AND SEIZURE ACTION DID NOT LEAD TO ANY RECOVERY OF ANY MATERIAL OR INFORMATION , WHICH COULD GO TO SHOW THAT THERE IS UNDER ESTIMATED PROFIT. THE ASSESSEE RELIE D UPON THE ORDER OF THE ITAT, DELHI BENCH IN THE CASE OF ANIL KUMAR BHATIA VS. AC IT 1 ITR (TRIB.) 484, ORDER OF ITAT AHMEDABAD BENCH IN THE CASE OF MEGHMANI ORGANI CS LTD. VS. DCIT, 129 TTJ 255. IT WAS FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNT AND OTHER RECORDS THROUGH WHICH THE INCOME WAS SHOWN BY THE ASSESSEE IS VERIFIABLE, HAD BEEN MAINTAINED IN REGULAR COURSE OF BUSINESS AND THE SA ME WERE EVEN FOUND TO BE KEPT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 15 AND MAINTAINED AT THE TIME OF SEARCH AND SEIZURE AC TION ALSO. IT WAS ALSO CONTENDED THAT NO MATERIAL WAS RECOVERED DURING THE COURSE OF SEARCH WHICH COULD INDICATE ANY RECOVERY OF UNDISCLOSED INCOME ASSESSABLE IN TH E HANDS OF THE ASSESSEE IN THE ASSESSMENT YEAR UNDER APPEAL. THE BOOK RESULTS ARE OPEN TO CROSS VERIFICATION, WHICH IS SUPPORTED BY NUMBER OF SUBSIDIARY RECORDS WHICH ARE KEPT BY THE ASSESSEE AND PRODUCED BEFORE THE AO DURING THE ASSESSMENT PR OCEEDINGS. THE REGULARITY OF THE ACCOUNTS HAVE BEEN MAINTAINED, HAVE NOT BEEN DI SPUTED. THEREFORE, THERE WAS NO OCCASION TO REJECT THE BOOK RESULTS OR MAKING AD HOC ADDITION BY MECHANICALLY ENHANCING THE GP RATE BY 20%. IT WAS SUBMITTED THAT IN SUBSEQUENT ASSESSMENT YEAR, EVEN THE LOWER G.P. HAS BEEN ACCEPTED BY THE AO. IT WAS FURTHER SUBMITTED WITHOUT ADMITTING THAT EVEN IF RECORDS WERE NOT FOU ND AT THE TIME OF SEARCH AND SEIZURE ACTION, IT WILL NOT IPSO FACTO LEAD TO AN I NFERENCE OF ANY UNDISCLOSED INCOME EMBEDDED IN THE RECORDS FOUND DURING THE COURSE OF SEARCH SO AS TO ASSESSABLE IN THE ASSESSMENT MADE U/S. 153A OF THE IT ACT. THE AS SESSEE FILED DETAILED SUBMISSIONS AND THE CASE LAWS BEFORE THE LD. CIT(A) WHICH IS REPRODUCED IN THE APPELLATE ORDER AS UNDER : 21. AS PER GROUNDS NO. 5 TO 13 , THE APPELLANT HAS DISPUTED EXTRA PROFIT ADDITION OF RS. 4,35,51,668 AS HAD BEEN MADE BY THE ASSESSING OFFICER BY ENHANCING THE GROSS PROFIT OF RS.21,77,8 0,473 (WHICH WORKS OUT TO A G.P. RATE OF 22.40%) DISCLOSED BY THE APPE LLANT BY 20% THEREOF ON ADHOC BASIS, WHICH HAS THE EFFECT OF EN HANCING THE G.P. RATE TO 26.88% . THE TRADING ACCOUNT AS EXTRACTED FROM AUDITED ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 16 STATEMENT OF ACCOUNT FORMING PART OF THE RETURN, IS REPRODUCED HEREUNDER:- M/S CARPET INTERNATIONAL BHADOHI TRADING, PROFIT AND LOSS ACCOUNT FOR THE ENDED ON 3 1ST MARCH 2005 FIGURES FIGURES (IN RUPPEES) (IN RUPPEES) PARTICULARS (ROUNDED OFF) PARTICULARS (ROUNDED OFF) TO OPENING STOCK 106,348,942 BY EXPORTS SALES OF SUPPORTING TO RAW MATERIAL CONSUMED 540,899,724 MANUFACTURERS CARPETS 972,217,768 TO MANUFACTURING & FINISHING BY DUTY DRAWBACK EXPENSES INDIRECT EXPORTS 103,334,106 A) WEAVING CHARGES 218,059,382 B) CLIPPING CHARGES 26,168,492 BY CLOSING STOCK C) DYEING CHARGES 25,636,142 D) FINISHING CHARGES 43,142,306 (AS PER STOCK PHYSICALLY E) MAPS & DESIGN 1,539,435 TAKEN VALUED & CERTIFED 149,108,430 F) THIRD PACKING CHARGES 1,226,892 BY PARTNER) G) WASHING CHARGES 4,767,727 H) LATEXING & BINDING CHARGES 23,292,076 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 17 I) DRIER EXPENSES 334,598 J) STRETCHING CHARGES 514,981 344,682,031 TO PACKING & FORWARDING EXPENSES A) SERVICE CHARGES 1,620,677 B) SHIPPING CHARGES 6,642,207 C) PACKING EXPENSES 3,149,468 D) FREIGHT 3,536,782 14,949,134 TO GROSS PROFIT CARRIED DOWN 217,780,473 TOTAL 1,224,660,304 TOTAL 1,224,660,304 COPY OF THE AUDITED STATEMENT OF ACCOUNT AS ALSO TH E TAX AUDIT REPORT UNDER SECTION 44AB ARE ENCLOSED (AT PAGES 191 TO 220). 22. FOR MAKING SUCH AN ENHANCEMENT, THE ASSESSING O FFICER HAS RECORDED HIS FINDINGS IN PARA 5.4 AND AT SL. NO. (I) TO (VI) OF PARA 5.5 , WHICH ARE REPRODUCED HEREUNDER:- 5.4 IF AT ALL, FOR THE SAKE OF DISCUSSION, IT IS A CCEPTED THAT THE ASSESSEE MAINTAINS REGULAR BOOKS OF ACCOUNT, THE SA ME CANNOT BE RELIED UPON, SIMPLY BECAUSE BASIC DOCUMENTS ARE NOT AVAILABLE TO SUPPORT THE ENTRIES MADE THEREIN. THE SE ENTRIES, THEREFORE, REMAIN UNVERIFIABLE. IF THE ASSESSEE FI RM HAS DEBITED THE AFORESAID EXPENSES RELATING TO MANUFACTURING OF CARPETS, THE ONUS WAS SQUARELY ON IT TO PRODUCE THE VOUCHERS IN SUPPORT OF SUCH EXPENSES DEBITED TO ITS P&L ACCOUNT. ENTRIES IN BOOKS OF ACCOUNT HAVE NO EVIDENTIARY VALUE WHATSOEVER IN THE ABSENCE OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 18 SUPPORTING VOUCHERS/BILLS/DOCUMENTS. IN THE LIGHT OF NON- MAINTENANCE AND FAILURE TO PRODUCE PROPER VOUCHERS RELATING TO BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE (WHICH WE RE NEITHER FOUND DURING THE COURSE OF SEARCH OPERATION NOR ANY REASON GIVEN FOR THE SAME) THE SO CALLED BOOKS CANNOT BE T REATED TO BE GENUINE OR RELIABLE. 5.5 THE ASSESSEES CONTENTION HAS BEEN CAREFULLY CO NSIDERED BUT IS UNACCEPTABLE IN THE LIGHT OF THE FACTS DISCU SSED ABOVE AND PARTICULARLY CONSIDERING THE FOLLOWING: (I) NO BOOKS OF ACCOUNT WERE FOUND OR PRODUCED DURI NG THE SEARCH AND SEIZURE OPERATIONS AT THE VARIOUS PREMIS ES OF THE ASSESSEE. (II) NO BOOKS OF ACCOUNT OR DOCUMENT WAS PRODUCED D URING THE POST SEARCH ENQUIRIES. (III) AS DISCUSSED, THE SO CALLED BOOKS OF ACCOUNT THAT WERE PRODUCED LACK EVIDENTIARY VALUE IN THE ABSENCE OF BILLS/VOUCHERS/BASIC DOCUMENTS ON THE BASIS OF WHIC H THE BOOKS OF ACCOUNTS ARE GENERALLY PREPARED. (IV) MOREOVER, THE ASSESSEE FAILED TO ESTABLISH ANY CORRELATION BETWEEN CARPET MANUFACTURED BY IT AND THE MANUFACTURING EXPENSES CLAIMED. THE ASSESSEE PRODU CES HUNDREDS OF VARIETIES OF CARPETS AND UTILIZES VARIO US QUALITIES OF RAW WOOLS/COTTON YARNS, WHOSE RATES HA VE SUBSTANTIAL VARIATIONS. IT IS A WELL KNOWN FACT TH AT CARPETS ARE MANUFACTURED BY THE WEAVERS AT THEIR RESIDENCES AND THEY OBTAIN WOOL AND OTHER RAW MATER IALS FROM THE EXPORTERS/CONTRACTORS AND AFTER WEAVING TH E CARPETS THEY RETURN BACK THE SAME TO THE EXPORTERS/CONTRACTORS. ON ANY DATE, PARTICULARLY O N 31 ST MARCH OF EACH YEAR, THERE SHOULD BE AVAILABILITY OF RAW WOOL/SEMI FINISHED/HALF WOVEN CARPETS. NO SUCH STO CK HAS BEEN SHOWN IN THE AUDIT REPORT AND PROFIT AND L OSS ACCOUNT OF THE ASSESSEE FIRM FOR THE RELEVANT ASSES SMENT YEAR. IN THE LIGHT OF THESE FACTS, IT IS MANIFEST THAT THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 19 ASSESSEE FIRM HAS SUPPRESSED ITS CLOSING STOCK. IT HAS BEEN SETTLED IN NUMEROUS JUDICIAL PRONOUNCEMENTS TH AT SUPPRESSION OF CLOSING STOCK IN ITSELF CONSTITUTES A SUFFICIENT GROUND FOR REJECTION OF BOOKS OF ACCOUNT . (V) THE CONTENTION OF THE ASSESSEE THAT QUANTITATIVE/QUALITATIVE STOCK ARE AVAILABLE AND TH E SAME HAS ALREADY BEEN FURNISHED BEFORE THE UNDERSIGNED I S ABSOLUTELY INCORRECT BECAUSE WHATEVER DETAILS HAVE BEEN SUBMITTED REGARDING THE DETAILS OF STOCK, REMAINED WITHOUT ANY SUPPORT OF DOCUMENTARY EVIDENCE. (VI) IT IS ALSO VERY IMPORTANT TO MENTION THAT, NUM EROUS LETTERS WRITTEN TO THE WEAVERS/CONTRACTORS AND CREDITORS U/ S 133(6) OF THE ACT, FOR FURNISHING INFORMATION REGAR DING THE WORK/SUPPLIES DONE FOR THE ASSESSEE, BUT SURPRI SINGLY MOST OF THEM RETURNED EITHER UNSERVED OR REMAINED UNCOMPLIED WITH. 23. THEREAFTER, HE REFERRED TO VARIOUS CASE LAWS AN D COMPUTED THE EXTRA PROFIT ADDITION OF RS.4,35,51,668 HAS BEEN MA DE IN THE FOLLOWING MANNER:- 5.8 AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD AND IN THE LIGHT OF THE SUBSTANTIAL INFIRMITIES AS DISCUSS ED ABOVE, THE G.P. OF THE ASSESSEE FIRM IS REASONABLE IF INCREA SED BY 20% OF THE G.P. WHICH HAS BEEN DECLARED BY THE ASSESSEE. I T IS WELL SETTLED THAT THERE IS NO MATHEMATICAL FORMULA FOR D OING SO AND EVERY CASE OF BEST JUDGMENT, AN ELEMENT OF GUESS WO RK CANNOT BE ELIMINATED (VIDE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS VS. JOINT COMMISSIONER OF INCOME TAX , JAIPUR REPORTED IN 158 TAXMAN 71). HOWEVER, ENHANCEMENT OF INCOME BY 20% OF G.P. SHOWN BY THE A SSESSEE IS BEING DONE ON THE BASIS OF G.P. SHOWN BY THE OTH ER COMPARABLE CASE OF THE SAME GROUP ENGAGED IN THE SI MILAR ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 20 TRADE IN THE SAME LOCALITY, WHICH COMES TO 26.88% ( 22.40+20% OF 22.40%), AMOUNT OF ADDITION IS WORKED OUT AS UND ER:- TOTAL TURNOVER 97,22,17,788 G.P. @ 26.88% 26,13,32,141 LESS: G.P. SHOWN BY THE ASSESSEE @ 22.40% 21,77,80,473 DIFFERENCE 4,35,51,668 THUS, RS. 4,35,51,668/- IDS ADDED TO THE TOTAL INCO ME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT ARE INITIATED FOR CONCEALMENT OF INCOME. (ADDITION OF RS. 4,35,51,668/-) 6. THE COMPUTATION OF TOTAL INCOME OF THE ASSESSEE IS AS UNDER:- TOTAL INCOME AS PER RETURN 16,50,93,497 'ADD: ADDITION IN G.P. AS DISCUSSED ABOVE 4,35,51, 668 20,86,45,165 ROUND OFF 20,86,45,170 24. IT IS WORTHY OF MENTION HERE THAT, SIMULTANEOUS LY, THE ASSESSING OFFICER HAD MADE ASSESSMENTS UNDER SECTION 153A FOR THE ASSESSMENT YEARS 2006-07 , 2007-08 & 2008-09 AND REGULAR ASSESSMENT FOR THE ASSESSMENT YEAR 2009-10 , ON THE SAME DATE I.E. ON 30.12.2010 IN THE CASE OF THE APPELLANT. WITH ALMOST IDENTICAL NARRAT ION AS CONTAINED IN PARAS 5.4, 5.5 & 5.8 ABOVE (AS HAVE BEEN REPRODUCED IN THE FOREGOING PARAGRAPHS NO. 22 & 23 ) HE HAS ENHANCED THE GROSS PROFIT (AS DISCLOSED BY THE APPELLANT) IN ALL THESE ASSESSMENT YEARS BY APPLYING STRAIGHT JACKET FORMULAE OF ENHANCEMENT OF 20% TH EREOF INSPECTIVE OF THE RESULTANT PERCENTAGES OF G.P. RATE THAT WORK ED OUT TO BE APPLICABLE IN SUBSEQUENT THREE ASSESSMENT YEARS. F OR THE SAKE OF EASY COMPREHENSION THE TRADING RESULTS FOR DIFFERENT ASS ESSMENT YEARS, ARE TABULATED HEREUNDER:- PARTICULARS 2005-06 2006-07 2007-08 2008-09 CREDIT ITEMS TURNOVER 972217768 607116199 1261464165 1244699320 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 21 DUTY DRAWBACK 103334106 52043819 119455473 184320830 CLOSING STOCK 149108430 183119774 225813189 2922674 25 SUB-TOTAL (A) 1224660304 842279792 1606732827 17212 87575 DEBIT ITEMS OPENING STOCK 106348942 149108430 183119774 2258131 89 RAW MATERIAL CONSUMED 540899724 347202445 727751000 757159237 CARPET PURCHASE & OTHERS 0 20506 42572316 97160668 MANUFACTURING & FINISHING EXPS. 344682031 201132709 379162100 392865693 PACKING & FORWARDING EXPENSES 14949134 8689072 14505909 12563958 SUB-TOTAL (B) 1006879831 706153162 1347111099 14855 62745 GROSS PROFIT = (A) - (B) 217780473 136126630 259621728 235724830 GROSS PROFIT RATIO 22.40% 22.42% 20.58% 18.94% GP ADDITION MADE U/S 143(3) R.W.S 153A 43551668 27187628 81465422 89 091451* GROSS PROFIT AFTER ADDITION 261332141 163314258 341087150 324816281 GROSS PROFIT RATIO AFTER ADDITION 26.88% 26.90% 27.04% 22.73% * * HOWEVER, NO SEPARATE ADDITION AS SUCH HAS BEEN MA DE ON ACCOUNT OF EXTRA GROSS PROFIT AS THE ASSESSING OFFICER HAS TRE ATED SUCH AN ADDITION (ON ACCOUNT OF EXTRA GROSS PROFIT) TO BE C OVERED BY VARIOUS OTHER ADDITIONS. FROM THE AFORESAID TABLE, IT EMERGES THAT IN THE ASSESSMENT YEARS 2009-10 WHICH IS THE YEAR OF SEARCH ALSO, WITH THE OVER AL L SALES REVENUE IN THE SAME REGION (LESSER BY ABOUT 8%) AS THAT OF ASSESSMENT YEAR 2005-06 (YEAR UNDER APPEAL) THE RESULTANT G.P. WORKS OUT TO 12.65% (AFTER CONSIDERING THE ENHANCEMENT BY 20% TO THE DISCLOSED FIGURE) WHICH WAS FOUND TO BE ACCEPTABLE TO THE ACIT WHEREAS THE GP RATE DISCLOSED BY THE APPELLANT ITSELF AT 22.40% IN THE YEAR UNDER ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 22 APPEAL HAS BEEN REJECTED. IT IS VERY RELEVANT TO MENTION HERE THAT IN ALL THESE ASSESSMENT YEARS, METHOD OF ACCOUNTING AS WELL AS SYSTEM OF BOOK KEEPING/RECORDS KEEPING HAS BEEN IDENTICAL . THIS IS SERIOUS INCONGRUITY, IF NOT FALLACY, IN THE APPROACH OF THE ACIT AND ON THIS GROUND ALONE, THE ENTIRE ADDITION OF RS.4,35,51,668 /- DESERVES TO BE DELETED. COPIES OF THE ASSESSMENT ORDER DATED 30.12.2010 FOR THE ASSESSMENT YEARS 2006-07 TO 2009-10 ARE ENCLOSED AT (PAGES 221 TO 281). 25. AT THIS STAGE ITSELF, THE APPELLANT BEGS TO GIV E AN ANALYSIS OF THE TRADING RESULTS FOR THE ASSESSMENT YEAR 2005-06 (YE AR UNDER APPEAL) VIS--VIS EARLIER TWO YEARS ALSO WHERE THERE WAS A MUCH HIGHER G.P. RATE (THAN DISCLOSED IN THE YEAR UNDER APPEAL) LEST IT IS NOT ACCUSED OF NOT PLACING THE FACTS IN THEIR ENTIRETY. ASSESSMENT YEARS (FIGURES IN RUPEES) PARTICULARS 2003-04 2004-05 2005-06 CREDIT ITEMS TURNOVER 368483268 693808369 972217768 DUTY DRAWBACK 37721999 64817374 103334106 CLOSING STOCK 44753769 106348942 149108430 SUB-TOTAL (A) 450959036 864974685 1224660304 DEBIT ITEMS OPENING STOCK 23295077 44753769 106348942 RAW MATERIAL CONSUMED 191324321 387377720 540899724 CARPET PURCHASE & OTHERS - 177219 - MANUFACTURING & FINISHING EXPS. 105430635 228442974 344682031 PACKING & FORWARDING EXPENSES 7404523 20286317 14949134 SUB-TOTAL (B) 327454556 681037999 1006879831 GROSS PROFIT = (A) - (B) 123504480 183936686 217780473 GROSS PROFIT RATIO 33.52% 26.51% 22.40% ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 23 GP ADDITION MADE U/S 143(3) R.W.S 153A 43551668 GROSS PROFIT AFTER ADDITION 123504480 183936686 261332141 GROSS PROFIT RATIO AFTER ADDITION 33.52% 26.51% 26.88% FROM THE SAID PARTICULARS, AND PERUSAL OF THE ASSES SMENT ORDERS FOR THE ASSESSMENT YEARS 2003-04 & 2004-05 (MADE ON 30. 12.2010 ITSELF, AFTER INVOKING THE PROVISION OF SECTION 153A) IT WI LL BE SEEN THAT NO INTERFERENCE WAS MADE BY THE ASSESSING OFFICER, EVE N THOUGH THE FINDINGS ARE IDENTICAL TO THE FINDINGS GIVEN IN PAR AS 5.4 , 5.5 & 5.8 IN THE ASSESSMENT YEAR 2005-06 (AS HAVE BEEN REPRODUCE D ALSO IN PARAS 22 & 23 HEREINFORE) BY HOLDING THE HIGHER G.P. RATE (AS DI SCLOSED IN THESE TWO ASSESSMENT YEARS) AS REASONABLE. KIND AT TENTION IS INVITED TO FOLLOWING PASSAGE AS APPEARING AT THE END OF THE ASSESSMENT ORDERS FOR THESE TWO ASSESSMENT YEARS:- THEREFORE, THE BOOKS OF ACCOUNTS PRODUCED ARE H EREBY REJECTED LOOKING IN TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND MATERIAL AVAILABLE ON RECORD AND LOOKING AT THE REASONABLENESS OF THE G.P. SHOWN BY THE ASSESSEE THE ADVERSE INFER ENCE AGAINST GP IS NOT TAKEN . THE CLEAR CUT IMPLICATIONS OF SAID FINDINGS ARE THA T, IF G.P. RATES AS DISCLOSED BY THE APPELLANT YEAR AFTER YEAR CAN BE S HOWN TO BE REASONABLE, THERE IS NO OBJECTION TO THE ACCEPTABIL ITY OF THE SAME, BY THE ASSESSING OFFICER NOT WITH STANDING THE SHORT COMINGS REFERRED TO IN PARAS 5.4 , 5.5 & 5.8 OF THE IMPUGNED ORDER. COPIES OF THE ASSESSMENT ORDERS DATED 31.12.2010 FO R THE ASSESSMENT YEARS 2003-04 AND 2004-05 PASSED UNDER SECTION 153A READ WITH SECTION 143(3) ARE ENCLOSED AT (PAGES 282 TO 293) OF THIS COMPILATION. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 24 26. IF THE YARDSTICK OF REASONABLENESS OF G.P. R ATE AS HAS BEEN FOLLOWED AND APPLIED BY THE ACIT IN THE ASSESSMENTS MADE UNDER SECTION 153A FOR THE ASSESSMENT YEARS 2003-04 AND 2 004-05, IS STRICTLY APPLIED IN THE ASSESSMENT YEAR 2005-06 ALS O (YEAR UNDER APPEAL) IT WILL BE SEEN THAT HIGHER ADDITION OF RS. 4,35,51,668 AS HAS BEEN MADE IN THE ASSESSMENT YEAR 2005-06, WAS WHOLL Y UNCALLED FOR. IN THIS RESPECT, THE APPELLANT BEGS TO SUBMIT THAT IN THE ASSESSMENT YEAR UNDER APPEAL (2005-06) G.P. RATE DISCLOSED AT 22.40% COMPARES WELL WITH THE ASSESSMENT YEARS 2008-09 AND 2009-10 WHEREIN, EVEN AFTER ADHOC ENHANCEMENT OF 20% TO THE GROSS PROFIT DISCLOSED BY THE APPELLANT (IN THOSE YEARS) THE ENHANCED G.P. RATE W ORKS OUT TO 22.73% AND 12.65%. KIND ATTENTION OF IS INVITED TO THE DE TAILED WORKING GIVEN IN PARA 24 HEREINFORE. 27. FURTHER, THE G.P. RATE SHOWN AT 22.40% (AS WORK ED OUT IN PARA 24 HEREINFORE) CANNOT BE SAID TO BE UNREASONABLE, EVE N THOUGH THERE WAS FALL IN G.P. RATE AS COMPARE TO THE ASSESSMENT YEAR 2003-04 AND 2004-05. THE REASONS ARE THAT THERE HAS BEEN A CON STANT INCREASE IN THE COST WHEREAS THE SOLE BUYER I.E. M/S. IKEA OF SWEDEN, BECAUSE OF ITS BARGAINING POWER AND SEVERE COMPETITION IN THE MARKET, DID NOT INCREASE THE SALE PRICE. IN SUPPORT OF INCREASE I N COST, THE APPELLANT BEGS TO SUBMIT HEREWITH COST ANALYSIS OF GOOD S OLED TO SALES IN THE ASSESSMENT YEAR 2005-06 VIS--VIS EARLIER TWO Y EARS - A S S E S S M E N T Y E A R S PARTICULARS 2003-04 2004-05 2005-06 RAW MATERIAL CONSUMED 191324321 387377720 540899724 ADD: DIRECT EXPENSES A) MANUFACTURING & FINISHING EXPENSES B) OTHER MISC. DIRECT EXPENSES 105430635 - 228442974 177219 344682031 - COST OF PRODUCTION 296754956 615997913 885581755 ADD: OPENING STOCK OF CARPETS 23295077 44753769 106348942 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 25 PURCHASES OF CARPETS - - - LESS: CLOSING STOCK OF CARPETS 320050033 44753769 660751682 106348942 991930697 149108430 COST OF SALES SUB-TOTAL(A) 282700787 574689057 857771401 SALES TURNOVER SUB-TOTAL(B) 368483268 693808369 972217768 GROSS PROFIT BEFORE DUTY DRAW BACK=(A)-(B) ADD: DUTY DRAWBACK 85782481 37721999 119119312 64817374 114446367 103334106 GROSS PROFIT AFTER DUTY DRAWBACK 123504480 183936686 217780473 RATIOS SALES LESS: COST OF SALES TO SALES 100.00% 76.72% 100.00% 82.83% 100.00% 88.23% GROSS PROFIT RATIO BEFORE DUTY DRAW BACK ADD: DUTY DRAW BACK TO SALES 23.28% 10.24% 17.17% 9.34% 11.77% 10.63% GROSS PROFIT RATIO AFTER DUTY DRAW BACK 33.52% 26.51% 22.40% 28. FROM THE SAID ANALYSIS, IT WILL BE SEEN THAT WHEREAS IN THE ASSESSMENT YEARS 2003-04 & 2004-05, THE COST WAS 76 .72% AND 82.83% RESPECTIVELY, IN THE YEAR UNDER APPEAL IT HA D GONE UPTO 88.23%. AS REGARDS SALE PRICE, THE SAME REMAINED CONSTANT AND IN SOME CASES THE BUYERS NAMELY M/S. IKEA (THE SOLE BU YER) HAD REDUCED ALSO THE PRICE (AT WHICH GOODS WERE SUPPLIED TO T HEM). A STATEMENT GIVING RELEVANT DETAILS AS ALSO THE RELATED PURCHAS E AGREEMENT AS HAD BEEN ENTERED INTO DURING THE YEAR UNDER APPEAL, ARE BEING SUBMITTED HERE AT PAGES 294 TO 311. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 26 29. THE APPELLANT FURTHER BEGS TO STATE THAT EARLIE R TWO YEARS CANNOT BE SAID TO BE COMPARABLE WITH THE YEAR UNDER APPEAL , FOR THE REASON THAT LEVEL OF OPERATIONS IS MUCH HIGHER IN THIS YEA R THAN IN THE EARLIER YEARS. FURTHER, THE SAID COMPARATIVE DETAILS THEMSE LVES GO TO SHOW THAT WITH THE INCREASE IN TURNOVER, THERE HAS BEEN A FALL IN GP RATE. IN THE ASSESSMENT YEAR 2003-04 , THE TURNOVER WAS 36.85 CRORES GIVING A GP RATE OF 33.52% . IN THE ASSESSMENT YEAR 2004-05 , THE GP RATE FELL DOWN TO 26.51% , WITH THE INCREASE IN TURNOVER (AS COMPARED TO THE ASST. YEAR 2003-04) TO RS.69.38 CRORES. IN THE YEAR UNDER APPEAL, THE TURNOVER HAD FURTHER GONE UP TO 97.22 CRORES AND WITH SUCH AN INCREASED LEVEL OF OPERATION, THE REDUCED GP RATE O F 22.40% CANNOT BE SAID TO BE UNREASONABLE. THIS IS MORE SO IN VIE W OF THE COST ANALYSIS AS GIVEN IN PARA 27 HEREINFORE. 30. NOTWITHSTANDING THE SUBMISSIONS MADE IN PARAS 26, 27, 28 AND 29 ABOVE ABOUT THE REASONABLENESS OF G.P. RATE SHOW N BY THE APPELLANT IN THE YEAR UNDER APPEAL, THE APPELLANT B EGS TO CONTEND THAT VARIOUS GROUNDS AS HAVE BEEN REFERRED TO IN PARAS 5.4 AND 5.5 IN THE IMPUGNED ASSESSMENT ORDER (REPRODUCED IN PARAS 22 HEREINFORE) FOR THE PURPOSES OF REJECTION OF BOOKS OF ACCOUNT, ARE NOT TENABLE, AS MAY BE SEEN FROM THE REPLY TO THE SAID PARAS AS GIVEN H EREINAFTER. REPLY TO PARAS 5.4 & 5.5 OF THE IMPUGNED ORDER 31. FOR THE PURPOSES OF DEALING WITH PARAS 5.4 & 5.5 OF THE IMPUGNED THE APPELLANT BEGS TO INVITE THE KIND ATTE NTION OF YOUR HONOUR TO THE FACT THAT UPTO THE ASSESSMENT YEAR 20 04-05, IT HAD BEEN MAINTAINING THE BOOKS OF ACCOUNT AND OTHER RECORDS MANUALLY, BUT FROM ASSESSMENT YEAR 2005-06 (YEAR UNDER APPEAL BEF ORE YOUR HONOUR) IT HAD CHANGED OVER TO ONLINE SYSTEM WHIC H BECAME NECESSARY FOR THE REASON THAT THERE WAS ONLY ONE O VERSEAS BUYER/DEALER NAMELY M/S. IKEA OF THE PETITIONERS P RODUCT AND THEY HAVE BEEN COMMUNICATING ALL THEIR INSTRUCTIONS (WHI CH INCLUDED SUPPLY ORDERS AND INSTRUCTION FOR DISPATCH OF GOODS TO DIFFERENT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 27 DESTINATIONS THROUGHOUT THE WORLD) ON LINE, AND THE APPELLANT WAS ALSO REQUIRED TO RESPOND TO THEM THROUGH ONLINE. THE FA CT OF CHANGE OVER FROM MANUAL TO ONLINE SYSTEM STANDS ESTABLISHED FROM THE TAX AUDIT REPORT UNDER SECTION 44AB WHICH CONTAIN FOLLO WING NARRATIONS. SL. NO. REQUIREMENT OF FORM 3CD VERIFICATION IN FORM 3 CD 9(B) BOOKS OF ACCOUNT MAINTAINED. (IN CASE OF BOOKS OF ACCOUNT ARE MAINTAINED IN A COMPUTER SYSTEM, MENTION THE BOOKS OF ACCOUNT GENERATED BY SUCH COMPUTER SYSTEM) BOOKS OF ACCOUNT GENERATED THROUGH COMPUTER SYSTEM . CASH BOOK, JOURNAL, LEDGER, WEAVING, WASHING, CLIPPING, FINISHING, BINDING, STRETCHING, LATEXING, THIRD PACKING REGISTER ETC. 9(C) LIST OF BOOKS OF ACCOUNT EXAMINED CASH BOOK, JOURNAL, LEDGER, WEAVING, WASHING, CLIPPING, FINISHING, BINDING, STRETCHING, LATEXING, THIRD PACKING REGISTER ETC. ON COMPUTER SYSTEM . 32. THE RECORDS SO MAINTAINED BY THE APPELLANT ARE INTEGRATED ONES, WHICH INCLUDE THE FOLLOWING:- MAIN BOOKS OF ACCOUNT A. CASH BOOK B. LEDGER C. JOURNAL D. BANK BOOK SUBSIDIARY BOOKS OF ACCOUNT E. CARPET PURCHASE REGISTER F. PRODUCTION REGISTER / WEAVING REGISTER G. WASHING CHARGES REGISTER ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 28 H. STRETCHING CHARGES REGISTER I. CLIPPING CHARGES REGISTER J. MAPS AND DESIGNING CHARGES REGISTER K. THIRD PACKING CHARGES REGISTER L. PACKING EXPENSES REGISTER AND FINANCIAL TRANSACTIONS AS APPEARING IN THE TWO SETS OF BOOKS OF ACCOUNT ARE FULLY CO-RELATED AND VERIFIABLE FROM E ACH OTHER THE NARRATION GIVEN IN TAX AUDIT REPORT AS MENTIONED IN PARA 31 ABOVE, MAIN BOOKS OF ACCOUNT AS WELL AS SUBSIDIARY BOOKS O F ACCOUNT WERE SUBJECTED TO AUDIT BY THE AUDITOR. IN SHORT, THE APPELLANTS CONTENTION IS THAT ITS ANNUAL STATEMENT OF ACCOUNT ON THE BASI S OF WHICH RETURN HAD FILED UNDER SECTION 139 AS WELL AS IN COMPLIANCE WITH NOTICE UNDER SECTION 153A(A) ARE BASED ON THE SAID BOOKS OF ACCOUNT, MAIN BOOKS OF ACCOUNT AS WELL AS SUBSIDIAR Y BOOKS OF ACCOUNT WHICH REPRESENTED AN INTEGRATED CODE AND TH E SAME WERE SUBJECTED TO TAX AUDIT UNDER SECTION 44AB, LEAVING NO SCOPE FOR INTERFERENCE WITH THE TRADING RESULTS. 33. IN ORDER TO DEMONSTRATE CROSS VERIFIABILITY OF FINA NCIAL RECORDS/MAIN BOOKS OF ACCOUNT, WITH THE SUBSIDIARY RECORDS/PRIMARY RECORDS KEPT BY THE APPELLANT AS AND WHEN A TRANSAC TION TAKES PLACE THE APPELLANT GIVES HEREIN BELOW A FORMATS OF THE S UBSIDIARY RECORDS AS AFORESAID:- E. CARPET PURCHASE REGISTER DATE NAME OF SUPPLIERS & ADDRESS QUANTI TY SIZE PIECES AREA RATE AMOUNT (RS.) PAYME NT (RS.)+ DAT E F. PRODUCTION REGISTER / WEAVING REGISTER RECEIPT FROM WEAVERS YARN CONSUMED PAYMENT TO WEAVER WEAVERS NAME AND ADDRESS FOLI O NO. PIECES DATE QUALITY AREA WOOLEN YARN LOSS NET WOOLEN YARN THARRI LACHI TAR RAT E GROSS AMT PENALTY TDS SEC AMT. A M T P AI D ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 29 G. WASHING REGISTER CARPET RECEIVED CARPET ISSUED NAME OF CONTRACTOR DATE OF RECEIPT OF CARPET VOUCHER NO. ISSUE NO. DATE OF ISSUE OF CARPET SIZE GROUND PIECE QUALITY RATE H. STRETCHING REGISTER CARPET RECEIVED CARPET ISSUED NAME OF CONTRACTOR DATE OF RECEIPT OF CARPET VOUCHER NO. ISSUE NO. DATE OF ISSUE OF CARPET SIZE GROUND PIECE QUALITY RATE I. BINDING REGISTER CARPET RECEIVED CARPET ISSUED NAME OF CONTRACTOR DATE OF RECEIPT OF CARPET VOUCHER NO. ISSUE NO. DATE OF ISSUE OF CARPET SIZE GROUND PIECE QUALITY RATE J. CLIPPING AND BERAI REGISTER CARPET RECEIVED CARPET ISSUED NAME OF CONTRACTOR DATE OF RECEIPT OF CARPET VOUCHER NO. ISSUE NO. DATE OF ISSUE OF CARPET SIZE GROUND PIECE QUALITY RATE K. THIRD PACKING REGISTER L. LATEXING REGISTER CARPET RECEIVED CARPET ISSUED NAME OF CONTRACTOR DATE OF RECEIPT OF CARPET VOUCHER NO. ISSUE NO. DATE OF ISSUE OF CARPET SIZE GROUND PIECE QUALITY RATE CARPET RECEIVED CARPET ISSUED NAME OF CONTRACTOR DATE OF RECEIPT OF CARPET VOUCHER NO. ISSUE NO. DATE OF ISSUE OF CARPET SIZE GROUND PIECE QUALITY RATE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 30 34. FROM THE NATURE OF SUBSIDIARY RECORDS, AS PER P ROFORMA GIVEN IN PARA 33 ABOVE, IT WILL BE SEEN THAT PURCHASE OF CARPETS ARE FULLY VERIFIABLE FROM THE CARPET PURCHASE REGISTER MENTIO NED AT SERIAL E OF PARA 33 ABOVE. EXPENSES INCURRED UNDER THE HEADS RAW MATE RIAL CONSUMED AND MANUFACTURE EXPENSES UNDER VARIOUS MAJOR SUB- HEADS VIZ; WEAVING CHARGES, CLIPPING CHARGES, MAPS AND DESIGNING CHARGES, THIRD PACKING CHARGES, WASHING CHARGES, LA TEXING AND BINDING CHARGES ARE FULLY VERIFIABLE FROM DAY TO DE TAILS AS MENTIONED THEREIN, AND IN TURN, WERE OPEN TO CROSS VERIFICATI ON FROM THE FINANCIAL RECORDS. AS REGARDS OTHER ITEMS, THE SAME WERE ALSO OPEN TO VERIFICATION IN THE FOLLOWING MANNER:- (I) DYEING CHARGES : THE SAME ARE PAID TO THE DYEING HOUSE SITUATED AT BHADOHI AND PAYMENTS ARE INVARIABLY MAD E THROUGH CHEQUES, ON THE BASIS OF BILLS RAISED BY TH EM, AFTER DUE VERIFICATION. ON SUCH PAYMENTS, TAX AT S OURCE HAD BEEN DEDUCTED AND DEPOSITED IN THE GOVERNMENT ACCOUNT. (II) FINISHING CHARGES : THE SAME PERTAIN TO THE CHARGES PAID FOR FINAL FINISHING OF CARPETS. THIS IS THE JOB DO NE UPTO 25 TH OCTOBER 2004, BY DIRECTLY EMPLOYING WORK FORCE AND PAYMENTS MADE TO THEM ARE SUPPORTED BY THE PAYEES ACKNOWLEDGEMENTS AS TAKEN IN THE MUSTER ROLLS PREPA RED BY THE APPELLANT IN REGULAR COURSE. AFTER 25 TH OCTOBER 2004, THE JOB WAS GOT DONE THROUGH CONTRACTOR NAMEL Y, CARPET AMERICAN AND ON THE PAYMENTS SO MADE DUE DEDUCTION OF TAX AT SOURCE HAD BEEN MADE. 35. SO FAR AS EXPENSES UNDER THE HEAD PACKING AND FORWARDING AGGREGATING RS.1,49,49,134/- ARE CONCERNED, THE RELEVANT DETAILS ARE GIVEN HEREUNDER:- (A) SHIPPING CHARGES (RS.) TRANS LOGISTIC 27,85,627 CONTAINER CORPORATION OF INDIA, KANPUR 38,24,025 CENTRAL EXCISE REVENUE 1,25,113 LIABILITIES PAYABLE 31.03.2005 32,408 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 31 TOTAL 67,67,173 LESS DISCOUNT 1,24,966 GRAND TOTAL 66,42,207 ALL THE PAYMENTS HAVE BEEN MADE THROUGH ACCOUNT PA YEE CHEQUES WHICH, WHEREVER APPLICABLE, WERE SUBJECTED TO DEDUCTION OF TAX AT SOURCE ALSO. THE CHEQUES SO ISS UED BY THE APPELLANT ARE ENTERED IN THE BANK BOOK. (B) SERVICE CHARGES APL LOGISTICS 1603864 LIABILITIES PAYABLE 31.03.2005 16813 GRAND TOTAL 1620677 THE PAYEES IS THE NOMINATED AGENCY OF IKEA, THE S OLE BUYER WITH WHICH THE APPELLANT HAD BEEN DEALING. THE PAYM ENTS ARE MADE THROUGH ACCOUNT PAYEE CHEQUES AND TAX AT SOURC E HAD DULY BEEN DEDUCTED. (C) PACKING CHARGES PACKING CHARGES 31,49,467 PAYMENTS UNDER THIS HEAD MAINLY RELATE TO THE LABOU R CHARGES PAID FOR PACKING THE GOODS MEANT FOR EXPORT AND AS AND WHEN THE EXPENSES ARE SO INCURRED, THE SAME ARE DULY ENT ERED IN THE CASH BOOK, THE MAIN RECORD KEPT AND MAINTAINED BY T HE APPELLANT ON DAY TO DAY BASIS.. (D) FREIGHT CHARGE SERVICES OF THE TRANSPORTERS HAVE BEEN AVAILED BY T HE APPELLANT FOR TRANSPORTATION OF FINISHED GOODS FROM FACTORY S ITE TO ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 32 MUMBAI PORT AND PARTYWISE BREAK UP OF THE PAYMENTS ARE AS UNDER:- AJAY TRANSPORT CORPORATION 16,75,000 SAI ROAD LINES 17,22,950 SHRI RAM CARRIERS 9,585 EAGLE SHIPPING SERVICES 1,39,468 OM TRANSPORT 30,500 TOTAL 35,77,503 LESS DISCOUNT 40,721 GRAND TOTAL 35,36,782 TOTAL (A+B+C+D) = 1,49,59,133 36. IT IS ALSO A MATTER OF RECORD THAT PAYMENTS MAD E THROUGH CHEQUES UNDER ANY OF THE ABOVE HEADS ARE NOT ONLY V ERIFIABLE FROM THE SUBSIDIARY RECORDS (AS PER DETAILS GIVEN IN PARAS 32 & 33 HEREINFORE) THE SAME WERE ENTERED INTO BANK BOOK WR ITTEN A DAY TO DAY BASIS, AS HAS BEEN REFERRED TO IN PARA 32 AND FROM THEIR THE SAME WERE VERIFIABLE FROM THE BANK ACCOUNT OF THE APPELL ANT. SIMILAR IS THE POSITION WITH REGARD TO PAYMENTS MADE IN CASH WHICH ARE NOT VERIFIABLE FROM THE SUBSIDIARY RECORDS MENTIONED IN PARAS 32 & 33 HEREINFORE, THE SAME WERE DULY SUPPORTED BY THE ACK NOWLEDGEMENTS OF THE PAYEES AND ENTERED INTO THE CASH BOOK AS AND WH EN THE TRANSACTION TOOK PLACE. 37. AS FAR AS CREDIT SIDE OF THE TRADING ACCOUNT IS CONCERNED, THERE ARE FIGURES OF EXPORT SALES WHICH ARE SOLELY TO ONL Y ONE BUYER M/S. IKEA OF SWEDEN ON WHOSE INSTRUCTIONS FINISHED GOODS ARE DISPATCHED TO THEIR STORES SITUATED THROUGHOUT THE WORLD. THE SALES SO MADE BY THE APPELLANT (THROUGH EXPORTERS) ARE FULLY VERIFIA BLE FROM SHIPPING BILLS, BILL OF LADING AND THE REMITTANCES AS ARE CO LLECTED THROUGH OUR BANK. DUTY DRAW BACK IS RECEIVED FROM GOVT. OF INDIA UNDE R EXIM POLICY. THE CLAIM IS MADE ON THE BASIS OF REALISATION OF FO REIGN SALES AS CERTIFIED BY THE BANK. AS REGARDS CLOSING STOCK WHICH IS THE ONLY ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 33 OTHER ITEM LEFT ON THE CREDIT SIDE OF THE TRADING ACCOUNT, THE QUANTITATIVE DETAILS OF THE SAME ARE VERIFIABLE FRO M THE FOLLOWING RECORDS MAINTAINED BY THE APPELLANT:- CLOSING STOCK OF RAW MATERIAL IS THE FIGURE ARRIVED AT AFTER ADJUSTMENT OF AGGREGATE OF OPENING STOCK & PURCHAS ES BY THE ACTUAL CONSUMPTION. OPENING STOCK IS VERIFIABLE FR OM THE QUANTITATIVE DETAILS OF THE CLOSING STOCK OF THE PR ECEDING YEAR, PURCHASES ARE SUPPORTED BY THE INVOICES WHICH CONTA INED QUANTITATIVE DETAILS ALSO AND PAYMENT OF WHICH ARE MADE THROUGH ACCOUNT PAYEE CHEQUES. CONSUMPTION MADE DURING THE YEAR IS VERIFIABLE FROM WEAVING REGISTER WHEREI N VARIETY WISE DETAILS OF CARPETS AS WOVEN BY THE KARIGARS A ND CONSUMPTION ARE KEPT, AS HAS BEEN REFERRED TO AT SE RIAL NO.E OF PARA 30 HEREINFORE. SUCH WEAVING/PRODUCTION REGISTER HAS BE EN MAINTAINED MANUALLY ALSO IN REGULAR COURSE, WHICH H AS BEEN PRODUCED ALSO BEFORE THE ASSESSING OFFICER VIDE ITE M (F) AT SL. NO.(III) OF PARA 5.3 OF THE ASSESSMENT ORDER. AS REGARDS CLOSING STOCK OF FINISHED GOODS THE SAME IS VERIFIABLE IN TERMS OF QUANTITY AS PURCHASED THROUG H CARPET PURCHASE REGISTER AND THE QUANTITY PROCURED THROUGH PRODUCTION/WEAVING REGISTER AND SALES THERE FROM. AS FAR AS VALUATION PART IS CONCERNED, THERE IS NO DISPUTE WH ATSOEVER. 38. ALL THESE RECORDS MENTIONED IN PARAS 32 , 33 , 34 , 35 & 36 HEREINFORE WERE NOT ONLY EXAMINED BY THE AUDITORS A S MENTIONED IN PARAS 31 & 32 ABOVE, THE SAME WERE FOUND TO BE AVAILABLE ON COMPUTER SYSTEM ALSO CONSISTING OF 11 COMPUTERS AS WERE FOUND TO BE INSTALLED AND IN OPERATION AT THE TIME OF SEARCH AT BYE PASS ROAD, HARIOUN, BHADOHI AND THE RECORDS REFERRED TO ABOVE WERE PRODUCED ALSO BEFORE THE LD. ASSESSING OFFICER DURING THE CO URSE OF PROCEEDINGS UNDER SECTION 153A. THIS IS EVIDENT FROM PARA 5.3 OF THE IMPUGNED ASSESSMENT ORDER ITSELF. FURTHER, IN SUPPORT OF THE SAID CONTENTION, AN AFFIDAVIT DULY SWORN IN BY PANNA LAL YADAV IS ENCLO SED, PAGES 312 TO 316. 39. FROM THE DISCUSSION MADE IN PARA 32 TO 37 ABOVE, IT IS SEEN THAT EACH AND EVERY COMPONENT OF THE TRADING ACCOUNT AS PER WHICH THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 34 APPELLANT HAD DISCLOSED A GP RATE OF 22.40% IS FULL Y VERIFIABLE AND THE SAME ARE EVEN OPEN TO CROSS AND INDEPENDENT VER IFICATION FROM THE SUBSIDIARY RECORDS. FROM THIS, IT FOLLOWS THAT THE LD. ACIT HAS WRONGLY HELD THAT THE BOOKS OF ACCOUNT AND OTHER RE CORDS AS KEPT BY THE APPELLANT ARE NOT RELIABLE AND CORRECT INCOME C ANNOT BE DEDUCED FROM THEM . ON THE OTHER HAND, THE APPELLANT HAD MAINTAINED F ULL- PROOF SYSTEM OF ACCOUNTING, CAPABLE OF YIELDING TO CORRECT DETERMINATION OF INCOME AND INCOME THAT MAY BE NO D ETERMINED IS IN CONFORMITY WITH THE INCOME DECLARED IN THE RETURN BY THE APPELLANT. 40. IT IS NOTEWORTHY THAT EVEN AFTER EXAMINATION AND SC RUTINY OF THE RECORDS MAINTAINED BY THE APPELLANT AS HAD BEEN PRODUCED ALSO BEFORE THE ASSESSING OFFICER, NO DEFECT OR DISCREPA NCY WAS FOUND OR SPECIFIED BY HIM IN THE SAID RECORDS. EVEN THE RE GULARITY WITH WHICH THE SAID RECORDS HAD BEEN KEPT AND MAINTAINED BY THE APPELLANT HAS NOT BEEN QUESTED BY THE ACIT. IN SUC H A SITUATION THE ENTRIES APPEARING IN THE BOOKS OF ACCOUNT, THEMSELV ES CONSTITUTE EVIDENCE ABOUT CORRECTNESS OF THE SAME AND PROVISIO NS OF SECTION 34 OF THE EVIDENCE ACT 1872 ARE APPLICABLE. NEITHER TH ERE IS ANY QUALIFICATION RAISED BY THE AUDITORS IN THE MATTER OF VERIFIABILITY OF VARIOUS COMPONENTS OF TRADING ACCOUNT AS (AS HAVE B EEN DISCUSSED HEREINFORE). THUS, REJECTION OF ACCOUNT BY INVOKIN G THE PROVISION OF SECTION 145(3) IS WHOLLY FARFETCHED AND UNTENABLE, BOTH ON FACTS AS WELL AS ON LAW. ALTERNATIVELY 41. IT IS FURTHER SUBMITTED THAT LOOKING TO COMPLET E AND INDEPENDENT VERIFIABILITY OF THE TRADING RESULTS, AS HAS BEEN D ISCUSSED AT LENGTH IN PARAS 32 TO 37 HEREINFORE, THE TRADING RESULTS DISCLOSED BY THE APPELLANT COULD NOT HAVE BEEN INTERFERED WITH AND N O ADDITION COULD HAVE BEEN MADE BY WAY OF EXTRA GROSS PROFIT, IRRESP ECTIVE OF THE OBSERVATIONS MADE BY THE ACIT IN PARAS 5.4, 5.5 & 5.8 OF THE IMPUGNED ORDER (AS HAVE BEEN REPRODUCED IN PARAS 22 & 23 HEREINFORE) AND THIS WOULD BE SO, EVEN AFTER APPLYI NG SUB-SECTION (3) OF SECTION 145 OF THE ACT. IN SUPPORT OF THE CONTEN TION, THE APPELLANT BEGS TO REFER AND RELY UPON THE DECISION OF HONBLE ALLAHABAD HIGH ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 35 COURT IN THE CASE OF PILOT SHOE FACTORY VS. CST (1977) 6 CTR 3 (ALLD) WHEREIN THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER:- 8.WE ARE ALSO UNABLE TO ACCEPT THE CONTENTION OF T HE LEARNED STANDING COUNSEL THAT MERELY BECAUSE THE BOOKS OF A CCOUNTS OF THE ASSESSEE ARE REJECTED AS UNRELIABLE THE TURNOVE R RETURNED BY THE ASSESSEE MUST NECESSARILY BE REJECTED AND THAT SUCH TURNOVER SHOULD BE ESTIMATED AT A HIGHER FIGURE THA N THAT RETURNED BY THE ASSESSEE. INSPITE OF SUCH REJECTION OF THE ASSESSEES BOOKS OF ACCOUNTS WHETHER THE TURNOVER R ETURNED BY HIM SHOULD BE ACCEPTED OR WHETHER A HIGHER TURNOVER SHOULD BE ESTIMATED BY THE ASSESSING AUTHORITY MUST DEPEND U PON THE FACTS AND CIRCUMSTANCES OF EACH CASE. THE REVISING AUTHORITY HAS SET OUT CIRCUMSTANCES WHICH ACCORDING TO IT WOU LD, SHOW THAT THE INTRA-STATE AND INTER-STATE TURNOVERS RETU RNED BY THE ASSESSEE COULD BE ACCEPTED AS REASONABLE. HENCE IT CANNOT BE SAID THAT THE REVISING AUTHORITY SHOULD NOT HAVE AC CEPTED THE TURNOVERS RETURNED BY THE ASSESSEE. 9. AS A RESULT OF THE FOREGOING DISCUSSION OUR ANSW ER TO THE QUESTION REFERRED TO US, IN EACH OF THESE CASES, IS AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE AND IS AS FOL LOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, WHEN THE ASSESSEES BOOKS OF ACCOUNTS WERE REJECTED THE TURNOVER, AS RETURNED BY THE ASSESSEE, NEED NOT NECESSARILY HAVE BEEN REJECTED BUT COULD BE ACCEPTE D IF IT APPEARED TO BE REASONABLE AND PROPER. 42. THE SAID PRINCIPLE WAS LATER ON FOLLOWED BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. GOTAN LIME KHANIJ UDHYOG REPORTED IN (2002) 256 ITR 243 , WHEREIN THEIR LORDSHIPS HAVE LAID DOWN THE FOLLOWING PRINCIPLE:- SECTION 145 OF THE INCOME-TAX ACT, 1961, ONLY PROVIDES THE BASIS ON WHICH COMPUTATION OF INCOME IS TO BE MADE FOR THE PURPOSE OF DETERMINING THE AMOUNT OF TAX. THE PROV ISION BY ITSELF DOES NOT DEAL WITH ADDITION OR DELETION TO T HE INCOME. THEREFORE, MERE REJECTION OF, OR SOME DEFICIENCY IN , THE BOOKS OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 36 ACCOUNT WOULD NOT MEAN THAT IT MUST NECESSARILY LEA D TO ADDITIONS TO THE RETURNED INCOME. (243) XXXX XXXX XXXX XXXX SECTION 145 ONLY PROVIDES THE BASIS ON WHICH COMPUT ATION OF INCOME IS TO BE MADE FOR THE PURPOSE OF DETERMINING THE AMOUNT OF TAX PAYABLE BY AN ASSESSEE. THE PROVISION BY IT SELF DOES NOT DEAL WITH ADDITION OR DELETION IN THE INCOME. THEREFORE, MERELY BECAUSE THERE IS SOME DEFICIENCY IN THE BOOKS OF AC COUNT OR MERELY BECAUSE OF REJECTION OF THE BOOKS OF ACCOUNT IT DOES NOT MEAN THAT IT MUST LEAD NECESSARILY TO ADDITIONS IN THE RETURNED INCOME OF THE ASSESSEE . WHAT CHANGES IN EITHER CASE IS THE BASIS FOR COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION OR I NCOME FROM OTHER SOURCES. THE RESULT WOULD DEPEND ON THE OTH ER PRINCIPLES OF COMPUTING THE INCOME. THEREFORE, WE HOLD THAT MERELY CHANGING THE BASIS OR METHOD OF ARRIVING AT THE END RESULT OF WORKING OUT THE COMPUTATION OF TAXABLE IN COME UNDER THE INCOME-TAX ACT, NECESSARILY DOES NOT RESULT IN DEVISING PROFITS OR GAINS FROM BUSINESS OR OTHER SOURCES DIF FERENT FROM ONE RETURNED BY THE ASSESSEE, WHERE HE HAS RETURNED HIS INCOME AND DIFFERENT FROM THE RESULT REACHED BY THE ASSESS EE AS PER THE METHOD OF ACCOUNTING EMPLOYED BY HIM, BY ADOPTING A DIFFERENT BASIS BY THE ASSESSING AUTHORITY. (PAGE 247-248) 43. IT IS FURTHER SUBMITTED THAT AFTER THE ASSESSME NT FOR THE ASSESSMENT YEAR 2005-06 HAD BEEN ORIGINAL MADE UNDE R SECTION 143(1), WITH REFERENCE TO THE RETURN FILED UNDER SECTION 139(1) OF THE ACT THE ASSESSMENT RECORDS WERE EXAMINED BY THE LD. CIT, VARANASI IN EXERCISE OF HIS SUPERVISORY JURISDICTION, OBVIOUSLY FOR THE REASON THAT THERE WAS FALL IN THE G.P. RATE THIS YEAR AS COMPAR ED TO THE EARLIER ASSESSMENT YEARS AS REFERRED TO IN PARA 25 ABOVE. THEREFORE, INSTEAD OF ISSUING A FORMAL SHOW CAUSE NOTICE UNDER SECTION 263(1), HE PREFERRED TO MAKE ENQUIRIES BY ISSUING NOTICE UNDER SECTION 133(6) OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 37 THE ACT, WHICH FORMS PART OF THE STATEMENT OF FACTS ACCOMPANYING THE MEMO OF APPEAL, CALLING UPON THE APPELLANT TO JUSTIFY ITS TRADING RESULTS. THE APPELLANT RESPONDED TO THE SAID SHOW CAUSE BY MAKING DUE SUBMISSIONS AND THERE AFTER NO FURTHER PROCEEDI NGS WERE TAKEN BY THE LD. CIT(A), VARANASI. THIS SHOWS THAT TRADING RESULTS SHOWN BY THE APPELLANT IN THE ASSESSMENT YEAR 2005-06 (YEAR UNDER APPEAL) HAD BEEN WITHIN THE PURVIEW OF THE LD. CIT ALSO IN HIS SUPERVISING JURISDICTION AND FROM THE STAGE ALSO, THE TRADING R ESULTS AS SHOWN BY THE APPELLANT STOOD ACCEPTED . 44. THUS, IT STANDS FULLY ESTABLISHED THAT, FROM WH ATEVER ANGLE, THE MATTER IS EXAMINED, THE TRADING RESULTS DISCLOSED B Y THE APPELLANT , NOT ONLY STOOD SUPPORTED BY THE SUBSIDIARY RECORDS AND MAIN RECORDS (AS PREPARED FROM THE SUBSIDIARY RECORDS) WHICH WERE SU BJECTED TO AUDIT ALSO, THE SAME WERE WHOLLY REASONABLE ALSO. EVEN FALL IN GP RATE (AS COMPARED TO THE EARLIER YEARS) STAND FULLY EXPLAINE D BY THE INCREASE IN COST AND THE STATIC SALES PRICE (WHICH IN FEW CASES HAD BEEN REDUCED ALSO). APPLICABILITY OF SECTION 153A 45. THE SUBMISSIONS AS AFORESAID COUPLED WITH THE F ACT THAT EVEN IN PARAS 5.4, 5.5 AND 5.8 (AS HAVE BEEN REPRODUCED IN PARAS 22 & 23 HEREINFORE) IT CANNOT BE INFERRED AND FOUND OUT THA T ANY INCRIMINATING MATERIAL HAD BEEN FOUND, DURING THE COURSE OF SEARC H AND SEIZURE ACTION THAT HAD TAKEN PLACE ON 11.02.2009, WHICH CO ULD IMPINGE UPON THE VERACITY OF INCOME ALREADY DISCLOSED BY THE APP ELLANT IN THE RETURN (WHICH WAS ON RECORD) IS NOT MAINTAINABLE UNDER SEC TION 153A OF THE ACT, THE PRINCIPLE LAID DOWN IN VARIOUS CASE LAWS A S HAVE BEEN REFERRED TO IN PARAS 18 & 19 HEREINFORE ARE APPLICABLE AND THE ADDITION OF RS.4,35,51,668 AS PER NARRATION GIVEN I N PARA 5.8 OF THE IMPUGNED ASSESSMENT ORDER (AS REPRODUCED IN PARA 23 HEREINFORE) DESERVES TO BE DELETED. CASE LAWS REFERRED TO IN THE ASSESSMENT ORDER ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 38 46. AS REJECTION OF BOOKS OF ACCOUNT, BY INVOKING T HE PROVISIONS OF SECTION 145(3), WAS WHOLLY UNCALLED FOR AND EVEN OT HERWISE NO INTERFERENCE WITH THE GROSS PROFIT SHOWN BY THE APP ELLANT COULD HAVE BEEN MADE, IT IS WHOLLY UNNECESSARY TO DWELL UPON V ARIOUS CASE LAWS AS HAVE BEEN PRESSED INTO SERVICE BY THE ACIT , IN SUPPORT OF THE REJECTION OF BOOKS OF ACCOUNTS AND ENHANCEMENT IN T HE GROSS PROFIT BY RS.4,35,51,668. HOWEVER, FOR THE SAKE OF COMPLETENE SS OF THE SUBMISSIONS, THE APPELLANT BEGS TO CONTEND THAT NON E OF THE CASE LAWS (AS HAVE BEEN REFERRED TO IN THE IMPUGNED ASSESSMEN T ORDER) ARE APPLICABLE ON THE FACTS OF THE PRESENT CASE AND BEC AUSE OF THEIR DISTINGUISHING FEATURES. THIS HAS BEEN DEMONSTRATED IN THE PARAGRAPHS THAT FOLLOW. FACTS OF THE CASES AS RELIED UPON BY THE ASSESSING OFFICER FACTS OF OUR CASE. 1) AWADHESH PRATAP SINGH ABDUL REHMAN & SONS VS. CI T REPORTED IN (1994) 210 ITR 406 THE VARIOUS FINDINGS RECORDED BY THE TAX AUTHORITIES AND BY THE INCOME-TAX APPELLANT TRIBUNAL HAVE NOT BEEN CHALLENGED IN THESE PROCEEDINGS. WHAT IS CONTENDED IS THAT EVEN IF THE SALE OR EXPENSES MAY NOT BE VERIFIABLE, YET THE PROVISIONS OF SECTION 145(2) ARE NOT ATTRACTED. EXCEPT FOR STATING THE ARGUMENT, LEARNED COUNSEL DID NOT ELABORATE THE CONTENTION TO BRING THE POINT HOME. AS NOTICED EARLIER, THE ACCOUNT BOOKS WERE REJECTED BECAUSE ADMITTEDLY NO STOCK REGISTER WAS MAINTAINED NOR WERE THE SALES FOUND VERIFIABLE IN THE ABSENCE OF THE CASH MEMOS. THE VOUCHERS OF EXPENSES WERE ALSO NOT FORTHCOMING AND THE INCOME RETURNED WAS RIDICULOUSLY LOW AS COMPARED TO THE EXORBITANT TURNOVER AND THE EXTENT OF THE BUSINESS CARRIED ON BY THE ASSESSEE. IT IS DIFFICULT TO CATALOGUE THE VARIOUS TYPES OF DEFECTS IN THE ACCOUNT BOOKS OF AN ASSESSEE WHICH MAY RENDER REJECTION OF ACCOUNT BOOKS ON THE GROUND THAT THE ACCOUNTS ARE NOT COMPLETE OR CORRECT FROM WHICH THE CORRECT PROFIT IN THE CASE OF THE APPELLANT PURCHASES AND SALES ARE FULLY VOUCHED AND VERIFIABLE WITH REFERENCE TO THE PURCHASE INVOICES AND SALES BILLS WHICH WERE DULY EXAMINED BY THE AO HIMSELF. SO MUCH SO THAT PURCHASES AS WELL AS SALES AS DISCLOSED BY THE APPELLANT HAVE NOT EVEN BEEN ADVERSELY VIEWED BY THE ACIT . ALL THE ITEMS OF TRADING ACCOUNTS ARE CAPABLE OF INDEPENDENT VERIFICATION FROM LARGE NUMBER OF SUBSIDIARY BOOKS OF ACCOUNT (AS HAVE BEEN DISCUSSED IN PARAS.TO..HEREINFORE) ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 39 CANNOT BE DEDUCED. WHETHER THE PRESENCE OR THE ABSENCE OF A STOCK REGISTER IS MATERIAL OR NOT WOULD DEPEND UPON THE TYPE OF BUSINESS. IT IS TRUE THAT ABSENCE OF THE STOCK REGISTER OR CASH MEMOS IN A GIVEN SITUATION MAY NOT PER SE LEAD TO AN INFERENCE THAT THE ACCOUNTS ARE FALSE OR INCOMPLETE. HOWEVER, WHERE THE ABSENCE OF A STOCK, REGISTER, CASH MEMOS, ETC., IS COUPLED WITH OTHER FACTORS LIKE VOUCHERS IN SUPPORT OF THE EXPENSES AND PURCHASES MADE NOT BEING FORTHCOMING AND THE PROFITS BEING LOW, MAY GIVE RISE TO A LEGITIMATE INFERENCE THAT ALL IS NOT WELL WITH THE BOOKS AND THE SAME CANNOT BE RELIED UPON TO ASSESS THE INCOME, PROFITS OR GAINS OF AN ASSESSEE. IN SUCH A SITUATION, THE AUTHORITIES WOULD BE JUSTIFIED TO REJECT THE ACCOUNT BOOKS UNDER SECTION 145(2) OF THE ACT AND TO MAKE THE ASSESSMENT IN THE MANNER CONTEMPLATED IN THOSE PROVISIONS. (408) 2. S.N. NAMASIVAYAM CHETTIAR VS. CIT REPORTED IN 38 ITR 579(SC) IN THE INSTANT CASE BOOK OF ACCOUNTS WERE REJECTED BECAUSE VOUCHERS FOR PURCHASES WERE NOT PRODUCED AND FOR PURCHASES VALUING OVER RS.3 LACS 200 VOUCHERS WERE FORTHCOMING. IN THE CASE OF THE APPELLANT PURCHASES AND SALES ARE FULLY VERIFIABLE WITH AND SUPPORTED BY RELEVANT PURCHASES AND SALES BILLS/INVOICES ETC WHICH WERE EXAMINED ALSO BY THE ACIT . THE SAID CASE IS THEREFORE, NOT AT ALL COMPARABLE; WITH THE ASSESSEE. 3. P.M. MOHAMMAD MEERKHAN VS. C.IT REPORTED IN (19 69)73 ITR 735 (SC) IN THIS CASE THE ISSUE INVOLVED IN THE REJECTION OF BOOKS OF ACCOUNT BUT THE QUESTION WHETHER THE BUSINESS CARRIED ON BY THE ASSESSEE WAS AN ADVENTURE IN THE NATURE OF TRADE AND VALUATION OF CLOSING STOCK. RELEVANT EXTRACTS FROM THE HEAD NOTES ARE AS UNDER:- (II) THAT THE INCOME-TAX OFFICER HAD THE FACTS OF THE INSTANT CASE ARE ALSO QUITE DISTINGUISHABLE BECAUSE NO SUCH ISSUE IS INVOLVED IN THE CASE OF THE APPELLANT. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 40 CORRECTLY ESTIMATED THE PROFIT OF THE APPELLANT BY TREATING THE LAND AS STOCK- IN-TRADE AND VALUING IT ACCORDING TO THE NORMAL ACCOUNTANCY PRACTICE. IT WAS NOT CORRECT TO SAY THAT THE PROFITS OF THE ADVENTURE COULD BE DETERMINED ONLY AT THE TIME OF THE COMPLETION OF THE SALE OF THE ENTIRE ESTATE. EACH YEAR WAS A SELF CONTAINED UNIT AND IN THE CASE OF A TRADING AT THE BEGINNING AND AT THE END OF THE ACCOUNTING YEAR HAD TO BE TAKEN INTO ACCOUNT. PRINCIPLE IN WHIMSTER AND CO. V. COMMISSIONER OF INLAND REVENUE (1925) 12 T.C. 813, COMMISSIONER OF INLAND REVENUE V. COCK RUSSELL AND CO. LTD. [1949] T.C. 387 AND COMMISSIONER OF INCOME TAX V. KRISHNAWAMI MUDALLIAR [1964] 53 I.T.R. 122 (S.C.) APPLIED. IT IS NOT POSSIBLE TO EVOLVE ANY SINGLE LEGAL TEST OR FORMULA WHICH CAN BE APPLIED IN DETERMINING WHETHER A TRANSACTION IS AN ADVENTURE IN THE NATURE OF TRADE OR NOT. THE ANSWER TO THE QUESTION MUST NECESSARILY DEPEND IN EACH CASE ON THE TOTAL IMPRESSION AND EFFECT OF ALL THE RELEVANT FACTORS AND CIRCUMSTANCES PROVED THEREIN AND WHICH DETERMINE THE CHARACTER OF THE TRANSACTION. 4. ALA FIRM VS. CIT REPORTED IN (1991)189 ITR 285 ( SC) IN THIS CASE THE ISSUE INVOLVED WAS METHOD FOLLOWED BY THE ASSESSEE FOR VALUATION OF ITS CLOSING STOCK ON THE DATE OF DISSOLUTION OF THE FIRM AND NOT REJECTION OF BOOKS OF ACCOUNTS, AS SUCH HEAD NOTE OF THE SAID CASE READS AS UNDER:- HELD DISMISSING THE APPEAL (I) THAT THOUGH THE INCOME-TAX OFFICER, AT THE TIME OF THE ORIGINAL ASSESSMENT, HAD FACTS OF THIS CASE ARE QUITE DISTINGUISHABLE FROM THE FACTS OF THE APPELLANTS CASE BECAUSE NO SUCH ISSUE IS INVOLVED HERE. RATHER IN THE MATTER OF VALUATION OF CLOSING STOCK THERE IS NO DISPUTE IN THE CASE OF THE APPELLANT. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 41 LOOKED AT THE FACTS AND ACCEPTED THE ASSESSEES CONTENTION THAT THE SURPLUS WAS NOT TAXABLE, IN DOING SO, HE HAD OBVIOUSLY MISSED TO TAKE NOTE OF THE LAW LAID DOWN IN THE CASE OF G.R. RAMACHARI AND CO.[1961] 41 ITR 142 (MAD) AND THERE WAS NOTHING TO SHOW THAT THE CASE HAD BEEN BROUGHT TO HIS NOTICE. WHEN HE, SUBSEQUENTLY, BECAME AWARE OF THE DECISION, HE INITIATED PROCEEDINGS UNDER SECTION 147(B). THE MATERIAL WHICH CONSTITUTED INFORMATION AND ON THE BASIS OF WHICH THE ASSESSMENT WAS REOPENED WAS THE DECISION IN G.R. RAMACHARI AND CO. [1961] 41 ITR 142 (MAD). THIS MATERIAL WAS NOT CONSIDERED AT THE TIME OF THE ORIGINAL ASSESSMENT. THOUGH IT WAS A DECISION OF 1961 AND THE INCOME-TAX OFFICER COULD HAVE KNOWN OF IT HAD HE BEEN DILIGENT, THE OBVIOUS FACT WAS THAT HE WAS NOT AWARE OF THE EXISTENCE OF THAT DECISION THEN AND, WHEN HE CAME TO KNOW ABOUT IT, HE RIGHTLY INITIATED PROCEEDINGS FOR ASSESSMENT. 5. CIT VS. BRITISH PAINTS INDIA LTD. REPORTED IN ( 1991)188 ITR 44 (SC) ISSUE INVOLVED IN THIS CASE WAS WHETHER METHOD OF STOCK VALUATION REGULARLY FOLLOWED BY THE ASSESSEE, WHEREIN IT DID NOT INCLUDE THE OVER HEADS, COULD BE DISPUTED BY THE ASSESSING OFFICER, AS MAY BE SEEN FROM THE FOLLOWING EXTRACT OF THE HEAD NOTE. SECTION 145 CONFERS SUFFICIENT POWER UPON THE ASSESSING OFFICER--NAY, IT IMPOSES A DUTY UPON HIMTO MAKE SUCH COMPUTATION IN SUCH MANNER AS HE DETERMINES FOR DEDUCING THE CORRECT PROFITS AND GAINS. THIS MEANS THAT WHERE ACCOUNTS ARE PREPARED WITHOUT DISCLOSING THE REAL COST OF THE STOCK-IN- TRADE, ALBEIT ON SOUND EXPERT ADVICE IN THE INTEREST OF EFFICIENT ADMINISTRATION IN THE PRESENT CASE, THERE IS NO SUCH DISPUTE AS STATED AT SERIAL NO.4 ABOVE. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 42 OF THE BUSINESS, IT IS THE DUTY OF THE ASSESSING OFFICER TO DETERMINE THE TAXABLE INCOME BY MAKING SUCH COMPUTATION AS HE THINKS FIT. WHAT IS THE PROFIT OF A TRADE OR BUSINESS IS A QUESTION OF FACT AND IT MUST BE ASCERTAINED, AS ALL FACTS MUST BE ASCERTAINED, WITH REFERENCE TO THE RELEVANT EVIDENCE, AND NOT ON DOCTRINES OR THEORIES. 6. GOODYEAR INDIA LTD. VS. CIT REPORTED IN (2000) 2 46 ITR 116 (DELHI) THE FACTS OF THIS CASE WERE THAT NEITHER DETAILS OF EXPENSES INCURRED NOR PAID VOUCHERS OR ANY OTHER MATERIAL OR EVIDENCE WERE PRODUCED TO JUSTIFY HIS CLAIM FOR VARIOUS EXPENSES. IN THE CIRCUMSTANCES SUITABLE DISALLOWANCE WERE MADE BY ITO, WITH WHICH NO INTERFERENCE WAS MADE BY THE HONBLE COURT IN APPEAL FILED UNDER SECTION 260A OF THE ACT. REFERENCE IS INVITED TO THE HEAD NOTE READING AS UNDER :- MERELY BECAUSE AN AUDIT REPORT IS AVAILABLE THERE IS NO FETTER ON THE POWER OF THE INCOME-TAX OFFICER TO REQUIRE THE ASSESSEE TO JUSTIFY ITS CLAIM WITH REFERENCE TO THE RECORDS, MATERIALS AND EVIDENCE. SUCH A POWER IS INHERENT IN AN ASSESSING OFFICER IN THE SCHEME OF THE ACT. THE ASSESSEE CLAIMED CANTEEN EXPENSES, SPORTS ACTIVITY EXPENSES, SALES AND MISCELLANEOUS EXPENSES, OFFICE EXPENSES AND INCIDENTAL EXPENSES AS A DEDUCTION. THE INCOME-TAX OFFICER FOUND THAT THE DETAILS WERE NOT COMPLETE AND THE EXPENDITURE WAS NOT SUPPORTED BY VOUCHERS. ACCORDINGLY, AND HOC DISALLOWANCE TO RS.10 LAKHS. ON AN APPEAL.: HELD, DISMISSING THE APPEAL, THAT NO IN THE CASE OF THE APPELLANT, THE ACIT MERELY INTERFERED WITH THE GROSS PROFIT WHICH WORKED OUT TO 22.40% AS PER WORKING GIVEN IN PARA HEREINFORE. VARIOUS ITEMS OF TRADING ACCOUNT, DEBIT SIDE AS WELL AS CREDIT SIDE ARE FULLY VERIFIABLE WITH REFERENCE TO AN INTEGRATED CODE OF SUBSIDIARY RECORDS AS WELL AS MAIN RECORDS. EXPENDITURE CLAIMED IN THE PROFIT AND LOSS ACCOUNT HAS NOT BEEN INTERFERED WITH AS THE SAME WERE FOUND TO BE FULLY VERIFIABLE AFTER DUE EXAMINATION. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 43 VOUCHERS AND DETAILS WERE PRODUCED BEFORE THE ASSESSING OFFICER AND SINCE THE MAGNITUDE OF TURNOVER AND EXTENT OF EXPENSES CLAIMED WAS HUGE, THE DISALLOWANCE COULD NOT BE SAID TO BE UNREDUCED IN APPEAL BY THE TRIBUNAL AND IN VIEW OF THE FACTUAL FINDINGS THERE WAS NO SCOPE FOR INTERFERENCE IN AN APPEAL UNDER SECTION 260A. 7. OMAX SHOE FACTORY VS. CIT REPORTED IN 148 TAXMAN 51 7 ALLD. REJECTION OF BOOKS OF ACCOUNT AS HAD BEEN UPHELD BY THE HONBLE ITAT, WAS NOT INTERFERED WITH BY THE HONBLE HIGH COURT IN APPEAL UNDER SECTION 260 A, AS 7. ADMITTEDLY, ASSESSEE IS THE MANUFACTURER AND EXPORTER OF LEATHER SHOES, THEREFORE, IT WAS NECESSARY TO MAINTAIN PRODUCTION REGISTER AND DAY- TO-DAY RECORD OF PRODUCTION AND CONSUMPTION REGISTER OF RAW MATERIAL. UNLESS THE CONSUMPTION REGISTER FOR RAW MATERIAL AND THE PRODUCTION REGISTER RELATING TO THE MANUFACTURED GOODS ARE MAINTAINED, THE PRODUCTION CANNOT BE VERIFIED. 8. APART FROM NON-MAINTENANCE OF PRODUCTION REGISTER AND THE RAW MATERIAL CONSUMPTION REGISTER, ASSESSING AUTHORITY ALSO FOUND THAT PROPER ACCOUNTS RELATING TO THE PAYMENT OF WAGES HAVE ALSO NOT BEEN MAINTAINED. IN OUR VIEW, THE AFORESAID REASONS ARE SUFFICIENT TO INVOKE THE PROVISO TO SECTION 145(1) OF THE ACT. (520) IN THE PRESENT CASE DAY-TO-DAY RECORD OF PRODUCTION OF CARPETS (AS WOVEN BY THE KARIGARS) HAD BEEN KEPT AND MAINTAINED IN THE FORM OF PRODUCTION REGISTER/WEAVING REGISTER AS MENTIONED AT SL. (F) OF PARA 29 AND CARPET PURCHASE REGISTER AT SL. (E) THEREOF. THE SAME WERE PRODUCED ALSO BEFORE THE ASSESSING OFFICER AND NO DEFECT OR DISCREPANCY WAS FUND THEREIN. THUS , T HE FACTS OF THE APELLANTS CASE ARE DISTINGUISHABLE. 8. RAZA TEXTILE LTD. VS. CIT REPORTED IN (1972) 86 ITR 673(ALLD) IN THIS CASE BOOKS WERE REJECTED ON THE GROUND THAT, IN THE ABSENCE OF A REGISTER INDICATING THE SUPPLY OF YARN ISSUED FROM SPINNING DEPTT. TO THE WEAVING DEPTT., CO- RELATION BETWEEN SUPPLY OF YARN AND PRODUCTION OF CLOTH WAS NOT POSSIBLE, AS FOR THE REASON GIVEN AT SL. NO.7 ABOVE, THE CASE REFERRED TO BY ACIT IS NOT APPLICABLE. FROM THE WEAVING/PRODUCTION REGISTER MAINTAINED BY THE APPELLANT, EVEN KARIGAR WISE RECORDS OF THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 44 MAY BE SEEN FROM THE HEAD NOTES EXTRACT OF WHICH IS AS UNDER:- (II) IN RESPECT OF THE PRODUCTION OF CLOTH, IN THE ABSENCE OF A REGISTER INDICATING THE SUPPLY OF YEARN ISSUED FROM THE SPINNING DEPARTMENT TO THE WEAVING DEPARTMENT, IT WAS PLAIN THAT THERE WAS NO POSSIBILITY OF CO-RELATING THE SUPPLY OF YARN AND THE PRODUCTION OF CLOTH. THEREFORE, THERE WAS NO WAY OF CHECKING WHETHER THE PRODUCTION OF CLOTH SHOWN IN THE BOOKS REPRESENTED THE TRUE FIGURE OF PRODUCTION. THE SYSTEM OF RECORDS ADOPTED BY THE ASSESSEE WAS INADEQUATE AND DID NOT AFFORD AN EFFECTIVE METHOD OF DETERMINING THE TRUE INCOME, PROFITS AND GAINS SO FAR AS THE PRODUCTION OF CLOTH WAS CONCERNED. THERE WAS ALSO THE CIRCUMSTANCE THAT THE NET INCREASE IN WEIGHT FOR THE RELEVANT YEAR WAS FAR BELOW THAT IN OTHER YEARS AND THE EXPLANATION ATTEMPTED BY THE ASSESSEE IN THIS BEHALF WAS NOT ACCEPTED BY THE TRIBUNAL. THERE WAS MATERIAL ON THE RECORD FOR NOT ACCEPTING THE SHORTAGE DISCLOSED BY THE ASSESSEE, AND IN ESTIMATING THE SHORTAGE IN THE PRODUCTION OF CLOTH, THE TRIBUNAL ADOPTED A REASONABLE BASIS. ISSUE OF ALL THE RAW MATERIALS AND PRODUCTION OBTAINED FROM THEM, ARE AVAILABLE. 9. BHARAT MILKS PRODUCTS LTD. VS. CIT REPORTED IN ( 1981) 128 ITR 682 (ALLD) IN THIS CASE BOOKS OF ACCOUNTS HAD BEEN REJECTED BECAUSE OF THE REASON THAT NO DAY TO DAY RECORD OF PRODUCTION OR MANUFACTURE WAS MAINTAINED AND THE ASSESSEE WAS NOT ABLE TO JUSTIFY THE YIELD WHICH WAS LESSER BY AS COMPARED WITH OTHER COMPARABLE CASES. HEAD NOTE IS REPRODUCED HEREUNDER:- (I) THAT IT WAS OPEN TO THE ITO TO ESTIMATE GROSS PROFITS AT A RATE AT WHICH PROFIT WAS EARNED IN SIMILAR BUSINESS BY OTHER MERCHANTS. IN THE IN THE PRESENT CASE DAY-TO- DAY RECORD OF PRODUCTION OF CARPETS (AS WOVEN) BY THE KARIGARS HAD BEEN KEPT AND MAINTAINED IN THE FORM OF PRODUCTION REGISTER/WEAVING REGISTER AS MENTIONED AT SL. (F) OF PARA 29 AND CARPET REGISTER AT SL. (E) THEREOF. THE SAME WERE PRODUCED ALSO BEFORE THE ASSESSING OFFICER AND NO DEFECT OR ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 45 ABSENCE OF THE DAY-TO-DAY MANUFACTURING OR PRODUCTION ACCOUNT, THE ACCOUNTS WERE NOT COMPLETE AND ACCURATE AND FURTHER THE YIELD SHOWN BY THE ASSESSEE WAS LESS BY 2.5 PER CENT WHEN COMPARED WITH THE YIELD SHOWN BY ANOTHER DEALER IN THE SAME BUSINESS WHICH WAS RELIED UPON BY THE ASSESSEE HIMSELF. NO SATISFACTORY EXPLANATION WAS GIVEN BY THE ASSESSEE TO JUSTIFY THE LOWER RATE DISCLOSED BY HIM. (II) THAT THE APPELLATE TRIBUNAL RECORDED ITS FINDINGS ON A CONSIDERATION OF THE MATERIAL ON RECORD. THEY WERE PURE FINDINGS OF FACT WHICH COULD NOT BE CHALLENGED IN A REFERENCE. AS REGARDS THE QUANTUM OF THE ADDITION SUSTAINED BY THE APPELLATE TRIBUNAL, IT WOULD BE TOO MUCH FOR THE ASSESSEE TO SAY THAT IT WAS BASED ON MERE CONJECTURE, FOR, IF THERE COULD BE ANY GRIEVANCE BY THE RELIEF ALLOWED BY THE APPELLATE TRIBUNAL, IT COULD BE ONLY TO THE DEPARTMENT. THE AVERAGE SALE PRICE OF LOOSE CONDENSED MILK WAS A PROPER GUIDE FOR ESTIMATING THE VALUE OF THE SHORT YIELD, THERE WAS NO BASIS FOR ADOPTING THE PURCHASE RATE FOR HIS PURPOSE, AND, THEREFORE, THE ASSESSEE COULD NOT WITH ANY JUSTIFICATION DISPUTE THE QUANTUM OF ADDITION SUSTAINED BY THE TRIBUNAL. THE TRIBUNAL WAS JUSTIFIED IN REJECTING THE ACCOUNTS OF THE ASSESSEE AND IN SUSTAINING THE QUANTUM OF THE ADDITION. DISCREPANCY WAS FUND THEREIN. THE FACTS OF THE APELLANTS CASE IS DISTINGUISHABLE. FURTHER, YARN AND OTHER RAW MATERIALS ISSUED TO THE WEAVERS FOR WEAVING CARPETS WERE FULLY ACCOUNTED FOR EITHER IN THE FORM OF CONSUMPTION OR STOCK HELD WITH WEAVERS. IN FACT THERE IS NO DISPUTE ABOUT YIELD IN THE CASE OF THE APPELLANT AND THIS ALONE MAKES THE APPELLANTS CASE DISTINGUISHABLE FROM THE CASE OF BHARAT MILLS PRODUCTS LTD. REFERRED TO BY THE ACIT . SUBMISSIONS MADE AT SERIAL NO.7 & 8 ARE FURTHER REFERRED TO AND RELIED UPON. 10. ARYA CONFECTIONERY WOKS VS. CIT REPORTED IN (1 983)143 ITR 814 (MP) IT WAS A CASE WHEN THE ASSESSEE WAS FOUND TO BE CARRYING ON BENAMI BUSINESS IN THE SAME OF G. AGENCIES DURING THE COURSE OF IN THE PRESENT CASE DAY-TO-DAY RECORD OF PRODUCTION OF CARPETS (AS WOVEN) BY THE KARIGARS HAD ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 46 SEARCH. AS FAR AS REJECTION OF ACCOUNT IS CONCERNED, THE CATCH NOTE READS AS UNDER:- ACCOUNTING-ASSESSEE-FIRM DERIVING INCOME FORM MANUFACTURE AND SALE OF CONFECTIONERY-ITO ESTIMATING SALES AND RATE OF GROSS PROFIT-TRIBUNAL FINDING THAT DAY TO DAY RECORD OF RAW MATERIALS AND FINISHED GOODS NOT MAINTAINED- PURCHASES AND SALES NOT FULLY VOUCHED- TRIBUNAL FINDING THAT INCOME CANNOT BE PROPERLY DEDUCTED FROM ACCOUNTS MAINTAINED-BUSINESS SIMILAR TO THAT OF ASSESSEE CARRIED ON BY G AGENCIES IN ASSESSEES PREMISESCAPITAL FOR G AGENCIES CONTRIBUTED BY ASSESSEE AND SALE PROCEEDS HANDED OVER TO PARTNER OF ASSESSEE FIRMNO RENT OR EXPENSES RECOVERED FROM G AGENCIES-TRIBUNAL FINDING THAT BUSINESS WAS BENAMI BUSINESS OF ASSESSEEPRINCIPLES GOVERNING FINDINGFINDINGS ERE FINDINGS OF FACT AND NO QUESTION OF LAW AROSE FORE REFERENCEINCOME-TAX ACT, 1961, S.145(1), PROV. BEEN KEPT AND MAINTAINED IN THE FORM OF PRODUCTION REGISTER/WEAVING REGISTER AS MENTIONED AT SL. (F) OF PARA 29 AND CARPET PURCHASE REGISTER AT SL. (E) THEREOF. THE SAME WERE PRODUCED ALSO BEFORE THE ASSESSING OFFICER AND NO DEFECT OR DISCREPANCY WAS FUND THEREIN. THE FACTS OF THE APPELLANTS CASE ARE DISTINGUISHABLE. FURTHER, THE RECORDS KEPT BY THE APPELLANT WERE FOUND TO BE MAINTAINED ON-LINE ON 11 COMPUTERS INSTALLED AT ITS BUSINESS PREMISES. THE DATA AVAILABLE IN THE SAID COMPUTERS WAS FOUND TO BE VERIFIABLE FROM THE VOLUMINOUS RECORDS MAINTAINED MANUALLY. DUE TO THIS REASON, THE AUTHORISED OFFICERS DID NOT EVEN CONSIDER IT NECESSARY TO SEAL THE COMPUTERS OR TO TAKE SOFT COPIES FROM THE SAME. 11. BASTI RAM NARAYAN DAS MAHESHWARI VS. CIT (199 4) 210 ITR 438 (BOMBAY) IT WAS A CASE OF BIDI MANUFACTURE AND HEAD NOTE OF THE SAID CASE READ AS UNDER:- HELD, (I) THAT THE ASSESSEE HAD NOT PRODUCED THE RELEVANT RECORDS AS POINTED OUT BY THE INCOME-TAX OFFICER RELATING TO ITS DAY-TO-DAY MANUFACTURE OF BIDIS INCLUDING THE QUANTITY OF BIDIS MANUFACTURED DAILY, THE FIGURES OF BIDI LEAVES CONSUMED PER DAY IN EACH FACTORY AND THE RECORD RELATING TO THE DAILY COLLECTION OF CHAT AND MAPARI BIDIS. THE TRIBUNAL HAD CORRECTLY HELD THAT IN THIS SITUATION, THE INCOME-TAX OFFICER WAS NOT SATISFIED ABOUT THE FAIRNESS OR CORRECTNESS OF THE ACCOUNTS OF THE ASSESSEE AND THAT ITEM DEALT WITH BY THE APPELLANT IS ENTIRELY DIFFERENT. IN THE PRESENT CASE DAY-TO-DAY RECORD OF PRODUCTION OF CARPETS (AS WOVEN) BY THE KARIGARS HAD BEEN KEPT AND MAINTAINED IN THE FORM OF PRODUCTION REGISTER/WEAVING REGISTER AS MENTIONED AT SL. (F) OF PARA 29 AND CARPET REGISTER AT SL. (E) THEREOF. THE SAME WERE PRODUCED ALSO BEFORE THE ASSESSING OFFICER AND NO DEFECT OR D ISCREPANCY WAS FUND THEREIN. THE SUBMISSIONS MADE AT SERIAL NO.7, 8, 9 & 10, ARE FULLY APPLICABLE. THUS, THE FACTS OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 47 THE INCOME-TAX OFFICER WAS ENTITLED TO MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144 OF THE INCOME-TAX ACT, 1961. THE APELLANTS CASE ARE DISTINGUISHABLE. 12. COMMISSIONER, SALES TAX, U.P. LUCKNOW VS. GIRJA SHANKER AWANISH KUMAR REPORTED IN (1996) 11 SCC 648 HEAD NOTE OF THE SAID JUDGEMENT READS AS UNDER:- SALES TAX-- BEST JUDGMENT ASSESSMENTNECESSARY IF STOCK BOOK NOT MAINTAINED AS PER S.12(2)OMISSION TO MAINTAIN STOCK BOOKS IN ACCORDANCE WITH S.12(2) OF THE U.P.SALES TAX ACT, HELD, IS NOT ONLY A TECHNICAL DEFECT BUT RENDERS THE ACCOUNT BOOKS DOUBTFULHENCE, IN SUCH A CASE THE TURNOVER SHOULD BE DETERMINED TO THE BEST JUDGMENT OF THE ASSESSING AUTHORITY WHO ON THE FACTS OF A PARTICULAR CASE SHOULD CONSIDER ALONG WITH OTHER MATERIALS DISCLOSED IN THE CASE THE EXTENT OF RELIABILITY OF THE ACCOUNT BOOKSU.P. SALES TAX ACT, 1948 (15 OF 1948) SS. 12(2) AND 7(3)ASSESSMENT. IN THE APPELLANTS CASE TURNOVER SHOWN BY THE APPELLANT HAS BEEN ACCEPTED. FURTHER, THE APPELLANT HAS BEEN OBTAINING ITS STOCK-IN- TRADE FROM THE TWO SOURCES VIZ. CARPET PURCHASES FROM THE MARKETS AND CARPETS GOT WOVEN FROM THE KARGARS. THE APPELLANT HAD MAINTAINED CARPET PURCHASE REGISTER AND ALSO REGISTER KNOWN AS PRODUCTION REGISTER/WEAVING REGISTER, IN THE FORM MENTIONED AT SL. NO.(E) AND (F) OF PARA 29 HEREINFORE. THE QUANTITATIVE TALLY OF THE STOCKS SO PROCURED IS AVAILABLE AND THE SAME FORMS PART OF THE AUDITED STATEMENT OF ACCOUNTS, AS WELL AS THE TAX AUDIT REPORT (AS PREPARED BY THE AUDITORS AFTER DUE VERIFICATION FROM THE SUBSIDIARY RECORDS AS MAINTAINED BY THE APPELLANT). THEREFORE THIS CASE LAW IS ALSO NOT APPLICABLE HERE. 47. FURTHER, IN SUPPORT OF REJECTION OF ACCOUNTS, T HE ACIT HAS ALSO REFERRED TO AND RELIED UPON A DECISION OF HON BLE SUPREME COURT IN THE CASE REPORTED IN 158 TAXMAN 71, CORRESPONDIN G CITATION OF WHICH IS KACHWALA GEMS VS. JT. CIT REPORTED IN (2007) 288 IT R 10 . WITH GREAT RESPECT, IT IS SUBMITTED THAT THE SAID C ASE WAS ALSO A PRECEDENT ON ITS OWN FACTS, WHOLLY DIFFERENT FROM T HE FACTS OF THE APPELLANTS CASE, THEREFORE NOT APPLICABLE. THIS CA N BE EASILY SEEN FROM AN ANALYSIS THEREOF, AS GIVEN HEREUNDER:- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 48 SL. NO. GROUND OF REJECTION IN THE CASE OF KCHWALA GEMS (AS REFERRED TO BY THE ASSESSING OFFICER). FACTS OF THE APPELLANTS CASE 1. THE ASSESSEE HAS NOT MAINTAINED AND KEPT ANY QUANTITATIVE DETAILS/STOCK REGISTER FOR THE GOODS TRADED IN BY THE ASSESSEE. COMPLETE QUANTITATIVE TALLY OF RAW MATERIAL AND FINISHED PRODUCTS IS MAINTAINED AS IS VERIFIABLE FROM THE AUDITORS REPORT ALSO GIVEN IN FORM 3CD. ALL SUCH DETAILS ARE FULLY VERIFIABLE FROM PRODUCTION/WEAVING REGISTER AS MENTIONED AT SERIAL NO.F OF PARA 29. THEREFORE FACTS OF THE APPELLANTS CASE ARE QUITE DISTINGUISHABLE FROM THE FACTS OF THE INSTANT CASE AND SAME CANNOT BE RELIED UPON FOR REJECTION OF THE APPELLANTS BOOKS OF ACCOUNT BY INVOKING SECTION 145(3) OF THE ACT. 2. THERE IS NO EVIDENCE ON RECORD OR DOCUMENT TO VERIFY THE BASIS OF THE VALUATION OF THE CLOSING STOCK SHOWN BY THE ASSESSEE. THE ASSESSEE IS NOT ABLE TO PREPARE SUCH DETAILS EVEN WITH THE HELP OF BOOKS OF ACCOUNT MAINTAINED, PURCHASE BILLS AND SALE INVOICES. CLOSING STOCK OF FINISHED CARPETS AS WELL AS UNFINISHED CARPETS ARE CLEARLY SHOWN IN THE BOOKS OF ACCOUNTS OF THE APPELLANT ALONG WITH QUANTITY AND RATE APPLIED FOR VALUATION OF CLOSING STOCK OF DIFFERENT QUALITIES OF CARPETS. THIS IS ALSO VERIFIABLE FROM THE AUDIT REPORT FOR THE RELEVANT YEAR ENDED ON 31.03.2005 DULY SIGNED AND VERIFIED BY THE AUDITORS. SUCH VALUE AS ASSIGNED BY THE APPELLANT HAD NOT EVEN BEEN DISPUTED BY THE ACIT THEREFORE FACTS OF OUR CASE ARE QUITE DISTINGUISHABLE FROM THE FACTS OF THE CASE REFERRED TO BY THE ACIT AND SAME CANNOT BE RELIED FOR REJECTION OF OUR BOOKS. 3. PROVISIONS OF SECTION 145(3) ARE CLEARLY ATTRACTED IN THIS CASE. AS NONE OF THE TWO GROUNDS AS REFERRED TO AT SERIAL NO. 1 & 2 ABOVE, ARE APPLICABLE HERE, THE PROVISIONS OF SECTION 145(3) CAN ALSO NOT BE INVOKED. THIS IS IN ADDITION TO THE DETAILED SUBMISSIONS MADE BY THE APPELLANT IN PARAS.TO.. HEREINFORE. 4. THE GENUINENESS OF PURCHASES TO THE EXTENT OF RS.42 LAKHS (APPROX) IS NOT PROVED ALL THE PURCHASES MADE ARE FULLY VERIFIABLE FROM CARPET PURCHASE REGISTER AND THE CARPETS THAT GOT MANUFACTURED FROM PRODUCTION REGISTER/WEAVING REGISTER AS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 49 WITHOUT ANY DOUBT. MENTIONED AT SERIAL NO. E & F O F PARA 29 HEREINFORE AND SAME HAVE BEEN ACCEPTED ALSO BY THE ACIT AND NO ADVERSE INFERENCE HAS BEEN DRAWN IN THE ASSESSMENT ORDER ON THIS ISSUE. 5. THE GP RATE DECLARED BY THE ASSESSEE AT 13.49 PER CENT, DURING THE ASSESSMENT YEAR IS NOT A MATCH TO THE RESULT DECLARED BY ITSELF IN THE PREVIOUS ASSESSMENT YEARS. RESULTS FOR THE EARLIER TWO YEARS ARE NOT COMPARABLE WITH THE YEAR UNDER APPEAL BECAUSE OF SMALLNESS OF LEVEL OF OPERATIONS IN THOSE YEARS. IN ANY CASE REASONS FOR FALL IN G.P. RATE HAVE BEEN EXPLAINED BY MATERIAL & DOCUMENTARY EVIDENCES AS HAVE BEEN DEALT WITH IN PARAS. HEREINFORE. FURTHER THE G.P. RATE COMPARES WELL WITH THE ASSESSMENT YEARS 2008-09 & 2009-10 AS DISCUSSED IN PARA.. HEREINFORE. 6. M/S GEM PLAZA, ENGAGED IN LOCAL SALES OF SIMILAR GOODS DECLARED VOLUNTARILY THE RATE OF 35% IN ITS ASSESSMENT FOR THE ASSESSMENT YEAR 1997- 98. THERE IS NO SUCH COMPARABLE CASE HERE AS NONE HAS BEEN CITED BY THE ACIT, NOR CONFRONTED TO THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ON THE OTHER HAND, EVEN THE REDUCED G.P. RATE DISCLOSED BY THE APPELLANT THROUGH ITS VERIFIABLE ACCOUNTS, IS MUCH BETTER THAN THAT OF THE CASE AS DECIDED BY THE ACIT HIMSELF; PARTICULARS OF SUCH CASES BEING GIVEN INFRA. 7. M/S DHADDA EXPORTS, ANOTHER ASSESSEE DEALING IN THE SAME ITEMS, BUT DOING EXPORT BUSINESS DECLARED A GP RATE OF 43.8 PERCENT, (EVEN WITHOUT CONSIDERING THE VALUE OF EXPORT INCENTIVES) IN THE ASSESSMENT YEAR 1997- 98. PARTICULARS OF SUCH COMPARABLE CASES (SO CALLED) HAVE NOT BEEN GIVEN IN THE ASSESSMENT ORDER AND THE SAME WERE NOT CONFRONTED ALSO TO THE APPELLANT DURING THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS. THEREFORE, PRINCIPLE LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF K.T. SHADULI AS REPORTED IN AIR 1977 (SC) 1627 IS SQUARELY APPLICABLE. IN CASE, DETAILS OF COMPARABLE CASES (SO CALLED) ARE MADE AVAILABLE TO THE APPELLANT, IT IS STILL PREPARED TO DEMONSTRATE AS TO HOW THE SAME ARE NOT APPLICABLE IN THE CASE OF THE APPELLANT . 48. FROM THE DISCUSSIONS MADE IN PARAS 46 & 47 HERE INFORE, DEALING WITH VARIOUS CASE LAWS AS HAVE BEEN REFERRE D TO AND RELIED ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 50 UPON BY THE ASSESSING OFFICER, IT BECOMES IMMEDIATE LY EVIDENT THAT COMPARISON HAVE BEEN MADE BY THE ACIT IN A VERY MUNDANE MANNER, WITHOUT HAVING ANY REGARD TO THE FACT OF TH E SAID CASES AND PRINCIPLE LAID DOWN THEREIN. FROM CASE-WISE ANALYS IS AS GIVEN ABOVE, IT WILL BE SEEN THAT THE PRINCIPLE THAT EMERGES IS THAT WHERE MANUFACTURING DETAILS, CONSUMPTION OF RAW MATERIAL AND PRODUCTION OBTAINED THERE FROM AND PURCHASES AND SALES ARE NOT VERIFIABLE, THE ACCOUNTS MAINTAINED BY AN ASSESSEE CANNOT BE SAID T O BE RELIABLE, CALLING FOR REJECTION OF THE SAME. IN THE APPELLANT S CASE, A VERY COMPREHENSIVE RECORD FOR CONSUMPTION OF RAW MATERIA L WITH REFERENCE TO EACH LOT OF CARPETS GOT WOVEN FROM THE KARIGARS, HAS BEEN MAINTAINED AS ALSO OF THE PRODUCTION OBTAINED THERE FROM, AS MAY VERY KINDLY BE SEEN FROM THE PRODUCTION REGISTER/WEAVING REGISTER AS GIVEN AT SL.NO. F OF PARA 33 HEREINFORE. PURCHASES OF CARPETS, OTHER THAN THE CARPETS WOVEN THROUGH THE KARIGARS, ARE VERIFIABLE FROM PURCHASE REGISTER AS MENTIONED AT SL. NO. F OF PARA 33 . SALES OF CARPETS ARE SUPPORTED BY RELATED SALES BILLS/BILL OF LADING ETC ., AS REFERRED TO IN PARA 37 ABOVE. QUANTITATIVE TALLY OF FINISHED GOODS, SEMI- FINISHED GOODS AS ALSO RAW MATERIAL ARE AVAILABLE AND THE SA ME HAS BEEN REFERRED TO, ALSO IN THE TAX AUDIT REPORT IN THE PR ESCRIBED MANNER. NO DEFECT OR DISCREPANCY HAS BEEN FOUND IN SUCH RECORD S AND NOTHING HAS BEEN SPECIFIED BY THE ASSESSING OFFICER. 49. IN REFERRING TO THE CATENA OF CASE LAWS, EACH O NE OF WHICH HAS BEEN DEALT WITH IN PARAS 46 & 47 HEREINFORE, THE ACIT HAS EVEN VIOLATED THE WELL LAID RULE OF FOLLOWING A PRECEDE NCE, AS LAID DOWN BY THE HONBLE APEX COURT IN THE CASES OF; (I) CIT VS SUN ENGINEERING WORKS REPORTED IN (1992) 198 ITR 297 (SC) WHEREIN IT WAS HELD THAT; IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OU T A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT, DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE LAW DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAVE T O BE CONSIDERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 51 THIS COURT. A DECISION OF THIS COURT TAKES ITS COL OUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS R ENDERED AND WHILE APPLYING THE DECISION TO A LATER CASE, TH E COURTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT, DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THI S COURT., TO SUPPORT THEIR REASONINGS. IN MADHAV RAO JIVAJI RAO SCINDIA BAHADUR VS. UNION OF INDIA (1971 ) 3 SCR 9; AIR 1971 SC 530, THIS COURT CAUTIONED (AT PA GE 578 OF AIR 1971 SC): IT IS NOT PROPER TO REGARD A WORD, A CLAUSE OR A SENTENCE OCCURRING IN A JUDGMENT OF THIS SUPREME COURT, DIVORCED FROM ITS CONTEXT, AS CONTAINING A FULL EXPOSITION OF THE LAW ON A QUESTION WHEN THE QUESTION DID NOT EVEN FALL TO BE ANSWERED IN THAT JUDGMENT. (PAGE 320) (II) UNION OF INDIA AND OTHERS VS. DHANWANTI DEVI & OTHERS REPORTED IN 1996 (VOL.VI) SCC 44. WHEREIN THEIR LORDSHIPS WERE PLEASED TO LAID DOWN AS UNDER:- A DECISION IS ONLY AN AUTHORITY FOR WHAT IT ACTUALLY DECIDES. WHAT IS OF THE ESSENCE IN A DECISION IS ITS RATIO AND NOT EVERY OBSERVATION FOUND THEREIN NOR WHAT LOGICALLY FOLLOWS FROM THE VARIOUS OBSERVATIONS MADE IN THE JUDGMENT. EVERY JUDGMENT MUST BE READ AS APPLICABLE TO THE PARTICULAR FACTS PROVED, OR ASSUMED TO BE PROVED, SINCE THE GENERALITY OF THE EXPRESSIONS WHICH MAY BE FOUND THERE IS NOT INTENDED TO BE EXPOSITION OF THE WHOLE LAW, BUT GOVERNED AND QUALIFIED BY THE PARTICULAR FACTS OF THE CASE IN WHICH SUCH EXPRESSIONS ARE TO BE FOUND. IT WOULD, THEREFORE, BE NOT PROFITABLE TO EXTRACT A SENTENCE HERE AND THERE FROM THE JUDGMENT AND TO BUILD UPON IT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 52 BECAUSE THE ESSENCE OF THE DECISION IS ITS RATIO AN D NOT EVERY OBSERVATION FOUND THEREIN. ( PAGE-47) (III) AMBICA QUARRY WORKS VS. STATE OF GUJRAT & OTHERS REPORTED IN 1987 (VOL.I) SCC 213 WHEREIN IT HAS BEEN HELD THAT; 18. THE AFORESAID OBSERVATIONS HAVE BEEN SET OUT IN DETAIL IN ORDER TO UNDERSTAND THE TRUE RATIO OF THE SAID DECISION IN THE BACKGROUND OF THE FACTS OF THAT CASE. IT IS TRUE THAT THIS COURT HELD THAT IF THE PERMISSION HAD BEEN GRANTED BEFORE THE COMING INTO OPERATION OF THE 1980 ACT AND THE FOREST LAND HAS BEEN BROKEN UP OR CLEARED, CLAUSE (II) OF SECTION 2 OF 1980 ACT WOULD NOT APPLY IN SUCH A CASE. BUT THAT DECISION WAS RENDERED IN THE BACKGROUND OF THE FACTS OF THAT CASE. THE RATIO OF ANY DECISION MUST BE UNDERSTOOD IN THE BACKGROUND OF THE FACTS OF THAT CASE. IT HAS BEEN SAID LONG TIME AGO THAT A CASE IS ONLY AN AUTHORITY FOR WHAT IT ACTUALLY DECIDES, AND NOT WHAT LOGICALL Y FOLLOWS FROM IT. (SEE LORD HALSBURY IN QUINN V. LEATHEM). BUT IN VIEW OF THE MANDATE OF ARTICLE 141 THAT THE RATIO OF THE DECISION OF THIS COURT IS A LAW OF THE LAND, SHRI GOBIND DAS SUBMITTED THAT THE RATIO OF A DECISION MUST BE FOUND OUT FROM FINDING OUT IF THE CONVERSE WAS NOT CORRECT. BUT TH IS COURT, HOWEVER, WAS CAUTIONS IN EXPRESSING THE REASONS FOR THE SAID DECISION IN STATE OF BIHAR V. BANSHI RAM MODI. THIS COURT OBSERVED IN THAT DECISION THAT THE RESULT OF TAKING THE CONTRARY VIE W WOULD BE (SCC P.648, PARA 10) THAT WHILE THE DIGGING FOR PURPOSES OF WINNING MICA CAN GO ON, THE LESSEE WOULD BE DEPRIVED OF COLLECTING FELSPAR OR QUARTZ WHICH HE MAY COME ACROSS WHILE HE IS CARRYING ON MINING OPERATIONS FOR WINNING MICA. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 53 THAT WOULD LEAD TO AN UNREASONABLE RESULT WHICH WOULD NOT IN ANY WAY SUBSERVE THE OBJECT OF THE ACT. THERE WAS AN EXISTING LEASE WHERE MINING OPERATION WAS BEING CARRIED ON AND WHAT WAS DUE BY INCORPORATION OF A NEW TERM WAS THAT WHILE MINING OPERATIONS WERE BEING CARRIED ON SOME OTHER MINERALS WERE AVAILABLE, HE WAS GIVING RIGHT TO COLLECT THOSE. THE NEW LEASE ONLY PERMITTED UTILISATION OR COLLECTION OF THE SAID OTHER MINERAL S. ( 221 ) 50. AS THE ASSESSING OFFICER HAS BEEN LARGELY INFLU ENCED BY THE CASE LAWS REFERRED TO IN PARAS 46 & 47 HEREINFORE, WHICH ARE DISTINGUISHABLE ON FACTS AND NOT RELEVANT IN THE PR ESENT CASE, HIS FINDINGS ARE VITIATED, AS PER THE PRINCIPLE LAID DO WN BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. S.P. JAIN REPORTED IN (1973) 87 ITR 370 WHEREIN THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER:- THE HIGH COURT AND THE SUPREME COURT HAVE ALWAYS T HE JURISDICTION TO INTERFERE WITH THE FINDINGS OF THE APPELLATE TRIBUNAL IF IT APPEARS THAT EITHER THE TRIBUNAL HAS MISUNDERSTOOD THE STATUTORY LANGUAGE, BECAUSE THE P ROPER CONSTRUCTION OF THE STATUTORY LANGUAGE IS A MATTER OF LAW, OR IT HAS ARRIVED AT A FINDING BASED ON NO EVIDENCE OR WH ERE THE FINDING IS INCONSISTENT WITH THE EVIDENCE OR CONTRA DICTORY OF IT, OR IT HAS ACTED ON MATERIAL PARTLY RELEVANT AND PAR TLY IRRELEVANT OR WHERE THE TRIBUNAL DRAWS UPON ITS OWN IMAGINATIO N AND IMPORTS FACTS AND CIRCUMSTANCES NOT APPARENT FROM T HE RECORD OR BASES ITS CONCLUSIONS ON MERE CONJECTURES OR SUR MISES OR WHERE NO PERSON JUDICIALLY ACTING AND PROPERLY INST RUCTED AS TO THE RELEVANT LAW COULD HAVE COME TO THE DETERMINATI ON REACHED. IN ALL SUCH CASES THE FINDINGS ARRIVED AT ARE VITIA TED. (P. 372 ) BEST JUDGMENT ASSESSMENT : 51. IN ANY CASE AND WITHOUT CAUSING IN ANY MANNER A NY PREJUDICE TO NON-APPLICABILITY OF VARIOUS CASE LAWS REFERRED TO IN THE IMPUGNED ASSESSMENT ORDER, AS HAVE BEEN DEALT WITH IN PARAS 46 TO 50, IT IS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 54 STATED THAT REJECTION OF BOOKS OF ACCOUNT IS NOT TH E END OF THE MATTER. THEREAFTER, A BEST JUDGMENT ASSESSMENT HAS TO BE MADE , WHICH SHOULD NECESSARILY BE BASED ON MATERIAL , THE TERM THAT HAS BEEN DEFINED IN UMPTEEN NUMBER OF CASE LAWS. SUFFICE IT TO REFER TO THE FOLLOWING PASSAGE; MATERIAL OR EVIDENCE WHAT IT IS? THE WORD EVIDENCE AS USED IN SECTION 143 (3) OBVIOUSLY CANNOT BE CONFINE D TO DIRECT EVIDENCE. THE WORD IS COMPREHENSIVE ENOUGH TO COVER CIRCUMSTANTIAL EVIDENCE (PARAS DASS MUNNA LAL V. CI T (1937) 5 ITR 523, 526 (LAH). ALSO SEE, HOMI JEHANGIR GHEES TA V CIT (1961) 41 ITR 135, 142 (SC); CIT V KAMESHWAR SINGH (1933) 1 ITR 94, 106 (PC); KANHAIYA LAL UMRO SINGH VS. CIT (1941) 9 ITR 225, 239 (OUDH);, CHATURBHUJ V. CIT 9 ITR 286 , 291 (OUDH), LAL MOHAN KRISHNA LAL PAUL V. CIT (1944) 12 ITR 441 (CAL); ABDULLABHAI ABDUL KADAR V. CIT (1953) 22 ITR 241 (BOM). THE WORD EVIDENCE HAS BEEN USED IN THAT SEC TION IN A WIDER SENSE [CIT V KHEMCHAND RAMDAS (1940) 8 ITR 15 9, 176 (SIND) OR THE GENERIC SENSE, AND NOT IN THE ARRESTE D SENSE SO AS TO BE EITHER ORAL OR DOCUMENTARY EVIDENCE OR BOTH [ CIT V. METAL PRODUCTS OF INDIA, (1984) 150 ITR 714, 717 (P UN)]. WHILE THE WORD EVIDENCE MAY RECALL THE ORAL AND DOCUMENTARY EVIDENCE AS MAY BE ADMISSIBLE UNDER THE INDIAN EVIDENCE ACT, THE USE OF THE WORD MATERIAL IN SEC TION 143 (3) SHOWS THAT THE ASSESSING OFFICER NOT BEING A COURT, CAN RELY UPON MATERIAL, WHICH MAY NOT STRICTLY BE EVIDENCE A DMISSIBLE UNDER THE INDIAN EVIDENCE ACT, FOR THE PURPOSE OF M AKING AN ORDER OF ASSESSMENT. COURT OFTEN TAKES JUDICIAL NOT ICE OF CERTAIN FACTS WHICH NEED NOT BE PROVIDE, WHILE ADMINISTRATI VE AND QUASI JUDICIAL AUTHORITIES CAN TAKE OFFICIAL NOTICE OF WIDER VARIETIES OF FACTS WHICH NEED NOT BE PROVED BEFORE THEM. THUS, NOT ONLY IN RESPECT OF THE RELEVANCY BUT ALSO IN RE SPECT OF PROOF THE MATERIAL WHICH CAN BE TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER AND OTHER AUTHORITIES UNDER THE A CT IS FOR WINDER THAN THE EVIDENCE WHICH IS STRICTLY RELEVANT AND ADMISSIBLE UNDER THE EVIDENCE ACT (ADDL. CIT V. JAY ENGINEERING WORKS LTD. (1978) 113 ITR 389, 391 (DEL )] ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 55 IN MAKING AN ASSESSMENT, THE ASSESSING OFFICER DOES NOT ACT MERELY ON WHAT IS TECHNICALLY DESCRIBED AS EVIDENC E IN THE INDIAN EVIDENCE ACT. IT MAY BE SEEN FROM SECTIONS 1 42 AND 143 THAT HE MAY ALSO ACT ON THE MATERIAL GATHERED BY HIM. THE WORK MATERIAL CLEARLY SHOWS THAT THE ASSESSING OF FICER IS NOT FETTERED BY THE TECHNICAL RULES OF EVIDENCE AND THE LIKE, AND THAT HE MAY ACT ON MATERIAL WHICH MAY NOT, STRICTLY SPEA KING, BE ACCEPTED AS EVIDENCE IN A COURT OF LAW [VIMAL CHAND RA GOLECHA V. ITO (1982) 134 ITR 119, 130 (RAJ)] MATERIAL OR EVIDENCE ON WHICH TAXING AUTHORITIES MA Y RELY UNDER THE INCOME-TAX ACT IS NOT CONFINED TO DIRECT TESTIMONY IN THE SHAPE OF STATEMENTS MADE BY WITNESSES. ALL RELE VANT CIRCUMSTANCES WHICH HAVE A BEARING ON THE ISSUE WHI CH ARE REVEALED IN THE COURSE OF THE ASSESSMENT, WOULD BE COVERED BY THE EXPRESSION MATERIAL OR EVIDENCE ON WHICH THE I NCOME-TAX OFFICER COULD RELY [MANGALCHAND GOBARDHAR DAS V. C IT (1954) 26 ITR 706, 710-1 (ASSAM)]. SECTION 143 (3) IS NOT EXHAUSTIVE OR DEFINITIVE OF THE MATERIAL ON WHICH A N ASSESSMENT MAY BE BASED. THE MATERIAL ON WHICH RELIANCE MAY BE PLACED BY THE ASSESSING OFFICER, MAY BE WITHIN HIS OWN KNO WLEDGE AND MIGHT HAVE BEEN DERIVED BY HIM FROM HEARSAY OR FROM INFORMATION OF A MOST AUTHENTIC CHARACTER. ASSESSME NT MAY BE BASED ON ALL SUCH INFORMATION AND MATERIAL EVEN THO UGH IT MAY NOT BE EVIDENCE WITHIN THE MEANING OF THE INDIAN EVIDENCE ACT AND MAY BE MERELY SECONDARY OR HEARSAY EVIDENCE WIT HIN THE MEANING OF THAT ACT, PROVIDED THE ASSESSEES ATTENT ION HAS BEEN DRAWN TO THAT INFORMATION OR MATERIAL AND THE RULES OF NATURAL JUSTICE ARE NOT VIOLATED [SETH GURMUKH SINGH V CIT (1944) 12 ITR 393, 425 (LAH); GANGA RAM BALMOMAND V. CIT (193 7) 5 ITR 464, 484-5 (LAH)] (AS APPEARING IN CHATURVEDI AND PITHISARIAS, INCOME TAX LAW FIFTH EDITION, VOL.3 (1999)PAGE 4813 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 56 52. THE HONBLE HIGH COURT ALSO IN THE CASE OF AWADHESH PRATAP SINGH ABDUL REHMAN AND BROTHERS V. CIT REPORTED IN (1994) 210 ITR 406 HAS ALSO LAID DOWN SPECIFICALLY THAT AFTER REJECT ION OF ACCOUNT, THE ASSESSMENT HAS TO BE MADE AS PER THE P ROVISIONS OF LAW; SUCH PROVISIONS BEING CONTAINED IN SECTION 144(1) OF THE ACT, WHICH AS A WHOLE IS REPRODUCED HEREUNDER:- BEST JUDGMENT ASSESSMENT. 144. (1) IF ANY PERSON (A) FAILS TO MAKE THE RETURN REQUIRED UNDER SUB- SECTION (1) OF SECTION 139 AND HAS NOT MADE A RETURN OR A REVISED RETURN UNDER SUB-SECTION (4) OR SUB-SECTION (5) OF THAT SE CTION, OR (B) FAILS TO COMPLY WITH ALL THE TERMS OF A NOTI CE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR FAILS TO COMPLY W ITH A DIRECTION ISSUED UNDER SUB-SECTION (2A) OF THAT SECTION, OR (C) HAVING MADE A RETURN, FAILS TO COMPLY WITH A LL THE TERMS OF A NOTICE ISSUED UNDER SUB-SECTION (2) OF SECTION 143, THE ASSESSING OFFICER, AFTER TAKING INTO ACCOUNT AL L RELEVANT MATERIAL WHICH THE ASSESSING OFFICER HAS GATHERED, SHALL, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, MAKE THE ASSESSMENT OF THE TOTAL INCOME OR LOSS TO THE BEST OF HIS JUDGMENT AND DETERMINE THE SUM PAYABLE BY THE ASSES SEE ON THE BASIS OF SUCH ASSESSMENT : PROVIDED THAT SUCH OPPORTUNITY SHALL BE GIVEN BY THE ASSESS ING OFFICER BY SERVING A NOTICE CALLING UPON THE ASSESS EE TO SHOW CAUSE, ON A DATE AND TIME TO BE SPECIFIED IN THE NO TICE, WHY THE ASSESSMENT SHOULD NOT BE COMPLETED TO THE BEST OF H IS JUDGMENT : PROVIDED FURTHER THAT IT SHALL NOT BE NECESSARY TO GIVE SUCH OPPORTUNITY IN A CASE WHERE A NOTICE UNDER SUB-SECT ION (1) OF SECTION 142 HAS BEEN ISSUED PRIOR TO THE MAKING OF AN ASSESSMENT UNDER THIS SECTION. (2) THE PROVISIONS OF THIS SECTION AS THEY STOOD IM MEDIATELY BEFORE THEIR AMENDMENT BY THE DIRECT TAX LAWS (AMEN DMENT) ACT, 1987 (4 OF 1988), SHALL APPLY TO AND IN RELATI ON TO ANY ASSESSMENT FOR THE ASSESSMENT YEAR COMMENCING ON TH E 1ST DAY ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 57 OF APRIL, 1988, OR ANY EARLIER ASSESSMENT YEAR AND REFERENCES IN THIS SECTION TO THE OTHER PROVISIONS OF THIS ACT SH ALL BE CONSTRUED AS REFERENCES TO THOSE PROVISIONS AS FOR THE TIME B EING IN FORCE AND APPLICABLE TO THE RELEVANT ASSESSMENT YEAR. 53. IN THE INSTANT CASE, THE SAID PROVISIONS FOR MA KING BEST JUDGEMENT ASSESSMENT, HAS NOT BEEN COMPLIED WITH AS NO MATERIAL, AS HAS BEEN DEFINED IN VARIOUS JUDICIAL PRONOUNCEME NTS AND REFERRED TO IN PARA 51 ABOVE, HAS BEEN COLLECTED AND, IF COLLECTED, THE S AME NOT BEEN CONFRONTED TO THE APPELLANT . ENHANCEMENT TO THE QUANTUM OF DISCLOSED GROSS PROFIT, WHICH WORKED OUT TO 22.40% HAS BEEN MADE AT A FLAT RATE OF 20% THEREOF, BY HOLDING IN 5.8 (AS H AS BEEN REPRODUCED IN PARA 23 HEREINFORE), HOWEVER, ENHANCEMENT OF INCOME BY 20% OF GP SHOWN BY THE ASSESSEE IS BEING DONE ON THE BASIS OF GP SHOWN BY THE OTHER COMPARABLE CASES OF THE SAME GROUP ENGAGE D IN THE SIMILAR TRADE IN THE SAME LOCALITY , BUT NO SUCH COMPARABLE CASE WAS EVER MADE AVAILABLE TO THE APPELLANT AT ANY STAGE. THIS FACT, UNCONTROVERTIBLE AS THE SAME IS, ITSELF GOES TO VIT IATE WHOLE OF THE ADDITION OF RS.4,35,51,668 AS HAS BEEN MADE IN THE ASSESSMENT IN VIEW OF THE DECISION IN LARGE NUMBER OF CASES. SUFFICE IT TO REFER HERE, THE FOLLOWING CASE LAWS (ALONGWITH GISTS THERE OF): - (I) COLONIZER VS. ACIT REPORTED IN 41 ITD 57 WHEREIN THE HONBLE MEMBERS OF THE SPECIAL BENCH OBSERVED AND HELD AS UNDER:- IN REGARD TO THE SECOND POINT OF DIFFERENCE, TWO SEGMENTS OF IT EXISTED. THE FIRST SEGMENT WAS AS TO WHETHER THE ADDITIONS MADE IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE SHOULD BE SET ASIDE A S VOID AB INITIO. THE SECOND SEGMENT WAS AS TO WHETHER THE ADDITION SHOULD BE DELETED OR SHOULD TH E CASE BE RESTORED TO THE ITO WITH A DIRECTION FOR RE - DOING. THE RULES OF NATURAL JUSTICE OPERATE AS IMPLIED MANDATORY REQUIREMENT, NON-OBSERVANCE OF WHICH AMOUNTS TO ARBITRARINESS AND DISCRIMINATION. THE PRINCIPLES OF NATURAL JUSTICE HAVE BEEN ELEVATE D TO THE STATUS OF FUNDAMENTAL RIGHTS GUARANTEED IN T HE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 58 CONSTITUTION AS IS EVIDENT FROM THE DECISION OF THE FULL BENCH OF THE SUPREME COURT IN THE CASE OF UNION OF INDIA V. TULSIRAM PATEL AIR 1985 SC 1416 AT P.1416, HOLDING THAT THE PRINCIPLES OF NATURAL JUSTICE HAVE THUS COME TO BE RECOGNISED AS BEING A PART OF THE GUARANTEE CONTAINED IN ARTICLE 14 OF TH E CONSTITUTION BECAUSE OF THE NEW AND DYNAMIC INTERPRETATION GIVEN BY THE SUPREME COURT TO THE CONCEPT OF EQUALITY WHICH IS THE SUBJECT MATTER OF THAT ARTICLE AND THAT VIOLATION OF PRINCIPLES OF NATURAL JUSTICE BY A STATE ACTION IS A VIOLATION OF ARTICLE 14. IN FACT, THE PRINCIPLES OF NATURAL JUSTICE, IN THE REALM OF LIFE AND LIBERTY, WOULD IPSO FACTO EVEN BE READ INTO ARTICLE 21 BECAUSE ANY PROCEDURE WHICH AFFECTED LIF E OR LIBERTY HAD TO BE A JUST, FAIR AND REASONABLE PROCEDURE WHICH NECESSARILY MEANT THE OBSERVANCE OF THE PRINCIPLES OF NATURAL JUSTICE. THAT IS WHY T HESE PRINCIPLES HAVE BEEN CALLED AS PART OF THE UNIVERSA L LAW, AS PART OF THE RULE OF LAW AND HAVE ALSO BEEN TERMED AS FAIR PLAY IN ACTION. AUTI ALTERAM PARTEM IS ONE OF THE FUNDAMENTAL PRINCIPLES OF NATURAL JUSTICE. A QUASI-JUDICIAL OR ADMINISTRATIVE DECISION RENDERED OR AN ORDER MADE IN VIOLATION OF THE RULE OF AUDI ALTERAM PARTEM IS NULL AND VOID AND THE ORDER MADE IN SUCH A CASE CAN BE STRUCK DOWN AS INVALID ON THAT SCORE ALONE MANEKA GANDHI V UNION OF INDIA AIR 1978 SC 597, GANGADHARAN PILLAI V ACED (1980) 126 ITR 256 AT PP 365 TO 367 (KER). IN OTHER WORDS, THE ORDER WHIC H INFRINGES THE FUNDAMENTAL PRINCIPLE, PASSED IN VIOLATION OF AUDI ALTERAM PARTEM RULE, IS A NULLITY WHEN A COMPETENT COURT OF AUTHORITY HOLD SUCH AN ORDER AS INVALID OR SETS IT ASIDE, THE IMPUGNED ORD ER BECOMES NULL AND VOID NOWABKHAN ABBASKHAN V ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 59 STATE OF GUJARAT AIR 1974 AT P 1479. IN THE LIGHT O F THESE DECISIONS, THE ADDITIONS MADE BY THE ASSESSIN G OFFICER IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE HAD TO BE SET ASIDE AS VOID ONLY INSOFAR AS THE ADDITIONS BY WAY OF CASH CREDITS ALONE WERE CONCERNED, WHICH WERE SEPARABLE FROM THE OTHER ADDITIONS IN THE ORDER THAT WERE NOT CHALLENGED. (II) STATE OF KERALA VS. K.T. SHADULI REPORTED IN AIR 19 77 S.C. 1627 WHEREIN THEIR LORDSHIPS HAVE RELIED AS UNDER:- THE SECOND PART OF THE PROVISO LAYS DOWN THAT WHERE A RETURN HAS BEEN SUBMITTED, THE ASSESSEE SHOULD BE GIVEN A REASONABLE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF SUCH RETURN. THE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMPLETENESS OF THE RETURN WOULD NECESSARILY CARRY WITH IT THE RIGHT TO EXAMINE WITNESSES AND THAT WOULD INCLUDE EQUALLY THE RIGHT TO CROSS-EXAMINE WITNESS EXAMINED BY THE SALES TAX OFFICER (PARA 5) (PAGE 1628) 54. IN ORDER TO BE VERY CANDID IN ITS SUBMISSIONS, THE APPELLANT ITSELF HAS COLLECTED THE DETAILS OF CARPET INTERNATIONAL PVT. LTD ., WHICH WAS BEING RUN BY THE FAMILIES OF TWO BROTHERS (AS S TATED IN DETAIL IN THE STATEMENT OF FACTS) TILL 31.3.2008 . THEIR PREMISES WERE ALSO SUBJECTED TO SEARCH & SEIZURE ACTION UNDER SECTION 132(1) AS PER PARTICULARS GIVEN AT SERIAL NO.(I), IN OPENING PARAGRAPH. IT IS NOW AVAILABLE IN THE FORM OF ORDER DATED 23.6.2011 PASSED BY YOUR HONOUR IN THE CASE OF CARPET PALACE FOR THE ASSESSMENT YEAR 2005-06 ITSELF. ON PAGE 8, THE GROSS PROFIT RATES AS HAD BEEN APPLIED BY THE SAME ASSESSING OFFICER IN THE CASE OF CARPET INTERNATIONAL PVT. LTD., HAVE BEEN GIVEN, WHICH ARE AS UNDER:- ASSESSMENT YEAR GROSS PROFIT RATE APPLIED BY THE ASSESSING OFFICER 2005-06 11.90% 2006-07 14.02% 2007-08 12.64% ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 60 2008-09 13.85% 2009-10 4.68% FROM THIS IT IS BORNE OUT, THE APPELLANT REGRETFULL Y STATES, THAT THE BASIS GIVEN BY THE ACIT FOR ENHANCING THE GROSS PRO FIT SHOWN BY THE APPELLANT, BY 20% THEREOF IS FALSE. IF SUCH FALSEHOOD ALONE IS EXCLUDED, THEN ALSO THERE REMAINS NO BASIS WHATSOEV ER TO MAKE THE IMPUGNED ADDITION . A COPY OF THE SAID APPELLATE ORDER DATED 23.6.2011 IS ENCLOSED HEREWITH, AT PAGES 317 TO 328. 55. IN THE IMPUGNED ASSESSMENT ORDER, THE LD. ASSES SING OFFICER HAS ALSO OBSERVED THAT BOOKS OF ACCOUNT WERE NOT FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTION. IT IS STATED THAT TH E APPELLANT HAS BEEN FOLLOWING A VERY DETAILED PROCEDURE IN THE MATTER O F RECORDING ITS DAY- TO-DAY TRANSACTIONS, FROM WHERE THE INFORMATION IS FED IN THE COMPUTER WHICH 11 IN NUMBERS WERE FOUND INSTALLED AT BY-PASS ROAD, HARION, BHADOHI, AS IS EVIDENT FROM THE PANCHNAMA PREPARED BY THE AUTHORISED OFFICERS AT THE TIME OF SEARCH AND SEIZU RE ACTION. THE AUTHORISED OFFICERS HAD EXAMINED THE DATA THAT WERE AVAILABLE IN THE COMPUTER INSTALLATION (CONSISTING OF 11 COMPUTERS) AS FOUND AT BYE PASS ROAD, HARYAUN, BHADOHI, WITH THE BOOKS OF ACCO UNT AND OTHER RECORDS AS WERE AVAILABLE AT THE SAID PREMISES. IT IS FOR THIS REASON, THAT THE COMPUTERS WERE NEITHER SEALED NOR SOFT COP IES FROM THE HARD DISK OF THE COMPUTERS WERE TAKEN. THE SAID COMPUTE R CONTAINS ONLINE DATA OF THE TURNOVER ALSO AND LOOKING TO C OMPLETE VERIFIABILITY OF THE SAME, THE AUTHORISED OFFICERS DID NOT EFFECT ANY SEIZURE EITHER OF THE BOOKS OF ACCOUNT EXCEPT THOSE MENTIONED IN THE PANCHNAMA NOR OF THE COMPUTERS. IN SUPPORT OF THIS CONTENTION, THE APPELLANT BEGS TO SUBMIT HEREWITH AN AFFIDAVIT OF SHRI PRAMOD KUMAR B ARANWAL, WHO HAS BEEN PARTNER EVEN IN ERSTWHILE FIRM THAT CAME I NTO EXISTENCE ON 01.05.1996 THE MAJOR PARTNER OF THE APPELLANT FIRM, WHO WAS PRESENT AT THE TIME OF SEARCH AND SEIZURE ACTION. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 61 56. WITH REFERENCE TO THE AVERMENTS MADE IN THE AFF IDAVIT REFERRED TO IN THE FOREGOING PARAGRAPH, THE APPELLANT BEGS T O PRODUCE BEFORE YOUR HONOR THE BOOKS OF ACCOUNT AND OTHER RECORDS T HAT HAD BEEN MANUALLY KEPT BY THE APPELLANT ON DAY TO DAY BASIS (WHICH HAD BEEN PERUSED ALSO BY THE AUTHORISED OFFICERS, AND COMPAR ED WITH THE DATA AVAILABLE IN THE COMPUTER INSTALLED AT THE TIME OF SEARCH AND SEIZURE ACTION). 11. THE LD. CIT(A), CONSIDERING THE EXPLANATION OF THE ASSESSEE AND THE MATERIAL ON RECORD IN THE LIGHT OF THE FINDINGS OF LD. A.O., DELETED THE ENTIRE ADDITION OF RS.4,35,51,668/- AND ALSO ACCEPTED THE BOOK RESULT OF THE ASSESSEE. FINDINGS OF THE LD. CIT(A) IN PARA 27 TO 42 OF THE IMPUGNED ORDER A RE REPRODUCED AS UNDER : 27. I HAVE CAREFULLY CONSIDERED THE VIEW EXPRESSED BY THE ASSESSING OFFICER AS HAS BEEN SUMMARIZED BY HIM PAR AS 5.4 TO 5.8 OF HIS ORDER (WHICH HAS BEEN REPRODUCED IN PARA 13 ABO VE), MATERIAL AND INFORMATION ON RECORD AND THE SUBMISSIONS MADE BY T HE LD. COUNSEL FOR THE APPELLANT, TO COUNTER THE SAME, THROUGH WRI TTEN SUBMISSIONS AS GIVEN IN PARA 5 ABOVE, AS SUPPLEMENTED BY THE SUBMI SSIONS MADE VERBALLY AT THE TIME OF HEARING OF APPEAL. BEFORE PROCEEDING FURTHER, IT IS NECESSARY TO PERUSE SECTION 145 AS A WHOLE WH ICH IS REPRODUCED HEREUNDER:- METHOD OF ACCOUNTING. 145. (1) INCOME CHARGEABLE UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION OR INCOME FROM OTHER SOURC ES SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), BE COMPUTED I N ACCORDANCE WITH EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING REGU LARLY EMPLOYED BY THE ASSESSEE. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 62 (2) THE CENTRAL GOVERNMENT MAY NOTIFY IN THE OFFICI AL GAZETTE FROM TIME TO TIME ACCOUNTING STANDARDS TO BE FOLLOWED BY ANY CLASS OF ASSESSEES OR IN RESPECT OF ANY CLASS OF INCOME. (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUNTIN G STANDARDS AS NOTIFIED UNDER SUB-SECTION (2), HAVE NOT BEEN REGUL ARLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSM ENT IN THE MANNER PROVIDED IN SECTION 144. 28. FROM A PERUSAL OF THE SAID SECTION, IT WILL BE SEEN THAT WHERE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED, INCOME IS TO BE DETERMINED ON THE BASIS OF SUCH BOOKS OF ACCOUNT AND REJECTION OF THE SAME, BY INVOKING SUB-SECTION (3) CAN TAKE PLACE IN THE FOLL OWING SITUATION ONLY:- (A) WHERE THE ASSESSING OFFICER IS NOT SATISFIED AB OUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF TH E ASSESSEE; OR (B) WHERE THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IN A PARTICULAR YEAR IS NOT CONSISTENT WITH THE EARLIER YEARS; OR (C) ACCOUNTING STANDARDS AS NOTIFIED BY THE CENTRAL GOVT. HAVE NOT BEEN FOLLOWED BY THE ASSESSEE. IN THE PRESENT CASE THERE IS NO DISPUTE THAT SO FAR AS (B) AND (C) ARE CONCERNED, THE SAME ARE NOT APPLICABLE. THEREFORE, ONLY ISSUE THAT REMAINS TO BE CONSIDERED IS AS TO WHETHER THE ASSES SING OFFICER CAN JUSTIFIABLY BE HELD TO BE NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS. GOING FURTHER, COM PLETENESS OF ACCOUNTS IS ALSO NOT THE ISSUE RAISED BY THE ASSESS ING OFFICER. THUS, THE CORE ISSUE THAT REMAINS TO BE DECIDED IS AS TO WHETHER THERE CAN BE ANY LEGITIMATE GROUND FOR DISSATISFACTION OF THE AS SESSING OFFICER ABOUT THE CORRECTNESS OF THE BOOKS OF ACCOUNT. THR UST OF THE GROUNDS FOR REJECTION OF ACCOUNTS BY THE ASSESSING OFFICER, WHICH HAVE BEEN SOUGHT TO BE SUPPORTED BY HIM WITH VARIOUS CASE LAW S AS HAVE BEEN REFERRED TO IN PARAS 5.5, 5.6 & 5.8 (AND DEALT WITH BY THE APPELLANT IN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 63 PARAS 46 AND 47 OF WRITTEN SUBMISSIONS, AS HAVE BEE N REPRODUCED BY ME IN PARA 26 ABOVE) IS THAT (I) BOOKS OF ACCOUNT WERE NEITHER FOUND DURING THE COUR SE OF SEARCH AND SEIZURE ACTION UNDER SECTION 132(1), WHI CH TOOK PLACE ON 11.02.2009 (AT THE FAG END OF THE RELEVANT ACCOUNTING YEAR), NOR SUCH BOOKS OF ACCOUNT HAVE BEEN PRODUCED DURING THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS; (II) BOOKS OF ACCOUNT PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LACKED EVIDENTIARY VALUE IN THE ABSENC E OF BILLS/VOUCHERS/BASIC DOCUMENTS ON THE BASIS OF WHI CH BOOKS OF ACCOUNT WERE GENERALLY PREPARED. (III) THERE IS NO CO-RELATION BETWEEN CARPET MANUFACTURED BY THE APPELLANT AND MANUFACTURING EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT. (IV) THE ASSESSEES CONTENTION THAT QUANTITATIVE/QUALITA TIVE TALLY HAS BEEN FURNISHED IS NOT CORRECT. (V) THE ENQUIRY LETTERS SENT TO THE WEAVERS/CONTRAC TORS/CREDITORS HAVE BEEN RETURNED UNSERVED AND/OR REMAINED NON-COM PLIED WITH; AND (VI) DEDUCTION OF TAX AT SOURCE OUT OF PAYMENTS MAD E TO THE WEAVERS/CONTRACTORS ETC, CANNOT BE SAID TO BE CONCL USIVE PROOF OF CORRECTNESS OF CLAIM FOR DEDUCTION OF MANUFACTUR ING EXPENSES AS HAVE BEEN CLAIMED IN THE CONSOLIDATED T RADING AND PROFIT LOSS ACCOUNT. 29. I HAVE CAREFULLY EXAMINED VARIOUS ASPECTS OF TH E MATTER RELATED TO ADDITION OF RS.4,35,51,668/- WHICH HAS SIMPLY BE EN MADE BY ENHANCING THE DISCLOSED G.P. RATE BY 20%. IT IS AL SO SEEN THAT ENHANCEMENT @ 20% HAS BEEN MADE BY THE ASSESSING OF FICER RIGHT FROM THE ASSESSMENT YEAR 2005-06 TO 2009-10, IRRESP ECTIVE OF THE TURNOVER AND G.P. RATE DISCLOSED IN THE RESPECTIVE ASSESSMENT YEARS. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 64 AS A RESULT, THE G.P. RATE WHICH CAME TO BE APPLIED IN DIFFERENT YEARS IS AS UNDER:- TURNOVER GROSS PROFIT (RS.) G.P. RATE AS APPLIED BY THE ASSESSING OFFICER (AFTER MAKING ENHANCEMENT SL. NO. ASST. YEAR DISCLOSED (RS.) ACCEPTED IN THE ASSESSMENT (RS.) DISCLOSED (RS.) ACCEPTED IN THE ASSESSMENT (RS.) DISCLOSED (RS.) ACCEPTED IN THE ASSESSMENT (RS.) (I) 2005- 06 97,22,17,768 97,22,17,788 21,77,80,473 26,13,32,141 22.40% 26.88% (II) 2006- 07 60,71,16,199 60,71,16,199 13,61,26,630 16,33,14,258 22.42% 26.90% (III) 2007- 08 1,26,14,64,164 1,38,09,19,637 25,96,21,728 34,10,87 ,150 20.58% 27.04% (IV) 2008- 09* 1,24,46,99,320 1,42,90,20,150 23,57,24,829 32,48,16 ,280 18.94% 26.10% (V) 2009- 10* 77,20,41,617 87,53,06,477 8,13,76,218 11,07,26,269 10.54% 12.62% *NO SEPARATE ADDITION HAS BEEN MADE ON THIS SCORE F OR THE REASON THAT VARIOUS OTHER ADDITIONS/DISALLOWANCES HAVE BEEN MAD E IN THE RESPECTIVE ASSESSMENTS. 30. THE AFORESAID SCENARIO GOES TO SHOW THAT IRRESP ECTIVE OF FALL IN TURNOVER AND G.P. RATE IN DIFFERENT YEARS THE ASSES SING OFFICER HAS ADOPTED A STRAIT-JACKET FORMULE BY ENHANCING THE G. P. RATE BY 20%. THIS SHOWS THAT TRADING RESULTS HAVE BEEN INTERFERE D WITH IN A VERY CASUAL MANNER AND WITHOUT APPLICATION OF MIND. IT IS A SETTLED LAW THAT WHERE BOOKS OF ACCOUNT HAVE BEEN MAINTAINED AS SESSMENT HAS TO BE NECESSARILY MADE ON THE BASIS OF BOOKS OF ACCOUN T MAINTAINED BY AN ASSESSEE AND IN CASE REJECTION IS CALLED FOR THE N SUCH A REJECTION SHOULD BE BASED ON COGENT MATERIAL AND INFORMATION AVAILABLE ON RECORD OR CALCULATED THROUGH ENQUIRY. 31. THE ASSESSMENT YEAR 2005-06 (YEAR UNDER APPEAL) IS A TRANSITIONAL YEAR IN WHICH THE APPELLANT HAD SWITCH ED OVER TO ON- LINE-ACCOUNTING SYSTEM. AS THIS WAS THE FIRST YEA R FOR SUCH A CHANGE OVER, AS IS BORNE OUT FROM THE TAX AUDIT REPORT ALS O (WHICH WAS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 65 ALREADY ON RECORD AND WHICH WAS NOT HELD OR FOUND T O BE UNTRUE). THE RECORDS WERE KEPT MANUALLY AS WELL AS ON-LINE. IN FACT ON-LINE ACCOUNTING HAS BEEN MADE ON THE BASIS OF RECORDS KE PT MANUALLY. THE MAIN PLAN THE FOR REJECTION OF BOOKS OF ACCOUNT WAS THAT THE RECORDS KEPT MANUALLY WERE NOT FOUND DURING THE COURSE OF S EARCH AND THE SAME WERE NOT PRODUCED ALSO DURING THE COURSE OF AS SESSMENT PROCEEDINGS. THE APPELLANT THROUGH ITS MAIN PARTNE R SRI PRAMOD KUMAR BARANWAL HAD FILED AN AFFIDAVIT BEFORE ME, ST ATING THEREIN THAT ALL THE IMPORTANT RECORDS FROM WHICH VARIOUS COMPON ENTS OF TRADING ACCOUNT WERE FULLY VERIFIABLE HAD BEEN MAINTAINED A ND THE SAME WERE AVAILABLE AT THE TIME OF SEARCH AND SEIZURE ACTION UNDER SECTION 132(1). RELEVANT PARA OF THE SAID AFFIDAVIT WHICH IS PARA 11 IS REPRODUCED HEREUNDER:- 11. THAT SINCE VERY BEGINNING, THE APPELLANT FIRM HAD BEEN MAINTAINING THE BOOKS OF ACCOUNT MANUALLY AND W.E.F . 1.4.2004, IT CHANGED OVER TO ONLINE SYSTEM, ALONGWITH THE MAN UAL RECORDS. DURING THE COURSE OF SAID SEARCH AND SEIZURE ACTION AT THE BUSINESS PREMISES OF THE APPELLANT FIRM AS REFERRED TO ABOVE, APART FROM ONLINE MAINTENANCE OF ACCOUNTS THROUGH 1 1 COMPUTERS FOUND INSTALLED AT THE BUSINESS PREMISES AT BYE-PASS ROAD, HARIAON, BHADOHI, THE RECORDS KEPT MANUALLY W ERE ALSO FOUND WHICH INCLUDED A NUMBER OF SUBSIDIARY REGISTE RS SUCH AS; (I) CARPET PURCHASE REGISTER (II) PRODUCTION REGISTER / WEAVING REGISTER (III) WASHING CHARGES REGISTER (IV) STRETCHING CHARGES REGISTER (V) CLIPPING CHARGES REGISTER (VI) MAPS AND DESIGNING CHARGES REGISTER (VII) THIRD PACKING CHARGES REGISTER (VIII) PACKING EXPENSES REGISTER AND THE RECORDS SO KEPT AND MAINTAINED BY THE APPEL LANT FIRM WERE SUBJECTED TO VERIFICATION ALSO BY THE AUTHORIZ ED OFFICERS FROM THE COMPUTER INSTALLATION. HOWEVER, LOOKING TO THE CROSS VERIFIABILITY OF SUCH RECORDS, THE COMPUTER INSTALL ATION WAS NOT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 66 SEALED NOR PRINTOUTS FROM THE SAID COMPUTER INSTALL ATION WERE TAKEN BY THE AUTHORISED OFFICERS. THE SAID AFFIDAVIT APPEARS AT PAGES 329 TO 345 OF T HE PAPER BOOK. 32. AN AFFIDAVIT FROM SRI PANNA LAL YADAV, THE ACCO UNTANT OF THE APPELLANT FIRM WAS ALSO FILED STATING THEREIN THE P ARTICULARS OF BOOKS OF ACCOUNT MAINTAINED MANUALLY BY THE APPELLANT AND ALSO THE FACT THAT SUCH RECORDS HAD DULY BEEN PRODUCED ALSO BEFOR E THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 153A(A) OF THE ACT. RELEVANT PARAS ARE 6 AND 10 WH ICH ARE REPRODUCED HEREUNDER:- 6. THAT EVER SINCE THE BEGINNING, THE APPELLANT FI RM HAS BEEN MAINTAINING MAIN BOOKS OF ACCOUNT AS WELL AS S UBSIDIARY RECORDS MANUALLY AS PER PARTICULARS GIVEN HEREIN BE LOW:- MAIN BOOKS OF ACCOUNT (I) CASH BOOK (II) LEDGER (III) JOURNAL (IV) BANK BOOK SUBSIDIARY BOOKS OF ACCOUNT (I) CARPET PURCHASE REGISTER (II) PRODUCTION REGISTER / WEAVING REGISTER (III) WASHING CHARGES REGISTER (IV) STRETCHING CHARGES REGISTER (V) CLIPPING CHARGES REGISTER (VI) MAPS AND DESIGNING CHARGES REGISTER (VII) THIRD PACKING CHARGES REGISTER (VIII) PACKING EXPENSES REGISTER 10. THAT DURING THE COURSE OF PROCEEDINGS AS WERE BEING CONDUCTED BY M/S. V.K. JINDAL & CO., CHARTERED ACCO UNTANTS, THE BOOKS OF ACCOUNT AND OTHER RECORDS INCLUDING TH E SUBSIDIARY ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 67 RECORDS AS AFORESAID, AS MENTIONED IN PARA 6 ABOVE, WERE DULY BEEN PRODUCED BEFORE THE ASSESSING OFFICER I.E. ACI T, CENTRAL CIRCLE, VARANASI. 33. AS STATED ABOVE THE PAPER BOOK CONTAINING THE A FFIDAVIT DULY FORWARDED TO THE ACIT AND THERE WAS NO REBUTTAL FRO M HER END, TO THE SAID AFFIDAVITS. BY WAY OF REPLY TO THE SAID PAPER BOOK THE ACIT MERELY REFERRED TO THE REMAND REPORT AS HAS BEEN RE PRODUCED IN PARA 5 HEREINFORE. 34. FROM THE AFORESAID FACTS, IT EMERGES THAT THE A PPELLANT HAD MAINTAINED ALL THE PRIMARY RECORDS AS WELL AS SUBSI DIARY RECORDS MANUALLY. I FIND THAT ALL THE COMPONENTS OF THE TR ADING ACCOUNT ARE OPEN TO CROSS VERIFICATION. THEREFORE, IT CANNOT B E SAID THAT BOOKS OF ACCOUNT ARE NOT CORRECT AND COMPLETE AND CALLED FOR REJECTION UNDER SECTION 145(3) OF THE ACT. 35. IN THE WRITTEN SUBMISSIONS, THE APPELLANT HAS A LSO REFERRED TO THE PAST HISTORY, PARTICULARLY THE ASSESSMENT YEARS 2003-04 AND 2004- 05 FOR WHICH ASSESSMENTS HAD BEEN MADE UNDER SECTIO N 153A READ WITH SECTION 143(3), IN THE WAKE OF SEARCH AND SEIZ URE ACTION AS HAD COMMENCED ON 11.2.2009. IN THOSE YEARS ALSO IT IS NOT IN DISPUTE THAT THE ACCOUNTS HAD BEEN MAINTAINED ON THE SAME PATTER N AS HAD BEEN MADE IN THE ASSESSMENT YEAR 2005-06 (YEAR UNDER APP EAL BEFORE ME NOW). IN THOSE ASSESSMENT YEARS NO INTERFERENCE WA S MADE WITH THE TRADING RESULTS SHOWN BY THE APPELLANT PRECISELY ON THE GROUND THAT THE G.P. RATE SHOWN WAS REASONABLE. THERE IS A FOR CE IN THE CONTENTION PUT FORTH BY THE APPELLANT THAT IF THE S AME YARDSTICK IS APPLIED IN THE ASSESSMENT YEAR 2005-06 ALSO, IT WIL L BE SEEN THAT THE TRADING RESULT COMPARED WELL WITH THE ASSESSMENT YE ARS 2008-09 AND 2009-10 EVEN AFTER CONSIDERING THE ENHANCEMENT MADE THERE, AS MAY BE SEEN FROM THE FOLLOWING TABLE:- SL. NO. ASST. YEAR TURNOVER DISCLOSED AND ACCEPTED (IN G.P. RATE SHOWN BY THE APPELLANT G.P. RATE APPLIED BY THE ASSESSING OFFICER WHILE MAKING ASSESSMENT ASSESSMENT MADE UNDER SECTION ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 68 CRORES) 1. 2005-06 97.22 22.40% 26.88% 153A R.W.S. 143(3) 2. 2008-09 124.46 18.94% 22.73% 153A R.W.S. 143(3) 3. 2009-10 77.20 10.54% 12.65% 143(3) 36. THERE IS ALSO FORCE IN THE APPELLANTS CONTENTI ON THAT SUCH RECORDS WERE AVAILABLE AT THE TIME OF SEARCH & SEIZ URE ACTION AND THE SAME HAD BEEN PRODUCED ALSO BEFORE THE ASSESSING OF FICER, AS IS AMPLY BORNE OUT FROM VARIOUS ORDER SHEET ENTRIES AN D REPLIES GIVEN FROM TIME TO TIME AS HAVE BEEN REPRODUCED ALSO BY T HE ASSESSING OFFICER HIMSELF IN THE ASSESSMENT ORDER PASSED BY H IM UNDER SECTION 153A AND WHICH IS SUBJECTED MATTER OF APPEAL BEFORE ME. NO DEFECT OR DISCREPANCY HAS BEEN NOTED IN SUCH RECORDS. THEREF ORE, CREDIBILITY OF THE SAME CANNOT BE DISPUTED. 37. THERE IS ALSO FORCE IN THE APPELLANTS CONTENTI ON THAT EVEN IF THE RECORDS WERE NOT FOUND AT THE TIME OF SEARCH, ALTHO UGH IT CAN NOT BE SAID TO BE A FACT, IT CAN NOT LEAD TO ANY PRESUMPTI ON (MUCH LESS AN INFERENCE) THAT SEARCH & SEIZURE ACTION HAD LED TO RECOVERY OF ANY UNDISCLOSED INCOME. 38. .APART FROM HOLDING THAT PROVISIONS OF SECTION 145(3) ARE NOT APPLICABLE AND THE REJECTION OF BOOKS OF ACCOUNT AN D CONSEQUENT ADDITION OF RS.4,35,51,668/- WAS NOT CALLED FOR, I PROCEED TO EXAMINE THE ALTERNATE CONTENTION ALSO AS PUT FORTH BY THE A PPELLANT, FOR THE SAKE OF COMPLETENESS OF DECISION. THE SUM AND SUBSTANCE OF THE ALTERNATE CONDITION IS THAT EVEN IF THE BOOKS OF ACCOUNT ARE REJECTED, IT IS NOT NECESSARY THAT ADDITION TO G.P. RATE SHOULD ALSO BE MADE, AS A MATTER OF COURSE. THE TRADING RESULTS ARE OPEN TO VERIFIC ATION AS HAS BEEN FOUND IN THE PRESENT CASE NO ADDITION IS CALLED FOR . THIS PRINCIPLE WHICH IS WELL LEAD AND SUPPORTED BY CASE LAWS IS FU LLY APPLICABLE IN THE PRESENT CASE AND ADDITION MADE BY THE ASSESSING OFFICER IS NOT AT ALL JUSTIFIED. 39. IT CAN ALSO NOT BE LOST SIGHT OF THAT THE ASSE SSING OFFICER WAS CONCERNED FOR MAKING SEARCH RELATED ASSESSMENT FOR WHICH PROCEEDINGS HAD BEEN INITIATED UNDER SECTION 153A(A ) OF THE ACT. IT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 69 HAS NO WHERE BE BROUGHT ON RECORD BY THE ASSESSING OFFICER THAT WHICH WERE FOUND ALSO. THE RECORDS MAINTAINED BY T HE APPELLANT, DID NOT CONTAIN ANY UNDISCLOSED INCOME. IT IS SEEN TH AT IN THE YEAR UNDER APPEAL THERE IS A FALL IN G.P. RATE AS COMPARE TO T HE EARLIER ASSESSMENT YEARS I.E. 2003-04 AND 2004-05. FROM TH E INFORMATION AVAILABLE ON RECORD IN THOSE ASSESSMENT YEARS AND A S ANALYSED BY THE APPELLANT, THERE WAS PERCEPTIBLE INCREASE IN THE CO ST OF SALES AS COMPARED TO THE EARLIER TWO YEARS, WHICH IS SUMMARI ZED HEREUNDER:- SL. NO. ASST. YEAR COST OF SALES TO SALES G.P. RATE AFTER DUTY DRAW BACK (I) 2003-04 76.72% 33.52% (II) 2004-05 82.83% 26.51% (III) 2005-06 (YEAR UNDER APPEAL) 88.23% 22.40% FROM THE SAID ANALYSIS IT IS SEEN THAT FALL IN G.P. RATE THIS YEAR IS COMMENSURATE WITH THE COST. IN THE ASSESSMENT YEAR 2005-06 THERE IS A DIP OF NEARLY 11% IN THE G.P. RATE. SIMILARLY IN THE ASSESSMENT YEAR 2004-05 THE INCREASE IN THE COST IS 5.40% AND FALL IN THE G.P. RATE IS NEARLY 5.89% AS AGAINST THE INCREASED COST, THERE W AS NO CORRESPONDING ENTRIES IN THE SALE RATES AS THE SAME WERE GOVERNED BY THE AGREEMENT ENTERED INTO WITH IKEA THE SOLE BUYE R OF THE APPELLANT. THEREFORE, THE INCREASED COST IS NOT REFLECTED IN T HE RECOVERY OF SALES REVENUE, WITH THE RESULT THAT THE APPELLANT ACHIEVE D LOWER MARGIN OF PROFIT. THUS, THE CAUSE FOR FALL IN G.P. RATE ALSO STAND EXPLAINED, ALTHOUGH MERE FALL IN G.P. RATE CANNOT BE THE GROUN D FOR REJECTION OF BOOKS OF ACCOUNT. 40. FURTHER, FOR MAKING ESTIMATE OF INCOME THERE MU ST BE IN EXISTENCE SOME MATERIAL TO SUPPORT SUCH ESTIMATE. IN THE PRESENT CASE THE ACIT HAS MERELY MENTIONED THAT IN SOME OTHER CA SES OF THE GROUP BETTER G.P. RATE HAS BEEN SHOWN. THE DETAILS OF SU CH COMPARABLE CASE HAVE NOT BEEN CONFRONTED TO THE APPELLANT NOR THE S AME HAVE BEEN MENTIONED IN THE ASSESSMENT ORDER UNDER APPEAL. TH E APPELLANT HAS FOUND OUT THAT THE BUSINESS SIMILAR TO THAT OF THE APPELLANT WAS BEING CARRIED ON BY M/S CARPET INTERNATIONAL PVT. LTD. I N THAT CASE ALSO ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 70 ASSESSMENTS HAD BEEN MADE IN THE WAKE OF SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) AS HAS BEEN CARRIED OUT SIMULT ANEOUSLY. ON THE BASIS OF THE ASSESSMENT RECORDS OF THE SAID COMPANY THE APPELLANT HAS POINTED OUT THAT THE ASSESSING OFFICER HIMSELF HAS APPLIED A G.P. RATE OF 11.09%, AFTER REJECTING THE BOOKS OF ACCOUNT. F ROM THE RECORDS AVAILABLE AT MY END, FOR THE REASON THAT THE SAID C OMPANY HAD ALSO FILED AN APPEAL AGAINST THE ASSESSMENT MADE UNDER S ECTION 153A IN ITS CASE, I FIND THAT THE APPELLANTS CONTENTION IS COR RECT. IF THE CASE OF M/S CARPET INTERNATIONAL (P) LTD., IS TREATED TO BE A COMPARABLE CASE, THEN ALSO NO INTERFERENCE IS CALLED FOR WITH THE TRADING RESULT DISCLOSED BY THE APPELLANT WHICH ARE AS HIGH AS 22. 40% AND THE ADDITION OF RS.4,35,51,668/- DESERVES TO BE DELETED . 41. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS REFERRED TO VARIOUS CASE LAWS ALSO, IN SUPPORT OF REJECTION OF BOOKS OF ACCOUNT AND APPLICATION OF SECTION 145(3), AS HAS BEEN MADE BY HIM. THE SAID CASE LAWS TOO ARE OF NO HELP TO THE ASSESSING OFFIC ER, KEEPING IN VIEW THE FACT THAT BOOKS OF ACCOUNT ARE CORRECT AND COMP LETE IN ALL RESPECTS AND FROM SUCH BOOKS OF ACCOUNT AND OTHER RECORDS IN COME CAN BE DEDUCED PROPERLY. INDEPENDENT OF THAT ALSO THE TRA DING RESULTS ARE REASONABLE, FALL IN G.P. RATE AS COMPARE TO THE EAR LIER YEARS STAND FULLY EXPLAINED WITH THE INFORMATION OF CORROBORATI VE NATURE AND IS MUCH BETTER THAN THE COMPARABLE CASE REFERRED TO BY THE ASSESSING OFFICER. IN ANY CASE THE APPELLANT HAS DEALT WITH ALL SUCH CASE LAWS DETAILED A THOROUGH ANALYSIS OF THE FACTS OF EACH S UCH CASE LAWS AND THE VIEW TAKEN BY THE HONBLE COURTS. FROM SUCH AN ALYSIS ALSO, IT IS SEEN THAT THE SAME ARE NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. AS STATED ABOVE, THE TRADING RESULTS WHICH HAVE BEE N INTERFERED BY THE ASSESSING OFFICER, ARE VERIFIABLE FROM THE RECORDS, RATHER THE SAME ARE OPEN TO CROSS VERIFICATION ALSO. THE POINT AT ISSU E STAND FULLY PROVED FROM THE SUBMISSIONS MADE BY THE APPELLANT IN PARA 33 TO 36 AS HAVE BEEN REPRODUCED BY ME IN THE EARLIER PART OF THIS O RDER AND TO AVOID ANY FURTHER BULK TO THIS ORDER, I AM NOT REPEATING THE SAME HERE. 42. THUS, FROM WHATEVER ANGLE THE MATTER IS EXAMINE D, THERE EXIST NO GROUND ON WHICH THE ADDITION OF RS. 4,35,51,668/ - AS HAS BEEN MADE JUST BY ENHANCING THE DISCLOSED G.P. RATE BY 2 0% CAN BE SUSTAINED. THEREFORE, I HAVE NO ALTERNATIVE BUT TO HOLD THAT T HE SAME ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 71 HAS TO BE DELETED AND ACCORDINGLY I DIRECT FOR DELE TION OF THE SAME. IN CONSEQUENCE THE APPELLANT IS ALLOWED A RELIEF OF RS.4,35,51,668/- 12. THE LD. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE AO POINTED OUT VARIOUS DEFECTS IN THE MAINTENANCE OF T HE BOOKS OF ACCOUNT AND THE ASSESSEE DID NOT CLARIFY SUCH QUERY BEFORE THE AO. THE LD. CIT(A) DID NOT TAKE CARE OF THE ORDER OF THE AO. THE ASSESSEE HAS NOT PRODUC ED SUPPORTING VOUCHERS BEFORE THE AO. THEREFORE, INFLATION OF THE EXPENSES IS POS SIBLE. HE HAS ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F S.N.NAMASIVAYA CHATTIAR VS. CIT, 38 ITR 579. THE LD. CIT(A) WAS, THEREFORE, NOT JUSTIFIED IN DELETING THE ENTIRE ADDITION. ON THE OTHER HAND, THE LD. COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE AO ACCEPTED THE TURNOVER OF THE ASSESSEE. THE G.P. RATE IS ENHA NCED ARBITRARILY BY 20%. HE HAS REFERRED TO REPLY FILED BEFORE THE AUTHORITIES BELO W IN THE PAPER BOOK. IN THE ASSESSMENT YEAR 2009-10, THE AO ACCEPTED THE G.P. R ATE OF 12.65%. ALL OBJECTIONS OF THE AO WERE EXPLAINED PROPERLY IN WHICH NO DEFEC TS HAVE BEEN POINTED OUT. COMPLETE EXPLANATION WAS GIVEN OF THE EXPENSES AND ALL THE CASE LAWS WERE ALSO EXPLAINED, WHICH CLEARLY DISTINGUISHED FROM THE FAC TS OF ASSESSEES CASE. EVEN IN COMPARABLE CASES OF GROUP CONCERN, THE AO APPLIED M AXIMUM G.P. RATE OF 13.85%, WHICH IS VERY LOW AS COMPARED TO THE G.P. R ATE DISCLOSED BY THE ASSESSEE. NO INCRIMINATING MATERIAL WAS FOUND AGAINST THE ASS ESSEE DURING THE COURSE OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 72 SEARCH TO INDICATE ANY UNDISCLOSED INCOME EARNED BY THE ASSESSEE. AFFIDAVIT OF THE PARTNER AND THE ACCOUNTANT WERE FILED BEFORE THE AO ABOUT THE MAINTENANCE OF THE BOOKS OF ACCOUNT, WHICH HAVE NOT BEEN REBUTTED AND EVEN IN THE REMAND REPORT FILED BY THE AO, THE CONTENTIONS OF THE ASSESSEE HAVE NOT BEEN DISPUTED REGARDING MAINTENANCE OF ALL THE RECORDS BY THE ASSESSEE. IN SUBSEQUENT ASSESSMENT YEAR 2008-09 AND 2009-10, NO ADDITION HAVE BEEN MADE ON ACCOUNT OF REJECTION OF BOOKS OF ACCOUNT OR FOR ENHANCING THE G.P. AND AS S UCH, THE BOOK RESULTS HAVE BEEN ACCEPTED IN SUBSEQUENT ASSESSMENT YEAR ALSO. THEREF ORE, THERE WAS NO JUSTIFICATION TO MAKE THE ADDITION AGAINST THE ASSESSEE. THE LD. CIT(A) ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTLY DELETED THE AD DITION. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD. IN THE PRESENT CASE, NO RECOVERY HAS BEEN MADE DURING THE COURSE OF SEARCH AND SEIZURE ACTION AGAINST THE ASSESSEE TO PROVE THAT THE ASSES SEE EARNED ANY UNDISCLOSED INCOME. NO UNDISCLOSED INCOME WAS ALSO FOUND IN SEA RCH AND EVEN NO CORROBORATIVE EVIDENCES HAVE BEEN FOUND DURING THE COURSE OF SEARCH TO SUPPORT THE FINDINGS OF THE AO. THE ASSESSEE FIRM CAME INTO EXI STENCE IN 1996 AND STATED TO HAVE MAINTAINED SIMILAR TYPE OF BOOKS OF ACCOUNT, I N WHICH NOTHING ADVERSE WAS FOUND AGAINST THE ASSESSEE. THE AO MERELY DREW ADVE RSE INFERENCE BECAUSE NO ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 73 BOOKS OF ACCOUNT WERE FOUND AT THE TIME OF SEARCH B UT IT IS ADMITTED THAT THE ASSESSEE PRODUCED COMPLETE BOOKS OF ACCOUNT AND SUP PORTING / SUBSIDIARY RECORDS BEFORE THE AO AT THE ASSESSMENT STAGE. EVEN IF THE RECORDS WERE NOT FOUND AT THE TIME OF SEARCH, IT CANNOT LEAD TO ANY INFERENCE THA T RECOVERY OF ANY UNDISCLOSED INCOME WAS MADE DURING THE COURSE OF SEARCH AND SEI ZURE ACTION. WHEN THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE AO, THE AO SHOU LD HAVE VERIFIED THE SAME BEFORE TAKING ANY ADVERSE VIEW AGAINST THE ASSESSEE . ALL THE ACCOUNTS OF THE ASSESSEE ARE AUDITED. THE ASSESSEE MAINTAINED COMPL ETE BOOKS OF ACCOUNT AND SUBSIDIARY BOOKS, WHICH WERE PRODUCED BEFORE THE AO AT THE ASSESSMENT STAGE. ALL THE EXPENSES ARE VERIFIABLE FROM THE SUBSIDIARY BOO KS OF ACCOUNT MAINTAINED BY THE ASSESSEE. MOST OF THE PAYMENTS ARE MADE BY ACCOUNT PAYEE CHEQUES ON WHICH TDS HAVE BEEN DEDUCTED AND PAID TO THE GOVERNMENT ACCOU NT. NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN THE MAINTENANCE OF BOOKS OF ACC OUNT BY THE ASSESSEE DURING THE COURSE OF FINDINGS GIVEN BY THE AO. THE SALES, PURC HASES AND EXPENSES HAVE BEEN ACCEPTED BY THE AO AS PER THE BOOKS OF ACCOUNT. THE ASSESSEE HAS DEALT WITH ALL THE CASE LAWS RELIED UPON BY THE AO THROUGH ANALYSIS OF FACTS OF EACH SUCH CASE LAW AND HAS BEEN ABLE TO DISTINGUISH THE SAME ON FACTS. THEREFORE, THE LD. CIT(A) RIGHTLY CONSIDERED THAT THE CASE LAW RELIED UPON BY THE AO CLEARLY DISTINGUISHED FROM THE FACTS OF THE CASE. EVEN DURING THE COURSE OF ARGUMENTS, THE LD. DR HAS NOT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 74 POINTED OUT ANY SUCH DISTINCTION IN THE CASE LAW AS CONTENDED BY THE ASSESSEE AND COMMENTS ON THE CASE LAW TO DISPUTE THE FINDINGS RE CORDED BY THE LD. CIT(A). THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT EVEN THE CIT HAS MADE VERIFICATION U/S. 133(6) OF THE IT ACT. NO ACTION HAS BEEN TAKEN AGAINST THE ASSESSEE. THE ABOVE STATEMENT OF THE ASSESSEE HAS NOT BEEN CONTROVERTED BY THE REVENUE THROUGH ANY MATERIAL ON RECORD. IN THE GROUP CASES OF M/S. CARP ET INTERNATIONAL PVT. LTD., THE AO ACCEPTED THE LESSER G.P. RANGING FROM 4.68% TO 1 3.85% IN ASSESSMENT YEARS 2005-06 TO 2009-10, WHICH IS FAR BELOW THAN THE G.P . RATE DISCLOSED BY THE ASSESSEE. IN ASSESSMENT YEAR 2009-10, THE AO IN THE CASE OF ASSESSEE ACCEPTED THE G.P. RATE OF 12.62%. THE ASSESSEE FILED AFFIDAVIT O F THE PARTNER AND THE ACCOUNTANT CONFIRMING ABOUT THE MAINTENANCE OF PROPER BOOKS OF ACCOUNT AND SUBSIDIARY BOOKS OF ACCOUNT, WHICH HAVE NOT BEEN REBUTTED BY THE AO. THUS, NO MATERIAL WAS FOUND TO EXIST AGAINST THE ASSESSEE TO SUPPORT THE FINDIN GS OF THE AO. SIMILARLY, ON THE SAME SET OF ACCOUNTS IN SUBSEQUENT ASSESSMENT YEARS 2008-09 AND 2009-10, NO ADDITIONS HAVE BEEN MADE ON ACCOUNT OF G.P. AND BOO KS HAVE BEEN ACCEPTED. SIMILARLY, IN ASSESSMENT YEAR 2008-09, THE G.P. OF 22.73%, IS ALMOST SAME AS DISCLOSED IN THE ASSESSMENT YEAR UNDER APPEAL. THE AO COMPARED THE G.P. FROM THE ASSESSMENT YEARS 2003-04 AND 2004-05, IN WHICH THE ASSESSEE EXPLAINED THE COST AND TURNOVER BECAUSE IN ASSESSMENT YEAR UNDER APPEA L, THE COST AND TURNOVER HAVE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 75 INCREASED SO IT COULD NOT BE COMPARED WITH THE EARL IER YEARS. THERE IS A FALL IN G.P. AS COMPARED TO THE EARLIER YEAR, WHICH IS ALMOST SA ME TREND AS HAPPENED IN SUBSEQUENT ASSESSMENT YEARS ALSO. HONBLE PRIVI COU NSEL IN THE CASE OF LAXMI NARAIN BADRI DAS, 5 ITR (PC) 170 HELD THAT ESTIMATE OF PROFIT SHOULD BE FAIR. THE AO SHOULD NOT ACT DISHONESTLY OR VINDICTIVELY OR CA PRICIOUSLY ON OWN KNOWLEDGE OF PREVIOUS HISTORY, LOCAL KNOWLEDGE. THE CIRCUMSTANCE S OF THE ASSESSEE HAVE TO BE CONSIDERED TO ARRIVE AT THE FAIR AND PROPER ESTIMAT E OF INCOME. HONBLE DELHI HIGH COURT IN THE CASE OF AERO CLUB, 336 ITR 400 HELD TH AT THE ASSESSMENT SHOULD BE ON RATIONAL BASIS. PROFIT MARGIN DISCLOSED BY THE ASSE SSEE CANNOT BE REJECTED ARBITRARILY. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. K.S. BHATIA, 269 ITR 577 HELD THAT LOW PROFIT IS NO GRO UND TO REJECT THE BOOK RESULTS U/S. 145(1) OF THE IT ACT. HONBLE DELHI HIGH COURT IN T HE CASE OF CIT VS. SMT. POONAM RANI, 326 ITR 223 HELD THAT ABSENCE OF STOCK REGISTER ALONE IS NOT A GROUND TO INFER THAT THE ACCOUNTS ARE INACCURATE OR INCOMPLETE. IT MAY PUT THE AO ON GUARD AGAINST THE FALSITY OF THE RETURN MADE BY THE ASSESSEE AND PERSUADE THE AO TO CAREFULLY SCRUTINIZE THE ACCOUNT BOOKS OF THE AS SESSEE. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DISCUSSION AND T HE CASE LAWS, WE ARE OF THE VIEW THAT THE LD. CIT(A) ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTLY HELD THAT THE BOOKS OF ACCOUNT SHOULD NOT HAVE BEEN REJECTED U/S. 145(3) OF THE IT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 76 ACT AND THERE WAS NO BASIS TO MAKE ADDITION BY ENHA NCING THE G.P. IN THE CASE OF THE ASSESSEE. THE LD. CIT(A, THEREFORE, RIGHTLY DEL ETED THE ADDITION IN ISSUE. WE, THEREFORE, DO NOT FIND ANY MERIT IN THE APPEAL OF T HE REVENUE. THE SAME IS ACCORDINGLY, DISMISSED. ITA NO. 157 & 158/2012 (CARPET INTERNATIONAL A.Y. 2006-07 & 2007-08): 14. IN BOTH THE DEPARTMENTAL APPEALS, THE ISSUE IS SAME AS IS CONSIDERED IN ASSESSMENT YEAR 2005-06 EXCEPT IN ASSESSMENT YEAR 2 007-08, WHEREIN THE AO ALSO PROPOSED TO MAKE ADDITION BY DISALLOWING EXPENSES I N A SUM OF RS.67,36,033/-, BUT NO SEPARATE ADDITION HAS BEEN ON ACCOUNT OF GROSS P ROFIT ADDITION. THE LD. CIT(A) SET ASIDE THE FINDINGS OF THE AO FOR DISALLOWANCE O F THE EXPENSES AS WELL, ON WHICH THERE IS NO GROUND IN DEPARTMENTAL APPEAL. THEREFOR E, THE FINDING OF THE LD. CIT(A), DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENSES HAVE REACHED FINALITY. ULTIMATELY, THE ISSUE IS SAME IN BOTH THE APPEALS, I.E., REJECTION OF ACCOUNT BOOKS AND G.P. ADDITION. SINCE THE ISSUE IS SAME AS IS CO NSIDERED IN ASSESSMENT YEAR 2005-06, THEREFORE, FOLLOWING THE ORDER FOR THE ASS ESSMENT YEAR 2005-06, WE DISMISS THESE DEPARTMENTAL APPEALS AS WELL. IN THE RESULT, THE DEPARTMENTAL APPEALS IN ITA NOS. 157 AND 158/A/2012 ARE ALSO DISMISSED. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 77 ITA NO. 159/A/2012 & 91/A/2012 (CARPET INTERNATIONA L-A.Y. 2008-09): 15. BOTH THE CROSS APPEALS BY THE REVENUE AND THE A SSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A), VARANASI DATED 21.03.2012 FOR THE ASSESSMENT YEAR 2008- 09. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO. 1, 2, 3 & 4 OF THE APPEAL OF ASSESSEE. THE SAME ARE, THEREFORE, DISMIS SED AS NOT PRESSED. 16. IN THIS YEAR, THE AO HAS PASSED THE ASSESSMENT ORDER U/S. 153A READ WITH SECTION 143(3) ON DATED 30.12.2010 AND DETERMINED T HE TOTAL INCOME OF THE ASSESSEE AT RS.40,57,35,230/- AS AGAINST RS.16,85,6 7,225/- DISCLOSED BY THE ASSESSEE. THE VARIATION OF RS.23,71,68,001/- WAS AT TRIBUTED TO VARIOUS ADDITIONS. THE ASSESSEE CHALLENGED ALL THE ADDITIONS BEFORE TH E LD. CIT(A) AND FILED WRITTEN SUBMISSIONS, ON WHICH REMAND REPORT OF THE AO WAS C ALLED FOR AND THE ASSESSEE ALSO FILED REJOINDER. THE FACTS ARE SAME REGARDING SEARCH AND THE FRAMING OF ASSESSMENT AND BACKGROUND OF THE ASSESSEE. THE AO, AS PER FINDINGS GIVEN IN THE ASSESSMENT YEAR 2005-06 (SUPRA) ALSO REJECTED THE B OOK RESULTS ON THE SAME REASONS AS HAVE BEEN GIVEN EARLIER BY ENHANCING THE G.P. RA TE, PROPOSED TO MAKE ADDITION OF RS.8,90,91,451/-, BUT IN VIEW OF SPECIFIC ADDITI ONS MADE OF RS.23,71,68,001/-, NO SEPARATE ADDITION ON ACCOUNT OF G.P. WAS MADE. T HE ASSESSEE CHALLENGED THE REJECTION OF BOOKS OF ACCOUNT BEFORE THE LD. CIT(A) AND SAME SUBMISSIONS WERE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 78 REPEATED BEFORE THE LD. CIT(A) AS HAVE BEEN EXPLAIN ED IN ASSESSMENT YEAR 2005-06 ABOVE AND THE LD. CIT(A) ON THE SAME REASONS AS GIV EN IN ASSESSMENT YEAR 2005-06 HELD THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOK RESULTS U/S. 145(3) OR TO MAKE ADDITION BY ENHANCING THE GROSS PROFIT AND MAK ING ADDITION OF RS.8,90,91,451/- AND ACCORDINGLY, THE ORDERS OF THE AO WAS SET ASIDE AND ADDITION WAS DELETED AND BOTH THESE GROUNDS WERE ALLOWED. 17. THE LD. CIT(A), THEREAFTER PROCEEDED TO DECIDE OTHER ADDITIONS AGGREGATING TO RS.23,71,68,001/-. THE ASSESSEE HAS GIVEN SEIZUR E-WISE CLARIFICATION ON THESE ADDITIONS. THE LD. CIT(A) FOR THE SAKE OF CONVENIEN CE, DISCUSSION AND ADJUDICATION OF VARIOUS ADDITIONS. SUMMARIZED THESE ADDITIONS AS UNDER : SL. NO. PARTICULARS OF SEIZURE PLACE OF SEIZURE PARAS OF ASST. ORDER ADDITION MADE (RS.) (A) ANNNEXURE BK-2 FROM WHICH IT HAS BEEN INFERRED THAT THERE HAS BEEN INFLATION OF EXPENSES PREMISES OF CARPET INTERNATIONAL PVT. LTD A SEPARATE ENTITY UNDER EXCLUSIVE MANAGEMENT AND CONTROL OF SRI PRADEEP KUMAR BARANWAL AND ITS FAMILY MEMBERS. 5, 5.2 & 5.3 2,84,20,475 (B) PRINTOUT FROM THE COMPUTER ON THE BASIS OF WHICH IT HAS BEEN HELD THAT THERE WAS UNDISCLOSED STOCK OF YARN WITH THE WEAVERS PRINT OUT FROM THE COMPUTER INSTALLED ON BAKUCHIA, BHADOHI WHICH WAS SUBJECTED TO SEARCH AS PER WARRANT OF AUTHORIZATION DATED 03.02.2009 (IN THE 6.1 TO 6.8 3,11,64,149 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 79 NAME OF CARPET INTERNATIONAL, THE APPELLANT) (C) PRINT OUT FROM THE PEN DRIVE FROM WHICH IT HAS BEEN INFERRED THAT PAYMENT OF RS.89,00,000 HAD BEEN MADE BY THE APPELLANT, OVER AND ABOVE THE AMOUNT STATED IN THE SALE DEED. PEN DRIVE RECOVERED FROM THE LOCKER NO.18 WITH STATE BANK OF INDIA IN THE NAME OF SRI PRADEEP KUMAR BARANWAL OPERATED BY THE AUTHORISED OFFICERS ON 02.04.2009 , VIDE LP-1, AS IT TRANSPIRES FROM PARA 7 OF THE IMPUGNED ASSESSMENT ORDER. 7 TO 7.5 89,00,000 (D) PRINTOUTS TAKEN FROM THE CPU FROM WHICH IT HAS BEEN WORKED OUT THAT THE APPELLANT HAD EXCESS STOCK OF WOOLEN YARN AS ON 31.03.2008. COMPUTER FOUND INSTALLED AT THE PREMISES OF CARPET INTERNATIONAL PVT. LTD AND SEIZED VIDE ANNEXURE AR-1 DATED 1.4.2009 8 TO 8.10 15,95,66,177 (E) PRINTOUTS TAKEN FROM THE COMPUTER FROM WHICH IT HAS BEEN INFERRED THAT THE APPELLANT HAD EXCESS STOCK OF THARRI (YARN) USED AS WARP IN PRODUCTION OF CARPETS. COMPUTER FOUND INSTALLED AT THE PREMISES OF CARPET INTERNATIONAL PVT. LTD AND SEIZED VIDE ANNEXURE AR-1 DATED 1.4.2009 9 TO 9.2 91,17,200 TOTAL RUPEES 23,71,68,001 17.1 THE LD. CIT(A) AFTER CONSIDERING THE ISSUE IN DETAIL WITH REFERENCE TO THE SEIZED MATERIAL DELETED ALL THE ADDITIONS EXCEPT TH E ADDITION OF RS.91,17,200/- ON WHICH THE ASSESSEE IS IN APPEAL AND ON THE OTHER AD DITIONS, DELETED BY THE LD. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 80 CIT(A), THE REVENUE IS IN APPEAL. WE, THEREFORE, DE AL WITH ALL THE ITEMS OF ADDITIONS CONFIRMED AND DELETED, SEPARATELY AS UNDE R : 18. THE REVENUE ON GROUND NO. 1 IN THEIR APPEAL CHA LLENGED THE ORDER OF THE LD. CIT(A) IN OVERRULING THE REJECTION OF ACCOUNT BOOKS BY THE AO U/S. 145(3). THE AO ON THE SAME REASONING AS GIVEN IN ASSESSMENT YEA R 2005-06, REJECTED THE BOOK RESULTS AND BY APPLYING HIGHER G.P. PROPOSED TO MAK E ADDITION OF RS.8,90,91,451/-, BUT BECAUSE SEPARATE ADDITIONS HAVE BEEN MADE, NO S EPARATE ADDITION WAS MADE ON ACCOUNT OF ENHANCED GROSS PROFIT. THE LD. CIT(A) ON THE SAME REASONING AS GIVEN IN THE ASSESSMENT YEAR 2005-06 SET ASIDE THE ORDERS OF THE AO AND OVER RULED THE REJECTION OF ACCOUNTS AND CONSEQUENTLY PROPOSED ADD ITION WAS ALSO DELETED. BOTH THE PARTIES STATED THAT THE ISSUE IS SAME AS IS CON SIDERED IN ASSESSMENT YEAR 2005- 06. IN ASSESSMENT YEAR 2005-06, WE HAVE DISMISSED T HE DEPARTMENTAL APPEAL ON THE SAME GROUND. BY FOLLOWING THE SAME REASONS FOR DECI SION OF ASSESSMENT YEAR 2005- 06 IN ITA NO. 156/A/2012, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. GROUND NO. 1 OF APPEAL OF THE REVENUE IS DISMISSED. 19. ON GROUND NO. 2, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.2,84,24,475/- MADE BY THE AO ON ACCOUNT OF INFLA TED MANUFACTURING EXPENSES ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 81 AS PER SEIZED DOCUMENT, ANNEXURE-BK-2 OF PANCHNAMA. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT THE ADDITION IS NOT BASED ON AN Y MATERIAL FOUND FROM THE PREMISES OF THE ASSESSEE OR FROM THE POSSESSION AND CONTROL OF ANY OF ITS PARTNERS. THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS TO EXPLAIN THE ISSUE AND WRITTEN SUBMISSIONS OF THE ASSESSEE IS REPRODUCED IN THE AP PELLATE ORDER AS UNDER : 39. INFLATION OF EXPENSES RS.2,84,20,475 (ITEM NO.( I ) OF PARA 36 ): ON THE BASIS OF LOOSE PAGES NUMBERED AS 15 TO 27 FORMING PART OF ANNEXURE BK2 , THE LD. ACIT HAS INFERRED THAT THERE HAS BEEN INFLATION OF EXPENSES UNDER SOME SPECIFIED HEADS TO THE TUNE OF RS. 2,84,20,475 AS PER PARTICULARS GIVEN BELOW:- SL, NO . HEADS OF EXPENDITURE AMOUNT AS PER BK-2 (RS.) AMOUNT DEBITED IN P/L ACCOUNT (RS.) DIFFERENCE TREATED AS INFLATION (RS.) (A) BINDING CHARGES 1,60,98,267 1,93,18,481 32,20,214 (B) CLIPPING CHARGES CLIPPING & BERAI CHARGES 16,04,710 1,80,35,315 1,96,40,025 2,10,73,526 14,33,501 (C) COATING CHARGES LATEXING CHARGES 8,444 1,37,68,355 1,37,76,799 2,14,59,151 76,82,352 (D) DRYING CHARGES 5,07,771 5,16,940 9,169 (E) STRACHING CHARGES 20,03,375 23,84,061 3,80,686 (F) THIRD PACKING 33,88,931 1,63,02,467 1,29,13,537 (G) WASHING CHARGES 1,19,76,066 1,47,14,551 27,38,485 TOTAL 6,73,91,234 9,57,69,177 2,83,77,944* * DIFFERENCE OF RS.42,531 (2,84,20,475 2,83,77,94 4) ON ACCOUNT OF CALCULATION ERRORS IN THE ASSESSMENT ORDER. COPIES OF THE ABOVE REFERRED PAGES 15 TO 27 FORMING PART OF ANNEXURE BK2 ARE ENCLOSED AT PAGES 129 TO 141 HERETO. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 82 40. FROM A PERUSAL OF THE SAID PAPERS, IT APPEARS T HAT SRI PRADEEP KUMAR BARANWAL AND FAMILY MEMBERS WHO WERE PARTNERS IN THE APPELLANT FIRM TILL 31.3.2008 HAD WITHHELD WITH THEMSELVES THE STATEMENT OF EXPENDITURE INCURRED AT GYANPUR ROAD, BHADOHI [T HE PREMISES WHICH WERE IN THE USE OF THE APPELLANT FIRM ALSO TILL 31. 03.2008 AND IN THE EXCLUSIVE POSSESSION OF M/S. CARPET INTERNATIONAL P VT. LTD., EVER SINCE 1.4.2008, AS THE APPELLANT FIRM HAD WITHDRAWN ITSEL F FROM THAT PLACE, FOLLOWING THE FAMILY SETTLEMENT). UPTO 31.3.2008 THE APPELLANT, AS CONSTITUTED BY THE MEMBERS OF THE FAMILIES OF TWO B ROTHERS NAMELY SRI PRADEEP KUMAR BARANWAL AND SRI PRAMOD KUMAR BARANWA L HAD BEEN CARRYING ON BUSINESS ACTIVITIES FROM THREE PREMISES AS PER PARTICULARS GIVEN BELOW:- OLD CONSTITUTION UPTO 31.3.2008 SHARE OF PROFIT OLD ADDRESS SRI PRADEEP KUMAR BARANWAL 35% (A) GYANPUR ROAD, BH ADOHI (PREMISES BELONGING TO M/S CARPET INTERNATIONAL (P) LTD. (B) BYE-PASS ROAD, HARIYAON, BHADOHI (C) BAKUCHIYA, BEHIND GYANPUR ROAD, BHADOHI. SMT. SUMAN DEVI BARANWAL 5% SRI NITIN BARANWAL 5% SRI RAJAT BARANWAL 5% SRI PRAMOD KUMAR BARANWAL 45% SMT. RADHIKA DEVI BARANWAL 3% MASTER PRASHANT BARANWAL 1% MASER PRANAV BARANWAL 1% AFTER FAMILY SETTLEMENT EFFECTIVE FROM CLOSE OF BUS INESS ON 31.3.2008, THE APPELLANT FIRM HAD UNDERGONE A CHANGE IN THE CONSTI TUTION, UNDER WHICH THE FAMILY MEMBERS OF SRI PRADEEP KUMAR BARANWAL HA D OPTED OUT AND IN CONSEQUENCE, THE APPELLANT HAD ALSO WITHDRAWN FR OM THE PREMISES SITUATED AT GYANPUR ROAD, BHADOHI [AS BELONGING TO M/S. CARPET INTERNATIONAL (P) LTD.]. WITH EFFECT FROM 1.4.2008 THE ACTIVITIES OF THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 83 APPELLANT FIRM WITH A NEW CONSTITUTION, REMAINED CO NFINED TO THE TWO REMAINING PREMISES ONLY; RELEVANT PARTICULARS BEING AS UNDER:- NEW CONSTITUTION UPTO 1.4.2008 SHARE OF PROFIT NEW ADDRESS SRI PRAOD KUMAR BARANWAL 50% (A) BYE-PASS ROAD, HARIYAON, BHADOHI (B) BAKUCHIYA, BEHIND GYANPUR ROAD, BHADOHI. SMT. RADHIKA DEVI BARANWAL 20% SRI PRASHANT BARANWAL 15% SRI PRANAV BARANWAL 15% 41. IT APPEARS THAT AT THE TIME OF WITHDRAWAL FRO M THE PREMISES SITUATED AT GYANPUR ROAD, BHADOHI SRI PRADEEP KUMAR BARANWAL HAD RETAINED WITH HIM CERTAIN STATEMENTS OF EXPENDITURE WHICH HAD BEEN INCURRED AT GYANPUR ROAD, BHADOHI, ONE OF THE THREE UNITS OF THE APPELLANT UPTO 31.3.2008 (BEFORE FAMILY SETTLEMENT) . THE SEIZED STATEMENTS AT THE VERY FACE OF IT APPEARED TO BE SU CH STATEMENTS. IF THE EXPENDITURE AT OTHER TWO UNITS FROM WHICH THE APPEL LANT FIRM HAD BEEN CONCURRENTLY CARRYING ON ITS BUSINESS IN THE RELEVA NT PERIOD, ARE TAKEN INTO CONSIDERATION, THERE WILL REMAIN PRACTICALLY N O DIFFERENCE, AS MAY BE SEEN FROM THE FOLLOWING STATEMENTS:- SL. NO. HEADS OF EXPENDITURE AMOUNT AS PER BK-2 (RS.) EXPENSES INCURRED AT BAKUCHIYA UNIT. (RS.) AMOUNT DEBITED IN P/L ACCOUNT (RS.) (A) BINDING CHARGES 1,60,98,267 32,20,214 1,93,18,481 (B) CLIPPING CHARGES CLIPPING & BERAI CHARGES 16,04,710 1,80,35,315 1,96,40,025 14,33,501 2,10,73,526 (C) COATING CHARGES LATEXING CHARGES 8,444 1,37,68,355 1,37,76,799 76,82,352 2,14,59,151 (D) DRYING CHARGES 5,07,771 9,169 5,16,940 (E) STRACHING CHARGES 20,03,375 3,80,686 23,84,061 (F) THIRD PACKING 33,88,931 1,29,13,537 1,63,02,467 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 84 (G) WASHING CHARGES 1,19,76,066 27,38,485 1,47,14,551 TOTAL 6,73,91,234 2,83,77,944* 9,57,69,177 * DIFFERENCE OF RS.42,532 (2,84,20,475 2,83,77,94 4) ON ACCOUNT OF CALCULATION ERRORS IN THE ASSESSMENT ORDER. THUS, THE PRESUMPTIONS RAISED BY THE LD. ACIT ABOUT THE INFLATION OF EXPENSES, IS NON-EXISTENT, AS THE SAME HAS BEEN ARR IVED AT WITHOUT CONSIDERING THE EXPENSES INCURRED BY THE APPELLANT AT ITS OTHER UNITS. 42. IN CASE THE AGGREGATE OF EXPENDITURE INCURRED B Y THE APPELLANT AS PER BK-2 AND EXPENDITURE INCURRED AT BAKUCHIYA UNIT, AS GIV EN IN PARA 48 ABOVE, (AND CLAIMED AS DEDUCTION IN THE RELEVANT P ROFIT & LOSS ACCOUNT) IS COMPARED WITH THE ASSESSMENT YEARS 2003-04 & 2004-05 TRADING RESULTS OF WHICH HAVE NOT BEEN INTERFERED W ITH [EVEN IN THE ASSESSMENTS MADE IN THE POST SEARCH PERIOD, BY TAKI NG ACTION UNDER SECTION 153A(A)], IT COMPARES WELL AS MAY BE SEEN F ROM THE COMPARATIVE CHART GIVEN HEREUNDER:- A S S E S S M E N T Y E A R S PARTICULARS 2003-04 2004-05 2008-09 AREA IN SQ.MT. IN SQ.YARD IN SQ.YARD TOTAL PRODUCTION (AS PER AUDITED BALANCE SHEET) 528,585 1,439,225 2,011,379 AMOUNT IN RS. IN RS. IN RS. CLIPPING & BERAI 9,482,047 21,418,594 21,073,526 COATING + LATEXING 10,350,328 33,773,749 21,459,151 BINDING BINDING CHARGES ARE INCLUDED WITH LATEXING CHARGES 19,318,481 WASHING 3,567,423 4,496,437 14,714,551 FINISHING 6,321,361 14,279,064 - DRIER EXPENSES - 206,355 516,940 STRETCHING 2,384,061 THIRD PACKING PROCESS OF STRETCHING & THIRD PACKING WERE EARLIER INCLUDED IN FINISHING CHARGE. 16,302,467 TOTAL AMOUNT 29,721,159 74,174,199 95,769,177 AVERAGE RATE RS./UNIT AREA 56.23 (PER SQ.MT.) 51.54 (PER SQ.YARD) 47.61 (PER SQ.YARD) ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 85 43. IF THE VIEW TAKEN BY THE ASSESSING OFFICER IS G IVEN ANY INFERENCE, IT WILL MEAN THAT THE EXPENDITURE AS APPEARING BK-2 IS THE ENTIRE EXPENDITURE INCURRED BY THE APPELLANT IN THE MANUFA CTURING OF CARPETS AND CLAIM MADE OVER AND ABOVE THE SAME IS UNREAL AN D INFLATED. SUCH A VIEW SHALL GIVE A VERY ABSURD VERSION, NOT MATCHING WITH REASONS, EQUITY AND SPECIFICALLY WITH THE QUANTITY OF GOOD S MANUFACTURED, AS MAY BE SEEN FROM THE COMPARATIVE CHART GIVEN HEREUN DER:- A S S E S S M E N T Y E A R S PARTICULARS 2003-04 2004-05 2008-09 AREA IN SQ.MT. IN SQ.YARD IN SQ.YARD TOTAL PRODUCTION (AS PER AUDITED BALANCE SHEET) 528,585 1,439,225 2,011,379 AMOUNT IN RS. IN RS. IN RS.(AS PER BK-2 ONLY) CLIPPING & BERAI 9,482,047 21,418,594 19,640,025 COATING + LATEXING 10,350,328 33,773,749 13,776,799 BINDING BINDING CHARGES ARE INCLUDED WITH LATEXING CHARGES 16,098,267 WASHING 3,567,423 4,496,437 11,976,066 FINISHING 6,321,361 14,279,064 - DRIER EXPENSES - 206,355 507,771 STRETCHING 2,003,375 THIRD PACKING PROCESS OF STRETCHING & THIRD PACKING WERE EARLIER INCLUDED IN FINISHING CHARGE. 3,388,930 TOTAL AMOUNT 29,721,159 74,174,199 67,391,234 AVERAGE RATE RS./UNIT AREA 56.23 (PER SQ.MT.) 51.54 (PER SQ.YARD) 33.50 (PER SQ.YARD) WITH THE EXPENDITURE OF RS. 33.50 PER SQ.YARD, IT IS NOT POSSIBLE TO CARRY OUT THE PRODUCTION OF THE QUANTITY ACTUALLY MANUFAC TURED BY THE APPELLANT DURING THE ASSESSMENT YEAR 2008-09 . COPIES OF THE AUDITED STATEMENT OF ACCOUNT FOR THE ASSESSMENT YEARS 2003-04 & 2004-05 ARE ALREADY ON RECORD, ALONGWITH THE RETURNS FOR THE RESPECTIVE ASSESSMENT YEARS. FOR THE SAKE OF IN STANT REFERENCE, COPIES OF THE SAID STATEMENTS OF ACCOUNTS ARE ENCLO SED AT PAGES 142 TO 173 & 174 TO 205 HERETO. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 86 44. IN THE AFORESAID SITUATION, THE PRINCIPLE LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF DR. N.G. DASTANE VS. MRS. S. DASTANE REPORTED IN 1975 AIR 1534 (SC) , WHEREIN THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER:- '24. THE NORMAL RULE WHICH GOVERNS CIVIL PROCEEDING S IS THAT A FACT CAN BE SAID TO BE ESTABLISHED IF IT IS PROVED BY A PREPONDERANCE OF PROBABILITIES. THIS IS FOR THE RE ASON THAT UNDER THE EVIDENCE ACT, SEC. 3, A FACT IS SAID TO BE PROV ED WHEN THE COURT EITHER BELIEVES IT TO EXIST OR CONSIDERS ITS EXISTE NCE SO PROBABLE THAT A PRUDENT MAN OUGHT, UNDER THE CIRCUMSTANCES OF THE PARTICULAR CASE, TO ACT UPON THE, SUPPOSITION THAT IT EXISTS. THE BELIEF REGARDING THE EXISTENCE OF A FACT MAY THUS BE FOUND ED ON A BALANCE OF PROBABILITIES. A PRUDENT MAN FACED WITH CONFLIC TING PROBABILITIES CONCERNING A FACT-SITUATION WILL ACT ON THE SUPPOSITION THAT THE FACT EXISTS, IF ON WEIGHING THE VARIOUS PR OBABILITIES HE FINDS THAT THE PREPONDERANCE IS IN FAVOUR OF THE EXISTENC E OF THE PARTICULAR FACT. AS A PRUDENT MAN, SO THE COURT AP PLIES THIS TEST FOR FINDING WHETHER A FACT IN ISSUE CAN BE SAID TO BE P ROVED. THE FIRST STEP IN THIS PROCESS IS TO FIX THE PROBABILITIES, T HE SECOND TO WEIGH THEM, THOUGH THE TWO MAY OFTEN INTERMINGLE. THE IM POSSIBLE IS WEEDED OUT AT THE FIRST STAGE, THE IMPROBABLE AT TH E SECOND. WITHIN THE WIDE RANGE OF PROBABILITIES THE COURT HA S OFTEN A DIFFICULT CHOICE TO MAKE BUT IT IS THIS CHOICE WHIC H ULTIMATELY DETERMINES WHERE THE PREPONDERANCE OF PROBABILITIES LIES IMPORTANT ISSUES LIKE THOSE WHICH AFFECT THE STATUS OF PARTIES DEMAND A CLOSER SCRUTINY THAN THOSE LIKE THE LOAN O N A PROMISSORY NOTE: 'THE NATURE AND GRAVITY OF AN ISSUE NECESSARI LY DETERMINES THE MANNER OF ATTAINING REASONABLE SATISFACTION OF THE TRUTH OF THE ISSUE' PER DIXON, J. IN WRIGHT V. WRIGHT, (1948) 77 CLR 191 AT P.210; OR AS SAID BY LORD DENNING, 'THE DEGREE OF P ROBABILITY DEPENDS ON THE SUBJECT-MATTER. IN PROPORTION AS TH E OFFENCE IS G RAVE, SO OUGHT THE PROOF TO BE CLEAR. BLYTH V. BLY TH, 1966-1 ALL ER 524 AT P.536'. BUT WHETHER THE ISSUE IS ONE OF CRU ELTY OR OF A LOAN ON A PRO-NOTE, THE TEST TO APPLY IS WHETHER ON A P REPONDERANCE OF PROBABILITIES THE RELEVANT FACT IS PROVED. IN CIVI L CASES THIS, NORMALLY, IS THE STANDARD OF PROOF TO APPLY FOR FIN DING WHETHER THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 87 BURDEN OF PROOF IS DISCHARGED.' (PAGES 1539- 1540, EMPHASIS ADDED). HAS TO BE APPLIED AND ON SUCH AN APPLICATION, IT WI LL BE SEEN THAT THE EXPENDITURE CLAIMED BY THE APPELLANT THROUGH THE PR OFIT & LOSS ACCOUNT, WHICH WAS ALREADY ON RECORD ALONGWITH THE RETURN FI LED IN PRE-SEARCH PERIOD, WAS PERFECTLY IN ORDER AND IS JUSTIFIED ALS O AND THE BOGEY OF INFLATION OF EXPENDITURE AS RAISED BY LD. ASSESSING OFFICER CANNOT BE ALLOWED TO BE SUSTAINED. 20. THE LD. CIT(A) CONSIDERING THE EXPLANATION OF T HE ASSESSEE AND THE MATERIAL ON RECORD, DELETED THE ADDITION OF RS.2,84,20,475/- . THE FINDINGS OF THE LD. CIT(A) IN PARA 45 & 46 OF THE APPELLATE ORDER ARE REPRODUC ED AS UNDER : 45. KEEPING THE LEGAL/PRELIMINARY OBJECTION OF THE APP ELLANT AS STATED IN PARA 7 ABOVE, IN ABEYANCE FOR THE TIME BEING, I PRO CEED TO DEAL WITH THE MERITS OF THIS ADDITION. SUM AND SUBSTANCE OF THE APPELLANT S CONTENTION ON MERITS OF THE ADDITION IS THAT PRIOR TO 1.4.2008, WHERE RESTRUCTU RING OF THE GROUP CONSISTING OF TWO BROTHERS NAMELY SRI PRADEEP KUMAR BARANWAL AND SRI PRAMOD KUMAR BARANWAL AND THEIR FAMILY MEMBERS AND THE BUSINESS ENTITIES WITH WHICH THEY WERE INTERESTED IN ONE WAY OR THE OTHER, TOOK PLACE, THE APPELLANT FIRM HAD BEEN CARRYING ON ITS BUSINESS ACTIVITIES FROM FOLLOWING THREE PRE MISES:- A) GYANPUR ROAD, BHADOHI B) BY-PASS ROAD, HARIYAON, BHADOHI C) BAKUCHIYA, BEHIND GYANPUR ROAD, BHADOHI WHEREAS DURING THE PRE-RESTRUCTURING PERIOD, THE PR EMISES SITUATED AT BY-PASS ROAD, HARIYAON, BHADOHI WAS BEING USED FOR THE PURP OSES OF PACKING OF GOODS, THE OTHER TWO PREMISES WERE BEING USED FOR RECORDING TH E EXPENSES INCURRED THROUGH RESPECTIVE UNITS. AFTER THE DIVISION, THE APPELLAN T HAD WITHDRAWN FROM THE PREMISES SITUATED AT GYANPUR ROAD, BHADOHI AND SHIFTED ITS A CCOUNTING AND OTHER ADMINISTRATIVE ACTIVITIES AT BY-PASS ROAD, HARIYAON , BHADOHI. THE LOOSE PAPERS FOUND AT THE PREMISES SITUATED AT GYANPUR ROAD, BHA DOHI WERE THE LEFT OVER ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 88 PAPERS AS HAD BEEN MAINTAINED AT THE SAID PREMISES DURING THE PRE-PARTITION PERIOD. IF THE EXPENSES AS ARE REFLECTED IN BK-2 A RE CONSOLIDATED WITH THE EXPENSES FOR WHICH RECORDS HAVE BEEN KEPT AT THE PREMISES AT BAKUCHIYA BEHIND GYANPUR ROAD, BHADOHI, THERE SHALL REMAIN NO DISCREPANCY. IN SUPPORT OF THIS CONTENTION MY SPECIFIC ATTENTION IS INVITED TO THE TABLE APPEA RING IN PARA 41 OF THE WRITTEN SUBMISSIONS AS HAVE BEEN HEREINFORE. IN PARA 42 AN D 43, THE APPELLANT HAS GIVEN FACTS AND FIGURES WHICH SHOW THAT AGGREGATE OF EXPE NDITURE AS HAD BEEN CLAIMED BY THE APPELLANT THROUGH ITS AUDITED PROFIT AND LOSS A CCOUNT WORKED OUT TO RS.47.61 PER SQ. YARD WHICH COMPARED FAVOURABLY WITH THE ASS ESSMENT YEARS 2003-04 AND 2004-05 FOR WHICH TOO ASSESSMENTS HAD BEEN MADE UND ER SECTION 153A READ WITH SECTION 143(3). IN CASE THE EXPENDITURE FOR WHICH LOOSE PAPERS WERE FOUND AT THE PREMISES SITUATED AT GYANPUR ROAD, BHADOHI ARE TREA TED TO BE THE ONLY EXPENDITURE INCURRED BY THE APPELLANT UNDER VARIOUS HEADS OF EX PENDITURE (AS MENTIONED THEREIN), IT WILL GIVE A COMPLETELY DISTORTED VERSI ON AND IT WAS NOT POSSIBLE TO CARRY OUT MANUFACTURING ON THE BASIS OF SUCH A VERSION. THE COMPARATIVE DETAILS ARE SUMAMRISED AS UNDER:- A S S E S S M E N T Y E A R S SL. NO. PARTICUALRS 2003-04 (RS.) 2004-05 (RS.) 2008-09 (RS.) 1. AVERAGE RATE PER SQ. MTR. AS WORKED OUT ON THE BASIS OF EXPENSES CLAIMED IN THE RELATED PROFIT AND LOSS ACCOUNT 56.23 51.54 47.61 2. AVERAGE RATE AFTER CONSIDERING THAT IN THE ASSESSMENT YEAR 2008-09 THE EXPENSES RECORDED IN THE LOOSE PAPERS FOUND FROM THE PREMISES SITUATED AT GYANPUR ROAD, BHADOHI REPRESENTED THE ONLY EXPENDITURE INCURRED BY THE APPELLANT. 56.23 51.54 33.50 46. THE FACTS AND FIGURES AS GIVEN BY THE APPELLANT IN PARA 42 AND 43 (FROM WHICH AFORESAID SUMMARY HAS BEEN CULLED OUT) ARE VE RIFIABLE FROM THE INFORMATION AVAILABLE ON RECORD. ON THE BASIS OF THE SAID ANAL YSIS, IT IS SEEN THAT THE APPELLANTS CLAIM THAT, OVER AND ABOVE THE EXPENDIT URE REFLECTED IN THE LOOSE PAPERS FOUND AT THE PREMISES SITUATED AT GYANPUR RO AD, BHADOHI THERE WERE OTHER EXPENSES ALSO INCURRED BY THE APPELLANT IN THE MANU FACTURING OF CARPETS FOR WHICH RECORDS WERE AVAILABLE AT BAKUCHIYA, BHADOHI) AND T HE APPELLANT HAD PREPARED THE PROFIT AND LOSS ACCOUNT AFTER CONSOLIDATING BOTH TH E FIGURES, STAND FULLY PROVED. FURTHER, THE ASSESSING OFFICER HAS NO WHERE DISPUTE D THE VERIFIABILITY OF THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 89 APPELLANTS VERSION OF EXPENSES AS HAS BEEN MADE BY IT THROUGH THE AUDITED STATEMENT OF ACCOUNTS, WHICH FORM PART OF THE RETU RN WHICH WAS AVAILABLE ON RECORD AT THE TIME OF SEARCH AND SEIZURE ACTION. T HE ACIT, CENTRAL CIRCLE THE PRESENT INCUMBENT TO WHOM THE PAPER BOOK (WHEREIN T HE AFORESAID WRITTEN SUBMISSIONS WERE CONTAINED HAD BEEN FORWARDED), HAS NOT DISPUTED THE VERSION CONTAINED THEREIN AND REFERRED TO BY ME ABOVE. THU S, ON A TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IT CANNOT BE SAID THAT T HERE HAS BEEN ANY INFLATION OF EXPENDITURE CLAIMED BY THE APPELLANT THROUGH THE AU DITED PROFIT AND LOSS ACCOUNT ON THE BASIS OF WHICH RETURN HAD BEEN FILED, PRIOR TO THE DATE OF SEARCH. THE DISCREPANCY ONLY ON ACCOUNT OF NON-CONSIDERATION OF EXPENSES INCURRED AT OTHER UNIT. THE DISALLOWANCE OF RS.2,84,20,475 IS, THEREFORE, D ELETED. 21. THE LD. DR SUBMITTED THAT THE ADDITION IS BASED ON SPECIFIC SEIZED MATERIAL AND THE DETAILS TALLY WITH THE ENTRIES. THEREFORE, THE ADDITION IS JUSTIFIED. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITER ATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE SEIZED PAPER WAS RECOVERED FROM M/S. CARPET INTERNATIONAL PVT. LTD. AND THAT THE SAME BE LONG TO SHRI PRADEEP KUMAR BARNWAL, WHO IS DISASSOCIATED FROM THE ASSESSEE FIR M W.E.F. 31.03.2008. THEREFORE, NO ADDITION COULD BE MADE ON SUCH SEIZED PAPER AND FURTHER IF THE EXPENDITURE IS CONSIDERED IN TOTALITY, IT WOULD NOT RESULT IN ANY ADDITION. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD. THE ASSESSEE PLEADED BEFORE THE LD. CIT(A) THAT THE SEI ZED PAPER BK-2 WAS RECOVERED FROM THE PREMISES OF CARPET INTERNATIONAL PVT. LTD. , WHICH FACT HAS NOT BEEN DISPUTED DURING THE COURSE OF ARGUMENTS. THE ASSESS EE ALSO EXPLAINED THAT PRADEEP ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 90 KUMAR BARNWAL AND HIS FAMILY MEMBERS WHO WERE PARTN ERS IN THE ASSESSEE FIRM HAVE WITHDRAWN THEMSELVES FROM THE ASSESSEE FIRM W. E.F. 31.03.2008 AND THE SEIZED PAPER WAS RECOVERED FROM THE PREMISES OF CAR PET INTERNATIONAL PVT. LTD., TO WHICH THE ASSESSEE HAS NO CONCERN. THE ASSESSEE HAS ALSO EXPLAINED IF THE EXPENDITURES PRIOR TO 31.03.2008 ARE CONSIDERED IN ENTIRETY, IT WOULD NOT LEAD TO ANY ADDITION. THE LD. CIT(A) VERIFIED THE FACTS FRO M THE RECORD AND FOUND THE CONTENTION OF THE ASSESSEE TO BE CORRECT. AFTER PRA DEEP KUMAR BARANWAL ETC. WITHDREW FROM THE ASSESSEE THEN THE BUSINESS WAS RE CONSTRUCTED AND THE PREMISES FROM WHERE THE SEIZED PAPER WAS RECOVERED DID NOT B ELONG TO THE ASSESSEE AND IT CAME TO THE SHARE OF M/S. CARPET INTERNATIONAL PVT. LTD., I.E., A COMPANY. THE LD. CIT(A), THEREFORE, RIGHTLY HELD THAT ON SUCH FACTS, ADDITION COULD NOT BE MADE AGAINST THE ASSESSEE AND FURTHER IF THE ENTIRE FIGU RES ARE TAKEN UP AND COMPARED FROM EARLIER YEARS, IT WOULD NOT LEAD TO ANY ADDITI ON. THEREFORE, WHEN EXPENDITURE ARE TAKEN INTO CONSIDERATION ONLY AS PER THE SEIZED PAPER, IT WOULD GIVE A DISTORTED FIGURE. IT, THEREFORE, APPEARS THAT THE LD. CIT(A) HAS PROPERLY APPRECIATED THE FACTS ON RECORD AND RIGHTLY CAME TO THE CONCLUSION THAT N O ADDITION COULD BE MADE AGAINST THE ASSESSEE. NO DISCREPANCIES WERE FOUND I N THE RECORD OF THE ASSESSEE. THEREFORE, THE ADDITION WAS RIGHTLY DELETED BY THE LD. CIT(A). WE, THEREFORE, DO NOT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 91 FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVE NUE. THE SAME IS DISMISSED. GROUND NO. 2 OF APPEAL OF THE REVENUE IS DISMISSED. 23. ON GROUND NO. 3, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.3,11,64,149/- MADE BY THE AO ON ACCOUNT OF UNDIS CLOSED STOCK OF WOOLEN YARN ON THE BASIS OF SEIZED DOCUMENT, ANNEXURE-AR-3. IT IS STATED THAT THE PRINT OUT WAS TAKEN FROM THE COMPUTER INSTALLED AT PREMISES AT BA KUCHIYA, BHADOHI, WHICH WAS SUBJECTED TO SEARCH AS PER WARRANT OF AUTHORIZATION DATED 03.02.2009 IN THE NAME OF CARPET INTERNATIONAL. THIS ADDITION WAS MADE ON ALL EGED UNDISCLOSED STOCK WITH THE WEAVERS. THE ASSESSEE CHALLENGED THE ADDITION BEFOR E THE LD. CIT(A) AND SUBMISSIONS OF THE ASSESSEE IS REPRODUCED IN THE AP PELLATE ORDER AS UNDER : 81. ALLEGED UNDISCLOSED STOCK WITH THE WEAVERS RS.3,11,64,149 : THE APPELLANT ENGAGED IN THE BUSINESS OF MANUFACT URING OF CARPETS, BY USING A VARIETY OF RAW-MATERIALS WHI CH INCLUDE WOOLEN YARN (MAIN RAW MATERIAL) COTTON YARN, COTTON CLOTH, COTTON WASTE YARN (THURRY) ETC., THROUGH THE WEAVERS LOCATED IN RURAL AREAS SITUATED IN THE RADIUS OF NEARLY 50 KMS., AT THE PERIPHERY OF BHADO HI (WHICH IS THE PRINCIPLE PLACE OF BUSINESS OF THE APPELLANT). THE WEAVERS REPRESENT COTTAGE INDUSTRIES OF THE COUNTRY AND THE JOB IS CA RRIED OUT BY THEM FROM THEIR RESPECTIVE COTTAGES (HOMES). WITH THE HELP OF LOOMS INSTALLED AT THEIR PLACES OF RESIDENCE, THEY HAVE BEEN WEAVING C ARPETS ON THE BASIS OF DESIGNS SUPPLIED BY THE APPELLANT AND THIS PRACTICE IS PREVALENT IN THIS INDUSTRY AS A WHOLE. DURING THE YEAR UNDER REFERENC E THE APPELLANT HAS ACHIEVED ALL TIME HIGH TURNOVER OF NEARLY RS.125 CRORES, SUBSTANTIAL PORTION OF WHICH IS ACCOUNTED FOR BY THE CARPETS GO T WOVEN BY THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 92 APPELLANT FROM A BIG FORCE OF WEAVERS, INFORMATIO N ABOUT WHOM IS AVAILABLE IN THE SEIZED MATERIAL (PRINTOUT TAKEN FR OM FOUR COMPUTERS INSTALLED AT BAKUCHIYA UNIT OF THE APPELLANT) WHICH IS THE BASIS OF THE DISCUSSION HERE. FOR GETTING THE CARPETS WOVEN APAR T FROM SUPPLYING THEM THE DESIGNS AND THE REQUISITE TECHNICAL KNOW-H OW, THE APPELLANT (LIKE OTHER DEALERS OF CARPETS) HAVE TO SUPPLY ALL THE INPUTS ALSO, WHICH INCLUDED ALL THE ABOVE REFERRED RAW-MATERIALS. FOR THE PURPOSES OF ENSURING INTERNAL CONTROL THE APPELLANT HAD BEEN MA INTAINING WEAVER WISE DETAILS ON ITS COMPUTER INSTALLED, AS HAS BEEN FOUND TO BE SO MAINTAINED BY THE AUTHORISED OFFICERS ALSO, AT ITS BAKUCHIYA UNIT. ONCE THE STOCKS ISSUED TO THE WEAVERS, THE SAME IS CONSU MED BY THEM IN THE CARPETS WOVEN BY THEM AND THE CARPETS SO WOVEN DELI VERED TO US REPRESENT THE STOCK-IN-TRADE OF THE APPELLANT. THE STOCKS OF INPUTS LEFT WITH THE WEAVERS (IN THE PROCESS OF WEAVING THE CARPETS) AND THE STOCKS AVAILABLE IN OUR GODOWNS/PROCESSING UNITS, TAKEN TO GETHER, REPRESENTS THE STOCK OF RAW MATERIALS UNDER VARIOUS HEADS OF ACCOU NT AS NOTED BY THE LD. ACIT ALSO AT PAGE 5 OF THE IMPUGNED ASSESSMENT ORDE R READING AS UNDER:- SCHEDULE D OF AUDIT REPORT DATED 30.06.08 FOR FY 0 7-08 THE DETAILS OF WOOLEN YARN HAVE BEEN SHOWN AS UNDER: RAW MATERIALS WOOLEN YARN IN KGS. (I) OPENING STOCK: 248528.500 (II) PURCHASE DURING THE PREVIOUS YEAR 4962256.45 0 (I) TRANSFER (II) CONSUMPTION DURING THE PREVIOUS YEAR 434466.500 (III) SALES DURING THE PREVIOUS YEAR - (IV) CLOSING STOCK (WOOLEN YARN) 524538.750 CLOSING STOCK (COTTON YARN) 131087 .600 CLOSING STOCK (COTTON/WOOLEN WASTE YARN) 73420.500 CLOSING STOCK (STAPLE YARN) 5528.500 (V) YIELD OF FINISHED PRODUCTS - (VI) PERCENTAGE OF YIELD - (VII) SHORTAGE 71795.700 82. THE LD. ACIT TREATING THE STOCKS OF RAW MATERIA L SO DISCLOSED IN THE BALANCE SHEET/AUDIT REPORT AS THE STOCK OVER AND AB OVE THE STOCK OF RAW MATERIAL AVAILABLE WITH THE WEAVERS AND ADDED THE V ALUE OF THE SAME TO ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 93 THE INCOME OF THE APPELLANT UNDER THE HEAD UNDISCL OSED STOCK WITH THE WEAVERS. FOR THE PURPOSES OF QUANTIFY SUCH ADDITI ON, HE HAS RELIED ON THE PRINTOUTS TAKEN FROM THE FOUR COMPUTERS INSTA LLED AT BAKUCHIYA. COPIES OF THE SAID PRINTOUTS ARE ENCLOSED AT PAGES .TO .. 83. FROM A PERUSAL OF THE SAID STATEMENT READ WITH THE DESCRIPTION THEREOF, AS GIVEN BY THE LD. ACIT IN PARA 6.2 THERE OF, IT WILL BE SEEN THAT THE SAID WEAVER-WISE RECORDS ARE VERY COMPREHENSIVE AND START FROM THE STAGE OF RAW MATERIALS ISSUED TO THEM TO THE STAGE OF MATERIAL USED IN WEAVING CARPET AND THE BALANCE OF RAW MATERIALS LEF T WITH THEM. IN FACT SUCH LEFT OVER BALANCES WITH THEM, HAVE BEEN TREATE D TO THE STOCKS AVAILABLE WITH THE WEAVERS AND VALUE THEREOF AS DET ERMINED AT RS.3,11,64,149 HAS BEEN ADDED TO THE INCOME OF THE APPELLANT AS UNDISCLOSED INVESTMENT IN THE FORM OF WOOLEN YARN . A VERY PECULIAR FEATURE IS DISCERNABLE FROM THE METHODOLOG Y ADOPTED BY VARIOUS CITS FOR MAKING THE SAID ADDITION. HE HAS NOT DISPU TED; (A) OPENING STOCKS OF RAW MATERIALS AVAILABLE WITH THEM ARE INVARIABLY BROUGHT FORWARDED FROM EARLIER YEAR I.E. ASST. YEAR 2007-08 (IN THE ASSESSMENT MADE UNDER SECTION 153A FOR THE ASSESSMENT YEAR 2007-08), THE CLOSING BALAN CES WITH WEAVERS, WHICH ARE THE OPENING BALANCE THIS YEAR, H AVE NOT BEEN TREATED TO BE THE STOCKS OVER AND ABOVE THE ST OCKS OF RAW MATERIAL SHOWN AT THE END OF THE YEAR; (B) QUANTITIES OF RAW MATERIALS AS ISSUED TO THEM W HICH ARE OUT OF OPENING STOCK OF RAW MATERIAL AND PURCHASES MADE DURING THE YEAR WHICH HAVE BEEN FOUND TO BE FULLY ACCOUNTE D FOR; (C) QUANTITY CONSUMED DURING THE YEAR WHICH FORM PA RT OF THE RAW MATERIAL CONSUMED IN WEAVING OF CARPETS, FOR BE ING PART OF THE MANUFACTURING EXPENSES. 84. IN SUCH A SITUATION, THE CLOSING BALANCES WHICH ARE MERELY THE BALANCE FIGURES OF (A) + (B) (C) ABOVE, COULD NOT HAVE BEEN DISPUTED. IN SHORT, THE APPELLANTS CONTENTION IS THAT THE CLOSI NG BALANCE OF THE RAW MATERIALS WITH THE WEAVERS IS ONLY A PART OF THE SA ME TRANSACTION WHICH HAS BEEN DULY ACCEPTED BY THE ASSESSING OFFICER. TH EREFORE, IT COULD NOT HAVE BEEN SAID THAT THE SAID CLOSING BALANCES REPRE SENTED UNDISCLOSED INVESTMENT IN THE FORM OF STOCKS OF RAW MATERIAL AV AILABLE WITH THE WEAVERS AS ON 31.03.2008. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 94 85. IT IS A LAW WELL SETTLED THAT IF A PART OF THE TRANSACTION HAS BEEN TREATED AS CORRECT, THE BALANCING PART OF THE SAME CANNOT BE TREATED AS UNTRUE OR INCORRECT IN ANY MANNER. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF ALLAHABAD BENCH OF THE HONBLE ITAT IN THE CASE OF ASHOK KUMAR JAISWAL, VARANASI VS. ITO, A-WARD, VARA NASI WHEREIN FOLLOWING OBSERVATIONS HAVE BEEN MADE. 17. BEFORE DECIDING THIS ISSUE, IT IS NECESSARY TO BEAR IN MIND THE SETTLED LEGAL POSITION THAT IN THE INCOME-TAX PROCE EDINGS DUE REGARD HAS TO BE HAD FOR ALL MATERIAL AND EVIDENCES WHICH MAY NOT EVEN COME UP TO THE LEVEL OF EVIDENCE INSTRICT SE NSE IN A COURT OF LAW, AND SUCH A MATERIAL AND EVIDENCE CAN BE ORAL A S WELL AS DOCUMENTARY. IF THE FACTS OF THE CASE ARE ANALYSED IN THIS LIGHT, THERE REMAINS NO DOUBT IN OUR MIND WITH REGARD TO T HE GENUINENESS OF THE EXCESS STOCK OF SILVER ORNAMENTS AS APPEAR ED BY WAY OF CLOSING BALANCES IN THE RUNNING ACCOUNTS OF THE RES PECTIVE KARIGARS, WITH WHOM OTHER TRANSACTIONS AS APPEARING IN THOSE VERY ACCOUNTS HAVE BEEN FOUND TO BE ACCEPTABLE TO THE DE PARTMENT AND HAVE, IN REALITY, BEEN ACCEPTED AS SUCH. WHEN SUCH AN EXCESS IN ADMITTEDLY A PART OF THE OTHER TRANSACTIONS WITH EA CH KARIGAR, WHICH HAVE BEEN FOUND AS GENUINE, WE FAIL TO UNDERS TAND AS TO WHY A DIFFERENT TREATMENT COULD BE GIVEN EITHER LEGALLY OR FACTUALLY TO THE AGGREGATES OF THE BALANCES APPEARING THE ACCOUN TS OF THE KARIGARS AT THE CLOSE OF THE ACCOUNTING PERIODS, SO AS TO MAKE THE ADDITIONS BY TREATING SUCH AGGREGATES AS UNEXPLAINE D INVESTMENTS OF THE ASSESSEES. NO DOUBT CONFIRMATORY LETTERS THE MSELVES MAY NOT GO TO PROVE THESE BALANCES, BUT THE FACT REMAINS TH AT THE EXISTENCE OF THE KARIGARS AND OTHER TRANSACTIONS WITH SUCH KA RIGARS STANDS ACCEPTED BY THE DEPARTMENT. THE DEPARTMENT CANNOT C APITALIZE MERELY BY SAYING THAT THE KARIGARS WERE NOT AVAILAB LE AT THE GIVEN ADDRESSES WHEN THEIR IDENTITIES EXPRESSLY STOOD ACC EPTED BY ACCEPTING OTHER TRANSACTIONS WITH THEM. ON A CONSID ERATION OF TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THERE IS NO JUSTIFICATION WHATSOEVER TO TREAT THE BALANC ES IN THE ACCOUNTS OF KARIGARS, WHICH GO TO MAKE THE AGGREGATED OF 33 ,937 KGS. OF SILVER ORNAMENTS IN THE CASE OF SHRI ASHOK KUMAR AN D 64,139 KGS. IN THE CASE OF M/S.BANARAS ALANKAR MANDIR AS HAVING NOT BEEN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 95 PROVED. WE, THEREFORE, HOLD THAT THE ADDITIONS OF R S.101,811 AND RS.1,28,728 AS MADE AND SUSTAINED BY THE AUTHORITIE S BELOW IN THE CASES OF SHRI ASHOK KUMAR JAISWAL AND M/S. BANARAS ALANKAR MANDIR RESPECTIVE DESERVE TO BE DELETED AND THE SAM E ARE ACCORDINGLY DIRECTED TO BE DELETED. A COPY OF THE SAID JUDGEMENT IS ENCLOSED HEREWITH A T PAGES 357 TO 371. 86. APART FROM DISCUSSING THE MERITS OF THE ADDITIO N, ON THE BASIS OF WELL LAID PRINCIPLE AS REFERRED TO ABOVE, AND ON TH E FACTS AVAILABLE ON RECORD OF THIS CASE, THE APPELLANT FURTHER BEGS TO SUBMIT THAT IN THE BALANCE SHEET, IT HAS BEEN SHOWING THE CLOSING STOC KS OF RAW MATERIAL WHICH A SUM TOTAL OF THE STOCKS AVAILABLE AT VARIOU S SITES SUCH AS HARIYAON BYEPASS ROAD, BHADOHI, BAKUCHIYA, BANKAT, B.C. YARN DYERS & DYEING HOUSE AND OF-COURSE WITH THE WEAVERS. AT T HE TIME OF SEARCH ON 11.2.2009, THE STOCKS OF YARN WERE FOUND KEPT AT AL L SUCH PLACES AND ALSO WITH THE WEAVERS AS PER THE PRINTOUT TAKEN BY THE A UTHORISED OFFICERS THEMSELVES. ON BEING REQUIRED TO EXPLAIN THE STOCKS FOUND AT VARIOUS PLACES VIZ; HARIYAON BYEPASS ROAD, BHADOHI, BAKUCHI YA, BANKAT, B.C. YARN DYERS & DYEING HOUSE, WITH REFERENCE TO THE ST OCKS REVEALED BY THE BOOKS OF ACCOUNT, THE APPELLANT HAD SUBMITTED THE R ECONCILIATION AS UNDER:- PARTICULARS KG. STOCK OF WOOLLEN YARN AS PER BOOKS OF ACCOUNT 2,76 ,888.180 STOCK OF WOOLLEN YARN AT BYPASS (AS PER PANCHANAMA) 40,134.000 STOCK OF WOOLLEN YARN AT BACKUCHIYA (AS PER PANCHANAMA) 700.000 STOCK OF WOOLLEN YARN AT BANKAT (AS PER PANCHANAMA) 54,400.000 STOCK OF WOOLLEN YARN AT BC YARN DYERS (AS PER PANCHANAMA) 43,500.000 STOCK OF WOOLLEN YARN WITH WEAVERS (AS PER A/C. STOCK) 1,37,970.450 ACTUAL STOCK AS PER PANCHANAMA 2,76,704.450 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 96 AND VERACITY OF THE SAME HAD NOT BEEN DISPUTED ANYW HERE. 87. FROM THE DISCUSSION MADE IN THE FOREGOING PARAG RAPH, IT IS EVIDENT THAT THERE WAS NO UNDISCLOSED INVESTMENT IN STOCKS, IN THE FORM OF STOCKS WITH THE WEAVERS AS ON 31.3.2008 AND SUCH STOCKS FO RM PART OF THE STOCKS DISCLOSED BY THE APPELLANT IN ITS BALANCE SHEET AS ON 31.3.2008 WHICH IN TURN WAS PROVED AND STOOD VERIFIED FROM THE QUANTIT ATIVE TALLY OF RAW MATERIAL DURING THE YEAR. THE OPENING STOCK IS VERI FIABLE FROM THE PRECEDING YEAR, PURCHASES MADE DURING THE YEAR ARE FULLY VERIFIABLE FROM THE BILLS OF THE SUPPLIERS (TO WHOM PAYMENTS HAVE B EEN MADE THROUGH ACCOUNT PAYEE CHEQUES AND DULY ENTERED IN THE BANK BOOK) AND CONSUMPTION OF RAW MATERIAL DURING THE YEAR IS FULL Y VERIFIABLE FROM THE CARPET WEAVING / PRODUCTION REGISTER AS HAVE BEEN M AINTAINED BY THE APPELLANT IN REGULAR COURSE (FOUND TO BE SO MAINTAI NED AT THE TIME OF SEARCH AND SEIZURE ACTION ALSO) AND FURTHER PRODUCE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 153A AS HAS BEEN NOTED BY THE ACIT HIMSELF. THUS THE ADDITION OF RS.3,11,64,149 I S BASED ON MERE SURMISES AND NON-APPRECIATION/NON-CONSIDERATION OF MATERIAL AND INFORMATION ON RECORD AS ALSO THE ACCOUNTING PROCED URE CONSISTENTLY FOLLOWED BY THE APPELLANT. THE SAME, THEREFORE, DE SERVES TO BE DELETED. 24. THE LD. CIT(A), CONSIDERING THE EXPLANATION OF THE ASSESSEE, DELETED THE ENTIRE ADDITION. THE FINDINGS OF THE LD. CIT(A) IN PARAS 63 TO 65 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 63. IN SHORT THE APPELLANTS CONTENTION IS THAT POSITI ON OF STOCKS OF RAW MATERIALS WITH THE WEAVERS, AT A GIVE N POINT OF TIME, IS VERIFIABLE FORM THE WEAVERS REGISTER AS HAS BEEN K EPT BY THE APPELLANT IN REGULAR COURSE AND FOUND TO BE SO KEPT AT THE TI ME OF SEARCH AND SEIZURE ACTION ALSO. IN THE SAID REGISTER, STOCKS OF RAW MATERIALS, AS AND WHEN ISSUED TO THE WEAVERS ARE RECORDED. THE S TOCKS UTILIZED BY THE WEAVERS FOR WEAVING CARPETS ON THE BASIS OF THE ORDERS/ DESIGNS GIVEN BY THE APPELLANT ARE SHOWN BY WAY OF ADJUSTME NT (OUT OF STOCKS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 97 ISSUED TO THEM) AND BALANCE REMAINING AT THE END OF THE YEAR IS SHOWN AS CLOSING BALANCE WITH THEM. THE ASSESSING OFFICER HAS ACCEPTED THE QUANTITIES OF STOCKS AS ISSUED TO THE WEAVERS AND A S RECORDED IN THE WEAVERS REGISTER, AS THE QUANTITIES EMANATING FROM THE STOCKS OF THE APPELLANT. ONCE THE STOCKS ISSUED TO THEM HAS BEEN ACCEPTED TO BE COMING OUT OF THE OVERALL STOCKS OF THE APPELLANT, THE BALANCE STOCK OF RAW MATERIALS REMAINING WITH THE WEAVERS (OUT OF TH E STOCKS ISSUED TO THEM FROM OVERALL STOCKS AVAILABLE WITH THE APPELLA NT) AT THE END OF THE YEAR CANNOT BE SAID OR TREATED TO BE THE UNACCO UNTED STOCK OF THE WEAVERS. SUCH STOCKS FORM AN INSE PARABLE PART OF T HE OVERALL TRANSACTION. AFTER ACCEPTING ONE PART OF THE SAID T RANSACTION, I.E. THE STOCKS ISSUED TO THE WEAVERS COMING OUT OF OVERALL STOCKS AVAILABLE WITH THE APPELLANT AS PER ITS BOOKS OF ACCOUNT, THE STOCKS REMAINING WITH THE WEAVERS AT THE END OF THE YEAR CANNOT BE T REATED TO BE THE UNACCOUNTED STOCKS WITH THE WEAVERS. THE PRINCIPLE LAID DOWN BY THE HONBLE ITAT IN THE CASE OF ASHOK KUMAR JAISWAL VS. ITO, A-WARD, VARANASI AS HAS BEEN REFERRED TO IN PARA 85 OF THE WRITTEN SUBMISSION IS FULLY APPLICABLE. AFTER CONSIDERING THE SAID CAS E LAW AS ALSO THE DETAILED PROCEDURE FOLLOWED BY THE APPELLANT IN THE MATTER OF ISSUING STOCK OF RAW MATERIAL TO THE WEAVERS, IT CANNOT BE DOUBTED THAT THE STOCKS AVAILABLE WITH THE WEAVERS AT THE END OF THE YEAR DO NOT FORM PART OF THE STOCKS DISCLOSED BY THE APPELLANT AS PE R ITS FINANCIAL RECORDS. THEREFORE, FACTS OF THE CASE, AS HAVE BEE N REFERRED TO BY THE APPELLANT IN PARAS 81 TO 87, DO NOT JUSTIFY THE AD DITION. 64. OTHERWISE ALSO, IT IS AN ASSESSMENT MADE UNDER SEC TION 153A, IN CONSEQUENCE OF SEARCH AND SEIZURE ACTION. SUCH SEAR CH AND SEIZURE ACTION DID NOT LEAD TO THE RECOVERY OF ANY MATERIAL WHICH COULD GO TO SHOW THAT THE STOCKS SHOWN WITH THE WEAVERS AS PER WEAVING REGISTER IS NOT COVERED BY THE STOCKS REVEALED FROM THE FINA NCIAL RECORDS. THEREFORE PRINCIPLE LAID DOWN IN THE UNDER NOTED CA SES ALSO BECOMES APPLICABLE AND THE ADDITION IN QUESTION DOES NOT SU RVIVE. (I) ANIL KUMAR BHATIA VS. ACIT REPORTED IN (2010) 1 ITR (TRIB) 484 (DELHI)B BENCH; (II) MEGHMANI ORGANICS LTD. VS. DCIT (2010) 129 TTJ 255 (AHD.); AND ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 98 (III) DCIT, CC-II, KANPUR VS. SHRI RAJ KUMAR ARORA, KOLKA TA IN ITA NO.290(LUC)2009 AY 2000-01 (UNREPORTED) 65. ON A CONSIDERATION OF FACTS AND CIRCUMSTANCES OF T HE CASE IN ITS ENTIRETY AS ALSO THE LEGAL POSITION AS REFERRED TO ABOVE THE ADDITION OF RS. 3,11,64,149 IS LIABLE TO BE DELETED AND I HOLD SO. THE APPELLANT GETS A RELIEF OF RS.3,11,64,149. 25. THE LD. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT ADDITION IS BASED ON SPECIFIC SEIZED MATERIAL. ON THE OTHER HAN D, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 25.1 BOTH PARTIES HEARD. AS PER ASSESSMENT ORDER, F OUR CPUS WERE SEIZED FROM BAKUCHIYA BUSINESS PREMISES OF M/S. CARPET INTERNAT IONAL PVT. LTD. AS PER ANNEXURE-A TO PANCHNAMA. THE ASSESSEE EXPLAINED THA T THE POSSESSION OF THE STOCK OF RAW MATERIAL WITH THE WEAVERS AT GIVEN POINT OF TIME IS VERIFIABLE FROM THE WEAVERS REGISTER, AS HAS BEEN KEPT BY THE ASSESSEE IN REGULAR COURSE, WHICH WAS ALSO FOUND AT THE TIME OF SEARCH. IN THE SAID REGIS TER, STOCKS OF RAW MATERIAL, AS AND WHEN ISSUED TO THE WEAVERS, ARE RECORDED. THE STOCK UTILIZED BY THE WEAVERS FOR WEAVING CARPETS ON THE BASIS OF THE ORDERS AND DESI GN GIVEN BY THE ASSESSEE AND SHOWN BY WAY OF ADJUSTMENT AND BALANCE IS SHOWN AS CLOSING BALANCE WITH THEM. THE AO HAS ACCEPTED QUANTITIES OF STOCKS AS ISSUED TO THE WEAVERS AND RECORDED IN THE WEAVERS REGISTER. ONCE THE STOCK POSITION IS AC CEPTED, IT CANNOT BE TREATED AS UNACCOUNTED STOCK OF THE WEAVERS. THE ASSESSEE HAS EXPLAINED THIS ISSUE BEFORE THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 99 LD. CIT(A), WHICH HAS BEEN RIGHTLY APPRECIATED BY T HE LD. CIT(A) AND FURTHER DURING THE COURSE OF SEARCH AND SEIZURE, NO INCRIMI NATING MATERIAL WAS FOUND AND SEIZED TO PROVE THAT THE STOCK SHOWN WITH THE WEAVE RS AS PER WEAVERS REGISTER, IS NOT COVERED BY THE STOCK KEPT WITH THE FINANCIAL RE CORDS. THE ASSESSEE HAS FILED DETAILED SUBMISSIONS BEFORE THE LD. CIT(A), AS NOTE D ABOVE, WHICH HAS NOT BEEN REBUTTED THROUGH ANY MATERIAL ON RECORD. SINCE THE REVENUE IS IN APPEAL, THEREFORE, IT IS THE DUTY OF THE DEPARTMENT TO PRODUCE SOME MA TERIAL BEFORE THE TRIBUNAL IN ORDER TO CONTRADICT THE SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF THE LD. CIT(A). HOWEVER, NO SUCH ATTEMPT HAS BEEN MADE. THEREFORE, WE DO NOT FIND IT APPROPRIATE TO REVERSE THE FINDINGS OF THE LD. CIT(A). IN THE R ESULT, GROUND NO. 3 OF APPEAL OF THE REVENUE IS DISMISSED. 26. ON GROUND NO. 4, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.89,00,000/- MADE ON ACCOUNT OF UNEXPLAINED INVES TMENT IN PURCHASE OF LAND. THE AO MADE ADDITION ON THE GROUND THAT THE ASSESSE E HAD MADE SAID PAYMENT FOR THE PURPOSE OF LAND OVER AND ABOVE THE SUM OF RS.41 ,88,000/- AS HAS BEEN RECORDED IN HIS BOOKS OF ACCOUNT AND SHOWN IN THE BALANCE SH EET UNDER THE HEAD SCHEDULE OF FIXED ASSETS. LIKE OTHER TWO ADDITIONS OF RS.15,95, 66,177/- AND RS.91,17,000/-, THIS ADDITION IS BASED ON PRINT OUT TAKEN FROM PEN DRIVE SEIZED BY THE AUTHORIZED ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 100 OFFICER FROM THE LOCKER NO. 18 OF STATE BANK OF IND IA STANDING IN THE NAME OF SHRI PRADEEP KUMAR BARNWAL AND HIS WIFE SMT. SUMAN BARAN WAL. THE PARTICULARS OF THE SAID PARCHA HAVE BEEN RECORDED BY THE AO IN THE ASS ESSMENT ORDER. IT WAS EXPLAINED BEFORE THE AO THAT THE SEIZED PAPER WAS F OUND FROM THE POSSESSION AND CONTROL OF SHRI PRADEEP BARANWAL AND SMT. SUMAN BAR ANWAL, THE JOINT HOLDERS OF THE BANK LOCKER WHICH CANNOT BE CONSIDERED TO BE TH E MATERIAL FOR THE PURPOSE OF MAKING ADDITION U/S. 153A, WHICH WAS NOT CONSIDERED BY THE AO AND MADE THE ADDITION. THE ASSESSEE CHALLENGED THE SAID ADDITION BEFORE THE LD. CIT(A) AND THE WRITTEN SUBMISSIONS OF THE ASSESSEE ARE INCORPORATE D IN THE APPELLATE ORDER, WHICH READ AS UNDER : 68. IT IS PRESUMED, SUBJECT TO VERIFICATION BY YOU R HONOUR, THAT THE SAID LOCKER WAS NOT SUBJECTED TO PROHIBITO RY ORDER EITHER UNDER PROVISO TO SECTION 132(1) OR SECTION 132(3) O F THE ACT, WITH THE COMMENCEMENT OF SEARCH AND SEIZURE ACTION ON 11.02.2009 . IF THE EXISTENCE OF THE LOCKER WAS KNOWN TO THE AUTHORISED OFFICERS, THEN IT SPEAKS VOLUMES OF THEIR CONDUCT, IN NOT PROCEEDING TO SERVE THE BANK WITH THE REQUIRED PROHIBITORY ORDER INSTANTLY AND I N ALLOWING THE LOCKER-HOLDERS, TO OPERATE THE SAME AT THEIR CONVEN IENCE AND MANIPULATE THE SITUATION. AS PER THE RECORDS OF TH E BANK THE SAID LOCKER WAS OPERATED BY SRI PRADEEP KUMAR BARANWAL H IMSELF ON 13.02.2009 AND AGAIN ON 18.02.2009 . IN CASE THE SAID LOCKER WAS SUBJECTED TO PROHIBITORY ORDER ON 11.02.2009 , CONTRARY TO APPELLANTS PRESUMPTION AS AFORESAID, THEN THE MATTER IS MORE C OMPLEX AND SERIOUS AS, WITHOUT THE CONSENT OF THE ASSESSING OF FICER, SRI PRADEEP KUMAR BARANWAL COULD NOT HAVE OPERATED THE LOCKER O N THE DATES MENTIONED ABOVE (WHICH FALL AFTER THE DATE OF COMME NCEMENT OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 101 SEARCH). THIS CLEARLY SHOWS THAT THE PARTIES WITH VESTED INTERESTS COLLIDED WITH EACH OTHER AND, IN ORDER TO HARM THE APPELLANT, HAD FIRST PLANTED A MANIPULATED PEN DRIVE IN THE SAID LOCKER (MUCH AFTER THE DATE OF SEARCH, MAY BE ON 13.02.2009 OR 18.02.2009 WHEN HE OPERATED THE LOCKER) AND MANEUVERED IN THE MANNER, SO THAT T HE SAME COULD BE TREATED TO HAVE BEEN RECOVERED FROM LOCKER ON 02.04.2009 . THEREFORE, NO COGNIZANCE OF THE PRINTOUT FROM THE SAID PEN DRI VE CANNOT BE TAKEN. 69. THE WHOLE EXERCISE SHOWS NOT ONLY THE ANIMUS TH AT THE OTHER PARTY HAD BEEN CARRYING AGAINST THE APPELLANT BUT A LSO SHOWS THE COMPLEXITY OF THE INCOME TAX AUTHORITIES CONCERNED IN THE MATTER. THE SITUATION, WHICH IS QUITE ALARMING, NOT ONLY CALLS FOR THE CROSS EXAMINATION OF THE PERSON GIVING STATEMENT AT THE T IME OF OPERATING THE LOCKER, BUT THE AUTHORISED OFFICERS SHOULD AL SO BE MADE AVAILABLE AS WITNESS SO THAT THEY MAY BE PUT TO CRO SS EXAMINATION BY THE APPELLANT, AND THE APPELLANT SPECIFICALLY PRAYS FOR THE SAME. IT UNDERTAKES TO BEAR THE COST ALSO OF SUCH AN ENQUIRY /CROSS EXAMINATION. FURTHER, GENUINENESS OF THE SAID PEN DRIVE AS WELL AS THE PRINTOUT TAKEN FROM THE SAME SHOULD ALSO BE PUT TO VERIFICAT ION BY THE EXPERTS IN THE FIELD, SO THAT AUTHENTICITY OF THE SAME MAY BE ESTABLISHED. 70. THE PRELIMINARY OBJECTIONS AS AFORESAID STAND F ULLY SUPPORTED BY THE PLEAS MADE BY THE APPELLANT IN PARAS 54 TO 64 HEREINFORE IN RELATION TO THE ADDITIONS OF (A) RS.15,95,66,177 : ON ACCOUNT OF ALLEGED EXCESS WOOLEN YARN AVAILABLE WITH THE APPELLANT; AND (B) RS. 91,17,200 : ON ACCOUNT OF ALLEGED EXCESS STOCK OF THURRY (WASTE YARN AVAILABLE WITH THE APPELLANT) IS BASED ON COMPUTER PRINTOUT THAT HAVE BEEN MADE ON THE BASIS OF PRINTOUT TAKEN FROM THE COMPUTERS INSTALLED AT THE PREMISES OF M/S CARPET INTERNATION AL (P) LTD. THE APPELLANT SPECIFICALLY BEGS TO REFER AND RELY ON TH E SAME TO DEFEND ITSELF AGAINST THE ADDITION OF RS.89,00,000. 71. AS REGARDS MERITS OF THE ADDITION OF RS.89,00,000/- , A PERUSAL OF THE ASSESSMENT ORDER (PARAS 7 TO 7.5 THEREOF) GOES TO SHOW THAT THE SAME HAS BEEN MADE ON THE BASIS OF PAGE 1 OF SOME D IARY WHICH HAD ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 102 BEEN SCANNED AND THEN FED INTO A PEN DRIVE (WHICH W AS MADE TO BE RECOVERED FROM THE BANK LOCKER NO.18 WITH STATE BAN K OF INDIA ON 02.04.2009 FOR WHICH PANCHNAMA WAS PREPARED ON 03. 04.2009 AS STATED ABOVE). THE SAID PART OF THE DIARY HAS BEEN REPRODUCED AGAIN THROUGH THE PROCESS OF SCANNING BY THE LD. ACIT IN PARA 7.1 OF THE IMPUGNED ASSESSMENT ORDER AND TOWARDS THE END OF PA GE 8, THE SAME HAS BEEN SUMMARIZED AS UNDER:- NAME OF BANK DATED AMOUNT SBI 09/10 15,00,000 UBI 16/10 10,00,000 ANANT FINAL SBI 17/10 75,00,000 18/10 (RECEIVED BACK ANANT) -11,00,000 EXPENDITURE 64,00,000 FINAL 72. FROM THE SAID NOTING, THE LD. ACIT HAS INFERRED THAT UNEXPLAINED INVESTMENT IN PURCHASE OF PROPERTY SHOW N AT RS.41,88,000 (RS.32,00,000 PAID TO THE 4 VENDORS + RS.9,80,006 PAID AS STAMP DUTY + OTHER MISC. EXPENSES) AMOUNTED TO R S.89,00,000 (IN ADDITION TO THE SUM OF RS.41,88,000 SHOWN BY THE AP PELLANT IN ITS BOOKS OF ACCOUNT), AS WORKED OUT IN THE FOLLOWING M ANNER:- (RS.) WITHDRAWALS FROM THE BANK ACCOUNTS STATE BANK OF INDIA ON 9.10.2007 15,00,000 UNITED BANK OF INDIA ON 16.10.2007 10,00,000 STATE BANK OF INDIA ON 17.10.2007 75,00,000 1,00,00,000 DEDUCT: RECEIVED BACK FROM ANANT ON 18.10.2007 11,00,000 89,00,000 IT IS SUBMITTED THAT ALL THE THREE SUMS AGGREGATING RS.1.00 CRORES STOOD DULY ENTERED IN THE CASH BOOK OF THE APPELLAN T (WHICH WAS AVAILABLE ON THE DATE OF SEARCH ALSO) AND FROM THER E THE SAME HAD BEEN USED IN MEETING DAY-TO-DAY EXPENDITURE IN THE BUSINESS OF MANUFACTURING AND SALE OF CARPETS AS CARRIED ON BY THE APPELLANT. IN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 103 SUPPORT OF THE SAID SUBMISSION, EXTRACT OF CASH BOO K RIGHT FROM 9.10.2007 TO 17.10.2007 ARE ENCLOSED AT PAGES 24 TO 252 HERETO. 73. IT IS CLARIFIED AND SUBMITTED THAT, LOOKING TO THE EXIGENCIES OF THE BUSINESS AND VOLUME THEREOF AND KEEPING IN VIEW THE FREQUENCY OF PAYMENTS THAT ARE REQUIRED TO BE MADE TO THE WEAVER S AND OTHERS AND FOR PROCURING OTHER INPUTS, THE APPELLANT HAS BEEN CARRYING ON HEAVY CASH BALANCES ON DAY-TO-DAY BASIS, AS A MATTER OF P RACTICE PREVALENT. IN ANY CASE, ONCE IT IS FOUND AND ACCEPTED THAT THE SAID WITHDRAWALS (FOR SUMS AGGREGATING RS.ONE CRORE) S TOOD REFLECTED ON THE RECEIPT SIDE OF THE CASH BOOK, IT COULD NOT HAVE BEEN SAID THAT THE SAID WITHDRAWALS HAD BEEN INVESTED BY THE APPEL LANT IN PURCHASE OF LAND IN QUESTION. IT IS BEYOND ALL HUMAN PROBABILITIES THAT FOR MAKING UNDISCLOSED INVESTMENT, AN ASSESSEE WILL UTI LIZE THE FUNDS WITHDRAWN FROM ITS FULLY DISCLOSED AND REGULAR BANK ACCOUNT WHICH IS RECORDED IN THE BANK BOOK ALSO WHICH HAS BEEN MAINT AINED IN REGULAR COURSE. RELIANCE IN THIS REGARD IS PLACED ON THE P RINCIPLE LAID DOWN BY THE HONBLE APEX COURT IN ITS DECISION IN THE CA SE OF CIT VS. DURGA PRASAD MORE REPORTED IN (1917) 82 ITR 540 WHEREIN AT PAGE 546 THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER :- ..SCIENCE HAS NOT YET INVENTED ANY INSTRUMENT TO TEST THE RELIABILITY OF THE EVIDENCE PLACED BEFORE A COURT O R TRIBUNAL. THEREFORE, THE COURTS AND TRIBUNALS HAVE TO JUDGE T HE EVIDENCE BEFORE THEM BY APPLYING THE TEST OF HUMAN PROBABILI TIES. HUMAN MINDS MAY DIFFER AS TO THE RELIABILITY OF A PIECE O F EVIDENCE. BUT IN THAT SPHERE THE DECISION OF THE FINAL FACT FINDI NG AUTHORITY IS MADE CONCLUSIVE BY LAW . 74. IT IS RELEVANT TO MENTION THAT, BUT FOR SUCH WI THDRAWALS, (WHICH HAVE BEEN SHOWN TO BE FULLY ACCOUNTED FOR) N O MATERIAL WHATSOEVER BECAME AVAILABLE EITHER AT THE TIME OF S EARCH OR EVEN COLLECTED BY MAKING ENQUIRIES TO SUPPORT THE SAID A DDITION OF RS.89,00,000. 75. IT DESERVES TO BE APPRECIATED THAT IT IS BILATE RAL TRANSACTION, ENTERED INTO BETWEEN THE APPELLANT ON ONE HAND AND FOUR VENDORS ON THE OTHER HAND, PARTICULARS OF WHOM, HAVE BEEN GIVE N IN SALE DEED ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 104 DATED 17.10.2007 ITSELF. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE APPELLANT HAD MADE FOLLOWING SPECI FIC SUBMISSION ON THIS ISSUE:- THAT REGARDING YOUR QUERRY NO.23 OF QUERRY LETTER DATED 9.11.10, THE ASSESSEE BEGS TO SUBMIT AS UNDER:- I) THAT THE ABOVE ADDITION IN LAND AMOUNTING TO RS.41,88,000 IN A.Y.2008-09 HAVE BEEN DULY INCORPORATED IN THE BOOKS OF ACCOUNTS OF THE ASSESS EE FIRM AND THE SAME HAVE ALSO BEEN ADMITTED BY THE DEPARTMENT. THE BREAK-UP OF THE SAID 41,88,000 HAS ALSO BEEN MENTIONED IN THE ABOVE SAID NOTICE CORRECTLY B Y YOUR GOODSELF. II) REGARDING YOUR ALLEGED PROPOSED ADDITION OF RS.89,00,000 YOUR ASSESSEE OBJECTS THE SAME BECAUSE OF THE FOLLOWING:- A) THE ASSESSEE IS NOT AWARE OF ANY PEN-DRIVE OR PRINT-OUT THEREOF, AS THE PEN-DRIVE WAS NEITHER WIT H THE ASSESSEE FIRM, NOR WITH PRAMOD BARANWAL/RADHIKA DEVI. B) THE STATEMENT OF THE EX-PARTNER NITIN BARANWAL HAS ALSO BEEN RECORDED DURING POST-SEARCH ENQUIRY IN THE ABSENCE OF THE PRESENT PARTNER SHRI PRAMOD KUMAR BARANWAL WHICH NEEDS TO CROSS- VERIFICATION. C) SIMPLY BECAUSE OF ANY DATA IN THE PEN-DRIVE PROPOSED ADDITION CANNOT BE MADE, WHEREAS AT THE SAME TIME, IT NEEDS CROSS-VERIFICATION AND/OR SUMMON SHOULD BE SERVED TO THE SELLER OF THE PROPERTY SHRI MOHD. YUSUF AND OTHERS. THUS, IN THE LIGHT OF THE ABOVE, ASSESSEE REQUESTS YOUR GOODSELF THAT, BEFORE GOING AHEAD FOR THE PROPOSED ADDITION, STATEMENT OF MOHD. YUSUF AND OTHERS SHOULD BE RECORDED WHICH IS VERY WELL ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 105 IN YOUR POWER. THE EX-PARTNER SHOULD BE CROSS-EXAM INED AND COPY OF PRINT-OUT OF THE SAID PEN-DRIVE SHOULD BE M ADE AVAILABLE TO THE ASSESSEE. IT APPEARS THAT NO ADVERSE MATERIAL COULD BE GATHER ED BY THE LD. ACIT AND EVEN THEN HE HAS MADE THE IMPUGNED ADDITION. THIS AGAIN IS A CLASSICAL EXAMPLE OF BIAS WITH WHICH THE LD. ACIT HAS MADE THE ASSESSMENT IN THE CASE OF THE APPELLANT. 76. IN ORDER TO MAKE SUBMISSIONS BEFORE YOUR HONOUR , ON THE MERITS OF THE CASE, THE APPELLANT HAS COLLECTED INFORMATIO N FROM THE PUBLIC RECORDS, I.E THE OFFICER OF SUB-REGISTRAR OF PROPER TIES OF THE STATE GOVERNMENT, FROM WHICH IT IS REVEALED THAT THE SALE CONSIDERATION PAID BY THE APPELLANT (AS STATED IN THE SALE DEED D ATED 17.10.2007 ALSO) THE EFFECTIVE RATE PER BISWA WORKS OUT TO RS. 33,508/- WHICH IS COMPARABLE, RATHER IT IS HIGHER THAN THE ACTUAL MAR KET RATE ON WHICH PROPERTIES WITH EVEN IN LESSER AREAS WERE SOLD IN T HE VICINITY OF APPELLANTS PROPERTY. SUCH COMPARATIVE STUDY IS GI VEN HEREUNDER:- SL. NO. SELLER PURCHASER AGREEMEN T DATE TOTAL AMOUNT (RS.) AREA EFFECTIVE, RATE PER BISWA (RS.) 1. DR. BIDHU GUPTA S/O RAMASHANK ER GUPTA OMPRAKASH, SHREEPRAKASH, JAYAPRAKASH, VEDPRAKASH & DHARAMPRAKASH S/O KANHAIYALAL GUPTA 02 JUL 07 500000 19 BISWA 06 DHOOR 25000/ BISWA 2. MOHD. YUSUF, NIZAMUDDI N, MOHIUDDIN & IMAMMUDDI N S/O HAZI MOHD. MUSTAFA, AZIZUNISHA CARPET INTERNATIONAL C/O PRAMOD BARANWAL 17 OCT 07 3200000 4 BIGHA 15 BISWA 10 DHOOR 33508/BI SWA ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 106 WIE NIZAMUDDI N ANSARI 3. RAFAT AAYSHA W/O MARHUM SALAM SHAYRA KHATUN W/O ABDUL HAFIZ KHAN 13 FEB 08 500000 13 BISWA 10 DHOOR 37037/BI SWA IT IS MENTIONED FOR THE KIND CONSIDERATION OF YOUR HONOUR THAT THE DOCUMENTS COLLECTED FROM PUBLIC RECORDS DO NOT CONS TITUTE ADDITIONAL EVIDENCE AND THE SAME ARE NOT EVEN REQUIRED TO BE P ROVED. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HONBLE IT AT, ALLAHABAD BENCH, ALLAHABAD IN THE CASE OF M.R. COLD STORAGE PVT. LTD., KANPUR VS. DY. COMMISSIONER OF INCOME-TAX (ASSTT) SPECIAL RANGE, KANPUR , RELEVANT PORTION OF WHICH IS REPRODUCED HEREUNDER:- 17. THE FIRST OF THEM IS A CERTIFIED COPY OF FORM NO.2 DATED 3 RD OF FEBRUARY, 1990 FILED BY THE ASSESSEE COMPANY WIT H THE REGISTRAR OF COMPANIES. PAGE 861 BEING RETURN OF ALLOTMENT PURSUANT TO SECTION 75 (1) OF THE COMPANIES ACT, 19 56 SEEKS TO DECLARE THAT 23,000 EQUITY SHARES OF RS.100/- EACH WORTH RS.23,00,000/- WERE ALLOTTED BY THE COMPANY. TO WH OM, THE ANSWER COMES FROM PAGES 863 TO 866 WHICH CONTAINS T HE DETAILS TOGETHER WITH DATE OF ALLOTMENT WHICH IS THE 3 RD OF FEBRUARY,1990 COMMON TO ALL CASES, THE NAME OF THE ALLOTTEES THEIR ADDRESSES AND OCCUPATION AND THE NUMBER OF SH ARES THEY WERE FAVOURED WITH. THE OTHER DOCUMENT WHICH STARTS FROM PGE 867 IS THE COPY OF ANNUAL RETURN OF THE ASSESSEE CO MPANY AGAIN SUBMITTED TO THE REGISTRAR OF COMPANIES U/S. 159 OF THE COMPANIES ACT WHICH TOO PROVIDES SIMILAR INFORMATIO N ABOUT THE SHARE CAPITAL SUBSCRIBED TOGETHER WITH THE PART ICULARS OF PERSONS WHO WERE DIRECTORS OF THIS COMPANY. THE RE TURN IS APPENDED WITH VARIOUS ODD CERTIFICATES STATUTORILY REQUIRED AS IS EVIDENT FROM PAGE 874 AND ONCE AGAIN ANNEXED ALONG WITH IT THE DETAILS OF ALL ITS SHARE HOLDERS AVAILABLE AT P AGES 876-878. THESE DOCUMENTS ARE PUBLIC DOCUMENTS WITHIN THE MEA NING OF SECTION 74 OF THE INDIAN EVIDENCE ACT,1872 AND AS P OINTED OUT BY US HEREINBEFORE STAND ON A FOOTING DIFFERENT THA N OTHER NORMAL PAPER SOUGHT TO BE ADMITTED BY THE ASSESSEE. IT MAY NOT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 107 BE OUT OF PLACE TO STATE THAT THERE WAS A SALUTARY OBJECT TO BE ACHIEVED BY PUTTING RESTRICTION ON THE ADMISSION O F ADDITIONAL EVIDENCE BEFORE ANY HIGHER JUDICIAL/QUASI-JUDICIAL AUTHORITY, SO THAT, INTER ALIA, THE PROCEEDINGS REMAINED UNDER CO NTROL, THE OPPOSITE SIDE IS NOT TAKEN BY SURPRISE AND THE PART Y ADDUCING SUCH EVIDENCE DOES NOT OUTMANEUVER THE OTHER SIDE, THE COURT/TRIBUNAL AND MORE THE ADMINISTRATION OF JUSTI CE BY COOKING UP DOCUMENTS OF HIS CHOICE AND AT HIS CONVE NIENCE. PUBLIC DOCUMENTS CAN BE SAID TO CARVE OUT AN EXCEPT ION OUT OF THIS GENERAL RULE AS THEIR AUTHENTICITY AND AGE WHI CH IS CAPABLE OF BEING VERIFIED WITH EXACTITUDE CANNOT BE DOUBTE D OR FROWNED UPON. THE TWO DOCUMENTS WHICH HAVE BEEN DETAILED O UT BY US HEREINBEFORE ARE OF THIS NATURE AND HAVING BEEN FIL ED BY THE ASSESSEE ON PARTICULAR DATE BEFORE A STATUTORY AUTH ORITY WHICH ACTS AS GUARDIAN FOR THE EFFECTIVE RUNNING OF THE C OMPANIES UNDER THE COMPANIES ACT, 1956 HAVE, THEREFORE, TO B E ACCEPTED. THESE PUBLIC DOCUMENTS AS HELD BY VARIOUS JUDICIAL PRONOUNCEMENTS DO NOT REQUIRE ANY FURTHER PROOF. T HEY STAND PROVED THROUGH THEIR CERTIFIED COPIES AS PROVIDED B Y SECTION 76 READ WITH SECTION 77 OF THE EVIDENCE ACT. WE ARE, THEREFORE, OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO ENSURE TH EIR CONSIDERATION BY THE TRIBUNAL. HOWEVER, EVEN WHILE ADMITTING THESE DOCUMENTS WE WILL NOT FORGET TO EMPHASISE THA T WHAT COMES OUT OF THESE DOCUMENTS IS A DIFFERENT MATTER WHICH DEPENDS UPON THE NORMAL RULE OF APPRECIATION OF EVI DENCE. COPIES OF ALL ABOVE REFERRED SALE DEEDS AS OBTAINED FROM THE OFFICE OF THE SUB-REGISTRAR OF PROPERTIES (INCLUDING THAT OF THE APPELLANT) AS ALSO THE ORDER OF HONBLE ITAT ARE ENCLOSED AT PAGES 253 TO 275 & PAGES 276 TO 316 HERETO. 77. THE LAW IS WELL SETTLED THAT EVEN THE VALUATION MADE BY THE STAMP OFFICER (IN THE PRESENT CASE SUB-REGISTRAR OF PROPERTIES) CANNOT BE SAID TO BE CONCLUSIVE FOR DETERMINATION OF MARKE T RATE, AND WHOLLY IRRELEVANT FOR MAKING ANY ADDITION ON ACCOUNT OF TH E SAME. ACTUAL SALES INSTANCES IN THE VICINITY ALONE MAY FORM A GU IDING FACTOR, SUBJECT TO SPECIFIC FEATURES OF SUCH SALES INSTANCES, LIKE AREA, LOCATIONS ETC. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING CASE LAWS:- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 108 (I) JAWAJEE NAGNATHAM VS. REVENUE DIVISIONAL OFFICER REPORTED IN (1994) 4 SCC 595 WHEREIN THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER:- IT IS, THEREFORE, CLEAR THAT THE BASIC VALUATION R EGISTER PREPARED AND MAINTAINED FOR THE PURPOSE OF COLLECTI NG STAMP DUTY HAS NO STATUTORY BASE OR FORCE. IT CANN OT FORM A FOUNDATION TO DETERMINE THE MARKET VALUE MENTIONE D THEREUNDER IN INSTRUMENT BROUGHT FOR REGISTRATION. EQUALLY IT WOULD NOT BE A BASIS TO DETERMINE THE MA RKET VALUE UNDER SECTION 23 OF THE ACT, OF THE LANDS ACQ UIRED IN THAT AREA OR TOWN OR THE LOCALITY OR THE TALUK E TC. EVIDENCE OF BONA FIDE SALES BETWEEN WILLING PRUDENT VENDOR AND PRUDENT VENDEE OF THE LANDS ACQUIRED OR SITUATED NEAR ABOUT THAT LAND POSSESSING SAME OR SI MILAR ADVANTAGEOUS FEATURES WOULD FURNISH BASIS TO DETERM INE MARKET VALUE. (II) RAMESH CHAND BANSAL AND OTHERS VS. COLLECTOR, GHAZA IBAD REPORTED IN (1999) 5 SCC 62 WHEREIN AT PAGES 67/68 THEIR LORDSHIPS HAVE HELD AS UNDER:- READING SECTION 47-A WITH THE AFORESAID RULE 340-A IT IS CLEAR THAT THE CIRCLE RATE FIXED BY THE COLLECTO R IS NOT FINAL BUT IS ONLY A PRIMA FACIE DETERMINATION OF RA TE OF THE AREA CONCERNED ONLY TO GIVE GUIDANCE TO THE REGISTE RING AUTHORITY TO TEST PRIMA FACIE WHETHER THE INSTRUMEN T HAS PROPERLY DESCRIBED THE VALUE OF THE PROPERTY. THE CIRCLE RATE UNDER THIS RULE IS NEITHER FINAL FOR THE AUTHO RITY NOR TO ONE SUBJECTED TO PAY THE STAMP DUTY. SO FAR SUB - SECTIONS (1) AND (2) ARE CONCERNED THEY ARE VERY LI MITED IN THEIR APPLICATION AS THEY ONLY DIRECT THE REGIST ERING AUTHORITY TO REFER TO THE COLLECTOR FOR DETERMINATI ON IN CASE THE PROPERTY IS UNDERVALUED IN SUCH INSTRUMENT . THE CIRCLE RATE DOES NOT TAKE AWAY THE RIGHT OF SUCH PE RSON TO SHOW THAT THE PROPERTY IN QUESTION IS CORRECTLY VAL UED AS HE GETS AN OPPORTUNITY IN CASE OF UNDERVALUATION TO PROVE IT BEFORE THE COLLECTOR AFTER REFERENCE IS MADE. T HIS ALSO ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 109 MARKS THE DIVIDING LIEN FOR THE EXERCISE OF POWER B ETWEEN THE REGISTERING AUTHORITY AND THE COLLECTOR. IN CA SE THE VALUATION IN THE INSTRUMENT IS SAME AS RECORDED IN THE CIRCLE RATE OR IS TRULY DESCRIBED IT COULD BE REGIS TERED BY THE REGISTERING AUTHORITY BUT IN CASE IT IS UNDERVA LUED IN TERMS OF SUB-SECTION (1) OR SUB-SECTION (2), IT HAS TO BE REFERRED TO BE DECIDED BY THE COLLECTOR. THUS, THE CIRCLE RATE, AS AFORESAID, IS MERELY A GUIDELINE AND IS AL SO INDICATIVE OF A DIVISION OF EXERCISE OF POWER BETWE EN THE REGISTERING AUTHORITY AND THE COLLECTOR. (III) CIT VS. SMT. RAJ KUMAR VIMLA DEVI AND ANOTHER REPORTED IN (2005) 279 ITR 360 WHEREIN FOLLOWING PRINCIPLES WERE LAID DOWN:- THIS COURT IN THE CASE OF DINESH KUMAR MITTAL VS. ITO [1992] 193 ITR 770; [1990] UPTC 1209 HAS HELD THAT WE CANNOT RECOGNIZE ANY RULE OF LAW TO THE EFFECT T HAT THE VALUE DETERMINED FOR THE PURPOSE OF STAMP DUTY IS T HE ACTUAL CONSIDERATION PASSING BETWEEN THE PARTIES TO A SALE. THE ACTUAL CONSIDERATION MAY BE MORE OR MAY BE LESS. WHAT IS THE ACTUAL CONSIDERATION THAT PASSED BETWEEN THE PARTIES IS A QUESTION OF FACT TO BE DET ERMINED IN EACH CASE, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THAT CASE. COPIES OF THE ABOVE REFERRED JUDGMENTS ARE ENCLOSED AT PAGES 336 TO 343 & 344 TO 351 HERETO 78. IN THE CASE OF THE APPELLANT, IT IS NOT EVEN TH E ALLEGATION OF THE ASSESSING OFFICER THAT THE SALE CONSIDERATIO N AS STATED IN THE SALE DEED DATED 17.10.2007 IS BELOW THE PRICE P REVAILED IN THE MARKET AND IN VIEW OF THE DATE GIVEN IN PARA 76 , IT WAS NOT EVEN FEASIBLE TO MAKE ANY SUCH ALLEGATION. IN SUCH A SITUATION COUPLED WITH THE FACT THAT THE VENDORS ARE IN NO WA Y RELATED TO THE APPELLANT, IT AGAIN BEYOND HUMAN PROBABILITY TH AT THE APPELLANT MUST HAVE PAID ANY SUM OVER AND ABOVE WHA T HAS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 110 BEEN STATED IN THE SALE DEED DT. 17.10.2007. THE PR INCIPLE IN THE CASE OF DURGA PRASAD MORE (SUPRA) AS HAS BEEN D ISCUSSION IN PARA 73 HEREINFORE, IS FULLY APPLICABLE. 79. EVEN AFTER INTRODUCTION OF SECTION 50C, THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. CHANDANI BHOCHER REPORTED IN 323 ITR 510 HAS HELD AS UNDER:- THE ARGUMENT OF THE LEARNED COUNSEL FOR THE REVENU E THAT THE TRIBUNAL SHOULD HAVE ASKED THE ASSESSING OFFICER TO MAKE A REFERENCE TO THE VALUATION OFFICER UNDER SECTION 14 2A OF THE ACT DOES NOT REQUIRE ANY DETAILED CONSIDERATION BECAUSE THE COMMISSIONER OF INCOME-TAX (APPEALS) HAD SENT THE E VIDENCE PRODUCED BY THE ASSESSEE TO THE ASSESSING OFFICER F OR HIS COMMENTS. HE CONDUCTED AN INQUIRY AND ASKED THE AS SESSEE- RESPONDENT TO PRODUCE ORIGINAL BANK STATEMENT. THE N HE SENT A REPLY TO THE COMMISSIONER OF INCOME-TAX (APPEALS) AUTHENTICATING THE WHOLE TRANSACTIONS. THEREAFTER, THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE TRIBUN AL HAVE ACCEPTED THE SALE CONSIDERATION DEPICTED IN THE SAL E DEED AS FACT. THE ASSESSEE-RESPONDENT HAS DISCHARGED THE B URDEN OF PROVING THE SALE CONSIDERATION AS PROJECTED IN THE SALE DEED. MOREOVER, LEARNED COUNSEL FOR THE REVENUE HAS NOT B EEN ABLE TO POINT OUT THAT THE VIEW TAKEN BY THE ALLAHABAD HIGH COURT IN SMT. RAJ KUMARI VIMLA DEVIS CASE [2005] 279 ITR 36 0 HAS BEEN CHALLENGED BEFORE THE HONBLE SUPREME COURT AN D THE SAME HAS BEEN REJECTED. THE AFORESAID VIEW SEEMS T O HAVE ACCEPTANCE OF THE APPELLANT. IF THAT BE SO THEN TH E PRINCIPLE OF CONSISTENCY WOULD REQUIRE THAT THE AFORESAID VIEW B E FOLLOWED AS THE CORRECT VIEW. 80. THUS, WHETHER THE MATTER IS EXAMINED FROM THE P OINT OF E LEGAL OBJECTIONS AS RAISED BY THE APPELLANT 68 TO 70 HEREINFORE OR ON THE MERITS OF THE CASE AS DISCUSSED IN PARAS 71 & 79 , THE ADDITION OF RS.89,00,000 AS MADE BY THE LD. ACIT IS NOT MAINTAINABLE AND DESERVES TO BE DELETED. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 111 59. THE SUBMISSION SO MADE BY THE APPELLANT CAN BE SUM MARIZED AS UNDER:- SL. NO. GIST OF THE SUBMISSIONS (I) THE RECOVERY OF THE PRINTOUT CONTAINING THE SCANNED COPY OF SOME PARCHA AS HAS BEEN RECOVERED FROM BANK LOCKER NO.18 STANDING IN THE JOINT NAMES OF SRI PRADEEP KUMAR BARANWAL AND HIS W IFE SMT. SUMAN BARANWAL ON 2.4.2009 IS A CONCOCTED AFFAIR. THE SEARCH AND SEIZURE ACTION HAD TAKEN PLACE ON 11.2.2009 AND THE RE AFTER AS PER BANK RECORDS, THE SAID LOCKER WAS OPERATED WITH IMP UNITY BY SRI PRADEEP KUMAR BARANWAL ON 13.2.2009 AND 18.2.2009. THE RECOVERY THEREFORE IS OF CONSPIRATORIAL NATURE AN D CANNOT EVEN BE SAID TO HAVE BEEN SEIZED DURING THE COURSE OF SEARC H AND SEIZURE ACTION, EVEN IN THE CASE OF SRI PRADEEP KUMAR BARAN WAL AND SMT. SUMAN BARANWAL. THEREFORE NOT ONLY THE PERSON GIVIN G THE STATEMENT AT THE TIME OF OPERATING BANK LOCKER, THE AUTHORIZED OFFICER NEEDED TO BE TO CROSS EXAMINED, BY GIVING DUE OPPOR TUNITY TO THE APPELLANT, BEFORE DRAWING ANY ADVERSE INFERENCE ON THE BASIS OF SUCH PEN-DRIVE. THIS HAVING NOT BEEN DONE, UNDISPUTEDLY, THE ADDITION HAS BEEN MADE IN VIOLATION OF PRINCIPLES OF NATURAL JUS TICE AND IS, THEREFORE, NOT MAINTAINABLE. (II) THE MATERIAL (SO CALLED AS GATHERED FROM THE PEN-DR IVE) RECOVERED ON 2.4.2009, IS AT THE SAME FOOTING AT WHICH THE OTHER TWO ADDITIONS AGGREGATING RS.16,86,83,377 WERE (AS HAVE ALREADY B EEN DEALT WITH BY ME IN PARAS 31 TO 42 ABOVE). BY IMPLICATION, IT MEANS THAT THE VIEW THAT MAY BE TAKEN WITH REFERENCE TO THE SAID T WO ADDITIONS, SHOULD BE MADE APPLICABLE TO THIS ADDITION ALSO. (III) VARIOUS SUMS AS MENTIONED ON THE SAID PARCHA HAVE B EEN DULY RECORDED IN THE BOOKS OF ACCOUNT OF CARPET INTERNAT IONAL AND THE SAID PARCHA NO WHERE INDICATES THAT THE APPELLANT HAS MA DE PAYMENT OF RS.89,00,000/- (OVER AND ABOVE THE SALE CONSIDERATI ON THAT STOOD RECORDED IN THE BOOKS OF ACCOUNT OF THE APPELLANT). ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 112 (IV) THE WITHDRAWALS MENTIONED IN THE SAID PARCHA HAS BE EN DULY ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT OF TH E APPELLANT AND THEREFORE IT CANNOT BE SAID THAT THE SAID WITHDRAWA LS HAD BEEN UTILIZED IN MAKING PAYMENT, OVER AND ABOVE THE CONS IDERATION IN EXPENSES INCURRED IN REGISTRATION OF SALE DEED THAT RECORDED IN THE BOOKS OF ACCOUNT. (V) AS PER THE LETTER OF THE APPELLANT, AS SUBMITTED BE FORE THE ASSESSING OFFICER, IT HAD DEMANDED THAT ENQUIRIES MAY BE MADE FROM THE VENDORS MENTIONED THEREIN. AS NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD, THROUGH THE PROCESS OF SUCH ENQU IRY, IF ANY, CONDUCTED BY THE ASSESSING OFFICER, IT CANNOT EVEN BE PRESUMED THAT THE APPELLANT HAD MADE ANY PAYMENT FOR PURCHASE OF LAND, OVER AND ABOVE THE AMOUNT MENTIONED IN THE SALE DEEDS. (VI) SOME SALES INSTANCES OF THE PROPERTY SITUATED IN TH E VICINITY OF THE LAND (THAT HAD BEEN PURCHASED BY THE APPELLANT) WER E GIVEN. AS THE SALE DEEDS IN QUESTION CONSTITUTE PUBLIC RECORDS, T HE SAME CANNOT EVEN BE SAID TO BE THE ADDITIONAL EVIDENCE. IN VIE W OF THE SAID SALES INSTANCES ALSO, IT CANNOT BE INFERRED THAT THE PREV ALENT MARKET PRICE WAS MORE THAN WHAT HAD BEEN PAID BY THE APPELLANT. THEREFORE, IT WAS ILLOGICAL TO PRESUME THAT THE APPELLANT HAD MAD E ANY PAYMENT, IN ADDITION TO THE PAYMENT RECORDED IN THE BOOKS OF ACCOUNT. (VII) SALES INSTANCES IN THE VICINITY OF THE LAND PURCHAS ED BY THE APPELLANT CONSTITUTE GUIDELINES FOR DETERMINING THE VALUE OF PROPERTY, AS PER VARIOUS CASE LAWS REFERRED TO THEREIN. ON AN APPLI CATION OF THE PRINCIPLE LAID DOWN IN THE SAID CASE LAWS, IT CANNO T EVEN BE SAID THAT ANY SUCH AMOUNT (OVER AND ABOVE THE SALE CONSIDERAT ION STATED IN THE RELEVANT SALE DEEDS HAD BEEN PAID BY THE APPELLANT. (VIII) WITH THE SUPPORT OF THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. CHANDANI BHOCHAR REPOR TED IN 323 ITR ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 113 510, IT HAS BEEN SUBMITTED THAT EVEN AFTER INSERTIO N OF SECTION 50C, NO SUCH INFERENCE, AS HAS BEEN DRAWN BY THE ASSESSI NG OFFICER, CAN BE DRAWN IN THE PRESENT CASE. 27. THE LD. CIT(A), CONSIDERING THE EXPLANATION OF THE ASSESSEE AND THE MATERIAL ON RECORD DELETED THE ADDITION OF RS.89,00,000/-. H IS FINDINGS IN PARA 60 AND 61 OF THE APPELLATE ORDER REPRODUCED AS UNDER : 60. I HAVE CAREFULLY CONSIDERED THE RIVAL VIEW POINTS AND REACHED A CONCLUSION THAT ADDITION OF RS. 89,00,000 /- AS MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE, FOR A VARIETY OF REASONS. FIRSTLY LOOKING TO VARIOUS DATES AS GIVEN IN PARA 68, IT CA NNOT BE SAID THAT THE PEN-DRIVE IN QUESTION IS A RESULT OF RECOVERY MADE DURING THE COURSE OF SEARCH AND SEIZURE ACTION, EVEN IN THE CASE OF SRI PRADEEP KUMAR BARNWAL AND SMT. SUMAN BARANWAL. EVEN IF THE ALLEG ATION THAT RECOVERY OF THE PEN-DRIVE MAY BE A MANIPULATED AFFA IR IS IGNORED, FOR A MOMENT, ALTHOUGH IT IS QUITE PLAUSIBLE, THE SITUA TION REMAINS THAT THE PEN-DRIVE IN QUESTION CANNOT BE TREATED TO HAVE BEE N FOUND KEPT IN THE BANK LOCKER IN A NORMAL SITUATION. LOOKING TO THE VARIOUS ABNORMALITIES AS ARE REFLECTED IN THE DATES ON WHIC H LOCKER WAS OPERATED UPON AND RECOVERY WAS MADE, THE CREDIBILIT Y OF THE RECOVERY ITSELF IS IN DISPUTE. SECONDLY FOR PROVING GENUINE NESS OF THE PEN-DRIVE AS ALSO THE SCANNED COPY OF THE PARCHA FED THEREIN, IT WAS NECESSARY FOR THE ASSESSING OFFICER, TO BRING ON RECORD THE O RIGINAL PAPER ITSELF SO AS TO ASCERTAIN THAT ANY SUCH PARCHA EXISTED IN REALITY (CONTENTS THEREOF HAD BEEN SCANNED AND FED IN THE COMPUTER IN AN ABRIDGED MANNER). THE CIRCUMSTANCES LEADING TO THE RECOVERY ARE ALSO QUITE SUSPICIOUS. THE ASSESSING OFFICER, THEREFORE, COULD NOT HAVE RELIED UPON THE PARCHA WITHOUT MAKING SOME INDEPENDENT ENQ UIRIES. THEREFORE, THE ADDITION IS VITIATED. THIRDLY THE P ARCHA EVEN IN THE FORM IN WHICH IT WAS AVAILABLE, NOWHERE SHOWS THAT SUMS MENTIONED THEREIN HAD BEEN PAID AS EXTRA SALE CONSIDERATION. RATHER THE SUMS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 114 SHOWN AS WITHDRAWALS IN THE SAID PARACHA WERE FOUND ENTERED IN THE CASH BOOK MAINTAINED BY THE APPELLANT IN REGULAR CO URSE, DURING THE PRE-SEARCH PERIOD. THEREFORE, THE SAID WITHDRAWALS COULD NOT HAVE BEEN TREATED TO BE PAYMENTS MADE BY THE APPELLANT BY WAY OF EXTRA SALES CONSIDERATION, OVER AND ABOVE WHAT HAD BEEN R ECORDED IN THE BOOKS OF ACCOUNT. FOURTHLY THE SALES INSTANCES ALSO LEND SUPPORT TO THE APPELLANTS VERSION OF INVESTMENT AS STOOD RECORDED IN ITS REGULAR BOOKS OF ACCOUNT. THIS INFORMATION CONSTITUTES MAT ERIAL IN SUPPORT OF THE APPELLANTS CONTENTION THAT NO SUM OVER AND ABO VE THE CONSIDERATION MENTIONED IN THE SALE DEEDS AND RECOR DED IN THE BOOKS OF ACCOUNT, HAD BEEN PAID. FIFTHLY, THE APPELLANT HAD SPECIFICALLY REQUESTED THAT THE MATTER MAY BE EXAMINED BY MAKING ENQUIRIES FROM THE VENDORS. THIS BEING A BILATERAL TRANSACTION, N O ADVERSE INFERENCE COULD HAVE BEEN DRAWN IN THE CASE OF THE APPELLANT, WITHOUT MAKING ENQUIRIES FROM THE OTHER PARTY. THE ISSUE CANNOT E VEN BE SET ASIDE FOR THE PURPOSE AS IT IS NOT NECESSARY IN THE PRESENT C ASE BECAUSE OF OTHER CIRCUMSTANCES AS HAVE BEEN NOTED BY ME ABOVE. 61. FINALLY THE VIEW EXPRESSED BY ME IN PARAS 47 TO 56 ABOVE, IN THE CONTEXT OF ADDITIONS OF RS.15,95,66,177/- IS FU LLY APPLICABLE WITH RESPECT TO THE ADDITION OF RS.89,00,000. THUS ON A CONSIDERATION OF TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE LEGAL POSITION AS REFERRED TO ABOVE, I HOLD THAT NO EXTRA PAYMENTS HAS BEEN MADE FOR PURCHASE OF LAND. ACCORDINGLY THE ADDITION OF RS.89,00,000 IS DELETED. 28. THE LD. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE ADDITION IS BASED ON SPECIFIC MATERIAL. ON THE OTHER HAND, T HE LD. COUNSEL REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 29. IT IS NOT IN DISPUTE THAT THE PEN-DRIVE IN QUES TION WAS SEIZED FROM THE LOCKER OF SHRI PRADEEP KUMAR BARANWAL AND SMT. SUMAN BARAN WAL, JOINTLY HELD BY THEM ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 115 ON 02.04.2009. PRIOR TO THAT THE SAME LOCKER WAS OP ERATED BY SHRI PRADEEP KUMAR BARANWAL AND THE LOCKER WAS NOT PUT TO PROHIBITORY ORDER PRIOR TO THE SEARCH. THEREFORE, THERE IS EVERY POSSIBILITY OF MAKING A C ONCOCTED STORY AGAINST THE ASSESSEE AND ITS CREDIBILITY IS IN DOUBT. THEREFORE , THE PRINTOUT TAKEN FROM THE SAID PEN-DRIVE CANNOT BE SAID TO BE THE INCRIMINATING MA TERIAL IN NATURE. THIS CANNOT BE SAID TO BE SUFFICIENT TO DISCARD THE FINDINGS OF TH E LD. CIT(A). FURTHER, IN THE SEIZED PAPER NOTHING IS MENTIONED THAT THE ASSESSEE PAID A NY EXTRA CONSIDERATION. THE LD. CIT(A) ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD CORRECTLY DELETED THE ADDITION. GROUND NO. 4 OF APPEAL OF THE REVENUE IS, THEREFORE, DISMISSED. 30. ON GROUND NO. 5, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.15,95,66,177/- MADE BY THE AO ON ACCOUNT OF UNDI SCLOSED VALUE OF WOOLEN YARN ON THE BASIS OF THE PRINTOUT OF SEIZED CPU. THIS AD DITION IS BASED ON TWO CPUS FOUND AND SEIZED FROM THE PREMISES OF M/S. CARPET I NTERNATIONAL PVT. LTD. GYANPUR ROAD, BHADOHI AND NOT ON THE BASIS OF ANY MATERIAL FOUND OR SEIZED FROM THE PREMISES OF THE ASSESSEE. IT WAS SUBMITTED THAT THE PRINTOUT BEARS THE NAME OF CARPET INTERNATIONAL PVT. LTD. AND AT THAT TIME THI S COMPANY WAS IN EXCLUSIVE POSSESSION OF THE PROPERTY FROM WHERE THE SEIZED MA TERIAL WAS RECOVERED. THEREFORE, THE ASSESSEE IS NOT UNDER OBLIGATION TO EXPLAIN THE PRINTOUT OF OTHER ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 116 COMPANY. HOWEVER, THE AO DID NOT ACCEPT THE CONTENT ION OF THE ASSESSEE AND MADE THE ADDITION. IT WAS ALSO POINTED OUT THAT THE STAT EMENT OF SHRI NITIN BARANWAL, ONE OF THE DIRECTORS OF THE SAID COMPANY WAS RECORDED, BUT THE SAME WAS NOT SUPPLIED TO THE ASSESSEE. THE DETAILED WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER, WHICH READS AS UNDER : 54. ALLEGED EXCESS STOCK OF WOOLEN YARN RS.15,95,66,177 : THIS ADDITION, AS STATED IN PARA 37 & 38 ABOVE, IS BASED ON SOME COMPUTER PRINTOUTS TAKEN FROM THE COMPUTER INSTALLED AT THE PREMISES OF M/S. CARPET INTERNATIONAL PVT. LTD. (AS STATED IN THE IM PUGNED ASSESSMENT ORDER ALSO). THE APPELLANT BEGS TO ENCLOSE HEREWITH PHOTOCOPY OF THE SAID PRINTOUT (AS MADE AVAILABLE TO THE APPELLANT AFTER THE ASSESSMENT ORDER DATED 30.12.2010 HAD BEEN PASSED) AT PAGES.. & .. HERETO, FROM A PERUSAL OF WHICH, IT WILL BE SEEN THAT THE SAME BEARS THE N AME OF CARPET INTERNATIONAL PVT. LTD . A COMPANY WHICH EVER SINCE ITS COMING INTO EXISTENCE ON 31.12.2004 , HAD BEEN ENGAGED IN SIMILAR BUSINESS USING SAME RAW MATERIALS, AND FROM WHOSE PREMISES THE PR INTOUT IN QUESTION HAD BEEN TAKEN. THE FACT THAT, EVEN THOUGH, THE SAID PRINTOUTS CLE ARLY MENTIONS THE NAME OF CARPET INTERNATIONAL PVT. LTD. , YET ADDITION ON THAT BASIS HAS BEEN MADE IN THE ASSESSMENT OF THE A PPELLANT, SHOWS THE BIAS OF THE ASSESSING OFFICER, AGAINST THE APPELLAN T. THIS AVERMENTS ITSELF IS SUFFICIENT TO DELETE THE ADDITION IN TOTO . 55. IN ORDER TO PROVE THE BIAS OF THE LD. ACIT, THE APPELLANT ALSO BEGS TO GIVE HEREIN BELOW A COMPARATIVE CHART OF THE GP RATES APPLIED BY HIM IN THE ASSESSMENT OF M/S. CARPET INTERNATIONAL PVT. LTD. (FROM WHOSE PREMISES THE COMPUTER PRINTOUT IN QUESTION HAD BEEN OBTAINED) IN DIFFERENT YEARS, VIS--VIS, THE G.P. RATE APPLIED I N THE CASE OF THE APPELLANT IN THE CORRESPONDING ASSESSMENT YEARS . ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 117 ASSESSMENT YEAR G.P. ASSESSED BY ASSESSING OFFICER FOR CARPET INTERNATIONAL PVT. LTD. G.P. ASSESSED BY ASSESSING OFFICER FOR CARPET INTERNATIONAL (THE APPELLANT HERE) 2005-06 11.90% 26.88% 2006-07 14.02% 26.90% 2007-08 12.64% 24.70% 2008-09 13.85% 22.73% INFORMATION ABOUT THE RATES APPLIED BY THE ASSESSIN G OFFICER IN THE CASE OF CARPET INTERNATIONAL PVT. LTD. HAS BEEN GATHERED BY THE APPELLANT FROM THE APPELLATE ORDER DATED 23.6.2011 , PASSED BY YOUR HONOUR IN THE CASE OF CARPET PALACE FOR THE ASSESSMENT YEAR 2005-06 , COPY OF WHICH IS ENCLOSED HEREWITH AT PAGES . TO . HERETO. 56. HAD THE ASSESSING OFFICER BEEN UNBIASED AND FAIR IN HIS APP ROACH, HIS NATURAL INSTINCT WOULD HAVE BEEN TO KEEP THE AP PELLANTS ACCOUNT UNDISTURBED AND APPLY THE HIGHER G.P. RATE AS DISCL OSED BY IT (THE APPELLANT) IN THE CASE OF CARPET INTERNATIONAL PVT. LTD., WHILE COMPLETING ASSESSMENTS IN THEIR CASE FOR DIFFERENT ASSESSMENT YEARS. THE PARADOX OF THE MATTER IS THAT THE MUCH BETTER G.P. RATE DISCLO SED BY THE APPELLANT HAS BEEN HELD TO BE LOW EVEN WITHOUT GIVING THE PARTICU LARS OF ALLEGED COMPARABLE CASES AS REFERRED TO IN PARA 10.8 OF THE ASSESSMENT ORDER, WHICH IS REPRODUCED HEREUNDER:- 10.8 AFTER CONSIDERING THE MATERIAL AVAILABLE ON R ECORD AND IN THE LIGHT OF SUBSTANTIAL INFIRMITIES AS DISCUSSED A BOVE, THE G.P. OF THE ASSESSEE FIRM IS REASONABLE IF INCREASED BY 20% OF THE G.P. WHICH HAS BEEN DECLARED BY THE ASSESSEE. IT IS WEL L SETTLED THAT THERE IS NO MATHEMATICAL FORMULA FOR DOING SO AND I N EVERY CASE OF BEST JUDGMENT, AN ELEMENT OF GUESS WORK CANNOT BE E LIMINATED (VIDE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KACHWALA GEMS VS. JOINT COMMISSIONER OF INCOME TAX, JAIPUR, ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 118 REPORTED IN 158 TAXMANN 71). HOWEVER, ENHANCEMENT OF INCOME BY 20% OF G.P. SHOWN BY THE ASSESSEE IS BEING DONE ON THE BASIS OF GP SHOWN BY THE OTHER COMPARABLE CASES OF THE SAME GROUP ENGAGED IN THE SIMILAR TRADE IN THE SAME LOCALITY, WHICH COMES TO 22.73% (18.94% + 20% OF 18.04%), AMOUNT OF ADDITION IS WORKED OUT AS UNDER:- TOTAL TURNOVER 1,42,90,20,150 G.P. @ 22.73% 32,48,16,280 LESS: G.P. SHOWN BY THE ASSESSEE @ 18.94% 23 ,57,24,829 DIFFERENCE 8,90,91,451 THIS AMOUNT IS LIABLE TO BE ADDED IN TOTAL INCOME O F THE ASSESSEE, BUT SINCE SPECIFIC ADDITIONS ON ACCOUNT OF BOGUS EXPENSES/TRANSACTIONS AND UNDISCLOSED STOCK ETC. HA S ALREADY BEEN DONE WHICH COVERS UP THE ADDITION WHICH IS REQUIRED TO BE DONE ON BOOKS OF ACCOUNT ARE REJECTED U/S 145(3). 57. STILL, FOR THE PURPOSES OF EXTENDING ALL THE CO OPERATION FROM ITS END, THE APPELLANT TOOK UPON ITSELF THE TASK OF ANALYZIN G THE SAID PRINTOUTS, IN THE LIGHT OF OBSERVATIONS MADE BY THE LD. ACIT IN P ARAS 8.4 TO 8.10 OF THE IMPUGNED ASSESSMENT ORDER. AS FAR AS THE APPELLANT IS ABLE TO COMPREHEND, THE LD. ACIT HAS GIVEN THE FOLLOWING RE ASONS FOR LINKING THE SAID PRINTOUTS, WITH THE APPELLANT:- (I) ENQUIRIES MADE FROM 3 PARTIES NAMELY (I) A.G. W OOLEN MILLS, PANIPAT (II) JESSA RAM KHUSHI RAM PVT. LTD., PANIPA T (III) ESS ENN TRADING CO., PANIPAT, REVEALED THE FOLLOWIN G:- ACCORDING TO THE INFORMATION GATHERED FROM THESE PARTIES IT BECOMES AMPLY CLEAR THAT THE SUPPLIES MA DE BY THEM IS DULY ENTERED IN THE LEDGER AS AVAILABLE IN THE CPUS SEIZED BY THE DEPARTMENT. THE BILLS ARE RAISED AGAINST THE ASSESSEE AND NOT AGAINST THE M/S . CARPET INTERNATIONAL PVT. LTD. FURTHER, THE PAYMENT S RECEIVED BY THEM ARE THROUGH ACCOUNT PAYEE CHEQUES DEBITED IN THE ACCOUNT OF M/S. CARPET INTERNATIONAL IN THE UNION BANK OF INDIA, BHADOHI ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 119 (II) AS PER THE STATEMENT OF SHRI NITIN BARANWAL (W HO HAS BEEN ONE OF THE PARTNERS TILL 31.3.2008), ENTRIES IN THE SAID COMPUTER PRINTOUTS MARKED AS ANNEXURE AR-I FOR THE PERIOD FROM 1 ST APRIL, 2008 TO 15 TH MAY, 2008 PERTAINED TO CARPET INTERNATIONAL (THE APPELLANT HERE) AND FROM ALL THIS, THE ASSESSING OFFICER HAS INFERR ED THAT BALANCES AS ON 1.4.2008 AS MENTIONED IN THE SAID COMPUTER PRINTOUT ARE THE CLOSING BALANCES OF STOCK OF THE CARPET INTERNATIONAL (THE APPELLANT) AS ON 31.3.2008 RELEVANT TO THE ASSESSMENT YEAR 2008-09. 58. AS FAR AS FIRST GROUND, IT IS ADMITTED THAT THE SAID THREE PARTIES HAD BEEN REGULARLY SUPPLYING US COTTON CLOTH. IT IS ALSO EQUALLY TRUE THAT THE SAID PARTIES HAD BEEN SUPPLYING COTTON CLOTHES TO C ARPET INTERNATIONAL PVT. LTD ., ALSO. ALL THE 11 BILLS AS HAVE BEEN REFERRED TO IN THE IMPUGNED ASSESSMENT ORDER, PERTAIN TO THE FINANCIAL YEARS 20 07-08 & 2008-09 AS MAY BE SEEN FROM PARTICULARS THEREOF AS GIVEN HEREU NDER:- SL. NO. NAME OF THE PARTY BILL NO./DATE AMOUNT (RS.) (I) A.G. WOOLEN MILLS 3978/27.4.2008 4,36,025 (II) A.G. WOOLEN MILLS 3984/13.5.2008 6,98,243 (III) A.G. WOOLEN MILLS 2993/16.5.2008 32,590 (IV) A.G. WOOLEN MILLS 2995/17.5.2008 96,946 (V) A.G. WOOLEN MILLS 3005/29.5.2008 5,58,449 (VI) ESS ENN TRADING CO. 3972/5.4.2008 10,8,669 (VII) JESSA RAM KHUSHI RAM PVT. LTD. 10469/28.3.2008 8,23,354 (VIII) JESSA RAM KHUSHI RAM PVT. LTD. 10322/5.3.2008 8,72,028 (IX) JESSA RAM KHUSHI RAM PVT. LTD. 10401/11.3.2008 5,64,279 (X) JESSA RAM KHUSHI RAM PVT. LTD. 10424/15.3.2008 7,02,171 (XI) JESSA RAM KHUSHI RAM PVT. LTD. 10451/23.3.2008 6,38,858 THE SAID BILLS RELATE TO THE APPELLANT AND THE SAME ARE DULY ENTERED IN ITS REGULAR BOOKS OF ACCOUNT AND PAYMENTS MADE TO THEM ARE ALSO SHOWN NOT ONLY IN RESPECTIVE LEDGER ACCOUNTS OF THE THREE PAR TIES BUT ALSO IN THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 120 BANK BOOK MAINTAINED BY US ON DAY-TO-DAY BASIS. COP IES OF THE LEDGER ACCOUNTS OF THE SAID PARTIES ARE ENCLOSED HEREWITH AT PAGES 220 TO 237 HERETO. THE BANK BOOK IS BEING PRODUCED FOR KIND V ERIFICATION/PERUSAL OF YOUR HONOUR. 59. FROM A PERUSAL OF THE DATES OF THE BILLS REFERR ED TO ABOVE, IT WILL BE SEEN THAT ONLY 3 BILLS PERTAINED TO THE PERIOD FROM 1.4.2008 TO 15.5.2008 AND ON THE BASIS OF SAID BILLS, THE SPECIFICATION O F GOODS SUPPLIED BY THEM HAVE BEEN LISTED BY THE APPELLANT AND PLACED IN A S TATEMENT WHICH IS ENCLOSED HEREWITH AT PAGE .. IF THE SPECIFICATIONS OF THE BILLS, SO WORKED OUT IN THE SAID STATEMENT, ARE COMPARED WITH ANNEXURE AR-1, IT WILL BE SEEN THAT THE SAME DO NOT MATCH AT ALL WITH THE ENT RIES IN THE PRINTOUT UNDER CONSIDERATION. THEREFORE, ON THE BASIS OF THE BILLS OF THE 3 PARTIES REFERRED TO IN THE IMPUGNED ASSESSMENT ORDER, THE T HEORY OF LINKAGE OF THE PRINT OUT WITH THE APPELLANT GOES TO THE GROU ND. CONSEQUENTLY, THE ADDITION MADE ON THE BASIS OF SUCH A LINKAGE WHIC H HAS BEEN ESTABLISHED TO BE FALSE, DESERVES TO BE DELETED. O N THE SAME TOKEN (AS HAD BEEN APPLIED IN THE CASE OF THE APPELLANT) THE SAID PRINTOUT AR-1 SHOULD BE HELD TO BE BELONGING TO M/S CARPET INTERN ATIONAL (P) LTD, MORE PARTICULARLY FOR THE REASON THAT; (A) PRINTOUT BEARS THE NAME OF CARPET INTERNATIONA L (P) LTD.; AND (B) AND THE PRINTOUT HAS BEEN OBTAINED FROM THE C OMPUTER INSTALLED AT THE PREMISES OF M/S. CARPET INTERNATIO NAL (P) LTD., WHOSE NAME TOO IS MENTIONED AT THE TOP OF THE SAID PRINTOUT. THEREFORE, CARPET INTERNATIONAL (P) LTD., ALONE WAS LIABLE TO BE TREATED TO BE ACCOUNTABLE FOR THE SAME AND BE LIABLE FOR TAXAT ION FOR ANY OMISSION AT THEIR END. THIS NATURAL COURSE HAVING NOT BEEN FOLLOWED BY THE LD. ACIT, AGAIN REFLECTS ON HIS FAIRNESS TO PASS THE I MPUGNED ASSESSMENT ORDER IN THE CASE OF THE APPELLANT. 60. AS REGARDS STATEMENT OF SHRI NITIN BARANWAL, IT IS SUBMITTED THAT THE SAID STATEMENT IS NOT ADMISSIBLE AS EVIDENCE PR IMARY BECAUSE OF THE FACTUAL POSITION AS STATED IN PARAS 58 & 59 HEREINFORE. FURTHER, IT IS THE LAW WELL SETTLED THAT A STATEMENT OF CULPABLE NATUR E GIVEN BY 3RD PARTY CANNOT BE APPLIED IN THE CASE OF OTHER PERSON, UNLE SS SUCH OTHER PERSON ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 121 HAS BEEN GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE PERSON (GIVING CULPABLE STATEMENT). RELIANCE IN THIS REGARD IS PLA CED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF STATE OF KERALA VS. K.T. SHADULI REPORTED IN AIR 1977 S.C. 1627 AND OTHER CASE LAWS AS HAVE BEEN REFERRED TO IN PARAS 34 & 35 HEREINFORE. 61. THE APPELLANTS CASE IS EVEN ON A BETTER FOOTIN G AS STATEMENT OF NITIN BARANWAL, WHICH WAS RECORDED AT ITS BACK, WAS NOT MADE AVAILABLE TO THE APPELLANT, EVEN DURING THE COURSE OF ASSESSM ENT PROCEEDINGS UNDER SECTION 153A. IT IS ALSO NOT KNOWN AS TO IN WHAT CO NTEXT THE SAID STATEMENT WAS RECORDED. THUS THERE IS A GROSS VIOLATION OF PR INCIPLES OF NATURAL JUSTICE AND IN VIEW OF THE PRINCIPLE LAID DOWN BY I N THE CASE LAWS REFERRED TO IN PARAS 34 & 35 HEREINFORE, THE ADDITION OF RS. 15,96,66,177 DESERVES TO BE DELETED ON THIS GROUND ALSO. 62. AUTHENTICITY OF THE OPENING STOCK AS FOUND RECO RDED IN THE SAID PRINTOUT IS ALSO NOT PROVED. BEFORE MAKING HUGE AD DITION TO THE TUNE OF RS. 15,95,66,177 TO THE INCOME OF THE APPELLANT, ON THE BASIS OF OP ENING BALANCES, THE ASSESSING OFFICER HIMSELF SHOULD HAVE FOUND OUT AUTHENTICITY OF THE SAID OPENING BALANCES WITH SOU RCE THEREOF. NO BACKGROUND MATERIAL HAS BEEN REFERRED TO WHICH COUL D VOUCHSAFE CORRECTNESS OF THE SAID FIGURES (SO CALLED OPENING BALANCES). 31. THE LD. CIT(A), CONSIDERING THE EXPLANATION OF THE ASSESSEE IN THE LIGHT OF SEIZED MATERIAL, DELETED THE ENTIRE ADDITION. HIS F INDINGS IN PARAS 50 TO 56 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 50. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE B Y THE APPELLANT. AS PER THE INFORMATION ON RECORD, SEARCH AND SEIZURE ACTION WAS SIMULTANEOUSLY CARRIED OUT AT THE PREMISES SITU ATED AT GYANPUR ROAD BHADOHI AS BELONGING TO AND IN EXCLUSIVE CONT ROL OF M/S CARPET INTERNATIONAL PVT. LTD., AN ALTOGETHER SEPARATE AND DISTINCT ENTITY AND UNDER THE CONTROL AND MANAGEMENT OF AN ALTOGETHER DIFFERENT SET OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 122 PERSONS (BELONGING TO THE FAMILY OF SHRI PRADEEP K UMAR BARANWAL). DURING THE COURSE OF SEARCH AT THE SAID PREMISES, P RINTOUTS WERE TAKEN BY THE AUTHORIZED OFFICERS FROM THE COMPUTER FOUND INSTALLED THEREIN. ON SUCH PRINTOUT, THE NAME OF CARPET INTERNATIONAL PVT. LTD., GYANPUR ROAD, BHADOHI 221 401 STOOD SUPERSCRIBED W HICH IS A COMPANY AND UNDISPUTEDLY DIFFERENT FROM THE APPELLA NT, WHICH IS A PARTNERSHIP FIRM. THE SAID PRINTOUT CONTAINS PARTIC ULARS OF VARIOUS RAW MATERIALS AS ARE USED IN THE MANUFACTURING OF C ARPETS. OUT OF ITEMS SO RECORDED IN THE SAID PRINTOUT, A LARGE NUM BER OF ITEMS ARE DENOTED BY (-). ON THE SAID PRINTOUT BEING TAKEN FROM THE COMPUTER INSTALLED AT THE PREMISES OF M/S. CARPET INTERNATIO NAL PVT. LTD., STATEMENT OF SHRI NITIN BARANWAL, SON OF SHRI PRADE EP KUMAR BARNWAL (BOTH OF WHOM ARE THE DIRECTORS IN CARPET I NTERNATIONAL PVT. LTD.), WAS RECORDED BY THE AUTHORIZED OFFICERS. ON THE BASIS OF SUCH STATEMENT, WHICH WAS NEVER CONFRONTED TO THE APPELL ANT (SO MUCH SO THAT EVEN COPY OF THE SAME WAS MADE AVAILABLE TO TH E APPELLANT AFTER COMPLETION OF ASSESSMENT AND THAT TOO ON A REQUEST MADE BY IT) IT WAS PRESUMED BY THE ASSESSING OFFICER THAT THE SAID PRI NTOUT BELONGED TO THE APPELLANT. IT APPEARS THAT THE ASSESSING OFFICE R COLLECTED INFORMATION ABOUT THE SUPPLIERS OF THE GOODS MENTIO NED IN THE SAID PRINTOUTS AND ON THE BASIS OF INFORMATION SO GATHER ED, HE MADE ENQUIRY FROM THREE PARTIES, BY ISSUE OF SUMMONS UND ER SECTION 133(6). THE SAID 3 PARTIES NAMELY (I) A.G. WOOLEN MILLS, (I I) ESS ENN TRADING COMPANY, (III) JESSA RAM KHUSI RAM PVT. LTD., HAD F ORWARDED TO THE ASSESSING OFFICER COPIES OF 11 BILLS AS HAD BEEN RA ISED BY THEM IN THE NAME OF THE APPELLANT FIRM (FOR SUPPLY OF GOODS) AN D IT ALSO FORWARDED COPIES OF ACCOUNTS OF THE APPELLANT FIRM IN THEIR R ESPECTIVE BOOKS OF ACCOUNTS. ON THE BASIS OF INFORMATION SO COLLECTED AND ALSO THE STATEMENT OF NITIN BARANWAL, THE ASSESSING OFFICER HAS INFERRED THAT THE SAID PRINTOUT BELONGING TO THE APPELLANT CONTRA RY TO THE FACT THAT THE SAID PRINTOUT ITSELF WAS SUPERSCRIBED BY THE NA ME OF CARPET INTERNATIONAL PVT. LTD.. THEREAFTER HE PICKED UP T HE POSITIVE FIGURES IN THE SAID STATEMENT (IN QUANTITATIVE TERMS) AND A FTER ADJUSTING FROM AGGREGATE OF SUCH QUANTITIES, THE QUANTITY OF CLOSI NG STOCK AS PER THE AUDITED STATEMENT, TREATED THE DIFFERENCE AS EXCESS STOCK AND VALUE THEREOF WAS TREATED AS VALUE OF EXCESS STOCK. THE W ORKING OF ADDITION OF RS.15,95,66,177 HAS BEEN GIVEN IN PARAS 8.7, 8. 8 & 8.10 OF THE ASSESSMENT ORDER, WHICH ARE REPRODUCED HEREUNDER:- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 123 8.7. HOWEVER STOCK OF WOOLEN YARN AS ON 31.03.08 A S PER PAGE 8 AND 9 OF ANNEXURE AR-1 OF PANCHNAMA DATED 01 .04.09 IS AS UNDER: POSITIVE FIGURES (IN KGS.) (I) 30C ARGENTINA WOOL 352116.704 (II) 60C BIK WHILE 2 PLY WOOL 205479.349 (III) 60C BIK YELLOW 2 PLY WOOL 152616.500 (IV) 60C NYLON WHITE 2 PLY WOOL 200.000 (V) 60C NYLON YELLOW 2 PLY WOOL 200.000 (VI) 60C BIKENAR WHITE WOOL 198597.000 (VII) 60C BIKENAR YELLOW WOOL 144939.000 (VIII) 60C C NZ WHITE WOOL 53777.492 (IX) 60C NZ WHITE WOOL 141 20652.000 (X) 60C NZ YELLOW WOOL 606014.078 (XI) 60C TOOSA WOOL 129579.000 (XII) 60C WOOL 1062.909 (XIII) ACRYLIC WOOL 200.000 TOTAL 1865431.000 KGS. 8.8. ON COMPARISON OF STOCK OF RAW MATERIAL IN FORM OF WOOLEN YARN SHOWN IN THE AUDIT REPORT AND RECORDED IN COMPUTERI ZED BOOKS OF ACCOUNTS FOR A.Y. 08-09, IT IS CLEAR THAT THERE IS SIGNIFICANT DIFFERENCE IN BOTH THE FIGURES. THE QUANTUM OF THE DIFFERENCE IS WORKED OUT AS UNDER- (I) CLOSING STOCK OF WOOLEN YARN AS PER AR-1 18654 31.000 KG (II) CLOSING STOCK AS PER AUDIT REPORT 524538.7 50 KG. DIFFERENCE 1340892.250 KG. XXXXX XXXX XXXX 8.10. SINCE THE RATE OF WOOL SHOWN IN THE AUDIT REP ORT IS RS.119/- PER KG. HENCE, THE SAME RATE IS APPLIED FOR CALCULATION OF VALUE OF UNDISCLOSED WOOLEN YARN. THUS, VALUE OF WOOLEN YARN OF 1340892.250 KGS. WILL BE RS.15,95,66,177/- WHICH IS UNDISCLOSED STOCK OF WOOLEN YARN RELATING TO M/S. CARPET INTERN ATIONAL FOR A.Y. 08-09. THEREFORE, THE ADDITION OF RS.15,95,66,177/- IS BEI NG DONE IN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 124 THE TOTAL INCOME OF M/S. CARPET INTERNATIONAL U/S. 69 OF THE ACT. PENALTY PROCEEDING U/S. 271(1)(C) IS BEING INITIATE D SEPARATELY FOR CONCEALMENT OF INCOME. (ADDITION OF RS.15,95,66,177/-) 51. THE APPELLANTS OBJECTION IS, APART FROM THE LEGAL OBJECTION TO THE EFFECT THAT THE SAID PRINTOUT COULD NOT HAVE BE EN CONSIDERED IN THE SEARCH RELATED ASSESSMENT IN ITS CASE, IS THAT THE PARTICULARS OF GOODS SUPPLIED BY THE SAID THREE PARTIES THROUGH 11 BILLS REFERRED TO ABOVE, DID NOT TALLY WITH THE PARTICULARS OF GOODS MENTION ED IN THE PRINTOUT. AS FAR AS THE SAID 11 BILLS ARE CONCERNED, THE SAME WERE REFERABLE TO DIFFERENT TYPES OF GOODS AND THE SAME STOOD DULY EN TERED IN THE BOOKS OF ACCOUNT OF THE APPELLANT. IN VIEW OF THIS FACT, UNACCOMPANIED BY ANY OTHER MATERIAL, IT CANNOT BE SAID THAT THE STOC KS AS WORKED OUT BY THE ASSESSING OFFICER, ALTHOUGH IN A HIGHLY LACONIC MANNER, BELONGED TO THE APPELLANT AND SUCH STOCK WAS IN EXCESS OF TH E STOCK RECORDED BY THE AUDITORS IN THE AUDIT REPORT FOR THE YEAR ENDIN G ON 31.3.2008. THERE IS ALSO FORCE IN THE APPELLANTS CONTENTION T HAT NATURE OF BUSINESS CARRIED ON BY THE APPELLANT AND M/S. CARPE T INTERNATIONAL PVT. LTD., BEING THE SAME THE TYPE OF RAW MATERIALS MENTIONED IN THE SAID PRINTOUT WAS USED BY THE SAID COMPANY ALSO. AS THE THEORY OF UNDISCLOSED PURCHASE MADE FROM THE THREE PARTIES RE FERRED TO IN THE ASSESSMENT ORDERS STANDS COMPLETELY DEMOLISHED AND THE MATERIAL MENTIONED IN THE PRINTOUT ARE USED BY CARPET INTERN ATIONAL PVT. LTD. ALSO, IT CANNOT BE SAID THAT THE SAID PRINTOUT BELO NGED TO THE APPELLANT AND ON THE BASIS OF SAID PRINTOUT, NO SUCH INFERENC E AS HAS BEEN DRAWN BY THE ASSESSING OFFICER, COULD HAVE BEEN VALIDLY D RAWN. ACCORDINGLY, THE ADDITION OF RS.15,95,66,177 IS NOT MAINTAINABLE IN THE CASE OF THE APPELLANT AND THE SAME IS DELETED. 52. BEFORE PARTING WITH THE ISSUE OF ADDITION FOR THE SUMS VIZ; RS.15,95,66,177, I MAY ALSO MENTION THAT ON LEGAL G ROUND ALSO, THESE ADDITIONS ARE NOT TENABLE, AS HAS BEEN CANVASSED BY THE LD. COUNSEL FOR THE APPELLANT. IT IS AN UNDISPUTED FACT THAT TH E SAID PRINTOUT HAD BEEN TAKEN FROM THE COMPUTER INSTALLED AT THE PREMI SES OF M/S. CARPET INTERNATIONAL PVT. LTD., SITUATED AT GYANPUR ROAD, BHADOHI. THE SAID PREMISES WERE SEPARATELY COVERED BY SEARCH AND SEIZ URE ACTION UNDER SECTION 132(1) AS HAD COMMENCED SIMULTANEOUSLY. THE SAID RECOVERY ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 125 IS NOWHERE REFERRED TO IN THE PANCHNAMA PREPARED IN THE CASE OF THE APPELLANT, AND OBVIOUSLY IT COULD NOT BE SO, AS THE SAME WAS FOUND FROM THE PREMISES BELONGING TO M/S. CARPET INTERNAT IONAL PVT. LTD., AN ALTOGETHER DIFFERENT PERSON. IT WAS, THEREFORE, A MATERIAL TO BE CONSIDERED IN THE CASE OF SAID CARPET INTERNATIONA L PVT. LTD. AND FOR THE ASSESSING OFFICER, THE APPELLANT WAS OTHER PER SON COVERED BY SECTION 153C OF THE ACT. IN CASE THE ASSESSING OFFI CER WHILE DECIDING THE CASE OF CARPET INTERNATIONAL PVT. LTD., WAS OF THE OPINION THAT THE SAID PAPER BELONGED TO THE APPELLANT BEFORE ME NOW, THE LAW REQUIRED THAT HE SHOULD HAVE RECORDED A SATISFACTION TO THAT EFFECT AND IN ORDER TO BRING THE SAME TO TAXATION IN THE HANDS OF THE P RESENT APPELLANT, NOTICE UNDER SECTION 153C WAS REQUIRED TO BE ISSUED . I HAVE CALLED FOR THE ASSESSMENT RECORDS OF THE SAID COMPANY M/S. CAR PET INTERNATIONAL PVT. LTD. ALSO, IN EXERCISE OF MY JURISDICTION UNDE R SECTION 250(4). FROM SUCH AN ENQUIRY, I HAVE FOUND OUT THAT NO SUCH SATISFACTION HAS BEEN RECORDED IN THE SEARCH RELATED ASSESSMENT RECO RDS OF THE SAID COMPANY, ALTHOUGH ASSESSMENTS UNDER SECTION 153A HA D BEEN MADE IN THE CASE OF SAID COMPANY ALSO, WHICH COVERED THE AS SESSMENT YEAR 2008-09 ALSO (YEAR UNDER APPEAL HERE). FOR THIS ADD ITIONAL REASON ALSO, THE SUM AGGREGATING RS.15,95,66,177, COULD NO T HAVE BEEN TREATED AS UNDISCLOSED INCOME OF THE APPELLANT, ASS ESSABLE UNDER SECTION 153A OF THE ACT. 53. IT IS ALSO SEEN THAT WHILE PROCEEDING AGAINST THE APPELLANT, ON THE BASIS OF SAID PRINTOUT, THE ASSESSING OFFICER H AS RELIED ON THE STATEMENT OF SHRI NITIN BARANWAL WHO WAS ONE OF THE DIRECTORS IN M/S. CARPET INTERNATIONAL PVT. LTD. AT THE RELEVANT TIME . SUCH A STATEMENT WHICH WAS OF CULPABLE NATURE COULD NOT HAVE BEEN RE FERRED TO AND RELIED JUPON FOR THE PURPOSES OF MAKING ASSESSMENT IN THE CASE OF THE APPELLANT BEFORE ME, WITHOUT CONFRONTING IT WITH TH E SAID STATEMENT AND GIVING IT AN OPPORTUNITY TO CROSS EXAMINE SHRI NITIN BARANWAL. IT IS A MATTER OF RECORD THAT SUCH STATEMENT WAS NEVER CONFRONTED TO THE APPELLANT BEFORE COMPLETING THE ASSESSMENT, WHAT TO SAY OF GIVING THE APPELLANT AN OPPORTUNITY TO CROSS EXAMINE SHRI NITI N BARANWAL. THE APPELLANT CAME TO KNOW ABOUT THE SAID STATEMENT ONL Y AFTER IT HAD RECEIVED THE ASSESSMENT ORDER IN QUESTION AND THERE UPON IT OBTAINED A COPY OF THE SAID STATEMENT BY MAKING APPLICATION TO THE ACIT. THUS, THE ADDITION HAS BEEN MADE IN VIOLATION OF PRINCIPL ES OF NATURAL JUSTICE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 126 AND THERE ARE UMPTEEN NUMBER OF AUTHORITIES WHEREIN A PROPOSITION HAS BEEN LAID DOWN THAT ADDITION MADE IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE IS VITIATED AND NOT SUSTAINABLE. 54. THE ISSUE HAS GOT ANOTHER ASPECT ALSO. AS STATED AB OVE, THE PRINTOUT WAS TAKEN FROM THE COMPUTER INSTALLED AT T HE PREMISES OF M/S. CARPET INTERNATIONAL PVT. LTD. THIS MEANS THAT THE MATERIAL WAS FOUND FROM THE POSSESSION AND CONTROL OF M/S. CARPET INTE RNATIONAL PVT. LTD. THEREFORE, INITIAL ONUS WAS ON THEM TO EXPLAIN THE SAID PRINTOUT, AS PER SECTION 132(4A) OF THE ACT. NO EFFORT WAS MADE BY T HE ASSESSING OFFICER TO MAKE ENQUIRIES FORM M/S. CARPET INTERNAT IONAL PVT. LTD., WHEREBY, THEY SHOULD HAVE BEEN CALLED UPON TO DISCH ARGE THEIR BURDEN IN TERMS OF SECTION 132(4A). MERELY BY SAYING THAT THE PRINTOUT BELONGED TO CARPET INTERNATIONAL (THE APPELLANT BEF ORE ME, NOW), THEIR BURDEN DID NOT GET DISCHARGED. IN ANY CASE, WHATEVE R MATERIAL HAS BEEN REFERRED TO IN THE STATEMENT OF SHRI NITIN BAR ANWAL, IN SUPPORT OF HIS CONTENTION THAT THE PRINTOUT IN QUESTION BELONG ED TO THE APPELLANT PRESENTLY BEFORE ME, HAS NOT BEEN FOUND TO ADVERSE. THE THREE PARTIES FROM WHOM ENQUIRIES HAVE MADE ON THE BASIS OF STATE MENT GIVEN BY SHRI NITIN BARANWAL, THEY DID SUPPLY GOODS TO THE A PPELLANT FIRM AS PER ELEVEN BILLS, COPIES OF WHICH HAD BEEN FORWARDE D BY THEM TO THE ASSESSING OFFICER IN RESPONSE TO SUMMONS UNDER SECT ION 133(6) OF THE ACT, BUT THE SAME WERE FOUND TO BE DULY RECORDED IN THE REGULAR BOOKS OF ACCOUNT OF THE APPELLANT. NOT ONLY THIS, THE GOO DS SUPPLIED BY THEM (THROUGH THE ELEVEN BILLS AS HAVE BEEN RELIED UPON FOR HOLDING THE PRINTOUT TO BE BELONGING TO THE APPELLANT) ARE DI FFERENT FROM THE ITEMS FOUND RECORDED IN THE SAID PRINT OUT. THUS, THE BURDEN REMAINED ON M/S. CARPET INTERNATIONAL PVT. LTD. AND IT NEVER GOT SHIFTED ON TO THE APPELLANT. 55. IT IS ALSO INTERESTING TO NOTE THAT THE SAID VERY PRINTOUT CONTAINS A LOT OF FIGURES AGAINST WHICH SIGN OF (-) HAS BE EN MENTIONED. THE SAID POSITION RUNS COUNTER TO THE STATEMENT GIVEN B Y SHRI NITIN BARANWAL AND THE ACIT HAS ALSO NOT DEALT WITH THE S AME IN HIS ORDER. FROM THIS ALSO IT FOLLOWS THAT THE ADDITION IN QUES TION HAS BEEN MADE ON THE BASIS OF IRRELEVANT MATERIAL AND WITHOUT CON SIDERING OTHER MATERIAL AND INFORMATION AS WAS AVAILABLE ON THE SE IZED PRINTOUT ITSELF. ON THIS GORUND ALSO, THE ADDITION IN QUESTI ON HAS BEEN VITIATED, ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 127 AS PER THE PRINCIPLE LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. S.P. JAIN REPORTED IN (1973) 86 ITR 370 WHEREIN THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER:- THE HIGH COURT AND THE SUPREME COURT HAVE ALWAYS T HE JURISDICTION TO INTERFERE WITH THE FINDINGS OF THE APPELLATE TRIBUNAL IF IT APPEARS THAT EITHER THE TRIBUNAL HAS MISUNDERSTOOD THE STATUTORY LANGUAGE, BECAUSE THE P ROPER CONSTRUCTION OF THE STATUTORY LANGUAGE IS A MATTER OF LAW, OR IT HAS ARRIVED AT A FINDING BASED ON NO EVIDENCE OR WH ERE THE FINDING IS INCONSISTENT WITH THE EVIDENCE OR CONTRA DICTORY OF IT, OR IT HAS ACTED ON MATERIAL PARTLY RELEVANT AND PAR TLY IRRELEVANT OR WHERE THE TRIBUNAL DRAWS UPON ITS OWN IMAGINATIO N AND IMPORTS FACTS AND CIRCUMSTANCES NOT APPARENT FROM T HE RECORD OR BASES ITS CONCLUSIONS ON MERE CONJECTURES OR SUR MISES OR WHERE NO PERSON JUDICIALLY ACTING AND PROPERLY INST RUCTED AS TO THE RELEVANT LAW COULD HAVE COME TO THE DETERMINATI ON REACHED. IN ALL SUCH CASES THE FINDINGS ARRIVED AT ARE VITIA TED. (P. 372 ) 56. FROM THE DISCUSSION MADE IN PARAS 4 7 TO 55 ABOVE, IT IS CLEARLY BORNE OUT THAT THE ADDITION FOR ALLEGED EXCESS STOCK OF WOOLEN YARN VALUED AT: RS.15,95,66,177 IS NOT SUSTAINABLE EITHE R ON FACTS OR IN LAW. THE SAME ARE, THEREFORE, DELETED. THIS COVERS THE GROUNDS NUMBER 6 TO 14. 32. THE LD. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE ADDITION IS BASED ON SPECIFIC MATERIAL SEIZED. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 128 33 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE SEIZE D PAPER WAS RECOVERED FROM THE PREMISES AT GYANPUR ROAD, BHADOHI, WHICH I S IN EXCLUSIVE POSSESSION OF M/S. CARPET INTERNATIONAL PVT. LTD. IT BELONGS TO F AMILY OF SHRI PRADEEP KUMAR BARANWAL. EVEN IN THE PRINTOUT TAKEN FROM CPU, THE NAME OF M/S. CARPET INTERNATIONAL PVT. LTD. WAS FOUND MENTIONED, WHICH IS DIFFERENT FROM THE ASSESSEE FIRM. SINCE THE SEIZED PAPER IS NOT IN THE NAME OF THE ASSESSEE, THEREFORE, NO LIABILITY CAN BE FIXED UPON THE ASSESSEE. THE STATE MENT OF SHRI NITIN BARANWAL WAS RECORDED BY THE AUTHORIZED OFFICER, BUT IT WAS NEVE R CONFRONTED TO THE ASSESSEE. EVEN IT WAS NOT MADE AVAILABLE TO THE ASSESSEE TILL THE COMPLETION OF ASSESSMENT. THEREFORE, SUCH STATEMENT CANNOT BE READ IN EVIDENC E AGAINST THE ASSESSEE. THE LD. CIT(A), THEREFORE, ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTLY HELD THAT SUCH AN ADDITION AGAINST THE ASSESSEE IS NOT MAINTAINABLE. EVEN THE DETAILS CONTAINED IN THE NAME OF THE COMPANY HAVE NOT BEEN CORROBORATED THROUGH ANY MATERIAL. THE LD. CIT(A) ALSO RIGHTLY CONSIDERED TH AT SINCE THE SEIZED MATERIAL IS RECOVERED FROM THE PREMISES OF M/S. CARPET INTERNAT IONAL PVT. LTD., WHICH IS A PERSON SEARCHED U/S. 153A OF THE ACT, THEREFORE, TH E AO COULD NOT MAKE ANY ADDITION WITHOUT RECORDING HIS SATISFACTION AS REQU IRED U/S. 153C OF THE IT ACT. THE FINDINGS OF THE LD. CIT(A) ARE SUPPORTED BY THE REC ENT DECISION OF HONBLE GUJRAT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 129 HIGH COURT IN THE CASE OF VIJAYBHAI N. CHANDRANI VS . ACIT, 333 ITR 436 IN WHICH IT WAS HELD AS UNDER : SECTION 153A, 153B AND 153C OF THE INCOME-TAX ACT, 1961, LAY DOWN A SCHEME FOR ASSESSMENT IN CASE OF SEARCH AND REQUI SITION. SECTION 153C WHICH IS SIMILARLY WORDED TO SECTION 158BD OF THE ACT, PROVIDES THAT WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A HE SHAL L PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON. HOWEVER, T HERE IS A DISTINCTION BETWEEN THE TWO PROVISIONS INASMUCH AS UNDER SECTION 153C NOTICE CAN BE ISSUED ONLY WHERE THE MONEY, BUL LION, JEWELLERY OR OTHER VALUATION ARTICLE OR THING OR BOOKS OF ACCOUN T OR DOCUMENTS SEIZED OR REQUISITIONED BELONG TO SUCH OTHER PERSON , WHEREAS UNDER SECTION 158BD IF THE ASSESSING OFFICER WAS SATISFIE D THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THA N THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132 O R WHOSE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS WERE REQUIS ITIONED UNDER SECTION 132A, HE COULD PROCEED AGAINST SUCH OTHER P ERSON UNDER SECTION 158BC. THUS A CONDITION PRECEDENT FOR ISSUI NG NOTICE UNDER SECTION 153C AND ASSESSING OR REASSESSING INCOME OF SUCH OTHER PERSON, IS THAT THE MONEY, BULLION, JEWELLERY OR OT HER VALUABLE ARTICLES OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED SHOULD BELONG TO SUCH PERSON. IF THE REQUIREMENT IS NOT SATISFIED, RECOURSE CANNOT BE HAD TO THE PROVISIONS OF SECTION 153C. HELD, ALLOWING THE PETITION, THAT ADMITTEDLY, THE THREE LOOSE PAPERS RECOVERED DURING THE SEARCH PROCEEDINGS DID NOT BELONG TO THE PETITIONER. IT WAS NOT THE CASE OF THE REVENUE THAT THE THREE DOCUMENTS WERE IN THE HANDWRITING OF THE PETITIONER. IN THE C IRCUMSTANCES, WHEN THE CONDITION PRECEDENT FOR ISSUANCE OF NOTICE WAS NOT FULFILLED ACTION TAKEN UNDER SECTION 153C OF THE ACT STOOD VITIATED. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 130 33.1 CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE FINDINGS OF LD. CIT(A), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD . CIT(A) IN DELETING THE ADDITION. IN THE RESULT, GROUND NO. 5 OF APPEAL OF THE REVENU E IS DISMISSED. AS A RESULT, THE DEPARTMENTAL APPEAL IS DISMISSED. 34. THE ASSESSEE, ON GROUND NO. 5 TO 10 OF ITS APPE AL CHALLENGED THE ADDITION OF RS.91,17,200/- ON ACCOUNT OF EXCESS STOCK OF THARRY . THIS ADDITION HAS BEEN MADE ON THE BASIS OF COMPUTER PRINT OUT OBTAINED BY THE AUTHORIZED OFFICER IN THE COURSE OF SEARCH AND SEIZURE FROM THE PREMISES OF CARPET I NTERNATIONAL PVT. LTD. THE ASSESSEE HAS NOT GIVEN PROPER EVIDENCE. THEREFORE, THE ADDITION WAS MADE. THE LD. CIT(A) ALSO CONFIRMED THE ADDITION. 35. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SEIZED PAPER ANNEXURE AR-1 WAS SEIZED FROM THE PREMISES OF M/S. CARPET IN TERNATIONAL PVT. LTD., GYANPUR ROAD, BHADOHI. THE COPY OF WHICH IS FILED IN PAPER BOOK AT PAGE 140 AND 141, WHICH IS IN THE NAME OF CARPET INTERNATIONAL PVT. L TD., WHICH IS ALSO THE BASIS OF MAKING ADDITION OF RS.15,95,66,177/- AS IS RAISED I N GROUND NO. 5 OF THE DEPARTMENTAL APPEAL. HE HAS, THEREFORE, SUBMITTED T HAT SINCE SEIZED PAPER DID NOT BELONG TO THE ASSESSEE AND NO RECOVERY HAS BEEN MAD E FROM THE PREMISES OF THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 131 ASSESSEE. THEREFORE, ON THE SAME ANALOGY, THE ADDIT ION SHOULD NOT HAVE BEEN MADE ON THIS ISSUE. HE HAS SUBMITTED THAT SINCE COMPUTER PRINTOUT DID NOT BELONG TO THE ASSESSEE, THEREFORE, THE ADDITION IS UNJUSTIFIED. O N THE OTHER HAND, THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 36. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT ANNEXURE AR-1 HAS BEEN SEIZED F ROM THE PREMISES OF M/S. CARPET INTERNATIONAL PVT. LTD., GYANPUR ROAD, BHADO HI. THE REVENUE AUTHORITIES SEIZED TWO CPUS FROM THEIR PREMISES AND AFTER TAKIN G PRINTOUT, PROPOSED TO MAKE ADDITION AGAINST THE ASSESSEE. THE SEIZED PRINTOUT ITSELF IS IN THE NAME OF CARPET INTERNATIONAL AND NOT IN THE NAME OF THE ASSESSEE A ND AS SUCH IT CANNOT BE USED AGAINST THE ASSESSEE AS INCRIMINATING EVIDENCE. THE LD. CIT(A) WITHOUT GIVING FINDING AGAINST THE ASSESSEE ON THIS ISSUE MERELY A GREED WITH THE ORDER OF THE AO WITHOUT GIVING ANY REASONS FOR DECISION. ON THE SAM E IDENTICAL ISSUE, THE LD. CIT(A) HAS DELETED THE ADDITION OF RS.15,95,66,177/ -, ON WHICH WE HAVE DISMISSED GROUND NO. 5 OF THE DEPARTMENTAL APPEAL. SINCE THIS ISSUE IS RELATED TO THE SAME GROUND, THEREFORE, IT WOULD NOT BE APPROPRIATE ON T HE PART OF THE LD. CIT(A) TO HAVE TAKEN A CONTRARY VIEW FOR THE PURPOSE OF CONFIRMING THE ADDITION AGAINST THE ASSESSEE. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 132 THE ADDITION. IN THE RESULT, GROUND NO. 5 TO 10 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 91/A/2012 IS, ACCORDINGLY, PARTLY ALLOWED. ITA NOS. 160/A/2012 & 90/A/2012 (CARPET INTERNATION AL - A.Y. 2009-10): 37. BOTH THE CROSS-APPEALS BY THE REVENUE AND THE A SSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A), VARANASI DATED 21.03.2012 FOR THE ASSESSMENT YEAR 2009- 10. 38. IN THIS ASSESSMENT YEAR, THE AO PASSED THE ASSE SSMENT ORDER U/S. 143(3) ON DATED 30.12.2010 AND COMPLETED THE ASSESSMENT PROCE EDINGS BY DETERMINING TOTAL INCOME OF RS.24,63,04,655/- AS AGAINST RS.2,30,03,5 30/- DISCLOSED BY THE ASSESSEE. THE VARIATION OF RS.22,33,01,125/- WAS ATTRIBUTABLE TO THE FOLLOWING ADDITIONS : (I). BOGUS PURCHASE OF CARPETS RS.10,69,69,000/- (II). UNDISCLOSED STOCK AS ON DATE OF SEARCH RS. 6 ,37,00,615/- (III). UNDISCLOSED STOCK AS ON DATE OF SEARCH AT B.C. YARD DYERS RS. 48,66,100/- (IV). UNEXPLAINED TRANSACTION OF RS.45 CRORE RS. 4 ,77,65,410/- --------------------- RS.22,33,01,125/- --------------------- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 133 ALL THESE ADDITIONS WERE CHALLENGED BEFORE THE LD. CIT(A) AND THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS, ON WHICH REMAND REPOR T FROM THE AO WAS CALLED FOR AND THE ASSESSEE ALSO FILED REJOINDER TO THE SAME A ND THE LD. CIT(A) VIDE IMPUGNED ORDER DECIDED THE APPEAL DELETING THE SUBSTANTIAL A DDITION AGAINST THE ASSESSEE. 38.1 AS FAR AS THE ASSESSMENT YEAR 2009-10 IS CONCE RNED, THIS IS THE SEARCH YEAR. AT THE COMMENCEMENT OF THE RELEVANT PREVIOUS YEAR, THE ASSESSEE FIRM GOT RE- CONSTITUTED AND SHRI PRAMOD KUMAR BARANWAL AND HIS FAMILY MEMBERS HAVE BECOME THE PARTNERS AS PER PARTICULARS GIVEN, I.E., PRAMOD KUMAR BARANWAL, SMT. RADHIKA DEVI BARANWAL, PRASHANT BARANWAL AND PRANAV BARANWAL. SHRI PRADEEP KUMAR BARANWAL AND HIS FAMILY MEMBERS WERE EXCLUDED . THE AO WAS INFORMED ABOUT THE PARTITION OF THE GROUP AS A WHOLE AND THE PREMISES, FROM WHERE SEIZED PAPERS WERE RECOVERED, WAS IN THE CONTROL OF SHRI P RADEEP KUMAR BARANWAL. IN THE POST SEARCH ERA AND IN USUAL COURSE, THE ASSESSEE F ILED ITS RETURN U/S. 139(1) FOR THE ASSESSMENT YEAR 2009-10 ON 29.09.2009 SHOWING AN IN COME OF RS.2,30,03,530/-. THE RETURN WAS SUBJECTED TO SCRUTINY AND THE AO PAS SED THE ORDER AS ABOVE IN WHICH THE BOOKS OF ACCOUNT WERE REJECTED U/S. 145(3 ) OF THE IT ACT AND G.P. WAS PROPOSED TO BE ENHANCED AND ADDITION WAS PROPOSED O N ACCOUNT OF G.P. OF RS.2,93,50,051/-, BUT NO SEPARATE ADDITION WAS MADE BECAUSE OF THE FOUR SPECIFIC ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 134 ADDITIONS UNDER CHALLENGED ABOVE WERE MADE IN THE A SSESSMENT ORDER. THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.48,66,100/- ON WHICH THE ASSESSEE IS IN APPEAL AND REMAINING THREE ADDITIONS WERE DELETED BY THE L D. CIT(A) AND THE LD. CIT(A) ALSO HELD THAT THE PROVISIONS OF SECTION 145(3) HAV E BEEN WRONGLY APPLIED IN THIS CASE. THE REVENUE AS WELL AS THE ASSESSEE ARE IN CR OSS-APPEALS AS ABOVE. 39. THE LD. COUNSEL FOR THE ASSESSEE IN APPEAL OF T HE ASSESSEE DID NOT PRESS GROUND NO. 1, 2 & 3. THE SAME ARE, THEREFORE, DISMI SSED AS NOT PRESSED. 40. THE REVENUE ON GROUND NO. 1 CHALLENGED THE ORDE R OF THE LD. CIT(A) IN OVER-RULING THE REJECTION OF BOOKS OF ACCOUNT BY TH E AO U/S. 145(3) OF THE IT ACT. THE AO AS PER FINDINGS GIVEN IN EARLIER YEARS, I.E. , IN THE ASSESSMENT YEAR FALLING IN SEARCH PERIOD ALSO REJECTED THE BOOKS OF ACCOUNT IN ASSESSMENT YEAR UNDER APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE T HE LD. CIT(A) THAT SIMILAR ISSUE WAS CONSIDERED IN EARLIER YEARS AND THERE WAS NO BA SIS FOR REJECTION OF BOOKS OF ACCOUNT. THE ASSESSEE ALSO DISTINGUISHED THE CASE L AW RELIED UPON BY THE AO. THE LD. CIT(A) CONSIDERED THE ISSUE IN DETAIL ON THE SA ME LINE AS HAVE BEEN CONSIDERED IN ASSESSMENT YEAR 2005-06 AND AFTER CONSIDERING TH AT THE ASSESSEE MAINTAINED PROPER BOOKS AND SUBSIDIARY RECORDS, HELD THAT IT W AS WHOLLY ERRONEOUS ON THE PART ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 135 OF THE AO TO REJECT THE BOOKS OF ACCOUNT U/S. 145(3 ) AND TO PROPOSE TO MAKE ADDITION ON ACCOUNT OF HIGHER G.P. IT IS STATED BY THE LD. REPRESENTATIVES OF BOTH THE PARTIES THAT THE ISSUE IS SAME AS HAVE BEEN CONSIDE RED IN THE ASSESSMENT YEAR 2005- 06 AND THE AO HAS GIVEN THE SAME REASONS FOR REJECT ION OF BOOKS OF ACCOUNT THOUGH NO SEPARATE ADDITION HAS BEEN MADE ON THIS ISSUE IN VIEW OF THE SPECIFIC ADDITIONS MADE AGAINST THE ASSESSEE. WE, THEREFORE, FIND THAT THE ISSUE IS SAME AS HAVE BEEN CONSIDERED IN THE ASSESSMENT YEAR 2005-06. THEREFOR E, FOLLOWING THE ORDER IN THAT YEAR IN ITA NO. 156/A/2012, WE DO NOT FIND ANY MERI T IN DEPARTMENTAL APPEAL. GROUND NO.1 OF THE DEPARTMENTAL APPEAL IS, ACCORDIN GLY, DISMISSED. 41 ON GROUND NO. 2, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.10,69,69,000/- MADE BY THE AO ON ACCOUNT OF BOGU S PURCHASES OF CARPETS. THE AO DEALT WITH THIS ISSUE UNDER THE HEAD IMPROPER BO OKS OF ACCOUNT AND PROPOSED TO MAKE ADDITION U/S. 69C OF THE IT ACT. THE LD. CIT(A ) NOTED THAT SINCE HE HAS ALREADY GIVEN FINDING OF FACT THAT THE ASSESSEE MAI NTAINED BOOKS OF ACCOUNT ON DAY- TO-DAY BASIS AND IN REGULAR COURSE OF ITS BUSINESS ACTIVITIES, WHICH ARE CORRECT AND COMPLETE, THEREFORE, BOOK RESULTS ARE CLEARLY VERIF IABLE. THEREFORE, THE ALLEGATION OF BOGUS PURCHASES RAISED BY THE AO IS NOTHING BUT A F IGMENT OF IMAGINATION. THEREFORE, ON THIS SCORE ITSELF, THIS ADDITION IS L IABLE TO BE KNOCKED OFF. THE LD. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 136 CIT(A) ALSO NOTED THE BASIS OF THE AO FOR TREATING THE ABOVE AMOUNT FOR BOGUS PURCHASES, WHICH IS AS UNDER : (A) IN REALITY THERE WAS NO PURCHASES OF 47,410 CA RPETS (IN NUMBER) AS SHOWN TO HAVE BEEN MADE BY THE APPELLANT FROM M/S CARPET INTERNATIONAL PVT. LTD. THROUGH 4 SALES BILL S [AS ISSUED BY M/S CARPET INTERNATIONAL PVT. LTD.], OF THE CORR ESPONDING VALUE; (B) THE ABOVE MENTIONED 4 SALES BILLS ARE FABRICATE D; (C) THE PAYMENTS AMOUNTING TO RS.10,69,69,000/- AS SHOWN TO HAVE BEEN MADE BY THE APPELLANT AGAINST THE PURCHAS E VALUE OF 47,410 CARPETS (THROUGH SAID 4 BILLS) WAS UNACCOUN TED MONEY PAID BY THE APPELLANT TO SRI PRADEEP KUMAR BARANWAL AND HIS FAMILY MEMBERS IN PURSUANCE OF FAMILY SETTLEMENT; (D) AFTER SEARCH AND SEIZURE ACTION, STATEMENT OF S RI PRAMOD KUMAR BARANWAL (MAIN PARTNER OF THE APPELLANT FIRM) AS ALSO OF SRI PRADEEP KUMAR BARANWAL (WHO, ALONGWITH HIS FAMI LY MEMBERS, WAS IN ABSOLUTE CONTROL OF THE MANAGEMENT OF THE COMPANY SUPPLYING THE CARPETS IN QUESTION THROUGH S AID FOUR BILLS) WERE RECORDED AND THEY COULD NOT SUBSTANTIAT E THE TRANSACTION; (E) THE APPELLANTS CONTENTION THAT THE PURCHASES S O MADE BY IT FROM M/S CARPET INTERNATIONAL PVT. LTD. HAD BEEN SOLD ALSO, TO ITS SOLE BUYER M/S IKEA OF SWEDEN COULD NOT BE SUB JECTED TO VERIFICATION FROM THE PURCHASE ORDER OF THE SAID BU YER; AND (F) ON THE BASIS OF (A) (B) (C) (D) & (E) ABOVE, HE HELD THAT PURCHASES OF THE VALUE OF RS.10,69,69,000/- WERE BO GUS AND DEDUCTION FOR THE SAME AS HAD BEEN CLAIMED THROUGH THE PROFIT AND LOSS ACCOUNT (INCLUDED IN OVERALL PURCHASES SHO WN THERE) ARE NOT ADMISSIBLE AS DEDUCTION. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 137 41.1 THE ASSESSEE FILED WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A), WHICH IS REPRODUCED AS UNDER : 18. AS PER SUMMARY GIVEN IN PARA 4 ABOVE, THE APPELLANT HAS DISPUTED AN ADDITION OF RS. 10,79,79,000 (CORRECT FIGURE RS.10,69,69,000) VIDE GROUNDS NO. 4 , 5 & 6, AS HAD BEEN MADE BY THE ACIT BY HOLDING THAT GENUINENESS OF PURCHASES OF 47410 CARPETS FROM M/S. CARPET INTERNATIONAL PVT. LTD., (BY PAYING THE SAID SUM) COULD NOT BE PROVED. FOR DRAWING SUCH AN INFERENCE, THE A CIT MADE REPEATED REFERENCES TO THE REGISTER OF SRI YOGESH P RASAD BARANWAL AS CAPTIONED BY SHRI PRAMOD KUMAR BARANWAL (MAIN PARTN ER OF THE APPELLANT FIRM, AFTER RECONSTITUTION W.E.F. 1.4.200 8) IN HIS DIARY AND FINALLY HELD THAT THE PAYMENTS IN QUESTION WERE NOT MADE FOR PURCHASE OF CARPETS, BUT IN PURSUANCE OF FAMILY SETTLEMENT. IT IS SUBMITTED THAT THE DISALLOWANCE IN QUESTION IS BASED ON INHERENT C ONTRADICTIONS IN THE IMPUGNED ASSESSMENT ORDER ITSELF, AS IS EVIDENT FRO M A GIST OF PARAS 5 TO 5.17 OF THE SAME (WHEREIN THE SAID ADDITION HAS BEEN DE ALT WITH), AS REFERRED TO HEREINAFTER. 19.01 PARA 5 , OF THE IMPUGNED ASSESSMENT ORDER, CONTAINS A SCAN NED COPY OF THE LEDGER ACCOUNT OF M/S. CARPET INTERNATI ONAL PVT. LTD., AS APPEARING IN THE BOOKS OF ACCOUNT MAINTAINED MANUAL LY BY THE APPELLANT FIRM, WHICH IS UNDER SEIZURE ALSO. WHILE REFERRING TO SAID LEDGER ACCOUNT (AS EXTRACTED FROM THE MANUAL LEDGER ) THE ACIT HAS IGNORED THE COMPUTER PRINTOUT WHICH TOO HAD BEEN TA KEN BY THE AUTHORISED OFFICERS, FROM THE COMPUTERS INSTALLED A T THE BUSINESS PREMISES OF THE APPELLANT, AT THE TIME OF SEARCH AN D SEIZURE ACTION. AS HAS BEEN STATED IN THE SUBMISSIONS MADE BY THE APPE LLANT IN ITS APPEAL FOR THE ASSESSMENT YEAR 2005-06, IT HAD STARTED MAI NTAINING ITS BOOKS OF ACCOUNTS AND OTHER RECORDS ON COMPUTER INSTALLAT ION OWING TO BUSINESS EXIGENCIES. KIND ATTENTION IS INVITED TO P ARA 13 OF THE SUBMISSIONS MADE FOR THE ASSESSMENT 2005-06 , WHICH ARE REPRODUCED HEREUNDER:- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 138 13. FOR THE PURPOSES OF DEALING WITH PARAS 10.4 & 10.5 OF THE IMPUGNED THE APPELLANT BEGS TO INVITE THE KIND ATTE NTION OF YOUR HONOUR TO THE FACT THAT UPTO THE ASSESSMENT YEAR 20 04-05, IT HAD BEEN MAINTAINING THE BOOKS OF ACCOUNT AND OTHER REC ORDS MANUALLY, BUT FROM ASSESSMENT YEAR 2005-06 IT HAD C HANGED OVER TO ONLINE SYSTEM WHICH BECAME NECESSARY FOR THE R EASON THAT THERE WAS ONLY ONE OVERSEAS BUYER/DEALER NAMELY M/ S. IKEA OF THE PETITIONERS PRODUCT AND THEY HAVE BEEN COMMUNICATI NG ALL THEIR INSTRUCTIONS (WHICH INCLUDED SUPPLY ORDERS AND INST RUCTION FOR DISPATCH OF GOODS TO DIFFERENT DESTINATIONS THROUGH OUT THE WORLD) ON LINE, AND THE APPELLANT WAS ALSO REQUIRED TO RES POND TO THEM THROUGH ONLINE. THE FACT OF CHANGE OVER FROM MA NUAL TO ONLINE SYSTEM STANDS ESTABLISHED FROM THE TAX AUDIT REPOR T UNDER SECTION 44AB WHICH CONTAIN FOLLOWING NARRATIONS. SL. NO. REQUIREMENT OF FORM 3CD VERIFICATION IN FORM 3 CD 9(B) BOOKS OF ACCOUNT MAINTAINED. (IN CASE OF BOOKS OF ACCOUNT ARE MAINTAINED IN A COMPUTER SYSTEM, MENTION THE BOOKS OF ACCOUNT GENERATED BY SUCH COMPUTER SYSTEM) BOOKS OF ACCOUNT GENERATED THROUGH COMPUTER SYSTEM . CASH BOOK, JOURNAL, LEDGER, WEAVING, WASHING, CLIPPING, FINISHING, BINDING, STRETCHING, LATEXING, THIRD PACKING REGISTER ETC. 9(C) LIST OF BOOKS OF ACCOUNT EXAMINED CASH BOOK, JOURNAL, LEDGER, WEAVING, WASHING, CLIPPING, FINISHING, BINDING, STRETCHING, LATEXING, THIRD PACKING REGISTER ETC. ON COMPUTER SYSTEM . 19.02 SUCH COMPUTER PRINTOUT OF THE LEDGER ACCO UNT OF M/S CARPET INTERNATIONAL (P) LTD. DISCLOSED THAT:- (A) THERE WAS A DEBIT OF RS.97,408 IN THE ACCOUNT O F M/S CARPET INTERNATIONAL (P) LTD, WHICH REPRESENTED PAYMENT TO THEM ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 139 AGAINST THE OPENING BALANCE, AS BROUGHT FORWARD FRO M THE EARLIER YEAR; AND (B) ALSO THERE WAS A SUM OF RS.10,69,69,000 DEBITE D IN THE SAID ACCOUNT FOR CHEQUE ISSUED TOWARDS PAYMENT OF FOUR B ILLS RAISED BY M/S. CARPET INTERNATIONAL PVT. LTD., FOR SUPPLY OF 47410 CARPETS IN THE MONTH OF JULY 2008 AS PER PART ICULARS GIVEN BELOW:- INVOICE NO. DATE AMOUNT (RS.) LOCAL-01/08-09 03/07/2008 31246500 LOCAL-02/08-09 05/07/2008 29686700 LOCAL-03/08-09 09/07/2008 30411200 LOCAL-01/08-09 11/07/2008 15624600 106969000 A COPY OF THE SAID LEDGER ACCOUNT (PRINTOUT FROM TH E COMPUTER) IS ENCLOSED AT PAGE 53-61 OF THIS WS . 19.03 ALL THE ABOVE REFERRED BILLS AS ISSUED BY M/S. CARPET INTERNATIONAL PVT. LTD. WERE FOUND DURING THE COURS E OF SEARCH AND SEIZURE ACTION, AS IS BORNE OUT FROM QUESTION NO.2 AS PUT BY THE AUTHORISED OFFICERS, TO SHRI PRAMOD KUMAR BARANWAL A PARTNER OF THE APPELLANT FIRM, WHILE RECORDING HIS STATEMENT UNDER SECTION 132(4). A COPY OF THE SAID STATEMENT IS ENCLOSED AT PAGES 6 2TO 66 AND 67 TO 70 TO THE W.S. 19.04 PARA 5.2 : IT CONTAINS A SCANNED COPY OF THE APPELLANTS ACCOU NT AS APPEARING IN THE BOOKS OF M/S. CARPET INTERNATIO NAL PVT. LTD. WHICH WAS ALSO FOUND DURING THE COURSE OF SIMULTANEOUS SE ARCH AND SEIZURE ACTION IN THEIR CASE. IN THE SAID LEDGER ACCOUNT, B OTH THE PAYMENTS AS MADE BY THE APPELLANT I.E. RS.97,408/- (AGAINST THE OPENING BALANCE BROUGHT FORWARD FROM EARLIER YEARS) AND RS.10,69,69 ,000 (MADE FOR PURCHASE OF CARPETS THROUGH FOUR INVOICES AS AFORES AID) STOOD DULY ENTERED. THE SAID LEDGER ACCOUNT CONTAINS PARTICULA RS OF FOUR INVOICES ALSO AS REFERRED TO ABOVE, COPIES OF WHICH WERE FOU ND FROM THE PREMISES OF THE APPELLANT FIRM. THE TRANSACTIONS WERE VERIFI ABLE FROM THE BANK ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 140 ACCOUNTS OF THE BUYERS (THE APPELLANT) AND THE PAYE E M/S CARPET INTERNATIONAL (P) LTD [WHO ARE THE BUYERS AND SELLE RS RESPECTIVELY 47410 CARPETS]. 19.05 THUS, THE TRANSACTION OF PURCHASES AND SALES OF CAR PETS OF CARPETS OF THE INVOICE VALUE OF RS.10,69,69,000 AS ALSO THE PAYMENT MADE BY THE APPELLANT STOOD FULLY PROVED, FROM THE MATERIAL FOUND DURING THE COURSE OF SEARCH & SEIZURE ACTION. THUS THE VIEW TAKEN BY THE ACIT IS NOT ONLY BASED ON INHERENT CONTRADICTIO N TO THE MATERIAL AS SEIZED FROM THE PREMISES OF THE APPELLANT (THE BUYE R/PAYER) BUT A GLARING EXAMPLE OF ARBITRARINESS ALSO. SUCH AN ARBITRARINESS IS WORKS CONFOUNDED BY THE OBSERVATIONS MADE BY THE ACIT TO THE EFFECT THAT THE SALES INVOICES COULD BE FABRICATED IN THE POST SEAR CH PERIOD, EVEN THOUGH THE SAME WERE FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTION AND EVEN A SINGLE PAYMENT AGAINST SUCH FOUR INVOICES HA D BEEN MADE AS EARLY AS ON 19.03.2008 I.E. MUCH BEFORE THE DATE OF SEARC H. 19.06 IN LATER PARAS OF THE IMPUGNED ASSESSMENT ORDER, STARTING FROM PARA 5.3 ONWARD, THE ACIT HAS AGAIN RECORDED A CONTRADICTOR Y FINDING TO THE EFFECT THAT THE PAYMENT IN QUESTION REPRESENTE D UNACCOUNTED MONEY PAID BY THE APPELLANT TO THE FAMILY OF SHRI PRADEEP KUMAR BARANWAL AND HIS FAMILY MEMBERS, IN PURSUANCE OF FAMILY SETTLEME NT. THE PAYMENT HAVING BEEN MADE THROUGH CHEQUE AND OUT OF REGULAR BANK ACCOUNT OF THE APPELLANT FIRM, PROCEEDS OF WHICH STOOD COLLECTED B Y THE PAYEE M/S CARPET INTERNATIONAL (P) LTD THROUGH THEIR BANK ACC OUNT, COULD NOT BE TREATED AS UNACCOUNTED MONEY. AS THE PAYMENT IN Q UESTION HAD BEEN MADE AGAINST THE PURCHASES AND THE OTHER PARTY NAME LY M/S CARPET INTERNATIONAL (P) LTD HAD RECEIVED THE SAME AGAINST SALE OF CARPETS AS MADE BY THEM, THE SAID SUM COULD NOT HAVE BEEN HELD TO BE THE PAYMENTS MADE IN PURSUANCE OF FAMILY SETTLEMENT ALLEGED TO T HE REFERABLE TO THE LEDGER KEPT BY SRI YOGESH PRASAD BARANWAL, AND FROM THERE COPIES BY SRI PRAMOD KUMAR BARANWAL IN HIS DIARY. 19.07 THE FACT THAT THE APPELLANT HAD MADE THE P AYMENT OF RS.10,69,69,000 TOWARDS PURCHASES OF CARPETS IS FUR THER PROVED FROM THE CONTEMPORANEOUS EVIDENCE OF THE SALE OF THE SAME, B Y THE APPELLANT TO ITS SOLE BUYER IKEA OF SWEDEN. THE SAID SALES ARE FULL Y REFLECTED IN THE QUANTITATIVE TALLY AS ALSO IN THE LEDGER ACCOUNT OF IKEA WHEREIN THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 141 INVOICES ISSUED BY THE APPELLANT (FOR SALES MADE TO IKEA) ARE FULLY REFLECTED. 19.08 SUBMISSIONS AS HAVE BEEN MADE IN THE FORE GOING PARAGRAPHS STARTING FROM PARAS 19.01 TO 19.06, BY THE APPELLANT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO, WHICH HAS BEEN REPRODU CED BY THE ASSESSING OFFICER ALSO IN PARA 5.5 , READING AS UNDER:- 5.5 THE ASSESSEE VIDE REPLY DATED NIL STATED AS UNDER: 3- THAT REGARDING YOUR QUERY NO.19 OF QUERY LETTER DAT ED 09.11.2010, YOUR ASSESSEE BEGS TO SUBMIT AS UNDER:- I) THAT IN THE SAID QUERY YOUR GOODSELF HAVE CORREC TLY MENTIONED THAT THE FIRM HAS MADE THE PURCHASE OF CA RPET AMOUNTING TO RS.10.69 CRORES FROM OTHER ASSESSEE I. E. FROM M/S.CARPET INTERNATIONAL PVT. LTD. II) THAT THE SAID PURCHASES ARE DULY SUPPORTED WITH THE INVOICE RAISED BY THE SELLER OR THE PURCHASER ALONGWITH SPE CIFICATIONS THEREOF (THOUGH PHOTOCOPY OF INVOICES AND SPECIFICA TION HAVE BEEN SUBMITTED DURING POST SEARCH ENQUIRY AND EVEN THE S AME WAS SEIZED) COPY OF THE SAME ARE AGAIN BEING ENCLOSED H EREWITH. III) THE SAID CARPETS AFTER BEING PURCHASED HAVE BE EN SOLD BY THE FIRM TO M/S IKEA TRADING COMPANY, PHOTOCOPY OF THE SALE BILLS ARE BEING ENCLOSED HEREWITH. IV) THAT THE PAYMENT OF THESE PURCHASES HAS BEEN MA DE BY ACCOUNT PAYEE CHEQUE AS THE SAME HAS ALREADY BEEN A DMITTED IN YOUR ABOVE NOTICE. V) THAT DURING COURSE OF POST SEARCH ENQUIRY STATEM ENT OF PRESENT PARTNER (SHRI PRAMOD BARANWAL) WAS RECORDED BUT NO WHERE HE HAS ADMITTED THAT THERE IS AN ELEMENT OF C OMPENSATION ON ACCOUNT OF PARTITION IN THIS PURCHASE OF RS.10.69 C RORES. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 142 VI) THAT IF ANY SUCH STATEMENT HAS BEEN RECORDED OR ADMITTED, WE REQUEST YOU TO PROVIDE COPY/CERTIFIED COPY (THE ASSESSEE IS READY TO PAY THE REQUISITE FEES) SIR, IT IS SETTLED LAW AS HAVE BEEN HELD BY NUMEROU S COURTS AND EVEN BY THE HONORABLE APEX COURT THAT WHEN THE DEPA RTMENT IS GOING TO ACCEPT THE ONE LEG I.E. SALES MADE BY THE ASSESSEE FIRM, THE SECOND LEG I.E. PURCHASES HAVE TO BE CONSIDERED JUDICIOUSLY WHERE THE IDENTITY, SOURCE AND CAPACITY IS PROVED . (EMPHASIS ADDED) 20. THE ACIT HAS TRIED TO REPEL THE SAID SUBMISSION BY SAYING THAT THE SPECIFICATIONS OF THE PURCHASE MADE BY THE APPELLANT FROM M/S. CARPET INTERNATIONAL PVT. LTD. FOR SUMS AGGREG ATING RS. 10,69,69,000 , ARE NOT VERIFIABLE FROM THE PURCHASE ORDER GIVEN BY IKEA. WITH GREAT RESPECT, IT IS SUBMITTED THAT SUCH AN ASSUMPTION IS ALSO FACTUALLY INCORRECT. IN SUPPORT OF ITS VERSION, THE APPELLANT BEGS TO GIVE HEREIN BELOW DIRECT RECONCIL IATION OF SPECIFICATIONS OF PURCHASES, WITH THE CORRESPONDING PURCHASE ORDER GIVEN BY IKEA AS GIVEN HEREUNDER:- SPECIFICATION OF CARPETS AS PER PURCHASE ORDER GIVEN BY IKEA SPECIFICATION OF PURCHASES AS MADE THROUGH FOUR BILLS FROM M/S. CARPET INTERNATIONAL PVT. LTD. BILL DATE BILL NO. NO. OF PCS. OF CARPETS ANDREA CIRKEL RUG 170 X 240 ANDREA RAND RUG 140 X 200 3.7.2008 1 1094 5.7.2008 2 945 9.7.2008 3 988 11.7.2008 4 496 ANDREA RUND RUG 230 ANDREA RUG 170 X 240 3.7.2008 1 2420 5.7.2008 2 1980 9.7.2008 3 2013 11.7.2008 4 687 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 143 BETA RUG 140 X 200 BETA RUG 230 X 230 BETA RUG 90 X 150 GATTEN RUG 140 X 200 GATTEN RUG 170 X 240 GATTEN RUG 200 X 300 GEDSER RUG 140 X 200 3.7.2008 1 1170 5.7.2008 2 980 9.7.2008 3 1005 11.7.2008 4 455 GEDSER RUG 170 X 240 GEDSER RUG 200 X 300 GEDSER RUG 60 X 90 HEDA RUG 140 X 200 HEDA RUG 170 X 240 HEDA RUG 200 X 200 HELLUM N RUG 140 X 200 3.7.2008 1 2112 5.7.2008 2 3580 9.7.2008 3 4960 11.7.2008 4 425 HELLUM N RUG 170 X 240 HELLUM N RUG 200 X 300 HELLUM RUG 140 X 200 HELLUM RUG 170 X 240 IKEA STHLUM RUG 200 X 300 5.7.2008 2 295 9.7.2008 3 325 IKEA STOCKHOLM FIGURE 170 X 240 3.7.2008 1 398 11.7.2008 4 178 INDO GABBEH B RUG 60 X 90 INDO GABBEH RUG 120 X 180 INDO GABBEH RUG 140 X 200 INDO GABBEH RUG 170 X 240 INDO GABBEH RUG 200 X 300 JORUN RUG 240 X 280 JORUN RUG 90 X 90 OFELIA RUG 170 X 240 OFELIA RUG 230 X 230 STRIB RUG 140 X 200 3.7.2008 1 1836 5.7.2008 2 2705 9.7.2008 3 1744 11.7.2008 4 2101 ULDUM RUG 230 X 230 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 144 HELLUM N. RUG 135 X 90 UNNI RUG 170 X 240 3.7.2008 1 2465 5.7.2008 2 2205 9.7.2008 3 2285 11.7.2008 4 1457 ULDUM RUG 230 X 230 3.7.2008 1 1420 5.7.2008 2 950 9.7.2008 3 981 11.7.2008 4 755 47410 FURTHER, THE APPELLANT ALSO BEGS TO ENCLOSE HEREWIT H A STATEMENT GIVING THE PARTICULARS OF PURCHASES (AS TAKEN FROM THE FOUR INVOICES) AND CORRESPONDING DESPATCHES AS MADE BY I T TO IKEA, AT PAGES 71 TO 77 OF THIS WS . 21. THE APPELLANT BEGS TO CLARIFY AND SUBMIT THAT T HE INFORMATION GIVEN IN PARA 20 HEREINFORE IS BASED ON MATERIAL AND INFORMATION ALREADY ON RECORD, EITHER IN THE FORM OF SEIZED MAT ERIAL OR BY WAY OF SUBMISSIONS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ALL THAT THE APPELLANT HAS DONE BEFORE YOUR HONOUR, IS TO PUT THE SAME IN A SEQUENCE JUST TO MAKE THE SAME EASILY COM PREHENSIBLE. 40. IN SUBSEQUENT PARAS 22 & 23 THE APPELLANT SUBMI TTED THAT THE PURCHASES IN QUESTION HAD BEEN MADE IN THE MONTH OF JULY 2008 AND THE SAME HAD BEEN DULY DISCLOSED BY IT IN THE RETU RN OF VAT FOR THAT MONTH FILED ON 20.8.2008, WHICH IS A PRE SEARCH EVE NT. IN THE RETURN SO FILED BY THE APPELLANT, IT HAD DISCLOSED THE PUR CHASE OF AGGREGATE VALUE OF RS.10,80,76,194/- WHEREIN THE SAID FIGURE OF RS.10,69,69,000 STOOD SPECIFICALLY INCLUDED, AS PER BREAKUP GIVEN H EREUNDER:- PURCHASE OF CARPET FROM M/S CARPET INTERNATIONAL PVT. LTD. : RS.10,60,69,000/- PURCHASE OF COTTON YARN : RS. 11,07,194/- RS.10,80,76,194/- 41. PROCEEDING FURTHER, MY ATTENTION WAS INVITED TO THE SUBMISSIONS MADE IN PARA 24 OF THE WRITTEN SUBMISSIONS (SUPRA) WHEREIN IT HAS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 145 BEEN STATED THAT IN THE APPELLATE PROCEEDINGS FOR T HE CORRESPONDING ASSESSMENT YEAR IN THE CASE OF M/S CARPET INTERNATI ONAL PVT. LTD. IT HAS ALREADY BEEN ACCEPTED BY ME THAT THE SAID PARTY HAD RECEIVED THE SUM OF RS.10,69,69,000/-, BY WAY OF CONSIDERATION F OR SALE OF 47,410 CARPETS IN TERMS OF THE ABOVE MENTIONED FOUR BILLS, AND NOT BY WAY OF ANY CONSIDERATION RECEIVED IN LIEU OF FAMILY SETTLE MENT, EFFECTIVE FROM 1.4.2008. EVEN PURCHASES OF THE CARPETS AT THE END OF THE SUPPLIERS WERE VERIFIABLE. IT IS RELEVANT TO MENTION HERE TH AT THE SAID SUM HAD BEEN TREATED BY THE SAME VERY ASSESSING OFFICER IN THE CASE OF M/S CARPET INTERNATIONAL PVT LTD., AS WINDFALL AND WA S SUBJECTED TO ASSESSMENT AS SUCH, WITHOUT INTERFERING WITH THE VE RSION OF SALES OF THE SAID COMPANY, WHEREIN THE SAID SALE OF RS.10,69,69, 000 STOOD INCLUDED. 42. FINALLY, SRI RASHMI B. GHABHAWALA THE LD. AUTHO RISED REPRESENTATIVE SUBMITTED THAT THE PURCHASES SO MADE BY THE APPELLANT FORMED PART OF THE PURCHASES APPEARING IN THE PROFI T AND LOSS ACCOUNT WHICH IS A COMPONENT OF THE TRADING ACCOUNT. IN SUP PORT OF THE APPELLANTS VERSION OF PURCHASES, THE LD. AUTHORISE D REPRESENTATIVE FOR THE APPELLANT REFERRED TO IN EXTENSO THE SUBMISSION MADE BY HIM, IN SUPPORT OF CORRECTNESS AND COMPLETENESS OF BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT, IN THE CONTEXT OF EXTR A PROFIT ADDITION AS HAD BEEN WORKED OUT BY THE ASSESSING OFFICER, AFTER INVOKING THE PROVISION OF SECTION 145(3). IN VIEW OF THE SUBMI SSIONS SO MADE BY THE APPELLANT, IN THE CONTEXT OF EXTRA PROFIT ADDIT ION, HE PLEADED THAT DISALLOWANCE OF PURCHASES WOULD PUSH UP THE G.P. RA TE TO 26% ON THE TURNOVER DISCLOSED (AND ACCEPTED ALSO BY THE ASSESS ING OFFICER), WHEREAS THE ACIT HIMSELF HAS HELD THE G.P. RATE AT 12.65% (AFTER MAKING ENHANCEMENT) TO BE REASONABLE. ON THIS GROU ND ALSO, THE DISALLOWANCE WAS WHOLLY UNREASONABLE AND UNJUSTIFIE D. HE, HOWEVER, HASTENED TO ADD THAT THIS SUBMISSION WAS B EING MADE BY HIM, WHOLLY WITHOUT PREJUDICE TO THE PLEADINGS ABOU T ACCEPTABILITY OF THE BOOKS OF ACCOUNT AND THE TRADING RESULTS AS SHO WN BY THE APPELLANT, (THIS ISSUE HAS ALREADY BEEN ADJUDICATED UPON BY ME IN THE EARLIER PART OF THIS ORDER, IN FAVOUR OF THE APPELL ANT). ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 146 42. THE LD. CIT(A), CONSIDERING THE EXPLANATION OF THE ASSESSEE DELETED THE ENTIRE ADDITION. FINDINGS OF LD. CIT(A) IN PARAS 43 TO 49 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 43. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE LD. AUTHORISED REPRESENTATIVE, WRITTEN (PART OF WHI CH HAS BEEN REPRODUCED ALSO IN PARAS 32 & 39 ABOVE) AS WELL AS ORALLY, PERUSED THE ASSESSMENT RECORDS AND ALSO THE RECORDS MAINTAI NED BY THE APPELLANT WHICH WERE SPECIFICALLY CALLED FOR BY ME FOR MY EXAMINATION. IT IS AN UNDISPUTED FACT, ACCEPTED BY THE ASSESSING OFFICER ALSO, THAT DURING THE COURSE OF SEARCH AND SEIZURE ACTION WHICH TOOK PLACE SIMULTANEOUSLY IN THE CASE OF THE APPELL ANT AS ALSO IN THE CASE OF M/S CARPET INTERNATIONAL PVT. LTD (A COMPAN Y BELONGING TO THE SEPARATED GROUP OF SRI PRADEEP KUMAR BARANWAL), COP IES OF THE RELEVANT FOUR BILLS WERE FOUND AND THE SAME EVEN F ORMED PART OF THE SEIZED MATERIAL IN THE CASE OF PRADEEP KUMAR BARANW AL GROUP. THE SAID BILLS WERE FOUND TO BE ACCOMPANYING BY THE SPE CIFICATION SHEETS. THE PURCHASES IN QUESTION WERE FOUND TO BE RECORDED IN THE BOOKS OF ACCOUNT OF THE APPELLANT AND CORRESPONDING SALES WE RE FOUND TO BE RECORDED IN THE BOOKS OF M/S CARPET INTERNATIONAL P VT. LTD. THE SAID BILLS (PURCHASERS COPY) WERE AVAILABLE WITH THE AP PELLANT ALSO AT THE TIME OF SEARCH AND SEIZURE. COPIES OF SUCH BILLS A LONGWITH SPECIFICATION SHEETS ATTACHED TO EACH ONE OF THEM A PPEAR AT PAGES 54 TO 61 OF THE PAPER BOOK. 44. FURTHER, DURING THE COURSE OF SEARCH COPY OF AC COUNT OF THE APPELLANT AS APPEARING IN THE BOOKS OF M/S CARPET I NTERNATIONAL PVT. LTD. WAS ALSO FOUND AND AS NOTED BY THE ASSESSING O FFICER IN PARA 5.2 OF THE ASSESSMENT ORDER (WHEREIN COPY OF SAID LEDGE R ACCOUNT HAS BEEN REPRODUCED, AS IT IS, THROUGH THE PROCESS OF S CANNING) THE SAID BILLS WERE DULY FOUND ENTERED IN THEIR BOOKS OF ACC OUNT. THE PAYMENTS OF RS.10, 69, 69,000 MADE BY THE APPELLANT VIDE SIN GLE CHEQUE DATED 19.7.2008 WAS FOUND TO BE ENTERED IN THE APPELLANT S BOOKS OF ACCOUNT AS PER COPY OF LEDGER ACCOUNT AS HAS BEEN REPRODUCE D BY THE ASSESSING OFFICER HIMSELF IN PARA 5.1 OF THE ASSESS MENT ORDER AND THE CORRESPONDING CREDIT OF THE SAME WAS FOUND TO BE AP PEARING IN THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 147 BOOKS OF M/S CARPET INTERNATIONAL PVT LTD, IN THE A CCOUNT OF THE APPELLANT. THE SAID PAYMENT OF RS.10,69,69,000 IS R EFLECTED IN THE REGULAR BANK ACCOUNT OF THE APPELLANT AND THE RELAT ED CHEQUE HAD BEEN COLLECTED BY THE SUPPLIER M/S. CARPET INTERNA TIONAL (P) LTD., THROUGH THEIR REGULAR BANK ACCOUNT. THUS THE TRANSA CTION OF PURCHASE AND SALE AS ALSO PAYMENT MADE BY THE APPELLANT (TOW ARDS THE PRICE OF SAID PURCHASES) WERE FOUND DULY RECORDED IN THE REC ORDS FOUND DURING THE COURSE OF SEARCH, CARRIED OUT IN THE CASES OF B UYERS (APPELLANT HERE) AND THE SUPPLIERS. 45. FURTHER, IN SUPPORT OF PURCHASES SO MADE BY THE APPELLANT, THE LD. A.R. HAS ALSO RELIED UPON THE RETURN FOR THE MONTH OF JULY 2008 UNDER VAT FILED IN THE COMMERCIAL TAX DEPARTMENT ON 20.8.2008 I.E. MUCH PRIOR TO THE DATE OF SEARCH. IN THE SAID RETU RN, THE APPELLANT HAD SPECIFICALLY DISCLOSED PURCHASES MADE BY IT IN THE MONTH OF JULY 2008 AT RS.10,80,76,194/- WHICH SPECIFICALLY INCLUDED TH E SAID SUM OF RS.10,69,69,000/- AND IN SUPPORT OF THE SAME, THE C OPY OF THE SAID RETURN WAS PLACED IN THE PAPER BOOK. SUBMISSIONS TO THE AFORESAID EFFECT, HAVE BEEN MADE BY THE APPELLANT VIDE PARAS 22 AND 23 OF THE WRITTEN SUBMISSIONS (SUPRA) WHICH ARE REPRODUCED HE REUNDER:- 22. TO LEND FURTHER SUPPORT TO THE PURCHASES OF 474 10 CARPETS OF THE VALUE OF RS. 10,69,69,000 AS MADE BY THE APPELLANT FROM M/S CARPET INTERNATIONAL (P) LTD., THE APPELLANT PL ACES BEFORE YOUR HONOUR A RETURN FOR THE MONTH OF JULY 2008 W HEREIN THE APPELLANT HAD DISCLOSED PURCHASES OF RS.10,80,76,19 4 MADE UP AS UNDER:- PURCHASE OF CARPETS FROM CARPET INTERNATIONAL PVT. LTD. : 10,69,69,000 PURCHASE OF COTTON YARN 11,07,194 10,80,76,194 A COPY OF THE SAID RETURN ALONGWITH ALL ITS ENCLOSU RES, WHICH HAD BEEN ON THE RECORD OF THE STATE GOVERNMENT, PRI OR TO THE DATE OF SEARCH, ARE ENCLOSED AT PAGES 78. TO 82 OF THIS WS . 23. THE APPELLANT FURTHER PRAYS THAT THE SAID RETU RN IS A PART OF THE PRE-SEARCH RECORDS, AS ARE AVAILABLE WI TH AN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 148 INDEPENDENT AUTHORITY OF THE STATE GOVERNMENT AN D THE SAME CONSTITUTES A MATERIAL FOR THE PURPOSES OF THE TRANSACTIONS ENTERED INTO BY IT AND THE SAME CAN ALWAYS BE REFER RED TO IN THE ASSESSMENT PROCEEDINGS UNDER THE INCOME TAX ACT. R ELIANCE IN THIS REGARD IS PLACED ON THE PRINCIPLE LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SRI SHANKER KHANDASARI SUGAR MILLS VS. CIT REPORTED IN (1992) 193 ITR 669 . A COPY OF THE SAID JUDGEMENT AS A WHOLE IS ENCLOSED AT PAG ES 83 TO 88 OF THIS WS . 46. THE SAID INFORMATION CANNOT BE TREATED AS ADDIT IONAL EVIDENCE AS THE SAME ARE BASED ON PUBLIC RECORDS, WHICH NEED NOT BE PROVED. IN ANY CASE, THE ACIT (TO WHOM COPY OF THE SAME HAD DULY BEEN FORWARDED AS MENTIONED IN PARA 6 ABOVE) HAS NOT OBJ ECTED TO THE ADMISSIBILITY OF THE SAME. THIS INFORMATION WHICH RELATED TO THE PRE- SEARCH PERIOD, GOES TO SUPPORT FULLY THE APPELLANT S CONTENTION THAT IT HAD MADE PURCHASES OF CARPETS WORTH RS.10,69,69,000 /- FROM M/S CARPET INTERNATIONAL PVT. LTD AND PAYMENT OF THE SA ID BILLS HAVE BEEN MADE THROUGH A SINGLE CHEQUE WHICH UNDISPUTEDLY HAS ROUTED THROUGH THE REGULAR BANK ACCOUNTS OF THE PURCHASER THE APPE LLANT BEFORE ME, AS WELL AS THE SELLER M/S CARPET INTERNATIONAL PVT. LTD. 47. IN ANY CASE EVEN WITHOUT THE HELP OF SUCH RETU RN, THE APPELLANT HAD SUCCESSFULLY ESTABLISHED THAT THE PAY MENT OF SUM OF RS.10,69,69,000/- HAD BEEN MADE FOR PURCHASE OF CAR PETS, A FACT VERIFIABLE EVEN FROM THE RECORDS OF THE SELLER I.E. M/S CARPET INTERNATIONAL PVT. LTD. WHICH TOO WAS SUBJECTED TO SEARCH. IT IS A NORMAL PRACTICE THAT WHEREVER ANY VERIFICATION IS C ONSIDERED NECESSARY, THE SAME IS MADE FROM THE SECOND PARTY I NVOLVED IN THE TRANSACTION. IN THE INSTANT CASE SUCH A VERIFICATI ON WAS AVAILABLE AT THE TIME OF SEARCH AND SEIZURE ACTION, WHICH BOTH T HE PARTIES WERE SUBJECTED TO SIMULTANEOUSLY AND WAS INHERENT AND EM BEDDED IN THE SEIZED MATERIAL. EVEN PRESUMPTION OF CORRECTNESS O F THE SAID INFORMATION CAN BE RAISED AS PER THE PROVISIONS CON TAINED IN SECTION 132(4A) READ WITH SECTION 292C AS HAS BEEN INTRODUC ED BY THE FINANCE ACT 2007 WHICH HAS THE EFFECT OF EXTENDING SCOPE OF PRESUMPTION TO THE REGULAR ASSESSMENT PROCEEDINGS A LSO. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 149 48. THUS, JUDGED FROM ALL ANGLES THERE REMAINS NOT EVEN AN IOTA OF DOUBT ABOUT THE GENUINENESS OF PURCHASES OF THE VAL UE OF RS.10,69,69,000 AS MADE BY THE APPELLANT FROM M/S C ARPET INTERNATIONAL PVT. LTD., (DEDUCTION OF WHICH HAS BE EN CLAIMED THROUGH THE PROFIT AND LOSS ACCOUNT) AND THAT PAYMENT OF A CORRESPONDING SUM HAD BEEN MADE AGAINST SUCH GENUINE PURCHASES ONLY. FROM THIS, IT FOLLOWS THAT THE ASSESSING OFFICER HAS FALLEN INTO GRAVE ERROR OF FACT, IN TREATING THE PAYMENT OF RS.10,69,69,000/- AS MAD E BY THE APPELLANT IN PURSUANCE OF SOME FAMILY SETTLEMENT, CAMOUFLAGED AS PURCHASES SO AS TO DISALLOW THE SAME. THE ADDITION IS, THEREFORE, DELETED AND THE APPELLANT GETS RELIEF OF RS.10,69,69,000/-. 49. AS I HAVE FOUND THE PURCHASES TO BE GENUINE AND HAVE HELD THAT PAYMENT IN QUESTION HAD BEEN MADE FOR THE PURCHASES SO MADE BY THE APPELLANT, IT IS WHOLLY UNNECESSARY TO GO INTO OTHE R MULTIPLE PLEAS AS HAVE BEEN RAISED BY THE LD. AUTHORIZED REPRESENTATI VE. 43. THE LD. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE AO MADE ADDITION CORRECTLY ON ACCOUNT OF BOGUS PURCHASES. I N PARTITION, THERE ARE EXCHANGE OF ASSETS AND, THEREFORE, THIS FACT WAS ACCEPTED BY THE ASSESSEE, FROM WHICH THE ASSESSEE CANNOT DEVIATE FROM THEIR STAND. NO RECONC ILIATION WAS FILED BEFORE THE AO. THEREFORE, THE LD. CIT(A) ON IMPROPER APPRECIAT ION OF FACTS, DELETED THE ADDITION. ON THE OTHER HAND, THE LD. COUNSEL FOR TH E ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTE D THAT THE PROVISIONS OF SECTION 69C ARE NOT ATTRACTED AND PAYMENTS WERE MAD E BY CHEQUES. THE TURNOVER HAS BEEN ACCEPTED BY THE AO. WHEN THE SALES HAVE BE EN ACCEPTED, THEY ARE BOUND TO BE THE PURCHASES MADE BY THE ASSESSEE. THE DETAI LS ARE FILED AT PB-23 TO 25 AND ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 150 ALL THE PURCHASES ARE ENTERED IN THE BOOKS OF ACCOU NT. PB-28 IS SPECIFICATION OF PURCHASES AND BIFURCATION WHICH WAS FILED BEFORE TH E AUTHORITIES BELOW. ALL THE PURCHASES HAVE BEEN SHOWN IN SALES TAX RECORDS PRIO R TO THE SEARCH. THEREFORE, ADDITION HAS BEEN RIGHTLY DELETED BY THE LD. CIT(A) . 44. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE OR DER OF THE LD. CIT(A) IN DELETING THE ADDITION. SECTION 69C OF THE IT ACT PROVIDES AS UNDER : [ UNEXPLAINED EXPENDITURE, ETC. 69C. WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURR ED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF, OR THE EXPLANATION, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SA TISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR : PROVIDED THAT, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTH ER PROVISION OF THIS ACT, SUCH UNEXPLAINED EXPENDITURE WHICH IS DEEMED TO BE THE INCOME OF THE ASSESSEE SHALL NOT BE ALLOW ED AS A DEDUCTION UNDER ANY HEAD OF INCOME. 44.1 BEFORE APPLYING THE ABOVE PROVISIONS, THE AO S HALL HAVE TO PROVE THAT THE ASSESSEE HAS INCURRED ANY EXPENDITURE AND HAS OFFER ED NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE. THE ASSESSEE ON THE BAS IS OF THE MATERIAL ON RECORD HAS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 151 BEEN ABLE TO PROVE THAT THE ASSESSEE HAS INCURRED E XPENDITURE ON ACCOUNT OF PURCHASE AND THE PAYMENTS HAVE BEEN MADE THROUGH TH E CHEQUES. THEREFORE, THE SOURCE OF THE PURCHASE HAS BEEN EXPLAINED. THEREFOR E, THE PROVISIONS OF SECTION 69C WOULD NOT APPLY IN THE CASE OF THE ASSESSEE. IT WAS ALSO A FACT THAT DURING THE COURSE OF SEARCH IN THE CASE OF M/S. CARPET INTERNA TIONAL PVT. LTD., COPIES OF ALL THE PURCHASE BILLS WERE FOUND AND SAME WERE FOUND AS PA RT OF THE SEIZED MATERIAL. THE BILLS WERE ALSO FOUND TO BE ACCOMPANYING BY SPECIFI CATION SHEETS. THE PURCHASES WERE FOUND TO BE RECORDED IN THE BOOKS OF ACCOUNT O F THE ASSESSEE AND CORRESPONDINGLY, THE SALES WERE ALSO FOUND RECORDED IN THE BOOKS OF ACCOUNT OF M/S. CARPET INTERNATIONAL PVT. LTD. THE BILLS WERE AVAILABLE WITH THE ASSESSEE AT THE TIME OF SEARCH AND COPY OF THE ACCOUNT AND LEDGER A CCOUNT WOULD SHOW THAT ALL ENTRIES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT AND PAYMENT HAS BEEN MADE THROUGH CHEQUES, I.E., BANKING CHANNEL. SINCE THE T RANSACTIONS OF PURCHASES WERE RECORDED IN THE BOOKS OF THE ASSESSEE AND THE SELLE RS ARE REFLECTED IN THE BOOKS OF ACCOUNT OF BOTH THE PARTIES AND THEIR BANK ACCOUNTS , THEREFORE, THERE IS NO QUESTION OF TREATING THAT THE SOURCE OF PURCHASES HAS NOT BE EN EXPLAINED. FURTHER, THE SAME PURCHASES WERE DISCLOSED TO THE COMMERCIAL TAX DEPA RTMENT UNDER VAT PRIOR TO THE SEARCH. ALL THESE FACTS HAVE NOT BEEN DISPUTED BY THE LD. DR DURING THE COURSE OF ARGUMENTS THROUGH ANY MATERIAL ON RECORD. IN VIE W OF THE OVERWHELMING ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 152 MATERIAL ON RECORD, WHICH ALSO FORMED PART OF THE S EIZED MATERIAL, THE LD. CIT(A), ON PROPER APPRECIATION OF FACTS AND MATERIAL ON REC ORD, RIGHTLY DELETED THE ADDITION. IN THE RESULT, GROUND NO. 2 OF APPEAL OF THE REVENU E IS ACCORDINGLY DISMISSED. 45. ON GROUND NO. 3, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.6,37,00,615/- MADE BY THE AO U/S. 69 OF THE IT A CT ON ACCOUNT OF UNDISCLOSED STOCK OF TUFTED CARPETS. THE ASSESSEE CONTESTED THE ABOVE ADDITION MADE BY AO BEFORE THE LD. CIT(A) ON THE GROUND THAT AT THE TIM E OF SEARCH AND SEIZURE, STOCK OF CARPETS AND RAW MATERIALS WERE STATED TO BE FOUND I N EXCESS OF STOCK REVEALED BY THE BOOKS OF ACCOUNT, MADE UP AS UNDER : (I) STOCK OF TUFTED CARPETS 2,08,98,424/- (II) STOCK OF OTHER VARIETIES OF CARPETS 3,54,84,6 48/- EXCESS STOCK OF CARPETS 5,63,83,072/- (III) STOCK OF RAW MATERIAL 73,17,543/- AGGREGATE OF EXCESS STOCK OF CARPETS 6,37,00,615/ - & RAW MATERISLS IT WAS STATED THAT THE AO WORKED OUT THE EXCESS STO CK OF CARPETS OF RS.5,63,83,072/- AS PER INVENTORY PREPARED BY THE A UTHORIZED OFFICER AND IN THE SAME FIGURE THE STOCK OF NON-TUFTED CARPETS AT BAKU CHIA UNIT AND CARPETS AT HARIYAON BY-PASS UNIT IS TAKEN AT RS.3,54,84,648/- AND STOCK OF TUFTED CARPETS AT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 153 BAKUCHIA UNIT RS.2,08,98,424/- AND AS FAR AS THE EX CESS STOCK OF RS.3,54,84,648/-, THE AO HAS TAKEN FIGURE FROM BAKUCHIA UNIT AND HARI YAON BY-PASS UNIT AND WORKING WAS EXPLAINED BEFORE THE LD. CIT(A) IN PARA 53 & 54 AND IT WAS EXPLAINED THAT FINDING OF THE AO OF THE COMPONENT OF RS.2,08, 98,424/- IS CONCERNED, THE SAME IS WHOLLY NON-EXISTENT AS PER AO, BUT AS PER A UTHORIZED OFFICER, IT IS DIFFERENT. THE ASSESSEE MADE DETAILED SUBMISSIONS ON THE ISSUE TO SHOW THAT THE WORKING OF THE AO IS INCORRECT, DUPLICITY AND ASSESSEE EXPLAIN ED THIS ISSUE IN DETAIL. WRITTEN SUBMISSIONS OF THE ASSESSEE REPRODUCED IN THE APPEL LATE ORDER ARE AS UNDER : 55. SRI RASHMI B. GABHAWALA, THE LD. AUTHORIZED REPRESENTATIVE FOR THE APPELLANT SUBMITTED THAT THE RE WAS NO SEPARATE EXISTENCE OF THE STOCKS OF TUFTED CARPETS VALUED AT RS.2,08,98,424/-, RATHER SUCH STOCKS ALREADY STOOD INCLUDED IN THE FI GURE OF RS.13,38,91,571/-(AS GIVEN IN PARA 53 HEREINFORE) A ND THEREBY IN THE FIGURE OF RS.3,54,84,648/- AS SHOWN ABOVE. AS REGAR DS THE OBSERVATIONS OF THE ACIT, TO THE EFFECT THAT THE TU FTED CARPETS ARE NOT APPEARING IN THE FINANCIAL RECORDS OF THE APPELLANT (AS PER THE PRINTOUT REFERRED TO ABOVE), SRI RASHMI B. GABHAWALA INVITED MY POINTED ATTENTION TO PAPER BOOK, PAGE 125 (A PART OF THE PR INT OUT ITSELF) CONTAINING A HEADING AS ULDUM RUG HND-TFT, THE TE RM TFT IS A SHORT FORM OF TUFTED AS PER THE PROGRAMMING IN THE COMPUTER. IN SHORT, THE APPELLANTS CONTENTION IS, SUBJECT TO OT HER OBJECTIONS, THAT THE STOCKS OF TUFTED CARPETS VALUED AT RS.2,08,98,4 24/- AS HAS BEEN INCLUDED IN THE COMPUTATION OF OVERALL EXCESS STOCK OF RS.5,63,83,072/- IS A DUPLICITY. 56. PROCEEDING FURTHER, SRI RASHMI B. GABHAWALA SUB MITTED, THAT THERE ARE ARITHMETICAL ERRORS COMMITTED BY THE ASSE SSING OFFICER IN WORKING OUT THE QUANTITIES OF STOCKS OF CARPET AND VALUATION THEREOF. IF ARITHMETICAL ERRORS ALONE, IN THE WORKING, ARE CORR ECTED, THE VALUATION OF STOCKS AT BAKUCHIA UNIT WILL WORK OUT TO RS.8,27 ,43,691 AS AGAINST ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 154 THE VALUE WORKED OUT AT RS.12,99,11,208/- (RS.10,9 0,12,784/- + RS.2,08,98,424/-) BY THE ASSESSING OFFICER. RELIANC E FOR THE PURPOSES OF SUCH A CORRECTION WAS PLACED ON THE STATEMENT GI VEN IN PARA 34 OF THE WRITTEN SUBMISSIONS. ON MY DIRECTION, THE LD. A.R. HAS GIVEN A COMPARATIVE CHART WHICH IS REPRODUCED HEREUNDER:- AS PER THE APPELLANT AS PER THE ASSESSMENT ORDER VARIETIES OF CARPETS, AS PER PARTICULARS GIVEN ON PAGES 124 & 125 OF PAPER BOOK (AS BASED ON THE INVENTORY PREPARED BY THE AUTHORISED OFFICERS) AREAS IN SQ. MTRS. RATE PER SQ.MTRS. (RS.) VALUATION (RS.) CORRECT QUANTITY AS WORKED OUT FROM PANCHNAMAS (AREAS IN SQ. MTRS.) VALUATION AS WORKED OUT BY APPLYING THE SAME RATES AS HAVE BEEN APPLIED BY THE ASSESSING OFFICER (RS.) GATERN 26,117 1,082 2,82,68,518 8,913 96,46,848 HELLUM 55,829 430 2,40,37,734 76919 3,31,18,460 BETA RUG 711 460 3,27,387 712 3,27,866 INDOGABBAH 12,131 717 87,05,205 6,038 43,33,185 GEDSER 48,545 903 4,38,36,135 12,956 1,17,00,063 NAPALI 1,693 2,000 33,86,000 1,693 33,86,400 DARI 900 502 4,51,800 900 4,52,088 TUFTED 36,793 568 2,08,98,424 34,821 1,97,78,782 1,82,719 12,99,11,208 1,42,954 8,27,43,691 57. PROCEEDING FURTHER, THE LD. AUTHORIZED REPRESE NTATIVE FOR THE APPELLANT SUBMITTED THAT WORKING OF STOCKS OF RS.9, 84,06,923/- AS PER BOOKS OF ACCOUNT, ALSO SUFFERS FROM APPARENT ERRORS . AT THE TIME OF SEARCH, THERE WERE STOCKS WHICH WERE IN THE PROCES S OF SHIPMENT (FROM THE FACTORY SITE TO THE PLACE OF SHIPMENT). THE APPELLANT HAD PREPARED THE INVOICES FOR SUCH STOCKS AND TRANSMITT ED THE SAME ON- LINE TO ITS OVERSEAS BUYERS FOR SEEKING APPROVAL OF DELIVERY SCHEDULE. SUCH INVOICES HAD BEEN DULY ACCOUNTED FO R IN THE FINANCIAL RECORDS ALONGWITH TIME SCHEDULE OF DELIVERY THERE OF. HOWEVER, PHYSICAL MOVEMENT OF SUCH STOCKS FROM THE BUSINESS PREMISES OF THE APPELLANT HAD NOT TAKEN PLACE AS THE SAME WERE AWAI TING LOADING IN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 155 THE CONTAINERS FOR BEING SHIPPED TO THE DESTINATION FOR WHICH THE SAME WERE MEANT. THUS SUCH STOCKS CONTINUE TO BE AVAILA BLE AT THE BUSINESS PREMISES OF THE APPELLANT, IN PHYSICAL FORM. THUS, ON ONE HAND SUCH STOCKS HAVE BEEN INCLUDED IN THE INVENTORY AS PREPA RED BY THE AUTHORIZED OFFICERS AND AT THE SAME TIME, THE BOOK VERSION AS NOTED BY THE AUTHORISED OFFICERS, STOOD STATED AT A CORRE SPONDINGLY REDUCED FIGURE. THE FIGURES OF SUCH STOCK AMOUNTED TO RS.1 ,54,65,591/-. 58. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, EX PLANATION TO THE AFORESAID EFFECT HAD DULY BEEN GIVEN BY THE APP ELLANT, BEFORE THE ASSESSING OFFICER, BUT THE SAME HAD BEEN REJECTED B Y HIM WITHOUT DUE APPRECIATION AND CONSIDERATION, AS PER THE SUBMISSI ON MADE BY THE LD. AR. IN SUPPORT OF ALL SUCH PLEADINGS AS ARE CONTAI NED IN THIS PARA AS ALSO IN THE EARLIER PARAS ON THIS ISSUE, THE LD. A. R. SPECIFICALLY REFERRED TO AND RELIED UPON THE SUBMISSIONS MADE VIDE PARAS 28 TO 41 OF THE WRITTEN SUBMISSIONS (SUPRA) WHICH, FOR THE SAKE OF FURTHER REFERENCE, ARE REPRODUCED HEREUNDER:- 28. DURING THE COURSE OF SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) THAT HAD COMMENCED ON 11.02.2009 THE AUTHORISED OFFICERS PREPARED THE PANCHNAMA CONTAINING INVENTOR Y OF STOCKS OF FINISHED GOODS OF CARPETS AS FOUND AT THE BAKUCHIA UNIT AND ALSO ANOTHER PANCHNAMA FOR HARIYAON BYE-PASS UNIT WHICH CONTAINE D THE PARTICULARS OF FINISHED GOODS AS WELL AS RAW MATERIALS. ON THE BASIS OF SAID PANCHNAMAS, THE ACIT HAS WORKED OUT EXCESS STOCK OF FINISHED CARPETS AT RS.3,54,84,648 IN THE FOLLOWING MANNER:- RS. A) STOCK OF CARPETS AT BAKUCHIA UNIT 10,90,1 2,784 B) STOCK OF CARPETS AT HARIYAON BYE-PASS UNIT 2,48,78,787 13,38,91,571 DEDUCT: STOCK WORKED OUT AS PER BOOKS OF ACCOUNT (COMPUTER PRINTOUT TAKEN BY THE AUTHORISED OFFICERS ) 9,84,06,923 3,54,84,648 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 156 29. SIDE BY SIDE STOCK OF RAW MATERIAL VALUED AT RS .73,17,543 AS INVENTORISED AT HARIAON BYE-PASS ROAD WAS ALSO TREA TED TO BE EXCESS STOCK, DURING THE COURSE OF REGULAR ASSESSMENT PROC EEDINGS. IN ORDER TO CALL FOR AN EXPLANATION A SHOW CAUSE NOTICE, RELEVA NT PART OF WHICH READS AS UNDER:- Q.28 PLEASE REFER TO ANNEXURE E OF PANCHNAMA DATE D 12/02/09 OF BUSINESS PREMISES SITUATED AT BYE-PASS ROAD, BHADOHI. THIS ANNEXURE CONTAINING TWO PAGES RELATES TO VARIO US RAW MATERIALS. VALUATION OF ABOVE RAW MATERIAL HAS BEE N MADE DURING THE COURSE OF SEARCH AS PER INVENTORY FOR RS.73,17, 54,373. YOU ARE HEREBY REQUIRED TO STATE WHETHER THIS STOCK HAS BEE N REFLECTED IN YOUR BOOKS OF ACCOUNTS, PRODUCE STOCK REGISTER AND OTHER EVIDENCE TO SUPPORT YOUR CLAIM, FAILING WHICH ADVERSE INFERE NCE MAY BE DRAWN AND THIS STOCK MAY BE TAKEN AS UNDISCLOSED ST OCK. WAS ISSUED. 30. IN RESPONSE TO THE SAID SHOW CAUSE NOTICE, THE APPELLANT GAVE DETAILED EXPLANATION TO THE EFFECT THAT OVERALL STO CKS AVAILABLE WITH THE APPELLANT WERE MUCH HIGHER IN QUANTITY THAN WORKED OUT BY THE AUTHORISED OFFICERS AND IN SUPPORT OF ITS VERSION T HE QUANTITATIVE TALLY OF STOCKS (RAW MATERIAL AS WELL AS FINISHED GOODS) WAS FURNISHED. IN SUPPORT OF THE SAID QUANTITATIVE TALLY, THE RELEVANT RECORD S WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER. EXPLANATION GIVEN BY THE APPELLANT HAS BEEN REPRODUCED BY THE ACIT IN PARA 6.2 OF THE ASSESSMENT ORDER. FOR THE SAKE OF INSTANT REFERENCE, THE SAID REPRODUCTIO N IS GIVEN HEREUNDER:- 5- THAT REGARDING YOUR QUERY NO.27 AND 28, ASSESS EE BEGS TO SUBMIT AS UNDER:- A) IN QUERY NO.27, YOUR GOODSELF HAS PROPOSED ADDIT ION OF RS.3,54,84,648 WHICH IS BASED ON CERTAIN PAPERS AND ON VALUATION BEST KNOWN TO INCOME TAX DEPARTMENT. IT IS TRUE THAT THE SCANNED COPY IS SIGNED BY THE PARTNER, ALL EGATION OF TUFTED STOCK FOUND PHYSICALLY AND NOT IN COMPUTER I S NOT CORRECT. SIR, WE ARE PRODUCING/ENCLOSING THE DETAI LED LIST OF STOCK AS ON 11.02.09 AS WELL AS 31.03.09 (CARPET AN D RAW MATERIAL) WHICH IS FAR FAR GREATER THAN WHAT HAS BE EN WORKED OUT BY YOUR GOODSELF IN YOUR ABOVE TWO QUERI ES. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 157 B) REGARDING YOUR QUERY FOR STOCK OF RAW MATERIAL I T IS ALSO BEING SUBMITTED THAT STOCK OF RAW MATERIAL ON 11.02 .09 AND 31.03.09 IS BEING ENCLOSED AND FOR WHICH DETAIL AND SUPPORTING IS BEING PRODUCED FOR YOUR KIND VERIFICA TION [OPENING STOCK OF RAW MATERIAL, PURCHASE OF RAW MAT ERIAL, CONSUMPTION OF RAW MATERIAL (SUPPORTED BY WEAVING REGISTER)] AND CLOSING STOCK OF RAW MATERIAL . SIR WE AGAIN WANT TO BRING TO YOUR KIND NOTICE THAT THE ENCLOSED STOCK OF RAW MATERIAL IS INCLUSIVE OF BOTH RAW MATERIAL LYIN G AT THE FACTORY PREMISES AND AT THE DIFFERENT DESTINATION (WEAVER/CONTRACTORS). (EMPHASIS PROVIDED) 31. BEFORE PROCEEDING TO DEAL WITH THE REJECTION OF THE SAID EXPLANATION BY THE ACIT, THE APPELLANT BEGS TO STAT E THAT SO FAR AS STOCK OF FINISHED CARPETS IS CONCERNED, THE QUANTITIES ME NTIONED BY THE AUTHORISED OFFICERS IN THE ANNEXURE TO THE PANCHANM AS PREPARED AT THE TIME OF SEARCH AND SEIZURE ACTION WERE WHOLLY UNAUT HENTICATED. TO SUPPORT THIS CONTENTION IT IS STATED THAT THE APPEL LANT WAS NOT PROVIDED WITH THE COPIES OF THE KACHHI SHEETS FROM WHICH QUA NTITIES IN THE INVENTORIES AS AFORESAID HAD BEEN INCORPORATED. TO ADVANCE THIS ARGUMENT, THE APPELLANT BEGS TO REFER TO THE QUANTI TIES OF CARPETS AS MENTIONED THEREIN WHICH VARY BETWEEN 3 NOS. TO 7200 NOS. FOR RECORDING THE QUANTITIES OF 7200 NOS. THE AUTHORISED OFFICERS WERE REQUIRED TO COUNT AT LEAST 240 PILES AS ONE PILE CANNOT CONTAIN MORE THAN 30 CARPETS. FOR COUNTING SUCH A NUMBER OF PILES AND CARPETS IN EACH PILE, THERE HAS TO BE SOME WORKING SHEETS, POPULARLY KNOWN AS KACHH I SHEETS. SUCH A HUGE QUANTITY CANNOT BE INVENTORISED AND RECORDED B EFORE ONE SINGLE ITEM IN THE INVENTORY WITHOUT THE HELP OF SUCH WORKING S HEETS/KACHHI SHEETS. THIS WILL BE TRUE ABOUT ALL THE QUANTITIES ENTERED INTO THE PANCHANMAS, WHICH ARE IN EXCESS OF 30 IN NOS. FROM THIS, THE I NESCAPABLE CONCLUSION THAT EMERGES IS THAT THERE WAS NO ACTUAL COUNTING D ONE BY THE AUTHORISED OFFICERS AND THE QUANTITIES NOTED BY THE AUTHORISED OFFICERS (IN THE INVENTORY FORMING PART OF THE PANCHNAMA) CANNOT BE SAID TO BE AUTHENTICATED VERSION OF STOCKS PHYSICALLY FOUND AT THE TIME OF SEARCH. NEEDLESS TO STATE THAT ON THE BASIS OF SUCH AN UNAU THENTICATED VERSION OF STOCK, NO ADDITION ON ACCOUNT OF UNDISCLOSED INCOME CAN BE MAKE. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION O F HONBLE DELHI HIGH ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 158 COURT IN THE CASE OF CIT VS. BANSAL HIGH CARBONS (P) LTD. REPORTED IN (2009) 223 CTR (DEL.) 179 . RELEVANT PORTION FROM THE HEAD NOTE ARE REPRODUCED HEREUNDER:- IN FAVOUR OF : ASSESSEE SEARCH AND SEIZUREBLOCK ASSESSMENTCOMPUTATION OF UNDISCLOSED INCOMEEXCESS STOCK FOUND DURING SEARCH SEARCH PARTY DID NOT PHYSICALLY COUNT THE BUNDLES OF WIRES AND ONLY MADE A VISUAL ESTIMATEALSO, THERE WAS NO ACTUAL WEIGHME NT OF THE BUNDLES AND THE WEIGHT OF THE BUNDLES WAS TAKEN ON ESTIMATE BASISTHIS ASSESSMENT OF THE STOCK WAS NOT CORRECT IT WOULD HAVE BEEN APPROPRIATE IF THE NUMBER OF BUNDLES AND THE AVERAGE WEIGHT WERE WORKED OUT ON SOME EMPIRICAL BASIS RATH ER THAN THROUGH MERE GUESSWORKSEARCH PARTY APPEARS TO HAVE TAKEN A SHORT-CUT TO COME TO ITS CONCLUSION ON ESTIMATE BAS ISMERE FACT THAT SOME EMPLOYEES OF THE ASSESSEE SIGNED THE PANC HNAMA DOES NOT MEAN THAT THEY CERTIFIED THE CORRECTNESS OF THE NUMBER OF BUNDLES OR THE AVERAGE WEIGHT OF EACH BUNDLETHEY O NLY CERTIFIED THAT THEY WERE WITNESS TO THE PROCEEDINGS THEREFORE, TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF ALLEGED EXCESS STOCK AS ESTIMATED BY THE REVENUENO SUBSTANTIAL QUESTION OF LAW ARISES HELD : THE TRIBUNAL RIGHTLY CAME TO THE CONCLUSION THAT IT WOULD HAVE BEEN APPROPRIATE IF THE NUMBER OF BUNDLES AND THE A VERAGE WEIGHT WAS WORKED OUT ON SOME EMPIRICAL BASIS RATHER THAN THROUGH MERE GUESSWORK. IT APPEARS THAT DURING THE SEARCH, THE N UMBER OF BUNDLES AND WEIGHT ESTIMATE IN RESPECT OF HALF A DO ZEN BUSINESS CONCERNS WERE MADE WITHIN A FEW HOURS. THE SEARCH P ARTY EITHER DID NOT HAVE THE NECESSARY TIME OR DID NOT HAVE THE NECESSARY EXPERTISE TO CORRECTLY ASSESS THE STOCK POSITION. A SHORT-CUT APPEARS TO HAVE BEEN TAKEN BY THE SEARCH PARTY WHICH CAME T O A CERTAIN CONCLUSION ON AN ESTIMATE BASIS. IN LAW, AS IN LIFE , A SHORT-CUT IS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 159 OFTEN A WRONG CUT. THE MERE FACT THAT SOME EMPLOYEE S OF THE ASSESSEE SIGNED THE PANCHNAMA DOES NOT MEAN THAT TH EY CERTIFIED THE CORRECTNESS OF THE NUMBER OF BUNDLES OR THE AVE RAGE WEIGHT OF EACH BUNDLE. THEY ONLY CERTIFIED THAT THEY WERE WIT NESSES TO THE PROCEEDINGS. WHAT CONCLUSIONS HAVE TO BE DRAWN FROM THE PANCHNAMA IS OF NO CONCERN TO THOSE EMPLOYEES. OF C OURSE, THE BEST METHOD OF DETERMINING THE NUMBER OF BUNDLES AN D THEIR AVERAGE WEIGHT WOULD BE TO ACTUALLY COUNT THE BUNDL ES AND USE MACHINES/CRANES FOR WEIGHING EACH BUNDLE. THIS IS N O DOUBT A TEDIOUS EXERCISE BUT WHERE A LIABILITY IS SOUGHT TO BE FOISTED UPON AN ASSESSEE, THE REVENUE HAS TO BE A LITTLE MORE SE RIOUS WHILE EXERCISING POWERS CONFERRED UPON IT UNDER THE ACT. MERE GUESS- WORK OR AN ESTIMATE CANNOT BE AN ADEQUATE SUBSTITUT E FOR A SCIENTIFIC INVESTIGATION OR CARRYING OUT SOME EMPIR ICAL STUDY. THE OFFICERS WHO CONDUCTED THE SEARCH DID NOT WANT TO T AKE THE NECESSARY TROUBLE WHICH, OF COURSE, WOULD HAVE BEEN TIME CONSUMING, BUT THE IMPACT OF MAKING A GUESSTIMATE C AN BE QUITE DAMAGING INSOFAR AS THE ASSESSEE IS CONCERNED. THE ASSESSEE CANNOT BE MADE TO SUFFER THE CONSEQUENCES OF LETHAR GY ON THE PART OF THE OFFICERS OF THE REVENUE. UNDER THESE CIRCUMS TANCES, THE TRIBUNAL RIGHTLY CAME TO THE CONCLUSION THAT THE AL LEGED EXCESS STOCK CALCULATED BY THE REVENUE NEEDS TO BE DELETED . NO SUBSTANTIAL QUESTION OF LAW ARISES. BANSAL STRIPS (P) LTD. & ORS. VS. ASSTT. CIT (2006) 100 TTJ (DEL) 665 AFFIRMED . (PARAS 18 TO 22) CONCLUSION : SEARCH PARTY HAVING MADE A GUESTIMATE OF ENORMOUS Q UANTITY OF STOCK HELD BY THE ASSESSEE BY FOLLOWING A SHORT-CUT AND SLIPSHOD PROCEDURE RATHER THAN ACTUAL COUNTING AND WEIGHING THE BUNDLES, THE FINDING THAT EXCESS STOCK WAS FOUND DURING THE COURSE OF SEARCH CANNOT BE SUSTAINED AND, THEREFORE, ADDITION ON ACC OUNT OF ALLEGED EXCESS STOCK WAS RIGHTLY DELETED. IN FAVOUR OF : ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 160 ASSESSEE A COPY OF THE SAID JUDGMENT AS A WHOLE IS ENCLOSED AT PAGES 116 TO 121 HERETO. 32. AS REGARDS STOCKS OF RAW MATERIALS AS INVENTORI SED AT HARIYAON BYE-PASS ROAD (AS STOOD INCLUDED IN THE PANCHNAMA P REPARED FOR FINISHED GOODS AS WELL AS RAW MATERIAL), IT IS SUBMITTED THA T THE SAID ADDITION TOO IS WHOLLY ARBITRARY AT THE VERY FACE OF IT. ON THE DATE OF SEARCH AND SEIZURE, THE APPELLANT HAD WITH IT AVAILABLE STOCKS OF RAW MATERIALS, OF THE VALUE OF RS.5,24,25,357/- (INCLUDING THE STOCKS OF WOOLEN YARN WITH THE WEAVERS) AS PER THE INFORMATION CONTAINED IN CHART REFERRED TO IN THE ABOVE MENTIONED REPLY THE ACIT HAS REJECTED THE SAI D EXPLANATION BY MERELY SAYING THAT NO BASIS WHATSOEVER HAS BEEN PRODUCED BY THE ASSESSEE, TO SUPPORT THE FIGURES MENTIONED IN THE C HART . IT IS SUBMITTED THAT THE SAID QUANTITY TALLY (AS CONTAINED IN THE C HART SUBMITTED BEFORE THE ACIT) WAS FULLY VERIFIABLE FROM THE RECORDS MAINTAI NED BY THE APPELLANT ON ITS COMPUTER INSTALLATION AND THE SAME IS STILL OPEN FOR VERIFICATION. 33. AS AGAINST THE SHOW CAUSE NOTICE FOR THE TWO SU MS VIZ. RS.3,54,84,648 ON ACCOUNT OF STOCKS OF FINISHED CAR PETS AND RS.73,17,524 ON ACCOUNT OF STOCKS OF RAW MATERIAL, THE ACIT HAS MADE AN ADDITION OF RS.6,37,00,615 ON ACCOUNT OF STOCKS OF FINISHED GOO DS AS WELL AS RAW MATERIALS AS PER PARTICULARS GIVEN HEREUNDER:- CARPET STOCK AT BAKUCHIA UNIT NON TUFTED 10,90,12,784 CARPET STOCK AT BAKUCHIA UNIT TUFTED 2,08,98,424 CARPET STOCK AT HARIAUN, BY PASS UNIT I 2,48,78,7 87 RAW MATERIAL AT HARIAUN, BY PASS UNIT I 73,17,52 4 TOTAL: 16,21,07,538 LESS STOCK AS PER COMPUTER PRINT OUT TAKEN BY SEARCH PARTY ON 11.02.2009 9,84,06,923 ADDITION BY ASSESSING OFFICER 6,37,00,615 34. FROM THE SAID TABLE, IT IS SEEN THAT A SUM OF R S.2,08,98,424 HAS BEEN INCLUDED THEREIN ON ACCOUNT OF STOCK OF TUFTED CARPETS AT BAKUCHIA UNIT, WITHOUT THERE BEING ANY SEPARATE INVENTORY PR EPARED BY THE AUTHORISED OFFICERS, FOR THE SAME. THE FACTUAL POS ITION IS THAT THERE WAS ONE INVENTORY PREPARED AT BAKUCHIA UNIT BY THE AUTH ORISED OFFICERS AND ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 161 THE ASSESSING OFFICER EXCLUDED FROM THE SAID INVENT ORY THE STOCKS OF TUFTED CARPETS AND WORKED OUT THE VALUE OF OTHER CARPETS L IKE GETTARN, HELLIUM, BEATA RUG, INDOGABLE, GEDSER AND N EPALI AT AN ARITHMETICALLY WRONG FIGURE OF RS.10,90,12,784, WHI CH IS A RESULT OF ARITHMETICAL INACCURACY IN WORKING OUT THE AREA IN SQ. MTRS, TO WHICH RATES ARE APPLIED RS.12,99,11,208. THE APPELLANT I TSELF HAS PREPARED A CORRECT CHART OF VALUATION OF THE ENTIRE PANCHNAMA RELATED TO STOCKS AT BAKUCHIA UNIT (WHICH INCLUDED TUFTED AS WELL AS NON -TUFTED CARPETS) BY ADOPTING THE SAME RATE AS HAD BEEN ADOPTED BY THE A SSESSING OFFICER FOR VARIOUS VARITIES OF NON-TUFTED CARPETS AND THE RATE OF 568 PER SQ. MTRS AS HAD BEEN APPLIED BY HIM FOR TUFTED CARPETS (VIDE PA GE 16 OF THE ASSESSMENT ORDER) AND FOUND THAT THE VALUE OF INVEN TORY MADE UP OF TUFTED AS WELL AS TUFTED CARPETS BAKUCHIA UNIT WORKED TO R S. 8,27,43,691 AS AGAINST THE FIGURE OF RS.12,99,11,203 TAKEN BY THE ASSESSING OFFICER AS PER STATEMENT GIVEN HEREIN BELOW:- ACTUAL FIGURES OF PANCHNAMA WORKED OUT BY THE APPELLANT SL. NO. PARTICULARS TOTAL AREA IN SQ. MTRS. RATE APPLIED IN RS./SQ.MTRS. VALUE (AREA X RATE) (I) GOTTEN 8913.12 1,082.32 96,46,848 (II) HELLIUM 76919.50 430.56 3,31,18,460 (III) BEATA RUG 712.04 460.46 3,27,866 (IV) INDOGABLE 6038.44 717.60 43,33,185 (V) GEDSER 12956.88 903.00 1,17,00,063 (VI) NEPALI 1693.20 2,000.00 33,86,400 (VII) DARRI 900.00 502.32 4,52,088 (VIII) TUFTED 34821.80 568.00 1,97,78,782 TOTAL 8,27,43,691 35. FROM THE COMPARATIVE FIGURES GIVEN AS AFORESAID , IT WILL BE SEEN THAT DIFFERENCE OF RS.4,71,68,511 IN THE WORKING OF STOCK OF CARPET IS ATTRIBUTABLE TO THE CALCULATION ERRORS (IN WORKING OUT THE AREA OF STOCKS OF CARPETS, TUFTED AND NON-TUFTED AT BAKUCHIA UNIT). IN SUPPORT OF APPELLANTS WORKING OF TOTAL AREA, A STATEMENT GIVI NG PAGE WISE SUMMARY IS ENCLOSED AT PAGES 122 TO 123 OF THIS WS . ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 162 36. FURTHER, IN THE INVENTORIES OF FINISHED GOODS P REPARED BY THE AUTHORISED OFFICERS THERE STOOD INCLUDED SUCH STOCK S ALSO, WHICH HAD BEEN SHOWN AS SALES AND ACCORDINGLY ADJUSTED FROM T HE FIGURES (ON THE BASIS OF INVOICES ISSUED), AS PER THE FINANCIAL REC ORDS, BUT THE SAME WERE KEPT IN THE GODOWNS BECAUSE SUCH GOODS WERE AWAITIN G SHIPMENTS. FIGURES OF SUCH STOCK WORKED OUT TO RS. 1,54,65,591 . RELEVANT PARTICULARS OF SUCH STOCKS FOR WHICH INVOICES HAD BEEN PREPARED BUT THE GOODS HAD NOT MOVED OUT OF THE GODOWN (BECAUSE OF NON-MOVEMEN T OF GOODS FROM THE PREMISES OF THE APPELLANT) OWING TO VARIOUS IMP ENDING FORMALITIES). AS PER THE PRACTICE FOLLOWED BY THE APPELLANT, AS S OON AS THE INVOICES ARE PREPARED THE GOODS COVERED BY SUCH INVOICES ARE TAK EN OUT OF STOCKS AS PER BOOKS OF ACCOUNT, BUT SUCH STOCKS REMAIN PHYSIC ALLY AVAILABLE WITH THE APPELLANT TILL THE SAME ARE TRANSPORTED OUT OF PREMISES FOR ONWARD SHIPMENT. 37. WHILE WORKING OUT THE VALUE OF STOCKS AT RS. 9,84,06,923 , AS PER BOOKS OF ACCOUNT ON 11.02.2009 , AUTHORISED OFFICERS THEMSELVES FOUND THIS PRACTICE REFLECTED IN THE STOCKS OF FINISHED G OODS AS TAKEN BY THEM FROM COMPUTERS INSTALLED AT THE BUSINESS PREMISES. IN THE PRINTOUT SHOWING VALUE OF STOCKS AT RS.9,84,06,923, SUCH STO CKS WHICH AWAITED SHIPMENT, ARE CLEARLY DISCERNABLE. A COPY OF THE S AID PRINTOUT (AS TAKEN BY THE AUTHORISED OFFICERS) IS ENCLOSED AT PAGES 12 4 TO 125 TO THIS WS . 38. THUS, AFTER CONSIDERING THE ERRORS IN THE AGGRE GATE OF MEASUREMENTS AS COMMITTED BY THE AUTHORISED OFFICER S, AS PER WORKING GIVEN IN PARA 34 ABOVE AND AFTER EXCLUDING SUCH STOCKS OF CARPETS F OR SALE OF WHICH INVOICES HAD BEEN PREPARED UPTO 11.02.2009 (AS STATED IN PARAS 36 & 37 ABOVE), THERE REMAINS PRACTICALLY NO DIFFERENCE, A S MAY BE SEEN FROM THE FOLLOWING RECONCILIATION GIVEN HEREIN BELO W:- SL. NO. PARTICULARS STOCKS AS PER WORKING GIVEN BY THE ASSESSING OFFICER CORRECT WORKING AS PER STATEMENT REFERRED TO IN PARA 34 (I) STOCKS OF NON-TUFTED CARPETS AT BAKUCHIA UNIT, AS PER QUANTITATIVE 10,90,12,784 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 163 DESCRIPTION GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. (II) STOCKS OF TUFTED CARPETS AT BAKUCHIA UNIT 2,08,98,424 8,27,43,691 (III) STOCK OF CARPERTS AT HARIAUN BYE- PASS UNIT. 2,48,78,787 2,48,78,787 15,47,89,995 10,76,22,478 DEDUCT: STOCKS EXCLUDED FROM THE BOOKS OF ACCOUNT ON THE BASIS OF SALES INVOICES PREPARED, LYING IN GODOWNS AWAITING SHIPMENT. 1,54,65,591 9,21,56,887 STOCK OF FINISHED GOODS AS PER WORKING OF THE ASSESSING OFFICER 9,84,06,923 SHORTAGE OF STOCK FOUND AT THE TIME OF SEARCH (DUE TO THE ERRORS IN COUNTING (AS REFERRED TO IN PARA 34 ABOVE) 62,50,036 39. THE ABOVE MENTIONED POSITION OF STOCK CAN BE SU BJECTED TO VERIFICATION BY WORK BACK METHOD ALSO. IN THE CHAR T SUBMITTED BEFORE THE ACIT AS REFERRED TO THE REPLY REPRODUCED IN PARA 30 HEREINFORE, THE APPELLANT HAD GIVEN THE FIGURES OF CLOSING STOCK AS ON 31.03.2009 ALSO, WHICH HAVE BEEN ACCEPTED BY THE ACIT. IF THE QUANT ITATIVE TALLY AS ON 11.02.2009 IS PREPARED AFTER TAKING INTO CONSIDERAT ION THE TRANSACTIONS TAKING PLACE BETWEEN 11.02.2009 AND 31.03.2009 ON T HE BASIS OF SAID FIGURES OF CLOSING STOCK, THERE SHALL REMAIN NO DIF FERENCE THUS, THE ADDITION OF RS.5.63.83,872 (RS.6,37,00,615 RS.73, 17,543) IS NOT MAINTAINABLE AT ALL. 40. AS REGARDS ADDITION OF RS.73,17,543 (INCLUDED I N THE FIGURE OF RS.6,37,00,615) ON ACCOUNT OF RAW MATERIALS AT HARI AUN BY-PASS UNIT, THE SAID ADDITION TOO SUFFERS FROM ARBITRARINESS. WHOLE OF THE STOCK OF RAW MATERIALS AS WERE AVAILABLE AT THE SAID PREMISES HA S BEEN TAKEN AS EXCESS STOCK/UNDISCLOSED STOCK . AS PER THE CHART REFERRED TO IN THE APPELLANTS REPLY AS HAS BEEN REPRODUCED IN PARA 39 ABOVE, THE APPELLANT HAD STOCK OF RAW MATERIALS VALUED AT RS.5,24,25,357 WHICH INCLUDED THE STOCKS AVAILABLE WITH THE WEAVERS, ON THE BASIS OF BOOKS OF ACCOUNT AND OTHER RECORDS AS MAINTAINED BY IT IN REGULAR COURSE (AND FOUND TO BE SO ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 164 MAINTAINED, BY THE AUTHORISED OFFICERS ALSO AT THE TIME OF SEARCH AND SEIZURE ACTION). AS PER BALANCE SHEET AS ON 31.03. 2009 THE APPELLANT HAD STOCK OF RAW MATERIALS WORTH RS.5,00,72,673/- WHICH HAD DULY BEEN ACCEPTED BY THE ASSESSING OFFICER EVEN IN TERMS OF THE ASSESSMENT ORDER. 41. THE MATTER MAY BE EXAMINED FROM YET ANOTHER ANG LE ALSO. DURING THE YEAR UNDER APPEAL, THE APPELLANT HAD ACHIEVED A TURNOVER OF RS.77.20 CRORES. THE FIGURES OF RAW MATERIAL CONSUMED AMOUN TED TO RS.36.02 CRORES. LOOKING TO SUCH A HUGE VOLUME OF TURNOVER, OVERALL VALUE OF STOCK AT RS.5,00,72,673/- AS ON 31.03.2009 CANNOT B E SAID TO BE IMPROBABLE / UNREASONABLE AND LOOKING TO THE SAME, THE FIGURES OF RAW MATERIAL AS HAS BEEN SHOWN TO BE AVAILABLE AT RS.5, 24,25,357 AS ON THE DATE OF SEARCH I.E. 11.02.2009 ALSO CANNOT BE DISPU TED. THUS, FROM WHATEVER ANGLE THE MATTER IS EXAMINED, WHOLE OF ADD ITION OF RS.6,37,00,615 IS NOT MAINTAINABLE ON FACTS OF THE CASE . 59. WITH REFERENCE TO THE SAID SUBMISSIONS, AND REC ONCILIATION APPEARING IN PARA 38 THEREOF (AS HAS BEEN REPRODUCED ABOVE) WHIC H IS STATED TO BE BASED ON FACTS AND FIGURES AVAILABLE ON RECORD, IT WAS SUBMI TTED BY THE LD. A.R. THAT THERE WAS NO EXCESS STOCK OF CARPETS FOUND DURING THE C OURSE OF SEARCH AND SEIZURE ACTION. ON THE OTHER HAND, THERE WAS SHORTAGE OF STOCK OF THE VALUE OF RS.62,50,035/- (AS PER RECONCILIATION GIVEN IN PARA 38 OF THE WRITTEN SUBMISSIONS). EVEN SUCH A SHORTAGE (AS REFLECTED IN THE RECONCILIATION) COULD NOT BE SAID TO BE REAL ONE AS THE INVENTORY P REPARED BY THE AUTHORIZED OFFICERS WAS NOT AUTHENTIC; THE REASON BEING THAT T HE STOCKS FOUND AT THE TIME OF SEARCH WERE NOT DETERMINED BY ACTUAL PHYSICAL COUNT AS HAS BEEN STATED IN PARA 31 OF THE WRITTEN SUBMISSIONS (REPRODUCED IN PARA 5 8 HEREINFORE). 45.1 THE LD. CIT(A), CONSIDERING THE EXPLANATION OF THE ASSESSEE AND THE MATERIAL ON RECORD AND EXAMINING THE SEIZED MATERIAL ACCEPTE D THE WORKING OF THE ASSESSEE AND DELETED THE ADDITION. THE FINDINGS OF THE LD. C IT(A) IN PARAS 60 TO 72 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 165 60. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE LD. AR AT THE TIME OF HEARING, AS ALSO THE WRITTEN SUBMISSIONS WHICH HAVE BEEN REPRODUCED BY ME IN PARA 59 ABOVE AND AS HAVE BEEN REFERRED TO BY HIM IN HIS PLEADINGS. BEFORE DECIDI NG THE ISSUE, IT HAS TO BE EXAMINED AS TO WHETHER THE INVENTORY PREPARED BY THE AUTHORIZED OFFICERS CAN BE SAID TO BE AUTHENTIC ONE . THEN ONLY A CONCLUSION CAN BE DRAWN ABOUT DIFFERENCE IN STOCKS. FROM A PERUSAL OF THE INVENTORY OF STOCKS FOUND AT BAKUCHIA UNIT, FOR MING PART OF THE PANCHNAMA MENTIONED AT SL. NO.I(B) (PAGES 21 TO 27 OF THE PAPER BOOK) THE APPELLANTS CONTENTION THAT QUANTITIES OF CARPETS AS MENTIONED THEREIN VARY BETWEEN 3 NOS. TO 7200 NOS. IS FOUND TO BE CORRECT. IT IS ALSO TRUE, AS PLEADED BY THE APPELL ANT, THAT FOR RECORDING THE QUANTITIES OF 7200 NOS. THE AUTHORISE D OFFICERS WERE REQUIRED TO COUNT AT LEAST 240 PILES AS ONE PILE C ANNOT CONTAIN MORE THAN 30 CARPETS. FOR COUNTING SUCH A NUMBER OF PIL ES AND CARPETS IN EACH PILE, THERE HAS TO BE SOME WORKING SHEETS, POP ULARLY KNOWN AS KACHHI SHEETS. SUCH A HUGE QUANTITY CANNOT BE INVE NTORISED AND RECORDED BEFORE ONE SINGLE ITEM IN THE INVENTORY WI THOUT THE HELP OF SUCH WORKING SHEETS/KACHHI SHEETS. THIS WILL BE TR UE ABOUT ALL THE QUANTITIES ENTERED INTO THE PANCHANMAS, WHICH ARE I N EXCESS OF 30 IN NOS. IN THE ABSENCE OF KACHHI SHEETS BEING AVAILABL E (WHICH WERE REQUIRED TO BE PREPARED BY THE AUTHORIZED OFFICERS BEFORE RECORDING THE QUANTITIES IN THE INVENTORY PREPARED BY THEM, I T CANNOT BE SAID THAT SUCH INVENTORIES REPRESENT AUTHENTIC RECORD OF STOC KS FOUND AT THE TIME OF SEARCH AND SEIZURE ACTION. PRINCIPLE LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF BANSAL HIGH CARBONS PVT. LTD. REPORTED IN 223 CTR(DEL) 179 IS FULLY APPLICABLE AN D ON THE BASIS OF SUCH INVENTORY THE EXCESS/ SHORTAGE OF STOCK VIS-- VIS THE STOCK AS BORNE OUT FROM THE FINANCIAL RECORDS CANNOT BE WORK ED OUT WITH ACCURACY. THEREFORE, THE QUANTITIES OF STOCKS AS M ENTIONED IN THE INVENTORY PREPARED BY THE AUTHORIZED OFFICERS CAN A T BEST BE SAID TO BE ESTIMATES ONLY AND ON THE BASIS OF SUCH ESTIM ATES NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE. 61. THE ADDITION ON ACCOUNT OF EXCESS/UNEXPLAINED S TOCK CAN BE MADE UNDER SECTION 69/69A OF THE ACT, WHICH ARE THE DEEMING PROVISIONS. SUCH DEEMING PROVISIONS CREATE A FI CTION AND IT IS A LAW WELL SETTLED THAT FICTION OF A FICTION CANN OT BE CREATED ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 166 THEREFORE, THESE SECTIONS ARE TO BE CONSTRUED AND A PPLIED IN A STRICTEST POSSIBLE MANNER. ON SUCH AN APPLICATION, IT HAS TO BE HELD THAT ADDITION FOR SUMS AGGREGATING RS.5,63,83,072/- (FOR MING PART OF THE OVERALL ADDITION OF RS.6,37,00,615/-) CANNOT BE SUS TAINED, AS THE SAME IS BASED ON THE STOCKS WORKED OUT ON ESTIMATE BA SIS (FROM THE INVENTORY PREPARED BY THE AUTHORISED OFFICERS) WHIC H CAN NOT BE SAID TO BE AUTHENTIC VERSION OF STOCKS NOTED AT THE TIME OF SEARCH AND SEIZURE ACTION. 62. OTHERWISE ALSO, IT IS SEEN THAT IN THE WORKING OF EXCESS STOCK AS MADE BY THE ASSESSING OFFICER (ON THE BASIS OF I NVENTORY PREPARED BY THE AUTHORISED OFFICERS) THERE ARE ARITHMETIC ER RORS. THE APPELLANT HAS GIVEN RECONCILIATION IN PARA 38 OF WRITTEN SU BMISSIONS (WHICH HAS BEEN REPRODUCED IN PARA 58 ABOVE). FOR THE SAK E OF COMPLETENESS OF ADJUDICATION, I PROCEED TO EXAMINE THE MERITS OF SUCH A RECONCILIATION ALSO, IN THE PARAGRAPHS THAT FOLLOW. 63. AS PER WORKING GIVEN IN PARA 57 ABOVE, THE ASSE SSING OFFICER HAS CALCULATED THE VALUE OF INVENTORY AT BAKUCHIA A T RS.12,99,11,208/- WHICH INCLUDES A SEPARATE SUM OF RS.2,08,98,424/- O N ACCOUNT OF AGGREGATE VALUE OF TUFTED CARPETS SAID TO HAVE BEEN FOUND AT THE BUSINESS PREMISES. INCLUSION OF THE SAID FIGURE OF RS.2,08,98,424 HAS BEEN MADE BY THE ASSESSING OFFICER ON THE GROUND TH AT THE PRINTOUT TAKEN FROM THE FINANCIAL RECORDS OF THE APPELLANT D ID NOT SHOW THAT THE APPELLANT CARRIED THE STOCK OF TUFTED CARPETS AT A LL. HOWEVER, FROM A BARE PERUSAL OF THE SAID COMPUTER PRINTOUT, A PART OF WHICH APPEARS AT PAGE 125 OF THE PAPER BOOK, IT IS SEEN THAT FINANCI AL RECORDS DID INCLUDE THE STOCKS OF TUFTED CARPETS. THEREFORE, T HE GROUND TAKEN BY THE ASSESSING OFFICER FOR INCLUDING A SEPARATE SUM OF RS.2,08,98,424/- IN THE VALUATION OF STOCK SAID TO HAVE BEEN FOUND A T THE TIME OF SEARCH ON 11.02.2009 IS ERRONEOUS AS BEING WHOLLY INCONSIS TENT WITH THE MATERIAL FOUND AT THE TIME OF SEARCH ITSELF. 64. EVEN WITHOUT SUCH AN EXCLUSION, THE VALUE OF ST OCKS FOUND AT THE TIME OF SEARCH & SEIZURE ACTION IS OVER STATED BY A SUM OF RS.4,71,67,501/- (RS.12,99,11,208 RS.8,27,43,691). THE APPELLANT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 167 HAS PREPARED AN ANALYSIS OF DIFFERENT VARIETIES OF CARPETS AND AREAS THEREOF, AS HAD BEEN RECORDED BY THE AUTHORISED OFF ICERS IN THE INVENTORY PREPARED BY THEM (COPY APPEARING AT PAGES 21 TO 27 OF THE PAPER BOOK). THE STATEMENT GIVING SUCH AN ANALYSIS APPEARS AT PAGES 122 AND 123. ON THE BASIS OF SUCH AN ANALYSIS, THE APPELLANT HAS PREPARED A COMPARATIVE CHART WHICH HAS BEEN REPRODU CED BY ME IN PARA 56 ABOVE. AS PER THE SAID CHART CORRECT QUANT ITY (ARITHMETICALLY) OF THE CARPETS FOUND AT BAKUCHIA UNIT WORK OUT 1,42 ,954 SQ. MTRS (ROUNDED UP) AND ON THE BASIS OF RATES MENTIONED BY THE AUTHORISED OFFICERS THEMSELVES AGAINST EACH VARIETY OF CARPETS (AS NOTED BY THEM) THE VALUATION WORKS OUT TO RS.8,27,43,691/- AS AGAI NST THE CORRESPONDING FIGURES OF 1,82,719 SQ. MTRS AND RS.1 2,99,11,208/- 65. I HAVE CHECKED UP THE SAID COMPARATIVE CHART (A S HAS BEEN GIVEN IN PARA 57 ABOVE), WITH THE INVENTORY PREPARE D BY THE AUTHORISED OFFICERS ON ONE HAND AND THE STOCKS ANAL YSIS (IN TERMS OF VARIETY AS WELL AREA) AS PREPARED FROM THE SAID INV ENTORY WHICH APPEARS AT PAGES 122 AND 123 OF THE PAPER BOOK. IN THE SAID ANALYSIS, AT PAGES 122 & 123, ALL THAT HAS BEEN DONE BY THE A PPELLANT IS THAT QUANTITIES AS WELL AS AREAS OF ALL TYPES OF CARPET S FOUND AT BAKUCHIA UNIT, BE IT TUFTED OR NON-TUFTED, HAVE BEEN SERIALI ZED, VARIETY WISE AND THEIR RESPECTIVE AREAS HAVE BEEN MENTIONED AGAINST EACH ONE OF THEM. IN THE COMPARATIVE CHART REFERRED TO IN PARA 56 ABO VE, THE CORRECT AREAS OF EACH VARIETY OF CARPET HAS BEEN VALUED ON THE SAME RATE AS MENTIONED IN THE INVENTORY AND AS APPLIED BY THE AS SESSING OFFICER IN THE TABLE GIVEN BY HIM IN PAGE 17 OF THE ASSESSMENT ORDER. THE CORRECTED VALUATION WORKS OUT TO RS.8,27,43,691/- B Y THE APPELLANT HAS BEEN COMPARED WITH THE WORKING GIVEN BY THE ASSESSI NG OFFICER AT PAGE 17 OF THE ASSESSMENT ORDER, WHICH HAS BEEN REP RODUCED IN PARA 53 ABOVE. I REPEAT THAT THE QUANTITY AS WELL AS VA LUE AS GIVEN BY THE ASSESSING OFFICER AT PAGE 17 OF THE ASSESSMENT ORDE R INCLUDE THE TUFTED CARPETS ALSO FOR WHICH SEPARATE ADDITION HAS BEEN MADE AT RS.2,08,98,424/- VIDE PARA 16 OF THE ASSESSMENT ORD ER. THEREFORE, THE WORKING AT PAGE 17 OF THE ASSESSMENT ORDER IS EQUIV ALENT TO FIGURE OF RS.12,99,11,208/- AS HAS BEEN CONSIDERED BY THE ASS ESSING OFFICER IN WORKING OUT THE QUANTUM OF EXCESS STOCK. THUS, THE FIGURE OF RS.12,99,11,208/- (RS.10,90,12,784 + RS.2,08,98,424 ) IS TO BE SUBSTITUTED BY RS.8,27,43,691/- THEREFORE, I HOLD T HAT THE QUANTUM OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 168 STOCK AS WORKED OUT BY THE ASSESSING OFFICER IS TO BE REDUCED, BY THE DIFFERENCE OF TWO FIGURES, WHICH WORKS OUT OF RS.4, 71,67,507) 66. FURTHER, AS HAS RIGHTLY BEEN STATED BY THE LD. COUNSEL FOR THE APPELLANT, THERE IS ANOTHER AREA OF DIFFERENCE IN T HE WORKING OF EXCESS STOCK AS HAS BEEN MADE BY THE ASSESSING OFFICER. AT THE TIME OF SEARCH AND SEIZURE ACTION, THE AUTHORIZED OFFICERS HAD TAKEN A PRINTOUT FROM THE COMPUTER INSTALLED AT THE PREMI SES OF THE APPELLANT, SHOWING THE POSITION OF STOCKS AS ON THE DATE OF SEARCH, AS PER THE FINANCIAL RECORDS OF THE APPELLANT. ON THE FACE OF SUCH PRINTOUT ITSELF, COPY OF WHICH APPEARS AT PAGES 124 AND 125, THE STOCKS OF CARPETS WHICH WERE IN THE PROCESS OF BEING DELIV ERED TO THE OVERSEAS BUYER NAMELY M/S IKEA AND FOR WHICH INVOIC ES HAD BEEN SENT TO THE SAID BUYER ON-LINE, ARE MENTIONED. ON THE BASIS OF SUCH INVOICES SENT ON LINE, VALUE OF WHICH WORKED OUT TO RS.1,54,65,591/-, THE APPELLANT HAD ADJUSTED ITS STOCK IN THE FINANCI AL RECORDS. AS THE GOODS COVERED BY THE SAID INVOICES WERE YET TO BE D ELIVERED, AS PER THE DELIVERY SCHEDULE GIVEN IN THE SAID PRINT OUT, TH E APPELLANTS CONTENTION THAT SUCH STOCKS WERE PHYSICALLY AVAILAB LE AT THE PREMISES OF THE APPELLANT AT THE TIME OF SEARCH, HAS TO BE A CCEPTED. THE RECORDS NO WHERE SHOW THAT SUCH STOCKS HAD BEEN EXCLUDED/SE PARATED BY THE AUTHORISED OFFICERS FROM IN THE INVENTORY PREPARE D BY THEM ON THE DATE OF SEARCH ON SUCH STOCKS WERE OTHERWISE AVAILA BLE, IN ADDITION TO THE STOCKS INVENTORISED BY THE AUTHORISED OFFICERS. THEREFORE, SUCH STOCKS ARE EITHER TO BE REDUCED FROM THE STOCKS FOU ND AT THE BUSINESS PREMISES OR THE VALUE OF STOCKS AS WORKED OUT ON TH E BASIS OF FINANCIAL RECORDS, ARE TO BE ENHANCED BY THE SAID FIGURE IN O RDER TO ARRIVE AT A COMPANION. THE RESULT WILL BE THAT THE DIFFERENCE OF RS.5,63,83,072/- WILL HAVE TO BE FURTHER REDUCED BY THE SAID FIGURE OF RS.1,54,65,591. 67. AFTER CONSIDERING THE SAID ERRORS/DISCREPANCIES IN VALUATION MADE BY THE ASSESSING OFFICER, IRRESPECTIVE OF THE LACK OF AUTHENTICITY OF THE INVENTORY ITSELF, CORRECT VALUATION OF STOC KS AS ON 11.2.2009 AS PER THE INVENTORY WOULD BE WORK AT RS.9,21,56,887 AND INSTEAD OF EXCESS STOCK THERE IS A SHORTAGE OF THE VALUE OF RS.62,50,034 AS WORKED OUT HEREUNDER:- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 169 RS. A) STOCKS OF CARPETS AT BAKUCHIA UNIT AS PER WORKING GIVEN IN PARA 51 ABOVE 12,99,11,208 DEDUCT: (A) EFFECT OF EXCESS VALUATION OF INVENTORY (AS WORKED OUT IN PARA 65 ABOVE) 4,7 1,67,517 (B) STOCKS ADJUSTED IN THE FINANCIAL RECORD BUT PHYSICALLY AVAILABLE IN THE STOCKS INVENTORISED AT THE TIME OF SEARCH, AS DISCUSSED IN PARA 66 ABOVE 1,54,65,591 6,26,33,108 SUB TOTAL (A) 6,72,78,100 B) STOCKS OF CARPETS AT HARIYAON BY-PA SS UNIT (B) 2,48,78,787 PHYSICAL STOCK (A+B) 9,21,56,887 C) STOCK OF FINISHED GOODS AS PER FINANCIAL RECORDS AS WORKED OUT BY THE ASSESSING OFFICER (AS PER PARTICULARS GIVEN IN PARA 52 ABOVE) 9,84,06,923 D) STOCK FOUND SHORT (A+B-C) (-) 62,50,034 68. THUS, EVEN ARITHMETICALLY, IT IS SEEN THAT INST EAD OF EXCESS STOCK OF FINISHED GOODS AS WORKED OUT BY THE ASSESSING OF FICER AT RS.5,63,83,072/- (INCLUDED IN THE FIGURE OF RS.6,37 ,00,615/- FOR WHICH ADDITION HAS BEEN MADE IN THE ASSESSMENT), THERE IS , IN FACT, SHORTAGE OF STOCKS OF CARPETS TO THE TUNE OF RS.62,50,034/-. FROM THIS, IT FOLLOWS THAT THERE BEING NO EXCESS STOCK OF CARPETS FOUND D URING THE COURSE OF SEARCH AND SEIZURE ACTION, THE ADDITION FOR THE SUM OF RS.5,63,83,072/- IS NOT SUSTAINABLE . THEREFORE, I HAVE NO OPTION BUT TO DIRECT FOR DELETION OF THE SAME. 69. AN INCIDENTAL QUESTION THAT ARISES FOR CONSIDER ATION NOW, AS TO HOW THE SHORTAGE OF STOCKS OF FINISHED GOODS OF THE VALUE OF RS.62,50,034/- SHOULD TO BE DEALT WITH. IT IS A MA TTER OF RECORD, NOT DISPUTED EVEN BY THE ACIT, THAT THE APPELLANT HAD B EEN MAKING ENTIRE SALES THROUGH EXPORTS TO M/S IKEA AND NO DOMESTIC S ALES HAD BEEN MADE NOR ANY EVIDENCE OF MAKING ANY DOMESTIC SALES WAS FOUND EVEN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 170 DURING THE COURSE OF SEARCH AND SEIZURE ACTION, WHI CH COVERED ALL THE BUSINESS PREMISES OF THE APPELLANT FIRM AS ALSO THE RESIDENTIAL PREMISES OF ITS PARTNERS. EXPORT SALES AS MADE TO THE SOLE BUYER M/S IKEA ALSO STAND FULLY SUPPORTED BY DOCUMENTARY EVID ENCES IN THE FORM OF BILLS OF LADING, SHIPPING BILLS, CUSTOM ATTESTED INVOICES ETC. PAYMENTS OF ALL SUCH SALES AS RECEIVED/RECEIVABLE B Y THE APPELLANT, ARE WITHIN THE PURVIEW OF RESERVE BANK OF INDIA. T HEREFORE, THERE IS NO POSSIBILITY OF EXPORT SALES BEING MADE WITHOUT P REPARING THE BILLS FOR THE SAME, NOR IN THE ABSENCE OF ANY SUCH BILLS ANY REMITTANCE CAN BE RECEIVED FROM THE OVERSEAS BUYERS. NO SUCH INST ANCE OF UNACCOUNTED EXPORT SALE WAS EVEN FOUND DURING THE C OURSE OF SEARCH AND SEIZURE ACTION. ON THE OTHER HAND FIGURES OF S ALES (WHICH ARE WHOLLY THROUGH EXPORTS) HAVE BEEN ACCEPTED BY THE A SSESSING OFFICER. SO MUCH SO THAT WHILE WORKING OUT EXTRA PROFIT ADDI TION, HE HAS ADOPTED THE FIGURES OF SALES AS SHOWN BY THE APPELL ANT, AS BASE. THEREFORE, IT CANNOT BE SAID THAT SHORTAGE OF STOC KS OF FINISHED GOODS AS WORKED OUT IN PARA 68 ABOVE REPRESENTS ANY SALES OUTSIDE THE BOOKS OF ACCOUNT. IT CAN, THEREFORE, VERY WELL BE ATTRIB UTED TO SOME HONEST ERRORS IN NOTING DOWN THE FIGURES OF STOCKS IN THE INVENTORY PREPARED BY THE AUTHORIZED OFFICERS, OCCURRENCE OF WHICH IS NOT UNKNOWN. EVEN UNINTENTIONAL OCCURRENCE OF SUCH LIKELY MISTAKE CAN NOT BE RULED OUT, AS THERE IS NO MEANS TO CHECK THE ARITHMETICAL ACCU RACY OF QUANTITY OF CARPETS AS NOTED BY THE AUTHORISED OFFICER, IN THE ABSENCE OF WORKING SHEETS BEING MADE AVAILABLE, AN ISSUE THAT HAS BEEN DEALT WITH BY THE LD. AR IN PARA 31 OF THE WRITTEN SUBMISSIONS AND DI SCUSSED BY ME IN PARA 61 ABOVE. SUM AND SUBSTANCE OF THE MATTER IS THAT THE SHORTAGE COULD AT BEST BE SAID TO BE ON PAPER AND IN REALITY THERE WAS NO SUCH SHORTAGE. MY FINDINGS ARE FURTHER SUPPORTED FROM T HE FACT THAT THE ASSESSING OFFICER, EVEN WHILE REJECTING THE BOOKS O F ACCOUNT UNDER SECTION 145(3) HAS NOT DISPUTED THE APPELLANTS VERS ION OF SALES. WHILE DECIDING THE ISSUE OF REJECTION OF BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3), I HAVE ALREADY HELD I N PARAS 33,34 & 35 ABOVE THAT BOOKS OF ACCOUNT AND OTHER RECORDS ARE C ORRECT AND COMPLETE IN ALL RESPECTS. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE APPELLANT, EVEN ON THE BASIS OF SHORTAGE AS WORKED OUT IN P ARA 67 ABOVE AND THE SAME IS EVEN ILLUSORY. IN THIS VIEW OF THE MAT TER, RELIEF OF RS.5,63,83,072/- AS HAS BEEN ALLOWED BY ME VIDE PAR A 68 ABOVE IS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 171 FULLY SUSTAINABLE AND NO DEVIATION FROM THE STAND TAKEN BY ME IN THIS RESPECT IS CALLED FOR. UNACCOUNTED STOCK OF YARN: RS.73,17,543/- 70. NOW, I PROCEED TO DEAL WITH ANOTHER COMPONENT O F THE ADDITION OF RS.6,37,00,615/- WHICH IS RS.73,17,543/- REPRESE NTING THE VALUE OF STOCKS OF RAW MATERIAL FOUND AT HARIYAON BY-PASS UN IT OF THE APPELLANT. THE MATTER HAS BEEN ADEQUATELY DEALT WI TH BY THE APPELLANT THROUGH ITS WRITTEN SUBMISSIONS (SUPRA) VIDE PARAS 29, 30, 40 AND 41 THEREOF WHICH HAVE BEEN REPRODUCED IN PARA 58 ABOV E. 71. SUM AND SUBSTANCE OF THE SAID SUBMISSIONS IS TH AT THE ASSESSING OFFICER HAS TREATED THE STOCKS OF RAW MATERIALS AS INVENTORISED BY THE AUTHORIZED OFFICER AS UNACCOUNTED STOCKS, WITHOUT H AVING ANY REGARD TO THE FACT THAT THE APPELLANT FIRM IS A GOING CONC ERN AND STOCKS OF RAW MATERIAS OF MANIFOLD VALUE (OF THE STOCKS RECORDED BY THE AUTHORIZED OFFICERS) ARE ALWAYS CARRIED ON BY IT. AVAILABILITY OF SUCH STOCKS AS PER FINANCIAL RECORDS STANDS REFLECTED IN THE QUANT ITY TALLY ALSO AS HAD BEEN PREPARED BY THE ASSESSEE AND SUBMITTED BEFORE THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDING S, WHICH IS AVAILABLE IN THE ASSESSMENT RECORDS. THERE IS SUF FICIENT FORCE IN THE SUBMISSION MADE BY THE APPELLANT AND ACCORDINGLY SA ID ADDITION OF RS.73,17,543/- IS ALSO LIABLE TO BE EXCLUDED FROM T HE COMPUTATION OF ASSESSED INCOME. 72. IN THE RESULT, ENTIRE ADDITION OF SUMS AGGREGAT ING RS.6,37,00,615/- AS HAS BEEN OBJECTED TO BY THE APP ELLANT VIDE GROUNDS NO.7, 8, 9 AND 10 IS DELETED AND THE APPELL ANT GETS A RELIEF OF RS.6,37,00,615/-. 46. THE LD. DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO PB-47 & 52, WHICH ARE THE SUB MISSIONS MADE BEFORE THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 172 AUTHORITIES BELOW TO SHOW THAT THE ISSUE WAS EXPLAI NED AND ON REMAND REPORT CALLED ON THIS ISSUE, THE AO COULD NOT REBUT THE SUBMISSIO NS OF THE ASSESSEE. THEREFORE, THE LD. CIT(A) CORRECTLY DELETED THE ADDITION. 47. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GO NE THROUGH THE FINDINGS OF AUTHORITIES BELOW. THE LD. CIT(A) EXAMINED THE MATE RIAL BEFORE HIM AS WELL AS INVENTORY PREPARED BY THE AUTHORIZED OFFICER. THE L D. CIT(A) ON EXAMINATION OF THE SEIZED MATERIAL FOUND THE CONTENTION OF THE ASSESSE E TO BE CORRECT THAT THE INVENTORY PREPARED BY THE AUTHORIZED OFFICER IS NOT CORRECT. THUS, THE INVENTORY PREPARED BY THE AUTHORIZED OFFICER WAS NOT FOUND TO BE VERIFIED . THERE WERE SEVERAL ARITHMETICAL ERRORS, WHICH WERE RECONCILED BY THE ASSESSEE. THE LD. CIT(A) NOT ONLY EXAMINED THE MATERIAL BEFORE HIM, BUT ALSO FOUND RECONCILIAT ION FILED BY THE ASSESSEE TO BE CORRECT. THE COMPARATIVE CHART WAS ALSO EXAMINED WI TH REFERENCE TO THE INVENTORY PREPARED BY THE AUTHORIZED OFFICER AND THE LD. CIT( A) FOUND THAT IT IS NOT A CASE OF EXCESS STOCK FOUND DURING THE COURSE OF SEARCH. THE ISSUE OF THE SHORTAGE OF THE STOCK WAS ALSO EXAMINED BY THE LD. CIT(A) AND FOUND THE CONTENTION OF THE ASSESSEE TO BE CORRECT. THE ASSESSEE EXPLAINED EACH AND EVERY ITEM BEFORE THE LD. CIT(A) AND SATISFIED HIM THAT THERE WAS NO EXCESS S TOCK FOUND DURING THE COURSE OF SEARCH. SINCE IT IS A DEPARTMENTAL APPEAL, THEREFOR E, THE BURDEN IS UPON THE REVENUE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 173 TO ESTABLISH THAT THE FINDING OF FACT RECORDED BY T HE LD. CIT(A) IS CONTRARY TO THE MATERIAL ON RECORD. HOWEVER, NO MATERIAL IS PRODUCE D BEFORE US TO CHALLENGE THE FINDINGS OF THE LD. CIT(A) IN DELETING THE ADDITION . NOTHING IS PROVIDED BEFORE US TO CHALLENGE THE RECONCILIATION FILED BY THE ASSESSEE TO EXPLAIN THE EXCESS STOCK. IN THE ABSENCE OF ANY MATERIAL OR EVIDENCE CONTRARY TO THE FINDING OF LD. CIT(A) ON RECORD, WE DO NOT FIND IT APPROPRIATE TO INTERFERE WITH THE FINDING OF FACT RECORDED BY THE LD. CIT(A) IN DELETING THE ADDITION. IN THE RESULT, GROUND NO. 3 OF THE APPEAL OF REVENUE IS DISMISSED. 48. ON GROUND NO. 4, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.4,77,65,410/- MADE ON ACCOUNT OF UNEXPLAINED NON -BUSINESS TRANSACTIONS DETECTED ON THE BASIS OF DIARY SEIZED AS PER ANNEXU RE A-8 OF THE PANCHNAMA. DURING THE COURSE OF SEARCH AND SEIZURE ACTION AT T HE PREMISES OF BY-PASS ROAD, HARIAUN, BHADOHI BUSINESS PREMISES OF THE ASSESSEE, A EXECUTIVE DIARY WAS FOUND, WHICH IS STATED TO BE WRITTEN IN HAND WRITING OF SH RI PRAMOD KUMAR BARNWAL. THE AO INFERRED THAT SUMS AGGREGATING TO RS.45 CRORES W ERE PAID IN PURSUANCE OF SETTLEMENT, WHEREUNDER SHRI PRADEEP KUMAR BARANWAL AND HIS FAMILY MEMBERS HAD WITHDRAWN FROM THE ASSESSEE FIRM AND THE FIRM WAS T AKEN EXCLUSIVELY BY THE FAMILY OF SHRI PRAMOD KUMAR BARNWAL W.E.F. 01.04.2008. ACC ORDING TO THE ACIT, IN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 174 PURSUANCE OF SUCH AN AGREEMENT, SUM AGGREGATING TO RS.40,22,34,590/- HAD ALREADY EXCHANGED HANDS AND THE BALANCE OF RS.4,77,65,410/- (RS.45,00,00,000 40,22,34,590) WAS TREATED AS LIABLE TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE BECAUSE IT WAS NOT THE TRANSACTION, WHICH IS RELATE D TO THE BUSINESS. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LD. CIT(A) AND T HE WRITTEN SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED AS UNDER : 80. SRI RASHMI B. GABHAWALA, AT THE VERY OUTSET, O BJECTED TO THE VERY ADMISSIBILITY OF SAID 5 PAGES WRITTEN IN T HE EXECUTIVE DIARY, AS MATERIAL FOR ARRIVING AT THE INFERENCE AS AFORESA ID AS HAS BEEN DRAWN BY THE ASSESSING OFFICER. IN A VERY POINTED MANNER, HE INVITED MY ATTENTION TO THE SAID 5 PAGES OF THE EXECUTIVE D IARY WHEREIN AT THE VERY FIRST PAGE AND AS OPENING LINE, IT IS MENTIONE D THAT IT IS A COPY FROM THE REGISTER OF BABUJI (FATHER OF SRI PRAMOD K UMAR BARANWAL) (ENGLISH TRANSLATION). SRI YOGESHWAR PRASAD BARANW AL (FATHER OF SRI PRAMOD KUMAR BARANWAL) HIMSELF, DID NOT HAVE ANY INTEREST IN THE APPELLANT FIRM AND HE HAS NEVER BEE N A PARTNER THERE. AS SOME BICKERING HAD BEEN GOING ON BETWEEN THE FAM ILIES OF TWO BROTHERS, SRI YOGESHWAR PRASAD BARANWAL BEING HEAD OF THE UNIFIED FAMILY OF THE TWO BROTHERS HAD MERELY TRIED TO MEDI ATE IN THE DISPUTE. IN THAT CONTEXT, HE HAD WORKED OUT SOME PROPOSAL IN HIS OWN REGISTER (AS WRITTEN BY HIM), WHICH WAS SIMPLY COPIED BY SRI PRAMOD KUMAR BARANWAL (ONE OF THE PARTNERS OF THE APPELLANT FIRM ) IN THE EXECUTIVE DIARY AS AFORESAID. 81. ACCORDING TO SRI GHABAWALA, ALTHOUGH, FAMILY SE TTLEMENT HAD TAKEN PLACE BUT IT HAD NOT TAKEN PLACE ALONG THE LI NES PROPOSED BY SRI YOGESHWAR PRASAD BARANWAL. IN SUPPORT OF THIS CONT ENTION, HE REFERRED TO A FIGURE OF RS.10,69,69,000/- WHICH HAS BEEN TREATED TO HAVE BEEN PAID AS A PART OF SETTLEMENT MONEY, WHERE AS FROM DOCUMENTARY EVIDENCES FOUND DURING THE COURSE OF SE ARCH ITSELF, IT STOOD ESTABLISHED THAT THE SAID PAYMENT HAD BEEN MA DE IN CONNECTION WITH A COMMERCIAL AND WHOLLY GENUINE TRANSACTION RE LATED TO ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 175 PURCHASE OF 47,410 CARPETS BY THE APPELLANT FIRM FR OM M/S CARPET INTERNATIONAL PVT. LTD. AND NOT BY WAY OF CONSIDERA TION OR A PART THEREOF, PAID IN LIEU OF FAMILY SETTLEMENT. IF THI S FIGURE (AS TREATED BY THE ACIT AS PART OF PAYMENT MADE IN LIEU FAMILY SET TLEMENT) IS EXCLUDED FROM CONSIDERATION, THE THEORY PROPOUNDE D BY THE ACIT GETS WHOLLY DECIMATED. 82. PROCEEDING FURTHER, AND WITHOUT PREJUDICE TO TH E SAID SUBMISSION THE LD. A.R. SUBMITTED THAT AT ITS BEST, THE SAID FIGURE OF RS.45 CRORES COULD BE TREATED AS NET WORTH OF THE APPELLANT FIRM AT THE END OF THE PRECEDING YEAR WHEREIN THE OBLIGATIO N OF THE CONTINUING PARTNERS BELONGING TO THE FAMILY OF SRI PRAMOD KUMA R BARANWAL FAMILY WAS CONFIRMED TO PAY HALF OF THAT I.E. RS.22 .50 CRORES AS THE VALUE OF STAKE ACQUIRED BY THEM AND SUCH 50% OF THE NET WORTH HAD DULY BEN PAID IN THE FOLLOWING MANNER:- (RS.) A) PAYMENTS OF CREDIT BALANCES APPEARING IN THE ACCOUNTS OF OUTGOING PARTNERS BELONGING TO THE FAMILY OF SRI PRADEEP KUMAR BARANWAL 17,97,65,590/- B) GIFT GIVEN BY SRI PRAMOD KUMAR BARANWAL AND SMT. RADHIKA DEVI (W/O SRI PRAMOD KUMAR BARANWAL THE CONTINUING PARTNERS) TO SRI PRADEEP KUMAR BARANWAL, DURING THE FINANCIAL YEAR 2008-09 10,0 0,00,000/- 27,97,65,590/- 83. THUS, THE CLAIM OF OUTGOING PARTNERS (WHO WERE THE PARTNERS TO THE EXTENT OF 50%) WHICH COULD NOT HAVE BEEN MORE T HAN RS.22.50 CRORES BEING ONE HALF OF THE NET WORTH OF RS.45 CRO RES STOOD FULLY SATISFIED AND NO INFERENCE COULD HAVE BEEN DRAWN TH AT ANY PAYMENT OVER AND ABOVE THE SAME HAD BEEN MADE OR EVEN REQUI RED TO BE MADE, SO AS TO JUSTIFY THE IMPUGNED ADDITION. 84. LASTLY, SRI RASHMI B. GABHAWALA SUBMITTED THAT SO FAR AS THE APPELLANT FIRM IS CONCERNED, IT ITSELF HAD NO OBLIG ATION TO MAKE ANY PAYMENT TO THE OUTGOING PARTNERS AND UNDER NO CIRCU MSTANCES ANY ADDITION COULD HAVE BEEN MADE IN ITS HANDS ON ACCOU NT OF FAMILY ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 176 SETTLEMENT. ALL SUCH SUBMISSIONS HAVE BEEN MATE IN GREAT DETAIL IN THE PARAS 49 TO 60 OF THE WRITTEN SUBMISSIONS ALSO WHIC H ARE REPRODUCED HEREUNDER:- 49. IN THESE GROUNDS THE APPELLANT HAS DISPUTED AN ADDITION OF RS. 4,77,65,410 AS HAS BEEN MADE BY THE ACIT ON ACCOUNT OF ALLEGED UNEXPLAINED TRANSACTION . BY THIS, THE ACIT MEANT THAT DURING THE RELEVANT PREVIOUS YEAR, A FAMILY SETTLEM ENT TOOK PLACE UNDER WHICH WORTH OF THE APPELLANT FIRM WAS E STIMATED AT RS.45 CRORES AGAINST WHICH SUMS AGGREGATING RS.40,2 2,34,590 HAD BEEN ACCOUNTED FOR AND THE BALANCE OF RS.4,77,6 5,410 REMAINED UNACCOUNTED FOR AND IT IS THIS ALLEGED UN ACCOUNTED FOR TRANSACTION FOR WHICH ADDITION IN QUESTION HAS BEEN MADE. THE WORKING OF THE SAID UNEXPLAINED TRANSACTION AS APPEARING IN PARA 8.5 OF THE IMPUGNED ASSESSMENT ORDER, IS GIVEN HEREUNDER:- (RS.) NET WORTH OF THE APPELLANT FIRM AS ON 31.3.2008 45,00,00,000 DEDUCT: (I) ACCOMMODATION ENTRY OF SALE OF CARPET AS DISCUSSED ABOVE. 10,69,69,000 (II) CASH PAYMENT OF 1,55,00,000 (III) GIFT BY SRI PRAMOD KUMAR BARANWAL GIFT DEED DT. SRI PRADEEP KUMAR BARANWAL 5,00,00,000 (IV) GIFT BY SMT. RADHIKA BARANWAL W/O SRI PRAMOD KUMAR BARANWAL TO PRADEEP KUMAR BARANWAL 5,00,00,000 GIFT DEED DATED (V) SRI PRADEEP KUMAR BARANWAL 1,28,90,538 (VI) SRI NITIN BARANWAL 7,27,73,264 (VII) SRI RAJAT BARANWAL 7,49,23,215 (VIII) SMT. SUMAN BARANWAL 1,91,78,573 40,22,34,590 DIFFERENCE SETTLED BY MAKING PAYMENT (NOT RECORDED) 4,77,65,410 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 177 50. FOR DRAWING THE AFORESAID INFERENCE ABOUT THE F AMILY SETTLEMENT, THE ACIT HAS REFERRED TO A DIARY FOUND FROM THE PRE MISES OF THE APPELLANT, WHICH IN THE HANDWRITING OF SRI PRAMOD K UMAR BARANWAL, PARTNER OF THE APPELLANT FIRM, (EVER SINCE ITS INCE PTION ON 01.05.1996) . WITH GREAT RESPECT, IT IS SUBMITTED THAT SUCH AN AS SUMPTION IS BASED ON MISREADING OF THE SAID DIARY AND IS WHOLLY INCONSIS TENT WITH THE MATERIAL AND INFORMATION ON RECORD. THE RELEVANT PAGES OF T HE DIARY HAVE BEEN NUMBERED BY THE AUTHORISED OFFICERS, AS PAGE 78 ONW ARD AND THE VERY FIRST LINE OF THE SAID DIARY READS AS BABUJI KE REGISTER PER LIKHA GAYA COPY THIS NARRATION SHOWS THAT SRI PRAMOD KUMAR BARANWAL HAS MERELY COPIED A PROPOSAL FOR SETTLEMENT FROM THE REGISTER OF BABUJI I.E. SRI YOGESH PRASAD BARANWAL FATHER OF SRI PRAMOD KUMAR B ARANWAL WHO IS ADDRESSED AS BABUJI BY HIS SONS. A COPY OF THE RELEVANT PAGES OF THE DIARY STARTING FROM PAGE 78 AS AFORESAID IS ENCLOSED AT PAGES 200 TO 204 OF THIS WS . 51. ON BEING ENQUIRED INTO ABOUT THE SAID DIARY, TH E ABOVE MENTIONED FACT THAT THE NARRATION APPEARING IN THE DIARY HAD BEEN COPIED FROM THE REGISTER OF SRI YOGESH PRASAD BARANWAL WAS DULY BRO UGHT TO THE NOTICE OF THE ASSESSING OFFICER. IT WAS MERELY A PROPOSAL WHI CH WAS NOT ACTED UPON, AS IT DID NOT COVER WHOLE RANGE OF DISPUTES T HAT HAD ARISEN BETWEEN THE FAMILY OF TWO BROTHERS NAMELY SRI PRADEEP KUMAR BARANWAL AND SRI PRAMOD KUMAR BARANWAL (WHOSE MEMBERS HAVE BEEN CONS TITUTING THE FIRM TILL 31.03.2008). THE EXPLANATION SO GIVEN WA S IN CONFORMITY WITH THE STATEMENT GIVEN BY SRI PRAMOD KUMAR BARANWAL DU RING THE COURSE OF SEARCH AND SEIZURE ACTION THAT HAD COMMENCED ON 11. 02.2009 (AS PER PARTICULARS GIVEN IN THE OPENING PARAGRAPH OF THIS WS) . IT WAS FURTHER STATED IN THE SAID STATEMENT THAT IT WAS THE TOTAL WORTH OF CARPET INTERNATIONAL, THE APPELLANT, WHICH WAS WORKED OUT AT RS.45 CRORES. A COPY OF THE STATEMENT SO GIVEN BY SRI PRAMOD KUMA R BARANWAL DURING THE COURSE OF SEARCH AND SEIZURE ACTION IS ENCLOSED AT PAGES 62 TO 70 OF THIS WS . ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 178 52. THE APPELLANT BEGS FOR THE KIND CONSIDERATION O F YOUR HONOUR THAT AFTER THE EXPLANATION HAS BEEN RENDERED, NO ENQUIRY WHATSOEVER WAS MADE FROM SRI YOGESH PRASAD BARANWAL, AUTHOR OF THE REGISTER (FROM WHERE SRI PRAMOD KUMAR BARANWAL HAD COPIED THE SAME ), NOR ANY ENQUIRY (TO THE BEST OF THE APPELLANTS KNOWLEDGE) HAD BEEN MADE FROM SRI PRADEEP KUMAR BARANWAL AND/OR HIS FAMILY MEMBER S WHO HAD BEEN THE PARTNERS OF THE FIRM UPTO 31.03.2008. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF DELHI BENCH OF HONBLE IT AT IN THE CASE OF ATUL KUMAR JAIN VS. DY.CIT REPORTED IN (1999) 64 TT J (DEL.) 786 . PARAS 6.4 AND 6.5 AS ARE RELEVANT HERE, ARE REPRODU CED HEREUNDER TO INVITE IMMEDIATE ATTENTION OF YOUR HONOUR:- 6.4 WE FIND THAT THE AO HAS MADE OUT THE CASE FOR MAKING SUCH ADDITION BASED EXCLUSIVELY ON THE SAID PIECE OF PAP ER FOUND AND SEIZED DURING THE COURSE OF SEARCH. IT IS, THEREFO RE, TO BE EXAMINED WHETHER THE SAID PAPER FOUND AND SEIZED IS A DOCUME NT HAVING EVIDENTIARY VALUE TO PROVE THE FACT OF THE TRANSACT ION. THE WORD DOCUMENT HAS BEEN DEFINED IN S. 32 OF THE INDIAN EVIDENCE ACT TO MEAN-ANY MATTER EXPRESSED OR DESCRIBED UPON ANY SUBSTANCE BY MEANS OF LETTERS, FIGURES, OR MARKS OR BY MORE THAN ONE OF THOSE MEANS, INTENDED TO BE USED OR WHICH MAY BE USED FOR THE PURPOSE OF RECORDING THAT MATTER. THE WORD DOCUMENT HAS ALSO BEEN SIMILARLY DEFINED IN THE GENERAL CLAUSES ACT. THE MEANING OF THE WORD DESCRIBE USED IN THE DEFINITION AS GIVEN IN THE NEW SHORTER OXFORD ENGLISH DICTIONARY IS PORTRAY IN WORDS, REC ITE THE CHARACTERISTICS OF, IN A DETAILED OR GRAFFIC ACCOUN T OF. THE MEANING OF THE WORD EXPRESS USED IN THE DEFINITION AS PER THE NEW SHORTER ENGLISH DICTIONARY IS A GRAPHIC REPRESENTA TION AS IMAGE, AN ACT OF EXPRESSING OR REPRESENTING BY WORDS, SIGN S OR ACTIONS, EXPRESSIONS, A MODE OF SPEECH, OF PHRASE, AN UTTERA NCE. ACCORDING TO THE HONBLE SUPREME COURT IN THE CASE OF RAMJI D AYAWALA & SONS (P) LTD VS. INVERT IMPORT AIR 1981 SC 2085, ME RE PROOF OF THE HANDWRITING OF A DOCUMENT WOULD NOT TANTAMOUNT TO A PROOF OF ALL THE CONTENTS OR THE FACTS STATED IN THE DOCUMEN TS, IT THE TRUTH OF THE FACTS STATED IN A DOCUMENT IS IN ISSUE, MERE PR OOF OF THE HANDWRITING AND EXECUTION OF THE DOCUMENT WOULD NOT FURNISH EVIDENCE OF THE TRUTH OF THE FACT OR CONTENTS OF TH E DOCUMENT. THE TRUTH OR OTHERWISE OF THE FACT OR CONTENTS SO STATE D WOULD HAVE TO ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 179 BE PROVED BY ADMISSIBLE EVIDENCE I.E., BY THE EVIDE NCE OF THOSE PERSONS WHO AN VOUCHSAFE FOR THE TRUTH OF THE FACTS IN ISSUE. 6.5 FURTHER, THE HONBLE SUPREME COURT IN THE CASE OF MOHD. YUSUF & ANR. VS. D & ANR. AIR 1968 BOM. 112 HAS OBS ERVED THAT THE EVIDENCE OF THE CONTENTS CONTAINED IN DOCUMENT IS HEARSAY EVIDENCE UNLESS THE WRITER THEREOF IS EXAMINED BEFO RE THE COURT. THE HONBLE COURT, THEREFORE, HELD THAT THE ATTEMPT TO PROVE THE CONTENTS OF THE DOCUMENT BY PROVING THE SIGNATURES OF THE HANDWRITING OF THE AUTHOR THEREOF IS TO SET AT NOUG HT, THE WELL- RECOGNISED RULE THAT HEARSAY EVIDENCE CANNOT BE ADM ITTED. A COPY OF THE SAID JUDGMENT AS A WHOLE IS ENCLOSED AT PAGES 205 TO 230 OF THIS WS . 53. IN THE LIGHT OF PRINCIPLE LAID DOWN IN VARIOUS CASE LAWS AS HAVE BEEN REFERRED TO IN THE ABOVE MENTIONED CASE OF ATUL KUMAR JAIN , IT IS FURTHER SUBMITTED THAT THE ADDITION IN QUESTION IS NOT BASED ON ANY EVIDENCE OF CORROBORATIVE FOUND DURING THE COURSE O F SEARCH AND/OR COLLECTED BY THE ASSESSING OFFICER BY MAKING ENQUIR IES FOR WHICH HE WAS FULLY EMPOWERED UNDER SECTION 131 OF THE ACT. ON T HE OTHER HAND, THE EVIDENCES AVAILABLE ON RECORD, INDICATE CONTRARY TO THE ALLEGATION OF FAMILY SETTLEMENT (ON THE BASIS OF WHICH ADDITION O F RS.4,77,65,410 HAS BEEN MADE) AS DISCUSSED HEREINAFTER. 54. IT IS A MATTER OF RECORD THAT THE FAMILY OF SRI PRAMOD KUMAR BARANWAL HAD BEEN WORKING LIKE AN ASSOCIATE OF HIS ELDER BROTHER SRI PRADEEP KUMAR BARANWAL AND IN THAT CAPACITY SRI PRA MOD KUMAR BARANWAL HIS WIFE SMT. RADHIKA BARANWAL AND THEIR T WO SONS (MINOR AT THAT TIME) HAD BEEN ALLOWED TO HAVE SOME INTEREST I N VARIOUS BUSINESS ENTITIES THAT WERE BEING RUN BY THE MEMBERS OF THE TWO FAMILIES. WITH THE PASSAGE OF TIME, THERE AROSE SERIOUS DISPUTES AND D ISSENSIONS BETWEEN THE TWO BROTHERS AND THEIR FAMILY MEMBERS. IN ORDER TO SAVE THE TWO FAMILIES FROM BEING RUINED BECAUSE OF ONGOING DISPUTES, SRI YOGESH PRASAD BARANWAL INTERVENED AND MADE THE PROPOSAL AS NOTED BY SRI YOGESH PRASAD BARANWAL HIMSELF IN HIS REGISTER (AND SHRI P RAMOD BARANWAL, PARTNER OF APPELLANT FIRM, MERELY COPIED THE DETAIL S OF SAID PROPOSAL IN HIS DIARY, JUST TO GIVE A THOUGH TO IT). HOWEVER , THE PROPOSAL IN THAT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 180 FORM (AS MADE BY SRI YOGESH PRASAD BARANWAL) DID NO T MATERIALIZE, AS THE SAME COVERED ONLY THE CARPET INTERNATIONAL, THE APPELLANT FIRM, WHEREAS THE TWO FAMILIES HAD INTEREST IN OTHER BUSI NESS CONCERNS ALSO LIKE CARPET INTERNATIONAL (P) LTD. FINALLY, WITH THE IN TERVENTION AND PRESSURE OF RELATIVES, FAMILY FRIENDS, A FULL FLEDGED OF SET TLEMENT WAS DEVISED BY THE TWO BROTHERS (REPRESENTING THEIR RESPECTIVE FAMILIE S) WHICH, BROADLY SPEAKING, PROVIDED FOR THE FOLLOWING:- (I) FAMILY OF SRI PRADEEP KUMAR BARANWAL SHALL WITH DRAW COMPLETELY FROM CARPET INTERNATIONAL, THE APPELLANT FIRM HERE AND IT WILL BE PLACED IN THE EXCLUSIVE CONTROL OF THE FAMILY OF SR I PRAMOD KUMAR BARANWAL. (II) CARPET INTERNATIONAL, THE APPELLANT HERE SHALL WITHDRAW COMPLETELY FROM THE BUSINESS PREMISES OF CARPET INTERNATIONAL PVT LTD. SITUATED AT GYANPUR ROAD, BHADOHI. (III) FAMILY OF SRI PRAMOD KUMAR BARANWAL SHALL W ITHDRAW FROM CARPET INTERNATIONAL PVT. LTD AND THE SAME WILL BE PLACED IN THE EXCLUSIVE CONTROL OF THE FAMILY OF SRI PRADEEP KUMA R BARANWAL. (IV) ACCOUNTS OF THE OUTGOING PARTIES SHALL BE SETT LED ON THE BASIS OF FINAL ACCOUNTS AS ON 31.3.2008. 55. THE SAID PACKAGE OF SETTLEMENT WAS ACTED UPON A LSO BY BOTH THE GROUPS AS MAY BE SEEN FROM THE CHRONOLOGY OF EVENTS THAT TOOK PLACE THEREAFTER, A BRIEF RESUME OF WHICH IS GIVEN HEREUN DER:- (A) AS FAR AS THE APPELLANT FIRM IS CONCERNED, THE CHANGES TOOK PLACE IN ITS CONSTITUTION, FROM OLD CONSTITUTION UPTO 31.3.2008 SHARE OF PROFIT OLD ADDRESS SRI PRADEEP KUMAR BARANWAL 35% (A) GYANPUR ROAD, BHADOHI (PREMISES BLONGING TO M/S CARPET INTERNATIONAL (P) LTD. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 181 (B) (C) BYE-PASS ROAD, HARIYAON, BHADOHI BAKUCHIYA, BEHIND GYANPUR ROAD, BHADOHI. SMT. SUMAN DEVI BARANWAL 5% SRI NITIN BARANWAL 5% SRI RAJAT BARANWAL 5% SRI PRAMOD KUMAR BARANWAL 45% SMT. RADHIKA DEVI BARANWAL 3% MASTER PRASHANT BARANWAL 1% MASTER PRANAV BARANWAL 1% TO THE FOLLOWING:- NEW CONSTITUTION UPTO 1.4.2008 SHARE OF PROFIT NEW ADDRESS SRI PRAOD KUMAR BARANWAL 50% (A) (B) BYE-PASS ROAD, HARIYAON, BHADOHI BAKUCHIYA, BEHIND GYANPUR ROAD, BHADOHI. SMT. RADHIKA DEVI BARANWAL 20% SRI PRASHANT BARANWAL 15% SRI PRANAV BARANWAL 15% TOOK PLACE. (B) ON FINALIZATION OF ACCOUNTS OF CARPET INTERNAT IONAL AS ON 31.03.2008, CREDIT BALANCES IN THE ACCOUNTS OF THE OUTGOING PARTNERS WORKED OUT AS UNDER:- RS. (I) SRI PRADEEP KUMAR BARANWAL 1,28,90,538 (II) SRI NITIN BARANWAL S/O SRI PRADEEP KUMAR BARANWAL 7,27,73,264 (III) SRI RAJAT BARANWAL S/O SRI PRADEEP KUMAR BARANWAL 7,49,23,215 (IV) SMT. SUMAN BARANWAL W/O SRI PRADEEP KUMAR BARANWAL 1,91,78,573 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 182 17,97,65,590 AND THE SAME WERE SETTLED BY MAKING PAYMENTS THROUG H ACCOUNT PAYEE CHEQUES DURING THE FINANCIAL YEAR 2008-09. (C) OUT OF THE FREE WILL, SRI PRAMOD KUMAR BARANWAL AND SMT. RADHIKA DEVI W/O SRI PRAMOD KUMAR BARANWAL MADE GIF TS OF RS.5.00 CRORES EACH AGGREGATING RS.10 CRORES TO SRI PRADEEP KUMAR BARANWAL DURING THE FINANCIAL YEAR 20 08- 09. (D) THE FAMILY OF SRI PRAMOD KUMAR BARANWAL WITHDRE W COMPLETELY FROM M/S CARPET INTERNATIONAL (P) LTD AN D THE SAID COMPANY WAS PLACED IN EXCLUSIVE CONTROL OF SRI PRADEEP KUAMAR BARANWAL AND HIS FAMILY MEMBERS. 56. IT IS FURTHER SUBMITTED FOR THE KIND CONSIDERAT ION OF YOUR HONOUR THAT THE ACIT HAS DRAWN HIS PRESUMPTION, INTER-ALIA , ON THE GROUND THAT A SUM OF RS.10,69,69,000 WAS PAID BY THE APPELLANT FI RM TO M/S CARPET INTERNATIONAL (P) LTD IN PURSUANCE OF SUCH A FAMILY SETTLEMENT AND IT IS FOR THIS REASON THAT, WHILE WORKING OUT THE IMPUGNE D ADDITION OF RS.4,77,65,410, HE HAD ALLOWED CREDIT FOR THE SAME AS IS EVIDENT FROM THE WORKING GIVEN IN PARA 49 HEREINFORE. IN CONSEQUENC E OF SUCH A FINDING, HE HAD HELD IN THE CORRESPONDING ASSESSMENT OF M/S CARPET INTERNATIONAL (P) LTD THAT RECEIPT IN QUESTION WAS A WINDFALL F OR THEM AND ACCORDINGLY WHOLE OF THE SAID SUM WAS ADDED IN THEI R ASSESSMENT. AGGRIEVED BY THE SAID ADDITION THE SAID CARPET INTE RNATIONAL (P) LTD HAD FILED AN APPEAL BEFORE YOUR HONOUR WHICH HAS SINCE BEEN DECIDED VIDE APPELLATE ORDER DATED 20.06.2011. IN TERMS OF THE SAID ORDER, IT HAS BEEN CLEARLY HELD THAT THE SUM OF RS.10,69,69,000 HAD BE EN PAID BY THE APPELLANT FIRM TO M/S CARPET INTERNATIONAL (P) LTD. , SOLELY BY WAY OF PAYMENT FOR THE PURCHASE PRICE OF RS.47410 CARPETS [AS SUPPLIED BY M/S CARPET INTERNATIONAL (P) LTD.] AND ON A DUE CONSIDE RATION OF THE SAME THE ADDITION OF RS.10,69,69,000 IN THE SAID COMPANY HAS BEEN DELETED. KIND ATTENTION OF YOUR HONOUR IS INVITED TO THE DISCUSSI ONS APPEARING IN PARAS 18 TO 27 HEREINFORE. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 183 57. FURTHER, THE SUMS AGGREGATING RS.TEN CRORES TOO HAD BEEN TREATED AS GIFTS SIMPLICITOR (NOT CONNECTED WITH ANY SETTLE MENT AS SUCH) IN THE HANDS OF DONEES AND WERE NOT TREATED AS THE SUMS RE CEIVED BY THE PAYEES IN FAMILY SETTLEMENT, TO THE BEST OF THE KNOWLEDGE OF THE APPELLANT. THIS ALSO GOES TO SHOW THAT FAMILY SETTLEMENT, REFERRED TO IN THE REGISTER OF SRI YOGESH PRASAD BARANWAL HAD NOT TAKEN PLACE AND ACTE D UPON AS PER DETAILS GIVEN IN PARAS 49 & 50 ABOVE, AND NOT ALONG THE LINES PROPOSED BY SHRI YOGESH PRASAD BARANWAL. 58. FROM THE DISCUSSIONS MADE IN THE FOREGOING PARA GRAPH IT STANDS CONCLUSIVELY ESTABLISHED, EVEN ON FACTS THAT NO SUC H FAMILY SETTLEMENT WHICH MIGHT HAVE PROVIDED FOR PAYMENT OF RS.45 CROR ES BY THE APPELLANT TO M/S CARPET INTERNATIONAL (P) LTD HAD TAKEN PLACE . CONSEQUENTLY, THE ADDITION IN QUESTION DESERVES TO BE DELETED AND THE APPELLANT PRAYS FOR SUCH A DELETION BY YOUR HONOUR. 59. EVEN IF, FOR THE SAKE OF ARGUMENTS ONLY, IT IS ACCEPTED THAT ANY PAYMENT HAD BEEN MADE ON THE BASIS OF NOTINGS IN TH E REGISTER OF SRI YOGESH PRASAD BARANWAL (COPIED BY SHRI PRAMOD KUMAR BARANWAL IN HIS DIARY) THEN ALSO NO ADDITION WHATSOEVER WAS CAL LED FOR. THE SAID NOTINGS MERELY SHOW THAT WORTH OF CARPET INTERNATIO NAL WAS VALUED AT RS. 45 CRORES BY SHRI YOGESH PRAMOD BARANWAL. IN NET WORT H SO ESTIMATED, SHARE OF THE OUTGOING PARTNERS AMOUNTIN G TO RS. 22.50 CRORES ONLY; BEING THE VALUE OF THEIR 1/2 SHARE IN THE TOTAL WORTH. AGAINST SUCH SUM OF RS. 22.50 CRORES THE OUTGOING PARTNERS HAD BEEN PAID SUMS AGGREGATING RS. 17,97,65,590 (BY WAY OF PAYMENT OF CREDIT BALANCES STANDING IN THEIR RESPECTIVE ACCOUNTS. IN ADDITION, THE CONTINUING PARTNERS NAMELY SRI PRAMOD KUMAR BARANWAL AND HIS WIFE SMT. RADHIKA DEVI HAD PAID FURTHER SUMS AGGREGATING RS.10 CRORES TO THE O UTGOING PARTNERS. THUS, PAYMENTS AGGREGATING RS.27,97,65,590 HAD BEEN MADE TO THE OUTGOING PARTNERS, WHICH IS ALREADY FAR IN EXCESS O F THEIR SHARE OF RS. 22.50 CRORES (ON THE BASIS OF NET WORTH AS ESTIMATED BY SHRI YOGESH PRASAD BARANWAL IN HIS REGISTER REFERRED TO ABOVE). THUS, EVEN ON THE BASIS OF PROPOSAL OF SRI YOGESH PRASAD BARANWAL, NO FURTHER AMOUNT WAS PAYABLE TO THE OUTGOING PARTNERS, BY THE PARTNE RS OF THE APPELLANT FIRM . ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 184 60. IN ANY CASE AND WHOLLY WITHOUT PREJUDICE THE S UBMISSION MADE 49 TO 59 , IT CANNOT BE SAID THAT IT WAS THE APPELLANT FIRM WHICH CARRIED ANY OBLIGATION OR HAD THE OCCASION TO MAKE ANY SUCH PAYMENT OR IT HAD MADE ANY SUCH PAYMENT. THE SEARCH AND SEIZURE A CTION CARRIED OUT GLOBALLY DID NOT LEAD TO THE RECOVERY OF ANY MA TERIAL THAT ANY SUCH PAYMENT HAD BEEN MADE BY THE APPELLANT FIRM AND/OR ANY OF ITS PARTNERS. IT COULD BE TREATED TO BE THE LIABILITY OF THE CONTINUING PARTNERS TO SETTLE THE ACCOUNTS OF THE OUTGOING PA RTNERS BUT THE WERE ALSO NOT FOUND TO HAVE MADE ANY SUCH PAYMENT (TO TH E OUTGOING PARTNERS). 48.1 THE LD. CIT(A), ON EXAMINING THE ISSUE IN THE LIGHT OF THE FINDINGS OF THE AO DELETED THE ADDITION. HIS FINDINGS IN THE APPELLATE ORDER IN PARAS 85 TO 88 ARE REPRODUCED AS UNDER : 85. I HAVE CAREFULLY CONSIDERED THE PREMISE ON WHI CH ADDITION OF RS.4,77,65,410/- HAS BEEN MADE BY THE A SSESSING OFFICER AND THE WORKING OF SUCH ADDITION AS HAS BEEN GIVEN BY HIM IN PARAS 8.5AND 8.6 OF THE ASSESSMENT ORDER. THE ONLY MATER IAL THAT HAS BEEN REFERRED TO BY HIM FOR COMING TO THE CONCLUSION THA T SUMS AGGREGATING RS.45 CRORES HAD BEEN PAID (FOR TAKING OVER EXCLUSI VE CONTROL OVER THE APPELLANT FIRM W.E.F.1.4.2008) WAS THE EXECUTIVE D IARY WRITTEN IN THE HANDWRITING OF SRI PRAMOD KUMAR BARANWAL AND FOUND FROM THE PREMISES OF THE APPELLANT FIRM. AT THE VERY TOP OF THE FIRST PAGE OF THE DIARY (OUT OF 5 PAGES REFERRED TO BY THE ASSESSING OFFICER), IT IS CLEARLY WRITTEN THAT IT WAS COPIED FROM THE REGISTER KEPT BY BABUJI, HIS FATHER. SUCH A NARRATION AND THAT TOO FOUND IN THE SEIZED MATERIAL LENDS FULL SUPPORT TO THE CONTENTIONS PUT FORTH BY THE LD. A.R. THAT THERE WAS SOME PROPOSAL MADE BY SRI YOGESH PRASAD BARANWA L (FATHER OF THE TWO BROTHERS NAMELY SRI :PRADEEP KUMAR BARANWAL AND SRI PRAMOD KUMAR BARANWAL) IN HIS EFFORTS TO MEDIATE IN THE ON GOING DISPUTE BETWEEN THEM AND SUCH MATERIAL DID NOT EVEN GO TO SHOW THAT A PAYMENT OF RS.45 CRORES WAS TO BE MADE BY THE APP ELLANT FIRM IN WHOSE HANDS THE ADDITION OF RS.4,77,65,410 HAS BEEN MADE. SUCH A COPY (FROM THE REGISTER OF SRI YOGESH PRASAD BARA NWAL) COULD NOT HAVE BEEN TREATED AS MATERIAL FOR THE PURPOSES OF DRAWING AN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 185 INFERENCE THAT THERE EXISTED AN AGREEMENT UNDER WHI CH A SUM OF RS.45 CRORES WAS TO BE PAID BY THE APPELLANT FIRM TO THE OUTGOING PARTNERS. 86. THERE IS ALSO FORCE IN THE SUBMISSIONS MADE BY THE LD. A.R. TO THE EFFECT THAT IN CASE HIS SUBMISSION ABOUT THE PA YMENT OF RS.10,69,69,000 (WHICH HAD BEEN TREATED BY THE ACIT AS A COMPONENT OF RS.45 CRORES AS PER WORKING GIVEN BY HIM IN PARA S 8.5 & 8.6) TO THE EFFECT THAT SUCH PAYMENT HAD BEEN MADE IN LIEU OF COMMERCIAL TRANSACTION FOR PURCHASE OF CARPETS AND THAT TOO FR OM A SEPARATE COMPANY, WERE TO BE ACCEPTED, THE THEORY PROPOUND ED BY THE ASSESSING OFFICER FALLS TO THE GROUND AND THE ADDIT ION OF RS.4,77,65,410 WAS LIABLE TO BE DELETED. IT HAS ALR EADY BEEN HELD BY ME IN PARAS 43 TO 49 ABOVE THAT SAID PAYMENT MERELY REPRESENTED A PAYMENT MADE FOR PURCHASE OF CARPETS GENUINELY MADE BY THE APPELLANT FIRM, TO THE SUPPLIERS M/S CARPET INTERNA TIONAL PVT, LTD. A CATEGORICAL FINDING BASED ON MATERIAL AND INFORMATI ON FOUND AT THE TIME OF SEARCH AND SEIZURE ACTION ITSELF HAS BEEN G IVEN, TO THE FOLLOWING EFFECT, I) THE APPELLANT FIRM HAD PURCHASED 47410 CARPETS F ROM M/S CARPET INTERNATIONAL PVT. LTD. II) PURCHASES OF SUCH CARPETS WERE FULLY SUPPORTED BY 4 BILLS AS HAD BEEN FOUND AT THE PREMISES OF THE SUPPLIERS AND PURCHASERS COPIES THEREOF FROM THE POSSESSION OF SRI PRAMOD KU MAR BARANWAL, THE MAIN PARTNER OF THE APPELLANT FIRM. III) THE TRANSACTIONS IN THE SAID MANNER WERE FOUND RECO RDED IN THE BOOKS OF BOTH THE PARTIES. IV) SIMILARLY PAYMENT OF RS.10,69,69,000/- HAD BEEN MAD E BY CHEQUE BY THE APPELLANT FIRM, THROUGH ITS REGULAR B ANK ACCOUNTS AND THE SAME HAD DULY BEEN COLLECTED ALSO BY THE PA YEE M/S CARPET INTERNATIONAL PVT. LTD. THROUGH THEIR REGULA R BANK ACCOUNT. V) THE PURCHASES OF CARPETS REPRESENT A WHOLLY GENUINE TRANSACTIONS AND PURCHASES SO MADE HAVE BEEN PHYSIC ALLY SHIPPED ALSO TO THE OVERSEAS BUYER M/S IKEA. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 186 87. THE ACIT HAS TREATED THE SAID SUM OF RS.10,69,6 9,000 AS ONE OF THE COMPONENTS OF THE ALLEGED PAYMENTS AGGREGATING RS.40,22,34,590 ( AS WORKED OUT BY THE ACIT IN PARA 8.5 OF THE ASSE EMENT ORDER) SAID TO HAVE BEEN MADE IN LIEU OF FAMILY SETTLEMENT. AS THE VIEW TAKEN BY THE ASSESSING OFFICER IN THIS RESPECT HAS BEEN FOUN D TO BE WHOLLY MISCONCEIVED, THE VERY BASIS OF DRAWING AN INFERENC E THAT THERE WAS A SETTLEMENT UNDER WHICH SUMS AGGREGATING RS.40,22,34 ,590 HAD BEEN PAID BECOMES NON-EXISTENT. 88. IF AT ALL ANY CREDENCE CAN BE GIVEN TO THE COP Y AS MADE BY SRI PRAMOD KUMAR BARANWAL FROM THE REGISTER OF HIS FATH ER, ALTHOUGH THIS IS ALSO NOT PERMISSIBLE IN LAW IN THE ABSENCE OF AN Y ENQUIRY BEEN MADE BY THE ACIT FROM SRI YOGESH PRASAD BARANWAL, THE FA LLINGS COULD AT BEST BE TREATED TO BE REFERABLE TO THE NET WORTH OF THE FIRM (INCLUSIVE OF CAPITAL BALANCES IN THE ACCOUNTS OF THE PARTNERS). AS THE FAMILY OF SRI PRAMOD KUMAR BARANWAL WAS ALREADY THE STAKE HOLDER OF 50%, IN THE FIRM, THE CONTINUING PARTNERS COULD AT BEST BE REQU IRED TO MAKE PAYMENT FOR ACQUIRING REMAINING 50% OF THE STAKE. TOWARDS SUCH PAYMENTS, CREDIT BALANCES OF THE OUTGOING PARTNERS WERE FULLY PAID AND OVER AND ABOVE THAT, SUMS AGGREGATING RS.10 CRO RES HAD ALSO BEEN PAID BY WAY OF GIFTS TO SRI PRADEEP BARANWAL. SUCH PAYMENTS GO TO SETTLE COMPLETELY THE ISSUE. THERE IS NO MATERI AL AVAILABLE, NOR COLLECTED BY THE ASSESSING OFFICER WHICH COULD GO T O SHOW THAT ANY PAYMENT WAS SO REQUIRED TO BE MADE, MUCH LESS PAID AND THAT TOO BY THE APPELLANT FIRM. IT IS ALSO NOT UNDERSTOOD AS T O HOW A FIRM WHICH IS AN ENTITY ASSESSABLE AS A PERSON DIFFERENT F ROM THE PARTNERS CONSTITUTING IT, COMES INTO THE PICTURE IN SETTLEME NT OF ANY DISPUTE BETWEEN THE PARTNERS AND BE TREATED TO BE LIABLE MA KE ANY SUCH PAYMENT. THUS, THERE EXIST NO MATERIAL, NEITHER ANY JUSTIFIC ATION FOR HOLDING THAT PAYMENT AMOUNTING TO RS.4,77,65,410/- HAD BEEN MADE BY WAY OF AN UNACCOUNTED TRANSACTION. THE ADDITION IS THEREFORE DELETED. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 187 49. THE LD. DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 50. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE A DDITION IS MADE BY REFERRING TO THE EXECUTIVE DIARY. THE LD. CIT(A) ON EXAMINATI ON OF THE DIARY FOUND THAT ON THE FIRST PAGE OF THE DIARY, IT IS CLEARLY WRITTEN THAT IT WAS COPIED FROM THE REGISTER KEPT BY BABUJI, I.E., FATHER OF SHRI PRAMOD KUMAR B ARANWAL. SUCH NARRATION WAS ALSO FOUND IN THE SEIZED MATERIAL, WHICH SUPPORTED THE CONTENTION OF THE ASSESSEE THAT IT WAS A MERE PROPOSAL WHICH WAS TRIED BY FATH ER OF PRADEEP KUMAR BARANWAL AND PRAMOD KUMAR BARANWAL. NO MATERIAL WAS FOUND DU RING THE COURSE OF SEARCH TO INDICATE THAT ANY PAYMENT HAS BEEN MADE BY THE A SSESSEE FIRM OR IT HAS EXCHANGED ANY HANDS. THE LD. CIT(A), THEREFORE, RIG HTLY FOUND THAT THE THEORY PROPOUNDED BY THE AO IS NOTHING AND CANNOT BE TREAT ED AS MATERIAL EVIDENCE TO SUPPORT THE ADDITION. FURTHER, NO EVIDENCES WERE FO UND TO ESTABLISH ANY PAYMENT MADE BY THE ASSESSEE FIRM. FURTHER NO ENQUIRY HAS B EEN MADE FROM FATHER OF SHRI PRAMOD KUMAR BARNWAL, WHOSE NAME WAS REFERRED TO IN THE EXECUTIVE DIARY. IN THE ABSENCE OF ANY MATERIAL TO INDICATE ANY PAYMENT BY THE ASSESSEE FIRM, THE LD. CIT(A) RIGHTLY DELETED THE ADDITION. THE ASSESSEE P LEADED BEFORE THE AUTHORITIES ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 188 BELOW THAT IT WAS A TENTATIVE PROPOSAL WHICH WAS NE VER FINALIZED. THEREFORE, IN THE ABSENCE OF ANY MATERIAL AGAINST THE ASSESSEE, SUCH AN ADDITION IS MADE MERELY ON PRESUMPTION AND ASSUMPTION OF FACTS WHICH HAS NO BA SIS AT ALL. THE LD. CIT(A), THEREFORE, ON PROPER APPRECIATION OF FACTS AND MATE RIAL ON RECORD, RIGHTLY DELETED THE ADDITION. IN THE RESULT, GROUND NO. 4 OF APPEAL OF THE REVENUE IS DISMISSED. IN THE RESULT, THE DEPARTMENTAL APPEAL IN ITA NO. 160/ A/2012 IS DISMISSED. ITA NO. 90/A/2012 (CARPET INTERNATIONAL VS. ACIT -A .Y. 2009-10) : 51. IN THIS APPEAL OF THE ASSESSEE, ON GROUND NO. 4 TO 6, THE ASSESSEE CHALLENGED THE ADDITION OF RS.48,66,100/-. IT IS STATED THAT W HILE SEARCH AND SEIZURE ACTION U/S. 132(1) WAS BEING CARRIED AT VARIOUS BUSINESS PREMIS ES OF THE ASSESSEE AS ALSO AT THE RESIDENTIAL PREMISES OF ITS PARTNERS, A SURVEY U/S. 133A WAS CARRIED OUT AT ITS EXTENDED BUSINESS PREMISES KNOWN AS PREMISES OF B.C . YARN DYERS, NAWEDAKALA, BHADOHI. IT WAS EXPLAINED THAT AT THE TIME OF FAMIL Y SETTLEMENT BETWEEN THE TWO BROTHERS, SHRI PRADEEP KUMAR BARNWAL AND SHRI PRAMO D KUMAR BARNWAL, THE ASSESSEE FIRM CAME INTO EXCLUSIVE CONTROL AND MANAG EMENT OF SHRI PRAMOD KUMAR BARNWAL AND SINCE IT DID NOT HAVE ANY ARRANGEMENTS AT ITS BUSINESS PREMISES FOR DYING OF YARN FOR THE PURPOSE OF WEAVING THE CARPET S, THE ASSESSEE HAD BEEN USING SUCH FACILITY WHICH WERE AVAILABLE AT THE PREMISES OF M/S. CARPET INTERNATIONAL PVT. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 189 LTD. AFTER THE SAID COMPANY HAD COME INTO EXCLUSIVE CONTROL AND MANAGEMENT OF SHRI PRADEEP KUMAR BARNWAL AND HIS FAMILY MEMBERS, THE FACILITY OF DYING OF YARN CEASED TO BECOME AVAILABLE TO THE ASSESSEE FIRM. IN SUCH A SITUATION, THE ASSESSEE FIRM ENTERED INTO LEASE AGREEMENT WITH M/S. B.C. YA RN DYERS, WHO HAS FULL FLEDGED DYING FACILITY AT THEIR PREMISES SITUATED AT NAWEDA KALA, BHADOHI. FROM HIS PRINCIPAL PLACE OF BUSINESS AT BAKUCHIA AND HARIYAO N BY-PASS ROAD, THE ASSESSEE HAD BEEN ISSUING YARN FOR BEING DYED AT THAT PREMIS ES AND AFTER DYING, DYED YARN USED TO RETURN BACK TO THE ASSESSEE AT ITS MAIN BUS INESS PREMISES AS AFORESAID. AT THE TIME OF SURVEY, THE AUTHORIZED OFFICER FOUND ST OCK OF COLOURED (DYED) AND PLAIN WOOLEN YARN KEPT THERE. A REGISTER WHICH CONTAINED THE PARTICULARS OF YARN ISSUED FOR DYING, RETURN OF YARN AFTER SUCH DYING FROM TIM E TO TIME AND BALANCE LEFT WITH THE SAID DYING HOUSE HAD BEEN FOUND AT HARIYAON BY- PASS ROAD, ONE OF THE TWO PRINCIPAL BASIS OF THE ASSESSEE FIRM. THE AO BEFORE COMPLETION OF ASSESSMENT REQUIRED THE ASSESSEE TO SHOW AS TO WHETHER THE STO CK OF YARN SO FOUND IS REFLECTED IN ITS BOOKS OF ACCOUNT. THE ASSESSEE EXPLAINED THA T ALTHOUGH SEPARATE REGISTER FOR STOCK AT SAID DYING HOUSE HAD NOT BEEN MAINTAINED, THE AVAILABILITY OF STOCKS AT DYING HOUSE WAS FULLY VERIFIABLE FROM THE OVERALL S TOCK POSITION OF THE ASSESSEE. IN SUPPORT OF THE SAID CONTENTION, THE DETAILED WORKIN G WITH THE SUPPORT OF OPENING STOCK AND PURCHASES MADE DURING THE YEAR WAS MADE A VAILABLE. HOWEVER, THE AO ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 190 WAS OF THE OPINION THAT IT IS NEXT TO IMPOSSIBLE TO WORK OUT THE EXACT POSITION OF STOCK FROM SUCH VOLUMINOUS DETAILS AND TREATED THE STOCK OF PLAIN WOOL AND COLOURED WOOL AS FOUND THERE AS UNACCOUNTED STOCK B ELONGING TO THE ASSESSEE AND MADE ADDITION OF RS.48,66,100/-. IT WAS, THEREFORE, EXPLAINED THAT THE ADDITION IS MADE BECAUSE THE AO FOUND IT DIFFICULT TO EXAMINE T HE DETAILS SUBMITTED BY THE ASSESSEE. THE ASSESSEE CHALLENGED THE ADDITION BEFO RE THE LD. CIT(A). THE WRITTEN SUBMISSIONS OF THE ASSESSEE IS REPRODUCED AS UNDER : 44. FROM A PERUSAL OF THE SAID PARAS OF THE ASSE SSMENT ORDER, IT IS SEEN THAT THE APPELLANT HAD SUBMITTED A DETAILED EXPLANATION TO THE EFFECT THAT THE STOCK OF WOOLEN YARN FOUND WITH B.C . YARN DYERS WAS OUT OF OVERALL STOCKS OF RAW MATERIALS HELD BY THE APPE LLANT ON THAT DATE. THE SAID EXPLANATION HAS BEEN REJECTED AS UNACCEPTABLE ONLY ON THE GROUND THAT LOOKING TO THE NATURE AND VOLUME OF THE BUSINESS OF THE APPELLANT, IT IS NEXT TO IMPOSSIBLE TO WORK OUT THE EXACT POSI TION OF STOCK (PART OF PARA 7.3 ABOVE). IT THE ASSESSING OFFICER FOUND IT DIFFICULT TO CARR Y OUT THE VERIFICATION, EVEN THOUGH ALL THE RELEVANT DETA ILS HAD BEEN PRODUCED BEFORE HIM, IT CANNOT BE INFERRED THAT THE STOCKS F OUND AT THE PREMISES OF B.C. YARN DYERS WAS UNACCOUNTED STOCK OF THE APP ELLANT. 45. IN OTHER WORDS, THE APPELLANTS CONTENTION IS THAT DIFFICULTY EXPERIENCED BY THE ACIT OR TO PUT IT DIFFERENTLY, U NWILLINGNESS AT THE PART OF THE ACIT TO UNDERSTAND THE DETAILS, AS HAD BEEN SUBMITTED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDIN GS CANNOT BY ITSELF LEAD TO AN INFERENCE THAT THE STOCK FOUND AT THE PR EMISES OF THE APPELLANT (THE PREMISES OWNED BY B.C. YARN DYERS HAD BEEN TAK EN ON LEASE BY THE APPELLANT FOR THE PURPOSES OF USING THE SAME AS DYE ING HOUSE) REPRESENTED UNACCOUNTED STOCKS. REFERENCE CAN USEFU LLY BE MADE TO THE PRINCIPLE LAID DOWN BY THE HONBLE ALLAHABAD HIGH C OURT IN THE CASE OF SWADESHI COTTON MILLS COMPANY LTD. VS. CIT AND ANOT HER REPORTED IN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 191 (1988) 171 ITR 634 IN THE CONTEXT OF PROCEEDINGS U NDER SECTION 142(2A), READING AS UNDER:- HOWEVER, ALL THAT ARE DIFFICULT TO UNDERSTAND SHOU LD NOT BE REGARDED AS COMPLEX WHAT IS COMPLEX TO ONE MAY BE S IMPLE TO ANOTHER. IT DEPENDS UPON ONES LEVEL OF UNDERSTAND ING OR COMPREHENSION. SOMETIMES, WHAT APPEARS TO BE COMPL EX ON THE FACE OF IT, MAY NOT BE REALLY SO IF ONE TRIES TO UN DERSTAND IT CAREFULLY. THEREFORE, SPECIAL AUDIT SHOULD NOT BE DIRECTED ON A CURSORY LOOK AT THE ACCOUNTS. THERE SHOULD BE AN H ONEST ATTEMPT TO UNDERSTAND THE ACCOUNTS OF THE ASSESSEE. (PAGE 637) IN THE CONTEXT OF PROCEEDINGS UNDER SECTION 142(2A) . 46. THE APPELLANT AGAIN BEGS TO SUBMIT BEFORE YOUR HONOUR THAT IT HAD FURNISHED A QUANTITATIVE TALLY OF THE STOCKS AS ON 11.02.2009 AND HAS ALSO GIVEN THE QUANTITATIVE TALLY AS ON 31.03.2009 I.E. AT THE END OF THE YEAR, AS PER WHICH THE APPELLANT HAD STOCKS OF RAW MATERIALS AVAILABLE WITH IT, WAS OF THE VALUE OF RS. 5,00,72,673/- WHICH COVER FULLY THE STOCKS OF RS.48,68,100 AS WAS FOUND TO BE IN THE PROCESS AT THE PREMISES OF M/S. B.C.YARN DYERS, IN POSSESSION OF THE APPELLANT AT T HAT TIME. 47. IT ALSO DESERVES TO BE APPRECIATED THAT THE APP ELLANTS CONTENTION THAT THE STOCK FOUND AT THE TIME OF SURVEY AT THE P REMISES OF B.C. YARN DYERS, HAD MOVED OUT OF OVERALL STOCK AVAILABLE WIT H THE APPELLANT, IS FURTHER PROVED FROM THE CONTEMPORARY EVIDENCES FOUN D AT THE TIME OF SURVEY ITSELF. THE QUANTITIES AS NOTED BY THE AUTHO RISED OFFICERS WERE AS PER THE STOCK REGISTER FOUND AT THE TIME OF SURVEY WHICH CONTAINED THE FOLLOWING COLUMNS:- DATE CHALLAN NO. ISSUE RECEIPT BALANCE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 192 THE CHALLANS REFERRED TO THEREIN ARE THE CHALLANS P REPARED AT THE MAIN BUSINESS PREMISES OF THE APPELLANT AT THE TIME OF D ELIVERY TO DYEING HOUSE AND SUCH CHALLANS WERE AVAILABLE AT THE TIME OF SEA RCH ALSO. THE FACT THAT ALL THE RECEIPTS IN THIS REGISTER, (ON THE BASIS OF WHICH STOCK AVAILABLE AT THE DYEING HOUSE HAS BEEN WORKED OUT) ARE SUPPORTED BY THE SAID CHALLANS, ITSELF GOES TO SHOW THAT THE STOCKS FOUND AT THE PREMISES OF B.C. YARN DYERS REPRESENTED THE STOCKS OF THE APPELLANT, COMING OUT FROM ITS OVERALL STOCKS MADE UP OF OPENING STOCK AND PURCHAS ES MADE DURING THE YEAR. COPY OF THE SAID STOCK REGISTER AS FOUND AT THE PREMISES OF B.C. YARN DYERS IS ENCLOSED AT PAGES .TO..HERETO AND T HE CHALLANS REFERRED TO THEREIN (WHICH TOO WERE AVAILABLE AT THE TIME OF SIMULTANEOUS SEARCH AT THE PREMISES OF THE APPELLANT) ARE BEING PRODUCED B EFORE YOUR HONOUR FOR ALL SUCH VERIFICATION AS IS CONSIDERED NECESSARY. 76. FURTHER, VIDE PARA 48 OF THE SAID PART OF THE S UBMISSIONS, THE LD. A.R. HAS RELIED UPON THE SUBMISSIONS MADE ON THE IS SUE OF ADDITION OF RS.73,17,524 IN RELATION TO THE STOCK OF YARN FOUND AT THE BUSINESS PREMISES OF THE APPELLANT WHICH HAS BEEN DEALT WITH BY ME IN PARAS 71, 72 & 73 HEREINFORE. IN RESPONSE TO THE SAID WRI TTEN SUBMISSIONS (WHICH WAS FORWARDED TO THE ASSESSING OFFICER, IN P ARA 6 HEREINFORE), THE ACIT SHE RELIED UPON THE REMAND REPORT SUBMITTE D EARLIER WHEN, WITHOUT STATING ANYTHING NEW, SHE RELIED UPON PARA 7.3 OF THE ASSESSMENT ORDER, AS HAS BEEN REPRODUCED IN PARA 73 ABOVE. 51.1 THE LD. CIT(A), HOWEVER, CONFIRMED THE ADDITIO N. HIS FINDINGS IN PARA 77 & 78 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 77. I HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMIS SIONS MADE BY THE APPELLANT ON THE ISSUE OF ALLEGED UNDISCLOSE D STOCK OF YARN, PLAIN AS WELL AS COLOURED, AS FOUND AT ITS EXTENDED BUSINESS PREMISES KNOWN AS THE PREMISES OF B.C.YARN DYERS, AVERMENTS MADE IN THE STATEMENT OF FACTS, WRITTEN SUBMISSIONS AS ALSO THE PLEADINGS MADE VERBALLY AS HAVE BEEN NOTED ABOVE. IT IS SEEN THAT THE WHOLE CONTROVERSY AROSE OWING TO A DEBATABLE-CONCEPTION C ARRIED BY THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 193 ASSESSING OFFICER THAT THE STOCKS FOUND AT THE B.C . YARN DYERS PREMISES WAS NOT RECORDED BY THE APPELLANT, ALTHOU GH FOR SUCH A DEBATABLE ISSUE, IT IS THE APPELLANT ITSELF WHO IS TO BE BLAMED. IN ITS LETTER DATED 27.12.2009 IT HAD MENTIONED THAT NO RE CORDS HAS BEEN KEPT FOR THE STOCKS OF YARN FOUND UNDER SECTION 133 A. THE FACT, HOWEVER, REMAINS THAT FOR SUCH STOCK A REGISTER HAD DULY BEEN KEPT AT THE HARIYAON BY-PASS ROAD UNIT (THE PRINCIPAL PLACE OF BUSINESS OF THE APPELLANT) AND SUCH REGISTER WAS UNDER SEIZURE ALSO . FROM THE SEIZED MATERIAL THE APPELLANT HAS OBTAINED COPY OF THE SAI D REGISTER WHICH RUNS INTO 29 PAGES AND FIRST PAGE OF THE SAID REGIS TER AND ALSO LAST TWO PAGES OF THE SAME HAVE BEEN PLACED IN THE PAPER BOO K ALSO AT PAGES 126, 127 AND 128 THEREOF. PHOTOCOPY OF THE REGISTER AS A WHOLE (AS OBTAINED BY THE APPELLANT FROM THE SEIZED MATERIAL, FROM THE ASSESSING OFFICER) HAS BEEN PRODUCED BEFORE ME, ON BEING REQU IRED TO DO SO BY ME. AS HAS BEEN MENTIONED IN PARA 47 OF THE WRITTE N SUBMISSIONS, THE SAID REGISTER HAS BEEN MAINTAINED IN A COLUMNAR FOR M WHICH GIVES THE POSITION OF AVAILABILITY OF STOCKS OF YARN THERE ON DAY-TO-DAY BASIS. SUCH COLUMNS ARE DISCUSSED HEREUNDER:- I) DATE II) CHALLAN NO., (WHICH ARE IN TWO SERIES, ONE USED FOR THE PURPOSES OF RECEIVING THE STOCKS FOR DYING AND OTHE R FOR RETURNED BACK OF THE STOCK OF YARN AFTER DYING) III) ISSUE (IT REFERS TO THE QUANTITY RECEIVED FOR DYING AS ISSUED BY THE APPELLANT FROM ITS PRINCIPAL PLACE OF BUSINESS) IV) RECEIVED (QUANTITY AS GIVEN BACK BY THE DYING HOUS E AFTER DYING, AND RECEIVED BACK BY THE APPELLANT AT ITS PR INCIPAL PLACE OF BUSINESS) V) DYED WEIGHT OF YARN RETURNED BACK (THERE IS DECRE ASE AS WELL AS INCREASE IN WEIGHT OF YARN AFTER DYING. THIS CO LUMN REFERS TO THE ACTUAL QUANTITY IN WEIGHT AFTER DYING) VI) BALANCE (IT IS AN ADJUSTMENT OF COLL. (III) AND(IV) WITH THE BALANCE OF THE PRECEDING DAY) ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 194 AFTER UPDATED POSTING OF THE CHALLANS, THE BALANCE IN THE SAID REGISTER TALLIES WITH THE QUANTITIES FOUND AT THE B.C. YARN DYING PREMISES. 78. ON THE CAREFUL CONSIDERATION, I DID NOT FIND AN Y MATERIAL WITHIN THE PREMISES OF B.C YARN DYERS WHICH CAN PROVE THE GENUINENESS OF STOCK. THE SEIZED REGISTER AS MENTIONED BY AUTHORIS ED REPRESENTATIVE IN THE WRITTEN SUBMISSIONS WAS ALSO ONLY WITH THE M AIN UNIT OF CARPET INTERNATIONAL. IN ABSENCE OF PROPER RECORDS AT THE PREMISES OF B.C. YARN DYERS. I FIND THAT TOTAL ADDITION OF RS. 48,66,100/- IS LI ABLE TO BE CONFIRMED. 52. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN RECEIPTS ARE VERIFIABLE, THERE IS NO QUESTION OF MAKING ADDITION OF UNEXPLAINED STOCK. B ALANCE IN THE INVENTORY OF STOCK CANNOT BE DISPUTED BY THE AO. ON THE OTHER HA ND, THE LD. DR SUBMITTED THAT EXCESS STOCK WAS NOT EXPLAINED, THEREFORE, THE ADDI TION IS JUSTIFIED. 53. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THERE WAS DIVISION OF BUSINESS BETWEEN THE TWO BROTHERS OF BARANWAL FAMILY AND THE ASSESSEE FIRM CAME INTO THE SHARE OF FAMILY OF SHRI PRAMOD KUMAR BARNWAL. TO SOME EXTENT, DYING FACILIT Y WAS STATED TO BE USED AT THE PREMISES OF M/S. CARPET INTERNATIONAL PVT. LTD. THEREAFTER, THE ASSESSEE STARTED USING DYING FACILITIES WITH M/S. B.C. YARN DYERS. T HE ASSESSEE SUBMITTED BEFORE THE AO THAT THE CROSS VERIFICATION OF THE RAW MATER IAL COULD BE DONE FROM M/S. B.C. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 195 YARN DYERS AND THAT COMPLETE DETAILS ARE MAINTAINED WITH THE CHALLAN AND RECEIPTS. THE ASSESSEE ALSO FURNISHED DETAILED EXPLANATION ON THIS ISSUE AND ALSO FILED DETAILED WORKING ALONGWITH ALL THE SUPPORTING DOCUM ENTS, WHICH IS ALSO SUPPORTED BY THE BILLS AND VOUCHERS AND OTHER REGISTERS. THE WORKING OF THE STOCK WAS ALSO FURNISHED. AO INSTEAD OF VERIFYING AND EXAMINING TH E MATERIAL PRODUCED BEFORE HIM FOUND IT IMPOSSIBLE TO WORK OUT THE EXACT POSIT ION OF STOCK. THE AO ALSO FOUND IT DIFFICULT TO EXAMINE THE DETAILS LOOKING TO THE NATURE AND VOLUME OF BUSINESS OF THE ASSESSEE. AO INSTEAD OF EXAMINING THE DETAILS, WRONGLY NOTED THAT NO PROPER AND PLAUSIBLE EXPLANATION HAS BEEN GIVEN ON THE ISS UE. WHEN THE AO HAS FOUND IT IMPOSSIBLE TO WORK OUT EXACT POSITION OF STOCK, HE SHOULD NOT HAVE DECIDED THE ISSUE AGAINST THE ASSESSEE TREATING THE STOCK TO BE UNEXPLAINED STOCK. SAME IS THE POSITION BEFORE THE LD. CIT(A), AS THE ASSESSEE SUB MITTED BEFORE HIM THAT WHEN QUANTITATIVE TALLY OF STOCK HAS BEEN FURNISHED, WHI CH IS SUPPORTED BY CONTEMPORARY EVIDENCE, FOUND AT THE TIME OF SURVEY, THE LD. CIT( A) INSTEAD OF CONFIRMING THE ORDER OF THE AO SHOULD HAVE VERIFIED THE DETAILS ON THIS ISSUE. THE LD. CIT(A) ALSO FAILED TO MAKE OUT ANY ENQUIRY ON THIS ISSUE. THERE FORE, IN THE ABSENCE OF ANY ADVERSE FINDING GIVEN ON THE EXPLANATION AND DETAIL S SUBMITTED BY THE ASSESSEE, THE AUTHORITIES BELOW SHOULD NOT HAVE MADE THIS ADDITIO N AGAINST THE ASSESSEE. WHEN THE AO WANTED TO TAX A PARTICULAR INCOME ON ACCOUNT OF UNACCOUNTED STOCK, THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 196 BURDEN IS UPON THE AO TO PROVE THAT IT WAS IN FACT UNACCOUNTED STOCK. THE AO INSTEAD OF EXAMINING THE DETAILS AND QUANTITATIVE T ALLY OF STOCK FILED BY ASSESSEE, MADE THE ADDITION WITHOUT ANY REASONS. SIMILARLY, T HE LD. CIT(A) WITHOUT ANY VERIFICATION OF THE MATERIAL AND WITHOUT GIVING ANY ADVERSE FINDING AGAINST THE ASSESSEE SHOULD NOT HAVE CONFIRMED THE ADDITION ON THIS ISSUE. SINCE THE AO DID NOT EXAMINE THE MATERIAL PRODUCED BEFORE HIM ON THIS IS SUE AND FOUND IT DIFFICULT/IMPOSSIBLE TO WORK OUT THE EXACT POSITION OF STOCK, THE RESULTANT ADDITION CANNOT BE SUSTAINED. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDITION. IN THE RESULT, GROUNDS NOS . 4, 5 6 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 175/A/2012 (ACIT VS. RADHIKA DEVI BARANWAL- A.Y. 2008-09): 54. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), VARANASI DATED 21.03.2012 FOR THE ASSESSMENT YEAR 2 008-09. IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF RS.1,66,15,000/- OUT OF ADDITION OF RS.1,68,76,000/- MADE ON ACCOUNT OF UNEXPLAINED RECEIPTS FOUND RECORDED IN THE SEIZED DOCUMENTS DURING THE SEARCH AS WELL AS DELET ING THE ADDITION OF RS.3,00,000/- U/S. 69C OF THE IT ACT ON ACCOUNT OF UNEXPLAINED EXPENDITURE INCURRED ON FOREIGN TRAVEL. THE AO COMPLETED THE AS SESSMENT ORDER DATED ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 197 30.12.2010 PASSED U/S. 153A READ WITH SECTION 143(3 ). IN THE SAID ASSESSMENT ORDER, THE AO HAS COMPLETED THE ASSESSMENT PROCEEDI NGS DETERMINING TOTAL INCOME AT RS.2,39,02,620/- AS AGAINST RS.67,26,620/- DISCL OSED BY THE ASSESSEE. THE VARIATION OF RS.1,68,76,000/- WAS ADDED BEING ATTRI BUTABLE TO UNEXPLAINED RECEIPTS AND ADDITION OF RS.3,00,000/- OUT OF UNDISCLOSED EX PENDITURE ON FOREIGN TRIP. THE ASSESSEE CHALLENGED BOTH THE ADDITIONS BEFORE THE L D. CIT(A). DETAILED WRITTEN SUBMISSIONS WERE FILED, ON WHICH REMAND REPORT FROM THE AO WAS CALL FOR AND AFTER HEARING THE ASSESSEE, THE LD. CIT(A) DELETED THE AD DITION OF RS.1,66,15,000/- OUT OF ADDITION OF RS.1,68,76,000/-, THEREBY SUSTAINING AD DITION OF RS.2,61,000/- AND THE ADDITION OF RS.3,00,000/- MADE BY AO ON ACCOUNT OF FOREIGN TRAVEL WAS FULLY DELETED. 55. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS IND IVIDUAL HAS BEEN EARNING INCOME BY WAY OF SHARE IN PROFIT/LOSS IN PARTNERSHIP FIRM, M/S. CARPET INTERNATIONAL, WHICH CAME INTO EXISTENCE ON 01.04.1996, WHICH QUALIFIES FOR EXEMPTION U/S. 10(2A) OF THE IT ACT, INTEREST ON CAPITAL INVESTED IN THE SA ID FIRM AS ALSO REMUNERATION AS WORKING PARTNER WAS RECEIVED FROM THE SAID FIRM. AP ART FROM IT, THE ASSESSEE HAS BEEN EARNING INCOME FROM INVESTMENT MADE IN RBI BON DS. SEARCH AND SEIZURE ACTION WAS CONDUCTED ON 11.02.2009 COVERING SEVERAL PERSONS, AS NOTED ABOVE. A ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 198 DIARY WAS SEIZED FROM RAJPURA RESIDENCE OF THE ASSE SSEE, WHICH WAS SEIZED AS ANNEXURE LP (PAGE 1 TO 77). FROM PAGE 52 TO 76 OF T HIS ANNEXURE, VARIOUS AMOUNTS WERE FOUND TO HAVE MENTIONED TOTALING TO RS.1,68,76 ,000/-. THE ASSESSEE WAS DIRECTED TO EXPLAIN THE SAME AND IN RESPONSE TO THE NOTICE, THE ASSESSEE EXPLAINED THAT THE SAME AMOUNTS RELATED TO M/S. CARPET INTERN ATIONAL, WHERE THE ASSESSEE IS A PARTNER. THE AO, HOWEVER, DID NOT ACCEPT THE CONTEN TION OF THE ASSESSEE AND MADE THE ADDITION TREATING THE SAME AS UNEXPLAINED RECEI PTS AND FURTHER ADDITION WAS MADE ON ACCOUNT OF ESTIMATED ADDITION OF FOREIGN TR AVEL EXPENSES IN A SUM OF RS.3,00,000/-. BOTH THE ADDITIONS WERE CHALLENGED B EFORE THE LD. CIT(A). THE ASSESSEE FILED DETAILED COMPILATION, WHICH IS REFER RED TO IN THE APPELLATE ORDER AND THE ASSESSEE EXPLAINED BOTH THE ADDITIONS. IT WAS E XPLAINED THAT ADDITIONS ARE UNJUSTIFIED. THE LD. CIT(A), CONSIDERING THE EXPLAN ATION OF THE ASSESSEE WITH REFERENCE TO THE EVIDENCE AND MATERIAL ON RECORD, D ELETED BOTH THE ADDITIONS. THE FINDINGS OF THE LD. CIT(A) IN PARAS 23 TO 34 ARE RE PRODUCED AS UNDER : 23. I HAVE CONSIDERED THE SUBMISSIONS MADE ON BEHALF O F THE APPELLANT, VIS--VIS THE OBSERVATIONS MADE /FINDING GIVEN BY THE ASSESSING OFFICER AS ALSO THE WRITTEN SUBMISSIONS F ORMING PART OF THE COMPILATION THAT HAS BEEN PLACED BEFORE ME. FOR BETTER APPRECIATION OF THE APPELLANTS CASE, THE SUBMISSIO NS SO MADE ON ITS BEHALF WHICH STARTS FROM PARA 47 TO 56 OF THE WS IN ADDITION TO THE PLEADING MADE ORALLY BY THE LD. AUTHORISED REPRESEN TATIVE, ARE REPRODUCED HEREUNDER:- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 199 47. THE APPELLANT HAS DISPUTED AN ADDITION OF RS. 1,68,76,000 AS HAD BEEN MADE BY THE ACIT ON THE BASIS OF DIARY AND LOOSE PAPER SEIZED FROM HIG-23,RAJPURA, BHADOHI . 48. UNEXPLAINED RECEIPTS OF RS. 1,68,76,000 HAS BEEN CULLED OUT BY THE ACIT FROM ANNEXURE A-1 (PAGES 1 T O77) IS INCLUSIVE OF:- A. DUPLICITY, FOR EXAMPLE 15,00,000 APPEARING A T PAGE 54(BACK) OF ANNEXURE A-1 HAS BEEN COVERED AT P AGE 54. B. CERTAIN NOTING WHICH HAS NO NEXUS TO INCOME/ RECEIPTS E.G. AT PAGE 52 AND 53 OF ANNEXURE A-1 RELATES OF R S. 1,00,000/- (WRONGLY TAKEN BY LD. ACIT AS 1,00,00,000/-). 49. DETAILED WORKING OF EACH AND EVERY ENTRY OF EACH PAGE OF SEIZED DIARY ANNEXURE A-1 APPEARS AT PAGES 71 TO 73 , WHICH IS AGAIN SUMMARIZED AS UNDER:- UNEXPLAINED RECEIPTS ADDED BY LD. ACIT IN ASSESSMENT ORDER FOR A.Y. 2008-09 SOURCES OF RECEIPTS PAGE NO. AMOUNT (RS.) 52 1,00,00,000 IT IS NOT AN ITEM OF RECEIPT. RS. 1,00,000/- ITEM O F EXPENDITURE HAS BEEN TAKEN BY LD. ACIT AS RS. 1,00,00,000/- RECEIPTS. 53 3,50,000 EXPENDITURE OF RS. 1,00,000/- AND RS. 2,50,000/- H AS BEEN AGGREGATE AT RS. 3,50,000/- AT PAGE 52. TOTAL OF RS. 3,50,000/- OF PAGE 52 HAS BEEN CARRIE D FORWARD TO PAGE 53. IT IS NOT AN ITEM OF RECEIPT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 200 RS. 36,00,000/- ARE RECEIVED, DETAILS ARE AS UNDER: - (I) 8 8,00,000 - RECEIVED FROM CARPET INTERNATIONAL FOR SAFE CUSTODY (II) 8 8,00,000 - RECEIVED FROM SALE OF TREE (III) 5 5,00,000 - RECEIVED FROM SALE OF AGRICULTURAL LAND (IV) 15 15,00,000 - RECEIVED FROM CARPET INTERNATIONAL FOR SAFE CUSTODY 54 36,00,000 TOTAL 36 54 (BACK) 16,76,000 RS. 15,00,000/- IS REPETITION AND ALREADY COVERED A T PAGE 54 1,76,000 IS RETURN FROM DELHI 55 9,00,000 9,00,000 RECEIVED FROM CARPET INTERNATIONAL FOR SAF E CUSTODY 1,65,26000 TOTAL 3,50,000 TOTALING MISTAKE IN ASSESSMENT ORDER 1,68,76,000 ADDITION MADE BY LD. ACIT 50. EXPENDITURE NOTED AT PAGE 52 TO 55 IS INCURRED FROM FOLLOWING SOURCES. SOURCES OF EXPENDITURE EXPENDITURE NOTED IN PAGE 52 TO 55 SALE OF AGRICULTURE TREES 8,00,000 EXPENDITURE ON DELHI FLAT 7,35,000 SALE OF AGRICULTURAL LAND 5,00,000 PERSONAL EXPENSES 11,00,000 WITHDRAWALS OF SMT. RADHIKA DEVI BARANWAL 3,59,000 WITHDRAWALS OF SHRI PRAMOD KUMAR BARANWAL 4,15,000 TOTAL : 20,74,00 0 TOTAL : 18,35,000 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 201 51. THE TOTAL AMOUNT OF EXPENDITURE AS NOTED IN PAR A 52 TO 55 NAMELY RS. 735,000 AND RS. 11,00,000 FOR THE EXPEND ITURE ON DELHI FLAT AND PERSONAL EXPENSES RESPECTIVELY, WERE INCURRED FROM VARIOUS SOURCES. TWO OF SUCH SOURCES WERE SALE OF TREES FOR RS.8,00,000; AND SALE OF AGRICULTURAL LAND FOR RS.5,00,000 BOTH THESE SOURCES ARE EXPLAINED IN THE PAPER BOOK PAGES 88 TO 163 AND PARA 60 OF WRITTEN SUBMISSIONS OF SHRI PRAM OD KUMAR BARANWAL FOR THE ASSESSMENT YEAR 2007-08 AND 2008-0 9. RELEVANT PARA 60 OF WS IS AT PAGES 74. 52. ON THE BASIS OF SUCH SOURCES OF EXPENDITURE NO ADDITION COULD HAVE BEEN MADE IN THE ASSESSMENT OF THE APPEL LANT. 53. LASTLY, THE APPELLANT HAS DISPUTED THE ADDITION OF RS. 3 LAKHS AS HAS BEEN MADE IN THE ASSESSMENT FOR THE AS SESSMENT YEAR 2008-09 ON ACCOUNT OF EXPENDITURE SAID TO HAVE BEEN INCURRED BY THE APPELLANT AND HER HUSBAND SHRI PRAM OD KUMAR BARANWAL ON A FOUR-DAY VISIT TO BANGKOK, AS R EVEALED ON THEIR PASSPORTS. SUCH AN ADDITION, NOT BEING BASED ON SEIZED MATERIAL (COPIES OF THE PASSPORTS FROM WHICH INFORM ATION HAS BEEN GATHERED BY THE ASSESSING OFFICER, WERE NOT FO UND DURING THE COURSE OF SEARCH) IS OUTSIDE THE PURVIEW OF COM PUTATION OF UNDISCLOSED INCOME UNDER SECTION 153A OF THE ACT. 54. FURTHER, THE APPELLANT VERY CANDIDLY ADMITS THA T IT WAS A PERSONAL TRIP, BUT AT THE SAME TIME IT HAD BEEN PLA NNED IN THE BACKGROUND THAT M/S CARPET INTERNATIONAL (WHEREIN T HE APPELLANT AND HER HUSBAND ARE PARTNERS HAD ACQUIRED A TUFTED GUN MACHINE FROM M/S TUFTING MACHINERY SERVICES LTD , NEW HOUSE ROAD, HUNCOAT INDUSTRIAL ESTATE, HUNCOAT, ACC RINGTON LANCES, U.K. WHICH IS APPEARING IN THE SCHEDULE OF FIXED ASSET OF THE SAID PARTNERSHIP FIRM, UNDER THE HEAD TUFTED GUN MACHINE FOR THE YEAR ENDING ON 31.3.2008 IN THE FOLLOWING M ANNER:- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 202 PARTICULARS AMOUNT OPENING BALANCE (01.04.07) 3,45,233 ADD: ADDITION AS PER INVOICE DATED 19.07.07 26,22,632 LESS: DEPRECIATION 29,67,865 3,65,363 CLOSING BALANCE (31.03.08) 26,02,502 THE SAID SUPPLIER HAD THE SOLD SIMILAR MACHINE TO A BUYER IN BANGKOK AND IT WAS IN USE THERE. IN ORDER TO ACQUAI NT THEMSELVES WITH THE WORKING OF THE SAID MACHINE THE DUE HAD PLANNED THIS VISIT FOR BANGKOK. THUS, IN ANY WAY I T WAS A BUSINESS EXPENDITURE INCURRED BY THE APPELLANT WAS ATTRIBUTABLE TO M/S CARPET INTERNATIONAL. 55. IN ANY CASE, IN THE SEIZED MATERIAL THERE WAS N O INFORMATION AVAILABLE ABOUT QUANTUM OF EXPENDITURE AND THE ACIT HAS MERELY MADE AN ESTIMATE OF RS.3 LAKHS (FOR THE VISIT WHICH LASTED FOR FOUR-DAYS ONLY). SUCH AN ESTIMATE IS NOT ONLY ARBITRARY, BUT HIGH PITCHED ALSO. THE APPELLANT BE GS TO GIVE HEREUNDER INFORMATION DOWNLOADED FROM THE WEBSITE MAKEMYTRIP.COM :- BUZZING BANGKOK- 4DAYS 3 NIGHTS.(ALL NIGHTS IN BAN GKOK) PACKAGE INCLUSIONS:- RETURN ECONOMY-CLASS AIRFARE ACCOMMODATION FOR 3 NIGHTS IN BANGKOK RETURN AIRPORT TRANSFERS CURRENT APPLICABLE TAXES DAILY BREAKFAST TWIN SHARING RS. 13,990 PER HEAD HTTP://WWW.MAKEMYTRIP.COM/HOLIDAYS-INTERNATIONAL/67 10-BUZZING_BANGKOK.HTML ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 203 AS PER WHICH THE EXPENDITURE (INCLUDING AIR FARE FR OM DELHI IS RS.13,990 PER HEAD), FOR TWO PERSONS WHICH WORKS OU T TO RS.28,000 ONLY. AS AGAINST THIS THE ACIT HAS ADDED AN AGGREGATE OF SUM OF RS.6,00,000 AS HAS BEEN APPORTI ONED BY HIM BETWEEN THE APPELLANT AND SHRI PRAMOD KUMAR BAR ANWAL AND ADDED IN THEIR RESPECTIVE ASSESSMENTS. THUS, T HE ESTIMATE IS WHOLLY ARBITRARY. AS REGARDS SOURCE OF SUCH AN EXP ENDITURE WHICH, FOR BOTH THE PERSONS, MAY NOT BE MORE THAN 3 0/40 THOUSAND, THE SAME IS FULLY COVERED BY HUGE WITHDRA WALS MADE BY THE APPELLANT AND HER HUSBAND SHRI PRAMOD KUMAR BARANWAL AS PER PARTICULARS GIVEN BELOW:- NAME AMOUNT RADHIKA DEVI BARANWAL 3,59,250 PRAMOD KUMAR BARANWAL 4,15,000 TOTAL WITHDRAWAL 7,74,250 56. IN ANY CASE, THE TRIP SHOULD BE TREATED TO BE T HE TRIP UNDERTAKEN BY THE PARTNERS OF M/S CARPET INTERNATIO NAL AND SUCH TRIP HAVE BEEN SERVED THE BUSINESS INTEREST OF THE SAID FIRM, SHOULD BE TREATED TO BE AN EXPENDITURE INCURRED IN CARRYING ON THE BUSINESS OF THE SAID FIRM AND THEREFORE ALLOWAB LE AS DEDUCTION UNDER SECTION 37 OF THE ACT. FROM THIS I T FOLLOWS THAT EVEN IF THE SAID SUM OF RS.30,000 (WHICH COVER THE COST OF JOURNEY UNDERTAKEN BY BOTH THE PERSONS) IS TREATED TO HAVE BEEN REMAINED UNEXPLAINED, THE SAME IS ALLOWABLE AS DEDU CTION ALSO. THUS, THE EFFECT IS REVENUE NEUTRAL AND NO ADDITION WHATSOEVER, ON THIS SCORE, WAS CALLED FOR EITHER IN THE CASE OF THE APPELLANT AND/OR IN THE CASE OF SHRI PRAMOD KUMAR BARANWAL. 24. THE AUTHORIZED REPRESENTATIVE HAS BROUGHT MY ATTEN TION TO DETAILED REPLY FILED DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, WHICH IS REPRODUCED HERE IN BELOW: 1- THAT ON PERUSAL OF PAGE 52 IT APPEARS THAT THE A MOUNT RECORDED IN THIS PAGE IS RS. 2,50,000 (TWO LACS FIF TY THOUSAND) ON 07.01.2008 AND REST ALL ARE IN THOUSAN DS AND ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 204 REMEMBERING SOME UNWRITTEN AMOUNTS IN THOUSANDS. IT IS SUPPOSED TO BE 1,00,000 (RS. ONE LAC) COMPLETED. NOW TOTAL EXPENSES ARE 3,50,000 (THREE LACS FIFTY T HOUSANDS) WHICH IS MORE THAN OUR EXCEPTED EXPENSES. ALL EXPEN SES ARE FOR PURCHASING GIFTS FOR SHRI MONTY BABU (SON IN LAW OF ASSESSEE) AND AMOUNT IS WITH DRAW BY THE PARTNER OF FIRM (PRA MOD BARANWAL). 2- ON PAGE 53 THIS EXPENSES ARE FORWARDED. 3- THAT FOR SAFETY PURPOSE, THE BALANCE MONEY LEFT AT THE END OF THE DAY AT FACTORY PREMISES IS USED TO BE BROUGHT A T HOME AND THE SAME WAS TAKEN BACK TO THE FACTORY ON EVERY NEX T DAY AND THE SAME WAS RECORDED MONEY IN THE DIARY. 4- THAT THOUGH MAXIMUM ENTRIES ARE FOR CARPET INTER NATIONAL, YET THE OTHER ENTRIES WHICH IT RELATED TO PERSONAL EXPENSES ARE VERY WELL COVERED THROUGH THE DRAWINGS OF THE PARTN ERS 25 . AUTHORISED REPRESENTATIVE FURTHER ARGUED THAT LD. ACIT HAS ADDED DOUBLE AMOUNT AT SEVERAL PLACES. FOR INSTANCE , AT PAGE 52 THERE IS SUMMARY OF EXPENSES OF RS. 3,50,000/- (RS. 3,50, 000 WRITTEN IN LAST LINE OF THE PAGE, WHERE AS, THIS AMOUNT WAS CARRIED FORWARD TO NEXT PAGE 53 IN THE DIARY SEIZED FROM RAJPURA RESIDENCE. SIMILARLY THERE ARE DIFFERENT AMOUNTS AT PAGE 54 WHICH REPRESENT CA SH RECEIVED FROM CARPET INTERNATIONAL FOR SAFE CUSTODY. ASSESSING OF FICER HAS MADE ADDITION ON THE BASIS OF NOTINGS FOUND IN THE DIARY SEIZED FROM THE RESIDENTIAL PREMISES OF THE APPELLANT. HE FURTHER S UBMITTED CHART APPEARED ON PAGES 71 TO PAGE 73 OF PAPERBOOK WITH E ACH AND EVERY ENTRY ON PAGES OF SEIZED DIARY AND DETAILED EXPLANA TION OF ACTUAL EXPENSES WITH SOURCE OF EXPENSES. HE THEREFORE SUBM ITTED THAT THE ADDITION MADE BY THE ASSESSING OFFICER WAS WHOLLY E RRONEOUS AND DESERVES TO BE DELETED. 26. FINDING OF ACIT ON PAGE 52 AS AMOUNT OF RS. 1 CROR E RECEIVED FROM MONTY BABU IS ACTUALLY A MISCONCEPTION AS THE APPELLANT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 205 SUBMITTED ON PAGE 71 OF WS THAT THIS IS RS. 1 LAC AND ON THE SAME PAGE THERE IS CLEARLY WRITTEN ALSO RS. 2.5 LACS WIT H DATE OF 07.01.2008 AND IN LAST LINE ADDITION OF BOTH AMOUNT IS WRITTEN 3.5 LACS, THIS AMOUNT OF RS.3.5 LACS ARE ALSO REPEATED ON PAGE 53 OF SAID DIARY. THIS MISCONCEPTION OF ACIT WAS OBJECTED AND DETAILS OF W HICH WERE SUBMITTED DURING AN APPEARING IN ASSESSMENT PROCEED ING, IN REPLY TO NOTICES AND IT ALSO APPEARED IN ASSESSMENT ORDER AT PARA 4.3 PRODUCED IN PARA 24 HERE IN ABOVE. IN SHORT, ADDITION OF RS. 1,68,76,000 ARE BASED ON THE NOTING OF DIARY WITHOUT CONSIDERING TH E REPETITION AND CASH BROUGHT TO HOME FOR SAFE DEPOSIT AND TAKEN BAC K ON NEXT DAY. 27. FROM THE AFORESAID FACTS, IT EMERGES THAT THE APPE LLANT HAD INCURRED PERSONAL EXPENSES AND HAD MADE INVESTMENT IN DELHI FLAT DURING A.Y. 2008-09. APPELLANT HAS NOT DENIED THE F ACT OF EXPENSES AT ANY STAGE, RATHER SHE IS CONTINUALLY OPPOSING THE R EPETITION AND DUPLICITY AND CASH RECEIVED FOR SAFE CUSTODY OF THE ADDITIONS AND THE LEARNED ACIT OUTRIGHTLY REJECTED APPELLANTS OBJECTI ON OF CROSS CHECKING OF PAYMENT AND ITS SOURCE. CONSIDERING ALL THESE FACT I REACHED TO THE CONCLUSION THAT APPELLANT CONTENTION HAS FULL FORCE AND AFTER GOING THROUGH THE WS, I HAVE PLACED RELIANCE ON THE FACTS THAT THERE ARE REPETITIONS, DUPLICITY AND HOLDING OF CAS H FOR SAFETY, IN THE SEIZED DIARY. 28. THE AUTHORIZED REPRESENTATIVE HAS EXPLAINED THAT T OTAL EXPENDITURE INCURRED AS ANNEXURE LP (PAGES 1-77) HA S BEEN SPENT OUT OF FOLLOWING SOURCES: ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 206 29. AS STATED ABOVE THE PAPER BOOK CONTAINING DETAILED WORKING OF EACH AND EVERY ENTRY OF SEIZED DIARY APPEARING AT PAGES 71 TO 73 OF WS, WERE DULY FORWARDED TO THE ACIT IN NOVEMBER, 2011 FOR HER COMMENTS AND THERE WAS NO REBUTTAL FROM HER END. BY WAY OF REPLY TO THE SAID PAPER BOOK THE ACIT MERELY REFERRED TO THE REMAND REPORT AS HAS BEEN REPRODUCED IN PARA 5 HEREIN FORE. 30. FROM THE AFORESAID FACTS, IT EMERGES THAT THE APPE LLANT HUSBAND SHRI PRAMOD KUMAR BARANWAL HAD MADE INVESTMENT IN T HE AGRICULTURE LAND THROUGH HIS FATHER-IN-LAW. HE HAS TAKEN THE ADVANTAGE OF POWERFUL REPUTE OF HIS FATHER-IN-LAW I N ACQUIRING AND AS WELL AS SELLING OUT THE AGRICULTURAL LAND, BUT THIS RESULTING IN UNDISCLOSED INCOME EARNED ON THAT BEHALF IS NOT ACC EPTABLE BECAUSE THIS AGRICULTURAL INCOME AS WELL AS CAPITAL GAIN ON SALE OF LAND HAS BEEN SHOWN IN HIS IT RETURN FOR A.Y. 2007-08 AND 20 08-09 BY THE APPELLANT. THEREFORE SALE OF AGRICULTURAL TREE OF R S. 8,00,000 AND SALE OF AGRICULTURAL LAND IS NOT ACCEPTED. 31. REGARDING EXPENDITURE OF RS. 1,68,76,000/- AS CALC ULATED BY THE ASSESSING OFFICER MY OBSERVATION IS THAT FIRSTLY TH ERE EXISTED REPETITION OF ENTRIES, HENCE ACTUAL AMOUNT OF EXPENSES UNDER C ONSIDERATION FOR A.Y. 2008-09 IS RS. 18,35,000/- ONLY AS MADE ON PAGES 71 TO 73 OF WS , WHICH IS COVERED BY SURRENDER MADE BY APPELLANTS HUSBAND SHRI PRAMOD KUMAR BARANWAL OF RS. 8,00,000 IN A.Y. 2008-09. THE SOURCES OF EXPENDITURE EXPENDITURE NOTED IN PAGE 52 TO 55 SALE OF AGRICULTURE TREES 8,00,000 EXPENDITURE ON DELHI FLAT 7,35,000 SALE OF AGRICULTURAL LAND 5,00,000 PERSONAL EXPENSES 11,00,000 WITHDRAWALS OF SMT. RADHIKA DEVI BARANWAL 3,59,000 WITHDRAWALS OF SHRI PRAMOD KUMAR BARANWAL 4,15,000 TOTAL : 20,74,000 TOTAL : 18,35,000 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 207 BALANCE ADDITION OF RS. 10,35,000/- RELATED TO A.Y. 2008-09 ARE COVERED BY WITHDRAWALS OF SMT. RADHIKA DEVI BARANWA L AND SHRI PRAMOD KUMAR BARANWAL AND ALSO THE CASH RECEIVED FR OM INVESTMENTS MADE EARLIER IN AGRICULTURAL LAND. 32. THUS THERE REMAINS SHORTFALL, WHICH IS UNDISCLOSED INCOME OF THE APPELLANT, WHICH IS WORKED OUT AS UNDER:- EXPENDITURE NOTED IN PAGE 52 TO 55 OF ANNEXURE LP AMOUNT EXPENDITURE ON DELHI FLAT 7,35,000 PERSONAL EXPENSES 11,00,000 18,35,000 LESS : SOURCES OF EXPENDITURE SURRENDER BY PROMOD KYMAR BARANWAL IN A.Y. 2008-09 8,00,000 WITHDRAWALS OF SMT. RADHIKA DEVI BARANWAL 3,59,000 WITHDRAWALS OF SHRI PRAMOD KUMAR BARANWAL 4,15,000 15,74,000 SHORT FALL INCURRED OUT OF UNEXPLAINED INCOME 2,61, 000 33. THUS, IT STANDS FULLY ESTABLISHED THAT, FROM WHATE VER ANGLE, THE MATTER IS EXAMINED, THE ADDITIONS MADE BY THE LD. A CIT HAS NO FORCE AND MOREOVER TO THIS, ALL EXPENSES ACTUALLY INCURRE D, NOT ONLY STOOD SUPPORTED BY THE RECORDS AND THE SAME WERE WHOLLY R EASONABLE ALSO. HENCE EXPENDITURE OF RS. 1,66,15,000/- (I.E., 1,68,76,000 2,61,000) SAID TO BE INCURRED STANDS DELETED IN THE HANDS OF THE APPELLANT. THUS ADDITION OF RS. 2,61,000 STANDS CONFIRMED ON T HIS ACCOUNT. 34. NOW ADDITION OF RS. 3,00,000/- OF FOREIGN TOUR EXP ENDITURE REMAINS UNDER DISPUTE BEFORE ME. IN THIS REGARD I H AVE RELIED UPON THE SUBMISSION MADE BY THE APPELLANT AND ORAL PLEADINGS PRESENTED BY THE COUNSEL OF THE APPELLANT THAT ALTHOUGH THE VISIT WA S IN THE NATURE OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 208 PERSONAL TRIP YET EFFECTED FOR THE BUSINESS PURPOSE . AS APPELLANTS FIRM PURCHASED NEW TUFTED GUN MACHINE (APPEARING IN THE FIXED ASSETS SCHEDULE OF THE FIRM M/S CARPET INTERNATIONAL IN IT S AUDITED ACCOUNTS) DURING THE YEAR UNDER CONSIDERATION. THEY GOT TO KN OW THAT SAME MACHINE WAS ALSO BEING USED IN BANGKOK BY SOME MANU FACTURER, HENCE THEY PLANNED TO VISIT FACTORY IN PERSONAL TRI P TO BANGKOK WITH THE HOPE TO MAKE THEMSELVES ACQUAINTED WITH THE WOR KING OF THE NEW TUFTED MACHINE. THE APPELLANT MADE A TRIP TO BANGKO K ALONG WITH HUSBAND SHRI PRAMOD KUMAR BARANWAL WHO IS ALSO A PA RTNER OF THAT FIRM SINCE ITS INCEPTION. MORE OVER TO ALL THIS, E STIMATION OF THE EXPENSES AT SUCH A HIGH PITCH SCALE IS NOT CORRECT. THE COST OF TRAVELING PER PERSON PROVIDED BY THE APPELLANT BY T RAVEL WEBSITES SUPPORT HIS CONTENTION. AS THE WITHDRAWALS OF THE A PPELLANT ALONG WITH HIS WIFE ARE SUFFICIENT ENOUGH TO COVER UP THE EXPE NSES INCURRED. HENCE ADDITION OF RS. 3,00,000/- STANDS FULLY DELETED IN THE HANDS OF THE APPELLANT. 56. THE LD. DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 57. ON CONSIDERATION OF THE RIVAL SUBMISSIONS AND P ERUSAL OF THE FINDINGS OF THE LD. CIT(A), WE DO NOT FIND ANY JUSTIFICATION TO INT ERFERE WITH THE ORDER OF THE LD. CIT(A). THE ASSESSEE EXPLAINED EACH AND EVERY ENTRY AND ALSO EXPLAINED THAT THERE IS A MISTAKE IN TAKING THE FIGURES FROM THE SEIZED MATERIAL. THE LD. CIT(A) VERIFIED ALL THE ENTRIES FROM THE SEIZED MATERIAL AND EXPLAN ATION OF THE ASSESSEE AND FOUND TO BE CORRECT. WHATEVER ACTUAL EXPENSES WERE INCURRED WERE EXPLAINED THROUGH KNOWN ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 209 SOURCES AND WHATEVER SHORTFALL WAS THERE, THE SAME COULD NOT BE EXPLAINED. THEREFORE, THE LD. CIT(A) MAINTAINED PART OF THE AD DITION. FOREIGN TRAVEL EXPENSES WERE ALSO EXPLAINED. IT IS A DEPARTMENTAL APPEAL AN D NO MATERIAL IS PRODUCED BEFORE US TO REBUT THE FINDINGS OF THE LD. CIT(A) ON MERIT S. THE FINDING OF FACTS HAVE BEEN RECORDED BY THE LD. CIT(A) AFTER VERIFYING THE DETA ILS FROM THE SEIZED MATERIAL AND IN THE ABSENCE OF ANY SERIOUS CHALLENGE TO THE FIND ING OF THE LD. CIT(A), WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE FINDIN GS OF THE LD. CIT(A) IN DELETING THE ADDITION. IN THE RESULT, THE DEPARTMENTAL APPEAL FA ILS AND IS DISMISSED. ITA NO. 175/A/2012 FILED BY REVENUE IS DISMISSED. ITA NO. 176/A/2012 (ACIT VS. SMT. RADHIKA DEVI BARA NWAL- A.Y. 2009-10): 58. THIS DEPARTMENTAL APPEAL IS FILED AGAINST THE O RDER OF LD. CIT(A), VARANASI DATED 21.03.2012 FOR THE ASSESSMENT YEAR 2009-10, C HALLENGING THE DELETION OF ADDITION OF RS.2,08,75,000/- MADE ON ACCOUNT OF UNE XPLAINED RECEIPTS FOUND RECORDED IN THE SEIZED DOCUMENTS. THE AO COMPLETED THE ASSESSMENT ON 30.12.2010 AND MADE THE ABOVE ADDITION ON ACCOUNT O F UNDISCLOSED RECEIPTS. THIS ADDITION WAS MADE ON ACCOUNT OF DIARY SEIZED FROM R AJPURA RESIDENCE. THE SEIZED PAPER CONTAINED SEVERAL AMOUNTS MENTIONED TOTALING TO RS.2,08,75,000/-. THE ASSESSEE EXPLAINED THAT THE SAME PERTAINED TO THE F IRM, M/S. CARPET INTERNATIONAL ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 210 WHERE THE ASSESSEE IS A PARTNER. THE AO, HOWEVER, D ID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND MADE ADDITION. THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A) EXPLAINING EACH AND EVERY PAP ER OF THE SEIZED DIARY TO SHOW THAT ALL THE ENTRIES ARE EXPLAINED. THE LD. CIT(A) ON VERIFICATION OF THE SAME DELETED THE ADDITION. HIS FINDINGS IN PARAS 18 TO 2 5 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 18. I HAVE CONSIDERED THE SUBMISSIONS MADE ON BEHALF O F THE APPELLANT, VIS--VIS THE OBSERVATIONS MADE /FINDING GIVEN BY THE ASSESSING OFFICER AS ALSO W.S FORMING PART OF THE COMPILATION THAT HAS BEEN PLACED BEFORE ME. FOR BETTER APPRECI ATION OF THE APPELLANTS CASE, THE SUBMISSIONS SO MADE ON ITS B EHALF WHICH STARTS FROM PARA 24 TO 27 OF THE WS IN ADDITION TO THE PLEADING MADE ORALLY BY THE LD. AUTHORISED REPRESENTATIVE, ARE RE PRODUCED HEREUNDER:- 24. THE APPELLANT HAS DISPUTED AN ADDITION OF RS.2,08,75,000 AS HAD BEEN MADE BY THE ACIT ON THE BASIS OF DIARY AND LOOSE PAPER SEIZED FROM HIG-23,RAJPURA, BHADOHI. 25. UNEXPLAINED RECEIPTS OF RS. 2,08,75,000 HAS BEEN CULLED OUT BY THE ACIT FROM ANNEXURE A-1(PAGES 1 TO77) IS INCL USIVE OF:- A. DRAWING OF RS. 50,00,000 BY PRAMOD KUMAR BARANWAL FROM CARPET INTERNATIONAL (AS PER LEDGER N O. 10005) AND ADVANCE FOR EXPENSES OF RS. 10,00,000 TO PRAMOD KUMAR BARANWAL (AS PER LEDGER NO. 11829) TOTALING TO RS. 60,00,000. B. CERTAIN NOTING WHICH HAS NO NEXUS TO INCOME E.G. OF RS. 14,00,000 RECEIVED FROM CARPET INTERNATIONAL FO R SAFE CUSTODY AND RS. 62,00,000 WAS RECEIVED FROM CARPET INTERNAT IONAL FOR SAFE CUSTODY OF RS. 62,00,000. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 211 C. RECEIVED FROM AKRISTI PURSE AND RE DEPOSITED OF RS. 3,75,000 (PAGE 59 BACK). D. RS. 36,00,000 AND RS. 16,00,000 ARE REPETITI ON AND ALREADY COVERED AND EXPLAINED AT PAGE 54 AND 55 IN RADHIKA DEVI BARANWAL IN A.Y. 2008-09. E. RS. 15,00,000 IS NOT AN ITEM OF RECEIPT. IT REPRESENTS REPAYMENT TO CARPET INTERNATIONAL OUT OF HOME SAFE ACCOUNT. AND RS. 2,00,000 RECEIVED FROM CARPET INTERNATIONAL FOR HOME SAFE ACCOUNT. 26. DETAILED WORKING OF EACH AND EVERY ENTRY OF EACH PA GE OF SEIZED DIARY ANNEXURE A-1 APPEARS AT PAGES 34 TO 41 , WHICH IS AGAIN SUMMARIZED AS UNDER:- UNEXPLAINED RECEIPTS ADDED BY ID ACIT IN ASSESSMENT ORDER FOR AY 2009-10 SOURCES OF RECEIPTS PAGE NO. TOTAL AMOUNT MENTIONED ON THE PAGE 55 BACK 15,00,000 56 10,00,000 56 BACK 5,00,000 57 5,00,000 57 BACK 10,00,000 58 15,00,000 DRAWINGS BY PRAMOD KUMAR BARANWAL FROM CARPET INTERNATIONAL IN A.Y. 2009-10 (AS PER LEDGER A/C. NO. 10005) 07.04.08 18,00,000 10.04.08 13,50,000 25.04.08 18,50,000 50,00,000 ADVANCE FOR EXPENSES ON 31.05.2008 TO PRAMOD KUMAR BARANWAL FROM CARPET INTERNATIONAL IN A.Y. 2009-10 (AS PER 10,00,000 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 212 LEDGER NO. 11829) 60,00,000 60,00,000 59 14,00,000 14,00,000 RECEIVED FROM CARPET INTERNATIONAL FOR SAFE CUSTODY 59 BACK 3,75,000 RECEIVED FROM AKRISTI PURSE & RE-DEPOSITED 74 BACK 62,00,000 62,00,000 - RECEIVED FROM CARPET INTERNATIONAL FOR SAFE CUSTODY. 75 36,00,000 36,00,000 - IS MERE REPETITION AND ALREADY COVERED AT PAGE 54. ALREADY EXPLAINED IN RADHIKA DEVI BARANWAL IN AY 2008-09. 76 16,00,000 16,00,000 - IS MERE REPETITION AND ALREADY COVERED AT PAGE 54. ALREADY EXPLAINED IN RADHIKA DEVI BARANWAL IN AY 2008-09. 76 BACK 17,00,000 A. 15,00,000 - IS NOT AN ITEM OF RECEIPT. IT REPRESENTS REPAYMENT TO CARPET INTERNATIONAL OUT OF HOME SAFE A/C. B. 2,00,000 IS RECEIPT FROM CARPET INTERNATIONAL FOR HOME SAFE ACCOUNT. 2,08,75,000 27 EXPENDITURE NOTED AT PAGE 55 TO 77 HEREIN ABOVE ARE INCURRED FROM FOLLOWING SOURCES:- SOURCES OF EXPENDITURE EXPENDITURE NOTED IN PAGE 55 BACK TO 77 DRAWINGS BY PRAMOD KUMAR BARANWAL FROM CARPET INTERNATIONAL IN A.Y. 2009-10 (AS PER LEDGER A/C. NO. 10005) PERSONAL EXPENSES 10,30,000 07.04.08 18,00,000 EXPENSES FOR DELHI FLAT 36,10,000 10.04.08 13,50,000 EXPENSES FOR VARANASI FLAT 9,60,000 25.04.08 18,50,000 50,00,000 ADVANCE FOR EXPENSES ON 31.05.2008 TO PRAMOD KUMAR BARANWAL FROM CARPET 10,00,000 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 213 INTERNATIONAL IN A.Y. 2009-10 (AS PER LEDGER NO. 11829) SOURCE : 60,00,000 EXPENDITURE INCURRED : 56,00,000 AND ON THE BASIS OF SUCH SOURCES OF EXPENDITURE, NO ADDITION COULD HAVE BEEN MADE IN THE ASSESSMENT OF THE APPELLANT. 19. THE AUTHORIZED REPRESENTATIVE HAS BROUGHT MY ATTE NTION TO DETAILED REPLY FILED DURING THE COURSE OF ASSESS MENT PROCEEDINGS AGAINST SEIZED DIARY FROM RAJPURA HOUSE AS PER ANNE XURE LP (PAGES 1-77), WHICH IS REPRODUCED HERE IN BELOW: 1-THAT ON PERUSAL OF PAGE 52 IT APPEARS THAT THE AM OUNT RECORDED IN THIS PAGE IS RS. 2,50,000/- (TWO LAC FI FTY THOUSAND) ON 07-01-08 AND REST ALL ARE IN THOUSANDS AND REMEMBERING SOME UNWRITTEN AMOUNTS IN THOUSANDS, IT IS SUPPOSED TO BE 1,00,000 ( RS. ONE LAC) COMPLETED. NOW TOTAL EXPENSES ARE 3,50,000 (THREE LAC FIFTY TH OUSAND) WHICH IS MORE THAN OUR EXPECTED EXPENSES. ALL EXPEN SES ARE FOR PURCHASING GIFTS FOR SHRI MONTY BABU (SON IN-LAW OF ASSESSEE) F.Y. 2008-09 I.E., A.Y. 2009-10 RS. 36,10,000 HAS BEEN TRANSFERRED AND EXPLAINED FROM DIARY SEIZED FROM HIG 23, RAJPURA RESIDANCE, BHADOHI AS PER ANNEXURE A-1 (PAGE 1-77) IN THE ASSESSMENT OF SMT. RADHIKA DEVI BARANWAL FOR A.Y. 2009-10 36,10,000 TOTAL: 36,10,000 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 214 AND AMOUNT IS WITH DRAW BY THE PARTNER OF FIRM (PRA MOD BARANWAL). 2- ON PAGE 53 THIS EXPENSES ARE FORWARDED. 3- THAT FOR SAFETY PURPOSE, THE BALANCE MONEY LEFT AT THE END OF THE DAY AT FACTORY PREMISES IS USED TO BE BROUGHT A T HOME AND THE SAME WAS TAKEN BACK TO THE FACTORY ON VERY NEXT DAY AND THE SAME WAS RECORDED IN THE DIARY. 4- THAT THOUGH MAXIMUM ENTRIES ARE FOR CARPET INTER NATIONAL, YET THE OTHER ENTRIES WHICH IF RELATED TO PERSONAL EXPENSES ARE VERY WELL COVERED THROUGH THE DRAWINGS OF THE PARTN ERS. 20. APPELLANT HAD NOT ONLY REPEATEDLY OPPOSED TO REPET ITION AND DUPLICACY OF SAME AMOUNT, BESIDES IT HAS ALSO OPPOS ED TO RECEIVING OF CASH FROM CARPET INTERNATIONAL FOR SAFE CUSTODY AND RETURNING THE SAME TO THEM THE NEXT DAY, BUT THE LEARNED ACIT OUT RIGHTLY REJECTED APPELLANTS OBJECTION FOR CROSS VERIFICATION OF RECE IPT AND PAYMENT FROM THE SEIZED DIARY. AUTHORISED REPRESENTATIVE HA S BROUGHT MY ATTENTION TO PAGES 42 TO 47 OF PAPER BOOK WHEREIN LEDGER A/C. OF PRAMOD KUMAR BARANWAL AND LEDGER A/C. OF ADVANCE FO R EXPENSES GIVEN TO PRAMOD KUMAR BARANWAL IN THE BOOKS OF CARP ET INTERNATIONAL FOR THE YEAR ENDED 31.03.2009, THUS S OURCE OF EXPENDITURE IS WITHDRAWALS OF PRAMOD KUMAR BARANWAL FROM THE BOOKS OF M/S CARPET INTERNATIONAL IN WHICH APPELLAN T AND HER HUSBAND ARE PARTNERS SINCE ITS INCEPTION IN MAY, 19 96. EVEN SUCH BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE SAME ASSE SSING OFFICER WHO HAS PASSED ORDER OF APPELLANT ON THE SAME DATE IN THE CASE OF CARPET INTERNATIONAL FOR A.Y. 2009-10. 21. CLEAR EXAMPLE OF REPETITION IS AT PAGE 54, WHEREIN WRITTEN AMOUNT IS RS. 36,00,000/- (I.E., 8+8+5+15 = 36), WH ERE AS AGAIN RS. 36,00,000/- (15+5+8+8 = 36) WAS WRITTEN AT PAGES 75 AND 76 OF SAME SEIZED DIARY. ON BOTH THE PAGES 54 AND (75 AND 76) THERE IS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 215 COMMON EXPENSES OF DELHI FLAT AT RS.5,50,000/-. SIM ILARLY AT PAGE 76 THERE IS RECEIPT RS.16,00,000/- (8+8 = 16) AND SAME RECEIPT OF 16,00,000 HAS ALREADY BEEN MENTIONED AT PAGE 54. ON BOTH THE PAGES THERE IS COMMON EXPENSES OF NANCY FEES OF RS. 2,50, 000/-. ASSESSING OFFICER HAS MADE ADDITION SOLELY ON THE BASIS OF NO TING FOUND IN THE DIARY SEIZED FROM THE PREMISES OF THE APPELLANT. 22. W.S. ALONGWITH PAPER BOOK CONTAINING DETAILED WO RKING OF EACH AND EVERY ENTRY OF SEIZED DIARY WAS FORWARDED TO THE LD. ACIT IN NOVEMBER, 2011 FOR HER COMMENT AND REPORT AND THERE WAS NO REBUTTAL FROM HER END IN A PERIOD OF FOUR MONTHS. B Y WAY OF REPLY TO THE SAID PAPER BOOK, THE ACIT MERELY REFERRED TO TH E EARLIER REMAND REPORT DATED 12.09.2011. REMAND REPORT DATED 12.09. 2011 AND 06.03.2012 HAS ALREADY BEEN REPRODUCED IN PARA 3 AND 5 HEREINBEFORE. 23. FURTHER, THE LD. ACIT HAS BLINDLY BELIEVED ON THE ENTRIES MADE IN THE DIARIES, AND HAS NEITHER ANALYZED NOR CROSS CHECKED THE REPETITIVE FIGURES WRITTEN IN DIARY. BESIDES, HE HA S MADE ADDITION OF ALL THE SUMS FOUND WRITTEN AT VARIOUS PAGES OF THE DIAR Y MARKED AS ANNEXURE LP (PAGE 1 TO 77). EVEN LD. ACIT HAS NOT T AKEN COGNIZANCE OF MONEY OF CARPET INTERNATIONAL BROUGHT TO HOME FO R SAFE CUSTODY AND RETURNED ON NEXT DAY AS WRITTEN AT SEVERAL PLAC ES OF DIARY. 24. AUTHORISED REPRESENTATIVE HAS BROUGHT MY ATTENTION TO ACTUAL AMOUNT OF EXPENDITURE AT RS.56,00,000/- ONLY AND IT S SOURCE IS SUMMARIZED AS UNDER:- SOURCES OF EXPENDITURE EXPENDITURE AND INVESTMENT AS PER ANNEXURE LP (PAGES 1-77) DRAWINGS BY PRAMOD KUMAR BARANWAL FROM CARPET INTERNATIONAL IN A.Y. 2009-10 (AS PER LEDGER A/C. NO. 10005) 50,00,000 PERSONAL EXPENSES 10,30,000 ADVANCE FOR EXPENSES ON 31.05.2008 TO PRAMOD KUMAR BARANWAL FROM CARPET INTERNATIONAL IN A.Y. 2009-10 (AS PER 10,00,000 EXPENSES FOR DELHI FLAT 36,10,000 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 216 LEDGER NO. 11829) EXPENSES FOR VARANASI FLAT 9,60,000 SOURCE : 60,00,000 EXPENDITURE INCURRED : 56,00,000 AS AGAINST ESTIMATED RECEIPT BY LD. ACIT OF RS.2,08 ,75,000/- RECEIPT OF RS. 1,52,75,000/- IS EITHER REPETITION, DUPLICACY O R CASH TAKEN TO HOME FOR SAFE DEPOSIT HAVING NO RELEVANCE AS DISCUSSED A BOVE. AS FAR AS RS. 56,00,000/- IS CONCERNED, IT STANDS FULLY SUPPORTED BY THE DRAWINGS MADE BY PRAMOD KUMAR BARANWAL (HUSBAND OF APPELLANT ) FROM M/S CARPET INTERNATIONAL. VERIFIABILITY OF RS. 56,00,0 00/- COMES BEFORE ME AFTER COMBINED ANALYSIS OF BOTH DIARIES SEIZED F ROM G-3 UPASANA NAGAR, NEW DELHI AND FROM RAJPURA COLONY, BHADOHI , AS BOTH THE DIARIES CONTAINS THE RELATED ENTRIES. LD. ACIT HAS MADE ADDITION SEPARATELY IN ISOLATION BY OBSERVING NOTING INDEPEN DENTLY IN BOTH DIARIES SEIZED FROM G-3, UPASANA NAGAR, NEW DELHI ( ANNEXURE A-1 AND LP 1) AND HIG 23 RAJPURA RESIDENCE (ANNEXURE LP PAGE 1-77). HENCE WHOLE ADDITION MADE IN THIS BEHALF IS DENIED AS INCORRECT. 25. THUS, IT STANDS FULLY ESTABLISHED THAT, FROM WHATE VER ANGLE, THE MATTER IS EXAMINED, THE ADDITIONS MADE BY THE LD. A CIT HAS NO FORCE AND MOREOVER TO THIS ALL EXPENSES ACTUALLY INCURRED , NOT ONLY STOOD SUPPORTED BY THE RECORDS AND THE SAME ARE ALSO PROV ED FROM CASH WITHDRAWAL BY PRAMOD KUMAR BARANWAL FROM CARPET INT ERNATIONAL WHERE THE APPELLANT AND HER HUSBAND ARE PARTNERS SI NCE ITS INCEPTION. HENCE UNEXPLAINED RECEIPT OF RS.2,08,75,000/- AS PE R LD. ACIT IS PROVED AND EXPLAINED THOUGHT ESTABLISHED SOURCES AN D AS SUCH WHOLE ADDITION OF RS. 2,08,75,000/- STANDS DELETED IN THE HANDS OF THE APPELLANT. ACIT, CENTRAL CIRCLE, VARANASI IS DIRECT ED TO GIVE APPEAL EFFECT. 59. THE LD. DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 217 60. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE ASSESSEE EXPLAINED EACH AN D EVERY ENTRY OF THE SEIZED PAPER WITH REFERENCE TO THE BOOKS OF ACCOUNT MAINTA INED BY THE FIRM. ALL THE ENTRIES WERE EXPLAINED. THEREFORE, NOTHING IS UNEXPLAINED R ECEIPT IN THE HANDS OF THE ASSESSEE. NO MATERIAL IS PRODUCED BEFORE US TO CONT RADICT THE FINDINGS OF THE LD. CIT(A). SINCE THE LD. CIT(A) VERIFIED FROM THE RECO RD THAT ALL THE ENTRIES ARE EXPLAINED THROUGH KNOWN SOURCES, THEREFORE, ENTIRE ADDITION WAS WHOLLY UNJUSTIFIED. IN THE ABSENCE OF ANY CONTRARY MATERIA L ON RECORD, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). HIS ORDER IS CONFIRMED AND THE DEPARTMENTAL APPEAL IS DISMISSED. IN THE RE SULT, THE DEPARTMENTAL APPEAL IN ITA NO. 176/A/2012 IS DISMISSED. ITA NO. 177/A/2012 & 89//A/2012 (PRAMOD KUMAR BARAN WAL- A.Y. 2007-08): 61. BOTH THE CROSS APPEALS BY THE REVENUE AND ASSES SEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A), VARANASI DATED 21.03.2012 FOR THE ASSESSMENT YEAR 2007-08. 62. THE ASSESSEE IN HIS APPEAL DID NOT PRESS GROUND NO. 1, 2 & 3. THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE ACCORDINGLY DISMISSED AS NOT PRESSED. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 218 63. THE REVENUE IN ITS APPEAL CHALLENGED THE DELETI ON OF ADDITION OF RS.1,44,09,275/- U/S. 69C OF THE IT ACT ON ACCOUNT OF UNEXPLAINED EXPENSES IN CONNECTION WITH MARRIAGE OF ASSESSEES DAUGHTER ON ALL FOUR GROUNDS. THE ASSESSEE IN HIS APPEAL ON GROUND NO. 4 & 5 CHALLENGED THE OR DER OF THE LD. CIT(A) IN MAINTAINING THE ADDITION OF RS.30,45,236/- ON THE S AME ISSUE. 64. THE AO PASSED THE ASSESSMENT ORDER DATED 30.12. 2010 U/S. 153A READ WITH SECTION 143(3) OF THE IT ACT. IN THE SAID ASSESSMEN T ORDER, THE AO HAS COMPLETED ASSESSMENT PROCEEDINGS DETERMINING TOTAL INCOME AT RS.4,32,20,730/- AS AGAINST RS.2,57,66,220/- DISCLOSED BY THE ASSESSEE, THE VAR IATION OF RS.1,74,54,511/- BEING SOLELY ATTRIBUTABLE TO THE ADDITION OUT OF EXPENDIT URE ON MARRIAGE OF ASSESSEES DAUGHTER. THE ASSESSEE CHALLENGED THE AFORESAID ADD ITION BEFORE THE LD. CIT(A) AND FILED DETAILED WRITTEN SUBMISSIONS, ON WHICH REMAND REPORT OF THE AO WAS ALSO CALLED FOR. THE ASSESSEE ALSO FILED REJOINDER. THE FACTS ARE SAME THAT THE ASSESSEE IS AN INDIVIDUAL AND HAS INCOME BY WAY OF SHARE IN PRO FIT / LOSS IN PARTNERSHIP FIRM, M/S. CARPET INTERNATIONAL, WHICH CAME INTO EXISTENC E ON 01.04.1996, WHICH QUALIFIES EXEMPTION U/S. 10(2A) OF THE IT ACT, INTE REST ON CAPITAL INVESTED IN THE SAID FIRM AND REMUNERATION AS RECEIVED FROM THE FIR M. IN ADDITION TO ABOVE, HE ALSO ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 219 EARNED INCOME FROM INVESTMENT IN RBI BONDS. THE ASS ESSEE WAS ALSO SUBJECTED TO SEARCH ON THE SAME DAY ALONG WITH OTHER GROUP CONCE RNS, AS NOTED ABOVE. THE ASSESSEE FILED RETURN OF INCOME DECLARING ADDITIONA L INCOME OF RS.34,80,000/- IN THE ASSESSMENT YEAR UNDER APPEAL TO COVER THE EXPEN SES INCURRED BY THE ASSESSEE ON THE MARRIAGE OF HIS DAUGHTER TO THE EXTENT OF RS.32 ,00,000/- AND TO COVER UP EXPENSES INCURRED ON EDUCATION TO THE EXTENT OF RS. 2,80,000/-. ACCORDING TO THE AO, ANNEXURE AR-2 OF PANCHNAMA DATED 03.04.2009 PRO VIDED THE DETAILS OF VARIOUS EXPENDITURE INCURRED ON MARRIAGE OF AKRISHT I BARANWAL, DAUGHTER OF THE ASSESSEE WITH MANVENDRA MOR, WHICH WAS RECORDED IN THE SEIZED PAPER. SUCH MARRIAGE WAS CELEBRATED IN HISTORIC RESORTS HOTELS LTD., CITY PALACE, UDAIPUR ( IN SHORT HRH HOTELS) AND THE MARRIAGE CEREMONY TOOK PL ACE ON 7 TH 8 TH AND 9 TH MARCH, 2007. TOTAL EXPENDITURE AS PER LETTER OF HRH HOTELS IS RS.60,52,282/-. OUT OF THE ABOVE AMOUNT, PAYMENT TO THE EXTENT OF RS.1,57,282/ - WAS MADE IN CASH AND BALANCE AMOUNT OF RS.58,95,000/- WAS PAID THROUGH D EMAND DRAFTS. THE ASSESSEE WAS REQUIRED TO GIVE DETAILS AND SOURCE OF THE SAME . FURTHER, AS PER ANNEXURE AR-2 OF THE SAID PANCHNAMA, SEIZED FROM THE LOCKER OF SH RI PRADEEP KUMAR BARANWAL, WHEREIN TAXI RENT OF RS.2,49,925/- HAS BEEN RECORDE D ON PAGE 29 TO 30. IT IS ALSO STATED THAT SHRI PRAMOD KUMAR BARANWAL DEPOSITED RS .1.00 LAC ON 27.12.2006 IN HRH HOTELS PVT. LTD., BUT NO ADJUSTMENT DETAILS WER E FURNISHED. ACCORDING TO ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 220 ANNEXURE AR-2, DETAILS OF OTHER HOTELS BOOKED SHOWS THAT RS.51,60,270/- WAS SPENT. ACCORDING TO THE SAME SEIZED DOCUMENT, THE D ETAILS OF AIR TRAVEL EXPENSES WERE PREPARED, WHICH COMES TO RS.57,83,134/- AND TR AVEL BY TRAIN WAS NOTED AT RS.1,08,700/-. THUS, TOTAL EXPENSES INCURRED DURING THE MARRIAGE OF DAUGHTER OF THE ASSESSEE WAS AS FOLLOWS : (I). PAYMENT TO HRH HOTELS 60,52,288/- (II). PAYMENT TO HRH HOTELS AS ADVANCE 1,00,00 0/- (III). AMOUNT PAID FOR TAXI RENT 2,49,925/- (IV). PAYMENT FOR ROOMS OF OTHER HOTELS 51,60,270 /- (V). PAYMENT FOR TRAVEL BY AIR 57,83,134/- (VI) PAYMENT FOR TRAVEL BY TRAIN 1,08,700/- -------------------------- TOTAL EXPENDITURE 1,74,54,311/- -------------------------- 64.1 THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE ASSESSEE HAS ALREADY SURRENDERED RS.32,00,000/- ON ACCOUNT OF UNDISCLOSE D MARRIAGE EXPENSES AND PAID THE TAXES. THE DD AMOUNTING TO RS.28,55,000/- FOR H OTEL WERE ISSUED IN THE NAME OF ASSESSEE PRAMOD KUMAR BARANWAL, WHICH WAS PURCHA SED DIRECTLY BY THE GUESTS OR PROVIDED BY THE GUESTS. THUS, THE SURRENDERED AM OUNT IS SUFFICIENT TO COVER UP THE ENTIRE PROPOSED ADDITION. THE SEIZED DOCUMENT A R-2 IS PEN-DRIVE IN WHICH ALLEGED TRANSACTION HAS BEEN RECORDED, BUT THE SAID PEN-DRIVE DID NOT BELONG TO ASSESSEE SINCE IT WAS RECOVERED FROM THE LOCKER OF SHRI PRADEEP KUMAR BARANWAL. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 221 THEREFORE, THE ASSESSEE CANNOT BE PUT TO ANY LIABIL ITY. THE AO, HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND NOTED THA T THE MARRIAGE OF THE ASSESSEES DAUGHTER IS NOT DISPUTED, WHICH WAS SOLEMNIZED IN H RH HOTELS AND THEY HAVE CONFIRMED IN THEIR LETTER THAT THE AMOUNT SPENT WAS RS.60,52,282/-. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT THE PEN DRIVE DID NOT BELONG TO HIM, WHICH CONTAINED COMPLETE DETAILS OF EXPENDITURE INC URRED ON THE MARRIAGE OF ASSESSEES DAUGHTER AND ALSO REFERRED TO THE STATEM ENT OF THE PERSONS RECORDED AND ALSO NOTED THAT ENTIRE EXPENDITURE HAS BEEN SPENT O N THE MARRIAGE OF ASSESSEES DAUGHTER AND ACCORDINGLY MADE ADDITION OF RS.1,75,5 4,511/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE INCURRED ON THE MARRIAGE OF ASSESSEES DAUGHTER. 64.2 THE ASSESSEE CHALLENGED THE SAID ADDITION BEFO RE THE LD. CIT(A). THE DETAILED SUBMISSIONS WERE MADE AND IT WAS EXPLAINED THAT THE PRINTOUT TAKEN FROM THE PEN DRIVE WAS FOUND FROM THE BANK LOCKER JOINTLY OWNED BY SHRI PRADEEP KUMAR BARANWAL AND HIS WIFE SMT. SUMAN BARANWAL, BROTHER & WIFE OF BROTHER OF ASSESSEE. IT WAS SUBMITTED THAT PEN-DRIVE WAS RECOV ERED ON 02.04.09 AND NO PROHIBITORY ORDER WAS PASSED ON SAID LOCKER ON THE DATE OF SEARCH AND SEIZURE ACTION ON 11.02.2009. EVEN THIS LOCKER WAS OPERATED IN BETWEEN BY SHRI PRADEEP KUMAR BARANWAL ON 13.02.2009 AND 18.02.2009 AFTER T HE SEARCH. THEREFORE, THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 222 ONUS IS UPON SHRI PRADEEP KUMAR BARANWAL TO EXPLAIN THE SAME. THE LD. CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE AND THE MATERIAL ON RECORD DID NOT ACCEPT THE AOS VERSION REGARDING THE DETAILS CONTA INED IN THE PEN DRIVE FOR ESTIMATING THE EXPENSES AND ACCORDINGLY, SUBSTANTIA L ADDITIONS MADE ON THE BASIS OF PEN-DRIVE WERE DELETED. SINCE THE ASSESSEE ACCEPTED THAT HE HAS INCURRED EXPENSES OF RS.62,45,236/-, THEREFORE, AFTER GIVING BENEFIT OF ADDITIONAL SURRENDERED INCOME OF RS.32,00,000/-, REMAINING ADDITION OF RS.30,45,2 36/- WAS SUSTAINED AND THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED. THE DETA ILED FINDINGS OF THE LD. CIT(A) IN PARAS 24 TO 33 OF THE APPELLATE ORDER ARE REPROD UCED AS UNDER : 24. I HAVE CONSIDERED THE SUBMISSIONS MADE ON BEHALF O F THE APPELLANT, VIS--VIS THE OBSERVATIONS MADE/FINDING GIVEN BY THE ASSESSING OFFICER AS ALSO THE WRITTEN SUBMISSIONS F ORMING PART OF THE COMPILATION THAT HAS BEEN PLACED BEFORE ME. ADDI TION OF RS. 1,74,54,311/- IN TOTO IS BASED ON PRINTOUT TAKEN F ROM THE PEN DRIVE SEIZED FROM THE AUTHORISED OFFICERS FROM THE LOCKER NO. 18 WITH STATE BANK OF INDIA STANDING IN THE JOINT NAMES OF PRADEE P BARANWAL, ELDER BROTHER OF THE APPELLANT, AND SMT. SUMAN BARANWAL, WIFE OF PRADEEP BARANWAL. PARTICULARS OF SAID PARCHA HAVE BEEN RECO RDED BY THE ASSESSING OFFICERS IN PARA 4.1 TO 4.3 OF THE ASSESS MENT ORDER. PRELIMINARY OBJECTION OF THE APPELLANT IS THAT THE SAID PARCHA HAVING BEEN FOUND FROM THE POSSESSION AND CONTROL OF SRI P RADEEP KUMAR BARANWAL AND SMT. SUMAN BARANWAL (THE JOINT HOLDERS OF THE BANK LOCKER) CANNOT BE CONSIDERED TO BE THE MATERIAL FOR THE PURPOSES OF ASSESSMENT IN THE CASE OF THE APPELLANT UNDER SECTI ON 153A. THE APPELLANT HAS MADE EXHAUSTIVE SUBMISSIONS ON THIS I SSUE VIDE PARAS 40 TO 67 OF THE WRITTEN SUBMISSIONS APPEARING IN TH E PAPER BOOK (THE COPY OF WHICH HAD DULY BEEN FORWARDED TO THE ACIT A LSO AS MENTIONED ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 223 ABOVE). AUTHORISED REPRESENTATIVE VERY CANDIDLY SUB MITTED THAT THE SAID SUBMISSIONS COVER ALL HIS ARGUMENTS ON THE ISS UE. IT HAS THEREFORE BECOME NECESSARY TO TAKE NOTE OF THE SAID SUBMISSIONS AND FOR THE PURPOSE THE SAME ARE REPRODUCED HEREUNDER:- 40. IN THE PARAGRAPH STARTING FROM 16 TO 39 , THE APPELLANT HAS DEALT WITH THE LEGAL GROUNDS WHICH ARE COMMON I N BOTH THE ASSESSMENT YEARS, EACH ONE OF WHICH GO TO THE VERY ROOT OF THE ASSESSMENT ORDER DATED 30.12.2002 AS HAD BEEN PASSE D BY THE ACIT FOR THE ASSESSMENT YEARS 2007-08 & 2008-09 CAPTIONED AS ORDERS U/S. 153A READ WITH SECTION 14 3(3) OF THE ACT. IN THE ASSESSMENTS SO MADE, THE ACIT IGNORED THE ADDITIONAL INCOME AS HAS BEEN SHOWN IN THE RETURNS FOR THE ASSESSMENT YEARS 2007-08 & 2008-09 (AS PER PARTICUL ARS GIVEN IN PARA 13 HEREINFORE) AND PROCEEDED TO COMPUTE UNDISCLOSED INCOME (OVER AND ABOVE THE INCOMES THAT STOOD ALREA DY DISCLOSED FOR THE ASSESSMENT YEARS 2007-09 & 2008-0 9) IN THE FOLLOWING MANNER:- ASSESSING YEARS SL. NO. PARTICULARS 2007-08 (RS.) 2008-09 (RS.) (I) EXPENSES SAID TO HAVE BEEN INCURRED IN THE MARRIAGE OF AKRISHTI DAUGHTER OF SHRI PAMOD KUMAR BARANWAL 1,74,54,511 - (II) ALLEGED UNEXPLAINED EXPENDITURE, BY INVOKING PROVISIONS OF SECTION 69 OF THE ACT. - 3,86,36,238 (III) EXPENSES INCURRED ON FOREIGN TOUR (UNDERTAKEN ON 29.12.2007) - 3,00,000 1,74,54,511 3,89,36,238 41. WITHOUT CAUSING IN ANY MANNER ANY PREJUDICE TO THE SUBMISSIONS MADE IN PARAS 16 TO 39 HEREINFORE, THE APPELLANT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 224 BEGS TO SUBMIT THAT NONE OF THE COMPONENTS OF UNDIS CLOSED INCOMES AS AFORESAID, IS SUSTAINABLE. IT IS STATED THAT THE COMPONENTS AS MENTIONED AT SL. NO .(I) AND (II) (WHICH RELATED TO THE ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY) ARE BASED SOLELY ON THE PRINTOUT TAKEN (BY THE AUTHOR ISED OFFICERS) FROM THE PEN DRIVE AS STATED TO HAVE BE EN RECOVERED BY THE AUTHORISED OFFICERS ON OPENING OF BANK LOC KER NO. 18 WITH STATE BANK OF INDIA, STANDING IN THE JOINT NAM ES OF SRI PRADEEP KUMAR BARANWAL (ELDER BROTHER OF THE APPELL ANT) AND SMT. SUMAN BARANWAL (WIFE OF SRI PRADEEP KUMAR BARA NWAL) ON 02.04.2009; AND PANCHNAMA PREPARED ON 03.04.2009 . THE APPELLANT BEGS TO CONTEND, FOR THE KIND CONSIDERATI ON OF YOUR HONOUR, THAT SUCH A PRINTOUT CANNOT BE TREATED TO BE THE MATERIAL RECOVERED DURING THE COURSE OF SEARCH AN D SEIZURE ACTION IN THE CASE OF THE APPELLANT (SO AS TO MAKE HIM LIABLE TO BE PROCEEDED WITH UNDER SECTION 153A OF THE ACT). THIS FACT ITSELF COMPLETELY OUSTS THE SAID PRINT OUT FROM C ONSIDERATION IN THE PROCEEDINGS INITIATED UNDER SECTION 153A OF THE ACT. 42. THE PEN DRIVE, IN QUESTION IS A LIVE EXAMPLE OF CONCOCTION OR MANIPULATED AFFAIR AND THE APPELL ANT HAS NO HESITATION IN SAYING THAT SUCH A CONCOCTION OR M ANIPULATION COULD NOT HAVE BEEN PERPETRATED OR GIVEN EFFECT TO WITHOUT COLLUSION OF THE PARTIES ON THE OTHER SIDE. IT IS P RESUMED, SUBJECT TO VERIFICATION BY YOUR HONOUR, THAT THE SAID LOCKE R WAS NOT SUBJECTED TO PROHIBITORY ORDER EITHER UNDER PROVISO TO SECTION 132(1) OR SECTION 132(3) OF THE ACT, WITH THE COMME NCEMENT OF SEARCH AND SEIZURE ACTION ON 11.02.2009, [ IF THE EXISTENCE OF THE LOCKER WAS KNOWN TO THE AUTHORISED OFFICERS, THEN I T SPEAKS VOLUMES OF THEIR CONDUCT, IN NOT SERVING THE BANK W ITH THE PROHIBITORY ORDER INSTANTLY UNDER SECTION 132(3) SO AS TO PREVENT OPERATION OF THE SAME BY THE LOCKER-HOLDERS ]. AS PER THE RECORDS OF THE BANK, THE SAID LOCKER WAS OPERATED B Y SRI PRADEEP KUMAR BARANWAL HIMSELF ON 13.02.2009 AND AGAIN ON 18.02.2009, I.E. AFTER SEARCH AND SEIZURE HAD COMMENCED. THIS CLEARLY SHOWS THAT THE PARTIES WITH VESTED INTEREST COLLUDED WITH EACH OTHER AND, IN ORDER TO HARM THE APPELLANT, HAD FIRST PLANTED A MANIPULATED PEN-DRIVE IN THE SAID LOCKER (MUCH AFTER ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 225 THE DATE OF SEARCH, MAY BE ON 13.02.2009 OR 18.02.2 009 WHEN THE LOCKER WAS OPERATED BY THEM) AND THEN MANEUVERE D IN THE MANNER, SO THAT THE SAME COULD BE SHOWN TO HAVE BEE N RECOVERED FROM LOCKER ON 02.04.2009 . THEREFORE, NO COGNIZANCE OF THE PRINTOUT FROM THE SAID PEN DRIVE CAN BE TAKEN. IN ANY CASE, GENUINENESS OF THE SAID PEN DRIVE AS W ELL AS THE PRINTOUT TAKEN FROM THE SAME SHOULD ALSO BE PUT T O VERIFICATION BY THE EXPERTS IN THE FIELD, KEEPING I N VIEW THE SUSPICIOUS CIRCUMSTANCES AS REFERRED TO HEREINFORE. 43. SOME SPECIFIC FEATURES WHICH INTER-ALIA, CALL F OR SUCH VERIFICATION BY SOME COMPUTER EXPERTS (THE APPELLAN T IS PREFERRED TO SEE THE CASE OF SUCH ENQUIRY) ARE LIST ED HEREIN BELOW:- (I) THE APPELLANT HAS BEEN MADE AVAILABLE AT THE BELATED STAGE OF THE ASSESSMENT PROCEEDINGS, A BUNC H OF LOOSE PAPERS NUMBERED AS 1 TO 90 (PHOTOCOPIES ENCLOSED AT PAGES 164-175), EXCEPTING PAGES 5 & 6 WHICH HAVE BEEN STATED TO BE BELONGING EXCLUSIVELY TO SHRI PRA DEEP KUMAR BARANWAL ONLY; (II) ALL THESE PAPERS (COPIES OF WHICH HAVE BEEN M ADE AVAILABLE TO THE APPELLANT) HAVE BEEN ADMITTED TO B E THE COPIES TAKEN THROUGH THE PROCESS OF MIRROR IMAGE (SCANNING) AND THE ORIGINALS OF THE DOCUMENTS (FROM WHICH THE MIRROR IMAGES HAVE BEEN STATED TO HAVE BE EN TAKEN AND LOADED IN THE PEN DRIVE) HAD NOT BEEN MAD E AVAILABLE TO THE APPELLANT; (III) IN THE SAID BUNCH (AS MADE AVAILABLE TO THE APPELLANT), THERE ARE PAGES MARKED AS 3 & 12 , SUCH PAGES ARE SAID TO BE PHOTO COPIES OF THE SAME DOCUM ENT; A PERUSAL OF THE SAID TWO PAPERS GOES TO SHOW SOME INTERPOLATIONS, LIKE ON PAGE 3 BELOW A FIGURE OF RS.50 LAKHS, THREE LETTERS ASU WERE WRITTEN WHEREAS ON PAGE NUMBERED AS 12 WHICH IS STATED TO BE THE COPY ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 226 TAKEN FROM THE SAME ORIGINAL NO SUCH LETTERS ARE WRITTEN; (IV) INTERESTINGLY ENOUGH THE THREE LETTERS ASU ARE IN THE HAND-WRITING OF SHRI PRADEEP KUMAR BARANWAL, WHICH CAN BE EASILY PROVED BY MAKING REFERENCE TO A HAND-WRITING EXPERT (AT THE COST OF THE APPELLANT); (V) THIS INTERPOLATION, AS IT TRANSPIRED LATER ON, WAS MEANT TO MEAN THE NAME OF ONE ASHU TANDON THE INDIA N REPRESENTATIVE OF M/S IKEA, WHO HAVE BEEN THE SOLE BUYERS OF M/S CARPET INTERNATIONAL, A PARTNERSHIP F IRM WHICH HAD COME INTO EXCLUSIVE CONTROL OF THE FAMILY OF SHRI PRAMOD KUMAR BARANWAL (THE APPELLANT) W.E.F. 1.4.2008; (VI) ON THE BASIS OF SUCH AN INTERPRETATION OF THE THREE LETTERS ASU AS CONVEYED BY THE OTHER SIDE, THE INVESTIGATION WING WAS PROMPTED (BY THE OTHER SIDE) , TO INITIATE ENQUIRY FROM ASHU TANDON OF M/S IKEA AND D Y. DIRECTOR OF INVESTIGATION ISSUED SUMMONS UNDER SECT ION 131(1A) DATED 22.04.2009 IN THE NAME OF ASHU TANDON (COPY ENCLOSED AT PAGE 69); (VII) BY TAKING COGNIZANCE OF SUCH PROCEEDINGS INI TIATED IN THE CASE OF ASHU TANDON (THE INDIAN REPRESENTATI VE OF M/S IKEA) M/S IKEA THEY SNAPPED THEIR BUSINESS TIES WITH M/S CARPET INTERNATIONAL WHICH BY THAT TIME HAD COM E UNDER THE EXCLUSIVE CONTROL OF THE FAMILY OF THE AP PELLANT; (VIII) FROM THE SAID EXAMPLE OF INTERPOLATION IN T HE PRINTOUTS COUPLED WITH THE FACT THAT SHRI PRADEEP K UMAR BARANWAL (THE JOINT HOLDER OF THE LOCKER) HAD BEEN ALLOWED TO OPERATE (OBVIOUSLY BY THE AUTHORISED OFF ICERS) THE SAID LOCKER ON 13 TH & 18 TH FEBRUARY 2009 (THE DATE FALLING AFTER COMMENCEMENT OF SEARCH ON 11.02.2009) THE CONCLUSION IS IRRESISTIBLE THAT WHOLE EXERCISE OF K EEPING THE PEN-DRIVE IN SUCH A SECURED PLACE WAS AN ACT OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 227 MANIPULATION SIMPLY TO HARM THE APPELLANT AND THROU GH HIM THE BUSINESS ENTITY WITH WHICH HE AND HIS FAMIL Y MEMBERS CAME TO BE EXCLUSIVELY ASSOCIATED W.E.F. 1.4.2008; (IX) TO ENSURE DETECTION OF SUCH MANIPULATION, THE PERPETRATES OF THE MISDEED DID NOT MAKE AVAILABLE T O THE AUTHORISED OFFICERS COPY OF THE ORIGINAL FROM WHICH FEEDING HAD BEEN IN THE PEN-DRIVE, ON THE PRETEXT THAT ORIGINAL WAS NOT AVAILABLE AND/OR MISSING; (X) AS PER THE STATEMENT OF SHRI PRADEEP KUMAR BARANWAL [STATED TO HAVE BEEN RECORDED BY THE AUTHORISED OFFICERS UNDER SECTION 132(4)], HE PLEA DED IGNORANCE ABOUT THE CONTENTS OF THE PEN- DRIVE ITSE LF AND INFORMED THE AUTHORISED OFFICERS THAT INFORMATION A BOUT THE SAME WOULD BE MADE AVAILABLE BY HIS SON SHRI NI TIN BARANWAL (COPY OF THE STATEMENT OF SHRI PRADEEP KUM AR BARANWAL ENCLOSED AT PAGES 70 TO 73); (XI) IN HIS STATEMENT RECORDED ON 4.4.2009, SHRI N ITIN BARANWAL OWNED SOME OF THE PRINTOUTS PARTICULARLY P AGES 5 & 6 AND ABOUT THE ORIGINAL (FROM WHICH PRINTOUTS HAD BEEN TAKEN AND LOADED IN THE PEN-DRIVE ON INITIAL S TAGE), WAS STATED TO HAVE BEEN LOST. COPY OF THE STATEMENT OF SHRI NITIN BARANWAL ENCLOSED AT PAGES 74-79; (XII) IN THE ABSENCE OF THE ORIGINALS, THE AUTHENT ICITY OF THE PRINTOUTS COULD NOT BE VOUCHEDSELFED, STILL THE AUTHORISED OFFICERS DID NOT THINK IT NECESSARY TO E NQUIRE INTO AUTHENTICITY OF THE PRINTOUTS NOR ANY QUESTI ON TO THAT EFFECT WAS PUT TO SHRI NITIN BARANWAL NOR FROM SHRI PRADEEP KUAMAR BARANWAL; (XIII) FROM THE SEQUENCE OF EVENTS AS AFORESAID, I T STANDS FULLY ESTABLISHED THAT WITH THE TIME AVAILABLE WITH SHRI PRADEEP KUMAR BARANWAL (AFTER SEARCH AND SEIZURE ACTION ON 11.02.2009) NOT ONLY A MANIPULATED PEN DR IVE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 228 WAS PLANTED IN THE LOCKER NO.18 WITH STATE BANK OF INDIA, THE SAME WAS MANOEUVERED ALSO, TO BE RECOVERED FROM THEIR LOCKER BY THE AUTHORISED OFFICERS; 44. IN NUTSHELL , THE APPELLANTS CONTENTION IS FOUR FOLD IN THIS RESPECT, VIZ; FIRSTLY : THE PRINTOUTS TAKEN FROM PEN DRIVE ON 3.4.2009, AS HAD BEEN SHOWN TO HAVE BEEN RECOVERED BY THE AUTHORISED OFFICES FROM BANK LOCKER NO.18 WITH STATE BANK OF INDIA, STANDING IN THE JOINT NAMES OF SHRI PRADEEP KUMAR BARANWAL & SMT. SUMAN BARANWAL HIS WIFE) CANNOT BE SAID OR TREATED TO BE THE MATERIAL FIND DURING THE COURSE OF SEARCH AND SEIZURE ACTION CARRIED OUT IN THE CASE OF THE APPELLANT; SECONDLY : IN VIEW OF THE FIRSTLY, THE CONTENTS OF THE SAID PRINTOUTS CANNOT BE MADE THE BASIS OF COMPUTATION OF UNDISCLOSED INCOME IN THE CASE OF THE APPELLANT, BY INVOKING THE PROVISIONS OF SECTION 153A(A) OF TH E ACT; THIRDLY : IN ANY CASE AND WITHOUT PREJUDICE TO FIRSTLY & SECONDLY , THE PEN DRIVE ITSELF IS A CONCOCTED AFFAIR AND RECOVERY OF THE SAME IS AN AFFAIR CLEVERLY MANOUVERED BY THE PARTIES HAVING VESTED INTEREST SO AS TO SHOW THE SAME TO HAVE BEEN RECOVERED FROM THE BANK LOCKER, WITH THE COMPLEXITY OF THE AUTHORISED OFFICERS; AND FOURTHLY : AND NOT THE LEAST, THE PRINTOUTS TAKEN FROM THE PEN DRIVE (SHOWN TO HAVE BEEN RECOVERED ON 2.4.2009) CANNOT BE SAID TO BE OF CREDIBLE NATURE. 45. IN SUPPORT OF THIRDLY & FOURTHLY , THE APPELLANT BEGS TO SUBMIT THAT IT IS ALSO THE LAW WELL SETTLED THAT BEFORE REFERRING TO AND RELYING UPON THE DATA AVAILABLE IN A COMPUTER PRINTOUT, ITS CONTINUITY SHOULD BE ENSURED. IN T HE ABSENCE OF SUCH A CONTINUITY BEING ESTABLISHED, EVEN ANY PRE SUMPTION ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 229 CANNOT BE RAISED. RELIANCE IN THIS REGARD IS PLACE ON THE FOLLOWING CASE LAWS WITH GISTS THEREOF:- (VIII) PREMIER INSTRUMENTS & CONTROLS LTD. VS. COMMISSIONE R OF CENTRAL EXCISE, COIMBATORE REPORTED IN 2005 (183 ) ELT 65 (TRI.-CHENNAI) WHEREIN CHENNAI BENCH HAS HELD AS UNDER :- ON THE DEMAND OF DUTY ON WASTE AND SCRAP, AGAIN TH E APPELLANTS HAVE MADE OUT A STRONG CASE ON MERITS. THE DEMAND COVERING THE PERIOD NOVEMBER, 1993 TO SEPTEMBER, 1998 IS BASED ON CERTAIN COMPUTER PRINTO UT RELATING TO THE PERIOD FEBRUARY, 1996 TO SEPTEMBER, 1998. THESE PRINTOUTS WERE GENERATED FROM A PERSONAL COMPUTER OF SHRI G. SAMPATH KUMAR, A JUNIOR OFFICER OF THE COMPANY, WHOSE STATEMENTS WERE ALSO RECORDED BY THE DEPARTMENT. ADMITTEDLY, WHATEVER FACTS WERE ST ATED BY SHRI SAMPATH KUMAR, IN HIS STATEMENTS, WERE BASE D ON THE ENTRIES CONTAINED IN THE COMPUTER PRINT-OUTS. THE STATEMENTS OF OTHERS, RECORDED IN THIS CASE, DID NO T DISCLOSE ANY ADDITIONAL FACT. THEREFORE, APPARENTL Y, WHAT IS CONTAINED IN THE COMPUTER PRINT-OUT IS THE ONLY BASIS OF THE DEMAND OF DUTY ON WASTE AND SCRAP. THE QUESTIO N NOW ARISES AS TO WHETHER THESE PRINT-OUTS ARE ADMIS SIBLE AS EVIDENCE, IN THIS CASE. LD. SR. COUNSEL HAS POI NTED OUT THAT THE COMPUTER PRINT-OUTS DID NOT SATISFY THE ST ATUTORY CONDITIONS. HE HAS REFERRED TO THE RELEVANT PROVIS IONS OF SECTION 36B OF THE CENTRAL EXCISE ACT WHICH DEAL WI TH ADMISSIBILITY OF COMPUTER PRINT-OUTS ETC. AS EVIDEN CE AND SAYS THAT THE STATEMENT CONTAINED IN A COMPUTER PRI NT-OUT SHALL BE DEEMED TO BE A DOCUMENT FOR THE PURPOSES O F THE ACT AND THE RULES MADE THEREUNDER AND SHALL BE ADMISSIBLE AS EVIDENCE OF THE CONTENTS OF ITS ORIGI NAL, IF THE CONDITIONS MENTIONED IN SUB SECTION (2) AND OTH ER PROVISIONS OF THE SECTION ARE SATISFIED IN RELATION TO THE STATEMENT AND THE COMPUTER IN QUESTION. SUB-SECTION (2) READS AS UNDER:- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 230 THE CONDITIONS REFERRED TO IN SUB-SECTION(1) IN RE SPECT OF THE COMPUTER PRINT-OUT SHALL BE THE FOLLOWING, N AMELY:- (A) THE COMPUTER PRINT-OUT CONTAINING THE STATEMEN T WAS PRODUCED BY THE COMPUTER DURING THE PERIOD OVER WHICH THE COMPUTER WAS USED REGULARLY TO STORE OR PROCESS INFORMATION FOR THE PURPOSES OF ANY ACTIVIT IES REGULARLY CARRIED ON OVER THAT PERIOD BY THE PERSON HAVING LAWFUL CONTROL OVER THE USE OF THE COMPUTER; (B) DURING THE SAID PERIOD, THERE WAS REGULARLY SUPPLIED TO THE COMPUTER IN THE ORDINARY COURSE OF THE SAID ACTIVITIES, INFORMATION OF THE KIND CONTAINED IN THE STATEMENT OF THE KIND FROM WHICH THE INFORMATION SO CONTAINED IS DERIVED; (C) THE INFORMATION CONTAINED IN THE STATEMENT REPRODUCED OR IS DERIVED FROM INFORMATION SUPPLIED TO THE COMPUTER IN THE ORDINARY COURSE OF THE SAID ACTIVITIES. LD. SR. COUNSEL HAS ARGUED THAT THE ABOVE CONDITION S WERE NOT FULFILLED IN THE RESPECT OF THE COMPUTER PRINT-OUT TAKEN FROM THE PERSONAL COMPUTER OF SHRI SAMPATH KUMAR. IT APPEAR S FROM THE STATEMENT OF SHRI SAMPATH KUMAR WAS THE PERSON HAVI NG LAWFUL CONTROL OVER THE USE OF THE COMPUTER. THE COMPUTER WAS NOT SHOWN TO HAVE BEEN USED REGULARLY TO STORE OR PROCE SS INFORMATION FOR THE PURPOSES OF ANY ACTIVITIES REGU LARLY CARRIED ON BY THE COMPANY. IT WAS ALSO NOT SHOWN THAT INFO RMATION OF THE KIND CONTAINED IN THE COMPUTER PRINT-OUT WAS RE GULARLY SUPPLIED BY THE COMPANY TO THE PERSONAL COMPUTER OF SHRI SAMPATH KUMAR IN THE ORDINARY COURSE OF ACTIVITIES. AGAIN, IT WAS NOT SHOWN THAT, DURING THE RELEVANT PERIOD, THE COMPUTER WAS OPERATING IN THE ABOVE MANNER PROPERLY. THE AB OVE PROVISION ALSO CASTS A BURDEN ON THAT PARTY WHO WAN TS TO RELY ON THE COMPUTER PRINT-OUT, TO SHOW THAT THE INFORMA TION CONTAINED IN THE PRINT-OUT HAD BEEN SUPPLIED TO THE COMPUTER IN THE ORDINARY COURSE OF BUSINESS OF THE COMPANY. WE FIND THAT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 231 NONE OF THESE CONDITIONS WAS SATISFIED BY THE REVEN UE IN THIS CASE. WE HAVE CONSIDERED THE TRIBUNALS DECISION I N INTERNATIONAL COMPUTER RIBBON CORPORATION V. CCE, C HENNAI (SUPRA). IN THAT CASE, AS IN THE INSTANT CASE, COM PUTER PRINT- OUTS WERE RELIED ON BY THE ADJUDICATING AUTHORITY F OR RECORDING A FINDING OF CLANDESTINE MANUFACTURE AND CLEARANCE OF EXCISABLE GOODS. IT WAS FOUND BY THE TRIBUNAL THAT THE PRINT -OUTS WERE NEITHER AUTHENTICATED NOR RECOVERED UNDER MAHAZAR. IT WAS ALSO FOUND THAT THE ASSESSEE IN THAT CASE HAD DISOW NED THE PRINT-OUTS AND WAS NOT EVEN CONFRONTED WITH WHAT WA S CONTAINED THEREIN. THE TRIBUNAL REJECTED THE PRINT -OUTS AND THE REVENUES FINDING OF CLANDESTINE MANUFACTURE AND CL EARANCE. WE FIND A STRONG PARALLEL BETWEEN THE INSTANT CASE AND THE CITED CASE. NOTHING CONTAINED IN THE PRINT-OUTS GENERATE D BY SAMPATH KUMARS PC CAN BE ADMITTED INTO EVIDENCE FO R NON- FULFILMENT OF THE STATUTORY CONDITIONS. IT IS ALSO NOTEWORTHY THAT THE COMPUTER PRINT-OUTS PERTAINED TO THE PERIOD FEB RUARY, 1996 TO SEPTEMBER,1998 ONLY BUT THE INFORMATION CONTAINE D THEREIN WAS USED FOR A FINDING OF CLANDESTINE REMOVAL OF WA STE AND SCRAP FOR EARLIER PERIOD ALSO, WHICH, IN ANY CASE, WAS NOT PERMISSIBLE IN LAW. IN THE RESULT, WE HOLD THAT TH E ENTIRE DEMAND OF DUTY ON WASTE AND SCRAP IS LIABLE TO BE S ET ASIDE. (IX) PREMIUM PACKAGING PVT. LTD VS. COMMISSIONER OF CENT RAL EXCISE, KANPUR REPORTED IN 2005 (184) ELT 165 (TRI. DEL), WHEREIN DELHI BENCH OF HONBLE CEGAT HAS HELD AS UNDER :- 5. THE DEPARTMENT HAS NO DOUBT PLACED MUCH RELIANC E ON THE PROVISIONS OF SECTION36-B, TO SUSTAIN THE ADMIS SIBILITY OF THE COMPUTER PRINT OUTS FOR PROVING THE CHARGE OF CLAND ESTINE RECEIPT OF RAW MATERIAL AND MANUFACTURE OF THE FINA L PRODUCTS BY THE APPELLANTS, BUT ADMISSIBILITY OF THE PRINTED MATERIAL UNDER THE SAID SECTION, HAS BEEN MADE SUBJECT TO TH E FULFILLMENT OF CERTAIN CONDITIONS, DETAILED THEREIN. THE CONDI TION IN RESPECT OF THE COMPUTER PRINT OUT LAID DOWN IN THAT SECTION , AS IS EVIDENT FROM THE READING OF ITS CLAUSE (II), IS THAT, THE C OMPUTER PRINT OUT CONTAINING THE STATEMENT WAS PRODUCED BY THE COMPUT ER DURING THE PERIOD OVER WHICH THE COMPUTER WAS USED REGULAR LY TO STORE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 232 OR POSSESS THE INFORMATION. IN THE INSTANT CASE, TH E PRINT OUTS WERE NOT PRODUCED BY THE COMPUTER. PERIPHERALS WER E PICKED UP BY THE OFFICERS FROM THE HEAD OFFICE-CUM-SALE DE POT OF THE APPELLANTS AND THEY WERE INSERTED INTO THE COMPUTER , AND THAT TOO, NOT ALL BUT CERTAIN INFORMATIONS FROM THE PAR T OF TWO ZIP DISCS WERE TAKEN IN THE ABSENCE OF THE APPELLANTS. CERTAIN ZIP DISCS WERE COPIED OUT BY THE OFFICERS IN THE COMPUT ER OF THE DEPARTMENT AND THAT TOO WITHOUT ASSOCIATING ANY AUT HORIZED PERSON OF THE APPELLANTS COMPANY. AS OBSERVED ABO VE, WHEN THE APPELLANTS WANTED TO HAVE ACCESS TO THE PERIPHE RALS AND REQUESTED FOR OBTAINING THE INFORMATION OR DATA FRO M THOSE PERIPHERALS, SOME FLOPPIES WERE FOUND BLANK WHILE S OME EVEN COULD NOT RUN ON THE COMPUTER. THE HARD DISC EVEN COULD NOT BE OPENED FOR THE REASON BEST KNOWN TO THE DEPARTMENT AS ALL THESE PERIPHERALS REMAINED IN THEIR CUSTODY AFTER T HE DATE OF SEIZURE I.E. 30.07.1999. 6. THE CONTENTION OF THE LEARNED SDR THAT SHRI AJAY JAIN WAS ONE OF THE DIRECTORS OF THE APPELLANTS, ADMITTE D THE CORRECTNESS OF THE ENTRIES IN THE PRINT OUT AND THA T THE COMPUTER OPERATOR MS. AARTI SRIVASTVA ALSO ADMITTED OF HAVIN G PREPARED AND GENERATED THE BILL IN THE NAME OF DIFFERENT BUY ERS THROUGH COMPUTER AS ENTERED THE DATA FROM THE SLIPS AND AS SUCH THE COMPUTER PRINT OUTS ARE SUFFICIENT TO CHARGE THE AP PELLANTS WITH THE CLANDESTINE RECEIPT OF THE RAW MATERIAL AND THE MANUFACTURE AND REMOVAL OF THE FINISHED GOODS WITHOUT PAYMENT O F DUTY, CANNOT BE ACCEPTED. THE TESTIMONY OF MS. AARTI SRI VASTAVA THAT SHE WAS GIVEN THE RESPONSIBILITY TO DO THE WORK REL ATED TO THE DESIGNS IN THE COMPUTER, PREPARATION AND GENERATION OF THE BILLS THROUGH THE COMPUTER, MAKING ENTRIES FROM CER TAIN SLIPS MADE AVAILABLE TO HER BY SHRI AJAY JAIN, DIRECTOR O F THE APPELLANTS COMPANY, AND MISC. TYPING WORK RELATING TO THE COMPUTER, DID NOT IN ANY MANNER PROVE THE CLANDESTI NE RECEIPT OF THE RAW MATERIAL AND MANUFACTURE AND REMOVAL OF THE FINISHED GOODS BY THE APPELLANTS IN A CLANDESTINE M ANNER. NO DETAILS OF THE ENTRIES AND THE BILLS PREPARED AND G ENERATED FROM THE COMPUTER HAD BEEN FURNISHED BY HER. SIMILARLY, THE BALD STATEMENT OF SHRI VIPUL JAIN, DIRECTOR OF THE APPEL LANTS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 233 COMPANY, THAT THE COMPUTER PRINT OUTS CONTAINED ENT RIES REGARDING THE RECEIPT OF THE RAW MATERIAL FROM VARI OUS SUPPLIERS AND MANUFACTURE AND CLEARANCE OF THE FINI SHED GOODS TO VARIOUS BUYERS DURING THE PERIOD IN DISPUTE BY T HE APPELLANTS, ALSO COULD NOT BE TAKEN AS A CONCLUSIVE PROOF, FOR WANT OF CORROBORATION FROM ANY OTHER TANGIBLE EVIDENCE. NO STATEMENT OF ANY SUPPLIER OF RAW MATERIAL OF HAVING SUPPLIED THE SAME TO THE APPELLANTS IN A CLANDESTINE MANNER WITHOUT ANY INVOICES, HAS BEEN BROUGHT ON RECORD. THE ALLEGED BUYERS OF THE FINISHED GOODS FROM THE APPELLANTS HAVE NOT SUPPORTED THE CA SE OF THE DEPARTMENT. SHRI DEEPAK KOTHARI, PROPRIETOR OF M/S . R.K. PRODUCTS, HAD DENIED THE RECEIPT OF FINISHED GOODS I.E. PACKING MATERIAL FROM THE APPELLANTS WITHOUT THE COVER OF D UTY PAID INVOICES. HE HAD DEPOSED THAT HIS STATEMENT DURING INVESTIGATION WAS TAKEN UNDER PRESSURE AND HE MADE THE STATEMENT AS THE REVENUE OFFICERS WISHED HIM TO MAK E. SIMILARLY, SHRI SATNAM ARORA OF M/S. S.F. FLAVOURS HAD DENIED OF HAVING MADE ANY INCRIMINATING STATEMENT AGAINST THE APPELLANTS BEFORE THE CENTRAL EXCISE OFFICERS REGAR DING THE RECEIPT OF THE FINISHED GOODS FROM THEM WITHOUT THE COVER OF THE INVOICES. TO THE SAME EFFECT HAD BEEN THE STATEMEN T OF MD. SHAHZAD, MANAGER OF M/S. SYNDICATE TOBACCO PRODUCT. THE ARGUMENT OF THE LEARNED SDR THAT THE RETRACTION OF THE EARLIER STATEMENTS BY THESE WITNESSES, WAS AFTERTHOUGHT, CA NNOT BE ACCEPTED AS THEY GOT THE OPPORTUNITY TO STATE THE T RUTH ONLY DURING THE ADJUDICATION PROCEEDINGS WHEN THEY WERE CALLED FOR CROSS-EXAMINATION. EARLIER THEIR STATEMENTS DURING INVESTIGATION, WERE RECORDED AT THE BACK OF THE APP ELLANTS. THEIR CROSS-EXAMINATION HAS TO BE TAKEN AS A PART O F THEIR COMPLETE STATEMENTS AND IT CANNOT BE DISCARDED FOR THE SIMPLE REASON THAT IT WAS RECORDED AFTER A LONG TIME. THE DELAY IN RECORDING THEIR CROSS-EXAMINATION, CANNOT BE ATTRIB UTED TO THE APPELLANTS AS THE EXPEDITIOUS DISPOSAL OF THE ADJUD ICATION PROCEEDINGS WAS IN THE HANDS OF THE DEPARTMENT AND NOT WITHIN THEIR POWER. WHATEVER THE RAW MATERIAL WAS PURCHAS ED BY THE APPELLANTS AND THE FINISHED GOODS WERE CLEARED IN T HEIR RECORD. WE FIND THAT SEPARATE SHOW CAUSE NOTICE WAS SERVED ON THE APPELLANTS ON ACCOUNT OF DETECTION OF THE EXCESS FI NISHED GOODS ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 234 LYING IN THEIR RECORD. WE FIND THAT SEPARATE SHOW CAUSE NOTICE WAS SERVED ON THE APPELLANTS ON ACCOUNT OF DETECTIO N OF THE EXCESS FINISHED GOODS LYING IN THEIR FACTORY. THOS E GOODS WERE INITIALLY ORDERED TO BE CONFISCATED BY THE ADJUDICA TING AUTHORITY ON THE GROUND THAT THE SAME WERE INTENDED TO BE REM OVED IN A CLANDESTINE MANNER, BUT THE COMMISSIONER (APPEALS) VACATED THAT CONFISCATION BY OBSERVING THAT THE ALLEGATIONS OF INTENDED CLANDESTINE REMOVAL OF THE GOODS ON THE PART OF THE APPELLANTS, DID NOT HOLD GOOD IN THE CIRCUMSTANCES. HE, HOWEVE R, REDUCED THE REDEMPTION FINE FOR THE RELEASE OF THE GOODS AN D THE PENALTY. 7. IN THE ABSENCE OF ANY TANGIBLE EVIDENCE REGARDIN G THE CLANDESTINE RECEIPT OF THE RAW MATERIAL BY THE APPE LLANTS FROM THE SUPPLIERS AND THE MANUFACTURE OF THE FINISHED G OODS OUT OF THAT MATERIAL AND CLANDESTINE REMOVAL OF THE SAME T O THE BUYERS, WITHOUT PAYMENT OF DUTY, THE UNCORROBORATED STATEMENT OF SHRI VIPUL JAIN, DIRECTOR OF THE APPELLANTS COM PANY, COULD NOT BE MADE SOLE BASIS BY HOLDING THE APPELLANTS GU ILTY OF THE MANUFACTURE AND REMOVAL OF THE FINISHED GOODS WITHO UT PAYMENT OF DUTY DURING THE DISPUTED PERIOD. THE AP PELLANTS HAVE RATHER PRODUCED AFFIDAVITS OF SOME RAW MATERIA L SUPPLIERS WHEREIN THEY HAD DENIED OF HAVING SUPPLIED THE RAW MATERIAL TO THEM WITHOUT THE COVER OF DUTY PAID DOCUMENTS. THE EVIDENCE OF SHRI R.D. GUPTA, DIRECTOR OF A TRANSPORT COMPANY , M/S. VINDHVASNI CARRIES PVT. LTD. DID NOT ADVANCE THE CA SE OF THE DEPARTMENT TO ANY LOGICAL END. NO DETAILS OF THE C ONSIGNEES TO WHOM THE GOODS WERE DELIVERED, AT THE BEHEST OF THE APPELLANTS, WITHOUT THE COVER OF THE INVOICES, HAS BEEN DISCLOS ED BY THEM AND NO STATEMENT OF ANY SUCH CONSIGNEE HAD BEEN REC ORDED, TO SEEK CORROBORATION OF THEIR STATEMENTS. 8. THE RECOVERY OF LOOSE SLIPS, NAMED AS DISPATCH S LIPS, AND CERTAIN TRANSPORT DOCUMENTS FROM THE POSSESSION OF SHRI RAJESH SRIVASTAVA AND HIS STATEMENT AND THAT OF SHRI BRAJE SH DWIVEDI, AUTHORISED SIGNATORY OF THE APPELLANTS COMPANY, DI D NOT PROVIDE ANY TANGIBLE EVIDENCE REGARDING THE CLANDES TINE RECEIPT OF THE RAW MATERIAL AND MANUFACTURE OF THE FINAL PR ODUCT OUT OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 235 THAT MATERIAL AND CLEARANCE OF THE SAME IN A CLANDE STINE MANNER BY THE APPELLANTS. THE STATEMENT OF SHRI RA JESH SRIVASTAVA THAT THE SLIPS SHOWED THE DISPATCH OF GO OD TO M/S. SYNDICATE TOBACCO PRODUCTS AND WERE ALSO REFLECTED IN THE COMPUTER PRINT OUTS AND THAT THE TRANSPORT BITES FO UND IN THE FILE RESUMED FROM HIS POSSESSION CONTAINED THE DISPATCH OF THE GOODS TO DIFFERENT PARTIES, COULD NOT BE ATTACHED A NY AUTHENTICITY AND LEGAL VALUE AS M/S. SYNDICATE TOBA CCO PRODUCTS HAD NOT ACCEPTED THE RECEIPT OF THE GOODS WITHOUT PAYMENT OF DUTY FROM THE APPELLANTS. THE TRANSPORT ER INVOLVED IN THE ALLEGED DISPATCHES HAD ONLY DISCLOSED THAT T HE GOODS WERE TRANSPORTED THROUGH THEM, BUT NO CONSIGNEE TO WHOM THE GOODS WERE ALLEGEDLY DELIVERED HAS COME FORWARD TO CORROBORATE THEIR VERSION AND ACCEPT THE RECEIPT OF THE GOODS THROUGH THEM, FROM THE APPELLANTS, WITHOUT THE COVE R OF THE DUTY PAID INVOICES. 9. SIMILARLY, THE OCULAR TESTIMONY OF SHRI BRAJESH DWI VEDI, ALLEGED AUTHORIZED SIGNATORY OF THE APPELLANTS, REGARDING THE RECEIPT OF THE RAW MATERIAL IN A CLANDESTINE MA NNER AND MANUFACTURE OF THE GOODS OUT OF THAT MATERIAL A ND DISPATCH OF THE SAME TO VARIOUS BUYERS THROUGH VARI OUS TRANSPORTERS, DID NOT CARRY ANY LEGAL AUTHENTICITY FOR WANT OF CORROBORATION FROM ANY OTHER TANGIBLE EVIDE NCE. THE GENERATION OF MORE THAN ONE INVOICE HAVING COMM ON NUMBER, AS ALLEGEDLY STATED BY SHRI BRAJESH DWIVEDI , AND ALSO MS. AARTI SRIVASTAVA ALSO DID NOT ADVANCE THE CASE OF DEPARTMENT IN ANY MANNER FOR LACK OF ANY EVIDENC E TO PROVE THE ACTUAL RECEIPT OF THE GOODS ON THE BASIS OF THOSE INVOICES BY THE BUYERS- THE MANUFACTURERS OF THE P AN MASALA. THE RAISING OF UNSECURED LOANS BY THE APPELLANTS FROM THE FINANCIAL COMPANIES, NAMELY, M/ S. AVP INVESTMENTS(P) LTD. AND M/S. VRS FININVEST (P) LTD. ALSO DID NOT IN MANNER HELP THE DEPARTMENT IN PROVING THE EVASION OF THE DUTY BY CLANDESTINE REMO VAL OF THE EXCISABLE FINISHED GOODS BY THEM. NONE OF THOS E COMPANIES HAD ADMITTED THAT THE ADVANCEMENT OF LOA N WAS A SHAM TRANSACTION AND THAT IT WAS THE MONEY OF THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 236 APPELLANTS WHICH THEY COLLECTED BY EVASION OF THE C ENTRAL EXCISE DUTY BY CLANDESTINE SALE OF THE EXCISABLE GO ODS. SIMILARLY, THE STATEMENTS FILED WITH THE BANK BY TH E APPELLANTS FOR THE PURPOSE OF FINANCIAL ACCOMMODATI ON, LOAN, PAYMENT SCHEDULES, OVERDRAFTS ETC., ALSO DID NOT FURNISH ANY TANGIBLE PROOF OF CLANDESTINE RECEIPT O F THE RAW MATERIAL AND MANUFACTURER AND REMOVAL OF THE FINISHED GOODS IN A CLANDESTINE MANNER BY THEM. TH OSE STATEMENTS WERE GIVEN BY THE APPELLANTS FOR PROCURI NG MORE FINANCES FROM THE BANK. IT IS WELL SETTLED TH AT THE RECORD MAINTAINED BY AN ASSESSEE FOR ARRANGING FINA NCE, WOULD NOT BE SUFFICIENT FOR PROVING THE CLANDESTINE REMOVAL OF THE FINISHED GOODS BY THEM AS LAID DOWN BY THE TRIBUNAL IN THE CASE OFM/S. T.M. INDUSTRIES V.C CE- 1993 (68) E.L.T. 807. THE FLAWS IN THE INVESTIGATI ON AND IMPERFECTNESS OF THE EVIDENCE HAS BEEN EVEN ACKNOWLEDGED BY THE ADJUDICATING AUTHORITY IN THE IMPUGNED ORDER ITSELF. HE HAS, HOWEVER, STILL ACCE PTED THE INCOMPLETE AND INCONCLUSIVE EVIDENCE FOR SADDLI NG THE APPELLANTS WITH THE DUTY LIABILITY AND THE PENA LTY FOR CLANDESTINE MANUFACTURE AND REMOVAL OF THE EXCISABL E GOODS WITHOUT PAYMENT OF DUTY. THE LAW IS WELL SETT LED THAT THE CHARGE OF CLANDESTINE REMOVAL OF THE DUTIA BLE GOODS BY AN ASSESSEE HAS TO BE PROVED BY THE DEPART MENT BY ADDUCING COGENT, CONVINCING AND TANGIBLE EVIDENC E. SUCH A CHARGE CANNOT BE BASED ON ASSUMPTIONS AND PRESUMPTIONS. IN THIS CONTEXT, REFERENCE MAY BE MA DE TO- (I) KALVERT FOODS INDIA PVT. LTD. V. CCE, MUMBAI-20 03 (152) E.L.T 131 (T);(II) DEEPAK TANDON V. CCE, BHUBANESWAR-2000 (126) E.L.T 1079(T) AND OUDH SUGAR MILLS LTD. V. UNION OF INDIA-1978 (2) E.L.T 172 (S. C), WHEREIN SUCH A PROPOSITION OF LAW HAS BEEN LAID DOW N. 46. FURTHER, APART FROM SERIOUS IRREGULARITIES COMM ITTED BY THE AUTHORISED OFFICERS IN THE MATTER OF RECOVERY OF TH E PEN-DRIVE, AS HAS BEEN HIGHLIGHTED IN PARA 41 ABOVE, THE FACT REMAINS THAT THE PEN DRIVE (FROM WHICH PRINTOUTS HAD BEEN TAKEN) WAS FOUND FR OM THE EXCLUSIVE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 237 POSSESSION AND CONTROL OF SHRI PRADEEP KUMAR BARANW AL, RATHER FOUND TO BE SECURELY PLACED IN HIS BANK LOCKER (JOI NTLY IN THE NAME OF SRI PRADEEP KUMAR BARANWAL AND HIS WIFE SMT. SUMAN BARANWAL) NO.18 WITH STATE BANK OF INDIA. AT THE RELEVANT PO INT OF TIME SRI PRADEEP KUMAR BARANWAL HIMSELF WAS HAVING UNDISPUTE D CONTROL, NOT ONLY ON THE BUSINESS ACTIVITIES CARRIED ON BY THE F AMILIES OF THE TWO BROTHERS, BUT ALSO ON THE DAY-TO-DAY AFFAIRS OF THE TWO FAMILIES. BY VIRTUE OF HIS STATUS IN THE FAMILY. HE HIMSELF ORGA NIZED VARIOUS EVENTS CONNECTED WITH THE MARRIAGE OF APPELLANTS DAUGHTER , AS PER THE ETHOS OF FAMILY DISPENSION UNDER THE HINDU LAW. HE HIM SELF WAS ANSWERABLE TO EXPLAIN THE DOCUMENTS (IF AT ALL TH E PRINT OUT SO OBTAINED COULD BE CLARIFIED AND TERMED AS DOCUMENT ) SEIZED FROM HIS CUSTODY AND CONTROL, BOTH FROM THE ANGLE OF THE ANCIENT RULE OF HINDU LAW AS ALSO FROM THE ANGLE OF APPLICABILITY O F SECTION 132(4A) OF THE ACT, WHICH WAS INTRODUCED ON THE STATUTE BOO K BY THE TAXATION LAW (AMENDMENT) ACT 1975 AND WAS MADE APPLICABLE W. E.F. 1.10.1975. THE SAID SUB-SECTION AS A WHOLE READS AS UNDER:- 132(4A) WHERE ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY , BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG ARE OR IS FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN THE COUR SE OF A SEARCH, IT MAY BE PRESUMED-- (I) THAT SUCH BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING BELONG S TO SUCH PERSON; (II) THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHE R DOCUMENTS ARE TRUE; AND (III) THAT THE SIGNATURE AND EVERY OTHER PART OF SUCH BOO KS OF ACCOUNT AND OTHER DOCUMENTS WHICH PURPORT TO BE IN THE HAND WRITING OF ANY PARTICULAR PERSON OR WHICH MAY REASONABLY BE AS SUMED TO HAVE BEEN SIGNED BY, OR TO BE IN THE HANDWRITING OF , ANY PARTICULAR PERSON, ARE IN THAT PERSONS HANDWRITING , AND IN THE CASE OF A DOCUMENT STAMPED ,EXECUTED OR ATTESTED, T HAT IT WAS DULY STAMPED AND EXECUTED OR ATTESTED BY THE PERSON BY WHOM IT PURPORTS TO HAVE BEEN SO EXECUTED OR ATTESTED. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 238 47. THUS, INITIAL ONUS LIED ON SHRI PRADEEP KUMAR B ARANWAL AND SMT. SUMAN BARANWAL (HIS WIFE) FROM WHOSE LOCKERS T HE SAID PEN DRIVE HAD BEEN RECOVERED ON 2.4.2009 (PRINTOUT TAKE N ON 3.4.2009), TO EXPLAIN THE NATURE OF THE SAID PRINTOUTS AND IN THE ABSENCE OF ANY SATISFACTORY EXPLANATION BEING RENDERED BY THEM, AD VERSE INFERENCE, IF ANY CALLED FOR, COULD BE DRAWN IN THE ASSESSMENT OF SRI PRADEEP KUMAR BARANWAL AND/OR HIS WIFE SMT. SUMAN BARANWAL ONLY. 48. THE SAID SUB-SECTION (4A) WAS INTERPRETED TO ME AN THAT IT WAS APPLICABLE UPTO THE STAGE OF SEARCH AND SEIZURE ACT ION ONLY AND THEREAFTER IT HAS NO ROLE TO PLAY IN THE REGULAR AS SESSMENTS. KIND ATTENTION OF YOUR HONOUR IS INVITED TO THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PUSHKAR NARAIN SARRAF VS. CIT REPORTED IN (1990) 183 ITR 388 [AND THE SUPREME COURT DECISION IN THE CASE OF P.R. METRANI VS. CIT REPORTED IN (2006) 287 ITR 20 9 WHEREIN THE DECISION IN THE CASE OF PUSHKAR NARAIN SARRAF WAS QUOTED WITH APPROVAL]. TO OVERCOME THE DIFFICULTY ARISING OUT OF THE SAID JUDICIAL PRONOUNCEMENT, SECTION 292C WAS INSER TED BY FINANCE ACT 2007 WITH RETROSPECTIVE EFFECT FROM 1.10.1975. THE EFFECT OF SUCH AN INSERTION IS THAT PRESUMPTION UNDER SECTION 132( 4A) IS APPLICABLE AT THE ASSESSMENT STAGE ALSO. THEREFORE, ON AN APPL ICATION OF PROVISIONS OF SECTION 132(4A) READ WITH SECTION 292 C, NO ADVERSE INFERENCE COULD HAVE BEEN DRAWN AGAINST THE APPELLA NT ON THE BASIS OF SAID PRINT-OUT. 49. IN VIEW OF THE LAW OF PRESUMPTION UNDER SECTION 132 (4A) AS HAS BEEN DEALT WITH IN PARAS 45, 46 & 47 HEREINFORE, T HE ADDITIONS IN QUESTION VIZ; RS.1,74,54,511 IN THE ASSESSMENT YEAR 2007-08 & RS.3,86,36,238 IN THE ASSESSMENT YEAR 2008-09 CONST ITUTED MISTAKES OF LAW. ACCORDINGLY, THE APPELLANT HAD EVEN SOUGHT FOR RECTIFICATION OF THE SAME BY FILING SEPARATE PETITIONS DATED 14.02.2 011 FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 (COPIES APPEARING AT PAGES 80 TO 86). THE ACIT HAS PER-FUNCTIVELY DISMISSED THE SAID PETITIONS VIDE SEPARATE ORDERS DATED 29.08.2011, OPERATIVE PART OF WHICH IS CONTAINED IN PARA 3 THEREOF WHICH READS AS UNDER:- 3. RELIANCE IS PLACED ON THE CASE LAW OF BALARAM ( T.S.), ITO VS. VOLKARI BROS. 82 ITR 50 (SC), WHEREIN APEX COUR T HAS HELD ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 239 THAT A MISTAKE APPARENT ON THE RECORD MUST BE AN O BVIOUS AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTAB LISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY CONCEIVABLY BE TWO OPINIONSA DECISION ON A DEBA TABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE REC ORDS. COPIES OF THE ORDERS DATED 29.08.2011 PASSED BY THE ACIT ARE ENCLOSED AT PAGE 87 HERETO. 50. WITH GREAT RESPECT, IT IS SUBMITTED THAT THE IS SUES RAISED BY THE APPELLANT IN THE PETITIONS DATED 14.02.2011 WERE BA SED ON EXPRESS PROVISIONS OF LAW AS REFERRED TO IN PARAS 45 , 46, 47 & 48 ABOVE AND THERE COULD NOT HAVE BEEN TWO VIEWS ON THE SAME. TH EREFORE, REJECTION OF THE APPLICATION FOR RECTIFICATION DATED 14.02.20 11, THROUGH THE ORDERS DATED 29.08.2011 IS NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW. IN ANY CASE THE CONTENTIONS RAISED IN THE PETITIONS DATED 14.02.2011 MAY KINDLY BE TREATED TO BE FORMING PART OF THE APPELLANTS ARGUMENTS IN THESE APPEALS. 51. FURTHER, THE APPELLANTS GRIEVANCE IS THAT, WH ILE DEALING WITH THE PRINTOUT, THE ACIT HAS ADOPTED A PARTISAN ATTITUDE AND INSTEAD OF EXAMINING THE MATTER IN THE ASSESSMENTS OF THE HOLD ERS OF THE LOCKER, THE MATTER HAS BEEN CONSIDERED IN THE HANDS OF THE APPELLANT. IT IS WORTHWHILE TO SUBMIT HERE THAT IT IS NOT A CASE WHE RE DOCUMENT (THE PRINTOUT AS HELD TO BE SO) HAS BEEN SEIZED FROM A S TRANGER OR A PERSON UNCONNECTED WITH THE AFFAIRS OF THE FAMILY. SHRI PR ADEEP KUMAR BARANWAL IS THE ELDER BROTHER OF THE APPELLANT AND IT WAS A NORMAL AND USUAL STATE OF AFFAIRS THAT HE HIMSELF MADE ARR ANGEMENTS FOR THE MARRIAGE OF HIS NIECE (TO BE SOLEMNIZED IN HIS OWN WAY). IN FACT, IT HAS BEEN SO DONE BY HIM AS IS BORNE OUT FROM THE BOOKIN G ARRANGEMENTS AS HAVE BEEN MADE BY HIM. BY WAY OF EVIDENCE, THE A PPELLANT BEGS TO PLACE HEREWITH A COPY OF E-TICKET AS BOOKED BY SHRI PRADEEP BARANWAL, FOR THE JOURNEY UNDERTAKEN BY THE FAMILY MEMBERS FROM VARANASI TO DELHI, AT PAGE 176 HERETO. 52. THE WHOLE EXERCISE SHOWS NOT ONLY THE ANIMUS TH AT THE OTHER PARTY HAD BEEN CARRYING AGAINST THE APPELLANT BUT A LSO SHOWS THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 240 COMPLEXITY OF THE INCOME TAX AUTHORITIES CONCERNED IN THE MATTER. THE SITUATION, WHICH IS QUITE ALARMING, NOT ONLY CALLS FOR THE CROSS EXAMINATION OF THE PERSON GIVING STATEMENT AT THE T IME OF OPERATING THE LOCKER, BUT THE AUTHORISED OFFICERS SHOULD AL SO BE MADE AVAILABLE AS WITNESS SO THAT THEY MAY BE PUT TO CRO SS EXAMINATION BY THE APPELLANT, AND THE APPELLANT SPECIFICALLY PRAYS FOR THE SAME. THE APPELLANT UNDERTAKES TO BEAR THE COST ALSO OF SUCH AN ENQUIRY/CROSS EXAMINATION. 53. APART FROM THE MALPRACTICE/MALAFIDE COMMITTED B Y THE AUTHORISED OFFICERS AS HAS BEEN SPECIFICALLY REFERR ED TO IN PARA 42 HEREINFORE, THE ADDITIONS IN QUESTION ARE BASED ON PREJUDICE OF THE ASSESSING OFFICER, THAT HE CARRIED AGAINST THE APPE LLANT AS WELL AS THE PARTNERSHIP FIRM M/S CARPET INTERNATIONAL WHEREIN T HE APPELLANT AND HIS FAMILY MEMBERS ARE THE PARTNERS W.E.F. 01.04.20 08 TO THE EXCLUSION OF SRI PRADEEP KUMAR BARANWAL AND HIS FAMILY MEMBER S. 54. GLARING EXAMPLE OF THE BIAS AND PREJUDICE T HAT THE ACIT HAS BEEN CARRYING AGAINST THE APPELLANT IS TO BE FO UND NOT ONLY IN THE PRESENT ASSESSMENTS BUT ALSO IN THE CASE OF M/S.CAR PET INTERNATIONAL WITH WHICH THE APPELLANT AND HIS FAMILY MEMBERS CAN NOT TO BE EXCLUSIVELY ASSOCIATED W.E.F. 1.4.2008. 55. IN ORDER TO PROVE THE BIAS OF THE LD. ACIT, THE APPELLANT BEGS TO GIVE HEREIN BELOW A COMPARATIVE CHART OF THE GP RAT ES APPLIED BY HIM IN THE ASSESSMENT OF M/S. CARPET INTERNATIONAL PVT. LTD. (IN WHICH PRADEEP KUMAR BARANWAL AND HIS FAMILY MEMBER ARE HA VING CONTROL AFTER 31.03.2008, FROM WHOSE LOCKER PEN DRIVE WAS O BTAINED) IN DIFFERENT YEARS, VIS--VIS CARPET INTERNATIONAL (IN WHICH PRAMOD KUMAR BARANWAL AND HIS FAMILY MEMBER ARE HAVING FUL L CONTROL), THE G.P. RATE APPLIED IN THE CASE OF IN THE CORRESPONDI NG ASSESSMENT YEARS. ASSESSMENT YEAR G.P. ASSESSED BY ASSESSING OFFICER FOR CARPET INTERNATIONAL PVT. LTD. (OWNED BY PRADEEP KUMAR BARANWAL AND HIS G.P. ASSESSED BY ASSESSING OFFICER FOR CARPET INTERNATIONAL (OWNED BY APPELLANT AND HIS FAMILY MEMBER) ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 241 FAMILY MEMBER) 2005-06 11.90% 26.88% 2006-07 14.02% 26.90% 2007-08 12.64% 24.70% 2008-09 13.85% 22.73% 56. HAD THE ASSESSING OFFICER BEEN UNBIASED AND FAIR IN HIS APPROACH, HIS NATURAL INSTINCT WOULD HAVE BEEN TO K EEP CARPET INTERNATIONAL ACCOUNT UNDISTURBED AND APPLY THE HIG HER G.P. RATE AS DISCLOSED BY CARPET INTERNATIONAL IN THE CASE OF CA RPET INTERNATIONAL PVT. LTD., WHILE COMPLETING ASSESSMENTS IN THEIR CA SE FOR DIFFERENT ASSESSMENT YEARS. THE PARADOX OF THE MATTER IS THA T THE MUCH BETTER G.P. RATE DISCLOSED BY THE APPELLANT HAS BEEN HELD TO BE LOW EVEN WITHOUT GIVING THE PARTICULARS OF ALLEGED COMPARABL E CASES. 57. IN VIEW OF THE SETTLED LEGAL POSITION AS HAS BE EN DEALT WITH IN PARAS 41 TO 55 ABOVE, THE ADDITIONS OF RS.1,74,54,511 & RS.3,86,36,238 IN THE ASSESSMENT YEARS 2007-08 & 20 08-09 RESPECTIVELY, ARE NOT AT ALL MAINTAINABLE AND THE S AME DESERVE TO BE DELETED. VI APPELLANTS VERSION (ON THE ISSUE OF EXPENDITURE IN THE MARRIAGE OF HIS DAUGHTER) 58. THE APPELLANTS CONTENTION ALL THROUGH BEEN THA T FROM HIS END, HE CONTRIBUTED SUMS AGGREGATING RS.32 LAKHS IN THE MARRIAGE OF HIS DAUGHTER AKRISHTI AND REST OF THE EXPENDITURE, IF A NY, WAS INCURRED BY SHRI PRADEEP KUMAR BARANWAL WHO HAD MADE ALL THE AR RANGEMENTS, IN HIS CAPACITY AS HEAD OF THE FAMILY. 59. AS REGARDS SOURCE OF EXPENDITURE INCURRED IN MA RRIAGE OF APPELLANTS DAUGHTER AKRISHTI, TO THE EXTENT OF RS. 32 LACS, AS HAD BEEN CONTRIBUTED BY HIM, THE SAME IS ATTRIBUTABLE TO A) SALE PROCEEDS OF AGRICULTURAL LANDS SITUATED IN VILLAGES (WHEREIN INVESTMENT HAD BEEN MADE BY THE APPELLANT FROM TIM E TO TIME THROUGH HIS FATHER-IN-LAW SRI NAND LAL JI BARANWAL) ; ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 242 B) SALE OF EUCLYPTUS AND OTHER TREES MAINLY MEANT F OR FIRE WOOD, AS HAD BEEN GROWN ON SUCH AGRICULTURAL LANDS (AS HAD B EEN TAKEN POSSESSION BY THE APPELLANT BY MAKING INVESTMENTS I N EARLIER YEARS); AND C) CONTRIBUTION MADE FROM NANIHAL (GRAND MATERNAL UNCLE) SIDE OF AKRISHTI THROUGH HIS NANA SRI NAND LAL JI BARANW AL. FURTHER ELUCIDATION ON THE AFORESAID SOURCES IS B EING GIVEN IN THE PARAGRAPHS THAT FOLLOW. 60. AS STATED IN PARA 4 ABOVE, THE APPELLANT HAD BEEN MAKING INVESTMENT IN PURCHASE OF AGRICULTURAL LANDS IN VIL LAGE AREAS WITH OR WITHOUT BUILDING. AS PER STATEMENT OF AFFAIRS AS ON 31.03.1995(ACCOMPANYING HE RETURNS FOR RESPECTIVE ASSESSMENT YEARS) STOOD AT AN AGGREGATE FIGURE OF RS.9,30,000 BREAK OF WHICH IS GIVEN HEREUNDER:- ASSESSMENT YEAR FINANCIAL YEAR AMOUNT ADVANCED FOR AGRICULTURAL LAND 1992-93 1991-92 2,80,000 1993-94 1992-93 50,000 1994-95 1993-94 1,00,000 1995-96 1994-95 5,00,000 9,30,000 AFTER MAKING INVESTMENT IN THE AGRICULTURAL LANDS ( WITH OR WITHOUT BUILDINGA), THE APPELLANT HAD TAKEN POSSESSION OF T HE SAME AND SUBJECTED SUCH LANDS TO PLANTATION MAINLY OF EUCLYP TUS TREES AND OTHER TREES OF THE SAME VARIETY WHICH ARE USED IN THE VIL LAGE AREAS AS FIRE WOOD. THE AGRICULTURAL LANDS SO ACQUIRED BY THE AP PELLANT WERE SOLD MAINLY DURING THE FINANCIAL YEAR 2006-07 (WHICH WAS THE YEAR IN WHICH MARRIAGE OF HIS DAUGHTER TOOK PLACE) AND PART LY IN THE SUBSEQUENT YEAR. THE PROCEEDS OF SUCH TREES (AS HA D BEEN PLANTED IN THE EARLIER 1990S) AND ALSO THE PROCEEDS OF THE AGR ICULTURAL LANDS THAT HAD BEEN SOLD DURING THE FINANCIAL YEAR 2006-07 AND 2007-08 (OUT OF INVESTMENTS OF SUMS AGGREGATING RS.5,00,000/- AS M ADE IN THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 243 ASSESSMENT YEAR 1995-96) CONSTITUTED THE SOURCE OF RECEIPTS AS MENTIONED AT SL. NO. (A) AND (B) OF PARA 59 HEREINFORE. TRANSACTION OF SALES TOOK PLACE MOSTLY IN THE FINAN CIAL YEAR 2006-07 AND PARTLY IN THE FINANCIAL YEAR 2007-08, THE FATHE R-IN-LAW OF THE APPELLANT HAD BEEN ABLE TO MOP UP SUBSTANTIAL FUNDS AND THE SAME WERE DULY HANDED OVER TO SRI PRAMOD KUMAR BARANWAL, APPELLANT HERE. YEAR WISE BREAK OF FUNDS SO REALIZED AND HAND ED OVER TO APPELLANT IS AS UNDER:- FINANCIAL YEARS SL. NO. PARTICULARS 2006-07 2007-08 (I) SALE OF AGRICULTURAL LANDS 13,00,000 5,00,000 (II) SALE OF TREES 14,00,000 8,00,000 TOTAL 27,00,000 13,00,000 61. AS REGARDS (C) OF PARA 59 , IT IS STATED THAT SRI NAND LAL JI BARANWAL HAILS FROM A JAMINDAR FAMILY WHICH HAD UND ER ITS OWN CULTIVATION OVER LARGE AREAS OF LAND, WHICH GOT FRA GMENTED /DIVIDED WITH THE PASSAGE OF TIME, OWING TO SETTLEMENTS MADE IN BIGGER FAMILY FROM TIME TO TIME. EVEN AS ON TODAY, HE HAD UNDER THE CULTIVATION OF HIS BRANCH OF FAMILY, LAND AREAS ADMEASURING 54 BIS WAS. AS AKRISHTIS MARRIAGE WAS THE FIRST IN THE THIRD GENE RATION OF SRI NAND LAL JI BARANWAL, HE ALSO SOLD THE EUCLYPTUS TREES A ND OTHER TREES AS HAD BEEN GROWN BY HIM OVER A PERIOD OF YEARS IN THE LAND AREAS UNDER THE CULTIVATION OF HIS FAMILY, DURING THE FINANCIAL YEAR 2006-07 AND OUT OF SUCH REALISATIONS HE MADE GENEROUS CONTRIBUTIO N, MOSTLY IN CASH (EXCEPT SOME TRADITIONAL GIFT ITEMS) IN THE MARRIAG E OF APPELLANTS DAUGHTER. 62. AS ALL THE ACTIVITIES REFERRED TO IN PARAS 4, 59, & 60 HEREINFORE WERE MANAGED AND LOOKED AFTER BY SHRI NAND LAL BARA NWAL, AN AFFIDAVIT DULY SWORN IN BY HIM, WHICH CONTAIN ALL T HE RELEVANT DETAILS, ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 244 IS BEING SUBMITTED HEREWITH AT 88 TO 93) THE APPELL ANT COULD NOT PLACE THE INFORMATION (AS CONTAINED IN THE SAID AFFIDAVIT ) DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 153A BEFORE THE ACIT AS THE APPELLANT WAS NOT GIVEN A DUE AND EFFECTIVE OPPORTU NITY OF BEING HEARD. THIS CONTENTION IS BORNE OUT FROM THE FOLLO WING FACTS; (I) COPY OF AR-2 WHICH IS A PRINTOUT STATED TO HA VE BEEN TAKEN FROM THE PEN DRIVE RECOVERED FROM BANK LOCKER NO.18 WITH STATE BANK OF INDIA (IN THE JOINT NAMES OF PRADEEP KUMAR BARANWAL AND HIS WIFE SMT. SUMAN BARANWAL), ON THE BASIS OF WHICH HUGE ADDITION OF RS.1,74,54,511/- WAS MADE AVAILABLE TO THE APPELLANT AT THE FAG END OF THE LIMITATION PERIOD; (II) AFTER CONCLUSION OF SEARCH, STATEMENT OF SMT. RADHI KA BARANWAL (WIFE OF THE APPELLANT) WAS RECORDED (IN THE PRESEN CE OF THE APPELLANT) WHEREIN QUERIES WERE RAISED ABOUT THE MA RRIAGE EXPENSES, WITH REFERENCE TO THE SAID PRINTOUT; HOWE VER, COPY OF THE PRINTOUT WAS NOT MADE AVAILABLE TO THE APPELLAN T AT THAT TIME; (III) SO MUCH SO, EVEN COPY OF THE STATEMENT DATED 9.4.20 09 WAS NOT MADE AVAILABLE TILL THE COMPLETION OF THE ASSESSMEN T AND THE APPELLANT COULD OBTAIN THE SAME IN THE MONTH OF AUG UST 2011, I.E. MUCH AFTER THE COMPLETION OF ASSESSMENT ON 31. 12.2010; (IV) SPECIFIC QUERIES ABOUT MARRIAGE EXPENSES WERE RAISE D IN TERMS OF QUESTIONNAIRE DATED 9.11.2010, THAT WAS ALMOST T HE FAG END OF THE LIMITATION PERIOD WHEN LARGE NUMBER OF PROCE EDINGS WERE GOING ON IN WHICH CASES ALSO LIMITATION WAS DUE TO EXPIRE ON 31.12.2010; (V) BY WAY OF REPLY TO THE QUESTIONNAIRE, ISSUED UNDER SECTION 142(1), THE APPELLANT HAD DULY EXPLAINED THAT HIS C ONTRIBUTION IN MARRIAGE EXPENSES WAS TO THE EXTENT OF RS.32 LAK HS AND THE SAID SUM WAS ARRANGED FROM VARIOUS SOURCES WHICH IN CLUDE THE SOURCES MENTION IN PARA 59 ABOVE; ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 245 (VI) AFTER SAID EXPLANATION NO FURTHER QUERIES WERE RAIS ED BY THE ACIT PRESUMABLY FOR THE REASON THAT SHRI PRADEEP KUMAR BARANWAL AND SMT. SUMAN BARANWAL (FROM WHOSE POSSES SION THE PEN DRIVE WAS RECOVERED, FROM WHICH PRINTOUTS W ERE TAKEN ON 3RD APRIL, 2009) WERE THEMSELVES ANSWERABLE FOR THE DETAILS MENTIONED IN THE SAID PRINTOUTS, NO FURTHER ELABORA TION OF VARIOUS SOURCES FROM WHICH CONTRIBUTION AGGREGATING RS.32 LAKHS HAD BEEN ARRANGED BY THE APPELLANT, 63. IN VIEW OF THE REASONS GIVEN PARA 62 HEREINFORE, IT IS A CASE WHERE THE IMPUGNED ASSESSMENT ORDER HAS BEEN PASSED BY TH E ACIT, WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO ADDUCE EVIDENCE WHICH IS COVERED BY CLAUSE (D) OF RULE 46A OF INCOME-TAX RULES 1962. THEREFORE, IN THE INTEREST OF SUBSTANTIAL JUSTICE, THE AFFIDAVIT AS AFORESAID AS ALSO THE INFORMATION CONTAINED THEREIN DESERVES TO BE ADMITTED FOR CONSIDERATION. 64. IT IS ALSO SIGNIFICANT TO MENTION HERE THAT THE APPELLANT IS OBLIGED UNDER THE LAW TO EXPLAIN THE EXPENDITURE IN THE MAR RIAGE OF AKRISHTI, TO THE EXTENT OF RS.32 LAKHS, AS HAVE BEEN CONTRIBUTED BY THE APPELLANT, WHICH STAND FULLY PROVED BY THE INFORMATION GIVEN H EREINFORE. IN THIS VIEW OF THE MATTER, NOT ONLY THE INCOME OF RS.32 LAKHS ( INCLUDING IN THE SUM OF RS.34,80,000) SHOWN BY THE APPELLANT AS HAD BEEN SH OWN BY THE APPELLANT IN THE RETURN FILED IN COMPLIANCE WITH TH E NOTICE UNDER SECTION 153A DESERVES TO BE EXCLUDED FROM THE COMPUTATION O F UNDISCLOSED INCOME, THE ADDITION OF RS.1,74,54,511/- SHOULD ALS O BE DELETED. FOR SIMILAR REASONS, THAT THE SUM OF RS.8,00,000 (AS HA D BEEN SHOWN AS INCOME IN THE ASSESSMENT YEAR 2008-09 IN THE RETUR N FILED IN COMPLIANCE WITH NOTICE UNDER SECTION 153A) REPRESENTED THE REC EIPT FROM SALE OF TREES, THE SAME SHOULD ALSO BE EXCLUDED FROM THE IN COME. 65. FURTHER IT WAS ONLY UNDER A MISTAKEN NOTION OF LAW ABOUT THE TAXABILITY OF THE RECEIPTS FROM THE SOURCES MENTION ED IN PARA 59 HEREINFORE, THAT THE APPELLANT HAD OFFERED A SUM OF RS.32 LAKHS (INCLUDED IN RS.34,80,000) AND RS.8,00,000 IN THE ASSESSMENT YEARS 2006-07 AND 2007-08 FOR TAXATION IN HIS HANDS IN THE RETURN FIL ED IN COMPLIANCE WITH NOTICE UNDER SECTION 153A FOR THE ASSESSMENT YEARS 2006-07 AND 2007- 08. HE HAS NOW BEEN ADVISED THAT THE AGRICULTURAL L ANDS WHICH WERE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 246 SUBJECTED TO SALE DURING THE FINANCIAL YEAR 2006-07 (AND ALSO IN THE FINANCIAL YEAR 2007-08) WERE OUTSIDE THE DEFINITION OF CAPITAL ASSET AS CONTAINED IN SECTION 2(14) OF THE ACT AND THEREFORE DID NOT ATTRACT TAXATION. ACCORDINGLY, IN VIEW OF THE PRINCIPLE LA ID DOWN BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. MAHALAXMI SUGAR MILLS CO. LTD. REPORTED IN (1986)160 ITR IN 920 WHEREIN THEIR LORDSHIPS HAVE OBSERVED AND HELD AS UNDER:- THERE IS A DUTY CAST ON THE INCOME-TAX OFFICER TO APPLY THE RELEVANT PROVISIONS OF THE INDIAN INCOME-TAX ACT FO R THE PURPOSE OF DETERMINING THE TRUE FIGURE OF THE ASSESSEE'S TAXAB LE INCOME AND THE CONSEQUENTIAL TAX LIABILITY. THAT THE ASSESSEE FAILS TO CLAIM THE BENEFIT OF A SET-OFF CANNOT RELIEVE THE INCOME-TAX OFFICER OF HIS DUTY TO APPLY SECTION 24 IN AN APPROPRIATE CASE. (PAGE 921 ) THE SAID SUMS OF RS.32 LAKHS AND RS.8 LAKHS DESERVE TO BE DIRECTED TO BE EXCLUDED FROM THE RETURNED INCOME AND TAXES PAID THEREON SHOULD ALSO BE HELD TO BE REFUNDABLE. 66. WHOLLY WITHOUT PREJUDICE THE CONTENTION RAISED IN THE FOREGOING PARAGRAPHS THE APPELLANT BEGS TO CONTEND THAT COMPU TATION OF UNDISCLOSED INCOME AT RS. 1,74,54,511 ON ACCOUNT OF EXPENDITURE ALLEGED TO HAVE BEEN INCURRED IN THE MARRIAGE OF AKRISTI IN THE ASSESSMENT YEAR 2007-08 , IS BASED ON MIS-CONCEPTION AND MIS-READING OF THE PRINTOUT AS HAD BEEN TAKEN FROM THE DOCTORED PEN-DRIVE (REFERRE D TO IN PARAS 41 TO 55 HEREINFORE) AND UNFOUNDED ESTIMATES, AS MAY BE S EEN FROM THE ANALYSIS GIVEN HEREUNDER:- (I) PAYMENT TO HRH HOTELS: RS.60,52,282/- IT IS STATED TO BE SUPPORTED BY THE BILL OF HRH HOT ELS AS OBTAINED BY THE ASSESSING OFFICER BY MAKING ENQUIRIES UNDER SECTION 133(6). AS THE APPELLANT WAS NOT SUPPLIED WITH A COPY OF TH E SAID BILL (EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS), THE A PPELLANT HIMSELF HAS OBTAINED A COPY OF THE SAID BILL DIRECT LY FROM THE HRH HOTELS AND FROM THE SAID BILL IT IS SEEN THAT PART OF THE SAME IS IN THE NAME OF LALIT BARANWAL. THIS STATE OF AFFAIRS, WHICH IS WELL DOCUMENTED, ITSELF GOES TO SHOW THAT THE APPELLANT HAD MERELY ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 247 MADE CONTRIBUTION IN MARRIAGE OF HIS DAUGHTER AND B UT FOR SUCH CONTRIBUTION, ALL THE ARRANGEMENTS WERE MADE BY THE BROTHERS OF THE APPELLANT, OUT OF THEIR OWN RESOURCES, IN THE M ARRIAGE OF AKRISTI. (II) PAYMENT TO HRH HOTEL AS ADVANCES: RS.1,00,000/ - THIS IS A PRE-PAYMENT AND COVERED FULLY BY THE GROS S AMOUNT OF THE BILL AS MENTIONED AT SL. NO.(I) ABOVE. (III) AMOUNT PAID FOR TAXI RENT: RS. 2,49,925/- THERE IS NO EVIDENCE OF SUCH AN EXPENDITURE HAVING BEEN INCURRED IN THE MARRIAGE OF AKRISTI. FROM THE PRINTOUT TAKEN FROM THE PEN- DRIVE REFERRED TO HEREINFORE, IT IS SEEN THAT THER E WAS SOME SORT OF AN ESTIMATE GIVEN BY SOME TOUR OPERATOR FOR PROVIDI NG TAXI SERVICE. THIS DOCUMENT BY ITSELF DOES NOT SHOW THAT ANY SUCH EXPENDITURE WAS ACTUALLY INCURRED, EVEN BY SRI PRADEEP KUMAR BA RANWAL, WHAT TO SAY OF THE APPELLANT. (IV) PAYMENTS FOR ROOM OF OTHER HOTELS: 51,60,270 THIS ADDITION IS ALSO BASED ON THE INFERENCE DRAWN FROM THE PRINTOUT TAKEN FROM THE PEN-DRIVE REFERRED TO ABO VE. THE PRINTOUT CONTAINS THE DETAILS OF GUESTS ARRIVING AT UDAIPUR AND THE PLACES OF STAY EARMARKED FOR THEM. ON THE BASIS OF SUCH LIST, THE ASSESSING OFFICER HAS PRESUMED THAT THE ARRANGEMENT S FOR STAY WERE MADE OVER AND ABOVE THE ACCOMMODATION ARRANGED IN VARIOUS HOTELS OF HRH GROUP FOR WHICH THEY HAD RAIS ED BILLS FOR SUMS AGGREGATING RS. 60,52,282 . IN ANY CASE OVER AND ABOVE THE PAYMENTS TO HRH HOTELS MENTIONED AT (I) ABOVE, THERE IS NO EVIDENCE FOUND EVEN FROM THE SAID PRINTOUT THAT ANY PAYMENT HAD BEEN MADE OVER AND ABOVE THE PAYMENTS MADE TO HRH H OTELS. (V) PAYMENT FOR TRAVEL FOR AIR:RS.57,83,134 THIS AMOUNT HAS AGAIN BEEN INCLUDED ON THE BASIS OF SAID VERY PRINT-OUT WHICH CONTAINED THE PARTICULARS OF GUES TS FROM BRIDEGROOM SIDE, COMING FROM DELHI TO UDAIPUR. FRO M THE ENQUIRIES MADE, IT HAS BEEN REVEALED THAT SUCH PART ICULARS WERE NOTED BY THE PERSON DEPUTED BY SRI PRADEEP KUMAR BA RANWAL HIMSELF, TO ENSURE THAT THE BARATIS ARE PROPERLY LO DGED IN THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 248 ACCOMMODATION RESERVED FOR THEM AND IT HAS HAVE NOT HING TO DO WITH THE EXPENDITURE INCURRED IN THEIR TRAVEL ARRAN GEMENTS. FURTHER, THE SAID PRINTOUT ALSO INCLUDES BOOKING BY SRI PRADEEP KUMAR BARANWAL FOR THE ARRANGEMENTS MADE BY HIM FOR MEMBERS OF THE BRIDES SIDE (GHARATIS) FOR THEIR TRAVELING FROM VARANASI TO DELHI, AS PER WHICH EXPENDITURE INCURRED WAS RS.42, 127. FROM DELHI TO UDAIPUR JOURNEY WAS UNDERTAKEN BY TRAIN. THEREFORE, TWICE OF RS.42,127 WHICH COMES TO RS.84,254 COULD A LONE BE ATTRIBUTED TO BE THE EXPENDITURE INCURRED BY SRI PR ADEEP KUMAR BARANWAL IN MAKING TRAVEL ARRANGEMENTS OF THE GHAR ATIS FROM VARANASI TO DELHI AND BACK. AS REGARDS THE TRAVELI NG EXPENSES FROM DELHI TO UDAIPUR THE SAME ARE COVERED BY THE E XPENDITURE MENTIONED IN SL. NO (VI) HEREINAFTER. (VI) PAYMENT FOR TRAVEL BY TRAIN FROM DELHI TO UDAIPUR A ND BACK:RS.1,08,700/- THIS EXPENDITURE IS ADMITTED TO HAVE BEEN INCURRED IN CONNECTION WITH THE JOURNEY OF GHARATIS. 67. FROM THE SAID ANALYSIS, THE ESTIMATE OF RS. 1,74,54,511 IS LIABLE TO BE SUBSTITUTED BY A FIGURE OF RS. 62,45,236 AS MADE UP OF THE FOLLOWING: (RS.) (I) PAYMENT TO HRH HOTELS 60,52,282 (II) TRAVEL ARRANGEMENTS MADE FOR GHARATIS, VARANASI TO DELHI AND BACK (RS.42127 X 2) 84,254 (III) EXPENDITURE INCURRED ON TRAVEL ARRANGEMENTS OF THE GHARATIS FROM DELHI TO UDAIPUR AND BACK 1,08,700 62,45,236 AND ON THE BASIS OF SUCH A SUBSTITUTED AMOUNT ALSO, NO ADDITION COULD HAVE BEEN MADE IN THE ASSESSMENT OF THE APPELLANT A S HIS CONTRIBUTION IN THE OVERALL ARRANGEMENT OF THE MARRIAGE (WHICH INCL UDE THE ABOVE REFERRED HEADS OF EXPENDITURE ALSO) WAS RS.32 LACS WHICH STAND FULLY PROVED FROM THE SOURCES AS MENTIONED IN PARA 59 ABOVE. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 249 25. THE SUBMISSION SO MADE BY THE APPELLANT CAN BE SUM MARIZED AS UNDER:- SL.NO. GIST OF THE SUBMISSIONS (I) THE RECOVERY OF THE PRINTOUT CONTAINING THE SCA NNED COPY OF SOME PARCHA (I.E., EXCELL SHEET OF RECEVING AND DEPARTURE OF GUESTS ETC.) AS HAS BEEN RECOVERED FRO M BANK LOCKER NO.18 STANDING IN THE JOINT NAMES OF SRI PRA DEEP KUMAR BARANWAL AND HIS WIFE SMT. SUMAN BARANWAL ON 2.4.2009 IS A CONCOCTED AFFAIR. THE SEARCH AND SEI ZURE ACTION HAD TAKEN PLACE ON 11.2.2009 AND THERE AFTER AS PER BANK RECORDS, THE SAID LOCKER WAS OPERATED WITH IMP UNITY BY SRI PRADEEP KUMAR BARANWAL ON 13.2.2009 AND 18.2.2009. THE RECOVERY THEREFORE IS OF CONSPIRA TORIAL NATURE AND CANNOT EVEN BE SAID TO HAVE BEEN SEIZED DURING THE COURSE OF SEARCH AND SEIZURE ACTION, EVEN IN THE CASE OF SRI PRADEEP KUMAR BARANWAL AND SMT. SUMAN BARANWAL. THEREFORE NOT ONLY THE PERSON GIVING THE STATEMENT AT THE TIME OF OPERATING BANK LOCKER, FOR WHICH STATEMENT THE AUTHORIZED OFFICER NEEDED TO BE TO CR OSS EXAMINED, BY GIVING DUE OPPORTUNITY TO THE APPELLAN T, BEFORE DRAWING ANY ADVERSE INFERENCE ON THE BASIS O F SUCH PEN-DRIVE. THIS HAVING NOT BEEN DONE, UNDISPUTEDLY, THE ADDITION HAS BEEN MADE IN VIOLATION OF PRINCIPLES O F NATURAL JUSTICE AND IS, THEREFORE, NOT MAINTAINABLE . (II) VARIOUS SUMS AS MENTIONED ON THE SAID PARCHA C ONTAINING THE DETAILS OF BOOKING OF HOTELS AND PAYMENT MADE A RE DULY SUPPORTED BY THE SOURCES AND THE SAID PARCHA N O WHERE INDICATES THAT THE APPELLANT HAS MADE PAYMENT OUT OF UNDISCLOSED SOURCES. (III) ANALYSIS OF THE FIGURES OF EXPENSES MENTIONED IN THE SAID PARCHAS (CALLED AS DOCUMENTS IN THE WS) BY AUTHORIS ED OFFICERS ARE BASED ON MIS-CONCEPTION AND MIS-READIN G OF THE PRINTOUT. ACTUAL EXPENSES INCURRED AS PER APPEL LANTS ANALYSIS (AS DETAILED IN PARA 66 & 67 OF WS) IS RS. 62,45,236 AS AGAINST RS. 1,74,54,511/- AS ESTIMATED BY THE OFFICERS. OUT OF THIS 62,45,236/- APPELLANT HAS IN CURRED ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 250 ONLY RS. 32,00,000/- SOURCE OF WHICH IS DULY ESTABL ISHED AND BALANCE OUT OF TOTAL EXPENSES INCURRED WAS MET BY PRADEEP BARANWAL (TAU OF AKRISHTI BARANWAL). (VI) AS FAR AS SOURCE OF INCOME OF RS. 32,00,000/- IS CONCERNED, THE SAME IS ATTRIBUTABLE TO SALE PROCEEDS OF AGRICU LTURE LAND, EUCALYPTUS AND OTHER TREES AND CONTRIBUTION F ROM NANIHAL. DETAILED DISCUSSION REGARDING SOURCE OF SUCH INCOME HAS BEEN MADE IN PARA 58 TO 65 OF WS. (VII) AFFIDAVIT OF SHRI NAND LALA BARANWAL, KHASRA KHATUNI OF NAND LAL BARANWAL AND CERTIFICATE FROM GRAM PRADHAN REGARDING GROWING & SALE OF TREES SUPPORTS THE SOUR CE OF RS. 32,00,000/- VERY CANDIDLY. MOREOVER TO THIS PRO DUCTION OF SALE DEED OF VARIOUS BUYERS MAKES THE GENUINENES S OF THE TRANSACTION VERY MUCH CLEAR. 26. I HAVE CAREFULLY CONSIDERED THE RIVAL VIEW POINTS AND REACHED A CONCLUSION THAT ADDITION OF RS. 1,74,54,511/- AS MA DE BY THE ASSESSING OFFICERS IS SUSPICIOUS FOR A VARIETY OF REASONS. F IRSTLY LOOKING AT VARIOUS DATES OF OPERATION, IT CANNOT BE SAID THAT THE PEN-DRIVE IN QUESTION IS A RESULT OF RECOVERY MADE DURING THE CO URSE OF SEARCH AND SEIZURE ACTION, EVEN IN THE CASE OF SRI PRADEEP KUM AR BARNWAL AND SMT. SUMAN BARANWAL. EVEN IF THE ALLEGATION THAT RE COVERY OF THE PEN- DRIVE MAY BE A MANIPULATED AFFAIR IS IGNORED, FOR A MOMENT, ALTHOUGH IT IS QUITE PLAUSIBLE, THE SITUATION REMAINS THAT T HE PEN-DRIVE IN QUESTION CANNOT TREATED TO HAVE BEEN FOUND KEPT IN THE BANK LOCKER IN A NORMAL SITUATION. LOOKING TO THE VARIOUS ABNORMAL ITIES AS ARE REFLECTED IN THE DATES ON WHICH LOCKER WAS OPERATED UPON AND RECOVERY WAS MADE, THE CREDIBILITY OF THE RECOVERY ITSELF IS IN DISPUTE. SECONDLY FOR PROVING GENUINENESS OF THE PEN-DRIVE T HE LD. ACIT HAS BROUGHT ON RECORD EXPENSES INCURRED IN HOTEL BILL A T RS. 60,52,282/- THROUGH ENQUIRIES MADE U/S. 133(6). THIRDLY THE PAR CHA/DOCUMENT EVEN IN THE FORM IN WHICH IT WAS AVAILABLE, NOWHERE SHOWS THAT SUMS MENTIONED THEREIN WAS ACTUAL EXPENSES INCURRED. RAT HER THE SUMS SHOWN IN IMPUGNED ASSESSMENT ORDER ARE MERELY AN ES TIMATION OF LD. ACIT ON THE ARRANGEMENTS OF THE MARRIAGE OF THE DAU GHTER. THEREFORE, THE SAID AMOUNTS COULD NOT HAVE BEEN TREATED TO BE THE AMOUNT INCURRED ON MARRIAGE OF DAUGHTER BY THE APPELLANT. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 251 27. NOW THE DISPOSAL OF APPEAL DEPENDS UPON THE APPEL LANTS VERSION OF SUBMISSION REGARDING SOURCE OF EXPENDITU RE INCURRED. IN THIS REGARD AN AFFIDAVIT FROM SRI NAND LAL BARANWAL , FATHER-IN-LAW OF THE APPELLANT, WAS ALSO FILED STATING THEREIN THE P ARTICULARS OF SOURCES OF ADDITIONAL INCOME AS DISCLOSED BY THE APPELLANT. RELEVANT PARA 10 TO 19 OF AFFIDAVIT ARE REPRODUCED HEREUNDER: 10. THAT IN ORDER TO PROVIDE FOR LONGTERM REQUIREM ENTS OF THE FAMILY OF MY DAUGHTER SMT. RADHIKA DEVI BARANWAL, I T WAS CONSIDERED TO BE MORE PRUDENT BY ME TO PUT THE AGRI CULTURAL LANDS AS HAD BEEN ACQUIRED ON BEHALF OF SRI PRAMOD KUMAR BA RANWAL TO PLANTATION OF QUICK GROWING VARIETIES OF TREES WHIC H WERE EASILY SALABLE IN THE LOCAL AREA. 11. THAT INITIAL INVESTMENT INCURRED IN THE PLANTAT ION WAS PROVIDED BY SRI PRAMOD KUMAR BARANWAL HIMSELF. SO F AR AS MAINTENANCE WAS CONCERNED, THE SAME WAS ENTRUSTED T O THE NATIVES WHO HAD READILY AGREED TO TAKE THE RESPONSIBILITY I N LIEU OF MY ALLOWING THEM TO APPROPRIATE THE AGRICULTURE PRODUC E OVER SUCH LANDS (WHICH WERE BEING PUT TO PLANTATION OF QUICKE R GROWING VARIETIES OF TREES). 12. THAT IN THE YEAR 2006-07 MARRIAGE OF KM. AKRIST I (FIRST CHILD OF MY DAUGHTER RADHIKA AND WHO HAPPENED TO BE THE FIRST CHILD IN MY THIRD GENERATION ALSO GOT ARRANGED AND BY THE GR ACE OF GOD THE BRIDEGROOMS FAMILY WAS A VERY HIGHLY PLACED FAMILY CARRYING ON BUSINESS AT VISAKHAPATNAM. 13. THAT AS PER FAMILY TRADITIONS AND TO PROTECT IT S HONOUR SRI PRADEEP KUMAR BARANWAL (ELDER BROTHER OF SRI PRAMOD KUMAR BARANWAL) TOOK THE COMPLETE CHARGE OF THE ARRANGEME NTS OF THE MARRIAGE SO THAT THE SAME COULD BE MADE IN ACCORDAN CE WITH THE STATUS OF BRIDEGROOMS SIDE ALSO. STILL SRI PRAMOD KUMAR BARANWAL FELT THAT IN ORDER TO DISCHARGE HIS PARENTAL OBLIGA TIONS HE SHOULD ALSO COME FORWARD TO MAKE SOME POSITIVE CONTRIBUTION TO MEET THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 252 EXPENSES THAT WERE BEING INCURRED BY SRI PRADEEP KU MAR BARANWAL IN THE MARRIAGE OF AKRISTI. 14. THAT FOR THE REASON THAT INVESTMENT IN AGRICULT URAL LANDS AND IN PLANTATION OVER THE SAME HAD BEEN MADE AS A PART OF PLANNING TO MEET LONGTERM REQUIREMENTS OF THE FAMILY OF THE DEP ONENTS DAUGHTER SMT. RADHIKA DEVI BARANWAL AND TO HONOUR THE SENTIM ENTS EXPRESSED BY HER HUSBAND SRI PRAMOD KUMAR BARANWAL, THE DEPONENT UNDERTOOK THE SALE OF AGRICULTURAL LANDS A S HAD BEEN ACQUIRED ON BEHALF OF HIM IN THE EARLIER YEARS AS M ENTIONED HEREINFORE, AS ALSO THE BRIEF PLANNING THEREOF. 15. THAT THROUGH SUCH SALES WHICH TOOK PLACE MOSTLY IN THE FINANCIAL YEAR 2006-07 AND PARTLY IN THE FINANCIAL YEAR 2007-08, THE DEPONENT HAD BEEN ABLE TO MOP UP SUBSTANTIAL FUNDS AND THE SAME WERE DULY HANDED OVER TO SRI PRAMOD KUMAR BARANWAL. YEAR WISE BREAK OF FUNDS SO REALIZED AND HANDED OVER TO SRI P RAMOD KUMAR BARANWAL, IS AS UNDER:- FINANCIAL YEARS SL. NO. PARTICULARS 2006-07 2007-08 (I) SALE OF AGRICULTURAL LANDS 13,00,000 500,000 (II) SALE OF TREES 14,00,000 800,000 TOTAL 27,00,000 13,00,000 16. THAT SO FAR AS THE FUNDS RAISED THROUGH SALE OF AGRICULTURAL LANDS IS CONCERNED, THE SAME STAND FULLY PROVED BY SALE DEEDS EXECUTED BY THE PERSONS IN WHOSE NAME THE SAME CONT INUED TO STAND IN THE LAND RECORDS. THE SALE PROCEEDS, ON EXECUTI ON OF SUCH SALE DEEDS WERE DULY COLLECTED BY THE DEPONENT; PARTICUL ARS OF SUCH SALE DEEDS ARE GIVEN HEREUNDER:- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 253 SL. NO . NAMES OF VENDEES DATE OF EXECUTION OF SALE DEED AMOUNT (RS.) A.Y. 2007-08 (I) SESHMANI PATHAK S/O LATE BABUNANDAN PATHAK R/O VILLAGE PIPRIS, BHADOHI. 26.07.2006 2,25,000 (II) KUNWAR LAL S/O LATE LAL DAS RAI R/O. VILLAGE MUSI, BHADOHI 14.07.2006 3,25,000 (III ) NURUL HASAN S/O BAKRIDAN R/O VILLAGE PURE NURKHAN, BHADOHI. 10.07.2006 7,50,000 TOTAL : 13,00,000 A.Y. 2008-09 (IV) MATA CHARAN S/O LATE RAM PRATAP R/O VILLAGE MAKANPUR ROHI, GYANPUR 18.05.2007 5,00,000 AFFIDAVIT AS WELL AS CERTIFIED COPIES OF THE ABOVE REFERRED SALE DEEDS ARE ENCLOSED CONTAINING 58 PAGES. 17. THAT AS REGARDS SALE OF TREES, THE SAME WERE AF FECTED AT THE SITE ITSELF. A GENERAL ANNOUNCEMENT WAS MADE IN TH E NEARBY AREAS AND PERSONS INTERESTED IN BUYING THE TREES WHICH WE RE MAINLY MEANT FOR BEING USED AS FIRE WOOD HAD BEEN COMING TO THE SITES AND COLLECTING THE WOOD AVAILABLE FROM FALLING OF TREES , AGAINST CASH PAYMENT. THEY THEMSELVES MADE ARRANGEMENTS FOR TRAN SPORTATION OF THE SAME. FOR SUCH SALES NO DOCUMENTARY EVIDENCE WE RE KEPT, HOWEVER FACT OF SUCH SALES BEING MADE, STAND FULLY PROVED BY THE CERTIFICATES OF GRAM PRADHAN WHICH ARE ENCLOSED HER EWITH. 18 THAT BESIDES, HANDING OVER THE PROCEEDS REALIZED BY THE DEPONENT ON SALE OF TREES (AS HAD BEEN GROWN ON THE AGRICULTURAL LANDS BELONGING TO SRI PRAMOD KUMAR BARANWAL) AND A LSO THE AGRICULTURAL LANDS REFERRED TO ABOVE, THE DEPONENT ALSO MADE CASH GIFT OF SUMS AGGREGATING RS.5 LAKHS, AT THE OCCASIO N OF MARRIAGE OF AKRISTI. SUCH FUNDS WERE ARRANGED BY THE DEPONENT OUT OF POOL OF THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 254 FAMILY SAVINGS AS ALSO INSTANT COLLECTIONS MADE THR OUGH SALE OF TREES AS HAD BEEN PLANTED BY HIM ON THE AGRICULTURAL AND OTHER LANDS THAT WERE AVAILABLE WITH THE BIGGER FAMILY. 19. THAT IT IS MENTIONED THAT APART FROM SUBSTANTIA L AREAS AS WERE IN POSSESSION OF THE FAMILY OF THE DEPONENT, FOR TH E PURPOSES OF COLLECTION, HE HIMSELF HAD 54 BISWAS OF AGRICULTURA L LANDS AS PER PARTICULARS GIVEN BELOW:- WHICH STOOD RECORDED IN HIS NAME IN LAND RECORDS. C OPIES OF KHASRA KHATAUNI ARE BEING ENCLOSED CONTAINING 2 PAGES. 28. FROM THE AFORESAID FACTS, IT EMERGES THAT THE APPE LLANT HAD MADE INVESTMENT IN THE AGRICULTURE LAND THROUGH HIS FATHER-IN-LAW. IT IS VERY CANDIDLY ACCEPTABLE THAT AFTER MARRIAGE OF THE APPELLANT WITH RADHIKA DEVI, FATHER OF RADHIKA DEVI BEING WELL REP UTED PERSON IN HIS VILLAGE, SUPPORTED HIS SON-IN-LAW. APPELLANT HAS TA KEN THE ADVANTAGE OF POWERFUL REPUTE OF HIS FATHER-IN-LAW IN ACQUIRIN G AND AS WELL AS SELLING OUT THE AGRICULTURAL LAND, BUT THIS AUTOMAT ICALLY GENERATE INCOME IS NOT ACCEPTABLE BECAUSE THIS AGRICULTURAL INCOME AS WELL AS CAPITAL GAIN ON SALE OF LAND HAS BEEN SHOWN IN HIS IT RETURN FOR A.Y. 2007-08 AND 2008-09 BY THE APPELLANT. 29. AS STATED ABOVE THE PAPER BOOK CONTAINING THE AFFI DAVIT WAS DULY FORWARDED TO THE ACIT AND THERE WAS NO REBUTTA L FROM HER END, TO THE SAID AFFIDAVITS. BY WAY OF REPLY TO THE SAID PA PER BOOK THE ACIT MERELY REFERRED TO THE REMAND REPORT AS HAS BEEN RE PRODUCED IN PARA 3 AND 5 HEREIN FORE. 30. NOW, THERE ARE TWO FACTS TO BE CONSIDERED BEFORE D ISPOSING THE APPEAL, FIRST IS ADDITIONAL INCOME DISCLOSED BY THE APPELLANT AND OTHER IS EXPENDITURE CLAIMED TO BE INCURRED BY ACIT IN IT S ORDER. THE MATTER REGARDING ADDITIONAL INCOME IS CLEAR IN ABOVE PARA S, I WILL NOW MOVE AHEAD TOWARDS THE EXPENSES INCURRED POINT BY POINT, AS HAS BEEN DEALT BY THE ACIT IN HER ASSESSMENT ORDER. ADDITIO N OF RS. 1,74,54,311/- WAS MADE UP OF VARIOUS ELEMENTS AS H AS BEEN REPRODUCED IN PARA 12 ABOVE. LEARNED ACIT HAS MADE ADDITION FOR ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 255 PAYMENT OF HRH HOTEL (FOR STAY AND FOODING OF GUES T) IN THREE HEADS NAMED AS : PAYMENT TO HRH HOTELS RS. 60,52,282/- PAYMENT TO HRH HOTELS AS ADVANCE RS. 1,00,000/- PAYMENTS FOR ROOM OF OTHER HOTELS RS. 51,60,270/- PAYMENT OF RS. 60,52,282/- STANDS FULLY VERIFIABLE FROM THE BILLS OF HRH HOTEL. IT MAKES NO DIFFERENCE THAT THE ARRANGEM ENT OF MARRIAGE WAS DONE BY THE BROTHERS OF THE APPELLANT OR BY THE APPELLANT HIMSELF. AS PER HINDU CULTURE, IT IS VERY OBVIOUS THAT ARRAN GEMENTS OF RITUALS OF MARRIAGE WILL BE HANDLED BY THE ELDER MEMBERS OF TH E FAMILY BUT APPELLANT COULD NOT ESCAPE BEHIND THE SHADOW OF HIS ELDER BROTHERS BY SAYING THAT HE WAS NOT KNOWING ABOUT THE EXPENSES I NCURRED BY THEM. AS FAR AS PAYMENT OF RS. 1,00,000/- AND RS. 51,60,2 70/- IS CONCERNED, IT APPEARS THAT THESE TWO FIGURES CAME OUT OF PRINT OUT OF PEN DRIVE RATHER THAN ANY PROOF OF PAYMENT IN SUPPORT OF THE SAME. HENCE IT COULD BE DERIVED FROM THE SITUATION APPEARING BEFOR E ME THAT OVERALL PAYMENT TO HRH HOTEL WAS RS. 60,52,282/- AND OTHER TWO FIGURES OF RS. 1,00,000/- AND RS. 51,60,270/- IS ONLY THE PART AND PARCEL OF THE AMOUNT PAID TO HRH HOTEL OF RS. 60,52,282/- HENCE, PAYMENT OF RS. 60,52,282/- CAN NOT BE DENIED BY THE APPELLANT IN A NY CASE. OTHER TWO FIGURES ARE HAVING NO SUBSTANCE HERE HENCE DELETED. 31. NOW I HAVE REMAINED WITH THREE MORE COMPONENTS OF THE OVERALL ADDITION, ONE OF WHICH IS RS. 2,49,925/- FO R PAYMENT OF TAXI RENT. IN THIS REGARD ALSO, MY BELIEF IS BASED ON TH E SITUATION ARISING FROM THE SUBMISSIONS OF THE APPELLANTS AND POINTS R AISED BY ACIT IN HER ASSESSMENT ORDER, IT COMES TO ME THAT THIS ADDI TION IS ALSO BASED ON SOME ESTIMATES PREPARED BY THE TOUR OPERATORS BE FORE MARRIAGE, WHICH COULD BE AT THE TIME OF PLANNING FOR THE ARRA NGEMENTS OF MARRIAGE. NO BILLS OR VOUCHERS WERE FOUND IN THIS R EGARD OR NO MATERIAL WAS FOUND WHICH COULD PROVE THAT ACTUAL PA YMENTS WERE MADE, HENCE ADDITION ON THE BASIS OF SOME WRITTEN E STIMATION ARE NOT VALID, HENCE DELETED. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 256 32. OTHER TWO COMPONENTS ARE RS. 57,83,134/- FOR PAYME NT FOR AIR TRAVEL AND RS. 1,08,700/- FOR PAYMENT FOR TRAVEL BY TRAIN. AS PAYMENT OF RS. 1,08,700/- FOR PAYMENT BY TRAIN HAS BEEN ADM ITTED BY THE APPELLANT THERE REMAINS NO POINT FOR DISCUSSION, TH E ONLY POINT WITH US IS PAYMENT FOR TRAVEL BY AIR. BEFORE PARTING MY C ONCLUSION I WOULD PLACE AHEAD THE SITUATION AS COMES OUT FROM THE OVE RALL SUBMISSIONS OF THE APPELLANT. IT EMERGES TO ME THAT WHEN SOMEON E ARRANGES A MARRIAGE OF HIS DAUGHTER, HE WILL DEFINITELY TRY HI S LEVEL BEST TO SATISFY HIS GUEST IN EVERY RESPECT. PERSON DEPUTED FOR CARI NG THE GUEST IS LIABLE FOR EACH AND EVERY MOVEMENT OF THE GUEST. IN CONTINUATION TO THIS ONLY IN THE CASE BEFORE ME A PERSON WAS DEPUTE D BY SRI PRADEEP BARANWAL TO TAKE CARE OF THE GUEST BOARDING AND LOD GING. AS THE LIST SHOWN TO ME APPEARS TO BE THE LENGTHY ONE, IT BECOM ES NECESSARY TO NOTE DOWN EVERY THING. THE DEPUTED PERSON HAS DONE THE SAME. ADDITION ON THE BASIS OF THIS NOTING WILL NOT BE JU STIFIABLE, HENCE EXPENDITURE UP TO RS. 84,254/- AS STANDS PROVED FOR TRAVEL OF FAMILY MEMBERS OF THE APPELLANT FROM VARANASI TO DELHI AND DELHI TO UDAIPUR IS ONLY LIABLE TO BE EXPLAINED BY THE APPEL LANT. REMAINING EXPENDITURE OF RS. 56,98,880/- INCURRED BY THE GUES T HIMSELF STANDS DELETED IN THE HANDS OF THE APPELLANT AS FOR MAKING ESTIMATE OF EXPENDITURE THERE MUST BE IN EXISTENCE SOME MATERIA L TO SUPPORT SUCH ESTIMATE. 33. COMBINING MY DISCUSSION IN PARA 26 TO 33, IT COMES OUT THAT FOLLOWING THREE EXPENDITURES ARE LIABLE TO BE EXPLA INED BY THE APPELLANT: PAYMENT TO HRH HOTELS RS. 60,52,282/- PAYMENT FOR TRAVEL BY AIR RS. 84,254/- PAYMENT FOR TRAVEL BY TRAIN RS. 1,08,700/- 62,45,236/- AGAINST EXPENDITURE OF RS. 62,45,236 AS DISCUSSED I N ABOVE PARAS, APPELLANT HAD DISCLOSED ADDITIONAL INCOME OF RS. 3 2,00,000/- ONLY. HENCE EXPENDITURE UP TO RS. 32,00,000/- STANDS COVE RED FROM THE ADDITIONAL INCOME DISCLOSED BY THE APPELLANT AN REM AINING RS. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 257 30,45,236/- STANDS CONFIRMED IN THE ABSENCE OF ANY SOURCE PROVIDED BY THE APPELLANT. THUS APPELLANT GETS RELIEF OF RS. 1,44,09,275/- (I.E., ADDITION BY ACIT AT RS. 1,74,54,511 ADDITION CONF IRMED FOR MARRIAGE EXPENSES AT RS. 30,45,236/-) 65. THE LD. DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT ADDITION WAS RIGHTLY MADE ON THE BASIS OF ANNEXURE AR-2, A PEN-D RIVE, WHICH CONTAINED THE DETAILS OF EXPENSES INCURRED ON THE MARRIAGE OF DAU GHTER OF THE ASSESSEE, WHICH WAS RECOVERED FROM THE LOCKER OF SHRI PRADEEP KUMAR BAR ANWAL, THE BROTHER OF THE ASSESSEE. HRH HOTELS WAS BOOKED BY THE ASSESSEE, WH ICH IS NOT IN DISPUTE AND THE ASSESSEE INCURRED EXPENSES IN THE SAID HOTEL IS ALS O NOT IN DISPUTE. BUT NO SUFFICIENT WITHDRAWALS HAVE BEEN MADE BY THE ASSESSEE. THEREFO RE, THE SOURCE OF THE EXPENDITURE IS IN DISPUTE. THEREFORE, THE LD. CIT(A ) SHOULD NOT HAVE DELETED THE SUBSTANTIAL ADDITION. 66. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T THE PEN DRIVE WAS RECOVERED FROM THE LOCKER OF THE BROTHER OF ASSESSEE AND WIFE OF HIS BROTHER JOINTLY HELD BY THEM, WHICH WAS NOT SUBJECTED TO PROHIBITORY ORDER ON THE DATE OF SEARCH AND IT WAS OPERATED BY SHRI PRADEEP KUMAR BARANWAL AFTER THE S EARCH AND BEFORE RECOVERY OF THE PEN DRIVE. THEREFORE, NO RELIANCE COULD BE PLAC ED ON THE SAME. THE RECOVERY OF ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 258 PEN-DRIVE IS ILLEGAL AND THERE IS NO HAND WRITING O F THE ASSESSEE RECOVERED ON ANY MARRIAGE EXPENSES. WHATEVER EXPENSES WERE INCURRED BY THE ASSESSEE ON THE MARRIAGE OF HIS DAUGHTER, HAVE BEEN EXPLAINED THROU GH KNOWN SOURCES. THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE SUBSTA NTIAL ADDITION. HOWEVER, THE LD. CIT(A) WAS NOT JUSTIFIED IN MAINTAINING EVEN THE PA RT ADDITION. THEREFORE, THE DEPARTMENTAL APPEAL MAY BE DISMISSED AND THE APPEAL OF THE ASSESSEE MAY BE ALLOWED. 67. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD AND DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE OR DER OF THE LD. CIT(A). IT IS NOT IN DISPUTE THAT MARRIAGE OF DAUGHTER OF ASSESSEE WAS S OLEMNIZED DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. IT IS ALSO NOT IN DISPUTE THAT SUCH MARRIAGE WAS CELEBRATED BY THE ASSESSEE IN HRH HOTE LS, UDAIPUR. HRH HOTELS IN THEIR LETTER CONFIRMED TOTAL EXPENDITURE INCURRED B Y THE ASSESSEE IN A SUM OF RS.60,52,282/- AND EVEN THE ASSESSEE IN HIS WRITTEN SUBMISSIONS BEFORE THE LD. CIT(A) ADMITTED THAT SUCH EXPENDITURE HAVE BEEN INC URRED BY HIM FOR MARRIAGE OF HIS DAUGHTER. THEREFORE, TO THAT EXTENT, THE LD. CI T(A) WAS JUSTIFIED IN CONSIDERING THE SAME EXPENDITURE IN THE HANDS OF THE ASSESSEE. THE ASSESSEES SUBMISSION THAT SOME EXPENDITURE WERE INCURRED BY OTHER GUESTS DIRE CTLY IS NOT SUPPORTED BY ANY ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 259 EVIDENCE AND SINCE THE ASSESSEE BOOKED HRH HOTELS F OR MARRIAGE PURPOSES, THEREFORE, THE BURDEN IS UPON THE ASSESSEE TO EXPLA IN THROUGH EVIDENCE THAT THE EXPENSES HAVE NOT BEEN INCURRED BY HIM. THE ASSESSE E ALSO ADMITTED IN HIS WRITTEN SUBMISSIONS THAT THE TRAVEL EXPENSES IN A SUM OF RS .84,284/- AND RS. 1,08,700/- WERE ALSO SPENT BY HIM. THEREFORE, TOTAL EXPENDITUR E ADMITTED BY THE ASSESSEE ARE IN A SUM OF RS.62,45,236/- SPENT ON THE MARRIAGE OF ASSESSEES DAUGHTER. HOWEVER, THE ASSESSEE HAS DISCLOSED INCOME OF RS. 32,00,000/ - IN THE RETURN OF INCOME, WHICH IS NOT SUFFICIENT TO EXPLAIN THE SOURCE OF THESE MA RRIAGE EXPENDITURES. THUS, THE BALANCE OF RS.30,45,236/- REMAINED UNEXPLAINED EVEN BEFORE THE LD. CIT(A) AND DURING THE COURSE OF ARGUMENTS, NO DOCUMENTARY EVID ENCES WERE SUBMITTED OR EXPLAINED BEFORE US, THEREFORE, IT IS ESTABLISHED T HAT THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF MARRIAGE EXPENSES OF RS.30,45,236/-. HOWEVER, AS REGARDS THE OTHER AMOUNT OF EXPENDITURE FOR WHICH THE AO MADE THE ADD ITION, I.E., ADVANCE PAYMENT, TAXI RENT, PAYMENT FOR ROOMS IN OTHER HOTELS, PAYME NT FOR TRAVEL BY AIR, THESE DETAILS WERE OBTAINED FROM AR-2, I.E., PEN DRIVE RE COVERED FROM THE JOINT LOCKER OF SHRI PRADEEP KUMAR BARANWAL AND HIS WIFE SMT. SUMAN BARANWAL. THE AO ON THE BASIS OF THE PRINT OUT TAKEN FROM THE SEIZED PEN-DR IVE, ESTIMATED THE BALANCE EXPENDITURE STATED TO HAVE BEEN SPENT BY THE ASSESS EE. HOWEVER, THE ASSESSEE EXPLAINED THAT THE PEN DRIVE DID NOT BELONG TO HIM AND IT WAS RECOVERED FROM THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 260 LOCKER JOINTLY OPERATED BY HIS BROTHER SHRI PRADEEP KUMAR BARANWAL AND HIS WIFE SMT. SUMAN BARANWAL ON 02.04.2009. IN BETWEEN THE D ATE OF SEARCH AND RECOVERY OF THE PEN DRIVE FROM THE LOCKER, THE SAID LOCKER W AS OPERATED BY SHRI PRADEEP KUMAR BARANWAL AND THE STATEMENT OF THE ASSESSEE WA S FOUND TO BE CORRECT. THEREFORE, NO RELIANCE COULD BE PLACED UPON THE REC OVERY OF PEN-DRIVE FROM THE LOCKER OF PRADEEP KUMAR BARANWAL AND HIS WIFE. IT I S FOR THE AO TO ESTABLISH THAT THE CONTENTS OF THE PEN DRIVE ARE CORRECT BECAUSE T HERE IS A SUSPICION WITH REGARD TO THE RECOVERY OF THE SAME AND NO CREDENCE COULD BE G IVEN TO THE RECOVERY OF PEN DRIVE BECAUSE IT IS NOT ESTABLISHED AS TO WHY SAID LOCKER WAS OPERATED AFTER THE SEARCH AND BEFORE RECOVERY BY PRADEEP KUMAR BARANWA L. NO CORROBORATING EVIDENCES HAVE BEEN FOUND AND BROUGHT ON RECORD TO ESTABLISH THAT REMAINING EXPENSES HAVE BEEN INCURRED BY THE ASSESSEE. THE AS SESSEE HAS ALREADY PLEADED THAT AFTER THE DIVISION IN THE FAMILY, RELATIONS BETWEEN THE ASSESSEE AND HIS BROTHER, PRADEEP KUMAR BARANWAL WERE STRAINED AND AS SUCH TH ERE IS POSSIBILITY OF TEMPERING OF RECORD AND MANIPULATION OF PEN-DRIVE. NO EXPLANATION HAS BEEN GIVEN BY THE AO OR PRADEEP BARANWAL WITH REGARD TO THE SA ME. IT IS, THEREFORE, ACCEPTED FACT THAT THE RECOVERED PEN-DRIVE DID NOT BELONG TO THE ASSESSEE AND THE DETAILS CONTAINED THEREIN HAVE NOT BEEN CORROBORATED BY ANY EVIDENCE OR MATERIAL. SINCE THE LOCKER WAS OPERATED BY PRADEEP KUMAR BARANWAL A FTER THE SEARCH AND BEFORE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 261 RECOVERY OF PEN-DRIVE FROM HIS LOCKER, THEREFORE, N O ADVERSE INFERENCE COULD BE DRAWN ON THE BASIS OF SAID PEN-DRIVE AGAINST THE AS SESSEE. THE LD. CIT(A) ON PROPER APPRECIATION OF EVIDENCE AND MATERIAL ON RECORD RIG HTLY DID NOT PLACE RELIANCE UPON THE RECOVERY OF PEN DRIVE FROM THE LOCKER OF SHRI P RADEEP KUMAR BARANWAL AND HIS WIFE SMT. SUMAN BARANWAL. THEREFORE, NO ADDITION CO ULD BE MADE AGAINST THE ASSESSEE ON THE BASIS OF THE PRINT OUT TAKEN FROM T HE SAID PEN-DRIVE. THE LD. CIT(A), THEREFORE, WAS JUSTIFIED IN DELETING THE REMAINING ADDITIONS. THE LD. CIT(A) ON PROPER APPRECIATION OF EVIDENCE RIGHTLY HELD THAT T HE ASSESSEE HAS INCURRED AMOUNT OF RS.62,45,236/- ON THE MARRIAGE OF HIS DAUGHTER. THEREFORE, THE ADDITION OF RS.1,44,09,275/- MADE ON THE BASIS OF RECOVERY OF P EN-DRIVE WAS RIGHTLY DELETED. IT IS A DEPARTMENTAL APPEAL, ON WHICH SUBSTANTIAL DELE TION OF ADDITION HAS BEEN CHALLENGED, BUT NO MATERIAL IS PRODUCED BEFORE US T O CONTRADICT THE FINDINGS OF THE LD. CIT(A). WE, THEREFORE, DID NOT FIND ANY JUSTIFI CATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) IN DELETING THE SUBSTANTIAL ADDIT ION AND MAINTAINING PART OF THE ADDITION ON THIS ISSUE. IN THE RESULT, THE DEPARTME NTAL APPEAL AS WELL AS THE APPEAL OF THE ASSESSEE IS DISMISSED ON THIS ISSUE. IN THE RES ULT, GROUND NO. 1 TO 4 OF THE DEPARTMENTAL APPEAL AND GROUND NO. 4 & 5 OF APPEAL OF THE ASSESSEE ARE DISMISSED. IN THE RESULT, BOTH THE CROSS APPEALS ARE DISMISSED . ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 262 ITA NO. 178/A/2012 (ACIT VS. PRAMOD KUMAR BARANWAL- A.Y. 2008-09): 68. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), VARANASI DATED 21.03.2012 FOR THE ASSESSMENT YEAR 2 008-09. ON GROUND NO. 1 TO 3, THE REVENUE CHALLENGED THE DELETION OF ADDITION OF RS.3,86,36,238/- MADE BY THE AO U/S. 69C OF THE IT ACT AS UNEXPLAINED EXPENSES O N THE BASIS OF PEN-DRIVE RECOVERED. ON GROUND NO. 4 & 5, THE REVENUE CHALLEN GED THE DELETION OF ADDITION OF RS.3,00,000/- MADE U/S. 69C OF THE IT ACT ON ACC OUNT OF UNEXPLAINED FOREIGN TRAVEL EXPENSES. 69. THE AO PASSED THE ASSESSMENT ORDER ON 30.12.201 0 U/S. 153A READ WITH SECTION 143(3). IN THE SAID ASSESSMENT ORDER, THE A O HAS COMPLETED THE ASSESSMENT PROCEEDINGS DETERMINING THE TOTAL INCOME AT RS.6,95 ,34,518/- AS AGAINST RS.3,05,98,280/- DISCLOSED BY THE ASSESSEE, THE VAR IATION OF RS.3,89,36,238/- BEING ATTRIBUTABLE TO ADDITION OF RS.3,00,000/- OUT OF FO REIGN TRAVEL EXPENSES AND RS.3,86,36,238/- OUT OF UNEXPLAINED EXPENSES. THE A SSESSEE CHALLENGED BOTH THESE ADDITIONS BEFORE THE LD. CIT(A) AND FILED DETAILED WRITTEN SUBMISSIONS, ON WHICH REMAND REPORT FROM THE AO WAS CALLED FOR AND AFTER TAKING REJOINDER OF THE ASSESSEE, THE LD. CIT(A) DELETED BOTH THE ADDITIONS . THE ASSESSEE IN HIS WRITTEN SUBMISSIONS CHALLENGED THE ADDITION ON MERIT BECAUS E BOTH THE ADDITIONS WERE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 263 SOLELY BASED ON THE PRINT OUT TAKEN BY THE AUTHORIZ ED OFFICER FROM THE PEN-DRIVE WHICH WAS RECOVERED FROM THE BANK LOCKER STANDING I N THE JOINT NAMES OF SHRI PRADEEP KUMAR BARANWAL AND HIS WIFE SMT. SUMAN BARA NWAL ON 02.04.2009. IT WAS STATED THAT THE PEN-DRIVE IS NOT A MATERIAL FOR THE PURPOSE OF MAKING ADDITION. THE ASSESSEE MADE SIMILAR SUBMISSIONS AS WERE MADE IN ASSESSMENT YEAR 2007-08 AND SUBMITTED THAT THE PEN-DRIVE IS NOT RECOVERED F ROM THE POSSESSION OF THE ASSESSEE AND THE LOCKER WAS NOT PUT TO ANY PROHIBIT ORY ORDER AND THE SAID LOCKER FROM WHERE PEN-DRIVE WAS RECOVERED WAS OPERATED BY PRADEEP KUMAR BARANWAL AFTER THE SEARCH AND BEFORE RECOVERY OF THE PEN-DRI VE BY THE AUTHORIZED OFFICER. THEREFORE, BOTH THE ADDITIONS HAVE BEEN SOLELY MADE IN TOTO ON THE BASIS OF PRINTOUT TAKEN FROM THE SAID PEN-DRIVE. THE ASSESSEE MADE SI MILAR SUBMISSIONS AS WERE MADE IN THE ASSESSMENT YEAR 2007-08, WHICH IS REPRO DUCED IN THE APPELLATE ORDER AND THE ASSESSEE SUBMITTED THAT NO RELIANCE COULD B E PLACED UPON THE RECOVERY OF PEN-DRIVE WHICH DID NOT BELONG TO THE ASSESSEE. THE LD. CIT(A) SIMILARLY CONSIDERED THIS ISSUE AS WAS CONSIDERED IN THE ASSE SSMENT YEAR 2007-08 AND HELD THAT BOTH THE ADDITIONS HAVE BEEN MADE IN TOTO ON T HE BASIS OF PRINTOUT TAKEN FROM THE PEN-DRIVE SEIZED BY THE AUTHORIZED OFFICER FROM THE BANK LOCKER STANDING IN JOINT NAMES OF SHRI PRADEEP KUMAR BARANWAL AND HIS WIFE SMT. SUMAN BARANWAL. ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 264 NO RELIANCE SHOULD BE MADE ON SUCH PEN-DRIVE. THERE FORE, BOTH THE ADDITIONS WERE DELETED. 70. THE LD. REPRESENTATIVES OF BOTH THE PARTIES SUB MITTED THAT THE ISSUE IS SAME AS IS CONSIDERED IN THE ASSESSMENT YEAR 2007-08 IN ITA NO. 177/A/2012 AND THE FINDING IN THAT CASE MAY BE FOLLOWED IN THIS YEAR A LSO. 71. ON CONSIDERATION OF THE FACTS OF THE CASE IN TH E LIGHT OF THE FINDINGS OF THE LD. CIT(A) AND THE SUBMISSIONS OF THE PARTIES, WE FIND THAT THE ISSUE IS SAME AS WAS CONSIDERED IN ASSESSMENT YEAR 2007-08 ABOVE AND BOT H THE ADDITIONS ARE BASED ON THE SAME PEN-DRIVE, WHICH IS STATED TO BE RECOVERED FROM THE JOINT BANK LOCKER OF SHRI PRADEEP KUMAR BARANWAL AND HIS WIFE SMT. SUMAN BARANWAL. ON THE SAME FACTS, WE HAVE DISMISSED THE DEPARTMENTAL APPEAL FO R THE ASSESSMENT YEAR 2007-08. THEREFORE, FOLLOWING THE REASONS FOR DECISION OF TH E SAME, WE DISMISS THIS DEPARTMENTAL APPEAL AS WELL. IN THE RESULT, THE DEP ARTMENTAL APPEAL IS DISMISSED. ITA NO.179/A/2012 (ACIT VS. PRAMOD BARANWAL- A.Y. 2 009-10): 72. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), VARANASI DATED 21.03.2012 FOR THE ASSESSMENT YEAR 2 009-10, IN WHICH THE REVENUE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 265 ON ALL THE GROUNDS CHALLENGED THE DELETION OF ADDIT ION OF RS.58,17,116/- MADE U/S. 69C OF THE IT ACT ON ACCOUNT OF UNEXPLAINED EXPENSE S. 73. THE AO IN THIS CASE ALSO PASSED THE ASSESSMENT YEAR ON 30.12.2010 U/S. 143(3). IN THE SAID ASSESSMENT ORDER, THE AO HAS CO MPLETED THE ASSESSMENT PROCEEDINGS DETERMINING TOTAL INCOME AT RS.2,26,18, 480/- AS AGAINST RS.1,54,11,360/- DISCLOSED BY THE ASSESSEE, VARIATI ON OF RS.72,07,115/- WAS SOLELY ATTRIBUTABLE TO ADDITION ON ACCOUNT OF UNEXPLAINED EXPENSES. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A) AND DETAILED SUBMI SSIONS WERE MADE AND REMAND REPORT FROM THE AO WAS CALLED FOR AND AFTER FILING THE REJOINDER BY ASSESSEE, THE LD. CIT(A) DELETED THE ADDITION. THE AO IN THE ASSESSME NT ORDER DISCUSSED VARIOUS SEIZED PAPERS RECOVERED DURING THE COURSE OF SEARCH AND FOUND THAT THE ASSESSEE HAS INCURRED UNDISCLOSED EXPENSES AND AS PER ANNEXURE A -1 AND LP-1 OF PANCHNAMA DATED 11.02.2009 SEIZED FROM THE PREMISES SITUATED AT G-3, UPASANA APARTMENTS, HAILY RAOD, NEW DELHI, THE ASSESSEE HAS SPENT RS.72 ,07,115/-. THE SAID TRANSACTION RELATED TO THE PURCHASE AND CONSTRUCTION OF FLAT. T HE ASSESSEE IN THE SUBMISSIONS ACCEPTED THAT THESE ANNEXURES BELONG TO HIM AND WRI TTEN BY HIM. ACCORDINGLY, THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF THES E EXPENSES. YEAR-WISE AND PAGE- WISE DETAILS OF THE ABOVE ANNEXURES ARE NOTED AT PA GE 3 OF THE ASSESSMENT ORDER, ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 266 TOTALING TO RS.72,07,115/-, WHICH IS BIFURCATED IN TWO FINANCIAL YEARS 2007-08 AND 2008-09. THE ASSESSEE EXPLAINED THAT RS.14,10,000/- RELATED TO F.Y. 2007-08 FOR WHICH THE ASSESSEE HAS ALREADY SURRENDERED RS.8,00, 000/- WHILE FILING THE RETURN U/S. 153A AND RS.5,50,000/- IS APPEARING TWICE ON P AGE NO. 3 AND 14. REGARDING THE BALANCE AMOUNT OF RS.57.97 LACS AND 22.88 LACS APPROXIMATELY, ON WHICH MANY AMOUNTS ARE REPEATED, THE ASSESSEE SUBMITTED THAT D RAWINGS OF ASSESSEE DURING THE YEAR WAS AROUND 53.59 LACS, WHICH IS SUFFICIENT TO COVER UP THESE EXPENSES RECORDED IN THE SAID ANNEXURES. FURTHERMORE, THE ASSESSEE HA S WITHDRAWN MONEY FROM M/S. CARPET INTERNATIONAL, WHICH IS APPEARING AS ADVANCE FOR EXPENSES IN THE SAID FIRM. REPLY OF THE ASSESSEE WAS, HOWEVER, NOT ACCEPTED BY THE AO AND MADE THE ADDITION. THE ASSESSEE IN DETAILED WRITTEN SUBMISSI ONS EXPLAINED THIS ISSUE AND DETAILED WORKING OF EACH AND EVERY ENTRY OF SEIZED DIARY WAS FILED TO SHOW THAT SOME ENTRIES PERTAINED TO EARLIER FINANCIAL YEAR 20 07-08. SOME ENTRIES ARE DUPLICATE AND IN ASSESSMENT YEAR UNDER APPEAL, THE AMOUNT PER TAINS TO RS.36,10,000/- ONLY, WHICH IS ALSO EXPLAINED. THE LD. CIT(A), CONSIDERIN G THE EXPLANATION OF THE ASSESSEE ON PERUSAL OF THE SEIZED PAPER, DELETED TH E ENTIRE ADDITION OF RS.72,07,115/-. THE FINDINGS OF THE LD. CIT(A) IN T HE APPELLATE ORDER IN PARAS 18 TO 26 ARE REPRODUCED AS UNDER : ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 267 18. I HAVE CONSIDERED THE SUBMISSIONS MADE ON BEHALF O F THE APPELLANT, VIS--VIS THE OBSERVATIONS MADE /FINDING GIVEN BY THE ASSESSING OFFICER AS ALSO THE WRITTEN SUBMISSIONS F ORMING PART OF THE COMPILATION THAT HAS BEEN PLACED BEFORE ME. FOR BETTER APPRECIATION OF THE APPELLANTS CASE, THE SUBMISSIO NS SO MADE ON ITS BEHALF WHICH STARTS FROM PARA 18 TO 21 OF THE WS IN ADDITION TO THE PLEADING MADE ORALLY BY THE LD. AUTHORISED REPRESEN TATIVE, ARE REPRODUCED HEREUNDER:- 18. AS PER SUMMARY GIVEN IN PARA 4 ABOVE, THE APPELLANT HAS DISPUTED AN ADDITION OF RS. 72,07,115 VIDE GROUND NO. 3, 4, 5, 6, 7 & 8 AS HAD BEEN MADE BY THE ACIT ON THE BASIS OF DIARY AND LOOSE PAPER SEIZED FROM G-3, UPASANA APARTMENT, HEL LY ROAD, CP, NEW DELHI. 19. UNEXPLAINED EXPENDITURE OF RS.72,07,116/- HAS BEEN CULLED OUT BY THE ACIT FROM ANNEXURE A-1 AND LP-2 I S INCLUSIVE OF:- A. RS. 14,10,000 RELATED TO EARLIER A.Y. 2008-0 9 AND THE SAME IS NOT RELATED TO THE YEAR UNDER APPEAL. B. DUPLICITY, FOR EXAMPLE CASH SUMMARY IS APPEAR ING AT PAGE 3 OF ANNEXURE A-1, WHEREAS INDIVIDUAL PARTY ACCOUNT WAS OPENED AT PAGE 14, 17 AND 18 OF ANNEXUR E A-1. IT WAS LEDGERISED FROM CASH SUMMARY. C. CERTAIN NOTINGS WHICH HAS NO NEXUS TO SPENDIN G / EXPENDITURE E.G. AT PAGE 3 AND 4 OF ANNEXURE A-1 (A T SL. NO. 5) RELATES OF RS. 1,05,115 WHICH WAS NEVER PAID . D. DOUBLE ADDITION ONE ON THE BASIS OF RECEIVING OF PAYMENT AND ANOTHER ADDITION FOR THE SAME EXPENDITURE ON TH E BASIS OF LEDGER ACCOUNTS IN THE DIARY E.G. ON PAGE 25 OF ANNEXURE A-1 (SL. NO. 16), THERE IS RECEIVING OF PA YMENT ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 268 BY BATHLINE ON PAGE 18 OF ANNEXURE A-1 (SL. NO. 12 ) THERE IS LEDGER OF BATHLINE. 20. DETAILED WORKING OF EACH AND EVERY ENTRY OF EA CH PAGE OF SEIZED DIARY ANNEXURE A-1 AND LP APPEARS AT PAGES 31 TO 37 , WHICH IS AGAIN SUMMARIZED AS UNDER:- S. N O. REFERENCE OF SEIZED MATERIAL AMOUNT (IN RS.) ACTUAL EXPENSES DUPLICITY AND REPETITION OF EXPENSES, BALANCE NOT PAID FINANCIAL YEAR 2007-08 1 ANNEXURE A-1, PAGE 3 735,000 735,000 - 2 ANNEXURE A-1, PAGE 14 550,000 - 550,000 3 ANNEXURE A-1, PAGE 17 25,000 - 25,000 4 ANNEXURE A-1, PAGE 18 100,000 - 100,000 SUB TOTAL: 14,10,000 7,35,000 FINANCIAL YEAR 2008-09 5 ANNEXURE A-1, PAGE 3 & 4 950,115 845,000 105,115 6 ANNEXURE A-1, PAGE 14 2,300,000 1,800,000 500,000 7 ANNEXURE A-1, PAGE 15 400,000 300,000 100,000 8 ANNEXURE A-1, PAGE 16 260,000 80,000 180,000 9 ANNEXURE A-1, PAGE 17 120,000 100,000 20,000 10 ANNEXURE A-1, PAGE 18 205,000 200,000 5,000 11 ANNEXURE A-1, PAGE 19 212,000 135,000 77,000 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 269 12 ANNEXURE A-1, PAGE 21 100,000 100,000 - 13 ANNEXURE A-1, PAGE 22 600,000 - 600,000 14 ANNEXURE A-1, PAGE 25 100,000 - 100,000 15 ANNEXURE A-1, PAGE 26 100,000 - 100,000 16 ANNEXURE LP-1, PAGE 2 50,000 50,000 - 17 ANNEXURE LP-1, PAGE 4 100,000 - 100,000 18 ANNEXURE LP-1, PAGE 5 300,000 - 300,000 SUB TOTAL: 57,97,115 36,10,000 GRAND TOTAL FOR A.Y. 2007- 08 AND A.Y. 2008-09 7,207,115 4,345,000 2,862,115 21. EXPENSES OF RS. 43,45,000 AS PER ABOVE PARA HA S BEEN INCURRED FROM THE FOLLOWING SOURCE:- F.Y. 2007-08 I.E., A.Y. 2008-09 RS. 7,35,000 HAS BEEN TRANSFERRED AND EXPLAINED FROM DIARY SEIZED FROM HIG 23, RAJPURA RESIDANCE, BHADOHI AS PER ANNEXURE A-1 (PAGE 1-77) IN THE ASSESSMENT OF SMT. RADHIKA DEVI BARANWAL FOR A.Y. 2008-09 7,35,000 F.Y. 2008-09 I.E., A.Y. 2009-10 RS. 36,10,000 HAS BEEN TRANSFERRED AND EXPLAINED FROM DIARY SEIZED FROM HIG 23, RAJPURA RESIDANCE, BHADOHI AS PER ANNEXURE A-1 (PAGE 1-77) IN THE ASSESSMENT OF SMT. RADHIKA DEVI BARANWAL FOR A.Y. 2009-10 36,10,000 TOTAL: 43,45,000 ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 270 AND ON THE BASIS OF SUCH SOURCES OF EXPENDITURE NO ADDITION COULD HAVE BEEN MADE IN THE ASSESSMENT OF THE APPELLANT. 19. THE AUTHORIZED REPRESENTATIVE HAS BROUGHT MY ATTEN TION TO DETAILED REPLY FILED DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, WHICH IS REPRODUCED HERE IN BELOW: I] IN QUERY NO. 6 OF QUERY LETTER DATED 09.11.2010. YOUR GOOD SELF HAS ASKED EXPLANATION REGARDING 72,07,115 AND IN QU ERY NO. 18 ABOUT 22,88,343. II] THAT IN YOUR QUERY NO. 6. THE EXPLANATION IS RE QUIRED FOR RS. 14,10,000 (RELATED TO F.Y. 200708) FOR WHICH ASSES SEE HAVE ALREADY SURRENDERED RS. 8 LAKHS WHILE FILING THE RE TURN U/S 153A AND 5,50,000 AMOUNT IS SAME WHICH IS APPEARING TWIC E ON PG# 3 AND 14 (RELEVANT COPY OF THE SAME IS BEING ENCLOSED HEREWITH). III] REGARDING BALANCE AMOUNT OF RS. 57.97 LAKHS AN D 22.88 LAKHS (APPROX) (OF WHICH MANY AMOUNTS ARE REPEATED). ASSE SSEE BEGS TO SAY THAT THE DRAWINGS OF THE ASSESSEE DURING THE YE AR IS AROUND RS. 53,59,783 WHICH IS SUFFICIENT TO COVERUP HOUSEHOLD EXPENSES AND FURTHER PETTY EXPENSES RECORDED IN THE SAID ANNEXUR E. FURTHER MORE. ASSESSEE HAS WITHDRAWN THE MONEY FROM CARPET INTERNATIONAL WHICH IS APPEARING AS ADVANCE FOR EXP ENSES IN THE SAID FIRM. THIS AMOUNT WAS WITHDRAWN TO MEET OUT CE RTAIN EXPENSES AS RECORDED IN THE ANNEXURE. SINCE, THE DETAIL WAS NOT MADE AVAILABLE TO THE FIRM DUE TO SEARCH AND SEIZURE PRO CEEDINGS, HENCE JOURNAL ENTRY COULD NOT HE PASSED. 20. FROM THE AFORESAID FACTS, IT EMERGES THAT THE APPE LLANT HAD MADE INVESTMENT IN THE CONSTRUCTION OF FLAT DURING THE A.Y. 2009-10. APPELLANT HAS NOT DENIED THE FACT OF CONSTRUCTION O F FLAT AT ANY STAGE, RATHER HE IS CONTINUALLY OPPOSING THE REPETITION AN D DUPLICITY OF THE ADDITIONS AND THE LEARNED ACIT OUTRIGHTLY REJECTED APPELLANTS OBJECTION OF CROSS CHECKING OF PAYMENT AND ITS SOUR CE. CONSIDERING ALL THESE FACT I REACHED TO THE CONCLUSION THAT APPELLA NTS CONTENTION HAS FULL FORCE AND AFTER GOING THROUGH THE WS IN THE CASE OF SMT. RADHIKA ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 271 DEVI BARANWAL (WIFE OF THE APPELLANT) FOR A.Y. 2009 -10, WHICH IS ALSO UNDER APPEAL BEFORE ME. I HAVE PLACED MY RELIANCE O N THE CONTENTS OF COPY OF LEDGER A/C. OF PRAMOD KUMAR BARANWAL AND LE DGER A/C. OF ADVANCE FOR EXPENSES GIVEN TO PRAMOD KUMAR BARANWAL IN THE BOOKS OF CARPET INTERNATIONAL FOR THE YEAR ENDED 31.03.20 09, APPEARING AT PAGES 42 TO 47 OF PAPER BOOK OF RADHIKA DEVI BARANW AL FOR A.Y. 2009-10. THIS SHOWS THAT SOURCE OF EXPENDITURE INCU RRED IS THE DRAWING MADE FROM THE FIRM M/S CARPET INTERNATIONAL IN WHICH APPELLANT IS A PARTNER. 21. AUTHORISED REPRESENTATIVE FURTHER ARGUE THAT APPEL LANT HAS HABIT OF WRITING INDIVIDUAL TRANSACTION AT ONE PAGE IN FORM OF CASH BOOK AND LEDGER OF THE PARTY AT OTHER PAGE, LEARNED ACIT HAS CONSIDERED BOTH THE NOTING WHILE MAKING ADDITION. F OR INSTANCE AT PAGE 3 THERE IS CASH SUMMARY OF RS. 7,35,000/- WHER E AS LEDGER ACCOUNT APPEARS AT PAGES 14, 17 AND 18 OF DIARY SEI ZED FROM G-3, UPASANA. SIMILARLY AT PAGE 25 THERE IS RECEIVING OF PAYMENT BY BATH LINE AND ON THE OTHER HAND AT PAGE 18, LEDGER OF BATH LINE WAS PREPARED. ASSESSING OFFICER HAS MADE ADDITION SOLEL Y ON THE BASIS OF NOTING FOUND IN THE DIARY SEIZED FROM THE PREMISES OF THE APPELLANT. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT AD DITION OF RS. 72,07,115/- IS INCLUSIVE OF 14,10,000/- WHICH IS NO T RELATED TO THE YEAR UNDER APPEAL AND THE LD. ACIT WAS NOT JUSTIFIED IN TREATING THE SAME AS UNEXPLAINED EXPENDITURE OF THE YEAR UNDER APPEAL . HE THEREFORE SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING O FFICER WAS WHOLLY ERRONEOUS AND DESERVES TO BE DELETED. 22. FURTHER, IN THE PRESENT CASE THE LD. ACIT HAS MERE LY AND BLINDLY BELIEVED ON THE ENTRIES MADE IN THE DIARIES . SHE HAS NOT ANALYZED AND CROSS CHECKED THE FIGURES WRITTEN IN TWO DIARIES OF THE SAME GROUP, ONE FOUND FROM THE PREMISES OF THE APPE LLANT AT G-3, UPASANA APARTMENT, NEW DELHI AND OTHER FROM RESIDEN CE AT RAJPURA COLONY, BHADOHI. LD. ACIT HAS MADE ADDITION OF ALL THE SUMS FOUND WRITTEN AT VARIOUS PAGES OF THE ANNEXURE A-1 AND LP -1 OF THE PANCHANAMAS, WITHOUT RECONCILING THE AMOUNT TRANSFE RRED FROM ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 272 RAJPURA DIARY TO DELHI FLAT DIARY MAINTAINED AT G-3 , UPASANA APARTMENT. 23. NOW THE DISPOSAL OF APPEAL DEPENDS ON THE APPELLA NTS VERSION OF REGARDING ACTUAL EXPENDITURE INCURRED AND SOURCE S THEREOF. DUPLICITY AND REPETITION OF ADDITION IS APPARENT FR OM THE DETAILED SUBMISSIONS MADE IN WS . REGARDING EXPENDITURE OF RS. 14,10,000/- AS CALCULATED BY THE ASSESSING OFFICER MY OBSERVATI ON IS THAT FIRSTLY THESE EXPENSES ARE RELATED TO A.Y. 2008-09 AND SEC ONDLY THERE EXISTED REPETITION OF ENTRIES, HENCE ACTUAL AMOUNT OF EXPEN SES UNDER CONSIDERATION FOR A.Y. 2008-09 IS RS. 7,35,000/- O NLY, WHICH IS COVERED BY SURRENDER MADE BY APPELLANT OF RS. 8,00, 000 IN A.Y. 2008- 09. THE SAID ADDITION OF RS. 14,10,000/- RELATED TO A.Y. 2008-09 HENCE NEITHER DESERVES TO BE ADDED IN THE YEAR UNDER APPE AL I.E A.Y. 2009-10 NOR IN A.Y. 2008-09 AND THUS STANDS DELETED. 24. AS STATED ABOVE THE PAPER BOOK CONTAINING DETAILED WORKING OF EACH AND EVERY ENTRY IN SEIZED PAPER OF DIARY APPEA RING AT PAPER BOOK PAGES 31 TO 37, WERE DULY FORWARDED TO THE ACI T AND THERE WAS NO REBUTTAL FROM HER END. BY WAY OF REPLY TO THE SA ID PAPER BOOK THE ACIT MERELY REFERRED TO THE REMAND REPORT AS HAS BE EN REPRODUCED IN PARA 5 HEREIN FORE. 25. NOW, THE ONLY FACT TO BE CONSIDERED BEFORE DISPOSI NG THE APPEAL, IS THE EXPENSES OF RS. 57,97,115/- (REMAINI NG EXPENSES OUT OF TOTAL ADDITION OF RS. 72,07,115/- AFTER DELETION OF RS.14,10,000 AS DISCUSSED IN PARA 22 ABOVE). IN THIS REGARD ALSO APPELLANT HAS FILED DETAILED WORKING IN THE FORM OF CHART, APPEARING FR OM PAGES 31 TO 37 OF PAPER BOOK WHICH SHOWS THAT ACTUAL AMOUNT OF EXP ENDITURE WAS RS. 36,10,000/- ONLY, REMAINING RS. 21,87,116/- OUT OF RS. 57,97,116/- IS REPETITION OR DUPLICITY OF THE SAME EXPENDITURE HAV ING NO RELEVANCE AS DISCUSSED ABOVE. AS FAR AS RS. 36,10,000/- IS CONC ERNED, IT STANDS FULLY SUPPORTED BY THE DRAWINGS MADE BY THE APPELLA NT FROM M/S CARPET INTERNATIONAL, THE PARTNERSHIP FIRM WHERE AP PELLANT IS A PARTNER AS IN PAPER BOOK OF SMT. RADHIKA DEVI BARAN WAL A.Y. 2009- ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 273 10 APPEARING FROM PAGES 42 TO 47 OF WS. VERIFIABI LITY OF RS. 36,10,000/- COMES BEFORE ME AFTER COMBINED ANALY SIS OF TWO DIARIES SEIZED FROM G-3 UPASANA NAGAR, NEW DELHI AND FROM R AJPURA COLONY, BHADOHI , AS BOTH THE DIARIES CONTAINS RELA TED ENTRIES. LD. ACIT HAS MADE ADDITION ONLY BY OBSERVING SOME NOTIN G IN THE DIARY SEIZED FROM G-3, UPASANA NAGAR, NEW DELHI AND HAS N OT CONSIDERED THE OTHER ONE. HENCE WHOLE ADDITION MADE IN THIS BE HALF IS DENIED AS INCORRECT. 26. THUS, IT STANDS FULLY ESTABLISHED THAT, FROM WHATE VER ANGLE, THE MATTER IS EXAMINED, THE ADDITIONS MADE BY THE LD. A CIT HAS NO FORCE AND MOREOVER TO THIS ALL EXPENSES ACTUALLY INCURRED , NOT ONLY STOOD SUPPORTED BY THE RECORDS AND THE SAME WERE WHOLLY R EASONABLE ALSO. HENCE EXPENDITURE OF RS.72,07,115/- SAID TO BE INCURRED B Y THE APPELLANT STANDS DELETED AT THE HANDS OF THE APPELL ANT. 74. THE REVENUE HAS CHALLENGED THE DELETION OF ADDI TION OF RS.58,17,116/- ONLY IN THE PRESENT DEPARTMENTAL APPEAL. 75. THE LD. DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 76. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE ASSESSEE HAS FILED DETAILED WORKING OF EACH AND EVERY ENTRY OF EACH PAGE OF THE SEIZED DIARY AN D EXPLAINED THAT PART OF THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 274 AMOUNT BELONG TO F.Y. 2007-08, WHICH IS ALSO HAVING DUPLICATE ENTRIES AND RS.14,10,000/- PERTAINED TO EARLIER YEARS. THEREFOR E, IT IS NOT RELATED TO THE ASSESSMENT YEAR UNDER APPEAL. THE LD. CIT(A) ON EXA MINATION OF THE SEIZED MATERIAL FOUND THE STATEMENT OF THE ASSESSEE TO BE CORRECT, WHICH IS ALSO APPARENT FROM THE DETAILS OF SEIZED PAPER NOTED BY THE AO AT PAGE 3 OF THE ASSESSMENT ORDER. MOREOVER, THE ADDITION OF RS.14,10,000/- NOT RELATE D TO ASSESSMENT YEAR UNDER APPEAL HAVE NOT BEEN CHALLENGED BY THE REVENUE IN T HE PRESENT APPEAL. THE BALANCE AMOUNT OF RS.7,35,000/- WAS ALSO EXPLAINED AS PERTA INING TO EARLIER YEAR WHICH IS ALSO SUPPORTED BY THE SEIZED MATERIAL. THE DUPLICAC Y OF THE ENTRIES HAVE BEEN EXAMINED BY THE LD. CIT(A) WITH REFERENCE TO THE SE IZED MATERIAL, WHICH HAS BEEN CORRECTLY DELETED BY THE LD. CIT(A). THE ONLY AMOUN T LEFT FOR CONSIDERATION FOR THE ASSESSMENT YEAR UNDER APPEAL WAS RS.36,10,000/- WHI CH THE LD. CIT(A) VERIFIED FROM THE RECORD AND FOUND THAT THE SAME IS FULLY SU PPORTED BY THE DRAWINGS MADE BY THE ASSESSEE FROM M/S. CARPET INTERNATIONAL, PAR TNERSHIP FIRM WHERE THE ASSESSEE AND HIS WIFE ARE THE PARTNERS. THE LD. CIT(A), THER EFORE, ON PROPER APPRECIATION OF THE SEIZED MATERIAL WITH REFERENCE TO THE ENTRIES M ADE IN THE BOOKS OF ACCOUNT CORRECTLY DELETED THE ADDITION. IT IS A DEPARTMENTA L APPEAL AND NO MATERIAL IS PRODUCED BEFORE US TO CONTRADICT OR REBUT THE FINDI NGS OF FACT RECORDED BY THE LD. CIT(A). IN THE ABSENCE OF ANY ADVERSE MATERIAL AGAI NST THE ASSESSEE, THE ITA NOS. 156 TO 160/A/2012 ITA NOS.91 & 90/A/2012 ITA NO. 175 & 176/A/2012 ITA NO. 177 TO 179/A/2012 & ITA NO. 89/A/2012 275 EXPLANATION OF THE ASSESSEE CANNOT BE DISPUTED AT T HIS STAGE. THE DEPARTMENTAL APPEAL HAS, THEREFORE, NO MERIT AND IS ACCORDINGLY DISMISSED. 77. NO OTHER POINT IS ARGUED OR PRESSED. 78. IN THE RESULT, ALL THE DEPARTMENTAL APPEALS ARE DISMISSED. 79. APPEAL OF THE ASSESSEE IN ITA NO. 89/A/2012 IS ALSO DISMISSED. 80. APPEALS OF THE ASSESSEE IN ITA NOS. 91/A/2012 A ND 90/A/2012 ARE, HOWEVER, PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, ALLAHABAD 6. GUARD FILE ASSTT. REGISTRAR TRUE COPY
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