The Dy. Commissioner of Income Tax, Circle-3(1)(2), Ahmedabad V. Real Strips Ltd., Ahmedabad

ITA 2255/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8222 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 01-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH SINGH
• Assessee Lawyers: P D SHAHA R
• Keywords: Rejection of books of accounts; Business income; Tangible material; Corroborative evidences
• Section: 143(3); 133A; 145; 144

Judgement Text

, , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD OLHE VGEN] YS[KK LNL; OLHE VGEN] YS[KK LNL; OLHE VGEN] YS[KK LNL; OLHE VGEN] YS[KK LNL; , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ I.T.A. NO.2255/AHD/2016 ( / ASSESSMENT YEAR : 2012-13) DCIT, CIR 3(1)(2), AHMEDABAD. / VS. M/S. REAL STRIPS LTD., 401-402, FLORENCE, OPP. ASHRAM ROAD, POST OFFICE, ASHRAM ROAD, AHMEDABAD. ./ ./ PAN/GIR NO. : AABCR 2893 N ( / APPELLANT ) .. ( !' / RESPONDENT ) # / APPELLANT BY : SHRI SAURABH SINGH, SR. D.R. !' $ # / RESPONDENT BY : SHRI P. D. SHAH, A.R. % &' $ () / DATE OF HEARING 23/05/2018 *+,- $ () / DATE OF PRONOUNCEMENT 31/05/2018 . / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE APPELLATE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-9, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)- 9/650/DCIT-CIR-3(1)(2)/14-15 DATED 15/06/2016 ARISI NG IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') DATED 27/03 /2015 RELEVANT TO ASSESSMENT YEAR (AY) 2012-13. ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 2 - 2. THE GROUNDS RAISED BY THE REVENUE PER ITS APPEAL ARE AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.4,57,82,539/- MADE ON ACCOUNT OF SUP PRESSION OF PRODUCTION AND SALE OUT OF BOOKS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.3,81,75,044/- MADE ON ACCOUNT OF EST IMATION OF GROSS PROFIT. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THE MATERIAL FACTS BROUGHT ON RECORD BY THE AO IN T HE ASSESSMENT ORDER. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 5. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD . CIT(A) MAY BE SET-ASIDE AND THAT OF THE AO BE RESTORED. 3. THE ISSUES RAISED BY THE REVENUE ARE INTER-CONNE CTED TO EACH OTHER THEREFORE WE HAVE CLUBBED ALL OF THEM FOR THE PURPO SE OF ADJUDICATION AND BREVITY. 4. THE REVENUE IN THIS APPEAL HAS CHALLENGED THE DE LETION OF THE ADDITION MADE BY THE AO ON ACCOUNT OF SUPPRESSION O F PRODUCTION LEADING TO THE SUPPRESSION OF SALE AS WELL AS DETER MINATION OF GROSS PROFIT ON ESTIMATED BASIS. 5. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN TH E PRESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE MANUFACT URING BUSINESS OF S. S. COLD ROLLED COILS/STRIPS AND GENERATION OF PO WER. THERE WAS A SURVEY AT THE FACTORY PREMISES OF THE ASSESSEE LOCA TED AT 245-246, VILLAGE ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 3 - SARI, AHMEDABAD BAWLA-HIGHWAY, AHMEDABAD DATED 21-0 1-2015. DURING THE SURVEY PROCEEDINGS, THE STATEMENT OF PRO DUCTION MANAGER SHRI N. ANANTHA PADMANABHAN WAS RECORDED. THE RELEVANT E XTRACT OF THE STATEMENT IS REPRODUCED AS UNDER: STEP NO. DETAILS OF PROCESS LOSS INCURRED STEP 1 RECEIPT OF HOT ROLLED COIL FROM JINDAL STEEL NO LOSS STEP 2 HOT ROLLING ANNEALING AND PICKLING INVISIBLE LOSS OF FROM 1.5% TO 2% OF WEIGHT STEP 3 ROLLING TO CUSTOMERS REQUIREMENT NO LOSS STEP 4 COLD ROLL ANNEALING AND PICKLING INVISIBLE LOSS OF 0.4% TO 0.6% OF WEIGHT STEP 5 FINISHING I.E. SLITTING LINES TO CUT COIL AS PER REQUIREMENT OF CUSTOMER SCRAP OF 2% AT HEAD END AND 1% SCRAP AT FAIL END. STEP 6 PACKING NO LOSS STEP 7 DISPATCH NO LOSS AS PER THE ABOVE STATEMENT, IT WAS REVEALED THAT TH ERE WAS MAXIMUM LOSS OF 5.6% (2%+.6%+3%) IN THE MANUFACTURING PROCESS OF THE MATERIAL CONSUMED ON ACCOUNT OF INVISIBLE LOSS AS WELL AS SC RAP LOSS. HOWEVER, THE ASSESSEE HAS SHOWN PROCESSING LOSS @ OF 6.9% OF THE MATERIAL CONSUMED IN THE YEAR UNDER CONSIDERATION. THUS, THE AO WAS O F THE VIEW THAT THE ASSESSEE HAS CLAIMED EXCESS LOSS BY 1.3% (6.90%-5.6 0%) OF THE TOTAL MATERIAL CONSUMED. ACCORDINGLY, THE AO TREATED THE EXCESS LOSS SHOWN BY THE ASSESSEE AS SUPPRESSED PRODUCTION WHICH WORK ED OUT AT 445355 KGS (1.3% OF TOTAL CONSUMPTION 3,42,58,111 KGS). TH US THE EXCESS LOSS/SUPPRESSED PRODUCTION WAS TREATED AS UNDISCLOS ED SALE MADE BY THE ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 4 - ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS. ACCORDINGLY THE VALUE OF SUCH UNDISCLOSED WAS DETERMINED BY MULTIPLYING BY THE AV ERAGE SALE PRICE OF RS.102.80/KG TO DETERMINE THE AMOUNT OF SALE MADE B Y THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS WHICH WORKED OUT TO R S.4,57,82,539/- ONLY. THUS, THE SAID AMOUNT WAS TREATED AS SUPPRESSED SAL E OF THE ASSESSEE. IN ADDITION TO THE ABOVE, THE AO ALSO OBSERVED THAT THE GROSS PROFIT AS WELL AS NET PROFIT DECLARED BY THE ASSESSEE IS REDU CING CONSISTENTLY. THE RELEVANT DETAILS OF THE TURNOVER, GROSS PROFIT, NET PROFIT VIS--VIS GROSS PROFIT RATIO AND NET PROFIT RATIO STAND AS UNDER: A.Y. TURNOVER (RS. LAKHS) GROSS PROFIT (RS. LAKHS) GP RATIO (1%) NET PROFIT (RS. LAKHS) NP RATIO (1%) 2010-11 22781.97 2298.28 10.09 711.39 3.12 2011 - 12 28795.48 2454.32 8.52 782.64 2.72 2012-13 32887.26 2676.64 8.14 656.85 2.00 ACCORDINGLY, THE AO WAS OF THE VIEW THAT THE ASSESS EE HAS SUPPRESSED ITS PRODUCTION LEADING TO SUPPRESSED SALE THEREFORE THE RE IS A FALL IN THE GP RATIO CONSISTENTLY. IN-FACT THE ASSESSEE HAS CLAIME D ALL THE EXPENSES AGAINST THE SUPPRESSED SALE WHICH IS LEADING TO FAL L IN THE GP RATIO. THUS, THE AO FURTHER OBSERVED THAT THE FINANCIAL STATEMEN TS ARE NOT REFLECTING THE TRUE AND CORRECT INCOME OF THE ASSESSEE. ACCORD INGLY AS PER THE AO THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE LIABLE FO R REJECTION U/S 145(3) OF THE ACT. FINALLY, THE AO AFTER REJECTING THE BOOKS OF ACCOUNTS HELD THAT ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 5 - THE GROSS PROFIT OF THE ASSESSEE SHOULD HAVE BEEN E NHANCED BY RS.3,81,75,944/- (3,26,29,01,170 1.170%). HOWEVER, THE AO FURTHER OBSERVED THAT THE AMOUNT OF ADDITION ON ACCOUNT OF SUPPRESSED PRODUCTION/SALES IS GREATER T HAN THE AMOUNT OF ENHANCED GROSS PROFIT DETERMINED BY 1.17% OF THE TU RNOVER. ACCORDINGLY, THE HIGHER AMOUNT OF DISALLOWANCE OF RS. 4,57,82,53 9/- WAS TREATED AS SUPPRESSED SALE/ INCOME AND ADDED TO THE TOTAL INCO ME OF THE ASSESSEE. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A ). THE SUBMISSION OF THE ASSESSEE CAN BE CATEGORIZED AS UNDER : 6. SUBMISSION OF THE ASSESSEE REGARDING SUPPRESSION OF SALES OF RS.4,57,82,539/- : (I) THE SUPPRESSION OF PRODUCTION HAS BEEN WORKED O UT BY AO WITHOUT CONSIDERING THE INCREASE CLOSING STOCK IN THE WORK IN PROGRESS. THERE WAS NET INCREASE OF 466497 KGS IN THE CLOSING WORK-IN- PROGRESS. THERE WILL NOT BE ANY SUPPRESSION OF PROD UCTION IF THE INCREASED WORK-IN-PROGRESS SHOWN IN THE AUDITED FIN ANCIAL STATEMENT IS CONSIDERED. THUS, THE AO ERROR IN CALC ULATING THE SUPPRESSED PRODUCTION THOUGH ALL THE RELEVANT DETAI LS WERE DULY AVAILABLE IN THE TAX AUDIT REPORT IN FORM 3CD. (II) THERE COULD NOT BE ANY ADDITION MERELY ON THE BASIS OF STATEMENT OBTAINED IN SURVEY U/S 133A OF THE ACT AS IT DOES N OT HAVE ANY EVIDENTIARY VALUE AS THE SAME IS ALSO NOT SUPPORTED WITH ANY ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 6 - CORROBORATIVE EVIDENCES. THE ASSESSEE IN SUPPORT OF HIS CLAIM RELIED ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF P. R. METRANI VS. CIT REPORTED IN 287 ITR 209. (III) THE BOOKS OF ACCOUNTS WERE SUBJECT TO AUDIT U NDER THE COMPANIES ACT, INCOME TAX ACT, VAT AND EXCISE DEPARTMENTS. TH ERE WAS NO ALLEGATION IN ANY OF THE AUDIT REPORT REGARDING THE SUPPRESSION OF PRODUCTION AS ALLEGED BY THE AO. (IV) THERE WAS NO EVIDENCE BROUGHT ON RECORD BY THE AO SUGGESTING THAT THE ASSESSEE HAS MADE ANY SALES OUTSIDE THE BO OKS OF ACCOUNTS. (V) THE STATEMENT OF THE PRODUCTION MANAGER WAS TAK EN U/S133A OF THE ACT ON 21-01-2015 AND THEREFORE, THE SAME CANNOT BE USED AGAINST THE ASSESSEE FOR THE EARLIER YEARS I.E. AY 2012-13. THERE WAS VARIOUS MODIFICATION / UP GRADATION AND CHANGES IN THE TYPE OF RAW MATERIAL USED FOR THE PRODUCTION PROCESSED BETWEEN THE A.Y.2012- 13 AND THE DATE ON WHICH STATEMENT U/S 133A OF THE ACT WAS OBTAINED. THEREFORE, NO REFERENCE OF THE STATEMENT RECORDED U/S 133A OF THE ACT CAN BE MADE TO THE PROCEEDINGS FOR THE A.Y. 2012-13 WHICH IS UNDER CONSIDERATION. (VI) THE STATEMENT GIVEN BY THE PRODUCTION MANAGER WAS BASED ON THE PRODUCTION SHEETS, WHICH WAS MADE FOR INTERNAL PURP OSE AND INTERNAL DISCUSSION. THEREFORE, NO RELIANCE CAN BE PLACED ON THE STATEMENT VIS--VIS SUCH PRODUCTION STATEMENT. ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 7 - (VII) THE PROCESS OF LOSS SHOWN BY THE ASSESSEE AT THE 6.9% IS WITHIN THE LIMIT AS SPECIFIED IN THE IMPORT AND EXPORT POLICY, WHEREIN, AN ORDINARILY PROCESS LOSS IN SCRAP IS 11% BUT THE ASS ESSEE HAS SHOWN ONLY 6.90% OF THE MATERIAL CONSUMED. (VII) THE ASSESSEE WAS MAINTAINING DAY TO DAY STOCK REGISTER OF THE INVENTORIES AND NO DEFECT/ UNACCOUNTED STOCK WAS PO INTED OUT ON THE BASIS OF SUCH RECORDS IN THE DETAILS OF THE RAW MATERIALS, ITS CONSUMPTION, SCRAP AND FINISHED GOODS MANUFACTURED. THE DETAILS OF THE GOODS REMOVED ARE DULY FURNISHED TO EXCISE D EPARTMENT ON MONTHLY BASIS BUT NO DEFECT WHATSOEVER WAS RECORDED BY SUCH EXCISE DEPARTMENT. 7. THE SUBMISSION OF THE ASSESSEE FOR THE REJECTION OF THE BOOKS OF ACCOUNTS: (I) ONCE BOOKS OF ACCOUNTS OF THE ASSESSEE HAVE BEE N REJECTED THEN THE AO WAS REQUIRED MAKE THE ASSESSMENT U/S 144 OF THE ACT BUT THE ASSESSMENT HAS BEEN FRAMED U/S 143(3) OF THE ACT. (II) THERE WAS NO DEFECT POINTED OUT BY THE AO IN T HE BOOKS OF ACCOUNTS OF THE ASSESSEE DURING THE ASSESSMENT PROC EEDINGS. ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 8 - (III) ALL THE BOOKS OF ACCOUNTS WERE DULY AUDITED U NDER EXCISE, INCOME TAX, VAT AND COMPANIES ACT BUT NO DEFECT IN THE SAM E WAS MENTIONED. THE LEARNED CIT (A) AFTER HEARING THE CONTENTION OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER : FINDING OF THE LD.CIT(A) REGARDING THE ADDITION OF RS.4,57,82,539/- AS UNDER: 6.6 FROM PERUSAL OF THE ORDER OF ASSESSMENT AND TH E SUBMISSIONS OF THE APPELLANT SUMMARIZED ABOVE IT IS EVIDENT THAT A O HAS NOT CONSIDERED/DISCUSSED THE EFFECT OF INCREASE IN THE WORK IN PROGRESS FOR THE DETERMINATION OF THE ALLEGED UNACCOUNTED PRODUC TION NOWHERE IN THE ORDER OF ASSESSMENT HAS THE AO CONSIDERED THE C LOSING STOCK OPENING STOCK AS WELL AS THE SCRAP GENERATED DURING THE PRODUCTION IN ORDER TO UNDERTAKE THE QUANTITATIVE ANALYSIS OF UNA CCOUNTED OR SUPPRESSED PRODUCTION IN THE SUBMISSION BEFORE THE AO THE APPELLANT HAD DONE THE WORKING ALTER GIVING EFFECT OF OPENING AND CLOSING WORK IN PROGRESS. ACCORDING TO WHICH THERE HAS BEEN A NET I NCREASE IN PRODUCTION BY 4,66,497 KGS. THE AO HAS NOT TAKEN IN TO ACCOUNT THE SUBMISSION OF APPELLANT WHILE DOING THE QUANTITATIV E ANALYSIS. WHEREAS THE AO HAS CALCULATED SUPPRESSED PRODUCTION OF 4,45 ,355 KGS. FURTHER, IT IS APPARENT THAT THE YEAR OF SURVEY AND THE YEAR OF ASSESSMENT ARE DIFFERENT AND DURING THE SAID PERIOD THE APPELLANT HAS MADE INVESTMENT IN ASSETS IN ORDER TO IMPROVE THE EFFICIENCY OF PRO DUCTION. THERE HAS BEEN ADDITION OF RS.13.97 CRORES TO THE PLANT & MACHINERY IN THE FY 2011-12 OF RS.13.35 CRS IN FY 2012-13 AND OF RS.5.8 2 CRS N FY 2013- 14. THESE A R E SIGNIFICANT CHANGES IN THE PRODUCTION PROCESS. TH E APPELLANT HAD MADE A CHANGE M THE AIR QUENCH SECTIO N IN THE FURNACE. THE LENGTH OF ACID TANS IN HRAP SECTION WAS INCREAS ED TO ENABLE PROCESS AT HIGHER SPEED. ON GOING THROUGH ANNEXURE 2 OF FORM 3CD IT IS OBSERVED THAT THE APPELLANT HAS MADE HUGE INV ESTMENT IN ANNEALING FURNACE (BA LINE) (2 NOS.), MODIFICATION IN HRAP LI NES, MODIFICATION IN AP LINES ETC THE SAID ADDITIONS INTO FIXED ASSET S OF THE COMPANY HAVE BEEN CERTIFIED BY THE TAX AUDITOR THE QUALITY OF RA W MATERIAL PURCHASED ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 9 - DURING THE AY UNDER CONSIDERATION IS DIFFERENT FROM THE QUALITY OF RAW MATERIAL PURCHASED AT THE TIME OF SURVEY. APPELLANT HAS STARTED PURCHASING HRAP (NON-BLACK) COILS FROM JINDAL STAIN LESS LTD. DUE TO WHICH THERE IS NO INVISIBLE PROCESS LOSS AT HRAP LE VEL EVEN THE THICKNESS WISE PRODUCTION REPORT REFLECTS THE CHANG E IN THE QUALITY OF FINISHED GOODS. THE EXCISE DEPARTMENT AT PERIODIC I NTERVALS HAD BEEN CONDUCTING AUDIT OF ITS PRODUCTION PROCESS THE APPE LLANT HAD BEEN DISCLOSING THE PROCESS LOSS IN ITS EXCISE REPORTS. IF THE OPENING AND CLOSING WORK IN PROGRESS IS TAKEN INTO ACCOUNT AND THE PROCESS LOSS DISCLOSED BY THE APPELLANT IS CONSIDERED THEN IT CA NNOT BE SAID THAT THERE IS ANY OTHER PROCESS LOSS IN EXCESS OF WHAT HAS BEE N DISCLOSED IN FORM E.R. 6 TO THE EXCISE DEPARTMENT. IN ABSENCE OF ANY CORROBORATIVE EVIDENCES, ALL THESE FACTORS GO ON TO SUPPORT THE C LAIM OF THE APPELLANT THAT IT HAD BEEN ABLE TO REDUCE THE PROCESS LOSS BY BRINGING NEW MACHINERIES OR MAKING MODIFICATIONS IN THE EXISTING ORES FURTHER DURING THE COURSE OF SURVEY NO EVIDENCE OF ANY UNACCOUNTED SALES WAS FOUND NOR HAS ANY PERSON AT THE FACTORY CONFIRMED OF THER E BEING ANY ACCOUNTED PRODUCTION/SALES. 6.7 IN LIGHT OF THE CIRCUMSTANCES AND FACTS MENTIO NED ABOVE, 1 AM OF THE CONSIDERED OPINION THAT THE APPELLANT HAS NOT S UPPRESSED ITS PRODUCTION BY 4,45,355 KGS THE AVERAGE SALE VALUE O F WHICH COMES TO RS.4,57,82,539/-. THEREFORE AO IS DIRECTED TO DELET E THE ADDITION OF RS.4,57,82,539/- THUS THIS GROUND OF APPEAL 3(A) IS ALLOWED. FINDINGS OF THE LD. CIT(A) REGARDING THE REJECTION OF THE BOOKS OF ACCOUNTS. 7.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ON AS WELL AS THE OBSERVATION OF THE A.O THE ASSESSING OFFICER HAS DE TERMINED ADDITION OF RS.3,81,75,944/- ON ACCOUNT OF REDUCTION IN THE GRO SS PROFIT OUT NO SEPARATE ADDITION HAS BEEN TRADE, AS ADDITION ON AC COUNT OF SUPPRESSED PRODUCTION AND UNACCOUNTED SALE HAS BEEN MADE IN TH IS REGARD IT HAS BEEN OBSERVED BY THE AO THAT THERE IS DECREASE IN A VERAGE GROSS PROFIT BY 1.17% AND THEREFORE AO ESTIMATED GROSS PROFIT OF 9.31 % (8 14+1 17) AND ADDITION OF RS 3,81,75,944/- HAS BEEN MADE. THE AO HAS POINTED THAT FROM THE MATERIAL IMPOUNDED AND STATEMENT RECO RDED OF PRODUCTION MANAGER AND DIRECTOR OF THE COMPANY, IT IS GATHERED THAT THE ASSESSEE IS CLAIMING ITS INVISIBLE LOSS AT HIGHER SIDE AND I S PRODUCING COLD ROLLED COIL WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNTS . IT IS ALSO ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 10 - OBSERVATION OF THE AO THAT FROM REDUCTION OF NET PR OFIT AND GROSS PROFIT, FT IS EVIDENT THAT THE FINDINGS OF SURVEY A RE CORRECT IN VIEW OF THE SAID FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER HAS OBSERVED THAT THE BOOKS OF ACCOUNTS ARE NOT SHOWING TRUE AND CORR ECT E OF THE ASSESSEE COMPANY AND HAS CONCLUDED THAT BOCK RESULT OF THE A SSESSEE IS LIABLE TO BE REJECTED AS PER PROVISION OF SECTION 145 OF THE INCOME TAX ACT. 7.3 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E APPELLANT HAS SUBMITTED THAT AS PER SECTION 145 OF THE ACT, THE A O CAN REJECT THE RESULT OF BOCK OF ACCOUNTS ONLY IF CONDITIONS OF SAID SECT ION ARE SATISFIED AND SINCE IN ITS CASE, NO DISSATISFACTION ABOUT THE COR RECTNESS OR COMPLETENESS OF THE ACCOUNTS HAVE BEEN FOUND RESULT S OF THE BOOKS CANNOT BE REJECTED. IT IS ALSO SUBMITTED BY THE APP ELLANT THAT THERE IS NO EVIDENCE/ADMISSION OF SUPPRESSION OF THE SALES OR C LAIM OF EXCESS INVISIBLE TOSS FOR THE ASSESSMENT YEAR UNDER CONSID ERATION HAS BEEN FOUND DURING PROCEEDINGS UNDER SECTION 133A OF THE ACT WITH REGARD TO QUANTITATIVE ANALYSIS OF SUPPRESSION OF PRODUCTION BY 1.3% UNDERTAKEN BY THE AO. I HAVE ALREADY ALLOWED THE GROUND NO 3(A ) OF THE APPELLANT AND DELETED THE ADDITION MADE ON ACCOUNT OF SAID UN ACCOUNTED SUPPRESSED PRODUCTION. 7.4 THE APPELLANT HAS FURTHER SUBMITTED THAT THE RE DUCTION IN THE GROSS PROFIT CANNOT BE GROUND FOR APPLYING SECTION 145 OF THE ACT AND PLACED RELIANCE ON THE FOLLOWINGS JUDGMENTS: (A) INTERNATIONAL FOREST CO VS CIT (1975) (101 ITR 721)(J&K) (B) PANDIT BROTHERS VS CIT (1954) (26 ITR 159) (C)ALUMINUM INDUSTRIES (P) LTD VS CIT (80 TAXMAN 184)(GAUHATI) THAT HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SYMPHONY COMFORT SYSTEM LIMITED (2013) 216 TAXMAN 225 (MAG) (GUJ.)(HC) IT HAS BEEN HELD THAT 'THE ASSESSING OFFICE; NOTICED T HAT THERE WAS FALL IN GROSS PROFIT RATE DECLARED BY ASSESSEE AS COMPARED TO THE PRECEDING YEAR AND HE MADE ADDITION ON ACCOUNT OF LOW GROSS P ROFIT RATE TO ASSESSEE'S INCOME. HOWEVER, NO SPECIFIC DEFECT IN M AINTENANCE OF BOOKS OF ACCOUNT BY ASSESSEE HAD BEEN POINTED OUT BY ASSE SSING OFFICER HELD, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REJECTIN G BOOK RESULTS AND ENHANCING GROSS PROFIT RATE. (AY.2005-06). ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 11 - 7.5 IN VIEW OF ABOVE FACTS CIRCUMSTANCES, THE DECI SION TAKEN WITH RESPECT THE GROUND NO 3(A) AND IN VIEW THE CASE LAW MENTIONED ABOVE, I AM OF THE CONSIDERED OPINION THAT THE ACTION OF THE AO IN REJECTING BOOKS OF ACCOUNTS AND ESTIMATING PROFIT IS NOT JUST IFIED AND NO ADDITION ON THIS COUNT IS REQUIRED TO BE MACE. THEREFORE, AD DITION IN THE GROSS PROFIT OF RS.3,81,75,944/- IS ALSO NOT REQUIRED THU S THIS GROUND OF APPEAL 3(B) IS ALLOWED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) REVENUE IS IN SECOND APPEAL BEFORE US. THE LD. DR BEFORE US VEHEMENTLY SUPPORTED THE ORDER OF THE AO. ON THE OTHER HAND, LD.AR BEFORE US SUBMITTED AS UNDER: GROUND NO.1 ADDITION OF RS. 4,57,82,539/- ON ACCOU NT OF ALLEGED SUPPRESSED SALES ON ACCOUNT OF ALLEGED UNACCOUNTED PRODUCTION 1. THE STATEMENT RECORDED ON OATH DURING THE COURSE OF PROCEEDING UNDER SECTION 133 A OF THE ACT DOES NOT HAVE EVIDEN TIARY VALUE IN THE ASSESSMENT- (A) C1T VS S. KHADER KHAN (300 ITR 1 57)(MAD). SAID JUDGMENT HAS BEEN CONFIRMED BY THE H ONBLE APEX COURT. REFER ITR 352 1TR 480(2013) (B) HON'BLE APEX COURT IN THE CASE OF P.R. MCTRANI VS. COMMISSIONER OF INCOME TAX (2006) 287 ITR 209 (SC). 2. THE IMPUGNED ASSESSMENT IS FOR AY 2012-13 AND STATE MENT RECORDED ARE DATED 21.1.2015 AND THEREFORE THE STAT EMENTS CANNOT BE RELIED UPON FOR THE ASSESSMENT YEAR CONSI DERATION. 3. THE LEARNED AO HAS WORKED OUT 4,45,355 KGS. AS SUPP RESSED PRODUCTION, HOWEVER WHILE COMPUTING THE ALLEGED SUP PRESSED PRODUCTION THE LEARNED AO HAS NOT GIVEN EFFECT OF I NCREASE TO THE CLOSING STOCK OF WORK IN PROGRESS OF 4,66,497 KGS ( CLOSING W1P OF 18,57,428 KGS LESS OPENING WIP OF 13,90,931 KGS. ). THE SAID RELEVANT FACT WAS BROUGHT TO THE NOTICE OF LD. AO V IDE OUR LETTER DATED 16/3/2016. REFER MARKED PARA 4.2(IV) ON PAGE NO.4 OF THE ASSESSMENT ORDER THE SAID ISSUE HAS NOT BEEN DISCUS SED BY THE LEARNED AO AND ACCORDINGLY THE ENTIRE ADDITION IS A GAINST THE FACT OF THE CASE ITSELF. IN THIS REGARD RELEVANT PA GE OF 3CD REPORT ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 12 - FOR F.Y. 2010-11 TO 2013-14 (GIVING DETAILS OF RAW MATERIAL AND FINISHED GOODS ONLY) ALONG WITH THE WORKING OF EFFE CT OF INCREASE IN WORK IN PROGRESS ON THE PRODUCTION WAS SUBMITTED TO THE LD. CIT(A) AS PAGE NO H/1 TO H/6 OF PAPER BOOK. 4. DURING THE COURSE OF PROCEEDINGS UNDER SECTION 133A OF THE ACT, NO EVIDENCE OF UNACCOUNTED PRODUCTION AND SALES THE REOF FOR THE YEAR UNDER CONSIDERATION HAS BEEN FOUND NOR ANY PER SON IN THEIR STATEMENT ACCEPTED SUPPRESSION OF PRODUCTION OR SAL ES THEREOF AND THEREFORE THE ENTIRE ADDITION IS ON PRESUMPTION AND SURMISE BASIS. 5. THE BOOKS OF ACCOUNTS ARE SUBJECT TO AUDIT UNDE R THE COMPANIES ACT INCOME TAX ACT, VAT AND EXCISE AND NONE OF THE AUTHORITIES/ AUDITORS HAVE STATED/HIGHLIGHTED ANYTHING WITH REGA RD TO SUPPRESSION OF PRODUCTION AND SALES THEREOF. 6. THE YIELD FOR THE SUBSEQUENT ASSESSMENT YEAR AND EARLIER YEARS HAVE BEEN ACCEPTED IN THE ORDER PASSED UNDER SECTIO N 143(3) AND WHEREIN NO ADDITION FOR SUPPRESSED PRODUCTION OR SA LES HAS BEEN MADE. 7. THE OBSERVATION OF THE LEARNED AO FOR NON-ACCE PTANCE OF THE EXPLANATION HAVE BEEN MET OUT BEFORE THE LD.CIT(A) AND AFTER CONSIDERING THE SAME, THE GROUND HAS BEEN ALLOWED B Y THE LD.CIT(A).REFER MARKED PARA 6 ON PAGE NO 15 OF THE ID.CIT(A). FURTHER THE EXPLANATION FOR THE PRODUCTION SHEET FO UND DURING THE COURSE OF PROCEEDING UNDER SECTION 133A HAS BEE N GIVEN BY THE COMPANY. 8. THAT, IN ANY CASE, ALLEGED WORKING OF SUPPRES SED PRODUCTION CANNOT BE BASE FOR MAKING AM ADDITION FOR SALE, IN ABSENCE OF ANY EVIDENCES OF ITS SALES OR UNACCOUNTED OF LYING IN STOCK. 9. IN VIEW OF THE ABOVE FACTS AND SUBMISSION, RE LIANCE IS PLACED ON THE ORDER OF THE LD. CIT(A) AND THEREFORE GROUND OF THE REVENUE IS REQUIRED TO BE DISMISSED. GROUND NO.2 1. THAT THE SAID ADDITION HAS BEEN MADE WITHOUT ISSUING ANY SHOW CAUSE NOTICE. 2. IN VIEW OF THE ABOVE SUBMISSION, NO DEFECT IN THE BOOKS OF ACCOUNTS HAVE BEEN FOUND AND THEREFORE, THE BOOK RE SULT CANNOT BE REJECTED UNDER SECTION 145 OF THE ACT. 3. THE REDUCTION OF THE GROSS NET PROFIT CANNOT BE GROUND FOR THE REJECTION OF THE BOOKS OF ACCOUNT UNDER SECTION 145 OF THE ACT. ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 13 - 4. IN VIEW OF THE ABOVE FACTS AND SUBMISSION, RELIANCE IS PLACED ON THE ORDER OF THE LD. CIT(A) AND THEREFORE GROUND OF THE REVENUE IS REQUIRED TO BE DISMISSED. YOUR HONOR IS REQUESTED TO CONSIDER THE ABOVE SUBMI SSION WHILE DECIDING THE APPEALS AND OBLIGE 8. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED T HE MATERIALS AVAILABLE ON RECORD. THE ADDITION FOR THE SUPPRESSI ON OF PRODUCTION / SALES WAS MADE BY THE AO ON ACCOUNT OF STATEMENT RECORDED U/S 133A OF THE ACT. IN THE STATEMENT, IT WAS ACCEPTED THAT THE PRO CESS OF LOSS COMES TO 5.6% OF THE TOTAL RAW MATERIAL CONSUMPTION. HOWEVER , FROM THE PRODUCTION REGISTERS, IT WAS POINTED OUT BY THE AO THAT THE ASSESSEE HAS CLAIMED PRODUCTION LOSS @6.9% OF THE MATERIAL CONS UMPTION. THUS, THE AO TREATED THE EXCESS LOSS OF 1.3% OF RAW MATERIAL CONSUMPTION AS SUPPRESSED PRODUCTION MADE BY THE ASSESSEE LEADING TO SUPPRESSED SALE OF RS.4,57,82,539/- OUTSIDE THE BOOKS OF ACCOUNTS. ACC ORDINGLY, THE ADDITION WAS MADE BY THE AO. SIMILARLY, THE AO REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE ON THE GROUND THAT THE FINANCIAL STATEMENTS PREPARED BY IT ARE NOT SHOWING TRUE AND CORRECT INCOME. THEREFORE, THE AO ENHANCED THE GROSS PROFIT @1.3% OF THE TOTAL SALES DECLARED BY THE ASSESSEE. HOWEVE R, THE GROSS PROFIT ESTIMATED BY THE ASSESSEE WAS LESS THAN THE AMOUNT OF SUPPRESSED SALE THEREFORE THE ADDITION ON ACCOUNT OF SUPPRESSED SAL E WAS MADE BY THE AO. ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 14 - HOWEVER, THE LD. CIT(A) DELETED THE ADDITIONS MADE BY THE AO BY OBSERVING THAT NO DEFECT WHATSOEVER WAS POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. AS PER THE LD. C IT(A), THE ADDITION WAS BASED MERELY ON THE STATEMENT OBTAINED UNDER SE CTION 133A OF THE ACT DURING SURVEY PROCEEDINGS WITHOUT ANY CORROBORA TIVE EVIDENCES AND HE WAS OF THE VIEW THAT THE ADDITION CANNOT BE HELD AS SUSTAINABLE. NOW THE ISSUE BEFORE US ARISES SO AS WHETHER THE DE LETION MADE BY THE LD. CIT(A) IS CORRECT AND IN ACCORDANCE WITH THE PROVIS IONS OF LAW. IN THIS REGARD, WE NOTE THAT THERE WAS NO WHISPER HIGHLIGHT ING THE ANY DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY THE AO. TH US, THE ADDITION WAS MADE MERELY ON THE BASIS OF STATEMENT RECORDED U/S 133A OF THE ACT. WE ALSO NOTE THAT THE STATEMENT U/S 133A WAS RECORD ED ON 21-01-2015, WHEREIN, THE EXCESS PRODUCTION LOSS WAS OBSERVED. T HE SAME OBSERVATION WAS APPLIED TO THE A.Y. 2012-13 AND ACCORDINGLY, SU PPRESSED PRODUCTION LEADING TO SUPPRESS SALE WAS DETERMINED. IN OUR CON SIDERED VIEW, THE STATEMENT RECORDED DURING THE F.Y.2014-15 ON THE BA SIS OF DOCUMENTARY EVIDENCES PERTAINING TO F.Y. 2014-15 CANNOT BE IPSO FACTO APPLIED TO THE A.Y. 2012-13 WITHOUT HAVING ANY CORROBORATIVE EVIDE NCE. IN HOLDING SO, WE FIND SUPPORT AND GUIDANCE BY THE ORDER OF THIS TRIBUNAL IN THE CASE OF ITO VS. RUTVI STEEL & ALLOYS PVT. LT D. IN ITA NO.3870/AHD.2007 PERTAINING TO A.Y. 2005-06, ORDER DATED 18-06-2010, WHEREIN, IT WAS HELD AS UNDER: ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 15 - 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSES SEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACT URE OF M. S AND CTD BARS. THE LEARNED ASSESSING OFFICER OBSERVED TH AT THERE WAS HUGE VARIATION BETWEEN THE PRODUCTION SHOWN BY THE ASSES SEE AND THE UNITS OF ELECTRICITY CONSUMED IN EACH MONTH DURING THE YEAR HELD THAT THE BOOKS OF ACCOUNTS ARE NOT RELIABLE AND REJECTED THE SAME BY INVOKING SECTION 145 OF THE INCOME TAX ACT, 1961. HE THEREAFTER, OBS ERVED THAT IN THE MONTH OF MAY 2004, THE ASSESSEE HAS SHOWN PRODUCTIO N OF 133MT AGAINST CONSUMPTION OF 82847 UNITS OF POWER. THUS, HE HELD THAT FOR 1 MT OF PRODUCTION, 622.9 UNITS OF POWER CONSUMPTION HAS BEEN DECLARED BY THE ASSESSEE. HE NOTED THAT 14,15,899 UNITS OF P OWER WAS CONSUMED BY THE ASSESSEE IN THE ENTIRE YEAR AND BY TAKING TH E PRODUCTION RATE AS 1 MT AGAINST CONSUMPTION OF 622.9 UNITS OF POWER ARRI VED AT TOTAL PRODUCTION OF 2329.264 MT. AS AGAINST 1736.535 MT. AND BY ADOPTING THE AVERAGE SALE PRICE OF 22436.88 MT. SHOWN BY THE ASSESSEE ARRIVED AT THE VALUE OF SUPPRESSED PRODUCTION OF 592.729 MT . AT RS.1,33,04,916/-. AFTER ALLOWING REBATE FOR ALL ADV ERSE EVENTUALITIES IN THE PRODUCTION PROCESS WITH REFERENCE TO THE CONSUM PTION OF POWER UNIT AND ALSO CONSIDERING CONTENTION OF THE ASSESSEE THA T PRODUCTION CANNOT BE COMPARED WITH CONSUMPTION OF POWER ONLY ESTIMATE D 70% OF RS.1,33,04,916/- AS SUPPRESSED PRODUCTION OF THE AS SESSEE WHICH WORKED OUT TO RS.92,,89,426/- AND MADE ADDITION TO THE INCOME OF THE ASSESSEE. IN APPEAL, THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) HELD THAT REJECTION OF BOOK RESULT WAS NOT JUSTIFIE D BY THE LEARNED ASSESSING OFFICER FOR THE REASON THAT THE ASSESSEE MAINTAINED BOOKS OF ACCOUNT WHICH WERE AUDITED UNDER THE COMPANIES ACT AND ALSO UNDER SECTION 44AB OF THE INCOME TAX ACT AND TH E LEARNED ASSESSING OFFICER HAS BROUGHT NO MATERIAL TO SHOW THAT THEY ARE NOT MAINTAINED AS PER PROVISIONS OF THE INCOME TAX ACT, 19 61. FURTHER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OBSERVE D THAT THE LEARNED ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCES WHICH INDICATES THAT THE ASSESSEE WA S INDULGING IN UNACCOUNTED MANUFACTURING AND SALES AND MADE UNACCO UNTED PURCHASES OF RAW MATERIALS TO MANUFACTURE UNA CCOUNTED PRODUCTS. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) H AS ALSO OBSERVED THAT THE EXCISE AUTHORITIES HAVE VERIFIED T HE PRODUCTION RECORDS OF THE ASSESSEE AND HAS FOUND NO DISCREPANCIES IN THEM. HE ALSO OBSERVED THAT IN THE SIMILAR FACTS AND CIRCUMSTANCE S, THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF PONDY METAL AND ROLLING MILLS P. LTD. ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 16 - (SUPRA) DELETED THE ADDITION MADE ON ACCOUNT OF SUP PRESSED PRODUCTION AND DELETED THE ADDITION OF RS.92,82,426/-MADE IN T HE INSTANT CASE OF THE ASSESSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE H AS MERELY RELIED UPON THE ORDER OF THE LEARNED ASSESSING OFFICER. HE COULD NOT POINT OUT ANY ERROR IN THE ABOVE FINDING OF THE LEARNED C OMMISSIONER OF INCOME TAX(APPEALS). THE LEARNED DEPARTMENTS REPRES ENTATIVE COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE A SSESSEE HAS PURCHASED RAW MATERIALS OUTSIDE THE BOOKS OF ACCO UNT FOR MAKING UNACCOUNTED PRODUCTION. FURTHER, THE ASSESSEE HAS M AINTAINED BOOKS OF ACCOUNT, PURCHASE AND SALE REGISTER AND NO DEFECTS COULD BE POINTED OUT IN THE SAME BY THE LEARNED ASSESSING OFFICER. FURTH ER, NO ERROR COULD BE POINTED OUT IN THE SUBMISSION OF J THE ASSESSEE THAT IT HAS MAINTAINED RG-1 REGISTER WHICH IS SUBJECT TO VERIFICATION BY E XCISE AUTHORITIES AND NO DEFECT HAS BEEN POINTED OUT BY THEM ON THEIR INS PECTION AND THAT THE ACCOUNTS OF THE ASSESSEE ARE AUDITED UNDER THE COMP ANIES ACT AND THE INCOME TAX ACT, 1961 AND NO ADVERSE COMMENTS WERE M ADE BY THE AUDITORS ON THE ACCOUNTS OF THE ASSESSEE. FURTHER, THE HON'BLE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF PONDY METAL AN D ROLLING MILLS P. LTD, (SUPRA) HAS HELD THAT WHERE ASSESSEE IS MAINTA INING REGULAR BOOKS OF ACCOUNTS AND ALL THE PURCHASE AND SALES ARE DULY VOUCHED AND SUPPORTED BY RAW MATERIAL REGISTER, PRODUCTION REGI STER AND FINISHED GOOD REGISTER WHICH WERE SUBJECT TO CHECK BY EXCISE AUTHORITIES NO ADDITION CAN BE MADE ON ACCOUNT OF ALLEGED SUPPRESS ION OF PRODUCTION SIMPLY ON THE BASIS OF CONSUMPTION OF ELECTRICITY. WE ALSO FIND THAT THE CONTENTION OF THE ASSESSEE THAT THE VARIATION IN CO NSUMPTION OF ELECTRICITY MAY BE CAUSED DUE TO VARIOUS REASONS SU CH AS BREAK DOWN OF MACHINERY, QUALITY OF RAW MATERIALS, THICKNESS OF F INISHED GOODS AND FREQUENCY OF POWER FAILURE, ETC. COULD NOT BE CONTR OVERTED BY THE LEARNED ASSESSING OFFICER. RATHER IT IS OBSERVED TH AT THE ABOVE ARGUMENT OF THE ASSESSEE WAS ACCEPTED BY THE LEARNE D ASSESSING OFFICER TO THE EXTENT OF 30% FOR WHICH NO BASIS COU LD BE CITED. NO MATERIAL WAS BROUGHT ON RECORD TO SHOW THAT IT WAS SCIENTIFIC TO ARRIVE AT THE QUANTITY OF PRODUCTION MERELY ON THE BASIS O F CONSUMPTION OF UNITS OF ELECTRICITY. THEREFORE, IN OUR CONSIDERED OPINION MERELY ON THE BASIS OF UNITS OF ELECTRICITY CONSUMPTION, IT CANNO T BE CONCLUDED THAT THE ASSESSEE'S BOOKS OF ACCOUNT WERE NOT RELIABLE OR TH E ASSESSEE IS ENGAGED IN PRODUCING FINISHED GOODS OUTSIDE THE GOODS OF AC COUNT. KEEPING IN VIEW THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LEAR NED COMMISSIONER OF ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 17 - INCOME TAX(APPEALS). IT IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. THE ADDITION WAS SOLELY MADE ON THE BASIS OF THE ST ATEMENT FURNISHED BY THE PRODUCTION MANAGER OF THE ASSESSEE AT THE TIME OF SURVEY. THE LOWER AUTHORITIES HAVE NOT BROUGHT ANY IOTA OF EVIDENCE S UGGESTING THAT THE ASSESSEE HAS SUPPRESSED THE PRODUCTION LEADING TO S UPPRESSED SALE OUT THE BOOKS. HERE IT IS PERTINENT TO NOTE THAT THE CBDT H AS DISCOURAGED TO ITS OFFICERS TO MAKE THE ADDITION ON THE BASIS OF THE S TATEMENTS AND WITHOUT BRINGING ANY TANGIBLE MATERIALS FOR ANY ADDITION/DI SALLOWANCE. THE RELEVANT EXTRACT OF CBDT INSTRUCTIONS ISSUED VIDE F . NO. 286/98/2013- IT(INV.II) DATED 18 TH OF DECEMBER 2014 READS AS UNDER:- INSTANCES/COMPLAINTS OF UNDUE INFLUENCE/COERCION H AVE COME TO NOTICE OF THE CBDT THAT SOME ASSESSEES WERE COERCED TO ADM IT UNDISCLOSED INCOME DURING SEARCHES/SURVEYS CONDUCTED BY THE DEP ARTMENT. IT IS ALSO SEEN THAT MANY SUCH ADMISSIONS ARE RETRACTED I N THE SUBSEQUENT PROCEEDINGS SINCE THE SAME ARE NOT BACKED BY CREDIB LE EVIDENCE. SUCH ACTIONS DEFEAT THE VERY PURPOSE OF SEARCH/SURVEY OP ERATIONS AS THEY FAIL TO BRING THE UNDISCLOSED INCOME TO TAX IN A SUSTAIN ABLE MANNER LEAVE ALONE LEVY OF PENALTY OR LAUNCHING OF PROSECUTION. FURTHER, SUCH ACTIONS SHOW THE DEPARTMENT AS A WHOLE AND OFFICERS CONCERN ED IN POOR LIGHT. 2. I AM FURTHER DIRECTED TO INVITE YOUR ATTENTION T O THE INSTRUCTIONS/GUIDELINES ISSUED BY CBDT FROM TIME TO TIME, AS REFERRED ABOVE, THROUGH WHICH THE BOARDS HAS EMPHASIZED UPON THE NEED TO FOCUS ON GATHERING EVIDENCES DURING SEARCH/SURVEY A ND TO STRICTLY AVOID OBTAINING ADMISSION OF UNDISCLOSED INCOME UNDER COERCION/UNDUE INFLUENCE. 3. IN VIEW OF THE ABOVE, WHILE REITERATING THE AFOR ESAID GUIDELINES OF THE BOARD, I AM DIRECTED TO CONVEY THAT ANY INSTANCE OF UNDUE INFLUENCE/COERCION IN THE RECORDING OF THE STATEMEN T DURING SEARCH/SURVEY/OTHER PROCEEDING UNDER THE IT ACT, 19 61 AND/OR RECORDING A DISCLOSURE OF UNDISCLOSED INCOME UNDER UNDUE PRESSURE/COERCION SHALL BE VIEWED BY THE BOARD ADVE RSELY. ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 18 - FROM THE ABOVE CIRCULAR IT IS CRYSTAL CLEAR THAT TH E CBDT HAS EMPHASIZED TO ITS OFFICERS TO FOCUS ON GATHERING EVIDENCES DUR ING SEARCH/SURVEY OPERATIONS AND STRICTLY DIRECTED TO AVOID OBTAINING ADMISSION OF UNDISCLOSED INCOME UNDER COERCION/ UNDUE INFLUENCE. KEEPING IN VIEW THE GUIDELINES ISSUED BY THE CBDT FROM TIME TO TIME REGARDING THE STATEMENTS OBTAINED DURING SEARCH AND SURVEY OPERAT ION, IT IS UNDISPUTEDLY CLEAR THAT THE LOWER AUTHORITIES HAVE NOT COLLECTED ANY OTHER EVIDENCE TO PROVE THE SUPPRESSED PRODUCTION OTHER T HAN THE STATEMENT. THEREFORE UNDER SUCH FACTS & CIRCUMSTANCES WE ARE I NCLINED NOT TO INTERFERE IN THE ORDER OF LEARNED CIT (A). IN THIS REGARD THE AO IS DIRECTED TO DELETE THE ADDITION. HENCE THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/05/2018 SD/- SD/- JKTIKY ;KNO JKTIKY ;KNO JKTIKY ;KNO JKTIKY ;KNO OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LN L; L; L; L; (RAJPAL YADAV) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 31/05/2018 PRITI YADAV, SR.PS ITA NO.2255/AHD/2016 DCIT VS. REAL ST RIPS LTD. ASST.YEAR 2012-13 - 19 - !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. /01( % 2( / CONCERNED CIT 4. % 2( ( ) / THE CIT(A)-9, AHMEDABAD. 5. 567 !(&01 , ) 01- , 8 / / DR, ITAT, AHMEDABAD 6. 79 :' / GUARD FILE. % & / BY ORDER, ' 5( !( //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 25/05/2018 (DICTATION-PAD 7 PA GES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30/05/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 31/05/2018 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER