SHANTA SALSES CORPORATION, Jaipur V. ITO, Jaipur

ITA 231/JPR/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2939 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 21-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts
• Section: 143(3); 195; 48; 13; 145(3); 22; 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 231/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2010-11 M/S SHANTA SALES CORPORATION 2-KHA-23, JAWAHAR NAGAR, JAIPUR CUKE VS. THE INCOME TAX OFFICER WARD-6(1), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AADFS2403C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. MANISH AGARWAL (FCA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. RUNI PAL (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 12/12/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 11/03/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), AJMER DATED 04.01.2017 WHEREIN THE ASSESSEE HAS TAK EN FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE ACTION OF LD. AO IN REJECTING THE BOOKS OF ACCOUNT OF ASSESSEE BY INVOKING THE PROVISIONS O F SECTION 145(3) OF THE INCOME TAX ACT, 1961 ARBITRARILY AND WITHOUT PR OPER APPLICATION OF MIND. THEREFORE, THE ACTION OF THE LD. CIT(A) DESER VES TO BE HELD BAD IN LAW AND THE BOOKS OF ACCOUNT OF ASSESSEE DESERVE TO BE UPHELD. 1.1 THAT, THE LD. AO HAS FURTHER ERRED IN GIVING HI S OPINIONS/OBSERVATIONS ON TECHNICAL ISSUES OF THE MODE AND MANNER OF PRODU CTION PROCESS MERELY ON THE BASIS OF ASSUMPTIONS AND PRESUMPTIONS , WITHOUT SEEKING AN EXPERT REPORT ON THE SAME. IT HAS BEEN HELD BY S UPREME COURT IN THE ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 2 CASE OF SARASWATI INDUSTRIAL SYNDICATE LTD. VS. CIT REPORTED IN [1999] 237 ITR 1 (SC) WHEREIN IT HAS BEEN HELD THAT THE AS SESSING OFFICER IS NOT ENTITLED TO MAKE OBSERVATIONS ON TECHNICAL MATTERS, FOR WHICH THERE IS NO MATERIAL ON RECORD. THUS, THE ACTION OF LD. AO DESE RVES TO BE HELD BAD IN LAW. 1.2 THAT, THE LD. CIT(A) HAS FURTHER ERRED IN UPHOL DING THE APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT MERELY B Y ALLEGING THAT THE PRIMARY RECORD OF PRODUCTION WAS NOT MAINTAINED BY ASSESSEE BY COMPLETELY IGNORING THE FACT THAT DAILY PRODUCTION RECORDED MAINTAINED AT MINES WAS ITSELF THE PRIMARY RECORD OF PRODUCTIO N. THEREFORE, THE ACTION OF LD. AO IN REJECTING THE BOOKS OF ACCOUNT OF ASSESSEE DESERVES TO BE HELD BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN SUSTAINING THE TRADING ADDITIO N OF RS. 70,00,000/- OUT OF THE ADDITION OF RS. 75,00,000/-MADE ARBITRARILY BY LD. AO BEING A LUMP SUM / ESTIMATED ADDITION WITHOUT ANY BASIS. THUS, T HE ADDITION OF RS. 70,00,000/- SUSTAINED BY LD. CIT(A) DESERVES TO BE DELETED. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE OWNS 3 MINES SITUATED AT RADHERA AND SANKHLA KI BASTI IN AND ARO UND THE VICINITY OF BIKANER AND ENGAGED IN THE BUSINESS OF MINING OF THE CLAY. THE ASSESSEE ALSO OWNS 3 GRINDING UNITS FOR CONVERTING CLAY LUMPS INTO CLAY POWDER AND THESE UNITS ARE SITUATED AT GUDA. THE ASSESSEE IS ALSO ENGAGED IN T RADING OF CLAY. IT PURCHASES CLAY FROM THE 3 RD PARTIES AND SUPPLY TO ITS PROSPECTIVE CUSTOMERS. I T FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 1,80 ,105/ WHICH WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, 1961 VIDE ORDER DATED 25.03.2013 WHEREIN, INTERALIA, ADDITION OF RS.75,00,000/- WAS MADE BY THE ASSESSING OFFICER WHICH ON APPEAL, HAS BEEN RED UCED TO RS.70,00,000/- BY ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 3 THE LD CIT(A). AGAINST THE ADDITION SO SUSTAINED BY LD. CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS MAINTAINED BY THE AS SESSEE BY INVOKING OF PROVISIONS OF SECTION 145(3) OF THE ACT. AS PER THE ASSESSING OFFICER, THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NOT FOUN D TO BE RELIABLE IN VIEW OF THE VARIOUS DISCREPANCIES DISCUSSED IN THE ASSESSME NT ORDER REGARDING THE PRODUCTION OF CLAY AT VARIOUS MINES, PRODUCTION OF CLAY POWDER, TRADING OF CLAY AND CLAY POWDER AS WELL AS THE EXPENSES DEBITED IN THE TRADING ACCOUNT. IN THIS REGARD, A SHOW CAUSE WAS ISSUED BY THE ASSESSING OF FICER DATED 22.02.2013 AND IN RESPONSE, THE ASSESSEE FILED ITS SUBMISSION DATED 08.03.2013 AND WHICH WAS TAKEN ON RECORD AND THEREAFTER, THE AO HAS RECO RDED HIS FINDING. IT WOULD THEREFORE, BE RELEVANT TO REFER TO EACH OF THE DISC REPANCIES AS NOTED BY THE ASSESSING OFFICER, THE REPLY SO FILED BY THE AO AND FINDINGS SO RECORDED BY THE ASSESSING OFFICER. 4. FIRSTLY REGARDING TRADING OF CLAY AND CLAY POWDE R, IN THE SHOW CAUSE NOTICE, THE ASSESSING OFFICER HAS STATED THAT ON TE ST CHECK BASIS OF THE TRADED GOODS, TOTAL PURCHASES OF RS. 14,06,54,17/- ARE NOT LINKED WITH THE SALES AS SALES ITEMS ARE COMPOSITE AS TRADED GOODS AS WELL A S MANUFACTURED GOODS. THEREFORE, THE VERIFICATION WITH REGARD TO THE SALE OF TRADED GOODS AS WELL AS GOODS IN STOCK CANNOT BE ASCERTAINED AND AS SUCH TH E SALES ITEMS ARE NOT SUBJECT TO VERIFICATION. IT WAS FURTHER STATED BY T HE AO IN THE SHOW-CAUSE NOTICE THAT THE ASSESSEE HAS SHOWN PURCHASE AND SALE TO SI STER CONCERN NAMELY M/S HEMENDRA MINERALS AND BHANWAR SALES CORPORATION. TH E TRANSACTIONS WITH THESE CONCERNS ARE REQUIRED TO BE VERIFIED WITH THE SIMILAR TRANSACTIONS OF OUTSIDE PARTIES. THEREAFTER, IN THE FINAL FINDINGS RECORDED BY THE AO AT PARA 10 OF HIS ORDER, THE AO HAS LISTED DOWN THE PURCHASES MADE FOR TRADING PURPOSE ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 4 FROM VARIOUS PARTIES AMOUNTING TO RS 1,13,06,791/- AND HELD THAT FROM THE PERUSAL OF TRADING SALES, IT REVEALS THAT GROSS PRO FIT RATE IN TRADING OF CLAY VARIES FROM 18.57% TO 32.85%. IT IS ALSO SEEN THAT THE ASS ESSEE HAS MADE PURCHASES FROM ITS SISTER CONCERN M/S HEMENDRA MINERALS AT HI GHER RATE AS COMPARED TO OTHER CONCERNS HENCE THE GROSS PROFIT EARNED ON SUC H TRANSACTION IS LOWER. SIMILARLY, WHEN SALES ARE MADE TO SISTER CONCERN, T HE GROSS PROFIT EARNED IS LOWER. HENCE IT IS NOT POSSIBLE TO VERIFY THE ACTUA L GROSS PROFIT EARNED BY THE ASSESSEE ON THE TRADING OF CLAY & CLAY POWDER. THE SAID FINDINGS OF THE AO HAVE BEEN CONFIRMED BY THE LD CIT(A), HOWEVER, THER E IS NO REASONING WHICH IS DISCERNABLE FROM THE ORDER OF THE LD CIT(A) ON THE BASIS OF WHICH HE HAS CONFIRMED THE FINDINGS OF THE AO. 5. DURING THE COURSE OF HEARING, THE LD AR SUBMITTE D THAT AS REGARDS THE TRADING ACTIVITIES WITH THE PERSONS SPECIFIED U/S 4 0A(2)(B) IS CONCERNED, THE SAME ARE AT THE PREVAILING MARKET RATES. THE DETAIL S OF THE SAME WERE FURNISHED BEFORE LEARNED ASSESSING OFFICER DURING T HE COURSE OF HEARINGS AND IT WAS SUBMITTED THAT IN SHRI KOLAYATJI, THERE WERE DI FFERENT AREAS OF CLAY, WHERE DIFFERENT QUALITY OF CLAY WAS FOUND AND PURCHASES W AS MADE FROM THE DIFFERENT PARTIES AS PER REQUIREMENT. THE QUANTITY PURCHASED IS DIRECTLY RESOLD AFTER ADDING PROFIT. THE PROFIT EARNED ON TRADING OF DIFF ERENT TYPES OF CLAY WILL VARY AND IS NOT THE SAME. IT IS THEREFORE SUBMITTED THAT NO DISALLOWANCE IS WARRANTED ON THIS ACCOUNT MORE PARTICULARLY WHEN NO SPECIFIC INSTANCE HAS BEEN POINTED BY LD.AO WHEREIN ASSESSEE HAS MADE PAYMENT TO RELAT ED CONCERNS AT HIGHER THAN MARKET RATE. 6. WE FIND THAT MERELY BECAUSE GROSS PROFIT RATE IN TRADING OF CLAY VARIES FROM 18.57% TO 32.85%, TRADING RESULTS CANNOT BE RE JECTED WITHOUT SPECIFYING THE REASONS OR ANY CORROBORATIVE MATERIAL ON RECORD WHICH DISPUTE SUCH TRADING RESULTS. FURTHER PURCHASES AND SALES FROM SISTER C ONCERN HAVE BEEN DISPUTED ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 5 HOLDING THAT THE PURCHASES ARE AT HIGHER RATE AND S ALES AT LOWER RATE. HOWEVER, THERE IS NOTHING ON RECORD IN TERMS OF THIRD PARTY COMPARABLE AS TO HOW SUCH PURCHASES AND SALES ARE AT VARIANCE WITH ANY THIRD PARTY TRANSACTIONS UNDERTAKING SIMILAR TRANSACTIONS UNDER IDENTICAL CO NDITIONS. THE ASSESSEE HAS ALSO SUBMITTED THAT DIFFERENT QUALITY OF CLAY WERE PURCHASED AND SOLD AND THEREFORE, TRADING MARGINS WILL ALSO VARY AND CANNO T BE STATIC IN RESPECT OF EVERY TRANSACTION. THEREFORE, THE FINDING OF THE A O THAT THE TRADING RESULTS CANNOT BE ACCEPTED IS NOT BORNE OUT OF ANY SPECIFIC FINDING SO RECORDED BY HIM AND THEREFORE, CANNOT BE ACCEPTED. 7. NOW COMING TO DISCREPANCY IN PRODUCTION OF CLAY POWDER AS STATED BY THE AO, WE FIND THAT THERE IS NO MENTION OF THE SAID DI SCREPANCY IN THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER. FURTHER, TH ERE IS NO FINDING WHICH HAS BEEN RECORDED BY THE ASSESSING OFFICER HIGHLIGHTING THE SPECIFICS OF ANY DISCREPANCY SO NOTICED BY HIM. THEREFORE, MERELY S TATING THAT THE BOOKS OF ACCOUNTS ARE NOT RELIABLE AS FAR AS IT RELATES TO P RODUCTION OF CLAY POWDER CANNOT BE ACCEPTED IN ABSENCE OF ANY FINDINGS RECOR DED IN THE ASSESSMENT ORDER. 8. NOW COMING TO THE DISCREPANCIES NOTICED IN THE E XPENSES DEBITED IN THE TRADING ACCOUNT. IN THE SHOW CAUSE NOTICE, THE ASS ESSING OFFICER HAS TALKED ABOUT EXPENSES ON ACCOUNT OF DIESEL AND OIL CONSUMP TION AS NOT FULLY VERIFIABLE, MINING EXPENSES WHICH ARE HIGHER THAN THE PRECEDING YEAR AND NOT SUBJECT TO VERIFICATION, AND INCREASE IN THE TRANSPORTATION AN D CARTAGE EXPENSES AS COMPARED TO PREVIOUS YEAR. HOWEVER IN THE FINAL FI NDINGS SO RECORDED BY THE ASSESSING OFFICER, HE HAS RESTRICTED HIS FINDINGS L IMITED TO DISCREPANCIES IN CONSUMPTION OF DIESEL, AND EXPENSES PERTAINING TO T RANSPORTATION AND CARTAGE. AS PER THE ASSESSING OFFICER, ON THE BASIS OF TEST CHECK BASIS OF THE VOUCHERS PRODUCED BY THE ASSESSEE, IT IS FOUND THAT THE EXPE NSES HAVE BEEN INCURRED ON ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 6 NUMBER OF VEHICLES WHICH ARE NOT OWNED BY THE ASSES SEE. IT WAS FURTHER OBSERVED THAT THE EXPENSES PERTAINING TO SISTER CON CERN M/S HEMENDRA MINERALS WERE ALSO DEBITED IN THE ACCOUNTS OF THE A SSESSEE. FURTHER, THE ASSESSEE HAS LIFTED 100 LITRES OF DIESEL HOWEVER, T HE ASSESSEE DID NOT MAINTAIN DAY TO DAY CONSUMPTION OF THE DIESEL SO LIFTED. REG ARDING TRANSPORTATION AND CARTAGES EXPENSES, IT WAS NOTICED BY THE ASSESSING OFFICER THAT AS AGAINST CLAIM OF RS. 6,87,269/- IN THE PRECEDING YEAR, THE ASSESS EE HAS CLAIMED TRANSPORTATION EXPENSES OF RS. 30,85,671/- AND THER EFORE, THE ASSESSEE WAS ASKED TO PRODUCE COMPLETE BILLS AND VOUCHERS AS WEL L AS TO LINK TRANSPORTATION AND CARTAGES EXPENSES WITH SALES BILLS. IN RESPONSE , THE ASSESSEE FILED DETAILS AND RECORDS WHICH WERE PUT TO TEST CHECK BY THE AO. THE ASSESSEE HAS ALSO EXPLAINED THAT DUE TO INCREASE IN PRODUCTION INCREA SE IN FARES, THE EXPENSES HAVE INCREASED DURING THE YEAR. IT WAS HOWEVER HEL D BY THE AO THAT THE ASSESSEE COULD NOT LINK THE ENTIRE TRANSPORTATION A ND CARTAGES EXPENSES WITH THE SALES BILLS AND THE EXPENSES HAVE INCREASED 5 T IMES WHEREAS INCREASE IN PRODUCTION OF CLAY IS ONLY 0.64% AS COMPARED TO PRE CEDING YEAR. FURTHER, THE ASSESSEES CONTENTION THAT NUMBER OF TRIPS OF THE D UMPER HAS INCREASED DUE TO REMOVING OF SOME QUANTITY OF OVER BURDEN WAS ALSO N OT FOUND ACCEPTABLE AS THE ASSESSEE HAS NEVER PRODUCED DATA REGARDING QUAN TITY OF OVER BURDEN REMOVAL. 9. DURING THE COURSE OF HEARING, THE LD AR SUBMITT ED THAT THE REASON FOR INCREASE IN EXPENSES IN COMPARISON TO THE PREVIOUS YEAR IS DUE TO REVISION OF RATES OF DAILY WAGES PAID TO THE MANUAL LABOURS, RA TE INCREASED FOR THE PAYMENT MADE TO OUTSIDE LABOUR FOR REMOVAL OF OVERBURDEN, T RANSPORTATION CHARGES, MACHINE WORKING OF OUTSIDE PARTIES AND DUMPERS WORK ING FOR REMOVAL OF OVERBURDEN WITH MACHINE. FURTHER, PRODUCTION HAS AL SO INCREASED FROM THE LAST YEAR AND SO IS THE OVERBURDEN REMOVAL INCREASED, HE NCE THE EXPENSES RELATED TO THE PRODUCTION AND REMOVAL OF OVERBURDEN ARE ON THE HIGHER SIDE. ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 7 10. WE FIND THAT AS FAR AS EXPENSES PERTAINING TO SISTER CONCERN IS CONCERNED, THE SAME CLEARLY CANNOT BE ALLOWED IN THE HANDS OF THE ASSESSEE COMPANY, HOWEVER, AT THE SAME TIME, GIVEN THAT THERE ARE TRA NSACTIONS OF PURCHASE FROM THE SAME SISTER CONCERN, IT NEEDS TO BE DETERMINED WHETHER THE TRANSPORTATION EXPENSES ARE PART OF ASSESSEES OBLIGATION OR NOT. FURTHER, THE ASSESSING OFFICER IS RIGHT IN EXAMINING THE TRANSPORTATION EXPENSES W ITH THE SALES GENERATED BY THE ASSESSEE ESPECIALLY WHERE THERE IS INCREASE IN EXPENDITURE AS COMPARED TO LAST YEAR BUT GIVEN THE VOLUME AND SCALE OF OPERATI ONS, APPROPRIATE AUDIT METHODOLOGY NEEDS TO BE EMPLOYED AND SAMPLE SIZE TO BE IDENTIFIED TO VERIFY THESE EXPENSES RATHER THAN EXPECTING THE ASSESSEE T O PRODUCE DOCUMENTATION LINKING THE ENTIRE TRANSPORTATION AND CARTAGES EXPE NSES WITH THE SALES BILLS MAY BE PRACTICALLY NOT FEASIBLE. AT THE SAME TIME, ON P ERUSAL OF RECORDS, WE ALSO FIND THAT THERE ARE ALSO GAPS AND RELUCTANCE ON PART OF THE ASSESSEE IN COMING FORWARD WITH APPROPRIATE EXPLANATION AND FILING DOC UMENTATION IN SUPPORT THEREOF. IN OVERALL VIEW OF THE MATTER, WE FIND TH AT DISCREPANCY SO HIGHLIGHTED BY THE AO IN RESPECT OF THESE TWO EXPENSE HEADS IN TERMS OF NON-VERIFIABILITY NEED TO BE READ ALONG WITH OTHER DISCREPANCIES TO A RRIVE AT THE FINAL CONCLUSION REGARDING NON-RELIABILITY OF BOOKS OF ACCOUNTS WHIC H WE SHALL BE DISCUSSING IN THE SUBSEQUENT PARAGRAPHS. 11. NOW COMING TO THE MAIN ISSUE OF SUPPRESSION OF PRODUCTION BY THE ASSESSEE AND APPARENTLY THE MAIN REASON FOR REJECTI ON OF BOOKS OF ACCOUNTS AS DISCERNABLE FROM THE ASSESSMENT ORDER. 12. IN THE SHOW CAUSE NOTICE, THE ASSESSING OFFICER HAS STATED THAT THE PRODUCTION SHOWN BY THE ASSESSEE IS TO BE VERIFIED VIS-A-VIS THE FACTS REVEALED FROM THE EXAMINATION OF THE RECORDS PRODUCED AND EX AMINATION OF THE MINING MATE (THE PERSON EMPLOYED AT THE SITE) AND OTHER FA CTORS. IT WAS FOUND THAT THE FIRM IS RUNNING MINES AT 3 PLACES. IN THE PROCESS O F MINING, FIRSTLY THE ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 8 OVERBURDEN IS REMOVED TO REACH THE CLAY BED AND FOR THE PURPOSES, THE EXCAVATOR & THE DUMPER/TIPPER ARE MAINLY HIRED AND LABOUR IS HIRED ON DAILY WAGES. THE EXPENSES OF EXCAVATOR & DUMPER/TIPPER AR E BOOKED UNDER THE HEAD MINING EXPENSES AND EXPENSE OF TRACTOR & TROLLEY IS BOOKED UNDER THE HEAD CARTAGE EXPENSES. THE DETAIL OF LABOUR ON CONTRAC T IS MAINTAINED IN WAGES REGISTER OF OVERBURDEN REMOVAL. HOWEVER, THE ASSESS EE DOES NOT MAINTAIN HIS OWN RECORD OF THE WORK DONE BY THE HIRED MACHINES I .E EXCAVATOR & DUMPERS. FURTHER, NO DETAILS ARE MAINTAINED BY THE ASSESSEE OF THE WORK DONE BY THE EXCAVATOR & DUMPERS OWNED BY THE ASSESSEE. THUS, TH E EXTENT & PURPOSE OF UTILIZATION OF THE EXCAVATORS & DUMPERS IS NOT REFL ECTED. SIMILARLY, QUANTITY OF WORK DONE BY THE REGULAR PAID WORKERS IS ALSO NOT R EFLECTED IN ANY BOOKS. THEREAFTER, HE REFERRED TO THE PERIOD FOR WHICH THE EXCAVATORS & DUMPERS HAVE BEEN HIRED FROM EXTERNAL AGENCIES DURING THE YEAR. FURTHER, HE REFERRED TO THE CALCULATION OF DENSITY OF THE CLAY BY USING THE DAT A SHOWN IN ITS SORTING PAYMENT REGISTER. THEREAFTER, THE ASSESSING OFFICER REFERRED TO THE STATEMENT OF THE MINING MATE AND BASIS HIS UNDERSTANDING OF FACT S AND FIGURES, HE DETERMINED THAT IN RESPECT OF MINE NO. 8/96, 1.243 FEET OF CLAY IS DUG OUT IN A DAY WITH THE HELP OF EXCAVATOR & LABOUR. SIMILARLY WITH LABOUR ONLY, THE CLAY DUGOUT & DISPATCHED IS 0.355 FEET PER DAY. THEREAFT ER, BASIS THE DIMENSION OF THE CLAY BED AND WORKING DAYS, THE ASSESSING OFFICE R HAS WORKED OUT THE PRODUCTION FOR THE YEAR AMOUNTING TO 168,756/- TONE S IN RESPECT OF MINE NO. 8/96 AS AGAINST 143,099 TONS OF PRODUCTION SHOWN BY THE ASSESSEE. BASIS THE SAME, HE ARRIVED AT THE FINDING THAT THE ASSESSEE H AS SUPPRESSED PRODUCTION TO THE TUNE OF 25,657 TONS WHICH COMES TO 17.92% OF TH E PRODUCTION DECLARED. APPLYING THE SAME PROPORTION IN RESPECT OF OTHER TW O MINES, THE AO WORKED OUT THE SUPPRESSION OF PRODUCTION IN RESPECT OF OTHER T WO MINES NO. 2/95 AND 7/96. FURTHER, THE ASSESSING OFFICER ASSUMED THAT THE PRO DUCTION OF SGRS GRADE CLAY & C GRADE CLAY IS IN 4.1 RATIO AND BASIS THE SALE V ALUE IS RECORDED IN THE BOOKS OF ACCOUNTS, HAS WORKED OUT THE SUPPRESSED PRODUCTI ON OF RS. 63,13,099/- ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 9 DURING THE YEAR AND THE ASSESSEE WAS ACCORDINGLY IS SUED A SHOW CAUSE NOTICE. IN RESPONSE, THE ASSESSEE FILED ITS SUBMISSION WHIC H WAS CONSIDERED HOWEVER, NOT FOUND ACCEPTABLE AND THE RELEVANT FINDINGS OF T HE AO ARE CONTAINED AT PARAS 7 TO 9 OF THE ASSESSMENT ORDER WHEREIN EFFECT IVELY, HE REITERATES HIS INITIAL FINDINGS AS PER SHOW-CAUSE NOTICE AND REBUT THE SUB MISSIONS OF THE ASSESSEE AND FINALLY HELD AS UNDER: 9. IN VIEW OF THE DETAILED DISCUSSION AND FACTUAL VERIFICATION SUPPORTED WITH THE NORMS OF THE INDUSTRY AS WELL AS AFTER ALL OWING LEVERAGE FOR ALL CONTINGENCIES AND FURTHER KEEPING IN MIND THE VOLUM E OF MEN AND MACHINERY EMPLOYED BY THE ASSESSEE ON THE AVAILABLE MINE AT THE TIME OF RELEVANT YEAR I.E, F.Y 2009-10, I HAVE COME TO T HE CONCLUSION THAT THE ASSESSEES A/RS SUBMISSION IS WITHOUT ANY VALID BA SIS AND NOT SUPPORTED WITH THE PRIMARY RECORDS AS SUCH IS NOT TENABLE AND IT IS ESTABLISHED THAT THE ASSESSEE HAS SUPPRESSED PRODUCTION AT LEAST TO THE TUNE OF 29,925.30 MT OF CLAY WHICH IS VALUED AT RS 66,43,417/-. AGAINST THE SAID FINDINGS OF THE AO, THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS SINCE CONFIRMED THE S AID FINDINGS AND NOW THE ASSESSEE IS IN APPEAL AGAINST THE SAID FINDINGS. 13. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT BOOKS OF ACCOUNTS OF ASSESSEE WERE SUBJECT TO AUDIT BY QUALI FIED CHARTERED ACCOUNTANT AND WHO HAD NOT POINTED OUT ANY DEFECT IN THE BOOKS SO EXAMINED. THE APPELLANT HAD PRODUCED SUCH AUDITED BOOKS OF ACCOUN TS ALONGWITH THE SUPPORTING VOUCHERS BEFORE LD.AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH WERE EXAMINED ON TEST CHECK BASI S BY THE LEARNED ASSESSING OFFICER AND NO DISCREPANCY WHATSOEVER WAS OBSERVED. HOWEVER, LD.AO HAS INVOKED THE PROVISIONS OF SECTION 145(3) AND HAS REJECTED THE BOOKS OF ACCOUNTS ALLEGING THAT ASSESSEE COULD NOT PRODUC E THE PRIMARY RECORDS LIKE THE DISPATCH RECEIPT TO TRUCK DRIVERS FOR TAKING CL AY FROM BASE TO STORAGE AREA, ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 10 COUNTER FOIL OF RAVANA RECEIPTS FOR DISPATCH FROM S TORAGE PLACE TO CUSTOMER AND VEHICLE WISE DIESEL CONSUMPTION AND DETAILS OF USAG E OF OWN EXCAVATORS AND DUMPERS. IN THIS REGARD, IT IS SUBMITTED THAT LD.AO HAS MISUNDERSTOOD THE DISPATCH RECEIPTS ISSUED TO TRUCK DRIVERS FOR TAKIN G CLAY TO THE STORAGE AREA AS PRIMARY RECORDS, WHEREAS THE SAME IS IN THE NATURE MEMORANDUM RECORD AND THE PRODUCTION REGISTER, IN WHICH ENTRIES OF PRODUC TION ARE MADE ON DAY TO DAY BASIS CONSTITUTES THE BASIC AND PRIMARY RECORDS. SI MILARLY, RAVANA RECEIPTS ISSUED TO TRUCKS CARRYING PRODUCE FROM STORAGE PLAC E TO CUSTOMER ARE ISSUED BY THE MINING DEPARTMENT FOR THE PURPOSE OF DETERMINAT ION OF ROYALTY AND CROSS CHECKING AS TO WHETHER ROYALTY PAID BY ASSESSEE IS CORRECT OR NOT. ALSO, SO FAR AS VEHICLES OWNED BY ASSESSEE ARE USED FOR THE PURP OSE OF BUSINESS (MORE PARTICULARLY WHEN NATURE OF VEHICLES IS SUCH WHICH CANNOT BE USED FOR PERSONAL PURPOSES). IT IS NOT PRACTICALLY POSSIBLE TO MAINTA IN RECORD AS TO WHICH PARTICULAR EXCAVATOR REMOVED HOW MUCH OVER BURDEN AND WORKED F OR SO MUCH HOUR IN A DAY AND SIMILARLY WHICH PARTICULARLY DUMPER CARRIED THIS MUCH OVER BURDEN BY WORKING FOR SO MUCH HOURS IN ONE PARTICULAR DAY. IT IS PRECISELY BECAUSE OF THIS REASON THAT EVEN MINING DEPARTMENT HAS NOT PUT ANY STATUTORY OBLIGATION ON MINES TO KEEP SUCH RECORD. THUS, IT IS EVIDENT THAT THERE IS NO REQUIREMENT FOR MAINTAINING VEHICLE WISE CONSUMPTION AND DETAILS OF USAGE OF EXCAVATORS AND DUMPERS BY ANY LAW ENFORCING AGENCY. AS REGARDS INC OME TAX IS CONCERNED, IT IS SUBMITTED THAT SECTION 44AA OF THE INCOME TAX AC T DOES NOT SPECIFY ANY SPECIFIC TYPE OF BOOKS OF ACCOUNTS REQUIRED TO BE M AINTAINED BY BUSINESSMEN AND RATHER SIMPLY SAYS THAT ASSESSEE SHOULD MAINTAI N SUCH BOOKS OF ACCOUNTS AS WOULD ENABLE THE AO TO COMPUTE THE TOTAL INCOME OF ASSESSEE IN ACCORDANCE WITH PROVISIONS OF INCOME TAX ACT. THUS, INCOME TAX ACT ALSO DOES NOT IMPOSE ANY LEGAL OBLIGATION TO MAINTAIN SUCH AND SUCH TYPE OF PRIMARY RECORD FOR PRODUCTION. 14. IT WAS FURTHER SUBMITTED THAT THE APPELLANT COU LD NOT MAKING ANY SALES FROM THE MINES WITHOUT ISSUING THE RAVANA, AND THE BILLS WERE MADE FOR ALL THE ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 11 RAVANA ISSUED BY THE APPELLANT, WHICH WERE VERIFIED WHILE DOING THE ROYALTY ASSESSMENT BY THE MINING DEPARTMENT. NO DIFFERENCE WAS POINTED OUT BY THE MINING OFFICER IN THE PRODUCTION DECLARED BY THE AP PELLANT AND SALES MADE IN THE ASSESSMENT MADE. IN SUPPORT OF SUCH CONTENTION, COPY OF ROYALTY ASSESSMENT ORDER, COPY OF MONTHLY RETURN FOR THE FR ACTION PERIOD, DETAILS OF PRODUCTION AT MINES AND DISPATCHES FROM THE MINES W ITH RECONCILIATION WITH THE PRODUCTION AND DISPATCHES AS PER MONTHLY RETURNS SH OWN BY THE APPELLANT AND ASSESSED BY THE MINING OFFICE WERE FURNISHED BEFORE LOWER AUTHORITIES, HOWEVER THE SAME WERE BRUSHED ASIDE WITHOUT POINTING OUT AN Y SINGLE DISCREPANCY THEREIN. MOREOVER, LD. AO HAS ALSO NOT FOUND ANY SA LES WITHOUT ISSUING SALE BILLS. 15. IT WAS SUBMITTED THAT IN THE INSTANT CASE, PROD UCTION REGISTER ITSELF IS PRIMARY RECORD, WHEREIN NO DISCREPANCIES HAVE BEEN POINTED OUT BY THE ROYALTY DEPARTMENT OR BY THE AO, THUS THE ALLEGATIONS MADE BY LD. AO ARE NOT SUSTAINABLE. SO FAR AS THE CASE OF ASSESSEE IS CON CERNED, PRODUCTION RECORDS AS FURNISHED BEFORE MINING DEPARTMENT WERE ACCEPTED WI THOUT ANY ADVERSE FINDINGS AND IN FACT, COPY OF ROYALTY ASSESSMENT OR DER WAS FILED BEFORE THE LD. AO ALONGWITH MONTHLY RETURN OF THE PRODUCTION AT MI NES AND DISPATCHES MADE DURING THE MONTH SO FILED BEFORE MINING DEPARTMENT. IT MAY BE APPRECIATED THAT ROYALTY ASSESSMENT IS MADE BY THE MINING DEPAR TMENT AFTER VERIFYING ALL THE RECORDS MAINTAINED I.E. PRODUCTION REGISTER, RA VANA REGISTER AND SALES BILLS ETC. THERE IS NO DIFFERENCE IN THE DAY TO DAY PRODU CTION SHOWN BY THE APPELLANT AND WORKED OUT BY MINING DEPARTMENT OFFICIALS AND T HAT RECORDED IN THE PRODUCTION REGISTER MAINTAINED AT THE MINES. THERE IS NO DIFFERENCE IN PRODUCTION AND DISPATCHES MADE BY THE APPELLANT AS SHOWN IN THE ROYALTY ASSESSMENT MADE BY THE MINING DEPARTMENT. LD. CIT(A ) OBSERVED THAT SUCH ASSESSMENT BY MINING DEPARTMENT WERE BASED ON THE E XAMINATION OF SAME BOOKS, WHICH IS INCORRECT. IN FACT, AS STATED ABOVE , RAVANA WERE ISSUED BY THE ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 12 DEPARTMENT ITSELF, THEY HAVE THE RECORDS OF ALL THE RAVANA ISSUED, WHICH ARE RECONCILED WITH THE RAVANA GIVEN WITH LORRY. AT CHE CK POST BARRIER, VEHICLE IS WEIGHED AND AFTER CROSS CHECKING AND MATCHING THE M INED ITEM AS WELL AS ITS WEIGHT, THE ROYALTY IS CHARGED. THUS, THE ASSESSMEN T DONE BY MINING DEPARTMENT IS A RECONCILIATION OF THEIR RECORD WITH ASSESSEE RECORD. MOREOVER, VERIFICATION OF THE PRODUCTION DONE AT MINE IS THE JURISDICTION OF MINING DEPARTMENT WHOSE ASSESSMENT SHOULD BE GIVEN CREDENC E AND SHOULD BE ACCEPTED BY OTHER DEPARTMENTS WHEN THEY DO NOT HAVE ANY EVIDENCE OF SUPPRESSED PRODUCTION. 16. IT WAS SUBMITTED THAT BOOKS OF ACCOUNTS AND OTH ER RECORDS MAINTAINED BY ASSESSEE ARE ACCEPTED AS CORRECT BY MINING DEPARTME NT, WHERE OFFICIALS HAVE MORE TECHNICAL KNOWLEDGE AND ARE MORE EQUIPPED FOR COMPUTING/VERIFYING PRODUCTION SHOWN FROM MINES. IT WAS THUS SUBMITTED THAT PRODUCTION FROM MINES AS ACCEPTED BY MINING DEPARTMENT CANNOT BE CH ALLENGED IN INCOME TAX PROCEEDINGS BY LD. A.O., UNLESS SOME CONTRARY POSIT IVE EVIDENCE OR MATERIAL IS BROUGHT ON RECORD. 17. IT WAS FURTHER SUBMITTED THAT LD. AO HAS ESTIMA TED THE QUANTUM OF PRODUCTION BY APPLYING CERTAIN FORMULAS IN A CLUMSY AND ROUND ABOUT MANNER WHICH WERE NOT AT ALL REQUIRED AND MOREOVER THE BAS IC FIGURE FOR THE SAME HAS BEEN TAKEN PURELY ON ESTIMATED BASIS ON THE VERY GE NERALIZED STATEMENT OF ONE SHRI RAGHVENDRA, THE MINING MATE, WHOSE MAIN RESPON SIBILITY IS SAFETY OF MINE. THE LD.CIT (A) HAS JUST CONFIRMED THE SAME BY MEREL Y STATING THAT LD.AO HAS DERIVED THE SUPPRESSED PRODUCTION IN LOGICAL MANNER , WITHOUT APPRECIATING THAT AO HAS MERELY DONE ROUND ABOUT AND RATHER REVERSE W ORKING AND EVEN FOR THIS WORKING LD. AO HAS TAKEN ESTIMATED GENERALIZED FIGU RE INSTEAD OF A SPECIFIC AND DAY-TO-DAY PRODUCTION FIGURE WHICH ARE MAINTAINED B Y ASSESSEE. ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 13 18. WITHOUT PREJUDICE TO ABOVE, IT WAS FURTHER SUBM ITTED THAT ESTIMATION OF PRODUCTION BY CONSIDERING OVERBURDEN REMOVAL, LENGT H AND WIDTH OF THE SPACE AVAILABLE FOR MINING DEPTH / HEIGHT OF INSTANT MINE , VOLUME AND DENSITY OF CLAY ETC. IS PURELY A TECHNICAL MATTER. IT WOULD BE APPR ECIATED THAT AO IS NOT ENTITLED TO MAKE HIS OWN ESTIMATION UPON TECHNICAL ISSUES AS HAS BEEN HELD BY HONBLE SUPREME COURT IN THE CASE OF SARASWATI INDUSTRIAL S YNDICATE LTD. LTD. REPORTED IN 237/ITR 1/ 103 TAXMAN 395 (SC). THUS, IF AT ALL, LD.AO HAD ANY RESERVATIONS IN ACCEPTING THE PRODUCTION DECLARED BY ASSESSEE, P ROPER COURSE OF ACTION WAS TO SEEK THE OPINION OF MINING DEPARTMENT OFFICIALS AND ONLY IF THE SAME IS FOUND AGAINST THE ASSESSEE, AO COULD HAVE MADE ADDITION A FTER GIVING OPPORTUNITY. IT IS A TRITE LAW THAT ACTION OF REJECTING BOOKS AND T RADING RESULTS DECLARED BY ASSESSEE CANNOT BE MADE SO LIGHT HEARTEDLY AND LD. AO HAS TO HAVE STRONG EVIDENCES AGAINST THE ASSESSEE BEFORE MAKING SUCH A HUGE ADDITION. RELIANCE WAS PLACED ON THE DECISION IN CASE OF CIT VS. ANAND HA METAL CORPORATION (2005) 273 ITR 263 (MAD), AND COMMISSIONER OF INCOM E TAX VS. SHRI GIRIJA SMELTERS (P) LTD. 230 TAXMAN 28 (AP). IT WAS THUS SUBMITTED THAT THE OBSERVATIONS OF LD. AO AND LD. CIT(A) REGARDING ASS ESSMENT DONE BY MINING DEPARTMENT ARE CONTRARY TO FACTS AND THUS DESERVES TO BE IGNORED AND EXCLUDED. 19. IT WAS FURTHER SUBMITTED THAT THE AO FOR INVOKI NG PROVISIONS OF SECTION 145 (3) HAS DERIVED SUPPORT FROM THE JUDGMENT OF HO N'BLE RAJASTHAN HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V/S NARENDRA MOHAN PALIWAL 271 ITR 347 (RAJ). IN THAT CASE, THE ASSESS EE WAS MAKING UNDERWEIGHT INVOICES AND THIS FACT WAS EVIDENT FROM THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH. THE ASSESSEE IN THAT C ASE HAD NOT PRODUCED ANY BOOKS OF ACCOUNTS DURING THE COURSE OF ASSESSME NT PROCEEDINGS. THUS THE FACTS OF THE CASE WERE ENTIRELY DIFFERENT FROM THE CASE OF APPELLANT WHERE, ALL THE DISPATCHES FROM THE MINES ARE MADE B Y ISSUING THE RAVANA IN ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 14 SERIAL NUMBER(S) (BOOKLETS ISSUED BY THE MINING DEP ARTMENT) AND ENTRY IS MADE IN THE RAVANA REGISTER MAINTAINED AT MINES. TH E RAVANA IS CHECKED BY THE MINING DEPARTMENT REPRESENTATIVE NEAR TO THE WE IGH BRIDGE AND IF ANY TRUCK IS FOUND WITHOUT RAVANA OR ANY WEIGHT DIFFERE NCE IS FOUND OUT, THE SAME IS SEIZED AND IS RELEASED ONLY AFTER PAYING RO YALTY EQUAL TO THE SALE AMOUNT AND A HEFTY PENALTY WHICH RANGES BETWEEN RS. 1,000 TO RS. 1,00,000/. IN RAVANA REGISTER, THE ACTUAL WEIGHT I S WRITTEN FROM THE WEIGHT SLIP AND BILLS ARE PREPARED AS PER ACTUAL WEIGHT. 20. THE LD AR FURTHER EXPLAINED THE MINING PROCESS AND SUBMITTED THAT THE MINING OF CLAY IS DONE IN OPEN CAST MINES AND THE F IRST STEP IS TO DETERMINE THE MINING SITE THROUGH DIGGING OF A TEST PIT AND ONCE THE MINING SITE IS DETERMINED, THE FIRST PROCESS IS THE REMOVAL OF OVE RBURDEN, WHICH EXTENDS UPTO 40-60 FEET DEPTH. THEREAFTER, THE CLAY BED IS REACH ED WHICH EXTENDS UPTO 25-30 FEET. ONCE, THE CLAY FROM THE FIRST LAYER IS REMOVE D, THE PROCESS OF REFILLING OF THE PIT IS STARTED. OVERBURDEN IS REMOVED WITH THE HELP OF EXCAVATORS AS WELL THROUGH MANUAL LABOUR WHEREVER MACHINES CANNOT REAC H. 21. IT WAS FURTHER SUBMITTED THAT IN ORDER TO UNDER STAND THE MINING PROCESS IN DETAIL, DURING THE COURSE OF ASSESSMENT PROCEEDI NGS LD.AO RECORDED STATEMENTS OF TWO PERSONS, ONE SH. RAGHAVENDRA [MIN ING MATE OF GUDA RADHERA I MINES AND ANOTHER SH. RUPA RAM (LABOUR)]. BOTH THESE PERSONS WERE NOT RESPONSIBLE FOR QUANTITY OF MINED CLAY ON DAY-TO-DAY BASIS OR EVEN OTHERWISE ALSO. IN THE STATEMENTS SO RECORDED, VARI OUS QUESTIONS WERE ASKED ABOUT THE PROCEDURE AND MINING PROCESS, MAINLY OVER BURDEN REMOVAL, DIGGING OF MINE ETC. APART FROM IT SHI RAGHVENDRA WAS ASKED ABOUT QUANTUM OF PRODUCTION WITH MACHINES AND WITHOUT MACHINES, WHIC H WAS NOT EXACTLY IN HIS DOMAIN. SAME IS EVIDENT FROM THE PERUSAL OF THE STA TEMENT OF SHRI RAGHVENDRA. IT IS SEEN THAT AT Q. NO. 4 HE WAS ASKED ABOUT WHO ARE WORKING ON MINE WHERE HE IS WORKING AND WHAT ARE THEIR WORKS. HE HAS REPL IED THAT HIS WORK IS RELATED ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 15 TO SAFETY OF MINE AND TO TELL THE LABOUR FOR WORK F OR DIGGING (AS TO WHERE AND TO WHAT DEPTH LABOUR SHOULD DIG CONSIDERING THE OVERAL L SAFETY OF MINES). SHRI MITTAL WAS MINING ENGINEER AND OVERALL INCHARGE. HE ALSO STATED THAT DETAILS RELATED TO PRODUCTION ARE LOOKED AFTER BY SHRI MURL IDHARJI. FOR THE SAKE OF READY REFERENCE HIS STATEMENT IS REPRODUCED: Q. NO. 4 ESA0 'KKURK LSYL DWKIKSZJSKU ESA FTL EKBZUL IJ VKI DKE DJRS GS ML EKBZUL IJ VKI DKE DJRS GS] ML EKBZUL IJ VKSJ DKSU D KSU O;FDR DKE DJRS GS RFKK D;K DKE DJRS GS+ \ ANS. 1. EKBZUL IJ JH FEKY] EKBZFUAX BAFTFU;J GSA 2- JH CDLHNKU & QKSJESU DS IN IJ GS 3- JH JK?KOSUNZ FLAG & EKBZFUAX ESU 4- JH EQJYH/KJ & EQFUE & IKFJ;SIJ ORZEKU ESA 8 YSCJ GS FTUDK EQ>S UKE ;KN UGH GSA ES JK DKE [KKU DH LQJ{KK NS[KUK VKSJ YSCJ DKS DKE CRKUK GS FD DGK IJ [KQNKBZ DJUH GSA EQFUE EQJYH/KJ TKS HKJKBZ DS CKN FGLKC FDRKC NS[KRK GSA 8 YSCJ [KQNKBZ DK DKE DJRS GS VKSJ HKJKBZ DK DKE EKHU DS }KJK GKS RK GSA 22. THUS, IT IS EVIDENT THAT STATEMENTS OF THESE PE RSONS CANNOT BE RELIED UPON IN RELATION TO QUANTUM OF PRODUCTION, AS THIS IS NOT THEIR DOMAIN. ON THE BASIS OF STATEMENTS OF THESE TWO PERSONS, WHEREIN T HEY WERE REFERRING TO PRODUCTION ACTIVITY IN GENERAL, THAT TOO RELATED TO THE PERIOD OF FEBRUARY, 2013 OR SO WHEN THEIR STATEMENT WAS RECORDED. IT IS OBVI OUS THAT THEY COULD NOT HAVE REMEMBERED THE SPECIFIC PRODUCTION DETAILS OF THREE YEARS BACK. LD. AO DEVELOPED HIS OWN THEORY BASED ON THE ASSUMPTIONS A ND PRESUMPTIONS TO WORK OUT THE QUANTUM OF EXCAVATION DURING THE YEAR ON TH E BASIS OF GENERALIZED STATEMENT AND FURTHER APPLIED CERTAIN GENERALIZED F ORMULAS OF DENSITY, WHICH HAD NO BEARING ON THE ACTUAL PRODUCTION. LD.AO ARRI VED AT SOME PRESUMPTION THAT ASSESSEE HAD SUPPRESSED PRODUCTION BY RS.66,43 ,417/-. ALSO, LD.AO ALLEGED SOME VARIATION IN CONSUMPTION OF ELECTRICIT Y AND TRADING ACTIVITIES WITH ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 16 PERSONS SPECIFIED U/S 40A(2)(B) AND ACCORDINGLY MAD E LUMP SUM ADDITION OF RS.75 LACS, WHICH HAS BEEN REDUCED TO RS. 70 LACS B Y LD.CIT(A). 23. IN THIS REGARD, IT WAS SUBMITTED THAT LD.AO HAS WORKED OUT QUANTUM OF EXCAVATION BY MISAPPLYING THE STATEMENTS OF SH. RAG HAVENDRA AND SH. RUPA RAM, THEREFORE IT WOULD NOT BE OUT OF PLACE TO MENT ION HERE THE RELEVANT EXTRACTS OF STATEMENTS OF THE TWO PERSONS RECORDED. STATEMENTS OF SH. RAGHAVENDRA (MINING MATE): IZ-5 VKI FTL EKBZUL IJ DKE DJRS GS ML EKBZUL DS FUNCTION DH IWJH TKUDKJH NS O EKBZUL DH LKBZT D;K GS VKSJ WORKING VHKH YSCY @ LRJ IJ PY JGH GS VKSJ EKPZ] 2010 LS FDL LRJ IJ PY JGH FKH ? MKJ EKBZUL ESA GE EKBZFUAX BAFTFU;FJAX DS FUNSZK IJ OVERBURDEN GVKRS GS RFKK OVERBURDEN GVKUS DS CKN DYSA CLAY RKS VKRK GS RKS PRODUCTION DJRS GSA OVERBURDEN RFKK PRODUCTION STEPS ESA FD;K TKRK GSA IST STEP 50 PT. PKSM+H GKSRH RFKK AVERAGE HEIGHT GJ LVSI ES 20 FT. GKSRH GSA BL RJG LS OVERBURDEN GVKRS GQ, CLAY BED RD IGQAPRS GS RC RD 3 STEPS CU TKRS GSA OVERBURDEN DGH DGH 40 FT. GKSRK GS RKS DGH 60 FT. GKSRK GSA VUQEKSNU 60 FT. IJ GKSRK GSA TGK OVERBURDEN DE GKSRK GS OGK CLAY BED HKH DE GKSRK GSA 60 FT. OVERBURDEN TGK GKSRK GS OGK VUQEKSNU 30 FT. DK CLAY BED GKSRK GSA MINE 360 FT. PKSM+H GSA OVERBURDEN GVKUS DS FY, EXCAVATOR L&T DEIUH DK BLRSEKY GKSRK GS RFKK 3 TIPPER / DUMPER BLRSEKY GKSRS GSA EXCAVATOR L&T OVERBURDEN DKS [KKSNK TKRK GS RFKK VIUS ARM / BUCKET LS TIPPER ES MKYK TKRK GSA GJ 5 LS 10 FEUV ESA ,D TIPPER HKJ TKRK GSA ,D TIPPER ESA DJHC 12 VU OVERBURDEN VKRK GSA GJ TIPPER DH FCYVH ISSUE GKSRH GSA EXCAVATOR MACHINE DK EQFUE ISSUE DJRK GS FTLDH COPY OVERBURDEN UNLOAD DJUS DS CKN GEKJH COMPANY DS EQUHE DKS NS NSRS GSA EXCAVATOR EKBZUK DS WORKING HOURS DS NKSJKU DKE DJRK GSA EKBZUK DS WORKING HOURS LQCG 9-00 CTS LS 'KKE 5-00 CTS RD GKSRS GSA FTLES , D ?KUVS DK LUNCH GKSRK GSA EXCAVATOR DEIUH DS [KQN DS HKH GS RFKK FDJK;S IJ HKH FY, TKRS GSA BLH IZDKJ MEIJ @ TIPPER HKH DEIUH DS [KQN DS GS RFKK FDJK;S IJ HKH FY, TKRS GSA TC FDLH DH EXCAVATOR EKHU O DUMPER ,D LKFK YXRS GS RKS EXCAVATPR US FDRUK ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 17 DKE FD;K] FDRUS ?KUVS DKE FD;K] ;G UGH FXUK TKRK TIPPER DH NUMBER OF TRIPS FXUS TKRS GSA PER TRIP TIPPER DK :I;S 150@& PKTZ GKSRK GSA ,D FNU ESA ,D EXCAVATOR EKHU DJHCU 60 LS 70 TIPPER HKJ NSRH GS] BLDK ERYC GS FD GJ FNU ES DJHCU 720 LS 840 VU OVERBURDEN REMOVE GKS TKRK GSA ,D STEP DKS [KKSNUS ES ;K CUKUS ES 360 FT. PKSMKBZ] 50 FT. YECKBZ O 20 FT. DH MPKBZ DK OVERBURDEN REMOVE GKSRK GSA ;G FUDKYUS ESA DJHC 15 FNU DK LE; YXRK GS A BL RJG LS 3 STEPS ;KUH 60 FT. DH XGJKBZ IJ CLAY BED VKRK GS TKS FD VUKSEU 30 FT. DH XGJKBZ RD GKSRK GSA VHKH EKBZUL DK EXTENSION ;K C<+KSRJH L SHAPE GKS JGH GSA EKBZUL DS DKSUS ESA EKHU ;KFU FD EXCAVATOR DKS ?KQEUS DH TXG UGH FEYRH OGK ESU;WVY LABOUR DK BLRSEKY DJDS VSDVJ ES OVERBURDEN MKYDJ REMOVE GKSRK GSA ,D VSDVJ ES DJHCU 3 VU OVERBURDEN VKRK GSA BLH RJG PRODUCTION DS FY, HKH ,D EXCAVATOR EKHU O DJHCU 3 TIPPER DKE ESA VKRS GSA PRODUCTION ES HKH OVERBURDEN REMOVAL DH RJG GH DKMZ GKSRK GSA ;GAK IJ HKH DKSUKSA ES ESU;WVY LABOUR DKE DJRH GSA ESU;WVY LABOUR SIEVING SORTING DK HKH DK;Z DJRH GSA PRODUCTION ES DJHC 8 LS 10 YSCJ DK;Z DJRH GS] T;KNK LE; YSCJ [KQNKBZ DK DKE DJRH GSA EKY BDBBK GKSUS IJ T:JR DS VUQLKJ SORTING DJRH GSA SORTING ES 2 XZSM DH SORTING GS] WHITE ;K XZS DYJ DH FEVV~H DKS SGRS GR. DGRS GS RFKK CKDH JAX DH FEVV~H VKS& CKJHD PWJK FEVV~H C XZSM DGYKRH GSA SGRS GRADE ES LUMPS GKSRS GSA SGR GRADE DK PWJK HKH C XZSM ES 'KKFEY GKS TKRK GSA SORTING DS FY, REGULAR LABOUR DK BLRSEKY UGH GKSRK GSA ;G DK;Z BSDS DH LABOUR DJRH GSA BL YSCJ DKS DKSBZ INSTRUCTION NSUS DK DKE O MUDK DK;Z MUDK SUPERVISION DJUS DK DK;Z EQJYH/KJ EQUHE TH DJRS GSA ESA PRODUCTION ESA EXCAVATOR EKHU RFKK ESU;WVY YSCJ DK SUPERVISION DK DK;Z DJRK GWWA EXCAVATOR EKHU LS GJ FNU DJHCU 700 VU EKY FUDYRK GSA ESU;WVY H 200 VU FUDYRK GSA IJ HKH ESUS 700 VU CRK;K GS MLES YSC J }KJK [KKSNK X;K EKY HKH 'KKFEY GSA DHKH DHKH EXCAVATOR UGH PYRH GS] DSOY YSCJ DKE DJRH GSA RC 200 VU DK PTODUCTION GKSRK GSA T;KNKRJ LE; EXCAVATOR EKHU JK/KSJK] XQ<+K ES JGRH GS] EFGUS ES ,D ;K NKS FNU DS FY, GH EKHU NQL JH MINE IJ GH TKRH GSA 3 EKHU EXCAVATOR EKHU ES LS DJHC DJHC 2 BLH MINE IJ JGRH GSA 3 EXCAVATOR EKHU BL JK/KSJK XQ<+K IJ PYRH JGRH GSA 2 EKHU [KQ N DH GS RFKK ,D FDJK;S OKYH EKHU O MLDS LKFK 2&3 TIPPER JGRS GSA DEIUH DH [KQN DH EKHU ESA LS ,D EXCAVATOR OVERBURDEN REMOVE ES JGRK GS RFKK ,D PRODUCTION ES JGRK GSA FDJK;K DK EXCAVATOR GESKK OVERBURDEN REMOVAL ES JGRK GSA ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 18 24. FROM PERUSAL OF ABOVE, IT IS EVIDENT THAT WHAT WAS ASKED FROM MINING MATE SH. RAGHAVENDRA SINGH WAS REGARDING FUNCTIONIN G OF MINE AND AT WHICH LEVEL, MINES WERE OPERATING AND FURTHER AT WHICH LE VEL THE SAME WAS OPERATING SINCE MARCH 2010. IN RESPONSE TO SUCH QUESTION, HE EXPLAINED PRODUCTION PROCESS AT LENGTH, HOWEVER THROUGHOUT HIS STATEMENT S HE HAS MENTIONED THE DETAILS IN PRESENT, I.E. AT THE TIME OF RECORDING OF STATEMENTS ON 18.02.2013 AND AT NO POINT OF TIME HE STATED THAT PRODUCTION WAS BEING CARRIED OUT A PARTICULAR LEVEL IN PAST SINCE 2010. IN FACT, IN HI S SUBSEQUENT QUESTIONS, I.E. IN Q. 6, HE HAS MENTIONED THAT HE HAS EVEN STATED THAT HE WAS NOT INVOLVED IN THE WORK OF OVERBURDEN REMOVAL AND HAD ANSWERED QUESTIO N NO. 5 ON ESTIMATE BASIS. HOWEVER, LD.AO HAS MISCONSTRUED THE SAME AS LEVEL OF OPERATION OF FY 2009-10, AND THUS HAS MADE SUCH DATA AS BASIS OF AL L HIS SUBSEQUENT CALCULATIONS. FURTHER, LEARNED ASSESSING OFFICER HA S CONSIDERED THAT 8 M.T. PRODUCTIONS IS DONE BY THE MANUAL LABOUR PER DAY PE R LABOUR BY PLACING HEAVY RELIANCE ON THE PART STATEMENT OF SHRI RUPA RAM LAB OUR RECORDED ON 18.02.2013. AFTER RELATING THE STATEMENTS OF ABOVE TWO PERSONS, LD.AO OBSERVED THAT AS SH. RAGHAVENDRA STATED THAT 200 M. T. CLAY WAS PRODUCED BY THE MANUAL LABOUR PER DAY AND SH. ROOPA RAM MENTION ED THAT PER DAY MANUAL PRODUCTION PER LABOUR IS 8 M.T. ACCORDINGLY, 25 LAB OUR ARE REQUIRED CONTINUOUSLY TO PRODUCE THE 200 M.T. CLAY @ 8 M.T. PER DAY PER LABOUR, WHICH WAS NOT AT ALL THE ACTUAL POSITION IN THE ASSESSMEN T YEAR 2010-11. IN PERIOD RELEVANT TO A.Y. 2010-11 ON AN AVERAGE 20 LABOURS W ERE APPOINTED IN ALL AND THAT TOO NOT CONTINUOUSLY AS PER ACTUAL ATTENDANCE OF LABOURS FOR EXCAVATION OF CLAY BY ADOPTING 23 WORKING DAYS (AS CONSIDERED BY THE LEARNED ASSESSING OFFICER). 25. IT WAS SUBMITTED THAT EVEN FOR THE ARGUMENT SAK E, IF IT IS PRESUMED THAT EACH LABOUR GIVES 8 MT PRODUCTION PER DAY UNIFORMLY (BUT NOT ADMITTING) THE TENTATIVE PRODUCTION WOULD BE WORKED OUT AS BELOW: ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 19 MONTH NUMBER OF LABOURS WORKING DAYS TOTAL ATTENDANCE OF MALE LAB OUR FOR PRODUCTION IN 23 DAYS PRODUCTION DONE @ 8 M.T. APRIL,09 26 23 559 4,472 MAY,09 19 23 388 3,104 JUNE,09 20 23 396 3,158 JULY,09 21.5 23 422 3,376 AUG.,09 21.5 23 415 3,320 SEPT.,09 20 23 420 3,360 OCT.,09 21 23 427 3,416 NOV.,09 21 23 327 2,616 DEC.,09 22 23 285 2,280 JAN.,10 19.5 23 279 2,232 FEB.,10 20 23 262 2,096 MAR.,10 15.5 23 230 1,840 TOTAL 35,280 WHEREAS THE LEARNED ASSESSING OFFICER HAD TAKEN THE CLAY PRODUCTION BY MANUAL LABOUR FOR 23 DAYS OF WORKING @ 200 M.T. PER DAY FO R THE YEAR. THIS MUCH OF THE PRODUCTION CAN ONLY BE POSSIBLE WITH MORE THAN 33 LABOURS WORKING EACH DAY CONSIDERING ON AN AVERAGE 6 MT PRODUCTION BY EA CH LABOUR PER DAY. EVEN AS PER AOS ASSUMPTION OF AVERAGE PRODUCTION OF 8 M T PER LABOUR, AT LEAST 25 LABOURS EACH DAY WOULD BE REQUIRED. HOWEVER, FROM P ERUSAL OF DETAILS OF ATTENDANCE REGISTER OF LABOUR WORKING FOR PRODUCTIO N, WHICH GIVES THE ACTUAL POSITION OF LABOUR EMPLOYED ON DAY-TO-DAY BASIS, IT IS SEEN THAT IN THE MONTH OF MARCH, 2010, IT WAS AS LOW AS 15.5 AND IN MOST OF T HE MONTHS IT WAS 20-21 LABOURS. HENCE, PRESUMPTION OF AO COMPLETELY CONTRA RY TO THE FACTS ON RECORD. HENCE, THE MANUAL LABOUR PRODUCTION SO PRESUMED BY THE LEARNED ASSESSING OFFICER AT 55,200 M.T. DESERVES TO BE IGNORED BEING NOT BASED ON CORRECT FACTS. ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 20 IT IS SUBMITTED THAT EVEN AS PER AOS PRESUMPTION N UMBER OF LABOUR WORKING IN THE MINES AND AS PER HIS ATTENDANCE THE PRODUCTION WOULD WORK OUT AT 35,280 M.T. ONLY. AS SUCH THE LEARNED ASSESSING OFFICER HA D TAKEN 19,920 M.T. MORE PRODUCTION IN HIS CALCULATION. AS PER CALCULATION, THE APPELLANT DID NOT HAVE EXTERNAL EXCAVATOR FOR 17.5 DAYS OUT OF THE TOTAL W ORKING DAYS OF 276 DAYS. THE PRODUCTION EFFECTED BY IT IS 17.5 X 500 = 8,750 M.T . THE TOTAL EFFECT OF THE ABOVE WORKING IS 19,920 +8,750 = 28,670 M.T. LESS P RODUCTION BY THE APPELLANT FROM HIS CALCULATION OF PRODUCTION.- TO B E MODIFIED SUITABLY AS AO HAS ALREADY GIVEN BENEFIT OF 17.5 DAYS. AS PER LEARNED ASSESSING OFFICER CALCULATION THE TOTAL PRODUCTION AT RADHERA I MINES COMES TO 1, 40,086 M.T. (168756 - 28670). THE APPELLANT HAD SHOWN THE TOTAL PRODUCTIO N OF 1,43,099 M.T. THERE IS NO SUPPRESSION OF PRODUCTION BY THE APPELLANT AS CALCULATED BY THE LEARNED ASSESSING OFFICER. ON THE SIMILAR BASIS, THERE IS N O SUPPRESSED PRODUCTION IN OTHER MINES. 26. IT WAS FURTHER SUBMITTED THAT CALCULATION OF SU PPRESSED PRODUCTION IS THE STATEMENT OF SHRI RAGHAVENDRA SINGH MINING MATE WHI CH WERE RECORDED ON 18.02.2013 WHO STATED PREVAILING GENERAL WORKING PO SITION AT THE MINES. OTHER THAN THAT NO EVIDENCE FOR THE SUPPRESSED PRODUCTION AND SALE OF THE SAME BY THE APPELLANT WAS GIVEN BY THE ASSESSING OFFICER. AT THIS JUNCTURE, IT IS SUBMITTED THAT LD. AO IN REMAND REPORT, HAS COMMENT ED THAT AS PER STANDARDS, THE DENSITY OF THE CLAY IS FOUND TO BE 2 400/KG/M3 TO 2600/KG/M3, WHEREAS THE AO HAS TAKEN THE DENSITY AT JUST 1122/K G/M3, THUS IF THE DENSITY IS TAKEN AS PER THE STANDARDS OF ENGINEERING, THE SUPP RESSED PRODUCTION WOULD HAVE BEEN MUCH MORE. IN THIS REGARD ALSO, IT IS MENTIONED THAT LD. AO H AS GIVEN A GENERALIZED OBSERVATIONS. HAD THERE BEEN AC TUALLY INCREASE IN PRODUCTION CONSIDERING DENSITY AS PER STANDARDS (AS MENTIONED), LD.AO WOULD HAVE BEEN DEFINITELY RE COMPUTED THE SAME, WHICH HA S NOT BEEN DONE BY AO. IN FACT, IN REPLY TO REMAND REPORT, ASSESSEE HAS FU RNISHED CALCULATION OF ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 21 PRODUCTION BY ADOPTING DENSITY OF CLAY AS STATED BY LD.AO, WHICH HAS NOT RESULTED IN ANY CHANGE IN PRODUCTION. ALL THESE FAC TS LEAD TO THE CONCLUSION THAT FORMULAS ADOPTED BY LD.AO IN RE COMPUTATION OF PROD UCTION ARE GENERALIZED AND NOT BASED ON THE TECHNICALITIES INVOLVED. IN FACT, IN THE ASSESSMENT OF A.Y. 2012-13, LD.AO APPLIED THE SAME FORMULA AS ADOPTED IN A.Y. 2010-11 AND RECOMPUTED THE PRODUCTION SHOWN BY ASSESSEE, HOWEVE R EVENTUALLY ARRIVED AT A CONCLUSION THAT THE ASSESSEE HAD SHOWN PRODUCTION OF 295072.800 MT OF CLAY FROM ALL THE THREE MINES WHERE AS THE PRODUCTION CA LCULATED AS PER THE FORMULAE APPLIED IN PREVIOUS YEAR THE PRODUCTION CO MES TO 196891MT, THUS THE PRODUCTION SHOWN BY ASSESSEE DURING THE YEAR UNDER CONSIDERATION IS MORE THAN THE PRODUCTION ESTIMATED HENCE THE MINING RESU LTS OF THE ASSESSEE ARE ACCEPTED. . IT IS THUS SUBMITTED THAT THE FORMULA APPLIED HA S NO DIRECT BEARING ON THE COMPUTATION MADE AND FURTHER CONFIRM THE CON TENTION OF ASSESSEE THAT PRESUMPTION OF LD.AO THAT THE FIGURES OF PRODUCTIO N STATED BY MINING MATE RAGHAVENDRA AND LABOUR ROOPA SINGH ARE PERTAINING TO A.Y. 2010-11 IS CONTRARY TO THE FACTS. 27. IT WAS FURTHER SUBMITTED THAT ONCE THE TURNOVER DECLARED BY ASSESSEE IS ACCEPTED, THERE IS NO REASON TO REJECT THE QUANTUM OF PRODUCTION. IT IS THUS CLEAR THAT THERE IS NO SUPPRESSED PRODUCTION OF CLA Y AT MINES. MORE PARTICULARLY WHEN, THE DAY TO DAY PRODUCTION IS NOTED IN THE PRO DUCTION REGISTER MAINTAINED AT THE MINES AND DISPATCHES MADE FROM THE MINES WER E ENTERED IN RAVANA REGISTER AND ACTUAL WEIGHT IS WRITTEN FROM THE WEIG HT SLIPS AND BILLS WERE PREPARED FOR IT. THERE IS NO MISTAKE POINTED OUT BY THE LEARNED ASSESSING OFFICER IN THE SALES BILLS ISSUED DURING THE YEAR. THEN THE RE WAS NO REASON TO CALCULATE THE UNDISCLOSED INCOME OF THE APPELLANT AND MAKE AD DITION OF RS. 66,43,417/- WITHOUT MENTIONING ANY DISCREPANCY IN THE SALE BILL S. ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 22 28. WITH RESPECT TO ALLEGATION OF LD.AO REGARDING V ARIATION IN ELECTRICITY CONSUMPTION IN FACTORIES POINTED OUT BY LD. A.O, IT WAS SUBMITTED THAT THERE IS NO VARIATION IN THE CONSUMPTION OF ELECTRICITY AT F ACTORIES. IN THE ASSESSMENT ORDER, THE LD. A.O. ERRONEOUSLY CALCULATED CONSUMPT ION BY DIVIDING UNITS OF ELECTRICITY BY PRODUCTION IN MT, WHEREAS PRODUCTION AFTER CONVERTING IN KG. IS TO BE DIVIDED BY THE UNIT OF ELECTRICITY CONSUMED. THE CHART SHOWING THE PRODUCTION OF CLAY POWDER OF FACTORIES AS PER UNIT CONSUMPTION OF ELECTRICITY IS AS UNDER: MONTH UNITS OF ELECTRICITY CONSUMED PRODUCTION OF CLAY POWDER IN M.T. WORKI NG DAYS PRODUCTION PER UNIT CONSUMPTION OF ELEC. IN KG PRODUCTION PER DAY IN M.T. PRODUCTION PER UNIT IN M.T. APRIL,09 17820 925 25 51.90 37.00 18.50 MAY,09 16365 658 25 40.21 26.32 13.16 JUNE,09 14520 706 26 48.62 27.15 13.58 JULY,09 12420 775 27 62.40 28.70 14.35 AUG.,09 16005 1099 24 68.66 45.79 22.90 SEPT.,09 21405 1049 25 49.01 41.96 20.98 OCT.,09 18855 960 25 50.91 38.40 19.20 NOV.,09 19202 968 23 50.41 42.08 14.03 DEC.,09 21746 825 27 37.94 30.55 10.18 JAN.,10 21472 750 24 34.93 31.25 10.42 FEB.,10 15641 790 24 50.51 32.91 10.97 MAR.,10 18290 1080 25 59.05 43.20 14.40 IN THE MONTH OF AUGUST, NORMAL MESH POWDER IS GRIND ED 1036 M.T. AND HIGH MESH IS 63 M.T., HENCE PER UNIT PRODUCTION IS INCRE ASED. IN THE MONTH OF JANUARY, 2010 NORMAL MESH POWDER GRINDED 622 M.T. A ND HIGH MESH POWDER GRINDED 128 M.T. AND DUE TO MOISTURE IN THE MATERIA L PER UNIT PRODUCTION DECREASED. IN ALL THE OTHER MONTHS THE CONSUMPTION OF UNIT ARE NORMALLY RANGING WITHIN 40 TO 60 KG. AS INFORMED TO THE LEAR NED ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 23 29. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS DECLARED GP RATE OF 13.02% DURING THE YEAR UNDER CONSIDERATION, WHICH W AS 13.69% IN IMMEDIATELY PRECEDING YEAR DESPITE OF AROUND 20% IN CREASE IN TURNOVER. IN OTHER WORDS, THERE IS JUST MARGINAL DECREASE IN GP RATE. ALSO, IF TRADING ADDITION OF RS. 70,00,000/- AS CONFIRMED BY CIT(A) IS ADDED BACK TO THE GP, IT WOULD RESULT IN GP RATE AS HIGH AS 23.37%, WHICH IS EXORB ITANTLY HIGH TO ACHIEVE PRACTICALLY. IT IS THUS SUBMITTED THAT TRADING ADDI TION OF RS.70 LACS IS COMPLETELY IMAGINARY AND DESERVES TO BE DELETED. IN SUPPORT, R ELIANCE WAS PLACED ON THE DECISION IN CASE OF INCOME TAX OFFICER VS. CHOHTAN CONSTRUCTION CO. 84 TTJ 693 (JODH) AND SARDAR KEHAR SINGH VS. COMMISSIONER OF INCOME TAX AND OTHERS 195 ITR 769 (RAJ). IN VIEW OF ABOVE, IT WAS SUBMITTED THAT TRADING ADDITION CONFIRMED BY LD. CIT(A) AT RS.70 LACS DESE RVES TO BE DELETED. 30. THE LD DR IS HEARD WHO HAS SUBMITTED THAT THE AO HAS DISCUSSED IN DETAIL IN THE ASSESSMENT ORDER THE DISCREPANCIES /D EFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND HAD COME TO A CONCLUSIO N THAT PRODUCTION OF CLAY AT MINES AND ALSO THE PRODUCTION OF CLAY POWDER, QU ANTITY OF CLAY AND CLAY POWDER TRADED BY THE ASSESSEE RECORDED IN THE BOOKS OF ACCOUNTS ARE NOT RELIABLE. FURTHER, THE EXPENSES DEBITED IN THE TRAD ING ACCOUNT WERE ALSO FOUND NOT VERIFIABLE BY THE AO. HENCE, THE BOOKS OF ACCOU NTS OF THE ASSESSEE WERE RIGHTLY REJECTED BY THE AO UNDER SECTION 145(3) OF THE I.T. ACT, 1961 AND CONFIRMED BY THE LD CIT(A). IT WAS FURTHER SUBMITTE D THAT AFTER REJECTION OF BOOKS OF ACCOUNTS, THE AO HAS MADE ADDITION OF RS.7 5,00,000/- TO PROFIT DECLARED BY THE ASSESSEE ON ACCOUNT OF SUPPRESSED P RODUCTION OF RS.66,43,417/- AND OTHER DISCREPANCIES NOTICED BY H IM. ON THE OTHER HAND, THE ASSESSEE HAS NO DOUBT FURNISHED A DETAILED WORKING OF THE PRODUCTION TO SHOW THAT THERE WAS NOT SUPPRESSION OF PRODUCTION AND HA S ALSO FILED COPIES OF THE VF/KKQYD FU/KKZJ.K IZI= IN RESPECT OF ALL THE THREE MINES ALONGWITH THE REC ONCILIATION STATEMENT RECONCILING THE QUANTITY OF PRODUCTION SH OWN IN THE VF/KKQYD FU/KKZJ.K IZI= ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 24 WITH THE QUANTITY OF PRODUCTION SHOWN IN THE BOOKS OF APPELLANT. IT WAS HOWEVER SUBMITTED THAT THE APPELLANT COULD NOT CONT ROVERT THE FINDING OF THE AO THAT THE APPELLANT HAD FAILED TO PRODUCE PRIMARY RECORDS OF THE PRODUCTION. THE QUANTITY OF THE PRODUCTION SHOWN IN THE VF/KKQYD FU/KKZJ.K IZI= IS ALSO BASED ONLY ON THE BOOKS OF ACCOUNTS OF THE APPELLANT. THE AUTHORITY ISSUING VF/KKQYD FU/KKZJ.K IZI= HAS NOT MADE ANY INDEPENDENT INQUIRY TO FIND OUT TH E ACTUAL PRODUCTION OF THE APPELLANT NOR THE AUTHORITY KEEPS ITS OWN INDEPENDENT RECORD FOR THE PRODUCTION MADE IN THE MINES OF THE APPELLA NT. IT WAS ACCORDINGLY HELD BY THE LD CIT(A) AND RIGHTLY SO THAT THE AO IS NOT BOUND TO ACCEPT THE QUANTITY OF THE PRODUCTION SHOWN IN THE VF/KKQYD FU/KKZJ.K IZI= AS CORRECT WHEN HE HAD POINTED OUT VARIOUS DISCREPANCIES AND DEFECTS IN TH E BOOKS OF ACCOUNTS OF THE APPELLANT. THE AO HAS WORKED OUT THE QUANTITY OF SU PPRESSED PRODUCTION IN VERY SCIENTIFIC AND LOGICAL MANNER, KEEPING IN VIEW THE ENTIRE WORKING ENVIRONMENT OF THE MINES OF THE APPELLANT. IN VIEW OF THE FACTS DISCUSSED BY THE AO IN THE ASSESSMENT ORDER, THE ACTION OF THE A O REJECTING THE BOOK RESULTS BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT, 1961 IS TO BE UPHELD. IT WAS FURTHER SUBMITTED THAT INSPITE OF D ISCREPANCIES SO NOTICED BY THE AO AND ALSO BY LD CIT(A), THE LATTER IS MORE THAN R EASONABLE AS HE HAS RESTRICTED THE ADDITION OF RS. 75,00,000/- MADE BY THE AO TO RS. 70,00,000/- AND NO FURTHER RELIEF MAY BE GRANTED TO THE ASSESSE E. HE ACCORDINGLY RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES. 31. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND CAREFULLY EXAMINED THE FACTUAL MATRIX OF THE MATTER. 32. IN RESPECT OF ONE OF THE MINES OWNED BY THE ASS ESSEE, WE FIND THAT THE ASSESSING OFFICER HAS ESTIMATED THE QUANTUM OF SUPP RESSED PRODUCTION BY CONSIDERING THE REMOVAL OF OVERBURDEN FROM SUCH MIN E BY THE EXCAVATORS AND DUMPERS HIRED FROM THE EXTERNAL AGENCIES AS WELL AS THOSE OWNED BY THE ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 25 ASSESSEE. THEREAFTER, HE REFERRED TO THE PERIOD FO R WHICH THE EXCAVATORS & DUMPERS WERE HIRED FROM EXTERNAL AGENCIES AND USED DURING THE YEAR. FURTHER, HE REFERRED TO THE CALCULATION OF DENSITY OF THE CL AY BY USING THE DATA SHOWN IN ITS SORTING PAYMENT REGISTER. THEREAFTER, THE ASSES SING OFFICER REFERRED TO THE STATEMENT, OF SHRI RAGHVENDRA, ONE OF THE MINING MA TE EMPLOYED AT THE SITE, RECORDED DURING THE COURSE OF ASSESSMENT PROCEEDING S AND BASIS HIS UNDERSTANDING OF FACTS AND FIGURES, HE DETERMINED T HE LENGTH AND WIDTH OF CLAY BEDS AVAILABLE FOR MINING, VOLUME AND DENSITY OF CL AY AND HAS WORKED OUT THAT 1.243 FEET OF CLAY IS DUG OUT IN A DAY WITH THE HEL P OF EXCAVATOR & LABOUR AND WHERE ONLY MANUAL LABOUR IS EMPLOYED, HE DETERMINED THAT LABOUR IS ABLE TO DIG OUT 0.355 FEET OF CLAY PER DAY. THEREAFTER, BASIS T HE DIMENSION OF THE CLAY BED SO DETERMINED BY HIM AND ESTIMATED WORKING DAYS AVA ILABLE WITH THE ASSESSEE TO CARRY OUT MINING OPERATIONS, THE ASSESSING OFFIC ER HAS WORKED OUT THE PRODUCTION AMOUNTING TO 168,756/- TONES OF CLAY IN RESPECT OF MINE NO. 8/96 AS AGAINST 143,099 TONS OF CLAY PRODUCTION AS SHOWN BY THE ASSESSEE. BASIS THE SAME, HE ARRIVED AT THE FINDING THAT THE ASSESSEE H AS SUPPRESSED PRODUCTION TO THE TUNE OF 25,657 TONS WHICH COMES TO 17.92% OF TH E PRODUCTION DECLARED. APPLYING THE SAME PROPORTION IN RESPECT OF OTHER TW O MINES, THE AO WORKED OUT THE SUPPRESSED PRODUCTION IN RESPECT OF OTHER TWO M INES NO. 2/95 AND 7/96. FURTHER, THE ASSESSING OFFICER ASSUMED THAT THE PRO DUCTION OF SGRS GRADE CLAY & C GRADE CLAY IS IN 4.1 RATIO AND BASIS THE SALE V ALUE IS RECORDED IN THE BOOKS OF ACCOUNTS, HAS WORKED OUT THE SUPPRESSED PRODUCTI ON OF RS. 63,13,099/- DURING THE YEAR. FURTHER, THE AO HAS ALLEGED THAT THE ASSESSEE HAS NOT PRODUCED THE PRIMARY RECORDS LIKE THE DISPATCH RECE IPTS TO TRUCK DRIVERS FOR TAKING THE CLAY SO DUG OUT FROM THE MINING AREA TO STORAGE AREA AND FROM THERE, FOR DISPATCH TO THE CUSTOMERS. 33. PER CONTRA, THE CONTENTION OF THE LD AR ON BEHA LF OF THE ASSESSEE IS THAT THE PRODUCTION REGISTER IN WHICH ENTRIES OF PRODUCT ION ARE MADE ON DAILY BASIS IS ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 26 THE BASIC AND PRIMARY RECORD. IT WAS FURTHER SUBMI TTED THAT ITS MINING OPERATION COMES UNDER THE JURISDICTION OF STATE MIN ING DEPARTMENT WHEREIN BOTH EXTRACTION/PRODUCTION AND DISPATCHES ARE CLOSE LY MONITORED BY THE MINING DEPARTMENT AT THE CHECK POST BEFORE THE CLAY IS FIN ALLY DISPATCHED TO THE CUSTOMERS AND RAVANA RECEIPTS ARE ISSUED TO TRUCKS BY THE MINING DEPARTMENT FOR THE PURPOSE OF DETERMINATION OF ROYALTY. IT WA S FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT MAKING ANY SALES FROM THE MINES WITHOUT THE RAVANA RECEIPTS, AND THE BILLS WERE MADE FOR ALL THE RAVAN AS ISSUED AND NO DIFFERENCE WAS POINTED OUT BY THE MINING DEPARTMENT IN THE PRO DUCTION AND SALES DECLARED BY THE ASSESSEE. IN SUPPORT OF SUCH CONTENTION, COP Y OF ROYALTY ASSESSMENT ORDERS, COPY OF MONTHLY RETURNS, DETAILS OF PRODUCT ION AT MINES AND DISPATCHES FROM THE MINES WITH RECONCILIATION WITH THE PRODUCT ION AND DISPATCHES AS PER MONTHLY RETURNS DECLARED BY THE ASSESSEE AND ASSESS ED BY THE MINING DEPARTMENT WERE FURNISHED BEFORE LOWER AUTHORITIES, HOWEVER THE SAME WERE NOT CONSIDERED NOR ANY DISCREPANCY WAS POINTED OUT. IT WAS FURTHER SUBMITTED THAT ROYALTY ASSESSMENT WAS MADE BY THE MINING DEPA RTMENT AFTER VERIFYING ALL THE RECORDS MAINTAINED I.E. PRODUCTION REGISTER, RA VANA REGISTER AND SALES BILLS ETC. THERE IS NO DIFFERENCE IN THE DAY TO DAY PRODU CTION SHOWN BY THE ASSESSEE AND WORKED OUT BY MINING DEPARTMENT OFFICIALS AND T HAT RECORDED IN THE PRODUCTION REGISTER MAINTAINED AT THE MINES. THERE IS ALSO NO DIFFERENCE IN PRODUCTION AND DISPATCHES MADE BY THE APPELLANT AS SHOWN IN THE ROYALTY ASSESSMENT MADE BY THE MINING DEPARTMENT. REGARDING OBSERVATIONS OF THE LD. CIT(A) THAT SUCH ROYALTY ASSESSMENT BY MINING DEPAR TMENT WERE BASED ON THE EXAMINATION OF SAME BOOKS, IT WAS SUBMITTED THAT TH E SAME IS NOT CORRECT AS RAVANAS WERE ISSUED BY THE DEPARTMENT ITSELF, THEY HAVE THE RECORDS OF ALL THE RAVANA ISSUED, WHICH ARE RECONCILED WITH THE RAVANA GIVEN TO THE TRUCK DRIVERS. AT CHECK POST BARRIER, VEHICLE IS WEIGHED AND AFTER CROSS CHECKING AND MATCHING THE MINED ITEM AS WELL AS ITS WEIGHT, THE TRUCK IS ALLOWED TO LEAVE AND ROYALTY IS CHARGED ACCORDINGLY. THUS, THE ASSESSMENT DONE BY M INING DEPARTMENT IS A ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 27 RECONCILIATION OF THEIR RECORD WITH ASSESSEES RECO RD. IT WAS FURTHER SUBMITTED THAT VERIFICATION OF THE PRODUCTION DONE AT MINES C OMES UNDER THE JURISDICTION OF MINING DEPARTMENT WHERE OFFICIALS HAVE MORE TECH NICAL KNOWLEDGE AND ARE MORE EQUIPPED FOR COMPUTING/VERIFYING PRODUCTION SH OWN FROM MINES AND WHOSE ASSESSMENT SHOULD BE GIVEN CREDENCE AND SHOUL D BE ACCEPTED BY INCOME TAX DEPARTMENT UNLESS SOME CONTRARY POSITIVE EVIDENCE OR MATERIAL IS BROUGHT ON RECORD WHICH DEMONSTRATE SUPPRESSED PROD UCTION AND ULTIMATE SALE THEREOF. IT WAS FURTHER SUBMITTED THAT LD. AO HAS ESTIMATED THE QUANTUM OF PRODUCTION BY APPLYING CERTAIN FORMULAS IN A CLUMSY AND ROUND ABOUT MANNER WHICH WERE NOT AT ALL REQUIRED AND MOREOVER THE BAS IC FIGURE FOR THE SAME HAS BEEN TAKEN PURELY ON ESTIMATED BASIS ON THE VERY GE NERALIZED STATEMENT OF ONE SHRI RAGHVENDRA, THE MINING MATE, WHOSE MAIN RESPON SIBILITY WAS OF SAFETY OF MINE. THE LD.CIT (A) HAS JUST CONFIRMED THE SAME BY MERELY STATING THAT LD.AO HAS DERIVED THE SUPPRESSED PRODUCTION IN LOGICAL MA NNER, WITHOUT APPRECIATING THAT AO HAS MERELY DONE IN A ROUNDABOUT MANNER AND RATHER REVERSE WORKING AND EVEN FOR THIS WORKING, LD. AO HAS TAKEN ESTIMAT ED GENERALIZED FIGURE INSTEAD OF A SPECIFIC AND DAY-TO-DAY PRODUCTION FIG URES WHICH ARE MAINTAINED BY ASSESSEE AND DULY SUBMITTED DURING THE COURSE OF AS SESSMENT PROCEEDINGS. 34. WE AGREE WITH THE CONTENTION SO ADVANCED BY THE LD. AR THAT AS FAR AS THE DETERMINATION OF QUANTUM OF CLAY WHICH CAN BE E XTRACTED/PRODUCED FROM MINES IS CONCERNED, IT IS CLEARLY A COMPLEX AND TEC HNICAL MATTER INVOLVING UNDERSTANDING OF THE TOPOGRAPHY OF THE AREA WHERE M INES ARE LOCATED, THE METHODOLOGY AND PROCESS OF EXTRACTION/PRODUCTION IN VOLVED, THE MACHINERY AND LABOUR EMPLOYED AS WELL AS VARIOUS ENVIRONMENTAL AN D RELATED REGULATORY MATTERS. THEREFORE, WHERE THE ASSESSING OFFICER HAD SOME APPREHENSION IN TERMS OF NON DECLARATION OF THE REQUISITE PRODUCTIO N/EXTRACTION, AS WE CAN SEE FROM READING OF INITIAL PART OF THE ASSESSMENT ORDE R, IN OUR VIEW, HE IS WELL WITHIN HIS JURISDICTION TO CARRY OUT FURTHER EXAMIN ATION AND CAN ALSO RECORD THE ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 28 STATEMENT OF EMPLOYEES OF THE ASSESSEE WORKING AT T HE MINING SITES BUT AT THE SAME TIME, BEFORE ARRIVING AT THE FINAL CONCLUSION, HE SHOULD HAVE REFERRED THE MATTER TO THE STATE MINING DEPARTMENT AND SOUGHT TH E OPINION AND ASSISTANCE OF THE DOMAIN EXPERTS IN THE FIELD OF MINING WHO HA VE THE REQUISITE QUALIFICATION AND EXPERIENCE IN THE MATTER. WE FIND THAT SIMILAR MATTER HAD COME UP FOR CONSIDERATION BEFORE THE HONBLE ANDHRA PRADESH HIGH COURT IN CASE OF CIT VS. SHRI GIRIJA SMELTERS (P) LTD., (SUPRA) WHEREIN THE RELEVANT FINDINGS READ AS UNDER: 14. ALL SAID AND DONE, THE OCCASION TO LEVY INCOME TAX WOULD ARISE, ONLY WHEN THE PRODUCT IN QUESTION WAS FOUND OR ALLEGED T O HAVE BEEN SOLD, AND THE SALE PROCEEDS, CONSTITUTING INCOME WERE NOT REFLECTED IN THE RETURNS. IT WAS NOT EVEN ALLEGED THAT THE PRODUCT S HOWN IN THE FORM OF DISCREPANCIES, WAS SOLD AT ALL. 15. WE ARE SURE THAT WHEN FACED WITH A SITUATION OF THAT NATURE, EVEN A SUPERINTENDENT OF A CENTRAL EXCISE WOULD NOT HAVE V ENTURED TO RECORD HIS OWN FINDINGS ABOUT THE MATERS LIKE BURNING LOSSES O R OTHER RELEVANT ISSUES AND WOULD HAVE CHOSEN TO AVAIL THE SERVICES OF A METALLURGICAL EXPERT. WHAT WE HAVE EXTRACTED ABOVE IS JUST A SAMP LE. THE WHOLE ORDER IS FULL OF SUCH DISCUSSIONS AND INSTANCES. IT IS ON THE BASIS OF SUCH AN EXERCISE, THAT THE ASSESSING OFFICER ARRIVED AT THE CONCLUSIONS THAT THE UNDISCLOSED INCOME ON ACCOUNT OF THE IMPROPER DISCL OSURE, OR SUPPRESSION OF THE PRODUCTION FOR VARIOUS ASSESSMEN T YEARS IS RS.1,22,86,712/-. EVEN THE EXPENDITURE INCURRED FOR PURCHASE OF RAW MATERIALS BECAME THE SUBJECT-MATTER OF EXTENSIVE DI SCUSSION, WITHOUT INDICATING AS TO HOW THE PURCHASE OF RAW MATERIAL C AN HAVE ANY IMPACT UPON THE INCOME OF AN ASSESSEE, THAT TOO, OF A MANU FACTURING COMPANY. ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 29 IN THE ORDER OF ASSESSMENT, WHICH RUNS INTO 31 CLOS ELY TYPED PAGES, SUCH INSTANCES ARE GALORE. 16. OBVIOUSLY, TO ANALYSE AND UNDERSTAND THE APPROA CH OF THE ASSESSING OFFICER, THE TRIBUNAL DISCUSSED THE MATTER AT LENGT H. THE ORDER PASSED BY IT RUNS INTO 48 PAGES. AT MORE PLACES THAN ONE, IT WAS POINTED OUT THAT THE STOCK AVAILABLE ON GROUND, CANNOT BE COMPARED O R VERIFIED WITH REFERENCE TO THE RG-I REGISTER. IT WAS ALSO POINTED OUT THAT BY-PRODUCTS OR WASTE MATERIALS, SUCH AS SLAG, WAS TREATED BY TH E ASSESSING OFFICER AS THE MAIN PRODUCT OR AN INCOME YIELDING MATERIAL AND THE CONCLUSIONS WERE ARRIVED AT, ONLY ON THE BASIS OF ASSUMPTIONS. WE AGREE WITH THE FINDINGS RECORDED AND VIEW EXPRESSED BY THE TRIBUNA L. 17. AN INCOME TAX OFFICER CANNOT CARRY OUT THE FUNC TIONS OF AN AUTHORITY UNDER THE CENTRAL EXCISE ACT AND ARROGATE TO HIMSEL F THE POWER TO DETERMINE THE QUANTITY OF PRODUCTION, OR TO UTTER A FINAL WORD ON THE INTRICACIES OF THE MANUFACTURING PROCESS, THAT TOO, WITHOUT REFERRING TO ANY RELIABLE MATERIAL. THE ASSESSING OFFICER, IN TH E INSTANT CASE, WAS TOTALLY UNSUITED FOR UNDERTAKING THE ACTIVITY OF DE TERMINING THE EXACT PRODUCTION OF THE MATERIAL, WHICH ITSELF INVOLVES V ERY COMPLICATED PROCEDURES. 35. SIMILARLY, THE HONBLE SUPREME COURT IN THE CASE OF SARASWATI INDUSTRIAL SYNDICATE LTD. (SUPRA) HAS HELD THAT NEITHER THE ITO NOR THE HIGH COURT WERE ENTITLED TO MAKE STATEMENTS OF TECH NICAL MATTERS FOR WHICH NO BASIS HAS BEEN LAID DOWN ON RECORD AND THE RELEVANT FINDINGS READS AS UNDER:- 6. WE CAN UNDERSTAND THAT THE AUTHORITIES DECLINED TO RELY THE EXPERTS' OPINION BECAUSE HE WAS NOT PRODUCED FOR CROSS-EXAMI NATION. BUT NEITHER THE ITO NOR, INDEED, THE HIGH COURT WERE ENTITLED T O MAKE STATEMENTS ON ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 30 TECHNICAL MATTERS FOR WHICH NO BASIS HAD BEEN LAID ON THE RECORD BY EITHER THE REVENUE OR THE ASSESSEE. IF THE HIGH COU RT WAS OF THE VIEW THAT FURTHER MATERIAL WAS REQUIRED, THE APPROPRIATE COURSE WAS TO REQUIRE THE TRIBUNAL TO TAKE FURTHER EVIDENCE AND DRAW UP A SUPPLEMENTAL STATEMENT OF CASE. 36. IN THE INSTANT CASE, HOWEVER, WE FIND THAT THE ASSESSING OFFICER HAS PROCEEDED AHEAD AND BASIS HIS OWN INVESTIGATION AND UNDERSTANDING OF THE MINING PROCESS INVOLVED, AND BASIS HIS OWN CALCULAT ION AND UNDERSTANDING OF VARIABLES HAS WORKED OUT THE QUANTUM OF CLAY WHICH COULD BE EXTRACTED FROM ONE OF THE MINES OWNED BY THE ASSESSEE WITHOUT REFE RRING THE MATTER TO THE DOMAIN EXPERTS IN THE FIELD OF MINING SUCH AS GEOLO GISTS AND MINING ENGINEERS. SUCH AN ACTION ON THE PART OF THE ASSESSING OFFICER CANNOT BE UPHELD ESPECIALLY IN LIGHT OF AFORESAID DECISIONS WHEREIN THE COURTS HAVE HELD THAT AN INCOME TAX OFFICER CANNOT CARRY ARROGATE TO HIMSELF THE PO WER TO DETERMINE THE QUANTITY OF PRODUCTION, OR TO UTTER A FINAL WORD ON THE INTRICACIES OF THE MANUFACTURING PROCESS, THAT TOO, WITHOUT REFERRING TO ANY RELIABLE MATERIAL. THE ASSESSING OFFICER, IN THE INSTANT CASE, WAS TOTALLY UNSUITED FOR UNDERTAKING THE ACTIVITY OF DETERMINING THE EXACT PRODUCTION OF THE MATERIAL, WHICH ITSELF INVOLVES VERY COMPLICATED PROCEDURES. FURTHER, WE FIND THAT BASIS SUCH CALCULATION, THE ASSESSING OFFICER HAS DETERMINED T HE SHORTFALL OR SUPPRESSION IN THE CLAY PRODUCTION VIS--VIS PRODUCTION DISCLOSED BY THE ASSESSEE IN RESPECT OF ONE OF THE MINES. FURTHER, USING THE SAME PERCENTAG E OF SUPPRESSED PRODUCTION, HE HAS PROCEEDED AHEAD AND WORKED OUT P ROPORTIONATE SUPPRESSION OF PRODUCTION IN THE OTHER TWO MINES WITHOUT GETTIN G INTO SPECIFIC OF FUNCTIONING OF SUCH MINES WHICH AGAIN CANNOT BE ACCEPTED. WITHO UT GETTING INTO THE MERITS OF THE FORMULA SO ARRIVED BY THE ASSESSING OFFICER, AS WE FIND OURSELF NOT COMPETENT ENOUGH TO COMMENT UPON, WE FIND THAT EFFE CTIVELY, THE AO HAS TRIED TO DETERMINE THE QUANTUM OF CLAY WHICH COULD POTENT IALLY BE EXTRACTED FROM THE ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 31 MINES AND THATS WHERE WHOLE CASE OF THE REVENUE RE ST. THE QUESTION FOR CONSIDERATION HERE IS NOT THE POTENTIAL EXTRACTION OF CLAY RATHER THE ACTUAL CLAY WHICH HAS BEEN EXTRACTED FROM THE MINES AND WHICH H AS BEEN SOLD/DISPATCHED DURING THE YEAR UNDER CONSIDERATION AND WHICH HAS N OT BEEN DISCLOSED IN THE RETURN OF INCOME AND WHAT CREDIBLE MATERIAL IS AVAI LABLE ON RECORD IN SUPPORT OF SUCH FINDINGS. WE HOWEVER FIND THAT THERE IS NO MA TERIAL ON RECORD AND NO FINDING RECORDED BY THE AO THAT QUANTUM OF CLAY SO DETERMINED BY HIM AS PART OF SUPPRESSED PRODUCTION HAS BEEN ACTUALLY DISPATCH ED AND SOLD AND MORE SO, WHEN THE ASSESSEES ACTIVITIES COMES UNDER THE JURI SDICTION OF STATE MINING DEPARTMENT AND BOTH ITS PRODUCTION AND DISPATCHES A RE CLOSELY MONITORED BY THE MINING DEPARTMENT. AS HELD BY THE HONBLE HIGH COURT IN CASE OF CIT VS. SHRI GIRIJA SMELTERS (P) LTD (SUPRA), THE OCCASION TO LEVY INCOME TAX WOULD ARISE, ONLY WHEN THE PRODUCT IN QUESTION WAS FOUND OR ALLEGED TO HAVE BEEN SOLD, AND THE SALE PROCEEDS, CONSTITUTING INCOME WE RE NOT REFLECTED IN THE RETURNS. IT WAS NOT EVEN ALLEGED THAT THE PRODUCT S HOWN IN THE FORM OF DISCREPANCIES, WAS SOLD AT ALL. FURTHER, WE FIND TH AT ROYALTY ASSESSMENTS WERE CARRIED OUT BY THE MINING DEPARTMENT WITHOUT ANY AD VERSE FINDINGS AND COPY OF ROYALTY ASSESSMENT ORDERS, COPY OF MONTHLY RETURNS, DETAILS OF PRODUCTION AT MINES AND DISPATCHES FROM THE MINES AND RECONCILIAT ION THEREOF WERE ADMITTEDLY FURNISHED BEFORE THE LOWER AUTHORITIES A ND EVEN ACKNOWLEDGED BY THE LD CIT(A) AND NO DISCREPANCY HAS BEEN HIGHLIGHT ED THEREIN EITHER BY THE AO OR BY THE LD CIT(A) AND THERE IS NO MATERIAL ON REC ORD WHICH HIGHLIGHT DISPATCHES FROM THE MINES WITHOUT PAYING THE REQUIS ITE ROYALTY. IN LIGHT OF AFORESAID DISCUSSIONS, WE THEREFORE FIND THAT THERE IS NO BASIS FOR ALLEGING SUPPRESSION OF PRODUCTION BY THE ASSESSEE AND THE F INDINGS OF THE LOWER AUTHORITIES ARE HEREBY SET-ASIDE. 37. IN LIGHT OF AFORESAID DISCUSSIONS AND IN THE EN TIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DONOT FIND ANY JUSTIF IABLE BASIS FOR REJECTION OF ITA NO. 231/JP/2017 MS SHANTA SALES CORPORATION, JAIPUR VS. ITO, JAIP UR 32 BOOKS OF ACCOUNTS BY THE ASSESSING OFFICER. CONSEQ UENTIALLY, THE ADDITION SO MADE BY THE AO AND CONFIRMED BY THE LD CIT(A) IS HE REBY SET-ASIDE AND DIRECTED TO BE DELETED. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/03/2020. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/03/2020 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S SHANTA SALES CORPORATION, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-6(1), JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 231/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR