STERLING BIOTECH LTD, MUMBAI V. PR CIT CEN 1, MUMBAI

ITA 2756/MUM/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3013 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 15-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Keywords: Capital asset; Depreciation; Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Opportunity of being heard; Principle of natural justice; Assessment record; Block assessment; Documents seized
• Section: 143(3); 54F; 142(1); 133A; 153A; 10B; 131; 69; 263; 63; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NOS. 2750 TO 2756/MUM/2016 (ASSESSMENT YEAR: 2006-07 TO 2012-13) STERLING BIOTECH LIMITED, 43, ATLANTA BUILDING, NARIMAN POINT, MUMBAI 400 021 APPELLANT VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL)-1, MUMBAI 400 020 RESPONDENT PAN: AABCS1946H / BY ASSESSEE : SHRI VIJAY MEHTA, A.R. / BY REVENUE : SHRI MANJUNATHASWAMY, D.R. /DATE OF HEARING : 15.06.2016 /DATE OF PRONOUNCEMENT : 29.06.2016 ORDER PER BENCH: THESE SEVEN APPEALS FILED BY ASSESSEE AGAINST THE O RDERS OF PRINCIPAL COMMISSIONER OF INCOME-TAX (APPEALS)-I, MUMBAI FOR A.YS. 2006-07 TO 2012-13 ON THE POINT OF SECTION 26 3 OF THE ACT. SINCE, MOST OF THE ISSUES INVOLVED IN ALL THE APPEALS ARE ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 2 SIMILAR THEREFORE, THEY ARE HEARD TOGETHER AND BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. IN ITA NO.2750/MUM/2016 FOR A.Y. 2006-07, ASSESS EE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS: 1. THE ORDER PASSED BY THE LEARNED PR. CIT IS ILLE GAL, BAD IN LAW, ULTRA VIRES AND CONTRARY TO THE PROVISIONS OF THE LAW AND FACTS AND WITHOUT APPRECIATING THE FACTS OF THE CASE IN THEIR PROPER PERSPECTIVE AND WITHOUT APPLICATION OF MIND AND IS IN GROSS VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED PR. CIT ERRED IN ASSUMING JURISDICTION U/S. 263 OF THE I T ACT, IN RESPECT OF ORDER PASSED BY ASSESSING OFFICE R WITH PRIOR APPROVAL OF THE ADDITIONAL COMMISSIONER OF IN COME TAX BY TREATING THE SAME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED PR. CIT ERRED IN COMING TO THE CONCLUSION THAT THE ASSESSING OFFICER OUGHT TO HAVE EXAMINED THE APPLICABILITY OF PROVISION OF SECTION 69 OF THE ACT WHICH HE HAS FAILED TO DO AND THEREBY TREATING THE ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED PR. CIT ERRED IN COMING TO THE CONCLUSION THAT ASSE SSING OFFICER HAS FAILED TO CARRY OUT NECESSARY VERIFICAT ION AND INQUIRIES BEFORE ALLOWING DEDUCTION U/S. L0B AND TH EREBY TREATING THE ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED PR. CIT ERRED IN COMING TO THE CONCLUSION THAT ASSE SSING OFFICER HAS FAILED TO CARRY OUT NECESSARY VERIFICAT ION AND INQUIRIES WITH REGARD TO TRADING ACTIVITY AT UAE AN D THEREBY TREATING THE ORDER AS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF REVENUE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED PR. CIT ERRED IN COMING TO THE CONCLUSION THAT ASSE SSING ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 3 OFFICER HAS FAILED TO CARRY OUT NECESSARY VERIFICAT ION AND INQUIRIES WITH REGARD TO RECORDS OF 151 ENTITIES FO UND DURING SEARCH ACTION AND THEREBY TREATING THE ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED PR. CIT ERRED IN COMING TO THE CONCLUSION THAT ASSE SSING OFFICER HAS FAILED TO CARRY OUT NECESSARY VERIFICAT ION AND INQUIRIES WITH REGARD TO OVERSEAS INVESTMENT IN NIG ERIA, USA, DUBAI ETC AND THEREBY TREATING THE ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED PR. CIT ERRED IN COMING TO THE CONCLUSION THAT THE ASSESSING OFFICER OUGHT TO HAVE CARRIED OUT PROPER EXAMINATION OF SEIZED DATA AND MANUFACTURING REPORT BEFORE ARRIVING AT ANY CONCLUSION REGARDING THE YIE LD OF BY-PRODUCT/GELATIN AND THEREBY TREATING THE ORDER A S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED PR. CIT ERRED IN COMING TO THE CONCLUSION THAT THE ASSESSING OFFICER HAS FAILED TO CARRY OUT NECESSARY VERIFICATION AND INQUIRIES WITH REGARD TO SHARE APPLICATION MONEY TO THE TUNE OF RS.45 CRORE OBTAIN ED FROM 18 ENTITIES AND THEREBY TREATING THE ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 10.ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED PR. CIT ERRED IN SETTING ASIDE ASSESSMENT ORDER PAS SED U/S. 143(3) READ WITH SECTION 153A ON 31/0312014 BY ASSESSING OFFICER FOR DE NOVO ASSESSMENT. 3. AT THE OUTSET OF HEARING, LD. AUTHORIZED REPRESE NTATIVE POINTED OUT THAT FIRST TWO GROUNDS BEING GENERAL IN NATURE, SO, SAME WILL BE TAKEN CARE BY US IN FOLLOWING PARAS. 4. IN THIS CASE ALONG WITH OTHER ENTITIES, INCLUDIN G FAMILY MEMBERS CONTROLLING THE AFFAIRS OF THE GROUP, SEARC H AND SEIZURE OPERATIONS U/S.132 OF THE ACT WAS UNDERTAKE N ON ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 4 28.06.2011. THE RELEVANT ASSESSMENT U/S.143(3) R.W .S. 153A OF THE ACT FRAMED ON 31.03.2014 DETERMINING TOTAL I NCOME OF ASSESSEE AT RS.49,25,01,170/- AS AGAINST RETURN OF INCOME OF RS.38,16,47,426/-. BOOK PROFIT U/S.115JB WAS ASSES SED AT RS.1,51,12,09,970/-. 5. ON VERIFICATION OF ASSESSMENT RECORDS INCLUDING SEIZED MATERIAL, CIT NOTICED THAT ASSESSMENT ORDER PASSED BY THE DCIT WAS FOUND TO BE PRIMA FACIE ERRONEOUS IN SO FA R AS PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, PROCEEDINGS U/S.263 OF THE ACT WERE INITIATED BY ISSUANCE OF NO TICE DATED 07.03.2016 REQUESTING THE ASSESSEE TO SHOW CAUSE AS TO WHY ASSESSMENT ORDER PASSED BY ASSESSING OFFICER ON 31. 03.2014 SHOULD NOT BE SET ASIDE FOR DE NOVO CONSIDERATION A S PER PROVISIONS OF SECTION 263 OF THE ACT. THE RELEVANT PORTION OF SHOW CAUSE NOTICE IS REPRODUCED HEREUNDER: '2. ON VERIFICATION OF THE ASSESSMENT RECORD, INCLU DING THE SEIZED MATERIAL, FOR A. Y. 2006-07 IT IS NOTICED TH AT THE ASSESSMENT ORDER PASSED BY THE DCIT CC-10, MUMBAI (PRE-RESTRUCTURING), IN THE ABOVE CASE IS FOUND TO BE PRIMA FACIE ERRONEOUS IN SO FAR AS IT IS PREJUDICIA L TO THE INTEREST OF THE REVENUE FOR THE FOLLOWING REASONS:- (I) THE AO HAD GIVEN A FINDING IN PARA 10.3 OF THE ASSESSMENT ORDER THAT THE CASH TRANSACTIONS FOUND AS PER SEIZED MATERIAL VIDE ANNEXURE1 TO 14 [PARTY NO. 17] OF STERLING BIOTECH LIMITED, SANDESARA, VADODARA AND ANNEXURE-1 TO 21 [PARTY NO. 11] OF PMT MACHINES LTD. AT 20/B, KHATAU BUILDING, FORT, MUMBAI WERE SOURCED FROM THE UNACCOUNTED SALE OF BYE-PRODUCTS BY THE ASSESSEE AND ALLOWED IT TO BE TELESCOPED AGAINST THE UNDISCLOSED INCOME WITHOUT THERE BEING ANY NEXUS ESTABLISHED BETWEEN THE GENERATION OF CASH ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 5 AND ITS APPLICATION. WHEN THE SOURCE OF CASH UTILIZED IN SUCH TRANSACTIONS IS NOT SUBSTANTIATED, THE AO OUGHT TO HAVE EXAMINED THE APPLICABILITY OF PROVISIONS OF SECTION 69 OF THE ACT WHICH HE HAD FAILED TO DO. (II) ASSESSEE'S CLAIM OF DEDUCTION U/S. 10B OF THE ACT ON ITS EXPORT OF COENZYME Q10 FROM MASSAR PLANT WAS ALLOWED BY THE AO WITHOUT CAUSING NECESSARY ENQUIRIES TO ASCERTAIN THE VERACITY OF ITS CLAIM THAT IT IS EXPORTING THE CO-ENZYME Q10 TO UAE AT AN AVERAGE PRICE OF RS.2,55,000/- PER KG AS COMPARED TO THE RATE OF RS. 15,000 PER KG AT WHICH IT EXPORTED THE SAME TO FRANCE AND THE DOMESTIC SALE PRICE OF RS. 1,226/- PER KG. THE AO FAILED TO TAKE COGNIZANCE OF THE IMPORTANT FACT THAT THE DEPARTMENT OF CUSTOMS AND CENTRAL EXCISE, AHMEDABAD HAD CLEARLY STATED THAT DURING THE RELEVANT PERIOD I.E. 01.04.2005 TO 31.03.2013 ONLY TWO CONSIGNMENTS OF CO-ENZYME Q10, OF 50 KG EACH, VALUED AT RS. 15,48,816/- WERE EXPORTED TO FRANCE BY THE ASSESSEE AND THAT NO OTHER EXPORT HAS TAKEN PLACE IN RESPECT OF THIS PRODUCT, EITHER BY THE ASSESSEE OR ANY OTHER PARTY. NO EVIDENCE IN THE FORM OF EXPORT BILLS OR EXPORT REALIZATION CERTIFICATES WAS FURNISHED BY THE ASSESSEE. THE A. 0. HAS ACCEPTED THE CLAIM OF THE ASSESSEE ON THE BASIS OF CONFIRMATIONS FILED IN RESPECT OF A FEW PARTIES IN THIS REGARD AND SOME OF THESE CONFIRMATIONS ARE APPARENTLY SIGNED BY THE SAME PERSON. (III) AS PER THE RETURNS FILED BY THE ASSESSEE HUG E PURCHASES WERE CLAIMED TO HAVE BEEN MADE FROM CERTAIN CONCERNS STATIONED AT DUBAI. THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE ASSESSEE THAT THESE PURCHASES REPRESENTS THE PURCHASES OF THE ASSESSEE'S TRADING DIVISION AT UAE, WITHOUT VERIFYING THE AUDIT REPORT OF SUCH OFFSHORE BRANCH. IN THE ANNUAL RETURNS FILED BY THE ASSESSEE COMPANY ALSO, NO SUCH SEGMENT REPORTING OR RESULTS OF OFFSHORE BRANCH WERE SHOWN. ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 6 (IV) DURING THE COURSE OF SEARCH AT THE PREMISES 2 02, SUVIDHI APARTMENTS GOREGAON (WEST) OWNED BY SHRI. RAMANULYER, DIRECTOR M/S STERLING INTERNATIONAL LTD., (AS PER ANNEXURE I, PART OF COR E DOCUMENTS)A LIST OF 151 ENTITIES WITH THEIR SEALS AND OTHER DOCUMENTARY EVIDENCE WERE FOUND AND SEIZED. A SIMILAR LIST OF 16 ENTITIES WAS ALSO FOUN D FROM THE PREMISES AT 4TH FLOOR, CHAVDA COMMERCIAL CENTRE, LINK ROAD, MALAD (W), MUMBAI WHICH IS ALSO PART OF CORE DOCUMENTS (ANNEXURE 1- PAGES 80 TO 81), IN THESE COMPANIES SHRI CHETAN SANDESARA HAS SUBSTANTIAL INTEREST. THESE COMPANIES FORM A PART OF THE AFORESAID 151 COMPANIES. THE C.A. OF THE GROUP, SHRI H.S.HAATHI STATED THAT THESE ARE PAPER COMPANIES, USED BY THE ASSESSEE. HOWEVER, LATER ON DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS CLAIMED THAT MOST OF THESE COMPANIES ARE CLIENTS OF SHRI H.S.HAATHI WITH WHICH THE ASSESSEE DID NOT HAVE ANY NEXUS. DESPITE SUCH CONTRADICTORY STATEMENTS, THE A.O. ACCEPTED THE ASSESSEE'S CLAIM WITHOUT ANY VERIFICATION. (V) DURING THE COURSE OF SEARCH, CERTAIN DOCUMENTS WERE FOUND AND SEIZED, FOR INSTANCE MATERIAL FOUND AND SEIZED FROM THE PREMISES OF SBL AT BKC OFFICE MUMBAI (ANNEXURE A. 9) INDICATING INVESTMENT IN OFF-SHORE ENTITIES AT LOCATIONS LIKE NIGERIA, USA AND DUBAI, ETC. THE AO HAS NOT CAUSED ANY VERIFICATION IN RESPECT OF THESE TRANSACTIONS ENTERED INTO WITH OFFSHORE ENTITIES BY THE ASSESSEE. (VI) DURING THE COURSE OF THE SEARCH, AN ADMISSION WAS MADE BY SHRI H. S.HATHI, CA OF THE ASSESSEE GROUP REGARDING THE BOGUS CAPITAL EXPENSES ON ACCOUNT OF PURCHASE OF CAPITAL ASSETS. THOUGH THE AO HAD MADE DISALLOWANCE OF DEPRECIATION IN RESPECT OF SOME OF THE PARTIES IDENTIFIED BY THE CA, HE DID NOT CAUSE NECESSARY VERIFICATION, ABOUT THE SUBSTANTIAL ADDITION TO THE BLOCK OF ASSETS IN OTHER YEARS AND FROM, OTHER PARTIES. (VII) DURING THE COURSE OF SEARCH, 3 FACTORY PREMI SES OF THE ASSESSEE AT MASAR, AT KARKHADI AND AT OOTY ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 7 WERE COVERED AND CERTAIN DOCUMENTS WERE FOUND AND SEIZED. DURING ASSESSMENT PROCEEDINGS, AN ESTIMATION OF BYE-PRODUCTS AND WASTES FROM THE DATA OF BONE CONSUMPTION FROM THE ASSESSEES DATA HAS BEEN MADE TO QUANTIFY THE VARIOUS BYE- PRODUCT RATIOS, ON THE BASIS OF INFORMATION AVAILABLE ON A WEBSITE TECHNOGELOCONSULTANT .COM. THE AO HAS ERRED IN PRESUMING THAT SINCE THE SALE OF GELATIN IS MOSTLY TO MNCS, THEREFORE SUPPRESSION IS NOT PLAUSIBLE. HOWEVER, THE A.O. SHOULD HAVE EXAMINED ANY SUPPRESSION OF SALE OF EITHER GELATIN OR DCP, BEFORE COMING TO SUCH CONCLUSION. (VIII) DURING THE COURSE OF SEARCH, IT WAS FOUND T HAT 18 ENTITIES OF THE STERLING GROUP HAVE SUBSCRIBED TO THE SHARE CAPITAL OF SBL TO THE TUNE OF RS. 45 CRORES IT WAS ADMITTED BY SHRI H.S.HATHI IN HIS STATEMENT DURING SEARCH THAT THIS WAS A MERE PAPER ENTRY AND THE MONEY ACTUALLY BELONGS TO THE ASSESSEE. THIS ISSUE HAS ALSO NOT BEEN PROPERLY EXAMINED BY THE A. 0. 3. FROM THE ABOVE, PRIMA FACIE IT IS EVIDENT THAT T HE ASSESSING OFFICER HAS FAILED TO CARRY OUT ENQUIRIES AS WARRANTED BY THE FACTS AND CIRCUMSTANCES OF THE CAS E AND THAT THE ASSESSMENT HAS BEEN COMPLETED WITHOUT EXAMINING ALL THE ASPECTS WHICH WERE REQUIRED TO BE LOOKED INTO FOR DETERMINING THE ASSESSEE'S INCOME B ASED ON THE DOCUMENTS AND OTHER EVIDENCES DETECTED AS A RESULT OF SEARCH ACTION ON 28.06.20011 AS WELL AS T HE STATEMENTS OF VARIOUS PERSONS RECORDED AT THE TIME OF SEARCH AND DURING POST SEARCH PROCEEDINGS WHEREIN T HERE IS CLEAR ADMISSION OF SUPPRESSION OF INCOME, INFLAT ION OF EXPENSES AND ROUTING SUCH UNACCOUNTED AMOUNT THROUGH VARIOUS BOGUS / PAPER ENTITIES, AND THUS TH E ASSESSMENT IS RENDERED ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE AS ENVISAGED IN SECTION 263 OF THE I.T. ACT. 4. IN VIEW OF THE ABOVE, YOU ARE HEREBY REQUIRED TO SHOW- CAUSE AS TO WHY THE ASSESSMENT ORDER PASSED BY THE A. O. ON 31.03.2014 BE NOT SET ASIDE FOR DE NOVO CONSIDERATION AS PER THE PROVISIONS OF SECTION 263 OF THE ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 8 ACT. FOR THIS PURPOSE YOUR CASE IS FIXED FOR HEARIN G ON 17.03.2016 AT 11.00 A.M. YOU MAY APPEAR ON THE STIPULATED DATE AND TIME EITHER IN PERSON, OR THROU GH YOUR AUTHORIZED REPRESENTATIVE. IF YOU DO NOT WISH TO AVAIL THE OPPORTUNITY OF BEING HEARD, YOU MAY SEND WRITTEN SUBMISSION WHICH WILL BE DULY CONSIDERED BE FORE PASSING THE ORDER U/S 263 OF THE ACT.' 6. IN COMPLIANCE TO THE SHOW-CAUSE NOTICE, WRITTEN SUBMISSIONS DATED 21/03/2016 WERE FILED ON BEHALF O F ASSESSEE, RELEVANT PART OF THE SAME IS REPRODUCED B ELOW: 'FROM THE ABOVE, IT MAY BE SEEN THAT THE ASSESSEE H AS ALREADY BEEN SCRUTINIZED AND INVESTIGATED BY THE DEPARTMENT AT THREE STAGES. NOW, THE DEPARTMENT IS ENVISAGING TO AGAIN VERIFY THE SAME DOCUMENTS AND S AME INFORMATION WHICH HAVE ALREADY BEEN VERIFIED AND EX AMINED AT THREE STAGES. IF THE DEPARTMENT PROPOSES TO REVI EW THE ASSESSMENT ALREADY MADE EARLIER TWICE, THERE WOULD NEVER BE FINALITY IN THE ASSESSMENT PROCEEDINGS. THIS WILL B E AGAINST THE OBSERVATION OF THE HON'BLE BOMBAY HIGH COURT IN CIT VS. GABRIEL INDIA LTD (1993) 203 ITR 108, WHEREIN THE H ONBLE HIGH COURT HELD THAT SUCH AN ACTION IS AGAINST THE WELL ACCEPTED POLICY OF LAW THAT THERE MUST BE FINALITY IN ALL LEGAL PROCEEDINGS AND THAT ISSUES SHOULD NOT BE REACTIVAT ED BEYOND THE PARTICULAR STAGE. THIS VIEW HAS BEEN CON SISTENTLY TAKEN BY VARIOUS COURTS THAT ASSESSMENT MUST REACH A FINALITY AND THAT THE DEPARTMENT CANNOT GO ON MAKIN G FRESH COMPUTATIONS AND ISSUE FRESH NOTICES FOR ALL TIME T O COME. IN THE INSTANT CASE, AS ALREADY ELABORATED ABOVE, THE ASSESSEE HAS PASSED THROUGH THE INVESTIGATIONS / VERIFICATIO N / SCRUTINY FOR THREE TIMES WHICH IS DIRECTLY AGAINST THE RATIO LAID DOWN BY VARIOUS COURTS INCLUDING THE JURISDICT IONAL BOMBAY HIGH COURT IN GABRIEL INDIA. THIS PRINCIPLE, THAT IS FINALITY OF ASSESSMENT, HAS ALSO BEEN APPROVED BY T HE HON'BLE SUPREME COURT IN CASE OF HABIBULAH (44 ITR 809). THE ASSESSEE ALSO RELIES ON THE DECISION OF ALL CAR GO GLOBAL LOGISTICS LTD WHICH HAS HELD THAT IN THE CASES WHER E THE INCOME HAS ALREADY BEEN ASSESSED U/S. 143(3), THE ASSESSMENT U/S. 153A CAN BE MADE ONLY ON THE BASIS OF ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 9 INCRIMINATING MATERIALS/DOCUMENTS FOUND DURING THE SEARCH AND SEIZURE. IN OTHER WORDS, THE AO HAS LIMITED JUR ISDICTION IN RESPECT OF THE ASSESSMENTS WHICH ARE ALREADY COM PLETED U/S. 143(3). ACCORDINGLY, IN PROCEEDING U/S. 263, O NLY THOSE ISSUES WHICH CAN BE TAKEN BY THE PR. CIT, WHICH COU LD HAVE BEEN TAKEN UP BY THE AO AS PER THE RATIO LAID DOWN BY THE BOMBAY HIGH COURT. IT IS SEEN FROM THE NOTICE ISSUED BY YOUR HONOUR TH AT NO COGENT MATERIAL HAS BEEN REFERRED TO ESTABLISH THAT THE ASSESSMENT IS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE. IN THE CASE OF DUNCAN BROTHERS REPORTE D IN (209 ITR 44) IT HAS BEEN CATEGORICALLY HELD THAT AN ORDER OF THE COMMISSIONER (U/S. 263 OF THE ACT) NOT BRINGING ANY COGENT MATERIAL ON RECORD AND BASED ONLY ON HYPOTHE SIS IS UNSUSTAINABLE. IN ORDER TO INVOKE SECTION 263, TWO CONDITIONS ARE TO BE SATISFIED SIMULTANEOUSLY I.E. THE ORDER PASSED BY T HE AO HAS TO BE ERRONEOUS THE ORDER SO PASSED SHOULD BE PREJU DICIAL TO THE INTEREST OF THE REVENUE. IF ANY ONE OF THE COND ITIONS IS NOT FULFILLED, THE ORDER CANNOT BE SET ASIDE U/S. 2 63. IN THE INSTANT CASE, THE AO HAS EXAMINED ALL THE ISSUES RE LATED TO THE DETERMINATION OF THE INCOME AND HAS TAKEN ONE O F THE POSSIBLE VIEWS AND THEREFORE, THE ORDER PASSED BY T HE AO CANNOT BE CONSIDERED AS ERRONEOUS. WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN O NE VIEW IN THE ASSESSMENT ORDER WITH WHICH THE CIT DOE S NOT AGREE, THE ORDER CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS T HE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. IN THIS CONNECTION, ATTENTION IS INVITED TO THE DECISION OF THE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (243 ITR 83) WHEREIN THE APEX COURT HAS HELD THAT A BARE READING OF THIS PROVISION MAKES IT CLEAR TH AT THE PRE-REQUISITE TO THE EXERCISE OF JURISDICTION BY TH E COMMISSIONER SUO MOTTO UNDER IT, IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS , ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 10 NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUG HT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BU T IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRO NEOUS BUT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT B E HAD TO S. 263(1) OF THE ACT. THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER; IT IS ONLY WHEN AN ORDER IS ERRO NEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENTS OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVE NUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORD ER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EX AMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHER E TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW W ITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. IT HAS BEEN HELD BY THIS COUR T THAT WHERE A SUM NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING, THE ORDE R PASSED BY THE AO ACCEPTING THE SAME AS SUCH WILL BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. AS HELD BY SUPREME COURT IN CASE OF MALABAR INDUSTRIAL CO. LTD WHERE TWO DIFFERENT VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, I T CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW . IN VIEW OF THE ABOVE SINCE THE ORDER IS NOT ERRONEOUS EXERCISE OF THE JURISDICTION BY CIT UNDER SECTION 263 IS NOT CALLED FOR. THE ASESSEE ALSO REL IES ON THE ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 11 DECISIONS IN THE CASE OF CIT V. GREENWORLD CORPORATION (314 ITR 81)(SC) AND CIT V. GOKULDAS EXPORTS (333 ITR 21 4)(KAR). THE ASSESSEE WOULD ALSO LIKE TO RELIES ON THE DECIS ION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. AR VIND JEWELLERS (2003)259 ITR 502 (GUJ) WHICH HAS FOLLOWE D THE SUPREME COURT DECISION IN CASE OF MALABAR INDUSTRIA L CO. LTD. IT HAS BEEN HELD BY THE HIGH COURT AS UNDER: COMING TO THE FACTS OF THE PRESENT CASE, IT IS THE FINDING OF FACT GIVEN BY THE TRIBUNAL THAT THE ASSE SSEE HAS PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANATIONS IN PURSUANCE OF THE NOTICES ISSUED UND ER SECTION 142(1) AS WELL AS SECTION 143(2) OF THE ACT AND AFTER CONSIDERING THE MATERIALS AND EXPLANATION, TH E INCOME- TAX OFFICER HAS COME TO A DEFINITE CONCLUSI ON. THE COMMISSIONER OF INCOME-TAX DID NOT AGREE WITH THE CONCLUSION REACHED BY THE INCOME-TAX OFFICER. SECTION 263 OF THE ACT DOES NOT EMPOWER HIM TO TAKE ACTION ON THESE FACTS TO ARRIVE AT THE CONCLUSION T HAT THE ORDER PASSED BY THE INCOME-TAX OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE INCOME-TAX OFFICER AND A PARTICULAR VIEW WAS TAKEN, THE MERE F ACT THAT A DIFFERENT VIEW CAN BE TAKEN, SHOULD NOT BE T HE BASIS FOR AN ACTION UNDER SECTION 263 OF THE ACT AN D IT CANNOT BE HELD TO BE JUSTIFIED. ' THE CALCUTTA TRIBUNAL HAS ALSO IN THE CASE OF USHA MARTIN INDUSTRIES LTD. (86 ITD 261) HELD THAT UNLESS IT CA N BE ESTABLISHED THAT THE VIEW TAKEN BY THE AO IS A PERV ERSE, OR IMPOSSIBLE VIEW, COMMISSIONER CANNOT INVOKE THE REVISIONARY POWERS CONFERRED UPON HIM BY THE STATUT E UNDER SECTION 263. FURTHER, IT IS SUBMITTED THAT THE LEARNED PR.CIT HA S NOT GIVEN ANY FINDING AS TO HOW THE ISSUES RAISED BY HI M HAVE LED TO ANY LOSS IN REVENUE. IN THE ABSENCE OF ANY S UCH FINDING, INTERFERENCE U1S.263 IS NOT PERMITTED AS H ELD IN THE CASE OF THANGAMALIAGI REPORTED IN 259 ITR 129. AS ALREADY STATED EARLIER, THE ASSESSMENT ORDER HAS BEEN ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 12 PASSED BY THE AO U/S. 153A OF THE ACT. IN SUCH CASE S, THE ENTIRE CASE HAS ALREADY BEEN ANALYZED AND INVESTIGA TED EVEN BY THE INVESTIGATION TEAM AT THE TIME OF SEARCH AND POST SEARCH. THE ORDER PASSED BY THE AO U/S. 153A R.W.S. 143(3) HAS ALSO BEEN APPROVED BY THE ADDL. CIT AS STATED I N THE LAST PARA OF THE ASSESSMENT ORDER DATED 31 MARCH, 2 014. THUS, IT IS SUBMITTED THAT WHEN THE ASSESSMENT IS M ADE U/S. 153A CANNOT BE SUBJECT TO PROCEEDINGS U/S. 263 OF THE ACT. NOW COMING TO THE MERITS OF THE ISSUES RAISED BY YO UR HONOUR, WE SUBMIT AS UNDER: THE NOTICE U/S. 263 SETS OUT SEVEN REASONS FOR TREA TING THE ASSESSMENT ORDER AS ERRONEOUS IN SO FAR AS IT IS PR EJUDICIAL TO THE INTEREST OF THE REVENUE. THE SUBMISSIONS SER IATIM ARE AS UNDER: THE SHOW CAUSE READS AS UNDER: I) THE AO HAD GIVEN A FINDING IN PARA 10.3 OF THE ASSESSMENT ORDER THAT THE CASH TRANSACTIONS FOUND A S PER SEIZED MATERIAL VIDE ANNEXURE-1 TO 14 [PARTY NO . 17] OF STERLING BIOTECH LIMITED, SANDESARA, VADODAR A AND ARMEXURE -1 TO 21 [PARTY NO. 11] OF PMT MACHINE S LTD, AT 201B, KHATAU BUILDING, FORT, MUMBAI WERE SOURCED FROM THE UNACCOUNTED SALE OF BYE-PRODUCTS B Y THE ASSESSEE AND ALLOWED IT TO BE TELESCOPED AGAINS T THE UNDISCLOSED INCOME WITHOUT THERE BEING ANY NEXU S ESTABLISHED BETWEEN THE GENERATION OF CASH AND ITS APPLICATION. WHEN THE SOURCE OF CASH UTILIZED IN SU CH TRANSACTIONS IS NOT SUBSTANTIATED, THE AO OUGHT TO HAVE EXAMINED THE APPLICABILITY OF PROVISIONS OF SE CTION 69 OF THE ACT WHICH HE HAD FAILED TO DO. IN THIS CONNECTION, IT IS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDING U/S 153A, THE ASSESSING OFFIC ER (AO) HAD ASKED FOR THE EXPLANATION IN RESPECT OF VARIOUS NOTINGS MADE IN THE LOOSE PAPERS/NOTE BOOKS/PAD FOUND DURIN G THE SEARCH CARRIED OUT IN VARIOUS PREMISES OF THE ASSES SEE AND IN THE ABSENCE OF SUCH EXPLANATION, THE AO HAD SOUG HT TO CONSIDER THESE EXPENSES AS UNEXPLAINED AND ADDED TO THE TOTAL INCOME. THE ASSESSEE HAD GIVEN A DETAILED EXP LANATION ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 13 FOR EACH AND EVERY PAGE OF THE LOOSE PAPER/DOCUMENT S/NOTE BOOK. THESE WERE EXAMINED BY THE AO. THE AO HAD EXAMINED THE APPLICABILITY OF PROVISIONS OF SECTION 69 OF THE ACT. HOWEVER, AFTER THOROUGHLY CONSIDERING THE EXPL ANATION OF THE ASSESSEE, THE AO THOUGHT IT FIT NOT TO INVOK E THE SAID PROVISION. HENCE IT IS SUBMITTED THAT YOUR CONTENTI ON THAT THE ASSESSING OFFICER HAD NOT EXAMINED THE APPLICAB ILITY OF SECTION 69 IS NOT JUSTIFIED. THE SHOW CAUSE READS AS UNDER: II) ASSESSEE'S CLAIM OF DEDUCTION U/ S. 10 B OF THE ACT ON ITS EXPORT OF CO-ENZYME Q10 FROM MASSAR PLANT WA S ALLOWED BY THE AO WITHOUT CAUSING NECESSARY ENQUIRI ES TO ASCERTAIN THE VERACITY OF ITS CLAIM THAT IT IS E XPORTING THE CO-ENZYME Q10 TO UAE AT AN AVERAGE PRICE OF RS.2,55,000/- PER KG AS COMPARED TO THE RATE OF RS. 15,000 PER KG AT WHICH IT EXPORTED THE SAME TO FRAN CE AND THE DOMESTIC SALE PRICE OF RS. 1,226/-PER KG. T HE AO FAILED TO TAKE COGNIZANCE OF THE IMPORTANT FACT THAT THE DEPARTMENT OF CUSTOMS AND CENTRAL EXCISE, AHMEDABAD HAD DEARLY STATED THAT DURING THE RELEVAN T PERIOD I.E. 01.04.2005 TO 31.03.2013 ONLY TWO CONSIGNMENTS OF CO-ENZYME Q10, OF 50 KG EACH, VALUE D AT RS. 15,48,816/- WERE EXPORTED TO FRANCE BY THE ASSESSEE AND THAT NO OTHER EXPORT HAS TAKEN PLACE I N RESPECT OF THIS PRODUCT, EITHER BY THE ASSESSEE OR ANY OTHER PARTY. NO EVIDENCE IN THE FORM OF EXPORT BILL S OR EXPORT REALIZATION CERTIFICATES WAS FURNISHED BY TH E ASSESSEE. THE A.O. HAS ACCEPTED THE CLAIM OF THE ASSESSEE ON THE BASIS OF CONFIRMATIONS FILED IN RES PECT OF A FEW PARTIES IN THIS REGARD AND SOME OF THESE CONFIRMATIONS ARE APPARENTLY SIGNED BY THE SAME PERSON. IN THIS CONNECTION, IT IS SUBMITTED THAT THE ISSUE RAISED IS IRRELEVANT AS THE ASSESSEE HAS STARTED SELLING COEN ZYME Q10 FROM THE FINANCIAL YEAR 2007-08 CORRESPONDING TO ASSESSMENT YEAR 2008-09. THE SHOW CAUSE READS AS UNDER: III) AS PER THE RETURNS FILED BY THE ASSESSEE HUGE . ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 14 PURCHASES WERE CLAIMED TO HAVE BEEN MADE FROM CERTAIN CONCERNS STATIONED AT DUBAI. THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE SE PURCHASES REPRESENTS THE PURCHASES OF THE ASSESSEES TRADING DIVISION AT UAE, WITHOUT VERIFYING THE AUDI T REPORT OF SUCH OFFSHORE BRANCH. IN THE ANNUAL RETUR NS FILED BY THE ASSESSEE COMPANY ALSO, NO SUCH SEGMENT REPORTING OR RESULTS OF OFFSHORE BRANCH WERE SHOWN. IN THIS CONNECTION, IT IS SUBMITTED THAT THE ASSESS EE HAS A BRANCH OFFICE IN DUBAI, UAE SINCE 2006. THE ASSESSEE HAD ALSO OBTAINED TRADING LICENSE AS PER T HE PREVAILING LAW OF UAE. THE SAID LICENSE AUTHORIZED THE ASSESSEE TO CARRY OUT TRADING BUSINESS IN ACCORDANC E WITH THE VALID LAWS AND REGULATION THEREOF. THE ASSESSEE HAS BEEN TRADING IN GELATINE/DCP WITHIN UAE. FOR THE SAID TRADING THE ASSESSEE HAS NOT SENT ANY MATERIAL FROM INDIA NOR IMPORTED ANY MATERIAL FROM DUBAI TO INDIA. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS U/S 153A/143(3), THE COMPLETE DETAILS O F SUCH PURCHASE AND SALES WERE SUBMITTED. THE ASSESSING OFFICER HAD SPECIFICALLY CALLED FOR THE CONFIRMATION FROM THE CUSTOMERS AS WELL AS SUPPLIER FOR DUBAI TRADING WHICH WERE DULY SUBMITTED BY THE ASSESSEE COMPANY. THE ASSESSEE HAD ALSO FILED COPIE S OF ACCOUNT OF ALL THESE PARTIES DURING THE COURSE O F ASSESSMENT PROCEEDING U/S 153A OF THE ACT. THUS THE AO HAS VERIFIED THE TRANSACTIONS WHICH WERE CARRIED OUT IN DUBAI. MOREOVER, NO INCRIMINATING MATERIAL H AS BEEN FOUND IN THIS REGARD DURING THE SEARCH. THE SH OW CAUSE IS ABSOLUTELY SILENT AS TO HOW THERE IS A LOS S OF REVENUE IN THE INSTANT CASE. THE SHOW CAUSE READS AS UNDER: IV) DURING THE COURSE OF SEARCH AT THE PREMISES 202, SUVIDHI APARTMENTS GOREGAON (WEST) OWNED BY SHRI RARNANI IYER, DIRECTOR MIS STERLING INTERNATIONAL LTD., (AS PER ANNEXURE I, PART OF COR E DOCUMENTS) A LIST OF 151 ENTITIES WITH THEIR SEALS AND OTHER DOCUMENTARY EVIDENCE WERE FOUND AND SEIZED. A SIMILAR LIST OF 16 ENTITIES WAS ALSO FOUN D FROM THE PREMISES AT 4TH FLOOR, CHAVDA ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 15 COMMERCIAL CENTRE, LINK ROAD, MALAD (W), MUMBAI WHICH IS ALSO PART OF CORE DOCUMENTS (ANNEXURE L - PAGES 80 TO 81). IN THESE COMPANIES SHRI. CHETAN SANDESARA HAS SUBSTANTIAL INTEREST. THESE COMPANIES FORM A PART OF THE AFORESAID 151 COMPANIES. THE C.A. OF THE GROUP, SHRI H. S. HATHI STATED THAT THESE ARE PAPER COMPANIES, USED BY THE ASSESSEE. HOWEVER, LATER ON DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS CLAIMED THAT MOST OF THESE COMPANIES ARE CLIENTS OF SHRI H.S. HAATHI WITH WHICH THE ASSESSEE DID NOT HAVE ANY NEXUS. DESPITE SUCH CONTRADICTORY STATEMENTS, THE A.O. ACCEPTED THE ASSESSEE'S CLAIM WITHOUT ANY VERIFICATION. IN THIS CONNECTION, IT IS SUBMITTED THAT THE LIST O F 151 ENTITIES (WHICH ALSO INCLUDES 16 ENTITIES FOUND FRO M THE PREMISES AT 4TH FLOOR, CHAVDA COMMERCIAL CENTRE, LI NK ROAD, MALAD (W), MURNBAI) FOUND DURING THE SEARCH WERE THE CLIENTS OF H.S. HATHI. AS IN THE STATEMENTS RECORDED ON 2810612011, SHRI H. S. HATHI WAS NOT CONFRONTED WITH THE SAID LIST AND HENCE THE QUESTIO N OF HIS STATING THAT THESE ARE PAPER ENTITIES DOES NOT ARISE. THERE WAS NO CONTRADICTORY STATEMENTS AS CONTENDED BY YOUR HONOUR. MOREOVER, EXCEPT FOR THE LIST, NO INCRIMINATING DOCUMENTS HAVE BEEN FOUND. THE SHOW CAUSE READS AS UNDER: V) DURING THE COURSE OF SEARCH, CERTAIN DOCUMENTS W ERE FOUND AND SEIZED, FOR INSTANCE MATERIAL FOUND AND SEIZED FROM THE PREMISES OF SBL AT BKC OFFICE MUMBA I (ANNEXURE A.9) INDICATING INVESTMENT IN OFF-SHORE ENTITIES AT LOCATIONS LIKE NIGERIA, USA AND DUBAI E TC. THE AO HAS NOT CAUSED ANY VERIFICATION IN RESPECT O F THESE TRANSACTIONS ENTERED INTO WITH OFF SHORE ENTI TIES BY THE ASSESSEE. IN THIS CONNECTION, IT IS SUBMITTED THAT THE ASSESSEE HAS NEVER MADE INVESTMENT IN ANY OFFSHORE ENTITIES AT LOCATIO NS LIKE NIGERIA, USA OR DUBAI. HOWEVER, THE ASSESSEE HAD MA DE SMALL INVESTMENTS OF AROUND RS. 11 LAKHS IN THREE OFFSHORE ENTITIES. THE DETAILS OF THE SAID INVESTMENT TOGETH ER WITH ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 16 NAMES OF ENTITIES WERE SUBMITTED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS U/S. 153A OF THE ACT. MOREOV ER, NO INCRIMINATING MATERIAL HAS BEEN FOUND IN THIS REGAR D DURING THE SEARCH THE SHOW CAUSE IS ABSOLUTELY SILENT AS T O HOW THERE IS A LOSS OF REVENUE IN THE INSTANT CASE. THE SHOW CAUSE READS AS UNDER: VI) DURING THE COURSE OF SEARCH, 3 FACTORY PREMISES OF THE ASSESSEE AT MASAR, AT KARKHADI AND AT OOTY WERE COVERED AND CERTAIN DOCUMENTS WERE FOUND AND SEIZED . DURING ASSESSMENT PROCEEDINGS, AN ESTIMATION OF BYE - PRODUCTS AND WASTES FROM THE DATA OF BONE CONSUMPTION FROM THE ASSESSEE'S DATA HAS BEEN MADE TO QUANTIFY THE VARIOUS BYE-PRODUCT RATIOS, ON THE BASIS OF INFORMATION AVAILABLE ON A WEBSITE TECHNOGELCONSULTANT.COM. THE AO HAS ERRED IN PRESUMING THAT SINCE THE SALE OF GELATIN IS MOSTLY TO MNCS. IN THIS CONNECTION, IT IS SUBMITTED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO HAD CALLED FOR A TECHNICAL NOTE ON THE MANUFACTURING PROCESS. THE AS SESSEE HAD SUBMITTED THE STAGE-WISE MANUFACTURING PROCESS RIGHT FROM PURCHASE OF RAW MATERIAL VIZ BOVINE BONES FROM BONE MILLER, CRUSHING, DEMINERALIZATION, LIMING, DELIMIN G, EXTRACTION, CONDUCTIVITY, TILL THE MANUFACTURE OF F INAL PRODUCTS NAMELY GELATINE. THE DCP IS GENERATED AT T HE STAGE OF BONE ACIDULATION ITSELF. THE ASSESSEE COMPANY HA D ALSO SUBMITTED MONTH-WISE QUANTITY OF BONE CHARGING, GEL ATINE PRODUCTION, DCP PRODUCTION, RECOVERY PERCENTAGE, ET C AT EACH STAGE. THE ASSESSEE COMPANY HAD ALSO SUBMITTED LAST PAGE OF RG-1 REGISTER OF GELATINE TO SUBSTANTIATE T HE PRODUCTION OF GELATIN FOR ALL THE YEARS. THE ASSESS ING OFFICER HAD THOROUGHLY EXAMINED AND VERIFIED THESE DETAILS / DOCUMENTS BEFORE COMING TO THE CONCLUSION THAT THE WASTE WAS TO THE EXTENT OF 5% AND NOT 30% AS CLAIMED BY T HE ASSESSEE. HENCE IT CANNOT BE SAID THAT THE CONCLUSI ON OF THE AO WAS MERELY BASED ON PRESUMPTION, THOUGH EVEN THE SAID CONCLUSION OF THE AO IS DEVOID OF ANY MERITS. MOREO VER, NO INCRIMINATING MATERIAL HAS BEEN FOUND IN THIS REGAR D DURING THE SEARCH. THE SHOW CAUSE IS ABSOLUTELY SILENT AS TO HOW THERE IS A LOSS OF REVENUE IN THE INSTANT CASE. ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 17 THE SHOW CAUSE READS AS UNDER: VII) DURING THE COURSE OF SEARCH, IT WAS FOUND THAT 18 ENTITIES OF THE STERLING GROUP HAVE SUBSCRIBED TO T HE SHARE CAPITAL OF SBL TO THE TUNE OF RS. 45 CRORES. IT WAS ADMITTED BY SHRI H S HATHI IN HIS STATEMENT DURING SEARCH THAT THIS WAS A MERE PAPER ENTRY AND THE MONEY ACTUALLY BELONGS TO THE ASSESSEE. THIS ISSUE HAS ALSO NOT BEEN PROPERLY EXAMINED BY THE A.O. IN THIS CONNECTION, IT IS SUBMITTED THAT DURING THE SEARCH A DOCUMENT CONTAINING SHARE APPLICATION MONEY AGGREGA TING TO RS. 45 CRORES RECEIVED FROM 18 COMPANIES WAS FOU ND. IT IS ALLEGED THAT THOUGH SHRI H.S. HATHI WAS ADMITTED TH AT THIS IS MERELY A PAPER ENTRY, THE SAME HAS NOT BEEN PROP ERLY EXAMINED BY THE AO. IN THIS CONNECTION, IT IS RESPE CTFULLY SUBMITTED THAT ENTITIES ARE PROMOTERS OF THE ASSESS EE COMPANY. THE SHARE APPLICATION MONEYS WERE RECEIVED IN THE FINANCIAL YEARS 2001-02 AND 2002-03. AS THE SHA RES WERE NOT ALLOTTED, THE SAID SHARE APPLICATION MONEY S WERE RETURNED TO THE APPLICANT COMPANIES IN DECEMBER, 20 06. THE AO HAD CALLED FOR THE DETAILS AND EXPLANATION R EGARDING THIS SHARE APPLICATION MONEY WHICH WERE DULY SUBMIT TED AND THE AFORESAID EXPLANATION WAS ALSO SUBMITTED. H ENCE IT IS SUBMITTED THAT THIS ISSUE HAS ALSO BEEN DULY EXA MINED BY THE AO. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT THE ORDE R DATED 31ST MARCH, 2014 PASSED BY THE AO IS NOT ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HENC E WE REQUEST YOUR HONOUR TO KINDLY DROP THE PROCEEDINGS INITIATED U/S.263 OF THE ACT AND OBLIGE.' 7. THE MAIN THRUST OF THE ASSESSEE U/S.263 OF THE A CT WAS THAT AS THE CASE HAS ALREADY BEEN SCRUTINIZED AT TH REE STAGES, I.E. DURING REGULAR ASSESSMENT, THAN DURING SEARCH AND SEIZURE OPERATION BY THE INVESTIGATION WING AND FINALLY DUR ING POST SEARCH ASSESSMENT U/S. 153A OF THE ACT, THERE WAS N O JUSTIFICATION FOR INITIATION OF PROCEEDINGS U/S. 26 3 OF THE ACT. ASSESSEE RELIED UPON SO MANY CASE LAWS IN SUPPORT O F ITS ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 18 CONTENTION BEFORE CIT. IT HAS ALSO BEEN CONTENDED T HAT NO INCRIMINATING MATERIAL HAS BEEN REFERRED IN THE SHO W CAUSE NOTICE. IT WAS ALSO ARGUMENT OF ASSESSEE COMPANY T HAT THE ASSESSMENT ORDER CANNOT BE HELD AS ERRONEOUS AND PR EJUDICIAL WHEN TWO VIEWS ARE POSSIBLE AND ASSESSING OFFICER H AS ADOPTED ONE OF THE POSSIBLE VIEWS. 8. CIT OBSERVED THAT SEARCH AND SEIZURE OPERATION H AS BEEN UNDER TAKEN BY THE INVESTIGATION WING AFTER BEING S ATISFIED THAT THERE IS CONCEALMENT OF INCOME BY THE GROUP. THERE AFTER, A REPORT HAS BEEN FORWARDED TO THE ASSESSMENT UNIT AF TER COMPILATION OF EVIDENCE GATHERED AND OBSERVATIONS M ADE DURING THE SEARCH AND SEIZURE OPERATION IN RESPECT OF THE CONCEALED INCOME OF THE GROUP. THE SUBSEQUENT ASSES SMENT U/S 153A OF THE ACT WAS A LEGAL PROCESS FOR ASSESSI NG THE ASSESSEES TOTAL INCOME INCLUDING THE CONCEALED INCO ME ON THE BASIS OF SEIZED MATERIAL AND THE OBSERVATIONS MADE DURING THE SEARCH AND SEIZURE OPERATION. THEREFORE, CIT REJECT ED THE GENERAL ARGUMENT OF ASSESSEE, REGARDING THE FACT TH AT NO INCRIMINATING MATERIAL HAS BEEN REFERRED IN SHOW CA USE NOTICE, WAS ALSO WITHOUT ANY BASIS, AS THE PARTICULAR ANNEX URES OF THE SEIZED MATERIAL AND THE NAME OF THE PREMISES FROM W HERE DOCUMENTS HAVE BEEN SEIZED, AS WELL AS THE CONTENT OF THESE DOCUMENTS HAVE BEEN CLEARLY REFERRED IN THE SHOW CA USE NOTICE. CIT OBSERVED THAT IN THIS PARTICULAR CASE REVISION PROCEEDINGS HAVE BEEN INITIATED ON THE BASIS OF DIFFERENT VIEWS TAKEN BY THE ASSESSING OFFICER ON SPECIFIC INSTANCES. ACCORDING TO CIT, SHOW ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 19 CAUSE NOTICE ALSO CLEARLY INDICATES LOSS OF REVENUE DUE TO LACK OF PROPER ENQUIRIES BY THE ASSESSING OFFICER. 9. MOREOVER, EXPLANATION-2 TO SUB-SECTION (1) TO SE CTION 263 (INSERTED BY THE FINANCE ACT W.E.F. 01.06.2015) WAS FOUND RELEVANT AND THE SAME IS REPRODUCED HEREUNDER FOR T HE SAKE OF CLARITY: EXPLANATION-2 - FOR THE PURPOSES OF THIS SECTION, IT IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSI NG OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR A S IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSION ER, (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; (B)THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; (C)THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR (D)THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WITH ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JURISDICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OTHER PERSON. 10. ACCORDING TO CIT, SHOW CAUSE NOTICE CLEARLY BRI NGS OUT THE INSTANCES WHERE THE ASSESSING OFFICER HAS FAILED TO MAKE INQUIRIES/INVESTIGATIONS WHICH HE SHOULD HAVE MADE UNDER THE FACTS OF THE CASE AND MATERIAL ON RECORD. ACCORDIN G TO CIT, RELIEF HAS ALSO BEEN ALLOWED WITHOUT MAKING PROPER ENQUIRIES ABOUT THE CLAIM OF ASSESSEE. THEREFORE, IN VIEW OF THE ABOVE FACTS AND THE CLEAR PROVISION OF THE ACT, SPECIALLY W.E.F. 01.06.2015 AFTER INSERTION OF NEW EXPLANATION-2 BEL OW SECTION 263(1) OF THE ACT, ASSESSEE'S ARGUMENTS IN THIS REG ARD WERE ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 20 FOUND TO BE BASELESS BY CIT AND SAME WERE REJECTED. 11. REGARDING DECISIONS RELIED BY ASSESSEE, CIT OBS ERVED THAT FACTS OF WHICH ARE TOTALLY DIFFERENT FROM THE FACTS OF THIS CASE. MOREOVER, THE INSERTION OF EXPLANATION 2 BELOW SECT ION 263(1) OF THE ACT HAS BEEN CLEARLY BROUGHT OUT THE ELEMENTS W HICH MAKE AN ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL T O THE INTEREST OF REVENUE. CIT OBSERVED THAT THE RELIANCE OF ASSE SSEE ON VARIOUS CASE LAWS WAS NOT RELEVANT AFTER AMENDMENT IN THE STATUTE. 12. BEFORE US, FIRST ISSUE IN ASSESSEES APPEAL HAS BEEN RAISED WITH REGARD TO CASH TRANSACTIONS FOUND RECORDED IN THE SEIZED MATERIAL (ANNEXURE 1 TO 14 OF M/S. STERLING BIOTECH LIMITED, SANDESARA ESTATE, VADODRA AND ANNEXURE I TO 21 OF P MT MACHINES LTD, AT 20/B, KHATAU BUILDING, FORT, MUMBA I). IN THIS REGARD, CIT FOUND FROM THE ASSESSMENT ORDER TH AT HE HAS NOT MADE ANY ENQUIRIES TO FIND OUT THE SOURCE OF TH E CASH RECEIPTS AS WELL AS ITS APPLICATION. THEREFORE, ASS ESSING OFFICER'S FINDINGS THAT THE CASH TRANSACTIONS RECORDED IN THE SEIZED MATERIAL WERE SOURCED FROM UNACCOUNTED SALE OF BY-P RODUCTS BY THE ASSESSEE AND ALLOWING IT TO BE TELESCOPED AG AINST THE UNDISCLOSED INCOME OF THE ASSESSEE, WITHOUT ESTABLI SHING ANY NEXUS BETWEEN THE GENERATION OF CASH AND ITS APPLIC ATION, WAS CLEARLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F REVENUE, AS THE SOURCE OF CASH UTILIZED IN SUCH TRANSACTIONS WA S NOT SUBSTANTIATED. THEREFORE, THE ASSESSING OFFICER OUG HT TO HAVE EXAMINED THE APPLICABILITY OF PROVISIONS OF SECTION 69 OF THE ACT, WHICH HE HAD FAILED TO DO. IN THIS REGARD, AS SESSEES STAND ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 21 BEFORE CIT HAS BEEN THAT IT HAD GIVEN EXPLANATION F OR EACH AND EVERY PAGE OF THE LOOSE PAPERS/DOCUMENTS/NOTE BOOKS AND THE SAME HAD BEEN EXAMINED BY THE ASSESSING OFFICER. IN THIS REGARD, EMPHASIS WAS DRAWN TOWARDS PARA 9.1 OF THE ASSESSMENT ORDER WHICH READS AS UNDER:- 'IN THE COURSE OF DISCUSSIONS WITH C.A. SHRI H. S. HATHI REPRESENTING THE GROUP AND ALSO WITH SHRI NITIN SANDESARA, THE KEY PERSON, THEY HAVE TAKEN A STAND THAT THESE DOCUMENTS HAVE NOTHING TO DO WITH THEM AND TH AT IF AN EMPLOYEE IS INDULGING IN ANY CASH DEALINGS ON HIS OWN BEHALF, THE COMPANY FROM WHOSE PREMISES SUCH DOCUMENTS HAVE BEEN SEIZED, CANNOT BE HELD RESPONSI BLE.' 13. ASSESSEE IN ASSESSMENT PROCEEDINGS HAS DENIED T HAT THESE DOCUMENTS HAD ANY RELATION WITH THE ASSESSEE'S GROU P AND HAS TOTALLY DISOWNED THESE DOCUMENTS ON THE GROUND THAT THEY WERE MAINTAINED BY THE EMPLOYEES INDEPENDENTLY WITH OUT KNOWLEDGE OF THE ASSESSEE COMPANY. HOWEVER, WITHOU T PREJUDICE TO THEIR STAND ASSESSEE COMPANY HAS REQUE STED FOR ADJUSTMENTS OF THESE TRANSACTIONS AGAINST THE ADDIT IONS MADE BY THE ASSESSING OFFICER IN RESPECT OF CASH SALE OR CASH INCOME, WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. HOWEVER, ASSESSEE'S CONTENTION THAT IT HAD SUBMITTED EXPLANA TION FOR THE TRANSACTIONS RECORDED IN EACH AND EVERY PAGE OF THE LOOSE PAPERS/DOCUMENTS/NOTE BOOKS WAS FOUND PATENTLY WRON G BY CIT. CIT OBSERVED THAT IN ABSENCE OF ANY SPECIFIC EXPLANATION IN RESPECT OF THE SOURCE OF CASH UTILIZED IN TRANSA CTIONS FOUND RECORDED IN THE SEIZED MATERIAL, ASSESSING OFFICER SHOULD HAVE EXAMINED THE APPLICABILITY OF PROVISIONS OF SECTION 69 OF THE ACT. HIS INACTION IN THIS REGARD HAS RENDERED THE A SSESSMENT ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 22 ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 14. IN THIS REGARD FURTHER LD. AUTHORIZED REPRESENT ATIVE SUBMITTED THAT PRINCIPLE CIT ERRED IN COMING TO THE CONCLUSION THAT ASSESSING OFFICER OUGHT TO HAVE EXAMINED THE A PPLICABILITY OF PROVISION OF SECTION 69 OF THE ACT WHICH HE HAS FAILED TO DO AND THEREBY TREATING THE ORDER AS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF REVENUE. SO, THE PRECISE ISSUE BEF ORE US IS REGARDING TELESCOPING WHILE APPLYING PROVISIONS OF SECTION 69 OF THE ACT. ASSESSEE TOOK US THROUGH DIFFERENT DETAIL S TO JUSTIFY THE ORDER OF ASSESSING OFFICER ON THE ISSUE. HE AL SO PLACED RELIANCE ON VARIOUS DECISIONS AND REQUESTED TO SET ASIDE THE ORDER OF CIT ON THE ISSUE OF APPLICABILITY OF PROVI SIONS OF SECTION 69 OF THE ACT. ON THE OTHER HAND, LD. DEPA RTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF CIT AND PLACE D RELIANCE ON CASE LAWS. 15. THE STAND OF ASSESSEE HAS BEEN THAT AVERAGE LOS S BEING SHOWN YEAR AFTER YEAR WAS IN RANGE OF 30%. THIS WA S EVIDENT FROM THE ENCLOSED ANNEXURE AND YEAR WISE DETAILS OF CONSUMPTION AND PRODUCTION OF GELATIN AND DCP AND CONSEQUENT LOSS. LD. AUTHORIZED REPRESENTATIVE DRE W OUR ATTENTION TO THE SHOW CAUSE NOTICE ISSUED DATED 14. 03.2014 BY THE CONCERNED ASSESSING OFFICER PLACED AT PAGE NO.1 6 TO 19 OF THE PAPER BOOK I WHICH IS REPRODUCED AS UNDER: PLEASE REFER TO PROCEEDINGS OF ASSESSMENT AND THE DETAILED TECHNICAL NOTE SUBMITTED BY YOU ON THE MANUFACTURING PROCESS OF GELATIN. PLEASE ALSO TAKE NOTE OF STATEMENT U/S 131 RECORDED ON 28/06/2011 FROM SH RI M. MALLAN, ASSISTANT MANAGER (PRODUCTION) AT THE OO TY ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 23 FACTORY AND THAT OF THE PRESIDENT AND CEO OF THE ASSESSEE, SHRI DEEPAK KORPAL, BEING IN-CHARGE OF MANUFACTURING AND OPERATIONS AT VADODARA FACTORY MANUFACTURING GELATIN. IN THEIR STATEMENTS U/S 131 RECORDED IN THE COURSE OF SURVEY AT THE FACTORY PRE MISES THEY HAVE SUBMITTED IN DETAIL THE MANUFACTURING PRO CESS BEING CARRIED OUT AT THESE FACTORIES. 2. A PERUSAL OF DETAILS OF MANUFACTURING AVAILABLE ON RECORDS REVEALS THAT THE AVERAGE LOSS BEING SHOWN Y EAR AFTER YEAR IS IN THE RANGE OF 30%. THIS IS EVIDENT FROM ENCLOSED ANNEXURE CONTAINING YEAR WISE DETAILS BONE CONSUMPTION, PRODUCTION OF GELATIN AND DCP AND CONSEQUENT LOSS. YOU ARE HEREWITH REQUIRED TO EXPLA IN THE BASIS OF LOSS SO APPEARING IN THE MANUFACTURING PRO CESS. 3. IT IS ALSO BROUGHT TO YOUR KNOWLEDGE THAT THE EVIDENCES COLLECTED IN THE COURSE OF SEARCH HAVE CONFIRMED UNDISCLOSED SALES OF DCP BEING UNDERTAKEN BY THE COMPANY. THERE ARE DIRECT EVIDENCES TO CONFIRM THAT DCP IS BEING SOLD TO FARMERS IN CASH. IN THIS CONN ECTION STATEMENT OF SHRI H. S. HAATHI, CHARTERED ACCOUNTAN T OF THE GROUP NEEDS MENTION. REFERRING TO ANNEXURE A-1 PAGE NO.73 IMPOUNDED FROM THE PREMISES AT 4 TH FLOOR, CHAWDA COMMERCIAL CENTRE, MALAD (W), MUMBAI 64 BEING THE OFFICE OF GROUP COMPANIES AS ALSO OFFICE OF THE GROUP CHARTERED ACCOUNTANT SHRI H. S. HAATHI HAS SUBMITTED AN ANNEXURE BEARING NUMBER C FORMING PA RT OF HIS STATEMENT WHICH ELABORATES THE COMPARATIVE PICTURE FOR THREE YEARS, F.Y. 06-07 TO 08-09. IT C AN BE SEEN THAT WHILE DCP IS BEING SOLD IN CASH TO FARMER S DURING F.Y. 2006-07 AND 2007-08, NO SUCH SALES ARE SHOWN IN SUBSEQUENT YEARS. THE ASSESSEE IS INDULGIN G INTO UNDISCLOSED SALES AS EVIDENCED BY THESE DOCUME NTS. IT IS ACCORDINGLY PROPOSED TO INCREASE SALES OF DCP ON ESTIMATION BASIS TAKING INTO CONSIDERATION VARIOUS EVIDENCES GATHERED IN COURSE OF SEARCH ACTION AS WE LL AS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 4. IT IS FURTHER NOTICED FROM ANALYSIS OF MANUFACTU RING PROCESS THAT THE SO CLAIMED WASTAGES ARE VALUABLE B Y- PRODUCTS SALEABLE IN THE MARKET. YOU ARE HEREWITH REQUIRED TO SUBMIT QUANTITATIVE DETAILS WITH DOCUME NTARY ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 24 EVIDENCE OF PRODUCTION OF THESE BY-PRODUCTS FOR EAC H OF THE ASSESSMENT YEARS UNDER CONSIDERATION. THESE BY- PRODUCTS CLAIMED AS WASTAGE ARE IMPORTANT INPUT INGREDIENTS FOR POULTRY FEED AND AS MANURE/FERTILIZ ER AS WELL AS IN GLUE INDUSTRY. YOU ARE HEREWITH ALSO REQ UIRED TO GIVE DETAILS OF RATES FOR VALUING PRODUCTION OF THESE BY- PRODUCTS. 5. SEIZED DOCUMENTS 5.1 DURING THE COURSE OF SEARCH ACTION U/S 132 AT T HE BUSINESS PREMISES OF M/S STERLING BIOTECH LTD., AT SANDESARA ESTATE ATLADARA, OLD PADRA ROAD, VADODARA , VARIOUS LOOSE PAPER FILES AND DOCUMENTS WERE FOUND AND SEIZED AS PER ANRIEXURE-A-1 TO A-H TO PANCHANAMA DA TED 29.6.2011. COPIES OF THESE DOCUMENTS HAVE ALREADY B EEN HANDED OVER TO YOU. THESE DOCUMENTS CONTAIN DAY TO DAY FINANCIAL TRANSACTIONS UNDER TAKEN BY THE ASSESSEE COMPANY AND PART OF THESE TRANSACTIONS ARE NOTED IN CASH. THE TRANSACTIONS ARE PRIMARILY IN NATURE OF EXPENSES INCURRED. YOU ARE REQUESTED TO FURNISH EVIDENCES TO SHOW THAT EACH OF THE TRANSACTIONS NOT ED IN SEIZED ANNEXURE A-1 TO A-14 ARE RECORDED IN YOUR RE GULAR BOOKS OF ACCOUNTS FAILING WHICH THE CASH EXPENSES REVEALED FROM THESE EVIDENCES WILL BE CONSIDERED AS UNEXPLAINED AND ADDED TO YOUR TOTAL INCOME BY TREAT ING IT AS UNDISCLOSED INCOME. 6. DURING THE COURSE OF SURVEY ACTION U/S 133A IN T HE CASE OF YOUR ASSOCIATE ENTITY NAMELY M/S PMT MACHIN ES LTD. AT 20/B, KHATTAU BUILDING, ALKA DINESH MODI MA RG, FORT, MUMBAI ON 28.06.2016, VARIOUS LOOSE PAPERS AN D OTHER INCRIMINATING DOCUMENTS WERE FOUND AND IMPOUNDED AND INVENTORIZED AS PER ANNEXURE A-1 TO A - 23. IN THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF M/S PMT MACHINES LTD. A DETAILED SHOW CAUSE WAS ISSUED CALLING FOR THE EXPLANATION AND EVIDENCES IN RESPECT OF DOCUMENTS IMPOUNDED THEREFROM. IN RESPON SE TO THE SAME A REPLY IS RECEIVED FROM M/S PMT MACHINES LTD. VIDE LETTER DATED __________ WHEREIN IT HAS BE EN STATED THAT SOME OF THE DOCUMENTS IMPOUNDED FROM PREMISES OF M/S PMT MACHINES LTD, PERTAIN TO M/S STERLING BIOTECH LTD. AS ALL CASH TRANSACTIONS OF M /S ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 25 STERLING BIOTECH LTD. WERE KEPT AT THAT PREMISES. I T IS PERTINENT TO MENTION THAT DURING COURSE OF SURVEY A CTION AT THIS PREMISES THE STATEMENT OF OATH WAS ALSO REC ORDED FROM SHRI ASHOK C. GANDHI. ACCOUNTS OFFICER ON 28- 06.2011 WHEREIN HE HAS STATED THAT SOME OF THESE DOCUMENTS PERTAIN TO M/S STERLING BIOTECH LTD AS HE IS HANDLING CASH TRANSACTIONS FOR AND ON BEHALF OF M/S STERLING BIOTECH LTD., IN VIEW OF THE ABOVE FACTS Y OU ARE REQUESTED TO FURNISH EVIDENCES TO SHOW THAT THE TRANSACTIONS NOTED IN IMPOUNDED ANNEXURE A-1 TO A-2 3 AND CLAIMED TO BE PERTAINING TO M/S STERLING BIOTEC H LTD. ARE RECORDED IN YOUR REGULAR BOOKS OF ACCOUNTS FAIL ING WHICH THE CASH EXPENSES REVEALED FROM THESE EVIDENC ES WILL BE CONSIDERED AS UNEXPLAINED AND ADDED TO YOUR TOTAL INCOME BY TREATING IT AS UNDISCLOSED INCOME. 7. YOU ARE REQUESTED TO FURNISH THE ABOVE DETAILS W ITH EVIDENCES ON OR BEFORE 20.3.2014 FAILING WHICH THE ASSESSMENT ON THIS ISSUE SHALL BE FINALIZED AS PROP OSED ABOVE. THIS INFORMATION IS BEING CALLED FOR U/S142 (1) OF THE I.T. ACT FOR WHICH THIS LETTER MAY BE TREATED A S NOTICE U/S.142(1). 16. SAME WAS REPLIED TO THE CONCERNED DEPUTY COMMIS SIONER OF INCOME TAX VIDE LETTER DATED 20.03.2014. RELEVA NT PART OF THE SAME IS AS UNDER: HOWEVER, WITHOUT PREJUDICE WE HAVE TO STATE THAT O NE OF THE ASPECT ON WHICH THE DETAILS HAVE BEEN FURNISHED IS REGARDING THE CASH INCOME GENERATED ON ACCOUNT OF UNACCOUNTED SALES DCP AND DCP LUMPS AND ON ACCOUNT OF SALE OF BY-PRODUCTS. THOUGH NONE OF THE CASH TRANS ACTIONS BELONGS TO US BUT IN CASE IF THERE IS ANY TRANSACTI ONS WHICH ARE CONSIDERED TO BE OF THE COMPANY THEREBY CAUSING ANY EFFECT ON THE UNDISCLOSED INCOME OF THE COMPANY, IT IS OUR REQUEST THAT THE SAID CASH SHOULD BE FIRST ADJUSTED FROM THE CASH SALE OR CASH INCOME, BASED ON THE ADDITION MAD E. ANY CASH EXPENSES IF CONSIDERED AS BELONGING TO THE COM PANY, THEN THIS CASH OUTGO SHOULD BE FIRST CONSIDERED AS THE APPLICATION OF ALLEGED CASH INCOME AND ANY IMPACT W ILL ARISE ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 26 ONLY IF THE CASH OUTGO IS MORE THAN THE CASH INCOME . THE ALLEGED CASH INCOME FROM EACH OF THE YEARS IS FAR M ORE THAN THE CASH OUTGO. THEREFORE, IF ANY CASH EXPENDITURE IS CONSIDERED AS TAXABLE IN THE HANDS OF THE COMPANY T HE SAME SHOULD BE AFTER THE APPLICATION OF ALLEGED INCOME. 17. THUS, ASSESSEE HAS FILED ALL DETAILS IN RESPONS E TO QUERIES MADE BY CONCERNED ASSESSING OFFICER IN THIS REGARD AT ASSESSMENT PROCEEDINGS. LD. AUTHORIZED REPRESENTAT IVE HAS DRAWN OUR ATTENTION TOWARDS ASSESSMENT ORDER FOR A. Y. 2008- 09 IN ASSESSEES OWN CASE, WHICH IS PLACED AT PAGE NO.74 TO 101. SPECIAL ATTENTION WAS DRAWN TO PAGE 90 OF THE SAME, WHEREIN AT PARA 8.1 BASIS OF WASTAGE HAS BEEN DRAWN ON THE ANALOGY OF MANUFACTURING OF GELATIN FROM WEBSITE I. E. TECHNOGELOCONSULTANT .COM WHICH OFFERS A COMPLETE PORTFOLIO OF CONSULTING SERVICE FOR THE VETERINARY PHARMACEUTICA L MARKET AND SLAUGHTERHOUSES SUCH AS MARKET SURVEY, LAUNCHES OF PRODUCTS PRODUCT POSITIONING AND REPOSITIONING PROD UCT CUSTOMIZATIONS AND IMPORT OPTIMIZATION OF PORTFOLIO PROSPECTING AND DEVELOPMENT OF LOCAL PARTNERS (IMPORTERS) FILED TRIALS AND LABORATORY TESTS TECHNICAL TRAINING & CORPORATE SAL ES FOR GELATIN AND SLAUGHTER HOUSE AS CONSULTANT. ACCORDING TO AS SESSING OFFICER, THIS SITE GIVES A COMPLETE DETAIL OF PROCE SS EVOLVED IN MANUFACTURING GELATIN AND RESULTANT WASTAGE THAT OC CURS IN SUCH PROCESS. THE SUM AND SUBSTANCE IS THAT ALL BA SIS FOR REACHING A CERTAIN CONCLUSION BY ASSESSING OFFICER HAS BEEN ELABORATED BY HIM. FURTHER, IN ASSESSMENT ORDER, N O INCRIMINATING MATERIAL IN RESPECT OF WASTAGE WAS FO UND. ASSESSING OFFICER CONCLUDED 5% INSTEAD OF ASSESSEE S CLAIM 30%. TO BE MORE PRECISE ON THE POINT OF TELESCOPIN G, ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 27 OBSERVATION OF ASSESSING OFFICER IS REPRODUCED AS U NDER: 10.3 BOTH THE SET OF DOCUMENTS EVIDENCING CASH TRANSACTIONS HAVE BEEN ANALYZED IN GREAT DETAILS AN D AN EXERCISE WAS UNDERTAKEN, WHERE ASSESSEE'S REPRESENT ATIVE WAS ASSOCIATED, OF WORKING OUT THE CASH IMPACT ON A DAY TO DAY BASIS THEREBY GIVING THE CASH INCIDENCE ON A YEAR TO YEAR BASIS. THIS EXERCISE WAS DONE KEEPING IN MI ND THAT IN MAKING ADDITION TO INCOME ON ACCOUNT OF UNDISCLOSED SALES OF DCP AND OTHER BY-PRODUCTS, THE SOURCE OF CASH HAS BEEN IDENTIFIED. THEREFORE, WHAT REMAINS TO BE ANALYZED IS THE OUTGO OF CASH EVIDENC ED BY THESE DOCUMENTS, EITHER IN THE FORM OF EXPENDITURE OR IN ANY OTHER MANNER. THE POSITION OF OUTGO OF CASH ON A YEARLY BASIS IS WORKED OUT IN TH E ANNEXURE TO THIS ORDER FORMING AN INTEGRAL PART OF THIS ORDER. IN THAT TABLE, SUMMARY OF EACH DOCUMENT UNDE R SEIZURE HAS BEEN GIVEN. FURTHER, IN THE TABLE COMI NG UP IN SUCCEEDING PARAGRAPH, THE SAME WORKING HAS BEEN GIV EN YEAR WISE, THE CASH OUTGO FOR ALL THE DOCUMENTS TAK EN TOGETHER, THEIR IMPACT FOR EACH YEAR SEPARATELY. A T THE SAME TIME, THE YEAR WISE POSITION OF ESTIMATED CASH GENE RATED, BEING THE INCOME ON ACCOUNT OF UNDISCLOSED SALES, I S TAKEN IN A PARALLEL COLUMN TO ASCERTAIN WHETHER CASH GENE RATED IS SUFFICIENT TO EXPLAIN CASH OUTGO. IN CRUX, AS CASH FLOW STATEMENT HAS BEEN PREPARED. 10.3 THE CASH FLOW A.Y. F.Y. OPENING BALANCE INCOMING BEING UNDISCLOSE D SALES CASH AVAILABLE CASH OUTGO BALANCE 2006-07 2005-06 - 11,08,53,732 11,08,53,732 11,20,000 10,97,33,732 2007-08 2006-07 10,97,33,732 12,07,20,142 23,04,53,874 1,85,21,000 21,19,32,874 2008-09 2007-08 21,19,32,874 15,37,83,679 36,57,16,553 4,49,45,000 32,07,71,553 2009-10 2008-09 32,07,71,553 16,33,52,586 48,41,24,139 9,53,59,000 38,87.65,139 2010-11 2009-10 38,87,65,139 17,36,29,050 56,23,94,189 5.80,47,000 50,43,47,189 2011-12 2010-11 50,43,47,189 18,7 2.95,867 69,16,43,056 22,43,59,000 46,72,84,056 2012-13 2011-12 46,72,84,056 19,39,03,543 66,11,87,599 5,17,14,000 60,94,73,599 18. IN THIS BACKGROUND, IT CANNOT BE SAID THAT NO I NQUIRY HAS BEEN MADE WITH REGARDS TO SOURCE OF CASH RECEIVED. WE FIND ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 28 THAT HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. J AWANMAL GEMAJI GANDHI (1985) 151 ITR 353 (BOM) HELD THAT SE CRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARLIER ASSESSMENT YEAR CAN CONSTITUTE A FUND, THOU GH CONCEALED, FROM WHICH ASSESSEE MAY DRAW SUBSEQUENTL Y. IN THE INSTANT CASE, ASSESSEE ACQUIRED GOLD DURING THE LATER HALF OF ASSESSMENT YEAR AND IT COULD BE THAT THE UNDISCLOSE D INCOME EARNED IN THAT VERY YEAR CONSTITUTED A FUND FROM WH ICH THE ASSET WAS ACQUIRED. THOUGH, ASSESSEE DID NOT CONTE ND BEFORE THE ITO THAT SOURCE FOR THE ACQUISITION OF GOLD WAS THE ADDITION MADE BY ITO TO THE TURNOVER, YET IT WAS ASSESSEES CASE BEFORE THE ITO THAT THE GOLD HAD BEEN LEGITIMATELY ACQUIRE D. ASSESSEE COULD NOT THEN HAVE KNOWN THAT THE ITO WOULD MAKE A N ADDITION TO THE INCOME ON THE BASIS OF AN ADDITION TO THE TURNOVER. EVEN BEFORE THE TRIBUNAL, ASSESSEE HAD A DOPTED THIS STAND BUT THE ASSESSEE HAD CONTENDED IN ALTERNATIVE THAT THE SOURCE OF GOLD COULD BE ASSUMED TO HAVE COME OUT OF INTANGIBLE ADDITIONS ON ACCOUNT OF INCREASED TURNOVER. IN THI S BACKGROUND, IT WAS HELD THAT TRIBUNAL WAS HELD JUST IFIED IN DELETING THE ADDITION OF THE AMOUNT AS INCOME FROM UNDISCLOSED SOURCES. THIS RATIO HELPS THE FACTS OF ASSESSEE AS DISCUSSED ABOVE. THUS, THE RATIO OF JAWANMAL GEMAJ I GANDHI (SUPRA) SUPPORTS THE PROPOSITION OF APPLICABILITY O F TELESCOPY AS REQUESTED BY THE ASSESSEE. 19. WE ALSO FIND THAT HONBLE SUPREME COURT IN CASE OF CIT VS. MAX INDIA LTD. (2007) 295 ITR 282(SC) HELD AS U NDER: THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE IN ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 29 SECTION 263 OF THE INCOME-TAX ACT, 1961, HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER P ASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CA NNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER ADOPTS ONE OF T WO COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE AS SESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIO NER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOU S ORDER PREJUDICIAL TO THE REVENUE, UNLESS THE VIEW TAKEN B Y THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. IT SHOWS THAT ASSESSING OFFICER CAN ADOPT ONE POSSI BLE VIEW AS HAS BEEN SHOWN BY ASSESSING OFFICER IN THIS CASE. IN SUCH A SITUATION, ORDER OF THE ASSESSING OFFICER ON THE IS SUE CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE. 20. WE FIND THAT HONBLE PUNJAB & HARYANA HIGH COUR T IN CASE OF CIT VS. SUPERMAN KNITTERS (P) LTD. IN ITA N O.862 OF 2010 (O&M) HAS HELD AS UNDER: THE COMMISSIONER HAD THE ENTIRE RECORDS BEFORE HIM AND ALSO THE ASSERTION OF THE ASSESSEE THAT NONE OF THE EXPENSES COMPRISED IN RS.9,77,010/- WAS RELATABLE TO UNIT II . UNDER THESE CIRCUMSTANCES, THE COMMISSIONER HAS CHOSEN TO MERELY SET ASIDE THE ISSUE WITHOUT FIRST ESTABLISHI NG ANY ERROR IN THE ASSESSMENT MADE BY THE ASSESSING OFFIC ER ON THIS COUNT. IT IS ALSO TRITE LAW THAT BEFORE AN OR DER CAN BE TERMED AS ERRONEOUS, IT HAS TO BE ESTABLISHED AS TO WHAT IS THE ERROR OF FACT OR LAW THAT IS SOUGHT TO BE MADE OUT BY THE COMMISSIONER. INFACT, THE COMMISSIONER IS EXPECTED TO EXAMINE THE RECORD AND FURNISH HIS OPINION PRECISEL Y TO JUSTIFY THE PROVISIONS OF SECTION 263 OF THE ACT. IN THIS BACKGROUND, LD. AUTHORIZED REPRESENTATIVE S UBMITTED THAT CIT CANNOT CHOOSE TO SET ASIDE THE ISSUE WITHO UT FIRST ESTABLISHING ANY ERROR IN THE ASSESSMENT ORDER MADE BY THE ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 30 ASSESSING OFFICER ON THIS COUNT. IT IS ALSO TRITE LAW THAT BEFORE AN ORDER COULD BE TERMED AS ERRONEOUS, IT HAS TO BE ESTABLISHED AS TO WHAT IS THE ERROR OF FACT OR LAW THAT IS SOUG HT TO BE MADE OUT BY THE COMMISSIONER. IN THIS BACKGROUND, WE AR E OF THE VIEW THAT THE COMMISSIONER IS EXPECTED TO EXAMINE T HE RECORD AND ARRIVE AT HIS OPINION TO JUSTIFY THE PROVISION OF SECTION 263 OF THE ACT WHICH HAS NOT BEEN DONE IN THIS CASE, WH ICH IS NOT JUSTIFIED TO INVOKE THE PROVISIONS OF SECTION 263 O F THE ACT. THUS, CIT IS SUPPOSED TO FIND THE ERROR IN THE ORDE R OF ASSESSING OFFICER AND HE IS NOT SUPPOSED TO SET ASI DE THE MATTER TO ASSESSING OFFICER FOR FINDING OF THE SAME . THIS APPROACH IS NOT JUSTIFIED AS HELD BY HONBLE SUPREM E COURT IN CASE OF CIT VS. MAX INDIA LTD. (SUPRA). 21. WE ALSO FIND THAT MUMBAI G BENCH IN ITA NO.2378/MUM/2015 FOR A.Y.2010-11 IN CASE OF GAURAV MATHRAWALA VS. CIT HAS HELD AS UNDER: LD. CIT HAS NOT DISPUTED THIS CONTENTION OF THE AS SESSEE RAISED BEFORE HIM, BUT HAS SIMPLY SET ASIDE THE ASS ESSMENT TO THE AO TO EXAMINE IT AFRESH. SUCH AN EXERCISE B Y THE CIT CANNOT BE APPRECIATED, FIRSTLY, HE SHOULD GIVE SPEC IFIC FINDING AS TO WHY SUCH A CONTENTION RAISED BY THE ASSESSEE IS NOT CORRECT OR DIVORCED FROM THE FACTS AND MATERIAL REC ORDS AND SECONDLY, HOW ON THE FACTS THE ORDER OF THE AO IS A CTUALLY ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF T HE REVENUE. SIMPLY MENTIONING THE PHRASE IN THE ORDER THAT THE ASSESSMENT ORDER IS ERRONEOUS AND SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IS NOT SUFFICIENT. THE LD. CIT AFTER EXAMINING THE RECORDS AND THE CONTENTIONS OF THE ASSESSEE BEFORE HIM, HAS TO GIVE A SPECIFIC FINDING AND THEN HE CAN SET ASIDE THE ASSESSMENT ORDER, WHICH HERE I N THIS CASE HAS NOT BEEN DONE. THUS, WE HOLD THAT, THE IMP UGNED ORDER PASSED BY CIT IN THE SECTION 263 CANCELLING T HE ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 31 ASSESSMENT / SETTING ASIDE THE ASSESSMENT FOR EXAMI NATION OF EXEMPTION U/S 54F CANNOT BE SUSTAINED AS THE CIT HAS DULY EXAMINED THE ISSUE DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND LD. CIT UNDER THE SCOPE OF SECTION 263 CANNOT BE SAID TO BE SITTING AS A REVIE WING AUTHORITY AND CANCEL THE ASSESSMENT WITHOUT POINTIN G OUT HOW THE ASSESSMENT ORDER IS ERRONEOUS OR PREJUDICIA L TO THE INTEREST OF THE REVENUE. THUS, WE QUASH THE IMPUGNE D ORDER PASSED BY THE CIT AND ALLOW THE GROUNDS RAISED BY T HE ASSESSEE. AGAIN COMMISSIONER HAS NOT GIVEN ANY COMMENT ON THE ARGUMENT OF LD. AUTHORIZED REPRESENTATIVE ON THE IS SUE BEFORE HIM BUT HE IS SIMPLY SETTING ASIDE THE ASSESSMENT O RDER TO EXAMINE AFRESH. SUCH EXERCISE OF CIT CANNOT BE APPR ECIATED BECAUSE HE SHOULD GIVE SPECIFIC FINDING AS TO WHY S UCH ARGUMENTS RAISED BY ASSESSEE WAS NOT CORRECT OR DIV ORCED FROM THE FACTS AND MATERIAL RECORDS AND SECONDLY, HOW ON THE FACTS THE ORDER OF THE ASSESSING OFFICER WAS ACTUALLY ERR ONEOUS AND ALSO AS TO BE PREJUDICIAL TO THE INTEREST OF THE RE VENUE. SIMPLY MENTIONING THE FACT THAT ASSESSMENT ORDER IS ERRONE OUS AND SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REV ENUE, IS NOT SUFFICIENT. CIT HAVING EXAMINED THE RECORDS AND THE CONTENTIONS OF THE ASSESSEE BEFORE HIM, HAS TO GIVE A SPECIFIC FINDING ONLY THEN HE CAN SET ASIDE THE ASSESSMENT O RDER, WHICH HAS NOT BEEN DONE IN THIS CASE BEFORE US. SO, THE IMPUGNED ORDER PASSED BY CIT(A) U/S. 263 OF THE ACT SETTING ASIDE THE ASSESSMENT CANNOT BE SUSTAINED AS THE ASSESSING OFF ICER HAS DULY EXAMINED THE ISSUE DURING THE COURSE OF THE AS SESSMENT PROCEEDINGS. CIT UNDER THE PROVISIONS OF SECTION 26 3 OF THE ACT CANNOT BE SAID TO BE SITTING AS A REVIEWING AUTHORI TY AND CANCEL THE ASSESSMENT WITHOUT POINTING OUT HOW THE ASSESSM ENT ORDER ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 32 IS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 22. REGARDING AMENDMENT TO SECTION 263 OF THE ACT, WE FIND THAT ITAT B BENCH IN ITA NOS. 2690 & 2691/MUM/201 6 FOR A.YS. 2007-08 & 2008-09 IN CASE OF SHRI NARAYAN TAT U RANE VS. ITO IN SIMILAR SET OF FACTS HAS OBSERVED AS UND ER: 19. THE LAW INTERPRETED BY THE HIGH COURTS MAKES I T CLEAR THAT THE LD PR. CIT, BEFORE HOLDING AN ORDER TO BE ERRONEOUS, SHOULD HAVE CONDUCTED NECESSARY ENQUIRIES OR VERIFI CATION IN ORDER TO SHOW THAT THE FINDING GIVEN BY THE ASSESSI NG OFFICER IS ERRONEOUS, THE LD PR. CIT SHOULD HAVE SHOWN THAT THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. IN TH E INSTANT CASE, THE LD PR. CIT HAS FAILED TO DO SO AND HAS SI MPLY EXPRESSED THE VIEW THAT THE ASSESSING OFFICER SHOUL D HAVE CONDUCTED ENQUIRY IN A PARTICULAR MANNER AS DESIRED BY HIM. SUCH A COURSE OF ACTION OF THE LD PR. CIT IS N OT IN ACCORDANCE WITH THE MANDATE OF THE PROVISIONS OF SE C. 263 OF THE ACT. THE LD PR. CIT HAS TAKEN SUPPORT OF THE NE WLY INSERTED EXPLANATION 2(A) TO SEC. 263 OF THE ACT. E VEN THOUGH THERE IS A DOUBT AS TO WHETHER THE SAID EXPL ANATION, WHICH WAS INSERTED BY FINANCE ACT 2015 W.E.F. 1.4.2 015, WOULD BE APPLICABLE TO THE YEAR UNDER CONSIDERATION , YET WE ARE OF THE VIEW THAT THE SAID EXPLANATION CANNOT BE SAID TO HAVE OVER RIDDEN THE LAW INTERPRETED BY HONBLE DEL HI HIGH COURT, REFERRED ABOVE. IF THAT BE THE CASE, THEN TH E LD PR. CIT CAN FIND FAULT WITH EACH AND EVERY ASSESSMENT O RDER, WITHOUT CONDUCTING ANY ENQUIRY OR VERIFICATION IN O RDER TO ESTABLISH THAT THE ASSESSMENT ORDER IS NOT SUSTAINA BLE IN LAW AND ORDER FOR REVISION. HE CAN ALSO FORCE THE A O TO CONDUCT THE ENQUIRIES IN THE MANNER PREFERRED BY LD PR. CIT, THUS PREJUDICING THE INDEPENDENT APPLICATION O F MIND OF THE AO. DEFINITELY, THAT COULD NOT BE THE INTENTION OF THE LEGISLATURE IN INSERTING EXPLANATION 2 TO SEC. 263 OF THE ACT, SINCE IT WOULD LEAD TO UNENDING LITIGATIONS AND THE RE WOULD NOT BE ANY POINT OF FINALITY IN THE LEGAL PROCEEDIN GS. THE HONBLE SUPREME COURT HAS HELD IN THE CASE OF PARAS HURAM POTTERY WORKS CO. LTD VS. ITO (1977)(106 ITR 1) THA T THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDING S AND THE STALE ISSUES SHOULD NOT BE REACTIVITATED BEYOND A P ARTICULAR ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 33 STAGE AND THE LAPSE OF TIME MUST INDUCE REPOSE IN A ND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROVERSIES AS I T MUST IN OTHER SPHERES OF HUMAN ACTIVITY. 20. FURTHER CLAUSE (A) OF EXPLANATION STATES THAT A N ORDER SHALL BE DEEMED TO BE ERRONEOUS, IF IT HAS BEEN PAS SED WITHOUT MAKING ENQUIRIES OR VERIFICATION, WHICH SHO ULD HAVE BEEN MADE. IN OUR CONSIDERED VIEW, THIS PROVISION S HALL APPLY, IF THE ORDER HAS BEEN PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH A REASONABLE AND PR UDENT OFFICER SHALL HAVE CARRIED OUT IN SUCH CASES, WHICH MEANS THAT THE OPINION FORMED BY LD PR. CIT CANNOT BE TAK EN AS FINAL ONE, WITHOUT SCRUTINISING THE NATURE OF ENQUI RY OR VERIFICATION CARRIED OUT BY THE AO VIS--VIS ITS REASONABLENESS IN THE FACTS AND CIRCUMSTANCES OF TH E CASE. HENCE, IN OUR CONSIDERED VIEW, WHAT IS RELEVANT FOR CLAUSE (A) OF EXPLANATION 2 TO SEC. 263 IS WHETHER THE AO HAS PASSED THE ORDER AFTER CARRYING OUR ENQUIRIES OR VERIFICAT ION, WHICH A REASONABLE AND PRUDENT OFFICER WOULD HAVE CARRIED OUT OR NOT. IT DOES NOT AUTHORISE OR GIVE UNFETTERED POWER S TO THE LD PR. CIT TO REVISE EACH AND EVERY ORDER, IF IN HI S OPINION, THE SAME HAS BEEN PASSED WITHOUT MAKING ENQUIRIES O R VERIFICATION WHICH SHOULD HAVE BEEN MADE. IN OUR VI EW, IT IS THE RESPONSIBILITY OF THE LD PR. CIT TO SHOW THAT T HE ENQUIRIES OR VERIFICATION CONDUCTED BY THE AO WAS N OT IN ACCORDANCE WITH THE ENQURIES OR VERIFICATION THAT W OULD HAVE BEEN CARRIED OUT BY A PRUDENT OFFICER. HENCE, IN OU R VIEW, THE QUESTION AS TO WHETHER THE AMENDMENT BROUGHT IN BY WAY OF EXPLANATION 2(A) SHALL HAVE RETROSPECTIVE OR PROSPECTIVE APPLICATION SHALL NOT BE RELEVANT. 23. WE ALSO FIND THAT HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. FINE JEWELLERY (INDIA) LIMITED 372 ITR 303 OBSERVED THAT ONCE ASSESSING OFFICER HAD CALLED FOR THE DETA ILS AND THE SAME WERE FILED BY THE ASSESSEE, MERELY BECAUSE THE RE WAS NO DISCUSSION IN THE ASSESSMENT ORDER WOULD NOT LEAD T O ASSUMPTION THAT ASSESSING OFFICER HAD NOT APPLIED H IS MIND. IN THE PRESENT CASE BEFORE US, MANY ISSUES DISCUSSE D BY THE COMMISSIONER WERE NOT FINALLY DISCUSSED IN ASSESSME NT ORDER ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 34 BY THE ASSESSING OFFICER. HOWEVER, THERE WERE ENOU GH CORRESPONDENCE IN THE MATTER AT THE TIME OF ASSESSM ENT PROCEEDINGS WHICH WOULD CLEARLY REVEAL THAT ASSESSI NG OFFICER HAD APPLIED HIS MIND AND CAUSED NECESSARY ENQUIRY. 24. FACTS AND DECISION THEREON IN SHRI NARAYAN TATU RANE HELP THE CASE OF ASSESSEE. CIT CAN REACH TO ANY CO NCLUSION ONLY AFTER MAKING ENQUIRIES AND VERIFICATION BEFORE SETTING ASIDE ASSESSMENT ORDER UNDER PROVISIONS OF SECTION 263 OF THE ACT. THE OPINION TAKEN BY COMMISSIONER CANNOT BE TAKEN A S FINAL ONE WITHOUT SCRUTINIZING THE NATURE OF ENQUIRY OR V ERIFICATION CARRIED OUT BY ASSESSING OFFICER VIS--VIS ITS REAS ONABLENESS IN ITS FACTS AND CIRCUMSTANCES. IN VIEW OF THE ABOVE, IN OUR VIEW, THE QUESTION AS TO WHETHER THE AMENDMENT BROUGHT IN BY WAY OF EXPLANATION 2(A) SHALL HAVE RETROSPECTIVE OR PRO SPECTIVE APPLICATIONS SHALL NOT BE RELEVANT. 25. TO SUM UP ACCORDING TO US DURING COURSE OF ASSE SSMENT PROCEEDINGS U/S.153A OF THE ACT, ASSESSING OFFICER HAS ASKED FOR EXPLANATION IN RESPECT OF VARIOUS NOTINGS MADE IN LOOSE PAPERS/NOTE BOOK/ PAD FOUND DURING THE SEARCH CARRI ED OUT IN VARIOUS PREMISES OF ASSESSEE. THE ASSESSEE CONTEND ED THAT IN THE ALTERNATIVE THE EXPENDITURE SHOULD BE TELESCOPE D AGAINST THE INCOME. THIS WAS EXAMINED IN DETAIL BY THE ASSE SSING OFFICER AND ALSO DISCUSSED IN HIS ORDER. THIS IS C ERTAINLY ONE OF THE POSSIBLE VIEW TAKEN BY THE ASSESSING OFFICER. IN VIEW OF THIS, THE REVIEW OF SAME U/S.263 OF THE ACT IS NOT JUSTIFIED AS DISCUSSED ABOVE. SIMILAR ISSUE AROSE IN A.Y.2007-0 8, 2008-09, 2009-10, 2010-11, 2011-12 & 2012-13. FACTS BEING S IMILAR SO ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 35 FOLLOWING SAME REASONING, THIS ISSUE IN ALL THESE Y EARS IS DECIDED IN FAVOUR OF ASSESSEE. IT IS PERTINENT TO MENTION HERE THAT ALL CASE LAWS RELIED BY PARTIES HAVE BEEN TAKE N INTO CONSIDERATION, THOUGH SAME MAY NOT BE SPECIFICALLY MENTIONED. 26. NEXT ISSUE IS WITH REGARD TO ALLOWABILITY OF DE DUCTION U/S. L0B OF THE ACT TO HOLD THE ORDER OF ASSESSING OFFIC ER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. CIT HELD THAT ASSESSING OFFICER HAS ALLOWED THE DEDUCTION U/ S.10A OF THE ACT AND ON ITS EXPORT OF CO-ENZYME Q-L0 FROM MA SSAR PLANT WITHOUT MAKING NECESSARY ENQUIRY TO ASCERTAIN THE V ERACITY OF ASSESSEE'S CLAIM. IN THIS REGARD, ASSESSEE HAS SUBM ITTED THAT IT HAS STARTED SELLING CO-ENZYME Q-10 FROM FINANCIAL Y EAR 2007- 08 CORRESPONDING TO ASSESSMENT YEAR 2008-09. SINCE, IT IS A MATTER OF FACT, ASSESSING OFFICER WAS DIRECTED TO V ERIFY THE ASSESSEE'S CLAIM IN THIS REGARD, AND IF THERE IS NO SUCH ACTIVITY DURING THE YEAR, NO FURTHER ACTION WAS REQUIRED ON THIS ISSUE AS DIRECTED BY CIT. THUS, CIT HAS GIVEN DIRECTION FOR VERIFICATION WITHOUT POINTING OUT ANY FAULT I.E. NO CLAIM OF SEC TION 10B OF THE ACT FOR THE YEAR UNDER CONSIDERATION WAS EVER M ADE BY THE ASSESSEE. SUCH DIRECTION OF CIT FOR VERIFICATION O F CLAIM, WHICH IN FACT HAS NOT BEEN MADE, IS NOT JUSTIFIED. SO, T HE ORDER OF CIT ON THE ISSUE OF VERIFICATION OF CLAIM U/S.10B OF TH E ACT IS NOT JUSTIFIED BECAUSE SAME HAS NOT BEEN CLAIMED FOR A.Y . 2006-07 & 2007-08 AS THERE WAS NO SALE BY ASSESSEE AS DISCU SSED ABOVE. SO, INVOKING OF PROVISIONS OF SECTION 263 O F THE ACT IN THESE YEARS ON THIS ISSUE IS NOT JUSTIFIED. ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 36 26.1 IN A.Y. 2008-09 ON THIS ISSUE, CIT FURTHER OBS ERVED THAT CLAIM OF DEDUCTION U/S. L0B OF THE ACT ON ITS EXPOR T OF CO- ENZYME Q-10 FROM MASAR PLANT, ALLOWED BY THE ASSESS ING OFFICER WITHOUT CAUSING NECESSARY ENQUIRY TO ASCERT AIN THE VERACITY OF ASSESSEE'S CLAIM. IN THIS REGARD, ASSE SSEE CLAIMED EXPORT OF Q-10 WHICH WAS CLAIMED MANUFACTURED IN IT S MASAR PLANT. DURING COURSE OF SEARCH PROCEEDINGS ON 28.06 .2011, IT WAS ADMITTED BY ONE SHRI SANTOSH BHAKTPRATAP, THE D EPUTY GENERAL MANAGER PRESENT AT THE PREMISES THAT THE PL ANT AT MASAR ALONG WITH THE LAND WAS ACQUIRED FROM TORRENT GROUP IN THE YEAR 2006. IT WAS FURTHER STATED BY HIM THAT TH E ENTIRE MACHINERY ACQUIRED FROM TORRENT WERE BEING USED IN PRODUCTION FACILITY BY ASSESSEE AFTER GETTING THEM CLEANED AND REFURNISHED. REGARDING NEW MACHINERY INSTALLED IF ANY, IT WAS SUBMITTED BY HIM THAT AS PER FORM NO. ER 7 AND FORM NO. 14 IO, VERY LIMITED ITEMS OF CAPITAL ASSETS WERE PURCH ASED. HOWEVER, DURING COURSE OF ASSESSMENT PROCEEDINGS, I T WAS CLAIMED BY ASSESSEE THAT THE MACHINERY PURCHASED FR OM TORRENT WAS NOT BEING USED FOR PRODUCTION OF Q-10 O N WHICH DEDUCTION U/S.10B OF THE ACT WAS BEING CLAIMED BY A SSESSEE COMPANY. ACCORDING TO ASSESSEE, IT HAS EXPORTED MA JORITY OF Q- 10 TO A LONE PARTY, NAMELY RICHMOND OVERSEAS P. LTD . AT DUBAI. THE COST OF PRODUCTION OF Q10 AS PER ASSESSE E'S BOOKS WAS RS. 12,341/- PER KG. THE AVERAGE DOMESTIC SALE WAS AT A PRICE OF RS. 19,973/- ONLY WHEREAS ASSESSEE HAS CLA IMED THAT IT HAD EXPORTED TO RICHMOND OVERSEAS P. LTD. @ RS.2,25 ,686/- PER KG. AS PER THE INFORMATION RECEIVED FROM THE CU STOM AND CENTRAL EXCISE AUTHORITIES AT AHMEDABAD, ASSESSEE H AS ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 37 EXPORTED A TOTAL OF 100 KG OF Q-10 ONLY TO A PARTY NAMED CAPSUGEL FRANCE @ RS. 13,000/- PER KG FOR ONE CONSI GNMENT OF 50 KG AND AT THE RATE OF RS.13,500/- PER KG FOR ANO THER CONSIGNMENT OF 50 KG IN F.Y.2010-11. THE CUSTOMS AN D CENTRAL EXCISE AUTHORITIES FURTHER CONFIRMED THAT B ETWEEN THE PERIOD F.Y. 2005-06 TO F.Y. 2013-14, NO OTHER PARTY HAS EXPORTED Q-L0 AND ASSESSEE HAS ALSO NOT EXPORTED AN Y CONSIGNMENT OTHER THAN THESE TWO LOTS DURING THE RE LEVANT PERIOD FROM THE AHMEDABAD PORT TO ANY OTHER COUNTRY ALSO. 26.2 THE ABNORMALLY HIGH RATE AT WHICH ASSESSEE HAD CLAIMED TO HAVE EXPORTED THE PRODUCT Q-10 HAS NOT BEEN EXAM INED BY ASSESSING OFFICER WITH REFERENCE TO THE APPRAISED V ALUE. NO PROOF OF EXPORT HAS BEEN BROUGHT ON RECORD BY THE A SSESSING OFFICER. NO DOCUMENTARY EVIDENCE REGARDING THE CUST OM CLEARANCE, ASSESSED VALUE AND OR THE PROOF OF FOREI GN INWARD REMITTANCE CERTIFICATE IN RESPECT OF THE SAID EXPOR T SALE HAS BEEN GATHERED BY THE ASSESSING OFFICER. FURTHER, BL ANK LETTER HEADS OF RICHMOND OVERSEAS P. LTD., UAE WERE FOUND AND SEIZED FROM THE PREMISES OF ASSESSEE GROUP DURING T HE COURSE OF SEARCH, WHICH OUGHT TO HAVE RAISED REASONABLE DO UBTS IN THE MIND OF ASSESSING OFFICER BEFORE ALLOWING SUBSTANTI AL SUMS AS DEDUCTION U/S. L0B OF THE ACT. THEREFORE, THE ASSES SING OFFICER HAD CLEARLY FAILED TO CARRY OUT NECESSARY VERIFICAT IONS AND INQUIRIES INTO THE CLAIM. THUS, THE ORDER OF ASSES SING OFFICER WAS FOUND CLEARLY HIT BY CLAUSE (B) OF NEWLY INSERT ED EXPLANATION 2 BELOW SUB-SECTION (1) OF SECTION 263 OF THE ACT. ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 38 26.3 BEFORE US, THE STAND OF ASSESSEE HAS BEEN THAT ASSESSING OFFICER HAD ISSUED NOTICE DATED 0508.2013 CALLING F OR FORM 14 IO WHICH IS PLACED AT PAGE NOS. 33 TO 39. ASSESSEE HAD PURCHASED LAND, BUILDING AND MACHINERIES FROM TORRE NT GUJARAT BIOTECH LIMITED (HEREINAFTER CALLED AS TGB L) IN THE MONTH OF MARCH, 2006. ASSESSEE USED PART OF LAND & BUILDING PURCHASED FROM TGBL TO MANUFACTURE PHARMA PRODUCTS LIKE CHLORO BENZOIC ACID, DICHLORO BENZOIC ACID, IMATINI B MESYLATE ETC. APART FROM THE ABOVE, ASSESSEE HAD STARTED A SEPARATE PLANT FOR THE PURPOSE OF MANUFACTURING OF COENZYME Q-10 FOR WHICH THE PRODUCTION AND SALE STARTED IN THE MONTH OF MARCH 2008. THIS PLANT WAS SET UP WITH THE HELP OF BRAND NEW PLANT AND MACHINERY PARTLY IMPORTED FROM VARIOUS COUNTRIE S. THIS WAS REGISTERED AS 100% EOU AS IT WAS TOTALLY NEW PL ANT WITH NEW PLANT AND MACHINERY. ASSESSEE ONLY USED PART O F LAND AND BUILDING EARLIER ACQUIRED FROM TGBL. FURTHER MACHIN ERY PURCHASED FROM TGBL ARE SUCH THAT IT COULD BE USED ONLY FOR MANUFACTURING OF OTHER PHARMA PRODUCTS BUT IT CANNO T BE USED FOR MANUFACTURING COENZYME Q10 PRODUCT. CERTIFICAT ES OBTAINED FROM CHARTERED ENGINEER WERE ALSO SUBMITTE D DURING ASSESSMENT PROCEEDINGS. SUBMISSION MADE OF FORM 14 IO AND OTHER DETAILS OF EOU UNIT ARE PLACED AT PAGE NOS. 4 0 TO 50. FORM 14 IO IS FOR IMPORTED CAPITAL GOODS FOR PRODUC TION OF CO- Q10. SANTOSH BHAKTPRATAP STATED THAT WE ARE USING OLD MACHINERIES BUT NO WHERE HE HAS MENTIONED THAT OLD MACHINERIES ARE USED FOR MANUFACTURING CO-ENZYME Q 10 AS DETAILED ON PAGE NOS. 17 TO 32 OF THE PAPER BOOK. I N RESPONSE TO VARIOUS CLAIMS MADE BY ASSESSING OFFICER, ASSESS EE HAD ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 39 MADE SUBMISSIONS DATED 24.12.2013 IN REGARD TO USAG E OF PLANT PURCHASED FROM TORRENT WHEREIN INSTALLATION C ERTIFICATE WAS ALSO SUBMITTED. ASSESSEE SUBMITTED THE VARIOUS PERMISSION OBTAINED FROM KANDLA ECONOMIC ZONE OF MI NISTRY OF COMMERCE & INDUSTRY, COPIES OF INVOICES OF NEW MACH INERIES OBTAINED AND INSTALLED IN EOU UNIT OF MASAR PLANT F OR MANUFACTURING CO-ENZYME Q10 AS DETAILED ON PAGE NOS .51 TO 173. IN THIS BACKGROUND, IT WAS SUBMITTED THAT ASS ESSING OFFICER HAS MADE ENQUIRIES FOR THE SAID SUBJECT MAT TER AND ALL THE REPLIES WITH DOCUMENTARY EVIDENCES WERE PLACED ON RECORD. IF ASSESSEES EXPLANATION WAS FOUND TO BE CORRECT, MATTER CANNOT BE SET ASIDE BY CIT. IT IS A MATTER OF RECO RD THAT ASSESSING OFFICER HAS MADE VARIOUS ENQUIRIES AND IN REPLY, ASSESSEE SUBMITTED ON 24.12.2013 AN EXPLANATION THA T EXPORTS WERE MADE TO CAPSUGEL FRANCE PARTY ON TRIAL BASIS T O KEEP LONG RELATION WITH THEM. COPY OF THE SAME IS PLACED AT PAGE NOS.174 TO 177. FURTHER, IT WAS SUBMITTED THAT ASSESSING O FFICER ENQUIRED ABOUT THE RATE DIFFERENCE BETWEEN SALE IN DOMESTIC MARKET AND INTERNATIONAL MARKET DURING ASSESSMENT PROCEEDINGS. IN RESPONSE TO THE QUERY OF ASSESSING OFFICER, ASSESSEE SUBMITTED AN EXPLANATION ON 19.02.2014 THA T THE EXPORT QUALITY THAT OF CO-ENZYME Q10 WAS DIFFERENT FROM THE PRODUCT SOLD IN THE DOMESTIC MARKET. PRODUCTION PR OCESS WAS ALSO SUBMITTED AND INTER ALIA STATED THAT IN DOMEST IC MARKET, CO- Q10 SOLD WAS OF EP GRADE AND THAT FOR EXPORTS W AS USP GRADE AS DETAILED ON PAGE NOS.178 TO 180. ASSESSEE ALSO SUBMITTED EXTRACTS OF WEBSITE FOR THE INTERNATIONAL PRICES OF CO- ENZYME Q10 PREVAILING IN THAT PERIOD WERE PLACED ON PAGE ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 40 NOS.181-182 TO SUBSTANTIATE THE AMOUNT OF TRANSACTI ON. IT SHOWS THAT ASSESSING OFFICER HAS MADE ALL RELEVANT ENQUIRY. IN THIS REGARD, SAME WAS PROPERLY RESPONDED BY ASSESSE E AS DISCUSSED ABOVE. 26.4 WE FIND THAT ENQUIRY WITH REGARD TO NEW MACHIN ERY WAS MADE BY ASSESSING OFFICER AT ASSESSMENT STAGE. ASS ESSEE HAS STARTED MANUFACTURING OF CO-ENZYME Q 10 WITH THE HE LP OF NEWLY IMPORTED MACHINERY. IT WAS MADE CLEAR BEFORE ASSESSING OFFICER THAT THIS UNIT WAS REGISTERED AS 100% EOU B EING NEW ONE. ASSESSEE HAS USED PART OF LAND AND BUILDING E ARLIER ACQUIRED FROM TGBL. THE MACHINERY PURCHASED FROM T GBL ARE SUCH THAT IT COULD BE USED ONLY FOR MANUFACTURI NG OF OTHER PHARMA PRODUCT, BUT IT COULD NOT BE USED FOR MANUFA CTURING OF CO-ENZYME Q 10 PRODUCT. IN THIS REGARD, CERTIFICAT ES OBTAINED FROM CHARTERED ENGINEER WERE ALSO SUBMITTED DURING ASSESSMENT PROCEEDINGS. A SUBMISSION MADE OF FORM 1 4 IO AND THE DETAILS OF EOU HAVE BEEN PLACED BY ASSESSEE AT PAGE NOS. 40 TO 50, CERTIFIED TO BE FILED BEFORE ASSESSI NG OFFICER AT RELEVANT POINT OF TIME. FORM 14 IO IS FOR IMPORTED CAPITAL GOODS FOR PRODUCTION OF CO-ENZYME Q 10. ABOVE DISC USSION SHOWS THAT SAID SANTOSH BHAKTPRATAP STATED THAT WE ARE USING OLD MACHINERY BUT NO WHERE HE MENTIONED THAT OLD MA CHINERY WAS BEING USED FOR MANUFACTURING CO-ENZYME Q 10. CI T MISUNDERSTOOD THESE FACTUAL ASPECT WHILE INVOKING P ROVISIONS OF SECTION 263 OF THE ACT. IN FACT, ALL THESE FACT S WERE GIVEN TO ASSESSING OFFICER AT ASSESSMENT STAGE. ASSESSEE HA D ALREADY SUBMITTED THAT VARIOUS PERMISSIONS OBTAINED FROM KA NDLA ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 41 ECONOMIC ZONE OF MINISTRY OF COMMERCE & INDUSTRIES. THE COPIES OF INVOICES OF NEW MACHINERIES OBTAINED AND INSTALLED IN EOU UNIT OF MASAR PLANT FOR MANUFACTURING CO-ENZYME Q 10 HAVE BEEN PLACED ON PAGE NOS. 51 TO 173, CERTIFIED TO BE BEFORE ASSESSING OFFICER AT RELEVANT POINT OF TIME. ASSES SING OFFICER HAS MADE RELEVANT ENQUIRIES IN THIS REGARD, SAME WE RE REPLIED ON BEHALF OF ASSESSEE. EVEN WITH REGARD TO EXPORT, ENQUIRIES WERE MADE WHICH WERE REPLIED BY ASSESSEE. EVEN RAT E DIFFERENCE OF DOMESTIC SALE AND EXPORT WAS STATED B EFORE ASSESSING OFFICER INTER ALIA SUBMITTING THAT THERE WAS A BIG QUALITY DIFFERENCE IN BOTH SALES I.E. DOMESTIC AND FOREIGN WITH REGARD TO ONE CONSIGNMENT TO FRANCE AT LOWER RATE I T WAS NOT SALE BUT SAMPLE SALE IN WHICH AMOUNT IS NOT MATERIA L. IT WAS DONE ON MINIMUM PRICE JUST FOR THE SAKE OF CUSTOM C LEARANCE. ASSESSEE CAN NOT SHOW ZERO AMOUNT OF SALE OF THESE SAMPLE, SO NOMINAL COST WAS TAKEN FOR CUSTOM PURPOSE. IN SUCH A SITUATION, PROVISIONS OF SECTION 263 OF THE ACT IS NOT JUSTIFIED AND SAME IS SET ASIDE. SIMILAR ISSUE AROSE IN A.Y. 2008-09, 2009-10, 2010-11, 2011-12 & 2012-13. FACTS BEING S IMILAR SO FOLLOWING SAME REASONING, WE SET ASIDE THE ORDER OF CIT ON THIS ISSUE IN ALL THESE YEARS. 27. THE NEXT ISSUE RAISED IN GROUND NO.5 OF ASSESSE ES APPEAL IS WITH REGARDS TO HUGE PURCHASES FROM CERTAIN CONCERN S STATIONED AT DUBAI. ACCORDING TO CIT, ASSESSING OF FICER HAS ACCEPTED THE CLAIM OF ASSESSEE WITHOUT VERIFYING TH E AUDIT REPORT OF SUCH OFFSHORE BRANCH. ACCORDING TO CIT I N THE ANNUAL RETURNS FILED BY ASSESSEE COMPANY, NO SUCH SEGMENT REPORTING ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 42 OR RESULTS OF OFFSHORE BRANCH WERE SHOWN. IN THIS R EGARD, THE STAND OF ASSESSEE HAS BEEN THAT ASSESSEE HAS A BRAN CH OFFICE IN DUBAI, UAE, SINCE 2006 AND ASSESSEE IS CARRYING OUT TRADING BUSINESS OF GELATIN/DCP IN UAE IN ACCORDANCE WITH T HE VALID LAWS AND REGULATIONS. IT WAS CLAIMED THAT IN RESPEC T OF THE SAID TRADING ACTIVITY, ASSESSEE HAS NEITHER SENT ANY MATERIAL FROM INDIA NOR IMPORTED ANY MATERIAL FROM DUBAI TO INDIA AND IT WAS CLAIMED THAT THE ASSESSING OFFICER HAS VERIFIED ALL THESE TRANSACTIONS AND NO INCRIMINATING MATERIAL HAS BEEN FOUND IN THIS REGARD DURING SEARCH. ACCORDING TO CIT, NO SE GMENT REPORTING HAS BEEN DONE WHILE FINALIZING THE AUDITE D REPORT OF THE ASSESSEE COMPANY. ACCORDING TO HIM, CERTIFIED AUDITED RESULTS OF OFFSHORE BRANCH WERE NOT VERIFIED BY THE ASSESSING OFFICER. CIT OBSERVED THAT ASSESSING OFFICER OUGHT TO HAVE CALLED FOR THE AUDITED ACCOUNTS OF THE OFFSHORE BRA NCH OF THE ASSESSEE COMPANY FOR VERIFICATION OF THE ASSESSEES CLAIM IN THIS REGARD WHICH HE HAS FAILED TO DO. 27.1 IN THIS REGARD, ASSESSEE DREW OUR ATTENTION TO THE PAGE NO.25 OF PAPER BOOK NO.I I.E. LETTER DATED 19.02.20 14 ADDRESSED TO DEPUTY COMMISSIONER INTER ALIA WHICH READS AS UN DER: 3) WE ARE ENCLOSING HERE WITH TRADING, P&L ACCOUNT OF DUBAI BRANCH OF STERLING BIOTECH LIMITED FOR THE YE AR ENDED FROM 31.03.2006 TO 31.03.2011 AS PER YOUR REQUIREMENT. SO, IN THIS BACKGROUND, IT WAS SUBMITTED THAT ALL D ETAILS WITH REGARDS TO TRANSACTIONS IN QUESTION WERE FILED BEFO RE THE ASSESSING OFFICER AT RELEVANT POINT OF TIME. LD. A UTHORIZED ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 43 REPRESENTATIVE TOOK US TO THE RELEVANT DETAILS FILE D TO THE PAPER BOOK AS ON PAGE NO.27 AND ALSO DREW OUR ATTENTION T O PAGE NO.35 LETTER DATED 05.03.2014 ADDRESSED TO CONCERNE D ASSESSING OFFICER REGARDING INFORMATION CALLED FOR IN THE CASE OF STERLING BIOTECH LIMITED WHICH READS AS UNDER: 2) CONFIRMATIONS WERE CALLED FROM THE PARTIES WITH WHOM TRANSACTIONS I.E. SALES/PURCHASES CARRIED OUT AT DU BAI BRANCH. SOME OF THE PARTIES RESPONDED ON OUR REQUE ST AND PROVIDED THEIR CONFIRMATIONS WHICH ARE ENCLOSED TO THIS LETTER. 27.2 THUS, WE FIND THAT CONFIRMATIONS WERE CALLED F ROM PARTIES WITH WHOM TRANSACTIONS OF SALE AND PURCHASE CARRIED OUT. THUS, ASSESSING OFFICER CALLED FOR INFORMATION AND SAME WERE RESPONDED AT RELEVANT POINT OF TIME WITH REGARDS TO THE TRANSACTIONS CARRIED OUT AT DUBAI. FOR THE EXAMPLE , OUR ATTENTION WAS DRAWN TO PAGE NO.36 OF PAPER BOOK I, LETTER DATED 15 TH FEBRUARY, 2014 ADDRESSED TO ASSESSEE BY CONCERNED PARTY I.E. TRADING INC. SIMILARLY ATTENTION DRAWN TO THE LETTER OF ONE BLUE MARK MERCANTILE LTD. DATED 26 TH FEBRUARY, 2014 ADDRESSED TO ASSESSEE REGARDING CONFIRMATION OF ACC OUNTS OF STERLING BIOTECH LIMITED. THIS SHOWS THAT ASSESSIN G OFFICER HAS EXAMINED THE TRANSACTIONS OF ASSESSEE AT DUBAI. IN THIS SITUATION, IT CANNOT BE SAID THAT NO DETAILS WERE V ERIFIED BY THE ASSESSEE REGARDING OFF SHORE TRANSACTIONS. MOREOVE R, ASSESSING OFFICER HAS CALLED FOR AUDITED ACCOUNTS OF OFFSHORE BRANCH OF ASSESSEE COMPANY FOR VERIFICATION OF ASSESSEES CLA IM IN THIS REGARD. IN SUCH SITUATION, CIT WAS NOT JUSTIFIED I N INVOKING PROVISIONS OF SECTION 263 OF THE ACT WITH REGARDS T O THE TRANSACTIONS AT DUBAI AS DISCUSSED ABOVE. SO, SAME IS SET ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 44 ASIDE ON THIS ISSUE. SIMILAR ISSUE AROSE IN A.YS. 2007-08 TO 2012-13. FACTS BEING SIMILAR SO FOLLOWING SAME REA SONING, WE ARE NOT INCLINED TO CONCUR WITH THE FINDING OF CIT WHO WAS NOT JUSTIFIED TO SET ASIDE THE ORDER OF ASSESSING OFFIC ER. ACCORDINGLY, THE ORDER OF CIT ON THIS ISSUE IS SET ASIDE. 28. THE NEXT ISSUE IS WITH REGARDS TO LIST OF 151 E NTITIES WITH THEIR LETTER HEAD AND STAMPS AND OTHER DOCUMENTARY EVIDENCES FOUND AND SEIZED DURING SEARCH OPERATION FROM TWO D IFFERENT PREMISES. DURING SEARCH OPERATION SHRI RAMANI IYER, DIRECTOR OF THE GROUP COMPANIES, HAD SUBMITTED THAT THESE DO CUMENTS BELONG TO SBL GROUP COMPANIES AND THAT THE PREMISES WHEREFROM THEY WERE SEIZED WAS BEING USED BY ASSESS EE. HOWEVER, LATER ON DURING COURSE OF ASSESSMENT PROCE EDINGS AFTER DUE ANALYSIS OF DETAILS ANOTHER CLAIM WAS MAD E CONTENDING THAT MOST OF THESE COMPANIES ARE CLIENTS OF SHRI H. S. HATHI AND ASSESSEE DO NOT HAVE ANY RELATION WITH THESE COMPANIES. ACCORDING TO CIT, THE ASSESSING OFFICER SIMPLY ACCEPTED THE CHANGED STAND ON THIS ISSUE, WITHOUT A NY VERIFICATION, IN SPITE OF FACT THAT AT INITIAL STAG E SHRI RAMANI IYER, THE DIRECTOR OF THE GROUP COMPANIES ACCEPTED THAT THESE ARE COMPANIES BELONGING TO SBL GROUP AND THE LIST O F THESE COMPANIES ALONG WITH THE STAMPS AND LETTER HEADS OF THESE COMPANIES HAVE BEEN SEIZED FROM THE ASSESSEE'S PREM ISES. ACCORDING TO CIT, THIS WAS AN IMPORTANT PIECE OF EV IDENCE WHICH NEEDED FURTHER INVESTIGATION, WHICH THE ASSES SING OFFICER FAILED TO DO AND ASSESSES CONTENTION THAT NO INCRI MINATING DOCUMENTS HAVE BEEN FOUND IS NOT BASED ON APPRECIATION OF ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 45 FACTS GIVEN ABOVE. SO, HE INVOKED PROVISIONS OF SE CTION 263 OF THE ACT ON THIS ISSUE AS WELL. 28.1 IN THIS REGARD, LD. AUTHORIZED REPRESENTATIVE DREW OUR ATTENTION TO PAGE NO.9 OF PAPER BOOK II, HAVING STA TEMENT OF SHRI RAMANI IYER, DIRECTOR OF ASSESSEE GROUP COMPAN IES AND SPECIFIC ATTENTION WAS ALSO DRAWN TO THE ANSWER TO QUESTION NO.7 INTER ALIA SAID RAMANI IYER STATED AS UNDER: Q.7. YOU HAVE STATED THAT YOU HAVE A FLAT AT SUVID HI APARTMENT (FLAT NO.202). PLEASE STATE HOW YOUR ARE UTILIZING IT? ANS. NO ONE IS STAYING IN THE ABOVE FLAT, BUT I HAV E GIVEN THAT FLAT FREE OF RENT TO STERLING BIOTECH GROUP FO R THEIR USE. BUT THERE IS NO LEASE OR RENTAL AGREEMENT TO PROVE THAT. THEY ARE USING THAT PREMISES FOR KEEPING THE RECORDS OF THEIR VARIOUS COMPANIES. THOUGH THE COM PANY IS USING IT, THE KEYS ARE AVAILABLE WITH ME IN MY H OUSE. IT SHOWS THAT RAMANI IYER HAS NOT STATED IN CLEAR W ORDS THAT SAID OFFICE IS BEING USED BY ASSESSEE GROUP COMPANI ES, WHICH IS EVIDENT FROM THE ANSWER OF QUESTION NO.8 WHICH READ S AS UNDER: Q.8. WILL YOU PLEASE TELL WHAT KIND OF RECORDS THE STERLING GROUP IS KEEPING IN YOUR ABOVE FLAT? ANS. I DONT KNOW CLEARLY BUT RECORDS BELONGS TO VA RIOUS COMPANIES OF STERLING BIOTECH GROUP ARE KEPT THERE. THUS, AGAIN RAMANI IYER WAS NOT CERTAIN WHAT KIND O F FILES ARE THERE IN SAID OFFICE. 28.2 LD. AUTHORIZED REPRESENTATIVE ALSO DREW OUT AT TENTION TO ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 46 PAGE NO.1 REGARDING 18 OUT OF 151 COMPANIES GROUP, THE DETAILS OF COMPANY WAS DISCUSSED BY ASSESSING OFFICER WHERE BY HE WAS SATISFIED ON THIS ISSUE. IN THIS SITUATION, TH E DIRECTION OF CIT TO AGAIN VERIFY 151 ENTITIES WAS NOT JUSTIFIED. HOWEVER, THE SAME HAVE BEEN CLEARLY VERIFIED AS MENTIONED IN PAG E NO.1 OF PAPER BOOK II WHICH ADDRESSED TO ASSTT. COMMISSIONE R OF INCOME TAX INTER ALIA EXPLAINING WITH REGARD TO DOC UMENTS FOUND OF 151 COMPANIES IN THE CASE OF SEARCH ACTION CONDUCTED ON STERLING BIOTECH LIMITED GROUP DATED 24.12.2013, WHEREIN IT WAS STATED THAT: WITH REGARD TO ABOVE AND IN ADDITION TO THE DETAIL S SUBMITTED AS PER THE ANNEXURE TO THE NOTICE U/S.142(1) FOR TH E BLOCK PERIOD FROM A.Y. 2006-07 TO A.Y. 2011-12, WE ARE SU BMITTING HERE WITH THE FURTHER EXPLANATION ON THE SUBJECT MA TTER AS DISCUSSED AND QUESTIONED BY YOU IN THE HEARING. IN THIS REGARD WE SUBMIT THAT THESE ARE ALL THE DET AILS OF THE COMPANIES BELONGING TO THE CLIENTS OF M/S H. S. HAT HI & CO., CHARTERED ACCOUNTANTS. SOME OF THE COMPANIES BELONG TO OUR PROMOTER GROUP COMPANIES AND SOME OF THEM BELONG TO THE CLIENTS OF M/S H.S. HATHI & CO., CHARTERED ACCOUNTANTS. AS OFFICE OF M/S H.S. HATHI & CO. WAS UNDER RENOVAT ION MR. HEMANT HATHI, PARTNER OF M/S. H. S. HATHI & CO., HA S REQUESTED TO MR. CHETAN SANDESARA TO MAKE AN ACCOMMODATION FOR KEEPING THE FILES AND OTHER RECOR DS, FOR WHICH MR. CHETAN SANDESARA HAS TAKEN A FLAT OF MR. RAMANI IYER TO KEEP THE ABOVE DOCUMENTS ON TEMPORARY BASIS . SANDESARA GROUP ALONG WITH ITS PROMOTER COMPANIES A RE BEING THE CLIENTS OF H.S. HATHI & CO., THERE WERE MEMORAN DUM AND ARTICLES OF OTHER COMPANIES WERE ALSO FOUND ALONG W ITH OUR GROUP CONCERNS IN THE PREMISES OF M. RAMANI IYER WH ICH ALL PUT TOGETHER WERE 151 COMPANIES IN THE LIST. ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 47 WITH REGARD TO TRANSACTIONS OF STERLING BIOTECH LIM ITED WITH OTHER COMPANIES WE STATE THAT WE DO HAVE ANY TRANSA CTION NEITHER IN SALES NOR IN PURCHASES. WITH REGARD TO T HE GROUP COMPANIES WE STATE THAT THESE BEING INVESTING COMPA NIES THERE ARE CERTAIN DIVIDEND PAYMENTS FROM OUR COMPAN Y GROUP COMPANIES MAY APPEAR WHICH HAS BEEN PROPERLY ACCOUN TED AND FILED THE INCOME TAX RETURN REGULAR BASIS. ON VERIFICATION FROM M/S. H. S. HAUL & CO. WE CAME TO KNOW THAT THERE ARE CERTAIN COMPANIES WHICH ARE IN NASCE NT STAGE AND SOME OF THE COMPANIES DO NOT HAVE ANY BUSINESS ACTIVITIES AND THEY HAVE ALSO INFORMED US WHEREVER THE BUSINESS ACTIVITIES ARE THERE IN THOSE COMPANIES TH EY ARE REGULAR IN FILING THE TAX RETURNS. WE HAVE ENCLOSED THE DETAILED NAMES OF THE COMPANIE S ALONG WITH THEIR ADDRESSES AND PAN FOR YOU RECORDS AND RE FERENCE (ANNEXURE 6A-1). ANNEXURE DETAILS 6A - 1 STATEMENT SHOWING THE DETAILS OF THE 151 COMPANIES ALONG WITH THEIR PAN, DIRECTORS AND INCOME TAX JURISDICTION DETAILS. KEEPING ABOVE FACTS, WE SUBMIT THAT THERE IS NO CON NECTION OF STERLING BIOTECH LIMITED WITH THAT OF AT THE 151 CO MPANIES FOUND AT THE FLAT OF MR. RAMANI IYER EXCEPT WITH GR OUP COMPANIES AS MENTIONED ABOVE. WE HEREBY CONFIRM THA T THESE COMPANIES ARE NOT OPERATED BY STERLING BIOTECH LIMI TED FOR THEIR BENEFIT AS ALL COMPANIES OTHER THEN PROMOTER COMPANIES ARE INDEPENDENT COMPANIES AND ARE REGULAR IN FILING THEIR RESPECTIVE TAX RETURNS. 28.3 IT SHOWS THAT ASSESSEE IN CERTAIN SITUATION HA S GIVEN ITS PREMISES TO M/S. H. S. HATHI & CO., CHARTERED ACCOU NTANTS, TO USE THIS PREMISE TO RUN ITS OFFICE BECAUSE OF RENOV ATION IN ITS OFFICE 18 OUT OF 151 DETAILS BELONGS TO ASSESSEE GR OUP AND REST BELONGS TO M/S. H. S. HATHI & COS. CLIENTS AS MENT IONED ABOVE. THUS, THIS CLEAR CUT FACTUAL FINDING ARRIVED BY ASS ESSING OFFICER ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 48 AT RELEVANT POINT OF TIME. THE ASSESSEE HAD SUBMIT TED NAME, ADDRESS, PAN NUMBER, DETAILS OF JURISDICTIONAL OFFI CERS IN RESPECT OF 151 PARTIES. IN SUCH A SITUATION, CIT W AS NOT JUSTIFIED IN GIVING DIRECTION TO VERIFY THE DETAILS OF ALL 151 COMPANIES ASSUMING THE SAME TO BE BELONGING TO THE ASSESSEE GROUP. 28.4 AS REGARDS TO ISSUE OF 18 ENTITIES AS RAISED I N GROUND NO.9 BY ASSESSEE FROM WHICH SUBSCRIPTION TO THE SHARE CA PITAL OF ASSESSEE COMPANY TO THE TUNE OF RS.45 CRORE WAS ADM ITTED AS MERELY A PAPER ENTRY BY SHRI H.S. HATHI. IT WAS CL AIMED BY ASSESSEE THAT SHARE APPLICATION MONEY WAS RETURNED IN DECEMBER, 2006. CIT OBSERVED THAT THESE COMPANIES WHICH WERE REPORTEDLY BELONGING TO THE PROMOTER GROUP HAD INVESTED IN THE ASSESSEE COMPANY WHICH WAS ADMITTED AS A PAP ER ENTRY BY THE IN HOUSE C.A. CIT HAS IGNORED THESE ASPECTS. LD. AUTHORIZED REPRESENTATIVE DREW OUR ATTENTION TO ANN EXURE-2, NOTICE U/S.142(1) OF THE ACT DATED 05.08.2013 AND A TTENTION DRAWN TOWARDS QUESTION NOS.1, 2 & 3 WHICH READS AS UNDER: Q.1 DURING THE COURSE OF SEARCH IT IS FOUND THAT M /S STERLING GROUP HAS SUBSCRIBED TO SHARE CAPITAL OF S .B.L. IN F.Y. 2005-06. THE LIST OF THE NAME OF THE COMPANY OF THE 18 CONCERNS ARE LISTED BELOW. SR.NO. NAME OF THE COMPANY 1. ADITI HOSPITALS PVT. LTD. 2. ANULA PROPERTIES P.LTD. 3. BLUE MARK MERCANTILE LTD. 4. BULLWORTH INVESTRADE P. LTD. 5. DORAL TRADING P. LTD. 6. HELICOPTER SERVICES P. LTD. 7. JAICO TEXTILES P LTD. ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 49 8. JANGPRIYA INVESTMENTS P. LTD. 9. MODI CAPITAL FINANCE (INDIA)LTD. 10. NATASHA INVESTMENT CO. PVT. LTD. 11. PAYSAN PUBLISHERS PVT. LTD. 12. PRABAL INVESTRADE P.LTD. 13. PUJA AQUA FARMS P. LTD. 14. RICHMOND INVESTMENTS P. LTD. Q.2 YOU ARE REQUESTED TO GIVE THE DETAILS OF THE PA N NO., MEMORANDUM OF ASSOCIATION AND ARTICLE OF ASSOCIATIO N OF THE ABOVE MENTIONED 18CONCERN. Q.3 YOU ARE REQUESTED TO GIVE THE BANK STATEMENT FO R THE LAST 6 MONTHS FROM THE DATE OF CREDIT OF SHARE CAPI TAL TO SBL OF THE ABOVE MENTIONED 18 CONCERN AND ALSO THE BANK STATEMENT AFTER 6 MONTHS FROM CREDIT OF SHARE CAPI TAL TO SBL. FURTHER ATTENTION WAS DRAWN TO PAGE NO.71 TO 73 OF THE PAPER BOOK II WHEREIN IT CONTAINS THE REPLY OF THE ASSESS EE TO THE CONCERNED ASSISTANT COMMISSIONER OF INCOME TAX DATE D 24.12.2013, WITH REGARD TO SHARE APPLICATION MONEY OF RS.45 CRORES BY STERLING BIOTECH LIMITED AND REFUNDED BAC K AFTERWARDS. WITH REGARD TO ABOVE AND IN ADDITION TO THE DETAIL S SUBMITTED AS PER THE ANNEXURE TO THE NOTICE U/S. 14 2(1) FOR THE BLOCK PERIOD FROM A.Y. 2006-07 TO A.Y. 2011 -12, WE ARE SUBMITTING HERE WITH THE FURTHER EXPLANATION ON THE SUBJECT MATTER AS DISCUSSED AND QUESTIONED BY Y OU IN THE HEARING. IN THIS REGARD WE SUBMIT THAT PURSUANT TO THE REQUIREMENT OF TERM LENDING BANKS FOR EQUITY CONTRIBUTION, THE PROMOTERS HAVE TO BRING IN ADDITI ONAL CAPITAL TOWARDS COMPANY'S MARGIN AND ACCORDINGLY TH E COMPANY HAS INVITED SHARE APPLICATION FORMS FROM OU R 18 GROUP COMPANIES TO THE TUNE OF 45 CR. COPY OF SANCTION LETTER RECEIVED FROM TERM LENDING BANK ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 50 HIGHLIGHTING THE CONDITION FOR CAPITAL EXPANSION IS ENCLOSED FOR YOUR PERUSAL (ANNEXURE 1 A-7). THE ABOVE COMPANIES HAVE APPLIED FOR THE SHARES ALO NG WITH SHARE APPLICATION FORM. ALL 18 COMPANIES HAVE PAID THE SHARE APPLICATION MONEY OF RS. 2.50 CRORES EACH TO STERLING BIOTECH LIMITED PRIOR TO 31.03.2003 WHICH IS NOT IN THE PURVIEW OF THE BLOCK ASSESSMENT. FURTHER WE ARE NOT KEEPING ANY RECORDS RELATED TO THE 18 COMPANIES FOR THE YEAR ENDED 31.03.2003 OR PRIOR AS IT IS 10 YEAR S OLD RECORD, WHICH IS NOT TRACEABLE. STERLING BIOTECH LI MITED BEING LISTED COMPANIES, WE HAVE ENCLOSED HEREWITH T HE BALANCE SHEET OF STERLING BIOTECH LIMITED SHOWING T HE SHARE APPLICATION MONEY AS RS. 45CRORES IN THE YEAR ENDING 31.03.2003 (ANNEXURE - 1A-6). FURTHER WE ENC LOSE HEREWITH BOARD RESOLUTION FOR RECEIVING SHARE APPLI CATION MONEY DATED 30 TH APRIL, 2005 (ANNEXURE - 1A-1). HOWEVER DUE TO MANAGEMENT DECISION IN THE F.Y. ENDE D 31.03.2007 IT WAS DECIDED TO REFUND THE SHARE APPLI CATION MONEY BACK TO ALL 18 COMPANIES INSTEAD OF ALLOTMENT OF EQUITY SHARES. COPY OF THE BOARD RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS HELD ON 15TH NOVE MBER, 2006 FOR REFUND OF THE SAID MONEY IS ENCLOSED HEREW ITH (ANNEXURE 1A - 2). STERLING BIOTECH LIMITED HAS REF UNDED THE APPLICATION MONEY TO THE CONCERNED APPLICANT COMPANIES THROUGH ACCOUNT PAYEE CHEQUES. WE HAVE HEREWITH ENCLOSED THE COPIES SHARE APPLICATION FORM S GIVEN BY APPLICANT COMPANIES AND A COPIES OF BANK STATEMENTS OF OUR COMPANY AND THE APPLICANT COMPANI ES HIGHLIGHTING THE PAYMENTS MADE/RECEIVED FOR YOUR KI ND PERUSAL AND RECORDS (ANNEXURE - 1A-4). FURTHER WE A RE ENCLOSING HEREWITH BALANCE SHEET OF STERLING BIOTEC H LIMITED FOR THE YEAR ENDED 31.03.2007 SHOWING EFFEC T OF REFUND OF SHARE APPLICATION MONEY (ANNEXURE 1A-5). WE HAVE ALSO ENCLOSED THE BALANCE SHEET, ITR ACKNOWLEDGEMENTS COPIES OF ALL THE 18 APPLICANT COMPANIES FOR YOUR REFERENCE AND RECORDS. ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 51 ANNEXURE DETAILS 1 A - 1 COPY OF BOARD RESOLUTION FOR APPROVAL OF SHARE APPLICATION 1 A - 2 COPY OF BOARD RESOLUTION FOR REFUND OF SHARE APPLICATION 1 A - 3 DETAILS OF PROMOTERS CO MPANIES WITH DATE OF INCORPORATION 1 A - 4 COPIES OF SHARE APPLICATION FORMS, BANK STATEMENTS OF THE APPLICANT COMPANIES, BALANCE SHEET OF THE APPLICANT COMPANIES AND I.T.R. ACKNOWLEDGEMENT COPIES OF THE APPLICANT COMPANIES 1 A - 5 COPY OF BALANCE SHEET AND SCHEDULE OF M/S . STERLING BIOTECH LTD SHOWING SHARE APPLICATION MONEY REFUNDED IN THE YEAR ENDED 31ST MARCH, 2007 1 A - 6 COPIES OF BALANCE SHEET OF M/S STERLING BIOTECH LTD OF MARCH, 2003 SHOWING SHARE APPLICATION MONEY RECEIVED BY THE COMPANY 1 A - 7 COPY OF SANCTION LETTER RECEIVED FROM TERM LENDING BANK HIGHLIGHTING THE CONDITION FOR CAPITAL EXPANSION IN VIEW OF THE ABOVE SUBMISSIONS, IT IS PERTINENT T HAT THESE 18 COMPANIES HAVE ACQUIRED FUNDS PRIOR TO MARCH, 20 03 AND THEY HAVE INVESTED THESE AMOUNTS AS A SHARE APPLICATION MONEY IN MARCH, 2003 IN M/S STERLING BI OTECH LTD. AS THE PERIOD IS OF 10 YEARS OLD WE ARE NOT IN A POSITION TO SUBMIT THE DOCUMENTS RELATED TO 18 COMP ANIES AS MENTIONED ABOVE BUT WE ARE SUBMITTING THE BOARD RESOLUTION PASSED AT THE MEETING OF DIRECTORS OF ST ERLING BIOTECH LIMITED FOR RECEIVING SHARE APPLICATION MON EY ALONG WITH BALANCE SHEET OF STERLING BIOTECH LIMITE D FOR THE YEAR ENDED 31.03.2003 REFLECTING SHARE APPLICAT ION MONEY RECEIVED TO THE TUNE OF RS. 45 CRORES. FURTHER GOING AHEAD IN MARCH' 2007 THE ENTIRE AMOUN T WAS REFUNDED BACK TO ALL 18 COMPANIES. THE COPIES O F BALANCE SHEET REFLECTING THE TRANSACTIONS IS BEEN SUBMITTED AND ALSO THE INCOME TAX RETURNS OF THESE ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 52 APPLICANT COMPANIES IS ALSO SUBMITTED FOR YOUR PERU SAL. WE HAVE ALSO ENCLOSED COPY OF BANK STATEMENT OF 18 COMPANIES REFLECTING THE TRANSACTION OF MONEY RETUR NED BY STERLING BIOTECH LIMITED ALONG WITH THE COPIES OF B ANK STATEMENT OF STERLING BIOTECH LIMITED REFLECTING TH E PAYOUT OF THE SAID MONEY. 28.5 THIS GIVES THE DETAILS OF INVESTORS AND ALSO D ETAILS OF REFUND OF THE SAME TO 18 COMPANIES AS DISCUSSED ABO VE AND WAS AVAILABLE BEFORE ASSESSING OFFICER AT RELEVANT POINT OF TIME. IT SHOWS THAT 18 COMPANIES BELONG TO ASSESSEE AND TRANSACTIONS WITH THE SAME HAVE BEEN CLEARLY SPECIF ICALLY ASKED IN ASSESSMENT PROCEEDINGS AND SAME WERE REPLIED BY THE ASSESSEE. SO, CIT WAS NOT JUSTIFIED IN INVOKING P ROVISIONS OF SECTION 263 OF THE ACT WITH REGARD TO TRANSACTIONS WITH 18 PARTIES AS DISCUSSED ABOVE BECAUSE SAME WERE DULY V ERIFIED AT ASSESSMENT LEVEL. REGARDING REMAINING OTHER THAN 1 8 OUT OF 151, SAME DID NOT BELONG TO ASSESSEE AS DISCUSSED A BOVE BECAUSE SAME BELONG TO CLIENT OF M/S. H. S. HATHI & CO. WHO WAS USING THE PREMISES IN QUESTION ON TEMPORARY BAS IS AS DISCUSSED ABOVE. IN ANY CASE THE SHARE APPLICATION S MONEY OF RS.45 CRORE HAD BEEN RECEIVED FROM 18 COMPANIES IN A.Y. 2003-04 WHICH IS BEYOND THE ASSESSMENT YEARS UNDER CONSIDERATION. THIS TAKE CARE OF ISSUE RAISED IN G ROUND NOS. 6 & 9. SO, ORDER OF ASSESSING OFFICER CANNOT BE SAID TO BE ERRONEOUS AS TO BE PREJUDICIAL TO THE INTEREST OF R EVENUE TO MAKE IT FALL IN PROVISIONS OF SECTION 263 OF THE AC T. SAME IS SET ASIDE. SIMILAR ISSUE AROSE IN A.Y.2007-08 TO 2012- 13. FACTS BEING SIMILAR SO FOLLOWING SAME REASONING, ALL ORDE RS OF CIT ARE SET ASIDE FOR REASONS DISCUSSED ABOVE. ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 53 29. NEXT ISSUE IS WITH REGARDS TO DOCUMENTARY EVIDE NCE FOUND DURING THE COURSE OF SEARCH IN RESPECT OF INVESTMEN T IN OFFSHORE ENTITIES LIKE USA AND DUBAI ETC. IN THIS REGARD, T HE STAND OF ASSESSEE HAS BEEN THAT ASSESSEE COMPANY HAS NOT MAD E ANY SUCH INVESTMENT, EXCEPT SMALL INVESTMENT OF RS. 11, 00,000/- IN THREE OFFSHORE ENTITIES. IT WAS CLAIMED THAT DE TAILS OF SUCH INVESTMENTS WERE SUBMITTED DURING THE COURSE OF ASS ESSMENT PROCEEDINGS U/S 153A OF THE ACT. FURTHER, ASSESSEE' S ABOVE SUBMISSIONS WERE NOT FOUND TO BE SATISFACTORY AS TH E SEIZED MATERIAL CONTAINS SUFFICIENT EVIDENCES TO INDICATE THAT THE ASSESSEE COMPANY HAS SUBSTANTIAL OFFSHORE INVESTMEN TS. ACCORDING TO CIT, PAGE 1 OF ANNEXURE 2 OF THE LOOSE PAPER SEIZED DURING SEARCH OPERATION INDICATED INVOICE RA ISED BY M/S. BURNISH INFRASTRUCTURE LTD., WHICH HAS ALSO FOUND P LACE IN THE STATEMENT OF SHRI CHETAN SANDESARA RECORDED DURING SEARCH ACTION ON 29.06.2011. THE SAME WAS TRUE FOR PAGE NO . 2 & 3 OF THE ABOVE ANNEXURE WHICH ALSO INDICATES HUGE PAYMEN TS MADE BY STERLING PORT LTD. PAGE NOS. 6 TO 8 OF THE SAME ANNEXURE IS INDICATIVE OF FUND TRANSFER TO THE TUNE OF 1.07 LAK H US DOLLARS TO THEIR SUBSIDIARY BUSINESS OF OIL EXPLORATION IN NIGERIA. PAGE NO. 17 IS INDICATIVE OF CYCLE PLAN FOR ROUTING FUND FOR PROJECT IN NIGERIA. IN ADDITION TO THE ABOVE, THERE WERE OTHE R DOCUMENTS IN THE SAME ANNEXURE WHICH CONTAINS IDENTICAL INFOR MATION ABOUT OVERSEAS INVESTMENT ACTIVITIES OF THE ASSESSE ES COMPANY, AND THE GROUP. BLANK LETTER HEADS OF MANY SUCH OFFS HORE ENTITIES, LIKE ARABIAN PROJECTS LTD, HALLMARK ENTER PRISES LTD AND RICHMOND OVERSEAS LTD WERE FOUND AND SEIZED. AC CORDING TO CIT, ASSESSING OFFICER OUGHT TO HAVE THOROUGHLY EXAMINED ALL ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 54 THE DOCUMENTS AND SHOULD HAVE WORKED OUT THE CORREC T SCALE OF OVERSEAS INVESTMENTS OF THE ASSESSEE COMPANY. ACCO RDINGLY, HE INVOKED SECTION 263 OF THE ACT ON THIS ISSUE, W HICH HAS BEEN OPPOSED ON BEHALF OF ASSESSEE. ON OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF CIT. 29.1 BEFORE US, LD. AUTHORIZED REPRESENTATIVE DREW OUR ATTENTION TO PAGE NO.21 OF THE PAPER BOOK II HAVING INVOICE OF BURNISH INFRASTRUCTURE PVT. LTD. WHICH READS AS UND ER: WORK DESCRIPTION UNIT PRICE TOTAL PRICE MOBILE HARBOR CRANES 2000 TPH FOR MULTIPURPOSE CARGO BERTH DESIGN, ENGINEERING, PROCUREMENT, SUPPLY AND ERECTION TOTAL ORDER VALUE (EX CGS, DAHEJ) RS. 35,51,00,000 RS.71,02,00,000 ADVANCE TOWARDS START OF WORKS RS.28,40,80,000 TOTAL ADVANCE DUE RS.28,40,80,000 B ANKDETAILS BANK NAME AXIS BANK LTD BRANCH GOREGAON LINK ROAD BRANCH, MUMBAI ACCOUNT NO 910020017038117 RTGS CODE UTIB0000219 THIS SHOWS THAT LETTER OF BURNISH INFRASTRUCTURE PR IVATE LIMITED DATED MAY 10,2011 WAS ADDRESSED TO STERLING PORT LI MITED AND THIS DOCUMENT REVEALS THE FACTS THAT ADVANCES HAVE MADE BY ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 55 STERLING PORT LIMITED TOWARDS START OF WORKS OF RS.28,40,80,000/-. THIS DOCUMENT EVIDENCED THE TRAN SACTIONS BETWEEN BURNISH INFRASTRUCTURE PVT. LTD. AND STERLI NG PORT LIMITED. IN THIS REGARD, OUR ATTENTION WAS DRAWN T OWARDS THE ASSESSMENT ORDER OF STERLING PORT LIMITED AS PLACED ON PAGE 39TO 40 OF PAPER BOOK II WHEREIN IT IS CLEARLY MENT IONED THAT SAID ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPING PORT AT DAHEJ (GUJARAT). DURING THE REL EVANT YEAR ASSESSEE COMPANY HAS NOT EARNED ANY INCOME AS THE P ROJECT WAS ON INITIAL STAGE. THERE WAS NO BUSINESS ACTIVI TY. THE CAPITAL WORK IN PROGRESS FOR THE YEAR AS PER BALANC E SHEET WAS SHOWN AT RS.393.26 CRORE. BUT FACTS REMAINED THAT TRANSACTIONS WERE BETWEEN BURNISH INFRASTRUCTURE PV T. LTD. AND STERLING PORT LIMITED AND IT IS NOTHING TO DO WITH THE ASSESSEE. OUR ATTENTION WAS DRAWN TO THE STATEMENT OF SHRI CH ETAN J. SANDESARA RECORDED U/S.132(4) OF THE ACT. DURING A SSESSMENT PROCEEDINGS, EXPLANATION FOR ALL THE DOCUMENTS SEIZ ED WAS SUBMITTED. PAGE NO.1,2,3 ARE RELATED TO STERLING P ORT LIMITED (PAGE 21-23 OF PART II). IN RESPONSE TO THE ENQUIR IES, SUBMISSION WAS MADE TO ASSESSING OFFICER ON 24.12.2 013 WITH REGARD TO CAPITAL ADVANCES MADE BY STERLING PORT LI MITED (PAGE 37-38 OF PART II). FURTHER ASSESSMENT OF STERLING PORT LIMITED WAS ALSO COMPLETED BY ASSESSING OFFICER AND ALL REL ATED DOCUMENTS AND EXPLANATIONS WERE FILED. PAGE NO.6,7 ,8 ARE FUND TRANSFER DETAILS OF FOREIGN ENTITIES WHICH HAV E NOT FINANCIAL IMPACT IN THE BOOKS OF STERLING BIOTECH LIMITED (PA GE 24-26 OF PART II). PAGE NO.17 WHICH IS PROJECTION / ESTIMAT ION OF PROJECT AT NIGERIA WHICH ALSO DOES NOT HAVE ANY FINANCIAL I MPACT IN THE ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 56 BOOKS OF STERLING BIOTECH LIMITED (PAGE 27 OF PART II). THE ASSESSEE HAD ALSO GIVEN PAGE-WISE EXPLANATION BEFOR E THE INVESTIGATING WING AS WELL AS THE ASSESSING OFFICER (PAGE NOS. 28, 29 OF PB NO.2). LETTER HEADS FOUND ARE BELONGI NGS OF THE VISITORS WHO LEFT BY MISTAKE AT THE PREMISES OF ASS ESSEE. IN THIS BACKGROUND, LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ORDER OF CIT BE SET ASIDE ON THE ISSUE. ON THE OTH ER HAND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF CIT. 29.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATE RIAL ON RECORD, WE FIND THAT DURING COURSE OF SEARCH, IN RE SPECT OF INVESTMENT IN OFFSHORE ENTITIES LIKE USA AND DUBAI WERE FOUND. IN THIS REGARD, THE STAND OF ASSESSEE HAS BEEN THAT HE HAS NOT MADE SUCH BIG INVESTMENT IN OFFSHORE ENTITIES AND D ETAILS OF SAME WERE SUBMITTED DURING COURSE OF PROCEEDINGS U/ S.153A OF THE ACT. THE DOCUMENTS AS DISCUSSED IN PARA 29.1 R EVEALS THAT BURNISH INFRASTRUCTURE PRIVATE LIMITED WAS HAVING T RANSACTION WITH STERLING PORT LIMITED TOWARDS START OF WORKS O F RS.28,40,80,000/-. ACCORDING TO THE DETAILS AT PAG E NOS. 39- 40 OF PAPER BOOK II, SAID COMPANY WAS ENGAGED IN TH E BUSINESS OF DEVELOPING PORT AT DAHEJ (GUJARAT). ALL DETAILS IN THIS REGARD HAD BEEN APPRECIATED BY ASSESSING OFFICER INDICATIN G THAT SAID TRANSACTION WAS BETWEEN BURNISH INFRASTRUCTURE PVT. LTD. AND STERLING PORT LIMITED NOT WITH ASSESSEE. ALL RECOR DS FOUND AS DISCUSSED ABOVE IN PRECEDING PARA AND RECORDS WERE NOT BELONGED TO ASSESSEE COMPANY. THE SAID CONTENTION OF ASSESSEE WAS ACCEPTED BY ASSESSING OFFICER AFTER DU E CONSIDERATION OF THE FACTS BECAUSE IN ASSESSMENT PR OCEEDINGS, ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 57 EXPLANATION FOR ALL DOCUMENTS WERE SEIZED AND SUBMI TTED. IN RESPONSE TO THE QUERIES, SUBMISSIONS WERE MADE TO T HE ASSESSING OFFICER ON 24.12.2013 WITH REGARD TO CAPI TAL ADVANCES MADE BY STERLING PORT LIMITED AS PLACED ON PAGE 37- 38 OF PAPER BOOK PART II. ASSESSMENT OF SAID STERL ING PORT LIMITED WAS ALSO COMPLETED BY SAME ASSESSING OFFICE R AND ALL RELATED DOCUMENTS AND EXPLANATIONS WERE FILED IN SA ID ASSESSMENT. THE SAID TRANSACTION IS NOTHING TO DO WITH THE ASSESSEE STERLING BIOTECH LIMITED. EVEN PROJECTION /ESTIMATION OF PROJECT AT NIGERIA HAS NOTHING TO DO WITH ASSESS EE. ASSESSEE HAS ALREADY GIVEN PAGE-WISE EXPLANATION BEFORE THE INVESTIGATING WING AS WELL AS THE ASSESSING OFFICER AS DETAILED ON PAGE NOS. 28, 29 OF PAPER BOOK NO.II. IN VIEW O F OUR LEGAL AND FACTUAL DISCUSSION, CIT WAS NOT JUSTIFIED TO IN VOKE THE PROVISIONS OF SECTION 263 OF THE ACT IN REGARD TO T HIS ALLEGATION, SO, SAME IS SET ASIDE. 30. NEXT ISSUE IS WITH REGARDS TO ESTIMATION OF THE BY-PRODUCTS AND WASTES FROM THE DATA OF BONE CONSUMPTION SOURCE D FROM ASSESSEE, TO QUANTIFY VARIOUS BYPRODUCTS, ON THE BA SIS OF INFORMATION AVAILABLE ON WEBSITE AND ASSESSING OFFI CER'S PRESUMPTION THAT SINCE THE SALE OF GELATIN IS MOSTL Y TO MNCS, THERE IS NO SCOPE OF SUPPRESSION IN RESPECT OF GELA TINE. IT WAS CONTENDED ON BEHALF OF ASSESSEE THAT THE ASSESSING OFFICER HAD EXAMINED THE RELEVANT DETAILS/DOCUMENTS DURING ASSE SSMENT PROCEEDINGS U/S 153A OF THE ACT AND HE CAME TO THE CONCLUSION THAT WASTE WAS 5% AS AGAINST 30% CLAIMED BY THE ASS ESSEE. IT WAS ALSO THE STAND OF ASSESSEE BEFORE ASSESSING OFF ICER THAT NO ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 58 INCRIMINATING MATERIAL WAS FOUND IN THIS REGARD DUR ING THE SEARCH. SINCE, THE COMPLETE QUANTITATIVE DETAILS WE RE ADMITTEDLY MAINTAINED REGARDING PRODUCTION OF GELAT IN AND DCP AT BOTH UNITS THAT IS KARKHADI AND OOTY, WHICH WERE FURTHER VERIFIABLE WITH REFERENCE TO THE VARIOUS INTERNAL Q UALITY CHECK REPORTS AND QUANTITATIVE TALLY, ANY SUCH SUPPRESSIO N OF SALE EITHER OF GELATIN AND DCF, OUGHT TO HAVE BEEN ASCER TAINED FROM THE FACTS THE CASE. HOWEVER, THE ASSESSING OFFICER CHOSE TO RESORT TO ESTIMATION OF BYPRODUCTS AND WASTES FROM THE DATA OF BONE CONSUMPTION SOURCED FROM ASSESSEE. ACCORDING TO CIT, ASSESSING OFFICER ALSO ERRED IN HOLDING THAT SINCE THE SALE OF GELATIN IN MOSTLY TO MNCS, THEREFORE, SUPPRESSION W AS NOT FEASIBLE AND THAT ONLY IN SALE OF DCP, THERE WAS A POSSIBILITY OF UNACCOUNTED SALES. CIT DISCUSSED THAT EVEN THE PAR TY WISE DETAILS OF SALES AND PURCHASES HAD NOT BEEN BROUGHT ON RECORD BEFORE ARRIVING AT THIS FINDING. THE METHOD ADOPTED BY THE ASSESSING OFFICER AND THE BASIS CHOSEN IS NOT SUPPO RTED BY ANY CASE SPECIFIC DATA. CIT OBSERVED THAT ASSESSING OF FICERS DISCUSSION ABOUT THE INTERNET INFORMATION ALSO DOES NOT MENTION ABOUT THE ACCEPTED YIELD OF GELATIN, THE MA IN PRODUCT. THE EXERCISE RESORTED TO BY THE ASSESSING OFFICER I N ESTIMATING THE YIELD AND CONSEQUENT SUPPRESSION OF SALE DOES N OT STAND ON ANY FACTUAL OR LOGICAL FOOTING, WHEN ALL THE RELEVA NT MATERIALS AND DATA WAS AT HIS DISPOSAL. HE SHOULD HAVE CARRIE D OUT PROPER EXAMINATION OF SEIZED DATA AND IN PARTICULAR MANUFACTURING REPORT, BEFORE ARRIVING AT ANY CONCLU SION IN THIS REGARD. HIS FAILURE TO DO SO AND THE METHOD OF ESTI MATION AS DISCUSSED ABOVE CLEARLY RESULTED IN THE ASSESSMENT ORDER BEING ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 59 TOTALLY ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F REVENUE. 30.1 IN THIS REGARD, THE STAND OF ASSESSEE HAS BEEN THAT WASTAGE AT 30% WAS REDUCED TO 5% BY ASSESSING OFFIC ER. LD. AUTHORIZED REPRESENTATIVE RELIED ON THE WRITTEN SUB MISSION FILED ON PAGE NO.105 OF THE PAPER BOOK II AND HE DR EW OUR ATTENTION TO THE PAGE NO.41 OF THE PAPER BOOK II IN TER ALIA SUBMITTED THAT DEPUTY COMMISSION OF INCOME TAX CALL ED FOR INFORMATION AND SAME WAS SUBMITTED BY ASSESSEE VIDE LETTER DATED 06.02.2014 WHICH READS AS UNDER: DURING THE COURSE OF HEARING OF THE ABOVE COMPANY YOUR GOOD SELF HAS CALLED FOR CERTAIN INFORMATION/ DOCUM ENTS I RECORDS. WE ARE HEREWITH SUBMITTING THE INFORMATION IN THE FOLLOWING MANNER ALONG WITH ANNEXURES. 1) COPY OF LAST PAGE OF RG-1 REGISTER OF GELATIN FOR T HE YEARS ENDED 31ST MARCH OF EACH YEAR FROM 2006 TO 2012. 2) WITH REGARD TO THE QUERY RAISED DURING THE COURSE O F HEARING RELATED TO PURCHASE OF PLANT & MACHINERY IN MASAR EOU UNIT OF STERLING BIOTECH LIMITED, WE HAVE TO STATE THAT COMPANY HAS NOT MADE ANY PURCHASE FROM THE 151 COMPANIES. 3) MONTH WISE DETAILS OF BONES CHARGEDGA1IN AND DCP PRODUCED IS ENCLOSED HERE WITH AS PER 'ANNEXURE - 1 '. IN THIS BACKGROUND, IT WAS SUBMITTED THAT DETAILS O F PRODUCTION AND WASTAGE AT 30% HAVE BEEN FILED BEFORE THE ASSES SING OFFICER IN TOTO. IN SUCH A SITUATION, EVEN ACCORDI NG TO LD. AUTHORIZED REPRESENTATIVE, ONCE DETAILS ARE GIVEN, THE ESTIMATION OF WASTAGE AT 5% AS AGAINST THE CLAIM BY ASSESSEE AT ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 60 30% WAS NOT JUSTIFIED AND IF DETAILS WOULD HAVE BEE N VERIFIED PROPERLY. ASSESSING OFFICER COULD NOT HAVE MADE AN Y ADDITION AT ALL. IN SUCH A SITUATION, EVEN IF WITHOUT PREJU DICE TO THE MERIT OF THE CLAIM OF THE WASTAGE, ASSESSING OFFICE RS ORDER ESTIMATING 5% OF THE WASTAGE AFTER DUE VERIFICATION OF THE FACTS PRODUCED BEFORE HIM, ORDER CANNOT SAID TO BE ERRONE OUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE AS STATED BY CIT. SO, CIT WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SEC TION 263 OF THE ACT IN THIS ACCOUNT AS WELL. IN THIS BACKGROUN D, LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT ORDER OF C IT BE SET ASIDE AND THAT OF ORDER OF ASSESSING OFFICER BE RES TORED. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER OF CIT. 30.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATE RIAL ON RECORD, WE FIND THAT ASSESSEE HAS CLAIMED WASTAGE O F 30% WHICH WAS REDUCED TO 5% BY ASSESSING OFFICER AFTER TAKING INTO CONSIDERATION ALL DETAILS IN THIS REGARD. THOUGH, ASSESSEE WAS NOT SATISFIED WITH THE REDUCTION OF WASTAGE, BUT, F ACTS REMAIN THAT ENQUIRY WAS DONE BY THE ASSESSING OFFICER AT R ELEVANT POINT OF TIME IN ASSESSMENT PROCEEDINGS. SO, CIT C ANNOT BE SAID THAT ORDER OF ASSESSING OFFICER IS ERRONEOUS S O AS TO PREJUDICE TO THE INTEREST OF REVENUE IN ABSENCE OF ANY ENQUIRY. UNDER THE CIRCUMSTANCES, THE ORDER OF ASSESSING OFF ICER ON THIS ISSUE CANNOT BE SAID TO BE ERRONEOUS, SO AS TO PREJ UDICIAL TO THE INTEREST OF REVENUE SO AS TO INVOKE PROVISIONS OF S ECTION 263 OF THE ACT, AND SAME IS SET ASIDE. ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 61 31. NEXT ISSUE PERTAINS TO A.Y.2010-11, 2011-12 & 2 012-13 WITH REGARDS TO BLOCK OF ASSETS. WITH REGARDS TO A DDITION TO BLOCK OF ASSETS FROM OTHER PARTIES HAS BEEN SUBMITT ED PARTY- WISE WITH RELEVANT INVOICES AND DOCUMENTS AT ASSESS MENT STAGE. CIT OBSERVED THAT NO SUCH EVIDENCES LIKE IN VOICES ETC. WERE FOUND ON THE RECORD INDICATING NECESSARY ENQUI RY HAVING BEEN CARRIED OUT IN THIS REGARD. CONSIDERING THE F ACTS THAT INFLATION OF CAPITAL ASSET HAS BEEN ADMITTED BY ASS ESSEE, ASSESSING OFFICER OUGHT TO HAVE CARRIED OUT DUE VER IFICATION OF ADDITION WITH REGARD TO FIXED ASSETS DURING THE REL EVANT YEAR IN ALL OTHER INSTANCES AS WELL. THEREFORE, CONTENTION OF ASSESSEE WAS NOT FOUND ACCEPTABLE AND PROVISION OF SECTION 2 63 OF THE ACT WAS INVOKED BY CIT. 31.1 BEFORE US, IN THIS REGARD, LD. AUTHORIZED REPR ESENTATIVE DREW OUR ATTENTION TO ORDER OF ASSESSING OFFICER IN TER ALIA QUESTIONNAIRE WAS ISSUED WITH REGARDS TO FIXED ASSE TS BY ASSESSING OFFICER AS DETAILS ON PAGE NOS.12 TO 18 O F THE PAPER BOOK DULY CERTIFIED BEFORE THE ASSESSING OFFICER. IN RESPONSE TO ABOVE QUESTIONNAIRE, ASSESSEE SUBMITTED DETAILS BEF ORE THE ASSESSING OFFICER AS DETAILED ON PAGE NOS. 190 TO 1 97 OF THE PAPER BOOK. IN THIS BACKGROUND, IT WAS SUBMITTED T HAT IT IS NOT CORRECT THAT ASSESSING OFFICER HAS NOT DONE VERIFIC ATION OF ADDITION TO THE FIXED ASSETS. SIMILAR EXPLANATION WAS SUBMITTED BEFORE THE CIT IN RESPONSE TO SHOW CAUSE U/S.263 OF THE ACT WITH RESPECT TO THE ADDITION TO THE BLOCK O F ASSETS AS DETAILED ON PAGE 23 OF THE PAPER BOOK. SO, LD. AUT HORIZED REPRESENTATIVE REQUESTED THAT THE ORDER OF CIT ON T HE ISSUE BE ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 62 SET ASIDE. ON THE OTHER HAND, LD. DEPARTMENTAL REP RESENTATIVE SUBMITTED THAT ORDER OF CIT ON THE ISSUE BE UPHELD. 31.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATE RIAL ON RECORD, WE FIND THAT THE ALLEGATION OF CIT IS THAT THERE IS INFLATION OF THE CAPITAL ASSETS BY ASSESSEE. ASSES SING OFFICER OUGHT TO HAVE DULY VERIFIED THE ADDITION TOWARDS FI XED ASSETS. AS STATED ABOVE, QUESTIONNAIRE WAS ISSUED BY ASSESS ING OFFICER WITH REGARDS TO FIXED ASSETS AS MENTIONED ABOVE AND IN RESPONSE TO THE SAME, RELEVANT DETAILS HAVE BEEN FI LED BY ASSESSEE AT RELEVANT POINT OF TIME AS DISCUSSED ABO VE. IN THIS BACKGROUND, IT CANNOT BE SAID THAT ASSESSING OFFICE R HAS NOT DONE VERIFICATION OF THE ADDITION TO THE FIXED ASSE TS. ALL THESE EXPLANATIONS WITH REGARD TO QUESTIONNAIRE BY ASSESS ING OFFICER HAD BEEN SUBMITTED BEFORE CIT IN RESPONSE TO SHOW C AUSE NOTICE AND WITH REGARDS TO ADDITION TO THE BLOCK OF ASSETS. BUT, SAME HAS NOT BEEN TAKEN INTO CONSIDERATION BY CIT, WHICH IS NOT JUSTIFIED. UNDER FACTS AND CIRCUMSTANCES, CIT WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SECTION 263 OF THE ACT, WHILE ASSESSING OFFICER HAS ALREADY MADE DETAILED INVESTI GATION WITH REGARD TO ADDITION OF ASSETS IN ASSESSMENT U/S.153A R.W.S. 143(3) OF THE ACT. SO, ORDER OF CIT ON THE ISSUE B E SET ASIDE. 32. IN ALL THESE CASES, CIT HAS SET ASIDE THE ASSES SMENT ORDER U/S.153A R.W.S. SECTION 143(3) OF THE ACT PASSED BY ASSESSING OFFICER FOR DE NOVO ASSESSMENT. CIT SHOULD NOT SET ASIDE THE ASSESSMENT TO BE DONE DE NOVO. ASSESSMENT CAN BE S ET ASIDE U/S.263 OF THE ACT ONLY ON THOSE ISSUES WHERE ORDER IS ERRONEOUS SO AS TO PREJUDICIAL TO THE INTEREST OF R EVENUE. SO, ITA NOS.2750 TO 2756/MUM/16 A.YS. 06-07 TO 12-13 [STERLING BIOTECH LTD. VS. PR.CIT] PAGE 63 CIT WAS NOT JUSTIFIED IN SETTING ASIDE THE ASSESSME NT AND CANNOT DIRECT TO DO THE ASSESSMENT DE NOVO. 33. IN THE RESULT, ALL APPEALS FILED BY ASSESSEE AR E ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF JUNE, 2016. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 29/06/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. ! / CONCERNED CIT 4. !- / CIT (A) 5. )*+ ,--, , / DR, ITAT, MUMBAI 6. +12 34 / GUARD FILE. BY ORDER / , / , ,