M/s S.S. Flavour (P) Ltd., Agra V. Dy. C.I.T., Agra

ITA 323/AGR/2010

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0365 (ITAT-AGRA)
• Duration Of Justice: 8 year(s) 10 month(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: WASEEN ARSHAD
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Rejection of books of accounts; Search and seizure; Opportunity of cross examination
• Section: 143(3); 142(1); 153A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO. 323 & 324/AGRA/2010 ASSTT. YEAR : 2007-08 & 2008-09 M/S. S.S. FLAVOUR (P) LTD., VS. D.C.I.T., CENT RAL CIRCLE, 5/157, TRANSPORT NAGAR, AGRA. AGRA. (PAN : AAJCS 1250 Q). ITA NO. 353 & 352/AGRA/2010 ASSTT. YEAR : 2007-08 & 2008-09 D.C.I.T., CENTRAL CIRCLE, VS. M/S. S.S. FLAVOUR (P) LTD., AGRA. 5/157, TRANSPORT NAGAR, AGRA. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI ASHWANI TANEJA, ADVOCATE. FOR REVENUE : SHRI WASEEN ARSHAD, SR. D.R. DATE OF HEARING : 21.10.2011 DATE OF PRONOUNCEMENT : 26.12.2011 ORDER PER B.C. MEENA, AM : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARISING OUT OF THE ORDERS DATED 10.05.2010 OF THE LD. CIT(A)-II, AGRA FOR ASS ESSMENT YEARS 2007-08 AND 2008-09. IN BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION, THE ASSES SEE BY VARIOUS GROUNDS OF APPEALS HAS CHALLENGED THE REJECTION OF BOOKS OF ACCOUNT BY INV OKING THE PROVISIONS OF SECTION 145(3) AS WELL AS SUSTENANCE OF TRADING ADDITION OF RS.39,92,285/- FOR THE A.Y. 2007-08 AND RS.47,52,800/- IN A.Y. 2008-09 WHEREAS THE REVENUE IN ITS APPEALS HAS ASSAILED THE ORDERS OF THE LD. CIT(A) DELETING THE TRADING ADDITION OF RS.16,62,69,680/- AND RS. 15,45,95,523/- IN ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY. SINCE ALL THESE A PPEALS WERE HEARD TOGETHER AND COMMON ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 2 ISSUES ARE INVOLVED THEREIN, THE SAME ARE DECIDED B Y THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE RELEVANT FACTS, IN BRIEF, ARE THAT THE ASSES SEE IS A PRIVATE LIMITED COMPANY INCORPORATED ON 15.07.2005 ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF PAN MASALA, GUTKHA AND KHAINI HAVING THREE DIRECTORS, NAMELY S/ SHRI ANIL SHARMA, GOVIND PRASAD AGARWAL AND SHYAM SUNDER KESHWANI (WRONGLY MENTIONED BY THE ASSESSING OFFICER AS KAMAL KUMAR KESHWANI AND JITENDRA KUMAR KESHWANI). PREVIOUSLY, THE SAID BUSINESS WAS BEING CARRIED OUT BY THE PARTNERSHIP FIRM, M/S. NARENDRA PRODUCTS WHICH WAS SUBSEQUENTLY TAKEN OVER BY THE ASSESSEE-COMPANY. THE PRODUCT OF THE ASSESSEE IS AN EXCISABLE COMMODITY. THE ASSESSMENT FOR THE A. Y. 2007-08 HAS BEEN COMPLETED U/S. 153A/143( 3) AND FOR A. Y. 2008-09 U/S 143(3) OF THE ACT ON THE BASIS OF A SEARCH AND SEIZURE OPERATION U/S. 132(1) OF THE INCOME-TAX ACT CARRIED OUT AT THE PREMISES OF THE ASSESSEE COMPANY ON 30.01.2008 AS ALSO AT THE RESIDENCES OF ITS DIRECTORS AND THEIR OTHER BUSINESS CONCERNS. ONE SHRI MAHENDRA KU MAR KESHWANI WAS FOUND PRESENT AT THE BUSINESS PREMISES OF ASSESSEE AT THE TIME OF SEARCH WHOSE STATEMENTS WERE RECORDED. STOCK INVENTORY WAS PREPARED IN RESPECT OF THE STOCK OF R AW MATERIAL AND FINISHED PRODUCTS FOUND AT VARIOUS PREMISES AT THE TIME OF SEARCH AND VARIOUS DOCUMENTS, ACCOUNT BOOKS ETC. WERE SEIZED. ON THE BASIS OF THE SEIZED MATERIAL, STATEMENTS REC ORDED AT THE TIME OF SEARCH AND CONSIDERING VARIOUS CONTENTIONS OF THE ASSESSEE AS UNSATISFACTO RY, THE ASSESSING OFFICER REJECTED THE BOOK VERSION OF ASSESSEE BY INVOKING THE PROVISIONS OF S ECTION 145(3) OF THE INCOME-TAX ACT, POINTING OUT THE FOLLOWING DISCREPANCIES : ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 3 (I). COMPLETE BOOKS OF ACCOUNT, BILLS VOUCHERS FOR F.Y. 2001-02 TO 2007-08, CASH BOOK FOR F.Y. 2001-02 TO 2003-04, STOCK REGISTER FO R 2007-08, PURCHASE BILLS OF RAW MATERIAL, VOUCHERS FOR EXPENSES, SALE BILLS HA VE NOT BEEN PRODUCED DURING THE ASSESSMENT PROCEEDINGS. (II). THE EXCESS STOCK OF RAW MATERIAL AND FINISHED PRODUCTS WORTH RS.31,13,682/- WAS FOUND AT THE FACTORY PREMISES AT TRANSPORT NAGAR, A GRA FOR WHICH NO SATISFACTORY EXPLANATION WAS OFFERED BY THE ASSESSEE. (III). THE VALUE OF STOCK OF FRAGRANCE FOUND FROM T HE POSSESSION OF SHRI LAXMAN DAS KESHWANI AT THE TIME OF SEARCH AT THE RESIDENCE OF DIRECTORS OF ASSESSEE-COMPANY AT 92 SURYA NAGAR, AGRA, WORKS OUT TO RS.26,52,918/ - WHEREAS SHRI LAXMAN DAS KESHWANI TO WHOM THIS STOCK RELATED, HAD SURRENDERE D ONLY A SUM OF RS.15,29,666/- IN HIS CASE FOR A.Y. 2008-09 AND THE STATEMENT OF SHRI LAXMAN DAS KESHWANI GIVEN U/S. 132(4) THAT THE STOCK OF FR AGRANCE IS USED BY THE ASSESSEE-COMPANY IN THE MANUFACTURING OF PAN MASALA , HAS TO BE CONSIDERED FOR WORKING OUT THE UNACCOUNTED PRODUCTION AND SALE. (IV). DISCREPANCIES WERE FOUND BY VARIOUS OTHER GOV T. DEPARTMENTS. SOME SALES OF FINISHED PRODUCTS WERE FOUND IN EXCESS TO THE STOCK AVAILABLE WITH THE ASSESSEE AS PER ANN. BK-18. THE TRADE TAX DEPARTMENT DURING THE SURVEY DATED 02.06.2007 DETECTED DISCREPANCIES IN THE STOCK OF FINISHED PRO DUCTS AS PER ANN. LP-7 AND THE EXCISE DEPARTMENT ALSO DETECTED SHORTAGE OF DUTY PA ID BY THE ASSESSEE AS PER ANN. LP-11. FROM ANN. A-48 ALSO THE SALES MADE TO VARIOU S PERSONS WERE FOUND OUT OF BOOKS. (V). AS PER LIST OF WORKERS PREPARED AT THE TIME OF SEARCH, THE NUMBER OF WORKERS WERE FOUND 32 AS AGAINST ONLY 22 WORKERS SHOWN BY ASSESS EE IN PF RECORDS. THIS WEIGHED WITH THE ASSESSING OFFICER TO CONCLUDE THAT EXTRA MAN-POWER IS BEING PAID IN CASH FOR UNRECORDED PRODUCTION. (VI). EXCISE REGISTER OF RAW MATERIAL (ANN. BK-19) AND OF FINISHED PRODUCTS (ANN. BK- 18) WERE FOUND INCOMPLETE ON VARIOUS DATES AND ON B EING CONFRONTED, NO SATISFACTORY REPLY COULD BE OFFERED ON BEHALF OF TH E ASSESSEE. THIS LED THE ASSESSING OFFICER TO OBSERVE THAT THE ASSESSEE HAS NOT MAINTAINED THE STOCK REGISTER AND PRODUCTION REGISTER ON DAY-TO-DAY BASI S. (VII). DURING THE SEARCH PROCEEDINGS CARRIED OUT AT THE RESIDENTIAL PREMISES OF ASSESSEES ACCOUNTANT, SHRI KAILASH MAHESHWARI, SOME TORN BILL S (ANN. A-23 & LP-3) OF M/S. K.S. TRADING COMPANY, ONE OF ASSESSEES GROUP CONCERNS, BUT SAID SALE WAS FOUND OUT OF THE BOOKS OF M/S. K.S. TRADING CO. THI S LED THE ASSESSING OFFICER TO ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 4 HOLD THAT M/S. K.S. TRADING CO. HAD MADE THESE SALE S OUT OF THE UNDISCLOSED PURCHASES MADE FROM THE ASSESSEE-COMPANY. (VIII). VARIOUS PAPERS AND BILL (ANN. B-8) RELATING TO PURCHASE OF PERFUMES, ITS FORMULA AND PURCHASE OF RAW MATERIAL WERE SEIZED FROM THE R ESIDENTIAL PREMISES OF THE DIRECTOR, FOR WHICH NO SATISFACTORY REPLY COULD BE OFFERED ON BEHALF OF THE ASSESSEE. THIS LED THE ASSESSING OFFICER TO CONCLUD E THAT THE TRANSACTIONS MENTIONED ON THESE PAPERS WERE MADE OUT OF BOOKS. (IX). 15 POUCH PACKING MACHINES WERE FOUND AT THE B USINESS PREMISES OF ASSESSEE AT THE TIME OF SEARCH WHEREAS ONLY 11 MACHINES WERE INFORM ED BY THE ASSESSEE TO THE CENTRAL EXCISE DEPARTMENT FOR JANUARY, 2008. THIS L ED THE ASSESSING OFFICER TO OBSERVE THAT THE ASSESSEE WAS DECLARING OPERATION O F LESS POUCH PACKING MACHINES THAN THE NUMBER OF MACHINES INSTALLED. 3. AS REGARDS THE ESTIMATION OF SALES AND GROSS PRO FIT, WHAT WEIGHED WITH THE ASSESSING OFFICER, IS (I) THE AVERAGE NUMBER OF MRP WISE POUC H PACKING MACHINES USED DURING THE YEAR; (II) AVERAGE PRODUCTION CAPACITY OF EACH MACHINE PE R HOUR; (III) AVERAGE WORKING HOURS PER DAY; (IV) AVERAGE WORKING DAYS DURING THE YEAR AND (V) S ALE VALUE OF THE POUCHES OF VARIOUS MRPS. KEEPING IN VIEW THE AFORESAID ASPECTS, THE LD. ASSE SSING OFFICER HAS ESTIMATED THE GROSS SALES OF ASSESSEE FOR BOTH THE YEARS UNDER CONSIDERATION AS UNDER : ASSESSMENT YEAR 2007-08 : (I). WORKING OF PRODUCTION AND SALES OF POUCHES OF MRP @ RS.0.50 PER POUCH: POUCHES PER MACHINE PER HOUR 8000 POUCHES OF MRP RS.0.50 PRODUCED ON 12 MACHINES PER HOUR 8000 X 12 = 96000 POUCHES PRODUCED ON 12 MACHINES IN TWO SHIFTS OF 9 HOURS EACH ,I.E. 18 WORKING HOURS. 96000 X 18 = 1728000 POUCHES PRODUCED ON 12 MACHINES IN 300 DAYS (15 DAY S ALLOWED FOR HOLIDAYS ETC. & 50 DAYS FOR WEEKLY OFF PRESCRIBED BY FACTORY ACT/MARKETING ACT. 1728000 X 300 = 518400000 POUCHES SALE VALUE @ RS.0.42 PER POUCH 518400000 X 0.42 = 2 17728000 (II). WORKING OF PRODUCTION AND SALES OF POUCHES OF MRP @ RS.1.00 PER POUCH: POUCHES PER MACHINE PER HOUR 8000 POUCHES OF MRP RS.1.00 PRODUCED ON 2 MACHINES PER 8000 X 2 = 16000 ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 5 HOUR POUCHES PRODUCED ON 2 MACHINES IN TWO SHIFTS OF 9 HOURS EACH, I.E. 18 WORKING HOURS. 16000 X 18 = 288000 POUCHES PRODUCED ON 2 MACHINES IN 300 DAYS (15 DAYS ALLOWED FOR HOLIDAYS ETC. & 50 DAYS FOR WEEKLY OFF PRESCRIBED BY FACTORY ACT/MARKETING ACT. 288000 X 300 = 86400000 POUCHES SALE VALUE @ RS.0.85 PER POUCH 86400000 X 0.85 = 13 440000 (III). WORKING OF PRODUCTION AND SALES OF POUCHES O F MRP @ RS.2.00 PER POUCH: POUCHES PER MACHINE PER HOUR 8000 POUCHES OF MRP RS.2.00 PRODUCED ON ONE MACHINE PER HOUR 8000 X 1 = 8000 POUCHES PRODUCED ON ONE MACHINE IN TWO SHIFTS OF 9 HOURS EACH, I.E. 18 WORKING HOURS. 8000 X 18 = 144000 POUCHES PRODUCED ON 2 MACHINES IN 300 DAYS (15 DAYS ALLOWED FOR HOLIDAYS ETC. & 50 DAYS FOR WEEKLY OFF PRESCRIBED BY FACTORY ACT/MARKETING ACT. 144000 X 300 = 43200000 POUCHES SALE VALUE @ RS.1.70 PER POUCH 43200000 X 1.70 = 73 440000 G.T. 36,46,08,000 FOR THE ASSESSMENT YEAR 2008-09 ALSO THE PRODUCTION AND SALE OF POUCHES WERE ESTIMATED BY THE ASSESSING OFFICER ON THE SAME FIGURES AS IN THE YEA R 2007-08 MENTIONED ABOVE, OBSERVING THAT SIMILAR NUMBER OF POUCH PACKING MACHINES WERE BEING USED BY ASSESSEE AND THE BUSINESS WAS BEING RUN IN THE SIMILAR MANNER. THUS, THE ASSESSIN G OFFICER ESTIMATED THE SALES OF PAN MASALA, GUTKHA ETC. AT RS.36,46,08,000/- EACH FOR A.Y. 2007 -08 AND 2008-09 AS AGAINST RS.1,74,93,662/- AND RS.3,74,09,113/- RESPECTIVELY. 4. THE ASSESSING OFFICER ADOPTED GROSS PROFIT RATE OF 49% ON THE ESTIMATED SALES OBSERVING THAT SINCE THE ASSESSEE HAS BEEN FOUND MANUFACTURIN G AND SELLING ITS PRODUCT OUT OF BOOKS OF ACCOUNT, THERE IS NO QUESTION OF INCURRING ANY EXPE NSES ON ACCOUNT OF EXCISE DUTY, TRADE TAX ETC. AND THE MAJOR INCOME OF THE ASSESSEE FROM OUT OF BOOKS PRODUCTION & SALES WAS ON ACCOUNT OF NON-PAYMENT OF EXCISE DUTY. HE ACCORDINGLY, DREW THE PROFIT AND LOSS ACCOUNT FOR THE PERIODS ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 6 ENDING ON 31.03.2007 AND 31.03.2008 AND WORKED OUT THE G.P. RATE AT 49% FOR BOTH THE YEARS UNDER CONSIDERATION. AFTER APPLYING THIS RATE TO TH E ESTIMATED SALES, THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT AT RS.17,86,57,920/- EAC H FOR BOTH THE YEARS. FROM THIS ESTIMATED GROSS PROFIT, THE AO HAS REDUCED EXCISE DUTY OF RS.70,01, 483/- PAID PLUS EXPENSES DEBITED TO PROFIT & LOSS ACCOUNT DURING THE YEAR 2007-08 AND EXCISE DUT Y OF RS.1,79,63,989/- PAID PLUS EXPENSES DEBITED IN PROFIT & LOSS ACCOUNT DURING THE YEAR 20 08-09. HE, ACCORDINGLY WORKED OUT GROSS PROFIT AT RS.17,16,56,437/- AS AGAINST DECLARED G.P . AT RS.13,94,472/- AND, THUS, MADE A TRADING ADDITION OF RS.17,02,61,965/- FOR THE ASSESSMENT YE AR 2007-08. SIMILARLY, A TRADING ADDITION OF RS.15,97,45,171/- WAS MADE FOR THE ASSESSMENT YEAR 2008-09. 5. IN APPEALS BEFORE THE FIRST APPELLATE AUTHORITY, THE LD. CIT(A) CONFIRMED THE INVOCATION OF SECTION 145(3) OF THE ACT, BUT RESTRICTED THE ESTIM ATED SALES TO RS. 3,98,80,358/- AND RS.4,35,05,845/- RESPECTIVELY FOR A.Y. 2007-08 AND 2008-09 WORKING OUT THE GROSS PROFITS AT RS.55,83,250/- AND RS.60,90,818/- BY ADOPTING G.P. RATE OF 14%. AFTER REDUCING THE EXPENSES OF RS.14,23,935/- AND RS.9,22,898/- FROM THE GROSS PRO FITS, THE LD. CIT(A) DETERMINED THE NET INCOME OF ASSESSEE AT RS.41,23,935/- AND 51,67,920/ - FOR THE ASSESSMENT YEARS 2007-08 AND 2008-08 RESPECTIVELY. FOR ARRIVING AT THIS CONCLUSI ON, THE LD. CIT(A) HAS CONSIDERED THE AVERAGE SALES AND AVERAGE GROSS PROFIT RATE OF M/S. NARENDR A PRODUCTS, THE PREDECESSOR OF ASSESSEE, FOR LAST FIVE YEARS AND HAS ALSO TAKEN INTO ACCOUNT THE NUMBER OF 15 MACHINES USED BY THE ASSESSEE DURING THE YEARS UNDER CONSIDERATION. BOTH THE PART IES WERE NOT SATISFIED WITH THE RELIEF GIVEN BY THE LD. CIT(A) VIDE IMPUGNED ORDERS, HENCE, THESE C ROSS APPEALS BEFORE THE TRIBUNAL. ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 7 6. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE CONTENDED THAT PLAUSIBLE EXPLANATIONS WERE OFFERED BY THE ASSESSEE BEFORE TH E AUTHORITIES BELOW WITH RESPECT TO EACH AND EVERY DISCREPANCY POINTED OUT BY THE ASSESSING OFFI CER, BUT THE SAME HAS NOT BEEN CONSIDERED BY THEM IN RIGHT PERSPECTIVE BEFORE REJECTING THE BOOK VERSION OF ASSESSEE AND ESTIMATING THE INCOME OF ASSESSEE AT IMAGINARY FIGURES. ASSAILING THE OBS ERVATION OF THE ASSESSING OFFICER AS MENTIONED AT SL. NO. (I) OF PARA 2 OF THIS ORDER, IT IS SUBMI TTED BEFORE US, AS ALSO BEFORE THE AUTHORITIES BELO W, THAT THE ASSESSING OFFICER HAS MENTIONED WRONG FACT S IN THE IMPUGNED ASSESSMENT ORDERS. SINCE THE ASSESSEE-COMPANY WAS INCORPORATED W.E.F. 15.07. 2005, IT WAS NOT FEASIBLE FOR THE ASSESSEE TO PRODUCE THE BOOKS FOR F.Y. 2001-02 TO 2004-05 AND C ASH BOOK FOR F.Y. 2001-02 TO 2003-04. THE STOCK REGISTER FOR A.Y. 2007-08 WAS SEIZED AT THE T IME OF SEARCH AS ANNEXURE BK-2 AND STOCK REGISTERS OF RAW MATERIAL AND FINISHED GOODS FOR A. Y. 2008-09 WERE ALSO SEIZED AS ANNEXURES BK-18 AND BK-19. SIMILARLY, ALL THE PURCHASE BILLS, SALE BILLS AND OTHER VOUCHERS UPTO THE DATE OF SEARCH WERE SEIZED DURING THE SEARCH AS AVAILABLE A T ANN. BK-3, BK-17, LP-1, LP-3 TO 6, LP-8 TO 10, LP-14, LP-16 TO 18, LP-20 TO LP-323. BESIDES, C OMPLETE ACCOUNTS WERE FOUND AVAILABLE IN THE COMPUTER OF ASSESSEE, WHICH WAS ALSO SEIZED. MO REOVER, ALL THE BOOKS OF ACCOUNTS ALONGWITH BILLS AND VOUCHERS WERE SUBMITTED BEFORE THE AO AS ALSO MENTIONED IN THE REPLY FURNISHED BEFORE THE ASSESSING OFFICER. HENCE, IT IS WRONG TO STATE THAT THE ASSESSEE DID NOT PRODUCE REQUISITE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER. 7. ASSAILING THE SECOND OBJECTION OF THE ASSESSING OFFICER REGARDING EXCESS STOCK OF FINISHED PRODUCT AND RAW MATERIAL FOUND AT THE TIME OF SEARCH AND INVENTORIZED BY THE SEARCH PARTY, IT IS SUBMITTED THAT THE STOCK INVENTORY HAS BEEN PREPARED IN HAPHAZARD MANNER IN HURRY. THE ASSESSEE MANUFACTURES FOUR DIFFERENT BRANDS OF PAN MASALA & GUTKHA, NAMELY, SARVAPRIYA ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 8 SHANKER GUTKHA, SHAURAT GUTKHA, SARVAPRIYA PAN MASA LA AND SHAURAT PAN MASALA OF DIFFERENT MRPS. OUT OF 90 BAGS OF FINISHED PRODUCT FOUND DURI NG SEARCH AT THE GROUND FLOOR, 45 BAGS CONTAINED SARVAPRIYA SHANKER GUTKHA, 20 BAGS OF SHA URAT GUTKHA, 20 BAGS OF SARVAPRIYA PAN MASALA AND 5 BAGS OF SHAURAT PAN MASALA. ONE BAG OF DIFFERENT BRANDS OF PRODUCT CONTAINS DIFFERENT WEIGHT. THE DETAILS OF WEIGHT PER POUCH, NUMBER OF POUCHES CONTAINED IN A PACKET AND NUMBER OF PACKETS CONTAINED IN A BAG WERE GIVEN BEF ORE THE AUTHORITIES BELOW AS MENTIONED AT PAGES 7 & 8 OF THE IMPUGNED ORDERS, ACCORDING TO WH ICH THE TOTAL WEIGHT OF FINISHED PRODUCTS FOUND COMES TO 2352.032 KGS. AS AGAINST 3815 KGS. N OTED IN THE STOCK INVENTORY APPEARING AT PAGES 60 TO 62 OF THE PAPER BOOK. IT IS SUBMITTED T HAT ALL KINDS OF FINISHED GOODS FOUND HAS BEEN TAKEN AS ONE PRODUCT AND EACH BAG HAS BEEN WRONGLY TAKEN TO HAVE UNIFORM WEIGHT OF 40 KGS. WHEREAS ONE BAG OF SARVAPRIYA SHNKER GUTKHA CONTAIN S WEIGHT OF 24.300 KG., SHAURAT GUTKHA 30.420 KG., SARVAPRIYA PAN MASALA 21.525 KG. AND SH AURAT PAN MASALA OF 24.395 KG. IF THE RECONCILIATION FIGURES OF WEIGHT ARE TAKEN INTO ACC OUNT, THERE REMAINS NO DIFFERENCE IN THE STOCK OF FINISHED GOODS FOUND AT THE TIME OF SEARCH, WHIC H HAS NOT BEEN CONSIDERED BY THE AO WITHOUT ASSIGNING ANY REASON. MOREOVER, NO ADVERSE REMARK O R FINDING HAS BEEN GIVEN BY THE AUTHORITIES BELOW ON THE RECONCILIATION STATEMENTS GIVEN BY THE ASSESSEE. SIMILARLY, COMPLETE RECONCILIATION STATEMENTS WER E SUBMITTED BEFORE THE AUTHORITIES BELOW IN RESPECT OF EACH ITEM OF RAW MATERIAL FOUND. THE STOCK REGISTERS OF VARIOUS RAW MATERIALS WERE FOUND WRITTEN UPTO VARIOUS DATES AND RECONCILIATION STATEMENTS OF STOCKS FROM 1 ST JANURARY, 2008 TILL THE DATE OF SEARCH WERE SUBMITTED BEFORE THE AUTHORITIES BELOW, AS ALSO REPRODUCED IN THE IMPUGNED ORDERS, WHICH HAVE NOT BEEN CONSIDERED NOR ANY ADVERSE COMMENTS HAVE BEEN MADE BY THE AUTHORITIES BELOW ON IT. ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 9 AS REGARDS THE STOCK OF 813 PACKETS OF SHAURAT GU TKHA FOUND AT THE PREMISES OF GROUP CONCERN, M/S. LDK SHARES AND SECURITIES PVT. LTD., IT WAS SUBMITTED THAT THE BILL FOR THE SALE OF THESE GOODS WAS ISSUED, WHICH IS AVAILABLE IN THE S EIZED MATERIAL AND THE REMAINING 75 PACKETS OF SARVAPRIYA PAN MASALA FOUND WAS OF OLD STOCK NOT FI T FOR SALE, WHICH FETCHED A MEAGER VALUE OF RS.4647/- AND THEREFORE, NO ADVERSE INFERENCE CAN B E DRAWN ON THIS COUNT. 8. REGARDING THE THIRD DISCREPANCY POINTED OUT BY T HE ASSESSING OFFICER WITH RESPECT TO THE STOCK OF FRAGRANCE FOUND FROM THE POSSESSION OF SHR I LAXMAN DAS KESHWANI AT THE TIME OF SEARCH ON RESIDENTIAL PREMISES, IT IS CONTENDED THAT THE A BOVE STOCK OF FRAGRANCE WAS ADMITTEDLY FOUND FROM THE POSSESSION OF SHRI LAXMAN DAS KESHWANI AND HE HAS SURRENDERED THE VALUE OF SAID STOCK IN HIS HANDS IN HIS CASE FOR ASSESSMENT YEA R 2008-09. THE SAID SURRENDER HAS BEEN ACCEPTED BY THE DEPARTMENT AND THEREFORE, IT IS NOW NOT OPEN TO THE ASSESSING OFFICER IN THE CASE OF ASSESSEE THAT THE VALUE OF SAID STOCK SURRENDERE D BY SRI LAXMAN DAS KESHWANI WAS LESS THAN THE VALUE ESTIMATED BY THE ASSESSING OFFICER. THERE FORE, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE ON THIS ACCOUNT. 9. ASSAILING THE NEXT DISCREPANCY POINTED OUT BY TH E ASSESSING OFFICER AS MENTIONED AT SL. NO.(IV) ABOVE, IT WAS SUBMITTED THAT RG-1 REGISTER SEIZED AT ANN.BK-18 IS THE DAILY STOCK REGISTER. THIS REGISTER IS MAINTAINED ON DAY-TO-DAY BASIS AND NO DISCREPANCY WAS FOUND IN THE STOCK REGISTER FOR THE A.Y. 2007-08. THE STOCK REGI STER FOR A.Y. 2008-09 WAS FOUND COMPLETE UPTO 22.01.2008. A COMPLETE QUANTITATIVE TALLY AND RECONCILIATION STATEMENT WAS FURNISHED FROM WHICH THE EXACT QUANTITY OF STOCK CAN BE CALCULATED . THE MOST SIGNIFICANT POINT THAT EMERGES FROM THIS REGISTER IS THAT ALL THE REMOVAL OF GOODS, I.E ., SALES ARE DULY RECORDED IN IT TILL THE DATE OF ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 10 SEARCH AND THE SAME TALLIES WITH THE BILLS AND THE ACCOUNTS SEIZED. THIS REGISTER ALSO SHOWS THE DATES ON WHICH NO PRODUCTION TOOK PLACE AND SUCH DA TES HAVE BEEN CLUBBED TOGETHER. IF THESE ASPECTS ARE TAKEN INTO ACCOUNT, NO DISCREPANCY WOUL D REMAIN IN EXISTENCE AS POINTED OUT BY THE ASSESSING OFFICER. THE MATTER RELATING TO THE SURVEY BY TRADE TAX DE PARTMENT (ANN. LP-7) IS STATED TO BE SUBJUDICE BEFORE THE HIGHER AUTHORITIES AND THEREFO RE, NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE ON THE BASIS OF INVENTORY MADE BY THE SAID DEPARTMENT IN A HURRIED MANNER, WHICH IS NOT ADMITTED TO THE ASSESSEE. AS REGARDS THE SURVEY MADE BY EXCISE DEPARTMENT ( ANN. LP-11), IT WAS SUBMITTED THAT ON THE BASIS OF SEARCH OPERATION CARRIED OUT BY THE SA ID DEPARTMENT ON 17.11.2006, A SHOW CAUSE NOTICE WAS ISSUED TO EXPLAIN WHY A DUTY OF RS.2,17, 871/- BE NOT IMPOSED FOR REMOVAL OF GOODS MENTIONED IN THE SAID NOTICE, WITHOUT PAYING THE DU TY. FIRSTLY, THE SALE OF THESE GOODS WAS DULY FOUND ENTERED IN THE CASH BOOK ON 17.11.2006 WHICH IS AVAILABLE IN THE SEIZED MATERIAL AND SECONDLY, THIS ISSUE HAS BEEN FINALLY DECIDED BY TH E COMMISSIONER (APPEALS) VIDE HIS ORDER AVAILABLE AT PAGE 96 OF THE PAPER BOOK, WHEREIN IT HAS BEEN CATEGORICALLY CONCLUDED THAT THE SHORTAGE IN THE STOCK OF FINISHED GOODS WAS UNCORRO BORATED WITH ANY EVIDENCE OF CLANDESTINE REMOVAL. THEREFORE, THIS SEARCH CONDUCTED BY EXCISE DEPARTMENT CANNOT BE READ AGAINST THE ASSESSEE, PARTICULARLY WHEN THE SALE OF STOCK ALLEG EDLY FOUND LESS WAS RECORDED IN THE BOOKS AND SUPPORTED BY SALE BILLS AND CASH BOOK SEIZED. WITH RESPECT TO ANN. A-48, IT WAS ALSO SUBMITTED THAT THE ASSESSEE MADE SALES TO DILIP KUMAR VIDE BILL DATED 16.01.2008 AND THE PERSONS W HOSE NAMES WERE MENTIONED AT PAGES 1 TO 8 OF ANN.A-48, WERE THE PERSONS APPOINTED BY SHRI DIL IP KUMAR FOR MARKETING THE PRODUCT. ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 11 THEREFORE, IT IS WRONG ON THE PART OF ASSESSING OFF ICER TO STATE THAT NO REPLY WAS GIVEN ON THIS COUNT. 10. ASSAILING THE NEXT DISCREPANCY POINTED OUT BY A SSESSING OFFICER IN REPORTING THE NUMBER OF WORK FORCE, THE LD. COUNSEL FOR THE ASSESSEE CHA LLENGED THE AUTHENTICITY OF THE LIST OF WORKERS ALLEGEDLY PREPARED AT THE TIME OF SEARCH. THIS LIST DOES NOT CONTAIN ANY SIGNATURE OF PERSON WHO PREPARED IT, NOR SIGNATURE OF ANY PERSON RELATING T O ASSESSEE NOR ANY SUCH LIST WAS CONFRONTED AT THE TIME OF SEARCH. MOREOVER, NO WORKER MENTIONED I N THE ALLEGED LIST IS THERE ON THE ROLL OF ASSESSEE EXCEPT ONE, AS IS EVIDENT FROM THE PF REGI STER AND SALARY REGISTER SEIZED. EVEN NO COMPLETE ADDRESSES OF THE WORKERS ARE MENTIONED IN THE LIST. THE ASSESSEE MADE SPECIFIC REQUEST BEFORE THE AO TO CROSS EXAMINE ANY OF THE LABOURERS WHOSE NAMES ARE MENTIONED IN THE LIST OR GAVE STATEMENTS AT THE TIME OF SEARCH. EVEN SHRI MA HENDRA KUMAR KESHWANI, ONE OF THE FAMILY MEMBERS FOUND PRESENT ON THE SEARCH, WAS NOT CONFRO NTED WITH THE ALLEGED LIST AND ALLEGED STATEMENTS OF THE WORKERS, WHILE RECORDING HIS FINA L STATEMENTS BY THE SEARCH PARTY. CONTRARY TO IT, THE NUMBER OF EMPLOYEES REGISTERED WITH THE PF DEPA RTMENT IS 22 AS IS EVIDENT FROM THE PF REGISTER, WHICH TALLIES WITH ATTENDANCE REGISTER SE IZED. THE LAST SALARY SHEET SEIZED DURING THE SEARCH ALSO SPEAKS OF THE NAMES OF THE WORKERS AS W ELL AS THEIR FATHERS NAMES, THEIR MONTHLY SALARY/WAGES AND DEDUCTION ON ACCOUNT OF PF, WHICH IS VERIFIABLE FROM THE RELEVANT RECORD. THE WORKER SHRI MATA PRASAD WHOSE STATEMENT HAVE BEEN R ELIED BY AO, IS NOT STATED TO BE THE WORKER OF THE ASSESSEE AND ALTERNATIVELY, IT WAS SUBMITTED THAT HIS STATEMENTS NOWHERE SPEAKS THAT THE MACHINES ARE OPERATED IN TWO SHIFTS OR 24 HOURS, BU T HIS STATEMENT SHOWS THAT HE HAD TOLD THE CAPACITY OF THE MACHINES. THERE IS NO SUCH STATEMEN T THAT HE HANDS OVER THE MACHINE TO OTHER WORKER, AS WRONGLY ALLEGED BY THE ASSESSING OFFICER . HENCE, THE STATEMENT OF SHRI MATA PRASAD ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 12 CANNOT BE RELIED UPON WITHOUT GIVING AN OPPORTUNITY TO CROSS EXAMINE HIM DESPITE THE SPECIFIC REQUEST IN THAT REGARD. THEREFORE, SUCH LIST OF WOR KERS AND ALLEGED STATEMENTS, HAVING NO EVIDENTIARY VALUE, CANNOT BE READ AGAINST THE ASSES SEE FOR REJECTION OF ACCOUNTS OR ESTIMATION OF SALES. 11. IN RESPECT OF DISCREPANCY MENTIONED AT SL. NO.( VI) ABOVE, IT IS CONTENDED THAT THE EXCISE REGISTER REGARDING RAW MATERIAL AND FINISHED PRODUC T IS WRITTEN EITHER BY THE DIRECTOR OR BY THE ACCOUNTANT SHRI KAILASH MAHESHWARI. SHRI MAHENDRA K UMAR KESHWANI FOUND PRESENT AT THE TIME OF SEARCH WAS NEITHER DIRECTOR NOR EMPLOYEE OF THE ASSESSEE-COMPANY. THE DIRECTOR SHRI ANIL KUMAR SHARMA WAS OUT OF STATION FOR 20 DAYS AND, TH EREFORE, HE COULD NEITHER MAKE ENTRIES IN THE STOCK REGISTER NOR COULD GIVE DETAILS TO THE ACCOUN TANT. HOWEVER, COMPLETE RECONCILIATION STATEMENTS WITH RESPECT TO FINISHED PRODUCTS AND RA W MATERIAL WERE FILED BEFORE THE AO. THE REPLY WAS SUBMITTED BEFORE THE AO WHO HAS WRONGLY O BSERVED IN THE ASSESSMENT ORDER THAT NO REPLY WAS OFFERED IN THIS REGARD. MOREOVER, NON-MAI NTENANCE OF STOCK REGISTERS ON DAY-TO-DAY BASIS IS NOT A VALID GROUND FOR INVOKING THE PROVIS IONS OF SECTION 145 OF THE ACT. RELIANCE IS PLACED ON THE DECISION IN THE CASE OF DCIT VS. GAJA NAN TRADERS (2006) 104 TTJ (BANG.) 1030 AND ITO VS. KEDARMAL KESHORDEO (1979) 7 TTJ (GAU) 4 10. 12. CHALLENGING THE 7 TH DISCREPANCY POINTED OUT BY THE AO, IT WAS SUBMITTE D ON BEHALF OF THE ASSESSEE THAT SHRI KAILASH MAHESHWARI WAS, ADMITTED LY, A COMMON ACCOUNTANT OF ASSESSEE- COMPANY AND THAT OF M/S. K.S. TRADING CO. THE GROUP CONCERN OF THE FAMILY. THE SO CALLED TORN BILLS FOUND FROM THE PREMISES OF THE ACCOUNTANT REL ATED TO K.S. TRADING CO. AND PLAUSIBLE EXPLANATION WAS FURNISHED IN THE CASE OF K.S. TRADI NG CO. MOREOVER, THESE BILLS WERE ENTERED IN ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 13 THE BOOKS OF K.S. TRADING CO. MAINTAINED ON COMPUTE R AND NO SUPPRESSION OF SALES CAN BE PRESUMED ON THE PART OF ASSESSEE, AS THE ALLEGED TO RN BILLS DO NOT CONTAIN ANY BRAND NAME OF ASSESSEES PRODUCT. 13. WITH REGARD TO ANNEXURE B-8, THE LD. COUNSEL FO R THE ASSESSEE SUBMITTED THAT NO QUERY WAS RAISED IN THIS REGARD IN THE NOTICE U/S. 142(1) AND, THEREFORE, ASSESSING OFFICER HAS NOTHING TO JUSTIFY HIS OBSERVATION THAT NO SATISFACTORY REPLY WAS OFFERED BY ASSESSEE. HENCE, NO ADVERSE INFERENCE CAN BE DRAWN ON THIS COUNT. 14. IT WAS NEXT CONTENDED ON BEHALF OF THE ASSESSE E THAT THE OBSERVATION OF THE AO REGARDING OPERATION OF MACHINES MORE THAN THAT DECLARED TO TH E EXCISE DEPARTMENT, IS NOT TENABLE IN THE FACT SITUATION OF THE CASE. IT IS CONTENDED THAT ON THE BASIS OF EXCISE RECORDS AND INFORMATION GIVEN BY ASSESSEE TO THE CENTRAL EXCISE DEPARTMENT REGARD ING THE OPERATION OF MACHINES, A COMPLETE CHART SHOWING MRP WISE ALLOCATION OF MACHINES IN OP ERATION FROM TIME TO TIME, NUMBER OF DAYS THE MACHINES REMAINED IN OPERATION DURING EACH MONT H, WAS SUBMITTED BEFORE THE ASSESSING OFFICER. THE INFORMATION LETTER GIVEN TO THE EXCISE DEPARTMENT WAS SUBMITTED ALONGWITH THE SAID CHART. 15 MACHINES DID NOT REMAIN IN OPERATION DURI NG WHOLE OF JANUARY, 2008 AS OBSERVED BY THE AO, BUT THE FACT IS THAT ONLY 11 MACHINES REMAINED OPERATIONAL UPTO 13.01.2008 AND FOUR MACHINES WERE UNSEALED ON 14.01.2008 MAKING THE TOT AL NUMBER OF MACHINES IN OPERATION AT 15 WHICH WERE FOUND AT THE TIME OF SEARCH AS CAN ALSO BE VERIFIED FROM THE LETTER GIVEN IN THIS RESPECT TO THE EXCISE DEPARTMENT ON 14.01.2008, AVAILABLE I N THE SEIZED MATERIAL IN THE FILE AT ANN. LP- 19. AS A MATTER OF FACT, THERE IS NO EVIDENCE ON RE CORD TO SHOW THAT THE ASSESSEE HAS EVER USED THE MACHINES MORE THAN THAT INFORMED TO THE EXCISE DEPA RTMENT. ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 14 15. ON THE STRENGTH OF THESE ARGUMENTS, THE LD. COU NSEL FOR THE ASSESSEE CONTENDED THAT THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN REJECTING TH E ACCOUNT BOOKS BY INVOKING THE PROVISIONS OF SECTION 145(3). ALL THE QUERIES MADE BY AO WERE SA TISFACTORILY REPLIED AND SUPPORTED BY EVIDENCE. ALL THE BOOKS OF ACCOUNT, BILLS & VOUCHER S FOR THE YEARS UNDER CONSIDERATION TILL THE DATE OF SEARCH WERE SEIZED AND WERE IN POSSESSION O F THE AO, BUT NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN THE MAINTENANCE OF ACCOUNTS KEPT IN REGULAR COURSE OF BUSINESS BEFORE INVOKING THE PROVISIONS OF SECTION 145(3). 16. AS FAR AS THE ESTIMATION OF SALES IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE LD. AUTHORITIES BELOW HAVE MADE VAGUE ESTI MATION OF SALES BASED ON CONJECTURES AND SURMISES WITHOUT CONSIDERING VARIOUS EXPLANATIONS O F THE ASSESSEE, SUPPORTED BY VARIOUS EVIDENCES AND THE SEIZED MATERIAL. THE PRODUCTION A ND REMOVAL OF GOODS OF THE ASSESSEE- COMPANY IS UNDER THE STRICT SUPERVISION OF THE CENT RAL EXCISE DEPARTMENT. THE MACHINES ARE GOT SEALED AND UNSEALED BY THE EXCISE DEPARTMENT AS PER DEMAND OF ASSESSEES PRODUCT. NO STEP FOR OPERATION OR CLOSURE OF MACHINES OR OF PRODUCTION C AN BE TAKEN WITHOUT ITS DUE INFORMATION TO THE EXCISE DEPARTMENT IN TERMS OF NUMBER OF MACHINES IN OPERATION, WORKING HOURS, WORKING DAYS ETC. THE STOCK REGISTERS, I.E., RG-1, ARE MAINTAINE D AS PER EXCISE RULES AND ARE PERIODICALLY INSPECTED BY EXCISE DEPARTMENT. NO CLANDESTINE PROD UCTION OR REMOVAL OF GOODS HAS BEEN FOUND BY THE SAID DEPARTMENT. EVEN THE FACTORS WHICH WEIG HED IN THE MIND OF THE AO FOR ESTIMATION OF TURNOVER IN THE PRESENT CASES HAVE NOT BEEN PROPERL Y CONSIDERED FOR THE FOLLOWING REASONS : ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 15 17. THE ESTIMATION OF PRODUCTION HAS BEEN MADE DUR ING BOTH THE YEARS KEEPING IN VIEW TOTAL 15 MACHINES FOUND INSTALLED IN THE FACTORY PREMISES AT THE TIME OF SEARCH AND THEIR OPERATION IN TWO SHIFTS EACH OF 9 HOURS. THIS APPROACH OF THE AU THORITIES BELOW IS VAGUE, ERRONEOUS AND AGAINST THE TRUE FACTS ATTENDING THE CASES. IT HAS BEEN VEH EMENTLY CONTENDED THAT (I) THE PRODUCTION WAS STARTED BY ASSESSEE-COMPANY FROM 06.05.2006, BUT THE AUTHORITIES BELOW HAVE ESTIMATED THE PRODUCTION AND SALE EVEN FOR COMPLETE ASSESSMENT YEAR 2007-08; (II) SOME OF THE MACHINES WERE PURCHASED MUCH AFTER 06.0 5.2006, AS IS VERIFIABLE FROM RECORDS, BUT PRODUCTION HAS BEEN CALCULATED AF TER TAKING INTO ACCOUNT THE OPERATION OF ALL THE 15 MACHINES AT ALL POINTS OF T IME DURING THE DISPUTED YEARS; (III) THE AO AT PAGE 23 OF THE ASSESSMENT ORDER HAS HIMSE LF ACCEPTED THE CLAIM OF ASSESSEE THAT 2-3 MACHINES ARE ALWAYS KEPT ON STAND BY MODE, BUT WHILE CALCULATING THE PRODUCTION, HE HAS WORKED OUT THE S AME ON THE BASIS OF ALL THE 15 MACHINES FOUND AT THE TIME OF SEARCH ON 30.08.2001 AND, THUS, THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN BLOWING HOT AND COLD IN THE SAME STREAM; (IV) EVEN IN THE MONTH OF JANURARY, 2008, ONLY 11 MACHINES REMAINED IN OPERATION UPTO 13.01.2008 AND FOUR MACHINES WERE UNSEALED ON 14.01.2008 MAKING THE TOTAL NUMBER OF MACHINES IN OPERATION AT 15 WHICH WERE FO UND AT THE TIME OF SEARCH AND THIS FACT IS VERIFIABLE FROM THE LETTER GIVEN IN TH IS RESPECT TO THE EXCISE DEPARTMENT ON 14.01.2008 WHICH IS AVAILABLE IN THE SEIZED MATE RIAL IN A FILE AT ANN. LP-19. IT IS ALSO AN UNDISPUTED FACT THAT AFTER 13.01.2008, 1 5 MACHINES REMAINED IN OPERATION FOR VERY SHORT PERIOD AND IN FEBRUARY, 20 08 FOUR MACHINES WERE AGAIN GOT SEALED AFTER GIVING DUE INFORMATION TO THE EXCI SE DEPTT. HENCE, IT IS AGAINST ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 16 THE FACTS TO WORK OUT THE PRODUCTION ON 15 MACHINES AT EVERY POINT OF TIME DURING THE DISPUTED YEARS INSTEAD OF WORKING OUT THE SAME ON THE BASIS OF NUMBER OF MACHINES, WHICH REMAINED IN OPERATION DURING THE YE AR, FOR WHICH SUBSTANTIAL MATERIAL WAS AVAILABLE WITH THE AO IN THE FORM OF I NFORMATION FURNISHED THE EXCISE DEPARTMENT AND THE LIST OF MACHINES PREPARED FROM THE EXCISE RECORDS. THEREFORE, THE LD. AUTHORITIES BELOW WERE NOT JUSTI FIED IN WORKING OUT THE PRODUCTION AND SALE OF ASSESSEE ON THE BASIS OF 15 MACHINES AT ALL THE TIMES DURING THE DISPUTED YEARS; (V) THE INFORMATION LETTER DATED 13.11.2007 REPROD UCED IN THE ASSESSMENT ORDER HAS BEEN MISREAD BY THE AO INASMUCH AS THE SAID LETTER FURNISHES THE INFORMATION REGARDING TOTAL MACHINES INSTALLED IN THE FACTORY W ITH THEIR ALLOCATION MRP WISE, WHICH HAS BEEN MISUNDERSTOOD BY THE AO AS MACHINES IN OPERATION INSTEAD OF MACHINES INSTALLED IN THE FACTORY. BESIDES, THE TIM INGS OF SECOND SHIFT IS GIVEN IN THIS LETTER ADDING THE WORDS WITH PRIOR INFORMATIO N, WHICH MEANS THAT PRODUCTION IN SECOND SHIFT CAN ONLY BE DONE WHEN THE EXCISE AU THORITIES ARE GIVEN PRIOR INTIMATION. THE ASSESSEE HAS NEVER INFORMED THE EXC ISE AUTHORITIES THAT IT IS OPERATING TWO SHIFTS NOR ANY SUCH MATERIAL WAS SEIZ ED DURING THE SEARCH. ON THE OTHER HAND, THE ACTUAL WORKING HOURS HAVE REGULARLY BEEN REPORTED TO THE CENTRAL EXCISE DEPARTMENT, WHICH HAVE BEEN ACCEPTED. ONE SH IFT AS INFORMED TO THE SAID DEPTT. OPERATES FROM 10 HOURS TO 19 HOURS, I.E., 9 HOURS WITH ONE HOUR OF LUNCH BREAK TO THE LABOURERS AND, THUS, THE EFFECTIVE WOR KING HOURS CANNOT EXCEED 8 IN ANY CASE. THE OBJECTIONS OF ASSESSEE, AS NARRATED A BOVE, REGARDING ALLEGED ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 17 STATEMENTS OF SO CALLED WORKERS FROM THE LIST OF WO RKERS, HAVE BEEN IGNORED AND THE PERSONS WHOSE STATEMENTS WERE RECORDED WERE NOT ALLOWED CROSS-EXAMINATION. THEREFORE, THE PRODUCTION WORKED OUT BY THE AUTHORI TIES BELOW IN TWO SHIFTS OF 9 HOURS EACH IS NOT SUSTAINABLE. (VI) ASSUMPTION OF 300 WORKING DAYS IS ALSO NOT SU BSTANTIATED BY ANY EVIDENCE. THE NUMBER OF WORKING DAYS WERE DULY RECORDED IN THE ST OCK REGISTERS FOUND AND SEIZED AND THE DATES HAVE BEEN CLUBBED TOGETHER AS AND WHEN PRODUCTION TOOK PLACE. COMPLETE MONTHWISE DETAILS OF THE NUMBER OF DAYS WORKED WERE FURNISHED TO THE AUTHORITIES BELOW AND THE CENTRAL EXCISE DEP ARTMENT HAS DULY ACCEPTED THE NUMBER OF DAYS WORKED BY THE UNIT. 18. AS REGARDS APPLICATION OF GROSS PROFIT RATE, IT IS VEHEMENTLY CONTENDED THAT THE LD. ASSESSING OFFICER HAS ADOPTED THE EXORBITANT GROSS PROFIT RATE OF 49% WITHOUT ANY MATERIAL ON RECORD TO SUBSTANTIATE THE SAME, PARTICULARLY WHEN THERE IS NO EVIDENCE TO SHOW ANY UNRECORDED SALES BY THE ASSESSEE. HOWEVER, THE ALTERNATIVE ARG UMENT ON BEHALF OF THE ASSESSEE IS THAT EVEN IF FOR THE SAKE OF ARGUMENTS, IT IS TAKEN FOR GRANTED THAT THE ASSESSEE MADE UNRECORDED SALES, THE PREVIOUS HISTORY OF ASSESSEE IS THE BEST GUIDE. THE ASSESSMENTS OF ASSESSEES PREDECESSOR, M/S. NARENDRA PRODUCTS FOR PREVIOUS YEARS WHOSE BUSINESS WAS TAKEN OVER BY THE ASSESSEE-COMPANY, HAVE BEEN COMPLETED U/S. 153A OF THE ACT BY THE SAM E ASSESSING OFFICER & ON THE SAME DATE AND THE PROFIT RATE ON THE DECLARED SALES SHOWN BY THEM HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER, BUT THE GROSS PROFIT RATE IN THE ASSESSEES CASES H AS BEEN ADOPTED AT ABOUT 4 TO 5 TIMES OF THE GP RATE ACCEPTED IN THE CASE OF M/S. NARENDRA PRODUCTS , WHICH IS NOT TENABLE IN THE EYE OF LAW, ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 18 PARTICULARLY WHEN M/S. NARENDRA PRODUCTS WAS MANUFA CTURING THE PRODUCTS OF SAME BRANDS, USING THE SAME MACHINES AND SELLING THESE PRODUCTS AT SAM E MRP. THEREFORE, THE ENTIRE ESTIMATION MADE BY THE ASSESSING OFFICER IS ARBITRARY, VAGUE A ND NOT SUPPORTED BY ANY MATERIAL ON RECORD. SUBMITTING A CHART OF ESTIMATION, THE LD. COUNSEL F OR THE ASSESSEE CONTENDS THAT AS NO SALES OR REMOVAL OF GOODS WAS FOUND UNRECORDED, THE SALES DE CLARED BY ASSESSEE MAY BE ACCEPTED AS ACCEPTED BY THE AO IN THE CASE OF M/S. NARENDRA PRO DUCTS AND GROSS PROFIT MAY BE WORKED OUT BY APPLYING THE G.P. RATE OF 14% ( THE AVERAGE GP RATE OF NARENDRA PRODUCTS), AS APPLIED BY THE LD. CIT(A). 19. THE LEARNED DR, ON THE OTHER HAND, RELIED ON TH E ASSESSMENT ORDERS AND SUBMITTED THAT THE REJECTION OF BOOKS AND ESTIMATION OF SALES MADE BY THE ASSESSING OFFICER ARE BASED ON THE SEIZED MATERIAL AND THE LD. CIT(A) HAS WRONGLY RESTRICTED THE SAME. THE ASSESSING OFFICER HAS POINTED OUT VARIOUS DISCREPANCIES IN THE BOOKS OF ACCOUNTS, STOCK POSITION OF RAW MATERIAL AND FINISHED PRODUCTS FOUND AT THE BUSINESS PREMISES OF THE ASSE SSEE AS WELL AS OTHER FAMILY CONCERNS AND RESIDENCE OF DIRECTORS. THE STOCK REGISTERS FOUND A T THE TIME OF SEARCH WERE ALSO NOT FOUND COMPLETE. SOME TORN BILLS FROM THE PREMISES OF ASSE SSEES ACCOUNTANT WERE ALSO SEIZED AND THE NUMBER OF WORKERS AND WORKING HOURS WERE FOUND MORE THAN THAT DISCLOSED BY ASSESSEE. THE CIT(A) HAS ACCEPTED THE INVOCATION OF SECTION 145(3 ) IN PRINCIPLE, BUT HAS NOT GIVEN GOOD REASONING FOR RESTRICTING THE ESTIMATION OF SALE AN D GROSS PROFIT WORKED OUT BY THE ASSESSING OFFICER. THE LD. DR, DURING THE COURSE OF HEARING, ALSO SUBMITTED PHOTOCOPY OF A SURVEY REPORT MADE AT THE PREMISES OF M/S. VERSA TRADERS, AGRA, G ODOWN OF M/S. NARENDRA PRODUCTS AND ASSESSEE-COMPANY AND ALSO AT THE PREMISES OF M/S. R AMDEV PRINTER, KANPUR, THE ALLEGED LAMINATION PRINT SUPPLIER OF KESHWANI GROUP. HE ALS O PRODUCED PHOTOCOPY OF A LIST WHICH IS SAID ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 19 TO BE THE LIST OF UNRECORDED SALE OF ASSESSEE TO VA RIOUS PERSONS. THIS LIST CONTAINS THE NAMES OF 36 PERSONS AGAINST WHICH THE SALE AMOUNTS ARE ENTERED RANGING FROM RS.20 TO RS.90/-. THE SALE IS MENTIONED TO HAVE BEEN MADE TO VARIOUS THELWALAS, S TORES, PANWALAS ETC. IN REJOINDER, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THESE DOCUM ENTS WERE NEVER CONFRONTED TO THE ASSESSEE NOR ANY ADVERSE INFERENCE HAS BEEN TAKEN BY THE AUT HORITIES BELOW ON THE BASIS OF THESE DOCUMENTS. EVEN THERE IS NO MENTION OF THESE DOCUME NTS IN THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. BY NO STRETCH OF IMAGINATION, IT CAN BE GATHERED THAT THE ASSESSEE-COMPANY WOULD MAKE SALES OF ITS PRODUCTS FOR SUCH MEAGER AM OUNTS FROM RS.20/- TO 90/- AND THAT TOO TO THE SMALL THELWALAS, PANWALAS OR STORES. THEREFORE, THESE DOCUMENTS CANNOT BE SAID TO BE AUTHENTIC. IT WAS CONTENDED BY THE LD. DR THAT AFTE R APPLICATION OF PROVISIONS OF SECTION 145(3), THE SALES OF ASSESSEE HAVE RIGHTLY BEEN ESTIMATED B Y THE ASSESSING OFFICER ON THE BASIS OF BEST JUDGMENT ASSESSMENT, WHICH NEEDS NO INTERFERENCE. 20. WE HAVE HEARD BOTH THE SIDES AND HAVE CONSIDERE D THEIR RIVAL SUBMISSIONS AND MATERIAL AVAILABLE ON RECORD. ASSESSING OFFICER REJECTED TH E ACCOUNT BOOKS AND APPLIED THE PROVISIONS OF SECTION 145(3) OF THE ACT. FROM THE RECORD, WE NOT ICE THAT THE STOCK DISCREPANCIES POINTED OUT BY THE A.O. WERE RECONCILED BY ASSESSEE TO SOME EXTENT . THE RECONCILIATION STATEMENT MADE BEFORE CIT(A) WERE FORWARDED TO THE A.O. FOR HIS COMMENTS. FROM THE PERUSAL OF THE REMAND REPORT, WE FIND THAT NO ADVERSE COMMENTS WERE MADE BY ASSES SING OFFICER. THUS, THE RECONCILIATION OF STOCK MADE BY ASSESSEE WAS ADMITTED BY THE REVENUE AUTHORITIES. 21. AS FAR AS EMPLOYMENT OF EXTRA MANPOWER IS CONCE RNED, WE FIND THAT THE REVENUE COULD NOT REBUT THE CONTENTION OF THE ASSESSEE ABOUT THE AUTHENTICITY OF LABOUR LIST WHICH NEITHER ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 20 CONTAINS ANY SIGNATURE OF THE PERSON PREPARING THE SAME NOR ANY PERSON PRESENT FROM THE SIDE OF ASSESSEE. IT WAS NEVER CONFIRMED WITH THE PERSON P RESENT AT THE TIME OF SEARCH. IT ALSO DOES NOT CONTAIN COMPLETE ADDRESS OF WORKERS MENTIONED THERE IN. NO CROSS EXAMINATION OF ANY OF THE LABOURERS MENTIONED THEREIN WAS MADE EVEN ON THE SP ECIFIC REQUEST OF THE ASSESSEE. 22. THE SURVEY REPORT SUBMITTED BY THE REVENUE DURI NG THE COURSE OF HEARING IS ALSO CHALLENGED BY ASSESSEE. THIS REPORT IS AN INTERNAL DOCUMENT OF THE DEPARTMENT WHICH WAS NEVER CONFRONTED TO THE ASSESSEE. COGNIZANCE OF THE SAME WAS TAKEN FOR REJECTION OF BOOKS OF ACCOUNTS. IN THIS LIST, PETTY SALES RANGING FROM RS. 20/- TO 90/- ARE WRITTEN. THE ASSESSEE IS HAVING TURNOVER IN CRORES, THEREFORE, IT CANNOT BE SAID THAT ASSESS EE HAVE MADE SUCH PETTY SALES, THAT TOO TO VARIOUS SMALL PAN WALAS/THELE WALAS. 23. HOWEVER, WE NOTE THAT THERE EXISTED SOME OTHER DISCREPANCIES WHICH ARE SUFFICIENT FOR NOT TO REVERSE THE ACTION OF AUTHORITIES BELOW FOR INVO KING THE PROVISIONS OF SECTION 145(3) OF INCOME-TAX ACT. A PERUSAL OF THE ASSESSMENT ORDER R EVEALS THAT SEARCH WAS CARRIED OUT ON 30.01.2008 AND DURING THE COURSE OF SEARCH PROCEEDI NGS, THE STOCK REGISTER OF RAW MATERIAL SEIZED AS ANNEXURE BK-19 AND STOCK REGISTER OF FINISHED PR ODUCTS SEIZED AS ANNEXURE BK-18 WERE NOT FOUND WRITTEN UPTO DATE AND WERE FOUND INCOMPLETE. THE LD. ASSESSING OFFICER AT PAGE 17 OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2008-09 HAS PR EPARED A CHART SHOWING NON-COMPLETION OF THESE REGISTERS ON VARIOUS DATES. WE DO NOT FIND AN Y COGENT EVIDENCE ON RECORD TO EXPLAIN THIS VITAL DISCREPANCY. THE PERSON PRESENT AT THE TIME O F SEARCH SHRI MAHENDRA KUMAR KESHWANI ALSO SHOWED HIS INABILITY TO EXPLAIN THIS DISCREPANCY. I T IS ALSO EVIDENT FROM THE RECORD THAT ENTRIES OF PRODUCTION WERE NOT RECORDED IN THE STOCK REGISTERS FOR SAME DAYS PRIOR TO THE SEARCH. ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 21 24. AS FAR AS THE ESTIMATION OF SALES IS CONCERNED, WE ARE OF THE VIEW THAT ONCE THE BOOKS OF ACCOUNT STAND REJECTED, THE TRADING RESULTS HAVE TO BE ASSESSED BY BEST JUDGMENT ASSESSMENT. HOWEVER, WHILE MAKING THE BEST JUDGMENT ASSESSMENT, IT IS INCUMBENT UPON THE TAX AUTHORITIES TO ASCERTAIN THAT THE ESTIMATION SO MADE MUST BE FAIR, REASONABLE AND BASED ON MATERIAL AVAILABLE ON RECORD. THE ESTIMATES MADE BY THE TAX AUTHORITIES I N MAKING THE BEST JUDGMENT ASSESSMENT SHOULD NOT BE BASELESS, BUT SHOULD BE A BONA FIDE ESTIMATE AND ARRIVED AT A RATIONAL BASIS. THE APPLICATION OF SECTION 145(3) DOES NOT EXTEND UNFETTERED POWERS TO THE ASSESSING OFFICER TO ESTIMATE AS PER HIS/HER IMAGINATION AS ITS SOLE BASE. THERE SHOULD BE A RATIONAL NEXUS BETWEEN THE ESTIMATION OF TURNOVER AND PROFIT THERE ON WITH THE MATERIAL AVAI LABLE ON RECORD. WE HAVE LOOKED INTO THE FACT WHETHER THE ASSESSING OFFICER HAD ARRIVED AT CORREC T ESTIMATE OR NOT. THE ASSESSING OFFICER HAS TAKEN THE FOLLOWING FACTORS INTO ACCOUNT FOR ESTIMA TION OF SALES FOR BOTH THE YEARS UNDER CONSIDERATION: (I) 15 POUCH PACKING MACHINES MRP-WISE AS FOUND AT THE TIME OF SEARCH, WERE USED BY ASSESSEE DURING THE YEAR; (II) AVERAGE PRODUCTION CAPACITY OF EACH MACHINE WA S @ 8000 POUCHES PER HOUR; (III) PRODUCTION WAS MADE IN TWO SHIFTS OF 18 WORKI NG HOURS PER DAY; (IV) PRODUCTION WAS MADE FOR 300 WORKING DAYS DURIN G THE YEAR; (V). SALE VALUE OF THE POUCHES OF VARIOUS MRPS AS D ECLARED BY ASSESSEE. 25. AS REGARDS THE ESTIMATION OF PRODUCTION AND SAL E KEEPING IN VIEW THE OPERATION OF 15 MACHINES DURING THE WHOLE OF THE DISPUTED YEARS, WE HOLD THAT THE AUTHORITIES BELOW WERE NOT FULLY JUSTIFIED ON THE FACTS AND CIRCUMSTANCES OF T HE CASES. IN FACT THERE IS NO MATERIAL ON RECORD TO REBUT THE CONTENTIONS OF THE ASSESSEE THAT THE PROD UCTION WAS STARTED BY ASSESSEE-COMPANY FROM 06.05.2006 ONLY. SOME OF THE MACHINES WERE PURCHAS ED AFTER 06.05.2006. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ITSELF HAS ADMITTED THAT 2- 3 MACHINES EVER REMAINS IN STANDBY MODE. ALL THESE ARGUMENTS OF THE ASSESSEE ARE TENABLE IN VIEW OF THE DOCUMENTARY EVIDENCE FOUND AND SEIZED AT THE TIME OF SEARCH. THE ASSESSEE ALSO FU RNISHED THE DETAILS OF MONTH-WISE OPERATION OF ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 22 MACHINES FOR PRODUCTION OF PAN MASALA AND GUTKHA OF VARIOUS MRPS ALONGWITH NUMBER OF WORKING DAYS EACH MONTH. NO CONCLUSIVE PROOF AVAIL ABLE ON BOTH SIDES WHETHER THE ASSESSEE HAS OPERATED MACHINES MORE THAN THOSE REPORTED TO THE C ENTRAL EXCISE DEPARTMENT FROM TIME TO TIME. HENCE, IN OUR OPINION, IT IS UNJUSTIFIED TO ESTIMAT E THE PRODUCTION AND SALE OF ASSESSEE ON THE BASIS OF 15 MACHINES FOR WHOLE OF THE YEARS. IT CO ULD BE ESTIMATED FOR THE PART OF THE YEAR. 26. THERE IS NO DISPUTE REGARDING CAPACITY OF MACHI NES FOR ESTIMATING THE PRODUCTION AND SALE. 27. WITH REGARD TO 18 WORKING HOURS PER DAY ADOPTED BY THE AUTHORITIES BELOW FOR ESTIMATING THE PRODUCTION AND SALE, WE HOLD THAT THERE IS NO E VIDENCE ON RECORD TO JUSTIFY THE SAME. REVENUE IS UNABLE TO REBUT THE CONTENTION OF ASSESSEE THAT THEY HAVE NEVER INFORMED THE EXCISE AUTHORITIES FOR OPERATION OF TWO SHIFTS. NO MATERIAL WAS SEIZE D DURING THE SEARCH TO ESTABLISH THIS FACT. THE ACTUAL WORKING HOURS HAVE BEEN REPORTED TO THE CENT RAL EXCISE DEPARTMENT, WHICH HAVE BEEN ACCEPTED. THE INFORMATION LETTER DATED 13.11.2007 A PPEARS TO HAVE BEEN MISREAD BY THE ASSESSING OFFICER AS EXPLAINED BY THE ASSESSEE IN HIS ARGUMEN TS. WE HAVE ALSO GONE THROUGH THE STATEMENTS OF THE ALLEGED WORKER SHRI MATA PRASAD RELIED BY AO FOR ESTIMATING THE WORKING HOURS AS 18, AND WE FIND THAT THE SAID STATEMENTS NOWHERE SPEAK THAT MACHINES ARE OPERATED IN TWO SHIFTS OR 18 HOURS. THE ASSESSEE DENIED THE EMPLOYMENT OF THIS PERSON. FURTHER, NO OPPORTUNITY OF CROSS EXAMINATION WAS PROVIDED EVEN ON SPECIFIC REQUEST I N THIS REGARD. WE, THEREFORE, FIND NO REASONS TO ADOPT THE PRODUCTION IN TWO SHIFTS OF 9 HOURS EA CH. 28. WITH REGARD TO THE WORKING DAYS FOR THE YEARS A RE CONCERNED, WE HOLD THAT NUMBERS OF WORKING DAYS WERE RECORDED IN THE STOCK REGISTERS F OUND AND SEIZED. THE DATES HAVE BEEN MENTIONED AS AND WHEN PRODUCTION TOOK PLACE. MONTH WISE DETAILS OF THE NUMBER OF MACHINES ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 23 OPERATED AND NUMBER OF DAYS WORKED WERE FURNISHED. THE LD. CIT(A) IS PARTLY JUSTIFIED IN ESTIMATING PRODUCTION BY OPERATING 15 MACHINES FOR THE YEAR. IN OUR CONSIDERED VIEW, THE ESTIMATE MADE BY CIT (A) TAKING THE AVERAGE SALES O F M/S. NAREDRA PRODUCTS FOR 5 YEARS IS JUSTIFIED. AFTER CONSIDERING ALL THE FACTS IN RES PECT OF THE MACHINES IN OPERATION, WE FIND IT APPROPRIATE TO ESTIMATE THE SALES BY TAKING 12 MACH INES IN OPERATION FOR 11 MONTHS DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 2007-08 WHICH CO MES TO RS.3,19,04,286/-. THE TURNOVER FOR THE PERIOD RELEVANT TO ASSESSMENT YEAR 2008-09 IS B EING WORKED OUT BY TAKING THE 14 MACHINES IN OPERATION FOR WHOLE OF THE YEAR. THE TURNOVER WORK S OUT TO RS.3,48,04,676/- X 14 12 = RS.4,06,05,455/-. 29. AS FAR AS THE ESTIMATION OF GROSS PROFIT RATE I S CONCERNED, THE RECORD SHOWS THAT THE ASSESSEE HAS DECLARED GROSS PROFIT OF RS.13,94,472/ - IN THE A.Y. 2007-08 AND RS.8,78,764/- IN 2008-09 WHICH CANNOT BE ACCEPTED. IN VIEW OF THE R EJECTION OF BOOK RESULTS, CORRECT PROFIT CANNOT BE DEDUCED ON THIS RATE. THE PROFIT RATE OF 49% A DOPTED BY THE LD. ASSESSING OFFICER IS IMAGINARY AND UNREASONABLE TAKING INTO ACCOUNT THE FACT ON RECORD. NEITHER THE ASSESSEE NOR THE REVENUE ARE ABLE TO ADDUCE ANY CONCRETE EVIDENCE TO SUPPORT THE ESTIMATE MADE BY THEM OF THE GROSS PROFIT. HOWEVER, LAYING OUR HANDS ON THE DECI SION OF HON'BLE JURISDICTIONAL HIGH COURT RENDERED IN THE CASE OF ACIT VS. D.M. BROTHERS (201 0) DTR (ALL.) 13, WE ARE OF THE CONSIDERED OPINION THAT PAST HISTORY OF THE ASSESSEE IS THE GO OD GUIDE FOR ESTIMATING THE GROSS PROFIT RATE IN SUCH CIRCUMSTANCES. IN THE INSTANT CASES, IT IS NOT IN DISPUTE THAT ASSESSEE COMPANY CAME INTO EXISTENCE W.E.F. 15.07.2005 AND PRODUCTION WAS STAR TED W.E.F. 06.05.2006. PREVIOUSLY, THE SAID BUSINESS WAS BEING CARRIED OUT BY THE PARTNERSHIP F IRM, M/S. NARENDRA PRODUCTS, MANUFACTURING THE PRODUCTS OF SAME BRANDS, USING THE SAME MACHINE S AND SELLING THESE PRODUCTS AT SAME MRP, WHICH WAS SUBSEQUENTLY TAKEN OVER BY THE ASSESSEE-C OMPANY. THE ASSESSMENTS OF ASSESSEE'S ITA NO. 323 & 324/AGRA/2010 ITA NO. 353 & 352/AGRA/2010 24 PREDECESSOR, M/S. NARENDRA PRODUCTS FOR PREVIOUS YE ARS HAVE BEEN COMPLETED U/S. 153A OF THE ACT BY THE SAME ASSESSING OFFICER & ON THE SAME DAT E AND THE PROFIT RATE ON THE DECLARED SALES SHOWN BY THEM HAVE BEEN ACCEPTED BY THE ASSESSING O FFICER, BUT THE GROSS PROFIT RATE IN THE ASSESSEE'S CASES HAS BEEN ADOPTED AT ABOUT 4 TO 5 T IMES OF THE GP RATE ACCEPTED IN THE CASE OF M/S. NARENDRA PRODUCTS, WHICH IS NOT TENABLE IN THE EYE OF LAW AND FACTS OF THE CASE. WE, THEREFORE, FIND THAT THE LD. CIT(A) HAS RIGHTLY CONSIDERED THE PREVIOUS HISTORY OF ASSESSEE-COMPANY AND THE AVERAGE GROSS PROFIT RATE OF M/S. NARENDRA PRODUCTS FOR LAST FIVE YEARS FOR ADOPTING THE GROSS PROFIT RATE IN THE CASES OF ASSESSEE AT 14% FOR BOT H THE YEARS UNDER CONSIDERATION. THEREFORE, AFTER APPLYING THE G.P. RATE AT 14% ON THE ESTIMATED SALE S, THE GROSS PROFITS ARE WORKED OUT TO RS.44,66,600/- AND RS.56,84,763/- FOR A.Y. 2007-08 AND 2008-09 RESPECTIVELY. AFTER REDUCING THE EXPENSES OF RS.14,23,935/- AND RS.9,22,898/-, T HE TOTAL INCOME WORKS OUT TO RS.30,42,665/- AND RS.47,61,865/- FOR THE YEARS 2007-08 AND 2008-0 9 RESPECTIVELY. 30. IN THE RESULT, THE APPEAL NO.323/AGRA/2010 FILE D BY THE ASSESSEE AND APPEAL NO.352/AGRA/2010 FILED BY THE REVENUE ARE PARTLY AL LOWED. APPEAL NO.353/AGRA/2010 FILED BY REVENUE AND APPEAL NO.324/DEL/2010 FILED BY ASSESSE E ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 26 TH DAY OF DECEMBER, 2011. SD/- SD/- (H.S. SIDHU) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 26 TH DAY OF DECEMBER, 2011 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-II, AGRA. 5.CIT(ITAT), NEW DELHI. AR, ITAT AGRA