M/s. Meroform (India) Pvt. Ltd., Uttar Pradesh V. DCIT, New Delhi

ITA 4494/DEL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6993 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 29-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 14-08-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Depreciation; Business expenditure; Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Principle of natural justice; Difference of opinion; Competent authority; Block assessment; Documents seized; Change of opinion; Reassessment proceedings
• Section: 143(3); 133A; 153A; 133(6); 131; 68; 148; 132

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A NOS.: - 4630, 4631, 4632, 4633, 4634, 4635/DE L/2014 A.Y.S: 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 & 2011-12 ITA. NO. 4494/DEL/2014 ASSESSMENT YEAR 2011-12 MEROFORM INDIA PVT. LTD. A-37, SECTOR 80, PHASE II NOIDA UTTAR PRADESH 201305 PAN AACCM5189P VS. DCIT CENTRAL CIRCLE 8 NEW DELHI. (APPELLANT) (RESPONDENT) O R D E R PER BENCH THE AFORESAID APPEALS HAVE BEEN FILED BY THE REVENUE AGAINST SEPARATE IMPUGNED ORDERS OF EVEN DATE, 30 TH MAY, 2014, PASSED BY LD. ACIT CENTRAL CIRCLE-8 NEW DELHI. VS. MEROFORM INDIA PVT. LTD. A-37, SECTOR 80, PHASE II NOIDA PAN AACCM5189P (APPELLANT) (RESPONDENT) DEPARTMENT BY: SMT. SHAFALI SWAROOP, CIT(DR) ASSESSEE BY : SHRI S.K. TULSIYAN CA DATE OF HEARING 26/06/2018 DATE OF PRONOUNCEMENT 31/07/2018 2 CIT (APPEALS) XXXII, NEW DELHI FOR THE QUANTUM OF ASS ESSMENT PASSED U/S 153A R.W.S 143(3) FOR THE ASSESSMENT YEARS 2006-0 7, 2007-08, 2008-09, 2009-10, 2010-11 AND 2011-12. IN THE ASSES SMENT YEAR 2010-11 THE ASSESSEE HAS ALSO FILED CROSS APPEAL. SI NCE COMMON ISSUES ARE INVOLVED IN ALL THE APPEALS ARISING OUT O F IDENTICAL SET OF FACTS, THEREFORE, THE SAME WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2. THE DISALLOWANCES AND ADDITIONS AS CHALLENGE D IN THE GROUNDS OF APPEAL BY THE DEPARTMENT IN VARIOUS ASSESSMENT YEARS O N MERITS AS WELL AS BY THE ASSESSEE IN THE ASSESSMENT YEAR 2011-12 ARE SUMMARISED AS UNDER: - NATURE OF ADDITION MADE BY THE AO 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 PERSONAL EXPENSES 5,23,970 4,77,263 6,16,841 5,43,453 29,52,758 19,93 ,202 BOGUS PURCHASES MADE FROM NITIN ENTERPRISES 27,15,435 40,77,004 2,19,48,700 89,49,347 2,52,67,1 72 2,11,70,553 UNEXPLAINED PURCHASES MADE FROM KIRAN FURNITURE 1,87,375 8,17,996 14,28,290 9,88,687 2,54,685 1,03, 39,624 DISALLOWANCE U/S 40A (3) 5,00,973 2,55,101 12,05,538 - - - UNEXPLAINED CASH FOUND - - - - - 6,68,483 3 DISALLOWANCE ON ACCOUNT OF TOUR TRAVELLING, REPAIRS, DEPRECIATION ON CAR ETC. - - - - - 6,65,138 SALE OF SCRAP - - - - - 1,74,23,441 3. WHEREAS ON MERITS THE ASSESSEE HAS CHALLENGED IN THE APPEAL FOR ASSESSMENT YEAR 2011-12 FOLLOWING TWO ADDITIONS: - I) ADDITION ON ACCOUNT OF SCRAP SALES: RS.1,16,15 ,628/- II) DISALLOWANCE ON ACCOUNT OF LOW DECLARATION OF INCOME: RS. 11,84,425/- 4. THE ASSESSEE IN THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2006-07, 2007-08 AND 2008-09 HAS FILED A PETITION UND ER RULE 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963, WHEREB Y A LEGAL GROUND HAS BEEN RAISED; THAT THE ADDITIONS MADE BY THE A .O. IN THE IMPUGNED ASSESSMENT ORDERS ARE BEYOND THE SCOPE OF AS SESSMENT U/S 153A, AS NO INCRIMINATING MATERIAL WAS FOUND DURING TH E COURSE OF SEARCH IN RELATION TO ALL ADDITIONS MADE. IN THE SAID P ETITION IT HAS BEEN SUBMITTED THAT THIS ISSUE WAS ALSO CHALLENGED BEFOR E THE LD. CIT(A) VIDE GROUND NO. 2 IN ALL THE THREE ASSESSMENT Y EARS WHICH READS AS UNDER: - 2. THE LD. A.O. HAS GROSSLY ERRED ON FACTS AS WELL AS IN LAW IN MAKING ADDITIONS U/S 153A IN SPITE OF THE FACT THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH TO ENABLE TO THE A.O. TO MAKE ADDITION ON THE IMPUGNED ISSUE IN THE 4 ASSESSMENT U/S 153A AGAINST THE ALREADY COMPLETED ASSESSMENT. 5. BEFORE US LD. COUNSEL HAS POINTED OUT THAT THIS ISSUE H AS BEEN DECIDED AGAINST THE ASSESSEE BY THE LD. CIT(A) IN A VE RY DETAILED WAY, HOWEVER, SINCE LD. CIT(A) HAS GRANTED RELIEF ON MER ITS, THEREFORE, ASSESSEE HAS NOT FILED ANY CROSS APPEAL OR CROSS OBJ ECTION. HE FURTHER ARGUED THAT RULE 27 PERMITS THE RESPONDENT EVEN THOUGH HE MAY NOT HAVE APPEALED BUT CAN SUPPORT THE ORDER APPEALED AGAIN ST ON ANY OF THE GROUNDS DECIDED AGAINST HIM. THIS INTER-ALIA MEANS THAT IF ANY ISSUE HAS BEEN DECIDED AGAINST THE RESPONDENT, THEN THE SAME CAN BE CHALLENGED BY THE RESPONDENT BY INVOKING THIS RULE. 6. ON THE OTHER HAND, LD. CIT(DR) OBJECTING TO THE ADM ISSION OF THE PETITION MADE UNDER RULE 27, SUBMITTED THAT THE RESPOND ENT ASSESSEE CANNOT BE PERMITTED TO RAISE A GROUND OR AN ISSUE WHICH HAS BEEN DECIDED AGAINST HIM WHICH COULD HAVE ONLY DONE BY FI LING OF APPEAL. IN SUPPORT STRONG RELIANCE WAS PLACED IN THE JUDGMENT OF H ON'BLE P & H HIGH COURT IN THE CASE OF SELF KNITTING WORKS VS. CIT , REPORTED IN (2014) 227 TAXMAN 253; AND ITAT AHMEDABAD DECISION IN THE CASE OF DCIT VS. SANDEEP M PATEL, REPORTED IN (2012) 137 ITD 104. 7. FIRST OF ALL, WE SHALL DECIDE THE ADMISSIBIL ITY OF ASSESSEES PETITION MADE UNDER RULE 27 MADE FOR THE ASSESSMENT YEA RS 2006-07, 2007-08 & 2008-09, CHALLENGING THE VALIDITY OF ADDITI ONS MADE IN THE IMPUGNED ASSESSMENT ORDERS ON THE GROUND THAT SAME ARE BEYOND THE SCOPE OF SECTION 153A. FROM THE PERUSAL OF THE MATERIA L PLACED ON RECORD IT IS SEEN THAT ASSESSEE BEFORE THE LD. CIT (A) HAS CHALLENGED THE VALIDITY OF THE ADDITIONS MADE U/S 153A ON THE GROU ND THAT, FIRSTLY , NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURS E OF SEARCH SO AS TO ENABLE THE AO TO MAKE THE ADDITION ON THE IMPUGNED I SSUES IN THE 5 ASSESSMENT PASSED U/S 153A; AND SECONDLY , THEY HAVE ALREADY BEEN CONSIDERED IN THE ASSESSMENT COMPLETED EARLIER AND HA D ATTAINED FINALITY. THIS GROUND HAS BEEN RAISED VIDE GROUND N OS. 1 & 2 BEFORE CIT(A) IN ALL THESE YEARS, WHICH HAS BEEN DECIDED AG AINST THE ASSESSEE IN A VERY DETAILED MANNER, WHICH FOR SAKE OF READY R EFERENCE IS REPRODUCED HEREUNDER: - 6.1 FROM A PLAIN READING OF SECTION 153A IT IS EVIDENT THAT IT REQUIRES THE ASSESSING OFFICER TO ASSESS OR RE-ASSE SS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDIN G THE YEAR OF SEARCH. THERE HAS BEEN LOT OF DEBATE AND JUDICIAL C ONTROVERSY REGARDING THE NATURE OF ASSESSMENT OR RE-ASSESSMENT PROCEEDINGS TO BE UNDERTAKEN U/S 153A. LEGISLATURE REQUIRES THE ASSESSING OFFICER TO ASSESS OR RE-ASSESS THE TOTAL INCOME OF PENDING SIX ASSESSMENT YEARS. THE WORDS 'TOTAL INCOME' HAS BEEN USED UNDER CLAUSE 'B' OF SECTION 153A (1) AS WELL AS UNDER FIR ST PROVISO TO SECTION 153A (1). 6.2 THE ASSESSMENT OR RE ASSESSMENT PROCEEDINGS TO BE UNDERTAKEN U/S 153A MAY BE CLASSIFIED AS UNDER: A. FOR THE ASSESSMENT YEAR RELATING TO THE YEAR OF SEARCH- WHETHER NORMAL ASSESSMENT CAN BE FRAMED EXAMINING A ND MAKING ADDITIONS RELATING TO ALL THE ISSUES AS CAN BE DONE IN NORMAL SCRUTINY CASE? B. IN THE CASE WHEN ASSESSMENT PROCEEDINGS U/S 143( 3) WERE PENDING AND THOSE PROCEEDINGS WERE ABATED DUE TO SE ARCH HAVING TAKEN PLACE- WHETHER ASSESSMENT FOR SUCH YEA RS CAN BE MADE AS NORMAL ASSESSMENT EXAMINING AND MAKING ADDI TIONS RELATING TO ALL THE ISSUES AS CAN BE DONE IN NORMAL SCRUTINY CASE? C. FOR THE YEARS FOR WHICH NO NOTICE U/S 143(2) WAS EARLIER ISSUED AND THE SAME HAVING BEEN TIME BARRED - WHETHER ASSE SSMENT FOR SUCH YEARS CAN BE MADE AS NORMAL ASSESSMENT EXAMINI NG AND MAKING ADDITIONS RELATING TO ALL THE ISSUES AS CAN BE DONE IN NORMAL SCRUTINY CASE? SUCH YEARS MAY FURTHER BE CLA SSIFIED AS THE YEARS FOR WHICH PROCESSING UNDER SECTION 143(1) (A) HAS BEEN DONE OR 6 D. IN THE CASE OF PROCEEDINGS U/S 153A RELATING TO THE YEARS FOR WHICH ASSESSMENT ORDER U/S 143(3) HAS BEEN PASSED E ARLIER - WHETHER ISSUES ALREADY EXAMINED IN EARLIER ASSESSME NT PROCEEDINGS CAN BE RE-EXAMINED BY THE ASSESSING OFF ICER? WHETHER THERE CAN BE CHANGE OF OPINION BY THE ASSES SING OFFICER ON THE ISSUES ALREADY CONSIDERED WITHOUT ANY NEW EV IDENCES COMING TO HIS POSSESSION? 6.3 THUS, THERE HAS TO BE A CLARITY REGARDING NATUR E OF THE PROVISION OF SECTION 153A REQUIRING THE ASSESSMENT OR REASSESSMENT TO BE MADE IN THE CASE OF SEARCH CASES . REQUIREMENT OF SECTION 153A IS TO OPEN OR RE-OPEN O F THE CASES FOR THE PURPOSES OF MAKING ASSESSMENT OR RE-ASSESSMENT OF THE TOTAL INCOME OF PROCEEDINGS FOR SIX ASSESSMENT YEARS PRIO R TO THE YEAR OF SEARCH. IT DOES NOT CONTAIN ANY PROVISION REGARDING THE CONCEPT OF MAKING ASSESSMENT OF UNDISCLOSED INCOME ALONE AS WA S THE CASE UNDER BLOCK ASSESSMENT REGIME UNDER CHAPTER XIVB. I T DOES NOT CONTAIN ANY PROVISION REGARDING THE NATURE OF ADDIT ION WHICH CAN BE MADE UNDER THIS SECTION. THIS SECTION HAS RATHER PROVIDED, FOR THE REMOVAL OF DOUBTS, BY WAY OF INSERTION OF EXPLA NATION AT THE END OF THE SECTION THAT 'SAVE AS OTHERWISE PROVIDED IN THIS SECTION, SECTION 153B AND SECTION 153C, ALL OTHER PROVISIONS OF THIS ACT SHALL APPLY TO THE ASSESSMENT MADE UNDER THIS SECTI ON.' 6.4 THUS, IT IS CLEARLY IMPLIES THAT THE NATURE OF ASSESSMENT OR RE- ASSESSMENT TO BE MADE UNDER THIS SECTION 153A SHALL BE GOVERNED BY THE NORMAL PROVISIONS OF THE ACT. IN CASE IT IS AN ASSESSMENT MADE FOR THE FIRST TIME, ALL PRINCIPLES OF ASSESSME NT WHICH ARE APPLICABLE TO ASSESSMENT UNDER SECTION 143(3) SHALL BECOME APPLICABLE AND IN CASE IF A RE-ASSESSMENT IS BEING MADE, ALL THE PRINCIPLES OF RE-ASSESSMENT WHICH ARE APPLICABLE IN THE CASE OF PROCEEDINGS UNDER SECTION 147/148 SHALL BECOME APPL ICABLE. 6.5 THE PROVISIONS CONTAINED UNDER SECTION 153A ARE NOT COMPARABLE WITH THE NATURE OF PROVISIONS CONTAINED UNDER CHAPTER XIVB REGARDING BLOCK ASSESSMENT PROCEEDINGS. CONCEP T OF BLOCK ASSESSMENT UNDER CHAPTER XIVB WAS ALTOGETHER DIFFER ENT. IT WAS A SPECIAL PROCEDURE OF ASSESSMENT FOR SEARCH CASES TO BE MADE RELATING TO ONLY UNDISCLOSED INCOME. THERE WAS THEN THE CONCEPT OF DUAL ASSESSMENT PROCEEDINGS. NORMAL ASSESSMENT PROC EEDINGS FOR OTHER THAN UNDISCLOSED INCOME USED TO BE UNDERTAKEN 7 INDEPENDENTLY AND SIMULTANEOUSLY. SECTION 153A DOES NOT CONTAIN ANY SUCH SPECIAL PROCEDURE TO ASSESS UNDISCLOSED IN COME FOUND AS RESULT OF SEARCH, RATHER PENDING NORMAL ASSESSME NT OR RE- ASSESSMENT PROCEEDINGS ARE ABATED AND, IN A WAY, ME RGED WITH THE PROCEEDINGS TO BE UNDERTAKEN U/S 153A. ASSESSME NT PROCEEDINGS PURSUANT TO NOTICE U/S 153A ARE NOT INT ENDED TO BE RESTRICTED TO MAKE ASSESSMENT OF UNDISCLOSED INCOME ONLY DETECTED AS A RESULT OF SEARCH. 6.6 THE PROCEEDINGS UNDER SECTION 153A ARE IN FACT DE NOVO ASSESSMENT PROCEEDINGS FOR THE FOLLOWING REASONS: 1. SECTION 153A REQUIRES TOTAL INCOME FOR PRECEDING SIX YEARS TO BE ASSESSED OR RE-ASSESSED IN PURSUANCE TO NOTICE U NDER SECTION 153A. TOTAL INCOME WOULD INCLUDE ANY KIND O F INCOME AND IT CANNOT BE RESTRICTED TO UNDISCLOSED I NCOME OR ESCAPED INCOME. 2. AFTER INITIATION OF SEARCH, PENDING ASSESSMENT P ROCEEDINGS ARE ABATED AND THE SAME ARE MERGED WITH THE ASSESSM ENT PROCEEDINGS TO BE UNDERTAKEN PURSUANT TO NOTICE UND ER SECTION 153A. NATURE OF ASSESSMENT PROCEEDINGS, SO MERGED, CANNOT BE RESTRICTED TO MAKE ASSESSMENT ONLY OF UND ISCLOSED INCOME. 3. SECTION 153A REQUIRES TOTAL INCOME FOR ALL THE P RECEDING SIX YEARS TO BE ASSESSED OR REASSESSED, THEREFORE, THE NATURE OF ASSESSMENT PROCEEDINGS FOR ALL THE SIX YEARS WOULD BE OF THE SAME NATURE AND THE NATURE OF COMPLETED ASSESSMENT PROCEEDINGS TO BE REASSESSED PURSUANT TO NOTICE UND ER SECTION 153A CANNOT BE DIFFERENT. 4. THERE IS NO CONCEPT OF ASSESSMENT OF UNDISCLOSED INCOME UNDER SECTION 153A AS WAS THE CASE DURING BLOCK ASSESSMENT REGIME UNDER CHAPTER XIV8. UNDER BLOCK ASSESSMENT, THERE WAS CONCEPT OF DUAL ASSESSMENT - ONE FOR UNDISCLOSED INCOME DETECTED AS A RESULT OF SEARCH A ND OTHER FOR NORMAL ASSESSMENT AS PER NORMAL PROVISIONS OF T HE ACT. SINCE UNDER SECTION 153A, BOTH THE ASSESSMENT PROCE EDINGS ARE MERGED TOGETHER, THE NATURE OF THE ADDITIONS MA DE CANNOT BE RESTRICTED TO ASSESS ONLY UNDISCLOSED INC OME DETECTED AS A RESULT OF SEARCH. 8 5. IN CASE OF REOPENING OF ASSESSMENT UNDER SECTION 147/148 SPECIFIC REASONS OF INCOME ESCAPING ASSESSMENT ARE RECORDED AND, THEREFORE, ENQUIRIES ARE MADE DURING ASSESSMENT PROCEEDINGS WITH RESPECT TO SUCH ISSUES. HOWEVER, IN CASE OF SEARCH CASE, THERE ARE NO SPECI FIC REASONS RECORDED. IN THE CASE OF SEARCH BEFORE ISSU ING SEARCH WARRANT, SATISFACTION MAY BE RECORDED BY THE COMPETENT AUTHORITY REGARDING ACCUMULATION OF UNDIS CLOSED INCOME BY THE PERSON TO BE SEARCHED AND THE LEGISLA TURE REQUIRES SUCH PERSON TO BE MANDATORILY ASSESSED FOR PRECEDING SIX YEARS WITH RESPECT TO HIS TOTAL INCOM E. THEREFORE, ENQUIRIES CAN BE MADE RELATING TO ALL TH E ISSUES DURING SECTION 153A ASSESSMENT PROCEEDINGS. 6.7 IN VIEW OF THE ABOVE IT IS HELD THAT THE ASSESS MENT PROCEEDINGS PURSUANT TO NOTICE U/S 153A ARE NOT INTENDED TO BE RESTRICTED TO MAKE ASSESSMENT OF UNDISCLOSED INCOME ONLY DETECTED AS A RESULT OF SEARCH BUT NORMAL ASSESSMENT PROCEEDINGS FOR OTH ER THAN UNDISCLOSED INCOME CAN BE UNDERTAKEN INDEPENDENTLY AND SIMULTANEOUSLY. DELHI BENCH OF ITAT IN THE CASE OF SHIVNATH RAI HARNARAIN (INDIAN) LTD. V. DY. CIT [2009] 117 ITO 7 4 WHEREIN IT HAS BEEN HELD AS UNDER: 'IN VIEW OF OUR ABOVE ANALYSIS OF THE PROVISIONS OF SECTIONS, THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE HAVE NO FORCE BECAUSE THERE IS NO REQUIREMENT FOR AN ASSESSMENT M ADE UNDER SECTION 153A OF THE ACT BEING BASED ON ANY MATERIAL SEIZED IN THE COURSE OF SEARCH. FURTHER, UNDER THE SECOND PROVISO TO SECTION 153A PENDING ASSESSMENT OR REASSESSMENT PROCEEDINGS IN RELATION TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN SECTION 153A(B) OF THE ACT SHALL COME TO AN END (ABATE), WHICH MEANS THAT THE AO GET S JURISDICTION FOR SIX ASSESSMENT YEARS REFERRED TO I N SECTION 153A(B) OF THE ACT FOR MAKING AN ASSESSMENT OR REAS SESSMENT.' FURTHER DELHI BENCH OF ITAT IN THE CASE OF MS. SHAY M LATA KAUSHIK V. ASSTT. CIT [2008] 114 ITD 305 HAS EXPRES SED THE SIMILAR VIEW- 'THE CONTENTION OF THE ASSESSEE WAS THAT THERE WAS NO SEIZED MATERIAL BASED ON WHICH THE ASSESSMENT WAS COMPLETE D BY THE AO IN THE CASE OF THE ASSESSEE AND, THEREFORE, THE ASSESSMENT 9 FRAMED SHOULD BE HELD TO BE NULL AND VOID. IT WAS A LSO SUBMITTED THAT THE PROVISIONS OF SECTION 153A CANNOT BE INVOK ED TO MAKE AN ASSESSMENT OR REASSESSMENT OF INCOME JUST BECAUSE A SEARCH HAD TAKEN PLACE IN THE CASE OF AN ASSESSEE. THIS CO NTENTION OF THE ASSESSEE CANNOT BE ACCEPTED. THERE IS NO REQUIR EMENT FOR AN ASSESSMENT MADE UNDER SECTION 153A BEING BASED ON A NY MATERIAL SEIZED IN THE COURSE OF SEARCH. FURTHER UN DER THE SECOND PROVISO TO SECTION 153A, PENDING ASSESSMENT OR REAS SESSMENT PROCEEDINGS IN RELATION TO ANY ASSESSMENT YEARS FAL LING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN S ECTION 153A(B) SHALL ABATE. THUS, THE AO GETS JURISDICTION FOR SIX ASSESSMENT YEARS REFERRED TO IN SECTION 153A(B) FOR MAKING AN ASSESSMENT OR REASSESSMENT. IT IS NOT THE COMPLAINT OF THE ASSESS EE THAT ANY INCOME, WHICH IS ALREADY SUBJECTED TO ASSESSMENT UN DER SECTION 143(3) OR UNDER SECTION 148 COMPLETED PRIOR TO THE SEARCH IN RESPECT OF SIX ASSESSMENT YEARS REFERRED TO IN SECT ION 153A(B) AND IN THE SECOND PROVISO TO SECTION 153A, HAS ALSO BEEN INCLUDED IN THE ASSESSMENT FRAMED UNDER SECTION 153 A. IN SUCH CIRCUMSTANCES THE PLEA OF THE ASSESSEE CANNOT BE AC CEPTED. THERE IS NO REQUIREMENT FOR AN ASSESSMENT MADE UNDE R SECTION 153A BEING BASED ON ANY MATERIAL SEIZED IN THE COUR SE OF SEARCH.' 6.8 IN VIEW OF THE ABOVE, I HOLD THAT THE ACTION OF THE ASSESSING OFFICER IN MAKING THE IMPUGNED ADDITION WAS WITHIN THE SCOPE OF JURISDICTION U/S 153A OF THE IT ACT, 1961. THE APPE LLANT HAS RELIED ON VARIOUS DECISIONS BUT THESE DECISIONS DO NOT SUP PORT THE CASE OF APPELLANT'S IN VIEW OF THE ABOVE DISCUSSION. IN FAC T, THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA, RELIED UPON BY THE APPELLANT IS ALSO NOT IN FAVOUR OF THE APPELLANT. THEREFORE, THE CONTENTION OF THE APPELLANT THAT THE ADDITIONS MADE IN THE ASSESSMENT COMPLETED U/S 153A READ WITH SECT ION 143(3) WAS BEYOND THE SCOPE OF JURISDICTION U/S 153A IS RE JECTED. HENCE THIS GROUND OF APPEAL DISMISSED. 8. HOWEVER, ON MERITS ALL THE ADDITIONS HAVE BEEN DEL ETED BY LD. CIT(A) AND THAT IS WHY ASSESSEE WAS NOT AGGRIEVED BY THE OUTCOME OF THE JUDGMENT AND HENCE THERE WAS NO REASON TO FILE ANY APPEAL. 10 9. RULE 27 OF APPELLATE TRIBUNAL RULES, 1963 PROVIDE S THAT: 27. THE RESPONDENT, THOUGH HE MAY NOT HAVE APPEALE D, MAY SUPPORT THE ORDER APPEALED AGAINST ON ANY OF THE GR OUNDS DECIDED AGAINST HIM. THE AFORESAID RULE GIVES THE LIBERTY TO THE RESPONDENT TO SUPPORT THE FIRST APPELLATE ORDER ON ANY OF THE GROUND DECIDED AG AINST HIM, THAT IS, THE RESPONDENT CAN RAISE A DEFENCE UPON THE ORDER FIL ED BY THE APPELLANT ON ANY OF THE GROUNDS WHICH HAVE BEEN DECID ED AGAINST HIM. THE APPELLANT BEFORE THE FIRST APPELLATE AUTHORITY MAY R AISE MANY ARGUMENTS IN AN APPEAL TO PLEAD HIS CASE AND IF ONE O F THE LINES IS ACCEPTED AND OTHER IS REJECTED, THEN IN THE SECOND APP EAL FILED BY THE RESPONDENT (OF THE FIRST APPEAL AND NOW THE APPELLANT), THEN THE RESPONDENT HAS A RIGHT TO DEFEND THAT PART WHICH WAS ADVE RSELY DECIDED. HERE THE ISSUE OF SCOPE OF ADDITION IN TERMS OF ASSESSMENT COMPLETED U/S 153A HAS BEEN DECIDED AGAINST THE ASSES SEE AND THEREFORE, AS A RESPONDENT IT CAN VERY WELL RAISE THE D EFENCE IN THE APPEAL FILED BY THE REVENUE THAT ADDITIONS WHICH HAVE D ELETED ON FACTS ARE ALSO NOT SUSTAINABLE IN LAW. THE ONLY LIMITATION WHICH CAN BE INFERRED IS THAT IT IS NOT OPEN TO THE RESPONDENT THA T IT CANNOT CLAIM ANY FRESH RELIEF WHICH HAS BEEN DENIED TO HIM BY THE FIRST APPELLATE AUTHORITY AND ALSO WHICH IS NOT PART OF THE GROUNDS SO RAISED BY THE REVENUE. HERE IT IS NOT A CLAIM OF ANY FRESH RELIEF D ENIED TO THE ASSESSEE AND ALSO IT IS NOT PART OF THE GROUND RAISED BY THE REVENUE. THE RESPONDENT ASSESSEE GOT THE FAVOURABLE JUDGMENT ON MERITS BUT THERE IS AN ADVERSE FINDING ON THE ISSUE OF SCOPE OF SAME ADDITION UNDER SECTION 153A; AND THEREFORE, IN OUR OPINION THE ASSESSEE CAN VERY WELL RAISE SUCH AN ISSUE UNDER RULE 27. ACCORD INGLY, WE ALLOW THE ASSESSEES PETITION FILED UNDER RULE 27. 11 10. AS STATED IN THE FOREGOING PARAGRAPH, THE RESPO NDENT ASSESSEE HAS CHALLENGED THE ADDITIONS MADE BY THE AO IN THE AP PEALS FOR THE ASSESSMENT YEAR 2007-08 ; 2008-09 AND 2009-10 ON TH E LEGAL GROUND THAT THE IMPUGNED ADDITIONS MADE BY THE AO ARE BEYOND THE SCOPE OF SECTION 1543A FOR THE REASONS THAT AT THE TIME OF SEARCH, THE ASSESSMENTS FOR THESE ASSESSMENT YEARS WERE UNABATED IN TERMS OF PROVISO TO SECTION 153A; AND IN CASE OF SUCH UNABATED ASSESSM ENTS ADDITIONS CAN ONLY BE MADE ON THE BASIS OF ANY INCRIM INATING MATERIAL FOUND DURING THE COURSE OF SEARCH QUA THE ASSESSMENT YEARS AND IF NO SUCH INCRIMINATING MATERIAL HAS BEEN FOUND THEN SUCH A N ADDITION CANNOT BE ROPED IN THE ASSESSMENT FRAMED U/S 153A. BEF ORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS GIVEN THE FOLLOWING FACTS IN THIS REGARD WHICH ARE AS UNDER: - DATE OF SEARCH U/S 132: 19.10.2010 PARTICULARS AY 2006-07 AY 2007-08 AY 2008-09 DATE OF FILING OF RETURN OF INCOME AND INCOME RETURNED 1.12.2006 RS.1,37,31,204 27.10.2007 RS.1,27,56,410 28.09.2009 RS.3,68,63,690 LAST DATE OF ISSUANCE OF NOTICE U/S 143(2) --- 30.09.2008 --- DATE OF PASSING OF ASSESSMENT ORDER U/S 143(3) 11.11.2008 AT AN INCOME OF RS.1,37,31,204 NO NOTICE U/S 143(2) WAS ISSUED, HENCE THE RETURN INCOME ATTAINED FINALITY 21.05.2010 AT AN INCOME OF RS.3,68,63,690 12 11. ERGO, IN THIS CASE SEARCH AND SEIZURE ACTIO N WAS CONDUCTED AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE ON 19.10.2010 AND ACCORDINGLY NOTICES U/S 153A WERE ISSUED ON 27.9 .2012, WHICH ALSO INCLUDED FOR THE ASSESSMENT YEARS 2006-07 TO 200 8-09. IN ALL THESE YEARS RETURN HAD BEEN FILED ON THE DUE DATE U/S 139(1) AND IN THE ASSESSMENT YEARS 2006-07 AND 2008-09, THE ASSESSME NT ORDER U/S 143(3) WAS PASSED MUCH PRIOR TO THE DATE OF SEA RCH AND SUCH AN ASSESSMENT ORDER CANNOT BE SAID TO BE ABATED IN TERMS OF SECOND PROVISO TO SECTION 153A. IN SO FAR AS ASSESSMENT YEAR 2007-08 IS CONCERNED, THE RETURN INCOME FILED BY THE ASSESSEE HAD ATTAINED FINALITY, BECAUSE NO NOTICE U/S 143(2) HAS BEEN ISS UED AS REQUIRED WITHIN THE STIPULATED TIME PERIOD WHICH WAS 30.9.2008. THUS, IT WAS SUBMITTED BY THE LD. COUNSEL THAT FOR THESE THREE ASSES SMENT YEARS, ASSESSMENTS WERE UNABATED. HE FURTHER POINTED OUT IT IS AN ADMITTED FACT THAT NONE OF THE ADDITIONS MADE BY THE AO ARE BASED ON ANY SEIZED MATERIAL OR INCRIMINATING DOCUMENTS FOUND IN T HE COURSE OF SEARCH, WHICH FACT IS NOT ONLY EVIDENT FROM THE ASSES SMENT ORDER BUT ALSO NOT DISPUTED BY THE LD. CIT(A). THE LD. CIT (A) HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE ON THE GROUND THAT ONCE NOTI CE U/S 153A IS ISSUED FOR ANY OTHER SIX ASSESSMENT YEARS THEN AO HAS TO MAKE THE ASSESSMENT /REASSESSMENT AFRESH AND THERE IS NO BAR U NDER THESE PROVISIONS THAT THE ADDITIONS ONLY BASED ON INCRIMIN ATING MATERIAL CAN BE MADE AND IN SUPPORT HE PLACED STRONG RELIANCE ON T HE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR BHATIA (2012) 211 TAXMANN 453 (DELHI). HE SUBMITTED THAT IT IS NOW WELL SETTLED PROPOSITION OF LAW THAT IF THE INCOME OF THE ASS ESSEE HAS ALREADY BEEN ASSESSED AND ON THE DATE OF SEARCH SUCH ASSESSMENT HAS ATTAINED FINALITY AND ARE NOT TREATED AS ABATED ASSESSME NT, THEN WITHOUT ANY INCRIMINATING MATERIAL FOUND DURING THE CO URSE OF SEARCH NO ADDITION CAN BE MADE. THIS ISSUE HAS BEEN DISCUS SED IN DETAIL BY 13 THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA (2016) 380 ITR 573 AND CATENA OF OTHER JUDGMENTS OF THE HONBLE DELHI HIGH COURT. IN SUPPORT HE RELIED UPON F OLLOWING JUDGMENTS: - 1. DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. CONTINENTAL WAREHOUSING CORPORATION, ALL CARGO GLOB AL LOGISTICS LTD. [2015] 374 ITR 645 (BOM) 2. DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. KABUL CHAWLA DATED 28.08.2015 380 IT R 573 (DEL) 3. DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF JAI STEEL (INDIA), JODHPUR VS. ACIT (2013) 259 CTR 281, 219 TAXMAN 223 (RAJ) 4. DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME- TAX V. KURELE PAPER MILLS P . LTD DATED 06.07.2015 [2016] 380 ITR 571 (DEL) 5. DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF PR. CIT -2 VS SALASAR STOCK BROKING LTD DATED 24.08.2016 (G.A. NO . 1929 OF 2016/ITAT NO. 264 OF 2016) 6. DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF PR CIT & ORS VS MEETA GUTGUTIA, PROP. FERNS 'N' PETALS & ORS (2017) 395 ITR 526, (2017) 82 TAXMANN.COM 287 (DELHI) 7. DECISION OF HON'BLE BOMBAY HIGH COURT IN CIT V. GUR INDER SINGH BAWA (2016) 386 ITR 483 (BOM) 8. DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS. SINHGAD TECHNICAL EDUCATION SOCIETY (2017) 397 ITR 344 (SC) 9. DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT, DELHI 2 VS. BEST INFRASTRUCTURE (INDIA) PVT. LTD. & OTHERS IN ITA NOS. 11/2017 TO 22/2017 10. DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. DHARAMPAL PREMCHAND LTD. (2017) 99 CCH 202 12. THUS, HE SUBMITTED THAT NONE OF THE ADDITIONS MADE BY THE AO CAN BE SUSTAINED IN THE ASSESSMENT YEAR 2007-08, 2008 -09 AND 2009- 10. 14 13. ON THE OTHER HAND, LD. CIT (DR), THOUGH DID NOT REB UT THE ASSESSEES CONTENTION THAT NO INCRIMINATING MATERIAL HAS BEEN FOUND QUA THE ADDITIONS MADE BY THE AO IN THESE ASSESSMENT YEA RS, HOWEVER SHE STRONGLY RELIED UPON THE ORDER OF LD. CIT (A) AND ON JUDGMENT OF HONBLE KERALA HIGH COURT IN THE CASE OF E.N. GOPAKUM AR VS. CIT (2016) 75 TAXMANN.COM 215 (KERALA), WHEREIN THE HONB LE KERALA HIGH COURT HAS TAKEN NOTE OF ALL THE JUDGMENTS OF HONBLE DE LHI HIGH COURT. BESIDES THIS SHE ALSO RELIED UPON FOLLOWING JUDGMENTS : - I. CIT VS RAJ KUMAR ARORA [2014] 52 TAXMANN.COM 172 (ALLAHABAD)/[2014] 367 ITR 517 (ALLAHABAD) WHERE HO N'BLE ALLAHABAD HIGH COURT HELD THAT ASSESSING OFFICER HA S POWER TO REASSESS RETURNS OF ASSESSEE NOT ONLY FOR UNDISCLOS ED INCOME FOUND DURING SEARCH OPERATION BUT ALSO WITH REGARD TO MAT ERIAL AVAILABLE AT TIME OF ORIGINAL ASSESSMENT. II. CIT VS KESARWANI ZARDA BHANDAR SAHSON ALLD. [ITA NO . 270 OF 2014] (ALLAHABAD), WHERE HON'BLE ALLAHABAD HIGH COURT HELD THAT ASSESSING OFFICER HAS POWER TO REASSESS RETURNS OF ASSESSEE NOT ONLY FOR UNDISCLOSED INCOME FOUND DURING SEARCH OPE RATION BUT ALSO WITH REGARD TO MATERIAL AVAILABLE AT TIME OF ORIGIN AL ASSESSMENT. III. CIT VS ST. FRANCIS CLAY DECOR TILES (385 ITR 624), WHERE HON'BLE DELHI KERALA COURT HELD THAT NOTICE ISSUED UNDER SECTION 153A - RETURN MUST BE FILED EVEN IF NO INCRIMINATING DOCUMENTS DI SCOVERED DURING SEARCH. IV. SMT DAYAWANTI VS CIT [2016] 75 TAXMANN.COM 308 (DEL HI)/[2017] 245 TAXMAN 293 (DELHI)/[2017] 390 ITR 496 (DELHI)/[2016 ] 290 CTR 361 (DELHI); WHERE HON'BLE DELHI HIGH COURT HELD THAT W HERE INFERENCES DRAWN IN RESPECT OF UNDECLARED INCOME OF ASSESSEE W ERE PREMISED ON MATERIALS FOUND AS WELL AS STATEMENTS RECORDED B Y ASSESSEE'S SON IN COURSE OF SEARCH OPERATIONS AND ASSESSEE HAD NOT BEEN ABLE 15 TO SHOW AS TO HOW ESTIMATION MADE BY ASSESSING OFFI CER WAS ARBITRARY OR UNREASONABLE, ADDITIONS SO MADE BY ASS ESSING OFFICER BY REJECTING BOOKS OF ACCOUNT WAS JUSTIFIED. V. CIT VS ANIL KUMAR BHATIA (24 TAXMANN.COM 98. 211 TA XMAN 453. 352 ITR 493); WHERE HON'BLE DELHI HIGH COURT HELD THAT JURISDICTION OF AO UNDER 153A IS TO ASSESS TOTAL INCOME FOR THE YEAR A ND NOT RESTRICTED TO SEIZED MATERIAL. POST SEARCH REASSESSMENT IN RES PECT OF ALL 6 YEARS CAN BE MADE EVEN IF ORIGINAL RETURNS ARE ALRE ADY PROCESSED U/S 143(1)(A) - ASSESSING OFFICER HAS POWER U/S 153 A TO MAKE ASSESSMENT FOR ALL SIX YEARS AND COMPUTE TOTAL INCO ME OF ASSESSEE, INCLUDING UNDISCLOSED INCOME, NOTWITHSTANDING THAT RETURNS FOR THESE YEARS HAVE ALREADY BEEN PROCESSED U/S 143(1)(A). EVEN IF ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ALL OR ANY OF THOSE SIX ASSESSMENT YEARS, EITHER UNDER SECTION 143(1)(A) OR SECTION 143(3) PRIOR TO INITIATION OF SEARCH/REQ UISITION, STILL ASSESSING OFFICER IS EMPOWERED TO REOPEN THOSE PROC EEDINGS UNDER SECTION 153A WITHOUT ANY FETTERS AND REASSESS TOTAL INCOME TAKING NOTE OF UNDISCLOSED INCOME, IF ANY, UNEARTHED DURIN G SEARCH. FILALEX INDIA LTD VS CIT (49 TAXMANN.COM 465); WHER E HON'BLE DELHI HIGH COURT HELD THAT DURING ASSESSMENT UNDER SECTIO N 153A, ADDITIONS NEED NOT BE RESTRICTED OR LIMITED TO INCR IMINATING MATERIAL, FOUND DURING COURSE OF SEARCH. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO P ERUSED THE RELEVANT MATERIAL REFERRED TO BEFORE US AND THE DECISI ONS RELIED UPON BY THE PARTIES. AS DISCUSSED ABOVE, IT IS AN UNDISPUTED FACT THAT FOR THE ASSESSMENT YEARS 2006-07, 2007-08 AND 2008-09 THE RETURN OF INCOME WAS FILED U/S 139(1) AND ORDER U/S 143(3) WA S PASSED MUCH BEFORE THE DATE OF SEARCH, EXCEPT FOR THE ASSESSMENT YE AR 2007-08, WHEREIN NO NOTICE U/S 143(2) WAS ISSUED WITHIN THE STI PULATED TIME 16 PERIOD. ACCORDINGLY, ON THE DATE OF SEARCH, I.E., 19 .10.2010 THE ASSESSMENTS FOR THESE ASSESSMENT YEARS HAVE ATTAINED F INALITY AND HENCE HAS TO BE RECKONED AS UNABATED ASSESSMENT IN TE RMS OF SECOND PROVISO TO SECTION 153A. NOW UNDER THE JURISDICTION OF HONB LE DELHI HIGH COURT IT IS A WELL SETTLED PRINCIPLE THAT IN THE CA SE OF ASSESSMENTS WHICH HAVE ATTAINED FINALITY AND ARE NON-ABATED ASSESS MENT, THEN NO ADDITIONS CAN BE MADE OVER AND ABOVE THE ORIGINAL ASS ESSED INCOME UNLESS SOME INCRIMINATING MATERIAL HAS BEEN FOUND DUR ING THE COURSE OF SEARCH QUA THAT ASSESSMENT YEAR. THIS PROPOSITION HAS BEEN WEL L DISCUSSED IN THE JUDGMENT OF CIT VS. KABUL CHAWLA, W HEREIN THEIR LORDSHIPS HAVE ALSO DISCUSSED THE JUDGMENT OF SHRI AN IL KUMAR BHATIA (SUPRA). AFTER CONSIDERING THE VARIOUS JUDGMEN TS THE HONBLE HIGH COURT HAVE SUMMARISED THE DECISIONS IN THE FOLLO WING MANNER: - 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT , READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLA INED IN THE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT E MERGES IS AS UNDER :- I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF T HE ACT, NOTICE UNDER SECTION 153A (1) WILL HAVE TO BE MANDATORY IS SUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DA TE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS W ILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REA SSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN S EPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTH ER WORDS, THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EAC H OF THE SIX AYS 17 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED IN COME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOU ND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATE RIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESS MENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NE XUS WITH THE SEIZED MATERIAL. OBVIOUSLY, AN ASSESSMENT HAS T O BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMP LETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSME NT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTIO N 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PEND ING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMP LETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY O NE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON TH E BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER M ATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY TH E AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURI NG THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURS E OF 18 SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLO SED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 15. THE RATIO LAID DOWN IN THE AFORESAID JUDGMENT HAS BEEN FURTHER REITERATED ON THE HONBLE DELHI HIGH COURT IN THE CAS E OF PR.CIT VS. (SUPRA) VS MEETA GUTGUTIA AND CATENA OF OTHER CASES AS REFERRED ABOVE. IN SO FAR AS JUDGMENTS RELIED UPON BY THE LD. CIT DR, SAME MAY NOT HAVE BINDING PRECEDENCE FOR THE REASON THAT; FIRSTLY, MOST OF THE JUDGMENTS ARE DISTINGUISHABLE; SECONDLY, MAJORITY OF THE HIGH COURT JUDGMENTS ARE IN FAVOUR; AND LASTLY, JURISDICTIONAL H IGH COURT IN SERIES OF JUDGMENT HAS REITERATED THE SAME PRINCIPLE. THUS, IN VIEW OF THE SETTLED PROPOSITION LAID DOWN BY THE HONBLE JURISDICTI ONAL HIGH COURT WHICH IS APPLICABLE ON THE FACTS OF THE PRESENT CASE AL SO, WE HOLD THAT ALL THE ADDITIONS MADE BY THE AO IN THE ASSESSMENT YEARS 2006-07, 2007-08 AND 2008-09 ARE BEYOND THE SCOPE OF ASSESSME NT U/S 153A, BECAUSE ASSESSMENTS FOR THESE ASSESSMENT YEARS HAD ATTA INED FINALITY BEFORE THE DATE OF SEARCH AND NO INCRIMINATING MATERIA L OR SEIZED DOCUMENTS WERE FOUND QUA THESE ADDITIONS. ACCORDINGLY , ADDITIONS MADE BY THE AO ARE QUASHED ON THIS GROUND. 16. SINCE WE HAVE ALREADY DELETED THE ADDITIONS ON TH E LEGAL GROUND THEREFORE THE DELETION OF THE ADDITION MADE BY THE LD. CIT(A) WHICH HAS BEEN RAISED IN THE REVENUES APPEAL IN ITA NOS. 4630 /DEL/2014, 4631/DEL/2014 & 4632/DEL/2014 HAVE BECOME ACADEMIC AND INFRUCTUOUS. ACCORDINGLY, THE REVENUES APPEALS ARE TREATED AS DISMISSED. 17. NOW WE COME TO THE APPEAL FOR THE ASSESSMENT YEAR 2 009-10, 2010-11 AND 2011-12. HERE THE COMMON ADDITIONS INVOLV ED ARE: - 1) 1/5 TH DISALLOWANCE OF BUSINESS EXPENSES ON ADHOC BASIS; 19 2) BOGUS PURCHASE MADE FROM M/S. KIRAN FURNITURE; 3) ADDITION ON ACCOUNT OF UNEXPLAINED PURCHASES MADE FRO M M/S. KIRAN FURNITURE; 4) DISALLOWANCE U/S 40A (3); 5) UNEXPLAINED CASH; 6) ADDITIONAL ACCOUNT OF SCRAP SALES AND LOW DECLARA TION OF INCOME IN THE ASSESSMENT YEAR 2011-12. 18. WE WILL FIRST TAKE UP THE ISSUE OF DISALLOWANCE OF BUSINESS PROMOTION EXPENSES BY THE AO. THE FACTS IN BRIEF ARE THAT AS DISCUSSED IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2009-1 0 ARE THAT AO NOTICED THAT THE ASSESSEE HAS DEBITED FOLLOWING EXPENSE S TO ITS PROFIT AND LOSS ACCOUNT: - SL. NO. PARTICULARS AMOUNT (RS.) 1. BUSINESS PROMOTION EXPENSES 13,41,288/- 2. STAFF LABOUR AND WELFARE EXPENSES 3,12,213/- 3. PRINTING & STATIONARY 7,80,974/- 4. MISCELLANEOUS EXPENSES 2,82,788/- TOTAL 27,17,263/- AO OBSERVED THAT MOST OF THESE EXPENSES HAVE BEEN INCUR RED IN CASH OR PAYMENT HAS BEEN MADE THROUGH CREDIT CARD OF THE DIR ECTORS. THE CASH VOUCHERS FURNISHED BY THE ASSESSEE HAVE BEEN HE LD BY HIM TO BE NOT GENUINE AS THEY DO NOT PROVE THE GENUINENESS OF THE EXPENSES CLAIMED. HE HELD THAT THE ELEMENT OF PERSONAL EXPENSE S CANNOT BE 20 RULED AND ACCORDINGLY, HE HAS DISALLOWED THESE EXPEN SES WHICH COME TO RS. 5,43,453/-. 19. LD. CIT(A) HELD THAT AO DID NOT POINT OUT ANY SPE CIFIC INSTANCE AS TO WHICH ARE THE EXPENSES HAVE BEEN INCURRED FOR NON-BUSINESS PURPOSES AND ANY KIND OF ADHOC DISALLOWANCE WITHOUT P OINTING OUT TO ANY PARTICULAR EXPENDITURE WHICH IN THE OPINION OF A O WAS INCURRED IN PERSONAL USE CANNOT BE SUSTAINED. MAINLY BECAUSE CERTA IN PAYMENTS HAVE BEEN MADE IN CASH OR THROUGH THE CREDIT CARD OF THE DIRECTORS, IT CANNOT BE GROUND FOR MAKING ANY KIND OF DISALLOWANCE . IF THE EXPENSES DEBITED ARE RECORDED IN THE REGULAR BOOKS OF ACCOUNTS WHICH HAVE BEEN INCURRED IN THE NORMAL COURSE OF BUSINESS AND ARE SU BJECTED TO VARIOUS AUDITS THEN SUCH KIND OF DISALLOWANCE CANNO T BE UPHELD. HE FURTHER HELD THAT EXPENSES DEBITED UNDER THE HEAD BUSIN ESS PROMOTION EXPENSES AND STAFF LABOUR AND WELFARE EXPENSES, PRIN TING AND STATIONARY AND MISCELLANEOUS EXPENSES ARE PRE-DOMINAN TLY ASSOCIATED IN THE EXECUTION OF BUSINESS ACTIVITIES AND NO PERSONAL EXPENSES HAS BEEN BROUGHT BY THE AO. ACCORDINGLY, HE HAS DIRECTED THE AO TO ALLOW THE EXPENSES. 20. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RELEVANT FINDING IN THE IMPUGNED ORDER, WE FIND THAT ASSESSEE HAS FILED ENTIRE DETAILS OF EXPENSES ALONGWITH THE RELEVANT VOUCHERS AN D AUDITED BOOKS OF ACCOUNTS AND HAD ALSO INFORMED THE MODE AND MANNE R OF PAYMENT OF SUCH EXPENSES. THE VERY NATURE OF THESE EXPENSES D EBITED SHOWS THAT THEY HAVE BEEN INCURRED DURING THE NORMAL COURSE OF BUSINESS AND WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE NA TURE OF EXPENSES OR SPECIFYING THAT SUCH EXPENSES WERE EITHER FOR NON-B USINESS PURPOSE OR FOR PERSONAL USE, NO ADHOC DISALLOWANCE CAN BE M ADE OR SUSTAINED, ESPECIALLY WHEN ENTIRE BOOKS OF ACCOUNTS AND VOUCHER S HAVE BEEN PRODUCED FOR SCRUTINY BEFORE THE AO. THUS, WE DO NOT F IND ANY 21 INFIRMITY IN THE ORDER OF THE LD. CIT (A) FOR DELETING SUCH AN ADDITION AND SAME IS AFFIRMED AND ACCORDINGLY, THE DISALLOWA NCE OF BUSINESS EXPENSES IS DISMISSED. ADMITTEDLY SIMILAR REASONING H AS BEEN GIVEN BY THE AO FOR SIMILAR KIND OF EXPENSES IN THE ASSESSMENT YEAR 2010-11 AND 2011-12, THEREFORE, OUR REASONING GIVEN ABOVE WI LL APPLY MUTATIS MUTANDIS FOR THESE TWO YEARS ALSO. ACCORDINGLY, THE G ROUNDS RAISED BY THE REVENUE ON THIS ISSUE STAND DISMISSED. 21. OTHER MAJOR ISSUE WHICH IS PERMEATING IN ALL THE YEARS IS DISALLOWANCE ON ACCOUNT OF ALLEGED BOGUS PURCHASE MA DE FROM M/S. NITIN ENTERPRISES. THE FACTS IN BRIEF ARE THAT IN ORDER TO VERIFY THE GENUINENESS OF THE PURCHASE MADE BY THE ASSESSEE, A S URVEY OPERATION U/S 133A WAS CARRIED OUT IN THE CASE OF M/S. NITIN ENTERPRISES AND THE STATEMENT OF ONE OF ITS PARTNERS, SHRI NITIN BANSAL WAS ALSO RECORDED. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THIS FIRM WAS ENGAGED IN THE PRACTICE OF ISSUING BOGUS BILLS TO VA RIOUS PARTIES AND AO OBSERVED THAT MODUS OPERANDI ADOPTED BY THIS PARTY W AS THAT THE BOGUS BILLS WERE RAISED BY M/S. NITIN ENTERPRISES TO A PARTICULAR PARTY AND THE PAYMENT ON THE BASIS OF THESE BOGUS BILLS WERE RETURNED TO OTHER PARTIES OUT OF THE CASH SALES. IN THE STATEMENT ALSO, THE PARTNER ACCEPTED THAT BOGUS BILLS WERE ALSO ISSUED TO THE ASSES SEE COMPANY AND INVOICES RAISED BY HIM TO THE ASSESSEE COMPANY F OR THE GOODS WERE ACTUALLY NOT SUPPLIED. HE FURTHER STATED THAT THE AMOU NT RECEIVED IN CHEQUE FROM THE ASSESSEE COMPANY WAS RETURNED TO IT IN THE FORM OF CASH. RELEVANT QUESTION NO. 23 AND 24 OF THE STATEMENT OF SHRI NITIN BANSAL HAS BEEN INCORPORATED IN THE IMPUGNED ASSESSM ENT ORDER AT PAGES 3 AND 4. BASED ON THIS SURVEY AND THE STATEMENT O F PARTNER, THE LD. AO HAS MADE THE ADDITION ON ACCOUNT OF PURCHASES SHOWN BY THE ASSESSEE FROM THIS PARTY TO BE BOGUS AND DISALLOWED TH E SAME WHILE 22 COMPUTING TAXABLE INCOME FOR THE ASSESSMENT YEAR 2009-1 0, 2010-11 AND 2011-12. 22. BEFORE THE LD. CIT (A), IT WAS SUBMITTED THAT ASSESSEE HAS FAILED TO TAKE NOTE OF VARIOUS FACTS AND SUBMISSIONS MADE BEFO RE HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH WERE AS UN DER: - (A) THAT M/S. NITIN ENTERPRISES, HAS FILED A SUIT FOR RECOVERY OF BALANCE DUE TO THEM ON ACCOUNT OF PURCHASES MADE BY APPELLA NT COMPANY. THIS VITAL FACT THOUGH IN THE KNOWLEDGE OF THE LD. A.O. HAS NEITHER BEEN REBUTTED BY HIM, NOR HAS BEEN DISCUSSED IN THE ASSESSMENT ORDER. (B) THAT THE LD. A.O. WAS UNJUSTIFIED IN RELYI NG UPON UNCORROBORATED STATEMENT GIVEN BY THIRD PARTY, RECORDED BY SOME OT HER AUTHORITY, WITHOUT INDEPENDENTLY VERIFYING THE SAME. (C) THE LD. A.O. WAS UNJUSTIFIED IN RELYING UP ON STATEMENT RECORDED FROM THIRD PARTY AT THE BACK OF THE APPELLANT, WITH OUT GRANTING COPY OF ALLEGED RELIED STATEMENT TO THE APPELLANT AND WI THOUT GRANTING ANY OPPORTUNITY TO THE APPELLANT FOR CROSS EXAMINAT ION. (D) THE LD. A.O. WAS UNJUSTIFIED IN MAKING DIS ALLOWANCE OF ENTIRE PURCHASES MADE FROM SUCH THIRD PARTY IN ABSENCE OF ANY EVIDENCE WHICH COULD SUPPORT THAT THE PURCHASES MADE WERE NO T GENUINE. (E) THE LD. A.O. WAS UNJUSTIFIED IN MAKING ADD ITION WITHOUT REJECTING THE BOOKS OF ACCOUNTS. (F) THE LD. A.O. WAS UNJUSTIFIED IN REJECTING ENTIRE PURCHASES AND SIMULTANEOUSLY ACCEPTING THE LIABILITY ON ACCOUNT O F PURCHASES MADE FROM M/S. NITIN ENTERPRISES AS GENUINE, ACKNOW LEDGED, CONFIRMED LIABILITY AND ACCEPTING COST OF SUCH PURC HASES INCLUDED IN STOCKS. 23 (G) THE ADDITIONS ARE CONTRARY TO SETTLED POSI TION IN FAVOUR OF ASSESSEE BY THE JUDGMENT OF HON'BLE HIGH COURT IN THE CASE O F CIT V. MAHALAXMI GLASS WORKS (P) LTD., 318 ITR 116 (BOM) A ND ALSO THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. MAHA VEER ALUMINIUM LTD, 297 ITR 77 , WHEREIN, IT HAS BE EN HELD THAT IF THERE IS CHANGE IN VALUATION OF CLOSING STOCK IN ON E END, IT MUST NECESSARILY BE A CORRESPONDING CHANGE AT THE OTHER END, OTHERWISE, THE TRUE PROFIT WOULD NOT BE REFLECTED. HON'BLE DEL HI HIGH COURT IN THE CASE OF MAHAVEER ALMN LTD (SUPRA) HAVE HELD AFT ER CONSIDERING THE DECISION IN THE CASE OF CIT V. AHMEDABAD NEW CO TTON MILLS CO. LTD., AIR 1930 PC 56, THAT A MISTAKE IN THE METHOD OF VALUATION CANNOT BE RECTIFIED BY REFUSING THE VALUATION OF CL OSING STOCK ONLY BUT THE VALUATION OF OPENING AND CLOSING STOCK HAD TO BE REVISED. IN THE CASE OF MAHALAXMI GLASS WORKS PVT LTD., (SUPRA) , THE ISSUE RELATED TO CLOSING STOCK VALUATION OF ADJUSTMENT OF UNUTILIZED MODVAT CREDIT. THE TRIBUNAL ALLOWED THE ADJUSTMENT. HON'BLE HIGH COURT CONFIRMED THE ORDER OF THE TRIBUNAL. THEREFOR E, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HON'BLE HIGH COURT. HENCE, IF THE CLOSING STOCK IS TO BE INCREAS ED ON ACCOUNT OF UN UTILIZED MODVAT CREDIT, THE CORRESPONDING OPENING S TOCK OF THAT YEAR SHOULD ALSO BE INCREASED. BESIDES ABOVE SUBMISSIONS VARIOUS DECISIONS WERE AL SO REFERRED ON THE ISSUE THAT IF THE STATEMENT GIVEN BY THIRD PARTY IS REL IED UPON, WITHOUT ANY OPPORTUNITY TO CROSS EXAMINE BY THE ASSESSEE THEN SAME CANNOT BE RELIED UPON. ONE MOST IMPORTANT SUBMISSION MADE ON THE BASIS OF MATERIAL FACTS TO PROVE THAT ASSESSEE HAS MADE ACTUAL PU RCHASES WAS THAT, THIS PARTY HAS ALSO FILED A SUIT AGAINST THE ASS ESSEE FOR RECOVERY OF BALANCE AMOUNT DUE TO THEM ON ACCOUNT OF PURCHASE M ADE BY THE ASSESSEE COMPANY. THIS FACT ALONE GOES TO SHOW THAT T HE PURCHASES MADE BY THE ASSESSEE CANNOT BE HELD TO BE BOGUS. 24 23. LD. CIT (A), AFTER CONSIDERING THE ENTIRE F ACTS AND SUBMISSIONS PLACED ON RECORD, FIRST OF ALL HELD THAT, AO WITHOUT G RANTING A REASONABLE AND MEANINGFUL OPPORTUNITY TO ALLOW CROSS EXAMINATION TO THE ASSESSEE OF THE SAID PARTY HAS VIOLATED THE PRINCIP LES OF NATURAL JUSTICE; AND ALSO, AO WAS REQUIRED TO PROVIDE ALL THE INCRIMINATING DOCUMENTS / MATERIALS ON WHICH HE HAS RELIED UPON BE FORE PROPOSING TO MAKE SUCH ADDITION. IN SUPPORT OF HIS CONCLUSION H E HAS ALSO REFERRED TO VARIOUS JUDGMENTS WHICH HAVE BEEN INCORPO RATED AT PAGE 32 OF HIS ORDER. THEREAFTER HE HAS GIVEN FOLLOWING FINDING OF FACTS BASED ON VARIOUS MATERIALS WHICH FOR SAKE OF BETTER APPRECI ATION IS REPRODUCED HEREUNDER: - 13.5 FURTHER, IN THE INSTANT CASE, FROM THE DET AILS ON RECORD, I FIND THAT THE APPELLANT PRODUCED COMPLETE BOOKS OF ACCOUNT IN THE COURSE OF THE ASSESSMENT PROCEEDINGS CONDUCTED BY T HE ASSESSING OFFICER U/S 153A OF THE IT ACT, 1961 WHICH ALSO INC LUDED THE STOCK REGISTER MAINTAINED BY IT IN THE REGULAR COURSE OF BUSINESS. THE PURCHASES MADE BY THE APPELLANT FROM M/S NITIN ENTE RPRISES WERE FOUND RECORDED IN THE STOCK REGISTER. WITHOUT POINT ING OUT TO ANY DISCREPANCY IN THE BOOKS OF ACCOUNT MAINTAINED BY T HE APPELLANT, THE ASSESSING OFFICER IN AN UNREASONABLE AND UNJUST IFIED MANNER TREATED SUCH PURCHASES AS BOGUS. THERE WAS NO INCRI MINATING MATERIAL FOUND IN THE COURSE OF SEARCH OPERATION U/ S 132 PERTAINING TO PURCHASES MADE BY THE APPELLANT. WITHOUT BRINGIN G ANY ADVERSE MATERIAL ON RECORD AND WITHOUT REJECTING THE BOOKS OF ACCOUNT POINTING TO ANY DISCREPANCY, MAKING AN ADDITION BY THE ASSESSING OFFICER WAS UNWARRANTED. 13.6 ON PERUSAL OF THE DETAILS UNDER THE HEAD 'SUND RY CREDITORS', I FIND THAT M/S NITIN ENTERPRISES APPEARED AS A CREDI TOR IN THE BOOKS OF THE APPELLANT. THEREFORE, TO DOUBT THE PURCHASES MADE BY THE APPELLANT ON THE BASIS OF THE STATEMENT OF SH. NITI N BANSAL, PARTNER 25 OF M/S NITIN ENTERPRISES WITHOUT CONSIDERING THE OT HER EVIDENCE FURNISHED BY THE APPELLANT WAS NOT JUSTIFIED. FROM THE DETAILS ON RECORD, IT IS SEEN THAT ALL PURCHASES WERE SUPPORTE D BY RELEVANT BILLS AND PAYMENTS WERE MADE THROUGH BANKING CHANNE LS AS PER THE STATEMENTS FURNISHED. IT IS ALSO A MATTER OF RE CORD THAT M/S NITIN ENTERPRISES FILED A SUIT BEFORE THE HON'BLE H IGH COURT OF DELHI VIDE PETITION CS (OS) 2055 OF 2011 FOR RECOVERY OF AN OUTSTANDING BALANCE. IN THE SAID WRIT PETITION, M/S NITIN ENTER PRISES ACCEPTED THE FACT THAT MATERIAL WAS SUPPLIED TO THE APPELLAN T REGULARLY ON CREDIT BASIS AND PAYMENTS OF SOME INVOICES WERE PEN DING. SUCH COPIES OF THE INVOICES WHERE THE PAYMENTS WERE PEND ING WAS SUBMITTED BY M/S NITIN ENTERPRISES BEFORE THE HON'B LE HIGH COURT OF DELHI AND THE SAME WERE ALSO FURNISHED. BEFORE THE ASSESSING OFFICER IN THE COURSE OF THE ASSESSMENT PROCEEDINGS VIDE ITS LETTER DATED 27.05.2013. M/S NITIN ENTERPRISES ALSO SUBMIT TED BEFORE THE HON'BLE HIGH COURT OF DELHI, A COPY OF THE LEDGER A CCOUNT OF THE APPELLANT COMPANY I.E. M/S MEROFORM INDIA PVT. LTD. IN ITS BOOKS OF ACCOUNTS WHICH EVIDENCED THAT THE MATERIAL WAS DELI VERED TO THE APPELLANT. SUBSEQUENTLY, BOTH THE PARTIES I.E. M/S NITIN ENTERPRISES AND THE APPELLANT CONCLUDED THE MATTER BY ENTERING INTO AN OUT OF COURT SETTLEMENT AGREEMENT, ACCORDING TO WHICH M/S NITIN ENTERPRISES AGREED TO RECEIVE THE BALANCE PAYMENT W ITHOUT THE INTEREST AMOUNTING TO RS.55.58 LACS AND FILED A COM BINED APPLICATION ON MAY 31ST 2012 BEFORE THE HON'BLE HIG H COURT FOR DISPOSAL OF THE WRIT FILED BY M/S NITIN ENTERPRISES . VIDE ORDER DATED 01.06.2012, THE HON'BLE DELHI HIGH COURT DISMISSED THE WRIT FILED BY M/S. NITIN ENTERPRISES AND CONCLUDED THE MATTER AS EXTRACTED BELOW: 1. PLAINTIFF HAS FILED THE PRESENT SUIT FOR RECOVE RY OF RS. 72,62,050/-. 26 2. THIS IS AN APPLICATION FILED BY PARTIES UNDER X XXIX RULE 3 CPC FOR RECORDING THE TERMS OF SETTLEMENT ARRIVED A T BETWEEN THE PARTIES. THIS APPLICATION IS DULY SIGNED BY MR. NIT IN BANSAL, PARTNER IN THE PLAINTIFF COMPANY AND BY MR. M.S. VI NOD, ONE OF THE DIRECTORS OF DEFENDANT COMPANY AS ALSO BY LEARNED C OUNSEL FOR THE PARTIES. THIS APPLICATION IS ALSO SUPPORTED BY THE AFFIDAVITS OF MR. NITIN BANSAL AND MR. M.S. VINOD. ALONGWITH THIS APP LICATION THE PARTIES HAVE ALSO FILED DEED OF SETTLEMENT OF DISPU TES DATED 17.05.2012. THE DEED OF SETTLEMENT IS MARKED AS EXH IBIT C-1. 3. ONE OF THE AUTHORIZED REPRESENTATIVES OF THE DE FENDANT COMPANY IS PRESENT IN COURT. HE IS DULY IDENTIFIED BY HIS COUNSEL. THE DIRECTOR ALSO IDENTIFIES THE SIGNATURE OF MR. M . S. VINOD IN THE APPLICATION AS WELL AS IN THE DEED OF SETTLEMENT. H E SUBMITS THAT HE HAS SEEN MR. M.S. VINOD WRITE AND SIGN. 4. LEARNED COUNSEL FOR THE DEFENDANT HAS HANDED OV ER TWO CHEQUES IN THE TOTAL SUM OF RS.55,58,927/- [(I) CH. NO. 433650 DATED 1.7.2012, DRAWN ON YES BANK IN THE SUM OF RS. 25,58927/- AND [II] CH. NO.433648 DATED 1.06.2012, DRAWN ON YE S BANK IN THE SUM OF RS.30,00,000/-] TO COUNSEL FOR THE PLAIN TIFF IN COURT TODAY IN FULL AND FINAL SETTLEMENT OF ALL THE CLAIM S. 5. LEARNED COUNSEL FOR THE PARTIES SUBMIT THAT IN VIEW OF THE SETTLEMENT ARRIVED AT BETWEEN THE PARTIES PRESENT SUIT MAY BE DECREED IN TERMS OF DEED OF SETTLEMENT DATED 17.05. 2012, MARKED AS EXHIBIT C-1. 6. HEARD COUNSEL FOR THE PARTIES AND ALSO PERUSED THE APPLICATION AND THE DEED OF SETTLEMENT, MARKED AS E XHIBIT C-1. THE TERMS OF SETTLEMENT ARE LAWFUL. ACCORDINGLY, PR ESENT APPLICATION IS ALLOWED. AS PRAYED, SUIT STANDS DECR EED IN TERMS OF DEED OF SETTLEMENT DATED 17.05.2012, MARKED AS EXHI BIT C-1, 27 LEAVING THE PARTIES TO BEAR THEIR OWN COSTS. LET A DECREE SHEET BE DRAWN UP ACCORDINGLY. 7. HAVING REGARD TO THE FACT THAT THE PARTIES HA VE ARRIVED AT AN AMICABLE SETTLEMENT BEFORE FRAMING OF ISSUES, COURT FEE SHALL BE REFUNDED TO THE PLAINTIFF IN TERMS OF SECTION 16A O F THE COURT FEE ACT, AS PRAYED. 8. APPLICATION STANDS DISPOSED OF I.A.1683S/2011 (037 R 3) & I.A. 6313/2012 (LEAVE TO DEFEND) 9. APPLICATIONS STAND DISPOSED OF IN VIEW OF THE S ETTLEMENT ARRIVED AT BETWEEN THE PARTIES.' 13.7 THIS ACTION OF M/S NITIN ENTERPRISES WAS CONTR ARY TO THE STATEMENT GIVEN BY ITS PARTNER IN THE COURSE OF SUR VEY PROCEEDINGS ON 1.04.2011. ON THE OTHER HAND, SUCH A PETITION FO R RECOVERY BEFORE HON'BLE HIGH COURT SUBSTANTIATES THE GENUINE NESS OF PURCHASES. NO PRUDENT PERSON WOULD EXPEND MONEY ON LEGAL MATTERS WHICH IS NOT ONLY TIME CONSUMING BUT ALSO L ONG DRAWN IN PROCEDURES ON AN ISSUE WHICH NEVER EXISTED OR FOUND TO BE BOGUS. AGAIN, IN THE COURSE OF SEARCH U/S 132 THERE WAS NO EXCESSIVE CASH FOUND THAT SUBSTANTIATED THAT THE APPELLANT RECEIVE D CASH IN LIEU OF CHEQUE FROM M/S NITIN ENTERPRISES OR ANY INCRIMINAT ING MATERIAL WHERE CERTAIN CASH TRANSACTIONS WERE FOUND RECORDED ON LOOSE SHEETS I PAPERS TO SUPPORT CASH RECEIPT. IN THE COU RSE OF APPEAL PROCEEDINGS, AS WELL AS ASSESSMENT PROCEEDINGS THE APPELLANT FILED COMPLETE DETAILS PERTAINING TO THE LEGAL BATTLE BET WEEN THEM, WHICH THE ASSESSING OFFICER DID NOT CONSIDER NOR HE HAS B ROUGHT ANY MATERIAL CONTRARY TO WHAT WAS STATED BY THE APPELLA NT. IT IS ALSO A POINT TO BRING ON RECORD THAT THERE WAS NO BAR ON T HE ASSESSING OFFICER TO CONDUCT FURTHER INDEPENDENT ENQUIRY PERT AINING TO THESE TRANSACTIONS. THE ASSESSING OFFICER WAS UNABLE TO B RING ON RECORD 28 THE NUMBER OF INVOICES WHICH SPECIFY SUCH ADJUSTMEN TS ALLEGED AS BOGUS BY HIM. IN THE ASSESSMENT ORDER, THE ASSESSIN G OFFICER RECORDED THAT SH. NITIN BANSAL, PARTNER OF M/S NITI N ENTERPRISES WHICH PROVIDED THE ALLEGED ENTRIES, EXPRESSED HIS I NABILITY TO ATTRIBUTE ANY PARTICULAR INVOICE TO SUCH ADJUSTMENT S / ACCOMMODATION MADE FOR THE APPELLANT COMPANY. THERE FORE, THE ASSESSING OFFICER FAILED TO BRING ON RECORD ANY ADV ERSE MATERIAL TO PROVE THAT THE PURCHASES MADE BY THE APPELLANT WERE NOT GENUINE AND WERE BOGUS, EXCEPT A THIRD-PARTY STATEMENT IN T HE COURSE OF SURVEY U/S 133A WHICH WAS CONTRARY TO THE SETTLEMEN T DEED PASSED BY THE HON'BLE HIGH COURT OF DELHI. CONSIDER ING THE FACTS AND CIRCUMSTANCES OF THIS ISSUE, THE ASSESSING OFFI CER WAS NOT JUSTIFIED IN TREATING THE PURCHASES MADE FROM M/S. NITIN ENTERPRISES BY THE APPELLANT AS BOGUS. ACCORDINGLY, THE ADDITIO N MADE BY THE ASSESSING OFFICER AMOUNTING TO RS. 89,49,347/- ON A CCOUNT OF BOGUS PURCHASES IS DELETED. 24. BEFORE US LD. DR STRONGLY RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT ONCE THE SAID PARTY HAS BEEN FOUND TO BE PROVIDING BOGUS BILLS AND THE PARTNER HAS CATEGORICALLY ADMITTED THAT THE FIRM WAS PROVIDING BOGUS BILLS TO THE ASSESSEE AFTER REC EIVING THE CHEQUE AND RETURNING THE SAME IN CASH, THEN IT CANNOT BE HELD THAT SUCH PURCHASES ARE GENUINE. 25. ON THE OTHER HAND, LD. COUNSEL SUBMITTED THAT ASSESS EE HAD FILED PLETHORA OF EVIDENCES LIKE; A) COPY OF LEGAL NOTICE DATED 11.3.2011 ISSUED BY M/S. NITIN ENTERPRISES TO THE ASSESSEE FOR RECOVERY OF DUES. B) COPY OF SUIT FOR RECOVERY OF DUES FILED BY M/S. NIT IN ENTERPRISES BEFORE HON'BLE DELHI HIGH COURT [CS(OS) 2055 OF 201 1]. 29 C) COPY OF STATEMENT OF ACCOUNTS (LEDGER) AND RECONCIL IATION FILED BY M/S. NITIN ENTERPRISES DURING SUIT FOR RECOVERY BEF ORE HONBLE HIGH COURT, CONFIRMING THE TRANSACTIONS AND BALANCE ARISING THEREFROM AS RECOVERABLE ON OATH. D) COPY OF LEDGER ACCOUNT OF M/S. NITIN ENTERPRI SES IN THE BOOKS OF THE ASSESSEE AND RECONCILIATION OF BALANCES. E) COPY OF SETTLEMENT DEED DATED 17.05.2012 BETWEE N THE ASSESSEE AND M/S. NITIN ENTERPRISES AND SETTLEMENT ORDER OF HON'BLE DELHI HIGH COURT. IT WAS POINTED OUT THAT, AO EVEN FAILED TO ACKNOWLEDGE TH ESE EVIDENCES AND INSTEAD CHOOSE TO RELY UPON THE STATEMENT OF THE PARTNE R TAKEN BEHIND THE BACK OF THE ASSESSEE WITHOUT ALLOWING ANY OP PORTUNITY TO CROSS EXAMINE. APART FROM THAT, DURING THE COURSE OF SEARCH OPERATION NOTHING INCRIMINATING IN RESPECT OF BOGUS PURCHASE H AS BEEN FOUND AND THERE IS AN INHERENT CONTRADICTION IN THE CONDUCT OF THE SAID PARTY, BECAUSE ON ONE HAND THE PARTNER SHRI NITIN BANSAL STAT ED THAT IT HAS GIVEN ACCOMMODATION ENTRY BUT AT THE SAME TIME THE FIRM H AS ISSUED LEGAL NOTICE TO THE ASSESSEE COMPANY FOR RECOVERY OF OUTSTANDING DUES ON ACCOUNT OF BILL RAISED AGAINST THEM FOR THE PURCHAS ES MADE BY THE ASSESSEE COMPANY AND ALSO FILED A SUIT BEFORE THE HON BLE DELHI HIGH COURT; AND THEREAFTER DEED OF SETTLEMENT HAS BEEN EXECU TED BETWEEN THE SAID PARTY AND THE ASSESSEE WHEREIN THE QUANTIFICAT ION OF LIABILITY OF UNPAID PURCHASES HAS BEEN SETTLED AND HONBLE HIGH COURT WHICH HAS BEEN ACCEPTED BY THE PARTIES IN THE SETTLEMENT RATIFIE D VIDE ORDER DATED 1.6.2012. CONSEQUENT TO SETTLEMENT THE WRIT PETITION FI LED BY M/S. NITIN ENTERPRISES HAS BEEN DISMISSED. THUS, UNDE R THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PURCHASES MADE BY THE A SSESSEE FROM M/S. NITIN CANNOT BE HELD TO BE BOGUS. 30 26. AFTER HEARING THE RIVAL CONTENTIONS AND ON P ERUSAL OF THE MATERIAL REFERRED TO BEFORE US, WE FIND THAT THE MAIN GROUND FOR MAKING THE ADDITION BY THE AO IS THAT; DURING THE COUR SE OF SURVEY MADE IN THE CASE OF M/S NITIN ENTERPRISES WAS FOUND TO BE ENGAGED IN PROVIDING BOGUS BILLS AND ONE OF ITS PARTNER HAS GIVE N A STATEMENT THAT ASSESSEE WAS ALSO GIVEN THE BOGUS BILL AND HAS RECEI VED CHEQUE FROM THE ASSESSEE FOR THE SAID BILLS IN LIEU OF CASH FOR THE SAME AMOUNT RETURNED BACK TO THE ASSESSEE. ON THE OTHER HAND, THE ASSESSEE BEFORE THE AO HAS GIVEN VARIOUS DOCUMENTS LIKE; I) COPY OF L EGAL NOTICE ISSUED BY M/S. NITIN ENTERPRISES TO THE ASSESSEE FOR RECOVER Y OF THE DUES RELATING TO SAME PURCHASES MADE BY THE ASSESSEE; II) SUIT OF RECOVERY FILED BY M/S. NITIN ENTERPRISES BEFORE THE HONBLE DEL HI HIGH COURT; III) COPY OF STATEMENT OF ACCOUNT AND RECONCILIATION FILED B Y M/S. NITIN ENTERPRISES DURING THE SUIT FOR RECOVERY BEFORE THE HON BLE HIGH COURT CONFIRMING THE TRANSACTION OF PURCHASE AND BALANCE AM OUNT RECOVERABLE FROM THE ASSESSEE; IV) COPY OF LEDGER AC COUNT AND RECONCILIATION OF BALANCE IN THE BOOKS OF ACCOUNT OF BOTH THE PARTIES; AND V) SETTLEMENT DEED BETWEEN THE ASSESSEE AND M/S. NI TIN ENTERPRISES WHEREBY PARTIES HAVE SETTLED THE DUES WHICH GOT RATIFIED BY THE SETTLEMENT ORDER OF THE HONBLE DELHI HIGH COURT. ALL THESE EVIDENCES HAVE NEITHER BEEN REBUTTED NOR HAS ANY ADVE RSE VIEW BEEN GIVEN BY THE AO. APART FROM THAT, THERE IS A CATEGORICA L FINDING THAT THE STATEMENT OF SHRI NITIN BANSAL RECORDED BY THE SURVEY PA RTIES WAS BEHIND THE BACK OF THE ASSESSEE AND THE COPY OF THE STATE MENT WAS NEITHER PROVIDED NOR WAS ANY OPPORTUNITY GIVEN FOR C ROSS EXAMINATION. THE ASSESSEE HAS MADE THE PAYMENT TO THE PARTY THROUGH B ANKING CHANNELS AND SIMPLY RELYING UPON THE STATEMENT OF ONE OF THE PARTNER THAT CASH HAS BEEN RETURNED IN LIEU OF CHEQUE CANNOT B E ACCEPTED WITHOUT SUCH A PERSON BEING SUBJECTED TO CROSS EXAMINA TION. EVEN OTHERWISE ALSO SUCH A STATEMENT ITSELF LOSES ITS CREDIBIL ITY AND 31 EVIDENTIARY VALUE, WHEN THE FIRM ITSELF HAS TAKEN A LEG AL ACTION FOR RECOVERY OF SAME DUES FROM THE ASSESSEE ON THE PURCHA SES MADE FOR WHICH IT HAS ISSUED THE BILLS. NOT ONLY THAT, THERE H AS BEEN AMICABLE SETTLEMENT OF DUES AND PAYMENT HAS BEEN MADE BY THE ASSE SSEE TO THE SAID PARTY. IN LIGHT OF THESE EVIDENCES FILED BEFORE HONBLE HIGH COURT IN THE SUIT PROCEEDINGS, THE STATEMENT OF THE PARTNER GETS MITIGATED AND NO CREDENCE CAN BE GIVEN TO SUCH A SETTLEMENT. THE DETAILED FINDING OF THE LD. CIT (A) ON THIS ISSUE AS INCORPORA TED ABOVE IS NOT ONLY BASED ON CORRECT APPRECIATION OF FACTS BUT ALSO IN LAW, THEREFORE, THE SAID FINDING IS AFFIRMED AND THE ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASE IS DELETED. IN THE RESULT IS SUE OF BOGUS PURCHASES IN ALL THE ASSESSMENT YEARS FROM THE SAID P ARTY STANDS DECIDED IN FAVOUR OF THE ASSESSEE AND THE GROUNDS RA ISED BY THE REVENUE ARE DISMISSED. 27. THE NEXT ISSUE RELATES TO ADDITION ON ACCOUNT OF UNEXPLAINED PURCHASES MADE FROM M/S. KIRAN FURNITURES. THE FACTS IN BRIEF ARE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICES U /S 133(6) WAS SENT TO VARIOUS PARTIES FROM WHOM THE ASSESSEE COMPANY HAS MADE PURCHASES DURING THE YEAR. ALL THE PARTIES HAVE DULY COMPLIED WITH THE SAID NOTICES EXCEPT FOR ONE PARTY, NAMELY, M/S KISHOR E MAHADEO MISTRY LOCATED IN MUMBAI. WHEN THIS FACT WAS CONFRONTED TO THE ASSESSEE, IT PROVIDED THE NEW ADDRESS AND NOTICE WAS SENT ON THE GIVEN ADDRESS HOWEVER AGAIN NO RESPONSE WAS RECEIVED FROM THE SAID PARTY. ACCORDINGLY, AO CONCLUDED THAT THE PURCHASES MADE FROM THE SAID PARTY IS NON GENUINE. BEFORE THE LD. CIT (A) IT WAS S UBMITTED THAT M/S. KIRAN ENTERPRISES IS ENGAGED IN MANUFACTURING OF FURN ITURE AND DURING THESE YEARS ASSESSEE HAS OBTAINED SERVICES FROM THE SA ID PARTY FOR ITS VARIOUS PROJECTS AND FOR SERVICE RENDERED INVOICES H AVE BEEN RAISED BY M/S. KIRAN ENTERPRISES WHICH HAVE BEEN DULY RECORDED IN THE BOOKS OF ACCOUNTS. THESE INVOICES CLEARLY SHOW THE NATURE OF JO B WORK 32 PERFORMED ALONG WITH THE DETAILS OF SITE AND OTHER INFO RMATION. THE ASSESSEE HAS ALSO CLASSIFIED THIS EXPENDITURE UNDER THE HEAD JOB WORK CHARGES. NOT ONLY THAT, TDS HAS ALSO BEEN DEDUCTED AND DEPOSITED IN THE GOVERNMENT TREASURY ON THE PAYMENT MADE TO SAID PART Y. THERE IS NOTHING ON RECORD THAT EITHER THE ALLEGED SERVICES HAVE NOT BEEN GIVEN BY THE SAID PARTY OR OTHER EVIDENCES IN THE FORM OF INVOICES AND TDS CERTIFICATE ARE NOT CORRECT. THE ASSESSEE HAD DULY PLA CED FOLLOWING RECORD AND INFORMATION BEFORE THE AO:- (A) CONFIRMED STATEMENT OF ACCOUNTS. (B) INVOICES OF THE SERVICES RENDERED BY M/S. KIRAN ENTERPRISES (C) PERMANENT ACCOUNT NUMBER OF MR. KISHORE M. MESTRY, PROPRIETOR, M/S. KIRAN FURNITURE. (D) THE ADDRESS OF THE KISHORE M. MESTRY, PROPRIETOR, M/S. KIRAN FURNITURE. (E) THE MODE OF PAYMENTS MADE. (F) NATURE OF SERVICES OBTAINED, PLACE WHERE SUCH SER VICE OBTAINED AND BILLS OF SERVICES RENDERED RAISED BY M/S. KIRAN FURNITURE. (G) THE INCOME TAX RETURNS OF M/S. KIRAN FURNITURE WH ICH DULY REFLECTED THAT THE JOB CHARGES RECEIVED FROM THE APPELL ANT WERE DULY ACCOUNTED FOR AND INCOME EARNED THEREFROM HAS BE EN OFFERED FOR TAXATION BY THE SAID PARTY. (H) THE TDS RECORDS IN THE FORM OF TDS CERTIFICATES, AS REQUIRED BY THE PROVISIONS OF CHAPTER XVII SHOWING THE NATURE O F SERVICES OBTAINED AND TDS AS REQUIRED BY LAW DULY DEDUCTED AN D DEPOSITED BY US TO THE CREDIT OF CENTRAL GOVT. 28. LD. CIT(A) AFTER CONSIDERING THE FACTS AND RECORD HAS DELETED THE SAID ADDITION AFTER OBSERVING AND HOLDING AS UNDER : - 33 6. I HAVE GONE THROUGH THE FACTS OF THIS ISSUE, W RITTEN SUBMISSIONS MADE BY THE APPELLANT, CITATIONS OF THE CASE LAWS RELIED UPON BY THE APPELLANT IN SUPPORT OF ITS CONT ENTIONS, AND CONSIDERED THEM. I HAVE ALSO CALLED FOR THE ASSESSM ENT RECORD AND PERUSED IT. DURING THE YEAR UNDER CONSIDERATION, TH E APPELLANT COMPANY OBTAINED SERVICES FROM THE SAID PARTY I.E. MLS KIRAN FURNITURE AT THE PROJECT SITES WHERE CERTAIN JOB WO RK WAS REQUIRED. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE APPELLA NT FURNISHED THE FOLLOWING: (I) CONFIRMED STATEMENT OF ACCOUNTS. (II) INVOICES OF THE SERVICES RENDERED BY M/S. KIR AN ENTERPRISES. (III) PERMANENT ACCOUNT NUMBER OF MR. KISHORE M. M ESTRY, PROPRIETOR, M/S. KIRANFURNITURE. (IV) THE ADDRESS OF THE KISHORE M. MESTRY, PROPRIE TOR, M/S. KIRAN FURNITURE. (V) THE MODE OF PAYMENTS MADE. (VI) NATURE OF SERVICES OBTAINED, PLACE WHERE SUCH SERVICE OBTAINED AND BILLS OF SERVICES RENDERED RAISED BY M /S. KIRAN FURNITURE. (VII) THE INCOME TAX RETURNS OF M/S. KIRAN FURNITURE, WHICH DULY REFLECTED THAT THE JOB CHAR GES RECEIVED FROM THE APPELLANT WERE DULY ACCOUNTED FOR AND INCOME EARNED THEREFROM HAS BEEN OFFERED FOR TAXATI ON BY THE SAID PARTY. [VIII] THE TDS RECORDS IN THE FORM OF TDS CERTIFIC ATES, AS REQUIRED BY THE PROVISIONS OF CHAPTER XVII SHOWING THE NATUR E OF SERVICES OBTAINED AND TDS AS REQUIRED BY LAW DULY DEDUCTED AND DEPOSITED BY US TO THE CREDIT OF CENTR AL GOVT. FROM THE DETAILS PLACED ON RECORD IT IS SEEN THAT S H. KISHORE MAHADEO MISTRY IS THE PROPRIETOR OF MLS KIRAN FURNI TURE AND IS SITUATED IN MUMBAI AND WAS ENGAGED IN THE BUSINESS ACTIVITY OF MANUFACTURE OF FURNITURE AND FIXTURE AND ALSO RENDE RED SERVICES AS A 'LABOUR CONTRACTOR'. ON PERUSAL OF THE DETAILS , IT IS SEEN THAT THE ASSESSING OFFICER MADE THE IMPUGNED ADDITION ME RELY ON THE BASIS OF NON-COMPLIANCE TO THE NOTICES ISSUED TO TH E ABOVE MENTIONED ENTITY U/S 133(6) OF THE IT ACT, 1961. WH ILE MAKING 34 SUCH DISALLOWANCES, THE ASSESSING OFFICER NOT ONLY IGNORED ALL THE MATERIAL FACTS BROUGHT ON RECORD BY THE APPELLANT, BUT ALSO THE NATURE OF SERVICES RENDERED BY M/S KIRAN FURNITURE, AND ALSO THE CLASSIFICATION AND DISCLOSURE MADE THEREOF IN ITS A UDITED BOOKS OF ACCOUNT, WHICH WAS FURNISHED SUCH AS BALANCE SHEET AND PROFIT AND LOSS ACCOUNT DURING THE COURSE OF THE ASSESSMEN T PROCEEDINGS. IN FACT, ONE CANNOT IGNORE THAT THE NO TICES ISSUED U/S 133(6) BY THE ASSESSING OFFICER ON BOTH THE OCCASIO NS WERE PROPERLY SERVED UPON THE INTENDED PARTY AND THEY WE RE NOT RETURNED TO THE SENDER UN-DELIVERED OR WITH CERTAIN REMARKS BY THE POSTAL AUTHORITIES. THIS ITSELF EVIDENCES THE FACT THAT THE PARTY EXISTED AND ITS IDENTITY WAS ESTABLISHED. THE ASSES SING OFFICER DID NOT BRING ANY ADVERSE MATERIAL ON RECORD TO EST ABLISH THAT SUCH SERVICES WERE NOT RENDERED BY M/S KIRAN FURNIT URE OR THAT THE SAME WAS NOT OBTAINED BY THE APPELLANT, OR THAT THE SERVICES OBTAINED WERE NOT UTILIZED FOR THE BUSINESS OF THE APPELLANT. THE ASSESSING OFFICER'S ACTION WHILE MAKING THE IMPUGNE D ADDITION IS CONTRADICTORY TO EACH OTHER. ON ONE HAND, THE ENTIR E JOB WORK CHARGES PAID WERE DISALLOWED AND ON THE OTHER HAND THE ASSESSING OFFICER HIMSELF ACCEPTED THE LIABILITY ON ACCOUNT OF SERVICES OBTAINED FROM THE PARTY DULY ACKNOWLEDGED AND CONFIRMED LIABILITY AS A TRADE LIABILITY. DESPITE O F THE SUBMISSIONS MADE AND EVIDENCES FURNISHED NOTICES ISSUED U/S 133 (6) WHICH REMAINED UN-COMPLIED, DOES NOT TANTAMOUNT TO AN ADV ERSE INFERENCE THAT COULD BE DRAWN AGAINST THE APPELLANT AS IT WAS OPEN TO THE ASSESSING OFFICER TO CONDUCT FURTHER IN VESTIGATIONS I ENQUIRY BY EXERCISING THE POWERS CONFERRED UPON HIM IN THE INCOME TAX ACT, 1961 TO ISSUE A COMMISSION U/S 131 (1 )(D) TO HIS COUNTERPART IN MUMBAI TO CARRY OUT A CONCLUSIVE ENQ UIRY. THE APPELLANT FURNISHED THE DETAILS OF ITS TRANSACTIONS WITH M/S KIRAN FURNITURE BEFORE THE ASSESSING OFFICER IN THE COURS E OF THE ASSESSMENT PROCEEDINGS FOR PROPER SCRUTINY IN THE F ORM OF INVOICES, SCHEDULE 9 FORMING PART OF THE FINANCIAL STATEMENTS , COPIES OF TDS CERTIFICATES, WHERE TDS WAS DEDUCTED IN ACCORDANCE WITH THE PROVISIONS OF LAW FOR THE KIND OF NATURE OF SERVICE S RENDERED I OBTAINED ETC. HOWEVER, THE ASSESSING OFFICER IGNORE D EVEN THE FACT THAT M/S KIRAN FURNITURE FURNISHED THE ITRS FOR VAR IOUS YEARS AND THE ASSESSING OFFICER COULD HAVE EASILY VERIFIED FR OM THE JURISDICTIONAL ASSESSING OFFICER WHERE THE SAID PAR TY WAS 35 ASSESSED TO TAX REGULARLY. WITHOUT AN INTENDED UNDE RTAKING TO FURTHER CONDUCT NECESSARY ENQUIRIES I INVESTIGATION , TO VERIFY THE GENUINENESS OF THE TRANSACTIONS WHICH THE ASSESSING OFFICER DOUBTED, MERELY DISALLOWANCE OF PURCHASES ONLY ON T HE GROUND THAT THE PARTY DID NOT RESPOND TO THE NOTICES WHICH WERE RIGHTFULLY SERVED UPON THE SAID PARTY U/S 133(6) IS UNJUSTIFIE D AS THE ASSESSING OFFICER AT THE LEAST COULD HAVE ALSO LEVI ED A PENALTY FOR NON-COMPLIANCE OF SUCH NOTICES SERVED ON IT. 16.1 THE EVIDENCE FURNISHED BY THE APPELLANT WAS IG NORED AND NOT TAKEN INTO ACCOUNT ON MERIT BY THE ASSESSING OFFICE R. THE PAYMENTS MADE WHICH WERE DULY SUPPORTED, CONFIRMED AND VOUCHED CANNOT BE TREATED AS THE UNDISCLOSED INCOME OF THE APPELLANT IN THE NAME OF UNEXPLAINED PURCHASES SIMP LY ON THE GROUND THAT M/S KIRAN FURNITURE DID AND RESPOND TO THE NOTICE ISSUED U/S 133(6) AND THAT IT REPRESENTED AND UNEXP LAINED AND UNDISCLOSED INCOME OF THE APPELLANT. THE INSTANT CA SE IS NOT A CASE OF CASH CREDIT SIMPLICITOR, BECAUSE THE APPELL ANT FURNISHED THE ENTIRE PROCEEDS AND TRANSACTIONS BEFORE THE ASSESSI NG OFFICER IN THE COURSE OF THE ASSESSMENT PROCEEDINGS U/S 153A, AND IT IS ALSO NOT A CASE WHERE THE CREDIT BALANCE DUE TO M/S KIRA N FURNITURE COULD BE ADDED UNDER THE DEEMING PROVISIONS OF SECT ION 68 OF THE IT ACT, 1961 WITHOUT ASSIGNING THE REASON FOR MAKIN G SUCH AN ADDITION. IT IS ALSO SEEN THAT NOWHERE AND AT NO PO INT OF TIME, THE ASSESSING OFFICER EXPRESSED HIS DISSATISFACTION PER TAINING TO THE IDENTITY, CREDITWORTHINESS OF GENUINENESS OF THE TR ANSACTIONS INVOLVED WHICH IS THE PRIMARY INGREDIENT LAID DOWN IN THE PROVISIONS OF SECTION 68. 16.2 IN THE INSTANT CASE, ON PERUSAL OF THE MATERIA L PLACED ON RECORD, I FIND THAT ALL THE SERVICES OBTAINED BY TH E APPELLANT WERE DULY SUPPORTED BY INVOICES RAISED BY M/S KIRAN FURN ITURE AND THE PAYMENTS MADE BY THE APPELLANT IN RESPECT OF THE SE RVICES OBTAINED WERE SUBJECTED TO THE PROVISIONS OF CHAPTE R XVII. ON PERUSAL OF THE DETAILS OF SUNDRY CREDITORS I FIND T HAT M/S KIRAN FURNITURE DULY APPEARED IN THE LIST OF SUNDRY CREDI TORS OF THE APPELLANT. SH. KISHORE MAHADEO MESTRY, WHO IS PROPR IETOR OF M/S KIRAN FURNITURE IS BEING REGULARLY ASSESSED TO INCO ME TAX UNDER PAN AGPPM57590 WITH THE ITO WARD- 25(3)(2) MUMBAI A ND HIS ACCOUNTS WERE DULY AUDITED. THE APPELLANT COMPANY A LSO APPEARED IN THE LIST OF SUNDRY DEBTORS OF M/S KIRAN FURNITURE. THE TRANSACTIONS WITH THE APPELLANT COMPANY WERE DULY A CCOUNTED FOR AND DISCLOSED IN THE RETURN FILED AND INCOME EARNED FROM THE SAID TRANSACTIONS WERE DULY OFFERED FOR TAXATION BY M/S KIRAN FURNITURE. THE APPELLANT IN HIS SUBMISSIONS RELIED ON PLETHORA OF 36 THE CASE LAWS IN SUPPORT OF ITS CONTENTIONS. CONSID ERING ALL THESE FACTS I AM OF THE VIEW THAT THERE IS SUBSTANTIAL MA TERIAL ON RECORD TO PROVE THE EXISTENCE OF THE PARTY AND THE GENUINE NESS OF THE TRANSACTIONS. WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD CONTRARY TO THAT FURNISHED BY THE APPELLANT, THE AS SESSING OFFICER WAS NOT JUSTIFIED IN CONSIDERING ONLY THAT PIECE OF EVIDENCE THAT COULD PROBABLY BE USED AGAINST THE APPELLANT WHILE IGNORING THE OTHER CORROBORATIVE EVIDENCE FURNISHED BY IT. AN AS SESSMENT HAS TO BE MADE CONSIDERING THE ENTIRE MATERIAL IN THE POSS ESSION OF THE ASSESSING OFFICER IN A FAIR AND JUDICIOUS MANNER / AND IN THE INTEREST OF REVENUE BUT NOT TO DEAL WITH IT IN A DI SCRETIONARY MANNER TO CHOOSE WHAT SUITED HIM. THEREFORE, THE IM PUGNED DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. ACCORDINGLY, THE ADDITION OF RS.9,88,687/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENSES INCURRED IN CONNECTI ON WITH THE SERVICES OBTAINED BY THE APPELLANT FROM M/S KIRAN F URNITURE IS DELETED. 29. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF T HE RELEVANT MATERIAL PLACED ON RECORD, WE FIND THAT THE ASSESSEE H AS FURNISHED VARIOUS EVIDENCES AND DOCUMENTS AS ENLISTED BY THE LD. CIT (A) TO PROVE THE GENUINENESS OF THE PURCHASES MADE AND SIMPL Y BECAUSE, THE NOTICES ISSUED BY THE AO TO THE SAID PARTY HAS NOT BEE N REPLIED BACK, IT CANNOT BE HELD THAT EITHER THE SAID PARITY HAS NOT R ENDERED ANY SERVICES TO THE ASSESSEE OR THE INVOICES RAISED BY THE SAID PARTY IS FICTITIOUS OR THE IDENTITY OF THE SAID PARTY CANNOT BE E STABLISHED. MOREOVER THE PAYMENTS HAVE BEEN MADE TO THE SAID PARTY THROUGH CHEQUES ON WHICH TDS HAS BEEN DEDUCTED. ALL THESE FAC TS OSTENSIBLY LEADS TO CONCLUSION THAT PAYMENT HAS BEEN MADE TO THE AS SESSEE TO THE SAID PARTY FOR RECEIVING THE SERVICES AT VARIOUS P ROJECTS AND SUCH A PAYMENT CANNOT BE HELD TO BE NON GENUINE. THE DETAILED FINDING OF THE LD. CIT (A) AS INCORPORATED ABOVE CANNOT BE DEVIATED FROM WITHOUT THEIR BEING ANY OTHER CONTRARY MATERIAL COMING ON RECO RD AND HENCE THE AFORESAID FINDING IS HEREBY CONFIRMED. THE GROUN DS RAISED BY THE REVENUE IN ALL THE YEARS ARE THUS DISMISSED. 37 30. THE NEXT ISSUE RAISED BY THE REVENUE IN THE ASS ESSMENT YEAR 2011-12 IS ADDITION ON ACCOUNT OF UNEXPLAINED CASH O F RS. 6,68,483/-. THE FACTS IN BRIEF ARE THAT DURING THE COURSE OF SEARC H CONDUCTED ON 19.10.2010 AT THE ASSESSEE'S PREMISES AT A-37, SECTOR 80, PHASE-IT, NOIDA (UP), IT WAS FOUND THAT IT WAS SHARED BY ANOTHER ENTITY, M/S. G.L. LITMUS EVENTS PVT. LTD. AND OTHER CONCERNS. US DOL LAR $ 15,017 (EQUIVALENT TO INR 6,68,483) WAS FOUND BY THE SEARCH PARTY FROM THE SAID PREMISES. WHEN CONFRONTED TO THE ASSESSEE, IT WAS EXPLAINED BEFORE THE SEARCH PARTY THAT THE SAID FOREIGN CURRENCY WAS PERSONAL PROPERTY OF FOREIGN NATIONALS, NAMELY, MR. ALEXANDER VIDAL, MR. HERVE CHU AND MR. VICTOR BESA, WHO WERE EMPLOYEES OF M/S. G.L. LITMUS EVENTS PVT. LTD. WHOSE PREMISES WAS ALSO COVERED UNDER THE SAME SEARCH PROCEEDING AND PANCHANAMA WAS ALSO DRAWN IN THEIR NAMES JOINTLY. NOTHING FURTHER WAS ASKED OR QUERIES WERE RA ISED FROM THE ASSESSEE AND THE SEARCH TEAM BEING SATISFIED WITH THE O WNERSHIP OF THE DOLLARS RELEASED THE SAME TO THE SAID FOREIGN NATIONAL S INSTANTLY. HOWEVER, DURING THE IMPUGNED ASSESSMENT PROCEEDING, THE LD. A.O. ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF THESE DOLL ARS. IN REPLY, THE ASSESSEE REITERATED THE FACT AS STATED ABOVE AND FURTHE R SUBMITTED THAT CONFIRMATION FROM M/S. G.L. LITMUS EVENTS PVT. LTD. IS A WAITING AND THE SAME WILL BE FILED AS SOON AS IT IS RECEIVED. IN SPITE OF THE ABOVE FACTS, THE A.O. WITHOUT CALLING FOR ANY FURTHER EXPLANA TION OR ISSUING ANY FURTHER NOTICE OR ENQUIRING THE MATTER FROM M/S. G.L. LITMUS EVENTS PVT. LTD., WHOSE SEARCH ASSESSMENT WAS ALSO UNDE R HIS CHARGE, MADE THE ADDITION OF RS.6,68,483/- IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED CASH ON THE GROUND THAT THE ASSESSEE FAILED TO FURNISH A CONFIRMATION PERTAINING TO THE SOURCE OF DOLLARS. 31 . BEFORE THE LD. CIT (A) ASSESSEE SUBMITTED THAT FOLLOWING DOCUMENTS IN SUPPORT OF THE CLAIM THAT THE DOLLAR/CASH FO UND AT THE 38 SEARCHED PREMISES JOINTLY OWNED BY SEVERAL ENTITIES WA S NOT BELONGING TO IT:- (A) COPY OF PANCHANAMA TO ESTABLISH THAT THE PREMIS ES SEARCHED WAS IN THE JOINT NAMES OF THE ASSESSEE-COMPANY, M/S . G.L. LITMUS EVENTS PVT. LTD. AND OTHER ENTITIES. (B) COPY OF CONFIRMATION FROM M/S. G.L. LITMUS EVEN TS PVT. LTD. STATING THAT MR. ALEXANDER VIDAL, MR. HERVE CHU AND MR. VICTOR BESA (FOREIGN NATIONALS) WERE WORKING ON ITS PROJEC T AND THEIR US DOLLARS WERE KEPT FOR SAFE CUSTODY IN THE SEARCHED PREMISES. (C) COPIES OF STATEMENTS OF FLOATING ADVANCE ACCOUN TS DULY ACKNOWLEDGED BY THE SAID FOREIGN NATIONALS FOR THE PERIOD 04.10.2010 TO 31.10.2010 ESTABLISHING THAT THEY WER E CONTRACTED BY M/S. G.L. LITMUS EVENTS PVT. LTD. FOR ITS PROJEC TS AS WELL AS THEIR PRESENCE IN INDIA AT THE TIME OF SEARCH. (D) COPY OF FIR DATED 28.08.2010 (BEFORE DATE OF SE ARCH) LODGED BY THE SAID FOREIGN NATIONALS ON OUTBREAK OF FIRE A T THEIR PREMISES ON 27.8.2010, ESTABLISHING THAT THEIR VALUABLES WER E KEPT IN THE SAFE CUSTODY OF M/S. G.L. LITMUS EVENTS PVT. LTD. A T THE PREMISES SHARED BY IT WITH THE ASSESSEE AND OTHERS. 32. LD. CIT(A) AFTER CONSIDERING THE ENTIRE FACTS AND MATERIAL ON RECORD HAS DELETED THE ABOVE AFTER OBSERVING AND HOL DING AS UNDER:- I HAVE GONE THROUGH THE DETAILS OF THIS ISSUE AND WRITTEN SUBMISSIONS FILED BY THE APPELLANT. THERE IS A CONS IDERABLE FORCE IN THE CONTENTION OF THE APPELLANT WHERE THE AR ARG UED THAT WITHOUT TAKING INTO ACCOUNT ALL THE FACTORS, ADDITI ON WAS MADE BY THE ASSESSING OFFICER FOR NOT FURNISHING OF CONFIRM ATION IS NOT ONLY INVALID BUT UNREASONABLE ALSO. FROM THE DETAILS ON RECORD, IT IS SEEN THAT ANOTHER GROUP COMPANY M/S G. L. LITMUS EV ENTS PVT. LTD. WAS ALSO SUBJECTED TO SEARCH AND SEIZURE OPERA TIONS U/S 132 OF THE IT ACT, 1961 AND THEREAFTER IT WAS CENTRALIZ ED WITH THE SAME ASSESSING OFFICER WHERE THE CASE OF THE APPELLANT W AS ALSO CENTRALIZED. AS THE JURISDICTION OVER BOTH THE CASE S I.E. M/S G. L. 39 LITMUS EVENTS PVT. LTD. AND THAT OF THE APPELLANT W ERE VESTED WITH THE SAME ASSESSING OFFICER I.E. CENTRAL CIRCLE-B. N EW DELHI, VERIFICATION OF SUBMISSIONS MADE BY THE APPELLANT P ERTAINING TO M/S G. L. LITMUS EVENTS PVT. LTD. COULD HAVE BEEN M ADE BY THE ASSESSING OFFICER RATHER THAN SIMPLY DISCARDING THE M. THE ASSESSING OFFICER DID NOT BRING ANY MATERIAL ON REC ORD TO SUBSTANTIATE THAT THE FOREIGN CURRENCY FOUND IN THE PREMISES OF THE APPELLANT BELONGED TO THE APPELLANT ONLY AND IT REP RESENTED THE UNDISCLOSED INCOME. IT IS A MATTER OF FACT THAT THE APPELLANT'S PREMISES WAS ALSO SHARED BY M/S G. L. LITMUS EVENTS PVT. LTD. AND THAT PURSUANT TO THE SEARCH A PANCHNAMA WAS ALS O DRAWN IN THE JOINT NAMES OF THE APPELLANT AND M/S G. L. LITM US EVENTS PVT. LTD. WITH THE ADDRESS AT A-37, SECTOR 80, PHASE-II, NOIDA (UP). IT IS ALSO A MATTER OF RECORD THAT CONSIDERING THE FACT T HAT THE AMOUNT PERTAINED TO THE FOREIGNERS, NAMELY MR. ALEXANDER V IDAL, MR. HERVE CHU AND MR. VICTOR BESA, CONTRACTED BY M/S G. L. LI TMUS EVENTS PVT. LTD., THE SEARCH PARTY DID NOT SEIZE THE DOLLA RS BUT RELEASED THE SAID AMOUNT OF RS.6,68,483/-. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS / POST SEARCH PROCEEDINGS THE APPELLANT FURNISHED THE FOLLOWING: (A) COPY OF CONFIRMATION FROM M/S. CL LITMUS EVENTS PVT . LTD. CONFIRMING THE FACTS THAT MR. ALEXENDER VIDAL, MR. HERVE CHU AND MR. VICTOR BESA WERE PERSONS CONTRACTED FOR THE ITS PROJECT AS WELL AS THAT THE FOREIGN CURRENCY FOUND DURING S EARCH BELONGED AND RETURNED TO THESE CONTRACTED PERSON. (B) STATEMENT OF FLOATING ADVANCE ACCOUNTS FOR THE PERI OD 4.10.2010 TO 31.10.2010 ACKNOWLEDGED BY SAID FOREIGN NATIONAL S. THIS IS UNDOUBTEDLY ACKNOWLEDGMENT OF THE FACT THAT THE SAI D PERSONS WERE CONTRACTED BY M/S. LITMUS EVENTS PVT. FOR ITS PROJECTS AS WELL AS THEY WERE IN INDIA AT THE TIME OF SEARCH. 40 (C) REFER P.B. PAGE NO 9D BEING COPY OF A FIR DATED 28.08.2010 LODGED BY THE FOREIGN NATIONAL CONTRACTED PERSONS O F M/S. G.L. LITMUS EVENTS PVT. LTD. SUBSEQUENT TO OUTBREAK OF F IRE AT THEIR PREMISES ON 27.08.2010 I.E. JUST PRIOR TO SEARCH. T HEREFORE UNDER THE CIRCUMSTANCES THE VALUABLES BELONGING TO CONTRACTED FOREIGN NATIONALS WERE KEPT IN THE SAFE CUSTODY AT THE PREMISES AND UNDER POSSESSION OF M/S. C.L. LITMUS EVENTS PVT . LTD. 10.1 FROM THE ABOVE DISCUSSION, IT IS EVIDENT THAT THE APPELLANT COMPANY FURNISHED SUBSTANTIAL MATERIAL IN SUPPORT O F ITS CONTENTION, BUT THE ASSESSING OFFICER FAILED TO BRI NG ON RECORD ANYTHING ADVERSE CONTRARY TO WHAT IS SUBMITTED AND ON RECORD. FURTHER, THE RELEASE OF FOREIGN CURRENCY BY THE SEA RCH PARTY DURING THEIR SEARCH OPERATION U/S 132 ITSELF PROVED THAT T HE SAME WAS RELEASED AFTER THE SATISFACTION OF THE SEARCH PARTY WITH A CONCLUSION THAT THE SAME WAS NEITHER AN UNEXPLAINED NOR AN UNDISCLOSED INCOME OF THE APPELLANT NOR IT BELONGED TO M/S. G.L. LITMUS EVENTS PVT. LTD. BUT THE SAME BELONGED TO TH E FOREIGNERS CONTRACTED BY THE COMPANY M/S. G.L. LITMUS EVENTS P VT. LTD. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFIC ER CANNOT BE SUSTAINED AS NO MATERIAL WAS BROUGHT ON RECORD BY T HE ASSESSING OFFICER TO PROVE THAT AN AMOUNT OF RS. 6,68,483/- ( $15,017) WAS THE UNDISCLOSED INCOME OF THE APPELLANT WHICH REMAI NED UNEXPLAINED. AS THERE IS NO JUSTIFICATION FOR SUCH AN ADDITION, I DELETE THE ADDITION OF RS. 6,68,483/-. 33. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RELEVANT FINDING IN THE IMPUGNED ORDER AS WELL AS MATERIAL ON RECORD, WE FIND THAT THE ASSESSEES STAND CONSISTENTLY BEFORE THE AO WAS THAT THE FOREIGN CURRENCY FOUND FROM THE PREMISES OF THE ASS ESSEE BELONG TO DIFFERENT CONCERN, NAMELY, M/S. G.L. LITMUS EVENTS PV T. LTD. WHO HAVE 41 THEIR OFFICE AT THE SAME PREMISES AND WERE ALSO SUBJEC TED TO SEARCH. THE INVESTIGATION AUTHORITIES CONCLUDED THAT THE FOREIGN C URRENCY NEITHER REPRESENTS UNDISCLOSED INCOME OF ASSESSEE NOR OF M/S. G L LITMUS EVENTS PVT. LTD., THEREFORE, THE SAME WAS RELEAS ED. ALTHOUGH WHATEVER CASH WAS FOUND FROM THE POSSESSION OF THE ASS ESSEE THE SAME WAS FOUND TO BE REFLECTED IN THE BOOKS OF ACCOU NTS. THE ASSESSEE IN THE COURSE OF SEARCH ITSELF HAS CATEGORICAL STATED TH AT THE CASH IN THE FORM OF FOREIGN CURRENCY BELONGED TO M/S. GL LITMU S EVENTS PVT. LTD., AND WITHOUT ANY OTHER MATERIAL TO HOLD THAT THE FO REIGN CURRENCY BELONG TO THE ASSESSEE AO HAS HELD TO BE UNDISCLOSED INCOME OF THE ASSESSEE. EVEN THE PANCHNAMA ALSO SHOWS THE JOINT NAME OF ASSESSEE AND M/S. G.L. LITMUS EVENTS PVT. LTD. AND HOW THIS AD VERSE INFERENCE HAS ONLY BEEN DRAWN BY THE ASSESSEE IS NOT UNDERSTOOD . THE COPY OF CONFIRMATION FROM M/S. G.L. LITMUS EVENTS PVT. LTD. CONF IRMING THE ENTIRE FACTS AND OTHER CATENA OF DOCUMENTS WHICH HAVE B EEN FILED BEFORE THE AO HAS NEITHER BEEN CONSIDERED NOR ANY HAS BEEN REBUTTED BY THE AO. ACCORDINGLY, OBSERVATION AND FINDING OF TH E LD. CIT (A) BASED ON FACTS AND MATERIAL ON RECORD THAT THE FOREIGN CURRENCY DOES NOT BELONG TO THE ASSESSEE BUT TO M/S. G.L. LITMUS EVEN TS PVT. LTD. CANNOT BE DISTURBED AND ACCORDINGLY THE ORDER OF LD. CIT(A) AFFIRMED. IN THE RESULT THE GROUNDS RAISED BY THE REVENUE ON THIS SCORE IS DISMISSED. 34. COMING TO THE ISSUE OF SCRAP SALES WHICH HAS BEEN RAISED BY THE ASSESSEE AS WELL AS BY THE REVENUE IN THE ASSESSMENT Y EAR 2009-10, THE FACTS IN BRIEF ARE THAT THE AO HAS MADE THE ADDITION O F RS. 2,90,39,068/- ON ACCOUNT OF ALLEGED SCRAP SALES. THE FACTS IN BRIEF ARE THAT, ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF ERECTION, COMMISSIONING AND CONSULTANCY OF STRUCTURE DESIGN PRO CESS, DECORATION AND EXHIBITION PAVILIONS ETC. THE ASSESSEE WAS AWARDED 42 WORK FOR EXECUTION OF SAME. BEFORE US LD. COUNSEL HA S EXPLAINED THE ENTIRE FACTS ON THIS ISSUE IN THE FOLLOWING MANNER:- THE ASSESSEE COMPANY AWARDED WORK FOR EXECUTION OF COMMON WEALTH GAMES, 2010 (CWG).1N RELATION TO THIS, THE A PPELLANT HAD PROVIDED TO M/S. GL LITMUS EVENTS PVT. LTD. FOR THE EXECUTION OF THE CWG GAMES THE FOLLOWING: I) SERVIC ES AMOUNTING TO RS.8.82 CRORES; AND II) SALES OF RS. 1,25,30,700/-. 2. THE ID. AO. HOWEVER NOTED THAT THE SERVICES (TOT ALLING TO RS.8.82 CRORES), INCLUDED IN IT RENTAL CHARGES OF RS.5,80,7 8,138/- EARNED ON MATERIAL GIVEN ON HIRE TO M/S G.L. LITMUS EVENTS PVT. LTD. AS UNDER:- S NO. AMOUNT(RS.) DESCRIPTION 1 25,38,077 RENTAL CHARGES FOR PRE- FABRICATED CEIL ING 2 48,34,400 RENTAL CHARGES FOR PROVIDING CASSETTE FLOOR/RAMPS/CABLE DUCTS AND STAGE IN CWG 3 2,61,15,924 RENTAL CHARGES FOR PROVIDING TEMPORAR Y WALLS AND DOORS IN CWG FOR GAMES VENUE. 4 41,43,540 RENTAL CHARGES FOR PROVIDING MISCELLANE OUS ON SITE MATERIAL IN CWG 5 51,40,000 RENTAL CHARGES FOR PROVIDING SIGNAGES, DESIGNS, HOARDING SERVICES AT NATIONAL & INTERNATIONAL AIRPORT 6 75,20,586 RENTAL CHARGES FOR PROVIDING ELECTRICAL & OTHER EQUIPMENT FOR EXECUTION OF CWG 7 24,68,681 RENTAL CHARGES FOR INSTALLATION OF WALL STRUCTURES AT DIFFERENT SITES OF CWG 43 8 53,16,930 RENTAL CHARGES FOR PROVIDING TEMPORARY OFFICE, AIR CONDITIONERS & FURNITURE AT ITO SITE. TOTAL 5,80,78,138 2.1. THE LD. AO DURING THE ASSESSMENT PROCEEDINGS E NQUIRED ABOUT THE DETAILS OF PURCHASES MADE BY THE APPELLAN T FOR THE CWG AND ALSO REGARDING THE SCARP/RESIDUAL VALUE OF THE SAID MATERIALS PURCHASED FOR THE CWG. IN CONNECTION TO THE SAME, IT WAS EXPLAINED TO THE AO. THAT THE SERVICES AND GOODS PROVIDED TO M/S G.L. LITMUS EVEN TS FOR CWG WAS PROVIDED OUT OF COMMON POOL OF THE APPELLANT BU SINESS AND NO SEPARATE PURCHASES WERE MADE FOR THE CWG. THUS I T WAS EXPLAINED THAT NO SUCH SEPARATE LIST OF PURCHASES A ND THE RESULTANT SCRAP/RESIDUAL VALUE OF THE SAME COULD BE PROVIDED. 2.2. ALSO THE LD. AO NOTED THAT THE APPELLANT HAD B EFORE THE SETTLEMENT COMMISSION SURRENDERED RS.20,00,000/- AS UNACCOUNTED INCOME FROM SCRAP SALE FROM MATERIAL SU PPLIED FOR CWG PROJECT. IN THE SAID CONNECTION IT WAS EXPLAINED BY THE APPE LLANT THAT ONE SHRI RAJENDRA KUMAR SITE MANAGER, WAS IN CHARGE AND LOOKING AFTER THE CWG SITE. AFTER HIS DEATH, A NOTING ON LO OSE SHEET WAS RECOVERED FROM HIS OFFICE DESK WHEREIN AN AMOUNT OF RS.16,78,340/- WAS FOUND RECORDED AS SALE OF SCRAP, WITHOUT GIVING THE DETAILS OF THE ITEMS SOLD, QUANTITY AND TO WHOM SOLD. THESE FACTS WERE UNKNOWN TO THE APPELLANT-COMPANY A ND HE WAS DOING SO OF HIS OWN. 44 HOWEVER, INSPITE OF THE FACT THAT DURING THE ENTIRE SEARCH NOT A SINGLE DOCUMENT WAS FOUND SUGGESTING SUPPRESSION OF INCOME, THE APPELLANT, CONSIDERING THE ABOVE UNFORESEEN PECULIA R CIRCUMSTANCES OWING TO THE NOTING ON LOOSE SHEET RE COVERED FROM THE OFFICE DESK OF THE SAID SITE MANAGER AFTER HIS DEATH, WITH A VIEW TO COMING OUT CLEAN TO PROTECT ITS GOODWILL, T O BUY PEACE OF MIND AND TO COVER UP ANY OTHER SHORTFALL BESIDES TH E ABOVEMENTIONED INCOME OF RS.L6,78,340/- ARISING FRO M SALE OF SCRAP, OFFERED A SUM OF RS.20 LAKHS ON ACCOUNT OF S CRAP SALE TO TAX IN THE SETTLEMENT APPLICATION FILED BEFORE THE HON' BLE SETTLEMENT COMMISSION U/S.245C OF THE ACT TO DEPICT THE TRUE A ND FULL DISCLOSURE. HOWEVER THE SAID APPLICATION STOOD UN-ADMITTED FOR THE REASON THAT THE COMPANY, ACCORDING TO HON. SETTLEMENT COMM ISSION, COULD NOT SATISFACTORILY EXPLAIN AS TO WHY CAPITALI ZATION OF INCOME GENERATED FROM SALE OF SCRAP IN CASH SHOULD BE REST RICTED TO RS.16,78,340/-. 2.3. THE APPELLANT ALSO FURNISHED A DETAILED CHART, WHICH IS ALSO APPEARING ON PAGES 48 TO 50 OF THE ORDER OF LD. CIT (A), SHOWING/NARRATING BILL-WISE CONTENTS OF ITEMS, THEI R UTILITY, SCRAP VALUE, STOCK POSITION ETC. 2.4. THE LD. A.O., HOWEVER, ALLEGED THAT ALTHOUGH THE APPELLANT- COMPANY HAD ADMITTED UNACCOUNTED SALE OF SCRAP BUT NO EVIDENCE IN THAT REGARD WAS FILED. HE ALLEGED THAT THE MATERIAL PURCHASED WAS USED FOR A SHORT PERIOD OF 45 DAYS ONLY AFTER WHICH IT COULD BE EASI LY REUSED OR SOLD AT A PRICE. WITHOUT APPRECIATING/CONSULTING THE ANALYSIS AND RE LATED DOCUMENTS, HE ON HIS WHIMS AND FANCIES PRESUMED THA T THE SCRAP VALUE OF THESE ITEMS SHOULD NOT BE LESS THAN 50% OF THEIR ORIGINAL 45 VALUE AND, ACCORDINGLY, REJECTING THE EXPLANATION O F THE ASSESSEE ADDED SUM OF RS. 2,90,39,069/-, BEING 50% OF TOTAL COST OF RS. 5,80,78,138/-, TO THE INCOME OF THE APPELLANT ON TH E FOLLOWING GROUNDS: (A) THAT THE SCRAP/RESIDUAL VALUE OF MATERIAL PURCH ASED FOR CWG HAS NOT BEEN PROVIDED BY THE ASSESSEE. (B) THAT THE ASSESSEE BEFORE HON 'BLE SETTLEMENT CO MMISSION HAD SUO MOTO OFFERED RS.20 LAKHS ON ACCOUNT OF SCRAP SA LE FOR CWG PROJECT. (C) THAT THE SETTLEMENT APPLICATION WAS FILED ON TH E BASIS OF ROUGH NOTING IN THE LOOSE PAPERS FOUND IN THE DESK OF MR. RAJENDER KUMAR, SITE MANAGER, SUBSEQUENT TO HIS DEATH AND MU CH LATER TO THE DATE OF SEARCH CONDUCTED ON THE ASSESSEE-COMPAN Y. 35. BEFORE THE LD. CIT (A) ALSO THIS ISSUE WAS EXPLAI NED BY THE ASSESSEE AS UNDER:- (A) THAT THE APPELLANT-COMPANY HAD EXECUTED ORDERS PLACED BY M/S GL LITMUS EVENTS PVT. LTD. FOR THE SUPPLY OF TEMPORARY STRUCTURES ETC. ON HIRE BASIS AT VARIOUS LOCATIONS OF C WG. ALL THE SITES WERE TO BE VACATED IMMEDIATELY AFTER THE EVENT, FA ILING WHICH HEAVY PENALTY WAS ENVISAGED. THE EMPLOYEE OF THE APPELLANT-COMPANY, THEREFORE, SOLD A LOT OF MATERIAL AS SCRAP TO LOCAL SCRAP DEALERS RESULTING IN CASH SALE OF RS.16, 78,340/-, WHICH WAS WRITTEN IN THE LOOSE SHEET RECOVERED FROM TH E OFFICE DESK OF THE SITE MANAGER AFTER HIS DEATH AND REMAINED TO BE ACCOUNTED FOR. (B) THE SCRAP GENERATED IN THE NORMAL COURSE OF BUSINESS HAS BEEN SOLD IN THE RESPECTIVE YEARS AND DULY ACCOUNTED FOR I N THE BOOKS OF ACCOUNT. 46 (C) MOST OF THE MATERIAL FOR RENTAL CONTRACT WAS OF SUCH NAT URE THAT EITHER IT DOES NOT HAVE ANY SCRAP VALUE OR OTHERWISE THE SCRAP VALUE IS NEGLIGIBLE. THAT IN THESE TYPES OF WORK, TH E COMPANY HAD TO BEAR COST FOR BREAKAGE AND REMOVAL OF THE INSTALLED MATERIAL/SCRAP/GARBAGE, WHICH WAS MUCH MORE THAN THE NEGLIGIBLE SCRAP VALUE. HENCE, IN MANY OCCASIONS TH E MATERIALS WERE NOT REMOVED AND THE LOCAL CONTRACTORS WERE ASKED TO REMOVE THE SAME AND TO KEEP THE SCRAP AS PAYMENT IN LI EU OF THE SERVICES PROVIDED FOR DISMANTLING/REMOVING THE STRUC TURES AND CLEANING THE VILLAGE SITE. (D) THAT IN THE INTEREST OF THE BUSINESS AND IN VIEW OF V ARIOUS COST INVOLVED IN REMOVING THE STRUCTURES ETC. WITHIN A SHORT SPAN OF TIME, SHORTAGE OF GODOWNS FOR STORING THOSE SCRAP ETC., THE COMPANY GAVE AUTHORITY TO ITS SITE SUPERVISOR/IN CHARG E TO DISPOSE OF AT THE SITE ITSELF AT THE MAXIMUM BARGAIN PRI CE. (E) THAT THE STRUCTURES ERECTED IN THE CWG VILLAGE HAVE MO RE ARTISTIC VALUE THAN THE COST OF THE MATERIAL USED, WHICH HAS NO RESIDUAL VALUE AFTER THE WORK IS OVER. (F) THE AO HAS ALLEGED THAT THE MATERIALS/GOODS WERE USED FOR 45 DAYS IN THE CWG VILLAGE, BUT HE HAS FAILED TO APPRECI ATE THAT DURING THIS PERIOD THE GOODS WERE SUBJECTED TO SUCH R OUGH USE, THAT BY THE END OF THE PERIOD THE GOODS HAD LOST THEIR US ABLE LIFE. FURTHER, THE GOODS WHICH WERE FOUND RE-USABLE, WERE TA KEN BACK TO THE GODOWNS, DULY SHOWN AS PART OF THE CLOSING STOCK AND VALUED THE SAME IN ACCORDANCE WITH THE PRESCRIBED ACC OUNTING STANDARDS. (G) THAT DURING THE COURSE OF VERIFICATION OF BOOKS OF ACCOUNTS, STOCK REGISTERS AND OTHER SEIZED MATERIAL IN THE IMPU GNED ASSESSMENT PROCEEDING, THE AO ADMITTEDLY HAS NOT COME AC ROSS 47 ANY UNRECORDED TRANSACTION OR OBJECTED EITHER ABOUT COR RECTNESS OF THE BOOKS OF ACCOUNT OR VALUATION OF THE CLOSING S TOCK. THE SEARCH PARTY ALSO DID NOT FIND ANY INCRIMINATION. (H) BEFORE THE AO AS WELL AS BEFORE THE LD. C.I.T.(A), TH E APPELLANT- COMPANY FILED THE DETAILS OF SERVICES INCLUDING THE MA TERIAL GIVEN ON HIRE TO M/S. GL LITMUS EVENTS PVT. LTD. WITH RESPECTIV E BILLS/INVOICES, REFERRED TO ABOVE (PAGES 7 & 8 OF AS SESSMENT ORDER). TO ELABORATE THE MATTER FURTHER, THE COMPANY ALS O FILED A CHART ANALYZING BILL WISE CONTENTS OF ITEMS, THEIR UTILIT Y, SCRAP VALUE, STOCK POSITION ETC., WHICH IS APPEARING ON PAG ES 48 TO 50 OF THE APPELLATE ORDER. (I) THAT, THEREFORE, THE AO. ON SURMISE & CONJECTURE HAS M ADE ADDITION ON LUMP SUM BASIS OF RS.2,90,39,069/-, BEIN G 50% OF TOTAL VALUE OF SERVICES OF RS.5,80,78,138/-, UPON PRE SUMPTION OF SCRAP SALE WITHOUT BRINGING ON RECORD ANY DISCREPANCY THEREIN OR INSTANCES OF ALLEGED UNDISCLOSED SALES BROUGHT ON REC ORD DURING THE ASSESSMENT PROCEEDING. 36. LD. CIT (A) HAS GIVEN PART RELIEF AFTER OBSERVIN G AND HOLDING AS UNDER:- 22.2...FROM THE DETAILS ON RECORD, I FIND THAT THE ASSESSING OFFICER CONSIDERED THE STOCK THAT WAS RECORDED IN THE BOOKS OF ACCOUNT OF THE APPELLANT TO THE EXTENT IT WAS CLASSIFIED TO BE RE-USED AND, THEREFORE, NO ADDITION WAS MADE ON THAT ACCOUNT BY HIM. IN HIS SUBMISSIONS, THE APPELLANT ITSELF EXPRESSED ITS INABILITY TO SEGREGATE USEABLE AND UN-USEABLE RESIDUE. THEREFORE , THE ASSESSING OFFICER DID NOT RAISE ANY QUESTION PERTAI NING TO THE CORRECTNESS OF THE BOOKS OF ACCOUNT MAINTAINED BY T HE APPELLANT. 48 FURTHER, IT IS ALSO MATTER OF RECORD THAT APART FRO M THE TRANSACTIONS RECORDED ON THE LOOSE SHEETS FOUND IN THE DESK OF T HE SITE MANAGER SH. RAJINDER KUMAR, NO OTHER INCRIMINATING MATERIAL PERTAINING TO THE SCRAP SALE WAS RECOVERED BY THE INVESTIGATING W ING OF THE DEPARTMENT EXCEPT THAT AN AMOUNT OF RS.16, 78,340/- WAS FOUND RECORDED AS SALE OF SCRAP, WITHOUT GIVING THE DETAI LS OF THE ITEMS SOLD, QUANTITY, AND TO WHOM SOLD. HOWEVER, THE APPE LLANT DID NOT ADMIT THE RECEIPT OF SUCH AMOUNT FROM THE MANAGER S ITE IN CHARGE I. E. SH. RAJINDER KUMAR EVEN THOUGH SUCH EXISTENCE OF TRANSACTIONS PROVE THAT THERE WAS A SALE OF SCRAP B Y THE APPELLANT. THEREFORE, THIS WAS THE EVIDENCE IN THE POSSESSION OF THE ASSESSING OFFICER WITH REGARD TO THE SCRAP SALE AND WHICH WAS FOUND NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE A PPELLANT. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE APPELLANT FAILED TO PROVIDE THE COMPLETE DETAILS OF SALE OF SCRAP AND A DMITTED THAT WAS AN UNACCOUNTED SALE OF SCRAP TO THE EXTENT OF T HE TRANSACTIONS FOUND RECORDED ON THE LOOSE SHEET RECOVERED FROM TH E DESK OF THE MANAGER SITE IN CHARGE. THE FACT THAT THE APPELLANT OFFERED RS.20 LAKHS AS INCOME ON ACCOUNT OF SALE OF SCRAP IN AN A PPLICATION FILED BEFORE THE HON'BLE SETTLEMENT COMMISSION ITSELF EST ABLISHED BEYOND DOUBT THAT THE APPELLANT MADE SALE OF SCRAP OUT OF ITS BOOKS. 22.4. IT IS ALSO SEEN THAT THE ASSESSING OFFICER MA DE THE DISALLOWANCE ON ADHOC BASIS WITHOUT SPECIFYING PART ICULAR ITEM OR BILL ON AN ESTIMATE BASIS AS THERE WAS NO MATERIAL IN HIS POSSESSION EXCEPT THE TRANSACTIONS RECORDED ON THE LOOSE SHEET PERTAINING TO RS. 16,78,340/-. THE APPELLANT ALSO DID NOT FURNISH ANY DETAILS PERT AINING TO THE SALE OF SCRAP EXCEPT TO ADMIT THE TRANSACTIONS RECO RDED ON THE 49 LOOSE SHEET, THE ONE WHICH IS ALREADY IN THE POSSES SION OF THE ASSESSING OFFICER. AS THERE IS NO COGENT EVIDENCE TO SUBSTANTIATE THE ADDITION MADE BY THE ASSESSING OFFICER NOR ANY EVIDENCE ON THE CO NTRARY WITH THE APPELLANT, IN MY VIEW IT WOULD BE FAIR AND REASONAB LE TO ESTIMATE THE VALUE OF THE SCRAP SOLD AT 20% OF THE PURCHASE VALUE, AS 50% IS AN EXORBITANT ESTIMATE AS THE APPELLANT'S PURCHA SES ALSO INCLUDED ITEMS LIKE MDF BOARD, PLYWOOD, PREFABRICAT ED CEILING, SOWN WOOD, LAMINATES, CARPETS ETC. WHERE THE VALUE OF THE RESIDUE IS NOT FETCHING, BESIDES ALUMINIUM, IRON AND STEEL, MS PLATES, ELECTRICAL ITEMS, ELECTRICAL CABLES ETC. THE ASSESSING OFFICER ALSO DID NOT BRING ON RECORD ANY COMPARABLE CASES WHERE THE SCRAP VALUE WAS ASSESSED AT 50% OF THE PURCHASE VALUE OR THE NATURE OF THAT BUSINESS ACTIV ITY AKIN TO THAT OF THE APPELLANT WHERE 50% OF THE PURCHASES CAN GEN ERATE A SCRAP VALUE. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO MOD IFY THE ADDITION MADE BY HIM TO THE TENT OF 20% OF RS.5,80,78, 138/- AND TO PASS A CONSEQUENTIAL ORDER ACCORDINGLY. 37. BEFORE US LD. COUNSEL SUBMITTED THAT THE ENTIRE DETAI LS OF PURCHASES MADE FOR CWG AND SCRAP RESALE VALUE OF SU CH GOODS WERE PROVIDED BEFORE THE AO AND IN RESPECT OF SCRAP VALUE OF MATERIAL USED IN CWG WHICH THE AO HAS PRESUMED TO HAVE BEEN SOLD. IT WAS EXPLAINED BEFORE HIM WITH REFERENCE TO INVOICES RAIS ED FOR THAT PURPOSE THAT THE SERVICES FOR THE SUPPLY OF TEMPORARY STRUCTURES ETC. WERE ON HIRE BASIS AT VARIOUS LOCATIONS OF CWG AND GOODS WER E PROVIDED TO M/S. G L LITMUS EVENTS PVT. LTD. OUT OF COMMON POOL AND NO SEPARATE PURCHASES WERE MADE FOR PROVIDING SERVICES / GOODS TO THE COMPANY. THE ASSESSEE HAS ALSO FILED A CHART DESCRIBING THE MA TERIALS PROVIDED 50 TO M/S. G L LITMUS EVENTS PVT. LTD. AND ULTIMATE UTILISATIO N WHICH WERE AS UNDER :- BILL NO. NATURE OF SALE /SERVICES AS PER BILLS RAISED DESCRIPTION OF RENTAL CHARGES - UTILIZATION OF MATERIAL & SUBSEQUENT TREATMENT OF THE SAME. 134 RENTAL CHARGES FOR PRE- FABRICATED CEILING PROVIDED IN CWG (RS.25,38,077) PVC & AMF CEILING - THIS MATERIAL HAS NO SCRAP VALUE 136 RENTAL CHARGES FOR TENTS (FOR PROVIDING CASSETTE FLOOR, RAMPS/CABLE DUCTS & STAGE AT CWG (RS.48,34,400) TENTS ARE PART OF STOCK OF ASSESSEE-COMPANY - BROUGHT BACK TO ITS GODOWN FOR REUSE AND REFLECTED IN STOCK AS AT 31.03.2011. 137 RENTAL CHARGES FOR PROVIDING TEMPORARY WALLS & DOORS AT CWG (RS. 2,61,15,924) COMPANY HAD STOCK OF THESE MATERIALS FOR RECYCLE AND THESE ITEMS FORMED PART OF STOCK AS AT 31.03.2011. 138 RENTAL CHARGES FOR PROVIDING MISCELLANEOUS ON SITE MATERIAL (RS.41,43,540) REPAIR/RENOVATION OF DOPING CENTRES TOILETS ETC. - NOTHING IN THE NATURE TO BE RESOLD OR SCRAP VALUE. 177 RENTAL CHARGES FOR PROVIDING SIGNAGE, DESIGN, HOARDING SERVICES AT DELHI AIRPORTS. (RS. 51,40,000) FURNITURE SUPPLIED AT THE AIRPORT BROUGHT BACK AFTER CWG AND PART OF CLOSING STOCK VALUED AS PER THEIR BALANCE USEFUL LIFE. SIGNAGES INSTALLED AT AIRPORTS WERE NOT DISMANTLED AND HENCE NOT TAKEN AS STOCK OR SCRAP. 178 RENTAL CHARGES FOR PROVIDING ELECTRICAL & OTHER EQUIPMENTS (RS.75,20,586) A)ELECTRICAL MATERIAL SUPPLIED FROM OWN STOCK AND TAKEN BACK AT STOCK AS AT 31.03.2011 - RS.33,64,746 B)AIR-CONDITIONING DONE BY TAKING ON RENT FROM OUTSIDE PARTIES & RETURNED TO RESPECTIVE 51 PARTIES -RS.30,71,250 C) LABOUR CHARGES FOR INSTALLATION & DISMANTLING OF AIR- CONDITIONERS RS. L0,84,590 - THEREFORE, NO SCRAP VALUE. 179 RENTAL CHARGES FOR INSTALLATION OF WALL STRUCTURES AT DIFFERENT SITES OF CWG (RS. 24,68,681) NO MATERIAL USED, ONLY INSTALLATION CHARGES INCURRED AND FOR SUCH SERVICES THERE CAN HAVE ANY SCRAP VALUE. 181 RENTAL CHARGES FOR PROVIDING TEMPORARY OFFICE AIR-CONDITIONER & FURNITURE (RS. 53,16,930) A) MOST OF THE MATERIAL WAS USED OUT OF APPELLANT'S STOCK AND WAS TAKEN BACK TO ITS STOCK AT THE VALUE OF THEIR BALANCE USEFUL LIFE. B) SOME MATERIAL TAKEN ON RENT WERE TAKEN BY PARTY AND HENCE NO SCRAP VALUE. THUS, HE SUBMITTED THAT NEITHER THE AO NOR THE LD. CIT (A ) COULD BRING ANY RECORD OF ANY SALE OF ALLEGED SCRAP BY THE ASSESSEE AFTER THE COMPLETION OF CWG AND THE ENTIRE DETAILS AND EVIDENCES HAVE NEITHER BEEN DISBELIEVED NOR ANY MATERIAL HAS BEEN BROUGHT ON RECORD THAT THE ITEMS ALLEGEDLY SOLD AS SCRAP WERE NOT REPRESENTED IN STOCK. DURING THE COURSE OF SEARCH NOTHING WAS FOUND EVIDENCING SCRAP SALE OF RS. 16,78,340/- AND NOT DISCLOSED IN THE ACCOUNTS. AGAINST THAT ASSESSEE HAS ALREADY OFFERED RS. 20 LACS. AS FAR AS PURCHASE S ARE CONCERNED THE SAME WERE PART OF STOCK DULY DISCLOSED AND NOT DISPUTED . ONLY RENTAL INCOME WAS EARNED BY GIVING ON HIRE SUCH PURCHASED GOODS IN CWG WHICH TOO HAS BEEN DULY ACCOUNTED FOR. THE AMOUNT OF RS. 16,78,340/- WRITTEN ON LOOSE SHEETS FOUND IN THE DESK OF SITE MANAGER SHRI RAJINDER KUMAR IS BEYOND THE KNOWLEDGE OF THE A SSESSEE COMPANY AFTER HIS DEATH AND ONLY TO GIVE PIECE OF MIN D , IT HAS OFFERED 52 SUM OF RS. 20 LACS ON ACCOUNT OF SCRAP SALE TO TAX IN THE SETTLEMENT APPLICATION. AO ALSO COULD NOT BRING ON RECORD ANY SU CH EVIDENCE TO ESTABLISH SALE OF SCRAP. THUS NEITHER THE AO NOR LD. CIT(A) ARE JUSTIFIED IN EITHER ESTIMATING THE 50% OF THE TOTAL COST OF SERVICE/ MATERIAL PROVIDED TO M/S. G.L. LITMUS EVENTS PVT. LTD. WAS RESTRICTED TO 20% OF SUCH SERVICES. 38. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE AO. 39. AFTER CONSIDERING THE ENTIRE GAMUT OF FACTS AND M ATERIAL ON RECORD, WE FIND THAT THE IMPUGNED ISSUE OF SALE OF SCR AP HAS ARISEN DUE TO FACT THAT ASSESSEE ITSELF HAS ADMITTED AND OFFERED RS. 20 LACS AS INCOME ON ACCOUNT OF SCRAP AND MATERIAL PLACED FROM CWG PROJECT BEFORE THE SETTLEMENT COMMISSION AND THE ASSESSEE HAS N OT PROVIDED ANY DOCUMENTARY EVIDENCES. BASED ON THIS FACT, THE AO HAS TREATED THE ENTIRE DETAILS OF SERVICES AND MATERIAL GIVEN ON H IRE TO M/S. G L LITMUS EVENTS P LTD. AND DISALLOWED 50% OF THEIR VALUE ON THE GROUND ASSESSEE HAS FAILED TO PROVIDE DETAILS OF PURCHASE MA DE FOR CWG AND KEEPING IN VIEW THE MATERIAL AND USAGE. HE HELD THAT S CRAP VALUE OF THESE ITEMS CANNOT BE LESS THAN 50% OF THE VALUE. LD. CIT (A) TOO HAS MADE VALUE OF SCRAP SOLD AT 20% OF THE PURCHASE VAL UE. ASSESSEE WHO HAS AWARDED THE EXECUTION OF CWG HAD ASSIGNED M/S G.L . LITMUS EVENTS FOR THE EXECUTION OF CWG FOR THE SERVICES AND S ALES THE SAID SERVICES ALSO INCLUDED RENTAL CHARGES OF RS. 5,80,78 ,138/-. THE DETAILS OF WHICH HAVE BEEN INCORPORATED ABOVE. DURING THE COU RSE OF SURVEY A LOOSE DOCUMENT WAS FOUND IN THE OFFICE OF SITE MANAG ER SHOWING AN AMOUNT OF RS. 16,78,340/- RECORDED SALE OF SCRAP WITH OUT GIVING THE DETAILS OF ITEM SOLD ETC. BASED ON THIS MATERIAL ASSESSE E HAS OFFERED SUM OF RS. 20 LACS ON ACCOUNT OF SCRAP SALE BEFORE T HE SETTLEMENT COMMISSION BUT ITS APPLICATION BEFORE SETTLEMENT COMMI SSION STOOD 53 UN-ADMITTED. ONE OF THE KEY CONTENTIONS RAISED BY THE ASS ESSEE IS THAT MOST OF THE MATERIAL WAS PART OF STOCK APPEARING IN THE BOOKS OF ACCOUNT AND SCRAP GENERATING IN THE NORMAL COURSE OF B USINESS HAS BEEN SOLD IN THE RESPECTIVE YEARS AND INCOME HAVE BE EN SHOWN IN THE BOOKS OF ACCOUNTS. BEFORE US LD. COUNSEL HAS GIVEN TH E ENTIRE DETAILS OF DESCRIPTION OF RENTAL CHARGES AND UTILISATION OF MATE RIAL AND SUBSEQUENT TREATMENT WHICH HAS BEEN INCORPORATED ABOVE, WHICH GOES TO POINT OUT THAT THESE PROJECTS WERE EITHER PART OF THE STO CK OR WERE TAKEN ON RENT FROM OUTSIDE PARTIES WHICH WAS RETURNED B ACK AND WE ACCEPT THE CONTENTION OF THE LD. COUNSEL THAT THE RENTING OF VARIOUS EQUIPMENTS / MATERIAL CANNOT BE HELD TO BE HAVING A SC RAP VALUE WHICH HAS BEEN SOLD BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS, BECAUSE THEY HAVE BEEN RETURNED BACK. 40. THE ASSESSEE HAS GIVEN BEFORE US THE DETAILED CHART DESCRIBING THE MATERIALS PROVIDED TO M/S. G.L. LITMUS EVENTS PVT. LTD. AND ITS ULTIMATE UTILISATION OF GOODS AND SERVICES, THE SUMMA RY OF WHICH HAS ALREADY BEEN INCORPORATED ABOVE. FROM THE SAID SUMMAR Y, IT CAN BE SEEN THAT; FIRSTLY, SOME OF THEM WERE PART OF STOCK OF ASSESSEE WHICH ARE REFLECTED IN THE BOOKS OF ACCOUNT AS STOCK AS ON 3 1 ST MARCH, 2011; SECONDLY, SOME OF THE EQUIPMENTS TAKEN ON RENT FROM OUTSIDE PARTIE S HAVE BEEN RETURNED; THIRDLY, THE LABOUR CHARGES FOR INSTALLATION AND DISMANTLING CANNOT BE SAID TO HAVE ANY SCRAP VALUE; A ND LASTLY, SOME OF THE SCRAP HAS BEEN STATED TO BE SOLD IN THE NEXT YEA R WHICH HAS BEEN TAKEN AS INCOME OF THE ASSESSEE. UNDER THESE FACTS , WE FIND IT VERY DIFFICULT TO APPRECIATE THE STAND TAKEN BY THE AO A ND LD. CIT (A) TO ESTIMATE ON ADHOC BASIS, THE SALE OF SCRAP MATERIAL OUTSIDE THE BOOKS OF ACCOUNT EITHER BY APPLYING 50 % OR 20%. MORE SO, WHEN ALL THE INVOICES AND DETAILS OF SERVICES PROVIDED AND PUR CHASES WERE DULY SUPPORTED BY INVOICE AND RECORDED IN THE BOOKS OF ACC OUNTS; AND 54 NEITHER THE BOOKS NOR THE TRADING RESULTS INCLUDING VA LUATION OF SCRAP MADE HAS BEEN DISTURBED. NONE OF THE AUTHORITIES HAVE E XAMINED THIS ISSUE IN A PROPER PERSPECTIVE. THEREFORE, IN THE INTER EST OF JUSTICE WE FEEL THAT THIS ISSUE NEEDS TO BE REMANDED BACK TO THE FIL E OF THE AO, WHO SHALL SEE; FIRSTLY , WHETHER THE STOCKS WHICH ARE REFLECTED IN THE BOOKS OF ACCOUNT ARE PART OF STOCK AS ON 31 ST MARCH, 2011 OR NOT AND IF SO, THEN NO ADDITION SHOULD BE MADE; SECONDLY , IF THE STOCK TAKEN ON RENT HAS BEEN RETURNED BACK THEN ALSO NO ADDITION ON A CCOUNT OF ALLEGED SALE OF SCRAP SHOULD BE ESTIMATED; AND LASTLY , THE AO SHALL EXAMINE WHETHER ANY PART OF THE SCRAP WHICH HAS BEEN SOLD IN THE SUBSEQUENT YEAR HAS BEEN ACCOUNTED FOR OR NOT. WITH THI S DIRECTION THIS MATTER IS REMANDED BACK TO THE AO, WHO SHALL GIVE P ROPER OPPORTUNITY OF HEARING TO THE ASSESSEE TO SUBSTANTIATE I TS CONTENTION ALONGWITH THE DOCUMENTARY EVIDENCES. IN THE RESULT GROU NDS RAISED BY THE ASSESSEE AS WELL AS BY THE REVENUE ON THIS SCORE A RE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 41. LASTLY, IN THE ASSESSEES APPEAL THE OTHER GRO UND WHICH HAS BEEN RAISED RELATES TO ADDITION OF RS. 11,84,424/-. THE FACTS QUA THE ISSUE ARE THAT THE ASSESSEE WAS AWARDED CONTRACT WITH DD A TO PROVIDED INSTALLATION OF SIGNAGE AT DIFFERENT SITES F OR COMMON WEALTH GAMES. IN ITS BOOKS OF ACCOUNTS FOR THE IMPUGNED ASSES SMENT YEAR, (I.E., A. Y. 2011-12) THE ASSESSEE COMPANY HAS BOOKE D AN AMOUNT OF RS. 78,39,230/- AS REVENUE FROM DDA, WHEREAS THE AO ON THE INFORMATION OBTAINED FROM DDA FOUND THAT BILL WISE PAY MENT TO THE ASSESSEE WERE TO THE TUNE OF RS. 90,23,654/-. WHEN CO NFRONTED ON THIS ISSUE, THE ASSESSEE EXPLAINED THAT DDA HAS RAISED CERT AIN OBJECTIONS AND IT WAS NOT KNOWN AS TO WHEN SUCH BILLS WILL BE CLE ARED AND WHAT WOULD BE THE FINAL QUANTUM OF SUCH BILLS, TILL THE CLO SE OF THE RELEVANT FINANCIAL YEAR 31 ST MARCH, 2011. HENCE, THE AMOUNT PENDING OBJECTION 55 RAISED ON CERTAIN BILLS BY DDA, ASSESSEE HAD NOT REC OGNISED AS REVENUE. FURTHER, THE ASSESSEE HAS FULLY ACCOUNTED FOR THE BALANCE PAYMENT IN ITS BOOKS AND FINANCIAL STATEMENT FOR THE FINA NCIAL YEAR 2011-12 AND HAS SHOWN IT AS INCOME FOR THE ASSESSMENT YEAR 2012-13 POST SETTLEMENT WITH THE DDA. THIS FACT WAS ALSO INFORM ED TO THE AO. THE LEDGER OF THE DDA IN THE BOOKS OF THE ASSESSEE WAS SHOWING BALANCE OF RS. 11,84,424/- WHICH HAS BEEN OFFERED A S INCOME OF THE ASSESSEE IN THE SUBSEQUENT YEAR. HOWEVER BOTH AO AND L D. CIT (A) HELD THAT ASSESSEE SHOULD HAVE SHOWN IT AS THE INCOME I N THIS YEAR ITSELF. ACCORDINGLY, THE SAID DIFFERENTIAL AMOUNT HAS B EEN ADDED IN THIS YEAR. 42. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RELEVANT FINDING AND THE MATERIAL REFERRED TO BEFORE US, WE F IND THAT THE ONLY REASON FOR ADDING THE INCOME OF RS. 11,84,424/- BY TH E REVENUE WAS THAT DDA HAS INFORMED AO THAT PAYMENTS HAVE BEEN MADE TO THE ASSESSEE AT RS. 90,23,654/-, WHEREAS THE ASSESSEE HAS ONLY ACCOUNTED FOR RS. 78,39,230/-. THE ASSESSEES CONTENTION HAS BE EN THAT THERE WERE CERTAIN OBJECTIONS RAISED BY THE DDA AND THE FINAL QUANTUM OF THE BILL AMOUNT THAT WOULD BE PASSED WAS NOT CERTAIN TILL THE CLOSING OF THE FINANCIAL YEAR 31 ST MARCH, 2011. ACCORDINGLY, THE ASSESSEE HAS SHOWN THE BALANCE RECEIPT OF RS. 11,84,424/- AS RECEI VABLE. ONCE THE AMOUNT WAS RECEIVED, THE ASSESSEE HAS DISCLOSED IT AS ITS INCOME IN THE NEXT FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2 012-13, WHICH FACT HAS NEITHER BEEN DISPUTED BY THE AO NOR BY C IT (A). ONCE THE AMOUNT HAS BEEN OFFERED TO TAX IN THE SUBSEQUENT YEAR , WE DO NOT FIND ANY REASON TO AGAIN TAX THE SAME AMOUNT IN THIS YEAR. ACCORDINGLY, WE HOLD THAT THE ADDITION MADE ON ACCOUN T OF DECLARATION OF INCOME FROM DDA AMOUNTING TO RS. 11,84,424/- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE CANNOT BE ADDED AS INCOM E OF THE 56 ASSESSEE AS THE SAME HAS ALREADY BEEN OFFERED TO TAX IN THE SUBSEQUENT YEAR. THUS, GROUND NO. 2 AS RAISED BY THE ASSESSEE IS ALLOWED. 43. IN THE RESULT APPEALS FILED BY THE REVENUE ARE DI SMISSED AND APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2018. SD/- SD/- (L.P. SAHU) (AMI T SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31/07/2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI