M/s. Kent Malleables Pvt. Ltd., Jalandhar V. Income Tax Officer, Jalandhar

ITA 499/ASR/2010

• Counselvise Citation: 49920914 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-08-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 28-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Keywords: Rejection of books of accounts; Unexplained investment; Income from undisclosed sources; Document seized; Principle of natural justice; Documents seized
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NOS.498 & 499 (ASR)/2010 ASSESSMENT YEARS:2006-07 & 2007-08 PAN :AAACK6465E M/S. KENT MALLEABLES PVT. LTD. VS. THE INCOME TAX O FFICER, JALANDHAR. WARD-II(1), JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. SUDHIR SEHGAL, ADV. RESPONDENT BY:SH. R.L. CHHANALIA, DR DATE OF HEARING:21/08/2012 DATE OF PRONOUNCEMENT: ORDER PER BENCH ; THESE TWO APPEALS OF THE ASSESSEE ARISE FROM TWO D IFFERENT ORDERS OF CIT(A), JALANDHAR, EACH DATED 08.11.2010 RELATING TO ASSESSMENT YEARS 2006-07 & 2007-08 RESPECTIVELY. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL IN ITA NO.498(ASR)/2010: 1. THAT THE ORDER PASSED BY WORTHY CIT(A) IS AGAIN ST LAW & FACTS OF THE CASE. ITA NOS. 498 & 499(ASR)/2010 2 2. A) THAT THE WORTHY CIT(A) HAS WRONGLY CONFIRMED THE ORDER OF ITO REGARDING DIARIES SEIZED DURING SURVEY CONDU CTED U/S 133A ON THE BUSINESS PREMISES OF THE ASSESSEES COMPANY, AS RELATING TO PRODUCTION WORK OF THE ASSE SSEES COMPANY, WHILE THESE DIARIES RELATED TO CONSTRUCTIO N WORK OF SISTER CONCERN OF ASSESSEES COMPANY I.E. M/S/ K HANNA MALCAST. B) THAT THE WORTHY CIT(A) HAS NOT PROPERLY CONS IDERED THE FACT THAT TRADE MARK KMK OF KHANNA MALCAST WAS MENTIONED ON THE VARIOUS PAGES OF SEIZED DOCUMENTS AND THERE WERE THREE FURNACES IN THE ASSESSEES COMPANY AND THERE WERE FOUR FURNACES IN KHANNA MALCAST, WHILE S EIZED DOCUMENTS RELATE TO FOUR FURNACES. C) THAT THE FACTS OF THE STATEMENTS OF WORKERS O F ASSESSEES COMPANY RECORDED BY A.O. DURING ASSESSMENT PROCEEDINGS ARE ABSOLUTELY DIFFERENT FROM THE CONCL USION DRAWN BY THE AO. THE WORTHY CIT(A) HAS HIMSELF DRAW N ALTOGETHER DIFFERENT CONCLUSION FROM THAT OF A.O. A GAINST ACTUAL FACTS OF THE CASE. 3. THAT THE LD. AO HAD HELD THAT THE WAGES HAVE BEE N PAID TO WORKERS OF ASSESSEES COMPANY FOR CASTING OF RAW MATERIAL BUT HAD WRONGLY MADE ADDITION ON THE BASIS OF SALE OF FINISHED PRODUCTS, WITHOUT ESTABLISHING HOW ALLEGED CASTING WAS CONVERTED INTO FINISHED PRODU CTS AND THIS FACT HAS NOT BEEN PROPERLY CONSIDERED BY WORTH Y CIT(A). 4. THAT THE IMPUGNED ORDER PASSED BY LD. CIT(A) AND THE AO IS CONTRARY TO THE PROVISIONS OF LAW AND AGAINST ALL CANNONS OF NATURAL JUSTICE AND IS ALSO CONTRARY TO THE FACTS, MATERIAL AND EVIDENCE EXISTING ON RECORDS, A S DATA OF THOSE FIRMS, WITH WHICH THE COMPARISON OF EXPEN SES OF THE ASSESSEE WAS MADE, WAS NOT FURNISHED TO THE ASSESSEE, INSPITE OF REPEATED REQUESTS. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS GROSSLY ERRED IN HOLDING THAT BOOKS OF ITA NOS. 498 & 499(ASR)/2010 3 ACCOUNTS HAVE RIGHTLY BEEN REJECTED BY THE LD. AO. CONCLUSION DRAWN BY THE LD. CIT(A) IS ILLEGAL AND B AD IN LAW. THE WORTHY CIT(A) HAS WRONGLY CONCLUDED IN ITS APPELLATE ORDER THAT STOCK AS PER PHYSICAL VERIFICA TION DURING SURVEY DIFFERS FROM BOOK RESULTS, WHILE NO DISCREPANCY WAS FOUND DURING SURVEY REGARDING STOC K, PURCHASES, SALES, DEBTORS, CREDITORS, CASH IN HAND, FIXED ASSETS ETC. 6. THAT THE TOTAL PRODUCTION WORKED OUT BY A.O. AND CONFIRMED BY CIT(A) IS BEYOND THE WORKING CAPACITY OF THE UNIT AND THERE ARE MANY ERRORS IN THE WORKING O F A.O. AND HAVE NOT BEEN PROPERLY CONSIDERED BY WORTHY CIT(A). 7. THAT THE ORDER PASSED BY CIT(A) IS AGAINST THE L AW LAID DOWN BY JURISDICTIONAL ITAT, AMRITSAR BENCH, AMRITS AR, IN THE CASE OF M/S. ATAM VALVES P) LTD. ( ITA NO.272/07-08/CIT(A), JAL. DATED 30.06.2008. CIT(A) HAS WRONGLY MENTIONED IN ITS APPELLATE ORDER THAT D AILY PRODUCTION HAS BEEN RECORDED IN THE SEIZED DOCUMENT S, AGAINST ACTUAL FACTS OF THE CASE. 8. THAT THE LD. CIT(A) HAS WRONGLY NOT ADMITTED ADD ITIONAL EVIDENCE FILED DURING APPELLATE PROCEEDINGS. 9. THAT THE CIT(A) HAS WRONGLY UPHELD THE ADDITION OF RS.57,34,084/- OUT OF RS.94,79,109/-, ON ACCOUNT OF PROFIT EARNED ON ALLEGED UNACCOUNTED SALES AND ALLEGED INVESTMENT FOR SUCH SALES WHILE NO SUCH SALES WERE DELETED EITHER DURING SURVEY ON THE PREMISES OF THE COMPANY OR DURING ASSESSMENT PROCEEDINGS. HE HAS WRONGLY RESTRICTED OVERHEAD EXPENSES OF 30% OF GROS S PROFIT REGARDING ALLEGED UNACCOUNTED SALES AGAINST 10% ALLOWED BY THE A.O. ACTUAL ACTUAL OVERHEAD EXPENSES ARE VERY HIGH IN RESPECT OF ACCOUNTED SALES. 10. THAT THE WORTHY CIT(A) HAS WRONGLY UPHELD THE O RDER OF ITO REGARDING INVESTMENT OF CAPITAL FOR ALLEGED UNACCOUNTED SALES. ITA NOS. 498 & 499(ASR)/2010 4 11. THAT THE ASSESSEE REQUESTS TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE SAME IS HEARD OR DISPOSED OF. 3. IN ITA NO.499(ASR)/2010, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER PASSED BY WORTHY CIT(A) IS AGAIN ST LAW & FACTS OF THE CASE. 2. A) THAT THE WORTHY CIT(A) HAS WRONGLY CONFIRMED THE ORDER OF ITO REGARDING DIARIES SEIZED DURING SURVEY CONDU CTED U/S 133A ON THE BUSINESS PREMISES OF THE ASSESSEES COMPANY, AS RELATING TO PRODUCTION WORK OF THE ASSE SSEES COMPANY, WHILE THESE DIARIES RELATED TO CONSTRUCTIO N WORK OF SISTER CONCERN OF ASSESSEES COMPANY I.E. M/S/ K HANNA MALCAST. B) THAT THE WORTHY CIT(A) HAS NOT PROPERLY CONS IDERED THE FACT THAT TRADE MARK KMK OF KHANNA MALCAST WAS MENTIONED ON THE VARIOUS PAGES OF SEIZED DOCUMENTS AND THERE WERE THREE FURNACES IN THE ASSESSEES COMPANY AND THERE WERE FOUR FURNACES IN KHANNA MALCAST, WHILE S EIZED DOCUMENTS RELATE TO FOUR FURNACES. C) THAT THE FACTS OF THE STATEMENTS OF WORKERS O F ASSESSEES COMPANY RECORDED BY A.O. DURING ASSESSMENT PROCEEDINGS ARE ABSOLUTELY DIFFERENT FROM THE CONCL USION DRAWN BY THE AO. THE WORTHY CIT(A) HAS HIMSELF DRAW N ALTOGETHER DIFFERENT CONCLUSION FROM THAT OF A.O. A GAINST ACTUAL FACTS OF THE CASE. 3. THAT THE LD. AO HAD HELD THAT THE WAGES HAVE BEE N PAID TO WORKERS OF ASSESSEES COMPANY FOR CASTING OF RAW MATERIAL BUT HAD WRONGLY MADE ADDITION ON THE BASIS OF SALE OF FINISHED PRODUCTS, WITHOUT ESTABLISHING HOW ALLEGED CASTING WAS CONVERTED INTO FINISHED PRODU CTS AND THIS FACT HAS NOT BEEN PROPERLY CONSIDERED BY WORTH Y CIT(A). ITA NOS. 498 & 499(ASR)/2010 5 4. THAT THE IMPUGNED ORDER PASSED BY LD. CIT(A) AND THE AO IS CONTRARY TO THE PROVISIONS OF LAW AND AGAINST ALL CANNONS OF NATURAL JUSTICE AND IS ALSO CONTRARY TO THE FACTS, MATERIAL AND EVIDENCE EXISTING ON RECORDS, A S DATA OF THOSE FIRMS, WITH WHICH THE COMPARISON OF EXPEN SES OF THE ASSESSEE WAS MADE, WAS NOT FURNISHED TO THE ASSESSEE, INSPITE OF REPEATED REQUESTS. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS GROSSLY ERRED IN HOLDING THAT BOOKS OF ACCOUNTS HAVE RIGHTLY BEEN REJECTED BY THE LD. AO. CONCLUSION DRAWN BY THE LD. CIT(A) IS ILLEGAL AND B AD IN LAW. THE WORTHY CIT(A) HAS WRONGLY CONCLUDED IN ITS APPELLATE ORDER THAT STOCK AS PER PHYSICAL VERIFICA TION DURING SURVEY DIFFERS FROM BOOK RESULTS, WHILE NO DISCREPANCY WAS FOUND DURING SURVEY REGARDING STOC K, PURCHASES, SALES, DEBTORS, CREDITORS, CASH IN HAND, FIXED ASSETS ETC. 6. THAT THE TOTAL PRODUCTION WORKED OUT BY A.O. AND CONFIRMED BY CIT(A) IS BEYOND THE WORKING CAPACITY OF THE UNIT AND THERE ARE MANY ERRORS IN THE WORKING O F A.O. AND HAVE NOT BEEN PROPERLY CONSIDERED BY WORTHY CIT(A). 7. THAT THE ORDER PASSED BY CIT(A) IS AGAINST THE L AW LAID DOWN BY JURISDICTIONAL ITAT, AMRITSAR BENCH, AMRITS AR, IN THE CASE OF M/S. ATAM VALVES P) LTD. ( ITA NO.272/07-08/CIT(A), JAL. DATED 30.06.2008. CIT(A) HAS WRONGLY MENTIONED IN ITS APPELLATE ORDER THAT D AILY PRODUCTION HAS BEEN RECORDED IN THE SEIZED DOCUMENT S, AGAINST ACTUAL FACTS OF THE CASE. 8. THAT THE LD. CIT(A) HAS WRONGLY NOT ADMITTED ADD ITIONAL EVIDENCE FILED DURING APPELLATE PROCEEDINGS. 9. THAT THE CIT(A) HAS WRONGLY UPHELD THE ADDITION OF RS.15,99,343/- OUT OF RS.29,15,463/-, ON ACCOUNT OF PROFIT EARNED ON ALLEGED UNACCOUNTED SALES WHILE NO SUCH SALES WERE DELETED EITHER DURING SURVEY ON THE PREMISES O F THE ITA NOS. 498 & 499(ASR)/2010 6 COMPANY OR DURING ASSESSMENT PROCEEDINGS. HE HAS WRONGLY RESTRICTED OVERHEAD EXPENSES OF 30% OF GROS S PROFIT REGARDING ALLEGED UNACCOUNTED SALES AGAINST 10% ALLOWED BY THE A.O. ACTUAL ACTUAL OVERHEAD EXPENSES ARE VERY HIGH IN RESPECT OF ACCOUNTED SALES. 10. THAT THE ASSESSEE REQUESTS TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE SAME IS HEARD OR DISPOSED OF. 4. FIRST OF ALL, WE TAKE UP APPEAL OF THE ASSESSEE IN ITA NO.498(ASR)/2010 FOR THE A.Y. 2007-08. THE BRIEF FA CTS IN THE APPEAL OF THE ASSESSEE AS APPEARING IN THE AOS ORDER AT PAGES 2 TO 5 ARE REPRODUCED FOR THE SAKE OF CLARITY AS UNDER: 3. DURING THE ASSESSMENT PROCEEDINGS, A LETTER DAT ED 21.11.2008 OF PROPOSED REJECTION OF BOOKS OF ACCOUNTS U/S. 145 (3) ON ACCOUNT OF PRODUCTION OUTSIDE BOOKS OF ACCOUNTS, ETC. AND PROP OSED ADDITION OF RS. 94,79,109/- WAS ISSUED TO THE ASSESSEE, WHICH R EADS AS UNDER :- DURING SURVEY US. 133A OF THE IT ACT, 1961 CONDUC TED AT YOUR BUSINESS PREMISES ON 27.09.2006, CERTAIN DIARIES WE RE IMPOUNDED PERUSAL OF WHICH REVEALED THAT THE ASESSEE COMPANY HAD BEEN MAKING THE PAYMENT OF WAGES OUTSIDE THE BOOKS OF ACCOUNTS AND WHEN THE ASSESSEE COMPANY WAS CONFRONTED WITH THE CONTENTS O F THESE DIARIES VIE THIS OFFICE LETTER DATED 06.09.2007 AND ELSEWHE RE, REPLY WAS FILED ON THE ISSUE VIDE LETTER DATED 19.09.2007. AS PER R ECORDS FOR THE ASSTT. YEAR 2005-06. AS THE TOTAL COMMUNICATIONS ON THIS SUBJECT HAVE RELEVANCE WITH COMPLETION OF ASSESSMENT FOR THE YEA R UNDER CONSIDERATION, HENCE THESE MAY BE TREATED TO FROM P ART HERE AS FORMING ANNEXURE HERETO, REPETITION SAVED. 2. PERUSAL OF THE ENTRIES CONTAINED IN THE DIARY M ARKED AS ANNUXURE-I ( SR. NO.2) REVEALED THAT IT CONTAINED THE DESCRIPT ION OF LABOUR HAVING BEEN PAID TO THE LABOURERS ( CONTRACTORS) NAMELY S/ SH. NARINDER KUMAR, HARI LAL, RAJ BALI, MOHINDER, SHEETAL, UDAY BHAN, VINOD KUMAR, SHIV KUMAR, ETC. THE DIARY MAINTAINED IS FO R THE PERIOD FROM 01.04.2004 ONWARDS. THE FOLLOWING PAYMENTS, INTERAL IA, WERE MADE IN THE DIARY AS RELATE TO THE YEAR UNDER CONSIDERATION : ITA NOS. 498 & 499(ASR)/2010 7 F.YEAR PAYMENT MADE WORK DONE IN ACCOUNT 2005-06 8,53,070/- 8,88,369/- IN THE STATEMENT OF SH. S.K. KHANNA. ,MD RECORDED D URING THE ASSESSMENT PROCEEDINGS FOR THE ASSTT. YEAR 2005-06, IN REPLY TO EACH OF THE QUESTIONS PUT IT WAS EXPLAINED THAT THESE EN TRIES WERE RELATED WITH THE CONSTRUCTION WORK CARRIED OUT AT M/S. KHAN NA MALCAST, A SISTER CONCERN, OUT OF PERSONAL WITHDRAWALS OF SH. S.K. KHANNA, AND MRS. ANITA KHANNA AS STATED IN THE LETER NO.KM/ACIT DATED 10.10.2006. 3. IT IS, THEREFORE, PROPOSED TO MAKE THE FOLLOWIN G ADDITION IN YOUR CASE ON THIS ISSUE OF PRODUCTION OUTSIDE BOOKS OF A CCOUNTS: PERSUAL OF THE ENTRIES CONTAINED IN THE ABOVE DIARI ES REVEAL THAT THE LABOUR WAS PAID BY THE ASSESSEE COMPANY @ RS. 1.60 P FOR MANUFACTURING PURPOSE DURING THE YEAR UNDER ASSESSM ENT AND THE LABOUR PAID AMOUNTS TO RS. 8,88,369/-. IT SUGGESTS THAT GOODS WORTH 5,55,230/- KILOGRAMS WERE MANUFACTURED DURING THE F INANCIAL YEAR 2005-06 UNDER ASSESSMENT AND THIS PRODUCTION OF 5,5 5,230/- KGS HAS NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF T HE ASSESSEE. THUS, ADOPTING THE AVERAGE COST OF MANUFACTURED GOODS AT RS. 60/- PER KG, THE COST OF GOODS MANUFACTURED COMES TO RS. 3,33,13 ,800/-. THUS APPLYING GP RATE OF 26.06/- ADDITION CALLED FOR ON ACCOUNT OF GROSS PROFIT NOT REFLECTED COMES TO RS. 86,81,576/-. HOW EVER, THE ASSESSEE IS ALLOWED DEDUCTION FOR OVERHEAD EXPENSES ON ACCOUNT OF CASH DISCOUNT, ESTABLISHMENT, LABOUR WELFARE, PACKING EXPENSES, PO STAGE ETC. @ 10/% OF THE GROSS PROFIT THAT COMES TO RS. 8,68,157/-. APART FROM THIS 5% OF THE SALES MADE OUTSIDE THE BOOKS OF ACCOUNT IS ALSO ADDED TO THIS TOTAL INCOME FOR CAPITAL INVESTMENT FOR THIS PURPOSE THAT COMES TO RS. 16,65,690/-. IN THIS WAY THERE WILL BE AN ADDITION OF RS. 94,79,109/- ON ACCOUNT OF PROFIT EARNED ON SALES OUTSIDE THE BO OKS OF ACCOUNT AND CAPITAL INVESTMENT. 4. IN RESPONSE TO THIS OFFICE LETTER DATED 21.11.2 008 AS ABOVE, THE ASSESSEE VIDE HIS LETTER DATED 05.12.2008 REPLIED A S UNDER: ITA NOS. 498 & 499(ASR)/2010 8 1. THAT YOUR GOODSELF ARE REQUESTED TO KINDLY CONSIDER OUR DETAILED SUBMISSIONS IN AY 05-06 AND I N OUR APPEAL BEFORE THE LD. CIT(A) FOR THAT YEAR. 2. WE AGAIN SUBMIT THAT OUR BOOKS OF ACCOUNTS DO NO T CARRY ANY MANIPULATIONS AND HAVE ALWAYS BEEN ACCEP TED BY ONE AND ALL THE DEPARTMENTS, INCLUDING THE INCOM E TAX DEPARTMENT, WITHOUT POINTING OUT OF ANY MISTKE, EXC EPT FOR A.Y. 2002-03 WHERE ADDITION MADE WAS DELETED BY THE CIT(A) AND NOT CONTESTED FURTHER BY THE DEPTT; HENC E QUESTION OF APPLICABILITY OF PROVISIONS OF SECTION 145 DOES NOT ARISE (REFERENCE ALSO INVITED TO VARIOUS JUDGME NTS ALREADY QUOTED). AS REGARDS OUR GP RATE, WE ARE AMO NGST BEST RESULT ACHIEVERS, OUR PAST RECORDS SPEAK VOLUM ES IN THIS RESPECT. WE MAY HOWEVER EXPLAIN THAT OUR BULK EXPORT ORDER OF THE VALUE OF RS.8,82,446/- MEANT FO R EXPORT TO M/S. ORIENTS IMPEX CO. LTD; CANADA (MANUFACTURED ACCORDING TO THEIR REQUIREMENTS/ SPECIFICATION) WAS CANCELLED AND GOODS HAD TO BE CA LLED BACK FROM LUDHIANA DRY PORT WHICH ALONG WITH OTHE R FACTORS LIKE INCREASE IN SALES BY 27.727%, REDUCED OUR GP RATE FROM 28.45% IN THE PRECEDING YEAR TO 26.06% IN THE YEAR UNDER CONSIDERATION. THUS, THERE COULD BE NO REASON AS TO WHY OUR RATIO CANNOT BE ACCEPTED BY TH E DEPARTMENT. 3. THAT AS ALREADY EXPLAINED IN THE STATEMENT RECORDED DURING ASSESSMENT PROCEEDINGS FOR THE A.Y. 2005-06, PENDING DECISION AS YET WITH THE LD. CIT(A ), IT IS AGAIN REITERATED HERE THAT THE CONTENTS OF DIARI ES IMPOUNDED DURING SURVEY AND IN QUESTION RELATE TO T HE CONSTRUCTION WORK OF A SISTER ACTIVITIES OF THE ASS ESSEE COMPANY. AS ALREADY STATED, THE CONSTRUCTION WORK W AS BEING CARRIED OUT BY WITHDRAWALS FROM THEIR S.B. ACCOUNTS BY SH. S.K. KHANNA & MRS. ANITA KHANNA, COPIES OF THESE SB ACCOUNTS HAVE ALREADY BEEN SUBM ITTED WITH THE COMMUNICATION DATED 10.10.2006. SO IT IS REQUESTED THAT THE FACTS MAY KINDLY BE APPRECIATED IN THE LIGHT OF THE FACTS ABOVE STATED AND NO ADVERSE INFE RENCE BE DRAWN. ITA NOS. 498 & 499(ASR)/2010 9 4. THAT IT WILL BE APPRECIATED THAT NO ADDITION ON ACCOUNT OF ALLEGED CAPITAL INVESTMENT, WORKED OUT A T RS.16,65,690/- IS CALLED FOR TO BE MADE IN THE YEAR UNDER ASSESSMENT AS AN ADDITION OF RS.14,80,409/- ALREADY STANDS MADE IN THE A.Y. 2005-06, OTHERWISE IT WOULD BE A DUPLICATION. MOREOVER, IT HAS BEEN HELD BY VARIOUS COURTS THAN NO ADDITION CAN BE MADE OF UNACCOUNTED INVESTM ENT UNTIL AO PROVES THAT UNACCOUNTED INVESTMENT WAS MAD E FOR MAKING UNACCOUNTED SALES. COPY OF ORDER FOLLOWS . 5. HOWEVER, WE WOULD LIKE TO INFORM YOU THAT WE HAV E ALREADY EXPLAINED THE GROUND REALITY OF BUSINESS AN D AS WELL AS PAYMENT MADE TO WORKERS IN OUR DETAILED SUBMISSIONS TO THE HONBLE CIT(A) WHICH MAY PLEASE BE CONSIDERED TO FORM PART HERE AS WELL. WE WOULD ONCE AGAIN ASSURE THAT NOTHING HAS BEEN PAID OUTSIDE BOO KS OF ACCOUNTS. 5. THE ASSESSEE HAS INVITED REFERENCE TO HIS SUBMIS SIONS MADE DURING THE ASSESSMENT PROCEEDINGS FOR THE A.Y. 2005-06 AND IN APPEAL BEFORE THE LD. CIT(A) FOR THAT ASSES SMENT YEAR, WHICH IS PENDING DECISION YET. THE SUBMISSIONS MADE BY THE ASSESSEE COMPANY IN THE ASSESSMENT PROCEEDINGS FOR THE A.Y. 2005-06 ALREADY STAND CONSIDERED AND REJECTED IN TH E ASSESSMENT ORDER FOR THE SAID ASSESSMENT YEAR, WHIC H FORMS PART HERE AS ANNEXURE-I, TO SAVE REPETITION. I RELY ON T HE FINDINGS OF MY PREDECESSOR. 5(A). THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE T HE LD.CIT(A) FOR THE A.Y. 2005-06 ARE VIRTUALLY THE SA ME AS MADE DURING THE ASSESSMENT PROCEEDINGS WHICH HAVE BEEN A DEQUATELY DEALT WITH IN THE ASSESSMENT ORDER FOR THE PRECEDIN G ASSESSMENT YEAR 2005-06, WHICH ALSO FORMS PART HERE AS ANNEXUR E-II, TO SAVE REPETITION. 6. THE CONTENTIONS OF THE ASSESSEE IN THE ABOVE REP LY ARE CONSIDERED UNSATISFACTORY FOR THE SIMILAR REASONS A S PER ASSESSMENT ORDER FOR THE A.Y. 2005-06. THEREFORE, I T IS HELD THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELI ABLE AS THESE DO NOT DEPICT CORRECT PICTURE OF THE AFFAIRS OF THE ASSESSEE COMPANY, WHICH ARE THEREFORE, HEREBY REJECTED U/S 1 45(3) OF THE ITA NOS. 498 & 499(ASR)/2010 10 I.T. ACT, 1961 AND AN ADDITION OF RS.94,79,109/- IS HEREBY MADE, AS PROPOSED. SATISFACTION IS ALSO EXPRESSED T HAT THE ASSESSEE S NOT RECORDING FULLY THE PURCHASES MADE A ND THE SALES MADE AS DISCUSSED ABOVE AND HAS FURNISHED INACCURAT E PARTICULARS OF ITS INCOME. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT, 1961 ARE BEING INITIATED SEPARATELY F OR THE DEFAULT OF FURNISHING INACCURATE PARTICULARS OF INCOME. 5. THE LD. CIT(A) AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE ALLOWED THE RELIEF OF RS.37,45,024/- BY SUSTAINING THE ADDITION OF RS.57,34,084/-. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DURING THE COURSE OF SURVEY CERTAIN DIARIES WERE FOUND AND SEIZED IN WH ICH CERTAIN PAYMENTS TO THE LABOURS HAVE BEEN RECORDED AND STATEMENT WAS G IVEN BY THE ASSESSEE. THESE PAYMENTS WERE RELATED TO THE CONSTRUCTION WOR K OF THE FACTORY OF THE SISTER CONCERN, M/S. KHANNA MALCAST. THE LD. COUNSE L FOR THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS BEFORE THE LD. CIT(A): I) IT WAS FOUND A MATTER OF FACT THAT DURING THAT PERIOD THE FACTORY OF THE SISTER CONCERN WAS UNDER CONSTRUCTION. II) THE VALUATION WAS MADE BY THE DEPARTMENT OF THE SAID FACTORY AND THERE WAS NO DIFFERENCE BETWEEN THE BOOK VERSIO N AND VALUE MADE BY THE VALUATION OFFICER OF THE DEPARTMENT. III) IN THE DIARIES, THE REFERENCE WAS THERE OF 4 FURNAC ES WITH M/S. KHANNA MALCAST AND, WHEREAS, THE ASSESSEE HAD THREE ANNEALING ITA NOS. 498 & 499(ASR)/2010 11 FURNACES ONLY. THIS HAS NOT BEEN REBUTTED BY THE DE PARTMENT OR BY THE CIT(A). IV) THE TRADE MARKET KMK WAS MENTIONED IN THE SEIZED DIARIES, WHICH WAS THE TRADE MARK OF M/S. KHANNA MALCAST AND THIS AGAIN PROVES BEYOND ANY DOUBT THAT IT WAS NOT RELAT ABLE TO THE APPELLANT. 6.1. THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATE D THAT THE LOWER AUTHORITIES HAVE HELD THAT THE DIARIES BELONG TO TH E ASSESSEE, BECAUSE AS PER NOTINGS IN THE DIARY, THERE ARE AT SOME PLACES, THE NOTING IN KGS, INCHES AND CERTAIN MENTIONING OF PIECES AND ALSO CERTAIN NOT INGS OF DEDUCTIONS AGAINST ADVANCES MADE TO PERSONS AND ON THE STRENGTH OF THE ABOVE SAID FIGURES, IT HAS BEEN HELD BY THE LOWER AUTHORITIES, THAT THESE DIARIES BELONG TO THE ASSESSEE AND THESE ARE TOTAL AMOUNT OF WAGES PAID I N THE YEAR UNDER CONSIDERATION WERE TO THE TUNE OF RS.8,88,369/- AS PER TOTALS MADE IN THE DIARY. THE AO BY APPLYING A PARTICULAR RATE PER KG IS 1.60 AND BY DIVIDING THE TOTAL AMOUNT OF WAGES PAID, ESTIMATED THE PRODU CTION IN KGS AND THEN BY APPLYING THE AVERAGE RATE OF SALE, ESTIMATED THE T OTAL SALES. ON THE SALES, THE GROSS PROFIT RATE AS PER BOOKS HAVE BEEN APPLIED AN D, THEN, AFTER GIVING SOME MARGIN OF OVER HEAD EXPENSES AND BY ADDING TEN PERC ENT AS INITIAL INVESTMENT, THE AO HAS MADE THE ADDITION OF RS.95,7 9,109/-. IT WAS FURTHER ITA NOS. 498 & 499(ASR)/2010 12 STATED THAT THE LD. CIT(A) HAS ADOPTED THE SAME FOR MULA FOR THE PURPOSES OF MAKING THE ADDITION, BUT HAS GIVEN A BENEFIT WITH R EGARD TO THE RATE OF PRODUCTION PER KG AND APPLIED A RATE OF 1.75 PER KG AND THE BENEFIT OF SOME MORE EXTRA OVER HEAD EXPENSES AND OF INITIAL INVES TMENT AND HAD REDUCED THE ADDITION TO THE TUNE OF RS.57,34,084/- AND AGAINST THIS ADDITION, THE ASSESSEE IS IN APPEAL AND WHEREAS THE DEPARTMENT HAS NOT FIL ED ANY APPEAL AGAINST THE RELIEF GIVEN BY THE CIT(A). THIS FACT OF THE DEPART MENT NOT FILING THE APPEAL AGAINST THE PART RELIEF GIVEN BY THE CIT(A) GOES TO PROVE THAT THE MODE AND MANNER OF MAKING THE ADDITION BY THE AO WAS NOT COR RECT, BECAUSE HOW CAN AGAINST THE ALLEGED EVIDENCE OF RS.8,88,369/- OF AL LEGED WAGES, CAN THERE BE AN INCOME OF RS.94,79,109/- AS ESTIMATED BY THE A. O. WHICH HAS BEEN REDUCED TO RS.57,34,084/- AND PARTICULARLY, SUSTAI NING OF PART ADDITION WHICH IS AGAIN FAULTY BECAUSE OF THE FOLLOWING FACTS: I) NO EVIDENCE OF PURCHASES AND SALES OUTSIDE THE B OOKS OF ACCOUNTS AND ALL THE PURCHASES AND SALES ARE FULLY VOUCHED. II) ALL THE PAYMENT RECEIVED AGAINST SALES AND PURCHASE S ARE PAID BY ACCOUNT PAYEE CHEQUES. III) THE UNIT OF THE ASSESSEE IS AN EXCISABLE UNIT AND T HE ASSESSEE IS MAINTAINING STATUTORY RECORD AS PER GUIDELINES AND REQUIREMENT OF THE CENTRAL EXCISE AND NO DISCREPANCY NOTICED BY THE EXCISE AUTHORITY. IV) SIMILARLY, THE ASSESSEE IS PAYING VAT/CST AND NO DI SCREPANCY NOTICED BY THE DEPARTMENT. ITA NOS. 498 & 499(ASR)/2010 13 V) NO EVIDENCE OF INCURRING EXPENSES OUTSIDE THE BOOKS OF ACCOUNTS OR ANY OTHER ITEM WHICH WOULD LEAD TO THE CONCLUSION THAT THE ACTIVITY OF MANUFACTURING , PRODUCTION AND INCURRING OF EXPENSES, OUTSIDE THE BOOKS OF ACCOUNTS WAS BEING C ARRIED OUT. THOUGH, THE ALLEGED PRODUCTION AS ASSUMED BY THE LO WER AUTHORITIES CANNOT BE A THOUGHT OF REALM OF DREAM. VI) NO EVIDENCE OF OUTSIDE SUNDRY CREDITORS, DEBTORS, C ASH IN HAND, BANK ACCOUNTS, UNDISCLOSED BANK ACCOUNT OR INVESTME NT IN ANY MOVABLE/IMMOVABLE ASSETS HAVE BEEN FOUND. VII) THE CONTENTION OF LOWER AUTHORITIES THAT IN THE DIA RY, THE FIGURES IN KG. REPRESENT THE PRODUCTION HAVE BEEN MENTIONED IS NOT CORRECT IN TOTO, BECAUSE IT HAS BEEN MENTIONED AT V ERY FEW PLACES AND THAT MENTIONING OF KG AT SOME PLACES RELATES TO CONSTRUCTION MATERIAL AND NOT TO PRODUCTION. THEN A GAIN THE DIARY HAS TO BE READ AS WHOLE AND NOT PIECEMEAL, PA RTICULARLY THE FACT THAT THE NAME OF THE OTHER CONCERNS TRADE MARK KMG HAS BEEN MENTIONED AND ALSO THERE IS MENTION OF FOU R FURNACES AND THE APPELLANT HAS ONLY THREE. VIII) THE ASSESSEE HAS AN ELECTRIC CONNECTION AND WITHOUT ELECTRICITY, PRODUCTION CANNOT BE CARRIED OUT AND FOR THAT, THE ATTENTION IS INVITED TO PAGE 32 OF THE PAPER BOOK, WHICH GIVES T HAT THE PRODUCTION AS ESTIMATED BY THE AUTHORITIES BELOW, W HICH WOULD MEAN EXORBITANT CONSUMPTION OF ELECTRICITY AND WHI CH FACT HAS TOTALLY BEEN IGNORED BY THE CIT(A) AND EVEN, AS COM PARED WITH THE COMPARATIVE CASES WHICH WERE QUOTED BY THE AO, THE PERCENTAGE OF ELECTRICITY EXPENSES, AGAINST THE SAL ES AS CLAIMED BY THE APPELLANT ARE FAR LESS AND, THUS, THERE COUL D BE NO CASE OF UNACCOUNTED PRODUCTION. THE CIT(A) HAD ADMITTED THE FACT THAT THE RATIO OF ELECTRICITY CONSUMPTION OF APPELLANT W AS BETTER THAN THE SEVERAL OTHER CONCERNS IN PARA 10 OF HIS ORDER AT PAGE 31, BUT THEN HAS GIVEN A CONTRADICTORY FINDING IN PARA 10.2 THAT THERE IS NO REASON TO RELATE CONSUMPTION OF ELECTRICITY ALON E TO SCALE DOWN THE ESTIMATION OF PRODUCTION AND SALES. THIS F INDING OF THE CIT(A) IS ABSOLUTELY CONTRARY TO THE FACT THAT WITH OUT ELECTRICITY, NO WORTHWHILE PRODUCTION COULD BE CARRIED OUT AND, THUS, THE WHOLE BASIS OF ESTIMATION FALLS DOWN AND IT IS LIKE A HOUSE BUILT ON SANDY FOUNDATION, WHICH IS LIABLE TO BE CRASHED. ITA NOS. 498 & 499(ASR)/2010 14 IX) SIMILARLY, RELIANCE IS BEING MADE TO PAGE 31 O THE PAPER BOOK WHICH GIVES THE COMPARISON OF GROSS PROFIT RATE OF THE APPELLANT AND OTHERS AND OUR GROSS PROFIT IS MUCH HIGHER AS C OMPARED TO OTHER UNITS CARRYING ON THE SAME BUSINESS PROVES TH E BONAFIDE OF THE ASSESSEE. X) IT IS BEING SUBMITTED FOR THE SAKE OF ARGUMENT, IF SOME PAYMENT OF WAGES IS MADE OUTSIDE THE BOOKS OF ACCOUNTS AND FOR THAT THE PRODUCTION STANDS DISCLOSED IN THE REGULAR BOOKS OF ACCOUNTS AND THIS PRACTICE IS VERY COMMON, SINCE MOST OF THE WORKERS DO NOT WANT THE DEDUCTION OF PF, ESI AND, ON THAT FACT ALSO NO ADDITION CAN BE MADE OF THE PRODUCTION OUTSIDE THE BOOKS. 6.2. THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATE D THAT THE LD. CIT (A) HAS IGNORED THE JUDGMENT OF THE JURISDICTIONAL TRIB UNAL OF THE ITAT, AMRITSAR BENCH, AMRITSAR WHICH IS ON SIMILAR FACTS AND CIRCUMSTANCES, NAMELY IN THE CASE OF M/S. ATAM VALVES PVT. LTD, AN D, THROUGH, THE CIT (A) HAS DISCUSSED THIS CASE IN PARA 10.03 AT PAGE 32 & 33, BUT THEN IN PARA 10.3.1 HAS CONVENIENTLY STATED THAT IN THE CASE OF M/S. AT AM VALVES PVT. LTD, THE EVIDENCE OF ONLY PAYMENT OF UNACCOUNTED WAGES WAS F OUND IN THE DIARY AND WHEREAS IN THE DIARY AS PER CIT (A), THE PRODUCTIO N IN KG HAS ALSO BEEN MENTIONED AND WHICH FACT IS NOT CORRECT. IT WAS SUB MITTED THAT IN THE DIARY ONLY AT VERY FEW PAGES, THE PRODUCTION HAS BEEN MEN TIONED AND SINCE THE FACTS AND CIRCUMSTANCES ARE THE SAME, THE FINDING O F THE CIT (A) THAT ACTUAL PRODUCTION HAS BEEN RECORDED ON DAY TO DAY BASIS I N PARA 10.3.1 IS TOTALLY VAGUE AND AGAINST THE FACTS AND CIRCUMSTANCES OF TH E CASE SINCE DIARY HAS ITA NOS. 498 & 499(ASR)/2010 15 NOT BEEN WRITTEN BY THE DIRECTOR AND NOR THERE IS A NY RECORDING OF PRODUCTION ON DAY TO DAY BASIS AND FEW PAGES OF DIARY AS ATTAC HED BY THE CIT (A) PROVE THAT FACT. 6.3 THE FINDING OF THE HONBLE BENCH IN THE CASE OF M/S. ATAM VALVES ( SUPRA) IS THERE AT PAGE-8 AND 9 OF THE ORDER AND IT HAS BEEN CATEGORICALLY HELD AS UNDER : IN OUR OPINION, THE AO IS NOT JUSTIFIED IN ESTIMA TING THE SALES ON THE BASIS OF LOOSE SLIPS WITHOUT SUBSTANTIATING THAT TH E ASSESSEE HAS ACTUALLY MADE THE SALES TO THAT EXTENT OF ESTIMATIO N MADE BY THE AO AND HAVING NO IOTA OF EVIDENCE IN THE FORM OF SALE BILL OR BANK ACCOUNT OR MOVABLE AND IMMOVABLE PROPERTY WHICH REPRESENT E ARNING OF UNACCOUNTED INCOME BY THE ASSESSEE. AS SUCH, THE L D CIT (A) TO THAT EXTEND IS JUSTIFIED IN HOLDING THAT ESTIMATION OF SALES ON THE BASIS OF LOOSE SLIPS REPRESENTED PAYMENT OF WAGES IS NOT POSSIBLE 6.4. HOWEVER, AS REGARDS THE DIARY, THE SAME HAS TO BE READ IN TOTO WHERE THERE IS NAME OF OUT SISTER CONCERN, TRADE MARK OF THE SISTER CONCERN, THE NOTINGS PROVE THAT IT RELATES TO UNIT WHERE FOUR FU RNACES ARE THERE AND WHICH ARE NOT WITH THE SISTER CONCERN AND NOT WITH APPELL ANT AND ALL THE ABOVE THINGS PROVE POSITIVELY THAT IT IS PROVED BEYOND AN Y DOUBT THAT IT BELONGS TO SISTER CONCERN. IT IS ONLY DOUBT OR SUSPICION HOWS OEVER STRONG IT MAY BE CANNOT TAKE THE SHAPE OF EVIDENCE. RELIANCE WAS PL ACED ON THE FOLLOWING CASE LAWS: ITA NOS. 498 & 499(ASR)/2010 16 I. M/S. MONGA METALS PVT. LTD, VS. ACTI(2000) 67 TTJ 2 47 (ALLAHABAD). II. M/S. ELITE DEVELOPERS VS. DCIT(2000) 73 ITD 379 ( N AGPUR TRIBUNAL) III. DCIT VS. D.N. KAMANI ( HUF) (1999) 70 ITD 77 ( PATN A TRIBUNAL) IV. JCIT VS. GRAMOPHONE COMPANY OF INDIA LTD, (2004) 26 5 ITR (A.T) 46 ( KOLKATA TRIBUNAL) V. CIT VS. RAM NARAIN 224 ITR 180 (P & H) 6.5. THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THA T IN THE FINDING OF THE CIT (A) IN PARA 11.1, HE HAS ONLY ESTIMATED THE RATE OF PER KG OR PRODUCTION AND THEN CALCULATED THE PRODUCTION AND A PPLYING THE AVERAGE RATE PER KG. TO ARRIVE AT A SALE CONSIDERATION. THEN, A GAIN PRESUMING THAT SUCH PRODUCTION WOULD HAVE BEEN SOLD OUTSIDE THE BOOKS O F ACCOUNT AND AGAIN PRESUMING THAT CERTAIN OVER HEAD EXPENSES OF ESTABL ISHMENT, PACKING ETC. AND ABOVE ALL, ESTIMATING THE CAPITAL INVOLVED IN SUCH ACTIVITY IS FARFETCHED IMAGINATION IS LIABLE TO BE REJECTED AND FINDING CA NNOT BE SUSTAINED, SINCE THERE ARE NO EVIDENCE OF ALLEGED PURCHASES AND SALE S, CONSUMPTION OF ELECTRICITY, HIGHER G P RATE AS COMPARED TO OTHER C ASE HAND WITHOUT THERE BEING ANY EVIDENCE OF PURCHASES EVIDENCE OF MAKING SOME PAYMENT OF WAGES OUTSIDE THE BOOKS OF ACCOUNTS, CANNOT BE LEAD TO ESTIMATION OF INCOME AS HELD BY THE JURISDICTIONAL ITAT. PRODUCTION AND APPLYING THE AVERAGE RATE ITA NOS. 498 & 499(ASR)/2010 17 PER KG. TO ARRIVE AT A SALE CONSIDERATION. THEN, A GAIN PRESUMING THAT SUCH PRODUCTION WOULD HAVE BEEN SOLD OUTSIDE THE BOOKS O F ACCOUNT AND AGAIN PRESUMING THE CERTAIN OVER HEAD EXPENSES OF ESTABLI SHMENT PACKING ETC. AND ABOVE ALL, ESTIMATING THE CAPITAL INVOLVED IN SUCH ACTIVITY IS FARFETCHED IMAGINATION IS LIABLE TO BE REJECTED AND FINDING CA NNOT BE SUSTAINED, SINCE THERE ARE NOT EVIDENCE OF ALLEGED PURCHASES AND SAL ES, CONSUMPTION OF ELECTRICITY , HIGHER G.P. RATE AS COMPARED TO OTHER CASE AND WITHOUT THERE BEING ANY EVIDENCE PURCHASES, EVIDENCE OF MAKING SO ME PAYMENT OF WAGES OUTSIDE THE BOOKS OF ACCOUNTS, CANNOT BE LEAD TO ES TIMATION OF INCOME AS HELD BY THE JURISDICTIONAL ITAT. THEN AGAIN, FROM T HE DIARY, WE HAVE DEMONSTRATED THAT IT DOES NOT BELONG TO THE APPELLA NT AT ALL AND THE DISTINGUISHING FACTOR IS THAT IN THE PRESENT CASE, WE HAVE RENDERED A BONAFIDE EXPLANATION THAT DIARY DOES NOT BELONG TO THE APPEL LANT AND, THUS, NO ADDITION IS CALLED FOR. 7. THE LD. DR, SH. R.L. CHHANALIA, ON THE OTHER HAN D, RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSEE HAD SUBMITTED THE EXPLANATION VIDE LET TER DATED 05.12.2008 THAT THE LABOUR PAYMENTS RELATE TO THE CONSTRUCTION WORK OF SISTER CONCERN M/S. KHANNA MALCAST AND HAVE NOTHING TO DO WITH MANUFAC TURING ACTIVITIES OF ITA NOS. 498 & 499(ASR)/2010 18 THE ASSESSEE COMPANY. THIS EXPLANATION IS EVIDENT F ROM THE LETTER OF THE ASSESSEE DATED 5.12.2008, AVAILABLE IN THE ASSESSME NT ORDER REPRODUCED HEREINABOVE. THE ASSESSEE HAD SUBMITTED THE SAID EX PLANATION BEFORE THE LD. CIT(A), AS WELL AND HAD FURTHER SUBMITTED THAT SUCH LABOUR PAYMENTS HAD BEEN MADE OUT OF THE SOURCES OF MR. S.K. KHANNA & M RS. ANITA KHANNA AND THIS FACT IS EVIDENT FROM THE ORDER OF THE LD. CIT( A) IN PARA 8.2. IT WAS ALSO SUBMITTED THAT THE VALUATION HAD BEEN MADE BY THE DEPARTMENT OF THE SAID FACTORY OF THE SISTER CONCERN AND NOT DIFFERENCE IN THE BOOK VERSION AND THE VALUATION MADE BY THE DVO WAS FOUND IN THE DIARIES EVEN DURING THE COURSE OF SURVEY. THE REFERENCE WAS MADE OF FOUR FURNACES WITH M/S. KHANNA MALCAST AND WHEREAS THE ASSESSEE HAD THREE ANNEALIN G FURNACES ONLY. THIS FACT HAS ALSO NOT BEEN REBUTTED BY THE DEPARTMENT. THE TRADE MARK KMK WAS MENTIONED IN THE SEIZED DIARIES, WHICH WAS TRAD E MARK OF M/S. KHANNA MALCAST AND THIS ALSO GOES TO PROVE THE FACT THAT THE PAYMENTS ARE NOT RELATED TO THE PRESENT ASSESSEE. WE ARE CONVINCED W ITH THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE THE LD. CIT(A) AS WELL AS BEFORE US THAT THOUGH DIARIES BELONGED TO THE ASSESSEE BUT AS PER NOTING IN THE DIARY, THERE ARE AT SOME PLACES, THE NOTING IN KGS, INCH ES AND CERTAIN MENTIONING OF PIECES AND ALSO CERTAIN NOTINGS OF DEDUCTIONS AGAINST ADVANCES MADE TO CERTAIN PERSONS AND IT IS ONLY ON THIS FIGURE, THE AO AS WELL AS LD. CIT(A) ITA NOS. 498 & 499(ASR)/2010 19 HAD COME TO THE CONCLUSION THAT THESE DIARIES BELO NGED TO THE ASSESSEE. IT IS ALSO NOT DISPUTED THAT NONE OF THE AUTHORITIES BELO W HAVE POINTED OUT ANY MISTAKE IN ANY PURCHASES AND SALES OUTSIDE THE BOOK S OF ACCOUNT, WHICH ARE FULLY VOUCHED. NO DEFECT HAS BEEN POINTED OUT IN SU NDRY DEBTORS OR CREDITORS. THE ASSESSEE IS MAINTAINING STATUTORY RECORD WITH R EGARD TO CENTRAL EXCISE AND NO DISCREPANCY HAD BEEN NOTICED BY THE EXCISE D EPARTMENT AND THERE IS NOTHING ADVERSE BROUGHT OUT BY ANY OF THE AUTHORITI ES BELOW WITH REGARD TO THE CENTRAL EXCISE DUTY AS WELL AS VAT/CST. NO EVID ENCE WITH REGARD TO INCURRING OF ANY EXPENSES OUTSIDE THE BOOKS OF ACCO UNT HAD BEEN BROUGHT ON RECORD AND APPROACH OF THE AUTHORITIES BELOW IN SPI TE OF THE FACT MENTIONING OF KG AND OTHER THINGS MENTIONED HEREINABOVE TO W ORK OUT THE PRODUCTION AND SALES OUTSIDE THE BOOKS OF ACCOUNT IS TOTALLY P ERVERSE OF THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. THERE IS NO DISPUTE TO THE FACT AS ADMITTED BY THE LD. CIT(A) THAT THE ELECTRICITY EXPENSES ARE QU ITE COMPARABLE WITH OTHER COMPARABLE CASES. BUT AT THE SAME TIME, THE LD. CIT (A) HAD GIVEN CONTRADICTORY FINDING BY SAYING THERE IS NO REASON RELATING TO CONSUMPTION OF ELECTRICITY ALONE TO SCALE DOWN THE ESTIMATION O F PRODUCTION AND SALES. THE LD. CIT(A) GOES TO POINT OUT CERTAIN OTHER ERRORS WITHOUT ANY BASIS AND ONLY ON THE BASIS OF SURMISES AND CONJECTURES. BOTH THE AUTHORITIES BELOW HAVE IGNORED THE EXPLANATION GIVEN BY THE ASSESSEE THAT THE SAID LABOUR PAYMENTS ITA NOS. 498 & 499(ASR)/2010 20 BELONGED TO THE CONSTRUCTION WORK OF THE SISTER CON CERN M/S. KHANNA MALCAST, WHERE SUCH PAYMENTS HAVE ALREADY BEEN CONS IDERED DURING THE ASSESSMENT PROCEEDINGS IS A MATTER OF RECORD. MOREO VER, ON THE BASIS OF EXPENSES WHICH ARE THE ACTUAL EXPENDITURE OF THE SI STER CONCERN M/S. KHANNA MALCAST, NO ESTIMATE OF THE PRODUCTION OR SALE OUTS IDE THE BOOKS OF ACCOUNT CAN BE MADE IN THE PRESENT CASE IN THE ABSENCE OF A NY FINDING OR ANY EVIDENCE OF PURCHASES AND SALES OR PRODUCTION OUTSI DE THE BOOKS OF ACCOUNT. SUCH ESTIMATION BY THE AO AS WELL AS BY THE LD. CIT (A) IS BASED ON SURMISES AND CONJECTURES AND ADDITION WAS MADE BY T HE AO CANNOT BE SUSTAINED. THE AO IS DIRECTED TO DELETE THE ADDITI ON AND ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS REVERSED. THUS, ALL THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 9. NOW, WE TAKE UP APPEAL OF THE ASSESSEE IN ITA NO .499(ASR)/2010 FOR THE ASSESSMENT YEAR 2007-08. THE BRIEF FACTS OF THE CASE ARE IDENTICAL TO THE FACTS IN ASSESSEES APPEAL IN ITA NO.498(ASR)/2010 FOR THE ASSESSMENT YEAR 2006-07, EXCEPT LABOUR PAYMENTS FOUND IN THE DIARY WERE TO THE TUNE OF RS.3,03,792/- AND THE AO MADE THE ADDITION OF RS.29 ,15,463/- AND THE LD. CIT(A) HAD SUSTAINED THE ADDITION OF RS.15,99,342/- BY ALLOWING A RELIEF OF RS.13,16,120/-. ITA NOS. 498 & 499(ASR)/2010 21 9.1. SINCE THE FACTS IN THE PRESENT CASE ARE IDENTI CAL TO THE FACTS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 AND OUR DECISION IN ASSESSEES CASE FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO.498(ASR)/2010 IS APPLICABLE IN THE PRESENT CASE AND ACCORDINGLY, THE ADDITIONS MADE BY THE AO ARE DIRECTED TO BE DELETED AND THE ORDER OF THE LD. CIT(A) IS REVERSED. . THUS, ALL THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E IN ITA NOS. 498 & 499(ASR)/2010 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH AUGUST, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24 TH AUGUST, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. KENT MALLEABLES (P) LTD. JALANDHA R. 2. THE ITO WARD II(1), JALANDHAR. 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.