Shri Raghuvir Tulshiram Patodia, Malegaon V. JCIT, Range-3, Nashik

ITA 591/PUN/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9888 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 13-09-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 19-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA; MUKESH KUMAR
• Keywords: Business income; Wrong claim; Reason to believe; Reassessment proceedings
• Section: 148; 144

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 590/PN/2010 (ASSESSMENT YEAR 2004-05) SHRI VISHNUKUMAR MAHESH KUMAR PATODIA, PROPRIETOR OF SHRI RANISATI FABRICS, SHRIJI PRASAD BUILDING, NEAR SWAMI NARAYAN MANDIR, MALEGAON 423203 PAN NO. ABLPP 3031C .. APPELLANT VS. JOINT COMMISSIONER OF INCOME TAX, RANGE-3, NASHIK. .. RESPONDENT ITA NO. 591/PN/2010 (ASSESSMENT YEAR 2004-05) SHRI RAGHUVIR TULSHIRAM PATODIA, PROPRIETOR OF PATODIA TEXTILES, SHRIJI PRASAD BUILDING, NEAR SWAMI NARAYAN MANDIR, MALEGAON 423203 PAN NO. ABHPP 1298B .. APPELLANT VS. JOINT COMMISSIONER OF INCOME TAX, RANGE-3, NASHIK. .. RESPONDENT ITA NO. 592/PN/2010 (ASSESSMENT YEAR 2004-05) SHRI MAHESHKUMAR TULSHIRAM PATODIA, PROPRIETOR OF SHRI RAM TEXTILES, SHRIJI PRASAD BUILDING, NEAR SWAMI NARAYAN MANDIR, MALEGAON 423203 PAN NO. AAYPP 8988J .. APPELLANT VS. JOINT COMMISSIONER OF INCOME TAX, RANGE-3, NASHIK. .. RESPONDENT ASSESSEE BY : SRI SUNIL GANOO DEPARTMENT BY : SRI MUKESH KUMAR, CIT & MS. ANN KAPTHUAMA DATE OF HEARING : 13-09-2012 DATE OF PRONOUNCEMENT : 06-11-2012 ORDER PER R.K. PANDA, AM : THE ABOVE THREE APPEALS FILED BY THE RESPECTIVE ASS ESSEES ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 21-01-2010 OF THE CIT(A)- II, NASHIK RELATING TO ASSESSMENT YEAR 2004-05. SINCE COMMON GROUNDS HAVE BEEN TAKEN BY THE 2 RESPECTIVE ASSESSEES IN THE ABOVE APPEALS, THEREFOR E, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 592/PN/2010 (SHRI MAHESH KUMAR T. PATODIA) (A.Y. 2004-05): 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF TRADING IN COTTON/MAN MADE YARN AND GREY TEXTILE FA BRIC MADE THERE FROM. HE ALSO CLAIMED TO BE INVOLVED IN MANUFACTURING OF CLOTH. IT IS HOLDING CENTRAL EXCISE REGISTRATION FOR GETTING THE GREY COTTON AND GREY P OLYESTER FABRICS FALLING UNDER CHAPTER 52 AND 54 OF THE FIRST SCHEDULE TO THE CENT RAL EXCISE TARIFF ACT, 1955 PRODUCED OR MANUFACTURED FROM THE POWER LOOM OWNERS /WEAVERS ON JOB WORK BASIS BY AUTHORISING THEM FOR SUCH PURPOSE. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 04-11-2004 DECLARIN G TOTAL INCOME OF RS.8,55,344/-. THEREAFTER, THE ASSESSING OFFICER I SSUED NOTICED U/S.148 ON 16-05- 2007 WHICH WAS SERVED ON THE ASSESSEE ON 17-05-2007 AFTER RECORDING THE FOLLOWING REASONS : RECEIVED INFORMATION FROM R.E.I.C. MEETING HELD ON 27-04-2007, IN CONNECTION WITH THE TAX EVASION AND THE MODUS OPERANDI ADOPTED BY THE A SSESSEE TO EVADE EXCISE DUTY AND SALES TAX. HE HAS DIVERTED CREDIT AVAILED INPUTS (POLYESTER + COTTON YARN). THE RATE OF DUTY ON GREY FABRICS IS ON LOWER SIDE (8%) THAN THE INPUTS (16% & 24%). THE ASSESSEE HAS AVAILED CREDIT ON INPUTS AT THE RATE OF 16% AND 24% AND FURTHER SHOWN AS MANUFA CTURED THE GREY FABRIC OUT OF THE INPUT CLEARED AS SUCH ON PAYMENT OF THE CENTRAL EXCISE DU TY. IF MANUFACTURER SHOWS THAT THEY HAVE MANUFACTURED AND CLEARED THE GREY FABRICS, THEN THE Y ARE REQUIRED TO PAY SALES TAX AT LOWER RATE. FURTHER, THE ASSESSEE HAS ABUSED THE CENVAT CREDIT FACILITY AS MADE APPLICABLE TO TEXTILE PRODUCTS UNDER NOTIFICATION NO. 25/2003. AS PER TH E INFORMATION, THE ASSESSEE HAS MANUFACTURED GREY FABRICS AND SOLD THE SAME UNDER EXCISE INVOICE . TO LEGALIZE THE TRANSACTIONS HE HAS ALSO PREPARED SELF MADE VOUCHERS FOR PAYMENTS MADE TO TH E FICTITIOUS WEAVERS (JOB WORKERS). IN VIEW OF THE ABOVE INFORMATION, IT SEEMS THAT THE AMOUNT DEBITED TO YARN MANUFACTURING A/C. AT RS.75,19,591/- AND RS.2,81,91,945/- TO THE CLOTH MANUFACTURING ACCOUNT, UNDER THE HEAD JOB CHARGES ARE SEEMS TO BE FICTITIOUS AND REQUIRED TO BE VERIFIED AND DISALLOWED I HAVE THEREFORE REASON TO BELIEVE THAT THE INCOME TO THE TUNE OF RS .3,57,11,536/- HAS ESCAPED THE ASSESSMENT. ISSUE NOTICE U/S.148. 2.1 IN RESPONSE TO THE SAME THE ASSESSEE VIDE LETTE R DATED 11-06-2007 REQUESTED THE AO TO TREAT ORIGINAL RETURN FILED ON 04-11-2004 AS RETURN FILED IN RESPONSE TO NOTICE U/S.148 OF THE INCOME TAX ACT. SUBSEQUENTLY THE AO ISSUED NOTICE U/S.143(2) AND NOTICE U/S.142(4) WHICH WERE DULY SE RVED ON THE ASSESSEE. IN 3 RESPONSE TO THE SAID NOTICES, THE AUTHORISED REPRES ENTATIVE OF THE ASSESSEE APPEARED BEFORE THE AO FROM TIME TO TIME. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT SEARCH ACTION WAS CONDUCTED AT THE OFFICE PREMISES, WAREHO USE AND FACTORY OF THE ASSESSEE AND MALAGAON SPINNING MILLS LTD. BY THE OFFICE OF T HE DIRECTOR GENERAL, CENTRAL EXCISE INTELLIGENCE WITH THE ASSISTANCE OF LOCAL CE NTRAL EXCISE OFFICE ON 29-03- 2003 TO VERIFY THE ALLEGATION THAT ASSESSEE IS INDU LGING IN EVASION OF CENTRAL EXCISE DUTY BY DIVERSION OF INPUTS ON WHICH CENVAT CREDIT IS AVAILED BY THE ASSESSEE. IT WAS ALLEGED THAT THE INPUT (POLYESTER AND COTTON YARN) IS SOLD INTO THE OPEN MARKET IN THE GUISE OF GREY FABRICS BY CONTRAVENING THE PROVISIONS OF RULE 12(B) OF CENTRAL EXCISE RULES 2002 AS INSERTED W.E.F. 01-03- 2003 VIDE NOTIFICATION NO. 24/2003 AND CE(NT) AND BY ABUSING THE CENVAT CREDIT FACILITY AS MADE APPLICABLE TO TEXTILE PRODUCTS UNDER NOTIFICATION N O. 25/2003. THE AO FURTHER NOTED THAT POST SEARCH INVESTIGATIONS CONDUCTED BY CENTRAL EXCISE AUTHORITIES REVEALED THAT THE ASSESSEE HAD SHOWN TO HAVE REMOVE D THE INPUTS (COTTON/POLYESTER YARN) AFTER AVAILING CENVAT CREDIT, TO THE LOCAL PO WER LOOM OWNERS/WEAVERS FOR WEAVING GREY FABRICS AND FURTHER SHOWN AS RETURNED BACK TO THE ASSESSEE. THE ASSESSEE PREPARED COMPUTERISED CHALLANS FOR SHOWING SUCH REMOVAL. IT WAS FOUND DURING THE INVESTIGATION BY CENTRAL EXCISE DEPARTME NT THAT IN NO SINGLE CASE, THERE WAS ANY ACKNOWLEDGED RECEIPT OF YARN BY THE WEAVER AS WELL AS RETURN OF GREY FABRICS TO THE SAID FIRM, I.E. THE ASSESSEE. INVES TIGATIONS CONDUCTED AT MSEB END REVEALED THAT NONE OF THE WEAVERS TO WHOM THE YARN WAS SHOWN TO HAVE SENT WERE REGISTERED AS POWER CONSUMERS BY MSEB. THE ASSESSE E PREPARED FALSE AND MANIPULATED ACCOUNTS TO SHOW THAT OUT OF THE YARN, THEY HAVE MANUFACTURED GREY FABRICS AND SOLD THE SAME UNDER EXCISE INVOICES. T O LEGALISE THE TRANSACTIONS, SELF MADE VOUCHERS WERE PREPARED SHOWING PAYMENTS MADE T O THE FICTITIOUS WEAVERS 4 (JOB WORKERS). INPUT YARN (COTTON & POLYESTER) WER E NEVER USED IN THE MANUFACTURE OF FABRICS BUT WERE DIVERTED IN THE OPEN MARKET FOR SALE. 3.1 THE AO FURTHER NOTED THAT THE ADDITIONAL DIRECT OR GENERAL DGCEI ZONAL UNIT, BOMBAY HAD PASSED AN ORDER ON 14-02-2006 IN T HIS CASE WHEREIN DEMAND OF RS.205.63 LAKHS WAS RAISED. THE MATTER WAS FINALLY ADJUDICATED BY THE HONBLE SETTLEMENT COMMISSION, CUSTOMS AND CENTRAL EXCISE, MUMBAI. THE AO FURTHER NOTED THAT BEFORE THE HONBLE SETTLEMENT COMMISSION THE ASSESSEE HAD NEVER ARGUED THAT IT HAD ACTUALLY MANUFACTURED GREY FABRI C. THE AO THEREFORE CAME TO THE CONCLUSION THAT BY NOT ARGUING THAT IT HAD ACTU ALLY MANUFACTURED THE GREY FABRIC AND SIMPLY REQUESTING THE HONBLE SETTLEMENT COMMIS SION TO ALLOW HIM TO ADJUST THE PAYMENT OF DUTY AGAINST THE CENVAT CREDIT EARNE D ON THE INPUTS SHOW THAT THE ASSESSEE HAD INDIRECTLY AGREED THAT THE CONTENTIONS OF THE INVESTIGATION DONE IS CORRECT. HE THEREFORE WAS OF THE OPINION THAT THE JOB WORK CHARGES PAID BY THE ASSESSEE FOR WEAVING/MANUFACTURING OF GREY FABRIC B ECOMES DOUBTFUL. SINCE THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.3,57,11,536/- (I.E. RS.75,19,591/- UNDER YARN MANUFACTURING ACCOUNT AND RS. 2,81,91,945/- UNDER C LOTH MANUFACTURING ACCOUNT) ON ACCOUNT OF JOB WORK CHARGES PAID FOR MANUFACTURI NG OF CLOTH/YARN FABRIC, THE AO CALLED FOR THE COMPLETE DETAILS OF JOB WORK CHAR GES PAID BY THE ASSESSEE FOR HIS EXAMINATION. THE ASSESSEE, IN RESPONSE TO THE SAME , FURNISHED COMPLETE RECEIPT OF VOUCHERS FOR JOB WORK CHARGES PAID TO VARIOUS PERSO NS IN MALEGAON. THE AO HOWEVER WAS OF THE OPINION THAT IN VIEW OF THE FIND ING GIVEN BY THE EXCISE DEPARTMENT, EXISTENCE OF VOUCHERS IS NOT SUFFICIENT ENOUGH TO ESTABLISH THE GENUINENESS OF THE JOB WORK CHARGES. HE THEREFORE ISSUED NOTICE U/S.131 TO VARIOUS PARTIES. THE ASSESSEE WAS ALSO ASKED TO PRODUCE SR I EDIAMIN MUNAF, SHRI ARBAZ AMIR, SRI MAHZOOR AMIR, SHRI AMIR AYYUB, SHRI NADEE M ABBAS, SHRI NADEEM HARIS, SHRI SAMEER HABIB AND SHRI MUNAF SAMAD SINC E NOTICE U/S.131 COULD NOT BE SERVED ON THEM AS THEY WERE NOT TRACEABLE. THE ASSE SSEE WAS ALSO ASKED TO PRODUCE 5 THESE PARTIES FOR VERIFICATION. SUBSEQUENTLY THE A O ASKED THE ASSESSEE TO PRODUCE ALL THOSE PARTIES TO WHOM JOB WORK CHARGES WERE PAI D FOR HIS VERIFICATION. IT WAS MENTIONED THAT IF THE ASSESSEE FAILS TO DISCHARGE I TS ONUS, JOB WORK CHARGES WOULD BE DISALLOWED ACCORDINGLY. 4. THE ASSESSEE PRODUCED CERTAIN PARTIES FOR VERIFI CATION. THE AO RECORDED THE STATEMENT OF SRI EDIAMIN MUNAF, SHRI ARBAZ S.K. AMI R, SHRI SAOOD M. FAHEEM, SHRI SAHHID MD. MUNAF, SHRI IQBAL MD. JAMIL, SHRI M OBEEN AKHALAQUEAH, SHRI NADEEM ABBAS, SHRI AKBAR MD. TAHEER, SRI AKEEL SK S ALMAN, SHRI AKBAR MOHD. TAHEER, SHRI AKEEL S.K. SALMAN, SHRI SATTAR MD. JAM IL, SHRI M.M. SHAHID, SHRI MUNAF SK SAMAD, SHRI SAMEER HABIB, SHRI SHAHID MD. MUNAF, SHRI NADEEM HARIS ETC. IN WHICH THEY HAVE CONFIRMED TO HAVE RE CEIVED JOB WORK CHARGES FROM THE ASSESSEE AND THEY ARE NOT FILING THE INCOME TAX RETURNS. THE AO NOTED THAT DURING THE COURSE OF RECORDING OF STATEMENT THE ABO VE-MENTIONED PERSONS WERE UNABLE TO PRODUCE ANY IDENTIFICATION SUCH AS IDENTI TY CARD, PAN OR DRIVING LICENCE ETC. TO ESTABLISH THEIR IDENTITY. SINCE NONE OF TH EM COULD PRODUCE ANY DOCUMENTARY EVIDENCE TO PROVE THEIR IDENTITY AND SINCE NONE OF THEM ARE FILING INCOME TAX RETURNS THE AO CAME TO THE CONCLUSION THAT MERE ADM ISSION FOR RECEIVING PAYMENTS FROM THE ASSESSEE REGARDING JOB WORK CHARGES IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE CLAIM. HE FURTHER NOTED THAT TH E ADDRESSES MENTIONED ON THE JOB WORK VOUCHERS ARE INCOMPLETE AND IN SOME CASES MORE THAN ONE VOUCHER WAS ISSUED TO THE SAME PERSON CONTAINING DIFFERENT ADDR ESS. THE AO THEREFORE AGAIN CONFRONTED THE ASSESSEE TO EXPLAIN AS TO WHY THE JO B WORK CHARGES SHOULD NOT BE DISALLOWED. AFTER CONSIDERING THE SUBMISSIONS GIVE N BY THE ASSESSEE AND NOTING THAT THE PERSONS TO WHOM THE JOB WORK CHARGES HAVE BEEN PAID HAD NO MSEB CONNECTION IN THEIR NAMES, HE DISBELIEVED SUCH JOB WORK CHARGES. HE REJECTED THE CLAIM OF THE ASSESSEE THAT THE MSEB CONNECTIONS ARE IN THE NAME OF SHED OWNERS IN ABSENCE OF PROOF OF THE SAME EITHER BEFORE HIM OR T HE EXCISE AUTHORITIES. THE AO 6 THEREFORE REJECTED THE CLAIM OF JOB WORK CHARGES IN VIEW OF THE FOLLOWING ASPECTS/DISCREPANCIES AS PER PARA 3.15 OF HIS ORDER AND WHICH READS AS UNDER : (A) THE ASSESSEE COULD NOT PRODUCE ALL THE PARTIES, TO WHOM JOB WORK CHARGES WERE PAID FOR VERIFICATION. (B) THE PERSONS WHO WERE PRODUCED FOR VERIFICATION OR THOSE WHO WERE SUMMONED U/S.131 COULD NOT ESTABLISH THEIR IDENTITY. (C) NONE OF THEM WERE ASSESSED WITH INCOME TAX, DES PITE THEIR CLAIM THAT THEY HAD RECEIVED SUBSTANTIAL PAYMENTS FROM THE ASSESSEE. (D) DIFFERENT VOUCHERS ISSUED TO SAME PERSON CONTAI NED DIFFERENT ADDRESSES, BRINGING IN DOUBT THEIR VERACITY. (E) ADDRESSES MENTIONED ON THE JOB WORK VOUCHERS W ERE ALL INCOMPLETE. (F) DURING THE COURSE OF SEARCH OPERATIONS MOUNTED BY THE EXCISE DEPARTMENT, IT WAS CLEARLY ESTABLISHED THAT ASSESSEE HAD PRODUCED SELF MADE VOUCHERS AND NO JOB WORK CHARGES WERE PAID TO ANY PERSON WHATSOEVER. (G) THE PERSONS TO WHOM THE ASSESSEE HAD CLAIMED TO HAVE MADE PAYMENT OF JOB WORK CHARGES WERE NOT HAVING ELECTRICITY CONNECTION IN T HEIR NAME (AS VERIFIED FROM MSEB BY THE EXCISE DEPARTMENT), THEREFORE, IT WAS N OT POSSIBLE FOR THEM TO OPERATE POWER LOOMS. (H) BEFORE THE HONBLE SETTLEMENT COMMISSION OF CEN TRAL EXCISE, THE ASSESSEE HAS NOT ARGUED AGAINST THE FINDING THAT ASSESSEE HAD NOT IN DULGED IN ANY MANUFACTURING ACTIVITY. THEREBY, INDIRECTLY ADMITTING BEFORE THE HONBLE SETTLEMENT COMMISSION THAT THE JOB WORK CHARGES PAID WERE ALL BOGUS. 5. WHILE DISALLOWING THE JOB WORK CHARGES THE AO AL SO RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RAMANAN D SAGAR VS. DCIT REPORTED IN 256 ITR 134 AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. CALCUTTA AGENCY LTD. REPORTED IN 19 ITR 191. 6. BEFORE THE CIT(A) THE ASSESSEE CHALLENGED THE VA LIDITY OF THE NOTICE ISSUED U/S.147/148 AS WELL AS THE QUANTUM ADDITION. SO FAR AS THE ISSUE RELATING TO VALIDITY OF REASSESSMENT PROCEEDINGS ARE CONCERNED, IT WAS S UBMITTED THAT THE NOTICE U/S.148 WAS ISSUED FOR VERIFYING WHETHER THE JOB CHARGES PA ID ARE FICTITIOUS OR NOT. IT WAS ARGUED THAT NOTICE U/S.148 CANNOT BE ISSUED FOR VER IFYING THE JOB WORK CHARGES PAID UNLESS THERE IS SOME REASON TO BELIEVE THAT THERE I S ESCAPEMENT OF INCOME ON ACCOUNT OF PAYMENT OF JOB CHARGES IS FICTITIOUS ON THE BASIS OF MATERIAL AVAILABLE AT THE TIME OF ISSUE OF NOTICE U/S.148. FOR THIS PROP OSITION VARIOUS DECISIONS WERE ALSO 7 RELIED UPON. IT WAS ARGUED THAT THE AO IN THE INST ANT CASE HAS HIMSELF RECORDED THAT AS PER THE INFORMATION, THE ASSESSEE HAS MANUFACTUR ED GREY FABRICS AND SOLD THE SAME UNDER EXCISE INVOICES. THEREFORE, WHEN HE HIM SELF HAD ADMITTED THAT GREY CLOTH IS MANUFACTURED THERE IS NO NECESSITY TO INI TIATE REASSESSMENT PROCEEDINGS FOR VERIFYING AND INVESTIGATING THE FACT THAT JOB C HARGES PAID ARE WHETHER FICTITIOUS OR NOT. 7. SO FAR AS THE QUANTUM ADDITION IS CONCERNED ON A CCOUNT OF DISALLOWANCE OF JOB WORK CHARGES THE ASSESSEE MADE DETAILED WRITTEN SUBMISSION WHICH WERE FORWARDED BY THE LEARNED CIT(A) TO THE AO CALLING F OR A REMAND REPORT FROM HIM. IN THE ORDER U/S.250(4) PASSED ON 06-07-2009 THE L EARNED CIT(A) DIRECTED THE AO TO EXAMINE AS UNDER : (I) THE JOB WORK CHARGES OF RS.75,19,591/- PAID T O MALEGAON CO-OP. SPINNING MILLS, MALEGAON, ON ACCOUNT OF MANUFACTURING OF YARN FROM COTTON, MAY BE ENQUIRED IN DETAIL REGARDING THE GENUINENESS OF THE SAID PAYMENT BY GIVING A DUE OPPORTUNITY TO THE APPELLANT AND SUBMIT THE FACTUAL REPORT IN THIS REGARD. (II) THE APPELLANT MAY BE GIVEN ONE MORE OPPORTUNIT Y TO ESTABLISH THE CLAIM OF JOB WORK CHARGES. THE WEAVERS MAY BE EXAMINED U/S.131 OF TH E ACT ONCE AGAIN WITH A PROPER INTIMATION REGARDING THE REQUIREMENTS TO BE COMPLIED WITH AT T HE TIME OF EXAMINATION. (III) THE TRANSACTIONS OF YARN PURCHASED FOR MANUF ACTURING THE CLOTH AND THE PAYMENTS MADE AND SIMILARLY, THE TRANSACTION OF SALE OF MANUFACTU RED CLOTH REFLECTED IN THE BOOKS OF ACCOUNTS MAY BE ENQUIRED INTO, REGARDING THE GENUINENESS OF THE PURCHASE OF YARN AND SALE OF CLOTH TO VARIOUS PARTIES, AS THERE WAS NO CLEAR CUT FINDINGS IN THE ASSESSMENT ORDER ON THIS ISSUE. (IV) THE APPELLANT ALSO MADE AN ALTERNATIVE CLAIM WITHOUT PREJUDICE TO HIS SUBMISSIONS ON THIS ISSUE THAT THE GROSS PROFIT WOULD BECOME ABNORMALLY HIGH IF THE HOB WORK CHARGES ARE DISALLOWED AND IT WOULD GIVE A DISTORTED PICTURE OF THE BUSINE SS. THEREFORE, IT WAS SUBMITTED THAT THE GROSS PROFIT RATE CAN BE ESTIMATED ON ACCOUNT OF THEIR BU SINESS WHICH IS NORMALLY IN THE RANGE OF 1.21% TO 1.84% AS IS IN THE SIMILAR LINE OF BUSINESS. TH E AO IS DIRECTED TO GIVE COMMENTS ON THIS CLAIM ON MERITS, WITH COMPARABLE CASES WITHOUT PREJUDICE TO THE FINDINGS OF HIS ENQUIRY IN THIS REGARD. (V) THE APPELLATE ALSO CHALLENGED THE ISSUE OF NOTI CE U/S.148 OF THE ACT, AS THE SAME WAS ISSUED FOR VERIFICATION OF JOB WORK CHARGES TO THE WEAVERS. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE SAME AND GIVE HIS DETAILED COMMENTS. 8. IN RESPONSE TO THE REMAND REPORT CALLED FOR BY T HE CIT(A) THE AO SUBMITTED THE REMAND REPORT WHICH HAS BEEN REPRODUCED BY THE CIT(A) IN HIS ORDER AT PAGE 19 TO 24 AND WHICH IS BEING REPRODUCED HERE UNDER F OR THE SAKE OF CLARITY : POINT RAISED : 1. JOB WORK CHARGES AMOUNT OF RS.89,066/- PAID TO MALEGAON CO-OP SPINNING MILL, MALEGAON ON ACCOUNT OF MANUFACTURING OF YARN FROM C OTTON BE INQUIRED IN DETAILS. 8 AOS REPORT : THIS OFFICE INSPECTOR WAS DEPUTED TO CONDUCT INQUIR Y IN THIS REGARD. HE HAS REPORTED THAT ONLY IN THE CASE OF SHRI RAGHUVIR T. PATODIYA THE PAYMENT O F RS.89,066/- IS GENUINE. THIS PAYMENT WAS MADE TO MALEGAON CO-OP SPINNING MILL, MALEGAON AS R ECORDED AS BY BANK ON PAGE NO. 351/352 OF GENERAL LEDGER OF THE SOCIETY. HENCE, I T APPEARS THAT THE PAYMENT OF RS.89,066/- IS FOUND TO BE PAID (THE CIT(A) HAS REPORTED IT AT RS. 89,066/-). THE INQUIRY FURTHER REVEALS THAT THERE ARE NO SUCH PAYMENTS RECEIVED BY THE MALEGAON CO-OP SPINNING MILLS FROM OTHER TWO ASSESSES, VIZ SHRI MAHESH T. PATODIYA AND SHRI VISH NUKUMAR T. PATODIYA. POINT RAISED : 2. IT HAS BEEN DIRECTED TO GIVE ONE MORE OPPORTUNIT Y TO THE ASSESSEE TO ESTABLISH THE CLAIM OF JOB WORK CHARGES BY EXAMINING THE WEAVERS U/S.131. AOS REPORT : AT THE TIME OF ASSESSMENT ITSELF, THE AO HAD CALLED FOR THE DOCUMENTS IN THE FORM OF SETTLEMENT COMMISSION, CUSTOMS & CENTRAL EXCISE, MUMBAI VIDE O RDER NO.21/CX/2005, ISSUED IN F.NO.SC/MZ/CEZ/511/512/200S DTD 26-04-05. THE ORDE R IS SELF EXPLANATORY. IN THIS ORDER, IT IS SEEN THAT WHEN ASSESSEE WAS CAUGHT BY THE CENTRAL E XCISE FOR HAVING CLAIMED THE BOGUS MANUFACTURING ACTIVITY. WHEN THE CENTRAL EXCISE CARRIED OUT FURTHER INSPECT ION REGARDING BOGUS MANUFACTURING ACTIVITIES AND PROVED BEYOND DOUBT THAT ASSESSEE HAD MANIPULAT ED DOCUMENTARY EVIDENCE HE WENT FOR SETTLEMENT BY ACCEPTING THE FINDING OF THE CENTRAL EXCISE AND PRAYED FOR LENIENT VIEW BEING TAKEN DURING THE PENALTY TO BE IMPOSED. SOME OF THE SALI ENT FEATURES OF THE ORDER OF SETTLEMENT COMMISSION OF CENTRAL EXCISE ARE AS UNDER : IN PARA 3.3 ON PAGE NO. 2 OF THE ORDER, IT IS CLEAR LY MENTIONED THAT THE ASSESSEE HAS NOT ENGAGED ANY POWER LOOM OWNER NOR SUPPLIED ANY YARN TO THEM AND MADE SELF MADE VOUCHERS FOR USE AS COLOURABLE DEVICE TO PROJECT THAT IT GOT MANUFACTUR ED GREY FABRIC. IN PARA NO.3.4 ON THE SAME PAGE OF THIS ORDER, IT I S MENTIONED THAT ASSESSEE PREPARED FAKE INVOICES FOR SALE OF GREY FABRICS FOR CONCEALED SAL E OF YARN. IT IS ALSO CLEARLY MENTIONED IN THE ORDER THAT ASSESSEE MANIPULATED ITS RECORDS AND REL EVANT DOCUMENTS. ASSESSEE PREPARED FAKE INVOICES FOR SALE OF GREY FABRICS FOR CONCEALMENT O F YARN. ASSESSEE HAD NOT MANUFACTURED OR GOT MANUFACTURED IN COTTON OR POLYESTER FABRIC BUT DIVE RTED YARN TO THE UNSPECIFIED BUYERS UNDER THE COVER OF FABRICS. THE ENTIRE AFFAIR UNEARTHED BY T HE EXCISE DEPARTMENT GOES TO SHOWN THAT THE ALLEGED MANUFACTURING EXPENSES WERE NOT GENUINE AND ALL THE DOCUMENTS IN SUPPORT OF THIS ALLEGED CLAIM OF ASSESSEE WAS EITHER FABRICATED OR MANIPULATED. APART FROM THESE FACTS THE RECORDS SHOW THAT THE AO ALSO ATTEMPTED TO ENQUIRE BY CAUSING INDEPENDENT ENQUIRY TO VERIFY THE GENUINENESS OF TH E ALLEGED PAYMENTS MADE BY ASSESSEE BY ISSUING SUMMONS TO THE CONCERNED WEAVERS. THE PERS ONS ATTENDED IN THIS REGARD BEFORE THE AO COULD NOT PRODUCE ANY RELIABLE EVIDENCE. SIMILAR W AS THE POSITION WHEN THE UNDERSIGNED SET IN MOTION THE PROCESS OF INQUIRY AGAIN TO LOOK INTO TH E ALLEGED PAYMENTS AS DIRECTED BY THE CIT(A). AT THAT TIME ALSO NONE OF THE ALLEGED RECIPIENTS OF ALLEGED CHARGED PAID BY ASSESSEE FOR MANUFACTURING COULD NOT PRODUCE ANY MATERIAL EVIDEN CE. THESE INDEPENDENT EFFORTS MADE BY THE AO AND THIS OFFICE SIMPLY CONFIRMED THE FINDINGS OF THE CENTRAL EXCISE DEPTT. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAD ACCEPTED THAT HE INDULGE D IN FAKE MANUFACTURING ACTIVITIES AND IN ORDER TO SEEK SOME IMMUNITIES HE APPROACHED TO THE SETTLE MENT COMMISSION OF CENTRAL EXCISE. WHEN ALL THE FACTS RELATING TO FAKE MANUFACTURING A CTIVITY OF THE ASSESSEE AND ALLEGED PAYMENTS THEREOF BEING NOT GENUINE HAVE BEEN ACCEPTED BY THE ASSESSEE BEFORE ONE OF THE RESPONSIBLE GOVT. OFFICE LIKE CENTRAL EXCISE, HE CANNOT ALTER HIS STA ND AGAIN BEFORE ANOTHER GOVT. OFFICE LIKE INCOME TAX. THERE ARE CLEAR CUT FACTS WHICH HAVE BEEN EST ABLISHED BEYOND DOUBTS THAT ASSESSEE HAS FABRICATED HIS RECORDS FOR FAKE MANUFACTURING OF GO ODS AS WELL AS FOR THE GOODS. INSPITE OF THE ABOVE, THE INDEPENDENT ENQUIRIES WER E ALSO CALLED BY THIS OFFICE HAS DIRECTED BY THE CIT(A). IN THIS REGARD, ASSESSEE WAS REQUESTED TO PRODUCE ALL THE ALLEGED WEAVERS TO WHOM THE ALLEGED PAYMENTS WERE MADE FOR ALLEGED MANUFACTURIN G OF CLOTH WHEN ASSESSEE VOLUNTARILY ATTENDED THIS OFFICE TO ENQUIRE INTO THE PROGRESS W ITH RESPECT TO REMAND REPORT. IT HAS BECOME CLEAR THAT ASSESSEE COULD NOT PRODUCE ALL THE PERSONS IN THIS REGARD. ONLY SOME OF THEM WERE PRODUCED. THE CASE WISE ATTENDANCE IS AN UNDER : NAME OF THE ASSESSEE ATTENDED NO. OF PERSONS 1. SHRI RAGHUVIR T. PATPODIYA 15 2. SHRI MAHESHKUMAR T. PATODIYA 12 3. SHRI VISHNUKUMAR T. PATODIYA 14 9 FROM THE STATEMENTS RECORDED U/S.131 IN RESPECT OF ABOVE PERSONS (COPIES ENCLOSED), IT IS REVEALED THAT THE ALLEGED PERSONS DID NOT HAVE ANY MATERIAL PROOF FOR HAVING RECEIVED ALLEGED PAYMENTS FOR ALLEGED MANUFACTURING. THEY COULD NOT PRODUCE ANY CORROBORATIVE EVIDENCE TO REASONABLY PROVE THE ALLEGED PAYMENTS TO HAVE RECEIVED. IN THE STAT EMENT THEY SIMPLY AFFIRMED ORALLY TO HAVE RECEIVED THE PAYMENT. THEREFORE, THE VERBAL CONFIR MATION ONLY OF THE ALLEGED PARTIES CANNOT FORM THE BASIS FOR ASSESSEES ALLEGED MANUFACTURING ACTIV ITIES. THESE ENQUIRIES CONDUCTED BY THIS OFFICE AS WELL AS THE ENQUIRY CAUSED BY THE A.O. AT THE TI ME OF ASSESSMENT ALSO GO TO STRENGTHEN THE FINDINGS OF THE EXCISE DEPARTMENT WHICH ASSESSEE HA S ACCEPTED IN TOTALITY. ON THE CONTRARY IT CAN BE INFERRED THAT THE ALLEGED PERSONS HAVE OBLIGED T HE ASSESSEE. THIS FACT IS CLEAR FROM THE ASSESSEES APPROACH TO THE SETTLEMENT COMMISSION OF CENTRAL EXCISE. IT IS PERTINENT TO NOTE THAT ASSESSEE HAS NOT CHALLENGED THE FINDINGS OF THE CEN TRAL EXCISE IN WHICH THE ASSESSEES BOGUS CLAIM WAS UNVEILED. DURING THE APPELLATE STAGE HER EIN AGAIN ASSESSEE HAS NOT POINTED OUT ANY SHORT COMINGS IN THE ENQUIRY CAUSED BY THE CENTRAL EXCISE. IN THIS SCENARIO IT MAY BE HELD THAT THERE WAS NO MANUFACTURING OF GREY CLOTH FROM YARN AND ASSESSEE HAS RESORTED TO THE CLAIM IN ORDER TO GAIN THE UNDUE ADVANTAGE AS IS BROUGHT OUT IN THE ORDER OF THE SETTLEMENT COMMISSION. THE ASSESSEE HIMSELF HAS CERTIFIED HIS MANUFACTURIN G ACTIVITY AS BOGUS AS SOON AS HE APPROACHED TO THE SETTLEMENT COMMISSION OF CENTRAL EXCISE. POINT RAISED : 3. THE CIT(A) HAS DIRECTED TO ENQUIRY INTO THE TRAN SACTIONS OF YARN PURCHASED FOR MANUFACTURING THE CLOTH AND THE TRANSACTION OF SALE OF MANUFACTURING CLOTH : AOS REPORT : IN VIEW OF THE FACTS WHICH HAVE PROVED THAT THE ASS ESSEE HAD INDULGED IN FABRICATING AND MANIPULATING ACCOUNTS AND RELEVANT DOCUMENTS TO PRO VE HIS BOGUS CLAIM OF MANUFACTURING, IT MAY BE INFERRED THAT THE ALLEGED PURCHASER OF ALLEGED C LOTH ARE ALSO NAME LENDER AND THERE IS NO REAL SALE OF CLOTH BY ASSESSEE, AS NO SUCH CLOTH WAS EVE R MANUFACTURED. POINT RAISED : 4. THE ASSESSEES ARGUMENT IS THAT IF THE JOB WORK CHARGES ARE DISALLOWED THE GROSS PROFIT RATE WOULD BE ABNORMALLY HIGH AND AS SUCH WOULD GIV E DISTORTED PICTURE OF THE BUSINESS. AOS REPORT : WHEN THE FACTS HAVE BEEN PROVED THAT ASSESSEES ENTI RE TRANSACTIONS ARE FABRICATED AND THEREFORE THE ACCOUNTS ARE THUS MANIPULATED THEN THERE IS NO MEANING IN ASSESSEES ARGUMENT. THE ASSESSEE CAN PREPARE HIS ACCOUNTS BY MANIPULATING ALL THE FI GURES THE WAY HE LIKES. MOREOVER IN SUCH CASES OF FRAUD, REASONABLENESS OR OTHERWISE OF GROS S PROFIT IS IMMATERIAL. POINT RAISED : 5. ASSESSEE HAS CHALLENGED TO ISSUE OF NOTICE US.1 48. AOS REPORT : THE NOTICE HAS BEEN ISSUED AFTER RECORDING REASONS. THERE IS A CLEAR MENTIONING OF THE AO THAT HE HAS REASON TO BELIEVE THAT THE INCOME TO THE TUN E OF RS.2,15,16,040/- HAS ESCAPED ASSESSMENT DUE TO THE ASSESSEES MANIPULATION OF ACCOUNTS. 6. GENERAL REMARKS : IT WILL NOT BE OUT OF PLACE TO MENTION THAT WHEN IT HAS BEEN HELD BY THE SETTLEMENT COMMISSION THAT THERE WAS NO MANUFACTURING AND PARTICULARLY WH EN SUCH DECISION OF SETTLEMENT COMMISSION HAS NOT BEEN CHALLENGED BEFORE THE HIGH COURT! THE SUPREME COURT AND IT HAS BECOME FINAL AS SUCH, THE JUDICIAL DISCIPLINE DEMANDS THAT THE SAID FINAL DECISION HAS TO BE FOLLOWED BY ALL THE AUTHORITIES WHO ARE SUBORDINATE TO SETTLEMENT COMMI SSION EVEN IF THE SETTLEMENT COMMISSION HAPPENS TO BE CONSTITUTED UNDER THE CENTRAL EXCISE . THE AO FILED FURTHER REPORTS VIDE HIS LETTERS DATED 17-09-2009 & 08-10-2009. THE REPORTS ARE EXTRACTED BELOW : LETTER DATED 17-09-2009 2.] AS DIRECTED BY YOUR HONOUR, A COPY OF REMAND R EPORT DATED 27-08-09 WAS ALSO FORWARDED TO THE PATODIYAS. ON RECEIPT OF THE REPORT, SHRI MAHESH T. PATODIYA HAS FILED A LETTER DATED 09-9- 09 RECEIVED IN THIS OFFICE ON 09-9-09 AND BROUGHT TO THE NOTICE OF THIS OFFICE THAT THERE WAS A FACTUAL MISTAKE IN VERIFYING HIS ACCOUNT WITH MALEG AON CO-OPERATIVE SPINNING MILLS, MALEGAON. 3] WITH REFERENCE TO THE ASSESSEES OBJECTION TO TH E REPORTED FACTS BY THIS OFFICE IN THE REMAND REPORT, THIS OFFICE CAUSED FURTHER INQUIRIES . THE INSPECTOR OF THIS OFFICE WAS DEPUTED AND HE VERIFIED THE CONTENTS OF THE ASSESSEE MENTIONED IN HIS LETTER DATED 09-9-09. 10 4] IT APPEARS THAT, MALEGAON CO-OPERATIVE SPINNING MILLS IS MAINTAINING THE ACCOUNTS IN THE NAME OF BUSINESS CONCERNS AND NOT IN THE NAME OF PR OPRIETORS. THAT IS WHY THE MISTAKE HAS OCCURRED IN THE INITIAL REMAND REPORT SUBMITTED BY THIS OFFICE. FROM THE FRESH REPORT GATHERED, IT IS SEEN THAT M/S. SHRIRAM TEXTILES, PROP. SHRI MAHE SH T. PATODIYA OF MALEGAON HAS PAID JOB CHARGES FOR SPINNING YARN FROM COTTON TO MALEGAON C O-OPERATIVE SPINNING MILLS DURING THE F.Y. 2003-04 AS UNDER : SR.NO. MONTH AMOUNT PAID MODE OF PAYMENT 1. DECEMBER 2003 RS.6,78,720/- BY VARIOUS CHEQUE S FROM UNION BANK OF INDIA, MALEGAON 2. JANUARY, 2004 RS.28,98,000/- -DO- 3. FEBRUARY, 2004 RS.19,25,262/- - DO- 4. MARCH, 2004 RS.20,04,408/- -DO- ------------------- RS.75,06,390/- ------------------- 5] THE MALEGAON CO-OPERATIVE SPINNING MILLS HAS DEP OSITED ALMOST ALL THE CHEQUES RECEIVED FROM SHRI MAHESH T. PATODIYA, PROP. M/S. SHRIRAM TE XTILES, MALEGAON IN THEIR ACCOUNT WITH STATE BANK OF INDIA, MALEGAON. THE EXTRACT OF BANK A/C. HAS ALSO BEEN OBTAINED. 6] BESIDES THIS, THE INSPECTOR OF THIS OFFICE HAS O BTAINED A LETTER FROM MALEGAON CO-OPERATIVE MILLS IN CONFIRMATION OF THE FACTS THAT NO JOB CHAR GES WERE RECEIVED BY THE SOCIETY FROM THE FOLLOWING PERSONS : 1} SHRI RAGHUVIR TULSHIRAM PATODIYA, PROP. M/S. PATODIYA TEXTILES, MALEGAON 2} SHRI VISHNU MAHESH PATODIYA, PROP. M/S. RANISATI FABRICS, MALEGAON 7] FROM THE ABOVE DISCUSSION, IT HAS BECOME CLEAR T HAT SHRI MAHESH T. PATODIYA PROP. OF M/S. SHRIRAM TEXTILES, MALEGAON ONLY PAID JOB CHARG ES OF RS.75,06,390/- TO MALEGAON CO- OPERATIVE SPINNING MILLS, MALEGAON DURING THE F.Y. 2003-04. THE JOB CHARGES WERE PAID FOR SPINNING OF YARN FROM THE COTTON. LETTER DATED 08-10-2009 I AS PER THE SETTLEMENT COMMISSION REPORT, THE ASS ESSEE HAD ACCEPTED THAT THEIR MANUFACTURING WAS FICTITIOUS. THIS FACT HAS BECOME CLEAR FROM THE SETTLEMENT COMMISSION, ADDL. BENCH, CENTRAL EXCISE, MUMBAIS ORDER DATED 18-04-2 006 IN THE CASE OF M/S. SHRIRAM TEXTILES AND SHRI MAHESH T. PATODIA CO-APPLICANT. ON PAGE N O.6 OF THE ORDER IN PARA 20, IT IS OBSERVED AS UNDER : 20. WE OBSERVE THAT THE SHOW CAUSE NOTICE DATED 29 -8-05 IN PARA 14.2 CLEARLY STATES THAT THE APPLICANT SUPPRESSED THE FACT THAT IT HAD EVER MANU FACTURED GREY CLOTH POLYSTER FABRICS THAT IT REMOVED THE INPUT COTTON POLYESTER YARN AS SUCH ON WHICH IT HAD AVAILED CENVAT CREDIT UNDER THE FICTITIOUS TRANSACTION PROJECTED AS SALE OF FAB RICS THAT IT FABRICATED AND MANIPULATED ALL THE DOCUMENTS AND RECORDS AND MIS-PROJECTED THE TRANSAC TIONS AND SALE OF FABRICS (WHICH IT NEVER PRODUCE) SO AS TO APPEAR AS REAL. THE SETTLEMENT COMMISSION ON PAGE NO.7 OF ITS ORDER MADE IT EXCEEDINGLY CLEAR AS UNDER : NOTWITHSTANDING THIS, THE FACT THAT M/S. SRT RECE IVED THE PAYMENT BY CHEQUES DEMAND DRAFTS DOES NOT NECESSARILY MEAN THAT IT JUSTIFIED SALE OF FABRICS AND NOT THE DIVERTED SALE OF YARN, IN AS MUCH AS FOR SHOWING SALE OF FABRICS IT MUST DEMONSTRATE AND PROVE THAT IT HAS PRODUCED THE FABRICS AND IT IS ON THIS FRONT FO R STATED PRODUCTION OF FABRICS, NO EVIDENCE EXISTS, LEAST THE AUTHENTIC OR CORROBORATI VE, TO LEGALLY OR OTHERWISE JUSTIFY DOES NOT EVEN PROMOTE TO REMOTELY APPLY THE THEORY OF PR EPONDERANCE OF PROBABILITY TO ADMIT PRODUCTION OF FABRICS BY M/S. SRT. THEREFORE, THE S ALE OF FABRICS AS SHOWN IN THE INVOICES AND SALE PROCEEDS AS SHOWN TO HAVE BEEN RECEIVED BY CHEQUES/D.D. IN CONCEALED ARRANGEMENT CAN BE SQUARELY TAKEN TO REPRESENT DIVE RTED SALE OF INPUT YARN AND SALE PROCEEDS TOWARDS SUCH SALES. (STRESSED BY SETTLEMENT COMMISSION). IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAD NOT C HALLENGED THE FINDINGS OF THE SETTLEMENT COMMISSION OF CENTRAL EXCISE & CUSTOMS, MUMBAI IN T HE HIGH COURT. MOREOVER, IN THE CASE OF M/S. PATODIA TEXTILES WHERE FACTS ARE IDENTICAL IT IS MENTIONED IN PARA 6.5 OF THE ORDER DATED 20- 09-06 OF SETTLEMENT COMMISSION THAT THE ASSESSEE HA S ACCEPTED THE ALLEGATION LEVELLED (THAT IT NEVER MANUFACTURED CLOTH AND THE YARN PURCHASED WAS CLEARED AS SUCH ) RELEVANT PORTION FROM 11 PARA 6.5 IS REPRODUCED BELOW : THE APPLICANT HAS A CCEPTED THE ALLEGATIONS LEVELLED AND DEMANDS PUT FORTH BY THE REVENUE IN THEIR SHOW CAUSE NOTICE DATED 7-2-2006 AND PRAYS THAT THE DUTY PAYMENT MADE ON CLEARANCE OF FINISHED GOODS MAY KIN DLY BE ALLOWED AS ADJUSTMENT FOR THE CLEARANCE OF YARN AS SUCH ). THUS, IN THE NUTSHELL HAS ACCEPTED BEFORE A HIGHER FORUM THAT IT NEVER PRODUCED CLOTH AND THE YARN PURCHASED WAS CLEARED AS SUCH. THIS MEANS THAT THE FINDINGS OF THE EXCISE DEPARTMENT THAT ASSESSEE NEVER CARRIED OUT ANY MANUFACTURING A CTIVITY OF CLOTH WERE ACCEPTED AND THE SAME HAVE BECOME FINAL HAVING BEEN NOT CHALLENGED BEFORE HIGH COURT. THE SETTLEMENT COMMISSION BEING THE HIGHER FORUM THEIR FINDINGS CANNOT BE THE SUBJECT MATTER FOR VERIFICATION BEFORE THE LOWER AUTHORITY SUCH AS A.O. BECAUSE SUCH VERIFICAT ION MAY AMOUNT TO CONTEMPT OF VERIFICATION DONE AND FINDINGS GIVEN BY THE SETTLEMENT COMMISSIO N. THUS, THE CLAIM OF MANUFACTURING OF CLOTH BEFORE CIT(A) IS IN CONTRADICTION TO ADMISSION BEFO RE SETTLEMENT COMMISSION AND HENCE OF NO CONSEQUENCE. AS THERE IS NO MANUFACTURING THERE CANNOT BE ANY SA LE OF CLOTH. THE CREDITS ARE ON ACCOUNT OF SALE OF YARN AS SUCH AS ACCEPTED BY THE ASSESSEE AND AS HELD BY THE SETTLEMENT COMMISSION. THUS ENTIRE AMOUNT OF RS.14,38,02,594/ - REPRESENTS CREDITS ON ACCOUNT OF SALE OF YARN AND NO PORTION OF IT CAN BE SAID TO BE SALE OF CLOTH. AS THERE IS NO SALE OF CLOTH, THE OPENING STOCK OF RS.38,00,380/- SHOWN AS THAT OF CLOTH IS A LSO FICTITIOUS AND HENCE THE FIGURE HAS TO BE ADOPTED AS ZERO AS NO SUCH SALE OF CLOTH IS COMPRIS ED IN SALE OF RS.14,38,02,594/- AS ADMITTED BEFORE THE SETTLEMENT COMMISSION. THUS, THE REAL F IGURES ARE THAT OF OPENING STOCK OF YARN OF VALUE OF RS.46,38,371/-, PURCHASE OF YARN OF VALUE OF RS.10,47,24,679/- AND CREDITS ON ACCOUNT OF SALE OF YARN FOR RS.14,38,02,594/-. THUS, IF IMAGI NARY OR FICTITIOUS ENTRIES ARE REPLACED BY REAL ENTRIES AS ADMITTED BEFORE THE SETTLEMENT COMMISSIO N IMAGINARY MANUFACTURING ACCOUNT HAS TO BE RECASTED AS REAL TRADING ACCOUNT OF YARN AS UNDE R . OPENING STOCK OF YARN 46,38,371/- YARN PURCHASED 10,47,24,679/- CREDITS ON ACCOUNT 3,44,39,544/- OF SALE OF YARN 14,38,02,594/- ------------------------- ------------------- - 14,38,02,594/- 14,38,02,594/- ------------------------ -------------------- THE CORRECT P & L A/C. WILL BE AS UNDER : EXPENSES DEBITED 22,00,161/- G.P. IN YARN MANUFACTURING A/C. 6,10,942/- G.P. IN YARN TRADING A/C DISGUISED AS CLOTH MANUFACTURING A/C. 3,44,39,544/- N.P. 3,28,51,509/- DIVIDEND 1184/- ----------------------- --------------------- - 3,50,51,670/- 3,50,51,670/- ----------------------- --------------------- - HENCE, REAL INCOME MAY BE ADOPTED AT RS.3,28,51,509 /- AS AGAINST ASSESSED INCOME OF RS.3,65,66,880/-. WITHOUT PREJUDICE TO ABOVE, IF AT ALL THE CLAIM OF THE ASSESSEE THAT CLOTH OF VALUE OF RS.38,00,380/- EXISTED ON OPENING DAY, IT BEING NOT PART OF SALES COMPRISED IN TOTAL SALES OF RS.14,38,02,594/- AS ACCEPTED BEFORE SETTLEMENT COM MISSION AND AS HELD BY THE SETTLEMENT COMMISSION, G.P. ON SALE OF SUCH CLOTH WILL HAVE TO BE SEPARATELY ADDED HAVING BEEN SOLD OUTSIDE THE BOOKS OF ACCOUNTS BEING NOT COMPRISED IN SALES OF RS.14,38,02,594/-. 9. THE LEARNED CIT(A) NOTED THAT THE ASSESSEE HIMSE LF MADE A REQUEST BEFORE THE AO VIDE HIS LETTER DATED 03-11-2009 THAT FURTHE R ENQUIRIES MAY BE CONDUCTED REGARDING THE SALE OF MANUFACTURED CLOTH TO VARIOUS CUSTOMERS. HOWEVER, THE AO REJECTED THE REQUEST OF THE ASSESSEE. THEREAFTER, THE ASSESSEE FILED HIS LETTER DATED 09-01-2010 DURING THE COURSE OF APPEAL PROCEEDINGS STATING THAT THE REMAND REPORT 12 SUBMITTED BY THE AO WAS NOT CORRECT AND ALSO INCOMP LETE FOR THE REASONS THAT THE PARTIES TO WHOM MANUFACTURED CLOTH WAS SOLD WERE NE VER EXAMINED BY THE AO. IT WAS ARGUED THAT THE ASSESSEE HAD MANUFACTURED THE C LOTH AND PAID THE JOB WORK CHARGES. ALTERNATIVELY IT WAS ARGUED THAT THE TOTA L INCOME MAY BE DETERMINED ON ESTIMATE BASIS BY APPLYING THE GP RATE. IT WAS SUB MITTED THAT ASSUMING THAT THE ASSESSEE HAS NOT MANUFACTURED THE CLOTH FROM THE YA RN BUT RESOLD THE YARN SO PURCHASED, IN SUCH CASES THE GP AT THE MOST CAN BE ESTIMATED WITHOUT DISALLOWING THE JOB WORK CHARGES. IT WAS ARGUED THAT TRADING R ESULTS OF DIFFERENT YARN TRADERS IN THE CITY AT MALGAON VARIES FROM 1.21% TO 1.84% WHO HAVE MAINTAINED THE QUANTITATIVE DETAILS AND WHOSE ACCOUNTS ARE AUDITED . SINCE THE GP RATE SHOWN BY THE ASSESSEE IN THE INSTANT CASE IS 1.70% AS PER RE GULAR BOOKS OF ACCOUNT MAINTAINED, THEREFORE, THE SAME SHOULD BE ALLOWED. 10. HOWEVER, THE LEARNED CIT(A) WAS NOT CONVINCED W ITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE REASSESSMEN T PROCEEDINGS INITIATED BY THE AO BY HOLDING AS UNDER : 14. I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AS WELL AS THE SUBMISSIONS OF THE AO IN HIS REMAND REPORTS. A PERUSAL OF THE REA SONS RECORDED BY THE ASSESSING OFFICER CLEARLY ESTABLISHES THAT THE AO HAD SUFFICIENT REAS ONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN VIEW OF THE JOB WO RK CHARGES CLAIMED. THE AO HAD SUFFICIENT MATERIAL ON RECORD THAT THERE WAS AN ESC APEMENT OF INCOME BY CLAIMING JOB WORK CHARGES WITHOUT ANY MANUFACTURING ACTIVITY. T HE APPELLANTS EMPHASIS ON USES OF WORDS VERIFICATION OF THE CLAIMS ETC. ARE NOT VER Y MUCH RELEVANT FOR THE PRESENT FACTS OF THE CASE. THE AO FOLLOWED THE PROPER PROCEDURE AND ISSUED THE NOTICE U/S.148 OF THE ACT, AND THE SAME WAS ACCEPTED BY THE APPELLANT AT THE T IME OF ASSESSMENT PROCEEDINGS WITHOUT CHALLENGING IT. THE VARIOUS DECISIONS RELI ED ON BY THE APPELLANT IN THIS REGARD ARE NOT RELEVANT TO THE PRESENT FACTS OF THE CASE. THEREFORE, THE APPELLANTS GROUNDS IN THIS REGARD ARE REJECTED AND THE PROCEEDINGS INITIA TED BY THE AO U/S.147/148 OF THE ACT ARE VALID AND THE GROUNDS OF THE APPELLANT ARE DISM ISSED. 11. SO FAR AS THE DISALLOWANCE OF ENTIRE JOB WORK C HARGES IS CONCERNED HE OBSERVED THAT THE AO HAD CONDUCTED ENQUIRIES AND WA S NOT SATISFIED WITH THE CLAIM OF THE ASSESSEE AND FINALLY CAME TO THE CONCLUSION THAT THERE WAS NO MANUFACTURING ACTIVITY AND THE JOB WORK CHARGES CLAIMED BY THE AS SESSEE WAS BOGUS FOR WHICH HE DISALLOWED THE ENTIRE CLAIM. HE NOTED THAT THE EXC ISE DEPARTMENT HAD CONDUCTED 13 ENQUIRIES AND CAME TO THE CONCLUSION THAT THE ASSES SEE NEVER MANUFACTURED THE FABRIC FROM THE INPUTS OF YARN BUT HAD AVAILED THE CENVAT CREDIT AND HAS FICTITIOUSLY SHOWN TO HAVE SENT TO THE WEAVERS. AC CORDINGLY, THE CENTRAL EXCISE DEPARTMENT HAD ISSUED SHOW CAUSE NOTICE FOR WHICH T HE ASSESSEE APPROACHED THE HONBLE SETTLEMENT COMMISSION, CENTRAL EXCISE AND C USTOMS. HE NOTED THAT THE HONBLE SETTLEMENT COMMISSION IN THEIR ORDER HAD ME NTIONED THAT THE CONCLUSIVE ALLEGATION MADE BY THE REVENUE IN THE SHOW CAUSE NO TICE AND THE CORRIGENDUM IS THAT THE YARN SHOWN, IN FACT, HAS NOT BEEN USED IN THE MANUFACTURING OF FABRICS BUT WAS REMOVED AS SUCH TO THE MARKET AND THIS FINDING OF THE HONBLE SETTLEMENT COMMISSION HAS NOT BEEN CHALLENGED BY THE ASSESSEE BEFORE THE HONBLE HIGH COURT. 12. HE NOTED THAT THE ASSESSEE BEFORE HIM TOOK A DI FFERENT STAND AND SUBMITTED THAT THE JOB WORK CHARGES CLAIMED IN THE BOOKS OF A CCOUNT WERE GENUINE BOTH DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS APPEAL PROCEEDINGS. HOWEVER, HE REJECTED SUCH CLAIM OF THE ASSESSEE ON THE GROUND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO CONDUCTED I NQUIRIES WITH REGARD TO THE CLAIM OF JOB WORK CHARGES PAID BY THE ASSESSEE TO V ARIOUS WEAVERS AND ISSUED SUMMONS U/S.131 OF THE INCOME TAX ACT. THE ASSESSE E COULD NOT PRODUCE MANY OF THE WEAVERS BUT PRODUCED ONLY SOME OF THEM WHOSE ID ENTITY WERE DOUBTED BY THE AO ALTHOUGH THEY HAVE CONFIRMED TO HAVE RECEIVED TH E JOB WORK CHARGES FROM THE ASSESSEE. ACCORDING TO HIM, MERE CONFIRMATION THAT ONE HAD RECEIVED THE PAYMENT OF JOB WORK CHARGES IS NOT SUFFICIENT FOR ALLOWING THE CLAIM OF THE ASSESSEE. HE ALSO REJECTED THE CONTENTION OF THE ASSESSEE THAT M OST OF THE WEAVERS HAVE MIGRATED ON THE GROUND THAT SOME OF THE WEAVERS MIGHT HAVE M IGRATED BUT IT CANNOT BE SAID THAT ALL THOSE PERSONS WHO COULD NOT BE PRODUCED HA D MIGRATED. ACCORDING TO THE LEARNED CIT(A) IT WAS THE DUTY OF THE ASSESSEE TO P RODUCE THE PARTIES/PERSONS TO WHOM JOB WORK CHARGES CLAIMED TO HAVE BEEN PAID TO THE SATISFACTION OF THE AO. 14 AS REGARDS THE CONTENTION OF THE ASSESSEE THAT AN A MOUNT OF RS.2,81,91,945/- DEBITED TO CLOTH MANUFACTURING ACCOUNT WAS GENUINE AND NECESSARY VOUCHERS DULY SIGNED BY THE PAYERS WERE MAINTAINED AND THE SAME W ERE PRODUCED AND THEREFORE THE SAME SHOULD HAVE BEEN ACCEPTED, HE HELD THAT IT WAS THE DUTY OF THE ASSESSEE TO ENSURE THAT THE GOODS ARE GIVEN TO A PERSON WHO CAN BE TRACED LATER ON. EVEN THOUGH THERE IS NO OBLIGATION/CONDITION REQUIRING T HE ASSESSEE TO MAINTAIN THE CORRECT ADDRESS BUT A PRUDENT BUSINESSMAN WOULD ENS URE THAT METICULOUS DETAILS ARE MAINTAINED SO THAT THE ASSESSEE CAN PROVE GENUINENE SS OF SUCH PAYMENTS. 12.1 AS REGARDS THE CONTENTION OF THE ASSESSEE THAT QUANTITATIVE DETAILS OF PURCHASE OF YARN AND SALE OF MANUFACTURING PRODUCTS WERE MAI NTAINED ACCORDING TO THE REQUIREMENT OF CENTRAL EXCISE ACT AND RULES AND THA T THE BOOKS OF ACCOUNTS WERE AUDITED AND THEREFORE THE TRANSACTIONS SHOULD BE AC CEPTED HE HELD THAT THIS CANNOT BE ACCEPTED FOR THE SIMPLE REASON THAT THE CENTRAL EXCISE DEPARTMENT ITSELF DID NOT BELIEVE THE TRANSACTION AND FOUND THAT THE ASSESSEE HAD NOT INDULGED IN ANY MANUFACTURING ACTIVITY WHICH WAS ULTIMATELY ADMITTE D BY THE ASSESSEE BEFORE THE HONBLE SETTLEMENT COMMISSION. SINCE THE BASIC REQ UIREMENT OF MANUFACTURING ACTIVITY WAS NOT PROVED, THEREFORE, THE QUESTION OF CONSIDERING ANY CIRCUMSTANTIAL EVIDENCE DOES NOT ARISE. 12.2 AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THERE WAS NO FINDING BY THE HONBLE SETTLEMENT COMMISSION THAT THE ASSESSEE DID NOT INDULGE IN ANY MANUFACTURING ACTIVITY HE NOTED THAT THE ALLEGATION OF THE CENTRAL EXCISE DEPARTMENT WAS ACCEPTED BY THE HONBLE SETTLEMENT C OMMISSION IN THEIR ORDER AND THEREFORE THE SAME AMOUNTS TO A FINDING IN THIS REGARD. THEREFORE, THE ASSESSEES ARGUMENT ON THIS ISSUE IS NOT ACCEPTABLE . HE OBSERVED THAT SINCE THE ASSESSEE HAD CLAIMED THE JOB WORK CHARGES AS DEDUCT ION IN COMPUTING THE TOTAL INCOME, THEREFORE, THE INITIAL BURDEN LIES ON HIM T O PROVE THE GENUINENESS OF THE 15 PAYMENT OF JOB WORK CHARGES. SINCE THE EVIDENCE PR ODUCED BY THE ASSESSEE WAS NOT SATISFACTORY, THEREFORE, IT IS NOT NECESSARY ON THE PART OF THE REVENUE TO PROVE THAT THE ASSESSEE HAD PURCHASED THE GREY CLOTH AND SOLD IN THE MARKET. HE ACCORDINGLY HELD THAT THE JOB WORK CHARGES OF RS.2 ,81,91,945/- IS NOT AN ALLOWABLE EXPENDITURE. AS REGARDS THE REQUEST OF THE ASSESSE E TO MAKE FURTHER ENQUIRIES REGARDING PURCHASE OF YARN AND SALE OF CLOTH TO VAR IOUS PARTIES SO AS TO ENABLE THE ASSESSEE TO PROVE THAT THERE WAS MANUFACTURING ACTI VITY HE REJECTED THE SAME ON THE GROUND THAT THE ASSESSEE HAD ALREADY ACCEPTED THE O RDER OF THE SETTLEMENT COMMISSION OF CUSTOMS AND CENTRAL EXCISE AND CANNOT TAKE A DIFFERENT STAND NOW BEFORE THE INCOME TAX DEPARTMENT. 12.3 AS REGARDS THE ALTERNATE CLAIM OF THE ASSESSEE THAT INCOME MAY BE ESTIMATED ON GP RATE HE NOTED THAT IT IS NOT A CASE FOR ESTIM ATING THE INCOME BY APPLYING THE GP RATE SINCE THE ASSESSEE BROUGHT THE SALE PROCEED S BY WAY OF CASH OR CHEQUE INTO THE BOOKS OF ACCOUNT AND CLAIMED THE PURCHASES AND OTHER EXPENSES. SINCE THE EXPENDITURE OF JOB WORK CHARGES HAS BEEN PROVED TO BE NOT GENUINE, THEREFORE, THE ASSESSEE CANNOT GET AWAY BY ESTIMATED PROFIT WITHOU T EXPLAINING THE SOURCE OF MONEY BROUGHT INTO THE BOOKS OF ACCOUNT. HE ACCORD INGLY REJECTED THE ALTERNATE CLAIM OF THE ASSESSEE FOR ESTIMATION OF GP. HE HOW EVER NOTED THAT PAYMENT OF RS.75,06,391/- PAID TO M/S. MALEGAON SPINNING MILLS AS JOB WORK CHARGES HAS BEEN ACCEPTED BY THE AO AS GENUINE IN THE REMAND REPORT DATED 17-09-2009, THEREFORE, HE ALLOWED TO THIS EXTENT THE CLAIM OF THE ASSESSEE TOWARDS JOB WORK CHARGES. THUS, THE LEARNED CIT(A) SUSTAINED AN AMOUNT OF RS.2,81,9 1,945/- OUT OF THE DISALLOWANCE OF RS.3,57,11,536/-. 12.4 AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT(A ) THE ASSESSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 16 1. IN THE ABSENCE OF CONDITIONS PRECEDENT FOR ISSU ANCE OF NOTICE U/S.148 OF THE I.T. ACT, 1961, THE IMPUGNED REASSESSMENT ORDER PASSED B Y THE LEARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED CIT(A) IS PATENTLY ILLE GAL, BAD IN LAW, NULL AND VOID AB-INITIO, LEGALLY UNSUSTAINABLE AND WITHOUT JURISDICTION AND HENCE THE SAME MAY PLEASE BE VACATED. 2. SINCE THE IMPUGNED REASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED CIT(A) IS BARRED BY LIMITATION THE SAME IS PATENTLY ILLEGAL, BAD IN LAW, NULL AND VOID AB-INITIO, LEGAL LY UNSUSTAINABLE AND WITHOUT JURISDICTION AND HENCE THE SAME MAY PLEASE BE VACATED. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,81,91,945.00 OU T OF JOB CHARGES PAID TO WEAVERS DEBITED UNDER THE HEAD CLOTH MANUFACTURING ACCOUNT, ON THE GROUND OF ALLEGED BOGUS PAYMENT WITHOUT ANY COGENT EVIDENCE. IT MAY PLEASE BE HELD THAT THE SAID PAYMENT IS A GENUINE PAYMENT AND THE SAME MAY PLEASE BE ALLOWED. 4. IT MAY PLEASE BE HELD THAT THE RELIANCE PLACED B Y BOTH THE LOWER AUTHORITIES ON THE FINAL ORDER NO.21/CEX/2006 PASSED BY THE HON. SETTL EMENT COMMISSION ADDITIONAL BENCH CUSTOMS & CENTRAL EXCISE MUMBAI IN SETTLEMENT APPLICATION NO.SC/MZ/CEX/511-512/2005 IN SUPPORT OF THE DISALLO WANCE OF RS.2,81,91,945.00 OUT OF JOB CHARGES PAID TO WEAVERS DEBITED UNDER THE HEAD CLOTH MANUFACTURING ACCOUNT, IS CLEARLY MISPLACED AND DEVOID OF MERITS. IT MAY PLE ASE BE FURTHER HELD THAT DURING THE RELEVANT PREVIOUS THE APPELLANT CARRIED ON THE BUSI NESS OF MANUFACTURE OF GREY CLOTH. IN THE CIRCUMSTANCES THE SAID DISALLOWANCE MAY PLEASE BE DELETED. 5. WITHOUT PREJUDICE TO GROUND OF APPEAL NOS. 3 & 4 ABOVE AND BY WAY OF AN ALTERNATE CLAIM THE APPELLANT SUBMITS THAT IF IT IS HELD THAT DURING THE RELEVANT YEAR THE APPELLANT DID NOT MANUFACTURE GREY CLOTH, THEN THE BOOKS OF ACCOUNT OF THE APPELLANT MAY PLEASE BE REJECTED AS NOT TRUE, CORRECT AND COMPLET E AND THE INCOME OF THE APPELLANT MAY PLEASE BE ESTIMATED U/S.145 R.W.S. 144 OF THE I.T. ACT, 1961. 6. THE APPELLANT DENIES HIS LIABILITY TO PAY ANY IN TEREST U/S.234B OF THE I.T. ACT, 1961. THE INTEREST LEVIED U/S.234B OF THE I.T. ACT , 1961 BY THE LEARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED CIT(A) MAY PLEASE B E DELETED. 13. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE TI ME OF HEARING BEFORE US, SUBMITTED THAT THE REASONS RECORDED BY THE AO ON 16 -05-2007 BEFORE THE ISSUANCE OF NOTICE U/S.148 OF THE INCOME TAX ACT ARE EITHER UNSIGNED OR PURPORTED TO BE SIGNED BY SOME UNKNOWN PERSON MEANING THEREBY THAT THE REASONS WERE NOT RECORDED BY THE AO BEFORE THE ISSUANCE OF NOTICE U/ S.148 OF THE INCOME TAX ACT. THEREFORE, REASSESSMENT PROCEEDINGS ARE BAD IN LAW IN VIEW OF THE PROVISIONS OF SECTION 148(2) OF THE INCOME TAX ACT. REFERRING TO THE COPY OF THE REASONS RECORDED, PLACED AT PAPER BOOK PAGE NO.159 HE SUBMI TTED THAT JUST BELOW THE REASONS RECORDED THERE APPEARS TO BE SOME SIGNATURE AND NEXT TO THAT SIGNATURE IT IS WRITTEN IN HAND AS SD/- . HE SUBMITTED THAT THE ABOVE FACTS SHOW THAT THE REASONS 17 WERE UNSIGNED FIRST AND THEREAFTER SOME UNKNOWN PER SON HAS SIGNED THE SAME. HE SUBMITTED THAT WHEN THE REASONS ARE EITHER UNSIGNED OR SIGNED BY SOME OTHER PERSON OTHER THAN THE AO THE REASSESSMENT PROCEEDIN GS BECOME A NULLITY SINCE THE AO DOES NOT DERIVE JURISDICTION TO MAKE REASSESSMEN T IN ABSENCE OF FULFILMENT OF THE CONDITIONS PRESCRIBED IN SECTION 148(2). FOR T HIS PROPOSITION HE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF DEEPCHAND J AIN VS. IAC REPORTED IN 2 ITD 403 AND IN THE CASE OF CIT VS. APARNA AGENCY PVT. LTD. REPORTED IN 267 ITR 50. AGAIN RELYING ON A SERIES OF DECISIONS HE SUBMITTED THAT THE OFFICER WHO RECORDED THE REASONS HAS TO ISSUE THE NOTICE U/S.148 OF THE INCOME TAX ACT. SINCE IN THE INSTANT CASE THE OFFICER WHO HAS RECORDED THE REASO NS HAS NOT SIGNED THE NOTICE U/S.148 WHICH IS APPARENT FROM THE VARIATION IN SIG NATURE IN THE TWO NOTICES, THEREFORE, THE PROCEEDINGS U/S. 148 SHOULD BE QUASH ED. HE ALSO RELIED ON THE FOLLOWING TWO DECISIONS : 1. CIT VS. VIMAL MOULDERS (INDIA) LTD. REPORTED IN 330 ITR 214 (DELHI) 2. ACIT VS. VIGNESH KUMAR JEWELLERS REPORTED IN 33 0 ITR 209 (MADRAS) 14. SO FAR AS THE MERITS OF THE CASE ARE CONCERNED HE SUBMITTED THAT THE AO DISBELIEVED THE LABOUR PAYMENTS ON THE GROUND THAT THERE WAS NO ELECTRICITY CONNECTION IN THE PREMISES OF THE SO CALLED WEAVERS TO WHOM LABOUR CHARGES HAVE BEEN PAID, THAT THEY ARE NOT INCOME TAX ASSESSEES A ND THAT THE PERSONS WHO WERE PRODUCED BEFORE HIM DID NOT CARRY THEIR PROOF OF ID ENTITY. HE SUBMITTED THAT WHEN THE PURCHASE AND SALES ARE NOT CHALLENGED, THE VARI OUS OTHER EXPENSES ARE NOT CHALLENGED AND HAS BEEN ACCEPTED BY THE AO, THEREFO RE, DISALLOWANCE OF THE ENTIRE JOB WORK CHARGES WILL GIVE AN ABSURD RESULT WHICH I S NOT POSSIBLE IN THIS LINE OF TRADE. HE SUBMITTED THAT THE ACCOUNTS OF THE ASSES SEE ARE AUDITED, NO MISTAKE HAS BEEN POINTED OUT BY THE AUDITORS AND THERE IS NO EV IDENCE BROUGHT ON RECORD BY THE AO THAT THE JOB WORK CHARGES PAID BY THE ASSESSEE H AS DIRECTLY OR INDIRECTLY COME BACK TO THE ASSESSEE. HE SUBMITTED THAT MERELY BECA USE THE ASSESSEE HAS NOT 18 CHALLENGED THE ORDER OF THE SETTLEMENT COMMISSION T HE SAME CANNOT BE USED AGAINST THE ASSESSEE TO DISTURB THE MANUFACTURING, TRADING, PROFIT AND LOSS ACCOUNT FOR THE INCOME TAX PURPOSE. HE SUBMITTED THAT SOME OF THE WEAVERS APPEARED BEFORE THE AO WHOSE STATEMENTS WERE RECORDED AND TH EY HAVE CONFIRMED TO HAVE RECEIVED THE PAYMENT TOWARDS JOB WORK CHARGES. THE RE MAY BE SO MANY REASONS AS TO WHY THEY HAVE NOT FILED THEIR INCOME TAX RETURNS BUT THEIR NON-FILING OF INCOME TAX RETURNS CANNOT BE HELD AGAINST THE ASSESSEE AND THEREFORE GENUINE JOB WORK CHARGES SHOULD NOT BE DISALLOWED. 14.1 AS REGARDS THE ALLEGATION OF THE AO THAT THERE WAS NO ELECTRICITY CONNECTION TO THE PREMISES OF THE WEAVERS FOR THEIR POWER LOOM S HE SUBMITTED THAT NO JOB WORK WAS ALLOTTED TO ANY POWER LOOM OWNER BUT WAS ALLOTT ED TO DIFFERENT WEAVERS WHO WERE NOT THE OWNERS OF THE POWER LOOMS. THE POWER L OOMS OF DIFFERENT OWNERS WERE HIRED BY THE WEAVERS AND THEREFORE THE QUESTIO N OF ELECTRICITY CONNECTION FROM MSEB IN THE NAME OF THE WEAVERS DOES NOT ARISE. 14.2 AS REGARDS THE NON SUBMISSION OF THE ADDRESS P ROOF BY DIFFERENT PERSONS HE SUBMITTED THAT THE WEAVERS IN THEIR STATEMENTS HAD CATEGORICALLY STATED THAT THEY HAVE NOT BROUGHT ANY IDENTITY CARD ON THE DATE OF E XAMINATION. HE SUBMITTED THAT NEITHER THE AO IN THE SUMMONS HAD ASKED THE WEAVERS TO BRING THEIR IDENTITY PROOF NOR THE AO ASKED THEM TO PRODUCE THEIR IDENTITY PRO OF AFTER RECORDING THEIR STATEMENTS. THEREFORE, THE CLAIM OF THE AO THAT TH E WEAVERS COULD NOT PRODUCE THEIR IDENTITY PROOF CANNOT BE A GROUND FOR DISALLO WING THE GENUINE LABOUR CHARGES. FURTHER, WHEN THE AO HAS RECORDED THEIR STATEMENTS ON THE BASIS OF SUMMONS ISSUED, HE SHOULD NOT HAVE DOUBTED THEIR IDENTITY. 14.3 SO FAR AS THE ALLEGATION OF THE AO THAT ALL TH E WEAVERS COULD NOT BE PRODUCED TO WHOM JOB WORK CHARGES HAVE BEEN PAID, THE LEARNE D COUNSEL FOR THE ASSESSEE SUBMITTED THAT AFTER A GAP OF MORE THAN 4 TO 5 YEAR S IT IS NOT POSSIBLE ON THE PART OF 19 THE ASSESSEE TO PRODUCE ALL THE WEAVERS SINCE MOST OF THEM MIGHT HAVE LEFT MALAGAON FOR BETTER OPPORTUNITIES ELSEWHERE. IT IS NOT POSSIBLE ON THE PART OF THE ASSESSEE TO DO SOMETHING WHICH IS BEYOND HIS CONTRO L. 14.4 AS REGARDS THE ALLEGATION OF THE AO THAT THE W EAVERS, DESPITE THEIR CLAIM OF HAVING RECEIVED SUBSTANTIAL PAYMENTS, HAVE NOT FILE D INCOME TAX RETURNS HE SUBMITTED THAT THEY HAVE CATEGORICALLY STATED BEFOR E THE AO THAT THEY HAVE ALSO EMPLOYED LABOURERS FOR DOING THE WORK. THEY HAVE A LSO CATEGORICALLY STATED THAT SINCE THEIR INCOME WAS BELOW THE TAXABLE LIMIT THEY HAVE NOT FILED ANY INCOME TAX RETURN. HE SUBMITTED THAT AFTER COMPUTING THE INCO ME ON THE JOB WORK CHARGES ON PRESUMPTIVE BASIS AND CONSIDERING THE INCOME SLAB F OR THE PURPOSE OF INCOME TAX, INCOME OF NONE OF THE WEAVERS WILL EXCEED THE TAXAB LE LIMIT. THEREFORE, THIS CANNOT BE A GROUND FOR DENYING THE GENUINE CLAIM OF THE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT THE GENUINENESS OF THE EXPENSES SHOU LD NOT BE DOUBTED. SINCE THERE IS WIDE DIFFERENCE BETWEEN THE PURCHASE PRICE AND T HE SALE PRICE, THEREFORE, THERE HAS TO BE SOME VALUE ADDITION. SINCE THE AO HAS NO T DOUBTED THE VARIOUS OTHER EXPENSES DEBITED TO THE MANUFACTURING AND PROFIT AN D LOSS ACCOUNT, THEREFORE, DISALLOWANCE OF THE ENTIRE LABOUR CHARGES WILL GIVE AN ABSURD PROFIT RATE WHICH IS NOT POSSIBLE IN THIS LINE OF TRADE. 14.5 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER THE AUDITED TRADING RESULTS OF DIFFERENT TRADERS ENGAGED IN SIMILAR LIN E OF BUSINESS IN THE CITY OF MALEGAON, THE GP RATE VARIES FROM 1.21% TO 1.84% WH ICH IS EVIDENT FROM THE COPIES OF THE AUDIT REPORTS FURNISHED BEFORE THE LE ARNED CIT(A) AND WHICH HAS BEEN EXTRACTED AT PARA 12 OF THE ORDER OF THE CIT(A). S INCE THE GROSS PROFIT SHOWN BY THE ASSESSEE IN THE INSTANT CASE IS 1.70% IN THE CL OTH MANUFACTURING ACCOUNT WHICH IS MORE THAN THE GROSS PROFIT SHOWN BY THE TRADERS ENGAGED IN SIMILAR LINE OF BUSINESS, THEREFORE, THE INCOME RETURNED BY THE ASS ESSEE SHOULD BE ACCEPTED AND NO 20 ADDITION SHOULD BE MADE. HE ACCORDINGLY SUBMITTED THAT THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE SHOULD BE ALLOWED. 15. THE LEARNED DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDERS OF THE AO AND THE CIT(A). AS REGARDS THE SUBMISSION OF THE LEARN ED COUNSEL FOR THE ASSESSEE THAT THE NOTICE U/S.148 WAS EITHER UNSIGNED OR SIGNED BY A PERSON OTHER THAN THE AO HE SUBMITTED THAT THIS ISSUE WAS NEVER RAISED EITHER B EFORE THE AO OR BEFORE THE CIT(A). ONLY AT THE TRIBUNAL STAGE THE ASSESSEE IS RAISING THIS POINT THAT THE NOTICE U/S.148 WAS EITHER UNSIGNED OR SIGNED BY SOME OTHER PERSON OTHER THAN THE AO. HE SUBMITTED THAT SINCE THE AO WHO HAS SIGNED THE ORDE R SHEET HAS NOT DISOWNED THE SIGNATURE, THEREFORE, IT CANNOT BE SAID THAT SOME O THER PERSON OTHER THAN THE AO HAS SIGNED THE ORDER SHEET. THEREFORE, THIS PLEA OF TH E LEARNED COUNSEL FOR THE ASSESSEE SHOULD BE REJECTED OUT RIGHT AND THE REASSESSMENT P ROCEEDINGS INITIATED SHOULD BE HELD AS VALID. AS REGARDS THE VARIOUS DECISIONS RE LIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE HE SUBMITTED THAT ALL THE DECISIONS AR E DISTINGUISHABLE ON FACTS AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 15.1 HE SUBMITTED THAT THE CENTRAL EXCISE DEPARTMEN T HAS CONDUCTED EXTENSIVE ENQUIRIES AND AFTER FINDING THAT THE ASSESSEE WAS E NGAGED IN CLANDESTINE SALE OF YARN WITHOUT CONDUCTING ANY MANUFACTURING ACTIVITY AND THEREBY EVADED CENTRAL EXCISE DUTY BY DIVERSION OF INPUTS ON WHICH CENVAT CREDIT WAS AVAILED BY HIM HAS RAISED A DEMAND OF RS.205.63 LAKHS. THE MATTER WAS FINALLY ADJUDICATED BY THE HONBLE SETTLEMENT COMMISSION, CUSTOMS AND CENTRAL EXCISE, MUMBAI AND THE FINDING OF THE HONBLE SETTLEMENT COMMISSION WAS NO T CHALLENGED BY THE ASSESSEE BEFORE THE HONBLE HIGH COURT. THEREFORE, THE FIND ING OF THE HONBLE SETTLEMENT COMMISSION THAT THE ASSESSEE HAD NEVER USED THE YAR N (COTTON AND POLYESTER) IN THE MANUFACTURING OF FABRICS BUT WERE REMOVED AS SUCH T O BE SOLD IN THE OPEN MARKET FOR SALE WAS NOT CHALLENGED BY THE ASSESSEE BEFORE THE HONBLE HIGH COURT. THIS 21 SHOWS THAT THERE WAS NO MANUFACTURING ACTIVITY AT A LL. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE COULD NOT PRODU CE ALL THE WEAVERS TO WHOM JOB WORK CHARGES HAVE BEEN PAID. THE WEAVERS WHO W ERE PRODUCED BEFORE THE AO COULD NOT PRODUCE THEIR PROOF OF IDENTITY NOR ARE T HEY ASSESSED TO INCOME TAX. THERE WAS NO ELECTRICITY CONNECTION IN THEIR PREMIS ES TO RUN THE POWER LOOMS FOR WHICH THEY WERE PAID JOB WORK CHARGES. ALL THESE T HINGS TAKEN TOGETHER SHOW THAT THE ASSESSEE HAD NEVER DONE ANY MANUFACTURING ACTIV ITY FOR WHICH THE JOB CHARGES WERE PAID AND HE HAD MANIPULATED THE ACCOUNTED TO G IVE A COLOUR OF TRUTH TO THE LABOUR CHARGES SO PAID. THE ORDER OF THE LEARNED C IT(A) BEING IN CONFORMITY WITH THE FINDINGS OF THE AO, THEREFORE, THE SAME SHOULD BE UPHELD. 15.2 AS REGARDS THE SUBMISSION OF THE LEARNED COUNS EL FOR THE ASSESSEE THAT GP RATE SHOULD BE ADOPTED HE SUBMITTED THAT IT IS THE ASSESSEE WHO HAS CLAIMED THE JOB WORK CHARGES. THEREFORE, THE ONUS WAS ON THE ASSES SEE TO PROVE TO THE SATISFACTION OF THE AO THAT THE LABOUR CHARGES SO PAID ARE GENUI NE AND FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IN ABSENCE OF DISCHARGIN G THE ONUS CAST ON HIM THE ASSESSEE CANNOT GET AWAY BY ESTIMATING THE GP ADDIT ION INSTEAD OF FULL DISALLOWANCE OF THE JOB WORK CHARGES PAID. HE ACCO RDINGLY SUBMITTED THAT THE ORDER OF THE LEARNED CIT(A) SHOULD BE UPHELD 16. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. AS REGARDS THE FIRST ISSUE RAISED BY THE ASSESSEE CHAL LENGING THE VALIDITY OF THE REASSESSMENT PROCEEDINGS ON THE GROUND THAT THE REA SONS RECORDED ARE EITHER UNSIGNED OR SIGNED BY SOME OTHER PERSON WE FIND THI S ISSUE HAS BEEN RAISED BEFORE THE TRIBUNAL FOR THE FIRST TIME. FROM THE COPY OF THE REASONS RECORDED, COPY OF WHICH IS PLACED AT PAPER BOOK PAGE NO.159 WE FIND, ABOVE ACIT CIRCLE-III, 22 MALAGAON, THERE IS SOME SIGNATURE. THE AO WHO IS S UPPOSED TO HAVE MADE THE SIGNATURE HAS NOT DENIED THAT IT IS NOT HIS SIGNATU RE. WE ALSO DO NOT FIND MUCH FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE SIGNATURE CONTAINING IN THE NOTICE ISSUED U/S.148 AND IN THE REASONS RECORDED FOR REOPENING THE ASSESSMENT ARE DIFFERENT SINCE THE TRIBUNAL IN OUR OPINION IS NOT AN INVESTIGATING AUTHORITY OR HAND WRITING EXPERT. AS LONG AS THE PERSON WHO IS SUPPOSED TO HAVE SIGNED THE ORDER SHEET ENTRY HAS N OT DISOWNED HIS SIGNATURE THE TRIBUNAL CANNOT SIT OVER THE JUDGMENT REGARDING THE GENUINENESS OF SUCH SIGNATURE. FURTHER, THE ASSESSEE IN RESPONSE TO NOTICE U/S.148 HAS OBTAINED A CERTIFIED COPY OF THE ORDER SHEET ENTRY AND THEREAFTER HAS PARTICIPAT ED IN THE ASSESSMENT PROCEEDINGS AND APPEAL PROCEEDINGS AND THIS ISSUE WAS NEVER CHA LLENGED EITHER BEFORE THE AO OR THE CIT(A). THEREFORE, CHALLENGING THE AUTHENTI CITY OF THE SIGNATURE AT THIS JUNCTURE IN OUR OPINION IS A FUTILE EXERCISE. THE VARIOUS DECISIONS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABL E AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THIS VIEW OF THE MATTER WE DO NOT FIND ANY FORCE IN THE PROPOSITION OF THE ASSESSEE THAT THE RE-ASSESSMENT PROCEEDINGS SHOULD BE HELD AS NULL AND VOID. ACCORDINGLY, THE GROUNDS ON THIS IS SUE ARE DISMISSED. 17. SO FAR AS THE DISALLOWANCE OF ENTIRE JOB WORK C HARGES IS CONCERNED WE FIND AFTER THE SEARCH CONDUCTED BY THE CENTRAL EXCISE DE PARTMENT THE AO HAD REOPENED THE ASSESSMENT AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD CONDUCTED INDEPENDENT ENQUIRIES TO FIND OUT THE GENUINENESS O F SUCH JOB WORK CHARGES. WE FIND IN RESPONSE TO SUMMONS ISSUED BY THE AO SOME O F THE WEAVERS, WHO HAVE RECEIVED LABOUR CHARGES, APPEARED BEFORE HIM AND CO NFIRMED TO HAVE RECEIVED SUCH LABOUR CHARGES. HOWEVER, WE FIND THE AO REJECTED T HE GENUINENESS OF SUCH LABOUR CHARGES ON THE GROUND THAT ; (A) ALL THE WEAVERS WHO HAVE RECEIVED LABOUR CHARGE S WERE NOT PRODUCED BY THE ASSESSEE BEFORE HIM. 23 (B) WEAVERS WHO APPEARED BEFORE HIM COULD NOT PROD UCE THEIR IDENTITY. (C) THEY ARE NOT INCOME TAX ASSESSEES. (D) DIFFERENT VOUCHERS ISSUED TO SAME PERSONS CONT AIN DIFFERENT ADDRESSES. (E) ADDRESSES MENTIONED ON THE JOB WORK VOUCHERS W ERE INCOMPLETE. (F) THE PERSONS TO WHOM JOB WORK CHARGES WERE PAID ARE NOT HAVING ANY ELECTRICITY CONNECTION IN THEIR NAME AND (G) THE ASSESSEE HAD NOT ARGUED BEFORE THE HONBLE SETTLEMENT COMMISSION AGAINST THE FINDING THAT THE ASSESSEE HAD NOT INDULGED IN A NY MANUFACTURING ACTIVITY. HE THEREFORE WAS OF THE OPINION THAT THE ASSESSEE I NDIRECTLY HAD ADMITTED BEFORE THE HONBLE SETTLEMENT COMMISSION THAT THE JOB WORK CHA RGES PAID WERE BOGUS. 18. WE FIND THE LEARNED CIT(A) AFTER OBTAINING THE REMAND REPORT FROM THE AO UPHELD THE ACTION OF THE AO IN DISALLOWING THE JOB WORK CHARGES TO THE EXTENT OF RS.2,81,91,945/- AND DELETED AN AMOUNT OF RS.75,06, 391/-. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE AO HA S NOT DOUBTED THE PURCHASE AND SALES AND HAS ACCEPTED THE VARIOUS OTHER EXPENSES D EBITED TO THE PROFIT AND LOSS ACCOUNT, THEREFORE, HE SHOULD NOT HAVE DISALLOWED T HE ENTIRE JOB WORK CHARGES AMOUNTING TO RS.2,81,91,945/-. FURTHER IT IS ALSO THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT WHEN THE ACCOUNTS ARE AUDITED AND NO DEFECT HAS BEEN POINTED OUT BY THE AUDITORS, THEREFORE, MERELY BECA USE THE ASSESSEE HAD NOT CHALLENGED THE FINDING OF THE HONBLE SETTLEMENT CO MMISSION BEFORE THE HONBLE HIGH COURT TO BUY PEACE OF MIND, THE JOB WORK CHARG ES SHOULD NOT BE DISALLOWED ESPECIALLY WHEN SOME OF THE JOB WORKERS HAD APPEARE D BEFORE THE AO AND HAVE CONFIRMED TO HAVE RECEIVED THE PAYMENTS. IT IS THE ALTERNATE CONTENTION OF THE ASSESSEE THAT SINCE PERSONS ENGAGED IN SIMILAR TRAD E ARE SHOWING THE GP RATE OF 1.21% TO 1.84% AND SINCE THE GP RATE SHOWN BY THE A SSESSEE IS 1.70%, THEREFORE, THE SAME BEING REASONABLE SHOULD BE ALLOWED. IT IS THE CONTENTION OF THE REVENUE THAT SINCE THE ASSESSEE HAS CLAIMED JOB WORK CHARGE S, THE ONUS WAS ON HIM TO PROVE TO THE SATISFACTION OF THE AO REGARDING THE GENUINE NESS OF SUCH EXPENDITURE. HOWEVER, THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST ON HIM, THEREFORE, THE 24 AUTHORITIES BELOW ARE JUSTIFIED IN DISALLOWING THE ENTIRE JOB WORK CHARGES PAID AND THIS IS NOT A CASE FOR ADOPTION OF GP. 19. IN THE INSTANT CASE WE FIND THE ASSESSEE HAD PR ODUCED SOME OF THE JOB WORKERS WHO HAVE CONFIRMED TO HAVE RECEIVED THE JOB WORK CHARGES. AS REGARDS THE ALLEGATION OF THE AO THAT THEY COULD NOT PRODUC E THE PROOF OF THEIR IDENTITY WE FIND MERIT IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT NEITHER THE AO IN THE SUMMONS ISSUED TO THE WEAVERS HAD ASKED T HEM TO PRODUCE SUCH DOCUMENTARY EVIDENCE NOR DID THE AO ASKED THEM TO P RODUCE THEIR PROOF OF IDENTITY AFTER THE STATEMENTS WERE RECORDED. FURTH ER, THE AO HAS RECORDED THE STATEMENTS OF PERSONS WHO APPEARED BEFORE HIM IN RE SPONSE TO SUMMONS ISSUED. THEREFORE, DOUBTING THEIR IDENTITY IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR OPINION, IS NOT PROPER. 19.1 AS REGARDS THE ALLEGATION OF THE AO THAT THE W EAVERS ARE NOT ASSESSED TO INCOME TAX WE FIND THE WEAVERS HAVE ALSO STATED TO HAVE ENGAGED LABOURERS FOR THE JOB WORK AND THEIR INCOME WAS BELOW TAXABLE LIMIT. AS REGARD THE OBJECTION OF THE AO THAT ALL THE PARTIES TO WHOM JOB WORK CHARGES WE RE PAID WERE NOT PRODUCED WE FIND FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT AFTER A GAP OF 4 TO 5 YEARS SOME OF THE WEAVERS MIGHT HAVE SHIF TED TO VARIOUS OTHER PLACES FOR BETTER JOB PROSPECTS. WE ALSO FIND FORCE IN THE SU BMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IT WAS ARGUED BEFORE THE LOWE R AUTHORITIES THAT NO JOB WORK WAS ALLOTTED TO ANY OWNER OF THE POWER LOOM BUT TO DIFFERENT WEAVERS WHO HAD HIRED THE POWER LOOMS AND WERE NOT THE OWNERS OF TH E POWER LOOMS AND THIS SUBMISSION HAS NOT BEEN PROVED TO BE FALSE OR UNTRU E. 20. IT IS AN ADMITTED FACT THAT THE CENTRAL EXCISE DEPARTMENT HAD CONDUCTED CERTAIN ENQUIRIES AND HAD FOUND THAT THE ASSESSEE W AS NOT ENGAGED IN MANUFACTURING ACTIVITY BUT WAS CLANDESTINELY SELLIN G THE YARN IN THE MARKET AFTER 25 AVAILING CENVAT CREDIT. THE FINDING OF THE HONBLE SETTLEMENT COMMISSION HAS NOT BEEN CHALLENGED BY THE ASSESSEE BEFORE THE HON BLE HIGH COURT. THEREFORE, THERE REMAINS SOME DOUBT REGARDING THE MANUFACTURIN G ACTIVITY CONDUCTED BY THE ASSESSEE. AT THE SAME TIME WE FIND THE YARN MANUFA CTURING ACCOUNT BY THE ASSESSEE HAS BEEN PARTLY ACCEPTED BY THE DEPARTMENT AFTER TH E LEARNED CIT(A) ALLOWED THE CLAIM OF JOB CHARGES TO THE TUNE OF RS.75,19,591/- FOR WHICH THE REVENUE IS NOT IN APPEAL. THE PROFIT AND LOSS ACCOUNT OF THE ASSESSE E HAS ALSO BEEN ACCEPTED BY THE DEPARTMENT WITHOUT ANY ADDITION. THE GINNING JOB W ORKS UNDER THE HEAD LOOSE COTTON ACCOUNT HAS ALSO BEEN ACCEPTED BY THE DEPART MENT AS GENUINE. UNDER THESE CIRCUMSTANCES WE FIND SOME FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT WITHOUT ANY VALUE ADDITION THE RAW MA TERIAL CONSUMED CANNOT BE SOLD AT A HIGHER PRICE. FURTHER, THE REVENUE HAS NOT DO UBTED THE PURCHASE OF RAW MATERIAL AND THE SALE OF THE SAME. THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT PERSONS ENGAGED IN ONLY TRADING OF YA RN IN THE SAME LOCALITY ARE SHOWING PROFIT RATE OF 1.21% TO 1.84% AND THEREFORE ADDITION OF THE ENTIRE JOB WORK CHARGES WILL GIVE AN ABSURD RESULT MERITS SOME CONS IDERATION. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND CONSIDERING T HE FACT THAT THE ASSESSEE COULD NOT PRODUCE ALL THE WEAVERS TO WHOM JOB WORK CHARGES HA VE BEEN PAID, AND FURTHER CONSIDERING THE FACT THAT THE VOUCHERS PRODUCED BEF ORE THE AO WERE FOUND TO BE DEFECTIVE SUCH AS DIFFERENT VOUCHERS ISSUED TO SAME PERSON CONTAINING DIFFERENT ADDRESSES AND INCOMPLETE ADDRESS MENTIONED IN SOME OF THE VOUCHERS, THE ENTIRE JOB WORK CHARGES PAID IN OUR OPINION CANNOT BE TREA TED AS GENUINE. UNDER THESE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, ADDIT ION OF RS. 10 LAKHS ON ADHOC BASIS IN OUR OPINION WILL MEET THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED. 26 21. THE NEXT GROUND RAISED BY THE ASSESSEE RELATES TO CHARGING OF INTEREST U/S.234B OF THE INCOME TAX ACT SINCE CHARGING OF IN TEREST U/S.234B IS MANDATORY AND CONSEQUENTIAL IN NATURE, THEREFORE, THIS GROUND BY THE ASSESSEE IS DISMISSED. ITA NO.591/PN/2010 (SRI RAGHUVIR TULSHIRAM PATODIA) (A.Y. 2004-05) : 22. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. IN THE ABSENCE OF CONDITIONS PRECEDENT FOR ISSUA NCE OF NOTICE U/S.148 OF THE I.T. ACT, 1961, THE IMPUGNED REASSESSMENT ORDER PASSED B Y THE LEARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED CIT(A) IS PATENTLY ILLE GAL, BAD IN LAW, NULL AND VOID AB-INITIO, LEGALLY UNSUSTAINABLE AND WITHOUT JURISDICTION AND HENCE THE SAME MAY PLEASE BE VACATED. 2. SINCE THE IMPUGNED REASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED CIT(A) IS BARRED BY LIMITATION THE SAME IS PATENTLY ILLEGAL, BAD IN LAW, NULL AND VOID AB-INITIO, LEGAL LY UNSUSTAINABLE AND WITHOUT JURISDICTION AND HENCE THE SAME MAY PLEASE BE VACATED. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2,15,16,040.00 OF JOB CHARGES ON THE GROUND OF ALLEGED BOGUS PAYMENT WITHOUT ANY COGENT EVIDENCE. IT MAY PLEASE BE HELD THAT THE SAID PAYMENT IS A GENUINE PAYMENT AND THE SAME MAY PLEASE BE ALL OWED. 4. IT MAY PLEASE BE HELD THAT THE RELIANCE PLACED B Y BOTH THE LOWER AUTHORITIES ON THE FINAL ORDER NO.149/KNA/CEX/2006 PASSED BY THE HON. SETTLEMENT COMMISSION ADDITIONAL BENCH CUSTOMS & CENTRAL EXCISE MUMBAI IN THE CASE OF THE APPELLANT IN SUPPORT OF THE DISALLOWANCE OF RS.2,15,16,040.00 OU T OF JOB CHARGES, IS CLEARLY MISPLACED AND DEVOID OF MERITS. IT MAY PLEASE BE FURTHER HEL D THAT DURING THE RELEVANT PREVIOUS THE APPELLANT CARRIED ON THE BUSINESS OF MANUFACTURE OF GREY CLOTH. IN THE CIRCUMSTANCES THE SAID DISALLOWANCE MAY PLEASE BE DELETED. 5. WITHOUT PREJUDICE TO GROUND OF APPEAL NOS. 3 & 4 ABOVE AND BY WAY OF AN ALTERNATE CLAIM THE APPELLANT SUBMITS THAT IF IT IS HELD THAT DURING THE RELEVANT YEAR THE APPELLANT DID NOT MANUFACTURE GREY CLOTH, THEN THE BOOKS OF ACCOUNT OF THE APPELLANT MAY PLEASE BE REJECTED AS NOT TRUE, CORRECT AND COMPLET E AND THE INCOME OF THE APPELLANT MAY PLEASE BE ESTIMATED U/S.145 R.W.S. 144 OF THE I.T. ACT, 1961. 6. THE APPELLANT DENIES HIS LIABILITY TO PAY ANY IN TEREST U/S.234B OF THE I.T. ACT, 1961. THE INTEREST LEVIED U/S.234B OF THE I.T. ACT , 1961 BY THE LEARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED CIT(A) MAY PLEASE B E DELETED. 23. AFTER HEARING BOTH THE SIDES, WE FIND THE GROUN DS RAISED BY THE ASSESSEE ARE IDENTICAL TO THE GROUNDS IN ITA NO.592/PN/2010. WE HAVE ALREADY DECIDED THE APPEAL. SO FAR AS THE GROUNDS RELATING TO RE-OPENI NG OF ASSESSMENT U/S.148, THE SAME HAVE BEEN DISMISSED AND THE RE-OPENING OF THE ASSESSMENT HAS BEEN HELD TO BE VALID. FOLLOWING THE SAME REASONINGS THE GROUND S RELATING TO RE-OPENING OF 27 ASSESSMENT ARE DISMISSED. SO FAR AS THE QUANTUM AD DITION IS CONCERNED, WE FIND IN THE INSTANT CASE THE ENTIRE JOB WORK CHARGES OF RS. 2,15,16,040/- DISALLOWED BY THE AO HAS BEEN UPHELD BY THE CIT(A). FOLLOWING OUR RE ASONINGS IN ITA NO.592/PN/2010 WE RESTRICT THE DISALLOWANCE TO RS.9 LAKHS. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY PARTLY-ALLOWED. THE G ROUND RELATING TO CHARGING OF INTEREST U/S.234B IS DISMISSED BEING MANDATORY & CO NSEQUENTIAL IN NATURE. ITA NO.590/PN/2010 (SHRI VISHNUKUMAR MAHESHKUMAR PA TODIA) (A.Y. 2004- 05) : 24. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. IN THE ABSENCE OF CONDITIONS PRECEDENT FOR ISSU ANCE OF NOTICE U/S.148 OF THE I.T. ACT, 1961, THE IMPUGNED REASSESSMENT ORDER PASSED B Y THE LEARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED CIT(A) IS PATENTLY ILLE GAL, BAD IN LAW, NULL AND VOID AB-INITIO, LEGALLY UNSUSTAINABLE AND WITHOUT JURISDICTION AND HENCE THE SAME MAY PLEASE BE VACATED. 2. SINCE THE IMPUGNED REASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED CIT(A) IS BARRED BY LIMITATION THE SAME IS PATENTLY ILLEGAL, BAD IN LAW, NULL AND VOID AB-INITIO, LEGAL LY UNSUSTAINABLE AND WITHOUT JURISDICTION AND HENCE THE SAME MAY PLEASE BE VACATED. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.28,26,552.00 OUT OF JOB CHARGES PAID TO WEAVERS DEBITED UNDER THE HEAD CLOTH MANUFACTURING ACCOUNT, ON THE GROUND OF ALLEGED BOGUS PAYMENT WITHOUT ANY COGENT EVIDENCE. IT MAY PLEASE BE HELD THAT THE SAID PAYMENT IS A GENUINE PAYMENT AND THE SAME MAY PLEASE BE ALLOWED. 4. IT MAY PLEASE BE HELD THAT THE RELIANCE PLACED B Y BOTH THE LOWER AUTHORITIES ON THE FINAL ORDER NO.148/KNA/CEX/2006 PASSED BY THE HON. SETTLEMENT COMMISSION ADDITIONAL BENCH CUSTOMS & CENTRAL EXCISE MUMBAI IN THE CASE OF THE APPELLANT IN SUPPORT OF THE DISALLOWANCE OF RS.28,26,552.00 OUT OF JOB CHARGES, IS CLEARLY MISPLACED AND DEVOID OF MERITS. IT MAY PLEASE BE FURTHER HEL D THAT DURING THE RELEVANT PREVIOUS THE APPELLANT CARRIED ON THE BUSINESS OF MANUFACTURE OF GREY CLOTH. IN THE CIRCUMSTANCES THE SAID DISALLOWANCE MAY PLEASE BE DELETED. 5. WITHOUT PREJUDICE TO GROUND OF APPEAL NOS. 3 & 4 ABOVE AND BY WAY OF AN ALTERNATE CLAIM THE APPELLANT SUBMITS THAT IF IT IS HELD THAT DURING THE RELEVANT YEAR THE APPELLANT DID NOT MANUFACTURE GREY CLOTH, THEN THE BOOKS OF ACCOUNT OF THE APPELLANT MAY PLEASE BE REJECTED AS NOT TRUE, CORRECT AND COMPLET E AND THE INCOME OF THE APPELLANT MAY PLEASE BE ESTIMATED U/S.145 R.W.S. 144 OF THE I.T. ACT, 1961. 6. THE APPELLANT DENIES HIS LIABILITY TO PAY ANY IN TEREST U/S.234B OF THE I.T. ACT, 1961. THE INTEREST LEVIED U/S.234B OF THE I.T. ACT , 1961 BY THE LEARNED ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED CIT(A) MAY PLEASE B E DELETED. 28 25. AFTER HEARING BOTH THE SIDES, WE FIND THE GROUN DS RAISED BY THE ASSESSEE ARE IDENTICAL TO THE GROUNDS IN ITA NO.592/PN/2010. WE HAVE ALREADY DECIDED THE APPEAL. SO FAR AS THE GROUNDS RELATING TO RE-OPENI NG OF ASSESSMENT U/S.148, THE SAME HAVE BEEN DISMISSED AND THE RE-OPENING OF THE ASSESSMENT HAS BEEN HELD TO BE VALID. FOLLOWING THE SAME REASONINGS THE GROUND S RELATING TO RE-OPENING OF ASSESSMENT ARE DISMISSED. SO FAR AS THE QUANTUM AD DITION IS CONCERNED, WE FIND IN THE INSTANT CASE THE ENTIRE JOB WORK CHARGES OF RS. 28,26,552/- DISALLOWED BY THE AO HAS BEEN UPHELD BY THE CIT(A). FOLLOWING OUR RE ASONINGS IN ITA NO.592/PN/2010 WE RESTRICT THE DISALLOWANCE TO RS. 2,50,000/-. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY PARTLY-ALLOW ED. THE GROUND RELATING TO CHARGING OF INTEREST U/S.234B IS DISMISSED BEING MA NDATORY & CONSEQUENTIAL IN NATURE. 26. IN THE RESULT, ALL THE THREE APPEALS FILED BY T HE RESPECTIVE ASSESSEES ARE PARTLY- ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 6 TH DAY OF NOVEMBER, 2012. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 6 TH NOVEMBER 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II, NASHIK 4. THE D.R, A PUNE BENCH 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE