DCIT, Circle-5(1), V. Kuwer Industries Ltd.,

ITA 685/DEL/2005

• Counselvise Citation: 68520114 RSA 2005
• Duration Of Justice: 6 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 14-12-2011
• Assessment Year: 1995-1996
• Appeal Filed On: 11-02-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R S NEGI
• Keywords: Reopening of assessment; Unexplained cash credit; Depreciation; Share purchase agreement; Opportunity of being heard; Additional evidence; Difference of opinion; Assessment record; Block assessment; Change of opinion; Reassessment proceedings
• Section: 143(3); 234B; 150(1); 147; 68; 148; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E NEW DELHI DELHI BENCH : E NEW DELHI DELHI BENCH : E NEW DELHI DELHI BENCH : E NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMEBR AND SHRI B.C. MEENA, ACCOUNTANT MEMBER I.T.A NO. 427/DEL/2005 ASSTT. YEAR 1995-96 KUWER INDUSTRIES LTD. A-71-72, SECTOR-58, NOIDA U.P. VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 5 (1), NEW DELHI. (APPELLANT) (RESPONDENT) AND I.T.A NO. 685/DEL/2005 ASSTT. YEAR 1995-96 DY. COMMISSIONER OF INCOME TAX, CIR. 5 (1), NEW DELHI. VS. M/S. KUWER INDUSTRIES LTD. A-71-72, SECTOR-58, NOIDA UP (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PRAMOD KAPUR, CA RESPONDENT BY: SHRI R.S. NEGI, SR. DR ORDER PER RAJPAL YADAV, JM: THE ASSESSEE AND REVENUE ARE IN CROSS APPEAL AGAIN ST THE ORDER OF LD. CIT(A) DATED 10.11.2004 PASSED FOR ASSTT. YEAR 1995-96. FIRST WE TAKE THE APPEAL OF ASSESSEE. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 2 NOT IN CONSONANCE WITH RULE 8 OF ITAT RULES. THEY A RE ARGUMENTATIVE AND DESCRIPTIVE IN NATURE. IN GROUND NO. 1, ASSESSEE HA S TAKEN 6 SUB GROUNDS WHICH ARE IN FACT THE ARGUMENTS. IT HAS PLEADED THA T LD. CIT(A) HAS ERRED IN UPHOLDING THE REOPENING OF ASSESSMENT U/S 147/14 8 OF THE INCOME TAX ACT. 2. THE BRIEF FACTS ARE THAT ASSESSEE COMPANY AT THE RELEVANT TIME WAS IN THE BUSINESS OF MANUFACTURING OF METALIZED POLYE STER AND BOPP FILM. IT HAS FILED ITS RETURN OF INCOME ON 28.11.1995, DECLA RING A LOSS OF ` 67,48,290/-. AN ASSTT. ORDER WAS PASSED U/S 143(3) ON 22.12.1997 AT AN INCOME OF ` 3,07,933/- . DURING THE PENDENCY OF REG ULAR ASSESSMENT PROCEEDING, A SEARCH U/S 132 OF THE INCOME TAX ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE AND RESIDENTIAL P REMISES OF THE DIRECTORS ON 20.3.1996. THE AO WHILE FRAMING THE AS STT. ORDER U/S 143(3) HAS NOTICED THAT ASSESSEE IS REQUIRED TO EXPLAIN TH E UNEXPLAINED CREDITS OF ` 19,90,000/-, ` 21,60,000/-, ` 27,40,000/-. HE ALS O OBSERVED THAT DEPRECIATION CLAIM OF ASSESSEE AMOUNTING TO ` 51,24 ,939/- ALSO DESERVES TO BE DISALLOWED. HOWEVER, WHILE ARRIVING AT A CONC LUSION, LD. AO DID NOT MAKE ANY ADDITION OF THESE AMOUNTS ON THE GROUND TH AT ASSTT. YEAR 1995- 96 IS COVERED IN THE BLOCK ASSTT. U/S 158BC AND THE AMOUNTS HAVE ALREADY BEEN ADDED IN THE INCOME FOR THE BLOCK PERIOD. THER EFORE, NO FURTHER ADDITION IS BEING CONSIDERED ON THESE GROUNDS IN AS STT. YEAR 1995-96. THE BLOCK ASSTT. ORDER U/S 158BC WAS ALSO PASSED ON 30. 6.1997 I.E. PRIOR TO PASSING OF THE REGULAR ASSTT. ORDER U/S 143(3) ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 3 3. DISSATISFIED WITH THE BLOCK ASSTT. ORDER, ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE ITAT, VIDE ITSS NO. 141/D/97. TRIBUNAL HAS ALLOWED THE APPEAL OF THE ASSESSEE ON THE GROUND THAT BLOCK ASSTT. ORDER HAS BEEN PASSED AFTER EXPIRY OF LIMITATION. ACCORDING TO THE TRIBUNAL, THE VALID ASSTT. ORDER COULD BE PASSED ONLY ON OR BEFORE 31 ST MARCH, 1997 WHEREAS IT WAS PASSED ON 30 TH JUNE, 1997. APART FROM THIS ISSUE, THE TRIBUNAL HA S ALSO OBSERVED THAT NOW IT HAS BEEN SETTLED THAT UNDISCLO SED INCOME FOR THE PURPOSE OF BLOCK ASSESSMENT HAS TO BE COMPUTED ON T HE BASIS OF SEIZED MATERIAL. IN OTHER WORDS, IF ANY ITEM HAS ALREADY B EEN DISCLOSED BY THE ASSESSEE TO THE DEPARTMENT PRIOR TO THE SEARCH AND IT IS FORMING PART OF REGULAR RETURN THEN ASSESSMENT OF SUCH ITEM COULD B E EXAMINED IN THE REGULAR ASSESSMENT ONLY. THUS ACCORDING TO THE TRI BUNAL, THE SCHEME OF INCOME TAX ACT SUGGEST THAT INCOME WHICH HAS ALREA DY BEEN DISCLOSED BY THE ASSESSEE TO THE DEPARTMENT CAN NOT BE ASSESSED IN THE BLOCK ASSESSMENT AND CANNOT BE SUBJECT TO HIGHER RATE OF TAX. SUCH AN INCOME CAN ONLY BE ASSESSED IN THE REGULAR ASSTT. PROCEEDI NG. 4. AFTER THE ORDER OF THE TRIBUNAL, THE AO HAD RECO RDED REASONS FOR REOPENING OF ASSTT. AND ISSUED NOTICE U/S 148 UPO N THE ASSESSEE. THIS NOTICE WAS ISSUED ON 27 TH MARCH, 2002. IN RESPONSE TO THE NOTICE, ASSESSEE HAS FILED ITS REPLY VIDE LETTER DATED 27.1.2003. LD . AO HAS REJECTED THE EXPLANATION OF ASSESSEE AND PROCEEDED TO PASS THE R EASSESSMENT ORDER. THE APPEAL TO THE LD. CIT(A) DID NOT BRING ANY RELI EF TO THE ASSESSEE. ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 4 5. BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS SUBM ITTED THAT NOTICE U/S 148 HAS BEEN SERVED UPON THE ASSESSEE AFTER EXP IRY OF FOUR YEARS. AN ASSESSMENT AT THE FIRST INSTANCE WAS PASSED U/S 143 (3). THEREFORE, THE INTERDICTION AVAILABLE IN THE PROVISO APPENDED TO S ECTION 147 WOULD COME IN THE WAY OF AO FOR ISSUING THE NOTICE UPON THE AS SESSEE FOR REOPENING OF THE ASSESSMENT. HE POINTED OUT THAT THE EMBARGO PUT BY WAY OF PROVISO CONTEMPLATES THAT IF FOUR YEARS HAVE EXPIRED AND SC RUTINY ASSESSMENT U/S 143(3) WAS MADE BY THE AO, THEN THE ASSESSMENT CAN BE REOPENED, IF IT IS ESTABLISHED THAT INCOME HAS ESCAPED ASSESSMENT ON A CCOUNT OF FAILURE OF ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY AND T RULY IN CONNECTION WITH THE INCOME OF THE ASSESSEE FOR THAT ASSTT. YEAR. LD . COUNSEL FOR ASSESSEE WHILE TAKING US THROUGH THE REASONS RECORDED BY THE AO CONTENDED THAT THERE IS NO ALLEGATION OF THE AO THAT INCOME HAS ES CAPED ASSESSMENT ON ACCOUNT OF FAILURE OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY. HE FURTHER SUBMITTED THAT THE TRIBUNAL HAS N OT GIVEN ANY DIRECTION WHICH CAN ENABLE THE AO TO ASSESSEE THE I NCOME WITH THE HELP OF EXPLANATION 2 AND 3 APPENDED WITH SECTION 153 OF TH E INCOME TAX ACT. IN HIS NEXT FOLD OF SUBMISSION, HE SUBMITTED THAT AN A SSESSMENT CAN NOT BE REOPENED ON THE DIRECTION OF ANY APPELLATE AUTHORIT Y. FOR BUTTRESSING HIS CONTENTION, HE RELIED UPON THE ORDER OF THE ITAT NA GPUR BENCH IN THE CASE OF M.B.TRADERS VS. ACIT REPORTED IN (2011) 9 ITR (T RIB) 453. 6. ON THE OTHER HAND, LD. DR SUBMITTED THAT VIDE LE TTER DATED 4 TH DECEMBER 1997 ASSESSEE HAS SUBMITTED TO THE AO DURI NG THE REGULAR ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 5 ASSESSMENT PROCEEDING THAT THE INCOME OF THIS ASSTT . YEAR HAS ALREADY BEEN ASSESSED IN THE BLOCK ASSESSMENT. THEREFORE, N O FURTHER ASSESSMENT IS NEEDED. THE ASSESSEE HAS RELIED UPON THE DECISIO N OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE HIGH COURT IN THE CASE OF RAJARAM KULWANT RAI VS. ACIT REPORTED IN 227 ITR 187 WHICH WAS OPERATI NG IN FIELD AT THAT POINT OF TIME. ON ACCOUNT OF THIS REASON, LD. AO HAS NOT CONSIDERED THESE ISSUES ON MERIT. THE ASSESSEE HAS CLAIMED RECEIPT OF SHARE APPLICATION MONEY REPRESENTING CREDITS ON ACCOUNT OF STOCK INVESTMENT , CREDITS TAKEN FROM COMMON ADDRESS AND CREDITS ON ACCOUNT OF SHARE APPL ICATION MONEY. DURING THE COURSE OF SEARCH, THE MATERIAL WAS COLLE CTED EXHIBITING THAT ALL THESE UNEXPLAINED CREDITS WERE BOGUS AND IN FACT TH ESE WERE THE AMOUNTS OF THE ASSESSEE. IN SUCH SITUATION, IT CANNOT BE SA ID THAT ASSESSEE HAS DISCLOSED ALL MATERIAL FACTS FULLY AND TRULY. IT AL SO CANNOT BE THE CASE THAT AO HAS EXAMINED THESE ISSUES AND, THEREFORE, ASSESS MENT HAS BEEN REOPENED ON THE BASIS OF CHANGE OF OPINION. NO OPIN ION WAS FORMED BY THE AO IN THE FIRST ROUND OF ASSESSMENT PROCEEDING. HE FURTHER TOOK US THROUGH THE ORDER OF THE LD. CIT(A) WHO HAS CONSIDE RED ALL THESE ASPECTS ELABORATELY. HE POINTED OUT THAT LD. FIRST APPELLAT E AUTHORITY HAS MADE REFERENCE TO SECTION 153(3) OF THE INCOME TAX ACT AND TAKEN COGNIZANCE OF EXPLANATION 2 AND 3 WHICH CONTEMPLATES THE ASSES SMENT OF ESCAPED INCOME IN SUCH TYPE OF SITUATION. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE HAS FILED THE RETURN ON 28.11.1995. IT HAS ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 6 TREATED THE UNEXPLAINED CASH CREDIT AS GENUINE. DUR ING THE COURSE OF SEARCH, MATERIAL WAS FOUND INDICATING THE FACTS THA T THESE WERE BOGUS CASH CREDITS. THUS, IN THE ORIGINAL ASSESSMENT PROC EEDING ASSESSEE HAD NOT DISCLOSED TRUE AND FULL FACTS IN RESPECT OF SHA RE CAPITAL OR SHARE APPLICATION MONEY AND THE CLAIM OF DEPRECIATION. 8. APART FROM THIS ONE ASPECT, WE FIND THAT CASE OF THE ASSESSEE DULY COME WITHIN THE AMBIT OF EXPLANATION 2 AND EXPLANAT ION 3 OF SECTION 153(3). LD. FIRST APPELLATE AUTHORITY HAS CONSIDERE D THIS ASPECT LUCIDLY AND ELABORATELY. THE ORDER OF THE LD. FIRST APPELLANT A UTHORITY IN THIS RESPECT IS WORTH TO REFER WHICH READ AS UNDER :- 1.10 WITHOUT PREJUDICE TO THE OBSERVATIONS IN THE EARLIER PARAGRAPHS, IT WOULD ALSO BE RELEVANT TO REFER TO T HE PROVISIONS OF SECTION 153(3). JUST AS SECTION 150(1) PROVIDES THA T THE TIME LIMIT FOR ISSUE OF NOTICE U/S 148 SHALL NOT APPLY TO CASES WH ERE ASSESSMENT ETC IS IN PURSUANCE OF A FINDING OR DIRECTION CONTA INED IN AN ORDER ON APPEAL ETC. SECTION 153(3) EXCEPTS OUT SUCH CASES F ROM THE PURVIEW OF THE PROVISIONS OF SECTION 153(3) EXCEPTS OUT SUC H CASES FROM THE PURVIEW OF THE PROVISIONS OF SECTION 153 (1) AND 15 3(2) WHICH PRESCRIBE TIME LIMIT FOR COMPLETION OF ASSESSMENTS ETC. EXPLANATION 2 & 3 OF SECTION 153 SET OUT THE CIRCUMSTANCES WHER E AN ASSESSMENT ETC IS TO BE DEEMED TO BE ONE MADE IN CO NSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTA INED IN THE APPELLATE ORDER ETC. IN THIS REGARD, IT WOULD BE RE LEVANT TO REPRODUCE EXPLANATION 2 AND EXPLANATION 3 TO SECTION 153(3) A S UNDER : EXPLANATION 2. WHERE, BY AN ORDER REFERRED TO IN CLAUSE (II) OF SUB SECTION (3), ANY INCOME IS EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE FOR AN ASSESSMENT YEAR, THEN, AN ASSESSMEN T OF SUCH INCOME FOR ANOTHER ASSESSMENT YEAR SHALL, FOR THE P URPOSES OF SECTION 150 AND THIS SECTION, BE DEEMED TO BE ONE M ADE IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTAINED IN THE SAID ORDER. EXPLANATION 3.-WHERE, BY AN ORDER REFERRED TO IN CL AUSE (II) OF SUB- SECTION (3), ANY INCOME IS EXCLUDED FROM THE TOTAL INCOME OF ONE ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 7 PERSON AND HELD TO BE THE INCOME OF ANOTHER PERSON, THEN, AN ASSESSMENT OF SUCH INCOME ON SUCH OTHER PERSON SHA LL, FOR THE PURPOSES OF SECTION 150 AND THIS SECTION, BE DEEMED TOBE ONE MADE IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION CONTAINED IN THE SAID ORDER, PROVIDED SUCH OTHER PE RSON WAS GIVEN AN OPPORTUNITY OF BEING HEARD BEFORE THE SAID ORDER WAS PASSED. THE EFFECT OF THE SUPREME COURT RULING IN THE CASE OF MURLIDHAR BHAGWAN DAS, CITED BY THE LD. AR WAS ERODED BY ENAC TMENT OF EXPLANATION 2 AND 3 TO SECTION 153(3). THUS IT CAN BE SEEN THAT THE EXPLANATION 2 CREATES A FICTION. IT PROVIDES THAT W HERE BY AN ORDER U/S 250, 254, 260, 262, 263 OR TO 264 IN AN APPEAL, REVISION ETC AN INCOME IS EXCLUDED FROM A TOTAL INCOME OF AN ASSESS EE FOR A PARTICULAR ASSESSMENT PERIOD THEN A RE-ASSESSMENT O F SUCH INCOME FOR THE PROPER ASSESSMENT YEAR SHALL BE DEEMED TO B E THE ONE MADE IN CONSEQUENCE OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION WITHIN THE MEANING OF SECTION 150 AND 153(3)(II). IT HAS B EEN HELD BY THE BOMBAY HIGH COURT IN THE CASE OF AMBAJI TRADER PVT. LTD. VS ITO 105 ITR 273 (BOMBAY) THAT THE FICTION REMOVES THE BAR O F THE LIMITATION FOR THE INITIATION OF THE REASSESSMENT PROCEEDINGS AS WELL AS FOR THE COMPLETION OF THE ASSESSMENT OR RE-ASSESSMENT IRRES PECTIVE OF THE QUESTION WHETHER THE APPELLATE AUTHORITY HAS INFACT GIVEN OR CAN IN LAW GIVEN A FINDING OR DIRECTION THAT THE INCOME SH OULD BE ASSESSED IN A SPECIFIED ASSESSMENT YEAR OTHER THAN THE ONE UNDER APPEAL. THE ISSUE ALSO CAME UP BEFORE AP HIGH COURT IN THE CASE OF B.A.R ABDUL REHMAN SAHIB VS ITO 100 ITR 541 WHILE INTERPR ETING EXPLANATION 2 TO SECTION 153 (3). IN THIS CASE IT W AS HELD BY THE COURT THAT THE EFFECT OF SECTION 150 AND SECTION 153(3) R EAD WITH EXPLANATION 2 IS THAT IF ANY INCOME IS DELETED FROM ASSESSMENT IN A HIGHER PROCEEDINGS ON THE GROUND THAT IT IS NOT THE INCOME OF THAT YEAR, STEPS MAY BE TAKEN U/S 147 TO ASSESS IT AS TH E INCOME OF ANOTHER YEAR WITHOUT ANY LIMITATION APPLYING TO THE ISSUE OF NOTICE U/S 148. THIS DECISION WAS FOLLOWED BY M.P. HIGH CO URT IN THE CASE OF SUKHDAYAL PAHWA VS CIT 140 ITR 206. IT WAS HELD BY THE COURT THAT THE PROVISIONS OF SECTION 150 OVERRIDE THE PROVISIO NS OF SECTION 149 AND 151. THE SLP AGAINST THE SAID DECISION WAS DI SMISSED BY THE HONBLE SUPREME COURT AS REPORTED IN 160 ITR (ST.) 74 (SC). THUS AS PER EXPLANATION 2 TO SECTION 153(3), WHERE AN INCOM E OF A PARTICULAR ASSESSMENT YEAR IS EXCLUDED BY AN ORDER IN AN APPEA L ETC. ITS ASSESSMENT IN ANOTHER YEAR WILL BE DEEMED TO BE IN CONSEQUENCE OF OR IN ORDER TO GIVE EFFECT TO FINDING OR DIRECTION IN APPEAL ETC. THE INTENTION OF BRINGING THIS EXPLANATION IS THAT THE INCOME OF AN ASSESSEE SHOULD NOT GO UNTAXED IF THE SAME IS NOT T AXED IN THE HANDS OF AN ASSESSEE BY VIRTUE OF AN ORDER OF AN AP PELLATE AUTHORITY. THE REVENUE SHOULD NOT BE RENDED HELPLESS BY NOT BE ING ABLE TO TAX IT IN ANOTHER ASSESSMENT YEAR BECAUSE OF THE LIMITA TION OF TIME FOR TAKING ACTION U/S 147 OR FOR COMPLETING ASSESSMENT. THE INTENTION OF ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 8 THE LEGISLATURE CANNOT BE THAT ANY INCOME CANNOT BE TAXED IN ANY ASSESSMENT YEAR. SIMILARLY, THE INTENTION OF EXPLAN ATION 3 IS THAT IF BY AN ORDER OF APPELLATE AUTHORITY A PARTICULAR INC OME IS HELD TO BE NON-TAXABLE IN THE HANDS OF A PERSON, ITMUST BE TAX ED IN THE HANDS OF ANOTHER PERSON IN WHOSE CASE IT IS LIABLE TO BE ASSESSED AS AN INCOME. THE UNDERLYING PRINCIPLE IS THAT THE INCOME CHARGEABLE TO TAX MUST BE BROUGHT TO TAX IN THE HANDS OF A CORRE CT PERSON AND IN THE CORRECT ASSESSMENT YEAR. THAT IS WHY THE SHACKL ES OF TIME LIMITS PROVIDED IN SECTION 148, 149, 153(1) AND 153(2) HAV E BEEN REMOVED IN SUCH CASES BY INSERTING EXPLANATION 2 & 3 BELOW SECTION 153(3). EXTENDING THE SAME LOGIC AND KEEPING IN VIEW THE IN TENTION OF THE LEGISLATURE IF AN INCOME IS HELD TO BE NOT TAXABLE UNDER CHAPTER XIVB IT CANNOT BE THE INTENTION OF THE LEGISLATURE THAT IT SHOULD NOT BE TAXABLE IN CHAPTER XIV ALSO. THEREFORE, I AM OF THE CONSIDERED VIEW THAT SINCE AS A RESULT OF THE ORDER OF THE ITAT THE INCOME IS EXCLUDED FROM BLOCK ASSESSMENT PERIOD UNDER CHAPTER XIV B, B Y THE DEEMING PROVISIONS OF THE EXPLANATION 2 TO THE SECTION 153( 3) THE PROCEEDINGS U/S 147 COULD BE FICTIONALLY TREATED AS PROCEEDINGS TAKEN IN CONSEQUENCE OR TO GIVE ANY EFFECT TO ANY F INDING OR DIRECTION CONTAINED IN THE ORDER. THEREFORE, ON THI S COUNT ALSO THE PROVISIONS OF SECTION 150(1) WERE APPLICABLE IN THI S CASE AND THE AO WAS NOT BOUND BY THE SHACKLES OF THE PROVISO TO SEC TION 148 OR SECTION 149. 9. WITH THE ASSISTANCE OF LD. REPRESENTATIVE, WE HA VE GONE THROUGH THE RECORD CAREFULLY. SUB SECTION 1 OF SECTION 150 CONTEMPLATES THAT A NOTICE U/S 148 MAY BE ISSUED AT ANY TIME FOR THE PU RPOSE OF MAKING AN ASSESSMENT OR REASSESSMENT OR RECOMPUTATION IN CON SEQUENCES OF OR TO GIVE EFFECT TO ANY FINDING OR DIRECTION GIVEN IN AN Y APPELLATE ORDER. IN THE REASONS AO HAS MADE A REFERENCE TO THE ORDER OF THE ITAT WHEREIN IT HAS BEEN OBSERVED THAT SUCH TYPE OF INCOME IS TO BE ASS ESSED IN THE REGULAR ASSESSMENT AND NOT IN THE BLOCK ASSESSMENT. THIS OB SERVATION IS IN THE NATURE OF FINDING COMES WITHIN THE MEANING OF SECTI ON 150 (I) AND THERE WAS NO TIME LIMIT FOR ISSUING A NOTICE U/S 148 IN O RDER TO GIVE EFFECT TO THE FINDING OF THE ITAT. IF THE ADDITION COULD NOT BE M ADE UNDER THE BLOCK ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 9 ASSESSMENT AND THE SAME HAD TO BE MADE IN THE REGUL AR ASSESSMENT, THEN IT WOULD BE UNREASONABLE TO SAY THAT THIS INCO ME COULD NOT BE TAXED EITHER IN THE BLOCK ASSESSMENT OR IN THE REGULAR AS SESSMENT OF THE ASSESSEE. LD. FIRST APPELLATE AUTHORITY HAS CONSIDE RED THIS ASPECT ALSO AND HAS OBSERVED THAT OBSERVATION OF THE ITAT MAY NOT B E DIRECTION BUT IT IS A FINDING WHICH CAN AUTHORIZE THE AO TO INITIATE PROC EEDING U/S 147 ALSO. AS FAR AS THE CASE LAW REFERRED BY THE LD. COUNSEL FOR THE ASSESSEE IS CONCERNED, IT IS QUITE DISTINGUISHABLE ON FACTS. TH E AO HAS NOT REOPENED THE ASSESSMENT ON THE DIRECTIONS OF ANY AUTHORITY, RATHER HE APPLIED HIS MIND ON THE FINDING RECORDED IN THE APPELLATE ORDER OF THE TRIBUNAL. HE USED IT AS AN INFORMATION FOR INITIATING THE PROCEE DING. HE USED IT TO TAX THE ESCAPED INCOME WITH THE HELP OF 150 (I) OF THE INCOME TAX ACT. TAKING INTO CONSIDERATION THE WELL REASONED ORDER OF LD. F IRST APPELLATE AUTHORITY COVERING ALL POSSIBLE ARGUMENTS OF THE ASSESSEE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING OF LD. FIRST APP ELLATE AUTHORITY. THIS GROUND OF APPEAL IS, THEREFORE, REJECTED. 10. GROUND NO. 2 TAKEN BY THE ASSESSEE READ AS UNDE R :- 2) THAT THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN HOLDING THAT THE ASSESSING OFFICER HAS VALIDLY MADE THE FOLLOWING ADDITIONS :- A) ` 19,90,000/- ON ACCOUNT OF PURPORTED UNEXPLAINE D CASH CREDIT ON ACCOUNT OF STOCK INVESTS. B) ` 21,60,000/- ON ACCOUNT OF PURPORTED UNEXPLAINE D CASH CREDITS. C) ` 27,40,000/- ON ACCOUNT OF SHARE APPLICATION MONEY AND PURPORTEDLY HELD TO BE THE UNEXPLAINED C ASH CREDITS. ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 10 11. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF SEARCH OPERATION, SOME SHARE CERTIFICATE / APPLICATION FOR MS OF PRIVATE PLACEMENT AND FEW CANCELLED STOCK INVESTS WERE FOUND AND SEIZ ED. THE AO NOTICED THAT ASSESSEE COMPANY HAD COME OUT WITH A PUBLIC I SSUE ON 20 TH MARCH, 1995. DURING THE COURSE OF SEARCH AS WELL AS POST S EARCH INQUIRY, IT REVEALED TO THE DEPARTMENT THAT LARGE NUMBER OF STO CK INVESTS APPLICATIONS WERE SUBMITTED AT THE BEHEST OF ASSESS EE BY GIVING ADDRESS OF SHRI J.B. AGGARWAL, DIRECTOR OF THE ASSESSEE COM PANY. DIFFERENT PERSONS HAD MADE APPLICATION IN THE PUBLIC ISSUE OF THE ASS ESSEE COMPANY BY GIVING ADDRESS OF THE COMPANY OR ITS CONNECTED PERS ONS. A SUM OF ` 19.90 LAC WAS NOTICED BY THE AO REPRESENTING STOCK INVEST S. SIMILARLY, AO HAD OBTAINED STOCK INVESTS FORM FROM ACCOUNT NO. 120 TO 218 FROM STATE BANK OF SAURASHTRA, PATPARGANJ, NEW DELHI IN RESPECT OF APPLICATION IN THE PUBLIC ISSUE OF THE COMPANY. THE AO HAS NOTICED SUC H DETAILS ON PAGES NO. 9-12 OF THE BLOCK ASSTT. ORDER. FROM THE PERUSA L OF THE STOCK-INVEST APPLICATION, IT REVELED TO THE AO THAT IN THE STOCK - INVEST PAY AND ISSUE REGISTER, THE NAME OF THE INVESTOR APPLICANT WAS SH RI R.K. AGGARWAL, DIRECTOR OF THE ASSESSEE COMPANY. THE AO FURTHER OB SERVED THAT IN A LARGE NUMBER OF APPLICATIONS FOR ISSUE OF STOCK-INVEST TH E NAME OF THE APPLICANT WAS FILLED IN THE HAND WRITING OF SHRI TARUN AGGARW AL SON OF SHRI J.B. AGGARWAL, DIRECTOR OF THE COMPANY. THE AO TOOK THE HELP OF HANDWRITING EXPERT AND TOOK INTO CONSIDERATION THE LEDGER FOLIO ACCOUNT. ON THE STRENGTH OF THESE EVIDENCE, HE OBSERVED THAT ALL TH E STOCK INVEST WERE PURCHASED IN CASH. UN-ALLOTTED STOCK INVESTS WERE P AID TO THE EMPLOYEES ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 11 OF THE COMPANY AFTER THE VALIDITY OF THE EXPIRY DAT E. THE VALUE OF SUCH ENTRIES IS ` 21.80 LACS. THE AO MADE THE ADDITION O F THIS AMOUNT WITH THE HELP OF SECTION 68. SIMILAR IS THE POSITION WITH RE GARD TO SHARE APPLICATION REPRESENTING A SUM OF ` 27.40 LACS. 12. ON APPEAL, LD. FIRST APPELLATE AUTHORITY HAS CO NFIRMED THE ADDITION AFTER ELABORATE DISCUSSION ON THE ISSUES THE CONCLU DING PARAGRAPH ON PAGE 24 OF THE LD. CIT(A)S ORDER READ AS UNDER :- THE RATIO IN THE ABOVE MENTIONED REASONS IS CLEARL Y APPLICABLE IN THIS CASE. IN THE PRESENT CASE, THE SO CALLED SHARE APPLICANTS APPLIED FROM THE RESIDENTIAL PREMISES OR THE BUSINESS PREMI SES OF THE ASSESSEE CO. THEY CAME FROM FAR OFF PLACES FROM ALL OVER THE COUNTRY TO DELHI TO APPLY FOR THE SHARES OF THE ASSESSEE CO . THEY CAME TO THE SAME BANK AND PURCHASED DRAFTS HAVING CONSECUTIVE N UMBERS. THEIR SHARE APPLICATION FORMS WERE FILLED BY THE DIRECTOR S/EMPLOYEES OF THE ASSESSEE CO. THESE PERSONS WERE NOT FOUND AT TH E ADDRESSES GIVEN IN THE SHARE APPLICATION FORMS. THE BLANK SHA RE TRANSFER DEEDS SIGNED BY THEM ALONGWITH ACKNOWLEDGEMENT SLIPS WERE FOUND AT THE PREMISES OF THE ASSESSEE. SIMILARLY, IN SOME CASES EVEN THE SHARE CERTIFICATES WERE FOUND AT THE PREMISES OF THE ASSE SSEE. THEREFORE, CONSIDERING THE SURROUNDING CIRCUMSTANCES AND APPLY ING THE TEST OF HUMAN PROBABILITY AS ENUNCIATED BY THE HONBLE SUPR EME COURT IN THE ABOVE MENTIONED CASE, THE AO HAD RIGHTLY CONCLU DED THAT THESE ENTIRE TRANSACTIONS WERE NOT GENUINE AND HE HAD RIG HTLY INVOKED THE PROVISIONS OF SECTION 68 OF THE I.T. ACT, 1961. THE REFORE, THE ADDITIONS OF ` 19.90 LACS, 21.60 LACS AND 27.40 LAC S AGGREGATING TO ` 68.90 LACS U/S 68 MADE BY THE AO ARE UPHELD. 13. WITH THE ASSISTANCE OF LD. REPRESENTATIVE, WE H AVE GONE THROUGH THE RECORD CAREFULLY. LD. COUNSEL FOR THE ASSESSEE WAS UNABLE TO ADVANCE ANY ARGUMENTS CONTRARY TO THE FINDING OF FACTS RECO RDED BY THE LD. CIT(A). HE WAS UNABLE TO DISCHARGE THE ONUS CONTEMPLATED BY SECTION 68 OF THE INCOME TAX ACT. THE ASSESSEE COULD NOT GIVE THE IDE NTITY OF THE PERSONS WHO MADE APPLICATION FOR STOCK-INVEST SHARE APPLICA TION ETC. AFTER GOING ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 12 THROUGH THE WELL REASONED ORDER OF THE LD. CIT(A), WE DO NOT FIND ANY GROUND TO INTERFERE IN IT. THIS GROUND OF APPEAL IS REJECTED. 14. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO C HARGING OF INTEREST U/S 234A AND 234B OF THE INCOME TAX ACT. IT IS CONS EQUENTIAL IN NATURE HENCE THIS GROUND OF APPEAL IS REJECTED. 15. IN THE NEXT GROUND OF APPEAL, ASSESSEE HAS PLEA DED THAT LD. COMMISSIONER HAS FAILED TO APPRECIATE THAT REQUEST MADE BY THE AUTHORIZED REPRESENTATIVE THE ASSESSEE TO THE AO TO TREAT THE RETURN FILED U/S 139 AS RETURN FILED IN RESPONSE TO NOTICE U/S 1 48 AS WELL AS HAS NOT BEEN VALIDLY REJECTED. 16. FROM PERUSAL OF THE LD. FIRST APPELLATE AUTHORI TIES ORDER, IT REVEALED THAT LD. CIT(A) HAS DULY CONSIDERED THIS I SSUE AND ARRIVED AT A CONCLUSION THAT IN RESPONSE TO THE NOTICE DATED 27. 3.2002 U/S 148 ASSESSEE HAD NOT MADE ANY REQUEST FOR TREATING THE ORIGINAL RETURN AS FILED IN RESPONSE TO THE NOTICE U/S 148 TILL 27.1.2003. A CCORDING TO THE LD. CIT(A), THE RECORD INDICATE THAT RETURN IN RESPONSE TO THE NOTICE U/S 148 WAS FILED ON 27.1.2003. THEREFORE, AO HAS RIGHTLY T AKEN THE DATE OF FILING OF RETURN AS 27.1.2003 WHILE LEVYING THE INTEREST U /S 234A. LD. COUNSEL FOR THE ASSESSEE COULD NOT REBUT THIS FINDING OF FACT R ECORDED BY THE LD. CIT(A). ACCORDINGLY, THIS GROUND OF APPEAL IS ALSO REJECTED. 17. NOW, WE TAKE THE APPEAL OF REVENUE. THE SOLITAR Y GRIEVANCE OF THE REVENUE IS THAT LD. CIT(A) HAS ERRED IN GRANTING TH E DEPRECIATION AMOUNTING TO ` 67,92,680/- BY HOLDING THAT THE COMP ANY STARTED COMMERCIAL PRODUCTION W.E.F. 23.3.1995. IN SUPPORT OF THIS GROUND OF ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 13 APPEAL, IT IS PLEADED BY THE REVENUE THAT LD. FIRST APPELLATE AUTHORITY HAS ADMITTED ADDITIONAL EVIDENCE AND HAS IGNORED THE ST ATEMENT OF SHRI SANJAY SRIVASTAVA, WHO IS A WORKS MANAGER OF THE CO MPANY . THIS STATEMENT WAS GIVEN BY HIM U/S 132(4) ON OATH ON 20 .3.1996. IN THE STATEMENT HE HAS DEPOSED THAT OPERATION OF THE PLAN T WAS STARTED SOMETIME IN APRIL, 1995. THE REVENUE HAS FURTHER P LEADED THAT ASSESSEE AT THE RELEVANT TIME WAS HAVING POWER LOAD OF 350 KV WHEREAS THE PLANT AND MACHINERY IMPORTED BY IT COULD BE RUN ONLY ON 5 00 KVA OR ABOVE POWER LOAD. THUS, THERE WAS NO OCCASION FOR THE ASS ESSEE TO DEMONSTRATE THAT MACHINERY WAS PUT TO USE PRIOR TO 31 ST MARCH, 1995. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF LD. CIT(A) AND SUBMITTED THAT LD. FIRST APPELLATE AUTHORITY HAS CA LLED FOR REMAND REPORT FROM THE AO WHICH WAS GIVEN BY THE AO ON 5 TH APRIL, 2004. 18. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AN D GONE THROUGH THE RECORD CAREFULLY.THE ASSESSEE HAS CLAIMED A DEPRECI ATION OF ` 67,92,780/-. IT WAS CLAIMED ON THE METALISING PLANT ON THE GROUN D THAT COMMERCIAL PRODUCTION HAD STARTED ON 28.3.1995. LD. AO HAS DIS ALLOWED THE DEPRECIATION AT ` 51,24,939/-. ACCORDING TO THE LD. CIT(A), THE ACTUAL DISALLOWANCE SHOULD BE ` 67,92,780/-. THE DISALLOWA NCE HAS BEEN MADE BY THE AO MAINLY ON THE GROUND THAT DURING THE COURSE OF SEARCH OPERATION AT THE FACTORY PREMISES OF THE ASSESSEE COMPANY, STATE MENT OF SHRI SANJAY SRIVASTAVA, WORKS MANAGER WAS RECORDED U/S 132 (4) OF THE ACT. HE MADE REFERENCE TO THE QUESTION AND THE REPLY GIVEN BY SH RI SANJAY SRIVASTAVA. ACCORDING TO THE AO, THE NEW PLANT AND MACHINERY CO ULD BE RUN BY A POWER LOAD OF MORE THAN 500 KVA. THE ASSESSEE WAS N OT HAVING THIS MUCH OF POWER LOAD BEFORE 31 ST MARCH AND, THEREFORE, IT CANNOT BE CONCLUDED THAT ASSESSEE WAS ABLE TO PUT THE MACHINERY ON USE BEFORE 31 ST MARCH. THE LD. FIRST APPELLATE AUTHORITY HAS MADE AN ELABO RATE DISCUSSION ABOUT THE EVIDENCE PRODUCED BY THE ASSESSEE AS WELL AS TH E REASONS ASSIGNED ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 14 BY THE AO. WE DEEM IT APPROPRIATE TO MAKE REFERENCE OF THE ORDER OF LD. CIT (A) WHICH READ AS UNDER :- 3.6 COMING TO THE MERITS OF THE ADDITION, THE MAIN PLANK OF AOS ARGUMENT FOR DISALLOWING THE DEPRECIATION IS THE ST ATEMENT OF SHRI SANJAY SRIVASTAVA, WORKS MANAGER, RECORDED DUR ING THE COURSE OF SEARCH OPERATIONS. HOWEVER, THE ISSUE REG ARDING ALLOWABILITY OF DEPRECIATION HAS TO BE DECIDED NOT ONLY ON THE BASIS OF THE STATEMENT OF SHRI SRIVASTAVA BUT ON TH E TOTALITY OF CIRCUMSTANCES AND THE EVIDENCE PLACED ON RECORD DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. THE STATEMENT HAS TO BE WEIGHED AGAINST THE VARIOUS EVIDENCES FILED BY THE ASSESSEE TO PROVE THAT THE MACHINERY WAS PUT TO USE BEFORE 3 1.3.95. THE VITAL DOCUMENT IN THIS REGARD WAS FILED BY THE ASSESSEE BEFORE THE AO VIDE HIS LETTER DATED 17.3.03. THIS I S A LETTER FROM ADDL. DIRECTOR, INDUSTRIES, GOVERNMENT OF UP, NOIDA, GAUTAM BUDH NAGAR ADDRESSED TO THE COMMERCIAL TAX AUTHORITIES, NOIDA WITH REGARD TO THE EXEMPTION FRO M COMMERCIAL TAX TO THE NEWLY SET UP INDUSTRIAL UNITS IN THE STATE OF UP. IN THIS CERTIFICATE IT HAS BEEN CLEARLY MENT IONED THAT THE DATE OF START OF PRODUCTION BY THE ASSESSEE CO. IS 27.03.1995. ALTHOUGH THIS CERTIFICATE WAS FILED BEFORE THE AO B UT HE HAD CHOSEN NOT TO SAY ANYTHING ON THE CERTIFICATE IN TH E ASSESSMENT ORDER. HE HAS COMPLETELY IGNORED THIS VI TAL PIECE OF EVIDENCE PLACED BEFORE HIM BY THE ASSESSEE. THE INDUSTRIES DEPARTMENT OF THE U.P. GOVERNMENT IS AN INDEPENDENT AUTHORITY AND IT WOULD NOT HAVE ISSUED SUCH CERTIFI CATE WITHOUT SATISFYING ITSELF ABOUT THE ACTUAL STATE OF AFFAIRS . THEREFORE, THIS CERTIFICATE CANNOT BE SIMPLY BRUSHED ASIDE TO DETERMINE THE ISSUE AS TO WHETHER THE PRODUCTION REALLY START ED BEFORE 31.03.1995 OR NOT. ON THE OTHER HAND, THE STATEMENT OF SHRI SANJAY SRIVASTAVA DURING THE COURSE OF SEARCH IS NO T SUPPORTED ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 15 BY ANY EVIDENCE ON RECORD. FROM THE PERUSAL OF THE ASSESSMENT RECORD IT IS ALSO NOTICED THAT ALONGWITH ITS REPLY DATED 27.1. 2003 FILED BEFORE THE AO THE ASSESSEE E NCLOSED VARIOUS EVIDENCES IN SUPPORT OF ITS CONTENTION REGA RDING USE OF MACHINERY BEFORE 31.3.1995. THIS ALSO CONTAINS A CE RTIFICATE DATED 29.08.1995 ISSUED BY THE SUPERINTENDENT CENTR AL EXCISE-VIII, DIVISION-II, NOIDA WHEREIN IT WAS MENT IONED THAT THE METALIZING PLANT IMPORTED BY THE ASSESSEE CO. V IDE BILL OF ENTRY DATED 30.11.1944 WAS INSTALLED AT THE ASSESSE ES FACTORY AT NOIDA AND THE FACTORY CAME INTO PRODUCTION ON 28 .3.1995. THE GOODS PRODUCED BY THE ASSESSEE ARE EXCISABLE GO ODS AND COME WITHIN THE PURVIEW OF THE CENTRAL EXCISE DEPAR TMENT. THEREFORE, THE CERTIFICATE ISSUED BY THE CENTRAL EX CISE AUTHORITIES TO THE EFFECT THAT THE PRODUCTION HAD S TARTED ON 28.03.1955 ALSO CANNOT BE TAKEN LIGHTLY, AS IT IS A CERTIFICATE ISSUED BY A GOVERNMENT AUTHORITY AND A NON-INTEREST ED PARTY. 3.7 FURTHER, IT HAS BEEN STATED BY THE AO THAT SINC E THE REQUIRED POWER CAPACITY TO RUN THE MACHINERY WAS 500KVA WHER EAS THE POWER CONNECTION WAS FOR A CAPACITY OF 350KVA, THE PRODUCTION COULD NOT HAVE TAKEN PLACE. IN THIS REGA RD, IT MAY BE MENTIONED THAT THE ASSESSEES CONTENTION THAT IT HAD DRAWN IN EXCESS OF SANCTIONED LOAD WHICH ATTRACTED PENALT Y IN THE SHAPE OF ADDITIONAL CHARGES FOR THE PERIOD OF MARCH , 1995 TO DECEMBER, 1995 STANDS PROVED BY THE COPIES OF THE B ILLS OF UPSEB PLACED ON RECORD BY THE ASSESSEE VIDE ITS LET TER DATED 13.3.2003. IN THE BILLS FROM SEPTEMBER TO DECEMBER, 1995, IT HAS BEEN CLEARLY MENTIONED THAT THE ADDITIONAL CHAR GES FOR EXCESS DEMAND EXCEEDING THE CONTRACTED DEMAND @ ` 1 85 PER KVA ON 106 KVA. HOWEVER, FOR THE PERIOD 27.3.19 95 TO AUGUST 1995 THERE IS A CONSOLIDATED BILL ISSUED BY THE UPSEB WHICH HAS NOT SPELT OUT THE ACTUAL MAXIMUM DEMAND A ND ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 16 EXCESS DEMAND IN KVA BUT HAS CHARGED ADDITIONAL CHA RGES OF ` 2,38,897.86 @25% ON ESTIMATED BASIS ON ACCOUNT OF E XCESS DRAWAL OF POWER BY THE ASSESSEE FROM THE PERIOD 27. 03.1995 TO AUGUST, 1995. THESE BILLS INDICATE THAT THE ASSE SSEE HAD DRAWN EXCESS POWER LOAD THAN THE SANCTIONED POWER L OAD FROM 27.3.1995 ONWARDS. THEREFORE, THE AOS CONTENTION T HAT WITH SANCTIONED POWER LOAD OF 350KVA THE MACHINERY COULD NOT BE PUT TO USE IS NOT CORRECT. IN FACT, FROM THE DOCUME NTS FILED BY THE ASSESSEE BEFORE THE AO VIDE ITS LETTER DATED 13 .3.2003 IT IS NOTICED THAT THE ADDITIONAL POWER LOAD OF 150KVA WA S SANCTIONED TO THE ASSESSEE CO. VIDE UPSEB LETTER DA TED 20.04.1996. IF THE AOS CONTENTION THAT WITHOUT SAN CTIONED POWER LOAD OF 500KVA THE MACHINERY COULD NOT BE PUT TO USE THEN IT CAN BE SAID THAT THE MACHINERY WAS NOT USED TILL 20.04.1996. IN OTHER WORDS, IT MEANS THAT EVEN IN T HE AY 1996-97 THE PLANT AND MACHINERY WAS NOT PUT TO USE. THIS CONCLUSION WILL BE ABSOLUTELY UNREASONABLE IN VIEW OF THE FACT THAT IN THE AY 1996-97 THE PRODUCTION AND SALE SHOW N BY THE ASSESSEE HAVE BEEN ACCEPTED BY THE AO. 3.8 AS REGARDS THE AOS OBSERVATION THAT THE ISSUE ANALYSIS REPORT FOR THE COMPANYS PUBLIC ISSUE PREPARED BY M/S. R.R . INVESTMENT & RESEARCH AND INFORMATION CENTRE INDICA TED THAT THE COMMERCIAL PRODUCTION WAS SCHEDULED FROM APRIL, 1995, THIS WAS ONLY AN ANTICIPATION AND A FORECAST AND NO T AN ACTUAL REALITY. SIMILARLY, THE MENTION IN THE PROSPECTUS T HAT THE CO. HAD NOT RECEIVED THE POLLUTION CLEARANCE CERTIFICAT E IS NOT OF ANY CONSEQUENCE AS THE ASSESSEE HAS PLACED ON RECOR D BEFORE THE AO A COPY OF THE POLLUTION CLEARANCE CERTIFICAT E DATED 14.02.1995 ISSUED BY THE UP POLLUTION CONTROL BOARD . A COPY OF THE SAME WAS PLACED BY THE AR ON PAGE 227 OF THE PA PER BOOK. THEREFORE, NO ADVERSE INFERENCE CAN BE DRAWN IN RESPECT ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 17 OF THE SAME ALSO. FROM THE PERUSAL OF THE TAX AUDIT REPORT FILED IN THE PAPER BOOK IT IS NOTICED THAT ON PAGE 19 THE AUDITORS HAVE GIVEN THE QUANTITATIVE DETAILS IN RESPECT OF T HE PURCHASES, SALES, RAW MATERIAL CONSUMED AND PRODUCT ION. THE TOTAL PRODUCTION OF METALIZED PLASTIC FILM HAS BEEN SHOWN AS 1049.80 KG OUT OF WHICH 431 KG IS SHOWN TO HAVE BEE N SOLD AND THE BALANCE QUANTITY OF 618.80 KG VALUED AT ` 1 ,23,760/- HAS BEEN SHOWN AS CLOSING STOCK. THIS CLOSING STOCK OF FINISHED GOODS APPEARS IN SCHEDULE 5 OF THE AUDITED ACCOUNTS AT PAGE 14 OF THE PAPER BOOK. THE AO HAS NOT CHALLENGED THE CORRECTNESS OF THE CLOSING STOCK OF FINISHED GOODS AND THE SAME HAS BEEN ACCEPTED BY HIM AS CORRECT WITHOUT GI VING ANY ADVERSE COMMENTS ABOUT THE SAME. IN THE BLOCK ASSES SMENT ORDER THE AO HAS DOUBTED THE SALES MADE TO M/S ZARI UDYOG IN THE MONTH OF MARCH 1995. BUT AS REGARDS SALES TO M/ S AJIT POLYESTER METALIC LTD. , THE AO DID NOT BRING ANY E VIDENCE ON RECORD TO PROVE THAT THE SALES MADE TO THIS PARTY W ERE NOT GENUINE. HE HAS SIMPLY STATED THAT THE CONFIRMATION FROM THIS PARTY WAS NOT FILED. THE ASSESSEE HAD FILED A COPY OF THE SALE BILL IN RESPECT OF SALES TO THIS PARTY. THE PAYMENT AGAINST THIS SALE WAS RECEIVED BY CHEQUE. THERE IS NOTHING ON RE CORD TO PROVE THAT THE SALES MADE TO THIS PARTY WERE NOT GE NUINE. THE AO HAS FURTHER MENTIONED IN THE IMPUGNED ORDER THAT THE ASSESSEE HAD ONLY FILED CIRCUMSTANTIAL EVIDENCE FOR CLAIM OF DEPRECIATION. THIS OBSERVATION OF THE AO IS NOT COR RECT IN VIEW OF THE EVIDENCE LIKE LETTER OF THE ADDL. DIRECTOR O F INDUSTRIES, UP GOVERNMENT AND THE CERTIFICATE OF THE CENTRAL EX CISE AUTHORITIES REGARD PRODUCTION IN THE FACTORY BEFORE 31.3.95 WHICH HAS BEEN DISCUSSED IN THE EARLIER PARAS. 3.9 IN VIEW OF THE DISCUSSIONS IN THE FOREGOING PARAGRA PHS AND THE EVIDENCE ON RECORD THE AOS OBSERVATIONS THAT THE M ACHINERY ITA NOS. 427, 685/DEL/05 A.Y. 1995-96 18 WAS NOT PUT TO USE BEFORE 31.3.1995 IN MY VIEW IS N OT CORRECT. THE INDEPENDENT EVIDENCE OF SEVERAL GOVERNMENT DEPARTMENTS INDICATING THE USE OF MACHINERY BEFORE 31.3.1995 JUSTIFIES THE ASSESSEES STAND THAT THE PLANT AND M ACHINERY WAS PUT TO USE BEFORE 31.3.1995. THEREFORE, THE AO WAS NOT JUSTIFIED IN DISALLOWING THE DEPRECIATION ON THE PL ANT AND MACHINERY. ACCORDINGLY, THE DISALLOWANCE MADE BY TH E AO IS DELETED. 19. LD. CIT(A) HAS NOT ENTERTAINED ANY EVIDENCE IN VIOLATION TO RULE 46A. HE HAS DULY GRANTED OPPORTUNITY TO THE AO FOR CONTR OVERTING THE EVIDENCE TAKEN ON RECORD. THEREFORE, AFTER GOING THROUGH HIS FINDING EXTRACTED SUPRA, WE DO NOT SEE ANY REASON TO INTERFERE IN IT. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DEVOID OF ANY MERIT IT IS DISMISS ED. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY 2012. SD/- SD/- [B.C. MEENA] [B.C. MEENA] [B.C. MEENA] [B.C. MEENA] [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED: 31 ST JANUARY, 2012 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DE PUTY REGISTRAR, ITAT