M/s. Harsh Engineering, Jaysingpur V. Addl. JCIT Sp.Range-1, Kolhapur

ITA 720/PUN/2001

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62728 (ITAT-PUNE)
• Duration Of Justice: 10 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2012
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 05-03-2012
• Assessment Year: misc
• Appeal Filed On: 23-05-2001
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: SUNIL U PATH AK
• Keywords: Bogus purchase; Unexplained expenditure; Depreciation; Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Peak credit; Question of law; Assessment record; Block assessment; Documents seized; Unabsorbed depreciation
• Section: 131; 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NOS. 720/PN/2001 (BLOCK PERIOD : 1988-89 TO 1998-99 ) (01-04-1987 TO 25-03-1998) M/S. HARSH ENGINEERING 102 A, L.K. AKKIWATE INDUSTRIAL ESTATE, JAYSINGPUR. ... APPELLANT VS. ADDL. CIT SP. RANGE-I, KOLHAPUR RESPONDENT & ITA NO. 697/PN/2001 (BLOCK PERIOD : 1988-89 TO 1998-99 ) (01-04-1987 TO 25-03-1998) ADDL. CIT SP. RANGE-I KOLHAPUR APPELLANT VS. M/S. HARSH ENGINEERING 102 A, L.K. AKKIWATE INDUSTRIAL ESTATE, JAYSINGPUR. RESPONDENT ASSESSEE BY : SHRI. SUNIL U. PATHAK DEPARTMENT BY : SHRI S.K. SINGH DATE OF HEARING : 05-03-2012 DATE OF PRONOUNCEMENT : 03-05-2012 ORDER PER R.K. PANDA, AM THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AND ARE DIRECTED AG AINST THE ORDER DATED 15-03- 2001 OF THE CIT(A), KOLHAPUR RELATING TO BLOCK PERI OD 01-04-1987 TO 25-03-1998. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FIRM IS A MEMBER OF THE KULKARNI GROUP OF CONCERNS. IN 1987, BUSINESS IN T HE NAME AND STYLE OF M/S. HARSH ENGINEERING WAS STARTED AS A PROPRIETORSHIP C ONCERN OF SRI RATNAKAR G.KULKARNI. THE SAID PROPRIETORSHIP WAS CONVERTED INTO A PARTNERSHIP WITH EFFECT FROM 01-07-1993 WHEN SRI RAMESH G KULKARNI JOINED I T AS A PARTNER. THE 2 ASSESSEE FIRM IS ENGAGED MAINLY IN TRADING IN IRON SCRAP WHICH IS BASICALLY CAST IRON SCRAP AND BORING SCRAP. THE ASSESSEE FIRM PUR CHASES SCRAP FROM LOCAL SCRAP DEALERS, MACHINE SHOPS AND PETTY HAWKERS AND SUPPLI ES THE SAME TO ITS GROUP CONCERNS M/S. SUPER CRAFT FOUNDRY AND SRI GANESH FOUNDRY. THE ASSESSEE HAS ALSO CARRIED ON JOB WORK OF ANOTHER SISTER CONCERN SWIFT ENTERPRISES PVT. LTD. 3. SEARCH AND SEIZURE OPERATIONS WERE CARRIED OUT A T THE PREMISES OF THE CONCERNS OF THE KULKARNI GROUP INCLUDING THAT OF TH E ASSESSEE ON 25-03-1998 DURING WHICH A NUMBER OF BOOKS OF ACCOUNT, LOOSE PA PERS, AND DOCUMENTS ETC. WERE SEIZED. THESE INCLUDED BANK PASS BOOKS AND CH EQUE BOOKS OF THE BELOW NAMED PARTIES, SEIZED FROM THE CUSTODY OF THE ACCOU NTANT OF THE ASSESSEE FIRM SRI A.D. PATIL, WHO HAD ALSO REPORTEDLY OPERATED THE BA NK ACCOUNTS : PARTYS NAME PROPRIETORS NAME 1. M/S. G.N. INDUSTRIES - SRI B. N. JOSHI 2. M/S. GANESH TRADERS - SRI PRABHAKAR PUJARI 3. M/S. MAHESH SALES CORPORATION - SRI MAHESH V. P UJARI 4. M/S. ANIL INDUSTRIES - SRI A.D. PATIL 5. M/S. OMEGA TRADERS - SRI SURENDRA HOGADE 6. SRI VAISHALI ENTERPRISES - SOU. PATIL 7. M/S. OMKAR TRADERS - SRI UCHGAONKAR 4. DURING THE COURSE OF SEARCH OPERATIONS THE REVEN UE AUTHORITIES REPORTEDLY RECORDED STATEMENTS OF THE ABOVE NAMED S/SHRI B N J OSHI, PRABHAKAR V PUJARI AND MAHESH V PUJARI, THE ALLEGED PROPRIETORS OF THE ABO VE SAID M/S. G N INDUSTRIES, M/S. GANESH TRADERS AND M/S. MAHESH SALES CORPORATI ON RESPECTIVELY. THESE PERSONS ADMITTED THAT THEY KNEW NOTHING ABOUT AND H AD NO CONNECTION WITH THE ALLEGED BUSINESSES CONDUCTED IN THEIR NAMES. THEY ALSO ADMITTED THAT THEY HAD KNOWN THE PARTNERS OF THE ASSESSEE FIRM AND IT WAS ONLY TO ACCOMMODATE THE PARTNERS THAT THEY HAD ALLOWED THEIR NAMES TO BE US ED FOR OPENING BANK ACCOUNTS IN THE NAMES OF THE SAID PROPRIETORSHIPS. THEY ALS O CLARIFIED THAT THEY HAD SIGNED BLANK CHEQUE BOOKS AND HAD HANDED THE SAME OVER TO THE PARTNERS FOR SUCH FURTHER USE AS THE PARTNERS MIGHT CONSIDER NECESSARY. SRI RATNAKAR G KULKARI AND SRI RAMESH G KULKARNI ALSO ADMITTED THAT THE ABOVE SAID PROPRIETORSHIP CONCERNS HAD BEEN FLOATED/CREATED FOR THEIR BUSINESS PURPOSES. 3 5. THE ASSESSEE CLAIMED THAT THE ABOVE MENTIONED S EVEN BOGUS CONCERNS HAD BEEN FLOATED FOR CONVENIENCE OF ACCOUNTING TRANSACT IONS AND OPERATIONS. THE ASSESSEE ALSO CLAIMED THAT DUE TO MARKET COMPULSION S A SUBSTANTIAL PORTION OF THE SCRAP HAS TO BE PURCHASED FROM PETTY HAWKERS. IT W AS EXPLAINED THAT THESE HAWKERS ARE UNEDUCATED, HAVE NO PERMANENT ADDRESS, DO NOT ACCEPT PAYMENT THROUGH CHEQUE/DD AND ARE NOT IN A POSITION TO ISSU E REGULAR INVOICES/VOUCHERS THAT MAY STAND THE TEST OF SCRUTINY. IT WAS FOR THI S REASON THAT THE ASSESSEE FIRM HAD FLOATED THE ABOVE SAID CONCERNS WITH THE HELP OF KN OWN PERSONS SO THAT PURCHASES COULD BE SHOWN TO HAVE BEEN MADE FROM THEM. IT WAS CLAIMED THAT THIS PLOY HAD WORKED SUCCESSFULLY OVER THE YEARS AND WHENEVER THE OCCASION DEMANDED THE PURCHASES COULD BE EXPLAINED SATISFACTORILY TO THE AUDITORS ETC., AS PAYMENTS HAD BEEN MADE THROUGH CHEQUES/DDS AND THE PARTIES COULD BE SHOWN TO BE IDENTIFIABLE. THE ASSESSEE ALSO SOUGHT TO EXPLAIN THAT IT WAS FOR THIS REASON THAT SALES TAX REGISTRATIONS HAD BEEN OBTAINED FOR THE S EVEN BOGUS CONCERNS. 6. THE ASSESSEE CONTENDED THAT THE ABOVE WAS JUST A N ARRANGEMENT AND IN REALITY THE BOGUS CONCERNS DID NOT DO ANY PURCHASES /SALE OF SCRAP. IT WAS ALSO CONTENDED THAT THE PAYMENTS SHOWN TO HAVE BEEN MADE TO THEM WERE IN FACT WITHDRAWN FROM THEIR BANK ACCOUNTS AND WERE UTILIZE D FOR THE PURPOSES OF PURCHASING THE SCRAP FROM HAWKERS, WHOSE IDENTITY C OULD NOT BE ESTABLISHED FULLY. THE ASSESSEES PLEA WAS THAT EVEN IF IT HAD OBTAINE D CASH VOUCHERS REGARDING PURCHASE OF SCRAP FROM THESE HAWKERS THE ASSESSING OFFICER MAY NOT HAVE BELIEVED THE GENUINENESS OF THE PURCHASES. AS SUCH , IT WAS CLAIMED THAT THE ASSESSEE HAD RESORTED TO THIS PARTICULAR TECHNIQUE WHEREBY PURCHASES MADE FROM ROAD SIDE HAWKERS HAD BEEN GIVEN THE GARB OF PURCHA SES MADE FROM THE SAID SEVEN BOGUS CONCERNS. 7. ON THE BASIS OF THE FOLLOWING DETAILS, CULLED OU T FROM THE ASSESSEES BOOKS OF ACCOUNT, THE ASSESSING OFFICER NOTED THAT OVER T HE YEARS A VERY SUBSTANTIAL PART (63.18%) OF THE ASSESSEES PURCHASES WAS MADE FROM THE ABOVE NAMED SEVEN BOGUS CONCERNS THE DETAILS OF WHICH ARE AS UNDER : TOTAL PURCHASES PURCHASES FROM FICTITIOUS CONCERNS A.Y. WEIGHT (MT) AMOUNT IN RS. WEIGHT (MT) AMOUNT I N RS. 95-96 1197.505 64,72,957.79 651.084 34,22,284.40 95-96 2217.886 1,22,08,964.24 1240.686 68,03,683.70 4 96-97 3117.245 1,70,03,873.40 1989.990 1,08,16,160.70 97-98 3330.085 1,77,82,603.80 2220.450 1,17,92,058.62 98-99 883.965 50,39,105.86 726.065 41,29,441.86 TOTAL 10746.686 5,85,07,505.09 6828.275 3,69,63,629.34 8. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROV E THAT SCARP PURCHASED FROM THE ABOVE SAID SEVEN FICTITIOUS CONCERNS WAS R EAL AND MATERIAL HAD ACTUALLY BEEN RECEIVED. THE ASSESSEE REITERATED THE SUBMISS IONS BROUGHT OUT ABOVE. 9. THE ASSESSEE STRESSED THAT THE PURCHASES WERE AC TUALLY MADE FROM PETTY HAWKERS WITH NO PROPER ADDRESSES ETC. THE PURCHASE S WERE GENUINE BUT IT WAS NOT POSSIBLE TO IDENTIFY/LOCATE THE REAL SUPPLIERS AND PRODUCE THEM FOR CONFIRMATION ETC. IT WAS CLAIMED THAT PROOF OF GENUINENESS OF P URCHASES LAY IN CERTAIN ASCERTAINABLE FACTS. IT POINTED OUT THAT IT HAD AC TUALLY PAID TO THE FICTITIOUS CONCERNS AND SUCH PAYMENT WAS VERIFIABLE. IT ALSO CLAIMED THAT IMMEDIATELY AFTER THE PURCHASES HAD BEEN MADE SCRAP HAD BEEN SOLD TO ASSESSEES ASSOCIATE FOUNDRY UNITS (SUPER CRAFT FOUNDRY) & (SHRI GANESH FOUNDRY PRIVATE LIMITED) AND EVIDENCE OF SUCH SALES WAS CLEARLY DISCERNIBLE FROM THE BOOKS OF THESE FOUNDRIES. THE ASSESSEE STRESSED THAT THE TWO FOUNDRIES HAD TO COMPLY WITH RATHER STRICT PROVISIONS OF EXCISE AND SALES TAX AND IF PURCHASES WERE ACTUALLY SHOWN TO HAVE BEEN MADE FROM HAWKERS, LIVING IN HUTMENT AREAS WIT H NO PROPER ADDRESS ETC., THERE WOULD HAVE BEEN SERIOUS PROBLEMS OF DOCUMENTA TION. THE ASSESSEE CLAIMED THAT THESE PROBLEMS WERE AVOIDED THROUGH PURCHASES SHOWN TO HAVE BEEN MADE FROM THE FICTITIOUS CONCERNS. THE ASSESSEE CLAIMED THAT REGULAR RETURNS HAVE BEEN FILED BY IT AS ALSO BY THE ASSOCIATE FOUNDRY UNITS AND IT WAS OBVIOUS THAT THERE WAS ABSOLUTELY NO MALAFIDE INTENTION BEHIND THE WHOLE A RRANGEMENT. IT WAS ARGUED THAT THE ARRANGEMENT, IF ANY, DID NOT COMPRISE OF M ERE PAPER TRANSACTIONS BUT INVOLVED REAL TRANSFER (PURCHASE/SALE) OF GOODS. 10. DESPITE REPEATED OPPORTUNITIES GIVEN BY THE AO TO PRODUCE THE HAWKERS AND UNREGISTERED DEALERS FROM WHOM SCRAPS ARE CLAIM ED TO HAVE BEEN PURCHASED FOR VERIFICATION, THE ASSESSEE COULD NOT PRODUCE TH EM. EVEN THEIR NAMES AND ADDRESSES ALSO COULD NOT BE GIVEN. THE PROPRIETORS OF THE 7 BENAMI CONCERNS HAD ALREADY STATED THAT THEY HAVE NOT DONE ANY SCRAP BU SINESS AND THE WHOLE OPERATION IS CONTROLLED AND MASTERMINDED BY THE PARTNERS THEM SELVES. THEREFORE, THE AO WAS OF THE OPINION THAT THIS MECHANISM OF PURCHASE OF SCRAPS THROUGH THE CREATION 5 OF THE BOGUS FIRMS IS WITH A VIEW TO MANIPULATE THE ACCOUNTS AND THEREBY MAKING THE VERIFICATION OF THE ACCURACY AND CORRECTNESS OF THE PURCHASE OF SCRAP MATERIAL DIFFICULT. HE, THEREFORE, WAS OF THE OPINION THAT THE BOOKS OF ACCOUNTS CANNOT BE RELIED UPON AND HAS TO BE REJECTED. IN VIEW OF THE ABOVE AND IN VIEW OF THE VARIOUS DISCREPANCIES FOUND FROM THE SEIZED DOCUMEN TS THE AO PROCEEDED TO DETERMINE THE INCOME ON ESTIMATE BASIS. 11. THE AO NOTED THAT ASSESSEE WAS PURCHASING SCRAP S FROM HAWKERS, PETTY TRADERS AND UNREGISTERED DEALERS IN CASH. THE FIRM HAS SUPPLIED THE NAMES OF 5 TO 6 SUPPLIERS OUT OF WHOM SUMMONS U/S. 131 WERE ISSUE D TO 4 PERSONS AND THEIR STATEMENTS WERE RECORDED. ONE SRI BALASAHEB SHINDE WHO WAS LOOKING AFTER THE PURCHASE OF SCRAPS UPTO APRIL 1997 STATED THAT THER E WERE 8 TO 10 AGENTS THROUGH WHOM THE FIRM WAS COLLECTING/PURCHASING SCRAPS AND FOR THIS COMMISSION OF ABOUT 1% OF THE VALUE OF SCRAP WAS PAID BY THE FIRM. SR I ANAND PANDURANG VEDANTE, WHO ALSO SUPPLIED SCRAPS TO THE FIRM IN FINANCIAL Y EAR 1995-96 AND 1996-1997 HAS STATED THAT HE USED TO GET COMMISSION OF RS.50/ - PER MT WHICH COMES TO ABOUT 1% TO 1.10% OF SCRAP VALUE. SRI SHRIKANT GOP AL BHIDE WHO ALSO SUPPLIED SCRAP TO THE FIRM HAS STATED THAT HE USED TO GET RS . 50 TO RS. 60 PER MT AS COMMISSION WHICH COMES TO SLIGHTLY MORE THAN 1% AS COMMISSION. STATEMENT OF OTHER PERSONS WERE ALSO RECORDED WHO HAVE STATED T HAT THEY USE TO GET COMMISSION FROM 1% TO 1.50%. ACCORDING TO THE AO T HE PREVALENT RATE OF COMMISSION IN SCRAP TRADING WAS 1% TO 2%. ACCORDIN G TO HIM THE COMMISSION @ 2% ON THE PURCHASE OF 6828.275 M.T. VALUED AT RS. 3,69,63629/- COMES TO RS. 7,39,273/-. SINCE THE ASSESSEE HAS NOT DEBITED ANY COMMISSION, THE AO PROPOSED TO ADD THIS AMOUNT AS UNACCOUNTED EXPENDITURE. 12. FROM THE VARIOUS DETAILS SUPPLIED BY THE ASSESS EE THE AO COMPARED THE RATE OF GP FOR ASSESSMENT YEAR 1993-94 TO 1997-98 WHICH IS 8.24%. THE AO COMPARED GP RATE OF ONE M/S. OBEROI TRADERS OF KOLH APUR FOR ASSESSMENT YEAR 1997-98 WHO HAD SHOWN GP RATE OF 10%. REJECTING TH E EXPLANATION GIVEN BY THE ASSESSEE, THE AO APPLIED THE AVERAGE RATE OF 9.24% AND WORKED OUT UNDISCLOSED INCOME AMOUNTING TO RS.6,61,448/-. 13. THE AO SIMILARLY ANALYZED THE LOOSE PAPERS WHIC H WERE SEIZED FROM THE PREMISES OF THE ASSESSEE. THE AO NOTED FROM THE VA RIOUS ENTRIES MADE IN THE LOOSE PAPERS THAT THESE PERTAIN TO VARIOUS TRANSACT IONS ENTERED INTO BY THE ASSESSEE 6 WITH VARIOUS SUPPLIERS OF SCRAP. THE AO FOUND THAT THOSE PAPERS CONTAIN NAMES OF SUPPLIERS AGAINST EACH OF WHOM DIFFERENT AMOUNTS WERE WRITTEN. ON BEING CONFRONTED BY THE AO, IT WAS SUBMITTED THAT THE AMO UNTS ARE THE OUTSTANDING PAYMENTS DUE TO THE SUPPLIERS. THE AO MADE A DETAI LED EXAMINATION OF ENTRIES IN PARA 10 OF BUNDLE NO. 11 OF 11PARTIES AGAINST WHOM AMOUNTS AGGREGATING TO RS. 11,03,195/- AS ON 14-12-1995 WERE MENTIONED. HE NO TED THAT OUT OF THESE 11 PARTIES ONLY 4 APPEARED AS SUPPLIERS IN THE BOOKS O F THE ASSESSEE. FURTHER AMOUNTS DUE TO ONLY 2 SUPPLIERS TALLIED WITH THE ENTRIES MA DE IN BOOKS. THEREFORE, HE WAS OF THE OPINION THAT THE REMAINING AMOUNT OF RS. 9,5 4,941/- BEING UNACCOUNTED PURCHASE HAS TO BE CONSIDERED FOR DETERMINING THE U NDISCLOSED INCOME OF THE ASSESSEE. THE AO FURTHER NOTED THAT SOME ENTRIES W ERE MADE IN OTHER SEIZED PAPERS APPEARING IN BUNDLE NO. 15, (PAGES 26 TO 40) AND LOOSE PAPERS NO. 48, 36 APPEARING IN BUNDLE NO. 11. SIMILARLY, BACKSIDE OF PAGE 7 ON A DIARY (BEARING NO. 2) SEIZED FROM THE OFFICE OF M/S. GANESH FOUND RY INDICATED PASSING OF RS. 4.50 LAKHS BY THE ASSESSEE. 14. IN VIEW OF THE ABOVE, THE AO CAME TO THE CONCLU SION THAT THE FIRM IS DOING PURCHASE AND SALES OUTSIDE THE BOOKS OF ACCOUNTS WH ICH ARE UNACCOUNTED. THE KULKARNI BROTHERS ARE USING THEIR CONCERNS TO GENER ATE UNACCOUNTED INCOME. THE ASSESSEE FIRM HAD FLOATED FICTITIOUS/BENAMIES CONCE RNS IN THE NAMES OF THEIR TRUSTED EMPLOYEES AND RELATIVES AND CLAIMED TO HAV E PURCHASED SCRAPS FROM HAWKERS, PETTY TRADERS AND UNREGISTERED DEALERS THR OUGH THEM. THE ASSESSEE FIRM HAS ISSUED ACCOUNT PAYEE CHEQUES/DEMAND DRAFTS IN F AVOUR OF THESE CONCERNS AND IMMEDIATELY THEREAFTER CASH OF SIMILAR AMOUNTS WER E WITHDRAWN FROM THE BANK ACCOUNTS OF THESE CONCERNS. THE SO CALLED PROPRIET ORS OF THESE CONCERNS HAVE SIMPLY SIGNED THE CHEQUES AND BILLS WITHOUT GETTING INVOLVED IN ACTUAL TRADING ACTIVITIES. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND CONSIDERING THAT IT IS NOT POSSIBLE TO DETERMINE THE CORRECT INCOME DUE TO UNACCOUNTED EXPENDITURE, UNACCOUNTED ADVANCES, UNACCOUNTED COMMISSION, LOWER G.P.ETC., THE AO DETERMINED RS. 1 CRORE AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD WITHOUT ANY YEAR-WISE BIFURCATION. 15. BEFORE THE CIT(A) THE ASSESSEE REITERATED THE S AME SUBMISSIONS AS MADE BEFORE THE AO AND FILED VOLUMINOUS DETAILS CHALLENG ING THE ADDITION MADE BY THE AO. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E, THE LEARNED CIT(A) HELD THAT NO UNDISCLOSED INCOME CAN BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE FOR 7 THE BLOCK ASSESSMENT PERIOD ON ACCOUNT OF PURCHASE OF SCRAPS THROUGH FICTITIOUS FIRMS. THE RELEVANT OBSERVATION OF THE ORDER OF TH E LEARNED CIT(A) READS AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS, MADE BEFORE ME. I HAVE ALSO GONE THROUGH THE CASE LAW RELIED UPON BY THE A SSESSING OFFICER AND ALSO THE APPELLANT. ON FACTS, THERE IS NO DOUBT TH AT THE SEVEN CONCERNS NAMED EARLIER IN PARAGRAPH 2.2 ABOVE ARE FICTITIOUS . THE ASSESSING OFFICERS IMPUTATION IS THE PURCHASES ADMITTEDLY MA DE FROM THESE PARTIES APPEAR TO BE BOGUS. IN THIS CONNECTION REFERENCE I S INVITED TO PAGE 33 OF THE APPELLANTS PAPER BOOK, WHICH IS ATTACHED HERET O AS ANNEXURE-A. THIS PAGE IS ESSENTIALLY A CHART, WHICH GIVES YEAR-WISE QUANTITY/VALUE DETAILS OF PURCHASES MADE BY THE APPELLANT AND SALES MADE TO I TS CUSTOMERS (S G IRON FOUNDRY, SHRI GANESH FOUNDRY PVT. LTD., AND SUPER C RAFT FOUNDRY). THE PRESENT ASSESSING OFFICER HAS CONFIRMED THAT THESE DETAILS APPEAR ON THE ASSESSMENT RECORD AND THE APPELLANT HAD APPARENTLY RELIED UPON THE SAME IN THE COURSE OF THE IMPUGNED BLOCK ASSESSMENT PROC EEDINGS. THE ASSESSING OFFICER HAS NOT DOUBTED THE QUANTITY/VALU E OF THE APPELLANTS ADMITTED SALES. THIS BEING THE CASE IT HAS TO BE B ELIEVED THAT EVEN IF THE SAID SEVEN ALLEGED SUPPLIERS ARE FICTITIOUS THE APP ELLANT MUST HAVE OBTAINED NECESSARY QUANTITIES OF SCRAP FROM SOME OTHER PARTI ES/SOURCES, OTHERWISE IT COULD NOT HAVE MADE SALES OF SCRAP, SHOWN IN ITS BO OKS. IT FOLLOWS THAT DEDUCTION ON ACCOUNT OF SUCH PURCHASES IS DEFINITEL Y DUE TO THE APPELLANT. 4.3 THE ASSESSING OFFICERS CLAIM IS THAT THERE IS AN ELEMENT OF INFLATION INVOLVED IN URD PURCHASES, INCORPORATED IN THE APPE LLANTS BOOKS AS PURCHASES FROM THE ABOVE SAID SEVEN FICTITIOUS CONC ERNS. IN THIS CONTEXT, REFERENCE HAS TO BE MADE TO A COMPARATIVE CHART (PA GE 47 OF THE APPELLANTS PAPER BOOK ATTACHED HERETO FOR READY RE FERENCE AS ANNEXURE- B), GIVING YEAR-WISE DETAILS OF AVERAGE PURCHASE PR ICE OF SCRAP IN RELATION TO TOTAL PURCHASES. THIS CHART ALSO GIVES THE AVER AGE PURCHASE PRICE IN RESPECT OF BREAK UP OF TOTAL PURCHASES INTO RD PURC HASES AND URD PURCHASES IS LOWER THAN THE AVERAGE RATE OF URD PUR CHASES BY RATE OF URD PURCHASES. ON GOING THROUGH THIS CHART IT IS O BSERVED FOR EACH OF THE ASSESSMENT YEARS UNDER CONSIDERATION THE AVERAGE RA TE RD PURCHASES IS LOWER THAN THE AVERAGE RATE OF RD PURCHASES BY A MI NIMUM OF RS. 50/- PER 8 MT FOR ASSESSMENT YEARS 1993-94 TO 1996-97. THE DI FFERENCE IS RS. 31/- FOR ASSESSMENT YEAR 1997-98. ONCE AGAIN IT IS OBSERVED THAT THIS CHART IS AVAILABLE ON THE RECORD OF THE ASSESSING OFFICER AN D WHILE PASSING THE IMPUGNED ORDER HE HAS SIMPLY IGNORED THE MATERIAL C ONTAINED IN IT. NOTHING SPECIFIC HAS BEEN BROUGHT ON RECORD TO SHOW THAT AT ANY SPECIFIC POINTS OF TIME THE PURCHASE PRICE OF SCRAP AS DECLA RED BY THE APPELLANT IN RESPECT OF URD PURCHASES WAS HIGHER THAN THE ONE PR EVAILING IN THE MARKET. THIS BEING THE CASE THE MATERIAL ARRANGEME NT IN THE ABOVE CHART CANNOT BE IGNORED AND HAS TO BE TAKEN INTO ACCOUNT. CONSIDERING THE SAME, IT FOLLOWS THAT BY RESORTING TO AN ARRANGEMENT WHER EBY CASH PURCHASES OF SCRAP WERE ADMITTEDLY INCORPORATED IN BOOKS THROUGH PURCHASES MADE FROM THE FICTITIOUS CONCERNS THE APPELLANT HAS NOT RESOR TED TO ANY APPARENT INFLATION OF PURCHASE. AS SUCH, IT HAS TO BE HELD THAT THE ASSESSING OFFICERS CONCLUSIONS ARE BASED ON PRESUMPTIONS AND ARE WITHO UT REGARD TO MATERIAL AVAILABLE ON RECORD. 4.4 TO SUBSTANTIATE ITS CLAIMS, THE APPELLANT HAS A LSO RELIED UPON DETAILS OF PRODUCTION FOR THE YEARS ENDING ON 31-03-96, 31- 03-97 AND 31-03-98, AS CARRIED OUT BY ONE OF ITS CUSTOMERS, M/S. SUPERCRAF T FOUNDRY. THESE DETAILS (COPY ENCLOSED AS ANNEXURE-C), WHICH ARE ALSO AVAIL ABLE ON THE ASSESSMENT RECORD OF THE ASSESSING OFFICER, SHOW THAT IN CASE PURCHASES MADE FROM THE APPELLANT ARE PRESUMED TO BE BOGUS THE PRODUCTION S HALL EXCEED THE NET CONSUMPTION, WHICH WOULD LEAD TO AN ABSURDITY BEYON D REASONABLE PRESUMPTION. 4.5. IN ANY CASE, THE ASSESSING OFFICER HAS NOT BEE N ABLE TO COME TO ANY PROPER QUANTIFICATION AS TO WHAT WOULD BE THE EXTEN T OF URD PURCHASES THAT CAN BE SAID TO BOGUS. SUCH VAGUENESS IS NOT P ERMITTED WITHIN THE SCHEME OF BLOCK ASSESSMENT, WHICH PRIMARILY DEALS W ITH QUALIFICATION OF UNDISCLOSED INCOME BROUGHT TO LIGHT AS A RESULT OF SEARCH ACTION. TRUE, THE ASSESSING OFFICER HAS MADE OUT A CASE THAT THE APPE LLANTS REGULAR BOOKS OF ACCOUNT DO NOT APPEAR TO BE FULLY RELIABLE IN AS MU CH AS THE APPELLANT IS UNABLE TO PROVE URD PURCHASES (MADE IN THE GARB OF PURCHASES FROM THE AFORESAID SEVEN FICTITIOUS CONCERNS). HOWEVER, EVE N THOUGH THE APPELLANTS BOOKS SUFFER FROM SOME INHERENT DEFECT, IT IS NOT O PEN TO THE ASSESSING OFFICER TO DRAW CONCLUSIONS, WHICH ARE WITHOUT BASI S OR ARE BASED ON 9 ASSUMPTION, CONTRARY TO FACTS APPARENT FROM RECORD. IT IS A MATTER OF RECORD THAT SALES MADE BY THE APPELLANT ARE NOT IN DOUBT. AS SUCH, PURCHASES INCLUDING URD PURCHASES, IN SO FAR AS TH ESE CAN BE SAID TO CONTRIBUTE TO SALES MADE, CANNOT BE IN DOUBT. AS C AN BE SEEN FROM THE FOREGOING, THIS IS THE CASE HERE. THEREFORE, IT HA S TO BE INFERRED THAT IN THE FACTS AND CIRCUMSTANCES AVAILABLE ON RECORD THERE I S NO CASE FOR COMING TO THE CONCLUSION THAT THE URD PURCHASES, GIVEN THE GA RB OF PURCHASES MADE FROM THE SEVEN FICTITIOUS CONCERNS IN THE APPELLANT S BOOKS, ARE BOGUS. AS SUCH, IT FOLLOWS THAT ON THIS SCORE NO UNDISCLOSED INCOME HAS TO BE BROUGHT TO TAX IN THE APPELLANTS HANDS FOR THE PURPOSES OF THE IMPUGNED BLOCK ASSESSMENT ORDER. 16. SO FAR AS THE ALLEGED PAYMENT OF COMMISSION OF 2% OUTSIDE BOOKS OF ACCOUNTS, THE LEARNED CIT(A) WAS OF THE OPINION THA T NO PAYMENT ON ACCOUNT COMMISSION OUTSIDE BOOKS OF ACCOUNT CAN BE PRESUMED IN THE IMPUGNED CASE FOR THE BLOCK ASSESSMENT. THE RELEVANT OBSERVATION OF THE LEARNED CIT(A) READS AS UNDER : 5.3. I HAVE GONE THROUGH THE MATERIAL RELIED UPON BY THE APPELLANT. AT THE OUTSET, IT MUST BE MENTIONED THAT THE TENOR OF THE ABOVE SAID STATEMENTS OF SHRI SHRIKANT GOPAL BHIDE, ANANDA P. VEDANTA, AN D BALASAHEB SHINDE CLEARLY SUGGESTS THAT COMMISSION, PAYABLE TO THE AG ENTS, WAS PART OF THE PRICE BEING PAID TO THE SELLERS. FURTHER, IT IS OB VIOUS THAT THE ENTIRE EXERCISE IS BASED ON PRESUMPTION, WHICH HAS LITTLE BASIS IN FACTS DISCOVERED IN POST SEARCH INQUIRIES. ALSO, IT IS OBVIOUS THAT EVEN IF PAYMENT OF COMMISSION OUTSIDE BOOKS IS PRESUMED THE CORRESPOND ING AMOUNT, CONSIDERED IN THE DETERMINATION OF UNDISCLOSED INC OME, SHALL BE NEUTRALIZED COMPLETELY BY AN EQUIVALENT AMOUNT ALLO WABLE U/S. 37(1), ALSO, IT IS WELL KNOWN THAT UNDISCLOSED INCOME IS CONCEAL ED INCOME. THUS ANY ADDITIONAL INCOME WORKED OUT ON A PURELY PRESUMPTIV E AND ADHOC BASIS CANNOT BE HELD TO BE UNDISCLOSED INCOME. THIS DRAW S SUPPORT FROM THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF N K E MEMON 112 TAXMAN 96. AS SUCH, IN THE FACTS AND CIRCUMSTANCES OF THE CASE I AM UNABLE TO ACCEPT THE ASSESSING OFFICERS CONTENTION THAT PAYM ENT OUTSIDE BOOKS OF ACCOUNT OF COMMISSION OF RS. 7,19,273/- HAS TO BE P RESUMED IN THE PRESENT CASE FOR THE PURPOSES OF THE IMPUGNED BLOCK ASSESSM ENT. 10 17. AS REGARDS THE OBSERVATION OF THE AO THAT THE A SSESSEE HAS SUPPRESSED ITS GROSS PROFIT, THE LEARNED CIT(A) WAS OF THE OPINION THAT THE COMPARABLE CASE ADOPTED BY THE AO IS NOT CORRECT AND CANNOT BE COMP ARED TO THAT OF THE ASSESSEE BECAUSE OF DIFFERENCE IN NATURE OF BILLINGS OF GOOD S, DIFFERENCE IN THE SIZE AND COMMERCIAL POTENTIALS OF KOLHAPUR AND TRADING IN JA YSINGHPUR. RELEVANT OBSERVATION OF THE LEARNED CIT(A) READS AS UNDER : 6.2 I HAVE CAREFULLY GONE THROUGH THE MATERIAL AV AILABLE ON RECORD AND HAVE DISCUSSED THE SAME WITH THE PRESENT ASSESSING OFFICER. IT IS TRUE THAT THE ASSESSING OFFICER HAS SIMPLY IGNORED THE APPELL ANTS OBJECTIONS REGARDING THE COMPARABILITY OF THE CASE OF M/S. OBE ROI TRADERS. THIS PARTY APPARENTLY DEALS IN GOODS OF A RATHER DIFFERENT QUA LITY. FURTHER CONSIDERING THE DIFFERENCE IN THE SIZES AND COMMERC IAL POTENTIALS OF KOLHAPUR ALSO IT MAY NOT BE POSSIBLE TO COMPARE THE GP RATE OF A TRADER IN KOLHAPUR TO THE GP RATE OF A TRADER IN JAYSINGPUR. FURTHER, IT IS OBVIOUS THAT DEPENDING UPON THE MARKET CONDITIONS THE GP RA TE WOULD FLUCTUATE FROM YEAR TO YEAR. HENCE IT IS RATHER TOO FAR FETC HED TO APPLY THE SAME GP RATE FOR THE ENTIRE BLOCK ASSESSMENT PERIOD, WHICH COMPRISES MANY ASSESSMENT YEARS. FURTHER, THE RECORD SHOWS THAT T HE APPELLANT HAS FILED A COMPARATIVE CHART OF PRICES AT WHICH THE APPELLANT PURCHASED SCRAP AND THE PRICES PREVAILING IN THE MARKET. THROUGH THIS CHART, THE APPELLANT HAS DEMONSTRATED THAT THE RATES AT WHICH PURCHASES HAVE BEEN MADE BY IT ARE DEFINITELY LOWER, AS COMPARED TO THE PREVAILING MAR KET PRICES. AS SUCH, THE QUESTION OF UNDERSTATEMENT OF GROSS PROFIT WOULD NO RMALLY NOT ARISE. CONSIDERING ALL THESE ASPECTS OF THE MATTER, ONE TH ING IS VERY CLEAR THE ESTIMATION MADE BY THE ASSESSING OFFICER IS PURELY PRESUMPTIVE IN NATURE. THIS GOES AGAINST THE GRAIN OF BLOCK ASSESSMENT U/ S. 158BC(C). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . UNDER SECTION 158BB READ WITH 158BC, WHAT IS ASSESS ED IS THE UNDISCLOSED INCOME OF THE BLOCK PERIOD AND NOT THE TOTAL INCOME OR LOSS OF THE PREVIOUS YEAR REQUIRED TO BE ASSESSED UNDER THE REGULAR ASSESSMENT VIDE SECTION 143(3). THIS EXERCISE UNDER SECTION 1 43(3) FOR REGULAR ASSESSMENT STANDS ON A DIFFERENT FOOTING IN CONTRAS T TO THE EXERCISE 11 UNDERTAKEN BY THE ASSESSING OFFICER UNDER CHAPTER X IV-B WHERE THE ASSESSING OFFICER HAS TO ASSESS ONLY THE UNDISCLOSE D INCOME. THEREFORE, THE SCOPE OF REGULAR ASSESSMENT IS QUITE DIFFERENT FROM THE SCOPE OF ASSESSMENT UNDER CHAPTER XIV-B. THE REGULAR ASSESS MENT IS TO ENSURE THAT THE ASSESSEE HAS NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDERPAID THE TAX IN ANY MANNER WHE REAS WHAT IS ASSESSED UNDER CHAPTER XIV-B IS ONLY THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD AND NOT THE INCOME OR LOSS OF THE PREVIOUS YEAR WHI CH IS ONLY DONE IN THE NORMAL REGULAR ASSESSMENT U/S. 143(3). FROM THE FOREGOING ONE THING IS OBVIOUS. THE ESTIM ATION MADE BY THE ASSESSING OFFICER, SINCE IT IS NOT BASED ON ANY CON CRETE MATERIAL BUT A SIMPLE RULE OF THUMB, CANNOT BE MADE PART OF PROCEE DINGS UNDER CHAPTER XIV-B. FURTHER, IT HAS CLEARLY BEEN LAID DOWN BY T HE DELHI HIGH COURT IN THE CASE OF L R GUPTA 194 ITR 32 THAT UNDISCLOSED I NCOME MEANS HIDDEN INCOME. A DISPUTED ADDITION, BASED ON A DIFFERENT OPINION ADHERED TO BY THE ASSESSING OFFICER, CAN BY NO STRETCH OF IMAGINA TION BE TREATED AS UNDISCLOSED INCOME FOR THE PURPOSES OF QUANTIFICA TION UNDER CHAPTER XIV-B. THEREFORE, I HAVE NO HESITATION IN HOLDING THAT IN THE GIVEN FACTS AND CIRCUMSTANCES THERE IS NOTHING TO INFER THAT ANY UN DISCLOSED INCOME HAS TO BE QUANTIFIED WITHIN THE SCOPE OF CHAPTER-XIV-B BY WAY OF SUPPRESSED GROSS PROFIT. HENCE, THE QUANTIFICATION DONE BY TH E ASSESSING OFFICER HAS TO BE IGNORED AS BEING UNTENABLE ON FACTS AND IN LAW. 18. SO FAR AS THE NOTINGS ON LOOSE PAPERS WERE CONC ERNED, HE WAS OF THE OPINION THAT AN AMOUNT OF RS. 11,93,729/-, AT BEST , CAN BE ADDED AS INCOME OF THE BLOCK PERIOD ON ACCOUNT OF ENTRIES MADE IN THE SEIZ ED LOOSE PAPERS. THE RELEVANT OBSERVATION OF THE LEARNED CIT(A) READS AS UNDER : 7.7 I HAVE CAREFULLY CONSIDERED THE ISSUES THAT HA VE BEEN RAISED. AT THE OUTSET IT MUST BE MENTIONED THAT THE FACTS AVAILABL E ON RECORD SHOW THAT THE AMOUNTS MENTIONED IN THE ABOVE SAID SEIZED PAPERS I NDICATE AMOUNTS DUE FROM THE APPELLANT. THIS IS EVIDENT FROM THE FACT THAT THE ASSESSING OFFICER HAS HIMSELF FOUND THAT SOME OF THE PARTIES AND THE AMOUNTS DUE, MENTIONED 12 IN THE SEIZED PAPERS, TALLY WITH THOSE APPEARING IN THE APPELLANTS BOOKS OF ACCOUNT. WHAT DOES NOT TALLY HAS TWO ASPECTS TO IT . FIRSTLY, THERE ARE ENTRIES WHICH PERTAIN TO CERTAIN PARTIES THAT ARE S AID TO BE PETTY HAWKERS. SUPPLIES MADE BY THEM ARE SAID TO HAVE BEEN INCORPO RATED IN THE APPELLANTS BOOKS THROUGH TRANSACTIONS SHOWN TO HAV E BEEN MADE WITH THE FICTITIOUS REGISTERED DEALERS (PARAGRAPH 2 REFERS) . CONSIDERING THE VOLUME OF PURCHASES, ADMITTEDLY SHOWN TO HAVE BEEN MADE FR OM SUCH DEALERS, IT IS OBVIOUS THAT NO ADVERSE INFERENCE CAN BE DRAWN IN R ESPECT OF THESE ENTRIES. SECONDLY, THERE ARE ENTRIES, WHICH ADMITTEDLY PERTA IN TO REGULAR DEALERS. ADMITTEDLY, THE APPELLANT IS HAVING DEALINGS WITH T HESE PARTIES ON A REGULAR BASIS. BUT, THE AMOUNTS MENTIONED AGAINST THEIR NA MES IN THE SEIZED PAPERS, DO NOT TALLY WITH THE AMOUNTS APPEARING IN THEIR RESPECTIVE LEDGER ACCOUNTS IN THE APPELLANTS BOOKS. AS SUCH, IT IS OBVIOUS THAT THIS DISCREPANCY CANNOT BE ENTIRELY IGNORED. AT THE SAM E TIME, THE FACT REMAINS THAT THE ENTRIES ARE ALSO IN THE NATURE OF NOTES FO R MEMORY. THROUGH THESE, THE APPELLANT MIGHT HAVE MADE A ROUGH ESTIMATE OF T HE AMOUNTS DUE TO SUPPLIERS, INCLUDING PETTY HAWKERS, WHO WERE NOT GI VING PROPER INVOICES AND SUPPLIES MADE BY WHOM HAD TO BE INCORPORATED IN THE APPELLANTS BOOKS THROUGH PURCHASES ALLEGEDLY MADE FROM SEVEN F ICTITIOUS CONCERNS PUT UP BY THE APPELLANT. ON GOING THROUGH THE AGGREGAT E OF TRANSACTIONS, REFLECTED IN THE SEIZED LOOSE SHEETS, IT IS OBSERVE D THAT THE PEAK AMOUNT DUE FROM THE APPELLANT ON ANY GIVEN PARTICULAR DATE COM ES TO RS. 11,93,729/- (AS ON 24-01-1995). APPARENTLY, THE APPELLANT HAS NOT GIVEN ANY SEPARATE EXPLANATION FOR THE SAME. AS SUCH, TAKING INTO ACC OUNT THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AVAILABLE ON RECORD, I AM O F THE VIEW THAT THE INTEREST OF JUSTICE SHALL BE SERVED IF THE SAID FIG URE OF RS. 11,93,729/- IS TREATED AS REPRESENTING UNEXPLAINED TRANSACTIONS, R EFLECTED THROUGH ENTRIES MADE IN SEIZED LOOSE PAPERS. THIS COVERS ALL OTHER DATE-WISE AGGREGATES OF AMOUNTS SHOWN TO BE DUE FROM PARTIES LISTED ON EACH OF THE ABOVE SAID SEIZED LOOSE PAPERS. THEREFORE, ON ACCOUNT OF ENTR IES MADE IN SEIZED LOOSE PAPERS, THE APPELLANTS UNDISCLOSED INCOME FOR THE BLOCK PERIOD HAS TO BE TAKEN RS. 11,93,729/-. 19. CONSIDERING THE TOTALITY OF THE FACTS OF THE CA SE, THE LEARNED CIT(A) FINALLY HELD THAT FOR THE PURPOSE OF THE IMPUGNED BLOCK ASS ESSMENT NO UNDISCLOSED 13 INCOME CAN BE WORKED OUT ON ACCOUNT OF ALLEGED BOGU S PURCHASES FROM THE SEVEN FICTITIOUS CONCERNS, PAYMENT OF COMMISSION OUTSIDE BOOKS OF ACCOUNT AND UNDER STATEMENT OF GP. ACCORDING TO HIM ANY UNDISCLOSED INCOME, IF ANY HAS TO BE WORKED OUT ONLY WITH REFERENCE TO ENTRIES MADE IN S EIZED LOOSE PAPERS AND IT WOULD BE RS. 15 LAKHS. THEREFORE, FOR THE PURPOSE OF THE IMPUGNED BLOCK ASSESSMENT HE DIRECTED THE AO TO DETERMINE THE UNDI SCLOSED INCOME FOR THE BLOCK PERIOD AT RS. 15 LAKHS. 20. AGGRIEVED WITH SUCH PART RELIEF GIVEN BY THE LE ARNED CIT(A) THE ASSESSEE AND REVENUE ARE IN APPEAL BEFORE US WITH THE FOLLOW ING GROUNDS : GROUNDS OF APPEAL BY THE ASSESSEE : 1. ON THE FACTS AND IN LAW, THE LEARNED CIT(A) ERRE D IN CONFIRMING THE UNDISCLOSED INCOME IN CASE OF THE APPELLANT AT RS. 15 LAKHS ON AN ESTIMATED BASIS (PARA 9) AS AGAINST THE CLAIM OF THE APPELLAN T THAT THERE WAS NO UNDISCLOSED INCOME ASSESSABLE ON THE BASIS OF THE L OOSE PAPERS FOUND DURING SEARCH. 1.2. ON THE FACTS AND IN LAW, THE LEARNED CIT(A) WA S NOT JUSTIFIED IN REJECTING THE APPELLANTS CONTENTIONS THAT THE IMPU GNED PAPERS SEIZED DURING THE SEARCH DID NOT LEAD TO ANY UNDISCLOSED I NCOME IN THE HANDS OF THE APPELLANT. 1.3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT, (A) FOR TAXING THE UNDISCLOSED INCOME, ON THE BASI S OF THE LOOSE PAPERS FOUND, THE DEPT. HAD TO DISCHARGE THE BURDEN CAST UPON ITSELF THAT THE PAPERS REFLECTED THE IMPUGNED UNDISCLOSED INCOME. (B) THE APPELLANT SUBMITS THAT THE LOOSE PAPERS REF LECTED THE PURCHASES/CREDIT BALANCES DUE TO THE VARIOUS PERSON S AND WHICH DID NOT RESULT IN ANY UNDISCLOSED INCOME IN THE HANDS O F THE APPELLANT. 1.4 THE LEARNED CIT(A) ERRED IN OBSERVING THAT THE APPELLANT DID NOT GIVE ANY EXPLANATION REGARDING THE PEAK AMOUNT OF R S. 11,93,729/- REFLECTED ON THE BASIS OF THE LOOSE PAPERS. 14 1.5 WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE APP ELLANT SUBMITS THAT THE CIT(A) ERRED IN MAKING THE ADDITION ON A PRESUM PTION/ESTIMATION INSTEAD OF CONFIRMING HIMSELF TO THE ACTUAL PEAK AM OUNT AS PER THE PAPERS FOUND AND WHICH WAS TOTALING RS. 11,93,709/- ONLY. 1.6 THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR DEL ETE ANY OF THE ABOVE GROUND OF APPEAL AND/OR RELIEF CLAIMED. GROUNDS OF APPEAL BY THE REVENUE : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN RESTRICTING THE UNDISCLOSED INCOME DETERMINED BY THE AO AT RS. 1,00,00,000/- TO RS. 15,00,000/-, WHEN THE SAME WAS RIGHTLY ASSESSED BY THE AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT PEAK AMOUNT DUE FROM THE ASSE SSEE AT RS. 11,93,729/- AS UNEXPLAINED AND CONSIDERING FACTS AND TOTALITY O F THE CASE RESTRICTED THE UNDISCLOSED INCOME AT RS. 15,00,000/-, WHEN HE HAS ACCEPTED THE VARIOUS TRANSACTIONS NOTED IN LOOSE PAPERS ARE INDICATIVE O F TRANSACTIONS OUTSIDE BOOKS OF ACCOUNTS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN NOT APPRECIATING THAT THE SUBSTANTI AL MARGIN WAS ALREADY ALLOWED BY THE AO WHILE FINALIZING ASSESSMENT ORDER ITSELF, IN AS MUCH AS THE TOTAL UNDISCLOSED INCOME OF THE ASSESSEE WAS AD OPTED AT RS. 1 CRORE, WHEN THE AGGREGATE OF THE DISCREPANCIES NOTICED DUR ING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS COMES TO RS. 1,86,70,039/-, AS DETAILED BELOW : SR.NO. PAGE NO. OF ASSESSMENT ORDER PAGE NO./BUNDLE NO. OF SEIZED MATERIAL PARTICULARS AMOUNT 1 21 -- UNACCOUNTED EXPENDITURE ON COMMISSION 7,39,273/- 2 23 10/11 UNACCOUNTED PURCHASES NOT REFLECTED IN THE REGULAR BOOKS OF ACCOUNTS 9,54,941/- 15 3 23 26 TO 40/15 UNACCOUNTED TRANSACTION 1,40,55,23 6/- 4 24 48/11 UNDISCLOSED EXPENDITURE 9,00,172/- 5 25 36/11 UNDISCLOSED ADVANCES TO FICTITIOUS PARTIES 9,08,969/- 6 25 7 OF DIARY NO.9 PLANNING OF AMOUNT RECEIVABLE 4,50,000/- 7 27 - G.P. ADDITION 6,61,448/- TOTAL 1,86,70,039/- 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES TO ADD, ALTER , AMEND, MODI FY ANY OF THE ABOVE GROUNDS OR RAISE ANY OTHER GROUNDS AT THE TIME OF P ROCEEDINGS BEFORE THE HONBLE TRIBUNAL, WHICH MAY PLEASE BE GRANTED. 21. THE REVENUE HAS ALSO TAKEN THE FOLLOWING ADDITIONAL GROUNDS : I. ACTION OF THE AO WITH REGARD TO REJECTION OF BOO KS OF ACCOUNTS U/S.145 OF THE I.T. ACT, 1961, IN THE FACTS AND CIR CUMSTANCES OF THE CASE, BE UPHELD. II. THE DECISION OF THE CIT(A) IN THE LAST PARA IS BOTH IN LAW & ON FACTS, AGAINST THE PROVISIONS OF SECTION 145 OF THE I.T. A CT, 1961 WHICH REQUIRED INCOME TO THE ESTIMATED IN THE FACTS & CIRCUMSTANCE S OF THE CASE IN TERM OF 95 ITR 375, 4 ITR 87, 96 ITR 64, 114 ITR 272 AND OT HER DECISIONS OF HONBLE ITAT, PUNE INCLUDING 74 ITD 25. 22. AFTER HEARING BOTH SIDES, THE ADDITIONAL GROUND S RAISED BY THE REVENUE ARE ALLOWED FOR ADJUDICATION. 23. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS MADE LUMPSUM ADDITION OF RS.1 CRORE ON ACCOUNT OF U NACCOUNTED TRANSACTIONS LOWER G.P. RATE, PAYMENT OF COMMISSION OUTSIDE BOOK S OF ACCOUNT, UNDISCLOSED ADVANCE TO FICTITIOUS PARTIES, UNACCOUNTED PURCHASE S AND UNACCOUNTED EXPENDITURE ON COMMISSION WHICH WAS RESTRICTED TO RS.15.00 LAKH S BY THE LD.CIT(A). REFERRING TO PAGE NO.34 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE YEAR-WISE PURCHAS E AND SALE OF SCRAP. REFERRING 16 TO PAGE 33 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE SALES TO SISTER CONCERNS. HE SUBMITTED THAT THE SALES ARE NOT DOUBTED BY THE ASSESSING OFFICER. THEREFORE WITHOUT PURCHASE THE ASSESSEE COULD NOT HAVE EFFECTED THE SALES. REFERRING TO PAGE 47 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE PRICE PAID PER M.T. OF SCRAP TO REGISTERED D EALERS (RD) AS WELL AS TO UNREGISTERED DEALERS (URD) AND SUBMITTED THAT THE P RICE PAID TO URD IS LESS THAN THE PRICE PAID TO THE R.D. THEREFORE, THE ASSESS EE HAS NOT PAID ANY HIGHER PRICE TO THE UNREGISTERED DEALERS AND THERE IS NO INFLATION OF PURCHASES. HE SUBMIT TED THAT THE ASSESSING OFFICER HIMSELF HAS MADE ADDITIO N OF RS.1 CRORE AS AGAINST ALLEGED FICTITIOUS PURCHASE OF RS.3,69,63,629.34. THIS IMPLIES THAT T HE ASSESSING OFFICER HAS ACCEPTED MAJOR PART OF THE ALLEGED BOGU S PURCHASE. MERELY BECAUSE THE ASSESSEE COULD NOT PRODUCE THE VENDORS THE PURC HASES CANNOT BE TREATED AS NON-GENUINE. HE SUBMITTED THAT UNLESS THERE ARE PU RCHASES THERE CAN BE NO SALES. FOR THIS PROPOSITION HE RELIED ON THE DECISION OF T HE CHANDIGARH BENCH OF THE I.T.A.T. IN THE CASE OF J.R.SOLVENT INDUSTRIES (P) LTD., VS. ACIT REPORTED IN 68 ITD 65 (TM) (CHD). REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. GOPAL PULSE PROCESSOR PVT. LTD. CO. VIDE ITA 636/PN/2001 ORDER DATED 29/09/2006 FOR THE BLOCK PE RIOD 01/04/1987 TO 05/10/1997 HE SUBMITTED THAT FOLLOWING THE DECISION OF THE CHANDIGARH BENCH (TM) CITED ABOVE THE TRIBUNAL DISMISSED THE APPEAL FILED BY THE REVENUE WHEREIN THE CIT(A) HAD DELETED THE ADDITION MADE BY THE AS SESSING OFFICER UNDER IDENTICAL CIRCUMSTANCES ON ACCOUNT OF BOGUS PURCHAS ES. REFERRING TO THE DECISION OF THE HONBLE MUMBAI HIGH COURT (AURANGABAD BENCH) VIDE TAX APPEAL NO.26 OF 2007 HE SUBMITTED THAT THE HONBLE HIGH COURT HA S DISMISSED THE APPEAL FILED BY THE REVENUE. HE ACCORDINGLY SUBMITTED THAT NO A DDITION ON ACCOUNT BOGUS PURCHASES COULD HAVE BEEN MADE. 24. SO FAR AS THE RATE OF GP IS CONCERNED THE LEARN ED COUNSEL FOR THE ASSESSEE WHILE SUPPORTING THE ORDER OF THE CIT(A) ON THIS IS SUE SUBMITTED THAT THE ASSESSEE HAS ALSO GIVEN COMPARABLE CASE IN THE CASE OF M/S. NIRAJ ENTERPRISES WHEREIN THE GP RATE IS 7.10% FOR ASSESSMENT YEAR 1994-95 AND 19 95-96, 8.80% FOR ASSESSMENT YEAR 1996-97 AND 8.30% FOR ASSESSMENT YE AR 1997-98. HE SUBMITTED THAT THE GP RATES SHOWN BY THE ASSESSEE A T 9.70% FOR A.Y. 1994-95, 9.10% FOR A.Y. 1995-96, 10.60% FOR A.Y. 1996-97 ARE MORE THAN THAT OF M/S. NIRAJ ENTERPRISES. SO FAR AS THE FALL IN G.P. RATE FOR A.Y. 1997-98 HE SUBMITTED 17 THAT THE SAME IS DUE TO FALL IN THE TURNOVER TO RS .54.46 LAKHS AS AGAINST RS.203.89 LAKHS IN THE IMMEDIATELY PRECEEDING YEAR. 25. AS REGARDS THE ISSUE RELATING TO LOOSE PAPERS A RE CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PAGE NOS. 52,53 AND 54 AND ONWARDS OF THE PAPER BOOK AND SUBMITTED THAT THOSE ARE THE OUTSTANDING BALANCES PAYABLE TO THE SUPPLIERS. HOWEVER, SINCE THE LEARNED CIT(A) HAS ALREADY SUSTAINED RS. 15 LAKHS NO FURTHER ADDITION IS REQUIRED ON ACCOUNT OF LOOSE PAPERS FOR THE PEAK CREDIT. 26. THE LEARNED DR ON THE OTHER HAND WHILE SUPPORTI NG THE ORDER OF THE AO SUBMITTED THAT SEIZED DOCUMENTS CONTAIN UNACCOUNTED TRANSACTIONS, UNACCOUNTED PURCHASES, PAYMENT OF COMMISSION OUTSIDE BOOKS OF A CCOUNTS ETC., THE ASSESSEE HAS FLOATED FICTITIOUS CONCERNS IN THE NAME OF EMPL OYEES AND CLOSE RELATIVES AFTER PAYING CHEQUES TO THEM, HAS WITHDRAWN CASH IMMEDIA TELY FROM THOSE ACCOUNTS. UNDER THESE CIRCUMSTANCES, THE ADDITION MADE BY THE AO BEING JUSTIFIED SHOULD HAVE BEEN UPHELD BY THE LEARNED CIT(A). HE ACCORDI NGLY SUBMITTED THAT THE ORDER OF THE CIT(A) SHOULD BE REVERSED AND THE ORDER OF T HE AO BE RESTORED. 27. LEARNED COUNSEL FOR THE ASSESSEE IN HIS REJOIND ER SUBMITTED THAT EVEN THOUGH SOME ADDITION HAS TO BE MADE THE SAME SHOULD BE REASONABLE. THE ASSESSEE HAS PAID LESSER PRICE FOR PURCHASE OF SCRA P FROM URD THAN MARKET PRICE. THE GROSS PROFIT DECLARED BY THE ASSESSEE IS REASON ABLE. MERELY BECAUSE SOME ENTRIES ARE FOUND OUTSIDE BOOKS OF ACCOUNTS ADDITIO N CANNOT BE MADE. 28. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DEC ISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAD PUR CHASED SCRAPS FROM 7 BOGUS CONCERNS AMOUNTING TO RS. 3,69,63,629/- DURING THE A.Y. 1995-96 TO 1998-99. ACCORDING TO THE AO, THE ASSESSEE WAS UNABLE TO PRO DUCE THE PERSONS FROM WHOM SCRAP WAS PURCHASED, COULD NOT FURNISH THEIR NAMES AND ADDRESSES ETC. AND THEREFORE VERIFICATION OF THE ACCURACY AND CORRECTN ESS OF PURCHASE & SCSCRAP IS DIFFICULT. FURTHER ACCORDING TO THE AO, THE GP RAT E DISCLOSED BY THE ASSESSEE IS LESS THAN A COMPARABLE CASE, I.E., M/S. OBEROI TRAD ERS FOR A.Y. 1997-98. SIMILARLY IT IS ALSO THE ALLEGATION OF THE AO THAT THE ASSESS EE HAS PAID COMMISSION OUTSIDE 18 BOOKS OF ACCOUNTS SINCE NO COMMISSION HAS BEEN DEBI TED IN THE PROFIT AND LOSS ACCOUNT ALTHOUGH SOME OF THE PERSONS EXAMINED BY HI M HAVE ADMITTED TO HAVE RECEIVED COMMISSION. IN VIEW OF THE ABOVE AND VARI OUS OTHER DISCREPANCIES FOUND DURING THE COURSE OF SEARCH INCLUDING ENTRIES CONTA INED IN THE LOOSE PAPERS THE AO REJECTED THE VARIOUS SUBMISSIONS OF THE ASSESSEE, R EJECTED THE BOOK RESULTS AND MADE LUMPSUM ADDITION OF RS.1.00 CRORE WHICH HAS BE EN REDUCED TO RS. 15.00 LAKHS BY THE LEARNED CIT(A). 29. SO FAR AS THE CREATION OF 7 FICTITIOUS CONCERNS FOR PURCHASE OF SCRAPS FROM HAWKERS & URDS ARE CONCERNED WE FIND AS AGAINST PUR CHASE FROM SUCH CONCERNS AT RS. 3,69,63,629.34 THE AO HAS MADE ADDITION OF R S. 1.00 CRORE ONLY FOR SUCH PURCHASES & VARIOUS OTHER DISCREPANCIES. THIS IMPL IES THAT THE AO HAS ACCEPTED A PART OF SUCH ALLEGED BOGUS PURCHASES AS GENUINE. T HE TURNOVER DECLARED BY THE ASSESSEE HAS BEEN ACCEPTED. WE, THEREFORE, FIND FO RCE, IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT UNLESS THERE ARE PURC HASES THERE CANNOT BE SALES AND IF SUCH PURCHASES ARE EXCLUDED THEN THE RESULTS WIL L BE ABSURD. FURTHER THE RATE PER M.T. OF SCRAP FROM THESE HAWKERS AND URDS IS LESS T HAN THE PRICE PAID PER M.T. OF SCRAP TO THE REGISTERED DEALERS. THEREFORE, THE RE CANNOT BE INFLATION IN THE PURCHASE PRICE. 30. WE FIND A SIMILAR TYPE OF CASE HAD COME UP BEFO RE THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF GOPAL PULSE PROCESSOR PVT. LTD., (SUPRA) WHERE SIMILAR ADDITIONS WERE MADE BY THE AO FOR PURCHASES MADE FR OM FICTITIOUS CONCERNS. THE LD. CIT(A) DELETED SUCH ADDITION AND THE TRIBUNAL U PHELD THE ORDER OF THE CIT(A) AND DISMISSED THE APPEAL FILED BY THE REVENUE BY HO LDING AS UNDER : 9. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES . THE MAIN EXPLANATION OF THE ASSESSEE WAS THAT DUE TO STRICT PROVISIONS OF I .T.ACT, ASSESSEE WAS EXPECTED TO CONFIRM THE PURCHASES BUT HE WAS HELPLE SS DUE TO THE REASON THAT THE PURCHASES WERE MADE FROM THE FARMERS. TH OSE FARMERS WERE NEITHER GIVING ANY AUTHENTIC RECEIPT OF PURCHASE TR ANSACTION NOR WERE INCLINED TO APPEAR BEFORE ANY COURT AS A WITNESS OF THE PURCHASE OF AGRICULTURE PRODUCE. SO, THE EXPLANATION OF THE AS SESSEE IS THAT TO OVERCOME THIS DIFFICULTY AND TO SAFEGUARD ITS BUSIN ESS INTEREST, IN THE ABSENCE OF PROPER CONFIRMATION OF PURCHASES, IT WAS DECIDED TO OPEN BANK ACCOUNT IN TWO NAMES FROM WHOM THE PURCHASE WERE SH OWN IN THE BOOKS OF 19 ACCOUNTS THROUGH PROPER BANK TRANSACTIONS. IT HAS A LSO BEEN ARGUED THAT THIS SHOWS THIS SIMPLE REASON FOR CREATION OF TWO ENTITIES. HOWEVER, THERE WAS NO MALAFIDE ON THE PART OF THE ASSESSEE BECAUSE HE HAD TO RECORD THE PURCHASES, OTHERWISE THERE WAS NO JUSTIFICATION OF THE PURCHASES SHOWN BY THE ASSESSEE. WE FIND THIS ARGUMENT AND THE EXPLA NATION OF THE ASSESSEE QUITE REASONABLE BECAUSE ONCE THE SALES HAVE NOT BE EN DISPUTED, HENCE CORRESPONDING PURCHASES OUGHT TO HAVE BEEN MADE. INDEED IT IS A MATTER OF COMMON SENSE THAT THERE IS NO POSSIBILITY OF PRO DUCTION IF THERE IS NO RAW MATERIAL. WITHOUT INPUT, THERE COULD NOT BE ANY O UTPUT. ADDITIONALLY, THE ASSESSEE HAS ALSO PROVED THAT IF THE PURCHASES ARE NOT TAKEN INTO ACCOUNT, THEN THE RESULTS ARE GOING TO BE UNREALISTIC AND TH E G.P. HAD TO GO HIGH RATE AWAY FROM ANY REASONABLE PERCENTAGE. EVEN IF THOS E CONCERNS WERE BOGUS PARTIES, BUT THE BASIC QUESTION IS THAT WITHOUT PUR CHASES, THERE CANNOT BE ANY MANUFACTURING OF SALES. AS FAR AS THE ARGUMEN T OF THE LD. DR THAT THE ASSESSMENT WAS MAD UNDER CHAPTER XIV B IS CONCERNED , THE ANSWER GIVEN BY LD. AR WAS THAT THE COMPUTATION OF UNDISCLOSED I NCOME EVEN OF THE BLOCK PERIOD HAS TO BE MADE U/S. 158BB AND AS PER E XPLANATION ANNEXED TO THIS SECTION, THE TOTAL INCOME OR LOSS OF EACH PREV IOUS YEAR, FOR THE PURPOSE OF DETERMINATION OF UNDISCLOSED INCOME, BE TAKEN AS THE TOTAL INCOME OR LOSS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT AND THE ONLY RIDER IS THAT THE SAME SHOULD BE WITHOUT GIVING EFF ECT TO SET OFF OF BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION. BY THI S EXPLANATION, THE LEGISLATURE HAS MADE IT CLEAR THAT THE UNDISCLOSED INCOME IS ALSO REQUIRED TO BE DETERMINED OR COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF I.T. ACT, SO THE BASIC PRINCIPLE OF DETERMINATION OF INCOME H AS TO BE FOLLOWED PARTICULARLY IN A CASE WHEN THE INCOME IS OUT OF A TRADING ACTIVITY OF THE ASSESSEE. RELIANCE WAS ALSO PLACE ON THE DECISION OF ITAT BOMBAY IN THE CASE OF BALAJI TEXTILE INDUSTRIES, 49 ITD 177. FU RTHER, A RELIANCE HAS ALSO BEEN PLACED ON A DECISION OF ITAT CHANDIGARH BENCH IN THE CASE OF J.R.SOLVENT INDUSTRIES PVT.LTD. V. ACIT (TM) (CHD.) , 68, ITD 65 WHEREIN IT WAS OBSERVED THAT IF ENTIRE PURCHASE WERE TREATED A S BOGUS AND EXCLUDED FROM MANUFACTURING PROCESS, YIELDS RESULTING THERE- FROM WOULD BE ABNORMAL AS COMPARED TO THAT OF PRECEDING YEARS. THESE ARGUMENTS ARE CONVINCING ESPECIALLY CONSIDERING THE SURROUNDING C IRCUMSTANCES, MATERIAL PLACED AND THE CASE LAWS CITED. VIEW TAKEN BY LD. CIT(A) IS HEREBY ENDORSED AND THIS GROUND OF THE REVENUE IS DISMISSE D. 20 31. WE FIND ON FURTHER APPEAL BY THE REVENUE, THE HONBLE JURISDICTIONAL HIGH COURT DISMISSED THE APPEAL FILED BY THE REVENUE BY HOLDING AS UNDER : 3. WE HAVE CONSIDERED THE SUBMISSIONS ADVANCED BY LEARNED COUNSEL APPEARING FOR THE PARTIES AND PERUSED THE IMPUGNED ORDER. 4. LEARNED SENIOR COUNSEL SHRI P.M.SHAH APPEARING O N BEHALF OF RESPONDENT PLACES RELIANCE ON TWO REPORTED JUDGMENT S IN THE CASE OF VISHWASRAO MADHAVRAON CHIPULNKAR VS. KAMLABAI VISHW ASRAO CHIPLUNKAR [2003 (SUPP.2) BOM.C.R.197] AND GURUDEV KAUR V. KAK AI [(2007) 1 SCC 546] IN SUPPORT OF HIS SUBMISSIONS THAT UNLESS THE APPELLANT MAKES OUT A SUBSTANTIAL QUESTION OF LAW, THIS COURT NEED NOT EN TERTAIN THE APPEAL AS A COURT OF FACTS. WE HAVE PERUSED THE CASES CITED (S UPRA). 5. WE DO NOT FIND THAT THE APPEAL RAISES SUBSTANTIA L QUESTION OF LAW. THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ISSUES PROPERLY REGARDING THE PURCHASES AND ENTRIES EFFECTED IN THE ACCOUNTS OF THE ASSESSEE. WE DO NOT FIND ANY PATENT OR GROSS ERROR FOR CAUSING INTERFERENCE IN THE IMPUGNED ORDER. THERE IS NO MERIT IN THE AP PEAL AND THE SAME DESERVES TO BE DISMISSED. 32. RESPECTFULLY FOLLOWING THE DECISION OF THE JURI SDICTIONAL HIGH COURT AND CONSIDERING THE FACT THAT THE SALES HAVE BEEN ACCEP TED BY THE AO AND THE RATE PAID PER M.T. OF SCRAP TO THE HAWKERS & URDS ARE LESS TH AN THE PRICE PAID PER M.T. OF SCRAP TO THE REGISTERED DEALERS WE ARE OF THE CONSI DERED OPINION THAT NO ADDITION COULD HAVE BEEN MADE ON THIS ACCOUNT. 33. SO FAR AS THE RATE OF GP IS CONCERNED WE FIND T HE COMPARABLE CASE ADOPTED BY THE AO IN THE CASE OF OBEROI TRADERS OF KOLHAPUR , WHO DEALS IN GOODS OF DIFFERENT QUALITY, CANNOT BE A SUITABLE CASE FOR CO MPARISON WITH THAT OF THE ASSESSEE WHO OPERATES FROM A DIFFERENT PLACE, I.E., JAYSINGHPURAND GOODS OF DIFFERENT QUALITY. FURTHER, THE ASSESSEE HAS ALSO GIVEN A COMPARABLE CASE BEFORE THE AO WHOSE GP IS LESSER THAN THAT OF THE ASSESSEE . THE CHART PRODUCED BY THE ASSESSEE BEFORE THE AO SHOWING PURCHASES AT LESSER PRICE THAN THE MARKET PRICE 21 REMAINS UNCONTROVERTED BY THE REVENUE. UNDER THESE CIRCUMSTANCES WE ARE OF THE OPINION THAT NO ADVERSE VIEW CAN BE TAKEN FOR DECLA RATION OF LOWER G.P. 34. SO FAR AS THE ALLEGATION OF THE AO REGARDING PA YMENT OF COMMISSION OUTSIDE BOOKS OF ACCOUNT WE FIND THE SAME IS BASED ON PRESUMPTIONS AND BASED ON POST SEARCH ENQUIRIES. WE FIND MERIT IN THE SUBMIS SION OF THE LD. COUNSEL FOR THE ASSESSEE AS WELL AS THE FINDINGS GIVEN BY THE LD. C IT(A) THAT IF PAYMENT OF COMMISSION OUTSIDE BOOKS OF ACCOUNT IS PRESUMED THE N THE SAME HAS TO BE REDUCED FROM CORRESPONDING UNDISCLOSED INCOME. 35. AS REGARDS THE NOTINGS ON LOOSE PAPERS ARE CONC ERNED WE FIND THE LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE AND HIS FINDINGS HAVE ALREADY BEEN INCORPORATED AT PARA 18 OF THIS ORDER. NEITHER THE LD. D.R. NOR THE LD. COUNSEL FOR THE ASSESSEE COULD CONTROVERT THE FINDINGS GIVEN BY THE LD. CIT(A). THE FINDING GIVEN BY THE LD. CIT(A) THAT THE ENTRIES WHICH PERT AIN TO REGISTERED DEALERS AND CONTAIN AMOUNTS MENTIONED AGAINST THEIR NAMES IN TH E SEIZED PAPERS DO NOT TALLY WITH THE AMOUNTS APPEARING IN THEIR RESPECTIVE LEDG ER ACCOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE COULD NOT BE CONTROVERTE D BY THE LD. COUNSEL FOR THE ASSESSEE. THEREFORE, WE CONCUR WITH THE OBSERVATIO N OF THE LD. CIT(A) THAT THIS DISCREPANCY CANNOT BE ENTIRELY IGNORED. THE FINDIN G OF THE LD. CIT(A) THAT THE AMOUNT DUE FROM THE ASSESSEE ON ANY GIVEN PARTICUL AR DATE COMES TO RS. 11,93,729/- ALSO COULD NOT BE CONTROVERTED BY THE L D. COUNSEL FOR THE ASSESSEE. 36. CONSIDERING THE TOTALITY OF THE FACTS OF THE CA SE AND AFTER CONSIDERING THE ELABORATE DISCUSSIONS BY THE LD. CIT(A) WE ARE OF T HE CONSIDERED OPINION THAT THE BOOK RESULTS OF THE ASSESSEE CANNOT BE ACCEPTED AND RESORT TO PROVISIONS OF SECTION 145 OF THE I.T. ACT HAS TO BE TAKEN. IN OUR CONSID ERED OPINION THE ADDITION OF RS. 12.50 LAKHS AS AGAINST RS. 1.00 CRORES BY THE AO WH ICH WAS BROUGHT DOWN TO RS. 15.00 LAKHS BY THE CIT(A) WOULD MEET THE ENDS OF JU STICE. THE UNDISCLOSED INCOME OF THE ASSESSEE IS ACCORDINGLY DETERMINED AT RS. 12.50 LAKHS AS AGAINST RS. 15.00 LAKHS BY THE CIT(A) AND RS. 1.00 CRORES BY TH E A.O. THE GROUNDS RAISED BY THE REVENUE AS WELL AS THE ASSESSEE ARE PARTLY-A LLOWED. 22 37. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE PARTLY-ALLOWED. PRONOUNCED IN THE OPEN COURT ON 3 RD MAY 2012 SD/- SD/- (I.C. SUDHIR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED THE 03 RD MAY 2012 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE. 2. ADDL. JC, IT SP, RANGE-I, KOLHAPUR. 3. ADDL. CIT, SP, RANGE-I, KOLHAPUR. 4. THE CIT(A), KOLHAPUR. 5. THE CIT CONCERNED. 6. D.R. B BENCH, PUNE. 7. GUARD FILE. BY ORDER PR IVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE