Avani Petrochem Pvt. Ltd., Baroda V. The Dy, Comm of Income Tax, Circle-1, Baroda

ITA 789/AHD/2004

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8835 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-02-2010
• Assessment Year: 1989-1990
• Appeal Filed On: 11-03-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: M G PATEL
• Keywords: Business income; Document seized; Documents seized
• Section: 143(3); 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD. BEFORE: HON'BLE SHRI T.K. SHARMA, JUDICIA L MEMBER, AND HON'BLE SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER ITA NO. 789/AHD/2004 ASSESSMENT YEAR : 1989-1990 AVANI PETROCHEM PVT. LTD., BARODA (PAN : AABCA 7945 A) VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, BARODA (APPELLANT) (RESPONDENT) -VS.- ITA NO. 1064/AHD/2004 ASSESSMENT YEAR : 1989-1990 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, BARODA VERSUS AVANI PETROCHEM PVT. LTD., BARODA (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.G. PATEL DEPARTMENT BY : SHRI C.K. MISHRA, SR. D.R. ORDER PER T K SHARMA, JUDICIAL MEMBER :- THESE CROSS APPEALS ARE AGAINST THE ORDER DATED 05.01.2004 OF LD. COMMISSIONER OF INCOME TAX( APPEALS)-I, BARODA FOR THE ASSESSMENT YEAR 1989-90. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A PRIVATE LIMITED COMPANY, IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. IT I S ENGAGED IN THE MANUFACTURING AND TRADING OF VARIOUS INDUSTRIAL OILS. FOR THE ASSESSM ENT YEAR UNDER APPEAL, THE A.O. FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 31.03 .1992, WHEREIN HE MADE VARIOUS ADDITIONS AMOUNTING TO RS.43,01,177/-. ON APPEAL, T HE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-I, BARODA VIDE ORDER DATED 29.0 9.1992 ALLOWED PARTIAL RELIEF TO THE ASSESSEE. THE MAJOR CONTROVERSY RELATES TO THE ADJUSTMENT OF VARIOUS ADDITIONS MADE IN THE ASSESSMENT ORDER AGAINST DISCLOSURE OF RS.18,00,000/- MADE UNDER SECTION 132 DURING THE SEARCH PROCEEDINGS AT THE PREMISES O F THE COMPANY AND THE RESIDENCE OF THE MANAGING DIRECTOR ON 29.11.1988. THE LEARNED COMMISSIONER OF INCOME 2 ITA NO. 789 & 1064/AHD/2004 TAX(APPEALS) ALLOWED THE ADJUSTMENT ONLY IN RESPECT OF ONE ITEM OF RS.2,57,106/- AND BENEFIT OF ADJUSTMENT WAS NOT ALLOWED IN RESPECT OF OTHER ADDITIONS. 3. ON APPEAL BY BOTH THE SIDES, HON'BLE ITAT, B B ENCH VIDE ORDER DATED 16.12.1999 SET ASIDE THE ORDERS OF TAX AUTHORITIES AND RESTORED THE ENTIRE ASSESSMENT TO THE FILE OF A.O. WITH THE DIRECTION THAT THE ASSESS MENT MAY BE MADE AFRESH AFTER CONSIDERING THE CLAIM OF THE BENEFIT OF SET OFF IN THE LIGHT OF OBSERVATIONS AND DIRECTIONS GIVEN IN THE SAID ORDER. 4. PURSUANT TO THE AFORESAID ORDER OF THE TRIBUNAL DATED 16.12.1999, THE A.O. RE- FRAMED THE ASSESSMENT ON 28.03.2002 UNDER SECTION 1 43(3), WHEREIN HE ASSESSED THE TOTAL INCOME AT RS.39,55,647/-. IN THE ASSESSMENT O RDER, THE A.O. MADE VARIOUS ADDITIONS AND REFUSED TO GIVE THE BENEFIT OF SET OF F VARIOUS ADDITIONS AGAINST DISCLOSURE OF RS.18,00,000/- ON THE GROUND THAT NO NEXUS IS ES TABLISHED BY THE ASSESSEE BETWEEN THE INVESTMENT MADE IN THE ASSETS OF AMISHEE PETROC HEM PVT. LTD. AND THE SOURCE OF INCOME WHICH CAN BE REASONABLY ACCEPTED AS PERTAINI NG TO THE YEAR UNDER CONSIDERATION. THE A.O. ALSO OBSERVED THAT THE MAJO R AMOUNT TO THE EXTENT OF RS.14,00,000/- PERTAINED TO THE DISCREPANCIES IN ST OCK FOR THE ASSESSMENT YEAR 1988- 89. AGAINST THIS ORDER, AN APPEAL WAS FILED, WHICH WAS DECIDED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-I, BARODA ON 05 .01.2004. IN THIS ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS ALL OWED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THIS ORDER OF LEARNED COMMIS SIONER OF INCOME TAX(APPEALS), BOTH THE SIDES ARE IN APPEAL BEFORE US. 5. THE VARIOUS GROUNDS RAISED BY THE ASSESSEE IN IT S APPEAL ARE AS UNDER :- 1. THE COMMISSIONER OF INCOME TAX (APPEALS)-I BARODA ERRED IN HOLDING THAT THE ADJUSTMENT FOR THE DECLARATION OF RS.18 LACS U/S. 132(4) WAS AVAILABLE ONLY WITH REFERENCE LO 'DISCREPANCIES IN STOCKS AND NOT WITH REFERENCE TO OTHER ADDITIONS WHICH WERE MADE F OR ALLEGED SALES OF GOODS AND NOT RECORDED IN BOOKS OF THE APPELLANT. T HE APPELLANT SUBMITS THAT WHEN AMOUNT OF ITS, 18 LACS WAS OFFERED FOR TA X U / S . 132(4) THE SAID CIT (A) OUGHT TO HAVE HELD THAT NO OTHER ADDITIONS FOR ALLEGED DISCREPANCIES IN STOCKS AND ALLEGED SALES OF GOODS NOT RECORDED IN BOOKS BASED ON THE PAPAS AND DOCUMENTS SEIZED DURIN G SEARCH SHOULD HAVE BEEN MADE BY THE ASSESSING OFFICER. 3 ITA NO. 789 & 1064/AHD/2004 2. (I) THE SAID C1T(A) ERRED IN CONFIRMING TH E ACTION OF THE A.O. IN MAKING ADDITION OF RS. 1,68,000/- ON THE GROUND TH AT THE APPELLANT HAD MADE SALES OF 24 KL MATERIAL WHICH WERE ALLEGEDLY T RANSPORTED THROUGH D.B. TRANSPORT AND NOT RECORDED IN THE BOOKS, (II) THE SAID CIT(A) ALSO ERRED IN REJECTING T HE APPELLANTS' ALTERNATIVE SUBMISSION CHAT THIS ADDITION MAY BE RE STRICTED TO RS.1,44,000/- I.E. RS.6/-PER LITRE ON THE BASIS OF THE APPELLATE ORDER FOR EARLIER YEAR, (III) THE SAID CIT(A) ALSO ERRED IN HOLDING THA T THE ABOVE ADDITION WAS NOT COVERED BY THE ADDITION OF RS. 18 LACS DECL ARED U/A 132(4) WHEN THE SAID DECLARATION WAS TO COVER-UP DISCREPAN CIES IN STOCK REALIZED DURING THE YEAR RELEVANT TO A.Y. 1989-90 A ND MISC.' THE APPELLANT SUBMITS THAT THE ALLEGED SALE OF MATERIAL S OUT OF STOCKS NOT ACCOUNTED FOR WAS COVERED BY THE ABOVE DECLARATION. 3. (I) THE SAID CTT(A) ERRED IN CONFIRMING T HE ACTION OF THE A.O. IN MAKING ADDITION OF RS.10,000/- ON ACCOUNT OF UNACC OUNTED SALES BASED ON CERTAIN SEIZED PAPERS DURING SEARCH WHEN THERE WAS NO EVIDENCE OF SUCH SALE. (II) THE SAID CIT(A) ERRED IN HOLDING THAT AB OVE ADDITION WAS NOT COVERED BY THE ADDITION OF RS.18 LACS DECLARED U/S 132(4) WHEN THE SAID DECLARATION WAS TO COVER DISCREPANCIES IN STOCKS RE ALIZED AND COVERED SALES OUT OF STOCKS NOT RECORDED IN BOOKS. 4. APPELLANT CRAVES LEAVE TO ADD, AMEND, AL TER, MODIFY OR DELETE ANY OF THE ABOVE GROUNDS ON OR BEFORE THE DATE OF H EARING. 6. THE VARIOUS GROUNDS RAISED BY THE REVENUE IN ITS APPEAL ARE AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED CIT(A), BARODA HAS ERRED IN (I) IN CONSIDERING THE DISCLOSURE OF RS. 18 LAK HS MADE DURING THE COURSE OF OPERATION U/S 132(4) TO BE LIABLE FOR IMM UNITY UNDER THE PROVISIONS OF THE ACT IN THE CIRCUMSTANCES THAT NO NEXUS IS ESTABLISHED BETWEEN THE INVESTMENT MADE IN THE ASSETS OF AMISHE E PETROCHEM LTD. AND THE SOURCE OF INCOME WHICH CAN BE REASONABLY AC CEPTED AS PERTAINING TO THE YEAR UNDER CONSIDERATION. THE MAJ OR AMOUNT TO THE EXTENT OF RS. 14,00,000/-- PERTAINS TO THE DISCRIPA NCIES IN STOCK FOR A.Y. 88-89. (II) IN DELETING THE ADDITION MADE FOR UNDER INV OICING OF LIGHT SPRAY OIL OF RS. 11,16,7101- AS A.O. HAS POINTED OUT SO MAY I NSTANCES OF UNDER INVOICING OF SALES VIDE PARA 4 ON PAGE 2 & 3 OF ASS ESSMENT ORDER DATED 31-03-92 WHICH HAVE NOT BEEN CLASSIFIED AND ANALYSE D WITH GRADATION POINTED OUT BY THE ASSESSEE, 4 ITA NO. 789 & 1064/AHD/2004 (III) IN HOLDING THAT STOCK OF LIQUID PARAFIN HE AVY OF RELATED TO STOCK DISCREPANCY AND SHOULD BE GIVEN SET OFF AGAINST DIS CLOSURE OF RS. 18 LAKHS AS, AS PER AUTHENTICATED STATEMENT BY THE CUS TOM & EXCISE DEPARTMENT THE STOCK IS SHOWN TO BE 'NIL', (IV) IN DIRECTING TO ADJUST THE ADDITION SUSTAINE D OF RS. 2,57,106/- OF SALE OF GOODS ON THE BASIS OF PAGE NO. 56 IN SEIZED FILE NO. X-3, AGAINST THE DECLARATION OF RS. 18 LAKHS U/S 132(4) WITHOUT CO-RELATING TO CLOSING STOCK. (V) IN DIRECTING TO ADJUST THE ADDITION CONFIRME D OF RS. 48,432/-OF EXCESS PROCESS LOSS, THE DISCREPANCY IN STOCK FOUND DURING THE SEARCH WHICH COULD NOT BE RECONCILED IN RESPECT OF VARIOUS PRODUCTS, AGAINST THE DECLARATION OF RS. 18 LAKHS U/S 132(4) WITHOUT CO-RELATING TO CLOSING STOCK. 7. AT THE TIME OF HEARING ON BEHALF OF ASSESSEE SHR I M.G. PATEL APPEARED AND CONTENDED THAT IN THE IMPUGNED ORDER THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS)-I, BARODA ERRED IN HOLDING THAT THE AD JUSTMENT FOR THE DECLARATION OF RS.18 LACS UNDER SECTION 132(4) WAS AVAILABLE ONLY WITH REFERENCE TO DISCREPANCIES IN STOCKS. HE SUBMITTED THAT IN THE ASSESSMENT ORDER, THE A.O. MADE ADDITION OF RS.1,68,000/- ON THE GROUND THAT THE ASSESSEE HAD M ADE SALES OF 24 KL MATERIAL, WHICH WERE ALLEGEDLY TRANSPORTED THROUGH D.B. TRANS PORT AND NOT RECORDED IN THE BOOKS OF ACCOUNTS. HE SUBMITTED THAT THE AMOUNT OF THIS ADDITION BE RESTRICTED TO RS.1,44,000/-, I.E. RS.6/- PER LITRE ON THE BASIS O F THE APPELLATE ORDER FOR EARLIER YEAR. FURTHER, IT MAY BE HELD THAT THE AFORESAID ADDITION IS ALSO COVERED BY THE DECLARATION OF RS.18 LACS MADE UNDER SECTION 132(4) OF THE INCOME TAX ACT, 1961. 8. ON THE OTHER HAND, SHRI C.K. MISHRA, LD. DEPARTM ENTAL REPRESENTATIVE CONTENDED THAT THE ADDITION OF RS.1,68,000/- WAS RI GHTLY MADE BECAUSE NEITHER BEFORE THE A.O. NOR BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) THE ASSESSEE RECONCILED THE DISCREPANCIES POINTED OUT BY THE A.O . WITH REGARD TO THE REJECTION OF THE CLAIM OF SET OFF, THE LD. D.R. SUBMITTED THAT I TEMS PERTAINED TO SALE/ TRANSPORTATION OF GOODS, AND NOT TO THE DISCREPANCIES IN STOCKS. H ENCE, NO SET OFF CAN BE GRANTED ON THIS POINT. 5 ITA NO. 789 & 1064/AHD/2004 9. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT BEF ORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), IT WAS CONTENDED THAT IF THIS ADDITION IS UPHELD, THE SAME SHOULD BE CONSIDERED AS REALIZATION OF STOCKS, WHIC H WAS NOT RECORDED IN THE BOOKS AND SHOULD, THEREFORE, BE ADJUSTED AGAINST THE DISC LOSED AMOUNT OF RS.18 LACS. EVEN BEFORE US, THE ASSESSEE COULD NOT RECONCILE THE DIS CREPANCIES. THE ASSESSEE HAS TRANSPORTED 24 KL MATERIAL, WHICH IS NOT RECORDED I N THE BOOKS OF ACCOUNTS. PRICE PER LITRE ADOPTED BY THE A.O. IS NOT REASONABLE. TO SUM UP, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS GIVEN COGENT REASON FOR CON FIRMING THIS ADDITION BY HOLDING THAT BENEFIT OF SET OFF CANNOT BE ALLOWED. WE, THER EFORE, DECLINE TO INTERFERE. THIS GROUND OF APPEAL IS REJECTED. 10. WITH REGARD TO THE ADDITION OF RS.10 LACS DISPU TED IN GROUND NO. 3, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS ADDITIO N WAS MADE IN THE ORIGINAL ASSESSMENT, WHICH WAS CONFIRMED BY THE LEARNED COMM ISSIONER OF INCOME TAX(APPEALS). IN THE IMPUGNED ORDER, THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE SAME ON THE GROUND THAT THE ASSESSEE HAS NOT FURNISHED ANY SATISFACTORY EXPLANATION. HE SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE HELD THAT THIS ADDITION IS COVERED BY ADDITION OF RS.18 LACS DECLARED UNDER SECTION 132(4) BECAUSE THE SAID DECLARATION WAS TO COVER DISCREPANCIES IN STOCKS REALIZATION AND COVERED SAL ES OUT OF STOCK NOT RECORDED IN THE BOOKS. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDERS OF AUTHORITIES BELOW. 11. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AU THORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE RELEVANT SEIZED DOCUMENTS INDICATE THAT THE ASSESSEE HAS EFFECTED THE SALES OF RS.5,70,412/- OUT OF WHICH SALES TO THE EX TENT OF RS.5,60,400/- HAS BEEN ACCOUNTED. ON THIS BASIS, ADDITION WAS MADE AND CON FIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-1, BARODA IN EA RLIER ORDER DATED 29.09.1992 VIDE PARA 8.2 AT PAGE 15. LOOKING TO THE PECULIAR F ACTS, WE ARE OF THE VIEW THAT IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) RIGHTLY CONFIRMED THE ADDITION IN HOLDING THAT THIS ADDITIO N IS NOT COVERED BY ADDITION OF RS.18 LACS DECLARED UNDER SECTION 132(4). THIS GROU ND OF APPEAL IS ALSO REJECTED. 6 ITA NO. 789 & 1064/AHD/2004 12. NOW WE TAKE UP THE APPEAL OF THE REVENUE, I.E. ITA NO. 1064/AHD/2004. WITH REGARD TO THE GROUND NO. 1, THE LD. D.R. POIN TED OUT THAT MAJOR AMOUNT TO THE EXTENT OF RS.14 LAKHS PERTAINS TO THE DISCREPAN CIES IN STOCK FOR THE ASSESSMENT YEAR 1988-89. THE DISCLOSURE OF RS.18 LACS UNDER SECTION 132(4) WAS MADE FOR THE ASSESSMENT YEAR 1989-90. IN THESE CIRCUMSTANCES, NO NEXUS IS ESTABLISHED BETWEEN THE INVESTMENT MADE IN THE ASSETS OF AMISHEE PETROCHEM LTD. AND THE SOURCE OF INCOME WHICH CAN BE REASONABLY ACCEPTED AS PERTAINING TO T HE YEAR UNDER CONSIDERATION. THE LD. D.R. ACCORDINGLY CONTENDED THAT IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CLEARLY ERRED I N CONSIDERING THE DISCLOSURE OF RS.18 LAKHS MADE DURING THE COURSE OF OPERATION UND ER SECTION 132(4) OF THE INCOME TAX ACT, 1961. 13. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE SUBMITTED THAT THE PREVIOUS YEAR OF THE ASSESSMENT YEAR UNDER APPEAL IS OF 21 M ONTHS, I.E. 1.7.1988 TO 31.03.1990. THIS IS CLEARLY STATED BY THE A.O. IN THE ASSESSMEN T ORDER, WHEREAS IN THE FRESH ASSESSMENT ORDER THROUGH OVERSIGHT, THIS WAS NOT ME NTIONED. IF ONE TAKES INTO CONSIDERATION THE PREVIOUS YEAR OF 21 MONTHS, ONE C AN APPRECIATE THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS LEGALLY AND FACTUALLY CORRECT IN CONSIDERING THE DISCLOSURE OF RS.18 LAKHS MADE DURING THE COURS E OF OPERATION UNDER SECTION 132(4) TO BE LIABLE FOR IMMUNITY UNDER THE PROVISIO NS OF THE ACT. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT IN THE IMPUGNED ORDER IN PARA 3 TO 3.10 ON PAGE 2- 14, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS GIVEN DETAILED REASONS. THEREFORE, THE VIEW TAKEN BY THE LEARNED COMMISSION ER OF INCOME TAX(APPEALS) BE UPHELD. 14. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AU THORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE HON'BLE TRIBUNAL B BENCH VIDE OR DER DATED 16.12.1999 (SUPRA) AFTER CONSIDERING THE ARGUMENT ON BOTH SIDES CAME TO THE CONCLUSION THAT DISCLOSURE OF RS.18 LACS HAS BEEN MADE TO COVER UP DISCREPANCIES IN THE STOCK. IN THAT ORDER, IT IS ALSO STATED THAT IF THE SAID DISCLOSED AMOUNT IS IN VESTED IN ASSETS OF M/S. AMISHI PETROCHEM, WHICH REPRESENTS PARTLY BY FICTITIOUS LI ABILITY ARE REQUIRED TO BE TREATED AS CANCELLED. THEREFORE, FIRSTLY UNEXPLAINED INVESTMEN T IN AMISHI PETROCHEM UPTO THE DATE OF SEARCH OPERATION HAS TO BE CLARIFIED AND A DDITION ON ACCOUNT OF DISCREPANCIES 7 ITA NO. 789 & 1064/AHD/2004 IN STOCK SUBSEQUENT TO THE DATE OF SEARCH CANNOT BE CONSIDERED. THE ORIGINAL ASSESSMENT WAS SET ASIDE BECAUSE DETAILS AVAILABLE WERE NOT ADEQUATE FOR ADJUDICATING THE ISSUE OF SET OFF OF THE VARIOUS ADDITIONS AGAIN ST THE DISCLOSED AMOUNT AND A DIRECTION WAS GIVEN THAT ASSESSMENT SHOULD BE MADE AFRESH AFTER CONSIDERING THE CLAIM OF BENEFIT OF SET OFF IN THE LIGHT TRIBUNALS OBSER VATION. FROM THIS OBSERVATION OF THE TRIBUNAL IN ITS EARLIER ORDER DATED 16.12.1999 (SUP RA), IT IS CLEAR THAT THE A.O. WAS REQUIRED TO QUANTIFY THE AMOUNT OF ADDITION, WHICH IS COVERED BY DISCLOSURE OF RS.18 LACS MADE DURING THE COURSE OF SEARCH OPERATION UND ER SECTION 132(4) OF THE INCOME TAX ACT, 1961. THIS GROUND OF APPEAL IS ACCORDINGLY REJECTED. 15. IN RESPECT OF GROUND NO. 2, WE HAVE HEARD BOTH THE SIDES. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS) DELETED THE ADDITION OF RS.11,16,710/- MADE BY THE A.O. ON ACCOUNT OF INVOI CING OF SALES FOR THE DETAILED REASONS GIVEN IN PARA 4 TO 4.5 ON PAGE 14 TO 18 OF THE IMPUGNED ORDER. IT IS PERTINENT TO NOTE THAT SIMILAR ADDITION WAS MADE IN THE ASSES SMENT YEAR 1988-89. ON IDENTICAL FACTS, AN ADDITION OF RS.4,34,702/- WAS MADE AND CO NFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). HOWEVER, ITAT, B BENCH VIDE ORDER DATED 30.06.1999 IN ITA NO. 1624/AHD/1992 DELETED THE SAI D ADDITION FOR THE DETAILED REASONS GIVEN IN PARA 4 OF PAGES 5 & 6, WHICH READS AS UNDER :- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND THE EVIDENCE ON RECORD. IT IS FOUND THAT THE A.O. START ED WITH SUSPICION TO THE EFFECT THAT IT WAS COMMON IN THIS TRADE TO UNDER INVOICE THE SALE. OUT OF THE FORTY SIX ITEMS OF SAL ES ENUMERATED BY HIM IN RESPECT OF LSO, ONLY TWO ITEMS SHOW SALE PRI CE OF RS.9.5 PER LITRE. THERE IS ONE ITEM SHOWING THE RATE OF RS .5.5. PER LITRE. ALL THE OTHER ITEMS WERE SOLD @ 6.5 PER LITRE. THE A.O. HAS TAKEN DETAILS OF COST OF PRODUCTION AND THE VALUATION OF THE CLOSING STOCK ONLY TO SUPPORT HIS FINDING THAT THE ASSESSEE WAS SELLING THE PRODUCT AT A PRICE HIGHER THAN RS.7 PER LITRE. AS P ER THE STATEMENT OF THE MANAGING DIRECTOR, THE SELLING PRICE WAS RS. 7.5 IN THE EARLIER YEAR AND THE SAME PERSON ADMITTED THAT THE PRICES WERE RISING IN THE MARKET AND THEY WERE SELLING THE PROD UCT AT A PROFIT. ON CONSIDERING THESE FACTORS, THE A.O. ADOPTED THE SALE PRICE AT RS.8 PER LITRE. HERE THE A.O. DID NOT AT ALL CONSID ER THE DIFFERENT GRADES OF LSO SAID TO HAVE BEEN PRODUCED BY THE ASS ESSEE. THERE IS NO ANALYSIS OF THE PRODUCT GRADEWISE IN ORDER TO FIND OUT WHETHER THERE WAS SUPPRESSION IN THE SALE PRICE OF EACH GRADE. ON THE OTHER HAND, THE LD. C.I.T.(A) IN PARA 3.12 O F HIS APPELLATE ORDER WHICH WE HAVE EXTRACTED IN PARA 3 ABOVE WAS C ONVINCED AS 8 ITA NO. 789 & 1064/AHD/2004 TO THE FACT THAT THE ASSESSEE WAS PRODUCING THREE G RADES OF LSO WHICH WAS SOLD RS.9.50, RS.7.50 AND RS.6.50 PER LIT RE. IT IS ALSO POINTED OUT THAT THERE WERE ONLY TWO ITEMS OF SALE @ RS.9.50 PER LITRE AND THE OTHERS BEING C GRADE VARIETY. AT TH E SAME TIME, THE LD. C.I.T.(A) ALSO DID THE SAME MISTAKE AS COMM ITTED BY THE A.O. BY DRAWING ADVERSE INFERENCE AGAINST THE ASSES SEE BY APPLYING THE FLAT RATE OF RS.7.50 PER LITRE TO THE ENTIRE SALES WITHOUT EVEN BOTHERING TO VERIFY WHETHER THE ASSESS EE PRODUCED B GRADE VARIETY OF LSO DURING THE YEAR UNDER CONS IDERATION. ON THE OTHER HAND, THE ASSESSEE PIN POINTS THE FACT THAT THERE WERE ONLY TWO INSTANCES OF SALE OF A GRADE VARIET Y ONE INSTANCE OF SALE AT RS.5.50 PER LITRE (WHILE POINT IS NOT PROPERTY ESTABLISHED) AND THE REMAINING ITEMS BEING AT RS.6. 50 PER LITRE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS COLLECTED MORE SALE PRICE THAN WHAT IS INDICATED IN THE INVOI CES SINCE THE MAJOR PORTION OF THE SALE HAS BEEN VERIFIED BY EXAM INING THE PURCHASER, PANAMA PETROLEUM PRODUCTS, BOMBAY. ON GO ING THROUGH THE MATERIAL EVIDENCE ON RECORD AS INDICATE D IN THE PAPER BOOK, WE DO NOT HAVE ANY DOUBT REGARDING THE CORRECTNESS OF THE FIGURE GIVEN BY THE ASSESSEE WITH REGARD TO THE COST OF PRODUCTION AND THE VALUATION OF STOCK. CONSIDERING THE TOTALITY THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE BOOK RESULTS SHOWN BY THE ASSESSEE IN RESPECT OF SALE OF THE LSO, AS F AR AS THE SALE RATE IS CONCERNED, HAVE TO BE ACCEPTED WITHOUT ANY MODIFICATION. IN THIS VIEW OF THE MATTER, WE DELETE THE ADDITION OF RS.4,34,702/- SUSTAINED BY THE LD. C.I.T.(A). IN THE ASSESSMENT YEAR UNDER APPEAL ALSO, THE BASIS OF ADDITION IS IDENTICAL WITH THAT OF ASSESSMENT YEAR 1988-89. THE LEARNED COMMISSIONER O F INCOME TAX(APPEALS) CLEARLY STATED THAT THE ISSUE OF THE ASSESSMENT YEA R UNDER APPEAL IS SAME AS IN THE PREVIOUS YEAR. SHE DELETED THE ADDITION BY FOLLOWIN G THE TRIBUNALS ORDER FOR THE ASSESSMENT YEAR 1988-89. WE, THEREFORE, DECLINE TO INTERFERE. THIS GROUND OF APPEAL IS REJECTED. 16. THE ONLY GRIEVANCE OF REVENUE IN GROUNDS NO. 3, 4 AND 5 IS AGAINST ALLOWING THE BENEFIT OF SET OFF AGAINST DISCLOSURE OF RS.18 LACS MADE UNDER SECTION 132(4) IN RESPECT OF FOLLOWING THREE ITEMS :- (I) STOCK OF LIQUID PARAFFIN HEAVY GIVEN SET OFF RS. 82,000/- (II) ADDITION SUSTAINED TO THE EXTENT OF SALE OF G OODS RS.2,57,106/- (III) EXCESS PROCESS LOSS GIVEN SET OFF .RS . 48,432/-. 9 ITA NO. 789 & 1064/AHD/2004 17. AT THE TIME OF HEARING, SHRI C.K. MISHRA, SR. D .R. APPEARING ON BEHALF OF THE REVENUE POINTED OUT THAT THE LEARNED COMMISSIONER O F INCOME TAX(APPEALS) ERRED IN ALLOWING THE BENEFIT OF SET OFF OF ALL THE THREE AD DITIONS AGAINST DISCLOSURE OF RS.18 LACS MADE UNDER SECTION 132(4). ELABORATING HIS SUB MISSIONS, THE LD. D.R. SUBMITTED THAT THERE IS NO PRESUMPTION THAT DISCREPANCY IN ST OCK FOUND TO THE EXTENT OF RS.82,000/- IS ACTUALLY SOLD BY THE ASSESSEE. SIMIL ARLY WITH REGARD TO THE DIRECTION OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TO ALLO W SET OFF OF ADDITION SUSTAINED TO THE EXTENT OF SALE OF GOODS OF RS.2,57,106/- AND WITH REGARD TO EXCESS PROCESS LOSS TO THE EXTENT OF RS.48,432/-, THE LD. D.R. SUBMITTE D THAT BOTH ADDITIONS ARE ALSO RELATED TO DISCREPANCY IN STOCK AND, THEREFORE, THERE IS NO PRESUMPTION THAT THE SAME IS SOLD SO AS TO ALLOW THE BENEFIT OF SET OFF OF ADDITION AGAI NST DISCLOSURE OF RS.18 LAKHS. 18. ON THE OTHER HAND, SHRI M.G. PATEL, APPEARING O N BEHALF OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED COMMISSIONER OF INCO ME TAX(APPEALS). THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SEARCH U NDER SECTION 132 WAS CONDUCTED AT THE PREMISES OF COMPANY AND THE RESIDENCE OF MANAGI NG DIRECTOR OF THE COMPANY ON 29.11.1988. THE PREVIOUS YEAR FOR THE ASSESSMENT YE AR UNDER APPEAL WAS FOR 21 MONTHS FROM 01.07.1987 TO 31.03.1989. THERE IS NO D IRECT OR INDIRECT EVIDENCE, WHICH INDICATES THAT WHATEVER DISCREPANCY OF STOCK FOUND WAS NOT SOLD BY THE ASSESSEE BEFORE THE END OF THE PREVIOUS YEAR. THE LD. COUNSE L ACCORDINGLY SUBMITTED THAT THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS) FOR ALLOWING SET OFF OF ADDITION IN RESPECT OF ALL THE THREE ITEMS O F DISCREPANCY AGAINST THE DISCLOSURE OF RS.18 LACS MADE UNDER SECTION 132(4) OF THE I.T. AC T IS FAIR AN REASONABLE, THEREFORE, THE VIEW TAKEN BY THE LD. CIT.(A) BE UPHELD. 19. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . IT IS PERTINENT TO NOTE THAT THE SEARCH UNDER SECTION 132 WAS CONDUCTED ON 29.11.198 8 AT THE PREMISES OF COMPANY AND THE RESIDENCE OF MANAGING DIRECTOR OF THE COMPA NY. THE ACCOUNTING YEAR (PREVIOUS YEAR) RELEVANT TO THE ASSESSMENT YEAR UND ER APPEAL I.E. ASSESSMENT YEAR 1989-90 IS OF 21 MONTHS (FROM 01.07.1987 TO 31.03.1 989). THE DISCLOSURE OF RS.18 LACS AS RECORDED IN THE DECLARATION UNDER SECTION 1 32(4) READS AS UNDER :- 10 ITA NO. 789 & 1064/AHD/2004 DISCREPANCIES IN STOCK REALIZED DURING THE YEAR RE LEVANT TO A.Y. 89-90, AND MISCELLANEOUS RS.18 LACS TO COVER UP THE DISCREPANCIES IN STOCK REALIZED DURING THE YEAR REL EVANT TO A.Y. 1989-90 AND INVESTED IN ASSETS ETC. OF AMISHI PETROCHEM PVT. LTD. REPRESENTING PARTLY BY THE FICTITIOUS LIA BILITIES WHICH ARE TO BE TREATED AS CANCELLED. ON THE BASIS OF AFORESAID DECLARATION, THE ASSESSE E-COMPANY HAS CREDITED RS.18 LACS TO THE PROFIT & LOSS A/C. FOR THE PERIOD 01.07 .1987 TO 31.03.1989 AND THIS IS ALSO OFFERED FOR TAX FOR THE ASSESSMENT YEAR UNDER APPEA L. THIS DECLARATION HAS BEEN ACCEPTED BY THE A.O. WHILE MAKING THE COMPUTATION O F BUSINESS INCOME BECAUSE HE HAS STARTED ON THE BASIS OF NET PROFIT AS PER PROFI T & LOSS A/C. WHICH INCLUDED A SUM OF RS.18 LACS. KEEPING IN VIEW THE NATURE OF DISCREPAN CY, IN OUR CONSIDERED OPINION, WHATEVER ADDITION IS SUSTAINED BY THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) OUT OF DISCREPANCY IN STOCK, IS ELIGIBLE FOR SET OF F AGAINST THE DECLARATION OF RS.18 LACS MADE UNDER SECTION 132(4) OF THE INCOME TAX ACT, 19 61. WE ARE, THEREFORE, OF THE VIEW THAT THE LEARNED COMMISSIONER OF INCOME TAX(AP PEALS) HAS GIVEN COGENT REASON FOR ALLOWING SET OFF OF ADDITION IN RESPECT OF ALL THE THREE ITEMS OF DISCREPANCY AGAINST THE DISCLOSURE OF RS.18 LACS MADE UNDER SEC TION 132(4) OF THE I.T. ACT. WE, THEREFORE, DECLINE TO INTERFERE. RESULTANTLY, GROUN DS NO. 3 TO 5 ARE REJECTED. 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AS WELL AS THE APPEAL BY THE REVENUE BOTH ARE DISMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 05 MARCH, 2010. SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA) ACCOUNTANT MEMBER JUD ICIAL MEMBER DATED: 05 /03/2010 COPY OF THE ORDER IS FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED (4) THE CIT, (5) THE DR, AH MEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //C OPY // ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHM EDABAD BENCHES, AHMEDABAD LAHA/SR. P.S.