The DCIT, Central Circle-3, Surat V. Shri Ajit Oulp & Paper Ltd., Vapi

ITSSA 12/AHD/2013

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9253 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-07-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-06-2013
• Assessment Year: 2010-2011
• Appeal Filed On: 03-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Keywords: Business income; Income from undisclosed sources; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER A ND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.(SS)A. NO. 12/ AHD/2013 (ASSESSMENT YEAR 2010-11) DCIT, CC-3, SURAT VS. SHRI AJIT PULP & PAPER LTD., SURVEY NO. 239, NR. MORAL RLY CROSSING, VILLAGE SALVAV, VIA VAPI, VAPI 396191 PAN/GIR NO. : AADCS3903Q (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI SHELLEY JINDAL, CIT DR RESPONDENT BY: SHRI TUSHAR P HEMANI, AR DATE OF HEARING: 19.06.2013 DATE OF PRONOUNCEMENT: 05.07.2013 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS THE REVENUES APPEAL DIRECTED AGAINST THE ORDER OF LD. CIT(A)II, AHMEDABAD DATED 29.10.2012 FOR THE ASSESS MENT YEAR 2010-11. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADMITTED ADDITIONAL EVIDENCE IN RELATION TO THE SHORTAGE OF STOCK, WITHOUT GIVING THE A.O. AN OPPORTUNITY TO OFFER HIS COMMENT S, IN CONTRAVENTION OF PROVISIONS OF RULE 46A OF THE I.T. RULES. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) OUGHT TO HAVE UP[HELD THE ORDER OF THE A .O. 3) IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) BE SET ASIDE THAT OF THE A.O. BE RESTORED TO THE ABOVE EXT ENT. I.T(SS).A.NO.12 /AHD/2013 2 3. BRIEF FACTS OF THE CASE TILL THE ASSESSMENT STAG E ARE NOTED BY LD. CIT(A) IN PARA 3, 3.1 & 3.2 OF HIS ORDER AND FOR TH E SAKE OF READY REFERENCE, THE SAME ARE REPRODUCED BELOW: 3. THE ASSESSING OFFICER HAS OBSERVED IN PARA 5 OF THE ASSESSMENT ORDER (WRONG HEADING WAS PUT AS 'EXCESS STOCK FOUND' INST EAD OF 'SHORTAGE OF STOCK*), THAT DURING THE COURSE OF SEARCH, INVENTOR Y OF STOCK WAS TAKEN BY THE SEARCH TEAM AND SHORTAGE OF FINISHED GOODS WAS FOUND AT THE TIME OF SEARCH AS UNDER: PREMISE S STOCK AS PER BOOKS - STOCK AS PER PHYSICAL INVENTORY DIFFERENCE ITEM IN QUANTITY (IN KGS) VALUE (RS.) IN QUANTITY VALUE (RS.) IN QUANTITY VALUE (RS.) FACTORY - PREMISES AT AJIT PULP & PAPER LTD FINISHED GOODS 701818 10791630 438821 6749066 -262997 4042564 3.1 IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSES SEE SUBMITTED LETTER DATED 30 TH OCTOBER, 2009 IN WHICH IT WAS CLAIMED THAT COPIES OF INVENTORY OF STOCK OF UNFINISHED ROLLS ON FLOOR IN THE FORM O F JUMBO ROLL OR PARENT ROLL WERE NOT GIVEN ON THE DATE OF SEARCH OR DURING THE ASSESSMENT PROCEEDINGS. SO IT WAS ALSO CLAIMED THAT, SEARCH PA RTY DID NOT TAKE THE STOCK OF UNFINISHED ROLL ON FLOOR OR JUMBO ROLL OR PARENT ROLL ON < MACHINE PRODUCTION, AND THEREFORE, THE QUANTITY AND VALUATI ON AS PER THEIR BOOK RECORDS AND THOSE INVENTORISED DID NOT MATCH. IT WA S FURTHER CLAIMED THAT THERE WAS NO SHORTAGE IN THE FINISHED GOODS BECAUSE THEIR PRODUCTION PROCESS IS CONTINUOUS PROCESS AND THE RG-1 REGISTER ENTRIES ARE MADE FOR FINISHED REELS QUANTITY ONLY. UNFINISHED ROLLS, PAR ENT ROLLS/JUMBO ROLLS CANNOT BE ENTERED IN RG-1 REGISTER. MACHINE PRODUCT ION IS FURTHER PROCESSED FOR FINISHING AND ARE CUT INTO SMALLER SI ZE REELS AS PER CUSTOMERS' REQUIREMENTS AND THEREAFTER ONLY READY G OODS ARE ENTERED IN I.T(SS).A.NO.12 /AHD/2013 3 RG-1 REGISTER. MACHINE PRODUCTION PAPER CANNOT BE S OLD DIRECTLY TO THE MARKET, AS THIS IS REQUIRED TO BE FURTHER FINISHED AND REWOUND INTO SMALLER REELS AS PER THE SIZE REQUIREMENT OF THE CU STOMERS. SUCH MACHINE PRODUCTION IN THE FORM OF UNFINISHED ROLLS REMAIN L YING ON FLOOR. THE SEARCH PARTY HAD INVENTORISED AND SEIZED DETAILS OF UNFINISHED ROLLS ON THE FLOOR AS ON 13 TH JULY, 2009 AT PAGE NO. 43 OF ANNEXURE - A/2. FINIS HED PRODUCTION IS IN THE REEL FORM AND EVERY REEL IS HA VING IDENTIFICATION AS EXCISE REEL NUMBER. THE ASSESSEE FILED RECONCILIATI ON OF PHYSICAL STOCK INVENTORY AND STOCK AS PER RG-1 REGISTER AS UNDER: S. NO . PARTICULARS QUANTITY IN KGS 1 PHYSICALLY VERIFIED BY THE SEARCH PARTY UPTO REEL N O: 30635 438821 2 LESS: PHYSICALLY VERIFIED BY SEARCH PARTY OF PRODUC TION DT. 14/07/2009 FROM EXCISE REEL NO.3058 1 TO 30635 18923 3 ADD: PRODUCTION AS PER RG-1 REGISTER AS ON 14/07/20 09 FROM EXCISE REEL NO. 30581 TO 30*944 132838 A- - - -ADD: PRODUCTION AS PER RG-1 REGISTER AS ON 15/07/2 009 FROM EXCISE REEL NO. 30945 TO 3 1307. 130034 5 ADD: DISPATCH ON 16/07/09. (ENCLOSED COPY OF INVOIC ES AND DELIVERY CHALLANS OF PRODUCTION DATED 14-07-2009 AND 15-07-2 009 AND PRIOR TO THAT DATE) 193.37 6 LESS: WEIGHMENT DIFFERENCE IN SOME REELS 289 7 TOTAL OPENING BALANCE AS PER RG-1 REGISTER AS ON 16 /07/2009 UP TO REEL NO. 3 1307. (COPY ENCLOSED RG- 1, FINISHED PRO DUCTION REGISTER) 701818 3.2 ON THE BASIS OF THIS RECONCILIATION, THE AS SESSEE SUBMITTED THAT THERE WAS NO DISCREPANCY IN THE STOCK OF FINISHED G OODS AS ON DATE OF SEARCH. THE ASSESSEE'S SUBMISSION THAT THE SEARC H PARTY HAD NOT TAKEN STOCK OF UNFINISHED ROLL ON THE FLOOR OR JUMBO ROLL OR PARENT ROLL ON THE FLOOR OF MACHINE PRODUCTION WAS NOT ACCEPTED BY THE ASSESSING OFFICER ON THE GROUND THAT SEARCH TEAM HAS TAKEN THE STOCK WIT H THE HELP OF EMPLOYEES OF THE ASSESSEE AND INVENTORY WAS SIGNED BY THE EMPLOYEES CERTIFYING THAT THIS MUCH OF STOCK WAS ACTUALLY THE RE AT THE TIME OF STOCK I.T(SS).A.NO.12 /AHD/2013 4 TAKEN DURING THE SEARCH. THE EMPLOYEES WERE WELL CO NVERSANT WITH THE GRADATION AND CLASSIFICATION OF DIFFERENT STOCK AND THE RATES. THE ASSESSING OFFICER CONCLUDED THAT ASSESSEE HAS NO EX PLANATION FOR SHORTAGE OF FINISHED GOODS OF 2,62,997 KGS VALUED A T RS. 40,42,564 AND THIS SHORTAGE OF STOCK REPRESENTS UNACCOUNTED SALES MADE BY THE ASSESSEE. SINCE ASSESSEE HAS BOOKED ALL THE EXPENSES RELATED TO SALES, TOTAL SALE VALUE OF THIS STOCK HAS BEEN TREATED AS UNACCOUNTED INCOME IN THE HANDS OF COMPANY AND MADE ADDITION OF RS. 40,42,564 AFTER MULTIPLYING THE SHORTAGE OF QUANTITY BY AVERAGE RATE PER KG. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO HAS DELETED THE ENTIRE ADDITION MADE BY THE A.O. AND NOW, THE REVENUE IS IN APPEAL BEFORE US. 5. LD. D.R. SUPPORTED THE ASSESSMENT ORDER. HE SUB MITTED THAT ALTHOUGH GROUND NO.1 RAISED BY THE REVENUE IS ONLY IN RESPECT OF CONTRAVENTION OF THE PROVISIONS OF RULE 46A OF THE I. T. RULES BUT AS PER GROUND NO.2 OF THE REVENUE, THE REVENUE IS DISPUTIN G THE ORDER OF LD. CIT(A) ON MERIT ALSO, AS PER WHICH HE DELETED THE D ISALLOWANCE/ADDITION MADE BY THE A.O. HE ALSO SUBMITTED THAT REGARDING CONTRAVENTION OF RULE 46A, THE ORDER OF LD. CIT(A) IS DEFECTIVE BECAUSE N O REMAND REPORT WAS OBTAINED BY HIM FROM THE A.O. REGARDING THE MERIT OF THE ORDER OF LD. CIT(A), AS PER WHICH, HE DELETED THE ADDITION MADE BY THE A.O., IT WAS SUBMITTED THAT THE ADDITION WAS MADE BY THE A.O. ON VALID BASIS AFTER CONSIDERING ALL THE FACTS AND LD. CIT(A) WAS NOT JU STIFIED IN DELETING THE SAME. HE STRONGLY SUPPORTED THE ASSESSMENT ORDER. 6. AS AGAINST THIS, REGARDING GROUND NO.1 OF THE RE VENUE, IT WAS SUBMITTED BY THE LD. A.R. THAT IN THE PRESENT CASE, LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE BY RELYING UPON THOS E EVIDENCES WHICH WERE ALSO PLACED BEFORE THE A.O. AND THERE WAS NO FRESH AND / OR ADDITIONAL EVIDENCE TAKEN INTO CONSIDERATION BY LD. CIT(A) AND , THEREFORE, THERE IS NO VIOLATION OF RULE 46A AND THE REVENUES APPEAL H AS NO LEGS TO STAND. I.T(SS).A.NO.12 /AHD/2013 5 7. REGARDING MERIT OF THE ORDER OF LD. CIT(A) AS PE R WHICH HE DELETED THE ADDITION MADE BY THE A.O., HE MADE THE FOLLOWIN G SUBMISSIONS BY WAY OF WRITTEN NOTE WHICH IS REPRODUCED BELOW: THE ONLY GROUND TAKEN BY THE REVENUE IS VIOLATIO N OF RULE 46A OF THE IT RULES. NO CHALLENGE TO THE ADDITION ON MERITS. IN THE PRESENT CASE, ID. CIT(A) HAS GRANTED RELIE F TO THE ASSESSEE RELYING UPON EVIDENCES WHICH WERE PLACED BEFORE AO. THERE W AS NO FRESH AND/OR ADDITIONAL EVIDENCE TAKEN INTO CONSIDERATION BY THE CIT(A). (PGS.8 TO 11, PARA 7 OF CIT(A)'S ORDER). HENCE, THERE IS NO VIOLATION OF RULE 46A AND THE REVENUE'S APPEAL HAS NO LEGS TO STAND. EVEN ON MERITS, REVENUE HAS NO CASE AT ALL. A SEA RCH ACTION TOOK PLACE ON 16/07/09 DURING THE COURSE OF WHICH SO CALLED SH ORTAGE OF FINISHED STOCK WAS FOUND AND HENCE ADDITION OF RS.40,42,564/ - WAS MADE IN RESPECT OF THE SAME. SHORTAGE IN STOCK CAN NEVER BE MADE A GROUND FOR MAKING ANY ADDITION. THERE IS NO PROVISION UNDER THE SCHEME OF THE ACT W HICH ENABLES AO TO TAX SUCH SHORTAGE. RELIANCE IS PLACED ON 'AJIT STEE L CENTRE' BEARING IT(SS) NO.614/AHD/2012 ARGUED BEFORE HON'BLE BENCH 'D' ON 13/06/13 WHEREIN IDENTICAL ISSUE WAS INVOLVED. IN ANY CASE, THERE WAS NO SHORTAGE OF FINISHED ST OCK. THE SEARCH TEAM COMPARED THE PHYSICAL STOCK (4,38,821 KGS) WITH THE STOCK AS PER RG-1 REGISTER AS ON 16/07/09 (7,01,818 KGS) AND ACCORDIN GLY CONCLUDED THAT THERE WAS A SHORTAGE OF STOCK TO THE TUNE OF 2,62,9 97 KGS (I.E. 701818- 438821). THE SEARCH TEAM GROSSLY FAILED TO UNDERSTAND THE PROCESS OF THE ASSESSEE. ASSESSEE'S PROCESS IS A CONTINUOUS PROCESS WHEREB Y THE MACHINE PRODUCTION/PARENT ROLLS/JUMBO ROLLS/UNFINISHED ROLL S ARE CUT TO SMALLER SIZES REELS AS PER THE SPECIFIC REQUIREMENT OF THE CUSTOMERS. THE PHYSICAL STOCK OF INVENTORY WAS TAKEN ON 16 TH JULY, 2009 WHEREAS THE EXCISE STOCK AS PER RG-1 REGISTER AS ON 16 TH JULY, 2009 WAS TAKEN ON 31 ST JULY WHEN PO WAS OPERATED. THEREFORE THE STOCK AS P ER RG-1 REGISTER WAS WRITTEN UPTO REEL NO.31307. IN OTHER WORDS, STO CK WHICH WAS LYING ON THE SHOP FLOOR AND NOT CONSIDERED BY THE SEARCH PARTY WHILE TAKING PHYSICAL INVENTORY WAS ALREADY INCLUDED IN RG-1 REG ISTER. STOCK OF 'UNFINISHED/JUMBO ROLLS' WHICH GOT MANUFACTURED ON 14/07/09 & 15/07/09 AND DULY ENTERED IN RG-1 REGISTER AS STOCK OF THOSE 2 DAYS WAS TOTALLY IGNORED BY THE SEARCH TEAM WHILE TAKING THE PHYSICAL STOCK. I.T(SS).A.NO.12 /AHD/2013 6 DETAILS OF SUCH GOODS PRODUCED ON 14/07/09 & 15/07/ 09 (WHICH FORMED PART OF UNFINISHED ROLLS ON THE DATE OF SEARCH) AND RECORDED IN RG-1 REGISTER ARE AS UNDER: DATE OF PRODUCTIO N REEL NOS. PRODUCTION REGISTER (PGS. OFP/B) QUANTITY (KGS.) RG- 1 REGISTER (PGS. OFP/B) 49553 30 30581 25640 34 14/07/09 TO 115 TO 127 21855 38 30944 35790 42 132838 15/07/09 30945 TO 31307 128 TO 140 59596 40344 30094 130034 30 34 43 FURTHER, GOODS WEIGHING 19,337 KGS WERE DISPATCHED ON 16/07/09 ITSELF AND HENCE, THOUGH THE SAME WERE INCLUDED IN RG-1 RE GISTER, THE SAME WERE NOT THERE AT THE TIME OF PHYSICAL VERIFICATION OF STOCK. SUMMARY AS WELL AS COPIES OF INVOICES AND DELIVERY CHALLAN IN RESPECT OF THE SAID DISPATCH ARE PLACED AT PGS.152 TO 162 OF P/B. FURTHER, AT THE TIME OF PHYSICAL VERIFICATION OF ST OCK, STOCK UPTO REEL NOS. 30635 WAS TAKEN INTO ACCOUNT (PGS.8 & 9 OF CIT(A)'S ORDER) OF WHICH STOCK FROM REEL NOS.30581 TO 30635 WAS A PART OF PR ODUCTION DATED 14/07/09 (AS MENTIONED ABOVE) WHICH HAS BEEN ADDED SEPARATELY WHILE RECONCILING THE SAME WITH STOCK AS PER RG-1 REGISTE R. HENCE, THE QUANTITY (IN KGS) PERTAINING TO THE SAID REELS AGGREGATING T O 1 8923 KGS NEEDS TO BE EXCLUDED FROM PHYSICAL STOCK SO AS TO AVOID DUPLICA TION. FURTHER, FINISHED GOODS PRODUCED ON 14/07/09 AND 15 /07/09 WERE SOLD IN THE SUBSEQUENT PERIOD AFTER COLLECTING EXCISE DUTY ON THE SAME. HENCE, IT CAN'T BE SAID THAT SUCH FINISHED GOODS WERE SOLD OU TSIDE THE BOOKS AS PRESUMED BY THE AO (PG.10 OF CIT(A. AFTER CONSIDERING THE ABOVE, THERE REMAINS A DIFFER ENCE OF 289 KGS. THE SAME CAN BE ATTRIBUTED TO LACK OF PRECISION IN WEIG HING THE SAID STOCK. ON I.T(SS).A.NO.12 /AHD/2013 7 THE WHOLE, THE ENTIRE DIFFERENCE BROADLY STANDS EXP LAINED AND HENCE, THERE IS NO ROOM FOR ANY SHORTAGE OF STOCK AS ALLEGED BY THE DEPARTMENT. FURTHER, ASSESSEE'S BOOKS OF ACCOUNTS ARE DULY AUDI TED. TAX AUDIT REPORT IS PLACED AT PGS.163 TO 177 OF P/B. AO HAS NEITHER POINTED OUT ANY IRREGULARITY IN THE BOOKS OF ACCOUNTS, NOR ANY INST ANCES OF ANY SALES OUTSIDE THE BOOKS. ALTERNATIVELY, THE VERY SAME REE LS HAVE BEEN SOLD AFTER PAYMENT OF EXCISE DUTY IN THE SUBSEQUENT YEAR. HENC E, IN CASE A VIEW IS TAKEN THAT SUCH SHORTAGE IS TO BE TREATED AS UNACCO UNTED SALES IN THIS YEAR, THEN SALES, TO THAT EXTENT, IN THE SUBSEQUENT YEARS SHOULD HAVE BEEN EXCLUDED FROM TOTAL SALES OF THAT PERIOD. 8. IN THE COURSE OF HEARING BEFORE US, THE BENCH WA NTED TO KNOW AS TO WHETHER THE COPY OF PANCHNAMA TO FIND THE TIME OF B EGINNING OF SEARCH AND ITS CLOSURE IS AVAILABLE IN THE PAPER BOOK OF 1 77 PAGES FILED BY THE ASSESSEE AND IN REPLY, IT WAS SUBMITTED BY THE LD. A.R. THAT SINCE THIS IS AN APPEAL FILED BY THE REVENUE, SUCH DOCUMENT SHOUL D HAVE BEEN FILED BY THE REVENUE AND THE ASSESSEE IS UNDER NO OBLIGATION TO FILE ANY PAPER BEFORE THE TRIBUNAL ALTHOUGH THE ASSESSEE HAS FILED A DETAILED PAPER BOOK CONTAINING 177 PAGES AND, THEREFORE, EVEN IF SOME P APER IS NOT AVAILABLE IN THE PAPER BOOK, NO ADVERSE INFERENCE COULD BE DR AWN AGAINST THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. REGARDING GROUND NO.1 OF THE REVENUE, WE FIND FORCE IN THE SU BMISSION OF THE LD. A.R. THAT NO NEW DOCUMENT HAS BEEN CONSIDERED BY LD . CIT(A) FOR DECIDING THIS APPEAL AND HENCE, THERE IS NO VIOLATI ON OF RULE 46A OF THE I T RULES BECAUSE, WE FIND THAT THE DECISION OF LD. C IT(A) IS BY CONSIDERING THE LETTER DATED 29.10.2009 WHICH WAS S UBMITTED BY THE ASSESSEE BEFORE THE A.O. ALSO AND WAS REPRODUCED BY THE A.O. ON PAGES 3-5 OF THE ASSESSMENT ORDER. HENCE, GROUND NO.1 OF THE REVENUE IS REJECTED. I.T(SS).A.NO.12 /AHD/2013 8 10. NOW, WE PROCEED TO DECIDE THE APPEAL OF THE REV ENUE ON MERIT I.E. GROUND NO.2. AS PER THE ORDER OF LD. CIT(A) AS PER WHICH HE DELETED THE ADDITION MADE BY THE A.O. IN RESPECT OF SHORT STOCK FOUND BY THE SEARCH PARTY OF FINISHED GOODS IN THE COURSE OF SEARCH. B UT BEFORE ADJUDICATING THIS ISSUE, WE WOULD LIKE TO CONSIDER THESE SUBMISS IONS MADE BY THE LD. A.R. THAT SINCE THIS IS THE APPEAL FLED BY THE REVE NUE, THE ASSESSEE IS NOT UNDER ANY OBLIGATION TO FILE ANY PAPER BOOK OR ANY DOCUMENT BEFORE THE TRIBUNAL AND IT IS THE DUTY OF THE REVENUE TO BRING EVIDENCE ON RECORD TO POINT OUT ANY DEFECT IN THE ORDER OF LD. CIT(A). WE WOULD LIKE TO OBSERVE THAT THIS ARGUMENT OF THE LD. A.R. IS NOT C ORRECT AND THE SAME IS FALLACIOUS. HAD THIS BEEN THE CASE THAT BEFORE THE TRIBUNAL, ONLY THE APPELLANT HAS TO BRING MATERIAL IN SUPPORT OF THE G ROUNDS RAISED BY THE APPELLANT THEN THERE WAS NO NEED TO GRANT ANY HEARI NG TO THE RESPONDENT. BUT THE LAW REQUIRES THAT THE TRIBUNAL SHOULD DECID E THE APPEAL AFTER GRANTING HEARING TO BOTH THE SIDES I.E. THE APPELLA NT AND THE RESPONDENT. AS PER RULE 27 OF THE TRIBUNAL RULES 1963, THE RESP ONDENT CAN EVEN SUPPORT THE ORDER OF LD. CIT(A) ON ANY GROUND WHICH IS DECIDED AGAINST BY LD. CIT(A). THIS ALSO GOES TO SHOW THAT THE TRI BUNAL HAS TO DECIDE THE APPEAL AFTER HEARING AND CONSIDERING THE SUBMISSION S OF BOTH THE SIDES. 10.1 AS PER SUB-SECTION (1) OF SECTION 254, THE TRI BUNAL HAS TO HEAR BOTH SIDES. AS PER RULE 18(1) OF APPELLATE TRIBUNAL RUL ES, 1963, BOTH PARTIES MAY SUBMIT PAPER BOOK BEFORE ITAT. AS PER RULE 18( 2), THE TRIBUNAL SUO MOTO MAY DIRECT ANY PARTY INCLUDING RESPONDENT TO FILE PAPER BOOK. HENCE, IT IS TRUE THAT NONE OF THE PARTIES IS UNDER COMPULSION TO FILE A PAPER BOOK UNLESS DIRECTED BY THE TRIBUNAL, BUT AT THE SAME TIME, NOT DEBARRED ALSO THAT HE CANNOT FILE PAPER BOOK. THE PROVISIONS OF LAW IN I.T(SS).A.NO.12 /AHD/2013 9 THIS REGARD ARE SAME FOR BOTH I.E. APPELLANT AND RE SPONDENT AND HENCE, THIS ARGUMENT THAT BEING RESPONDENT, THE ASSESSEE IS NOT REQUIRED TO FILE PAPER BOOK, IS NOT ON THE BASIS OF ACT OR RULES. 11. NOW, THE QUESTION IS AS TO WHETHER THE RESPONDE NT IS REQUIRED TO BRING EVIDENCE ON RECORD IN SUPPORT OF THE ORDER PA SSED BY LD. CIT(A) AND IF THE RESPONDENT IS NOT DOING SO, WHETHER ANY ADVERSE INFERENCE CAN BE DRAWN BY THE TRIBUNAL ON ACCOUNT OF THIS ACTION OR INACTION OF THE RESPONDENT ALTHOUGH NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE APPELLANT REVENUE TO POINT OUT ANY DEFECT IN THE OR DER OF LD. CIT(A). IN THIS REGARD, WE ARE OF THE CONSIDERED OPINION THAT IT IS THE DUTY OF BOTH THE SIDES TO BRING EVIDENCE BEFORE THE TRIBUNAL IN SUPP ORT OF RESPECTIVE CONTENTIONS AND IT CANNOT BE SAID BY THE RESPONDENT THAT HE IS NOT DUTY BOUND TO BRING ANY EVIDENCE BEFORE THE TRIBUNAL EVE N IN SUPPORT OF HIS OWN CONTENTION. THIS IS TRUE THAT NO PARTY IS SUPP OSED TO BRING EVIDENCE ON RECORD WHICH IS AGAINST HIM BUT AT THE SAME TIME IF A PARTY IS NOT BRINGING ON RECORD THE EVIDENCE WHICH IS CLAIMED TO BE IN SUPPORT OF HIS CONTENTION, THEN IT HAS TO BE ACCEPTED THAT SUCH EV IDENCE IN FACT IS NOT SUPPORTING HIS CONTENTION AND THE DECISION OF LD. C IT(A) IS BY WAY OF WRONG APPRECIATION OF SUCH FACTS OR MATERIAL AND TH AT IS WHY THE RESPONDENT IS NOT BRINGING SUCH EVIDENCE ON RECORD BEFORE THE TRIBUNAL PARICULARLY, WHEN THE ORDER OF LD. CIT(A) IS CONTRA DICTORY WITH REGARD TO THE EVIDENCE STATED TO BE THE BASIS OF HIS ORDER AN D ALSO WHEN NO PROPER BASIS IS INDICATED BY LD. CIT(A) IN SUPPORT OF HIS DECISION. ADMITTEDLY, THERE IS NO CONTROL OF THE ASSESSEE ON THE WAY, LD . CIT(A) IS WRITING HIS ORDER BUT IT IS ALSO TRUE THAT THE EVIDENCES BROUGH T ON RECORD BY THE ASSESSEE BEFORE THE LD. CIT(A) ARE VERY MUCH AVAILA BLE WITH THE ASSESSEE AND THE SAME CAN BE BROUGHT ON RECORD BEFORE THE TR IBUNAL AND EVEN IF I.T(SS).A.NO.12 /AHD/2013 10 PROPER BASIS IS NOT GIVEN BY LD. CIT(A) IN SUPPORT OF HIS DECISION OR WHERE THE BASIS INDICATED BY LD. CIT(A) IN HIS ORDE R IS IN CONTRADICTION OF THE MATERIAL AVAILABLE ON RECORD, AND THE CORRECT A PPRECIATION OF SUCH MATERIAL IS ALSO SUPPORTING THE DECISION TAKEN BY L D. CIT(A) AND IN SPITE OF THIS, THE ASSESSEE IS NOT BRINGING SUCH MATERIAL ON RECORD THEN, IT WILL BE IN FITNESS OF THINGS THAT ADVERSE INFERENCE SHOULD BE DRAWN BY THE TRIBUNAL AGAINST THE FAILURE OF THE ASSESSEE WHETHE R INTENTIONALLY OR BY NEGLIGENCE OR OTHERWISE IN BRINGING SUCH MATERIAL O N RECORD BEFORE THE TRIBUNAL. WE WOULD LIKE TO OBSERVE THAT IN THE PR ESENT CASE, IN SPITE OF SPECIFIC QUERY RAISED BY THE BENCH REGARDING THE PA NCHNAMA IN SUPPORT OF THE CONTENTION RAISED BY THE ASSESSEE BEFORE LD. CI T(A) AND ALSO BEFORE US, LD. A.R. FLATLY REFUSED TO BRING THE SAME BEFOR E THE TRIBUNAL BY PLEADING THAT SINCE THE APPEAL IS FILED BY THE REVE NUE, THE ASSESSEE IS UNDER NO OBLIGATION TO BRING ANY SUCH EVIDENCE BEFO RE THE TRIBUNAL AND IF THERE IS ANY MATERIAL WHICH SUPPORTS THE CASE OF TH E REVENUE, IT IS THE DUTY OF THE REVENUE TO BRING SUCH EVIDENCE ON RECORD. W E ARE OF THE CONSIDERED OPINION THAT THIS ARGUMENT IS TOTALLY UN FOUNDED AND FALLACIOUS. IF THE ORDER OF LD. CIT(A) IS WITHOUT ANY BASIS OR THE BASIS INDICATED BY HIM IN HIS ORDER IS NOT IN LINE WITH THE EVIDENCE R EFERRED TO BY HIM ON THE BASIS OF WHICH HE HAS TAKEN THE DECISION THEN OBVIO USLY, THE TRIBUNAL CAN TAKE ADVERSE VIEW FOR THE REFUSAL BY THE RESPONDENT IN BRINGING EVIDENCE ON RECORD IN SUPPORT OF THE ORDER OF LD. CIT(A) EVE N AFTER BEING POINTED OUT BY THE TRIBUNAL. IN THE PRESENT CASE, THE LD. A.R. HAS NOT EVEN REQUESTED FOR THE TIME TO BRING SUCH EVIDENCE ON RE CORD AND IN FACT, HE HAS FLATLY REFUSED TO BRING SUCH EVIDENCE ON RECORD BY PLEADING THAT IT IS THE DUTY OF THE REVENUE TO BRING EVIDENCE ON RECORD BEI NG THE APPELLANT AND THE ASSESSEE BEING THE RESPONDENT, IS NOT REQUIRED TO BRING ANY EVIDENCE I.T(SS).A.NO.12 /AHD/2013 11 ON RECORD BEFORE THE TRIBUNAL. HENCE, WE DECIDE TH IS APPEAL OF THE REVENUE ON THIS BASIS THAT WHETHER HIS DECISION IS DULY SUPPORTED BY VALID AND REASONABLE BASIS AND IF HIS DECISION IS FOUND T O BE WITHOUT INDICATING ANY VALID BASIS FOR HIS DECISION, THEN IT HAS TO BE ACCEPTED THAT HIS ORDER IS NOT SUSTAINABLE AND SHOULD BE REVERSED. SIMILARLY, IF IT IS FOUND THAT THE BASIS INDICATED BY HIM AND THE MATERIAL INDICATED B Y HIM ON THE BASIS OF WHICH HE HAS DECIDED THIS ISSUE IS CONTRADICTORY TH EN ALSO, THE TRIBUNAL HAS TO DECIDE THE ISSUE AGAINST THE ASSESSEE BECAUS E SUCH A DECISION WHICH IS CONTRADICTORY TO THE MATERIAL INDICATED BY LD. C IT(A) CANNOT BE UPHELD PARTICULARLY IN THE ABSENCE OF SUCH MATERIAL HAVIN G BEEN BROUGHT ON RECORD BY THE RESPONDENT ASSESSEE TO SUPPORT THE OR DER OF LD. CIT(A) BECAUSE EVEN IF THE CONTRADICTION IN HIS ORDER IS C REATED BY LD. CIT(A) BUT IT IS NOT EXISTING IN FACT THEN ALSO, THE TRIBUNAL HAS NO OPTION BUT TO REVERSE THE ORDER OF LD. CIT(A) FOR THIS REASON THAT HIS OR DER IS IN CONTRADICTION TO THE MATERIAL INDICATED BY HIM BEING THE BASIS OF HI S DECISION AND THE RELEVANT MATERIAL IS NOT MADE AVAILABLE BEFORE THE TRIBUNAL TO EXAMINE AS TO WHETHER THE BASIS IS TRUE OR NOT AND WHETHER CON TRADICTION IS TRUE OR NOT. 12. NOW, WE EXAMINE THE BASIS OF THE DECISION OF LD . CIT(A). THIS IS ALSO BEING EXAMINED AS TO WHETHER THE BASIS OF HIS DECISION IS IN LINE WITH THE MATERIAL INDICATED BY HIM FOR TAKING HIS DECISI ON. WE FIND THAT THE DECISION OF LD. CIT(A) IN THE PRESENT CASE IS CONTA INED IN PARA 7 OF HIS ORDER AND FOR THE SAKE OF READY REFERENCE, THE SAME IS REPRODUCED BELOW: 7. I HAVE CONSIDERED THE BASIS OF ADDITION MADE BY THE ASSESSING OFFICER AND ALSO THE SUBMISSION OF THE APPELLANT ALONG WITH COPIES OF IN VENTORIES AND RECONCILIATION & WORKING FILED BY THE APPELLANT. I AM OF THE CONSIDE RED OPINION THAT THE ASSESSING OFFICER WAS, RIOT JUSTIFIED IN MAKING ADDITION OF R S. 40,42,564 ON ACCOUNT OF SHORTAGE IN FINISHED GOODS STOCK WITHOUT APPRECIATING THE RE ASONS FOR DISCREPANCY AND WITHOUT APPRECIATING THE RECONCILIATION FILED BY THE APPELL ANT BEFORE HIM. THE PHYSICAL STOCK INVENTORY WAS TAKEN ON 16 TH JULY, 2009 WHEREAS THE STOCK AS PER EXCISE RECORD RG-1 REGISTER AS ON 16 TH JULY, 2009 WAS TAKEN ON 31 ST JULY 2009 AT THE TIME OF OPERATING THE PROHIBITORY ORDER. IN THE PHYSICAL STOCK INVENTORY OF STOCK OF FINISHED GOODS UP TO I.T(SS).A.NO.12 /AHD/2013 12 EXCISE REEL NO. 30635 WAS INCLUDED WHEREAS THE STOC K OF FINISHED GOODS AS PER RG-1 REGISTER AS ON 15 TH JULY, 2009 HAS BEEN ENTERED UPTO EXCISE REEL NO. 3 1307. IN THE RG-1 REGISTER, PRODUCTION AS ON 14 TH JULY, 2009 OF EXCISE REEL NO, 30581 TO 30944 I.E. 1,32,838 KGS AND PRODUCTION AS ON 15 TH JULY, 2009 FROM EXCISE REEL NO. 30945 TO 31307 I.E. 1,30,034 KGS HAS BEEN ENTERED BUT THE SA ME WAS NOT INCLUDED IN PHYSICAL STOCK INVENTORY PREPARED ON 16 TH JULY, 2009. THE RG-1 REGISTER WAS NOT IN PROHIBITO RY ORDER PLACED ON 16 TH JULY, 2009 AND THAT WAS SEIZED ON 31 ST JULY, 2009. PRODUCTION PROCESS, AS EXPLAINED BY THE APPELLANT IT. IS CLEAR THAT FT IS .A CONTINUOUS PROCESS PLANT WHEREIN UNFINISHED ROLLS ARE ALWAYS ON THE FLOOR IN THE FORM OF JUMBO ROLL OR PARENT ROLL LYING ON FLOOR FOR AWAITING FINAL CUTTING OR T RIMMING AS PER CUSTOMER SPECIFICATION BEFORE THE DISPATCHES TAKE PLACE. FROM THE INVENTOR Y OF GOODS IT IS CLEAR THAT INVENTORY OF UNFINISHED ROLL ON THE FLOOR WAS NOT TAKEN BY TH E SEARCH PARTY ON 16 TH JULY, 2009. THE APPELLANT HAS WRITTEN LETTER TO ADIT, VALSAD, O N 29 TH OCTOBER, 2009 TO INVENTORISE AND INCLUDE JUMBO ROLL OR THE PARENT ROLL IN THE IN VENTORY OF FINISHED GOODS WHEREAS THE PROHIBITORY ORDER WAS OPERATED ON 31 ST JULY, 2009. FOR PROPER COMPARISON OF STOCK AS PER EXCISE RECORDS I.E. RG-1 REGISTER, AND PHYSICAL STOCK TAKEN ON 16 TH JULY, 2009 THE PRODUCTION OF 14 TH JULY, 2009 AND 15 TH JULY, 2009 WHICH WAS ON THE FLOOR WAS REQUIRED TO BE INCLUDED IN THE PHYSICAL INVENTORY. THE DISPATCH OF 19,337 KGS OF FINISHED GOODS ON 16 TH JULY, 2009 WAS TO BE ADDED IN THE PHYSICAL STOCK I NVENTORISED ON 16 TH JULY, 2009 TO GIVE AT THE OPENING STOCK AS PER RG- 1 REGISTER BECAUSE THESE DISPATCHES WERE 'NOT INCLUDED IN THE PHYSICAL STOCK INVENTORY PREPARED. IT IS APPARENT THAT STOCK AS PER RG-1 REGISTER AS ON 15 TH JULY, 2009.ENTER.ED UPTO REEL NO. 31307 WAS COMPARED WITH THE PHYSICAL STOCK OF FINISHED GO ODS AS ON 16 TH JULY, 2009 UPTO FINISHED GOODS BEARING EXCISE REEL NO. 30635. THE D ISPATCH ON 16 TH JULY, 2009 I.E. 19,337 KG WAS ALSO TO BE CONSIDERED TO ARRIVE AT OP ENING BALANCE AS PER RG-1 REGISTER. THERE IS NO EVIDENCE FOUND DURING THE SEA RCH OR DURING THE ASSESSMENT PROCEEDINGS OF ANY SPECIFIC DEFECTS OR INSTANCES OF FINDING OF ANY UNACCOUNTED SALES, SUPPRESSED RECEIPTS OR UNACCOUNTED OR INFLATED PURC HASES. SO, IT CANNOT BE SAID THAT THE SHORTAGE OF STOCK WAS DUE TO SALES OUTSIDE BOOK S. THE FINISHED GOODS BEARING EXCISE REEL NO. 30581 TO 30944 ENTERED IN PRODUCTIO N ON 14* JULY, 2009 AND ON 15TH JULY, 2009 IN RG-1 REGISTER, WAS SOLD IN SUBSEQUENT PERIOD AFTER COLLECTING EXCISE DUTY ON THE SAME. SO, IT CANNOT BE SAID THAT THE FINISHED GOODS WERE SOLD OUTSIDE BOOKS. THE SHORTAGE OF FINISHED GOODS OCCURRED ONLY ON ACCOUNT OF NON- INCLUSION OF UNFINISHED JUMBO ROLLS/PARENT ROLLS LY ING ON THE FLOOR WHICH WERE SUBSEQUENTLY TRIMMED AND CUT INTO SMALLER ROLLS AND ENTERED IN RG-1 REGISTER AGAINST PRODUCTION OF 14 TH JULY, 2009 AND 15 TH JULY, 2009. IF THE FINISHED STOCK FROM EXCISE REEL NUMBER 30636 TO 31307 WAS CONSIDERED AS FINISH ED STOCK AS PER BOOKS ON 16 TH JULY, 2009, THE SAME WERE ALSO REQUIRED TO BE INCLU DED IN THE PHYSICAL INVENTORY OF FINISHED GOODS PREPARED ON 16 TH JULY, 2009. THE SHORTAGE OF STOCK WAS ONLY DUE TO THIS REASON WHICH HAS BEEN SUCCESSFULLY RECONCILED BY TH E APPELLANT AS UNDER: S. NO. : PARTICULARS QUANTITY IN KGS 1 PHYSICALLY VERIFIED BY THE SEARCH PARTY UPTO REEL NO. 30635(EXHIBIT-4) 438821 I.T(SS).A.NO.12 /AHD/2013 13 2 LESS: PHYSICALLY VERIFIED BY SEAR CH PARTY OF PRODUCTION DT. 14/07/2009 FROM EXCISE REEL NO.30581 TO 30635 ((EXH IBIT-4)) 18923 3 ADD: PRODUCTION AS PER RG- 1 REGISTER AS ON 14/07/2009 FROM EXCISE REEL NO. 3058 1 TO 30944(EXHIBIT-5) 132838 4 ADD: PRODUCTION AS PER RG-1 REGISTER AS ON 15/07/2009 FROM EXCISE REEL NO. 30945 TO 31307. (EXHIBIT- 6) 130034 5 ADD: DISPATCH ON 16/07/09 (ENCLOSED COPY OF INVOICE S AND DELIVERY CHALLANS OF PRODUCTION DATED 14-07-2009 AN D 15-07- 2009 AND PRIOR TO THAT DATE) (EXHIBIT-7) 19337 6 LESS: WEIGHMENT DIFFERENCE IN SOME REELS 289 7 TOTAL OPENING BALANCE AS PER RG- 1 REGISTER AS ON 16/07/2009 UP TO REEL NO. 31307. (COPY ENCLOSED RG- 1, FINISHED PRODUCTION REGISTER) (EXHIBIT-3) 701818 THE ASSESSING OFFICER'S ARGUMENT THAT STOCK WAS TAK EN BY THE SEARCH TEAM AS HELPED BY THE EMPLOYEES WHO WERE WELL CONVERSANT WITH THE GRADATION AND CLASSIFICATION OF DIFFERENT STOCK AND WITH THE RATES, CANNOT BE CONSI DERED AS CONCLUSIVE PROOF AGAINST THE FACTUAL MISTAKE OF NOT INCLUDING THE FINISHED G OODS REELS FROM EXCISE REEL NO. 30636 TO 31307 WHICH WAS INCLUDED IN THE BOOK STOC K BUT NOT INCLUDED IN*THE PHYSICAL INVENTORY OF FINISHED GOODS. IN VIEW OF TH E ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND RECONCILIATION FILED BY THE APPELLANT, AS REPRODUCED HEREIN ABOVE, IT IS HELD THAT THERE WAS NO SHORTAGE OF FINISHED GOODS A ND ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 40,42,564 ON AC COUNT OF ALLEGED SHORTAGE OF STOCK WITHOUT CONSIDERING AND APPRECIATING THE REASONS OF NON-INCLUSION OF FINISHED GOODS IN THE PHYSICAL INVENTORY WHEREAS THE SAME PRODUCTI ON HAS BEEN ENTERED AS PER RG-1 REGISTER AGAINST PRODUCTION OF 14 TH JULY, 2009 AND 15 TH JULY, 2009. THE ADDITION OF RS. 40,42,564 IS ACCORDINGLY DELETED AND THE GROUND OF APPEAL IS ALLOWED. 13. WE FIND THAT IT IS STATED BY LD. CIT(A) IN ABOV E PARA THAT PHYSICAL STOCK INVENTORY WAS TAKEN BY THE SEARCH PARTY ON 16 .07.2009. THEREAFTER HE IS SAYING THAT STOCK AS PER EXCISE RECORD, RG-1 REGISTER ALSO ON 16.07.2009 WAS TAKEN ON 31.07.2009 AT THE TIME OF O PERATING THE PROHIBITORY ORDER AND THEREAFTER, HE IS SAYING THAT IN THE PHYSICAL STOCK INVENTORY OF STOCK OF FINISHED GOODS, UP TO REEL NO .306350 WAS INCLUDED WHEREAS PRODUCTION OF FINISHED GOODS AS PER RG-1 RE GISTER AS ON 15.07.2009 HAS BEEN ENTERED INTO EXCISE RECORDS UP TO REEL NO.31307. I.T(SS).A.NO.12 /AHD/2013 14 THEREAFTER HE IS SAYING THAT IN THE RG-1 REGISTER, PRODUCTION AS ON 14.07.2009 WAS ENTERED BEING REEL NO.30581 TO 30944 I.E. 132838 KG AND PRODUCTION AS ON 15.07.2009 BEING REEL NO.30945-313 07 I.E. 130034 KG. HAS BEEN ENTERED BUT THESE REELS WERE NOT INCLUDED IN THE PHYSICAL STOCK INVENTORY PREPARED ON 16.07.2009. THEREAFTER, HE I S SUPPORTING THIS FINDING ON THIS BASIS THAT RG-1 REGISTER WAS NOT UN DER PROHIBITORY ORDER PLACED ON 16.07.2009 AND THIS WAS SEIZED ON 31.07.2 009. THEREAFTER, HE IS GIVING THE BASIS OF HIS DECISION THAT THE SHORTA GE OF FINISHED GOODS OCCURRED ONLY ON ACCOUNT OF NON INCLUSION OF UNFINI SHED JUMBO REEL/PARENT REEL LYING ON THE FLOOR WHICH WAS SUBSE QUENTLY CUT INTO SMALL REELS AND ENTERED INTO RG-1 REGISTER AGAINST PRODUC TION ON 14.07.2009 AND 15.07.2009. THIS BASIS GIVEN BY LD. CIT(A) IN SUPP ORT OF HIS DECISION IS TOTALLY CONTRARY TO THE FACTS. IF SOME JUMBO REELS AND PARENT REELS LYING ON THE FLOOR ON THE DATE OF SEARCH I.E. ON 16.07.2009 WERE NOT INCLUDED IN THE INVENTORY OF FINISHED GOODS THEN HOW SUCH NON INCLU SION IN THE INVENTORY OF FINISHED GOODS ON THE DATE OF SEARCH CAN EXPLAIN THE FINISHED GOODS AS PER RG-1 REGISTER ON 16.07.2009. AS PER THE LETTER DATED 29.10.2009 WRITTEN BY THE ASSESSEE AND REPRODUCED BY THE A.O. IN THE ASSESSMENT ORDER, IT WAS EXPLAINED BY THE ASSESSEE AS STATED B Y THE A.O. ON PAGE 4 OF THE ASSESSMENT ORDER THAT IN RG-1 REGISTER, ENTRIES ARE MADE FOR FINISHED REEL QUANTITY ONLY AND UNFINISHED REELS/PARENT REEL S/JUMBO REELS CANNOT BE ENTERED IN RG-1 REGISTER STOCK. IT IS ALSO SUBMITT ED BEFORE THE A.O. THAT THE MACHINE PRODUCTION IS FURTHER PROCESSED FOR FIN ISHING AND THEREAFTER, QUANTITY OF FINISHED GOODS ARE ENTERED INTO RG-1 RE GISTER. THE ASSESSEE ALSO SUBMITTED THAT THE MACHINE PRODUCTION/PARENT R EEL/JUMBO REELS ARE CUT INTO SMALL SEIZES REELS AS PER THE CUSTOMERS R EQUIREMENT AND THEREAFTER, READY GOODS ARE ENTERED IN RG-1 REGISTE R. THIS IS THE I.T(SS).A.NO.12 /AHD/2013 15 REQUIREMENT OF LAW AND EXCISE RULES THAT THE ENTRY IN RG-1 REGISTER HAS TO BE MADE ON THE SAME DAY AND HENCE, THE PRODUCTION O N 14.07.2009 AND 15.07.2009 MUST HAVE BEEN INCLUDED IN RG-1 REGISTER ON THE RESPECTIVE DATES AND THEREAFTER ONLY, THE OPENING BALANCE IN R G-1 REGISTER AS ON 16.07.2009 CAN BE SHOWN AS 701818 KG AND THIS IS NO T THE CLAIM OF THE ASSESSEE THAT THERE IS ANY MISTAKE IN OPENING STOCK AS ON 16.07.2009 AS PER RG-1 REGISTER. THE BASIS OF LD. CIT(A) IS THIS THAT FROM THE INVENTORY OF GOODS, IT IS CLEAR THAT INVENTORY OF UNFINISHED REELS ON THE FLOOR WAS NOT TAKEN IN STOCK AS ON 16.07.2009. EVEN IF IT IS COR RECT, IT IS NOT RELEVANT FOR THE PURPOSE OF EXPLAINING THE SHORTAGE IN THE STOCK OF FINISHED GOODS ON THE DATE OF SEARCH BECAUSE IT IS ADMITTED POSITION OF FACT THAT IN THE RG-1 REGISTER, ONLY FINISHED GOODS IS ENTERED AS PRODUCT ION AND THEREFORE, THE SEARCH TEAM WAS REQUIRED TO TAKE STOCK OF ONLY FINI SHED GOODS FOR THE PURPOSE OF COMPARING THE AVAILABLE STOCK OF FINISHE D GOODS AS COMPARED TO BOOK STOCK OF FINISHED GOODS. THIS IS NOT THE C ASE OF THE ASSESSEE THAT ANY FINISHED STOCK WAS NOT CONSIDERED BY THE SEARCH PARTY IN THE INVENTORY OF FINISHED GOODS. THIS IS ALSO NOT THE CASE OF THE ASSESSEE THAT THERE IS ANY OTHER GODOWN OR WAREHOUSE TO KEEP STOCK OF EXCI SABLE FINISHED GOODS IN RESPECT OF WHICH, NO INVENTORY WAS TAKEN. IN TH E RECONCILIATION STATEMENT AS REPRODUCED BY THE A.O. ON PAGE 4 OF TH E ASSESSMENT ORDER AND BY LD. CIT(A) ON PAGE 10 OF HIS ORDER, IT IS SE EN THAT THIS RECONCILIATION IS MADE BY THE ASSESSEE BY EXCLUDING THE PRODUCTION ON 14.07.2009 AND 15.07.2009 BEING 132838 KG AND 13003 4 KG RESPECTIVELY FROM THE STOCK AS PER RG-1 REGISTER AS ON 16.07.200 9. WE FAIL TO UNDERSTAND THE BASIS OF SUCH EXCLUSION FORM OPENING STOCK OF FINISHED GOODS AS ON 16.07.2009 BECAUSE THE PRODUCTION ON 14 .07.2009 AND 15.07.2009 IS INCLUDED IN THE RG-1 REGISTER AND THE SAME MUST BE I.T(SS).A.NO.12 /AHD/2013 16 AVAILABLE WITH THE ASSESSEE ON THE DATE OF SEARCH I .E. 16.07.2009 IN THE FORM OF FINISHED GOODS AND THE SAME CANNOT BE EXPLA INED BY AVAILABILITY OF UNFINISHED GOODS ON THE DATE OF SEARCH. THE ASS ESSEE HAS ALSO REDUCED 19337 KG. ON ACCOUNT OF DISPATCH ON 16.07.2009 BUT THIS IS NOT CLEAR AS TO WHETHER SUCH DISPATCH ON 16.07.2009 IS AFTER THE IN VENTORY TAKEN BY SEARCH PARTY ON 16.07.2009 OR BEFORE TAKING THE INV ENTORY BY THE SEARCH PARTY ON THAT DATE. THIS EXCLUSION ON ACCOUNT OF S UCH DISPATCH ON 16.07.209 IS ALSO WITHOUT ANY BASIS IN THE FACTS OF THE PRESENT CASE WHEN THERE IS NO FINDING GIVEN BY LD. CIT(A) THAT SUCH D ISPATCH ON 16.07.2009 IS BEFORE THE INVENTORY TAKEN BY THE SEARCH PARTY. GENERALLY, THE SEARCH IS CARRIED IN THE MORNING HOURS AND HENCE, ANY DISPATC H ON THE DATE OF SEARCH CANNOT BE BEFORE TAKING THE INVENTORY BY THE SEARCH PARTY AND IN SOME CASES, THERE CAN BE SUCH DISPATCH BUT THEN THI S HAS TO BE BROUGHT TO THE NOTICE OF THE SEARCH PARTY AND EVIDENCE MAY BE BROUGHT ON RECORD ABOUT THE TIME OF DISPATCH AND THE TIME OF TAKING I NVENTORY BY THE SEARCH PARTY AND IN THE ABSENCE OF ANY SUCH EVIDENCE PRODU CED BY THE ASSESSEE, THE RECONCILIATION STATEMENT IS NOT ACCEPTABLE. ON E MORE DEDUCTION IS MADE BY THE ASSESSEE OF 289 KG. FOR ALLEGED WEIGHME NT DIFFERENCE IN SOME REELS BUT THIS IS ALSO WITHOUT ANY BASIS AND I T APPEARS TO BE A BALANCING FIGURE AFTER INCLUDING VARIOUS ITEMS REGA RDING PRODUCTION ON 14.07.2009 AND 15.07.2009 AND DESPATCH ON 16.07.200 9 AND THEREFORE, THIS EXCLUSION IS ALSO NOT ACCEPTABLE IN THE ABSENC E OF ANY EVIDENCE IN SUPPORT THEREOF. 14. FROM THE ABOVE DISCUSSION, IT IS SEEN THAT THE ORDER OF LD. CIT(A) IS EITHER WITHOUT ANY BASIS OR THE BASIS INDICATED BY HIM IS CONTRARY TO THE MATERIAL INDICATED BY HIM FOR TAKING THIS DECISION. HENCE, THIS ORDER OF LD. CIT(A) IS NOT SUSTAINABLE AND BECAUSE OF THIS R EASON THAT THE ASSESSEE I.T(SS).A.NO.12 /AHD/2013 17 HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SUPPORT T HE CONTENTION RAISED BY HIM AND NO TIME WAS REQUESTED BY LD. A.R. TO BRING SUCH EVIDENCE ON RECORD I.E. PANCHNAMA ETC, WE HAVE NO OPTION BUT TO REVERSE THE ORDER OF LD. CIT(A) ON THIS ISSUE. WE WOULD LIKE TO OBSERV E THAT IT IS STATED BY THE ASSESSEE IN THE PAPER BOOK THAT PAGES 27-44 OF THE PAPER BOOK ARE COPIES OF RELEVANT EXTRACT OF RG-1 REGISTER. IT WA S POINTED OUT BY THE BENCH TO LD. A.R. THAT THESE PAGES ARE NOT LEGIBLE AT ALL AND IT WAS THE REPLY OF THE ASSESSEE THAT THESE PAGE ARE NOT BEING RELIED UPON BUT WHATEVER PAGES ARE BEING RELIED UPON BY HIM IS PAGE 26 OF THE PAPER BOOK AND THE SAME IS LEGIBLE. PAGE 26 OF THE PAPER BOOK IS NOTHING BUT STOCK OF RAW MATERIAL PREPARED BY THE SEARCH PARTY AND SINCE WE ARE EXAMINING THE EXPLAINABILITY OF FINISHED GOODS STOCK, THIS PAGE 2 6 OF THE PAPER BOOK IS NOT RELEVANT FOR THIS PURPOSE. WE ALSO FIND THAT P AGE 45 OF THE PAPER BOOK CONTAINS THE DETAILS OF FINISHED STOCK OF 438821 KG . AND PAGES 46-96 ARE FURTHER DETAILS OF SUCH PHYSICAL INVENTORY CARRIED BY THE SEARCH PARTY AND NO DEFECT WAS POINTED OUT BY THE LD. A.R. IN SUCH I NVENTORY TAKEN BY THE SEARCH PARTY. IN FACT, THESE PAGES WERE NOT EVEN R EFERRED BY THE LD. A.R. IN THE COURSE OF ARGUMENT BEFORE US. ON PAGE 152-1 62 ARE THE COPIES OF INVOICES, DELIVERY CHALLANS WITH REGARD TO DESPATCH ON 16.07.2009 AND WE FIND THAT ON PAGE 153 IS AN INVOICE WHERE TIME OF R EMOVAL IS SHOWN AS 15.20. SIMILARLY, PAGE 155 IS ANOTHER INVOICE WHER E TIME OF REMOVAL IS SHOWN AS 15.40. ON PAGE 157 IS ANOTHER INVOICE HAV ING TIME OF REMOVAL 16.40 AND THE REMOVAL TIME ON PAGE 159 IS ALSO 16.4 0. ON PAGE 161, REMOVAL TIME IS 17.30. THERE IS NO EVIDENCE BROUGH T ON RECORD BY LD. A.R. TO SHOW THAT PHYSICAL INVENTORY TAKEN BY SEARC H PARTY WAS AFTER THIS TIME OF REMOVAL I.E. 17.30 AS PER PAGE 161 OF THE P APER BOOK. HENCE, THIS ARGUMENT IS ALSO WITHOUT ANY BASIS THAT THE REMOVAL ON 16.07.2009 BY I.T(SS).A.NO.12 /AHD/2013 18 WAY OF DESPATCH IS BEFORE TAKING THE STOCK INVENTOR Y OF FINISHED GOODS BY THE SEARCH PARTY AND THEREFORE, THIS DEPSATCH SHOUL D BE CONSIDERED AS PHYSICAL STOCK EXISTING ON 16.07.2009. EVEN IF THI S IS A CLAIM OF THE ASSESSEE THAT INVENTORY WAS TAKEN BY THE SEARCH PAR TY AFTER 17.30 ON 16.07.2009 THEN THE PRODUCTION OF THE ASSESSEE ON 1 6.07.2009 SHOULD ALSO BE ADDED IN THE OPENING STOCK OF FINISHED GOODS AS ON 16.07.2009 BECAUSE THIS IS THE ASSESSEES OWN ARGUMENT THAT ASSESSEE I S HAVING CONTINUOUS PROCESS AND, THEREFORE, PRODUCTION CANNOT STOP IN S PITE OF SEARCH AND IT MUST HAVE CONTINUED THROUGHOUT THE SEARCH TIME I.E. UP TO 17.30 OR UP TO THE TIME WHEN SEARCH PARTY HAS TAKEN PHYSICAL INVEN TORY OF FINISHED GOODS AND, THEREFORE, EVEN IF THE DESPATSCH ON 16.07.2009 IS BEFORE THE TIME OF TAKING PHYSICAL STOCK BY THE SEARCH PARTY, PRODUCTI ON OF 16.07.2009 UP TO THAT TIME IS REQUIRED TO BE ADDED IN THE BOOK STOCK ON THAT DAY BECAUSE FOR THE PURPOSE OF COMPARISON, BOOK STOCK HAS BEEN TAKE N AS PER OPENING STOCK OF RG-1 REGISTER AS ON 16.07.2009 AND PHYSICA L STOCK HAS BEEN CONSIDERED UP TO 17.30 OR THEREAFTER ON 16.07.2009 WHICH INCLUDES THE PRODUCTION OF THAT DATE ALSO. 15. REGARDING THIS CONTENTION OF THE LD. A.R. THAT RELIANCE IS PLACED ON THE CASE OF AJIT STEEL CENTRE IN IT(SS)A NO.614/AHD /2012 ARGUED BEFORE D BENCH OF THE TRIBUNAL ON 13.06.2013 INVOLVING I DENTICAL ISSUE, WE WOULD LIKE TO OBSERVE THAT AFTER INQUIRY FORM THE R EGISTRY, IT WAS FOUND THAT THIS TRIBUNAL ORDER IN THAT APPEAL IS NOT YET PRONOUNCED AND, THEREFORE, SUCH RELIANCE OF THE LD. A.R. IS OF NO RELEVANCE. 16. ONE MORE CONTENTION HAS BEEN RAISED BY THE LD. A.R. OF THE ASSESSEE THAT SHORTAGE IN STOCK CAN NEVER BE MADE A GROUND FOR MAKING ANY ADDITION BECAUSE THERE IS NO PROVISION UNDER TH E SCHEME OF THE ACT ENABLING THE A.O. TO TAX SUCH SHORTAGE. IN THIS RE GARD, WE FIND THAT THE I.T(SS).A.NO.12 /AHD/2013 19 CASE OF THE A.O. IS THIS THAT THE SHORTAGE OF STOCK REPRESENTS UNRECORDED SALES MADE BY THE ASSESSEE AND SINCE THE ASSESSEE H AS BOOKED ALL THE EXPENSES RELATED TO SUCH SALES, TOTAL SALE VALUE OF STOCK HAS BEEN TREATED AS UNACCOUNTED INCOME IN THE HANDS OF THE ASSESSEE COM PANY. THEREFORE, THIS ARGUMENT OF THE LD. A.R. THAT THERE IS NO PROV ISION IN THE ACT FOR MAKING THE ADDITION IN RESPECT OF THE SHORTAGE IN S TOCK FOUND IS WITHOUT ANY BASIS. 16.1 THE ASSESSEE HAS TRIED TO EXPLAIN THE STOCK OF FINISHED GOODS ON THE DATE OF SEARCH BY STATING THAT REEL NO.30581 TO 309 44 WITH QUANTITY OF 132838 KG. AND REEL NO.30945 TO 31307 HAVING QUANTI TY OF 130034 KG. BEING THE PRODUCTION OF 14.07.2009 AND 15.07.2009 W ERE IN FACT LYING IN STOCK BECAUSE THESE REEL NUMBERS WERE SOLD IN THE S UBSEQUENT PERIOD AND, THEREFORE, THE SAME CANNOT BE SOLD OUTSIDE THE BOOK S AS PRESUMED BY THE A.O. IN THIS REGARD, WE WOULD LIKE TO OBSERVE THAT THE ASSESSEE IS UNDER SELF REMOVAL SCHEME OF EXCISE DEPARTMENT AND IS NOT UNDER THE SCHEME WHERE A PERSON OF EXCISE DEPARTMENT REMAINS PRESENT AT THE FACTORY OR WAREHOUSE TO MONITOR THE MOVEMENT OF EXCISABLE GOOD S. HENCE, THIS EXPLANATION OF THE ASSESSEE IS NOT RELIABLE OR ACCE PTABLE BECAUSE PUTTING THE SAME REEL NUMBER ON A SUBSEQUENT LOT OF PRODUCT ION AND SELLING THE SAME AS PER BOOKS WITHOUT INCLUDING THE SAME IN THE PRODUCTION QUANTITY AS PER RG-1 REGISTER, CANNOT BE RULED OUT. MOREOVE R, IT IS ALSO SEEN THAT THE ASSESSEES CONSUMPTION OF RAW MATERIAL AND PROD UCTION OF FINISHED GOODS QUANTITY ARE NOT CORRELATED. SUCH QUANTITATI VE DETAILS ARE AVAILABLE ON PAGE 176 OF THE PAPER BOOK IN THE FORM OF ANNEXU RE 10 TO THE TAX AUDIT REPORT FOR THE CURRENT YEAR. AS PER THE SAME , THE CONSUMPTION OF INDIAN WASTE PAPER IS SHOWN AT 8011473 KG AND CONSU MPTION OF IMPORTED WASTE PAPER HAD BEEN SHOWN AT 38959350 KG AND CONSUMPTION I.T(SS).A.NO.12 /AHD/2013 20 OF COLOUR AND CHEMICAL HAD BEEN SHOWN AT 380014 KG. TOTALING 50770837 KG. AND THE PRODUCTION OF FINISHED GOODS HAD BEEN S HOWN AT ONLY 44071468 KG. AND THIS IS CLEAR THAT THE PRODUCTION QUANTITY OF FINISHED GOODS AND CONSUMPTION QUANTITY OF RAW MATERIAL IS H AVING VERY WIDE DIFFERENCE AND THEREFORE, THERE IS ALWAYS A SCOPE O F HAVING UNACCOUNTED PRODUCTION IN SUCH CASES WHICH CAN BE SOLD OUTSIDE THE BOOKS. THIS IS ALSO ADMITTED POSITION OF FACT THAT IN SPITE OF SEA RCH, PHYSICAL STOCK FOUND OF THE FINISHED GOODS ON THE DATE OF SEARCH WAS LES S AS COMPARED TO BOOK STOCK OF SUCH FINISHED GOODS AS PER RG-1 REGISTER A ND THIS IS NEVER AN ARGUMENT AND THERE CANNOT BE SUCH ARGUMENT THAT ANY FINISHED GOODS WERE LYING AT ANY OTHER PLACE BECAUSE EXCISABLE GOO DS CAN BE STORED AT ONLY THOSE PLACES WHICH ARE DECLARED BEFORE THE EXC ISE DEPARTMENT BEING FACTORY PREMISES AND/OR WAREHOUSE. THIS IS NOT THE CASE OF THE ASSESSEE THAT THERE WAS ANY OTHER WAREHOUSE DECLARED BEFORE THE EXCISE DEPARTMENT WHERE THOSE REELS WHICH ARE CLAIMED TO BE NOT INCLU DED IN THE PHYSICAL GOODS INVENTORY WERE KEPT. HENCE, THIS IS ADMITTED POSITION OF THE FACT THAT WHATEVER FINISHED GOODS WERE AVAILABLE ON THE DATE OF SEARCH, WERE INCLUDED BY THE SEARCH PARTY IN THE PHYSICAL GOODS INVENTORY OF FINISHED GOODS AND THE CLAIM OF THE ASSESSEE THAT SOME UNFIN ISHED GOODS WERE NOT INCLUDED IN SUCH INVENTORY, IS NOT RENDERING ANY HE LP TO THE ASSESSEE BECAUSE STOCK OF UNFINISHED GOODS CANNOT BE CONSIDE RED TO EXPLAIN THE FINISHED GOODS STOCK ON THE DATE OF SEARCH. AS PER THE ABOVE DISCUSSION, WE FIND THAT THESE ARGUMENTS ARE ALSO NOT RENDERING ANY HELP TO THE ASSESSEE IN THE PRESENT CASE. 16.2 AN ALTERNATIVE CLAIM HAS BEEN MADE BY THE LD. A.R. THAT SINCE THOSE REELS HAD BEEN SOLD AFTER PAYMENT OF EXCISE D UTY IN THE SUBSEQUENT YEAR, A DIRECTION SHOULD BE GIVEN TO EXCLUDE SUCH S ALES FROM TOTAL SALES OF I.T(SS).A.NO.12 /AHD/2013 21 THE NEXT YEAR IF IT IS HELD THAT THE ADDITION MADE BY THE A.O. IN RESPECT OF SHORTAGE OF STOCK IS JUSTIFIED. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT ALSO BECAUSE WE HAVE ALREADY NOTED THAT SUCH SUBSEQ UENT SALES OF THE SAME REEL NUMBER CAN BE OUT OF UNACCOUNTED PRODUCTI ON OUT OF RAW MATERIAL CONSUMPTION SHOWN AND CLAIMED AND FOR WHIC H THE SAME REEL NUMBER MAY BE GIVEN BY THE ASSESSEE AND, THEREFORE, THIS ALTERNATIVE ARGUMENT IS ALSO LIABLE TO BE REJECTED. WE HOLD AC CORDINGLY. 17. FROM THE ABOVE DISCUSSION, IT IS APPARENT THAT THE DECISION OF LD. CIT(A) IS ENTIRELY WITHOUT BASIS OR CONTRADICTORY T O THE MATERIAL INDICATED BY HIM BEING THE BASIS OF HIS DECISION AND, THEREFO RE, WE REVERSE HIS ORDER AND RESTORE THAT OF THE A.O. 18. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED . 19. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T(SS).A.NO.12 /AHD/2013 22 1. DATE OF DICTATION 24/06/2013 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25/06/2013. OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 05/07/2013 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.5/7 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 05/ 07/2013 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .