M/S. MCS TRADING COMPANY PVT. LTD., Indore V. THE ACIT-2(1), Indore

ITSSA 257/IND/2015

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2802 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 24-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALCHAND
• Assessee Lawyers: ARPIT GAUR CAS
• Keywords: Gross profit estimation; Rejection of books of accounts; Unexplained investment; Search and seizure; Loose papers; Document seized; Transactions in derivatives; Period of limitation; Competent authority; Block assessment; Onus to prove; Sham transactions; Documents seized; Reassessment proceedings
• Section: 43B; 40A(3); 143(3); 142(1); 153A; 133(6); 147; 131; 68; 145; 263; 132; 15

Judgement Text

MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER IT(SS)A NO. 257, 258/IND/2015 & ITA NO.568/IND/2015 A.YS. 2007-08, 2010-11 & 2011-12 M/S. MCS TRADING CO. P. LTD., INDORE PAN AADCM 9997 N :: ASSESSEE VS ACIT-2(1), INDORE :: RESPONDENT IT(SS)A NO. 262/IND/2015 & ITA NO.623/IND/2015 A.YS. 2010-11 & 2011-12 ACIT-2(1), INDORE :: ASSESSEE VS M/S. MCS TRADING CO. P. LTD., INDORE PAN AADCM 9997 N :: RESPONDENT ASSESSEES BY SHRI ANIL KAMAL GARG AND SHRI ARPIT GAUR, CAS RESPONDENT BY SHRI LAL CHAND, CIT DATE OF HEARING 08 . 12 .2016 DATE OF PRONOUNCEMENT 08 .1 2 . 2 016 MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 2 O R D E R PER SHRI D.T. GARASIA, JM THE ABOVE APPEALS BY THE ASSESSEE AND REVENUE ARE D IRECTED AGAINST THE DIFFERENT ORDERS OF LD. CIT(A) DATED 18.3.2015 & 29 .5.2015. ASSESSEES APPEAL BEARING IT(SS)A NO. 257/IND/2015 (A.Y. 2007-08) ASSESSEES GROUND NO. 1 THIS GROUND OF APPEAL OF THE ASSESSEE IS WITH REGA RD TO THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE AOS ACTION OF FRAMING THE ASSESSMENT ORDER UNDER S.153A R.W.S. 143(3) OF THE I T ACT, 1961 BEYOND TH E TIME LIMIT PRESCRIBED U/S. 153B(1)(A) OF THE ACT. ACCORDING TO THE ASSESSEE, A LTHOUGH IN THE ASSESSMENT ORDER, THE DATE OF PASSING THE ORDER HAS BEEN STATE D AS THAT OF 28-03-2013, BUT IN FACT IT WAS PASSED AFTER 31-03-2013 I.E. AFTER T HE EXPIRY OF THE LIMITATION. 2. MATTER CARRIED TO LD. CIT(A), WHO DISMISSED THE GROUND BY HOLDING THAT THE ASSESSEE COULD NOT PRODUCE ANY PROOF FOR ESTABL ISHING THAT THE ASSESSMENT ORDER WAS NOT FRAMED ON 31-03-2013. THE CIT(A) HELD THAT SENDING OF SOME ENVELOPE WITH BLANK PAPERS COULD BE A CLERICAL ERRO R. THE CIT(A) FURTHER HELD THAT IT WAS NOT NECESSARY FOR THE DEPARTMENT TO SER VE THE ASSESSMENT ORDER ON THE ASSESSEE WITHIN THE PRESCRIBED PERIOD OF LIM ITATION. 3. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WEL L AS WRITTEN SUBMISSION AS UNDER: MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 3 1.01 IN THE INSTANT CASE, THE SEARCH UNDER S. 132( 1) OF THE INCOME-TAX ACT, 1961 WAS CARRIED OUT IN THE APPELLANT'S PREMISES ON 25-11-2010 AND THE SAME GOT CONCLUDED AS ON 26-11-2010. IN OTHER W ORDS, LAST OF THE AUTHORIZATIONS FOR SEARCH UNDER S. 132 OF THE ACT W AS EXECUTED DURING THE FINANCIAL YEAR ENDED ON 31-03-2011 AND, CONSEQU ENTLY, IN ACCORDANCE WITH PROVISIONS OF CLAUSE (A) OF SUB-SEC TION (1) TO SECTION 153B OF THE ACT THE ORDER OF ASSESSMENT WAS COMPULS ORILY REQUIRED TO BE MADE WITHIN A PERIOD OF TWO YEARS FROM THE END O F THE FINANCIAL YEAR ENDED ON 31-03-2011 IN WHICH SUCH LAST AUTHORI ZATION FOR SEARCH WAS EXECUTED I.E. UPTILL 31-03-2013. 1.02 IT IS SUBMITTED THAT, ALTHOUGH IN THE IMPUGNED ASSESSMENT ORDER THE DATE OF PASSING THE ORDER HAS BEEN STATED TO BE 28- 03-2013, BUT THE FACT REMAINED THAT SUCH ASSESSMENT ORDER WAS ACTUAL LY PASSED BY THE AO ONLY AFTER 31-03-2013 I.E. AFTER THE EXPIRY OF T HE PERIOD OF LIMITATION AS ENJOINED UNDER S. 153B(1)(A) OF THE A CT. 1.03 IT IS SUBMITTED THAT AS ON THE LAST DATE OF TH E LIMITATION I.E. ON 31-03- 2013, THE AO, BEING NOT READY WITH THE FINAL ASSESS MENT ORDER, ADOPTED THE TACTICS OF SENDING A BUNCH OF BLANK LOO SE PAPERS, IN THE GUISE OF THE ASSESSMENT ORDER, THROUGH SPEED POST I N A SEALED ENVELOPE WHICH GOT RECEIVED BY THE APPELLANT ON 01- 04-2013. IT IS SUBMITTED THAT THE SIMILAR TACTICS WAS ALSO ADOPTED BY THE AO IN RESPECT OF OTHER GROUP ASSESSEES. SINCE, WHILE OPEN ING THE ENVELOPE IN THE NAME OF THE GROUP ASSESSEES, SENT BY THE AO THR OUGH SPEED POST, THE GROUP ASSESSEES WERE NOT AWARE OF THIS TACTIC O F THE AO AND, THEREFORE, AS AN HONEST AND BONA FIDE RECEIVER OF T HE ENVELOPE, THEY OPENED THE ENVELOPES IN THE NORMAL COURSE AND GOT T ERRIBLY SHOCKED WITH THE BLANK PAPERS ONLY FOUND IN THE ENVELOPE. H OWEVER, THE APPELLANT COMPANY UPON NOTICING THE TACTIC OF SENDI NG BUNCH OF PLAIN PAPERS AS ADOPTED BY THE AO, DID NOT OPEN THE ENVEL OPE PURPORTED TO CONTAIN THE IMPUGNED ASSESSMENT ORDER BUT KEPT THE SAME PRESERVED. IT IS SUBMITTED THAT INSTEAD OF THE OPENING THE ENV ELOPE, THE APPELLANT CARRIED SUCH ENVELOPES BEFORE THE AO AND HIS HIGHER AUTHORITIES. ON COMPLAINT, THE AO ADMITTED THAT BUNCH OF BLANK PAPE RS GOT TO BE SENT BY HIS OFFICE BUT ACCORDING TO THE AO, IT WAS ONLY A CLERICAL ERROR. THEREAFTER, AS ON 02-04-2013, THE IMPUGNED ASSESSME NT ORDER ACTUALLY HAPPENED TO BE SERVED UPON THE APPELLANT B Y HAND DELIVERY. IT IS SUBMITTED THAT THE APPELLANT IS PREPARED TO FILE AN AFFIDAVIT IN SUPPORT OF THE FACTS STATED HEREINABOVE IF SO DIREC TED BY YOUR HONOUR. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 4 2.01 FROM THE FACTS NARRATED ABOVE, IT IS EVIDENT T HAT THE SUBJECT ASSESSMENT ORDER WAS PASSED BY THE AO ONLY AFTER 31 -03-2013 I.E. EITHER ON 01-04-2013 OR 02-04-2013 ON WHICH THE HAN D DELIVERY OF THE ORDER WAS MADE TO THE APPELLANT. IT IS SUBMITTED TH AT HAD THE ASSESSMENT ORDER BEEN PASSED BY THE LEARNED AO WITH IN THE PRESCRIBED TIME LIMIT, I.E. UP TILL 31-03-2013, THERE WAS NO N ECESSITY FOR THE AO OR HIS SUBORDINATES TO SEND ENVELOPE CONTAINING THE BL ANK LOOSE PAPERS. 2.02 THE THEORY OF AO THAT SENDING OF BLANK PAPERS IN A SEALED ENVELOPE WAS ONLY A CLERICAL ERROR DESERVES TO BE KNOCKED DO WN AT THRESHOLD ONLY FOR THE REASON THAT SUCH AN ERROR COULD, AT TH E BEST, BE EXPECTED TO HAVE BEEN MADE IN ONE CASE AND NOT IN ALL THE CA SES OF THE GROUP ASSESSEES IN WHICH THE ASSESSMENT ORDERS HAPPENED T O BE PHYSICALLY SERVED ON OR AFTER 01-04-2013 ONLY. 2.03 IN THE INSTANT CASE, IT CAN ALSO NOT BE A CASE OF THE AO THAT THE IMPUGNED ASSESSMENT ORDER WAS DISPATCHED BY HIMSELF OR WAS HANDED OVER FOR DISPATCHING TO ANY OF HIS MINISTERIAL STAF F ON OR BEFORE 31-03- 2013 THEREBY MEANING THAT THE SUBJECT ORDER REMAINE D TO BE UNDER THE SOLE CUSTODY AND CONTROL OF THE AO ONLY TILL IT S ACTUAL SERVING UPON THE APPELLANT BY HAND DELIVERY ON 02-04-2013. IN SU CH AN EVENTUALITY, IT HAS TO BE PRESUMED THAT THE SUBJECT ASSESSMENT O RDER WAS NOT PASSED BY THE AO ON 28-03-2013, AS STATED IN THE OR DER BUT THE SAME WAS PASSED ONLY AND ONLY AFTER 31-03-2013. 3.01 IN THE IDENTICAL CIRCUMSTANCES, THE HON'BLE JO DHPUR BENCH OF ITAT IN THE CASE OF SHANTI LAL GODAWAT & ORS. VS. ACIT (200 9) 30 DTR 413 (JD.) HAS HELD THAT THE LAST DATE BEING 31 ST DECEMBER, 2007, THE ASSESSMENT ORDERS SERVED ON 2 ND JANUARY, 2008 WERE BEYOND THE PERIOD OF LIMITATION AND CONSEQUENTLY SUCH ORDERS ARE NON EST AND INEFFECTIVE UNDER LAW. 3.02 RELIANCE IS ALSO PLACED ON THE FOLLOWING JUDIC IAL PRONOUNCEMENTS: A) COMMISSIONER OF AGRICULTURAL INCOME TAX VS. KAPP UMALI ESTATE (1998) 234 ITR 187 (KER.) B) K. JOSEPH JACOB VS. AGRICULTURAL INCOME TAX OFFI CER AND ANR.(1991)190 ITR 464 (KER.) C) ACIT VS. ORISSA STEVEDORES LTD. (2012) 16 ITR (T RIB.) 431 (CUTTACK) D) RAI BAHADUR KISHORCHAND & SONS V. ITO (2009) 117 ITD 57 (ASR.) MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 5 4.01 IN VIEW OF THE ABOVE SAID PECULIAR FACTS AND C IRCUMSTANCES OF THE CASE, IT IS SUBMITTED THAT THE IMPUGNED ASSESSMENT ORDER BEING PATENTLY BARRED BY THE STATUTORY LIMITATION, DESERVES TO BE REGARDED AS AN ILLEGAL AND NON-EST ORDER WITHOUT ANY LEGAL SANCTIT Y AND FORCE AND CONSEQUENTLY, THE SAME DESERVES TO BE QUASHED IN LI MINE WITH THE NATURAL COROLLARY THEREOF THAT THE DEMAND RAISED IN CONSEQUENCE OF SUCH AN ILLEGAL ORDER DESERVES TO BE DIRECTED AS NO T ENFORCEABLE AGAINST THE APPELLANT. 4. THE LD. DR RELIED ON THE ORDERS OF THE REVENUE A UTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE ASSESSEE HAS TAKEN THE GROUND THAT THE ORDER IS PASSED ON A DATE BEYON D THE PRESCRIBED LIMIT U/S 153B(1)(A) OF THE ACT. AS PER THE ASSESSMENT ORDER, THE DATE OF THE ASSESSMENT ORDER IS 28.3.2013 BUT THERE IS NO EVIDENCE BEFORE US THAT THE ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER AFTER EXPIRY OF LIM ITATION. WE FIND THAT THE ASSESSING OFFICER HAD PASSED THE ORDER IN TIME BUT IT WAS DISPATCHED ON LATER DATE BUT IT DOES NOT MEAN THAT THE ORDER IS PASSED AFTER THE PERIOD OF LIMITATION, THEREFORE, WE DISMISS THIS GROUND. ASSESSEES GROUND NO. 2 6. THIS GROUND OF APPEAL OF THE ASSESSEE IS DIRECTE D AGAINST THE ACTION OF THE LD. AO IN INVOKING THE PROVISIONS OF SECTION 15 3A ON THE GROUND THAT FOR SUCH YEAR, DURING THE COURSE OF SEARCH UNDER S. 132 , NO MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCRIMINATING BOOKS OF MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 6 ACCOUNT OR DOCUMENT PERTAINING TO THE ASSESSMENT YE AR UNDER CONSIDERATION WAS FOUND. 7. MATTER CARRIED TO THE LD. CIT(A) WHO HAS DISMISS ED THE GROUND BY HOLDING THAT ASSESSMENT UNDER SECTION 153A OF THE INCOME-TA X ACT COMBINE BOTH SEARCH ASSESSMENT AND NORMAL ASSESSMENT INTO ONE AN D, THEREFORE, IT WAS NOT NECESSARY THAT VALUABLE ARTICLES OR INCRIMINATING M ATERIAL FOR EACH OF THE SIX YEARS IS FOUND. ACCORDING TO THE CIT(A), EVEN IF NO SUCH THING IS FOUND, A NORMAL ASSESSMENT HAS TO BE MADE UNDER S. 153A OF THE ACT. FOR SUCH PROPOSITION, THE CIT(A) RELIED UPON THE DECISION OF HONBLE DELHI HI GH COURT IN THE CASE OF FILATEX INDIA LTD. (2014) 49 TAXMANN.COM 465 (DELHI ) , SUNNY JACOB JEWLLERS & WEDDING CENTRE (2014) 362 ITR 664 (KER.) AND ANIL KUMAR BHATIA (2012) 24 TAXMAN.COM 98 (DELHI) . 8. LD. AR FOR THE ASSESSEE DID NOT PRESS THIS GROUN D, THEREFORE, SAME IS DISMISSED BEING NOT PRESSED. ASSESSEES GROUND NOS. 3 & 4 9. BOTH THE GROUNDS RELATE TO ADDITION OF RS.60,00, 000/- MADE BY THE AO ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. GROUND NO. 3 RELATES TO THE SCOPE OF THE ASSESSMENT IN VIEW OF T HE DECISION OF THE ITAT SPECIAL BENCH, MUMBAI IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. & ORS. VS. DCIT (2012) 74 DTR (MUM.) (SB) (TRIB.) 89 . AS PER THE GROUND RAISED, THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 7 ASSESSMENT YEAR UNDER CONSIDERATION DID NOT GET ABA TE AND, FURTHER NO DOCUMENT OR ANY OTHER INCRIMINATING MATERIAL IN RES PECT OF SHARE APPLICATION MONEY WAS FOUND OR SEIZED DURING THE COURSE OF SEAR CH UNDER S. 132 AND, THEREFORE, THE ADDITION OF RS.60,00,000/- SO MADE B Y THE AO WAS NOT JUSTIFIED. THROUGH THE GROUND NO. 4, THE ASSESSEE AGITATED THE MAKING OF ADDITION ON MERITS OF THE CASE ON THE GROUND THAT BY FURNISHING VARIOUS DOCUMENTARY EVIDENCES, WHICH REMAINED UNREBUTTED, THE ASSESSEE HAD DISCHARGED ITS ONUS OF ESTABLISHING THE GENUINENESS OF THE SHARE APPLIC ATION TRANSACTIONS BEYOND ALL DOUBTS. 10. SHORT FACTS OF THE GROUNDS ARE THAT THE ASSESSE E HAD FURNISHED ITS ORIGINAL RETURN OF INCOME UNDER S.139(1) OF THE ACT ON 13-10 -2007, WITH THE THEN ITO- 2(1), INDORE DECLARING AN INCOME OF RS.16,74,610/-. IN RESPONSE TO SUCH RETURN, NO NOTICE UNDER S.143(2) WAS ISSUED AND THE TIME LI MIT FOR ISSUANCE OF ANY SUCH NOTICE HAD GOT EXPIRED BY 31-10-2008. A SEARCH UNDE R S.132 OF THE I.T. ACT, 1961 WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 25-11-2010. IN PURSUANCE OF THE SEARCH, A NOTICE UNDER S.153A WAS ISSUED ON 29-11-2011 REQUIRING THE ASSESSEE TO FILE ITS RETURN OF INCOME . IN RESPONSE TO SUCH NOTICE, THE ASSESSEE FILED ITS RETURN UNDER S.153A ON 01-02 -2012 DECLARING THE SAME TOTAL INCOME OF RS.16,74,610/- AS WAS DECLARED BY I T IN THE ORIGINAL RETURN UNDER S.139. DURING THE COURSE OF THE ASSESSMENT PR OCEEDINGS, THE AO NOTED MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 8 THAT THE ASSESSEE HAD RECEIVED AMOUNT BY WAY OF SHA RE APPLICATION MONEY FROM PENNY STOCK COMPANIES OF INDORE AND CALCUTTA. THE AO NOTED THAT DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAD ISSUED 75000 SHARES AT A PREMIUM OF RS.90/- ON EACH SHARE OF FACE VALUE OF RS.10/-. OUT OF THESE 75000 SHARES, THE AO NOTED THAT 60000 SHARES WERE ISSUED TO FIVE COMPANIES OF INDORE AND CALCUTTA. DURING THE COURSE OF THE ASSESSMENT PROCE EDINGS, THE ASSESSEE FURNISHED VARIOUS DOCUMENTARY EVIDENCES SUCH AS COP IES OF THE SHARE APPLICATION FORMS, COPIES OF MEMORANDUM & ARTICLES OF ASSOCIATION OF SHARE APPLICANT COMPANIES, COPIES OF CERTIFICATE OF REGIS TRATION, COPIES OF AUDITED BALANCE SHEETS, COPIES OF INCOME-TAX RETURNS AND CO PIES OF RELEVANT BANK STATEMENTS OF THE SHARE APPLICANTS. THEREAFTER, THE AO ISSUED SUMMONS UNDER S.131 TO DIRECTORS OF TWO INDORE BASED COMPANIES AN D RECORDED THEIR STATEMENTS. THE AO ALSO ISSUED NOTICES TO THREE KOL KATA BASED COMPANIES UNDER S.133(6) OF THE ACT. THE AO NOTED THAT KOLKAT A BASED COMPANIES DID NOT FILE ANY REPLY. FURTHER, FROM THE STATEMENT OF DIRE CTOR OF INDORE BASED COMPANIES AS RECORDED UNDER S.131, THE AO FORMED TH E VIEW THAT SHARE CAPITAL GIVEN BY THESE COMPANIES WERE NOT GENUINE. THUS, TH E AO HELD THAT THE ASSESSEE FAILED TO ESTABLISH THE IDENTITY AND CREDI TWORTHINESS OF THE PROVIDER OF SHARE APPLICATION MONEY AND THE GENUINENESS OF TRAN SACTION WAS ALSO NOT MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 9 PROVED. ACCORDINGLY, THE AO MADE AN ADDITION OF RS. 60,00,000/- IN THE INCOME OF THE ASSESSEE AS ITS UNDISCLOSED INCOME. 11. MATTER CARRIED TO LD. CIT(A). BEFORE THE CIT(A) , ON THE LEGAL GROUND, THE ASSESSEE CONTENDED THAT THE ASSESSMENT YEAR UNDER C ONSIDERATION WAS A NON- ABATED ASSESSMENT YEAR AND IN RESPECT OF SUCH ASSES SMENT YEAR, THE ASSESSEE HAD FILED ITS ORIGINAL RETURN UNDER S.139 AND IN RE SPONSE TO SUCH NOTICE, NO PROCEEDING WAS PENDING. IT WAS ALSO CONTENDED BEFOR E THE CIT(A) THAT THE SUBJECT ADDITION OF RS.60,00,000/- HAS BEEN MADE ME RELY ON THE BASIS OF THE AUDITED ACCOUNTS WITHOUT HAVING RECOURSE TO ANY INC RIMINATING MATERIAL. THE CIT(A) HAS DEALT WITH THIS LEGAL GROUND AT PARA 5, AT PAGE NO.33 AND PARA 6 AT PAGE NO.38 OF HIS ORDER. THE CIT(A) HAS DISMISSED T HE LEGAL GROUND BY HOLDING THAT ASSESSMENT UNDER SECTION 153A OF THE INCOME-TA X ACT COMBINE BOTH SEARCH ASSESSMENT AND NORMAL ASSESSMENT INTO ONE HE NCE ASSESSMENT FOR SIX YEARS IS TO BE DONE IN SEARCH CASES AND ADDITIONS P RESCRIBED UNDER NORMAL ASSESSMENTS AS WELL AS ADDITIONS ARISING OUT OF FIN DING OF SEARCH BOTH HAVE TO BE MADE. ON MERITS ALSO, THE CIT(A) HAS DISMISSED T HE GROUND BY HOLDING THAT THE SHARE APPLICANT COMPANIES ARE MERELY ACCOMMODAT ION ENTRY PROVIDERS AND SUCH COMPANIES WERE NOT HAVING ANY CREDITWORTHINESS TO INVEST THE MONEY IN THE ASSESSEE COMPANY. FURTHER, ACCORDING TO THE CIT (A), THERE WAS NO MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 10 JUSTIFICATION FOR SUCH COMPANIES TO MAKE INVESTMENT IN THE ASSESSEE COMPANY AT A PREMIUM OF RS.90/- PER SHARE. 12. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WE LL AS WRITTEN SUBMISSION AS UNDER: 1.01 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, I.E. FOR A.Y. 2007-08, THE APPELLANT COMPANY HAD FURNISHED ITS ORIGINAL RETURN OF INCOME UNDER S. 139(1) OF THE ACT ON 13-10-2007 VIDE ACKNOWLEDGEMEN T NO.483260131007 WITH THE THEN ITO-2(1), INDORE DECL ARING AN INCOME OF RS.16,74,608/-. 1.02 IN RESPONSE TO THE RETURN FURNISHED UNDER S. 1 39(1), NO NOTICE UNDER S. 143(2)WAS ISSUED TO THE APPELLANT UPTIL 31-10-2008 I.E. THE TIME LIMIT PRESCRIBED UNDER THE THEN PREVAILING S. 143(2) OF T HE ACT BEING EXPIRY OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FURNISHED. ACCORDINGLY, THE ASSESSMENT WAS DEEMED T O HAVE BEEN FRAMED UNDER THE PROVISIONS OF S. 143(1)(A) OF THE ACT. 2.01 IN THE CASE OF THE APPELLANT THE SEARCH WAS IN ITIATED ON 25-11-2010 AND, THEREFORE, IT CAN BE SAFELY CONCLUDED THAT ON THE DATE OF THE SEARCH, THE ASSESSMENT PROCEEDINGS OF THE APPELLANT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. A.Y. 2007- 08 WERE NOT PENDING AND THE SAME WERE COMPLETE IN ALL RESPECT. IN OTHER WORDS, THE ASSESSMENT YEAR UNDER CONSIDERATION WAS NOT A Y EAR WHICH CAN BE SAID TO BE A YEAR OF ABATE AS CONTEMPLATED UNDER TH E SECOND PROVISO TO S. 153A OF THE ACT. 3.01 IN THE INSTANT CASE, THE IMPUGNED ASSESSMENT O RDER HAS BEEN PASSED BY THE ASSESSING OFFICER ONLY ON THE BASIS OF A SEA RCH UNDER S.132 CARRIED OUT IN THE APPELLANT'S PREMISES. THE AO HAS MADE THE ADDITION OF RS.60,00,000/- IN THE RETURNED INCOME OF THE APP ELLANT, ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY AND SHARE PR EMIUM UNDER S. 68 OF THE ACT, WITHOUT HAVING ANY RECOURSE TO ANY I NCRIMINATING MATERIAL OR DOCUMENT OR VALUABLE ARTICLE OR THING F OUND DURING THE COURSE OF THE SEARCH PROCEEDINGS. 3.02 THE AO HAS DEALT THE ISSUE OF SHARE CAPITAL RE CEIVED BY THE APPELLANT COMPANY AT PARA 3 FROM PAGE NO.2 TO 8 OF THE ASSESS MENT ORDER. THE AO HAS MADE A REFERENCE OF THE APPELLANTS CLAIM RE GARDING RECEIPT OF MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 11 AMOUNT BY WAY OF SHARE APPLICATION MONEY. THE AO HA S ALSO MADE A REFERENCE OF STATEMENTS RECORDED POST-SEARCH OF THE DIRECTORS OF THE SHARE APPLICANT COMPANIES BY THE ADIT(INV.). THE AO HAS ALSO MADE REFERENCE OF STATEMENT OF A DIRECTOR OF ONE OF THE SHARE APPLICANT COMPANIES. HOWEVER, NOWHERE THE AO HAS MADE REFEREN CE OF ANY LOOSE PAPER OR DOCUMENT OR ANY OTHER INCRIMINATING MATERIAL OR EVIDENCE FOUND DURING THE COURSE OF SEARCH UNDER S. 132 IN THE PREMISES OF THE APPELLANT. 3.03 IT IS SUBMITTED THAT WITHOUT HAVING ANY RECOUR SE TO THE INCRIMINATING MATERIAL, THE ADDITION WAS NOT WARRANTED FOR THE AS SESSMENT YEAR UNDER CONSIDERATION WHICH WAS NOT A YEAR IN RESPECT OF WHICH ANY PROCEEDINGS WERE PENDING. 4.01 THE PROVISIONS OF SECTION 153A, 153B AND 153C ENJOINING SCHEME FOR ASSESSMENT IN CASE OF SEARCH OR REQUISITION HAVE BE EN BROUGHT TO THE STATUTE BY THE FINANCE ACT, 2003 W.E.F. 01-06-2003. ON A PLAIN READING OF THE PROVISIONS OF SECTION 153A IT BECOMES ABUNDA NTLY CLEAR THAT SUCH PROVISIONS ARE MEANT TO CARRY THE OPERATION OF SEARCH UNDER S. 132 OR THE OPERATION OF REQUISITION UNDER S. 132A T O ITS LOGICAL END BY WAY OF FRAMING AN ASSESSMENT OR REASSESSMENT OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR REL EVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. 4.02 ON A PLAIN READING OF THE PROVISIONS OF SECTIO N 153A, ONE MAY NOTE THAT THESE PROVISIONS CAN BE SET INTO MOTION ONLY IN THE CASE OF A PERSON WHERE A SEARCH IS INITIATED UNDER S. 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED UND ER S. 132A. EVEN, THE CAPTION OF THE PROVISION IS READ AS ASSESSMENT IN CASE OF SEARCH OR REQUISITION. THUS, THERE REMAINS NO DOUBT TO THE P ROPOSITION THAT THE SECTION 153A CANNOT BE INVOKED IN EACH AND ANY CASE BUT IT CAN BE INVOKED ONLY FOR THE PURPOSE OF MAKING AN ASSESSMEN T OR REASSESSMENT IN THE CASE OF A PERSON IN WHOSE CASE EITHER A SEARCH UNDER S. 132 IS INITIATED OR A REQUISITION UNDER S. 132A IS MADE. THE SOLE PURPOSE OF THE SECTION 153A IS TO BRING HOME THE TAX ON THE UNDISCLOSED INCOME, UNEARTHED DURING THE COURSE OF ACTION UNDER S. 132/ 132A, TO THE KITTY OF THE EX-CHEQUER. IT IS SU BMITTED THAT THE SECTION 153A IS NOT MEANT FOR ASSESSING/ REASSESSIN G ANY INCOME WHICH IN THE OPINION OF REVENUE AUTHORITIES HAS ESC APED TO THE ASSESSMENT AND FOR THAT THERE ARE OTHER PROVISIONS SUCH AS SECTION 147 AND SECTION 263 IN THE STATUTE. ALTHOUGH, NOT EXPLI CITLY STATED, THE PROVISIONS OF SECTION 153A ARE AIMED FOR MAKING THE ASSESSMENT/ MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 12 REASSESSMENT, FOR SIX ASSESSMENT YEARS, OF THE PERS ONS SEARCHED/ REQUISITIONED, ONLY, ON THE BASIS OF MONEY, BULLION , JEWELLERY, OTHER VALUABLE ARTICLES OR THINGS OR BOOKS OF ACCOUNT OR DOCUMENTS FOUND AND SEIZED EITHER UNDER S. 132 OR REQUISITIONED UND ER S. 132A. IN OTHER WORDS, SUBJECT TO CERTAIN EXCEPTIONS, AS DISCUSSED HERE-IN-AFTER, UNDER THE SCHEME OF THE LAW ANY ASSESSMENT/ REASSESSMENT UNDER THE PROVISIONS OF SECTION 153A HAS TO BE MADE ONLY ON T HE BASIS OF INCRIMINATING MATERIAL OR UNDISCLOSED ASSETS FOUND DURING THE COURSE OF ACTION UNDER S. 132/ 132A AND IT CANNOT BE MADE ON THOSE ISSUES IN RESPECT OF WHICH NO INCRIMINATING MATERIAL/ UNDISCL OSED ASSET WAS FOUND. 4.03 IT IS SUBMITTED THAT NORMALLY PROVISIONS OF SE CTION 132 ARE INVOKED ONLY WHEN THE AUTHORIZING OFFICER BEING THE DIRECTOR GEN ERAL OR DIRECTOR OR CHIEF COMMISSIONER OR COMMISSIONER OR ADDITIONAL DI RECTOR OR ADDITIONAL COMMISSIONER OR JOINT DIRECTOR OR JOINT COMMISSIONER, IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION, HAS R EASON TO BELIEVE THAT ANY PERSON IS IN POSSESSION OF SOME MONEY, BUL LION, JEWELLERY OR OTHER VALUABLE ARTICLES OR THINGS OR BOOKS OF ACCOU NT OR DOCUMENTS WHICH HAVE NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSE D BY SUCH PERSON FOR THE PURPOSE OF THE INCOME-TAX ACT, 1961. THE PU RPOSE OF THE PROVISIONS OF SECTION 132 IS NOT TO MAKE ANY ASSESS MENT OR REASSESSMENT BUT TO GATHER THE MATERIAL NECESSARY F OR THE PURPOSE OF MAKING ASSESSMENT OR REASSESSMENT. IT IS SUBMITTED THAT THE PROVISIONS OF SECTION 132 ARE NOT AIMED FOR DISCOVE RY OF THOSE ASSETS, BOOKS OR DOCUMENTS OR TRANSACTIONS, WHICH ARE ALREA DY IN THE SPECIFIC KNOWLEDGE OR DOMAIN OF THE REVENUE OR IF REQUIRED M AY COME IN THE SPECIFIC KNOWLEDGE OR DOMAIN OF THE REVENUE. IT SHA LL THUS BE APPRECIATED THAT THE PROVISIONS OF SECTION 132 ARE NOT MEANT FOR VERIFYING THE TRANSACTIONS WHICH ARE ALREADY RECORD ED IN THE REGULAR BOOKS OF ACCOUNT OF AN ASSESSEE. FOR SUCH VERIFICAT ION, THE POWERS OF ASSESSMENT OR REASSESSMENT ARE DULY VESTED WITH THE AO UNDER THE PROVISIONS OF SECTION 143/ 147 OF THE ACT. AS A NAT URAL COROLLARY IT THUS FOLLOWS THAT VERY PURPOSE OF INITIATING ACTION UNDE R S. 132 IS TO UNEARTH OR DISCOVER ANY UNDISCLOSED INCOME OR UNDISCLOSED A SSET OF AN ASSESSEE AND ITS OBJECTIVE IS NOT AT ALL TO VERIFY THE VERACITY OF THE TRANSACTIONS ALREADY RECORDED IN TH E REGULAR BOOKS OF ACCOUNT OR IN RESPECT OF WHICH ASSESSMENTS HAVE ALR EADY ATTAINED FINALITY. SINCE, THE PROVISIONS OF SECTION 153A HAV E THE SOLE OBJECTIVE OF FRAMING THE ASSESSMENT/ REASSESSMENT IN THE CASE OF A PERSON IN WHOSE CASE SEARCH UNDER S. 132 IS INITIATED OR REQU ISITION UNDER S. 132 MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 13 IS MADE, IT HAS TO BE NECESSARILY CONCLUDED THAT TH E SCOPE OF THE ASSESSMENT/ REASSESSMENT UNDER THE PROVISIONS OF SE CTION 153A IS LIMITED AND RESTRICTED ONLY TO THE UNDISCLOSED INCO ME BASED UPON THE INCRIMINATING MATERIAL/ UNDISCLOSED ASSETS FOUND DU RING THE COURSE OF SEARCH/ REQUISITION. 4.04 IT IS SUBMITTED THAT THE SCHEME OF SECTION 153 A TAKES WITHIN ITS SWEEPS NOT ONLY THE ASSESSMENT/ REASSESSMENT FOR THOSE COM PLETED ASSESSMENT YEARS IN RESPECT OF WHICH EITHER THE ASS ESSMENTS UNDER S. 143(3) HAVE ALREADY GOT COMPLETED PREVIOUSLY OR THE TIME LIMIT FOR ISSUANCE OF NOTICE UNDER S. 143(2) HAVE GOT EXPIRED BUT IT ALSO INCLUDE THOSE ASSESSMENT YEARS IN RESPECT OF WHICH EITHER T HE ASSESSMENT PROCEEDINGS WERE PENDING OR THE STATUTORY TIME LIMI T FOR ISSUANCE OF NOTICE UNDER S. 143(2) WERE ALIVE, ON THE DATE OF I NITIATION OF THE SEARCH. THE LATER SITUATION HAS BEEN CONTEMPLATED U NDER CLAUSE (B) OF SUB-SECTION (1) TO SECTION 153A OF THE ACT WHICH PR ESCRIBES THAT ALL THE ASSESSMENT PROCEEDINGS WHICH ARE PENDING ON THE DAT E OF SEARCH SHALL GET ABATE. IT IS SO BECAUSE WHILE LEGISLATING THE LAW THE LEGISLATURE WERE NOT INTENDING TO CARRY OUT TWO PARALLEL ASSESS MENT/ REASSESSMENT PROCEEDINGS FOR THE SAME ASSESSMENT YE ARS UNDER TWO DIFFERENT SECTIONS WHICH WAS THE SITUATION PREVALEN T IN THE OLD BLOCK ASSESSMENT SCHEME UNDER CHAPTER XIV-B OF THE ACT IN RESPECT OF SEARCH INITIATED UP TILL 31 ST DAY OF MAY, 2003. IT IS THEREFORE, IT HAS BEEN PRESCRIBED THAT NO SOONER ANY SEARCH UNDER S. 132 T AKES PLACE IN CASE OF ANY ASSESSEE, ALL THE ASSESSMENT PROCEEDINGS WHI CH WERE EITHER IN THE MOTION OR WHICH WERE PENDING SHALL COME TO A HA LT. 4.05 IT IS SUBMITTED THAT UNDER THE PROVISIONS OF S ECTION 153A OF THE ACT, ASSESSMENT OR REASSESSMENT OF TOTAL INCOME OF THE P ERSON SEARCHED OR REQUISITIONED FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SEARCH IS CONDUCTED OR REQUISITION IS MADE HAS TO BE MADE BY THE CONCERNING ASSESSING OFFICER. UNDER THE SECOND PROVISO TO SECT ION 153A, IT HAS BEEN ENJOINED THAT ASSESSMENT OR REASSESSMENT, IF A NY, RELATING TO ANY OF THE SIX ASSESSMENT YEARS WHICH IS PENDING ON THE DATE OF INITIATION OF THE SEARCH OR MAKING THE REQUISITION SHALL ABATE . ON A PLAIN READING OF THE PROVISO, IT BECOMES ABUNDANTLY CLEAR THAT ON LY THE ASSESSMENT PROCEEDINGS WHICH WERE PENDING ON THE DATE OF INITI ATION OF SEARCH OR REQUISITION SHALL GET ABATE WHEREAS THE ASSESSMENT PROCEEDINGS FOR OTHER ASSESSMENT YEARS, WHICH HAVE ATTAINED FINALIT Y, SHALL NOT GET ABATED. THUS, A CLEAR CUT DISTINCTION HAS BEEN MADE IN THE SECTION ITSELF IN RESPECT OF THOSE ASSESSMENT YEARS IN RESPECT OF WHICH PROCEEDINGS MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 14 HAVE ATTAINED FINALITY AT THE AO STAGE AND THOSE AS SESSMENT YEARS WHERE THE ASSESSMENT PROCEEDING HAVE NOT SO ATTAINE D THE FINALITY AT AO STAGE. IT IS SUBMITTED THAT WHILE MAKING THE ASS ESSMENT UNDER S. 153A, AN AO HAS TO MAKE A SPECIFIC DISTINCTION FOR NON-ABATED ASSESSMENT YEARS WITH THAT OF THE ABATED ASSESSMENT YEARS. 5.01 IT IS SUBMITTED THAT THE ISSUE RELATING TO SCO PE OF ASSESSMENT UNDER S. 153A/153C IS NOT RES INTEGRA. THE VARIOUS CONTROVER SIES AND INTRICACIES INVOLVED IN THE ISSUE HAS FINALLY BEEN SET AT REST BY HON'BLE ITAT, MUMBAI SPECIAL BENCH, IN THE CASE OF ALL CARGO GLOB AL LOGISTICS LTD. & ORS. VS. DCIT (2012) 74 DTR (MUMBAI) (SB) (TRIB) 89 IN ITS LANDMARK DECISION PRONOUNCED ON 06-07-2012. IT IS SUBMITTED THAT THE HON'BLE SPECIAL BENCH AT PARA (58) OF ITS ORDER, WAS PLEASE D TO LAY DOWN THE RATIO AS UNDER: '58. THUS, QUESTION NO.1 BEFORE US IS ANSWERED AS U NDER: (A) IN ASSESSMENTS THAT ARE ABATED, THE AO RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFE RRED ON HIM UNDER S. 153A FOR WHICH ASSESSMENTS SHALL BE MA DE FOR EACH OF THE SIX ASSESSMENT YEARS SEPARATELY; (B) IN OTHER CASES, IN ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT UNDER S. 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL , WHICH IN THE CONTEXT OF RELEVANT PROVISIONS MEANS (I) BOOKS OF ACCOUNT, OTHER DOCUMENTS, FOUN D IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COU RSE OF ORIGINAL ASSESSMENT, AND (II) UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH.' 5.02 THE HON'BLE SPECIAL BENCH OF ITAT IN THE CASE OF ALL CARGO (SUPRA) AT PARA (5) OF THE ORDER HAS IMPLIEDLY STATED THAT EVE N IN A CASE WHERE THE ASSESSMENT PROCEEDINGS ARE COMPLETED UNDER S. 1 43(1)(A), IT HAS TO BE TAKEN THAT THE PROCEEDINGS ARE COMPLETED AND THE SE ARE NOT PENDING AND CONSEQUENTLY SUCH PROCEEDINGS WOULD NOT GET ABATED. 5.03 THE HON'BLE MUMBAI 'A' BENCH OF ITAT IN THE CA SE OF ATITHI N. PATEL VS. ACIT IN ITA NO. 43/MUM/2010 FOLLOWING THE DECISION OF THE HON'BLE SPECIAL BENCH IN THE CASE OF ALL CARGO HELD THAT IN RESPECT OF THOSE ASSESSMENT YEARS FOR WHICH ASSESSMENT PROCEEDINGS H AD ATTAINED FINALITY, THE ADDITIONS CAN BE MADE ONLY ON THE BAS IS OF INCRIMINATING MATERIAL. ACCORDINGLY, THE HON'BLE BENCH FOR THE AS SESSMENT YEAR MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 15 2004-05, IN WHICH THE TIME LIMIT FOR ISSUANCE OF NO TICE UNDER S. 143(2) HAD GOT EXPIRED DELETED THE ADDITION MADE ON ACCOUN T OF DISALLOWANCE OF INTEREST WHICH WAS NOT BASED UPON ANY SEIZED MAT ERIAL OR DOCUMENT. SINCE, IN THE INSTANT CASE TOO, THE ADDIT IONS MADE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ARE NOT BASED U PON ANY SEIZED MATERIAL OR DOCUMENT, THE ENTIRE ADDITIONS SO MADE DESERVES TO BE DELETED IN TOTO. 5.04 THE RATIO LAID DOWN BY THE ITAT SPECIAL BENCH, MUMBAI IN THE CASE OF AL CARGO SUPRA HAS BEEN APPROVED EXPLICITLY BY THE HON'BLE HIGH COURT OF RAJASTHAN IN THE CASE OF JAI STEEL (INDIA) VS. C IT (2013) 259 CTR 281 (RAJ.) AND IMPLIEDLY BY THE HON'BLE HIGH COURT OF D ELHI IN THE CASE OF CIT VS. ANIL KUMAR BHATIA (2012) 211 TAXMAN 453 (DE L.). 5.05 RECENTLY, THE HONBLE HIGH COURT OF DELHI IN T HE CASE OF CIT VS. KABUL CHAWLA (2015) 93 CCH 0210 (DEL HC), AFTER CONSIDERI NG ALL THE AVAILABLE DECISIONS ON THE ISSUE HAS HELD THAT IN R ESPECT OF THE COMPLETED ASSESSMENT, ADDITIONS CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING DOCUMENTS. 5.06 IT IS SUBMITTED THAT FOLLOWING THE JUDGMENT OF THE HONBLE DELHI HIGH COURT, IN THE CASE OF KABUL CHAWLA, THE HONBLE JUR ISDICTIONAL BENCH OF ITAT IN CASE OF KALANI BROTHERS IN IT(SS)A NO. 7 1/IND/2014 AND AGAIN IN THE CASE OF ANANT STEEL PVT. LTD. IN IT(SS )A NOS. 31, 28, 29 & 30/IND/2010, HAS HELD THAT IN RESPECT OF THE COMPLE TED ASSESSMENT YEARS, IN ABSENCE OF ANY INCRIMINATING DOCUMENTS FO UND AND SEIZED DURING THE COURSE OF SEARCH, NO ADDITION CAN BE MAD E. 5.07 THE RELIANCE IS ALSO PLACED ON THE FOLLOWING J UDICIAL PRONOUNCEMENTS: I) ACIT VS. DELHI HOSPITAL SUPPLY P. LTD. (2015) 45 CCH 0092 DEL. TRIB II) VIMAL KUMAR RATHI VS. DCIT (2015) 45 CCH 0122 M UM. TRIB. III) SANJAY AGARAWAL VS. DCIT (2015) 169 TTJ 0282 ( DEL) IV) SHRI YAMUNA PROTEINS, DAHOD VS. ACIT [APPEAL NO . IT(SS) NOS. 227 TO 232/AHD/2010 ORDER DATED 18-10- 2012] V) VEE GEE INDUSTRIAL ENTERPRISES NEW DELHI VS. ACI T [ITA NO. 1/DEL/2011 ORDER DATED 12-07-2013] VI) MARIGOLD MERCHANDISE (P) LTD. VS. DCIT (2014) 104 D TR (DEL)(TRIB) 113 MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 16 VII) ACIT VS. M/S. PRITHVI SOUND PRODUCTS CO. PVT. LTD. [ITA NO.3422 TO 3426/DEL/2011 ORDER DATED 17-04-2014] VIII) ACIT VS. M/S. KS. FOOD PRODUCTS [ITA NO.519/A GRA/2012 & C.O. NO.10/AGRA/2013 ORDER DATED 17-05-2013] IX) SMT. SUNITA BAI VS. DCIT (2015) 68 SOT 0098 (PA NAJI) (URO) X) DCIT VS. RELIANCE GRANITE P LTD. (2015) 43 CCH 0 028 (HY. TRIB.) 6.01 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT AND VARIOUS JUDICIAL PRONOUNCEMENTS, IT IS SUBMITTED TH AT SINCE THE ASSESSMENT YEAR UNDER CONSIDERATION WAS A YEAR IN R ESPECT OF WHICH ASSESSMENT PROCEEDINGS HAD GOT COMPLETED AND THE SA ME WAS NOT PENDING ON THE DATE OF THE SEARCH, ANY ADDITION WHI CH IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH IS NOT LEGALLY SUSTAINABLE AND THE SAME DESERVES TO BE KNO CKED OUT ON THE THRESHOLD ITSELF. 1.01 AT THE OUTSET, IT IS SUBMITTED THAT THE LEAR NED AO GROSSLY ERRED IN MAKING THE IMPUGNED ADDITION OF RS.60,00,000/- ON ACCOUNT OF T HE ALLEGED FAILURE OF THE APPELLANT TO ESTABLISH THE GENUINENESS OF THE SHARE APPLICATION MONEY RECEIVED BY IT FROM 5 COMPANIES MERELY ON THE BASIS OF VARIOUS DOCUMENTS AND MATERIALS FURNISHED BY THE APPELLANT ITSELF EITHER DURING THE COURSE OF POST- SEARCH ENQUIRIES OR DURING THE COURSE OF THE ASSESS MENT PROCEEDINGS WITHOUT CONSIDERING THE MATERIAL FACT THAT THE ASSESSMENT Y EAR UNDER CONSIDERATION WAS A YEAR IN RESPECT OF WHICH ASSESSMENT PROCEEDIN GS HAD ALREADY GOT COMPLETED EARLIER AND THEREFORE, IN ABSENCE OF ANY INCRIMINATING MATERIAL OR EVIDENCE COLLECTED DURING THE COURSE OF SEARCH, NO ADDITION COULD HAVE BEEN MADE ON THE SUBJECT ISSUE IN VIEW OF THE VARIOUS JU DICIAL PRONOUNCEMENTS, AS DISCUSSED IN RESPECT OF GROUND NO.3 SUPRA. 2.01 DURING THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR UNDER CONSIDERATION, THE APPELLANT COMPANY HAD RECEIVED FRESH SHARE APPL ICATION MONEY AMOUNTING TO RS.75,00,000/- FROM 11 SHARE APPLICANT S OUT OF WHICH 5 SHARE APPLICANTS WERE THE COMPANIES DULY REGISTERED UNDER THE COMPANIES ACT, 1956. IT IS SUBMITTED THAT DURING THE RELEVANT PREV IOUS YEAR, THE APPELLANT COMPANY HAD REFUNDED SHARE APPLICATION MONEY AGGREG ATING TO RS.10,50,000/- TO THE CONCERNING SHARE APPLICANTS W HICH WAS RECEIVED BY IT DURING THE PREVIOUS YEAR 2005-06 RELEVANT TO A.Y. 2 006-07. A COPY OF THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 17 STATEMENT SHOWING DETAILS OF SHARE APPLICATION MONE Y RECEIVED BY THE APPELLANT COMPANY IS PLACED AT PAGE NO.100 OF OUR P APER BOOK. 2.02 THAT, OUT OF THE TOTAL SHARE APPLICATION MONEY AGGREGATING TO RS.75,00,000/- AS RECEIVED BY THE APPELLANT DURING THE RELEVANT PR EVIOUS YEAR FROM 11 SHARE APPLICANTS, THE LEARNED AO HAS DULY ACCEPTED GENUIN ENESS OF SHARE APPLICATION MONEY RECEIVED FROM 6 NON-CORPORATE ENT ITIES AGGREGATING TO RS.15,00,000/-. HOWEVER, IN RESPECT OF SHARE APPLIC ATION MONEY RECEIVED FROM 5 CORPORATE ENTITIES AGGREGATING TO RS.60,00,000/-, THE LEARNED AO AT LAST PARA OF PAGE NO. 5 OF THE IMPUGNED ORDER, MADE THE FINDING THAT THE APPELLANT COMPANY FAILED TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE PROVIDER OF SHARE APPLICATION MONEY AND ALSO FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. ACCORDINGLY, THE L EARNED AO MADE THE SUBJECT ADDITION OF RS.60,00,000/-. THE DETAILS OF SHARE APPLICATION MONEY, IN RESPECT OF WHICH THE SUBJECT ADDITION HAS BEEN MADE , ARE GIVEN IN A TABULAR FORM, AS UNDER: SNO NAME OF THE COMPANY ADDRESS OF THE COMPANY PAN AMOUNT 1 M/S. BHANU COMPUTRON ICE & EQUIPMENT PVT. LTD. GROUND FLOOR, 10-B, SIKANDARPURA ESTATE, KOLKATA AABCB4490P 8,00,000 2 M/S. FEDDER TIE- UP PVT. LTD. 207, MAHARISHI DEVENDRA ROAD, KOLKATA AAACF3773G 10,00,000 3 M/S. REMO ENGINEERING WORKS PVT. LTD. GROUND FLOOR, 10-B, SIKANDARPURA ESTATE, KOLKATA AABCR5848R 15,00,000 4 M/S. MGM TOOLS PVT. LTD. 241, APOLLO TOWER, 2, M.G. ROAD, INDORE AABCM1733A 11,00,000 5 M/S. CONVENIENT HOUSING FINANCE LTD. 241, APOLLO TOWER, 2, M.G. ROAD, INDORE AAACC6705H 16,00,000 TOTAL 60,00,000 3.01 THAT, DURING THE COURSE OF THE ASSESSMENT PROC EEDINGS, THE LEARNED AO VIDE QUERY NO. 7 OF THE NOTICE DATED 12-10-2012 ISSUED U NDER S. 142(1) OF THE ACT (KINDLY REFER PB PAGE NO. 36) HAD REQUIRED THE APPE LLANT TO ESTABLISH THE GENUINENESS OF SHARE APPLICATION MONEY RECEIVED BY IT DURING THE VARIOUS PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YEARS UND ER SCRUTINY BEFORE HIM. 3.02 THAT, IN RESPONSE TO THE SPECIFIC QUERY AS AFO RESAID, THE APPELLANT COMPANY VIDE ITS COUNSEL'S LETTER DATED 03-12-2012 (PB PAGE NO. 55 & 56) MADE THE NECESSARY COMPLIANCE BY FURNISHING ALL THE DOCUMENT ARY EVIDENCES FOR ESTABLISHING THE GENUINENESS OF SHARE APPLICATION M ONEY AGGREGATING TO RS.75,00,000/- RECEIVED BY IT DURING THE RELEVANT P REVIOUS YEAR. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 18 4.01 SUBSEQUENT TO MAKING THE COMPLIANCE AS AFORESA ID, THE APPELLANT WAS SERVED WITH ANOTHER NOTICE DATED 15-02-2013 (PB PAGE NO. 4 8 & 49) ISSUED BY THE AO REQUIRING THE APPELLANT TO FURNISH SOME MORE INF ORMATION IN RESPECT OF SHARE APPLICATION MONEY. ALONG WITH THE NOTICE, THE APPELLANT WAS ALSO PROVIDED WITH A XEROX COPY OF A STATEMENT OF ONE MR . SATYNARAYAN GADIYA, A DIRECTOR OF TWO SHARE APPLICANT COMPANIES FROM WHOM THE APPELLANT HAD, INTER-ALIA, TAKEN SHARE APPLICATION MONEY DURING TH E RELEVANT PREVIOUS YEAR. THE SAID STATEMENT WAS RECORDED UNDER S. 131(1A) OF THE INCOME-TAX ACT, 1961 BEFORE THE DDIT(INV.), INDORE ON 13-06-2011. A COPY OF THE STATEMENT IS PLACED AT PAGE NO. 101 TO 105 OF OUR PAPER BOOK. 4.02 IN COMPLIANCE TO THE SHOW CAUSE NOTICE DATED 1 5-02-2013, AS AFORESAID, THE APPELLANT COMPANY MADE ITS DETAILED REPLY THROUGH I TS COUNSEL'S LETTER DATED 06-03-2013 (PB PAGE NO. 78 TO 80). 4.03 MEANWHILE, AS ON 05-03-2013, THE AO AGAIN RECO RDED STATEMENT OF SHRI SATYANARAYAN GADIYA, A PERSON HOLDING POSITION OF A DIRECTOR IN TWO SHARE APPLICANT COMPANIES VIZ. M/S. MGM TOOLS PVT. LTD. A ND M/S. CONVENIENT HOUSING FINANCE LTD., UNDER S.131(1) OF THE INCOME- TAX ACT, 1961. A GIST OF THE STATEMENT OF SHRI SATYANARAYAN GADIYA HAS DULY BEEN REPRODUCED BY THE LEARNED AO AT PAGE NO. 5 OF THE IMPUGNED ASSESSMENT ORDER. HOWEVER, FOR THE SAKE OF MORE CLARITY, A COPY OF THE STATEMENT I S BEING SUBMITTED AT PAGE NO. 106 TO 107 OF THE PAPER BOOK. 5.01 ON A PERUSAL OF THE IMPUGNED ASSESSMENT ORDER AS WELL AS THE FACTS AND CIRCUMSTANCES OF THE CASE AS NARRATED ABOVE, IT SHA LL BE APPRECIATED THAT IN THE INSTANT CASE, THE APPELLANT COULD BE ABLE TO DI SCHARGE ITS INITIAL ONUS OF PROVING THE GENUINENESS OF THE SHARE APPLICATION TR ANSACTIONS BEYOND ALL DOUBTS BY COMPLYING WITH ALL THE THREE ESSENTIAL IN GREDIENTS OF PROVING AS CONTEMPLATED UNDER S.68 OF THE ACT. HOWEVER, FOR TH E SAKE OF CLARITY, EACH OF THE ASPECTS OF PROVING THE GENUINENESS OF THE SHARE APPLICATION TRANSACTIONS, AS PER THE TOUCHSTONE OF THE PROVISIONS OF S.68 ARE DISCUSSED IN THE ENSUING PARAS. 6.01 AS REGARD THE IDENTITY OF THE SHARE APPLICANT COMPANIES, IT IS SUBMITTED AS UNDER: I) THAT, ALL THE SHARE APPLICANT COMPANIES ARE DULY REGISTERED UNDER THE COMPANIES ACT, 1956. THE DETAILS OF CORPORATE IDENT IFICATION NUMBER [CIN] ALLOTTED TO EACH OF THE SHARE APPLICANT COMPA NIES, BY THE REGISTRAR OF COMPANIES, GOVERNMENT OF INDIA ARE BEI NG GIVEN AS UNDER: SNO. NAME OF THE SHARE APPLICANT COMPANY CIN 1 M/S. BHANU COMPUTRON ICE & U52392WB1993PTC059892 MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 19 EQUIPMENT PVT. LTD., KOLKATA 2 M/S. FEDDER TIE-UP PVT. LTD., KOLKATA U74140WB1996PLC078294 3 M/S. REMO ENGINEERING WORKS PVT. LTD., KOLKATA U28999WB1993PTC059793 4 M/S. MGM TOOLS PVT. LTD., INDORE U45400MH1995PTC2 43836 5 M/S. CONVENIENT HOUSING FINANCE LTD., INDORE U45400MP1993PTC007890 II) THAT, THE SHARE APPLICANT COMPANIES BEING ARTIF ICIAL JURISTIC PERSONS HAVING NO PHYSICAL EXISTENCE HAVE BEEN INCORPORATED UNDER A CERTIFICATE OF INCORPORATION ISSUED TO THEM BY THE CONCERNING REGISTRAR OF COMPANIES UPON FURNISHING THE MEMORANDUM & ARTIC LES OF ASSOCIATION AND OTHER RELEVANT DOCUMENTS BY SUCH CO MPANIES. A COPY OF CERTIFICATE OF INCORPORATION ALONG WITH COPY OF MEMORANDUM AND ARTICLES OF ASSOCIATION OF COMPANIES ARE PLACED AT PAGE NO. 108 TO 197 OF OUR PAPER BOOK. III) THAT, AS PER THE COMPANIES ACT, 1956 AND AS AL SO UNDER THE SUBSTITUTED COMPANIES ACT, 2013, EVERY COMPANY IS C OMPULSORILY REQUIRED TO HAVE A REGISTERED OFFICE AND WITHOUT HA VING A REGISTERED OFFICE, A COMPANY CANNOT CONTINUE TO HAVE ITS NAME REGISTERED WITH THE REGISTRAR OF COMPANIES. FURTHER, AS PER THE EXI STING LAWS, PREVAILING FOR THE LAST FEW YEARS, THE DIRECTORS OF EVERY COMPANY HAVE TO HAVE A SEPARATE DIRECTOR IDENTIFICATION NUMBER [ DIN] AND THE DETAILS OF SUCH DIN ARE COMPULSORILY REQUIRED TO BE FILED WITH THE CONCERNING REGISTRAR OF COMPANIES. THE DIN, IN ITS TURN, IS ALLOTTED TO ANY DIRECTOR ONLY UPON HIS FURNISHING THE NECESSARY EVIDENCES IN SUPPORT OF HIS IDENTITY AND ADDRESS PROOF. IT IS SU BMITTED THAT ALL THE SHARE APPLICANT COMPANIES ARE IN EXISTENCE EVEN TIL L TODAY AND THEREFORE, BY NO STRETCH OF IMAGINATION, IT CAN BE SAID THAT THESE COMPANIES ARE NOT HAVING ANY OFFICE OR FOR THAT MAT TER, THE DIRECTORS OF THESE COMPANIES ARE NOT IN EXISTENCE. IV) THAT, ALL THE SHARE APPLICANT COMPANIES ARE REG ULARLY ASSESSED TO INCOME-TAX WITH THE PAN AS MENTIONED IN THE TABLE G IVEN AT PARA 2.02 SUPRA. XEROX COPIES OF INCOME-TAX RETURNS OF SHARE APPLICANT COMPANIES OR COPIES OF PAN CARDS ALLOTTED TO SUCH C OMPANIES ARE PLACED AT PAGE NO. 199 TO 203 OF OUR PAPER BOOK. V) THAT, THE IDENTITY OF KOLKATA BASED THREE COMPANIES NAMELY M/S. BHANU COMPUTRON ICE & EQUIPMENT PVT. LTD., M/S. FED DER TIE-UP PVT. LTD. AND M/S. REMO ENGINEERING WORKS PVT. LTD. GETS ALSO ESTABLISHED FROM THE FACT THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO, AS PER THE FINDING GIVEN AT PA RA 4 OF PAGE NO. 4 OF THE IMPUGNED ASSESSMENT ORDER, HAD ISSUED NOTICE S UNDER S.133(6) MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 20 TO ALL SUCH COMPANIES WHICH ALTHOUGH REMAINED UNREP LIED BUT CERTAINLY GOT SERVED UPON THESE COMPANIES. VI) THAT, FURTHER, THE IDENTITY OF INDORE BASED TWO COM PANIES NAMELY M/S. MGM TOOLS PVT. LTD. AND M/S. CONVENIENT HOUSIN G FINANCE LTD. GETS ALSO ESTABLISHED FROM THE FACT THAT DURING THE COURSE OF THE POST-SEARCH INVESTIGATION AS WELL AS DURING THE COU RSE OF THE ASSESSMENT PROCEEDINGS, SHRI SATYANARAYAN GADIYA, A CHARTERED ACCOUNTANT BY PROFESSION, HOLDING THE POSITION OF A DIRECTOR IN BOTH THE COMPANIES GOT HIMSELF APPEARED BEFORE THE AUTHO RITIES IN RESPONSE TO THE SUMMONS ISSUED UNDER S.131(1A)/131( 1) OF THE ACT. SHRI SATYANARAYAN GADIYA ALSO MADE HIS STATEMENTS, ON OATH, BEFORE THE AUTHORITIES AS IS EVIDENT FROM THE FINDINGS GIV EN BY THE LEARNED AO HIMSELF AT PARA 4 OF PAGE NO. 3 AND PARA 1 OF PA GE NO. 5 OF THE IMPUGNED ASSESSMENT ORDER. (VII) IT IS SUBMITTED THAT SINCE IN THE INSTANT CAS E ALL THE SUMMONS ISSUED UNDER S. 131 AND NOTICES ISSUED UNDER S. 133(6) HAV E GOT SERVED TO THE SHARE APPLICANT COMPANIES, IT HAS TO BE NECESSARILY HELD THAT THE APPELLANT COMPANY COULD BE ABLE TO ESTABLISH THE ID ENTITY OF THESE SHARE APPLICANT COMPANIES BEYOND DOUBTS IN VIEW OF THE DECISION PRONOUNCED BY THIS HONBLE BENCH OF ITAT ITSELF IN THE CASE OF M/S. AGRAWAL COAL CORPORATION PVT. LTD. VS. ADDL. CIT 18 ITJ 717 (IND.) TRIB. IT SHALL BE APPRECIATED THAT IN THE CASE OF M/S. AG RAWAL COAL CORPORATION, THE NOTICES/SUMMONS ISSUED BY THE AO T O THE SHARE APPLICANT COMPANIES HAD GOT RETURNED AND UNDER SUCH CIRCUMSTANCES ONLY THIS BENCH HAS HELD THAT THE IDENTITY OF THE S HARE APPLICANT COMPANIES COULD NOT BE GOT ESTABLISHED. 6.02 AS REGARD GENUINENESS OF THE SHARE APPLICATION TRANSACTIONS, AS CLAIMED BY THE APPELLANT, IT IS SUBMITTED AS UNDER: I) THAT, BEFORE MAKING THE INVESTMENT IN THE APPELL ANT COMPANY BY WAY OF SUBSCRIPTION OF SHARES, THE BOARD OF DIRECTORS O F THE SHARE APPLICANT COMPANIES PASSED A RESOLUTION TO THIS EFFECT. FURTH ER, THEY SEPARATELY MADE APPLICATIONS FOR ALLOTMENT OF SHARES IN THE AP PELLANT COMPANY UNDER THE SIGNATURE OF THE DIRECTOR SO AUTHORIZED O N THIS BEHALF. A COPY OF THE BOARD RESOLUTION, COPY OF THE SHARE APPLICAT ION FORMS DULY FILLED UP AND SIGNED AND COPY OF COVERING LETTERS ACCOMPAN YING THE SHARE APPLICATION FORMS ARE PLACED AT PAGE NO.204 TO 231 OF THE PAPER BOOK. II) THAT, THE ENTIRE SHARE APPLICATION MONEY AMOUNT ING TO RS.60,00,000/- WAS RECEIVED BY THE APPELLANT FROM THE AFORESAID SH ARE APPLICANT COMPANIES THROUGH ACCOUNT PAYEE CHEQUES ONLY AS PER THE DETAILS GIVEN IN THE SHARE APPLICATION FORMS THEMSELVES. FU RTHER, A COPY OF SHARE APPLICANT MONEY ACCOUNT SHOWING THE COMPLETE DETAILS OF THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 21 DATES AND MODES OF THE RECEIPTS OF SHARE APPLICATIO N MONEY, IS PLACED AT PAGE NO. 232 TO 233 OF OUR PAPER BOOK. III) THAT, IN CONSIDERATION OF THE SHARE APPLICATIO N MONEY OF RS.60,00,000/- SO RECEIVED, THE APPELLANT COMPANY H AD DULY ALLOTTED 60,000 EQUITY SHARES OF FACE VALUE OF RS.10/- EACH, AT A PREMIUM OF RS.90/- EACH, TO THESE SHARE APPLICANT COMPANIES ON 15-05-2007 AND THE NECESSARY RETURN FOR ALLOTMENT OF SHARES WAS DU LY FILED BY THE APPELLANT COMPANY WITH THE CONCERNING REGISTRAR OF COMPANIES. IV) THAT, THE GENUINENESS OF THE TRANSACTIONS ALSO GETS ESTABLISHED FROM THE LETTERS OF CONFIRMATION DULY GIVEN BY THE SHARE APPLICANT COMPANIES, A COPY WHEREOF ARE PLACED AT PAGE NO. 23 4 TO 243 OF THE PAPER BOOK. V) THAT, THE GENUINENESS OF THE SHARE APPLICATION T RANSACTIONS IN RESPECT OF INDORE BASED TWO COMPANIES NAMELY M/S. MGM TOOLS PVT. LTD. AND M/S. CONVENIENT HOUSING FINANCE LTD. GETS FULLY EST ABLISHED FROM THE STATEMENT GIVEN BY ONE OF THE DIRECTORS OF SUCH COM PANIES, NAMELY SHRI SATYANARAYAN GADIYA, BEFORE THE LEARNED AO ON 05-03-2013 IN RESPONSE TO THE SUMMONS ISSUED UNDER S. 131(1) OF T HE ACT. ON A PERUSAL OF THE STATEMENT OF SHRI SATYANARAYAN GADIY A, AS REPRODUCED BY THE LEARNED AO HIMSELF AT PAGE NO. 5 OF THE IMPU GNED ASSESSMENT ORDER, IT CAN BE GATHERED THAT SHRI SATYANARAYAN GA DIYA IN AN UNEQUIVOCAL TERM HAS CONFIRMED MAKING OF INVESTMENT AMOUNTING TO RS.16,00,000/- AND RS.11,00,000/-, AGGREGATING TO R S.27,00,000/-, BY HIS TWO COMPANIES IN THE APPELLANT COMPANY THROUGH ACCOUNT PAYEE CHEQUES. 6.03 AS REGARD THE CREDITWORTHINESS OF THE SHARE AP PLICANT COMPANIES, IT IS SUBMITTED AS UNDER: I) THAT, ALL THE SHARE APPLICANT COMPANIES WERE HAV ING AMPLE FUNDS FOR MAKING INVESTMENT IN THE SHARE APPLICANT COMPANIES. IN EVIDENCE OF SUCH FACT, WE ARE SUBMITTING HEREWITH COPIES OF THE AUDITED FINANCIAL STATEMENTS OF THE SHARE APPLICANT COMPANIES FOR THE FINANCIAL YEAR ENDED ON 31-03-2006 WHICH ARE PLACED AT PAGE NO. 24 4 TO 308 OF THE PAPER BOOK. ON A PERUSAL OF THE AUDITED FINANCIAL S TATEMENTS, IT SHALL BE OBSERVED THAT ALL THE COMPANIES WERE HAVING THEI R OWN FUNDS TO JUSTIFY THE MAKING OF INVESTMENT IN THE APPELLANT C OMPANY. FOR A READY REFERENCE, THE DETAILS OF OWNED FUNDS I.E. SH ARE CAPITAL AND RESERVES & SURPLUS OF EACH OF THE SHARE APPLICANT C OMPANIES, AS PER THEIR RESPECTIVE AUDITED FINANCIAL STATEMENTS AS OF 31-03-2006, ARE GIVEN IN A TABULAR FORM AS UNDER: SNO. NAME OF THE SHARE APPLICANT COMPANY OWNED FUNDS AS ON TOTAL INVESTMENT IN MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 22 31-03-2006 THE APPELLANT COMPANY 1 M/S. BHANU COMPUTRON ICE & EQUIPMENT PVT. LTD., KOLKATA 5,73,67,569 8,00,000 2 M/S. FEDDER TIE-UP PVT. LTD., KOLKATA 6,15,89,088 10,00,000 3 M/S. REMO ENGINEERING WORKS PVT. LTD., KOLKATA 6,63,59,956 15,00,000 4 M/S. MGM TOOLS PVT. LTD., INDORE 25,00,000 11,00,000 5 M/S. CONVENIENT HOUSING FINANCE LTD., INDORE 96,09,832 16,00,000 II) THAT, ALL THE COMPANIES ARE REGULARLY ASSESSED TO INCOME-TAX AS PER THE DETAILS GIVEN HEREINABOVE. 7.01 IT IS SUBMITTED THAT MERELY FOR THE REASON THA T SOME OF THE SHARE APPLICANT COMPANIES WERE HAVING THEIR REGISTERED OFFICE AT KO LKATA BY ITSELF CANNOT GIVE RISE TO A CONCLUSION THAT WHATEVER TRANSACTIONS WER E MADE WITH SUCH COMPANIES ARE NOT GENUINE. 8.01 IN THE INSTANT CASE, THE AO HAS HEAVILY RELIED UPON THE DECISION OF HON'BLE ITAT INDORE BENCH, INDORE IN CASE OF M/S. AGRAWAL C OAL CORPORATION AS REPORTED IN 18 ITJ 717 WITHOUT CONSIDERING THE MATE RIAL FACT THAT THE FACTS OF THE APPELLANT COMPANY ARE QUITE DISTINGUISHABLE FRO M THAT OF THE ABOVE CITED CASE. THE MOST DISTINGUISHING FEATURE IS THAT IN TH E CASE OF M/S. AGRAWAL COAL CORPORATION, THE ASSESSEE COMPANY COULD NOT PRODUCE THE DIRECTORS BEFORE THE AO OR EVEN BEFORE THE ITAT WHEREAS IN THE PRESENT C ASE, TWO COMPANIES GOT THEMSELVES APPEARED THROUGH THEIR DIRECTOR BEFORE T HE AO. FURTHER, IN THE CASE OF M/S. AGRAWAL COAL CORPORATION, NOTICES/ SUM MONS ISSUED TO THE SHARE APPLICANT COMPANIES RETURNED UNSERVED WHEREAS IN TH E CASE OF THE APPELLANT COMPANY, THE NOTICES ISSUED AT THE FAG END OF THE L IMITATION PERIOD, I.E. ON 11- 01-2013, GOT DULY SERVED TO THE SHARE APPLICANT COM PANIES. FURTHERMORE, IN THE CASE OF M/S. AGRAWAL COAL CORPORATION, ENQUIRIE S WERE GOT CONDUCTED BY THE AO WHEREAS IN THE PRESENT CASE, NO SUCH ENQUIRY WAS EVER CONDUCTED BY THE LEARNED AO. IN NUTSHELL, THE RULING OF M/S. AGR AWAL COAL CORPORATION IS NOT APPLICABLE IN THE APPELLANT'S CASE. 8.02 IT IS SUBMITTED THAT IN THE INSTANT CASE THE A O, EXCEPT RECORDING THE STATEMENTS OF DIRECTORS OF TWO OF THE COMPANIES, HA S NOT CONDUCTED ANY OTHER ENQUIRY AND EVEN IF SUCH ENQUIRY WAS CONDUCTED, THE APPELLANT HAS NOT BEEN CONFRONTED WITH SUCH ENQUIRY. IN SUCH CIRCUMSTANCES , IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF KISHANCHAN D CHELARAM VS. CIT (1980) 125 ITR 713 (SC) NO ADVERSE VIEW CAN BE TAKE N AGAINST THE APPELLANT. 9.00 IT IS SUBMITTED THAT THE CIT(A) MERELY ON THE BASIS OF GUESS WORK AND CONJECTURES HELD THE SHARE APPLICANT COMPANIES AS A CCOMMODATION ENTRY MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 23 PROVIDERS. THE CIT(A) MERELY ON THE BASIS OF COPIES OF THE INCOME-TAX RETURNS AND FINANCIAL STATEMENTS OF SUCH SHARE APPLICANT CO MPANIES, HELD THAT THESE COMPANIES WERE NOT HAVING CREDITWORTHINESS. THE CIT (A) HAS ALSO DISBELIEVED THE TRANSACTION OF SHARE CAPITAL ON THE EXTRANEOUS CONSIDERATION OF AMOUNT OF SHARE PREMIUM PER SHARE. HOWEVER, IT WILL BE APPREC IATED THAT THE CIT (A) COULD NOT BRING ON RECORD ANY COGENT MATERIAL TO ES TABLISH THAT THE SHARE APPLICANT COMPANIES WERE NOT IN EXISTENCE. THE CIT( A) HAS ALSO NOT FOUND ANY DEFECT IN THE VARIOUS DOCUMENTARY EVIDENCES FURNISH ED BY THE APPELLANT FOR ESTABLISHING THE GENUINENESS OF THE TRANSACTION. 10.00 ALTHOUGH IN THE INSTANT CASE, THE APPELLANT, BESIDES ESTABLISHING THE IDENTITY OF THE SHARE APPLICANT, HAD ALSO ESTABLISHED THE GE NUINENESS OF THE TRANSACTIONS AS ALSO THE CREDITWORTHINESS OF SHARE APPLICANT BUT AS PER THE RULING OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195, IT WAS REQUIRED TO ESTABLI SH THE IDENTITY ONLY. THE HON'BLE APEX COURT IN THE CASE OF M/S. LOVELY EXPOR TS PVT. LTD. HAS HELD THAT ONCE THE IDENTITY OF THE SHARE APPLICANT IS ESTABLI SHED, NO ADDITION UNDER S.68 CAN BE MADE IN THE HANDS OF THE RECIPIENT COMPANY. 10.01 THE HON'BLE JURISDICTIONAL INDORE BENCH OF IT AT IN THE CASE OF RAJAT CAPITAL MARKET PVT. LTD. VS. ACIT (2014) 24 ITJ 219 (INDORE ) FOLLOWING THE DECISIONS OF HON'BLE SUPREME COURT IN CASE OF LOVELY EXPORTS SUP RA AND ALSO OF HIGH COURT OF MADHYA PRADESH IN THE CASE OF DCIT VS. PEOPLES G ENERAL HOSPITAL LTD. (2007) 9 ITJ 481 (MP) HAS HELD THAT WHEN THE IDENTI TY OF THE SHAREHOLDERS IS ESTABLISHED, NO ADDITION CAN BE MADE IN THE HANDS O F THE RECIPIENT COMPANY. 10.02 IT IS SUBMITTED THAT THIS HONBLE BENCH, AGAI N IN THE CASE OF M/S. ANANT STEEL PVT. LTD. VS. ACIT (IN APPEAL NO. IT(SS)-31, 28, 29 & 30/IND/2010), HAS DELETED THE ENTIRE ADDITION MADE BY THE AO ON ACCOUNT OF SHARE APPLICATION MONEY . 13. ON THE OTHER HAND, LD. DR HAS RELIED ON THE ORD ERS OF THE REVENUE AUTHORITIES. 14. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. SO FAR AS THE ABOVE G ROUND NO.3 WITH REGARD TO INCRIMINATING MATERIAL IS CONCERNED, WE FIND THAT I T IS ADMITTED FACT THAT IN RESPONSE TO THE RETURN FURNISHED UNDER S. 139(1), N O NOTICE UNDER S. 143(2) WAS MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 24 ISSUED TO THE ASSESSEE UPTIL 31-10-2008 I.E. THE TI ME LIMIT PRESCRIBED UNDER THE THEN PREVAILING SEC. 143(2) OF THE ACT BEING EXPIRY OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FURNISHED, THU S, THE ASSESSMENT WAS DEEMED TO HAVE BEEN FRAMED UNDER THE PROVISIONS OF SEC. 143(1)(A) OF THE ACT. IN THE CASE OF THE ASSESSEE, THE SEARCH WAS INITIAT ED ON 25-11-2010, THEREFORE, ON THE DATE OF THE SEARCH, THE ASSESSMENT PROCEEDIN GS OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. A.Y. 2007- 08 WERE NOT PENDING AND THE SAME WERE COMPLETE IN ALL RESPECT. IN OTHER WOR DS, THE ASSESSMENT YEAR UNDER CONSIDERATION WAS NOT A YEAR WHICH CAN BE SAI D TO BE A YEAR OF ABATE AS CONTEMPLATED UNDER THE SECOND PROVISO TO SEC. 153A OF THE ACT. THUS, THE ASSESSMENT IS NOT ABATED AND THEREFORE WITHOUT FIND ING ANY INCRIMINATING MATERIAL, NO ADDITIONS CAN BE MADE. IN THE PRESENT APPEAL, WE FIND THAT NO INCRIMINATING MATERIAL WAS FOUND AND THE ASSESSING OFFICER MADE ADDITIONS ON THE MATERIAL WHICH ARE ALREADY DISCLOSED IN THE BOO KS. THE LD. CIT(A) AFTER DISCUSSING SOME VARIOUS CASE LAWS DISMISSED THIS GR OUND. HE WAS OF THE VIEW THAT EVEN IF NO INCRIMINATING MATERIAL IS FOUND, A NORMAL ASSESSMENT HAS TO BE MADE UNDER S. 153A OF THE ACT. WE FIND THAT NO INCR IMINATING DOCUMENTS WERE FOUND DURING THE COURSE OF THE SEARCH FOR THE A.Y. 2007-08 WHICH IS EVIDENT FROM THE ASSESSMENT ORDER WHEREIN THE ADDITIONS WER E MADE ON THE MATERIALS WHICH HAVE ALREADY BEEN SHOWN IN THE BOOKS OF ACCOU NTS AND ALSO SHOWN IN THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 25 BALANCE SHEET FILED ALONG WITH THE RETURN OR DISCLO SED IN THE RETURN. LD. DR HAS DEFENDED THE ACTION OF THE REVENUE AUTHORITIES BUT COULD NOT CONTROVERT THE FACTUAL SUBMISSION MADE BY THE LD. AR OF THE ASSESS EE ON THE ISSUE OF INCRIMINATING MATERIAL. KEEPING IN VIEW THE FACTS A ND SUBMISSIONS THEREOF, WE FIND THAT THE PRESENT ISSUE WITH REGARD TO ABSENCE OF ANY INCRIMINATING MATERIAL OR DOCUMENTS SEIZED DURING THE COURSE OF SEARCH HAS BEEN DECIDED BY INDORE BENCH IN THE CASE OF KALANI BROS. IN IT(SS)A NO.71/ IND/2014 AND OTHERS WHEREIN INDORE BENCH, HAVING CONSIDERED VARIOUS JUDICIAL PR ONOUNCEMENTS, DECIDED THAT IN THE ABSENCE OF INCRIMINATING MATERIAL DURIN G THE COURSE OF SEARCH, THE ASSESSING OFFICER CANNOT PASS ORDER U/S 153A R.W.S. SEC. 143(3) OF THE I.T. ACT. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HER EUNDER: 8. IN RESPECT OF 153A BAD IN LAW ON THE GROUND THA T ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3) WAS COMPLETED ON 29.12.2006 (HEREINAFTER REFERRED AS ORIGINAL ASSESSMENT ORDER FOR EASE OF REFERENCE), THE AO TREATED THE SAID LEASE TRANSACTION AS SALE TRANSACTION AND TAXED THE TOTAL SECURITY DEPOSIT RECEIVABLE AS SALE CONSIDERATION OF SALE OF LAND. THE ADDITION MADE IN THE SEARCH ASSESSMENT ORDER PERTAINED TO THE ISSUE ALREADY DEALT IN THE ORIGINA L ASSESSMENT ORDER I.E. LEASE TRANSACTION CATEGORIZED AS SALE TRANSACTION. THE FA CT THAT THE AFORESAID ISSUE BEARS NO RELATION TO THE ANY OF THE MATERIAL / DOCUMENTS / RECORDS FOUND AND SEIZED DURING THE SEARCH ACTION ON 16.04.2009. LD. CIT(A) HAS REL IED UPON THE CIRCULAR NO. 7 OF 2003 WHICH CLARIFIES THE POSITION OF THE PENDING AP PEALS AS ON THE DATE OF THE SEARCH. THE RELEVANT PORTION IS PRODUCED HEREWITH 'THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME OF EACH OF THESE SIX ASSESSMENT YEARS. ASSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WIT HIN THE PERIOD OF MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 26 SIX ASSESSMENT YEARS PENDING ON THE DATE OF INITIAT ION OF THE SEARCH UNDER SECTION 132 OR REQUISITION UNDER SECT ION 132A, AS THE CASE MAY BE, SHALL ABATE. IT IS CLARIFIED THAT THE APPEAL, REVISION OR RECTIFICATION PROCEEDINGS PENDING ON THE DATE OF IN ITIATION OF SEARCH UNDER SECTION 132 OR REQUISITION SHALL NOT A BATE..' ACCORDINGLY, AS FAR AS COMPLETED ASSESSMENTS ARE CO NCERNED, THEY DO NOT ABATE. THE AO CANNOT PROCEED TO MAKE THE SAME ADDITION IN THE BLOCK ASSESSMENT WITHOUT ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARC H. THE SAID VIEW PREVENTS THE AO TO UNDO WHAT HAS ALREADY BEEN COMPLETED AND HAS BEC OME FINAL IN THE ORIGINAL ASSESSMENT PROCEEDINGS. 9. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON BY BOTH THE SIDES. WE HAVE ALSO CO NSIDERED VARIOUS RELEVANT FACTS OF THE CASE. IT IS A SETTLED LEGAL POSITION T HAT ONCE A SEARCH AND SEIZURE ACTION HAS TAKEN PLACE U/S 132 OF THE ACT OR A REQU ISITION HAS BEEN MADE U/S 132A, THE PROVISIONS OF SECTION 153A TRIGGED AND AS SESSING OFFICER IS BOUND TO ISSUE NOTICE U/S 153A OF THE ACT. ONCE NOTICES ARE ISSUED U/S 153A OF THE ACT THEN ASSESSEE IS LEGALLY OBLIGED TO FILE RETURN OF INCOME FOR SIX YEARS. THE ASSESSMENT AND REASSESSMENT FOR SIX YEARS SHALL BE FINALISED BY THE ASSESSING OFFICER. IT IS ALSO HELD BY VARIOUS COURTS THAT ON CE NOTICE U/S 153A OF THE ACT ISSUED, THEN ASSESSMENT FOR SIX YEARS SHALL BE AT L ARGE BOTH FOR ASSESSING OFFICER AND ASSESSEE HAVE NO WARRANT OF LAW. IT HAS BEEN ALSO HELD THAT IN THE ASSESSMENT YEARS WHERE ASSESSMENTS HAVE BEEN ABATED IN TERMS OF SECOND PROVISO TO SECTION 153A THEN ASSESSING OFFICER ACTS UNDER ORIGINAL JURISDICTION AND ONE ASSESSMENT IS MADE FOR TOTAL INCOME INCLUDI NG THE ADDITION MADE ON THE BASIS OF SEIZED MATERIAL. BUT WHERE THERE IS NO ABATEMENT OF ASSESSMENTS AND ASSESSMENTS WERE COMPLETED ON THE DATE OF SEARC H THEN ADDITION CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING DOCUMENTS O R UNDISCLOSED ASSETS, ETC. IN THESE CASES THERE WAS NO INCRIMINATING DOCUMENT FOUND AND SEIZED. NO ASSESSMENT PROCEEDINGS WERE ABATED IN THESE ASSESSE ES. THUS ASSESSMENTS FOR THESE ASSESSMENT YEARS WERE COMPLETED ON THE DA TE OF SEARCH. THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 27 ASSESSMENTS WERE COMPLETED U/S 143(3) OF THE ACT RE AD WITH SECTION 153A/153C OF THE ACT AFTER THE SEARCH. THERE WAS NO ABATEMENT OF ANY PROCEEDINGS IN THESE CASES FOR THESE ASSESSMENT YEA RS IN TERMS OF SECOND PROVISO TO SECTION 153A OF THE ACT. THERE IS NO SEI ZED MATERIAL BELONGING TO THE ASSESSEE WHICH WAS FOUND AND SEIZED IN RELATION TO ADDITIONS MADE. IN A RECENT DECISION, HON'BLE DELHI HIGH COURT IN THE CA SE OF CIT VS. KABUL CHAWLA (SUPRA) HAS HELD THAT COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE ASSESSING OFFICER WHILE MAKING ASSESSMENT U/S 153A OF THE ACT, ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURI NG THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME O R PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WAS NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. IN ALL THESE CASES NO ASSESSMENTS WERE PENDING ON THE DATE OF SEARCH FOR THESE ASSESSMENT YEARS. NO ASSESSMENTS WERE ABATED IN TERMS OF SECOND PROVI SO TO SECTION 153A OF THE ACT. HON'BLE DELHI HIGH COURT IN THE CASE OF C IT VS. KABUL CHAWLA (SUPRA) HAS CONSIDERED VARIOUS HIGH COURT DECISIONS RELIED UPON BY THE LEARNED DR. THE HON'BLE DELHI HIGH COURT HAS CONSIDERED THE CAS ES OF CANARA HOUSING DEVELOPMENT CO. VS. DCIT; MADUGULA VS. DCIT; CIT VS . CHETANDAS LAXMANDAS AND CIT VS. ANIL KUMAR BHATIA (SUPRA). THE ONLY DE CISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RAJ KUM AR ARORA; 367 ITR 517 RELIED ON BY THE LEARNED DR WAS NOT CONSIDERED BY H ON'BLE DELHI HIGH COURT WHILE DECIDING THE ISSUE IN THE CASE OF KABUL CHAWL A. THE HON'BLE ALLAHABAD HIGH COURT HAS REVERSED THE ORDER OF THE TRIBUNAL A ND REMANDED THE ISSUE TO THE TRIBUNAL TO CONSIDER THE APPEAL OF THE DEPARTME NT ON MERITS. IT IS A SETTLED LEGAL POSITION THAT WHEN TWO VIEWS ARE POSS IBLE ON A PARTICULAR ISSUE THEN THE VIEW FAVOURABLE TO THE ASSESSEE SHOULD BE FOLLOWED AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS; 88 ITR 192. RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE APEX COURT, WE DISMISS THE GROUND OF APPEALS OF THE REVENUE. DEPARTMENTAL APPE ALS ARE DISPOSED ACCORDINGLY. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 28 14.1 WE ALSO FIND SUPPORT FROM THE DECISION OF HON BLE GUJRAT HIGH COURT IN CASE OF PRINCIPAL CIT VS. SUMAYA CONSTRUCT ION P. LTD., 387 ITR 529 (GUJ) WHEREIN THE HON'BLE HIGH COURT HAS FOLLOWED THE DEC ISION OF RAJASTHAN HIGH COURT IN THE CASE JAI STEEL VS. ACIT, 1 ITR OL 371. THE GUJARAT HIGH COURT HAS ALSO APPROVED THE DECISION OF KABUL CHAWLA, 380 ITR 573 (DELHI). THUS, WE, FOLLOWING THE ABOVE ORDER OF THIS BENCH AND VARIOUS HIGH COURTS AS CITED ABOVE, ALLOW THE PRESENT APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 ON THE ISSUE OF SECTION 153A R.W.S. SECTION 143(3) OF THE I.T. ACT WHEREIN IT HAS BEEN HELD THAT IN ABSENCE OF ANY INCRIMINATING DOCU MENTS FOUND AND SEIZED DURING THE COURSE OF SEARCH, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE ADDITIONS IN NON-ABATED ASSESSMENT WHILE PASSING TH E ORDER U/S 153A R.W.S. 143(3) OF THE ACT. THUS, WE HOLD THE MAKING OF ADD ITION IN NON-ABATED ASSESSMENT FOR THE A.Y. 2007-08 AS VOID AB INITIO. CONSEQUENTLY, THE ADDITION MADE IN THE PRESENT ASSESSMENT ORDER PASSED U/S 153 A/143(3) FOR THE ASSESSMENT YEARS 2007-08 IS DELETED. ACCORDINGLY, T HIS ISSUE OF INCRIMINATING MATERIAL INVOLVED IN THE ASSESSEES APPEAL IT(SS)A NO.257/IND/2015 IS ALLOWED. 14.2 SO FAR AS THE GROUND NO.4 ON MERIT IS CONCERNE D, WE FIND THAT ON MERIT, THE ASSESSEE HAS RECEIVED RS.60 LACS ON ACCOUNT OF SHARE APPLICATION MONEY FROM FIVE COS. THE FIVE COS. ARE AS UNDER: MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 29 SNO. NAME OF THE SHARE APPLICANT COMPANY OWNED FUNDS AS ON 31-03-2006 TOTAL INVESTMENT IN THE APPELLANT COMPANY 1 M/S. BHANU COMPUTRON ICE & EQUIPMENT PVT. LTD., KOLKATA 5,73,67,569 8,00,000 2 M/S. FEDDER TIE-UP PVT. LTD., KOLKATA 6,15,89,088 10,00,000 3 M/S. REMO ENGINEERING WORKS PVT. LTD., KOLKATA 6,63,59,956 15,00,000 4 M/S. MGM TOOLS PVT. LTD., INDORE 25,00,000 11,00,000 5 M/S. CONVENIENT HOUSING FINANCE LTD., INDORE 96,09,832 16,00,000 THE ASSESSING OFFICER HAS EXAMINED ONE MR. SATYANAR AYAN GADIA FROM WHOM THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY. MR. SATYANARAYAN GADIA HAS, ON OATH IN THE STATEMENT RECORDED BEFORE THE A SSESSING OFFICER, CATEGORICALLY ADMITTED THAT HE HAS INVESTED MONEY I N ASSESSEES CO. WITH THEIR OWN FUNDS I.E. RS.25 LACS IN MGM TOOLS P. LTD. AND RS.96,09,832/- IN CONVENIENT HOUSING FINANCING LTD., INDORE. THEREFOR E, WE ARE OF THE VIEW THAT IN RESPECT OF INDORE BASED CO., THE ASSESSEE HAS SU BMITTED ALL THE EVIDENCE, THUS, NO ADDITION CAN BE MADE. THE ASSESSEE HAS SUB MITTED THAT THREE OTHER COS. CORPORATE IDENTIFICATION NO. ALLOTTED TO EACH OF THE SHARE APPLICANT COS. BY REGISTRAR OF COS., GOI. THESE COS. ARE HAVING OFFIC E AND WITHOUT REGISTERED OFFICE, NO CO. REGISTRAR WILL REGISTER THE COS. IN THE REGISTER OF REGISTRAR OF COS. THE XEROX COPIES OF SHARE APPLICANT COS., COPIES OF PAN CARDS WERE GIVEN. IN RESPECT OF TWO COS., M/S. MGM TOOLS P. LTD. AND M/S . CONVENIENT HOUSING FINANCE LTD., THE DIRECTOR GAVE STATEMENT ON OATH, THEREFORE, IT IS ESTABLISHED MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 30 THAT THESE COS. WERE IN EXISTENCE AT THAT TIME. THE REFORE, WE ARE OF THE VIEW THAT ASSESSEE HAS COMPLIED WITH ALL THE INFORMATION WHICH WAS DESIRED BY THE ASSESSING OFFICER TO BE SUBMITTED. THEREFORE, WE AR E OF THE VIEW THAT NO ADDITION IS CALLED FOR AS WE HAVE ALREADY HELD IN A NANT STEEL P. LTD. VS. ACIT, FOLLOWING THE JUDGMENT OF LOVELY EXPORT (SC), THAT IF AT ALL THE ASSESSING OFFICER IS NOT SATISFIED WITH THE GENUINENESS OF TRANSACTIO N, THEN THE ASSESSING OFFICER IS AT LIBERTY TO MAKE THE ADDITION IN HANDS OF THAT CO. IN DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. S OFTLINE CREATIONS P. LTD. (2016) 387 ITR 636 (DEL) DECIDED ON 31 ST AUGUST, 2016, IT HAS BEEN HELD THAT ASSESSEE HAS DULY DISCHARGED BURDEN OF PROOF BY PROVIDING NE CESSARY INFORMATION AND INABILITY TO PRODUCE SHARE APPLICANTS COULD NOT LEA D TO AN ADVERSE INFERENCE FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN CASE OF CIT VS. LOVELY EXPORT P. LTD. (2008) 216 CTR 195 (SC). ACCORDINGLY , THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. ASSESSEES APPEALS BEARING IT(SS)A NO. 258/IND/2015 (A.Y. 2010-11) & IT(SS)A NO. 568/IND/2015 (A.Y. 2011-12) DEPARTMENTAL APPEAL BEARING IT(SS)A NO. 262/IND/201 5 (A.Y. 2010-11) AND IT(SS)A NO. 623/IND/2015 (A.Y. 2011-12) ASSESSEES GROUND NO. 1 (FOR A.Y. 2010-11 AND A.Y. 2011-12) 15. THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE DIR ECTED AGAINST THE ACTION OF THE AO IN FRAMING THE ASSESSMENT ORDER UNDER S.1 53A R.W.S. 143(3) OF THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 31 I.T. ACT, 1961 BEYOND THE TIME LIMIT PRESCRIBED U/S . 153B(1)(A) OF THE ACT. ACCORDING TO THE ASSESSEE, ALTHOUGH IN THE ASSESSME NT ORDERS, THE DATE OF PASSING THE ORDERS HAS BEEN STATED AS 28-03-2013, B UT IN FACT THEY WERE PASSED AFTER 31-03-2013 I.E. AFTER THE EXPIRY OF THE LIMIT ATION. 16. THIS GROUND IS SIMILAR TO GROUND NO.1 OF ASSESS EES APPEAL FOR THE ASSESSMENT YEAR 2007-08. THEREFORE, BY FOLLOWING OU R ABOVE ORDER ON THIS ISSUE, THE GROUND NO.1 FOR BOTH THE PRESENT YEARS I S ALSO DISMISSED. . GROUND NO. 2 (A.Y. 2010-11) 17. THIS GROUND OF APPEAL OF THE ASSESSEE IS DIRECT ED AGAINST THE ACTION OF THE AO IN INVOKING THE PROVISIONS OF SECTION 153A F OR THE VERY REASON THAT FOR SUCH YEAR, DURING THE COURSE OF SEARCH UNDER S. 132 , NO MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCRIMINATING BOOKS OF ACCOUNT OR DOCUMENT PERTAINING TO THE ASSESSMENT YE AR UNDER CONSIDERATION WAS FOUND. HOWEVER, THIS GROUND WAS NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SAME IS DISMISSED BEING NO T PRESSED. ASSESSEES GROUND NO.3(A) & 3(B) (FOR A.Y. 2010-11) AND GROUND NO. 2(A) & 2(B) (FOR A.Y. 2011-12) 18. THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE DIR ECTED AGAINST THE ACTION OF THE CIT(A) IN UPHOLDING THE DECISION OF THE AO O F REJECTION OF BOOKS OF ACCOUNT. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 32 19. SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING IN GOLD AND SILV ER BULLION AND FUTURE TRADING IN COMMODITIES THROUGH MCX. THE BOOKS OF ACCOUNT AR E AUDITED AND TAR WAS ALSO FILED FOR BOTH THESE YEARS. A SEARCH UNDER S.1 32 TOOK PLACE IN THE BUSINESS PREMISES OF THE ASSESSEE AS WELL AS IN THE VARIOUS RESIDENTIAL PREMISES OF ITS DIRECTORS ON 25-11-2010. DURING THE COURSE OF THE S EARCH, PHYSICAL STOCK OF CADBURY (GOLD BULLIONS) & COINS AGGREGATING TO 8562 .103 GMS. VALUED AT RS.1,73,81,069/- WAS FOUND IN EXCESS THAN THAT SHOW N IN THE STOCK REGISTER AND REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE . IN VIEW OF SUCH EXCESS STOCK, SHRI PRAGNESH NEEMA, ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY, IN HIS STATEMENT GIVEN UNDER S. 132(4) OF THE ACT, ON 26-11-2010, ADMITTED THE ENTIRE VALUE OF THE STOCK I.E. RS.1,73,81,069/- AS UNDISCLOSED INVESTMENT OF THE ASSESSEE COMPANY FOR A.Y. 2011-12. DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE PRODUCED THE BOOKS OF ACC OUNT AND DOCUMENTS/ VOUCHERS/ BILLS ETC. WHICH WERE TEST CHECKED. THE A SSESSEE HAD ALSO FILED AUDITED FINANCIAL STATEMENTS AND TAX AUDIT REPORT O BTAINED UNDER S.44AB OF THE INCOME-TAX ACT, 1961. THE AO NOTED THAT THE ASSESSE E HAD MADE HUGE CASH SALES WITHOUT MAINTAINING ANY DETAILS AS REGARD TO NAME AND ADDRESSES OF THE CUSTOMERS. THE AO ALSO FOUND THAT THE ASSESSEE HAD DEPOSITED HEAVY CASH IN ITS VARIOUS BANK ACCOUNTS AND MANY A TIMES, THESE C ASH DEPOSITS WERE NOT MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 33 MATCHING WITH THE CASH SALES. ACCORDINGLY, ON 22-01 -2013, THE AO ISSUED A SHOW CAUSE NOTICE UNDER S.145(3) OF THE ACT TO THE ASSESSEE FOR REJECTION OF BOOKS OF ACCOUNT. IN COMPLIANCE TO SUCH SHOW-CAUSE NOTICE, THE ASSESSEE MADE ITS REPLY WHICH HAS BEEN REPRODUCED AT PARA 3.3 AT PAGE NO. 12 TO 17 OF THE ASSESSMENT ORDER. UPON RECEIPT OF THE REPLY, THE AO HELD THAT BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE DEFECTIVE AN D THE ASSESSEE COULD NOT FURNISH THE REQUIRED INFORMATION CALLED THROUGH ITS QUESTIONNAIRE. FINALLY, THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE ON THE VARIOUS GROUNDS TAKEN BY THE AO AT PARA 3.4 OF THE ORDER WHICH CAN BE SUM MARIZED AS UNDER: I) THE ASSESSEE HAS NOT PRODUCED ANY SINGLE PHYSICA L SALE BILL FOR VERIFICATION. THE SOFT COPY CONTAINING THE SALES BI LLS WERE FOUND DEPICTING THE SAME NAME OF A CUSTOMER FOR A PERIOD OF MORE TH AN ONE MONTH. II) THE AUDIT OF ACCOUNTS OF THE ASSESSEE IS QUESTI ONNAIRE AS DURING THE COURSE OF THE SEARCH, EXCESS STOCK WAS FOUND SURREN DERED BY THE ASSESSEE. FURTHER, IN THE AUDIT REPORT SUBMITTED BY THE ASSESSEE SOME HAND WRITTEN CORRECTION IN THE REPORT GIVEN IN FORM NO. 3CD WERE FOUND FOR A.Y. 2010-11. III) THE ASSESSEES SUBMISSION THAT THE AUDITORS DI D NOT FIND ANY DEFECT IN THE MAINTENANCE OF THE BOOKS OF ACCOUNT IS OF NO RE LEVANCE AS DURING THE COURSE OF THE SEARCH, THE ASSESSEE HAD SURRENDERED CERTAIN INCOME UNDER S. 132(4) AND FURTHER THE DIRECTORS OF THE CO MPANY HAD ALSO SURRENDERED FURTHER INCOME. THE SURRENDER OF UNDISC LOSED INCOME BY ITSELF PROVES THAT THE BOOKS OF ACCOUNT WERE NOT RE LIABLE. IV) CASH DEPOSITS MADE IN THE BANK ACCOUNTS OF THE ASSESSEE ON ANY PARTICULAR DATE, WERE NOT FOUND RECONCILED WITH THE SALES SHOWN IN THE STOCK REGISTER OF THAT DATE. V) ALTHOUGH, EXCEPT FINDING THE STOCK OF RS.1,73,81 ,169/-, NO OTHER DISCREPANCY OR DEFECT WAS FOUND BY THE SEARCH PARTY BUT SUCH FINDING OF MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 34 EXCESS STOCK ITSELF ESTABLISH THAT DAY TO DAY MAINT ENANCE OF QUANTITATIVE AND QUALITATIVE DETAILS OF STOCK WAS DEFECTIVE. VI) THE SUBMISSION OF THE ASSESSEE THAT THE DISCREP ANCY FOUND DURING THE COURSE OF THE SEARCH WAS GOT RECTIFIED WHILE DRAWIN G THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31-03-2011 WAS FOUND TO BE CORRECT BY THE AO BUT THE ASSESSEE COULD NOT FURNISH THE REQUI RED INFORMATION SO THAT THE AUTHENTICATION OF THE BOOKS OF ACCOUNT COU LD BE POSSIBLE. VII) IN RESPECT OF THE ASSESSEES CLAIMED THAT DURI NG THE COURSE OF SURPRISE INSPECTION OF ANTI EVASION BUREAU NO DISCREPANCIES WERE FOUND, THE AO HELD THAT COPIES OF DOCUMENTS FOUND AND SEIZED BY T HE SALES TAX DEPARTMENT WERE NOT PRODUCED BEFORE HIM. THE AO ALS O HELD THAT ALTHOUGH THE ASSESSEE WAS REQUIRED TO OBTAIN SALES TAX REGISTRATION DURING F.Y. 2008-09 BUT HE ACTUALLY OBTAINED SUCH R EGISTRATION DURING F.Y. 2009-10 ONLY. VIII) THE ASSESSEE ITSELF COULD NOT OBTAIN COPIES O F ITS LEDGER ACCOUNTS IN THE BOOKS OF ITS DEBTORS AND CREDITORS BUT REQUIRED THE AO TO ISSUE NOTICE UNDER S. 133(6) AND SUMMONS UNDER S. 131 TO SUCH DE BTORS AND CREDITORS. THE ASSESSEE WAS REQUIRED TO DO SO VIDE QUESTIONNAIRE DATED 12-10-2012 WHEREAS IT MADE THE REQUEST AFTER PASSIN G OF THREE MONTHS. IX) THE ASSESSEE FAILED TO FURNISH THE REPLY OF QUE STION NO. 30 & 31 OF THE NOTICE DATED 12-10-2012. IN ABSENCE OF SUCH DETAILS , THE GROSS PROFIT OF THE ASSESSEE COULD NOT BE ASSERTIONS. X) THE ASSESSEE COULD NOT FURNISH THE NAME AND ADDR ESSES OF THE CASH PURCHASERS. XI) THE ASSESSEE HAD SOLD THE ADDITIONAL STOCK SURR ENDERED BY IT AT A LOSS OF RS.6 LAKHS. XII) DURING F.Y. 2010-11 RELEVANT TO A.Y. 2011-12, THE ASSESSEE HAD SHOWN GROSS PROFIT OF RS.575.66/- ON SALE OF PER 100 GMS. GOLD BULLION WHEREAS SOME M/S. M.P. BULLION HAD SHOWN THE SAME AT RS.798 .54/- PER 100 GMS.. XIII) THE PRICE OF THE GOLD BULLION AND SILVER BULL ION HAVE INCREASED MANY FOLD DURING F.Y. 2008-09 TO F.Y. 2010-11 AND EVERY YEAR, THE ASSESSEE HAD SHOWN CLOSING STOCK THEREBY THE GROSS PROFIT OF THE ASSESSEE MUST HAVE BEEN INCREASED IN SUBSEQUENT YEARS. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 35 20. MATTER CARRIED TO LEARNED CIT(A), WHO UPHELD TH E ACTION OF THE AO OF REJECTING THE BOOKS OF ACCOUNT. THE VARIOUS REASONS ASSIGNED BY THE CIT(A) AT PARA 8.1 OF HIS ORDER ARE SUMMARIZED AS UNDER: I) DURING THE COURSE OF THE SEARCH ACTION CARRIED O UT AT THE ASSESSEES PREMISES EXCESS UNACCOUNTED BULLION STOCK OF RS.1,7 3,81,069/- AND EXCESS UNACCOUNTED CASH OF RS.11,52,550/- WAS FOUND . BOTH UNACCOUNTED STOCK AND UNACCOUNTED CASH ARE DIRECT I NDICATOR OF UNACCOUNTED TRADING OF BULLION. II) THE ASSESSEE WAS INVOLVED IN HUGE CASH SALES OF BULLION, WHEREIN CASH SALES OF SEVERAL LAKHS OF RUPEES WERE MADE TO VARIO US KNOWN PARTIES INVOLVED IN DAILY CASH PURCHASES, BUT IN THE CASH S ALE BILLS, NO NAMES OR ADDRESSES WERE MENTIONED AND SUCH CASH SALE BILLS W ERE NOT ISSUED TO BUYERS BUT REMAINED ON COMPUTER OF ASSESSEE. IT IS BECAUSE, THE BUYERS WHO MADE CASH PURCHASES OF LAKHS OF RUPEES, KNEW TH AT THEY WERE MAKING UNACCOUNTED CASH PURCHASES, WHICH COULD NOT BE SHOWN IN BOOKS, AS CASH PURCHASES WERE NOT PERMITTED IN I.T. ACT ABOVE RS.20,000/- U/S. 40A(3) OF THE I.T. ACT. HENCE BUYE RS NEVER ASKED FOR SUCH BILLS. THIS GAVE A LOT OF SCOPE OF ASSESSEE, T O MANIPULATE SUCH CASH SALE BILLS, BY CHANGING RATES, QUANTITY AND AMOUNTS OF SUCH SALES, IN ORDER TO SUPPRESS THE SALES AND IN TURN SUPPRESSED THE PR OFITS. III) THE G.P. OF THE ASSESSEE HAS DROPPED DOWN FROM 0.66% IN A.Y. 2009-10 TO 0.57% AND 0.29% RESPECTIVELY IN A.Y. 2010-11 AND A.Y. 2011-12. IV) G.P. FOR A.Y. 2011-12, SHOWN AT 0.29% SHALL GET FURTHER DECREASED I.E. TO 0.03% ONLY IF THE AMOUNT OF SURRENDER INCOME ON ACC OUNT OF EXCESS STOCK AT RS.1,73,81,069/- IS EXCLUDED. IN SUCH A CA SE, THE G.P. WILL REMAIN ONLY RS.26,03,400/- ON A SALE OF RS.674,81,22,607/- . THERE WAS NO COMPELLING REASON FOR SELLING THE STOCK OF RS.1,73, 81,069/- SURRENDERED IN SEARCH AT A LOSS. V) THE OTHER CONCERN NAMELY M/S. M.P. BULLION HAD S HOWN GROSS PROFIT OF RS.798.54 PER 100 GMS. SALE OF GOLD AS AGAINST THE SAME SHOWN BY THE ASSESSEE AT RS.575.66 PER 100 GMS. SALE OF GOLD WHE N TURNOVER OF M.P. BULLION WAS RS.755 CRORES IN COMPARISON OF ASSESSEE S TURNOVER OF RS.675.81 CRORES. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 36 21. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WE LL AS WRITTEN SUBMISSION AS UNDER: THAT, THE APPELLANT BEING A PRIVATE LIMITED COMPAN Y HAD MAINTAINED REGULAR BOOKS OF ACCOUNT, ALONG WITH ALL SUPPORTING BILLS AND VOUCHERS, IN THE ORDINARY COURSE OF ITS BUSINESS, IN WHICH AL L THE TRANSACTIONS RELATING TO TRADING RECEIPTS AND EXPENDITURE WERE F ULLY AND TRULY RECORDED. THE APPELLANT HAD MAINTAINED SUCH BOOKS O F ACCOUNT IN ACCORDANCE WITH THE VARIOUS PROVISIONS OF THE COMPA NIES ACT, 1956 AS WELL AS UNDER THE PROVISIONS OF SECTION 44AA OF THE INCOME-TAX ACT, 1961. ALL THE BOOKS OF ACCOUNT ALONG WITH RELEVANT DOCUMENTS/ VOUCHERS WERE DULY PRODUCED BEFORE THE AO AS IS EVI DENT FROM THE FINDINGS GIVEN BY THE AO HIMSELF AT 1 ST PARA ON PAGE NO. 2 OF THE IMPUGNED ASSESSMENT ORDER. 2.00 THAT, THE APPELLANT COMPANY HAS MAINTAINED ITS BOOKS OF ACCOUNT BY CONSISTENTLY OBSERVING MERCANTILE SYSTEM OF ACCOUNT ING AND AS ALSO BY OBSERVING ALL THE ACCOUNTING STANDARDS AS NOTIFIED UNDER THE PROVISIONS OF SUB-SECTION (2) OF SECTION 145 OF THE INCOME-TAX ACT, 1961. EVEN THE AO HAS NOT CASTED ANY DOUBT ON THE M ETHOD OF ACCOUNTING AS WELL AS OBSERVANCE OF THE PRESCRIBED ACCOUNTING STANDARDS BY THE APPELLANT COMPANY. 3.00 THAT, THE BOOKS OF ACCOUNT OF THE APPELLANT CO MPANY WERE SUBJECTED TO AUDIT BY A FIRM OF QUALIFIED CHARTERED ACCOUNTAN TS, BOTH UNDER THE COMPANIES ACT, 1956 AS WELL AS UNDER S. 44AB OF THE INCOME-TAX ACT, 1961. THE APPELLANT COMPANY HAD OBTAINED AUDIT REPO RTS UNDER BOTH THE ENACTMENTS AND THE SAME WERE ALSO PLACED ON THE RECORD OF AO. AUDITORS DID NOT FIND ANY DISCREPANCY OR DEFECT, WH ATSOEVER, EITHER IN THE MAINTENANCE OF BOOKS OF ACCOUNT BY THE APPELLAN T COMPANY OR IN THE COMPLIANCE OF THE APPLICABLE ACCOUNTING STANDAR DS. IT HAS BEEN HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PARADISE HOLIDAYS (2010) 325 ITR 0013 (DEL) THAT THE ACCOUNT S WHICH ARE REGULARLY MAINTAINED IN THE COURSE OF THE BUSINESS AND ARE DULY AUDITED, FREE FROM ANY QUALIFICATION BY THE AUDITOR S, SHOULD NORMALLY BE TAKEN AS CORRECT UNLESS THERE ARE ADEQUATE REASO NS TO INDICATE THAT THEY ARE INCORRECT OR RELIABLE. 4.00 THAT, THE APPELLANT COMPANY IS DULY REGISTERED UNDER COMMERCIAL TAX ENACTMENTS SUCH AS THE MADHYA PRADESH VAT TAX ACT, 2002 AND CENTRAL SALES TAX ACT, 1956 AND UNDER BOTH THESE EN ACTMENTS, THE APPELLANT COMPANY WAS REQUIRED TO FURNISH ITS PERIO DICAL RETURNS AS MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 37 REGARD TO THE PURCHASES AND SALES AND SUCH RETURNS WERE UNDER SCRUTINY BY THE CONCERNING AUTHORITIES REGULATING T HE ENACTMENTS. IT IS SUBMITTED THAT THE SALES, PURCHASES AND OTHER TRADI NG TRANSACTIONS HAVE DULY BEEN ACCEPTED BY THE COMMERCIAL TAX AUTHO RITIES WITHOUT ANY INTERFERENCE. A COPY OF THE ASSESSMENT ORDER PA SSED BY THE DEPUTY COMMISSIONER OF COMMERCIAL-TAX, UJJAIN FOR THE PREV IOUS YEAR RELEVANT TO A.Y. 2011-12, IS PLACED AT PAGE NO. 113 & 114 OF THE PAPER BOOK. 5.00 THAT, THE APPELLANT COMPANY BESIDES MAINTAININ G DAY TO DAY FINANCIAL BOOKS OF ACCOUNT IN ITS ORDINARY COURSE OF BUSINESS WAS ALSO REGULARLY MAINTAINING STOCK TALLY CONTAINING EACH AND EVERY T RANSACTION OF RECEIPT AND ISSUE OF GOODS, IN TERMS OF QUANTITY. T HE STOCK TALLY WAS DULY PRODUCED BEFORE THE AO AND THE AO AFTER IN-DEP TH EXAMINATION THEREOF WITH PURCHASE INVOICES AND SALES INVOICES C OULD NOT FIND EVEN THE SLIGHTEST DISCREPANCY IN MAINTENANCE THEREOF. T HE APPELLANT COMPANY AT POINT NO. 11 OF SCHEDULE-N OF THE AUDITE D FINANCIAL STATEMENTS FOR THE RELEVANT PREVIOUS YEAR, AS PLACE D AT PAGE NO. 112 OF THE PAPER BOOK AND AS ALSO IN SCHEDULE-D OF THE TAX AUDIT REPORT ISSUED BY THE TAX AUDITORS, AT PAGE NO.96, HAVE FUR NISHED THE FULL ANNUAL SUMMARY OF THE QUANTITATIVE DETAILS SUCH AS OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK, IN RESPECT OF B OTH THE ITEMS IN WHICH IT DEALS I.E. GOLD BULLION AND SILVER BULLION . IT WOULD BE PERTINENT TO NOTE THAT AS PER THE FINDINGS GIVEN BY THE AO AT PARA 2 ON PAGE NO.22 OF THE IMPUGNED ASSESSMENT ORDER THE STOCK ST ATEMENT WAS DULY VERIFIED BY HIM BUT NOWHERE THE AO DOUBTED THE CORRECTNESS OF THE ABOVE SAID DETAILS OF THE STOCK TALLY . 6.00 THAT, DURING THE COURSE OF THE SEARCH AND SEIZ URE OPERATIONS, CARRIED OUT IN THE APPELLANT'S PREMISES UNDER S.132 OF THE ACT, OBVIOUSLY ON SURPRISE BASIS, NOT EVEN A SINGLE LOOSE PAPER OR AN Y OTHER DOCUMENT EVIDENCING ANY UNACCOUNTED PURCHASE OR SALE TRANSAC TION WAS FOUND EITHER IN THE BUSINESS PREMISES OF THE APPELLANT COMPANY OR IN THE PREMISE S OF ITS DIRECTORS OR ANYONE ELSE. IN NUTSHELL, DURING THE COURSE OF T HE SEARCH, NO ADVERSE MATERIAL WAS GATHERED BY THE SEARCH PARTY WHICH COU LD HAVE WARRANTED THE REJECTION OF BOOKS OF ACCOUNT OF THE APPELLANT FOR ANY OF THE ASSESSMENT YEARS. IT IS SUBMITTED THAT EVEN THE AO COULD NOT CONTRAVENE SUCH ASSERTION OF THE APPELLANT AS IS EV IDENT FROM PARA 5 OF PAGE NO.18 OF THE ASSESSMENT ORDER. 7.00 BEFORE THE AO IT WAS ALSO SUBMITTED THAT UNDER THE M.P. VAT ACT, 1994, A SURPRISE INSPECTION AND INVESTIGATION WAS C ARRIED OUT BY THE ANTI EVASION BUREAU OF THE COMMERCIAL-TAX DEPARTMEN T IN ALL THE BUSINESS PREMISES OF THE APPELLANT COMPANY ON 10-11 -2010 AND DURING THE COURSE OF SUCH SURPRISE INSPECTION NOT A SINGLE DISCREPANCY OR DEFECT IN MAINTENANCE OF ACCOUNTS BY THE APPELLA NT COMPANY OR ANY EVASION OF ANY TAX WAS FOUND BY THE INSPECTION TEAM . IN ORDER TO MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 38 ESTABLISH SUCH FACT, THE APPELLANT COMPANY HAD FURN ISHED COPIES OF EACH OF TWO POST INSPECTION ORDERS BOTH DATED 12-12 -2011 PASSED BY THE COMPETENT AUTHORITY OF THE COMMERCIAL-TAX DEPAR TMENT. A COPY OF SUCH ORDERS, AS FURNISHED BEFORE THE AO TOO, ARE PLACED AT PAGE NO. 115 & 116 OF OUR PAPER BOOK. ON A PERUSAL OF SUCH ORDERS, IT MAY BE OBSERV ED THAT EVEN THE COMMERCIAL TAX AUTHORITIES WHICH ARE COMPETENT AUTH ORITIES FOR DETERMINING TRADING RESULTS AND LEVY OF TAXES THERE ON, HAVE NOT FOUND ANY FAULT EITHER IN THE RECORDS OR MANNER OF MAINTE NANCE OF BOOKS OF ACCOUNT BY THE APPELLANT COMPANY. HERE, IT SHALL BE PERTINENT TO NOTE THAT THE CONDUCTION OF INSPECTION BY THE SALES TAX DEPARTMENT IN THE APPELLANTS PREMISES JUST 15 DAYS BEFORE THE INCOME -TAX SEARCH WAS ALSO IN THE SPECIFIC KNOWLEDGE OF THE LEARNED AO AN D THE AO HAD ISSUED A SPECIFIC QUERY ON THIS ISSUE WHICH IS EVID ENT FROM QUESTIONNAIRE PLACED AT PAGE NO. 43 OF THE PAPER BO OK. 8.00 THAT, DURING THE COURSE OF THE ASSESSMENT PROC EEDINGS, THE AO ISSUED A SHOW-CAUSE NOTICE DATED 22-01-2013 WHEREBY THE AP PELLANT COMPANY WAS REQUIRED TO SHOW-CAUSE AS TO WHY ITS BO OKS OF ACCOUNT MIGHT NOT BE REJECTED UNDER THE PROVISIONS OF S.145 (3) OF THE ACT. IN RESPONSE TO THE SHOW-CAUSE NOTICE, THE APPELLANT MA DE A DETAILED REPLY VIDE ITS COUNSEL'S LETTER DATED 28-01-2013, B Y DEMONSTRATING THAT THE APPELLANT'S CASE WAS NOT A FIT CASE FOR INVOKIN G THE PROVISIONS OF S.145(3) OF THE ACT. A COPY OF THE REPLY IS PLACED AT PAGE NO.80 TO 84 OF THE PAPER BOOK. THE REPLY OF THE ASSESSEE HAS ALSO BEEN REPRODUCED BY THE LEARNED AO AT PAGE NO. 12 TO 17 OF HIS ASSESSME NT ORDER. 9.01 AS REGARD THE FIRST OBSERVATION OF THE AO, TO THE EFFECT THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS NOT A SINGLE S ALE BILL WAS PRODUCED BEFORE HIM FOR VERIFICATION, IT IS RESPECT FULLY SUBMITTED THAT SUCH AN OBSERVATION IS COMPLETELY BASELESS AND FAR FROM TRUTH. IT IS SUBMITTED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE APPELLANT HAD TIME AND AGAIN PRODUCED THE COPIES OF SALES INVOICES ALONG WITH ITS BOOKS OF ACCOUNT, STOCK TALLY, VOUCH ERS, ETC.. ON A PERUSAL OF THE COPY OF THE SUBMISSION LETTER DATED 03-12-2012 [KINDLY REFER PAGE NO. 60 TO 77 OF THE PAPER BOOK] AND LETT ER DATED 01-02- 2013 [KINDLY REFER PAGE NO. 78 & 79 OF THE PAPER BO OK] AS SUBMITTED BY THE APPELLANT COMPANY IN RESPONSE TO THE SUMMONS ISSUED TO IT UNDER S. 131 DATED 22-01-2013, THE FACTUM OF PRODUC ING THE BOOKS OF ACCOUNT, SALES BILLS, PURCHASE BILLS, BANK STATEMEN TS, REGISTERS ETC. BY THE APPELLANT BEFORE THE AO IS CLEARLY EVIDENT. FUR THER, EVEN THE AO HIMSELF AT PARA 2 AT PAGE NO.2 OF THE IMPUGNED ASSE SSMENT ORDER, HAS GIVEN FINDING TO THE EFFECT THAT THE APPELLANT ATTE NDED THE PROCEEDINGS FROM TIME TO TIME AND FURNISHED THE REQUISITE INFOR MATION WITH BOOKS OF ACCOUNT AND DOCUMENTS/VOUCHERS. THE AO GOING ONE STEP FURTHER HAS ALSO STATED THE BOOKS OF ACCOUNT HAVE BEEN EXAM INED BY TEST CHECK WITH REFERENCE TO RETURN OF INCOME AND FURTHE R THE BILLS, MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 39 VOUCHERS/DOCUMENTS PRODUCED HAVE ALSO BEEN VERIFIED BY TEST CHECK. IT IS FURTHER SUBMITTED THAT THE OBSERVATION OF THE AO AS REGARD TO NON PRODUCTION OF THE SALES BILLS ALSO GETS CONTRAVENED FROM THE AO'S OWN OBSERVATION GIVEN AT PARA 1 AT PAGE NO.8 OF THE IMP UGNED ASSESSMENT ORDER INASMUCH THE AO HAS STATED THAT FROM THE PATT ERN OF THE SALES BILLS ISSUED BY THE APPELLANT HE NOTED THAT THE SAL ES WERE MADE TO THE AMOUNT RANGING BETWEEN RS.20 LAKHS TO RS.50 LAKHS. EVEN OTHERWISE, IT IS SUBMITTED THAT THE STATUTORY AUDITORS OF THE APP ELLANT COMPANY, WHO CARRIED OUT THE AUDIT AND ISSUED THE AUDIT REPO RTS HAVE CLEARLY STATED THAT THE APPELLANT COMPANY HAD MAINTAINED PR OPER BOOKS OF ACCOUNT WHICH WERE DULY PRODUCED BEFORE THEM FOR TH EIR VERIFICATION. NEVERTHELESS, ALL SUCH BOOKS OF ACCOUNT ALONG WITH THE SUPPORTING BILLS AND VOUCHERS WERE ALSO FOUND MAINTAINED BY THE SEAR CH PARTY. FINALLY, ON THIS OBSERVATION, IT IS SUBMITTED THAT IT IS NOT THE CASE OF THE AO THAT THE APPELLAN T DID NOT MAINTAIN THE SALES BILLS. IT IS ALSO NOT THE CASE OF THE AO THAT ANY OF THE SALES BILL WAS NOT FOUND ENTERED IN THE REGULAR BOOKS OF ACCOUNT. THE AO HAS ONLY ALLEGED THAT THE BILLS SO MAINTAINED WERE NOT PRODU CED BEFORE HIM, BUT AT ANY RATE, SUCH NON PRODUCTION CANNOT RESULT INTO REJECTION OF BOOKS OF ACCOUNT. 9.02 AS REGARD SECOND OBSERVATION OF THE AO TO THE EFFECT THAT DURING THE COURSE OF THE SEARCH PROCEEDINGS EXCESS STOCK TO TH E TUNE OF MORE THAN 1.6 CRORES WAS FOUND, IT IS SUBMITTED THAT FIRST OF ALL THE FINDING OF EXCESS STOCK IN A SUBSEQUENT ASSESSMENT YEAR CANNOT BY ITSELF LEAD TO AN INFERENCE THAT FOR THE ASSESSMENT YEAR UNDER CON SIDERATION, THE BOOKS OF ACCOUNT OF THE APPELLANT WERE NOT RELIABLE . IT IS SUBMITTED THAT UNDER THE SCHEME OF THE INCOME-TAX LAW EACH AS SESSMENT YEAR IS A DIFFERENT ASSESSABLE UNIT AND ON THE BASIS FINDIN G IN ONE ASSESSMENT YEAR, NO ADVERSE INFERENCE CAN BE DRAWN IN OTHER AS SESSMENT YEARS. EVEN OTHERWISE, IT IS SUBMITTED THAT NEITHER DURING THE COURSE OF THE SEARCH PROCEEDINGS NOR DURING THE COURSE OF THE ASS ESSMENT PROCEEDINGS, ANY INSTANCE OF SUPPRESSED OR UNACCOUN TED SALES OR PURCHASES WERE NOTED. FURTHER, EXCESS STOCK FOUND A ND SURRENDERED DURING THE COURSE OF THE SEARCH AND SUBSEQUENTLY RE CORDED IN THE REGULAR BOOKS OF ACCOUNT, CANNOT BE LEGALLY SUSTAIN ABLE GROUND FOR REJECTION OF BOOKS OF ACCOUNT WHEN NO OTHER DEFECT OR DISCREPANCY IN MAINTENANCE OF BOOKS OF ACCOUNT WAS NOTED. FOR SUCH PREPOSITION, RELIANCE IS PLACED ON THE DECISION OF HONBLE ITAT NAGPUR BENCH IN THE CASE OF ITO VS. DILIP & BROTHERS (2004) 80 TTJ 0583 . IN THIS CASE, THE HONBLE BENCH AT PARA 6 HAS OBSERVED AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE AO REJECTED THE BOOK RESULTS ONLY ON THE GROUND THAT I N THE COURSE OF THE SURVEY, THE STOCK IN EXCESS OF THE QUANTITY FOUND R ECORDED IN THE BOOKS OF ACCOUNT WAS FOUND BY THE SURVEY TEAM AND THAT TH E PARTNER OF THE ASSESSEE ADMITTED THAT THESE WERE UNRECORDED INVEST MENTS IN STOCK. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 40 THESE ARE NOT SUFFICIENT REASONS TO REJECT THE BOOK S OF ACCOUNT. APART FROM THIS, THE AO HAS NOT POINTED OUT ANY OTHER DEF ECT IN THE BOOKS OF ACCOUNT. LIKEWISE, THE HONBLE CHANDIGARH BENCH OF ITAT IN THE CASE OF VENUS WOOLLEN MILLS VS. CIT (2014) 36 ITR (TRIB) 0388 (CH D), HAS ALSO HELD THAT IT IS NOT NECESSARY THE BOOKS OF ACCOUNT OF AN ASSESSEE SHOULD BE REJECTED WHEREVER A SURVEY IS CONDUCTED AND EXCESS STOCK IS FOUND. 9.03 AS REGARD THE THIRD OBSERVATION OF THE AO THAT SOME CHANGES IN FORM NO.3CD OF THE AUDIT REPORT WERE NOTED, IT IS SUBMIT TED THAT AUDIT REPORTS CANNOT BE EQUATED WITH THE BOOKS OF ACCOUNT AND ANY CHANGES MADE IN THE AUDIT REPORT BY THE AUDITORS, BY THEMSE LVES, CANNOT LEAD TO AN INFERENCE AS REGARD TO DEFECT OR INCOMPLETENE SS IN BOOKS OF ACCOUNT MAINTAINED BY THE AUDITEE. EVEN OTHERWISE, IT IS SUBMITTED THAT THERE HAD BEEN TWO MINOR ADDITIONS, THROUGH IN K PEN, IN TAX AUDIT REPORT IN FORM NO.3CD FOR A.Y. 2010-11 IN COLUMN NO .21 THEREOF IN WHICH THE AUDITORS HAVE ADDED PARTICULARS OF PAYMEN TS OF TWO MORE STATUTORY DUES COVERED UNDER S. 43B OF THE ACT. IT IS SUBMITTED THAT EVEN THE AO HAS STATED THAT SUCH CHANGES MIGHT HAVE BEEN MADE BY THE STATUTORY AUDITORS THEMSELVES. IN SUCH CIRCUMST ANCES, YOUR HONOUR WOULD APPRECIATE THAT THE COGNIZANCE TAKEN BY THE A O OF SUCH A BONA FIDE CORRECTION IN THE AUDIT REPORT WHILE ADJUDICAT ING THE ISSUE OF REJECTION OF BOOKS OF ACCOUNT WAS MISCONCEIVED AND ILL-FOUNDED. 9.04 AS REGARD THE FOURTH OBSERVATION OF THE AO THA T DURING THE COURSE OF THE SEARCH OPERATIONS THE APPELLANT COMPANY AND ITS DIRECTORS HAD SURRENDERED TOTAL INCOME TO THE TUNE OF RS.5 CRORES , IT IS SUBMITTED THAT SUCH AN OBSERVATION, AGAIN, IS NOT GERMANE TO THE ISSUE OF ADJUDICATING THE REJECTION OF BOOKS OF ACCOUNT OF T HE APPELLANT COMPANY. IT SHALL BE APPRECIATED BY YOUR HONOUR THA T THE DIRECTORS BEING SEPARATE ASSESSEES MADE THE SURRENDER ON THE BASIS OF MERITS OF THEIR OWN CASES AND SUCH SURRENDER HAS NOTHING TO D O WITH THE CORRECTNESS AND COMPLETENESS OF BOOKS OF ACCOUNT MA INTAINED BY THE APPELLANT COMPANY. 9.05 AS REGARD THE FIFTH OBSERVATION OF THE AO TO T HE EFFECT THAT THE APPELLANT MADE CASH DEPOSITS IN ITS BANK ACCOUNTS E VEN ON THOSE DAYS WHEN NO SALES WAS GETTING REFLECTED AS PER STOCK RE GISTER, IT IS SUBMITTED THAT THE AO PROCEEDED ON A PATENTLY WRONG NOTION THAT SALES PROCEEDS REALIZED IN THE FORM OF CASH WERE DE POSITED BY THE APPELLANT ON THE VERY SAME DAY ON WHICH SALES TOOK PLACE; WHEREAS IT IS NOT A FACT FOR THE REASON THAT MANY A TIMES BUT NOT SALES PROCEEDS ARE DEPOSITED IN BANK ACCOUNTS ON SUBSEQUENT DAY OR DAYS. IT IS SUBMITTED THAT IT IS NOT THE CASE OF THE AO THAT HE NOTED MAKING OF CASH DEPOSITS ON ANY PARTICULAR DAY WITHOUT AVAILAB ILITY OF THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 41 SUFFICIENT CASH BALANCE AS PER THE REGULAR CASH BOO K OF THE APPELLANT ON THAT DAY. 9.06 AS REGARD THE SIXTH OBSERVATION OF THE AO TO T HE EFFECT THAT DURING THE COURSE OF SEARCH EXCESS STOCK AMOUNTING TO RS.1,73, 81,169/- WAS FOUND, IT IS SUBMITTED THAT SUCH AN OBSERVATION OF THE AO IS MERE REPETITION OF THE OBSERVATION MADE AT PARA 2 ON PAG E NO.17 OF THE IMPUGNED ORDER. HOWEVER, IT SHALL BE APPRECIATED BY YOUR HONOUR THAT THE AO HIMSELF, AT PARA 6 AT PAGE NO.18 OF HIS ASSE SSMENT ORDER HAS ADMITTED THAT THE DISCREPANCY AS REGARD TO THE EXCE SS STOCK WAS DULY RECTIFIED BY THE APPELLANT ITSELF WHILE DRAWING ITS FINANCIAL STATEMENTS FOR THE YEAR ENDED ON 31-03-2011. 9.07 AS REGARD THE SEVENTH OBSERVATION OF THE AO TO THE EFFECT THAT THE APPELLANT COULD NOT PROVIDE THE WORKING OF GROSS PR OFIT AND NET PROFIT EARNED BY IT ON EACH AND EVERY TRANSACTION OF BANK DEPOSIT MADE BY IT, IT IS SUBMITTED THAT FIRST OF ALL NON-FURNISHING OF ANY WORKING IN ANY PARTICULAR MANNER OR DESIGN AS DESIRED BY THE AO, B Y ITSELF, CANNOT BE A GROUND FOR REJECTION OF BOOKS OF ACCOUNT. FURTHER , IT SHALL BE APPRECIATED BY YOUR HONOUR THAT THE AO INSISTED THE APPELLANT TO DO A JOB WHICH IS PRACTICALLY IMPOSSIBLE IN ANY RUNNING BUSINESS WITH THOUSANDS OF TRANSACTIONS AND MILLIONS OF TURNOVER. IT IS SUBMITTED THAT THE CASH DEPOSITS ARE MERELY ONE SMALL PART OF THE CONDUCT OF ENTIRE TRADING BUSINESS WHICH CONSIST OF MANY ACTIVITIES S UCH AS PURCHASES, SALES, COLLECTION THROUGH CHEQUES OR CASH, ETC. AND , THEREFORE, FOR AN ISOLATED TRANSACTION OF CASH DEPOSIT, NO GROSS PROF IT OR NET PROFIT CAN BE WORKED OUT. HOWEVER, IN THE IN STANT CASE IT IS VERY PITY TO SUBMIT THAT THE AO, VIDE QUERIES NO.30 AND 31 OF HIS NOTICE DATED 12-10-2012 [KINDLY REFER PB PAGE NO. 47 TO 49 ], REQUIRED THE APPELLANT TO FURNISH THE BREAK-UP OF EACH CASH DEPO SIT IN TERMS OF SALES BILLS TO WHICH IT PERTAINS ALONG WITH OTHER D ETAILS SUCH AS DATE OF DELIVERY OF THE GOODS SOLD, PLACE OF THE DELIVERY, NAME AND ADDRESS TO WHOM GOODS WERE DELIVERED AND NAME & ADDRESS OF THE PERSON WHO DELIVERED THE GOODS ALONG WITH THE CORRESPONDING DE TAILS OF PURCHASES OF SUCH GOODS AND FINALLY PROFIT THEREON QUA EACH O F THE CASH DEPOSITS. SUCH QUERIES HAVE ALSO BEEN REPRODUCED BY THE AO AT PAGE NO.3 TO 5 OF THE IMPUGNED ASSESSMENT ORDER. ON A PERUSAL OF S UCH QUERIES, IT SHALL BE APPRECIATED BY YOUR HONOUR THAT EVEN WITH THE AID OF A SUPER COMPUTER, THE REPLY TO THE QUERIES OF THE AO CANNOT BE MADE FOR THE VERY REASON THAT IT IS VIRTUALLY IMPOSSIBLE TO PERF ECTLY CORRELATE THE CASH DEPOSITS FIRSTLY WITH THE SALES, SECONDLY WITH THE CORRESPONDING PURCHASES AND FINALLY WITH THE PROFIT EARNED THEREO N. IN SUCH AN EVENTUALITY, ONE CAN VERY WELL ADJUDGE THE LEGAL SU STAINABILITY OF THE GROUNDS [RATHER PRETENCES] TAKEN BY THE AO FOR INVO KING THE PROVISIONS OF S. 145(3) OF THE ACT IN THE APPELLANT'S CASE. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 42 9.08 AS REGARD THE EIGHTH OBSERVATION OF THE AO WIT H REGARD TO NON- FURNISHING OF THE COPIES OF THE DOCUMENTS FOUND AND SEIZED BY THE ANTI EVASION WING OF THE SALES TAX DEPARTMENT ON 10-11-2 010, IT IS SUBMITTED THAT FIRST OF ALL NOT A SINGLE INCRIMINAT ING MATERIAL OR DOCUMENT WAS FOUND OR SEIZED BY THE ANTI EVASION WI NG AND, SECONDLY, THE APPELLANT HAD DULY FURNISHED A COPY O F THE ORDER OF THE SALES TAX DEPARTMENT, PASSED IN CONSEQUENCE OF THE AFORESAID SEARCH, BEFORE THE AO FROM WHICH IT WAS EVIDENT THAT NO ADV ERSE MATERIAL OR DOCUMENT WAS FOUND BY THE SALES TAX DEPARTMENT DURI NG THE COURSE OF AFORESAID SEARCH. THE FURNISHING OF SUCH ORDER H AS ALSO BEEN ADMITTED BY THE AO IN LAST PARA OF PAGE NO.8 OF THE IMPUGNED ORDER.. IT SHALL BE APPRECIATED BY YOUR HONOUR THAT THE ORD ERS PASSED BY THE COMMERCIAL TAX AUTHORITIES BY THEMSELVES ADDUCE EVI DENCE IN SUPPORT OF THE APPELLANT'S ASSERTION THAT DURING THE COURSE OF THE SEARCH OPERATIONS BY THE ANTI EVASION WING OF THE COMMERCI AL TAX DEPARTMENT, NOT A SINGLE INCRIMINATING DOCUMENT WAS FOUND OR SEIZED. 9.09 AS REGARD THE NINTH OBSERVATION OF THE AO TO T HE EFFECT THAT THE APPELLANT COULD NOT PRODUCE COPY OF ITS ACCOUNTS IN THE BOOKS OF DEBTORS AND CREDITORS, IT IS SUBMITTED THAT THE APP ELLANT HAD MADE PURCHASES EITHER FROM THE BANKS OR FROM OTHER BULLI ON MERCHANTS OF REPUTE AND DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, DESPITE MAKING ITS BEST EFFORTS, THE APPELLANT COULD NOT PR OCURE ITS COPY OF ACCOUNT IN THEIR BOOKS FOR THE REASON THAT THE TRAN SACTIONS WERE OLD AND THERE WERE VOLUMINOUS CREDITORS. AS REGARD THE COPIES OF ACCOUNT IN THE BOOKS OF THE DEBTORS, IT IS SUBMITTED THAT T HE APPELLANT HAD SOLD GOODS EITHER ON CASH BASIS OR ON CREDIT BASIS AND F OR THE CASH SALES THERE COULD NOT HAVE BEEN ANY CASE OF APPELLANT'S A CCOUNT IN THE LEDGER OF THE PURCHASERS AND FOR PROCURING THE COPI ES OF ITS ACCOUNT IN THE BOOKS OF DEBTORS IT HAD MADE REQUEST TO THE DEB TORS BUT THE DEBTORS NOT BEING UNDER THE CONTROL OF THE APPELLANT SUCH REQUEST COULD BE OF NO AVAIL. IN SUCH CIRCUMSTANCES, THE APPELLANT MADE A SPECIFIC REQUES T TO THE AO FOR ISSUING EITHER SUMMONS UNDER S. 131 OR NOTICES UNDE R S. 133(6) OF THE ACT, MUCH BEFORE THE DATE OF EXPIRY OF THE PERIOD O F LIMITATION FOR PASSING OF THE ASSESSMENT ORDER I.E. ON 28-01-2013 [KINDLY REFER PB PAGE NO.82]. SUCH A POSITION HAS ALSO BEEN ADMITTED BY THE AO HIMSELF AT 3 RD PARA OF PAGE NO.19 OF THE IMPUGNED ASSESSMENT ORDE R. IN SUCH A SITUATION, WHEN THE AO HAS NOT ACTED UPON THE REQUE ST OF THE APPELLANT TO ISSUE SUMMONS/NOTICES, MADE WELL IN AD VANCE, NO FAULT COULD BE FOUND ON THE APPELLANT'S PART. EVEN OTHERW ISE, IT IS SUBMITTED THAT THE APPELLANT HAD DULY FURNISHED NAMES AND ADD RESSES OF THE DEBTORS AND CREDITORS ALONG WITH THE COPIES OF THEI R RESPECTIVE ACCOUNTS IN ITS BOOKS OF ACCOUNT AND THE AO COULD N OT FIND ANY DEFECT OR DISCREPANCY THEREIN. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 43 9.10 AS REGARD TENTH OBSERVATION OF THE AO THAT THE RE WAS A FALL IN GP RATE IN SUBSEQUENT YEARS, IT IS SUBMITTED THAT FIRST OF ALL FALL IN GP RATE IN SUBSEQUENT YEARS COULD NOT HAVE BEEN A VALID GROUND FOR REJECTING THE BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION. EVEN OTHERWISE, IT IS SUBMITTED THAT THE FALL IN GP RATE IN SUBSEQUENT YEARS, WHICH IN ITS TURN WAS ATTRIBUTABLE TO TREMENDOUS INCREASE OF VOL UME AND TURNOVER CANNOT BE A GROUND FOR ASSUMING THAT THE BOOKS OF A CCOUNT OF SUCH SUBSEQUENT YEARS OR OF THE YEAR UNDER ASSESSMENT WA S NOT RELIABLE. IT IS SUBMITTED THAT IT IS A SETTLED LAW THAT A LOWER GP RATE BY ITSELF CANNOT GIVE RISE TO REJECTION OF BOOKS OF ACCOUNT. FOR SUCH PROPOSITION, RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOU NCEMENTS: I) MADNANI CONSTRUCTION CORPORATION (P) LTD. VS. CIT ( 2008) 296 ITR 0045 (GAU) II) PANDIT BROS. VS. CIT (1954) 20 ITR 159 (PUNJ.) III) VEERIAH REDDIAR VS. CIT (1960) 38 ITR 152 (KER.) IV) INTERNATIONAL FOREST CO. VS. CIT (1975) 101 ITR 721 (J&K) V) RATAN CAF VS. STATE OF MADRAS (1974) 33 STC 39 (MA D.) VI) M. DUBAI RAJ VS. CIT (1972) 38 ITR 484 (KER.) VII) R.M.P. PERIANNA PILLAI & CO. VS. CIT (1961) 42 ITR 370 (MAD.) VIII) NARENDRA MAFATLAL MEHTA VS. ITO (1997) 59 TTJ (MUM. ) 165 IX) NAGARJUN CONSTRUCTION CO. LTD. VS. JCIT (2012) 52 SOT 0178 (URO) 9.11 AS REGARD THE ELEVENTH OBSERVATION OF THE AO T O THE EFFECT THAT THE APPELLANT HAD SOLD THE EXCESS STOCK AMOUNTING TO RS .1.73 CRORES, AS FOUND DURING THE COURSE OF SEARCH, ON A LOSS OF RS. 6 LAKHS, IT IS SUBMITTED THAT FIRST OF ALL SUCH AN EVENT HAD NO BE ARING IN THE TRADING RESULTS OR FOR THAT MATTER THE BOOKS OF ACCOUNT OF THE APPELLANT FOR THE RELEVANT ASSESSMENT YEAR AS SUCH EXCESS STOCK WAS F OUND AND SOLD DURING THE SUBSEQUENT YEAR I.E. A.Y. 2011-12. EVEN OTHERWISE, IT IS SUBMITTED THAT AS ON THE DATE OF SEARCH, I.E. ON 25 -11-2010, UPON PHYSICAL VERIFICATION GOLD BULLION WEIGHING 8562.10 3 GMS. WERE FOUND IN SURPLUS IN COMPARISON TO THE STOCK REGISTER AND ACCORDINGLY, AS PER THE PREVAILING MARKET RATE OF THE GOLD BULLION ON S UCH DATE, THE VALUATION OF THE EXCESS STOCK WAS ARRIVED AT RS.1,7 3,81,069/- I.E. @ RS.20,293/- PER 10 GMS. THE APPELLANT MADE SALES OF SUCH SURPLUS STOCK FOUND, WHICH WAS SEPARATELY KEPT, ON 28-01-20 11 @ RS.19,435/- PER 10 GMS. IT IS SUBMITTED THAT DUE TO MARKET FLUC TUATION, SUBSEQUENTLY THE INTERNATIONAL AS WELL AS DOMESTIC PRICE OF THE GOLD BULLION FELL DOWN WITH THE RESULT THAT UPON ACTUAL SALES OF THE EXCESS STOCK FOUND, THE APPELLANT COULD FETCH A RELATIVELY LOWER AMOUNT AT WHICH IT WAS VALUED ON THE DATE OF SEARCH THEREBY R ESULTING IN CERTAIN LOSS. IT IS SUBMITTED THAT THE AO HIMSELF WHILE FRA MING THE ASSESSMENT IN THE APPELLANT'S OWN CASE, FOR A.Y. 2011-12, AT 1 ST PARA OF PAGE NO.3 OF THE ORDER, HAS GIVEN A FINDING THAT ON THE AFORE SAID DATE OF SALE I.E. ON 28-01-2011, THE PREVAILING MARKET RATE OF GOLD W AS RS.1,943/- PER GM. I.E. RS.19,430/- PER 10 GMS. IN VIEW OF SUCH FA CT, IT SHALL BE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 44 APPRECIATED BY YOUR HONOUR THAT DUE TO FALL IN THE GOLD BULLION RATE, THE AFORESAID LOSS ON SALE OF SURRENDERED STOCK RES ULTED TO THE APPELLANT AND THEREFORE, IT CANNOT BE A VALID GROUN D FOR REJECTION OF BOOKS OF ACCOUNT. 9.12 AS REGARD THE TWELFTH OBSERVATION OF THE AO TH AT THE APPELLANT HAD SHOWN A LOWER GP, IN COMPARISON TO THE OTHER DEALER I.E. M/S. M.P. BULLION, AT THE OUTSET, IT IS SUBMITTED THAT FIRST OF ALL SUCH A FACTOR CANNOT BE A BASIS FOR REJECTION OF BOOKS OF ACCOUNT FOR THE REASON THAT THE APPELLANT HAD MAINTAINED QUANTITATIVE DETAILS A ND THE AO HAS NEITHER DISTURBED THE PURCHASE VALUE NOR THE SALES VALUE, AS RECORDED IN THE REGULAR BOOKS OF ACCOUNT OF THE APPELLANT. I T IS SUBMITTED THAT ONE OTHER DEALER I.E. M/S. RAVI BULLION HAD SHOWN G .P. RATE OF 0.10% ONLY DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2011 -12 AS PER THE FINDINGS GIVEN BY THE CIT(A) HIMSELF AT PARA 9.6 OF THE ORDER. IT IS SUBMITTED THAT DURING THE COURSE OF THE ENTIRE ASSE SSMENT PROCEEDINGS THE AO NOT EVEN ONCE CONFRONTED THE APPELLANT WITH SUCH A COMPARISON WHICH IS MANDATORY AS PER THE RULING OF THE HON'BLE SUPREME COURT IN THE CASE OF DHAKESHWARI COTTON MIL LS LTD. VS. CIT (1954) 26 ITR 775 (SC) AND AGAIN IN THE CASE OF KIS HAN CHAND CHELARAM VS. CIT (1980) 125 ITR 713 (SC). EVEN OTHE RWISE, IT IS SUBMITTED THAT THE GROSS PROFIT OF THE APPELLANT WA S NOT COMPARABLE WITH THE ABOVE NAMED CONCERN FOR THE REASON THAT FI RST OF ALL SUCH OTHER CONCERN WAS PIONEER IN THE BULLION TRADING IN INDORE WITH MORE THAN 20 YEARS' STANDING WHEREAS THE APPELLANT START ED THE BUSINESS OF BULLION DURING THE FINANCIAL YEAR 2008-09 ONLY. SEC ONDLY, IT IS SUBMITTED THAT THE PRICES OF THE GOLD BULLION AND S ILVER BULLION ARE GOVERNED BY THE GLOBALLY PREVAILING RATES AND, THER EFORE, THE SAME ARE HIGHLY SUSCEPTIBLE FOR VOLATILE FLUCTUATION ON DAY TO DAY BASIS. IN SUCH CIRCUMSTANCES, IT MIGHT BE POSSIBLE THAT A DEALER H AD PURCHASED THE MORE QUANTITY WHILE THE RATES WERE LOW IN COMPARISO N TO OTHER DEALER OR VICE VERSA AND, THEREFORE, COMPARISON OF TRADING RESULTS CANNOT BE A DECISIVE FACTOR FOR ASSESSING THE TRUENESS AND COMP LETENESS OF BOOKS OF ACCOUNT OF ANY ASSESSEE. FOR SUCH PROPOSITION, R ELIANCE IS PLACED ON THE DECISION OF THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF M. DURAI RAJ VS. CIT (1972) 83 ITR 484 (KER.). FURTHER, AS N OTED BY THE AO HIMSELF, THE APPELLANT MADE 90% OF ITS SALES IN CAS H WHICH ALWAYS YIELDS A LOWER RATE OF GP IN COMPARISON TO CREDIT S ALES AND THEREFORE, WITHOUT BRINGING ON RECORD THE SALES MIX OF THE OTH ER DEALER, THE COMPARISON OF GP WAS NOT JUSTIFIED. 10.01 DURING THE COURSE OF THE ASSESSMENT PROCEEDIN GS, THE APPELLANT HAD EXPLAINED THE CIRCUMSTANCES IN WHICH IT WAS NOT POS SIBLE FOR IT TO MENTION THE NAME AND ADDRESSES OF THE CUSTOMERS ON CASH INVOICES. THE APPELLANT SUBMITTED THAT AFTER RECEIPT OF CASH AGAINST SALE OF GOODS, IT WAS NOT REQUIRED, EITHER STATUTORILY OR O THERWISE, TO KEEP A RECORD OF THE NAME AND ADDRESSES OF THE CUSTOMERS W HO PURCHASED MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 45 BULLION FROM IT AGAINST TENDERING PAYMENT IN CASH. THE APPELLANT ALSO BROUGHT TO THE NOTICE OF AO THAT THERE WAS NO REQUI REMENT UNDER THE COMMERCIAL TAX ENACTMENTS FOR MAINTENANCE OF RECORD S AS REGARD TO THE NAME AND ADDRESS OF THE PURCHASERS. IT WAS SUBM ITTED THAT SUCH CUSTOMERS CAN EITHER BE INVESTORS IN BULLION OR TRA DERS OF JEWELLERIES BUT IN EITHER CASE IF THEY WISH NOT TO DISCLOSE THE IR IDENTITY, THE APPELLANT COULD NOT HAVE COMPELLED THEM TO DO SO IN THE INTEREST OF HIS BUSINESS. HAD, THE APPELLANT INSISTED UPON ITS CASH CUSTOMERS FOR DISCLOSING THEIR IDENTITY PROBABLY THE COMPANY WOUL D HAVE LOST A SIZABLE AMOUNT OF BUSINESS WHICH WOULD HAVE PROVED DETRIMENTAL TO THE INTEREST OF THE ASSESSEE COMPANY. IT WAS FURTHE R SUBMITTED THAT THE NATURE OF THE GOODS TRADED BY THE ASSESSEE COMP ANY IS THAT OF BULLION AND, THEREFORE, IT IS NOT COVERED UNDER THE CATEGORY OF THOSE SENSITIVE COMMODITIES SUCH AS ARMS, EXPLOSIVES, ETC . FOR WHICH THERE IS A MANDATORY AND STATUTORY REQUIREMENT OF KEEPING TH E RECORD OF THE CUSTOMERS EVEN IN CASE OF CASH SALES OVER THE COUNT ER. IT WAS SUBMITTED THAT THE REQUIREMENT OF KEEPING THE RECOR DS, UNDER M.P. COMMERCIAL TAX ACT WOULD HAVE ARISEN ONLY IF THE BU YER CLAIMS HIMSELF TO BE A REGISTERED DEALER AND IF AT THE TIME OF PUR CHASES HE HAS NOT CLAIMED THAT HE IS A DEALER REGISTERED UNDER THE CO MMERCIAL TAX ENACTMENTS, NEITHER THE BUYER IS BOUND TO DISCLOSE HIS IDENTITY NOR THE ASSESSEE COMPANY CAN COMPEL HIM TO DISCLOSE HIS IDE NTITY AND UNDER SUCH CIRCUMSTANCES, IT IS NEITHER FEASIBLE NOR POSS IBLE TO MAINTAIN THE DETAILS AS REGARD TO NAMES AND ADDRESSES OF THE CAS H CUSTOMERS. HOWEVER, THE NECESSARY DETAILS OF THE CREDIT SALES WERE DULY FURNISHED BEFORE THE AO. IT WAS ALSO SUBMITTED THAT EVEN UNDE R THE INCOME-TAX ACT, 1961, THE LEGISLATURE IN THEIR BEST WISDOM HA VE RESTRICTED AN ASSESSEE TO MAKE PURCHASES OF ANY GOODS EXCEEDING A SUM OF RS.20,000/- OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQ UE OR DRAFT IN ACCORDANCE WITH PROVISIONS OF SECTION 40A(3) OF THE ACT BUT IN THE ENTIRE SCHEME OF THE LAW, NO RESTRICTION HAS BEEN I MPOSED FOR EFFECTING ANY SALES OF ANY VALUE IN CASH. IT SHALL BE PERTINE NT TO NOTE THAT EVEN THE PROVISIONS OF SUB-SECTION (1D) OF SECTION 206C OF THE INCOME-TAX ACT, INSERTED BY THE FINANCE ACT, 2012, REQUIRING A PERSON BEING A SELLER, WHO RECEIVES ANY AMOUNT IN CASH AS CONSIDER ATION FOR SALE OF BULLION, A SUM OVER THE PRESCRIBED AMOUNT, TO MAKE THE COLLECTION OF TAX AT SOURCE AT THE PRESCRIBED RATE FROM THE BUYER , HAS ITS APPLICATION ONLY FROM 01-07-2012 AND, THEREFORE, FOR THE YEARS UNDER CONSIDERATION, IT CANNOT BE PRESUMED THAT A SELLER OF BULLION WAS UNDER ANY OBLIGATION UNDER THE INCOME-TAX ACT, 1961 TO KE EP THE DETAILS OF NAMES AND ADDRESSES OF ITS CUSTOMERS. AS REGARD TH E ALLEGATION OF DELIBERATELY CONCEALING THE INFORMATION OF THE C USTOMERS, IT WAS SUBMITTED THAT QUESTION OF CONCEALMENT OF ANY INFOR MATION WOULD ARISE ONLY IF ANY PERSON IS IN POSSESSION OF THE RE QUIRED INFORMATION AND SINCE IN THE INSTANT CASE, THE APPELLANT COMPAN Y HAS NOT MAINTAINED THE DESIRED INFORMATION, THE CONCEALMENT THEREOF CANNOT BE PRESUMED BY ANY STRETCH OF IMAGINATION. IT WAS A LSO SUBMITTED THAT MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 46 THE APPELLANT WAS GAINING NOTHING BY NOT PROVIDING THE DETAILS OF THE NAMES AND ADDRESSES OF THE CUSTOMERS FOR THE ONLY R EASON THAT WHATEVER SALES CONSIDERATION THE APPELLANT COMPANY RECEIVED FROM SUCH CUSTOMERS HAD DULY BEEN RECORDED, FULLY AND CO RRECTLY, IN ITS REGULAR BOOKS OF ACCOUNT. IT WAS ALSO SUBMITTED THA T DURING THE COURSE OF THE SEARCH PROCEEDINGS CARRIED OUT UNDER SECTION 132(1) OF THE INCOME-TAX ACT, 1961, IN THE BUSINESS PREMISES OF T HE APPELLANT COMPANY AS WELL AS IN THE RESIDENTIAL PREMISES OF T HE DIRECTORS OF THE APPELLANT COMPANY, NO DETAILS OR DOCUMENTS AS REGAR D TO THE NAMES AND ADDRESSES OF THE CASH CUSTOMERS WERE FOUND WHIC H FORTIFIES THE ASSERTION OF THE APPELLANT COMPANY, TO THE EFFECT T HAT THE APPELLANT COMPANY, IN ITS ORDINARY COURSE OF BUSINESS, WAS NE ITHER REQUIRED NOR IT MAINTAINED THE DETAILS OF NAMES AND ADDRESSES OF TH E CUSTOMERS TO WHOM IT EFFECTED SALES IN CASH. FINALLY, ON THE ISS UE OF CASH MEMOS, IT WAS SUBMITTED THAT THE SALES OF THE APPELLANT COMPA NY WERE FULLY VERIFIABLE AND THE SAME, HAVE CONSISTENTLY BEEN ACC EPTED AS CORRECTED BY THE COMMERCIAL TAX AUTHORITIES. IT WAS SUBMITTED THAT EVEN DURING THE COURSE OF SURPRISE CHECK AND SEARCH BY THE OFFI CIO OF THE COMMERCIAL TAX DEPARTMENT, IN THE BUSINESS PREMISES OF THE APPELLANT, NO CASE OF ANY SALES EVASION WAS FOUND. 10.02 IT IS FURTHER SUBMITTED THAT A BUSINESSMAN, B Y HIMSELF, CANNOT BE EXPECTED TO ACT AS A LAW ENFORCING AGENCY AND CANNO T KEEP A TRACK ON THE INTENT OR MODUS OPERANDI OF HIS CUSTOMER THAT W HETHER OR NOT HE WOULD DISCHARGE HIS DUE OBLIGATIONS UNDER THE STATE AND CENTRAL ENACTMENTS SO LONG AS SUCH BUSINESS IS COMPLYING WI TH THE VARIOUS LAWS OF THE LAND. IN THE INSTANT CASE, THE APPELLAN T, UNDISPUTEDLY, HAS DISCHARGED ITS OBLIGATION FOR PAYMENT OF COMMERCIAL TAXES AND CENTRAL TAXES IN ACCORDANCE WITH THE ALL THE LAWS APPLICABL E AT THE RELEVANT TIME. 10.03 THE APPELLANT DEALS IN A COMMODITY OF WHICH T HE DAILY MARKET QUOTES, BOTH INTERNATIONAL AND LOCAL, ARE IN PUBLIC DOMAIN AND, THEREFORE, BY ANY STRETCH OF IMAGINATION, IT CANNOT BE SAID THAT A BULLION DEALER CAN MANIPULATE ITS SALES BY UNDER INVOICING FOR THE VER Y REASON THAT THE SALES RATES STATED IN THE INVOICES CAN VERY WELL BE COMPARED AND VERIFIED WITH THE DAILY MARKET QUOTES AS AFORESAID. IT SHALL BE APPRECIATED THAT IN THE INSTANT CASE, THE AO HAS NO T BROUGHT ON RECORD ANY SINGLE INSTANCE OF EFFECTING THE SALES AT A PRI CE LOWER THAN THE PRICE PREVAILING AT THE RELEVANT TIME. IT IS FURTHE R SUBMITTED THAT IN RESPECT OF THE CREDIT SALES, WHERE THE APPELLANT WA S REQUIRED TO MAKE A CONTACT WITH THE BUYER FOR SUBSEQUENT RECOVERY OF THE SALES PROCEEDS, COMPLETE IDENTITY AS REGARD TO NAME AND A DDRESS OF THE BUYER WAS NOT ONLY MAINTAINED BUT THE DETAILS OF AL L SUCH DEBTORS WITH COMPLETE NAME AND ADDRESS WERE ALSO FURNISHED BEFOR E THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 47 10.04 FURTHER, IT IS ALSO NOT THE CASE OF THE AO, T HAT THE APPELLANT, IN ORDER TO AVOID TAX, MADE CASH SALES EITHER TO ITS ASSOCIATES OR RELATED PARTIES AT THE RATES BELOW THE THEN PREVAILING MARKET RATES. 10.05 IT IS FURTHER SUBMITTED THAT DURING THE RELEV ANT PREVIOUS YEAR, THE APPELLANT HAD ALSO EFFECTED SALES OF BULLION ON CRE DIT BASIS AND IN RESPECT OF SUCH CREDIT SALES, THE APPELLANT HAD MAI NTAINED COMPLETE DETAILS OF THE PURCHASERS SUCH AS THEIR NAMES AND A DDRESSES. NOW, IT IS SUBMITTED THAT IT IS NOT THE CASE OF THE AO THAT ON ANY PARTICULAR DAY OR DATE, THE APPELLANT EFFECTED SALES ON CREDIT BAS IS AT A HIGHER RATE IN COMPARISON TO SALES ON CASH BASIS. IN OTHER WORDS, THERE WAS NO PRICE VARIATION IN BETWEEN CREDIT SALES AND CASH SALES. I N SUCH CIRCUMSTANCES, IT SHALL BE APPRECIATED BY YOUR HONO UR THAT THE ALLEGATION OF THE AO TO THE EFFECT THAT THE APPELLA NT DID NOT PRESERVE THE DETAILS OF IDENTITY OF THE CUSTOMERS FOR SUPPRE SSING THE SALES IS MISCONCEIVED. 10.06 IN THE SIMILAR CIRCUMSTANCES THE HON'BLE ITAT , RAJKOT BENCH IN THE CASE OF ITO VS. GIRISH M. MEHTA (2006) 99 TTJ (RAJKOT) 3 94 HAS HELD THAT FOR NON-MAINTENANCE OF NAME OF THE BUYERS IN THE CASH T RANSACTIONS, BOOKS OF ACCOUNT OF AN ASSESSEE CANNOT BE REJECTED. A COPY OF THE JUDGMENT IS BEING SUBMITTED HEREWITH FOR KIND PERUS AL AND RECORD OF YOUR HONOUR AS ANNEXURE A-7.01 [PB PAGE NO. 117 TO 124].THE HON'BLE BENCH, AT PARAS 15 & 16, HAS OBSERVED AS UN DER: '15. THE FACT THAT SOME OF THE CASH VOUCHERS, THE N AMES AND ADDRESSES OF BUYERS WERE NOT FULLY WRITTEN, MAY GIV E RISE TO REASON TO DOUBT REGARDING GENUINENESS OF THE SALE P RICE, BUT MERE SUSPICION IS NOT ENOUGH FOR MAKING ADDITION BY ESTIMATING HIGHER GP RATE. FOR REJECTING SALE PRICE OF CASH TRANSACTIONS, THE AO HAS TO BRING CORROBORATIVE MAT ERIAL ON RECORD TO REACH TO THE CONCLUSION THAT SALE PRICE O F THESE CASH BILLS WERE LOWER THAN THE SALE PRICE OF CREDIT SALE BILLS IN RESPECT OF WHICH FULL NAMES AND ADDRESSES OF THE BUYERS WER E WRITTEN. HOWEVER, THE AO HAS NOT POINTED OUT ANY CASH BILLS IN RESPECT OF SUCH SALES IN WHICH LOWER PRICE HAVE BEEN COLLEC TED. ON THE OTHER HAND, DURING THE APPELLATE PROCEEDINGS, ON VE RIFICATION OF EACH AND EVERY TRANSACTION OF CASH SALES BY THE CIT(A) IN THE PRESENCE OF THE AO, IT WAS FOUND AND CATEGORICALLY NOTED BY THE CIT(A) THAT THERE WAS NO DIFFERENCE IN PRICE CO LLECTED BY THE ASSESSEE IN RESPECT OF SUCH CASH SALE TRANSACTIONS. THE DEPARTMENT IS ALSO NOT AGGRIEVED BY ANY ADDITIONAL DOCUMENT BEING RELIED ON BY THE CIT(A) IN CONTRAVENTION OF R . 46A. THE RATE OF GOLD AND SILVER CHARGED BY THE ASSESSEE IN RESPECT OF CASH SALES WERE ACCORDING TO THE RATE PREVAILING IN THE MARKET ON THAT PARTICULAR DATE. THE FINDING RECORDED BY TH E CIT(A) TO THE EFFECT THAT RATES CHARGED IN CASH AND CREDIT SA LE BILLS WERE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 48 COMPARABLE, WAS NOT CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY COGENT MATERIAL ON RECORD. WE, THEREFO RE, DO NOT FIND ANY MERIT IN THE ACTION OF THE AO FOR REJECTIN G BOOK RESULTS MERELY ON THE GROUND THAT IN RESPECT OF SOME OF THE CASH SALE TRANSACTIONS, THE NAMES AND ADDRESSES OF THE BUYERS WERE NOT RECORDED FULLY. 16. IN THE INSTANT CASE, NO MISTAKE HAS BEEN POINTE D OUT BY THE AO EITHER IN THE BOOKS OF ACCOUNT OR IN THE STATEME NT OF PURCHASES, SALES AND STOCK WHICH WAS MAINTAINED QUANTITATIVELY ON DAY-TO-DAY BASIS. THE FINDINGS RE CORDED BY THE CIT(A) AT PAGE NOS. 3 AND 4 HAVE NOT BEEN CONTR OVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. WE ARE, THEREFORE, INCLINED TO AGREE WITH THE LEARN ED AUTHORISED REPRESENTATIVE, MR. RINDANI, THAT THE AS SESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNT AND FULL DETAILS REGARDING THE PURCHASES, SALES AND STOCK REGISTERS WERE FURNI SHED TO THE AO IN WHICH NO DEFECT WHATSOEVER WAS POINTED OUT, T HUS THERE WAS NO REASON BEFORE THE AO FOR REJECTING THE BOOK RESULTS AND THEREBY ESTIMATING THE PROFIT MERELY BY COMPARING T HE ASSESSEES GP RATE WITH M/S GAYATRI BULLION, WHICH WAS STANDING ENTIRELY ON DIFFERENT FOOTINGS THAN THE AS SESSEE.' 10.07 FOLLOWING THE JUDGMENT OF THE HON'BLE HIGH CO URT OF BOMBAY IN THE CASE OF R.B. JESSARAM FATEHCHAND VS. CIT (1970) 75 ITR 33 (BOM), THE HON'BLE ITAT, PUNE BENCH IN THE CASE OF ACIT VS. MA HESH T. PATODIA (2001) 73 TTJ (PUNE) 975 HAS ALSO HELD THAT NON-MEN TIONING OF ADDRESSES ON CASH BILLS CANNOT GIVE RISE TO REJECTI ON OF BOOKS. A COPY OF THE JUDGMENT IS PLACED AS ANNEXURE A-7.03 [PB PAGE NO. 129 TO 133]. FOR A READY REFERENCE, THE OPERATIVE PARA OF THE JU DGMENT IN THE CASE OF MAHESH T. PATODIA SUPRA, IS BEING REPRODUCED AS UNDER: '7. THE 3RD REASON GIVEN BY THE AO IS THAT NAMES AN D ADDRESSES OF THE CUSTOMERS ARE NOT GIVEN ON THE SAL E BILLS. THE CIT(A) HAS GIVEN A FINDING THAT NAMES AND ADDRESSES ARE NOT GIVEN BOTH IN THE PURCHASE AS WELL AS SALE BILLS. A S FAR AS THE PURCHASES ARE CONCERNED, THESE ARE FROM WELL-KNOWN PARTIES AND LIST OF SUCH PERSONS HAS BEEN GIVEN IN THE PAPE R BOOK AT P. 16. THEREFORE, THE FINDING OF THE CIT(A) TO THAT EX TENT IS FACTUALLY INCORRECT AND HEREBY VACATED. AS FAR AS S ALES BILLS ARE CONCERNED, IT IS NOT THE CASE OF THE AO THAT NAMES AND ADDRESSES ARE NOT GIVEN ON ALL THE SALE B ILLS. IT IS ONLY ON THE CASH SALE BILLS THAT NAMES AND ADDRESSE S ARE NOT GIVEN. IN THIS CONNECTION REFERENCE CAN BE MADE TO THE BOMBAY HIGH COURT JUDGMENT IN THE CASE OF JESSARM FATEHCHA ND, (SUPRA)WHEREIN IT HAS BEEN HELD THAT PROVISO TO S. 13 OF 1922 ACT [CORRESPONDING TO S. 145(1)] CANNOT BE APPLIED ON THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 49 GROUND THAT NAMES AND ADDRESSES OF THE PURCHASERS A RE NOT GIVEN IN RESPECT OF CASH SALES. FOLLOWING THE SAME, THESE REASONINGS OF THE AO CANNOT BE CONSIDERED FOR DECID ING THE ISSUE REGARDING THE APPLICABILITY OF S. 145(1).' 10.08 IT IS SUBMITTED THAT IN THE INSTANT CASE, THE APPELLANT HAD ISSUED SEPARATE CASH MEMOS FOR EACH AND EVERY CASH SALES W HEREAS IN THE CASE OF CIT VS. PRAYAG WINES (2014) 364 ITR 0660 (A LL), THE REJECTION OF THE BOOKS OF ACCOUNT WAS NOT HELD JUSTIFIED WHEN TH E ASSESSEE ISSUED ONE CONSOLIDATED BILL FOR ALL THE CASH SALES MADE D URING A DAY. THE HONBLE HIGH COURT AT PARAS 7 TO 9 WAS PLEASED TO O BSERVE AS UNDER: 7. HAVING HEARD THE LEARNED COUNSEL FOR THE PARTI ES, WE ARE OF THE VIEW THAT IT IS NOT NECESSARY THAT A CASH MEMO IS REQUIRED TO BE ISSUED FOR EACH AND EVERY SALE AND CONSEQUENT LY, BOOKS OF ACCOUNTS COULD NOT BE REJECTED ON THE SOLE GROUND T HAT ONLY ONE CONSOLIDATED CASH MEMO WAS ISSUED AT THE END OF THE DAY. 8. IN RAMJI LAL AND SON VS. COMMISSIONER SALES TAX, 50 STC 344 THE ALLAHABAD HIGH COURT HAS HELD THAT NO ADVERSE I NFERENCE AGAINST THE VERACITY OF THE ACCOUNT MAINTAINED BY T HE ASSESSEE COULD BE DRAWN NOR THE ASSESSEES ACCOUNT BOOK COUL D BE REJECTED ON THE GROUND OF NOT ISSUING SEPARATE CASH MEMO IN RESPECT OF PETTY SALES AND IN ISSUING A CONSOLIDATE D CASH MEMO AT THE END OF THE DAY. THE SAME VIEW WAS REITERATED BY THE ALLAHABAD HIGH COURT IN THE CASE OF COMMISSIONER OF SALES TAX VS. VISHNBU CHANDRA VIPIN CHANDRA, 50 STC 345, WHER EIN THE COURT HELD THAT FAILURE TO SUCH MEMOS BY ITSELF WAS INSUFFICIENT TO REJECT THE BOOKS OF ACCOUNT, WHERE THE BOOKS WER E OTHERWISE VERIFIABLE. 9. IN THE LIGHT OF THE AFORESAID, THE ORDER OF THE ASSESSING OFFICER REJECTING THE BOOKS OF ACCOUNT UNDER SECTIO N 145(3) OF THE ACT AND CONSEQUENTLY, MAKING AN ADDITION OF THE INCOME ON ESTIMATE BASIS WAS REVERSED BY THE TRIBUNAL. FURTHE R, SUCH ADDITION MADE ON ESTIMATE BASIS IS A QUESTION OF FA CT AS HAS BEEN HELD IN COMMISSIONER (CUSTOM VS. STONEMAN MARB LE, (2011) 2 SCC 758, VIJAY K. TALWAR VS. CIT, (2011) 1 SCC 673, NEW PLAZA RESTAURANT VS. ITO, 309 ITR 259 (HP) AND SANJAY OIL CAKE VS. CIT, 316, ITR 274 (GUJRAT THE HONBLE HIGH COURT OF KERALA IN THE CASE OF M. DURAI RAJ VS. CIT (1972) 83 ITR 0484, HAS ALSO HELD THAT MERELY FOR ABSENCE OF PARTICULARS OF THE ADDRESSES OF THE CUSTOMERS ON INVOICES, THE BOOKS OF ACCOUNT CANNOT BE REJECTED. 11.01 AS REGARD THE FINDING OF THE CIT(A) THAT DURI NG THE COURSE OF THE SEARCH EXCESS UNACCOUNTED BULLION STOCK OF RS.1,73,81,069/ - AND EXCESS MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 50 UNACCOUNTED CASH OF RS.11,52,550/- WAS FOUND, IT IS SUBMITTED THAT THE FINDING GIVEN AS REGARD TO EXCESS UNACCOUNTED C ASH IS FACTUALLY INCORRECT. IT IS SUBMITTED THAT DURING THE COURSE O F THE SEARCH EXCEPT FINDING EXCESS STOCK OF RS.1,73,81,069/- NO OTHER D ISCREPANCY WAS FOUND. EVEN, IN RESPECT OF THE EXCESS STOCK, IT IS SUBMITTED THAT THE EXCESS STOCK BY ITSELF CANNOT BE AN INDICATOR OF UN ACCOUNTED TRADING. IT IS SUBMITTED THAT DURING THE COURSE OF THE SEARCH, THE APPELLANT COMPANY COULD NOT EXPLAIN THE SOURCES OF SUCH EXCES S STOCK AND THEREFORE, IT WAS SURRENDERED. 11.02 AS REGARD THE SECOND OBSERVATION OF THE CIT(A ) THAT THE APPELLANT MADE HUGE CASH SALES AND CASH MEMOS WERE SUSCEPTIBL E TO AMENDMENT IS AGAIN A PURE GUESS WORK. IT IS SUBMITT ED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE APPELLANT HAD PRODUCED ITS ALL BOOKS OF ACCOUNT AND SALES INVOICES IN SOFT COP IES AND THE AO HAD NOT FOUND ANY CASE OF ANY MANIPULATION IN THE INVOI CES SO ISSUED. IT IS ALSO NOT THE CASE OF THE AO OR CIT(A) THAT THE APPE LLANT WAS FOUND TO HAVE BOOKED CASH SALES OF BULLION, ON ANY DAY, AT A RATE BELOW THAN THE RATE PREVAILING IN THE MARKET. THE CIRCUMSTANCES IN WHICH THE APPELLANT HAD NOT MA INTAINED THE NAMES AND ADDRESSES OF THE CUSTOMERS ON THE CASH ME MOS HAVE BEEN DISCUSSED IN DETAIL IN PRECEDING PARAS. 11.02.1 THE THEORY OF THE CIT(A) THAT THE CASH DEPO SIT IN THE BANK SHOULD TALLY WITH THE DAILY CASH SALES IS AGAIN PATENTLY WRONG F OR THE REASON THAT THE APPELLANT WAS UNDER NO COMPULSION TO MAKE DAILY CASH DEPOSIT OF THE EXACTLY CASH SALES AMOUNT. IT IS NOT THE CASE O F THE CIT(A) THAT THE APPELLANT MADE CASH DEPOSIT IN BANKS WITHOUT HAVING SUFFICIENT CASH BALANCE AS PER ITS REGULAR CASH BOOK. 11.03 AS REGARD THE THIRD REASON ASSIGNED BY THE CI T(A) FOR REJECTING THE BOOKS I.E. DROP IN G.P. RATE, IT IS SUBMITTED THAT G.P. RATE IN A BUSINESS DEPENDS ON MANY FACTORS SPECIALLY IN A COMMODITY WH ICH IS INTERNATIONALLY TRADED AND THE MARKET OF WHICH IS V ERY VOLATILE CHANGING FROM MINUTE TO MINUTE. MERELY BECAUSE AN A SSESSEE COULD NOT EARN THE PROFIT, WHICH AS PER THE REVENUE AUTHO RITIES OUGHT TO HAVE BEEN EARNED BY HIM, CANNOT BE A GROUND FOR REJ ECTION OF HIS BOOKS OF ACCOUNT. THERE ARE MANY JUDICIAL AUTHORITI ES ON THIS ISSUE WHICH HAVE BEEN CITED IN THE PRECEDING PARAS. 11.04 AS REGARD THE FOURTH AND LAST REASON I.E. SAL E OF EXCESS STOCK FOUND DURING THE COURSE OF THE SEARCH AT A LOSS OF RS.13, 12,505/- AND FURTHER, DROPPING OF THE G.P. RATE IN F.Y. 2010-11 TO 0.03% ONLY, IT IS SUBMITTED THAT BOTH THESE FACTORS ARE NOT RELEVANT FOR REJECT ION OF BOOKS OF ACCOUNT. THE CIT(A) HAS COMMENTED THAT THERE WAS NO COMPELLING REASON FOR SALE OF EXCESS STOCK FOUND IN SEARCH AT LOSS. THE CIT(A) OUGHT TO HAVE CONSIDERED THAT A REVENUE AUTHORITY C ANNOT OCCUPY THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 51 JUDGMENT SEAT OF BUSINESSMAN AND CANNOT DICTATE AS TO WHEN TO SALE OR NOT TO SALE HIS GOODS. IT SHALL BE APPRECIATED T HAT ON THE DATE OF SEARCH I.E. ON 25-11-2010, THE MARKET PRICE OF THE GOLD BULLION WAS PREVAILING RATE AT RS.20,300/- PER 10 GMS., WHEREAS ON THE DATE OF SALES OF SUCH STOCK I.E. ON 28-01-2011, THE MARKET PRICE OF THE GOLD BULLION HAD COME DOWN TO RS.19,430/- PER 10 GMS. TO RS.19,700/- PER 10 GMS., AS PER FINDINGS GIVEN BY THE AO HIMSELF AT PARA 3, PAGE NO. 3 OF THE ASSESSMENT ORDER FOR A.Y. 2011-12. IT IS SUB MITTED THAT THE FINANCIAL YEAR 2010-11 WAS A VERY TOUGH YEAR FOR TH E BULLION BUSINESS AS DURING SUCH YEAR THERE WAS CONTINUOUS FALL IN TH E PRICES OF BULLION. SUCH FACT IS SELF EVIDENT FROM THE SMALL EXAMPLE OF SALE OF EXCESS STOCK AT LOSS. EVEN, THE CIT(A) AT PARA 9.6, P.71 OF THE APPELLATE ORDER HAS STATED THAT SOME OTHER DEALER HAD SHOWN 0.10% GROSS PROFIT RATE IN A.Y. 2011-12. 11.04.1 IT IS A SETTLED LAW THAT WHERE SALES ARE SH OWN AT RATES LESS THAN MARKET RATES, EVEN TO CLOSE RELATIVES OR ASSOCIATES , THE ASSESSEE CANNOT BE TAXED ON THE BASIS OF HAVING SOLD THE GOO DS AT MARKET RATES, UNLESS THERE IS MATERIAL TO SHOW THAT THE SALES SHO WN ARE SHAM TRANSACTIONS OR THAT THE HIGHER PRICES WERE IN FACT RECEIVED BY THE ASSESSEE. RELIANCE IS PLACED ON THE FOLLOWING JUDIC IAL PRONOUNCEMENTS: I) BASIRAM NARAYANDAS MAHESHRI VS. CIT (1994) 210 ITR 438 (BOM) II) CIT VS. DAS INDUSTRIES (2008) 303 ITR 199 (ALL ) IN THE INSTANT CASE, THE AO WITHOUT FINDING ANY DE FECT OR DISCREPANCY IN THE BOOKS OF ACCOUNT OR RECORDS OF THE APPELLANT HA S REJECTED THE BOOKS OF ACCOUNT ON HIS OWN GUESS WORK, WHIMS AND S URMISES. THE AO FAILED TO APPRECIATE THAT NO INCRIMINATING MATERIAL OR DOCUMENT WARRANTING THE R EJECTION OF BOOKS OF ACCOUNT WAS FOUND DURING THE COURSE OF SEARCH UN DER S. 132 OF THE ACT. THE AO MAINLY ON THE GROUND OF NON-MAINTENANCE OF RECORDS AS REGARD TO THE IDENTITY OF THE CASH BUYERS INVOKED T HE PROVISIONS OF S. 145(3) IN THE INSTANT CASE WHICH IS NOT PERMISSIBLE IN ACCORDANCE WITH THE SETTLED LAW. 12.00 THE HONBLE APEX COURT IN THE CASE OF ST. TER ESAS OIL MILLS VS. STATE OF KERALA (1970) 76 ITR 365 (KER) HAS LAID DOWN THE PR EPOSITION THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE REJECTE D LIGHT HEARTEDLY UNLESS AND UNTIL THEIR EXISTS SUFFICIENT REASONS TO DO SO. THE HON. COURT IN SUCH CASE WENT TO HOLD AS UNDER: THE PROPOSITION IS WELL SETTLED THAT ACCOUNTS REG ULARLY MAINTAINED IN THE COURSE OF BUSINESS HAVE TO BE TAK EN AS CORRECT UNLESS THERE ARE STRONG AND SUFFICIENT REAS ONS TO MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 52 INDICATE THAT THEY ARE UNRELIABLE. THE DEPARTMENT H AS TO PROVE SATISFACTORILY THAT THE ACCOUNT BOOKS ARE UNRELIABL E, INCORRECT OR INCOMPLETE BEFORE IT CAN REJECT THE ACCOUNTS. TH E REJECTION OF ACCOUNTS IS NOT A MATTER TO BE DONE LIGHT-HEARTEDLY , THOUGH IT MAY NOT BE POSSIBLE TO LAY DOWN IN GENERAL TERMS TH E EXACT CIRCUMSTANCES IN WHICH THE ACCOUNTS SHOULD BE CONSI DERED AS UNRELIABLE OR INCORRECT. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE IT WOULD BE APPRECIATED BY YOUR HONOURS THAT THE AUTHORITIES BE LOW WOULD NOT HAVING ANY JUSTIFIED REASON TO REJECT THE BOOKS OF ACCOUNTS OF THE APPELLANT BY INVOKING PROVISIONS OF THE SECTION 145(3) OF THE INCOME-TAX ACT, 1961. 22. THE LD. DR HAS RELIED ON THE ORDERS OF THE REVE NUE AUTHORITIES. 23. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. IN RESPECT OF ASSESS MENT YEAR 2011-12, WE FIND THAT THERE WAS SEARCH AND SEIZURE OPERATION CARRIED OUT AND EXCESS STOCK AMOUNTING TO RS.1,73,81,169/- WAS FOUND AND THE ASS ESSING OFFICER HAS ALSO OBSERVED THAT ASSESSEE HAS RECTIFIED THE DISCREPANC IES REGARDING THE STOCK. IN OUR CONSIDERED VIEW, FINDING OF EXCESS STOCK DURING THE COURSE OF SEARCH BY ITSELF SUGGEST THAT BOOKS OF ACCOUNTS OF THE ASSESS EE WERE NOT CORRECT AND COMPLETE AND THESE WERE NOT RELIABLE. MOREOVER, WE FIND THAT ASSESSEE CO. AND ITS DIRECTORS HAVE ALSO SURRENDERED RS.5 CRORES AS ADDITIONAL INCOME, THEREFORE, IT WAS THE BASE FOR REJECTION OF BOOK RESULTS. THER EFORE, WE ARE OF THE VIEW THAT ASSESSING OFFICER AND LEARNED CIT(A) ARE JUSTIFIED IN REJECTING THE BOOK RESULTS FOR THE ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS R ELIED UPON MANY DECISIONS MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 53 DURING THE COURSE OF HEARING BUT THE FACTS OF ALL T HESE CASES ARE ALTOGETHER DIFFERENT. THEREFORE, WE ENDORSE THE ACTION OF THE ASSESSING OFFICER AND LEARNED CIT(A) REGARDING REJECTING THE BOOK RESULTS U/S 145(3) OF THE ACT FOR THE ASSESSMENT YEAR 2011-12. 23.1 THEREFORE, WE DISMISS THE APPEALS OF THE ASSES SEE ON GROUND NO.2(A) AND 2(B) FOR THE ASSESSMENT YEAR 2011-12. ASSESSEES GROUND NO. 7(A) & 7(B) (FOR A.Y. 2010-11 ) AND GROUND NO. 6(A) & 6(B) (FOR A.Y. 2011-12) DEPARTMENTAL GROUND NOS. (I) TO (VIII) (FOR A.Y. 20 10-11) AND GROUND NOS. (IV) TO (XI) (FOR A.Y. 2011-12) 24. THESE GROUNDS OF APPEAL ARE DIRECTED AGAINST TH E ACTION OF THE CIT(A) IN ESTIMATING THE G.P. @ 1.25% OF THE TOTAL TURNOVER. IN THE DEPARTMENTAL APPEALS, THE VARIOUS GROUNDS HAVE BEEN TAKEN AGAINS T THE LEARNED CIT(A)S ACTION IN REDUCING THE G.P. ADDITION ON SALE OF GOL D BULLION AND SILVER BULLION. 25. SHORT FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER HAS, AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE, ALLEGED THAT THE ASSESSEE USED TO BRING THE GOLD BULLION FROM AHMEDABAD TO INDORE, ILLEGALL Y AND THE CASH IS DEPOSITED IN BANK ACCOUNT OF THE ASSESSEE AT PLACE WHERE THE DELIVERY IS GIVEN. AT PARA 3.2, THE AO HAS AVERTED THAT THE ASSESSEE HAD DEPOS ITED CASH DEPOSITS MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 54 EXCEEDING RS.800 CRORES IN HIS VARIOUS BANK ACCOUNT S DURING F.Y. 2009-10 AND F.Y. 2010-11. ACCORDING TO THE AO, THE BULLIONS SAL ES HAVE BEEN EFFECTED FROM AHMEDABAD AND INDORE WHEREAS CASH WAS DEPOSITED IN MORE THAN 100 CITIES. ACCORDING TO THE AO, THE ASSESSEE WAS SUPPRESSING T HE FIGURES OF CASH SALES AND FURTHER CREDITS IN BANK ACCOUNT WAS NOT COMMENS URATE WITH THE SALE RECEIPT ON THAT DAY. AT PARA 3.5.3, THE AO MADE SOM E OBSERVATION AS REGARD TO SOME HAWALA TRANSACTIONS ALLEGEDLY CARRIED OUT BY O NE OF THE DIRECTORS OF THE ASSESSEE COMPANY. AT PARA 3.5.5, THE AO AVERTED THA T FROM THE INDEPENDENT MARKET ENQUIRIES, IT WAS FOUND BY HIM THAT ON AN AV ERAGE 100 GMS. GOLD K.G. BAR WAS SOLD WITH A PROFIT IN THE RANGE OF RS.3500/ - TO RS.5000/- AND ONE K.G. SILVER BAR WAS SOLD WITH A PROFIT IN THE RANGE OF R S.1000/- TO RS.2000/- DURING F.Y. 2009-10. FINALLY, AT PARA 3.6, THE AO ESTIMATE D G.P. ON GOLD BAR WEIGHING 571227 GMS. @ RS.4000/- PER 100 GMS. (RS.2,28,49,08 0/-) AND AFTER REDUCING THE G.P. OF RS.43,27,982/- SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT ON SALE OF GOLD BULLION MADE AN ADDITION OF RS.1,85,21 ,098/- ON ACCOUNT OF G.P. ON GOLD BULLION. THE AO, LIKEWISE, ESTIMATED G.P. ON S ILVER BAR WEIGHING 3372.500 K.G. AT RS.1500/- PER K.G. (RS.50,58,806/-) AND AFT ER REDUCING THE G.P. OF RS.13,59,696/- SHOWN BY THE ASSESSEE IN ITS BOOKS O F ACCOUNT ON SALE OF SILVER BAR MADE AN ADDITION OF RS.36,99,110/- ON ACCOUNT O F G.P. ON SILVER BULLION. LIKEWISE, FOR A.Y. 2011-12, THE AO MADE ADDITION OF RS.12,18,17,410/- AND MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 55 RS.39,76,118/- RESPECTIVELY ON ACCOUNT OF G.P. ON G OLD BULLION AND G.P. ON SILVER BAR BY ESTIMATING THE G.P. RATE ON GOLD BULL ION AT RS.4200/- PER 100 GMS. AND SILVER BAR AT RS.1800/- PER K.G. 26. MATTER CARRIED TO LEARNED CIT(A), WHO FOUND THA T THE AO MADE MISTAKE IN CONVERSION OF 1 K.G. GOLD BAR, BY TAKING IT AS E QUAL TO 100 GMS., WHEREAS IN REALITY, IT IS EQUAL TO 1000 GMS. THUS MADE A 10 TI MES HIGHER ESTIMATE OF GROSS PROFIT ON SALE OF GOLD BULLION. THE CIT(A) FURTHER HELD THAT THE SIMILAR MISTAKE WAS DONE IN ESTIMATE OF GROSS PROFIT ON SALE OF SIL VER BAR WHICH WAS TAKEN AT 1 K.G. WHEREAS EACH SILVER BAR IS OF 30 K.G.. THE CIT (A) ALSO HELD THAT THE AO FAILED TO DISCLOSE WHAT WAS THE MARKET ENQUIRY AND FROM WHERE THE DATA OF GROSS PROFIT ON BULLION WAS COLLECTED. THE CIT(A) H ELD THAT THE ESTIMATION OF GROSS PROFIT MADE BY THE AO WAS NOT ON SOUND FOOTIN G AND THE SAME WAS REJECTED. AT PARA 9.1, THE CIT(A) HELD THAT ONCE BO OKS OF ACCOUNTS ARE REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT, MOST RECOGNIZED METHOD IS APPLICATION OF ASSESSEES OWN G.P. RATE O F EARLIER YEARS OR G.P. RATE OF COMPARABLE CASES. AT PARA 9.2, THE CIT(A) REITER ATED THE THEORY OF CASH SALES MADE BY THE ASSESSEE. THE CIT(A) AT PARA 9.2.5 HELD THAT THE ASSESSEE WAS NOT MAINTAINING ANY STOCK REGISTER. THE CIT(A) AT PARA 9.6 HELD THAT IN THE CASE OF ONE OTHER DEALER I.E. SHRI OMPRAKASH DHANWANI (M/S. RAVI BULLION), THE G.P. RATE FOR A.Y. 2007-08 WAS 1.56 % ON A TURNOVER OF R S.26.15 CRORES, WHILE G.P. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 56 RATE FOR A.Y. 2011-12 WAS 0.10 % ON A TURNOVER OF R S.1035.53 CRORES AND IN THAT CASE ALSO SIMILAR MODUS OPERANDI OF MANIPULATION OF CASH SALES WAS DETECTED LEADING TO SUPPRESSION OF TURNOVER & SUPPRESSION OF PROFIT. THE CIT(A) CONSIDERING THAT THERE WAS SHARP INCREASE IN TURNOV ER, A 20% REDUCTION WAS ALLOWED IN G.P. RATE OF M/S. RAVI BULLION FOR THE A SSESSMENT YEAR 2007-08 AT 1.56% AND THE SAME WAS TAKEN AT 1.25%. THE CIT(A) A PPLIED THE SAME RATE OF G.P. I.E. 1.25% FOR BOTH GOLD BULLION AND SILVER BU LLION FOR ALL THE THREE ASSESSMENT YEARS I.E. A.Y. 2009-10, A.Y. 2010-11 & A.Y. 2011-12 FOR THE ASSESSEE. AGAINST THIS FINDING OF LEARNED CIT(A), B OTH ASSESSEE AND REVENUE ARE IN APPEALS BEFORE US. 27. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WE LL AS WRITTEN SUBMISSION AS UNDER: 1.01 IT IS SUBMITTED THAT THE APPELLANT COMPANY HAD MAINTAINED REGULAR BOOKS OF ACCOUNT, IN THE ORDINARY COURSE OF ITS BUS INESS OF BULLION TRADING, IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 44AA OF THE ACT, BY EMPLOYING THE MERCANTILE METHOD OF ACCOUNTING AN D AS ALSO BY OBSERVING THE PRESCRIBED ACCOUNTING STANDARDS AS PR ESCRIBED UNDER SUB-SECTION (2) OF SECTION 145 OF THE ACT. THE APPE LLANT HAS ALSO MAINTAINED DAY-TO-DAY STOCK TALLY IN RESPECT OF EAC H AND EVERY ITEM OF PURCHASES AND SALES OF THE GOODS IN WHICH IT TRADES . FURTHER, SUCH BOOKS OF ACCOUNT AND STOCK TALLY WERE ALSO SUBJECTE D TO AUDIT BOTH UNDER THE COMPANIES ACT, 1956 AND UNDER S. 44AB OF THE INCOME-TAX ACT, 1961 AND THE AUDITORS HAVE NOT FOUND ANY FAULT IN MAINTENANCE OF SUCH BOOKS OF ACCOUNT. FURTHERMORE, THE AO HAS ALSO NOT FOUND ANY SIGNIFICANT DEFECT OR DEFICIENCY IN SUCH BOOKS OF A CCOUNT WHICH COULD HAVE, LEGALLY, GIVEN RISE TO REJECTION OF BOOKS OF ACCOUNT. IN SUCH CIRCUMSTANCES, IN TERMS OF THE PROVISIONS OF SUB-SE CTION (1) OF SECTION 145 OF THE ACT, INCOME OF THE APPELLANT, CHARGEABLE UNDER THE HEAD MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 57 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', OUGH T TO HAVE BEEN COMPUTED ONLY ON THE BASIS OF THE BOOKS OF ACCOUNT WITHOUT MAKING ANY INTERFERENCE OR DISTURBANCE. 1.02 DURING THE COURSE OF THE SEARCH, NOT EVEN A SI NGLE DOCUMENT WAS FOUND OR RECOVERED FROM WHICH IT COULD HAVE BEEN IN FERRED THAT THE APPELLANT HAD NOT FULLY AND CORRECTLY RECORDED ITS BUSINESS TRANSACTIONS. 1.03 THAT, FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION, THE COMMERCIAL TAX AUTHORITIES HAVE ASSESSED THE TURNOVER OF THE APPEL LANT AT THE SAME AMOUNT AT WHICH IT WAS SHOWN BY IT IN ITS REGULAR B OOKS OF ACCOUNT. 2.00 IN THE INSTANT CASE, THE AO HAS REJECTED THE B OOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SUB-SECTION (3) OF SECTI ON 145 OF THE ACT, ON EXTRANEOUS CONSIDERATIONS AND WITHOUT ANY COGENT RE ASON, AS ELABORATELY DEALT WITH SUPRA. IT IS SUBMITTED THAT ONCE THE GROUND RELATING TO THE REJECTION OF THE BOOKS OF ACCOUNT A PPELLANT IS ALLOWED BY HOLDING REJECTION OF BOOKS OF ACCOUNT AS UNCALLE D FOR, THE CONSEQUENT FALLOUT OF SUCH REJECTION BEING THE IMPU GNED ADDITIONS BY WAY OF GP ESTIMATIONS WOULD NO LONGER SURVIVE AND W OULD DESERVE TO BE DELETED AUTOMATICALLY. 3.00 WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTE D THAT IT IS A SETTLED LAW THAT PROVISIONS OF SECTION 145 DO NOT ENVISAGE THAT BY RESORTING TO BEST JUDGMENT ASSESSMENT THE ASSESSING AUTHORITY MUST NE CESSARILY ARRIVE AT A DIFFERENCE FIGURE OF INCOME OR PROFIT THAN WHA T HAS BEEN DISCLOSED BY THE ASSESSEE. MERE REJECTION OF BOOKS OF ACCOUNT NEED NOT NECESSARILY LEAD TO ADDITIONS TO THE RETURNED INCOM E. IT IS NOT NECESSARY FOR THE AO TO MAKE ADDITION BY WAY OF MAK ING ESTIMATIONS. IN THIS REGARD, RELIANCE IS PLACED ON A DIRECT JUDG MENT ON THE ISSUE OF THE HON'BLE HIGH COURT OF RAJASTHAN IN CASE OF CIT VS. GOTAN LIME KHANIJ UDHYOG (2002) 256 ITR 243 (RAJ.). A COPY OF THE JUDGMENT IS PLACED AT PAGE NO. 134 TO 140 OF THE PAPER BOOK. RE LIANCE IS ALSO PLACED ON FOLLOWING JUDICIAL PRONOUNCEMENTS: I) CIT VS. DR. A. P. BAHAL (2010) 322 ITR 71 (RAJ.) I) ACIT VS. D.M. BROTHERS (2010) 44 DTR (RAJ) 13 II) ITO VS. ARUN KUMAR GUPTA (2006) 103 TTJ (JD) 134 III) SATISH KATTA VS. ACIT (2008) 13 DTR (JP) (TRIB) 237 IV) RAKESH KUMAR BANSAL VS. ACIT (2013) 37 CCH 193 AGRA TRIB V) MADAN LAL VS. ITO (2006) 99 TTJ (JD) 538 VI) BRIJMOHANDAS DEVIPRASAD SEHORE VS. ACIT (2007) 8 ITJ 391(INDORE TRIB) VII) AGRAWAL JEWELLERS VS. ACIT (2008) 10 ITJ 10 ( INDORE TRIB) MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 58 4.00 IT IS SUBMITTED THAT IN ANY TRADING BUSINESS, THE GROSS PROFIT IS ALWAYS A RESULTANT AMOUNT OF DIFFERENCE BETWEEN THE SUM OF S ALES AND CLOSING STOCK ON THE ONE HAND AND SUM OF OPENING STOCK, PUR CHASES AND DIRECT EXPENSES ON THE OTHER HAND. IN OTHER WORDS, IF ALL THE ITEMS OF A TRADING ACCOUNT SUCH AS OPENING STOCK, PURCHASES, D IRECT EXPENSES, SALES AND CLOSING STOCK ARE FOUND TO BE CORRECT, TH EN THE RESULTANT AMOUNT BEING THE GROSS PROFIT SHALL ALSO HAVE TO BE TAKEN AS CORRECT. IN THE INSTANT CASE, THE LEARNED AO HAS NOT DOUBTED TH E CORRECTNESS OF ANY OF THE ITEMS OF THE TRADING ACCOUNT AND THEREFO RE, THERE WAS NO JUSTIFICATION FOR MAKING AN ESTIMATION OF GROSS PRO FIT OTHER THAN THAT ARRIVED AT BY THE ITEMS OF THE TRADING ACCOUNT. IT IS SUBMITTED THAT IN THE INSTANT CASE, THE LEARNED AO HAS NOT DOUBTED TH E CORRECTNESS OF THE PURCHASES AND AS ALSO THE DAY-TO-DAY QUANTITY T ALLY AS WELL AS VALUATION OF OPENING AND CLOSING STOCK. THE LEARNED AO HAS ALSO NOT ESTIMATED ANY SALES AS AGAINST THAT SHOWN BY THE AP PELLANT IN ITS BOOKS OF ACCOUNT. IN OTHER WORDS, THE EARNED AO HAS NOT DOUBTED THE CORRECTNESS OF INVENTORIES OR PURCHASES OR SALES AN D THEREFORE, THERE WAS ABSOLUTELY NO JUSTIFICATION FOR HIM FOR MAKING THE ESTIMATION OF GROSS PROFIT. FOR SUCH PROPOSITION, RELIANCE IS PLA CED ON DIRECT JUDGMENT OF HON'BLE ITAT DELHI 'D' BENCH IN THE CAS E OF MASTER ABHINAV MALHOTRA VS. ACIT (2004) 89 TTJ (DEL) 144. THE RELEVANT ABSTRACT OF THE DECISION IS REPRODUCED AS UNDER : '25. WE HAVE HEARD THE PARTIES WITH REFERENCE TO TH E MATERIAL AVAILABLE ON RECORD. THERE IS NO CONSISTENCY IN THE BASIS OF VALUATION OF CLOSING STOCK. THE LEARNED CIT(A) HAS RECORDED A FINDING THAT THERE IS NO UNDERVALUATION OF CLOSING STOCK. BOTH OPENING AND CLOSING STOCK STAND PROPERLY ACCOUNTED FOR. THE PURCHASES ARE ALSO FULLY VOUCHED. THERE IS NO DISCR EPANCY FOUND. THE LEARNED CIT(A) AFTER VERIFICATION OF THE ENTIRE FACTS AND AFTER MAKING COMPLETE ANALYSIS CAME TO THE CONC LUSION THAT ESTIMATION OF SALES AT RS. 85 LAKHS AS AGAINST THE SALES OF RS. 69.03 LAKHS DISCLOSED BY THE ASSESSEE ARE WITHO UT ANY CONCRETE BASIS AND AS SUCH IN HIS OPINION THE SALES DECLARED BY THE ASSESSEE CANNOT BE DISTURBED. ONCE ALL THE FOUR COMPONENTS OF THE TRADING ACCOUNT I.E. OPENING STOC K, CLOSING STOCK, PURCHASES AND SALES ARE FOUND PROPERLY ACCOU NTED FOR, THE BALANCING FIGURE ESSENTIALLY HAS TO BE TAKEN AS GROSS PROFIT OF THE ASSESSEE. THIS LEAVES NO SCOPE OF DISTURBING THE PROFIT RATE. FOR ANY REASON EVEN IF THE ACCOUNTS HAVE BEEN REJECTED THE DEFECTS ARE NOT SO SERIOUS WHICH CALL FOR ANY A DDITION IN THE TRADING RESULTS. THE RATE DIFFERENCE IN SALES STAND S EXPLAINED DUE TO SALES BEING IN THE NATURE OF WHOLESALE AT TH E RELEVANT TIME. SOME OF THE RECEIPT OF JEWELLERY FROM MRS. NA GAR DENIED BY HER ARE FOUND TO HAVE RESULTED INTO DISCLOSURE O F PROFIT BY THE ASSESSEE. THIS CANNOT BE THE BASIS OF APPLYING HIGHER RATE OF PROFIT. DECLINE IN PROFIT RATE ALSO CANNOT BE A REASON FOR MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 59 REJECTING THE ACCOUNTS OF THE ASSESSEE. WHEN THE RE SULTS OF THE ASSESSEE ARE COMPARED WITH THE SIMILAR TRADER LIKE MEHRA SONS, THE TRADING RESULTS DECLARED BY THE ASSESSEE ARE FO UND BETTER. ESTIMATION OF PROFIT RATE WITHOUT GIVING ANY BASIS BY THE LEARNED CIT(A) ARE UNWARRANTED AND UNCALLED FOR EVE N IF THE ACCOUNTS OF THE ASSESSEE HAVE BEEN REJECTED, IT WAS NOT NECESSARY TO ESTIMATE THE PROFIT AND MAKE TRADING A DDITION. SUCH A VIEW FINDS FORTIFIED BY THE DECISION OF THE RAJASTHAN HIGH COURT IN CIT VS. GOTAN LIME KHANIJ UDYOG (2001 ) 169 CTR (RAJ) 318 : (2002) 256 ITR 243 (RAJ). WE, THEREFORE , DO NOT FIND ANY JUSTIFICATION IN SUSTAINING AN ADDITION OF RS. 3,48,629. THE SAME IS THEREFORE, DELETED. AS A RESULT OF THIS, AS SESSEES GROUND STANDS ALLOWED AND THAT OF REVENUE STANDS RE JECTED.' 5.00 IN THE INSTANT CASE, THE CIT(A) GROSSLY ERRED IN ESTIMATING GROSS PROFIT @ 1.25% OF TURNOVER, WITHOUT CONSIDERING AND APPREC IATING THE MATERIAL FACT THAT GOLD BULLION AND SILVER BULLION ARE VERY FAST MOVING ITEMS WITH THE PECULIAR FEATURE OF HIGHER VOLUME AND TURNOVER AND VERY MEAGER MARGIN OF PROFI T. IN THE BULLION TRADE, BECAUSE OF ITS UNIQUE FEATURES SUCH AS NO QU ALITY DISCRIMINATION, COMPLETE AWARENESS OF THE CUSTOMERS AS REGARD TO TH E PREVAILING SELLING PRICE, HIGH VALUE AND LOWER WEIGHT, A BULLI ON TRADER CAN NEVER BE EXPECTED TO EARN THE GROSS PROFIT AS ARBITRARILY ESTIMATED BY THE AO & CIT(A). IT IS SUBMITTED THAT THE ASSESSMENT YEAR UNDER CONSIDERATION WAS JUST THE SECOND YEAR OF OPERATION OF BULLION TR ADE BY THE APPELLANT AND THEREFORE, ITS PROFIT WAS NOT COMPARABLE WITH T HE OTHER DEALERS HAVING VERY OLD ESTABLISHMENT WITH THEIR OWN TRUSTE D CUSTOMERS BASE. IT IS SUBMITTED THAT FOR ESTABLISHING IN THE BULLIO N MARKET, THE APPELLANT WAS COMPELLED TO KEEP ITS GP MARGIN RELAT IVELY ON A LOWER SIDE. 6.00 THE CIT(A) GROSSLY ERRED IN STATING AT PARA 9. 2.5 THAT THE APPELLANT HAD NOT MAINTAINED STOCK REGISTER WHEREAS THE FACT THAT SUCH STOCK REGISTER WAS NOT ONLY MAINTAINED BUT IT WAS ALSO VERIFIED BY THE AO. SUCH STOCK REGISTER EVEN FOUND BY THE SEARCH PARTY WHICH IS AP PARENT FROM THE ANSWER TO QUESTION NO. 6 IN THE STATEMENT OF SHRI P RAGNESH NEEMA GIVEN UNDER S. 132(4) OF THE ACT BEFORE THE SEARCH PARTY [KINDLY REFER P.B. PAGE NO. 166]. 7.00 IT IS SUBMITTED THAT GROSS PROFIT OF ANY COMMO DITY TO A GREAT EXTENT DEPENDS UPON THE STOCK MOVEMENT RATIO. IT IS SUBMIT TED THAT FASTER THE STOCK MOVEMENT THE LOWER WOULD BE THE G.P. RATE BEC AUSE THE DEALER WOULD BE REQUIRING TO INFUSE MINIMUM CAPITAL IN FAS T MOVING ITEMS. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 60 THE G.P. RATE WOULD BE FURTHER LESS IF THE SALES AR E MADE ON CASH BASIS. IN THE APPELLANTS CASE ON A PERUSAL OF THE AUDITED BALANCE SHEET FOR A.Y. 2010-11 [KINDLY REFER P.B. PAGE NO. 103], IT M AY BE OBSERVED THAT THE APPELLANT WAS HAVING OPENING STOCK ONLY 1.84 LA KHS AND CLOSING STOCK 371.52 LAKHS MEANING THEREBY IT WAS HAVING AV ERAGE STOCK OF 186.68 LAKHS AGAINST THE TURNOVER OF 9939 LAKHS. TH US IN OTHER WORDS, THE APPELLANT WAS HAVING STOCK OF 1.87% ONLY, IN TE RMS OF TURNOVER. IT IS SUBMITTED THAT HAD THE TURNOVER ESTIMATED BY CIT (A) WAS GROUND REALITY, THE APPELLANT WOULD HAVE EARNED 1.24 CRORE S GIVING IT RATE OF RETURN ON INVESTMENT OF MORE THAN 60% WHICH IS NOT PRACTICABLE IN ANY TRADING BUSINESS. 8.00 IN THE INSTANT CASE, THE CIT(A) HAS MADE THE E STIMATION OF GP RATES, VERY EXORBITANTLY, WITHOUT KEEPING IN VIEW THE ACTU AL MARGIN IN BULLION TRADE EARNED BY THE OTHER BULLION DEALERS. IT IS SU BMITTED THAT ALTHOUGH FOR THE APPELLANT, THE YEAR UNDER CONSIDERATION WAS THE FIRST YEAR OF BULLION TRADE BUT IN CASE OF OTHER BULLION DEALERS NAMELY M/S. RAVI BULLION AND M/S. M.P. BULLION, IN WHOSE CASES TOO, IN PURSUANCE OF SEARCH UNDER S.132 SIMULTANEOUS ASSESSMENT PROCEEDI NGS UNDER S.153A WERE CARRIED OUT BY THE SAME AO, A REFERENCE AS REGARD TO THE ACTUAL GP RANGE COULD HAVE BEEN TAKEN BY THE LEARNE D AO FROM THE REGULAR ASSESSMENTS UNDER S.143(3) CARRIED OUT IN CASE OF SUCH OTHER DE ALERS, WHICH THE LEARNED AO MISERABLY FAILED TO DO SO. IT IS SUBMITT ED THAT IT IS A SETTLED LAW THAT EVEN IF THE BOOKS OF ACCOUNT OF AN ASSESSE E ARE REJECTED AND PROFIT IS TO BE ESTIMATED SUCH AN ESTIMATION SHOULD NOT BE CAPRICIOUS OR ARBITRARY ONE BUT IT SHOULD BE AN HONEST ESTIMAT ION BASED UPON SOME RATIONAL LOGICS LOOKING TO THE NATURE OF BUSIN ESS AND PAST HISTORY OF THE ASSESSEE. FOR SUCH PROPOSITION, RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: I) BRIJ BHUSHANLAL PRADUMAN KUMAR VS. CIT (1978) 115 I TR 524 (SC) II) MOHANLAL MAHARIBAL VS. CIT (1982) 133 ITR 683 (MP) III) DHAKESHWARI COTTON MILLS LTD. VS. CIT (1954) 26 ITR 775 (SC) IV) A. MUSA & SONS VS. CIT (1953) 23 ITR 73 (BOM.) V) CIT VS. K.Y. PILLAIAH AND SONS (1967) 63 ITR 411 (S C) VI) RAGHUBEER MANDAL HARIHAR MANDAL VS. STATE OF BIHAR (1957) 8 STC 770 (SC) 9.00 THE HON'BLE APEX COURT IN THE CASE OF STATE OF ORRISSA VS. MAHARAJA SHRI B.P. SINGH DEO (1970) 76 ITR 690 (SC) ON BEST JUDGMENT ASSESSMENT HAS OBSERVED AS UNDER: MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 61 '4. APART FROM COMING TO THE CONCLUSION THAT THE MA TERIALS PLACED BEFORE HIM BY THE ASSESSEE WERE NOT RELIABLE , THE ASSTT. COLLECTOR HAS GIVEN NO REASONS FOR ENHANCING THE AS SESSMENT. HIS ORDER DOES NOT DISCLOSE THE BASIS ON WHICH HE H AS ENHANCED THE ASSESSMENT. THE MERE FACT THAT THE MATERIAL PLA CED BY THE ASSESSEE BEFORE THE ASSESSING AUTHORITIES IS UNRELI ABLE DOES NOT EMPOWER THOSE AUTHORITIES TO MAKE AN ARBITRARY ORDE R. THE POWER TO LEVY ASSESSMENT ON THE BASIS OF BEST JUDGM ENT IS NOT AN ARBITRARY POWER; IT IS AN ASSESSMENT ON THE BASI S OF BEST JUDGMENT. IN OTHER WORDS, THAT ASSESSMENT MUST BE B ASED ON SOME RELEVANT MATERIAL. IT IS NOT A POWER THAT CAN BE EXERCISED UNDER THE SWEET WILL AND PLEASURE OF THE CONCERNED AUTHORITIES. THE SCOPE OF THAT POWER HAS BEEN EXPLAINED OVER AND OVER AGAIN BY THIS COURT.' 9.01 RELIANCE IS ALSO PLACED ON THE FOLLOWING JUDIC IAL PRONOUNCEMENTS: I) DHAKESHWARI COTTON MILLS VS. CIT (1954) 26 ITR 775 (SC) II) STATE OF ORISSA VS. SINGH DEV (1970) 76 ITR 69 0 (SC) 10.00 THE REASONABILITY OF THE GROSS PROFIT AS WELL AS THE NET PROFIT SHOWN BY THE APPELLANT IN ITS BOOKS OF ACCOUNT CAN BE ADJUDG ED FROM YET ANOTHER ANGLE OF RETURN ON INVESTMENTS. ON A PERUSA L OF THE AUDITED FINANCIAL STATEMENTS OF THE APPELLANT COMPANY, AS P LACED AT PAGE NO. 86 TO 112 OF THE PAPER BOOK, IT SHALL BE OBSERVED B Y YOUR HONOUR THAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE AP PELLANT COMPANY WAS HAVING OWNED FUNDS TO THE EXTENT OF NEARLY RS.1 75.13 LAKHS ONLY [I.E. PAID UP CAPITAL + SHARE PREMIUM RESERVE + OPE NING ACCUMULATED SURPLUS] AND ON SUCH FUNDS, AFTER INCURRING ALL ADM INISTRATIVE AND FINANCIAL EXPENSES AND AS ALSO THE DIRECTORS REMUNE RATION, THE APPELLANT HAS SHOWN NET PROFIT OF RS.45.56 LAKHS (B EFORE TAX) WHICH WORKS OUT TO BE NEARLY 26% WHICH CANNOT BE SAID TO BE INADEQUATE OR ON A LOWER SIDE. 11.00 THE HONBLE PUNE BENCH IN THE CASE OF SAMRAT BEER BAR VS. ACIT (2000) 69 ITJ (PUNE) TM 113 HAS HELD THE VIEW THAT IN A SE ARCH CASE, AN ASSESSING OFFICER CANNOT PRESUME THAT SOME MATERIAL RELATING TO EARLIER PERIOD HAVE BEEN DESTROYED BY AN ASSESSEE P ARTICULARLY IN A CIRCUMSTANCES WHEN DURING THE COURSE OF SEARCH EACH AND EVERY INVESTMENT AND EXPENDITURE OF THE PERSON SEARCHED I S SUPPOSED TO BE UNEARTHED. IT WAS HELD AS UNDER: MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 62 THE VERY PURPOSE OF A SEARCH IS TO TAKE THE ASSESS EE BY SURPRISE AND TO ASSES HIS INCOME ON THE BASIS OF TH E EVIDENCE AND MATERIALS FOUND DURING THE SEARCH. ONCE THE RAT IONALE BEHIND THE SEARCH IS KEPT IN VIEW, IT WOULD BE CLEA R THAT THE LAW PRESUMES THAT THE ASSETS OR MATERIALS FOUND IN THE COURSE OF THE SEARCH ARE EXHAUSTIVE OF THE UNDISCLOSED INCOME OF THE ASSESSEE. THE AO IS NO DOUBT EMPOWERED TO ESTIMATE THE UNDISCLOSED INCOME EARNED BY THE ASSESSEE, BUT THE ESTIMATE IS POSSIBLE ONLY WHEN THERE IS MATERIAL OR EVIDENCE FO UND DURING THE SEARCH TO UNMISTAKABLY SHOW THAT SUCH INCOME HA S BEEN EARNED. THE AO CANNOT PRESUME THAT THERE MUST BE SO ME OTHER MATERIAL OR EVIDENCE WHICH IS NOT FOUND DURING THE SEARCH AND THE ASSESSEE MUST HAVE DERIVED UNDISCLOSED INCOME THEREFROM. 12.00 IN THE APPELLANTS CASE EXCEPT FINDING EXCES S STOCK OF A WORTH OF NEARLY RS.1.71 CRORES, NO OTHER DISCREPANCY OR OTHER UNDIS CLOSED ASSET WAS FOUND BY THE SEARCH PARTY AND THEREFORE, THERE IS N O JUSTIFICATION FOR MAKING THE ESTIMATION OF HUGE INCOME IN THE INSTANT CASE. FOR THE PROPOSITION, A REFERENCE CAN ALSO BE DRAWN FROM THE JUDGMENT OF THE HONBLE ITAT, JAIPUR BENCH IN THE CASE OF MUSTAQ AH MED & ORS. VS. ACIT (2000)66 TTJ (JP) 305 AS UNDER: IN CASE OF SEARCHERS WHERE ALL BELONGING TO ASSESS EE ARE BEING CAUGHT BY THE DEPARTMENT, IT IS MORE RATIONAL AND A PPROPRIATE TO DETERMINE THE INCOME ON THE BASIS OF ASSETS/EXPE NDITURE THEORY WHICH DULY APPROVED IN ACCOUNTANCY. THE ESTI MATION OF UNDISCLOSED INCOME BY WAY OF A POSITIVE WORKING ON THE BASIS OF STATEMENTS OF TWO PERSONS AND A VERY FEW TRANSAC TIONS APPEARING IN SEIZED PAPERS FOR THE WHOLE BLOCK PERI OD FOR ALL THE PERSONS IS NOT LES THAN A WILD GUESS. THE BEST JUDGMENT ASSESSMENT IS NOT A PUNITIVE ASSESSMENT AND ONE HAS TO TRY TO MAKE A FAIR ESTIMATE NEARER TO THE TRUE AFFAIRS. AN ESTIMATION BASED ON ASSETS AND EXPENDITURE IS OBVIOUSLY BETTER THAN MAKING A WILD GUESS WITHOUT BACKING OF ASSETS/EXPEN DITURE PARTICULARLY WHEN DEPARTMENT HAS NO CASE THAT ANY A SSET REMAINED UNDETERMINED. WHEN AO HIMSELF HAS IDENTIFIED AND ASCERTAINED ALL THE UNDISCLOSED ASSETS AS ALSO ALL KINDS OF UNDISCLOSED EXPENDITURE INCLUDING THE HOUSEHOLD EXPENSES, EXPENDITURE ON MA RRIAGES AND HAJ YATRA, ACQUISITION OF HOUSEHOLD ITEMS, JEWE LLERY AND VEHICLES AND EXTENT OF UNDISCLOSED STOCKS THEN THER E WAS NO JUSTIFICATION IN PRESUMING THAT THERE IS MUCH MORE UNDISCLOSED INCOME. WE FAIL TO UNDERSTAND AS TO WHERE A SUBSTAN TIAL AMOUNT OF RS.9.62 CRORES HAS GONE WHEN THE DEPARTME NT HAS MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 63 CAUGHT EVERY ASSET AND EXPENDITURE PERTAINING TO TH E ASSESSEE BY TAKING RECOURSE TO THE PROVISIONS OF S. 132. WE THUS ALLOW GROUND NO. 2(1) OF THE ASSESSEE BY HOLDING THAT THE UNDISCLOSED INCOME BE DETERMINED ON THE BASIS OF ASSETS AND EXP ENDITURE ONLY INSTEAD OF MAKING ANY ADDITION ON ACCOUNT OF U NDER BILLING, JOB WORK AND SUPPRESSION OF SALES. 13.00 IN THE INSTANT CASE, IF, IT IS PRESUMED THAT THE EXCESS STOCK FOUND DURING THE COURSE OF THE SEARCH WAS NOT A RESULT OF TRADIN G TRANSACTIONS CARRIED OUT BY THE APPELLANT THEN IN SUCH CIRCUMSTA NCES BOOKS OF ACCOUNT CANNOT BE REJECTED AND ESTIMATION OF THE G. P. CAN ALSO NOT BE MADE. HOWEVER, IF, IT IS PRESUMED THAT THE EXCESS S TOCK WAS RESULT OF THE SUPPRESSION OF THE PROFIT BY THE APPELLANT IN I TS BOOKS OF ACCOUNT THEN IN SUCH A SITUATION, HAVING TAXED THE EXCESS S TOCK BEING THE RESULT OF THE SUPPRESS PROFIT, NO SEPARATE ADDITION FOR SU CH SUPPRESSED PROFIT CAN BE MADE. IN OTHER WORDS, FOR A.Y. 2011-12, THE APPELLANT DESERVES TO BE GRANTED THE BENEFIT OF GRANT OF TELESCOPING A GAINST THE VALUE OF EXCESS STOCK FOUND AND SURRENDERED IN THE RETURN AS INCOME. IT IS SUBMITTED THAT IT IS A SETTLED LAW THAT THE ISSUE F OR GRANT OF TELESCOPING CAN BE RAISED FOR THE FIRST TIME BEFORE THE ITAT. R ELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: I) MAJOR GEN (RETD.) KANWARJIT SINGH GILL VS. ACIT (2006) 101 TTJ 0538 (ASR) II) RAMESHWARLAL SONI VS. ACIT 85 TTJ 0553 (TM) ( JD) III) R.K. MEHTA VS. ITO (2013) 157 TTJ (RAJKOT) ( TM) 0649 IV) CIT VS. NELLIAPPAN (1967) 66 ITR 0722 (SC) IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE ESTIMATION OF G.P. @ 1.25% SO MADE BY THE CIT(A) DESERVES TO BE Q UASHED AND THE BOOK RESULTS SHOWN BY THE APPELLANT MAY BE DIRECTED TO B E ACCEPTED. 28. THE LD. DR HAS RELIED ON THE ORDERS OF THE REVE NUE AUTHORITIES. 29. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. LOOKING TO THE FACTS AND CIRCUMSTANCES, WE FIND THAT THERE WAS A SIMULTANEOUS SEARCH U/S 132(1) AND SIMULTANEOUS ASSESSMENT PROCEEDINGS WERE CARRIED OUT IN CASE OF ONE ASSESSE E NAMELY, OMPRAKASH DHANWANI, INDORE. THE NATURE OF BUSINESS OF ASSESSE E WAS ALSO THAT OF DEALING MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 64 IN GOLD, SILVER BULLION ON LARGE SCALE. IN THAT CAS E, THE RATE OF G.P. WAS ESTIMATED BY LEARNED CIT(A) @1.25% OF THE SALES VALUE. WE FIN D THAT THE TRIBUNAL HAS DECIDED IT(SS)A NO.241 TO 243/IND/2015 AND IT(SS)A NOS.254 TO 256/IND/2015 WHEREIN IT IS HELD AS UNDER: 12. AS REGARDS APPLICATION OF GROSS PROFIT RAT E AND ENHANCEMENT IN THE TURNOVER, WE HAVE GONE THROUGH THE VARIOUS DOCUMENTS PLACED BEFO RE US AS ALSO THE RECORD OF THE CASE. WE FIND THAT THE ASSES SEE HAS DISCLOSED GP RATE OF 0.53% IN THE ASSESSMENT YEAR 2009-10, 0.13% IN ASSE SSMENT YEAR 2010-11 AND 0.10% IN THE ASSESSMENT YEAR 2011-12 ON THE SAL ES RECORDED IN THE BOOKS OF ACCOUNTS. THE TURNOVER AS PER BOOKS OF THE ASSES SEE FOR THE ASSESSMENT YEAR 2009-10 WAS RS.190.26 CRORES. THE TURNOVER OF GOLD BULLION FOR THE ASSESSMENT YEAR 2010-11 INCREASED TO RS.585.95 CROR ES AND FOR THE ASSESSMENT YEAR 2011-12 IT INCREASED TO RS.1035.53 CRORES. ONE OF THE MAJOR REASONS CLAIMED FOR THE FALL IN GP RATE WAS THE MAN IFOLD INCREASE IN THE TURNOVER. THE ASSESSING OFFICER ESTIMATED THE PROF IT ON 1 KG. OF GOLD IN THE RANGE OF RS. 4000/- TO RS. 6000/- PER 100 GM AND GP ON SALES OF SILVER WAS IN THE RANGE OF RS.1200/- TO RS. 2500/- ON 1 KG. THE CIT(A) ESTIMATED THE GP AT 1.25% AND ALSO ENHANCED THE TOTAL TURNOVER BY 17.5% FOR THESE YEARS AND MADE THE ADDITION. 13. WE FURTHER FIND THAT THE CIT(APPEALS) VIDE PAR A-14 OF THE ORDER CONCLUDED THAT METHOD OF ESTIMATION OF PROFIT ADOPT ED BY AO WAS DEFECTIVE AND FAULTY HENCE SUCH ESTIMATION OF INCOME WAS REJE CTED FOR ALL THE YEARS IN RELATION TO GROSS PROFIT ON SALES OF GOLD BULLION. SIMILAR DEFECTS WERE ALSO THERE IN ESTIMATION OF PROFIT BY AO ON SALE OF SILV ER BARS HENCE THAT ESTIMATION WAS ALSO REJECTED. HOWEVER, THE LEARNED CIT(A) GROUPED THE SALES OF GOLD BULLION AND SILVER BULLION TOGETHER AT RS. 10,35,53,58,633/- (I.E. GOLD BULLION RS.1030,03,690/- AND SILVER BULLION RS.5,50 ,01,943/-) FOR A.Y. 2011-12. SIMILARLY, THE LEARNED CIT(A) GROUPED THE SALES OF GOLD BULLION AND SILVER BULLION TOGETHER AT RS. 585,95,67,563/- (I.E. GOLD BULLION RS.584,67,73,769/- AND SILVER BULLION RS.1,27,93,794/-) FOR A.Y. 2010- 11 AND BY MAKING ENHANCEMENT OF 17.5% ON AGGREGATE SALES, THE LEARNE D CIT(A) APPLIED GROSS PROFIT RATE OF 1.25%. 14. WE FURTHER FIND THAT THE ADDITIONS IN SILVER B ULLION ACCOUNT WERE MADE BY THE ASSESSING OFFICER AT RS.9,65,123/- AND RS.40,69,563/- IN A.Y. 2010-11 & 2011-12 BY ESTIMATING GROSS PROFIT O N SALE OF SILVER BULLION. IT WAS ALSO CONTENDED BY THE LEARNED COUNSEL FOR THE A SSESSEE BEFORE US THAT NO INCRIMINATING DOCUMENTS REGARDING PURCHASE/SALE OF SILVER BULLION WERE FOUND. GROSS PROFIT ON SALES OF SILVER BULLION WAS DISCLOSED @ 0.63% IN A.Y. 2010-11 AND @ 1.06% IN A.Y. 2011-12. QUANTITATIVE RECORDS HAVE BEEN MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 65 MAINTAINED AND BOOKS OF ACCOUNTS ARE AUDITED. SALE OF SILVER BARS DURING AND IN A.Y. 2010-11 WAS RS.1,27,93,794/- (522.946 KG) W HEREAS SALE IN A.Y. 2011- 12 WAS RS.5,50,01,943/- (1861.524 KG.). THE ASSESSI NG OFFICER DID NOT APPLY GROSS PROFIT RATE BUT HE CONDUCTED MARKET ENQUIRY O F SILVER BULLION TRADE BUSINESS. THE ASSESSING OFFICER ON THE BASIS OF MAR KET ENQUIRY FOUND THAT PROFIT ON ONE KG SILVER BAR WAS IN THE RANGE OF RS. 1200/- TO RS.2500/- PER KG. HE, THEREFORE, ESTIMATED THE GROSS PROFIT @ RS.2,00 0/- PER KG. IN A.Y. 2010-11 AND @ RS.2,500/- PER KG. ON SALES OF 522.946 KG IN A.Y. 2010-11 & ON 1861.524 KG IN A.Y. 2011-12 ON SALES OF SILVER BAR. 15. WE ALSO FIND THAT THE ASSESSEE IS DEALING IN PRECIOUS METAL LIKE GOLD AND SILVER AND THE RATES ARE VERIFIABLE AND AVAILAB LE IN OPEN TO EVERY CUSTOMER FROM MCX GOLD REPORTS OR SARAFA PUBLICATIONS. THUS, THE CUSTOMERS WHO PURCHASE GOODS FROM THE ASSESSEE WERE WELL AWARE AB OUT THE PREVAILING MARKET PRICE OF THESE METALS AT THE RELEVANT TIME. MOST OF THE PURCHASES ARE FROM REPUTED DEALERS. VERY FEW DOCUMENTS PERTAINING TO THE ASSESSMENT YEAR 2011-12 WERE SEIZED WHICH SUGGEST THAT THE ASSESSEE INDULGED IN TRADING WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. FO R RECORDED PURCHASES, THE ASSESSEE WAS MAINTAINING DAY TO DAY STOCK REGIS TER WITH QUANTITIES AND PURCHASE VOUCHERS. THE PAYMENTS WERE ALSO MADE THRO UGH BANKING CHANNELS. THEREFORE, THE LEARNED CIT(A)S ACTION IN ENHANCING THE TURNOVER BY 17.5% FOR ALL THE YEARS IS UNJUSTIFIED. THERE WAS SEIZURE OF DOCUMENTS WHICH SUGGEST UNACCOUNTED SALES FOR THE ASSESSMENT YEAR 2011-12 A ND WITH A VIEW TO PLUG THE LOOPHOLES, WE ARE OF THE VIEW THAT THE ENHANCEM ENT IN TURNOVER BY 5% ON THE SALES RECORDED IN THE BOOKS OF ACCOUNTS SHALL B E REASONABLE FOR THE ASSESSMENT YEAR 2011-12. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO ENHANCE THE TURNOVER BY 5%. FURTHER, ON ACCOUNT OF SHARP FALL IN GP RATE AS DISCLOSED BY THE ASSESSEE AS COMPARED TO ASSESSMENT YEAR 2009-10, WE ALSO FIND IT APPROPRIATE TO ENHANCE THE TURNOVER BY 5% F OR THE ASSESSMENT YEAR 2010-11. WE DIRECT ACCORDINGLY. SINCE WE ARE ACCEP TING THE GP RATE DECLARED FOR THE ASSESSMENT YEAR 2009-10 IN THE ABSENCE OF A NY INCRIMINATING DOCUMENTS FOR THE RELEVANT PERIOD AND BETTER BOOK R ESULTS IN COMPARISON TO SUCCEEDING YEARS AND NO DEFECT IN BOOKS OF ACCOUNTS WAS FOUND BY THE AUTHORITIES BELOW FOR ASSESSMENT YEAR 2009-10, THER EFORE, WE DIRECT TO ACCEPT THE BOOK RESULTS FOR THE ASSESSMENT YEAR 200 9-10. THE GOLD PRICES WERE ALSO INCREASED DURING THE RELEVANT PERIOD. THE AVERAGE GOLD PRICE FOR THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2007-08 WAS RS.8.36 LACS PER KG. WHICH INCREASED TO RS. 16.32 LACS PER KG FOR THE PE RIOD RELEVANT TO THE ASSESSMENT YEAR 2010-11 AND RS. 20,72,000/- FOR THE PERIOD RELEVANT TO ASSESSMENT YEAR 2011-12. WE ALSO OBSERVE THAT WHENE VER THERE IS TREMENDOUS INCREASE IN THE PRICE OF GOLD, THE MARGI N OF PROFIT SHRINKS. GOLD MARKET IS WELL INFORMED MARKED AND GUIDED BY INTERN ATIONAL PRICE. THERE WAS VAT OF 1% ON THE RECORDED TRADING OF GOLD. THUS, TH E GROSS PROFIT ESTIMATED ON UNRECORDED SALES CANNOT BE APPLIED TO THE RECORD ED SALES AS THE MARGIN OF TAX ALSO REMAINS WITH THE SELLER OF UNACCOUNTED SAL ES WHILE IN THE RECORDED SALES THE PRICES ARE INCREASED BY VAT WHICH REDUCES THE MARGIN OF PROFIT BY THE SIMILAR AMOUNT. THE CUMULATIVE EFFECT OF INCREA SE IN TURNOVER AND MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 66 INCREASE IN GOLD PRICE MUST HAVE REDUCED THE GROSS PROFIT FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12. WE ALSO FIND THAT THE AD DITIONAL COMMISSIONER OF THE SAME RANGE IN THE CASE OF SHRI NITESH KUMAR DOSHI FOR THE A.Y. 2010-11 HAS ACCEPTED THE G.P. RATE AT 0.14% ON THE RECORDED SALES AND SHRI DOSHI WAS ALSO ENGAGED IN SIMILAR BUSINESS. IN THE CASE OF B ALDEV KRISHNA THE GP WAS ESTIMATED AT RS. 400/- PER 120 GMS WHICH COMES TO A ROUND 0.2% OF THE SALES RECORDED. SIMILARLY IN THE CASE OF VONAMALA JAGDISH WARAIAH; (2015) 44 CCH 005 GP AT 0.1% HAS BEEN ACCEPTED BY HYDERABAD BENC H OF ITAT AND IN THE CASE OF MAHENDRA KUMAR AGRAWAL (2015) TAX PUBLICATI ON (DT) 2124 THE JAIPUR BENCH OF THE TRIBUNAL ACCEPTED THE GP OF 0.1% . FURTHER, WE ARE OF THE VIEW THAT ON UNRECORDED SALES ESTIMATED, THE PROFIT HAS TO BE WORKED OUT AT THE RATE OF 1.25%. CONSIDERING ALL THESE ASPECTS WE SUS TAIN THE GROSS PROFIT RATE OF 1.25% ON THE ENHANCED TURNOVER OF GOLD BULLION FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12 AND ON THE RECORDED TURNOVER DI SCLOSED IN THE BOOKS OF ACCOUNTS, WE DIRECT TO APPLY GROSS PROFIT RATE OF 0.25%. 16. WE ALSO HOLD THAT THE CIT(A) WAS NOT JUSTIF IED IN CONSIDERING THE COMBINED SALES OF GOLD AND SILVER BULLION BECAUSE T HERE WAS NOT A SINGLE INCRIMINATING DOCUMENT OR ANY EVIDENCE FOUND ON THE BASIS OF WHICH THE ASSESSING OFFICER COULD REJECT THE BOOK RESULTS OF PURCHASE/SALE OF SILVER BULLION. NO ADDITION CAN BE MADE ON ESTIMATIONS AN D ON HYPOTHETICAL GROUNDS WITH REGARD TO SALE OF SILVER BULLION. WE A RE ALSO OF THE VIEW THAT NOT ONLY THE ENHANCEMENT MADE BY THE CIT(A) IN SILVER B ULLION ACCOUNT BY 17.5% BUT THE APPLICATION OF GP RATE OF 1.25% APPLIED BY THE LEARNED CIT(A) IS NOT JUSTIFIED. WE, THEREFORE, DELETE THE ADDITIONS MAD E IN SILVER BULLION ACCOUNT FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12. WE, RESPECTFULLY, FOLLOWING THE SAME, HOLD THAT IN ABSENCE OF ANY INCRIMINATING DOCUMENTS, THERE IS ABSOLUTELY NO JUSTIFICATION FOR MAKING ANY ESTIMATION OF G.P. IN RESPECT OF ASSESSMENT YEAR 2010-11, FOR WHI CH, REJECTION OF BOOKS OF ACCOUNTS HAS NOT BEEN UPHELD BY US. ACCORDINGLY, WE HOLD THAT THERE WAS NO JUSTIFICATION IN THE ASSESSING OFFICERS ACTION AS WELL AS IN THE LEARNED CIT(A)S ACTION IN ESTIMATING G.P. ON SALES FOR THE ASSESSME NT YEAR 2010-11. HOWEVER, FOR ASSESSMENT YEAR 2011-12, WE HAVE UPHELD THE REJ ECTION OF BOOKS OF ACCOUNTS AND THEREFORE, WE HODL THAT CONSIDERING TH E FACTS AND CIRCUMSTANCES MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 67 OF THE ASSESSEES CASE, IT WOULD BE JUST AND FAIR T O ESTIMATE G.P. ON SALE OF GOLD BULLION AND SILVER BULLION @0.30% AS AGAINST 0.29% SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. THUS, THE GROUND NOS. 7(A) AND 7 (B) OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 ARE ALLOWED AN D GROUND NOS.6(A) & 6(B) OF THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YE AR 2011-12 ARE PARTLY ALLOWED. DEPARTMENTAL GROUNDS FOR BOTH THE YEARS ON THIS ISSUE ARE DISMISSED. ASSESSEES GROUND NO. 6(A) & 6(B) (FOR A.Y. 2010-11 ) AND GROUND NO. 5(A) & 5(B) (FOR A.Y. 2011-12) 30. THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE DIR ECTED AGAINST THE ACTION OF THE CIT(A) IN ENHANCING THE INCOME OF THE ASSESS EE BY SUO-MOTTU ESTIMATING THE SALES OF THE ASSESSEE 20% HIGHER THAN THAT SHOW N IN THE AUDITED BOOKS OF ACCOUNT. 31. SHORT FACTS OF THE CASE ARE THAT DURING THE COU RSE OF THE APPELLATE PROCEEDINGS, THE CIT(A) REJECTED THE BOOKS OF ACCOU NT OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T BY USING HIS CO-TERMINUS POWERS. ALTHOUGH, THE AO HAD ALSO REJECTED THE BOOK S OF ACCOUNT BUT HE HAD NOT MADE ANY REFERENCE OF SECTION 145(3) IN HIS ORD ER WHICH WAS OBJECTED BY THE ASSESSEE IN THE APPELLATE PROCEEDINGS BEFORE TH E CIT(A). AFTER REJECTING THE BOOKS OF ACCOUNT, THE CIT(A) HELD THAT IN THE ASSES SEES CASE, CASH SALES ARE MORE THAN 90% OF TOTAL SALES. IT WAS FURTHER OBSERV ED BY THE CIT(A) THAT THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 68 CASH SALES BILLS REMAIN WITH THE ASSESSEE AND IT GI VES LOT OF SCOPE TO HIM FOR MANIPULATION OF RATES, QUANTITY AND AMOUNT OF THE B ILLS. THUS, ACCORDING TO THE CIT(A), THE ASSESSEE WAS ENGAGED IN UNACCOUNTED TRA DING OF BULLION AND HAS THUS SUPPRESSED ITS TURNOVER. ACCORDINGLY, PRESUMIN G SUPPRESSION OF SALES, THE CIT(A), RELYING UPON THE DECISION IN THE CASE OF TR ILOKCHAND GIRDHARILAL (2014) 369 ITR 751, DIRECTED TO ENHANCE THE DECLARED TURNO VER OF THE ASSESSEE BY 20%. 32. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WE LL AS WRITTEN SUBMISSION AS UNDER: (I) THE CIT(A) HAD NOT ISSUED ANY NOTICE UNDER S. 251 OF THE ACT AVERTING THE APPELLANT OF HIS PROPOSED ACTION OF EN HANCING THE SALES BY 20%. (II) THE REJECTION OF BOOKS ITSELF WAS NOT JUSTIFIE D. ONCE IT IS HELD THAT THE BOOKS OF ACCOUNT WERE PROPERLY MAINTAINED, NO ESTIM ATION OF SALES OR GP WOULD BE PERMISSIBLE. (III) DURING THE COURSE OF THE SEARCH, NOT A SINGLE INSTANCE OF SUPPRESSED SALES WAS FOUND. (IV) SALES SHOWN BY THE APPELLANT HAVE DULY BEEN A CCEPTED BY THE COMMERCIAL TAX AUTHORITIES. THE HONBLE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT VS. MAHAN MARBLES (P) LTD. (2013) 3 54 ITR 0238, HAS HELD THAT WHEN THE SALES DECLARED BY THE ASSESSEE W AS ACCEPTED BY THE SALES TAX AUTHORITIES AND NO CASE OF OUT OF BOOKS S ALES WAS FOUND, NO ADDITION BY ESTIMATING EXTRA SALES CAN BE MADE. (V) THE CIT(A) HAS ENHANCED THE SALES MERELY ON PRE SUMPTIONS AND ASSUMPTIONS. 33. THE LD. DR HAS RELIED ON THE ORDERS OF THE REVE NUE AUTHORITIES. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 69 34. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. ON THE IDENTICAL ISSU E IN THE CASE OF OMPRAKASH DHANWANI [IT(SS)A NOS.241 TO 243/IND/2015, ORDER DA TED 17.5.2016), WE HAVE HELD AS UNDER: 16. WE ALSO HOLD THAT THE CIT(A) WAS NOT JUSTI FIED IN CONSIDERING THE COMBINED SALES OF GOLD AND SILVER BULLION BECAUSE T HERE WAS NOT A SINGLE INCRIMINATING DOCUMENT OR ANY EVIDENCE FOUND ON THE BASIS OF WHICH THE ASSESSING OFFICER COULD REJECT THE BOOK RESULTS OF PURCHASE/SALE OF SILVER BULLION. NO ADDITION CAN BE MADE ON ESTIMATIONS AN D ON HYPOTHETICAL GROUNDS WITH REGARD TO SALE OF SILVER BULLION. WE A RE ALSO OF THE VIEW THAT NOT ONLY THE ENHANCEMENT MADE BY THE CIT(A) IN SILVER B ULLION ACCOUNT BY 17.5% BUT THE APPLICATION OF GP RATE OF 1.25% APPLIED BY THE LEARNED CIT(A) IS NOT JUSTIFIED. WE, THEREFORE, DELETE THE ADDITIONS MAD E IN SILVER BULLION ACCOUNT FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12. 34.1 FOLLOWING THE ABOVE ORDER AND LOOKING TO THE F ACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT WE HAVE ALREADY GIVEN OUR F INDINGS IN THE PRECEDING PARAS THAT DURING THE COURSE OF THE SEARCH PROCEEDI NGS, NOT A SINGLE INCRIMINATING DOCUMENT OR LOOSE PAPER WAS FOUND FRO M WHICH THE UNACCOUNTED TRADING OF BULLION BY THE ASSESSEE COUL D GET ESTABLISHED. WE HAVE ALSO OBSERVED THAT THE ASSESSEE HAD MAINTAINED STOC K REGISTER AND SUCH STOCK REGISTER WAS DULY PRODUCED BEFORE THE ASSESSING OFF ICER. WE ALSO OBSERVED THAT THE REVENUE AUTHORITIES HAVE NOT BROUGHT ON RECORD ANY SINGLE INSTANCE OF ANY SALES HAVING BEEN MADE AT A RATE LOWER THAN THE THE N PREVAILING MARKET RATE. IF THE SALE IS NOT FOUND TO HAVE BEEN MADE AT THE RATE BELOW THAN THE MARKET RATE, ANY ALLEGATION REGARDING MANIPULATION IN THE CASH MEMOS WITHOUT ANY MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 70 BASIS HAS NO LEGS TO STAND. WE THUS FIND NO SUBSTAN CE IN THE ACTION OF THE LEARNED CIT(A) IN ENHANCING THE SALES OF THE ASSESS EE ON AD-HOC BASIS BY 20% OF THE SALES SHOWN IN THE AUDITED ACCOUNTS. ACCORDINGL Y, THESE GROUNDS OF APPEALS OF THE ASSESSEE ARE ALLOWED. ASSESSEES GROUND NO. 4(A), 4(B) & 4(C) (FOR A.Y. 2 010-11) AND GROUND NO. 3(A), 3(B) & 3(C) (FOR A.Y. 2011-12) 35. THESE GROUND OF APPEAL OF THE ASSESSEE ARE DIRE CTED AGAINST THE ACTION OF THE CIT(A) IN ENHANCING THE INCOME OF THE ASSESSEE ON ACCOUNT OF INCOME FROM COMMODITY TRADING AT RS.56,47,000/- AND RS.2,39,99, 497/-, RESPECTIVELY, FOR THE A.Y. 2010-11 AND A.Y. 2011-12. HOWEVER, THE LD. COU NSEL FOR THE ASSESSEE DID NOT PRESS GROUND NOS. 4(A) & 4(B) FOR A.Y. 2010-11 AND GROUND NOS. 3(A) & 3(B) FOR A.Y. 2011-12 WHICH ARE RELATED TO GIVING OF OPP ORTUNITY BY THE CIT(A) UNDER S.251(2) OF THE ACT. THEREFORE, SAME ARE DISMISSED BEING NOT PRESSED. 36. SHORT FACTS RELATING TO THE REMAINING GROUND NO S. 4(C) FOR A.Y. 2010-11 AND 3(C) FOR A.Y. 2011-12 ARE THAT DURING THE COURS E OF THE APPELLATE PROCEEDINGS, THE CIT(A) COMPARED COMMODITY TRANSACT IONS TRADING INCOME AND BROKERAGE INCOME FOR THREE ASSESSMENT YEARS WITH TH E TRANSACTIONS CHARGES SHOWN TO HAVE BEEN PAID BY THE ASSESSEE IN THESE TH REE ASSESSMENT YEARS. THE CIT(A) NOTED THAT FOR A.Y. 2009-10, THE ASSESSEE HA D EARNED 212.50% INCOME IN COMPARISON TO TRANSACTION CHARGES PAID WHEREAS, FOR A.Y. 2010-11 AND A.Y. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 71 2011-12, THESE INCOME HAD GOT REDUCED RESPECTIVELY TO 179.68% AND 116.98%. THUS, ACCORDING TO THE CIT(A), THERE WAS SUPPRESSIO N OF COMMODITY TRADING INCOME BY THE ASSESSEE TO THE EXTENT OF RS.56,47,00 0/- FOR A.Y. 2010-11 AND RS.1,92,52,243/- FOR A.Y. 2011-12. FURTHER, THE CIT (A), AT PARA 10.1.2 OF HIS ORDER, FROM A SEIZED DOCUMENT INVENTORIZED AS ANNEX URE B-I/12(LPS-4) AT PAGE NO. 10, WHICH IS A PROVISIONAL PROFIT & LOSS ACCOUN T, OBSERVED THAT IN SUCH SEIZED DOCUMENT, THE TRANSACTION CHARGES HAVE BEEN SHOWN FOR THE PERIOD FROM 01-04-2010 TO 31-03-2011 AT RS.66,13,352/- BUT IN THE AUDITED FINANCIAL STATEMENTS, THE ASSESSEE HAS MADE CLAIM OF THE TRAN SACTION CHARGES FOR A SUM OF RS.1,13,60,636/-. THUS ACCORDING TO THE CIT(A), THE ASSESSEE HAD CLAIMED AN EXCESS TRANSACTION CHARGES OF RS.47,47,254/- IN ITS BOOKS OF ACCOUNT RELEVANT TO A.Y. 2011-12. THE CIT(A) FURTHER AT PARA 10.1.3, OB SERVED THAT AS PER ANOTHER SEIZED DOCUMENT INVENTORIZED AS ANNEXURE B-I/12(LPS -4) AT PAGE NO. 12, THE ASSESSEE HAD SHOWN INCOME IN ICEX TRADING TRANSACTI ONS FOR THE PERIOD FROM 01-04-2010 TO 12-11-2010 AT RS.2,94,82,095/-. THE C IT(A) FURTHER OBSERVED THAT AS AGAINST SUCH INCOME OF RS.2,94,82,095/- SHO WN BY THE ASSESSEE UPTIL 12-11-2010, INCOME FROM SUCH TRANSACTIONS WAS SHOWN BY THE ASSESSEE IN ITS AUDITED PROFIT & LOSS ACCOUNT FOR THE RELEVANT YEAR AT RS.1,02,29,852/- ONLY, THEREBY SHOWING A LESSER INCOME OF RS.1,92,52,243/- . FOR A.Y. 2010-11, THE CIT(A) BY APPLYING THE RATIO OF COMMODITY TRADING I NCOME TO TRANSACTION MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 72 CHARGES FOR A.Y. 2009-10 I.E. [RS.1,48,86,740 / RS. 81,05,210=1.8366] ESTIMATED THE INCOME FROM COMMODITY TRANSACTION AT RS.2,62,21 ,977/- [I.E. TRANSACTION CHARGES RS.1,42,76,775 X 1.8366]. SINCE THE ASSESSE E HAD SHOWN INCOME AT RS.2,05,74,976/- IN ITS PROFIT & LOSS ACCOUNT FOR A .Y. 2010-11, THE CIT(A) DIRECTED TO MAKE ENHANCEMENT OF AN INCOME OF RS.56, 47,000 [RS.2,62,21,977 (- ) RS.2,05,74,976] FOR A.Y. 2010-11. FOR A.Y. 2011-1 2, THE CIT(A) MADE A TOTAL ENHANCEMENT OF RS.2,39,99,497/- I.E. A SUM OF RS.47 ,47,254/- ON THE ALLEGATION OF EXCESS CLAIM OF TRANSACTION CHARGES AND A SUM OF RS.1,92,52,243/- ON ACCOUNT OF SHOWING THE LESSER INCOME FROM COMMODITY TRADING TRANSACTIONS IN AUDITED FINANCIAL STATEMENTS FOR F.Y. 2010-11 [A.Y. 2011-12]. 37. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WE LL AS WRITTEN SUBMISSION AS UNDER: FOR A.Y. 2011-12 TRANSACTION CHARGES DEPEND UPON THE VOLUME OF THE T RANSACTION AND NOT UPON THE NET OUTCOME OF TRANSACTION (I) AT THE OUTSET, IT IS SUBMITTED THAT THE ATTEMPT MADE BY THE LEARNED CIT(A) IN MAKING COMPARISON OF TWO IRRELEVANT FACTO RS IS PATENTLY WRONG. IT IS SUBMITTED THAT TRANSACTION CHARGES ARE BEING CHARGED BY THE COMMODITY EXCHANGES DEPENDING UPON THE NATURE O F THE TRANSACTION AND VOLUME OF THE TRANSACTION. SUCH TRA NSACTION CHARGES ARE CHARGED ON EVERY TRANSACTION WHETHER IT HAS BEE N CARRIED OUT BY THE APPELLANT ON ITS OWN ACCOUNT OR ON ACCOUNT OF I TS CUSTOMERS. HOWEVER, THE TRADING INCOME SHOWN BY THE APPELLANT IN ITS AUDITED FINANCIAL STATEMENTS IS NET RESULT OF VARIOUS FORWA RD TRADING TRANSACTIONS CARRIED OUT BY IT ON ITS OWN BEHALF. IT IS SUBMITTED THAT ON SOME VOLUMINOUS TRANSACTIONS OF A LARGER AMOUNT, THE APPELLANT MAY EARN A LITTLE PROFIT OR EVEN INCUR A LOSS AND I N SUCH CASE SINCE THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 73 TRANSACTION CHARGES ARE CHARGED ON THE BASIS OF VOL UME, THE RATIO OF INCOME OVER CHARGES IS BOUND TO GET REDUCED. THE PO SITION MAY BE CONVERSED IF ON A SMALL VOLUME OF TRANSACTION RELAT IVELY HIGHER INCOME IS EARNED. IN SUCH CIRCUMSTANCES, COMPARISON OF TRA NSACTION CHARGES CANNOT BE A YARDSTICK FOR DETERMINING THE NET RESUL T OF THE TRADING INCOME FOR THE REASON THAT TRADING INCOME IS NOT DI RECTLY DEPENDENT UPON THE PAYMENT OF TRANSACTION CHARGES BUT IT IS D EPENDENT UPON THE FLUCTUATION AND VOLATILITY IN THE COMMODITY MARKET. IN SUCH CIRCUMSTANCES, THE APPROACH OF THE LEARNED CIT(A) I N COMPUTING THE INCOME OF THE APPELLANT FOR A.Y. 2010-11 ON THE BAS IS OF PAYMENT OF TRANSACTION CHARGES IS PATENTLY WRONG. TRANSACTION CHARGES OF RS.66,13,352/- WERE TILL THE DATE OF SEARCH I.E. 25-11- 2010 ONLY AND THEREFORE, THE SAME CANNOT BE COMPARE D WITH THE TRANSACTION CHARGES SHOWN IN THE AUDITED FINANCIAL STATEMENTS A S OF 31 ST MARCH, 2011 (II) THAT, THE LEARNED CIT(A) GROSSLY ERRED IN PRES UMING THAT THE TRANSACTION CHARGES AT RS.66,13,352/- SHOWN BY THE APPELLANT IN ITS PROVISIONAL PROFIT & LOSS ACCOUNT, AS FOUND AND SEI ZED AS B-I/12(LPS-4) AT PAGE NO. 10 [KINDLY REFER PB PAGE NO.149], WAS P ERTAINING TO THE ENTIRE PERIOD FROM 01-04-2010 TO 31-03-2011. THE LE ARNED CIT(A) OUGHT TO HAVE CONSIDERED THAT SUCH LOOSE PAPER WAS SEIZED DURING THE COURSE OF SEARCH UNDER S. 132 WHICH TOOK PLACE ON 2 5-11-2010 AND, THEREFORE, THERE WAS ABSOLUTELY NO JUSTIFICATION TO PRESUME THAT IN SUCH LOOSE PAPER THE TRANSACTIONS UPTIL 31-03-2011 WERE NOTED. THE FACT REMAINED THAT ALTHOUGH AS THE CAPTION ON THE L OOSE PAPER BEING IN THE FORM OF PROVISIONAL PROFIT & LOSS ACCOUNT, THE PERIOD HAS BEEN STATED TO BE FROM 1 APRIL 2010 TO 31 MARCH 2011 BUT THE FACT REMAINED THAT SUCH PROFIT & LOSS ACCOUNT WAS DRAWN TILL THE DATE OF SEARCH ONLY. ACCORDINGLY, ALL THE FIGURES OF INCOME AND EXPENDIT URE, AS STATED WERE AS OF THE DATE OF SEARCH I.E. 25-11-2010 ONLY. IT W AS, THEREFORE, THE TRANSACTION CHARGES WERE STATED ON SUCH PROVISIONAL PROFIT & LOSS ACCOUNT AT RS.66,13,352/- ONLY [UPTIL 25-11-2010] W HICH TILL THE END OF THE RELEVANT PREVIOUS YEAR I.E. 31-03-2011 RAISED T O RS.1,13,60,636/- AS SHOWN IN THE AUDITED FINANCIAL STATEMENTS FOR F. Y. 2010-11 [A.Y. 2011-12]. IN EVIDENCE OF SUCH FACT, THE COPY OF LED GER ACCOUNT OF TRANSACTION CHARGES IN THE BOOKS OF ACCOUNT OF THE APPELLANT FOR A.Y. 2011-12 IS BEING SUBMITTED AT PAGE NO.152 OF THE PA PER BOOK. ON A PERUSAL OF SUCH ACCOUNT, IT SHALL BE OBSERVED BY YO UR HONOURS THAT UPTIL 25-11-2010 THE APPELLANT HAD INCURRED A SUM O F RS.66,13,382/- TOWARDS THE TRANSACTION CHARGES WHICH IS GETTING EX ACTLY TALLIED WITH THE SAME SHOWN IN THE PROVISIONAL PROFIT & LOSS ACC OUNT FOUND DURING THE COURSE OF THE SEARCH. IT SHALL FURTHER BE OBSER VED THAT THE ENTIRE PAYMENTS HAVE BEEN MADE BY THE APPELLANT THROUGH AC COUNT PAYEE CHEQUES ONLY AND THAT TOO TO THE RECOGNIZED COMMODI TY EXCHANGES ONLY. IN SUCH CIRCUMSTANCES, THERE WAS NO JUSTIFICA TION FOR CIT(A) IN MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 74 MAKING DISALLOWANCE OF CLAIM OF THE APPELLANT FOR T RANSACTION CHARGES AT RS.47,47,254/- FOR A.Y. 2011-12. THE INCOME REFERRED TO BY THE CIT(A) WAS IN RESPECT OF ONLY ONE EXCHANGE AND IN RESPECT OF SUCH EXCHANGE THE APPELLANT HAS SHOWN EVEN HIGHER INCOME (III) THAT, AS REGARD THE ESTIMATION OF TRADING INC OME FROM COMMODITY TRANSACTIONS, FOR A.Y. 2011-12, IT IS SUBMITTED THA T HERE AGAIN THE LEARNED CIT(A) HAS COMMITTED A FACTUAL ERROR BY PRE SUMING THAT THE INCOME SHOWN IN THE PROVISIONAL PROFIT & LOSS ACCOU NT FOUND AND INVENTORIZED AS B-I/12 [LPS-4] PAGE NO.12 AT RS.2,9 4,82,095/- WAS THE INCOME OF THE APPELLANT FROM THE ENTIRE COMMODITY T RANSACTIONS CARRIED OUT BY THE APPELLANT THROUGH ALL THE COMMOD ITY EXCHANGES. HOWEVER, THE FACT REMAINED THAT THE APPELLANT IS CA RRYING OUT ITS FORWARD TRADING TRANSACTIONS THROUGH VARIOUS COMMOD ITY EXCHANGES SUCH AS, NMCE, MCX, ICEX, CURRENCY AND NCDEX. DURIN G THE RELEVANT PREVIOUS YEAR, THE APPELLANT EARNED A NET INCOME OF RS.1,02,29,852/- FROM ALL SUCH COMMODITY EXCHANGES, TAKEN TOGETHER, AS SHOWN IN A SEPARATE STATEMENT PLACED AT PAGE NO.163 OF THE PAP ER BOOK. HOWEVER, THE PROFIT & LOSS ACCOUNT [PB PAGE NO.159] REFERRED TO BY THE LEARNED AO WAS IN RESPECT OF ONLY ONE EXCHANGE I.E. ICEX EXCHANGE ONLY. ON A PERUSAL OF THE STATEMENT OF EXCHANGE-WIS E PROFIT AND LOSS, AS PLACED AT PAGE NO.163 OF THE PAPER BOOK, IT SHAL L BE OBSERVED BY YOUR HONOURS THAT AS AGAINST THE INCOME FROM ICEX T RANSACTIONS UPTIL 12-11-2010 AT RS.2,94,82,095/-, THE APPELLANT HAD S HOWN A HIGHER INCOME OF RS.4,00,80,795/- IN ITS BOOKS OF ACCOUNT UPTIL 31-03-2011. IN EVIDENCE OF SUCH FACT, WE HAVE SUBMITTED A COPY OF THE MCS TRADING [ICEX], IN THE BOOKS OF ACCOUNT OF THE APPELLANT FO R THE RELEVANT PREVIOUS YEAR AT PAGE NO.175 OF OUR PAPER BOOK. IN VIEW OF SUCH FACT, IT SHALL BE APPRECIATED BY YOUR HONOURS THAT THE LE ARNED AO HAS COMPARED TWO UNEQUALS I.E. HE HAS COMPARED THE INCO ME FROM ONE COMMODITY EXCHANGE TILL A PARTICULAR DATE WITH THE AGGREGATE OF INCOME/LOSS FROM MANY EXCHANGES TILL ANOTHER DATE. HAD THE LEARNED AO COMPARED THE PROFIT FROM ICEX EXCHANGE ONLY, AS NOTED IN THE SUBJECT LOOSE PAPER WITH THE REGULAR BOOKS OF ACCOU NT, NO DISCREPANCY WOULD HAVE BEEN FOUND AT HIS END. IN SUCH CIRCUMSTA NCES, THERE WAS ABSOLUTELY NO REASON FOR THE LEARNED CIT(A) TO MAKE AN ENHANCEMENT OF INCOME OF RS.1,92,52,243/- IN THE APPELLANTS IN COME ON ALLEGATION OF SUPPRESSION OF COMMODITY TRADING INCOME. FOR A.Y. 2010-11 SINCE, THE ENHANCEMENT MADE BY THE LEARNED CIT(A) F OR A.Y. 2010-11 IS BASED UPON THE VARIOUS OBSERVATIONS MADE BY HIM FOR A.Y. 2011-12 AND FURTHER SINCE WE HAVE DEMONSTRATED THAT THE OBSERVATION MADE BY T HE LEARNED AO FOR A.Y. 2011-12 WERE NOT CORRECT, BUT PATENTLY WRONG, NO AD DITION ON THE BASIS OF MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 75 ESTIMATION FOR A.Y. 2010-11 DESERVES TO SURVIVE. HE NCE THE ENHANCEMENT OF RS.56,47,000/- MADE BY THE CIT(A) DESERVES TO BE DE LETED. 38. THE LD. DR HAS RELIED ON THE ORDERS OF THE LD. CIT(A). 39. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. LOOKING TO THE FACTS AND CIRCUMSTANCES, WE FIND FROM THE PERUSAL OF LOOSE PAPER SEIZED AND INVENTOR ISED AS B-1/12 (LPS-4) PAGE NO.12 FILED AT PAGE NO. 159 OF THE PAPER BOOK THAT IT IS IN THE FORM OF ONE P & L ACCOUNT DRAWN FOR THE PERIOD FROM 01.4.2010 TO 12.1 1.2010 IN RESPECT OF ICEX COMMODITY DIVISION OF THE ASSESSEE. IN SUCH P & L A CCOUNT, THE ASSESSEE HAS SHOWN TO HAVE EARNED COMMODITY TRADING INCOME AMOUN TING TO RS.2,94,82,095/- FROM ICEX DIVISION. WE FIND THAT I N THE AUDITED P & L ACCOUNT, PLACED AT PAGE NO.162 OF THE PAPER BOOK, THE ASSESS EE HAS SHOWN CONSOLIDATED PROFIT FROM NON-DELIVERY BASED TRANSACTIONS ON ALL EXCHANGES AT RS.1,02,29,852/-. THE ASSESSEE HAS FILED THE BREAK- UP OF SUCH INCOME OF RS.1,02,29,852/- AT PAGE NO.163 OF THE PAPER BOOK. ON A PERUSAL OF SUCH BREAK UP, WE OBSERVED THAT THE ASSESSEE HAS DERIVED PROFI T FROM TWO EXCHANGES AND FROM OTHER EXCHANGES, IT HAS INCURRED LOSSES. SO TH E NET RESULT OF ALL THE EXCHANGES HAS WORKED OUT AT RS.1,02,29,852/-. WE OB SERVED THAT IN SUCH BREAK-UP, THE ASSESSEE HAS SHOWN A HIGHER AMOUNT OF PROFIT AT RS.4,00,80,795/- FROM ICES DIVISION, FOR THE PERIOD FROM 01.4.2010 TO 31.3.2011, AS AGAINST THE SAME SHOWN IN THE P & L A CCOUNT FOUND AND SEIZED IN MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 76 RESPECT OF ICEX DIVISION AT RS.2,94,82,095/-. THUS, WE FIND THAT THE ASSESSEE HAS SHOWN AN INCREASED AMOUNT OF PROFIT IN ITS AUDITED ACCOUNTS IN COMPARISON TO THE PROFIT SHOWN IN THE LOOSE PAPER. IT APPEARS THA T THE LEARNED CIT(A) HAS COMMITTED A FACTUAL ERROR BY COMPARING THE RESULTS OF ONLY ONE DIVISION AND THAT TOO, FOR A SHORTER PERIOD WITH THE CONSOLIDATE D RESULTS OF ALL THE DIVISIONS FOR THE WHOLE YEAR. WE FIND THAT THE ASSESSEE HAS M AINTAINED COMPLETE DETAILS IN RESPECT OF ALL THE TRANSACTIONS RELATING TO FORW ARD TRADING AND NO SPECIFIC DISCREPANCY OR DEFECT HAS BEEN NOTED BY THE REVENUE AUTHORITIES. IN SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT T HERE WAS NO REASON FOR THE LEARNED CIT(A) TO TAKE ANY ADVERSE VIEW ON THIS COU NT. THUS, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN MAKING AN ENHANCEMENT OF RS.1, 92,52,243/- IN THE ASSESSEES INCOME FOR THE ASSESSMENT YEAR 2011-12 O N ACCOUNT OF COMMODITY TRADING TRANSACTIONS. WE ALSO FIND THAT THE TRANSAC TION CHARGES HAVE NO DIRECT NEXUS WITH THE COMMODITY TRADING INCOME FOR THE REA SON THAT SUCH CHARGES ARE INVARIABLY REQUIRED TO BE PAID AT A FIXED RATE BY A DEALER/BROKER IN THE FORWARD COMMODITY MARKET TO THE RESPECTIVE COMMODITY EXCHAN GES IRRESPECTIVE OF THE OUTCOME OF THE TRANSACTIONS. SO, EVEN FOR LOSSES, O NE WOULD BE REQUIRED TO PAY THE TRANSACTION CHARGES. FURTHER, THE COMMODITY FOR WARD TRANSACTIONS ARE SPECULATIVE IN THE NATURE AND NET RESULT OF TRANSAC TIONS FOR ONE YEAR CANNOT BE COMPARED WITH THAT OF THE OTHER YEAR. WE FIND THAT EXCEPT MAKING THE GUESS MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 77 WORK, THE LEARNED CIT(A) HAS NOT BROUGHT ON RECORD ANY MATERIAL FOR HIS PRESUMPTION OF SUPPRESSION OF COMMODITY TRADING INC OME. IN SUCH CIRCUMSTANCES, THERE WAS NO REASON FOR THE LEARNED CIT(A) TO ESTIMATE THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010 -11 ON THE BASIS OF TRANSACTION CHARGES VIS-A-VIS COMMODITY INCOME SHOW N BY THE ASSESSEE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2009-10. THUS, THERE WAS NO JUSTIFICATION FOR MAKING AN ENHANCEMENT OF RS.56,47 ,000/- IN THE ASSESSEES INCOME ON ACCOUNT OF COMMODITY TRADING INCOME FOR T HE ASSESSMENT YEAR 2010-11 AND OF RS.1,92,52,243/- FOR ASSESSMENT YEAR 2011-12. WE ALSO FIND NO JUSTIFICATION IN THE LEARNED CIT(A)S ACTION IN MAK ING AN ENHANCEMENT OF RS.47,47,254/- IN THE ASSESSEES INCOME ON ACCOUNT OF EXCESS CLAIM OF TRANSACTION CHARGES. WE FIND THAT THE LEARNED CIT(A ) COULD NOT APPRECIATE THAT IN THE ASSESSEES CASE, SEARCH WAS CARRIED OUT ON 2 5.11.2010 AND THEREFORE, THE TRANSACTION CHARGES FOUND RECORDED ON THE LOOSE PAP ER SEIZED AT RS.66,12,382/- COULD BE ONLY UPTILL THE PERIOD OF S EARCH AND THEREFORE, ITS COMPARISON WITH THE EXPENSES BOOKED UPTILL 31.3.201 1 WAS NOT JUSTIFIABLE. ACCORDINGLY, GROUND NO. 4(C) FOR THE ASSESSMENT YEA R 2010-11 AND GROUND NO.3(C) FOR THE ASSESSMENT YEAR 2011-12 OF THE APPE ALS OF THE ASSESSEE ARE ALLOWED. MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 78 ASSESSEES GROUND NO.5(A), 5(B) & 5(C) (FOR A.Y. 20 10-11) AND GROUND NO. 4(A), 4(B) & 4(C) (FOR A.Y. 2011-12) 40. THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE DIR ECTED AGAINST THE ACTION OF THE LD. CIT(A) OF ENHANCEMENT BY MAKING DISALLOW ANCE OF SALARY OF A SUM OF RS.53,93,000/- FOR A.Y. 2010-11 AND RS.54,93,000/- FOR A.Y. 2011-12. HOWEVER, LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND N OS. 5(A) & 5(B) FOR A.Y. 2010-11 AND GROUND NOS. 4(A) & 4(B) FOR A.Y. 2011-1 2 WHICH ARE RELATED TO GIVING OF OPPORTUNITY BY THE CIT(A) UNDER S.251(2) OF THE ACT. THEREFORE, SAME ARE DISMISSED BEING NOT PRESSED. 41. SHORT FACTS RELATING TO THE REMAINING GROUND NO S. 5(C) FOR A.Y. 2010-11 AND 4(C) FOR A.Y. 2011-12 ARE THAT DURING THE COURS E OF APPELLATE PROCEEDINGS, THE CIT(A), FROM A DOCUMENT SEIZED AND INVENTORIZED DURING THE SEARCH AS B- I/12 [LPS-4] PAGE NO.10, BEING THE PROVISIONAL PROF IT & LOSS ACCOUNT, NOTED THAT THE ASSESSEE HAD SHOWN THE SALARY EXPENSES ONLY AT RS.39,53,000/- ONLY. THE CIT(A) FURTHER OBSERVED THAT IN YET ANOTHER LOOSE P APER, FOUND AND INVENTORIZED AS B-I/1 PAGE NO.5, THE DETAILS OF MON THLY SALARY OF THE STAFF WAS STATED TO BE AT RS.1,43,000/- PER MONTH I.E. RS.17, 16,000/- YEARLY ONLY. AS AGAINST SUCH EXPENDITURE STATED IN THE LOOSE PAPERS , THE CIT(A) OBSERVED THAT THE ASSESSEE HAD CLAIMED SALARY EXPENSES AMOUNTING TO RS.71,09,000/- AND RS.72,09,000/- RESPECTIVELY, IN ITS PROFIT & LOSS A CCOUNTS, FOR A.Y. 2010-11 AND MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 79 A.Y. 2011-12. THUS, THE CIT(A) MADE ENHANCEMENT OF AN INCOME OF RS.53,93,000/- [RS.71,09,000 (-) RS.17,16,000] FOR A.Y. 2010-11 AND RS.54,93,000/- [RS.72,09,000 (-) RS.17,16,000] FOR A.Y. 2011-12. 42. THE LD. AR FOR THE ASSESSEE HAS MADE ORAL AS WE LL AS WRITTEN SUBMISSION AS UNDER: THE STATEMENT REFERRED WAS ONLY IN RESPECT OF ONE DIVISION (I) FIRST OF ALL, THE PROFIT & LOSS ACCOUNT FOUND A ND INVENTORIZED AS B-I/12 [LPS-4] AT PAGE NO.10 [KINDLY REFER PB PAGE NO.149] , WAS ONLY IN RESPECT OF ONE OF THE DIVISIONS I.E. MCX DIVISION O F THE COMPANY ONLY. IT IS SUBMITTED THAT BESIDES MAINTAINING SUCH DIVISION , THE APPELLANT WAS ALSO MAINTAINING OTHER DIVISIONS OF BUSINESSES THRO UGH VARIOUS OTHER COMMODITY EXCHANGES. FURTHER, THE APPELLANT WAS ALS O CARRYING OUT THE BUSINESS OF BULLION IN WHICH IT HAD EFFECTED TU RNOVER IN CRORES. THE STATEMENT WAS PREPARED TILL THE DATE OF SEARCH ONLY (II) FURTHER, THE AFORESAID LOOSE PAPER WAS IN THE FORM OF A PROVISIONAL PROFIT & LOSS ACCOUNT OF THE MCX DIVISION OF THE CO MPANY FOR THE PERIOD FROM 01-04-2010 TO THE DATE OF SEARCH ONLY I .E. UPTIL 25-11- 2010. IN THE STATEMENT THE SALARY WAS STATED FOR 8 MONTHS ONLY (III) THE APPELLANT HAS INCURRED AND CLAIMED SALARY EXPENSES AMOUNTING TO RS.71,09,000/- FOR A.Y. 2010-11 AND RS.72,09,000/- FOR A.Y. 2011-12. THE APPELLANT HAS INCURRED SUCH EXPENSES FOR VARIOU S DIVISIONS. THE DIVISION-WISE BREAK-UP OF SUCH EXPENSES ARE PLACED AT PAGE NO.201 AND PAGE NO.186 OF THE PAPER BOOK. ON A PERUSAL OF THE PAGE NO.186 OF THE PAPER BOOK, IT SHALL BE OBSERVED BY YOUR HON OURS THAT THE APPELLANT COMPANY HAS CLAIMED SALARY EXPENSES, IN R ESPECT OF ITS MCX DIVISION, FOR THE F.Y. 2010-11 AT RS.65,62,000/- ON LY AS AGAINST THE SAME SHOWN IN THE SUBJECT LOOSE PAPER AT RS.39,53,0 00/-. IT IS SUBMITTED THAT IN SUBJECT LOOSE PAPER, THE SALARY F OR 8 MONTHS ONLY WAS STATED I.E. FOR THE MONTH OF APRIL 2010 TO OCTO BER 2010 WHEREAS IN THE PROFIT & LOSS ACCOUNT, THE SALARY FOR THE PERIO D OF 12 MONTHS HAS BEEN CLAIMED. COMPLETE DETAILS OF SALARY PAYMENTS ARE AVAILABLE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 80 (IV) THAT, THE EMPLOYEE-WISE DETAILS OF SALARY FOR A.Y. 2010-11 ARE PLACED AT PAGE NO.209 TO 212 WHEREAS THE SIMILAR DETAILS F OR A.Y. 2011-12 ARE PLACED AT PAGE NO.194 TO 196 OF THE PAPER BOOK. ON A PERUSAL OF SUCH STATEMENTS, IT SHALL BE APPRECIATED BY YOUR HONOURS THAT THE APPELLANT HAS FURNISHED THE COMPLETE DETAILS AS REGARD TO THE NAME OF THE EMPLOYEES, THEIR FATHERS NAME, ADDRESSES, THEIR DE SIGNATION AND TOTAL SALARY PAID TO THEM. ENTIRE SALARY PAYMENT MADE THROUGH ACCOUNT PAYEE CH EQUES ONLY (V) THAT, THE ENTIRE PAYMENT OF SALARY HAS BEEN MAD E BY THE APPELLANT COMPANY THROUGH ACCOUNT PAYEE CHEQUES ONLY. IN EVID ENCE OF SUCH FACT, SPECIMEN COPIES OF BANK ACCOUNT AND BANK STAT EMENTS FOR ONE MONTH ARE PLACED AT PAGE NO.213 TO PAGE NO.218 AND PAGE NO.197 TO PAGE NO.200 OF OUR PAPER BOOK. THE AO DID NOT FIND ANY DISCREPANCY (VI) THAT, DURING THE COURSE OF THE ASSESSMENT PROC EEDINGS, THE APPELLANT HAD PRODUCED ALL THE NECESSARY RECORDS AND BOOKS BE FORE THE AO AND THE AO DID NOT FIND ANY DISCREPANCY OR DEFECT IN CL AIM OF THE APPELLANT AS REGARD TO THE PAYMENT OF SALARY. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE E NHANCEMENT SALARY SO MADE BY THE LEARNED CIT(A) AT RS.53,93,000/- FOR A. Y. 2010-11 AND RS.54,93,000/- FOR A.Y. 2011-12 DESERVE TO BE DELET ED. 43. THE LD. DR HAS RELIED ON THE ORDERS OF THE LD. CIT(A). 44. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. LOOKING TO THE FACTS AND CIRCUMSTANCES, WE FIND THAT LEARNED CIT(A) HAS MISDIRECTED HIMSELF IN COMP ARING THE DETAILS FOR THE MID OF THE YEAR WITH THE FULL YEAR. WE OBSERVED THA T WHILE MAKING THE ENHANCEMENT OF THE SALARY, THE LEARNED CIT(A) HAS C OMMITTED THE SAME ERROR WHICH WAS COMMITTED BY HIM IN ESTIMATING THE COMMOD ITY TRANSACTIONS BASED MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 81 UPON BI/12-LPS-4, PLACED AT PAGE NO.149 OF THE PAPE R BOOK. WE FIND THAT SUCH LOOSE PAPER IS IN THE FORM OF P & L ACCOUNT OF ONE OF THE SEVERAL COMMODITY DIVISIONS OF THE ASSESSEE I.E. OF MCX DIVISION AND THAT TOO, FOR THE PERIOD FROM 01.4.2010 TO THE DATE OF SEARCH I.E. 25.11.2010. SI MILARLY, THE LOOSE PAPER INVENTORISED AS BI/1 PAGE NO.5 WAS ALSO IN RESPECT OF MONTHLY SALARY PAID IN ONE OF THE DIVISIONS. THE LEARNED CIT(A) MISDIRECTE D HIMSELF THAT THE SALARY STATED AT BI/1 PAGE NO.5 WAS IN RESPECT OF ENTIRE DIVISIONS WHEREAS IT WAS ONLY ONE OF THE DIVISIONS. WE FIND THAT THE ASSESSEE HAS FILED THE COMPLETE DETAILS OF SALARY PAID TO VARIOUS STAFF MEMBERS AND THE ENTIRE SALARY WAS PAID THROUGH ACCOUNT PAYEE CHEQUES. THE LD. DR COULD NOT CONTROV ERT SUCH FACT BY BRINING ANY CONTRARY MATERIAL ON RECORD. WE ALSO FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD PRODUCED A LL THE BOOKS OF ACCOUNT AND OTHER RECORDS BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAD NOT FOUND ANY DISCREPANCY IN THE SALARY PAYMENTS RE CORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. IN NUTSHELL, IN OUR VIEW, THE SUBJECT ENHANCEMENT IS A RESULT OF MISINTERPRETATION OF THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH WITHOUT CONSIDERING THAT SUCH DOCUMENTS WERE PERTAI NING ONLY IN RESPECT OF ONE OF THE DIVISIONS AND WERE CONTAINING THE DETAIL S FOR THE PART OF THE YEAR ONLY AND THEREFORE, THE SAME ARE NOT COMPARABLE WIT H THE CONSOLIDATED DETAILS FOR THE WHOLE YEAR. ACCORDINGLY, SUCH ADDITIONS FOR BOTH THE ASSESSMENT YEARS MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 82 ARE DEVOID OF ANY MERIT. THUS, THE GROUNDS NO.5 (C) FOR THE ASSESSMENT YEAR 2010-11 AND 4(C) FOR THE ASSESSMENT YEAR 2011-12 OF THE APPEALS OF THE ASSESSEE ARE ALLOWED. ASSESSEES GROUND NO. 7(A) & 7(B) FOR A.Y. 2011-12 A ND DEPARTMENTAL GROUND NOS. (I) TO (IV) (FOR A.Y. 2011-12) 45. THESE GROUNDS OF APPEAL OF THE DEPARTMENT ARE D IRECTED AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION O F RS.13,12,505/- MADE BY THE AO BY DISBELIEVING THE LOSS INCURRED BY THE ASSESSE E ON ACCOUNT OF SALE OF SURPLUS STOCK OF GOLD BULLION FOUND DURING THE COUR SE OF SEARCH. 46. LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROU ND NOS. 7(A) & 7(B) FOR A.Y. 2011-12, THEREFORE, SAME ARE DISMISSED BEING N OT PRESSED. 47. SHORT FACTS OF THE GROUNDS TAKEN BY THE REVENUE ARE THAT DURING THE COURSE OF THE SEARCH PROCEEDINGS WHICH WERE CARRIED OUT ON 25-11-2010, INTER ALIA, IN THE ASSESSEE'S PREMISES SITUATED AT BUNGAL OW NO. 9, 11 BUNGALOW COLONY, 61/1, LAL BAGH, KESHAR BAGH ROAD, INDORE, P HYSICAL VERIFICATION OF GOLD BULLION, GINNY, COINS, ETC. WAS CARRIED OUT BY THE SEARCH PARTY. UPON PHYSICAL VERIFICATION, TOTAL PHYSICAL STOCK OF GOLD BULLION, GINNY, COINS ETC. WEIGHING 13624.000 GMS. WAS FOUND IN THE ASSESSEE'S PREMISES WHEREAS AS PER THE BOOKS AND STOCK REGISTER OF THE ASSESSEE MAINTAINED UPTILL THE DATE OF SEARCH, THE STOCK OF GOLD BULLION, GINNY, COINS ETC. WAS FO UND RECORDED AT 5061.897 MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 83 GMS. THEREBY RESULTING IN AN EXCESS STOCK OF 8562.1 03 GMS. THE VALUATION OF SUCH STOCK WEIGHING 8562.103 GMS. WAS GOT VALUED BY THE SEARCH PARTY FROM THE GOVERNMENT REGISTERED VALUER AT RS.1,73,81,069/ - I.E. AT RS.2,030/- PER GM. THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE S OF INVESTMENT IN THE EXCESS STOCK SO FOUND. ACCORDINGLY, SHRI PRAGNESH N EEMA, ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY, WHILE RECORDING HIS STATEM ENT BEFORE THE SEARCH PARTY UNDER S. 132(4) OF THE ACT, VIDE HIS REPLY TO Q. NO. 6, EXPRESSED HIS INABILITY TO EXPLAIN THE SOURCE OF THE EXCESS STOCK OF GOLD BULLION, WEIGHING 8562.103 GMS., SO FOUND AND ACCORDINGLY, ADMITTED T HE AFORESAID SUM OF RS.1,73,81,069/- AS THE UNACCOUNTED INVESTMENT OF T HE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. SUBSEQUENT TO THE DATE OF SEARCH, THE ASSESSEE COMPANY HAD RECORDED THE AFORESAID EXC ESS STOCK OF GOLD BULLION WEIGHING 8562.103 GMS. IN ITS STOCK REGISTER WITHOU T CLAIMING ANY COST FOR ACQUISITION OF SUCH BULLION IN ITS BOOKS OF ACCOUNT . SUBSEQUENTLY, AS ON 28-01- 2011, THE ASSESSEE HAD SOLD THE ENTIRE STOCK OF AFO RESAID GOLD BULLION, AT THE THEN PREVAILING MARKET RATE OF THE GOLD BULLION IN LOCAL MARKET I.E. AT RS.1,943/- PER GM., TO A THIRD PARTY, FOR A SUM OF RS.1,66,40, 772/-. THE NECESSARY ENTRY REGARDING THE AFORESAID SALES WAS MADE BY THE ASSES SEE COMPANY IN ITS REGULAR BOOKS OF ACCOUNT. ACCORDING TO THE AO, DUE TO AFORE SAID SALE OF STOCK ON 28-01- 2011, THERE HAS RESULTED A LOSS OF RS.7,40,297/- TO THE ASSESSEE BEING THE MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 84 ACTUAL SALES PROCEEDS OF THE EXCESS STOCK AT RS.1,6 6,40,772/- VIS--VIS THE VALUATION OF THE EXCESS STOCK MADE ON THE DATE OF S EARCH AT RS.1,73,81,069/-. THE AO VERIFIED THAT ALTHOUGH, AS ON 28-01-2011, TH E RATE OF GOLD BULLION WAS THE SAME I.E. RS.1943/- PER GM. AT WHICH THE ASSESS EE SOLD THE EXCESS STOCK BUT ACCORDING TO THE AO, THE SALE OF GOLD BULLION WAS D ELIBERATELY SHOWN BY THE ASSESSEE ON SUCH DATE AT WHICH THE GOLD RATE WAS LO W AS COMPARED TO THE RATE OF PREVIOUS COUPLE OF DAYS. THE AO ALSO NOTED FROM THE RECORD OF OTHER TWO BULLION DEALERS NAMELY M/S. RAVI BULLION AND M/S. M .P. BULLION THAT THESE DEALERS HAD SOLD THE GOLD BULLION ON AN AVERAGE RAT E OF RS.1970/- PER GM. FURTHER, ACCORDING TO THE AO, THE ASSESSEE HAS SHOW N TO HAVE SOLD THE EXCESS STOCK ON 28-01-2011 FOR BOOKING LOSS OF RS.7,40,297 /- ON SALE OF UNACCOUNTED INVESTMENT. FINALLY, ON THE ONE HAND, THE AO DISALL OWED THE ENTIRE LOSS OF RS.7,40,297/- AS ARISEN TO THE ASSESSEE ON SALE OF SURPLUS STOCK OF GOLD BULLION FOUND ON SEARCH AND ON THE OTHER HAND, FURTHER ESTI MATED GP RATE OF RS.4200/- PER 100 GMS. ON THE ENTIRE PHYSICAL STOCK OF GOLD BULLION WEIGHING 13624 GMS. AS FOUND ON THE DATE OF SEARCH, AT RS.5,72,208/-. T HUS, IN TOTALITY, AN ADDITION OF RS.13,12,505/- [RS.7,40,297 + RS.5,72,208] WAS M ADE BY THE AO IN THE ASSESSEE'S RETURNED INCOME. 48. MATTER CARRIED TO LEARNED CIT(A), WHO DELETED T HE ENTIRE ADDITION OF RS.13,12,505/- BY HOLDING THAT THE AO FAILED TO PRO VE THAT SALE BILLS OF BULLION MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 85 WHERE STOCK WAS SOLD AT A LOSS WERE BOGUS AND EVEN IF SUCH SALE IS CONSIDERED AS DOUBTFUL, IT IS DULY TAKEN CARE OF, BY GP ADDITI ON ALREADY UPHELD BY HIM. 49. THE LD. AR FOR THE ASSESSEE HAS, REITERATING TH E SUBMISSIONS MADE BEFORE THE LD. CIT(A), RELIED UPON THE ORDER OF THE LD. CI T(A). 50. ON THE OTHER HAND, LD. DR HAS RELIED ON THE ORD ERS OF THE ASSESSING OFFICER. 51. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSE SSEE HAD SOLD THE ENTIRE STOCK OF AFORESAID GOLD BULLION, AT THE THEN PREVAI LING MARKET RATE OF THE GOLD BULLION IN LOCAL MARKET I.E. AT RS.1,943/- PER GM., TO A THIRD PARTY. THE NECESSARY ENTRY REGARDING THE AFORESAID SALES WAS MADE BY THE ASSESSEE COMPANY IN ITS REGULAR BOOKS OF ACCOUNT. THE AO VERIFIED THAT AS O N 28-01-2011, THE RATE OF GOLD BULLION WAS THE SAME I.E. RS.1943/- PER GM. AT WHICH THE ASSESSEE SOLD THE EXCESS STOCK. HOWEVER, THE AO, WITHOUT BRINGING ANY CONCRETE MATERIAL ON RECORD, PRESUMED THAT THE SALE OF GOLD BULLION WAS DELIBERATELY SHOWN BY THE ASSESSEE ON SUCH DATE AT WHICH THE GOLD RATE WAS LO W AS COMPARED TO THE RATE OF PREVIOUS COUPLE OF DAYS AND THE ASSESSEE HAS SHO WN TO HAVE SOLD THE EXCESS STOCK ON 28-01-2011 FOR BOOKING LOSS OF RS.7,40,297 /- ON SALE OF UNACCOUNTED INVESTMENT. WE HAVE ALREADY HELD THAT NO EVIDENCE F OUND AS REGARD TO MCS TRADING IT(SS)A NO.257 OF 2015 AND OTHERS 86 SUPPRESSION OF ANY SALE. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ENTIRE ADDITIO N HOLDING THAT THE AO FAILED TO PROVE THAT SALE BILLS OF BULLION WERE BOGUS. EVEN B EFORE US, NO CONTRARY MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO CONTROVERT THE FINDINGS OF THE LD. CIT(A). THUS, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY, GROUNDS OF THE APPE ALS OF THE REVENUE ON THIS ISSUE ARE DISMISSED WHEREAS THAT OF THE ASSESSEES ARE ALLOWED. FINALLY, THE APPEALS OF THE ASSESSEE ARE PARTLY ALL OWED WHEREAS THAT OF THE REVENUE ARE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 08.12.20 16. SD/- (O.P. MEENA) ACCOUNTANT MEMBER SD/- ( D.T. GARASIA) JUDICIAL MEMBER DATED : 08.12.2016 COPY TO: ASSESSEE/RESPONDENT/CIT(A)/CIT/DR, INDORE