The ACIT, Indore V. M/s. Shivangi Estates Ltd., Indore

ITSSA 35/IND/2010

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7656 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 12-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S N AGARWAL
• Assessee Lawyers: ANADI VERMA
• Keywords: Business income; Income from undisclosed sources; Search and seizure; Loose papers
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AACCA1283E I.T(SS).A.NO. 34/IND/2010 A.Y. : 2007-08 ACIT, M/S.ANANT STEEL PVT.LTD., 5(1), VS 170/10, FILM COLONY, INDORE. R.N.T.MARG, INDORE. APPELLANT RESPONDENT PAN NO. : AAGCS8004B I.T(SS).A.NO. 35/IND/2010 A.Y. : 2007-08 ACIT, M/S. SHIVANGI ESTATES LIMITED, 5(1), VS 170/10, FILM COLONY, INDORE. R.N.T.MARG, INDORE. APPELLANT RESPONDENT A PPELLANTS BY : SHRI ANADI VERMA, CIT DR DEPARTMENT BY : SHRI S.N.AGARWAL, C. A. DATE OF HEARING : 13 . 12 .201 1 DATE OF PRONOUNCEMENT : 13 . 0 2 .201 2 O R D E R -: 2: - 2 PER R. C. SHARMA, A.M. THESE ARE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 15.01.2010 FOR THE ASSES SMENT YEAR 2007-08, IN THE MATTER OF ORDER PASSED U/S 153 A READ WITH SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ONLY GRIEVANCE OF THE REVENUE IN BOTH THE APPEA LS RELATES TO DELETING THE ADDITION MADE ON ACCOUNT OF EXTRAPOLATION OF PROFIT ON ALLEGED UNACCOUNTED TURN OVER. 3. FACTS OF THE CASE ARE THAT SEARCH U/S 132 OF THE INCOME TAX ACT WAS EXECUTED ON 21.11.2006 ON THE OF FICE AND FACTORY PREMISES OF THE ASSESSEE GROUP. A NOTICE U/ S 153A OF THE INCOME TAX ACT WAS ISSUED TO THE ASSESSEE ON 05/10/ 2007 WHICH SERVED TO THE ASSESSEE ON 08.10.2007. IN THE CASE OF ANANT STEELS, THE ASSESSEE HAD FILED ITS RETURN OF TOTAL INCOME ON 14.11.2007 VIDE ACK. NO 9148811141107 DECLARING TOT AL INCOME AT LOSS OF RS. 1,42,84,106/-. THE ASSESSING OFFICER OBSERVED THAT AT THE TIME OF SEARCH IN THE CASE OF ANANT STEELS, THE ASSESSEE HAS AGREED TO SURRENDERED AN AMOUNT OF RS. 89,61, 911/- UNDER THE FOLLOWING HEADS OF INCOME :- -: 3: - 3 S.NO. DESCRIPTION OF HEAD ANANT STEELS P.LTD. 1. EXCESS STOCK 37,94,670 2. LOOSE PAPERS FOUND 42,67,241 3. PAYMENT MADE OUT OF BOOK 9,00,000 4. AT THE TIME OF SEARCH IN CASE OF SHIVANGI ESTATES, THE ASSESSEE HAS AGREED TO SURRENDER AN AMOUNT OF RS. 57,23,421/- UNDER THE FOLLOWING HEADS OF INCOME :- S.NO. DESCRIPTION OF HEAD SHIVANGI ESTATES LIMITED 1. EXCESS STOCK 2490662 2. LOOSE PAPERS FOUND 32,32,759 3. PAYMENT MADE OUT OF BOOK NIL 57,23,421 5. WITH REGARD TO THE AMOUNT SURRENDERED DURING SEARCH , THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HA S OFFERED AN AMOUNT OF RS. L,46,85,332/- IN BOTH THESE COMPAN IES, BREAK UP OF THE SAME ARE GIVEN ABOVE, CONSISTING OF EXCESS STOCK OF RS. 62,85,332/-, LOOSE PAPERS OF RS. 75,00,000/- AND UNRECORDED PAYMENT OF RS. 9,00,000/-. ON SCREENING OF THE AUDITED FINAL ACCOUNT AND REPLY OF THE ASSESSEE IT IS -: 4: - 4 NOTICED THAT THE ASSESSEE HAD OFFERED AN AMOUNT OF RS. 69,09,754/- AND RS.77,93,467/- ON ACCOUNT OF EXCESS STOCK OF ANANT STEELS P LIMITED AND M/S SHIVANGI ESTATE LIMITED TOTALING TO RS. 1,47,03,221/- AND IN ADDITION TO TH AT AN AMOUNT OF RS.25,00,000/- WAS OFFERED ON ACCOUNT OF LOOSE PAPERS IN THE COMPUTATION OF INCOME. THUS, TOTAL AM OUNT OF INCOME DECLARED BY THE ASSESSEE IN BOTH THESE COMPA NIES WERE OF RS. 1,72,03,221/- AS AGAINST INCOME DECLARE D AT THE TIME OF SEARCH WAS OF RS.L,46,85,332/-. AS REGARD THE CASE OF THE ASSESSEE IS CONCERNED, THE ASSESSEE COMPANY HAS OFFERED AN AMOUNT OF RS.77,93,467/- ON ACCOUNT OF EXCESS STOCK HIGHER THAN WHAT WAS ACCEPTED AT THE TIME OF SEARCH . CONSIDERING THESE FACTS NO ADVERSE VIEW WAS TAKEN B Y ASSESSING OFFICER. 6. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHETHER TH E SAID AMOUNT OF RS. 89,61,911/- IS INCLUDED IN THE F IGURE OF TOTAL INCOME OF THE ASSESSEE OR NOT. THE ASSESSEE V IDE ITS CONSOLIDATED REPLY AS FILED INCLUDING NAME OF BOTH THESE COMPANIES READS AS UNDER:- ' 1] THAT YOU HAVE ASKED FROM THE ASSESSEE TO EXPLAIN WHETHER AMOUNT -: 5: - 5 SURRENDERED AT THE TIME OF SEARCH INCLUDED IN THE RETURN OF TOTAL INCOME OR NOT. 2 .1] THAT AT THE TIME OF SEARCH ADDITIONAL INCOME OF RS. 1,46,85,332/- WERE DECLARED IN THE CASE OF THE ASSESSEE AND M/S. SHIVANGI ESTATES LIMITED. BREAK-UP OF THE SAME ARE AS UNDER:- S.NO DESCRIPTION OF HEAD ANANT STEELS SHIVANGI TOTAL P LIMITED ESTATES LIMITED 1 EXCESS STOCK 379 4670 2490662 6285332 2 LOOSE PAPERS FOUND 4267241 3232759 7500000 3 PAYMENT MADE OUT OF 900000 NIL 900000 BOOK 8961911 5723421 146853 2 2.2] THAT AS FAR AS DECLARATION IN RESPECT OF LOOS E PAPERS AND PAYMENT MADE OUT OF BOOKS OF RS.75,00,000/- AND RS.9,00,000/-ARE CONCERNED, BOTH THESE AMOUNT INCLUDED IN THE AMOUNT OF EXCESS STOCK FOUND AT THE TIME OF SEARCH. THE ASSESSEE ON PRECAUTIONARY MEASURE ON AD HOC BASIS AND TO AVOID HARASSMENT HAS READY TO PAY TAX ON THE AMOUNT OF ADDITION INCOME OF RS 1.46 CRORES WHICH INCLUDES -: 6: - 6 EXCESS STOCK, LOOSE PAPERS AND PAYMENT MADE OUT OF BOOKS OF ACCOUNT. 2.3] THAT LOOSE PAPERS THOUGH DUMB IN NATURE BUT WHAT SO EVER THERE NATURE, CONSIDERED IN THE AMOUNT OF EXCESS STOCK FOUND. 2.4.1]IT IS VERY WELL SETTLED PRINCIPLE THAT IN S EARCH PROCEEDING ONE CAN BE TAXED IN RESPECT OF THE DIFFERENCE OF THE AMOUNT OF ASSETS FOUND AND THAT WAS DISCLOSED BY THE ASSESSEE. 2.4.2] THAT PAYMENT MADE OUT OF BOOKS TOWARDS PURCHASE OF GOODS DULY CONSIDERED IN THE AMOUNT OF EXCESS STOCK FOUND. HENCE, NO SEPARATE ADDITION IS JUSTIFIED. THE ASSESSEE HAS NOT CLAIMED CREDIT OF UNPAID STOCK. HENCE, NO SEPARATE ADDITION IS JUSTIF IED ON ACCOUNT OF PAYMENT MADE OUT OF BOOK. FOR THIS REASON ONLY THE SAID AMOUNT OF RS. 9,00,000/- WAS NOT OFFERED BY THE ASSESSEE SEPARATELY IN ITS RETURN OF TOTAL INCOME. 2.5.1] THAT AS REGARD ADDITIONAL INCOME OF RS 75 -: 7: - 7 LACS DECLARED ON THE BASIS OF LOOSE PAPERS ARE CONCERNED. ON PERUSAL OF THE LOOSE PAPERS, WE FIND THAT THE CRUX OF LOOSE PAPERS HAS ALREADY BEEN INCLUDED IN FORM OF EXCESS STOCK FOUND. HENCE, THERE IS NO REASON FOR DECLARING ADDITIONAL INCOME ON ACCOUNT LOOSE PAPERS. 2.5.2] THE ASSESSEE IN ITS RETURN OF TOTAL INCOME THOUGH DECLARED ADDITIONAL INCOME OF RS. 25,00,000/- ON ACCOUNT OF LOOSE PAPERS SEPARATELY. HOWEVER, BY WAY OF NOTES ANNEXED WITH THE RETURN OF TOTAL INCOM E IT WAS CLAIMED THAT THE SAID AMOUNT OF ADDITIONAL INCOME AS DECLARED ON ACCOUNT OF LOOSE PAPERS OF RS. 25,00,000/- BE WITHDRAWN AND ASSESSED INCOME REQUIRES TO BE REDUCED BY THAT AMOUNT. 7. FURTHER THE AO REQUIRED THE APPELLANT TO EXPLAIN T HE NATURE. OF VARIOUS LOOSE PAPERS FOUND AND SEIZED AS PER LPS-2 FROM THE RESIDENTIAL PREMISES OF THE DIRECTOR OF THE ASSESSEE COMPANY, DR. R.K. BANSAL AND THE ASSESSEE WAS FURTHER REQUIRED TO EXPLAIN WHY THE BOOKS OF ACCOUN TS SHOULD NOT BE REJECTED U/S 145(3). THE APPELLANT SU BMITTED -: 8: - 8 DETAILED REPLY ON THIS ISSUE WHICH IS INCORPORATED BY AO ON PAGE 4 TO 8 OF THE ASSESSMENT ORDER. THE AO AFTER CONSIDERATION OF THE DETAILED REPLY SUBMITTED BY AP PELLANT OBSERVED THAT THE APPELLANT WAS INVOLVED IN PARALLE L BILLING OF SIMILAR NUMBER ON PAGE 8 OF THE ASSESSMENT ORDER 2.3. THEREAFTER, CALCULATED UNACCOUNTED SALE OF THE APPE LLANT ON PAGE 9, 10 & 11 OF THE ASSESSMENT ORDER FOR BOTH TH E GROUP CASES NAMELY ANANT STEEL AND SHIVANGI ESTATE PVT. L IMITED. 8. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE GROUP'S AVERAGE DAILY RECEIPT AGAINST UN RECORDED S ALE IS RS.48,36,428/-. TOTAL WORKING DAYS IN YEAR WAS CONS IDERED AT 340 DAYS FOR ESTIMATING UNRECORDED SALES OF THE ASSESSEE COMPANY WHICH WORKS OUT TO 1,64,43,85,520/-.( 4836428*340). 9. ON THE BASIS OF PARALLEL INVOICING IT WAS FOUND DUR ING THE COURSE OF SEARCH AT ANANT STEELS PRIVATE LIMIT ED THAT IT HAS ISSUED INVOICE NO.1284 ON 15.11.2006 TO NEW SAR DAR STEELS AND SOLD 17.070 M. T. IRON BARS FOR RS. 3,54 ,185/-. IT WAS FURTHER NOTICED THAT INVOICE HAS NOT BEEN ACCOUNTED FOR BY THE ASSESSEE COMPANY AS SEPARATE INVOICE OF SAME NUMBERS HAS BEEN ISSUED TO M/S. VIJ AY -: 9: - 9 SALES CORPORATION HAS BEEN ACCOUNTED FOR IN ITS BOO KS OF ACCOUNT. FROM THIS ASSESSING OFFICER INFERRED THAT THE ASSESSEE COMPANY UP TO 15/11/2006 OR IN THE 220 DAY S THE COMPANY HAD ISSUED 1284 INVOICES WHICH HAS NOT BEEN ENTERED IN THE REGULAR BOOKS OF THE ASSESSEE COMPAN Y. BY TAKING AVERAGE WEIGHT OF 16.000 M.TONS BY CONSIDERI NG THE RATE OF RS 20,750/-, THE AMOUNT OF UNRECORDED SALES WAS CALCULATED AT RS.42,62,88,000/-(L6.000 M.TONS * 220 DAYS = 20544 @ RS. 20750/-), FOR 340 DAYS IT WILL BE RS.65,88,08,727/- (426288000/220X340) IN THE HANDS OF ANANT STEELS PVT LTD. SIMILARLY, IN THE CASE OF SHI VANGI ESTATES LTD INVOICE NO 1399 ON 18/11/2006 FOUND AND SEIZED FROM THE PREMISES OF NEW SARDAR STEELS FOR 2 2.680 M. TON OF IRON BARS. THE ASSESSING OFFICER STATED THAT THIS INVOICE HAS NOT BEEN ACCOUNTED FOR BY THE ASSESSEE COMPANY, AS SEPARATE INVOICE OF SAME NUMBERS HAS BE EN ISSUED TO OTHER PARTY WHICH WAS ACCOUNTED FOR IN TH E BOOKS OF ACCOUNT. THIS MEANS UP TO 18/11/2006 OR IN THE 2 23 DAYS THE COMPANY HAD ISSUED 1399 INVOICES WHICH DID NOT ENTER IN THE SALES OF THE ASSESSEE COMPANY. FROM TH IS INFERENCE CAN BE DRAWN THAT THE ASSESSEE COMPANY IS SUED -: 10: - 10 PARALLEL INVOICES UP TO 1399 AND BY TAKING AVERAGE WEIGHT OF 21.000 M.TONS BY CONSIDERING THE RATE OF RS. 19,840 /-, UNRECORDED SALES UP TO ISSUANCE OF 1399 INVOICES WO RKS OUT TO RS.58,28,79,360/- (21 M.TONS * 1399= 29379 @ RS.19,840/-), FOR 340 DAYS IT WILL BE RS. 88,86,94, 988/- (582879360/223X340) IN THE HANDS OF SHIVANGI ESTATE S LTD. THE ASSESSING OFFICER FURTHER STATED THAT THE RECEI PT METHOD AND FROM PARALLEL BILLS METHOD THERE ARE NO MAJOR D IFFERENCE IN THE AMOUNT OF UN-RECORDED TOTAL TURNOVER. RECEIP T METHODS WERE CONSIDERED BY ASSESSING OFFICER FOR CALCULATING TOTAL TURNOVER OF THE ASSESSEE COMPANY. SINCE THE AVERAGE RECEIPTS ARE NOT IDENTIFIABLE AS TO WHI CH ARE OF ANANT STEELS PVT. LTD. AND WHICH ARE OF SHIVANGI ES TATES LTD. ASSESSING OFFICER DIVIDED THE SAME IN THE RATI O OF TURNOVER OF THESE COMPANIES AS SHOWN IN THE RETURN OF INCOME FOR THE ASSTT. YEAR 2006-07. ANANT STEEL PVT LTD HAS SHOWN TOTAL SALES AT RS.33,61,43,746/- AND SHIVANGI ESTATES LTD HAS SHOWN TOTAL SALES AT RS.25,16,61,95 9/-. HOWEVER, T HE AO GRANTED SET-OFF OF ADDITIONAL INCOME SURRENDERED BY THE APPELLANT FOR EXCESS STOCK FOUND TO THE TUNE OF RS.77,93,467/- IN THE CASE OF SHIVANGI -: 11: - 11 ESTATE PVT.LTD. AND IN THE CASE OF ANANT STEEL LTD. , THE AO GRANTED SIMILAR SET-OFF FOR EXCESS STOCK FOU ND AT RS.69,09,754/- ON ACCOUNT OF EXCESS STOCK OF RS. 25 LAKHS ON ACCOUNT OF INCOME SURRENDERED LOOSE PAPERS. 10. IN THE CASE OF ANANT STEELS PRIVATE LIMITED ON THE BASIS OF FIGURE OF ITS FINAL ACCOUNT FOR THE ASSESS MENT YEAR 2006-07, THE ASSESSING OFFICER WORKED OUT RATE OF G ROSS PROFIT AS SHOWN BY THE ASSESSEE AT 3.4 % AND IN CAS E OF SHIVANGI ESTATES LIMITED AT 3.14 %. ACCORDINGLY, TH E ASSESSING OFFICER WORKED OUT THE INCOME IN THE HAND S OF BOTH THE COMPANIES IN RESPECT OF UNACCOUNTED RECEIP TS BY APPLYING THE GROSS PROFIT RATE. HOWEVER, THE ASSESS ING OFFICER ALLOWED SET OFF OF ADDITIONAL INCOME. 11. AGAINST THE ADDITION SO MADE THE ASSESSEE APPROACHE D TO THE CIT AND IT WAS CONTENDED THAT LOOSE PAPERS A S ALLEGED BY THE ASSESSING OFFICER RELATED TO THE SAL E MADE OUTSIDE BOOKS OF ACCOUNT WERE NOT WRITTEN BY THE AS SESSEE NOR BY ANY OF HIS OTHER FAMILY MEMBERS, NOR RELATED TO THE BUSINESS OF THE ASSESSEE NOR ACCEPTED BY THE ASSESS EE AT ANY STAGE OF SEARCH PROCEEDING, AS THESE PAPERS WER E FOUND -: 12: - 12 AND SEIZED FROM THE RESIDENTIAL PREMISES OF DR R. K . BANSAL AND LISTED AS PAGE NOS. 1 TO 108 OF LP 8 AND DR R.K. BANSAL OFFERED AN AMOUNT OF RS 1,80,00,000/- ( RUPEES ONE CRORE EIGHTY LACS ONLY) ON ACCOUNT OF LOANS & ADVANCES AND INTEREST ON SUCH ADVANCES OF RS . 8,LO,O00/- ( RUPEES EIGHT LACS TEN THOUSAND ONLY) TOTALING TO RS 1,88,00,0001- ( RUPEES ONE CRORE EIGHTY EIGHT LACS TEN THOUSAND ONL Y) . 12. DETAILS OF TOTAL AMOUNT OF INCOME DECLARED VIS-A-VIS ASSETS FOUND IN POSSESSION OF THE ASSESSEE AND D ETAILS OF INCOME SURRENDERED IN THE HAND OF THE INDIVIDUAL FAMILY ME MBERS AND BY THE ASSESSEE AND MIS SHIIVANGI ESTATE LIMITED WA S STATED TO BE AS UNDER:- S.NO NAME OF THE PERSONS AMOUNT REMARKS 1 DR R.K. BANSAL 1,80,00,000 ON ACCOUNT OF ADVANCES 8,10,000 ON ACCOUNT OF INTEREST ON ADVANCES 2 MOHAN KUMAR BANSAL 1,50,00,000 ON ACCOUNT OF ADVANCES 6,75,000 ON ACCOUNT OF INTEREST ON ADVANCES 35,00,000 ON ACCOUNT OF INVESTMENT IN THE HOUSE 3 ANANT STEELS P LIMITED 69,09,754 ON ACCOUNT OF EXCESS STOCK FOUND 25,00,000 ON ACCOUNT LOOSE PAPERS 4 SLRIVANGI ESTATE LIMITED 77,93,467 ON ACCOUNT OF EXCESS STOCK-FOUND 5,51,88,221 -: 13: - 13 5] THAT IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT THE ASSESSEE CO MPANY AND OTHER PERSONS RELATED TO THE GROUP ON THE BASIS OF ASSETS FOUND D ECLARED INCOME IN THEIR RESPECTIVE HANDS. HENCE, THERE IS NO JUSTIFICATION FOR THE ASSESSING OFFICER TO CALCULATE THE INCOME ON NOTIONAL BASIS. 6] THAT IN VIEW OF THE ABOVE IT IS SUBMITTED THAT ADDITION MADE ON ACCOUNT OF INCOME EARNED ON UNACCOUNTED SALES BE DELETED IN FULL. WITHOUT PREJUDICE TO, ABOVE, FOLLOWING WAS THE FURT HER SUBMISSIONS OF ASSESSEE BEFORE THE CIT(A) :- 7.1] THAT YOUR HONOUR AT THE TIME OF LAST HEARING A SKED FROM THE ASSESSEE TO SUBMIT THE CALCULATION BASED ON ACTUAL SALE IN RESPECT OF SALE BILL ISSUED TILL SALE BILL NO 1399 7.2] THAT TILL SALE BILL NO 13 99 ISSUED TILL THE DATE OF SEARCH INCLUDES 1 081 SALE BILL RELATED TO THE ACTUAL SALE AND BALANCE 318 SALE BILL ISSUED FOR FACTORY CONSUMPTION. IF THE SA ID SALE BILL MULTIPLIED WITH THE ACTUAL QTY AND ACTUAL SALE PRICE, THE AMOUNT OF UNRECORDED SALES CALCULATED COMES TO RS 220348338/. CALCULATED AS U NDER:- SALE BILL ISSUED TILL SALE BILL NO 1399 ACTUAL AVER AGE QTY OF GOODS SOLD 1081 ACTUAL AVERAGE QTY. OF GOODS SOLD 11.500 M.TONS TOTAL QTY 112431.50.,TONS AVERAGE SALE RATE 17725/- PER M. TON TOTAL SALES 220348338/- AVERAGE RATE OF G.P. NEGATIVE UNACCOUNTED INCOME NIL 7.3) THAT IN VIEW OF THE ABOVE NOTIONAL CALCULATION ALSO THERE IS NO REASON FOR MAKING ANY ADDITION ON ACCOUNT OF PROFIT ON UNACCOUNTED SALES. THUS, YOUR HON 'OUR IS VERY KINDLY REQUESTED TO DELETED THE ENTIRE ADDITION MADE ON AC COUNT OF INCOME ON UNACCOUNTED SALES. -: 14: - 14 3.2 AFTER EXAMINATION OF THE WRITTEN SUBMISSIONS SO FILED, THE MATTER WAS REMANDED TO THE AO PER THIS OFFICE L ETTER DATED 25.,11.09 SPECIALLY IN THE MATTER OF VERIFICA TION OF APPELLANT'S CONTENTION ABOUT ISSUES OF SIZEABLE NUM BER, SALE BILLS FOR FACTUAL CONSUMPTION AND THE MATTER OF CON TENTIONS OF GP RATE ADOPTED BY THE AO. THE AO SUBMITTED HIS REPORT IN THE MATTER OF VERIFICATION PER REPORT DATED 17.1 2.09 ENCLOSED WITH APPEAL ORDER AS ANNEXURE A . THE COPY OF SUCH REPORT WAS MADE AVAILABLE TO THE APPELLANT AND APPE LLANT FURTHER SUBMITTED WRITTEN SUBMISSION DULY SUPPORTED BY THE COPY OF STATEMENT OF SHRI PANKAJ BANSAL, DIRECT OR OF BOTH THE ASSESSEE COMPANIES. 4. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- FACTS ON RECORD, FINDINGS GIVEN BY THE ASSESSING OFFICER IN ASSESSMENT ORDER AS WELL REMAND REPORT AFTER VERIFICATION OF FACTS AND THE CONTENTIONS PUT FORW ARD BY THE APPELLANT ARE CAREFULLY EXAMINED. 4.1 THE AR PRESENT IN COURSE OF APPEAL PROCEEDINGS IN DISCUSSION OVER AND ABOVE THE WRITTEN SUBMISSIONS FILED EMPHASIZED ON THE -: 15: - 15 FOLLOWING POINTS:- THE DUPLICATE BILL NO.1399 OF M/S. SHIVANGI ESTATES LTD., AS WELL BILL NO.1284 OF ANANT STEEL PVT. LTD., WERE NOT FOUND FROM THE PREMISES OF EITHER THESE TWO ASSESSEES AND BOTH WERE FOUND FROM THE BUSINESS PREMISES OF M/ S. NEW SARDAR STEEL, INDORE AND NO DUPLICATE BILL BOOK WHATSOEVER WAS FOUND FROM ANY OF THE BUSINESS PREMISES OF THE ASSESSEE. SECONDLY, THE OTHER LOOSE PAPERS FOUND FROM THE RESIDENTIAL PREMISES OF DR. R.K. BANSAL, DIRECTOR OF THE COMPANY DID NOT BEAR THE NAME OF ANY OF THE TWO COMPANIES, AND HAVE NO LINK WITH THE BUSINESS TRANSACTIONS OF THE APPELLANT COMPANIES AND DR. BANSAL HIMSELF HAS DECLARED ADDITIONAL INCOME OF RS.1.80 CRORE , THIRDLY, IT WAS EMPHASIZED THAT IN BOTH THE CASES, THE AO HAS NOT ESTIMATED SUCH UNACCOUNTED TURNOVER TILL THE DATE OF SEARCH BUT TILL THE END -: 16: - 16 OF THE F.Y. IGNORING THE BASIC FACT THAT THERE WAS NO EVIDENCES OR BASIS WHATSOEVER TO DRAW ANY INFERENCE THAT SUCH PARALLEL INVOICING CONTINUED EVEN AFTER SEARCH & SEIZURE OPERATION WHEN THE ASSESSEE WAS PRE-OCCUPIED WITH SORTING OUT THE ISSUES ARISING FROM THE SEARCH & SEIZURE OPERATION CARRIED OUT BY THE DEPARTMENT. IT WAS EMPHASIZED THAT THE AO IN WORKING OUT THE TOTAL TURNOVER HAS ALSO INCLUDED THE BILLS ISSUED FOR FACTORY CONSUMPTION WHICH WERE SUBSEQUENTLY VERIFIED AND ACCEPTED IN REMAND PROCEEDINGS. IT WAS ALSO EMPHASIZED THAT AVERAGE QUANTITY PER BILL AND THE AVERAGE RATE OF GOODS SOLD WERE ALSO ADOPTED AT MUCH HIGHER FIGURES THAN ACTUAL AS UNDER, WHICH HAS BEEN ACCEPTED IN COURSE OF REMAND PROCEEDINGS. NAME OF ASSESSEE QUANTITY AVERAGE RATE OF GOODS SOLD ADOPTED BY A.O. ACTUALS ADOPTED BY A.O. ACTUALS M/S.SHIVANGI ESTATE LTD. 21 MT 11.5 MT 19840 17725 M/S. ANANT STEEL PVT.LTD. 16 MT 123.768 MT 19674 -: 17: - 17 LASTLY, IT WAS EMPHASIZED THAT THE SALES DECLARED BY THE APPELLANTS HAVE BEEN ACCEPTED BY SALES TAX DEPARTMENT AND SHRI PANKAJ BANSAL, DIRECTOR OF BOTH THE CONCERNS IN HIS POST-SEARCH INQUIRIES ON 24.1.07 HAS CATEGORICALLY DENIED SALES OUTSIDE BOOKS OF ACCOUNTS AND EVEN THE GP RATE ADOPTED BY AO AT 4.5% AND 4.9 & IN THE CASE OF SHIVANGI ESTATE AND M/S. ANANT STEEL PVT. LTD., WERE WITHOUT ANY BASIS WHEN THE AO HAS HIMSELF CALCULATED GP @3.14% AND 3.40% IN THESE TWO CASES RESPECTIVELY IN ASSESSMENT ORDER. IT WAS ALSO STRESSED THAT SUCH WORKING OF GP WAS ALSO MISCONCEIVED IN SO MUCH AS IN WORKING OUT SUCH GP RATE, OTHER INCOME HAS BEEN TAKEN INTO CONSIDERATION AND IF THE SAME WAS EXCLUDED THERE WOULD BE NEGATIVE / NIL GP AND THE EXCESS STOCK FOUND HAS ALREADY BEEN DECLARED BY THE APPELLANT EVEN IN EXCESS OF THE AMOUNT ACCEPTED IN SEARCH AND SEIZURE OPERATION AND NO OTHER UNRECORDED ASSETS OR INVESTMENT BELONGING TO THE APPELLANT COMPANY WERE DETECTED IN SEARCH AND SEIZURE OPERATION. -: 18: - 18 4.2 THE AO HAS APPROACHED THE ISSUE OF ESTIMATION OF UNACCOUNTED SALES FROM TWO ANGLES. ONE IS BASED ON THE DUPLICATE BILLS FOUND I.E. PARALLEL UNACCOUNTED BILLING WHERE UNACCOUNTED SALES HAVE BEEN ESTIMATED ON THE BASIS OF RECORDED SALES. THIS APPROACH HAS BEEN CONTESTED ON FACTUAL GROUNDS BY THE APPELLANT AND THE AO'S REMAND REPORT HAS BEEN OBTAINED AS ALREADY DISCUSSED IN DETAIL ABOVE. 4.2.1 SECONDLY, THE AO HAS APPROACHED THE ISSUE OF UNACCOUNTED SALES BASED ON 4 LOOSE PAPERS FOUND FROM THE PREMISES OF DR. R.K. BANSAL, LISTED AS LPS-2, THE BROAD DESCRIPTION OF WHICH IS EXTRACTED ON PAGE 4 OF THE ASSESSMENT ORDER AS PART OF ASSESSEE'S SUBMISSIONS, WHERE THE TOTAL RECEIPTS AS PER 4 PAPERS HAS BEEN ADDED UPTO RS. 193.46 LAKHS AND PAYMENT AT RS. 182.66 LAKHS AND AVERAGE HAS BEEN WORKED OUT TREATING SUCH TRANSACTION BEING RECORDED TO A SINGLE DATE ON EACH PAPER AT RS. 48.36 LAKHS RECEIPTS AND RS. 45.66 LAKHS PAYMENTS. THE ASSESSEES CONTENTION ON THE ISSUE HAS BEEN RECORDED IN THE ASSESSMENT ORDER WHEREIN THE -: 19: - 19 APPELLANT HAS DENIED RELEVANCE OF SUCH DOCUMENTS FOR DETERMINING UNACCOUNTED SALES IN THE HANDS OF THE COMPANY AND THAT PAPER HAVING BEEN FOUND FROM THE RESIDENTIAL PREMISES OF THE DIRECTOR WERE REQUIRED TO BE IGNORED. IT HAS ALSO BEEN CONTENDED THAT THESE WERE ROUGH WORKINGS AND VARIOUS JUDICIAL DECISIONS TO SUPPORT SUCH CONTENTIONS WERE CITED BEFORE THE AO. THE AO BASED ON THE AFORESAID WORKING AND ALSO REFERRING TO OTHER INSTANCES OF TRANSACTIONS RECORDED IN LPS-2 ON PAGE NO. 91,92,98,99 & 100 HAS DRAWN INFERENCES THAT AVERAGE AND UNACCOUNTED RECEIPTS FOR ASSESSEE FOR BOTH CONCERNS WERE TAKEN AT RS.48.36 LAKHS AND THAT HAS BEEN MULTIPLIED BY 340 DAYS IN ESTIMATING UNRECORDED SALES OF BOTH COMPANIES AT RS.164.44 CR. THE AO HAS FINALLY ADOPTED SUCH HIGHER FIGURE COMPARED TO THE FIGURE ARRIVED ON THE BASIS OF OTHER APPROACH I.E. PARALLEL DUPLICATE BILLING. 4.3 IN COURSE OF APPEAL HEARING IT WAS EMPHASIZED THAT THE DOCUMENT RELIED UPON BY THE AO FOR ESTIMATING UNACCOUNTED SALES WERE FOR ALL -: 20: - 20 PURPOSE DUMB DOCUMENTS BECAUSE TWO OF SUCH DOCUMENTS WERE TOTALLY UNDATED AND IN ONE DOCUMENT THOUGH THE DATE WAS MENTIONED AS 16.10, THE YEAR WAS NOT MENTIONED AND HENCE COULD NOT HAVE BEEN RELIED UPON BY AO IN MAKING ANY VALID ESTIMATION OF UNACCOUNTED SALES. IT WAS FURTHER EMPHASIZED THAT THE VERY TENURE OF RECORDING ON SUCH LOOSE PAPERS INDICATED THAT THESE WERE SUMMARY OF TRANSACTIONS AND DID NOT RELATE TO A SINGLE DAY AND COULD NOT HAVE BEEN SO INFERRED AS INFERRED BY AO TO BE SORT OF CASH BOOK RECORDING ON ONE SIDE THE RECEIPTS OF THE DAY AND ON THE OTHER SIDE PAYMENT OF THE DAY. IT WAS FURTHER EMPHASIZED THAT PAGE NO.101 BEARING DATE 20.11 EVEN MENTIONED SEPARATE DATES OF 15.11 AND 18.11 IN THE INNER COLUMNS AND THERE WERE FURTHER NOTATIONS LIKE ADVANCE, BALANCE AND AGAINST BOOKS, CHEQUE ETC.,IN SOME OF THE ITEMS, WHICH IS NO WAY CONSIDERED BY THE AO IN ARRIVING AT PRE-MEDIATED CONCLUSIONS. IN THIS PROCESS, THE AO HAS ALSO IGNORED THE RECORDED TRANSACTIONS OF THE APPELLANT AND -: 21: - 21 ARRIVED AS UNRECORDED TRANSACTIONS, WHICH ARE NEARLY THRICE THE TURNOVER OF BOTH THE APPELLANT COMPANIES TAKEN TOGETHER. 4.3.1 THERE IS APPARENTLY MERIT IN THE ASSESSEES CONTENTION IN AS FAR AS ESTIMATION OF SALES BASED ON CERTAIN LOOSE PAPERS WHICH ARE HARDLY NUMBERING 10 INCLUDING THE OTHER PAPERS REFERRED BY ASSESSING OFFICER. THE TRANSACTIONS RECORDED IN SUCH LOOSE PAPER APPEAR TO BE IN THE NATURE OF SUMMARY OF TRANSACTIONS AND THERE ARE NO INDICATION WHATSOEVER TO DRAW THE INFERENCE THAT THESE WERE SUMMARY OF CASH RECEIPTS AND PAYMENTS OF A SINGLE DAY AS NEITHER OPENING BALANCE ARE INDICATED IN THE PAPERS NOR CLOSING BALANCE HAVE BEEN DRAWN. THE ASSESSING OFFICER COULD HAVE DEFINITELY DRAWN SOME SUPPORT TO HIS FINDING ABOUT PARALLEL UNRECORDED TRANSACTION FROM THE VARIOUS DETAILS APPEARING IN SUCH LOOSE PAPERS AND SHOULD HAVE VERY WELL CARRIED OUT FURTHER VERIFICATION IN THE MATTER OF ENTRIES APPEARING ON SUCH LOOSE PAPERS VIS-A-VIS OTHER RECORDS. BUT THE APPROACH ADOPTED BY AO AS -: 22: - 22 TREATING SUCH RECEIPTS AND PAYMENTS AS TRANSACTIONS OF A SINGLE DAY AND THEREBY ARRIVING AT AVERAGE RECEIPTS IN A SINGLE DAY AT RS,48.36 LAKHS CANNOT BE SAID TO BE SUPPORTED BY FACTS ON RECORD AND JUSTIFIED IN ANY MANNER. THE AO'S ACTION IN FURTHER MULTIPLYING THE SAME BY 340 DAYS IGNORING THE FACT THAT EVERY YEAR CONSISTS OF 52 SUNDAYS AND EVEN IF SOME OTHER DAYS ARE NOT WORKING DAYS, MAXIMUM NUMBER OF MULTIPLIER COULD HAVE BEEN ADOPTED AT 310 DAYS. 4.3.2 THE OTHER APPROACH OF THE AO IN ESTIMATING UNACCOUNTED SALES BASED ON PARALLEL UNRECORDED BILLS BEING MORE LOGICAL, THE AO SHOULD HAVE RATHER EMPHASIZED THE SAME INSTEAD OF BANKING ON ESTIMATION BASED ON CERTAIN UNRELATED AND UNCONNECTED LOOSE PAPERS AND WITHOUT CO- RELATING EACH SUCH LOOSE PAPERS WITH TRANSACTIONS RECORDED IN OTHER PAPERS. IT MAY FURTHER BE OBSERVED THAT SUCH LOOSE PAPERS PRIMA-FACIE INDICATE THAT APPELLANTS WERE ENGAGED IN UNRECORDED -: 23: - 23 TRANSACTIONS AND THERE IS NOT MUCH MERIT IN THE APPELLANT'S CONTENTION THAT SUCH PAPERS HAVE NOTHING TO DO WITH THE COMPANY'S AFFAIRS. THIS IS AGAIN ADMITTED POSITION THAT THE APPELLANT HAS OWNED UP HUGE UNACCOUNTED EXCESS STOCK AND HAS OTHER INCOME TO THE EXTENT OF RS.1.47 CRORES IN THE HANDS OF THESE TWO COMPANIES BESIDES FURTHER AMOUNT OF RS.3.65 CRORES IN THE HANDS OF THE DIRECTORS. 4 .4 THE BROAD UNDISPUTED POSITION, WHICH EMERGES AFTER CONSIDERING THE CONTENTION ADVANCED BY THE APPELLANT IN COURSE OF APPEAL PROCEEDINGS AND FACTUAL POSITION VERIFIED BY THE AO ARE TAKEN INTO CONSIDERATION, QUANTITY OF UNRECORDED SALES TO THE DATE OF SEARCH WOULD BE AS PER WORKING GIVEN IN PARA 7.2 OF THE WRITTEN SUBMISSIONS DATED 22.11.09 AS UNDER: 'THAT TILL SALE BILL NO.1399 ISSUED TILL DATE OF SE ARCH INCLUDES 1081 SALE BILL RELATED TO THE ACTUAL SALE AND BALANCE 318 SALE BILL ISSUED FOR FACTORY -: 24: - 24 CONSUMPTION. IF THE SAID SALE BILL MULTIPLIED WITH THE ACTUAL QUANTITY AND ACTUAL SALE PRICE, THE AMOUNT O F UNRECORDED SALES CALCULATED COMES TO RS.220348338/ -. CALCULATED AS UNDER: SALE BILL ISSUED TILL SALE BILL NO. 1284 1081 ACTUAL AVERAGE QUANTITY OF GOODS SOLD 11,500 M.T. TOTAL QUANTITY 1,12,431.50 M.T. AVERAGES SALE RATE 17,725/ - PER MT TOTAL SALES 220348338 AVERAGE RATE OF G.P. NEGATIVE UNACCOUNTED INCOME NIL 4.4.1 THE SIMILAR WORKING GIVEN IN THE CASE OF M/S. ANANT STEEL IS EXTRACTED HEREUNDER: 'THAT TILL SALE BILL NO. 1284 ISSUED TILL DATE OF SEARCH INCLUDES 924 SALE BILL RELATED TO THE ACTUAL SALE AND BALANCE 360 SALE BILL ISSUED FOR FACTORY CONSUMPTION. IF THE SAID SALE BILL MUL TIPLIED WITH THE ACTUAL QUANTITY AND ACTUAL SALE PRICE, THE AMOUNT OF UNRECORDED SALES CALCULATED COMES TO RS. 23,22,24 ,588/ -. CALCULATED AS UNDER: SALE BILL ISSUED TILL SALE BILL NO. 1284 924 ACTUAL AVERAGE QUANTITY OF GOODS SOLD 12,768 M.T.. TOTAL QUANTITY 11,797.632 M.T. AVERAGES SALE RATE 19,684/- PER M. T. TOTAL SALES 23,22,24,588/- AVERAGE RATE OF G.P. NEGATIVE UNACCOUNTED INCOME NIL -: 25: - 25 4.4.2 PROCEEDING FURTHER, EVEN ON FACTUAL PART THE ESTIMATE OF UNACCOUNTED SALES UPTO THE DATE OF SEARCH COMES TO RS.22.03 CRORES IN THE CASE OF SHIVANGI AND IN THE CASE OF ANANT STEEL LTD AT RS.23.22 CRORES I.E, RS.45.25 CR AS AGAINST TOTAL UNACCOUNTED SALES ESTIMATED BY AO FOR BOTH THE CONCERNS UPTO THE END OF THE F.Y ATRS.164.43 CRORES. 4.4.3 IN VIEW OF THE ABOVE DISCUSSION, IT CAN BE SAFELY CONCLUDED THAT UNACCOUNTED SALES CAN BE REASONABLY ESTIMATED AT RS.45.25 CRORES ONLY IN THE CASE OF BOTH THE APPELLANTS TAKEN TOGETHER UPTO THE DATE OF SEARCH. THERE IS NO CASE FOR MAKING ESTIMATION OF UNACCOUNTED SALES BEYOND THE DATE OF SEARCH BECAUSE NEITHER ANY EVIDENCE / INDICATION TO THIS EFFECT WERE FOUND IN SEARCH OPERATION OR EVEN IN POST-SEARCH INQUIRIES NOR THE AO HAS PROJECTED / ESTIMATED ANY SUCH UNACCOUNTED SALES IN ANY OF THE EARLIER A.YS FOR WHICH -: 26: - 26 SIMULTANEOUSLY SEARCH & SEIZURE ASSESSMENTS WERE COMPLETED. THE BROAD JUDICIAL OPINION INCLUDING FROM HON'BLE M.P. HIGH COURT IN THE CASE OF C.L. KHATRI ALSO SUPPORTS THE AFORESAID VIEW THAT UNLESS THERE IS DEFINITE MATERIAL ESTIMATION ON THE BASIS OF SOME LOOSE PAPERS OR UNACCOUNTED TRANSACTIONS FOUND PERTAINING TO A PARTICULAR YEAR CANNOT BE MADE FOR OTHER YEARS. THERE IS FURTHER MERIT IN ASSESSEES CONTENTION THAT THE ASSESSEE HAVING BEEN FACING PROBLEMS ARISING OUT OF SEARCH AND SEIZURE OPERATION CARRIED OUT BY THE DEPARTMENT, AS PER NORMAL HUMAN BEHAVIOUR WOULD NOT MUSTER UP COURAGE TO SIMULTANEOUSLY CONTINUE WITH PARALLEL UNACCOUNTED SALES STILL DURING THE COURSE OF FURTHER INVESTIGATION AND INQUIRIES. THUS TO SUM UP, THE UNACCOUNTED SALES FOR BOTH THE WRITTEN SUBMISSIONS TAKEN TOGETHER CAN AT BEST BE ESTIMATED AT RS.45.25 CRORES EVEN GOING BY AO'S APPROACH IN THE MATTER OF -: 27: - 27 ESTIMATING SALES ON THE BASIS OF PARALLEL UNACCOUNTED BILLING AND TOTALLY IGNORING APPELLANT'S CONTENTION IN THIS BEHALF. 4.5 THE NEXT QUESTION ARISES IS WHAT SHOULD BE APPROPRIATE RATE OF GP OR NP TO APPLY ON SUCH UNACCOUNTED SALES. THE HON'BLE M.P.- HIGH COURT IN THE CASE OF CIT V. BALCHAND AJITKUMAR, 263 ITR 610 (MP) AND FURTHER IN THE CASE OF MANMOHAN SADANI V. CIT, 304 ITR 52 (MP) HAS CLEARLY HELD THAT ONLY NP IS TO BE ESTIMATED ON UNACCOUNTED SALES. IN THAT VIEW OF THE MATTER, THERE IS SOME MERIT IN APPELLANT'S CONTENTION THAT AO SHOULD NOT HAVE RESORTED TO FURTHER ESTIMATION OF GP IGNORING THE GP WORKED OUT BY HIMSELF FOR ARRIVING AT UNRECORDED INCOME ON SUCH TRANSACTIONS. THE GP AS PER APPELLANT'S CONTENTION IS NIL, IF OTHER INCOMES WHICH ARE NOT DIRECTLY LINKED WITH PRODUCTION AND SALES ARE EXCLUDED. ONCE SUCH GP RATE IS NIL, NP ON SUCH UNRECORDED TRANSACTIONS ACCORDING -: 28: - 28 TO APPELLANT'S RECORD WOULD BE OBVIOUSLY NEGATIVE. 4.5.1 NOW THE QUESTION ARISES WHEN THE APPELLANT'S RECORDS ARE FOUND TO BE UNRELIABLE AND IT IS HELD THAT THE APPELLANT WAS INDULGING IN UNRECORDED TRANSACTION LEADING TO DISCLOSURE OF ADDITIONAL INCOME FOR EXCESS STOCK FOUND IN THE HANDS OF THE COMPANY ITSELF BESIDES AMOUNT DECLARED FOR LOOSE PAPERS, THE GP RATE AND NP RATE DECLARED AS PER RECORDS CANNOT BE ATTACHED MUCH SIGNIFICANCE AND CANNOT BE HELD TO BE THE CORRECT NP RATE TO BE ADOPTED FOR THE PURPOSE OF DETERMINING PROFITS ON UNRECORDED TRANSACTIONS. 4.5.2 PROCEEDING FURTHER, CONSIDERING THE GP RATE WORKED OUT BY THE AO INCLUDING OTHER INCOME AT 3.40% IN CASE OF M/S. ANANT STEEL PVT. LTD., AND 3.14% IN THE CASE OF SHIVANGI ESTATE LTD., REASONABLE -: 29: - 29 RATE OF NP CANNOT BE IN ANY WAY THAN 3% AT THE MAXIMUM AND EVEN IF THAT AMOUNT OF ADDITIONAL INCOME AT RS.147.03 LAKHS FOR EXCESS STOCK FOUND. THE ASSESSING OFFICER HAS BEEN FAIR ENOUGH TO GRANT SET-OFF OF PROFIT DETERMINED ON UNRECORDED SALES AGAINST SUCH ADDITIONAL INCOME DECLARED BEING EXCESS STOCK. HENCE, IN VIEW OF THE FINDINGS ARRIVED ABOVE, WHERE THE NP ON SUCH UNRECORDED TRANSACTIONS HAVE BEEN ARRIVED AT RS.!35.75 LAKHS, THERE IS ABSOLUTELY NO CASE FOR SUSTAINING ANY FURTHER ADDITION IN THE HANDS OF THE APPELLANT BEING PROFIT ON UNRECORDED SALES AND ACCORDINGLY GROUND NO.1 IN BOTH THE CASES RESULTING IN ADDITION OF RS.244.50 LAKHS IN THE CASE OF SHIVANGI ESTATE AND RS.357.02 LAKHS IN THE CASE OF ANANT STEEL PVT. LTD., ARE DECIDED IN FAVOUR OF ASSESSEE. 4.6 HOWEVER, IN VIEW OF THE AFORESAID DETAILED FINDINGS, THE GROUND RAISED BY THE -: 30: - 30 ASSESSEE IN CHALLENGING AO'S ACTION IN REJECTING BOOKS OF ACCOUNT U/S 145(3) IS DECIDED AGAINST THE ASSESSEE AS THE RECORDS MAINTAINED BY THE ASSESSEE ARE NOT FOUND TO BE RELIABLE. 13. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FROM THE RECORD, WE FOUND THAT THERE WAS S EARCH AT BUSINESS PREMISES OF THE ASSESSEE CONCERN AND RESIDENTIAL PREMISES OF THE DIRECTORS OF THE COMPAN Y. DURING THE COURSE OF SEARCH AT ANANT STEELS PRIVATE LIMITE D, STOCK WAS FOUND IN EXCESS AND CERTAIN LOOSE PAPERS WERE A LSO FOUND. DOCUMENTS WERE ALSO FOUND TO INDICATE THAT P AYMENT WAS MADE OUT OF BOOKS. ACCORDINGLY, THE ASSESSEE AG REED TO SURRENDER AN AMOUNT OF RS. 89,69,911/- IN THE CASE OF ANANT STEELS UNDER THE FOLLOWING HEADS :- S.NO. DESCRIPTION OF HEAD ANANT STEELS P.LTD. 1. EXCESS STOCK 37,94,670 2. LOOS E PAPERS FOUND 42,67,241 3. PAYMENT MADE OUT OF BOOK 9,00,000 14. AFTER THE SEARCH WAS OVER, THE ASSESSING OFFICER IS SUED NOTICES U/S 153A ON 5.10.2007 IN REPLIES TO WHICH T HE -: 31: - 31 ASSESSEE HAS FILED RETURN OF INCOME ON 14.11.2007. IN THE RETURN OF INCOME SO FILED, THE ASSESSEE HAS SURREND ERED ADDITIONAL INCOME OF RS. 94,09,754/- ON ACCOUNT OF EXCESS STOCK AND LOOSE PAPERS, AS AGAINST INCOMES SURRENDE RED AT THE TIME OF SEARCH AT RS. 89,61,911/-. SIMILARLY, I N CASE OF SHIVANGI ESTATES LIMITED SURRENDER WAS MADE ON ACCO UNT OF EXCESS STOCK AMOUNTING TO RS. 24.90 LAKHS, LOOSE PA PERS RS. 32.33 LAKHS, WHICH WORKS OUT TO BE RS. 57.23 LAKHS. AS AGAINST THE SURRENDER OF INCOME OF RS. 57.23 LAKHS DURING COURSE OF SEARCH, THE ASSESSEE HAS OFFERED INCOME O F RS. 77,93,467/- IN THE RETURN OF INCOME ON ACCOUNT OF E XCESS STOCK. HOWEVER, WHILE FRAMING THE ASSESSMENT, THE ASSESSING OFFICER HAS NOT ONLY MADE ADDITION ON ACC OUNT OF EXCESS STOCK, LOOSE PAPER ETC, BUT ALSO MADE ADDITI ON BY ESTIMATING THE SALES ON THE BASIS OF TWO BILLS FOUN D AT THE PREMISES OF M/S. NEW SARDAR STEELS. THE ASSESSING O FFICER OBSERVED THAT BILL NO.1284 DATED 15.11.2006 OF 176. 070 M.T OF ANANT STEELS PRIVATE LIMITED ISSUED IN THE N AME OF NEW SARDAR STEEL FOUND AT THE PREMISES OF NEW SARDA R STEELS. SIMILARLY BILL NO. 1399 DATED 18.11.2006 OF 22.608 M. T. OF SHIVANGI ESTATES LIMITED ISSUED IN THE NAM E OF NEW -: 32: - 32 SARDAR STEELS FOUND AND SEIZED FROM THE PREMISES OF NEW SARDAR STEELS. ON THE BASIS OF THESE TWO BILLS, THE ASSESSING OFFICER PRESUMED THAT THE ASSESSEE HAD CONTAINED PA RALLEL INVOICING, HE, THEREFORE, PROCEEDED TO ESTIMATE TUR NOVER FOR WHOLE YEARS ON THE BASIS OF THESE TWO BILLS. ON HYP OTHETICAL BASIS, THE ASSESSING OFFICER COMPUTED SALE OF WHOLE YEAR ON THE BASIS OF THESE TWO BILLS IN THE CASE OF BOTH TH E CONCERNS. THE ASSESSING OFFICER ALSO FOUND THAT GROSS PROFIT RATE OF M/S. ANANT STEELS ON THE BASIS OF FINANCIAL FIGURES OF THE YEAR 2006-07 WORKS OUT TO BE 3.40 % AND IN CASE OF SHIVANGI ESTATES LIMITED 3.14 %. BY DISREGARDING TH E ACTUAL GROSS PROFIT RATE WHICH WAS EVEN WORKED OUT BY THE ASSESSING OFFICER ON THE BASIS OF FIGURE FOR THE FI NANCIAL YEAR 2006-07, THE ASSESSING OFFICER HAS APPLIED GROSS PR OFIT RATE OF 4.96 % AND 4.58 % RESPECTIVELY IN THE CASE OF AN ANT STEELS PRIVATE LIMITED AND SHIVANGI ESTATES LIMITED ON THE SALES TURNOVER ESTIMATED BY HIM ON HYPOTHETICAL BAS IS. AFTER GIVING EFFECT OF INCOME DECLARED FOR THE EXCESS STO CK AND LOOSE PAPERS THE NET AMOUNT WAS ADDED BY THE ASSESS ING OFFICER IN ASSESSEES INCOME. SIMILAR COURSE OF ACT ION, HE HAS ADOPTED IN BOTH THE CONCERNS. IT IS PERTINENT T O MENTION -: 33: - 33 HERE THAT NO DUPLICATE BILL BOOK WAS FOUND FROM THE PREMISES OF THE ASSESSEE OR ITS DIRECTORS AND ON TH E BASIS OF THESE TWO BILLS ONLY, THE ASSESSING OFFICER HAS EST IMATED SALE OF ENTIRE YEAR HYPOTHETICALLY. THE ASSESSING OFFICE R ALSO STATED THAT CERTAIN PAPERS WERE FOUND AT THE PREMIS ES OF DR. R.K. BANSAL. THESE PAPERS WERE NEITHER WRITTEN BY A NY OF THE FAMILY MEMBERS OF ASSESSEE NOR NAME OF THE COMP ANIES WERE MENTIONED ON THESE PAPERS. THE ASSESSING OFFIC ER STATED THAT DR.R.K. BANSAL HIMSELF HAS DECLARED AN AMOUNT OF RS. 1,80,00,000/- AS HIS ADDITIONAL INCOME AND R S. 8.10 LAKHS AS INTEREST THEREON. ON THE BASIS OF FOUR LOO SE PAPERS OUT OF WHICH TWO PAPERS EVEN DOES NOT BEAR THE DATE , THE ASSESSING OFFICER ESTIMATED AMOUNT OF TURNOVER OF T HE ASSESSEE FOR BOTH THE COMPANIES. THUS, THE ASSESSIN G OFFICER HAS ALSO HYPOTHETICALLY CALCULATED THE TURN OVER OF BOTH THE COMPANIES ON THE BASIS OF PAPERS FOUND FRO M THE RESIDENCE OF DR. R.K. BANSAL. THUS, SEPARATE ADDITI ONS WERE MADE BY THE ASSESSING OFFICER IN CASE OF BOTH THE C ONCERNS ON ACCOUNT OF ESTIMATED PROFIT ASSUMED TO BE EARNED ON SUCH ESTIMATED SALES. THE LD. CIT(A) DELETED THE AD DITION AFTER CALLING FOR REMAND REPORT ON THE SUBMISSION G IVEN BY -: 34: - 34 THE ASSESSEE WITH REGARD TO THE ACTUAL SALE BILL AN D BILLS RELATED TO FACTORY CONSUMPTION, AND THE BILLS FOUND AT THE PREMISES OF SARDAR STEELS AND LOOSE PAPERS FOUND AT THE PREMISES OF THE DIRECTOR OF THE COMPANY. AFTER CONS IDERING THE REMAND REPORT AND THE ASSESSEES REPLY THEREON, THE CIT(A) FOUND THAT THERE WAS NO MERIT IN THE ASSESSI NG OFFICERS ESTIMATE OF SALE BASED ON CERTAIN LOOSE P APERS, WHICH WERE CLEARLY NUMBERING 10 INCLUDING OTHER PAP ERS REFERRED BY THE ASSESSING OFFICER. IT WAS FOUND THA T THE TRANSACTIONS RECORDED IN SUCH LOOSE PAPERS WERE IN THE NATURE OF SUMMARY OF TRANSACTION AND THERE ARE NO INDICATION WHATSOEVER TO DRAW THE INFERENCE THAT TH ESE WERE SUMMARY OF THE CASH RECEIPTS AND PAYMENT OF A SINGL E DAY AS NEITHER OPENING BALANCE ARE INDICATED IN THE PAP ER NOR CLOSING BALANCE HAVE BEEN DRAWN. THE CIT(A) OBSERVE D THAT APPROACH OF THE ASSESSING OFFICER FOR TREATING SUCH RECEIPTS AND PAYMENTS AS TRANSACTION OF A SINGLE DAY AND THA T BY ARRIVING AT AN AVERAGE RECEIPT IN A SINGLE DAY AT R S. 48.36 LAKHS CANNOT BE SAID TO BE SUPPORTED BY FACTS ON RE CORD AND JUSTIFIED IN ANY MANNER. AS PER THE CIT(A), THE ASS ESSING OFFICER SHOULD HAVE COMPUTED SALE ON THE BASIS OF A CTUAL -: 35: - 35 BILLS FOUND RATHER THAN APPLYING EXTRAPOLATION OF S UCH FIGURE TO THE ENTIRE YEAR. BY OBSERVING THAT THE ASSESSEE HAS OWNED UP HUGE UNACCOUNTED STOCKS AND OTHER INCOME TO THE TUNE OF RS. 1.75 CRORES IN THE HANDS OF THESE TWO COMPAN IES BESIDES FURTHER AMOUNTS OF RS. 3.65 CRORES IN THE H ANDS OF DIRECTORS, NO SEPARATE ADDITIONS WERE WARRANTED. 15. ON THE BASIS OF REMAND REPORT AND THE FACTUAL POSIT ION AS VERIFIED BY THE ASSESSING OFFICER IN RESPECT OF QUANTITY OF UNRECORDED SALES TO THE DATE OF SEARCH AS PER THE W ORKING GIVEN BY THE ASSESSEE, THE CIT(A) FOUND THAT AFTER EXCLUDING THE OTHER INCOME AND APPLYING AVERAGE GROSS PROFIT RATE, THERE WAS NO UNACCOUNTED INCOME OF THE ASSESSEE. SIMILARLY, THE LD. CIT(A) HAS ALSO VERIFIED THE WOR KING GIVEN BY THE ASSESSING OFFICER ON THE BASIS OF SALE BILL NO.1284 ISSUED BY ANANT STEELS AND AFTER EXCLUDING 924 SALE BILLS RELATED TO THE ACTUAL SALE AND BALANCE 360 BILLS IS SUED FOR CONTRADICTORY CONSUMPTION. AFTER HAVING THE DETAILE D WORKING, THE LD. CIT(A) REACHED TO THE CONCLUSION T HAT UNACCOUNTED SALES ON THE BASIS OF ASSESSING OFFICER S REMAND REPORT WORKS OUT AT RS. 45.25 CRORES IN CASE OF BOTH THE CONCERNS UPTO THE DATE OF SEARCH. THIS FINDING OF CIT(A) -: 36: - 36 IS AS PER MATERIAL ON RECORD. THE CIT(A) ALSO OBSE RVED THAT THERE IS NO CASE FOR MAKING ESTIMATION OF UNACCOUNT ED SALES BEYOND THE DATE OF SEARCH, BECAUSE NEITHER ANY EVIDENCE/INDICATION TO THESE EFFECT WERE FOUND IN T HE SEARCH OPERATION OR EVEN AT POST SEARCH INQUIRY NOR THE AS SESSING OFFICER HAS APPROACHED/ESTIMATED IN SUCH UNACCOUNTE D SALE IN ANY OF THE EARLIER ASSESSMENT YEARS FOR WHICH SIMULTANEOUSLY SEARCH AND SEIZURE ASSESSMENTS WERE COMPLETED. BY RELYING ON THE PROPOSITION LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF C.L. KHATR I, THE CIT(A) OBSERVED THAT UNLESS THERE IS DEFINITE MATER IAL, ESTIMATION ON THE BASIS OF SOME LOOSE PAPERS FOR UNACCOUNTED TRANSACTION FOUND PERTAINING TO A PARTI CULAR DAY/DAYS CANNOT BE MADE BASIS FOR ESTIMATION OF SAL E OF OTHER YEARS. 16. FROM THE RECORD, WE FOUND THAT TO VERIFY AND ASCERTAIN THE CORRECT UNACCOUNTED SALES ON THE BASI S OF DUPLICATE BILLS ISSUED BY THE ASSESSEE, THE CIT(A) CALLED FOR A REMAND REPORT VIDE ITS LETTER DATED 25.11.2009 AND DIRECTED THE ASSESSING OFFICER TO VERIFY TOTAL SALE BILLS IS SUED BY BOTH THE CONCERNS, BILLS ISSUED FOR FACTORY CONSUMPTION, BILLS -: 37: - 37 ISSUED FOR ACTUAL SALES, QUANTITY RELATED TO GOODS SOLD IN RESPECT OF EACH OF THE TWO CONCERNS. THE ASSESSING OFFICER VIDE ITS LETTER DATED 17.12.2009 SENT ITS REMAND RE PORT, WHICH IS ALSO FORMING PART OF THE CIT(A)S ORDER AS PER ANNEXURE A, WHEREIN ASSESSING OFFICER HAS DULY VE RIFIED AND CONFIRMED THE TOTAL SALES BILLS ISSUED BY EACH OF THE CONCERN FOR THE PURPOSE OF FACTORY CONSUMPTION AND THE BILLS ACTUALLY ISSUED FOR SALES IN RESPECT OF EACH OF THE CONCERN I.E. M/S. ANANT STEELS PRIVATE LIMITED AND M/S. SHIVANGI ESTATES LIMITED. IN THE REMAND REPORT, THE ASSESSING OFFICER HAS ALSO DULY INCORPORATED QUANTI TY RELATED TO THE GOODS SOLD, QUANTITY PER BILL, SALE VALUE OF EACH OF THE CONCERN AND THE SALE VALUE PER M. T. IN RESPECT OF EACH OF THE CONCERNS. AS PER THE REMAND REPORT, PRECISE FIGURE/QUANTITY OF THE DETAILS DISCUSSED ABOVE ARE AS UNDER :- S.NO. PARTICULARS ANANT STEELS P. LTD. SHIVANGI ESTATE LIMITED 1. TOTAL SALE BILL ISSUED 1315 1409 2. BILLS RELATED TO THE FACTORY CONSUMPTION 363 315 3. BILLS ACTUALLY ISSUED FOR SALE 952 1094 -: 38: - 38 4. QTY. RELATED TO THE GOODS SOLD 12155.740 12582.090 5. QTY. PER BILL 12.768 11.500 6. SALE VALUE 239271457 223012704 7. SALE VALUE PER M. TON 19684 17725 17. WE HAVE VERIFIED THE REMAND REPORT AND FOUND THAT UNACCOUNTED SALES ON THE BASIS OF FIGURES SO MENTIO NED IN THE REMAND REPORT WORKS OUT TO BE RS. 45.25 CRORES IN RESPECT OF BOTH THE CONCERNS. WHATEVER PROFIT THE A SSESSEE HAS EARNED ON SUCH UNACCOUNTED SALES IS REQUIRED TO BE ADDED IN THE ASSESSEES INCOME AFTER GIVING CREDIT FOR THE INCOME SURRENDERED BY THE ASSESSEE ON ACCOUNT OF EX CESS STOCK. WE FOUND THAT THE ASSESSING OFFICER HAS WORK ED OUT GROSS PROFIT AT 3.4 % IN CASE OF ANANT STEELS PRIVA TE LIMITED AND 3.14 % IN THE CASE OF SHIVANGI ESTATES LIMITED, WHICH INCLUDES OTHER INCOME OF ASSESSEE ALSO. KEEPING IN VIEW THE GROSS PROFIT WORKED OUT BY THE ASSESSING OFFICER, W E FIND IT PROPER TO APPLY NET PROFIT RATE OF 3.3 % ON THE UNA CCOUNTED SALES OF RS. 45.25 CRORES AS WORKED OUT ON THE BASI S OF REMAND REPORT. THE PROFIT SO WORKED OUT BY APPLYING NET PROFIT RATE 3.3 % IS REQUIRED TO BE REDUCED BY THE AMOUNTS SURRENDERED BY THE ASSESSEE AMOUNTING TO RS. 89,61, 911/- -: 39: - 39 IN CASE OF ANANT STEELS LIMITED AND RS. 57,23,421/- IN CASE OF SHIVANGI ESTATES LIMITED. THUS, THE TOTAL INCOME SURRENDERED FOR EXCESS STOCK AMOUNTING TO RS. 147.0 3 LAKHS IS REQUIRED TO BE REDUCED OUT OF UNACCOUNTED PROFIT EARNED BY THE ASSESSEE AS WORKED OUT IN THE MANNER STATED HEREINABOVE. THE ASSESSING OFFICER IS FURTHER DIREC TED TO DISTRIBUTE THE BALANCE AMOUNT OF UNACCOUNTED PROFIT IN THE RATIO OF TURNOVER OF THESE COMPANIES AS FOUND BY TH E ASSESSING OFFICER HIMSELF IN THE RETURN OF INCOME F OR ASSESSMENT YEAR 2006-07, WHICH WAS RS. 33.61 CRORES IN CASE OF ANANT STEELS PRIVATE LIMITED AND RS. 25.16 CRORES IN CASE OF SHIVANGI ESTATES LIMITED. WE DIRECT ACCORDI NGLY. 18. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED IN PART. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 13 TH FEBRUARY, 2012. (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13 TH FEBRUARY,2012. CPU* 131132