The DCIT, Central Circle-3, Surat V. M/s. Gayatrishakti Paper and Board Ltd., Mumbai

ITSSA 592/AHD/2012

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7905 (ITAT-SURAT)
• Duration Of Justice: 8 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 04-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P M JAGASHETH
• Keywords: Bogus purchase; Unexplained expenditure; Business income; Depreciation; Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Earning of tax free income; Additional evidence; Corroborative evidences; Assessment record; Block assessment; Documents seized; Bonafide mistake; Rule 8D
• Section: 69C; 143(3); 153A; 14A; 191; 13; 153; 145(3); 22; 153C; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM ./IT(SS)A NOS.569, 570, 571 & 572/AHD/2012 ( [ [ / ASSESSMENT YEARS: (2007-08, 08-09, 09-10 & 2010-11) (VIRTUAL COURT HEARING) M/S.GAYATRISHAKTI PAPER AND BOARDS LIMITED, 410-416, RAHEJA PLAZA, 4 TH FLOOR, 5B, SHAH INDUSTRIAL ESTATE, NEXT TO AFCONS, ANDHERI WEST MUMBAI 400058. V S. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, SURAT. ./ ./ PAN/GIR NO.: AABCG 0273 F (ASSESSEE) (RESPONDENT) ./IT(SS)A NOS.591, 592, 593 & 597/AHD/2012 ( [ [ / ASSESSMENT YEARS: (2007-08, 08-09, 09-10 & 2010-11) THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3, SURAT. V S. M/S.GAYATRISHAKTI PAPER AND BOARDS LIMITED, 410-416, RAHEJA PLAZA, 4 TH FLOOR, 5B, SHAH INDUSTRIAL ESTATE, NEXT TO AFCONS, ANDHERI WEST MUMBAI 400058. ./ ./ PAN/GIR NO.: AABCG 0273 F (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI P.M.JAGASHETH - CA RESPONDENT BY : SHRI SREENIVAS T. BIDARI CIT(DR) / DATE OF HEARING : 04/08/2021 /DATE OF PRONOUNCEMENT : 24/08/2021 / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS. FOUR APPEALS FILED BY THE ASSESSEE AND FOUR APPEAL FILED BY REVENUE, PERTAINING TO ASSESSMENT YEARS 2007-08, 2008-09, 2009-10 AND 2010-11, ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE LD.CIT(A) WHICH TURN ARISE OUT OF SEPARATE ASSESSMENT ORDERS PASSED BY THE LD.ASSESSING OFFICER UNDER SECTION 143(3) R.W.S 153A OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT]. PAGE | 2 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., 2. SINCE, THE ISSUES INVOLVED IN ALL THESE EIGHT APPEALS ARE COMMON AND IDENTICAL AND THESE APPEALS RELATE TO THE SAME ASSESSEE, FOR DIFFERENT ASSESSMENT YEARS, THEREFORE, THESE HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. ALTHOUGH, THESE APPEALS FILED BY THE REVENUE AND ASSESSEE CONTAIN MULTIPLE GROUNDS OF APPEALS. HOWEVER, AT THE TIME OF HEARING, WE HAVE CAREFULLY PERUSED ALL THE GROUNDS RAISED BY THE REVENUE AS WELL AS BY THE ASSESSEE. MOST OF THE GROUNDS RAISED BY THE REVENUE AS WELL AS ASSESSEE, ARE EITHER ACADEMIC IN NATURE OR CONTENTIOUS IN NATURE. HOWEVER, TO MEET THE END OF JUSTICE, WE CONFINE OURSELVES TO THE CORE OF THE CONTROVERSY AND MAIN GRIEVANCES OF REVENUE AND THE ASSESSEE AS WELL. WITH THIS BACKGROUND, WE CONCISE AND SUMMARISE, COMMON GROUNDS RAISED BY THE REVENUE AND ASSESSEE, AS FOLLOWS: 4. CONCISE AND COMMON GROUNDS OF APPEAL RAISED BY THE REVENUE, ASSESSMENT YEAR WISE, ARE AS FOLLOWS: (I) ADMITTING ADDITIONAL EVIDENCE IN RELATION TO THE ADDITION MADE ON ACCOUNT OF CASH PROFIT WITHOUT GIVING THE OPPORTUNITY TO THE ASSESSING OFFICER TO OFFER HIS COMMENTS WHICH IS IN CONTRAVENTION OF PROVISIONS OF RULE 46A OF THE INCOME TAX RULES. A) ASSESSMENT YEAR 2007-08 B) ASSESSMENT YEAR 2008-09 C) ASSESSMENT YEAR 2009-10 D) ASSESSMENT YEAR 2010-11 (II) DELETING THE ADDITION MADE ON ACCOUNT OF CASH PROFIT EARNED BY THE ASSESSEE ON UNACCOUNTED SALE AS REFLECTED IN THE DOCUMENTS SEIZED FROM THE OFFICE PREMISES OF THE ASSESSEE. A) ASSESSMENT YEAR 2007-08 - RS.3,55,77,417/- B) ASSESSMENT YEAR 2008-09 - RS.1,66,11,125/- C) ASSESSMENT YEAR 2009-10 - RS.2,45,47,626/- D) ASSESSMENT YEAR 2010-11 - RS.54,14,508/- (III) DELETING ADDITION OF RS.2 LAKHS MADE ON ACCOUNT OF INFLATION OF PURCHASES WITHOUT CONSIDERING THE FACT THAT THE SUPPLIERS WERE NOT MAINTAINING THE STOCK REGISTER AND THEIR BOOKS OF ACCOUNTS WERE REJECTED AT THE TIME OF ASSESSMENT UNDER SECTION 153C OF THE INCOME TAX ACT WHICH HAS ALSO BEEN CONFIRMED IN THE APPEAL. PAGE | 3 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., A) ASSESSMENT YEAR 2007-08 RS.2,00,000/- B) ASSESSMENT YEAR 2008-09 RS.2,00,000/- C) ASSESSMENT YEAR 2009-10 RS.2,00,000/- D) ASSESSMENT YEAR 2010-11 RS.2,00,000/- (IV) DELETED THE ADDITION OF RS.28,45,762/- OUT OF TOTAL ADDITION OF RS.53,09,056/- MADE ON ACCOUNT OF DIFFERENCE IN STOCK. (V) DELETED THE ADDITION OF RS.27,67,500/- BEING BOGUS PURCHASES MADE ON THE BASIS OF STATEMENTS RECORDED DURING THE COURSE OF SEARCH. (VI) DELETED THE ADDITION OF RS.2,75,00,000/- BEING UNACCOUNTED EXPENSES AND SALES REALIZATION MADE ON THE BASIS OF ENTRIES IN THE SEIZED LOOSE PAPERS. 5. CONCISE AND COMMON GROUNDS OF APPEAL RAISED BY THE ASSESSEE, ASSESSMENT YEAR WISE, ARE AS FOLLOWS: (1).DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, READ WITH RULE 8D, ASSESSMENT YEAR WISE, ARE AS FOLLOWS: A) ASSESSMENT YEAR 2007-08 RS.5,12,276/- B) ASSESSMENT YEAR 2008-09 RS.6,99,230/- C) ASSESSMENT YEAR 2009-10 RS.7,19,687/- D) ASSESSMENT YEAR 2010-11 RS.6,29,794/- (2).DISALLOWANCE ON ACCOUNT OF CASH PROFIT EARNED BY THE ASSESSEE ON UNACCOUNTED SALE COMPRISING OF UNDISCLOSED SALE. A) ASSESSMENT YEAR 2009-10 RS.18,99,119/- B) ASSESSMENT YEAR 2010-11 RS.4,84,178/- (3).ALLOWED SET OFF OF ADDITIONAL INCOME OF RS.9 CRORES DISCLOSED IN THE RETURN OF INCOME HAVING REGARD TO DISCLOSURE MADE UNDER SECTION 132(4) OF THE ACT BASED ON APPLICATION THEREOF IN ASSESSMENT YEAR UNDER APPEAL. A) ASSESSMENT YEAR 2009-10 B) ASSESSMENT YEAR 2010-11 (4).ADDITION ON ACCOUNT OF DISCREPANCY OF RS.24,63,294/- IN STOCK FOUND BETWEEN PHYSICAL INVENTORY TAKEN ON DATE OF SEARCH AND STOCK RECORD. (THIS GROUND RELATES TO ASSESSMENT YEAR 2010-11). 6. FIRST, WE SHALL TAKE REVENUES APPEAL. CONCISE AND COMMON GROUND NO.1 RAISED BY THE REVENUE IS REPRODUCED BELOW FOR READY REFERENCE: PAGE | 4 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., I) ADMITTING ADDITIONAL EVIDENCE IN RELATION TO THE ADDITION MADE ON ACCOUNT OF CASH PROFIT WITHOUT GIVING THE OPPORTUNITY TO THE ASSESSING OFFICER TO OFFER HIS COMMENTS WHICH IS IN CONTRAVENTION OF PROVISIONS OF RULE 46A OF THE INCOME TAX RULES. A) ASSESSMENT YEAR 2007-08 B) ASSESSMENT YEAR 2008-09 C) ASSESSMENT YEAR 2009-10 D) ASSESSMENT YEAR 2010-11 7. IN THIS GROUND, REVENUE HAS OBJECTED THAT LD.CIT(A) HAS ADMITTED ADDITIONAL EVIDENCE, IN RESPECT OF CASH PROFIT EARNED BY THE ASSESSEE AND THE ASSESSING OFFICER HAS NOT BEEN GIVEN OPPORTUNITY TO OFFER HIS COMMENTS, WHICH IS IN CONTRAVENTION OF PROVISIONS OF RULE 46A OF THE INCOME TAX RULES. WE HAVE HEARD BOTH THE PARTIES ON THIS PRELIMINARY ISSUE AND GONE THROUGH ORDER OF THE LD.CIT(A) AND HIS FINDINGS FOR ASSESSMENT YEARS 2007-08 TO 2010-11 AND OBSERVED THAT ASSESSEE HAS NOT SUBMITTED ADDITIONAL EVIDENCES DURING THE APPELLATE PROCEEDINGS. FOR INSTANCE, FINDINGS OF LD CIT(A) FOR ASSESSMENT YEAR 2010-11, WHICH IS MENTIONED AT PARA 5, (VIDE PAGE 23 TO 32 OF HIS ORDER) AND NOTED THAT ASSESSEE DID NOT SUBMIT ANY ADDITIONAL EVIDENCE DURING THE APPELLATE PROCEEDINGS. SINCE THERE WERE NO ADDITIONAL EVIDENCES DURING THE APPELLATE PROCEEDINGS THEREFORE LD CIT(A) DID NOT REFER THE MATTER FOR COMMENTS OF THE ASSESSING OFFICER. THE LD.CIT(A) HAS ADJUDICATED THE ISSUE RELATING TO CASH PROFIT AND OTHER ISSUES WITH HELP OF THE MATERIAL AVAILABLE IN THE ASSESSMENT RECORDS, WRITTEN SUBMISSIONS OF THE ASSESSEE, AND BASED ON THE FINDINGS OF THE ASSESSING OFFICER. THEREFORE, WE DO NOT FIND ANY IOTA OF ADDITIONAL EVIDENCE. LEARNED DR FOR THE REVENUE HAS FAIRLY AGREED THAT NO ADDITIONAL EVIDENCES WERE SUBMITTED BY THE ASSESSEE, DURING THE APPELLATE PROCEEDINGS, BEFORE THE LD CIT(A). THEREFORE, BASED ON THIS FACTUAL POSITION, THE GROUND NO.1 RAISED BY THE REVENUE IN ASSESSMENT YEARS, 2007-08, 2008-09, 2009-10 AND 2010-11, ARE DISMISSED. 8. COMMON AND CONCISE GROUND NO.2 RAISED BY THE REVENUE AND COMMON AND CONCISE GROUND NO.2 RAISED BY THE ASSESSEE ARE IDENTICAL AND SIMILAR THEREFORE, WE PAGE | 5 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., ADJUDICATE THEM TOGETHER. BOTH THE GROUNDS ARE REPRODUCED BELOW FOR READY REFERENCE: GROUND NO.2 RAISED BY REVENUE (II) DELETING THE ADDITION MADE ON ACCOUNT OF CASH PROFIT EARNED BY THE ASSESSEE ON UNACCOUNTED SALE AS REFLECTED IN THE DOCUMENTS SEIZED FROM THE OFFICE PREMISES OF THE ASSESSEE. A) ASSESSMENT YEAR 2007-08 - RS.3,55,77,417/- B) ASSESSMENT YEAR 2008-09 - RS.1,66,11,125/- C) ASSESSMENT YEAR 2009-10 - RS.2,45,47,626/- D) ASSESSMENT YEAR 2010-11 - RS.54,14,508/- GROUND NO.2 RAISED BY ASSESSEE (2).DISALLOWANCE ON ACCOUNT OF CASH PROFIT EARNED BY THE ASSESSEE ON UNACCOUNTED SALE COMPRISING OF UNDISCLOSED SALE. A)ASSESSMENT YEAR 2009-10 RS.18,99,119/- ( RS.2,64,46,745- RS.2,45,47,626) B)ASSESSMENT YEAR 2010-11 RS.4,84,178/-(RS.58,99,386-RS.54,14,508) 9. THESE GROUNDS RAISED BY THE REVENUE AND ASSESSEE RELATE TO ADDITION OF CASH PROFIT EARNED ON UNACCOUNTED SALE. THE RELEVANT MATERIAL FACTS, AS CULLED OUT FROM THE MATERIAL ON RECORD, IN RESPECT OF THIS ISSUE, ARE AS FOLLOWS. THE ASSESSING OFFICER HAS OBSERVED THAT DURING THE COURSE OF SEARCH, ANNEXURE - BS-1, BS-2, BS-3, BS-4, BS-6 AND BS-17 HAVE BEEN SEIZED WHICH CONTAIN MONTHLY PROFIT AND LOSS ACCOUNT OF ASSESSEE COMPANY FROM APRIL 2006 TO JUNE 2009 ALONG WITH WORKING OF MONTHLY REPORTS. THE ASSESSING OFFICER HAS REPRODUCED MONTHLY PROFIT AND LOSS ACCOUNT FOR APRIL 2006 TO JUNE 2006 FROM SEIZED PAPERS IN ASSESSMENT ORDER FOR UNDERSTANDING THE CONTENTS OF THE PAGE AND MODUS OPERANDI OF ASSESSEE THE COPY OF SEIZED PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED ON 30 TH APRIL, 2006 REPRODUCED BY THE ASSESSING OFFICER, IS AS UNDER: PAGE | 6 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 30.04.2006 SALES (MT) PRODUCTION (MT) 2816.113 LOCAL 296.268 EXPORT 3121.281 TOTAL 3520.476 APR. 2006 PARTICULARS APR. 2006 58162840 LOCAL SALES (BEFORE REBATE, COMM. ETC) 20654 340706 REBATE, DISCOUNT., COMMISSIONER. ETC 121 57822134 NET SALES (AFTER REBATE ETC.) 20533 6220192 EXPORT SALES 20995 477455 EXPORT ENTITLEMENTS 1612 1318204 DIRECT EXPORT EXPENSES 4449 5379443 NET EXPORT SALES (AFTER REBATE ETC.) 18157 63201577 TOTAL SALES 20307 30160 MISC. INCOME 10 63231737 TOTAL INCOME 20316 712014 PROFIT / LOSS BEFORE DEPRE. 229 1950000 DEPRECIATION 627 -1237986 POFIT / LOSS AFTER DEPRE. -398 1474396 NET PR. FROM TURBINE 236410 TOTAL ACS 20641 SALES 20632 - - - - - - - - - - - - - - - - - - - DIFF 9 - - - - - - - - - - - - - - - - - - - QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES (1) RAW MATERIALS 1160.795 314 (2) CHEM 598.75 170 (3) SALES A/C 1041.033 334 (4) COM 151.145 49 ========== 3609.737 ========== KPM TURBINE BALANCE B/F APRIL 06 268438 @5.30% 1422721 ======== BALANCE B/F 1422721 ======== RAW V/S CONTRACTOR 694957 I.E. 119.76 PMT PAGE | 7 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., THE ASSESSING OFFICER HAS OBSERVED THAT IN LOWER PORTION SEIZED PAPER(SAMPLE REPRODUCED HEREIN ABOVE) WHEREIN UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES' THE FIGURES OF RAW MATERIAL, CHEMICALS, SALES ACCOUNT AND COM ACCOUNT WHICH ACCORDING TO THE ASSESSING OFFICER IS CASH PROFIT EARNED BY THE ASSESSEE. THE ASSESSING OFFICER HAS REFERRED TO THE PAGES NO. 66, 135 AND 191 OF ANNEXURE - BS-2 AND SIMILAR PAGES OF ANOTHER ANNEXURE WHEREIN MONTHLY SUMMARY IS PREPARED IN THE CHART FORM 'DETAILS OF PROFIT & LOSS ACCOUNT FOR THE YEAR 2006- 07, 2007-08 AND 2008-09' AND ONE OF THE COLUMN IN SUCH SUMMARY IS 'CASH' FOR FY 2006-07 AND 'DEP' FOR FY 2007-08 AND 2008-09. IT IS OBSERVED BY ASSESSING OFFICER THAT IN COLUMN OF 'CASH' OR DEP' TOTAL FIGURE OF 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES' MENTIONED IN MONTHLY PROFIT AND LOSS ACCOUNT REFERRED HEREIN ABOVE IS REFLECTED. FOR EXAMPLE, FOR THE MONTH OF APRIL 2006, IN PROFIT & LOSS ACCOUNT FOR THE PERIOD ENDED 30 TH APRIL, 2006 WHICH IS REPRODUCED HEREIN ABOVE, UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES' AGAINST THE HEAD OF 'RAW MATERIAL', CHEM., SALES, COM, FIGURES OF RS. 1106.795, 598.750, 1041.1033, 151.145, RESPECTIVELY ARE MENTIONED AND AGGREGATE OF SUCH FIGURES COMES TO 2987.723 AND SAME IS MENTIONED UNDER THE COLUMN HEAD 'CASH' FOR RS.28,97,723. THEREAFTER, ASSESSING OFFICER HAS OBSERVED THAT WORD 'CASH' OR 'DEP' DENOTES CASH PROFIT EARNED BY THE COMPANY NOT RECORDED IN THE BOOKS OF ACCOUNT BUT MENTIONED IN MONTHLY REPORT PREPARED BY ASSESSEE COMPANY. THE ASSESSING OFFICER'S ARGUMENT FOR MAKING IMPUGNED ADDITION IN A.Y. 2007-2008 TO 2010-11 IS SIMILAR. THE ASSESSING OFFICER HAS REFERRED TO VARIOUS SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH WHICH INCLUDES MONTHLY PROFIT & LOSS ACCOUNT FROM 1 ST APRIL 2006. IT WAS HELD BY ASSESSING OFFICER THAT ON THE BOTTOM OF SUCH MONTHLY PROFIT & LOSS ACCOUNT, UNDER THE HEAD OF ' QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES', AGAINST THE DESCRIPTION OF RAW MATERIALS', 'CHEM', 'SALES AC' AND ' COM' , CERTAIN FIGURES ARE REFLECTED WHICH IS NOTHING BUT CASH PROFIT GENERATED BY ASSESSEE NOT SHOWN IN PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER HAS ALSO REFERRED TO CERTAIN LOOSE PAPERS FOUND (LIKE PAGE 66,135,191 OF ANNEXURE BS -2) FROM THE ASSESSEE'S PREMISES WHEREIN SUMMARY OF PROFIT & LOSS ACCOUNT FOR YEAR WISE IS FOUND WHICH CONTAINS DETAILS LIKE MONTH, BOOK PROFIT OF PLANT AND TURBINE AND UNDER ONE COLUMN OF 'CASH' PAGE | 8 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., OR 'DEP' , FIGURES NOTES EQUATES TO SUMMATION OF FIGURE MENTIONED UNDER ' QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES' FOUND IN LOOSE PAPER CONTAINING MONTH WISE PROFIT & LOSS ACCOUNT REFERRED (SUPRA). HENCE ASSESSING OFFICER HAS HELD THAT FIGURES MENTIONED UNDER THE HEAD ' QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES' IS NOTHING BUT CASH PROFIT GENERATED BY ASSESSEE FROM SALES, RAW MATERIAL ETC, NOT RECORDED IN BOOKS OF ACCOUNT. SUCH REASONING OF ASSESSING OFFICER WAS ALSO SUBSTANTIATED BY ASSESSING OFFICER BY REFERRING TO CERTAIN LOOSE PAPERS WHEREIN RECONCILIATION OF PROFIT & LOSS ACCOUNT IS PREPARED CONSIDERING THE PROFIT AS PER COSTING AND FINAL FIGURES COMPUTED IN SUCH LOOSE PAPERS ALSO EQUATE WITH PROFIT AS PER ACCOUNTS NOTED IN LOOSE PAPERS CONTAINING MONTH WISE PROFIT & LOSS REFERRED (SUPRA) WHICH ALSO INCLUDES FIGURES MENTIONED UNDER HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES'. 10.THUS, THE ASSESSING OFFICER HAS OBSERVED THAT SALES MENTIONED IN SUCH LOOSE PAPERS IS SALES NOT RECORDED IN BOOKS OF ACCOUNT, FIGURES MENTIONED IN MATERIAL IS NOTHING BUT CONSUMPTION OF RAW MATERIAL NOT RECORDED, IN BOOKS OF ACCOUNT AND SAME IS THE CASE FOR RM COM REPRESENTING CASH SALES OF SOLID WASTE. THUS, ASSESSING OFFICER HAS MADE ADDITION OF UNACCOUNTED CASH PROFIT GENERATED BY ASSESSEE ON THE BASIS OF SEIZED MATERIAL FOUND FROM ASSESSEE'S PREMISES. FINALLY, ON PAGE NO. 27 TO 29 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS CONCLUDED THAT THE FIGURES MENTIONED IN THE PAGES CONTAINING DETAILS OF MIS DATA WERE NOT ON ESTIMATE BASIS AND ON COMPARISON OF PRODUCTION AS PER MIS SHEETS AND AS PER FINANCIAL RECORDS, THE ASSESSING OFFICER HAS CONCLUDED THAT THESE DATA RECORDS SUPPRESSED PRODUCTION AS WELL AS UNACCOUNTED SALES. THIS IS CONCLUDED BY THE ASSESSING OFFICER ON THE GROUND THAT PRODUCTION AND SALES FIGURES SHOWN IN MIS SHEETS WERE NOT TALLYING WITH REGULAR BOOKS OF ACCOUNT. SO, CONCLUSION IS DRAWN THAT THESE WERE UNRECORDED SALES WHICH CAN NEVER BE REFLECTED IN BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAS FURTHER CONCLUDED THAT THE ASSESSEE HAS NOT DISCLOSED CORRECT SALES AND PROFIT EARNED BY IT, SO THE TOTAL PROFIT IN MIS SHEETS, WHICH IS TREATED AS CASH PROFIT, BY THE ASSESSING OFFICER, DERIVED FROM CASH SALES, EXCESS EXPENSES AND PAGE | 9 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., SALE OF SOLID WASTE AND THEREFORE ASSESSING OFFICER HAS MADE ADDITION TO THE TUNE OF RS. 58,99,386/-. 11. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) WHO HAS RESTRICTED THE ADDITION MADE BY THE ASSESSING OFFICER TO THE TUNE OF RS.4,84,878/- AND DELETED THE ADDITION OF RS.54,14,508/- [RS.58,99,386 - RS.4,84,878]. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ADDITION, DELETED AT RS.54,14,508/- AND ASSESSEE IS IN CROSS APPEAL BEFORE US AGAINST THE ADDITION SUSTAINED BY LD CIT(A) TO THE TUNE OF RS.4,84,878/-. 12. SHRI SREENIVAS T. BIDARI, LEARNED DR FOR THE REVENUE, TOOK THE BENCH THROUGH ASSESSMENT ORDER AND STATED THAT ORDER PASSED BY THE ASSESSING OFFICER IS QUITE REASONABLE. THUS, LD DR HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 13. ON THE OTHER HAND, SHRI P.M.JAGASHETH, LEARNED COUNSEL OF THE ASSESSEE, BEGINS BY POINTING THAT ASSESSEE HAS EXPLAINED THE CONTENTS OF THE LOOSE PAPERS BY LETTER DATED ON 18.11.2011. THE ASSESSING OFFICER HAS MADE ENTIRE ADDITION IGNORING THE SUBMISSIONS FILED BY THE ASSESSEE, ON 18.11.2011. THE LD.COUNSEL CONTENDED THAT VARIOUS LOOSE PAPERS FOUND DURING THE SEARCH, WERE NOTHING BUT MERELY MIS SHEETS PREPARED AT THE END OF EACH MONTH BASED ON THE DATAS THEN AVAILABLE IN THE SYSTEM WITHOUT REFERENCE TO THE ACTUAL FIGURE IN THE FINANCIAL BOOKS. THE LD.COUNSEL POINTED OUT THAT ACTUAL PROFIT AS PER ACCOUNTS IS ALWAYS MORE THAN WHAT IS REFLECTED IN THE SUMMARY SHEET PREPARED, YEAR WISE, FROM THE LOOSE PAPERS, MONTHLY WORKING SHEETS, THEREFORE, NO ADDITION IS CALLED FOR. THE VARIOUS LOOSE PAPERS, WHICH CONTAIN THE DATE OF THE MONTHLY PROFITABILITY OF THE COMPANY, ARE PREPARED ON ESTIMATED BASIS FOR WANT OF THE FINAL AMOUNTS, DUE TO VARIOUS VARIATIONS IN PURCHASE, SALES, EXPENSES, STOCK AND DEPRECIATION. THESE LOOSE PAPERS ARE PREPARED FOR INSTANT INFORMATION PURPOSES ON VARIOUS DATES AND TIME IN ORDER TO ASCERTAIN THE CURRENT POSITION OF THE PAGE | 10 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., COMPANY. THESE LOOSE PAPERS CONTAIN SOME DISPUTED SALES FIGURES MENTIONED SEPARATELY, AS THE ACCOUNTS DEPARTMENT WAS EXPECTING CERTAIN CLAIMS AND DISCOUNTS BESIDES, THE CLEAR SALES FOR THE PERIOD. THE MIS SHEETS WERE PREPARED BY THE ACCOUNTS DEPARTMENT AND THEY USED VARIOUS TERMINOLOGY SUITABLE TO EACH OF THEM, SUCH AS CASH, DEPRECIATION AND DISPUTED SALES ETC. ALL SALES ARE DULY RECORDED IN THE BOOKS DULY SUPPORTED BY THE SALES BILLS AND DELIVERY CHALLANS REFLECTED IN THE EXCISE RECORDS AND IN MONTHLY EXCISE RETURNS AND IN RG-1 REGISTER. PRODUCTION IS DULY SUPPORTED BY PRODUCTION REGISTER AND MONTHLY PRODUCTION STATEMENT BY FACTORY AND ENTRY IN RG 1 REGISTER. NEITHER AT THE FACTORY, NOR AT THE OFFICE, ANY CASH HAS BEEN FOUND OVER AND ABOVE CASH DISCLOSED IN THE BOOKS OF ACCOUNTS. 14. SHRI P.M.JAGASHETH FURTHER PLEADS THAT STOCKS WERE ALSO PHYSICALLY VERIFIED AT THE TIME OF SEARCH AND NO EXCESS STOCK WAS FOUND AND THE MARGINAL DISCREPANCY IN STOCK AS PHYSICALLY VERIFIED HAS BEEN DULY EXPLAINED. THERE IS NO EVIDENCE OF ANY EXTRA TRANSPORT CHARGES PAID IN RESPECT OF EITHER UNACCOUNTED PURCHASES OR SALE AS SOUGHT TO BE INFERRED BY THE DEPARTMENT. THE ASSESSEE'S INCOME TAX ASSESSMENT FOR THE A Y 2003-04 TO 2006-07 WERE SUBJECT MATTER OF SCRUTINY ASSESSMENT'S U/S 143 (3) OF THE ACT AND NO ADDITION HAS BEEN MADE IN RESPECT OF STOCKS, PURCHASES AND / OR SALES. NO LOOSE PAPERS HAVE BEEN FOUND AT THE TIME OF SEARCH IN RESPECT OF SALES MADE TO ANY PARTIES FROM WHOM ANY AMOUNT IS RECOVERABLE OR REALIZED IN CASH. CONSIDERING THESE FACTS, LD COUNSEL PRAYS THAT NO ADDITION FOR UNACCOUNTED CASH GENERATION, AS MADE BY ASSESSING OFFICER, IS CALLED FOR. THEREFORE, LD.COUNSEL PLEADS THAT THERE IS NO ANY UNACCOUNTED CASH PROFIT EARNED BY THE ASSESSEE COMPANY AND HENCE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD.CIT(A) NEEDS TO BE DELETED. 15. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. WE NOTE THAT LD COUNSEL HAS PAGE | 11 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., EXPLAINED THE BENCH ABOUT THE NATURE OF LOOSE SHEETS, ON THE BASIS OF WHICH ASSESSING OFFICER HAS MADE ADDITION AND THE MODE OF PREPARATION OF SUCH MIS SHEET, WHICH ONLY GIVES THE ESTIMATED PROFIT AND ARGUED THAT ACTUAL PROFIT AS PER AUDITED ACCOUNTS IS ALWAYS MORE THAN WHAT IS REFLECTED IN THE SUMMARY SHEET PREPARED YEAR WISE FROM THE LOOSE MONTHLY WORKING SHEETS, HENCE NO FURTHER ADDITION IS CALLED FOR. THE LEARNED COUNSEL HAS EXPLAINED THAT FIGURES NOTED AGAINST 'SALES' UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES' APPEARING IN MONTHLY PROFIT AND LOSS ACCOUNT, FOUND IN SEIZED MATERIAL, REFLECTS DISPUTED SALES, AS THE ACCOUNTS DEPARTMENT WAS EXPECTING CERTAIN CLAIMS AND DISCOUNT BESIDES THE CLEAR SALES FOR THE PERIOD BUT SUCH SALE IS ALREADY RECORDED IN FINANCIAL STATEMENTS, HENCE SUCH FIGURES CANNOT BE TERMED AS UNACCOUNTED CASH PROFIT GENERATED BY ASSESSEE. WITH REGARDS TO FIGURES NOTED AGAINST RAW MATERIAL, CHEMICAL AND RAW MATERIAL (COMM.), IT IS PLEADED BY THE LD COUNSEL THAT SUCH FIGURES ARE ALREADY CONSIDERED IN THE FINANCIAL BOOKS OF ACCOUNT AND THE OVERALL THERE IS HARDLY ANY DIFFERENCE IN CONSUMPTION OF RAW MATERIAL AS PER AUDITED FINANCIAL BOOKS OF ACCOUNTS. ON CAREFUL CONSIDERATION OF REASONING GIVEN BY ASSESSING OFFICER, SUBMISSION MADE BY ASSESSEE, CRITICAL ANALYSIS OF SEIZED MIS SHEETS AND COMPARISON OF DATA RECORDED ON SEIZED DOCUMENTS WITH AUDITED ACCOUNTS FILED WITH THE RETURN OF INCOME, THE FOLLOWING FACTS WERE NOTED BY THE ASSESSING OFFICER: (I)FOR A.Y. 2007-2008 ,2009-10 AND 2010-11, SEIZED MATERIAL WERE FOUND AND SEIZED FROM ASSESSEE'S PREMISES WHICH CONTAINS QUANTITATIVE DETAILS OF PRODUCTION, LOCAL SALES, EXPORT SALES IN QUANTITY AND IN VALUE WITH MONTHLY PROFIT & LOSS ACCOUNT WHEREIN AT BOTTOM OF PAGE UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES' FIGURES OF SALES, MATERIAL, CHEMICAL AND COM, IS NOTED AND SUCH AMOUNT IS CONSIDERED BY ASSESSING OFFICER AS UNACCOUNTED INCOME OF ASSESSEE (II)SUMMARY OF PROFIT & LOSS ACCOUNT IN TABULAR FORMAT WHEREIN UNDER THE COLUMN OF CASH OR DEP FIGURES NOTED ARE COINCIDING WITH FIGURES NOTED UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES' REFERRED (SUPRA), PAGE | 12 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., (III)RECONCILIATION OF PROFIT & LOSS WORKED OUT IN MIS SHEETS WITH WORKING SHEET OF COSTING DEPARTMENT WERE ALSO FOUND AND SEIZED. 16. ON THE BASIS OF SUCH LOOSE PAPERS, ASSESSING OFFICER WAS ABLE TO SORT OUT FIGURES OF UNACCOUNTED CASH GENERATED BY ASSESSEE FROM SALES NOT RECORDED IN BOOKS, MATERIAL NOT DEBITED IN BOOKS OF ACCOUNT. MAINLY ASSESSING OFFICER HAS CONCLUDED THAT PRODUCTION WAS SUPPRESSED AND UNACCOUNTED SALES WERE MADE AND ALSO ON THE GROUND THAT EXCESS CONSUMPTION OF RAW MATERIAL WAS DEBITED IN BOOKS OF ACCOUNT TO GENERATE CASH PROFIT AS WORKED OUT IN THE MIS SHEETS FOR A.Y. 2007-08 TO 2010-11. IN VIEW OF THE FINDINGS OF THE ASSESSING OFFICER IT IS NECESSARY TO FIND OUT AND CONCLUDE WHETHER THE ASSESSEE HAS PRODUCED GOODS AND MADE SALES OUTSIDE BOOKS OF ACCOUNT OR WHETHER EXCESS CONSUMPTION OF RAW MATERIAL IS DEBITED IN BOOKS OF ACCOUNT OR ANY RAW MATERIAL HAS BEEN SOLD OUTSIDE BOOKS OF ACCOUNT AND CONSUMPTION IS SHOWN IN BOOKS OF ACCOUNT. THE ABOVE ASPECTS, AFTER ANALYZING THE SEIZED RECORDS, COMPARING WITH THE AUDITED BOOKS OF ACCOUNT, THE FOLLOWING FINDING IS GIVEN: (I) FROM THE MONTH-WISE MIS SHEETS WITH PROGRESSIVE DETAILS OF PRODUCTION AND SALES, THE QUANTITATIVE DETAILS OF PRODUCTION AND SALES AND ALSO THE DETAILS FROM AUDITED ACCOUNTS ARE AS UNDER: A.Y. RELEVANT PAGE NO. OF SEIZED MATERIAL PRODUCTION IN MT AS PER SEIZED MATERIAL SALES QUANTITY AS PER SEIZED MATERIAL PRODUCTION AS PER AUDITED ANNUAL ACCOUNT SALES AS PER AUDITED ANNUAL ACCOUNTS 2007-08 BS-2/168 50706.272 50425.07 50706.270 50387.609 2008-09 BS-6/53 55649.412 55476.602 55649.412 55471.686 2009-10 BS-14/142 60075.319 59972.399 60075.319 59972.399 (II)OPENING AND CLOSING STOCK OF FINISHED GOODS FOR THE FY 2006- 07 RELEVANT TO A.Y. 2007-08 MENTIONED IN BS-2/193 OF SEIZED DATA IS TALLIED WITH AUDITED ANNUAL ACCOUNTS. THE CLOSING STOCK OF FINISHED GOODS NOTED IN SUCH SEIZED PAPER IS FOR PAGE | 13 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., 439.38 MT WHICH IS SIMILAR TO QUANTITY OF CLOSING STOCK OF FINISHED GOODS MENTIONED IN AUDITED ANNUAL ACCOUNTS. FURTHER, OPENING STOCK OF FINISHED GOODS MENTIONED IN SUCH SEIZED MATERIAL IS FOR 115.36 MT AND OPENING STOCK OF FINISHED GOODS AS PER AUDITED ANNUAL ACCOUNTS IS FOR 120.721 MT WHICH SHOWS ONLY A MINOR DIFFERENCE. 17. THE LD CIT(A) OBSERVED THAT ASSESSING OFFICER ON PAGE NO. 12 TO 14 OF THE ASSESSMENT ORDER HAS MENTIONED THAT THE CASH PROFIT AFTER CONSIDERING ADJUSTMENT MENTIONED UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES' IN DIFFERENT MIS SHEETS WERE EXACTLY TALLYING WITH THE RECONCILIATION OF PROFIT & LOSS ACCOUNT MAINTAINED BY THE COSTING DEPARTMENT. THE ASSESSING OFFICER HAS CITED THE WORKING FOR THE MONTH OF APRIL 2006 AT PAGE NO. 28 OF BS-1 WHEREIN FIGURE OF RS.36,09,737/- WAS MENTIONED AFTER CONSIDERING ADJUSTMENT UNDER THE HEAD QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES' OF RS.28,97,723 AND FIGURE OF RS.36,09,737/- IS RECONCILED WITH PAGE NO. 27 OF BS-1 BEING RECONCILIATION OF PROFIT & LOSS ACCOUNT WHEREIN PROFIT AS PER ACCOUNT HAS BEEN MENTIONED AS 36.10 LACS. THE ASSESSING OFFICER HAS CONCLUDED THAT THE RECONCILIATION STATEMENT CONFIRMS THAT TOTAL OF QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES, MENTIONED AS CASH IN SUMMARY PAGES, REPRESENTS CASH PROFIT GENERATED. THE ASSESSEE HAS STATED THAT THIS RECONCILIATION IS NOTHING BUT THE RECONCILIATION OF PROFITS SHOWN IN MIS SHEET IS DONE WITH THE PROFIT AS PER COSTING AND AFTER MAKING ADJUSTMENT WITH STANDARD COST AND ACTUAL COST DEBITED IN ACCOUNTS. IN COSTING DEPARTMENT STORES (MAINTENANCE IS CALCULATED ON STANDARD COST BASIS). THE ADJUSTMENT OF DISPATCHES IS MADE AS IN THE COSTING DEPARTMENT AND COST IS ASSIGNED ON PRODUCTION BASIS WHEREAS IN MIS SHEETS, IT IS RELATED TO DISPATCHES (SALES). THEREFORE, THIS RECONCILIATION IS BETWEEN THE PROFIT COMPUTED BY COSTING DEPARTMENT AND PROFIT AS PER MIS BUT SAME IS NOT COMPARED WITH PROFIT AS PER ANNUAL ACCOUNTS, WHICH IS HIGHER IN ALL THE THREE ASSESSMENT YEARS. IN VIEW OF THIS FACT, FOR FINDING OF ANY SUPPRESSED PROFIT, COMPARISON HAS TO BE MADE WITH PROFIT ARRIVED AT IN THE MIS SHEET AND FINANCIAL ACCOUNTS, ON THE BASIS OF WHICH RETURN OF INCOME IS FILED. PAGE | 14 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., 18. THE LD CIT(A) OBSERVED THAT MIS DATA INCLUDES PROFIT FROM TURBINE, WHICH IS NOTIONAL PROFIT ON PER UNIT PRODUCTION OF ELECTRICITY. THIS PROFIT IS WORKED OUT TO FIND OUT THE NOTIONAL PROFIT WHICH IS NOT ACCOUNTED FOR SEPARATELY IN FINANCIAL ACCOUNTS. WITH REGARD TO ADDITION MADE BY ASSESSING OFFICER FOR UNACCOUNTED SALES ON THE BASIS OF NOTING OF 'SALES ACCOUNT' UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES', THE ASSESSEE HAS SUBMITTED THE BILL-WISE, DATE-WISE, PARTY- WISE, MONTH-WISE AMOUNT OF DISPUTED SALES WHEREAS CLAIMS HAVE BEEN SETTLED BY ALLOWING REBATE FROM FINANCIAL STATEMENTS AND SUCH FIGURES ARE EXACTLY TALLYING WITH FIGURES NOTED IN SALES UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES'. THE MONTH-WISE CHART AS NARRATED ABOVE WERE CROSS VERIFIED FROM THE PARTY'S LEDGER ACCOUNT AND REBATE ACCOUNT AND IT IS FOUND THAT THE ALLEGED SALES WHICH THE ASSESSING OFFICER HAS TREATED AS CASH SALES AND NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT ARE DULY FOUND RECORDED IN FINANCIAL BOOKS OF ACCOUNT. THIS FACT ALSO GETS STRENGTH FROM THE FACT THAT FROM THE QUANTITATIVE DETAILS OF THE SALES THE DISPUTED SALES IN QUANTITY WERE NOT REDUCED; ONLY THE SALE VALUE OF SUCH DISPUTED SALES WHERE CLAIMS WERE TO BE RECEIVED, WAS DEDUCTED FROM SALES FIGURES. THE ASSESSEE HAS SUBMITTED PARTY-WISE DETAILS OF SALES BEFORE THE ASSESSING OFFICER WHICH ALSO INCLUDES SALES MENTIONED UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES'. 19. WE NOTE THAT DURING THE APPELLATE PROCEEDINGS, THE SAMPLE COPIES OF INVOICES WERE ALSO SUBMITTED BEFORE LD CIT(A) AND WERE TEST CHECKED BY THE LD CIT(A) AND IT IS OBSERVED BY LD CIT(A) THAT ASSESSEE HAS PAID EXCISE DUTY ON SUCH SALES AND SUCH SALE IS ALREADY RECORDED IN EXCISE REGISTER. FURTHER, WHENEVER ASSESSEE HAS GIVEN REBATE/CLAIM ON SUCH SALES, EXCISE DUTY PERTAINING TO SUCH REBATE/CLAIM IS REVERSED. THE ASSESSING OFFICER ON PAGE 14 OF THE ASSESSMENT ORDER HAS OBSERVED THAT MIS SHEETS FOUND AND SEIZED FROM ASSESSEE'S PREMISES ALSO REFLECT SALES REALIZATION MADE BY ASSESSEE FOR EVERY MONTH AND THE FIGURES MENTIONED IN PENCIL BELOW THE SHEET REPRESENT THE CASH REALIZATION OF SALES MENTIONED UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES'. THE ASSESSEE HAS PRODUCED ALL THE SHEETS MENTIONED BY ASSESSING OFFICER ON PAGE NO. 14 AND 15 OF THE ASSESSMENT PAGE | 15 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., ORDER FROM BS-1, BS-2, 3, 4 AND 17. ON PERUSAL OF THESE SHEETS, IT IS CRYSTAL CLEAR THAT THE SHEETS ARE WORKING OF EXPORTS SALES REALIZATION PER METRIC TON IN THE FOLLOWING FORMAT: BASIC AMOUNT ADD: DEPB AND DFRC BENEFIT LESS: EXPORT EXPENSES CREDIT NOTES REALISATION PER MT THE LD CIT(A) OBSERVED THAT BELOW THIS SHEET THE AMOUNT IS MENTIONED IN PENCIL ONLY WITHOUT ANY NARRATION. THE ASSESSING OFFICER HAS WRONGLY DRAWN THE CONCLUSION THAT THE AMOUNT MENTIONED IN PENCIL AMOUNTS TO CASH REALIZATION OF DISPUTED SALES WITHOUT ANY CORROBORATIVE EVIDENCE. ON THE CONTRARY, THE ASSESSEE HAS PROVED BEYOND DOUBT THAT ALL THE DISPUTED SALES WERE DULY RECORDED IN SALES LEDGER WHICH IS DISCUSSED IN DETAIL ABOVE. ON COMPARISON OF GROSS SALES RECORDED IN AUDITED FINANCIAL ACCOUNTS WITH THE GROSS SALES RECORDED IN MIS SHEETS, WHICH ALSO INCLUDES DISPUTED SALES NOTED UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES', IT CAN BE SEEN THAT GROSS SALES AS PER AUDITED ANNUAL ACCOUNTS ARE MORE THAN GROSS SALES NOTED IN MIS SHEETS. A.Y. LOCAL SALES AS PER MIS SHEET DISPUTED SALE CONSIDERED BY ASSESSING OFFICER AS UNACCOUNTED SALE TOTAL GROSS SALES AS PER MIS SHEET GROSS SALES AS PER AUDITED ANNUAL ACCOUNTS 2007-08 851969212 25119338 877088550 886218220 2009-10 1241895070 55864348 1297759418 1301977265 2010-11 (3 MONTHS) 372158606 17223749 389382355 392910544 PAGE | 16 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., 20. IN VIEW OF THE ABOVE FACTS, LD CIT(A) HELD THAT IT IS ESTABLISHED BEYOND DOUBT THAT ALLEGED SALES NOTED UNDER THE HEAD 'QUANTITATIVE DETAILS IN CLOSING VARIOUS DISPUTES' IS FOUND DULY RECORDED IN SALES IN THE FINANCIAL ACCOUNTS AND IN NO WAY THE SAME CAN BE CONSIDERED AS CASH SALES RESULTING IN CASH PROFIT TO THE ASSESSEE. WHEN THERE WAS NO UNACCOUNTED PRODUCTION AND SALES, THERE CANNOT BE UNACCOUNTED CASH PROFIT ON ACCOUNT OF SUPPRESSED SALES. THEREFORE, LD CIT(A) HELD THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION ON CASH PROFITS ALLEGEDLY GENERATED FROM CASH SALES WHICH WAS NOT PROVED BY THE ASSESSING OFFICER BY ANY CORROBORATIVE EVIDENCE. 21. WITH REGARDS TO ADDITION OF RAW MATERIAL CONSUMPTION , IT WAS OBSERVED BY LD CIT(A) THAT ASSESSEE HAS SOLD MIXED WASTE AND OTHER RAW MATERIAL IN CASH AS NOTED IN CERTAIN SHEETS. THE CASH SALES OF RAW MATERIAL (WASTE) ARE NOTED ON FOLLOWING SEIZED SHEETS: A.Y. SEIZED MATERIAL MONTH AMOUNT OF SALE (RS.) 2009-2010 BS4/8 APRIL 2009 226755 2009-2010 BS4/41 MAY 2009 126000 2009-2010 BS4/7 JUNE 2009 132123 TOTAL 484878 THE FIGURES MENTIONED HEREIN ABOVE COINCIDES WITH THE FIGURES NOTED IN LOOSE PAPER UNDER THE HEAD ' RAW MATERIAL' AND THE ASSESSEE HAS FAILED TO SUBMIT ANY EVIDENCE THAT THE SALE OF RAW MATERIAL HAS BEEN REDUCED FROM RAW MATERIAL CONSUMPTION IN AUDITED ANNUAL ACCOUNTS HENCE ADDITION OF RS 6,75,537/- WAS RESTRICTED BY LD CIT(A) TO RS 4,84,878/-. ON THE BASIS OF AFORESAID DISCUSSION, AND FACTS OF ASSESSEE'S CASE, ADDITION MADE ON ACCOUNT OF UNACCOUNTED PROFIT EARNED BY ASSESSEE FOR RS. 58,99,386/- WAS RESTRICTED BY LD CIT(A) TO RS.4,84,878. PAGE | 17 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., 22. WE NOTE THAT THAT ADDITIONS HAVE BEEN MADE BASED ON VARIOUS LOOSE PAPERS (SO CALLED MIS SHEETS) SHOWING MONTHLY ESTIMATED PROFIT WORKING OF PROFIT MADE ON THE LAST DAY OF THE MONTH, TAKING VARIOUS PROVISIONAL FIGURES, NOTIONAL PROFIT SUCH AS PROFIT FROM TURBINE ETC, USED FOR CAPTIVE POWER GENERATION. FROM THESE MONTHLY LOOSE PAPER SHEETS, YEAR WISE SUMMARY WAS PREPARED. AS ACTUAL PROFIT, AS PER AUDITED ACCOUNTS, IS ALWAYS MORE THAN, WHAT IS REFLECTED IN THE SUMMARY SHEET PREPARED YEAR WISE, FROM THE LOOSE MONTHLY WORKING SHEETS. WE NOTE THAT VARIOUS LOOSE PAPERS CONTAINING; THE DATA OF THE MONTHLY PROFITABILITY OF THE COMPANY ARE PREPARED ON ESTIMATED BASIS FOR WANT OF THE FINAL ACCOUNTS DUE TO VARIOUS VARIATIONS IN PURCHASE, SALES, EXPENSES, STOCK AND DEPRECIATION. THESE LOOSE PAPERS ARE MERELY PREPARED FOR INSTANT INFORMATION PURPOSES ON VARIOUS DATES AND TIME IN ORDER TO ASCERTAIN THE CURRENT POSITION OF THE COMPANY AND TO ACT FOR FUTURE OPERATIONS OF THE COMPANY. THESE REPORTS ARE ALSO PREPARED TO GIVE THE MANAGEMENT AN INSIGHT OF VARIOUS UNSETTLED ISSUES RELATING TO RM DIFFERENCES AND DISPUTED SALES AND EXPENSES ETC. THE FIGURE OF PRODUCTION SHOWN IN MIS TALLY WITH THE EXCISE RECORDS AS WELL AS THE DISCLOSURE MADE IN THE FINANCIAL ACCOUNTS BECAUSE THE PRODUCTION FIGURE ARE READILY AVAILABLE FROM THE EXCISE RECORDS. THESE MIS REPORTS BY NO MEANS CAN BE CONSIDERED TO BE THE FINAL FIGURE OF RESULTS DISCLOSED THEREIN. ON THE CONTRARY IF THE PROFIT FIGURES AS SHOWN IN THE STATEMENT ARE AGGREGATED, THE SAME ARE LESS THAN THE PROFITS DISCLOSED IN THE ACCOUNTS. THESE LOOSE PAPERS CONTAIN SOME DISPUTED SALES FIGURES MENTIONED SEPARATELY AS THE ACCOUNTS DEPARTMENT WAS EXPECTING CERTAIN CLAIMS AND DISCOUNT BESIDES THE CLEAR SALES FOR THE PERIOD. IN THE INITIAL YEAR 2006- 2007, THEY WERE NOT HAVING THE CLEAR DATA WITH REGARD TO THE CLAIM ON ACCOUNT OF THESE SALES HENCE, NO FIGURES WERE MENTIONED AS EXPENSES ON ACCOUNT OF CLAIM WHILE PREPARING THE MIS REPORTS BUT IN THE LATER YEAR 2008- 2009 AND 2009-2010 WITH EXPERIENCE OF WORKING AND KNOWING THE FACTS ABOUT THE CLAIMS TO BE RAISED BY THE PARTIES FROM TIME TO TIME, THE TENTATIVE FIGURES OF THESE ESTIMATED CLAIMS WERE MENTIONED AS MISC. EXPENSES IN THESE MIS WORKING SHEETS. 23. WE NOTE THAT ALL SALES ARE DULY RECORDED IN THE BOOKS, DULY SUPPORTED BY SALES BILLS AND DELIVERY CHALLANS, REFLECTED IN EXCISE RECORDS AND IN MONTHLY EXCISE PAGE | 18 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., RETURNS AND IN RG 1 REGISTER . PRODUCTION IS DULY SUPPORTED BY PRODUCTION REGISTER AND MONTHLY PRODUCTION STATEMENT BY FACTORY AND ENTRY IN RG 1 REGISTER. ALL PURCHASES ARE DULY SUPPORTED WITH GRN, DELIVERY CHALLAN OF PARTY AND TRANSPORT LR COPY, PURCHASE BILLS, ENTRY IN FORM IV OF EXCISE REFLECTING TOTAL PURCHASES FOR THE MONTH. ALL PURCHASES ARE RECORDED IN PURCHASE INWARD REGISTER AT THE TIME OF ARRIVAL. IN FORM IV, ASSESSEE COMPANY PROVIDES DETAILS OF OPENING STOCK, PURCHASES, CONSUMPTION AND CLOSING STOCK ON MONTHLY BASIS TO EXCISE DEPARTMENT. ASSESSEE IS FILING MONTHLY EXCISE RETURNS, EXCISE AUDIT AND CHECKS ARE CARRIED, OUT BY THE EXCISE DEPARTMENT ON REGULAR INTERVALS. IN ALL THESE EXCISE AUDIT AND CHECK NOT A SINGLE TIME IT WAS FOUND OUT BY THE EXCISE DEPARTMENT THAT THERE IS ANY VARIATION IN BOOK RECORDS AND FACTORY RECORDS. THEREFORE, BASED ON THIS FACTUAL POSITION WE DELETE THE ADDITION SUSTAINED BY LD CIT(A) FOR ASSESSMENT YEAR 2009-10 AT RS.18,99,119/- ( RS.2,64,46,745- RS.2,45,47,626) AND FOR ASSESSMENT YEAR 2010-11 , AT RS.4,84,178/-(RS.58,99,386-RS.54,14,508). 24. IN THE RESULT, CONCISE AND COMMON GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED WHEREAS, CONCISE AND COMMON GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED. 25. CONCISE AND COMMON GROUND NO.3 RAISED BY THE REVENUE IS REPRODUCED BELOW FOR READY REFERENCE: III)DELETING ADDITION OF RS.2 LAKHS MADE ON ACCOUNT OF INFLATION OF PURCHASES WITHOUT CONSIDERING THE FACT THAT THE SUPPLIERS WERE NOT MAINTAINING THE STOCK REGISTER AND THEIR BOOKS OF ACCOUNTS WERE REJECTED AT THE TIME OF ASSESSMENT UNDER SECTION 153C OF THE INCOME TAX ACT WHICH HAS ALSO BEEN CONFIRMED IN THE APPEAL. A) ASSESSMENT YEAR 2007-08 RS.2,00,000/- B) ASSESSMENT YEAR 2008-09 RS.2,00,000/- C) ASSESSMENT YEAR 2009-10 RS.2,00,000/- D) ASSESSMENT YEAR 2010-11 RS.2,00,000/- PAGE | 19 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., 26. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER HAS OBSERVED THAT TWO PERSONS WERE ASSESSED UNDER SECTION 153C OF THE ACT WITH THE CIRCLE OF ASSESSEE AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF SUCH PERSONS, IT WAS FOUND THAT THEY WERE NOT MAINTAINING THE STOCK REGISTER AND WERE UNABLE TO IDENTIFY ALL THEIR SUPPLIERS. THE BOOKS OF ACCOUNTS OF BOTH THE PARTIES WERE REJECTED UNDER SECTION 145(3) OF THE ACT AND AS THEY WERE ALSO SUPPLYING WASTE PAPER TO ASSESSEE. THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT POSSIBILITY OF INFLATION OF PURCHASE CANNOT BE RULED OUT AND, THEREFORE, AN AD HOC ADDITION OF RS. 2,00,000/- WAS MADE ON ACCOUNT OF INFLATED PURCHASES. 27. ON APPEAL, THE LD CIT(A) DELETED THE ADDITION OF RS. 2,00,000/-. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 28. WE HAVE HEARD BOTH THE PARTIES. LEARNED DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ON THE OTHER HAND, LD COUNSEL DEFENDED THE ORDER PASSED BY THE LD CIT(A). WE NOTE THAT LD CIT(A) HAS CONSIDERED THE BASIS OF THE ADDITION MADE BY THE ASSESSING OFFICER IN ALL THE THREE ASSESSMENT YEARS AND ALSO THE DOCUMENTS AND EXPLANATION SUBMITTED BY THE ASSESSEE. IT IS FOUND THAT AN AD HOC ESTIMATED ADDITION OF RS.2,00,000/- MADE IN ASSESSMENT YEAR WAS WITHOUT VERIFYING THE ACTUAL PURCHASES FROM M/S. MAHAVIR SALES CORPORATION. THE ASSESSEE HAS SUBMITTED ALL THE RELEVANT DOCUMENTS, PURCHASE BILLS, DELIVERY CHALLANS AND THE DETAILS OF PAYMENTS MADE TO THE SUPPLIER M/S MAHAVIR SALES CORPORATION. THE ASSESSMENT OF M/S MAHAVIR SALES CORPORATION WAS ALSO FINALIZED BY THE SAME ASSESSING OFFICER. THE ASSESSING OFFICER SIMPLY MADE THE ADDITION ON AD HOC BASIS WITHOUT RELYING UPON ANY ADMISSIBLE EVIDENCE OF INFLATION OF PURCHASES BY THE ASSESSEE. THE ADDITION WAS MADE WITHOUT ANY BASIS AND ON AD HOC BASIS ONLY. THE SIMILAR ADDITIONS WERE MADE BY ASSESSING OFFICER IN A.YS. 2004-05 TO 2006-07, WHEREIN LD CIT(A), VIDE HIS ORDER DATED 31 ST AUGUST, 2012 IN APPEAL NO. CIT(A) II/CC-III /286 TO 288/2011-12, SIMILAR ADDITIONS MADE BY ASSESSING OFFICER WERE DELETED.IN VIEW OF THE ABOVE FACTS, WE NOTE THAT ASSESSING PAGE | 20 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., OFFICER WAS NOT JUSTIFIED IN MAKING THE AD HOC ADDITION OF RS.2,00,000/-. HENCE, LD CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.2,00,000/-.THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF ID. CIT(A) IN DELETING THE AFORESAID ADDITIONS. HIS ORDER ON THIS ADDITION IS, THEREFORE, UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 29. IN THE RESULT, THE CONCISE AND COMMON GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 30. WE NOTE THAT CONCISE AND COMMON GROUND NO.4 RAISED BY THE REVENUE AND CONCISE AND COMMON GROUND NO.4 RAISED BY THE ASSESSEE ARE IDENTICAL AND SIMILAR THEREFORE, WE ADJUDICATE THEM TOGETHER. CONCISE AND COMMON GROUND NO.4 RAISED BY THE REVENUE IS AS FOLLOWS (IV)DELETED THE ADDITION OF RS.28,45,762/- OUT OF TOTAL ADDITION OF RS.53,09,056/- MADE ON ACCOUNT OF DIFFERENCE IN STOCK. CONCISE AND COMMON GROUND NO.4 RAISED BY THE ASSESSEE IS AS FOLLOWS (4).ADDITION ON ACCOUNT OF DISCREPANCY OF RS.24,63,294/- ( RS.53,09,056- RS.28,45,762) IN STOCK FOUND BETWEEN PHYSICAL INVENTORY TAKEN ON DATE OF SEARCH AND STOCK RECORD. (THIS GROUND RELATES TO ASSESSMENT YEAR 2010-11). 31. BRIEF FACTS OF THE ISSUE IN DISPUTE ARE STATED AS UNDER. ASSESSING OFFICER HAS MADE COMPARISON OF STOCK AS PER BOOKS OF ACCOUNT AND STOCK AS PER PHYSICAL INVENTORY FOUND DURING THE COURSE OF SEARCH, AS UNDER: STOCK AS PER BOOKS STOCK AS PER PHYSICAL INVENTORY DIFFERENCE ITEMS IN QTY (IN KGS) VALUE IN RS. IN QTY KGS. VALUE IN RS. IN QTY. VALUE IN RS. FINISHED GOODS 394901 8767190 347426.50 8593650 47475.10 (-)1174549 CHEMICALS 961191 21517543 906250 18500734 54941 (-)3016809 WASTE PAPER 6724728 61573161 6851460 62690859 126731 1117698 539056 PAGE | 21 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., THE ASSESSING OFFICER HAS OBSERVED THAT AS STOCK WAS TAKEN BY THE DEPARTMENT WITH THE HELP OF EMPLOYEES AND SIGNATURE OF EMPLOYEES HAVE BEEN OBTAINED, CERTIFYING THAT STOCK HAS BEEN CORRECTLY TAKEN, APPELLANTS ARGUMENT THAT SOME OF THE STOCK ITEMS WERE MISSED OUT AND VALUE WAS ON AD- HOC BASIS WAS NOT ACCEPTABLE. THE DIFFERENCE IN STOCK SUGGESTS THAT APPELLANT HAS INDULGED IN UNRECORDED SALES AND THUS ADDITION OF RS.53,09,056/- WAS MADE BY THE ASSESSING OFFICER. 32. ON APPEAL, LD.CIT(A) PARTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING AS FOLLOWS: 8.5 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSION FILED BY THE APPELLANT. THE ASSESSING OFFICER HAS COMPARED STOCK OF FINISHED GOODS, CHEMICALS AND WASTE AS PER BOOKS OF ACCOUNT OF APPELLANT WITH PHYSICAL STOCK AND FOUND DURING THE COURSE OF SEARCH AND MADE AGGREGATE ADDITION OF RS.53,09,056. 8.6 THE ASSESSING OFFICER HAS OBSERVED THAT FINISHED GOODS OF RS.3,47,426 WAS FOUND DURING THE COURSE OF SEARCH WHEREAS THE STOCK AS PER BOOKS OF ACCOUNT WAS OF 3,94,901 KGS., HENCE HE HAS MADE ADDITION OF RS. 11,74,549 FOR DIFFERENTIAL STOCK OF 47,475.10 KGS BEING SHORTAGE OF STOCK FOUND DURING THE COURSE OF SEARCH(THOUGH ASSESSING OFFICER HAS USED WORD EXCESS STOCK IN ASSESSMENT ORDER). THE APPELLANT HAS ARGUED THAT AS QUANTITY OF FINISHED GOODS RECORDED IN BOOKS OF ACCOUNT TALLIES WITH QUANTITY OF FINISHED GOODS AS PER EXCISE RECORDS BEING RG-1, NO ADDITION CAN BE MADE AS APPELLANT CANNOT SELL ANY GOODS WITHOUT RECORDING ENTRY IN EXCISE REGISTER. THIS ARGUMENT OF APPELLANT CANNOT BE ACCEPTED AS DURING THE COURSE OF SEARCH PHYSICAL STOCK OF FINISHED GOODS WAS TAKEN WITH THE HELP OF APPELLANT'S OWN EMPLOYEES AND SIGNATURE OF EMPLOYEES WAS OBTAINED. THESE EMPLOYEES WERE WELL VERSED WITH THE LOCATION, VARIETY OF FINISHED GOODS, DIFFERENT GRADING OF FINISHED GOODS AND ALSO THE WEIGHMENT SYSTEM FOLLOWED BY THE APPELLANT COMPANY. THE AUTHORISED OFFICER AND EMPLOYEES OF THE DEPARTMENT HAVE NOTED THE QUANTITY, RATE, AND VALUE OF THE FINISHED GOODS AS PER DESCRIPTION EXPLAINED BY THE EMPLOYEES OF THE APPELLANT COMPANY. THERE WAS NO OBJECTION RAISED ON BEHALF OF THE APPELLANT COMPANY REGARDING QUALITY/GRADE OF FINISHED GOODS, WEIGHMENT AND THE RATE APPLIED IN THE INVENTORISED FINISHED GOODS DURING THE SEARCH AND POST-SEARCH ENQUIRY. AS PHYSICAL STOCK FOUND DURING THE COURSE OF SEARCH WAS LESS THAN STOCK RECORDED IN BOOKS OF ACCOUNTS, IT SUGGESTS THAT APPELLANT HAS SOLD FINISHED GOODS OUT OF ITS BOOKS OF ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR IN APPELLATE PROCEEDINGS, APPELLANT HAS NOT BROUGHT ANY ADMISSIBLE EVIDENCE TO RECONCILE THE DIFFERENCE BETWEEN STOCK AS PER BOOKS OF ACCOUNT AND STOCK AS PER PHYSICAL INVENTORY TAKEN DURING THE COURSE OF SEARCH. FURTHER, THE APPELLANT HAS NOT BROUGHT OUT SPECIFIC INSTANCES LIKE PARTICULAR STOCK NOT TAKEN INTO INVENTORY DURING THE COURSE OF SEARCH, CLERICAL ERROR IN CALCULATION OF STOCK, ERROR IN TAKING WEIGHT IN STOCK, ETC., AS POINTED OUT IN CASE OF ADDITION OF WASTE PAPER AND CHEMICALS. SIMPLY BOOK STOCK TALLIES WITH EXCISE STOCK DOES NOT MEAN THAT NO ADDITION CAN BE MADE FOR SUCH SHORTAGE OF PHYSICAL STOCK HENCE ADDITION MADE BY AO FOR RS. 11,74,549 IS CONFIRMED. 8.7 FURTHER, ASSESSING OFFICER HAS MADE AN ADDITION FOR SHORTAGE OF CHEMICAL STOCK FOUND DURING THE COURSE OF SEARCH FOR RS. 30,16,809 WHEREIN HE HAS OBSERVED THAT STOCK OF CHEMICAL AS PER BOOKS IS 9,61,191 KGS OF RS. 2,15,17,543 WHEREAS STOCK AS PER INVENTORY PAGE | 22 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., TAKEN DURING THE COURSE OF SEARCH IS OF 9,06,250 KGS OF RS. 1,85,00,734. THE APPELLANT HAS ARGUED THAT MAJOR REASONS FOR DIFFERENCE IN STOCK IS DUE TO CLERICAL ERROR IN CALCULATION BY DEPARTMENT FOR RS. 2,70,000, CERTAIN ITEMS OF INVENTORY NOT INCLUDED IN INVENTORY AT THE TIME OF SEARCH FOR RS. 21,13,558 AND DIFFERENCE IN VALUATION IN PRICE PER UNIT CONSIDERED BY THE AO FOR RS. 5,07,211. (DETAILED RECONCILIATION SUBMITTED BY APPELLANT IS ALREADY REPRODUCED AT PARA 8.3 HEREIN ABOVE). THE SUBMISSION MADE BY APPELLANT IS DEALT AS UNDER: (I)THE AUTHORISED OFFICER HAS CONSIDERED THE STOCK OF 'FIXLINK' AT 3,000 KGS AND RATE OF 100 PER KG WHEREAS STOCK AS PER BOOKS OF ACCOUNT WAS 2,958 KGS AND RATE PER KG WAS RS. 102.80. THE AUTHORISED OFFICER HAS CONSIDERED BOOK VALUE OF STOCK AT RS. 3,04,082 (2958 X 102.80) WHEREAS STOCK, AS PER INVENTORY WAS CONSIDERED AT 30,000 ONLY THOUGH ACTUAL FIGURE WORKS OUT TO RS. 3,00,000 (3,000 X 100). THIS APPEARS TO BE CLERICAL MISTAKE ON PART OF AUTHORISED OFFICER WHILE PREPARING PANCHNAMA OF INVENTORY AND ACTUAL FIGURE OF RAW MATERIAL BEING FIXLINK WAS REQUIRED TO BE CONSIDERED AT RS. 3,00,000 AND NOT RS. 30,000 HENCE ADDITION MADE BY ASSESSING OFFICER TO THE EXTENT OF RS 2,70,000 IS REDUCED. (II).THE APPELLANT HAS ARGUED THAT AUTHORISED OFFICER HAS NOT CONSIDERED VARIOUS CHEMICALS OF RS. 21,13,558 WHILE TAKING STOCK DURING THE COURSE OF SEARCH THOUGH SUCH STOCK WAS LYING AT FACTORY PREMISES. THE APPELLANT HAS SUBMITTED DETAILS OF SUCH STOCK ALONG WITH PURCHASE BILLS, DATE OF PURCHASE, COPY OF GOOD RECEIPT NOTE AND LR. THE STATEMENT SHOWING MAJOR CHEMICALS NOT CONSIDERED BY AUTHORISED OFFICER AS SUBMITTED BY APPELLANT IS REPRODUCED AT PARA - 8.3 HEREIN ABOVE. ON CAREFUL CONSIDERATION OF DETAILED SUBMISSIONS MADE BY APPELLANT AND COPY OF PANCHNAMA PREPARED AT THE TIME OF SEARCH, IT IS OBSERVED THAT THOUGH AGAINST FEW STOCKS QUANTITY AS PER BOOKS OF ACCOUNT WAS MENTIONED, CORRESPONDING FIGURE OF STOCK FOUND DURING THE COURSE OF SEARCH WAS MENTIONED AS NIL WHICH IN OPINION, OF APPELLANT REFLECTS STOCK LYING IN FACTORY PREMISES NOT CONSIDERED BY AUTHORIZED OFFICER. IT IS NOT THE CASE THAT, FOR PARTICULAR ITEM OF CHEMICAL, PHYSICAL STOCK WAS FOUND AS WELL AS BOOK STOCK WAS ALSO FOUND WHICH HAS RESULTED INTO DIFFERENCE IN QUANTITY BUT DIFFERENCE IS ON ACCOUNT OF NO PHYSICAL STOCK TAKEN FOR CERTAIN PRODUCTS OF CHEMICAL AS POINTED OUT BY THE AR. THE ARGUMENT OF APPELLANT SEEMS TO BE PARTIAL CORRECT AS EVEN CERTAIN CHEMICAL WAS PURCHASED JUST PRIOR TO 4 TO 5 DAYS BEFORE THE DATE OF SEARCH, SAME WAS NOT CONSIDERED BY AUTHORIZED OFFICER WHILE CONSIDERING PHYSICAL STOCK. AS SEARCH WAS CARRIED OUT ON 16 TH JULY, 2009, THE BENEFIT OF NON-TAKING OF STOCK OF CHEMICAL FOR PURCHASE MADE DURING THE MONTH OF JUNE AND JULY 2009 CAN BE GIVEN TO APPELLANT AS APPELLANT HAS SUBMITTED ALL NECESSARY EVIDENCES REGARDING SUCH PURCHASE AND FOR REMAINING PERIOD, NO BENEFIT, CAN BE GIVEN AS SUCH STOCK SHOULD HAVE BEEN CONSUMED IN MANUFACTURING PROCESS. FURTHER , APPELLANT HAS NOT SUBMITTED ANY OTHER EVIDENCES TO SHOW THAT SUCH STOCK WAS ACTUALLY LYING AT FACTORY PREMISES OF THE DATE OF SEARCH. ON THE BASIS OF SAME, ADDITION MADE BY ASSESSING OFFICER IS REDUCED TO FOLLOWING EXTENT: PARTICULARS(NAME OF CHEMICAL) STOCK IN QTY. VALUE IN RS. REMARKS PAGE | 23 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., GK 1008 500 83,500 APPELLANT HAS CLAIMED 1388 KG BUT PURCHASE OF 500 KG WAS MADE ON 3 RD JUNE 2009 HENCE RELIEF IS GIVEN TO THAT EXTENT. THE BALANCE MATERIAL WAS PURCHASED PRIOR TO J UNE 2009 HENCE NO BENEFIT IS GIVEN. GK 18 460 1,82,620 ORGANOPAL 5540 1579 3,77,381 SPRAY DRIED KAUOLINE 15650 1,45,547 THE APPELLANT HAS CLAIMED THAT THIS VALUE COMES TO RS. 3,77,381 AFTER CONSIDERING RATE PER KG OF RS. 9.30 (15650 X 9.30) THIS IS ARITHMETICAL ERROR OF APPELLANT HENCE RELIEF OF RS, 1,45,545 IS GIVEN. COATING CLAY 90 24150 1,61,805 TOTAL 9,50,853 IN VIEW OF AFORESAID OBSERVATION, RELIEF OF RS. 9,50,853 IS GIVEN OUT OF RELIEF OF RS. 21,13,558 CLAIMED BY APPELLANT. (III) THE APPELLANT HAS FURTHER ARGUED THAT IN PANCHNAMA PREPARED AT THE TIME OF SEARCH, AUTHORISED OFFICER HAS CONSIDERED THE VALUATION OF STOCK OF CHEMICALS AT BASIC VALUE AND NOT AS PER LANDING COST SHOWN IN BOOKS OF ACCOUNT WHICH INCLUDES BASIC VALUE INCREASED BY CENTRAL SALES TAX (CST), FREIGHT, INSURANCE, HANDING CHARGES ETC. THE ARS HAVE ARGUED THAT AS QUANTITY OF SUCH STOCK AS PER BOOKS OF ACCOUNT AND STOCK AS PER INVENTORY TAKEN DURING THE COURSE OF SEARCH TALLIES WITH EACH OTHER, NO ADDITION CAN BE MADE FOR DIFFERENCE IN VALUATION FOR REASONS STATED SUPRA. THE DETAILS OF SUCH ITEMS OF CHEMICAL IS SUMMARISED IN TABULAR CHART AT PARA 8.3 HEREIN ABOVE. I HAVE CAREFULLY CONSIDERED THE PANCHNAMA PREPARED AT THE TIME OF SEARCH, PURCHASE BILLS FOR RELEVANT CHEMICAL PURCHASES AS WELL AS WORKING OF LANDING COST OF SUCH MATERIAL COMPUTED BY APPELLANT ALONGWITH SUPPORTING EVIDENCES AND THE CONTENTION OF APPELLANT THAT THERE IS NO DIFFERENCE IN QUANTITY OF CHEMICAL RECORDED IN BOOKS OF ACCOUNT AND STOCK AS PER INVENTORY PREPARED AT THE TIME OF SEARCH IS FOUND CORRECT. FURTHER, AUTHORIZED OFFICER HAS ADOPTED THE BASIC VALUE FROM PURCHASE BILLS WHILE COMPUTING VALUE OF STOCK AT THE TIME OF SEARCH BUT HAS NOT INCREASED SUCH VALUE BY OTHER EXPENDITURE LIKE SALES TAX, FREIGHT, INSURANCE ETC BORN BY APPELLANT ON SUCH PURCHASE FROM BRINGING MATERIAL AT FACTORY PREMISES. THE WORKING ADOPTED BY AUTHORIZED OFFICER AND CONSIDERED BY ASSESSING OFFICER IS NOT PROPER AS VALUATION OF CHEMICAL IS REQUIRED TO BE CONSIDERED AT LANDING COST AND NOT THE BASIS VALUE AND IF SUCH VALUE IS ADDED TO THE BASIC VALUE ADOPTED BY AUTHORIZED OFFICER, APPELLANT IS ENTITLED TO RELIEF OF RS 5,07,211. PAGE | 24 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., IN VIEW OF AFORESAID DISCUSSION, APPELLANT IS ENTITLED TO RELIEF OF RS 17,28,064( RS 2,70,000+ RS 9,50,853+ RS 5,07,211) OUT OF TOTAL ADDITION OF RS 30,16,809 MADE BY ASSESSING OFFICER. 8.8 THE ASSESSING OFFICE HAS FURTHER HELD THAT STOCK OF WASTER PAPER RECORDED IN BOOKS OF ACCOUNT AT THE TIME OF SEARCH WAS FOR 67,24,728 KGS WHEREAS STOCK PHYSICALLY FOUND DURING THE COURSE OF SEARCH WAS FOR 68,51,460 WHICH MEANS THAT PHYSICAL STOCK IS IN EXCESS OF BOOK STOCK BY 1,26,731 KGS FOR WHICH HE HAS MADE ADDITION OF RS 11,17,698. THE APPELLANT HAS SUBMITTED RECONCILIATION STATEMENT REGARDING STOCK OF WASTE PAPER FOUND DURING THE COURSE OF SEARCH AND STOCK RECODED IN BOOKS OF ACCOUNT AND WHENEVER THERE WAS DIFFERENCE, IT WAS SUBMITTED THAT WHILE TAKING THE STOCK AUTHORIZED OFFICER HAS TAKEN THE WEIGHT PER BALE ON RANDOM BASES WITHOUT CONSIDERING THE VARIATION OF WEIGHT IN EACH CONSIGNMENT/BALE OF THE SAME QUALITY AND DETAILED CHART OF SUCH RECOMPILATION IS REPRODUCED AT PARA 8.5 HEREIN ABOVE. IN SUPPORT OF ITS CONTENTION, LEARNED ARS HAVE FILED COPY OF PURCHASE BILL, PACKING LIST, BILL OF ENTRY INDICATING THE WEIGHT PER BALE, LORRY RECEIPT AND DELIVERY CHALLAN WHICH HAVE BEEN VERIFIED. THE ARGUMENT OF APPELLANT THAT IN ONE SINGLE CONSIGNMENT, IN DIFFERENT, CONTAINERS THE WEIGHMENT OF BALES IS DIFFERENT IS FOUND CORRECT. THE ASSESSING OFFICER HAS WORKED OUT DIFFERENCE IN WASTE PAPER BY COMPARING THE QUANTITY IN KGS FOUND DURING THE SEARCH ARRIVED AT AFTER CONSIDERING NO OF BALES AND AVERAGE RATE OF WEIGHT PER BUNDLE AND QUANTITY IN KGS RECORDED, IN BOOKS OF ACCOUNT AND SAME HAS RESULTED INTO SHORTAGES OF 1,26,732 KGS. THE DIFFERENCE BEING SHORTAGES IS FOR 5 PRODUCTS OUT OF TOTAL 17 PRODUCTS AS POINTED OUT IN TABULAR CHART AT PARA 8.4 HEREINABOVE. THERE IS NO DISPUTE REGARDING NO OF BALES/BUNDLES OF WASTE PAPER FOUND DURING THE COURSE OF SEARCH AND RECODED IN BOOK STOCK AS SAME IS 8301 IN BOTH THE CASES BUT DIFFERENCE IN QUANTITY IN KGS HAVE BEEN ARRIVED AS AUTHORISED OFFICER HAS APPLIED AVERAGE WEIGHT PER BUNDLE/BALE TO WORK OUT ACTUAL PHYSICAL STOCK WHEREAS APPELLANT HAS CONSIDERED ACTUAL WEIGHT PER BUNDLE/BALE DEPENDING UPON THE CONSIGNMENT IN ITS RECONCILIATION. FOR E.G. STOCK OF IMP NEWS & PAINS IS FOR 770 BUNDLE FOR WHICH AUTHORIZED OFFICER HAS CONSIDERED AVERAGE WEIGHT PER BUNDLE AT 900 AND HAS ARRIVED AT PHYSICAL STOCK OF 6,93,000 KGS WHEREAS APPELLANT HAS CONSIDERED 609 BUNDLES OF SAME; STOCK HAVING AVERAGE WEIGHT OF 900 PER BUNDLGE, 110 BALES HAVING WEIGHT OF 555 PER BUNDLE AND 51 BALES HAVING WEIGHT OF 615 PER BALE AND FOR AGGREGATE OF 770 BALES, STOCK HAS BEEN COMPUTED AT 6,40,513 RESULTING INTO SHORTAGE OF STOCK. IN THIS CASE, THOUGH APPELLANT HAS PURCHASED SAME PRODUCT WITH SAME SELLER BEING V.G. REC, AMSTERDAM, WEIGHT PER BALE IS DIFFERENT WHICH IS CLEARLY REFLECTED IN PURCHASE BILLS AS WELL AS OTHER DOCUMENTARY EVIDENCES. SIMILAR IS THE CASE FOR OTHER TYPES OF WASTE PRODUCTS. THESE EVIDENCES SUPPORT THE EXPLANATION OF APPELLANT THAT FOR EACH PRODUCT, STANDARD WEIGHT PER BALE CANNOT BE ADOPTED BUT STOCK AS ON THE DATE OF SEARCH IS REQUIRED TO BE CONSIDERED AFTER ADOPTING ACTUAL WEIGHT PER BILL IS FOUND CORRECT AND THIS SEEMS TO BE BONAFIDE MISTAKE ON PART OF AUTHORIZED OFFICER. EVEN IN THE PRESENT CASE, THERE IS NO DIFFERENCE IN NO OF BALES/BUNDLES FOUND DURING THE COURSE OF SEARCH AND BALES ALREADY RECORDED IN BOOKS OF ACCOUNT. CONSIDERING THE FACTS OF APPELLANT'S CASE AS DISCUSSED HEREIN ABOVE, ADDITION MADE BY ASSESSING OFFICER FOR RS 11,17,698 IS THUS DELETED. IN THE RESULT, GROUND OF APPEAL RAISED BY APPELLANT FOR ADDITION OF SHORTAGE/EXCESS OF STOCK IS PARTLY ALLOWED.9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 33. WE HAVE GONE THROUGH THE ORDER OF LD CIT(A) ON THIS PARTICULAR ISSUE AND WE NOTE THAT PANCHNAMA PREPARED AT THE TIME OF SEARCH, PURCHASE BILLS FOR RELEVANT CHEMICAL PURCHASES AS WELL AS WORKING OF LANDING COST OF SUCH MATERIAL COMPUTED PAGE | 25 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., BY ASSESSEE ALONGWITH SUPPORTING EVIDENCES SHOWS THAT THERE IS NO DIFFERENCE IN QUANTITY OF CHEMICAL RECORDED IN BOOKS OF ACCOUNT AND STOCK AS PER INVENTORY PREPARED AT THE TIME OF SEARCH. THE ASSESSEE HAS SUBMITTED RECONCILIATION STATEMENT REGARDING STOCK OF WASTE PAPER FOUND DURING THE COURSE OF SEARCH AND STOCK RECODED IN BOOKS OF ACCOUNT AND WHENEVER THERE WAS DIFFERENCE, IT WAS SUBMITTED THAT WHILE TAKING THE STOCK, THE AUTHORIZED OFFICER HAS TAKEN THE WEIGHT PER BALE ON RANDOM BASES WITHOUT CONSIDERING THE VARIATION OF WEIGHT IN EACH CONSIGNMENT/BALE OF THE SAME QUALITY. IN SUPPORT OF ITS CONTENTION, ASSESSEE HAS FILED COPY OF PURCHASE BILL, PACKING LIST, BILL OF ENTRY INDICATING THE WEIGHT PER BALE, LORRY RECEIPT AND DELIVERY CHALLAN WHICH HAVE BEEN VERIFIED. THE ARGUMENT OF ASSESSEE THAT IN ONE SINGLE CONSIGNMENT, IN DIFFERENT CONTAINERS, THE WEIGHMENT OF BALES IS DIFFERENT WHICH IS FOUND CORRECT. IN ASSESSEE`S CASE THERE IS NO DIFFERENCE IN NUMBER OF BALES/BUNDLES FOUND DURING THE COURSE OF SEARCH AND BALES ALREADY RECORDED IN BOOKS OF ACCOUNT. THE LD CIT(A) HAS ALREADY DELETED THE ADDITION OF RS.28,45,762/- BASED ON THE FACTUAL POSITION NARRATED ABOVE. CONSIDERING THESE FACTS ADDITION ON ACCOUNT OF DISCREPANCY OF RS.24,63,294/- ( RS.53,09,056- RS.28,45,762) IN STOCK FOUND BETWEEN PHYSICAL INVENTORY TAKEN ON DATE OF SEARCH AND STOCK RECORDED IN BOOKS OF ACCOUNTS SHOULD ALSO BE DELETED. ACCORDINGLY, WE ALSO DELETE THE ADDITION OF RS.24,63,294/-. 34. IN THE RESULT, CONCISE AND COMMON GROUND NO.4 RAISED BY THE REVENUE IS DISMISSED WHEREAS CONCISE AND COMMON GROUND NO.4 RAISED BY THE ASSESSEE IS ALLOWED. 35. CONCISE AND COMMON GROUND NO.5 RAISED BY THE REVENUE IS REPRODUCED BELOW: (V) DELETED THE ADDITION OF RS.27,67,500/- BEING BOGUS PURCHASES MADE ON THE BASIS OF STATEMENTS RECORDED DURING THE COURSE OF SEARCH. 36. THIS GROUND RELATES TO ADDITION ON ACCOUNT OF INFLATION OF PURCHASES. THE ASSESSING OFFICER HAS OBSERVED THAT DURING THE COURSE OF SEARCH, PAGE NO. 123 OF ANNEXURE BS-12, WAS SEIZED, WHICH CONTAIN INVOICE OF GAUTAM ENTERPRISES PAGE | 26 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., (DIVISION OF GAUTHAM EXIM PVT. LTD.) DATED 03/07/2009, WHICH SHOWS PURCHASE OF SUPER WHITE CUTTING FOR AN AMOUNT OF RS.27,67,500/-. THE ASSESSING OFFICER HAS MENTIONED THAT IN STATEMENT OF SHRI R. BALASUBRAMANIAN, CHIEF EXECUTIVE OF M/S GAUTAM ENTERPRISES, RECORDED ON 24/07/2009, WHEREIN HE HAS ADMITTED THAT THERE WAS NO REAL BUSINESS TRANSACTION AND MERE ACCOMMODATION BILLS HAVE BEEN ISSUED AND THE FUNDS RECEIVED HAS BEEN RETURNED BACK TO GAYATRI AND KHERANI PAPER MILLS. THEREFORE, ASSESSING OFFICER WAS OF THE VIEW THAT THESE PURCHASES ARE NOT REAL THEREFORE, HE MADE ADDITION TO THE TUNE OF RS.27,60,500/-. 37. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 38. WE HAVE HEARD BOTH THE PARTIES. LEARNED DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ON THE OTHER HAND, LD COUNSEL DEFENDED THE ORDER PASSED BY THE LD CIT(A). WE NOTE THAT ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER, PURCHASE REGISTER AND PARTY LEDGER ACCOUNT. DURING THE COURSE OF SEARCH PROCEEDING, INVOICE OF GAUTAM ENTERPRISE DATED 3 RD JULY, 2009 RELATING TO PURCHASE OF SUPER-WHITE CUTTING FOR RS. 27,67,500/- WAS FOUND. FURTHER, A STATEMENT OF SHRI R. BALASUBRAMANIAN, CHIEF EXECUTIVE OF M/S GAUTAM ENTERPRISES WAS RECORDED ON 24 TH JULY, 2009 WHEREIN HE HAS STATED THAT THERE IS NO REAL BUSINESS TRANSACTION AND MERE ACCOMMODATION BILLS HAVE BEEN RAISED AND FUNDS RECEIVED HAVE BEEN RETURNED BACK TO ASSESSEE. FURTHER, A STATEMENT OF MR. MAHESH JALAN, EXECUTIVE DIRECTOR OF APPELLANT WAS ALSO RECORDED WHEREIN HE HAS ADMITTED THAT THERE HAS BEEN NO BUSINESS TRANSACTION AND ONLY FINANCIAL ADJUSTMENT IS CARRIED OUT. THE AMOUNT PAID TO GAUTAM EXIM PVT. LIMITED HAS BEEN RECEIVED BACK FROM THE PARTY WITHIN TWO TO THREE DAYS. ON THE BASIS OF THESE TWO STATEMENTS, ASSESSING OFFICER HAS MADE ADDITION OF BOGUS PURCHASE OF RS. 27,60,500/-. PAGE | 27 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS ARGUED THAT BILLS ARE ONLY ACCOMMODATION BILLS FOR OBTAINING BANK FINANCE. IT WAS ARGUED THAT ON THE BASIS OF ABOVE BILL NO ACTUAL GOODS HAVE MOVED FROM ONE PARTY TO ANOTHER PARTY BUT ON THE BASIS OF BILL RAISED, OTHER PARTY HAS DISCOUNTED THIS BILL WITH BANK AND ON RECEIPT OF SUCH MONEY, SAME WERE TRANSFERRED TO APPELLANT. FURTHER, ON THE DUE DATE OF BILL DISCOUNTING, PAYMENT HAS BEEN MADE BY APPELLANT THROUGH ITS CASH CREDIT ACCOUNT AND ACCOUNT IS SETTLED. THE BILL ON THE BASIS OF WHICH ASSESSING OFFICER HAS MADE ADDITION HAS NOT BEEN CLAIMED AS EXPENDITURE HENCE PURCHASES CANNOT BE TREATED AS BOGUS PURCHASES AND ADDITION IS UNCALLED FOR. 39. DURING THE APPELLATE PROCEEDINGS, LD CIT(A) HAS EXAMINED THIS ISSUE AND ON CAREFUL CONSIDERATION OF ENTIRE DETAILS AS WELL AS PURCHASE REGISTER PRODUCED FOR RELEVANT MONTHS, BANK STATEMENTS AND LEDGER ACCOUNT OF GAUTAM ENTERPRISE, IT IS FOUND THAT APPELLANT HAS NOT INCLUDED PURCHASE OF RS. 27,60,500/ FROM GAUTAM ENTERPRISE IN ITS BOOKS OF ACCOUNT. FURTHER, IN THE LEDGER ACCOUNT OF GAUTAM ENTERPRISE, ONLY FINANCIAL TRANSACTION PERTAINING TO SUCH SUM IS RECORDED WHICH SUGGESTS THAT FUNDS RECEIVED BY SAID PARTY FROM BANK HAS BEEN TRANSMITTED TO APPELLANT AND AFTER CERTAIN PERIOD SUCH AMOUNT HAS BEEN PAID BY APPELLANT THROUGH ITS REGULAR BANK ACCOUNT. THUS, ARGUMENT OF APPELLANT REGARDING ACCOMMODATION ENTRY, APPEARS TO BE CORRECT AND AS APPELLANT HAS NOT CLAIMED ANY PURCHASE FROM GAUTAM ENTERPRISE FOR RS. 27,60,500/- AS EXPENDITURE WHILE COMPUTING PROFIT & LOSS ACCOUNT FOR CURRENT ASSESSMENT YEAR, PURCHASE SHOWN IN BILL CANNOT BE ADDED TO THE TOTAL INCOME OF APPELLANT AS BOGUS PURCHASE MORE PARTICULARLY WHEN ENTIRE TRANSACTION IS SETTLED THROUGH CHEQUES. BASED ON THIS FACTUAL POSITION, WE ARE NOT INCLINED TO ACCEPT THE CONTENTION OF THE ASSESSING OFFICER IN ANY MANNER AND THE ADDITION MADE BY ASSESSING OFFICER FOR RS. 27,60,500/- WAS RIGHTLY DELETED BY LD CIT(A), THEREFORE, WE DISMISS THE CONCISE AND COMMON GROUND NO.5 RAISED BY THE REVENUE. 40. IN THE RESULT, CONCISE AND COMMON GROUND NO.5 RAISED BY THE REVENUE IS DISMISSED. PAGE | 28 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., 41. CONCISE AND COMMON GROUND NO.6 RAISED BY THE REVENUE IS REPRODUCED BELOW FOR READY REFERENCE: (VI) DELETED THE ADDITION OF RS.2,75,00,000/- BEING UNACCOUNTED EXPENSES AND SALES REALIZATION MADE ON THE BASIS OF ENTRIES IN THE SEIZED LOOSE PAPERS. 42. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS REFERRED TO FOLLOWING SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH AND OBSERVED THAT THERE ARE UNEXPLAINED EXPENDITURE INCURRED BY THE ASSESSEE. THE SEIZED MATERIAL IS REPRODUCED BELOW: 1. NRI / GSP DIFFERENCE OF 40 LACS- CASH PORTION 2. NRI / GSP DIFFERENCE OF 25 LACS- INTEREST 3. NRI / GSP DIFFERENCE OF 25 LACS- MAINTENANCE 500/-RS. P/F 4. NRI / GSP DIFFERENCE OF 60 LACS- R M COST 150 LACS 5. NRI / GSP DIFFERENCE OF 25 LACS - SALES REALISATION DUE TO SECOND/FIRST SM MORE PAGE NO. 14 THE CONTENTS OF PAGE NO. 14 ARE AS UNDER : GSP 17 - INTEREST ON DEPOSITS + FIXED DEPOSITS - PART 6 - SALARY MISC. 6 - VERGHESE (CONTRACTOR, SALARY TO MISC.PERSONS + VARIOUS EXPENSES) AND 8 RENT OF FLATS 5 - I + ASST + FIZOZ (SOLID + OTHER EXPENSES) + ALL OTHER EXPENSES 4 - PAID BONUS ON WHITE CUTTING ON P AND ON OTHER VARIOUS GRADES BY WHICH R. M. COST IS REDUCED IN AKB'S RECORD. 40 + RAHEJA INTERIOR EXPENSES (EXTRA) KPM 6.00 - GANDHI FOR VAPI EXPENSES 1.5 - SANDA SURANA 2.5 - S.P. SHAH + OTHER EXPENSES VAPI /BOM 2.5 - BONUS ON R.M. AID AND EFFECTED IN R.M. COST OF VAPI 7.5 - GNA -------- 20.00 PAGE | 29 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., THE ASSESSING OFFICER HAS OBSERVED THAT ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT THESE EXPENDITURE ARE REFLECTED IN BOOKS OF ACCOUNT, TOTAL OF THESE FIGURES WORKS OUT TO RS. 2.75 CRORES (1.75 CRORE + 40 LACS + 20 LACS + 40 LACS), IS TREATED AS UNEXPLAINED EXPENSES AND SALES REALISATION NOT SHOWN IN BOOKS OF ACCOUNT. THUS, ASSESSING OFFICER HAS MADE ADDITION OF RS. 2.75 CRORES. 43. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 44. WE HAVE HEARD BOTH THE PARTIES. LEARNED DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ON THE OTHER HAND, LD COUNSEL DEFENDED THE ORDER PASSED BY THE LD CIT(A). DURING THE APPELLATE PROCEEDINGS, LD CIT(A) HAS EXAMINED THE SEIZED DOCUMENTS ON THE BASIS OF WHICH IMPUGNED ADDITION OF RS.2.75 CRORES HAS BEEN MADE BY ASSESSING OFFICER. THE ASSESSING OFFICER HAS REFERRED TO SEIZED PAPER BEING PAGE NO. 13 PAGE NO. 14 AND 19 FOUND DURING THE COURSE OF SEARCH WHEREIN AT THE LOWER PORTION OF PAGE NO. 13 UNDER THE NOMENCLATURE 'NRI/GSP DIFFERENCE', FIVE FIGURES AGGREGATING TO RS. 1.75 CRORES HAVE BEEN MENTIONED AND ON PAGE NO. 14, MONTHLY EXPENSES OF RS. 1 CRORE (40 LACS+ 20 LACS + 40 LACS) HAS BEEN MENTIONED. THE ASSESSING OFFICER HAS CONSIDERED THESE NOTING, AS UNEXPLAINED EXPENDITURE AND SALES REALISATION NOT OFFERED TO TAX. ON THE OTHER HAND, ASSESSEE HAS MAINLY ARGUED THAT THESE NOTINGS PERTAINING TO RS 1.75 CRORE ARE FOR COMPARISON OF EXPENDITURE BETWEEN APPELLANT COMPANY AND NR PAPER INDUSTRIES (NRI) BEING THE COMPANY OF DIRECTOR'S BROTHER AND THESE NOTINGS DO NOT REFLECT ANY CASH EXPENDITURE OR RECEIPT HENCE NO ADDITION IS CALLED FOR.THE LD CIT(A) OBSERVED ABOUT REMAINING ADDITION OF RS. 1 CRORE, IT WAS ALSO ARGUED THAT THERE IS NO UNACCOUNTED EXPENDITURE BUT SAME IS FIXED EXPENDITURE NOTED ON ESTIMATE BASIS. IT WAS ALSO ARGUED THAT OUT OF THE NOTINGS, MENTIONED FOR RS. 1 CRORE, RS.20 LACS IS FOR KPM I.E KHERANI PAPER MILLS AND SUCH AMOUNT CANNOT BE CONSIDERED AS PAGE | 30 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., ADDITION IN CASE OF APPELLANT. IT WAS ALSO ARGUED THAT AS PAGE NO. 14 SHOWS SUMMARY OF EXPENDITURE OF RS. 40 LACS, AND FIGURES NOTED IN SUCH PAPER COINCIDE WITH FIGURE OF RS. 40 LACS MENTIONED ON BACK SIDE OF PAGE 19, THEREFORE, ADDITION MADE BY ASSESSING OFFICER TO THE EXTENT OF RS. 40 LACS IS DUPLICATE ADDITION. 45. THE LD CIT(A), ON CAREFUL CONSIDERATION OF ENTIRE DETAILS, OBSERVED THAT AT LOWER PORTION OF PAGE NO. 13 SEIZED FROM APPELLANT'S PREMISES IS SHOWING COMPARISON BETWEEN CERTAIN EXPENDITURE/SALES BETWEEN APPELLANT COMPANY AND NR PAPER INDUSTRIES UNDER THE HEAD 'NRI/GSP DIFFERENCE'. IN THE SEIZED PAPER, NOWHERE THE DATE OF TRANSACTION HAS BEEN MENTIONED. FURTHER, ITEM MENTIONED LIKE INTEREST, MAINTENANCE, RM COST, SALES REALISATION, DOES NOT REFLECT THAT APPELLANT HAS MADE ANY CASH PAYMENT OR RECEIVED ANY CASH AMOUNT TOWARDS SALES REALISATION. THE RELEVANT SEIZED PAPER CLEARLY SUGGESTS COMPARISON OF CERTAIN EXPENDITURE/SALES BETWEEN TWO COMPANIES AND NO WHERE IT IS MENTIONED THAT ANY UNACCOUNTED SALES/EXPENDITURE HAS BEEN MADE OR PAID. EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER HAS NOT PROVED THAT FIGURES MENTIONED IN LOOSE PAPER REFLECTS ACTUAL CASH TRANSACTIONS NOT RECORDED IN BOOKS OF ACCOUNT WITH ANY CORROBORATIVE OR COGENT EVIDENCES. THE ASSESSING OFFICER HAS SIMPLY REFERRED THE SEIZED MATERIAL AND PRESUMED THAT FIGURES NOTED IN PAGE NO., 13 REFLECT UNEXPLAINED CASH EXPENDITURE/SALES REALISATION. EVEN IN THIS SEIZED MATERIAL, NAME OF THE PARTY OR ADDRESS WITH WHOM ALL THESE TRANSACTION WERE CARRIED OUT WERE NOT NOTED OR EVEN DURING THE COURSE OF SEARCH NO OTHER EVIDENCES WERE FOUND OR RELIED UPON BY ASSESSING OFFICER WHICH CAN PROVE THAT FIGURES NOTED IN THIS PAGE IS NOT COMPARISON OF EXPENDITURE/INCOME BUT ACTUAL TRANSACTION NOT REFLECTED IN BOOKS OF ACCOUNT. THEN LD CIT(A) HAS REFERRED THE JUDGMENT OF COORDINATE BENCH OF DELHI I.T.A.T. IN THE CASE OF MAHAN FOODS LTD. V. CIT (2009) 27 DTR 185, WHEREIN IT WAS HELD AS UNDER: 'SEARCH AND SEIZURE - BLOCK ASSESSMENT - COMPUTATION OF UNDISCLOSED INCOME - ALTHOUGH THE CONTENTS OF THE RELEVANT SEIZED DOCUMENTS SHOW THAT THE AMOUNTS MENTIONED THEREIN RELATE TO SOME EXPENDITURE, IN THE ABSENCE OF ANY OTHER EVIDENCE FOUND DURING THE COURSE OF SEARCH OR BROUGHT ON RECORD BY THE AO TO SHOW THAT THE SAID EXPENDITURE WAS ACTUALLY INCURRED BY THE ASSESSEE, THE SAME CANNOT BE ADDED TO THE UNDISCLOSED INCOME OF THE ASSESSEE BY INVOKING PROVISIONS OF S. 69C - PAGE | 31 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., ASSESSEE EXPLAINED THAT THE SAID ENTRIES REPRESENTED ESTIMATES MADE BY EMPLOYEES IN RESPECT OF PROPOSED EXPENDITURE - THERE IS NO EVIDENCE ON RECORD TO REBUT/CONTROVERT THE SAID EXPLANATION - ADDITIONS NOT SUSTAINABLE.' 46. THE LD CIT(A) FURTHER RELIED ON THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN CASE OF CIT V/S MAULIK KUMAR K. SHAH 307 ITR 137, WHEREIN IT WAS HELD AS UNDER: 'THE ASSESSEE HAD CONSTRUCTED CERTAIN SHOPS. THERE WAS A SEARCH AT THE ASSESSEE'S PREMISES AND A DIARY WAS SEIZED IN WHICH THE ASSESSEE HAD ESTIMATED RATES OF THESE SHOPS. THE ASSESSEE HAD BOOKED/SOLD 35 SHOPS AS ON DATE OF SEARCH. BECAUSE OF THE DIFFERENCE IN RATES AS MENTIONED IN THE SEIZED PAPER AND THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER CALCULATED THE 'ON-MONEY' AND MADE ADDITION ACCORDINGLY. HELD THAT NOTINGS IN THE SEIZED DIARY FOUND FROM THE PREMISES WERE THE ONLY MATERIAL ON THE BASIS OF WHICH THE ASSESSING OFFICER HAD MADE THE IMPUGNED ADDITIONS. THE ASSESSING OFFICER HAD NOT BROUGHT ANY CORROBORATIVE MATERIAL ON RECORD TO PROVE THAT SUCH SALES WERE MADE AND 'ON-MONEY' WAS RECEIVED BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAD NOT EXAMINED ANY PURCHASER TO WHOM THE SALES OF SHOPS WERE EFFECTED. ONUS HEAVILY LAY ON THE REVENUE TO PROVE WITH CORROBORATIVE EVIDENCE THAT THE ENTRIES IN THE SEIZED DIARY ACTUALLY REPRESENTED THE SALES MADE BY THE ASSESSEE. SUCH ONUS HAD NOT BEEN DISCHARGED BY THE REVENUE. MERE ENTRIES IN THE SEIZED MATERIAL WERE NOT SUFFICIENT TO PROVE THAT THE ASSESSEE HAD INDULGED IN SUCH A TRANSACTION. THE INFERENCE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS RECEIVED 'ON-MONEY', WAS MERELY BASED ON SUSPICION AND SURMISES AND THERE WAS NO MATERIAL WHATSOEVER TO SUPPORT THE CONCLUSION OF THE ASSESSING OFFICER THAT THE ASSESSEE HAD IN FACT RECEIVED ANY 'ON- MONEY. THE ADDITION AS MADE BY THE ASSESSING OFFICER BEING BASED ON MERE PRESUMPTIONS AND ASSUMPTIONS AND WITHOUT ANY CORROBORATIVE EVIDENCE, COULD NOT BE SUSTAINED.' 47. IN VIEW OF AFORESAID DECISIONS AND ON FACTS OF APPELLANT'S CASE, ADDITION OF RS. 1.75 CRORE MADE BY ASSESSING OFFICER WAS DELETED BY LD CIT(A). 48. THE LD CIT(A) ALSO OBSERVED WITH REGARD TO REMAINING ADDITION OF RS.1 CRORE, THAT FIGURES OF RS.20 LACS HAS BEEN MENTIONED UNDER THE HEAD KPM, WHICH IS FOR KHERANI PAEPR MILLS AND NOT APPELLANT, HENCE ADDITION MADE BY ASSESSING OFFICER FOR NOTING MADE IN SEIZED MATERIAL FOR KHERANI PAPER MILL BEING SISTER CONCERN OF APPELLANT IS NOT JUSTIFIED. THE REMAINING FIGURE OF RS.80 LACS COMPRISES OF NOTING OF RS.40 LACS ON PAGE NO.14 AND REMAINING 40 LACS ON BACKSIDE OF PAGE NO.19. THE PAGE | 32 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., ARGUMENT OF APPELLANT THAT AS FIGURES MENTIONED ON THESE TWO LOOSE PAPERS IS IDENTICAL, ADDITION OF RS.40 LACS IN ANY CASE IS DUPLICATING ADDITION, CANNOT BE ACCEPTED, AS FIGURES NOTED UNDER EACH HEAD MENTIONED IN TWO DIFFERENT PAGES DIFFERS WITH EACH OTHER. ON PAGE NO.14 FIGURE OF 6 HAS BEEN MENTIONED AGAINST SALARY WHEREAS ON PAGE NO.19 FIGURE NOTED IS 7. FIGURE OF 8 HAS BEEN MENTIONED AGAINST HEAD VARGHESE (CONTRACTOR, SALARY OF MISC. PERSON PLUS VARIOUS EXPENSES) AND RENT OF FLATS BUT NO SUCH EXPENDITURE IS MENTIONED ON PAGE NO.19, HENCE ARGUMENT OF APPELLANT THAT BACKSIDE OF PAGE NO.19 IS DUPLICATING PAGE OF 14 CANNOT BE ACCEPTED. HOWEVER, ON THE LOOSE PAPER FOUND DURING THE COURSE OF SEARCH, ON THE BASIS OF WHICH ASSESSING OFFICER HAS MADE IMPUGNED ADDITION SHOWS FIXED EXPENDITURE WHICH SUGGEST THAT THIS PAPER IS PREPARED FOR MONTHLY FIXED EXPENDITURE. IN THIS LOOSE PAPER DETAILS LIKE PAYMENT MADE IN CASH, NAME OF THE PARTY TO WHOM VARIOUS PAYMENTS HAVE BEEN MADE, DATE OF THE TRANSACTION HAS NOT BEEN MENTIONED WHICH LEADS TO CONCLUSION THAT THIS IS A DUMB DOCUMENT HAVING NO FINANCIAL IMPLICATION. THESE ENTIRE LOOSE PAPERS NOWHERE SUGGESTS THAT APPELLANT HAS MADE UNEXPLAINED EXPENDITURE OR EXPENDITURE ARE PAID IN CASH NOR ASSESSING OFFICER HAS BROUGHT ANY OTHER EVIDENCE WHICH CAN PROVE THAT THESE ARE NOTINGS FOR PAYMENT IN CASH BUT ADDITION HAS BEEN MADE ON PRESUMPTION BASIS. ON CAREFUL CONSIDERATION OF ENTIRE FACTS AND RESPECTFULLY FOLLOWING DECISION REFERRED HEREINABOVE, THE REMAINING ADDITION OF RS.1 CRORE IS DELETED. THIS WAY, LD CIT(A) HAS DELETED THE ENTIRE ADDITION OF RS.2.75 CRORE MADE BY THE ASSESSING OFFICER. WE DO NOT FIND ANY INFIRMITY IN THE ABOVE FINDINGS OF LD CIT(A). THE CONCLUSIONS ARRIVED AT BY THE CIT(A) ARE, THEREFORE, CORRECT AND ADMIT NO INTERFERENCE BY US. WE, APPROVE AND CONFIRM THE ORDER OF THE CIT(A). 49. IN THE RESULT, CONCISE AND COMMON GROUND NO.6 RAISED BY THE REVENUE IS DISMISSED. 50. NOW, WE SHALL TAKE ASSESSEE`S APPEAL. THE CONCISE AND COMMON GROUND NO.1 RAISED BY THE ASSESSEE IS REPRODUCED BELOW FOR READY REFERENCE: (1).DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, READ WITH RULE 8D, ASSESSMENT YEAR WISE, ARE AS FOLLOWS: PAGE | 33 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., A) ASSESSMENT YEAR 2007-08 RS.5,12,276/- B) ASSESSMENT YEAR 2008-09 RS.6,99,230/- C) ASSESSMENT YEAR 2009-10 RS.7,19,687/- D) ASSESSMENT YEAR 2010-11 RS.6,29,794/- 51. THIS GROUND OF APPEAL RELATES TO DISALLOWANCE U/S 14A OF THE ACT. THE ASSESSING OFFICER HAS OBSERVED THAT ASSESSEE HAS DIVERTED ITS FUND FOR EARNING INCOME WHICH IS EXEMPT, HENCE DISALLOWANCE U/S 14A OF THE ACT IS MADE FOR ALL THE ASSESSMENT YEARS BY APPLYING RULE 8D OF THE RULES. THE ASSESSING OFFICER HAS MADE FOLLOWING DISALLOWANCE. ASSESSMENT YEAR DISALLOWANCE RS. 2007-08 5,12,276 2008-09 6,99,230 2009-10 7 , 19 , 687 2010-11 6,29,794 52. ON APPEAL, LD CIT(A) HAS CONFIRMED THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 53. SHRI P.M.JAGASHETH, LEARNED COUNSEL, APPEARING ON BEHALF OF ASSESSEE PLEADS THAT ASSESSING OFFICER HAS APPLIED RULE 8D, READ WITH SECTION 14(A) OF THE INCOME TAX ACT WITHOUT FIRST ESTABLISHING THE CONDITIONS PRESCRIBED UNDER 14A (1) OF THE ACT. MOREOVER, RULE 8D COULD NOT HAVE BEEN ADOPTED FOR THE ASSESSMENT YEAR 2007-08, AS RULE 8D, HAS BEEN HELD TO BE PROSPECTIVE IN OPERATION I.E. FROM A.Y. 2008-09 ONWARDS, AS HELD BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. 328 ITR 81 (BOM). BESIDES, THERE WERE NO INCRIMINATING MATERIAL FOUND OR UNEARTHED BY THE SEARCH TEAM IN RESPECT OF DISALLOWANCE UNDER SECTION 14A OF THE ACT, HENCE NO ADDITION SHOULD BE MADE. PAGE | 34 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., WITH REGARDS TO DISALLOWANCE UNDER 14A FOR BALANCE YEARS, SHRI P.M.JAGASHETH ARGUED THAT SECTION 14A CAN NOT BE INVOKED WHERE NO EXEMPT INCOME WAS EARNED BY THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR, THEREFORE, HE PRAYS THE BENCH THAT DISALLOWANCE UNDER SECTION 14A MADE BY THE ASSESSING OFFICER MAY BE DELETED. 54. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 55. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. WE NOTE THAT ASSESSING OFFICER HAS DISALLOWED EXPENDITURE U/S 14A OF THE ACT APPLYING RULE 8D OF THE ACT. FOR A.Y. 2007-2008, LEARNED COUNSEL HAS ARGUED THAT NO DISALLOWANCE U/S 14A CAN BE MADE IN CURRENT YEAR, AS RULE 8D IS APPLICABLE FROM A.Y. 2008-2009, AS HELD BY HON`BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. 328 ITR 81 (BOM). THEREFORE, WE DELETE THE ADDITION OF RS.5,12,276/- PERTAINING TO ASSESSMENT YEAR 2007-08. 56. WE NOTE THAT FOR REMAINING ASSESSMENT YEARS, THAT IS, ASSESSMENT YEAR 2008-09 TO ASSESSMENT YEAR 2010-11, ASSESSING OFFICER MADE DISALLOWANCE OF EXPENSES RELATING TO EXEMPT INCOME AS PER RULE 8D READ WITH SECTION 14A OF THE ACT. HOWEVER, LD COUNSEL SUBMITS BEFORE US THAT FOR REMAINING ASSESSMENT YEARS, THAT IS, ASSESSMENT YEAR 2008-09 TO 2010-11, THE DISALLOWANCE UNDER SECTION 14A CAN NOT BE INVOKED AS THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE IN THESE RELEVANT ASSESSMENT YEARS, AND FOR THAT LD COUNSEL RELIED ON THE JUDGMENT OF THE HON`BLE HIGH COURT OF MADRAS IN THE CASE OF CHETTINAD LOGISTICS PVT. LTD, 248 TAXMAN 55(MAD). THE LD COUNSEL FURTHER SUBMITS THAT IN RELATION TO ASSESSMENT YEAR 2008-09 TO 2010-11, THERE WERE NO INCRIMINATING MATERIAL FOUND OR UNEARTHED BY THE SEARCH TEAM IN RESPECT OF DISALLOWANCE UNDER SECTION 14A OF THE ACT, HENCE NO ADDITION SHOULD BE MADE. PAGE | 35 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., WE NOTE THAT A SEARCH ACTION UNDER SECTION 132 OF THE ACT, WAS CARRIED OUT ON 16.07.2009 IN THE CASE OF N.R.AGARWAL GROUP AND OTHERS OF VAPI. ONE OF THE SUB- GROUP COVERED WAS GAJENDRA SUB-GROUP. DURING THE COURSE OF SEARCH, M/S GAYATRI SHAKTI PAPER & BOARD LTD WAS ALSO COVERED WHICH IS ONE OF THE MAIN BUSINESS CONCERNS OF GAJENDRA SUB -GROUP. SINCE THE SEARCH ACTION WAS CARRIED OUT ON 16.07.2009, WHICH FALLS IN ACCOUNTING PERIOD 01.04.2009 TO 31.03.2010, THEREFORE, FINANCIAL YEAR 2009-10, IS AN UNABATED FINANCIAL YEAR, RELATING TO ASSESSMENT YEAR 2010-11. THEREFORE, ASSESSMENT YEAR 2010-11 IS AN UNABATED ASSESSMENT YEAR WHERE ADDITION CAN BE MADE PROVIDED THERE IS AN INCRIMINATING MATERIAL. SINCE SEARCH TEAM DID NOT FIND ANY INCRIMINATING MATERIAL IN ASSESSMENT YEAR 2010-11 AND ASSESSMENT YEARS, PRIOR TO 2010-11, THEREFORE, NO ADDITION SHOULD BE MADE. HENCE SO NO ADDITION/DISALLOWANCE CAN BE MADE BY THE AO WITHOUT THE AID OF INCRIMINATING MATERIAL SEIZED/UNEARTHED QUA THE ASSESSEE, QUA THESE ASSESSMENT YEARS. SO, WE NOTE THAT IN NON-PENDING ASSESSMENTS ON THE DATE OF SEARCH, NO ADDITION/DISALLOWANCE CAN BE MADE BY THE AO WITHOUT THE AID OF INCRIMINATING MATERIAL FOUND/UNEARTHED DURING SEARCH. FOR COMING TO SUCH A CONCLUSION, WE RELY ON THE ORDER OF HONBLE DELHI HIGH COURT IN CIT VS . KABUL CHAWLA (2016) 380 ITR 573 (DEL), WHEREIN THEIR LORDSHIPS HAVE HELD AS UNDER: SUMMARY OF LEGAL POSITION 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN THE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A(1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE TOTAL INCOME OF THE AFOREMENTIONED SIX YEARS IN SEPARATE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX. PAGE | 36 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL. V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. THE WORD ASSESS IN SECTION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD REASSESS TO COMPLETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 57. WE ALSO NOTE THAT THE HON'BLE CALCUTTA HIGH COURT IN ITA NO. 661 OF 2008 COMMISSIONER OF INCOME TAX VS.VEERPRABHU MARKETING LTD. HAS ALSO HELD AS UNDER: WE AGREE WITH THE VIEW EXPRESSED BY THE KARNATAKA HIGH COURT THAT INCRIMINATING MATERIAL IS PRE-REQUISITE BEFORE POWER COULD HAVE BEEN EXERCISED U/S 153(C) R.W SECTION 153(A). IN THE CASE BEFORE US, THE AO HAS MADE A DISALLOWANCE OF THE EXPENDITURE, WHICH WAS HELD DISCLOSED, FOR ONE REASON OR THE OTHER, BUT SUCH DISALLOWANCES MADE BY THE AO WERE UPHELD BY THE LD.CIT(A) BUT THE LD. TRIBUNAL DELETED THESE DISALLOWANCE. WE FIND NO INFIRMITY IN THE AFORESAID ACT OF THE LD. TRIBUNAL. THE APPEAL IS, THEREFORE, DISMISSED. 58. THUS, WE NOTE THAT REVENUE COULD NOT CONTROVERT THE FACTS THAT THESE ASSESSMENT YEARS WERE NOT PENDING ON THE DATE OF SEARCH AND NO INCRIMINATING MATERIAL QUA THESE ASSESSMENT YEARS WERE THE BASIS FOR THE ADDITIONS/DISALLOWANCES, SO WE DELETE THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER SECTION 14A, FOR ASSESSMENT YEARS 2008-09 TO 2010-11. 59. THE CONCISE AND COMMON GROUND NO.3 RAISED BY THE ASSESSEE IS REPRODUCED BELOW FOR READY REFERENCE: PAGE | 37 CROSS APPEALS: IT(SS)A NOS.569 TO 572/AHD/2012 (A) VS. IT(SS)A NOS.591 TO 593 & 597/AHD/2012(R) GAYATRI SHAKTI PAPER & BOARD LTD., (3).ALLOWED SET OFF OF ADDITIONAL INCOME OF RS.9 CRORES DISCLOSED IN THE RETURN OF INCOME HAVING REGARD TO DISCLOSURE MADE UNDER SECTION 132(4) OF THE ACT BASED ON APPLICATION THEREOF IN ASSESSMENT YEAR UNDER APPEAL. A) ASSESSMENT YEAR 2009-10 B) ASSESSMENT YEAR 2010-11 60. IN THIS GROUND, ASSESSEE PRAYED THAT IF ANY DISALLOWANCE IS MADE, THE SAME SHOULD BE CONSIDERED TO BE INCLUDED IN THE RS.9 CRORES, THE DISCLOSURE MADE UNDER SECTION 132(4) OF THE ACT. LD. COUNSEL SUBMITS THAT ASSESSEE HAS VOLUNTARILY DISCLOSED RS.9 CRORES AND DEPARTMENT HAS NOT GIVEN ANY TELESCOPING BENEFIT, THEREFORE HE CONTENDS THAT IN THE EVENT, ANY ADDITION IS SUSTAINED BY THE TRIBUNAL, THEN SUCH ADDITION SHOULD BE SET-OFF AGAINST THE VOLUNTARILY DISCLOSED AMOUNT OF RS.9 CRORES. SINCE WE HAVE DELETED THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER THEREFORE, THERE IS NO NEED TO PROVIDE ANY TELESCOPING BENEFIT TO THE ASSESSEE, HENCE, THIS GROUND RAISED BY THE ASSESSEE BECOMES INFRUCTUOUS AND THEREFORE DOES NOT REQUIRE ADJUDICATION. 61. IN THE RESULT, APPEALS FILED BY REVENUE ARE DISMISSED AND APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER IS PRONOUNCED ON 24/08/2021 BY PLACING RESULT ON NOTICE BOARD. SD/- SD/- (PAWAN SINGH) (DR. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT / / DATE: 24/08/2021 / SGR COPY OF THE ORDER FORWARDED TO 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A) 4. PR.CIT 5. DR, ITAT, SURAT 6. GUARD FILE BY ORDER / / TRUE COPY / / SENIOR PRIVATE SECRETARY ITAT, SURAT