Punjab Plywood Industries, Yamunanagar v. DCIT, Chandigarh

ITA 1171/CHANDI/2013 | 2007-2008
Pronouncement Date: 28-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 117121514 RSA 2013
Assessee PAN AAAFP8142Q
Bench Chandigarh
Appeal Number ITA 1171/CHANDI/2013
Duration Of Justice 4 month(s) 10 day(s)
Appellant Punjab Plywood Industries, Yamunanagar
Respondent DCIT, Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 28-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 28-08-2014
Date Of Final Hearing 21-07-2014
Next Hearing Date 21-07-2014
Assessment Year 2007-2008
Appeal Filed On 18-12-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA JUDICIAL MEMBER ITA NOS.300 TO 305/CHD/2014 ASSESSMENT YEARS : 2001-02 TO 2006-07 PUNJAB PLYWOOD INDUSTRIES VS. THE D.C.I.T. KHAJURI ROAD CENTRAL CIRCLED II YAMUNANAGAR. CHANDIGARH. PAN: AAAFP8142Q ITA NO.1171/CHD/2013 ASSESSMENT YEAR : 2007-08 PUNJAB PLYWOOD INDUSTRIES VS. THE D.C.I.T. KHAJURI ROAD CENTRAL CIRCLED II YAMUNANAGAR. AAYKARBHAWAN CHANDIGARH. PAN: AAAFP8142Q AND ITA NO.1190/CHD/2013 ASSESSMENT YEAR : 2007-08 THE D.C.I.T. VS. PUNJAB PLYWOOD INDUSTRIES CENTRAL CIRCLED II KHAJURI ROAD CHANDIGARH. YAMUNANAGAR. PAN: AAAFP8142Q AND ITA NO.299/CHD/2014 ASSESSMENT YEAR : 2007-08 AGGARWAL WOOD INDUSTRIES VS. THE D.C.I.T. KHAJURI ROAD CENTRAL CIRCLED II YAMUNANAGAR. CHANDIGARH. PAN: AABFA3817C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT GOEL RESPONDENT BY : SHRI AKHILESH GUPTA DR DATE OF HEARING : 22.07.2014 DATE OF PRONOUNCEMENT : 28.08.2014 2 O R D E R PER SUSHMA CHOWLA J.M. : OUT OF THIS BUNCH OF APPEALS THE ASSESSEE HAS FILE D THE APPEALS AGAINST THE CONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)(CENTRAL) GURGAON DATED 30.1.2014 RELA TING TO ASSESSMENT YEARS 2001-02 TO 2006-07 AGAINST THE ORDER PASSED U NDER SECTION 143(3) R.W.S. 153A OF INCOME TAX ACT 1961. FURTHER BOT H THE ASSESSEE AND THE REVENUE HAVE FILED CROSS APPEALS AGAINST THE SE PARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS)(CENTRAL) GURGA ON DATED 24.10.2013 RELATING TO ASSESSMENT YEAR 2007-08 AGAI NST THE ORDER PASSED UNDER SECTION 143(3) R.W.S. 153A OF INCOME TAX ACT 1961 (IN SHORT THE ACT). 2. THE SISTER CONCERN OF THE ASSESSEE M/S AGGARWAL WOOD INDUSTRIES HAS FILED AN APPEAL AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX(APPEALS)(CENTRAL) GURGAON DATED 31.1.2014 RELA TING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 153A R.W.S. 143(3) OF INCOME TAX ACT 1961. 3. ALL THE APPEALS RELATING TO THE TWO ASSESSEES ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 4. THE LEARNED A.R. FOR THE ASSESSEE HAS POINTED OU T THAT THERE ARE TWO MAIN ISSUES ARISING IN ALL THE APPEALS FIR ST IS IN RELATION TO THE ADDITION ON ACCOUNT OF UN-EXPLAINED EXPENDIT URE BOOKED UNDER THE HEAD WAGES AND THE SECOND ISSUE IS ON A CCOUNT OF THE INCOME OF MEENA GARG BEING ADDED AS INCOME OF THE ASSESSEE ON SUBSTANTIVE BASIS FROM YEAR TO YEAR. WE PROCEED TO DECIDE THESE 3 TWO ISSUES AND THEREAFTER CONSIDER THE GROUNDS OF A PPEAL RAISED IN THE RESPECTIVE ASSESSMENT YEARS. 5. THE ASSESSEE IN ITA NO.300/CHD/2014 HAS RAISED F OLLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED CITA HAS ERRED IN LAW AND FACT S IN CONFIRMING AN ADDITION OF RS.2 67 443/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEAD WAGES. (PARA 4 PAGE 2-4 OF ASSESSMENT ORDER) (PARA 5.3 PAGE 3 OF CIT(A) ORDER) 1(A) THAT AUTHORITIES BELOW HAS ERRED IN LAW AND FA CTS IN MAKING ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITU RE UNDER THE HEAD WAGES WITHOUT REJECTING THE BOOKS OF ACC OUNTS. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD ALTER A MEND OR TO SUBSTITUTE THE ABOVE GROUNDS OF APPEAL EITHER BE FORE OR AT THE TIME OF HEARING OF CASE. 6. THE BRIEF FACTS OF THE CASE ARE THAT SEARCH AND SEIZURE OPERATIONS WERE CONDUCTED AT THE BUSINESS AND RESID ENTIAL PREMISES OF THE ASSESSEE ON 20.3.2007. PRIOR TO THE SEARC H SURVEY ON 9.9.2004 WAS CARRIED OUT AT THE BUSINESS PREMISES O F THE ASSESSEE. THE ASSESSEE IS A PARTNERSHIP CONCERN AND WAS ENGAG ED IN THE BUSINESS OF MANUFACTURING OF CORE VENEER WHICH IS UTILIZED IN PLY BOARD INDUSTRY. DURING THE YEAR UNDER CONSIDERAT ION THE ASSESSEE HAD DECLARED SALES OF RS.85 57 088/- ON WHICH GROSS PROFIT OF RS.11 82 565/- WAS DECLARED AND AFTER CLAIMING THE EXPENSES AND SALARY AND INTEREST PAID TO PARTNERS NET INCOME WA S SHOWN AT RS.18 742/-. DURING THE COURSE OF SURVEY CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 9.9.2004 THE LIST OF WORKERS PRE SENT IN THE PREMISES OF THE ASSESSEE WAS DRAWN WHICH IS ENCLOSE D AT ANNEXURE- A TO THE ASSESSMENT ORDER. THE ASSESSING OFFICER NOTED THAT AS PER THIS LIST THERE WERE 59 WORKERS EMPLOYED IN THE FA CTORY PREMISES OUT OF WHICH 43 WORKERS WERE BEING PAID ON MONTHLY BASIS AND 4 BALANCE 16 WORKERS WERE BEING PAID PER PIECE WISE. THE ASSESSING OFFICER COMPUTED THE TOTAL WAGES AFTER IGNORING THE PERSONS PAID PER PIECE WISE. THE ASSESSING OFFICER COMPUTED TH E TOTAL WAGES FOR THE YEAR AT RS.9 36 600/- AS AGAINST RS.4 67 42 4/- BOOKED IN THE BOOKS OF ACCOUNT. AS PER THE ASSESSING OFFICER TH ERE WAS SUPPRESSION OF LABOUR EXPENSES TO THE TUNE OF RS.2 67 443/- DURING THE ASSESSMENT YEAR 2001-02. THE ASSESSEE WAS SHO W CAUSED TO EXPLAIN AS TO WHY AN ADDITION OF RS.2 67 443/- SHOU LD NOT BE MADE IN THE HANDS OF THE ASSESSEE. IN REPLY THE ASSES SEE SUBMITTED THAT ON THE DATE OF SURVEY THE SURVEY TEAM ACCOUNTED TH E NUMBER OF WORKERS OF TWO ESTABLISHMENTS I.E. M/S PUNJAB PLYWO OD INDUSTRIES AND M/S AGGARWAL WOOD INDUSTRIES WHICH ARE SISTER C ONCERNS AND THE FACTORIES OF THE SAID CONCERNS WERE ADJOINING A ND ON THE DATE OF SURVEY THE WORK WAS SUSPENDED AND THE WORKERS OF T HE FACTORIES GATHERED AT ONE PLACE. THE ASSESSING OFFICER THER EAFTER POINTED OUT THAT THE LIST OF WORKERS PREPARED ON THE DATE O F SURVEY WAS CONFRONTED TO THE PARTNERS SHRI NARESH GARG WHO IN TURN HAD SIGNED THE SAID LIST AND IT WAS NEVER POINTED OUT BY HIM T HAT THE LIST CONTAINED THE NAMES OF THE WORKERS WORKING IN THE F ACTORY OF M/S AGGARWAL WOOD INDUSTRIES ALSO. IT IS THE FINDING OF THE ASSESSING OFFICER THAT BOTH THE CONCERNS ARE SISTER CONCERNS AND THE PREMISES OF BOTH THE CONCERNS WERE INDEPENDENT GATES. IT WAS FURTHER POINTED OUT BY THE ASSESSING OFFICER THAT DURING TH E ASSESSMENT PROCEEDINGS THE ASSESSEE HAD NOT FURNISHED ANY DOC UMENTARY EVIDENCE THAT THE LIST CONTAINED THE NAMES OF THE W ORKERS WORKING IN M/S AGGARWAL WOOD INDUSTRIES. IN VIEW THEREOF THE ADDITION OF RS.2 67 443/- WAS MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF UNEXPLAINED EXPENDITURE. 5 7. THE CIT (APPEALS) UPHELD THE ADDITION MADE BY TH E ASSESSING OFFICER. 8. THE PLEA OF THE ASSESSEE BEFORE US WAS THAT THE LIST OF THE WORKERS WERE DRAWN ON THE DATE OF SURVEY AND THE SA D LIST COMPRISED OF TWO CONCERNS I.E. M/S PUNJAB PLYWOOD I NDUSTRIES AND M/S AGGARWAL WOOD INDUSTRIES. FURTHER THE ASSESSI NG OFFICER HAS APPLIED THE RATIO OF LABOUR TO SALES TO COMPUTE THE EXPENDITURE ON LABOUR AND MADE ADDITION ON ACCOUNT OF SUPPRESSION IN THE EXPENDITURE OF WAGES. HOWEVER NO BOOKS OF ACCOUN T WERE REJECTED BY THE ASSESSING OFFICER BEFORE MAKING THE SAID ADDITION. 9. THE LEARNED D.R. FOR THE REVENUE POINTED OUT THA T WHEN THE STATEMENT OF THE PARTNER SHRI NARESH GARG WAS RECOR DED AND NO OBJECTION WAS RAISED BY THE SAID PARTNER AND IT IS INCORRECT TO SAY THAT BOTH THE ASSESSEE ARE AT THE SAME PLACE AS TH E PREMISES WERE ADJOINING BUT HAD DIFFERENT GATES AND WERE OWNED BY DIFFERENT SETS OF PEOPLE. THE LEARNED D.R. FOR THE REVENUE FURT HER PLACED RELIANCE ON THE OBSERVATIONS OF CIT (APPEALS) UNDER PARA 4.5 AT PAGES 7 AND 8 OF THE APPELLATE ORDER RELATING TO AS SESSMENT YEAR 2007-08. IT WAS POINTED OUT THAT THE APPEAL IN T HE FOR THE EARLIER ASSESSMENT YEAR WAS DECIDED ON THE BASIS OF THE SAI D DECISION. 10. IN REJOINDER THE LEARNED A.R. FOR THE ASSESSEE ALSO POINTED OUT THAT WHILE MAKING DISALLOWANCE ON ACCOUNT OF UNACCO UNTED EXPENDITURE OF WAGES ESTIMATED DISALLOWANCE WAS WOR KED OUT FROM YEAR TO YEAR ON THE BASIS OF THE SUPPRESSED SALES W HICH WERE NOTED IN THE SEARCH CARRIED OUT AT THE PREMISES OF THE AS SESSEE ON 20.3.2007 AND THE LIST OF WORKERS WAS DETECTED IN T HE COURSE OF SURVEY I.E. 9.9.2004. 6 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE FACTS OF THE PRESENT CASE BEFORE US SURVEY UNDER SECTION 133A OF THE ACT AT THE PREMISES OF THE ASSESSEE WAS FIRST CONDUCTED ON 9.9.2004. THEREAFTER SEARCH AND SEIZURE OPERAT IONS WERE CARRIED OUT UNDER SECTION 132 OF THE ACT BOTH AT TH E BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY THE TEAM HAD PREPARED THE LIST OF WORKERS UNDER WHI CH IT WAS REPORTED THAT THE TOTAL PERSONS WORKING IN THE PREM ISES OF THE ASSESSEE WERE 59 ON MONTHLY ROLL AND 16 ON PER PIEC E BASIS. THE ASSESSEE HAD BOOKED THE EXPENDITURE OF RS.4 67 424/ - IN ASSESSMENT YEAR 2005-06 I.E. THE YEAR IN WHICH SURVEY WAS COND UCTED. HOWEVER IN ASSESSMENT YEAR 2002-03 THE TOTAL EXPEN DITURE BOOKED BY THE ASSESSEE WAS RS.1 82 798/-. THE ASSESSING O FFICER ON THE BASIS OF THE SUPPRESSED SALES DETECTED CONSEQUENT T O THE SEARCH CARRIED ON AT THE PREMISES OF THE ASSESSEE ON 20.3. 2007 APPLIED THE RATIO OF EXPENSES ON LABOUR AND PRODUCTION AND WORK ED OUT THE RATIO OF 1:19.6 AND COMPUTED THE EXPENDITURE FOR ASSESSME NT YEAR 2001- 02 AT RS.4 50 241/- AND MADE AN ADDITION OF RS.2 67 443/-. SIMILAR ADDITION HAS BEEN MADE IN ASSESSMENT YEARS 2002-03 TO 2006-07. 12. THE PLEA OF THE ASSESSEE BEFORE US WAS TWO FOLD S THAT FIRST OF ALL THE DISCREPANCY IF ANY IN THE NUMBER OF WORKE RS DETECTED UNDER SURVEY AT THE PREMISES OF THE ASSESSEE ON 9.9.2004 COULD NOT BE UTILIZED FOR COMPUTING UNEXPLAINED EXPENDITURE ON A CCOUNT OF WAGES WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 153A OF THE ACT PURSUANT TO SEARCH CARRIED OUT AT T HE PREMISES OF THE ASSESSEE ON 20.3.2007. THE SECOND PLEA RAISED BY THE LEARNED A.R. FOR THE ASSESSEE BEFORE US WAS THAT THE LIST O F THE WORKERS PREPARED BY THE SURVEY TEAM COMPRISED OF THE WORKER S OF SISTER 7 CONCERNS AND MERELY BECAUSE THE ASSESSEE HAD NOT PO INTED OUT THE SAID FACT DURING THE COURSE OF SURVEY DOES NOT CHA NGE THE FACT SITUATION. WE FIND MERIT IN THE PLEA OF THE ASSES SEE IN THIS REGARD. FIRST OF ALL THE ASSESSMENT IN THE CASE HAS BEEN C OMPLETED UNDER SECTION 143(3) R.W.S. 153A OF THE ACT VIDE ORDER DA TED 30.12.2008. THE SAID ASSESSMENT WAS MADE PURSUANT TO THE SEARCH OPERATION CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 20.3 .2007. DURING THE COURSE OF SEARCH THE TEAM HAD DETECTED SUPPRESS ION IN SALE IN THE HANDS OF THE ASSESSEE AND HAD COMPUTED INCOME O F THE ASSESSEE AFTER THE SAID DETECTION BY MAKING VARIOUS DISALLOW ANCES UNDER VARIOUS HEADS OF EXPENDITURE. ONE SAID HEAD OF EXP ENDITURE WAS ON ACCOUNT OF UNEXPLAINED EXPENDITURE ON LABOUR. TH E CONCLUSION OF THE AUTHORITIES BELOW WAS THAT THE ASSESSEE HAD NOT BOOKED THE COMPLETE EXPENDITURE ON WAGES IN ITS BOOKS OF ACCOU NT AS THE NUMBERS OF THE WORKERS FOUND DURING THE COURSE OF S URVEY WERE MORE THAN THE LIST OF WORKERS AVAILABLE IN THE BOOK S OF ACCOUNT. FIRST OF ALL THE SAID SURVEY WAS CONDUCTED AT THE P REMISES OF THE ASSESSEE ON 9.9.2004 WHEN THE SAID LIST WAS PREPARE D. THE CONCLUSION OF THE SAID SURVEY COULD NOT BE APPLIED WHILE COMPLETING THE ASSESSMENT PURSUANT TO SEARCH CARRIE D OUT AT THE PREMISES OF THE ASSESSEE UNDER SECTION 132 OF THE A CT. SECONDLY THERE WAS NO MERIT IN THE SAID ADDITION BEING MADE IN THE HANDS OF THE ASSESSEE AS THE EXPLANATION OF THE ASSESSEE THA T THE WORKERS OF THE TWO CONCERNS WERE TOTALLY CONSIDERED IN THE LIS T OF WORKERS PREPARED BY THE SURVEY TEAM FOR THE ASSESSEE FIRM CANNOT BE IGNORED. THE SAID LIST OF 59 WORKERS WAS PREPAR ED ON 9.9.2004 AND THE PLEA OF THE ASSESSEE WAS THAT THE SAID 59 W ORKERS AS ON THE DATE OF SURVEY BELONGED TO THE ASSESSEE AND ITS SIS TER CONCERN. THE REQUISITE LIST OF WORKERS EMPLOYED WITH EITHER OF T HE CONCERNS WERE 8 FILED ON RECORD. MERELY BECAUSE THE SAID STATEMEN T WAS CONFRONTED TO ONE OF THE PARTNERS WHO HAD SIGNED THE LIST DOE S NOT ESTABLISH THAT THE WORKERS BELONGED TO THE FIRM IN WHICH HE W AS A PARTNER I.E. THE ASSESSEE FIRM BEFORE US. IN THE ABSENCE OF AN Y CONCRETE EVIDENCE FOUND WE FIND NO MERIT IN THE ORDERS OF T HE AUTHORITIES BELOW AND NO ADDITION IS WARRANTED IN THE HANDS OF THE ASSESSEE ON THE BASIS OF SAID LIST PREPARED BY THE SURVEY TEAM WHERE THE ASSESSEE HAD CLEARLY EXPLAINED ITS CASE THAT THE SA ID TOTAL NUMBER OF WORKERS BELONGED TO TWO CONCERNS AND NOT TO THE ASS ESSEE ITSELF. IN ANY CASE THE ADDITIONS IN THE HANDS OF THE ASSE SSEE FOR THE YEARS UNDER CONSIDERATION HAVE BEEN MADE ON PURE ESTIMATI ON AS NO EVIDENCE OF EXCESS WORKERS WAS FOUND IN THE YEARS U NDER APPEAL. IN VIEW THEREOF WE FIND NO MERIT IN THE ADDITION O F RS.2 67 443/- AND DIRECT THE ASSESSING OFFICER TO DELETE THE SAME . THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS ALLOWED. 13. THE ASSESSEE IN ITA NO.301/CHD/2014 HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CON FIRMING AN ADDITION OF RS.1 82 867/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEAD WAGES. (PARA 4 PAGE 2-4 OF ASSESSMENT ORDER) (PARA 6.1 P AGE 5 OF CIT(A) ORDER) L(A) THAT AUTHORITIES BELOW HAS ERRED IN LAW AND F ACTS IN MAKING ADDITIONS ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEAD ' WAGES' WITHOUT REJECTING THE BOOKS OF ACCOUNTS. 2. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS.1 44 210/- BEING INCOME OF MEENA GARG PROP PUNJA B TIMBER TRADING CO. AS INCOME OF APPELLANT ON SUBSTANTIVE BASIS. (PARA 5 PAGE 5-8 OF ASSESSMENT ORDER) (PARA 6.1 PA GE 5 OF CIT(A) ORDER) 3. THAT APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR TO SUBSTITUTE THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF CASE. 9 14. THE ASSESSEE IN ITA NO.301/CHD/2014 HAS RAISED TWO ISSUES. THE GROUND NO.1 RAISED BY THE ASSESSEE IS AGAINST T HE ADDITION MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEA D WAGES. THE FACTS AND CIRCUMSTANCES OF THE PRESENT ISSUE AR E IDENTICAL TO THE FACTS AND CIRCUMSTANCES OF THE ISSUE RAISED IN ASSESSMENT YEAR 2001-02. FOLLOWING THE SAME PARITY OF REASONING W E ALLOW THE CLAIM OF THE ASSESSEE AND DELETE THE ADDITION OF RS .1 82 867/- MADE BY THE ASSESSING OFFICER. THE GROUND OF APPEAL NO .1 RAISED BY THE ASSESSEE IS THUS ALLOWED. 15. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION MADE ON ACCOUNT OF INCOME OF MEENA GARG P ROPRIETOR OF M/S PUNJAB TIMBER TRADING COMPANY BEING TREATED AS INCOME OF THE ASSESSEE ON SUBSTANTIVE BASIS. 16. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT T HAT THE TRIBUNAL IN THE CASE OF MEENA GARG VIDE ORDER DATED 26.2.2014 HAD CONFIRMED THE SAID ADDITION IN HER HANDS ITSELF AND THEE IS NO MERIT IN THE PRESENT ADDITION. 17. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDERS OF THE AUTHORITIES BELOW. 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE TRIBUNAL IN ITA NOS.115 TO 1170/CHD/2013 IN THE CASE OF SMT.MEENA GARG RELATING TO ASSESSMENT YEARS 2002-03 TO 2007-08 VIDE ORDER DATED 26.2.2014 HAVE HELD THAT THE INCOM E ARISING FROM M/S PUNJAB TIMBER TRADING COMPANY WAS THE SOLE PROP RIETARY CONCERN OF SMT.MEENA GARG CONSEQUENT TO WHICH THE INCOME ARISING FROM THE SAID CONCERN WAS TO BE ASSESSED IN THE HANDS OF SMT.MEENA GARG. THE LEARNED A.R. FOR THE ASSESSE E HAS PLACED ON 10 RECORD COPY OF THE TRIBUNALS ORDER DATED 26.2.2014 . IN VIEW OF THE INCOME ARISING TO M/S PUNJAB TIMBER TRADING COM PANY BEING ASSESSED ON SUBSTANTIVE BASIS IN THE HANDS OF SMT.M ENA GARG AFTER HOLDING THAT THE ASSESSEE IS THE SOLE PROPRIETARY O F THE BUSINESS BEING RUN UNDER THE NAME AND STYLE OF M/S PUNJAB TI MBER TRADING CO THERE IS NO MERIT IN MAKING ANY ADDITION IN THE HANDS OF THE ASSESSEE IN THIS REGARD. ACCORDINGLY WE DIRECT T HE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.1 44 210/-. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS ALLOWED. 19. THE ASSESSEE IN ITA NO.302/CHD/2014 HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS.3 20 921/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEAD WAGES. (PARA 4 PAGE 2-4 OF ASSESSMENT ORDER) (PARA 7.1 PA GE 8 OF CIT(A) ORDER) L(A) THAT AUTHORITIES BELOW HAS ERRED IN LAW AND F ACTS IN MAKING ADDITIONS ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEAD ' WAGES' WITHOUT REJECTING THE BOOKS OF ACCOUNTS. 2. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS.1 41 060/- BEING INCOME OF MEENA GARG PROP PUNJA B TIMBER TRADING CO. AS INCOME OF APPELLANT ON SUBSTANTIVE BASIS. (PARA 5 PAGE 5-8 OF ASSESSMENT ORDER) (PARA 7.1 PA GE 8 OF CIT(A) ORDER) 3. THAT APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR TO SUBSTITUTE THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF CASE. 20. THE ASSESSEE IN ITA NO.302/CHD/2014 VIDE GROUND NO.1 HAS RAISED THE ISSUE AGAINST THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER HE HEAD WAGES. THE FACTS AND C IRCUMSTANCES OF THE PRESENT ISSUE ARE IDENTICAL TO THE FACTS AND CI RCUMSTANCES IN THE ISSUE RAISED IN ASSESSMENT YEAR 2001-02. FOLLOWIN G THE SAME PARITY OF REASONING WE ALLOW THE CLAIM OF THE ASSES SEE AND DELETE 11 THE ADDITION OF RS.3 20 921/- MADE BY THE ASSESSING OFFICER. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THU S ALLOWED. 21. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE ON ACCOUNT OF ADDITION OF RS.1 41 060/- BEING INCOME OF SMT.MEEN A GARG PROPRIETARY OF M/S PUNJAB TIMBER TRADING COMPANY. THE FACTS CIRCUMSTANCES AND ISSUE RAISED VIDE GROUND NO.2 IS IDENTICAL TO THE GROUND NO.2 RAISED IN ASSESSMENT YEAR 2002-03 AND F OLLOWING THE SAME PARITY OF REASONING WE FIND NO MERIT IN THE SA ID ADDITION. WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.1 41 060/-. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS ALLOWED. 22. THE ASSESSEE IN ITA NO.303/CHD/2014 HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CON FIRMING AN ADDITION OF RS.3 97 387/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEAD WAGES. (PARA 4 PAGE 2-4 OF ASSESSMENT ORDER) (PARA 8.1 PA GE 9 OF CIT(A) ORDER) L(A) THAT AUTHORITIES BELOW HAS ERRED IN LAW AND F ACTS IN MAKING ADDITIONS ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEAD ' WAGES' WITHOUT REJECTING THE BOOKS OF ACCOUNTS. 2. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS.2 94 389/- BEING INCOME OF MEENA GARG PROP PUNJA B TIMBER TRADING CO. AS INCOME OF APPELLANT ON SUBSTANTIVE BASIS. (PARA 5 PAGE 5-8 OF ASSESSMENT ORDER) (PARA 8.1 PAGE 9 OF CIT(A) ORDER) 3. THAT APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR TO SUBSTITUTE THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF CASE. 23. THE ASSESSEE IN ITA NO.303/CHD/2014 VIDE GRO UND NO.1 HAS RAISED THE ISSUE AGAINST THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER HE HEAD WAGES. THE FACTS AND C IRCUMSTANCES OF THE PRESENT ISSUE ARE IDENTICAL TO THE FACTS AND CI RCUMSTANCES IN THE ISSUE RAISED IN ASSESSMENT YEAR 2001-02. FOLLOWIN G THE SAME PARITY OF REASONING WE ALLOW THE CLAIM OF THE ASSES SEE AND DELETE 12 THE ADDITION OF RS.3 97 387/- MADE BY THE ASSESSING OFFICER. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THU S ALLOWED. 24. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE ON ACCOUNT OF ADDITION OF RS.2 94 389/- BEING INCOME OF SMT.MEEN A GARG PROPRIETARY OF M/S PUNJAB TIMBER TRADING COMPANY. THE FACTS CIRCUMSTANCES AND ISSUE RAISED VIDE GROUND NO.2 IS IDENTICAL TO THE GROUND NO.2 RAISED IN ASSESSMENT YEAR 2002-03 AND F OLLOWING THE SAME PARITY OF REASONING WE FIND NO MERIT IN THE SA ID ADDITION. WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.2 94 389/-. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS ALLOWED. 25. THE ASSESSEE IN ITA NO.304/CHD/2014 HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CON FIRMING AN ADDITION OF RS.4 69 176/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEAD WAGES. (PARA 4 PAGE 2-4 OF ASSESSMENT ORDER) (PARA 9.1 PA GE 9 OF CIT(A) ORDER) L(A) THAT AUTHORITIES BELOW HAS ERRED IN LAW AND F ACTS IN MAKING ADDITIONS ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEAD ' WAGES' WITHOUT REJECTING THE BOOKS OF ACCOUNTS. 2. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS.2 99 680/- BEING INCOME OF MEENA GARG PROP PUNJA B TIMBER TRADING CO. AS INCOME OF APPELLANT ON SUBSTANTIVE BASIS. (PARA 5 PAGE 5-8 OF ASSESSMENT ORDER) (PARA 9.1 PAG E 9 OF CIT(A) ORDER) 3. THAT APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR TO SUBSTITUTE THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF CASE. 26. THE ASSESSEE IN ITA NO.304/CHD/2014 VIDE GROUND NO.1 HAS RAISED THE ISSUE AGAINST THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER HE HEAD WAGES. THE FACTS AND C IRCUMSTANCES OF THE PRESENT ISSUE ARE IDENTICAL TO THE FACTS AND CI RCUMSTANCES IN THE ISSUE RAISED IN ASSESSMENT YEAR 2001-02. FOLLOWIN G THE SAME PARITY OF REASONING WE ALLOW THE CLAIM OF THE ASSES SEE AND DELETE 13 THE ADDITION OF RS.4 69 176/- MADE BY THE ASSESSING OFFICER. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THU S ALLOWED. 27. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE ON ACCOUNT OF ADDITION OF RS.2 99 680/- BEING INCOME OF SMT.MEEN A GARG PROPRIETARY OF M/S PUNJAB TIMBER TRADING COMPANY. THE FACTS CIRCUMSTANCES AND ISSUE RAISED VIDE GROUND NO.2 IS IDENTICAL TO THE GROUND NO.2 RAISED IN ASSESSMENT YEAR 2002-03 AND F OLLOWING THE SAME PARITY OF REASONING WE FIND NO MERIT IN THE SA ID ADDITION. WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.2 99 680/-. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS ALLOWED. 28. THE ASSESSEE IN ITA NO.305/CHD/2014 HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL: 1. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS. 7 88 803/- ON ACCOUNT OF UNEXPLAINED EXPENDI TURE UNDER THE HEAD 'WAGES'. (PARA 2 PAGE 2-4 OF ASSESSMENT ORDER) (PARA 10.1 PAGE 10 OF CIT(A) ORDER) L(A) THAT AUTHORITIES BELOW HAS ERRED IN LAW AND F ACTS IN MAKING ADDITIONS ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEAD 'WAGES' W ITHOUT REJECTING THE BOOKS OF ACCOUNTS. 2. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS 3 57 316/- BEING INCOME OF MEENA GAR G PROP PUNJAB TIMBER TRADING CO AS INCOME OF APPELLANT ON SUBSTANTIVE BA SIS. (PARA 3 PAGE 4-7 OF ASSESSMENT ORDER) (PARA 10.1 PAGE 10 OF CIT(A) ORDER) 3. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS.13 840/ ON ACCOUNT OF POPULAR FATTI. (PARA 4 PAGE 8-9 OF ASSESSMENT ORDER) (PARA 10 PAGE 10 OF CIT(A) ORDER) 3 (A) THAT THE AUTHORITIES BELOW HAVE ERRED IN TR EATING 'FALL' AS 'FATI' AND IN MAKING THE ADDITIONS WITHOUT REJECTING THE BOOKS OF ACCOUN TS. 4. THAT APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR TO SUBSTITUTE THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING O F CASE. 14 29. THE ASSESSEE IN ITA NO.305/CHD/2014 VIDE GROUND NO.1 HAS RAISED THE ISSUE AGAINST THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDER THE HEAD WAGES. THE FACTS AND CIRCUMSTANCES OF THE PRESENT ISSUE ARE IDENTICAL TO THE FACTS AND CIRCUMSTANCES IN THE ISSUE RAISED IN ASSESSMENT YEAR 2001-02. FOLL OWING THE SAME PARITY OF REASONING WE ALLOW THE CLAIM OF THE ASSES SEE AND DELETE THE ADDITION OF RS.7 88 803/- MADE BY THE ASSESSING OFFICER. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THU S ALLOWED. 30. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE ON ACCOUNT OF ADDITION OF RS.3 57 316/- BEING INCOME OF SMT.MEEN A GARG PROPRIETARY OF M/S PUNJAB TIMBER TRADING COMPANY. THE FACTS CIRCUMSTANCES AND ISSUE RAISED VIDE GROUND NO.2 IS IDENTICAL TO THE GROUND NO.2 RAISED IN ASSESSMENT YEAR 2002-03 AND F OLLOWING THE SAME PARITY OF REASONING WE FIND NO MERIT IN THE SA ID ADDITION. WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.3 57 316/-. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS ALLOWED. 31. ANOTHER ISSUE RAISED BY THE ASSESSEE VIDE GROUN D NO.3 IS ON ACCOUNT OF ADDITION OF RS.13 840/-. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT THE SAID ADDITION HAD BEE N MADE IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF VALUATION OF PA RTICULAR STOCK. HOWEVER THE SEARCH TEAM HAD COUNTED THE STOCK OF F ALLI ONE OF THE BYPRODUCT OF WOOD AS STOCK OF FATTI WHICH IS ANOTH ER BYPRODUCT AND COSTS LESS. THE CASE OF THE ASSESSEE BEFORE U S IS THAT BECAUSE OF THE SIMILARITY IN NAMES THERE WAS A DISCREPANCY IN COUNTING STOCK AND HENCE THE ADDITION. 32. THE LEARNED D.R. FOR THE REVENUE PLACED RELIANC E ON THE ORDERS OF THE AUTHORITIES BELOW. 15 33. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ON THE PERUSAL OF RECORD AND EVIDENCE PRODUCED BY T HE ASSESSEE WE FIND MERIT IN THE PLEA OF THE ASSESSEE ESPECIALLY I N VIEW OF THE FACT OF SIMILAR SOUNDING NAMES. THE ASSESSEE HAD PLACE D EVIDENCE ON RECORD TO SHOW THAT FALLIS COST IS LESSER THAN FAT TI AND IN CASE CORRECT VALUATION IS APPLIED THEN THERE IS NO DISCR EPANCY IN THE STOCK SHOWN BY THE ASSESSEE. IN THE TOTALITY OF T HE FACTS AND CIRCUMSTANCES WE FIND NO MERIT IN THE SAID ADDITIO N MADE IN THE HANDS OF THE ASSESSEE. WE DELETE THE ADDITION OF RS.13 840/-. 34. THE ASSESSEE IN ITA NO.1171/CHD/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS. 23 63 243/~ ON ACCOUNT OF UNEXPLAINED EXPEND ITURE UNDER THE HEAD 'WAGES'. (PARA 2 PAGE 2 OF ASSESSMENT ORDER) (PARA 4 PAGE 2-9 OF CIT(A) ORDER) 2. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS 3 35 405/- BEING INCOME OF MEENA GARG PROP PUNJA B TIMBER TRADING CO AS INCOME OF APPELLANT ON SUBSTANTIVE BASIS. (PARA 3 PAGE 4-8 OF ASSESSMENT ORDER) (PARA 5 PAGE 9-16 OF CIT(A) ORDER) 3. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS.4 41 345/- ON ACCOUNT OF POPULAR FATTI. 3 (A) THAT THE AUTHORITIES BELOW HAVE ERRED IN TR EATING 'PALI' AS 'FATI'. (PARA 5 PAGE 9-10 OF ASSESSMENT ORDER) (PARA 6 PAGE 16-18 OF CIT(A) ORDER) 4. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS 70 33 524/- OUT OF RS. 78 15 026/- MADE BY AO ON ACCOUNT OF DIFFERENCE IN VALUATION OF BUILDING ON THE BASIS OF REPORT OF VAL UATION OFFICER. (PARA 4 PAGE 8-9 OF ASSESSMENT ORDER) (PARA 8 PAGE 19-27 OF CIT(A) ORDER) 5. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS.10 98 211/- ON ACCOUNT OF ESTIMATED PROFIT ON SH ORT STOCK FOUND ON THE DATE OF SEARCH. (PARA 6 PAGE 10-11 OF ASSESSMENT ORDER) (PARA 9 PAGE 27-31 OF CIT(A) ORDER) 16 6. THAT APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR TO SUBSTITUTE THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF C ASE. 35. THE ASSESSEE IN ITA NO.1171/CHD/2013 RELATING T O ASSESSMENT YEAR 2007-08 VIDE GROUND NO.1 HAS RAISED THE ISSUE AGAINST THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE UNDE R HE HEAD WAGES. THE FACTS AND CIRCUMSTANCES OF THE PRESEN T ISSUE ARE IDENTICAL TO THE FACTS AND CIRCUMSTANCES IN THE ISS UE RAISED IN ASSESSMENT YEAR 2001-02. FOLLOWING THE SAME PARIT Y OF REASONING WE ALLOW THE CLAIM OF THE ASSESSEE AND DELETE THE A DDITION OF RS.23 63 243/- MADE BY THE ASSESSING OFFICER. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS ALLOWED. 36. THE ISSUE IN GROUND NO.2 RAISED BY THE ASSESSEE ON ACCOUNT OF ADDITION OF RS.3 35 405/- BEING INCOME OF SMT.MEEN A GARG PROPRIETARY OF M/S PUNJAB TIMBER TRADING COMPANY. THE FACTS CIRCUMSTANCES AND ISSUE RAISED VIDE GROUND NO.2 IS IDENTICAL TO THE GROUND NO.2 RAISED IN ASSESSMENT YEAR 2002-03 AND F OLLOWING THE SAME PARITY OF REASONING WE FIND NO MERIT IN THE SA ID ADDITION. WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.3 35 405/-. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS ALLOWED. 37. THE ISSUE IN GROUND NO.4 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN VALUATION OF BUILDING ON THE BASIS OF REPORT OF THE VALUATION OFFICER. 38. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT REJECTED AND CONSEQUENTLY NO ADDITION ON ACCOUNT OF DIFFERENCE I N VALUATION OF THE VALUATION OFFICER WAS WARRANTED IN VIEW OF THE RATIO LAID DOWN 17 BY THE HON'BLE SUPREME COURT IN SARGAM CINEMA VS. C IT [328 ITR 513 (SC)]. 39. THE LEARNED D.R. FOR THE REVENUE HAS FAIRLY ADM ITTED THAT THE BOOKS OF ACCOUNT WERE NOT REJECTED. 40. WE ARE OF THE VIEW THAT THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN SARGAM CINEMA (SUPRA) IS SQUARELY APP LICABLE TO THE FACTS OF THE PRESENT CASE WHERE THE BOOKS OF ACCOUN T WERE NOT REJECTED BY THE ASSESSING OFFICER. ON THE OTHER H AND THE ASSESSING OFFICER HAD REFERRED VALUATION OF THE BUI LDING TO THE VALUATION OFFICER WHO HAD REPORTED THE VALUE OF TH E BUILDING AT RS.78 15 026/- AS AGAINST THE COST OF THE BUILDING SHOWN BY THE ASSESSEE AT RS.70 33 524/-. IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT NO ADDITION ON THIS ACCOUNT CAN BE MADE IN THE HANDS OF THE ASSESSEE WHERE THE BOOKS OF ACCOUN T HAD NOT BEEN REJECTED. ACCORDINGLY WE DELETE THE SAID ADDITIO N MADE BY THE ASSESSING OFFICER AND REVERSE THE ORDER OF THE CIT (APPEALS) IN THIS REGARD. THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE IS THUS ALLOWED. 41. THE GROUND OF APPEAL NO.5 RAISED BY THE ASSESSE E IS ON ACCOUNT OF ESTIMATED PROFIT ON SHORT STOCK FOUND DU RING THE COURSE OF SEARCH. 42. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURING THE COURSE OF SEARCH AS PER THE BOOKS OF ACCOUNT THE STOCK WAS RS.2 76 77 856/- WHEREAS ON PHYSICAL VERIFICATION BY THE SEARCH TEAM TOTAL STOCK FOUND WAS RS.1 94 20 630/-. THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS TO WHY GP ON THE DIFFEREN CE OF THE STOCK 18 OF RS.82 57 226/- (SHORT) SHOULD NOT BE ADDED AS TH E INCOME. IN REPLY THE CONTENTION OF THE ASSESSEE WAS AS UNDER: A) ON 17.7.2007 THE VISITING OFFICER OF THE EXCISE DEPARTMENT FOUND ON PHYSICAL VERIFICATION THAT THE GOODS LYING IN TH E FACTORY TALLIED WITH THE RECORDED BALANCES. B) THE STOCK V/AS SO VOLUMINOUS THAT IT WAS NOT POS SIBLE TO DO PROPER PHYSICAL VERIFICATION IN FEW HOURS AS WAS DONE BY T HE SEARCH PARTY . 43. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER ON ACCOUNT OF THE FOLLOWING REASO NS : A) THE EXCISE DEPARTMENT CAME ON 19.7.2007 TO THE BUSI NESS PREMISES OF THE ASSESSEE AND VERIFIED THE STOCK AND FOUND IT TA LLYING WITH THE BOOKS OF ACCOUNT. THIS IS A SEPARATE PROCEEDING AND HAS NO C ORRELATION TO THE INCOME TAX PROCEEDING BECAUSE WHAT IS BEING QUESTIONED IS THAT ON THE DATE OF SEARCH ON 20.3.2007 (ALMOST 4 MONTHS BEFORE) THE INCOME TAX D EPARTMENT HAD TAKEN ACCOUNT OF STOCK OF THE ASSESSEE AND HAD FOUND A SH ORTAGE OF STOCK WORTH RS 82 57 226/-. B) THE STOCK TAKING WAS DONE IN THE PRESENCE OF THE SU PERVISOR/ EMPLOYEES OF THE ASSESSEE THROUGH HIS PARTNER SH. KEWAL GARG ALONG WITH THE WITNESSES. HOWEVER WHEN HE WAS CONFRONTED TO THE FACT THAT AS PER THE ABOVE STOCK INVENTORY THE VALUE OF THE STOCK FOUND IS SHORT BY RS 82 57 226/- WITH THE BOOK STOCK AS ON THE DATE OF THE SEARCH HE WAS NOT ABLE TO FURNISH ANY EXPLANATION FOR THE SAME. C) THE ASSESSEE AT NO POINT OF THE POST SEARCH PRO CEEDINGS FILED ANY OBJECTION/VALUATION OF THE STOCK. IN VIEW OF THE AB OVE GP ON RS 82 57 226/- @ 13.3% IS 10 98 211/-AS DISCUSSED ABOVE IS BEING ADD ED BACK TO THE INCOME OF THE ASSESSEE. 44. BEFORE THE CIT (APPEALS) THE ASSESSEE CONTENDED THAT THE SEARCH WAS CARRIED OUT ON 20.3.2007 AND AFTER THE S EARCH ON 23.3.2007 THE ASSESSEE REQUISITIONED DDIT (INVESTIG ATION) AMBALA TO GIVE THE COPY OF STOCK INVENTORY PREPARED ON THE DATE OF SEARCH. THE DDIT ISSUED LETTER TO THE ASSESSEE POINTING OUT DISCREPANCY IN THE STOCK TAKEN ON SEARCH VIDE LETTER DATED 2.4.200 7 AND COPY OF THE INVENTORY WAS ENCLOSED. VIDE LETTER DATED 11.4. 2007 THE ASSESSEE FILED COPY OF EXPLANATION ALONGWITH RECONCILIATION OF STOCK FOUND ON THE DATE OF SEARCH AND VALUE AS PER BOOKS OF ACC OUNT. THE DDIT HAD FORWARDED THE ALLEGED DISCREPANCIES FOUND DURING THE 19 SEARCH TO THE EXCISE DEPARTMENT AND THE ASSESSEE HA D FURNISHED EXPLANATION BEFORE VARIOUS EXCISE AUTHORITIES. AFT ER CONSIDERING THE EXPLANATION OF THE ASSESSEE THE OBJECTIONS RAI SED BY THE DDIT AMBALA WERE DROPPED BY CENTRAL EXCISE DEPARTMENT AN D NO FURTHER ACTION WAS TAKEN BY THEM. 45. THE SECOND PLEA RAISED BEFORE THE CIT (APPEALS) WAS THAT THE SALES TAX DEPARTMENT HAD ACCEPTED THE TOTAL SALES D ECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND THER EFORE THERE WAS NO ASSUMPTION OF SALES OUTSIDE THE BOOKS OF ACCOUNT . ANOTHER ASPECT RAISED BY THE ASSESSEE BEFORE THE CIT (APPEA LS) WAS THAT THE BOOKS OF ACCOUNT WERE NOT REJECTED BY THE ASSESSING OFFICER AND HENCE THERE WAS NO BASIS FOR MAKING THE TRADING ADD ITION. THE SAID SUBMISSIONS OF THE ASSESSEE WERE FORWARDED TO THE ASSESSING OFFICER WHO IN TURN SUBMITTED REMAND REPORT AND TH E ASSESSEE FILED REJOINDER. THE CIT (APPEALS) REJECTED THE P LEA OF THE ASSESSEE VIS--VIS SHORT STOCK FOUND DURING THE COU RSE OF SEARCH AND UPHELD HE ADDITION OF RS.10 98 211/-. 46. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT T HAT THE INVENTORY OF STOCK WAS NOT PROPERLY PREPARED BY THE SEARCH TEAM. THE ASSESSEE HAD STOCK OF INVENTORY WHICH WAS CORRE CTLY ACCOUNTED FOR. IT WAS FURTHER POINTED OUT BY THE LEARNED A. R. FOR THE ASSESSEE THAT ON THE DATE OF SEARCH I.E. 20.3.2007 TRADING ACCOUNT WAS DRAWN BY ADOPTING GP RATE OF THE PRECEDING YEAR WHICH WAS 15.77%. HOWEVER DURING THE YEAR UNDER CONSIDERAT ION THE ASSESSEE HAD DECLARED GP OF 13.3% WHICH IN TURN HA S BEEN ACCEPTED BY THE ASSESSING OFFICER. OUR ATTENTION WAS DRAWN TO RECONCILIATION OF THE STOCK AS ON 20.3.2007 PLACED AT PAGE 208 OF THE PAPER BOOK AND IT WAS POINTED OUT THAT AFTER AD OPTING THE GP 20 RATE DECLARED FOR THE YEAR THE VALUE AS PER THE IN COME TAX DEPARTMENT AMOUNTED TO RS.2 59 77 856/- WHEREAS AS PER THE BOOKS THE STOCK IS OF RS.2 59 28 016/-. THE LEARNED A.R . FOR THE ASSESSEE FURTHER POINTED OUT THAT IMMEDIATELY AFTER THE SEAR CH THE ASSESSEE HAD ASKED FOR THE COPY OF INVENTORY WHICH IS AS PER LETTER DATED 23.3.2007 PLACED AT PAGE 184 OF THE PAPER BOOK AND THEREAFTER ON 2.4.2007 THE SAID INVENTORY OF STOCK WAS SUPPLIED T O THE ASSESSEE AS PER COMMUNICATION PLACED AT PAGE 185 OF THE PAPER B OOK ALONGWITH STOCK LIST. THE ASSESSEE FURTHER POINTED OUT THAT THE DIFFERENCE IN STOCK WAS ALSO POINTED OUT DURING THE SEARCH ITSELF I.E. AT THE TIME OF SIGNING OF THE INVENTORY AS PER NOTINGS AT PAGE 109 OF THE PAPER BOOK. THE LEARNED A.R. FOR THE ASSESSEE POINTED O UT THAT ANOTHER LETTER WAS ADDRESSED TO THE DDIT(INVESTIGATION) ON 12.4.2007 POINTING OUT THAT THE STOCK VALUATION WAS NOT DONE PROPERLY BY THE SEARCH PARTY. 47. THE LEARNED D.R. FOR THE REVENUE POINTED OUT TH AT NO EXPLANATION WAS FURNISHED BEFORE THE SEARCH TEAM AN D THE STOCK WAS COUNTED IN THE PRESENCE OF THE ASSESSEE AND HENCE T HERE WAS NO MERIT IN THE CLAIM MADE BY THE ASSESSEE IN THIS REG ARD. 48. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT T HAT GROUND NO.3 RAISED BY THE ASSESSEE IS LINKED TO GROUND NO. 5 UNDER WHICH THE ADDITION ON ACCOUNT OF FALLI WAS PROPOSED TO BE MADE BY THE ASSESSING OFFICER AS PER THE DOCUMENTS SEIZED WHICH ARE PLACED AT PAGES 106 TO 113 OF THE PAPER BOOK. NOTIONAL SALES OF THE SAID ITEM WERE COMPUTED AND SEPARATE ADDITION WAS MADE B Y THE ASSESSING OFFICER BUT THE SAME WAS TO BE SET OFF A GAINST THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN THE STOCK . 21 49. THE LEARNED D.R. FOR THE REVENUE POINTED OUT TH AT THE ASSESSEE HAD ADMITTED TO THE FACT OF UNACCOUNTED SA LES TOTALING RS.4 41 345/- AND ADDITION ON THAT ACCOUNT WAS MADE IN THE HANDS OF THE ASSESSEE. 50. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE PROCEED TO DECIDE GROUND OF APPEAL NOS.5 AND 3 R AISED BY THE ASSESSEE AS THE ISSUES RAISED IN BOTH THE GROUNDS A RE LINKED. DURING THE COURSE OF SEARCH CERTAIN DOCUMENTS WERE SEIZED FROM THE RESIDENCE OF THE PARTNERS OF THE FIRM. ANNEXURE- A-1 AT PAGES 32 TO 38 CONTAINS CERTAIN INFORMATION WHICH IS TABULAT ED AT PAGES 9 AND 10 OF THE ASSESSMENT ORDER. THE SAID DOCUMENTS RE FLECTED DATE OF TRANSACTIONS OF THE ITEMS SOLD I.E. FATTI(WASTAGE) TO DIFFERENT PARTIES INCLUDING QUANTITIES AND RATES AT WHICH IT WAS SOLD . THE SAID DOCUMENTS ALSO MENTIONED AMOUNTS FOR WHICH THE SAID ITEMS WERE SOLD AND TOTALED TO RS.4 55 185/-. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS TO WHY SUM OF RS.4 55 185 SHOULD NOT BE ADDED TO HIS INCOME. IN REPLY THE ASSESSEE EXPLAINED THE DATE ON THE SAID DOCUMENTS DATE OF AUCTION AND QUANTITY OF MATERIAL WHICH A PERSON COULD BID. AS PER THE ASSESSEE IT DRAWS AN ESTIMATED SALE TO BE MADE TO K ABARI AND AS AND WHEN THEY LIFT LUMP SUM AMOUNT WAS PAID BY THEM. THE ASSESSING OFFICER THUS OBSERVED THAT THE ASSESSEE HAD ESTIMAT ED SALE OF FATTI BEING DONE AND AS PER SEIZED DOCUMENTS TOTAL SALE W ORKED OUT TO RS.4 41 345/- FOR THE MONTH OF MARCH AND THE SAME W AS ADDED AS THE INCOME OF THE ASSESSEE. 51. ANOTHER ADDITION MADE BY THE ASSESSING OFFICER WAS ON ACCOUNT OF DIFFERENCE IN STOCK. THE TOTAL STOCK F OUND DURING THE COURSE OF SEARCH ON PHYSICAL VERIFICATION WAS RS.1. 94 CRORES 22 WHEREAS AS PER THE BOOKS OF ACCOUNT STOCK WAS RS.2. 76 CRORES. THE EXPLANATION OF THE ASSESSEE WAS THAT THE STOCK BEING VOLUMINOUS IT WAS NOT POSSIBLE TO DO PHYSICAL VERIF ICATION IN FEW HOURS AS WAS DONE BY THE SEARCH PARTY. ANOTHER SU BMISSION MADE BY THE ASSESSEE WAS THAT SUBSEQUENT TO THE SEARCH B Y THE INCOME TAX DEPARTMENT THE OFFICERS OF THE EXCISE DEPARTME NT ON 17.7.2007 FOUND ON PHYSICAL VERIFICATION THAT THE G OODS LYING IN THE FACTORY TALLIED WITH RECORDED BALANCE. THE CONTENT ION RAISED BY THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER AS THE EXCISE DEPARTMENT HAD VISITED ON LATER DATE AND WERE SEPAR ATE PROCEEDINGS. FURTHER THE STOCK TAKING WAS DONE IN THE PRESENCE OF THE SUPERVISOR OF THE ASSESSEE AND ALSO THE PARTNER SHRI KEWAL GARG AND WHEN HE WAS CONFRONTED WITH THE FACT THAT THERE WAS DISCREPANCY IN THE STOCK NO EXPLANATION WAS FURNIS HED BY HIM. HOWEVER WE FIND THAT THE PARTNER HAD MADE AN ENDO RSEMENT ON STOCK LIST ITSELF PREPARED AT THE TIME OF SEARCH WHICH IS AVAILABLE ON RECORD. THE ASSESSING OFFICER ALSO OBSERVED TH AT IN POST SEARCH PROCEEDINGS NO OBJECTION/VALUATION OF THE STOCK WAS FILED BY THE ASSESSEE AND CONSEQUENTLY THE GP ON THE DIFFERENCE IN THE STOCK OF RS.82 57 226/- @ 13.3% I.E. RS.10 98 211/- WAS ADDE D AS INCOME OF THE ASSESSEE. 52. THE ASSESSEE BEFORE THE CIT (APPEALS) HAS POINT ED OUT THE CONSEQUENCES OF POST SEARCH PROCEEDINGS AND HAS REF UTED THE CLAIM OF THE ASSESSING OFFICER THAT THE ASSESSEE AT NO PO INT IN POST SEARCH PROCEEDINGS HAD FILED ANY OBJECTION TO THE VALUATIO N OF STOCK. THE FACTS AS NARRATED BY THE ASSESSEE ARE REPRODUCED AT PAGES 28 AND 29 OF THE APPELLATE ORDER WHICH READ AS UNDER: A) PHYSICAL'STOCK INVENTORY TAKEN AT THE TIME OF SEARC H HAS MANY DEFECTS. THE FIRM HAS 23 TWO PARTNERS NAMELY SH. NARESH GARG AND SH. KEWAL GARG. DURING THE ENTIRE PERIOD OF SEARCH SH. NARESH GARG WAS HELD AT THE RESIDENC E IN MADHU COLONY YAMUNA NAGAR AND HE WAS NOT AWARE HOW AND WHEN THE STOCK INVENTO RY WAS PREPARED. SH. KEWAL GARG SECOND PARTNER WAS BUSY IN REPLYING TO THE QUE RIES OF THE AUTHORISED OFFICERS AT THE FACTORY PREMISES. ENTIRE INVENTORY WAS PREPARED AT THE BACK OF THE PARTNERS. THIS FACT IS VERY CLEAR IF WE GO THROUGH THE DETAIL OF I NVENTORY PREPARED. B) THAT ON 23.3.2007 ASSESSEE HAS WRITTEN A LETTER TO DEPUTY DIRECTOR OF INCOME TAX INVESTIGATION AMBALA REQUESTING FOR COPY OF STOCK I NVENTORY TAKEN AND PREPARED ON THE DATE OF SEARCH AS ASSESSEE WAS HAVING AN APPREH ENSION THAT INVENTORY WAS WRONGLY TAKEN AND VALUED BYAO. THE COPY OF LETTER I S ATTACHED. C) DDIT HAS ISSUED A LETTER TO ASSESSEE POINTING OUT T HE DISCREPANCIES IN STOCK TAKEN ON THE DATE OF SEARCH FROM THE TRADING ACCOUNT VIDE LE TTER DATED 2.4.2007 ENCLOSING THE COPY OF INVENTORY ON THE DATE OF SEARCH AND THE SAM E IS ATTACHED. D) FURTHER ASSESSEE VIDE LETTER DATED 11.4.2007 HAS FILED THE COPY OF EXPLANATION OF ASSESSEE ALONG WITH RECONCILIATION OF STOCK FOUND O N THE DATE OF SEARCH AND VALUE AS PER BOOKS OF ACCOUNTS AND COPY OF THE RELEVANT CORR ESPONDENCE IS ATTACHED. E) ANOTHER LETTERS DATED 12.04.2007 AND 05.05.2007 W$RE ALSO WRITTEN TO DDIT AMBALA AND NO RESPONSE WAS RECEIVED FOR LETTER DATED 11.04 .2007 OR 05.05.2007. COPY OF LETTER DATED 05.05.2007 ALONGWITH AFFIDAVIT ARE ALS O BEING ENCLOSED. F) LEARNED DDIT AMBALA FORWARDED ALEDGED DISCREPAN CIES FOUND IN STOCK DURING PHYSICAL STOCK TAKING TO EXCISE DEPARTMENT AND WE W ROTE THE FOLLOWING LETTERS TO CENTRAL EXCISE IN OUR DEFENCE. 1. THE COMMISSIONER OF CENTRAL EXCISE YAMUNA NAGAR AL ONGWITH ANNEXURE IS BEING ENCLOSED. 2. PANCHNAMA OF EXCISE SURVEY AS ON 19.07.2007. COPY E NCLOSED. 3. THE SUPERINTENDENT (PREV.) CENTRAL EXCISE DIVISI ON YAMUNA NAGAR AS ON 30.08.2007 IS ALSO BEING ENCLOSED. AFTER CONSIDERING OUR VIEW THE OBJECTIONS RAISED B Y DDIT AMBALA WERE DROPPED BY CENTRAL EXCISE DEPARTMENT AND NO FURTHER ACTION WAS TAKEN BY THE CENTRAL EXCISE DEPARTMENT. G) SIMILARLY OUR CASE HAS BEEN ASSESSED BY SALES TA X AUTHORITIES AND TOTAL SALES ASSESSED BY THEM FOR FINANCIAL YEAR 2006-07 IS RS.75774365/- AND SALES AS PER OUR BOOKS IN FINANCIAL YEAR 2006-07 IS ALSO RS.75774365/-. AS SUCH ASSUMPTION OF SALES OUT OF BOOKS IS WITHOUT ANY FACTS ON RECORD. MOREOVER NO S UCH DOCUMENT WAS SEIZED DURING THE COURSE OF SURVEY. COPY OF SALE TAX ORDER IS BEI NG ENCLOSED. H) THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE HAS FILED DETAILED REPLY BEFORE ASSESSING OFFICER VIDE OUR LETTER DATED 22.12.2008 DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALONGWITH ANNEXURES. COPY OF LETTER IS BEING ENCLOSED. I] THE KIND ATTENTION OF YOUR HONOR IS INVITED TO THE FACT THAT LEARNED AO H AS ACCEPTED VALUE OF CLOSING STOCK AS ON 31.03.2007 AND THE SAID STOCK WAS ARRIVED AT AFTER MAKING ADJUSTMENT OF PURCHASES AND SALES BETWEEN 20.03.2007 TO 31.03.2007. ONCE SHE ACCEPTED OUR STOCK POSITION AS ON 31.03.2007 THERE IS NO SCOPE OF DISBELIEVING THAT STOCK AS ON 20.03.2007. IN FACT THE STAND OF REVENUE IS FOR CONVENIENCE TO MAKE ADDITIONS TO THE RETURNED I NCOME. REJECTION OF BOOKS OF ACCOUNTS IT IS TO BRING TO YOUR KIND NOTICE THAT AS PER THE PROVISIONS OF INCOME TAX ACT IT IS OPEN TO AO TO REJECT THE BOOKS OF ACCOUNTS IF HE IS NOT SAT ISFIED WITH CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE AS PER THE PROVISIO NS OF S. 145(3) AND CAN COMPLETE THE ASSESSMENT IN THE MANNER PROVIDED U/S. 144. 24 THE LEARNED ASSESSING OFFICER HAS ACCEPTED OUR BOOK RESULTS AS SUCH SHE HAS NOT REJECTED THE BOOK RESULTS AND ASSESSMENT IS NOT COMPLETED IN THE MANNER OF S. 144. THAT IT IS A SETTLED PRINCIPLES OF LAW THAT THERE IS NO JUSTIFIC ATION IN MAKING ANY TRADING ADDITIONS WITHOUT DISBELIEVING THE BOOK RESULTS. YOUR KIND AT TENTION IS DRAWN TOWARDS THE RATIO OF JUDGEMENTS IN THE FOLLOWING CASES WHICH PROVES OUR CONTENTION. 53. THE CIT (APPEALS) THOUGH HAD NOT ACCEPTED THE P LEA OF THE ASSESSEE AND UPHELD THE ADDITION OF RS.10 98 211/- VIDE PARA 9.5 OF THE APPELLATE ORDER. FURTHER THE CIT (APPEALS) HA D ALSO UPHELD THE ADDITION MADE ON ACCOUNT OF SALES OUTSIDE THE BOOKS OF POPULAR FATTI OF RS.4 55 185/- AS PER PARA 6.4 OF THE APPEL LATE ORDER. 54. IF WE RECONCILE FROM THE ADDITIONS WHERE THE A DDITION HAD BEEN MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SA LES OUTSIDE THE BOOKS OF ACCOUNT AND THE SECOND AID HAD BEEN MADE O N ACCOUNT OF SHORTAGE IN STOCK. ONCE IT IS ESTABLISHED THAT TH E ASSESSEE HAD MADE SALES OUTSIDE ITS BOOKS OF ACCOUNT OF ANY ITEM DEALT BY IT THEN PARTICULAR ADDITION JUSTIFIES THE AMOUNT OF SH ORTAGE IN STOCK. SINCE THE ITEM HAD BEEN SOLD OUTSIDE THE BOOKS OF A CCOUNT THEN JUSTIFIABLY THE STOCK ON PHYSICAL VERIFICATION WOUL D BE SHORT. 55. NOW COMING TO THE FIRST ADDITION MADE ON ACCOUN T OF SALES MADE OUTSIDE THE BOOKS OF ACCOUNT IT IS BASED ON T HE DOCUMENTS SEIZED FROM THE RESIDENCE OF THE PARTNERS OF THE AS SESSEE. THE SAID DOCUMENTS REFLECTED THE QUANTITY OF GOODS SOLD AND THE PERSONS TO WHOM SOLD DATE-WISE AND THE ASSESSEE HAD ADMITTED H AVING MADE KABARI SALES OF WASTE MATERIAL. IN VIEW THEREOF T HE WE UPHOLD THE ADDITION OF RS.4 55 185/- ON ACCOUNT OF SEIZED DOCU MENTS. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THU S DISMISSED. 56. NOW COMING TO THE EXPLANATION OF THE ASSESSEE W ITH REGARD TO SHORTAGE OF STOCK I.E. PHYSICAL INVENTORY PREPARED AT THE TIME OF SEARCH AND THE STOCK AVAILABLE AS PER THE BOOKS OF ACCOUNT. THE 25 ASSESSEE NO DOUBT HAD FURNISHED THE EXPLANATION BEF ORE THE DDIT(INVESTIGATION) IN RESPECT OF THE SHORTAGE IN T HE STOCK AFTER OBTAINING THE LIST OF INVENTORY FROM HIM. AT PAGE 208 OF THE PAPER BOOK THE ASSESSEE HAD FILED LIST OF RECONCILIATION STATEMENT IN RESPECT OF VARIOUS ITEMS OF STOCK AVAILABLE WITH TH E ASSESSEE. THE ASSESSEE HAD ALSO CONTENDED THAT THE DIFFERENCE IN VALUATION OF STOCK WAS ON ACCOUNT OF THE GP RATE APPLIED WHILE P REPARING TRADING ACCOUNT. THE ASSESSEE DURING THE YEAR UNDER CONSI DERATION HAD DECLARED GP RATE OF 13.33% WHICH HAD BEEN ACCEPTED BY THE ASSESSING OFFICER AS NO BOOKS OF ACCOUNT HAD BEEN R EJECTED BY THE ASSESSING OFFICER AND NO TRADING ADDITION HAD BEEN MADE EXCEPT ON ACCOUNT OF THE DIFFERENCE IN STOCK AND THE SALES OU TSIDE THE BOOKS OF ACCOUNT. 57. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES WHERE THE GP RATE DECLARED BY THE ASSESSEE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT THE SAME RATE SHOULD BE APPLIED WHILE PREPARING TRADING ACCOUNT A S ON THE DATE OF SEARCH. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN FALL IN GP RATE AND THE EXPLANATION OF THE AS SESSEE WAS THAT DUE TO HUGE INCREASE IN THE TURNOVER THERE WAS MARG INAL FALL IN GP RATE WHICH UNDOUBTEDLY HAS BEEN ACCEPTED BY THE AS SESSING OFFICER IN TOTO. IN VIEW OF THE TOTALITY OF THE FACTS AND CIRCUMSTANCES WHERE WE HAVE ALREADY UPHELD THE ADDITION OF RS.4 4 1 345/- ON ACCOUNT OF SALE DEPICTED IN THE SEIZED DOCUMENTS BE ING OUTSIDE THE BOOKS OF ACCOUNT AND ON ACCOUNT OF THE EXPLANATION GIVEN BY THE ASSESSEE THAT THE DISCREPANCY STANDS RECONCILED ON ACCOUNT OF THE GP RATE TO BE APPLIED AND OTHER DISCREPANCIES EXPLA INED BY THE ASSESSEE THERE IS NO MERIT IN ANY FURTHER ADDITION . ANOTHER ASPECT 26 TO BE KEPT IN MIND IS THAT THE INFORMATION GATHERED BY THE INCOME TAX DEPARTMENT DURING THE SEARCH PROCEEDINGS WERE F ORWARDED TO THE EXCISE DEPARTMENT WHO IN TURN VISITED THE PREM ISES OF THE ASSESSEE AND FOUND NO DISCREPANCY IN THE STOCK. I N THE TOTALITY OF THE FACTS AND CIRCUMSTANCES WE FIND NO MERIT IN TH E ADDITION OF RS.10 98 211/- MADE ON ACCOUNT OF ESTIMATED PROFIT OF SHORT STOCK FOUND ON THE DATE OF SEARCH. THE GROUND OF APPEAL NO.5 RAISED BY THE ASSESSEE IS THUS ALLOWED. 58. THE REVENUE IN ITA NO.1190/CHD/2013 HAS RAISED THE FOLLOWING TWO GROUNDS OF APPEAL: (I) 'WHETHER ON THE CIRCUMSTANCES OF THE CASE THE LD.CIT (A) WAS RIGHT IN DELETING THE ADDITION OF RS.39 90 000/- MADE BY ASSESSING OFFICE R ON UNACCOUNTED SALES CALCULATED ON THE BASIS OF MATERIAL SEIZED DURING T HE SEARCH BY ADOPTING G.P. RATE AS DECLARED BY THE ASSESSEE IN AUDITED REPORT. ' (II) 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING THE REBATE OF 25% ON ACCOUNT OF SELF-SUPER VISION INSTEAD OF 15% GIVEN BY THE ASSESSING OFFICER.' 59. THE ISSUE IN GROUND NO.(I) RAISED BY THE REVENU E IS AGAINST THE DELETION OF ADDITION OF RS.39 90 000/- MADE ON ACCOUNT OF UNACCOUNTED SALES. 60. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURING THE COURSE OF SEARCH ANNEXURES A-1 TO A-6 WERE SEIZED FROM THE BUSINESS PREMISES OF THE ASSESSEE AND WHICH PERTAINED TO THE PROCEDURE FOR CORE DRYING FROM DAY SHIFT TO NIGHT SHIFT. THE SAI D DOCUMENTS/LOOSE PAGES WERE MAINTAINED BY THE LABOUR EMPLOYED BY THE ASSESSEE. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE WAS U SING CORE VENEER FOR MANUFACTURING OF PLY OR PLY BOARD AND TH E PROCESS OF MANUFACTURING WAS REFERRED TO AT PAGE 12 OF THE ASS ESSMENT ORDER. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PROD UCTION OF PLY OR 27 PLY BOARD IN A PERIOD COULD BE ESTIMATED FROM THE C ORE USED IN THE UNIT. FURTHER AS PER THE PRODUCTION PROCESS THE C ORE WAS DRIED BEFORE USING FOR THE PRODUCTION OF PLY AND HENCE TH E CORE DRYING PRODUCTION SHOWN IN THE LOOSE PAPER AS PER THE ASS ESSING OFFICER WAS LINKED TO THE PRODUCT BEING MANUFACTURED DURING THE GIVEN DATE. THE ASSESSEE DID NOT MAINTAIN ANY STOCK REG ISTER AND THE ASSESSING OFFICER THUS WAS OF THE VIEW THAT HALF OF THE CORE COULD BE CONSIDERED AS USED FOR PLYBOARD MANUFACTURING AN D HALF FOR PLY MANUFACTURING. THEREFORE OUT OF THE TOTAL CORE OF 309138 SQ.MTR. 154569 SQ.MTR. WAS ALLEGEDLY USED FOR MANUFACTURING OF PLYBOARD AND SIMILAR MEASUREMENT FOR MANUFACTURING OF PLY. THE ASSESSING OFFICER THEREAFTER AS PER PARAS 7.4 AND 7.5 OF THE ASSESSMENT ORDER COMPUTED THAT THE PLYBOARD AND PLY MANUFACTURED FRO M CORE WOULD BE APPROXIMATELY 90 000 SQ.MTR. AS AGAINST WHICH A S PER RG-1 REGISTER THE PRODUCTION WAS APPROXIMATELY 31248.60 SQ.MTR. THE ASSESSING OFFICER THUS WORKED OUT THE ALLEGED SUPPR ESSION IN THE MANUFACTURING OF PLY AND PLYBOARD AND AS PER PARA 7 .8 OF THE ASSESSMENT ORDER SHOW CAUSED THE ASSESSEE AS TO WHY ADDITION OF RS.60 LACS SHOULD NOT BE MADE. THE ASSESSEE REFUT ED THE ALLEGATIONS OF THE ASSESSING OFFICER. HOWEVER TH E ASSESSING OFFICER IN VIEW OF THE SEIZED DOCUMENTS COMPUTED TH E ADDITION IN THE HANDS OF THE ASSESSEE OF RS.39 90 000/- BY ADOP TING GP RATE OF 13.3% ON PRODUCTION WORTH RS.3 CRORES. 61. BEFORE THE CIT (APPEALS) THE ASSESSEE EXPLAINED THAT THE SEIZED DOCUMENTS PERTAINED TO THE PERIOD 27.10.2006 TO 31.1.2007 AND THE ACTUAL PRODUCTION OF PLY AND PLYBOARD DURIN G THE RELEVANT YEAR WAS 57791 SQ.MTR. AND NOT 31248.60 SQ.MTR. AS ALLEGED BY THE ASSESSING OFFICER. THE ASSESSEE SUBMITTED THE REC ONCILIATION OF 28 CORE USED IN PLY AND PLYBOARD PRODUCTION AND POINTE D OUT THAT THERE IS NO BASIS FOR TAKING THE ACTUAL PRODUCTION OF PLY AND BOARD AS 50:50 WHEREAS THE ACTUAL PRODUCTION WERE 86:14. THE RELEVANT EXPLANATION OF THE ASSESSEE WAS AS UNDER: STATEMENT OF RECONCILIATION OF CORE USED IN PLY AND BOARD PRODUCTION DURING 27-10-2006 TO 31-1 -2007 A. TOTAL QUANTITY OF CORE AS PER SEIZED SHEETS 30 9138 SQM TOTAL PRODUCTION AS PER RG1 (27/10/06 TO 31/1/07) 57791 SQM TOTAL QTY OF BOARD MFD DURING THE PERIOD BY TAKING 14% 8090 SQM TOTAL QTY OF CORE REQD FOR BOARD MFG (X2) 16180 SQM TOTAL QTY OF PLY MFD DURING THE PERIOD 485 44 SQM B. TOTAL QTY OF PLY REQDFOR PLY MFG DURING THE PERI OD (X7) 339811 SQM C. TOTAL CORE USED DURING THE PERIOD SQM IN COMPARE TO 309 138 SQM WHICH IS DRIED DURING THE PERIOD AS PER SEIZED PAPERS AS SUCH THERE IS NO JUSTIFICATION IN THE ENTIRE SP ECULATIONS AND ESTIMATE OF AO. 62. THE SAID DOCUMENTS WERE CONFRONTED TO THE ASSES SING OFFICER WHO HAD REITERATED THE ASSESSMENT ORDER BUT HAD NOT GIV EN ANY COMMENTS IN THE REMAND REPORT. THE CIT (APPEALS) IN VIEW OF T HE EXPLANATION GIVEN BY THE ASSESSEE DELETED THE SAID ADDITION OBS ERVING AS UNDER: 10.5 I HAVE CONSIDERED THE SUBMISSIONS. I FIND TH AT THE ADDITION IS BASED ON LOOSE SHEETS SEIZED FOR PERIOD 27.10.2006 TO 19.1.2007 SP ANNING 52 DAYS N THE COURSE OF SEARCH WHICH ADMITTEDLY RELATE TO DAY-WISE QUANTITY OF CORE VENEER DRIED AND THE STATEMENT RECORDED ON THE ISSUE OF SHRI NARESH GARG. CORE VENEER IS THE B ASIC RAW MATERIAL FOR MANUFACTURING PLY AND PLY BOARD. THE O THER ADMITTED FACT IS THAT THE ASSESSEE DOES NOT MAINTAIN ANY QUANTITATIVE STOCK R EGISTER OF THE MANUFACTURED PRODUCTS I.E PLY AND PLY BOARD WHICH CASTS DOUBTS ON THE ACTUAL TOTAL PRODUCTION AND HOW MUCH OF IT IS BROUGHT TO TAX. ON ITS CONTEN TION THAT THE RATIO OF PRODUCTION THEREOF IS NOT 1:1 AS TAKEN BY THE AO B UT 14% BOARD AND 86% PLY AS PER RECORD WHAT IS GERMANE TO THE ISSUE IS THAT TH E ASSESSEE DOES NOT MAINTAIN ANY QUANTITATIVE RECORDS. RG-1 CONTAINS ONLY THE DAILY TOTAL PRODUCTION WITHOUT ANY BIFURCATION OF THE TWO PRODUCTS. SO THE VERACITY OF THE CLAIM OF THE ASSESSEE CANNOT BE CROSS CHECKED. FURTHERMORE CORE VENEER RECEIVED ON JOB WORK IS APPARENTLY ALSO NOT ACCOUNTED FOR. ON THE OTHER HAND 1 FIND T HAT THE AO HAS GIVEN THE BENEFIT OF CONSIDERING ONLY ONE PRESS AS USED FOR MANUFACTU RING DURING THE YEAR WASTAGE OF 10% AS CLAIMED WAS ALLOWED AND THE CORE DRIED ON BA SIS OF THE SEIZED PAPERS AT 309138 SQ MT AS AGAINST THE HIGHER AMOUNT OF 414614 SQ MT WORKED OUT BY THE ASSESSEE. THE RG-1 SHOWED THE PRODUCTION AT 31 248. 6 SQ MT ONLY FOR THE GIVEN 52 35588I SQM THUS IN FACT TOTAL CORE USED DURING THE PERIOD OF 27/10/ 06 TO 31/1/07 IS 3 55 881 29 DAYS FROM BOTH THE PRESSES. SO 1 AM INCLINED TO HO LD THAT MORE THAN ADEQUATE LEVERAGE HAS BEEN AFFORDED TO THE ASSESSEE. THE AO CALCULATED THE MINIMUM PRODUCTION AT 90 000 SQ MT FOR THE 52 DAYS IE FOR PERIOD 27.10.2006 TO 19.1.2007 AS AGAINST TH E DISCLOSED PRODUCTION IN RG-L OF 31 248 SQ MT. IN OTHER WORDS THERE IS SUPPRESSIO N OF PRODUCTION OF AT LEAST L/3 RD VIZ. 60 000 SQ MT. ON APPLYING THE AVERAGE SALE PRI CE OF RS. 82/- SQ MT THE VALUE COMES TO RS. 48 00 000/-APPROX. AND EXTRAPOLATING I T FOR THE WHOLE YEAR AN AMOUNT OF RS. 39 90 000/- WAS ADDED ON APPLYING THE GP OF 13.3%. HAVING PERUSED AND CONCEDING THAT THE ASSESSEE HAS NO EVIDENCE THAT THE CORE USED IS 50:50 FOR PLY AND PLYBOARD 1 AM HOWEV ER OF THE VIEW THAT TAKING EQUAL APPORTIONMENT IS NOT REALLY JUSTIFIABLE THOUGH THE CLAIM OF THE ASSESSEE OF 86:14 IS ALSO UNVERIFIABLE. THE OBJECTION OF TOTAL PRODUCTIO N IN RG-I FOR THE 52 DAYS WAS NOT 31 248 SQ MT BUT 57 791 SQ MTS WHICH APPARENTLY WAS SUBMITTED TO THE AO IN REPLY TO THE SHOW CAUSE NOTICE HAS NOT BEEN COMMENTED UPO N BY THE AO IN THE REMAND PROCEEDINGS. THE ASSESSEE ALSO EXPLAINED THE QUANTI TY OF CORE LAYERS USED IN MANUFACTURING OF PLY DEPENDED ON THE THICKNESS THER EOF. A RECONCILIATION STATEMENT OF CORE USED FOR PLY AND PLYBOARD PRODUCT ION WAS FILED TO SUPPORT ITS CASE THAT ACTUALLY THE TOTAL CORE USED I THE 52 DAYS WAS SLIGHTLY MORE THAN THE FIGURE DETERMINED BY THE AO TO CLAIM THAT THE ADDITION WAS NOT JUSTIFIABLE. BE THAT AS IT MAY I AM INCLINED TO HOLD THAT THERE IS NO INFIRMI TY IN THE INFERENCE DRAWN BY AO WHICH IS BASED ON THE SEIZED PAPERS AND ACCEPTED PR OCESS OF MANUFACTURING. THERE IS NO DOUBT THAT ; ASSESSEE RESORTS TO SALE AND PUR CHASES OUTSIDE THE BOOKS OF ACCOUNTS. THE NUMBER OF WORKERS ON ITS ROLL ARE MUC H MORE THAN ACCOUNTED FOR IN THE BOOKS. STOCK REGISTER GIVING QUANTITATIVE DETAI LS OF THE TWO PRODUCTS ARE NOT MAINTAINED BY THE ASSESSEE. HOWEVER LAVING CONFIRM ED THE ADDITIONS ON ACCOUNT OF SUPPRESSED LABOUR EXPENSES AND SHORT STOCK AM O F A MIND THAT THE SAME WOULD INEVITABLY COVER THE LEAKAGE OF REVENUE ON ACCOUNT OF REDUCTION OUT OF THE BOOKS. THIS WILL ALSO TAKE CARE OF ANY ALLEGATIONS OF DOUB LE ADDITIONS. THUS THE ADDITION HERE IS DIRECTED TO BE DELETED. ASSESSEE SUCCEEDS ON THIS GROUND OF APPEAL. 63. THE LEARNED D.R. FOR THE REVENUE HAS FAILED TO CONTROVERT THE FINDINGS OF THE CIT (APPEALS). FURTHER EVEN THE A SSESSING OFFICER HAD NOT REBUTTED THE DOCUMENTS AND RECONCILIATION STATE MENT SUBMITTED BY THE ASSESSING OFFICER DURING THE APPELLATE PROCEEDINGS AND IN THE ABSENCE OF THE SAME WE ARE IN CONFORMITY WITH THE ORDER OF THE CIT (APPEALS) IN DELETING THE ADDITION OF RS.39 90 000/-. 64. THE GROUND OF APPEAL NO.(II) RAISED BY THE REVE NUE AS ADMITTED BY BOTH THE PARTIES IS INFRUCTUOUS IN VIEW OF OUR ALL OWING THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE. BOTH THE GRO UND OF APPEAL NOS.(I) AND (II) ARE DISMISSED. 30 ITA NO.299/CHD/2014 (AGGARWAL WOOD INDUSTRIES) 65. THE ASSESSEE IN ITA NO.299/CHD/2014 HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT LEARNED CITA HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION OF RS. 13 64 908/- ON ACCOUNT OF UNEXPLA INED EXPENDITURE UNDER THE HEAD 'WAGES'. (PARA 3 PAGE 2-4 OF ASSESSMENT ORDER) (PARA 11 PAGE 9-13 OF CIT(A) ORDER) L(A) THAT AUTHORITIES BELOW HAS ERRED IN LAW AND F ACTS IN MAKING ADDITIONS ON ACCOUNT OF STOCK FOUND SHORT ON THE DATE OF SEARCH WITHOUT REJECTING THE BOOKS OF ACCOUNTS. 2. THAT APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR TO SUBSTITUTE THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF CASE. 66. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE PR ESENT APPEAL IS AGAINST CONFIRMATION OF ADDITION ON ACCOUNT OF STOC K FOUND SHORT ON THE DATE OF SEARCH. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SIMILAR TO TH E ISSUE RAISED BY THE SISTER CONCERN OF THE ASSESSEE VIDE GROUND OF APPEA L NO.5 IN ITA NO.1171/CHD/13. THE LEARNED A.R. FOR THE ASSESSEE FURTHER POINTED OUT THAT THE INVENTORY OF THE STOCK IS PLACED AT PAGES 7 TO 13 OF THE PAPER BOOK AND RECONCILIATION IS AT PAGE 20 OF THE PAPER BOOK. IT WAS ALSO POINTED OUT THAT THE LETTER TO DDIT IS PLACED AT PA GE 18 OF THE PAPER BOOK AND THERE WAS NO DISCREPANCY BETWEEN THE STOCK FOUND DURING THE SEARCH AND THE STOCK AS PER THE BOOKS OF ACCOUNT. 67. ON THE PERUSAL OF RECORD WE FIND THAT THE ISSUE RAISED IN THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS SIMILAR TO THE ISSUE RAISED IN THE CASE OF THE SISTER CONCERN RELATING TO ASSESSMENT YEAR 2 007-08. FOLLOWING THE SAME PARITY OF REASONING WE DIRECT THE ASSESSI NG OFFICER TO DELETE THE ADDITION OF RS.13 64 905/-. THE GROUND OF APP EAL RAISED BY THE ASSESSEE IS THUS ALLOWED. 31 68. IN THE RESULT THE APPEALS OF THE ASSESSEE IN I TA NOS.300 TO 305/CHD/2014 ARE ALLOWED AND THE APPEAL OF THE ASSE SSEE IN ITA NO.1171/CHD/2013 IS PARTLY ALLOWED AND THE APPEAL O F THE REVENUE IN ITA NO.1190 IS DISMISSED. FURTHER THE APPEAL IN I TA NO.299/CHD/2014 IN THE CASE OF AGGARWAL WOOD INDUSTRIES IS ALSO ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF AUGUST 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH AUGUST 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR ITAT CHANDIGARH