M/s Kaushal Ferro Metals P. Ltd, Kolkata v. ACIT, Bhubaneswar

IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK ( ) BEFORE . . HONBLE SHRI K.K.GUPTA ACCOUNTANT MEMBER. /AND . . . S HRI K.S.S.PRASAD RAO JUDICIAL MEMBER / I.T.A.NO. 407 408 AND 409/CTK/2010 / ASSESSMENT YEAR 2006 - 07 2007 - 08 AND 2008 - 09 M/S. KAUSHAL FERRO METALS PVT. LTD. A/174 SAHID NAGAR BHUBANESWAR 751 007. PAN AACK 4096 E - - - VE RSUS - ACIT CIRCLE 1(2) BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI A.TULSYAN AR / FOR THE RESPONDENT: / SHRI A.K.MAHAPATRA DR / ORDER . . SHRI K.K.GUPTA ACCOUNTANT MEMBER. THESE THREE APPEALS BY THE ASSESSEE ARE FOR THE AYS 2006 - 07 2007 - 08 AND 2008 - 09 RAISE A COMMON ISSUE WITH RESPECT TO BRINGING TO TAX AMOUNTS HELD BY THE ASSESSEE IN THE FORM OF SHARE CAPITAL/SHARE APPLICATION MONEY UNDER THE PROVISIONS OF SECTION68 WHICH ASSESSMENTS WERE MADE UNDER THE PROVISIONS OF SECTION 143(3)/153C. 2. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED ON THE ISSUE OF VALIDITY OF INITIATION OF PROCEEDINGS U/S.153C WHICH BECOMES CRUCIAL TO THE MERIT ADDITIONS/DISALLOWANCES TO BE CONSIDERED IN THE LIGHT OF THE FACT THAT BOTH THE AUTHORITIES BELOW HAVE ELABORATELY CONSIDERED THE FACTS OF THE ASSESSEES CASE BUT DECLINED TO HOLD THAT ASSUMING BUT NOT ACCEPTING THE SH ARE APPLICATION MONEY/SHARE CAPITAL ALONE WAS TO BE CONSIDERED UNDER THE PROVISIONS OF SECTION 68 COULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE BY WAY OF HOLDING THE ASSESSEE LIABLE TO TAXED 2 UNDER THE PROVISIONS OF SECTION 153C WHEN THE SAME WAS AVAILABL E FOR CONSIDERATION FOR TAXATION BY WAY OF A REGULAR ASSESSMENT. 3. WE PROPOSE TO HEAR THIS COMMON CRUCIAL POINT AS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE RELEVANT TO THE ASSESSMENT YEAR 2007 - 08 WHEREIN A SUBSTANTIAL AMOUNT OF RS.9.04 CRORES RECEIV ED AS SHARE APPLICATION MONEY FROM A BODY CORPORATE HAD ALSO BEEN AGITATED BY THE ASSESSEE APPELLANT BEFORE US CANNOT BE CONSIDERED BY WAY OF ASSESSMENT PASSED U/S.143(3)/153C. 4. THE BRIEF FACTS RELATING TO THE ISSUE IN DISPUTE ARE THAT ON 15.11.2007 A S EARCH AND SEIZURE OPERATION U/S.132 OF THE INCOME - TAX ACT 1961 WAS CONDUCTED BY THE DEPARTMENT IN THE BUSINESS PREMISES OF M/S.LAXMI BUILDERS GROUP OF CASES AS WELL AS IN THE RESIDENTIAL PREMISES OF THE DIRECTOR OF THE ASSESSEE COMPANY BEFORE US. A SURVEY U/S.133A WAS ALSO CONDUCTED ON 15.11.2007 IN THE OFFICE PREMISES OF M/S.LAXMI BUILDERS & DEVELOPERS AND THE ASSESSEE AT A1/4 SAHIDNAGAR BHUBANESWAR. DURING THE COURSE OF SEARCH OPERATION INCRIMINATING DOCUMENTS BOOKS OF ACCOUNT WERE FOUND AND SEIZED AS W ELL AS IN COURSE OF SURVEY OPERATION DOCUMENTS WERE IMPOUNDED. THE ASSESSEE WAS REQUIRED TO FILE RETURNS IN COMPLIANCE TO NOTICES U/S.153A(1) R.W.S. 153C OF THE I.T.ACT WHICH THE ASSESSEE RESPONDED BY FILING THE RETURNS SHOWING NIL INCOME. 5. THE ASSESSE E M/S.KAUSHAL FERRO METALS P. LTD. IS A NEW VENTURE OF THE GROUP. A SPONGE IRON FACTORY IS RUN UNDER THIS BANNER BY THE GROUP. THE COMPANY HAS AN AUTHORIZED SHARE CAPITAL OF RS.15 CRORES WHICH HAD ENTIRE CAPITAL PAID UP AS ON 31.3.2007 AND SHARE APPLICATI ON MONEY AMOUNTING TO RS.5.45 CRORES WAS PENDING FOR ALLOTMENT AS ON 31.3.2007 BEYOND THE PAID UP CAPITAL. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE NATURE OF SHARE APPLICATION MONEY LYING WITH THE ASSESSEE ON THE BASIS OF GATHERING 3 INFORM ATION THAT THE BODY CORPORATE WHICH HAS BEEN SHOWN AS SHARE APPLICANTS ARE LETTER BOX COMPANIES. 6. THE LEARNED COUNSEL SUBMITTED IN SUPPORT OF HIS ARGUMENT BY FILING DOCUMENTARY EVIDENCE OF THE PURPORTED LETTER BOX COMPANIES AS GENUINE COMPANIES D ULY FUNCTIONING HAVING IDENTITY CREDITWORTHINESS AND GENUINITY OF TRANSACTIONS IN THE FORM OF RECEIPT OF SHARE APPLICATION MONEY BY WAY OF ACCOUNT PAYEE CHEQUES. IT WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW THAT THE SAID COMPANIES AR E ASSESSED TO TAX BY SUPPORTING DOCUMENTS AS ARE APPENDED IN THE PAPER BOOK. 7. THE LEARNED COUNSEL SUBMITTED THAT IT WAS PURELY ASSUMPTION AND SURMISES IN THE MIND OF THE ASSESSING OFFICER TO BELIEVE THAT THE SEARCHED MATERIALS HAD INDICATED APPLICATION M ONEY DULY RECEIPTED BY THE COMPANY WAS THE INCRIMINATING DOCUMENTS FOUND AT THE TIME OF SEARCH AT M/S.LAXMI BUILDERS & DEVELOPERS (P) LTD. HE SUBMITTED THAT THE ASSESSEE COMPANY WAS NOT SEARCHED AND IT WAS ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY WHO A LONE WAS SUBJECTED TO SEARCH BEING DIRECTOR IN THE SEARCH PROCEEDINGS ON THE GROUP OF M/S.LAXMIBUILERS & DEVELOPERS (P) LTD. HE ARGUED THAT BY NO STRETCH OF IMAGINATION COULD THE ACKNOWLEDGEMENT OF SHARE CAPITAL APPLICATION BE CONSIDERED AS INCRIMINATING B ECAUSE WHAT THE AUTHORITIES BELIEVED WAS INCRIMINATING WAS THE COMPANY WHO HAD APPLIED FOR SHARE APPLICATION COULD NOT BE SAID TO HAVE THE CREDITWORTHINESS AS PROPOUNDED BY THE PROVISIONS OF SECTION 68 INSOFAR AS IT IS A FINDING OF FACT BY THE AUTHORITIES BELOW THAT THE MONEY WAS ACTUALLY TRANSFERRED FROM THE ASSESSEE COMPANY AND WAS PLOUGHED BACK IN THE FORM OF SHARE APPLICATION WITH ASSESSEE. HE ARGUED THAT THE AUTHORITIES BELOW THEMSELVES ANSWERED AND SETTLED THE ISSUE IN FAVOUR OF THE ASSESSEE BY INDICA TING THAT THE ASSESSEE COULD NOT BE TAXED ON THE BASIS OF THE VERY DOCUMENTS WHICH THE ASSESSEE DULY ACKNOWLEDGED 4 BY WAY OF REGULAR ASSESSMENT THEREFORE ONLY COMPLICATED THE ISSUE INSOFAR AS THE ASSESSING AUTHORITIES WANTED TO CONFIRM THEIR ASSUMPTION TH AT IT IS THE ASSESSEE WHO SHOULD BE TAXED UNDER THE PROVISIONS OF SECTION 68 ONCE IT HAS BEEN ESTABLISHED BEYOND DOUBT THAT THE ASSESSEE COMPANY WAS NOT THE COMPANY TO BE TAXED UNDER THE PROVISIONS OF SECTION 153C. HONBLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS (P) LTD (216 CTR 195) HAD CLEARLY STATED THAT THE SHARE CAPITAL CAN BE SUBJECTED TO TAXATION UNDER THE PROVISIONS OF SECTION 68 ONLY WHEN THE ASSESSING AUTHORITIES HAVE EXHAUSTED THEIR REMEDY AVAILABLE TO THEM BY VERIFYING THAT THE SAID APPLICANT COMPANIES ARE BOGUS. FOR THIS PROPOSITION HE PRODUCED THE AUDITED BALANCE SHEET FINANCIAL STATEMENTS ASSESSMENT ORDERS BANK ACCOUNTS OF THE RELEVANT APPLICANTS WHICH INTER ALIA ARE ONLY PART AND PARCEL OF THE GROUP WHICH ASSESSING AUTHORITIE S IN THEIR WISDOM HAVE ISOLATED FROM THE OTHER SHARE HOLDERS WHO HAD ALSO APPLIED FOR SHARES IN THE ASSESSEE COMPANY. HE PERUSED THE ORDER OF THE ASSESSING OFFICER WHO ON FACTS ASSUMED THAT MONEY HAD BEEN LAUNDERED THROUGH THE COMPANY AND THEREFORE INSISTE D ON CONSIDERING THE DOCUMENTARY EVIDENCES OF THE CREDITOR COMPANIES ONLY AFTER ESTABLISHING THAT THE MONEY WAS TRANSFERRED FROM THE ASSESSEE COMPANY COULD NOT BE CORRELATED FOR THE INITIATION OF PROCEEDINGS U/S.153C R.W.S. 68. HE POINTED OUT THAT THE LEA RNED CIT(A) IN THE ASSESSMENT YEAR 2006 - 07 CONSIDERED THE CONTENTION AND ACCEPTED THE PROPOSITION THAT THE SAID SUMS COULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE COMPANY SPECIALLY UNDER THE PROVISIONS OF SECTION 153C BUT SUSTAINED THE DOUBT AND SUSPICIO N AS WAS HOVERING IN THE MIND OF THE ASSESSING OFFICER THAT THE FLOW OF FUNDS FROM THE ASSESSEE COMPANY INDICATES A CONTRIVED CHARACTER OF THE INVESTMENT AND UPHELD THE ADDITIONS VIZ. RS.40 LAKHS IN THE ASSESSMENT YEAR 2006 - 07 RS.9.04 CRORES IN THE ASSES SMENT YEAR 2007 - 08 AND RS.52 LAKHS IN THE 5 ASSESSMENT YEAR 2008 - 09.THE LEARNED COUNSEL POINTED OUT THAT INTERESTINGLY THE ASSESSING OFFICER ALSO TRIED TO DISALLOW CERTAIN PORTION OF THE DEPRECIATION AND EXPENSES U/S.40(A)(IA) WHICH THE ASSESSING OFFICER L ATER RECTIFIED SUO MOTO. THIS ONLY INDICATES THAT THE SAID SUMS HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER AS PART OF THE SHARE CAPITAL OF THE ASSESSEE WHO HAD ALSO OBTAINED LOANS FROM BANKS FOR STARTING A SPONGE IRON FACTORY AND THE ONLY FAULT COMMITTED BY THE ASSESSEE COMPANY WAS THAT ONE OF ITS DIRECTOR WAS A MAJOR DIRECTOR IN M/S.LAXMI BUILDERS AND DEVELOPERS (P) LTD. IN ANY CASE THE SAID COMPANY WHOSE SHARE APPLICATION MONEY HAS BEEN DISALLOWED AND CONSIDERED UNDER THE PROVISIONS OF SECTION 68 HAD GO T NO BEARING TO INDICATE THAT THE PROVISIONS OF SECTION 153C WOULD BE APTLY APPLIED AND AS THE ASSESSING AUTHORITIES HAD ALSO VERIFIED THE CREDIT IN THE ACCOUNT OF THE ASSESSEE COMPANY WHICH THE RESPECTIVE APPLICANTS HAD ACKNOWLEDGED WAS THE MONEY OWED B Y THE ASSESSEES NAMELY THE APPELLANT THEREFORE HAD ACCEPTED THE FACT THAT THE CREDIT REMAINED EXPLAINED BY ITSELF. 8. CONCLUDING HIS ARGUMENT HE SUBMITTED THAT A PERUSAL OF THE ORDER OF THE LEARNED CIT(A) HAVING NOTED THAT ACCEPTING THE FACT THAT THE A SSESSEE COMPANY COULD BY WAY OF NO ASSUMPTION OR PRESUMPTION BE TAXED ON THE AMOUNTS RECEIVED BY IT BY WAY OF SHARE APPLICATION MONEY AND THAT TOO ALREADY DECLARED IN THE REGULAR RETURNS FILED BY THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEARS. THIS COULD BE RELATED TO THE FACT OF DISCOVERY IN SEARCH OR SEIZURE OPERATION ON A THIRD PARTY COULD NOT BE BROUGHT TO BE TAXED AS MONEY REMAINING UNDISCLOSED BY THE ASSESSEE BUT UNDER THE PROVISIONS OF SECTION 153C WHEN THE SEARCHED DOCUMENT WAS TO BE TAXED UNDE R THE PROVISIONS OF SECTION 68.BOTH PROVISIONS OF SECTION153 INDICATING SHARE APPLICATION MONEY BECOME CONTRADICTORY TO THE FACT FINDING OF BRINGING TO TAX THE SAME AMOUNT U/S.68 HAS BEEN WRONGLY MISINTERPRETED BY THE AUTHORITIES 6 BELOW WHICH MAY KINDLY BE CONSIDERED IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT. IN SUPPORT OF HIS CONTENTION HE HAS FILED A COMPILATION OF JUDICIAL PRONOUNCEMENTS WHICH INTER ALIA ON THE BASIS OF HONBLE SUPREME COURTS DECISION IN THE CASE OF CIT V. LOVELY EXPORTS (P) LT D (216 CTR 195) GATHERS STRENGTH FROM THE PLETHORA OF TRIBUNAL DECISIONS WHICH ESTABLISH THE DICTUM THAT THE ONUS TO ESTABLISH THE CREDITWORTHINESS GENUINENESS AND IDENTITY OF THE CREDITOR WHICH ONUS LIED ON THE ASSESSEE TO ESTABLISH WAS ESTABLISHED BY TH E ASSESSING AUTHORITIES THEMSELVES COULD NOT BE BROUGHT TO TAX AGAIN. 9. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE POINTED OUT THAT THE LEARNED COUNSEL FOR THE ASSESSEE HAS TRIED TO INTERPRETE THE PROVISIONS OF SECTION 153C ON FACTS AS WERE APPLICABLE EARLIER UNDER THE PROVISIONS OF SECTION 158BD. THE LEARNED COUNSEL HAS TAKEN SUPPORT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS (P) LTD (216 CTR 195) ON THE FACTS AS HAVE BEEN BROUGHT ON RECORD BY THE AUTHORITIES BELOW CLEARLY INDICATE THAT THE ASSESSEE COULD NOT EXPLAIN THE NATURE OF THE SHARE APPLICATION MONEY EXHAUSTIVELY TO THE EXTENT THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER ON THE FACT THAT THE SEARCH OPERATION ONLY BROUGHT ABOUT THE KNOWL EDGE OF MONEY HAVING BEEN ROUTED THROUGH THESE COMPANIES WAS TO BECOME SHARE CAPITAL OF THE ASSESSEE COMPANY. HE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART SUBMISSIONS. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILA BLE ON RECORD WE HAVE PERUSED THE ORDER OF THE ASSESSING OFFICER IN WHICH THE LEARNED ASSESSING OFFICER HAS TRIED TO INDICATING THE BASIS FOR HIS ASSUMING JURISDICTION U/S.153C ALONG WITH BRINGING TO TAX THE SHARE APPLICATION MONEY ACKNOWLEDGING THAT THE A UTHORIZED SHARE CAPITAL WAS OVERSUBSCRIBED WHEN THE SHARE APPLICATION MONEY WAS ALSO CAPITALIZED. IT CLEARLY INDICATES THAT THE SHARE APPLICATION MONEY AND SHARE CAPITAL AS 7 INDICATED BY THE ASSESSEE COMPANY BY WAY OF REGULAR RETURNS COULD NOT BE SUBJECTED TO TAX ON THE BASIS OF FINDING IN COMPANIES WHO HAD INVESTED IN THE SHARE APPLICATION /CAPITAL WHETHER OR NOT WERE BELONGING TO THE SAME GROUP. THE LEARNED COUNSEL THEREFORE HAS CLARIFIED THE DISTINCTION BETWEEN THE PROVISIONS OF SECTION 158BD VIS - - VIS 153C WHEN THE ASSESSEE IN RESPONSE TO NOTICE U/S.153A R.W.S. 153C CHOSE TO FILE THE NIL RETURN OF INCOME FOR THE IMPUGNED AYS. THE EXERCISE UNDERTAKEN BY THE ASSESSING AUTHORITIES WAS TO DISALLOW THE SHARE APPLICATION MONEY TO THE EXTENT MENTIONED IN THE THREE AYS KNOWING FULLY WELL THAT THE ASSESSEE NOW COULD NOT BE PROCEEDED U/S.153C WHEN THE VERY GROUP COMPANIES WERE ALSO ASSESSED BY HIM AND CONSIDERED AS LETTER BOX COMPANIES HAD BEEN IDENTIFIED GENUINE AND HAVING CREDITWORTHINESS TO THE EXTENT T HAT THE ASSESSING OFFICER HAD NOTED THAT THE AMOUNT WAS TRANSFERRED FROM THE ASSESSEE COMPANY TO BE ROUTED BACK IN THE FORM OF SHARE APPLICATION MONEY IN THE ASSESSEE COMPANY. ASSUMING BUT NOT ACCEPTING THAT THE FACTS AND CIRCUMSTANCES AS NARRATED BY THE AUTHORITIES BELOW DO NOT APPLY TO THE FACTS AS NOTED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT V. LOVELY EXPORTS (P) LTD (216 CTR 195) THE ISSUE WOULD CERTAINLY BECOME UNSUSTAINABLE TO THE EXTENT THAT THE CREDITORS TO BE DEFINED AS BOGUS WILL HAVE N O LEGS TO STAND ON U/S.132. THE LEARNED CIT(A) STOPPED SHORT OF THE FACT FINDING THAT THE ASSESSEE HAD EXPLAINED THE SHARE APPLICATION FOR THE IMPUGNED ASSESSMENT YEAR TO THE EXTENT AS PROVIDED UNDER LAW TO THEIR IDENTITY GENUINITY AND CREDITWORTHINESS WA S ESTABLISHED BEYOND DOUBT BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AS ALSO NOW BEFORE US DOCUMENTED IN THE FORM OF AUDITED BALANCE SHEETS FINANCIAL STATEMENT BANK STATEMENTS ASSESSMENT ORDERS AND OTHER MATERIAL TO SUPPORT THE CONTENTION THAT THE S HARE CAPITAL CANNOT BE TAXED IN THE HANDS OF THE COMPANY U/S.68 ITSELF WHEN THE VERY ASSESSING AUTHORITIES HAVE NOT 8 EXHAUSTED THE REMEDY AVAILABLE TO THEM TO ESTABLISH THAT THE APPLICANTS ARE BOGUS. THE LEARNED CIT(A) THEREFORE INDICATED THAT THE CONTRI VED CHARACTER OF THE INVESTMENT HAD NOT BEEN EXPLAINED BY THE ASSESSEE WHICH WAS NEVER THE CASE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER COULD NOT THEREFORE INDICATE IN THE SAME BREATH THAT THE INITIATION OF PROCEEDINGS U/S.153C WAS APPROPRIATE TO BE ULTIMATELY CONSIDERED FOR TAXATION ON THE SIMILAR ISSUE TO BRING TO TAX THE SHARE CAPITAL/APPLICATION MONEY UNDER THE PROVISIONS OF SECTION 68. IN OTHER WORDS BOTH THE AUTHORITIES HAVE CLEARLY ON THE BASIS OF FACTS BROUGHT ON RECORD INDICATED THAT TH E PROVISIONS OF SECTION 153C AND SECTION 68 STANDS CONTRARY TO EACH OTHER IN THE CASE OF THE ASSESSEE BEFORE US AND THEREFORE CANNOT STAND THE TEST OF TAXABILITY AT ANY POINT. THE LEARNED COUNSEL THEREFORE EMPHASIZED OF HOLDING THE PROCEEDINGS U/S.153C AS INVALID BECOMES A CASE IN POINT TO THE EXTENT THAT ONCE THE TAXATION U/S.68 HAS TO BE CONSIDERED WHETHER COULD ALSO INDICATE THAT THE GROUP COMPANIES WERE SUBJECTED TO SCRUTINY AND HAD THE MATERIAL TO INDICATE THAT IT WAS THE ASSESSEE TO BE APPROPRIATEL Y CONSIDERED FOR TAXATION U/S.153C/153A. THE PLETHORA OF JUDGMENTS WHICH THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED INCLUDES ITAT CALCUTTA BENCH DECISION REPORTED IN 119 TTJ (KOL) 294 IN THE CASE OF M/S.LMJ INTERNATIONAL LTD V. DCIT IS TO BE TAKE N NOTE OF TO THE EXTENT THAT PRESSING OF THE IMPUGNED PROVISIONS WOULD LEAD TO A SERIOUS HARDSHIP INVOLVING INJUSTICE DISPARITY AND ANOMALY INSOFAR AS ITEMS OF REGULAR ASSESSMENT COULD NOT BE ADDED N THE PROCEEDINGS U/S.153C.WHEN BOTH THE BORROWER AND PAY EES ACKNOWLEDGEMENT WHETHER SUCH DOCUMENTS COULD BE CONSIDERED INCRIMINATING TO THE EXTENT THAT ONLY SHARE APPLICATION/CAPITAL ROUTED THROUGH PROPER BANKING CHANNELS WAS AGAIN TO BE ESTABLISHED BY THE ASSESSEE UNDER THE PROVISIONS OF SECTION 68 WAS THE ON US STOOD DISCHARGED BY THE ASSESSING OFFICER HIMSELF AS CAN BE PERUSED IN HIS ORDER. THEREFORE WE 9 ARE OF THE CONSIDERED VIEW THAT THE SAID SUMS COULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE IN VIEW OF THE FACT THAT THE AMOUNTS HAVING BEEN ACKNOWLEDGED B Y THE ASSESSEE AND BECOMING PART AND PARCEL OF THE ASSESSEES BUSINESS WHICH THE ASSESSING OFFICER HIMSELF HAS CONSIDERED BY WAY OF REGULAR ASSESSMENT ALLOWING DEPRECIATION AND EXPENSES IN THE MANUFACTURING PROCESS OF THE ASSESSEE THEREFORE COULD NOT TA KE THE SHAPE OF UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE AT ANY POINT OF TIME. IT WAS ADJUDICATION BY EFFORTS MADE BY THE ASSESSING AUTHORITIES TO CONSIDER SHARE APPLICANTS CREDITWORTHINESS OF THE GROUP COMPANIES BY FRAMING THEIR SEPARATE ASSESSME NT ORDERS THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED IN THE PAPER BOOK ONLY LEAN IN FAVOUR OF THE ASSESSEE - APPELLANTS CONTENTION THAT THE SAID SUMS WERE BONAFIDELY APPLIED FOR FROM PROPER SOURCES CHANNELIZED THROUGH BANKS WHETHER COULD BE CONSID ERED BY THE AUTHORITIES BELOW TO TAX IN THEIR HANDS. 11. IN VIEW OF THE ABOVE WE HAVE NO HESITATION IN ALLOWING THE ASSESSEES CONTENTION AND DIRECT THE DELETION OF THE ADDITIONS OF THE RESPECTIVE AMOUNTS IN THE RESPECTIVE ASSESSMENT YEARS. 12. IN THE RES ULT THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 18 TH FEBRUARY 2011 S D/ - S D/ - ( . . . ) ( K.S.S.PRASAD RAO) JUDICIAL MEMBER ( . . ) (K.K.GUPTA) ACCOUNTANT MEMBER. ( ) DAT E: 18 TH FEBRUARY 2011 ( ) ( H.K.PADHEE ) SENIOR.PRIVATE SECRETARY. 10 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : 2 / THE RESPONDENT: 3 . / THE CIT 4 . ( )/ THE CIT(A) 5 . / DR CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY / BY ORDER [ ] S ENIOR PRIVATE SECRETARY