The ACIT, 1 (2), v. M/s Gwalior Tanks & Vessels Ltd,

ITSSA 175/IND/2008 | 2000-2001
Pronouncement Date: 29-12-2010 | Result: Dismissed

Appeal Details

RSA Number 17522716 RSA 2008
Assessee PAN AABCG1792M
Bench Indore
Appeal Number ITSSA 175/IND/2008
Duration Of Justice 2 year(s) 3 month(s) 3 day(s)
Appellant The ACIT, 1 (2),
Respondent M/s Gwalior Tanks & Vessels Ltd,
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 29-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 29-12-2010
Date Of Final Hearing 21-07-2010
Next Hearing Date 21-07-2010
Assessment Year 2000-2001
Appeal Filed On 26-09-2008
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C.SHARMA ACCOUNTANT MEMBER PAN NO. : AACCC0965-B I.T(SS).A.NOS.171 172 AND 174/IND/2008 A.YS. : 2003-04 2005-06 & 2006-07 ACIT. M/S. CHIRCHIND HYDRO POWER 1(2) LIMITED BHOPAL BHOPAL C.O. NO. 120/IND/08 ARISING OUT OF IT(SS)A NO. 171/IND/08 M/S. CHIRCHIND HYDRO ACIT POWER LIMITED 1(2) BHOPAL VS. BHOPAL OBJECTOR RESPONDENT PAN NO. : AABCG1792M I.T(SS).A.NOS.175 TO 181/IND/2008 A.YS. : 2000-01 TO 2006-07 ACIT 1(2) M/S. GWALIOR TANKS & VESSELS LIMITED BHOPAL VS 216 - 218 NEW INDUSTRIAL AREA-II MANDIDEEP BHOPAL (APPELLANT) (RESPONDENT) 2 C.O.NOS.121 TO 125/IND/2008 (ARISING OUT OF I.T(SS).A.NOS.177 TO 181/IND/2010) A.YS. : 2002-03 TO 2006-07 M/S. GWALIOR TANKS & VESSELS LIMITED ACIT 1(2) 216 - 218 NEW INDUSTRIAL AREA-II VS BHOPAL MANDIDEEP BHOPAL (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI K.K.SINGH CIT DR RESPONDENT BY : SHRI H.P.VERMA ADV. AND SHRI ASHISH GOYAL C.A. O R D E R PER R. C. SHARMA A.M. THESE ARE THE APPEALS FILED BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2000-01 TO 2006-07 AND CROSS OBJECTIONS ARE FILED B Y THE ASSESSEE FOR THE ASSESSMENT YEARS 2002-03 TO 2006-0 7. 2. AS ALL THE APPEALS PERTAIN TO THE SAME GROUP OF ASSESSES AND SIMILAR GROUNDS HAVE BEEN TAKEN IN THE SE APEALS THESE WERE HEARD TOGETHER AND NOW DECIDED BY THIS CONSOLIDATED ORDER. 3 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 4. FACTS IN BRIEF ARE THAT THERE WAS A SEARCH AT THE RESIDENCE OF DIRECTORS/PARTNERS OF THE ASSESSEE COMPANY/FIRM ON 16.9.2005. HOWEVER THERE WAS NO SEARCH AT THE ASSESSEES BUSINESS PREMISES. SURVEY WAS CONDUCTED U/S 133-A AT THE ASSESSEES BUSINESS PREMISES. THEREAFTER NOTICE U/S 153C WAS ISSUED AN D THE ASSESSEE FILED RETURN OF INCOME ACCORDINGLY THEREAFTER ASSESSMENTS WERE FRAMED U/S 153C. THE ASSESSEE M/S. CHIRCHIND HYDRO POWER LTD. IS A PRI VATE LTD CO. INCORPORATED ON 04-08-2000. THE ASSESSEE MAINTAINED THE REGULAR BOOKS OF A/CS WHICH WERE AUDITED U/S. 44AB OF THE IT ACT AND FILED THE RETUR NS U/S.139(1) OF THE IT ACT. THE SEARCH WAS CONDUCTED AGAINST THE DIRECTORS OF THE COMPANY SHRI MAHESH AGRAWAL SMT. VEENA AGRAWAL AND SHRI GAURAV AGRAWA L U/S.132(1) OF THE IT ACT ON 16-09-2005. THE LD. ASSESSING OFFICER ISSUED THE NOTICE U/S. 153C ON 22- 03-2006 AND REQUIRED THE ASSESSEE COMPANY TO FILE T HE RETURNS FOR THE ASSESSMENT YR 2002-03 WITHIN 30 DA YS FROM THE DATE OF RECEIPT OF THE NOTICE. THE ASSESSE E 4 RECEIVED THE NOTICE ON 25-03-2006 AND FILED THE RE TURNS ON 01-06-2006 FOR THE ASSESSMENT YEAR 2002-03 . HOWEVER THE INCOME WAS ASSESSED BY ORDER DTD. 31-1 2- 2007 PASSED U/S. 153C/143(3) OF THE IT ACT BY MAKIN G THE ADDITION OF RS.1 10 000/- TOWARDS SHARE APPLIC ATION MONEY. THE ASSESSEE HAS CHALLENGED THE LEGALITY OF THE ASSESSMENT MADE U/S. 153C/143(3) OF THE IT ACT FOR ALL THE ASSESSMENT YEARS ON THE PLEA THAT NO SATISFACTI ON WAS RECORDED BY THE ASSESSING OFFICER OF SEARCHED PERSON. IN AN APPEAL FILED BEFORE CIT(A) ATTENTION WAS INVITED TO THE PROVISIONS OF SEC. 153C WHICH READS AS UNDER:- 1 . NOTWITHSTANDING ANYTHING CONTAINED IN SEC. 139 SEC.147 SEC.148 SEC.149 SEC. 151 AND SEC. 153 WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SEC. 153A THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SEC. 153A]. [PROVIDED THAT IN CASE OF SUCH OTHER PERSON THE REFERENCE TO THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKING OF REQUISITION UNDER 5 SEC. 132A IN THE SECOND PROVISIO TO SECTION 153A SHALL BE CONSTRUED AS REFERENCE TO THE DATE OF RECEIVING THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON ] . 5. AS PER LD. AR PERUSAL OF THE ABOVE SECTION REQU IRE THAT A. THE ASSESSING OFFICER MAKING THE ASSESSMENT OF THE SEARCHED PERSON HAS TO SATISFY HIMSELF THAT SOME MATERIAL (INCRIMINATING) OUT OF THE SEIZED MATERIAL BELONGS TO SOME PERSON OTHER THAN THE SEARCHED PERSON ; B. THEN THE ASSESSING OFFICER MAKING THE ASSESSMENT OF THE SEARCHED PERSON HAS TO HAND OVER THE SAID INCRIMINATING MATERIAL BELONGING TO SOME PERSON OTHER THAN THE SEARCHED PERSON TO THE ASSESSING OFFICER HAVING JURISDICTION OVER THE SAID OTHER PERSON; C. THEN THE ASSESSING OFFICER HAVING JURISDICTION OVER THE PERSON OTHER THAN THE SEARCHED PERSON SHALL ISSUE A NOTICE U/S. 153C TO SUCH OTHER PERSON AND ASSESS HIS INCOME AND IF THE ASSESSING OFFICER HAS JURISDICTION OVER THE SEARCHED PERSON AND OTHER THAN SEARCHED PERSON AS WELL THEN HE SHALL ISSUED THE NOTICE U/S. 153C AFTER RECORDING A SATISFACTION ON THE MATTER STATED IN PARA-A ABOVE. 6. IT WAS FURTHER CONTENDED THAT THE PROVISIONS O F SEC. 153C ARE IDENTICAL WITH THE PROVISIONS OF SEC . 158BD WHICH READ AS UNDER:- WHERE THE ASSESSING OFFICER IS SATISFIED THAT A NY UNDISCLOSED INCOME BELONGS TO ANY PERSON OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132 OR WHOSE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS WERE REQUISITIONED UNDER SECTION 132A THEN THE BOOKS OF ACCOUNT OTHER DOCUMENTS OR ASSETS SEIZED OR 6 REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED [UNDER SECTION 158BC] AGAINST SUCH OTHER PERSON AND THE PROVISIONS OF THIS CHAPTER SHALL APPLY ACCORDINGLY . 7. LD. AR FURTHER SUBMITTED BEFORE THE CIT(A) THAT THE PROVISIONS OF SEC.158BD PROVIDE THAT THE ASSESSING OFFICER MAKING THE ASSESSMENT OF THE SEARCHED PERSO N HAS TO SATISFY HIMSELF THAT SOME UNDISCLOSED INCOME FOUND BY HIM BELONGS TO SOME PERSON OTHER THAN THE SEARCHED PERSON AND THEN HE OR THE ASSESSING OFFICE R HAVING JURISDICTION OVER SUCH OTHER PERSON (ON REC EIPT OF RECORD FROM THE ASSESSING OFFICER OF THE SEARCHED P ERSON) HAS TO ISSUE THE NOTICE U/S. 158BD AND HAS TO ASSE SS THE UNDISCLOSED INCOME OF SUCH OTHER PERSON. THE PROVISIONS OF SEC. 158BD WERE MINUTELY EXAMINED BY THE HONOURABLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI VS ITAT AS REPORTED ON (2007) 208 CTR 97 S.C. THE COPY OF THE SAID DECISION WAS ALSO PLACED ON RECORD. THE SAID APEX COURT DECISION IS FOLLOWED I N THE SAME SPIRIT BY DELHI COURT IN THE CASE OF NEW DELHI AUTO FINANCE (P) LTD VS CIT AS REPORTED ON (2008) 300 I TR 83 DELHI. AS PER LD. AR IT MAY BE SEEN THAT THE APEX COURT 7 HAS LAID OWN THAT THE ASSESSING OFFICER MAKING THE ASSESSMENT OF THE SEARCHED PERSON HAS TO RECORD I N WRITING THE SPECIFIC OBJECTIVE SATISFACTION (AND IT IS MANDATORY) THAT THE UNDISCLOSED INCOME FOUND BY HIM ON THE BASIS OF SEIZED MATERIAL BELONGS TO SOME P ERSON OTHER THAN THE SEARCHED PERSON. SINCE THE PROVISIO NS OF SEC. 153C ARE PARA MATERIA WITH THE PROVISIONS OF SEC. 158BD WITH REGARD TO REQUIREMENT OF SATISFACTIO N THE LAW LAID DOWN BY THE S.C. IN THE CASE OF MANISH MAHESHWARI SHALL APPLY WITH FULL FORCE TO THE CASE OF THE INITIATION OF PROCEEDINGS U/S. 153C. FURTHER CONTE NTION OF LD. AR WAS THAT THE WORD SATISFIED ALSO APPEAR S IN THE PROVISION RELATING LEVY OF PENALTY U/S. 271(1) . HERE ALSO THE HONOURABLE SUPREME COURT AS EARLY AS IN THE YEAR 1962 DECIDED IN THE CASE OF CIT VS S.G . ANG IDI CHETTIER AS REPORTED ON (1962) 44 ITR 739 AND LA TER ON IN THE YEAR1972 IN THE CASE OF D.M. MANSARI VS CIT AS REPORTED ON (1972) 86 ITR 557 THAT THERE SHOULD B E PROPER APPLICATION OF MIND AND RECORDING OF SATISFACTION BEFORE INITIATION OF PENALTY PROCEEDIN GS AND THIS DECISION IS CONSISTENTLY FOLLOWED BY THE COURT S AS EVIDENT FROM DELHI HIGH COURT DECISION IN THE CASE OF 8 BHAWANT FINANCE CO. LTD VS CIT AS REPORTED ON (200 6) 280 ITR 412 DELHI . NOW TO OVERCOME THE ABOVE SAI D SETTLED LEGAL POSITION THE INCOME TAX ACT HAS BEEN AMENDED BY FRESH PROVISIONS AS SEC. 271(1)(1B) THR OUGH THE FINANCE ACT 2008 WHICH IS INTENDED TO PROVI DE THAT THE RECORDING OF DIRECTION TO INITIATE THE PE NALTY PROCEEDINGS SHALL BE DEEMED TO CONSTITUTE THE SATISFACTION OF THE ASSESSING OFFICER. NEVERTHELESS SATISFACTION IS MANDATORY. 8. AS PER LD. AR IN VIEW OF ABOVE DISCUSSION IT IS QUITE EVIDENT THAT RECORDING OF SATISFACTION BEFORE ISSU E OF NOTICE U/S. 153C IS MANDATORY AND NO SUCH SATISFAC TION HAS BEEN SAID TO HAVE BEEN RECORDED BY THE ASSESSI NG OFFICER IN THE CASE OF ANY SEARCHED PERSONS THAT TH ERE IS SOME INCRIMINATING MATERIAL AND ITS BELONGS TO THE ASSESSEE. INFACT THE PERUSAL OF THE ASSESSMENT ORD ER WILL CLEARLY REFLECT THAT NO INCRIMINATING MATERIAL WORTH THE NAME BELONGING TO THE ASSESSEE WAS FOUND DURIN G THE COURSE OF SEARCH. IN THE OPENING PARAGRAPH OF THE ASSESSMENT ORDER THE LD. ASSESSING OFFICER HAS OBS ERVED THAT DURING THE COURSE OF SEARCH (AT THE RESIDENCE OF SHRI MAHESH AGARWAL) THE INCRIMINATING MATERIAL 9 RELATING TO THE ASSESSEE I.E. FDRS IN THE NAME OF CHIRCHIND HYDRO POWER WERE FOUND . ON PERUSAL OF TH E PANCHNAMA IN THE CASE OF MAHESH AGRAWAL WHO IS A DIRECTOR OF THE COMPANY AND AGAINST WHOM THE SEARCH PROCEEDINGS WERE CONDUCTED IT MAY BE SEEN THAT N O SUCH FDR WAS SEIZED. EVEN IF OTHERWISE HELD THERE WAS AN FDR OF RS. 25 00 000/- WHICH WAS MADE FROM THE BANK A/C OF THE ASSESSEE FROM THE CENTURION BANK A FTER OBTAINING THE LOAN FROM M/S. GWALIOR TANK & VESSELS (IN SHORT GTV). AS EVIDENT FROM THE COPY OF THE BANK A/C AND THE COPY OF A/C OF THE ASSESSEE IN THE BOOKS O F M/S. GTV. 9. ON THE ABOVE FACTS AS PER LD. AR IT MAY BE SEEN THAT THERE WAS NO INCRIMINATING MATERIAL BELON GING TO THE ASSESSEE WHICH WAS FOUND DURING THE COURSE OF SEARCH AT THE PREMISES OF THE DIRECTORS WHICH SA TISFIED OR COULD HAVE SATISFIED THE ASSESSING OFFICER OR AN Y PRUDENT COMMON MAN THAT THE SAID MATERIAL IS INCRIMINATING AND THAT IT BELONGS TO THE ASSESSE E AND THAT IT REFLECTS THE ESCAPED INCOME OF THE ASSESSE E . THE APEX COURT IN THE DECISION CITED SUPRA HAS LAI D DOWN THAT THE SEARCHED PERSON HAS TO BE CONFRONTED 10 WITH THE SEIZED MATERIAL AND WHEN THE SEARCHED PE RSON DENIES THAT THE SEIZED MATERIAL BELONGS TO HIM THEN OPPORTUNITY HAS TO BE GIVEN TO THE OTHER PERSON AND THE ASSESSING OFFICER HAS TO SATISFY THAT THE SEIZED MA TERIAL BELONGS TO SOME PARTICULAR PERSON OTHER THAN THE SEARCHED PERSON AND HE HAS TO RECORD HIS SATISFACTI ON BEFORE PROCEEDINGS U/S. 153C AGAINST SUCH OTHER PERSON. AS PER LEARNED AR NO SATISFACTION HAS BEEN RECORDED BEFORE INITIATION OF THE PROCEEDINGS AND E VEN THE PERUSAL OF THE ASSESSMENT ORDER DOES NOT GIVE A NY INKLING ABOUT ANY SUCH INCRIMINATING DOCUMENTS BELONGING TO THE ASSESSEE FOUND DURING THE COURSE O F SEARCH AT THE PREMISES OF THE DIRECTORS. THE ORDER OF CIT(A) JABALPUR IN THE CASE OF THE FIRM HOTEL SO NAM AND SMART BAR SAGAR IN APPEAL NO. J/CIT(A)- 1/ACIT/SAGAR/ 116 TO 122/ 06-07 WAS ALSO PLACED BEFORE HIM. THE FACTS OF THE SAID CASE ARE IDENTICA L WITH THE ASSESSEE THAT THERE WAS A SEARCH AGAINST ITS PARTNERS AND THERE WAS SURVEY AGAINST THE FIRM EXCE PT THAT IN THE SAID CASE THE ASSESSING OFFICER HAD RE CORDED A SATISFACTION WITHOUT APPLICATION OF MIND WHICH H AD NO 11 BASIS. THE OPERATING PARA-6.1 OF THE SAID ORDER REA DS AS UNDER:- I HAVE CAREFULLY CONSIDERED THE FACTS ON RECORD AND THE SUBMISSIONS MADE BY THE RIVAL PARTIES. FIRST OF ALL IT IS NOTED THAT THE SECTION 153C EFFECTS THE SUBSTANTIVE RIGHTS OF A PERSON IN SO FAR AS A PERSON WHO HAS NOT BEEN SEARCHED IS MADE TO FACE THE HARSH CONSEQUENCES OF REOPENING OF SIX YEARS CASES. THIS SECTION THUS CAN NOT BE GIVEN A LIBERAL INTERPRETATION SINCE IF IT IS SO DONE THEN THE PROCEEDINGS UNDER THIS SECTION CAN BE INITIATED AGAINST A PERSON- NOT-SEARCHED MERELY ON THE GROUND THAT SOME ACCOUNT OR EVEN A BANK STATEMENT OF THE PERSON HAS BEEN FOUND IN A SEARCH ACTION. IF IN SUCH A CASE INVOKING OF SECTION 153C IS HELD TO BE JUSTIFIED THEN THIS SECTION CAN BECOME A READY TOOL FOR REOPENING SIX YEAR CASES ON ANY PRETEXT OF A PERSON WHO HAD SOME DEALING WITH THE PERSON-SEARCHED. THE LD. A. R. HAS ARGUED THAT BEFORE INVOKING SECTION 153C THERE HAS TO BE SOME MATERIAL ON RECORD TO COME OUT OF THE PRESUMPTION OF SEC. 292C AND WHICH IS POSSIBLE ONLY AFTER CONFRONTING THE IMPUGNED MATERIAL TO THE PERSON-SEARCHED. BUT NO SUCH FINDING OF PRESUMPTION NOT BEING APPLICABLE HAS BEEN GIVEN BEFORE INVOKING SECTION 153C. I FIND SOME MERIT IN THIS CLAIM. FURTHER I ALSO FIND THAT THE SATISFACTIONS RECORDED IN MARCH 2006 FOR ALL THE SEVEN YEARS WERE WITHOUT APPLICATION OF MIND AS IS EVIDENT FROM THE FACT THAT IN ALL THE OTHER 12 CASES INVOLVING ABOUT 40 ASSESSMENTS THE ASSESSING OFFICER HAS RECORDED IDENTICAL STEREO TYPE SATISFACTIONS BY STATING THAT DURING SEARCH ACTIONS CARRIED OUT IN DECEMBER 2003 IN THE CASES OF SANTOSH KUMAR SAHU AND OTHERS INCRIMINATING DOCUMENTS PERTAINING TO EACH 12 OF THE YEARS WERE FOUND AND SEIZED WHEREAS THE FACT IS THAT IN SOME OF THE YEARS OF SOME OF THOSE CONCERNS WERE NOT IN EXISTENCE. HOWEVER THESE FACTS BY THEMSELVES COULD NOT BE REGARDED TO BE A SUFFICIENT GROUND TO HOLD THE INVOKING OF SECTION 153C WAS ILLEGAL. IT IS BECAUSE OF THE REASON THAT ON A PLAIN READING OF SEC. 153C IT DOES NOT TRANSPIRE THAT RECORDING OF A SATISFACTION IS A MUST. BUT AT THE SAME TIME IT IS ALSO TO HOLD THAT IT DOES NOT MEAN THAT REQUIRED SATISFACTION COULD BE HIGHLY SUBJECTIVE NOT OPEN TO SCRUTINY BY THE APPELLATE AUTHORITIES. THE MINIMUM REQUIREMENT TO JUSTIFY THE INVOKING OF SEC. 153C IS THAT AT LEAST IT SHOULD BE POSSIBLE TO GATHER A SATISFACTION- THERE SHOULD BE SOME SEIZED RECORD PERTAINING TO THE ASSESSEE WHICH HAD BEEN FOUND IN A SEARCH ACTION. FURTHER THE SAME SHOULD HAVE ALSO BEEN CONFRONTED TO THE ASSESSEE. BUT DURING THE ASSESSMENT PROCEEDINGS NO SEIZED RECORD PERTAINING TO THE ASSESSEE WAS CONFRONTED TO HIM. WHAT WAS CONFRONTED WERE THE DOCUMENTS IMPOUNDED DURING THE SURVEY ACTION CONDUCTED AT ITS OFFICE. IN VIEW OF THESE FACTS IT IS HELD THAT THE INVOKING OF SECTION 153C AGAINST THE ASSESSEE WAS BAD IN LAW. THE PROCEEDINGS SO INITIATED THEREFORE IS HELD TO BE VOID AB-INITIO AND ALL THE ASSESSMENTS THEREFORE ARE DECLARED AB- INITIO NULL & VOID. 10. AS PER LD. AR THERE IS ABSOLUTELY NO INCRIMINA TING MATERIAL BELONGING TO THE ASSESSEE FOUND DURING THE COURSE OF SEARCH AT THE PREMISES OF THE SEARCHED P ERSON AND THERE IS NO SATISFACTION OR EVEN THE BASIS FOR SATISFACTION TO ISSUE A NOTICE U/S. 153C AND NO 13 SATISFACTION IS RECORDED BY THE ASSESSING OFFICER BEFORE THE ISSUE OF NOTICE U/S. 153C AND THEREFORE THE NO TICE ISSUED U/S.153C IS ILLEGAL INVALID AND UNTENABLE- IN LAW AND THEREFORE IT IS REQUESTED THAT THE ASSESSM ENT MADE ON THE BASIS OF SUCH ILLEGAL NOTICE BE KINDL Y QUASHED. 11. FURTHER SUBMISSION OF ASSESSEE BEFORE THE CIT(A ) WAS THAT THE ASSESSEE FILED THE RETURN INCOMPLIANCE TO NOTICE U/S. 153C ON 01-06-2006 . HOWEVER THE LD. ASSESSING OFFICER ISSUED A FORMAL NOTICE U/S. 143(2 ) EARLIER ON 13-06-2006 BUT DID NOT TAKE ANY ACTION F OR ABOUT A YEAR. HOWEVER WHEN HE ISSUED A SECOND NOT ICE U/S. 143(2) ALONGWITH QUESTIONNAIRE ON 31-08-2007 THE ASSESSEE FILED THE DETAILED REPLY WITH NECESSARY ANNEXURE TO ALL THE QUESTIONS AS APPEARING IN THE QUESTIONNAIRE AND THE LD. ASSESSING OFFICER DID NOT RAISE ANY FURTHER QUERIES AT ANY POINT OF TIME DURING TH E ASSESSMENT PROCEEDINGS. THE LD. ASSESSING OFFICER H AS MADE A MENTION ABOUT FILING OF THE DELAYED RETURNS BY SOME OTHER PERSONS OF THE GROUP. BUT IT HAS NO CONC ERN WITH THE ASSESSEE .THE LD. ASSESSING OFFICER ALSO OBSERVED THAT THE BALANCE SHEET FOR ASSESSMENT YEA R 14 01-02 TO 2005-06 WERE NOT FILED BY THE ASSESSEE AL ONG WITH THE RETURN. HOWEVER HE INTENTIONALLY OMITTED TO MENTION THAT ALL THE BALANCE SHEET WERE FILED DURI NG THE ASSESSMENT PROCEEDINGS AND THEY WERE ALREADY ON RECORD WITH THE RETURNS FILED U/S. 139(1) . IT WILL ALSO BE WORTH WHILE TO SEE THAT ALL THE ADDITIONS IN ALL TH E ASSESSMENT YEARS HAVE BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE BALANCE SHEET AVAILABLE BEFORE HIM. HOWEVER THE LD. ASSESSING OFFICER MADE THE ADDITIONS WITHOUT GIVING ANY OPPORTUNITY AND WITHOU T INVITING ANY OBJECTIONS FROM THE ASSESSEE. THE ORDE R HAS BEEN PASSED BY THE ASSESSING OFFICER WITHOUT PROVID ING ADEQUATE OPPORTUNITY TO THE ASSESSEE AND IS AGAINS T THE PRINCIPLES OF NATURAL JUSTICE. IT WAS REQUESTED TO THE CIT(A) THAT THE ORDER PASSED U/S. 153C/143(3) BE KINDLY HELD AS ILLEGAL AND THE SAME BE KINDLY QUASH ED. 12. WITH REGARD TO THE MERIT OF THE ADDITION IT WAS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT LD. ASSESSING OFFICER FOUND THAT THERE IS RECEIPT OF S HARE APPLICATION MONEY OF RS. 1 10 000/- . HE OBSERVED THAT THIS SHARE APPLICATION MONEY IS UNEXPLAINABLE AND 15 THEREFORE HE MADE THE ADDITION OF RS. 1 10 000/- U /S. 68 OF THE IT ACT. 13. IN THIS CONNECTION IT WAS SUBMITTED THAT THE S HARE CAPITAL HAS BEEN CONTRIBUTED BY THE TWO DIRECTORS OF THE COMPANY WHO WERE REGULAR INCOME TAX ASSESSEES WIT H SPECIFIC PANO AS UNDER:- NAME PANO. ADDRESS SHARE APPLICATION MONEY CONTRIBUTED SHRI RAMESH REDDY ADQPM5781D PLOT NO. 28C NEW M.L.A COLONY BANJARA HILLS HYDRABAD. RS. 45 000.00 SHRI KESHAV REDDY AFYPM4987M PLOT NO. 28C NEW M.L.A COLONY BANJARA HILLS HYDRABAD. RS.65 000.00 ========= RS.1 10 000/ - ========== 14. IN SUPPORT OF THE SAME THE COPY OF THE CONFIRMATION LETTER OF THE ABOVE SAID SHARE HOLDERS WERE ALSO ENCLOSED. ON THE FACTS BOTH OF THESE PERSONS ARE INCOME TAX ASSESSEES AND HAVE ACCEPTED TO HAVE 16 CONTRIBUTED THE SHARE APPLICATION MONEY.THE HONOURABLE SUPREME COURT IN THE CASE OF CIT VS STE LLER INVESTMENT LTD AS REPORTED ON 251 ITR 263 S.C. HAVE HELD THAT WHERE THE INCOME TAX DEPARTMENT ACCEPTS THE CONTRIBUTION OF SHARE CAPITAL NO ADDITION SHOULD BE MADE IN THE HANDS OF THE COMPANY. RECENTLY THE S. C HAS REAFFIRMED THE ABOVE SAID PRINCIPLES BY MAKING THE STRONG OBSERVATIONS THAT EVEN IF THERE ARE THE BOGU S SHARE HOLDERS NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY. THIS PRINCIPLES HAS BEEN LAID DOWN BY THE S.C. IN THE CASE OF CIT VS LOVELY EXPORT (P) LTD. A S REPORTED ON (2008) 216 CTR S.C. 195. IN VIEW OF THE ABOVE IT WAS SUBMITTED BEFORE THE CIT(A) THAT THE SHARE APPLICATION MONEY AT RS.1 10 000/- BE ACCEPTED AND THE ADDITION MADE TOWARDS THE SAME BE DELETED. 15. IN THE ASSESSMENT YEAR 2003-04 SIMILAR CONTENTIONS WERE MADE BY LD. AR WITH REGARD TO THE LEGAL ISSUE. IN RESPECT OF MERIT OF THE ADDITION IT WAS SUBMITTED THAT THE LD. ASSESSING OFFICER OBSERVED T HAT THERE ARE NO DETAILS OF SHARE CAPITAL AT RS. 11 3 0 000/- AND SHARE APPLICATION MONEY AT RS. 36 90 000/- AND THEREFORE HE TREATED ALL THE SHARE CAPITAL AND SHA RE 17 APPLICATION MONEY AS THE UNDISCLOSED INCOME OF THE ASSESSEE U/S. 68 OF THE IT ACT AND ACCORDINGLY MA DE THE ADDITION OF RS. 11 30 000/- AND RS. 36 90 000/ - TOWARDS THE SAME. 16. IN THIS CONNECTION SUBMISSIONS WERE AS UNDER:- A. SHARE CAPITAL THE SHARES HAVE BEEN ALLOTTED TO THE PERSONS AS DETAILED BELOW:- NAME PANO. ADDRESS SHARE CAPITAL CONTRIBUTED DLF IND. (P) LTD 1 - E JHADEWALA EXTN NEW DELHI RS.6 20 000 /- SHRI M. RAMESH REDDY ADQPM578 9D PLOT NO. 28C NEW M.L.A COLONY BANJARA HILLS HYDRABAD. RS. 2 00 000/- BY CHEQUE SMT. M. SRIVARA AJFPM 7881D - DO - RS. 2 00 000/- BY CHEQ. SHRI G. BALAIAH - 5 - 143 SHABOONAGAR MIRYALGUDA NALGONDA A.P RS.40 000/ - BY CASH SHRI T. - SAGAR RS. 18 MADHAN ROAD MIRYALGU DA NALGONDA A.P. 40 000/ - BY CASH SHRI MADDI MADHUSUD AN REDDY - RAMAGIRI NALGONDA NALGONDA A.P. RS. 30 000/- BY CASH ========== == RS. 11 30 000/- ========== == IN SUPPORT OF THE SAME THE COPIES OF SHARE ALLOTME NT CERTIFICATES AND THE COPY OF BANK PASSBOOK WERE ENCLOSED. A. SHARE APPLICATION NAME PANO. ADDRESS SHARE APPLICATION MONEY CONTRIBUTED MR.S. RAMKRISHNA REDDY ARKPS1310E PLOT NO. 28C NEW M.L.A COLONY BANJARA HILLS HYDRABAD. RS. 30 00 000/- BY CHEQ. SMT. M. SRIVARA AJFPM 7881D - DO - RS. 5 00 000/- BY CHEQ. SMT. M.RAJITHA REDDY AFJPM9642N - DO - RS. 55 000/ - BY CASH 19 SMT. M.LAKSHMI REDDY - - DO - RS. 40 000/ - BY CASH MR. M. ARJUN REDDY AJSPM0907B - DO - RS.40 000/ - BY CASH N. BHUPAL REDDY - - DO - RS. 35 000/ - BY CASH N. VRUSHASENA REDDY - - DO - RS. 20 000/ - BY CASH =========== RS. 36 90 000/- ============ 17. IN SUPPORT OF THE SAME THE COPY OF THE CONFIRMATION LETTER AND BANK PASS BOOK OF THE ABOVE SAID SHARE HOLDERS WERE ENCLOSED. IT WAS PLEADED TH AT ALL OF THESE PERSONS ARE INCOME TAX ASSESSES OR AGRICULTURIST AND HAVE ACCEPTED TO HAVE CONTRIBUTED THE SHARE APPLICATION MONEY. THE HONOURABLE SUPREME COURT IN THE CASE OF CIT VS STELLER INVESTMENT LT D AS REPORTED ON 251 ITR 263 S.C. HAVE HELD THAT WHERE T HE INCOME TAX DEPARTMENT ACCEPTS THE CONTRIBUTION OF SHARE CAPITAL NO ADDITION SHOULD BE MADE IN THE H ANDS OF THE COMPANY. RECENTLY THE S.C HAS REAFFIRMED TH E ABOVE SAID PRINCIPLES BY MAKING THE STRONG OBSERVAT IONS 20 THAT EVEN IF THERE ARE THE BOGUS SHARE HOLDERS NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY. THIS PRINCIPLES HAS BEEN LAID DOWN BY THE S.C. IN T HE CASE OF CIT VS LOVELY EXPORT (P) LTD. AS REPORTED O N (2008) 216 CTR S.C. 195. IN VIEW OF THE ABOVE THE SHARE CAPITAL MONEY AT RS. 11 30 000/- AND SHARE APPLICAT ION MONEY AT RS.36 90 000/-( TOTALING TO RS. 48 20 000 /-) BE KINDLY ACCEPTED AND THE ADDITION MADE TOWARDS TH E SAME BE KINDLY REMOVED. 18. IN THE ASSESSMENT YEAR 2004-05 THE LD. ASSESSIN G OFFICER FOUND THAT THERE IS THE RECEIPT OF SHARE APPLICATION MONEY OF RS. 2 50 000/- . HE OBSERVED THAT THIS SHARE APPLICATION MONEY IS UNEXPLAINABLE AND THEREFORE HE MADE THE ADDITION OF RS. 2 50 000/- U /S. 68 OF THE IT ACT. BEFORE THE LD. COMMISSIONER OF IN COME TAX (APPEAL) IT WAS SUBMITTED THAT THE SHARE CAPIT AL HAS BEEN CONTRIBUTED BY THE FOUR DIRECTORS OF THE CO MPANY WHO WERE REGULAR INCOME TAX ASSESSEES WITH SPECIF IC PANS AS UNDER:- 21 NAME PANO. ADDRESS SHARE APPLICATION MONEY CONTRIBUTED SHRI M. RAMESH REDDY ADQPM5789D PLOT NO. 28C NEW M.L.A COLONY BANJARA HILLS HYDRABAD. RS. 1 00 000/- BY CHEQUE N. BHUPAL REDDY - - DO - RS.60 000/ - BY CASH N. VRUSHASENA REDDY - - DO - RS. 50 000/- BY CASH M. JAIPAL REDDY - - DO - RS.40 000/ - BY CASH ========== RS. 2 50 000/- ========== 19. IN SUPPORT OF THE SAME THE COPY OF THE CONFIRMATION LETTER AND COPY OF BANK PASS BOOK OF T HE ABOVE SAID SHARE HOLDERS WERE ALSO ENCLOSED. ON THE FACTS ALL OF THESE PERSONS ARE INCOME TAX ASSESSEE S OR AGRICULTURIST AND HAVE ACCEPTED TO HAVE CONTRIBUTED THE SHARE APPLICATION MONEY. THE HONOURABLE SUPREME COURT IN THE CASE OF CIT VS STELLER INVESTMENT LT D AS REPORTED ON 251 ITR 263 S.C. HAVE HELD THAT WHERE T HE 22 INCOME TAX ASSESSEE ACCEPTS THE CONTRIBUTION OF S HARE CAPITAL NO ADDITION SHOULD BE MADE IN THE HANDS O F THE COMPANY. RECENTLY THE S.C HAS REAFFIRMED THE ABOVE SAID PRINCIPLES BY MAKING THE STRONG OBSERVATIONS T HAT EVEN IF THERE ARE THE BOGUS SHARE HOLDERS NO ADDITI ON CAN BE MADE IN THE HANDS OF THE COMPANY. THIS PRINCIPLES HAS BEEN LAID DOWN BY THE S.C. IN THE CA SE OF CIT VS LOVELY EXPORT (P) LTD. AS REPORTED ON (2008) 216 CTR S.C. 195. IN VIEW OF THE ABOVE THE SHARE APPLICATION MONEY AT RS.2 50 000/- BE KINDLY ACCEP TED AND THE ADDITION MADE TOWARDS THE SAME BE KINDLY REMOVED. 20. IN THE ASSESSMENT YEAR 2005-06 THE LD. ASSESSIN G OFFICER FOUND FROM THE BALANCE SHEET THAT THE ASSES SEE HAD PAID THE AMOUNT OF RS. 28 00 000/- TO THE LAN D LORD TOWARDS PURCHASE OF LAND IN THE ASSESSMENT YE AR 2003-04 WHICH HAS BEEN RECEIVED BACK IN THE PRESE NT ASSESSMENT YEAR 2005-06. HE ASSUMED THAT WHEN THE ASSESSEE RETURN THE LAND AND RECEIVED BACK THE ADVANCE HE MUST HAVE RECEIVED SOME PREMIUM . HE ESTIMATED THE SALE CONSIDERATION OF THE LAND AT RS . 1 CRORE AND SINCE 28 00 000/- WERE PAID BY THE ASSESS EE 23 HE ASSUMED THAT THE ASSESSEE MUST HAVE EARNED THE PREMIUM OF RS. 72 00 000/- . THE LD. ASSESSING OF FICER TREATED THIS AMOUNT OF RS. 72 00 000/- AS THE SHORT TERM CAPITAL GAIN AND ACCORDINGLY MADE ADDITION OF RS. 72 00 000/- IN THE HANDS OF THE ASSESSEE. BEFOR E THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IT WAS SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS N O SUCH A QUESTION WAS RAISED AND THEREFORE THE ASSES SEE DID NOT FILE ANY EXPLANATION .IT WAS SUBMITTED THAT THE ASSESSEE COMPANY WANTED TO ESTABLISH THE HYDRO POW ER STATION NEAR THE VILLAGE LUNA TAH. BHARMOUR DIS TT. CHAMBA H.P HAVING A STREAM NEARBY .THE ASSESSE E COMPANY APPROACHED THE GRAM PRADHAN ( HEAD OF THE VILLAGE ) TO PURCHASE THE LAND IN THE VILLAGE AND ADVANCED THE AMOUNT OF RS. 28 00 000/- TO HIM. ON T HE LEFT BANK OF STREAM AS THERE WAS THE PRIVATE LA ND ON THE SAID SIDE AND THERE WAS THE FOREST LAND ON TH E RIGHT BANK. THE LAND POSITION FOR THE FOREST LAND WAS CONSIDERED DIFFICULT AND TIME CONSUMING AND AS COMPARED TO THE SAME THE LAND ACQUISITION FROM PRI VATE PARTIES WAS EASY BUT THE THING TURNED OTHERWISE. DESPITE MAKING THE PAYMENT OF RS. 28 00 000/- TO TH E 24 GRAM PRADHAN THE ASSESSEE INITIATED THE PROCEEDIN GS FOR THE ACQUISITION OF FOREST LAND .THE GRAM PRADHA N MADE THE SINCERE EFFORTS TO PURCHASE THE LAND FOR THE ASSESSEE BUT THE NECESSARY LAND AT THE REQUIRED PLACE COULD NOT BE PURCHASED EVEN AFTER A LONG PERIOD OF TWO YEARS AND HE EXPRESSED INABILITY TO PROCURE THE L AND FOR THE ASSESSEE . IN THE MEAN TIME THE ASSESSEE WAS ASSURED OF THE FOREST LAND BY THE GOVT AND THEREF ORE THE ASSESSEE RECEIVED BACK THE ADVANCE GIVEN TO TH E GRAM PRADHAN AT RS. 28 00 000/- AND GOT THE LAND F ROM FOREST DEPTT. OF HIMACHAL PRADESH AT THE VALUATION OF RS. 38 62 476/- IN MARCH 2006 AND ACCORDINGLY THE PROJECT OF THE ASSESSEE COMPANY IS COMING UP ON TH E RIGHT SIDE OF THE STREAM IN THE FOREST LANDS . ON T HE ABOVE FACTS IT MAY BE SEEN THAT NEITHER THE ASSES SEE PURCHASED ANY LAND NOR SOLD IT AND THEREFORE THER E IS NO QUESTION OF ANY PREMIUM EARNED OF RS. 72 00 000 /- . WITHOUT PREJUDICE TO THE ABOVE IT WAS SUBMITTED THAT THERE IS NO EVIDENCE THAT THE ASSESSEE EARNED ANY PREMIUM. IT WAS PLEADED BEFORE THE CIT(A) THAT ONLY THE PROFIT WHICH HAS REALLY BEEN EARNED CAN BE TAXED. CERTAINLY THE PROFIT WHICH COULD HAVE BEEN EARN ED BUT 25 HAVE NOT BEEN EARNED CAN NOT BE TREATED AS INCOME A ND CAN NOT BE BROUGHT TO TAX. IN THIS CONNECTION THE ASSESSEE RELIES UPON THE SUPREME COURT DECISION THE IN THE CASE OF CIT VS A. RAMAN & CO. REPORTED AT 67 I TR 11 S.C. A PLEA WAS ALSO RAISED THAT UNLESS THERE IS SOME EVIDENCE TO PROVE THAT SOME PREMIUM HOWSOEV ER SMALL HAS BEEN GIVEN THE PREMIUM CAN NOT BE ESTIMATED FOR THE PURPOSES OF WORKING OF THE CAPIT AL GAIN EVEN WHEN SECTION 52 WAS ON THE STATUE BOOK T ILL 01-04-88. IN THIS CONNECTION THE LD. COUNSEL ALSO PLACED ON RECORD THE DECISION OF THE SUPREME COURT IN THE CASE OF K.P. VARGHEES VS CIT REPORTED ON 131 ITR 597 ( SC). 21. IN VIEW OF THE ABOVE IT WAS PLEADED THAT TH ERE IS NO JUSTIFICATION TO ESTIMATE THE SHORT TERM CAPITAL GAIN AT RS. 72 00 000/- AND TO MAKE THE ADDITION TOWARDS T HE SAME. 22. IN THE ASSESSMENT YEAR 2006-07 LD. ASSESSING OFFICER FOUND FROM THE BALANCE SHEET THAT THE SHA RE APPLICATION MONEY HAS INCREASED FROM 15 70 000/- TO RS. 58 55 356/- DURING THE ACCOUNTING YEAR AND THAT THERE WAS THE INCREASE OF RS. 42 85 356/- . HE TREA TED THE DIFFERENCE AS UNEXPLAINED SHARE APPLICATION MON EY 26 AND ACCORDINGLY MADE THE ADDITION OF RS. 42 85 356 /- IN THE HANDS OF THE ASSESSEE. IN THIS CONNECTION IT WAS BROUGHT TO THE NOTICE OF LD. COMMISSIONER OF INCOME TAX (APPEAL) THAT THE COPY OF ACCOUNT OF THE SHARE APPLICATION MONEY AS WELL AS COPY OF ACCOUNT OF M/ S GWALIOR TANKS AND VESSELS LTD( IN SHORT GTV) WAS AVAILABLE IN THE BOOKS OF CHIRCHIND HYDRO POWER LT D WAS ALREADY BEFORE THE ASSESSING OFFICER WHICH IND ICATED THAT THE SHARE APPLICATION MONEY OF THE EARLIER MEMBERS OF THE MANAGEMENT AT RS. 4 70 000/- WERE RETURNED TO THEM THROUGH CHEQUE. IT ALSO REFLECTED THAT GTV ISSUED A CHEQUE FOR RS. 4 25 000/- FOR THE SHA RE APPLICATION MONEY .THE COPY OF A/C ALSO INDICATES T HAT M/S. GTV LTD INCURRED THE EXPENDITURE OF RS.43 30 356 ON BEHALF OF THE CHIRCHIND HYDRO POWE R LTD. AND THE SAID AMOUNT WAS TRANSFERRED TOWARDS T HE SHARE APPLICATION MONEY AND THEREFORE THE SHARE APPLICATION MONEY WENT UP FROM RS. 15 70 000/- T O RS. 58 55 356/- DURING THE ACCOUNTING YEAR. FROM T HE ABOVE FACTS IT IS QUITE CLEAR THAT ALL THE ADDITIO NS IN THE A/C OF SHARE APPLICATION MONEY WAS FROM GTV WHIC H NOT ONLY BEING ASSESSED TO THE INCOME TAX BUT WAS 27 BEING ASSESSED U/S. 153C AT THE RELEVANT TIME BY THE SAME ASSESSING OFFICER. IT WILL NOT BE OUT OF PLAC E TO MENTION THAT THE LD. ASSESSING OFFICER MADE A MEN TION ABOUT THE PURCHASE OF FDR FOR RS. 25 00 000/- FROM THE ACCOUNT OF GTV LTD IN THE BOOKS OF CHIRCHIND H YDRO POWER LTD. ON THE THESE FACTS IT IS QUITE EVIDENT THAT ALL THE SHARE APPLICATION MONEY AT RS.47 55 356/- HAS BEEN PROVIDED BY M/S. GTV WHO IS THE REGULAR IN COME TAX DEPARTMENT . THE COPY OF A/C OF SHARE APPLICAT ION MONEY AND GTV IN THE BOOKS OF CHIRCHIND HYDRO POWER LTD. AND THE COPY OF A/C OF CHIRCHIND HYDRO POWER LTD IN THE BOOKS OF GTV AND THE CONFIRMATION FROM M/S. GTV WERE SUBMITTED BEFORE THE LOWER AUTHORITIES. FURTHERMORE THE ABOVE SAID COMPANY IS INCOME TAX DEPARTMENT AND HAVE ACCEPTED TO HAVE CONTRIBUTED T HE SHARE APPLICATION MONEY. THE HONOURABLE SUPREME COURT IN THE CASE OF CIT VS STELLER INVESTMENT LT D AS REPORTED ON 251 ITR 263 S.C. HAVE HELD THAT WHERE T HE INCOME TAX DEPARTMENT ACCEPTS THE CONTRIBUTION OF SHARE CAPITAL NO ADDITION SHOULD BE MADE IN THE H ANDS OF THE COMPANY. RECENTLY THE S.C HAS REAFFIRMED TH E ABOVE SAID PRINCIPLES BY MAKING THE STRONG OBSERVAT IONS 28 THAT EVEN IF THERE ARE THE BOGUS SHARE HOLDERS NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY. THIS PRINCIPLES HAS BEEN LAID DOWN BY THE S.C. IN T HE CASE OF CIT VS LOVELY EXPORT (P) LTD. AS REPORTED O N (2008) 216 CTR S.C. 195. IN VIEW OF THE ABOVE THE SHARE APPLICATION MONEY AT RS. 42 85 356/- BE KINDLY ACCEPTED AND THE ADDITION MADE TOWARDS THE SAME BE KINDLY REMOVED. 23. IN CASE OF GWALIOR TANKS AND VESSELS LTD. (IN SHORT GTV) IT WAS SUBMITTED THAT NO SATISFACTION HAS BE EN SAID TO HAVE BEEN RECORDED BY THE ASSESSING OFFICE R IN THE CASE OF ANY SEARCHED PERSONS THAT THERE IS SOME INCRIMINATING MATERIAL AND ITS BELONGS TO THE ASSES SEE. INFACT THE PERUSAL OF THE ASSESSMENT ORDER WILL CL EARLY REFLECT THAT NO INCRIMINATING MATERIAL WORTH THE NAME BELONGING TO THE ASSESSEE WAS FOUND DURING THE COUR SE OF SEARCH. IN THE OPENING PARAGRAPH OF THE ASSESS MENT ORDER THE LD. ASSESSING OFFICER HAS OBSERVED THAT DURING THE COURSE OF SEARCH (AT THE RESIDENCE OF SHRI MAH ESH AGARWAL) THE INCRIMINATING MATERIAL RELATING TO T HE ASSESSEE LPS-1 TO LPS-4 LPS-5 LPS-8 LPS-13 AND LPS-15 WERE SEIZED . ON PERUSAL OF THESE DOCUMENTS IT 29 WILL BE SEEN THAT THEY ARE NOT AT ALL INCRIMINATING AT ALL. THESE SEIZED PAPERS ARE DISCUSSED BELOW:- SEIZED PAPERS P. NO. PARTICULARS OF PAGES LPS - 1 1 - 72 } PURCHASE DEED OF FLATS BY SHRI MAHESH AGRAWAL LPS - 2 1 - 71 } 601 - A - B - C & D DTD. 14 - 07 - 2004. LPS - 3 1 - 71 } LPS - 4 1 - 71 } LPS - 5 1 - 44 MOU FOR WORK BETWEEN GTV & ARUN EXCELLO LPS - 6 1 - 86 COPY OF BALANCE SHEET LPS - 7 1 - 60 DETAILS OF CALCULATION OF BALANCE AND COMMISSION TO BE RECEIVED FROM TECHNO PROMO EXPORT AND COPY OF CORRESPONDENCE LETTERS LPS - 8 1 - 34 CHART AND COPIES OF THE BILLS RAISED BY GTV AGAINST TPE (TECHNO PROMO EXPORT) LPS - 9 1 - 11 COPY OF ACK. RECEIPT IT RETURN OF MRS. VEENA AGRAWAL AND WORKING OF TAX LIABILITY OF MR. GAURAV AGRAWAL. LPS - 10 1 - 51 INTERNAL CORRESPONDENCE PAPERS WITHIN GTV DIVISIONS AND DETAILS OF TDS AND COPY OF COMPLETION CERTIFICATE ISSUED BY NHDC AND LOOSE PAPERS OF BALANCE SHEET OF GTV AS ON 31-03-2005 LPS - 11 1 - 64 COPY OF REGISTRY OF HOUSE PROPERTY OF MR. MAHESH AGRAWAL AND VEENA AGRAWAL LPS - 13 1 - 61 A. 58 - 61 AGENCY AGREEMENT BETWEEN TPE & GTV 30 B. 56 - 7 COPIES OF CHEQUES AND COVERING LETTER FROM GTV CHENNAI & BHOPAL AS INTERNAL CORRESPONDENCE. C. 50 - 55 COPIES OF FORM - 8 & 13 FILED BEFORE R O C. D. 26 - 59 CORRESPONDENCE BETWEEN GTV AND TPF & NHDC REGARDING COMPLETION OF WORK. E. 17 - 25 COPY OF LOAN SANCTION TO OTHER PARTY F. 11 - 16 ROUGH RECONCILIATION PAPERS OF GTV FIGURES APPEARING IN THE BOOKS OF ACCOUNTS. H. 10 ROUGH SHEET SHOWING TAX LIABILITY OF MAHESH AGRAWAL. I. 1 - 9 STATEMENT OF ASSETS LIABILITIES AND MAHESH VEENA AND DINESH AGRAWAL AS ON 27-03-2002. LPS - 14 1 - 61 LIST OF SHARE HOLDERS OF GTV AND LIST OF FORFEITED SHARE OF GTV AND COPY OF BALANCE SHEET OF GTV AS ON 31-03- 2005 LPS - 15 1 - 29 1 - 29 PROPOSAL BETWEEN MAHESH & DINESH AGRAWAL GROUP FOR TRANSFER OF SHARES IN THE COMPANIES AND FIRMS. 24. IT WAS FURTHER CONTENDED BY LD. AR BEFORE THE L D. COMMISSIONER OF INCOME TAX (APPEAL) THAT ON PERUSAL OF ALL THE ASSESSMENT ORDERS IT MAY BE SEEN THAT NO ADDITION ON THE BASIS OF THESE PAPERS WERE MADE ANYWHERE IN THE ASSESSMENT ORDER. ALL THE ADDITIO NS ARE MADE PURELY ON THE BASIS OF CONJECTURES AND 31 SURMISES AND SOME OF THESE CONJECTURES AND SURMISES ARE SOME TIMES REMOTELY CONNECTED WITH SOME MATERI AL FOUND DURING THE COURSE OF SURVEY CONDUCTED AGAINST THE ASSESSEE AND NOT SEARCH CONDUCTED AGAINST ANY PERS ON. ON PERUSAL OF THE ORDER AS PER LEARNED COUNSEL FOR THE ASSESSEE IT MAY BE SEEN THAT THE ASSESSING OFFICE R HAS OBSERVED THAT THERE ARE ALLEGATIONS AGAINST THE ASS ESSEE FIRM THAT THE ASSESSEE WAS EARNING HUGE PROFITS FR OM CONTRACT WORKS FROM YEAR TO YEAR AND THAT THEY ARE DISCLOSING ONLY NOMINAL INCOME BY SUPPRESSING THE PROFIT FROM YEAR TO YEAR BY APPLYING THE FOLLOWING METHODS :- (I). THE COMPANY IS BOOKING BOGUS PURCHASES BY TAKING BILLS OF IRON & STEELS FROM SELECTED DEALER S TO INFLATE THE COST OF PRODUCTIONS. THE PARTY FROM WHICH BILLS ARE RECEIVED ARE HAVING HUGE BALANCES OUTSTANDING FOR SOME TIME AND IN MOST OF THE CASES THEY ARE BEING PAID THROUGH CHEQUES BUT AMOUNTS ARE RECEIVED BACK IN CASH. (II) THE COMPANY IS MAKING BOGUS PAYMENTS TO VARIOUS LABOUR CONTRACTORS AND IS CLAIMING BOGUS FABRICATION CHARGES. THESE CONTRACTORS ARE BEING 32 PAID THROUGH CHEQUE AND THE AMOUNTS ARE RECEIVED BACK IN CASH. (III) BOGUS EXPENSES ARE CLAIMED IN RESPECT OF NON EXISTING FABRICATION CONTRACT FIRMS CREATED IN THE NAMES OF PRESENT AND PAST EMPLOYEES OF THE CONCERN AND MONEY PAID TO THESE FABRICATION UNITS ARE RECEIVED BACK IN CASH FROM THE SAID EMPLOYEES. 25. IT WAS CONTENDED THAT THESE ALLEGATIONS ARE CATEGORICALLY REFUTED AS THEY ARE BASELESS AND WITH OUT ANY SUPPORTING EVIDENCE OR EVEN MATERIAL. 26. THE LD. ASSESSING OFFICER OBSERVED IN THE ASSESSMENT ORDER THAT INCRIMINATING DOCUMENTS SUPPORTING SUCH ALLEGATIONS WERE FOUND DURING THE COURSE OF SEARCH. BUT HERE HE DOES NOT MAKE MENTION OF ANY PARTICULAR DOCUMENTS. THEN THE ASSESSING OFFICER CONCLUDES THAT BOGUS PAYMENTS ARE MADE TO THE MATERIAL SUPPLIERS THE SUB- CONTRACTORS AND CASH IS WITHDRAWN FROM TIME TO TIME FROM THEIR BANK ACCOUNTS AND IS RETURNED TO THE ASSESSEE FIRM. SIMILARLY THE ASSESSING OFFICER OBSERVES THAT THERE ARE BOGUS PURCHASES WITH THE SOLE PURPOSES OF INFLATING THE COSTS. THE LD. 33 ASSESSING OFFICER MAKES THE WILD CHARGES AGAINST THE ASSESSEE BUT DOES NOT MAKE MENTION OF ANY PARTICULAR DOCUMENTS IN THE ASSESSMENT ORDER. THE FACT OF THE MATTER IS THAT THERE ARE NO INCRIMINATI NG DOCUMENTS IN SUPPORT OF THE ALLEGATIONS. THE LD. ASSESSING OFFICER HAS NOT CITED EVEN A SINGLE CASE WHERE IT IS POINTED OUT THAT THE ASSESSEE FIRM HAS COLLECTED CASH FROM THE SUPPLIERS OR FABRICATORS OR HAS SHOWN THE PURCHASES WHICH INFACT HAVE NOT BROUGHT THE MATERIAL TO THE PREMISES OF THE ASSESSEE FIRM. THE LD. ASSESSING OFFICER FIRST MAKE S THE ALLEGATIONS AND THEN ACCEPTS THE SAME AS TRUTH WITHOUT ANY SUPPORTING EVIDENCE AND MAKES HUGE ADDITION ON THE BASIS OF HIS FANCIES CONJECTURES AND SURMISES. ON THESE FACTS IT MAY BE SEEN THAT THERE WAS NO INCRIMINATING MATERIAL BELONGING T O THE ASSESSEE WHICH WAS FOUND DURING THE COURSE OF SEARCH AT THE PREMISES OF THE PARTNERS WHICH SATISFIED OR COULD HAVE SATISFIED THE ASSESSING OFFICER OR ANY PRUDENT COMMON MAN THAT THE SAID MATERIAL IS INCRIMINATING AND THAT IT BELONGS TO THE ASSESSEE AND THAT IT REFLECTS THE ESCAPED 34 INCOME OF THE ASSESSEE . THE APEX COURT IN THE DECISION CITED SUPRA HAS LAID DOWN THAT THE SEARCHED PERSON HAS TO BE CONFRONTED WITH THE SEIZED MATERIAL AND WHEN THE SEARCHED PERSON DENIES THAT THE SEIZED MATERIAL BELONGS TO HIM THEN OPPORTUNITY HAS TO BE GIVEN TO THE OTHER PERSON AND THE ASSESSING OFFICER HAS TO SATISFY THAT THE SEIZED MATERIAL BELONGS TO SOME PARTICULAR PERSON OTHER THAN THE SEARCHED PERSON AND HE HAS TO RECORD HIS SATISFACTION BEFORE PROCEEDINGS U/S. 153C AGAINST SUCH OTHER PERSON. IT WAS CONTENDED THAT NO ANY SATISFACTION HAS BEEN RECORDED BEFORE INITIATION OF THE PROCEEDINGS AND EVEN THE PERUSAL OF THE ASSESSMENT ORDER DOES NOT GIVE ANY INKLING ABOUT ANY SUCH INCRIMINATING DOCUMENTS BELONGING TO THE ASSESSEE FOUND DURING THE COURSE OF SEARCH AT THE PREMISES OF THE PARTNERS. 27. IT WAS SUBMITTED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL) THAT THERE IS ABSOLUTELY NO INCRIMINATING MATERIAL BELONGING TO THE ASSESSEE FO UND DURING THE COURSE OF SEARCH AT THE PREMISES OF THE SEARCHED PERSON AND THERE IS NO SATISFACTION OR EVE N THE 35 BASIS FOR SATISFACTION TO ISSUE A NOTICE U/S. 153C AND NO SATISFACTION IS RECORDED BY THE ASSESSING OFFICE R BEFORE THE ISSUE OF NOTICE U/S. 153C AND THEREFORE THE NOTICE ISSUED U/S. 153C IS ILLEGAL INVALID AND UNTENABLE-IN LAW AND THEREFORE IT WAS PLEADED THA T THE ASSESSMENT MADE ON THE BASIS OF SUCH ILLEGAL NOTIC E BE KINDLY QUASHED. 28. IT WAS ALSO ARGUED THAT THE ASSESSEE WAS BEING ASSESSED AT GWALIOR BY ACIT-2 GWALIOR. THE LD. C IT GWALIOR ISSUED THE NOTICE ON 31-01-2006 TO THE ASSESSEE U/S. 127 OF THE IT ACT AS HE INTENDED T O TRANSFER THE CASE FROM GWALIOR TO BHOPAL ON REQUEST FROM IT AUTHORITIES AT BHOPAL THE ASSESSEE STRONG LY OBJECTED TO THE SAME AND THE MATTER OF TRANSFER OF THE CASE WAS DROPPED. HOWEVER AFTER THE CHANGE OF INCUMBENT OF THE OFFICE OF CIT THE CASE WAS TRANSF ERRED ON 23-08-2007 BY THE NEW INCUMBENT NEARLY 10 MONTHS AFTER THE NOTICE U/S. 127 WITHOUT GIVING ANY OPPORT UNITY TO THE ASSESSEE. THE ASSESSEE FILED THE WRIT PETIT ION BEFORE THE HONOURABLE HIGH COURT M.P. GWALIOR BENCH WHO GRANTED STAY TILL THE DATE OF NEXT HEARING ON 27-09- 2007. ON PERSUASION BY THE IT AUTHORITIES AT BHOPAL 36 THE ASSESSEE WITHDREW ITS WRIT PETITION AND ACCORDI NGLY THE HONBLEE HIGH COURT VACATED THE STAY ON 05-10-2 007 AND ALLOWED THE ASSESSEE TO WITHDRAW HIS WRIT PET ITION . IN THE MEANTIME THE LD. ACIT -1(2) BHOPAL ISSUED THE NOTICE U/S. 153C ON 30-08-2007 WHICH WAS SERVED O N THE ASSESSEE ON 04-09-2007 REQUIRING THE ASSESSEE TO FILE THE RETURN WITHIN 30 DAYSFROM THE DATE OF SER VICE. AS EVIDENT FROM THE ABOVE NARRATED FACTS THE ASS ESSEE WAS CONTESTING THE TRANSFER OF CASE TILL 05-10-200 7 AND THERE WAS NO REASON FOR THEM TO FILE THE RETURN INCOMPLIANCE TO NOTICE U/S. 153C. THE LD. ASSESSING OFFICER ISSUED THE NOTICE U/S. 143(2) ALONG WITH TH E QUESTIONNAIRE ON 12-10-2007 AND REQUIRED THE ASSESS EE TO REPLY TO THE QUESTIONNAIRE ON 22-10-2007. THE ASSESSEE AFTER WITHDRAWAL OF THE WRIT PETITION ON 05-10- 2007 FILED THE RETURNS ON 06-11-2007 SHOWING THE SAME AT NIL AS WAS SHOWN IN THE RETURN FILED U/S.1 39(1) AT NIL AND FILED THE DETAILED REPLY TO THE QUESTIO NNAIRE ON 23-11-2007. THE ASSESSEE FURTHER MADE THE COMPLIANCES FROM TIME TO TIME AS REQUIRED BY THE ASSESSING OFFICER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD. ASSESSING OFFICER NEVER OPENED HIS 37 MIND THAT HE INTENDS TO MAKE SUCH HUGE ADDITIONS AS HE ULTIMATELY MADE. INFACT ALL THE ASSESSMENT HAS BEEN MADE WITHOUT PROVIDING ANY WORTHWHILE ADEQUATE OPPORTUNITY TO THE ASSESSEE. IT IS REQUESTED THERE FORE THAT THE ASSESSMENT MADE BE KINDLY CANCELLED. 29. WITH REGARD TO REJECTION OF BOOKS OF ACCOUNTS BY THE AO IT WAS SUBMITTED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEAL) THAT THE ASSESSEE HAD MAINTAINE D THE REGULAR BOOKS OF ACCOUNTS WHICH WERE DULY SUPPORTED BY BILLS AND VOUCHERS . THESE ACCOUNT BOO KS WERE DULY AUDITED U/S. 44AB OF THE IT ACT . THE ASS ESSEE FULFILLED ALL THE REQUIREMENTS AS DESIRED BY THE AS SESSING OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEED INGS. INFACT ALL THE CASH BOOK LEDGERS AND SUPPORTING B ILLS AND VOUCHERS FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION REMAINED WITH THE ASSESSING OFFICER F OR ABOUT A MONTH BEFORE THE COMPLETION OF THE ASSESSMENT. THE A/C BOOKS OF THE ASSESSEE FOR ALL T HE ASSESSMENT YEARS WERE AVAILABLE IN THE HARD DISC SE IZED BY THE DEPTT. AND WERE IN THEIR POSSESSION RIGHT F ROM THE DATE OF SEARCH. THE LD. ASSESSING OFFICER DISBE LIEVED THE ACCOUNT BOOKS AVAILABLE IN THE SAID SEIZED HAR D DISC 38 FOR NO REASONS AS EVIDENT FROM THE ASSESSMENT ORDER . HE HAS REJECTED THE PRINT OUTS OF THE ACCOUNTS BOOKS OBTAINED FROM THE HARD DISC SEIZED BY THE DEPT. HE HAS SIMPLY OBSERVED THAT THE ASSESSEE IS SHOWING THE LE SS PROFITS BY INFLATING THE EXPENSES BUT HE HAS NOT GI VEN ANY BASIS FOR SUCH WILD ALLEGATIONS. AS PER LD AR THE ACCOUNT BOOKS CANNOT BE REJECTED WITHOUT GIVING PRO PER REASONS FOR THE SAME AND IN ABSENCE OF ANY DEFECTS IN THE ACCOUNT BOOKS THEY ARE OUGHT TO BE ACCEPTED. T HE ASSESSEE RELIES UPON THE M.P. HIGH COURT DECISION I N THE CASE OF SURESHCHANDRA VS CIT AS REPORTED ON (2006) 201 CTR 153 M.P AND GOHATI HIGH COURT DECISIONS IN THE CASE OF PYARELAL MITTAL VS ACIT AS REPORTED ON (2007) 197 TAXATION 186. IT IS REQUESTED THEREFORE THAT THE RESULTS SHOWN BY THE ACCOUNT BOOKS BE KINDLY ACCEPT ED AND ALL THE ADDITIONS MADE BY THE ASSESSING OFFICER BE KINDLY REMOVED. 30. THE LD. ASSESSING OFFICER FOUND THAT THE GROSS PROFIT OF THE ASSESSEE HAS COME DOWN TO 3.25% FROM 9.20% IN THE EARLIER YEAR AND THERE WAS NO EXPLANATION ON RECORD. HE ALSO FOUND THAT AT MALANPUR UNIT THERE IS A GROSS LOSS OF 133.80% AND AT MANDIDEEP UNIT THER E IS 39 A GROSS PROFIT OF 40.98% . HE ALSO FOUND THAT AT TH E MALANPUR UNIT THE MANUFACTURING EXPENSES ARE AT RS . 65 20 811/- (INCLUSIVE OF PURCHASE PRICE OF IRON & STEEL AT RS. 40 09 961/- ) AND SALARY & WAGES ARE AT RS. 61 25 388/- . THE LD. ASSESSING OFFICER FOUND THAT ALL THESE EXPENSES ARE DISPROPORTIONATE AND THEREFORE HE TREATED 1/4 TH AT RS. 51 77 530/- OF THE TOTAL PURCHASES AT RS. 2 07 10 122/- AS BOGUS AND ACCORDINGLY HE MADE THE DISALLOWANCE OF RS. 51 77 530/- U/S. 69C O F THE IT ACT. 31. IN THIS CONNECTION IT WAS SUBMITTED THAT THE LD. ASSESSING OFFICER HAS TAKEN THE VARIOUS FIGURES OF MALANPUR AS WELL AS MANDIDEEP UNIT WHICH ARE INCORRECT. THE CORRECT FIGURES OF UNITS ARE AS UNDER:- SALES RS. OTHER INCOME RS. INCREASE/ (DECREASE) IN STOCK RS. MATERIAL CONSUMED RS. MANUFA- CTURING EXPENSES RS. GROSS PROFIT/LOSS AS PER A.O GROSS PROFIT/LOS S AS PER ASSESSEE MALANPUR UNIT 7252059 14647006 (1252829) 6865695 6408473 9709160 7274938 MANDIDEEP UNIT 3236420 8 119107 2387888 16475106 10075161 13261751 8201829 32. THE LD. ASSESSING OFFICER HAS WORKED OUT THE GROSS LOSS AT RS. 97 09 160/- ON THE SALES OF RS. 72 52 056/- AT MALANPUR WHILE THE CORRECT LOSS IS RS. 72 74 938/- AS PER BALANCE SHEET OF THE ASSESSEE A S ON 40 RECORD. SIMILARLY THE GROSS PROFIT AT MANDIDEEP IS NOT 1 32 61 751/- ON THE SALES OF RS. 3 23 64 209/- BUT THE GROSS PROFIT IS RS. 82 01 829/-. IT IS ALSO SUBMI TTED THAT THE ASSESSEE HAS NOT CLAIMED THE MANUFACTURING EXPENSES AT RS. 65 20 811/- AT MALANPUR NEITHER HE HAS CLAIMED THE SALARY AND WAGES EXPENSES AT RS. 61 25 388/- AS OBSERVED BY THE ASSESSING OFFICER . INFACT AT THE MALANPUR UNIT THE ASSESSEE HAS CLAI MED THE MANUFACTURING EXPENSES AT RS. 64 08 473/- AND MATERIAL CONSUMED AT RS. 68 65 695/- AND SALARY AN D WAGES AT RS. 25 84 480/-. 33. AS PER LD. AR THE LD. ASSESSING OFFICER HA S MADE CERTAIN ASSUMPTIONS ON THE BASIS OF WRONG CALCULAT IONS WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE FACTUAL POSITION . IT WAS ALSO BROUGHT TO THE NOTICE OF LD. COMMISSIONER OF INCOME TAX (APPEAL) T HAT AT MALANPUR UNIT THE GROSS LOSS APPEARS BECAUSE OF IMPROPER ACCOUNTING BY THE ASSESSEE . IT WAS BROUGH T TO YOURE THE NOTICE OF THE LOWER AUTHORITIES THAT THE ASSESSEE HAS SHOWN THE OTHER INCOME AT RS. 1 46 47 008/- WHICH WAS RECEIVED FROM INTERNATIO NAL METRO CIVIL CONTRACTORS . THIS INCOME INCLUDES THE 41 RENTAL OF THE FACTORY PREMISES AT MALANPUR AT RS . 70 00 000/- AND THE BALANCE OF RS. 76 47 008/- TOWARDS THE REIMBURSEMENT OF SALARY AND WAGES A ND MATERIAL MADE AVAILABLE BY THE ASSESSEE AS PER TERM S OF THE AGREEMENT DTD. 12-09-2001. 34. IT WAS SUBMITTED THAT IN VIEW OF THE ABOVE OUT OF THE OTHER INCOME AT RS. 1 46 47 008/- RS. 70 00 0 00/- ARE TOWARDS RENT AND BALANCE ARE TOWARDS PAYMENT AGAINST SALARY WAGES AND MATERIAL PAID BY THE ASSE SSEE. IF THIS AMOUNT IS INCLUDED IN THE SALES THE TOTAL SALES WILL GO UP TO RS. 1 48 17 664/- . AGAINST WHICH T HE ASSESSEE HAS CLAIMED THE MATERIAL CONSUMED AND MANUFACTURING EXPENSES INCLUDING WAGES AT RS. 1 32 74 168/- AND DECREASE IN STOCK OF RS. 12 52 82 9/- IT MEANS THAT THE ASSESSEE HAS EARNED THE GROSS PRO FIT FROM THE MANUFACTURING SECTION AT RS. 2 90 667/- F ROM THE MALANPUR UNIT WHICH COMES TO RS. 1.96% WHICH QUITE COMPARABLE WITH THE G.P. SHOWN BY THE ASSESSE E IN THE EARLIER YEAR AT 9.2% AS PER CHART ENCLOSED. ON THESE FACTS IT WAS PLEADED BEFORE THE CIT(A) THAT THE LD. ASSESSING OFFICER HAS MADE THE WRONG PRESUMPTION A ND HAS DERIVED THE WRONG CONCLUSION. THE ASSESSEE HAS 42 MAINTAINED THESE ACCOUNTS ON THE QUANTITATIVE BASI S AND THEY ARE SUPPORTED BY BILLS AND VOUCHERS. IN T HESE CIRCUMSTANCES THERE IS NO JUSTIFICATION FOR THE ASSESSING OFFICER TO DISALLOW 1/4 TH PORTION OF THE PURCHASES AS THE BOGUS PURCHASES. THE ASSESSEE HAD FILED THE PARTY-WISE DETAILS OF PURCHASES DURING THE ASSESSMENT PROCEEDINGS AND THE A.O. HAS NOT FOUND A NY DEFECTS IN THE ACCOUNT BOOKS. IT IS PLEADED THAT T HE DISALLOWANCE MADE AT RS. 51 77 530/- BE KINDLY DIRECTED TO BE DELETED. 35. WITHOUT PREJUDICE TO THE ABOVE IT WAS SUBMITTED THAT THE LD. ASSESSING OFFICER HAS MADE T HE ADDITIONS U/S. 69C OF THE IT ACT WHICH READS AS UNDER:- WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OR PART THEREOF OR THE EXPLANATION IF ANY OFFERED BY HIM IS NOT IN THE OPINION OF THE [ASSESSING OFFICER] SATISFACTORY THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF AS THE CASE MAY BE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR]. 36. ON PERUSAL OF THE ABOVE SAID SECTION IT MAY BE SEEN THAT THE ADDITIONS U/S. 69C CAN BE MADE WH EN 43 IT IS FOUND BY THE ASSESSING OFFICER THAT THE ASSES SEE HAS INCURRED THE EXPENDITURE AND HE IS UNABLE TO EXPLAI N THE SOURCE OF SUCH EXPENDITURE. IN THE INSTANT CASE T HE LD. ASSESSING OFFICER HAS NOT FOUND ANY EXPENDITURE WH ICH CAN BE SAID TO BE UNEXPLAINED. INFACT THE ASSESSEE HAS SHOWN THE EXPENDITURE IN THE FORM OF PURCHASES AND THE LD. ASSESSING OFFICER IS OF THE OPINION THAT TH E ASSESSEE HAS NOT INCURRED THE SAME. ON THE ABOVE FACTS IT WAS REQUESTED THAT THE PROVISIONS OF SEC. 69C OF THE IT ACT ARE NOT ATTRACTED TO THE FACTS OF THE CA SE OF THE ASSESSEE. 37. IT WAS REQUESTED THAT ALL THE ADDITIONS MADE TOWARDS THE BOGUS PURCHASES IN THE ASSESSMENT YEAR 2002-03 AT RS. 51 77 530/- BE KINDLY BE DELETED. 38. THE LD. ASSESSING OFFICER FOUND THAT THE SALE S DURING THE ASSESSMENT YEAR 2002-03 ARE ALMOST EQUA L TO THE SALES IN THE ASSESSMENT YEAR 01-02. HE FURTH ER FOUND THAT DURING THE ASSESSMENT YEAR 2002-03 THE ASSESSEE RECEIVED OTHER INCOME AT RS. 1 67 46 360/ - AS AGAINST RS. 1 50 845/- IN THE ASSESSMENT YEAR 01-02 AND BECAUSE OF EXCESS OTHER INCOME THE ASSESSEE 44 INFLATED HIS MANUFACTURING EXPENSES AND SALARY AND WAGES EXPENSES BY RS. 46 80 719/- AND RS. 34 67 871/- RESPECTIVELY AS COMPARED TO THE LAST YE AR JUST TO SET OFF THE OTHER INCOME AND ACCORDINGLY THE LD. ASSESSING OFFICER DISALLOWED RS. 46 80 719/- OUT O F MANUFACTURING EXPS. AND RS. 34 67 871/- OUT OF SALA RY AND WAGES . 38. IN THIS CONNECTION IT WAS SUBMITTED THAT THE ASSESSEE HAS RECEIVED RS. 1 67 46 360/- AS OTHER INCOME FROM INTERNATIONAL METRO WHICH INCLUDES RS . 70 00 000/- TOWARDS RENT OF THE FACTORY PREMISES AND RS. 19 80 000/- TOWARDS RENTAL FOR STORAGE AND BA LANCE RS. 76 47 008/- TOWARDS REIMBURSEMENT OF SALARY AN D WAGES AND MATERIAL. THE RECEIPT OF REIMBURSEMENT AT RS. 76 47 008/- IS ALMOST EQUAL TO THE DIFFERENCE POINTED OUT BY THE ASSESSING OFFICER IN THE MANUFACTURING EXPENSES (RS. 46 80 719/-) AS SALARY AND WAGES. (RS. 34 67 971/-) TOTALING TO RS. 81 48 590/ - . ON THE ABOVE FACTS IT MAY BE SEEN THAT THE ASSE SSEE HAS NOT FABRICATED HIS ACCOUNTS OR HAS INFLATED T HEIR EXPENSES UNDER HEADS OF MANUFACTURING EXPENSES OR 45 SALARY AND WAGES. INFACT THERE IS A MISTAKE IN PR OPER ACCOUNTING AS THE ASSESSEE SHOULD HAVE SHOWN THE RENTAL AT RS. 89 80 000 AS OTHER INCOME AND SHOULD HAVE INCREASED THE SALES BY RS. 77 66 360/- OR SHOULD HAVE REDUCED THE MANUFACTURING EXPENSES AND WAGES BY THE SAID AMOUNT AND SHOULD HAVE CLAIMED THEM AGAINST THE OTHER INCOME AND THIS COULD HAVE GIVEN THE CORRECT PICTURE OF THE BUSINESS AFFAIRS O F THE ASSESSEE. AS POINTED OUT ABOVE THE ASSESSEE HAS NOT INFLATED ANY EXPENSES TOWARDS MANUFACTURING SALARY AND WAGES AND THERE IS NO JUSTIFICATION FOR THE ASSESSING OFFICER TO MAKE THE DISALLOWANCE OF RS. 46 80 719/- AND RS. 34 67 871/-. IT WAS REQUESTED THAT THE DISALLOWANCE MADE AT RS. 46 80 719/- AND RS. 34 67 871/- BE KINDLY DIRECTED TO BE REMOVED. 39. WITHOUT PREJUDICE TO THE ABOVE IT WAS ALSO SUBMITTED THAT THE LD. ASSESSING OFFICER HAS MADE T HE ADDITIONS U/S. 69C OF THE IT ACT WHICH READS AS UNDER:- WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH 46 EXPENDITURE OR PART THEREOF OR THE EXPLANATION IF ANY OFFERED BY HIM IS NOT IN THE OPINION OF THE [ASSESSING OFFICER] SATISFACTORY THE AMOUNT COVERED BY SUCH EXPENDITURE OR PART THEREOF AS THE CASE MAY BE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR]. 39. ON PERUSAL OF THE ABOVE SAID SECTION IT MA Y BE SEEN THAT THE ADDITIONS U/S. 69C CAN BE MADE WHEN IT IS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS INCURRED THE EXPENDITURE AND HE IS UNABLE TO EXPLAI N THE SOURCE OF SUCH EXPENDITURE. IN THE INSTANT CASE T HE LD. ASSESSING OFFICER HAS NOT FOUND ANY EXPENDITURE WH ICH CAN BE SAID TO BE UNEXPLAINED. INFACT THE ASSESSEE HAS SHOWN THE EXPENDITURE IN THE FORM OF PURCHASES AND THE LD. ASSESSING OFFICER IS OF THE OPINION THAT TH E ASSESSEE HAS NOT INCURRED THE SAME. ON THE ABOVE FACTS IT MAY BE SEEN THAT THE PROVISIONS OF SEC. 6 9C OF THE IT ACT ARE NOT ATTRACTED TO THE FACTS OF THE CA SE OF THE ASSESSEE. 40. IT WAS REQUESTED THAT ALL THE ADDITIONS MADE TOWARDS THE BOGUS PURCHASES IN THE ASSESSMENT YEAR 2002-03 AT RS. 46 80 719 AND RS. 34 67 871/- BE KINDLY DIRECTED TO BE REMOVED. 47 41. THE LD. ASSESSING OFFICER FOUND THAT THE ASSESS EE INCURRED THE EXPENDITURE OF RS. 3 16 895/- ON THE TRAINING OF THE EMPLOYEE IN M/S. S.P. JAIN INSTITUT E OF MANAGEMENT AT MUMBAI . THE LD. ASSESSING OFFICER FURTHER FOUND THAT THERE IS NO EVIDENCE THAT THE T RAINING WAS IMPARTED TO ANY EMPLOYEE OF THE COMPANY. HE PRESUMED THAT THE TRAINING MIGHT HAVE BEEN GIVEN TO MAHESH AGRAWAL OR HIS CHILDREN AND THEREFORE HE DISALLOWED THE EXPENDITURE FOR MANAGEMENT AT RS. 3 16 895/- . 42. IN THIS CONNECTION IT WAS SUBMITTED THAT KU. SMITA AGRAWAL D/O. MAHESH AGRAWAL JOINED THE COMPANY IN JUNE 2001. LOOKING TO HER INTEREST IN MANAGEMENT SHE WAS SENT FOR STUDIES AT M/S. S.P. JAIN INSTITUTE OF MANAGEMENT AT MUMBAI. SHE GAVE AN UNDERTAKING THAT SHE WILL SERVE THE COMPANY FOR THREE YEARS AFTER COMPLETION OF THE TRAINING ON THE SAME SALARY AS SHE WAS GETTING A S A GRADUATE. SHE COMPLETED HER TRAINING IN JULY2002 AND RESIGNED THE COMPANY. SHE GOT MARRIE D AND LEFT THE JOB IN OCTOBER2003. AS PER REQUIREME NT OF 48 THE AGREEMENT THE EFFORTS ARE BEING MADE TO RECOVE R THE AMOUNT OF RS. 3 16 895/- FROM SMITA AGRAWAL. IT WA S SUBMITTED THAT THE COMPANY HAS INCURRED THE EXPENDITURE SOLELY FOR BUSINESS PURPOSES TO HAVE BE ST TRAINING FOR THEIR EMPLOYEES AND SUCH AN EXPENDITUR E IS ALLOWABLE DEDUCTION U/S. 37 OF THE IT ACT AND THE EXPENDITURE CAN NOT BE DISALLOWED SIMPLY FOR THE RE ASON THAT THE SMITA AGRAWAL HAPPENS TO BE THE DAUGHTER OF THE MANAGING DIRECTOR. AT ANY EVENT THIS AMOUNT O F RS. 3 16 895/- CAN NOT BE DISALLOWED IN THE HANDS OF TH E COMPANY. 43. IN AN APPEAL FILED BEFORE THE LD. CIT(A) THE B ASIC GRIEVANCE OF THE ASSESSEE WAS THAT NOTICE U/S 143(2 ) WAS ISSUED PRIOR TO FILING OF RETURN IN RESPONSE TO NOT ICE U/S 153-C. HOWEVER NO NOTICE U/S 143(2) WAS ISSUED SUBSEQUENT TO FILING THE RETURN U/S 153C. ACCORDING LY IT WAS PRAYED THAT ASSESSMENT SO FRAMED WAS INVALID IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN CA SE OF HOTEL BLUE MOON; 229 CTR 219. DECISION OF JURISDICTIONAL TRIBUNAL IN THE CASE OF G.M. INFRASTRUCTURE 14TTJ 623 WAS ALSO RELIED ON. IT WA S ALSO CONTENTION OF THE ASSESSEE THAT NO SATISFACTION U/S 153C 49 WAS RECORDED WHICH IS MANDATORY IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI 289 ITR 341. FURTHER CONTENTION OF THE ASSESSEE WAS THAT NOTHING INCRIMINATING WAS FOU ND DURING SEARCH IN THE CASE OF MECH & FAB GROUP BEIN G ASSOCIATE CONCERN OF THE ASSESSEE THEREFORE THE A O HAS NO POWER TO DISTURB THE FINALITY OF CONCLUDED ASSES SMENT WITHOUT ANY MATERIAL TO INDICATE UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARCH. OUR ATTENTION WA S DRAWN TO THE NOTICE ISSUED U/S 153-C DATED 30.8.200 7 AS PLACED ON RECORD WHICH REQUIRED THE ASSESSEE TO FILE RETURN WITHIN 30 DAYS AND IT WAS CONTENDED THAT UNL IKE SECTION 139 THERE IS NO CONCEPT OF BELATED RETURN U /S 153C. THE RETURN WAS FILED ON 16.11.2007 WHICH WAS BEYOND 30 DAYS AS REQUIRED BY THE ASSESSING OFFICER IN THE NOTICE U/S 153C. AS PER LD. AUTHORIZED REPRESENTATIVE THE RETURN SO FILED WAS INVALID TH EREFORE ASSESSMENT ON THE BASIS OF SUCH RETURN WAS ALSO INV ALID. BY THE IMPUGNED ORDER THE CIT(A) ANNULLED THE ASSESSMENTS ON THE GROUND OF ASSUMPTION OF JURISDICTION AND FRAMING OF ASSESSMENT U/S153C. THE CIT(A) ALSO DELETED PART OF THE ADDITIONS MADE ON M ERIT. 50 45. M/S GWALIOR TANK & VESSELS IS A PRIVATE LIMITE D COMPANY CARRYING ON BUSINESS OF HIGH TECH HEAVY STE EL FABRICATION AND MANUFACTURER FOR THE LAST MORE THAN 10 YEARS. IT WAS REGULARLY ASSESSED BY THE ACIT-II GW ALIOR AND WAS TRANSFERRED TO ACIT 1(2) BHOPAL BY ORDER U/S 127 ON 23.8.2007. ALONGWITH REGULAR RETURNS THE ASSESSEE WAS FILING AUDIT REPORT U/S 44AB. SEARCH W AS CONDUCTED AGAINST DIRECTOR OF THE COMPANY U/S 132(1 ) ON 6.9.2005. THE ASSESSEE COMPANY WAS SUBJECT TO SURVEY U/S 133A. THEREAFTER THE AO ISSUED NOTICE U /S 153C ON 30.8.2007 REQUIRING THE ASSESSEE TO FILE RE TURNS FOR THE ASSESSMENT YEARS 2000-01 TO 2005-06 WITHIN A PERIOD OF 30 DAYS FROM THE RECEIPT OF THE SAID NOTI CE. THE ASSESSEE FILED RETURNS ON 16.11.2007 FOR ALL THESE ASSESSMENT YEARS. HOWEVER THE RETURN FOR ASSESSMEN T YEAR 2006-07 WAS FILED U/S 139(1) ON 28.11.2006. TH E AO PASSED ORDER U/S 153C/143(3) ON 31.12.2007 WHREIN VARIOUS ADDITIONS WERE MADE IN DIFFERENT YEA RS. 44. BY THE IMPUGNED ORDER THE LD. CIT(A) ANNULLED THE ASSESSMENT ON THE GROUND OF NO SATISFACTION HAVING BEEN RECORDED WHILE ISSUING NOT ICE U/S 153C AND FRAMING AST U/S 153C READ WITH SECTION 51 153A WHICH SECTION IS IN PARI MATERIA WITH THE PROVISIONS OF SECTION 158BD. THERE IS NO DISPUTE TO THE WELL SETTLED LEGAL PROPOSITION THAT RECORDING OF SATISFACTION BEFORE ISSUE OF NOTICE U/S 153C IS MANDATORY AND IN CASE OF FAILURE OF THE ASSESSING O FFICER TO RECORD SUCH SATISFACTION IN THE CASE OF SEARCHED PERSON SHOWING THAT THESE ARE INCRIMINATING MATERIA LS AND BELONGED TO THE ASSESSEE WILL RENDER THE ASSESS MENT SO FRAMED AS NULLITY. IN TERMS OF DECISION OF HON'B LE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI (SUPRA) THE SEARCHED PERSON HAS TO BE CONFRONTED W ITH THE SEIZED MATERIAL AND WHEN THE SEARCHED PERSON DE NY THAT SEIZED MATERIAL BELONGED TO HIM THEN OPPORTUN ITY HAS TO BE GIVEN TO THE OTHER PERSON AND THE AO HAS TO SATISFY THAT THE SEIZED MATERIAL BELONGS TO SOME PARTICULAR PERSON OTHER THAN THE SEARCHED PERSON AN D HE HAS TO RECORD HIS SATISFACTION BEFORE PROCEEDING S U/S 153C AGAINST SUCH OTHER PERSON. IN THE INSTANT CASE BEFORE US NO SUCH SATISFACTION WAS RECORDED BEFORE INITIATION OF PROCEEDINGS AND EVEN THE ASSESSMENT O RDER SO FRAMED DOES NOT GIVE ANY INKLING ABOUT ANY SUCH INCRIMINATING DOCUMENTS BELONGING TO THE ASSESSEE A S 52 FOUND DURING COURSE OF SEARCH AT THE PREMISES OF TH E PARTNERS. ON THE BASIS OF THIS LEGAL GROUND THE LD . CIT(A) ANNULLED THE ASSESSMENT AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE WRITTEN AND ORAL SUBMISSIONS OF THE AR. IN A NUTSHELL THE AR HAS STATED THAT THE ASSESSMENT IS ILLEGAL BECAUSE IT IS MADE IN THE WRONG STATUS BECAUSE IT IS MADE WITHOUT RECORDING THE SATISFACTION AND BECAUSE IT IS MADE WITHOUT HAVING ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH IN SUPPORT OF THE CLAIM HE HAS RELIED UPON THE VARIOUS COURT DECISIONS ARE AS UNDER :- 1. MANISH MAHESHWARI VS. I.T.A.T. AS REPORTED IN (2007) 208 CTR 97 S. C. 2. NEW DELHI AUTO FINANCE (P) LIMITED VS. CIT (2008) 300 ITR 83 (DEL) 3. CIT VS. S. G. ANGIDI CHETTIAR (1962) 44 ITR 739 (S.C.) 4. D.M. MANSARI VS. CIT (1972) 86 ITR 557. 5. BHAWANI FINANCE CO. LTD (2006) 280 ITR 412 (DEL) IN THIS CONTEXT IT MAY BE NOTED THAT THE ASSESSMENT RECORDS AND SEARCH MATERIAL HAVE BEEN OBTAINED FROM THE AO AND PERUSED THE SAME. THE ISSUES RAISED BY THE AR ARE DISCUSSED AS BELOW : 1. FIRST OF ALL IT IS NOTED THAT THE CONTENTION OF THE AR IS CORRECT TO THE EXTENT THAT THE APPELLANT IS A PUBLIC LIMITED COMPANY AND NOT AN INDIVIDUAL 53 AS MENTIONED BY THE ASSESSING OFFICER IN HIS ORDER. HOWEVER I DO NOT AGREE WITH THE AR THAT SIMPLY BECAUSE OF THE SAID REASON THE ORDER PASSED BY THE ASSESSING OFFICER IS ILLEGAL. PRIMA FACIE IT APPEARS THAT IT IS A CLERICAL MISTAKE AND THEREFORE THE ASSESSMENT CANNOT BE INVALIDATED IN VIEW OF THE PROVISIONS OF SECTION 292B OF THE INCOME-TAX ACT 1961. HOWEVER THE AO IS DIRECTED TO ADOPT THE CORRECT STATUS OF THE APPELLANT. 2. & C. REGARDING THE RECORDING OF SATISFACTION AND ABSENCE OF INCRIMINATING DOCUMENTS THE RECORDS CALLED FOR FROM THE AO HAVE BEEN VERIFIED. ON VERIFICATION IT IS FOUND THAT NO SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFFICER BEFORE THE ISSUE OF NOTICE U/S 153C. I ALSO HAVE GONE THROUGH THE MATERIAL SEIZED FROM THE RESIDENCE OF SHRI MAHESH AGRAWAL. THE SEIZED PAPERS ARE NAMED AS LPS-1 TO LPS-4 LPS-5 LPS-8 LPS-13 AND LPS- 15 AS INCRIMINATING DOCUMENTS. I MINUTELY EXAMINED EACH AND EVERY PAPER AND I FIND THAT NONE OF THESE PAPERS ARE INCRIMINATING. THESE PAPERS ARE DISCUSSED BELOW : DOCUMENTS MY OBSERVATION LPS - 1 TO LPS - 4 P1-71 IN ALL FOUR SETS REGISTERED PURCHASED DEEDS OF FLAT AT MUMBAI WHICH HAVE BEEN PURCHASED BY THE DIRECTOR SHRI MAHESH AGRAWAL. LPS - 5 P1-44 MOU BETWEEN APPELLANT AND HIS OTHER ASSOCIATE M/S. ARUN EXCELLO WHICH IS NOT INCRIMINATING AT ALL. LPS - 8 P1-34 CHART AND COPIES OF THE BILLS IN THE NAME OF TECHNO PHARMA EXPORTS RAISED BY THE APPELLANT WHICH ARE 54 APPEARING IN THE RE GULAR BOOKS OF ACCOUNT OF THE APPELLANT. LPS - 13 A. AGENCY AGREEMENT BETWEEN TPF & GTV B. COPIES OF CHEQUES AND COVERING LETTER FROM GTV CHENNAI & BHOPAL AS INTERNAL CORRESPONDENCE. C. COPIES OF FORM 8 & 13 FILED BEFORE ROC. D. CORRESPONDENCE BETWEEN GTV AND TPF & NHDC REGARDING COMPLETION OF WORK. E. COPY OF LOAN SANCTION TO OTHER PARTY. F. ROUGH RECONCILIATION PAPERS OF GTV FIGURES APPEARING IN THE BOOKS OF ACCOUNT. G. ROUGH SHEET SHOWING TAX LIABILITY OF MAHESH AGRAWAL. H. STATEMENT OF ASSETS LIABILITIES AND MAHESH VEENA AND DINESH AGRAWAL AS ON 27.3.2002. LPS - 15 PROPOSAL BETWEEN MAHESH & DINESH AGRAWAL GROUP FOR TRANSFER OF SHARES IN THE COMPANIES AND FIRMS. FROM THE ABOVE CHART I HAVE NO HESITATION TO HOLD THAT THESE PAPERS ARE NOT INCRIMINATING AND THAT MOT OF THEM DO NOT BELONG TO THE APPELLANT. I ALSO FIND THAT NO ADDITION OR EVEN OBSERVATION HAS BEEN MADE BY THE ASSESSING OFFICER IN ANY OF THE ORDERS 55 RIGHT FROM ASSESSMENT YEARS 2000-01 TO 2006-07 IN CONNECTION WITH ANY MATERIAL FOUND DURING THE COURSE OF SEARCH. WHEN NO INCRIMINATING MATERIAL RELATING TO THE ASSESSEE HAS BEEN FOUND FROM THE SEARCHED PERSON NO ACTION U/S 153C CAN BE INITIATED AGAINST THE ASSESSEE. IN THESE CIRCUMSTANCES IT APPEARS THAT THE REQUIREMENTS OF SECTION 153C ARE NOT FULFILLED AS CLAIMED BY THE AR. THE AR HAS HEAVILY RELIED UPON THE HON'BLE SUPREME COURT DECISION IN THE CASE OF MANISH MAHESHWARI. THE SAID DECISION HAS BEEN RENDERED IN RELATION TO THE PROVISIONS OF SECTION 158BD WHICH ARE IDENTICAL TO THE PROVISIONS OF SECTION 153C AS PER DETAILED SUBMISSIONS OF THE AR. I DO FIND THAT WITH REGARD TO SATISFACTION BOTH THE SECTIONS ARE IDENTICAL AND IT SHOULD BE MANDATORY TO RECORD THE SATISFACTION BEFORE THE ISSUE OF NOTICE U/S 153C IF IT IS NECESSARY TO RECORD THE SATISFACTION BEFORE THE ISSUE OF NOTICE U/S 158BD. IN THIS CONNECTION I HAVE ALSO SEEN THE APPELLATE ORDER OF MY LD. COLLEAGUE CIT(A)-I JABALPUR IN THE CASE OF M/S. HOTEL SONAM & SMART BAR SAGAR DATED 22.11.2007 IN APPEAL NO. ACIT- SAGAR/116 TO 122 WHICH HAS BEEN PASSED ON THE FACTS IDENTICAL WITH THE FACTS OF THE ASSESSEE. IN THE SAID CASE ALSO THERE WAS A SEARCH AGAINST THE PARTNERS AND SURVEY IN THE CASE OF THE FIRM AND NO INCRIMINATING MATERIAL AND SURVEY IN THE CASE OF THE FIRM AND NO INCRIMINATING MATERIAL BELONGING TO THE FIRM WAS FOUND FROM THE PREMISES OF THE PARTNERS WHERE THE SEARCH WAS CONDUCTED. I AM SATISFIED THAT ON PLAIN READING OF SECTION 153C IT MAY NOT BE NECESSARY TO RECORD THE SATISFACTION BUT AT LEAST THERE SHOULD BE SOME MATERIAL TO 56 GIVE SATISFACTION TO THE AO THAT SOME INCRIMINATING MATERIAL INDICATING SOME INCOME HAS BEEN FOUND IN THE SEARCH ACTION. IN THE INSTANT CASE NO INCRIMINATING MATERIAL BELONGING TO THE ASSESSEE HAS BEEN FOUND IN THE SEARCH. IN FACT THERE WAS NO MATERIAL FOUND DURING THE COURSE OF SEARCH WHICH COULD HAVE SATISFIED THE AO TO ISSUE THE NOTICE U/S 153C AND NO SATISFACTION HAS BEEN RECORDED. IT MAY BE APPRECIATED THAT THE NOTICE U/S 153C IS BASED ON THE MATERIAL SEIZED IN THE SEARCH AND NOT IN THE SURVEY PROCEEDINGS. NO DOUBT THERE ARE CERTAIN INCRIMINATING DOCUMENTS FOUND DURING THE SURVEY PROCEEDINGS BUT THE NOTICE U/S 153C CANNOT BE ISSUED ON THE BASIS OF THE SAME. IN VIEW OF THESE FACTS I HOLD THAT THE INVOKING OF SECTION 153C AGAINST THE ASSESSEE WAS BAD IN LAW AND THE NOTICE ISSUED U/S 153C WAS ILLEGAL. THE PROCEEDINGS U/S 153C IS AB INITIO NULL AND VOID. THE ASSESSMENT MADE IN CONSEQUENCE TO SUCH NOTICE U/S 153C FOR ALL THE ASSESSMENT YEARS ARE HEREBY QUASHED AND ACCORDINGLY THE GROUND NO.1 OF THE APPEAL IS ALLOWED. 45. VARIOUS ADDITIONS MADE ON MERIT IN CASE OF CHIRCHIND HYDRO LTD.WERE PARTLY BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) AFTER HAVING TH E FOLLOWING OBSERVATIONS. 46. THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) QUASHED THE ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSI NG OFFICER U/S 153C OF THE ACT WITH THE FOLLOWING OBSERVATIONS :- 57 IN THIS GROUND THE APPELLANT HAS CHALLENGED THE L EGALITY OF THE ASSESSMENT MADE U/S 153C/143(3) OF THE IT ACT. I H AVE EXAMINED THE LEGALITY OF THE ASSESSMENT IN THE ASSM T. YEAR 2001-02 AND HAVE DECIDED THAT THE ASSESSMENT MADE U /S 153C/143(3) IS ILLEGAL. FOLLOWING THE SAID ORDER T HE ORDER PASSED U/S 153C/143(3) FROM THIS YEAR IS ALSO HELD AS ILLEGAL FOR THE SAME REASONS AND ACCORDINGLY THE ASSESSMEN T IS QUASHED. 47. THE ADDITION OF RS. 10 20 000/- MADE BY THE ASS ESSING OFFICER ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL WAS DELETED BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) AFTER MAKING TH E FOLLOWING OBSERVATIONS :- I HAVE GONE THROUGH THE ASSMT. ORDER AS WELL AS TH E WRITTEN AND ORAL SUBMISSIONS OF THE AR. DURING THE ACCOUNT ING YEAR THE ASSESSEE HAS RECEIVED THE SHARE CAPITAL AT RS.1 1 30 000/- AND THE SHARE APPLICATION MONEY AT RS.36 90 000/- A S DETAILED ABOVE. THE ASSESSEE HAS GIVEN THE SOME OF THE DETAI LS OF ALL THE SHARE HOLDERS AND THE APPLICANTS. ALL THE BIG AMOU NTS ARE RECEIVED THROUGH CHEQUES. MOST OF THE SHARE HOLDER S AND SHARE APPLICANTS ARE INCOME TAX PAYERS. HOWEVER I FIND THAT SHARE CAPITAL OF RS.1 10 000/- AND SHARE APPLICATION MONE Y OF RS. 1 90 000/- IS RECEIVED THROUGH CASH. HENCE IT CAN NOT BE ACCEPTED AS EXPLAINED. FOLLOWING THE SUPREMENT COU RT DECISIONS IN THE CASE OF STELLER INVESTMENTS (251) ITR 263 AND LOVELY EXPORTS (P) LTD. 216 CTR 195 I DELETE THE A DDITION OF RS.10 20 000/- TOWARDS SHARE CAPITAL AND RS. 35 00 000/- TOWARDS SHARE APPLICATION MONEY AND I CONFIRM THE A DDITION OF RS.1 10 000/- TOWARDS SHARE CAPITAL AND RS.1 90 000 /- TOWARDS SHARE APPLICATION MONEY. ACCORDINGLY THE APPELLAN T GETS THE RELIEF OF RS.10 20 000/- AND RS. 35 00 000/-. IN T HE RESULT GROUND NO. 3 IS PARTLY ALLOWED. 48. THE ADDITION OF RS. 35 LACS MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY WAS DELETED BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) AFTER M AKING THE FOLLOWING OBSERVATIONS :- 58 I HAVE GONE THROUGH THE ASSMT. ORDER AS WELL AS T HE WRITTEN AND ORAL SUBMISSIONS OF THE AR. DURING THE ACCOUNTING YEAR THE ASSESSEE HAS RECEIVED THE SHARE CAPITAL AT RS.11 30 000/- AND THE SHARE APPLICATION MONEY AT RS.36 90 000/- AS DETAILED ABOVE. THE ASSESSEE HAS GIVEN THE SOME OF THE DETAILS OF ALL THE SHARE HOLDERS AND TH E APPLICANTS. ALL THE BIG AMOUNTS ARE RECEIVED THROUGH CHEQUES. MOST OF THE SHARE HOLDERS AND SHARE APPLICANTS ARE INCOME T AX PAYERS. HOWEVER I FIND THAT SHARE CAPITAL OF RS.1 10 000/- AND SHARE APPLICATION MONEY OF RS. 1 90 000/- IS RECEIVED THR OUGH CASH. HENCE IT CANNOT BE ACCEPTED AS EXPLAINED. FOLLOWI NG THE SUPREMENT COURT DECISIONS IN THE CASE OF STELLER IN VESTMENTS (251) ITR 263 AND LOVELY EXPORTS (P) LTD. 216 CTR 1 95 I DELETE THE ADDITION OF RS.10 20 000/- TOWARDS SHARE CAPITAL AND RS. 35 00 000/- TOWARDS SHARE APPLICATION MONEY AND I CONFIRM THE ADDITION OF RS.1 10 000/- TOWARDS SHARE CAPITAL AND RS.1 90 000/- TOWARDS SHARE APPLICATION MONEY. ACCORDINGLY THE APPELLANT GETS THE RELIEF OF RS.10 20 000/- AND RS. 35 00 000/-. IN THE RESULT GROUND NO. 3 I S PARTLY ALLOWED. 49. ITA NO. 171/IND/2008 AGAINST THE ABOVE ORDER OF CIT(A) THE REVENUE HAS P REFERRED THIS APPEAL ON THE FOLLOWING GROUNDS :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN : 1. QUASHING THE ORDER PASSED U/S 153C/143(3) OF THE I. T. ACT 1961. 2. DELETING THE ADDITION OF RS.10 20 000/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL. DELETING THE ADDITION OF RS.35 00 000/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED SHARE APPLICATION MONEY. 59 50. THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) QUASHED THE ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSI NG OFFICER U/S 153C OF THE ACT WITH THE FOLLOWING OBSERVATIONS :- IN THIS GROUND THE APPELLANT HAS CHALLENGED THE L EGALITY OF THE ASSESSMENT MADE U/S 153C/143(3) OF THE IT ACT. I H AVE EXAMINED THE LEGALITY OF THE ASSESSMENT IN THE ASSM T. YEAR 2001-02 AND HAVE DECIDED THAT THE ASSESSMENT MADE U /S 153C/143(3) IS ILLEGAL. FOLLOWING THE SAID ORDER T HE ORDER PASSED U/S 153C/143(3) FROM THIS YEAR IS ALSO HELD AS ILLEGAL FOR THE SAME REASONS AND ACCORDINGLY THE ASSESSMEN T IS QUASHED. 51. THE ADDITION OF RS. 72 LACS MADE BY THE ASSESSI NG OFFICER ON ACCOUNT OF SHORT TERM CAPITAL GAIN WAS DELETED BY T HE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) AFTER MAKING TH E FOLLOWING OBSERVATIONS :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS WRITTEN SUBMISSIONS OF THE AR. IT IS BROUGHT TO MY NOTICE THAT THE ASSESSEE NEITHER PURCHASED ANY LAND NOR GAVE TH E ADVANCE TO THE LAND OWNERS. IT IS SUBMITTRED THAT THE MONE Y WAS GIVEN TO THE GRAM PRADHAN SO THAT HE MAY PERUSED CERTAIN LAND OWNERS TO SALE THEIR LAND. UNFORTUNATELY THE ASSE SSEE DID NOT GET THE LAND AND IN THE MEANTIME THE FOREST DEPARTM ENT OF THE STATE GOVT. AGREED TO GIVE THE FOREST LAND TO THE A SSESSEE AND WHEN THE ASSESSEE BECAME SURE THAT HE WILL GET THE FOREST LAND HE RECEIVED BACK FROM THE GRAM PRADHAN. THERE IS N O EVIDENCE THAT THE ASSESSEE RECEIVED ANY PREMIUM AS AGAINST THE ADVANCE GIVEN TO THE GRAM PRADHAN. THERE IS NO IOT A OF EVIDENCE TO SUGGEST THAT THE ASSESSEE GOT RS. 1 CRO RE AGAINST THE ADVANCE OFRS. 28 00 000/-. IN VIEW OF THE SUPR EME COURT 60 DECISION IN THE CASE OF K.P. VARGHEESE NO ESTIMATE OF THE CONSIDERATION CAN BE MADE. ACCORDINGLY I HOLD THA T THE ASSESSEE RECEIVED BACK ONLY RS. 28 00 000/- AND THE RE IS NO SHORT TERM CAPITAL GAIN OF RS. 72 00 000/-. ACCORD INGLY I DELETE THE ADDITION OF RS. 72 00 000/-. ACCORDINGL Y THE APPELLANT GETS RELIEF OFRS. 72 00 000/-. IN THE RE SULT THE GROUND NO. 3 IS ALLOWED. 52. ITA NO. 172/IND/2008 AGAINST THE ABOVE ORDER OF CIT(A) T HE REVENUE HAS PREFERRED THIS APPEAL ON THE FOLLOWING GROUNDS :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN : 1. QUASHING THE ORDER PASSED U/S 153C/143(3) OF THE I. T. ACT 1961. 2. DELETING THE ADDITION OF RS.72 00 000/- MADE BY THE A.O. ON ACCOUNT OF SHORT TERM CAPITAL GAIN. 53. THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) QUA SHED THE ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSI NG OFFICER U/S 153C OF THE ACT WITH THE FOLLOWING OBSERVATIONS :- IN THIS GROUND THE APPELLANT HAS CHALLENGED THE L EGALITY OF THE ASSESSMENT MADE U/S 153C/143(3) OF THE IT ACT. I H AVE EXAMINED THE LEGALITY OF THE ASSESSMENT IN THE ASSM T. YEAR 2001-02 AND HAVE DECIDED THAT THE ASSESSMENT MADE U /S 153C/143(3) IS ILLEGAL. FOLLOWING THE SAID ORDER T HE ORDER 61 PASSED U/S 153C/143(3) FROM THIS YEAR IS ALSO HELD AS ILLEGAL FOR THE SAME REASONS AND ACCORDINGLY THE ASSESSMEN T IS QUASHED. 54. THE ADDITION OF RS. 42 85 356/- MADE BY THE ASS ESSING OFFICER ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL WAS DELETED BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) AFTER MAKING TH E FOLLOWING OBSERVATIONS :- ON THE ABOVE FACTS IT IS QUITE EVIDENT THAT ALL THE SHARE APPLICATION MONEY AT RS. 47 55 356/- HAS BEEN PROVI DED BY M/S GTV WHO IS THE REGULAR INCOME TAX PAYER. THE COPY OF A/C OF SHARE APPLICATION MONEY AND GTV IN THE BOOKS OF CHIRCHIND HYDRO POWER LTD. AND THE COPY OF A/C OF C HIRCHIND HYDRO POWER LTD. IN THE BOOKS OF GVT AND THE CONFIR MATION FROM M/S GTV ARE FILED. ON THE FACTS I FIND THAT THE ABOVE SAID COMPANY IS INCOME TAX PAYER AND HAVE ACCEPTED TO HAVE CONTRIBUTED THE SHA RE APPLICATION MONEY. THE HONOURABLE SUPREME COURT IN THE CASE OF CIT V. STELLER INVESTMENT LTD. AS REPORTED ON 25 1 ITR 263 SC HAVE HELD THAT WHERE THE INCOME TAX PAYER ACCEPT S THE CONTRIBUTION OF SHARE CAPITAL NO ADDITION SHOULD BE MADE IN THE HANDS OF THE COMPANY. RECENTLY THE SC HAS REAFFIRMED THE ABOVE SAID PRIN CIPLES BY MAKING THE STRONG OBSERVATIONS THAT EVEN IF THERE A RE THE BOGUS SHARE HOLDERS NO ADDITION CAN BE MADE IN THE HANDS OF THE COMPANY. THIS PRINCIPLES HAS BEEN LAID DOWN BY THE S.C. IN THE CASE OF CIT V. LOVELY EXPORT (P) LTD. AS REPORT ED ON (2008) 216 CTR S.C. 195. IN VIEW OF THE ABOVE THE SHARE 62 APPLICATION MONEY AT RS.42 85 356/- IS ACCEPTED AND THE ADDITION MADE TOWARDS THE SAME IS REMOVED. ACCORDI NGLY THE APPELLANT GETS THE RELIEF OF RS.42 85 356/-. IN TH E RESULT THE GROUND NO. 3 IS ALLOWED. 55. ITA NO. 174/IND/2008 AGAINST THE ABOVE ORDER THE REVENUE HAS PREFERRED THIS APPEAL ON THE FOLLOWING GROUNDS :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN : 1. QUASHING THE ORDER PASSED U/S 153C/143(3) OF THE I. T. ACT 1961. 2. DELETING THE ADDITION OF RS.42 85 356/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL. 56. VARIOUS OTHER ADDITIONS WERE MADE BY THE ASSESSING OFFICER ON MERIT WHICH HAVE BEEN PARTLY DELETED BY THE LD. CIT(A) IN RESPECT OF UNEXPLAINED PURCHASES ADDITION WAS MADE BY THE ASSESSING OFFIC ER U/S 69C WHICH HAS BEEN DELETED BY THE LD. CIT(A) A FTER RECORDING FOLLOWING FINDINGS AND OBSERVATIONS :- 3. I HAVE GONE THROUGH THE ASSESSMENT ' 63 ORDER AS WELL AS THE WRITTEN SUBMISSIONS OF THE APPELLANT. I FIND THAT THE ASSESSING OFFICER HAS TREATED THE PURCHASES MADE FROM THE SRD STEEL (P) LTD AS BOGUS. HE ALSO TREATED 1/4TH PORTION OF PURCHASES FROM FOUR OTHER PARTIES ALSO AS BOGUS. HE HAS GIVEN THE REASON THAT EVEN AFTER A NOTICE U/S. 131 TO M/S. SRD STEEL AND NOTICE U] S. 133(6) TO FOUR OTHER PARTIES NOBODY ATTENDED ON THEIR BEHALF AND THEREFORE HE DISALLOWED ALL THE PURCHASES MADE FROM SRD STEEL AND ALSO DISALLOWED 1/4TH PORTION OF OTHER PURCHASES AS IN LINE WITH OTHER FIRMS OF THE CONCERNS OF THE GROUP. I HAVE SEEN THE COPY OF THE NOTICE ISSUED U/S. 131 ON 23-11-2007 TO SRD STEEL WHICH IS SAID TO HAVE BEEN SENT BY THE AO CALLING FOR CONFIRMATION OF THE SALES MADE BY HIM. I FIND THAT LARGE NUMBER OF SUPPLIERS HAVE SENT THEIR CONFIRMATIONS FOR SUPPLIES MADE BY THEM. ONLY FOUR PARTIES HAVE FAILED TO SEND THEIR COPIES OF ACCOUNTS. THERE MAY BE SEVERAL REASONS FOR NOT SENDING THE COPIES. THE ASSESSMENT ORDER IS SILENT WHETHER THE NOTICES WERE ACTUALLY SERVED ON THE SUPPLIERS. I AM OF THE OPINION THAT SIMPLY BECAUSE SOME PERSON DOES NOT ATTEND IN COMPLIANCE TO 64 THE NOTICE U/S 131 OR U] S. 133(6) NO ADVERSE INFERENCE CAN BE DRAWN SIMPLY FOR HIS. NON ATTENDANCE. IT MAY BE MENTIONED HERE THAT I AM FORTIFIED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ANEES AHEMAD & SONS VS. CIT AS REPORTED IN (2008) 297 ITR 441 SC. THE AR HAS FILED THE COPIES OF ACCOUNT OF ALL THE SUPPLIERS WHICH WERE ALSO AVAILABLE BEFORE THE ASSESSING OFFICER. I FIND THAT ALL THE PAYMENTS ARE MADE THROUGH CHEQUES AND THE MATERIAL HAS BEEN RECEIVED THROUGH TRANSPORT LRS. THE ASSESSEE PRODUCES EXCISABLE ITEMS AND CLAIMS CENVAT CREDITS. THE CHARGE OF THE ASSESSING OFFICER THAT THE CHEQUES PAYMENTS MADE TO THE SUPPLIERS ARE RECEIVED BACK IN CASH HAS NO BASIS AND HE HAS NOT POINTED OUT ANY DEFECTS IN THE ACCOUNT BOOKS AND HAS MADE HUGE DISALLOWANCE FROM PURCHASES ON VERY FLIMSY GROUNDS AND THEREFORE THIS DISALLOWANCE CANNOT BE SUSTAINED. ACCORDINGLY THE APPELLANT GETS THE RELIEF OF RS. 78 76 426/- AND ACCORDINGLY GROUND NO. 4 & 5 ARE ALLOWED. 57. IN RESPECT OF ADDITION MADE ON ACCOUNT OF UNEXPLAINED PURCHASES FROM M/S. EVEREST STEEL THE LD. 65 CIT(A) HAS DELETED THE ADDITION AFTER HAVING THE FO LLOWING OBSERVATIONS :- I HAVE GONE THROUGH THE SUBMISSIONS AND THE ASSESSMENT ORDER. I FIND THAT THE ASSESSEE HAS PURCHASED ONLY 7.7 METRIC TONE OF STEEL FROM M/S. EVER BRIGHT STEEL FOR RS. 11 54 950/-. THE PRESUMPTION OF THE AO IS PATENTLY WRONG THAT THE PURCHASE IS FOR 75 METRIC TONES. THE COST OF 75 METRIC TONE WILL BE 10 TIMES MORE. I AGREE WITH THE AR THAT 7.7 METRIC TONE IS ALMOST HALF OF TRUCK LOAD AND TRANSPORTATION CHARGES AT RS. 3206/- ON 7.11.1999 ARE QUITE REASONABLE. THE AO HAS MADE A WRONG PRESUMPTION ABOUT THE WEIGHT OF THE SUPPLY. IN VIEW OF THE ABOVE I REMOVE THE ADDITION OF RS. 11 54 950/- BY ACCEPTING THE PURCHASE AS GENUINE. IN THE RESULT APPELLANT GETS THE RELIEF OF RS.11 54 950/- AND THIS GROUND IS ALLOWED. 58. THE AO HAS ALSO MADE ADDITION OF RS. 38 65 765/ - ON ACCOUNT OF UNEXPLAINED PURCHASES FROM M/S. MECH & FAB AND M/S. MECHMEN WHICH HAS BEEN DELETED BY THE LD. CIT(A) AFTER HAVING FOLLOWING OBSERVATIONS :- I HAVE SEEN THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSIONS OF THE AR. THE AO FOUND THAT THERE NO TRANSPORTATION CHARGES 66 TOWARDS THE PURCHASE FROM M/S. MECH & FAB INDUSTRIES AND M/S. MECHMEN INDUSTRIESAND THEREFORE THE PURCHASES MADE FROM THEM ARE BOGUS BECAUSE THEY ARE THE SISTER CONCERNS. I AGREE THE AR THAT NO SISTER CONCERN WILL PAY 20 % TAX TO MAKE A SAVING OF 30 % INCOME TAX AND THAT THE CONSIDERATION INCLUDES THE TRANSPORTATION CHARGES. ACCORDINGLY I REMOVE THE ADDITION OF RS. 38 65 765/-. IN THE RESULT THE APPELLANT GETS THE RELIEF OF RS. 38 65 765/- AND GROUND NO. 7 IS ALLOWED. 59. THE ADDITION MADE ON ACCOUNT OF FABRICATION EXPENSES AMOUNTING TO RS. 44 68 637/- WAS MADE BY THE ASSESSING OFFICER U/S 69C AND THE SAME WAS DELE TED BY THE LD. CIT(A) AFTER HAVING FOLLOWING OBSERVATIO NS :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE AR. THE AO HAS DISALLOWED THE FABRICATION EXPENSES AT RS. 36 36 992/- OUT OF TOTAL CLAIM OF RS. 37 37 673/- AT MALANPUR UNIT AND AT RS. 8 31 645/- OUT OF TOTAL CLAIM OF RS. 13 00 283/- AT MANDIDEEP UNIT. THE AR HAS POINTED OUT THAT THE APPELLANT HAS SUBCONTRACTED ALL THE LABOUR WORK AND HAS NOT PAID SINGLE PENNY AS THE WAGES TO THE WORKERS. INFACT THE APPELLANT PAID THE FABRICATION CHARGES IN PLACE OF WAGES AS A 67 MATTER OF HIS WORKING POLICY. SIMPLY BECAUSE THE BILLS ARE RECORDED IN THE LAST MONTH OF THE YEAR IT CANNOT BE SAID THAT THEY ARE BOGUS PARTICULARLY BECAUSE NO ENGINEERING WORKS CAN BE DONE WITHOUT LAOUR WORK AND BECAUSE THE PAYMENTS TO THE SUB CONTRACTORS ARE MADE FROM TIME TO TIME AS EVIDENT FROM THEIR COPIES OF ACCOUNTS ON RECORD. I HOLD THAT BOTH THE DISALLOWANCES MADE BY THE ASSESSING OFFICER OUT OF FABRICATION EXPENSES AT MALANPUR AND MANDIDEEP UNITS ARE UNJUSTIFIED. ACCORDINGLY I REMOVE BOTH THE ADDITIONS OF RS. 36 36 992/- AND OF RS. 8 31 645/-. IN THE RESULT GROUND NO. 8 & 9 ARE ALLOWED. 60. THE AO HAS ALSO MADE ADDITION ON ACCOUNT OF FOREIGN TRAVEL EXPENSES INCURRED BY THE ASSESSEE W HICH WAS ALLEGED TO BE NOT RELATED TO THE BUSINESS. BY T HE IMPUGNED ORDER THE LD. CIT(A) HAS DELETED THE DISALLOWANCE AFTER HAVING THE FOLLOWING OBSERVATION S :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS OF THE AR. I DONT KNOW FROM WHERE THE AO GOT AN IDEA THAT THE FOREIGN TRAVELING EXPENSES FOR VEENA AGRAWAL AND SMITA AGRAWAL WERE INCURRED BY THE APPELLANT. THE DOCUMENTS BEFORE ME INDICATE 68 THAT SHRI MAHESH AGRAWAL HAD GONE TO GERMANY AND FRANCE AS AMANAGING DIRECTOR AND FOR THE BUSINESS PURPOSES. ACCORDINGLY I REMOVE THE ADDITION OF RS. 3 97 885/-. IN RESULT THE APPELLANT GETS RELIEF OF RS. 3 97 885/- AND THIS GROUND IS ALLOWED. 61. GROUNDS TAKEN IN I.T.(SS).A.NO. 175/IND/2008 A.Y. 2000-01 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN - 1. QUASHING THE ASSESSMENT PROCEEDINGS U/S153C. 2. PARTLY ALLOWING RELIEF TO THE ASSESSEE ON THE GROUND OF REJECTION OF BOOKS OF ACCOUNT. 3. DELETING THE ADDITION OF RS. 78 76 426/- MADE BY THE ASSESSING OFFICER U/S 69C ON ACCOUNT OF UNEXPLAINED BOGUS PURCHASE. 4. DELETING THE ADDITION OF RS. 11 54 950/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED PURCHASES FROM EVEREST STEEL. 5. DELETING THE ADDITION OF RS. 38 65 765/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED PURCHASES FROM M/S. MECH & FAB & M/S. MECHMEN. 6. DELETING THE ADDITION OF RS. 44 68 637/- MADE BY THE ASSESSING OFFICER U/S 69C ON ACCOUNT OF FABRICATION EXPENSES. 7. DELETING THE ADDITION OF RS. 3 97 885/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED FOREIGN TRAVELS NOT RELATED TO BUSINESS. 69 62. IN THE ASSESSMENT YEAR 2001-02 ADDITION WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED PURCHASES AMOUNTING TO RS. 1 14 02 395/ - U/S 69C WHICH HAS BEEN DELETED BY THE LD. CIT(A) A FTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSIONS OF THE APPELLANT. I FIND THAT THE ASSESSING OFFICER HAS TREATED THE PURCHASES MADE FROM THE SRD STEEL (P) LTD AS BOGUS. HE ALSO TREATED 1/4TH PORTION OF PURCHASES FROM TWO OTHER PARTIES ALSO AS BOGUS. HE HAS GIVEN THE REASON THAT EVEN AFTER A NOTICE U/S. 131 TO M/S. SRD STEEL AND NOTICE U] S. 133(6) TO TWO OTHER PARTIES NOBODY ATTENDED ON THEIR BEHALF AND THEREFORE HE DISALLOWED ALL THE PURCHASES MADE FROM SRD STEEL AND ALSO DISALLOWED 1/4TH PORTION OF OTHER PURCHASES AS IN LINE WITH OTHER FIRMS OF THE CONCERNS OF THE GROUP. I HAVE SEEN THE COPY OF THE NOTICE .ISSUED U/S. 131 ON 23-11-2007 TO SRD STEEL WHICH IS SAID TO HAVE BEEN SENT BY THE AO CALLING FOR CONFIRMATION OF THE SALES MADE BY 70 HIM. I FIND THAT LARGE NUMBER OF SUPPLIERS HAVE SENT THEIR CONFIRMATIONS FOR SUPPLIES MADE BY THEM. ONLY THREE PARTIES HAVE FAILED TO SEND THEIR COPIES OF ACCOUNTS. THERE MAY BE SEVERAL REASONS FOR NOT SENDING THE COPIES. THE ASSESSMENT ORDER IS SILENT WHETHER THE NOTICES WERE ACTUALLY SERVED ON THE SUPPLIERS. I AM OF THE OPINION THAT SIMPLY BECAUSE SOME PERSONS DO NOT ATTEND IN COMPLIANCE TO THE NOTICE U/S 131 OR U/S . 133(6) NO ADVERSE INFERENCE CAN BE DRAWN SIMPLY FOR HIS NON ATTENDANCE. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE I AM FORTIFIED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ANEES AHEMAD & SONS VS. CIT AS REPORTED IN (2008) 297 ITR 441 SC. THE AR HAS FILED THE COPIES OF ACCOUNT OF ALL THE SUPPLIERS WHICH WERE ALSO AVAILABLE BEFORE THE ASSESSING OFFICER. I FIND THAT ALL THE PAYMENTS ARE MADE THROUGH CHEQUES AND THE MATERIAL HAS BEEN RECEIVED THROUGH TRANSPORT LRS. THE ASSESSEE PRODUCES EXCISABLE ITEMS AND CLAIMS CENVAT CREDITS. THE CHARGE OF THE ASSESSING OFFICER THAT THE CHEQUES PAYMENTS MADE TO THE SUPPLIERS ARE RECEIVED BACK IN CASH HAS NO BASIS 71 AND HE HAS NOT POINTED OUT ANY DEFECTS IN THE ACCOUNT BOOKS AND HAS MADE HUGE DISALLOWANCE FROM PURCHASES ON VERY FLIMSY GROUNDS AND THEREFORE THIS DISALLOWANCE CANNOT BE SUSTAINED. ACCORDINGLY THE APPELLANT GETS THE RELIEF OF RS. 1 14 02 395/-AND THUS GROUND NO. 4 & 5 ARE ALLOWED. 63. AN ADDITION WAS ALSO MADE BY THE ASSESSING OFFI CER ON ACCOUNT OF EXPENDITURE INCURRED ON FABRICATION A T MALANPUR UNIT AT RS. 23 96 539/-. IT WAS DELETED BY THE LD. CIT(A) AFTER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE AR. THE AO HAS DISALLOWED THE FABRICATION EXPENSES AT RS. 23 96 539/- OUT OF TOTAL CLAIM OF RS. 24 02 269/- AT MALANPUR UNIT AND AT RS. NIL OUT OF TOTAL CLAIM OF RS. 8 44 628/- AT MANDIDEEP UNIT. THE AR HAS POINTED OUT THAT THE APPELLANT HAS SUBCONTRACTED ALL THE LABOUR WORK AND HAS NOT PAID SINGLE PENNY AS THE WAGES TO THE WORKERS. INFACT THE APPELLANT PAID THE FABRICATION CHARGES IN PLACE OF WAGES AS A MATTER OF HIS WORKING POLICY. SIMPLY BECAUSE THE BILLS ARE RECORDED IN THE LAST MONTH OF THE YEAR IT CANNOT BE SAID THAT THEY ARE BOGUS PARTICULARLY BECAUSE NO ENGINEERING WORKS CAN BE DONE WITHOUT LAOUR WORK AND BECAUSE THE PAYMENTS TO THE SUB CONTRACTORS ARE MADE FROM TIME TO TIME AS EVIDENT FROM THEIR COPIES OF ACCOUNT ON 72 RECORD I HOLD THAT BOTH THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF FABRICATION EXPENSES AT MALANPUR UNIT IS UNJUSTIFIED. ACCORDINGLY I REMOVE BOTH THE ADDITIONS OF RS. 36 36 992/- AND OF RS. 8 31 645/-. IN THE RESULT GROUND NO. 6 IS ALLOWED. 64. GROUNDS TAKEN IN I.T.(SS).A.NO. 176/IND/2008 A.Y. 2001-02 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN - 1. QUASHING THE ASSESSMENT PROCEEDINGS U/S 153C. 2. PARTLY ALLOWING RELIEF TO THE ASSESSEE ON THE GROUND OF REJECTION OF BOOKS OF ACCOUNT. 3. DELETING THE ADDITION OF RS. 1 14 02 395/- MADE BY THE ASSESSING OFFICER U/S 69C ON ACCOUNT OF UNEXPLAINED BOGUS PURCHASE. 4. DELETING THE ADDITION OF RS. 23 96 539/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF FABRICATION EXPENSES. 65. IN THE ASSESSMENT YEAR 2002-03 THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED PURCHASES AMOUNTING TO RS. 51 77 530/- WAS DELETED BY THE LD. CIT(A) AF TER HAVING THE FOLLOWING OBSERVATIONS :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSIONS OF THE AR. I FIND THAT THE AO HAS NOT GIVEN ANY BASIS FOR THE DISALLOWANCE OF 1/4 TH AMOUNT OF THE TOTAL PURCHASES. THE LOW G.P. CANNOT BE A REASON 73 FOR TREATING THE PURCHASE AS BOGUS. THE APPELLANT HAS FILED THE COPIES OF ACCOUNT OF THE SUPPLIERS AND THEY WERE ALSO AVAILABLE BEFORE THE AO. IT REVEALS THAT ALL THE PAYMENTS ARE MADE THROUGH CHEQUES TO THE SUPPLIERS AND THE MATERIAL HAS BEEN RECEIVED THROUGH TRANSPORT. THERE IS ABSOLUTELY NO EVIDENCE TO INDICATE THAT THE APPELLANT HAS RECEIVED BACK THE CASH AMOUNT FROM THE SUPPLIERS OR THAT THE PURCHASED MATERIAL HAS NOT REACHED THE FACTORY PREMISES OF THE APPELLANT. ON THESE FACTS I FIND THAT THERE IS NO JUSTIFICATION FOR THE DISALLOWANCE OF RS. 51 77 539/-. ACCORDINGLY THE DISALLOWANCE OF RS. 51 77 530/- IS DIRECTED TO BE REMOVED. ACCORDINGLY THE APPELLANT GETS THE RELIEF OF RS. 51 77 530/-. IN THE RESULT THE GROUND NO.4 IS ALLOWED. 66. THE ADDITION WAS ALSO MADE BY THE ASSESSING OFFICER ON ACCOUNT OF MANUFACTURING EXPENSES AND SALARY AND WAGES AMOUNTING TO RS. 81 48 590/- U/S 69C AFTER RECORDING FOLLOWING FINDINGS THE LD. CIT (A) HAS PARTLY DELETED THE ADDITION TO THE EXTENT OF RS. 76 47 008/- :- I HAVE PERUSED THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS OF THE AR. AFTER MINUTE EXAMINATIONS I FIND THAT THE WHOLE CONFUSION HAS ARISEN BECAUSE OF THE MISTAKE OF THE APPELLANT IN NOT BIFURCATING THE RECEIPT FROM DELHI METRO AMOUNTING TO RS. 1 67 46 360/-. THE APPELLANT HAD LET OUT ITS FACTORY AND GODOWN FOR THE AMOUNTS OF RS. 70 00 000/- 74 AND RS. 19 80 000/- RESPECTIVELY AND ALL THE BALANCE EXPENDITURE WAS TOWARDS THE REIMBURSEMENT OF SALARY WAGES AND MATERIAL. IF THESE FACTS ARE TAKEN INTO CONSIDERATION THERE WILL BE NOT A BIG DIFFERENCE. AFTER CONSIDERING THE RENTAL THE BALANCE FOR SALARY WAGES ETC. COMES TO RS. 76 47 008/- AND THE DIFFERENCE POINTED OUT BY THE ASSESSING OFFICER COMES TOR S. 81 48 590/- AND THE DIFFERENCE COMES TO RS. 5 01 582/-. ACCORDINGLY I CONFIRM THE DISALLOWANCE OF RS. 5 01 582/- TOWARDS THE DIFFERENCE ( 81 48 590-76 47 008). IN THE RESULT THE APPELLANT GETS THE RELIEF OF RS. 76 47 008/-. ACCORDINGLY THIS GROUND IS PARTLY ALLOWED. 67. IN THE ASSESSMENT YEAR 2003-04 THE AO HAS MADE ADDITION OF RS. 50 24 882/- ON ACCOUNT OF BOGUS PURCHASE WHICH HAS BEEN DELETED BY THE LD. CIT(A) AFTER HAVING FOLLOWING OBSERVATIONS :- I HAVE GONE THROUGH THE ASSMT. ORDER AS WELL AS THE WRITTEN SUBMISSIONS OF THE APPELLANT. I FIND THAT THE ASSESSING OFFICER HAS TREATED 1/4TH OF ALL PURCHASES AS BOGUS. HE HAS GIVEN THE REASON THAT EVEN AFTER THE NOTICES U] S. 133(6) THE PARTIES LIKE GANGA IRON MITTAI ISPATH AND SUNIL INDUSTRIAL CORPORATION DID NOT ATTEND AND THE PURCHASES MADE FROM SURABHI ENTERPRISES DO NOT INDICATE THE TRANSPORTATION CHARGES TOWARDS PURCHASE MADE FROM SURABHI ENTERPRISES AND THEREFORE HE DISALLOWED 1/4 TH PORTION OF ALL THE PURCHASES FOLLOWING 75 HIS DECISION IN THE EARLIER ASSMT. YEARS. I FIND THAT LARGE NUMBER OF SUPPLIERS HAVE SENT THEIR CONFIRMATIONS FOR SUPPLIES MADE BY THEM. ONLY THREE PARTIES HAVE FAILED TO SEND THEIR COPIES OF ACCOUNT. THERE MAY BE SEVERAL REASONS FOR NOT SENDING THE COPIES AND CONFIRMATION LETTERS. THE ASSESSMENT ORDER IS SILENT WHETHER THE NOTICES WERE ACTUALLY SERVED ON THE SUPPLIERS. I AM OF THE OPINION THAT SIMPLY BECAUSE SOME PERSON DO NOT ATTEND IN COMPLIANCE TO THE NOTICE U/S 131 OR U/S. 133(6) NO ADVERSE INFERENCE CAN BE DRAWN SIMPLY FOR HIS NON ATTENDANCE. IN THE GIVEN FACTS AND CIRCUMSTANCES I AM FORTIFIED BY THE DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF ANEES AHEMAD & SONS VS. CIT AS REPORTED IN (2008) 297 ITR 441 SC. THE AR HAS RUED THE COPIES OF ACCOUNT OF ALL THE SUPPLIERS WHICH WERE ALSO AVAILABLE BEFORE THE ASSESSING OFFICER. I FIND THAT ALL THE PAYMENTS ARE MADE THROUGH CHEQUES AND THE MATERIAL HAS BEEN RECEIVED THROUGH TRANSPORT LRS. REGARDING THE PURCHASES FROM SURABHI ENTERPRISES THE ASSESSEE HAS FILED MANY TRANSPORT RECEIPTS. WHENEVER THE TRANSPORT RECEIPTS ARE NOT AVAILABLE THE FORM NO.75/49 THE COMMERCIAL TAX-RULES- STAMPED AT DIFFERENT SALES TAX CHECK POST IS FILED. MERELY BECAUSE SOME OF THE TRANSPORT RECEIPTS ARE NOT TRACEABLE IT DOES NOT MEAN THAT THE PURCHASES ARE BOGUS PARTICULARLY WHEN THE PAYMENT HAS BEEN MADE THROUGH CHEQUES. THE ASSESSEE PRODUCES EXCISABLE ITEMS AND CLAIMS CENVAT CREDITS. THE CHARGE OF THE ASSESSING OFFICER THAT THE CHEQUE PAYMENTS MADE TO THE SUPPLIERS ARE RECEIVED BACK IN CASH HAS NO 76 BASIS AND HE HAS NOT POINTED OUT ANY DEFECTS IN THE ACCOUNT BOOKS AND HAS MADE HUGE DISALLOWANCE FROM PURCHASES ON VERY FLIMSY GROUNDS AND THEREFORE THIS DISALLOWANCE CANNOT BE SUSTAINED. ACCORDINGLY THE APPELLANT GETS THE RELIEF OF RS. 50 24 882/- AND ACCORDINGLY GROUND NO. 4 IS ALLOWED. 68. WHILE FRAMING ASSESSMENT U/S 153C THE AO HAS ALSO MADE ADDITION OF RS. 2 10 00 000/- U/S 69C ON ACCOUNT OF COMMISSION PAYMENT WHICH HAS BEEN DELETED BY THE LD. CIT(A) AFTER HAVING FOLLOWING OBSERVATIONS :- I HAVE SEEN THE ASSESSMENT ORDER AS WELL AS THE ORAL AND WRITTEN SUBMISSIONS OF THE AR. I FIND FORCE IN THE SUBMISSIONS OF THE AR. WHEN HE POINTS OUT THAT WHEN THE APPELLANT RECEIVED THE COMMISSION OF RS. 3 56 81 619/- FROM TECHNO PROMO EXPORT. IT WAS ACCEPTED BY THE ASSESSING OFFICER WITHOUT RAISING MURMUR BUT WHEN IN THE IDENTICAL CIRCUMSTANCES THE APPELLANT CLAIMED THE EXPENDITURE OF ONLY RS. 2 10 00 000/- THE ASSESSING OFFICER MAKES HUE AND CRY. IF THE APPELLANT SPENDS RS. 2 10 00 000/- AND EARNS A HUGE AMOUNT OF RS. 3 56 81 619 WITHOUT DOING MANY EFFORTS IT HAS TO BE APPRECIATED. NO DOUBT CAN BE RAISED ABOUT THE GENUINENESS OF RECEIPTS AND PAYMENT WHICH ARE MADE THROUGH CHEQUES. WHATEVER SERVICES THE APPELLANT HAD RENDERED TO EARN THE COMMISSION THE SAME 77 SERVICES ARE RENDERED BY OTHER PARTIES FOR LESSER REMUNERATION. I FIND NO REASON FOR THE DISALLOWANCE OF COMMISSION PAYMENT ON THE GROUND OF ABSENCE OF EVIDENCE FOR SERVICES RENDERED BY THEM. ACCORDINGLY I REMOVE THE DISALLOWANCE OF RS. 2 10 00 000/-. IN THE RESULT THE GROUND NO.5 IS ALLOWED. 69. IN ASSESSMENT YEAR 2004-05 THE ADDITION WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED BOGUS PURCHASES U/S 69C AMOUNTING TO RS. 6 43 50 293/- WHICH HAS BEEN DELETED BY THE LD . CIT(A) AFTER RECORDING FOLLOWING OBSERVATIONS :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSIONS OF THE APPELLANT. I FIND THAT THE ASSESSING OFFICER HAS TREATED THE PURCHASES MADE FROM THE SRD STEEL (P) LTD AS BOGUS. HE ALSO TREATED 1/4TH PORTION OF ALL OTHER PURCHASES FROM OTHER PARTIES ALSO AS BOGUS. HE HAS GIVEN THE REASON THAT EVEN AFTER A NOTICE U/S. 131 TO M/S. SRD STEEL AND NOTICE U] S. 133(6) TO FOUR OTHER PARTIES NOBODY ATTENDED ON THEIR BEHALF AND THEREFORE HE DISALLOWED ALL THE PURCHASES MADE FROM SRD STEEL AND ALSO DISALLOWED 1/4TH PORTION OF OTHER PURCHASES AS IN LINE WITH OTHER FIRMS OF THE CONCERNS OF THE GROUP. I HAVE SEEN THE COPY OF THE NOTICE ISSUED U/S. 131 ON 23-11-2007 TO SRD STEEL WHICH IS SAID TO HAVE BEEN SENT BY THE AO CALLING FOR CONFIRMATION OF THE SALES MADE BY HIM. I FIND THAT LARGE NUMBER OF SUPPLIERS HAVE SENT THEIR CONFIRMATIONS FOR SUPPLIES MADE BY THEM. ONLY FOUR PARTIES HAVE FAILED TO SEND THEIR COPIES OF ACCOUNTS. 78 THERE MAY BE SEVERAL REASONS FOR NOT SENDING THE COPIES. THE ASSESSMENT ORDER IS SILENT WHETHER THE NOTICES WERE ACTUALLY SERVED ON THE SUPPLIERS. I AM OF THE OPINION THAT SIMPLY BECAUSE SOME PERSON DOES NOT ATTEND IN COMPLIANCE TO THE NOTICE U/S 131 OR U] S. 133(6) NO ADVERSE INFERENCE CAN BE DRAWN SIMPLY FOR HIS NON ATTENDANCE. IN THE GIVEN FACTS AND CIRCUMSTANCES I AM FORTIFIED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ANEES AHEMAD & SONS VS. CIT AS REPORTED IN (2008) 297 ITR 441 SC. THE AR HAS FILED THE COPIES OF ACCOUNT OF ALL THE SUPPLIERS WHICH WERE ALSO AVAILABLE BEFORE THE ASSESSING OFFICER. I FIND THAT ALL THE PAYMENTS ARE MADE THROUGH CHEQUES AND THE MATERIAL HAS BEEN RECEIVED THROUGH TRANSPORT LRS. I FIND THAT THE DOUBT OF THE AO ABOUT THE SMALL AMOUNT OF TRANSPORTATION CHARGES IS MISPLACED BECAUSE THEY ARE SIMPLY FOR LOADING AND UNLOADING. THE JAR HAS FILED THE DETAILED CHART SHOWING TRANSPORTATION CHARGES LOADING AND UNLOADING CHARGES AT PAGE NO. 34 TO 36 OF THE COMPLIATION. SOME TIME TRANSPORTATION CHARGES ARE INCLUDED IN THE PURCHASE AMOUNTS. THE ASSESSEE PRODUCES EXCISABLE ITEMS AND CLAIMS CENVAT CREDITS. THE CHARGE OF THE ASSESSING OFFICER THAT THE CHEQUE PAYMENTS MADE TO THE SUPPLIERS ARE RECEIVED BACK IN CASH HAS NO BASIS AND HE HAS NOT POINTED OUT ANY DEFECTS IN THE ACCOUNT BOOKS AND HAS MADE HUGE DISALLOWANCE FROM PURCHASES ON VERY FLIMSY GROUNDS AND THEREFORE THIS 79 DISALLOWANCE CANNOT BE SUSTAINED. ACCORDINGLY THE APPELLANT GETS THE RELIEF OF RS. 6 43 50 293/- AND THESE GROUNDS ARE ALLOWED. 70. THE AO HAS ALSO MADE OF RS. 1 00 00 000/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE ON EXTENSIVE DEVELOPMENT WORK U/S 69C.. WHICH HAS BEEN DELETED B Y THE LD. CIT(A) AFTER HAVING FOLLOWING OBSERVATIONS :- I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSIONS OF THE AR. THE ASSESSING OFFICER FOUND THAT ONE UNIT AT GTV MANDIDEEP RAISED THE INTERNAL BILL FOR THE WORK DONE AT GTV INDRASAGAR PROJECT FOR RS. 2 CRORES. THE ASSESSING OFFICER IS OF THE OPINION THAT THERE MUST HAVE BEEN THE EXPENDITURE OF RS.1 CRORE AGAINST THE BILL OF RS. 2 CRORES AND THEREFORE HE MADE THE ADDITION OF RS. 1 CRORE TOWARDS UNEXPLAINED EXPENDITURE U/S 69C OF THE IT ACT. THE AR SUBMITTED THAT THESE ARE NOT THE INDEPENDENT UNITS AND MANY TIMES THE EXPENSES INCURRED BY ONE UNIT ARE ACCOUNTED FOR IN ANOTHER UNIT. SIMILARLY THE RECEIPTS DO NOT NECESSARILY RELATE TO THE EXPENDITURE INCURRED BY THE SAME UNIT. THE AR INVITED MY ATTENTION TO THE PROVISIONS OF SEC. 69C. HE SUBMITS THAT WHEN THE ACTUAL EXPENDITURE IS SEEN AND CORRESPONDING ENTRIES ARE NOT AVAILABLE IN THE ACCOUNT BOOKS THEN 80 ONLY THE ADDITION CAN BE MADE U/S 69C. THE EXPENDITURE CANNOT BE ESTIMATED AND ADDITION CANNOT BE MADE TOWARDS THE UNEXPLAINED EXPENDITURE. I AGREE WITH THE SUBMISSIONS OF THE AR AND FIND THAT THE ADDITION OF RS. 1 CRORE IS UNNECESSARY. ACCORDINGLY I DELETE THE ADDITION OF RS. 1 CRORE. IN THE RESULT THE APPELLANT GETS THE RELIEF OF RS. 1 00 00 000/- AND ACCORDINGLY THIS GROUND IS ALLOWED. 71. AGAINST THE ABOVE ORDER FOLLOWING GROUNDS TAKEN IN I.T.(SS).A.NO. 179/IND/2008 A.Y. 2004-05 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN - 1. QUASHING THE ASSESSMENT PROCEEDINGS U/S 153C. 2. PARTLY ALLOWING RELIEF TO THE ASSESSEE ON THE GROUND OF REJECTION OF BOOKS OF ACCOUNT. 3. DELETING THE ADDITION OF RS. 6 43 50 293/- MADE BY THE ASSESSING OFFICER U/S 69C ON ACCOUNT OF UNEXPLAINED BOGUS PURCHASE. 4. DELETING THE ADDITION OF RS. 1 00 00 000/- MADE BY THE ASSESSING OFFICER U/S 69C ON ACCOUNT OF UNEXPLAINED EXPENDITURE ON EXTENSIVE DEVELOPMENT WORK. 72. IN THE ASSESSMENT YEAR 2005-06 THE ADDITION WA S MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED BOGUS PURCHASES U/S 69C AMOUNTING TO 81 RS. 9 98 47 818/- WHICH HAS BEEN DELETED BY THE LD . CIT(A) AFTER RECORDING FOLLOWING OBSERVATIONS :- I HAVE GONE THROUGH THE ASSMT. ORDER AS WELL AS THE WRITTEN SUBMISSIONS OF THE APPELLANT. I FIND THAT THE ASSESSING OFFICER HAS TREATED THE PURCHASES MADE FROM THE SRD STEEL (P) LTD AS BOGUS. HE ALSO TREATED 1/4TH PORTION OF ALL OTHER PURCHASES FROM OTHER PARTIES ALSO AS BOGUS. HE HAS GIVEN THE REASON THAT EVEN AFTER A NOTICE U] S. 131 TO M/ S. SRD STEEL AND NOTICE U/S. 133(6) TO FOUR OTHER PARTIES NOBODY ATTENDED ON THEIR BEHALF AND THEREFORE HE DISALLOWED ALL THE PURCHASES MADE FROM SRD STEEL AND ALSO DISALLOWED 1/4TH PORTION OF OTHER PURCHASES AS IN LINE WITH OTHER FIRMS OF THE CONCERNS OF THE GROUP. I HAVE SEEN THE COPY OF THE NOTICE ISSUED U/S. 131 ON 23-11-2007 TO SRD STEEL WHICH IS SAID TO HAVE BEEN SENT BY THE AO CALLING FOR CONFIRMATION OF THE SALES MADE BY HIM. I FIND THAT LARGE NUMBER OF SUPPLIERS HAVE SENT THEIR CONFIRMATIONS FOR SUPPLIES MADE BY THEM. ONLY FOUR PARTIES HAVE FAILED TO SEND THEIR COPIES OF ACCOUNTS WHICH ARE FILED. THERE MAY BE SEVERAL REASONS FOR NOT SENDING THE COPIES. THE ASSESSMENT ORDER IS SILENT WHETHER THE NOTICES WERE ACTUALLY SERVED ON THE SUPPLIERS. I AM OF THE 82 OPINION THAT SIMPLY BECAUSE SOME PERSON DOES NOT ATTEND IN COMPLIANCE TO THE NOTICE U/S 131 OR U/S. 133(6) NO ADVERSE INFERENCE CAN BE DRAWN SIMPLY FOR HIS NON ATTENDANCE. IN THE GIVEN FACTS AND CIRCUMSTANCES I AM FORTIFIED BY THE DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF ANEES AHEMAD & S ONS VS. CIT AS REPORTED IN (2008) 297 ITR 441 SC. THE AR HAS FILED THE COPIES OF ACCOUNT OF ALL THE SUPPLIERS WHICH WERE ALSO AVAILABLE BEFORE THE ASSESSING OFFICER. I FIND THAT ALL THE PAYMENTS ARE MADE THROUGH CHEQUES AND THE MATERIAL HAS BEEN RECEIVED THROUGH TRANSPORT LRS. I FIND THAT THE DOUBT OF THE ASSESSING OFFICER ABOUT THE PURCHASES FROM NEON METAL AND KANAK RATNA STEEL ARE MISPLACED AS M/S. NEON METAL AND KANAK RATNA HAVE CONFIRMED THEIR TRANSACTIONS WITH THE APPELLANT. THE ASSESSEE PRODUCES EXCISABLE ITEMS AND CLAIMS CENVAT CREDITS. THE CHARGE OF THE ASSESSING OFFICER THAT THE CHEQUE PAYMENTS MADE TO THE SUPPLIERS ARE RECEIVED BACK IN CASH HAS NO BASIS AND HE HAS NOT POINTED OUT ANY DEFECTS IN THE ACCOUNT BOOKS AND HAS MADE HUGE DISALLOWANCE FROM PURCHASES ON VERY FLIMSY GROUNDS. THEREFORE THIS DISALLOWANCE CANNOT BE SUSTAINED. ACCORDINGLY THE APPELLANT GETS THE RELIEF OF RS. 9 98 47 818/- AND 83 ACCORDINGLY GROUND NOS. 4 & 5 ARE ALLOWED. 73. THE AO HAS ALSO MADE OF RS. 1 87 67 570/- ON ACCOUNT OF UNEXPLAINED PAYMENT TO PANCHSHEEL ENGINEERING U/S 69C OF THE INCOME-TAX ACT 1961 WH ICH HAS BEEN DELETED BY THE LD. CIT(A) AFTER HAVING FOL LOWING OBSERVATIONS :- I HAVE GONE THROUGH THE ORDER AS WELL AS THE WRITTEN AND ORAL SUBMISSIONS OF THE AR. FROM THE FACTS ON RECORD I FIND THAT THE ASSESSEE HAS NOT MADE ANY PAYMENTS TO PANCHSHEEL ENGG AND THAT THE SAID CONCERN IS NOT THE SUB CONTRACTOR OF THE ASSESSEE. IN FACT THE ASSESSEE HAS MADE THE PAYMENT TO M/S ARUN FABRICATORS AND M/S. PANCHSHEEL ENGG. IS THEIR SUB CONTRACTORS. THERE IS NO EVIDENCE THAT ANY PAYMENTS MADE BY THE ASSESSEE TO M/S. ARUN FABRICATORS HAVE COME BACK TO THE ASSESSEE IN ANY FORM. IN FACT THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO DRAW SUCH AN INFERENCE. ON THESE FACTS I DON'T FIND ANY JUSTIFICATION FOR THE ASSESSING OFFICER TO DISALLOW THE 1/5 TH PART AT RS 1 87 67 570/- OUT OF THE PAYMENTS AT RS. 9 38 37 859/- SAID TO HAVE BEEN PAID TO M/S. PANCHSHEEL ENGG. FACT OF THE MATTER IS NO PAYMENT IS MADE TO M/S. 84 PACHSHEEL ENGG. AND PAYMENT MADE TO ARUN FABRICATORS IS ALSO NOT RS. 9 38 37 859/- BUT IS RS. 7 14 05 710/-. ON THE ABOVE FACTS I FIND THAT THERE IS NO JUSTIFICATION TO SUSTAIN THE ADDITION OF RS.1 87 67 570/- AND ACCORDINGLY THIS ADDITION IS DELETED. CONSEQUENTLY ASSESSEE GETS RELIEF OF RS. 1 87 67 570/-. THUS THIS GROUND IS ALLOWED. 74. AGAINST THE ABOVE ORDER FOLLOWING GROUNDS TAKEN IN I.T.(SS).A.NO. 180/IND/2008 A.Y. 2005-06 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN - 1. QUASHING THE ASSESSMENT PROCEEDINGS U/S 153C. 2. PARTLY ALLOWING RELIEF TO THE ASSESSEE ON THE GROUND OF REJECTION OF BOOKS OF ACCOUNT. 3. DELETING THE ADDITION OF RS. 9 98 47 818/- MADE BY THE ASSESSING OFFICER U/S 69C ON ACCOUNT OF UNEXPLAINED BOGUS PURCHASE U/S 69C OF THE INCOME-TAX ACT 1961. 4. DELETING THE ADDITION OF RS. 1 87 67 570/- MADE BY THE ASSESSING OFFICER U/S 69C ON ACCOUNT OF UNEXPLAINED PAYMENT TO PANCHSHEEL ENGG. U/S 69C OF THE INCOME-TAX ACT 1961. 75. VARIOUS OTHER ADDITIONS MADE IN THE ASSESSMENT YEAR 2006-07 WERE PARTLY DELETED BY THE CIT(A) 85 AFTER GIVING DETAILED FINDINGS IN HIS ORDER. REVENU E IS IN APPEAL BEFORE US AGAINST THE PART DELETION O F ADDITIONS WHERE AS ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE PART ADDITION RETAINED BY THE CIT(A). FOLLOWING GROUNDS HAVE BEEN TAKEN BY REVENUE AGAINST THE DELETION OF PART ADDITIONS. 76. GROUNDS TAKEN IN I.T.(SS).A.NO. 181/IND/2008 A.Y. 2006-07 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN - 1. QUASHING THE ASSESSMENT PROCEEDINGS U/S 153C. 2. PARTLY ALLOWING RELIEF TO THE ASSESSEE ON THE GROUND OF REJECTION OF BOOKS OF ACCOUNT. 3. DELETING THE ADDITION OF RS. 9 29 07 641/- MADE BY THE ASSESSING OFFICER U/S 69C ON ACCOUNT OF UNEXPLAINED BOGUS PURCHASE U/S 69C OF THE INCOME-TAX ACT 1961. 4. DELETING THE ADDITION OF RS.78 64 229/- MADE BY THE ASSESSING OFFICER U/S 69C ON ACCOUNT OF UNEXPLAINED PAYMENT TO PANCHSHEEL ENGG. U/S 69C OF THE INCOME-TAX ACT 1961. 5. DELETING THE ADDITION OF RS. 4 93 63 333/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEPRECIATION OF WIND MILL. 77. AGAINST THE ABOVE ORDERS OF THE LD. COMMISSIONE R OF INCOME TAX (APPEALS) THE REVENUE IS IN APPEAL B EFORE US. 86 78. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CA REFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D DELIBERATED ON THE CASE LAWS REFERRED BY THE LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AND BY THE RESPECTIVE COUNSELS DURING THE COURSE OF HEARING B EFORE US. FROM THE RECORD WE FIND THAT THE SEARCH WAS CA RRIED OUT AT THE RESIDENTIAL PREMISES OF DIRECTORS/PARTNE RS OF THESE CONCERNS AND NOT AT THE PREMISES OF THESE CONCERNS. AFTER THE SEARCH WAS CARRIED OUT AT THE RESIDENCE OF DIRECTORS/PARTNERS OF THESE ASSOCIATE CONCERNS ASSESSMENT WAS FRAMED IN RESPECT OF THESE CONCERNS U/S 153C OF THE ACT ON THE PLEA THAT INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH AT THE RESIDENCE OF PARTNERS/DIRECTORS. THE ASSUMPTION OF POWER BY THE ASSESSING OFFICER U/S 15 3C OF THE ACT FOR FRAMING THE ASSESSMENT IS SUBJECT TO THE CONDITION THAT THE ASSESSING OFFICER ASSESSING THE SEARCH PARTY IS SATISFIED THAT THE JEWELLERY OR OT HER VALUABLE ARTICLES OR THINGS OR BOOKS OF ACCOUNTS OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED PERTA IN TO SOME PERSON OTHER THAN THE PERSON REFERRED TO IN SE CTION 153A THEN THE BOOKS OF ACCOUNTS OR THE DOCUMENTS O R 87 ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED OVE R BY THE ASSESSING OFFICER OF SEARCHED PERSON TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON AND THAT THE ASSESSING OFFICER SHALL PROCEED AGAINST EACH OF SUCH PERSONS AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A OF THE ACT. THE OPENING WORD OF SECTI ON 153C SPEAKS THAT NOT-WITH-STANDING ANYTHING CONTAIN ED IN SECTIONS 139 147 148 149 151 AND 153 WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY JE WELLERY OR BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS TO A PERSON OTHER THAN THE PE RSON REFERRED TO IN SECTION 153A MEANING THEREBY THE ASSESSING OFFICER IS TO RECORD A SATISFACTION TO TH E EFFECT THAT SUCH JEWELLERY OR DOCUMENT SO SEIZED DOES NOT BELONG TO THE SEARCHED PERSON BUT TO SOME OTHER PER SON REFERRED TO IN SECTION 153A OF THE ACT. THUS THE PRE- REQUISITE OF SECTION 153C IS THAT THE ASSESSING OFF ICER MAKING THE ASSESSMENT OF THE SEARCHED PERSON HAS TO SATISFY HIMSELF THAT SOME MATERIAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE BELONGS TO SOME PERSON 88 OTHER THAN THE SEARCHED PERSON. THEN THE ASSESSING OFFICER MAKING THE ASSESSMENT OF SEARCHED PERSON HA S TO HAND-OVER THE SAID INCRIMINATING MATERIAL BELONG ING TO SOME PERSON OTHER THAN THE SEARCHED PERSON TO TH E ASSESSING OFFICER HAVING JURISDICTION OVER THE SAID OTHER PERSON. THEREAFTER THE ASSESSING OFFICER HAVING T HE JURISDICTION OVER THE PERSON OTHER THAN THE SEARCHE D PERSON SHALL ISSUE A NOTICE U/S 153C TO SUCH OTHER PERSON AND ASSESS HIS INCOME IN TERMS OF THE PROVIS IONS OF SECTION 153A OF THE ACT. THUS THE NOTICE U/S 1 53C OF THE ACT IS TO BE ISSUED ONLY AFTER RECORDING OF SATISFACTION. THE ASSUMPTION OF JUSRISDICTION TO IS SUE NOTICE AND FRAME ASSESSMENT UNDER SECTION 153C READ WITH SECTION 153A IS ACQUIRED BY THE ASSESSING OFFI CER ONLY AFTER HAVING BEEN SATISFIED AND SUCH SATISFACT ION IS RECORDED IN WRITING. THESE PROVISIONS OF SECTION 1 53C ARE IN PARI MATERIA WITH THE PROVISIONS OF SECTION 158BD WHICH PROVIDES THAT THE ASSESSING OFFICER MAKING TH E ASSESSMENT OF THE SEARCHED PERSON HAS TO SATISFY HIMSELF THAT SOME UNDISCLOSED INCOME FOUND BY HIM BELONGS TO SOME PERSON OTHER THAN THE SEARCHED PERS ON AND THEN HE OR THE ASSESSING OFFICER HAVING JURISDI CTION 89 OVER SUCH OTHER PERSON AFTER RECEIPT OF RECORD FROM THE ASSESSING OFFICER OF THE SEARCHED PERSON HAS TO ISS UE NOTICE U/S 158BD OF THE ACT AND HAS TO ASSESS INCOM E OF SUCH OTHER PERSON. THE PROVISIONS OF SECTION 15 8BD OF THE ACT WERE EXAMINED IN DETAIL BY THE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI; 208 CTR 97. THE SAID HONBLE SUPREME COURT DECISION WA S FOLLOWED BY THE HONBLE DELHI HIGH COURT IN THE CAS E OF NEW DELHI AUTO FINANCE LIMITED; 300 ITR 83. THE HONBLE SUPREME COURT HAS LAID DOWN A PROPOSITION T HAT THE ASSESSING OFFICER MAKING THE ASSESSMENT OF THE SEARCHED PERSON HAS TO NECESSARILY RECORD IN WRITIN G THE SPECIFIC OBJECTIVE SATISFACTION WHICH IS MANDATORY TO THE EFFECT THAT THE UNDISCLOSED INCOME FOUND BY HIM ON THE BASIS OF SEIZED MATERIAL BELONGS TO SOME PERSON OT HER THAN THE SEARCHED PERSON. INSOFAR AS THE PROVISION S OF SECTION 153C OF THE ACT ARE IN PARI MATERIA WITH TH E PROVISIONS OF SECTION 158BD OF THE ACT WITH REGARD TO THE REQUIREMENTS OF RECORDING NECESSARY SATISFACTION BY THE ASSESSING OFFICER OF SEARCHED PERSON THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF MANISH MAHESHWARI (SUPRA) SHALL APPLY WITH FULL FORCE IN C ASE OF 90 INITIATION OF PROCEEDINGS U/S 153C. THE ASSUMPTION OF JURISDICTION AND FRAMING OF ASSESSMENT BY THE ASSES SING OFFICER U/S 153C WITHOUT RECORDING SUCH SATISFACTIO N IS VOID AB INITIO. APPLYING THE PROPOSITION OF LAW LA ID DOWN BY THE HONBLE SUPREME COURT AS DISCUSSED ABOVE I T IS QUITE EVIDENT THAT RECORDING OF SATISFACTION BEFORE ISSUE OF NOTICE U/S 153C IS MANDATORY AND IN CASE WHERE N O SUCH SATISFACTION HAS BEEN RECORDED BY THE ASSESSIN G OFFICER IN THE CASE OF SEARCHED PERSON TO THE EFFEC T THAT SOME INCRIMINATING MATERIAL SO FOUND BELONGS TO SOM E OTHER PERSON THE ASSESSMENT FRAMED U/S 153C WILL B E LIABLE TO BE QUASHED. HOWEVER DETAILED FINDING HA S BEEN RECORDED BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) AFTER EXAMINING THE ASSESSMENT RECORDS OF THE CONCERNED PERSON/PARTIES TO THE EFFE CT THAT NO SATISFACTION HAS BEEN RECORDED BY THE ASSES SING OFFICER OF THE SEARCHED PERSON. THIS FINDING OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY APPLYING THIS PROPOSTION OF LAW THE ASSUMPTION OF JURISDICTION A ND 91 FRAMING OF ASSESSMENT IN THE INSTANT CASES BY THE ASSESSING OFFICER U/S 153C WERE BAD IN LAW. 79. IT WAS ARGUED BY SHRI K.K. SINGH THE LEARNED C IT DR THAT SATISFACTION NOTE AS STIPULATED U/S 153C OF THE ACT IS TO BE SEEN IN THE CONTEXT OF SATISFACTION N OTE PREPARED BY THE ADIT IN THE FORM OF APPRAISAL NOTE AFTER THE SEARCH IS OVER. HE PLACED ON RECORD A COPY OF THE APPRAISAL NOTE WHICH IS PREPARED BY THE ADIT AFTER THE SEARCH WAS OVER WHEREIN DETAILS OF SEARCH HAVING BE EN CARRIED OUT ALONG WITH THE SURVEY CARRIED OUT ON TH E SAME FAMILY MEMBERS OF THE GROUP WERE DULY MENTION ED ALONG WITH ASSERTION FOR ISSUE OF NOTICE U/S 153C I N CASES OF ASSESSEE NOT COVERED BY SEARCH BUT WHERE O NLY SURVEY ACTION HAS BEEN UNDERTAKEN. IT WAS CONTENDE D BY THE LEARNED CIT DR THAT WHENEVER A SEARCH IS BEI NG PLANNED ON THE BASIS OF DETAILED INFORMATION COLLE CTED BY THE DEPARTMENT AND AFTER DUE APPLICATION OF MIND STRATEGIES ARE FINALIZED IN RESPECT OF PLACES/PERSONS/CONCERNS WHERE SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT IS TO BE UNDERTAKEN AS WE LL AS THE PLACES/PERSONS/CONCERNS WHERE ACTION U/S 133A O F THE ACT WILL SERVE THE PURPOSE. THE WHOLE ACTION O F 92 SEARCH AND SURVEY IS PLANNED AT A TIME AND THE DEPARTMENT ALSO KEEPS IN MIND THAT THERE SHOULD NOT BE ANY HARASSMENT TO THE PERSONS/CONCERNS FALLING IN T HE SAME GROUP WHO ARE NOT SO IMPORTANT BUT ARE VERY MUCH RELEVANT AND ASSOCIATED WITH THE ASSESSEE WHI CH NECESSITATED SIMULTANEOUS SURVEY AT THEIR PREMISES SO THAT NOTHING IS LEFT OUT. OUR ATTENTION WAS DRAWN TO VARIOUS LISTS PREPARED AS A PART OF APPRAISAL NOTE DULY MENTIONING THE NAMES OF THE PERSONS ALONG WITH THEI R ADDRESSES DATE OF SEARCH WHO ARE APPEARING IN THE WARRANT OF AUTHORIZATION U/S 132. A LIST WAS ALSO PREPARED TO SHOW THE PREMISES WHEREIN SURVEY WAS UNDERTAKEN U/S 133A OF THE ACT. IN THE APPRAISAL N OTE A LIST WAS ALSO GIVEN WHERE ACTION U/S 153C OF THE ACT WAS INTENDED TO BE INITIATED. AS PER THE LEARNED CI T DR SUCH LIST COMPRISES OF THE PERSONS OTHER THAN THE P ERSON AT WHOSE PREMISES SEARCH IS BEING CARRIED OUT IN RE SPECT OF THE DOCUMENTS FOUND AT SUCH PLACES WHICH PERTAIN TO THE PERSON OTHER THAN PERSON AGAINST WHOM ACTION U/ S 132 WAS UNDERTAKEN. AS PER THE LEARNED CIT DR IT IS NOT ONLY THE OFFICER FRAMING THE ASSESSMENT SHOULD BE CONSIDERED AS ASSESSING OFFICER FOR RECORDING 93 SATISFACTION BUT THE OTHER OFFICERS INVOLVED IN THE SEARCH AND SURVEY LIKE ADIT/DDIT SHOULD ALSO BE CONSIDERED . OUR ATTENTION WAS ALSO DRAWN TO THE PROVISIONS OF S UB- SECTION (7A) OF SECTION 2 DEFINING THE ASSESSING OF FICER TO MEAN ASSISTANT COMMISSIONER DEPUTY COMMISSIONER ASSISTANT DIRECTOR DEPUTY DIRECTOR OR THE ITO WHO IS VESTED WITH THE RELEVANT JURISDICTION BY VIRTUE OF DIRECTIONS OR ORDERS ISSUED UNDER SUB-SECTION (1) O R SUB- SECTION (2) OF SECTION 120 OR ANY OTHER PROVISION O F THIS ACT AND THE ADDITIONAL COMMISSIONER OR THE ADDITION AL DIRECTOR OR JOINT COMMISSIONER OR JOINT DIRECTOR W HO IS DIRECTED UNDER CLAUSE (B) OF SUB-SECTION (4) OF THA T SECTION TO EXERCISE OR PERFORM ALL OR ANY OF THE PO WERS AND FUNCTIONS CONFERRED ON OR ASSIGNED TO AN ASSESS ING OFFICER. AS PER THE LEARNED CIT DR UNDER THE NEW SCHEME OF SECTION 153A/C THERE IS NO NEED TO FIND OUT UNDISCLOSED INCOME BUT THE ASSESSMENT IS MADE AFTE R THE SEARCH IS CARRIED OUT TO ASSESS OR REASSESS THE INCOME OF THE ASSESSEE FOR THE IMMEDIATELY PRECEDIN G SIX ASSESSMENT YEARS AND THE CURRENT ASSESSMENT YEAR FALLING UPTO THE DATE OF SEARCH. HE FURTHER CONTEN DED THAT UNDER THE OLD SCHEME OF SECTION 158BC/158BD OF 94 THE ACT THE DEPARTMENT WAS TO ASSESS THE UNDISCLOS ED INCOME ON THE BASIS INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH WHEREAS UNDER THE NEW SCHEME OF SECTION 153A/153C WHERE A SEARCH IS INITIATED U/S 132 OR BOOKS OF ACCOUNTS OR OTHER DOCUMENTS OR ANY ASSETS ARE REQUISITIONED U/S 132A THEN THE DEPARTMENT HAS TO ASSESS OR REASSESS THE T OTAL INCOME OF SUCH ASSESSEE FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. ACCORDINGLY IT WAS PLEADED TH AT JUDICIAL COGNIZANCE GIVEN TO THE LANGUAGE OF SECTIO N 158BD IN CASE OF MANISH MAHESHWARI BY THE HONBLE SUPREME COURT INSOFAR AS RECORDING OF NECESSARY SATISFACTION IS CONCERNED SHOULD NOT BE TAKEN WHIL E INTERPRETING SECTION 153C OF THE INCOME TAX ACT UND ER THE NEW SCHEME OF FRAMING ASSESSMENT IN SEARCH CASE S. AS PER THE LEARNED CIT- DR IN THE NEW SCHEME OF TH E ACT APPRAISAL REPORT AMOUNTS TO SATISFACTION BY TH E ASSESSING OFFICER FOR ISSUING A NOTICE U/S 153C OF THE ACT. 95 80. ON THE OTHER HAND IN REPLY TO THE LEARNED CIT DR'S CONTENTIONS IT WAS ARGUED BY THE LEARNED COUNSEL F OR THE ASSESSEE THAT EVEN UNDER THE NEW SCHEME OF ASSESSMENT U/S 153C OF THE ACT SATISFACTION IS TO BE NECESSARILY RECORDED BY THE ASSESSING OFFICER OF TH E SEARCHED PERSON INDICATING THE DOCUMENTS SEIZED OR REQUISITIONED WHICH BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A OF THE ACT. HE INVITED OUR ATTENTION TO THE PRECISE LANGUAGE USED IN SECTI ON 153C OF THE ACT WHICH CATEGORICALLY REQUIRES THE ASSESSING OFFICERS SATISFACTION TO THE EFFECT THAT VALUABLES SEIZED DOCUMENTS FOUND DURING THE COURSE OF SEARCH WHICH BELONG TO A PERSON OTHER THAN A PERSO N SEARCHED AND THE PROCEDURE OF HANDING OVER OF THESE DOCUMENTS/VALUABLES ETC. TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THEREAFTER OBLIGATION OF THE ASSESSING OFFICER OF S UCH OTHER PERSON TO PROCEED AGAINST EACH SUCH OTHER PER SON AND ISSUE SUCH OTHER PERSON NOTICE AND THEREAFTER T O ASSESS OR REASSESS THE INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A OF T HE ACT. AS PER THE LEARNED COUNSEL FOR THE ASSESSEE COPY OF 96 SUCH SATISFACTION NOTE SHOULD BE GIVEN TO THE ASSES SEE WHEREAS THE APPRAISAL NOTE AS REFERRED BY THE LEAR NED CIT DR IS A CONFIDENTIAL DOCUMENT PREPARED BY THE DEPARTMENT FOR THEIR INTERNAL USE AND COPY OF WHICH IS NOT HANDED OVER TO THE ASSESSEE. SUCH APPRAISAL RE PORT IS A SECRET DOCUMENT PREPARED BY THE DEPARTMENT AND WHICH IS NOT OPEN TO THE ASSESSEE THEREFORE CANNO T BE TREATED AT PAR WITH THE SATISFACTION NOTE AS CONTEM PLATED U/S 153C OF THE ACT WITH REGARD TO THE DOCUMENTS SE IZED DURING THE PROCEEDINGS U/S 132 WHICH IS ALLEGED TO BE BELONGING TO A PERSON OTHER THAN THE PERSON REFERRE D TO IN SECTION 153A OF THE ACT. RELIANCE WAS ALSO PLAC ED ON THE PROPOSITION LAID DOWN BY THE HONBLE SUPREME CO URT IN THE CASE OF MANISH MAHESHWARI; 289 ITR 341(SUPRA ) AND G.K. DRIVE SHAFT; 259 ITR 19 AND THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE CASE OF RISHI CONSTRUCTION; 10 ITJ 346 AND ASNANI BUILDERS; 10 IT J 618. 81. WE HAVE DELIBERATED UPON THE CONTENTIONS OF THE LEARNED CIT DR SHRI K.K. SINGH AND LEARNED COUNSE L FOR THE ASSESSEE SHRI H.P. VERMA WITH REGARD TO INTERPRETATION OF RECORDING OF SATISFACTION WHILE 97 ASSUMING JURISDICTION U/S 153C OF THE ACT. EVEN IN THE NEW SCHEME OF FRAMING OF ASSESSMENT IN CASE OF SEAR CH CASES THE LEGISLATURE HAS CLEARLY STIPULATED THE REQUIREMENT FOR RECORDING OF SATISFACTION WHILE ASS UMING JURISDICTION TO ISSUE NOTICE AND FRAME ASSESSMENT U /S 153C OF THE ACT WHICH REQUIRES THAT SATISFACTION T O BE RECORDED WITH REFERENCE TO THE DOCUMENTS AND OTHER MATERIALS FOUND DURING THE COURSE OF SEARCH BELONGI NG TO A PERSON OTHER THAN THE SEARCHED PERSON. PRIMA FACI E ASSESSING OFFICER OF SEARCHED PERSON SHOULD FORM AN OPINION WITH REGARD TO ANY DOCUMENT VALUABLE ETC. AS FOUND DURING THE COURSE OF SEARCH THAT SUCH DOCUMEN T WHICH IS DECLINED BY THE SEARCHED PERSON ACTUALLY BELONGS TO SOME OTHER PERSON AGAINST WHOM PROCEEDIN GS U/S 153C ARE REQUIRED TO PUT INTO OPERATION. AFTER SUCH RECORDING OF SATISFACTION THE DOCUMENTS SO SEIZED SHOULD BE HANDED OVER TO THE ASSESSING OFFICER OF S UCH OTHER PERSON. THE LEGAL REQUIREMENT OF RECORDING O F SUCH SATISFACTION CANNOT BE SUBSTITUTED BY APPRAISA L NOTE WHICH IS PREPARED BY THE SEARCH PARTY AFTER COMPLETION OF SEARCH INSOFAR AS SUCH APPRAISAL NOTE IS A SECRET DOCUMENT PREPARED BY THE DEPARTMENT FOR THEI R 98 INTERNAL USE CONTENTS OF WHICH ARE NOT CONVEYED TO THE ASSESSEE NOR ITS COPY IS SUPPLIED TO THE ASSESSEE E VEN ON MAKING A WRITTEN REQUEST. THE APPRAISAL NOTE SO PREPARED BY THE DEPARTMENT IS MEANT TO MONITOR AFTE R THE SEARCH PROCEEDINGS ARE OVER SO AS TO ENSURE EXHAUSTIVE ASSESSMENT OF ALL SEARCHED PERSON WITH RESPECT TO THEIR CORRECT INCOME AND TO PLAN A STRAT EGY FOR FURTHER DEEP INQUIRY AND INVESTIGATION OF DOCUMENTS FOUND DURING THE COURSE OF SEARCH. SINCE COPY OF SUCH APPRAISAL NOTE IS NOT SUPPLIED TO THE ASSESSEE IT CANNOT BE TAKEN AT PAR WITH THE REQUIREMENT OF RECORDING O F SATISFACTION NOTE AS STIPULATED U/S 153C OF THE ACT WHICH IS A MANDATORY REQUIREMENT. WHAT IS THE LEGISLATIVE INTENT OF SUCH SATISFACTION AND IN WHAT MANNER IT SHOULD BE RECORDED HAS BEEN DEALT WITH IN THE JUDICIAL PRONOUNCEMENTS IN THE CASES OF MANISH MAHEHWARI AND G.K. DRIVE SHAFT BY THE HONBLE SUPREME COURT. ACCORDINGLY WE ARE NOT INCLINED TO AGREE WITH THE PROPOSITION THAT THE APPRAISAL NOTE PREPARED BY THE DEPARTMENT SHOULD BE TREATED AS A SATISFACTION NOTE AS REQUIRED TO BE RECORDED IN TER MS OF SECTION 153C OF THE ACT SO AS TO EMPOWER THE ASSESS ING 99 OFFICER TO ASSUME JURISDICTION TO ISSUE NOTICE AND THEREAFTER FRAME ASSESSMENT U/S 153A READ WITH SECT ION 143(3) OF THE ACT. 82. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) WHO HAS QUASHED THE ASSESSMENT FRAMED U/S 153C OF THE ACT. FURTHER THE DETAILED FINDING RECORDED BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) WITH RESPECT TO RECORDING OF SATISFACTION HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON REC ORD. WE THEREFORE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) QUASHING THE ASSESSMENTS FRAMED U/S 153C OF THE ACT IN THE CASES OF ALL THESE ASSESSES. 83. SO FAR AS VARIOUS ADDITIONS WERE MADE BY THE ASSESSING OFFICER ON MERITS THE SAME WERE PARTLY DELETED AND PARTLY CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AFTER RECORDIN G DETAILED FINDING AS NARRATED HEREINABOVE. IN RESPE CT OF GROUNDS FILED BY THE REVENUE FOR DELETION OF ADDITI ON BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) ON 100 MERITS THE LEARNED CIT DR RELIED ON THE ORDER OF T HE ASSESSING OFFICER. THE FINDINGS RECORDED BY THE LE ARNED COMMISSIONER OF INCOMETAX (APPEALS) FOR PARTLY DELE TING THE ADDITIONS ON MERITS HAVE NOT BEEN CONTROVERTED BY THE DEPARTMENT WE THEREFORE DO NOT FIND ANY REAS ON TO INTERFERE WITH SUCH FINDING OF THE LEARNED COMMISSI ONER OF INCOMETAX (APPEALS). ACCORDINGLY EVEN THE PART OF ADDITIONS DELETED ON MERIT BY THE LEARNED COMMISSIO NER OF INCOMETAX (APPEALS) REQUIRE NO INTERFERENCE. 84. IN THE CROSS APPEALS AND CROSS FILED BY THE ASSESSEE GROUNDS HAVE BEEN TAKEN AGAINST PARTIALLY CONFIRMING SOME OF THE ADDITIONS/DISALLOWANCE OF EXPENSES ETC. BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS). AS WE HAVE ALREADY UPHELD THE ORDER OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) IN ENTIRETY EVEN FOR THE ADDITIONS/DISALLOWANCE SUSTAINED BY HIM ON MERITS NOTHING WAS BROUGHT BY THE LEARNED COUNSEL FOR THE ASSESSEE TO OUR NOTICE TO PERSUADE US TO DEVIATE FR OM THESE FINDINGS OF THE LEARNED COMMISSIONER OF INCOM E- TAX (APPEALS) ACCORDINGLY ALL THE GROUNDS TAKEN I N THE CROSS OBJECTION ARE ALSO DISMISSED IN TERMS OF THE 101 FINDINGS RECORDED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). ADDITIONAL GROUND WAS TAKEN BY THE ASSESSEE TO THE EFFECT THAT SINCE NO ADVERSE MA TERIAL WAS FOUND DURING THE COURSE OF SEARCH U/S 132 OF TH E ACT IN RESPECT OF THE ADDITIONS MADE BY THE ASSESSI NG OFFICER OR OTHERWISE THEREFORE THE ASSESSMENT IS BAD IN LAW AND UNJUSTIFIED. AS WE HAVE ALREADY CONFIRMED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN ANNULLING THE ASSESSMENT ITSELF FRAMED U/S 153C OF THE ACT WE DO NOT SEE ANY VALID REASON IN THE TECHNICAL GROUND RAISED BY THE ASSESSEE IN THE FORM OF ADDITIONAL GROUND. THE SAME IS THEREFORE DISMISSE D IN LIMINE. 85. IN THE RESULT ALL THE APPEALS OF THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE IN ALL T HE YEARS ARE DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER 2010. (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :_29 TH DECEMBER 2010. 102 COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR DN/