THE ACIT.Central CIR.1(4),, Ahmedabad v. M/S. ADVATECH INDUSTRIES,, Mehsana

ITSSA 314/AHD/2003 | misc
Pronouncement Date: 24-12-2010 | Result: Dismissed

Appeal Details

RSA Number 31420516 RSA 2003
Assessee PAN AAFFA7452F
Bench Ahmedabad
Appeal Number ITSSA 314/AHD/2003
Duration Of Justice 7 year(s) 4 month(s) 18 day(s)
Appellant THE ACIT.Central CIR.1(4),, Ahmedabad
Respondent M/S. ADVATECH INDUSTRIES,, Mehsana
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 24-12-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 24-12-2010
Date Of Final Hearing 09-12-2010
Next Hearing Date 09-12-2010
Assessment Year misc
Appeal Filed On 05-08-2003
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER IT(SS)A NO.314 & 286/AHD/2003 BLOCK ASSESSMENT FROM: 1/4/91 TO 9/1/01 DATE OF HEARING:9.12.10 DRAFTED:19.12.10 ACIT CENTRAL CIRCLE- 1(4) AHMEDABAD M/S. ADVATECH INDUSTRIES AT & POST DHANALI TAL. KADI DIST. MEHSANA GUNARAT PAN NO.AAFFA7452F V/S . V/S . M/S. ADVATECH INDUSTRIES AT & POST DHANALI TAL. KADI MEHSANA ACIT CENTRAL CIRCLE-1(4) AHMEDABAD (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI J.P. SHAH SR-AR REVENUE BY:- SHRI RAJOT BANSAL CIT-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE CROSS APPEALS ARE ARISING OUT OF THE ORDER O F COMMISSIONER OF INCOME- TAX (APPEALS)I AHMEDABAD IN APPEAL NO CIT[A]-I/CC. 1[4]/23/02-03 DATED19-05- 2003. THE BLOCK ASSESSMENT WAS FRAMED BY ACIT CENTR AL CIRCLE-1(4) AHMEDABAD U/S158BC OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 09-01-2003 FOR BLOCK PERIOD FROM 01-04- 1991 TO 09-01-2001. FIRST WE WILL DEAL WITH REVENUES APPEAL IN IT(SS)A NO.314/AHD/2003. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS.7 50 332/- MADE BY ASSE SSING OFFICER ON ACCOUNT OF IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 2 UNDISCLOSED INCOME OF THE BLOCK PERIOD FOR UNACCOUN TED STOCK FOUND DURING THE COURSE OF SEARCH. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.1 :- THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECT ING TO DELETE HE ADDITION OF RS.7 50 332/- MADE ON ACCOUNT OF UNACCOUNTED STOCK . 3. THE BRIEF FACT THAT LEADING TO THE ABOVE ISSUE A RE THAT DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER VIDE LETTER DATED 18-10-2010 REQUIRED THE ASSESSEE TO EXPLAIN THE DISCREPANCY IN THE STOCK OF RS.13 LAKH BUT WHEN THE ASSESSEE POINTED OUT THAT THE INVENTORY OF STOC K BY THE SEARCH PARTY WAS BASED ON ESTIMATE AND ON POINTING OUT CERTAIN DEFECTS MAD E BY SEARCH PARTY THE ASSESSING OFFICER AGREED FOR VERIFICATION OF THE DO CUMENTS AND SEIZED RECORDS ULTIMATELY MADE ADDITION OF RS.7 50 332/- OF UNACCO UNTED STOCK AS UNDISCLOSED INCOME OF THE BLOCK PERIOD BY GIVING FOLLOWING WORK ING:- 5 00 332/- EXCESS STOCK OF 55 500 MT OF SODA ASH @ RS 9015/- PER MT 2 50 000/- EXCESS STOCK OF 2066.355 MT OF SILICA @ RS.120/- PER MT ---------------- 7 50 332/- ----------------- AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE CIT( A) WHO AFTER CONSIDERING CASE RECORDS AND SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY GIVING FOLLOWING FINDINGS IN PARA 4.2 OF HIS APPELLATE ORDER:- 4.2 I HAVE CAREFULLY CONSIDERED THE ENTIRE ISSUE A ND I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AND FIND THAT THE A.O HAS WORK ED OUT ADDITION FOR EXCESS STOCK OF SODA ASH. HOWEVER CONSIDERING THE SUBMISSION MADE BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE A.O WAS CONVINCED ABOUT THE EXPLANATION FURNISHED HOWEVER THE CLAIM OF APPELLANT REGARDING DIFFERENCE OF 55.5 MT OF SODA ASH WAS NO T ACCEPTED AND THE SAME HAS BEEN CONSIDERED AS UNACCOUNTED STOCK VALUED AT RS.9015 PER M.T. THEREFORE THE ONLY DISPUTE IS PERTAINING TO THE SE T OFF OF55.5 MT. THEREFORE THE ONLY DISPUTE IS PERTAINING TO THE SET OFF OF 55 .5 MT WHICH HAS BEEN CLAIMED BY THE APPELLANT AS PURCHASED FROM ARIHANT TRADING CO AN JALARAM TRADING CO . ON 5/1/2001 & 6/1/2001 AS PER DETAILS FURNISHED IN THE SUBMISSION WITH RESPECT TO THE 4 INVOICES EQUIVAL ENT TO 55.5 MT WHICH HAS BEEN PURCHASED BY THE APPELLANT ONLY THREE DAYS PRI OR TO THE DATE OF SEARCH FOR AN AMOUNT OF RS.5 27 370/-. COPIES OF SUCH INVO ICES WERE PROVIDED TO THE A.O DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IT WAS ALSO SUBMITTED THAT IN THE LOOSE PAGE NO. 22 TO 27 OF ANNEXURE A-1 9 FOUND FROM THE RESIDENCE IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 3 OF YUNUS NANDOLIYA THERE WERE NOTINGS AVAILABLE PE RTAINING TO IMPUGNED PURCHASES OF SODA ASH BY THE APPELLANT FIRM. HOWEVE R THE SAID CLAIM OF THE APPELLANT HAS BEEN REJECTED BY THE A.O AS NO PAKKA INVOICES WERE FOUND AT THE TIME OF SEARCH AND NO DOCUMENTARY EVIDENCES PER TAINING TO THE TRANSPORTATION COULD BE FURNISHED. I HAVE CAREFULLY GONE THROUGH THE LOOSE PAPERS AND FIND THAT ON THESE LOOSE PAPERS THERE A RE DETAILS AVAILABLE FOR 5/1/2001 6/1/2001 & 7/1/2001 PERTAINING TO PURCHAS ES OF RAW MATERIALS AND DISPATCH GIVEN NAME OF THE PARTY ITEM QUANTITY R ATE ETC. THE DISPATCH AS FOUND NOTED ON THE SAID LOOSE PAPERS HAVING BEEN CO NSIDERED WHILE WORKING THE BOOK STOCK I FIND NO LOGIC WHY THE PURCHASES A S FUND NOTED ON THE SAID LOOSE PAPERS SHOULD NOT BE CONSIDERED MORE PARTICU LARLY IN THE PURCHASES INVOICE THE DETAILS OF LORRY NO DELIVERY CHALLAN ETC. ARE MENTIONED AND PAYMENT THEREOF WERE MADE BY ACCOUNT PAYEE CHEQUES . THEREFORE IN VIEW OF THESE FACTS THE PURCHASES MADE OF 55.5 MT ON 5/1/ 2001 & 6/1/2001 ARE CONSIDERED AS REGULAR PURCHASES MATERIAL OF WHICH HAVE BEEN RECEIVED PRIOR TO THE DATE OF SEARCH AS FOUND NOTED IN THE LOOSE P APERS AND THEREFORE ADDITION MADE BY THE A.O FOR SUCH PURCHASES OF RS.5 00 332/- IS WITHOUT ANY VALID BASIS AND IS DELETED. COMING TO THE BALANCE A DDITION OF RS.2 22 962/- ON ACCOUNT OF EXCESS STOCK OF SILICATE THE ADDITION HAS BEEN MADE BY THE A.O ON THE BASIS THAT STOCK FOUND WAS IN EXCESS AS COMP ARED TO THE BOOK STOCK. THE CONTENTION OF THE APPELLANT THAT PHYSICAL STOCK TAKEN WAS ESTIMATED AND ON ADHOC BASIS SEEMS TO BE LOGICAL AS I HAVE GONE T HROUGH THE PANCHANAMA WHEREIN I HAVE FOUND THAT THE PHYSICAL STOCK AS WE LL AS BOOK STOCK ON PAGE NO.2 OF THE STOCK INVENTORY HAS BEEN CALCULATED ON THE BASIS OF ESTIMATES CONSIDERING CONSUMPTION RATIO AND WITH CERTAIN NOTE S ABOUT ASSUMPTIONS AND FURTHER THE DIFFERENCE OF RS.2.5 LAS IN VALUE HAS B EEN WORKED OUT ON AN APPROXIMATE BASIS. THE SUBMISSION OF THE APPELLANT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THAT THE ENTIRE STOCK TAKING WAS ON ESTIMATED BASIS AND BOOK STOCK HAS BEEN CALCULATED APPLYING FORMULA COULD NOT BE CONTROVERTED AND THEREFORE I AM AFRAID NO ADDITION CAN BE MADE IN THE BLOCK ASSESSMENT ON SUCH BASIS AND THEREFORE ADDITION WO RKED OUT BY THE A.O FOR THE DIFFERENCE OF QUANTITY OF2066.355 MT IS MISPLAC ED AND RESULTANT ADDITION IS DELETED. AS A RESULT THE ENTIRE ADDITION MADE BY T HE A.O FOR THE STOCK OFRS.7 50 332/- IS DELETED AND THIS GROUND OF APPEA L IS ALLOWED. 4. BEFORE US LD. CIT-DR SH. RAJAT BANSAL MADE ARG UMENTS AND ALSO FILED WRITTEN SUBMISSIONS. HE ARGUED THAT THE CIT(A) CONS IDERED PURCHASES OF RS.5 00 332/- IN RESPECT OF 55.5 MT OF SODA ASH TO BE REGULAR PURCHASES ON THE BASIS OF ENTRIES IN LOOSE PAPERS CONTAINED IN ANNEX URE-A-19 SEIZED AT THE TIME OF SEARCH BUT FAILED TO APPRECIATE THAT EVEN IF THERE WAS MENTION OF PURCHASES FROM ARIHANT TRADING CO. AND JALARAM TRADING CO. IN THE SEIZED PAGES SUCH PURCHASES COULD NOT BE CONSIDERED AS ACCOUNTED PURCHASES WHE N THERE WAS NO MENTION OF BILL NUMBERS IN THE SEIZED PAGES AND WHEN THERE WAS NO E NTRIES FOR SUCH PURCHASES IN THE BOOKS OF ACCOUNTS ON THE DAY OF SEARCH. HE FURT HER STATED THAT NO MENTION WAS MADE BY THE ASSESSEE ON DAY OF SEARCH ABOUT BILLS I N RESPECT OF SUCH PURCHASES IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 4 BEING EITHER NOT RECEIVED OR REMAINING TO BE ENTERE D IN THE ACCOUNT BOOKS. HE FURTHER ARGUED THAT CIT(A) FAILED TO APPRECIATE THAT ASSESS EE MADE THIS CLAIM AT THE TIME OF ASSESSMENT FOR THE FIRST TIME AND NOT IMMEDIATELY A FTER SEARCH. BILLS WHICH WERE NEITHER FOUND AT THE TIME OF SEARCH NOR MENTIONED B Y THE ASSESSEE AT THE TIME OF SEARCH CANNOT BE TAKEN INTO CONSIDERATION NOW. IN V IEW OF THESE ARGUMENTS HE NARRATED THAT CIT(A) ACCEPTED ASSESSEE'S CONTENTION THAT PHYSICAL STOCK STATEMENT WAS PREPARED ON ESTIMATED BASIS BUT FAILED TO APPRE CIATE THAT NO OBJECTION WAS TAKEN BY THE ASSESSEE TO THE STOCK TAKING ON THE DAY OF S EARCH OR IMMEDIATELY THEREAFTER AND OBJECTION WAS TAKEN AT THE TIME OF ASSESSMENT P ROCEEDINGS FOR THE FIRST TIME WHEN VERIFICATION OF STOCK ACTUALLY PRESENT ON THE DAY OF SEARCH WAS NOT POSSIBLE FOR ALL PRACTICAL PURPOSES. HE STATED THE FACT THAT EVE N ASSESSEE HAS ALSO STATED THAT EXACT MEASUREMENT OF QUANTITY OF STOCK IS TIME CONS UMING AND WAS PRACTICALLY IMPOSSIBLE AT THE TIME OF SEARCH. IN THIS SITUATION EVEN IF SOME ELEMENT OF ESTIMATION WAS INVOLVED IN STOCK TAKING DONE AT THE TIME OF SE ARCH WITH ASSESSEE'S CONSENT THE SAME CANNOT BE A REASON FOR NEGLECTING ENTIRE DIFFE RENCE OF RS.2.5 LAKH IN THE VALUE OF STOCK. ACCORDINGLY HE PRAYED THAT ORDER OF CIT(A ) DELETING ADDITION OF RS.7 50 332/- BE SET ASIDE AND THAT OF ASSESSING OF FICER BE RESTORED. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE MADE ARGUMENTS IN SUPPORT OF THE ORDER OF CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS OF THE CASE. WE FIND FROM THE RECORDS THAT THE ASSESSEE-FIRM IS ENGAGED IN THE MANUFACTURE OF SODIUM SILICATE AND PART OF ITS PRODUCTION IS DONE ON JOB-WORK BASIS FOR VICASIL INDUSTRIES .ANAND MADHU SLICA PVT. LTD. BHAVNAGAR CHEMICAL INDIA HIMMADNAGAR AND MEMDALI & MORAYYA UNITS OF NIRMA LTD. DURING TH E COURSE OF SEARCH THE AUTHORISED OFFICER ALONG WITH SEARCH PARTY HAS TAKE N PHYSICAL VERIFICATION OF STOCK WITHIN 12 HOURS. THE NATURE OF PRODUCT AND MATERIAL I.E. SODIUM SILICATE SILICA AND SODA ASH ARE SUCH THAT FOR WEIGHTMENT 55.500 MT OF SODA ASH REQUIRES MUCH MORE TIME THAN AS TAKEN BY THE SEARCH PARTY AS THE SEARC H COMMENCED AT 8 A.M. IN THE MORNING OF 09-01-2001 AND CONCLUDED AT 8.45 P.M. ON THE SAME DAY. IN VIEW OF THESE FACTS WE ARE OF THE VIEW THAT AS NOTED BY TH E SEARCH PARTY THAT THERE IS HUGE DIFFERENCE IN STOCK AS PER THE PHYSICAL VERIFICATIO N VIS--VIS BOOK STOCK IT IS NOT POSSIBLE TO CARRY OUT PHYSICAL VERIFICATION IN JUST 12 HR. ACCORDINGLY WE ARE OF THE IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 5 VIEW THAT DURING THE COURSE OF SEARCH THE REVENUE HAS DETERMINED THE STOCK ON ESTIMATION AND VALUE ON AD HOC BASIS BY APPLYING A FORMULA INSTEAD OF ACTUAL VALUATION BASED ON STOCK AVAILABLE PHYSICALLY WITH THE ASSESSEE. WE FIND FROM THE FACTS OF THE CASE THAT THE DISCREPANCY OF 55.500 MT OF SODA ASH IS CONCERNED THAT THE SAME WAS PURCHASED FROM THE SUPPLIERS ON 05-01- 2001 06-01-2001 I.E. THREE DAYS PRIOR TO THE DATE OF SEARCH AND ASSESSEE SUBM ITTED THE FOLLOWING DETAILS:- NAME OF SUPPLIER INV. NO. DATE QTY. AMOUNT ARIHANT TRADING CO. 809 5.1.2001 15 000 MT 1 44 450/- ARHANT TRADING CO. 811 6.1.2001 14.250 MT 1 35 960/- ARIHANT TRADING CO. 812 6.1.2001 14 250 MT 1 35 060/- JALARAM TRADING CO. 24 6.1.2001 12 000 MT 1 12 800/- TOTAL 55 500 MT 5 27 370/- THE ASSESSEE SUBMITTED XEROX COPIES OF BILLS BEFORE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND EVEN NOW BEFOR E US WHICH ARE ENCLOSED PAGE-53 TO 57 OF ASSESSEES PAPER BOOK AND ALSO COPIES OF SEIZED PAGES. THE ASSESSING OFFICER AFTER CONSIDERING THE CLAIM OF PU RCHASE REJECTED ON MERE SURMISES. WE FURTHER FIND THAT THE PROOF OF PURCHASE OF SODA ASH AT RS.5 27 370/- IS ALSO FOUND FROM THE SEIZED MATERIAL. THE TOTAL ADDITION OF RS. 7.50 332/- IS MADE ON THE GROUND OF DISCREPANCY OF STOCK OUT OF WHICH STOCK WORTH R S.5 27 370/- IS DULY EXPLAINED AS DISCUSSED IN PARA 6 AND THE BALANCE ADDITION OF RS. 2 22 962/- ON ACCOUNT OF EXCESS STOCK OF SILICA ALSO TO BE CONSIDERED THAT THE INV ENTORY OF STOCK TAKEN BY THE SEARCH PARTY DOES NOT REPRESENT ACTUAL STOCK BUT MERELY AN AD HOC AND ESTIMATED STOCK SINCE NO PHYSICAL VERIFICATION OF THE STOCK WAS CAR RIED OUT BY THE SEARCH PARTY. IN VIEW OF THESE FACTS WE ARE OF THE VIEW THAT THE INVENTO RY OF STOCK PREPARED BY SEARCH PARTY WAS BASED ON ESTIMATIONS AS IS EVIDENT FROM C OPY OF PANCHNAMA WITH ANNEXURES OF INVENTORY AND ITS VALUATION WHICH ARE ENCLOSED IN THE ASSESSEES PAPER BOOK. EVEN OTHERWISE THE ASSESSEE HAS EXPLAI NED THE PURCHASE OF 55.5 MT OF SODA ASH FOR AN AMOUNT OF RS.5 27 370/- AND IN RESP ECT TO EXCESS STOCK OF SILICATE OF RS.2 22 962/- WE FOUND THAT PHYSICAL STOCK ESTIMATE BY THE AUTHORISED PARTY HAS MANY FACTUAL MISTAKES AS POINTED OUT BY THE ASSESSE E AND NOTED BY THE LOWER AUTHORITIES AND EVEN BY US AS ABOVE. ACCORDINGLY W E CONFIRM THE ORDER OF CIT(A) IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 6 DELETING THE ADDITION OF EXCESS STOCK OF RS.7 50 32 2/-. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 7. THE NEXT COMMON ISSUES IN THESE CROSS APPEALS IS AGAINST THE ORDER OF CIT(A) IN RESTRICTING THE ADDITION OF RS.20.50 LAKHS AND R S.16 LAKHS MADE BY ASSESSING OFFICER ON ACCOUNT OF UNACCOUNTED PURCHASE AND UNAC COUNTED PROFIT AT RS.4 LAKHS. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.2 :- THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRI CTING THE ADDITIONS OF RS.20 50 000/- AND RS.16 00 000/- MADE ON ACCOUNT O F UNACCOUNTED PURCHASES AND UNACCOUNTED PROFIT RESPECTIVELY TO RS .4 00 000/- THE ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.1-4 :- 1. THE LEARNED CIT(A) HAS ERRED IN ESTIMATING UNAC COUNTED PURCHASES FOR THE PERIOD NOVEMBER 1999 (COMMENCEMENT OF PRODUCTION) TILL JANUARY 2001 (MONTH OF SEARCH) THOUGH NO SPECIFIC EVIDENCES WER E FOUND DURING THE COURSE OF SEARCH PERTAINING TO UNACCOUNTED PURCHASES FOR T HE ENTIRE PERIOD EXCEPT JULY TO SEPTEMBER 2000. MOREOVER WHEN THE A.O HAS NOT ESTIMATED SUCH PURCHASES FOR THE ENTIRE BLOCK PERIOD. THEREFORE A CTION OF THE CIT(A) IN ESTIMATING UNACCOUNTED PURCHASES FOR THE ENTIRE BLO CK PERIOD ON THE BASIS OF EVIDENCES FOUND FOR 3 MONTHS REQUIRES TO BE CANCELL ED. 2. THE LEARNED CIT(A) HAS ERRED IN ENHANCING THE AD DITION MADE BY THE A.O BY RS.2 80 000/- ON THE BASIS OF ESTIMATION OF UNA CCOUNTED PURCHASES FOR THE ENTIRE BLOCK PERIOD AND THUS THE SEPARATE AND FUR THER ADDITION MADE BY THE CIT(A) OF RS.2 80 000/- REQUIRES TO BE DELETED. 3. THE LEARNED CIT(A) HAS ALSO ERRED IN ENHANCING T HE ADDITION BY RS.50 000/- BEING UNEXPLAINED INVESTMENT IN UNACCOUNTED PURCHAS ES. SINCE NO SUCH INVESTMENT IS MADE THE SEPARATE ADDITION OF RS.50 000/- REQUIRES TO BE DELETED. 4. THE LEARNED CIT(A) HAS ALSO ERRED IN RELYING UPO N THE NOTINGS FOUND FROM SHRI RASID I NANDOLIYA PERTAINING TO UNACCOUNTED P ROFIT DISTRIBUTED BY THE FIRM. SINCE NO UNACCOUNTED PROFIT HAS BEEN DISTRIBUTED T HE RELIANCE PLACED IS MISPLACED AND THE IMPUGNED FINDING REQUIRES TO BE C ANCELLED. 8. THE BRIEF FACTS LEADING TO THE ABOVE ISSUES ARE THAT THE ASSESSING OFFICER ON THE BASIS OF NOTINGS FOUND ON LOOSE PAPER PAGES NO. 28 TO 32 OF ANNEXURE A/19 MADE ADDITION OF UNACCOUNTED PURCHASE OF RS.20.50 LAKHS AND ALSO ASSESSED PROFIT AT RS.16 LAKHS. AGGRIEVED ASSESSEE PREFERRED APPEAL B EFORE CIT(A). THE CIT(A) DELETED ADDITIONS BY GIVING FOLLOWING FINDINGS IN PARA-5.2 OF HIS APPELLATE ORDER:- IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 7 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS AND RIVAL SUBMISSIONS PERTAINING TO BOTH THE ISSUES AND SINCE BOTH ARE IN TER RELATED SAME ARE DISPOSED OFF SIMULTANEOUSLY. THE ADDITION OF RS.20 50 000/- PERTAINING TO UNACCOUNTED PURCHASES HAS BEEN MADE BY THE A.O ON THE BASIS OF NOTINGS FOUND NOTED ON LOOSE PAGE NO.28 TO 32 OF ANNEXURE A -19 FOUND FROM THE RESIDENCE OF JAVEDBHAI AND YUNUS NANDOLIYA EMPLOYE ES OF THE APPELLANT FIRM. AT THE OUTSET THE TRANSACTIONS FOUND NOTED O N THE SAID LOOSE PAPERS PERTAINS TO THE APPELLANT FIRM AS IN THE STATEMENT SHRI JAVEDBHAI HAD ADMITTED THAT ALL THE PURCHASES ARE UNACCOUNTED AND IT PERTA INS TO THE APPELLANT FIRM. IT WAS ALSO ADMITTED THAT THE PURCHASES HAVE BEEN MADE FROM M/S. VIREHAND ULCHAND & BROTHERS MEHSANA. THEREFORE THE SUBMISS ION DURING THE COURSE OF ASSESSMENT THAT THERE WERE NO UNACCOUNTED PURCHASES AND VARIOUS OTHER ARGUMENTS DENYING THE SAID PURCHASES ARE AN AFTERTH OUGHT AND THUS CANNOT BE ACCEPTED AS IN THE LOOSE PAPERS I HAVE FOND TH AT THERE IS A CLEAR MENTION OF THE WORD WITHOUT BILL AND FURTHER WEIGHT OF THE SODA AS PURCHASED RATE OF THE PURCHASE DATE OF PAYMENT DISCOUNT BALANCE FREIGHT ETC. ARE CLEARLY NOTED. THESE PURCHASES ARE FOR THE PERIOD JULY TO S EPTEMBER 2000 AND PAYMENT OF RS.20 50 000/- IS MADE DUDRING5/8/2000 T O 1/10/2000 AS FOUND NOTED ON PAGE NO.31. HOWEVER THERE IS FORCE IN THE ARGUMENT OF LD. A.R THAT THE ENTIRE PURCHASES CANNOT BE ADDED AND ONLY THE P ROFIT MARGIN IS REQUIRED TO BE CONSIDERED FOR THE PURCHASE OF ADDITION. DURING THE COURSE HEARING OF APPEAL WORKING OF THE GROSS PROFIT PERTAINING TO MA NUFACTURING AND RESALE FOR THE F.Y 2000-01 WAS CALLED FOR AND ACCORDINGLY AS PER AUDITED ACCOUNTS THE GROSS PROFIT RATE IS ABOUT 3.4% AND THEREFORE AT T HE OUTSET THE ADDITION MADE BY THE A.O OF RS.20 50 000/- REQUIRES TO BE RESTRIC TED TO RS.70 000/- ON THE BASIS OF GROSS PROFIT. HOWEVER AS PER THE NOTINGS IT IS CLEAR THAT APPELLANT IS REGULARLY PURCHASING SODA ASH OUTSIDE BOOKS OF ACCO UNTS AND EARNING UNACCOUNTED INCOME WHICH IS FURTHER SUPPORTED FROM THE NOTINGS FOUND NOTED IN A DIARY FOUND IN THE CASE OF RASHID I. NANDOLIYA ON THE BASIS OF WHICH THE A.O HAS ADDED RS.16 LACS BEING THE UNACCOUNTED PROF IT DISTRIBUTED AMONGST THE PARTNERS. THEREFORE I INTEND TO CONSIDER THE U NACCOUNTED PURCHASES FOR THE PERIOD NOVEMBER 99 I.E. THE PERIOD WHEN THE FA CTORY COMMENCED PRODUCTION TILL JANUARY 2001 THE MONTH OF SEARCH I.E. FOR A TOTAL PERIOD OF 15 MONTHS. CONSIDERING THAT THE APPELLANT HAD PURCHASE D RS.20 50 000/- FOR JULY TO SEPTEMBER I.E. FOR THREE MONTHS TOTAL UNACCOUNTE D PURCHASES FOR THE PERIOD OF 15 MONTHS WILL BE APPROXIMATELY RS.102.50 LACS ON WHICH CONSIDERING GROSS PROFIT RATE OF 3.4% A PROFIT OF RS.3 50 000/- IS ESTIMATE AND THUS FOR THE BALANCE ADDITION OF RS.2 80 000/- (RS.3 50 000 RS .70 000/-) AND UNEXPLAINED INVESTMENT FOR SUCH PURCHASES OF RS.50 000/- TOTAL AMOUNTING TO RS.3 30 000/- IS LIABLE TO BE MADE. THE LD. A.R WAS REQUESTED TO EXPLAIN DURING THE COURSE OF APPEAL HEARING ON 8/5/2003 AS TO WHY THE INCOME ASSESSED BY THE A.O. SHOULD NOT BE ENHANCED BY RS.3 30 0O00/- FOR WHICH IT WAS ARGUED THAT IN ABSENCE OF ANY EVIDENCE SUCH EST IMATION OF THE UNACCOUNTED PURCHASES FOR THE ENTIRE BLOCK PERIOD I S UNJUSTIFIED. I HAVE ALREADY HELD THAT AS PER THE NOTINGS IN THE LOOSE P APERS IT APPEARS THAT APPELLANT IS REGULARLY HAVING UNACCOUNTED PURCHASES ADDITION FURTHER A.O HAS REFERRED LOOSE PAGE NO. 5.8 & 13 OF ANNEXUREA-2 FOU ND FROM RASHID I NANDOLIYA. ON THE BASIS OF THESE LOOSE PAPERS A.O HAS MADE SEPARATE IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 8 ADDITION OF RS.16 LACS. IT IS AN ADMITTED FACT THAT RASHHID I NANDOLIYA IS NOT A PARTNER IN THE APPELLANT FIRM BUT ON PAGE NO.5 I HAVE SEEN THAT THERE IS A CLEAR CUT MENTION OF RS.20 000/- RECEIVED BY HIM FR OM APPELLANT FIRM AS PROFIT. ON PAGE NO.8 THERE IS A MENTION OF RS.35 000/- PROFIT RECEIVED F ROM THE APPELLANT FIRM WHICH HAS BEEN PASSED ON TO OTHERS S EPARATELY AS PER THE NOTINGS AND THERE IS A CORRESPONDING PAYMENT OF RS. 36 000/- BEING CASH SENT TO RAFIQBHAI. ON PAGE NO.13 THERE IS A MENTION OF 7.5% SHARE OF PROFIT FROM THE APPELLANT FIRM BY FAMILY OF RASHID I. NANDOLIYA AND IN THE CASE OF RASHID I NANDOLIYA I HAD AN OCCASION TO GO THROUGH THE SAID ENTIRE DIARY AND FOUND THAT RASHID I NANDOLIYA WAS RECEIVING THE TOTAL PRO FIT/SALARY ON BEHALF OF HIS FAMILY AND THUS THE SAID AMOUNT OF RS.20 000/- IS CONSIDERED BY ME AS RECEIVED BY THE SAID SHRI RASHID I NANDOLIYA FAMILY MEMBERS WHO ARE PARTNERS IN THE APPELLANT FIRM AND THEREFORE I AM OF THE VIEW THAT THE AMOUNT OF RS.20 000/- WITHDRAWN BY HIM IS OUT OF THE UNACC OUNTED INCOME EARNED BY THE FIRM. THIS RS.20 000/- REPRESENTS 7.5% SHARE IN THE FIRM OF HIS FAMILY MEMBERS WHICH GIVES AN ANNUAL UNACCOUNTED INCOME OF RS.2 66 666/- AND THIS INCOME IS ALSO IN CONFORMITY WITH THE UNACCOUN TED PROFIT I HAVE CALCULATED HEREIN ABOVE OF RS.3 50 000/- AND THEREFORE THE SE PARATE ADDITION OF RS.16 LACS MADE BY THE A.O BASED ON THE SAID THREE LOOSE PAPERS IS UNWARRANTED AND THUS DELETED. THEREFORE OUT OF THE ADDITION M ADE BY THE A.O FOR UNACCOUNTED PURCHASES OF RS.20 50 000/- ADDITION T O THE EXTENT OF RS.70 000/- IS CONFIRMED AND FURTHER INCOME IS ENHA NCED BY AN AMOUNT OF RS.3 30 000/-AND THE SEPARATE ADDITION OF RS.16 LAC S IS DELETED. IT IS ALSO CLARIFIED THAT WHILE MAKING ADDITION OF RS.16 LACS THE A.O HAS REFERRED TO ONE PAYMENT OF RS.20 000/- AND OTHER PAYMENT OF RS.40 0 00/-. THE AMOUNT OF RS.20 000/- FOUND NOTED ON PAGE NO.5 OF ANNEXURE A- 2 HAS ALREADY BEEN CONSIDERED BY ME BUT THE SAME IS CONSIDERED AS EQU IVALENT TO 7.5% AS AGAINST CONSIDERED BY THE A.O AS 1.25% AS PER FIND ING GIVEN BY ME HEREIN ABOVE. COMING TO ANOTHER PROFIT OF RS.40 000/- DIST RIBUTED AND CONSIDERED BY THE A.O EQUIVALENT TO 2.5% BEING THE AMOUNT RECEIV ED BY RAFIQBHAI FROM THE LOOSE PAPER REFERRED BY THE A.O IT IS NOT CLEAR AS TO HOW THE FINDING HAS BEEN ARRIVED BY THE A.O. TO SUM UP ADDITION TO THE EXTEN T OF RS.40 00 000/- IS CONFIRMED OUT OF ADDITIONS OF RS.20 50 000/- AND RS .126 LAKHS AND THE BALANCE IS DELETED. AGGRIEVED AGAINST THE RESTRICTION OF ADDITION AT R S.4 LAKH BOTH REVENUE AND ASSESSEE CAME IN APPEAL BEFORE THE TRIBUNAL. 9. BEFORE US LD. CIT-DR FILED WRITTEN SUBMISSIONS A ND MADE ARGUMENTS THAT THE ADDITION OF RS.20 50 000/- WAS MADE BEING UNACCOUNT ED PURCHASES ON THE BASIS OF PAGE NUMBERS 28 TO 32 OF ANNEXURE-A-19 FOUND FROM R ESIDENCE OF SHRI JAVEDBHAI NANDOLIA AND SHRI YUNUS NANDOLIA EMPLOYEES OF ASSE SSEE FIRM AND FURTHER ADDITION OF RS.16 00 000/- ON THE BASIS OF DIARY A-2 SEIZED FROM RESIDENCE OF SHRI RASHID R. NANDOLIA. HE ARGUED THAT CIT(A) UPHELD AO'S FINDING THAT TRANSACTIONS AS PER SEIZED PAGES FROM RESIDENCE OF SHRI JAVEDBHAI NANDOLIA AS WELL AS FROM THE RESIDENCE OF IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 9 SHRI RASHID I. NANDOLIA REFLECTED ACTUAL TRANSACTIO NS PERTAINING TO ASSESSEE FIRM M/S. ADVATECH INDUSTRIES BUT HE HOWEVER DIRECTED THAT IN STEAD OF ADDITION OF RS.20 50 000/- BEING UNACCOUNTED PURCHASES FROM M/S . VIRCHAND FULCHAND & BROTHERS MEHSONA ADDITION OF RS.3 50 000/- BEING GROSS PROFIT ESTIMATED @ 3.4% (ON UNACCOUNTED PURCHASES ESTIMATED FOR 15 MONTH PE RIOD) BE MADE IN ADDITION TO UNEXPLAINED INVESTMENT OF RS.50 000/-. FURTHER HE A RGUED THAT CIT(A) ESTIMATED PROFIT ON THE BASIS OF PAPERS SEIZED FROM RESIDENCE OF RASHID I. NANDOLIA AT RS.2 66 666/- AND HELD THAT THE SAME WAS COVERED BY RS.4 00 000/- CALCULATED ON THE BASIS OF DOCUMENTS SEIZED FROM JAVED NANDOLIA. BUT HE STATED THAT THERE IS NO MERIT IN ASSESSEE'S CONTENTION ABOUT TRANSACTIONS A S PER PAPERS SEIZED FROM RESIDENCES OF JAVED YUSUFBHAI NANDOLIA AND RASHID I . NANDOLIA TO BE NOT PERTAINING TO ASSESSEE IN VIEW OF REASONS BROUGHT OUT IN THE A SSESSMENT ORDER (PARA 3.3. AND PARA 4.3. RESPECTIVELY) AND CIT(A) HAS ALSO UPHELD AO'S FINDINGS IN THIS REGARD. TO THAT EXTEND HE SUPPORTED THE ORDER OF CIT(A) AND ST ATED THAT PAPERS SEIZED FROM RESIDENCE OF JAVEDBHAI RECORDED UNACCOUNTED PURCHAS ES OF RS.20 50 000/- ONLY WITHOUT ANY CORRESPONDING TRANSACTIONS OF SALES AS ASSUMED BY CIT(A). HENCE THERE WAS NO QUESTION OF ESTIMATING GROSS PROFIT AS DONE BY CIT(A) AND ENTIRE AMOUNT OF RS.20 50 000/- WAS LIABLE TO BE ADDED AS ASSESSEE'S INCOME. EVEN THE ASSESSEE HAD NOT CLAIMED THE TRANSACTIONS TO BE RELATED TO M ANUFACTURING AND RESALE. HE ARGUED THAT RELIANCE PLACED BY ASSESSEE'S COUNSEL O N ITAT'S DECISION IN THE CASE OF M/S. VIRCHAND FULCHAND & BROS IS MISPLACED. ADDITI ON WAS DELETED BY ITAT IN THE CASE OF M/S. VIRCHAND FULCHAND FOR THE REASON THAT DOCUMENTS SEIZED WERE IN THE CASE OF ASSESSEE ADVATECH INDUSTRIES. THE CROSS EX AMINATION/RE-EXAMINATION STATEMENTS OF SHRI JAVEN NANDOLIA DURING ASSESSMENT PROCEEDINGS OF M/S. VIRCHAND FULCHAND DESERVE TO BE IGNORED IN VIEW OF HIS CLEAR -CUT ADMISSION U/S. 132(4) ABOUT TRANSACTIONS RECORDS IN ANNEXURE A-19 SEIZED FROM H IS RESIDENCE. ACCORDING TO HIM A PERUSAL OF THE STATEMENT OF SHRI JAVED NANDOLIA D URING ASSESSMENT PROCEEDINGS OF M/S.VIRCHAND FULCHAND (AS REPRODUCED IN PARAS 5 & 6 OF ITAT'S ORDER) WOULD SHOW THAT THESE WERE EVASIVE STATEMENTS UNDER THE GUIDAN CE OF BOTH ASSESSEE AND M/S. VIRCHAND FULCHAND. IN THE CROSS EXAMINATION/RE-EXAM INATION STATEMENTS SHRI JAVED'S VERSION IS 'I DON'T KNOW/I DON'T REMEMBER' ONLY AS AGAINST CLEAR-CUT ANSWERS IN HIS STATEMENT U/S. 132(4). THESE STATEMENTS DESE RVE TO BE IGNORED AND RELIANCE NEEDS TO BE PLACED ON THE FIRST STATEMENT RECORDED U/S132(4) ONLY. IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 10 10 LEARNED CIT-DR FURTHER ARGUED THAT THE CIT(A) ER RED IN COMPUTING FIGURE OF RS.2 66 666/~ ON THE BASIS OF PROFIT SHARE OF 7.5% WHEN THE SEIZED PAGES FROM RESIDENCE OF SHRI RASHID NANDOLIA MENTIONED HIS SHA RE AT 1.25% AND CORRESPONDING AMOUNT AT RS.20 000/-. UNACCOUNTED PROFIT OF THE AS SESSEE WORKS OUT AT RS.16 00 000/- ON THE BASIS OF 1.25% SHARE OF RASHI D I. NANDOLIA AND 2.5% SHARE OF RAFIKBHAI CORRESPONDING DISBURSEMENTS IN RESPECT O F WHICH WERE RS.20 000/- AND RS.40 000/-RESPECTIVELY. ACCORDINGLY HE STATED THAT CIT(A) ERRED IN CORRELATING RS.20 000/- TO 7.5% SHARE OF FAMILY MEMBERS WHEN T HE SEIZED PAGE NO. 13 OF ANNEXURE A~2 RECORDED SHARE OF RASHID NANDOLIA AT 1 .25% AND THIS FACT IS NOTED BY CIT(A) HIMSELF (TOP LINE OF PAGE 20 OF CIT(A)'S ORD ER) 'PAYMENT OF RS.36 000/- TO RAFIKBHAI AND FURTHER AT THE BOTTOM OF SAME PAGE C IT(A) WONDERED FROM WHERE PROFIT FIGURE OF RS.40 000/- AS DISTRIBUTED TO RAFI KBHAI AROSE ACCORDING TO HIM THE UNACCOUNTED PROFIT OF ASSESSEE WAS CORRECTLY WORKED OUT AT RS. 16 LAKH BY THE ASSESSING OFFICER ON THE BASIS OF DIARY AND CIT(A) ERRED IN OFFSETTING UNACCOUNTED PROFIT AS PER ANNEXURE A-2 SEIZED FROM SHRI RASHID I. NANDOLIA AGAINST ADDITION ON THE BASIS OF PAGES FOUND FROM THE RESIDENCE OF JAVE DBHAI IN RESPECT OF UNACCOUNTED PURCHASES WHEN LINK BETWEEN TWO TRANSACTIONS WAS N EITHER PLEADED NOR ADMITTED BY THE ASSESSEE. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE FACTS O F THE CASE THAT THE ASSESSING OFFICER HAS MADE THE ABOVE ADDITION OF RS.20.50LAKH RELYING ON PAGE NO.28 TO 32 OF ANNEXURE A-19 SEIZED FROM THE RESIDENCE OF YUNUSBHA I NANDOLIA. WE FIND THAT THE ASSESSEE-FIRM WAS REGULARLY PURCHASING SODA ASH FRO M M/S. VIRCHAND FULCHAND & BROS. MEHSANA AS THAT WAS AUTHORIZED DISTRIBUTOR OF SODA ASH PRODUCED BY TATA CHEMICALS LTD. AS ARGUED BY THE ASSESSEE THAT TCL I S A COMPANY BELONGING TO ONE OF THE BIGGEST INDUSTRIAL GROUPS OF THE COUNTRY AND THEIR PURCHASES AND SALES HAVE NOT TO BE DOUBTED. WE FIND THAT THE AO HEAVILY RELI ED ON THE STATEMENT OF SHRI JAVEDBHAI NANDOLIA RECORDED DURING THE COURSE OF SE ARCH WHEREIN INTER ALIA HE HAS ADMITTED THAT THESE PURCHASES ARE OUT OF THE BOOKS OF ACCOUNT OF THE ASSESSEE-FIRM BUT THE AO FAILED TO APPRECIATE THE FACT THAT SHRI JAVEDBHAI NANDOLIA IS SIMPLY A CLERK OF THE ASSESSEE-FIRM AND HE HAS TO LOOK AFTER THE P ROCESS OF JOB WORK AND FILING OF PAPERS ETC. HE HAS NOTHING TO DO WITH BOOKS OF ACCO UNT AND THEREFORE HE WAS NOT AWARE OF THE ACCOUNTING OF THE PURCHASES AND HIS VE RSION OUGHT TO NOT TO HAVE BEEN IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 11 BELIEVED. EVEN OTHERWISE THE AO WHILE RELYING UPON THE SAID STATEMENT FOR DRAWING ADVERSE INFERENCE IN CASE OF ASSESSEE-FIRM HAS FAIL ED TO GRANT CROSS EXAMINATION OF THE SAID PERSON AND WHEN BOOKS OF ACCOUNT WERE MADE AVAILABLE BEFORE ASSESSING OFFICER WHO SCRUTINIZED THE LEDGER OF THE ASSESSEE -FIRM AND HAD FOUND THAT ALL THE PURCHASES MADE BY ASSESSEE-FIRM HAVE BEEN ENTERED I N THE LEDGER AND OTHER RELEVANT BOOKS OF ACCOUNT EITHER ON THE SAME DAY OR AT LEAST BY NEXT DAY. THE AO VERIFIED THAT ALL THE PURCHASES ARE ACCOUNTED FOR A ND IN ABSENCE OF ANY INDEPENDENT EVIDENCE TO CONTROVERT THE SAID FACT NO ADDITION W AS WARRANTED MERELY ON THE BASIS OF THE STATEMENT OF A THIRD PARTY OR AN EMPLOYEE WH O IS NOT WELL AWARE WITH THE ACCOUNTS AND THE ACCOUNTING OF THE ASSESSEE-FIRM. T HE NAME OF ASSESSEE-FIRM DOES NOT APPEAR ANY OF THE LOOSE PAPERS SEIZED AS ABOVE AND THEREFORE MERELY RELYING ON THE STATEMENT OF A CLERK IT CANNOT BE STATED OR PR ESUMED THAT THE PAPERS ARE PERTAINING TO UNACCOUNTED PURCHASES. FURTHER THAT ON THE DATE OF SEARCH A SURVEY WAS CONDUCTED AT THE PREMISES OF M/S. VIRCHAND FULC HAND & BROS. MEHSANA AND A STATEMENT OF THE PARTNER OF THE SAID FIRM WAS ALSO RECORDED WHEREIN SPECIFIC QUESTIONS WERE ASKED ABOUT THE ABOVE REFERRED LOOSE PAPERS AND IN REPLY THESE QUESTIONS ALSO M/S. VIRCHAND FULCHAND & BROS. CLEAR LY DENIED HAVING SENT ANY UNACCOUNTED RAW MATERIAL TO THE ASSESSEE-FIRM. THE SURVEY TEAM ALSO COULD NOT FIND ANY EVIDENCE FROM THE PREMISES OF M/S.VIRCHAND FULC HAND & BROS. WHICH CAN PROVE THE ABOVE ADDITION OF RS.20.50 LAKH MADE BY ASSESSI NG OFFICER. WE FURTHER NOTED THAT FROM THE DECISION OF CO-ORDINATE BENCH IN ITA NO.904/AHD/2005 VIDE ORDER DATED27-03-2009 FOR ASSESSMENT YEAR 2001-02 IN THE CASE OF ACIT MEHSANA V. VIRCHAND FULCHAND & BROTHERS WHEREIN THE TRIBUNAL HELD IN PARA-11 AS UNDER:- 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. T HE SOLE BASIS OF THE ADDITION IS ON ACCOUNT OF SEIZED MATERIAL FOUND FROM THE PREMISES OF JAVED NANDOLIA AND HIS STATEMENT RECORDED DURING THE COURSE OF SEARCH U/S. 132(4). HOWEVER SUCH EVIDENCE CAN BE CONSIDERED ONLY IN THE CASE OF PERSONS SEARC HED AND NOT ANY OTHER PERSON. IF SUCH EVIDENCE OR STATEMENT ARE TO BE USED AGAINST A NY OTHER PERSON THE SAME CAN BE ADMITTED IN EVIDENCE ONLY AFTER SUCH OTHER PERSON I S FURNISHED THE COPY OF SUCH EVIDENCE AND AFFORDED OPPORTUNITY TO CROSS EXAMINE THE PERSON WHOSE STATEMENT IS RELIED UPON. IN THE PROCESS OF CROSS EXAMINATION J AVED NANDOLIA CATEGORICALLY ADMITTED THAT HE WAS CARRYING OUT ONLY JOB WORK FOR ADVOTECH INDUSTRIES AND HE HAS NO KNOWLEDGE AS FROM WHOM THE SODA ASH WAS PURCHASE D BY ADVOTECH INDUSTRIES HOW THE DELIVERY WAS TAKEN AND HOW THE PAYMENT OF MATER IAL WAS DONE. IT WAS ALSO ADMITTED THAT HE HAD NO INFORMATION ABOUT THE PURCH ASE OF SODA ASH FROM THE ASSESSEE AND IN RESPECT OF PAYMENT MADE INN CASH. HE ADMITTE D THAT THE REPLIES WERE GIVEN WITHOUT THINKING OF CONSEQUENCES. THUS AFTER THE S TATEMENT WAS RECORDED DURING THE IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 12 CROSS EXAMINATION NO EVIDENCE IS AVAILABLE TO HOLD THAT THE ASSESSEE HAS SOLD THE GOODS OUTSIDE THE BOOKS OF ACCOUNT OR RECEIVED CASH IN RESPECT THEREOF. EVEN IN THE CASE OF ADVOTECH INDUSTRIES THE ADDITION IS SUSTAI NED ONLY TO THE EXTENT OF PROFIT ON ACCOUNT OF UNACCOUNTED PURCHASES BUT SUCH UNACCOUN TED PURCHASES ARE NOT HELD TO BE FROM THE ASSESSEE ONLY. AS REGARDS EVIDENCE FOUN D DURING THE COURSE OF SEARCH AND RELIED UPON BY THE A.O IT IS NOTED THAT THE SAID E VIDENCE FOUND DURING THE COURSE OF SEARCH NO WHERE MENTIONS THE NAME OF ASSESSEE AS RE CIPIENT OF CASH. THE SAID STATEMENT IS TITLED AS SHAKIR A/C AND THEREFORE THE SAME CANNOT BE PRESUMED TO BE PERTAINING TO THE ASSESSEE. SINCE THERE IS NO EVIDE NCE ON RECORD TO SUGGEST THAT THE AS WE HA SOLD THE GOODS OUTSIDE THE BOOKS OF ACCOUNT A ND IN RESPECT OF WHICH CASH WAS RECEIVED BY THE ASSESSEE THE ADDITION WAS RIGHTLY DELETED BY THE LD. CIT(A). ACCORDINGLY THE SAME FALLS ON THIS GROUND. WE FIND FROM THE ABOVE THAT EVEN THE TRIBUNAL HAS NOT BELIEVED THE STATEMENT RECORDED U/S.132(4) OF THE ACT AS THE SAME WAS RETR ACTED AND DURING CROSS- EXAMINATION SHRI JAVED NANDOLIYA CATEGORICALLY DE NIED HAVING MADE ANY PURCHASES BY THE ASSESSEE FROM M/S. VIRCHAND FULCHAND & BROTH ERS. 12. FURTHER WHILE GOING THROUGH THE LOOSE PAPERS IT IS FOUND THAT SPECIFIC DATES AND QUANTITY OF SODA ASH ARE WRITTEN ON THEM AND IT HAS BEEN GIVEN TO UNDERSTAND BY M/S. VIRCHAND FULCHAND & BROS. THAT THEY HAD SOLD T HE SAME QUANTITY OF SODA ASH ON THE SAME DATE TO OTHER PURCHASERS WHO ARE NOT RELAT ED TO THE ASSESSEE AND THESE PURCHASES HAVE MADE THE PAYMENTS EITHER BY CHEQUES OR DEMAND DRAFTS TO M/S VIRCHAND FULCHAND & BROS DURING THE PERIOD JULY-SEP . AMOUNTING TO RS.20.50 LAKHS AND PAYMENTS ARE MADE DURING 05-08-200 TO 01-10-200 AS NOTED ON PAGE NO.31 . WE FURTHER FIND THAT THE ADDITION OF RS.16 LAKH ON ACCOUNT OF UNACCOUNTED DISTRIBUTION OF PROFIT WAS MADE ON THE BASIS OF NOTINGS IN THE D IARY SEIZED FROM THE RESIDENCE OF MR. RASIDBHAI NANDOLIYA DURING SEARCH AND ON PAGE-13 SOME NOTINGS HAVE BEEN MADE BY THE SAID PERSON. THE ASSESSEE CATEGORICALLY ARGUED THAT MR RASHIDBHAI NANDOLIYA AND OTHER MENTIONED IN THE SEIZED PAPER R EFERRED ABOVE ARE NOT OR WERE NEVER THE PARTNERS OF THE ASSESSEE-FIRM AND FOR THI S THE ASSESSEE HAS FILED COPY OF PARTNERSHIP DEED DURING ASSESSMENT PROCEEDINGS AND EVEN AT APPELLATE STAGES. IT IS ALSO A FACT THAT THESE PERSONS HAVE NEITHER MADE AN Y INVESTMENT OR CONTRIBUTION AS PARTNER IN VIEW OF THE EVIDENCE PRODUCED BY THE ASS ESSEE BY WAY OF BOOKS OF ACCOUNT AND OTHER DOCUMENTS. THE BOOKS OF ACCOUNT A ND OTHER SEIZED MATERIALS SEIZED FROM ASSESSEE-FIRM DO NOT MENTION ANYTHING B Y MR RASHIDBHAI NANDOLIA OR OTHERS. FURTHER THE DIARY ON WHICH RELIANCE HAS B EEN PLACED BY THE AO WAS NOT FOUND EITHER FROM THE PREMISES OF THE ASSESSEE-FIRM OR FROM THE PREMISES OF ANY OF IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 13 THE PARTNERS OF THE ASSESSEE-FIRM. THE NOTINGS MADE IN SUCH DIARY ARE IRRELEVANT IN SO FAR AS THE ASSESSEE-FIRM IS CONCERNED AND SHOULD NO T HAVE BEEN TAKEN AS A BASE TO MAKE SUCH A HUGE ADDITION. THAT APART THE ONUS TO ESTABLISH THAT THE NOTINGS RELATES TO PARTNERSHIP SHARE IN THE ASSESSEE-FIRM IS OUTSI DE THE BOOKS OF ACCOUNT IS ON THE PERSON FROM WHOSE POSSESSION THE DIARY HAS BEEN FOU ND AND SEIZED AND WHO HAS MADE THE NOTINGS THEREIN AND NOT THE ASSESSEE-FIRM AS WRONGLY ALLEGED BY THE REVENUE AS ONE OF THE REASONS FOR NOT ACCEPTING THE ASSESSEES CONTENTIONS AT THE BEST THE NET PROFIT AS ESTIMATED BY CIT(A) CAN BE S USTAINED. ACCORDINGLY WE CONFIRM THE ADDITION OF RS.4 LAKH AS PROFIT AND INVESTMENT IN THE ABOVE PURCHASES AND UPHOLD THE FINDINGS OF CIT(A).. THESE COMMON ISSUES OF BOT H THE ASSESSEE AS WELL AS THAT OF REVENUE ARE DISMISSED. 13. THE NEXT COMMON ISSUE IN THESE CROSS APPEALS IS AGAINST THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS.87 700/- MADE BY ASS ESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH FOUND. FOR THIS REVENUE HAS RAIS ED THE FOLLOWING GROUND NO.3 :- 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DI RECTING TO DELETE THE ADDITION OF RS.86 700/- MADE ON ACCOUNT OF UNEXPLAINED CASH FOUND. THE ASSESSEE HAS RAISED FOLLOWING GROUND NO.5 :- 5. THE LEARNED CIT(A) HAS ALSO ERRED IN NOT ACCEPT ED THE EXPLANATION FURNISHED PERTAINING TO CASH FOUND DURING THE COURS E OF SEARCH OF RS.84 700/-. IN VIEW OF THE EXPLANATION FURNISHED THE SAID CASH FOUND REQUIRES TO BE CONSIDERED AS EXPLAINED AND NOT OUT OF INCOME ESTIM ATED AND CONFIRMED BY THE CIT(A). . 14. WE HAVE HERD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE CIT(A) HAS DELETED THE ADDITION BY TAKING A TELESCOPING THEORY THAT HE HAS ALREADY ESTIMATED UNACCOUNTED PROFIT ON UNACCOUNTED SALES AND CERTAIN INVESTMENTS FOR UNACC OUNTED PURCHASE AND CONSIDERING THE PROFIT OF RS.4 LAKH THIS RS.87 700 /- CASH FOUND DURING THE COURSE OF SEARCH CAN BE HELD TO BE OUT OF THE ESTIMATED PROFI T. THE CIT(A) IN PARA-6.2 OF HIS APPELLATE ORDER HELD AS UNDER:- 6.2 I HAVE CONSIDERED THE FACTS AND THE RIVAL SUBM ISSIONS. THE ENTIRE ADDITION FOR THE CASH FOUND HAS BEEN MADE BY THE A.O ON THE GROUND THAT DURING THE COURSE OF SEARCH CASH BOOK FOUND WAS NOT COMPLETE AND THE SAME WAS NOT IT(SS)A NO.314 & 286/AHD/2003 B.P. 1/4/91 TO 9/1/01 ACIT CC-1(4) ABD V. M/S. ADVATECH INDS. PAGE 14 WRITTEN SINCE 1/4/2000. THEREFORE CASH BOOK PRODUC E DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS NOT BEEN CONSIDERED AND THE ENTIRE CASH HAS BEEN ADDED. AT THE OUTSET NO OTHER EVIDENCES/FINDI NGS COULD BE BROUGHT ON RECORD BY THE A.O AND IN THE CASH BOOK FURNISHED N O DEFECTS COULD BE POINTED OUT BY THE A.O. THEREFORE THE ENTIRE CASH BOOK CAN NOT BE SUMMARILY REJECTED. FURTHER I HAVE ALREADY ESTIMATED UNACCOUNTED PROFI T ON THE UNACCOUNTED SALES AND CERTAIN INVESTMENT FOR SUCH UNACCOUNTED P URCHASES AND CONSIDERING THE PROFIT WHICH HAS BEEN DISTRIBUTED B Y THE FIRM THERE IS STILL GAP OF ABOUT RS.84 000/- BETWEEN THE PROFITS AND UNACCO UNTED INVESTMENT AND THE AMOUNT DISTRIBUTED AND THUS THE SEPARATE ADDITION F OR THE CASH FOUND OF RS.84 700/- IS DELETED BEING COVERED BY THAT. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND ACC ORDINGLY WE CONFIRM THE SAME. THIS COMMON ISSUE IS DISMISSED. 15. IN THE RESULT THE APPEAL OF THE REVENUE AS WELL AS THAT OF ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 24/12/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 24/12/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-I AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD