Veekay Prints Pvt. Ltd.,, Ahmedabad v. The ACIT., Cent. Circle-3,, Surat

ITSSA 93/AHD/2006 | misc
Pronouncement Date: 31-01-2011 | Result: Allowed

Appeal Details

RSA Number 9320516 RSA 2006
Assessee PAN AAACV9663K
Bench Ahmedabad
Appeal Number ITSSA 93/AHD/2006
Duration Of Justice 4 year(s) 9 month(s) 2 day(s)
Appellant Veekay Prints Pvt. Ltd.,, Ahmedabad
Respondent The ACIT., Cent. Circle-3,, Surat
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 31-01-2011
Date Of Final Hearing 05-01-2011
Next Hearing Date 05-01-2011
Assessment Year misc
Appeal Filed On 28-04-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI D. C. AGRAWAL ACCOUNTANT MEMBER IT(SS)A NO.93 & 99/AHD/2006 BLOCK PERIOD FROM 1/4/95 TO 6/9/01 DATE OF HEARING:5.1.11 DRAFTED:18..1.11 VEEKAY PRINTS PVT. LTD. C/O. M/S. RAVI & DEV. CHARTERED ACCOUNTANTS 201 ARTH B/H. A.K. PATEL HOUSE MITHAKALI SIX ROADS AHMEDABAD-380 009 PAN NO.AAACV9663K ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-3 ROOM NO.507 AAYAKAR BHAVAN MAJAURA GATE SURAT V/S . V/S . ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-3 SURAT M/S. VEEKAY PRINTS PVT. LTD. BLOCK 213 KADODARA TAL. PALSANA DIST. SURAT (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI U.S. BHATI AR REVENUE BY:- SHRI RABINDRA KUMAR CIT-DR O R D E R PER SHRI MAHAVIR SINGH JUDICIAL MEMBER:- THESE CROSS-APPEALS BY ASSESSEE AND REVENUE ARE AR ISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-II AHMEDABAD IN APPEAL NO. CIT(A)- II/CC.3/133/2005-06 DATED FEBRUARY 2006. THE BLOCK ASSESSMENT WAS FRAMED BY ACIT CENTRAL CIRCLE-3 SURAT U/S 158BC[C] OF THE I NCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 30-0 9-2003 FOR BLOCK PERIOD 01-04-1995 TO 06-09-2001. IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 2 2. THE FIRST INTER-CONNECTED ISSUES IN THESE CROSS- APPEALS OF ASSESSEE IS AGAINST THE RESTRICTION OF ADDITION ON ACCOUNT OF UNACCOUNT ED INVESTMENT IN PLANT & MACHINERY AT RS.3 76 699/-. FOR THIS ASSESSEE HAS R AISED THE FOLLOWING GROUND NO.2.1 & 2.2 :- IT(SS)A NO.93/AHD/2006 (FOR ASSESSEE) ADDITION ON ACCOUNT OF UNACCOUNTED PLANT & MACHIE RY RS.3 76 699/- 2.1 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS.26 609/- REGARDI NG COST OF ROLLS. 2.2 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN LAW AND ON FACTS IN SUSTAINING ADDITION OF RS.3 50 090/- ON ES TIMATE BASIS IN RESPECT OF PLANT & MACHINERY. THE REVENUE HAS RAISED THE FOLLOWING GROUND NO.3 :- IT(SS)A NO.99/AHD/2006 (FOR REVENUE) 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO RESTRICT THE ADDITION OF RS.20 00 000/- MADE ON ACCOUNT OF UNACCOUNTED I NVESTMENT IN PLANT AND MACHINERY TO RS.6 30 589/-. 3. THE BRIEF FACTS LEADING TO THE ABOVE INTER-CONNE CTED ISSUES ARE THAT SEARCH U/S.132 OF THE ACT WAS CARRIED OUT ON BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE-COMPANY ON 06-09-2001 INCLUDING ALL DIRECT ORS. THE ASSESSEE-COMPANY IS ENGAGED IN BUSINESS OF PROCESSING OF ART SILK CLOTH ON JOB WORK BASIS. THE BLOCK ASSESSMENT WAS COMPLETED U/S.158BC OF THE ACT VIDE BLOCK ASSESSMENT ORDER DATED 30-09-2003 FOR BLOCK PERIOD 01-04-1995 TO 06-09-200 1 THEREBY UNDISCLOSED INCOME OF THE ASSESSEE WAS ASSESSED AT RS.65 53 720/- APAR T FROM UNDISCLOSED INCOME DECLARED IN THE BLOCK RETURN AT RS.7.70 LAKH. THE O RIGINAL APPEAL BEFORE CIT(A) WAS FILED BY ASSESSEE WHICH WAS DISPOSED OFF BY CIT(A) VIDE NO. CIT(A)-II/CC.3/10/03- 04 DTD.17/12/2003. THE ITAT DIRECTED THE CIT(A) TO DECIDE THE ISSUE AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO ASSESSEE AND TO THE R EVENUE. THE ITAT ALSO DIRECTED THE CIT(A) TO EXAMINE THE COMPLETE RECORDS AND ALSO RELEVANT FACTS. ACCORDINGLY CIT(A) DECIDED THE ISSUE AFRESH AND FOR WHICH BOTH REVENUE AND ASSESSEE CAME IN APPEAL BEFORE TRIBUNAL. DURING THE COURSE OF SEARCH ONE SHRI GHNASHYAM BHAIYA WHO WAS IN-CHARGE OF ACCOUNTS OF THE ASSESSEE-COMPA NY MADE A DISCLOSURE OF IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 3 UNDISCLOSED INCOME AT RS.70 LAKH U/S.132(4) OF THE ACT. THE RELEVANT QUESTION & ANSWER NO.21 OF STATEMENT RECORDED ON 06-09-2001 U/S.132(4) OF THE ACT AS REPRODUCED IN THE BLOCK ASSESSMENT ORDER READS AS UNDER:- Q.21: DO YOU WANT TO SAY ANYTHING MORE? A.21: I CONFORM THAT VEEKAY PRINTS PVT. LTD HAS EAR NED NET UNACCOUNTED INCOME OF RS.1.16 CRORE TILL DATE OUT OF WHICH RS.4 5 LAKHS HAS BEEN PAID AS SALARY TO PRINTING MASTER SHRI MAHENDRA PATEL. THUS THE NET UNACCOUNTED INCOME OF THE COMPANY HAS BEEN RSS.70 LAKH WHICH I VOLUNTARILY DISCLOSE BEFORE YOU. WE WILL SHOW THIS INCOME OF RS.70 LAKHS IN THE BLOCK RETURN OF THE COMPANY VEEKAY PRINTS PVT. LTD. FURTHER I CONFIRM THAT THIS UNACCOUNTED INCOME OF RS.70 LAKHS HAS BEEN INVESTED IN CONSTRUC TION AND MACHINERY AT OUR NEW UNIT AT PLOT NO.210 NEAR MAHALAXMI DYEING KADODARA SURAT. APPROXIMATELY RS.50 LAKHS HAVE BEEN INVESTED IN TH E MATERIALS FOR CONSTRUCTION LIKE STEEL CEMENT PLYWOOD ETC. AND APPROXIMATELY RS.20 LAKHS HAVE BEEN INVESTED IN THE MACHINERY ITEMS. ACCORDING TO ASSESSING OFFICER THE ASSESSEE-COMPAN Y IS CONTROLLED BY SHRI DINESH BHAIYA AND SHRI D.L. SHAH. SUBSEQUENT TO SEARCH SH RI DINESH BHAIYA VIDE HIS STATEMENT DATED 14-09-2001 WHEREIN HE ADMITTED THE STATEMENT OF SHRI GHANSHYAM BHAIYA AND FURTHER ON 12-11-2001 SHRI BHARAT L SHAH ANOTHER DIRECTOR ALSO ADMITTED TO HAVE ACCEPTED THE STATEMENT MADE BY SHR I GHANSHYAM BHAIYA. BUT SUBSEQUENTLY THE ASSESSEE FILED BLOCK RETURN OF INC OME DECLARING UNDISCLOSED INCOME AT RS.7.70 LAKH ON 22-02-2002. THE ASSESSEE DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS FILED AFFIDAVIT OF SH. GHANS HYAM BHAIYA RETRACTING THE DISCLOSURE VIDE DATED 09-09-2001 WHICH WAS FILED O N 16-06-2003. NOW THE INTER- CONNECTED ISSUES ARE TO BE EXAMINED WHETHER THE BLO CK ASSESSMENT IS BASED ON DOCUMENT FOUND DURING THE COURSE OF SEARCH OR MEREL Y ON STATEMENT WHICH IS RETRACTED BY FILING AFFIDAVIT. NOW WE WILL DEAL WIT H THE INTER-CONNECTED ISSUES ON MERITS. 4. THE ASSESSING OFFICER DURING BLOCK ASSESSMENT PR OCEEDINGS NOTED THAT REVENUE DURING THE COURSE OF SEARCH CONDUCTED AT TH E RESIDENCE OF SHRI GHANSHYAM BHAIYA 203 ROYALE PLACE GHOD DOD ROAD SURAT FOU ND BOOKS OF ACCOUNT INCRIMINATING DOCUMENTS AND SEIZED AND OUT OF THESE PAPERS SOME PAPERS RELATED TO VEEKAY PRINTS PVT. LTD. THE ASSESSEE-COMPANY. THE AO DISCUSSED PAGES NO.17 & 18 OF BS-I WHICH CONTAINS DETAILS OF INVENTORY OF B ALL BEARING OF UMIYA INDUSTRIAL IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 4 STORE KDODARA SURAT. ACCORDING TO THESE PAPERS DE TAILS LIKE BEARING NO QUANTITY AND RATE ARE NOTED. THE ASSESSEE WAS ASKED TO EXPLA IN AND ASSESSEE EXPLAINED THAT THE LIST WAS INVENTORY FOR THE PURCHASE OF BEARINGS BY VEEKAY PRINTS PVT. LTD BUT DEAL COULD NOT BE FINALIZED. ACCORDING TO AO THESE PURCH ASES OF BEARINGS VALUED AT RS.73 786/- PERTAINS TO ASSESSEE AND THIS IS UNACCO UNTED INVESTMENT UNDER THE HEAD MACHINERY AND AS PER STATEMENT RECORDED U/S 132 OF THE ACT OF SHRI GNAHSHAM BHAIYA WHEREIN HE HAS ADMITTED UNACCOUNTED INVESTM ENT OF RS.20 LAKH IN UNIT-2 OF THE ASSESSEE-COMPANY FOR SETTING UP OF MACHINERY. T HE AO FURTHER NOTED FROM PAGES 22-24 OF BS-I THAT THESE RELATES TO EXPENDITURE IN CURRED FOR CABLE STANTER ROLL ETC. AND THESE PAPERS SHOW THAT M/S NARENDRA TEXTILE HAS DONE SOME WORK ON BEHALF OF VEEKAY PRINTS PVT. LTD. FOR WHICH M/S. NARENDRA TEX TILE HAS CHARGED COMMISSIONS @ 5% WHICH IS REPRODUCED BY AO IN HIS BLOCK ASSESSME NT ORDER AND THE SAME IS BEING REPRODUCED AS UNDER:- CABLE RS.2 00 000/- 5% COMMISSION 10 000/- STRAINTER RS.4 00 000/- 5% COMMISSION 20 000/- THE VALUE IS NOT MENTIONED. HOWEVER THE SAME IS CO MPUTED ON THE BASIS OF % OF COMMISSION & COMMISSION AMOUNT. ROLL RS.80 000/- 5% COMMISSION 4 000/- LOADING RS. 2 000/- FLIGHT EXPENSES RS. 12500/- RS.6 80 000/- 48 500/- FURTHER AO NOTED FROM PAGE NO.22 THAT A SUM OF RS. 1 38 450/- WAS GIVEN OUT OF WHICH RS.1.20 LAKH WAS PAID AND RS.18 400/- WAS BAL ANCE. ACCORDING TO AO TOTAL PAYMENT OF RS.6 LAKH MADE FOR S.S TANK WAS CALCULAT ED AT PAGE 22 AND WHEN THIS WAS COMPARED WITH THE BOOKS OF ACCOUNT ACCORDING T O ASSESSING OFFICER THE CABLE WAS PURCHASED FOR A SUM OF RS.1 73 391/- AND STANTE R FOR RS.4 32 835/- AND THE FIGURES WRITTEN IN THE SEIZED MATERIAL DOES NOT TAL LY. FURTHER AO NOTED THAT ASSESSEE ITSELF HAS DECLARED A SUM OF RS.2 41 500 AS UNACCOU NTED INVESTMENT IN MACHINERY OF UNIT-2 OF THE ASSESSEE WHICH IS UNDER CONSTRUCTION AND INSTALLATION OF MACHINERY IS IN PROGRESS. THE AO IN VIEW OF THE ABOVE DISCUSSION M ADE ADDITION OF RS. 20 LAKH AS UNACCOUNTED INVESTMENT IN THE MACHINERY FOR THE ENT IRE BLOCK PERIOD AND PARTICULARLY IN VIEW OF THE STATEMENT RECORDED U/S.132(4) OF SHR I GNAHSHAM BHAIYA WHEREIN ASSESSEE HAS MADE INVESTMENT OUT OF UNDISCLOSED SOU RCE. THE CIT(A) AFTER IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 5 DISCUSSING THESE PAPERS SUSTAINED ADDITION OF RS.3. 50 LAKH BY GIVING FOLLOWING FINDINGS IN PARA-12 OF HIS APPELLATE ORDER:- 12. AFTER CAREFULLY CONSIDERING THE CONTENTIONS RA ISED BY THE APPELLANT AND OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER AS DISCUSSED IN THE PRECEDING PARA IT WOULD BE APPROPRIATE TO APPR ECIATE THE FACTS AND ARGUMENTS OF BOTH THE SIDES. THE CONTENTION OF THE APPELLANT THAT THE ASSESSING OFFICER HAS MADE THE TOTAL ADDITION MEREL Y ON THE BASIS OF THE STATEMENT RECORDED DURING SEARCH IS ABSOLUTELY WRON G. THE ASSESSING OFFICER HAS CLEARLY DISCUSSED THE EVIDENCES GATHERED DURING THE COURSE OF SEARCH PROCEEDINGS. HOWEVER AT THE SAME TIME IT CAN BE O BSERVED THAT ADDITION MADE BY THE ASSESSING OFFICER IS ON THE HIGHER SIDE . OUT OF TOTAL UNACCOUNTED INVESTMENT ASSESSED AT RS.20 LACS THE APPELLANT HA S DECLARED RS.2 53 890/- IN THE RETURN AS A RESULT OF WHICH EFFECTIVE ADDITI ON COMES TO RS.17 46 110/-. IN THIS REGARD ARGUMENT OF THE APPELLANT IN RESPECT O F STOCK INVENTORY FOUND IN RESPECT OF UMIYA IND. STORE KHADODARA AS PER PAGE 1 7 AND18 OF BS 1 IS APPRECIABLE. THE ASSESSING OFFICER HAS MADE THE ABO VE ADDITION ON THE BASIS OF PRESUMPTION ONLY. THUS THE ABOVE ADDITION OF RS .73 786/- IS DELETED. REGARDING ADDITION OF RS.26 609/- THE SAME IS MADE ON THE BASIS OF VARIATION IN BOOK VALUE. THE APPELLANT COULD NOT SUBSTANTIATE THE CONTENTION NOR FILED ANY DOCUMENTARY EVIDENCE IN THIS REGARD. IN THE FRE SH OPPORTUNITY THE APPELLANT REPEATED THE EARLIER ARGUMENTS AND DID NO T FURNISH ANY FRESH EVIDENCE. IN VIEW OF THESE FACTS THE ABOVE ADDITIO N OF RS.26 609/- IS SUSTAINED. THE THIRD ADDITION IS REGARDING PLANT AN D MACHINERY AT RS.16 45 715/-. PERUSAL OF THE OBSERVATIONS OF THE ASSESSING OFFICER REVEALS THAT CERTAIN EVIDENCES REGARDING UNACCOUNTED PURCHA SES EXISTED AS DISCUSSED IN THE PRECEDING PARA. THE ASSESSING OFFI CER DID NOT MAKE ADDITION MERELY ON THE BASIS OF STATEMENT BUT ALSO ON THE BA SIS OF EVIDENCES FOUND DURING THE COURSE OF SEARCH. THE APPELLANT SHIFTED STANDS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LIST HAS BEEN PERUSED B Y ME. THERE IS NO MENTION OF PRICE AGAINST CERTAIN ITEMS. THE ASSESSI NG OFFICER HAD MADE AN ESTIMATE ADDITION. THUS LOOKING TO THE FACTS OF TH IS CASE IT WOULD BE FAIR AND REASONABLE IF AN ADD OF RS.3 50 090/- IS SUSTAINED UNDER THIS HEAD. THIS GROUND OF THE APPELLANT IS THEREFORE PARTLY ALLOW ED. AGGRIEVED BOTH CAME IN APPEAL BEFORE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT PAGE NO.17 AND 18 OF SEIZED MATERIAL ARE ENCLOSED AT PAGE NO. 9 & 10 OF ASSESSEES PAPER BOO K WHICH CONTAINS DETAIL OF STOCK OF BALL BEARING OF M/S. UMIYA IND.STORE KHAD ODARA AGGREGATING TO RS.73 786/-. BOTH THE PAPERS ON WHICH WORD STOCK IS CLEARLY WR ITTEN ARE CANCELLED BY MARKING X AND ASSESSING OFFICER HAS CONSIDERED THESE CANCELLE D STOCK INVENTORY PAPERS AS BELONGING TO THE ASSESSEE-COMPANY. THE AO VERIFIED AND ACCEPTED AS CORRECT THE IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 6 INVENTORY OF STOCK DURING BLOCK ASSESSMENT AS WELL AS DURING ASSESSMENT U/S.143(3) OF THE ACT AND HAS NOT POINTED OUT ANY DISCREPANCY IN THE STOCK SHOWN BY ASSESSEE. EVEN IF BOTH THESE PAPERS ARE CONSIDERED AS BELONGI NG TO ASSESSEE WORD STOCK IS CLEARLY WRITTEN ON THESE PAPERS AND AS SUCH CAN NO T BE CONSIDERED AS REFLECTING UNACCOUNTED PURCHASES. WHEN THERE IS NO DIFFERENCE IN STOCK NO ADDITION CAN BE MADE ON THE BASIS OF PAPER MARKED STOCK CONSIDERI NG IT AS UNACCOUNTED PURCHASES. THE AO HAS ERRED IN CONSIDERING STOCK ST ATEMENT AS UNACCOUNTED PURCHASES OF THE ASSESSEE-COMPANY AND ADDED RS.73 7 86/- AS UNACCOUNTED INVESTMENT IN P & M. FURTHER AO HAS NOT EXPLAINED AS TO HOW CANCELLED PAPERS ON WHICH WORD STOCK IS CLEARLY WRITTEN ARE CONSIDER ED AS UNACCOUNTED PURCHASES OF THE ASSESSEE-COMPANY. ACCORDINGLY ADDITION OF RS.7 3 786/- MADE ON THE BASIS OF THESE TWO SEIZED PAPERS IS NOT WARRANTED. THE PAGE S NO.22 TO 24 SEIZED AT THE RESIDENCE OF SHRI GNAHSHAM BHAIYA REFLECTS WORKING OF COMMISSION AND OTHER EXPENSES PAYABLE TO M/S. NARENDRA TEXTILES AND DETA IL OF WORKING ON PAGE NO.22 IS REPRODUCED BY AO IN THE ASSESSMENT ORDER. THE ASSES SEE-COMPANY HAD SPENT RS.1 73 391/- ON THE PURCHASE OF ROLLS AND RS.4 36 835/- ON THE PURCHASE OF STRAINTER AND COST OF STRAINTER IN BOOKS EXCEED BY RS.36 835/ - WHERE AS COST OF ROLLS AS PER BOOKS OF ASSESSEE IS SHORT BY RS.26 609/- FROM THE FIGURE OF RS.2 LAKH AND RS.4 LAKH CONSIDERED BY M/S. NARENDRA TEXTILES FOR WORKING TH EIR COMMISSION. THE ASSESSING OFFICER ACCEPTED THE HIGHER INVESTMENT OF RS.4 36 8 35/- AS CORRECT IN WEFT STRAINTER AS AGAINST THIS ACTUAL INVESTMENT IN ROLLS WAS SHORT B Y RS.26 609/- WHICH HE CONSIDERED TO BE UNACCOUNTED INVESTMENT BY ASSESSEE-COMPANY AN D ADDED THE UNDISCLOSED INCOME OF THE ASSESSEE. THE WORKING OF COMMISSION B Y M/S. NARENDRA TEXTILE WAS BASED ON THE ESTIMATED COST TO THE ASSESSEE FOR ACQ UIRING ROLLS AND WEFT STRAINTER AND TOTAL INVESTMENT ESTIMATED IN BOTH ITEMS WAS RS.6 L AKH AS AGAINST ACTUAL COST OF RS.6 10 226/-. THE AO HAS NOT CONSIDERED THE FACT T HAT WHEN ACTUAL CAN EXCEED THE ESTIMATE AND ACTUAL CAN ALSO BE LESS THAN ESTIMATE HE IS NOT JUSTIFIED IN REJECTING ACTUAL WHEN IT IS LESS THAN ESTIMATE AND ACCEPT ACT UAL WHEN IT IS MORE THAN ACTUAL ESTIMATE. THE ASSESSEES CONTENTION WAS THAT THE AD DITION OF RS.26 609/- MADE ON THE BASIS OF THIS SEIZED PAPER BE DELETED AS INVEST MENT IN BOTH THE MACHINES REFLECTED THROUGH THESE SEIZED PAPERS IS ALREADY AC COUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE-COMPANY. THE ADDITION TO THE EXTENT OF RS.16 45 715/- UNDER THE HEAD IS MADE ON THE BASIS OF RETRACTED STATEMENT WITHOUT ANY CORROBORATIVE EVIDENCES. THE SEARCH TEAM HAD IN VENTORIZED ENTIRE P & M IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 7 AVAILABLE IN FACTORY PREMISES VIDE ANNEXURE M AND COPY OF INVENTORY OF PLANT & MACHINERY PREPARED BY SEARCH TEAM DURING SEARCH IS AVAILABLE AT PAGE NO. 4 & 5 OF ASSESSEES PAPER BOOK. ALL THE MACHINES REFLECTED T HROUGH THIS INVENTORY HAS BEEN FOUND TO BE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT M AINTAINED BY THE ASSESSEE- COMPANY AND COPY OF SCHEDULE OF FIXED ASSETS SHOWI NG DETAIL OF MACHINERIES AS PER ASSESSEE BOOK IS ENCLOSED AT PAGE NO. 6-8 OF ASSESS EES PAPER BOOK. THE ASSESSEE HAS MADE TOTAL INVESTMENT OF RS.3 92 13 682/- IN PL ANT AND MACHINERY OF UNIT-1 WHICH HAS ALREADY BEEN ACCEPTED TRUE AND IN ADDITION TO T HIS INVESTMENT TO THE EXTENT OF RS.64 31 852/- IN STRAINTER MACHINE FOR UNIT-2 MADE BY THE ASSESSEE IS ALSO ACCEPTED BY DEPARTMENT AS CORRECT. AS SUCH TOTAL INVESTMENT OF RS.4 58 99 424/- IN PLANT & MACHINERY TILL THE DATE OF SEARCH I.E. 05-09-2001 I S MADE AS PER DETAIL GIVEN BELOW:- PLANT AND MACHINERY OF UNIT-1 3 92 13 682 UNIT-2 64 31 852 IN BLOCK RETURN 2 53 890 TOTAL 4 58 99 42 4 ALL THE PLANT AND MACHINERY AS INVENTORIZED BY SEAR CH TEAM ARE DULY RECORDED IN THE BOOKS OF ASSESSEE-COMPANY AND ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THAT ABOVE INVESTMENTS MADE BY AS SESSEE IN MACHINERIES IS NOT CORRECT. THE AO HAS FAILED TO APPRECIATE THAT INVES TMENT CAN BE PRESUMED TO HAVE BEEN MADE WHEN EITHER SUCH ASSET IS FOUND OR THE PE RSON IS IDENTIFIED TO WHOM ADVANCES ARE MADE FOR PURCHASE OF ASSETS. THE AO HA S NOT BROUGHT ON RECORD EVEN SINGLE MACHINERY WHICH IS UNACCOUNTED IN THE ASSESS EES BOOKS OF ACCOUNT. FURTHER AO COULD NOT IDENTIFY EVEN A SINGLE SUPPLIER OF PLA NT AND MACHINERY TO WHOM ADVANCE AGAINST SUPPLY OF PLANT AND MACHINERY IS MA DE BY THE ASSESSEE-COMPANY AND WHICH IS UNACCOUNTED AND ENTIRE ADDITION IS BAS ED ONLY ON SUSPICION AND IF SUSPICION MAY BE STRONG MAY NOT BE TAKEN AS EVIDENC E. THE CONTENTION OF THE ASSESSEE THAT THE ADDITION OF RS.16 45 715/- MADE B Y ASSESSING OFFICER IS IN CONTRAVENTION OF THE CIRCULAR NO.286/2/2003-II(INV.) DATED 10-03-2003 OF CBDT WHICH CLEARLY SATES THAT ASSESSING OFFICER SHOULD R ELY UPON THE EVIDENCES/MATERIALS FOUND DURING THE COURSE OF SEARCH/SURVEY OPERATIONS AND FRAME THE RELEVANT ASSESSMENT. WE FIND THAT STATEMENT IS NOT CORROBORA TED BY THE EVIDENCES DISCUSSED IN SUBSEQUENT PARAS UNDER EACH HEAD OF UNACCOUNTED INVESTMENT AND THE ASSESSING IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 8 OFFICER HAS NOT POINTED OUT ANY EVIDENCE WHICH COUL D CORROBORATE THE RETRACTED CONFESSIONAL STATEMENTS. AND AS SUCH IN THE ABSENC E OF ANY EVIDENCE AO SHOULD NOT HAVE MADE ANY ADDITION ON THE BASIS OF RETRACTE D STATEMENT IN VIEW OF THE CLEAR- CUT CIRCULAR OF CBDT. ACCORDINGLY THE ADDITION SUS TAINED BY THE CIT(A) IS DELETED AND THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. AS REGARDS TO THE ISSUE OF REVENUES APPEAL WE CONFIRM THE ORDER OF CIT(A) AND THIS ISS UE OF REVENUES APPEAL IS DISMISSED. 6. THE NEXT COMMON ISSUE IN THESE CROSS APPEALS OF ASSESSEE AS WELL AS REVENUE IS AS REGARDS TO THE ADDITION OF UNACCOUNTE D INVESTMENT IN CONSTRUCTION OF FACTORY BUILDING. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.3.1 TO 3.3 :- ADDITION ON ACCOUNT OF UNACCOUNTED INVESTMENT IN CONSTRUCTION OF FACTORY BUILDING RS.24 32 090/- 3.1 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.32 090/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN FACTORY BUILDING. 3.2 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.16 00 000/- IN RESPECT OF PURCHASE OF LAND FOR FACTORY ON THE BASIS OF STAMP DUTY PAYMENT . 3.3 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN CONFIRMING THE ADDITION OF RS.8 00 000/- IN RESPECT OF CONSTRU CTION OF FACTORY ON ESTIMATE BASIS. AND REVENUE HAS RAISED THE FOLLOWING GROUND NO.4 :- 4. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO RESTRICT THE ADDITION OF RS.50 00 000/- MADE ON ACCOUNT OF UNACCOUNTED I NVESTMENT IN FACTORY BUILDING TO RS.26 55 790/-. 7. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ADDITION OF RS.32 090/- IS MADE ON THE GROUND THAT EXPENSES AS PER ANNEXURE-BS -2 OF SEIZED MATERIAL IDENTIFIED BY ASSESSING OFFICER WHICH AGGREGATES TO RS. 2 30 590 EXCEEDS THE EXPANSES IDENTIFIED BY ASSESSEE TO THE EXTEND OF RS .1 98 500/- AND ACCORDINGLY EXPENSES IDENTIFIED BY AO ARE CONSIDERED AS UNACCOU NTED INVESTMENT. THE FURTHER ADDITION OF RS.16 00 500/- IS MADE AS UNACCOUNTED I NVESTMENT IN LAND AND FACTORY IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 9 CONSTRUCTION ON THE PLEA THAT ASSESSEE PAID STAMP D UTY ON TOTAL VALUE OF RS.34 29 300/- DETERMINED BY STAMP DUTY AUTHORITY A S AGAINST DOCUMENT VALUE OF RS.18 28 800/-. THE ADDITION OF RS.31 24.210/- IS M ADE ON THE BASIS OF RETRACTED STATEMENT U/S 132(4)OF THE ACT OF SHRI GHANSHYAM BH AIYA AND SHRI DINESHS BHAIYA THAT INVESTMENTS OF RS.50 LAKH IS MADE IN CONSTRUCT ION OF UNIT-2. THE ASSESSING OFFICER IDENTIFIED THE FOLLOWING EXPENSES AS RELATA BLE TO CONSTRUCTION AS PER PARA- 6.4.1 OF HIS BLOCK ASSESSMENT ORDER:- S.NO PARTICULARS AMOUNT (RS) 1 INTWALA 25 000 2 HARDWARE 6 900 3 FURNITURE (PURSHOTAMA) 35 000 4 RANJIT (ADVANCE) 5 000 5 MAHARAJ 500 6 JAGDISH KHARCHI TRADING 1 500 7 OPERATOR DAMINI 1 000 8 NAMDEV KHAARCHI 500 9 MAGAN (CONSTRUCTION) 1 00 000 10 DINESH (INTWALA) VK-2 12 000 11 JAISHWAL (SALARY) 25 000 12 NITINBHAI TRADING 14 000 13 HASMUKHBHAI 3 000 TOTAL 2 30 590 THE ASSESSING OFFICER HAS STATED THAT ASSESSEE HAS IDENTIFIED ONLY RS.1 98 500/- TOWARDS UNACCOUNTED EXPENDITURE ON CONSTRUCTION AS AGAINST RS.2 30 590/- IDENTIFIED BY HIM AND ACCORDINGLY CONSIDERED DIFFERENCE OF RS. 32 090/- AS UNACCOUNTED EXPENDITURE. ALL THE EXPENSES IDENTIFIED BY AO ARE ALREADY COVERED BY THE INVESTMENT SHOWN IN THE BLOCK RETURN FILED BY ASSES SEE AND STATEMENT OF ASSETS DECLARED BY ASSESSEE IN THE BLOCK RETURN. THE UNACC OUNTED EXPENDITURE IDENTIFIED BY AO VIDE SERIAL NO. 1 TO 4 AND 9 TO 12 AGGREGATING T O RS.2 23 700/- IS SHOWN AS EXPENSES ON ACCOUNT OF CONSTRUCTION AND SIMILARLY EXPENSES IDENTIFIED BY AO VIDE SERIAL NO.13 AMOUNTING TO RS.3 390/- BEING ERECTION CHARGES IS SHOWN AS EXPENSES ON ACCOUNT OF PLANT AND MACHINERY. THE EXPENSES VI DE SERIAL NO.5 TO 8 AGGREGATING IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 10 TO RS.3 500/- ARE TOWARDS EXPENSES WHICH HAVE BEEN SET OFF AGAINST UNACCOUNTED PROFIT OF RS.7.70 LAKH DECLARED BY ASSESSEE AND ADD ITION MADE BY AO ON THE BASIS OF EXPENSES IDENTIFIED BY HIM IS ALREADY COVERED IN TH E BLOCK RETURN OF ASSESSEE. FURTHER ASSESSING OFFICER HAS DISCUSSED THE ISSUE IN PARA 6.4.4 TO 6.5.3 OF THE BLOCK ASSESSMENT ORDER AND NOTED THE DIFFERENCE IN VALUE OF LAND WHICH IS REPRODUCED AS UNDER:- REGN. NO. VALUE MENTIONED IN DOCUMENT (RS) VALUE DETERMINED BY STAMP DUTY AUTHORITY DIFFERENCE (RS) 800/11.9.00 4.51 000 8 45 700 3 94 700 972/16.6.00 4 51 000 8 45 700 3 94 700 946/17.11.00 4 51 000 8 45 700 3 94 700 197/19.3.01 4 75 800 8 92 200 4 16 400 TOTAL 18 28 800 34 29 300 16 00 500 THE AO CONSIDERED THE ISSUE WITH REGARD TO PAYMENT OF STAMP DUTY ON THE FINAL VALUE DETERMINED BY THE STAMP DUTY AUTHORITIES BUT ACCORD ING TO THE ASSESSEE THERE IS NO DOUBT THAT NO ON-MONEY INVOLVED IN THIS TRANSACTION . THE ASSESSING OFFICER NOTED THAT THIS IS A PECULIAR CASE WHERE FACTS REVEALED T HAT THE ASSESSEE DID NOT CHALLENGE THE ABOVE VALUATION AND ALSO ADMITTED IN A STATEME NT U/S. 132(4) OF THE ACT THOUGH RETRACTED AFTER A YEAR OR SO THE ASSESSEE VEHEMENT LY ADMITTED ON-MONEY PAID IN THE TRANSACTION. IN VIEW OF THESE FACTS THE ASSESSING O FFICER NOTED THAT IT IS A CLEAR CASE WHERE UNDERHAND MONEY HAS CHANGED AND ADDITION OF R S.16 LAKH ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASE OF LAND WAS MADE BY HIM FOR UNIT-2 OF ASSESSEE- COMPANY. THE CIT(A) SUSTAINED THE ADDITION BY GIVIN G FOLLOWING FINDINGS IN PARA-17 OF HIS APPELLATE ORDER:- 17. I HAVE CAREFULLY GONE THROUGH THE CONTENTIONS RAISED BY THE APPELLANT AND ALSO NOTED THE ARGUMENTS STATED BY THE ASSESSING OF FICER. DETAILS OF THE CONSTRUCTION EXPENSES FILED BY THE APPELLANT REVEAL S THAT EXPENSES TO THE TUNE OF RS.18 59 581/- + RS.46 57 021/- = RS.65 16 602/- HAVE BEEN DEBITED AFTER THE DATE OF SEARCH I.E. 6.9.2001. COPIES OF THE LED GER FILED BY THE APPELLANT REVEAL THAT MOST OF THE PAYMENTS AND THAT TOO VERY HEAVY PAYMENTS HAVE BEEN MADE IN CASH THROUGH INTERNAL VOUCHERS. THE EV IDENCES FILED BY THE APPELLANT HAVE NOT BEEN EXAMINED AT THE LEVEL OF AS SESSING OFFICER. IT IS ALSO NOT CLARIFIED AS TO WHETHER THESE PAPERS WERE FILED BEFORE THE ASSESSING OFFICER OR NOT. CONTENTION OF THE APPELLANT THAT AD DITION OF RS.31 24 210/- HAS NO BASIS IS NOT CORRECT BECAUSE THE SAME IS THE OUT COME OF THREE DIFFERENT ADDITIONS. THERE IS ABSOLUTELY NO DOUBT THAT EVIDEN CE FOR UNACCOUNTED INVESTMENT WAS GATHERED DURING THE SEARCH. IT IS A GLARING QUESTION AS TO WHY IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 11 THE APPELLANT DISCLOSED ONLY RS.2 23 700/- ONLY. TH E ADDITION MADE BY THE ASSESSING OFFICER WAS NOT ONLY ON ESTIMATE BASIS BU T IT WAS ON THE BASIS OF STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT WHICH WAS CONFIRMED AND RE-CONFIRMED BY DIFFERENT MEMBERS OF THE APPELLANT COMPANY. THE DETAILS FILED BY THE APPELLANT CANNOT BE SATED TO BE FOOL PROOF. THE ADDITION BEING SUSTAINED IS ON THE BASIS OF ESTIMATE. IT WOULD BE FAIR AND REASONABLE TO SUSTAIN ADDITION OF RS.8 00 000/- AND DELETE THE RE MAINING ADDITION UNDER THIS HEAD. ON THE WHOLE THE FIFTH GROUND OF THE APPELLA NT IS PARTLY ALLOWED. 8. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT HERE THE ASSESSEE IS PURCHAS ER OF THE PROPERTY IN QUESTION AND THE ASSESSING OFFICER HAS APPLIED THE PROVISION S OF SECTION 50C OF THE ACT FOR MAKING ADDITION OF UNDISCLOSED INCOME ON THE BASIS OF STAMP DUTY VALUATION OF THE TRANSFERRED PROPERTY. THE ADDITION OF RS.16 00 500/ - IS MADE AS UNACCOUNTED INVESTMENT IN LAND AND FACTORY CONSTRUCTION ON THE PLEA THAT ASSESSEE PAID STAMP DUTY ON TOTAL VALUE OF RS.34 29 300/- DETERMINED BY STAMP DUTY AUTHORITY AS AGAINST DOCUMENT VALUE OF RS.18 28 800/-. THE ADDITION OF R S.31 24.210/- IS MADE ON THE BASIS OF RETRACTED STATEMENT U/S 132(4)OF THE ACT O F SHRI GHANSHYAM BHAIYA AND SHRI DINESHS BHAIYA THAT INVESTMENTS OF RS.50 LAKH IS MA DE IN CONSTRUCTION OF UNIT-2. WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DEC ISION OF THIS TRIBUNAL IN THE CASE OF ITO WARD-4(3) ABD V. HARLEY STREET PHARMACEUTICALS LTD. ITA NO.2492/AHD/2007 DATED 16-03-2010 FOR ASSESSMENT YEAR 2004-05 38 SOT 486 (AHD) WHEREIN THE TRIBUNAL HAS HELD IN PARA-7 AS UNDER:- 7. IN VIEW OF THE ABOVE PROVISION AND EXPLAINING TH E PROVISION WE ARE OF THE VIEW THAT THE LAW U/S. 50C HAD BEEN PROVIDED ADEQUA TE PROTECTION TO THE TAX- PAYERS AGAINST ADOPTION OF ARBITRARY VALUES FOR THE COMPUTATION OF CAPITAL GAINS AND THE FOLLOWING PRECAUTIONARY ARE PROVIDED: - (I) THE VALUE WHICH IS CONSIDERED AS THE PROPER VAL UE OF THE PROPERTY AS FIXED BY THE AUTHORITY FOR REGISTRATION FOR STAMP D UTY PURPOSES IS PRESUMED TO BE THE FAIR MARKET VALUE FOR THE PURPOS ES OF COMPUTATION OF CAPITAL GAINS ON THE SALE OF PROPERTY. (II) IT IS OPEN TO THE TAXPAYER TO PLEAD THAT SUCH STAMP VALUE IS ABNORMAL AND CONTEST THE SAME IN APPEAL UNDER THE S TAMP LAW REQUIRING ADOPTION OF REDUCED VALUE. IF SUCH VALUE IS REDUCED IN APPEAL UNDER THE PROVISIONS OF THE RELEVANT STAMP LAW SUC H REDUCED VALUE WOULD ALONE BE ADOPTED. IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 12 (III) WHERE SUCH STAMP VALUE IS NOT DISPUTED IT IS OPEN TO THE ASSESSEE TO REQUIRE THE ASSESSING OFFICER TO REFER THE VALUA TION TO THE VALUATION OFFICER WHO SHALL FIX THE VALUATION BY ADOPTION OF THE PROCEDURE PRESCRIBED UNDER SECTION 16A OF THE WEALTH-TAX ACT. IT IS SUCH VALUE WHICH WILL BE ADOPTED BY THE ASSESSING OFFICER. WE FURTHER FIND FROM THE MEMORANDUM EXPLAINING THE PROVISION OF SECTION 50C IN THE FINANCE BILL 2002 WHICH CLEARLY STATES THAT WHERE THE CONSIDERATION DECLARED TO BE RECEIVED OR ACCRUING A S A RESULT OF TRANSFER OF LAND OR BUILDING OR BOTH IS LESS THAN THE VALUE ADO PTED OR ASSESSED BY ANY AUTHORITY OF A SATE GOVT. FOR THE PURPOSES OF PAYME NT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER THE VALUE SO ADOPTED OR ASSESSED SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION AND CAPITAL GAINS S HALL BE COMPUTED ACCORDINGLY U/S.48 OF THE ACT. IN CASE THE VALUE ADOPTED OR AS SESSED FOR STAMP DUTY PURPOSES IS REVISED IN ANY APPEAL REVISION OR REFE RENCE THE ASSESSMENT MADE SHALL BE AMENDED TO RE-COMPUTE THE CAPITAL GAI NS BY TAKING THE REVISED VALUE AS THE FULL VALUE OF CONSIDERATION. ACCORDI NGLY WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 50C ARE APPLICABLE ONLY F OR THE COMPUTATION OF CAPITAL GAINS IN REAL ESTATE TRANSACTION IN RESPECT TO SELL ER ONLY AND NOT FOR THE PURCHASER. WE FIND FROM SECTION 50C OF THE ACT THAT IT CREATES A LEGAL FICTION THEREBY APPARENT CONSIDERATION IS SUBSTITUTED BY VALUATION DONE BY STAMP VALUATION AUTHORITIES AND CAPITAL GAINS ARE CALCULATED ACCORDINGLY. LEGAL FICTION CANNOT BE EXTENDED ANY FURTHER AND HA S TO BE LIMITED TO THE AREA FOR WHICH IT IS CREATED. HON'BLE ANDHRA PRADESH HIG H COURT IN THE CASE OF ADDL. CIT V. DURGAMMA P. (1987) 167 1TR 776 (AP) HE LD THAT IT IS NOT POSSIBLE TO EXTEND THE FICTION BEYOND THE FIELD LEG ITIMATELY INTENDED BY THE STATUTE. THE HON'BLE COURT WAS DEALING WITH THE PRO VISIONS OF SEC. 171(1) OF THE I.T. ACT IN THE CONTEXT OF WHICH IT WAS HELD TH AT JOINT FAMILY SHALL BE DEEMED TO CONTINUE FOR THE LIMITED PURPOSE OF ASSESSING CA SES OF JOINT FAMILIES WHICH HAVE BEEN HITHERTO ASSESSED AS SUCH. IT IS NOT POSS IBLE TO EXTEND THAT FICTION TO OTHER CASES. SIMILAR VIEW WAS TAKEN BY THE HON'B LE KERLA HIGH COURT IN CIT V. KAR VALVES LTD. (1987) 168 ITR 416 (KER.) WHER EIN IT IS HELD THAT LEGAL FICTION IS LIMITED TO THE PURPOSE FOR WHICH THEY AR E CREATED AND COULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FRAME HON'BLE KERA LA HIGH COURT WAS DEALING WITH THE CASE WHERE ASSESSEE SOUGHT TO TAKE ADVANTAGE OF SEC.41(2) BY SUBMITTING THAT IF LIABILITIES ARE NOT LIQUID ATED AND OUTSTANDING ARE NOT COLLECTED THEN BUSINESS COULD BE DEEMED TO CONTINU E. THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CONTROLLER OF ESTATE DUTY V. KRISHNA KUMAR DEVI (1988) 173 ITR 561 (ALL) HELD THAT IN IN TERPRETING THE LEGAL FICTION THE COURT SHOULD ASCERTAIN THE PURPOSE FOR WHICH IT WAS CREATED 2ND AFTER DOING SO ASSUME ALL FACTS WHICH ARE LOGICAL TO GIVE EFFECT TO THE FICTION HON'BLE SUPREME COURT IN CIT V. MOTHER INDIA REFRIGERATION PVT. LTD. (1985) 155 ITGR 711 (SC) HELD THAT LEGAL FICTIONS ARE CREATED ONLY FOR SOME DEFINITE PURPOSE AND THEY MUST BE LIMITED TO THAT PURPOSE AN D SHOULD NOT BE EXTENDED BEYOND THAT LEGITIMATE FIELD. IN CI T V BHARANI PICTURES (1981) 129 ITR 244 (MAD ) IT IS HELD THAT LEGAL FICTIONS A RE FOR A DEFINITE PURPOSE AND ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREAT ED AND SHOULD NOT BE EXTENDED BEYOND ITS LEGITIMATE FIELD. THE STATU TORY FICTION INTRODUCED IN ONE ENACTMENT CANNOT BE INCORPORATED IN ANOTHER ENACTME NT. THE POINT THAT LEGAL FICTION CANNOT BE EXTENDED TO A NEW FIELD WAS HIGHL IGHTED BY HON'BLE MADRAS IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 13 HIGH COURT IN CIT V. RAJAM T.S (1988) 125 ITR 207 (MAD ) WHEREIN IT IS HELD THAT SECTION 41(2) CREATE A LEGAL FICTION UNDER WHI CH THE BALANCING CHARGE IS TREATED AS BUSINESS INCOME CHARGEABLE TO TAX BUT WH EN THIS AMOUNT IS DISTRIBUTED TO SHAREHOLDERS THEN IT WOULD NOT BECOM E DEEMED DIVIDEND AND IT WOULD BE ONLY A CAPITAL RECEIPT AND NOT DISTRIBUTIO N OF ACCUMULATED PROFITS. THUS A LEGAL FICTION WAS INVOKED IN THE HANDS OF T HE ASSESSEE COMPANY AND WAS NOT EXTENDED IN THE HANDS OF THE SHAREHOLDERS. IN THE PRESENT CASE SECTION 50C CREATES A LEGAL FICTION FOR TAXING CAPI TAL GAINS IN THE HANDS OF THE SELLER AND IT CANNOT BE EXTENDED FOR TAXING THE DIF FERENCE BETWEEN APPARENT CONSIDERATION AND VALUATION DONE BY STAMP VALUATION AUTHORITIES AS UNDISCLOSED INVESTMENT U/S 69. IN FACT SECTION 69 ITSELF IS A LEGAL FICTION WHEREBY INVESTMENT INTO AN ASSET IS TREATED AS INCO ME IF IT IS NOT DISCLOSED IN THE REGULAR BOOKS OF ACCOUNT. NO FURTHER LEGAL FICT ION FROM ELSEWHERE IN THE STATUTE CAN BE BORROWED TO EXTEND THE FIELD OF SECT ION 69. IT IS FOR THE LEGISLATURE TO INTRODUCE LEGAL FICTION TO OVERCOME DIFFICULTY IN TAXING CERTAIN RECEIPTS OR EXPENDITURE WHICH OTHERWISE WAS NOT POS SIBLE UNDER NORMAL PROVISIONS OF THE ACT. IT IS WITH THIS PURPOSE THAT WHEN IT WAS FOUND DIFFICULT TO PREVENT TAX EVASION BY UNDERSTATING APPARENT SALE C ONSIDERATION AS COMPARED TO THE VALUATION MADE BY STAMP VALUATION AUTHORITIE S FOR THE PURPOSES OF LEVYING STAMP DUTY THEN IT WAS THOUGHT NECESSARY TO INTRODUCE SECTION 50C FOR SUBSTITUTING APPARENT SALE CONSIDERATION BY VALUATI ON DONE BY STAMP VALUATION AUTHORITIES. THIS FICTION CANNOT BE EXTEN DED ANY FURTHER AND THEREFORE CANNOT BE INVOKED BY ASSESSING OFFICER T O TAX THE DIFFERENCE IN THE HANDS OF THE PURCHASER. HON'BLE MADRAS HIGH COURT I N CGT V R. DAMODARAN (2001) 247 ITR 698 HELD THAT STAMP VALUATION AUTHOR ITIES HAVE THEIR OWN METHOD OF EVALUATING THE PROPERTY. MERELY BECAUSE F OR THE PURPOSE OF STAMP DUTY PROPERTY IS VALUED AT HIGHER COST IT CANNOT BE SAID THAT ASSESSES HAS MADE MORE PAYMENT THAN WHAT IS STATED IN THE SALE D EED. THE HON'BLE ALLAHABAD HIGH COURT IN DINESH KURNAR MITTAL V. ITO (1992)193 ITR 770 (ALL.) QUASHED THE ORDER OF AUTHORITIES BELOW WHEREIN HALF OF THE DIFFERENCE BETWEEN THE AMOUNT PAID AND THE VALUE FO R PURPOSES OF STAMP DUTY WAS ADDED AS INCOME OF THE ASSESSEE BY THE ASSESSIN G OFFICER. IT IS HELD THAT THERE IS NO RULE OF LAW TO THE EFFECT THAT THE VALU E DETERMINED FOR THE PURPOSES OF STAMP DUTY IS THE ACTUAL CONSIDER ATION PASSED BETWEEN THE PARTIES TO THE SALE. IN THE PRESENT CASE THE ASSES SING OFFICER HAS APPLIED THIS PROVISION OF SECTION 50C FOR THE COMPUTATION OF UNE XPLAINED INVESTMENT U/S.69B OF THE ACT AND WHICH IS NOT PERMISSIBLE UND ER THE ACT. APART FROM THE STAMP DUTY VALUATION THERE IS NOTHING ON RECORD WH ICH SUGGESTS THAT THE REVENUE HAS PROVED THAT THE ASSESSEE HAS ACCEPTED O VER AND ABOVE WHAT HAS BEEN RECORDED AS PURCHASE CONSIDERATION OF THE LAND IN THE INSTRUMENT I.E. THE SALE DEED. WE ARE IN FULL AGREEMENT WITH THE A RGUMENTS OF THE ASSESSEE THAT SECTION 50C IS NOT APPLICABLE IN THE CASE OF P URCHASER AND THIS PROVISION BEING A DEEMING PROVISION WILL APPLY FOR DETERMININ G THE FULL VALUE OF CONSIDERATION AS A RESULT OF TRANSFER OF CAPITAL AS SETS FOR THE PURPOSES OF COMPUTATION OF CAPITAL GAINS U/S.48 OF THE ACT. WE FURTHER FIND THAT THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE CONSIDERATION O VER AND ABOVE WHAT HAS BEEN RECORDED IN THE SALE DEED HAS BEEN MADE BY TH E ASSESSEE AND IN THE ABSENCE OF THE SAME NO ADDITION OF UNDISCLOSED INV ESTMENT CAN BE MADE BY INVOKING THE PROVISION OF SECTION 69B OF THE ACT. ACCORDINGLY WE CONFIRM THE IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 14 ORDER OF CIT(A) DELETING THE ADDITION AND THIS ISSU E OF THE REVENUES APPEAL IS DISMISSED. FURTHER AS REGARDS TO THE ADDITION OF UNACCOUNTED INVESTMENT IN FACTORY BUILDINGS THE ASSESSING OFFICER HAS IDENTIFIED ONLY RS.1 98 500/- TOWARDS UNACCOUNTED EXPENDITURE ON CONSTRUCTION AS AGAINST RS.2 30 590/ - IDENTIFIED BY HIM AND ACCORDINGLY CONSIDERED DIFFERENCE OF RS.32 090/- AS UNACCOUNTED EXPENDITURE. WE FIND THAT ALL THE EXPENSES IDENTIFIED BY AO ARE ALR EADY COVERED BY THE INVESTMENT SHOWN IN THE BLOCK RETURN FILED BY ASSESSEE AND STA TEMENT OF ASSETS DECLARED BY ASSESSEE IN THE BLOCK RETURN. FURTHER UNACCOUNTED E XPENDITURE IDENTIFIED BY AO VIDE SERIAL NO. 1 TO 4 AND 9 TO 12 AGGREGATING TO RS.2 2 3 700/- IS SHOWN AS EXPENSES ON ACCOUNT OF CONSTRUCTION AND SIMILARLY EXPENSES IDE NTIFIED BY AO VIDE SERIAL NO.13 AMOUNTING TO RS.3 390/- BEING ERECTION CHARGES IS S HOWN AS EXPENSES ON ACCOUNT OF PLANT AND MACHINERY. THE EXPENSES VIDE SERIAL NO.5 TO 8 AGGREGATING TO RS.3 500/- ARE TOWARDS EXPENSES WHICH HAVE BEEN SET OFF AGAINS T UNACCOUNTED PROFIT OF RS.7.70 LAKH DECLARED BY ASSESSEE AND ADDITION MADE BY AO O N THE BASIS OF EXPENSES IDENTIFIED BY HIM IS ALREADY COVERED IN THE BLOCK R ETURN OF ASSESSEE. FURTHER ADDITION OF RS.32 090/- IS MADE ON THE GROUND THAT EXPENSES AS PER ANNEXURE-BS-2 OF SEIZED MATERIAL IDENTIFIED BY ASSESSING OFFICER WHICH AGGR EGATES TO RS. 2 30 590 EXCEEDS THE EXPANSES IDENTIFIED BY ASSESSEE TO THE EXTEND O F RS.1 98 500/- AND ACCORDINGLY EXPENSES IDENTIFIED BY AO ARE CONSIDERED AS UNACCOU NTED INVESTMENT. IN VIEW OF THE ABOVE FACTS AND DISCUSSION WE ARE OF THE VIEW THAT THE ASSESSEE HAS ALREADY MADE A DISCLOSURE TO COVER UP THE ABOVE DISCREPANCIES W HICH ARE NOT MORE THAN RS.2.50 LAKH IN AGGREGATE. ACCORDINGLY THE DISCLOSURE MADE BY ASSESSEE WILL COVER UP THE ADDITION AND ACCORDINGLY THIS ADDITION SUSTAINED BY CIT(A) IS DELETED AND THE DELETION MADE BY CIT(A) IS CONFIRMED. THIS ISSUE OF REVENUE S APPEAL IS DISMISSED AND THAT OF ASSESSEE IS ALLOWED. 9. THE NEXT ISSUE IS THIS APPEAL OF ASSESSEE IS AS REGARDS TO CONFIRMING THE ADDITION OF UNACCOUNTED PRODUCTION. FOR THIS ASSES SEE HAS RAISED FOLLOWING GROUND NO.4.1 & 5 :- ADDITION ON ACCOUNT OF UNACCOUNTED PRODUCTION AMOUNTING TO RS.34 00 000/-. IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 15 4.1 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.34 00 000/- ON ESTIMATE BASIS IN RESPECT OF ALLEGED UNACCOUNTED PRODUCTION. 5.0 THE ASSESSEE MAY BE ALLOWED TO ADD AMEND ALTE R OR RAISE ADDITIONAL GROUNDS OF APPEAL. 10. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS ASSESSING OFFICER ESTIMATED INCOME FROM UNACCOUNTED PRODUCTION AT RS.70 LAKH BY COMPARING 21 DAYS DAILY PRODUCTION AS ESTIMATED BY THE ASSESSING OFFICER AND IN VIEW OF THE REPORT OF PROD UCTION DEPARTMENT AT THE INTERMEDIARY STAGE OF FULL CYCLE OF PRODUCTION PROC ESS WITH THE38 DAYS PRODUCTION RECORD AS PER RG-1 REGISTER IN WHICH ENTRY OF FINA L FINISHED PRODUCT IS MADE WHEN THE FINAL PRODUCT IS NOTED AND THE GOODS IS KEPT READY FOR THE DISPATCH TO CUSTOMERS. AS AGAINST THIS PRODUCTION REFLECTED BY PRODUCTION REC ORDS THE QUANTITY PROCESSED ON THAT DAY BY THE PRINTING / DYEING DEPARTMENT AND WH ICH IS SUBJECT TO FURTHER PROCESS AS SPECIFIED IN THE PROCESS CHART THE AO HAS NOT T RIED TO UNDERSTAND THE SEQUENCE OF VARIOUS STAGES OF PRODUCTION INVOLVED IN A DYEING A ND PRINTING MILL. THE ASSESSEE HAS SUBMITTED A CHART AT PAGE 34 OF ASSESSEES PAPER BO OK REFLECTING VARIOUS STAGES OF PROCESS THROUGH WHICH FABRIC HAS TO PASS BEFORE BEI NG ENTERED IN RG-1 REGISTER AND BEFORE BEING DELIVERED TO PARTIES BUT AO HAS COMPLE TELY IGNORED THE CHART AND TRIED TO COMPARE THINGS WHICH ARE NOT RELATED TO EACH OTH ER. AFTER FINISHING IN STENTER MACHINE THERE ARE TWO MORE PROCESSES INVOLVED BEFO RE ANY ENTRY IS MADE IN THE RG1 REGISTER WHICH ARE 1 FINISH AT ZERO-ZERO MACH INE AND 2 FOLDING AT FOLDING DEPARTMENT. FABRIC FINISHED AT STENTER IS FORWARDED TO ZERO-ZERO MACHINE DEPARTMENT FOR ZERO-ZERO FINISH AND AFTER FINISH AT ZERO-ZERO MACHINE IT IS SENT TO FOLDING DEPARTMENT FOR CHECKING AS TO PRINTING RESULTS AND THE FOLDING IN ONE METER FOLD. AFTER FABRIC IS FOLDED IT ENTERED IN THE RG-1 REGISTER A ND THERE AFTER DELIVERED TO THE PARTIES. THE AO HAS NOT CONSIDERED THE REPLY OF ASS ESSEE IN WHICH ASSESSEE HAD STATED THAT FIGURES OF FINISH METERS RECORDED IN RG -1 REGISTER CAN BE RECONCILED WITH METERS OF GREY CLOTH ENTERED IN LOT REGISTER WITH R EFERENCE TO GATE PASSES THROUGH WHICH DELIVERY OF FINISH FABRIC IS MADE TO THE PART IES. WE FIND FROM COPIES OF SOME OF THE GATE PASS ARE AVAILABLE AT PAGE NO.65 TO 67 OF ASSESSEES PAPER BOOK BUT ASSESSING OFFICER PREFERRED TO RECONCILE THOSE FIGU RES WHICH ARE NOT RELATED TO EACH OTHER AND DAILY PRODUCTION RECORD OF PRINTING AND D YEING DEPARTMENT AND EXTRACT OF RG-1 REGISTER WHICH ARE COMPARED BY AO ARE AVAILABL E AT PAGE NO.36 TO 64 OF IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 16 ASSESSEES PAPER BOOK. THE AO HAS COMPARED THE PROD UCTION RECORD OF DYEING DEPARTMENT FOR 21 DAYS TO WORK OUT DIFFERENCE FOR 3 8 DAYS. RG1 REGISTER CONTAINS DETAIL OF PRODUCTION AND DISPATCH FOR REMAINING 17 DAYS ALSO AND AO HAS STATED IN HIS ASSESSMENT ORDER THAT PRODUCTION RECORD FOR REMAINI NG 17 DAYS ARE NOT AVAILABLE VIDE PARA-IV ON PAGE NO.17 OF HIS BLOCK ASSESSMENT ORDER . THE AO HAS NOT GIVEN ANY REASON WHICH COULD JUSTIFY SUCH COMPARISON BETWEEN INCOMPARABLE FIGURES AND HAS NOT CONSIDERED THE FACT THAT ASSESSEE HAS ALREADY R ECORDED FOLLOWING JOB CHARGES IN THE BOOKS OF ACCOUNT AND THOSE JOB CHARGES ARE NOT DISPUTED BY REVENUE FOR ASSESSMENT YEAR 2000-01 I.E. RS.6 81 23 574 FOR SIX MONTHS OF PRODUCTION AND ASSESSMENT YEAR 2001-02 AT RS.13 45 85 948. THE ASS ESSEE STATED THAT THERE IS NO DIFFERENCE IN THE PHYSICAL INVENTORY OF THE FABRICS FOUND DURING THE SEARCH AS COMPARED TO INVENTORY OF FABRIC AS PER BOOKS AND TH ERE IS NO PHYSICAL STOCK OF FABRICS FOUND DURING THE SEARCH. IT CANNOT BE PRESUMED THAT ASSESSEE RESORT TO UNACCOUNTED PRODUCTION. THE DAILY AVERAGE PRODUCTION OF ASSESSE E COMES TO 35000 MT. WHICH IS MORE THAN 30 000 MT OF DAILY PRODUCTION CONFESSED B Y SHRI GHANSHYAM BHAIYA IN HIS STATEMENT RECORDED U/S.132(4) AND AO PRESUMED THAT STILL THERE IS UNACCOUNTED PRODUCTION IS BASELESS AND WITHOUT ANY EVIDENCE TO SUPPORT. BUT CIT(A) CONFIRMED THE ADDITION VIDE PARA-21 OF HIS APPELLATE ORDER AS UNDER:- 21. NOW I HAVE CAREFULLY EXAMINED THE MERITS OF TH E ABOVE ADDITION. THE CONTENTIONS RAISED BY THE APPELLANT HAVE BEEN CONSI DERED IN THE LIGHT OF FINDINGS OF THE ASSESSING OFFICER. HOWEVER THE ASS ESSING OFFICER CANNOT BE STATED TO HAVE TOTALLY IGNORED THE SEQUENCE OF MANU FACTURING PROCESS. THE ASSESSING OFFICER HAS ALSO DISCUSSED VARIOUS STAGES OF FINAL PRODUCTION IN A DYEING MILL. THE CLAIM OF THE APPELLANT THAT PRODUC TION RECORD OF A SHORT PERIOD FOUND DURING THE COURSE OF SEARCH HAS BEEN MADE THE BASIS FOR TOTAL CALCULATION HAS FORCE INIT. THE ASSESSING OFFICER H AS GIVEN A SHOW CAUSE TO THE APPELLANT AFTER BRINGING ON RECORD CERTAIN DISC REPANCIES AS DISCUSSED AT THE BOTTOM OF PAGE 16 OF THE ASSESSMENT ORDER. I HA VE CAREFULLY PERUSED THE EXPLANATION OF THE APPELLANT WHICH IS REPRODUCED BY THE ASSESSING OFFICER AT PAGE 17 OF THE ASSESSMENT ORDER. THE EXPLANATION GI VES ONLY GENERAL IDEA OF THE PROCESS OF PRODUCTION IN A DYEING HOUSE. THE QU ERIES POSED BY THE ASSESSING OFFICER AND THE DISCREPANCIES ARE NOT PRO PERLY ADDRESSED TO. IT WOULD NOT BE PROPER TO DECLARE THE CALCULATION OF T HE ASSESSING OFFICER AS AUTHENTIC. THE ASSESSING OFFICER HAS MADE AN ESTIMA TE WHICH IS ON THE HIGHER SIDE. LOOKING TO THE FACT THAT REASONABLE EVIDENCE HAS BEEN FOUND DURING THE COURSE OF SEARCH WHICH INDICATES THAT UNACCOUNTED P RODUCTION IS DEFINITELY THERE A FAIR ESTIMATE CAN BE MADE KEEPING IN VIEW THE CONTENTIONS OF THE RIVAL PARTIES. IT WOULD BE FAIR AND REASONABLE TO SUSTAIN ED OF RS.34 00 000/- WITH THE REMARKS THAT ADDITION OF RS.3 LACS PERTAINING TO WA STAGE WILL BE SET OFF AGAINST IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 17 THE SAME. THE ABOVE ADDITION OF RS.34 50 000/- WILL BE TREATED AS SET OFF AGAINST HIGHER FIGURES OF INVESTMENT. 11. WE FIND FROM THE ABOVE FACTS AND CIRCUMSTANCES THAT FIRST OF ALL THE LOWER AUTHORITIES HAVE ERRED IN ESTIMATING THE UNACCOUNTE D PRODUCTION ON ESTIMATE BASIS AND PARTICULARLY ON THE BASIS OF THE DETAILS WHICH ARE INCOMPARABLE WITH THE DATA PRODUCED BY THE ASSESSEE. WE FIND FROM THE CHART SU BMITTED BY THE ASSESSEE AT PAGE 34 OF ASSESSEES PAPER BOOK REFLECTING VARIOUS STAGES OF PROCESS THROUGH WHICH FABRIC HAS TO PASS BEFORE BEING ENTERED IN RG -1 REGISTER AND BEFORE BEING DELIVERED TO PARTIES BUT AO HAS COMPLETELY IGNORED THE CHART AND TRIED TO COMPARE THINGS WHICH ARE NOT RELATED TO EACH OTHER. AFTER F INISHING IN STENTER MACHINE THERE ARE TWO MORE PROCESSES INVOLVED BEFORE ANY ENTRY IS MADE IN THE RG1 REGISTER WHICH ARE 1 FINISH AT ZERO-ZERO MACHINE AND 2 FOL DING AT FOLDING DEPARTMENT. FABRIC FINISHED AT STENTER IS FORWARDED TO ZERO-ZERO MACHI NE DEPARTMENT FOR ZERO-ZERO FINISH AND AFTER FINISH AT ZERO-ZERO MACHINE IT IS SENT T O FOLDING DEPARTMENT FOR CHECKING AS TO PRINTING RESULTS AND THE FOLDING IN ONE METER FO LD. AFTER FABRIC IS FOLDED IT ENTERED IN THE RG-1 REGISTER AND THERE AFTER DELIVERED TO THE PARTIES. THE AO AND CIT(A) HAVE NOT CONSIDERED THE REPLY OF ASSESSEE IN WHICH ASSES SEE HAD STATED THAT FIGURES OF FINISH METERS RECORDED IN RG-1 REGISTER CAN BE RECO NCILED WITH METERS OF GREY CLOTH ENTERED IN LOT REGISTER WITH REFERENCE TO GATE PASS ES THROUGH WHICH DELIVERY OF FINISH FABRIC IS MADE TO THE PARTIES. WE FIND FROM COPIES OF SOME OF THE GATE PASS ARE AVAILABLE AT PAGE NO.65 TO 67 OF ASSESSEES PAPER B OOK BUT ASSESSING OFFICER PREFERRED TO RECONCILE THOSE FIGURES WHICH ARE NOT RELATED TO EACH OTHER AND DAILY PRODUCTION RECORD OF PRINTING AND DYEING DEPARTMENT AND EXTRACT OF RG1 REGISTER WHICH ARE COMPARED BY AO ARE AVAILABLE AT PAGE NO.3 6 TO 64 OF ASSESSEES PAPER BOOK. THE AO HAS COMPARED THE PRODUCTION RECORD OF DYEING DEPARTMENT FOR 21 DAYS TO WORK OUT DIFFERENCE FOR 38 DAYS. RG1 REGISTER CO NTAINS DETAIL OF PRODUCTION AND DISPATCH FOR REMAINING 17 DAYS ALSO AND AO HAS STAT ED IN HIS ASSESSMENT ORDER THAT PRODUCTION RECORD FOR REMAINING 17 DAYS ARE NOT AVA ILABLE VIDE PARA-IV ON PAGE NO.17 OF HIS BLOCK ASSESSMENT ORDER. NEITHER THE AS SESSING OFFICER NOR THE CIT(A) HAVE GIVEN ANY REASON WHICH COULD JUSTIFY SUCH COMP ARISON BETWEEN INCOMPARABLE FIGURES AND HAS NOT CONSIDERED THE FACT THAT ASSESS EE HAS ALREADY RECORDED FOLLOWING JOB CHARGES IN THE BOOKS OF ACCOUNT AND THOSE JOB C HARGES ARE NOT DISPUTED BY REVENUE FOR ASSESSMENT YEAR 2000-01 I.E. RS.6 81 23 574 FOR SIX MONTHS OF IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 18 PRODUCTION AND ASSESSMENT YEAR 2001-02 AT RS.13 45 85 948. THE ASSESSEE STATED THAT THERE IS NO DIFFERENCE IN THE PHYSICAL INVENTO RY OF THE FABRICS FOUND DURING THE SEARCH AS COMPARED TO INVENTORY OF FABRIC AS PER BO OKS AND THERE IS NO PHYSICAL STOCK OF FABRICS FOUND DURING THE SEARCH. IT CANNOT BE PRESUMED THAT ASSESSEE RESORT TO UNACCOUNTED PRODUCTION. THE ASSESSEE HAS DEMONST RATED BY GIVING COMPLETE FIGURES AS UNDER:- PERIOD PRODUCTION IN MTS. AVERAGE DAILY MTS. 10-08-99 TO 31-03-00 58 31 985 35000 MTS. 01-04-00 TO 31-03-01 1 05 43 351 35000 MTS 01-04-01 TO 30-09-01 53 50 990 35000 MTS THE DAILY AVERAGE PRODUCTION OF ASSESSEE COMES TO 3 5000 MT. WHICH IS MORE THAN 30 000 MT OF DAILY PRODUCTION CONFESSED BY SHRI GHA NSHYAM BHAIYA IN HIS STATEMENT RECORDED U/S.132(4). ACCORDINGLY WE DELETE THE ADD ITION CONFORMED BY CIT(A) ON ESTIMATE BASIS. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 12. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN DELETING THE ADDITION OF UNEXPLAINED CASH. FOR THIS REVENUE HAS RAISE THE FOLLOWING GROUND NO.1 :- 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO RESTRICT THE ADDITION OF RS.2 87 881/- MADE ON ACCOUNT OF UNEXPLAINED CA SH TO RS.2 72 910/- 13. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER HAS WORKED OUT CASH FOUND DURING THE COURSE OF SEARCH AS UNDER:- CASH FOUND WITH ABHAY (EMPLOYEE) RS.50 000/- ACCOUNTANT DRAWER RS.33 102/- DEEPAK PATEL RS 5M000/0 BHARAT L SHAHS DRAWER RS.4 07 060/- TOTAL RS.4 95 162/- THE ASSESSING OFFICER ACCEPTED THE EXPLANATION OF T HE ASSESSEE QUA THE FOLLOWING:- TOTAL CASH FOUND RS.4 95 162./- LESS: 1] CASH BALANCE AS PER BOOKS OF ACCOUNT RS. 54 568/- IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 19 2] CASH BELONGING TO CONTRACTOR RS.1 52 713/.- R S.2 07 281/- BALANCE RS.2 87 881/- THE ASSESSING OFFICER CONSIDERED A SUM OF RS.2 87 8 81/- AS UNEXPLAINED CASH AND ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) DELETED THE ADDITION OF RS.14 971/- AS EXPLAINED AND BALANCE SUM OF RS.2 72 910/- WAS CONFIRMED BY STATING AS PER OBSERVATIONS OF THE A.O VARIOUS CONTRACTORS WERE EXAMINED WHO STATED THAT 75% OF THE SUM WITHDRAWN IS DISBURSED ON THE SAME D AY. THE A.O HAS ACCORDINGLY WORKED OUT THE CASH DISBURSED @ 75% AND REACHED THE FIGURE OF CASH OF RS.14 971/- . ON THE OTHER HAND THE APPELLANT ARGUED THAT OUT O F CAPITAL BALANCE OF RS.2 87 881/- AN AMOUNT OF RS.2 72 910/- HAS BEEN SHOWN AS UNDISC LOSED INCOME IN THE BLOCK RETURN AND BALANCE RS.14 971/- WAS THE REMAINING PA RT OF DAILY CASH DISBURSEMENT OF LABOUR PAYMENTS. THE APPELLANT PLEADED THAT THE A.O WAS WRONG IN MAKING THE ABOVE ADDITION ON THE GROUND OF STATEMENT OF LABOUR CONTRACTOR WHO STATED THAT ALMOST 75% OF CASH IS DISBURSED ON THE DAY OF WITHD RAWAL. THE A.O TOOK THE WORK ALMOST AS ACTUAL AND ACCORDINGLY MADE THE ABOVE ADDITION. IN MY OPINION THE A.O HAS CHRONICALLY ACTED ON A STATEMENT WHICH CANNOT B E TREATED AS FOOL-PROOF METHOD IN PRACTICAL DAY-TO-DAY LIFE. THE A.O WAS REQUIRED TO ACCEPT THE VERSION OF THE APPELLANT WHO FURNISHED PRACTICAL WORKING OF THE CA SH AVAILABLE. IN THE LIGHT OF THESE ARGUMENTS AND FACTS OF THIS CASE ADDITION OF RS.14 971/- ON ACCOUNT OF UNACCOUNTED CASH IS DELETED. 14. WE FIND THAT THE CIT(A) IS QUITE REASONABLE IN ACCEPTING THE ARGUMENT OF THE ASSESSEE THAT CASH DISBURSAL AT 75% REACHES TO THE FIGURE OF RS.14 971/- ON ANY GIVEN DAY AND HE HAS RIGHTLY ALLOWED THE RELIEF OF AVAILABILITY OF CASH TO THE ASSESSEE. WE FIND NO REASON TO INTERFERE IN THE SAME. THIS IS SUE OF REVENUES APPEAL IS DISMISSED. 15. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN DELETING THE ADDITION OF UNEXPLAINED CASH FOUND FRO M THE RESIDENCE OF SHRI GHANSHYAM BHAIYA. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.2 :- IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 20 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO DELETE THE ADDITION OF RS.19 500/- MADE ON ACCOUNT OF UNEXPLAINED CASH FOUND DURING THE SEARCH U/S 132 OF THE ACT AT THE RESIDENCE OF SHRI GHANSH YAMA BHAIYA. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSE E HAS ACCEPTED THIS CASH AS ITS CASH AND DECLARE IN THE BLOCK RETURN AS NARRATION G IVEN IN THE ORDER OF THE CIT(A). EVEN BEFORE THE ASSESSING OFFICER THE ASSESSEE HAS GIVEN WORKING OF CASH VIDE LETTER DATED 23-09-2003 WHICH HAS NOT BEEN CONSIDE RED BY ASSESSING OFFICER. THE CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND WE FIND NO REASON TO INTERFERE WITH THE SAME. THIS ISSUE OF REVENUES APPEAL IS DI SMISSED. 17. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN DELETING THE ADDITION OF UNEXPLAINED EXPENDITURE. F OR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.5 :- 5. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO DELETE THE ADDITION OF RS.16 337/- MADE ON ACCOUNT OF UNEXPLAINED EXPE NDITURE. 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSI NG OFFICER HAS MADE THE ADDITION AS THE ASSESSEE HAS SPENT THIS AMOUNT FOR MAKING OF SCREEN FOR VARIOUS DESIGNS. THE ASSESSEE BEFORE ASSESSING OFFICER AS WELL AS CIT(A) CONTENDED THAT IT WAS BUSINESS EXPENDITURE WHICH IS REQUIRED TO BE SPENT BY ANY DY EING HOUSE TO CARRY OUT ITS ACTIVITY AND THE BUSINESS EXPENDITURE INCURRED IN THE COURSE OF BUSINESS HAVE TO BE SET OFF AGAINST BUSINESS INCOME. THE AO HAS NOT ACCEPTED TH E PLEA OF THE ASSESSEE BUT CIT(A) DELETED THE ADDITION. WE FIND THAT CONTENTIO N RAISED BY ASSESSEE THAT UNACCOUNTED EXPENDITURE IS TO BE SET OFF AGAINST UN ACCOUNTED INCOME IS PLAUSIBLE. WE AGREE WITH THE FINDINGS OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 19. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN RESTRICTING THE UNDISCLOSED INCOME AT RS.34 LAKH AS AGAINST THE INCOME ASSESSED AT RS.73 LAKH BY ASSESSING OFFICER IN BLOCK ASSESSMENT . FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.6 :- IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 21 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECT ING TO RESTRICT THE UNDISCLOSED INCOME WORKED OUT AT RS.73 00 000/- IN THE ORDER OF ASSESSMENT TO RS.34 00 000/- 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ALL THE ASS ETS AND LIABILITIES INCLUDING THE INVESTMENT MADE BY THE ASSESSEE IN BUILDING AND LAN DS PLANT AND MACHINERY AND THE UNACCOUNTED PRODUCTION AND OTHER SEIZED DOCUMEN TS AS INVENTORIZED BY SEARCH TEAM ARE DULY RECORDED IN THE BOOKS OF ASSESSEE-COM PANY AND ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO PROVE THA T ABOVE INVESTMENTS MADE BY ASSESSEE ARE NOT RECORDED. THE AO HAS FAILED TO APP RECIATE THAT INVESTMENT CAN BE PRESUMED TO HAVE BEEN MADE WHEN EITHER SUCH ASSET I S FOUND OR THE PERSON IS IDENTIFIED TO WHOM ADVANCES ARE MADE FOR PURCHASE O F ASSETS. THE AO HAS NOT BROUGHT ON RECORD EVEN SINGLE ASSET WHICH IS UNACCO UNTED IN THE ASSESSEES BOOKS OF ACCOUNT. FURTHER AO COULD NOT IDENTIFY EVEN A S INGLE SUPPLIER OF PLANT AND MACHINERY TO WHOM ADVANCE AGAINST SUPPLY OF PLANT A ND MACHINERY IS MADE BY THE ASSESSEE-COMPANY AND WHICH IS UNACCOUNTED AND ENTIR E ADDITION IS BASED ONLY ON SUSPICION AND IF SUSPICION MAY BE STRONG MAY NOT BE TAKEN AS EVIDENCE. THE CONTENTION OF THE ASSESSEE THAT THE ADDITION OF RS. 70 LAKH MADE BY ASSESSING OFFICER IS IN CONTRAVENTION OF THE CIRCULAR NO.286/2/2003-I I(INV.) DATED 10-03-2003 OF CBDT WHICH CLEARLY SATES THAT ASSESSING OFFICER SHOULD R ELY UPON THE EVIDENCES/MATERIALS FOUND DURING THE COURSE OF SEARCH/SURVEY OPERATIONS AND FRAME THE RELEVANT ASSESSMENT. WE FIND THAT STATEMENT IS NOT CORROBORA TED BY THE EVIDENCES DISCUSSED IN SUBSEQUENT PARAS UNDER EACH HEAD OF UNACCOUNTED INVESTMENT AND THE ASSESSING OFFICER HAS NOT POINTED OUT ANY EVIDENCE WHICH COUL D CORROBORATE THE RETRACTED CONFESSIONAL STATEMENTS. AND AS SUCH IN THE ABSENC E OF ANY EVIDENCE AO SHOULD NOT HAVE MADE ANY ADDITION ON THE BASIS OF RETRACTE D STATEMENT IN VIEW OF THE CLEAR- CUT CIRCULAR OF CBDT. ACCORDINGLY WE CONFIRM THE O RDER OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. EVEN OTHERWISE ON M ERITS ALSO WE HAVE ALREADY DEALT WITH EACH AND EVERY ISSUE AND EITHER CONFIRME D THE ADDITION OR DELETED THE ADDITION BUT IN ANY CASE THE ASSESSED UNDISCLOSED I NCOME WILL NOT GO BELOW RETURNED UNDISCLOSED INCOME. IT(SS)A NO.93 & 99/AHD/2006 B.P.1/4/95 TO 6/9/ 01 VEEKAY PRINTS PVT. LTD. V. ACIT CC-3 SRT PAGE 22 21. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) IN DELETING THE LEVY OF SURCHARGE U/S 113 OF THE ACT. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.7 :- 7. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING TO DELETE THE SURCHARGE LEVIED U/S 113 OF THE ACT BY HOLDING THA T THE SURCHARGE IS NOT LEVIABLE IN RESPECT OF SEARCHES CONDUCTED PRIOR TO 01.06.2002 THOUGH THE PROVISO TO SECTION 113 SPECIFICALLY PROVIDES THAT S URCHARGE IS LEVIABLE INCOME SEARCHES U/S. 132 INITIATED ON OR AFTER 01.04.1999. 22. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ISSUE IN TH IS APPEAL OF REVENUE IS AGAINST THE CIT(A) IN DELETING THE SURCHARGE LEVIED BY THE ASSESSING OFFICER U/S.113 OF THE ACT IN THE BLOCK ASSESSMENT. AT THE OUTSET LD. CO UNSEL FOR THE ASSESSEE AS WELL AS LD. DR FAIRLY CONCEDED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE BY THE DECISION OF HONBLE APE X COURT IN THE CASE OF CIT V.SURESH N GUPTA (2008) 297 ITR 322 (SC). IN VIEW OF THE ABOVE POSI TION WE ALLOW THIS ISSUE OF THE REVENUES APPEAL AND DIRECT THE A SSESSING OFFICER TO LEVY SURCHARGE ACCORDINGLY. THIS ISSUE OF THE REVENUES APPEAL IS ALLOWED. 23. IN THE RESULT APPEAL OF ASSESSEE IS ALLOWED AND TH AT OF REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 31/01/2011 SD/- SD/ - (D.C.AGRAWAL) (MAHAV IR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 31/01/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-II AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD