Income Tax Appellate Tribunal - Pune
Dhariwal Industries Ltd, Pune vs Assessee on 2 May, 2016
आयकर अपील य अ धकरण, पुणे यायपीठ "बी" पुणे म
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
ी आर. के. पांडा, लेखा सद य
एवं ी !वकास अव थी, या#यक सद य के सम$
BEFORE SHRI R.K. PANDA, AM
AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA Nos.1318 to 1324/PN/2013
#नधा&रण वष& / Assessment Years : 2004 -05 to 2010-11
Dhariwal Industries Limited, .......... अपीलाथ /
Manikchand House, Plot No.100/101,
D. Kennedy Road, Appellant
Behind Hotel Le-Meridian,
Pune -411001
PAN No.AAACd5896L
बनाम v/s
ACIT Central Circle-1(1), Pune .......... यथ /
Respondent
आयकर अपील सं. / ITA Nos.1389 to 1391 and
ITA Nos.1408 to 1410/PN/2013
#नधा&रण वष& / Assessment Years : 2004 -05 to 2008-09
and 2010-11
ACIT Central Circle-1(1), Pune .......... अपीलाथ /
Appellant
बनाम v/s
Dhariwal Industries Limited, .......... यथ /
Manikchand House, Plot No.100/101, Respondent
D. Kennedy Road,
Behind Hotel Le-Meridian,
Pune -411001
PAN No.AAACd5896L
अपीलाथ क ओर से / Assessee by : Shri Sunil Pathak &
/ Sanjay N. Kapadia
यथ क ओर से / Department by : Shri M.K. Gautam
&B
2
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391
and 1408 to 1410/PN/13
सन
ु वाई क तार ख / घोषणा क तार ख /
Date of Hearing : 03.02.2016 Date of Pronouncement: 02.05.2016
आदे श / ORDER
PER R.K. PANDA, AM :
ITA Nos. 1318 to 1324/PN/2013 filed by the assessee are directed against the separate orders dated 29-03-2013 of the CIT(A)- II, Pune relating to Assessment Years 2004-05 to 2010-11. ITA Nos. 1389 to 1391/PN/2013 and ITA Nos. 1408 to 1410/PN/2013 filed by the Revenue are directed against separate orders dated 29-03- 2013 of the CIT(A)-II, Pune relating to Assessment Years 2004-05 to 2008-09 and 2010-11. For the sake of convenience, all these appeals were heard together and are disposed of by this common order.
2. First we take up appeals filed by the Assessee and the Revenue for Assessment Year 2004-05 as the lead case. Abridged grounds of appeal by the assessee in ITA No.1318/PN/2013 for A.Y. 2004-05 are as under:
"The following grounds are taken without prejudice to each other - On facts and in law,
1. The Ld.CIT(A) erred in sustaining the addition of undisclosed income based on the papers found with Shri Mithulal Jain and not with the appellant company during the course of search and hence, such addition made is not justified in the asst. completed u/s. 153A.
2. The Ld CIT(A) erred in sustaining an addition of Rs.20,78,41,250/- on the basis of the papers found during the course of search at the premises of Shri Mithulal Jain and which belonged to Shri Sohanraj Mehta and not the appellant company.
3. The Ld CIT(A) failed to appreciate that there was no incriminating evidence found at the appellant's premises during the course of search nor was there any corroborative evidence as regards unaccounted production in the factory of the appellant and therefore, the additions based on some notings by Shri Sohanraj Mehta is not justified in the hands of the appellant.3
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
4. Without prejudice, the Id CIT(A) erred in adopting the profit percentage @ 30% on the estimated unaccounted turnover based on the papers found during the search at the premises of Shri Mithulal Jain which belonged to Shri Sohanraj Mehta.
5. The Id CIT(A) erred in holding that the sales tax subsidy received of Rs. 10,02,61,664/- was a revenue receipt chargeable to tax without appreciating that the subsidy received by the appellant company was capital in nature and hence, not taxable at all.
6. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.
3. Grounds of appeal by the Revenue in ITA No.1389/PN/2013 for A.Y. 2004-05 are as under :
1. On the facts and in circumstances of the case the Ld. CIT(A) erred in adopting arbitrary GP @ 30% in respect of unaccounted turnover of Gutkha by assessee and erred in granting consequential relief to the assessee to the tune of Rs. 102 crores, as the said quantification of G.P. @ 30% is neither based on proper appreciation of facts nor of law nor on any sound logic.
2. On the facts and in circumstances of the case the Ld. CIT(A) erred in deciding that GP adopted by A.O. @ 60% is not correct, although G.P. adopted by A.O. is based on correct scientific analysis of material available on records.
3. On the facts and in circumstances of the case the Ld. CIT(A) erred in deciding that since GP was estimated in this case (to arrive at unaccounted income earned out of unaccounted sale of gutkha) and since entire GP was added, nothing further remained to be considered for disallowance, therefore, payment of bribe at Rs. 60 lakhs requires no further disallowance, ignoring the fact that although it is an expenditure but is not allowable as the same is incurred in contravention of Explanation to section 37(1) of the Act.
4. On the facts and in circumstances of the case the Ld. CIT(A) erred in allowing the claim of assessee that employee's Contribution of Rs.4,96,738/- to PF and ESI u/s. 36(1)(va) of the Act, although the same was not paid within due date prescribed within section 36(1)(va) of the Act.
5. On the facts and in circumstances of the case the Ld. CIT(A) erred in allowing the claim of assessee that employee's Contribution of Rs.4,96,738/- to PF and ESI u/s. 36(1)(va) of the Act, relying on the decision of the Apex court in the case of Alom Extrusions Ltd, although the same is not applicable in present facts of the case.
6. On the facts and in circumstances of the case the Ld. CIT(A) erred in allowing the claim of depreciation on assets of Hyderabad division, although block of assets installed in Hyderabad division, were not used in previous year, current year and subsequent years.
7. The order of the CIT(A) may be vacated and that of the Assessing Officer be restored.4
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
8. The appellant craves leave to add, alter, amend and modify any of the above grounds."
4. Grounds of appeal No.1 to 4 by the assessee and Grounds of appeal No. 1 and 2 by the revenue relate to part relief given by the CIT(A) by sustaining an amount of Rs.20,78,41,250/- out of the addition of Rs.40,88,32,514/-.
5. Facts of the case, in brief, are that the assessee filed the original return of income on 28-10-2004 disclosing total loss of Rs.4,09,43,385/-. A search action u/s.132 of the I.T. Act was conducted in the RMD Gutkha Group of cases on 20-01-2010. In response to the notice u/s.153A the assessee filed the return of income on 15-10-2010 disclosing total loss of Rs.4,09,43,385/- which is the same loss as disclosed in the original return of income. The AO issued a questionnaire dated 08-09-2011 along with notice u/s.142(1) of the I.T. Act in response to which the assessee submitted the requisite details.
6. During the course of assessment proceedings the AO noted that a search action u/s.132 of the I.T. Act was conducted at the residence of Shri Sohanraj Mehta, C&F agent of M/s. Dhariwal Industries Limited (in short 'M/s. DIL') as well as on the premises of M/s. Mehta Associates, No.104/1, Ground Floor, 7th Main, 3rd block, 4th Stage, Basaveshwar Nagar, Bangalore on 10-10-2009. Shri Sohanraj Mehta had stated that he is partner in M/s. Mehta Associates along with Shri Chetan Kumar Mehta and Shri Vikas Mehta. He had further stated that his firm is sole C&F Agent for Pan Masala and Gutkha product of the assessee company M/s. DIL for the state of Karnataka. Several incriminating documents, loose sheets etc were seized during the course of search proceedings from 5 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the premises of Shri Sohanraj Mehta. Search action was also conducted in the case of Shri Mithulal on 09-10-2009 during which various documents were found and seized from his residence at #219,68th cross, 5th Bock, Rajajinagar, Bangalore. The documents were stated to be belonging to Shri Sohanraj Mehta.
7. The AO noted that during the course of search and post search proceedings Shri Sohanraj Mehta had stated that the seized documents, loose sheets, etc. seized in the premises of Mr.Mithulal were actually belonging to the business of C&F Agency with M/s. DIL and were written by Mr. Mithulal in his handwriting in Marvari language. Further cross examination of the said documents by the Investigation Wing of Bangalore revealed that Shri Sohanraj Mehta, C&F Agent of RMD Gutkha group for Karnataka Region used to maintain detailed day to day account of the transactions of sale of Gutkha and also of the deployment of the said sale proceeds. From the day to day accounts he used to draw a monthly summary giving information of the sale proceeds received, and its deployment during a particular month. Finally from the monthly summary he used to prepare a consolidated summary for the entire period. As per the consolidated summary marked as Page 34 A/M/08 seized vide Panchanama dated 09-10-2009, the total unaccounted sales of M/s.DIL for the period April 2003 to August 2006 was Rs.218 crores approximately. Further, the total unaccounted sales for the period September 2006 to February, 2008 as computed form the seized pages was Rs.127.72 crores approximately. Thus, as per the said seized documents, the total unaccounted sales effected by Shri Sohanraj Mehta, C&F Agent of RMD Gutkha on behalf of M/s. DIL 6 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 for the period April 2003 to February 2008 was Rs.345.72 crores approximately.
8. The AO further noted that Shri Sohanraj Mehta had provided English translation of the books written in Marvari language working and quantifying the unaccounted turnover of M/s.DIL for various years. Further, he has declared that he has earned commission from sale of Gutkha for various years and offered the income before ADIT (Investigation). The AO also noted that Shri Sohanraj Mehta has explained the entire unaccounted business chain regarding unaccounted purchases, unaccounted manufacture, unaccounted packing, unaccounted printing, clandestine removal of goods, unaccounted sale and utilization of the sale proceeds which he has admitted to have done for and on behalf of M/s.DIL between 2003 to 2008.
9. The AO also noted that the seized books and documents revealed the entire facts about unaccounted business of M/s. DIL which he summarized as under :
"a) The seized material contains the daily, monthly and yearly summary of unaccounted sales of gutka like small, big & mini packets.
Further, it also substantiates the value of gutkha (i.e. price per pack). During the search proceedings, only stock of M/s. DIL was found with Shri. Sohanraj Mehta and no stock, whatsoever, of any other company/brand was found.
b) The summary of sales and apportionment of unaccounted sales of gutkha is available on A/M/08 of page no. 34 and monthly cash book summary (regarding sale of gutkha and apportionment of funds) is available in various pages of A/M/08 (page no. 39 to 58).
c) For carrying out unaccounted sales, there are matching unaccounted purchases of raw materials like Betel Nut (Shri. Mallikarjun, Shimoga), edible perfumes (from Shri P.C.Jain of Mumbai), cardamom (from Shri Vimal Nahar/Jain of Hyderabad), Menthol (from M/s Swathi Menthol), Supari (from Shri Kishen Kumar Gupta/MIs Bholenath Radhakishen of Delhi), chemicals (from Shri Mukesh Garg/M/s Prem brothers of Delhi) etc. Further, for packing the unaccounted goods, the assessee has paid unaccounted consideration to M/s. Champion Packaging which is also reflected in the seized material. 7
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 To print on the pouches of unaccounted goods, the assessee had paid unaccounted consideration to printer M/s. Rajhans Enterprises.
d) The unaccounted sale proceeds have been invested in real estate and assessee has paid on money to various parties. It is pertinent to note that these are the same parties with whom assessee has accounted business relationship and assessee has paid accounted consideration through banking channels. Some of such persons are Shri. Seetharamaih MLA, Mis. Tejaswini Builders and M/s. Mantri Developers. Further, the assessee has also paid commission (Shri. J.K. Reddy who is a broker ) and also paid for the legal opinion ( Shri. Chandramouli) .
e) The unaccounted sale proceeds have been paid to assessee's employee's like Shri. Jeevan Sanchethi and others who were authorized to collect the amounts.
f) The unaccounted sale proceeds have been paid by Shri Sohanraj Mehta to assessee, Shri. Rasiklal M Dhariwal ( for the sake of brevity, hereafter referred to as 'RMD'), his son Shri. Prakash Dhariwal (( for the sake of brevity, hereafter referred to as 'PRD') & to others, which is reflected in the seized material A/M/29 & further reflected in A/M/08 of page no. 34.
g) The C&F Agent has agreed and offered unaccounted commission received on behalf of unaccounted sales and further, there is a reflection of sales tax mamul paid to sales tax authorities for carrying out this modus operandi of unaccounted sales.
h) Packing materials and unaccounted payment of freight and tempo and hamali Charges are also reflected. All these evidences prove beyond reasonable doubt that entire unaccounted business chain has been established in this case regarding unaccounted purchase, unaccounted manufacture, unaccounted packing, unaccounted printing, clandestine removal of goods, unaccounted sale and utilization of the sale proceeds etc. This evidence is not more than enough to bring the said undisclosed income to tax."
10. The AO further noted that the following facts prove that the seized documents belong to the assessee company :
• "The said documents seized by the Investigation Wing of Bangalore have details of the accounted dispatches and also the unaccounted dispatches made by M/s Dhariwal Industries Ltd. to Shri Sohanraj Mehta. The unaccounted dispatches apparently have letter 'A' mentioned before them and the accounted dispatches have 'DIL' mentioned before them. Investigations revealed that the accounted dispatches are duly reflected in the books of M/s Dhariwal Industries Ltd.. Since Shri Sohanraj Mehta has accepted that the transactions with letter 'A' mentioned before them are in respect of the unaccounted dispatches • The names of brands dealt namely big, mini, 2 gms are belonging to M/s. DIL. The prices quoted in the unaccounted books and also unaccounted turnover of Shri. Sohanraj Mehta on behalf of M/s. DIL also match with that of prices of M/s. DIL.8
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 • The sale proceeds of unaccounted turnover of Gutka has been applied/utilized by Shri. Sohanraj Mehta on behalf of M/s. DIL. The parties who are appearing in right side of A/M/08 of page 34 are parties having transaction with M/s. DIL or Directors. The transactions are either being suppliers, sellers of property, people on their pay roles (sales tax department), C&F agent (Sohanraj mehta), legal advisors, etc. Though, the parties on the right side have not accepted to have received the unaccounted consideration in full, they have accepted for having transacted with M/s. DIL and have reflected the transactions of M/s. DIL to the extent of accounted entries.
• During the search proceedings, only stock of M/s. DIL was found at the premises of M/s. Mehta Associates, a concern of Shri Sohanraj Mehta which was C&F Agent of M/s. DIL.
• The price of various types of gutka like big, mini & 2 gms are brands of M/s. DIL and the price given in the working of unaccounted turnover is corresponding to the price of M/s. DIL brands.
• The C&F Agent Shri. Sohanraj Mehta all the way during search, post-search and assessment proceedings claimed that he has sold gutka of M/s. DIL. He has also declared the commission earned by him out of unaccounted sale of gutkas as C&F Agent.
• Shri. Sohanraj Mehta in his capacity as partner of M/s Mehta Associates had undertaken both accounted as well as unaccounted sales of gutka belonging to M/s. DIL. Unaccounted sales were not reflected in the books of M/s DIL or M/s. Mehta Associates or in hands of Shri. Sohanraj Mehta. Moreover, Shri. Sohanraj Mehta has acted in capacity of C&F Agent.
• The sale proceeds of Gutka are apportioned to sellers of immovable property or suppliers of raw materials of gutka or to people who have transacted with M/s. DIL etc. Moreover, as per seized material A/M/29, there are receipts signed by Shri. Rasiklal M. Dhariwal or by his son Shri. Prakash Dhariwal or by others on his behalf for having received unaccounted sale proceeds which were sent to them.
• All third parties appearing in A/M/08 of page no. 34 have stated that they had transactions only with M/s. DIL, most of them denying for having even known Shri. Sohanraj Mehta.
• Other supporting documents available in the seized material like A/M/01 shows the daily sales of gutka belonging to M/s. DIL, A/M/07 contains ledger extract of unaccounted considerations paid to various parties.
• Further, most of the parties belonging to Bangalore which are appearing on right side of the page 34 of A/M/08 were examined on oath by the OCIT Central Circle 2(2), Bangalore and they have 9 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 clarified that they had transactions only with M/s. DIL or some entity belonging to them but not with Shri. Sohanraj Mehta. This substantiates the fact that all the third parties who are appearing in the seized material namely A/M/08 of page no. 34 are having transactions only with M/s. DIL. Similarly, some of the other parties which are appearing on right side of the page 34 of A/M/08 and are presently being assessed in this office, were also examined in this regard.
• The various details submitted by the third parties were verified and it was found that most of the third parties were even not aware of Shri. Sohanraj Mehta. Some of the parties who knew Shri. Sohanraj Mehta were the employee's like Shri. Jeevan Sanchethi and Shri. Prashant Bafna.
11. In the light of the above the AO was of the opinion that the unaccounted income amounting to Rs.345.72 cores has to be taxed only in the hands of M/s.DIL.
12. The AO further noted that Shri Sohanraj Mehta, author of the seized document in his statement recorded u/s.132(4) on 10-10- 2009 dated 15-10-2009 explained the true import of the contents of the seized documents and also the fact that the said seized documents belong to M/s.DIL. According to the AO the said statements have immense evidentiary value. He noted that during the course of search u/s.132 and during the post search enquiries by the Investigation Wing of Pune the said documents seized by the Investigation Wing, Bangalore were confronted both to Shri Rasiklal M.Dhariwal and his Son Prakash Rasiklal Dhariwal. Both these persons accepted that the said chits giving instructions either to Shri Sohanraj Mehta or Jeevan Sanchethi, which are part of loose paper Bundle No. A/M/29 seized vide Panchanama dated 09-10- 2009, bear either of their signatures.
13. He noted that as per the said documents seized by the Investigation wing of Bangalore, an amount of Rs.14.35 crores was advanced by RMD Gutkha Group to Shri S. Balan during the period 10 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 from the year 2003 to 2008. Alongwith the search action in the case of RMD Gutkha Group, Shri S. Balan of Pune was also covered for the purpose of cross verification. In course of the search action, it was accepted by Shri S. Balan that the said amount of Rs.14.35 crores was kept by RMD Gutkha Group with him for safe custody.
14. The AO noted that as per the said documents seized by the Investigation wing of Bangalore, an amount of Rs.46.56 crores was deployed by RMD Gutkha Group to Shri Malikarjuna of Shimoga during the period 2003 to 2008. Alongwith the search action in the case of RMD Gutkha Group, Shri Mallikarjun of Shimoga was also covered for the purpose of cross verification. In the course of the search action, it was accepted by Shri Mallikarjun of Shimoga that the said amount of Rs.46.56 crores represents sales which are outside the regular books of accounts.
15. The AO also noted that in the course of the search action on 20/01/2010, statements on oath were also recorded of Shri Shital B. Patil, Area Sales Manager of Karnataka Region for RMD Gutkha Group. In course of the statement on oath, it was admitted by him that the accounted as well as the unaccounted stock of M/s Dhariwal Industries Ltd. is carried out through Mr. Sohanraj Mehta, C&F through the network of dealers/distributors across Karnataka. This statement on oath of Shri Shital B. Patil was also confirmed by Shri K.A. Raghunath, Sales Supervisor of M/s Dhariwal Industries Ltd.
16. The AO further noted that the analysis of the seized documents reveal that the assessee has resorted to the following modus operandi :
11
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 "i) The assessee company carries out a parallel production of its accounted production and also its unaccounted production in its factory at Bangalore.
For its accounted as well as its unaccounted production, the purchases of major raw materials like edible perfumes, betel nut, ellaichi, kattha etc, are purchased from the same suppliers. This is to ensure that the quality of its products, both accounted as well as unaccounted, is maintained. In the books of the suppliers, and also RMD Gutkha Group the supplies made for the accounted production of RMD Gutkha group are duly reflected in the books but the supplies made for the unaccounted production at Bangalore are kept out of the regular books.
ii) For the purpose of distribution and marketing of its products, assessee company has appointed a number of C & F agents. Sri Sohanraj Mehta is one of C & F agents who is a close confidante of promoters of assessee company. Sri Sohanraj Mehta used to maintain accounts of the unaccounted sales, expenses incurred etc during the relevant period. Further, he used to remit the. unaccounted cash so generated to the promoters of assessee company and also used to make payments to the suppliers of raw material etc, for the unaccounted production as per the instructions of promoters of assessee company namely Shri Rasiklal Dhariwal and his son Shri Prakash Rasiklal Dhariwal."
17. The AO categorized the seized documents in the hand writing of Shri Sohanraj Mehta as follows :
a. Day books giving details of the transactions for the months of January 2003 to December 2003.
b. Day books giving details of the transactions for the months of October 2006 to February 2008.
c. Books giving day-wise, month-wise details of the transactions for almost the entire period starting from April 2003 to January 2008.
d. Copies of chits signed either by Shri Rasiklal M.Dhariwal or Shri Prakash R. Dhariwal giving instructions to Shri Sohanraj Mehta to handover cash to the person whose name is specified in the chit or to the bearer of the chit.
18. In the light of the above, the AO issued a detailed show cause notice requesting the assessee to show cause as to why unaccounted income worked out based on the aforesaid seized documents should not be taxed in the hands of the assessee company. The assessee vide his submissions on various dates objected to such unaccounted income in its hands, the gist of which has been summarized by the AO at Para 3.3.1 of his order and which read as under : 12
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
a) Though the seized documents bear signature of Shri Rasiklal Dhariwal and/or Shri Prakash R Dhariwal, the amounts mentioned therein are not in the code form as explained by Shri Sohanraj Mehta u/s 132(4) of the I,T.Act.
b) Though the accounted transactions appearing in seized documents belong to the assessee company, the unaccounted transactions appearing in impugned seized documents have nothing to do with the assesee company.
c) The seized documents signed by the directors of assessee company Shri Rasiklal Dhariwal and/or Shri Prakash R Dhariwal, relate to recovery of certain advances/refunds due from Shri Sohanraj Mehta.
d) The seized documents have not been seized from the assessee and have nothing to do with Dhariwal Industries Ltd, Rasiklal Manikchand Dhariwal and their Group concerns.
e) Unaccounted assets commensurate with the unaccounted income generated through suppressed sales were not found by the department.
f) No evidence of suppression of turnover/income were found by government agencies like Central Excise dept, Sales Tax dept, etc.
g) No evidence of unaccounted purchases were found.
h) The seized documents relate to Shri Sohanraj Mehta's unaccounted business in some other brands of gutkha.
i) Cross examination of Shri Sohanraj Mehta should be allowed.
j) Shri.Sohanraj Mehta, Shri. Mallikarjuna, Shri Shital Patil, Shri K. Raghunath and Shri. S. Balan on whose statements Department is placing reliance, had retracted their respective statements."
19. However, the AO was not satisfied with the explanation given by the assessee. He observed that during the course of search u/s.132 and during post search enquiries by the investigation Wing of Pune the said documents seized by the Investigation Wing of Bangalore were confronted both to Shri Rasiklal M. Dhariwal and son Shri Prakash R. Dhariwal. Both of them have admitted u/s.132(4) that the said seized chits giving instructions either to Shri Sohanraj Mehta, C&F Agent of RMD Gutkha Group for Karnataka Region or Shri Jeevan Sanchethi, Bangalore factory incharge of RMD Gutkha group which are part of loose paper Bundle 13 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 No.A/M/29 seized vide Panchanama dated 09-10-2009 bear either of their signatures. Though they refused to accept the decoding explained by Shri Sohanraj Mehta that the amounts mentioned in "lakhs" actually stand for "crores" of rupees and the work "packet" stands for a "lakh" of rupees, both Shri Rasiklal M. Dhariwal and his son Shri Prakash R. Dhariwal stated that these are short term advances given by them to their friends and business associates. However, the AO noted that neither Mr. Rasiklal M. Dhariwal or Mr. Prakash R. Dhariwal could support the above claim with any cogent or supporting evidence.
20. The AO noted that though as per answer to Question no 9 of his statement recorded on 03/02/2010, Shri. RMD had committed to reply to the question as to what amount was blocked with Mr. Sohanraj which belonged to him and since when it was blocked and as to how can the said amounts were to be recovered through the chit containing written instructions after verifying the books of accounts and on discussion with the concerned relevant people, however, no explanation has yet been given in these 23 months, either by RMD/PRD/DIL on this issue though scrutiny assessments were in progress and more than 4 show cause notices were issued on the issue of said seized documents citing above mentioned admission of signatures on chits by RMD/PRD. The only reason why such an explanation was not given by RMD according to the AO is the fact that the said claim was untrue and the decoding explained by Shri. Sohanraj Mehta was absolutely correct, which also gets support from the seized documents themselves.
14
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
21. The AO inferred that on the basis of the instructions given in the said signed chits either by Shri Rasiklal M. Dhariwal or Shri Prakash R. Dhariwal, Shri Sohanraj Mehta used to make payments to the parties whose names were mentioned on the said chits. In many instances, these payments were spread over more than one installment. The day books maintained by Shri Sohanraj Mehta have a detailed narration of the various installment payments for the amounts mentioned in the signed chits. At many places, in the day books the amounts have been mentioned in de-coded form.
22. The AO discussed some of the instances as well as the statement given by Shri Rasiklal M. Dhariwal and the various evidences gathered during the search and post search enquiries. The AO rejected the contention of the assessee that the decoding explained by Shri Sohanraj Mehta that the amounts mentioned in the seized documents namely A/M/29 in "lakhs" actually stand for "crores" of rupees and the word "packet" stands for a "lakh" of rupees is wrong.
23. As regards the contention of the assessee regarding accounted as well as unaccounted transaction appearing in the seized documents is concerned, the AO noted that the documents seized during search in Bangalore have details of the accounted despatches and also the unaccounted despatches made by M/s. DIL through Shri Sohanraj Mehta. The unaccounted despatches apparently have letter 'A' mentioned before them and the accounted despatches have 'DIL' mentioned before them. He noted that as per the investigations the accounted despatches are duly reflected in the books of M/s. Dhariwal Industries Ltd. Shri Sohanraj Mehta has accepted that the transactions with letter 'A' mentioned before them are in respect of 15 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the unaccounted despatches. Since the same document has both accounted as well as unaccounted despatches and accounted despatches tally with the books of account of assessee company, the AO held that the unaccounted despatches also belong to M/s.DIL only.
24. He observed that though the assessee is owning up accounted portion, however he is not accepting the unaccounted portion written in the same document. According to the AO, seized document cannot be half true. Most importantly, in both accounted as well as uncounted dispatches it is written 'Bada', 'Mini' and '2 gm'. This description tallies exactly with the products sold by the assessee company. The price of the said accounted as well unaccounted 'Bada', 'Mini' and '2 gm' pouches mentioned in the seized documents perfectly matches with the actual price of the 'Bada', 'Mini' and '2 gm' pouches sold by the assessee company. This proves beyond doubt that both accounted as well as unaccounted dispatches appearing the seized documents belong to the assessee company. The above evidences according to the AO prove beyond doubt that the contention of the assessee in this regard lacks substance.
25. As regards the contention of the assessee that the seized documents signed by the directors of assessee company relate to recovery of certain advances/refunds due from Shri Sohanraj Mehta the AO rejected the same in absence of any plausible explanation and cogent evidence.
26. As regards the contention of the assessee that third party evidences do not have any evidentiary value is concerned, the AO held that if the argument of the assessee is accepted, the provisions 16 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 of Evidence Act and Sec.147, 158BD and 153C of Income Tax Act, 1961 become redundant. According to him, it is true that the strict rules of evidence are inapplicable to the proceedings under the I.T.Act, 1961. However that does not mean that the principles of evidence act are inapplicable to the proceedings under the I.T.Act. He noted that in the instant case, Shri Sohanraj Mehta is a business associate of assessee. The seized documents are in the handwriting of Shri Soharaj Mehta himself. Signatures of Shri Rasiklal Dhariwal and Shri Prakash Dhariwal are available in the said seized documents and duly admitted by both of them and the said documents contain both accounted as well as unaccounted transactions of the assessee company. Thus, if the ratio decidendi of VC Shukla case is applied to the facts of the case, it becomes very clear that assessee company can be taxed based on entries in the documents seized from Bangalore. He accordingly rejected the averment of the assessee that third party evidence cannot be used against it. He also rejected the contention of the assessee that unaccounted assets commensurate with the unaccounted income generated through suppressed sales were not found by the department.
27. As regards the contention that no evidences of suppression were found by other government agencies is concerned the AO rejected the same by observing that finding of evidences with other government agencies is not at all relevant to the issue under consideration in view of compelling evidences of suppression of turnover by the assessee. He further noted that the seized documents contain details of payment of bribes to Sales tax department by the assessee running into crores @ Rs.5 Lakhs per 17 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 month. This evidence proves that assessee is managing sales tax department through regular and systematic payment of bribes. Further, assessee is fighting many cases with Central Excise and Sales Tax department, which indicates suppression of turnover.
28. As regards the contentions of the assessee that no evidence of unaccounted purchases was found is concerned, the AO noted that the unaccounted sales appearing in the seized documents has matching unaccounted purchases of raw materials like Betel Nut (Shri. Mallikarjun, Shimoga), edible perfumes (from Shri P.C.Jain of Mumbai), cardamom (from Shri Vimal Nahar/Jain of Hyderabad), Menthol (from M/s Swathi Menthol), Supari (from Shri Kishen Kumar Gupta/M/s. Bholenath Radhakishen of Delhi), chemicals (from Shri Mukesh Garg/M/s Prem brothers of Delhi) etc. Further, for packing the unaccounted goods, the assessee has paid unaccounted consideration to M/s. Champion Packaging which is also reflected in the seized material. To print on the pouches of unaccounted goods, the assessee had paid unaccounted consideration to printer M/s. Rajhans Enterprises. He noted that an amount of Rs.46.56 crores was deployed by RMD Gutkha Group to Shri Malikarjuna of Shimoga during the period from the year 2003 to 2008 in the form of payment for unaccounted raw material supplies (arecanut/supari). Therefore, alongwith the search action in the case of RMD Gutkha Group, Shri Mallikarjun of Shimoga was also covered for the purpose of cross verification. In the . course of the search action, it was accepted by Shri Mallikarjun of Shimoga that the said amount of Rs.46.56 crores represents sales which are outside the regular books of accounts. He also made a disclosure of Rs. 3.026 crores being the income @ 6.5% on the said undisclosed turnover of Rs. 46.56 crores. However, later on, vide his letter dated 18 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 23-01-2010 filed before the Investigation Wing of Bangalore, Shri Mallikarjun of Shimoga has retracted his admission made u/s.132(4) of the I.T. Act. This retraction, according to the AO is unsubstantiated and the circumstantial evidence found at the time of revocation of the Prohibitory order from the searched premises of Shri Mallikarjun of Shimoga brings out following peculiar facts :
"(1) Shri Mallikarjun is having a branch office at Bangalore located at 799/6, Shop No.2, Anekal Road, Chandapur, Bangalore which is in close proximity to the Bangalore Factory of RMD Gutkha group.
(2) The entire turnover of this branch office at Bangalore is in cash and is around Rs. 50.28 crores for the period starting from the financial year 2006-07 to 2008-09.
(3) The branch office has no evidences in the form of names, addresses, etc .of the parties to whom sales have been effected.
(4) Though it has been claimed that they are carrying out retail sales from this branch office, surprisingly for each truck exactly 65 bills are raised. It is a height of coincidence that for each truck load of betel nut which arrives at Bangalore from Shimoga, every time exactly 65 sale bills are raised.
(5) The branch office at Bangalore is not even in possession of any evidences to suggest unloading of the trucks, its weighment etc."
29. The AO observed that the factual position as noted above related to the developments at the time of the search action and also post search action, provides clear evidence which suggests the authenticity of the documents seized by the Investigation wing of Bangalore pertaining to the unaccounted sales carried out by Mr. Sohanraj Mehta, C&F of RMD Gutkha Group for Karnataka Region. It also provides the evidence that Shri Mallikarjun of Shimoga was carrying out unaccounted sale of supari to RMD Gutkha Group and also that its cash sales from its Branch office at Bangalore were actually being diverted to RMD Gutkha Group, which in turn has been used for the unaccounted production and subsequent 19 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 sale. Therefore, the contents of seized documents irrefutably prove unaccounted purchases of the assessee also. In fact the seized documents are books of account for unaccounted transactions of the assessee. In view of the above the AO rejected the argument of the assessee that no evidence of unaccounted purchases was found during the search.
30. The AO also rejected the contention of the assessee that the unaccounted turnover belongs to Shri Sohanraj Mehta on account of the following reasons :
"1. During the search proceedings, only stock of M/s. DIL was found with Shri. Sohanraj Mehta and no stock, whatsoever, of any other company/brand was found.
2. In the said seized documents a commission income of Shri Sohanraj Mehta is clearly written @Rs.65 per carton of unaccounted sales. However, no one doing business on his own behalf would derive commission as stated in the said seized documents.
3. As per seized Bundle No. A/M/29 Shri Sohanraj Mehta use to handover money to the persons whose names appeared on the chits given to him as per directions of Shri RMD/PRD. If this unaccounted sales of gutkha was carried out by Shri Sohanraj Mehta in his own capacity, why he would act on the directions of Shri RMD/PRD as regards the utilization of this unaccounted sale proceeds. Even, Shri RMD/PRD vide their 132(4) statements, have admitted that they have signed the said chits instructing the said payments to the said parties by Shri Sohanraj Mehta on their behalf.
4. All the third parties such as raw material suppliers of M/s DIL, employees of DIL, friends and business associates of Shri RMD/DIL, whose names appear in the said seized pages as recipients of unaccounted sale proceeds have categorically accepted that they know M/s DIL/RMD and they transact business only with M/s DIL/RMD and not with Shri Sohanraj Mehta.
5. It is an undisputed fact that Shri Sohanraj Mehta, through his firm MIs Mehta Associates, acts as C & F agent of M/s DIL for Karnataka Region.
6. For making such a claim in his retraction letter dated 23/12/2009, Shri. Sohanraj Mehta has neither pointed out nor submitted any proof whatsoever, in support of his contention that the said seized documents relate to his unaccounted business in some other brands of gutkha. Even the assessee company who is 20 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 mainly relying on this contention in its defense that Shri. Sohanraj Mehta was doing unaccounted business in some other brands of gutkha, could not furnish any evidence whatsoever in this regard. This inability of the assessee to substantiate the above contention which is the most important plank of its defense on the matter involved can be seen from the answer of Chairman of the assessee company Shri RMD in response to specific query in this regard."
31. The AO observed that just like assessee demands proof from Department to prove the genuineness of information contained in the said seized documents, equal, rather more responsibility is cast on the assessee to prove that whatever stated therein is not correct, by virtue of presumption u/s.132(4A) and assessee can't just brush aside this responsibility by saying that "So far as the issue of parallel business carried on by Shri Sohanraj is concerned, I do not have any evidence to prove the same" and at the same time, expect Department not to draw any adverse inference out of this irrefutable evidence regarding assessee's unlawful activities.
32. As regards the question of opportunity of cross examination is concerned, the AO noted that the assessee sought opportunity to cross examine Shri Sohanraj Mehta on 23/11/2011 for the first time. Assessee was afforded the said opportunity vide letter dated 1/12/2011 as per which assessee was requested to present himself between 12th " to 15th December, 2011, in the office of DCIT, Central Circle, 2(2), Bangalore, who has conducted Examination- in- chief of the witness sought to be cross examined by the assessee namely Shri Sohanraj Mehta. However, assessee chose not to avail the said opportunity and instead requested that the said cross examination be conducted at Pune. According to the AO, the court of law in which Examination- in-chief is conducted can only conduct cross- examination or re-examination, as the case may be. Since, the Examination-in-chief of Shri Sohanraj Mehta in the form of 21 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 statement dated 10/08/2011 was conducted by DCIT, Central Circle, 2(2), Bangalore, the cross examination has to be necessarily conducted by the same officer. Therefore, the AO held that request of assessee to conduct the said cross examination of Shri Sohanraj Mehta at Pune was untenable on this very count. The AO further observed that as per the Code of Civil Procedure, summons can be issued to a person only if he is within 500 kms of the distance from the issuing authority. Where the person/witness is more than 500 km away from the summons issuing authority, commission has to be issued by such authority, authorizing other authority to cause/carry out such necessary examination/cross-examination/re- examination, on his behalf. He observed that in the instant case, the person M/s Dhariwal Industries Ltd., Shri. Rasiklal M. Dhariwal wish to cross-examine, namely Shri. Sohanraj Mehta, a resident of Bangalore and as such, the AO at Pune is not empowered to issue summons to him so as to accord an opportunity of cross examination to M/s. Dhariwal Industries Ltd., Shri Rasiklal M. Dhariwal. Therefore, the AO had issued commission on 01/12/2011 to Departmental Officer in Bangalore to grant M/s. Dhariwal Industries Ltd., Shri Rasiklal M. Dhjariwal an opportunity of cross examining Shri Sohanraj Mehta. This opportunity of cross examination was not availed by the assessee. In the interest of justice one more opportunity was afforded vide officer letter to assessee dated 23/12/2011. This time also, assessee chose not to avail the opportunity to cross examine Shri Sohanraj Mehta. He therefore concluded that assessee was afforded sufficient opportunity to cross examine Shri Sohanraj Mehta 22 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
33. As regards submission of the assessee that Shri.Sohanraj Mehta, Shri. Mallikarjuna, Shri Shital Patil, Shri K. Raghunath and Shri. S. Balan on whose statements Department is placing reliance, had retracted their respective statements is concerned, the AO also rejected the same. He observed that all these individuals, though under direct influence and control of the assessee, have, in first instance, admitted and substantiated the statement of Shri Sohanraj Mehta u/s 132(4} explaining the said seized pages, though the Pune search action was conducted after 3 months of discovery of the said evidence in Bangalore. This proves that these individuals have spoken only truth in their respective statements u/s 132(4) as it comes with an element of surprise. Having told the truth in first place, these individuals like Shri.Sohanraj Mehta (C & F agent), Shri. Mallikarjuna (raw material supplier), Shri Shital Patil & Shri K. Raghunath (employees) and Shri. S. Balan (friend and business associate ) were and are still under the influence and control of the assessee company for the obvious reason that they are dependent on the assessee for their existence/business livelihood and as such, they all have retracted subsequently as per the diktats of the assessee company.
34. The AO examined the evidentiary value of statement u/s 132(4) of the Income Tax Act and noted that section 132(4) of the Income Tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can be used as evidence under the Income Tax Act. Provisions of section 136 of the Income-tax Act, 1961 deem proceedings before an income-tax authority to be judicial proceedings. In the statement u/s 132(4) the evidences found at the time of search are examined on the spot. When statement is 23 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 recorded from the assessee u/s 132(4) on the date of search, surprise element is involved. In the statement u/s 132(4), assessee is confronted with the evidences found at the time of search for the first time and response of the assessee is elicited on the spot. In view of the natural human tendency, first response of the assessee would be true. Whatever is stated later would be normally after a lot of thought, calculation, manipulation and tutoring by CA's/Advocates, Therefore, statement u/s 132(4) is a virgin and contemporaneous evidence with immense value.
35. He observed that in the present case, the retraction is most definitely neither immediate nor is it corroborated with any evidence. Admission is a very important piece of evidence and to brush it aside whimsically would distort the whole purpose of the provisions, In order to allow a withdrawal or a retraction of the same conclusively, there must be mitigating circumstances making out a case for such retraction, a fact which is completely absent in the facts and circumstances of the present case. To allow a retraction without any cogent material would amount to making a mockery and travesty of the search and . seizure operations. The assessee having estopped the Revenue by the admission cannot be allowed to go back on its "promise" held out by him. The "promise" here would mean the surrender made at the time of search. Any retraction at a later stage would violate the principles of promissory estoppel and have very grave and serious consequences and ramifications. Further, when statement was made voluntarily and was not alleged to have been obtained under threat or coercion, onus was on assessee to prove that said declaration was made under any misconception of facts - Since assessee had not taken any steps to rectify its declaration before authorities before whom 24 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 such declaration was made, there was no valid reason for retraction of same after a gap of about two and a half months.
36. The AO further noted that Shri Sohanraj Mehta, C&F Agent of M/s.DIL vide his successive statements on oath dated 10-10-2009, 15-10-2009 , 21-10-2009 and 12-08-2011 has explained the entire unaccounted business chain regarding unaccounted purchases, unaccounted manufacture, unaccounted packing, unaccounted printing, clandestine removal of goods, unaccounted sale and utilization of the sale proceeds which he has admitted to have done for and on behalf of M/s.DIL between 2003 to 2008. The assessee has heavily relied upon the retractions of Shri Sohanraj Mehta vide letters dated 23-12-2009 and 03-12-2011. The AO noted that the letter of Shri Sohanraj Mehta dated 03-12-2011 is basically a request to consider his 23-12-2009 letter as correct and true narration of facts regarding the said seized documents. However, the said retraction dated 23-12-2009 was full of contradictions. All these contradictions were exposed by the DCIT, Central Circle-2(2), Bangalore by recording the statement of Shri Sohanraj Mehta u/s.131 on 10-08-2011 and again on 16-12-2011.
37. He observed that vide his statement recorded on oath u/s.131 on 10-08-2011 Shri Sohanraj Mehta has corroborated his statement recorded u/s.132(4) which carry the highest evidentiary value. He further observed that in his statement u/s.131 dated 10-08-2011 Shri Sohanraj Mehta has made it clear that the said retraction vide his letter dated 23-12-2009 was made by him at the behest of M/s.DIL. Thus, the AO noted that Shri Sohanraj Mehta has not only agreed that he had earned commission on the said unaccounted sale @ Rs.65/- per carton but also filed the returns 25 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 u/s.153A by offering this commission income to tax. This fact of earning commission on the said unaccounted sales @ Rs.65/- per carton is also as per the entries in the said seized pages where there is mention of such commission income of Shri Sohanraj Mehta amounting to Rs.1,52,83,320/-.
38. So far as the second retraction vide letter dated 03-12-2011 is concerned the AO noted that the said letter bears one address (old one) on its top and has different address on the envelope. Further, the fact that the letter of this office, sent on the old address of Shri. Sohanraj Mehta, was returned unserved with comment of the postal staffs comment dated 08-12-2011 "address left", also proves that the said address is no more in use. However, surprisingly and for reasons best known to him, Shri Sohanraj Mehta has put the old address on a very recent letter of retraction dated 03-12-2011, unmindful of the fact that the envelope carrying this very letter carries a different address outside. He further noted that the assessee intuitively quoted this letter of Shri Sohanraj Mehta dated 03-12-2011 in his letter dated 08-12-2011. However, in the envelope enclosed to the petition submitted before the Department for grant of opportunity of cross- examination, the said letter of Shri Sohanraj Mehta dated 03-12-2011 was actually received by the assessee on 09-12-2011 at 13.15 hrs. Therefore, he doubted as how the assessee quoted in its letter addressed to the AO on 08-12-2011. The AO further noted that his office could not communicate to Shri Sohanraj Mehta till 03-12-2011, regarding the issue of his proposed cross-examination at Bangalore by M/s Dhariwal Industries Ltd/ Shri Rasiklal M. Dhariwal.
26
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
39. However, the AO noted that the contents of the said letter of Shri Sohanraj Mehta dated 03-12-20111 are surprisingly matching with the petitions of M/s. Dhariwal Industries Ltd./Shri Rasiklal M. Dhariwal dated 26-11-2011 & 29-11-2011 for allowing cross- examination of Shri Mehta at Pune instead of Bangalore on the ground of health of Shri Rasiklal M. Dhariwal. He accordingly concluded that the retraction letter dated 03-12-2011 purported to be written by Shri Sohanraj Mehta is not actually written by him but it was drafted and supplied to him by somebody else and circumstantial evidence strongly points out that it was done by/at the behest of the assessee group. He further noted that Shri Sohanraj Mehta in his statement before the DCIT, Central Circle-2, Bangalore recorded u/s.131 on 16-12-2011 could not answer the specific and point-wise questions regarding retraction by him and remained absolutely silent on most of these questions.
40. So far as retraction of Shri Mallikarjun of Shimoga is concerned the AO noted that Arecanut and supari supplier of the assessee has confirmed the contents of the seized documents and admitted to have made unaccounted raw material supplies to M/s.DIL in his statement u/s.132(4). However, vide his letter dated 23-01-2010 filed before the Investigation Wing of Bangalore Shri Mallikarjun has retracted his statement made u/s.132(4). According to the AO, this retraction is unsubstantiated and the circumstantial evidence found at the time of revocation of the prohibitory order from the searched premises of Shri Mallikarjun of Shimoga brings out following peculiar facts :
27
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
(i) Shri Mallikarjun is having a branch office at Bangalore located at 799/6, Shop No.2, Anekal Road, Chandapur, Bangalore which is in close proximity to the Bangalore Factory o RMD Gutkha Group.
(ii) The entire turnover of this branch office at Bangalore is in cash and is around Rs.50.28 crores for the period starting from the financial year 2006-07 to 2008-09.
(iii) The branch office has not evidences in the form of names, addresses, etc. of the parties to whom sales have been effected.
(iv) Though it has been claimed that they are carrying out retail sales from the branch office, surprisingly for each truck exactly 65 bills are raised. It is a height of coincidence that for each truck load of betel nut which arrives at Bangalore from Shimoga, every time exactly 65 sale bills are raised.
(v) The branch office at Bangalore is not even in possession of any evidences to suggest unloading of the trucks, its weighment etc.
41. From the above he noted that the developments at the time of search action and also post search action provides clear evidence which suggests the authenticity of the documents seized by the Investigation Wing of Bangalore pertaining to the unaccounted sales carried out by Shri Sohanraj Mehta, C&F Agent of RMD Gutkha for Karnataka Region. It also provides the evidence that Shri Mallikarjun was carrying out unaccounted sale of Supari to RMD Gutkha group and that its cash sales from its branch office at Bangalore were actually being diverted to RMD Gutkha Group which in turn has been used for the unaccounted production and subsequent sale.
42. So far as retraction of Mr.S. Balan is concerned, the AO noted that Shri S. Balan is a close family friend and business associate of Shri Rasiklal M. Dhariwal/M/s. DIL. He had admitted on 20-01- 2010 vide his statement on oath that he was a custodian of about Rs.14 crores money of Dhariwal and the said seized documents also depict that about Rs.14.35 crores money was handed over by Shri 28 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Sohanraj Mehta to Shri S. Balan/his representatives on the directions of RMD/PRD. Shri S. Balan has retracted later on 25-11- 2011 by filing an affidavit stating that the admission made by him during search action was not actually made by him and he has not stated any such fact during the search. However, Shri S. Balan has admitted the said statement bears his signature only. Moreover, the retraction of Shri Balan is not made immediately after the search and it was made almost after 22 months after the search. Further, there was no element of any threat or coercion while recording the statement u/s.132(4). He observed that though the said retraction of Shri S. Balan has come only on 25-11-2011, M/s DIL could intuitively anticipate and could quote the said retraction in its written submission as early as dated 01-09-2011. It proves that the said retraction was made by Shri S. Balan only at the behest of M/s DIL and is a feeble attempt to keep M/s DIL away from the irrefutable evidences contained in the said seized documents and to save M/s DIL from the lawful consequences of this unlawful act.
43. As regards the retraction of Shri Shital Patil and Shri K. Raghunath are concerned, the AO noted that they manage sales of gutkha of M/s DIL in their respective capacities of Area Sales Manager and Sales Executive. They have confirmed the fact of unaccounted sale of gutkha of M/s DIL through Shri Sohanraj Mehta. There was no reason for these employees, who are under direct influence and control of M/s DIL, to have stated that Shri Sohanraj Mehta has carried out unaccounted sales of gutkha on behalf of their employer M/s DIL, if it was not true. Both these individuals, are still enjoying the faith of their employer M/s DIL and still on the payroll of M/s DIL. Therefore, notwithstanding their 29 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 unsubstantiated and uncorroborated retraction later on, which is at the behest of their employer M/s DIL, under whose influence and control they still remain, the statements u/s 132(4) made by both these individuals admitting the facts of unaccounted sales of gutkha by their employer M/s DIL through Shri Sohanraj Mehta, carry a very high evidentiary value in the eyes of law.
44. In view of the above the AO held that the statements under section 132(4) were retracted in letter only and not in spirit. The retraction is superficial and is not based on any evidence whatsoever. Moreover, no threat or coercion is proved in any of the retractions. Therefore, it can be concluded that all the abovesaid statements were retracted by respective persons at the behest of assessee company, on which these persons are dependent. It can further be concluded that the statements u/s 132(4) have not been retracted successfully. Thus, notwithstanding the subsequent unsuccessful retractions, the statements u/s 132(4) discussed above, still command immense evidentiary value.
45. During the course of assessment proceedings, it was argued by the assessee that the undisclosed income should not be assessed in the hands of M/s DIL. However, the AO rejected such argument as baseless on account of the following reasons :
The names of brands dealt namely big, mini, 2 gms are belonging to M/s. DIL. The prices quoted in the unaccounted books and also unaccounted turnover of Shri. Sohanraj Mehta on behalf of M/s. DIL also match with that of prices of M/s. DIL.
The sale proceeds of unaccounted turnover of Gutka has been applied/utilized by Shri. Sohanraj Mehta on behalf of M/s. DIL. The parties who are appearing in right side of A/M/08 of page 34 are parties having transaction with M/s. DIL or Directors. The transactions are either being suppliers, sellers of property, people on their pay roles (sales tax department), C&F agent (Sohanraj mehta), legal advisors, etc. 30 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Though, the parties on the right side have not accepted to have received the unaccounted consideration in full, they have accepted for having transacted with M/s. DIL and have reflected the transactions of M/s. DIL to the extent of accounted entries.
During the search proceedings, only stock of M/s. DIL was found at the premises of M/s. Mehta Associates, a concern of Shri. Sohanraj Mehta which was C&F Agent of M/s. DIL.
The price of various types of gutka like big, mini & 2 gms are brands of M/s. DIL and the price given in the working of unaccounted turnover is corresponding to the price of M/s. DIL brands.
The C&F Agent Shri. Sohanraj Mehta all the way during search, post- search and assessment proceedings claimed that he has sold gutka of M/s. DIL. He has also declared the commission earned by him out of unaccounted sale of gutkas as C&F Agent.
Shri. Sohanraj Mehta had in his letter dt: 23.12.2009 admitted some disallowable expenses of M/s. DIL and this amount has to be added back in the case of M/s. DIL during the assessment proceedings in that case and the statement of Sri. Sohanraj Mehta dated 10.08.2011 (Q. No
6) has to be referred in this regard.
Shri. Sohanraj Mehta in his capacity as partner of M/s Mehta Associates had undertaken both accounted as well as unaccounted sales of gutka belonging to M/s. DIL. Unaccounted sales were not reflected in M/s. Mehta Associates or in hands of Shri. Sohanraj Mehta. Moreover, Shri. Sohanraj Mehta has acted in capacity of C&F Agent. The sale proceeds of Gutka are apportioned to sellers of immovable property or suppliers of raw materials of gutka or to people who have transacted with M/s. DIL etc. Moreover, as per seized material A/M/29, there are receipts signed by Shri. Rasiklal M. Dhariwal or by his son Shri. Prakash Dhariwal or by others on his behalf for having received unaccounted sale proceeds which were sent to them. All third parties appearing in A/M/08 of page no. 34 have stated that they had transactions only with M/s. DIL, most of them denying for having even known Shri. Sohanraj Mehta.
Other supporting documents available in the seized material like A/M/01 shows the daily sales of gutka belonging to M/s. DIL, A/M/07 contains ledger extract of unaccounted considerations paid to various parties.
Further, most of the parties belonging to Bangalore which are appearing on right side of the page 34 of A/M/08 were examined on oath by the DCIT Central Circle 2(2), Bangalore and they have clarified that they had transactions only with M/s. DIL or some entity belonging to them but not with Shri. Sohanraj Mehta. This substantiates the fact that all the third parties who are entering in the seized material namely A/M/08 of page no. 34 are having transactions only with M/s. DIL. Similarly, some of the other parties which are appearing on right side of the page 34 of A/M/08 and are presently being assessed in this office, were also examined in this regard.
The various details submitted by the third parties were verified and it was found that most of the third parties were even not aware of Shri. Sohanraj Mehta. Some of the parties who knew Shri. Sohanraj Mehta 31 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 were the employee's like Shri. Jeevan Sanchethi and Shri. Prashant Bafna.
46. Relying on various decisions the AO held that the seized documents should be read as a whole. However, the assessee in the instant case is accepting a part of the seized document and disowning that part of the seized document which is inconvenient to the assessee. Therefore, if the said seized document read as a whole it leads to strong inference that the said seized documents indeed belong to the assessee and they depict unaccounted sale of Gutkha carried out by the assessee.
47. The AO observed that Pan Masala and Gutkha are considered to be most (excise duty) evasion prone commodities and for this reason, Govt of India tried to plug this evasion by ushering in a regime of Mandatory Compounded Levy of Excise on Pan Masala and Gutkha scheme w.e.f. 1-7-2008. As a result of this shift in excise duty regime, the excise duty liability of assessee company for AY 2009-10 for its Bangalore factory has risen from Rs. 43.70 crores as actually incurred in AY 2008-09, to Rs. 606 crore for A Y 2009-10 as is evident from the show cause notice issued by Excise Department to the assessee for its Bangalore factory.
48. Even, on scientific analysis of the probable production at Bangalore factory, based on the installed capacity of the packing machines, working hours and load factor as derived from Baroda factory of the assessee, it becomes evident that the Bangalore Factory of the assessee, which is set up newly (AY 2004-05 being the first year), ought to run atleast at the same load factor as that of Baroda factory of the assessee, which in fact is an old factory and 32 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the actual/probable quantum of production of Gutkha @ Bangalore has to be necessarily arrived at by adopting such a scientific working only i.e. at the least by adopting Baroda load factor to Bangalore installed capacity. When, such an analysis is made, it comes out that the Bangalore Factory has accounted production @ load factor of 29.81 % only whereas if accounted as well as unaccounted production as gathered from said seized documents is taken together, then the load factor of Bangalore factory's production comes to 62.39 % which is comparable with assessee's own factory at Baroda which shows average load factor at 53.13% for the relevant period.
BARODA FACTORY: Accounted only
Estimate Actual - Accounted
of ( Qty.)
machine
Assessment
based Accounted
Year Load Factor
production Accounted Sales
Production
based on Sales
installed
capacity
(kg) (kg) (kg) (Rs.)
. 2004-05 3,144,960 1,580,640 1,540,842 1,430,054,430 0.5026
2005-06 3,144,960 1,785,894 1,742,338 1,613,588,052 0.5679
2006-07 3,144,960 1,484,182 1,516,674 1,485,618,362 0.4719
2007-08 3,144,960 1,671,249 1,668,445 1,617,466,480 0.5314
2008-09 3,144,960 1,822,016 1,857,488,286 0.5828
1,832,888
TOTAL 15,724,800 8,354,853 8,290,315 8,004,215,610 0.5313
(Notes : Estimated Production is arrived at in Kgs. by considering machine packing capacity of 60 pouches/min, working hours of 8 hrs /day, working days of 25 days/month and considering actual no. of machines (146) for Baroda factory for the relevant period)
49. The AO observed that if accounted as well as unaccounted production, as gathered from said seized documents is considered for Bangalore factory as mentioned in Table below, the average load factor becomes comparable with Baroda factory of the assessee. 33
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 BANGALORE FACTORY: Accounted plus Unaccounted production considered Estimate of Accounted Unaccounted Production lI Total actual Load Factor machine Production Turnover of M/s. DIL based production at based on based on seized documents Bangalore accounted production maintained by Shri Sohanraj factory: plus based on Mehta Accounted unaccounted Assessment installed Production d production Year capacity plus unaccounted sale (Kg) (Kg) (Value in Rs.) (Qty in Kg.) (Kg) 2004-05 1,848,960 319,678 692,804,168 602,131 921,809 0.4986 2005-06 1,848,960 448,799 532,277,170 461,540 910,339 0.4924 1,026,08 2006-07 1,848,960 470,654 638,417,650 556,147 01 0.5553 1,449,23 2007-08 1,848,960 716,906 835,368,165 732,324 0 0.7838 1,459,60 2008-09 1,848,960 800,184 758,371,888 659,419 0.7894 3 5,767,78 TOTAL 9,244,800 2,756,221 3,457,239,041 3,011,561 0.6239 2 He noted that the abovementioned scientific analysis of production capacity based on availability of machinery and working hours prove that the Bangalore factory of the assessee was engaged in not only accounted generation but also unaccounted generation of Gutkha.
50. In view of the above the AO held that it is proved beyond doubt that the assessee company has suppressed turnover during the relevant year. The suppression of turnover of M/s Dhariwal Industries Ltd. for the period April, 2003 to Feb, 2008 is of Rs. 345.72 crores. However, entire turnover cannot be income. He noted that the seized documents contain details of unaccounted expenditure such as payments to various raw material suppliers like Shri Mallikarjuna (Supari/betelnut/arecanut), Shri. P C Jain (edible perfume) , Shri. Vimal Kumar Nahar (Cardamon), M/s Swati Menthol (Methol) etc. as well as other incidental expenses like 34 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 packaging (M/s Champion Packaging), transport Charges, hamali as well as unlawful payments like Sales Tax mamul etc. Therefore, the gross profit earned by the assessee out of such unaccounted turnover has to be estimated. He noted that the assessee has not paid any Excise duty on the said unaccounted turnover. Infact, one of the main reasons for suppression of turnover in the field of gutkha is high Central Excise duty. In view of the above, the AO held that the GP ratio has to be computed by excluding the excise duty payment as assessee company has not incurred any excise duty expense on the said unaccounted sales of gutkha. Therefore, applying the 'Gross- profit ratio excluding the excise duty payment' to Bangalore factory of the assessee company, the AO calculated the taxable profit for the relevant years, attributable to said unaccounted sale of Gutkha as under:
GP GP excludi Excise excluding Taxable ng the Accounted Excise Duty GP duty as a the Unaccounted Profit of expens Asst.Year Sales paid normal % of expense Turnover unaccounted e of Turnover of Excise sales Excise city duty (1) (2) (3) (4) (4) (5) (6) (7) (8) 2004-05 34,96,64,955 13,17,93,150 21.32 37.69 59.01 69,28,04,168 0.59 40,88,32,514 2005-06 48,4377,240 19,33,22,849 21.93 39.91 61.84 53,22,77,170 0.62 32,91,68,875 2006-07 53,77,31,832 21,99,87,873 20.28 40.91 61.19 63,84,17,650 0.61 39,06,49,874 2007-08 84,00,95,315 34,25,56,039 15.67 40.78 56.45 83,53,68,165 0.56 47,15,30,695 2008-09 94,25,24,178 43,72,29,103 13.86 46.39 60.25 75,83,71,888 0.60 45,69,12,736 315,43,93,520 132,48,89,014 345,72,39,041 205,70,94,693
51. In view of the above calculation the AO computed year wise break up of undisclosed income earned through suppression of turnover as under :35
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Taxable Profit of A.Y. unaccounted Sales (Rs.) 2004-05 40,88,32,514 2005-06 32,91,68,875 2006-07 39,06,49,874 2007-08 47,15,30,695 2008-09 45,69,12,736 TOTAL 205,70,94,693
52. The AO thus made addition of Rs.40,88,32,514/- to the total income of the assessee as his undisclosed income for the A.Y. 2004-05. Similar addition has been made to the total income of the assessee for various assessment years as per the table above as undisclosed income of the relevant assessment years.
53. The AO further held that since undisclosed income of the assessee is computed by estimating GP, therefore, it is deemed that all the expenses incurred for earning the undisclosed income have been allowed as deduction. Hence, any expenditure not allowable as per provisions of the Act, has to be necessarily disallowed. He noted from the said seized documents that M/s DIL has made certain unlawful payments to certain Government agencies such as Sales Tax Department, so as to facilitate as well as to keep its business of unaccounted sale of Gutkha, under wraps. He noted that Bundle no A/M/8 gives monthly summary of unaccounted sales and its deployment for the entire period, wherein ST mamul payment @ Rs. 5,00,000/- is mentioned per month, for most of the months. All these unlawful payments which are basically in the nature of bribe, are not allowable as expense, as per Explanation 1 to Section 37 of the I.T Act. He therefore disallowed the following unlawful expenses as unearthed from the seized documents u/s.37 of the I.T. Act 36 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 and added back to the income of the assessee for the relevant assessment years :
Disallowance u/s 37 AY (ST mamul) (Amt in Rs.) 2004-05 60,00,000 2005-06 60,00,000 2006-07 60,00,000 2007-08 52,25,000 2008-09 82,10,000 TOTAL 3,14,35,000
54. For the AY 2004-05, the AO disallowed Rs.60,00,000/- u/s.37 of the I.T. Act, 1961.
55. Before CIT(A) the assessee submitted that the addition of Rs.40,38,32,514/- made by the AO as undisclosed income from unaccounted sales of Gutkha is purely based on statement and seized materials belonging and found from Shri Sohanraj Mehta without there being any other corroborative and confirming evidences. Further, the statement of Shri Sohanraj Mehta is inconsistent and has been retracted. It was submitted that the AO has failed to produce appropriate and reasonable opportunity to cross examine Shri Sohanraj Mehta. Relying on various decisions it was submitted that the material seized from third parties and statement of third party do not carry any evidentiary value in the eyes of law, if the same is not corroborated with other justifiable evidences. It was submitted that the Chairman of the Company of M/s. DIL, Shri R.M. Dhariwal has repeatedly submitted that the seized documents found from the place of Shri Sohanraj Mehta are forged and intentionally created to mislead. It was submitted that the material seized from the place of Shri Sonraj Mehta lacks authenticity and has no relevance with the assessee.37
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
56. As regards the observation of the AO that the sale proceeds of unaccounted turnover of Gutkha has been applied/utilized by Shri Sohanraj Mehta on behalf of M/s. DIL, in respect of parties who are appearing in the right side of A/M/08 of page No.34 were parties having transactions with M/s. DIL or its Directors is concerned, it was submitted that Shri Sohanraj Mehta has prepared forged documents with an intention to make belief that the entire unaccounted business activity has been carried out on behalf of the assessee intentionally made to write the details of his parallel unaccounted business in the said seized material. It was submitted that the AO has miserably failed to provide a single confirmation from the alleged recipients of the money from Shri Sohanraj Mehta as is appearing on right side of the seized document bearing page No.34 of A/M/08.
57. As regards the statement of Shri S.Balan is concerned it was submitted that Shri S. Balan had filed a retraction affidavit. It was submitted that the assessee company had requested for cross examination of Shri S. Balan which was not offered and in its absence it would be improbable to rely on his statement. It was submitted that Shri M.B. Mallikarjun also retracted his statement vide letter dated 23-01-2010 and therefore the original statement recorded during the search proceedings seized to have any evidentiary value. It was submitted that the reliance on the statement of Shri Shital B. Patil, Area Sales Manager of RMD for Karnataka Region and affirmed by Shri K.A. Raghunath, Sales Supervisor of M/s. DIL has no evidentiary value since both of them have retracted their statements subsequently. 38
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
58. As regards the modus operandi analysed by the AO is concerned, it was submitted that the Chairman of the assessee company Shri R.M. Dhariwal has submitted that the impugned documents are forged and intentionally created to mislead the persons and the AO while deciphering the impugned seized material had failed to establish with corroborative and justifiable documentary evidence that the assessee company had infact carried out the entire business from procurement of raw material and making product and sales thereof. The AO failed to produce confirmation or other related evidence in respect of the alleged supply of raw material for carrying out alleged unaccounted turnover.
59. As regards the decoding of the figures in the chits is concerned it was argued that wherever instructions were given by Shri R.M.Dhariwal and his Son Shri Prakash M. Dhariwal as per the chits signed by them the amounts are mentioned in the chits and figures are same and there is no other meaning or requirement of decoding the same to read it for an amount beyond which it has been mentioned on those chits.
60. As regards the utilization of third party evidence against the assessee is concerned, it was submitted that the department has to first establish evidences against Shri Sohanraj Mehta in common conspiracy and thereafter establish that the assessee is a co- conspirator to design the common theory for effecting unaccounted turnover. The AO has completely failed to establish any of the allegations.
39
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
61. It was submitted that the AO is making routine and unsubstantiated statement with regard to the cases with the Central Excise and Sales Tax department indicating suppression of turnover. It was argued that in a huge business like that of the assessee there happens to be a fewer occasions where difference of opinion with regard to the interpretation of provision of law for which representation has been made by the assessee company. However, none of the case pertain to unaccounted suppression of production, clandestine removal or unaccounted turnover.
62. As regards the allegation of the AO on the issue of unaccounted purchase is concerned, it was submitted that none of the suppliers have confirmed of having received any consideration in excess of what has been recorded in the books of account of the assessee company. The assessee again reiterated the retraction made by Shri Mallikarjun of Shimoga and also the subsequent denials made by Shri Jeevan Sancheti for having made any payment to the said party through Shri Sohanraj Mehta in his statement recorded on 21-01-2010. It was submitted that the provisions of section 132(4A) r.w.s. 292C of the Act provides that where any books of account, other documents etc are found in the possession of any person, in the course of search, it may be presumed that such books, documents etc. belong to such person. The Chairman of the assessee company Shri R.M. Dhariwal has repeatedly submitted that the impugned seized documents are forged and intentionally created to mislead not only the assessee company but all others who refer to these documents and therefore the material seized and owned up by Shri Sohanraj Mehta has no relevance at all with the assessee company. It was submitted that since the AO has 40 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 placed reliance on the seized material of Shri Sohanraj Mehta and made it a base for making the addition, it is the primary responsibility and onus on the AO to justify through corroborative evidences that the allegation of unaccounted turnover are true and correct. However, no effort has been carried out by the AO and only the statements and seized material of Shri Sohanraj Mehta has been solely relied upon for making such huge estimated addition. Further, despite repeated requests for giving opportunity to cross examine Shri Sohanraj Mehta the same was not granted and therefore its non compliance tantamounts to contravention of law. It was argued that the seized material found from Shri Mittulal Jain and owned up by Shri Sohanraj Mehta does not have any linkage to the assessee and absolutely contrary to the provisions of section 132(4). The principle of estoppel as applicable to the statement of Shri Sohanraj Mehta and its subsequent retraction can be made applicable only to him and never be made applicable to a third party. In absence of any corroborative evidence the AO cannot make huge additions in the hands of the assessee on the basis of the sole and exclusive statement of Shri Sohanraj Mehta.
63. It was further argued that the seized document related to Shri Sohanraj Mehta's unaccounted business in some other brands of Gutkha. Further, the seized documents have not been seized from the assessee and have nothing to do with M/s. DIL, Shri R.M. Dhariwal or their group concern. Further, no unaccounted assets commensurate with the unaccounted income generated through such suppressed sales were found from the premises of the assessee. No evidence of suppression of income or turnover was found by any of the Government Agency such as Excise, Sales Tax, Income Tax etc. Relying on various decisions it was submitted that 41 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the addition made by the AO in the instant case is incorrect.
64. The assessee without prejudice to the above further submitted that the AO has erroneously determined the unaccounted sales in sum total for the block of assessment years at Rs.345.72 crores inspite of there being no complete records. Further, the adoption of the gross profit ratio of around 60% based on the presumption on prepositions of saving of Excise Duty on the unaccounted sales and not restricting it to the comparable book results on year to year basis on hypothetical formula based estimation of suppression of production without any corroborative and clinching evidences is also incorrect.
65. It was argued that the seized material found and owned up by Shri Sohanraj Mehta of Bangalore have not even remotely proved to have any links with the assessee company and there is no justifiable corroborative and reliable evidence. Therefore, the entire addition made is only on the basis of conjectures and surmises. The approach adopted by the AO in applying the hypothetical gross profit ratio by factoring in Excise duty percentage to the alleged unaccounted turnover amounts to presumption on presumption and that too without any basis which is against the principles of natural justice and equity. It was argued that the AO has determined the impugned additions in each of the assessment year by applying Excise duty percentage and as much as 55 to 60% of gross profit margin is considered while determining the unaccounted income of the respective assessment years. It was argued that resorting to enhancing the gross profit ratio by percentage of excise duty and applying the same to the undisclosed sales is absolutely incorrect. The entire addition made by the AO is 42 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 a blatant act of contortion created by the AO without realizing the responsibilities and duties that the AO has to determine the real income on which tax should be levied and collected and not on hypothetical estimated and unjustified computation of income. Relying on various decisions it was argued that the approach of the AO in resorting to hypothetical adoption of gross profit ratio is unheard of. It was argued that gross profit ratio, if at all to be adopted, has to be adopted at the rate at which the regularly maintained books of account show. It was submitted that in the past the AO in the same jurisdiction while estimating the unaccounted income on the same impugned seized material adopted the gross profit ratio as worked from the regularly maintained books of account of assessee company without considering any enhancement of the Excise duty percentage into the gross profit ratio. However, the said order has been the subject matter of 263 proceedings and the appeal is pending before the Tribunal. It was further submitted that estimation of unaccounted income for A.Y. 1992-93 was made on the basis of the gross profit ratio as worked out on the books of account adopted by the AO. It was accordingly argued that the addition made by the AO be deleted.
66. However, the Ld.CIT(A) also was not fully convinced with the arguments advanced by the assessee. He observed that the assessee for the first time sought opportunity to cross-examine Shri Sohanraj Mehta on 23-11-2011 and the assessee was offered the said opportunity vide letter dated 01-12-2011 as per which the assessee was requested to be present between 12th to 15th December, 2011 in the office of the DCIT, Central Circle-2(2) Bangalore who had conducted examination-in-chief of the witness sought to be cross examined by the assessee namely Shri Sohanraj 43 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Mehta. However, the assessee chose not to avail the said opportunity and instead requested that the said cross examination be conducted at Pune. Thereafter the assessee was again offered another opportunity vide letter dated 23-12-2011. However, the assessee again chose not to avail of the opportunity to cross examine Shri Sohanraj Mehta. The AO has also pointed out the legal impediment as per the Code of Civil Procedure that summons could be issued to a person only if he is within 500 kms of the distance from the issuing authority and if the witness/person concerned is 500 kms away, commission to be issued authorizing the other authority to cause and carry out necessary examination on his behalf. Since the assessee wished to cross examine Shri Sohanraj Mehta, a resident of Bangalore and since the AO at Pune was not empowered to issue summons and force his attendance at Pune, therefore, commission was rightly issued by the AO. However, the assessee did not avail the opportunity provided to him. In the remand proceedings the AO has reiterated similar facts as brought out in the assessment order. According to Ld.CIT(A), cross examination is a process by which truth is elicited and where the assessee asked for cross examination and it was not acceded to and the assessment order was passed, one might have expected to consider this a violation of principles of natural justice. However, in the instant case the assessee was provided opportunity to cross examine twice, therefore, the argument of the assessee that no opportunity of cross examination of Shri Sohanraj Mehta was granted for which there is violation of principles of natural justice is incorrect.
44
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
67. The CIT(A) further noted that search and survey action u/s.132 took place in the case of Shri Sohanraj Mehta on 10-10- 2009 whereas the search took place in the case of the assessee on 20-01-2010. During the course of search and survey action carried out in the case of the assessee he was confronted on the findings of the statements given by Shri Sohanraj Mehta. Thus, the assessee was always in knowledge of the entire transaction and also admitted to have given signed chits for the deployment of the money allegedly earned out of unaccounted sales. The search action had clearly revealed that the seized documents were not dumb documents and proved beyond reasonable doubt the entire unaccounted business chain of M/s. DIL. Therefore, the grievance of the assessee of not providing the cross examination of Shri Sohanraj Mehta is not a valid ground. In view of the above facts and relying on various decisions the CIT(A) rejected the ground relating to not giving of opportunity of cross examination.
68. As regards the contention of the assessee that additions were made on the basis of statement and seized material belonging and found from Shri Sohanraj Mehta and that too without any corroborative and confirming evidences is concerned, he held that during the course of search action u/s.132 and the post search enquiries and the statement recorded u/s.132(4) and 131 of the Act, Shri Sohanraj Mehta, being the author of the seized documents, had admitted to have written the documents in his own hand writing. A seized document has much more greater value than what it would have been otherwise. Shri Sohanraj Mehta has explained the entire modus operandi of the business notings and also the details made on the seized document written in Marvari Language by him makes 45 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the document a speaking one and the entries contained therein does not by way of any stretch of imagination be called a dumb document.
69. The Ld.CIT(A) also rejected the contention of the assessee that the seized document related to Shri Sohanraj Mehta's unaccounted business in some other brands of Gutkha. According to him the AO has stated that during the search action stock of only M/s. DIL was found with no stock of any other brand and which could be related to Shri Sohanraj Mehta. Shri Sohanraj Mehta had received commission income on sales of gutkha @ Rs.65/- per carton of unaccounted sales and the entire working of the commission earned by him has been recorded in the seized document. According to him, no one doing business on his behalf would derive commission. Further, Shri Sohanraj Mehta used to hand over money to the persons whose names appear on the chits given as per the directions of Shri R.M. Dhariwal/Prakash R. Dhariwal which leads to the inference that the unaccounted business of Gutkha was carried out as per the direction of Dhariwal. Further, both Shri R.M. Dhariwal and his Son Prakash R. Dhariwal in their statement recorded u/s.132(4) have admitted to have signed the said chit instructing the payment to the parties on their behalf. Further, it is an undisputed fact that Shri Sohanraj Mehta, through his firm Mehta Associates, acted as C&F agent of M/s DIL for the entire Karnataka Region. The raw material suppliers of M/s. DIL, employees of DIL and whose names appear on the seized document have categorically accepted that they knew DIL or Shri R.M. Dhariwal and not Shri Sohanraj Mehta. These factual findings clearly indicate that the entire unaccounted turnover as recorded in the seized document cannot pertain to Shri Mehta. He accordingly 46 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 rejected the contention of the assessee.
70. As regards the contention of the assessee that no unaccounted purchases were found the CIT(A) observed that the AO has brought on record substantive material which indicate that the unaccounted sales had matching purchases of raw material like betelnut from Shri Mallikarjun of Shimoga, edible perfurmes from Shri P.C. Jain, Mumbai, cardmon from Shri Vimal, Nahar/Jain of Hyderabad, menthol from Swati Menthol, Supari from Kishen Kumar Gupta and Bholenath Radhakishen of Delhi, Chemical from Ankush Garg/Prem brothers of Delhi. Similarly, for packing the unaccounted goods the assessee had paid unaccounted consideration to M/s. Champion packaging which is reflected in the seized material. For printing charges the payment has been made to M/s. Rajhans Enterprises. Therefore, the evidences gathered during the course of search overwhelmingly point towards utilisation of unaccounted purchase for unaccounted production and subsequent sales. Therefore, the contention of the assessee that no corresponding proof of unaccounted purchases was found is hard to be believed and therefore he justified the action of the AO in rejecting the same.
71. As regards the contention of the assessee that the seized documents have not been seized from him and have nothing to do with M/s. DIL, Shri R.M. Dhariwal and other group concern is concerned, he held that the seized documents, which have been admittedly written in the hand writing of Shri Sohanraj Mehta on which the signatures of both Shri R.M. Dhariwal and his son Shri Prakash R. Dhariwal are available and also admitted by them reveal both the unaccounted sales and unaccounted transactions. 47
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
72. As regards the contention of the assessee that unaccounted asset commensurate with the unaccounted income generated through suppressed sales were not found he upheld the observation of the AO that if generation of income is proved the corresponding asset or expenses need not be proved. According to him, since the search action at Bangalore was conducted on 10-10-2009 and the search action in the case of the assessee group took place on 20-01- 2010, i.e. after a gap of nearly 3 months, therefore, the assessee being on an alert could have shifted the movable assets. Further the AO noted that such unaccounted money has been deployed in real estate business of reputed builders. Further, the assessee has also paid an amount of Rs.32.89 crores as on-money for purchase of shares of M/s. CC Constructions from Shri Sitaramaiah, MLA. Therefore, he held that it is not necessary that matching unaccounted assets or expenses should be found for generation of such huge income.
73. As regards the contention of the assessee that no evidence of suppression of income/turnover were found by other Government Agency such as Excise, Income Tax is concerned, he observed that the seized document do indicate payment of Rs.5 lakhs per month by the assessee to the Sales Tax Department which prima-facie indicate the assessee managing the Sales Tax Department through systematic payment of bribe so as to conceal the unaccounted sales thereby suppressing the turnover.
74. As regards the contention of the assessee that the statements given by various persons were retracted is concerned, he observed that in the first instance the said persons admitted and substantiated the statement of Shri Sohanraj Mehta u/s.132(4) 48 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 explaining the seized document and after having been said the truth in their 132(4) statements the aforesaid persons, who were still under the influence and control of the assessee, for obvious reasons depending for their livelihood and business retracted their statements.
75. As regards the contention of the assessee that no evidence has been found to show that the transactions were carried out by him and that the AO has assumed the amounts reflected to be the income of the assessee is concerned, he held the same to be not acceptable. According to him, there are clear notings and admission of its author explaining each and every noting recorded on the seized documents and also explaining the modus operandi of the business and the manner in which the amounts were given to the persons including the assessee cannot be regarded as dumb document. According to him, no addition can be made on the basis of dumb document. However, in the present case the document found and seized are not dumb documents as they confirm specific details of the sales made by Shri Sohanraj Mehta, C&F Agent of Dhariwal group and also deployment of money as per the instruction of Shri R. M. Dhariwal and his son Shri Prakash R. Dhariwal. He also rejected the contention of the assessee that documents seized cannot be the basis for addition and the presumptions cannot be used against it.
76. So far as the argument of the assessee regarding the manner of estimation of the unaccounted sales and adoption of gross profit is concerned, the Ld.CIT(A) directed the AO to adopt the profit rate of 30% on the unaccounted sales by observing as under : 49
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 "5.6 In the light of the law stated above, let us now examine and evaluate, the evidence produced by the assessee, evidence required by the AO, relevant material which the AD has gathered, while making assessment of the total income of the assessee as required under section 143(3)(ii) of the Act. Let us first see how excise duty comes into play. Central Excise duty is an indirect tax levied on those goods which are manufactured in India and are meant for home consumption. The taxable, event is 'manufacture' and the liability of central excise duty arises as soon as the goods are manufactured. It is a tax on manufacturing, which is paid by a manufacturer, who passes its incidence on to the customers. As incidence of excise duty arises on production or manufacture of goods, the law does not require the sale of goods from place of manufacture, as a mandatory requirement.
Normally, duty is payable on 'removal' of goods. The Central Excise Rules provide that every person who produces or manufactures any 'excisable goods', or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rules or under any other law. No exisable goods, on which any duty is payable, shall be 'removed' without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided.
5.6.1 It is, therefore, clear that the excise duty becomes payable on removal of goods for sale. Even where the goods are clandestinely removed, the obligation to pay the excise duty does not get extinguished. When the detection of the clandestinely removed goods takes place, the concern of the Excise Department is restricted to the collection of the excise duty evaded and its consequences thereof on removal of such goods. On the other hand, the concern of the Income tax Department is restricted to the collection of income tax evaded and its consequences thereof on sale of such goods. The role of each of the Departments varies. Under the Act, the excise duty collected on goods sold under the Excise Laws is allowable, irrespective of the previous year in which the liability to pay the excise duty was incurred, in computing the income of that previous year in which such excise duty is actually paid, as per section 43B(a) of the Act. But it is to be remembered that the collection of excise duty on sale of goods is the sine qua non to allow excise duty when actually paid. Therefore, when excise duty is not shown as a part in the sales, whether made in a clandestine manner or not, there cannot be a question for its consideration in computation of income. That being the law, the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales, and furthermore, unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold by the assessee and that too has not been disclosed. Therefore, only a net rate of profit can be applied in respect of the goods sold outside the books of account. This is the view expressed by the courts, President Industries (2002) 258 ITR 654 (Guj); Sambhav Textiles Ltd. (2010) 328 ITR 444 (P&H) and other judicial authorities. The Gujarat High Court in the case of CIT Vs President Industries. (supra) has held as under:
"In the absence of any finding or material that there was suppression of investment in acquiring the goods which are subject of undisclosed sales, Tribunal was justified in holding that entire undisclosed sales could not be added as income of assessee but 50 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 addition could be made only to the extent of estimated profits embedded in sales for which net profit rate was adopted; no referable question of law arises."
5.6.2 In view of the established law, the mandate is that only a net rate of profit can be applied in respect of the goods sold outside the books of account. Therefore, it is obvious that in the light of the material on record the Assessing Officer's approach in arriving at the gross profit ratio in the present case is not proper and correct. Even in the case of suppression of sales and evasion of excise duty detected in the case of Chetna Zarda Company Vs DCIT (2012) 144 TT J 401 (Mum), the addition was made only of gross profit, apart from the fact that sales were kept outside the books by unlawful means. In the case of CIT Vs Gurbachan Singh J. Juneja (2008) 302 ITR 63 (Guj.), wherein undisclosed sales have been noticed the issue was whether the entire sales so noticed in the loose papers found during search or only gross profit could be added on such sales. It was held that since no undisclosed investments over and above the income estimated by gross profit method was found, the order of the Tribunal limiting the estimate of profits on such sales was upheld. The Assessing Officer by increasing the gross profit rate in essence has added the excise duty allegedly evaded by the appellant company which cannot be done by way of addition to the gross profit. Under the Act the excise duty unpaid can be added only u/s 43B. In the case of V R Textile (2011) 11 ITR (Trib) 476 (Ahd), the Gujarat High Court did not dispute income as ,well as sales made outside the books of account and as the assessee had paid excise duty on the unaccounted sales, it was held that only gross profit addition could be made. In the case of Rishabh Polymers (P) Ltd, IT(SS)A No.43/Hyd/05 order dated 10-12-2010, the ITAT, Hyderabad held that the assessee could not be considered to have earned profit equal to the undisclosed sale proceeds and the CIT(Appeals) is justified
-in considering a profit of 11 % on unaccounted sales as undisclosed income.
5.7 Thus the A.O's approach in arriving at the gross profit ratio is not proper and correct in view of the facts and the law as it stands. The cases relied by the appellant and also the discussion that followed reflecting consistent approach of courts and tribunals in adopting gross profit ratio of the book results without considering the evasion of excise duty has to be kept in mind in deciding the issue of G.P. During the course of the search and, thereafter, no evidence against the appellant of evasion of excise duty has been found. The excise department has not passed on any information of adverse nature. In the earlier search actions against the appellant, the additions on account of unaccounted sales/investment was made but the fact that the assessee was evading excise duty could not be established. Even in the present search action conducted at Mumbai, Hyderabad, Bangalore, Pune, Vadodara etc no evidence or any material document have been found which could remotely indicate the evasion of excise duty by the appellant. The conclusion drawn by the Assessing Officer in determining G.P. by factoring in excise duty element is not understandable and r in any case has remained unsubstantiated that the assessee is indulging in evasion of excise duty.
5.8 I am convinced that .the estimation of gross profit margin is to be based on the evidences available with regard to the gross profit earned by the appellant. However, the said estimation can be increased or reduced on the basis of justifiable evidences available to give effect to 51 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 such increase or reduction and in its absence the gross profit result as arrived at year after year in the same set of fact should be made a basis of estimation of unaccounted income. In the present case as the appellant is manufacturing goods which have been accounted for in its books of account as also manufacturing goods which are sold outside the books of account, the G.P. rate ought to be increased further on the ground that the margin of the profit in the unaccounted sales is likely to be higher as the risk factor is higher. The expenses directly related to the unaccounted sales which are matching in scale with the accounted sales have already been claimed by the appellant. The purchase invoices were in cash and unverifiable. There was no occasion to examine overvaluation of opening stock or undervaluation of closing stock. Hence it is a case of applying a higher G.P. rate. The profit arising out of the unaccounted sales needs to be taxed along with the initial investment made for the said transaction. If the G.P. alone is taxed, the initial investment will remain untaxed. The year-wise details are as under:
GP Percentage Unaccounted Sr. No. A.Y. Accounted Sales as per Sales books
1. 2004-05 21.32 34,96,64,955 69,28,04,168
2. 2005-06 21.93 48,43,77,240 53,22,77,170
3. 2006-07 20.28 53,77,31,832 63,84,17,650
4. 2007-08 15.67 84,00,95,315 83,53,68,165
5. 2008-09 13.86 94,25,24,178 75,83,71,888 5.9 The average G.P. shown by the appellant for these years is 17.89% highest being 21.93% and the lowest being 13.86%. The items sold being gutkha as a sale with a higher margin of profit is without dispute.
To meet the ends of justice it is thought to rationalize the G.P. rate at the upper level by increasing the normal G.P. reflected by the appellant in the respective year(s). The Assessing Officer is directed to compute the unaccounted income by applying the gross profit at 30% on the unaccounted sales for all the assessment years."
77. Aggrieved with such part relief granted by the CIT(A) both the Assessee as well as the Revenue are in appeal before us.
78. The Ld. Counsel for the assessee submitted that there was a search on the premises of Shri Mithulal Jain at Bengaluru on 09th October, 2009 wherein certain loose papers [samples on pages 41 to 106 and 33 to 37 in PB - IV] were found. He was searched along with Shri. Sohanraj Mehta, Bengaluru, who was the C & F Agent of the assessee Company for Karnataka Region. Referring to Page Nos.30 to 47 of the paper book, Volume-I, he submitted that Shri 52 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Mehta, in the course of search, owned up all these papers as belonging to him and he gave statement u/s 132(4) accepting the ownership of these papers. At that time he stated that these papers reflect the transactions of cash given to various persons as per the instructions of Shri. Prakash R Dhariwal and Shri Rasiklal Dhariwal, Directors of the assessee Company. He further stated that these papers are in his handwriting wherein the receipts of Gutkha consignments are written and the payments mentioned therein are as per the instructions from Dhariwal.
79. He submitted that a search u/s.132 of the I.T. Act was conducted on the assessee on 20-01-2010 and no incriminating documents were found. No unaccounted stock or unaccounted purchases/expenses /sales were found. There was not a single unaccounted sale/purchase voucher found during the search. Thus, during both the searches i.e. at Mehta's place and the assessee's place, there was no direct evidence found in the form of any unaccounted voucher or any unaccounted sale receipt or any unaccounted stock. What was found were the incriminating papers written and maintained by Shri Mehta and that too, they were found during the search on Mehta and nothing was found during the search on the assessee.
80. Referring to Page Nos. 53 to 85 of the paper book Volume-IV he submitted that Shri Rasiklal M Dhariwal, Chairman of the assessee Company, was asked during the course of search at his premises about the papers found with Mr. Mehta. In that context he clearly stated that the letters were written by him to Mr. Mehta for giving certain sums to various persons but he did not accept the decoding done by Mehta in his loose papers by adding two zeros to 53 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the figures in this letters and further he did not accept the accounts maintained by Mehta as belonging to the assessee. Referring to Page No.40 of paper book Volume-IV he submitted that the letters written by Dhariwals to Mr. Sohanraj Mehta were during the period June 2006 to Oct. 2007 and the total sum of the amounts to be given to various persons as per these papers amounted to Rs.61,04,816/- only. Referring to Page 115 of the paper Book Volume-II he submitted that Mr. Dhariwal had also demanded the cross examination of Mr. Sohanraj Mehta.
81. Referring to the copy of the assessment order he submitted that the AO has held that all these papers reflect the unaccounted sales made by the assessee company through Mehta for the period from 2003 to 2008. He estimated the unaccounted sales for all these years i.e. starting from A.Y. 2004 - 05 to A.Y. 2008 - 09 and taxed the G.P. thereon as per page 73 of his asst. order for A Y. 2007 - 08. Roughly, he estimated the G.P. around 60% of the sales.
82. Referring to the order of the Ld.CIT(A), he submitted that the CIT(A) held that these sales as per the papers found with Mehta were made by the assessee company as stated by Mehta. However, he reduced the percentage of G.P. for all these years to 30% (page 107 of CIT(A) order for A.Y. 2007 - 08 and accordingly, reduced the addition made by the A.O.
83. Referring to Para No.3.4 on Page Nos. 62 to 66 of the order the Ld. Counsel for the assessee drew the attention of the Bench to the important findings given by the AO for holding that the seized papers contain unaccounted suppressed turnover of Gutkha belong to the assessee company. Referring to statement of Mr. Sohanraj Mehta, placed in the paper book he submitted that the statement 54 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 of Mr. Sohanraj Mehta that these papers reflect transactions of the assessee is not believable for the following reasons (As per written submission filed) :
"a. On pages 15, 16, 17, 18, etc, etc of P.B. I, he states that the transactions noted in the seized papers relate to the assessee. On page 18, he states that he has to hand over the amount written in the slips to the bearer of the slips and he does not know the person who is the bearer of the chit. The chits are the evidences for the payments made by him out of the unaccounted income of the assessee and these chits are received from the directors of the assessee. On page 18, he states that he gets the commission of Rs.50/- per box of gutkha sold from the assessee. He admits that the papers are written by him. On page 43, he admits that he has given loans to various persons on interest and such interest income is not disclosed by him in the return. Further, in the statement he disclosed an additional income of Rs. 2 Crs on account of the unaccounted turnover of the assessee company for all these years (page 19 PB I). On one side, in the search on the assessee, no unaccounted investment, income was found to be pertaining to the assessee but on the other hand, Mehta disclosed additional income and admitted unaccounted investment. Does it mean that all these transactions are of Mehta and in order to get away from huge tax liability, he floated the story that the papers indicate the transactions of the assessee. On page 48 to 52, he gives a retraction on page 49 wherein he makes a request that his statements should be ignored and further he states that he had given the papers to Mithulal for secrecy and consolidation.
b. Again on 10.08.2011, on page 53 to 58, he states that the papers pertained to assessee. On 03.12.2011, on page 59, he states that he retracts from all his earlier statements and further that he is prepared to appear before the A.O. at Pune.
c. The assessee asked for cross examination of Mehta at Pune (page No. 115 & 116 of p.b. II) as the assessee's Chairman Shri Rasiklal Dhariwal was not able to travel out of Pune because he was unwell. Secondly, Mrs. K. R. Dhariwal was also hospitalised and she expired in December, 2011. (Refer page 41 & 42 of PB II). Despite, these facts the A.O. did not give the cross examination opportunity at Pune but instead, he asked the assessee to take Mehta's cross examination at Bengaluru. In view of his above retraction and despite the fact that he has offered to attend at Pune for cross examination, the A.O. having not called him at Pune, his earlier statements cannot be made use of against the assessee. Secondly, if Mehta changes his statement from time to time, the assessee submits that his statements are not reliable and they cannot be relied upon against the assessee by the dept.
84. Referring to statement of Mr. Dhariwal, copies of which are placed at paper book Pages 60 to 134 of paper book Volume-I he submitted that Shri Rasiklal M. Dhariwal, Chairman of the assessee company owned up the chits sent by him or Shri Prakash Dhariwal 55 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 to Mehta from time to time about making payments to various persons (page 61) but on page 62, he completely denies the decoding of the figures in the chits as alleged by Mehta. He confirmed that Mehta was a cheat. Again he was asked about the decoding alleged by Mehta and he denied it consistently in his statement (page 64, 67, 70, 72, 73, 74, etc. PB I) He confirms that his relations with Mehta are bad (62, 65, 82, etc. PB I). Accordingly, Shri Dhariwal constantly denied the decoding and other loose papers found with Mehta and right from the search, he confirmed that his relations with Mehta were bad. After the search, the assessee cancelled the C & F Agency of Mr. Mehta (Page No. III and 112 of Paper Book IV). The assessee explained that the reasons why the chits were sent to Mr.Mehta for making payments to various persons was that substantial sales tax refunds of the assessee were received by Mehta and he was not making the payments to the assessee. Secondly, some persons known to the assessee required small amounts at Bengaluru and that is why the assessee asked Mehta to make these payments. Mehta could not produce any evidence to support his interpretation of the papers written by the assessee to him that all these figures were coded figures. No evidence was found during the searches to support Mehta's contention that assessee asked him to advance such large amounts (coded) to various persons. Thus, the assessee right from beginning refuted Mehta's story.
85. As regards the statements of third parties are concerned the Ld. Counsel for the assessee referring to pages 138,141,153 and 176 etc. of Paper Book Volume-I submitted that some of the persons whose names figured in the loose papers were interrogated by the dept. such as Sheetal Patil, K. Raghunath, Mallikarjun and Balan. They were searched and under tension they admitted the notings in 56 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the papers but later on, they all retracted and submitted that the papers do not reveal any unaccounted money of the assessee. Similarly, no evidence was found with them that the assessee advanced such large amounts to them. Thus, they cannot be considered to be witnesses for the dept. against the assessee in view of the above facts. Referring to Pages 181 and 184 of paper book Volume-I he submitted that some of the third parties, whose names figured in the loose papers, in their statements have consistently denied that they have received any money from the assessee as per the loose papers. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Saif Ali Khan Mansurali Vs. ACIT reported in 30CCH 0509 he submitted that the Tribunal in the said decision has held that no addition can be made in the hands of the assessee on the basis of a piece of paper found and seized during the course of search at the premises of third party and on the basis of statement of director of the search party which contain many contradictions.
86. He submitted that during the searches, no evidence of unaccounted sales, unaccounted purchases or unaccounted stock was found at the assessee's premises. Even during the search, on Mehta, not a single unaccounted bill for purchases, sales made by the assessee was found at his premises. In case, the assessee has been making unaccounted sales of Rs.300 Crs approximately as estimated by the A.O., some evidence should have been found during the searches. The fact that not a single unaccounted purchase voucher / sale voucher was noticed is sufficient indication that no such unaccounted business was made by the assessee. No transportation receipt / bill was found indicating transportation of unaccounted stock. For effecting these unaccounted sales and 57 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 purchases, the assessee would have been required to engage at least 700 to 800 trucks in this period but not a single unaccounted bill / voucher or receipt was found during the searches for such truck booking. No record of unaccounted production was found for any day for factory at Bengaluru. No evidence for transporting such huge cash from Mehta to various persons is found. No evidence about Mehta reporting unaccounted sales / production to the assessee was found during the searches. The assessee's product Gutkha is sold in small packets. It is not given in loose form. No record of any unaccounted purchases of packing material was found.
87. The Ld. Counsel for the assessee submitted that the assessee normally sells production from Bangalore factory to various C & F Agents in Tamilnadu, Andhra Pradesh, Kerala, South Maharashtra. No record about these agents taking the stock from Mehta was found. No proof that these persons paid money to the assessee or Mehta was found. He submitted that if all these sales are made through Mehta in these territories, the above C & F Agents would have objected. Secondly, no evidence that Mehta maintained the ware houses in various states was found. Thus, if what Mehta says is correct, these unaccounted sales can be made by Mehta only and that too, in his region i.e. Karnataka. Any other presumption is not possible. He submitted that the assessee pays commission to Mehta on sales made by him in Karnataka. Why should he make commission payment to him on sales as per the loose papers. There is no reason. If the sales are made in other states, the assessee would make payment of commission to other C & F Agents and not to Mehta. Accordingly, Mehta's contention that he received commission on all these sales of more than Rs.300 Crs as per the loose papers is not correct and secondly, there is no reason for the 58 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 assessee to ask Mehta to make these sales to other states. Assessee could have made these sales directly to the respective C & F Agents. Hence, Mehta's contention is not correct. He submitted that the accounted sales in Karnataka are much lesser than these presumed sales and it is beyond logic that the assessee would be selling so much of stock in Karnataka only. He accordingly submitted that it is difficult to presume that the assessee sells unaccounted stock only in Karnataka and not in any other state in the country.
88. Referring to copy of the order of the Tribunal in the case of Mr. Vinit Ranawat he submitted that some of the persons like Ranawat were searched and no incriminating evidence was found against the assessee or such persons during the search. If assessee had given a sum of Rs.21 Crs. to Ranawat, some evidence could have been found during the search at his place that he made some unaccounted investment or he has given such big amounts to third parties. As nothing was found, it implies that Ranawat did not get a sum of Rs.21 Crs from Mehta. He submitted that if assessee has given such large amounts to these persons as loans since evidence of charging any interest, or taking any guarantee, security should have been found. However, no such evidence was found. Therefore, it is difficult to imagine that such large amounts are given by the assessee as loans without charging any interest or without taking any securities from these persons. He submitted that no evidence of any request letter from these persons, no investments or no record of any repayment was found from the various persons to whom the alleged funds have been given. He submitted that if assessee wanted to give such large amounts to people like Ranawat, Pradeep Runwal or Balan who are in Mumbai or Pune, he would have given them from Pune instead of asking them to take money from 59 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Bengaluru. Some of the parties who name appear on these papers have no business relation with the assessee. It is difficult to accept the contention that these persons had to pick up the cash all the way from Bangalore. As it is, the loose papers indicate money given by Mehta to Dhariwal. He could have given out of such amounts to these persons. Hence, the story of Shri Mehta does not fit in well when the theory of probability is applied.
89. The Ld. Counsel for the assessee submitted that all notings in Mehta's papers are in round figures. If they reflect unaccounted purchases, they would have been in some odd amounts also. The accounts written by Mehta are written for the period from Jan. 2003 to Feb. 2008. However the payment chits written by the assessee to Mehta are for the period June 2006 to Oct. 2007. No letters for the balance period were found during the searches. What is not found is presumed to be not there. Hence, Mehta has not corroborated that the assessee has verified all these loose papers found with him.
90. He submitted that no evidence was found that the figures mentioned by the assessee in his letters to Mehta are coded figures. No evidence was found that the assessee has checked, signed and okayed the notings of Mehta. Thus, Mehta has not maintained these figures for the purposes of reporting to the assessee or for purposes of giving account of unaccounted transactions to the assessee. He submitted that Mehta's papers are for the period from Jan. 2003 to Feb. 2008. The search on Mehta was conducted on 09.10.2009. For the period from March 2008 till the date of search, no such loose papers are found. No reason was attributed. If assessee was having such roaring unaccounted business, there is no reason that it has suddenly stopped doing this business from March 2008 onwards. 60
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Secondly, if the inference is that Mehta has already given the account for this period to the assessee and therefore, he destroyed the papers, there is no reason as to why he should have maintained the papers for the old period. This defies logic.
91. Referring to the decision of Hon'ble Supreme Court in the case of Sumati Dayal reported in 214 ITR 801 and Durga Prasad More reported in 82 ITR 540 where it has been held that taxing authority should look into surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities, he submitted that in view of the above contentions, the notings in the papers maintained by Mehta do not appear to be pertaining to the transactions of the assessee.
92. The Ld. Counsel for the assessee referring to paper book page Nos. 195 to 203 of paper book Volume-I drew the attention of the Bench to letters received from various parties that duplicate products under the brand name of the assessee's are sold in the market. Referring to pages Nos. 232 to 270 of paper book Volume-I he submitted that the assessee has written letters to Govt authorities about the duplicate products sold under the assessee's brand name. He accordingly submitted that the papers found with Mehta may be reflecting such unaccounted sales by Mehta of Gutkha under the assessee's brand name and in order to throw the burden of financial liability on the assessee, he stated that these transactions are of the assessee.
93. The Ld. Counsel for the assessee drew the attention of the Bench to page Nos. 204 and 208 of paper book Volume-I which are the summarized statements of receipts and payments for the particular period. He submitted that according to Mr. Mehta page 61 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 204 is the statement for the period 02.04.2003 to 31.08.2006. However, there is no signature of confirmation by the assessee on this paper. If this paper was written by Mehta for the benefit of the assessee, so as to give him the details of his account, he should have obtained the assessee's signature on this paper as a token of confirmation. Thus, there is no evidence that the loose papers belonged to the assessee.
94. The Ld. Counsel for the assessee submitted that the assessee is liable to pay excise duty on its production in the factory at Bengaluru. It had maintained quantitative stock account, RG 1 register for the production and till the date of search, no discrepancy was noticed by excise dept. Thus, there being no discrepancy noted by the excise dept. in the production record of the assessee, no addition on the basis of such unaccounted estimated sales can be made in the hands of the assessee. Referring to page No. 124 of paper book Volume-IV, he submitted that the assessee has given the list of the dates on which the excise officers visited the factory at Bengaluru and no discrepancy was noticed by them. 94.1 Referring to the decision of the Commissioner, Central Excize, dated 31-12-2015 he submitted that the Commissioner has given a finding that there is no sign of excess consumption of raw material or packing material or excess use of machine or excess manufacturing of Gutkha. Therefore, once there is no unaccounted production, the question of unaccounted sale does not arise. He submitted that if the goods manufactured are excisable and the excise authority has not found any discrepancy and the assessee has maintained the records, no addition can be made on account of unaccounted production / sales in the hands of the assessee, For 62 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the above proposition, he relied on the following decisions :
CIT v. Mascot Tools Allahabad H.C. - page 166 CIT v. Sanjay Oil Cake Industries Gujarat H.C. - Page 174 Hindustan Poly Amides, IT AT Mumbai - Page 188
95. Referring to the following decisions he submitted that presumption u/s l32( 4A) applies to the person who is searched and in whose custody the papers are found. Thus, loose papers found with Mehta cannot be presumed to be belonging to the assessee or reflecting the business transactions of the assessee.
Addl. CIT v. Lata Mangeshkar [97 ITR 696 (Bom)] Prarthana Construction v. DCIT [70 TTJ 122] Straptex (India) P. Ltd. v. DC IT [84 ITD 320] Amarj it Singh Bakshi v. ACIT [86 ITD 13 (TM)] ACIT v. Thakkar Developers [ITA No. 5811PN/08 (Pune)] ACIT v. Kishorlal Balwantrai and others [17 SOT 380 (Chd)]
96. Referring to the decision of the Tribunal in the case of Shri Vineet Ranawat he submitted that the Tribunal in the said decision has held that the persons whose names figured in Mehta's papers, no addition could be made in their hands on the basis of the papers found with Mehta. Similarly, on the same logic, no addition can be sustained in the hands of the assessee on the basis of the papers found with Mehta.
97. The Ld. Counsel further submitted that there is no corroborative evidence found to indicate that the transactions as per the loose papers with Mehta were of the assessee. Therefore, addition cannot be sustained on the basis of these loose papers in the hands of the assessee. For the above proposition he relied on the decision of the Tribunal in the case of S.P. Goel v. DCIT reported in 82 ITD 85 (TM). He accordingly submitted that the addition sustained by the CIT(A) should be deleted. 63
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
98. So far as the departmental appeal on this issue is concerned, he submitted that the CIT(A) has given various case laws in para 5.3 to 5.9 of his order to support that the G.P. ratio has to be adopted as per the books on the unaccounted sales. He submitted that the assessee relies on those case laws to support the contention that if at all, GP is to be estimated on the unaccounted sales, it must be at the rate which is as per books on accounted sales. CIT(A) has also stated that there is no evidence found in the papers of Shri Mehta that the assessee was collecting the excise duty on the sales mentioned therein. Thus, there being no evidence that the assessee collected excise duty on the unaccounted sales, the G.P. around 60% adopted by the A.O. is not justified. He submitted that without prejudice to the assessee's main contention in its appeal that no addition is warranted on account of unaccounted profits based on the papers found with Mehta, the assessee submits that if at all, addition is made, the GP should be taken as per books and not as per the estimate made by the A.O.
99. The Ld. Departmental Representative on the other hand heavily relied on the order of the AO. He submitted that Shri Sohanraj Mehta is a C&F agent of the assessee company for the State of Karnataka. The initial admission of Shri Sohanraj Mehta that seized documents belonged to the appellant company, is important because same is duly witnessed by the Panchas during the course of search. First response on spot would always be true. Referring to the decision in the case of Kantilal C Shah Vs. ACIT reported in 14 taxmann.com 108 he submitted that the Tribunal in the said decision has held that statement recorded u/s. 132(4A) is an evidence by itself and any retraction should be supported by 64 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 strong evidence to show that there was coercion or undue force. This view is also supported by following decisions:
(i) Carpenters Classics (Exim) Pvt. Ltd Vs. DCIT (108 ITD 142) (Bangalore ITAT)
(ii) Hiralal Maganlal & Co. Vs. DCIT (96 ITD 113) (Mumbai ITAT)
100. Referring to the decision in the case of Hotel Kiran reported in 82 ITD 453 (Pune ITAT) he submitted that the Tribunal in the said decision has held that where during the course of search, assessee made some admission, he debars the authorized officers from making further investigation. Therefore, in their wisdom the Legislature has provided that such statement can be used as evidence and the assessment can be made on that basis.
101. Referring to the decision of Hon'ble Supreme Court of India in the case of Surjeet Singh Chhabra Vs. Union of India he submitted that the Hon'ble Apex Court has held that the Revenue officials are not Police officers and the confession, though retracted, is an admission and would bind the petitioner.
102. Referring to the decision in the case of T.S. Kumarasamy Vs. ACIT reported in 65 ITD 188 (Madras), he submitted that the Tribunal has held that ITOs are not police officers, they do not use unfair means or third degree methods in recording statement on oath. Therefore such statements and oaths cannot be retracted unless it is proved by legally acceptable evidence that such admission/confession or oath was not voluntarily tendered or was under coercion or duress. In the present case no such evidence has been produced or even shown to have existed.
65
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
103. Referring to the decision of Hon'ble Punjab and Haryana High Court in the case of Rakesh Mahajan Vs. CIT reported in 214 CTR 218 he submitted that the Hon'ble High Court has held that "it is well settled that admissions constitute best piece of evidence because admission are self-harming statements made by the maker believing it to be based on truth. It is well known that no one will tell a lie especially harming one's own interest unless such a statement is true."
104. He submitted that the retraction of Sohanraj Mehta dated 23.12.2009 was contradictory. Nowhere he has been able to prove that confession U/s 132(4A) was given under duress or threat, or he was disturbed or not in proper state of mind. His version that he was dealing in other brands was simply an eye-wash. He did not furnish the names of vendors to whom the income in question was passed on. In the second last paragraph of his letter dated 23.12.2009, he reached an inference that owing to the nature of trade and not being sure of said business associates whose names are found in seized records, it is difficult to say that who is liable to be taxed in respect of seized documents.
105. The Ld. Departmental Representative submitted that in response to summons issued by DCIT, Central Circle-2(2), the statement of Mr. Sohanraj Mehta was recorded on 10-08-2011 where he again confirmed that he had retracted at the behest of Dhariwal Industries Ltd. and what he had said during the course of search was true. In response to notice u/s. 153A, he has duly offered to tax commission income of Rs.1,52,83,320/- in his return of income. Moreover documentary evidence is valuable as per section 91 & 92 of Indian Evidence Act as compared to oral evidence. For 66 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the above proposition he relied on the decision of Hon'ble Punjab & Haryana High Court in the case of Paramjit Singh Vs. ITO reported in 323 ITR 588. He submitted that the Hon'ble Bombay High Court in case of CIT Vs. Omprakash Jain reported in 24 DTR 157 has observed that the test of evidentiary value of the oral evidence has to be borne in mind and documentary evidence if genuine must prevail over the oral statement.
106. The Ld. Departmental Representative referring to the seized documents submitted that these are day to day accounts for sale of Gutka as well as appropriation of funds. From these day to day accounts, monthly summary was drawn. Thereafter these are summarized for the entire years (April,2003 to August,2006 Total unrecorded sales 218 crores). Further for the period i.e. September,2006 to February,2008, total unrecorded sales were shown at Rs.12 7.72 crores. Sohanraj Mehta has explained the entire modus operandi of this unaccounted business.
107. He submitted that there is no evidence that he was doing some duplicate/parallel business of Gutka/Pan Masala. He has no setup or infrastructure to manufacture the same. He does not have financial capacity to carry out such business. The seized documents found to be in his own handwriting contain unrecorded sales and unrecorded payments. The seized documents can be analyzed in two ways. The chits A/M/29 for making payments to various persons namely Mallikarjun for betelnuts, P C Jain for perfumes, Vimal Nahar for Cardamom, M/s Swathi Menthol for menthol, K K Gupta for supari, M/s Champion Packaging for packing etc. It is not in dispute that these chits are signed by Prakash Rasiklal Dhariwal (PRD) or Rasiklal Manekchand Dhariwal (RMD). These persons have 67 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 supplied goods to the assessee company for its Bangalore unit so there are matching purchases. The money is also paid for real estate investment found recorded in the books of the assessee company and employees like Jeevan Sancheti. As per seized documents (A/M/08 page 34) money is also paid to Prakash Rasiklal Dhariwal (PRD) or Rasiklal Manekchand Dhariwal (RMD). Sohanraj Mehta has been paid commission on these unrecorded sales. There are monthly payments to Sales Tax Officials for these unrecorded sales (A/M/8). That is why they have not drawn an adverse inference against the appellant. Even the brands big, mini and 2 gm pouches and their prices match with the value shown in the books of account of the appellant company. The AO has dealt with this issue on page 27 of the assessment order.
108. The Ld. Departmental Representative submitted that the quantum of payments as per these chits after decoding is Rs.72.02 crores (two zeros have to put up after each figure). The AO has dealt with this issue of decoding on pages 19 to 25 of the assessment order. These figures are then carried forward to page 34 of A/M/08. It is not in dispute that these pages show recorded sales as shown in the books of account (mentioned as DIL). The unrecorded sales of Rs.345.72 crores are not found recorded anywhere (mentioned as "A"). There can't be any contra confirmation of the unrecorded sales or expenses for mutual benefit.
109. He submitted that it can't be said that the appellant was not provided any opportunity to cross-examine Sohanraj Mehta. The AO had allowed two opportunities i.e. on 01.12.2011 & 23.12.2011. It could not take place due to absence of Rasiklal Manekchand Dhariwal. The department can't be blamed for such lapse on the 68 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 part of the assessee. Even otherwise, the opportunity to cross- examine will depend on the facts of a given case and may not be necessary. For the above proposition he relied on the decision of Hon'ble Punjab & Haryana High Court in the case of CIT Vs. K D Bali reported in 10 taxmann.com 215 and the decision of Punjab & Haryana High Court in the case of Smt. Kusum Lata Thukral reported in 327 ITR 424.
110. He submitted that these seized documents do show that books of account maintained by the assessee company do not show true state of affairs or actual profits. The fact that such type of evidences were not found at the time of search in the case of assessee company on 21.01.10 do not mitigate their evidentiary value. He submitted that there is no evidence that payments as per chits were to be made from sales tax refund (question 9 of statement of RMD on 03.02.2010 page 16 of the assessment order). Even the amount as per chits is not found recorded in the books of the assessee company.
111. He submitted that the documents seized from the third party can be used against the person to whom these belong as evident from the provisions of law i.e.158 BD, 153A, 148 etc. For the above proposition, he relied on the Third Member decision of Pune ITAT in the case of Dhunjibhoy Stud and Agricultural Farm Vs. DCIT reported in 82 ITD 0018 (TM Pune ITAT).
112. Referring to the decision of the Pune Bench of the Tribunal in the case of Khopade Kisanrao Manikrao Vs. ACIT reported in 74 ITD 25 (TM Pune Bench) he submitted that the Tribunal has held that if evidence of undisclosed income is found then corresponding assets/expenses need not be proved. He submitted that seized 69 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 documents have to be read as a whole. If a part of the document is found to be true (chits signed by RMD and PRD admitted by them) then whole has to be construed as true. For the above proposition, he relied on the following decisions :
Glass Lines Equipment Co. Vs. ACIT (253 ITR 454) (Gujarat HC) Chandra Mohan Mehta Vs. ACIT (71 ITD 245) Navjivan Oil Mills Vs. CIT (252 ITR 417) (Gujarat HC)
113. He submitted that the assessee is not entitled to grant of benefit of telescoping as it has not owned up the seized documents in question. Unless same is done, the appellant cannot claim that money received from unrecorded sales was available for making surrender in the personal hands of Shri Rasiklal Manekchand Dhariwal (RMD). For the above proposition, he relied on the following decisions :
1. Anantharam Veerasinghaiah & Co. Vs. CIT reported in 123 ITR 457 (SC),
2. CIT Vs. Nabadwip Chandra Dey reported in 190 ITR 133 (Gauhati HC),
3. CIT Vs. Kulwant Kaur reported in 121 ITR 914 (Delhi HC).
114. He submitted that the provisions of section 132(4A)/292C have been rightly invoked. It is not in dispute that chits are signed by Prakash Dhariwal or Rasiklal Dhariwal for making payments to various suppliers. The entries were made at the instance of Rasiklal Dhariwal/ Prakash Dhariwal. There is no evidence for duplicate business being carried by Sohanraj Mehta ( Question 4 of statement of RMD on 03.02.2010 page 29 and 45 of the assessment order).
During the search, only stock of Dhariwal Industries Limited was found in the premises of Sohanraj Mehta. If Sohanraj Mehta was doing some duplicate/parallel business why would he give 70 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 commission @ 65 per carton on unrecorded sales to him. All the suppliers admitted that they were supplying goods to DIL and not to Sohanraj Mehta.
115. He submitted that the AO has applied GP of 60% which is correct in the facts & circumstances of the case. The appellant company has itself shown GP of almost 20% in its regular books of account. When sales are not duly recorded and made out of books of account, there will be saving on account of local taxes such as sales tax/excise duty. In this case, the element of excise duty was itself 40 %. If these two are combined, it will yield GP of 60% as rightly estimated by the AO ( page 73 of the assessment order). His method was scientific. For the above proposition he relied on the decision of Ahmedabad Bench of the Tribunal in the case of Vijay Proteins Ltd. reported in 58 ITD 428.
116. He submitted that the fact that the assessee company did not own up these documents will not mitigate their evidentiary value. For the obvious reasons, Rasiklal Dhariwal made surrender of 38 crores in personal capacity as it would have landed the appellant company in serious trouble with Excise Department & other Govt. Authorities.
117. So far as the decisions relied on by the Ld. Counsel for the assessee are concerned, he submitted that all those decisions are distinguishable and not applicable to the facts of the present case.
118. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find a search u/s.132 of the 71 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 I.T. Act was carried out in the case of the assessee on 20-01-2010. The AO while completing the assessment u/s.143(3) r.w.s.153A referred to the search conducted at the residence of Shri Sohanraj Mehta, C&F Agent of M/s. Dhariwal Industries Ltd. for Karnataka Region as well as on the premises of Mehta Associates at Bangalore on 10-10-2009 and the search action conducted in the case of Shri Mithulal of Bengaluru on 09-10-2009. Various incriminating documents namely A/M/01 to A/M/29 were found and seized at Shri Mithulal's residence. Shri Sohanraj Mehta in his statement recorded u/s.132(4) had owned up all these papers as belonging to him. At that time, he had stated that these papers reflect the transactions of cash given to various persons as per the instructions of Shri Rasiklal M. Dhariwal and Sri Prakash R. Dhariwal, Director of the assessee company. He had also stated that these papers are in his own handwriting wherein the receipts of Gutkha consignments are written and the payments mentioned therein are as per the instructions from Shri R.M. Dhariwal and Shri Prakash R. Dhariwal. During the course of search in the case of the assessee, he was confronted about these facts. After considering the various submissions filed by the assessee from time to time and considering the seized materials from Shri Mithulal which were owned up by Shri Sohanraj Mehta, the AO held that all these papers reflect the unaccounted sales made by the assessee company through Shri Sohanraj Mehta for the period from 2003 to 2009. After analyzing the papers, the AO came to the following conclusion :
a. The seized papers contained daily, monthly and yearly summary of unaccounted sales of Gutkha.
b. There are matching unaccounted purchases of raw material noted on the papers.72
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 c. The unaccounted sale proceeds have been invested in the real estate and the assessee has paid money to various parties.
d. The papers indicate that the unaccounted sale proceeds have been paid to assessee's employees, Shri Rasiklal Dhariwal and Shri Prakash Dhariwal.
e. Shri Mehta has offered commission on unaccounted sales as income in his hands.
f. The packing material, freight, hamali are also reflected in the seized papers found with Mehta.
g. These unaccounted sale proceeds are paid to various persons on behalf of assessee like suppliers, C & F Agents, Legal advisers, etc. Although they have not accepted the receipts of such amounts, they have accepted having transacted with the assessee.
h. Mehta has accepted that the papers reveal the sale proceeds of Gutkha by assessee. The papers contained accounted and unaccounted transactions of the assessee.
i. The various persons whose names figured in the seized papers admitted transactions with the assessee but not with Mehta.
119. The AO further noted that accounted production load factor of Bangalore factory is 29.81% as against such load factor of 53.13% of Baroda factory. The machineries of Baroda factory are old whereas that of the Bangalore factory are new. Further , the assessee has saved the excise duty since the product is sold outside the books of account. He, therefore, computed the suppressed production and sale thereof and applying the GP rate of 60% on such suppressed turnover determined the undisclosed income for the block period, the details of which are already given at Para 50 and 51 of this order.
120. It is the submission of the Ld. Counsel for the assessee that during the course of search no unaccounted stock or unaccounted purchase/expenses/sales/transportation receipts were found from the premises of the assessee. Not a single unaccounted sale/purchase voucher was found. Similarly, during the search at Shri Sohanraj Mehta's place also there was no direct evidence found 73 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 in the form of any unaccounted voucher or any unaccounted sale receipts or any unaccounted stock. From the very beginning, Shri R.M. Dhariwal was disputing the authenticity of such papers and the decoding of figures written in the seized documents. When the amounts are written in figures and words, the department without any corroborative evidence has considered the same to be in Crores. It is also the submission of the Ld. Counsel for the assessee that Shri Sohanraj Mehta and various other persons have retracted their statements given earlier. Further, Shri Sohanraj Mehta could not produce any evidence to support his interpretation of the papers written by the assessee to him that all these figures were in coded figures. It is also the submission of the Ld. Counsel for the assessee that whenever additions have been made in the hands of different persons on account of receipt of money from Shri Sohanraj Mehta on the basis of chits of Shri R.M.Dhariwal/Shri Prakash R. Dhariwal, the different Benches of the Tribunal have deleted such addition stating that the said chits are not reliable. It is also the submission of the Ld. Counsel for the assessee that if the assessee could have given such huge amounts to various persons out of the unaccounted profit of the suppressed turnover, then atleast some sort of receipts, acknowledgements, security, blank cheque etc. could have been found from the place of either the assessee or Shri Sohanraj Mehta or Shri Mithulal. It is also the submission of the Ld. Counsel for the assessee that on the basis of the information provided by the Income-tax Department to Central Excise Department, they have conducted extensive investigations. The Commissioner, Central Excise on the basis of the directions issued by the CESTAT has held that the assessee has not indulged in any unaccounted production. Therefore, it is the submission of the Ld. 74 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Counsel for the assessee that no addition can be made in the hands of the assessee on account of undisclosed profit on suppressed turnover.
121. It is the submission of the Ld. Departmental Representative that the documents seized during the course of search action in the case of Shri Sohanraj Mehta and Shri Mithulal unequivocally show that they reflect the unaccounted transaction of Gutkha business of the assessee. They contain meticulously the deployment of funds generated out of such unaccounted turnover which have been given to various persons as per the direction of the Directors of the assessee company. Merely because those persons have subsequently retracted from their statements, the same cannot be believed since they are under the influence and control of the assessee as their livelihood depends on the assessee. Therefore, their retraction cannot be believed and the statement given initially which was without any threat or coercion should be held as genuine and the true state of affairs of the assessee. Therefore, the action of the AO should be upheld and the relief granted by the CIT(A) should be reversed.
122. In this background, we have to decide the amount of addition, if any, that has to be made in the hands of the assessee.
123. It is an admitted fact that search in the case of Shri Mithulal Jain of Bangalore took place on 09-10-2009 and search action in case of Shri Sohanraj Mehta was conducted on 10-10-2009. However, the search in the case of the assessee took place on 20- 01-2010, i.e. after a gap of more than 3 months from the date of search at Bangalore. It is not understood why there was such a 75 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 gap. During the course of search, no incriminating documents whatsoever was found from the premises of the assessee. No unaccounted stock or unaccounted purchase/expenses/sales/transport receipts were found. No unaccounted sale/purchase voucher was found during the search from the premises of Shri Sohanraj Mehta also. We find after the search was conducted and the Department informed the Excise authorities regarding the evasion of excise duty for which the Excise department swung into action. They obtained records from the Income-tax department and conducted extensive enquiries and demands were raised. The matter travelled upto CESTAT who restored the issue to the file of the Commissioner, Central Excise and Customs for deciding the issue afresh. We find the Commissioner, Central Excise and Customs in his order dated 31- 12-2015 held that there is no sign of excess consumption of raw material or packing materials by the assessee and there was no tangible evidence on record to demonstrate that there was excess use of machines or excess manufacturing of Gutkha was done.
124. The preliminary paragraphs of the Commissioner, Central Excise and Customs gives the background of the case :
"3.1 The relevant records were obtained from the Income Tax Department. Perusal of the' Assessment Proceedings of the assessees, revealed that the case against M/s. Dhariwal Industries Limited originated on account of the search carried by the Income Tax Authorities at the premises of an individual at Bangalore wherefrom documents/records relating to unaccounted sale of Gutkha were recovered. The said incriminating documents were allegedly belonging to an individual by name Shri.Sohanraj Mehta. The investigation focused on the activities of Shri. Sohanraj Mehta who was found to be dealing in the business of Gutkha and was sole C&F Agent of Dhariwal Industries Limited in Karnataka. Further enquiry of the said individual resulted in unearthing of illegal and unaccounted transaction of Gutkha dealt by him purportedly belonging to M/s. Dhariwal Industries Limited. Scrutiny of the documents seized by Income Tax revealed the details of unaccounted transaction dealt by him during the period from 2003-04 76 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 to 2007-08 causing huge loss to the Government revenue. Accordingly, search assessment proceedings in respect of the individual Shri.Sohanraj Mehta completed by the Income Tax Department were also obtained for initiating further necessary action. Scrutiny of the search assessment proceedings of the Income Tax Department pertaining to M/s.Dhariwal Industries Limited and that of Shri.Sohanraj Mehta, appeared to reveal that the assessees had evaded excise duty by clandestinely clearing the goods manufactured without payment of excise duty. Accordingly, investigation was initiated against M/s. Dhariwal Industries Limited, Singasandra, Bangalore.
3.2 From 01.07.2008, the assessees are working under "Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008" as per which duty is determined based on the number of machines operated. Further, the case made by Income Tax Department and evidences collected by them pertain to period upto February, 2008.
4.1 Income Tax Department had carried out extensive search operations covering the network of C&F Agent's premises, major suppliers of the assessees, major dealers of the asses sees and recorded Statements of the key personnel and individuals who appeared to be linked to the unaccounted transaction of Gutkha. A letter No. IV/6/29/2012-HPU I dated 17.05.2012 was written to Income Tax authorities seeking for copies of all the seized documents, note books, loose slips of papers, books of accounts; etc. In order to recover additional evidences, search operations were carried out. by the Officers of the Central Excise Commissionerate, Bangalore-I on 17.05.2012 and 18.05.2012 at the main factory premises of M/s. Dhariwal Industries Limited located at Singasandra, Hosur Road, Ban- galore apart from other important and connected business premises subsequently as; detailed below :
i) M/s. Dhariwal Industries Limited, No.2, 3, & 4, Singasandra, Hosur Road, Bangalore engaged in manufacture of Gutkha.
ii) M/s. Champion Packaging Industries Private Limited. No.274 D, Bommasandra Industrial Area, Bangalore-560 099 who are suppliers of laminated rolls (pouches) for Dhariwal Industries Limited.
iii) M/s. Rajhans Enterprises, 134, 4th Main Road, Industrial Town, Rajajinaqar, Bangalore-560044 who are suppliers of packing cartons for Dhariwal Industries Limited.
iv) Residential Premises of Sohanraj Mehta at No.776/1, Ist Floor, 3rd Stage, III Block, Basaveshwaranagar, Bangalore-560079 who was C & F Agent of M/s. Dhariwal Industries Limited.
v) M/s. Stuti Enterprises, No.52/1, 2nd Floor, Lalbagh Road, Bangalore - 560027 who are appointed as authorized distributors of Dhariwal Industries Limited.
4.2 Later, on 01.06.2012 the premises of M/s.Gajanana Arecanut Agencies, No.799/6, Shop No.2, Anekal Road, Chandapura, Bangalore - 560 081 who are suppliers of Supari/Arecanut to M/s. Dhariwal Industries Limited was also' visited by the team of officers.
.
77
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 4.3 During the search operations conducted at the above mentioned premises on 17.05.2012 and 18.05.2012, certain incriminating records and documents like Stock Registers, sales invoices, purchase invoices, ledger extracts, correspondences, etc., were recovered for further investigation in connection with the case.
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124.1 We find after elaborate discussion, the Ld. Commissioner of Central Excise has given his findings which read as under :
"DISCUSSIONS AND FINDINGS:
46. I have carefully perused the case records, the Final Order No.21956-
21964/2014 dated 20.10.2014 of the Hon'ble CESTAT, Bangalore, and . written as well as oral submissions made by the noticees. 46.1 The present proceedings are initiated in pursuance to the Final Order No. 21956-21964/2014 dated 20.10.2014 issued by the Hon'ble CESTAT, Bangalore with regard the Order-In-Original No.45/2013 dated 22.07.2013 issued by the Commissioner of Central Excise, Bangalore-I Commissionerate, wherein the demand of duty made in the SCN dated 01.08.2012, was confirmed along with interest and consequential penalties.
46.2 I find from the above mentioned order of the CESTAT, the matter has been remanded with the observation that the following important points have not been discussed and not considered, viz:
.
(i) Seizure or interception of any consignment while clearing without payment of duty.
(ii) Excess use of machines, use of extra labour and additional shifts of work done by the appellants during the relevant period.
(iii) Excess consumption of raw materials or mis-declaration of consumption by the party.
(iv) Evidence to show the meaning of codes 'A and 'DIL' on gutkha package and sale of other brand of Gutkha by Shri.Sohanraj Mehta.
(v) Surprise visits of the officers and the supervision/control exercised by the department and how assessee could produce excess quantity in spite of such intense supervision.
(vi) Retraction of the statement of Shri.Sohanraj Mehta.
(vii) Cross examination of Shri. Sohanraj Mehta.
The CESTAT has directed that the adjudicating authority has to necessarily take up detailed consideration of the above mentioned points while deciding the case in denovo proceedings and with the 78 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 available evidence decide whether a case can be made out. In addition, it is the direction of the Hon'ble Tribunal that the Commissioner to whom the matter is being remanded should consider each and every point that may be submitted by the appellants, record the observations and consider details of evidence gathered and why submissions of the appellants are not acceptable.
The submission made by the noticee in the denovo proceedings have been enumerated in Para 45.10 supra. Accordingly, taking into account the observations of the CESTAT an t submissions made by the noticee, I proceed to examine the case in detail.
47. Seizure or interception of any consignment while clearing without payment of duty :
47.1 On the question whether there was any seizure or interception of any consignment of gutkha which was allegedly cleared from the assessee's factory without payment of duty, I find from the records of the case that the officers who had visited the assessee's factory premises and conducted the investigation, have' not found any consignment of unaccounted gutkha lying in the factory-premises demonstrating clandestine manufacture of gutkha. Further, no seizure of unaccounted gutkha has been made from any premises including the premises of the assessee or that of the C&F Agents or the buyers. There is also no instance of unaccounted gutkha being intercepted by the Department. The case of clandestine clearance of gutkha is made out by the department on the basis of loose slips belonging to Shri.Sohanraj Mehta, seized by the Investigation Wing of the Income Tax Department from the residential premises of one Shri.Manoj Mitulal and the statement dated 21.10.2009 of Shri.Sohanraj Mehta, recorded by Investigating Agency of Income Tax and statement dated 05.06.2012 given before Central Excise authorities. The allegation made in the impugned notice is entirely based on the loose sheets, note books, records, seized from Shri.Sohanraj Mehta. During investigation a few records have been recovered from the premises of the assessee under Mahazar dated 17.05.2012 but the investigation has not made a case of clandestine clearance based on these records. In the absence of even a single consignment of unaccounted gutkha being seized or intercepted by the investigation, I find that the allegation of clandestine clearance of gutkha made against the assessee is not corroborated. A case of clandestine clearance cannot be justified only based on a Statement of C&F agent of the assessee without corroborating the same with any material evidence. In support of these views, I place reliance on the decisions of the Tribunal in the case of Rhino Rubbers Pvt. Ltd., Vs. Commissioner of Central Excise reported in 1996 (85) ELT 260 (Tri.) and Kothari Synthetic Industries Vs. Commissioner of Central Excise reported in 2002 (141) ELT 558 (Tri). wherein it is held that demand based on records of third parties, without considering other parameters is not sustainable.
48. Excess use of machines, use of extra labour and additional shifts of work done by the appellants during the relevant period.
48.1 the Hon'ble Tribunal' has observed' that no evidence has been gathered to show that there was excess use of machines or additional shifts of work done by the assessee during the relevant period. On perusal of the case records, it is seen that the assessee in their statutory 79 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 returns filed before the department have declared the quantities of gutkha that has been manufactured and cleared by them during the relevant period. For the charges made that the assessee had cleared large quantities of unaccounted gutkha, I find that the investigation has not placed on record any evidence to show as to how such unaccounted gutkha was manufactured. It is alleged that 57085' cartons of R.M.D. gutkha valued at Rs.78,17,87,500/- has been cleared by the assessee. The investigation has not substantiated with documentary proof the charges that the assessee manufactured such large quantities of gutkha. The investigation has not proved that the assessee used additional machines or the factory had run extra shifts to manufacture such large quantities. I also take note of the submission made by the Noticee before the' Tribunal that for clearance of 57085 cartons of gutkha, around 900 trucks are required. This submission was demonstrated before the Tribunal by showing the Tribunal one sample carton box. I find that the officers have not carried out the any investigation in this direction and not a single truck carrying the unaccounted gutkha has been intercepted. There is also no evidence to suggest that the assessee employed extra labour for the manufacture of unaccounted gutkha. In the absence of evidences to show that the assessee had used extra machines, employed extra labour or operated additional shifts at the factory to manufacture the alleged large quantities of, unaccounted gutkha, I am constrained to hold that the charges of clandestine manufacture and clearance of gutkha is not demonstrated in this case.
49. Excess consumption of raw materials / mis-declaration of consumption by the party:
49.1 As regards the consumption of raw material, the Preventive officers had conducted .Investigation to examine the same. A' statement of Shri.M.B.Mallikarjuna was recorded on 07.06.2012 before the Superintendent of Central Excise (Preventive), Banglaore-I Commissionerate wherein he has interalia stated that they supply arecanut to the assessee for manufacture of gutkha under sale bills for the purpose of transportation and e-sugam documents as per the state VAT and APMC permit. He has further stated that payments for supply of arecanut was received through demand drafts from the headquarters of the assessee at Pune and that about.5 years back they used to get payments through demand draft from M/s.Mehta Associates on behalf of the assessee. At no point of time Shri.Mallikarjuna has stated' before the Central Excise authorities, that he had supplied unaccounted gutkha to the assessee or that he had received amounts in cash from Shri.Sohanraj of M/s.Mehta Associates. Neither has he admitted to the supply of unaccounted arecanut to the assessee. The SCN alleges that the main supplier of arecanut, which is the principle raw material for manufacture of gutkha, was Shri.M.B.Mallikarjuna Managing Partner of Shri.Gajanana Arecanut Agencies, Shimoga and Shri Gajana Arecanut Trades, Shimoga, who had supplied 504350 kqs of supari valued at Rs.7.81 Crores during 2007-08 and has been dealing in accounted as well as unaccounted sale of gutkha in close contact with Shri.Sohanraj Mehta and has received huge sums of money from Shri.Sohanraj Mehta towards supply of unaccounted areca nut, out of sale proceeds of unaccounted gutkha.
49.2 The .allegation in the SCN is solely based on the statement of Shri.M.B.Mailikarjuna, given before the Income Tax Authorities on 20.01.2010, wherein he had admitted that he had sold unaccounted arecanut to the assessee and had received amounts towards such sales 80 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 which were outside the regular books of accounts. The assessee has however placed on record a letter dated 23.12.2010 of Shri.Mallikarjuna addressed to the Assistant Director of Income Tax (Investigation), wherein he has retracted his statement dated 20.01.2010 given before the Income Tax Authorities stating that he has not done any unaccounted sales to M/s.Dhariwal Industries Ltd., and has denied having received' any cash from Shri Sohanraj for any unaccounted sales.
In the instant case, I find that the SCN has placed heavy reliance on the retracted statement of Shri.Mallikarjuna given before the Income Tax Authorities without bringing forth any tangible evidence to demonstrate sale of unaccounted arecanut by Shri Mallikarjuna to the assessee. Therefore, I find that the allegations are baseless more so when the. investigation has also failed to prove that he had supplied unaccounted arecanut to the assessee and not even a single consignment of unaccounted arecanut has been seized in the case. Thus, in the absence of evidence, I cannot accept the charges made in the notice that Shri Mallikarjuna has supplied unaccounted arecanut to the assessee and had received payments for the same through Shri Sohanraj Mehta.
49.3 Further, investigation was also conducted on the supplier of lamination rolls viz., M/s.Champion Packaging Industries Pvt. Ltd., Bangalore. A statement dated 14.06.2012 of Shri Rajesh Bachhawat, Director of M/s.Champion Packaging Industries Pvt. Ltd., Bangalore (CPI' for short), was recorded by the Superintendent of Central Excise (Preventive). Banglaore-I Commissionerate. In the said statement· Shri Rajesh has interalia stated that they always received payments from Bangalore factory of the assessee through account payee cheques favouring CPI. On showing the summary of records which indicated that Shri.Soharaj Mehta had paid Rs.9,05,00,000/- to CPI during September 2006 to March 2007, Shri Rajesh has stated that as per their records they have received the payments by cheque for· supplies made during the relevant period and he is not aware about the amount mentioned in the extract shown to him. He has further stated that they have not supplied any goods other than packing material to M/s.Dhariwal Industries Ltd. He has also stated that none of the official of CPI had any contact with Shri Sohanraj Mehta and therefore he does not know about the transactions dealt by Shri.Sohanraj Mehta and the various entries of payments made in the documents shown to him.
49.4 The notice has alleged that in the seized records the: name of Shri.Shrinivas of CPI, is mentioned for having received amounts out of sale-proceeds of unaccounted gutkha. Therefore, it is alleged that CPI have played active role inclandestine activity of the assessee by supplying unaccounted laminating roll and realised large sums for supply of such unaccounted rolls. However, ;,from the statement dated 14.06.2012 of Shri Rajesh Bachhawat, Director of CPI given before the Superintendent of Central Excise (Preventive), Bangalore-I Commissionerate, I find that he has stated that he is not aware about the amount mentioned in the extract shown to him. No statement of Shri Srinivas, Accountant of CPI, whose name is mentioned in the loose slips recovered from Shri.Sohanraj Mehta, allegedly indicating that the said amounts were paid to him, is recorded in the case. Thus, I find that the investigation in the case is incomplete and I am of the opinion that no case of clandestine supply of packing materials by CPI to the assessee can be made based on this piece of evidence. In this case, there is also absence of evidence. to show that CPI were clandestinely removing the packing materials to the assessee as nothing 81 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 incriminating was recovered from CPI or the assessee to even faintly suggest that packing materials were being clandestinely supplied by CPI or were being received by the assessee. I find from the records of the case that there is no seizure of any unaccounted packing materials i.e., plastic rolls either from the . premises of CPI or the assessee. It is also seen from the statement dated . 14.06.2012 of Shri.Rajesh Bachavath, Director of CPI, that he has not admitted that unaccounted rolls were being supplied to the assessee. It is therefore· not established in the case that unaccounted rolls were being supplied by CPI to the assessee as these allegations are loosely based on only the slips recovered from Shri.Sohanraj Mehta wherein the name of Shri.Srinivasa, Accountant of CPI is mentioned and certain amounts are mentioned against his name. There is no investigation carried out against the said Shri.Srinivasa and he has not been examined to ascertain the facts and reasons as to why these amounts were paid to him, if at all they were paid to him. In the absence of investigation on this point, I am forced to hold that the investigation has only presumed that the impugned amounts mentioned against the name of Shri Srinivasa, Accountant of CPI, were paid to (PI who in turn have supplied unaccounted lamination rolls to the assessee for packing of unaccounted gutkha. Thus, in the absence of concrete documentary evidence. I am not inclined to accept the charges made in the notice that CPI have supplied unaccounted lamination rolls to the assessee.
49.5 During the investigation, it was observed that M/s.Rajhans Enterprises, Bangalore were supplying carton boxes to the assessee who were using the same for packing gutkha pouches. Hence, a statement dated 15.06.2012 of Shri.Ravindranath. Managing Partner of M/s.Rajhans Enterprises, Bangalore, was recorded by the Superintendent of Central Excise (Preventive). Bangalore-I Commissionerate. Shri.Ravindranath, in his statement had interalia stated that they supply carton boxes for packing of gutkha pouches; that they receive payment only through demand draft from their Bangalore factory against the sales made to them, which in the normal course is collected by their person from their factory at the time of deliver of the goods; that he is not connected to Sohanraj Mehta in any way at any given point of time and that he has not received any amount from Sohanraj Mehta at any given point of time. It is seen from the records of the case that there is no seizure of unaccounted. carton boxes either at the premises of the assessee or at the premises of M/s.Rajhans Enterprises. There is also no documentary evidence to show that M/s.Rajhans Enterprises had supplied unaccounted carton boxes to the assessee. In view of these facts, I find that the allegations that M/s.Rajhans Enterprises, Bangalore have supplied unaccounted carton boxes to the assessee· and had received an amount of Rs.97 lakhs on various dates for such supply, out of the funds generated by sale of unaccounted gutkha is not at all supported by any . corroborative evidence.
50. In my view, the charges of clandestine removal should be established by producing cogent, convincing and tangible evidence and charge of clandestine removal without any evidence to show excess receipt of raw material, excess consumption of electricity, excess receipt of packing materials, excess employment of labour, etc., is not sustainable. In the instant case, there is no evidence to show that the assessee had received excess raw materials or packing materials from their suppliers. There is also no evidence to show that the assessee had employed extra labour or machinery or had run extra shifts for the 82 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 manufacture of large quantities of gutkha as alleged by the Department. In support of my findings, I place reliance in the case of Kalveri Foods Vs. CCE, Mumbai reported in 2003 (152) ELT 131 (Tri.), wherein it is held that, "It is well settled that the charge of clandestine removal/ manufacture of the goods by the assessee has to be established by the Department by producing cogent, convincing 'and tangible evidence and such a charge cannot be based on assumptions and presumptions." Further, in the case of CCE, Kanpur Vs. S.C.Manufacturers reported in 2005 (179) ELT 193 (Tri.), the Hon'ble' Tribunal observed that, The duty demand was raised on the allegations of clandestine removal of the goods after visit of the Central Excise Officers to the factory premises of the appellants who took into possession certain torn pieces of paper and other documents. But, neither any shortage nor excess of the raw material as well as of the finished goods, was found by the Central Excise officers in the factory premises of the Respondents. It is also evident that Shri Sodhi, the then partner of the Respondents (now deceased) never admitted categorically in his statement about the clandestine manufacture and removal of the finished goods by his firm. The bald testimony of D.K. Bajpai, authorised signatory of the Respondents firm also did not advance the case of the Department as none of the consignees named in the alleged parallel invoices admitted the receipt of the goods from the Respondent's firm, No evidence regarding the excess use of the raw material or consumption of electricity by the Respondents had been brought on record. Therefore, charge of clandestine removal of the goods without payment of duty by .the Respondents, did not stand proved." In the case of Melton India (P) Ltd., Vs. CCE, Noida reported in 2005 (181) ELT 129 (Tri. Delhi) it was observed by the Hon'ble Tribunal that "Charge of clandestine removal cannot be based on assumptions and presumptions or on a simple bank record prepared by assessee showing inflated production figures - 58 invoices seized from factory premises; pleaded by assessee as prepared for getting financial assistance from bank - No admission of any of appellants and no evidence to prove actual clearance of goods through invoices-in-question on a clandestine manner - None of consignee named in invoices admitted receipt of goods - No evidence of excess receipt of raw material/, consumption of electricity or employment of labour by assessee for manufacture of extra finished goods." Furthermore, I am of the view that the charge of clandestine removal which is a serious charge is required to be proved beyond doubt on the basis of affirmative evidence and not on inferences. For my above views, ·1 draw support from the decision in the case of CCE, Shillong Vs. Shree Narottam Udyog (P). Ltd., reported in 2003 (158) ELT 40 (Tri. Kol) wherein it is observed by the Tribunal that" charge of clandestine removal being a serious charge, required to be proved beyond doubt on' the basis of affirmative evidences". Also, in the case of Durga Trading Co. Vs. CCE, Lucknow reported in 2002 (148) ELT 967 (Tri. Del) it is held that "In absence of any corroborative evidence like consumption of excess electricity or statements of buyers, it could not also be said that noticee company clandestinely removed goods manufactured from stock found short".
51. Evidence to show meaning of codes 'A' and 'DIL' on gutkha package and sale of other brand of Gutkha by Shri Sohanraj Mehta. 51.1 It is alleged in the case that entries for accounted sales in the loose slips are suffixed with letters of 'DIL" and the unaccounted sales are suffixed with letter 'A' and that it was explained by Shri.Sohanraj Mehta that the letter 'A' referred to unaccounted sales. Other than the 83 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 statement of Shri.Sohanraj Mehta, there are no evidences which corroborate that the entries in the impugned slips suffixed with letter 'A' actually relate to the sale of unaccounted gutkha manufactured by the assessee. Thus, I find that the allegation that the letter 'A' represents clearance of unaccounted gutkha manufactured by the assessee is not corroborated. Further, during the proceedings initiated by Income Tax Authorities against Shri.Sohanraj Mehta, it is seen that Shri.Sohanraj Mehta had stated that he is dealing with gutkha manufactured by the assessee as well as' other brands of gutkha. From the records of the case, it is seen that there is no investigation conducted to ascertain whether Shri.Sohanraj Mehta was dealing with other brands of gutkha. In. the absence of any investigation on this aspect, it cannot be concluded that the entries made in the impugned slips by suffixing with letter 'A' relate to unaccounted gutkha manufactured and clandestinely cleared by the assessee and that Shri.Sohanraj Mehta had not dealt with other brands of gutkha. I also find that the proceedings initiated by the Income Tax Authorities on the impugned slips have been dropped by the Commissioner of Income Tax (Appeals)- VI, Bangalore vide Order ITA Nos.229,230,231,232,233,234, & 235/CDIT/CC 2(2) B'lore/CIT (A)- VI /2011-12' dated 05.09.2012. Thus, I hold that this allegation is not substantiated in the case.
52. Surprise visits of the officers and the· supervision/control exercised by the ,department and how assessee could produce excess quantity in spite of such intense supervision.
52.1 The Hon'ble Tribunal while remanding the case for denovo adjudication has made an observation that in the Order-In-Original No.45/2013 dated 22.07.2013 passed by the Commissioner, Bangalore- I Commissionerate, there is no mention of surprise visits of the officers and the supervision/control exercised by the department and how the assessee could produce excess quantity in spite of such intense supervision. From the submissions made by the assessee, I find that the Superintendent of Central Excise, Electronic City Range had visited the unit on 11.09.2007, 24.10.2007 and 08.11.2007. Further, the said officer had visited the unit alongwith the Assistant Commissioner, Bangalore- 1I1 Division, Bangalore-I Commissionerate on 29.09.2007, 15.10.2007, 18.10.2007: 30.10.2007, 15.11.2007, 29.11.2007, 17.12.2007, 31.12.2007, 14.01.2008, 31.01.2008, 18.02.2008, 28.02.2008 and 18.03.2008. Furthermore, the unit has also been audited by the Internal Audit Party of the Department on 21st, 23rd, 24th and 25th of July 2008. I find that the Commissioner in his 010 dated 22.07.2013 had not considered these aspects while deciding the case. The Department while conducting the investigation has not made any observation as to how clandestine manufacture of unaccounted gutkha could have taken place under such intense supervision by the Department. On perusal of the reports submitted by the officers who had visited the assessee's. factory, I find that there is no mention about any shortage or excess of raw materials or the finished goods noticed during their many visits. There is also no mention about additional machines employed by the assessee. Apart from this, I find that the officers who had visited the assessee's factory premises during. the search .proceedings have also not noticed any shortage or excess of raw materials or finished goods or. even the packing materials. I am therefore of the view that the clandestine manufacture and removal of gutkha cannot be established only on the basis of loose slips recovered from the premises of the C&F Agent of the .assessee and the statement of Shri.Sohanraj Mehta, the C&F Agent, when no evidence to show that excess raw material or 84 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 finished goods or packing materials were found in the assessee's factory. In this regard, I rely on the decision of the Tribunal in the case of New India Dyeing & Finishing Mills Vs. CCE, Chandigarh reported in 2004 (165) ELT 316 (Tri.Calcutta) and R.K.Patel & Co. Vs. CCE, Nashik reported in 2008 (227) ELT 558 (Tri. Mumbai) wherein it is held that unaccounted production or clandestine clearance not found despite several surprise checks by the Department and therefore clandestine manufacture and clearance not proved. I find that the above decisions are squarely applicable to the case on hand.
53. Retraction of the statement of Shri.Sohanraj Mehta. 53 .1 The allegations of clearance of unaccounted gutkha by the assessee in the instant case are based on the statement dated 21.10.2009 of Shri.Sohanraj Mehta given before the Income Tax Authorities and his statement dated 05.06.2012 given before· the Superintendent of Central Excise (Preventive), Bangalore-I Commissionerate. However, Shri.Sohanraj Mehta, vide his letter dated 23.12.2009 addressed to the Assistant Director of Income Tax (Investigation), Bangalore had clarified that the notings in the slips reveal the handling of various products in a consolidated manner without indication of specific brands and movement of sale proceeds. He has also stated that this was precisely for the reason that he wanted to maintain confidentiality in the matter of handling other local products as otherwise there was an imminent threat of losing marketing of premium products and for the reason, the details of other products have not been mentioned in the said books. He has added that since an element of secrecy was required to be maintained in the transaction of various brands, lest the dealing of various other brands would come to the notice of main supplier namely Dhariwal Industries Ltd., the name of other vendors/suppliers were not mentioned in the books/noting. He has also stated that in all these statements it is stated that the transactions belong to the products of Dhariwal Industries, the premium product marketed by him and' that this was prompted by a sense of apprehension that if details come to light, there was every possibility of losing the business of the main product. However, when a statement of Shri.Sohanraj Mehta was recorded by the Superintendent (Preventive) on 05.06.2012, I find that there is no question posed to him on his letter dated 23.12.2009 addressed to Assistant Director of Income Tax (Investigation), retracting his statement dated 21.10.2009. Further, to a specific question as to whether he is dealing with any commodity of his own or belonging to other manufacturers/dealers, etc., Shri.Sohanraj Mehta has replied that he was not dealing with the products of his own except the products of Dhariwal Industries and that he did not have factory for manufacture of gutkha. I find that there is categorical denial by Shri.Sohanraj Mehta in his statement dated 05.06.2012 before the Central Excise authorities, that he was dealing with other brands of gutkha or gutkha manufactured by other manufacturers. It is also seen that he was not questioned whether he had received gutkha from Dhariwal Industries without invoice. All he has stated is that gutkha was received covered by invoice and the goods received were accounted in the stock register. He has not stated that he also received gutkha without invoice and I find that no question is' put to him to elicit this· information. Further, there is also no investigation regarding how the transfer of sale proceeds in connection with the sale of unaccounted gutkha, from Shri Sohanraj Mehta to the assessee took place.
85
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
54. Cross examination of Shri.Sohanraj Mehta.
54.1 The CESTAT while remanding the case back for denovo adjudication, has observed that the appellants had asked for cross- examination of only three . persons and only one has been 'allowed and no reasons have been given for denying the cross examination of others and that this needs reconsideration. The assessee filed a request to allow cross-examination of Shri.Sohanraj Mehta, Partner of M/s.Mehta Associates, Shri.D.Srinivas of M/s.Champion Packaging Industries Pvt. Ltd. and the officers who had conducted survey and visited the assessee and also the investigating officers. It was informed to the assessee under letter dated 03.06.2015 that in the light of the decision of the Hon'ble Supreme Court in the' case of CCE, Mumbai Vs. Kalvert Foods India Pvt. Ltd., cross-examination is not mandatory and that as per the decision of Hon'ble High Court of Madras in the Case of Thilagarathinam Match Works [2013(295) ELT 195 (Madras), persons who gave statements and who are witnesses alone are liable to be cross-examined and that cross-examination is not necessary in the case. 54.2 In response to this letter, the assessee filed a Writ Petition No.23627/2015 before the Hon'ble High Court of Karnataka, which stayed further proceedings in the case vide its Interim Order dated 10.06.2015. Later, the Hon'ble High Court of Karnataka in its Final Order dated 25.06.2015, disposed off the writ Petition No.23627/2015 and ordered that Shri.Sohanraj Mehta should be tendered for cross examination by the assessee. The High Court also observed that there is no justification by the assessee to cross-examine Shri.Srinivasa, Accountant of M/s.Champion Packaging Pvt. Ltd., Bangalore and the officers who had conducted surprise checks at the assessee's factory premises as these persons have' not been examined in the case. Accordingly, the assessee's request to cross- examine. Shri.Sohanraj Mehta, Partner of M/s.Mehta Associates, was considered and Shri.Sohanraj Mehta was asked to' appear before the Adjudicating Authority for cross examination by the assessee on 03.09.2015, 12.10.2015 and 03.11.2015; However, Shri.Sohanraj Mehta failed to appear for cross examination on all the three occasions. Shri.Sujay Kantawala, Advocate representing the assessee was present on all the three dates. On 03.11.2015, when Shri.Sohanraj Mehta failed to appear for the third time, Shri.Kantawala submitted that his statement/testimony not having being tested in cross-examination is unreliable, which was specifically permitted by the Hon'ble High Court. He also stated that the statement of Shri Sohanraj thus deserves to be discarded and there is no other credible or independent evidence available on record to sustain the charge of clandestine removal in the SCN. He further stated that the denovo adjudication can be proceeded with to analyze the charges in the SCN by disregarding the testimony of Shri.Sohanraj Mehta.
54.3 As per the above referred order of the Hon'ble High Court, it is binding on me to allow cross-examination of Shri.Sohanraj Mehta whose statement is heavily relied to charge the assessee of clandestine removal of gutkha. But, Shri.Sohanraj Mehta failed to appear for cross- examination even after giving three opportunities thereby rendering it doubtful that he was dealing with only the gutkha manufactured by the assessee and not dealing with other brands also. Thus, the contention of the noticee .that Shri.5ohanraj Mehta was dealing with other brands of 86 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 gutkha is not free from doubt and no reliance can be placed on his statement given before the Superintendent of Central Excise (Preventive). In support of this, I place reliance on the decision in the case of Nu-Trend Business Machines (P) ltd. Vs. CCE, Chennai - 2002 (141) ELT 119 (Tri.). wherein it is held that "When a person does not turn up for cross-examination, his statement cannot be accepted and on the basis of that statement demands cannot be confirmed":
55. I have further examined the case based on the additional written submissions dated 30.11.2015 made by the assessee along with the case records and my findings are detailed in the below paragraphs. 55.1 In the instant case, I find that there is also no evidence on record to show that the assessee manufactured and cleared the said unaccounted gutkha to the C&F agents. Further, not even a single buyer of the alleged unaccounted gutkha has been inquired in the case, Even though some of the names of buyers are said to be found on the loose slips, no effort is made to contact the purchasers·- of such unaccounted gutkha. There is no cross verification of the entries in the said loose slips to find out whether these persons have received the said gutkha or not, which is an important material to substantiate the case of the Department. Thus, I find that there is no evidence to show that the said gutkha was sold to the persons whose names were mentioned in the impugned loose slips. With regard to the investigation conducted on the flow back of sale proceeds of such unaccounted gutkha, no clinching evidence is made available in the case, which even faintly suggests that .the assessee had received money against such sale of unaccounted gutkha. 55.2 Furthermore, on the question as to whether these loose slips recovered from Shri.Sohanraj Mehta can form a strong basis for alleging clandestine clearance of gutkha by the assessee, I find that Shri.Sohanraj Mehta is only an independent C&F Agent of the assessee working for the commission he receives from the assessee and is not at all related to the business carried out by the assessee. I am of the view that the entries made in the loose slips by Shri Sohanraj Mehta cannot be accepted as conclusive proof of clearance of unaccounted gutkha by the assessee. When it is alleged that the assessee have manufactured and clandestinely cleared unaccounted gutkha through Shri.Sohanraj Mehta, clinching evidence to demonstrate these allegations should have been made available. At least evidence in the form of additional machines used or excess electricity consumed or excess raw materials consumed, excess packing materials used or extra labour employed, should have been made available to advocate excess production of gutkha. Further, when it is alleged that the unaccounted gutkha was transported from the factory of the assessee to the premises of C&F Agents, I find that there is no investigation conducted as to how such large quantities of gutkha were transported from the factory to the C&F Agent. Also, when it is alleged that the unaccounted gutkha was sold from the C&F Agents to the dealers/customers, the officers have not investigated to identify such buyers of unaccounted gutkha. None of the buyers of gutkha have been examined and no statement of any buyers of impugned unaccounted guktha is recorded. Thus, in my view, a demand based on records of third parties, without considering other parameters like power consumption, procurement of raw materials, usage of additional machinery, deployment of extra labour, etc., is not sustainable. In support of my views, I place reliance on the decisions in the case of Rhino Rubbers Pvt. Ltd. Vs. CCE, reported in 1996 (85) ELT 260 (Tri.) where it is held that "It is not safe to rely only on the third party's 87 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 records evidence when no direct links of the transactions established - Other parameters like electricity consumption etc. should have been considered before demanding duty on the alleged clandestine manufacture and removal of goods' and Kothari Synthetic Industries Vs. CCE, reported in 2002 (14) ELT 558 (Tri.) wherein it is observed that "No statement of any buyer to whom the appellants allegedly sold the processed fabrics had been recorded nor any documents showing the clearance of such fabrics by them, in a clandestine manner; had been placed on record. It is well settled that the charge of clandestine removal of the goods has to be established by adducing positive evidence and that the same cannot be based on assumptions and presumptions'.
55.3 Besides, the investigations carried out in the case has failed to show how such large quantities of unaccounted gutkha was transported from the factory of the assessee to the premises of C&F Agents. There is no corroborative evidence to show the movement of goods. In fact this part has not at all been- investigated. Iam therefore of the view that the demand cannot be raised on the basis of records recovered from third parties without any corroborative evidence to show that the movement of goods from the premises of a manufacturer has taken place. In this regard, reliance is placed on the decisions in the case of Rama Shyama Papers Vs. CCE reported in 2004 (168) ELT 494 (Tri.) wherein it is held by the Hon'ble Tribunal that "Records seized from third party - No evidence produced to show movement of goods from premises of assessee to that party and no enquiry made as to who ultimately received those goods". Further, in the case of Rutvi Steel Vs. CCE reported in 2009 (243) ELT 154 (Tri.), it was observed that "As regards the confirmation of demand of duty of Rs.1,21,290/- , we find that the same stands confirmed on the findings of the clandestine removal, which in turn are based upon the sole statement of Shri Manharlal Viradia of M/s. Patel Rolling Mills and M/s. Maruti Cement. There is no other evidence on record establishing any clandestine removal. The final products were found to be tallying with the recorded balance in RG-23A Part-I at the time of visit of the officers. It does not require. the support of precedent decisions to hold that the charges of clandestine removal are required to be established by production of sufficient and positive evidence leading to inevitable conclusion and the same cannot be upheld on the basis of the entries made in a diary recovered from the third party's premises and the statement of the authorized representative of that party. We are, accordingly, of the view that the findings of clandestine removal are unsustainable'. In the case of CCE Vs. Rajaguru Spinning Mills Pvt. Ltd. reported in 2009 (243) ELT 280 (Tri.), it was held that" We find that charge of evasion cannot be found solely on the basis of records of third party". I find that the ratio of the above decisions is squarely applicable to the instant case. 55.4 The Hon'ble Tribunal while remanding the case back to the original authority had observed that" what is required to be proved by the Department is preponderance of probability". There is no doubt that the Department need not establish an offence case with mathematical precision as required in a criminal case but preponderance of probability is also sufficient in a department's case. In the present proceedings there is no evidence recovered from the factory premises of the assessee pointing towards alleged clandestine clearance of gutkha.' Not a single pouch of illicitly cleared gutkha is seized in the case either in the factory premises or at the premises of the C&F agents. Also, no gutkha that is alleged to have been 88 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 manufactured and cleared clandestinely is seized from the dealer or distributors or even the buyers of the said goods. When it is alleged that excess production of gutkha happened at the factory premises of the assessee and that the goods were cleared from the factory to the C&F Agents, no instance of transportation of the said unaccounted gutkha has been established. In this regard; the investigation has not identified even a single transporter of impugned goods. To make a case on the basis of principles of preponderance of probability, at least one piece of evidence suggesting manufacture or clearance or transportation of gutkha from the assessee's premises is required to be available. In the absence of any such indicators, I find that the investigation has failed to establish a case based on the principles of preponderance of probability. The only evidence put forth by the investigation in this case is the loose slips recovered from Shri.Sohanraj Mehta where he has claimed that some of the entries relate to unaccounted gutkha received from the assessee. Even if it is accepted that these entries relate to the sale of unaccounted gutkha, there is no evidence whatsoever to suggest that the said unaccounted gutkha belonged to the assessee. In the absence of any evidence, the only way to ascertain that the unaccounted gutkha belonged to the assessee was by way of cross examination of Shri.Sohanraj Mehta. The Hon'ble High Court of Karnataka in its order dated 25.06.2015 had specifically directed the Adjudicating Authority to allow cross examination of Shri.Sohanraj Mehta and had rejected the assessee's plea to allow cross-examination of others. Even after several opportunities being given to Shri.Sohanraj Mehta to appear for cross- examination, he failed to appear before the Adjudicating Authority and thus he could not be cross-examined by the assessee. Therefore, placing reliance solely on his statement that the entries in the loose slips suffixed with the letter "A" relate to unaccounted gutkha, without any other· corroborative evidence, would be unjustified. As per the Investigation, the above evidence is sufficient to sustain the charges against the assessee. At first brush, it may appear to be sufficient. However, a proper examination Of the facts of the case prove otherwise. I find that the above evidence is not credible material and not sufficient to establish the case against the assessee even applying the test of preponderance of probability.
56. In view of my findings recorded above, it is evident that there is no sign of excess consumption of raw materials or packing materials by the assessee in the instant case. There is no tangible evidence on record to demonstrate that there was excess use of machines .or .excess manufacturing of gutkha was. done in additional shifts of work by the assessee during the relevant period. Also, not a single consignment of unaccounted gutkha has been seized or intercepted while being allegedly cleared without payment of duty. I find that the only evidence available is the statement of Shri.Sohanraj Mehta, which is not at all corroborated by any other evidence.
57. I find that there is failure on part of the investigation to gather corroborative evidences in the case, which has resulted in the investigation being inconclusive. As pointed out the Hon'ble CESTAT in its Final Order dated 20.10.2014, many crucial aspects have not been verified by the investigating team. Based on such incomplete investigation, no definite conclusion can be arrived at. In my view, incomplete investigation cannot and could not constitute the grounds for any allegation. As a result of this, it cannot be alleged that the stamps of the Check Post, seen on the transport documents, are fake. 89
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Hence, I am compelled to hold that no case of clandestine manufacture and clearance of gutkha has been established against the assessee.
58. In view of the above, I hold that the total demand of Rs.26,57,29,571/- made against the assessee in the show cause notice SI.No.163/2012 dated 01.08.2012, in terms of proviso to Section 11A(1)/Section 11A of Central Excise Act, 1944, alleging clandestine clearance of gutkha during the period from July 2007 to February 2008, is not sustainable. I also hold the demand of Interest in terms of Section 11AB/Section 11AA of the Central Excise Act, 1944 is also not sustainable. For the above mentioned reasons, there is no justification to hold 57085 cartons of R.M.D.Gutkha as liable for confiscation. I also hold that the penalty proposed to be imposed on the assessee under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002 is not sustainable.
58.1 Further, based on my finding that the demand on the main noticee is not sustainable and based on the written submissions made by the co-noticees in the case,1 also hold that the penalties proposed under Rule 26 of Central Excise Rules, 2002 against (i)Shri.Rasiklal M.Dhariwal, Chairman of M/s.Dhariwal Industries Limited, Bangalore,
(ii)Shri.Prakash R.Dhariwal, Managing Director of M/s.Dhariwal Industries Limited, Bangalore, (iii)Shri.5ohanraj Mehta,. Partner of M/s.Mehta Associates, Bangalore, (iv)Shri.Prashanth S. Bafna, CEO[Production] of M/s. Dhariwal Industries Limited, Bangalore, (v) Shri.Jeevan B.Sancheti, CEO[Accounts] of M/s.Dhariwal Industries Limited, Bangalore, (vi)Shri.Pavan Kumar Mehta, Proprietor of M/s.Stuti Enterprises, Bangalore, (vii)Shri.M.B.Mallikarjuna of Sri Gajanana Arecanut Traders/Agencies, Shimoga (viii) M/s. Champion Packaging Industries Pvt. Ltd., Bangalore and (ix)M/s.Rajhans Enterprises, Bangalore, is not liable to be imposed on them as the same is unsustainable In view of my above findings, I pass the following order. I drop the proceedings initiated against M/s.Dhariwal Industries Limited., No.2, 3 & 4, Singasandra, Hosur Road, Bangalore - 560 068 under show cause notice Sl.No.163/2012 dated 01.08.2012 issued from file C.No.V/24/15/154/2012C1 issued by the Commissioner of Central Excise, Bangalore-I Commissionerate, Bangalore. I also drop the proceedings initiated against Shri.Rasiklal M.Dhariwal, Shri.Prakash R.Dhariwal, Shri.Sohanraj Mehta, Shri. Prashanth S. Bafna, Shri. Jeevan B. Sancheti, Shri. Pavan Kumar Mehta, Shri.M.B. Mallikarjuna, MIs. Champion Packaging Industries Pvt. Ltd., Bangalore and M/s.Rajhans Enterprises. Bangalore, in the said notice."
125. We find the AO in the instant case while estimating the estimated production and turnover of the Bangalore factory has also based his calculation on the basis of the production of the Baroda unit of the assessee company. However, since the Commissioner, Central Excise after thorough investigation by the Excise 90 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 department has come to a conclusion that there is no suppressed production or excess consumption of raw materials or packing materials by the assessee or excess use of machines or excess manufacturing of Gutkha done in additional shifts worked by the assessee during the relevant period, therefore, the huge suppressed turnover determined by the AO and upheld by the CIT(A) in our opinion is not justified.
126. We find, the assessee is liable to pay excise duty on its production in the factory at Bangalore. It had maintained quantitative stock account, RG1 Register for the production and till the date of search no discrepancy was noticed by the excise department. On page 124 of the paper book the assessee has given the details of dates on which the excise officials have visited the factory premises and no discrepancy was noticed by them. It is also an admitted fact that while some evidence of payment of bribes to sales tax personnel are mentioned in the documents seized from Mr. Sohanraj Mehta, however, no such evidence of bribes paid to excise people are mentioned. Had there been any excess production of such huge quantity as computed by the AO, some evidence of managing the excise people could have been found. However, it is not the case here. Therefore, the computation of suppressed production by the AO and upheld by the CIT(A) in our opinion under the facts and circumstances of the case cannot be relied upon.
127. We find the Hon'ble Allahabad High Court in the case of CIT Vs. Mascot (India) Pvt. Ltd. and Forgings Pvt. Ltd. has held that when the sales declared by the assessee are all excisable goods, periodically checked by Excise authorities and also duly audited by 91 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the auditors, it is beyond comprehension that any addition on account of alleged suppressed sales can be made without any valid basis whatsoever on record. The relevant observation of the Hon'ble High Court reads as under :
"6. The main controversy is with regard to the addition of Rs.15,99,158 made by the assessing authority on account of alleged suppression in the domestic sales; rejection of book results and applying a net profit rate of 22 per cent by the assessing authority and disallowance of Rs. 5,71,832 paid by the assessee as commission on indirect export sales.
7. The Tribunal while deleting the addition of Rs. 15,99,158 made by the AO on account of alleged suppression in domestic sales has dealt with each and every aspect of the matter and also met the reasoning of the AO and was of the opinion that the addition of Rs. 15,99,158 made by the AO on account of alleged suppression in domestic sales was unjustified. The assessee had claimed commission and discount of Rs.11,80,488. This commission and discount was ranging between 1 and 7 per cent in the case of different parties. The assessee explained that on local sale, cash discount of 1 per cent is allowed to the customers and 3 per cent agency commission is allowed to the agent. On export sales, agency commission was 5 per cent except in the case of M/s Kajriwal Enterprises to whom commission at 7'l1er cent was allowed. The AO had also noted the complete details of the commission paid by assessee. The details of domestic sales, commission and discount paid thereon was furnished by the assessee before the lower authorities. The entire sales made by the assessee are' of excisable goods. While deleting the addition of Rs. 15,99,158 made by the AO the Tribunal, inter alia, has observed as follows:
"It is beyond comprehension that the charge of alleged suppression of sales has been confirmed by the CIT(A) without applying his mind on such elaborate written submission and comprehensive details submitted before him by the assessee. The AO has brought no material or evidence on records to prove the existence of any unaccounted local sales having been made by the assessee. The sales declared by the assessee are of excisable goods. The correctness of declared sales is supported by regular books of account which have duly been audited by the auditors as required by various provisions of the Companies Act and the IT Act. The auditors have given unqualified report. The excise authorities have not doubted the correctness of the declared sales. The sales recorded in the books of account are supported by various excise registers, which are periodically checked and verified by the excise authorities. It is beyond comprehension that any addition on account of alleged suppressed sales can be made without any valid basis whatsoever on record. We, are, therefore, of the considered opinion that the addition of Rs. 15,99,158 made by the AO and confirmed by the learned CIT(A) on account of alleged suppression of domestic sales is patently wrong. The same is, therefore, deleted."
8. The findings recorded by the Tribunal are based on appreciation of fact and material available on record. We do not find any illegality or infirmity m the order passed by the Tribunal on the aforesaid issue." 92
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
128. We find the Hon'ble Gujarat High Court in the case of CIT Vs. Sanjay Oil Cake Industries reported in 197 CTR 520 has held as under :
"8. The Tribunal has upheld the findings recorded by CIT(A) for deleting the additions on account of undisclosed income on account of suppressed sales of oil and oil-cakes. It has been found by the Tribunal that it is an undisputed fact that regular books of account have been maintained by the assessee along with records of stock as required under the provisions of the excise law. That correctness of book results relating to production of oil and oil-cakes has been accepted by the IT authorities in the past. The production of oil and oil-cakes as well as stock records have been examined by the Excise Department and the Sales-tax Department and neither of those authorities, who are also Revenue authorities, have found any discrepancy in the records maintained by the assessee. Similarly, the Tribunal has taken cognizance of the fact that the surprise visits by the officials of Civil Supplies Department have revealed that there were no irregularities in the maintenance of stock, and the physical stock and the stock records tallied and were found in order. The Tribunal has also found that percentage of yield of oil and oil-cakes would depend on the quality of groundnut and the quality of groundnut was likely to fluctuate/vary on the basis of various factors like the season during which purchases were made, the area from where the purchases were made, the extent of moisture content in the groundnut which in turn would depend upon the extent of rain, and also technical efficiency of the crushing process in each case. The Tribunal has further found that the AO has not pointed out any specific omission or suppression in the books of account maintained by the assessee. Nor has the Revenue disputed the fact that in case of various ether oil mills, the percentage of production of oil and oil-cakes during the year under consideration is less when compared to the percentage of production in case of the assessee. On the basis of these factors, the Tribunal has came to the conclusion that the CIT(A) was justified in deleting the additions on account of alleged suppression of unaccounted sales of oil and oil-cakes of Rs. 54,23,457 and Rs. 12,44,130, respectively.
9. The aforesaid findings recorded by the Tribunal are supported by the evidence which is available in the paper book and no material has been pointed out so as to take a different view of the matter. The Tribunal has taken into consideration all relevant facts for the purpose of adjudicating the issue as to whether there was any suppressed production of oil and oil-cakes resulting in sales outside books and consequently undisclosed income. In the result, it is not necessary to reiterate the reasons and the factors which have weighed with the Tribunal while deleting the additions on this count and there being no infirmity in the order of the Tribunal in relation to this issue, no interference is called for.
10. The question referred at the instance of the Revenue is, therefore, answered in the affirmative i.e., in favour of the assessee and against the Revenue holding that the Tribunal was right in law in deleting the addition of Rs. 54,23,457 made on account of suppressed production of 28,284 tins of oil and also Rs.12,44,130 on account of suppressed production of 678 tons of oil-cakes.93
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
11. Coming to the reference at the instance of the assessee, though as many as six questions have been referred, the issue is whether the assessee had manufactured 28,284 tins and failed to show the said production in the accounts maintained by the assessee."
129. We find the assessee from the very beginning was stating that Shri Sohanraj Mehta might be indulging in parallel business since the product of the company was a branded product. He might be indulging in clandestine manufacturing of Gutkha and Pan Masala. However, the Revenue authorities have rejected the above contention of the assessee on the ground that there was no other stock found on the date of search other than that of M/s. DIL from the premises of Shri Sohanraj Mehta. Further, no other evidence was given by the assessee to substantiate such claim. At the instance of the Bench, the assessee has filed certain evidences in the form of Complaint to the Police Department, Newspaper articles published in various newspapers regarding spurious marketing of Gutkha of the assessee company etc. and also copy of the Civil Court, Chennai. We find from the various evidences furnished that the assessee vide letter dated 09-10-1996 has addressed a letter to the Police Inspector, VP Road, Girgaon, Bombay on 09-10-1996 regarding supply of counterfeit Manikchand Gutkha. A Newspaper report published in Malai Mallar (Tamil Daily) dated 11-10-1997 shows the manufacturing of duplicate Pan Masala and Tea dust for which 3 persons were arrested. Similarly, another news article published on 11-10-1997 in Vikatan newspaper (Tamil) shows seizure of 20 boxes of spurious Pan Masala and Gutkha by the Police. The various FIR copies filed show sale of spurious Pan Masala and Gutkha of the assessee's brand at Hyderabad, Jaisinghpur, Tiruchy, Kanpur, Mahabubnagar etc. Although no FIR copy has been filed at Bangalore or in the State of Karnataka, the 94 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 submission of the Ld. Counsel that spurious Pan Masala and Gutkha under the brand name of the assessee company was being produced and sold in the market cannot be simply brushed aside.
130. So far as the finding of the Revenue authorities that the profit generated from suppressed production and sale was diverted to various persons whose names appear in the seized documents is concerned, we find the different Benches of the Tribunal have deleted such addition made in their hands. We find the Bangalore Bench of the Tribunal in the case of CIT Vs. H.S. Chandramouli vide ITA No.1551/Bang/2012 order dated 20-08-2013 has upheld the order of the CIT(A) in deleting the addition of Rs.22,75,000/- which was added by the AO on account of receipt of the above sum from Shri Sohanraj Mehta, C&F agent of M/s. DIL for Karnataka Region. The Lucknow Bench of the Tribunal in the case of Mohd. Yakub perfumers Pvt. Ltd. vide ITA No.388/Lkw/2013 order dated 10-12- 2014 has upheld the order of the CIT(A) in deleting the addition of Rs.50 lakhs which was added by the AO on account of entry found in the documents of Shri Sohanraj Mehta, C&F Agent of RMD Group at Bangalore. The Lucknow Bench of the Tribunal in the case of DCIT Vs. Pavan Kumar Agarwal vide ITA No.413/Lkw/2012 and CO No.70/Lkw/2012 order dated 16-02-2015 has upheld the order of the CIT(A) in deleting the addition of Rs.1,13,40,000/- made by the AO on account of addition on the basis of seized document of Shri Sohanraj Mehta. The Delhi Bench of the Tribunal in the case of M/s. Bholanath Radhakrishna vide ITA No.5149/Del/2012 order dated 15-04-2013 has upheld the order of the CIT(A) in deleting the addition of Rs.9 crores made by the AO on the basis of entries found in the books of Shri Sohanraj Mehta, C&F 95 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Agent for Karnataka Region of RMD group. The Pune Bench of the Tribunal in the case of Pradeep Arun Runwal reported in 149 ITR 548 has also deleted the addition made by the AO and upheld by the CIT(A) on account of additions made on the basis of the seized papers from Shri Sohanraj Mehta, C&F Agent of RMD group.
131. Based on the above decisions, the Pune Bench of the Tribunal in the case of Shri Vinit Ranawat vide ACIT vide ITA Nos. 1105 and 1106/PN/2013 order dated 12-06-2015 for A.Yrs. 2006-07 and 2007-08 has deleted the addition of Rs.21 crores made in the hands of the assessee on account of loose papers found during the course of search in the case of Shri Sohanraj Mehta, C&F Agent of M/s. DIL for Karnataka Region. Thus, we find some force in the submission of the Ld. Counsel for the assessee that the different Benches of the Tribunal have deleted the additions made in their hands on the basis of so called deployment of funds by the assessee company out of the generation of unaccounted income out of suppressed turnover.
132. As mentioned earlier, no incriminating documents in shape of any unaccounted purchase, unaccounted sale, unaccounted transport receipt was found either during the course of search at the place of Shri Sohanraj Mehta/Shri Mithulal or at the premises of the assessee. If the extent of unaccounted production and unaccounted turnover as computed by the AO is believed, then atleast 700 to 800 trucks are required, a finding given by the Commissioner, Central Excise. Therefore, we find force in the submission of the Ld. Counsel for the assessee that if the assessee was indulging in the clandestine manufacturing of Gutkha, then atleast some evidence could have been found which is not in the 96 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 instant case. Even the Commissioner, Central Excise has also given his findings that there was no unaccounted production. In our opinion, the question of unaccounted turnover will arise only when there is unaccounted production. Since one Government authority, after thorough investigation, has given a finding that there is no unaccounted production and clearance of such unaccounted Gutkha to the C&F Agent, therefore, estimation of huge unaccounted producuction and sale thereof as determined by the AO in the body of the assessment order and upheld by the CIT(A), in our opinion is uncalled for.
133. There is another aspect which we have noticed is regarding decoding of the figures. We find there are certain chits which are found during the course of search in the place of Shri Sohanraj Mehta/Shri Mithulal, copies of which are placed at paper book pages 41 to 102 of the paper book. These chits show amounts written both in words as well as in figures. Therefore, when the chits contain the amounts written both in words and figures, therefore, in absence of any cogent evidence in the hands of the department, it is not proper to decode the same by adding two more zeros.
134. So far as the statement of various persons recorded during the course of search in the case of Shri Sohanraj Mehta are concerned, the presumptions u/s.132(4A) will apply to the person who is searched and in whose custody the papers are found. Therefore, we find merit in the submission of the Ld. Counsel for the assessee that loose papers found with Shri Sohanraj Mehta cannot be presumed to be belonging to the assessee or reflecting the business transaction of the assessee. It has been held in various 97 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 decisions that the presumption u/s.132(4A) is applicable only against the person from whose possession the books of account or other documents were found and not against any other person. It has been held that as per section 132(4A) where any books of account or document is found in the possession and control of any person in the course of the search, it is to be presumed that they belong to such person. Thus, clearly the presumption is in respect of the person from whom they were found. In the instant case, such incriminating documents were found from the possession of Shri Sohanraj Mehta/Shri Mithulal. Therefore, we find force in the submission of the Ld. Counsel for the assessee that presumption u/s.132(4A) will be applicable to Shri Sohanraj Mehta and not to the assessee company.
135. Another aspect to be considered is non-finding of any unaccounted cash or asset or investment of such huge amounts from generation of such huge unaccounted money. No doubt the courts have held that if evidence of undisclosed income is found then corresponding asset/expenses need not be proved. However, if such undisclosed income is determined on the basis of estimation, as in the instant case, then finding of such corresponding asset could have given some credence to such estimated income. However, the same is not there in the instant case.
136. We also find force in the submission of the Ld. Counsel for the assessee that papers found from Shri Sohanraj Mehta is for the period from January 2003 to February, 2008. The search took place on 09-10-2009 at Shri Mehta's place. However, for the period from March 2008 till the date of search, no loose papers were found. Therefore, if the assessee was having such roaring unaccounted 98 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 business, there was no reason to stop such lucrative business from March 2008 onwards. Secondly, if the inference is that Shri Sohanraj Mehta has already given the account for this period to the assessee and therefore he has destroyed the papers, there is no reason as to why he should have maintained the papers for the old period. This defies logic.
137. Another aspect which the Ld. Counsel for the assessee has argued and which in our opinion finds force is that there is no signature of confirmation by the assessee in the statements. For example Page No.204 of the paper book is the statement for the period 02-04-2003 to 31-08-2006. There is no signature of confirmation by the assessee on this paper. If the paper was written by Shri Sohanraj Mehta for the benefit of the assessee so as to give him details of his account, he should have obtained the signature of the assessee on this paper as a token of confirmation. Thus, we find force in the submission of the Ld. Counsel for the assessee that there is no evidence that the loose papers belong to the assessee.
138. We also find merit in the arguments of the Ld. Counsel for the assessee that the assessee normally sells its product from Bangalore factory to various C&F agents in Tamilnadu, Andhra Pradesh, Kerala, South Maharashtra etc. No proof that these agents have taken the stock from Shri Sohanraj Mehta and paid money to the assessee or Mr. Mehta was found. If all these sales are made through Shri Sohanraj Mehta in these territories, the above C&F agents would have objected. Secondly, no evidence that Shri Sohanraj Mehta maintained the warehouses in various states was found. Thus, if what Shri Sohanraj Mehta says is correct, 99 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 these unaccounted sales can be made by Shri Sohanraj Mehta and that too in his region, i.e. Karnataka and any other presumption is not possible.
139. We further find that the accounts written by Shri Sohanraj Mehta are written for the period from January 2003 to February 2008 whereas the payment chits written by the assessee to Shri Sohanraj Mehta are for the period from June 2006 to October 2007. No letters for the balance period are found during the searches. We therefore find force in the arguments of the Ld. Counsel for the assessee that what is not found is presumed to be not there and therefore Shri Sohanraj Mehta has not corroborated that the assessee has verified all these loose papers found with him. Further, no evidence was found with the figures mentioned by the assessee in his letters to Shri Sohanraj Mehta are in coded figures. No evidence was found that the assessee has checked and okayed the notings of Shri Sohanraj Mehta. We therefore find some force in the arguments of the Ld. Counsel for the assessee that Shri Sohanraj Mehta has not maintained these accounts/details for the purpose of reporting to the assessee or for the purpose of giving account of unaccounted transactions to the assessee. Merely because Shri Sohanraj Mehta filed his return disclosing some commission as his additional undisclosed income and the department accepted the same without even making protective addition in his hands the same in our opinion cannot be the basis to compute huge suppressed turnover to the tune of about Rs.340 crores as assessee's unaccounted turnover especially when not a single piece of unaccounted purchase or sales voucher or transport receipt or unaccounted purchase receipt was found. This in our 100 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 opinion is also an indicator that no such unaccounted business was carried out by the assessee as alleged by the AO and upheld by the CIT(A). Even under the theory of probability also no such unaccounted business is possible under the facts and circumstances discussed above.
140. In view of the above, it has to be held that the huge suppressed production and suppressed turnover and thereby generation of huge unaccounted income as determined by the AO, in our opinion, is incorrect. Therefore, the addition made by the AO and partly sustained by the CIT(A) on account of unaccounted profit on suppressed production and sale thereof is directed to be deleted. 140.1 At the same time, it is also an admitted fact that certain chits duly signed by the assessee were found from the possession of Shri Sohranraj Mehta during the course of search on 10-10-2009. Those chits were in the hand writing of the assessee for different years. It is not known as to why and for what purpose the assessee used to give such chits in his hand writing. Further, the amount of such chits according to the assessee is about Rs.61 lakhs whereas the Revenue has considered the same at about Rs.61 crores by adding two zeros to the figures. We have already held at Para No.133 of this order that in absence of any cogent evidence in the hands of the revenue, it is not proper to decode the same by adding two zeros. The argument of the Ld. Counsel for the assessee that certain sales tax refunds were due to be received by Shri Sohanraj Mehta for which he has issued chits to be handed over to them is not borne out of records. Considering the totality of the facts of the case, in our opinion, addition of an amount of Rs.20 crores for the A.Yrs. 2004-05 to 2008-09 will meet the ends of justice under the 101 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 facts and circumstances of the case. We therefore direct addition of Rs.20 crores for the period from A.Yrs. 2004-05 to 2008-09 to be spread over equally. We hold and direct accordingly. Thus, the grounds raised by the Revenue are dismissed and the grounds raised by the assessee are partly allowed.
141. Identical grounds have been taken by the assessee as well as the Revenue in A.Y. 2005-06 to A.Y. 2008-09. In view of our above findings, the grounds raised by the assessee are partly allowed and the grounds raised by the revenue in these appeals are dismissed.
142. Ground of appeal No.5 by the assessee relates to treatment of sales tax subsidy received of Rs.10,02,61,664/- as revenue receipt as against capital receipt treated by the assessee.
143. Facts of the case, in brief, are that the AO noted during the course of assessment proceedings that in the assessment order passed u/s.143(3) on 29-12-2006, sales tax subsidy of Rs.10,02,61,664/- was treated as revenue receipt as against capital receipt claimed by the assessee. During the course of assessment proceedings he asked the assessee to explain as to why the same disallowance/addition should not be made for the same reasons as mentioned in assessment order u/s.143(3) dated 29-12-2006. The assessee reiterated the same submissions as made during the earlier assessment proceedings. It was further submitted that the same is pending before the appellate authorities. The AO accordingly considered the sales tax subsidy received at Rs.10,02,61,664/- as revenue in nature and brought the same to tax.
102
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
144. In appeal the Ld.CIT(A) following the order of his predecessor in assessee's own case for earlier year and the decision of the Pune Bench of the Tribunal in the case of the sister concern namely Rasiklal M. Dhariwal (HUF) vide ITA Nos. 575/PN/2007 and 150/PN/2008 order dated 31-03-2011 held that the amounts received on transfer of the sales tax incentive is revenue in nature.
145. Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
146. After hearing both the sides, we find the Tribunal in assessee's own case for A.Yrs. 2003-04 to 2005-06 vide ITA Nos. 485, 1559 and 1560/PN/2007 order dated 29-05-2015 has decided the issue and held that the sales tax subsidy received by the assessee in the instant case was in the course of carrying of its trade more profitably for which it cannot be held as capital receipt and the order of the CIT(A) treating the same as revenue receipt has been upheld. The Ld. Authorised Representative also conceded that the issue has been decided against the assessee by the order of the Tribunal in assessee's own case. In view of the decision of the Tribunal in assessee's own case this ground by the assessee is dismissed.
147. Identical ground has been raised by the assessee in A.Y. 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10. Following the reasons given in the preceding paragraphs, this issue by the assessee in the above years is dismissed.
148. In Ground of appeal No.3 the Revenue has challenged the order of the CIT(A) in deleting the addition of Rs.60 lakhs made by the AO under Explanation to section 37(1) of the I.T. Act. 103
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
149. After hearing both the sides, we find the AO during the course of assessment proceedings noted from the seized documents that M/s. DIL had made certain unlawful payments to officials of the Sales Tax Department. The said notings was found in Bundle No.A/M/08 which gives monthly summary of unaccounted sales and its deployment for the entire period wherein ST mamul payment of Rs.5 lakhs per month is mentioned for most of the months. According to the AO most of these payments were in the nature of bribe and not an allowable expenditure as per Explanation (1) of section 37 of the Act. He further noted that the entire undisclosed income of the assessee was computed by estimating the GP and therefore it is deemed that all the expenses incurred for earning the undisclosed income have been allowed as deduction. However, any expenditure not allowable as per the Act has to be disallowed. He accordingly made addition of Rs.60 lakhs to the total income of the assessee.
150. Before CIT(A) the assessee submitted that the disallowance made by the AO of an expenditure which has not been claimed as allowable and also does not form part of the regularly maintained books of account. The disallowance by the AO u/s.37 of the Act is based on wrong facts. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the addition made by the AO on the ground that the AO in the instant case has made the addition of the unaccounted income by applying the GP ratio and considered as added the entire GP and taxed, therefore, nothing further remains to be considered for disallowance as the entire expenses are deemed to have been disallowed and held to be part of the addition of unaccounted income, therefore, it cannot be added once again. 104
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
151. Aggrieved with such order of the CIT(A) the revenue is in appeal before us.
152. First of all we do not find any infirmity in the order of the CIT(A) holding the view that when the AO has estimated the unaccounted income by applying the GP ratio and since the entire GP has been added by him and taxed, therefore, nothing further remains to be added. Secondly while deciding the issue of addition of unaccounted production and suppressed turnover, we have already held that there is no suppressed production or sale thereof. Therefore, this ground by the revenue become infructuous and accordingly dismissed.
153. Identical ground has been raised by the Revenue in A.Yrs. 2005-06 to 2008-09. Following similar reasonings, the ground raised by the revenue on this issue is dismissed.
154. Grounds of appeal No. 4 and 5 by the revenue read as under :
"4. On the facts and in circumstances of the case the Ld. CIT(A) erred in allowing the claim of assessee that employee's Contribution of Rs.4,96,738/- to PF and ESI u/s. 36(1)(va) of the Act, although the same was not paid within due date prescribed within section 36(1)(va) of the Act.
5. On the facts and in circumstances of the case the Ld. CIT(A) erred in allowing the claim of assessee that employee's Contribution of Rs. 4,96,738/- to PF and ESI u/s. 36(1)(va) of the Act, relying on the decision of the Apex court in the case of Alom Extrusions Ltd, although the same is not applicable in present facts of the case. "
155. Facts in brief are that the AO passed the assessment order u/s.143(3) on 29-12-2006 for A.Y. 2004-05 and made disallowance of Rs.4,96,738/- u/s.36(1)(va) on account of delayed payment of employees contribution to PF and ESI. Before CIT(A) it was submitted that the payments of PF and ESI contribution were made before due date of filing of returns. The CIT(A) following the decision 105 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 of Hon'ble Supreme Court in the case of CIT Vs. Alom Extrusions Ltd. reported in 319 ITR 306 deleted the disallowance.
156. After hearing both the sides, we do not find any infirmity in the order of the CIT(A). Admittedly, the assessee has deposited the employees' contribution to PF and ESI before the due date of filing of the return. The Coordinate Benches of the Tribunal are taking the consistent view that if the assessee has deposited the employees' contribution to PF and ESI before the due date of filing of the return then no disallowance is called for. Since the assessee in the instant case has admittedly deposited the amounts before the due date of filing of the return, a finding given by the CIT(A) and not controverted by the revenue, therefore, we do not find any infirmity in his order. Grounds of appeal No.4 and 5 by the revenue are accordingly dismissed.
157. Identical grounds have been raised by the Revenue in A.Yrs. 2005-06 to 2008-09. Following similar reasonings the grounds raised by the revenue on this issue in the above appeals are dismissed.
158. In Ground of appeal No. 6 revenue has challenged the order of CIT(A) in allowing the claim of depreciation on assets of Hyderabad Division, although block of assets installed in Hyderabad Division, were not used in previous year, current year and subsequent years.
159. Facts of the case, in brief, are that the AO based on the original assessment order passed u/s.143(3) on 29-12-2006 disallowed depreciation of Hyderabad Division of Gutkha amounting to Rs.18,98,807/- on the ground that the said unit is non functional during the year. In appeal the Ld.CIT(A) following the decision of 106 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Hon'ble Bombay High Court in the case of G.R. Shipping Ltd. deleted the disallowance of depreciation in respect of Hyderabad Division (Gutkha).
160. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us
161. After hearing both the sides, we find no infirmity in the order of the CIT(A). The AO had disallowed the depreciation on the ground that the assessee has not used the assets during the year as the unit was non functional. We find the issue has been decided in faovur of the assessee by the decision of the Hon'ble Bombay High Court in the case of G.R. Shipping Ltd.(Supra). In that case the assessee was engaged in shipping business and owned a barge which was included in the block of assets. The barge met with an accident and sunk on 06-03-2000, i.e. relevant to A.Y. 2000-01. As the efforts to retrieve the barge was uneconomical the barge was sold on as is where is basis for Rs.55 lakhs in the month of May 2001 relevant to A.Y. 2002-03. As the barge was non operational and not used for business at a later date in A.Y. 2001-02 the AO denied depreciation. The Tribunal held that after the concept of "Block of Asset" w.e.f. 01-04-1988, individual assets had lost their identity once it entered with the Block of Assets and only the Block of Assets had to be considered. It was held that the test of user had to be applied upon the block of assets as a whole and not on individual assets. On appeal by the Revenue, the Hon'ble High Court dismissed the appeal filed by the Revenue. Therefore, since the Ld.CIT(A) in the instant case has allowed the claim of depreciation on the block of assets installed at Hyderabad Division which were not used during the impugned assessment year by 107 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 following the decision of Hon'ble Bombay High Court, therefore, in absence of any contrary material brought to our notice we do not find any infirmity in the order of the CIT(A). Ground raised by the Revenue is accordingly dismissed.
162. Identical grounds have been raised by the Revenue in A.Yrs. 2005-06 to 2007-08. Following similar reasonings the grounds on this issue raised by the revenue for the above years are dismissed.
163. Ground of appeal No.6 by the assessee and Ground of appeal No.5 by the Revenue for A.Y. 2007-08 read as under :
By Assessee :
"6. The Id CIT(A) erred in confirming the disallowance of Rs.5,00,000/- made u/s. 14A of the Act without appreciating that the disallowance made was on an adhoc basis and hence, the said disallowance made may kindly be deleted."
By Revenue :
5. On the facts and in circumstances of the case the Ld. CIT(A) erred in adopting arbitrary disallowance u/s.14A and erred in granting consequential relief to the assessee to the tune of Rs.3.64 lakhs, as the said quantification of disallowance u/s.14A is neither based on proper appreciation of facts nor of law nor on any sound logic."
164. Facts of the case, in brief, are that the AO following the order passed u/s.143(3) on 22-12-2009 wherein disallowance of Rs.8,64,152/- was made u/s.14A of the Act made the same disallowance. Before CIT(A) the assessee relying on various decisions submitted that no disallowance is called for u/s.14A r.w.Rule 8D.
165. Based on the arguments advanced by the assessee the Ld.CIT(A) sustained an amount of Rs.3,64,152/- out of Rs.8,64,152/- made by the AO. While doing so, he held that in view of the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce manufacturing Co. Ltd. Vs. CIT reported in 234 CTR 1 108 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 provisions of Rule 8D is not applicable. He noted that the dividend income of Rs.1,33,45,117/- has been received on a number of shares and mutual funds wherein investments have been made by it and the same has been claimed as exempt u/s.10(34) of the Act. Since the AO has already held that assessee was having substantial own funds for which disallowance of interest is not warranted. However, he has disallowed certain expenses by applying Rule 8D(2)(iii) at 0.5% of the average investment of Rs.17.28 crores which worked out to Rs.8,64,152/-. Considering the totality of the facts of the case the CIT(A) gave relief of Rs.5 lakhs and sustained the disallowance of Rs.3,64,152/- for which the Assessee as well as the Revenue are in appeal before us.
166. The Ld. Counsel for the assessee at the outset submitted that the entire dividend is received from mutual funds where the directors only take the decisions for which no expenses have been incurred, therefore, disallowance of the above amount is high and excessive.
167. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A).
168. After hearing both the sides, we find the AO disallowed Rs.8,64,152/- being administrative expenses incurred for earning the exempt income. We find the Ld.CIT(A) considering the totality of the facts of the case has restricted such disallowance to Rs.3,50,000/- which in our opinion is a reasoned one. We uphold the order of the CIT(A) on this issue and the grounds raised by the assessee as well as the revenue on this issue are dismissed. 109
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 168.1 The Ld. Counsel for the assessee did not press ground of appeal No.7 regarding disallowance of Rs.50,000/- in respect of sales promotion expenses because of smallness of the amount. Therefore, the ground raised by the assessee is dismissed.
169. The next issue that arises in A.Y. 2008-09 by the assessee is regarding disallowance of Rs.26,42,480/- u.s.14A r.w.Rule 8D. Ground of appeal No.6 on this issue read as under :
"6. The Ld CIT(A) erred in confirming the disallowance of Rs.26,42,480/- made u/s. 14A r.w.r. 8D ignoring the written submissions filed and without appreciating the fact that the learned AO has not provided any basis or working of disallowance made and hence, the said disallowance made may kindly be deleted."
170. Facts of the case in brief, are that the AO during the course of assessment proceedings noted that the assessee has claimed exempt income of Rs.3,43,74,993/-. However, the assessee has not attributed any amount as expenditure towards earning of such exempt income. According to the AO, it is difficult to accept the proposition that all the tax free income earned by the assessee has been earned without incurring any expenditure. Therefore, he asked the assessee to explain as to why expenditure relatable to exempt income should not be disallowed under the provisions of section 14A r.w. Rule 8D. It was explained by the assessee that it has received dividend income of Rs.3,39,95,312/- and the assessee has offered an amount of Rs.34,268/- towards disallowance u/s.14A of the I.T. Act. It was accordingly requested not to disallow any further expenditure. However, the AO was not satisfied with the explanation given by the assessee. According to him, there is always an element of indirect expenditure for earning such exempt income. Applying the provisions of section 14A, he disallowed an amount of Rs.26,42,480/- and added the same to the total income 110 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 of the assessee.
171. In appeal the Ld.CIT(A) upheld the action of the AO. He observed that the assessee has not brought any material so as to prove anything contrary to the findings of the AO. The assessee has merely stated that the assessee owned huge interest free funds in comparison to the investment in shares and mutual funds. However, the actual cash flow statement was not filed which could demonstrate the contention raised by the assessee. It was not proved that the investment has been made from the capital account which owned tax free funds. The details of other investments made has not been brought on record so as to justify the claim. The assessee has not been able to establish nexus of expenditure/investment with that of the interest free funds available with it. Rejecting the various explanations given by the assessee and distinguishing the decisions cited before him the CIT(A) upheld the disallowance made by the AO. He further observed that when assessee is paying interest on borrowing and the assessee is not able to show that investment in shares are out of internal accruals or non interest bearing funds disallowance u/s.14A can be made.
172. Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
173. The Ld. Counsel for the assessee submitted that no borrowings have been made for investment in exempt income and whatever borrowings were made were specifically for the windmill. Referring to page 10 of Volume-I of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the following chart :
111
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Disallowance out of Disallowance out Total A.Y. interest expenses of admn. disallowance u/s.14A r.w.R8D(ii) Expenses u/s.14A u/s.14A r.w. R8D(ii) 2008-09 14,69,688 11,72,792 26,42,480 2009-10 12,32,112 18,01,966 30,34,078 2010-11 7,84,674 22,26,799 30,11,473 He submitted that the mutual fund houses provide door step services for investment and are also charging entry load of 0.5% to 2.5% for administrative expenses which forms part of cost of investments. Therefore, no separate disallowance is warranted.
Further, the decisions for investments are taken by the directors of the assessee company who are not drawing any salary from the assessee company and the implementation of the decisions does not require incurring of any expenditure. He submitted that interest on term loans cannot be considered for disallowance since the same have been utilized for specific purposes for which the same was obtained. Further, the AO has also not brought any cogent reasons for disallowing expenditure u/s.14A r.w. Rule 8D. He accordingly submitted that no disallowance could be made.
174. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A).
175. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case has made disallowance of Rs.26,42,480/- u/s.14A r.w.Rule 8D. Since the assessment year involved in the instant case is A.Y. 2008-09, therefore, provisions of section 14A r.w. Rule 8D are applicable. It is the submission of the Ld. Counsel for the assessee that it has 112 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 sufficient own capital and free reserves which is more than the investment in shares/mutual funds, the income of which is exempt. The borrowings in the shape of term loan which are met specifically for acquiring windmill has not been generated for investment in shares/mutual funds, the income of which is exempt. It has been held in various decisions including the decision of Hon'ble Bombay High Court in the case of HDFC Bank Ltd. vide Writ Petition No.1753/2016 order dated 25-02-2016 that no disallowance of interest can be made u/s.14A r.w. Rule 8D if the assessee has sufficient own capital and free reserves which is more than the investment in shares/mutual funds, the income of which is exempt. However, the same is not borne out of the records in the instant case. We therefore restore this issue relating to disallowance of the interest part to the file of the AO with a direction to give one more opportunity to the assessee to substantiate that the own capital and interest free funds are more than the investment in shares/mutual funds, the income of which is exempt. The AO shall decide the issue accordingly in the light of the decision of Hon'ble Bombay High Court in the case of HDFC Bank Ltd. cited (Supra). If the own capital and free reserves are more than the investments in shares and mutual funds, the income of which is exempt, in that case, no disallowance u/s.14A r.w. Rule 8D is warranted on account of interest expenditure.
176. So far as disallowance of administrative expenses is concerned, we find the AO has disallowed an amount of Rs.11,72,792/- which has been upheld by the CIT(A). Disallowance of such expenses in our opinion is highly excessive and unreasonable under the facts and circumstances of the case. We 113 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 find force in the submission of the Ld. Counsel for the assessee that the mutual funds are charging entry load varying from 0.5% to 2.5%. Further, the directors are also not drawing any salary who are implementing the decision of investment in mutual funds etc. At the same time, incurring of some administrative expenses for earning such huge tax free income cannot be ruled out. Considering the totality of the facts of the case, we restrict the disallowance on account of administrative expenses at Rs.2 lakhs each for A.Yrs. 2008-09, 2009-20 and 2010-11 respectively. Ground raised by the assessee is accordingly allowed for statistical purposes.
177. Identical grounds raised by the assessee in A.Yrs. 2009-10 and 2010-11. Following our directions given in the preceding paragraphs the issue relating to disallowance of interest expenditure is restored to the file of the AO who shall decide the issue in the light of the directions given in the preceding paragraphs. So far as the disallowance of administrative expenses is concerned, we have already directed to disallow Rs.2 lakhs each for A.Yrs. 2009-10 and 2010-11 respectively. Ground raised by the assessee on this issue is accordingly allowed for statistical purposes.
178. Grounds of appeal No. 1 & 2 by the Revenue for A.Y. 2010-11 are as under :
"1. The Ld.CIT(A) erred in deciding that power generation from windmill is manufacturing activity of article or things.
2. The Ld.CIT(A ) erred in deciding that assessee can claim additional depreciation on windmill if assessee is engaged in manufacturing activities although windmill has no connection with its manufacturing business."114
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
179. Facts of the case, in brief, are that the AO during the course of assessment proceedings noted that the assessee during the impugned assessment year has installed 10 Windmills/Wind Turbine Generators (WTG's) consisting of 6 WTGs 2.1 M.W. and 4 WTGs of 1.5 M.W. capacity at Jaisalmer, Rajasthan. The assessee has claimed additional depreciation as per provisions of section 32(1)(iia) of the I.T. Act. All these 10 WTGs were installed during the year under consideration. The AO further noted that the assessee has claimed additional depreciation @10% on such windmills since the assets have been put to use for less than 180 days and such claim of additional depreciation u/s.32(1)(iia) amounts to Rs.9,15,52,187/-. However, according to the AO, "power generation activity" as such does not amount to "manufacture of article or thing" as mandated u/s.32(1)(iia) of the I.T. Act to make the assessee eligible for claim of additional depreciation under that section. He, therefore, asked the assessee to justify its claim of additional depreciation on windmill, since wind mills are not engaged in production of an article or thing. The assessee in his written submissions filed before the AO justified in claiming such additional depreciation on WTGs for two reasons, i.e. (a) electricity produced by way of windmill is also an article or thing and (b) additional depreciation is allowable to an assessee which is engaged in the business of manufacture or production of any article or thing. Even otherwise assessee is engaged in the business of manufacture or production of any article or thing.
180. However, the AO was not satisfied with the explanation given by the assessee and held that provisions of section 32(1)(iia) of the Act are not applicable to the newly installed windmills since those 115 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 do not fall in the category of "machinery or plant for the business of manufacturing or production of article or thing" and setting up of these windmills has absolutely no action with the assessee's business of manufacture which in the instant case is manufacture of Gutkha. The AO held that assessee does not have to pay any Excise duty on the so called production of the electricity. Had it been a manufacture or production of article or thing it would have been covered by the provisions of the Excise Act. Relying on the decision of the Hon'ble Supreme Court in the case of Escorts Ltd. where the Hon'ble Apex Court has underscored the philosophy of discouraging double benefit the AO disallowed the claim of additional depreciation on windmills amounting to Rs.9,15,52,187/-
181. Before CIT(A) the assessee submitted that the claim of additional depreciation is admissible if the assessee is engaged in the business of manufacture or production of any article or thing. It was submitted that the assessee is engaged in the business of manufacture of Pan Masala and Gutkha and is also in the business of generation of power which has been judicially held to be equivalent to manufacture of article or thing. Relying on various decisions it was submitted that if the assessee is engaged in the business of manufacturing, additional depreciation has to be allowed.
182. Based on the arguments advanced by the assessee and relying on the decisions of the Hon'ble Madras High Court in the case of CIT Vs. M/s. Hitech Arai Ltd. reported in 377, ITR 477, the decision in the case of Texmo Precision castings reported in 321 ITR 485 and the decision in the case of CIT Vs. VTM Ltd. reported in 319 ITR 336 and various other decisions the Ld.CIT(A) allowed the claim of 116 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 additional depreciation on windmills.
183. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us.
184. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. In the instant case, there is no dispute to the fact that the assessee during the impugned assessment year has installed windmills which has been put to use for a period of less than 180 days. The only dispute is regarding admissibility of additional depreciation on such windmills. It is the claim of the assessee that electricity produced by way of windmill is also an article or thing and therefore additional depreciation is allowable to the assessee since it is engaged in the business of manufacture or production of any article or thing. We find the AO rejected the above contention of the assessee and disallowed the claim of additional depreciation on the ground that assessee does not have to pay any Excise duty on the so called production of the electricity. Had it been a manufacture or production of article or thing it would have been covered by the provisions of the Excise Act. The AO accordingly rejected the claim of additional depreciation. While doing so, he further held that setting up of these windmills has absolutely no connection with the assessees business of manufacture of Gutkha. We find the Ld.CIT(A) based on various decisions allowed the claim of additional depreciation on wind mills. The relevant operative portion of the Ld.CIT(A) at Para 3.4 and 3.5 of the order reads as under :
117
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 "3.4 The Assessing Officer has not disputed the installation of the new plant and machinery in the form of windmill. The Assessing Officer has disallowed the claim of additional depreciation to the appellant on the ground that the same is available on any plant and machinery acquired or installed by the assessee engaged in the business of manufacture or production of article or thing and the appellant was not engaged in such business and that the windmill is classified as renewed energy device and in the generation of power which is not an article or thing. The appellant has brought to notice of the undersigned and also filed a copy of the decision in the case of NTPL Vs DCIT cited supra, wherein the Delhi bench of the ITAT has held as under:
"On due consideration of settled judicial decisions, it is implicitly clear that the Supreme Court has explained the meaning of electricity, the Court has considered the definition of goods as given in Article 366(12) of the Constitution of India. It also took into consideration the sales tax Act of the State of Andhra Pradesh as well as Madhya Pradesh and also considered the dictionary meaning. Thereafter the Court has observed that goods means, all kind of moveable properties. The terms moveable property when considered with reference to goods as defined for the purpose of sales-tax cannot be taken in a narrow sense and merely because electric energy is not a tangible or cannot be moved or touched like, for instance, a piece of wood or a book it cannot cease to be moveable property when it has all the attributes of such properties. It is capable of abstraction, consumption and use of which if done dishonestly is punishable under sec. 39 of the Indian Electricity Act. If there can be sales and purchase of electric energy like any moveable object than there was no difficulty in holding that electric energy was intended to be covered by the definition of goods;
The expression "article, thing or goods" are not defined in the Income-tax Act, 1961. The Commissioner while treating the electricity as not an article or thing has not made reference to any provisions of the Income-tax Act, 1961, he simply construed the meaning of electricity as not article or thing on the basis of his own inference drawn from the nature of this item but if we evaluate the conclusion drawn by the Commissioner in the light of the decision of the Supreme Court given in the case of Indian Cine Agency, CST Vs. M.P. Electricity Board and State of Madhya Pradesh Vs. NTPC then it would suggest that electric energy has all trappings of an article or goods. The process of its generation is also akin to manufacture or production of an article or thing. It is being generated in huge plants though scientifically one may say it is transformation of one source of energy into the other. But all these aspects have been considered in these three judgments of the Supreme Court wherein the Court has explained what is manufacture or production and what is electricity;
Thus, taking into consideration all these aspects, we are of the view that admissibility of additional depreciation cannot be denied to the assessee merely on the ground that electricity is not an article or thing. The order of the CIT (Appeals) is reversed to this extent and the disallowance is deleted."118
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 3.4.1 In the case of CIT Vs Hi Tech Arai Ltd supra the Madras High court has held as under:
"Sec 32(1 )(iia) does not state that the setting up a new machinery or a plant, which was acquired or installed upto 31st March 2002, should have any operational connectivity to the article or a thing that was already being manufactured by the assessee. Therefore the contention that the setting up of a windmill had nothing to do with the power industry, namely manufacture of oil seeds etc, was totally not germane to the specific provision contained in Sec 32(1 )(iia). It could not also be said that setting up of a windmill not fall within the expression setting up of a new machinery or a plant. Hence, the assessee was entitled to additional depreciation."
The aforesaid decision of the Madras High court is seen to have been followed by the Jaipur ITAT in the case of Fashion Suits Pvt. Ltd Vs DCIT in ITA No. 142/Jod/2011 dated 16-12-2011.
3.4.2 In the case of ACIT Vs M. Satishkumar (2012) 191 ITR (Trib) 646 (Chennai) it was held that the generation of electricity is a manufacturing activity. The assessee was involved in the manufacturing activity and fulfilled the conditions as laid down u/s 32(1)(iia). The bench further held that the Govt. vide Finance Act 2012 has amended the provisions of sec. 32(1)(iia) to include the business of generation and distribution of power, eligible for benefit u/s 32(1)(iia) and that although the said amendment is w.e.f. 1-4-2012 it gives impetus to the view that generation of electricity is a manufacturing process and qualifies for the benefit u/s 32(i)(iia). The aforesaid case was related to an assessee engaged in the business of generation of electricity through windmills and claimed 100% depreciation in respect of the windmill installed as per the provisions of sec 32(1) and item (xiii) of New Appendix I read with rule 5.
3.4.3 In the case of VTM Ltd., 319 ITR 336 (Mad), the ITAT Chennai cited the CBDT Circular dated 03.10.2001 vide F.No. 178/28/2001-ITA- I, in the context of section 80IA of the Act. In accordance with this circular, the generation of power by captive power plant was to be considered for deduction u/s 80IA. The Tribunal therefore held that the Department had, therefore, accepted the view that such power was an 'article' or 'thing', and hence, the contention of the authorities below was not sustainable. As the only objection of the A.O. was regarding the power generated by the windmill not being 'article' or 'thing', the Tribunal allowed the assessee's ground in that case based on the Board's Circular as well as the decision of the Delhi High court in the case of CIT vs. DCM Sriram Consolidated Ltd. (2009) 176 Taxman 49 (Del.); and some earlier decisions of the ITAT Chennai Bench. Further, the appellant has also cited the facts of the case of MIs Hi Tech Arai Ltd. (supra), in which also it was held that the appellant was entitled for claim of additional depreciation u/s 32( )(iia) in respect of windmill units for generation of power, where the power generated was captively used for its units. In that case, the A.O. had not allowed the claim on the ground that generation of power was not a business of the assessee, and the power generated through windmill was used for captive consumption. However, CIT(Appeals) had allowed the claim on the basis that the assessee was engaged in 'manufacture' and 'production' of 'article' or 'thing', as required by law. The Tribunal held that since the assessee was generating electricity by windmills, the condition for granting additional depreciation was fulfilled even if it 119 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 was used for captive consumption. Again the Tribunal relied upon the same CBDT circular as stated above. The appellant has thus emphasised that these two were direct decisions of ITAT Chennai on this particular issue of allowing additional depreciation uls 32(1 )(iia), which have also been separately upheld by the Madras High Court in the cases cited above, and therefore, the appellant's claim was acceptable. 3.5 In view of the facts brought on record and the ratio of the decisions cited above, it becomes apparent that the appellant is entitled to the claim of additional depreciation. Thus the disallowance made by the Assessing Officer of Rs. 9,15,52,187/- is directed to be deleted and the ground of appeal No 1 raised by the appellant is liable to be allowed."
185. Since the Ld.CIT(A) while allowing the claim of additional depreciation has relied on various decisions including the decisions of Hon'ble Madras High Court in the case of VTM Ltd. (Supra) and M/s. Hitech Arai Ltd. (Supra) and since nothing contrary was brought to our notice against the above decisions, therefore, we do not find any infirmity in the order of the Ld.CIT(A) allowing the claim of additional depreciation on windmills installed by the assessee during the year. Grounds of appeal No.1 and 2 by the revenue are accordingly dismissed.
186. Ground of appeal No. 3 by the Revenue for A.Y. 2010-11 reads as under :
"3. The Ld.CIT(A) erred in deciding that addition of Rs.2,05,000/- was made on the documents pertained to Dhariwal and Doshi Pvt. Ltd. and therefore it has to be considered in the case of Dhariwal and Doshi Pvt. Ltd. and not in the assessee even though the assessee has utilized it for own business purpose."
187. Facts of the case, in brief, are that the AO during the course of assessment proceedings noted that Page No.4 of Bundle No.4 (A-
15) was seized during the course of search action on 20-01-2010 at office premises of the assessee at Baroda shows quantity wise details of pet jars and note books as under :
120
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Sr.No. Item Name Quantity 1 Pet jar-250g 1,700 2 Pet jar-500g 6,400 3 Pet jar-1kg 2,900 4 Note Book (Parimal) 30,000
188. He further noted that during the search operation Shri Ajit Jain, Chief Executive of M/s. Dhariwal Industries Ltd. at Baroda in his statement recorded u/s.132(4) had replied to Question No.10 as under :
"The items shown at Sr.No.1, 2, & 3 are quantities of Pet Jar of various sizes which are no more in use for Tea division. We have utilized them for sales promotion of our products (Pan masala & gutkha). Sr.No.4 are note books of Tea-division which were also distributed free along with Pan masala cases. Approximate value of all these four items is Rs.2,05,000/- which is not shown in our books of accounts."
The AO therefore asked the assessee to explain as to why this amount of Rs.2,05,000/- should not be treated as the undisclosed income of the assessee for the relevant assessment year. The assessee in its reply submitted that the said page is titled DDIPL, i.e. Dhariwal and Doshi Industries Pvt. Ltd. and therefore it does not belong to the assessee company. It was further submitted that necessary explanation in this regard shall be furnished by the said company in its independent submission.
189. However, the AO was not satisfied with the explanation given by the assessee. According to him, the admission made by the key person of the assessee company Shri Ajit Jain is that the said unaccounted expenses belong to the assessee company. Shri Ajit Jain is the Chief Executive Officer of its Baroda factory and manages all the affairs of the Baroda factory. Therefore, his statement recorded on oath u/s.132(4) of the I.T. Act carries high evidentiary value in the eyes of law. The AO accordingly made 121 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 addition of Rs.2,05,000/- to the total income of the assessee as its unaccounted expenses.
190. Before CIT(A) it was submitted that the said document itself is titled Dhariwal and Doshi Industries Pvt. Ltd. (in short 'DDIPL') and the assessee has nothing to do with the said page. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the addition by observing as under :
"5.2 I have considered the submission made by the appellant and perused material on record. The notings made on page 4 and seized from the office premises of the appellant at Vadodara records the details of the pet jars which is actually utilized by M/s DDIPL which is engaged in the tea business. In the statement recorded u/s 132(4) of Shri. Ajit Jain this fact has been explained by him and he has stated that the pet jars at S.No 2 & 3 were utilized for sales promotion of the product of M/s DIL i.e. for gutkha and pan masala and the note books mentioned at S.No 4 were also distributed free along with pan masala case. The Assessing Officer has not considered the statement of Shri. Jain in this regard and held the expenses to be unaccounted in the case of M/s DIL. The loose paper indicating the items in any case related to M/s DDIPL and the same has been utilized by the appellant is not disputed by the Assessing Officer and, therefore, the addition if any has to be considered in the case of DDIPL if the same has been found to be unaccounted or not recorded in the books of accounts. The Assessing Officer has not apparently carried out any verification as is evident from the assessment order and is also not supported by any independent evidence. The reliance placed by the Assessing Officer on the statement of Shri. Jain also do not indicate the items in question to be belonging to the appellant company and in the given set of fact and circumstances of the case the addition made by the Assessing Officer is liable to be deleted and ground of appeal NO.3 raised by the appellant is liable to be allowed."
191. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us.
192. After hearing both the sides, we do not find any infirmity in the order of the CIT(A). The findings given by the CIT(A) that the notings made on page no.4 seized from the premises of the assessee at Baroda records the details of the pet jars which is actually utilized by DDIPL which is engaged in the Tea business could not be 122 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 controverted by the Ld. Departmental Representative. We find the AO in the instant case made the addition based mainly on the statement of Shri Ajit Jain without any verification and his finding is also not supported by any independent evidence. The assessee has already explained during the course of assessment proceedings itself that since the said page itself is titled DDIPL, addition if any, can be made in the hands of DDIPL and cannot be made in the hands of the assessee. In absence of any independent evidence that the said page belongs to the assessee company, we are of the considered opinion that addition cannot be made merely on the basis of the statement of Shri Ajit Jain. The Ld.CIT(A) in the instant case has given justifiable reasons for deleting the addition. The Ld. Departmental Representative could not controvert the factual finding given by the Ld.CIT(A). We accordingly uphold the order of the CIT(A) on this issue. The ground raised by the Revenue on this issue is accordingly dismissed.
193. Ground of appeal No.1 by the assessee for A.Y. 2010-11 reads as under ;
"1] The Ld CIT(A) erred in sustaining the addition towards the alleged difference in stock of packing material of Rs. 1,75,66,534/- disregarding the stock of packing material lying on factory floor and even the department considered by the department itself in the process of physical verification during the course of search proceedings."
194. Facts of the case, in brief, are that the AO noted that during the course of survey action u/s.133A of the I.T. Act carried out on 20-01-2010 at the factory premises of M/s. Dhariwal Industries Ltd. at Gut No.1524/2, 1526 and 1528, Village Saradwadi, Tal. Shirur, Pune, which was later on converted into a search operation u/s.132, stock of raw material, i.e. Polyester, metalized polyester, metalized BOPP, poly etc., were found amounting to Rs.4,47,87,898/-. As per 123 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the stock register maintained by the assessee company stock was shown at Rs.2,72,21,364/-. Thus, there was a stock difference of about Rs.1,75,66,534/- between the stock as per stock register maintained by the assessee company and the physical stock taken by the department. He further noted that while recording the statement u/s.131 of the I.T. Act, Shri Arun Seth, Chief Executive on 20-01-2010 he was specifically asked to explain the difference. However, he could not explain the same properly. On the basis of the above findings, while recording the statement u/s.132(4) of the I.T. Act a specific Question No.3 was asked to Shri Madhusudan Brahme, who was the Factory Manager of M/s. Manikchand Packaging vide which he was asked to reconcile the difference between physical stock and the stock as per books pointed out during the course of survey proceedings on 20-01-2010. He had clarified that the book stock had been provided variety wise whereas physical stock was taken on variety of packaging materials as available on the rack with no differentiation made as to the quality of the packing material contained therein. Hence, it was not immediately possible to reconcile physical stock with the stock as per books. He had however stated that the difference in stock with regard to quality and quantity would be worked out and the same would be submitted within a week. However, the same was not submitted. In view of the above, the AO issued a show cause notice to the assessee and gave further opportunity to reconcile and explain with proper evidence regarding the stock difference of about Rs.1,75,66,534/-. In absence of any reconciliation of the difference the AO made addition of Rs.1,75,66,534/-.
124
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
195. Before CIT(A) apart from reiterating the submissions made before the AO, it was further submitted that the stock found on physical verification during the search action comprised of stock found in the stock room and on the floor of the factory outside the store room whereas the figure of stock as per stock register comprise of stock inside the store room only and not those lying on the factory floor. It was submitted that the AO without pointing out or identifying even a single mistake had made the impugned addition.
196. However, the CIT(A) was not satisfied with the explanation given by the assessee and upheld the action of the AO by observing as under:
"4.2 I have carefully considered the submission made by the appellant and perused material on record. It is noticed that the difference of stock of Rs.1,75,66,534/- during the search action was also brought to the notice of the Chief Executive of the appellant company Shri Arun Seth and whose statement u/s.131 was also recorded on 20-01-2010 and he was specifically asked to explain the aforesaid difference, however the CEO of the appellant company, Shri Arun Sheth could not explain the difference. It is also seen that the statement recorded u/s.132(4) of Shri Madhusudhan Brahme, factory manager of M/s. Manikchand Packaging also failed to reconcile the difference between the physical stock and the stock as per books though he had stated that the difference in stock with regard to the quality and quantity would be worked out and submitted within a week which was never submitted. The appellant during the assessment proceedings also could not reconcile the stock difference with the assessment proceedings also could not reconcile the stock difference with the regular books of account maintained by way of cogent proof and evidences and the explanation furnished was found to be not satisfactory. The apex court in the case of CIT Vs. Mussadilal Ram Bharose (1983) 165 ITR 14 held that the burden placed upon the assessee is not discharged by any fantastic explanation nor is if law that any and every narration by the assessee must be acceptable. It must be an explanation acceptable to the fact finding body. Thus the material brought on record clearly indicate that no reasonable explanation has been furnished by the appellant and, therefore, addition made by the Assessing Officer is justified and upheld."
197. Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
125
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
198. The Ld. Counsel for the assessee strongly challenged the order of the CIT(A). Referring to page 6 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the reconciliation done by him and submitted that as per the said reconciliation the difference comes to only Rs.15,11,132/-. He submitted that the difference was due to valuation done by the Income tax department on an average rate. Because of the faulty method of valuation the discrepancy had arose. He submitted that in the interest of justice, the matter may be restored to the file of the AO with a direction to give one more opportunity to substantiate before him regarding the difference between the stock found during the course of survey/search and the stock as per books. He submitted that all these details were available before the AO and the CIT(A). However, they have not properly appreciated and due to wrong application of average rate by the department as against the actual rate the huge difference arose.
199. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that despite opportunities given by the AO and CIT(A) the assessee was unable to reconcile the difference. Therefore, no further opportunity should be given and the order of CIT(A) be upheld.
200. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We find the AO in the instant case has made addition of Rs.1,75,66,534/- to the total income of the assessee being the difference in value of stock found during the course of survey/search and the stock as per books. We find the Ld.CIT(A) has upheld the addition made by the AO in absence of any 126 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 satisfactory reconciliation of such difference. It is the submission of the Ld. Counsel for the assessee that instead of taking the actual rates the search/survey party has applied average rate for which this huge difference has arose. It is also the submission of the Ld. Counsel for the assessee that the maximum difference will be Rs.15,11,132/- if the correct valuation as per actual invoice is made. According to him, although the reconciliation statement was given to the AO and CIT(A), however, they have not appreciated the same. From the order of the AO as well as the submission of the assessee it is not verifiable as to what method of accounting for valuation of stock was being adopted by the assessee. If the valuation is being made as per actual invoice price, then taking average price will give a distorted figure. In view of the above discussion and keeping in mind the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the difference between physical stock and the stock as per books. Ground raised by the assessee is accordingly allowed for statistical purposes.
201. Ground of appeal No.2 by the assessee for A.Y. 2010-11 reads as under :
"2. The Id CIT(A) erred in addition of Rs. 1,04,84,609/- merely considering the statement of one the employee of the appellant company."
202. Facts of the case, in brief, are that during the assessment proceedings the AO noted that the seized document of page No.10 of Bundle No.4 of A-15 is Annexure seized from the office premises of M/s. DIL. The assessee company at Vadodara recorded the working 127 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 of expenses totaling to Rs.1,04,84,609/-. During the course of search action in the statement recorded on 21-01-2010 u/s.132(4), the Chief Executive of M/s. DIL Mr. Ajit Jain had explained expenses to be relating to Delhi office to have been sanctioned and paid as per Shri Rasiklal M. Dhariwal and the said expenses were also stated to have not been reflected in the books of the assessee. The AO, therefore, asked the assessee to explain as to why the above amount should not be treated as undisclosed income of the assessee. It was submitted by the assessee that the said page is a dumb document since it does not have name of any person/firm/company, date, period to which it belongs, nature of relevance to any person/firm/company, signature of the person who has prepared it. Further, it was submitted that the same is not even identified or accepted of having been prepared by any of the directors/employees of the assessee company. It was further submitted that the details mentioned on the said page is nowhere connected to the assessee or any group concern. It was submitted that the statement of Shri Ajit Jain is absolutely baseless and not justifiable. Further same is not binding on the assessee since he is in no way responsible for interpreting such dumb document which does not belong to the company. Further, the statement made by him during the course of search proceeding was under stress and the same was not even corroborated by any independent documentary or other evidence.
203. Without prejudice and without admitting for any of the contents in the said paper whatsoever, it was submitted that the said paper may be considered in the assessment proceedings of Shri R.M. Dhariwal and not in the proceedings of the assessee company since there are no clinching, substantive, corroborative evidence on 128 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 the subject matter. It was further argued that addition on the basis of any dumb document is absolutely improper and illegal and bad in law.
204. However, the AO was not satisfied with the explanation given by the assessee and found the same to be not acceptable. According to him, the admission made by the key person of the assessee company Shri Ajit Jain that the said unaccounted expenses belong to assessee company carries higher evidentiary value in the eyes of law since the statement was recorded on oath u/s.132(4) of the I.T. Act. He accordingly made addition of Rs.1,04,84,609/-.
205. Before CIT(A) it was submitted that the addition is based on a single page which is just a dumb document as it does not contain the name of the person, date and place, his signature and relevance to any person and does not contain any signature of the person who prepared it. The same has not even been identified or accepted of having been prepared by any of the directors/employees of the company. The said paper is in no way connected to the assessee company. Relying on various decisions it was submitted that addition based on a dumb document is not sustainable.
206. However, the Ld.CIT(A) was also not satisfied with the explanation given by the assessee and upheld the action of the AO by observing as under :
"6.2 I have considered the submission made by the appellant and perused material on record. The seized document from the office premises of the appellant at Vadodara records the details of the expenses amounting to Rs.1,04,84,609/- written under different heads as under :129
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 Sr.No. Detail Amount (Rs.) 1 Cash 5845000 2 Vouchers 1511909 3 Transportation 721550 4 Sampling and CC boys 392877 5 Free Pouches 1670984 Total 10142320 The entries contained therein has been explained by the person managing the office of the appellant co at Vadodara and, therefore, it will be wrong to conclude that the said document is a dumb document or a meaningless paper as the detail of each amount mentioned under each head has been explained and which indicates the link to the appellant's business under sec 292C. There is 'a presumption against the appellant that such loose papers or documents found from his possession belong to him and its contents are correct, though such presumption is a rebuttable presumption. The Assessing Officer has been able to establish that the detail mentioned on the loose papers are relating to undisclosed income of the appellant and the clear admission and explanation furnished by the chief executive has explained the nature of transaction recorded in it and, therefore, there is no guess work involved. The entire expenses as recorded from the statement u/s 132(4) of Shri. Jain recorded that it relates to the Delhi office of the appellant company which has not been recorded in the regular books of account. It has been explained by Shri Jain that the cash amounting to Rs. 58,45,000/- appearing at sr. no. 1 was expenses incurred on speed money to various persons and likewise has explained the expenses under other heads as appearing in the seized document in his. answer to question no. 9 of his statement recorded on 21.01.2010 u/s 132(4) of the Act In the case of P R Patel Vs DCIT (2001) 73 TT J 262 (Mum) held on the evidentiary value of incriminating material found during search could be used against the assessee even without reference to the provisions of sec 132 (4A) provided such evidence was relevant and material for assessee's assessment and put to him before use against him in the assessment proceedings.
6.3 Similar view was taken by the Pune ITAT in the case of Dhanvarsha Builders and Developers (P) Ltd Vs DCIT (2007) 2891TR (AT) 50 Pune) that it cannot be said that the document is a dumb document even though it does not contain assessee's name and that the statement recorded u/s 132(4) can be used in evidence in block assessment in the context of fact found in the search. Loose papers unlike bound books are generally not to be a basis for ready inference of concealment of figures found in them, but it cannot be said that they are totally irrelevant, if they have something to connect them with the assessee's business. The inference drawn in the case is on fact.
Sec.132(4A) which raises a presumption of legality of documents found, would mean that they cannot be totally ignored.
6.4 In view of the above fact the addition made by the Assessing Officer is upheld and the grounds of appeal No.4 raised by the appellant is liable to be dismissed."
207. Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
130
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
208. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case during the course of search action at the Baroda office premises of the company seized document appearing on Page 10 of Bundle No.4 of A-15 was seized which contain certain expenses totaling to Rs.1,04,84,609. During the course of search the statement of Shri Ajit Jain, Chief Executive of M/s.DIL was recorded on oath u/s.13(4) wherein he had stated that these expenses relate to Delhi office which were sanctioned and paid as per Shri Rasiklal M. Dhariwal and the said expenses were not reflected in the books of account. Since the assessee was unable to give any satisfactory explanation before the AO, the AO made the addition as undisclosed income of the assessee. While doing so, he rejected the submission of the assessee that these are dumb documents without having any name of any person, firm or company or date or period etc. He also rejected the submission of the assessee that the statement of Shri Ajith Jain is not binding on the assessee. We find in appeal the Ld.CIT(A) upheld the action of the AO on the ground that the entries contained in the said seized document was explained by the person managing the office of the assessee company at Baroda and therefore it cannot be said to be a dumb document or a meaningless paper. He further noted that details of each amounts mentioned under each head was expenditure which indicates the link to the assessees business u/s.292C of the I.T. Act. Relying on various decisions the CIT(A) held that the said document is not a dumb document even though it contains the assessee's name. We do not find any infirmity in the order of the CIT(A) on this issue. Since the 131 ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13 paper was found from the Baroda office of the assessee company and the Chief Executive managing the affairs of the assessee company had explained the nature of each and every item, therefore, merely because the name of the assessee company was not mentioned in the seized paper, it cannot be said that it does not belong to the assessee company. Further, the figures mentioned in the said seized document are not round figures. Out of the 5 entries 4 entries are in odd figures. Therefore, it also cannot be said that these are baseless or some estimates etc. Since the assessee company is engaged in the business of Gutkha and one of the item of the seized document show "free pouches", therefore, there is a strong indication that the same relates to the business of the assessee. Since the statement of the Chief Executive of the assessee company Shri Ajith Jain was recorded on oath u/s.132(4) of the I.T. Act wherein he has stated that these expenses relate to the Delhi office of the assessee company which are not recorded in the regular books of account, therefore, the presumption will be against the assessee especially when the paper is seized from the office premises of the assessee. We further find the CIT(A) while upholding the addition made by the AO has relied on the decision of the Pune Bench of the Tribunal in the case of Dhanvarsha Builders and Developers Pvt. Ltd. (Supra). The Ld. Counsel for the assessee could not give any satisfactory explanation to controvert the findings given by the CIT(A) or the decision relied upon by him. Since the order of the CIT(A) in our opinion is justified under the facts and circumstances of the case, therefore, we do not find any infirmity in his order. Accordingly, the same is upheld and the ground raised by the assessee on this issue is dismissed. 132
ITA Nos.1318 to 1324/PN/13 and ITA Nos. 1389 to 1391 and 1408 to 1410/PN/13
209. In the result, all the appeals filed by the Revenue are dismissed and the all the appeals filed by the assessee are partly allowed.
Order pronounced in the open court on 02-05-2016.
Sd/- Sd/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे Pune; दनांक Dated :02nd May, 2016 सतीश
आदे श क) *#त,ल!प अ-े!षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आय% ु त(अपील), / The CIT(A)-II, Pune
4. आयकर आय% ु त / The CIT-II, Pune
5.
(वभागीय +त+न,ध, आयकर अपील य अ,धकरण, "बी " पुणे / DR, ITAT, "B" Pune;
6. गाड0 फाईल / Guard file.
आदे शानस
ु ार/ BY ORDER,स या(पत +त
//True Copy //
// स या(पत +त //True Copy//
व2र3ठ +नजी स,चव / Sr. Private Secretary
आयकर अपील य अ,धकरण, पुणे / ITAT, Pune