9911796707
TMI Blog2016 (5) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stalled 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. 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 actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f M/s. DIL 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, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 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 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 : "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ariwal 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nraj 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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. 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 crossexamination 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted that Shri S. Balan is a close family friend and business associate of Shri Rasiklal M. Dhariwal/M/s. DIL. He had admitted on 20-012010 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 Sohanraj Mehta to Shri S. Balan/his representatives on the directions of RMD/PRD. Shri S. Balan has retracted later on 25-112011 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s comparable with Baroda factory of the assessee. BANGALORE FACTORY: Accounted plus Unaccounted production considered Assessment Year Estimate of machine based production based on installed capacity Accounted Production Unaccounted Production lI Turnover of M/s. DIL based on seized documents maintained by Shri Sohanraj Mehta Total actual production at Bangalore factory: Accounted Production plus unaccounted sale Load Factor based on accounted plus unaccounted d production (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 2006-07 1,848,960 470,654 638,417,650 556,147 1,026,08 01 0.5553 2007-08 1,848,960 716,906 835,368,165 732,324 1,449,23 0 0.7838 2008-09 1,848,960 800,184 758,371,888 659,419 1,459,60 3 0.7894 TOTAL 9,244,800 2,756,221 3,457,239,041 3,011,561 5,767,78 2 0.6239 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 engag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 : A.Y. Taxable Profit of 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 unlaw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 placed reliance on the seized material of Shri Sohanraj Mehta and made it a base for mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 a blatant act of contortion created by the AO without realizing the responsibilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity 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. 67. The CIT(A) further noted that search and survey action u/s.132 took place in the case of Shri Sohanraj Mehta on 10-102009 whereas the search took place in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounted 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) 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 transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxed, the initial investment will remain untaxed. The year-wise details are as under: Sr. No. A.Y. GP Percentage as per books Accounted Sales Unaccounted Sales 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 purchases, the assessee would have been required to engage at least 700 to 800 trucks in this period but not a single unaccounte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike 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 inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction 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. 98. So far as the departmental appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained 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 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned, 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 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 interpretatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 2001-2010, 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 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Bangalore 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 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... othari 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rjuna 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccounted 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 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 CP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 explai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner, Bangalore1I1 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 gut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aj 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 heavil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raj 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 submission of the Ld. Counsel that spurious Pan M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 instant case. Even the Commissioner, Central Excise has also given his findings that there was no unaccounted production. In our opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-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 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 mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd added the same to the total income 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmills 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 : "3.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme 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." 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in the Tea business could not be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciliation of the difference the AO made addition of Rs. 1,75,66,534/-. 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, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this issue. Since the 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 prem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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