9911796707
TMI Blog2002 (5) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... to day basis over a period of seven days. On behalf of the Department Shri V.S. Shah, the learned Commissioner of Income-tax [(DR)] appeared and supported the impugned block assessments made by the Assessing Officer. Shri K.C. Patel, the learned Counsel appeared on behalf of one of the Companies of the group viz., Western India Ceramics P. Ltd. and stated that new management has taken over the controlling interest in the Company with effect from 1-12-1997. On behalf of another group Company viz., Swiss Health Foods P. Ltd. which has gone into liquidation, none appeared despite service of notice on the liquidator who has been appointed by the Hon'ble Gujarat High Court for conducting liquidation proceedings. On behalf of the remaining five appellant companies as well as five HUFs of Vachhani Group, Shri S.N. Soparkar, the learned Counsel appeared. 4. The learned CIT (DR) filed separate paper books in connection with the afore-mentioned appeals. Shri K.C. Patel, learned Counsel filed paper books in two volumes in connection with the appeal in the case of Western India Ceramics P. Ltd. He also submitted compilation of 13 judgments of Hon'ble Supreme Court and various High Courts in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 48828 599449 268719 371630 1988-89 275205 194379 285349 403687 316200 1989-90 392741 2522549 285125 434112 538973 1990-91 694575 2343439 411425 334469 371826 1991-92 1464677 2195751 1127731 864416 594875 1992-93 2655111 6414199 2586072 3828112 3537933 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agricultural income which is not actually the agricultural income because our family members have been doing this for last many years, however, I admit that minimum of Rs. 1.75 crores of our unaccounted income has been introduced in our books of account and returns of income in the form of agricultural income, this amount is to be collaborated with the assets generated out of these funds in the respective years which we shall verify on scrutiny of our books of account. 7. Shri Krishnadas D Vachhani vide his statement dated 27-6-96, placed at pages 88 to 91 recorded at the business premises of M/s. Western India Ceramic P. Ltd., admitted that non-genuine agricultural income was to the tune of Rs. 3 crores. The relevant portion of the said statement being question No.7 and answer thereof is reproduced below: Q. 7 Your brother Shri M.D. Vacchani has stated under section 132(4) on 27-6-96 that you are earning unaccounted income by way of: a. Under invoicing b. Inflation of expenses c. Over billing of capital expenses. Please give the details break-up of unaccounted income under the above heads. A.7 I have consulted my brother Shri M. D. Vachhani, Shri V. D. Vachhani, Shri P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made detailed inquiries with regard to the ownership and cultivation of agricultural lands wherefrom agricultural income has been claimed by five HUFs of the group. There are mainly three categories of agricultural lands where from agricultural income has been claimed by the five families. (1) Agricultural income from leased land at Chakhari and Kharkhadi villages (2) Agricultural income from leased land at Upleta / Junagadh (3) Agricultural income from lands owned by the HUF at Nagvadar / Upleta. 10. With regard to the leased lands at Chakbari rand Kharkhadi villages, Shi M. D. Vachhani in his statement recorded on 26-6-96 claimed that the HUFs have taken on lease a vast track of agricultural land measuring about 600 bighas at village Chakhari and Kharkhadi on lease basis from seven, co-operative societies. However, no evidence with regard to the alleged lease could be produced on behalf of the assessees. The Income tax authorities, on the other hand, made detailed inquiries and recorded the statements of presidents of co-operative Societies in the two villages as well as the statements of Talati and Sarpanch etc. From these statements it was revealed that no lands have been l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of agricultural inputs or day-to-day expenses as well as record pertaining to the sale of agricultural produce was available with Vachhani Family. Spot inquiries made by the Assessing Officer from Upleta reveal that no such lands have been leased out to Vachhani Family and the claim was false. 11.1 At this stage, we may point out that Shri S.N. Soparkar, the learned Counsel for the appellant-HUFs before us fairly conceded that Vachhani family has not taken any land on lease basis either in Chokari and Karkhadi or in Upleta, as falsity claimed before the Income-tax Authorities. However the question still remains with regard to extent of agricultural income from lands owned by Vachhani family at Nagvadar, Upleta. The learned Counsel submitted that even though the agricultural income shown by the HUFs of Vachhani family are admittedly inflated and further that the earlier claim of the assessee regarding agricultural lands taken by the family on lease at Chokari and Karkhadi villages of Taluka Padra as well as the lands at Upleta are non-genuine, yet a reasonable estimate of agricultural income from the own land of the family may be adopted. The learned Counsel furnished the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 3820131 1993-94 2254473 4885537 1994-95 6280183 7098400 1995-96 2962513 7551141 1996-97 5355304 9160901 ----------------------------------------------------------------- Rs.44188712 Rs.38530702 ----------------------------------------------------------------- 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icultural inputs without directly supervising the agricultural operations. He further confirmed that no details of expenses incurred for agricultural purposes have been maintained by him. The Assessing Officer has indicated in the Block Assessment Orders of Vachhani HUFs that during the search operations cash book and ledger for years 1992-93 to 1995-96 were found which show credit or agricultural income in cash on various dates. However, despite specific opportunities in this behalf, sale bills in support of credit entries have not been produced. Similarly with regard to expenses debited in these books no bills or vouchers have been produced. Further, the assessee-HUFs also could not produce any books of account for the remaining assessment years covered under the Block Period despite specific opportunities allowed in this behalf. The Assessing Officer has also perused 7/12 records in respect of own lands of the family and noticed that the records indicate the cultivation of cotton, ground-nut and castor only whereas the assessee claims that the family has also been cultivating wheat, Teel etc. The Assessing Officer has worked out the average agricultural income of each of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 2,50,10,716 B.D. Vachhani-HUF 1,50,27,239 31,43,723 1,18,83,516 P.D. Vachhani-HUF 1,33,39,895 25,09,288 1,08,30,607 K.D. Vachhani-HUF 1,49,55,537 26,64,551 1,22,90,986 --------------------------------------------------------------------------------- 8,45,53,808 1,38,46,082 7,16,52,533 --------------------------------------------------------------------------------- 14. Thus the Assessing Officer made additions on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 1,68,02,518 4. Gibraltem Glass and Ceramics 4.30 30,81,058 Pvt. Ltd. 5. Swiss Pack Pvt. Ltd. 0.58 4,15,588 6. Swiss Chocolates P. Ltd. 1.65 11,82,266 7. Sweety Confectionery P. Ltd. 0.26 11,86,296 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer is on the lower side since the basis adopted by the Assessing Officer is erroneous. According to the learned Counsel, there are following mistakes in the Assessing Officer's computation: (a) The Assessing Officer has taken the average agricultural income of last 10 years and estimated the income on the basis of that average. It is submitted that 10 years is long period and average should have been restricted to 3 or at the most 5 years. (b) The said average, in any case, was required to be enhanced by atleast 4.27% at a yearly basis which is the growth rate achieved by the agricultural sector in the period 1980 to 1994. (c) The Assessing Officer has applied the wholesale price index of 1985-86 as the basis and proceeded to estimate the income by extrapolating the figure by taking that index as the basis. (d) In some cases there is actual purchase of agricultural land during the block period for which the appropriate credit is required to be given. 20. The learned CIT(DR) strongly opposed the submissions of the learned Counsel and argued that the estimate of agricultural income adopted by the Assessing Officer is at a rational basis and is liable to be upheld. 21. Aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome shown are Rs. 35,37,935 and Rs. 35,27,896 respectively. As against this in the intervening year i.e. assessment year 1993-94 the aggregate income shown by the Vachhani family is Rs. 8,95,861 only. Viewed in context of these facts, we feel that it would be highly unrealistic and unreasonable to argue for adoption of a formula of mathematical precision in the backdrop of facts and circumstances of the case. We have therefore no hesitation in upholding the estimate of agricultural income from the own lands adopted by the Assessing Officer at Rs. 1,38,10,275. We have already referred to the statements of Vachhani Brothers admitting substantially varying figures of inflation of agricultural income. Shri K.D. Vachhani in his statement has admitted that 20 per cent of agricultural income is genuine. In other statement 30 per cent of the agricultural income shown has been claimed as genuine. Out of the total income of Rs. 854 lacs shown by the Vachhani family there is no dispute that the amount of Rs. 385 lacs shown from the leased lands at Padra is fictitious inasmuch as no lands have admittedly been taken on lease. With regard to the balance income from Upleta it also includes non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Group Companies be confirmed and the substantive additions in the hands of the five HUFs be deleted. 24. We first heard the arguments of Shri S. N. Soparkar, the learned Counsel who appeared on behalf of the HUFs and five group companies. He submitted a brief synopsis of his arguments pleading for deletion of the substantive additions made in HUFs' cases. The brief synopsis of his arguments submitted during the course of hearing is reproduced below: '1. In view of the voluminous oral and documentary evidence, it is impossible to come to the conclusion that income was not earned by the companies. As a matter of fact there is no serious dispute as to that fact. The statements are made by all the directors of the company during and after the search proceedings wherein the directors have not only admitted that the Company has earned unaccounted income, but have also admitted the mode of earning such income. Such admissions made by the directors have never been disputed, much less retracted, by the directors before the Assessing Officer. The returns of income filed by the Companies clearly admit the above position. Even before this Hon'ble Tribunal, at the time of filing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom them." 25. Shri K. C. Patel, the learned counsel appearing on behalf of Western India Ceramaics P. Ltd. was next heard by us. Shri Patel at the outset, invited our attention to page 139 of the Paper Book Volume II filed by him containing the list of Directors for the financial year 1997-98 onwards and observed that new management has taken over the company with effect from 1-12-1997 with the exit of Vachhani group from Board of Directors and induction of Patel group as Directors from December 1997 onwards. Shri Patel strongly contended that Western India Ceramics P. Ltd. has been controlled, managed and run by Vachhani family which held total way over the Board of Directors as well as General Body Meeting of the shareholders. The learned Counsel dwelt upon at length on the Doctrine of "lifting of the corporate veil" and pleaded that Vachhani group Companies, including Western India Ceramics P. Ltd. were merely helpless creatures of Vachhani family who dance to its biding. According to Shri Patel, the Revenue authorities are entitled to go behind the smoke-screen of the corporate mantle and discover the true state-of-affairs. He cited series of judgments of Hon'ble Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; Capital Capital No. Account Account Rs. Rs. ---------------------------------------------------------------------------- 1. Shri M.D. Vachhani-HUF &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence has been brought on record to support and substantiate any addition on the ground of under invoicing of sales or inflation of expenses as alleged by the erstwhile Directors of the Company. Shri Patel added that the accounts of the Company are subject to audit and statements recorded by Revenue authorities at the back of the assessee-company regarding charging of on money or inflation of expenses have not been confronted to the assessee and such evidence therefore cannot be utilised for drawing any adverse conclusion against the, assessee-company. Concluding his arguments, the learned Counsel stated that he supports the case of the Revenue for deleting the protective additions in the cases of group Companies. 29. Shri V. S. Shah, learned CIT (DR) reiterated the Department's case and argued that since the HUFs have not discharged the onus under section 69, the substantive additions made in the cases of HUFs are liable to be upheld and as necessary corollary the protective additions in Companies' cases may be deleted. 30. We have carefully considered the rival submissions and gone through the orders of the Revenue authorities in the cases of HUFs as well as group Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the Tribunal, specific grounds have been taken against the protective additions made by the Assessing Officer on the ground of under-invoicing of sales, inflation of expenses and over-billing of capital expenses. The grounds in the cases of group Companies being ground Nos. 2 and 3 in each appeal are identically worded (excepting that the quantum of addition is different). In the case of Swiss Chocolate P. Ltd IT (SS) Appeal No. 42 (Ahd) of 1997 in ground Nos. 2 and 3 read as under: "2. The Learned Assessing Officer has erred in not properly appreciating the various detailed submissions made before him and consequently order in holding that the appellant has indulged into: (a) Under-invoicing of sales, (b) Inflation of expenses, and (c) Over-billing of capital expenses. In any case the estimate of alleged unexplained income on that basis was highly exaggerated and excessive. 3. The learned Assessing Officer, Baroda has erred in law and on facts in adding, on protective basis, a sum of Rs. 11,82,266 in the hands of assessee-company on account of alleged unaccounted income for the block period. The appellant has earned no such income. In any case the quantum of such income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Foods P. Ltd. has gone into liquidation. Shri Patel further added, invisibly agitated tone that after fleecing two main Companies of the group and selling off its shareholdings in one Company and pushing the other into the lap of liquidation, Vachhani group are not entitled to cast off the resultant tax liability, by making such illusory concessions which are neither genuine nor sincere. We see merit in the arguments of Shri Patel that mere statements of erstwhile directors of the Companies would not enable the Vachhani HUFs from transferring the tax liabilities of the HUFs to the Companies of the group. In our opinion, the assessee HUFs have failed to discharge the onus under section 69 of the Act. The Assessing Officer in our opinion is fully justified in holding that no evidence has been furnished during the assessment proceedings of the Five HUFs for linking the cash deposits with the income and funds of the Companies of the group. 33. Without prejudice to our findings as above, we may examine the merits of the substantive additions in the hands of the assessee-HUFs, proceeding on the basis that the cash deposits have been made out of concealed income of the group Companies re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons. The same can be seen in various European jurisdictions". (1990) 53 Modern Law Review 358 Indeed, as for back as 1912, another American Professor, L Maurice Wormser, examined the American decisions on the subject in a brilliantly written article piercing the Veil of Corporate Entity and summarised their central holding in the following words: When the conception of corporate entity is employed to defraud creditors, to evade an existing obligation, to circumvent a statute, to achieve or perpetuate monopoly, or to protect knavery or crime, the courts will draw aside the web of entity, will regard the corporate company as an association of live, up-and-doing, men and women shareholders, and will do justice between real persons". The various decisions of the Hon'ble Apex Court as well as High Courts cited by Shri K. C. Patel, the learned Counsel for Western India Ceramics P. Ltd., upheld the doctrine of lifting of the corporate veil particularly if it is used for violation of tax legislation or welfare legislation. Few such decisions may be considered at this stage. 34. In Shri Meenakshi Mills Ltd.'s case it has been held that the reality of the transaction would have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt should pull aside the corporate veil and treat these concerns as being his creatures - for whose doings he should be, and is, responsible." Applying the principles enunciated in the aforesaid decisions in the context of the facts and circumstances of the instant case, the inference is irresistible that Vachhani Brothers who were Kartas of the HUFs were really the directing mind and will of the Companies, the very ego and centre of these Companies of the group. The Companies were being used as mere puppets bound hand and foot to the Directors who were Kartas of the HUFs interested in getting their family arrangement and family interest promoted and nurtured by their actions. It is in the light of these facts that the income earned by Vachhani HUFs through their association with the Companies has to be assessed on substantive basis in their hands since the income unquestionably belongs to them and enjoyed by them. Thus even on the basis of self-serving statements of the Directors recorded during the search operations, the income is liable to be assessed in the hands of the HUFs on substantive basis. 38. Now we may deal with the contentions of Shri S.N. Soparkar, against assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doctrine of piercing corporate veil is to ascertain the reality and substance of the transaction. The substance of the transaction may be covered by the persons of corporate entity or by the arrangement entered into for concealing true form of the transaction. In the various decisions cited above, the principle has been applied even when the genuineness of corporate entity by itself is not in dispute. In Sri Meenakshi Mills Ltd.'s case the Hon'ble Supreme Court held that corporate entity has to be disregarded for ascertaining the true nature of the transaction. The genuineness of the corporate entity itself was not in question before the Hon'ble Supreme Court. Similarly in the case of Renusagar Power Co. cited above the genuineness of the subsidiary company was not in dispute, and the corporate veil was however lifted to ascertain the reality and substance of the transaction involving consumption of electricity generated by the subsidiary company. The limitations thus sought, to be placed by Shri Soparkar on the doctrine of lifting of corporate veil are entirely misplaced. It would be profitable in this context to refer to the decision of the Hon'ble Gujarat High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, the said funds are liable to be returned back to the company and can not be taxed in the hands of the Director. The proposition advanced by the learned Counsel however is not applicable in the facts of the present case. There is not even a whisper of allegation by the Companies of the group or by any party whatsoever that the funds of the companies have been taken away by the HUFs in an unauthorized manner. If at all, the statements of the Directors are to be accepted for explaining the cash deposits in bank accounts of the HUFS, the facts are undisputed that the possession and ownership of the funds are unquestionably with the HUFs. Whatever has been taken away by the Directors is under a common collective arrangement entered into by the Directors on the Board of Management of the Company who also controlled the General Body of Shareholders. Thus it cannot be said that any funds of the companies have been misappropriated or taken away without knowledge of the companies. On the contrary the entire arrangement has the implicit approval of the Board of Directors as well as the General Body of Shareholders and these executive organs of the group Companies are unquestionably in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by way of acquisitions of share capital as well as deposits in the group Companies. This share capital as well as deposits appearing in the names of family members have continued unchanged without any modification regarding ownership of such moneys as reflected in the books of account of the Companies. During the course of hearing the Bench put a specific question to Shri Soparkar that if the funds invested by the Directors and family members with the Companies are out of concealed income of the Companies and belong to the Companies, why necessary entries changing the ownership of such funds have not been made in the books of the Companies in consonance with the sworn testimony of the Directors. The specific query of the Bench did not elicit any response from the learned Counsel. On further repetition of the query by the Bench Shri Soparkar very faintly suggested that the query was not relevant to the point in issue. The inference is irresistible that ownership, possession and enjoyment of funds by the HUFs is undisputed and has been expressly accepted and acknowledged in the books of the group Companies. In our opinion it is amply clear that the arguments put forward by Shri S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be assessed in the hands of the HUFs on substantive basis as done by the Assessing Officer. We therefore uphold the substantive additions in the hands of the five HUFs and delete the protective additions in the hands of seven Companies. 45. The next common issue in the cases of the Companies of the group involved in the present batch of appeals relates to claim of deductions under Chapter VIA of the Act like deductions under section 80HH/80-I etc. in relation to undisclosed income. The learned Counsel placed reliance on the decision of the Ahmedabad Bench of the Tribunal in the case of Electrotherm India Ltd, in IT (SS) Appeal No. 38 (Ahd) of 1997 dated 29-12-1998 a copy of the Tribunal's decision has been placed on record. The learned Counsel further pointed out that the Hon'ble Gujarat High Court has upheld the conclusion of the Tribunal vide its order dated 5-7-2000 and held that no substantial question of law arises. Respectfully following the orders of the Tribunal as well as the High Court, we are inclined to accept the submissions of the learned Counsel that the assessee would be entitled to deduction under Chapter VIA in relation to undisclosed income included in the blo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no addition is called for. The Assessing Officer, however, rejected the explanation and adopted the difference of Rs. 98,919 as undisclosed income of the assessee. Thus the Assessing Officer made an aggregate addition of Rs. 1,11,16,543 being sum of aforesaid two figures [Rs. 1,10,17,624 + Rs. 98,919]. 2.1 Shri K.C. Patel, learned Counsel for the assessee-company strongly urged that there were no discrepancies in the closing stock and the addition made by the Assessing Officer is totally unjustified. The learned Counsel referred to written submissions made by the assessee dated 23-6-1997 during the course of assessment proceedings which are placed in the paper book-I at pages 45 to 53. With regard to the discrepancies pointed out by the Assessing Officer as on 31-3-1996 the learned Counsel invited our attention to copy of Provisional Stocks Statement submitted by the assessee to the bank as on 26-3-96 which is placed at page 269 of the paper book-II. Shri Patel stated that there is no difference in the quantities of raw materials and finished goods as per the bank statement as well as per the closing stock inventory prepared on the basis of assessee's books. According to him the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought out by comparing the closing stock inventory as per books with the Provisional Bank Statement. The very fact that the bank statement has been furnished as on 25-3-1996 and the statement is treated as a Provisional Stock Statement, would detract from the merit of any comparison with the figures in the books as on 31-3-1996. In our opinion, it is very important that the business premises of the assessee have been subjected to search operations. If there is any excess stock as on 31-3-1996, no such stock over and above the book figures appears to have come to light during the search operations conducted by the Income-tax authorities. This by itself demolished the Revenue's case for making the impugned addition on the basis of comparison with the Provisional Bank Statement. For the aforesaid reasons, we are inclined to delete the impugned addition. We may point out that even though the Assessing Officer has worked out the addition vide para 13 of the impugned assessment order in the sum of Rs. 1,11,16,543, while making computation at page 18 of the assessment order, the addition to the extent of Rs. 1,10,17,624 only has been made. We would accordingly delete the impugned additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to Annexure A of the Panchnama dated 29-6-1996 in respect of premises of Western India Ceramics P. Ltd. which runs into 63 pages. Photo copies of these documents included in the Annexure are available in the paper book filed by the learned CIT (DR) before us. These documents seized from the office of the assessee company included copies of accounts of certain creditors as well as confirmation letters from these creditors which are blank and bear the signatures of the creditors. The details of such creditors as appearing in the books of the assessee as on 31-3-1993 are placed in the Revenue's paper book at page 80. The total of these credits works out to Rs. 22,85,900 as under: Sr.No. Name Amount (Rs.) 01. Khimjibhai Jethabhai 15,000 02. Narandas Madhavbhai 19,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. Harilal Jamnadas 19,000 19. Amrutlal Jamnadas 18,000 20. Dinesh Savjibhai 19,000 21. Valjibhai Arjunbhai 48,900 22. Mansukhbhai Mendapara 18,500 23. Maganbhai Ravjibhai 19,500 24. Chhaganbhai Devraj 17,10,000 25. Sureshkumar M. Dhavbhai &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs in the accounts of each Director as under: 1. Shri V.D. Vachhani Rs. 5,00,000 2. Shri K.D. Vachhani Rs. 5,00,000 3. Shri P.D. Vachhani Rs. 5,00,000 4. Shri C.B. Vachhani Rs. 5,00,000 ------------- Rs. 20,00,000 ------------- 3.4 According to the Assessing Officer, the assessee has failed to furnish evidence regarding genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuine. The learned Counsel made strong grievance of the fact that the Assessing Officer as proceeded to make the impugned addition of Rs. 80,00,483 without allowing proper opportunity to the assessee and totally ignoring the facts and evidence on record supporting the genuineness of the loan transactions. 3.6 Shri V.S. Shah, the learned CIT (DR), on the other hand, argued that the deposits aggregating to Rs. 22,85,900, as per Annexure A of the Panchnama dated 29-6-96 have been categorically admitted by the assessee-company as non-genuine. Once the credits have been admitted as non-genuine and such confession is supported by incriminating evidence found during the search proceedings like blank letters of confirmation purportedly bearing the signatures of the creditors, it is amply established that the credits aggregating to Rs. 22,85,900 are non-genuine. According to the CIT(DR), the Assessing Officer has made the addition of Rs. 80,00,483 being the peak of unsecured loans and deposits appearing in the books of the company as on 31-3-1988. 3.7 We have carefully considered the rival submissions and gone through the facts and material placed on record. Regarding the addition of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Rs. 5,69,200 which I admit as non-genuine cash credits in our accounts". Thus, the admission of Shri V.D. Vachhani is in respect of Rs. 5,69,200 whereas the total as per Annexure A-1 of the Panchnama works out to Rs. 22,85,900. The discrepancy in the two figures appears to have been ignored by the Assessing Officer while considering the issue. It appears to us that the Assessing Officer, in his anxiety to treat the peak deposits during the block period as non-genuine, has failed to focus his attention on the scrutiny of the seized documents running into 63 pages forming part of Annexure A-1 of the Panchnama dated 29-6-1996. Photo copies of these documents, as already pointed out above, are available in the Departmental paper book. These documents considered in the conjunction with the statement of Shri V.D. Vachhani dated 29-6-96 furnish a relevant material for the purpose of genuineness of such deposits in the block assessment proceedings. The statement of Shri V. D. Vachhani admitting the deposits to the extent of Rs. 5,69,200 constitutes relevant evidence for deciding the issue of considering genuineness of such loans. However, the statement by itself would not clinch the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplained. 2.1 Shri S.N. Soparkar, the learned Counsel referred to page 7 of assessee's paper book and pointed out that no such query has been made by the Assessing Officer vide his letter dated 16-5-97. The learned Counsel further referred to the detailed statement of Shri Bharatbhai M. Makadia recorded by the Authorised Officer on 26-6-96 at the premises of the assessee-company. The statement is placed at pages 5 to 10 of the paper book filed by Shri Soparkar. In this statement it has been stated on behalf of the assessee that production of besan is actually weighed and recorded in the register whereas no record regarding the consumption of gram utilisation for the manufacturing process is maintained. Regarding the work-in-progress Shri Makadia explained that no separate account with regard to the work-in-progress is maintained and such goods are accounted for as stock of grams. The learned Counsel submitted that the explanation furnished by the assessee during the search operations itself has not been considered by the Assessing Officer while making the impugned addition which is in any case representing a small insignificant amount on account of estimate in the matter of valuat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the actual cash found as unexplained when the cash reflected in the cash book is much in excess of the cash found and the difference has also been explained before the Authorised Officer. We accept the contention and delete the addition. 5. The appeal is allowed. Gibralter Glass & Ceramics P. Ltd. IT (SS) Appeal No. 138/ Ahd/97 : 1. The first dispute is against the protective addition of Rs. 30,81,058 on account of under-invoicing as well as inflation of expenses. We have already discussed the issue above and accepted the contentions of the learned CIT (DR) that the substantive additions made in the cases of Five HUFs of the Group may be upheld and the corresponding protective additions made in the cases of group Companies may be deleted. For the reasons discussed hereinbefore, we delete the protective addition of Rs. 30,81,058. 2. The next dispute is against the addition of Rs. 13,68,635 on account of difference in closing stock. The Assessing Officer has discussed this issue vide para-3 of the assessment order. In the said para the Assessing Officer has reproduced various items of stocks, quantity as well as rate applied and worked out at Rs. 13,68,635. The said amount has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imal Proteins P. Ltd. in IT(SS) Appeal No. 142/Ahd/1997 discussed above. Respectfully following the decision of the Hon'ble Gujarat High Court in the case of NR. Paper & Board Ltd. and in the light of identical facts and circumstances as above, we delete the addition of Rs. 73,500. 4. The appeal is partly allowed. Swiss Pack Pvt. Ltd IT (SS) Appeal No. 137/Ahd/1997: 1. The first dispute is against the protective addition of Rs. 4,15,588 on account of under-invoicing as well as inflation of expenses. We have already discussed the issue above and accepted the contentions of the learned CIT (DR) that the substantive additions made in the cases of Five HUFs of the Group may be upheld and the corresponding protective additions made in the cases of Group Companies may be deleted. For the reasons discussed hereinbefore, we deleted the protective addition of Rs. 4,15,588. 2. The next dispute is against the addition of Rs. 91,831 on account of difference in stock. The Assessing Officer has dealt with the issue vide para-3 of the assessment order. During the search operations, stock inventory was prepared at the premises of the assessee-company which was valued at Rs. 10,81,411 as agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difference of 1516 Kgs. It may be added that the inventory of Ethyle Acetate and tolune was not taken nor found though available on purchase records and therefore this difference may be treated as explained. Similarly as per our records of excise, quantity of L.D.P.E. AND BOPP Poly is recorded at 7033 Kgs (i.e. a sum total of 1783 + 770 + 4480) where as the physical verification taken by the search party shows a total of 6186 Kgs (i.e. a sum total of 1622 + 430 + 3744 + 360). The difference in the two being of 847 Kgs." The learned Counsel submitted that the discrepancy has been fully explained by the assessee and therefore the impugned addition made by the Assessing Officer without considering the explanation deserves to be deleted. 2.2 We are inclined to accept the submissions of the learned Counsel. Surprisingly the explanation furnished by the assessee explaining the stock discrepancy before the Revenue authorities, vide letter dated 7-8-1996 placed in the paper book filed by the CIT (DR) himself has not been considered while making the impugned addition. The learned CIT (DR) who is present before us could not controvert the submissions made on behalf of the assessee-compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the cash book and ledger appearing at Sr. Nos. 13 and 14 are regular sets of books whereas the cash book and ledger appearing at Sr. Nos. 11 and 12 are discarded cash book and ledger for the same period. The Assessing Officer has stated in the assessment order that all the entries recorded in the discarded books are incorporated in the regular books. However, as per trial balance drawn even on the basis of regular sets of books of account the difference works out to Rs. 8,34,548. The Assessing Officer proceeded to treat the difference as undisclosed income of the block period on the ground that the same has not been reconciled. 6.1 The learned Counsel referred to the submissions made during the course of assessment proceedings placed at pages 19 and 20 of the Departmental paper book as well as page 28 of the said paper book. After going through the submissions, we find that there is no explanation given by the assessee-company regarding the trial balance difference which has been referred to in the assessment order. It appears to us that the discrepancy in the trial balance has not been confronted to the assessee during the course of block assessment proceedings and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of unsecured loans appearing in the books of account during the block period. The facts and issue involved are similar as in the case of Vimal Proteins P. Ltd., in IT(SS) Appeal No. 142/Ahd/1997 discussed above. Respectfully following the decision of the Hon'ble Gujarat High Court in the case of N. R. Paper & Board Ltd. and in the light of identical facts and circumstances as above, we delete the addition of Rs. 1,01,300. 6. The appeal of the assessee-company is allowed. Swity Confectionery P. Ltd. in IT (SS) Appeal No. 135/Ahd/ 1997 and Swiss Chocolate Pvt. Ltd. in IT (SS) Appeal No. 42/Ahd/1997: 1. The only dispute is against the protective addition of Rs. 1,86,296 in the case of Swity Confectionery P. Ltd. and Rs. 11,82,266 in the case of Swiss Chocolate P. Ltd., on account of under-invoicing as well as inflation of expenses. We have already discussed the issue above and accepted the contentions of the learned CIT (DR) that the substantive additions made in the cases of Five HUFs of the Group may be upheld and the corresponding protective additions made in the cases of Group Companies may be deleted. For the reasons discussed hereinbefore, we delete the protective addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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