9911796707
TMI Blog2003 (1) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1 The learned CIT(A) has erred in holding that the purchases made from certain suppliers amounting to Rs. 4.76 crores, for asst. yr. 1998-99 and Rs. 7.23 crores for asst. yr. 1999-2000 amounting in all to Rs. 11.99 crores are bogus and thereby has erred in confirming addition of Rs. 11.99 crores as undisclosed income. 2.2 The appellant says and submits that the purchases of Rs. 4.76 crores for asst. yr. 1998-99 is recorded in the books of accounts and that the IT return for asst. yr. 1998-99 was submitted on 30th Nov., 1998, i.e., prior to the date of search and purchases of Rs. 7.23 crores for asst. yr. 1999-2000 have been recorded in the normal manner in books of accounts prior to the date of search, i.e., 24th Feb., 1999 and therefore, such transactions are not considered as undisclosed income as provided in s. 158BC(3). 2.3 The appellant further says and submits that the learned CIT(A) has erred in placing reliance on finding based on inquiry made by Addl. DIT under s. 131(1A) and that the learned Dy. CIT has not made any independent inquiry and therefore the addition made on the basis of inquiry made by learned Addl. DIT under s. 131(1A) is illegal and not warranted s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the yield. However, the learned CIT(A) has ignored the facts of the material received and ignored the remand report and submissions of the assessee. 2.9 The appellant further says and submits that the purchases were at the market rate which is confirmed by the learned Dy. CIT in the remand report dt. 26th Dec., 2001 and therefore, it is clear that the purchases were not made to deflate the profit. 2.10 The appellant further says and submits that the assessee-company has made the payment of the entire purchases by cheques to the suppliers which is not disputed. 3. The learned CIT(A) has erred in placing reliance on finding given by Addl. DIT in his appraisal report and has erred in ignoring the other submissions regarding factum of purchases and regarding the recording of purchases in the books of accounts in the normal manner. 4. The learned CIT(A) has erred in confirming the addition to the extent of Rs. 3,86,968 being the profit of alleged sales made by the company inasmuch as the transaction have never taken place. 5.1 The order of block assessment is bad in law and illegal inasmuch as the approval of Jt. CIT is granted under s. 158BG without giving any opportunity to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order. Copies of bank accounts of these bogus parties were also obtained from the respective banks. The entire deposits in the bank accounts of these parties were treated as assessee's income on protective basis. It has been observed in the assessment order that inquiries are being conducted to find out the names of concerns which made these payments for purchases and other expenses to these parties. Substantive additions/disallowances will be made in those concerns after conclusion of inquiries. However, these additions were made protectively in the case of the assessee as "additions made as unaccounted payments". The summary of such additions made on account of bogus purchases and in respect of deposits in the bank accounts of these parties as given on p. 9 of the order passed by the CIT(A) are as under: (1) (2) (3) (4) (a) Adinath Corpn. 2,16,13,276 2,16,13,276 2,10,54,076 (b) Tirupati Corpn. 76,93,575* 4,76,93,575 3,33,07,324 (c) Vimal Industries 1,48,34,121 1,48,34,121 7,26,74,355 (d) Krishna Industries 3,19,56,782 3,19,56,782 2,79,02,721** (e) Karnavati Industries 38,10,000 8,10,000 12,34,73,600 (f) Trivedi Corpn. (goods are sold by NKPL an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und out the correct address of Shri Jaysukhlal Doshi who was then residing at Udaipur. The summons were served upon him. Shri Doshi did not appear in person in response to summons but sent an affidavit on a stamp paper of Rs. 10. The relevant facts stated in the said affidavit have been reproduced at pp. 7 and 8 of the assessment order, which read as under: "I, undersigned, Jaisukhlal Jamnadas Doshi, aged nearly 66 years, resident of A/5, Navprasthan Apartments, Nr Bhavsar Hostel, Nawa Wadaj, Ahmedabad at present residing at Toran Oil Mill (P) Ltd., 122, Chetak Marg, Sanghvi Bhavan, Udaipur, want to state under oath that I was doing trading of oil in Ahmedabad. Recently, I started Toran Oil Mill (P) Ltd. at Udaipur, but due to financial constrains could not commence the business. I, in my own name or in any other name have not supplied any goods to N. K. Proteins Ltd. nor have, I sold anything. I had signed the account opening form, blank cheque book, printed bill book on the direction of Shri Nileshbhai Patel of N. K. Proteins and had handed over the same to him. These papers were in the name of Adinath Corporation and Tirupati Corporation. I had signed account opening forms and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tell when and at what rate and in what quantity? Ans. Till date, I have not sold any goods in my own name and I have not sold anybody else's goods to M/s N.K. Proteins Ltd. Q. 4. Are you sure that you have not sold any goods to N.K. Proteins Ltd. or you have not done any brokerage for sale of anybody else's goods to M/s N.K. Proteins Ltd.? Ans. Yes, I am sure that I have not sold any goods to N.K. Proteins Ltd. nor I have done brokerage for sale of others' goods to M/s N.K. Proteins Ltd. Q. 5. Do you know Shri Nileshbhai Patel? If yes, how do you know? Ans. Yes, I do know Shri Nileshbhai Patel. I am doing business with the other concerns of Shri Nileshbhai Patel namely, N.K. Industries Ltd. I am supplying castor seeds and I am also doing brokerage for castor oil sale to N.K. Industries. Ltd. and brokerage for purchase of castor oil from N.K. Industries Ltd. Q. 6. Do you know Adinath Corporation address A/5, Navprasthan Apartments, Nr. Bhavsar Hostel, Nava Wadaj, Ahmedabad? Ans. I do not know any concern of this name. Q. 7. Do you know Tirupati Corpn. address A/5, Navprasthan Apartments, Nr. Bhavsar Hostel, Nava Wadaj, Ahmedabad and Triveni Corporation address A/5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by transfer entry on the date of deposit. The amount of withdrawal is exactly equivalent to the amount deposited on that particular date. The amount withdrawn from this bank account has gone by way of transfer to Triveni Corporation. The address of this concern given to the bank and address printed on their bills were different as in the case of AC. The AO relying upon the affidavit of Shri Jaisukhlal J Doshi reproduced in relation to Adinath Corporation, arrived at similar conclusions as in the case of AC. Vimal Industries: 10. Shri Dineshbhai Chaturbhai Patel is the proprietor of this concern. They had opened their bank account with Mehsana Urban Co-op. Bank, Usmanpura Branch, Ahmedabad. Their bank account No. is C/A 1117. The total deposits in their bank account during the period from 18th June, 1998 to 19th April, 1999 is Rs. 10,50,05,834. (Search was conducted on 24th Feb., 1999. It therefore appears that this figure includes payments after the search also). The summons sent to the aforesaid party at the address given to the bank could not be served. The Inspector was deputed to serve the summons and make necessary inquiries. It was found that no party existed at the given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d any goods through you from above three parties? If yes, please give details. Ans. No, I do not know N.K. Proteins Ltd. and above three parties. Any type of their goods had not been sold through me to N.K. Proteins Ltd. or I had not purchased any goods on behalf of N.K. Proteins Ltd. from them or N.K. Proteins Ltd. had not purchased any type of goods from them through me. 11. On the bills of Vimal Industries and Karnavati Industries sales-tax numbers were given. The inquiry from Sales-tax Officer was made with a view to find out identity of the owners of these concerns. From the details so obtained from the Sales-tax Department, it was gathered that the owner of Vimal Industries was one Shri Dinesh Chaturbhai Patel and the owner of Karnavati Industries was Shri Rasik Keshavlal Patel. The statement of Shri Dinesh Chaturbhai Patel, proprietor of Vimal Industries was recorded under s. 131(1A). The relevant portion of his statement have been reproduced at pp. 17 to 19 of the assessment order, which is as under: Extracts from statement of Shri Dinesh Chaturbhai Patel, proprietar of M/s Vimal Industries: Q. 2 What is the source of your income? Ans. I am not doing any business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Nileshbhai Patel. Q. 12 You have signed in the name of Vimal Industries on the direction of Nileshbhai Patel. Have you done any business in any other name? If yes, please explain? Ans. No, I have not signed on behalf of any other concern except for Vimal Industries. Q. 13 Now I am showing you p. 92 of loose paper file A/22, which has been seized from the N.K. Proteins Ltd. which is blank cheque of account No. 1117 of Mehsana Urban Co-op. Bank Ltd. on which rubber stamp of Vimal Industries is there and there is a signature below that, is it your signature? Ans. Yes, it is my signature, which I have done as per the direction of Nileshbhai Patel and I am doing this type of signature in bank. Q. 14 Please sign as you have signed in the bank. Ans. Sample signatures. Q. 15 What is the address of Vimal Industries given to sales-tax? Ans. Address of Vimal Industries given to sales-tax is 105/1, Amrut Indl. Estate, Dudheshwar Road, Ahmedabad. Q. 16 Is the address correct? Have you ever been to this place? Ans. No, I have not seen this address. The application form have been filled by Nileshbhai Patel. I have just signed it. Whether the address is right or wrong, I ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said inward register, the same shall be clarified from examination of books of NKPL. The AO found out the address of Rajesh Keshavlal Patel, proprietor of Krishna Industries from sales-tax registration form submitted by that party and with the help of Shri Dinesh Chaturbhai Patel, proprietor of Vimal Industries. He was summoned under s. 131(1A) and his statement was recorded on 3rd June, 1999. The relevant portion from the statement of Shri Rajesh Keshavlal Patel is reproduced at pp. 22 and 23 of the assessment order, which is as under: Extracts from statement of Shri Rajesh Keshavlal Patel, proprietor of M/s Krishna Industries: Q. 2. What are your sources of income? Ans. At present, I don't have any source of income. But sometimes that I was working for Shri Nileshbhai Patel of N.K. Proteins Ltd. For that he was paying me Rs. 2,500 per month. Q. 3. How do you know Shri Nileshbhai Patel? Ans. I was introduced to Shri Nileshbhai Patel by Shri Jagabhai Patel of Jotana, whose Ahmedabad phone No. is 6569184 and the residence phone No. at Mehsana is 50661. Q. 4. What is your relationship with Shri Nileshbhai Patel? Ans. I was working for Shri Nileshbhai Patel. As per his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Krishna Industries given by you on the bill book and letter head, i.e., A/15-1, Chinaibag Indl. Estate, Nr. Water Tank, Dudheshwar Road, Ahmedabad. On inquiry, it has been found that at this address, there is a factory in the name of M/s Virchand & Brothers which is making gas hot plate. At this address, no business activity is going on in the name of Krishna Industries. Please explain the same? Ans. I had signed on the sales-tax registration form and bank account opening form as per the direction of Shri Nileshbhai Patel. I don't know about the address. It has been given by Shri Nileshbhai Patel. Q. 14 Are you filing IT return? Ans. No, I don't have any source of income and I am not filing the IT return. On the basis of aforesaid material, the AO came to similar conclusions as in the case of Adinath Corporation that the aforesaid supplier is a fictitious entity and its entire affairs were controlled by Shri Nileshbhai Patel, who is director of the appellant-company. The purchases of raw material to have been made from Krishna Industries were bogus. Karnavati Industries: 13. Their account was opened with Visnagar Nagrik Sahakari Bank Ltd. Usmanpura Branch, Ahmedaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this name, I don't know. If any sale or purchases has been done in the name of Karnavati Industries the entire work has been done by Shri Nileshbhai Patel. I don't have any share in the profit and loss arising out of business in the name of Karnavati Industries. I don't have anything to do with the activities of Karnavati Industries. If there any income or loss has arisen, it has gone to Shri Nileshbhai Patel. Q. 6 In which banks, the accounts of Karnavati Industries have been opened? Ans. The account of M/s Karnavati Industries was in the Visnagar Nagrik Sahakari Bank Ltd., Usmanpura Branch but I have never visited the bank for any work pertaining to Karnavati Industries Q. 7 Have you ever purchased or sold goods in the name of Karnavati Industries or have you ever delivered goods in the name of Karnavati Industries? Ans. No, I have never sold or purchased goods in the name of Karnavati Industries If any sale or purchase has been done, it has been done by Shri Nileshbhai Patel. Q. 8 I am showing you loose paper file A/22 pp. 93 to 97 which has been seized from the 9th floor office of N.K. Proteins Ltd. during the income-tax search. These are blank cheques of account No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d along with the copies of relevant statements and affidavits of bogus suppliers had also been provided along with the letter dt. 4th Dec., 2000. The assessee submitted a reply dt. 15th Dec., 2000 stating that the entire purchases made from these parties are duly recorded in the books of accounts in the normal course before the date of search and therefore it does not fall within the purview of block assessment. The AO once again issued a show-cause notice dt. 8th Jan., 2001, which is reproduced at p. 28 of the assessment order. The assessee submitted a reply dt. 22nd Jan., 2001 which has been reproduced in para 6.3 on pp. 28 to 30 of the assessment order. The AO considered various replies and gave following findings in paras 6.4 to 6.6 on pp. 30 to 34 of the assessment order: "6.4 The reply of the assessee is carefully considered. The assessee has raised following arguments in its favour. (i) It is argued by the assessee that the entire purchases are duly recorded in the books of accounts in the normal course before the date of search, therefore, it does not fall within the purview of block assessment. (ii) The assessee has submitted that, if the purchases made from the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of evidences found at the time of search. From the evidences found during the course of search, it is also established that Triveni Corporation is fictitious one to whom the assessee has shown sale of goods. The assessee has also shown sale to Karnavati Industries which is also a bogus concern. If the quantity of this sale is reduced, then the revised yield would be less than 100 per cent. (iii) The assessee filed affidavits purported to be of four proprietors. It is very important to mention here that the signatures on two affidavits filed by the assessee do not tally with the signatures on the affidavit filed before the Dy. DIT. This shows that the assessee has fabricated these affidavits. These affidavits cannot be relied upon. (iv) During the course of search, blank signed cheque books, printed bill books and vouchers were seized from the office and factory premises of N.K. Proteins Ltd. and N.K. Industries Ltd. Shri Nileshbhai Patel who is the main person handling the day-to-day affairs of the assessee-company made a very vague submission during search that "he was having sales and purchases from Karnavati, Vimal and Tirupati Corporation As a result, he had to give payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown by the assessee in its books of accounts comes to Rs. 11,99,07,754. Therefore, an amount of Rs. 11,99,07,754 is considered as bogus purchases and added back to the total income of the assessee in respective assessment years, being bogus purchases. The yearwise break up is as under: Asst. yr. Amount 1998-99 4,75,93,575 1999-2000 7,23,14,179 Total 11,99,07,754" 15. The assessee preferred an appeal before the CIT(A) against the aforesaid order. The assessee submitted written submissions before the CIT(A) in which the assessee gave para-wise reply to the various findings and conclusions arrived at by the AO in paras 6.4 to 6.6 of assessment order. The relevant extract from the written submissions are reproduced below: Extracts from written submissions made by the assessee before the CIT(A): 2.5.2 The learned AO stated that since certain material such as blank signed cheques, blank bills, vouchers bills, etc. are found during search, income has to be considered as undisclosed income and form part of the block assessment. The view expressed is not correct. For the purpose of finding out any undisclosed income, two conditions have to be fulfilled; (i) that there shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion of search and to record the statements and obtain affidavits under s. 131(1A). 2.5.6.2 From the affidavits and statements, it may please be seen that the contents are similar. The type of question and the inquiries are same which show that they are recorded and obtained under undue influence and coersion. 2.5.6.3 The affidavits filed by the assessee from the said persons are not taken into account on the ground that the signature in one case vary. If such is the case, then the learned AO should have summoned the said persons and found out the truth or the genuineness of the signature. 2.5.6.4 The affidavits submitted by the assessee at the time of assessment state that the statements and affidavits given before Addl. DIT were under influence and coersion and that such statements and affidavits stand cancelled. He further stated that he was carrying on the business independently and that he used to deal in the seeds/oil and that he has not taken any help or assistance for carrying on business from Nilesh K Patel—managing director of the company. 2.5.6.5 Without examining the suppliers, one cannot conclude that the suppliers are bogus and therefore the purchases made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt (financial year 1998-99), if alleged purchases are excluded. The learned AO has observed that sales to Karnavati Industries and Triveni being bogus concerns, if ignored, yield would be less than 100 per cent. The view taken is not proper inasmuch as the sales to Karnavati Industries and Triveni Corporation is recorded in the books of accounts and quantity is also recorded in the stock register. Therefore, quantity of sales cannot be ignored for the purpose of working out yield. Further, even if sales quantity to Triveni Corporation and Karnavati Industries is excluded to calculate the yield, the yield would be more than 100 per cent if alleged purchases are excluded. In other words, the learned AO has not met with the contention of the assessee. This shows that the contentions raised by the assessee are correct. From the above, it is very clear that there cannot be production of more than 100 per cent. Since the production is 102.45 per cent (financial year 1997-98) and 102.61 per cent (financial year 1998-99) if the alleged purchases are excluded, it proves that the purchases are genuine and actually made and used for the production. 16. Thereafter, the assessee has furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of block assessment." 17. It may also be relevant here to reproduce the affidavits of all the suppliers submitted by the assessee before the AO during the course of assessment proceedings, in which they have retracted from their earlier affidavits/statements given to the Addl. DIT and Dy. DIT. (i) The affidavit dt. 12th April, 2001 of Shri Jaysukhlal Jamnadas Doshi, who is proprietor of Adinath Corporation and Tirupati Corporation appearing at p. 126 of the paper book dt. 1st July, 2002 is reproduced below: "I, Jaysukhlal Jamnadas Doshi, aged about residing at A/5, Navprasthan Apartments Nr. Bhavsar Hostel, Nava Wadaj, Ahmedabad do hereby solemnly affirm that at present Pratik, B/5, Agashi Road, Virar (W), 1. I had given an affidavit on 18th June, 1999 at the instance of Dy. DIT, Unit-3.1. This affidavit was made under pressure and coercion of Dy. DIT and was made as per his direction and therefore is stands cancelled. The facts stated in the said affidavit are not correct. I again made fresh affidavit stating the correct facts after cancelling the original affidavit. I had been carrying on business as dealer in oil and oil seeds as proprietor of Adinath Corporation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said business. I have not taken any help from Nileshbhai Patel of N.K. Proteins Ltd. or he has not given any instruction to me for making application for sales-tax number, opening of bank account, operation of bank account for the purpose of said business. The office of Vimal Industries was situated at 105/1, Amrut Industrial Estate, Opp.: Water Tank, Dudheshwar Road, Ahmedabad. The bill book and cheque books were kept at the office of N.K. Proteins Ltd. for the business convenience. I signed cheque book only for the sake of business convenience and that I did not sign the cheques at the instance of Nileshbhai Patel. The profit or loss from the said business belongs to me and that Nileshbhai Patel of N.K. Proteins Ltd. had no interest whatsoever in the said profit or loss. Nileshbhai Patel did not pay any remuneration. I was carrying on the said business independently and Nileshbhai Patel has no control whatsoever over it. I hereby again specifically declare that the statement recorded on 2nd June, 1997 and affidavit dt. 18th June, 1999 thus stands cancelled. This affidavit is made voluntarily and willingly without pressure from anybody. Dt. : 23rd Feb., 2001 Sd/- Place: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solemnly affirm that, 1. I made one affidavit on 18th June, 1999 as per direction of Dy. DIT, (Unit-3)-1 and also gave a statement on 3rd June, 1999 before him. The above referred statement and affidavit were given under pressure and coercion of Dy. DIT and as per his direction. Certain facts therein are not correct and therefore affidavit dt. 18th June, 1999 and statement dt. 3rd June, 1999 stand cancelled. The correct facts are as under: I was carrying on business as dealer in oil and oil seeds at Siddhpur before some time under the name and style of Karnavati Industries. I sold cotton seeds wash oil to N.K. Proteins Ltd. during the year 1998-99 and I used to make the profit about Rs. 2,000 per tanker from carrying on of the said business. I opened bank account with M/s Visnagar Nagrik Bank in the name of Karnavati Industries and for this purpose I have not taken any help from Nileshbhai Patel of N.K. Proteins Ltd. The cheque book and bill book were kept at the office of N.K. Proteins Ltd. for the purpose of business convenience since there was no permanent office of Karnavati Industries. I was carrying on this business independently and there was no control of Shri Nileshbh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) also observed that first affidavits submitted by these suppliers must be relied upon as some of those affidavits were given before the Metropolitan Magistrate or those represent statements on oath. The burden lies on the assessee to prove that there was any pressure or coercion. Reliance was placed by the learned CIT(A) on the judgments reported in V. Kunhambu & Sons vs. CIT (1996) 131 CTR (Ker) 396 : (1996) 219 ITR 235 (Ker) and Param Anand Builders (P) Ltd. vs. ITO (1996) 56 TTJ (Mumbai) 21 : (1996) 59 ITD 29 (Mumbai). The CIT(A) also placed reliance on the judgment of the Hon'ble Delhi High Court in the case reported in CIT vs. La Medica (2001) 168 CTR (Del) 314 : (2001) 250 ITR 575 (Del). The CIT(A) has also observed that the legal issues raised in respect of purchases made from all these bogus suppliers are common and have been dealt with in the case of Adinath Corporation. The CIT(A) has given elaborate reasons while confirming the addition of bogus purchases aggregating to Rs. 11.99 crores. 19. The learned counsel appearing for the assessee reiterated elaborate arguments made before the learned Departmental authorities. Shri A.C. Shah submitted that the entire finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is concerned, they have proved by producing documentary evidence of contemporary period that the goods in fact were received by the assessee. Such material was consumed in manufacture of goods which is supported by corresponding sales. The statement of yield obtained by the assessee were also given before the learned Departmental authorities. Summary thereof has been placed at pp. 14 to 16 of the paper book. If the purchases made from these five parties are excluded, the yield would be more than the raw material consumed, which is impossible. The learned counsel also drew our attention to written submissions regarding receipt of material furnished at p. 12 of the paper book dt. 1st July, 2002 in which attention has been invited towards assessee's letter dt. 22nd Jan., 2001. Our attention was also invited towards reply to question No. 25 of statement of Shri Kamleshbhai L. Patel. It has been stated in the said written submissions that the inward register is seized. All the purchases made from these parties are duly recorded in the inward register and have properly been accounted for in the books of accounts. The assessee contended before the AO that the same can be verified with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases were made from other regular dealers. In the aforesaid remand report he has also confirmed the fact that the purchases from these five parties were made at prevailing market price. It cannot therefore be a case of inflation of purchase price also. 24. The declared trading results are supported by books of accounts which are regularly maintained. The correctness and completeness and regularity of method of accounting followed by the assessee has not been doubted. The entire purchases and sales are supported by vouchers. The stocks are periodically checked by civil supply authorities. No defects have been pointed out by the AO in the books of accounts and records maintained by the assessee. Our attention was also drawn to the Circular No. 387, dt. 6th July, 1984 published in (1984) 43 CTR (TLT) 3 : (1985) 152 ITR (St) 12. In the said circular the scope and effect of s. 44AB has been explained. The said provision requiring compulsory tax audit was introduced with a view to ensure that the books of accounts and other records are properly maintained and that they faithfully reflect the income of the tax payers and claims for deductions are correctly made by him. Such audit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich will support the correctness of this contention. The learned counsel further contended that let us examine the contents of the affidavit dt. 18th June, 1999 obtained by Dy. DIT behind the back of the assessee. In this affidavit also Shri J.J. Doshi has confirmed that he was carrying on the business as dealer in oil and oil seeds at Ahmedabad and at present he formed a company known as "Toran Oil (P) Ltd." at Udaipur. This shows that Shri Doshi was an old and established dealer in oil and oil seeds. In the subsequent affidavit dt. 12th April, 2001, Shri J.J. Doshi has clearly stated that the statement given on 18th June, 1999 was under pressure and coercion and therefore, such affidavit stands cancelled. The learned CIT(A) has observed that the burden lies on the assessee to prove that coercion was exercised. The learned counsel contended that the fact or coercion has been stated by Shri J.J. Doshi in rebuttal of affidavit directly obtained by the Department from him on 18th June, 1999. Therefore, it was a matter between the Department and Shri J.J. Doshi. The assessee is under no obligation to prove the fact of exertion of coercion. The affidavit dt. 18th June, 1999 given by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. This necessarily implies that M/s Karnavati Industries were supplying material or issuing bills to various other parties. A perusal of the copy of bank account of M/s Karnavati Industries obtained by the Department also indicates that there are various debits by cheques given to other parties. For example, cheque No. 518492 dt. 18th Feb., 1998 has been given to "Marudhar" for Rs. 9,50,000; cheque No. 518491 dt. 18th Feb., 1998 has been given to "Mayur" for Rs. 9,50,000; cheque No. 518490 dt. 18th Feb., 1998 has been given to "Sanjay" for Rs. 2,15,000. The AO could easily ascertain the destination of this money by obtaining paid cheques from the bank and interrogating the persons to whom these cheques have been given which have been debited in bank account No. 4046 of M/s Karnavati Industries. Similarly, the learned counsel invited our attention to copy of bank account of Vimal Industries with Mehsana Urban Co-op. Bank. In this account also various cheques have been debited in the column of withdrawals. Those cheques must have been given to some parties. The destination of the money given by such cheques could have been easily verified by the AO by making further inquiries. It ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed behind the back of the assessee. The AO has also placed reliance on the statements of Shri Nileshbhai Patel recorded on 6th April, 1999 during the search. All these statements were recorded behind the back of the assessee-company. The assessee-company is a separate and distinct person/entity. Before using these statements against the assessee-company, the AO should have examined Shri Rajesh broker, Shri Lalchand broker, Shri Nileshbhai Patel and other persons during the course of assessment proceedings in the presence of assessee's representative. 30. During the course of hearing the Bench required the learned Departmental Representative to prepare a statement of peak of credit balance in the accounts of the alleged bogus suppliers. The learned senior Departmental Representative submitted the peak stock position in the accounts of these five parties along with the letter dt. 23rd Oct., 2002. A copy of this peak stock statement in the accounts of all these suppliers was handed over to the learned counsel also. A perusal of these accounts indicates that there was a peak credit as under in the accounts of these five parties: Peak statement Letter dt. 23-10-2002 Peak as on P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO in this regard. Therefore, this point is not the subject-matter of present appeal. 33. The learned counsel submitted that the CIT(A) has erred in placing reliance on the decision of the Hon'ble Delhi High Court in the case of La Medica vs. CIT. In that case, it was held that the question of law arises from the order of the Tribunal in view of the facts of that case and it does not lay down any principles of law relating to the point in issue. Likewise the learned counsel explained that reliance placed by the CIT(A) on various other decisions is not correct as the facts of those cases are clearly distinguishable. 34. The learned counsel placed strong reliance on the following decisions: (A) Dy. CIT vs. Adinath Industries (2001) 170 CTR (Guj) 262 : (2001) 252 ITR 476 (Guj) The learned counsel contended that the facts of this case are absolutely similar with the facts of the assessee's case. The Hon'ble Supreme Court has also dismissed SLP submitted by the Department against the said decision which is reported in (2001) 247 ITR 35 (St.). Copy of order passed by the Tribunal in ITA No. 2352/A/1988 dt. 17th Dec., 1998 was also furnished. This order of the Tribunal was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suppliers given by the assessee were not found to be incorrect. It is not a case, where the suppliers were not found at the given address. In the present case the suppliers have given their statements/affidavits to Dy. DIT clearly stating that they have not supplied any material to the assessee as shown in the bills issued by their concerns. They have also admitted that they were only name-lenders. The brokers Shri Rajesh and Shri Lalchandbhai have also stated that these suppliers have not supplied any material to the assessee through them. The assessee is not prepared to produce those suppliers along with their records, although a specific opportunity for this purpose was granted by the Tribunal. (B) CIT vs. M.K. Brothers (1986) 52 CTR (Guj) 228 : (1987) 163 ITR 249 (Guj). In this case, the assessee purchased material of Rs. 52,254 from certain parties. Those parties had admitted before the sales-tax authorities that they had issued bogus vouchers. The AO added the said amount. The Tribunal found that there was no evidence to show that the bogus vouchers had been issued by the said parties to the assessee. It has been further observed that nothing has been shown to indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The Tribunal held that the payments were made by account payee cheques and they were certainly deposited in some bank accounts which were opened, maintained and operated by suppliers or by some other persons and the amount was credited in those accounts. Who were the persons who operated the accounts, who introduced them to the bank, who deposited these account payee cheques and who was withdrawing and enjoying the money and whether these payments had reverted back to the originator, could very easily be known to the Department. No inquiries were made from sales-tax department as to whether those sales-tax registration numbers were allotted to non-existent persons or existing ones and whether the sales-tax was collected and deposited into the Government exchequer or not, and if yes, by whom. Such an inquiry should have been made by the Department in order to know the truth. Failure to do so on the part of the AO, cannot authorise him to treat the purchases as bogus without proper inquiries. The facts of the present case are clearly distinguishable. (E) ITA Nos. 2609/Ahd/1984 and 2894/Ahd/1988 for asst. yr. 1985-86 in the case of Arun Industries, Dhoraji, dt. 31st Jan., 1992 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to case depending on nature of business and the fact whether it was shown as credit purchases or cash purchases. (G) Asstt. CIT vs. Rehmat Khan Chandan Khan & Party (1995) 52 TTJ (Jp) 203: This was a case where lump sum addition made on account of low GP was held to be not justified. This case is not of any relevance to the point in issue. (H) ITO vs. Chandrakant Manilal Shah, Tribunal, Ahmedabad Bench: Copy has been submitted along with the compilation dt. 1st July, 2002. In this case, the suppliers initially denied. Later on they admitted. The supplier was dealer in colour and chemicals for last four years and was duly assessed to income-tax and sales-tax. The facts are clearly distinguishable, as the suppliers in the present case are not existing I.T. assessees and there is no evidence about their capacity to supply such material worth lakhs/crores on credit. The suppliers have not been produced. 35. The learned counsel placed reliance on the following decisions to support his contention that the statements recorded without knowledge of the assessee have no evidentiary value. These judgments were also relied upon to support his contention that the contents of affidav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of gross profit declared in various years: (i) J.H. Metals vs. ITO (2001) 71 TTJ (Asr) (TM) 683 : (2001) 77 ITD 71 (Asr) (TM) (ii) J.R. Solvent Industries vs. Asstt. CIT (1999) 63 TTJ (Chd) (TM) 165 : (1999) 68 ITD 65 (Chd) (TM) (iii) Balaji Textiles (1994) 49 ITD 177 (Bom) (iv) Dy. CIT vs. Brahmaputra Steels (P) Ltd. (2002) 76 TTJ (Gau) 447 39. Our attention was also invited to GP chart submitted along with the supplementary notes given on 22nd Oct., 2002 which is reproduced below: Asst. yr. GP Yield 1995-96 2.14% 97.80% 1996-97 3.28% 97.12% 1997-98 3.52% 97.15% 1998-99 3.39% 98.31% 1999-2000 5.58% 98.73% 40. It was contended that both the GP rate as well as yield disclosed by the assessee in asst. yrs. 1998-99 and 1999-2000 are better as compared to earlier years. Reliance was also placed on the decision of the Tribunal in the case of Asstt. CIT vs. Hynoup Food & Oil Industries (P) Ltd. (1999) 63 TTJ (Ahd) 111 where the shortage of 0.18 per cent in similar line of manufacturing activities was accepted by the Tribunal. The learned counsel also placed reliance on the following judgments: (i) CIT vs. Brahamputra Steels (P) Ltd. (ii) State of Ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny has taken stand that the notice under s. 131(1A) is ill conceived and has requested not to press for any more statement. Extract of this letter is on page No. 4 of the paper book submitted by the undersigned on 21st Oct., 2002. In view of the assessee's refusal and non-co-operation, the Dy. DIT carried out his enquiry in this case on seized material, incriminating documents, statements of various persons and leads coming out of bank enquiries and other enquiries. 2.1 The Dy. DIT was perfectly legal in carrying out such enquiries and the Hon'ble Gujarat High Court has held in the case of M/s Aarti Gases vs. Dy. DIT that notice under s. 131(1A) after the completion of search under s. 132 can be issued for proper appreciation of the facts and issues resulting from search and same is also beneficial to the assessee to explain his stand on these documents. In the case of Classic Builder & Developers vs. Union of India (2001) 171 CTR (MP) 319 : (2001) 251 ITR 492 (MP), the Hon'ble High Court has decided that the Dy. DIT was perfectly within his power in issuing the commission under s. 131(b)(D) with the view to elucidate the correctness of cost of construction by having power under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, factory premises, office premises and surveys under s. 133A were carried out on 24th Feb., 1999 and subsequently on N. K. Group. During the course of search, assets as mentioned on p. 1 of paper book filed on 21st Oct., 2002 of the Department were seized. 3.1 During the search, certain blank bills, letter head, delivery challan and blank cheque books of various parties were found. Blank bills of transporters were also found. Xeroxes of cheques found in the case of M/s Adinath Corporation has been given as first paper book containing 8 pages. Xeroxes of blank cheques found have been given on page Nos. 36 to 83 of paper book filed on 22nd Oct., 2002 of Department. Copies of blank letter heads and bills seized as per Annex. A-7 are as per page Nos. 14 to 28 of the paper book dt. 21st Oct., 2002. 3.2 During the course of search proceedings, it was found that the assessee has used names of following concerns for inflating the purchases (i) M/s Adinath Corporation, (ii) M/s Tirupati Corporation, (iii) M/s Krishna Industries, (iv) M/s Vimal Industries, and (v) M/s Karnavati Industries. Detailed enquiries were carried out in the case of M/s Adinath Corporation whose proprietor wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nth of July, 1998 and search was conducted in the month of February, 1999 and which is more than 8 months from the last transaction and there is no reason for keeping blank signed cheque book, blank bills, letter heads, vouchers etc. 3.6 The assessee has shown purchase of Rs. 2.16 crores from M/s Adinath Corporation. However, bank a/c shows deposits of Rs. 2,10,49,035 which means cheques were deposited somewhere else also. It has been found that payment for first three transactions which are mentioned in the copy of a/c on page No. 37 of Department's paper book dt. 21st Oct., 2002 have been made in the account of M/s Tirupati Corporation as mentioned in page No. 60 and 61 of Department's paper book of 21st Oct., 2002. Similarly cheque of Rs. 3,79,967 deposited in the account of M/s Adinath Corporation shown on page No. 59 of paper book has been found debited in the account of M/s Krishna Industries which is shown on p. 50 of the paper book. These transactions clearly shows that all these bank a/cs, cheques were in complete control of assessee-company. 3.7 It is clear from the above that the assessee-company was in complete control and they themselves have created these bogus en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. All these parties does not have storage capacity to store such a huge quantity of oil on their own. It is worthwhile to mention here that M/s Tirupati Corporation has sold 19 trucks of oil worth more than Rs. 1 crore on a single day, i.e., on 29th Dec., 1997 and again have sold 9 trucks of oil on 16th Nov., 1997. 3.11 Yield of cotton seed oil is about 10 to 12 per cent which means approximately 1 lakh kg. of cotton seed is required to produce one tanker of oil, i.e., 10000 litre of oil which means oil miller/expeller should have capacity to crush such a large quantity of cotton seed and capacity to store cotton seed and tanks to store cotton seed oil and it is worthwhile to mention here that M/s Tirupati Corporation has supplied 19 tankers oil on one day i.e. 19th Dec., 1997. 3.12 All entries of these stocks from the above bogus parties are appearing in the inward register. However, these are mere entries and no actual goods have been received as all these registers were made by the assessee and was part of the design for inflating the expenses. This fact further gets support if details entered in inward registers are seen. Inward register A-1/15 seized from the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f these seized material (A-6) itself. Asessee has stated that these purchase bills of value of about Rs. 2 crores were sold to M/s Triveni Corporation and M/s Tirupati Corporation (which the later denied and stated that these all bills were cancelled) is also not correct. All the purchase bills from N.K. Industries Ltd. are for the item wash cotton seed oil and all the sales bills to M/s Triveni Corporation and M/s Tirupati Corporation are for soyabean oil. How the person can sell soyabean oil out of purchase of wash cotton seed oil. Thirty pages from the seized documents A-6 have been enclosed as page No. 6 to 35 of Department's paper book dt. 22nd Oct., 2002 (total documents in the seized files are 234). It has to be further emphasised here that all these transactions are spread over a period of more than a month and all these transactions carry lorry No., signature of accountant, signature of checking staff and details of inward No. and date. It can further be seen that even these entries which have been made in the name of M/s Kothari Global Ltd. in the inward register are not correct. To illustrate this truck No. GJ-2U-9013 has come (highlighted in yellow colour of the papers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld. (i) Additive use in the process of refining cotton seed oil—Process of refining of cotton seed oil has been explained by Shri Kamlesh L. Patel in response to question No. 8 on page Nos. 153 to 155 of assessee's paper book. It can be seen that besides various chemicals like soda ash and water has also been used in the process. Use of any of these things may result yield of more than 100 per cent. (ii) Maintenance of accounts—It has been observed by the special auditors in the case of M/s N.K. Industries Ltd. which is under the same management; that management is accounting weight of the material as per invoice and not as per actual receipt which is invariably higher than the invoice quantity. On page No. 2 and 3 copy of two such reports have been annexed in the paper book of M/s N.K. Industries Ltd. filed by the Department on 21st Oct., 2002. Excess unaccounted receipt of material may result into excess yield. The special auditors have computed yield of more than 100 per cent in their various reports which are annexed on page Nos. 4, 5, 6 and 7 of the paper book of the Department in the case of N.K. Industries Ltd. which makes it clear that yield can be higher than 100 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and as to why it was found in the premises of the assessee and why officer has not come forward to own the diary. The addition in respect of unexplained entries in the diary was to be sustained in the hands of the assessee. (v) CIT vs. P.R. Metrani HUF (2001) 169 CTR (Kar) 149 : (2001) 251 ITR 244 (Kar): Presumption under s. 132(4A) that the articles found in possession or control of person belonged to him is not restricted under s. 132(5) only. Such, presumption is absolute for purpose of s. 132(5) and rebuttable for purposes of other provisions of IT Act. The assessment based on search and seizure stands on a different footing inference and the seized materials play vital role. There cannot be any direct evidence and no direct evidence would be forthcoming in these matters. (vi) P K Narayan vs. CIT (1997) 142 CTR (Ker) 381 : (1998) 229 ITR 596 (Ker): Where certain documents were discovered during the search showing that the assessee was the owner of the jewellery business run in the name of the third person and the assessee was not able to rebut the presumption arising under s. 132 of the Act, income from jewellery business was assessable in the hands of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO about the bogus purchases are, therefore, completely vitiated. Reliance has been placed on the judgment of the Hon'ble Supreme Court in the case of Omar Salay Mohamed Sait vs. CIT (1959) 37 ITR 151 (SC) to support their contention that the conclusions reached by the Tribunal should not be coloured by any irrelevant considerations. It has been reiterated that the AO in the remand report has accepted that the material purchased from these parties was in fact received and properly accounted for in inward register, stocks registers and financial books of accounts. He has also confirmed that such purchases have been made at market rate. The margin of GP and yield is better as compared to the past. All these facts indicate that it is not a case of either bogus purchases or inflated purchases. The assessee has also stated that the AO has erred in stating that the yield may be more than 100 per cent in some cases because soda ash and water are used in the process of production. This is factually incorrect. Soda ash and water is never used in manufacturing process carried out by the assessee. No purchases of soda ash has been established. The AO has confused the production activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nath Corporation ended in the month of July, 1998. The account was closed in July, 1998. Some bills/cheques were found during the course of search on 24th Feb., 1999. This shows that those cheques could not have been used when the account had already been closed in July, 1998. In para 9 of the rejoinder, the assessee has stated that these suppliers were traders. They were carrying on business not only with the appellant but with outsiders also. The total deposits in bank accounts of these suppliers upto April, 1999 were about Rs. 44 crores as against purchases of only Rs. 11.99 crores which were made by the assessee from them. This shows that the large scale dealings were made by these traders with outside other parties also. The allegation that the appellant was in complete control of the suppliers is without any cogent material. The suppliers have filed their affidavits at the time of assessments stating that they were independent and not controlled by Shri Nilesh K. Patel. In the absence of examination by the AO at the time of assessments, no adverse conclusion can be drawn against the assessee. Reliance is placed on the judgment of the Hon'ble Gujarat High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to supplies made by Kothari Global has been challenged. It has been stated that Kothari Global has supplied from some trader or manufacturer nearby Ahmedabad. The supply was in December, 1997. Old records are not available. Further such evidence is being produced for the first time before the Tribunal. Therefore it cannot be entertained. The assessee has contended in para 16 that he AO has taken a contradictory stand in the said written submissions as compared to the stand taken by him in the remand report. The same AO has stated in the remand report that the raw material has been received by the assessee and in the same breath he treated the payments made towards these purchases is unaccounted income which would mean that the suppliers supplied the goods without charging any price. Even assuming that the suppliers were kind enough to supply the goods free of cost, even then market price of goods so received has to be allowed as a deduction. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. Groz-Beckert Saboo Ltd. (1979) 8 CTR (SC) 155 : (1979) 116 ITR 125 (SC). 47. Before giving our findings in relation to the main ground, it ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 158BC. It accordingly filed the return in respect of "N.K. Proteins Ltd.". The point raised by the assessee is purely a technical one and even assuming there is some infirmity in the notice, it is curable under s. 292B. Reliance was placed on the decision reported in Dr. R.M.L. Mehrotra vs. Asstt. CIT (1999) 64 TTJ (All) 259 : (1999) 68 ITD 288 (All). The learned CIT(A) rejected the said ground. In our view, the CIT(A) has rightly rejected this ground raised by the assessee. 48. In ground nos. 5.1 and 5.2, it has been contended that the approval of Jt. CIT granted under s. 158BG without providing any opportunity to the assessee is invalid and the approval so granted by the Jt. CIT appears to be mechanical and without application of mind. The learned counsel contended that the approval was granted on 30th April, 2001 and on that very day, the assessment order has been passed by the AO. The approval granted in mechanical manner without grant of opportunity of hearing, is invalid. Reliance has been placed on the decisions reported in Chhugamal Rajpal vs. S.P. Chaliha & Ors. (1971) 79 ITR 603 (SC) and 197 ITR 194 (sic). The CIT(A) has negatived this plea by placing reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of context in which the questions arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete "law" declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings. In Madhav Rao Jivaji Rao Scindia Bahadur vs. Union of India (1971) 3 SCR 9 : AIR 1971 SC 530, this Court cautioned: 'It is not proper to regard a word, a clause or a sentence occurring in a judgment of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 1995-96. It was further submitted that in any event no addition could be made to the total income disclosed in the said returns in view of the block assessment made for the period which included the said asst. yr. 1995-96. The Division Bench of this Court in the case of N.R. Paper & Boards Ltd. vs. Dy. CIT (1998) 146 CTR (Guj) 612 : (1998) 234 ITR 733 (Guj) considered the provisions in detail. The Court pointed out that the block assessment of undisclosed income to be charged at a higher rate of tax prescribed was independent of the pending regular assessments and it operated in a different field from the assessment of undisclosed income which was not and would not have been disclosed for the purpose of the Act. Undisclosed income, by Chapter XIV-B, is classified separately for the purposes of assessment and is required to be worked out in the manner prescribed therein and treated to a higher rate of tax. This process did not disturb the assessments already made, of the previous years, and was only intended to sniff out what had remained hidden and not disclosed by the assessee. There would, therefore, be no overlapping in the nature of the assessment made under this chapter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not" as provided in sub-s. (2) of s. 158BA. This expression clearly indicates that the block assessment of undisclosed income and its being charged to a higher rate of tax prescribed, was independent of the pending regular assessments and it operated in a different field from the assessment of undisclosed income which was not and would not have been disclosed for the purposes of the Act. Undisclosed income, by this chapter, is classified separately for the purposes of assessment and is required to be worked out in the manner prescribed therein and treated to a higher rate of tax. This process did not disturb the assessments already made, of the previous years, and was only intended to sniff out what had remained hidden and would not have been disclosed by the assessee. There would, therefore, be no overlapping in the nature of the assessment made under chapter of undisclosed income and the regular assessment made under s. 143(3) of the Act. If the pending regular assessment proceedings were to be frozen and got substituted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the block period shall not include the income assessed in any regular assessment as income of such block period. It further provides that the income assessed in this chapter shall not be included in the regular assessment of any previous year included in the block period. The mere fact that the AO is empowered to assess the concealed income in regular assessment does not lead to the conclusion that what the ITO can assess in regular assessment cannot be assessed in block assessment. The Hon'ble Gujarat High Court while dealing with the reference application under s. 256(2) has declined to refer the various questions suggested by the CIT mainly on the ground that the questions proposed by the Revenue did not raise any question of law and it has also been observed that where the assessee has disclosed the particulars of income or expenditure in the return/books of accounts, the AO cannot take a different view on the basis of "same material". Such observations have been made by following the judgment reported in (1998) 234 ITR 733 (Guj). The judgment of the Hon'ble Gujarat High Court in the case of N.R. Paper & Boards Ltd.,if read in the context of questions raised before the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the block period shall be the aggregate of the total income of the previous years falling within the block period computed in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined......" 57. A plain reading of s. 158B(b) clearly indicates that any expense, deduction or allowance claimed under this chapter which is found to be false as a result of search will come within the ambit of undisclosed income under Chapter XIV-B. The expressions "on the basis of evidence found as a result of search" or "other documents and such other materials of information as are available with the AO and relatable to such evidence, the undisclosed income so detected as a result of search and/or as a result of other material or information as are available with the AO, will be assessable as undisclosed income in assessment for the block period. It may be rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apter XIV-B. 59. The other main argument advanced by the learned counsel was that the impugned assessment made by the AO for the block period is solely based on enquiries made by the Addl. DIT/Dy. DIT and on the appraisal report sent by them. All the affidavits/statements on which the AO has placed reliance were obtained by the investigation wing. The AO has simply relied on the appraisal report. The learned counsel has vehemently argued that the Addl. DIT/Dy. DIT have no power to conduct enquiry after the search. The CIT(A) has placed reliance on the judgment of the Hon'ble Gujarat High Court in the case of Arti Gases vs. Dy. DIT. The Hon'ble Gujarat High Court in that case at p. 63 has observed as under: "We are of the view that the notices under s. 131(1A) can also be issued after completion of the search undertaken under the provisions of s. 132 of the Act. In our opinion, it would be absolutely logical to call for information so as to have better particulars or to have a complete idea about the material seized during the search. If some material is seized at the time of the search and the authorised officer wants to have some details so as to understand the nature of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiries, affidavits/statements along with the letter dt. 4th Dec., 2000. Thereafter, the AO gave several opportunities to the assessee in respect of all such material gathered by the Addl. DIT/Dy. DIT before using the same against the assessee in the assessment order. The AO has thus fully complied with the relevant provisions of law and the principles of natural justice before using the material against the assessee. This contention of the learned counsel also, therefore, has no merit. 61. We have carefully gone through all the decisions cited by the learned representatives of the parties. It is well settled law that each case will depend on the facts and circumstances of that case. The decision in every case has to be arrived at on the basis of appreciation of facts, material and evidence existing on records. However, such evidence existing on records should be appreciated and evaluated on the basis of principles of law emerging from various decisions cited by the learned representatives. We have also indicated hereinbefore as to how the facts of various cases relied upon by the learned counsel are different and distinguishable from the facts of the present case. We will howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the block period from 17th April, 1998 to 7th July, 1998. The total deposits in their bank account was Rs. 2,10,54,076.50. Whenever any cheque given by the assessee towards payment of purchase price to this party was credited in their bank account, on that very day, on most of the occasions, an equivalent amount had been withdrawn by a self cheque. For instance, cheque of Rs. 3,69,857 was credited in their bank account on 23rd April, 1998 and there is a cash withdrawal of an equivalent amount on that very day. Most of the times, there is a withdrawal of an equivalent amount by self cheque on the date of deposit of the cheque on their account. This bank account was introduced by Shri Nileshbhai K. Patel, as director of the appellant-company. The balance in this bank account after such withdrawal soon after the deposit of the cheque mostly remained at the same figure of Rs. 5041. The learned Departmental Representative has submitted a copy of letter dt. 20th March, 2001 from Mehsana Urban Co-op. Bank Ltd. stating that as per the statement of account of Adinath Corporation account No. 531, all credit entries by transfer during the period from 17th April, 1998 to 7th July, 1998 are fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tirupati Corporation was also opened with an initial deposit of Rs. 1,000 on 29th Sept., 1997. The cheques deposited in this account which are mostly from NKPL (assessee-company) are also followed by immediate withdrawal of an equivalent amount on most of the occasions leaving a balance of Rs. 7,616 on most of the days. Most of the cheques are either cash withdrawn or have been issued in favour of Triveni Corporation, as is apparent from the narration given in the copy of bank statement placed at pp. 67 and 68 of the paper book dt. 1st July, 2002 submitted by the assessee. (B)(iii) The bank account of M/s Vimal Industries was also opened with an initial deposit of Rs. 1,000 on 18th June, 1998. The transactions of purchase bills obtained from this party pertained to the period from July, 1998 to December, 1998. M/s Vimal Industries had also withdrawn the amounts from time to time by way of self cheques soon after the respective cheques from various parties were credited. It is true that the total deposits in the account of M/s Vimal Industries with Mehsana Urban Co-op. Bank Ltd. account No. 1117 as per the assessment order for the period from 18th June, 1998 to 19th April, 1999 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1130 with Mehsana Urban Co-op. Bank are also by way of self cheques but there are other few withdrawals by way of cheques/DDs. For example there is a debit of Rs. 6,50,100 by way of demand draft dt. 28th July, 1998. Likewise, there are some withdrawals by cheques also. But most of the withdrawals from this bank account are by way of self cheques of substantial amounts withdrawn almost on the same day when corresponding cheques were credited in the said bank account. (B)(v) Karnavati Industries: They also opened their account on 29th Dec., 1997 with initial deposit of Rs. 1,000. The total deposits in the said account from 29th Dec., 1997 to 29th Dec., 1998 are Rs. 12,30,13,608 as per copy of bank statement submitted at pp. 87 to 101 of the said paper book. The total purchase bills obtained by the assessee from this party were only of Rs. 38,10,000. A copy of account of Karnavati Industries in the books of assessee submitted at pp. 57 to 59 shows the total debits in this account to the tune of Rs. 2,28,77,001. The total credits have been shown at Rs. 2,26,14,069 for the period from 18th June, 1998 to 31st March, 1999. There is a closing balance of Rs. 2,62,932 as on 31st March, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of them existed at the given addresses. (E) Most vital and significant evidence brought on records by the IT authorities is clear and categorical admission by all these parties in the form of affidavits/statements. Copies of affidavits/statements given by all these supplier concerns referred to in the assessment orders clearly indicate that all of them have clearly denied having supplied any material to the assessee. They also stated that they were being paid petty monthly amounts by Shri Nilesh K. Patel for signing cheques, bills and other documents in the names of these bogus concerns. The assessee contended, that no reliance on these affidavits/statements obtained by the Dy. DIT/Addl. DIT behind back of the assessee, should be placed, as they were not examined in the presence of the assessee nor the assessee was allowed to cross-examine them. It is pertinent to mention here that the AO vide very first questionnaire dt. 4th Dec., 2000 which is reproduced at p. 2 and 3 of the assessment order gave complete gist of inquiries conducted in respect of purchases made from these parties. Copies of all relevant statements/affidavits given by the owners of these supplier concerns ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge to examine or cross-examine the suppliers and the brokers in their presence. The assessee only repeated the arguments that material had really been received and the payments had been made by account payee cheques. It was also stated that since these transactions are recorded in the regular books of accounts, therefore, the question of considering the same in block assessment does not arise. 65. Thereafter, it appears that the affidavits of some of these suppliers retracting from their earlier affidavits given to Dy. DIT, were furnished in the course of assessment proceedings in the case of Shri Nilesh K. Patel. A copy of letter dt. 23rd Feb., 2001 from Shri Nileshbhai Patel to the Dy. CIT has been placed at pp. 30 to 32 of the Department's paper book. In this letter it has been stated that the original affidavits of proprietors of eight concerns including all these five parties in question in the present case are enclosed herewith. The affidavit of Shri J.J. Doshi, proprietor of M/s Adinath Corporation and M/s Tirupati Corporation, though specifically stated as having been enclosed with this letter dt. 23rd Feb., 2001 was not submitted with the said letter. Only four affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these suppliers at the fag end of the assessment proceedings and did not produce these suppliers before the AO along with their books of accounts and records from which the capacity of the suppliers and the reality and genuineness of credit sales of such large magnitude made by them to the assessee could have been verified. The assessee also did not produce the brokers through whom it was stated by Shri Nileshbhai Patel that the purchases from these parties were made through them. The suppliers who could give their affidavits subsequently in which they have retracted from their earlier affidavits/statements to Dy. DIT, were therefore fully co-operating with the assessee and there is no reason as to why the assessee did not or could not produce them before the AO for their examination along with the relevant records. 67. In the interest of fair play and justice, a specific opportunity was given to the learned counsel appearing for the assessee during the course of hearing before us, to produce all these suppliers along with their records before the Tribunal. The learned counsel after a deep consideration submitted a reply on the next date of hearing that the assessee cannot pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Departmental authorities that all these suppliers were only name lenders/billing agents. The purchases claimed to have been made by the assessee from them do not represent genuine purchases made from those parties. 68. The question still remains to be considered is as to whether the assessee had in fact received the material in question which was claimed as allegedly purchased from these name lenders/billing agents. The evidence existing on records, which will be discussed in details hereinafter, indicates that the material in question "wash cotton seed oil" shown as purchased through such fictitious invoices obtained in the names of five bogus parties, appear to have really been received. Such evidence on records are briefly as follows: (A) Various records of contemporary period including general inward register, daily gate outward register were found and seized during the course of search. Gate outward register was maintained by security staff of the factory of NKPL. In the assessment order, the AO while placing reliance on the statement of Shri Kamlesh L. Patel has observed that certain purchases are not found in the inward register, which is most reliable and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed through such fictitious invoices. (C) The learned CIT(A) called for a remand report from the AO during the course of appellate proceedings before him. As already stated hereinbefore, the AO in his remand report dt. 26th Dec., 2001 has clearly stated that the test check of the purchase bills and other supporting documents with reference to inward register, stock register etc. have been made and it is found that the entries in respect of purchases made from the above parties are entered and consumed. This remand report given by the AO after verifying the relevant facts stated in the documents produced by the assessee with the contents of seized registers, provide a clinching proof in favour of the assessee's contention that the material in question had really been received and used in the process of production. (D) One more vital evidence which supports the assessee's contention about real receipt of material in question is that a detailed stock inventory was prepared by the authorised officers of the Department at the time of conducting the search on 24th Feb., 1999 and 29th Feb., 1999. The AO required the assessee to reconcile the stocks found during the course of search wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressed their inability to produce them before the Tribunal. The facts of those two cases are therefore totally distinguishable as in those cases there was no such clear but categorical denial by the brokers/suppliers. The assessee must have obtained fictitious bills from such billing agents/name lenders with a view to derive some definite gain. It is true that the material in question was received by the assessee but those materials were not received from these billing agents/name lenders but were received from undisclosed sources or from unknown parties, which was within special and exclusive knowledge of the assessee and the assessee is not willing to disclose the true facts to the Department. It is well known that unaccounted material may be available in the market at much lower price as compared to the purchases made from genuine dealers on the strength of genuine bills. The real suppliers may be willing to sell those products at a much lower rate in view of manifold reasons. There may be saving on account of excise duty, sales-tax or other taxes which may be leviable in respect of manufacture and sale of such goods. The real suppliers or the oil mills may derive substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the said bogus purchases should be disallowed or the assessee should be held to be eligible for grant of deduction of a reasonable amount of purchase price of wash cotton seed oil which in fact had really been received by the assessee but was sought to be supported by fictitious invoices obtained from billing agents/name lenders. It is well settled law that tax can be levied only on real income. It is an elementary rule of accountancy as well as of taxation laws that profit cannot be ascertained without deducting cost of purchases from sales, otherwise it would amount to levy of income-tax on gross receipts or on sales. Such recourse is not permissible under any provisions contained in the IT Act. The facts and discussion made hereinabove show that the purchase invoices obtained from five name lenders/billing agents are fictitious. The material and evidence found during the course of search and post-search investigation conducted by the officers of the Department have adequately exposed the falsity of such entries of purchases made in the regular books of accounts. The undisclosed income derived by the assessee out of purchases aggregating to Rs. 11.99 crores shown as having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chases. All these facts and decisions submitted by the learned counsel are not relevant because we are not making any fresh addition in respect of any unexplained cash credit but this vital factor is being taken into consideration while estimating the amount of undisclosed income liable to tax in the block assessment in relation to such purchases of Rs. 11.99 crores. The peak credit as on any one date in the account of one of these billing agents/name lenders is Rs. 1,54,14,534. This chart was submitted by the learned Senior Departmental Representative and copies were given to the learned counsel for the assessee. No mistake in the said peak statements were pointed out by the learned counsel. The addition in respect of such unexplained part credit in the accounts of bogus suppliers can be made under s. 68 or 69C in view of decisions in the cases ofVijay Proteins Ltd. and is also supported by judgment of Hon'ble Rajasthan High Court in the case of Indian Woollen Carpet Factory vs. ITAT (2002) 178 CTR (Raj) 420. No separate or fresh addition is being made by us but this important factor is taken into consideration as to how much addition out of addition of Rs. 11.99 crores should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o actual purchase of goods or sale of goods was made by the assessee. The delivery of the goods was also not effected. This fact was verifiable from the inward register lying seized with the Department in which such transactions are not recorded. The assessee-company has also not received any payment from Triveni Corporation and Tirupati Corporation in respect of these sale bills which can be verified from their bank statements available with the IT Department. The company also passed a board resolution for cancellation of the bills in respect of abovereferred transactions. A copy of board resolution was also submitted to the AO. The AO considered the submissions made on behalf of the assessee. It was found that the seized bills bear the gate entry numbers at the factory premises of NKPL. Therefore, there is no doubt that the assessee made purchases from NKIL and also sold the goods to Triveni Corporation and Tirupati Corporation as per purchase bills and sale bills found and seized in the file marked as Annex. A-6. The AO therefore made an addition of Rs. 2,01,99,793 in respect of unaccounted purchases from NKIL for the block period for asst. yr. 1998-99. The AO also made separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the addition of Rs. 2,01,99,793 being purchases made from NKIL, which are proved beyond doubts from the sales invoices issued by NKIL in favour of NKPL, which were found and seized from the business premises of NKPL. Those sale bills bear the gate entry number. It also contains all other particulars such as truck number etc. A subsequent resolution of the board cannot nullify the facts so clearly revealed from the documents found and seized during the course of search. The CIT(A) has grossly erred in directing the AO to restrict the addition to Rs. 3,86,968. The learned Senior Departmental Representative made elaborate arguments in this regard in para 3.12 of his written submissions dt. 29th Oct., 2002 which have been reproduced hereinbefore. It has been mentioned in the said letter that what was purchased by the assessee from NKIL through such sale bills issued by NKIL was wash cotton seed oil. However, copies of sale bills issued by NKPL (the assessee) to Triveni Corporation and Tirupati Corporation are for sale of soyabean oil. How can a person sell soyabean oil out of purchase of wash cotton seed oil. The learned Senior Departmental Representative has also pointed out that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial purchased from bogus suppliers. It is evident from the photo copies of sale invoices issued by NKIL to NKPL and from copies of sale basis issued by NKPL to Triveni Corporation and Tirupati Corporation that what was purchased by the assessee from NKIL was wash cotton seed oil and what was sold by the assessee to Triveni Corporation and Tirupati Corporation was soyabean oil. These two items of purchase and sale reflected from the seized invoices have no nexus with each other. The entries in the seized inward register and outward register are also required to be thoroughly checked with reference to the quantity weight and truck numbers mentioned in these invoices forming part of A-6 in the light of similar material claimed to have been recorded as received from Kothari Global. Nature of purchases from Kothari Global have to be examined with reference to their invoices and its comparison with seized invoices. 78. On a careful consideration of the entire relevant facts, we are of the considered opinion that the orders passed by the CIT(A) and the AO in relation to this ground should be set aside and the matter should be restored back to the AO with a direction to decide the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies 7,26,74,355 4. Karnavati Industries 12,34,73,600 5. Krishna Industries 2,79,01,621 6. Triveni Corporation 3,64,01,356 Total 31,48,12,332 These also represent payments made by assessee group concerns for purchases and other expenses. Inquiries are being conducted from banks to find out the concerns which made these payments for purchases and other expenses. Substantive disallowance will be made in these concerns after conclusion of inquiries. However, protectively the addition is made in the case of the assessee being unaccounted payments in asst. yr. 1999-2000. Therefore total amount of Rs. 31,48,12,332 is added as unaccounted payments for the block period in respective assessment years as under: Asst. yr. Amount 1998-99 Rs. 2,12,73,188 1999-2000 Rs. 29,35,39,144 (Unaccounted payments Rs. 31,48,12,332)" 83. The addition of similar nature was in the case of NKIL which is subject-matter of revenue's appeal in IT(SS)A No. 38/Ahd/2002. Ground No. (2) of Revenue's appeal in IT(SS)A No. 38/Ahd/2002 in the case of NKIL relates to deletion of addition of Rs. 6,63,19,496 made in respect of alleged unexplained deposits in the accounts of bogus suppliers. The said po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t treated as unaccounted income of the assessee. The details of amounts deposited in these bank accounts were given in the aforesaid show-cause notice as under No. Name of the holder Amount credited 1. Krishna Industries 29,93,310 2. Triveni Corporation 3,64,01,356 3. Karnavati Industries 12,30,13,600 4. Adinath Corporation 2,10,54,076 5. Tirupati Corporation 3,33,37,324 6. Vimal Industries 10,50,05,834 7. Krishna Industries 6,52,08,617 8. Somnath Industries 3,25,77,224 9. Krishna Marketing 2,47,14,062 Total 44,43,05,403 It appears that these deposits in the bank accounts of these suppliers are for the period upto the date when copies of their bank accounts were obtained by the Dy. DIT/Addl. DIT. However, details in respect of deposits in their bank accounts upto the date of search i.e. 24th Feb., 1999 have been given in para 10 on p. 33 of the assessment order, which are as under: S. No. Name of the bank with branch A/c No. Name of the Holder Period Amount credited 1. The Visnagar Nagrik Sahakari Bank Ltd., Usmanpura Branch Ahd. 4203 Krishna Industries 30-6-98 to 24-2-99 29,93,310 2. Visnagar Nagrik Sahakari Bank Ltd. 4058 Triven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries 1,05,26,152 2,19,31,416 3,24,57,568 Krishna Marketing 51,67,228 1,95,46,834 2,47,14,062 Sejal Enterprises 1,26,48,060 -- -- from NKPL 2,83,41,440 4,14,78,250 5,71,71,630 Vimal Industries 1,48,34,121 5,78,40,234 7,26,74,355 Karnavati Industries 38,10,000 11,96,63,600 12,34,73,600 Adinath Corporation 2,16,13276 -- 2,10,54076 Tirupati Corporation 4,76,93,575 -- 3,33,07,324 Krishna Industries 31,95,67,82 -- 27902721 11,99,07,754 17,75,03834 27,84,12,076 Triveni Corporation (Goods are sold by NKPL and sale proceeds are accounted for in the books) -- -- 3,64,01,316 Total 14,82,49,194 21,89,82,084 37,19,85,062 87. It was submitted before the CIT(A) that so far as payments aggregating to Rs. 2,83,41,440 and Rs. 11,99,07,754 mentioned in the aforesaid chart are concerned, these payments were made by NKIL and NKPL respectively to these suppliers by cheques. Hence deposits in the bank accounts of these suppliers to the extent the deposits representing cheques received from NKIL and NKPL, cannot be treated as unexplained deposits. The issue relating to alleged bogus purchases made by NKPL and NKIL from these concerns has been dealt with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of convenience, the various contents and facts relating to the statements and evidences discussed by the AO in the block assessment order of the appellant, are not discussed again. The same have been elaborately discussed therein. In the case of Sejal Enterprises, addition of Rs. 1,26,48,060 was upheld on account of bogus purchases in the case of NKIL whereas finding was given that, in respect of Somnath Industries and Krishna Marketing, there was no material for considering the additions under s. 158BC, in the absence of any material discovered during the course of search. Similarly, in respect of bogus purchases relating to Vimal Industries, Karnavati Industries, Adinath Corporation, Tirupati Corporation, Krishna Industries totalling Rs. 11,99,07,754 was upheld in the orders of NKPL as discussed above. It was noted that the said payments originated in the books of NKIL and NKPL and were through cheque payments and the transactions have been duly reflected in the books of NKIL and NKPL. Thus, the source of the said deposits stands established. (b) In respect of deposits of Rs. 21,89,82,084, the amount is stated to be received from outsiders i.e. other than NKIL and NKPL. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing findings in relation to this ground raised in the Revenue's appeal in the case of NKPL in para 7.4 on pp. 23 and 24 of his order: "7.4 I have considered the submissions made and also perused the facts. It is noted that the AO has treated the total of deposits appearing in the bank accounts of the said 5 parties pointed out by the appellant in para 3.2 of the submissions. It is submitted that purchases from the appellant recorded only for Rs. 11.99 crores and the rest is from the outside parties for which no findings have been given by the AO. In respect of the amount of Rs. 3,64,01,316, no finding has been given by the AO and the transaction has already been considered in the case of NKIL. It is noted that the contention of the appellant are correct and the appeal of NKIL bearing Appeal No. CIT(A)-VI (now III)/CC2/54/01-02 has already been disposed of as per order dt. 16th Jan., 2002. After perusing the points made by the appellant, I find that there is no justification in making double addition first by way of treating the same as bogus purchases and than considering the same as unexplained deposits in the bank accounts of the proprietors/concerns. It is relevant to note tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92 crores. In other words, the said concerns are also dealing with outsiders which proves that the said concerns are not benamidar. Even the payment by the outsiders are considered payment made by the company without any basis and evidences. Further, the payment for purchases is by cheques and they are reflected in the accounts regularly maintained by the company and, therefore, such payment for purchases is accounted payment and cannot be considered as unaccounted payments. 10.4 Even if it is considered as unaccounted payment, the addition is already made for purchases and, therefore, there is no question of making for further addition for unaccounted payments, if so made, it is double addition. 10.5 The protective assessment is normally made, if the Department is in doubt about the person in whose hands the income is taxable. The learned AO has also stated that the inquiries would be made in the hands of the said suppliers and, therefore, the substantive addition would be made in the hands of the suppliers. Now, the said concerns are treated as benamidar and the deposits in the accounts of suppliers of NKIL and NKPL is treated as undisclosed income in the case of Nilesh K. Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lenders which have been deposited in their bank accounts and additions on substantive basis will be made after completing those inquiries in the cases of such other concerns who gave those cheques. The learned Senior Departmental Representative submitted a letter dt. 18th Dec., 2002. The relevant extracts of the said letter are reproduced as below: "As directed during the course of hearing by your honour, I am submitting herewith details of bank enquiries carried out in the group cases of N.K. concerns. It is submitted that there are large number of cheques and banks are involved due to which enquiries have not conducted yet. There are practical difficulties also due to which enquiries have not reached its conclusion. Kindly see the page No. 6 of the enclosure which is the reply from the Mehsana Urban Co-op. Bank Ltd. The bank has submitted as follows: "You are requested to note that we present all our bank clearing in computerised floppy and maintain our all records in computers. You are requested to note that we have the record of the name of the branch through which the instruments were presented by our bank. Moreover, all original instruments are presented to the concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sited. Our attention has been invited towards bank account opening form in respect of account no. 4002 in the name of Swastik Overseas Ltd. placed at p. 37 of the documents submitted along with the letter dt. 18th Dec., 2002. This account was introduced by N.K. Industries. The persons authorised to operate the bank account in the name of Swastik Overseas Ltd. is Shri R.B. Mehta and one other Mehta. The learned Senior Departmental Representative was requested to show the photo copy of the statement of Rajesh Mehta-broker with a view to find out whether the signature on this bank account opening form tallies with the signature of the said broker. It was found that signature on this bank account opening form appears to be of the same person viz. Shri Rajesh Mehta-broker. The Bench required the learned Senior Departmental Representative to state as to whether Shri Rajesh Mehta-broker has been interrogated in relation to transactions carried out in the name of Swastik Overseas Ltd. The learned Senior Departmental Representative admitted that no such interrogation of Shri Rajesh Mehta was made. The extracts from the statement of Shri Rajesh Mehta reproduced on p. 10 of the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us efforts have been made for finding out the complete particulars of various debits and credits in the bank accounts of all such bogus suppliers except locating details of cheques given by NKPL and NKIL as per books of accounts of these two concerns. The learned Senior Departmental Representative simply relied upon the reasons mentioned in the assessment orders to support such a ground raised in all the aforesaid three appeals by the Revenue; one in the case of NKPL; NKIL and Shri Nileshbhai K. Patel. The learned Senior Departmental Representative also drew our attention to letter dt. 23rd May, 2001 sent by Madhavpura Mercantile Co-op. Bank Ltd. to the AO informing them that cheque no. 162824 and 162854 were issued by M/s Madhukant Agrotech (P) Ltd. in favour of Karnavati Industries. Copy of current account card was also annexed with this letter which shows details of a/c no. 362 in the name of M/s Madhukant Agrotech (P) Ltd. The address of M/s Madhukant Agrotech (P) Ltd. as given in the account opening form is as under: Madhukant Agrotech (P) Ltd. Aarohi, Nr Vijay Restaurant, University Road, Navrangpura, Ahmedabad. 94. The persons authorised to operate the said bank acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s group show that no unaccounted money, bullion, jewellery, stock or any other valuable assets were found from any of the persons or concerns except meagre quantity of jewellery and cash etc. The unexplained jewellery was disclosed by the assessees of this group in the block return which have been accepted by the Department. The addition made on account of unexplained cash in the hands of different persons of this group was made by the AO but same was deleted by the CIT(A) and no further appeal has been preferred by the Revenue in relation to such deletion. This clearly proves that the assessee did not own any other unaccounted assets or deposits whatsoever. The learned counsel contended that no addition could be validly made in the hands of Shri Nilesh K. Patel as he was not carrying on any personal business. The entire evidence which contains reference of his name is in his capacity as MD/director in NKPL and NKIL. There is no material or evidence on record that any funds were provided by Shri Nileshbhai Patel for deposits in all or any of these bank accounts. Shri Nileshbhai Patel had no transactions with any of these suppliers. Mere introduction of some bank accounts cannot lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank statements submitted by the learned Senior Departmental Representative. The Department has miserably failed to bring any evidence on record to show that any of the cheques of outside parties/third parties were in any way connected with any of the persons or concerns of N.K. Group. The learned counsel strongly supported the orders of the CIT(A) in all these three cases in relation to the aforesaid common ground. 96. We have carefully considered the submissions made by the learned representatives of the parties and have gone through the orders of the learned Departmental authorities and all other documents submitted in the compilation to which our attention was drawn during the hearing. It is evident from the facts discussed hereinbefore that the addition in respect of unexplained deposits in the bank accounts of various suppliers were made in the cases of NKPL and NKIL on protective basis with the observation that further inquiries will be made from various branches of banks to ascertain that which other concerns have given such cheques which have been deposited in the bank accounts of these bogus suppliers. It is also clear from the facts discussed above that the Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts in the names of various suppliers as benami deposits/benami accounts of these assessees. The Hon'ble Supreme Court in the case of Daulatram Rawatmal has observed at p. 360 as under: "The onus to prove that the apparent is not the real is on the party who claims it to be so. As it was the Department which claimed that the amount of fixed deposit receipt belonged to the respondent-firm even though the receipt had been issued in the name of Biswanath, the burden lay on the Department to prove that the respondent was the owner of the amount despite the fact that the receipt was in the name of Biswanath. A simple way of discharging the onus and resolving the controversy was to trace the source and origin of the amount and find out its ultimate destination. So far as the source is concerned, there is no material on the record to show that the amount came from the coffers of the respondent-firm or that it was tendered in Burrabazar Calcutta Branch of the Central Bank, on 15th Nov., 1944, on behalf of the respondent. As regards the destination of the amount, it has already been mentioned that there is nothing to show that it went to the coffers of the respondent. On the contrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The CIT(A), in our view, has rightly deleted the additions so made by the AO in all these three cases under consideration. 100. We will, however, like to observe that the officers of the Department cannot leave the investigation of such an important matter in a lamentable and incomplete position like this. The Department has vast powers under s. 131(1A) or s. 133 and other relevant provisions by which they can compell the concerned banks to give them complete details of the concerns/persons whose cheques have been deposited in the bank accounts of all these bogus suppliers/billing agents/name lenders. The Department can also find out the details of amounts withdrawn from these bank accounts of bogus suppliers otherwise than by way of self cheques. The names and addresses of the parties to whom such cheques/demand drafts have been given can be obtained from the respective branch of the concerned banks. The Department can also obtain photo copies of self cheques by which the names of the persons who have withdrawn such cash can be found out by interrogation of concerned persons including bogus suppliers/concerned employees of the banks and concerned employees of the concerns of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n certainly use such information for making regular assessment under s. 143(3) which also includes reassessment under s. 147 subject to fulfilment of conditions precedent mentioned in the other provisions of the Act. It will be the duty of the learned Senior Departmental Representative who represented this case before us to bring this fact to the notice of the learned Chief CIT, learned CIT, and learned DG (Investigation) so that further investigation in this regard may receive serious attention, which it deserves, and timely action can be initiated against such other concerns/persons under ss. 147, 158BD or other relevant provisions. 101. Now we will deal with Ground No. (2) in Revenue's appeal in the case of NKPL [IT (SS) A No. 41/A/2002]. This ground relates to deletion of addition of Rs. 2,01,99,792 made on account of unaccounted purchase. As already stated hereinbefore, this addition was made on the basis of invoices found in Annex. A-6 during the search. Certain sale bills issued by NKIL in respect of sales made to NKPL were found and seized during the search. These invoices were not accounted for in the books of accounts of the assessee as well in the books of NKIL. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT as stated on from page No. 6 to 16 of the assessment order which is nothing but reproduction of appraisal report and that the AO has not made any independent inquiry whatsoever. The AO has relied only on the finding given by the Addl. DIT and that the AO has also not examined the supplier. 2.5 The appellant further says and submits that the learned Addl. DIT has obtained affidavit from the proprietor of Sejal Enterprises behind the back of the assessee and that the learned Dy. CIT has placed the reliance on such affidavit. 2.6 The appellant further says and submits that the affidavit obtained by the learned Addl. DIT is similar in contents with the affidavits and statements obtained in the case of N.K. Proteins Ltd. and therefore, it appears that such affidavit is obtained under undue influence, therefore, any finding based on such affidavit cannot be relied upon. 2.7 The appellant further says and submits that the learned Dy. CIT ought to have summoned the said persons and should have found out the truth and that the opportunity to cross-examine the said persons should have been given. 2.8 The appellant further says and submits that the assessee-company has, in fact, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much as the approval of Jt. CIT is granted under s. 158BG without giving any opportunity to the assessee of being heard. The power to grant approval is quasi-judicial and not administrative and therefore, there has to be a judicial approach on entire facts, material and evidence (Kirtilal Kalidas & Co. (1999) 64 TTJ (Mad) 77 : (1998) 67 ITD 573 (Mad). The Jt. CIT has a supervisory role and therefore, approval granted is administrative in nature in the normal course but in block assessment in Chapter XIV-B a specific provision is made under s. 158BG for granting approval. It means that the power is quasi-judicial and not of administrative nature. 6.2 The appellant says and submits that the approval granted by the Jt. CIT appears to be mechanical without application of mind inasmuch as the approval is granted on 30th April, 2001, i.e., date of passing of the order and the date of service of the order. 7. The interest under s. 158BFA(1) is wrongly charged. 8. The proceedings under s. 271(1)(c) r/w s. 158BFA(2) is wrongly initiated. 103. Ground No. 1 raised in this appeal is similar to ground No. 1 raised in the appeal of NKPL. The facts are similar. In view of the reasons give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to give him Rs. 2000 p.m. for all this work. The bank account of Somnath Industries was opened on 24th Aug., 1998 with initial deposit of Rs. 1,000 in cash. It has been closed on 12th May, 1999. One more bank account of Somnath Industries was also opened. The total amount of deposit in these two bank accounts upto the date of search was Rs. 2,24,57,568 as mentioned on p. 9 of the assessment order. The AO has also observed that in almost all cases, the deposits and withdrawals are on the same day. The AO on the basis of aforesaid evidence gave similar findings that Somnath Industries is fictitious entity and purchases shown by NKIL from them represented bogus purchases. The findings so given are recorded on p. 9 of the assessment order. 107. The facts relating to Krishna Marketing have been discussed on pp. 9 and 10 of the assessment order. They opened their bank account on 18th June, 1998 with Sabarmati Co-op. Bank Ltd. on 18th June, 1998 with initial deposit of Rs. 1,100. The proprietor of this concern is Shri Rajesh P. Doshi. The nature of this bank account is exactly similar to the other bank accounts of other alleged bogus suppliers. The address given by Shri R.P. Doshi to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of N.R. Paper & Boards and also the fact that no statement under s. 132(4) during the search in respect of these purchases was recorded, he deleted the addition made by the AO in respect of purchases made from Somnath Industries and Krishna Marketing amounting to Rs. 1,14,78,000 and Rs. 51,67,228 respectively. The CIT(A) however confirmed the addition in respect of purchases of Rs. 1,26,48,060 made from Sejal Enterprises. The CIT(A) has observed that two blank bills of Sejal Enterprises were found during the search. The AO issued summons at the address given on the said bills but the same were returned back. The entire deposits made in the bank account of this concern was by way of transfer entries from the appellant and moneys were immediately withdrawn from the said bank account. The CIT(A) also relied upon the judgment of the Hon'ble Delhi High Court in the case reported in CIT vs. La Medica (2001) 168 CTR (Del) 314 : (2001) 250 ITR 575 (Del). The CIT(A) also observed that since no affidavit has been submitted in respect of Sejal Enterprises, the submissions made relating to affidavit of other parties are not relevant. It is also found from the orders of the AO and the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XIV-B for the block period because no documents relating to those two parties were found during the course of search. The judgment of the Hon'ble Gujarat High Court in the case of N.R. Paper & Boards has been read by the CIT(A) out of context. We have already discussed this issue while dealing with the similar grounds in the case of NKPL. The judgment of the Hon'ble Gujarat High Court in the case of N.R. Paper and Boards if read in the light of context and the question decided by the Hon'ble Gujarat High Court, it would be amply clear that the ratio of the Hon'ble Gujarat High Court laid down in those cases does not in any manner support the view so taken by the CIT(A). The basic facts that the concerns of N.K. Group viz. NKPL and NKIL are resorting to the device of obtaining fictitious purchase invoices from the bogus suppliers came to the knowledge of the authorised officers, Dy. DIT/Addl. DIT as a result of search. The result of search clearly demonstrated that the assessee is claiming deduction in respect of inflated purchases, by debiting bogus purchases or may be by inflating the purchase price by obtaining the purchase invoices from name lenders/billing agents. It may also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omnath Industries cover the period from 26th Aug., 1998 to 1st Jan., 1999. The peak credit in these accounts as on 27th Sept., 1998 was Rs. 47,33,270. The peak credits in the accounts of Krishna Marketing covers period from 27th Aug., 1998 to 22nd Sept., 1998. The peak credit in this account as on 10th Sept., 1998 was Rs. 33,26,780. the entries in the account of Sejal Enterprises covers the period from 19th Dec., 1997 to 13th Nov., 1998 in the aforesaid peak statement submitted by the Department. The peak balance in this account is Rs. 11,77,456 as on 1st May, 1998. These figures have been given just with a view to show that credit purchases were shown as having been made from these billing agents/name lenders to aforesaid extent which proves that the assessee used black money for purchase of raw material from undisclosed sources which are within the exclusive knowledge of the assessee. 117. On a careful consideration of the entire relevant facts, we are of the view that it would be just and proper to direct the AO to restrict the addition in respect of undisclosed income relating to purchases shown as having been made from these three billing agents/name lenders, to only 25 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee. 120. Ground Nos. 5.1 and 5.2 relate to confirmation of addition to the extent of Rs. 19 lakhs as unaccounted deposits with Pari L.T. Shroff. This point has been discussed by the AO on pp. 19 to 21 of the assessment order. The AO has observed that the search and seizure action under s. 132 of the Act was undertaken in the case of M/s L.T. Shroff and its group concerns in the month of August, 1996. Prior to that search, search and seizure action was also undertaken at the, Bombay Office of M/s L.T. Shroff by FERA officials in May, 1995. During the search and seizure action, FERA officials had seized a diary which contains details of unaccounted cash transactions of Bombay office of M/s L.T. Shroff. The statement of one Shri Kalpesh L. Thakkar, son of Shri L.T. Thakkar was recorded under s. 132(4) on 3rd Aug., 1996. In this said statement he identified NKIL and admitted that the figures written in the said diary have been written after removing three zeros from actual figures. That means, if 475 is written in the diary, it actually means Rs. 4,75,000. It was also admitted by Shri K.L. Thakkar that the entire transactions noted in this diary were in cash and were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 16.01 in the diary seized from L.T. Shroff. The assessee made a disclosure in respect of receivables/credit transfer and debit transfer with L.T. Shroff to the tune of Rs. 20,08,000 on the basis of the said letter sent by Asstt. CIT. The CIT(A) after taking into consideration the entire relevant facts observed that in the application for disclosure made under VDIS, it was disclosed that such disclosure relates to amount receivable from L.T. Shroff whereas in the certificate issued by the CIT the word "receivables" only has been used. This cannot deprive the appellant from getting the benefit of the amount already disclosed under VDIS in this regard. The CIT(A) therefore granted relief of Rs. 20,08,000 and confirmed the addition of balance amount of Rs. 19 lakhs for which no evidence was given by the assessee. 122. The assessee is in appeal against confirmation of the said sum of Rs. 19 lakhs, which is subject-matter of consideration in Ground Nos. 5.1 and 5.2 of assessee's appeal. The Revenue has also raised one of the grounds viz. Ground No. 4 relating to deletion of the addition of Rs. 20,08,000 made on account of unexplained credit with L.T. Shroff. Both these grounds v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the impugned addition has been made on the basis of loose sheet and statement of third parties without giving any opportunity of cross-examination to the assessee. Moreover the pass book was neither found with the assessee or with L.T. Shroff during the course of search of premises of L.T. Shroff. A reference to reply dt. 21st Feb., 1997 from Shri K.L. Thakkar HUF has been given in which it was clearly stated that no such amount was found credited as on 10th Feb., 1997 in the name of the assessee. The Tribunal observed that the Revenue has not brought on record any material which suggests that the deposit amount was refunded to the assessee. Looking to the entirety of the facts the Tribunal held that the impugned addition of Rs. 6,85,000 in this case made by the AO merely on suspicion, and that too on the basis of a statement of third party without giving any opportunity of cross-examination, cannot be sustained. The Tribunal, therefore, deleted the said addition in the case of Shri K.R. Soni. He further submitted that the CIT(A) has rightly deleted the addition to the extent of Rs. 20,08,000 and further urged that the addition of Rs. 19 lakhs confirmed by the CIT(A) should al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed to cross-examine some persons nor had the opportunity to see the said diary. It would be relevant here to mention that Shri Nimish Patel had accepted in his statement dt. 24th Feb., 1999 that their group viz. N.K. Group had unaccounted transactions with M/s L.T. Shroff which were declared under VDIS, 1997. The fact of existence of unaccounted transactions with L.T. Shroff had been admitted by him. The AO has given complete details from seized records of L.T. Shroff seized at Bombay and Manekchowk, Ahmedabad at p. 20 of the assessment order. These details are based on records found and seized during the course of search. It is also true that the AO could not validly place reliance on these details unless copies of statement of Shri K.L. Thakkar, Nimish Patel and copies of contents of relevant seized records are supplied to him and the assessee is provided adequate and reasonable opportunity to cross-examine those persons. We are therefore of the considered opinion that the orders passed by the CIT(A) and the AO in relation to confirmation of the addition to the extent of Rs. 19 lakhs in respect of unaccounted deposits with L.T. Shroff should be set aside and the matter should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion that certain assets had not been installed and those assets have been described by the AO as non-performing assets. The AO has reproduced the extract from the statement of Shri M.K. Dave on p. 16 and 17 of the assessment order. The AO has arrived at the conclusion that the assessee has not used these assets as those assets were lying idle due to its non-installation. The disallowance of depreciation was made by the AO in respect of following items of plant and machinery: S. No. Make Depreciation 1. 70k expeller two chamber complete set with Ketely Krishna Hyd'bad 11,55,500 2. 120-s expeller M/c No. 10, 11, 12 Mfg. yr 1997 Satya Mech Hyd'bad 9,57,672 3. 120-s expeller Mfg. yr. 1996 Krishna Hyd'bad 4,74,414 4. 12-TK expeller Trinity Hyd'bad 4,01,219 5. Seed Craker (shifter Machine) — 87,500 15. M.S. tank LVBI Baroda 54,250 16. Refinery PLF pressure leaf filter Japro Engg. Bombay 2,18,750 17. Cylindrical cone type s s vessels Japro Engg. Bombay 43,750 18. Change over switch Helecon Electric 41,239 19. Old circuit breaker — 41,239 20. Electric motor Kirloskar 1,20,313 21. Electric motor G E C 2,47,435 22. Electric motor starter M E I Make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground No. 3 of Revenue's appeal is rejected. 136. Ground No. 4 relating to deletion of the addition of Rs. 20,08,000, being the amount of unexplained credit with L.T. Shroff already offered for tax by the assessee under VDIS, has already been discussed and decided. This ground of appeal has no merit and is accordingly rejected. 137. Ground No. 5 relates to deletion of addition of Rs. 3,66,78,297 made on account of unexplained deposits with M/s J.D. Shroff. Fifty per cent addition in respect of deposits with M/s J.D. Shroff has been made in equal proportion in the case of the assessee as well as in the case of M/s K.V. Patel & Co. This issue has been discussed by the AO on pp. 22 to 24 of the assessment order. Search and seizure action under s. 132 was undertaken at the premises of M/s J.D. Shroff and associated concerns. The statement of Shri J.D. Shroff was recorded under s. 131 in which he admitted that the transactions noted in duplicate set of books of account found and seized during the search were unaccounted and were not shown in return of income. The account of NKIL and M/s K.V. Patel & Co. was found in the abovereferred unaccounted books of account of M/s J.D. Shroff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,78,20,544)" 139. Similar grounds have been raised by the Revenue in their appeal IT (SS) A No. 39/Ahd/2002 in the case of M/s K.V. Patel & Co. which are reproduced below: 1. The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 3,66,78,297 made on account of unaccounted deposit. 2. The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 28,09,079 made on account of accrued interest on unaccounted deposits. 140. The AO in the case of M/s K.V. Patel & Co. has made aforesaid additions on similar reasoning as has been done in the case of NKIL. 141. The learned CIT(A) has dealt with this issue in the case of NKIL on pp. 22 to 24 of his order. The CIT(A) after considering the submissions made on behalf of the assessee and also after going through detailed reasons given in the assessment order, observed that the AO has not issued notice under s. 158BD to the assessee after conducting the search at the premises of M/s J.D. Shroff. The exact date of search conducted in the case of J.D. Shroff is also not mentioned. The appellant has denied having received any deposit in cash from M/s J.D. Shroff. The AO has himself mentioned th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 CTR (SC) 360 : (1980) 125 ITR 713 (SC). The learned counsel submitted that the AO has made the impugned addition without complying with the provisions of law and basic principles relating to natural justice. The CIT(A) has rightly deleted the said addition. The learned counsel thus strongly supported the order of the CIT(A) in relation to this ground in both these cases. 144. We have considered the submissions made by the learned representatives of the parties. It may be imperative to point out that the Revenue in their appeal IT(SS) A No. 38/Ahd/2002 in the case of NKIL has challenged the only deletion of addition of Rs. 3,66,78,297 made on account of unexplained deposits with L.D. Shroff (the correct name of J.D. Shroff) but has not challenged the deletion of addition of Rs. 1,78,20,544) being interest on the aforesaid amount added by the AO and deleted by the CIT(A). However in the case of M/s K.V. Patel & Co. the Revenue has challenged the deletion of the addition of Rs. 3,66,78,297 as well as deletion of interest of Rs. 28,09,079 added by the AO on the aforesaid deposits at the rate of 18 per cent upto 31st March, 1997 because that concern had merged with NKIL from 1st A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of J.D. Shroff and also with respect to statements of connected persons recorded in the proceedings of J.D. Shroff and associated concerns. The CIT(A) instead of deleting these additions ought to have restored the matter back to the AO with a direction that a copy of statement of J.D. Shroff recorded under s. 131 in the case of M/s J.D. Shroff and associated concerns and copies of relevant seized records should be supplied to the assessee and thereafter these assessees should also be provided an opportunity to cross-examine him. The AO should also find out as to what has finally been decided in the case of J.D. Shroff. The allegation as appearing from the discussion in the assessment orders is that these assessees gave cheques aggregating to Rs. 3,15,15,786 to J.D. Shroff and associated concerns which forms part of regular books of accounts and represent accounted transactions. As against this the diary seized from J.D. Shroff shows that they in turn had paid aggregate cash on various dates to the tune of Rs. 3,12,41,991 to these concerns from time to time and there was a net debit balance outstanding against these two concerns as per the seized diary to the tune of Rs. 2,73,795. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch. The learned CIT(A) has discussed this issue in para 12 on pp. 28 to 35 of his order. After elaborate discussion of the entire relevant facts, he has given his findings in para 12.3 and 12.4 which are reproduced below: "12.3 I have considered the submissions made before the AO and those in the above letters, before me, and also the facts stated by the AO in the assessment order. Before me, the appellant's counsel Shri Ashwini Shah and Shri Dhinal Shah, CAs submitted that the figures given to the banks are only for limited purposes for taking other additions etc. whereas actual production figures are reflected in A-97. It is further stated that even if the figures stated in Annex. A-98 i.e. those given to the banks are adopted, then the AO should also accept the figures of closing stock as per A-98 for both commercial castor oil and caster cake instead of those stated by the appellant in the Annex. A-97. It is stated that, if this is done, the closing stock for commercial caster oil gets reduced by 20487381 kgs. for financial year 1996-97 and 1261907 kgs. for financial year 1997-98 in respect of caster oil. Thus total excess stock shown in the closing stock as per books as comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO would work out to Rs. 56,81,00,000 which is much more than the addition made by the AO by relying on the figures of production as per A-98 for earlier months. Similarly in respect of caster cake it is stated that total excess stock as declared in the books for the period financial year 1996-97 and 1997-98 works out to 3392 MT valued at Rs. 59,88,000. The CIT(A) has observed that the AO cannot pick and choose entries from the statements given to the bank, which are suitable for making additions and ignore those items which would result in lowering closing stock or profits. The Hon'ble Supreme Court in the case reported in Indore Malwa United Mills Ltd. vs. State of Madhya Pradesh & Ors. (1966) 60 ITR 41(SC)relied upon by the learned counsel has held that the AO has to come to definite conclusion or the other in regard to reliability of everyone of the relevant accounts filed by the appellant, and in the absence of any such finding, it was not open to pick and choose some of the registers which were most favourable to the Revenue. In view of elaborate facts and reasons given in the order of the CIT(A), and in view of the further fact that Senior Departmental Representative has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not respond and has given a statement to the Dept. that they have not received any material. The company has no alternative but to file a civil suit against NPPL and debited Rs. 37.07 crores to NPPL a/c and credited to sales a/c. In other words whatever shortage was found is treated as sales and thereby treated as income of the company. Since the company has already treated the shortage as income, the question of treating the same as bogus does not arise." 153. The AO considered the arguments submitted on behalf of the assessee and gave following findings in para 10.6 on p. 30 of the assessment order: "10.6 On the basis of discussion made in preceding paras, it is well established that the assessee has made sales of FSG castor oil worth Rs. 37,01,81,250 out of books. Profit earned on this sale is totally unaccounted. In the preceding years, the assessee has shown gross profit @ 10 per cent approx. Profit from the sale of Rs. 37,07,81,250 @ 10 per cent comes at Rs. 3,70,78,125. As this is unaccounted profit of the assessee, amount of Rs. 3,70,78,125 it is considered as undisclosed income of the assessee in the asst. yr. 1998-99 and added in the undisclosed income of the block ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave qualified this debit in the account of NPPL as doubtful on account of denial by NPPL about having received any such material. The question as to who is responsible for such shortage is a subject-matter of pending litigation. The assessee has himself determined the value in stock found at market value while accounting for the aforesaid sales in its books of account. Therefore there is no justification for making any further addition at the rate of 10 per cent in the block assessment. This addition clearly falls outside the ambit of block assessment. The learned counsel thus strongly supported the order of the CIT(A). 157. We have considered the submissions made by the learned representatives of the parties and have gone through the relevant documents submitted in the compilation to which our attention has been drawn during the course of hearing. It may be pertinent to reproduce herein the relevant extracts from the order passed by the appellate authority for industrial and financial reconstruction in appeal No. 107/99 in the case of the assessee, a copy whereof has been filed by the learned Senior Departmental Representative in their paper book on pp. 32 to 49. The findings gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh being brought into the company's accounts." 158. The appellate authority for industrial and financial reconstruction has given very significant finding that NPPIPL have been shown as doubtful debtor of less than six months, which is indicative of future plan for writing of the said amount as bad debt. It has also been observed that this is a case of clandestine sales and siphoning away of sale proceeds and accounting manipulation after the shortage came to the notice of the creditors (banks) etc. The arguments advanced on behalf of the assessee that the entries relating to this matter did not affect financial picture of NKIL, was rejected as being purely technical. It has been observed that the accounting of his missing quantity of oil worth Rs. 37.08 crores as sale and the value thereof as doubtful debt (receivables) has within it the seed of future accounting of a loss of that amount. The IT authorities have to be very particular about the assessee's claim for bad debt in respect of this amount, as and when the said amount is written off as bad debt, in view of aforesaid findings given by the appellate authority in relation to this point. In view of the aforesaid findings gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the notice issued is invalid (Monga Metals (P) Ltd. vs. CIT (2000) 67 TTJ 247 (All). 2(a) The order of block assessment is bad in law and illegal inasmuch as the approval of Jt. CIT is granted under s. 158BG without giving any opportunity to the assessee of being heard. The power to grant approval is quasi-judicial and not administrative and therefore, there has to be a judicial approach on entire facts, material and evidence-Kirtilal Kalidas & Co.. The Jt. CIT has a supervisory role and therefore, approval granted is administrative in nature in the normal course but in block assessment in Chapter XIV-B a specific provision is made under s. 158BG for granting approval. It means that the power is quasi-judicial and not of administrative nature. (b) The appellant says and submits that the approval granted by the Jt. CIT appears to be mechanical without application of mind inasmuch as the approval is granted on 28th Feb., 2001, i.e., date of passing of the order and the date of service of the order. 161. All these grounds are similar in nature as have been raised by NKPL and NKIL in their respective appeals. The assessee has submitted return pursuant to the notice issued under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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