TMI Blog2016 (5) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... gle piece of unaccounted purchase or sales voucher or transport receipt or unaccounted purchase receipt was found. This in our opinion is also an indicator that no such unaccounted business was carried out by the assessee as alleged by the AO and upheld by the CIT(A). Even under the theory of probability also no such unaccounted business is possible under the facts and circumstances discussed above. In view of the above, it has to be held that the huge suppressed production and suppressed turnover and thereby generation of huge unaccounted income as determined by the AO, in our opinion, is incorrect. Therefore, the addition made by the AO and partly sustained by the CIT(A) on account of unaccounted profit on suppressed production and sale thereof is directed to be deleted. It is also an admitted fact that certain chits duly signed by the assessee were found from the possession of Shri Sohranraj Mehta during the course of search on 10-10-2009. Those chits were in the hand writing of the assessee for different years. It is not known as to why and for what purpose the assessee used to give such chits in his hand writing. Further, the amount of such chits according to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinate Benches of the Tribunal are taking the consistent view that if the assessee has deposited the employees’ contribution to PF and ESI before the due date of filing of the return then no disallowance is called for. Since the assessee in the instant case has admittedly deposited the amounts before the due date of filing of the return, a finding given by the CIT(A) and not controverted by the revenue, therefore, we do not find any infirmity in his order. Claim of depreciation on assets of Hyderabad Division - block of assets installed in Hyderabad Division, were not used in previous year, current year and subsequent years - Held that:- We find the issue has been decided in faovur of the assessee by the decision in the case of G.R. Shipping Ltd.(2009 (7) TMI 1169 - BOMBAY HIGH COURT ). In that case the assessee was engaged in shipping business and owned a barge which was included in the block of assets. The barge met with an accident and sunk on 06-03-2000, i.e. relevant to A.Y. 2000-01. As the efforts to retrieve the barge was uneconomical the barge was sold on as is where is basis for ₹ 55 lakhs in the month of May 2001 relevant to A.Y. 2002-03. As the barge was non o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. We find the AO in the instant case made the addition based mainly on the statement of Shri Ajit Jain without any verification and his finding is also not supported by any independent evidence. The assessee has already explained during the course of assessment proceedings itself that since the said page itself is titled DDIPL, addition if any, can be made in the hands of DDIPL and cannot be made in the hands of the assessee. In absence of any independent evidence that the said page belongs to the assessee company, we are of the considered opinion that addition cannot be made merely on the basis of the statement of Shri Ajit Jain. The Ld.CIT(A) in the instant case has given justifiable reasons for deleting the addition. Addition on difference in stock of packing material - Held that:- From the order of the AO as well as the submission of the assessee it is not verifiable as to what method of accounting for valuation of stock was being adopted by the assessee. If the valuation is being made as per actual invoice price, then taking average price will give a distorted figure. In view of the above discussion and keeping in mind the interest of justice, we deem it proper to restore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther and are disposed of by this common order. 2. First we take up appeals filed by the Assessee and the Revenue for Assessment Year 2004-05 as the lead case. Abridged grounds of appeal by the assessee in ITA No.1318/PN/2013 for A.Y. 2004-05 are as under: The following grounds are taken without prejudice to each other - On facts and in law, 1. The Ld.CIT(A) erred in sustaining the addition of undisclosed income based on the papers found with Shri Mithulal Jain and not with the appellant company during the course of search and hence, such addition made is not justified in the asst. completed u/s. 153A. 2. The Ld CIT(A) erred in sustaining an addition of ₹ 20,78,41,250/- on the basis of the papers found during the course of search at the premises of Shri Mithulal Jain and which belonged to Shri Sohanraj Mehta and not the appellant company. 3. The Ld CIT(A) failed to appreciate that there was no incriminating evidence found at the appellant's premises during the course of search nor was there any corroborative evidence as regards unaccounted production in the factory of the appellant and therefore, the additions based on some notings by Shri Sohanraj M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(va) of the Act, relying on the decision of the Apex court in the case of Alom Extrusions Ltd, although the same is not applicable in present facts of the case. 6. On the facts and in circumstances of the case the Ld. CIT(A) erred in allowing the claim of depreciation on assets of Hyderabad division, although block of assets installed in Hyderabad division, were not used in previous year, current year and subsequent years. 7. The order of the CIT(A) may be vacated and that of the Assessing Officer be restored. 8. The appellant craves leave to add, alter, amend and modify any of the above grounds. 4. Grounds of appeal No.1 to 4 by the assessee and Grounds of appeal No. 1 and 2 by the revenue relate to part relief given by the CIT(A) by sustaining an amount of ₹ 20,78,41,250/- out of the addition of ₹ 40,88,32,514/-. 5. Facts of the case, in brief, are that the assessee filed the original return of income on 28-10-2004 disclosing total loss of ₹ 4,09,43,385/-. A search action u/s.132 of the I.T. Act was conducted in the RMD Gutkha Group of cases on 20-01-2010. In response to the notice u/s.153A the assessee filed the return of income on 15- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period April 2003 to August 2006 was ₹ 218 crores approximately. Further, the total unaccounted sales for the period September 2006 to February, 2008 as computed form the seized pages was ₹ 127.72 crores approximately. Thus, as per the said seized documents, the total unaccounted sales effected by Shri Sohanraj Mehta, C F Agent of RMD Gutkha on behalf of M/s. DIL for the period April 2003 to February 2008 was ₹ 345.72 crores approximately. 8. The AO further noted that Shri Sohanraj Mehta had provided English translation of the books written in Marvari language working and quantifying the unaccounted turnover of M/s.DIL for various years. Further, he has declared that he has earned commission from sale of Gutkha for various years and offered the income before ADIT (Investigation). The AO also noted that Shri Sohanraj Mehta has explained the entire unaccounted business chain regarding unaccounted purchases, unaccounted manufacture, unaccounted packing, unaccounted printing, clandestine removal of goods, unaccounted sale and utilization of the sale proceeds which he has admitted to have done for and on behalf of M/s.DIL between 2003 to 2008. 9. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri. Prakash Dhariwal (( for the sake of brevity, hereafter referred to as PRD ) to others, which is reflected in the seized material A/M/29 further reflected in A/M/08 of page no. 34. g) The C F Agent has agreed and offered unaccounted commission received on behalf of unaccounted sales and further, there is a reflection of sales tax mamul paid to sales tax authorities for carrying out this modus operandi of unaccounted sales. h) Packing materials and unaccounted payment of freight and tempo and hamali Charges are also reflected. All these evidences prove beyond reasonable doubt that entire unaccounted business chain has been established in this case regarding unaccounted purchase, unaccounted manufacture, unaccounted packing, unaccounted printing, clandestine removal of goods, unaccounted sale and utilization of the sale proceeds etc. This evidence is not more than enough to bring the said undisclosed income to tax. 10. The AO further noted that the following facts prove that the seized documents belong to the assessee company : The said documents seized by the Investigation Wing of Bangalore have details of the accounted dispatches and also the unaccou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The sale proceeds of Gutka are apportioned to sellers of immovable property or suppliers of raw materials of gutka or to people who have transacted with M/s. DIL etc. Moreover, as per seized material A/M/29, there are receipts signed by Shri. Rasiklal M. Dhariwal or by his son Shri. Prakash Dhariwal or by others on his behalf for having received unaccounted sale proceeds which were sent to them. All third parties appearing in A/M/08 of page no. 34 have stated that they had transactions only with M/s. DIL, most of them denying for having even known Shri. Sohanraj Mehta. Other supporting documents available in the seized material like A/M/01 shows the daily sales of gutka belonging to M/s. DIL, A/M/07 contains ledger extract of unaccounted considerations paid to various parties. Further, most of the parties belonging to Bangalore which are appearing on right side of the page 34 of A/M/08 were examined on oath by the OCIT Central Circle 2(2), Bangalore and they have clarified that they had transactions only with M/s. DIL or some entity belonging to them but not with Shri. Sohanraj Mehta. This substantiates the fact that all the third parties who are appearing in the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gutkha Group, Shri Mallikarjun of Shimoga was also covered for the purpose of cross verification. In the course of the search action, it was accepted by Shri Mallikarjun of Shimoga that the said amount of ₹ 46.56 crores represents sales which are outside the regular books of accounts. 15. The AO also noted that in the course of the search action on 20/01/2010, statements on oath were also recorded of Shri Shital B. Patil, Area Sales Manager of Karnataka Region for RMD Gutkha Group. In course of the statement on oath, it was admitted by him that the accounted as well as the unaccounted stock of M/s Dhariwal Industries Ltd. is carried out through Mr. Sohanraj Mehta, C F through the network of dealers/distributors across Karnataka. This statement on oath of Shri Shital B. Patil was also confirmed by Shri K.A. Raghunath, Sales Supervisor of M/s Dhariwal Industries Ltd. 16. The AO further noted that the analysis of the seized documents reveal that the assessee has resorted to the following modus operandi : i) The assessee company carries out a parallel production of its accounted production and also its unaccounted production in its factory at Bangalore. For its accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Shri Rasiklal Dhariwal and/or Shri Prakash R Dhariwal, the amounts mentioned therein are not in the code form as explained by Shri Sohanraj Mehta u/s 132(4) of the I,T.Act. b. Though the accounted transactions appearing in seized documents belong to the assessee company, the unaccounted transactions appearing in impugned seized documents have nothing to do with the assesee company. c. The seized documents signed by the directors of assessee company Shri Rasiklal Dhariwal and/or Shri Prakash R Dhariwal, relate to recovery of certain advances/refunds due from Shri Sohanraj Mehta. d. The seized documents have not been seized from the assessee and have nothing to do with Dhariwal Industries Ltd, Rasiklal Manikchand Dhariwal and their Group concerns. e. Unaccounted assets commensurate with the unaccounted income generated through suppressed sales were not found by the department. f. No evidence of suppression of turnover/income were found by government agencies like Central Excise dept, Sales Tax dept, etc. g. No evidence of unaccounted purchases were found. h. The seized documents relate to Shri Sohanraj Mehta's unaccounted business in some othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue and the decoding explained by Shri. Sohanraj Mehta was absolutely correct, which also gets support from the seized documents themselves. 21. The AO inferred that on the basis of the instructions given in the said signed chits either by Shri Rasiklal M. Dhariwal or Shri Prakash R. Dhariwal, Shri Sohanraj Mehta used to make payments to the parties whose names were mentioned on the said chits. In many instances, these payments were spread over more than one installment. The day books maintained by Shri Sohanraj Mehta have a detailed narration of the various installment payments for the amounts mentioned in the signed chits. At many places, in the day books the amounts have been mentioned in de-coded form. 22. The AO discussed some of the instances as well as the statement given by Shri Rasiklal M. Dhariwal and the various evidences gathered during the search and post search enquiries. The AO rejected the contention of the assessee that the decoding explained by Shri Sohanraj Mehta that the amounts mentioned in the seized documents namely A/M/29 in lakhs actually stand for crores of rupees and the word packet stands for a lakh of rupees is wrong. 23. As regards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Evidence Act and Sec.147, 158BD and 153C of Income Tax Act, 1961 become redundant. According to him, it is true that the strict rules of evidence are inapplicable to the proceedings under the I.T.Act, 1961. However that does not mean that the principles of evidence act are inapplicable to the proceedings under the I.T.Act. He noted that in the instant case, Shri Sohanraj Mehta is a business associate of assessee. The seized documents are in the handwriting of Shri Soharaj Mehta himself. Signatures of Shri Rasiklal Dhariwal and Shri Prakash Dhariwal are available in the said seized documents and duly admitted by both of them and the said documents contain both accounted as well as unaccounted transactions of the assessee company. Thus, if the ratio decidendi of VC Shukla case is applied to the facts of the case, it becomes very clear that assessee company can be taxed based on entries in the documents seized from Bangalore. He accordingly rejected the averment of the assessee that third party evidence cannot be used against it. He also rejected the contention of the assessee that unaccounted assets commensurate with the unaccounted income generated through suppress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, vide his letter dated 23-01-2010 filed before the Investigation Wing of Bangalore, Shri Mallikarjun of Shimoga has retracted his admission made u/s.132(4) of the I.T. Act. This retraction, according to the AO is unsubstantiated and the circumstantial evidence found at the time of revocation of the Prohibitory order from the searched premises of Shri Mallikarjun of Shimoga brings out following peculiar facts : (1) Shri Mallikarjun is having a branch office at Bangalore located at 799/6, Shop No.2, Anekal Road, Chandapur, Bangalore which is in close proximity to the Bangalore Factory of RMD Gutkha group. (2) The entire turnover of this branch office at Bangalore is in cash and is around ₹ 50.28 crores for the period starting from the financial year 2006-07 to 2008-09. (3) The branch office has no evidences in the form of names, addresses, etc .of the parties to whom sales have been effected. (4) Though it has been claimed that they are carrying out retail sales from this branch office, surprisingly for each truck exactly 65 bills are raised. It is a height of coincidence that for each truck load of betel nut which arrives at Bangalore from Shimoga, ever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ird parties such as raw material suppliers of M/s DIL, employees of DIL, friends and business associates of Shri RMD/DIL, whose names appear in the said seized pages as recipients of unaccounted sale proceeds have categorically accepted that they know M/s DIL/RMD and they transact business only with M/s DIL/RMD and not with Shri Sohanraj Mehta. 5. It is an undisputed fact that Shri Sohanraj Mehta, through his firm MIs Mehta Associates, acts as C F agent of M/s DIL for Karnataka Region. 6. For making such a claim in his retraction letter dated 23/12/2009, Shri. Sohanraj Mehta has neither pointed out nor submitted any proof whatsoever, in support of his contention that the said seized documents relate to his unaccounted business in some other brands of gutkha. Even the assessee company who is mainly relying on this contention in its defense that Shri. Sohanraj Mehta was doing unaccounted business in some other brands of gutkha, could not furnish any evidence whatsoever in this regard. This inability of the assessee to substantiate the above contention which is the most important plank of its defense on the matter involved can be seen from the answer of Chairman of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant case, the person M/s Dhariwal Industries Ltd., Shri. Rasiklal M. Dhariwal wish to cross-examine, namely Shri. Sohanraj Mehta, a resident of Bangalore and as such, the AO at Pune is not empowered to issue summons to him so as to accord an opportunity of cross examination to M/s. Dhariwal Industries Ltd., Shri Rasiklal M. Dhariwal. Therefore, the AO had issued commission on 01/12/2011 to Departmental Officer in Bangalore to grant M/s. Dhariwal Industries Ltd., Shri Rasiklal M. Dhjariwal an opportunity of cross examining Shri Sohanraj Mehta. This opportunity of cross examination was not availed by the assessee. In the interest of justice one more opportunity was afforded vide officer letter to assessee dated 23/12/2011. This time also, assessee chose not to avail the opportunity to cross examine Shri Sohanraj Mehta. He therefore concluded that assessee was afforded sufficient opportunity to cross examine Shri Sohanraj Mehta 33. As regards submission of the assessee that Shri.Sohanraj Mehta, Shri. Mallikarjuna, Shri Shital Patil, Shri K. Raghunath and Shri. S. Balan on whose statements Department is placing reliance, had retracted their respective statements is concerned, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the provisions, In order to allow a withdrawal or a retraction of the same conclusively, there must be mitigating circumstances making out a case for such retraction, a fact which is completely absent in the facts and circumstances of the present case. To allow a retraction without any cogent material would amount to making a mockery and travesty of the search and seizure operations. The assessee having estopped the Revenue by the admission cannot be allowed to go back on its promise held out by him. The promise here would mean the surrender made at the time of search. Any retraction at a later stage would violate the principles of promissory estoppel and have very grave and serious consequences and ramifications. Further, when statement was made voluntarily and was not alleged to have been obtained under threat or coercion, onus was on assessee to prove that said declaration was made under any misconception of facts - Since assessee had not taken any steps to rectify its declaration before authorities before whom such declaration was made, there was no valid reason for retraction of same after a gap of about two and a half months. 36. The AO further noted that Shri Soh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to him, Shri Sohanraj Mehta has put the old address on a very recent letter of retraction dated 03-12-2011, unmindful of the fact that the envelope carrying this very letter carries a different address outside. He further noted that the assessee intuitively quoted this letter of Shri Sohanraj Mehta dated 03-12-2011 in his letter dated 08-12-2011. However, in the envelope enclosed to the petition submitted before the Department for grant of opportunity of cross- examination, the said letter of Shri Sohanraj Mehta dated 03-12-2011 was actually received by the assessee on 09-12-2011 at 13.15 hrs. Therefore, he doubted as how the assessee quoted in its letter addressed to the AO on 08-12-2011. The AO further noted that his office could not communicate to Shri Sohanraj Mehta till 03-12-2011, regarding the issue of his proposed cross-examination at Bangalore by M/s Dhariwal Industries Ltd/Shri Rasiklal M. Dhariwal. 39. However, the AO noted that the contents of the said letter of Shri Sohanraj Mehta dated 03-12-20111 are surprisingly matching with the petitions of M/s. Dhariwal Industries Ltd./Shri Rasiklal M. Dhariwal dated 26-11-2011 29-11-2011 for allowing crossexamination of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so post search action provides clear evidence which suggests the authenticity of the documents seized by the Investigation Wing of Bangalore pertaining to the unaccounted sales carried out by Shri Sohanraj Mehta, C F Agent of RMD Gutkha for Karnataka Region. It also provides the evidence that Shri Mallikarjun was carrying out unaccounted sale of Supari to RMD Gutkha group and that its cash sales from its branch office at Bangalore were actually being diverted to RMD Gutkha Group which in turn has been used for the unaccounted production and subsequent sale. 42. So far as retraction of Mr.S. Balan is concerned, the AO noted that Shri S. Balan is a close family friend and business associate of Shri Rasiklal M. Dhariwal/M/s. DIL. He had admitted on 20-012010 vide his statement on oath that he was a custodian of about ₹ 14 crores money of Dhariwal and the said seized documents also depict that about ₹ 14.35 crores money was handed over by Shri Sohanraj Mehta to Shri S. Balan/his representatives on the directions of RMD/PRD. Shri S. Balan has retracted later on 25-112011 by filing an affidavit stating that the admission made by him during search action was not actually ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dependent. It can further be concluded that the statements u/s 132(4) have not been retracted successfully. Thus, notwithstanding the subsequent unsuccessful retractions, the statements u/s 132(4) discussed above, still command immense evidentiary value. 45. During the course of assessment proceedings, it was argued by the assessee that the undisclosed income should not be assessed in the hands of M/s DIL. However, the AO rejected such argument as baseless on account of the following reasons : The names of brands dealt namely big, mini, 2 gms are belonging to M/s. DIL. The prices quoted in the unaccounted books and also unaccounted turnover of Shri. Sohanraj Mehta on behalf of M/s. DIL also match with that of prices of M/s. DIL. The sale proceeds of unaccounted turnover of Gutka has been applied/utilized by Shri. Sohanraj Mehta on behalf of M/s. DIL. The parties who are appearing in right side of A/M/08 of page 34 are parties having transaction with M/s. DIL or Directors. The transactions are either being suppliers, sellers of property, people on their pay roles (sales tax department), C F agent (Sohanraj mehta), legal advisors, etc. Though, the parties on the right sid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on oath by the DCIT Central Circle 2(2), Bangalore and they have clarified that they had transactions only with M/s. DIL or some entity belonging to them but not with Shri. Sohanraj Mehta. This substantiates the fact that all the third parties who are entering in the seized material namely A/M/08 of page no. 34 are having transactions only with M/s. DIL. Similarly, some of the other parties which are appearing on right side of the page 34 of A/M/08 and are presently being assessed in this office, were also examined in this regard. The various details submitted by the third parties were verified and it was found that most of the third parties were even not aware of Shri. Sohanraj Mehta. Some of the parties who knew Shri. Sohanraj Mehta were the employee's like Shri. Jeevan Sanchethi and Shri. Prashant Bafna. 46. Relying on various decisions the AO held that the seized documents should be read as a whole. However, the assessee in the instant case is accepting a part of the seized document and disowning that part of the seized document which is inconvenient to the assessee. Therefore, if the said seized document read as a whole it leads to strong inference that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144,960 1,580,640 1,540,842 1,430,054,430 0.5026 2005-06 3,144,960 1,785,894 1,742,338 1,613,588,052 0.5679 2006-07 3,144,960 1,484,182 1,516,674 1,485,618,362 0.4719 2007-08 3,144,960 1,671,249 1,668,445 1,617,466,480 0.5314 2008-09 3,144,960 1,832,888 1,822,016 1,857,488,286 0.5828 TOTAL 15,724,800 8,354,853 8,290,315 8,004,215,610 0.5313 (Notes : Estimated Production is arrived at in Kgs. by considering machine packing capacity of 60 pouches/min, working hours of 8 hrs/day, working days of 25 days/month and considering actual no. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the AO held that it is proved beyond doubt that the assessee company has suppressed turnover during the relevant year. The suppression of turnover of M/s Dhariwal Industries Ltd. for the period April, 2003 to Feb, 2008 is of ₹ 345.72 crores. However, entire turnover cannot be income. He noted that the seized documents contain details of unaccounted expenditure such as payments to various raw material suppliers like Shri Mallikarjuna (Supari/betelnut/arecanut), Shri. P C Jain (edible perfume) , Shri. Vimal Kumar Nahar (Cardamon), M/s Swati Menthol (Methol) etc. as well as other incidental expenses like packaging (M/s Champion Packaging), transport Charges, hamali as well as unlawful payments like Sales Tax mamul etc. Therefore, the gross profit earned by the assessee out of such unaccounted turnover has to be estimated. He noted that the assessee has not paid any Excise duty on the said unaccounted turnover. Infact, one of the main reasons for suppression of turnover in the field of gutkha is high Central Excise duty. In view of the above, the AO held that the GP ratio has to be computed by excluding the excise duty payment as assessee company has not incurred any excise du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as under : A.Y. Taxable Profit of unaccounted Sales (Rs.) 2004-05 40,88,32,514 2005-06 32,91,68,875 2006-07 39,06,49,874 2007-08 47,15,30,695 2008-09 45,69,12,736 TOTAL 205,70,94,693 52. The AO thus made addition of ₹ 40,88,32,514/- to the total income of the assessee as his undisclosed income for the A.Y. 2004-05. Similar addition has been made to the total income of the assessee for various assessment years as per the table above as undisclosed income of the relevant assessment years. 53. The AO further held that since undisclosed income of the assessee is computed by estimating GP, therefore, it is deemed that all the expenses incurred for earning the undisclosed income have been allowed as deduction. Hence, any expenditure not allowable as per provisions of the Act, has to be necessarily disallowed. He noted from the said seized documents that M/s DIL has made certain unlawful payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. As regards the observation of the AO that the sale proceeds of unaccounted turnover of Gutkha has been applied/utilized by Shri Sohanraj Mehta on behalf of M/s. DIL, in respect of parties who are appearing in the right side of A/M/08 of page No.34 were parties having transactions with M/s. DIL or its Directors is concerned, it was submitted that Shri Sohanraj Mehta has prepared forged documents with an intention to make belief that the entire unaccounted business activity has been carried out on behalf of the assessee intentionally made to write the details of his parallel unaccounted business in the said seized material. It was submitted that the AO has miserably failed to provide a single confirmation from the alleged recipients of the money from Shri Sohanraj Mehta as is appearing on right side of the seized document bearing page No.34 of A/M/08. 57. As regards the statement of Shri S.Balan is concerned it was submitted that Shri S. Balan had filed a retraction affidavit. It was submitted that the assessee company had requested for cross examination of Shri S. Balan which was not offered and in its absence it would be improbable to rely on his statement. It was submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the assessee company. However, none of the case pertain to unaccounted suppression of production, clandestine removal or unaccounted turnover. 62. As regards the allegation of the AO on the issue of unaccounted purchase is concerned, it was submitted that none of the suppliers have confirmed of having received any consideration in excess of what has been recorded in the books of account of the assessee company. The assessee again reiterated the retraction made by Shri Mallikarjun of Shimoga and also the subsequent denials made by Shri Jeevan Sancheti for having made any payment to the said party through Shri Sohanraj Mehta in his statement recorded on 21-01-2010. It was submitted that the provisions of section 132(4A) r.w.s. 292C of the Act provides that where any books of account, other documents etc are found in the possession of any person, in the course of search, it may be presumed that such books, documents etc. belong to such person. The Chairman of the assessee company Shri R.M. Dhariwal has repeatedly submitted that the impugned seized documents are forged and intentionally created to mislead not only the assessee company but all others who refer to these document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esumption on prepositions of saving of Excise Duty on the unaccounted sales and not restricting it to the comparable book results on year to year basis on hypothetical formula based estimation of suppression of production without any corroborative and clinching evidences is also incorrect. 65. It was argued that the seized material found and owned up by Shri Sohanraj Mehta of Bangalore have not even remotely proved to have any links with the assessee company and there is no justifiable corroborative and reliable evidence. Therefore, the entire addition made is only on the basis of conjectures and surmises. The approach adopted by the AO in applying the hypothetical gross profit ratio by factoring in Excise duty percentage to the alleged unaccounted turnover amounts to presumption on presumption and that too without any basis which is against the principles of natural justice and equity. It was argued that the AO has determined the impugned additions in each of the assessment year by applying Excise duty percentage and as much as 55 to 60% of gross profit margin is considered while determining the unaccounted income of the respective assessment years. It was argued that resorting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pediment as per the Code of Civil Procedure that summons could be issued to a person only if he is within 500 kms of the distance from the issuing authority and if the witness/person concerned is 500 kms away, commission to be issued authorizing the other authority to cause and carry out necessary examination on his behalf. Since the assessee wished to cross examine Shri Sohanraj Mehta, a resident of Bangalore and since the AO at Pune was not empowered to issue summons and force his attendance at Pune, therefore, commission was rightly issued by the AO. However, the assessee did not avail the opportunity provided to him. In the remand proceedings the AO has reiterated similar facts as brought out in the assessment order. According to Ld.CIT(A), cross examination is a process by which truth is elicited and where the assessee asked for cross examination and it was not acceded to and the assessment order was passed, one might have expected to consider this a violation of principles of natural justice. However, in the instant case the assessee was provided opportunity to cross examine twice, therefore, the argument of the assessee that no opportunity of cross examination of Shri Sohanr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had received commission income on sales of gutkha @ ₹ 65/- per carton of unaccounted sales and the entire working of the commission earned by him has been recorded in the seized document. According to him, no one doing business on his behalf would derive commission. Further, Shri Sohanraj Mehta used to hand over money to the persons whose names appear on the chits given as per the directions of Shri R.M. Dhariwal/Prakash R. Dhariwal which leads to the inference that the unaccounted business of Gutkha was carried out as per the direction of Dhariwal. Further, both Shri R.M. Dhariwal and his Son Prakash R. Dhariwal in their statement recorded u/s.132(4) have admitted to have signed the said chit instructing the payment to the parties on their behalf. Further, it is an undisputed fact that Shri Sohanraj Mehta, through his firm Mehta Associates, acted as C F agent of M/s DIL for the entire Karnataka Region. The raw material suppliers of M/s. DIL, employees of DIL and whose names appear on the seized document have categorically accepted that they knew DIL or Shri R.M. Dhariwal and not Shri Sohanraj Mehta. These factual findings clearly indicate that the entire unaccounted turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been deployed in real estate business of reputed builders. Further, the assessee has also paid an amount of ₹ 32.89 crores as on-money for purchase of shares of M/s. CC Constructions from Shri Sitaramaiah, MLA. Therefore, he held that it is not necessary that matching unaccounted assets or expenses should be found for generation of such huge income. 73. As regards the contention of the assessee that no evidence of suppression of income/turnover were found by other Government Agency such as Excise, Income Tax is concerned, he observed that the seized document do indicate payment of ₹ 5 lakhs per month by the assessee to the Sales Tax Department which prima-facie indicate the assessee managing the Sales Tax Department through systematic payment of bribe so as to conceal the unaccounted sales thereby suppressing the turnover. 74. As regards the contention of the assessee that the statements given by various persons were retracted is concerned, he observed that in the first instance the said persons admitted and substantiated the statement of Shri Sohanraj Mehta u/s.132(4) explaining the seized document and after having been said the truth in their 132(4) stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture, as a mandatory requirement. Normally, duty is payable on 'removal' of goods. The Central Excise Rules provide that every person who produces or manufactures any 'excisable goods', or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rules or under any other law. No exisable goods, on which any duty is payable, shall be 'removed' without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided. 5.6.1 It is, therefore, clear that the excise duty becomes payable on removal of goods for sale. Even where the goods are clandestinely removed, the obligation to pay the excise duty does not get extinguished. When the detection of the clandestinely removed goods takes place, the concern of the Excise Department is restricted to the collection of the excise duty evaded and its consequences thereof on removal of such goods. On the other hand, the concern of the Income tax Department is restricted to the collection of income tax evaded and its consequences thereof on sale of such goods. The role of each of the Departments varies. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J. Juneja (2008) 302 ITR 63 (Guj.), wherein undisclosed sales have been noticed the issue was whether the entire sales so noticed in the loose papers found during search or only gross profit could be added on such sales. It was held that since no undisclosed investments over and above the income estimated by gross profit method was found, the order of the Tribunal limiting the estimate of profits on such sales was upheld. The Assessing Officer by increasing the gross profit rate in essence has added the excise duty allegedly evaded by the appellant company which cannot be done by way of addition to the gross profit. Under the Act the excise duty unpaid can be added only u/s 43B. In the case of V R Textile (2011) 11 ITR (Trib) 476 (Ahd), the Gujarat High Court did not dispute income as ,well as sales made outside the books of account and as the assessee had paid excise duty on the unaccounted sales, it was held that only gross profit addition could be made. In the case of Rishabh Polymers (P) Ltd, IT(SS)A No.43/Hyd/05 order dated 10-12-2010, the ITAT, Hyderabad held that the assessee could not be considered to have earned profit equal to the undisclosed sale proceeds and the CIT(Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiable. There was no occasion to examine overvaluation of opening stock or undervaluation of closing stock. Hence it is a case of applying a higher G.P. rate. The profit arising out of the unaccounted sales needs to be taxed along with the initial investment made for the said transaction. If the G.P. alone is taxed, the initial investment will remain untaxed. The year-wise details are as under: Sr. No. A.Y. GP Percentage as per books Accounted Sales Unaccounted Sales 1. 2004-05 21.32 34,96,64,955 69,28,04,168 2. 2005-06 21.93 48,43,77,240 53,22,77,170 3. 2006-07 20.28 53,77,31,832 63,84,17,650 4. 2007-08 15.67 84,00,95,315 83,53,68,165 5. 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they were found during the search on Mehta and nothing was found during the search on the assessee. 80. Referring to Page Nos. 53 to 85 of the paper book Volume-IV he submitted that Shri Rasiklal M Dhariwal, Chairman of the assessee Company, was asked during the course of search at his premises about the papers found with Mr. Mehta. In that context he clearly stated that the letters were written by him to Mr. Mehta for giving certain sums to various persons but he did not accept the decoding done by Mehta in his loose papers by adding two zeros to the figures in this letters and further he did not accept the accounts maintained by Mehta as belonging to the assessee. Referring to Page No.40 of paper book Volume-IV he submitted that the letters written by Dhariwals to Mr. Sohanraj Mehta were during the period June 2006 to Oct. 2007 and the total sum of the amounts to be given to various persons as per these papers amounted to ₹ 61,04,816/- only. Referring to Page 115 of the paper Book Volume-II he submitted that Mr. Dhariwal had also demanded the cross examination of Mr. Sohanraj Mehta. 81. Referring to the copy of the assessment order he submitted that the AO has held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and admitted unaccounted investment. Does it mean that all these transactions are of Mehta and in order to get away from huge tax liability, he floated the story that the papers indicate the transactions of the assessee. On page 48 to 52, he gives a retraction on page 49 wherein he makes a request that his statements should be ignored and further he states that he had given the papers to Mithulal for secrecy and consolidation. b. Again on 10.08.2011, on page 53 to 58, he states that the papers pertained to assessee. On 03.12.2011, on page 59, he states that he retracts from all his earlier statements and further that he is prepared to appear before the A.O. at Pune. c. The assessee asked for cross examination of Mehta at Pune (page No. 115 116 of p.b. II) as the assessee's Chairman Shri Rasiklal Dhariwal was not able to travel out of Pune because he was unwell. Secondly, Mrs. K. R. Dhariwal was also hospitalised and she expired in December, 2011. (Refer page 41 42 of PB II). Despite, these facts the A.O. did not give the cross examination opportunity at Pune but instead, he asked the assessee to take Mehta's cross examination at Bengaluru. In view of his abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dept. such as Sheetal Patil, K. Raghunath, Mallikarjun and Balan. They were searched and under tension they admitted the notings in the papers but later on, they all retracted and submitted that the papers do not reveal any unaccounted money of the assessee. Similarly, no evidence was found with them that the assessee advanced such large amounts to them. Thus, they cannot be considered to be witnesses for the dept. against the assessee in view of the above facts. Referring to Pages 181 and 184 of paper book Volume-I he submitted that some of the third parties, whose names figured in the loose papers, in their statements have consistently denied that they have received any money from the assessee as per the loose papers. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Saif Ali Khan Mansurali Vs. ACIT reported in 30CCH 0509 he submitted that the Tribunal in the said decision has held that no addition can be made in the hands of the assessee on the basis of a piece of paper found and seized during the course of search at the premises of third party and on the basis of statement of director of the search party which contain many contradictions. 86. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission to other C F Agents and not to Mehta. Accordingly, Mehta's contention that he received commission on all these sales of more than ₹ 300 Crs as per the loose papers is not correct and secondly, there is no reason for the assessee to ask Mehta to make these sales to other states. Assessee could have made these sales directly to the respective C F Agents. Hence, Mehta's contention is not correct. He submitted that the accounted sales in Karnataka are much lesser than these presumed sales and it is beyond logic that the assessee would be selling so much of stock in Karnataka only. He accordingly submitted that it is difficult to presume that the assessee sells unaccounted stock only in Karnataka and not in any other state in the country. 88. Referring to copy of the order of the Tribunal in the case of Mr. Vinit Ranawat he submitted that some of the persons like Ranawat were searched and no incriminating evidence was found against the assessee or such persons during the search. If assessee had given a sum of ₹ 21 Crs. to Ranawat, some evidence could have been found during the search at his place that he made some unaccounted investment or he has give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Mehta's papers are for the period from Jan. 2003 to Feb. 2008. The search on Mehta was conducted on 09.10.2009. For the period from March 2008 till the date of search, no such loose papers are found. No reason was attributed. If assessee was having such roaring unaccounted business, there is no reason that it has suddenly stopped doing this business from March 2008 onwards. Secondly, if the inference is that Mehta has already given the account for this period to the assessee and therefore, he destroyed the papers, there is no reason as to why he should have maintained the papers for the old period. This defies logic. 91. Referring to the decision of Hon ble Supreme Court in the case of Sumati Dayal reported in 214 ITR 801 and Durga Prasad More reported in 82 ITR 540 where it has been held that taxing authority should look into surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities, he submitted that in view of the above contentions, the notings in the papers maintained by Mehta do not appear to be pertaining to the transactions of the assessee. 92. The Ld. Counsel for the assessee referring to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o unaccounted production, the question of unaccounted sale does not arise. He submitted that if the goods manufactured are excisable and the excise authority has not found any discrepancy and the assessee has maintained the records, no addition can be made on account of unaccounted production/sales in the hands of the assessee, For the above proposition, he relied on the following decisions : CIT v. Mascot Tools Allahabad H.C. - page 166 CIT v. Sanjay Oil Cake Industries Gujarat H.C. - Page 174 Hindustan Poly Amides, IT AT Mumbai - Page 188 95. Referring to the following decisions he submitted that presumption u/s l32( 4A) applies to the person who is searched and in whose custody the papers are found. Thus, loose papers found with Mehta cannot be presumed to be belonging to the assessee or reflecting the business transactions of the assessee. Addl. CIT v. Lata Mangeshkar [97 ITR 696 (Bom)] Prarthana Construction v. DCIT [70 TTJ 122] Straptex (India) P. Ltd. v. DC IT [84 ITD 320] Amarj it Singh Bakshi v. ACIT [86 ITD 13 (TM)] ACIT v. Thakkar Developers [ITA No. 5811PN/08 (Pune)] ACIT v. Kishorlal Balwantrai and others [17 SOT 380 (Chd)] 96. Referrin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search. First response on spot would always be true. Referring to the decision in the case of Kantilal C Shah Vs. ACIT reported in 14 taxmann.com 108 he submitted that the Tribunal in the said decision has held that statement recorded u/s. 132(4A) is an evidence by itself and any retraction should be supported by strong evidence to show that there was coercion or undue force. This view is also supported by following decisions: (i) Carpenters Classics (Exim) Pvt. Ltd Vs. DCIT (108 ITD 142) (Bangalore ITAT) (ii) Hiralal Maganlal Co. Vs. DCIT (96 ITD 113) (Mumbai ITAT) 100. Referring to the decision in the case of Hotel Kiran reported in 82 ITD 453 (Pune ITAT) he submitted that the Tribunal in the said decision has held that where during the course of search, assessee made some admission, he debars the authorized officers from making further investigation. Therefore, in their wisdom the Legislature has provided that such statement can be used as evidence and the assessment can be made on that basis. 101. Referring to the decision of Hon'ble Supreme Court of India in the case of Surjeet Singh Chhabra Vs. Union of India he submitted that the Hon ble Apex Court has h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Indian Evidence Act as compared to oral evidence. For the above proposition he relied on the decision of Hon ble Punjab Haryana High Court in the case of Paramjit Singh Vs. ITO reported in 323 ITR 588. He submitted that the Hon'ble Bombay High Court in case of CIT Vs. Omprakash Jain reported in 24 DTR 157 has observed that the test of evidentiary value of the oral evidence has to be borne in mind and documentary evidence if genuine must prevail over the oral statement. 106. The Ld. Departmental Representative referring to the seized documents submitted that these are day to day accounts for sale of Gutka as well as appropriation of funds. From these day to day accounts, monthly summary was drawn. Thereafter these are summarized for the entire years (April,2003 to August,2006 Total unrecorded sales 218 crores). Further for the period i.e. September,2006 to February,2008, total unrecorded sales were shown at ₹ 12 7.72 crores. Sohanraj Mehta has explained the entire modus operandi of this unaccounted business. 107. He submitted that there is no evidence that he was doing some duplicate/parallel business of Gutka/Pan Masala. He has no setup or infrastructure to man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. Even otherwise, the opportunity to crossexamine will depend on the facts of a given case and may not be necessary. For the above proposition he relied on the decision of Hon ble Punjab Haryana High Court in the case of CIT Vs. K D Bali reported in 10 taxmann.com 215 and the decision of Punjab Haryana High Court in the case of Smt. Kusum Lata Thukral reported in 327 ITR 424. 110. He submitted that these seized documents do show that books of account maintained by the assessee company do not show true state of affairs or actual profits. The fact that such type of evidences were not found at the time of search in the case of assessee company on 21.01.10 do not mitigate their evidentiary value. He submitted that there is no evidence that payments as per chits were to be made from sales tax refund (question 9 of statement of RMD on 03.02.2010 page 16 of the assessment order). Even the amount as per chits is not found recorded in the books of the assessee company. 111. He submitted that the documents seized from the third party can be used against the person to whom these belong as evident from the provisions of law i.e.158 BD, 153A, 148 etc. For the above proposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case. The appellant company has itself shown GP of almost 20% in its regular books of account. When sales are not duly recorded and made out of books of account, there will be saving on account of local taxes such as sales tax/excise duty. In this case, the element of excise duty was itself 40 %. If these two are combined, it will yield GP of 60% as rightly estimated by the AO ( page 73 of the assessment order). His method was scientific. For the above proposition he relied on the decision of Ahmedabad Bench of the Tribunal in the case of Vijay Proteins Ltd. reported in 58 ITD 428. 116. He submitted that the fact that the assessee company did not own up these documents will not mitigate their evidentiary value. For the obvious reasons, Rasiklal Dhariwal made surrender of 38 crores in personal capacity as it would have landed the appellant company in serious trouble with Excise Department other Govt. Authorities. 117. So far as the decisions relied on by the Ld. Counsel for the assessee are concerned, he submitted that all those decisions are distinguishable and not applicable to the facts of the present case. 118. We have considered the rival arguments made by both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also reflected in the seized papers found with Mehta. g. These unaccounted sale proceeds are paid to various persons on behalf of assessee like suppliers, C F Agents, Legal advisers, etc. Although they have not accepted the receipts of such amounts, they have accepted having transacted with the assessee. h. Mehta has accepted that the papers reveal the sale proceeds of Gutkha by assessee. The papers contained accounted and unaccounted transactions of the assessee. i. The various persons whose names figured in the seized papers admitted transactions with the assessee but not with Mehta. 119. The AO further noted that accounted production load factor of Bangalore factory is 29.81% as against such load factor of 53.13% of Baroda factory. The machineries of Baroda factory are old whereas that of the Bangalore factory are new. Further , the assessee has saved the excise duty since the product is sold outside the books of account. He, therefore, computed the suppressed production and sale thereof and applying the GP rate of 60% on such suppressed turnover determined the undisclosed income for the block period, the details of which are already given at Para 50 and 51 of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit on suppressed turnover. 121. It is the submission of the Ld. Departmental Representative that the documents seized during the course of search action in the case of Shri Sohanraj Mehta and Shri Mithulal unequivocally show that they reflect the unaccounted transaction of Gutkha business of the assessee. They contain meticulously the deployment of funds generated out of such unaccounted turnover which have been given to various persons as per the direction of the Directors of the assessee company. Merely because those persons have subsequently retracted from their statements, the same cannot be believed since they are under the influence and control of the assessee as their livelihood depends on the assessee. Therefore, their retraction cannot be believed and the statement given initially which was without any threat or coercion should be held as genuine and the true state of affairs of the assessee. Therefore, the action of the AO should be upheld and the relief granted by the CIT(A) should be reversed. 122. In this background, we have to decide the amount of addition, if any, that has to be made in the hands of the assessee. 123. It is an admitted fact that search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal Industries Limited. Scrutiny of the documents seized by Income Tax revealed the details of unaccounted transaction dealt by him during the period from 2003-04 to 2007-08 causing huge loss to the Government revenue. Accordingly, search assessment proceedings in respect of the individual Shri.Sohanraj Mehta completed by the Income Tax Department were also obtained for initiating further necessary action. Scrutiny of the search assessment proceedings of the Income Tax Department pertaining to M/s.Dhariwal Industries Limited and that of Shri.Sohanraj Mehta, appeared to reveal that the assessees had evaded excise duty by clandestinely clearing the goods manufactured without payment of excise duty. Accordingly, investigation was initiated against M/s. Dhariwal Industries Limited, Singasandra, Bangalore. 3.2 From 01.07.2008, the assessees are working under Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 as per which duty is determined based on the number of machines operated. Further, the case made by Income Tax Department and evidences collected by them pertain to period upto February, 2008. 4.1 Income Tax Department had carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after elaborate discussion, the Ld. Commissioner of Central Excise has given his findings which read as under : DISCUSSIONS AND FINDINGS: 46. I have carefully perused the case records, the Final Order No.2195621964/2014 dated 20.10.2014 of the Hon'ble CESTAT, Bangalore, and written as well as oral submissions made by the noticees. 46.1 The present proceedings are initiated in pursuance to the Final Order No. 21956-21964/2014 dated 20.10.2014 issued by the Hon'ble CESTAT, Bangalore with regard the Order-In-Original No.45/2013 dated 22.07.2013 issued by the Commissioner of Central Excise, Bangalore-I Commissionerate, wherein the demand of duty made in the SCN dated 01.08.2012, was confirmed along with interest and consequential penalties. 46.2 I find from the above mentioned order of the CESTAT, the matter has been remanded with the observation that the following important points have not been discussed and not considered, viz: (i) Seizure or interception of any consignment while clearing without payment of duty. (ii) Excess use of machines, use of extra labour and additional shifts of work done by the appellants during the relevant period. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri.Manoj Mitulal and the statement dated 21.10.2009 of Shri.Sohanraj Mehta, recorded by Investigating Agency of Income Tax and statement dated 05.06.2012 given before Central Excise authorities. The allegation made in the impugned notice is entirely based on the loose sheets, note books, records, seized from Shri.Sohanraj Mehta. During investigation a few records have been recovered from the premises of the assessee under Mahazar dated 17.05.2012 but the investigation has not made a case of clandestine clearance based on these records. In the absence of even a single consignment of unaccounted gutkha being seized or intercepted by the investigation, I find that the allegation of clandestine clearance of gutkha made against the assessee is not corroborated. A case of clandestine clearance cannot be justified only based on a Statement of C F agent of the assessee without corroborating the same with any material evidence. In support of these views, I place reliance on the decisions of the Tribunal in the case of Rhino Rubbers Pvt. Ltd., Vs. Commissioner of Central Excise reported in 1996 (85) ELT 260 (Tri.) and Kothari Synthetic Industries Vs. Commissioner of Central Excise reported i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive officers had conducted Investigation to examine the same. A' statement of Shri.M.B.Mallikarjuna was recorded on 07.06.2012 before the Superintendent of Central Excise (Preventive), Banglaore-I Commissionerate wherein he has interalia stated that they supply arecanut to the assessee for manufacture of gutkha under sale bills for the purpose of transportation and e-sugam documents as per the state VAT and APMC permit. He has further stated that payments for supply of arecanut was received through demand drafts from the headquarters of the assessee at Pune and that about.5 years back they used to get payments through demand draft from M/s.Mehta Associates on behalf of the assessee. At no point of time Shri.Mallikarjuna has stated' before the Central Excise authorities, that he had supplied unaccounted gutkha to the assessee or that he had received amounts in cash from Shri.Sohanraj of M/s.Mehta Associates. Neither has he admitted to the supply of unaccounted arecanut to the assessee. The SCN alleges that the main supplier of arecanut, which is the principle raw material for manufacture of gutkha, was Shri.M.B.Mallikarjuna Managing Partner of Shri.Gajanana Arecanut Agencies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory of the assessee through account payee cheques favouring CPI. On showing the summary of records which indicated that Shri.Soharaj Mehta had paid ₹ 9,05,00,000/- to CPI during September 2006 to March 2007, Shri Rajesh has stated that as per their records they have received the payments by cheque for supplies made during the relevant period and he is not aware about the amount mentioned in the extract shown to him. He has further stated that they have not supplied any goods other than packing material to M/s.Dhariwal Industries Ltd. He has also stated that none of the official of CPI had any contact with Shri Sohanraj Mehta and therefore he does not know about the transactions dealt by Shri.Sohanraj Mehta and the various entries of payments made in the documents shown to him. 49.4 The notice has alleged that in the seized records the: name of Shri.Shrinivas of CPI, is mentioned for having received amounts out of sale-proceeds of unaccounted gutkha. Therefore, it is alleged that CPI have played active role inclandestine activity of the assessee by supplying unaccounted laminating roll and realised large sums for supply of such unaccounted rolls. However, from the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49.5 During the investigation, it was observed that M/s.Rajhans Enterprises, Bangalore were supplying carton boxes to the assessee who were using the same for packing gutkha pouches. Hence, a statement dated 15.06.2012 of Shri.Ravindranath. Managing Partner of M/s.Rajhans Enterprises, Bangalore, was recorded by the Superintendent of Central Excise (Preventive). Bangalore-I Commissionerate. Shri.Ravindranath, in his statement had interalia stated that they supply carton boxes for packing of gutkha pouches; that they receive payment only through demand draft from their Bangalore factory against the sales made to them, which in the normal course is collected by their person from their factory at the time of deliver of the goods; that he is not connected to Sohanraj Mehta in any way at any given point of time and that he has not received any amount from Sohanraj Mehta at any given point of time. It is seen from the records of the case that there is no seizure of unaccounted. carton boxes either at the premises of the assessee or at the premises of M/s.Rajhans Enterprises. There is also no documentary evidence to show that M/s.Rajhans Enterprises had supplied unaccounted carton boxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s named in the alleged parallel invoices admitted the receipt of the goods from the Respondent's firm, No evidence regarding the excess use of the raw material or consumption of electricity by the Respondents had been brought on record. Therefore, charge of clandestine removal of the goods without payment of duty by .the Respondents, did not stand proved. In the case of Melton India (P) Ltd., Vs. CCE, Noida reported in 2005 (181) ELT 129 (Tri. Delhi) it was observed by the Hon'ble Tribunal that Charge of clandestine removal cannot be based on assumptions and presumptions or on a simple bank record prepared by assessee showing inflated production figures - 58 invoices seized from factory premises; pleaded by assessee as prepared for getting financial assistance from bank - No admission of any of appellants and no evidence to prove actual clearance of goods through invoices-in-question on a clandestine manner - None of consignee named in invoices admitted receipt of goods - No evidence of excess receipt of raw material/, consumption of electricity or employment of labour by assessee for manufacture of extra finished goods. Furthermore, I am of the view that the charge of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs initiated by the Income Tax Authorities on the impugned slips have been dropped by the Commissioner of Income Tax (Appeals)- VI, Bangalore vide Order ITA Nos.229,230,231,232,233,234, 235/CDIT/CC 2(2) B'lore/CIT (A)VI/2011-12' dated 05.09.2012. Thus, I hold that this allegation is not substantiated in the case. 52. Surprise visits of the officers and the supervision/control exercised by the, department and how assessee could produce excess quantity in spite of such intense supervision. 52.1 The Hon ble Tribunal while remanding the case for denovo adjudication has made an observation that in the Order-In-Original No.45/2013 dated 22.07.2013 passed by the Commissioner, BangaloreI Commissionerate, there is no mention of surprise visits of the officers and the supervision/control exercised by the department and how the assessee could produce excess quantity in spite of such intense supervision. From the submissions made by the assessee, I find that the Superintendent of Central Excise, Electronic City Range had visited the unit on 11.09.2007, 24.10.2007 and 08.11.2007. Further, the said officer had visited the unit alongwith the Assistant Commissioner, Bangalore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t dated 05.06.2012 given before the Superintendent of Central Excise (Preventive), Bangalore-I Commissionerate. However, Shri.Sohanraj Mehta, vide his letter dated 23.12.2009 addressed to the Assistant Director of Income Tax (Investigation), Bangalore had clarified that the notings in the slips reveal the handling of various products in a consolidated manner without indication of specific brands and movement of sale proceeds. He has also stated that this was precisely for the reason that he wanted to maintain confidentiality in the matter of handling other local products as otherwise there was an imminent threat of losing marketing of premium products and for the reason, the details of other products have not been mentioned in the said books. He has added that since an element of secrecy was required to be maintained in the transaction of various brands, lest the dealing of various other brands would come to the notice of main supplier namely Dhariwal Industries Ltd., the name of other vendors/suppliers were not mentioned in the books/noting. He has also stated that in all these statements it is stated that the transactions belong to the products of Dhariwal Industries, the premiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CCE, Mumbai Vs. Kalvert Foods India Pvt. Ltd., cross-examination is not mandatory and that as per the decision of Hon'ble High Court of Madras in the Case of Thilagarathinam Match Works [2013(295) ELT 195 (Madras), persons who gave statements and who are witnesses alone are liable to be cross-examined and that cross-examination is not necessary in the case. 54.2 In response to this letter, the assessee filed a Writ Petition No.23627/2015 before the Hon'ble High Court of Karnataka, which stayed further proceedings in the case vide its Interim Order dated 10.06.2015. Later, the Hon'ble High Court of Karnataka in its Final Order dated 25.06.2015, disposed off the writ Petition No.23627/2015 and ordered that Shri.Sohanraj Mehta should be tendered for cross examination by the assessee. The High Court also observed that there is no justification by the assessee to cross-examine Shri.Srinivasa, Accountant of M/s.Champion Packaging Pvt. Ltd., Bangalore and the officers who had conducted surprise checks at the assessee's factory premises as these persons have' not been examined in the case. Accordingly, the assessee's request to cross- examine. Shri.Sohanraj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eared the said unaccounted gutkha to the C F agents. Further, not even a single buyer of the alleged unaccounted gutkha has been inquired in the case, Even though some of the names of buyers are said to be found on the loose slips, no effort is made to contact the purchasers - of such unaccounted gutkha. There is no cross verification of the entries in the said loose slips to find out whether these persons have received the said gutkha or not, which is an important material to substantiate the case of the Department. Thus, I find that there is no evidence to show that the said gutkha was sold to the persons whose names were mentioned in the impugned loose slips. With regard to the investigation conducted on the flow back of sale proceeds of such unaccounted gutkha, no clinching evidence is made available in the case, which even faintly suggests that .the assessee had received money against such sale of unaccounted gutkha. 55.2 Furthermore, on the question as to whether these loose slips recovered from Shri.Sohanraj Mehta can form a strong basis for alleging clandestine clearance of gutkha by the assessee, I find that Shri.Sohanraj Mehta is only an independent C F Agent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled that the charge of clandestine removal of the goods has to be established by adducing positive evidence and that the same cannot be based on assumptions and presumptions'. 55.3 Besides, the investigations carried out in the case has failed to show how such large quantities of unaccounted gutkha was transported from the factory of the assessee to the premises of C F Agents. There is no corroborative evidence to show the movement of goods. In fact this part has not at all been- investigated. Iam therefore of the view that the demand cannot be raised on the basis of records recovered from third parties without any corroborative evidence to show that the movement of goods from the premises of a manufacturer has taken place. In this regard, reliance is placed on the decisions in the case of Rama Shyama Papers Vs. CCE reported in 2004 (168) ELT 494 (Tri.) wherein it is held by the Hon'ble Tribunal that Records seized from third party - No evidence produced to show movement of goods from premises of assessee to that party and no enquiry made as to who ultimately received those goods . Further, in the case of Rutvi Steel Vs. CCE reported in 2009 (243) ELT 154 (Tri.), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a has been established. In this regard; the investigation has not identified even a single transporter of impugned goods. To make a case on the basis of principles of preponderance of probability, at least one piece of evidence suggesting manufacture or clearance or transportation of gutkha from the assessee's premises is required to be available. In the absence of any such indicators, I find that the investigation has failed to establish a case based on the principles of preponderance of probability. The only evidence put forth by the investigation in this case is the loose slips recovered from Shri.Sohanraj Mehta where he has claimed that some of the entries relate to unaccounted gutkha received from the assessee. Even if it is accepted that these entries relate to the sale of unaccounted gutkha, there is no evidence whatsoever to suggest that the said unaccounted gutkha belonged to the assessee. In the absence of any evidence, the only way to ascertain that the unaccounted gutkha belonged to the assessee was by way of cross examination of Shri.Sohanraj Mehta. The Hon'ble High Court of Karnataka in its order dated 25.06.2015 had specifically directed the Adjudicating Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above, I hold that the total demand of ₹ 26,57,29,571/- made against the assessee in the show cause notice SI.No.163/2012 dated 01.08.2012, in terms of proviso to Section 11A(1)/Section 11A of Central Excise Act, 1944, alleging clandestine clearance of gutkha during the period from July 2007 to February 2008, is not sustainable. I also hold the demand of Interest in terms of Section 11AB/Section 11AA of the Central Excise Act, 1944 is also not sustainable. For the above mentioned reasons, there is no justification to hold 57085 cartons of R.M.D.Gutkha as liable for confiscation. I also hold that the penalty proposed to be imposed on the assessee under Section 11AC of Central Excise Act, 1944 and Rule 25 of Central Excise Rules, 2002 is not sustainable. 58.1 Further, based on my finding that the demand on the main noticee is not sustainable and based on the written submissions made by the co-noticees in the case,1 also hold that the penalties proposed under Rule 26 of Central Excise Rules, 2002 against (i)Shri.Rasiklal M.Dhariwal, Chairman of M/s.Dhariwal Industries Limited, Bangalore, (ii)Shri.Prakash R.Dhariwal, Managing Director of M/s.Dhariwal Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e excise officials have visited the factory premises and no discrepancy was noticed by them. It is also an admitted fact that while some evidence of payment of bribes to sales tax personnel are mentioned in the documents seized from Mr. Sohanraj Mehta, however, no such evidence of bribes paid to excise people are mentioned. Had there been any excess production of such huge quantity as computed by the AO, some evidence of managing the excise people could have been found. However, it is not the case here. Therefore, the computation of suppressed production by the AO and upheld by the CIT(A) in our opinion under the facts and circumstances of the case cannot be relied upon. 127. We find the Hon ble Allahabad High Court in the case of CIT Vs. Mascot (India) Pvt. Ltd. and Forgings Pvt. Ltd. has held that when the sales declared by the assessee are all excisable goods, periodically checked by Excise authorities and also duly audited by the auditors, it is beyond comprehension that any addition on account of alleged suppressed sales can be made without any valid basis whatsoever on record. The relevant observation of the Hon ble High Court reads as under : 6. The main controversy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise registers, which are periodically checked and verified by the excise authorities. It is beyond comprehension that any addition on account of alleged suppressed sales can be made without any valid basis whatsoever on record. We, are, therefore, of the considered opinion that the addition of ₹ 15,99,158 made by the AO and confirmed by the learned CIT(A) on account of alleged suppression of domestic sales is patently wrong. The same is, therefore, deleted. 8. The findings recorded by the Tribunal are based on appreciation of fact and material available on record. We do not find any illegality or infirmity m the order passed by the Tribunal on the aforesaid issue. 128. We find the Hon ble Gujarat High Court in the case of CIT Vs. Sanjay Oil Cake Industries reported in 197 CTR 520 has held as under : 8. The Tribunal has upheld the findings recorded by CIT(A) for deleting the additions on account of undisclosed income on account of suppressed sales of oil and oil-cakes. It has been found by the Tribunal that it is an undisputed fact that regular books of account have been maintained by the assessee along with records of stock as required under the provisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the additions on this count and there being no infirmity in the order of the Tribunal in relation to this issue, no interference is called for. 10. The question referred at the instance of the Revenue is, therefore, answered in the affirmative i.e., in favour of the assessee and against the Revenue holding that the Tribunal was right in law in deleting the addition of ₹ 54,23,457 made on account of suppressed production of 28,284 tins of oil and also ₹ 12,44,130 on account of suppressed production of 678 tons of oil-cakes. 11. Coming to the reference at the instance of the assessee, though as many as six questions have been referred, the issue is whether the assessee had manufactured 28,284 tins and failed to show the said production in the accounts maintained by the assessee. 129. We find the assessee from the very beginning was stating that Shri Sohanraj Mehta might be indulging in parallel business since the product of the company was a branded product. He might be indulging in clandestine manufacturing of Gutkha and Pan Masala. However, the Revenue authorities have rejected the above contention of the assessee on the ground that there was no other s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anraj Mehta, C F Agent of RMD Group at Bangalore. The Lucknow Bench of the Tribunal in the case of DCIT Vs. Pavan Kumar Agarwal vide ITA No.413/Lkw/2012 and CO No.70/Lkw/2012 order dated 16-02-2015 has upheld the order of the CIT(A) in deleting the addition of ₹ 1,13,40,000/- made by the AO on account of addition on the basis of seized document of Shri Sohanraj Mehta. The Delhi Bench of the Tribunal in the case of M/s. Bholanath Radhakrishna vide ITA No.5149/Del/2012 order dated 15-04-2013 has upheld the order of the CIT(A) in deleting the addition of ₹ 9 crores made by the AO on the basis of entries found in the books of Shri Sohanraj Mehta, C F Agent for Karnataka Region of RMD group. The Pune Bench of the Tribunal in the case of Pradeep Arun Runwal reported in 149 ITR 548 has also deleted the addition made by the AO and upheld by the CIT(A) on account of additions made on the basis of the seized papers from Shri Sohanraj Mehta, C F Agent of RMD group. 131. Based on the above decisions, the Pune Bench of the Tribunal in the case of Shri Vinit Ranawat vide ACIT vide ITA Nos. 1105 and 1106/PN/2013 order dated 12-06-2015 for A.Yrs. 2006-07 and 2007-08 has deleted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 134. So far as the statement of various persons recorded during the course of search in the case of Shri Sohanraj Mehta are concerned, the presumptions u/s.132(4A) will apply to the person who is searched and in whose custody the papers are found. Therefore, we find merit in the submission of the Ld. Counsel for the assessee that loose papers found with Shri Sohanraj Mehta cannot be presumed to be belonging to the assessee or reflecting the business transaction of the assessee. It has been held in various decisions that the presumption u/s.132(4A) is applicable only against the person from whose possession the books of account or other documents were found and not against any other person. It has been held that as per section 132(4A) where any books of account or document is found in the possession and control of any person in the course of the search, it is to be presumed that they belong to such person. Thus, clearly the presumption is in respect of the person from whom they were found. In the instant case, such incriminating documents were found from the possession of Shri Sohanraj Mehta/Shri Mithulal. Therefore, we find force in the submission of the Ld. Counsel for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the stock from Shri Sohanraj Mehta and paid money to the assessee or Mr. Mehta was found. If all these sales are made through Shri Sohanraj Mehta in these territories, the above C F agents would have objected. Secondly, no evidence that Shri Sohanraj Mehta maintained the warehouses in various states was found. Thus, if what Shri Sohanraj Mehta says is correct, these unaccounted sales can be made by Shri Sohanraj Mehta and that too in his region, i.e. Karnataka and any other presumption is not possible. 139. We further find that the accounts written by Shri Sohanraj Mehta are written for the period from January 2003 to February 2008 whereas the payment chits written by the assessee to Shri Sohanraj Mehta are for the period from June 2006 to October 2007. No letters for the balance period are found during the searches. We therefore find force in the arguments of the Ld. Counsel for the assessee that what is not found is presumed to be not there and therefore Shri Sohanraj Mehta has not corroborated that the assessee has verified all these loose papers found with him. Further, no evidence was found with the figures mentioned by the assessee in his letters to Shri Sohanraj Mehta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were due to be received by Shri Sohanraj Mehta for which he has issued chits to be handed over to them is not borne out of records. Considering the totality of the facts of the case, in our opinion, addition of an amount of ₹ 20 crores for the A.Yrs. 2004-05 to 2008-09 will meet the ends of justice under the facts and circumstances of the case. We therefore direct addition of ₹ 20 crores for the period from A.Yrs. 2004-05 to 2008-09 to be spread over equally. We hold and direct accordingly. Thus, the grounds raised by the Revenue are dismissed and the grounds raised by the assessee are partly allowed. 141. Identical grounds have been taken by the assessee as well as the Revenue in A.Y. 2005-06 to A.Y. 2008-09. In view of our above findings, the grounds raised by the assessee are partly allowed and the grounds raised by the revenue in these appeals are dismissed. 142. Ground of appeal No.5 by the assessee relates to treatment of sales tax subsidy received of ₹ 10,02,61,664/- as revenue receipt as against capital receipt treated by the assessee. 143. Facts of the case, in brief, are that the AO noted during the course of assessment proceedings that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of assessment proceedings noted from the seized documents that M/s. DIL had made certain unlawful payments to officials of the Sales Tax Department. The said notings was found in Bundle No.A/M/08 which gives monthly summary of unaccounted sales and its deployment for the entire period wherein ST mamul payment of ₹ 5 lakhs per month is mentioned for most of the months. According to the AO most of these payments were in the nature of bribe and not an allowable expenditure as per Explanation (1) of section 37 of the Act. He further noted that the entire undisclosed income of the assessee was computed by estimating the GP and therefore it is deemed that all the expenses incurred for earning the undisclosed income have been allowed as deduction. However, any expenditure not allowable as per the Act has to be disallowed. He accordingly made addition of ₹ 60 lakhs to the total income of the assessee. 150. Before CIT(A) the assessee submitted that the disallowance made by the AO of an expenditure which has not been claimed as allowable and also does not form part of the regularly maintained books of account. The disallowance by the AO u/s.37 of the Act is based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the decision of Hon ble Supreme Court in the case of CIT Vs. Alom Extrusions Ltd. reported in 319 ITR 306 deleted the disallowance. 156. After hearing both the sides, we do not find any infirmity in the order of the CIT(A). Admittedly, the assessee has deposited the employees contribution to PF and ESI before the due date of filing of the return. The Coordinate Benches of the Tribunal are taking the consistent view that if the assessee has deposited the employees contribution to PF and ESI before the due date of filing of the return then no disallowance is called for. Since the assessee in the instant case has admittedly deposited the amounts before the due date of filing of the return, a finding given by the CIT(A) and not controverted by the revenue, therefore, we do not find any infirmity in his order. Grounds of appeal No.4 and 5 by the revenue are accordingly dismissed. 157. Identical grounds have been raised by the Revenue in A.Yrs. 2005-06 to 2008-09. Following similar reasonings the grounds raised by the revenue on this issue in the above appeals are dismissed. 158. In Ground of appeal No. 6 revenue has challenged the order of CIT(A) in allowing the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CIT(A). Ground raised by the Revenue is accordingly dismissed. 162. Identical grounds have been raised by the Revenue in A.Yrs. 2005-06 to 2007-08. Following similar reasonings the grounds on this issue raised by the revenue for the above years are dismissed. 163. Ground of appeal No.6 by the assessee and Ground of appeal No.5 by the Revenue for A.Y. 2007-08 read as under : By Assessee : 6. The Id CIT(A) erred in confirming the disallowance of ₹ 5,00,000/- made u/s. 14A of the Act without appreciating that the disallowance made was on an adhoc basis and hence, the said disallowance made may kindly be deleted. By Revenue : 5. On the facts and in circumstances of the case the Ld. CIT(A) erred in adopting arbitrary disallowance u/s.14A and erred in granting consequential relief to the assessee to the tune of ₹ 3.64 lakhs, as the said quantification of disallowance u/s.14A is neither based on proper appreciation of facts nor of law nor on any sound logic. 164. Facts of the case, in brief, are that the AO following the order passed u/s.143(3) on 22-12-2009 wherein disallowance of ₹ 8,64,152/- was made u/s.14A of the Act made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regarding disallowance of ₹ 26,42,480/- u.s.14A r.w.Rule 8D. Ground of appeal No.6 on this issue read as under : 6. The Ld CIT(A) erred in confirming the disallowance of ₹ 26,42,480/- made u/s. 14A r.w.r. 8D ignoring the written submissions filed and without appreciating the fact that the learned AO has not provided any basis or working of disallowance made and hence, the said disallowance made may kindly be deleted. 170. Facts of the case in brief, are that the AO during the course of assessment proceedings noted that the assessee has claimed exempt income of ₹ 3,43,74,993/-. However, the assessee has not attributed any amount as expenditure towards earning of such exempt income. According to the AO, it is difficult to accept the proposition that all the tax free income earned by the assessee has been earned without incurring any expenditure. Therefore, he asked the assessee to explain as to why expenditure relatable to exempt income should not be disallowed under the provisions of section 14A r.w. Rule 8D. It was explained by the assessee that it has received dividend income of ₹ 3,39,95,312/- and the assessee has offered an amount of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18,01,966 30,34,078 2010-11 7,84,674 22,26,799 30,11,473 He submitted that the mutual fund houses provide door step services for investment and are also charging entry load of 0.5% to 2.5% for administrative expenses which forms part of cost of investments. Therefore, no separate disallowance is warranted. Further, the decisions for investments are taken by the directors of the assessee company who are not drawing any salary from the assessee company and the implementation of the decisions does not require incurring of any expenditure. He submitted that interest on term loans cannot be considered for disallowance since the same have been utilized for specific purposes for which the same was obtained. Further, the AO has also not brought any cogent reasons for disallowing expenditure u/s.14A r.w. Rule 8D. He accordingly submitted that no disallowance could be made. 174. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 175. We have considered the rival arguments made by both the sides, perused the orders of the AO and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the decision of investment in mutual funds etc. At the same time, incurring of some administrative expenses for earning such huge tax free income cannot be ruled out. Considering the totality of the facts of the case, we restrict the disallowance on account of administrative expenses at ₹ 2 lakhs each for A.Yrs. 2008-09, 2009-20 and 2010-11 respectively. Ground raised by the assessee is accordingly allowed for statistical purposes. 177. Identical grounds raised by the assessee in A.Yrs. 2009-10 and 2010-11. Following our directions given in the preceding paragraphs the issue relating to disallowance of interest expenditure is restored to the file of the AO who shall decide the issue in the light of the directions given in the preceding paragraphs. So far as the disallowance of administrative expenses is concerned, we have already directed to disallow ₹ 2 lakhs each for A.Yrs. 2009-10 and 2010-11 respectively. Ground raised by the assessee on this issue is accordingly allowed for statistical purposes. 178. Grounds of appeal No. 1 2 by the Revenue for A.Y. 2010-11 are as under : 1. The Ld.CIT(A) erred in deciding that power generation from windmill is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay any Excise duty on the so called production of the electricity. Had it been a manufacture or production of article or thing it would have been covered by the provisions of the Excise Act. Relying on the decision of the Hon ble Supreme Court in the case of Escorts Ltd. where the Hon ble Apex Court has underscored the philosophy of discouraging double benefit the AO disallowed the claim of additional depreciation on windmills amounting to ₹ 9,15,52,187/- 181. Before CIT(A) the assessee submitted that the claim of additional depreciation is admissible if the assessee is engaged in the business of manufacture or production of any article or thing. It was submitted that the assessee is engaged in the business of manufacture of Pan Masala and Gutkha and is also in the business of generation of power which has been judicially held to be equivalent to manufacture of article or thing. Relying on various decisions it was submitted that if the assessee is engaged in the business of manufacturing, additional depreciation has to be allowed. 182. Based on the arguments advanced by the assessee and relying on the decisions of the Hon ble Madras High Court in the case of CIT Vs. M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as renewed energy device and in the generation of power which is not an article or thing. The appellant has brought to notice of the undersigned and also filed a copy of the decision in the case of NTPL Vs DCIT cited supra, wherein the Delhi bench of the ITAT has held as under: On due consideration of settled judicial decisions, it is implicitly clear that the Supreme Court has explained the meaning of electricity, the Court has considered the definition of goods as given in Article 366(12) of the Constitution of India. It also took into consideration the sales tax Act of the State of Andhra Pradesh as well as Madhya Pradesh and also considered the dictionary meaning. Thereafter the Court has observed that goods means, all kind of moveable properties. The terms moveable property when considered with reference to goods as defined for the purpose of sales-tax cannot be taken in a narrow sense and merely because electric energy is not a tangible or cannot be moved or touched like, for instance, a piece of wood or a book it cannot cease to be moveable property when it has all the attributes of such properties. It is capable of abstraction, consumption and use of which if done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to additional depreciation. The aforesaid decision of the Madras High court is seen to have been followed by the Jaipur ITAT in the case of Fashion Suits Pvt. Ltd Vs DCIT in ITA No. 142/Jod/2011 dated 16-12-2011. 3.4.2 In the case of ACIT Vs M. Satishkumar (2012) 191 ITR (Trib) 646 (Chennai) it was held that the generation of electricity is a manufacturing activity. The assessee was involved in the manufacturing activity and fulfilled the conditions as laid down u/s 32(1)(iia). The bench further held that the Govt. vide Finance Act 2012 has amended the provisions of sec. 32(1)(iia) to include the business of generation and distribution of power, eligible for benefit u/s 32(1)(iia) and that although the said amendment is w.e.f. 1-4-2012 it gives impetus to the view that generation of electricity is a manufacturing process and qualifies for the benefit u/s 32(i)(iia). The aforesaid case was related to an assessee engaged in the business of generation of electricity through windmills and claimed 100% depreciation in respect of the windmill installed as per the provisions of sec 32(1) and item (xiii) of New Appendix I read with rule 5. 3.4.3 In the case of VTM Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer of ₹ 9,15,52,187/- is directed to be deleted and the ground of appeal No 1 raised by the appellant is liable to be allowed. 185. Since the Ld.CIT(A) while allowing the claim of additional depreciation has relied on various decisions including the decisions of Hon ble Madras High Court in the case of VTM Ltd. (Supra) and M/s. Hitech Arai Ltd. (Supra) and since nothing contrary was brought to our notice against the above decisions, therefore, we do not find any infirmity in the order of the Ld.CIT(A) allowing the claim of additional depreciation on windmills installed by the assessee during the year. Grounds of appeal No.1 and 2 by the revenue are accordingly dismissed. 186. Ground of appeal No. 3 by the Revenue for A.Y. 2010-11 reads as under : 3. The Ld.CIT(A) erred in deciding that addition of ₹ 2,05,000/- was made on the documents pertained to Dhariwal and Doshi Pvt. Ltd. and therefore it has to be considered in the case of Dhariwal and Doshi Pvt. Ltd. and not in the assessee even though the assessee has utilized it for own business purpose. 187. Facts of the case, in brief, are that the AO during the course of assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the said document itself is titled Dhariwal and Doshi Industries Pvt. Ltd. (in short DDIPL ) and the assessee has nothing to do with the said page. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the addition by observing as under : 5.2 I have considered the submission made by the appellant and perused material on record. The notings made on page 4 and seized from the office premises of the appellant at Vadodara records the details of the pet jars which is actually utilized by M/s DDIPL which is engaged in the tea business. In the statement recorded u/s 132(4) of Shri. Ajit Jain this fact has been explained by him and he has stated that the pet jars at S.No 2 3 were utilized for sales promotion of the product of M/s DIL i.e. for gutkha and pan masala and the note books mentioned at S.No 4 were also distributed free along with pan masala case. The Assessing Officer has not considered the statement of Shri. Jain in this regard and held the expenses to be unaccounted in the case of M/s DIL. The loose paper indicating the items in any case related to M/s DDIPL and the same has been utilized by the appellant is not disputed by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on factory floor and even the department considered by the department itself in the process of physical verification during the course of search proceedings. 194. Facts of the case, in brief, are that the AO noted that during the course of survey action u/s.133A of the I.T. Act carried out on 20-01-2010 at the factory premises of M/s. Dhariwal Industries Ltd. at Gut No.1524/2, 1526 and 1528, Village Saradwadi, Tal. Shirur, Pune, which was later on converted into a search operation u/s.132, stock of raw material, i.e. Polyester, metalized polyester, metalized BOPP, poly etc., were found amounting to ₹ 4,47,87,898/-. As per the stock register maintained by the assessee company stock was shown at ₹ 2,72,21,364/-. Thus, there was a stock difference of about ₹ 1,75,66,534/- between the stock as per stock register maintained by the assessee company and the physical stock taken by the department. He further noted that while recording the statement u/s.131 of the I.T. Act, Shri Arun Seth, Chief Executive on 20-01-2010 he was specifically asked to explain the difference. However, he could not explain the same properly. On the basis of the above findings, while record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded u/s.132(4) of Shri Madhusudhan Brahme, factory manager of M/s. Manikchand Packaging also failed to reconcile the difference between the physical stock and the stock as per books though he had stated that the difference in stock with regard to the quality and quantity would be worked out and submitted within a week which was never submitted. The appellant during the assessment proceedings also could not reconcile the stock difference with the assessment proceedings also could not reconcile the stock difference with the regular books of account maintained by way of cogent proof and evidences and the explanation furnished was found to be not satisfactory. The apex court in the case of CIT Vs. Mussadilal Ram Bharose (1983) 165 ITR 14 held that the burden placed upon the assessee is not discharged by any fantastic explanation nor is if law that any and every narration by the assessee must be acceptable. It must be an explanation acceptable to the fact finding body. Thus the material brought on record clearly indicate that no reasonable explanation has been furnished by the appellant and, therefore, addition made by the Assessing Officer is justified and upheld. 197. Aggrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the same. From the order of the AO as well as the submission of the assessee it is not verifiable as to what method of accounting for valuation of stock was being adopted by the assessee. If the valuation is being made as per actual invoice price, then taking average price will give a distorted figure. In view of the above discussion and keeping in mind the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the difference between physical stock and the stock as per books. Ground raised by the assessee is accordingly allowed for statistical purposes. 201. Ground of appeal No.2 by the assessee for A.Y. 2010-11 reads as under : 2. The Id CIT(A) erred in addition of ₹ 1,04,84,609/- merely considering the statement of one the employee of the appellant company. 202. Facts of the case, in brief, are that during the assessment proceedings the AO noted that the seized document of page No.10 of Bundle No.4 of A-15 is Annexure seized from the office premises of M/s. DIL. The assessee company at Vadodara recorded the wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of ₹ 1,04,84,609/-. 205. Before CIT(A) it was submitted that the addition is based on a single page which is just a dumb document as it does not contain the name of the person, date and place, his signature and relevance to any person and does not contain any signature of the person who prepared it. The same has not even been identified or accepted of having been prepared by any of the directors/employees of the company. The said paper is in no way connected to the assessee company. Relying on various decisions it was submitted that addition based on a dumb document is not sustainable. 206. However, the Ld.CIT(A) was also not satisfied with the explanation given by the assessee and upheld the action of the AO by observing as under : 6.2 I have considered the submission made by the appellant and perused material on record. The seized document from the office premises of the appellant at Vadodara records the details of the expenses amounting to ₹ 1,04,84,609/- written under different heads as under : Sr.No. Detail Amount (Rs.) 1 Cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2891TR (AT) 50 Pune) that it cannot be said that the document is a dumb document even though it does not contain assessee's name and that the statement recorded u/s 132(4) can be used in evidence in block assessment in the context of fact found in the search. Loose papers unlike bound books are generally not to be a basis for ready inference of concealment of figures found in them, but it cannot be said that they are totally irrelevant, if they have something to connect them with the assessee s business. The inference drawn in the case is on fact. Sec.132(4A) which raises a presumption of legality of documents found, would mean that they cannot be totally ignored. 6.4 In view of the above fact the addition made by the Assessing Officer is upheld and the grounds of appeal No.4 raised by the appellant is liable to be dismissed. 207. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 208. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case during the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the statement of the Chief Executive of the assessee company Shri Ajith Jain was recorded on oath u/s.132(4) of the I.T. Act wherein he has stated that these expenses relate to the Delhi office of the assessee company which are not recorded in the regular books of account, therefore, the presumption will be against the assessee especially when the paper is seized from the office premises of the assessee. We further find the CIT(A) while upholding the addition made by the AO has relied on the decision of the Pune Bench of the Tribunal in the case of Dhanvarsha Builders and Developers Pvt. Ltd. (Supra). The Ld. Counsel for the assessee could not give any satisfactory explanation to controvert the findings given by the CIT(A) or the decision relied upon by him. Since the order of the CIT(A) in our opinion is justified under the facts and circumstances of the case, therefore, we do not find any infirmity in his order. Accordingly, the same is upheld and the ground raised by the assessee on this issue is dismissed. 209. In the result, all the appeals filed by the Revenue are dismissed and the all the appeals filed by the assessee are partly allowed. Order pronounced in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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