TMI Blog1999 (11) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... lready been dismissed by us on the short ground that the appeal against order under s. 154, even if such an order related to block period assessment, was not maintainable directly before Tribunal. 2. In relation to the 'block assessment order' referred to above, the assessee initially came up with a petition for stay of the demand which contained an additional prayer for early hearing of appeal also, and the same was disposed of vide order dt. 23rd Feb., 1999, whereby the prayer for stay of demand was accepted subject to certain conditions. Against the said order the assessee filed a writ petition before the Hon'ble Allahabad High Court which disposed of the same vide order dt. 27th March, 1999, concluding part of which reads as under: "The learned counsel for the petitioner submitted that the appeal itself may be disposed of expeditiously. The petitioner can approach the Tribunal, directly submitting the application for disposing of the same as early as possible. The Tribunal shall fix the date for hearing of the appeal as early as possible." Later on the assessee moved a petition before the Hon'ble Supreme Court also which passed an interim order, grating unqualified stay o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 158BC (Chapter XIV-B of the Act) could be passed. (b) The assessment order, at any rate, did not reflect independent exercise of mind of the AO (in passing the order) as he was being continuously influenced and guided by the parallel proceedings as had been taken up by the DDI Wing, through examination of various persons (for which the DDI, Wing did not have the power, after the search under s. 132 had been concluded). (c) The manner in which search was actually conducted, particularly at the business premises of the appellant was neither proper nor in conformity with the rules laid down by the Department itself. 6. As far as the first aspect which, according to the learned counsel for the appellant, effects the very assumption of jurisdiction by the AO to pass block assessment order in the case of the appellant, is concerned, elaborate arguments were made by the learned counsel for the appellant with reference to various case laws (gist of which has been placed at APB 95 and 96). The sum and substance of the argument put forth by him is that the notice under s. 158BC, which confers jurisdiction on the AO to pass block assessment order in search cases, is like the notice und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eat any person connected with the management of the company as its principal officer, by serving a notice of his intention of treating him (such person) as principal officer of the company, as required by the provisions of s. 2(35). The notice in the present case, is neither addressed to the principal officer of the company nor any notice has even been served on any of the three directors connected with the management of the company, by treating any one of them as 'principal officer' of the company. Mere service of the notice dt. 12th Dec, 1996, on Sri Vijay Kumar Agarwal (the Department in its paper book has mentioned that notice had been served upon the main director of the company Sri Vinod Kumar Agarwal) was not enough to meet the requirement of law. Thus, the said notice cannot be said to have been either addressed to the company or served in accordance with the provisions of law. 8.1. According to the learned counsel for the appellant the said infirmity was much more pronounced in the instant case because of vagueness even in the text of the notice whereby company was required to include in its return the undisclosed income of various "persons" each one of which constitutes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him is invalid for any reason the entire proceedings taken by them would become void for want of jurisdiction. In the notice issued under s. 34 the ITO sought to reopen the assessment of the assessee for the asst.yr.1948-49 but in fact he reopened that assessment of the year 1949-50. Hence, in our opinion, the High Court was right in holding that the notice in question was invalid and as such the ITO had no jurisdiction to revise the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make an assessment on a particular assessee. In this view of the matter, in our opinion, the Tribunal has been right in holding that the assessment in question was not valid in law. (iv) Madan Lal Agrawal It is now well vs. CIT (1983) 32 settled, and we CTR (All) 179 : do not consider (1983) 144 ITR 745 it necessary to (All). advert to numerous authorities in this regard cited at the Bar, that issuing of a valid notice to the assessee under s. 148 of the IT Act within the period specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedural requirement, it is a condition precedent to the initiation or proceedings for assessment under s. 34. If no notice is issued or if the notice issued is shown to be invalid, then the proceedings taken by the ITO, without a notice or in pursuance of an invalid notice, would be illegal and void, [See Narayana Chetty Anr. vs. ITO]." (vi) P.N. Sasikumar We have already held Ors. vs. CIT that the issue and (1988) 69 CTR service of a notice (Kar) 78 : (1988) under s. 148 is a 170 ITR 80 (Kar). condition precedent or a matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er case laws also which we shall deal at the appropriate place. He very forcefully pleaded that the notice under s. 158BC was wholly valid and various irregularities/infirmities (as have been pointed on behalf of the assessee) were either non-existent or were of no consequence whatsoever and, in any case the same should be treated to be protected and cured by the provisions of s. 292B of the Act. 9.2. The notice in this case was duly addressed to the company and was served on one of its directors, namely Sri Vijay Kumar Agarwal. He clarified that in the Department's paper book the name of the director on whom the notice has been served, was wrongly mentioned as Vinod Kumar Agarwal, it should have been Vijay Kumar Agarwal, which should be treated to have been corrected. As the notice has been duly addressed to the company, it was not necessary that it should be addressed to the principal officer of the company and this was more so in the present case when the notice found its way directly into the hands of one of the directors of the company who was concerned and entrusted with the day-to-day management of the assessee-company. 9.3. He further submitted that the notice under s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in the business of manufacturing of CTD bars, colloquially known as "saria" and the date of commencement of commercial production is 22nd June, 1995. Thus, at the most the asst. yr. 1995-96 when the company was in the stage of constructing its factory building and installation of plant and machinery and the asst. yr. 1996-97 (when the company started production) could be roped in, in the block period. As per the Panchnama the search operation commenced at 8.30 AM on 3rd Sept., 1996, and got concluded on the same day at 6.15 PM after preparing the inventory of the stocks worth several crores (as per the estimates of the authorised officer) and other material found during the material seized during the course of search operation. Thereafter the assessee was served with a notice dt. 12th Dec, 1996. (copy from the 'original' of the notice is at p. 88 and typed copy thereof at 89 of APB) in the following manner: "NOTICE UNDER S. 158BC OF THE IT ACT, 1961 PAN/GIR No.: Block Period: The previous year relevant to ten assessment years preceding the previous year 1996-97 and including the period upto the last date of search warrant executed in your case upto 3rd Sept., 1996, (As de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8BC is akin, analogous and within the same parameter, as a notice under s. 148 and therefore, the grounds on which a notice under s. 148 can be held to be bad in law are sufficient to hold a notice under s. 158BC as bad in law." Our said view gets fortified by the specific provision as have been inserted in terms of the proviso to cl. (ii) of sub-s. (a) of s. 158BC, which reads as under: "Provided that no notice under s. 148 is required to be issued for the purpose of proceedings under this chapter." Thus, the legislature in its wisdom thought it fit to dispense with the requirement of issuing notice under s. 148, in the search cases covered by s. 158 BC. This is enough to support the plea that the notice under s. 158BC is at pari materia with s. 148, in so far as the matters related to issuance of such notice and service thereof are concerned. 14.1. The learned Addl. Standing Counsel made a valiant effort to distinguish the case of Monga Metals (P) Ltd. by referring to various case laws which, in our considered opinion fail to persuade us to deviate from the view taken by us in the abovementioned case, in view of the following analysis of the said case laws (referred to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to have been served on the secretary of the managing director who was principal officer of the company and the company had acknowledged receipt of such notice subsequently as may be seen from the following: "In the present case, there is no such infirmity. Service must be deemed to have been effected on the principal officer, namely, the managing director through his secretary who was authorized to receive such notices or, at any rate, the receipt by him had been acknowledged on behalf of the company subsequently. A notice under s. 34 of the Act must no doubt be served, if the assessee happens to be a company, on its principal officer." This admittedly is not the case here. Sri Vijay Kumar Agarwal was never intended to be treated as principal officer of the company, by the AO. Therefore, service on him cannot be treated as to be the service on the principal officer of the company and on that basis it cannot even be argued that the notice having been served on the principal officer of the company, it was not necessary that it should be addressed also to the company. Moreover, in the present case the company has been disputing the validity of such notice as may be seen fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aling with a return of income filed by a company which had not been signed by the managing director thereof. The assessee's case was that it was just as a defective return and validity thereof should not be affected in view of the provisions contained in s. 292B. The assessee's plea was rejected and the Hon'ble Court even went to hold that: "Sec. 292B has been inserted to provide against purely technical objections without substance coming in the way of the validity of the assessment proceedings. In the instant case, the original return was invalid as it was not signed and verified by the person competent to do so." Obviously, reliance on this decision is misplaced by the Revenue. On the other hand it goes to support the assessee's case that the s. 292B is not meant to cover all omissions/defects even if such omissions/defects go to affect the assumption of jurisdiction to initiate proceedings under the Act. (iv) Sardar Harvinder Singh vs. Asstt. CIT (1998) 144 CTR (Gau) 626 : (1998) 227 ITR 512 (Gau). In this case the Hon'ble Court was dealing with a notice under s. 148, validity of which was disputed on the ground that the said notice by itself did not contain the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been listed at the footnote of p. 1216 itself. The relevant portion appears at p. 230 of the said report which reads as under: "The language of s. 34 makes it clear that the issue of notice as contemplated by s. 34(1) is a jurisdictional step without which the further proceedings would be rendered null and void. It is not quite true to say that once a return has been filed no useful purpose would be served by the issue of a notice. Even if the object of a notice is to require the assessee to file a return and he has already filed one, it cannot be said that there is no further object to be served by a notice. A notice is required to be issued as a preliminary to a proceeding to assess under s. 34(1) and the issue of it puts the assessee on guard by warning him that the proceeding is under s. 34 and not under s. 23. In certain circumstances a notice contemplated by s. 34(1) cannot be issued by an ITO at all and, if it cannot issue, no assessment order can be passed. If the requirement of a notice is dispensed with there would be nothing to prevent his passing an assessment order even in the absence of these circumstances (by the proviso to the provision only the issue of a noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion is that: (i) notice under s. 158BC is not merely a procedural requirement but a condition precedent for assuming jurisdiction to pass block assessment order under Chapter XIV-B; (ii) any infirmity/illegality in the notice under s. 158BC, go to the very root of the assumption of jurisdiction to pass an order under s. 158BC and thereby to the very validity of the assessment order itself; (iii) in the case before us the notice dt. 12th Dec, 1996, is invalid and it does not meet the requirement of a valid notice; the grounds being as under: (a) the notice has not been addressed to the principal officer as required under s. 282(2) of the Act; (b) status in which the return of the so-called undisclosed income was required to be furnished, has not been mentioned; (c) otherwise also the notice is vague and from this notice it cannot even be inferred as to the "person" who has been required to file the return for the reason that the addressee mentioned in the said notice has been required on one hand to 'prepare a true and correct return of your total income' and at the same time to include in such income, 'the undisclosed income in respect of which "you" as individual/HUF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been taken by the appellant in this appeal. 17.2. Sri S. Chopra the Addl. Standing Counsel seriously objected to this plea, mainly on the ground that after having withdrawn the ground relating to validity of search (Ground No. 3.2) the assessee is debarred from taking this plea and it should be treated to be of no consequence so far as the present appeal was concerned. 17.3. After hearing both the sides we are of the opinion that the ground, irrespective of the merits thereof on which we reserve our comments at this stage, does not have any bearing on the validity of assessment and therefore, so far as the otherwise validity of the assessment as a whole is concerned the plea therefore, rejected at this stage. 18.1. The very validity of the assessment order as a whole has been challenged by the assessee's counsel on the basis of another ground that the order (that has been impugned before us) did not reflect independent exercise of mind by the AO and while passing the said order he was guided rather influenced by the extraneous exercise that was being continuously carried on by the DDI wing, even after conclusion of search on 3rd Sept., 1996, itself. He placed before us t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract from notice dt. 23rd July, 1997, APB 100] 18.3. Counsel further submitted that eventually in the impugned assessment order these statements have been extensively referred to and relied upon for making an addition of Rs. 77,34,961 in the asst. yr. 1997-98, on account of alleged suppression of production and sale. Such suppressed production and sale in the asst. yr. 1997-98 has been referred to by the AO, while estimating the requirement of working capital also for the business alleged to have been done outside the books of account. Thus, the assessment has not been made, as a result of independent exercise of mind by the AO, but is based on the instructions continuously given by the DDI Wing and, therefore, such an assessment was bad in law. In support of the said submissions, he referred to the decision of Hon'ble Supreme Court in the case of Sirpur Paper Mills Ltd. vs. CWT (1970) 77 ITR 6 (SC), CIT vs. S.P. Jain 1972 CTR (SC) 443 : (1973) 87 ITR 370 (SC) and a number of other decisions as rendered by various Benches of the Tribunal in the specific context of search and seizure case including the order in the case of Monga Metals (P) Ltd. to which both of us were parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case the AO cannot be said to have been influenced by any advice or 'dictate' of the DDI Wing, which could be said to be having any bearing on validity of the assessment order. 18.5. We have carefully considered the arguments put forth before us on behalf of the assessee as well as the Revenue. We are unable to agree with the learned Addl. Standing Counsel that even after carrying out search and seizure operation the authorised officers continue to have jurisdiction in the case of "person" who has been subjected to search and seizure operation and have therefore, the authority to call for the witnesses, examine them, record their statements and/or collect other information and pass on the same to the AO having jurisdiction in the case, for passing block assessment order. The issue had already come up for consideration before us in the case of M/s Monga Metals (P) Ltd. and after in-depth analysis of various provisions we have held as under: "27. As far as jurisdiction of authorised officer referred to in s. 132 of the Act is concerned we would like to consider relevant provisions as contained in s. 132 and are as under: "Search and seizure 132 (1) where the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the above provisions, it is evident that: (i) An authorised officer is a person who has been authorised, to carry out the search action and exercise the powers vested under s. 132, by the appropriate authority referred to in sub-s. (1) of s. 132; (ii) In view of the provisions of sub-s. (4) it is the authorised officer alone who can examine any person present at the place of search and is found to be in possession or control of any books of account, document, money, bullion, jewellery or other valuable articles or things. (iii) In view of the provisions of sub-s. (8) the authorised officer is entitled to retain the assessee's seized material for a period of 180 days and in case he wants to retain the same material for more than 180 days he has to record reasons and seek the approval of the CIT/Chief CIT. (iv) Contrary to the provisions of sub-s. (4) if the authorised officer has no jurisdiction over the person in whose case search has been carried on as a result of authorization under s. 132(1)(a),(b) and (c) then the seized material as well as the assets have to be handed over to the ITO having jurisdiction over the person in whose case search has been conducted, within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in the provisions of s. 132(9A), over the assessee and, therefore, under these circumstances, the only option left with the said authorised officer for the purpose of search and seizure was to hand over the seized material and assets to the ITO having jurisdiction over the assessee's case and not to anybody else, but in the present case the seized material has been handed over to the Asstt. CIT, Central Circle for making the assessment for the block period under s. 158BC of the Act, who was an authority (ACIT) not referred to in the provisions of sub-s. (9A). 29.2. Under these circumstances we are of the opinion that such an act has vitiated the assessment and the same has to be declared void ab initio for want of jurisdiction. 29.3. Even otherwise, recording of statement of Mr. Madan Hada by the said officer (ADI) on 8th Nov., 1996, lends to show that till that date the documents were retained by the authorised officer, which was in violation of provisions of s. 132(9A) and therefore, the reports as a result of examination of such unlawful retention of record or the statement recorded cannot be made the basis of the assessment". 18.6. Now comes the issue as to what is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These papers have been placed at pp. 1 to 7 of DPB and have been referred to on pp. 14 and 15 of the assessment order (Reference to page numbers is from the typed copy of the assessment order at pp. 1 to 46 of APB), in the following manner: "(A) Asst. yr. 1996-97 Unaccounted sale of C.T.D. bar during the period relevant to asst. yr. 1996-97 has been found in seized document LP-2. From page Nos. 21 to 23 of this Annexure, details of C.T.D. bars are given from 24th Nov., 1995, to 11th March, 1996. On all these 3 pages and on their back, total sale of 571.025 MT for 70,31,537 is recorded. Further on page No. 27 of this seized record, receipt of amount in cash has been shown. These amounts are in lacs. Total receipt of 43 lacs have been shown on this paper. These receipts appear to be against the above mentioned unaccounted sale of C.T.D. bars, On page Nos. 36 to 38 of this Annexure again details of unaccounted sale of C.T.D. bars in November and December, 1995, has been given. These sales have already been found recorded from page Nos. 21 to 23 as discussed above. On top of page No. 36 V.V.S. is written clearly showing that these sales belonged to M/s V.V.S. Alloys Ltd. Sales on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) Stores 1,93,458 9,70,352 (ii) Misc. exps. 27,000 (iii) Salary 1,28,301 3,48,759 -------------------- Net Profit worked out 6,21,593 The assessee's reply with reference to the said loose papers is at p. 179 of APB. Reliance was also placed on the assessment order in the case of Vandana Steels Limited (which were subjected to search-APB 188 to 192, in the matter of application of GP/NP rate. As per the assessee, the calculation of GP has been given in p. 196 to APB. 21.1 The learned counsel for the appellant vehementally opposed the conclusion drawn by the learned AO. It was contended that the said loose papers (found from the resident of the directors) had nothing to do with the business of the appellant. No presumption could be drawn against the appellant company as the said papers were not found from the business premises of the appellant. The name of V.V.S. as found mentioned on some loose papers merely refers to the names of 3 directors, Viz. Shri Vijai Kumar Agarwal, Shri Vinod Kumar Agarwal and Shri Sanjai Kumar Agarwal. The said papers remained wholly uncorroborated. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent has been adopted in the case of M/s Vandana Steels (P) Ltd. in their search assessment for asst. yr. 1995-96. A copy of their assessment order is enclosed herewith. No addition is therefore, justified. Without prejudice the addition proposed is high, arbitrary and without any basis. 21.2. Alternatively, it was submitted that according to the observations made by the AO himself as against the sale figures of Rs. 70,31,537 between the period commencing from November, 1995 to March, 1996 (covered by the said loose papers) the realisation was only Rs. 62,79,072 which meant that there was an overall loss of Rs. 7,52,465 (Rs. 70,31,537 - Rs. 62,79,072). Therefore, if seized material referred to by the AO is presumed to be the record of unaccounted sales, there was no undisclosed income as the said very papers revealed a loss of Rs. 7,52,465 in the alleged transaction of sale. 21.3 Without prejudice to all these submissions yet another plea was taken by the learned counsel for the appellant. As per the discussions appearing on pp. 41 to 43 (assessment order typed copy of which appears in the APB), the net profit rate of 13.8 per cent has been applied, subject to certain deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nothing but the records of sales made by the appellant company. As such sales are not verifiable from the regular books of account, the same had rightly been treated to be the unaccounted sales outside the books of account. As regards ownership over the said loose papers, Sri Pratap Singh took pain to point out that most of the loose papers were superscribed with "V.V.S." which is the name of the company. The said loose papers cannot be said to be related to any individual business of the directors as any information about the independent business activities of the three directors in this very line of business was neither available in their respective income-tax records nor found during the course of search. 21.5. As regards alternate claim of the appellant that the said loose papers did not go to show that the appellant had earned any income in the transaction recorded therein but there was a loss on account of short realization, Sri Pratap Singh submitted that there was no question of any loss particularly when the corresponding business as recorded in regular books of account showed a profit. It was possible that complete records of loose papers might not have become availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "undisclosed income" is addable in the block assessment of the appellant. It has been found by the AO himself, on the basis of the said loose papers that against the sale of Rs. 70,31,537 during the period from November, 1995 to March, 1996, the receipts were only Rs. 62,79,072 which shows a shortfall of Rs. 7,52,465. No information is available which could go to show that the shortfall is represented by sundry debtors. No such information was available in the seized material, nor the AO himself has been able to collect any information in this regard. At least nothing has been brought on record, nor shown to us. Considering the definition of the term undisclosed income, as given in Chapter XIV-B which is reproduced hereunder for the sake of ready reference. "(b) 'undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry is books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------------------------------- April, 1996 2,883.519 3,31,60,466 Rate 11,500/MT May, 1996 2,722.906 3,26,74,872 Rate 12,000/MT June 411.440 57.04,187 July, 1996 Aug., 1996 144.470 20,94,815 As found on pp. till date 50 51 of LP/2 of search rate 14,500/MT ----------- ----------- 6.162.335MT 7,36,34,340 mentioned as 7,36,46,274 ---------------------------------------------------- Detailed working at APB Pages 26 to 30 (working at p. 30 based on assumption) Pages 16 to 26 (2891,26(-) as per books 168.354) working at p. 25 Pages 30 31 Pages 31 to 34 ---------------------------------------------------- (B) Computation of profit ------------------------------------------------------------- (i) Undisclosed turnover worked out at Rs. 7,36,44,274 (ii) G.P. rate-Purchase and sale of 15.73% material-variation (iii) Gross Profit @15.73 Rs. 1,15,84,244 Less : Deduction for following expenses By app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n support of the contention that the company did not carry out the said manufacturing. As regards p. No. 31 of LP6, it has wrongly been taken to be containing loading details of 752.61 MT of CTD bars said to have been despatched outside the books of account. Sri Garg took pains to show that the quantities mentioned against various truck numbers is as little as .020 MT which cannot be the figure of loading for the purpose of despatches and sales outside the books of account. Very rarely, the figures mentioned in the said loose papers marked the quantity of the full truck. In fact the company had a very big campus within which handling of goods takes place very often for the sake of proper stacking, etc. The said loose papers could not have been treated to be a material to support the conclusion that: (a) the assessee-company suppressed its production; (b) such production had even been sold also outside the books of account; and (c) a part of such sales outside the books of account were reflected in the loose parcha No. 31 (said to containing the loading details of 752.61 MT of saria). May, 1996 24.2. During the course of search some diaries were found which are stated to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out by them for different principals, they had been taking assistance of Sri S.D. Verma, an employee of the company and it was for this reason that the said diaries were found at the premises of the appellant during the course of search operation. It was also submitted that the appellant did not have the capacity to produce this much of CTD bars (saria). As regards the loose paper No. 41 of LP-6, it was claimed to be belonging to Sri Jabbar Singh contractor who had been carrying out the job of twisting of C.T.D. bars (saria) on piece meal basis at different places. He had brought the said paper to show to the directors of the appellant company, his performance elsewhere. In support of this contention the appellant filed an affidavit from Sri S.D. Verma, copy appearing at p. 183 of the APB and also an affidavit from Sri Jabbar Singh. Sri Jabbar Singh was produced before the AO on 25th Sept., 1997, when his statement was also recorded. In his statement he clearly stated that the seized papers (41 of LP-6) did not belong to the appellant company but it belonged to some other rolling mill. The said paper contains the details of twisting done by him for some other mills and it had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,643 350 -------- 6,293 -------- Ambika Contt. 578.910 MT @ 37 23,395 632.285 Ad. 19,000 6 Lab. @ 35 4,395 210 -------- 4,785 -------- Mukesh Twisting 96.860 MT @37 3,583 Shifting 3 MT @ 10 30 7 Lamp 7D/work 35 245 Cylinder loading unloading 50 -------- 3,908 AD 2,000 -------- 1,908 Bhura Contt. Challa 12.372 MT @ 400 4,948 Tak Lab Balance 490 Milling 4 days 28/5 to 31.5 1,000 -------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44,44,000 received from different persons are given. Taking into consideration the page Nos. 46,47,50 and 51 of LP-2, it has been found that total sale of CTD bars (saria) carried cum in the month of June and July, 1996, is of Rs. 57,04,042. Necessary verification from the books of account of the assessee-company was made to verify the above sale, however, these sales were not found recorded in the books of account. Therefore, the sale amount of Rs. 57,04,042 found on these seized papers are treated as unaccounted sales of the assessee-company. 25.6. The learned counsel submitted that the writings on the said loose parchas could not have been treated to be the unaccounted sales of the appellant. There was no corroborative evidence which could go to show that the appellant carried out any such production, as for carrying out such production there is a requirement of raw material and other inputs. No materials was found even during the course of extensive search which could even remotely suggest that the appellant company had made any purchase of raw material and other inputs which remained unrecorded in the books of account and which could provide for the source of extra producti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he form of datewise statement prepared by Jabbar Singh which too was found during the course of search, marked as paper Nos. 32 and 41 of Annexure LP-6 has been referred to by the AO in the assessment order. The statement of Jabbar Singh does not inspire confidence as no reason whatsoever, much less a valid reason, could be given by him in his statement, about the recovery of the said statement from the possession of directors of the company. To a pointed question made by the AO (who recorded the statement of Sri Jabbar Singh) as to whom the said statement belonged, he could not even tell the name of the concerned rolling mill. Loading contractors to whom the diaries have been stated to be belonging, were not even produced till as late as 22nd Sept., 1999, Sri S.D. Verma and employee of the company, who had verified these diaries was not produced for examination. 25.11 Similarly for the month of April, 1996, although loading details showing unrecorded despatches found during the course of search were incomplete, yet from the working given by the AO at p. 30 (APB) of the assessment order the conclusion of the unaccounted sale gets confirmed. As regards the remaining months startin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sd/- POA" It was again pleaded that the addition was not maintainable either on facts or in law and in any case the same got wholly vitiated as it had been made at the behest of and under the instructions of the DDI Wing. 27.1. We have carefully considered the rival submissions. First of all we shall deal with the objection with regard to the very legality of the addition. It has not been disputed from the side of the Revenue and in fact it could not have been, in view of the letter dt. 23rd Sept., 1997, written by the AO himself, to the appellant company, copy appearing at pp. 98 to 101 of APB, relevant portion of which has already been reproduced by us in para 18.1 hereinfore. This goes to show that even after the search operation the DDI Wing continued to record statements of various persons at its own and passing on the same to the AO. Not only this, the AO has fully utilized the same, while making the addition. In our order dt. 30th June, 1999, the case of Monga Metals Ltd. we have already taken a view that the assessment if it is found to have been influenced by any other authority even if i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8BD, yet he issued notices to all the appellants under s. 158BC directing them to file return for the block period for income including UDI (undisclosed income). The appellants initially did not file such return contending that there was no UDI. However, ultimately they filed return after expiry of prescribed period. The AO after scrutinising seized materials and obtaining details/clarifications from appellants, made assessment for the block period determining respective UDI on 31st March, 1997. On appeal, the appellant assessee sought quashing of assessment orders on ground that: (1) search operations having been conducted on 30th Aug., 1995, according to s. 158BE assessment framed on 31st March, 1997, were barred by limitation; (2) that the AO did not act independently in making enquiries and in framing the impugned assessment but was greatly influenced and carried by the directions/instructions issued by DDI (Inv.) through appraisal report (3) that the CIT had given approval to the draft assessment orders without hearing the assessees and without giving or recording any reasons in the approval order, thereby violating the norms of natural justice, and (4) that there was no UD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1970) 77 ITR 6 (SC). In this case the Hon'ble Supreme Court while considering the scope and instruction and directions of CBDT as contemplated by s. 13 of the WT Act has held as under: "The orders, instructions and directions of the Central Board contemplated by s. 13 of the WT Act, 1957, may control the exercise of the power of the officers of the Department in matters administrative but not quasi-judicial. The proviso to the section does not imply that the Board may give any directions or instructions to the WTO or to the CWT in the exercise of his quasi-judicial functions." Accordingly, where, in certain applications for revision under s. 25 of the WT Act, 1957, from the inception of the proceedings, the CWT put himself in communication with the Central Board and so brought instructions from the Board as to how the revision applications filed before him should be decided and exercised on independent judgment in passing his order thereof, the Supreme Court, in appeals by special leave under Art. 136 of the Constitution against his order, set aside the order passed by the CWT and directed that the revision applications be heard and disposed of according to law and uninfluenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d parcha could not be treated to be containing the details of unrecorded despatches, there remains no evidence which could go to show that the appellant made sales outside the books of account in the month of April, 1996. There is also force in the appellant's contention that another parcha (on the basis of which it has been inferred that the appellant produced 3700 MT of CTD bars in April, 1996) cannot be said to be containing the details of production. The appellant raised specific objection to the effect that firstly the production as stood already recorded in the excise records of the assessee was commensurate with the electricity consumption and secondly the appellant's factory could not have produced so much of the quantity of CTD bars. Apart from huge electricity consumption, the unaccounted production of such level would have required purchases of raw material and other inputs also. No information was available on the record, nor even could be collected after the search, which could even remotely suggest that the assessee made purchases outside the books of account. Therefore, on a consideration of totality of facts and circumstances of the case and a thorough perusal of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 885.815 -------- Now the question remains as to what inference should be drawn with reference to the said quantity of 885.815 MT. It remains undisputed that the said quantity is over and above the despatches recorded by the appellant in its books of account. The only inference that follows from this, is that the said loading represented unrecorded sales. By applying a rate of 12,000 per MT as has been done by the AO himself, the sale value shall work out to 1,06,29,780 (885.815 x 12,000). This would be treated as unrecorded sale for the month of May, 1996. 28.3. As far as the remaining period is concerned, the undisputed position is that loose papers were found from the possession of the directors, containing various entries which cannot be anything but sales effected by the appellant company. Such sales having not been found entered in the books, the same would be treated as unaccounted sales effected during this period. Thus, the figures of unaccounted sale of Rs. 7,36,44,274 (as worked out by the AO) would be substituted by the figure of 1,84,28,782 as worked out hereunder: -------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of working capital requirement in the business alleged to have been done outside the books of account. During the course of assessment proceedings and in pursuance of his observation about the undisclosed business activities of the appellant company, the AO required the assessee in terms of his notice dt. 13th Sept., 1997, to show cause as to why the requirement of working capital in both the years be not estimated at Rs. 81,65,572 and Rs. 75,00,000 for the asst. yrs. 1996-97 and 1997-98 as worked out by him on the basis of pattern of working capital requirement said to have emerged as per the disclosed version in the asst. yr. 1996-97 and addition for the same be not made to the "undisclosed income" of these two years. The appellant responded to the said query vide its letter dt. 22nd Sept., 1997 and gave detailed working to demonstrate that even if some business activities are held to be carried on outside the books of account still there would not be any requirement of working capital. A chart was submitted to show that the business activities are held to be carried on outside the books of account still there would not be any requirement of working capital. A chart was submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t raised a legal objection also, to the effect that in order to make any such addition, it has to be shown that the appellant company had made investment also in purchases of raw material and other inputs. The onus was on the Revenue which raised an allegation about the undisclosed business activities, to show that there was investment also in purchases, source of which remained unexplained. The point at issue, according to the learned counsel for the appellant, is squarely covered in favour of the assessee, by the decision of the Hon'ble Allahabad High Court in the case of Ashok Kumar Rastogi vs. CIT (1991) 100 CTR (All) 204. 32. In reply Shri Chopra submitted that it was unthinkable that there would be no requirement of capital for the business done outside the books of account. The seized material unmistakably pointed out that the appellant carried substantial business activities outside the books of account. The AO has already given margin for the factors like quick turnover and the turnover made in cash. Looking to the fact that the turnover outside the books of account for the asst. yr. 1996-97 has been estimated to be of the order of Rs. 70.31 lakhs and for the period of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determining the undisclosed income on account of so-called working capital, was a result of pure guess work and findings are based on conjecture and surmises without there being any evidence or material in support thereof consequently the undisclosed income of Rs. 17,00,000 is to be deleted." Respectfully following the jurisdictional High Court's decision and also for the sake of consistency we direct the deletion of undisclosed income of Rs. 25,00,000. Ground No. 4.1(4) and 4.2(2): Undisclosed income on account of Introduction of cash Rs. 75,295 for the asst. yr. 1996-97 and Rs. 18,11,060 for the asst. yr. 1997-98 34.1. The aforesaid amounts have been considered assessee's undisclosed income on the basis of cash book recovered from the residence of the director covering the period from 22nd March, 1996 to 26th Aug., 1996, which disclosed the receipts aggregating Rs. 18,86,355, year, wise break-up of which being as under: Rs. Asst. yr. 1996-97 75,295 Asst. yr. 1997-98 18,11,060 (upto the date of search) 34.2 Copies of the seized material is available at pp. 102 to 197 of the DPB. In response to specific query ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant submitted that at the time of search operation which commenced on 3rd Sept., 1996, regular books of account were found to have been maintained wherein the cost of construction as incurred by the appellant company stood fully reflected at a figure of Rs. 33,67,877. Such books of account, wherein cost of construction has been debited were accepted for the purposes of assessment as could be seen from the regular assessment order for the asst. yr. 1996-97 dt. 15th March, 1999. The search and seizure operation did not reveal or led to the recovery of any information/material which could go to show that the appellant company had incurred any expenditure over and above what stood disclosed in its books of account, (as had been found during the course of search operation). Further, the appellant had duly filed, during the course of block assessment proceedings "valuation pleadings" as prepared by the approved valuer Shri J.N. Dubey. The said pleading, not only contained detailed objections to the application of CPWD rates (as had been done by the V.O. in his report referred to above), but also detailed working of his own estimate. From the cost of construction, as worked out by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of business and the cost incurred by the assessee is debited in such books of account, no addition can be made unless the books are rejected for the purposes of assessment. Reliance in this regard was also place on our decision dt. 30th June, 1999, in the case of Monga Metals (P) Ltd. 36. At this stage, we requested the Addl. Standing Counsel, Sri S. Chopra to produce the Valuation Officer and also to produce before us, the records relating to the issue of Commission by AO as well as the records for transfer of commission by DVO, Kanpur to Valuation Officer Allahabad. For this purpose, hearing was adjourned. On the next date of hearing the Valuation Officer based at Allahabad appeared before us. Learned Departmental Representative furnished the certified copies of Asstt. CIT letter No. ACIT/CC-II/KNP/Monga Group/1997-98, dt. 17th July, 1997, issuing commission in favour of District Valuation Officer, Income-tax Department. Kanpur and DVO Kanpur letter No. RUC/DVO/ITD/KNP/1997-98/339 dt. 22nd/24th July, 1997, addressed to Asstt CIT, Kanpur informing him of entrusting the job of valuation to Valuation Officer Allahabad of his own. From a perusal of the letters, we find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions made before the AO which remained unattended to/unanswered. It was also submitted by the learned counsel for the appellant that the capital cost of the project, which included the investment in factory building also, was financed by the U.P. Financial Corporation Ltd. The 'cost' as incurred by the assessee was within the purview of the financial institution also, which did not find any irregularity in this regard and the stipulated finance was provided. 38. On behalf of the Department, Shri S. Chopra submitted that the report prepared by the valuation cell was based on the authentic rates as declared by the CPWD and such report had rightly been given preference over the assessee's version of cost and even over the report prepared by the approved valuer; the reason being that in the pleading made by the approved valuer there were inherent infirmities inasmuch as he had even gone to estimate the cost, even below the cost declared by the appellant company itself. 39.1. On a careful consideration of the pleadings made before us, we find that the addition of Rs. 18,17,623 is not supported by any valid material or ground. First of all we find serious infirmities in the infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to treat the said 'information' as a 'material', the principle of natural justice demanded that the person supplying the information should have been made available for cross-examination by the appellant against whom the said information was sought to be, and in fact, utilized. This was all the more necessary in the present case where the information sought to have been relied upon against the appellant, had been collected from an unauthorized source. 39.3 To have a clarity of understanding in relation to the ambit and scope of the powers of the AO under s. 131(1)(d), let us go to the relevant provisions contained in the CPC. Sec. 75 of the CPC which provided for the powers of a Court to issue commissions reads as under: "Subject to such conditions and limitation as may be prescribed, the Court may issue a commission: (a) to examine any person; (b) to make a local investigation; (c) to examine or adjust accounts; (d) to make a partition; (e) to hold a scientific, technical or expert investigation; (f) to conduct sale of property which is subject to speedy and natural decay and which is in the custody of the Court pending the determination of the suit; (f) to perform any minist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Court deems a local investigation to be requisite or proper for the purpose or elucidating any matter in dispute, or of ascertaining the market value of any property, or the amount of any mesne profits or damages, or annual net profits, the Court may issue a commission to such person as it think fit directing him to make such investigation and to thereon to the Court: Provided that, where the State Government has made rules as to the persons to whom such commission shall be issued, the Court shall be bound by such rules." A bare perusal of the above rule leads one to infer that purposes like ascertaining the market value of any property, or the amount of any mesne profits or damages or annual net profits, provided for therein are contextually inapplicable for the purpose of ascertaining the cost of construction of a building in relation to which the AO seeks to appoint a Valuation Officer as Commissioner under s. 131(1)(d) of the Act. Once the aforesaid purposes are rule out, there remains the only purpose "of elucidating any matter in dispute" for which the AO can fall back upon the powers of a Civil Court under r. 9, O. 26-CPC which has to be a dispute about any matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction which can be interpreted to give rise to a dispute about the matter of adequacy or otherwise of the amount of the cost of construction. Thus, before a commission or favour of a Valuation Officer can be issued by the AO in terms of s. 131(1)(d), the AO must get himself judicially satisfied about the inadequacy of the cost of construction shown by an assessee. As explained above, the AO can derive the above satisfaction only after he has granted an opportunity to the assessee to explain his investment and has looked into the materials and/or evidence produced by the assessee. It is an established position of law that "no commission can be issued for the purposes of collecting evidence in suit". (Basant Kumar Swain vs. Baidya Kumar Parid Ors. AIR 1989 Ori 118. The Institute of Engineers (India) Anr. vs. Bishnu Pada Bag Anr. AIR 1978 Cal 296). The object and purpose of local investigation under r. 9, O. 26, CPC is to clarify or explain any point which is left doubtful on the evidence on record. Reasons to be recorded before issuing commission under s. 131(1)(d) 39.6. As held by the Orissa High Court in the case of K. Raghunath Rao vs. Smt. Tumula Jailaxmi AIR 1988 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delegates his power or appoints somebody else to be the Commissioner in his place, such an action is bad in law and the consequential report of such delegated/authorized person is without jurisdiction. So far as the present case is concerned, the AO having appointed the DVO Kanpur as Commissioner, it was DVO, Kanpur alone who could carry on the functions of Commissioner. His monetary jurisdiction for the purpose of WT Act or for the purpose of IT Act had nothing to do with his functions as Commissioner meaning thereby that it was only DVO, Kanpur alone who, irrespective of his monetary jurisdiction under the WT Act/IT Act, was the authorised person to exercise the power of Commissioner appointed by the AO and to carry on the functions of such Commissioner. 39.10. In view of these facts and circumstances the delegation of power and functions of a Commissioner by DVO, Kanpur, to Valuation Officer Allahabad and/or appointment of Valuation Officer Allahabad as Commissioner was illegal, bad in law and, therefore, the report of Valuation Officer Allahabad was not a lawful report. 39.11. In view of the above, we are of the opinion that so far as the present case is concerned, the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the construction was carried out, nor such 'information' was available in the records of the Valuation Officer. These are the important omissions, which affect the determination or cost of construction, as worked out by the Valuation Officer. 39.16. Moreover, the CPWD rates as have been applied by the Valuation Officer cannot be said to be relevant for the purposes of estimating the cost of construction and the same cannot be held to be of universal application in each and every case which is referred to the 'valuation cell' at least for following reasons: (1) Cost of construction is the actual expenditure incurred by the owner in constructing the building which comprises of cost of construction material labour components, overhead and miscellaneous unforeseen expenditure. (2) The plinth area rate fixed by CPWD/State PWD are meant for preparing preliminary/approximate estimate with fixed specification and standard quality of material and workmanship. These rates are worked out from the various tenders and cost of completion of different types of building executed by the concerned Departments. This plinth area rate is rough/assessment of cost for obtaining administrative app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot sustainable. The CPWD rates are the representative rates formulated after taking into consideration the rates prevailing in different zones of CPWD spread over throughout the country. In day-to-day practice it is found that the Public Works Department of various states are executing 'works' at a much lower rate. As has been pointed out by the learned counsel for the appellant that Tribunal allowed in a case, reduction in 'cost of construction' by applying UP PWD rates. On a 'reference' made under s. 256(2) the Hon'ble Allahabad High Court, did not find any infirmity in the said approach. Reference is made to the case of CIT vs. Raj Kumar (1990) 182 ITR 436 (All). In any case there is no 'rebuttal' from the side of the Valuation Officer, even during the course of hearing before us, to the plea taken by the 'approved valuer' for not following the CPWD rates. 39.18. Thus from whatever angle we may examine the matter the conclusion is that the appellant's version of construction which is otherwise supported by its books of account which have been made the basis of regular assessment also, has to be accepted. In this situation, the addition on account of alleged unexplained investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the factory premises of V.V.S. Alloys Ltd., stock taking has been done on 3rd Sept., 1996, for which a copy of the Panchnama along with annexure is being shown to you. Do you have any objection to this stock taking? A1. Yes I have objection. The stock is not so much. Q2. What is the basis of your disagreement? A2. On the basis of excise records which have been recorded by me today. Q3. Is there any other basis? A3. No Q4. Are you sure? A4. Yes. Sd/- Vinod Kumar Agarwal 4th Sept., 1996 All that has been said is true and correct to the best of my knowledge and belief. The statement has been given by me voluntarily and without any coercion. I have understood the statement and certify that it is correctly recorded. Sd/- Vinod Kr. Agarwal" 40.2. In the wake of the said search operation the entire stock as inventorised by the authorized officers was put under deemed seizure as per 2nd proviso to s. 132. Immediately after receiving the copy of Panchnama on 4th Sept., 1996 (by Sri V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Oct., 1996, along with copies of various representations referred to above and copies of various letters, telegrams, etc. submitted before DI Wing attached. 153-154 Letter dt. 4th Aug., 1997, (1) About ADI report and working sheet first time shown to the assessee on 31st July, 1997; (2) About mistakes in inventory and bundle of bar taken at 200 Kg as against 100 Kg(approx). (3) Other comparable cases where Department had reinventorised the stock and method adopted by them. 155 Letter dt. 11th Aug., 1997, Explanation of search party and other persons involved in the preparation of stock inventory. 156 Letter dt. 1st Sept., 1997, for examination of Sri A.N. Misra by Sri Tilak, Advocate. 161 to 166 Detail letter about inventory of stock. 176 Position of stock as per books as per inventory-prepared by search party on 31st Sept., 1996, as prepared by excise de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------- 1,93,10,480 ---------------------------------------------------------------- 40.4. Sri S.K. Garg learned counsel for the appellant object to the said addition and in support of his objection he referred to the representations made from time to time, which included the submissions made before the AO during the course of assessment proceedings (all such representations/submissions have been listed in para 1.2 above). The objections taken by the appellant at various stages originate from his grievance that no actual weighment/counting of pieces, bundles, heaps was carried out and the quantities mentioned in the inventory were just estimated ones, which resulted into grave errors which even stare at ones face. For example: (a) The weight of CTD bars which along account for an addition of Rs 1,26,92,658 has been taken as 200 Kg. per bundles whereas, as per the standard practice followed throughout the country, the weight of one bundle of CTD bars (irrespective of the thickness and dimension thereof) varies between 95 Kgs. to 100 Kgs. In support of the said contention certificates from various dealers in this line, aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45.080 ---------------------------------------------------------------- [extracted from letter dt............ APB 212] In support of the receipt of goods from the said parties the relevant documents which included excise gate passes also had been filed before the AO. (e) Exclusion of item belonging to the sister concern M/s V.V.S. Con-Cast Ltd. had wrongly been denied on the ground that the nomenclature of the items as mentioned in the said bills was different than that mentioned in the inventory. It had duly been pointed out before the AO that the items were same and had been procured by the said concerned for setting up its industrial unit. 40.5. It was further emphasised by the learned counsel for the appellant that the so-called working sheets were shown to the assessee for the first time on 31st July, 1997, although the appellant had been making repeated request for making such calculation sheets available to it ever since the search had taken place. This fact itself went to show that no actual counting/measurement was taken and it was only to cover up their own lapse that some sheets in the name of working sheet was hurriedly prepared. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r objection to the process of inventorisation, was the stage when the inventory was being prepared. No such objection was raised at that time. Moreover, the working sheet prepared by Sri Virendra Ojha a responsible officer of the Department and one of the authorized officers in the search goes to show that actual counting/weighment was done. The reason for not making the working sheet as a part of the Panchnama was not vital, as it is not usually done. Shri Ojha in his report has pointed out that while preparing the inventory even zero mistake in the weighing scale was sought to be eliminated by comparing standard weight of certain things (such things have not been specified in the report). He also pointed out that the appellant could not have claimed his records to be truthful as the search operation led to the recovery of large number of incriminating documents connected with business done by the appellant outside the books of account. This was a serious factor which cannot be ignored. He further referred to p. 176 of APB, which is a part of the explanation submitted by the appellant itself during the course of assessment proceedings. The said chart contained the figures of stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the inventory, before DI Wing and kept even the CIT/Chief CIT, Kanpur informed about its grievance. The same remained unattended to. On the face of such repeated representations, the delay in making the calculation sheet and the report of the authorised officer, available to the assessee after more than 10 months had passed, precisely on 31st July, 1997, is also inexplicable. The appellant's argument that the weight of CTD bars had been taken at 200 Kgs. Per bundle was erroneous as the standard weight varies between 95 and 105 Kgs. could also not be met by the learned Addl. Standing Counsel for the Department. On the other hand, as has been rightly pointed out by the counsel for the appellant, the seized material itself contains an evidence to the fact that weight of each bundle, irrespective of its dimension varies between 95 and 105 Kgs. giving an average of 100 Kg per bundle. Certificates/affidavits given by the transporters about the standard weight per bundle, which go to support the appellant's version also remained unrebutted. This irregularity along, which is so glaring and for which no further reference is needed, itself has the effect of diminishing the credibility of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings, copies of which are available in the APB also. The AO while making and addition of Rs. 1.93 crores in round figure has given credit for 2 bills which are under seizure. Looking to the fact that remaining 3 bills were also produced before the AO and such bills were accompanied by excise gatepasses (issued at the end of the suppliers) it would be just and proper to allow credit for all the 5 bills (instead of 2 bills for which credit has already been allowed by the AO) from the quantity working out by the excise Department as per Panchnama dt. 6th Sept., 1996, particulars of which have been given above. On doing such an exercise, the value of excess stock works out to Rs. 19,70,040 as per the working given below: -------------------------------------------------- Rs. Value of excess stock as worked out by the excise department 27,76,456 Deduct: Proportionate value of Steel ingot weighing 77.54 Mt as covered by 5 bills 20,31,536 x 77.54/195.34 8,06,416 ----------- Say 19,70,000 ------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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