Delhi High Court
Patni Chemicals Ltd. vs Asstt. Cit on 28 November, 2003
Equivalent citations: (2004)91TTJ(DEL)228
ORDER
R.K. Gupta, J.M.:
These are two appeals, one by assessed and one by department and a cross-objection by assessed for block period 1-4-1988 to 17-3-1999.
2. In the cross-objection filed by the assessed, which is in regard to challenging the legality of provisions of section 132(l) while completing assessment under section 158BC of the Act, was not pressed by the counsel of the assessed. Therefore, the cross-objection of the assessed is dismissed,
3. Now we will take the appeals in case of assessed M/s Patni Chemicals Ltd. in IT(SS)A No. 108 (by assessed) and IT(SS)A No. 233 (by department). The brief facts, as stated in the order of the Commissioner (Appeals) are as under :
“The facts in brief are that, as stated above, the assessed has been carrying on the business of manufacturing and sale of calcium carbonate since its very inception from its factory situated at Patni, Chikana Road, Distt. Saharanpur. Its registered office is also situated at village Patni. It has been filing return regularly right from the assessment year 1992-93 showing losses year after year and the same has been assessed also as such. At the fag end of the financial year 1998-99, precisely on 17-3-1999, search operations took place in terms of warrant of authorization issued by Director of IT(Investigation), Kanpur. The said search operations not only covered the factory premises as aforesaid but also residential premises of its directors, namely, Shri Nand Kishore Goyal, Shri Rakesh Goyal (son) and Smt. Parul Goyal. The books of accounts and other records were partly found from the office of the company at village Patni and some books of accounts and other records were found at the premises of Thrill Hotel (P) Ltd. wherein also, all the 3 persons mentioned are the directors. During the course of search operations at the factory premises the authorized officer sealed a steel almirah, as the key of the said almirah could not be made available. Later on, the said almirah was opened. The contents of the said almirah were inventorised and a Panchnama was prepared in the name of the company. As per this Panchnama, various invoices, challans etc. (as found kept in the said almirah) were seized. On 17-3-1999, itself. Another search was carried out at the premises of M/s Thrill Hotel situated at Court Road, Saharanpur. The 3 directors of the assessed- company are also the directors of the Thrill Hotels (P) Ltd., besides some other persons, namely, Sri Arvind Gupta, Sri Naresh Goyal and Smt. Geeta Goyal are also directors in this company. In the Panchnama prepared in the name of the said company some of books of accounts and other records of the assessed’s company, which is the appellant before me were also found and seized. The seizure so made included a ledger marked as B-29. In terms of the said Panchnama itself, some loose papers which have been marked B-19 were also seized. Some loose papers containing invoices marked as LP-18 were also found.
4. In the wake of the said search operation a notice under section 158BC was issued by the Dy. CIT Investigation Circle, Dehradun. In compliance with the said notice, the appellant filed a return on 30-5-2000, showing the undisclosed income of Rs. 6,31,200 as against the income so shown in the block return, the block assessment was made on 29-3-2001, at an income of Rs. 1,22,88,759. Broadly speaking the said income is made up of the following :
(a) Addition on account of undisclosed income on account of manufacturing and sale of calcium carbonate outside of the books of accounts, as revealed by the ledger (B-29), B-19 and LP-18 as referred to above.
Rs.
48,00,000
(b) Opening balance as per B-29 28,73,759
(c) Depositing of bank account No. 4515 with Oriental bank of Commerce, Ambala Road, Saharanpur 42,15,000
(d) Bid money payment 4,00,000 1,22,88,759”
3.1. The assessed preferred appeal before the Commissioner (Appeals) against the additions made by the assessing officer, as discussed above. The detailed written submissions along with other copies of material found during the course of search were filed before the Commissioner (Appeals). The Commissioner (Appeals) sought remand report from the assessing officer and the assessing officer has filed the remand report. On behalf of department, Shri Y.B.P. Singh, Asstt. Commissioner, was also present during the course of hearing before the Commissioner (Appeals). After that the Commissioner (Appeals) discussed the issue item-wise at great length and then allowed the appeal of the assessed in part. The Commissioner (Appeals) reproduced the submissions filed by assessed and thereafter the objection of the assessing officer and after considering the arguments of assessed and written reply on behalf of the assessed and the arguments of the Asstt. Commissioner, Shri Y.P.B. Singh, the Commissioner (Appeals) gave item-wise findings as follows :
“30. As the two issues related to the addition of
(a) Rs. 48,00,000 by way of profit on estimated turnover of Rs. 4 crores based on B-29, LP-18 and B-19, and
(b) Rs. 28,73,759 on account of debit balances on 1-4-1998, appearing in B-29 partly on account of closing balances in the regular books of accounts as on 31-3-1998.
are inter-related with each other, I proceed to decide these issues first. The ledger loose papers etc. marked as B-29, LP-18 & B-19 hereinafter referred as seized material, have been found and seized from the premises of Thrill Hotels (P) Ltd. The appellant tried to make out a case that the said material cannot be said to have been seized from the premises of the appellant- company and, therefore, the same could not have been treated in its block assessment during the course of proceedings, as have been taken in the case of the appellant by taking action under section 158BC. No doubt, M/s Thrill Hotels (P) Ltd. is an altogether different entity and the block assessment order has also been passed separately in that case, it is not stranger as far as the appellant is concerned. As has been rightly pointed out by the Asstt. Commissioner during the course of hearing of appeal by meaffairs of both the companies are controlled by Sri Rakesh Goyal and he is the key person in both the companies, irrespective of the fact as to whether or not the Asstt. Commissioner could not prove allegation (as contained in the assessment order) that B-29 is in the handwriting of Sri Rakesh Goyal and the appellant’s assertion made as early as on 27-12-2000, in terms of letter of even date, could not be met by the Asstt. Commissioner who appeared before me, this fact alone does not tilt the scale in favor of the assessed for various reasons discussed hereinafter:
(a) First and foremost reason is that the material in question had been seized from the premises of Thrill Hotels (P) Ltd., a company whose affairs are also controlled by Sri Rakesh Goyal. Heavy onus lied on the appellant- company to prove that the said papers were having nothing to do with it.
(b) It has been admitted by the appellant- company itself that the said papers are in the handwriting of one Shri Dinesh Kumar. He is one of the employees of the company and even possesses the key of the almirah kept in the factory premises. He admittedly provided key to the said almirah which was sealed at the time of search and was subsequently opened.
(c) Various entries appearing in the seized material particularly B-29 tallied with the regular books of accounts of the appellant- company.
Cumulative effect of all these factors is that the seized material in question belong to the appellant- company itself and to no one else. Therefore, the same was rightly utilized for the purpose of working out the undisclosed income of the appellant.
31. After this finding, only computation part remains. A combined reading of the entire seized material as well as regular books of accounts shows that the entries are overlapping with each other. A lot of entries in the regular books of accounts (which are also under seizure) are tallying with the seized material. The learned counsel for the appellant submitted before me a detailed chart in this respect. The same was confronted to the assessing officer, who appeared before me and on verification he himself found the appellant’s contention to be correct. I also perused the said chart and found the same to be tallying with the seized material. The aggregate of the entries in the seized material B-29 is Rs. 3,15,35,417, which is inclusive of the figures 1,05,25,168 (which are tallying with the regular books of accounts). Thus, the turnover which could not be verified from the regular books of accounts is Rs. 2,10,10,249. As far as the transactions appearing in LP-18 and B-19, the same are found recorded in B-29. The names of the parties, quantities dispatched and other particulars as appearing in LP-19 and B-19 are found to be tallying with B-29. Therefore, the determining factor for the purposes of working out undisclosed income is B-29. As discussed above, the unverified figure of sale as per B-29 is Rs. 2,10,10,249 only.
32. The computation of unverifiable turnover has to be pegged with the material during the course of search and according to such material, the figure is only Rs. 2,10,10,249 as against the figure of Rs. 4 crores taken by the assessing officer on estimate basis. Such an estimate is not permissible in the block assessment, in view of large number of cases. To cite a few, I refer to the decision of Hon’ble jurisdictional High Court in the case of CIT v. Usha Tripathi (2001) 249 ITR 4 (All). Respectfully following the said decision, I uphold the estimate of undisclosed turnover to the extent of Rs. 2,10,10,249.
33. Coming to the estimate of income on the said turnover, I find that whereas the assessing officer has taken the figure of assessment year 1997-98 as a base, the learned counsel of the appellant has raised an alternative objection that even if any turnover outside the books of accounts was to be estimated, it would not necessarily mean that there has been some income also. He urged that the circumstantial evidence that no undisclosed asset/investment was found as a result of search should be taken into account for the purpose of estimating the income. According to him, net asset method is a recognized principle of working out income, where records are not available. On this basis, his submission was that no income as such, should be considered. On the other hand, according to the Asstt. Commissioner, assessed’s own past records serve a useful guide in the matter. The appellant- company has disclosed a GP rate of 12 per cent in the assessment year 1997-98. The assessing officer has rightly applied the same for working out the income of the appellant, on account of business done outside the books of accounts.
34. I have very carefully considered the rival submissions and I find little force in the arguments by the learned counsel of the appellant. In view of the principle laid down in the case of Smt. Usha Tripathi (supra), the estimate of income has to be confined to the material found during the course of search. In the present case, the search operation did not lead to the recovery of any substantial asset, except that some cash as belonging to the appellant, was found from the residential premises of the director of the company which was attributed by them to be belonging to the company. The assessing officer has worked out the income by applying a GP rate and the resultant figure has been treated as income. This is not in accordance with the principles of computation of business income. Moreover, no example has been given by the assessing officer which could show that either in this business or in any other business, one can earn a taxable income at such a high rate of 12 per cent. This is more so in the case of this line of business where losses have been shown in past in spite of earning a good GP. For the assessment year 1997-98 for which regular assessment has been made in the post-search period, a loss of Rs. 11,89,870 has been determined (A photocopy of which is placed on page No. 31 of the paper book). However, the contention of the appellant that outside the books need not result into profit cannot be accepted, there has to be a reason for making sales outside the books.
35. Over a careful consideration of the matter in its entirety, I am of the opinion that the taxable income of -the appellant should be worked out by applying a net profit rate to the turnover of Rs. 2,10,10,249. Such a rate in my opinion, should most reasonably be 6.5 per cent of Rs. 2,10,10,249. I hold accordingly and the assessing officer is directed to work out the resuliant relief on this score. The contention of the appellant on this score that the reasonable NP rate generally shown in this kind of business be applied cannot be accepted as most of the direct expenses relatable to the turnover outside the books are claimed by the assessed and hence the rate of profit earned from the turnover outside the books of account cannot be at par with the declared rate of profit in similar business.
36. As regards the addition of Rs. 28,73,759 that has been made by the assessing officer by taking the balance in B-29 as also by picking up balances in the regular books of accounts as on 31-3-1998, I hold that the balance shown in the regular books of accounts cannot be taken into consideration in the block assessment. This is more so for the reason in the present case where the return was already on record when the search operation took place and the income shown in the return was found to be fully tallying with the regular books of accounts. Therefore, the addition of Rs. 1,90,309, which is a part of Rs. 28,73,759, is straightaway deleted.
37. Taking the said findings as a base and in consequence thereof, I further hold that excess of these balances as revealed by B-29, should form part of the additional income. Such an excess is Rs. 8,19,215 (Rs. 26,83,450-Rs. 18,64,235). Thus, the overall effect is that the addition of Rs. 28,73,759 shall get substituted by a figure of Rs. 8,19,215.
38. The Asstt. Commissioner in his remand report has requested for enhancement of undisclosed income on account of the funds invested by the company to manufacture the unaccounted sales. Sh. Sanjay Gupta, FCA has contended that no material is placed on record by the department which even remotely suggest that the appellant has any investment in this regard. He has also placed his reliance on the judgment of Hon’ble Allahabad High Court in the case of Smt. Tripathi v. Asstt. Commissioner (supra) and stated that as the block assessment proceedings are in addition to the regular assessment proceedings, the addition can only be made on the amounts against which the evidence was found in the course of search and there is no application of section 145 of the Act in the block assessment proceedings. At the time of hearing, I had specifically asked the Asstt. Commissioner to produce any material on record for making enhancement as requested. He has emphasized that the company must have invested certain funds for making undisclosed sales but denied to have any material to prove the same. I agree with the contention of the appellant that in the block assessment proceedings, the addition can be only made on the basis of evidence found during the course of search and the addition cannot be made without such evidence. Therefore, the request of the assessing officer for enhancement of income is rejected. However, the assessing officer is free to consider this issue in the regular assessment proceedings.
39. Next issue involved in the present appeal relates to an addition of Rs. 42,15,000 which is the aggregate of various sums as found credited in cash in the current a/c No. 4515 with Oriental Bank of Commerce, Ambala Road, Saharanpur, standing in the name of the appellant- company itself. In this account, a large number of entries on both the sides appeared. The assessing officer has, however, picked up the entries relating to deposits made in cash in the month of March, 1998-99 (which is the year of search),- and has made the impugned addition on the short ground that the explanation for the deposit of Rs. 42,15,000 did not appear to be tenable.
46. It is an undisputed fact that during the course of search operation itself books of account of the appellant- company were found from the premises of Thrill Hotel (P) Ltd. and deposit in the above referred bank account on various dates are fully verifiable from such books of account. This bank account too is a duly disclosed bank account of the appellant- company. It contains a large volume of transactions of the appellant, whole of which are fully verifiable from the regular books of accounts and other primary records, which included excise records also. To make sales in cash is a regular feature of the appellant’s trade and such sales could not have been adversely viewed in the present case, if the proposition of cash sales had been high in a particular month. This fact alone was, not enough to disprove the sales, particularly when there is no dispute with regard to availability of computer hardware for sales. Availability of cash with the appellant on the dates of deposits in bank account is, thus, self proved. Over and above this, the appellant submitted a cash flow chart during the course of block proceedings. Such chart could not be found fault with either at the assessment stage or even before me in the present proceedings. However, for the sake of completeness only, I proceed to decide various other points as have been raised by the learned counsel for the appellant in relation to the addition of Rs. 42,15,000 during the course of hearing of appeal. It has been rightly pointed out by him that it was not a case where some kind of device aimed at formation of cash was involved. On the other hand, as a matter of practice, the appellant has been making regularly sales in cash, and such cash sales which are as high as 2.23 crores during the financial year 1997-98, which is the year of immediately previous of search, are duly reflected in the books of account that are under seizure. Such cash sales formed part of the overall turnover as stood entered in the ledger of the appellant. None of the transactions relating to cash sales have been disproved by the assessing officer, either in the block assessment order which is the subject-matter of present appeal or even in the proceedings that are going in appeal before me.
47. On these facts alone, the addition of Rs. 42,15,000 as has been made in the block assessment order, is not maintainable, and I hold accordingly. In the result, the addition of Rs. 42,15,000 is deleted here. However, the assessing officer is free to properly examine and consider these entries made in the bank account of the assessed in the regular assessment for the respective year and draw appropriate conclusion in accordance with the provisions of law,
48. Another ground relates to an addition of Rs. 4,00,000 which has been made in the block assessment order, as per the following narration as appearing in the block assessment order itself.
54. I have considered the rival submissions. As to the preliminary objection raised by the learned counsel for the appellant, I do not find much force in the same for the simple reason that Shri Naresh Kumar was not a stranger, but the brother of Rakesh Kumar, managing director of the company. The papers found from his possession and control could have been very well taken to be the papers found from the possession and control of the appellant- company itself and, therefore, the same were liable to be considered in the case of the appellant- company. It is not without significance that the amount in question related to submission of tender and the appellant had duly owned having submitted the tender. It cannot escape the responsibility of explaining the said investment of Rs. 4 lakhs which, undisputedly, is part of the bid money of overall bid money of Rs. 73,15,000. For the reasons given above, the issue of presumption under section 132(4A) also fails and, the papers found from the residence of Shri Naresh Goyal having been linked with the business activities of the appellant have rightly been considered in the hands of the appellant-company.
55. I also do not find much force in the alternative submission made by Shri Sanjay Gupta, FCA, that B-29 only give closing balances of debtors as on 31-3-1998, and such amount may also be available during the year with the company in absence of any details of such investment in the debtors or any other place during the financial year 1997-98. Although I have already upheld the addition of Rs. 8,19,215 on account of opening balances in B-29 (being closing balance as on 31-3-1998) as undisclosed income of the appellant for the assessment year 1998-99, it cannot be said that the amount of Rs. 4,00,000 was available with the company on the date of purchasing the drafts and even if so, the said money cannot be presumed to have been utilized for the purchase of drafts. Therefore, the plea that no addition is called for on account of the amount of Rs. 4,00,000 in purchase of drafts in May, 1997 from American bank cannot be accepted. With respect of draft prepared for Rs. 4,00,000 which has been claimed by the assessed to be through Mr. Umesh Gupta, no concrete documentary evidence have been furnished by the assessed at any stage. Vide query dated 9-3-2001, made by the assessing officer, the assessed was again accorded opportunity to substantiate regarding genuineness of payment of Rs. 4,00,000 alleged to be through Shri Umesh Gupta. No convincing reply could be filed by the assessed. Shri Umesh Gupta was not produced before the assessing officer for examination. It was, therefore, clearly established that Rs. 4,00,000 has been arranged by the appellant out of its undisclosed sources and the same was, therefore, rightly considered as unexplained investment under section 69 of the Income Tax Act, 1961. Nowhere the appellant expressed his inability to produce Shri Umesh Gupta to whom summons could be issue by the assessing officer. It was the onus of the appellant to produce either the satisfactory document before the assessing officer regarding the tender money of Shri Umesh Gupta or to produce Shri Umesh Gupta himself.
56. I, therefore, confirm the addition of Rs. 4,00,000 made by the assessing officer on account of bid payment.
57. In the next grounds the appellant has raised the issue connected with levy of interest under section 158FA(l) and the levy of penalty under section 271(l)(c) read with section 158BFA(2). As far as the levy of interest is concerned, the same is mandatory and is upheld in principle. However, the assessing officer is directed to recompute the same after giving effect to this order.”
4. Now both the parties are in appeal here before the Tribunal. The assessed is objecting in sustaining the part addition and sustaining the chargeability of interest under section 158BFA(l). The department is objecting against the addition which were reduced and the addition which were deleted completely.”
5. First issue in both the appeals is against reducing the addition of Rs. 48 lakh to Rs. 13,16,666. The counsel of the assessed stated that complete books of accounts are maintained and regular returns were filed well in time. No discrepancy whatsoever has been found in the maintenance of books of accounts and purchase and sale vouchers. Therefore, no adverse inference can be drawn against the assessed. It was further stated that few duplicate bills were found from a third premises i.e., the premises of M/s Thrill Hotels (P) Ltd. It was further stated that some bills were found from an almirah, the key of which was with one of the employees of the assessed, Shri Dinesh Kumar. Shri Dinesh Kumar has deserted the assessed- company and he was preparing duplicate bills of his own just to harass the company and to pressurize to increase his perks. The company was not agreeable with the conditions laid by his employee Mr. Dinesh Kumar, who ultimately left the service of the assessed- company. It was further stated that cash sale bills were prepared by Shri Dinesh Kumar, they were unsigned, therefore, they cannot be taken into consideration. It was further stated that the confirmations of various transporters, whose names were mentioned in the bills, were filed and they have duly confirmed that no such material was transported by them from the premises of assessed to the premises of the customers. The attention of the Bench was drawn on copies of various bills placed on record. It was further stated that complete names and addresses of the parties were mentioned in the duplicate bills, along with their CST member and no enquiry whatsoever has been made by the assessing officer from these parties, whether they have received such material or not. Therefore, no addition can be made on the basis of duplicate bills found from a premises belonging to third party. Reliance was placed on various case laws (1994) 208 ITR 36 (Tribunal portion) (sic) and Mustaq Ahmed & Ors. v. Asstt. CIT (2000) 66 TTJ (Jp) 305. It was further stated that assessing officer has made estimation of sales of Rs. 4 crore on the basis of these bills whereas the total of these bills were about Rs. 2,10,10,249. It was further stated that some of the bills were already in regular books of accounts, as original bills were prepared by assessed and they were sent to the respective parties. It was further stated that Commissioner (Appeals) has reduced the estimate of Rs. 4 crore to the original figure of Rs. 2,10,10,249 and had applied a net profit rate of 6.5 per cent, as against the GP rate of 12 per cent applied on a total gross turnover estimated by the assessing officer at Rs. 4 crore. On a query from the Bench, the original copies of sale bills were also filed by assessed, which were duly signed.
5.1. On the other hand, the learned departmental Representative strongly placed reliance on the order of the assessing officer. It was further stated- that the premises of M/s Thrill Hotels (P) Ltd. was not belonging to any third party, as the directors in assessed- company, were also directors in M/s Thrill Hotels (P) Ltd. It was further stated that the main person Mr. Goyal was handling the affairs of both the companies, i.e., the assessed- company and M/s Thrill Hotels (P) Ltd. It was further stated that there is no dispute that sale bills were found in the almirah placed in the premises of M/s Thrill Hotels (P) Ltd. and which was sealed during the course of search as the keys were not available at that point of time. After that the key was taken from Shri Dinesh Kumar and the almirah was opened and thereafter the inventory was prepared and Panchnama was also prepared on the basis of material found from the almirah. From all these evidences, it cannot be said that assessed has not made any sales to the parties mentioned in these respective sale bills.
5.2. In reply on a query from the Bench, the learned departmental Representative fairly conceded that no unaccounted purchases were found. On a further query from the Bench, the learned departmental Representative replied that in fact, the assessed manufactured the items from raw material and approximately half of the material was sold outside the books of accounts and the sale of balance was recorded in the books of accounts. On further query from the Bench that how the quantitative tally of stock was prepared, however, no plausible reply was given by the learned departmental Representative.
5.3. In reply, the counsel of the assessed stated that the item of the assessed is subject to excise and at no point of time any difference has been found either by the Excise department or by the ST department, as the quantitative tally of stock was accepted by all the authorities concerned, i.e., ST department, Excise department and IT department, who accepted the return filed by the assessed in regard to manufacturing and trading account.
5.4. After considering rival submissions, we found that assessed deserves to succeed in this ground. The sole reason for allowing the ground of the assessed is that purchase shown by assessed were accepted by the department itself, as no addition whatsoever has been made on account of unaccounted purchases. Once the purchases have been accepted, then there is no point to accept the sales against the purchases. The yield shown by assessed year after year was accepted by the department. The quantitative details were filed and they were tallied with the sales and stock maintained by assessed on day-to-day basis as complete books of accounts were maintained and they were not rejected by the assessing officer. Once purchases are accepted and sales against those purchases were shown by the assessed in its books of accounts regularly maintained, then there is no point to make any sales against the same purchases again. It seems that the employee of the assessed was preparing duplicate bills for the reasons known to him. Nothing is on record whether statement of Shri Dinesh Kumar, employee of the assessed, was recorded or not, from which it could be found out the truth about maintaining the duplicate bills. It is also undisputed fact that all the sale bills found in the almirah, the keys of which were kept by Shri Dinesh Kumar, an employee of the assessed, were unsigned. Copies of these bills are placed in the paper book from pp. 96 to 149. We noted that complete addresses of the parties in whose names these sale bills were prepared, were mentioned. Even in some of the cases the CST numbers were also mentioned. Therefore, it was very easy for the assessing officer to verify from these parties, whether any such material was purchased by these parties from the assessed or not. We further noted that even the GIR number of the transporters were mentioned.
However, no such enquiries were made by the assessing officer directly from the transporters, whereas the assessed had filed confirmations on behalf of certain transporters who have confirmed that no such material has been transported by them. On the other hand, we have seen the copies of original bills filed by assessed on requirement of the Bench and found that all these bills are signed and the GIR number along with copy of GIR is maintained and the materials were supplied to the respective parties. Therefore, we hold that there was no justification in making any estimate of sales on the basis of the bills found from the almirah placed at the premises of M/s Thrill Hotels (P) Ltd. This is also undisputed fact that the keys of the almirah was retained by Shri Dinesh Kumar, who was one of the employees of the assessed. The contention raised by the learned counsel of the assessed neither could be controverter by the learned departmental Representative, nor any material was brought on record from which could establish otherwise. This is also undisputed that no addition whatsoever has been made by the assessing officer in regard to investment in purchases for the purpose of sales. Once there is no purchase, then how the sale can be made, no reason whatsoever have been given by the assessing officer or by Commissioner (Appeals), who confirmed the addition @ 6.5 per cent on sales of Rs. 2,10,10,249 found recorded in the duplicate sale bills kept in the almirah. We have also considered various case laws relied upon by the learned authorised representative and found that they are in support of assessed’s case. Therefore, in view of these facts and circumstances, we hold that no addition can be made on the basis of the sale bills found from the almirah operated by Shri Dinesh Kumar, one of the employees of the assessed who ultimately left the services. As such the addition of Rs. 13,65,666 sustained by the Commissioner (Appeals) is deleted. This ground of the assessed is allowed and the ground of the department to this regard fails.
6. Second issue in appeal of assessed is against sustaining the addition of Rs. 8,19,215 against the addition of Rs. 28,73,759 made by the assessing officer on the basis of ledger marked as B-29. Some discrepancies in the balances of accounts of various parties were noted by the assessing officer in financial year 1997-98, therefore, on estimating the sales at Rs. 2 crore and by applying a GP rate of 12 per cent, estimate of Rs. 28 lakh was made. However, no separate addition on this score was made as the assessing officer found that the difference in balances was more than Rs. 28 lakhs as, as per ledger B-29, the differences were of Rs. 28,73,758. The Commissioner (Appeals) noted that the entries found recorded in regular books of accounts cannot be considered while passing the assessment under section 158BC. These entries were to the extent of Rs. 1,90,390, therefore, the addition to this extent was deleted by the Commissioner (Appeals) straightway.
6.1. Regarding the balance amount of Rs. 26,83,450 it was noted by the Commissioner (Appeals) that there was a debit balance of Rs. 18,64,235 in regular books of accounts and as per debit balance in ledger, named, B-29, the debit balance was of Rs. 26,83,450. Therefore, he excluded the amount of Rs. 18,64,235, which was debit balance as per regular books of accounts and the remaining amount of Rs. 8,19,215 was sustained by him. Various Benches of the Tribunal as well as Hon’ble High Courts have held that ‘ any, entry found recorded in regular books of accounts cannot be taken into consideration while framing the assessment under section 158BC, as Chapter XIV-B is a special chapter. Therefore, we hold that the Commissioner (Appeals) was justified in excluding the figure of Rs. 18,64,235.
6.2. Regarding the remaining amount of Rs. 8,19,215, we noted that this figure was picked up by the assessing officer from the pocket diary named as B-29 maintained by Dinesh Kumar, which was kept by him in the almirah found from the premises of M/s Thrill Hotels (P) Ltd. The assessing officer has also observed in his order that the assessed has indulged in sales outside books of accounts, therefore, he estimated the sales at Rs. 2 crore for financial year 1997-98. However, no separate addition was made by the assessing officer because of the figure in ‘B-29’ was more than Rs. 24 lakhs, which was arrived at by the assessing officer by applying a GP rate of 12 per cent on two crore turnover estimated by the assessing officer. We have already held while disposing the issue in regard to estimation of sales of Rs. 4 crore above, that the duplicate bills prepared by Shri Dinesh Kumar cannot be made basis for any estimation of sales. Here also we do not find any basis for sustaining the estimation of Rs. 2 crore, though this issue is not here before the Tribunal, but for the purpose of arriving at a right conclusion, we are mentioning that there was no cogent reasoning for making any estimate of sales, as the department has not doubted the purchases shown by assessed. Therefore, any debit balances recorded in the diary maintained by Mr. Dinesh Kumar should also not be taken into consideration, as nothing supporting material was found further. Neither any enquiry was made from the parties in whose names the debit balance was shown in the diary maintained by Shri Dinesh Kumar, nor any-other material was with the department on which basis it can be held that the assessed has made any sales outside books of accounts. Entire purchases and sales made by assessed have been recorded in regular books of accounts and they have been accepted also by the department. Therefore, there is no question in making any sales outside books of accounts. Therefore, any figure mentioned in the diary B-29, should have been ignored, as undisputedly the diary was maintained by Shri Dinesh Kumar and not by the director of the company. This fact was examined by the assessing officer and in remand report before the Commissioner (Appeals) has fairly accepted that the diary was in the handwriting of Dinesh Kumar and not in the handwriting of Rakesh Goyal, as originally alleged by the assessing officer. Therefore, in view of these facts and circumstances, we delete the remaining addition of Rs. 8,19,215 sustained by the Commissioner (Appeals). In this way, the ground of the assessed is allowed and the ground of the department is dismissed.
7. Next issue in appeal of the assessed is against sustaining addition of Rs. 4 lakhs forming part of total bid money amounting to Rs. 73,16,500 for purchase of UP Carbide & Chemicals Ltd. In fact, the assessed-company entered into an agreement for purchasing of UP Carbide & Chemical Ltd. Four parties participated, namely, M/s. Patni Chemicals; M/s. Genious Computech, M/s. SKG Marketing and Shri Umesh Gupta. Shri Umesh Gupta invested a sum of Rs. 4 lakh through draft and the remaining out of total amount of Rs. 73,16,500 was invested by the three other parties mentioned above. All other investments were accepted by the assessing officer, however, the amount of Rs. 4 lakh was not accepted as genuine. Accordingly, the addition of Rs. 4 lakh was made under section 69 by the assessing officer. As stated above, the Commissioner (Appeals) confirmed this addition.
8. After hearing rival submissions and considering material on record, we find that assessed deserves to succeed in this ground also. We noted that out of bunch of loose papers for tender and making payment of tender money for U.P. Carbide & Chemicals Ltd. were found and seized from the residence of Shri Naresh Kumar. In these papers, Rs. 4 lakh was invested by Shri Umesh Gupta through drafts of Rs. I lakh and Rs. 3 lakh prepared on 21-4-1997, and 22-4-1997, bearing Nos. 010414 and 421, respectively made from American Bank in favor of Official Liquidator, U.P., Allahabad. We further noted that name and address of the person was got available to the assessing officer and request was also made by assessed for exercising the power under section 131. However, the assessing officer has not summoned the person concerned. We noted that the amount in question either could have been considered in the hands of Shri Naresh Kumar, from whose possession the paper was found or could have considered in the hands of Umesh Gupta, of which the complete details were filed. Therefore, we do not find any reason that why the addition of Rs. 4 lakh has been made in the hands of the assessed. The assessed is a company and assessed to tax regularly. The amount of Rs. 4 lakh was directly made to U.P. Carbide & Chemicals by Shri Umesh Gupta. Therefore, it cannot be held that this amount was paid by the assessed in any way. Accordingly we hold that there was no justification at the end of Commissioner (Appeals) to sustain this addition. Accordingly we delete the addition.
9. The alternate grounds i.e., ground Nos. 6.1 to 9 were not pressed by the counsel of the assessed. Therefore, they are dismissed as not pressed.
9.1. There is no other ground in appeal of assessed.
10. Now we will take the remaining grounds in appeal of the department.
11. Remaining issue in appeal of the department is against the deletion of addition of Rs. 42,15,000. This addition has been discussed in detail while discussing the finding of Commissioner (Appeals) above. The addition was made by the assessing officer on account of deposit in Oriental Bank of Commerce. The explanation of the assessed was not accepted by the assessing officer that these deposits were out of cash sales made by the assessed which were duly recorded in the regular books of accounts. The Commissioner (Appeals) deleted the addition by holding that the cash sales were duly recorded in the books of accounts and out of sale consideration the amount of Rs. 42,16,000 was deposited by the assessed in its bank. Therefore, source of deposit which was out of cash sales, cannot be questioned while completing the assessment of the block period under Chapter XIV-B. We further noted that from period 16-10-to March, 1998, the cash sales were ranging between Rs. 13 lakhs to Rs. 72 lakhs. Therefore, this is not the case of the department that there was no source of deposit in the bank account No. 4515 in Oriental Bank of Commerce, Ambala Road, Saharanpur. The finding of Commissioner (Appeals) neither could be controverter by the learned department Representative nor any other material was brought on record which could controvert the finding of Commissioner (Appeals). We further noted that Commissioner (Appeals) was more than reasonable in holding that the assessing officer is free to properly examine and consider these entries made in the bank account of the assessed in regular assessment for the respective years and draw appropriate conclusion in accordance with the provisions of law. Therefore, for the reasoning given by the Commissioner (Appeals) we confirm the order of Commissioner (Appeals) on this issue.
12. In the result, the cross-objection of the assessed is dismissed. Appeal of the assessed is partly allowed and the appeal of the department is dismissed.