B.S. SALUJA, J.M.: - (1.) THE assessee has filed this appeal against the assessment order, dated 31-12-1997 made under section 158BC read with section 143(3) of the Income Tax Act, 1961.
(2.) Ground Nos. 1 and 2 relating to conversion of survey proceedings into search proceedings and approval by CIT to the assessment order were not pressed by learned counsel. The same are, therefore, rejected. Learned counsel took up ground No. 23 relating to addition of Rs. 1,69,50,812 first, as the other additions have been telescoped by the assessing officer into this addition. Brief facts are that during search, 37 sealed samples of rice bran and phak were found and seized.These contained details of despatch of rice bran and phak from 27-10-1996 to 3-12-1996. The particulars of quantity of rice bran and phak were not found recorded in the regular books of account. The sealed samples contained particulars relating to the name of the party, date, vehicle number, number of bags, nature of goods description/signature of parties, as mentioned at pp. 16-16 of the assessment order. Assessing Officer observed that as per p. 7 of the document No. 2, i.e. stock register, the assessee was having 'nil' stock of rice bran as on 3-8-1996. Production of rice bran had been shown only between 29-10-1996 to 30-11-1996, totalling 326.72 qtls. Assessing Officer confronted the assessee vide letter dated 30-9-1996 with 2,315 bags, which included 2, 234 bags of rice bran and 81 bags of phak. He asked the assessee that these bags represented in the sealed sample packets were on account of paddy milled outside the books of account. The assessee, in its reply, asked for inspection of the said packets. It requested assessing officer to furnish photocopies of seals also. Assessing Officer informed that keeping in view the nature of seals, photocopies could not be provided. Complete particulars as written on the packets were, however provided. Assessing Officer asked the assessee vide letter, dated 11-11-1997, to inspect the said packets, which was done on 12-12-1977. Assessing Officer also furnished detailed working of unaccounted income earned on account of sale of rice bran at 1,117 qtls, which was the result of paddy milled outside the books. The detailed working of undisclosed income at Rs. 1,69,50,812 has been given at p. 17 of the order. Assessing Officer in the first instance took the quantity of each bag of rice bran at 60 kg and arrived at a figure of 1,117 qtls, allegedly sold by the assessee. He applied yield of 3.3 per cent of rice bran and calculated that for production of 1, 117 qtls, 33,848.48 qtls of paddy would have been milled. He further applied yield of 66 per cent for rice obtained from paddy so milled and held that the assessee had produced 22,340 qtls of rice, 1,015.45 qtls of phak and 4,476.46 cftls of husk and finally arrived at figure of Rs. 1,69,50,812. Assessing Officer confronted the assessee with the proposed addition and also asked it to produce S/Shri R.B. Singh and Gopal Krishan as their names appeared on 37 sample packets. He also asked the assessee to give names along with confirmed copies of account from the concerned solvent plant/s to which the alleged rice bran was despatched and sold. In reply, dated 11-12-1997, the assessee stated that it as trading in rice bran, i.e. purchase and sale. It mentioned that rice bran was controlled item and, therefore, transactions were not recorded in the books. Rice bran was purchased from the market through Shri Sham Lal broker and sales were made through S/Shri Raj Kumar and Verinder brokers. Assessing Officer referred to the statement of Shri Jagdish Rai Barisal, partner of the assessee-firm, given before the Asstt, Director of Inspection (ADI) on 3-2-1997. ADI showed Shri Bansal the packets of samples and asked him to identify those bags and explain seal and nature thereof. Shri Bansal replied that the said packets contained samples of rice bran and phak sent by the assessee-firm through agents and dalals. He mentioned that the goods had been sent as directed by agents or dalals. He mentioned that he did not know the names of the parties to whom the goods as per samples had been sent. He also denied knowledge of names and addresses of the agents/dalals through whom seal is placed on the packets. The various questions put to Shri Barisal during recording of his statement are reproduced at pp. 18-19 of the order. Assessing Officer concluded on the basis of the said statement that the assessee had shown total ignorance about the names of agents/dalals or about other particulars appearing on the packets of samples. He also observed that Shri Bansal did not want to give details and deposed in evasive/vague manner. The assessee furnished along with reply an affidavit from Shri Sham Lal son of Shri Dev Raj resident of Dhuri, alleged broker who effected rice bran purchase for the assessee concern. The assessee produced Shri Sham Lal during the course of hearing on 11-12-1997. In the affidavit, Shri Sham Lal deposed that he was working as a dalal for the by-products of paddy milling, i.e., rice bran, rice phak and rice husk in the areas of Dhuri, Sunam, Sangrur, etc. for the last 10-12 years and he indulged in purchase/sale of the said, products for constituent parties on brokerage basis. He used to procure rice bran from market for Jagdamba Rice Mills on cash basis and charged brokerage thereafter. Statement of Shri Sham Lal was recorded on 11-12-1997, during which he was asked about quality of good rice bran, about laboratory dealing with rice bran and parameter for determining quality of rice bran. Assessing Officer noted that Shri Sham Lal did not have any knowledge about oil content in rice bran and laboratory operating in and around Dhuri, Sunam, Sangrur, etc. In view of the answers given by Shri Sham Lal, assessing officer concluded that no reliance could be placed on the affirmation of a person who was doing brokerage of rice bran for the last 10-12 years and was not aware of the product. Assessing Officer was surprised that Shri Sham Lal did not know how much oil content was contained in rice bran of goods quality and also did no know about laboratory dealing with rice bran in the area. Assessing Officer observed that statement of Shri Jagdish Rai Barisal was also recorded, wherein he was asked whether he could give an example of a single paper from the seized document which might point to the fact that he was trading in rice bran. Shri Barisal stated that the assessee-firm was trading in rice bran as and when market rates were favourable. On a further query, Shri Bansal stated that the assessee did not get the purchase vouchers and the same were not kept with reference to purchase of rice bran. Assessing Officer concluded that Shri Barisal did not want to divulge the information. Assessing Officer observed that in reply dated 12-11-1997, the assessee has come up with the explanation that purchase of rice bran was made through Shri Sham Lal and sale of rice brain was made through brokers S/Shri Raj Kumar/Verinder. Assessing Officer referred to reply, dated 17-12-1997, wherein the assessee tried to give explanation regarding addition of Rs. 1, 69,50,812. The assessee submitted that the proposed addition had been computed on surmises and conjectures and was purely a guess work. The assessee submitted that in the seized material there was no a single paper or entry indicating purchase of such huge quantity of rice paddy amounting to 52,000 bags. Assessing Officer observed that if it was true and there was no corresponding evidence of milling outside the books of account in the seized material, but seized material contained definite evidence regarding unaccounted purchase of paddy. The assessee had not been able to give any convincing reply to the questions put to him in the two statements, dated 3-2-1996 and 11-12-1997. The assessee has not been able to bring any direct evidence in support of its contention that it was trading in rice bran. Assessing Officer observed that if this was the case, then replies of the assessee would have been spontaneous and revealing. assessing officer, therefore, held that the affidavit of Shri Sham Lal alleged broker was nothing but an afterthought in order to cover up the things. In the ultimate analysis, assessing officer held that the assessee had been making purchases of paddy outside the books of account and figure of Rs. 1,69,50,812 represented unexplained investment made out of its business. He further held that rice bran weighing 1,117 qtls was by-product of unaccounted paddy milled by the assessee. He, therefore, treated the amount of Rs. 1,69,50,812 as unaccounted investment under section 69 and as undisclosed income of the assessee during the financial year relevant to assessment year 1997-98. 3.1. Learned counsel Shri P.C. Jain submitted that a survey under section 133A was conducted on the premises of the assessee on 5-12-1996, which was converted into a search on 6-12-1996. Not a single bag of rice, bardana or paddy was found outside the books of account. The assessee was maintaining all statutory record required by Food and Supply department, Punjab. He further submitted that in case of production of rice, 75 per cent of rice produced was to be handed over to the Government under the existing law. If the assessee was indulging in milling of paddy outside the books, the State Government should not have spared it. There was no evidence of any violation of law regarding levy rice, i.e. share of the Government. The assessee was maintaining bills of all purchases/ sales made. He submitted that within a period of about 37 days, the assessee is presumed to have milled paddy weighing 33,848.48 qtls. He submitted that there was no iota of evidence with the department that the assessee mined so much of paddy and sold rice and other by-products during the said period. Learned counsel referred to Para. 46 of the assessment order and submitted that finding of assessing officer is that rice bran weighing 1,117 qtls was produced on account of paddy milled by the assessee. He mentioned in brief the system of purchase of paddy in mandis. There is a clearly a kacha arhatia and that heaps of paddy he in the open and are auctioned by various shopkeepers. He referred to the system that the intending buyer will come to a particular shop in the mandi and estimate the number of bags of paddy stacked for sale. The said particulars are entered in the Sauda Bahi. There is no written agreement for purchase of the said bags and it might happen that at the time of lifting the goods the shopkeeper may refuse as he might have already sold the same. When the Sauda materialises, the seller issues Form J to the buyer wherein name of buyer and quantity of paddy sold is mentioned. He referred to p. 87 of the paper book, where a copy of Form J is placed. Then the kacha arhatia issues a bill in Form I, copy given at p. 88. He referred to Form F at p. 89 and pointed out that the information in the said form is required to be sent through the Market Committee. In the said form, name of the product, actual weight, name of the purchaser, price per qtl, labour charges, etc. have to be indicated. Market fee is to be paid to the Market Committee under the Punjab Agricultural Produce Act. He referred to Form M at pp. 90-91, wherein information regarding daily sales/purchases have to be furnished to the Food Controller. He referred to pp. 92 onwards of paper-book, where record of purchases made by the assessee is kept. He submitted that the above mentioned evidence was given before assessing officer. Learned counsel further referred to the provisions of section 69 of the Act dealing with unexplained investment and submitted that before arriving at the conclusion of deemed income, assessing officer has to give a finding that it constitutes income/deemed income of the assessee and it has to be examined as to whether the finding of assessing officer is correct inasmuch as the explanation furnished by the assessee is satisfactory or not. Learned counsel referred to the decision in the case of Neena Syal v. Asstt CIT (1999) 70 ITD 62 (Chd), wherein the Tribunal noted at pp. 69-70, the decisions in CIT v. Bai Vina (1965) 58 HR 100 (Guj), CIT v. Rampur Timber & Tumery Co. Ltd. (1973) 89 ITR 150 (Afl), CIT v. Deepak Textile Industries Ltd. (1987) 66 CTR (Guj) 1 (1987) 168 ITR 773 (Guj), CIT v. S. Teia Singh (1959) 35 TTR 408 (SC), CIT v. Chhote Lal Kanhaiyalal (1971) 80 ITR 656 (MP) on the scope of the provisions of sections 69, 69A and 69B. He also referred to the decision reported in (1998) 3 SCC 410, as noted at p. 84 of the said case. In view of the said decisions, learned counsel urged that corroborative evidence was necessary for assessing officer to conclude that there was unexplained investment and it constituted deemed income of the assessee. He submitted that there was not a single bill/voucher found during search by the department to conclude that the assessee had purchased so much quantity of paddy and milled the same. There was no evidence of labour charges, purchase of gunny bags or freight paid for handing so much of paddy. There was no gate-pass of the sheller with reference to paddy received in the mill. In case the assessee had milled so much of paddy, there was no evidence regarding consumption of electricity. He submitted that no sale bills for rice produced and other by-products or collection of sales had been found by the department. He submitted that assessing officer also made no enquiry from the Market Committee or sellers/buyers of paddy or rice and other by-products allegedly produced by the assessee. There was no proof regarding entry of trucks for bringing/taking away the goods and that assessing officer made no enquiry from the Truck Union. He stressed that the said goods could not be lifted by the buyers otherwise. Learned counsel submitted that there was complete tally of cash, stock and purchases made in the books of account- In the month of October, which is covered in the period mentioned by assessing officer, paddy requires to be dried up on the ground or in the drier. He submitted that no unaccounted stock was found by the ADI, which would mean that the assessee was purchasing/selling rice, etc. on daily basis. If it were so, then only one days's investment was required to be made by the assessee in the purchase of paddy and milling thereof and that thereafter the said investment would be recycled. On the said basis, the assessee would not require more than Rs. one to two lakhs of investment. Learned counsel pointed out that assessing officer never examined as to whether the assessee cowd have milled so much of paddy. Total capacity of sheller was approximately two per hour. Optimum working of sheller could not have been more than 18 hours per day. On an average, there was no power supply for three hours daily and that the assessee did not have a generator. On the basis of 15 hours of working of sheller, 300 qtls per day could have been the maximum million of paddy, which mearly roughly 9,000 to 9,300 qtls per month, He, therefore, submitted that in relation to the period under consideration the assessee would require 14,090 qtls of paddy whereas according to assessing officer milling of paddy should be 33,848 qtls while maximun, capacity of the assessee could not be more than 14,090 qtls. He referred to the past history of milling of paddy by the assessee and submitted that for the whole year the milling has not been more than 54,000. He referred to the milling charges. He, therefore, urged that within 37 days milling of paddy as calculated by assessing officer was not possible. He further submitted that for assessment year 1993-94, there was total turnover of Rs. 3.13 crores. On the basis of g.p. rate of 8.39 per cent, the assessee would require total turnover of 20.20 crores for earning Rs. 1,69,50,812 which, according to learned counsel, is a wild guess made by assessing officer. On a query as to from where 37 packets of samples came, learned counsel submitted that rice bran was purchased by the assessee for various solvent plants. There were separate brokers for purchase of rice bran. The assessee was only charging commission for supply of rice bran and that with reference to quantity of rice bran involved the commission could not be more than Rs. 50,000 to Rs. 1 lakh. He further submitted that the assessee acts as a guarantor for payments to be made to sellers and if payments were not received from the solvent plant/s, loss was to be incurred by the assessee. He submitted that particulars of truck number are mentioned in the slip inside the packets of samples and that assessing officer could make enquiries from the Road Transport Authority in order to ascertain the quantity loaded in the truck and to whom the vehicle belonged. He further submitted that the assessee has led evidence and two brokers have been produced-one of whom Shri Sham Lal has filed an affidavit and also stated that he was purchasing rice bran for the assessee. He referred to pp. 322-350 of paper-book. The reply is placed at pp. 322-323, copy of affidavit at p. 324 and statement of Sham Lal recorded on 11-12-1997 at 325-332. Learned counsel referred' to the last question at p. 326 regarding source of income, to which Sham Lal replied that he was earning brokerage from rice bran, rice husk, etc. He referred to p. 328, where Sham Lal stated that quality of rice bran is to be decided by the purchaser. The quality of rice bran is determined by its ruggedness or softness after rubbing it on palm and that normally it is decided by the purchaser/buyer. He referred to the certificate issued by Kunal Rice Mills at p. 335 of paper-book, wherein it has been certified that from 1-10-1996 to 31-12-1996 rice bran had been sold to the assessee-firm through broker Sham Lal son of Dev Raj resident of Dhuri. Total quantity is mentioned at 290.15 qtls. He referred to the explanation given at pp. 337-338 of paper-book. He also referred to the bill issued by Bansal Commission Agency on 3-11-1996, at p. 339 of paper-book. He then referred to p. 349, where details of production of rice bran during the last five years, i.e. 1992-93 to 1996-97 have been given. He submitted that assessing officer has not brought any material on record to rebut the evidence/explanation given by the assessee. Learned counsel referred to the decision in the case of CTT v. Smt. P.K Voorjahan (1999) 155 CTR (SC) 509: (1999) 237 ITR 570 (SC), wherein while discussing the meaning of 'may' as used in section 69, it observed that the Tribunal had taken the view that although the explanation of the assessee was liable to be rejected, section 69 of the Act conferred only a discretion on the Income Tax Officer to deal with the investment as income of the assessee and that it did not make it mandatory on his part to deal with the investment as income of the assessee as soon as the latter's explanation happened to be rejected. The High Court agreed with the said view and held that it could not be said that the Tribunal was wrong in having differed from the Income Tax Officer and the Appellate Assistant Commissioner in the matter of exercising judicial discretion as to whether even after rejecting the explanation of the assessee, the value of the investment were to be treated as income of the assessee. The High Court held that the Tribunal has not committerl any error in taking into account the complete absence of resources of the assessee. The apex court held that there was no error in the finding recorded by the Tribunal and dismissed the appeal of the revenue . He referred to the decision in the case of Roshan Di Hatti v. CIT 1977 CTR (SC) 200: (1977) 107 HR 938 (SC) for the proposition that possibility of earning the alleged income, which is deemed as income of the assessee by assessing officer has to be seen. Learned counsel submitted that the deemed income by assessing officer must be represented by movable/immovable assets in the form of liquidity with reference to utilisation of the alleged income. Some disproportionate asset should be found by assessing officer before concluding that the assessee has deemed income of so much proportion. He referred to the decision in the case of Dalmia Cement Ltd. v. CIT (1999) 153 CTR (SC) 401 .- (1999) 104 Taxman 97 (SC). He submitted that the onus was on the department to show that the sales had been made outside the books of account, which is cardinal principle of jurisprudence. He relied on the decision in the case of Nagindas Dahyabhai Patel v. Assistant Commissioner (1999) 104 Taxman 80 (Ahd), wherein it was held that retraction made before assessing officer could not be dismissed as a self-serving statement, especially when no disproportionate asset was found and seized by search party and addition of Rs. 3 lakhs on basis of statement under section 132(4) of an aged and illiterate agriculturist assessee without any collateral or supportive evidence, was not sustainable. He referred to the decision in the case of Dr. RML. Mehrotra vs- Asstt. CIT (1999) 64 TTJ (All) 259 : (1999) 68 ITD 288 (All), wherein in the context of section 69 it was observed that since no other diary or other record comparable to notebook were found by the search party for remaining period nor movable/immovable assets were found that could be attributed to such patently hypothetical receipts, assessing officer was not justified in adopting multiplication formula for making addition for the whole year. He referred to the decision in the case of Mirah Exports (P) Ltd. v. Collector of Customs (1998) 3 SCC 292 (SC) where it has been observed that the burden of proving a charge of under valuation lies upon the revenue and the revenue has to produce the necessary evidence to prove the said charge. Ordinarily, the court should proceed on the basis that the apparent tenor of the agreements reflect the real state of affairs and what is to be examined is whether the revenue has succeeded in showing that the apparent is not the real and that the price shown in the invoices does not reflect the true sale price'. He referred to the decision in the case of Arumugham & Ors. (1999) 4 SCC 350 (SQ wherein it has been observed in para 16 that burden of proof is relevant in the context of the amendment provisions of section 100 CPC and the same would not be relevant when both sides had adduced evidence. The burden of proof will be relevant only if a person on whom burden of profit lay failed to adduce any evidence altogether. He referred to the decision in the case of Chaman Lal & Co. v. Income Tax Officer (1995) 53 TTJ (Chd) 241 for the proposition that some material is needed for making such addition in block assessments. He further referred to the decisions in the cases of Patel Rajesh Kumar Kantilal & Co. v. Assistant Commissioner (1998) 62 TTJ (Ahd) 189, UP. Ceramics & Potteries Ltd. v. Dy CIT (1995) 52 TTJ (Del) 499 : (1995) 52 ITD 334 (Del) and Sunder Agencies v. Dy. CIT (1997) 59 TTJ (Mumbai) 610.- (1997) 63 ITD 245 (Mumbai). In view of the foregoing learned counsel urged that the assessee has given all possible evidence regarding trading in rice bran and that burden was on the revenue to prove that the assessee had milled so much of paddy and produced rice and other by-products. Assessing Officer has not brought any material on record against the assessee to show processing and sales of the said commodity. The sales-tax assessment has been done and nothing has been found therein. Assessing Officer could have made enquiries from the ST department. There would have been entries in the octroi record with reference to paddy coming into the sheller and outgoing products. He, therefore, urged that at the most income in respect of trading in rice bran could have been on account of commission received by the assessee on purchase/sale of rice bran. The department has not been able to collect any material against the assessee even after search. 3.2. Learned departmental Representative Shri R.R. Thakur relied heavily on the assessment order with reference to addition of Rs. 1,69,50,812. He submitted that assessing officer asked the assessee to explain various issues relating to this addition, as mentioned in the questionnaire, dated 11-11-1997 refer pp. 316, 320 of paper-book. He referred to letter of assessing officer, dated 8-12-1997 at p. 321, whereby final opportunity was afforded to the assessee. He referred to para 42 of the assessment order, whereby statement of partner has been discussed. He referred to questions put by assessing officer to Shri Sham Lal so-called agent regarding oil content in rice bran and location of lab. dealing in rice bran. He, therefore, submitted that the assessee was producing rice bran outside the books and that he was also purchasing paddy outside the books. He therefore, urged that the case reported as 3 SCC 410 (supra), as relied upon by learned counsel, was not relevant. Regarding capacity of the sheller processing two tons of paddy per hour, learned departmental Representative submitted that the said plea of learned counsel was not supported by any evidence. He submitted that the case law relied upon by learned counsel is distinguishable on facts. He referred to paras 36-38 of the assessment order and submitted that the packets of samples indicated quantity of rice bran supplied by the assessee. 3.3. Learned counsel, in his reply, submitted that the assessing officer inferred on the basis of packets of samples that the assessee producing rice and by-products so as to supply quantity of rice bran found from the samples. There could not be a natural inference that the assessee would have purchased paddy in order to produce rice and other by-products including rice bran. Turnover of 20 crore was needed in 37 days in order to achieve results, as alleged by assessing officer. He reiterated that the assessee was only purchasing rice bran for others through agents. There was no enquiry by assessing officer regarding labour charges, electricity bills, etc. The decision reported at 3 SCC 410 (supra) was cited for the purpose that there should be some circumstantial evidence to support the addition made by assessing officer. 3.4. We have carefully considered the submissions made by both the parties and have perused the assessment order as also various documents placed in the paper-book to which our attention was invited during the course of hearing. It is observed that assessing officer noted in para 36 of order that the assessee had made supplies of rice bran weighing 1, 117 qtIs. The assessee had filed affidavit of Shri Sham Lal and he was also produced before assessing officer in order to support the plea that the assessee had been trading in rice bran and had been purchasing rice bran through agents. Assessing Officer did not believe the statement of Shri Sham Lal on the plea that he could not explain the oil contents in rice bran of good quality and could not name lab. operating in and around Dhuri, Sangrur, Sunam, etc. It is observed from the statement of Shri Sham Lal that he had clearly mentioned that oil content in rice bran is judged by rubbing it on palm and that actual oil content in rice bran is determined by the purchaser. We feel that the statement of Shri Sham Lal could not have been disbelieved only on the basis, as has been done by assessing officer. It is further observed that assessing officer proceeded to make certain calculations with reference to quantity of paddy which would have been milled so as to obtain production of rice bran weighing 1,117 qtls. He computed the said figure by applying yield of 3.3 per cent of rice bran. Proceeding further in reverse direction, assessing officer computed that the assessee had milled 33,848.48 qtls of paddy and obtained 22,340 qtls of rice and various other by-products mentioned at p. 17 of assessment order. On the basis of these calculations, assessing officer arrived at the figure of Rs. 1,69,50,812. It is obvious from the tenor of assessment order that assessing officer has not brought any material on record to show that the assessee had actually indulged in purchasing/milling of paddy and had produced rice to the tune of 22,340 qtls and phak and husk of 1,016.45 and 4,476.46 qtls respectively. He has also not brought anything on record to show that the assessee had sold the said commodities and had earned/received the alleged income. We, therefore, find merit in the submissions made by learned counsel that milling of paddy and production of rice and other by-products as computed by assessing officer is without any basis and is in the realm of conjectures and surmises. It is strange that during search assessing officer could not find any corroborative evidence with reference to purchase of alleged paddy milled as also regarding sales of huge quantity of rice and other by-products. As rightly pointed out by learned counsel, there is no evidence of electricity bills, labour charges, purchase of gunny bags, freight, etc. We, therefore, feel that no addition is sustainable with reference to alleged production of rice weighing 22,340 qtls and other by-products. The addition of Rs. 1,69,50,812 is, therefore, deleted, as it has no legs to stand. However, it is observed that quantity of rice bran computed by assessing officer on the basis of packets of samples at 1,117 qtls has not been disputed by learned counsel, The value of rice bran @ 285 per qtl has been computed by assessing officer at Rs. 3,18,345, which has also not been disputed. We, therefore, feel that the assessee would have earned income on sale of rice bran valued at Rs. 3,18,345 and it would be just and fair to sustain an addition of Rs. 60,000 in this behalf.
(3.) LEARNED counsel then took up ground No. 4 relating to addition of Rs. 13,98,514 as unexplained investment on account of purchase of paddy for assessment year 1996-97 and Rs. 22,49,643 for assessment year 1997-98. During search, two notebooks which were marked as 'Jindal Double Book No.2' were found and seized. Assessing Officer observed that these documents were at Sr. Nos. 20 and 29 respectively of the Panchnama, dated 6-12-1989. Shri Jagdish Rai Bansal partner explained that these notebooks referred to estimated purchases. Assessing Officer observed that the note books contained details of purchase of paddy made by the assessee concern during financial years 1995-96 and 1996-97 respectively. Assessing Officer referred to the statement of Shri Bansal recorded on 3-2-1997, wherein he explained the entries made in the said notebooks. The first column denoted name of the party from whom purchases were made, second mentioned quality of paddy, third estimate of bags purchased, fourth related to rates, fifth column indicated actual number of bags filled or received. Estimated number of bags were not actually received some times and that actual receipt could be less or more. Assessing Officer asked the assessee as to whether all purchases mentioned in document Nos. 20 and 29 were recorded in regular books, to which the assessee replied that most of purchases as detailed in these documents are recorded/entered in the regular books. He stated that sometimes certain heaps remained unsold and they were not entered in the books. He pointed out that this was told to the employees who go for lifting the goods and that there is no such indication made in these documents. He submitted that the assessee-firm. did not receive copy of original details from the employees who go for lifting of paddy and, therefore, merely looking into these documents would not reveal as to which purchase out of these are not accounted for. assessing officer, however, concluded that replies of Shri Bansal were not convincing. After comparing the entries of purchase of paddy as per documents Nos. 20, 29 and 62 with regular books of account, 29,992 bags of paddy remained unaccounted for. Out of 29,992 bags, 6,988 bags were calculated from document No. 20 and rest of the bags were calculated out of document Nos. 29 and 62. Assessing Officer confronted the assessee with investments of Rs. 17,26,036 and Rs. 60,33,368 made in purchase of unaccounted paddy. The assessee asked for basis of computation and alleged difference of unaccounted purchase, which was provided by assessing officer, The assessee, in its reply, stated that these are books maintained to record the estimated purchases of paddy The entries made therein regarding the quantum of bags are made on estimate basis as provided by the kacha arhtias. In fact, this is a book where bids of paddy purchased are noted for memory particularly the rate of purchase It is submitted that the conclusions drawn by your honour is based on mere guess, surmises and conjectures. There is no evidence of outside purchase of paddy nor evidence of any investment therein'. Assessing Officer noted that the assessee had furnished five explanations in order to explain the transactions of paddy allegedly made outside the books. The said explanations are discussed in paras 16-17 of assessment order. Assessing Officer observed that the assessee furnished affidavits of certain persons who were operating as commission agents in the Grain Market. The statements of S/Shri Som Nath, Rakesh Kumar, Rattan Kumar, Vinod Kumar and Ashok Kumar were recorded after they were produced by the assessee. All these persons were asked as to whether they had any documentary evidence in order to substantiate their affirmations made. Assessing Officer mentioned in para 17 the questions put to these persons and the affirmations regarding factors relating to bid of agricultural produce between the sheller and farmers falling through completely as farmers cancel the bid voluntarily or the purchaser cancels the transaction due to quality variation, rains, etc. Assessing Officer observed that none of these persons could adduce documentary evidence in support of the circumstances under which bid of agricultural produce falls through, He also observed that entries in heap register maintained by the commission agents to record bid of agricultural produce were made only at the end of the day and that these entries are not spontaneous, i.e., as and when a bid is made the same is entered in the heap register He, therefore, held that the results flowing from the heap register could not be relied upon in order to examine the explanation given by the assessee. He, therefore, rejected some of the explanations given. He held that the assessee had unexplaned purchases of 5,662 bags of paddy, as per document No. 20 and 8,762 bags as per document No. 29. He calculated that investment made in purchase of paddy outside the books during financial year 1995-96 relevant in assessment year 1996-97 came to Rs. 13,98,514. Similarly, investment in purchase of 8,762 bags as per document No. 29 was worked out at Rs. 22,49,643 for assessment year 1997-98. He treated the said amounts as unexplained investments under section 69 of the Act. 4.1. LEARNED counsel referred to pp. 105-260 of paper-book. The questionnaire issued by assessing officer is at pp. 105- 110 and reply of the assessee at pp. 111- 118, Copies of affidavits from certain kacha arhtias are placed at pp. 119-135, copies of statements of S/Shri Som Nath, Rakesh Kumar, Rattan Kumar, etc, at pp. 136-160 of paper-book. LEARNED counsel tried to explain the manner in which paddy is purchased in mandis. He submitted that the employees of the assessee were maintaining Sauda Bahi, wherein they noted the estimated number of bags which were available in the mandi in the form of heaps. He submitted that there is no written agreement and some times it may happen that when the employee goes to lift the material from the mandi the same is not available having already been sold. He gave an example that if 100 bags are estimated as available, then entry of 100 bags is made in the Sauda Bahi and when material is not available at the time when the employees goes to lift the material, then column in Sauda Bahi is filled as 'nil'. Even in such a situation, assessing officer is trying to hold that the assessee purchased 100 bags. The second situation could be that instead of 100 bags, only 80 were available out of heap. In such a situation, assessing officer is trying to make an addition of 20 bags. The third situation could be excess quantity purchased. It may be that instead of 100 bags, actual number of bags out of heap turned out to be 110 bags and in such a situation. Assessing Officer is trying to take quantity of bags at 110. The fourth situation could be that a seller was having five shops and payment had been made in respect of paddy available from five shops and the assessee had debited its accounts. In such a situation, assessing officer is trying to hold that payment for 500 bags to seller is alright but assessing officer is trying to hold that payment in respect of paddy available from remaining four shops has not been made. LEARNED counsel pointed out that copy of account of each person who has sold goods to the assessee is placed in the aforesaid document from pp. 105-260 of paper-book. Similarly, affidavit of each seller has been filed. Payment for these purchases have been made by cheques. The purchase/sales accounts were produced and even the shopkeepers were produced before. assessing officer, whose statements have been recorded and mentioned in assessment order. He has stressed that assessing officer has not pointed out any defect and no statement has been discarded. He referred to affidavit of the President of Kacha Arhtia Association placed at pp. 214-215 of paper-book, wherein it is mentioned that every kacha arhtia maintained a register known as 'Heap Register', in which details in respect of sale of agricultural produce which is brought by farmers at his shop is maintained, giving particulars, i.e. farmer's name, purchaser's name, selling rate, quantity sold, etc, After completion of sale transaction, kacha arhtia sends information to the Market Committee giving details of such transactions. After completion of sale bid transaction, the Market Committee officials immediately note down complete particulars of such transaction after visiting the arlitia's shop/s. The purchaser, if he is a licensee of Market Committee, pays market fee himself, othervise market fee is paid by arhtia. It is mentioned that for the last many years, agricultural produce particularly paddy and wheat were being sold in open bid which had been adopted because of heavy rush of work due to instant arrival of paddy/wheat, fluctuating whether conditions and concentration of main period of arrival of paddy/wheat in mandis. LEARNED counsel, therefore, urged that assessing officer was not correct in ignoring the evidence filed before him. He, therefore, urged that the additions which have been made by assessing officer on sunrises and conjectures ought to be deleted. 4.2. LEARNED departmental Representative relied heavily on the assessment order. 4.3. We have carefully considered the rival submissions and have perused assessment order as also various documents placed in the paper-book to which our attention has been invited during the course of hearing. It is observed that Shri Jagdish Rai Barisal partner in his statement, dated 3-2-1997, as reproduced at p. 6 of the order, gave necessary details regarding entries made in various columns of document Nos. 20 and 29. He mentioned that 'some heaps are unsold and not entered in the books and this fact is told to our employee who goes for lifting the goods'. The said statement is corroborated by the aforesaid documents placed in the paper-book including various affidavits filed by kacha arhtias. It is also observed that transaction of purchase of paddy is regulated through the Market Committee, where proper record of sale/purchase is maintained by kacha arhtias which are further transmitted to the Market Committee. The purchaser has to pay market fee for purchase of pacidy, The statements of commission agents working in Grain Market were recorded, as mentioned in para 17 of assessment order. Assessing Officer has disbelieved the affirmations made by the commission agents in their affidavits regarding cancellation of bid and the circumstances under which bid falls through only on the ground that the commission agents have not been able to produce any documentary evidence. We feel that in view of the affirmations made by the commission agents, assessing officer could have made enquiries from kacha arhtias/Market Committee in order to ascertain the procedure regarding sale/purchase of paddy. On the facts and circumstances of the case, we, therefore, feel that assessing officer has wrongly rejected the explanation furnished by the assessee and has proceeded to make calculations with reference to alleged number of bags of paddy purchased and has made both the impugned additions on the basis of surmises and conjectures. Assessing Officer has simply added up figures of alleged bags of paddy from documents Nos. 20 and 29 without bringing any material on record to indicate that such paddy has been actually purchased from mandis or otherwise and the same has been processed by the assessee resulting in production of rice, etc. and sale thereof. Thus on the facts and circumstances of. the case, we feel that the impugned additions of Rs. 13,98,514 and Rs. 22,49,643 cannot be sustained. The same are, therefore, deleted.;