These are five appeals of Revenue in cases of three assessees, who are related to each other. There are two appeals for asst. yrs. 1975-76 and 1976-77 in case of Shri Parkash Chandra Mehra, who carried on business of manufacture of cloth in name of M/s Diamond Woollen Mills. other two appeals for asst. yrs. 1975-76 and 1976-77 are in case of Smt. Karuna Kapoor, who carried on business of manufacture of cloth in name of M/s Amritsar Woolen Mills. remaining appeal for asst. yrs. 1975-76 is in case of Shri Prem Mehra, who carried on business of manufacture of cloth in name of M/s Mehra Trading Corporation. three persons named earlier are close-relative. Shri Parkash Chandra Mehra being father of Shri Prem Mehra and Smt. Karuna Kapoor being married sister of Shri Prakash Chandra Mehra. ITO has treated three cases to be interconnected and evidence gathered in case of Shri Parkash Chandra Mehra has been utilised in other two assessees, cases. appeals were argued in common and, therefore, all these appeals are considered together and disposed of by common order. We may refer now to certain relevant facts. All three persons are assessed in individual status and carried on separate proprietary business of manufacture of cloth under different names. accounting period followed in all three cases is financial years. books of accounts and prescribed registers for disbursement of wages were maintained in all three cases. Shri Prem Mehra lived with his father Shri Parkash Chandra Mehra. Search operations were carried on in premises of all three assessee on 12th Aug., 1975, date falling in financial year 1975-76 relevant to asst. yr. 1976-77. ITO in case of Shri Parkash Chandra Mehra states in assessment order for year 19975-76 about discovery of some undated signed cash vouchers and agreement of employment of M/s Diamond Woollen Mills with employee Shri Jaswinder Singh at his premises. In case of Smt. Karuna Kapoor, ITO mentions in assessment order of year 1975-76 about finding in search cash vouchers, which were signed but were undated and in number of cases amount was also not filled up relating to her propiretory business. In case of Shri Prem Mehra in assessment order of year 1975-76 ITO refers to discovery in search of cash vouchers, which were signed but were signed but were undated and in number of cases amount was also not filled up either. In assessment order in case of Shri Parkash Chandra Mehra no details about vouchers found are at all recorded but ITO relied on examination of worker Smt. Chana Rani and on examination of Shri Jaswinder Singh in respect of employment agreement. After considering explanation given by assessee in respect of vouchers found and statement recorded of Shri Jaswinder Singh, ITO proceeded to make assessment for year 1975-76 on 27th March, 1978. Here we may refer to certain relevant dates as furnished by assessee's counsel, Shri Sudershan Kapoor, in statement put in his paper book. Shri Jaswinder Singh's statement was recorded by ITO on 30th Aug., 1976 at back of assessee and its copy was given to him only on 15th March, 1978. assessee sent reply dt. 16th March, 1978 (which is at p. 10 of paper book) and in that, inter alia, it was stated that statement was recorded sometimes in 1976 but assessee had never been given any opportunity to cross examine this person and copy of statement was being supplied for first time. contents of statement were denied and it was submitted that no importance should be attached to such statement and in case ITO wanted to consider that statement then assessee may be allowed opportunity to cross-examine Shri Jaswinder Singh, who may be summoned under s. 131 again with intimation to assessee. This was not done and assessment was made by order dt. 27th March, 1978. However in course of assessment for year 1976-77, Shri Parkash Chand Mehra gave explanation given in preceding year about seized cash vouchers in form of affidavit and he also furnished affidavit of Shri Jasminder Singh dt. 29th April, 1978 in which he admitted that he was paid salary of Rs. 350 p.m. his joining service of M/s Diamond Woollen Mills only w.e.f. October 1974 as Weaving Master and serving that concern from October 1974 to March, 1975 at that salary and thereafter joining service of M/s. Amristar Woollen Mills for period April, 1975 to Dec., 1975 and above all circumstances in which his earlier statement was recorded by ITO sometimes in 1976. After that statement ITO examined Shri Jasminder Singh again on 28th March, 1979 and both ITO and Shri Prem Mehra examined and cross-examined him. It is after that assessment of year 1976-77 was completed on 30th March, 1979. ITO's conclusion recorded in assessment order of year 1975- 76 were two. Firstly, instance of Shri Jaswinder Singh as discussed and circumstantial evidence of "blank" signed undated cash vouchers" went to indicate that assessee had been inflating his expenses in order to reduce his income and secondly assessee was meeting expenses from income not disclosed to Department. ITO on basis of details of salary furnished by assessee in respect of Shri Jaswinder Singh and salary admitted by him to have been received as per his first statement concluded that expenses had been inflated by about 40 per cent in respect of wages and weaving charges shown at Rs. 44,741 and Rs. 68,291. addition was worked out at Rs. 45,000, in round figures. In assessment order of year 1976-77 ITO relied on same evidence as was noticed by him for preceding assessment year and took note of affidavit and further statement of Shri Jaswinder Singh but took view that as affidavit of Shri Jaswinder Singh was obtained by Shri Parkash Chandra Mehra and filed by him in Department, it was in nature of accommodation provided by Shri Jaswinder Singh to him and in view of that no reliance could be placed on that affidavit. He found some apparent contradictions in version of Shri P.C. Mehra and Shri Jaswinder Singh viz. Shri P.C. Mehra alleged that higher salary was offered to Shri jaswinder Singh for night duty but in cross- examination Shri Jaswinder Singh stated that he worked for day shift and night shift and in clarification given in response to questions of Shri Prem Mehra witness pointed out that he worked for day shift and few extra hours after day shift for which he was paid Rs. 160 extra. ITO on footing concluded that stand of assessee had been shifting in attempt to explain away inflation in expenses. He also observed that Shri Jaswinder Singh had earlier stated that he did work on probation but later on he alleged that he never worked on probation. Because of this his conclusion was that statement of Shri Jaswinder Singh recorded earlier was more truthful as it was given without any tutoring and without any motive and affidavit given later was most obviously given with main object of providing accommodation to Shri P.C. Mehra and, therefore, much reliance could not be placed on it. About affidavit of Shri Parkash Chandra Mehra containing his explanation about various vouchers, he observed that mere fact that same contention were now in form of affidavit did not itself make contentions correct. We finally relied on earlier statement of Shri Jaswinder Singh and statement of Smt. Chand Rani to hold that contentions in affidavit of Shri P.C. Mehra were not correct as has been held by her in her order for asst. yr. 1975-76. She also stated in order that some of vouchers have amounts written on them and amounts are in terms of paise only and that normally advances would be given in lump sum figures. It may be stated here that she did not mention details of any such vouchers being found in case of Shri Parkash Chandra Mehra. ultimate conclusion for assessment year was that from blank unfilled vouchers and fact that Shri Jaswinder Singh had been paid less than amount debited in cash book it came out that assessee had been inflating expenses in order to reduce income and estimate of Rs. 40,000 was made keeping in view addition made in earlier year. basis of additions made in case of Shri Parkash Chandra Mehra was adopted in two assessment of Smt. Karuna Kapur and on estimate addition of Rs. 20,000 was made in each year attributing it to inflation in expenses without specifying any particular heads of expenditure. However in assessment order of year 1975-76 ITO gave names of 11 persons cash vouchers in respect of whom were found in search. No amount was indicated in respect of any vouchers which only show that vouchers were carrying signatures and did not bear any date or amount. In assessment order of Shri Prem Mehra for year 1975-76 particulars about name of 10 persons in respect of whom blank vouchers were found were given and only in three cases amount were shown and out of those three in two cases amount were not in round figures and had paises also. It is this fact perhaps which ITO had tried to make use of case of Shri Prakash Chandra Mehra when in his assessment order for year 1976-77 sentence was added that some of vouchers had amounts written on them and amounts are in terms of paise also. AAC has deleted additions made in all three cases and his AAC has deleted additions made in all three cases and his detailed order is given in case of Shri Parkash Chandra Mehra for asst. yr. 1975-76. He found explanation given by assessee to be acceptable viz. advances were made to workers before conclusion of particular months and that such practice was well-known and very common and had been corroborated by statement of Smt. Chand Rani and that there was nothing to suggest that any payment was made outside books of accounts. In regard to statement of Shri Jaswinder Singh, AAC observed that total position has been clarified by him in his affidavit and second statement recorded by ITO subsequently. He found subsequent position to be correct and that amounts of Weaving charges paid for goods manufactured on job basis were duly supported by details etc. and these have been wrongly clubbed with wages paid to workers. He finally observed that wholly edifice built up by ITO would fall to pieces in view of fresh evidence adduced during course of Cross examination. As stated earlier, be deleted addition made in five assessments fo three assessees. Revenue has filed these appeals. We have heard very lengthily arguments of ld. Senior authorised representative, which continued to next day from date of hearing fixed and arguments of assessee's counsel Shri Sudarshan Kapoor and perused papers filed in paper book of assessee. ld. Departmental representative highlighted points, which were found out by ITO and these points we have summarised in preceding paras of our order. whole story has been built up by Revenue on basis of blank signed undated cash vouchers found in search and copy of employment between M/s. Diamond Woollen Mills and Shri Jaswinder Singh and testimony of one worker of that Mills Smt. Chand Rani. Some very eloquent facts are there to discredit conclusion of ITO, whose approach has been based on both ignoring relevant facts and principles for making additions of kind made. search was on 12th Oct., 1975. vouchers found were undated and bearing three instances noted in assessment order of Shri Prem Mehra did not show any amounts and merely carried signatures. In case of Shri Parkash Chandra Mehra no particulars of vouchers seized are at all relied upon and whole case turned on difference allegedly found between salary paid to Shri Jaswinder Singh. Weaving Master for period of six months. Oct., 1974 to March, 1975 and amount of difference Rs. 100 will be Rs. 600 only. statement of Smt. Chand Rani in his case has been twisted, as we will refer to later, to say that she did not know finally what amount was filled in some vouchers, which was not filled in at time of getting her signatures. Her statement as whole has not been read correctly. peculiar conclusion is drawn that no cash vouchers copy was received by persons signing cash vouchers. This is totally unknown procedure in world of commerce. Shri Jaswinder Singh's testimony has been used in Sri Parkash Chandra Mehra's case for asst. yrs. 1975-76 and 1976-77 when he was in employment only for first assessment year from Oct., 1974 to March, 1975. Same is position in cash of Smt. Karuna Kapoor in whose proprietary concern he was employed from April, 1975 to Dec., 1975 only, period relevant for asst. yr. 1976-77 and not asst. yr. 1975-76. Further in her case, there is no disparity in statement of Shri Jaswinder Singh about salary drawn. It was same Rs. 280 per months again in case of Shri Prem Mehra too reference is made to discrepancies noticed about services of Shri Jaswinder Singh, Weaving Master even though undisputedly he was not in service of his proprietory concern at any time and argument given by ITO is that account books of M/s Amristar Woollen Mills, M/s Diamond Woollen Mills and M/s Mehra Trading Corporation were written in same style, argument totally bereft of merit. Again Smt Chand Rani was working with M/s Diamond Woolen Mills but this fact did not deter ITO to use her testimony both in cases of Smt. Karuna Kapoor and Prem Mehra. Further ITO had no material in her possession to make undated signed cash vouchers without showing any amount to indicate what was importance of such vouchers qua amounts debited in books of assessee on account of Weaving Charges. By its very nature such vouchers could not give rise to any addition. At this stage, we may else mention that three vouchers showing amounts and names of person paid mentioned in assessment order of Shri Prem Mehra were in no way co-related to debits in books of Shri Prem Mehra and no debit as such has been found to be wrong on basis of amounts shown therein. Again ITO has listed names of person signing vouchers in assessment order of Smt. Karuna Kapoor and of Shri Prem Mehra of asst. yrs. 1975-76 but ITO never called these workers for examination. Not only that before putting charge of inflation of wages and weaving-charges paid by Shri Prem Mehra and Smt. Karuna Kapoor no worker of their concerns was at all examined nor was it shown how amounts debited in books of accounts of these assessed where inflated and why salary registers prescribed by Punjab Govt. Under appropriate legislation were un-reliable. In case of Shri Parkash Chandra Mehra only one worker Smt. Chand Rani was examined and when we read her evidence there is nothing which whill go to support Revenue. In fact, assessee's counsel, Shri Sudarshan Kapoor repeatedly said that in case of all three assessee no discrepancy was found either in stocks or cash held or in jewellery and no addition was made in these cases on any of these counts. It is significant to note that no undisclosed cash was discovered in searches and no such addition has been made. only slender thread with which story of Revenue bangs is testimony of Smt. Chand Rani and discrepancy of Rs. 600 allegedly found about salary of Shri Jaswinder Singh on basis of his first statement recorded by ITO on 30th Aug., 1976. vouchers are dumb and no efforts has been made to make them speak by recording testimony of persons signing vouchers. assessees have given explanation about vouchers that they were used for making advances in course of month to workers and these advances were deducted at time of paying salary of month and vouchers destroyed. only nexus that emerged from that explanation and even from evidence of Smt. Chand Rani and Shri Jaswinder Singh that these vouchers could relate only to advances made. New advances made, which are deducted at time of final payment of wags or charges, cannot give rise to any inflation of any expenses. We failed to understand on what count or reasoning such additions have been found to be possible by ITO. Taking note of these elementary and important facts, there is no evidence worth name on which conclusions of ITO can be said to be justified or disallowances can be made. Coming to testimony of Smt. Chand Rani, she was illiterate worker. Her statement was on pp. 14 and 15 of paper book. She admitted that wages were paid on monthly basis and in acknowledgement of receipt of wages she affixed her thumb impression on Register and that when she took advance then she put her thumb impression on paper. Specific question was asked whether she put her thumb impression on paper without receiving any amount she stated no. She also states that on 22nd of every month workers got advances, which were adjusted against pay of month and that advance was usually taken quite often. ITO cross-examined her as per statement and in reply to question about thumb impression being put earlier and amount filled later, she replied in affirmative. But in her re- examination two further questions were put. One was that how she know that she signed first on vouchers and they filled amount later, she replied that they deducted amount later, she replied that they deducted amount on 7th and balance was paid and it was at that time workers come to know that whatever advance was received has been filled in. Another question was put whether voucher was shown to her, her reply was that they did not show cash voucher to us but they tell us that particular amount had been deducted. ITO altogether forget that she was illiterate worker what will be use of showing voucher which was filled in later. But nevertheless, she stated position that workers were told about amount deducted at time of payment of salary of month finally on 7th. Reading statement of Smt. Chand Rani, we do not find any warrant for ITO's inference about workers not possessing knowledge about advance amount given to them and assessee filling in amounts as they liked. conclusion about supplying of copy of cash voucher to worker is too absurd to need any comment. Now coming to testimony of Shri Jaswinder Singh position in law was that his statement recorded on 30th Aug., 1976 could not be used against assessee. Shri Parkash Chandra Mehra even, until he-had been given right of cross-examination, which he had demanded very next day o f his being communicated copy of that statement by ITO. statement was communicated on 15th March, 1978 and assessee demanded right by letter dt. 16th March, 1978. Then right eventually was provided in course o f preceding for asst. yr. 1976-77. Shri Jaswinder Singh confirms facts through affidavit and his examination made subsequently about his getting salary of Rs. 350 per month from M/s. Diamond Woollen Mills for period Oct., 1974 to March, 1975 and Rs. 280 per month from April, 1975 to Dec., 1975 from M/s. Amritsar Woollen Mills. ITO could not dislodge him from that position. In subsequent statement recorded on 28th March, 1979. In affidavit dt. 29th April, 1978 Shri Jaswinder Singh had clearly explained circumstance in which his earlier statement was recorded sometimes in 1976. He stated that statement was recorded regarding his services and salary from M/s. Diamond Woollen Mills but he was not shown any records register except one document i.e. agreement dt. 8th May, 1974 on letter from with M/s. Diamond Woollen Mills. He also stated that he did not have any personal record with him and he did not have any other material to re-collect from memory. He explained that his salary of Rs. 350 per month consisted Rs. 250 plus of Rs.100 per month extra for night duty. He also clarified that he joined service only from Oct., 1974 and not from 8th May, 1974. In subsequent examination, he stated that he did not work on probation and that at time of earlier statement he was under impression that he was being questioned only about his normal salary and not about night shift allowance. Considering totally of evidence, it is difficult to held that statement recorded on 30th Aug., 1976 could be relied upon by Revenue. On basis of that statement if Shri Jaswinder Singh was to be held to be in service from 8th May, 1974 of M/s. Diamond Woollen Mills and his salary was shown debited in books for that mills from Oct., 1974. This will appear to be case of deflation of wages and not inflation. Shri Jaswinder Singh's later statement cannot be thrown out by wave of hand, at worst if Revenue considered him to unreliable witness, it was imperative for ITO to examine other employees and to establish inflation rather than pick and choose from his evidence. ITO has berupulously avoided examining any other workers of M/s. Diamond Woollen Mills or of M/s. Amritsar Woollen Mills or of Mrs. Mehra Trading Corporation. Again it is difficult to appreciate that on basis of alleged discrepancy of Rs. 600 additions of Rs. 45,000 and Rs. 40,000 could be made in assessment of Shri Parkash Chandra Mehra. After above analysis and considering totally of facts and circumstances of theses cases, we find nothing no justify addition made by Revenue in five appeals before us. search had taken place in Aug., 1975 and yet additions have been made for asst. yr. 1975-76 on basis of dumb undated signed cash vouchers. Further date 12th Aug., 1975 fell in accounting period 1975-76, relevant to asst. yr. 1976-77. Revenue has chosen to make additions out of expenses for whole year forgetting that if was preposterous to assume that any assessee would continue to inflate on basis of blank signed cash vouchers after search had taken place on 12th Aug., 1975. In facts, additions made are highly vexatious in nature and AAC had done well in deleting them in all five appeals. We confirm his action and dismiss appeals of Revenue. All appeals are dismissed. *** INCOME TAX OFFICER v. PRAKASH CHANDRA MEHRA