These two appeals are of Revenue for asst. yrs. 1997-98 and 1999-2000 directed against two separate orders of CIT(A)-X, Mumbai, dt. 4th June, 2003 for asst. yr. 1997-98 and dt. 2nd June, 2003 for asst. yr. 1999-2000. cross- objection is filed by assessee for 1997-98. For sake of convenience, both these appeals and cross-objection are being disposed of by this common order. First, we take up Revenue s appeal for asst. yr. 1997-98 in ITA No. 5549/Mum/2003. only ground raised by Revenue reads as under: "On facts and in circumstances of case as well as in law, learned CIT(A) erred in deleting addition of Rs. 3,24,16,500 made by AO under s. 68 of IT Act as unexplained share capital." learned Departmental Representative supported assessment order and reliance was placed on judgment of Hon ble Delhi High Court rendered i n case of CIT vs. Sophia Finance Ltd. (1993) 113 CTR (Del)(FB) 472: (1994) 205 ITR 98 (Del)(FB). It was submitted that as per this judgment of Hon ble Delhi High Court, AO is empowered to make addition under s. 68 of IT Act with regard to issue of share capital. It was submitted that judgment of Hon ble Delhi High Court rendered case of CIT vs. Stellar Investment Ltd. (1991) 99 CTR (Del) 40: (1991) 192 ITR 287 (Del) which has been affirmed by Hon ble apex Court as per judgment in (1993) 113 CTR (Del)(FB) 472: (1994) 205 ITR 98 (Del)(FB) (supra) is no more good law because as per judgment of Full Bench of Hon ble Delhi High Court rendered in case of Sophia Finance (supra), this judgment of Hon ble Delhi High Court in case of Stellar Investment Ltd. (supra) was distinguished and it was held that AO can make addition under s. 68 with regard to share capital also if it is found that shareholders are not existing. As against this, learned Authorised Representative of assessee supported order of learned CIT(A) and reliance was placed on judgment of Hon ble Delhi High Court rendered in case of CIT vs. Illac Investment (P) Ltd. (2007) 207 CTR (Del) 687: (2006) 287 ITR 135 (Del) and also on judgment of Hon ble Rajasthan High Court rendered in case of Shree Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432: (2006) 283 ITR 377 (Raj). It was also submitted by him that learned CIT(A) has upheld addition under s. 68 to extent of Rs. 85,500 and assessee has accepted same and assessee is not in appeal against upholding of this addition. We have considered rival submissions, perused material on record and have gone through orders of authorities below and judgments cited by both sides. We find that factual position after remand proceedings is that AO carried out verification in 96 cases on random basis out of total 196 cases. Out of these 96 cases, 64 persons have not responded and only 32 persons have responded to summons but summons were served to 74 persons and not served to 22 persons. It is noted by learned CIT(A) in para 14.1 of his order that as per analysis of remand report, all persons except 3 persons who have attended before AO admitted that they have subscribed to share capital of assessee. From this, inference has been drawn by learned CIT(A) that identity of shareholders are established and transactions are found to be genuine. learned CIT(A) has upheld addition with regard to 22 persons, on whom summons could not be served and also with regard to 3 persons, who have attended before AO but not confirmed regarding share application made by them. learned CIT(A) has confirmed addition with regard to these 25 persons amounting to Rs. 85,500 and regarding balance share application, it is noted by learned CIT(A) that since summons have been served on them, their identity is not in doubt and hence no addition can be made on this account. Reliance has been placed by learned Departmental Representative on judgment of Delhi High Court rendered in case of Sophia Finance Ltd. (supra), but we are of considered opinion that in facts and circumstances of this case, this judgment does not help case of Revenue because in present case, identity of all shareholders except 25 persons has been established. learned CIT(A) has upheld addition on account of those 25 persons whose identity has not been established and hence, fact remains that for additions deleted by learned CIT(A), identity of shareholders is not in doubt. As per judgment of Hon ble Delhi High Court rendered in case of Sophia Finance Ltd. (supra), ITO would be entitled to enquire and it would indeed be his duty to do so as to whether shareholders do in fact exist or not. If shareholders exist then, possibly, no further enquiry be made and it is also held that addition may be made by AO if shareholders do not exist. In present case, existence of shareholders is not in doubt with regard to those shareholders, addition on whose account has been deleted. We are of considered opinion that learned CIT(A) has examined issue in detail and decided issue in question correctly and we find no reason to interfere in his order on this issue. We, therefore, uphold his order on this issue and therefore this ground of Revenue is rejected. In result, appeal of Revenue stands dismissed. Now, we take up CO No. 458/Mum/2004 of assessee for asst. yr. 1997-98. learned Authorised Representative of assessee did not press this CO of assessee hence, this CO is dismissed as not pressed. Now, we take up Revenue s appeal in ITA No. 5550/Mum/2003 for asst. yr. 1999-2000. Ground No. 1 of appeal reads as under: "On facts and in circumstances of case as well as in law, learned CIT(A) erred in deleting addition of Rs. 1,23,750 made by AO on account of overtime payment beyond terms of agreement." learned Departmental Representative supported assessment order whereas learned Authorised Representative supported order of CIT(A). We have considered rival submissions, perused material on record and have gone through orders of authorities below. We find that this issue is decided by learned CIT(A) as per para 3.4 of his order and clear finding is given by him that AO has not disputed amount of Rs. 1,23,750 being amount paid to contractor for overtime. It is also noted by him that this amount was paid as overtime payment to M/s Sha Dwarkadas Vallabhdas & Co. and is confirmed by payee and such expenses incurred by assessee are for business purposes. It is also noted by him that necessity of payment of this amount has to be examined from businessman s angle. We reproduce relevant para of order of CIT(A): "I have carefully considered submissions of appellant company. At outset, it is relevant to mention that AO has not disputed payment of Rs. 1,23,750 being amount paid to contractor for overtime payment. amount paid as overtime payment to M/s Sha Dwarkadas Vallabhdas & Co. is confirmed by payee and such expenses incurred by appellant are for purposes o f business. necessity of payment of these expenses has to be examined from businessman s angle. appellant had obviously made payment of these expenses due to business contingencies. payee, i.e., M/s Sha Dwarkadas & Co., is not related to appellant and it is not AO s contention that t h e s e payments are bogus or transaction is "sham" transaction. expenses of Rs. 1,23,750 have been incurred wholly and exclusively for purpose of business and allowability of these expenses is not prohibited by s. 37(1) or any other provisions of IT Act. addition of Rs. 1,23,750 is deleted." learned Departmental Representative could not point out any specific defect in order of learned CIT(A) on this issue and under facts and circumstances of case, we find no reason to interfere in order of learned CIT(A) on this issue and hence we uphold same. This ground of Revenue is rejected. Ground No. 2 reads as under: "On facts and in circumstances of case as well as in law, learned CIT(A) erred in deleting addition of Rs. 4,43,350 made by AO in respect of sales-tax expenses on unaccounted sales." learned Departmental Representative supported assessment order whereas learned Authorised Representative supported order of learned CIT(A). We have considered rival submissions, perused material on record and have gone through orders of authorities below. We find that learned CIT(A) has deleted this disallowance on basis that this liability was set off against sales-tax refund receivable by assessee and such set off of this liability against sales-tax refund has been treated by learned CIT(A) as payment of sales-tax. But, this aspect is not clear from CIT(A) s order that whether this amount of refund against which this liability is set off, has been brought to tax in this year or not. If this amount of sales-tax refund has been subjected to tax in this year, assessee is entitled for deduction of sales-tax amounting to Rs. 4,43,350 as this liability has been set off against sales-tax refund and assessee is entitled to refund of net amount of sales-tax refund but if this amount of sales-tax refund is not subjected to tax in this year, then assessee is not entitled to get deduction on this amount in this year because this liability has been set off against this income which has not been offered to tax in this year. We, therefore, set aside order of learned CIT(A) and restore back this matter to AO with direction that he should decide this issue afresh after examining this aspect of matter and if it is found by him that sales-tax refund, against which assessee has set off this liability of sales-tax is subjected to tax in this year, then deduction should be allowed to assessee amounting to Rs. 4,43,350. He should pass necessary order as per law in light of this discussion and after providing adequate opportunity of being heard to assessee. This ground of Revenue stands allowed for statistical purposes. Ground No. 3 reads as under: "On facts and in circumstances of case as well as in law, learned CIT(A) erred in deleting addition of Rs. 50,00,000 made by AO on account of unaccounted sale proceeds of sludge." Briefly stated, facts are that there was survey under s. 133A of IT Act in business premises of assessee on 5th Feb., 1999 and in course of survey, assessee has made declaration of unaccounted income of Rs. 3 crores. It is stated by joint managing director of assessee company in his statement recorded in course of survey that assessee has received Rs. 3 crores on account of sale of unused oil and scrap which has not been recorded in books and same was offered for taxation. In course of assessment proceedings, another statement was recorded by AO under s. 131 on 21st March, 2002. In this statement it is stated by Shri Mullick, Joint Managing Director, that there is no sale of sludge after survey on 5th Feb., 1999. It is also stated by him in this statement that when survey was done, officers could not find anything after long period of survey and then after meeting with officers of survey, he had disclosed voluntarily this amount of Rs. 3 crores and used "income from sale of sludge" as vehicle to declare said income voluntarily. AO did not accept this contention of assessee that there was no sale of sludge upto date of survey and thereafter and he made addition of Rs. 50 lakhs on this account for period 6th Feb., 1999 to 31st March, 1999. On appeal, learned CIT(A) deleted this addition by holding that there is no evidence of sale outside books of account in post-survey period and action of AO of making presumptive addition cannot be sustained. Now, Revenue is in appeal before us. learned Departmental Representative supported assessment order. It is submitted by him that learned CIT(A) has deleted this addition on basis that no addition has been made on this account in three assessment years i.e. 1996-97, 1997-98 and 1998-99. It is submitted that each year is independent year and therefore, addition made by AO cannot be deleted on basis of assessment orders of three earlier years. It is also submitted that since assessee has admitted sludge sale upto date of survey on dt. 5th Feb., 1999, there is no reason that there was no such sale after 5th Feb., 1999. It was submitted by him that order of CIT(A) be reversed and that of AO be restored. As against this, learned Authorised Representative reiterated arguments advanced by him before CIT(A) and he supported order of CIT(A) on this issue. It was also submitted by him that no incriminating document was found by survey party and since survey party exerted undue pressure for declaration, covering of all lapses that might have occurred in accounts, assessee agreed to declare Rs. 3 crores as income from sale of sludge. income from sale of sludge was taken as vehicle to declare said income income from sale of sludge was taken as vehicle to declare said income voluntarily and, as matter of fact, no document showing income of alleged sale of sludge was neither found nor existed. It is also submitted that same AO, who passed order for this year, has completed assessment for asst. yrs. 1996-97, 1997-98 and 1998-99, and these orders were passed after date of survey and he had passed these orders based on book result and there was no addition in those 3 years on account of sludge sale and therefore, addition made to extent of Rs. 50 lakhs in this year has been rightly deleted by learned CIT(A) and order of learned CIT(A) should be upheld on this issue. Reliance was placed on following judgments in support of this contention that unless there is any material evidence, no addition can be made for earlier period or subsequent period: CIT vs. Dr. MKE Memon (2001) 168 CTR (Bom) 184: (2001) 248 ITR 310 (Bom) Shankar Rice Co. vs. ITO (2000) 67 TTJ (Asr) 84: (2000) 72 ITD 139 (Asr) Samrat Beer Bar vs. Asstt. CIT (2000) 69 TTJ (Pune)(TM) 113: (2000) 75 ITD 19 (Pune)(TM) Delhi Iron Syndicate (P) Ltd. Tax LR 1775 (All) Jain Steel (ITA No. 1505/Pune/1991, dt. 15th July, 1998). It is also contended that merely on basis of statement, no addition can be made and in support of this contention, reliance was placed on following Tribunal judgments: Pushpa Vihar vs. Asstt. CIT (1994) 48 TTJ (Bom) 389 India Seed House vs. Asstt. CIT (2000) 69 TTJ (Del)(TM) 241 We have considered rival submissions, perused material on record n d have gone through orders of authorities below and also judgments cited by learned Authorised Representative of assessee. We find that it is noted by AO himself that during course of survey, small writing pad was found from premises of assessee in which, cash receipt of Rs. 2.90 crores was written. This is not case of AO that any document or noting which was found suggests that such cash receipt was for sale of sludge. It is only in statement of joint managing director recorded during survey, he has stated that this amount plus another Rs. 10 lakhs were received on account of cash sale of scrap and unused oil known as sludge. In light of this factual position, we find force in contention of learned Authorised Representative that no incriminating document was found by survey party showing income for sale of sludge. document found in course of survey was regarding receipt of cash amounting to Rs. 2.90 crores and it is only on basis of this statement of joint managing director of assessee, AO has come to conclusion that this income of Rs. 2.90 plus another Rs. 10 lakhs totalling to Rs. 3 crores was on account of sale of sludge. assessee has submitted quantitative details of year and from same, it can be seen that closing stock as per books as on 31st March, 1999 was 21,324 MT against which, physical stock found on 31st March, 1991 was 20,924 MT and hence there was shortage of 400 MT. We find force in contention of learned Authorised Representative that this factual position regarding shortage of 400 MT also shows that this amount of Rs. 3 crores declared by assessee in course of survey action cannot be on account of sale of sludge because sale of 400 MT of sludge cannot fetch Rs. 3 crores. As per statement of Mr. Mullick, Joint Managing Director of assessee, price of sludge is Rs. 15 per kg. i.e. 15,000 per MT and as per this rate, sales price of 400 MT can be maximum of Rs. 60 lakhs and this fact supports case of assessee that this amount of Rs. 3 crores declared in course of survey action was not out of sale of sludge b u t income from sale from sludge was taken as vehicle to declare said income. If we now examine three assessment orders for asst. yrs. 1996-97, 1997-98 and 1998-99 passed by same AO on 26th March, 1999, 30th March, 1999 and 29th March, 2001, we find that all these assessment orders are passed after date of survey i.e. 5th Feb., 1999 and in none of these orders, any addition was made by AO on account of sale of sludge. This fact supports case of assessee and its contention that disclosure was made voluntarily as part of tacit understanding arrived between tax Department and assessee and after this, it has disclosed Rs. 3 crores and hence, no further addition should be made on that basis. In light of these circumstances, we are in agreement with learned Authorised Representative that there was no evidence found by survey party in course of survey regarding sale of sludge and theory of sale of sludge came into existence on basis of statement only of joint managing director of assessee company. same joint managing director has explained in subsequent statement that there was no sludge sale at any point of time and this theory of Shri Mullick was adopted as vehicle to make disclosure of Rs. 3 crores as per understanding between officials of survey team and assessee. In light of this fact that there was no evidence found regarding sale of sludge in course of survey action or otherwise, we are of considered opinion that learned CIT(A) has rightly deleted this presumptive addition made by AO. We find no reason to interfere in order of learned CIT(A) on this issue and hence, this ground of Revenue is rejected. In result, this appeal of Revenue is partly allowed for statistical purposes. *** INCOME TAX OFFICER v. LANYARD FOODS LTD.