1994 (10) TMI 34 - HC - Income Tax

Summary

Issues:
1. Addition made in respect of alleged bogus purchase of raw cashew
2. Valuation of closing stock of African raw nuts
3. Payment of Rs. 50,000 to Rajan by an uncrossed bearer cheque

Analysis:

Issue 1: Addition made in respect of alleged bogus purchase of raw cashew
The case involved a dispute regarding the addition made by the Income-tax Officer for the alleged bogus purchase of raw cashew. The Commissioner (Appeals) reduced the addition, but both the assessee and the Department appealed to the Tribunal. The Tribunal dismissed both appeals and sustained the addition of Rs. 4.5 lakhs. The Tribunal found evidence of local purchases from unauthorized dealers and suppression of out-turn in earlier years. It concluded that a substantial quantity of cashew was purchased from authorized dealers. The Tribunal's decision was based on an evaluation of evidence and materials, and it was deemed justified. The court held that no question of law arose from this part of the Tribunal's order.

Issue 2: Valuation of closing stock of African raw nuts
The Revenue sought reference on the valuation of the closing stock of African raw nuts, specifically regarding the inclusion of purchase tax. The Tribunal directed the Income-tax Officer to verify if the closing stock value included purchase tax and allowed the assessee to amend the value if necessary. The court found the Tribunal's direction justified and did not identify any legal issue arising from it.

Issue 3: Payment of Rs. 50,000 to Rajan by an uncrossed bearer cheque
The third point of contention was the payment of Rs. 50,000 to Rajan by an uncrossed bearer cheque. Initially, the assessee claimed the payment was made by a crossed cheque, but later admitted it was a bearer cheque. The Tribunal deemed the payment genuine and allowed the deduction based on rule 6DD(j) of the Income-tax Rules. The court found a legal question arising from this finding and directed the Tribunal to refer the question of law regarding the deduction of Rs. 50,000 to Rajan under section 256(2) of the Income-tax Act, 1961.

In conclusion, the judgment addressed the issues related to the addition of alleged bogus purchase, valuation of closing stock, and payment to Rajan. The court found no legal questions arising from the first two issues but directed a reference on the deduction of Rs. 50,000 to Rajan for further determination.