9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2005 (5) TMI 239 - AT - Income TaxIncome From Undisclosed Sources - unpaid liabilities (due to the Karigars) - Purchase not entered in the account books - non-production of the Karigars - trade of Banarsi sarees - 'cash credit' - HELD THAT - The purchases recorded in this manner have been accepted in toto, without any kind of controversy whatsoever. After the purchases of sarees supported by the 'Purjas' have been accepted, any further verification about the Karigars in whose favour such 'Purjas' have been issued is really not necessary; the reason being that it is the Karigar who come to the saree dealers and offers his stock for being dealt with by the saree dealers. The dealers also have no occasion to feel concerned about the names and addresses of such Karigars as purchases from them are made on credit and that too after due approval of the same through inspection and otherwise. In other words, it is only the verification of sarees that are brought for sale by the Karigars at the shop of the saree dealers which is relevant and not the Karigar themselves. It is for this reason that even the CBDT felt that, after the sales (made out of purchases from Karigars) are found to be verifiable, it is not necessary that there should be an insistence for producing the Karigars. The instructions like this, although, may not be capable of being treated as having binding effect, nonetheless they lay down necessary guidelines for completion of assessment in a particular line of trade. This logic is applicable with all its force in the present case. Necessity to have the addresses of the Karigars may arise only for the purposes of making enquiries from the Karigars, so far as the assessment of the saree dealers is concerned. If such a verification is not required to be made, in view of the regular system of accounting followed by the assessee as per the practice prevalent in this trade, we fail to understand as to why non-furnishing of addresses should be made an issue by the AO for making addition and that too on selective basis. This is more so in a case like this where the purchases and sales have been duly accepted. This leads to a conclusion that 'Purjas' themselves as also contents thereof have got great evidentiary value. If payment against the 'Purja' recorded in the books of account, then the liability in relation to such 'Purja has to be treated as genuine unless of course some material is brought on record that the assessee has actually made payment against the same which is not recorded. In the present case, no such material having been brought on record, it could not be said that the liability is bogus. Even at the cost of repetition, we state that bogus liability pre-supposes two things, firstly, there is a liability incurred and secondly, such liability has been discharged without being recorded in the books of account. As no such material is available on record, the liability in question cannot be said to be bogus so as to attract any addition on this score. It also appears to us that the AO has treated the liability to be of 'cash credit' in nature and that is why he felt anxious to have the identities of the creditors established. In this respect, first of all, we hold that credits 'in the sundry creditors (Udhar Khareed) Khata' are referable to the purchases of sarees made on credit basis. As the purchases have been held to be genuine and accepted as such, the credits that remained outstanding in such account cannot be treated to have remained unexplained. The balance appearing in this account, which included the disputed addition also, is the sum total of purchases that remained unpaid at the end of the year. As the genuineness of such purchases has not been disputed, rather, the same has been accepted, the credits stand fully explained and no adverse inference is called for, either on facts or in law. Thus, on a consideration of totality of facts and circumstances of the case, as have been discussed above, we hold that the liability aggregating Rs. 1,05,800 as has been shown against 15 Purjas/Karigars could not be treated as bogus liability. The learned CIT(A) has rightly deleted the addition and no interference in the same is called for. While upholding his finding, we dismiss the grounds of appeal raised by the Revenue. In the result, the appeal directed by the Revenue is dismissed.
Issues Involved:
1. Relief of Rs. 1,05,800 granted by the first appellate authority. 2. Treatment of outstanding liabilities on "Karigars account" as bogus. 3. Acceptance of purchases and trading results. 4. Verification and identification of Karigars. 5. Applicability of CBDT instructions. Issue-Wise Detailed Analysis: 1. Relief of Rs. 1,05,800 Granted by the First Appellate Authority: The Revenue's appeal was directed against the relief of Rs. 1,05,800 granted by the CIT(A) for the assessment year 1997-98. The primary contention was that this amount, treated as a bogus liability by the Assessing Officer (AO), was erroneously deleted by the CIT(A). 2. Treatment of Outstanding Liabilities on "Karigars Account" as Bogus: The AO treated a part of the outstanding liabilities on "Karigars account" as bogus, specifically an addition of Rs. 1,05,800, due to incomplete addresses in the "Purjas" which led to the inference that the Karigars were not identifiable. The total liability on this account was Rs. 83,96,602. The AO listed 15 cases on a random basis and treated these as representing bogus liabilities. 3. Acceptance of Purchases and Trading Results: The assessee maintained books of account in the regular course, subjected to tax audit under Section 44AB, and the trading results were invariably accepted. The purchases, both from organized sector parties and Karigars, were fully supported by Purjas issued by the assessee. The CIT(A) deleted the addition on the grounds that after accepting the purchases as genuine, a part of unpaid liabilities on account of such purchases could not be disallowed. 4. Verification and Identification of Karigars: The AO's primary ground for treating the liabilities as bogus was the lack of complete addresses for the Karigars. However, the CIT(A) and the Tribunal found that the assessee's method of accounting and maintaining records, including the Jama Jakhar Bahi and the ledger, was consistent and verifiable. The Tribunal noted that the identity of Karigars was not crucial as long as the purchases and sales were verifiable. The case of M/s Kusum Saree Kendra was cited, where non-production of Karigars was not considered a valid ground for rejecting the books of account. 5. Applicability of CBDT Instructions: The CBDT had issued instructions that the presence of Karigars should not be insisted upon for verification of purchases if the sales were verifiable. These instructions were circulated by the Chief CIT, Allahabad, to the concerned CIT, Varanasi. The Tribunal noted that while these instructions were not binding, they had persuasive value and reflected the policy of tax administration. The instructions emphasized that the verification of purchases should not require the production of Karigars if the sales were verifiable. Conclusion: The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 1,05,800, concluding that the liability could not be treated as bogus. The Tribunal emphasized that the assessee's method of accounting was consistent and verifiable, and the purchases and sales were accepted. The Tribunal also acknowledged the CBDT's instructions, which discouraged insisting on the production of Karigars for verification. Consequently, the appeal by the Revenue was dismissed.
|
