2001 (3) TMI 253 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 4,20,184 to the assessee's income.
2. Addition of Rs. 3,76,114 for lower yield of rice and by-products.

Summary:

1. Addition of Rs. 4,20,184 to the Assessee's Income:
The primary issue in the assessee's appeal (I.T.A. No. 1657/Chd./90) was the upholding of an addition of Rs. 4,20,184. The assessee firm, engaged in rice selling, claimed to have sold paddy to M/s. Ganesh Rice Mills, which was contested by the Revenue based on a statement from Shri Sat Pal, a partner at M/s. Ganesh Rice Mills, denying any such purchase. The Assessing Officer (AO) and the CIT (A) upheld the addition, treating the amount as income from undisclosed sources u/s 68/69A due to discrepancies in sales tax forms and the absence of the broker, Shri Bachan Lal, for examination.

The Tribunal noted that the books of account were regularly maintained and audited, and no discrepancies were found by the Revenue. The sales were also accepted by the Sales-tax Department. The Tribunal found that the Revenue's case was built on suspicion and that the application of section 68/69A was improper as it was not a case of cash credit simpliciter. The Tribunal ordered the deletion of the addition of Rs. 4,20,184, emphasizing that suspicion, however strong, cannot substitute for evidence.

2. Addition of Rs. 3,76,114 for Lower Yield of Rice and By-products:
In the Revenue's appeal (I.T.A. No. 1727/Chd./90), the issue was the addition of Rs. 3,76,114 for allegedly showing a lower yield of rice and other by-products. The AO had initially computed a concealed income of Rs. 3,76,114 due to lower yield but did not make this addition separately, considering it telescoped in the higher addition of Rs. 4,20,184.

The CIT (A) did not find justification for a further addition of Rs. 3,76,114. However, the Tribunal, considering that the higher addition of Rs. 4,20,184 was deleted, restored the matter back to the CIT (A) to reconsider the issue of addition of Rs. 3,76,114.

Separate Judgment:
Per Gandhi, a separate judgment was delivered dissenting from the majority view, holding that the addition of Rs. 4,20,184 was justified based on the evidence and the sequence of events, including the dubious nature of the alleged sale and the failure of the assessee to produce the broker, Shri Bachan Lal, for examination.

Final Order:
The majority opinion led to the deletion of the addition of Rs. 4,20,184, and the matter regarding the addition of Rs. 3,76,114 was remanded back to the CIT (A) for reconsideration. The assessee's appeal was allowed, and the Revenue's appeal was allowed for statistical purposes.