1998 (9) TMI 115 - AT - Income Tax

Summary

Issues Involved:

1. Alleged inflation of rice bran purchase price.
2. Alleged bogus purchases of rice bran.
3. Disallowance of telephone expenses.
4. Disallowance of car expenses.

Summary:

1. Alleged Inflation of Rice Bran Purchase Price:
The assessee contended that the purchases from M/s Raj Kumar Raghubir Kumar were genuine and supported by bills and payments made by account payee cheques. They argued that the average purchase rate for the entire year should be considered, which was Rs. 159.46 per qtl., whereas they paid Rs. 148.73 per qtl. to M/s Raj Kumar Raghubir Kumar. The Tribunal directed the Assessing Officer to recompute the addition based on the average purchase price for the entire year and the price paid to M/s Raj Kumar Raghubir Kumar.

2. Alleged Bogus Purchases of Rice Bran:
The Assessing Officer alleged that the purchases from M/s Raj Kumar Raghubir Kumar were bogus, citing reasons such as the non-existence of the firm at the given address, absence of telephone and sales tax numbers on bills, and transportation of goods by vehicles with registration numbers that did not exist or were inappropriate for transporting rice bran. The CIT(A) and the Tribunal found that the raw material did flow into the factory and was used in production, as evidenced by day-to-day records. However, the Tribunal upheld the addition of Rs. 1,45,600 for 1300 qtls. of rice bran transported by vehicles with bogus registration numbers, which did not reach the assessee's premises.

3. Disallowance of Telephone Expenses:
The CIT(A) upheld the disallowance of Rs. 2,000 out of telephone expenses on account of alleged personal use by the Managing Director. This disallowance was not pressed by the assessee during the hearing before the Tribunal and was dismissed as not having been pressed.

4. Disallowance of Car Expenses:
The CIT(A) upheld the disallowance of 1/4th of the car expenses amounting to Rs. 11,923 on account of alleged personal use by the Managing Director. This disallowance was also not pressed by the assessee during the hearing before the Tribunal and was dismissed as not having been pressed.

Separate Judgment:
The Judicial Member upheld the addition of Rs. 17,25,300 on account of bogus purchases from M/s Raj Kumar Raghubir Kumar, rejecting the books of account u/s 145(2) and invoking the provisions of section 145 of the I.T. Act. However, the Accountant Member partially allowed the assessee's appeal, directing the Assessing Officer to recompute the addition for inflation in purchase price and confirming the addition for bogus transportation. The matter was referred to a Third Member, who agreed with the Accountant Member's view, leading to the conclusion that the assessee did purchase rice bran either from M/s Raj Kumar Raghubir Kumar or some other party/parties, and the rice bran did go into production.