2002 (1) TMI 272 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the order under section 154 by the Assessing Officer.
2. Justification of the addition of Rs. 1,29,215 by the Assessing Officer.
3. Merger of the assessment order with the CIT(A) order.
4. Validity of the rectification under section 154.
5. Genuineness of the purchases from M/s. Rameshwar Enterprises.
6. Impact of the addition for low yield on the separate addition for inflated purchases.

Detailed Analysis:

1. Legality of the order under section 154 by the Assessing Officer:
The assessee challenged the legality of the order passed under section 154 by the Assessing Officer, claiming that the addition of Rs. 1,29,215 was unjustified and should be deleted. The Assessing Officer had initially discussed the addition in the assessment order but failed to include it in the computation of total income. The CIT(A) upheld the rectification under section 154, stating that the omission was a mistake apparent on record.

2. Justification of the addition of Rs. 1,29,215 by the Assessing Officer:
The Assessing Officer observed that the purchases of lime stone from Shri M.L. Grover, Katni, were not verifiable and suspected inflated purchases. The Inspector's enquiry revealed that Shri Grover denied making any sales to the assessee. Consequently, the Assessing Officer disallowed the purchases and added Rs. 1,29,215 to the total income. However, this addition was not included in the final computation, leading to the rectification under section 154.

3. Merger of the assessment order with the CIT(A) order:
The assessee argued that the assessment order had merged with the CIT(A)'s order, and thus, the Assessing Officer could not rectify it under section 154. The CIT(A) had declined to adjudicate the issue of the addition of Rs. 1,29,215, as it was not included in the final computation. The Tribunal noted that the issue was not adjudicated by the CIT(A), and therefore, it did not merge with the appellate order.

4. Validity of the rectification under section 154:
The Tribunal examined whether the omission of the addition in the final computation was a mistake apparent on record. The Tribunal concluded that the omission was a glaring and obvious mistake, justifying the rectification under section 154. The Assessing Officer was fully justified in rectifying the mistake, and his actions were upheld by the CIT(A).

5. Genuineness of the purchases from M/s. Rameshwar Enterprises:
The assessee contended that the purchases were genuine and provided a certificate from M/s. Rameshwar Enterprises. The Tribunal noted that the Assessing Officer had mentioned purchases from Shri M.L. Grover, not M/s. Rameshwar Enterprises. The Tribunal found that the purchases were not verifiable, and the addition was justified based on the available evidence.

6. Impact of the addition for low yield on the separate addition for inflated purchases:
The Tribunal considered the argument that the addition for low yield should cover the inflated purchases. The Assessing Officer had already made a significant addition for low yield, which was partly upheld by the Tribunal. The Tribunal concluded that no separate addition for inflated purchases was required once the addition for low yield was made.

Separate Judgment by Accountant Member:
The Accountant Member disagreed with the conclusion of the Judicial Member and recorded a separate finding. He noted that the inflation of purchases would result in low yield, and once the addition for low yield was made, no separate addition for inflated purchases was justified. He deleted the addition of Rs. 1,29,215 made by the Assessing Officer under section 154.

Third Member Order:
The Third Member was appointed to adjudicate the point of difference. He concurred with the Accountant Member, noting that the purchases were genuine and the addition for low yield covered the inflated purchases. The Third Member concluded that the addition of Rs. 1,29,215 was not warranted and should be deleted.

Final Decision:
In conformity with the majority opinion, the Tribunal adjudicated the issue in favor of the assessee. The appeal of the assessee was allowed, and the addition of Rs. 1,29,215 was deleted.