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Issues involved:
1. Confirmation of addition of Rs. 42,47,084 by treating the liability in relation to sugarcane purchases from farmers as bogus. 2. Disallowance of Rs. 2,32,195 on account of alleged gift articles under r. 6B and disallowance of Rs. 54,020 on account of expenses relating to the previous year. Detailed Analysis: 1. The first issue pertains to the confirmation of the addition of Rs. 42,47,084 by treating the liability related to sugarcane purchases from farmers as bogus. The Assessing Officer (AO) selected five farmers for investigation out of a total of 27,000 farmers to examine the genuineness of the liability. Statements of the farmers were recorded, and discrepancies were noted regarding the timing of payments made by the company to the farmers. However, the company provided detailed explanations supported by documentary evidence, including invoices, weekly statements sent to authorities, and the company's operational procedures. The Tribunal found that the AO's approach of randomly selecting five farmers to draw adverse inferences against all outstanding balances lacked logic. Considering the overall evidence and the company's financial position, the Tribunal concluded that the addition was unjustified and ordered its deletion. 2. The second issue involves the disallowance of Rs. 2,32,195 for alleged gift articles under r. 6B and Rs. 54,020 for expenses relating to the previous year. The CIT(A) dismissed the grounds challenging these additions, stating they did not originate from the assessment order under appeal. The Tribunal noted that the AO had made prima facie adjustments totaling Rs. 2,86,195, which were included in the assessment order under section 143(3). The Tribunal remitted the matter back to the CIT(A) for a reasoned order on these additions, emphasizing that the consideration should be restricted to examining the additions on their merits as if made in a regular assessment under section 143(3). The Tribunal clarified that the additional income-tax levied under section 143(1A) would not be reconsidered, as no appeal had been filed against the intimation. In conclusion, the Tribunal allowed the appeal in part, directing a review of the additions related to alleged gift articles and expenses from the previous year.
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