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TMI Blog2002 (3) TMI 214X X X X Extracts X X X X X X X X Extracts X X X X ..... iability in the name of Shri Chandu Lal when Shri Chandu Lal was not produced for verification. 2. The learned CIT(A) has further erred in deleting the addition of Rs. 1,00,000 on account of bogus purchases. 4. Firstly, we shall take up ground No. 1 of the appeal relating to the deletion of addition of Rs. 2,55,200 by the CIT(A) on account of liability in the name of Shri Chandu Lal. The relevant and material facts for the disposal of this ground of appeal are that in the original assessment order, an addition of Rs. 2,55,189.96 was made by the AO in respect of the liability shown in the name of Shri Chandu Lal, proprietor M/s Jagatjit Industrial Corp. but the assessment order was set aside by the CIT(A) for reconsideration. As per the direction of the CIT(A), the AO asked the assessee to produce Shri Chandu Lal for examination. The assessee did not produce Shri Chandu Lal and on the address given by the assessee, Shri Chandu Lal could not be located. However, in its letter dt. 3rd Feb., 1995, addressed to the AO, the assessee explained that M/s Jagatjit Industrial Corp. Rolling Mills, Kapurthala, was a proprietary business of Shri Chandu Lal and the same was converted into p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined before him that the account of Shri Chandu Lal, was not signed and confirmed by him as there was certain dispute with him. The CIT(A) has also remanded the matter to the AO for enquiry at the appeal stage. On dissolution of the firm on 10th Feb., 1989, the assessee has taken over the business of the firm which was prior to 11th Jan., 1989 the proprietary business of Shri Chandu Lal. On dissolution of the said firm, the entire assets and liabilities were taken over by the assessee. 4.5 The CIT(A) also observed from the earlier order passed by the CIT(A) that the AO had been asked to verify the facts from the assessment record of Shri Chandu Lal and a copy of the account received from ITO, Jalandhar, indicated that Shri Chandu Lal was being shown as proprietor of M/s Jagatjit Industrial Corporation and even though balance more or less tallies with the amount shown at credit in his name in the books of account of the assessee, but there were certain other discrepancies which required clarification as there was a debit balance of Rs. 10,000 on 9th Feb., 1989, whereas no payment has been made to Shri Chandu Lal as per books of account available with the assessee. Further a sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rietor of M/s Jagatjit Inds. Corpn. Kapurthala, and on 10th Jan., 1989, the assessee became the partner with the firm and this firm was dissolved on 10th Feb., 1989 and the assessee took over the assets and liabilities of the firm. It has also not been controverted that this very amount has been reflected in the account of Shri Chandu Lal in his return which was borne from the assessment record of Shri Chandu Lal. It means that from the records and uncontroverted observations of CIT(A), it has been established that the amount in question does not relate to any credit as received during the current accounting period but this amount has been brought forward from the account of the firm whose assets and liabilities were taken over by the assessee on dissolution of the said firm and, so, the AO was not justified in making the impugned addition under s. 68 of the IT Act, as held by the CIT(A). 4.8 In this case we also find that according to CIT(A), in compliance with the setting aside order of CIT(A), discrepancies were explained by the assessee before the CIT(A) and the AO was not able to point out anything against this reconciliation which was explained by the assessee in his lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 approx. Because of the contradiction and due to the fact that Shri Rajiv Kaushal was not able to answer the AO regarding the number of shop, etc., the AO came to the conclusion that Shri Rajiv Kaushal was not doing any business of purchase and sale of lubricants during the financial year 1988-89 and, therefore, the said amount of Rs. one lakh as payable by the assessee to M/s National Sales Corp. was bogus and, so, he disallowed the claim of the assessee amounting to Rs. one lakh. 5.2 On appeal before the CIT(A), the assessee filed a copy of letter dt. 3rd Feb., 1995 written to AO wherein it had been stated that the amount of Rs. one lakh standing in the name of M/s National Sales Corp. is for the purchases made during the previous year and, therefore, expenditure has been incurred for the purpose of business and is allowable. The statement of Shri Kaushal has already been recorded earlier by the AO on this account. As per another letter filed dt. 29th May, 1995 by the learned Authorised Representative for the assessee, it was stated that a copy of the account of Shri Kaushal was filed before the CIT(A) who directed the AO to enquire into the purchases made from M/s Nationa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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