9911796707
TMI Blog2000 (11) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... ed argument note running into 18 pages and also a paper book. The learned counsel for the assessee has also filed his separate comments on the reasons given by the AO, and also his comments on the argument note filed by the learned Departmental Representative. 3. The assessee has filed originally various grounds running into ten pages. These grounds are of an argumentative nature. Subsequently, the learned counsel for the assessee has filed revised grounds, which are 12 in numbers. We do not find it necessary to reproduce all the grounds. The gist of the grounds is that each of the additions made by the AO has been arranged. 4. This is a case which illustrates the extent of damage that can be done by an ill-informed and ill-trained, and possibly overworked part-time accountant. 5 The assessee-firm is engaged in the business of purchase and sale of lottery tickets from 1991 onwards. It is one of the authorised principal agents of Kerala State lottery tickets. It is also authorised agent of lotteries run by other State Governments to sell their tickets within the State of Kerala. The lottery tickets are distributed among the various sub-agents operating at the District level ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o produce whatever evidence it would like to produce to substantiate its claim with proper application of mind. 8. In the result, the appeal is allowed for statistical purposes." 7. It may be mentioned that in the first block assessment made on the assessee, a substantial addition made of asmuch as Rs. 1,15,41,397 relates to the asst. yr. 1995-96. For this assessment year the assessee had filed the return in the normal course on 31st Oct., 1995, i.e., on the due date for filing of the normal return. In other words, the normal return for this year had been filed much before the block return had been filed, even though no assessment seems to have been framed under s. 143(3) before the first block assessment had been completed. This fact is of some relevance, as it will be apparent in the course of this order. 8. In pursuance of the directions given by the Tribunal in its order dt. 18th Nov., 1997, the AO had completed the block assessment a second time vide his impugned order dt. 28th March, 2000, and that is how the matter is again before us. In the second block assessment made by the AO he has almost verbatim repeated all but one of the additions made in the first assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the day book (cash book) includes not only the cash as such, but also the prize winning tickets (hereinafter referred to as PWTs) received. In the written submissions filed before us, the assessee has explained this aspect of the matter at pp. 10 and 11 of its argument notes, which reads as under: "(b) Settlement Procedure In a raffle, number of lottery tickets (more than 1,00,000) win prizes of smaller value. In a majority of the cases, the value of the prizes will be less than Rs. 100. To claim the prize, the person holding the prize-winning ticket should present the ticket in the office of the Directorate of State Lotteries. With regard to the prizes of the lotteries run by other State Governments the claim has to be made at the respective States. As the value of the prize is less than Rs. 100, it will not be economical to personally claim the prizes at the respective places. So to receive prize money at the earliest, the prize winning tickets will be given to the local agent. He will purchase such prize winning tickets and will take a nominal commission for such services rendered. The prize winning tickets so collected from several such persons will be given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edgerised, whereas the others have not been ledgerised. This is an aspect of the matter which has been argued by the learned Departmental Representative before us, but this has no relevance so far as the additions made by the AO are concerned and so we shall revert to it subsequently. At this stage, suffice it to state that the cash balance recorded in the day books includes the value of the PWTs. 11. During the search action a number of registers were seized and they include the following: (i) Day book for financial year 1994-95. (ii) Fair ledger for the year 1994-95. (iii) Day book for the year 1995-96. (iv) Another ledger (hereinafter called personal ledger) for 1995-96 (MMC 11 MMC 16). It may be mentioned that the ledger for 1995-96 was not among the seized ledgers and the claim of the assessee is that it had not been written even up on the date of the search. 12. It is also necessary to mention the nature of the so-called personal ledger for the year 1995-96, which forms the basis for a substantial portion of the addition made by the AO in the block assessment. It is in two parts described in the assessment order at pp 3 and 4 as ledger No. MMC 11 and MMC 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lliterate and ignorant could not notice those blunders initially. The accountant maintained the day books for 1994-95 and 1995-96 continuously and in the day book for 1995-96 as on 1st April, 1995, he brought forward the cash balance as on 31st March, 1995, in the day book for 1994-95. He, however, noticed some of his egregious blunders only at the time of finalisation of accounts for the year 1994-95, i.e., in September, 1995, for the purpose of filing the income-tax return for the asst. yr. 1995-96. The blunder noticed was that the prize winning tickets (PWTs) received from different parties had been issued to other parties, i.e., creditors, but they were not recorded in the day book. While the receipts of PWTs were recorded regularly, the issue of PWTs, though effected, was not reflected in the day book. Consequently there was an overstatement of cash balance, which, as already mentioned, included the PWTs matched by a corresponding overstatement of creditors because their accounts were not debited in the books for the PWTs issued to them. So, when this blunder was noticed in about September, 1995, he recorded the issue of PWTs in the day book for 1994-95 as on 30th and 31st Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 65,58,110 on the ground of discrepancy between the cash balances on the basis of the figures recorded in the seized day books for 1994-95, 1995-96, he totally ignored the day book for 1995-96 and the rectification entries passed therein while making the other addition of Rs. 49,83,287 towards understatement of debtors, which has been discussed by us hereinabove. For making that addition the AO took into account only the personal ledger for 1995-96 and totally ignored the rectification entries passed both in the day book for 1994-95 as on 30th and 31st March, 1995, and the day book for 1995-96 as on 31st May, 1995. So, the claim of the learned counsel for the assessee has been that the AO had selectively relied and ignored the seized material to draw adverse inferences instead of taking a holistic view. 15. The story of the egregious blunders committed by the accountant does not stop here. As mentioned above, some of the blunders were rectified in September/October, 1995 while filing the income-tax return for 1995-96. The results of the rectification entries had also been incorporated in the final accounts filed along with the return for the year 1995-96. Thereafter, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its of Rs. 40,08,241 equals the aggregate of the understated credits in the name of two creditors. Now, the question is how are these rectification entries effected. The version of the assessee is that as these blunders in question were noticed after the search action and as the day books of both the years 1994-95 and 1995-96 along with the fair ledger for 1994-95 had been seized by the Department and as such were not available to the assessee, it could not effect the necessary rectification entries in respect of the above five accounts (three debits and two credits) only in the fair ledger for 1995-96. The blunders in question in the above five accounts were noticed in about March, 1997. He incorporated the correct balances in the above five accounts (3 assets 2 creditors) as opening balances in the ledger for 1995-96, as this ledger was not even started upto that date. As the total of the three assets is matched by the total of the two creditors, it did not make any difference for the tally of the trial balance. Even without a corresponding entry in the day book for 1994-95 or the ledger for 1994-95 the assessee incorporated the above assets and liabilities and filed a revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sent to bank for collection and credited to bank account. However, in the accounts the facts that they were drafts received and were sent to bank were not recorded as such. If that was so, there would be an inflation in cash/prize winning tickets in the cash book as the remittances to the bank were not routed through cash book. The inflation in cash Rs. 24,81,467 will be separately considered. The unaccounted bank balance for asst. yrs. 1992-93 to 1995-96 are considered as undisclosed income as under: Asst. yr. Rs. Rs. 1992-93 : Unaccounted balance 27,132 1993-94 : Unaccounted balance 31-3-1993 27,412 Less : Considered in 1992-93 27,132 1994-95 : Unaccounted balance 31-3-1994 27,412 280 Less : Considered in 1992-93 1993-94 27,412 Balance Nil 1995-96 : Considered separately under inflation in cash balance for 1996-97. Hence unaccounted balance assessable is considered as Nil Nil 10. Inflation in cash: While considering the unaccounted bank balance in the account of Canara Bank, Kottayam, an amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside the books amount to Rs. 5,70,00,000. Taking the percentage of profit in comparable cases of lottery agents the income earned by the assessee out of the sales outside the books of accounts was estimated at 1 per cent of the sales. Thus, an addition of Rs. 5,70,000 was made in the case of the assessee." 18. Before us, the learned counsel for the assessee mentioned the background of the assessee, in the argument notes given by him, in the following terms: "Background of the assessee: For the purpose of more clarity and easy understanding, background of the appellant-firm and its partners are given below: The appellant is a partnership firm consisting of the following partners: 1. Mr. T. Murugan 2. Mr. T. Selvaraj 3. Mrs. Palthurachi 4. Mr. T. Sengottal Singam 5. Mrs. Madathiammal Out of these, Mrs. Madathiammal is the mother of the other four partners. She migrated to Kerala seeking livelihood and accepted the employment as a casual and domestic worker in various houses. She could give only primary education to her children. The eldest son Sri Murugan, at the age of 20 years, was searching for an employment to have his livelihood. Due to lack of educati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered (by way of winnings from lotteries during asst. yrs. 1989-90, 1990-91, 1991-92 1993-94) Total Rs. Rs. Rs. 1. T. Murugan 3,97,206.85 6,04,497.00 10,01,703.85 2. T. Selvaraj 4,94,211.50 5,44,994.00 10,39,205.50 3. T. Sengottu Singham 5,35,792.15 2,43,492.00 7,79,284.25 4. Madathi Ammal 48,337.00 — 48,337.00 5. Palthuraichi 1,72,237.00 — 1,72,237.00 Total 16,47,784.50 13,92,983.00 30,40,767.50 The thrust of the argument of the learned counsel for the assessee is that if the firm or the partners have made income of the order of Rs. 1,46,20,170 during the block period, it would have surfaced as assets acquired during the block period. As there is no acquisition of unexplained assets, it is pleaded that the income returned in the block return deserves to be accepted. 19. Now we shall turn to the separate additions made by the AO. In respect of the addition of Rs. 49,83,287 made for the asst. yr. 1995-96, it is mentioned that the correct balance as per the personal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the debts owed to Sri Hariharan and M.M. Khan Bros. to the above-mentioned figure of Rs. 10,22,936, we arrive at the debtors as per the revised balance sheet of Rs. 27,03,190. The reconciliation can be seen in the following manner also: Rs. Balance of debtors in MMC-11 and MMC-16 adopted by the ADI and the AO 60,06,224 Error in the figure adopted by ADI and AO 2,10,000 Correct balance of debtors in MMC-11 and MMC-16 62,16,225 Less : Adjustments made in the accounts before filing the first balance sheet or before search 35,13,333** Balance as per revised balance sheet 27,03,192 Less : Debtors as per original balance sheet 10,22,936 Difference in the debtors between the first balance sheet and the revised balance sheet or total of adjustment made after search 16,80,256 @@ Rs. ** Discounts etc. written off (Col. 3 of Annexure -1 to assessment order) 15,29,853 Omissions in accounting for receipts, etc. rectified subsequently (Col. 7 of Annexure-1 to assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by us for the block period 1985-86 to 1995-96 and the hearing conducted on various occasions to offer our explanations and clarifications on the several matters stated in the return and the forwarding letter. Now we submit the following additional clarifications, explanations and furnish the evidences to enable your goodself to complete the assessment for the block period in a realistic and fair manner by taking into consideration justice and equity. It appears your goodself proposed to complete the assessment and determine the income for the block period on the basis of the finding made by the ADI, Kottayam, in his appraisal report. The ADI in finalising the appraisal report did not give us an opportunity to offer our explanations on the various matters relied on by him. It is understood that by referring to a rough book taken from the place of business of our firm the ADI had prepared a statement of certain balances as appeared in the name of some lottery sub-agents and came to a conclusion that those amounts represent the actual receivables from them. As already stated by us, this statement prepared by the ADI contains even the balances in the name of our own branches at Kotta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made as per Annexure-I to the assessment order had also been furnished. The balances of debtors as reflected in the revised balance sheet and mentioned in Annexure-I had also been supported by affidavits of the concerned parties, which had been filed before the AO even before the first block assessment had been made. It is to verify the correctness of there affidavits, if doubted, that the Tribunal had set aside the block assessment in the first round. The AO apparently did not doubt the affidavits. So he did not make any attempt to examine the deponents or to throw doubt on their version. Having accepted the affidavits, it is pleaded that the AO was totally wrong in rejecting the contention of the assessee that the MMC-11 and MMC-16 did not reflect the correct balances due from the various parties. The learned counsel for the assessee has also furnished before us the affidavits filed by the different parties, which are contained at pp. 1 to 112 of the assessee's paper book No. 1. He has also filed the details of the adjustments made of Rs. 15,29,853 (col. 3 of Anneuxre-1 to the assessment order) and of Rs. 2,25,095 (col. 8 of Annexure-1 to the assessment order) at p. 1 of paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the day book for 1995-96. 20. The learned counsel for the assessee, mentioned that the assessee had furnished confirmation letters about the correct credit balances in the name of Madhangi Lottery Agencies and Harsha Agencies. The confirmation in the name of Madhangi Lottery Agency, dt. 8th Jan., 2000, given on 24th Jan., 2000, to the AO, reads as under: "Dear Sir , Sub: Confirmation of balance for the Accounting year 1994-95. Ref. Your letter dt. 4th Dec., 1988 . We do hereby confirm that a sum of Rs. 18,85,619.60 (Rupees eighteen lakhs eighty-five thousand six hundred nineteen and paise sixty only) is outstanding, as per our records, as payable to us by you as on 31st March, 1995, against the value of lottery tickets sold to you. Our Income-tax No. (OLD) PAN : 45-52-PQ-2965/DC/Company Circle-11(1)/CBE and NEW PAN : ADJPM0921E. Thanking you and assuring you of our best cooperation always." It may be noticed that the confirmation is for Rs. 18,85,619, whereas as per the revised balance sheet the amount owed by the assessee is of the order of Rs. 19,49,368. The confirmation given by M/s Harsha Agencies, dt. 13th Jan., 2000, which was handed over to the AO in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on 30th and 31st March, 1995, by way of recording the despatches of PWTs to Madhangi Lottery Agencies and other parties and thus the total of cash balance plus PWTs has been reduced from Rs. 66,42,185 to Rs. 84,074 as shown in the above reconciliation statement. We have already mentioned that the corresponding entries in the day book for 1995-96 had been made on 31st May, 1995, for the reasons already mentioned hereinabove. Before us, the learned counsel for the assessee has enclosed the day book entries on 30th March, 1995, and 31st March,1995, in paper book No. 6 in support of the above entries. It is claimed that the addition of Rs. 65,58,110 is totally unjustified, as the said entries were made before the search and are evidenced even by the seized records. 22. With regard to the addition of Rs. 24,81,361 for the asst. yr. 1996-97 and the linked additions of Rs. 27,132 for 1992-93 and Rs. 280 for the asst. yr. 1993-94 as unaccounted bank balances, we have already referred to the explanation of the assessee that the bank balances in the Canara Bank has been reflected in the revised balance sheet filed by the assessee. This was filed subsequent to the search. But as already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice. 2. M/s Mathangi Lottery Agency, Prop. Shri S.S. Manian, is assessed in this Circle. 3. The total sundry debtors for the asst. yr. 1996-97, financial year 1995-96 is Rs. 52,75,36,277, out of which the debts appearing against M/s Meenakshi Lucky Centre, Kottayam is Rs. 18,85,619. Copy of account of M/s Meenakshi Lucky Centre is not available in the case records. 4. This amount payable by M/s Meenakshi Lucky Centre to my assessee has not changed during the next year and the balance as on 31st March, 1997, is also shown at Rs. 18,85,619." The letter of Dy. Director of Income-tax (Inv.), Bangalore, dt. 27th Sept., 2000, referred to at No. 3 above reads as under: "Sir, Sub: Confirmation of balance in the case of M/s Harsha Agencies—Reg. As directed by the Addl. Director of Income-tax (Inv.), Unit-I, Bangalore, two Inspectors were deputed to cause an enquiry at M/s Harsha Agencies, Power Green Building, Paris Corner, Bangalore, Please find enclosed Inspector's Report which is self-explanatory. REPORT As directed by the Dy. Director of Income-tax (Inv.), Unit-1(3), Bangalore to collect the account extract of Meenakshi Lucky Centre from M/s Harsha Agenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Departmental Representative specially wanted to rely. The other two letters do not add anything further to the stand of the Department. It may be observed that actually the Dy CIT Coimbatore has also confirmed the credit balance in the name of Madhangi Lottery Agency to the extent of Rs. 18,85,619 as on 31st March, 1995. The credit balance shown by the assessee in the name of Madhangi Lottery Agency in the revised balance sheet as on 31st March, 1995 is slightly higher, i.e., Rs. 19,49,368. This difference is explained by the learned counsel for the assessee before us as having been due to certain discounts claimed by the assessee which were allowed by Madhangi Lottery Agency subsequently, but not intimated to the assessee as on 31st March, 1995. So far as the Inspector's report regarding M/s Harsha Agency is concerned, the learned counsel for the assessee pointed out that possibility mentioned in the said letter of the tenants taking the premises in their individual capacity. At any rate, it is mentioned that the assessee did not have any further interest in M/s Harsha Agency after settling the account with then in May, 1995. As already mentioned, we are of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be included. The claim is that actually considering the casting mistake of Rs. 2,10,000, there would be a net enhancement of Rs. 89,458. The learned Departmental Representative also mentioned that the confirmation given by M/s Madhangi Lottery Agency cannot be accepted at its face value because they were confirming a balance of Rs. 18,55,619, whereas the balance as per the revised balance sheet of the assessee as on 31st March, 1995, is of the order of Rs. 19,49,369. However, the main thrust of the argument of the Departmental Representative is directed against the objections of the assessee to the addition of Rs. 65,58,110 and the arguments advanced are so tangled, we find we have no alternative except to reproduce the relevant portion of the argument, though it is somewhat too expansive: "10. The objection of the assessee to the additions of Rs. 65,58,110 is based on the grounds that it is due to omission in accounting the issue of prize winning tickets to the creditors for the supply of lottery tickets on the actual date of issue. It is alleged that the mistake was identified in October, 1995, but by that time the opening balance had been brought forward in the cash book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,58,110 on the debit side of the cash book on 1st April, 1995, if that be so, not cancelled by a simple credit entry in the cash book on 29th March, 1995 of an equal amount clarifying that the mistaken debit in the cash book was removed by the rectification entry. The assessee has not answered this point. The second question is why is it that the assessee has made a credit entry of Rs. 65,36,414 on 1st April, 1995, in the account of M/s Madhangi Lottery Agency in the financial year 1995-96, while already this account had been squared up in the books of financial year 1994-95. The further question is, how is that the assessee became aware of the opening balance of Rs. 19,49,368 in October, 1995 while the assessee claims that it became aware of this opening balance in March, 1997, when it filed a raised balance sheet as on 31st March, 1995, before the AO. How is it that the assessee completely wiped out the alleged credit entries as on 1st April, 1995, by the debit entries of Rs. 1,11,77,992 consisting of two amounts on 29th May, 1995 and 30th May, 1995, while the alleged credit total till that date in that account was only of Rs. 84,85,783. What is the nature and source of other cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed before us a separate paper book containing his comments on the observations of the AO and the learned Departmental Representative. In his rejoinder it is mentioned that no details were asked from him about any of his claims contained in Annexure-1 of the assessment order, even though he appeared many times before the AO. He further mentioned that the assessee-firm has claimed substantial amounts in different years under the head "agency bonus and commission" and the various write offs, inclusive of bad debts, are included under this head in the P L a/c of different years. 26. We are of the view that the explanations offered by the assessee have been rejected without any basis, it does not mean that they are false. We are in agreement with this contention of the learned counsel for the assessee. As the AO has not made any effort to even question the deponents in spite of a specific opportunity having been granted by the Tribunal vide its earlier order dt. 18th Nov., 1997, we infer that the AO has implicitly accepted the affidavits. We also find that the assessee has claimed substantial amount under the head "agency bonus and commission" in different years, as is evident fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rstatement of cash balance, we are of the view that the elaborate objections taken by the learned Departmental Representative, which we have extracted hereinabove, proceed from a failure of comprehension of the relevant accounting entries. The summary of the copy of account of Madhangi Lottery Agency in the ledger for 1995-96, as given by the learned counsel for the assessee at p. 17 of his paper book No. 6 stands as under: Date Particulars Amount Amount Rs. Rs. 1-4-1995 Opening balance 19,49,368.45 Excess credit for the transfer entries effected on 31-3-1995 65,36,414.55 84,85.783.00 26-3-1996 Other credits 26,92,209.00 Rectification entry passed for the issue of prize winning tickets 1,11,77,992.00 29-5-1995 26,50,320.00 30-5-1995 85,27,672.00 Closing balance. 11,177,992.00 The exact ledger page is at p. 18, but it is not convenient to reproduce it and so we prefer to go by the above summarised extract. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entries made in the day book for 1994-95 on 30th and 31st March,1995. The increase in the credit balance has, however, been effected on 1st April, 1995, itself in the ledger account corresponding to the inflated cash balance brought forward in the day book on 1st April, 1995. The above version can also be verified from the summary of transactions recorded in the day book for 1995-96 on 30th May, 1995, and the summary is available at p. 14 of the assessee's paper book No. 6, as under: Rs. Rs. Opening balance 1,17,48,857.44 Add : Receipts during the day Sales 17,59,184.00 Others 2,04,857.00 19,64,041.00 1,37,12,898.44 Less : Payments made during the day excluding Madhangi and Harsha Agencies 26,03,510.11 Less : Payment to Madhangi Lottery Agency 85,27,672.00 Payment to Harsha Agencies 13,12,000.00 1,24,43,182.11 Closing Cash balance 12,69,716.33 The payment of Rs. 85,26,672 to Madhangi Lottery Agency includes the payment by way of issue of PWTs of Rs. 65,36,414 recorded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h balance in the day book also got reduced correspondingly on 30th and 31st March, 1995. However, there was one more mistake in the entries passed in this regard inasmuch as the credit balance in the name of Madhangi Lottery Agency was reduced to nil, whereas the actual credit balance as on 31st March, 1995, was of the order of Rs. 19,49,368. This credit balance is part of other rectification entries which we have referred to earlier in the context of the filing of the revised balance sheet by the assessee. we do not think it is necessary for us to cover this field once again. The other question posed by the Departmental Representative is as to "why is it that the alleged inflation of Rs. 65,58,110 on the debit side of the cash book on 1st April, 1995, if that is so, not cancelled by simple credit entry in the cash book on 29th May, 1995, of an equal amount clarifying that the mistake in the debit in the cash book was removed by the rectification entry". We have already explained the entries passed in this regard and in the light of the explanation offered by the assessee in this regard, we see no merit in this poser. We do not think it necessary to cover this ground once again. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t brought forth any material that can persuade us to reject the version of the assessee that the revised balance sheet reflected the correct position. The only difference noticed by the Department is that the assessee showed the credit balance of Madhangi Lottery Agency as on 31st March 1995 to Rs. 19,49,368, whereas the creditor confirmed it at Rs. 18,89,619. This is a marginal difference and no mountain can be made out of this molehill. We have already referred to the explanation given by the assessee that the difference is due to some delayed accounting of the discount claim. 31. For the above reasons we find no merit in the addition of Rs. 65,58,110. This is not, however, to say that the results disclosed by the assessee are to be accepted in toto. We shall revert to this aspect of the matter. We have also to comment upon the argument of the Departmental Representative that some PWTs of the value of Rs. 1,09,81,290 have not been ledgerised. His comments in this regard are at para 14 of his argument notes. This is a matter raised by the learned Departmental Representative for the first time before us. The AO did not touch upon this aspect of the matter at all. So, this is one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,87,635 received on 30th July, 1994 is credited to the account of Kumaly Branch in the ledger folio No. 83. Similarly, the receipt of the prize winning ticket on 20th Aug., 1994, for Rs. 4,82,550 is represented by a contra entry shown on the same date in the same line. These entries were shown to the Hon'ble Tribunal on 11th Oct., 2000 itself. All these items mentioned by the learned Departmental Representative represent the value of prize winning tickets received from the agents the details of which were not known at the time of receipt. So, this was treated as 'receipt of prize winning tickets under suspense'. Subsequently, when the particulars are correctly ascertained these entries are reversed and the account of the parties are correctly credited. At any rate, this new ground shall not be accepted as has been held in several judgments of the High Courts/the apex Court." As this is a totally new material, we decline to admit it. 32. The learned Departmental Representative also objected at para 15 of his argument notes, to the claim of the assessee that the bank balance in the Canara Bank of Rs. 23,27,987 reflected in the revised balance sheet represented the drafts receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. This wrong accounting resulted in an inflated cash balance/prize winning tickets. To rectify this mistake, the accountant showed payment of prize-winning tickets to Harsha Agencies and Mathangi Lottery Agencies. He did not realise that this inflated cash balance represents drafts deposited with bank and are held as balance with Canara Bank. Hence, the rectification entry should have been made as under: (1) Canara Bank Dr. 23,27,987 To cash/prize winning tickets (being the drafts deposited in Canara Bank, wrongly shown as prize-winning ticket now rectified) 23,27,987 Instead, he showed it as payment to creditors, i.e. he passed the following entry (2) Creditors for supply of lottery tickets Dr. 23,27,987 To prize winning tickets/cash 23,27,987 Because of this wrong entry passed in the books of account, the liabilities payable to the creditors for supply of lottery tickets as well as the balance with the Canara Bank were understated to the extent of Rs. 23,27,987." In the light of the above, it is quite evident that the observation of the AO. reiterated by the learned Departmental Representative, before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank account. At any rate, the AO did not express any such misgivings about the drafts having been entered in the day books. His only objection was that if the version of the assessee that the drafts are deposited in the bank account is accepted, it could result in a deficit cash balance. We have already met this argument. In the circumstances, we see no merit in the contention of the learned Departmental Representative in this regard. 33. Regarding the addition of Rs. 5,70,000 made by the AO for 1996-97, the AO mentioned that the various transactions in the accounts of the various parties in the seized personal ledger MMC-11 during the period after 1st April, 1995 have not been entered in the day book for 1995-96, financial year. Apparently, the AO has not put any such omissions to the assessee. The remarks of the learned counsel for the assessee on this comment of the AO, as contained at item No. 6 of his explanations for the defects stated by the AO, are as under: "The AO did not give any proposal to estimate the income of Rs. 5,70,000 against the alleged estimated unaccounted sales of Rs. 5,70,00,000. In the absence of a specific instance of suppression being detected ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s required by your goodself. At the time of the completion of the original assessment for the block period, the learned assessing authority did not take into consideration the various evidences/documents furnished by us in support of the return of income filed and contention raised by us. The particulars of the evidences furnished by us are given below: 1. The revised balance sheet of our firm as on 31st March, 1995, showing the correct amount of cash and bank balances, receivables, and liabilities due to creditors for the purchase of lottery tickets. 2. Explanation and circumstances for the submission of the revised balance sheet as at 31st March, 1995 with full particulars of the amendments/rectifications made to the original balance sheet. 3. Explanation for treating as not recoverable certain debts due from various lottery agents (as stated in the assessment order amounting to Rs. 49,83,287 to whom we have supplied lottery tickets on credit basis during earlier years. Affidavits duly executed by these agents were also submitted confirming the fact that all these debts became irrecoverable due to financial incapacity/virtual insolvency of the concerned debtors. 4. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income during this period or defect in the accounts. We shall furnish any further information, clarifications/particulars/explanation that your goodself may require in this connection. In case your goodself needs any specific details with regard to any matter, we shall furnish the same. Now, we request your goodself to kindly complete the assessment in accordance with the return of income filed by us by taking into consideration the various evidences furnished by us and explanations given above." It is also explained that the counsel had attended hearing before the AO on various dates, like 23rd Sept., 1998, 24th Nov., 1999, 3rd Dec, 1999, 1st Jan., 2000, 20th Jan., 2000, 27th Jan., 2000 and 7th Feb., 2000. It is claimed that no particulars were asked for which were not furnished before the AO. It is also stressed that most of the relevant details were furnished even before the completion of the first block assessment in this case, as mentioned in the letter of the assessee dt. 24th Jan., 2000. The assessee furnished further details before the Tribunal only to support the claim already made before the AO vide Annexure-I to the assessment order. In the light of these contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not received from certain debtors like M.M. Khan Bros., and Shri Hariharan are recorded as having been received and their debit balances are understated. How did the assessee hit upon the fact that it owed asmuch as Rs. 19,49,368 to Madhangi Lottery Agency and Rs. 20,58,873 to Harsha Lottery Agency only as late as March, 1997. We enquired of the assessee whether there was any contemporaneous correspondence between the assessee and the said parties and the only explanation was that because of the credit facilities extended by the said creditors to the assessee and as there were periodical transactions between the assessee and the said parties, there was no pressure from the said parties for expediting the payments. While we cannot totally brush aside this explanation, still the fact remains that the assessee had not explained as to how exactly it hit upon the fact that it owed money to the said parties only in March, 1997. Similar is the position with the monies owed to M.M. Khan Bros., and Shri Hariharan. It is also incredible that the accountant had not debited the parties to whom the PWTs had been sent even though they were actually sent and that the entire omission came to n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y making very moderate additions. Considering the various discrepancies that have come to the notice of the Department because of the seized material like the unaccounted bank balance in the Canara Bank and the fact that the books were not maintained in the regular course of the business and other materials like personal ledger, we are of the view that a further addition under the provisions of s. 145 is warranted in this block assessment. Most of the variations noticed by the AO during the block assessment relate to the asst. yr. 1995-96. The relevant details upto the financial year 1994-95 since commencement of the assessee-firm, as available in our records, are as under: 1991-92 1992-93 1993-94 1994-95 Total 1. Sales 5,32,95,513 10,65,32,852 13,96,50,782 16,15,62,864 46,10,42,011 2. Purchases 5,25,01,287 10,49,95,829 13,77,74,941 15,94,11,739 45,46,83,796 3. Net commission 7,94,225 15,37,023 18,75,840 21,51,124 63,58,212 4. Net agency commission 6,68,081 2,89,878 2,44,326 63,766 12,66,051 5. Other rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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