9911796707
TMI Blog1980 (10) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer was holding charge." The application dt.10th July, 1980reads under: "I may submit that permission of the CIT was taken for filing the application for condonation of delay. I am enclosing the original certificate from Shri K.R. Rahvan, DI (Int) who was the CIT New Delhi. The reasons for delay were also explained to him and he has recorded his satisfaction in the said certificate. I may further submit that the said appeal was to be filed by7th Sept., 1979. This was filed on11th Sept., 1979. There is the delay of only 4 days. It may be stated that offices were closed on 8th and 9th Sept., being second. Saturday and Sunday. The papers were go typed on 10th and 11th and the appeal was filed on 11th itself. As already stated in my earlier application, i am a heart patient and was taken ill in office on3rd Sept., 1979. I could not attend the office work from 4th to7th Sept., 1979. It was only on10th after noonthat the fact of filling appeal was brought to my notice and the appeal was filed on 11th Each day delay is accounted as under: 4th to 7th Did not attend to work on account of heart trouble. 8th 9th Office closed on account of Second Saturday ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 23,67,575 and for the Asst. yr. 1973-74 the rate of G.P. was 6.7 per cent on sales of Rs. 4,90,500. The ITO required the assessee to explain the reason for the decline in the rate of G.P. in this year. The assessee first explained that purchases and sales were in bulk quantities and naturally the rate of G.P. was low. Sometimes, it was explained, copper wire had to be converted into thinner gauges and that increased the cost price by 25 paise to 50 paise per Kg. The frequent fluctuations in the rates of copper wire was also given a reason for selling the goods either at cost or even below cost on certain occasions. According to the ITO, these reasons were not new in this year alone. In the last year it was noticed that there was an excess of sales over the opening stock and purchases during the period April, 1973, to August, 1973 and for examining the position of stock in this year the ITO required the assessee to file a list of purchases and sales for each month. The assessee first filed a list which indicated that in each month the assessee had sufficient purchases to account for the sales of that month. The list prepared by the assessee was checked up with the quantities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to M/s. Shantilalal Bros. And seven bills related to M/s. Shantilal Bros. and seven bills related to M/s. RydbergIndia. In respect of the purchase from M/s. Shabntilal Bros. The cartage was paid on the same date, viz.,6th Aug., 1974. In respect of the purchases for M/s. RydsbergIndiathe cartage was not found to have been paid on the dates when the bills were made. According to the assessee, the payment of cartage was, however, not relevant because the owner of the tempo, who brought the goods, may have collected the payments for cartage either on the date when the bills were raised by the suppliers or even later. According to the ITO, no specific assessment evidence was available in support of the assessee's assertion that goods were received earlier on approval basis but the bills were received later. He, therefore came to the conclusion that the investment in the purchase of goods to the extent of 6,235.050 kg. Was unexplained investment. Such investment at the rate of Rs.30 per kg. was calculated at Rs. 1,87,050. The assessee had, however, explained that there was no unexplained investment because the purchases were accounted for in the subsequent months and finall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue. The CIT (A) also accepted the submission raised on behalf of the assessee that the payment of cartage for transportation of the goods was not very relevant in deciding the issue. "The CIT (A) in fact noticed that sometimes payment for cartage was made even after the payment of the bill of the suppliers. The CIT (A) was also not influenced by the ITO's submission that before the Inspector M/s. RydbergIndiadid not produce their books of account the CIT (A) observed that ITO could always summon the books of account and satisfy himself whether the certificate given by M/s. RydbergIndiawas correct or otherwise. The CIT (A) accepted the assessee's submission that as an overall quantity stock account had been furnished, there was no stock which could be said to have been purchased outside the books of account. He thus deleted the addition of Rs. 1,87,050. Before the CIT (A) another argument was taken that s. 59 was not applicable in reset of investment in stocks. This argument was based on the Gujart High Court judgement in CIT vs. Day Bhai pitamber Dass Co., IT Ref. No. 31 of 1972 decided on27th Nov., 1973. Since the addition of Rs. 1,87,050 had been deleted by the CIT (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e raised. He thus submitted that the CIT (A) was in error in deleting the addition of Rs. 1,87,050. The ld. Counsel for the assessee on the either hand, supported the order of the CIT (A) on this point. He emphasised the fact that 90 per cent of the supplies were made to two dealers, namely, M/s. Grandlay Electricals (India) and M/S Bat-Bro Engineering General Manufactures. He submitted that all the purchases and sales made were by cheques and since all the purchases and sales were properly vouched, there was no question of purchasing or selling any goods outside the books of account. He referred to the explanation dt.21st May, 1979before the CIT (A). He submitted that when the reconciliation of the total stock of wire preached and sold had been furnished, there would be no occasion for saying that there were discrepancies in the purchases or in the sales. He refereed to the Tribunal's order in ITA Nos. 4813 and 4922/1977-78 dt.21st Feb., 1980pertaining to the asst. yr. 1974-75 wherein in similar circumstances when the ITO made an addition of Rs. 51,627 the AAC deleted the addition of Rs. 25,297 and the Tribunal deleted the addition of Rs. 26,330. He referred to pages 26 and 27 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted by the AAC and, therefore there was no justification for rejecting the method of accounting only in this year. He, therefore submitted that the addition of Rs. 69,995 made by the CIT (A) should also be deleted. 7. We have carefully considered the rival submissions. We will first deal with the sum of Rs. 1,87,050 which is the subject matter of the Revenue's appeal. This addition came to be made on the ground that upto the month of July, 19974 the assessee had made purchases of 46,824.200 kg. of copper wire against which the sales were made to the extent of 53,059.250 kg. The excess sales amounts to 6,235.050 kg. and the allegation against the assessee is that these goods were purchased outside the books of account and supplied to the concerned parties. The explanation of the assessee, on the other hand, is that goods were received on approval basis and the payments in respect of the purchases were made later. The assessee has placed on record the following overall quantity stock details in respect of the goods purchased and sold: Opening stock 4203.60 . Purchased during the year 1,15,667.95 . . 1,19,871.55 . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chases the assessee would be showing the entire sale proceeds by way of his income Considering this aspect of the matter also, the addition of Rs.1,87,050 cannot be made because even if the assessee had not debited its purchase account the ITO's own finding is that the entire sale proceeds which would include the investment in purchased already form a part of the income. It could be argued on behalf of the Department that in such a situation of this nature, the assessee could debit the purchased later and could take away the cash. For accepting this argument, however, positive evidence would be necessary but in this case no evidence of any kind is on record which would suggest that the money in respect of certain purchases which were made after the sales had already been affected was withdrawn in cash. In this case all the purchases and all the sales are claimed to have been made by cheques and, therefore there is no question of withdrawing any money by cash and keep it outside the books of account. An overall quantity stock account has been furnished on the basis of which the closing stock shown is only 945.100 kg. worth Rs. 25,518. On a consideration of the entire material produc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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