9911796707
TMI Blog1988 (7) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... sheets and note books. They pertained to both No. I Firm and No. II Firm, the latter being the appellant before us. 3. The ITO noticed in the case of No. I firm that as per its books of accounts the firm purported to allow rebate of Rs. 10 per bale when it charged Rs. 35 per bale towards pressing charges. But, this rebate of Rs. 10 was never passed on to the parties and the firm had thus set up a bogus claim of rebate thereby reducing its income. However according to the ITO, the modus operandi had undergone a change in the case of No. II firm the appellant before us. Instead of charging the customers with higher rates, it started to show the cotton pressing charges at Rs. 25 per bale and collected outside its books anything ranging from Rs. 5 to Rs. 7 per bale. He also noticed that in certain cases it charged pressing charges at Rs. 35 up to Aug., 1976 and from about Sept., 1976 the rate has been brought down to Rs. 25. He also felt that this rate of Rs. 25 was charged only in the case of obliging customers obliging in the sense that the customers would pay the assessee extra monies outside the books of accounts. For this proposition, he relied on the entries in F-3 Note Book a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the diary and considering the past history of the case, the ITO made an addition of Rs. 2,03,186 as representing monies collected outside the books towards pressing charges. Thus, the additions made towards suppression of receipts is one of the issues common for all these assessment years. There are other issues also but we propose to deal with each one of them independently. 6. The assessee carried the matter in appeal and tried to explain the entries in the diary and also the F-3 note book stating that these notings were made by the accountant on the directions of the managing partner Sri Kollipara Subba Rao to find out the probable loss incurred or likely to be incurred by allowing a rebate or discount at certain estimated rates. The CIT(A) did not accept this explanation and concurred with the view of the ITO that if the explanation were true, the note books would not contain the account balances of the parties concerned which reduced or increased depending upon the incomings or outgoings. On an examination of the F-3 note book, he found that in almost all the cases the number of bales shown in F-3 note book tallied with the number of bales pressed for the customer by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of estimated understatement of pressing charges in respect of parties not found in F-3 note book, he found that the ITO had adopted the suppression at Rs. 5 per bale whereas the average suppression worked out to Rs. 3.25 per bale and on that basis he sustained the addition at Rs. 1,38,388 thus granting a relief of Rs. 1,19,655. For the asst. yr. 1979-80, for similar reasons, the CIT(A) confirmed the addition at Rs. 1,47,134 in respect of parties figuring in F-3 note book and sustained the addition at Rs. 61,246 in respect of the parties not found in F-3 note book. Though F-3 note book was not relevant for the asst. yr. 1980-81, considering the entries in another seized document, A-11 and the past history of the case, the CIT(A) estimated the understatement of pressing charges at Rs. 3.25 per bale as adopted in the preceding years and thus sustained the addition at Rs. 1,67,472. 8. Before us, Sri A. Satyanarayana, learned counsel for the assessee, submitted that up to Aug., 1976, the assessee was charging at the rate of Rs. 35 per bale pressed and allowed a rebate of Rs. 10 per bale. From Sept., 1976 onwards, the assessee used to charge only the net rate at Rs. 25 per bale. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in F-3 note book which were discussed by the ITO and supported the orders of the authorities below. As for the addition sustained in respect of the bales of parties not figuring in F-3 note book, Sri Radhakrishna Murty submitted that such an addition was called for considering the fact that the assessee was in the habit of collecting extra money. As a matter of fact, though technically No. I firm and No. II firm are different and distinct entities in the eyes of Income-tax law, the brain behind these two firms is Sri Kollipara Subba Rao. In No. I firm, the books purported to show a rebate of Rs. 10 on each bale when Rs. 35 was charged from the customers as pressing charges. Out of this alleged rebate of Rs. 10, actually only a rebate of Rs. 2 to Rs. 3 was allowed and the balance was never intended to be passed on to the customer. Now, in the case of the No. II firm, the pattern only has changed. Instead of withholding the rebate by not passing it on to the customer, the assessee had charged a lower rate per bale towards pressing charges and collected the extra amount outside the books from the obliging customers. There is no reason why when other similar firms were charging at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... destine transaction where money is received outside the books, entries in regular books of accounts will be conspicuous by their absence unlike their presence in secret books. In case of collections outside the books, there are two points that require consideration. One is evidence from the person who is said to have paid the extra amount to the assessee and two, the point of time at which, or at least the year in which, the amount was received. As far as the first point is concerned, it can be said that the Revenue has not brought on record any deposition or any statement from the concerned party regarding alleged payment made by him to the assessee. On the other hand, parties examined by the ITO have denied such payments. Even if such proof was not to be given by the Revenue, it is for the Revenue to establish the point of time of receipt of such payment. This has not been established in a large number of cases except a surmise based on the entry in F-3 note book. In the case of on-money collections, the addition can be sustained only on the basis of the actual receipt of the on-money and it could not be on accrual basis in the absence of complete set of secret accounts such as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be wrong translation. For reasons stated in item No. 1, the addition is deleted. (4) Venugopala Cotton Trading Co., Durgi: (p. 17 of F-3 r/w LF 124) The entry in the F-3 note book is as under: "1976 50 bales . 1977 ... 970 . . . 1020 x 5 = 5,100 . . 12/11 paid 2,000 . .. . 3,100" The account of this party in the Ledger of the assessee has a debit balance of Rs. 1,257.50 for the first year and credit balance of Rs. 1,347 each for the next two years and was settled only in the year 1979. The F-3 entry deals with only the first two years and the remark "12/11 paid Rs. 2,000" cannot refer to 1976. On the premise that the assessee will not hold itself liable in its books of accounts while insisting on spot settlement of on-money transaction, we delete the addition and consider the same for the asst. yr. 1980-81. (5) Kalpana Cotton Traders, Guntur: (p. 34 of F 3 r/w LF 172) The entry in the F 3 note book is as under: "1976 Bales 713 x 7 4991.00 . Credit in a/c 1961.10 . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r for 1978. There is no indication of receipt of on-money in this case. The translation in the extract in the assessment order as "By cash receipt" does not appear to be in accordance with the Telugu description in F-3 note book. Hence, the addition is deleted. (8) Rama Cotton Co., Guntur: (p. 84 of F-3 r/w LF 128) The entry in F-3 note book is as under: 1976 Pressed bales 777 x 41/2 . 3088.00 . . 388.50 Credit 3356.90 3476.50" This account has a debit balance of Rs. 643.10 in 1976 and it became a credit balance of Rs. 3,356,90 in the subsequent years. For reasons stated in respect of item No. 1, we delete the addition. (9) Sri Venkateswara Cotton Traders, Guntur, (Gurnudham) (Poturi Subbarao): (p. 86 of F-3 r/w 128) The entry in F-3 note book is as under:- "1976 50 x 7 350.00 1977 751 x 5 3755.00 . . 4105.00 9/11 2000/- . 16/12 1500/- 3500.00 . . 605.00 . A/c due 1145.15 . . 1750.15" The ITO observed as follows:- "I was by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate . 1900.00 . . . 7158.00 . Credit in Account . 7261.80" The regular books show a credit balance of Rs. 7,261.80 for all the years under appeal. For reasons stated in respect of item 1, the addition is deleted. (12) Garine Venkateswararao Co., Piduguralla: (p. 91 of F-3 r/w LF 189) The entry in F-3 note book is as under:- "1976 Pressed 854 x 7 5978.00 Cr. A/c balance 393.80 . 5584.20 Nagubandi Venkaiah Co., . Dachepalli-due 30.00 . 5614.20 1975 Rebate allowed bales 499 x 2 998.00 Rebate 4960.00 4616.20" The account of this party in the assessee's Ledger shows credit balance for all the years under appeal. For the reasons stated in respect of item 1, the addition is deleted. (13) Sri Viswanatha Cotton Co., Tarlupadu: (p. 92 of F-3 r/w LF 196) The entry in F-3 note book is as under: "Pressed in 1976 353 x 7 2471.00 Cr. In account . 1879.10 . . 591.90" The account of this party in the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the F-3 note book tallies with the balance in the regular books of accounts as on 1st Oct., 1977. However, there is no indication in the F-3 note book to say whether on-money was received. Therefore, the addition is deleted. Asst. yr. 1978-79 13. There are 12 parties figuring in F-3 note book for this year, (besides 28 as noted by the CIT (A), with which we deal as follows. (1) Sri Venugopala Rice Mill, Durgi: (p. 18 of F-3 r/w LF 114) The entry in F-3 note book is as under: "Due to us by Sri Venugopala Rice Mill, Durgi: 1785.60 Venugopala Cotton Trading Co., Durgi: 10973.00 .. 12758.60 1976 3100 1977 3620 1978 4253 . 10973 1976 50 . . 1977 970 . . 1978 700 . . Without 24 . . . 1744 x 5 8720 . . Paid 2000 . . . 6720 6720.00 . Account due . 3653.00 17500 . . 10373.00 13847 Inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no indication in the F-3 note book of any money having been received in 1977. Therefore, the addition is deleted. (4) Sri Sambasiva Cotton Co., Guntur: (p. 26 of F-3 r/w LF 23) The party's account in the assessee's Ledger is in debit for all the years under appeal. There is no indication in F-3 note book that cash has been received. The addition is, therefore, deleted. (5) Sri Hanuman Velangini Cotton Co., Guntur: (p. 29 of F-3 r/w LF 31) There is no indication in F-3 note book that on-money was received from this party. The balance in the account of this party in the Ledger is a credit balance in an amount of Rs. 2,057.20 which would appear to have been taken as Rs. 4,057.20. The addition is deleted. (6) Srinivasa Cotton General Trading Co., Pedanandipadu; (p. 29 of F-3 r/w LF 52) The account of this party in the Ledger is in debit for 1976, 1977 and 1978. There is no indication in F-3 note book of receipt of on-money. The addition is deleted. (7) Sri Satyanarayana Fertilisers, Atchampeta: (p. 31 of F-3 r/w LF 105) There is no indication in F-3 note book that on-money was received from this customer. The balance noticed in F-3 note book tallies with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . . . 1250 . Credit balance in Ledger . . . . 1451.58 . . . . 1250.00 Credit balance . . . . 201,58" The account of the customer in the Ledger shows credit balance of Rs. 1,451.58 for 1977, 1978 and 1979. There is no indication that cash was received. An amount of Rs. 3,000 which is sought to be deducted is under the caption "cash". Therefore, it cannot be concluded whether cash of Rs. 3,000 was received by the credit and not under the caption assessee outside the books of accounts and it is difficult to fix the year of such receipt especially when the same credit balance continues in the account for 1978 and 1979. In the circumstances, the addition is deleted. (12) M/s Lakshmi Ginning Mills Kondrupadu: (p. 42 of F-3 r/w LF 195) The entry in F-3 note book is as under: "1977 860 . 1978 300 . . . 1160 x 5 5800 . . Ledger credit 1324 . . . 4476" The account of the party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons stated therein, the addition is deleted. (5) KMS Brothers, Warangal: (p. 25 of F-3 r/w LF 12) The entry in F-3 note book is as under: "1978 page No. 14 12032.30 45777.27 . . 12032.30 . public 33744.97 1975 350 . . 1976 1715 . . . . 2065 x 7 : 14455 . 1978 977 x 2: 1954 . . . . 16409 16409.00 . . . . 50153.97 Due by KSR Firm : . .. Purchase of lint 11646.49 . 1975 dues 5640.85 . . 6005.64 . 1975 rebate 1742 bales x 2 3484.00 . . 9489.64 9489.64 . . 40664.33" The entry shows a balance of Rs. 33,744.97 termed as "public" which tallies with the account of the party in the Ledger for 1978. To this the assessee has added a sum of Rs. 16,409 calculated at the rate of Rs. 7 and Rs. 2 per bale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . 4380 27/10 public . 4400 . excess cr. 20" On 25th Sept., 1978, the account of this party in the Ledger shows a debit balance of Rs. 650 which tallies with the entry in the F-3 note book. Again, on 27th Oct., 1978, the assessee received Rs. 4,400 as per regular accounts, page 56 of the Ledger for 1978, which is carried in the F-3 note book. Moreover, the account results in a credit balance of Rs. 2,500 as on 31st Dec., 1978. Hence the addition is deleted. (11) Srinivasa Cotton Traders, Dachepalli: (p. 65 of F-3 r/w LF 73) The entry in F-3 note book is as under: "1977 400 . 1978 1900 . . . 2300 x 5 11500 Cr. Balance in a/c 121510.70 By purchase of cotton 8123.67 Credit 20634.37 . 11500.00 Due to us 9134.37" In the party s account in the Ledger for 1978, on 23rd Sept., 1978 there is a credit balance of Rs. 12,510.70 which tallies with the entry in the F-3 note book and the Ledger account of the party. Beyon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries in the F-3 note book regarding the receipt of Rs. 20,000 are also found in the Ledger. The assessee has worked out the probable on-money on 2661 bales as on 1st Nov., 1978, though subsequent to 1st Nov., 1978, the assessee had also pressed more bales for the party. The ITO took the bales pressed outside the books at 4066 which is not supported by the F-3 entry. Even in respect of 2661 bales which are found in the F-3 note book, in the absence of any indication as to receipt of on-money, the addition cannot be sustained. Hence, the addition of Rs. 20,330 is deleted. (14) Javvaji Jagannadharao, Sattanapalli: (p. 69 of F-3 r/w LF 104 277) The entry in the F-3 note book relates to the position in the account of the party in the Ledger as on 27th Oct., 1978 and there is no case for addition. The addition is deleted. (15) Sri Balanagu Nageswararao Sons, Guntur: (p. 70 of F-3 r/w LF 282) The entry in F-3 note book is as under: "A/c due 10,000 . 3,000 . 7,000 7,000.00 400 x 5 2000.00 . 9000.00 . 5000.00 . 4000.00" The entry speaks of a receipt of Rs. 5000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book is only an exercise in estimate. The credit of Rs. 1,000 found in the F-3 entry is also reflected as a balance in the party's account in the Ledger. Hence, the addition is deleted. (21) Nookala Rama Koteswararao, Guntur: (p. 76 of F-3 r/w LF 303) The entry in F-3 note book is as under:- "1331 x 5 6655 Account due 8775 . 15430 4/11/78 5000 . 10430" As per the F-3 entry, the assessee had received Rs. 5,000 on 4th Nov., 1978. This is reflected in the account of this party in the Ledger. The account debt also tallies with the difference of opening credit balance of Rs. 117. There is no indication of on-money receipt. Hence, the addition is deleted. (22) New Sivakesava Ginning, Rice Oil Mill, Kandulaparam: (p. 77 of F-3 r/w LF 305) The entry in F-3 is as under: "100 bales x 5 500.00 Account debt 2500.00 . 3000.00 28/10 Cr. Draft on State Bank 2100.00 . 900.00" The entry appears to be an exercise in estimate. The account debt of Rs. 2,500 and also the receipt of Rs. 2,100 on 28th Oct., 1978, are reflecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in F-3 note book is as under: "10,000.00 37063.18 . 10000.00 . 27063.18 1440 x 5 7200.00 . 34263.18 Purchase of Guddikaya cotton 28154.40 Due 6108.78" As per the F-3 note book, the sum of Rs. 6,108.78 is termed as "(receivable)". In other words, it has not been received. This is also an instance of exercise in estimate. The amount of Rs. 37,063.18 and the deduction of Rs. 10,000 are reflected in the Ledger at page 323. Hence, the addition is deleted. (29) Tadepalli Chenchu Subbarao, Yeluri Venkata Subbaiah Co.: (p. 84 of F-3 r/w LF 80) The entry in F-3 note book is as under: "1977 upto November debt 719.25 1977 Dec., pressing 100 . 3000.00 . . 15.00 . . 3734.25 . 500 x 30 15000.00 . . 18734.25 . credit 15000.00 . . 3734.25 . . 1868.25 . due 1866.00" The account of this party in the Ledger has a credit balance of Rs. 1,979 for 1978 and 1979. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r/w LF 114) The entry in F-3 note book is the same as that considered by us against item 16 for the asst. yr. 1977-78. The party's account in the Ledger is in credit for 1978 and 1979. The receipt of Rs. 20,000 is reflected in the Ledger account on 9th June, 1978. This is an instance of exercise in estimate. The addition is deleted. (36) Lakshmi Cotton Mill, Guntur: (p. 97 of F-3 r/w LF 117) The entry in F-3 note book is as under: "1978 650 x 5 3250 1977 50 250 700 3750 . 7250 26/10/78 Credit 3750 . 3500 . 3500 . 0000" In F-3 note book, the balance against this party is drawn to nil by deducting Rs. 3,500 which is an indication of receipt of on-money. However, the addition was made only in a sum of Rs. 3,250. Hence, it is confirmed. (37) Sri Dhanalakshmi Fertilisers Cotton Traders, Amaravathi: (p. 97 of F-3 r/w LF 103) The receipt of Rs. 1,021.22 in F-3 note book is reflected in the Ledger on 23rd Sept., 1978. There is no indication of receipt of on-money. The addition is deleted. (38) Krishna Cotton Traders, Dachepalli: (p. 98 of F-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of Rs. 750 made by the ITO. (46) Sri Venkateswara Cotton Ginning Co., Rentachintala: (p. 46 of F-3 r/w LF 136) The entry in F-3 note book is as under: "1977 100 . 1978 850 . . 950 x 5 4750 . Cr. Cash in Ledger 650 . . 4100" The account of the party in the Ledger started with a debit balance of Rs. 2,515 for the year 1978. On 6th Oct., 1978, there is a credit balance of Rs. 650 in the party's account as per Ledger. On 28th Oct., 1978, the assessee received Rs. 4,100 by way of cheque. On 30th Nov., 1978, the assessee paid Rs. 4,750 in cash. All these transactions are found in F-3 note book against this item. There is absolutely no case for making any addition as has been made by the ITO. This is yet another instance to point out that the assessee was only making estimates or indulging in rough calculations of the balance in F-3 note book in a number of cases in the hope of garnering extra money. Hence, the addition is deleted. (47) Sri Tirumala Cotton Traders, Guntur: (p. 49 of F-3 r/w LF 140) The entry in F-3 note book is as under: "197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bit balance represents the total of the debit side in the Ledger account of the party. The cash receipt is reflected in the Ledger. There is no indication of on-money receipt. The addition is deleted. (52) Srinivasa Cotton Agencies, Guntur: (p. 57 of F-3 r/w LF 219) There is indication of receipt of Rs. 1,000 which is not reflected in the account of the party in the Ledger. Hence, the addition is sustained. (53) Kesava Krishi Seva Kendram, Ponnekallu: (p. 58 of F-3 r/w LF 225) There is a credit balance of Rs. 93.61 as per Ledger. Indication of receipt of on-money not being available, the addition is deleted. (54) Srinivasa Commercial Corporation, Guntur: (p. 30 of F-3) and (55) Sri Satyanarayana Fertilisers, Atchampeta: (p. 31 of F-3) These items are repetitions of items 42 and 43 respectively, and the additions are accordingly deleted. 15. Now we deal with the additions made by the CIT(A) by way of enhancement, as follows: Asst. yr. 1977-78 (1) Sri Lakshmi Cotton Traders, Dachepalli: (p. 21 of F-3) the CIT(A) has added a sum of Rs. 3,165 based on the entries in F-3 note book. These entries have already borne our scrutiny at item 2 for the asst. yrs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.50" This is only an exercise in estimate computing the expected on-money. Hence, the addition of Rs. 750 is deleted. (5) Gopala Bhaskararao Co., Gollaprolu: (p. 102 of F-3) This has figured as item 41 for the asst. yr. 1979-80. For the reasons stated thereunder, the addition of Rs. 2,541 is deleted. (6) Sri Venkateswara Cotton Ginning Co., Rentachintala: (p. 46 of F-3) The item has figured in our discussion against item 46 for the asst. yr. 1979-80 and, for the reasons stated thereunder, the addition of Rs. 500 is deleted. (7) Sri Rama Cotton Traders, Guntur: (p. 47 of F-3) The entry in F-3 note book is as under: "1977 pressed 600 bales x 5 3000 Account debit 10090 . 13090 Credit 5000 . 8090" There is a receipt of Rs. 5,000 noted in F-3 note book which is not reflected in the account of this party in the Ledger. However, the enhancement made by the CIT(A) is only of the order of Rs. 3,000 and it is confirmed. (8) Sri Lakshmi Padmavathi Traders, Guntur: (p. 48 of F-3) The balance in the account of this party in the Ledger is only a sum of Rs. 2,103.15 whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00.00 . 24.46" There is clear indication in F-3 note book of receipt of Rs. 2,000 on 17th Feb., 1977 outside the books of accounts. However, the CIT(A) has made an addition of Rs. 5,718. It is restricted to Rs. 2,000. (20) Sri Venkeswara Cotton Traders, Guntur: (p. 86 of F-3) The entry in F-3 note book is the same as in respect of item 9 for the asst. yr. 1977-78. There is indication of receipt of on-money of Rs. 3,500 between Nov., and Dec., 1977. Therefore, the addition is confirmed to the extent of Rs. 3,500 for the asst. yr. 1978-79 in the place of Rs. 3,755 made by the CIT(A). (21) Sri Tirumala Cotton Agencies, Guntur: (p. 89 of F-3) This party has figured at item 30 for 1979-80. For the reasons stated thereunder the addition of Rs. 250 is deleted. (22) Sri Tirumala Cotton Traders, Atchampeta: (p. 92 of F-3) This party has figured at item 31 for 1979-80. For the reasons stated thereunder the addition of Rs. 1,000 is deleted. (23) Perumalla Nagayya, Yechuri Venkateswarlu, Gurajala: (p. 93 of F-3) This party has figured at item 14 for 1977-78. For the reasons stated thereunder the addition of Rs. 5,770 is deleted. (24) Yeluri Ven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te book established that the assessee used to collect money outside the books of accounts from the parties whose bales were pressed by the assessee, at the rate of Rs. 5 or Rs. 7 per bale depending upon the case, and once a pattern is established, an estimate could be made in respect of even those parties whose names did not figure in the F-3 note book. 19. Having regard to rival submissions and the materials on record, we are constrained to delete the additions except for Rs. 10,000 for the asst. yr. 1980-81. We have already indicated that in a large number of cases in the F-3 note book, only an exercise in estimate could be discerned. Of course, in a few cases there was indication of monies collected outside the books of accounts. The F-3 note book is no doubt a secret note book wherein collections outside the books of accounts are found to have been entered. If the assessee had really suppressed the pressing charges from all the parties whom it charged at the rate of Rs. 25 per bale, by receiving a sum of Rs. 5 per bale, outside the books of accounts, there is no reason why the names of all such parties did not figure in the F-3 note book. The pencil entries in the diaries or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pressing charges not accounted for in the regular books of accounts. Such pressing was done only on 30th April, 1979 and, therefore, addition, if any, has to be made only for the asst. yr. 1980-81. 22. As regards Gayatri Traders, there is no indication in F-1 note book page 53, as respects receipt of on-money though the computations would show, as in the case of other entries in F-3 note book, the intention of the assessee to garner extra receipts. This again cannot be a basis for generalising that the assessee had in fact received on-money from parties not figuring in F-3 note book. 23. In the absence of any records to prove that the assessee had in fact received money at the rate of Rs. 5 per bale in respect of parties not appearing in the F-3 note book or other records, the additions for the asst. yrs. 1977-78, 1978-79 and 1979-80. As for the addition made for the asst. yr. 1980-81, in the light of our discussions against item 4 for 1977-78 (Rs. 2,000), item 9 for 1978-79 (Rs. 2,250) and in para 21 (Rs. 750), and the entries in A II returned to by the CIT, an addition of Rs. 10,000 is sustained on estimate basis and the balance of the addition is deleted. 24. In ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09. Similarly, in ginning charges, there was an excess claim of Rs. 558 for the period from 17th June, 1979 to 30th June, 1979. He also referred to sheet No. 42 and found that there was inflation of Rs. 1,784.50. From these, he drew the conclusion that there was a systematic inflation of 20 per cent of the Muster charges. The CIT(A) was of the view that some of the papers seized were not clear on the point whether these amounts represented income by way of kickbacks or simply expenditure by way of Muster charges and the assessee had not discharged the prima facie onus on it under the provisions of s. 132 (4A) of the IT Act by explaining the contents of the documents and Sri A. Radhakrishna Murthy, accountant, had not thrown any light on the exact nature of these entries except saying that they were written at the instance of Sri Subba Rao, the managing partner. In this view of the matter, he confirmed the addition of Rs. 45,743. 27. Sri Satyanarayana, the learned counsel for the assessee, submitted that adverse inference had been drawn by the CIT(A) only because the accountant was not in a position to throw light on the nature of the entries. The jottings were made at the instanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Guntur Rate per bale 1-25 np 78-79 do 79-80 do 80-81 Muster payment (under cotton cleaning charges account) Rs. 80379-40 Average per bale 1-21 ps No. of bales pressed 66,378" It is stated before us and not controverted that the cotton cleaning in the earlier years was done on contract basis at a fixed rate of Rs. 1.25 per bale of cotton cleaned while for the assessment year the assessee engaged its own labour for cotton cleaning. Considering this aspect of the matter and also the defects pointed out by the ITO. We feel that an addition of Rs. 10,000 on this count will meet the ends of justice. 29. Ground No. 4 for the asst. yr. 1980-81 is against the addition of Rs. 33,189 towards inflation in Muster Cooli charges in pressing. The ITO observed that the assessee paid only Rs. 1.50 per bale as pressing charges while it actually debited its accounts at the rate of Rs. 2 per bale. The assessee's case is that it paid charges at Rs. 2 per bale to one Abdul Hamid Khan who was a Mastri and who engaged the necessary labourers for the purpose. He was also examined by the ITO and he had stated that he had about 50 men under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned counsel for the assessee, submitted that Sri Abdul Hamid Khan is a labour contractor and it is too much to say that the assessee got kick-backs from him. At the request of the contractor, a part of the amount was withheld to be made over to him during his visits to Sri Subba Rao. The calculation of amounts at the rate of 50 paise found in the sheets should naturally refer to the amount waiting in transit. The ITO had simply disbelieved the version of the contractor and made the addition which was sustained by the CIT(A). Sri Radhakrishna Murty for the Revenue relied on the order of the ITO and submitted that the deposition of Sri Abdul Hamid Khan was only an accommodating deposition and, therefore, it should not be acted upon. 31. Having regard to rival submissions and the materials on record, we delete the addition. The addition is about inflation in the payment of cooli charges. The assessee had a labour contractor who had engaged the labourers in the assessee's factory. It is on record that the contractor had admitted payment of Rs. 2 per bale and has explained that Rs. 1.50 per bale was disbursed to the labourers and the balance of 50 paise per bale was retained wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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