9911796707
TMI Blog1988 (5) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... rters, Manufacturer and Exporter of Handloom Clothes at Jaipur. She also attended Usha Sewing and Embroidery Diploma course at Jaipur and passed the examination in First Division in Feb., 1980. She has been taking training and was also carrying out the cutting and sewing work at home for several years. In Jan., 1976, she started her proprietary concern in the name and style of M/s Saraf International and the main business was that of designing apart from stitching. She was married on 1st May, 1982, and had to move to Bombay and, therefore, after her marriage, she had to close down the business. In respect of her proprietary business, she had been filing her return for and from asst. yr. 1977-78 onwards. She had been keeping regular books of accounts. The returns as filed by her were accepted on a protective basis holding that the income would be includible either in the hands of her father Shri S.M. Saraf or in the hands of M/s Saraf Textile Mills P. Ltd. for asst. yr. 1978-79, a petty addition of Rs. 50 only was made. For asst. yr. 1979-80, the total income was assessed at Rs. 30,845 on a protective basis holding her to be a benami of either her father or of M/s Saraf Textle Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come for 1981-82. The said petition has been admitted by the settlement commission vide their order dt. 30th March, 1983. 4. The assessee's representative pleaded that the authorities below have mis-read the contents of para-4 of the order of the Settlement Commission admitting the petition. According to him, the assessee's objection was that the Commissioner is wrongly treating the cash found at the bed room and cash of Rs. 1,60,001 found in the locker as relevant for asst. yr. 1982-83. According to the learned counsel for the assessee, this becomes amply clear by reading paragraph-4 of the said order of the Settlement Commission, wherein the objections of the Commissioner has been overruled for admission of the petition. 5. Referring to the issue of tailoring receipt, the plea was that the major expense was on payment of wages to workers, which are all supported by vouchers and, therefore, question of not allowing the expense does not arise. The other expenses are minor in nature, which are incurred in respect of maintenance of shop, on stationery and the like. The assessee pleaded that part of the assessee's operation involved carrying out supplies to M/s Saraj Textile Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the situation must be accepted as such. In regard to the interest income that was added to the assessee's income, the plea was that the assessee had provided the details of debtors and creditors and the copies of accounts of debtors and creditors have also been provided for referring to the balance sheet, the plea was that the total of the sundry debtors was Rs. 5.86 lacs and the total of sundry creditors of Rs. 5.17 lacs, which included trade creditors of Rs. 4.14 lacs. The assessee had also provided the details of interest income earned by her. She was also provided the confirmation from debtors which have been placed at pages 140 to 142 of the paper book. The plea was that the authorities below have confused themselves while examining the books of accounts in regard to interest income. They have only considered the receipt aspect of interest of Rs. 24,567 totally omitting to consider the fact of interest paid on loans borrowed. Referring to the profit and loss a/c, which is at page 8, his submission was that this was prepared on the basis of available information and, therefore, cannot be made the basis for dis-crediting the claim of the assessee. Further, again there was no b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was under a bona fide belief that she was not liable and there was no mala fide intention. 8. The learned Senior Departmental Representative produced the copy of the cash book in which the last entry was of Rs. 90,000, which bears no signatures of the ITO prior to this entry. The learned Senior Departmental Representative, however, submitted that this entry was inserted after the ITO had signed the page. Similarly, referring to the copy of the ledger account, he pleaded that the closing entries have been put subsequent to the signing of the page by the ITO. The learned Senior Departmental Representative pleaded that the relevant accounting year is Dewali, 1980. Referring to the journal at page 17, the balance sheet summary, he submits that this was not looked up by the ITO on 13th July, 1981, but was seized only on 15th Oct., 1981., which according to him, gave ample time for inserting the various figures. He was of the view that the various observations by the authorities below clearly go to indicate that the claim of the assessee cannot be accepted on its face value. He pleaded by referring to ITO's order pages 9, 10, 11 as well as pages 6, 7 and 8 that elaborate exercise ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of Rs. 70.000 though was received by the assessee from late Shri Dwarka Das Saraf but there is no conclusive documentary evidence in support of the claim, hence a sum of Rs. 30,000 be accepted and balance of Rs. 40,000 be added as income for the asst. yrs. 1977-78, 1978-79, 1979-80 and 1980-81, i.e. Rs. 10,000 for each assessment year. In the order of Settlement, admitting the Settlement petition dt. 30th March, 1983, paras 2, 3 and 4 of this order are reproduced below: "2. On behalf of the applicant, it was submitted that cursory glance at the objection of the commissioner would show that items (a) and (c) are relevant for the asst. yr. 1982-83 which year is not mentioned in the Settlement Petition. As regards asst. yrs. 1977-78 and 1978-79, it was submitted that an appeal has been filed before the AAC which is pending. In regarding to operation and mainpulation of books, it is submitted that the charge is a vague one. Nowhere it has been mentioned what manipulations were made and the mere allegation of non-co-operation would not be a ground for objecting to the application being admitted. Similar is the case with the allegation about the applicant being a mere benamida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artmental Representative himself found it difficult to support the issue of manipulations of record. At the time when the cash book was seized, the entry was already existing. The fact of closing entries being put subsequent to the ITO's signing of the ledger and the journal does only indicate that the assessee has only passed the necessary closing entries, which entries are already found recorded in the books and did not represent any new entry, except that it is sum total of the various entries in various accounts existing in the ledger. The claim of the Revenue about manipulation of accounts could be accepted, if it was established that when the books were seized, they did not contain any entry in regard to the designing income of Rs. 90,000. The seized records contained these entries at the time of seizure and it is an admitted fact that entries were found in the account books relevant to asst. yr. 1981-82. Manipulation is an Act done on the books while they are in the possession of the Revenue and the assessee being caught red-handed while carrying out the manipulation. There is no denial of the fact that the sole entry as last item in the cash book does give rise to suspicion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business at all. The total gross receipts from tailoring has been shown at Rs. 1,77,478 and the major expense is on wages at Rs. 1,02,503 giving a gross profit of Rs. 74,975. The trading account has been placed at page 7. At page 8 is the profit and loss account in which claim of deduction on expenditure has been made under the heads 'fees', 'workshop maintenance', 'conveyance', 'Stationery and printing', 'godown and shop', 'rent', 'water', 'electricity', 'machine repairs', 'salary', 'bad-debts', 'interest', 'depreciation' etc. aggregating to Rs. 33,333. The net profit has been shown at Rs. 41,642. As per the balance-sheet, total capital of the assessee including the net profit maintained to Rs. 2,02,000. In the assets side, balances with banks, fixed deposits with bank, stationery deposit account, share investment account and suspense account of Rs. 90,000 has been shown apart from furniture, machinery, sundry debtors. In the liability side, over draft with bank has been shown and also sundry creditors including trade creditors. It is not the case of the Revenue that payments in respect of services rendered by the assessee were not received either by cash or by cheques but the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difficult to reject the contention of the assessee that the business did belong to her and that she did carry on the business from 1976 till she got married in 1982. It could perhaps also be said that the suspicion raised by the Revenue perhaps only goes to fortify the claim of the assessee that the business belonged to her and she did carry on the business. Further, considering from the point of view the trading transaction of the assessee, which is less than Rs. 2 lacs on which the assessee made a profit of a little over Rs. 41,000 to say that this was only a made up affair with a view to reduce the profit of Saraf Textile Mills Pvt. Ltd. and to divert the income is clearly relied by the volume of a transaction itself. It is not the case of the Revenue that the rates paid by Saraf Textile Mills Pvt. Ltd. for job work was greater than the market rate and the rate as was paid by Saraf Textile Mills Pvt. Ltd. to several other job-workers. If that were so, then it would be a good ground for supporting the doubts raised by the Revenue, which in the instant case, is totally absent. In view of the above the not allowing the expenses out of the trading receipts without any basis therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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