9911796707
TMI Blog2008 (4) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... in this process it converts the raw materials supplied by such parties into aluminum conductors of different specifications. He has been doing this work for the past several years. During this year the break up of job charges is as under: ---------------------------------------------------------------- Name of the party Gross Debit note Net amount invoice issued credited amount ---------------------------------------------------------------- M/s P.G. Foils Ltd., Ahmedabad 73,72,897 56,70,828 17,02,068 ---------------------------------------------------------------- M/s Torrent Cables Ltd., Nadiad 8,31,555 25,044 8,06,511 ---------------------------------------------------------------- M/s General Engineering Works, 62,330 - 62,330 Faridabad. ---------------------------------------------------------------- 82,66,782 56,95,872 25,70,910 ---------------------------------------------------------------- As the discussion in subsequent para would be in relation to M/s P.G. Foils Ltd., Ahmedabad only, it wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------------------------ Thus, it is evident that while the assessee initially charged job rates varying from Rs. 4,000 per MT Rs. 8,008 per MT, it subsequently reduced the job rates to a petty amount of Rs. 1,000 per MT by issuing debit notes on 30th March, 1996. In this process aggregate sum of debit note so issued is for Rs. 56,70,828 and so credited net amount of Rs. 17,02,068 is credited in the P L a/c for taxation purposes. The assessee was therefore, asked to explain the transactions undertaken with M/s P.G. Foils Ltd. on this count and reasons for issuing debit notes for an aggregate amount of Rs. 56,70,828 which resulted in debiting of taxable income by Rs. 56,70,828. To explain the position, the assessee has submitted that job charges were charged by the office as per regular charges and IDS was also made by M/s P.G. Foils Ltd. on the accounted for job and conversion bills. However, in the last date of accounting period when it was noticed that for the job charges there lies an agreement according to which job charges should not be more than agreed, hence the company M/s P.G. Foils Ltd. raised debit notes al1d accordingly rate di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... too, by issuing debit notes for these charges amounting to Rs. 56,70,828 and Rs. 4,08,109 respectively. It may be mentioned here that in the accounts, however, the assessee had charged at the previous rates and had raised bills against M/s P.G. Foils Ltd. at the old rates and entries were made to that effect in the books; but at the fag end of the accounting year relevant to asst. yr. 1996-97, these debit notes were issued. The reasons given by the assessee for this anomaly was the terms and conditions mentioned in 'this agreement', referred to above. The assessee company purchased conductors at the same rate as it has purchased in earlier years, but had substantially reduced the rates for job work and conversion work. The reasons given by assessee company were that it had to supply conductors to RSEB (Rajasthan State Electricity Board) and there were huge orders for that supply and to meet that the assessee company had to execute the impugned agreement with M/s P.G. Foils. 10. We agree to that extent with learned Authorised Representative that it is the prudence of the assessee company, and not that of the Department which is relevant to carry on its business. Yes, it is the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative that this agreement is to be weighed in the light of the overall business interest of the assessee company. It is also true that last year the assessee had suffered heavy losses, and in this year positive income has been shown. 13. But, the doubts raised by the Department are that this agreement was executed after the assessee company had noticed huge profits and wanted to reduce taxable income. 14. To further elaborate, the AO disbelieved the impugned agreement, because in the opening words of the agreement, a reference has been made to the letter exchanged between assessee and M/s P.G. Foils Ltd. The assessee did not produce either the letters or the contents of these letters before the AO. But, it is clear from the observation of the AO on p. 4 that he never insisted or required the assessee to produce these letters. Otherwise also, these letters can be ignored by him on the basis of the same reasoning that when the 'agreement' is a collusive one, then the letters can also be collusive. So, it seems that the AO did not want to enquire about these letters. These letters are very significant to come to one conclusion about the impugned 'agreement'. 15. In the next ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he important factor is that M/s P.G. Foils Ltd did not benefit under s. 80HHC, as has been observed by the AO. The income-tax records of M/s P.G. Foils, which is assessed at Ahmedabad and in this year assessed at an income of Rs. 2,31,53,850 vide order dt. 29th Jan., 1999 wherein job charges as received by this assessee have been accepted by the Department. 20. In our opinion this is also a most important fact which the AO did not take notice of, to come to a conclusion. This fact also required investigation by the AO. 21. The finding of the learned CIT(A) that by this agreement this assessee has reduced excise duty by 400 per cent and thus gains for it were much more higher, which ultimately resulted into better rate of profit this year as compared to last year; and in fact net profit of this year are better than the last year. The reason was this arrangement between the assessee and M/s P.G. Foils. 22. This aspect has not been properly considered by the AO. The learned Departmental Representative has also not been able either to substantiate or refute the same. It would not be justified to come a conclusion by picking some facts from here and some from there, to complete a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed at Rs. 2,31,53,850 vide order dt. 29th Jan., 1999, wherein job charges and conversion charges as received by this assessee after considering these debit notes only have been accepted. This aspect has not been reasonably disposed of by AO, because these debit notes have a direct bearing on the impugned agreement. 29. The Tribunal being the final fact-finding body, it is desirable that full and final facts are ascertained from available records and if some facts are missing, the matter should be restored so that full and final facts are established to decide an important issue on the basis of available facts only is not justified, because it does good to no party to the litigation. The AO has taken one view and the learned CIT(A) has taken another view, so far as impugned agreement is concerned. But neither the AO nor the learned CIT(A) has considered the above noted factors, while arriving at a decision. The reasons given by them are not complete ones, The chains are missing and not complete. Any judgment cannot be based on half furnished facts. The finding is to be objective and not subjective one. 30. So, in the light of the above observations, we are of the considered opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in GP of Rs. 49,88,930. 3. Apart from these activities, the assessee also earned income by way of job charges for converting the raw material supplied by the parties into aluminium conductors of different specifications The assessee had been undertaking such activities for the past several years as well as the succeeding years. The AO observed that out of the gross job charges of Rs. 82,66,782, the assessee had shown job charges at Rs. 73,72,897 from M/s P.G. Foils Ltd. However, subsequently, debit notes were issued by M/s P.G. Foils Ltd. amounting to Rs. 56,70,828, thus, reducing the amount of job charges receivable from M/s P.G. Foils Ltd., Ahmedabad from Rs. 73,72,897 to Rs. 17,02,068. The details of gross amounts raised against the various parties, debit notes issued and the amount as recorded on p. 2 of the assessment order are as under: ---------------------------------------------------------------- Name of the party Gross Debit note Net amount invoice issued credited amount ---------------------------------------------------------------- M/s P.G. Foils Ltd., Ahmedaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educed its taxable income by the same amount. 4. Likewise, the AO further observed that the assessee had charged conversion charges as per original invoices @ Rs. 4,000 and Rs. 8,000 per MT. Subsequently, the assessee revised the rate to Rs. 2,000 per MT in respect of M/s P.G. Foils. In this manner, a benefit of Rs. 4,08,109 was passed to M/s P.G. Foils Ltd. The AO confronted these facts to the assessee. The assessee explained that job charges were charged as per regular rates by both the parties, i.e., M/s Prem Cables and M/s P.G. Foils Ltd. However, on the last date of accounting period relevant to assessment year under reference, it was noticed that there was an agreement between the two parties executed on 31st March, 1995 as per which it was agreed to charge the job charges from M/s P.G. Foils Ltd. @ Rs. 1,000 per MT. Therefore, M/s P.G. Foils Ltd. raised the debit notes on 30th March, 1995 and the assessee allowed the rate difference to the said concern. Same explanation was given for reducing the conversion charges. However, the AO observed that the agreement dt. 31st March, 1995 was nothing but a colourable device for reducing the genuine taxable income of the assessee. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a loss on account of job work and conversion activities by taking the reduced rates received from M/s P.G. Foils Ltd. (v) The agreement was sweeping in nature as it did not provide differential rates for the various types of conductors having different sizes and specifications. The fact that in the past and future, the differential rates had been charged, show, that labour cost involved was higher in respect of certain type of conductors vis-a-vis others. (vi) The AO also observed that in spite of agreement. different rates had been charged for conversion charges by way of debit note dt. 30th March, 1996. The rate mentioned in the agreement for conversion work was also Rs. 1,000 per MT but as per debit note the same was charged at Rs. 2,000 per MT. (vii) M/s P.G. Foils Ltd. also recorded the job charges as per the original invoices issued by the assessee. In fact, even on last date of the accounting year, job charges were credited to assessee's account at the old rates. The tax was also deducted at source on the relevant dates and promptly paid the same to the Government account by taking the amount of job charges as per original invoices. These details are indicated on p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the invoices, bills and job charges were debited to the account of M/s P.G. Foils Ltd. at the old rates. Likewise, M/s P.G. Foils Ltd. also credited the account of the assessee at the old rates. However, this mistake was noticed on 30th March, 1996, i.e., just a day before the last day of the accounting year and accordingly M/s P.G. Foils Ltd. issued debit notes and as a result reduced the job charges and conversion charges for the aforesaid amounts. It was also submitted that due to such arrangements, the assessee was able to execute huge orders received for supply of conductors to the electricity boards. The assessee also did not suffer any loss due to delay in execution of contracts for supply of conductors to State Electricity Board as the assessee had to pay only a sum of Rs. 96,627 by way of penalty whereas in the immediately preceding assessment year the assessee suffered a penalty of Rs. 9,00,597. It was also submitted that as a result of such arrangements the assessee earned a profit as against loss suffered in the earlier assessment year. It was also submitted that as a result of such agreement the assessee was allowed Modvat credit. It was also contended that it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the additions made by the AO are hereby deleted. The appellant will, therefore, get a relief of Rs. 60,78,937." Aggrieved, the Revenue has now brought this matter in appeal before the Tribunal. The submissions made by both the parties have been recorded by my learned Brother in his proposed draft order. Therefore, these are not repeated here. However, in nutshell while the Revenue has heavily relied on the order of the AO, the assessee has relied on the order of CIT(A) and reiterated the submissions which are made before the authorities below. 6. After hearing both the parties now the only issue that requires to be decided by the Bench is whether on the basis of facts and material placed on record, the AO was justified in coming to conclusion that agreement dt. 31st March, 1995 was a colourable device for reducing the taxable income or the CIT(A) was justified in holding otherwise and thereby deleting the impugned additions. From the facts discussed above, it is obvious that for the purpose of reducing job charges and conversion charges the assessee has heavily relied on the agreement dt. 31st March, 1995 which could not be taken into account by both the parties during the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to supply the raw material for the job work on time. There is also no clause in the agreement which binds the supplier, i.e., M/s P.G. Foils Ltd. to supply the finished goods to assessee at concessional rate. The agreement does not mention any compensatory or penal clause in case raw materials are not supplied to the assessee on time. It is also a fact that the agreement is supposed to have been made on 31st March, 1995 i.e. before the start of the accounting period relevant to assessment year under reference. It is not disputed by the assessee that it was making loss prior to 31st March, 1995. On this date, the company would have not imagined that by passing a benefit of Rs. 60,00,000 to M/s P.G. Foils Ltd., the company would earn profit by reducing the rates of job charges and conversion charges to 20 per cent of the amounts being charged in the past and also for subsequent years. It meant that, by entering into such agreement, the assessee ensured for itself substantial increase in the quantum of loss already suffered by it. Thus, the argument of the assessee that by entering into such agreement, the assessee has safe guarded its business interests or the same was executed for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged and no concession was allowed. Thus, if the assessee has earned such profit, it is co-incidental only and cannot be attributed to the agreement for reducing the job charges to such a nominal amount. 10. It is the contention of the assessee that as a result of such agreement, the assessee was able to avail of Modvat credit. The relevant clauses of the agreement have already been reproduced in the preceding para. However, cl. 4 of the agreement which refers to Modvat credit is again reproduced for the sake of convenience: "Excise duty will be paid by Prem Cables (P) Ltd. at the time of removal of the goods. Modvat credit will be taken by Prem Cables (P) Ltd. on input material supplied by P.G. Foils Ltd. as per excise rules and necessary credit be given to P.G. Foils Ltd. at year end." As mentioned earlier, this agreement is termed as job work agreement. As per the scope of the agreement, the supplier, i.e., M/s P.G. Foils Ltd. were required to supply raw materials to the assessee for job work and conversion work for which the assessee was entitled to receive job charges and conversion charges. Since the raw materials were supplied by M/s P.G. Foils Ltd., it was their respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to paid the same on their behalf. No such amount of excise duty is credited to assessee's account in respect of job charges because assessee was also allowed to avail of modvat credit to the extent duly paid by the assessee in respect of raw-materials. Thus, there is no additional benefit which flows to the assessee from the agreement. 11. It is trite law that while deciding the matters, the IT authorities can take into account the surrounding circumstances. In this regard, reliance is placed on the Judgment of Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More (1973) 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC) where the Hon'ble apex Court has held that though the apparent statement must be considered real until it was shown that there were reasons to believe that the apparent was not the real, in a case where a party relied on self serving recitals in documents, it was for that party to establish the truth of those recitals: the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such records. The same view was expressed in the case of Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC) where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the scope of activities undertaken by the assessee for the assessment year under reference and in the earlier and subsequent years remained the same. Similarly, the assessee was not allowed any concession in the price at which it purchased conductors from M/s P.G. Foils Ltd. Therefore, the logic of accepting the reduced rates at 20 per cent of the normal rate is inexplicable. As regards reference to an agreement requiring approval of the board of directors of the company mentioned in para 23 of the order of my learned Brother. I am of the view that the addition has not been made for the lack of such resolution and the CIT(A) has not deleted the same on account of existence of the same. No such pleadings have been made before us by either parties. Therefore, in my view such inquiry is not necessary. Similarly. the finding of the AO that M/s P.G. Foils Ltd. claimed deduction under s. 80HHC on higher business income which also included reduction in job charges and conversion charges amounting to Rs. 60,00,000 (approx.) is a finding of fact which is not disputed by the assessee. Therefore, no further inquiry is needed as the fact already brought on record is sufficient to decide this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inquiries?" HARI OM MARATHA, J.M.: As there has been a difference of opinion between the two Members being JM and AM constituting this Bench of Tribunal, Jodhpur the point of difference is stated below with a request that the Hon'ble President, Tribunal may be pleased to kindly nominate a Third Member for deciding the same as required under s. 255(4) of the IT Act, 1961: "Whether the genuinity or ingenuinity of the impugned 'agreement' can be determined on the basis of available facts on record; or further investigation of facts is necessary, in the backdrop of divergent views taken by the learned AO and learned CIT(A)?" R.S. SYAL, A.M. (AS THIRD MEMBER): 11th April, 2008 A reference under s. 255(4) of the IT Act, 1961 was made by the Hon'ble President for my opinion as Third Member on the following points of difference arising out of the appeal for asst. yr. 1996-97. 2. The learned JM has framed the following question for reference to the Third Member: "Whether the genuinity or ingenuinity of the impugned 'agreement' can be determined on the basis of available facts on record; or further investigation of facts is necessary, in the backdrop of divergent views taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------------------------------------------- M/s P.G. Foils Ltd., Ahmedabad 73,72,897 56,70,828 17,02,068 ---------------------------------------------------------------- M/s Torrent Cables Ltd., Nadiad 8,31,555 25,044 8,06,511 ---------------------------------------------------------------- M/s General Engineering Works, 62,330 - 62,330 Faridabad. ---------------------------------------------------------------- 82,66,782 56,95,872 25,70,910 ---------------------------------------------------------------- The dispute in question refers to job charges received from M/s P.G. Foils Ltd., a company in which the directors of the assessee company and their family members are interested, who hold substantial interest in both the companies. Numerous transactions were carried out by the assessee with M/s P.G. Foils Ltd., which included executing job work on the raw material supplied by them. purchasing finished goods/conductors which were manufactured by the assessee on job work basis from the said M/s P.G. Foils Ltd. and also lending and borrowing of raw material depending upon the availability of alumi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xability on the same rates in the hands of the two companies and found that M/s P.G. Foils Ltd. had claimed deduction under s. 80HHC for Rs. 44,82,097 on its inflated business income of Rs. 2,75,43,733. It was opined that by issuing debit note at the end of the year, the said M/s P.G. Foils Ltd. managed to-reduce the job charges as expenditure in its hands which resulted into the enhanced income and the resultant high benefit of deduction under s. 80HHC. Accordingly, addition of Rs. 56,70,828, being the amount for which debit note was issued by M/s P.G. Foils Ltd., was made. 5. That apart, the assessee had also executed work of conversion of aluminium ingots into aluminium rods for a number of parties including the abovereferred M/s P.G. Foils Ltd. Such activity of conversion was also being done in the past and also in the succeeding years as well. As against the invoiced amount of Rs. 25,60,276, being. the conversion charges from M/s P.G. Foils Ltd., charged throughout the year, a debit note of Rs. 4,08,109 was acknowledged thereby bringing down the income from conversion charges from M/s P.G. Foils Ltd. to Rs. 21,52,167. It was observed by the AO that the assessee also did conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent defects in the investigation because when a company enters into any agreement, a resolution of the board of directors of the company is passed and the same is to be sent to the RoC, which fact has also not been verified by the Department. The other relevant fact being purchase of stamp papers was also not found to be verified by the AO. Another important factor being, the question of grant of deduction under s. 80HHC to M/s P.G. Foils Ltd. was also found not to have been verified by the AO vide para 20 of the proposed order. Insofar as reduction in excise duty by 400 per cent is concerned, the learned JM in paras 21 and 22 found that the gains on account of benefit of excise duty to the assessee was material one and this aspect has also not been properly considered by the AO. Considering these facts, the learned JM, after setting aside the order of the learned CIT(A) on this issue. sent the matter back to the file of the AO to verify the genuineness of this issue from all angles and to take a decision on the same afresh. 8. The learned AM in his dissenting note came to the conclusion that the alleged agreement was a colourable device for reducing the income in the hands of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rates, ranging between Rs. 4,000 to Rs. 8,000 were erroneously made and discrepancy was noticed at the year end as a result of which debit note was issued by M/s P.G. Foils Ltd. in consonance with the terms of agreement. About the genuineness of the agreement, the learned Authorised Representative drew my attention to its copy placed in the paper book which depicts the treasury stamp dt. 12th Jan., 1995 and on the back-side of p. 1 of the said agreement the vendor has put the date of sale of stamp paper as 31st March, 1995. In the light of these dates it was contended by the learned Authorised Representative that the agreement was genuinely made as at the closing day of the preceding year to be effective during this year as per which the job charges were to be paid @ Rs. 1,000 per MT. It was further contended by the learned Authorised Representative that by no stretch of imagination this agreement could be doubted or said to be a colourable device for the reason that it was executed prior to the opening of the financial year and as such there could not have been any consideration about the prospective income to be earned from job charges in the year to come. The learned Authorised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Departmental Representative, while referring to the copy of agreement, stated that it was signed by Shri Pankaj P. Shah as managing director in M/s P.G. Foils Ltd. who was also director and managing director of the assessee company. He further submitted that Shri Ashok P. Shah, who signed as director of the assessee company, that is M/s Prem Cables (P) Ltd., was also the director and joint managing director of M/s P.G. Foils Ltd. It was, therefore, contended that the management of both the companies was same. The job charges throughout the year were charged by the assessee company ranging between Rs. 4,000 to Rs. 8,000 per MT. Not only the monthly payments were made by M/s P.G. Foils Ltd. to the assessee company but deduction of tax at source on such amount was also promptly made. While referring to copy of Form No. 16A, being part of assessment folder, the learned Departmental Representative contended that these forms were signed by Shri Pankaj P. Shah who was shown as managing director in the alleged agreement dt. 31st March, 1995. It was further submitted that in the preceding year, namely asst. yr. 1995-96 the rate charged by the assessee was at Rs. 5,365 per MT an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and take a decision afresh on the same. the learned AM has concluded that agreement was only a device for reducing the profits of the assessee and the final tax liability. Thus the scope of controversy raised before me is only to decide as to whether the matter required fresh examination for determining the genuineness of the agreement dt. 31st March, 1995 entered into between the assessee and M/s P.G. Foils Ltd. or it is to be held as a colourable device. The learned Authorised Representative has strenuously argued before me that the said agreement be declared as valid since all the requisite conditions of a valid agreement were satisfied. I am afraid that this proposition is too broad to be accepted in view of the limited scope of Third Member under s. 255(4) as per which he has to agree with either of the two opinions expressed by the learned Members of the Bench on the point of difference. He cannot formulate a third view de hors the opinion of the two Members who earlier heard the appeal. The choice before him is to either agree with the view taken by the learned JM or with the learned AM and hence he cannot set up a third view as proposed by the parties. Hence, I am unable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te authority is also empowered to direct the production of any additional evidence but that is possible only when he finds that such additional evidence is required to dispose of the appeal before him. Insofar as the right of the assessee for the production of additional evidence is concerned, the same is eclipsed and available only subject to the conditions aforementioned and under the circumstances as noted hereinabove. Similarly r. 29 of the Tribunal Rules, 1963 provides that the parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or if the IT authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on the points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced. The sum and substance of this discussion is that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip of raw material or goods finally produced remained with M/s P.G. Foils Ltd. till the completion of job work and it was only when the sale was made by M/s P.G. Foils Ltd. to the assessee that the said ownership was transferred. The assessee earned job charges from M/s P.G. Foils Ltd. till the raw material was under the ownership of M/s P.G. Foils Ltd. The dispute about the reduction in job charges is relatable to the period during which ownership of goods had not passed to the assessee. From the facts narrated above, it transpires that the assessee was regularly dealing with M/s P.G. Foils Ltd. in earlier years and in succeeding years also in same manner by way of doing job work on material supplied by M/s P.G. Foils Ltd. and thereafter purchasing such finished goods, which were eventually sold. In the year in question the assessee did similar activity of job work for M/s P.G. Foils Ltd. and rate was charged in original invoices ranging between Rs. 4,000 to Rs. 8,000 per MT. The invoices so raised by the assessee company on M/s P.G. Foils Ltd. were appropriately sent and the payment was made on monthly basis as per invoice value after deduction of tax at source, by M/s P.G. Foils ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the AO at p. 3 of the assessment order, it is noted that the assessee originally charged @ Rs. 4,000 per MT on three occasions, Rs. 5,000 per MT on four occasions and Rs. 8,008 per MT on one occasion, in the immediately preceding assessment year, i.e., 1995-96, the rate was charged at Rs. 5,365 per MT and in the immediately succeeding asst. yr. 1997-98 the rate was charged at Rs. 4,000 to Rs. 5,000 per MT. Thus, it can be clearly seen that the assessee was uniformly charging from M/s P.G. Foils Ltd. at Rs. 4,000 and above per metric ton for job work done by it in the preceding, current and succeeding years. The AO has recorded a categorical finding in the body of the assessment order that almost identical rates were charged by the assessee for job work done for outside parties in the assessment year in question. Such finding has not been controverted by the assessee either before the learned CIT(A) or the Tribunal. When the same work was done by the assessee for M/s P.G. Foils Ltd. as was being done in the past or future and the rate originally charged as per invoice, during the year correspond with that charged from M/s P.G. Foils Ltd. in the past as well as in the future a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income but his wife's income. His wife is supposed to have had two lakhs of rupees neither deposited in banks nor advanced to others but safely kept in her father's safe. Assessee is unable to say from what source she built-up that amount. Two lakhs before the year 1940 was undoubtedly a big sum, it was said that the said amount was just left in the hands of the father-in-law of the assessee. The Tribunal disbelieved the story, which is, prima facie, a fantastic story. It is a story that does not accord human probabilities. It is strange that the High Court found fault with the Tribunal for not swallowing that story. If that story is found to be unbelievable as the Tribunal has found, and in our opinion rightly, then the position remains that the consideration for the sale proceeds from the assessee and, therefore, it must be assumed to be his money." 16. From the ratio decidendi of these two summit Court judgments, it is manifest that before relying on the documents placed for consideration, it is important to consider the truthfulness of such recitals, which become paramount when these are between two interested parties. Adverting to the facts of the case, I am not inclined to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is continuously charged at Rs. 4,000 to 5,000 per MT throughout the year without any knowledge, whisper or objection from the either side. If the situation had been in fact as per the alleged agreement, it would have come to the fore immediately and correction would have been made accordingly during the year itself. In the facts of the present case, I find that the job charges were received by the assessee company as per invoice rates ranging between Rs. 4,000 to Rs. 8,000 per MT and it was only at the end of the year that both the sister concerns, having common directors, realized that if the rate of job charges is reduced, that would increase the income in the hands of M/s P.G. Foils Ltd. on which deduction under s. 80HHC would be admissible, that an ante dated agreement was executed for giving colour of genuineness to their intention. 17. The learned JM has taken into consideration the fact that the question of deduction under s. 80HHC in the hands of M/s P.G. Foils Ltd. was not property appreciated by the AO, which needed fresh consideration. In my considered opinion, the requisite information about deduction under s. 80HHC in the hands of M/s P.G. Foils Ltd., was made avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion, the learned CIT(A) did not properly appreciate the impact of excise duty in the transaction when he came to the conclusion that the assessee's liability of excise duty was reduced by 400 per cent. As there is no profit or loss to the assessee on account of excise duty, in my considered opinion, the learned AM was fully justified in holding so that no useful purpose would be served by remitting the matter back to the AO for fresh consideration on this aspect. Further, there is no reduction in the sale price by virtue of the reduction in the job charges as has been argued so far. Primarily, no such detail of the benefit to the assessee, worth the name, has been made available to any of the authorities below or the Tribunal. Further, since the assessee was issuing invoices during the currency of year at actual rate of job charges, it was also purchasing the goods from M/s P.G. Foils Ltd. at the stipulated price. The exercise of reducing job charges was done at the end of the year and by that time the assessee had already made purchases from its sister concern and recorded accordingly. No corresponding debit note issued by the assessee at the end of the year to reduce its purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reduction in amount of invoice which was received without any debit note as is the case with M/s P.G. Foils Ltd. The reasons cited above qua the job charges, mutatis mutandis hold good for conversion charges. Accordingly, I do not approve the reduction in the conversion charges. The learned counsel for the assessee has relied on certain decisions including that of Laxmi Engineering Industry, J.K. Woollen Manufacturers. In all these cases it was held by the Hon'ble Courts that an expenditure cannot be disallowed merely on the basis of, suspicion and in applying commercial expediency for determining whether the expenditure was wholly and exclusively made out for the purpose of assessee's business, the reasonableness of the expenditure has to be judged from the point of view of the businessman and not the Department. This is the ratio laid down by the Hon'ble Courts in the light of decision cited by the learned Authorised Representative. I find that these decisions are not applicable to the facts of the instant case for the reason primarily, that these have been rendered in the context of expenditure incurred by the assessee whereas the issue in question is that of non-recording of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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