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TMI Blog1978 (2) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ss profit of Rs. 72, 945 on a turnover of Rs. 11,30,080 in the branch, working out to 6.4per cent and that the assessee had not maintained day to day stock account. He observed that certain other dealers had disclosed gross profits ranging between 8.1 per cent to 10.5 per cent. He, therefore, made an addition of Rs. 17,000 for deficiency in gross profit. 2(b). He further noticed credit entries in the books of the assessee in the names of ten multani bankers of Madras. The assessee explained that such entries represented loans taken by it from those bankers for the purpose of its business. In support of the claim, the assessee produced before the ITO the discharged hundies and also vouchers showing payment of interest. the assessee pointed out that the interest had been paid by cheques. The ITO examined partner, Sri. C.V.K. Abdul Gani on 9th Nov., 1965 and again on 4th March, 1968. He stated that the loans were true. But the ITO observed that most of the bankers had accepted that they had not lent moneys but had only lent their names. He, therefore, held that the assessee had not established the geniuses of the transactions evidenced by the cash credit entries. The peak of the cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 and 1965-66, the disallowance of interest of Rs. 2,316 under the head 'business' for the last mentioned asst. year and (iii) the charging of interest under s. 217 for the asst. yrs. 1963-64 and 1964-65 were not proper. It was a urged before the AAC that the assessee had established the genuiness of the loans evidenced by the cash credit entries by producing the discharged hundies and the interest vouchers. It was also emphasised that the bankers in question were not fictitious persons but were real persons. It was also pointed out that the assessee had specifically requested the ITO on more that one occasion to summon the bankers so that it might cross-examine them. The AAC noticed that the ITO had informed the assessee of the fact that the bankers in question had denied having lent moneys to third parties, that the ITO required the assessee to specifically produce the bankers for examination and the assessee had, in turn, requested the ITO to summon the bankers concerned for being examined. He held that in such circumstances, the ITO should have examined the bankers before coming to a conclusion. By his orders dt. 19th Feb., 1970(In I.T.A.1304/67-68 and I.T.A.73/69-70, he set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee to state its objections to the proposals on or before 6th May, 1974. thereupon the assessee, by its letter dt. 16th Aug., 1974, stated its objections. Attention of the ITO was drawn to the fact that the AAC who had disposed of the appeals preferred against the original assessments, had categorically directed that the multani bankers in question should be examined and the as should be given opportunity to cross-examine them before deciding the question assessee to whether the credit entries standing in their names in the books of the assessee represented loans taken from them. It was urged that consequently the ITO could not straight away make the additions in respect of the hundi credits merely on the ground that the assessee had not furnished the addresses of the multani bankers. The ITO did not accept the contentions. He completed the assessments for all the three assessment years on 6th Feb., 1975 determining the income as Rs. 1,11,500, for the asst. yr, 1963-64, Rs. 84,600, for the asst. year 1964-65 and Rs. 54,630 for the asst. year 1965-66. In doing also, he made an addition of Rs. 58,481 Rs. 32,353 and Rs. 20,000 under the head "other sources" for the above menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot discharged even the initial onus in the matter of establishing the genuiness of credit entries in question. He pointed out that even in the course of the original assessment proceedings, the assessee was required to produce the bankers for being examined but that it did not do so. It was also pointed out that most of the creditors had admitted earlier that they had been indulging in what is termed as "hawala transactions", that is to say that they had not really lent moneys but had only lent their names, excerpts from the statements were also placed before us to show that most of them had very merge capitals and hence could not have advanced huge sums of money. It was further pointed out that despite several opportunities given in the course of the reassessment proceedings, the assessee has not cared to produce the bankers for being examined. It was emphasised that though the assessee had stated that the loans had been negotiated through a broker and had furnished the address of the broker, the latter was not available at the place. 7. The assessee's learned counsel, on the other hand, contended that the orders passed by the AAC on the earlier occasion has become final since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt under such circumstances, in the ITO requiring the assessee to produce the bankers in question to give evidence in support of its version. The bankers having already committed to a position which was against the interest of the assessee, we fail to see how the assessee can be called upon to produce the bankers and examine them in support of its version. On the other hand, the ITO should have given an opportunity to the assessee to cross-examine the bankers, since their original statement had not been recorded in the presence of the assessee. So, it was only natural that the assessee requested the ITO to allow it to cross-examine the bankers. Indeed it was stated by the Departmental Representative in the course of his argument that the ITO, even in the course of the original proceedings, had issued a commission to Mr. Koshi the ITO, Hundi, Circle, Madras on 31st July, 1967 to examine the bankers. Mr. Koshi was also reminded by the ITO by another letter dt. 30th Nov.,1967. But it appears that nothing further happened and the commission was not executed. In these circumstances, we are unable to appreciate how it could be said that the assessee has not even discharged the initial bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int to be considered is as regards the additions of Rs. 17,000 and Rs. 15,000 for low gross profit for the asst. yrs. 1963-64 and 1964-65. The above additions have been made only in respect of the branch shop in Madurai. The assessee had disclosed gross profit of Rs. 72,945 on a turnover of Rs. 11,30,080 working out to 6.6 per cent for the asst. yr. 1963-64 and gross profit of Rs. 86,758 on a turnover of Rs. 12,87,149, working out to 6.8 per cent for the asst. yr. 1964-65. The ITO took the view that such gross profit was low compared to other dealers. The names of such dealers are not given in the assessment orders. It was also not disputed that the details of the cash taken for comparison were not made available to the assessees. The only defect pointed by the ITO is that though the assessee had maintained the stock-book, the day to day details were not available. But it is to be noticed that no suppression of sales or inflation of purchases or any other defect was pointed out. It is not disputed that all its purchases and sales are supported by bills. It is also seen that in the latter years the book results have been accepted. In these circumstances, we are of the opinion that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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