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TMI Blog2005 (5) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... that are brought for sale by the Karigars at the shop of the saree dealers which is relevant and not the Karigar themselves. It is for this reason that even the CBDT felt that, after the sales (made out of purchases from Karigars) are found to be verifiable, it is not necessary that there should be an insistence for producing the Karigars. The instructions like this, although, may not be capable of being treated as having binding effect, nonetheless they lay down necessary guidelines for completion of assessment in a particular line of trade. This logic is applicable with all its force in the present case. Necessity to have the addresses of the Karigars may arise only for the purposes of making enquiries from the Karigars, so far as the assessment of the saree dealers is concerned. If such a verification is not required to be made, in view of the regular system of accounting followed by the assessee as per the practice prevalent in this trade, we fail to understand as to why non-furnishing of addresses should be made an issue by the AO for making addition and that too on selective basis. This is more so in a case like this where the purchases and sales have been duly accepted. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pathak, Advs. ORDER Keshaw Prasad, A.M.: 1. The appeal has been directed by the Revenue against the order of the learned CIT(A) , dt. 28th Dec., 1998, pertaining to the asst. yr. 1997-98. 2. Though three grounds have been taken, effectively the Revenue is aggrieved by the relief of Rs. 1,05,800 granted by the first appellate authority. 3. The facts in brief are that the assessee, through its head office in the name of Mathura Das Ashok Kumar and two branches in the names of Ashok Creation and Ankit Sarees , has been carrying on the business of dealing in Banarsi sarees. Purchases are made from various established parties of organised sector as also directly from the Karigars scattered in different mohallas of Varanasi as also in its peripheral areas. For the business activities so carried on by the assessee, it had been maintaining books of account in regular course which are subjected to tax audit also under s. 44AB, year after year. The trading results were invariably accepted on the fact. A statement in this respect as extracted from the records is as under: Asst. yr. Purchases Net sales Gross profit GP rate Net profit NP rate Remarks 1994-95 117130693 117553810 7408154 6.3% 54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount and payments to them, as had been made, either in cash or through cheque are debited in this very account. The credit balance at the end of the year is carried to the balance sheet under the head sundry Karigar account. During the course of assessment proceedings, queries were made by the AO, to which the assessee responded by filing all the details and narrating all the attended facts. Attention was specifically drawn to the said letter dt. 5th March, 1998, copy of which appears on pp. 1 to 5 of the paper book and also to the summary of Karigar account which appears at p. 6 of the paper book. 7. Proceeding further, the learned counsel submitted that in the case of M/s Kusum Saree Kendra and others carrying on the similar business the accounts were rejected by the AO and a higher GP rate was applied, on the ground of non-verifiability of purchases from Karigars. The controversy was resolved by the learned Third Member vide his order dt. 17th Jan., 2003, copy appearing at pp. 21-41 of the paper book. Looking to the peculiarity of the trade it was held that account could not be rejected merely on the ground that the Karigars were not produced for verification of purchases, as sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count themselves constituted an evidence about the correctness of entries appearing therein, unless something to the contrary is placed on record. All such particulars, as were relevant about the Karigars to whom Purjas were issued by the assessee, as a token of purchases made from them, are entered in Jama Jakhar Bahi. All the purchases are verifiable from the same. Therefore, antecedents are not required to be ascertained by the assessee, as the assessee is concerned only with the goods supplied by them. Overall liabilities on account of Karigars which remained outstanding at the end of the year were duly paid in the subsequent year(s). In the cases of disputed parties also payments have actually been made in the subsequent year(s), as per the particulars contained in Annex. 'A' to the impugned assessment order. The AO himself has extracted such particulars from the Jama Jakad Bahi. Payments made to these Karigars in the subsequent year(s) have not been adversely viewed in the assessment. In fact, it was an ongoing process as payments against the earlier years 'outstanding' have been made in this year. Further, the liabilities in question are referable to the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of them. No verification from the Karigars or any information about the identity of such Karigars was considered necessary. This too was quite logical as the liabilities were supported by the Purjas (issued by the assessee at the time of making purchases). The disputed liabilities are at par with other liabilities (as have been referred to above) and there was, therefore, no justification to treat same, differently. 14. In the case of Asstt. CIT vs. Kusum Saree Kendra Ors., learned Third Member has very categorically held that even non-production of Karigars cannot be taken as a ground for rejection of the books of account. Relevant portions of the said order are reproduced hereunder: 18........ It is also not disputed that on the same day after sale was effected, the assessee was issuing a Purja to the weavers which indicated that assessee had purchased that saree from him and that Purja was giving out the number of sarees, price thereof and the date on which amount of purchase of saree by assessee would be payable. This Purja was being recognised in the market. The weavers used to come to assessee to collect the amount of Purja as per trend and it is also noted by learned JM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts were not allegedly made till the date of search which have been questioned by the AO and added as such towards the income of the assessee. Taking the facts and circumstances as they stand, we are completely convinced that the alleged addition was unwarranted and the assessee was perfectly justified in not making the entries in the account books till the payments were made to the Karigars and it was the usual practice and it was never objected to by the AO in the earlier years, while accepting the account books till the asst. yr. 1986-87. We, therefore, hold that the said addition was not justified. The overall GP shown by the assessee had been 5 per cent, while this year it was 4.79 per cent, i.e., a little fall over the earlier years but that was quite natural as there was a steep increase in sales from about Rs. 36 lakhs to Rs. 51 lakhs in this year from that of the last year. We, accordingly, decide the issue and delete the said addition.' 19. The above observation of the Bench clearly goes to show that practice of issuing Purjas, containing details with the names and addresses of the Karigars from whom alleged sarees were purchased, was prevailing in the trade for so ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulting into addition of the amount which was alleged purchased from Kabaris. The Tribunal deleted the addition, inter alia, by observing as under: 'The raw material said to be purchased by them from unorganised sector disputed by the Department was also found recorded in the stock register. In such a situation if some of the suppliers were not found at the addresses provided by the assessee which, inter alia, could be the same as would have provided to them by those suppliers, the assessee cannot be found faulted with. Persons from unorganised sectors always do not give correct addresses and for reasons best known to them including the intention to suppress their identity so as to avoid the tax net. This fact could be judicially noticed by us. In fact, the corner stone of the case is that exactly as to whether all the Kabaris existed at the addresses provided by the assessee or not. It depended upon the fact as to whether the finished goods produced by the assessee were in commensurate with the raw material claimed to have been pumped in by them in their manufacturing process. This tally, even at the cost of repetition, was found to be wholly in order by the learned CIT(A) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a view that for verification of purchases, there should be no insistence for production of Karigars. At this stage, it is necessary to peruse the said instructions and, therefore, the same are reproduced hereunder: Office of the Chief CIT Allahabad Camp at Varanasi F. No. PG/l/95 Dt. 28th Jan., 2002 To, The CIT, Varanasi Sir, Sub: Assessments in the cases of Dealers of Banarsi Sarees-Regarding This refers to your endorsement F.No. Misc./CIT/VNS/2001-02, dt. 28th Jan., 2002, on the above subject. 2. I enclose a copy of Board's Instruction F. No. 272/46/2001. IT(J) , dt. 29th May, 2001, which must have come to your notice earlier also. Since the matter of assessment in the cases of dealers of Banarasi sarees is being considered at various levels in the Department we must take comprehensive and wholistic view in the matter. 3. I invite your attention to the contents of D.O.F. No. PG/1/95/4149, dt. 25th Jan., 2001. of Shri K.D. Gupta, Chief CIT, Lucknow, on the same issue which inter alia contained the following instruction: 'Whether the purchases claimed to have been made are genuine or not is a pure question of fact. Besides, since the sales are fully verifiable, the whole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was confronted with the CBDT instructions (as circulated by Chief CIT, Allahabad), made Revenue's appeal non-pressed. Relevant portion of the said consolidated order is reproduced hereunder: 5. The learned Departmental Representative, Shri Ashok Kumar, appearing for the Revenue Department, on the basis of all these papers stated that the Department do not press the grounds of appeal in view of the instructions of the CBDT in the matter. In view of the statements of the learned Departmental Representative and more particularly when instructions are issued by the CBDT to withdraw the appeals which are binding on the IT authorities, we do not find any justification to interfere with the order of the CIT(A). The assessee's compilation included various other orders also as had been passed by the Tribunal on similar lines. 17. Having discussed at length various features of the trade of Banarsi sarees, we proceed to decide the controversy before us. As has been noticed by us earlier, all the purchases made by the assessee wherever the same have been made from the Karigars are supported by the 'Purjas' issued by it (the assessee). Such 'Purjas' were found to be dul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the records of the assessee, only such names and addresses would be found recorded, as told to it by the Karigars themselves. Beyond this, the assessee is not concerned to ascertain correct or full addresses of the Karigars as the purchases have been made on credit. It is for the Karigars concerned or his nominee and/or transferee of the 'Purja' to collect his payment from the office of the saree dealer. Not that the saree dealer itself has to approach the Karigars for making payments to them. It has, therefore, to be held that even if the address is incomplete or even in an extreme situation, where the Karigar is not found at the address available with the assessee (as written in the Purja), no adverse inference can be drawn in the assessment of the same dealer or any of the aspects of the purchases. This is more so in a case like this where the purchases and sales have been duly accepted. This leads to a conclusion that 'Purjas' themselves as also contents thereof have got great evidentiary value. If payment against the 'Purja' recorded in the books of account, then the liability in relation to such 'Purja has to be treated as genuine unless of cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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