9911796707
TMI Blog1978 (10) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... ale of yarn the assessee disclosed sales at Rs. 49,886 with G.P. at 7.5 per cent The ITO has observed for the year under consideration that the assessee maintained production register and other relevant registers. However, he has observed that the assessee had purchased yarn of different denier which was consumed for production of cloth. In the absence of basic record in the form of consumption of yarn register quality-wise, it was not possible to verify the extent of the consumption of each type of yarn consumed for the production of particular type of cloth. The ITO further observed that the assessee did not maintain a register showing day-to-day consumption of yarn quality-wise and, therefore, there was no effective check on the consumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,105 treating that transaction alone as genuine one. Needless to state, the ITO not believing in the statements of the two parties who were produced before him, and since three parties could not be served with summons, added Rs. 27,453 to the income of the assessee. 5. The ITO considered the G.P. shown by the assessee as not satisfactory and that holding that as proviso to s. 145 is applicable made addition. However, the ITO observed that "as addition on account of alleged purchases of yarn not proved as genuine is made, no further addition on account of low G.P. is made as the same is covered by the addition made". 6. Against the order of the ITO the assessee went in appeal before the AAC, who in a very cryptic manner passed the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was recorded by the ITO. This person flatly denied having any transaction with the assessee. Since the witness had in categorical terms admitted that he had no transaction with the assessee, it was urged that the ITO was justified holding the alleged purchases from Reshamwala as bogus. The learned Departmental Representative also took us through the statement of Bachubhai, a Dalal through whom another alleged transaction had taken place. According to the learned Departmental Representative this witness also cannot be relied, as according to the witness certain account books were destroyed in the floods which had taken place in 1968. However, in the cross-examination he stated that certain books were with Mehta Shri Jain Dalal. An eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is definitely satisfactory and he drew our attention to the G. P. shown for the earlier year and later years. It was stated that more or less the G. P. shown by the assessee was accepted for all the years except one year where an addition of Rs. 7,000 was made, but the assessee did not go in appeal before the Tribunal. The leaned representative gave explanation for the alleged low G. P. by stating that for the year under consideration the labour charges were increased tremendously, in that from 14 NP. the assessee was required to pay 34 NP. per metre. It was also pointed out that the production for the year under consideration has gone up considerably and, therefore, there is no justification to make any addition. 10. Lastly, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year under consideration is very satisfactory as it has gone up. Therefore, we see no justification to make any addition on account of the G.P. There is third aspect of the matter. For the year 1963-64 the assessee had shown G.P. at 13.6 per cent which was accepted. For the years 1964-65 and 1965-66 the assessee showed G.P. at 11.8 per cent and 8.1 per cent which was also accepted. For 1966-67 also the G.P. was shown at 10 per cent and an addition was made of Rs. 14,900 which was deleted by the AAC. For the year 1968-69 G.P. shown by the assessee at 10.5 per cent was accepted. For the year 1967-68 the G.P. was shown at 12.1 per cent and an addition of Rs. 14,000 was made. It was stated by the learned representative of the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amwala is not genuine and that we direct that the addition on this transaction should be made to the income of the assessee. 14. The statement of a partner Shri Bachubhai Vijubahi Dalal shows that he had sold certain yarn to Deepak Textiles i.e. the assessee and it appears from the statement recorded that the ITO wanted to know whether this party had proved the purchases that he had made from S. Kashinath. In this regard we hold that the ITO was not justified because once this party accepted that it had sold certain yarn to the assessee, it is neither reasonable nor just to ask the party to prove the genuineness of its purchases from another party. In other words, it is something like proving the source of a source. Accordingly, we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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