9911796707
TMI Blog1998 (2) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... is a search case under section 132 of the I.T. Act and books of account were seized. The Assessing Officer found that the assessee made purchases of cloth/acrylic yarn from various parties including certain local parties. He mentioned that in the case of following four parties, the transactions are not verifiable:- (i) Kamal Synthetic Hosiery (ii) Zebra Knitting Works (iii) M.S. Knitting Mills (iv) Madhu Trading Corpn. The Assessing Officer looked into the transactions with reference to the vouchers of the parties, mentioned above, and the assessee was asked to prove the genuineness of these transactions. The Assessing Officer informed the assessee that the first three parties were not traceable and that the whereabouts of these may be intimated. The assessee informed that these parties have left the place, after closing their business, but the assessee did not give any evidence where these parties were initially located, to verify whether they existed or where they have moved. The Assessing Officer held that these purchases were not genuine and these transactions were bogus, i.e., the purchases from these three parties. The Assessing Officer observed that Madhu Trading Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------- 16-8-1983 6,000 Imprint, Calcutta (against expenses) 22-9-1983 6,000 -do- 7-9-1983 50,000 Knitman, Ludhiana (against purchases)" -------------------------------------------------------------------------------------- These payments were made in excess of Rs. 2,500 and not through account payee cheques or drafts. Ld. CIT(A) confirmed the disallowance of Rs. 12,000 paid to Imprint, Calcutta, but deleted the addition of Rs. 50,000 in respect of Knitman, in view of the Board's circular. After hearing ld. D.R., we find that the contention raised by the assessee and accepted by ld. first appellate authority is not in conformity with the relevant provisions of law and the Board's Circular No. 220 dated 31-5-1977. Therefore, her action in deletingthe disallowance of Rs. 50,000 under rule 6DD(j) cannot be upheld. Confirming her action in respect of the disallowance of the Rs. 12,000, her action in respect of Rs. 50,000 is reversed and order of the Assessing Officer is restored on the issue. Accordingly, ground of the assessee's appeal fails and those of the revenue succeed. 6. Ground No. 3 is against disallowance of Rs. 3,970 under staff welfare expenses. The Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere and the assessee's ground fails. 9. Ground No. 6 relates to the disallowance of interest relatable to the debit balance lying in the account of M/s. JN. Mohindra & Co. Ld CIT(A) followed her order for assessment year 1984-85 in this respect. Vide para 13 of our order in I.T.A. No. 521/90, we have confirmed the action of ld. CIT(A) on the point. The same holds good here also and the assessee's ground fails. 10. Ground No. 7 relates to the disallowance of interest of Rs. 4,950 on the amount advanced to Sh. Abhay Kumar. This amount has been advanced to Sh. Abhay Kumar Jain, MD, out of the company's overdraft with the bank. Since nexus has been established, as admitted by ld. counsel before CIT(A), we find that no interference is called for. The impugned addition stands confirmed and this ground fails. 11. Last ground in the assessee's appeal is in respect of non-chargeability of interest under sections 139(8) and 215/217 of the I.T. Act. Following earlier year's order, we direct that consequential relief be given on this count. Ground fails. 12. Coming to ground No. 2 in the revenue's appeal, which is against deletion of addition of Rs. 1,50,000 made in the trading account, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , books of account of the assessee were seized. The Assessing Officer found that the assessee had made purchases from the following four parties: ------------------------------------------------------------------ M/s. Kamal Synthetic Hosiery, Ldh. 95,409.75 M/s. Zebra Knitting Works, Ldh. 2,51,344.50 M/s. M.S. Knitting Mills, Ldh. 1,50,000.00 M/s. Madhu Trading Corpn., Ldh. 5,31,780.00 ------------------------------------------------------------------ Details of bills and mode of payment in the assessment year under consideration has been recorded by the Assessing Officer at pages 2 and 3 of the assessment order. The Assessing Officer found that the entries with regard to these purchases were recorded in the books of account of the assessee after a delay of one month to eleven months as noted in para 2.03 at page 4 of the order. The Assessing Officer also made local enquiries and found that out of the four parties, the first three were not found at the addresses given in the vouchers. With regard to fourth party, namely, M/s Madhu Trading Corpn., although the party was in existence, yet they claimed that the books of account had been lost and as such the transaction of purchases m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Shri B.R. Kaushik, the ld. D.R. 5. My ld. brother has summarised the facts in para 3 of the proposed order and thereafter he has recorded the submissions of the ld. D.R. in para 4 and has given his finding that the addition of Rs. 4,96,755 should be upheld as confirmed by the CIT(A) and with regard to the addition pf Rs. 5,31,780, he has restored the matter to the file of Assessing Officer as, according to ld. brother, the addition of Rs. 5,31,780 was made by the Assessing Officer on the basis of local reports which were not confronted to the assessee. 6. The assessee company derives income from manufacturing and sale of knitted cloth. The Assessing Officer has observed in para 2.02 of the assessment order that the promoters of the company were reported to indulge in clandestine activities of selling the import licences and goods at premium outside the books of account and the accumulated unaccounted wealth was used to procure the goods for the purpose of manufacturing and in order to cover up the sales, the purchase vouchers in the name of fictitious parties were created to present genuine transaction which resulted in the inflation of expenses and consequent reduction in inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus purchases, is justified or the entire addition of Rs. 10,28,835 be restored to the file of Assessing Officer for fresh adjudication, as held by the Accountant Member?" ORDER On a difference of opinion between the Members constituting the Division Bench, the following point of difference was referred to me for my opinion by the Hon'ble President under section 255(4) of the Income-tax Act, 1961:- "Whether, on the facts and in the circumstances of the case, the conclusion of the Judicial Member in confirming the addition of Rs. 4,96,755 and setting aside the addition of Rs. 5,31,780, on account of alleged bogus purchases, is justified or the entire addition of Rs. 10,28,835 be restored to the file of Assessing Officer for fresh adjudication, as held by the Accountant Member?" 2. I have heard both the parties at length and have also perused the material on record to which my attention was invited during the course of hearing. The orders passed by the ld. Accountant Member and ld. Judicial Member have also been minutely perused by me. The facts, no doubt, are stated in the orders of the ld. Members but to summarise these, there was a search and seizure action on the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t three parties. Both the parties challenged the order of the CIT(A) before the Tribunal. It is a matter of record that on the date of hearing, nobody appeared and the appeals were heard ex parte qua the assessee after considering the submissions of the ld. D.R. appearing on behalf of the department. 4. The ld. Judicial Member who wrote the initial order took the view that the relief of Rs. 5,31,780 given by the CIT(A) in respect of M/s Madhu Trading Corpn. was required to be withdrawn and the matter restored back to the file of the Assessing Officer for passing a fresh order. As regards the remaining addition of Rs. 4,96,755 in respect of the first three parties, he confirmed the action of the authorities below. I may at the outset mention that no independent reasons have been given for the aforesaid action and the only observation is to the effect that "the Assessing Officer made local report as the basis for making the additions which was not confronted to the assessee". 5. The ld. Accountant Member passed a separate order disagreeing with the view expressed by the ld. Judicial Member but for purposes of disposing of the present reference to me, I would like to state that inso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the question of set aside. The ld. counsel further reiterated the arguments advanced before the Division Bench and laid stress on the following:- (i) That sales had not been doubted by the department and in case the purchases had not been made then how could the corresponding sales be effected. (ii) The addition on account of alleged bogus purchases would increase the GP rate to an abnormal extent which was not the position in the trade in which the assessee was engaged. In concluding the ld. counsel urged that the view expressed by the ld. Accountant Member be approved. 7. The ld. D.R., on the other hand, supported the order passed by the ld. Judicial Member contendingin the process that the onus was squarely on the assessee to prove the purchases entered by it in the books of accounts. He highlighted the fact that there had been an inordinate delay in the recording of entries in the books of account. The further submissions were to the effect that the set aside on the part of the ld. Accountant Member vis-a-vis the three additions aggregating Rs. 4,96,755 was not justified on the facts and circumstances of the case as this had allowed an opportunity to the assessee to furn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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