TMI Blog2000 (9) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... th the references, the Assessing Officer made addition of Rs. 72,669 and Rs. 30,862 in respect of broom account on the ground that the books of account maintained by the assessee-firm do not reflect the actual transactions so as to enable him to compute the correct income. In respect of the rapeseed oil account, the Assessing Officer made addition of Rs. 72,669 and Rs. 41,676 on the ground that the shortage claimed by the assessee-firm is on the higher side. The learned Tribunal, on appeal by the assessee, eventually upheld the reasons for addition of the aforesaid amount but restricted the same to Rs. 55,000 in respect of the broom account and Rs. 80,000 in respect of the rapeseed oil account for the assessment year 1984-85. In respect of the account for the year 1985-86, the amount was restricted to Rs. 20,000 in respect of the broom account while the addition of Rs. 41,676 in respect of the rapeseed oil account was sustained. It would appear that the Assessing Officer while making the additions invoked the provisions of the proviso to sub-section (1) of section 145 of the Act and rejected the claim for deduction. Question No. 2 is relatable to the claim of deduction of interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises covering approximately 11,100 square feet on a nominal rent of Rs. 12,000. The Commissioner of Income-tax (Appeals) accepted the contention of the assessee-firm that the interest-free advance was made to Keshrichand Jaisukhlal in order to compensate the loss on account of nominal rent. But on appeal, the learned Tribunal noted that the unsecured loan was borrowed on interest payable at the rate between 12 per cent. to 18 per cent. and the same was diverted and advanced to Keshrichand Jaisukhlal. The learned Tribunal also rejected the contention of the assessee-firm that the partners would have utilised their capital in any manner they would have liked. The Tribunal observed that as soon as any capital whether in cash or kind was brought by the partner in the partnership firm, the partner ceases to be the owner of the money. On this finding, the learned Tribunal reversed the order of the Commissioner of Income-tax (Appeals) and restored that of the Assessing Officer. In so far as the broom account for the assessment year 1984-85 is concerned, it would appear that the Assessing Officer noticed that the purchases are not supported by vouchers/memos and that the three truck ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese inconsistencies and infirmities, the Assessing Officer came to the finding that income from the dealings in brooms cannot be properly deduced from the books of account produced by the assessee-firm and on that ground the sales and the gross profit have been reconstituted as per the provisions of the proviso to sub-section (1) of section 145 of the Act of 1961. Almost the same infirmities as had been noticed by the Assessing Officer in respect of the assessment year 1985-86 have been found in the books of account produced. It is pertinent to mention here that the assessee made a purchase of 116 quintals of brooms at the rate of Rs. 221 on March 28, 1985, and as there was no sale thereafter before the closing of the accounting year, the closing stock should have included 116 quintals purchased at the rate of Rs. 221. But the books of account reflected only 112.50 quintals as against 116 quintals, thus 3.50 quintals of a particular variety of broom in a day or two taking into consideration that the total shortage during the year has been shown at 1.50 quintals in the trading account. That apart, 230 quintals of brooms purchased at the rate of Rs. 425 in the later part of the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cies was not in a position to deduce the correct income of the assessee-firm, and, as such, he had to take resort to the extraordinary powers Vested in him under the proviso to sub-section (1) of section 145. The nature of deviation in the books of account and the infirmities and inconsistencies which remained unexplained appear to be the compulsion on the Assessing Officer to apply the proviso to sub-section (1) of section 145. We are, therefore, of the opinion that under the given circumstances the Assessing Officer had no other alternative but to evolve a method of his own to deduce the correct income. We find no error in the procedure adopted by the Assessing Officer. The Assessing Officer computed the profit taking the gross profit at the rate of 4 per cent. Shri Gogoi, learned counsel for the assessee objected to the figure being arbitrary and unjust. He also found fault with the rate of gross profit for want of reason. We have given our thoughtful consideration to the submission of Shri Gogoi. It appears that the assessee has all along maintained that they have been charging Rs. 4 as commission over the purchase price per quintal. Therefore, the Assessing Officer was obvio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e godown during storage. No shortage was noticed when the assessee, lifted the quota from the STC godown at Guwahati and there is no record of shortage on arrival of the rapeseed oil at the godown of the assessee. Therefore, the Assessing Officer was of the opinion that the shortage shown by the assessee is not the actual shortage as claimed. In the facts an circumstances, the Assessing Officer allowed shortage at the rate of 2 per cent. of the total number of tins of rapeseed oil which works out to 894 tins. Thus, the shortage was brought down from 1,542 tins to 894 tins and the value of the remaining 648 tins at the rate of Rs. 153 being Rs. 99,144 was added. The above conclusion on the facts and circumstances in respect of rapeseed oil was not disturbed by the learned Tribunal. After a careful consideration of the matter in its depth and for the reasons reproduced above, we are of the opinion that the Assessing Officer did not commit any error in adding the value of 648 tins to the total income of the assessee-firm. The discussions above do not warrant interference so far the decision with regard to the broom account and the rapeseed oil is concerned. Hence, our answer to qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cern of the applicant-firm. The assessee's case was that they had not charged interest on that advance in consideration of the fact that they got the premises of the sister firm at a very low rent. A Division Bench of this court following the decision rendered by this court in Highways Construction Co. Pvt. Ltd. v. CIT [1993] 199 ITR 702, answered the question in favour of the assessee and against the Revenue. The relevant observation of this court in Highways Construction Co. Pvt. Ltd. v. CIT [1993] 199 ITR 702, is reproduced below for better appreciation : "There is no finding of fact to the effect that actually the loan had been granted to the managing director or any other person on interest, or that interest had actually been collected and the collection of the interest was not reflected in the accounts. The finding of the Income-tax Officer is that the assessee ought to have collected interest. In other words, the view of the Income-tax Officer, which has been accepted by the Tribunal, was that the assessee, as a good business concern, should not have granted interest-free loan, or should have insisted on payment of interest. If the assessee had not bargained for interest, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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