TMI Blog1981 (2) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,097 Rs. 1,31,125.00 4. G. Kochu K.unju 415 Rs. 13,280.00 . . 19,979 Rs. 6,72,001.50 3. After the return had been furnished, there was on 16th Dec., 1976 a search and seizure in the business premises of the assessee. In the day book and Ledger in respect of processing charges paid to Shri Suresh Babu and K. Mohamed Kunju, there were erasures and overwritings. This is what is stated about it in the assessment order. "In this context, the erasures and overwritings indulged in the day book and ledger in respect of processing charges paid to Shri Suresh Babu and K. Mohamed Kunju assume importance. The amounts were debited in the accounts with description giving the number of bags and rate at which charges were paid. The amounts remain in tact but the number of bags and rate have been altered as below: Page in the day book Date Amount Rs. No. of bags Rate . . . Original-Altered Original Altered (In the case of Sri T.K. Suresh Babu) .16 30-4-1973 22,506 1023 682 22 33 32 9-6-1973 14,564 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from him and not a case of pure estimate. The AAC has further erred in omitting to take into consideration the alteration made by the assessee in his books in respect of processing charges by changing the figures Rs. 22 to Rs. 33." The Deptl. Rep argued the case mainly on the lines raised in this ground. He argued that the figure of Rs. 22 is taken from the books of the assessee itself. He pointed out that the alterations are so crudely done so that in many instances the altered number of bags multiplied by the rate does not even coincide with the total figure. He relied on these altered figures of number of bags and rate per bag to show that the alteration was artificial and that the altered figures are false figures. The assessee argued that the total or final figures in respect of any of the four individuals are not altered or erased or tampered and which is an admitted fact and that the initial figures or breakup like number of bags and the rate were due to some clerical or inadvertent mistake and that it was altered only to show the correct position by showing the correct number of bags and the correct rate paid per bag and that there is no dishonest motive behind this cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. It is in this context that we have to go into the comparable cases. As regards the comparable cases, the ground raised by the Department is as follows: "4. Without prejudice to the above ground, the appellant submits that the AAC has erred in allowing the reduction purporting to follow the decision of the Hon'ble Tribunal in the case of Malabar Cashew Nuts and Allied Products, Quilon in ITA No. 50/Coch/71-72. He ought to have noted that this decision of the Tribunal has been rendered in entirely different circumstances and is not applicable or relevant as far as the present case is concerned. 5. The AAC has erred in not affording opportunity to your appellant to point how the cases referred to in the appellate order are not comparable at all to the assessee's case, and also to cite cases which are comparable to that of the assessee and wherein the processing charges claimed compare with the amount allowed by your appellant in the assessment". This line of argument that the ITO was not given an opportunity is not acceptable. First of all, the ITO appeared before the AAC during the course of hearing. Now, the AAC has relied on two comparable case. One is a Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t labour benefits as a real anomaly or a real improbability. The assessee has some explanation that part of the work of processing in his own factory was also got done by these outsiders. The Department has disputed that proposition. But, however, it has later accepted it in part and allowed Rs. 12,000 for such work. Whatever that may be, we need only point out that it is worthwhile to note that without labour benefit, the rate of the assessee in his own factory is worked out by the Department at Rs. 20 per bag (see the IAC's directions) and that instead of that figure, the ITO himself has allowed a higher rate of Rs. 22 per bag for these outside works. Why should that higher rate be allowed? That shows that such improbability is not a sure ground for disbelief. In a case like this of probabilities and improbabilities of almost equal force, the Department should have summoned Suresh Babu and questioned him about the number of bags processed by him. All the more so, when the figure of Rs. 1,32,330 paid to him is being accepted by the Department. It should have also summoned the other three and questioned about the number of bags processed by each and the amount received by each of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have examined the ledger and cash book of the Head Office. T.K. Suresh Babu's account are in ledger folios 252,256 and 262 in the head office, ledger. The cash advance is debited and bills raised are credited. Details of the number of bags processed are mentioned against bills. There are overwritings and erasures in respect of number of bags mentioned in the head office ledger folios 256 and 262. There are similar overwritings and erasures in the head office cash book pages where the amount of bills are shown. At cash book folio 32 on 9th June, the assessee is supposed to have got 441.25 bags processed". The most crucial material is the portion italicized above to the effect that the details of the number of bags processed are mentioned against the bills. The basic documents in this method of accounting is the bill. What appears to us is that when the IAC says that the details of the number of bags processed are mentioned against the bills what the officer meant to say was the number of bags noted in the bills itself. It appears to us that the IAC did not find any alteration or overwriting in the number of bags shown in the bills. The figure of 441.25 bags is the altered figure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order was passed on 21st Sept., 1977. The draft assessment order was sent on 21st March, 1977. The IAC passed his directions on 20th Sept., 1977. The ITO in the draft assessment order did not make these additions. It was the IAC exercising his power under s. 144A that made these additions. Even the intention to make these additions was made known to the assessee only on 22nd July, 1977 as seen from the direction of the IAC. The argument of the assessee is that the extension of time is available only for assessment made under s. 144B and not s. 144A and that, therefore, these additions should have been made before 8th June, 1977 and not thereafter. We agree with the assessee. Sec. 144A assessment should be completed within the normal time allowed. So these additions are barred by limitation and have to be deleted. 10. The Deptl. Rep. argued that this is a case of concealment and that, therefore, eight years time is allowed for assessment. We cannot agree. The case under which time can be extended for concealment cases is indicated at page 1754 of Income Tax Law (Second Edn). by Chaturvedi and Pithisaria. The commentaries are based on reported decisions of High Courts. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the IAC made under s. 144B is vitiated and void because of the influence of s. 144B in the mind of the IAC and the intention of the IAC to enhance the assessment proposed in the draft assessment order. We cannot agree with the assessee. The assessment is rightly severable into one under s. 144A barred by time and the other under s. 144B not barred by time. We reject this argument. The three additions indicated above are deleted. Rs. 6,000 salary to Anandan: 12. This is shown in the balance sheet as payable on 31st March, 1974. The case of the ITO in the draft assessment order is that he did not do any service at all. The ITO has recorded a sworn statement from him on 5th Feb., 1977 where he denied having received any salary. A copy of it was forwarded to the assessee. The assessee wanted to cross-examine. The ITO refused it on the ground that at thing so obvious need no further proof. The assessee also stated before the IAC his case for cross examination. The IAC also did not extend an opportunity. He only stated that on the evidence available, he agrees with the ITO. Even the Appl. Authority found no defect in using a material against the assessee without giving an opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held that the liability to pay this much of amount has not been proved. The AAC while confirming the disallowance held that moreover as has rightly been pointed out by the ITO, the processing season ended by Dec., 1973 and that the probabilities, therefore, are that the entire wage payment of the workers in the factory were made before 31st March, 1974. 15. We are of the view that there is no reason at all to doubt the genuineness of this liability. The reasoning of the AAC is erroneous because even the ITO in paras 4 of assessment order and the IAC in para 19 of his directions have found that some wages of last week in March, is paid only in the first week of April,. That shows that the factory has worked even in March, 1974. So the probability relied on by the AAC has no factual basis. This provision for payment of wages could only be genuine. Without this payment, the processing charges comes only to Rs. 20 per bag if Rs. 36,78,080 is taken as the correct figure. Even the ITO and the IAC in his directions has in the case of the other two factories allowed Rs. 22 per bag. So even if this provision for wages is taken into consideration, the processing charges arrived at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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