9911796707
TMI Blog1990 (10) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... income earned on fixed deposit of unutilised grants-in-aid as capital receipt and accepted the assessee 's plea that it was not taxable income when on the other hand, he accepted that the unutilised amount of grant-in-aid is taxable and the assessee had offered for taxation of unutilised grants-in-aid in the revised profit and loss account. 3. The facts of the case are that the assessee company is a subsidiary company of U.P. Handloom Corpn. Ltd. The assessee company is aU.P.StateGovernment Undertaking established for the development of Handloom industry in District Bijnor andMeerut. The business of the assessee is purchase and sale of yarn (controlled and uncontrolled). The assessee company purchases handloom cloth from weavers as per specifications and designs given by the company. This handloom cloth so purchased, is sold to the various agencies on wholesale and retail through its holding company U.P. Handloom Corporation Ltd.,Kanpur. At first, the assessee did not file the return, so notice under s. 148 was issued by ITO. The assessee filed return without audited books of account, statement of the case, etc. It is an admitted fact that the accounts of the assessee had not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f primary transactions, viz., giving of yarn to weavers, taking cloth from them, and payment for such services, entirely unverifiable thus not only payment, or quality of cloth involved is unverifiable but even the exact period of such transactions is not known and whether these were so written at the time of transactions or they really reflect the transactions w.e.f. the period stated therein. IV. There are instances where subsequent dates are entered prior to the following dates, viz., 6th of a month recorded before 5th of the same month. V. Questionnaire issued by this office remains unanswered. VI. The assessee insisted to avoid this office in the Remand Report but seems most willing to appear before you. Reason for this is I. Reluctance in compliance. II. Not furnishing answers to questionnaire asked and keeping a dumb/started expressions. III. Admitting the deficiencies in entirety orally, but not accepting them in writing (This is for the simple reason, that, here before me, the assessee had no answers or very ridiculous explanations)." It was observed that the books had been written to suit a state of affairs after the actual transaction had been taken place. The CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit entries had been cut out and, therefore, these credit entries could not have been taken into account by the assessee for working out its profit. Since the assessee had not submitted any balance sheet for the year under consideration, he was of the view that it was not possible to know whether all the transactions had been taken into account by it. While the various debits in the controlled cloth purchases account on account of the aforesaid adjustments were clearly indicated in the purchases of controlled cloth account appearing at pp. 79, 80 and 533 to 537, the corresponding credit entries in this regard were not traceable in the ledger. In these circumstances the ledger for the years ending31st March, 1982, as also31st March, 1983were retained by the CIT(A). The assessee filed another computation of income for the year ending31st March, 1982in which income has been disclosed at Rs. 11,47,476.94 as against the income of Rs. 3,88,772.14 shown before the Assessing Officer. It was admitted by the assessee before the CIT(A) that the transaction totalling Rs. 12,31,800.73 being credits in yarn distribution account had not been taken into account with the result that the profit had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akhs. The assessee had not produced the details of claim of interest and the claim of Rs. 223,996,396 before the CIT(A). Therefore, on examination of ledger for that year the CIT(A) observed that the appellant had debited the transfer of goods account by a sum of Rs. 23,96,396.30 and had credited the accounts of U.P. Handloom Corporation Ltd. by a sum of Rs. 15,04,800 of Handloom Intensive Development Project, Dhampur by Rs. 5,14,328 and of Handloom Intensive Development Project, Maunath Bhanjan by Rs. 3,77,267.50. In this way, the entries in the books of account were at variance with the claim made and details filed before the Assessing Officer. He was of the view that if the goods had been purchased from Dhampur and Maunath Bhanjan centres as originally claimed, why their accounts have been credited. What entries were made in respect of Headquarter and other centres. Unless the assessee establish this contra entries in goods account, either by way of sale or closing stock, the adjustment entry made by the assessee cannot be allowed. So he confirmed the addition of Rs. 23,96,396 in the income of the assessee. 6. Regarding grant-in-aid, the CIT(A) has raised a query vide his lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no dispute that the statement of income as furnished by the assessee cannot be relied upon as giving true and correct income for these years. For example, he has mentioned the amendments of income made by the assessee which are as under: Asst. year Profit as per P&L a/c submitted return of income Further amounts added Income returned Revised income as per P&L a/c submitted during earlier proceedings Revised income submitted before the CIT(A) 1 2 3 4 5 6 . Rs. Rs. Rs. Rs. Rs. 1980-81 7,85,085 1,008 7,86,053 7,40,142 10,00,481 1981-82 14,28,192 6,166 14,34,360 15,65,826 20,01,595 1982-83 Return not submitted but as per P &L A/c for asst. yr. 1983-84 the income for the year . . 3,88,772 3,88,772 before discrepancy was pointed out . . . . . 11,47,477 as per revised P&L A/c submitted on 30.3.89 1983-84 8,974(-) 4,42,567 4,33,620 . 1,92,810 . (Prov.) (+) (Prov.) . . . 5,36,063 - 5,36,063 . . Thus, he was of the view that the assessee had been constantly changing its income for the years under consideration. The accounts are not reliable and the frequent adjustments and corrections had been made, which shows the total unfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was not able to make the adjustments and entries. Therefore, the method employed by the assessee was such that in that method, income cannot be properly deduced therefrom. Then the Assessing Officer was left with no alternative but to make estimate of its income. In the circumstances, the estimate made by the Revenue authorities is correct. 10. We have considered the rival submissions. Sec. 145(1) speaks as under" "145(1) Income chargeable under the head 'Profit and gains of business or profession' or 'Income from other sources' shall be computed in accordance with the method of accounting regularly employed by the assessee. Provided that in any case where the accounts are correct and complete to the satisfaction of the Officer but the method employed is such that, in the opinion of the Officer, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Officer may determine". In the present case, it is correct that the method of accounting employed by the assessee is such that it is not possible for the Assessing Officer to compute the income properly by the method employed by the assessee, so in the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made only in respect of some of the units which are located in the backward areas and not all units of the assessee. It was also observed that the computation had been made by the Chartered Accountant in respect of the claim under s. 80HH on the basis of unaudited accounts in proportion to the sales of various centres. The CIT(A) has rejected both the claims under ss. 80J and 80HH of the IT Act, on the basis that the assessee had made these claims on the basis of unaudited accounts. The correctness of these claims cannot be ascertained in the absence of audited accounts. The correctness of these claims cannot be ascertained in the absence of audited accounts. He further mentioned that the correctness of these accounts and statements had not been certified. It was also pointed out by him that in respect of some of the years the income has undergone a change after the submission of the said certificate by the Chartered Accountant which was mechanically done. Therefore, he rejected the assessee's claim. 13. The submission of the learned counsel for the assessee was that the CIT(A) had gone wrong in rejecting the claim of the assessee. Since the matter is going back, this matter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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