TMI Blog1992 (5) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... were taken on hire from M/s. Peckock Chemicals Pvt. Ltd. (hereinafter referred to as PCPL), a concern in which the Managing Director of the company, Shri S.C. Goyal (SCG) is also the Managing Director. In the asst. year 1986-87, the assessee had taken on hire 2050 oxygen gas cylinders and 750 DA cylinders and in the asst. year 1987-88, the hire was of 4000 oxygen gas cylinders. The dispute started with the Assessing Officer (hereinafter referred to as AO) examining the Audit Report under section 44AB. Column 6 of this report required details of payments made to certain persons specified in section 40A(2)(b) of the Income-tax Act. The report contained no reference to the payment of hire charges to the sister concern PCPL. 3. The revenue department conducted a survey at the factory and office premises of the company onFeb. 6, 1989, with the assistance of ADI,MeerutandDelhi. The survey covered examination of books and also recording of statements of officers. At a subsequent point of time, the books and other record were summoned, and were impounded. The AO examined the report as was prepared at the time of survey. AO framed his opinion that, PCPL had no office at Sahibabad, where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns. The information so obtained, revealed that, Sh. K.K. Gupta (KKG) was the Managing Director of those concerns. AO accordingly initiated second survey, this time at Bazar Sita Ram. Of the five concerns four were found as being run by KKG, either as sole-proprietor or as Managing Director. M/s. Gaurav Traders (GT) one of the five concerns, belonged to the father of KKG. The survey yielded a blank register belonging to M/s. Shiv Loha Bhandar (SLB), with the mark as pertaining to the year 1982-83. AO examined the details of availability of cylinders with PCPL, which showed 5054 cylinders and 750 DA cylinders. This detail showed that, PCPL had purchased 500 cylinders from SLB in the year 1982-83 while the survey yielded only a blank register of SLB. The details also showed sale of 1000 cylinders to GT on16-1-1984. The detail also showed transactions with M/s. Arya Industries (AI), a concern in which, Shri Akhilesh Kumar (AK) (brother of Shri. K.K. Gupta) and wife of Shri K.K. Gupta were partners. AK being the working partner of AI was questioned with reference to the transactions with PCPL. AK stated that his firm had no dealings with PCPL and had no godown to store the cylind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on an employee, he would not allow the employee to handle cash of the magnitude of Rs. 5 lakhs. AO with the above background, formed his opinion that, PCPL did not actually possess that many cylinders for being given on hire to assessee and the entries indicating hire were mere book entries, solely so made with the object of tax evasion. AO further was of the opinion, that the entries were so made purely with the object of obtaining loans from Financial Institutions on entirely false pretence. 8. A felt that the claim of hire charges could not be accepted. AO enquired from the assessee about the user of the cylinders. The reply was that, cylinders were being supplied from its units atBhavnagar, Nangal and Sahibabad, after being filled with the gas at Sahibabad. AO noted that, the assessee had provided the list of parties with whom, its cylinders were lying. AO called for their complete addresses and selected 28 parties. The assessee, as per AO, provided addresses of only six of the parties, vide its letter ofMarch 23, 1989. The assessee onMarch 27, 1989expressed its inability to provide any further detailed address than the one as was contained in the list of parties, with whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not locate that party at its location, despite seeking the help of the Police and the property dealers. 10. AO then called upon the assessee to file the receipts of octroi to verify the movement of the cylinders from PCPL to the assessee. The details were so called in respect of 952 cylinders in Dec. 1984, 773 cylinders in Jan. 1985 and 25 cylinders in Feb. 1995.The assessee submitted the details onMarch 27,1989. AO on examination of some registers, was of the opinion that, it did not indicate any increase in the no. of cylinders received in Jan. Feb. and in Apr. 1985. He was also of the opinion that, the accounts did not indicate any expenses on freight and octroi. AO's doubt got aroused because of the claim that, the cylinders were transported in assessee's own truck and that too in odd lots of 93, 182 etc. AO referred to the movement of truck No. DEG 136, which made several trips up and down Nangal, though the assessee had owned other trucks as well, which were plying on the same routes, but it was only truck No. DEG 136 which carried the cylinders, which according to him was rather strange. He then made reference to the trip onDec. 21, 1984on which date, the said truck had c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O made observation to the effect that, the assessee had made efforts to give the transactions the colour of genuineness, with PCPL having reflected the hire as its income and PCPL claiming depreciation on the cylinders. AO observed that, the obtaining of the loans from PICUP, banks etc., were only with a view to show a better liquidity position, which was all a carefully thought of action. AO further observed that, in asst. year 1987-88, the assessee's declaring a profit of Rs. one crore, claim of purchase of 4,600 cylinders from PCPL which was earlier claimed as taken on hire, was squared off with the claim of depreciation on the cylinders. He observed that, all these book entries were part of a well designed plot to evade tax and in reality, PCPL never had any cylinders for giving on hire or sale and, therefore, disallowed the claim of hire charges. 13. Shri Agarwal, the counsel of the assessee-company, submitted that, GCPL was incorporated in 1973, with its Registered Office atDelhi. PCPL was incorporated in 1976, with its Registered office at 8/7 Industrial Area, Site 4, Sahibabad. The first subscribers were Shri Ish Kumar Goyal and Smt. Pushpa Devi. PCPL was being assessed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 4000 cylinders, the hire was paid to PCPL and for 943 cylinders, hire charges were paid to another concern. Towards the end of the accounting year relevant to the assessment year 1987-88, the assessee purchased 4000 cylinders from PCPL. The date of the said purchase wasDec. 25, 1986and the hire was claimed only tillDec. 24,1986. CIT(A) went through the statement of availability of cylinders with PCPL right from the year 1979. By the year 1983 PCPL had acquired 1000 cylinders and in that year, it had sold 1000 cylinders to GT, a concern owned by KKG's father (now deceased). In 1984, there was purchase of 3000 cylinders from AI (concern of brother of KKG and wife of KKG) and its acquisition of cylinders totalled to 5054 in 1986. As a consequence of the dissolution of a firm M/s. Bihar Acetelyne Co., PCPL, further received 750 DA cylinders as its share. The said 750 DA cylinders were also taken on hire by the company, which had been accepted by the CIT(A) on the same set of facts and had allowed the payment o f hire charges. On this relief obtained by the company, the revenue too has accepted the order of CIT(A) and had not challenged it in appeal before the Tribunal. CIT(A) had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concern AI. AK flatly denied of having dealt in oxygen cylinders. CIT(A) therefore, had come to hold that, PCPL's claim of purchase of 3000 cylinders from AI as not true and correct. 16. CIT(A) thereafter considered the purchase of 1000 cyliders from ASCPL in which KKG was the Managing Director. CIT(A) made reference to the Balance Sheet of ASCPL and observed that, it did not reflect any sale but showed of receipt of commission only. CIT(A) in this connection made reference to the statement of KKG, where he had stated to have received only his commission and had to invest nothing by way of capital outlay. KKG had stated that, the entire funds were provided by PCPL to the assessee through ASCPL and there was no actual delivery of any cylinders by his company to PCPL. KKG has stated to have received only his commission for providing his service from PCPL as well as from the company. Accordingly CIT(A) held that PCPL's claim of having purchased 4000 cylinders as an untrue claim. In support of this conclusion. CIT(A) made reference to the introduction of the bank accounts by SCG. He also had noted that, the bank account of AI was opened in the name of Shri Mangtu Ram, who was an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, CIT(A) was confronted with the facts relating to the movement of funds between the various concerns and that, it all related to trading transactions of the assessee. He pleaded that, CIT(A) was explained that, the transaction of Rs. 59.93 lakhs with GI, a concern of KKG was in connection with sale of goods to that concern, the particulars and their evidences are part of the seized records, which could be got verified. The other sale for Rs. 25.48 lakhs was also stated as connected with a sale to ASCPL, which could also be verified from the seized records. The two concerns had paid by cheques drawn on Bank of Maharashtra and Punjab Sind Bank. Shri Agarwal contended that, this clearly established that, the statement of KKG that, his concerns had no dealings with the assessee-company is clearly falsified, because not only there was delivery of the goods but also there was receipt of money by cheques. Shri Agarwal pleaded that, there is no dispute to the fact that, Rs. 106.23 lakhs was paid by ASCPL for supply of gas cylinders to the assessee, which was earlier ordered with ASCPL, based on which PICUP had agreed to finance the purchase. Shri Agarwal pleaded that, PICUP had no ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Sahibabad, when it had a mere secretarial office only. CIT(A) referred to the direct ledger entry at the Head Office of the hire charges paid to PCPL and also to the statement of the Accountant of the assessee, that all receipts and issues are duly entered in the books of the factory. In this connection, the Accountant was asked to show the entries in regard to the purchase of the cylinders in Dec. 1986, but he could not show any entry as having been made in the books maintained at the factory, despite the claim made by him, that, at the factory complete record is maintained in record to fresh receipts as well as the movement of the old cylinders. CIT(A) therefore, formed his view that, the claim of 2050 cylinders as having been taken on hire in asst. year 1986-87 as not established and expressed it so in para 5.18 of his order. In para 5.19 of his order, CIT(A) made a similar expression for the hire of 4000 cylinders in asst. year 1987-88. 21. CIT(A) rejected the claim of the appellant that, on the date of survey, it had as many as 6947 cylinders in its factory premises and that, it included the purchased cylinders as well, by observing that, he is concerned with the availabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying out the basic examination of the existence of the equipment itself. He submitted that, it is evident from records that, PICUP had agreed to finance the purchase of gas cylinders trollied from ASCPL and in view of ASCPL's inability to supply them, allowed modification of the arrangement of the purchase of cylinders from PCPL. He contended that if PICUP had refused the modification, there was no alternative left with ASCPL but to refund the amount to PICUP. He contended that, the mere fact that, the amount as was paid by PICUP to ASCPL, was allowed to be further remitted to PCPL is sufficient indication of the concurrence of PICUP. He submitted that, the records show that, the assessee had been complying with the repayment schedule with PICUP and repayment of the loans were being made to PICUP. He strongly contended that, there is no evidence in the possession of the revenue to the effect that, PICUP had commenced any proceeding for having defrauded it in obtaining its funds, without the existence of the cylinders. He further contended that, revenue did not carry out any enquiry with PICUP on the advance allowed by it. He pleaded that, the revenue merely to reject the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s recorded in the books of the assessee are non-genuine. He contended that, if KKG fails to paint a complete picture of the transactions of purchases and sales in his books, but only paints the skeleton of the commission, it does not lead to the conclusion that, he had received the commission only or that, he was a mere procuring or marketing broker. He submitted that, the revenue has taken the submission of KKG that, he has no knowledge about the actions of the concerns belonging to him or to his wife and brother, rather very lightly. He contended that, normally any person can be expected to have full knowledge about one's own affairs, whereas, in the instant case, KKG lacked knowledge about his affairs, does not remember the chronological happening of events concerning his concerns, but has complete track of the transactions of the appellant and PCPL which never occurred to the revenue as a strange matter. 25. Shri Agarwal carried us through the list of availability of cylinders with PCPL from 1978 toJune 30, 1987. He submitted with reference to this list that, it provided particulars of the date, bill no party from whom the cylinders were purchased, its cost, the party to whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21st and 22nd sold 1000 cylinders to PCPL. Therefore, as of Mar. 1986, PCPL had in stock 1950 cylinders. From this stock, PCPL gave on hire 500 cylinders to Rajdahani Gases (P.) Ltd. (RGPL) on25-3-1986and balance of 1450 cylinders were hired out to the assessee on1-4-1986. RGPL returned the 500 cylinders on30-4-1986and this was further given on hire to the assessee on1-5-1986. Shri Agarwal pleaded that, if the contention of the revenue were to be true, then, how come that, PCPL came to provide on hire to POPL, ASCPL and RGPL which concerns were not at all sister concerns of the assessee or PCPL and why would these parties pay PCPL the hire charges, which were assessed as such by the revenue. 26. Shri Agarwal pleaded that Rs. 45 lakhs was paid to AI by PCPL for the purchase of cylinders from them. He pleaded that, the further payment made by AI to GT, a concern of KKG for Rs. 41.50 lakhs, the explanation should have been sought from AI or GT and not from the assessee or PCPL. He pleaded that, the CIT(A) had misunderstood the said payment by PCPL. He further pointed out that, the CIT(A) had also overlooked the vital fact of purchase of Breathing Apparatus by GT from the assessee at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re too supplies were made to parties. He submitted that, based on the stock register, which had complete record of the total cylinders available with the assessee, compilation had been made for each of the month. 29. He referred to the statement of availability of cylinders for the accounting period ending with June 1985 (pages 157-160) and Dec. 1986 (pages 164-166) and submitted that, this list showed the names of the parties together with the cylinders supplied to them with the gas and also the cylinders as at the platform, waiting for being filled with the gas. He submitted that, the perusal of these details showed that, the quantity of cylinders with the customers or parties were not uniform, but changing, depending upon their requirements. He submitted that, the appellant had its own cylinders numbering 6764 at the beginning of the asst. year 1986-87. It had taken on hire 1750 cylinders till Mar. 1985 and took additional 300 cylinders on1st Apr. 1985. This hire of 2050 cylinders continued for asst. year 1987-88 too and another set of 1950 cylinders were taken on hire in that asst. year, which hire continued till 24-12-1986. It was on25-12-1986, that the assessee-company had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause, it could not so hire out without owning them or taking them on hire. Since PCPL had not taken on hire the cylinders, but purchased it, which purchase has been accepted to be sold at a later point of time, the conclusion is that, the purchase too is proved and genuine. 31. Shri Agarwal contended that, revenue had stated that, the list of security deposits as provided to it did not contain complete addresses, which is wrong. He carried us through page 37 of the paper book, which is the letter addressed to the AO, along with which is the party-wise list of security deposits, giving particulars of the name, with address, amount of security at the begining of the year, fresh deposits received during the year, amounts repaid to them and the balance at the close of the accounting period. He pleaded that, the addresses as were provided by the parties, were entered as such in the registers, from which the said statement was prepared. He submitted that, the parties included several prominent parties and few from distant places. He submitted that, CIT(A) had categorically observed that, the sample test of six parties, who had stopped buying gas from the assessee from 1983, could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nus that lay on the assessee stands discharged. 34. Shri Agarwal referred to the list of DA cylinders, which included 750 Nos. taken on hire from PCPL. The facts and circumstances of the hire, their movements etc., are identical with the hiring of the cylinders numbering 2050 and 4000 in asst. year 1986-87 and 1987-88 respectively. He submitted that, the revenue has mistook the certificate placed at page 384 of the paper book as pertaining to the hire of cylinders from Dec. 1984 to Mar. 1985, while it pertained to the cylinders additionally taken on hire from Apr. 1986. He submitted that, on1-12-1984, 1750 cylinders were taken on hire, and another lot of 300 cylinders were taken on hire on1-4-1985. The third lot of hire was of 1450 cylinders from1-4-1986and the fourth was from1-5-1986of 500 cylinders. He submitted that, the revenue had placed heavy reliance on the statements of KKG recorded on Feb. 15, Mar. 21, Mar. 27, July 7, July 17 and July 18, 1989. He pointed out that onJuly 7, 1989, the assessee was not present because, it had no notice of the same. He pleaded that, the reading of the statement of KKG would show several contradictions. He submitted that, KKG denies all kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,, ASCPL did not have any capital outstay. Since ASCPL was concerned only with its commission, there was no necessity of any capital outlay. KKG stated that, the money as provided by PCPL was forwarded to the assessee as such. ASCPL did not take actual delivery from assessee and also did not give any actual delivery to the PCPL. KKG stated that his concerns, GI, SSC, SLB and ASCPL never purchased the cylinders physically. KKG stated that the transfer of Rs. 7.5 lakhs was by PCPL out of its funds. KKG stated with reference to the various bank accounts which were being operated by him and some of which were introduced by SCG, M.D. of the assessee company, that, the entire control vested with SCG and it he who used to deposit and withdraw the amounts from the banks. KKG further stated that, the transactions appearing in the banks accounts did not include transactions of his cncerns and has no relation to the business of KKG. KKG stated onJuly 17, 1989, that he does not know the constitution of the firm Al. When he was told that, the partners were none other than his wife and brother, he did not comment. AO asked him, how he would be able to provide the transactions from 1978, the repl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad encashed the cheques is of relevance, since the cheques were all signed by him. KKG when asked about the commission, raising of bills etc., he replied that, he merely provided the bills, but the supplies might have been made by other parties. KKG was asked as to whether this practice of providing of bills also continued in relation to the transactions of PCPL and the assessee, the reply was in the affirmative. KKG however denied that, the practice of raising of bills did not apply to the concerns belonging to him or to his family members. 36. Shri Agarwal submitted that, the perusal of the statement of KKG clearly goes to prove that, his statement is unreliable, because, he claims that he had merely raised the bills for the assessee or PCPL, without adducing any supporting evidence is statement. He had made the revenue to accept his statement on its face value, because, he does not maintain any records. The assessee on the other hands has on its records, which have been impounded by the revenue, the evidences in support of its purchases, sales etc. Shri Agarwal pleaded that the claim of KKG about the bills being raised for accommodation is incorrect, because PCPL paid Rs. 45 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by his concerns for a paltry commission, and that, there was never any actual delivery of the cylinders. Shri Tandon submitted that, the assessee and PCPL have succeeded to raise finance on the strength of paper bills only, without there existing any actual cylinders. He pleaded that, KKG in his statement had stated that, the bank accounts were controlled by SCG. He made reference to the exhaustive observations made by the CIT(A) in pages 10, 16 and 17, wherein, the movement of funds between the various bank accounts was examined and it all lead to the goal either of the assessee or to PCPL. He contended that, the assessee and PCPL had used all the concerns of KKG for their own ends. He contended that, the encashment of cheques were by Shri Hari Om Sharma, who was in the employment of the assessee and this fact cannot be overlooked at all, because, it pierces through the transactions and indicates the falsity in them. He referred to the observations of the CIT(A) at pages 18 and 19 of his order. 40. Shri Tandon touched upon the aspect of octroi receipts, which were called by the AO as well as by CIT(A), which the assessee never produced. He submitted that, octroi receipts would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h which it had no transactions from 1983. He contended that, the assessee also did not obtain any confirmation from parties who had provided fresh deposits in the year. Inspite of the assessee's lack of co-operation CIT(A) fairly remanded the issue of verification of the security deposit to the A.O. Shri Tandon submitted that, the assessee surrendered some of these deposits as its income in the asst. years 1986-87 and 1987-88 and in support of this statement, he filed the copies of the order of the AO made under section 250 of the Act. 42. Shri Tandon referred to the statement of availability of cylinders. He submitted that, this statement does not tally with the platform register maintained at the factory and there was no means available to verify the veracity of this statement. He pleaded that, AO normally does not disturb the incomes as offered by the assessee and therefore, it does not mean that, the income so shown stands fully explained. He submitted that, the sale of gas has been shown at an increased figure in each of the asst. years, so as to give the colour of genuineness to the hire of cylinders. He pleaded that, the claim of hire is only a cover up for the generation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed by the Sales-tax authorities was 6-12-1984. He pleaded that, the said challan has no credibility value. He submitted that, in respect of the other challans, under cover of which gas filled cylinders were supplied by PCPL the date on these challans and that of the Sales-tax barrier are in agreement with one another. 45. Shri Tandon submitted that, he would be placing all of the impounded books and other records at the disposal of the Bench and under cover of his letter, he listed those impounded books and placed the same before the bench. He pleaded that, the counsel for the assessee had stated that, the revenue is only making efforts to take an extraneous view of the matter, and his objection to this statement was that, the assessee should have come with clean hands before the concerned authorities. He contended that, if the claim of the assessee were true that, it did receive the cylinders than, the accountant would have known about it and that, suitable entries would have been made in the books, whereas, the accountant was unaware of the receipt of cylinders and there was no entry also found in the books. He strongly pleaded that, the appeal of the assessee on the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal hire Gas Apparatus Others Deposit --------------------------------------------------------------------------------------------------------------------------------------------------- 1985-86 12 6764 - 6764 - 27.48 56.97 14.91 28.07 1986-87 12 6764 2050 8814 3.98 51.77 4.33 24.59 30.95 1987-88 18 11364 934 12307 12.45 234.79 76.40 109.05 33.56 --------------------------------------------------------------------------------------------------------------------------------------------------- In asst. year 1987-88, the figure of cylinders owned includes purchase of 4600 cylinders, the figure of hire of 4000 cylinders got merged in the purchases, because, by the year end, they were purchased. --This should have included 4000 cylinders taken on hire, but, for tallying the total cylinders available, and since it got merged with the purchases, the No. of hired cylinders have been excluded. 48. The Auditor's Report submitted under section 227(4A) of the Indian Companies Act, 1965, Annexure A, para No. 7 contained common remarks, which is reproduced for the sake of facility : " The Company has purchased, taken on rent the cylinders or dealt otherwise with the firms, com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le volume, had hired the cylinders. Since the hire charges accounted for just about 7 per cent in asst. year 1986-87 and just about 5.5 per cent in asst. year 1987-88, it would be wrong to hold that, the assessee had made efforts only to transfer income to PCPL by hiring of the cylinders. From this point of view, there is justification in the claim made by the assessee of the hire charges. We may also observe that, the submission made by the departmental representative that, the revenue had accepted the sale because, the assessee had shown it, in our view, is a baseless argument. The reason being that, no assessee would make effort to show something as sales, merely for the reason that, he enjoys paying tax on such income. The sale of gas is to parties and not to onself and the sales of gas is supported by the sale bills or cash memos, which the revenue has not found to be wrong. It is not the case of the revenue that, the accounts are manipulated. The revenue has considered certain circumstances such as hire being paid to a concern in which the Managing Director of the Company is also the Managing Director. The argument advanced by the departmental representative that, the increas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the examination from the correctness of the deposit. It did notice that, the amount of deposit was just tittle over 50 per cent of the total sales of gas in assessment year and in assessment year, it was just 14 per cent of the total sales of gas. Therefore, there is hardly any relationship between the sales of gas and the security taken for the cylinders. The addresses of customers who had given the security deposit included several parties, who were located inFaridabadand other places. The six of the parties, from whom the revenue had conducted inquiries, did not have any dealings for the last few years and therefore the CIT (Appeals) was justified to hold that, the user of the cylinders could not be determined with reference to the security deposits. 54. Revenue had directed the assessee to provide evidence of octroi receipts and the challans under which the cylinder are claimed to have been received. The assessee claimed that, freight and octroi were incurred on the movement of the cylinders from Nangal to Sahibabad and that they are so recorded in the books, but, could not lay its hands on the delivery challans issued by PCPL. These delivery challans were filed before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever owned the cylinders. The background for this contention of the revenue is the statements of KKG and AKG. KKG had stated that, he had allowed the use of his concern ASCPL being used by the assessee and PCPL and it was in that connection, that, he had raised the bills for supply of cylinders to PCPL and in reality, he never took actual possession of the cylinders and also never gave possession to any buyer. KKG also had stated that, he was only concerned with his commission, which only was accounted for by him. He had claimed that, ASCPL never sold any cylinders in March, 1986 and the sale was initially made by the assessee to ASCPL, which forwarded it to PCPL, and therefore, it did not have to invest any capital for the transaction because, it was interested only on its commission. KKG stated that, in few cases there were actual delivery, but, by and large, the transactions only involved in his arranging the meeting between the buyer and the seller, they exchanging the goods and he receiving only his commission. 56. The records as are placed on our records, regarding the transactions of the assessee indicates that, the revenue had not contested the sale of gas, breathing appa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied along with cylinders that had been given on hire to the assessee, but, has allowed it. Revenue insisted that, assessee should establish that, PCPL did have the cylinders and the assessment order clearly indicates this fact. It was for this reason that, the counsel for the assessee too insisted on arguing with reference to PCPL's affairs, instead of with reference to the records of the assessee. The counsel for the assessee had submitted that for assessment year 1988-89, in the hands of PCPL, the sale of 4600 cylinders as were made on December 25, 1986 to the assessee had been accepted as such, with which fact, the senior departmental representative Shri Tandon had no dispute. Shri Tandon, in this connection had submitted that, the revenue accepts the figures as are shown by the assessee and therefore, this by itself should not be held as conclusive for the existence of the cylinders with PCPL. It was at this juncture that, the counsel for the assessee referred to the ruling of Supreme Court in Smt. Tara Devi Aggarwal's case also to the Punjab Haryana High Court in Jaswant Rai's case that if the revenue accepts the value of a property in one of the joint owners hands, then, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty-wise, at Sabibabad, Nangal etc. The entries on this register appear in chronological order. It is from this stock register that, the compilation of the availability of cylinders month-wise was submitted for both the assessment years under appeal. As per the stock register and this compliation of cylinder availability, the total of cylinders on stock, which included stocks with customers, at factory etc., in the months of Dec. 1984 to Mar. 1985 was 8514 and from Apr. to June 1985 was 8814. The stock at the platform was 1636, 1461, 907, 1301, 1959, 1553 and 2032 for Dec. 1984, Jan. to June 1985 respectively. The above stocks at the platform indicates that, all of the assessee's own cylinders are in circulation and even from out of the hired ones, they have been placed in circulation. It further indicates that, the circulation could not have been improved, but for the availability of additional cylinders. Therefore, considering the fact of increase in sales by Rs. 24 lakhs in asst. year 1986-87 and in asst. year 1987-88 by Rs. 207 lakhs, it is sufficiently established that, the assessee did have additional cylinders with it, which have been put into operation. Since it is nobody' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cylinders, we have to hold that, the assessee did take cylinders on hire. Since, revenue has not claimed that, the cylinders were taken from some other party, and the hire charges having been paid to PCPL, it has to be concluded that, the cylinders were taken on hire from PCPL. This conclusion also is supported by the fact that, the day, the hire was converted to a purchase, no hire charges were paid to PCPL. We therefore, allow the claim of deduction of hire charges of the cylinders for the two asst. years. Assessment year : 1986-87 62. The assessee had raised the issues relating to security deposit added as income, disallowance of Rs. 2,47,833 out of freight and cartage, loss on sale of diesel generator set of Rs. 1,23,623 and a part of the assessment being set aside by the CIT(A) to AO. The counsel for the assessee Shri Agarwal submitted that, he would not agitate these grounds and accordingly, these four issues are treated as dismissed, for not being pressed. 63. The assessee has raised the issue relating to the disallowance for personal usage of car, out of depreciation and car expenses. The counsel for the appellant Shri Agarwal pleaded that, the disallowance is uncal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equent to the additions that have been made in the assessment, the interest that had been levied is wrong and should be deleted. The rival submissions in this regard have been very carefully considered. The interest under section 217(1A) is levied with reference to non-filing of estimate of advance tax and has no relation to the filing of the return. Since the levy requires existence of certain circumstances, we only direct the assessing officer to allow an opportunity to the assessee as to whether those circumstances existed or not, before proceedings to apply the section. Assessment year : 1987-88 68. The assessee had claimed depreciation on the cylinders purchased by it from PCPL which had not been allowed to it, because, the revenue was of the opinion that, PCPL did not possess the cylinders and therefore, could not have sold them. This claim is closely connected to the issue of claim of hire charges of the cylinders, which had been dealt with above upto paragraph 61. In view of our finding that the purchase has to be held as genuine, we direct the AO to allow the depreciation on the cylinders as per rules. 69. The issue of security deposit, which was remanded back by C ..... 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