TMI Blog1992 (10) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The CIT(A), however, found himself in favour of the Assessing Officer (AO) on the ground that details furnished by the assessee did not throw much light on the point at issue since only voucher numbers and the amount paid had been mentioned therein. The CIT(A) also referred to the definition of the term 'deposit' and, thereafter, proceeded to reject the assessee's case with the following observations: "The appellant has itself conceded that hundies are drawn in favour of the suppliers. This, in fact, means that the appellant has agreed that the amount due to the suppliers was a debt, in other words money borrowed. Similarly, when the payment of the bills is withheld it amounts to borrowing the money indirectly. In this view of the matter, I would hold that interest paid on hundies and on account of delayed payment of bills amounted to interest paid on monies borrowed and, therefore hit by definition of the words deposit given in s. 40A (8). The disallowance of Rs. 23,499 is, therefore, confirmed." 5. The learned counsel for the assessee reiterated the arguments advance before the CIT(A) placing reliance in this connection on the decision of the Hon'ble Madhya Pradesh High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to the previous year. He also came across certain other expenses totalling Rs. 57,739 once again pertaining to the previous year but debited and claimed as deduction. On the ground that the assessee was maintaining its accounts on mercantile basis, he rejected the claim for deduction. 8. Being aggrieved, the assessee took up the matter before the CIT(A), who after perusing the material on record and ascertaining the facts therefrom proceeded to hold that the expenditure of Rs. 21,253 on account of travelling and conveyance related to the year under consideration. As regards the expenditure of Rs. 35,790 claimed on account of rebates, it was pointed out by the assessee that although it related to the sales of the preceding year, the company had consistently been following the practice of providing for the rebates in the succeeding assessment year. Both the aforesaid claims were accepted by the CIT(A), who directed the ITO to allow necessary deduction. As regards the remaining items, the CIT(A) took note of the fact that excise duty to the extent of Rs. 2,627 and ESI amounting to Rs. 8,702 had been ascertained and paid during the assessment year under appeal. These two amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination at the hands of the Assessing Officer since the case which has been argued before us is that this represents reimbursement of the conveyance expenses and does not represent conveyance allowance paid to various employees. No doubt, this claim was not raised earlier but in the interest of justice, we have decided to remit the matter back to the file of the Assessing Officer to verify the correct position after giving reasonable opportunity to the assessee. As regards the expenditure of Rs. 7,669 on gifts to customers, we find that no arguments were advanced before the CIT(A). Even before us, no information was placed on record or submissions made. The disallowance on this score is, accordingly, confirmed. 13. The 4th ground in the appeal pertains to the disallowance/addition of a sum of Rs. 5,28,504 made by the ITO and confirmed by the CIT(A) by resort to the provisions of s. 43B. We may mention that this was the liability appearing in the balance sheet on the last day of the previous year pertaining to the sales-tax payable. 14. Before us, the facts recorded by the CIT(A) in his order have not been challenged by the learned counsel and all that has been contented is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19. The learned counsel for the assessee at the outset stated that, in as much as in the asst. yr. 1985-86, the CIT(A) had held that the expenditure in question pertained to asst. yr. 1984-85, the same was required to be allowed as a deduction and for which necessary directions be issued. The learned Departmental Representative, on the other hand, supported the action of the CIT(A) in rejecting the additional ground reiterating thereafter the reasons recorded by the first appellate authority in doing so. 20. We have perused the copy of the order of the CIT(A) in the asst. yr. 1985-86, which was furnished to us by the learned counsel during the course of hearing. The issue raised in the additional ground is discussed at page 7 of the said appellate order, but we do not find any categorical finding on the part of the CIT(A) whereby he has stated that the expenses aggregating Rs. 1,13,172 pertain to the asst. yr. 1984-85. He refers to the words "earlier years". Even before us, no factual information has been furnished and we find ourselves unable to issue any directions. Ground No. 7 in the appeal is, accordingly, rejected. 21. Taking up for consideration the Revenue's appeal, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s convincing on a reference to the material on record which he had occasion to examine. According to him, the assessee was manufacturing various types of paper and it was not possible to believe that material classified as unusable was not being put to any use. The explanations regarding the recording of the lower weight in respect of the raw material received and non-lodging of any claims with the foreign suppliers also did not find favour with the Assessing Officer. In the ultimate analysis, the Assessing Officer proceeded to reject the books of account and apply the provisions of s. 145. He held that the quantity of raw material received by the assessee was 8124 MT and estimating the percentage of yield at 55%, he concluded that the production should have been to the tune of 4,468.2 MT as against 4221 MT shown by the assessee. In other words, he concluded that there had been understatement of production to the extent of the difference viz. 247.2 MT and the same had been sold outside the books of account. At the average selling price, he made an addition of Rs. 21,43,755 to the trading account. 25. Being aggrieved with the action of the Assessing Officer, the assessee came up i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not shown that the books of account were in any manner incomplete nor had he shown that the method of accounting followed by the assessee was not the one which was being regularly followed. (xiii) That the nominal decline in the gross profit rate was due to the increase in the rates of power, coal, raw material and wages. 26. The assessee, in the course of the proceedings before the CIT(A) also filed the balance sheets of seven other paper manufacturing units to show that the percentage of yield was substantially lower. This 'evidence' was passed on to the then Assessing Officer who was asked to file objections to the admission of such fresh evidence. It appears that the objection taken was that, in as much as sufficient opportunity had been given in the course of assessment proceedings, the additional evidence should not be entertained. On the next date of hearing, the Assessing Officer was also summoned and on this occasion, the learned counsel for the assessee contended that no enquiries, whatsoever, had been made regarding the decline in the percentage of the production. In order to verify the aforesaid statement, the CIT(A) requisitioned the assessment records and wen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns given by the assessee, he has held that the appellant should have got a yield of 55%. The reasons as mentioned in the assessee's letter dt.28th Jan., 1987are as under: i. Availability of smooth power ii. Quality of coal used for boiler for generation of heat. iii. Different quality of paper manufactured. iv. Quality of raw material used. v. Breakdown period of machine. The assessee has not been questioned on this aspect at all after28th Jan.,1987. As regards the total quantity of raw material used, I find that the IAC(Asst.) proceeded on certain presumption without going into the reasons given by the assessee for recording the lower of the two weights between the weight found as per assessee's weight bridge and the weight shown by the supplier. I cannot help saying that the IAC(Asst.)'s zeal and enthusiasm got the better of his discretion. If there was any doubt about the genuineness of the entries, the first thing that ought to have been done was to examine the suppliers. Secondly, the assessee has been repeatedly saying that the entire record was subject to the control and inspection of the excise authorities. In such circumstances, rejection of the books without e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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