TMI Blog1988 (4) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... ial is marked as A-3/63, A-3/65 to A-3/73, A-3/122 and A-3/119 to 121, A-3/106 and A-3/123. In this appeal we are concerned with the addition of Rs. 25,000 made on account of understatement of yield of cotton and an addition of Rs. 14,560, Rs. 96,207, Rs. 1,00,698, Rs. 71,693 and Rs. 10,832 which were added to the income of the assessee-firm under section 69 of the I.T. Act. So let us deal with those additions one after another. 2. First let us take up the sustainability of the addition of Rs. 25,000 on account of understatement of yield of cotton. During the year of account the assessee worked out Rs. 4,61,060 kgs. of cotton kappas and disclosed 1,44,064.05 kgs. of lint (31.25%) and 3,07,575 kgs. of cotton seed (66.71%). It had shown a loss of 9,421.05 kgs. which worked out the shortage of 2.04%. The Income-tax Officer states that the assessee did not maintain regular stock accounts, inasmuch as the account, kept by the assessee do not reflect either quantitative or qualitative particulars. The Income-tax Officer states that the stock accounts kept by the assessee are designed to its taste and at no point of time the stock accounts would give the correct picture of stock availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... average price of Rs. 1,222 he had arrived at the addition of Rs. 58,595. 2A. When the matter came up in appeal before the learned CIT(A) it was contended on behalf of the assessee-firm that out of the total purchases of 5.25 lakh kgs., 3.25 lakh kgs. had been purchased in the months of November and December 1979. Out of the total cotton worked out the quantity of 76,261 kgs. represents Varalaxmi variety of cotton, where the yield of lint would normally be less than 30%. The above two factors must have contributed to the reduced yield of lint. The learned CIT (Appeals) accepted the contentions of the assessee to certain extent. He held that it is not correct to estimate at the earlier years' figures merely because the assessee was able to show higher yields for the earlier years. In comparable cases yield per MOU 5 variety is taken at 31.5% and Varalaxmi Cotton at 30%. Considering these factors he retained a round sum addition of Rs. 25,000 and deleted an amount of Rs. 33,595. 3. Further aggrieved about the retained addition the assessee is now before us. It is contended by Shri A. Satyanarayana learned Advocate that during the accounting year in question the assessee had no gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voucher is dated 30-5-79 and it was signed by Sri T. Jaganmohan Rao. The voucher was executed on a printed voucher form maintained by the assessee-firm. Neither the purchase of cement, nor the payment towards its price, nor the amount said to have been due to Sri Jaganmohan Rao were reflected in the account books of the assessee-firm. The ITO ascertained the address of Sri T. Jaganmohan Rao and his address was given as A.T. Agraharam Guntur and on enquiry he is found not traceable. The ITO felt that the contents of the voucher, which is the seized material, are true and that the said voucher should be taken to bear the signature of Sri T. Jaganmohan Rao. Therefore, he made an addition of Rs. 14,560 under section 69 of the IT Act. Before the learned CIT(A) the assessee was not able to explain why the cement was purchased and where it was debited in the account and under the circumstances he found that the ITO was justified to make an addition of Rs. 14,560 under section 69 of the IT Act. In the appeal before us the learned Advocate for the assessee sought to argue that there was no need for the assessee-firm to purchase cement bags and the transaction evidenced by the said voucher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ped and executed or attested by the person by whom it purports to have been so executed or attested." According to the said sub-section any document seized in search operations conducted under section 132 should be deemed to belong to the person whose premises was searched and the contents of the said document are true and that the signature on the document should be purported to be in the handwriting of the person assumed to have signed that document. No doubt it is a rebuttable presumption, however, this presumption is not rebutted in this case either by any oral or documentary evidence. It is highly unlikely that the voucher would have been obtained in the printed form of the assessee-firm by Sri T. Jaganmohan Rao had this transaction not related to the assessee-firm. It is also mentioned in the grounds that the assessee was not having any construction work on hand on the material dates in order to require 400 bags of cement and therefore, it should be presumed that the transaction relates to another party. It is not acceptable to us. It is not the duty of the revenue to prove how the material purchased by the assessee-firm was spent or laid out. Nothing prevents the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The particulars of the statement given by Poda Achaiah was given at page 111 of paper book No. 1. The particulars of the examination of Sri K. Seetharamaiah was given at page 114 of the paper book No. 1. Sri Gottipati Seshagiri Rao stated that in May, 1979, 53 borams belonging to him were sold to M/s. Kollipara Subba Rao, Guntur and Pathipadu at the rate of Rs. 503 per quintal. The cotton was of Varalaxmi variety. Sri K. Appa Rao and a broker came to their house at the time of purchase. They have not paid the cash on that day but on the next day an undated voucher was issued by him to the broker to collect the cash. The voucher was submitted to the assessee-firm by the broker and the assessee-firm's people said to have told that the Managing Partner Sri Kollipara Subba Rao was admitted in the hospital and giving cash under the voucher takes sometime. Now and then he insisted the broker to get the money. Ultimately they paid the money in December 1979. So according to the witness he delivered the cotton produce in May 1979 whereas, the price of it was given to him only in December 1979. A photostat copy of the alleged undated voucher signed by this witness was provided at page 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted duplicate voucher on the reverse of which the circumstances in which the original voucher was handed over to the assessee-firm were mentioned. As in other cases the voucher given by this witness to the assessee-firm was found to be in the printed voucher form of the assessee-firm columns of which were all filled up. It was dated 30-5-1979 and it is found written in the blank columns that the amount of Rs. 10,161.20 was paid in cash in full discharge of the price of cotton, the particulars of which were noted in a 'patti' given to him. The signature was obtaining on 0.20 ps. revenue stamp affixed to the voucher. So according to the assessee the amounts were not paid to these parties on 30-5-1979 and the amounts noted against their names in the seized material A-3/63 represent only credit sales which were later paid in December, 1979. The delay was caused in payment of the price due to the fact that the Managing Partner Sri K. Subba Rao was admitted in Madras Hospital for different ailments. Whereas the case of the revenue is that the internal evidence of the seized material A-3/63 as well as the vouchers secured from the parties which would corroborate the internal evidence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing together in an amount of Rs. 36,346-40 were bracketed together and it was marked that the amount was paid. The word used in Telugu was ".............". The average rate per quintal was worked out at Rs. 423. Thus it can be seen that from out of the total purchases of cotton made only Varalaxmi variety was purchased from Yeddanapudi ryots and they were fully paid. So also, in Anantavaram both Varalaxmi variety as well as MOU-5 variety of cotton was purchased and for MOU-5 variety of cotton purchased from Anantavaram the amount due to the ryots was fully paid. The total amount paid to the ryots appear as under : Quintals Amount Rs. Yeddanapudi - Varalaxmi 12358 62,160-74 Yeddanapudi - Varalaxmi 6229 26,185-20 Anantavaram - MOU-5 2365 10,161-20 The total which appeared to have been paid on 30-5-1979 to the ryots is Rs. 98,506. Out of the credit of Rs. 1,05,000 an amount of Rs. 99,682-04 was subtracted. The difference between Rs. 98,506 and Rs. 99,682-04 represent the expenditure incurred by the assessee-firm over Mutah Coolies for arranging the borams, for loading and unloading and for purchase of borams etc. Thus there is unimpeachable internal evidence to the effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their sweat and labour for realising cotton from the land. They have to obtain their living only by sale of produce of their agricultural properties. In such circumstances it is quite unlikely that they would give an outright discharge voucher of having received the full amount for their produce without receiving the cash. Their admissions and the very fact that they have rightly obliged for executing a duplicate voucher on the mere representation of the assessee-firm that the previous vouchers which they have executed were seized by the IT department show that they were very obliging parties who can give any sort of voucher in favour of the assessee-firm, so long as it does not touch their pocket. Having received the amount due to each of them on 30-5-1979 itself it is not very difficult to oblige and give a duplicate set of vouchers. This circumstance only shows their interestedness rather than their disinterestedness. There is trite saying in law that men may lie but circumstances would not. Therefore, we are not prepared to accept the oral evidence of these witnesses as against the preponderant documentary evidence which tilt the balance in favour of the Department. Under the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough one Sri Pothuri Venkataratnam and the available total cash was stated to be Rs. 3,882-15. The denomination of notes representing Rs. 3,882-15 ps. were also disclosed in the second sheet of seized material i.e. A-3/122. Out of the three ryots two were examined by the Income-tax Officer long after the search and seizure. Sri Pokuri Laxminarayana was examined and the particulars of the examinations were provided at page 123. He states that for purchase of cotton Sri Kollipara Apparao son of Sri K. Subbarao had come. He further states that payment of cash for cotton purchased in this line of business is very rare. They pay the amount of a future date. Immediately after the said date they approached the assessee-firm and requested for payment. The firm people replied that the main partner viz., Kollipara Subbarao was admitted in the hospital at Madras and hence payment could not be made early for the cotton sold in April 1979 the payment was made in January, 1980. The voucher executed by this party is in the printed form maintained by the assessee-firm. The columns were filled up by the Accountant Sri Radhakrishnamurthy. No doubt the voucher is kept undated but in the recitals, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-firm in respect of the ryot was never produced. Without payment it is quite unlikely that the party would subscribe his signature on a stamped voucher. It is quite unlikely that he would deliver the goods as well as sign a voucher of having received value and submit it to the purchaser placing himself at the mercy of the purchaser whether to pay or not to pay. Further the amount is not a meagre amount. It is a substantial sum of Rs. 37,354-60 ps. Having received the amount even on 17-4-1979 it would be easy to execute another voucher on 9-1-1980, so long as it does not damage his position anywhere. The very fact that he had executed a duplicate voucher in favour of the assessee-firm would clearly show his interest in the firm, instead of showing his disinterestedness. Knowing fully well that he has already executed a stamped paper in favour of the assessee-firm and knowing fully well that it was seized by the Income-tax Deptt. and it was in its custody, no ordinary prudent man will execute a duplicate voucher as the original voucher was not lost but it was very much in existence and in the safe custody of the Department. The very fact that the party executed the duplicate receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a third party, and also certain expenses incurred for arranging the cotton in 64 borams and other expenses including payment of Rs. 542.50 to the welfare committee of the village. It is admitted that the last four items were duly entered in the account books of the assessee-firm. It was stated that the total of the first three items amounting to Rs. 71,693 was not paid to the parties and it relates to the credits purchases made on 6-6-1979. It is in the handwriting of Sri Radhakrishnamurthy the Accountant of the firm. In view of the fact that the attendant expenditure, incurred in purchase of cotton was duly entered in the account books of the firm, the seized paper A-3/106 should be held as belonging to the assessee-firm. Sri Bollu Seetharamaiah on behalf of his father-in-law Shri Koritala Narayana and Sri Kondisetty Seetharamaiah were examined. Koritala Narayana had given a voucher of having received Rs. 42,095-40 ps. on 6-6-79 itself. The voucher was also in the handwriting of Sri Radhakrishnamurthy, the accountant of the assessee-firm. It recites that the amount was paid in full discharge of patti disclosing the cotton purchased from him. He had subscribed his L.T.I. on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hor of the top sheet as well as vouchers viz. Sri Radhakrishnamurthy, Accountant of the firm did not come forth with any explanation whatsoever about the transaction. Therefore, we hold that the addition of Rs. 71,693 was correctly made u/s. 69 of the IT Act. Thus we dispose of grounds 12, 13, 14 and 15. 8. Now lot us take up the grounds 16, 17, 18 and 19 of the grounds of appeal. The addition made was Rs. 10,832 which was the subject matter of these grounds. The addition was made on the basis of seized material A-3/123. Copy of A-3/123 was not furnished to us by the assessee-firm. However, we secure a true copy of it from the seized material. It is dated 16-4-79. It represents a credit of Rs. 31,260 from out of which 8 borams weighing 811 kgs. of MOU-5 lint was purchased for Rs. 10,832-50 from one Sri Y. Venkateswara Reddy of Mallayapalem. Mutah cooly of Rs. 50 also was incurred from that. It is the case of the assessee that this amount of Rs. 10,832-50 was not given to the ryot Sri Y. Venkateswara Reddy in cash on 6-4-1979 but it was only a credit purchase. Alternatively it was contended that even it is considered to be a cash payment made on that day viz., 16-4-1979 it should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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