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TMI Blog1976 (11) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... his year at Rs. 1.34 per thousand beedies while in the preceding year it was only Rs.1.11. There was no proper issue register for consumption of leaves. He further observed that the assessee debited an expenditure of Rs. 87,026 to the beedi leaves contract account and expenditure was not supported by proper evidence. He, therefore, rejected the book results of the assessee and made an addition of Rs. 16,500 towards understatement of gross profit which raised the gross profit to a little over 16%. In appeal, the Appellate Assistant Commissioner restricted the addition to Rs.10,000 so as to bring down the rate of gross profit to 15% which in his opinion was reasonable. One of the contentious raised in the appeal by the department is against the relief granted by the Appellate Assistant Commissioner in this behalf while the assessee had objected to the addition sustained in the appeal filed by him. In the cross objection of the assessee, the same ground has been taken objecting the addition sustained. 3. We have heard both sides. We find that in the immediately preceding year, the Appellate Assistant Commissioner sustained an addition of Rs. 17,000 and it was accepted by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his order in the case of P. Govinda Reddy & Co., for the same assessment year. His order is dated 3rd February, 1976 in I.T.A. Nir. 13/1973-74, in which he held that M/s. Govinda Reddy & Co. was entirely a separate concern, that none of the partners in that concern was a benamidar of the assessee and that all of them had enough resources to invest capital in that business. He accordingly directed the Income-tax Officer to grant registration to that firm as an independent entity. We are told by the Departmental Representative that this order of the Appellate Assistant Commissioner has been accepted by the department. In the circumstances, there is no room for the contention that M/s. Govinda Reddy & Co. is benami concern of the assessee, or that Sri Govinda Reddy is a benamidar of the assessee. The Appellate Assistant Commissioner was, therefore, not correct in directing that the share income of Sri. Govinda Reddy in the said firm should be included in the assessee's hands. We accordingly, direct that the share income of Sri Govdina Reddy should be deleted from the assessment under appeal. Thus, while the department's contention is rejected, the assessee's contention is allowed. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Officer and in his deposition, he admitted the transactions and explained that the money came from his agricultural savings. He was having 6 acres of wet land and 35 acres of dry land. The Income Tax Officer was not prepared to believe the statement of Sri Govinda Reddy. He held that the party's resources did not permit availability of substantial savings and the credits in his account in assessee's books did not belong to him, but belonged to the assessee. He accordingly added the peak credit of Rs.18,000 in the assessment of the assessee as income from other sources. In appeal the Appellate Assistant Commissioner observed that Sri Govinda Reddy was a partner in the firm of M/s. Govinda Reddy & Co., and since he was held to be a benamidar of the assessee, his account in that firm's books also should be taken into consideration for arriving at the peak credit during the year. The reason is that it was noticed that some of the credits in Sri Govinda Reddy's account in the books of the firm of Govinda Reddy & Co., came out of his withdrawals from his account in the debits together, the Appellate Assistant Commissioner was wrong in reducing the addition to Rs. 4,339, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Appellate Assistant Commissioner's finding in respect of Govinda Reddy & Co. as mentioned earlier. In the circumstances, we see no justification for the addition sustained by the Appellate Assistant Commissioner and we delete it. 8. Next issue relates to the addition on account of cash credits in the name of Shri Bheemarao. The assessee maintained separate books for beedi leaves contract. He had procured a contract for picking of beedi leaves in an area in Boath taluq. The expenses incurred in the procurement of beedi leaves were debited in this account and ultimately transferred to the books maintained for beedi manufacture. In the beedi leaves contract books, the Income-tax Officer found an account in the name of Shri Bheema Rao in which there were a number of cash credits and debits. The total of the credits amounted to Rs. 21,131. In support of the credits, the assessee filed a letter from the party confirming the loans. The letter, however, was silent as to the source from which the money was available to the creditor. The party was not produced before the Income-tax Officer for examination. The Income-tax Officer appears to have deputed his Inspector to make enquiries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m January, 1966. In that year there were cash credits to the tune of Rs. 16,000 and he was also paid a commission of Rs. 2,028 in connection with the beedi leaves contract. The cash credits in the account were accepted by the Income-tax officer for 1966-67 and 1967-68 assessments and also the commission paid. A credit balance of Rs. 2,045 was carried forward on 1st April, 1967 and the same was repaid in the year ending on 31st March, 1968. In the same year, there was another account in the party's name in the beedi manufacturing set where there was a cash credit of Rs. 5,000 and it was paid back on 24th February, 1969. This cash credit was accepted as genuine in the relevant year. A perusal of the party's statement also shows that he was a man of substantial means. According to him, he sold 28 acres of land for a sum of Rs.28,000 in 1968-69. Three years earlier, i.e., sometime in 1965, he sold lands to the extent of 26 to 27 acres for about Rs. 30,000. The sale consideration or both occasions was received by him in instalments. The sales were supported by registered sale deeds. He stated that he advanced loans on various occasions to the assessee from out of the aforesaid sale proc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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