9911796707
TMI Blog1988 (7) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue came across a number of slips, loose sheets and note books. They pertained to both No. I Firm and No. II Firm, the latter being the appellant before us. 3. The ITO noticed in the case of No. I firm that as per its books of accounts the firm purported to allow rebate of Rs. 10 per bale when it charged Rs. 35 per bale towards pressing charges. But, this rebate of Rs. 10 was never passed on to the parties and the firm had thus set up a bogus claim of rebate thereby reducing its income. However according to the ITO, the modus operandi had undergone a change in the case of No. II firm the appellant before us. Instead of charging the customers with higher rates, it started to show the cotton pressing charges at Rs. 25 per bale and collected outside its books anything ranging from Rs. 5 to Rs. 7 per bale. He also noticed that in certain cases it charged pressing charges at Rs. 35 up to Aug., 1976 and from about Sept., 1976 the rate has been brought down to Rs. 25. He also felt that this rate of Rs. 25 was charged only in the case of obliging customers--obliging in the sense that the customers would pay the assessee extra monies outside the books of accounts. For this proposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esenting monies collected outside the books towards pressing charges. Thus, the additions made towards suppression of receipts is one of the issues common for all these assessment years. There are other issues also but we propose to deal with each one of them independently. 6. The assessee carried the matter in appeal and tried to explain the entries in the diary and also the F-3 note book stating that these notings were made by the accountant on the directions of the managing partner Sri Kollipara Subba Rao to find out the probable loss incurred or likely to be incurred by allowing a rebate or discount at certain estimated rates. The CIT(A) did not accept this explanation and concurred with the view of the ITO that if the explanation were true, the note books would not contain the account balances of the parties concerned which reduced or increased depending upon the incomings or outgoings. On an examination of the F-3 note book, he found that in almost all the cases the number of bales shown in F-3 note book tallied with the number of bales pressed for the customer by the assessee as per the usual books of accounts and the F-3 note book contained certain adjustments on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the ITO had adopted the suppression at Rs. 5 per bale whereas the average suppression worked out to Rs. 3.25 per bale and on that basis he sustained the addition at Rs. 1,38,388 thus granting a relief of Rs. 1,19,655. For the asst. yr. 1979-80, for similar reasons, the CIT(A) confirmed the addition at Rs. 1,47,134 in respect of parties figuring in F-3 note book and sustained the addition at Rs. 61,246 in respect of the parties not found in F-3 note book. Though F-3 note book was not relevant for the asst. yr. 1980-81, considering the entries in another seized document, A-11 and the past history of the case, the CIT(A) estimated the understatement of pressing charges at Rs. 3.25 per bale as adopted in the preceding years and thus sustained the addition at Rs. 1,67,472. 8. Before us, Sri A. Satyanarayana, learned counsel for the assessee, submitted that up to Aug., 1976, the assessee was charging at the rate of Rs. 35 per bale pressed and allowed a rebate of Rs. 10 per bale. From Sept., 1976 onwards, the assessee used to charge only the net rate at Rs. 25 per bale. The notings in the seized documents do not establish that the assessee had in fact collected extra money out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition sustained in respect of the bales of parties not figuring in F-3 note book, Sri Radhakrishna Murty submitted that such an addition was called for considering the fact that the assessee was in the habit of collecting extra money. As a matter of fact, though technically No. I firm and No. II firm are different and distinct entities in the eyes of Income-tax law, the brain behind these two firms is Sri Kollipara Subba Rao. In No. I firm, the books purported to show a rebate of Rs. 10 on each bale when Rs. 35 was charged from the customers as pressing charges. Out of this alleged rebate of Rs. 10, actually only a rebate of Rs. 2 to Rs. 3 was allowed and the balance was never intended to be passed on to the customer. Now, in the case of the No. II firm, the pattern only has changed. Instead of withholding the rebate by not passing it on to the customer, the assessee had charged a lower rate per bale towards pressing charges and collected the extra amount outside the books from the obliging customers. There is no reason why when other similar firms were charging at the rate of Rs. 30 to Rs. 37 per bale as pressing charges, the assessee should charge Rs. 25 per bale. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the point of time at which, or at least the year in which, the amount was received. As far as the first point is concerned, it can be said that the Revenue has not brought on record any deposition or any statement from the concerned party regarding alleged payment made by him to the assessee. On the other hand, parties examined by the ITO have denied such payments. Even if such proof was not to be given by the Revenue, it is for the Revenue to establish the point of time of receipt of such payment. This has not been established in a large number of cases except a surmise based on the entry in F-3 note book. In the case of on-money collections, the addition can be sustained only on the basis of the actual receipt of the on-money and it could not be on accrual basis in the absence of complete set of secret accounts such as secret cash book and secret ledger etc. Even if the on-money is to be taxed on accrual basis, evidence has to surface in the form of an agreement between the parties and such an agreement has not surfaced in any of the cases. The credit balance of Rs. 672.90 in the case of this party remains as such for the years 1976 to 1978 until it was paid off on 8th Feb., 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remark "12/11 paid Rs. 2,000" cannot refer to 1976. On the premise that the assessee will not hold itself liable in its books of accounts while insisting on spot settlement of on-money transaction, we delete the addition and consider the same for the asst. yr. 1980-81. (5) Kalpana Cotton Traders, Guntur: (p. 34 of F 3 r/w LF 172) The entry in the F 3 note book is as under:-- "1976 Bales 713 x 7 4991.00 . Credit in a/c 1961.10 . . 3029.90 . Less 1426.00 . . 1603.90 . 19/10/78 Credit 1603.90" The assessee's Ledger shows a credit balance of Rs. 1,961.10 for the first two years and the amount was settled in 1978 by payment of Rs. 1,961.10 This is referred to in F-3 note book also. From the entries in F-3 note book, it would appear that the assessee had given a rebate of Rs. 2 out of Rs. 7 per bale. There is no indication of receipt of on-money in this case. The reference to "19th Oct., 1978, Credit Rs. 1603.90" would appear to be mistakenly noted as the amount was settled only on 20th Oct., 1978. Therefore, the addition is deleted. (6) Preumalla Nagayya, K.V. G. Subrahmanayam, Gurajala: (p. 35 of F-3 r/w LF 182) The entry in F-3 note book reads as under:-- "1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,750,15 as outstanding amount due from this dealer. Thus the assessee collected Rs. 350 from this party outside its books of the year which escaped assessment. Rs. 350" The entry in F-3 note book relates only to Sri Venkateswara Cotton Traders, Gunter (LF 128 for 1976; LF 89 for 1977; LF 81 for 1978; and LF 38 for 1979). The amount remains outstanding. However, from the F-3 note book entry, the assessee seems to have received Rs. 3,500 in the months of November and Dec., (year not noted) which are not found in the regular books of accounts. But then it could not have been in the year 1976 in which only 50 bales had been pressed. The assessee has not pressed any bales for this customer for the calendar years 1978 and 1979. For these reasons, the addition is deleted and discussed at item 20 of CIT(A)'s enhancement for the asst. yr. 1978-79. (10) Veeranjaneya Ginning Mill, Pulladigunta: (p. 87 in F-3 r/w LF 129) The entry in F-3 note book is as under: . . "Due as per old book receivable 425.00 1976 550 x 7 3850 . 1977 -- . . 1978 50 x 5 250 . . . 4100.00 . . A/c credit 1900.50 . . . 2199.50 . . . 425.00 . . . 2624.50" . The account of this part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was received on 26th Dec., 1978 taking the total of the credit to Rs. 24,704.40 leaving a balance of Rs. 5,929.40 in credit in the regular accounts. Therefore, it cannot be concluded that on-money would have been received on the date when the balance was struck in F-3 note book. As the regular account remains in credit for reasons stated in respect of item 1, the addition is deleted. (15) Perumalla Venkatramayya & Sons, Rentachintala: (p. 94 of F-3 r/w LF 199) The entry in F-3 note book is as under: "1976 50 x 7 350.00 1977 -- . 1978 102 x 5 510.00 . . 860.00 . A/c debit 2200.00 . . 3060.00 . 27/10/78 By Cheque 3000.00 . . 60.00" The account of this customer in the Ledger remains in credit for all the years under appeal. For the reasons stated in respect of item 1, the addition is deleted. (16) Yeluri Venkata Subbaiah & Co., Pilugfuralla: (p. 95 of F-3 r/w LF 207) The entry in F-3 note book is as under: 1976 400 x 7 2800 1977 967 x 5 4835 . . 7635 . 34835.05 3672 . 31163.00 11307 . 3672.05 1657 Ramakrishna . . 12964" The balance noticed in the F-3 note book tallies with the balance in the regular books of accounts as on 1st Oct. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustained in the place of Rs. 8,250 made by the ITO. (3) Saptagirisa Cotton Traders, Guntur: (p. 22 of F-3 r/w LF 8) The account of this party in the assessee's Ledger shows a credit balance for the years 1977 and 1978. There is no indication in the F-3 note book of any money having been received in 1977. Therefore, the addition is deleted. (4) Sri Sambasiva Cotton Co., Guntur: (p. 26 of F-3 r/w LF 23) The party's account in the assessee's Ledger is in debit for all the years under appeal. There is no indication in F-3 note book that cash has been received. The addition is, therefore, deleted. (5) Sri Hanuman Velangini Cotton Co., Guntur: (p. 29 of F-3 r/w LF 31) There is no indication in F-3 note book that on-money was received from this party. The balance in the account of this party in the Ledger is a credit balance in an amount of Rs. 2,057.20 which would appear to have been taken as Rs. 4,057.20. The addition is deleted. (6) Srinivasa Cotton & General Trading Co., Pedanandipadu; (p. 29 of F-3 r/w LF 52) The account of this party in the Ledger is in debit for 1976, 1977 and 1978. There is no indication in F-3 note book of receipt of on-money. The addition is delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t balance of Rs. 1,451.58 for 1977, 1978 and 1979. There is no indication that cash was received. An amount of Rs. 3,000 which is sought to be deducted is under the caption "cash". Therefore, it cannot be concluded whether cash of Rs. 3,000 was received by the credit and not under the caption assessee outside the books of accounts and it is difficult to fix the year of such receipt especially when the same credit balance continues in the account for 1978 and 1979. In the circumstances, the addition is deleted. (12) M/s Lakshmi Ginning Mills Kondrupadu: (p. 42 of F-3 r/w LF 195) The entry in F-3 note book is as under: "1977 -- 860 . 1978 -- 300 . . . 1160 x 5 5800 . . Ledger credit 1324 . . . 4476" The account of the party shows a credit balance of Rs. 9,177 for the year 1977 and Rs. 622.50 for the year 1978 and was settled only in 1979. Though there is an entry in F-3 note book for a sum of Rs. 1,324, it cannot be taken to be a receipt in the absence of evidence, nor can it be related to 1977. Therefore, the addition is deleted. Asst. yr. 1979-80 14. For this year, there are 55 parties whose names appear in F-3 note book and we deal with the same as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 . 1975 rebate 1742 bales x 2 3484.00 . . 9489.64 9489.64 . . 40664.33" The entry shows a balance of Rs. 33,744.97 termed as "public" which tallies with the account of the party in the Ledger for 1978. To this the assessee has added a sum of Rs. 16,409 calculated at the rate of Rs. 7 and Rs. 2 per bale on the bales pressed during the years 1975 to 1978. There is no indication that any on-money was received. In fact, the amount is added to the balance against the public balance. We have already indicated that on-money can be taxed only on receipt basis and not on accrual basis, in the facts and circumstances of the assessee's case. We delete the addition in the absence on any indication of receipt. (6) M/s Polisetti Venkateswararao: (p. 27 of F-3 r/w LF 22) The entry in F-3 note book is as under: "1978 pressed cotton bales 954 X 5 4770.00 Cr. Varalakshmi cotton bales . . 323.5 4600 4184.53 . . 585.47 50 bales pressing without numbers . 1500.00 . . 2085.47" There is no indication of receipt of on-money. Therefore, the addition of Rs. 4,770 is deleted. However, there is an entry in F-3 note book to the effect that 50 bales were pressed "without Nos." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by cash" etc. At best, it could be only an exercise in estimate as rightly contended by the learned counsel for the assessee. Therefore, the addition of Rs. 7,250 is deleted. (12) Sri Srinivasa Ginning & Cotton Pressing Co., Sattenapalli: (p. 66 of F-3 r/w LF 271) There is no indication in F-3 note book towards receipt of on-money. The addition is, therefore, deleted. (13) Jamili Gopalarao, Maddali Venkateswararao Cotton Traders, Guntur: (p. 67 of F-3 r/w LF 267) The entry in F-3 note book is as under: "Bales 2658 x 5 . 13250.00 . . 75503.56 . 25503.56 . Cr. 50000.00 . 38753.56 . . 25503.56 . 0.58 . . .58 . 38754.14 . . . . 20000.00 . . 25504.14 . . . . 200.00 . 18754.14 . . 25704.14 . 240.00 8 bales . 20000.00 . 18994.14 . . 5704.14 . . . . 75.00 . . . . 5779.14 2661 x 5 A/c due 13305.00 . . . . 5779.12 . . . . 19084.12 . . . 11-11-1978 State Bank cheque . 5779.12 . . . . 13305.00 . . . . 90.00 . . . . 13215.00" Up to 25th Oct., 1978, the assessee had received Rs. 50,000 in cash and on 27th Oct., 1978, it received another sum of Rs. 20,000. These are reflected in F-3 note book res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt" or "cash received". There is no such indication against this party in F-3 note book. Hence the addition is deleted. (18) Kamala Cotton Co., Guntur: (p. 73 of F-3 r/w LF 287) The entry in F-3 note book is as under:- "51 x 5 255 Paid 255" In this case, there is indication of receipt of on-money of Rs. 255 by reasons of the remark "Paid 255" in F-3 note book. However, the ITO has computed the on-money receipt on the basis of the total number of bales pressed during the year under appeal and thus arrived at a figure of Rs. 1,755 for which there is no evidence on record except a surmise. Hence, the addition is restricted to Rs. 255 and the balance is deleted. (19) Sri Jayalakshmi Cotton Traders, Guntur: (p. 74 of F-3 r/w LF 57) The entry in F-3 note book is as under: "1977 450 . 1978 1915 . . 2565 x 5 11825.00 . Account due 692.50 Cr. Ledger 25000 . 12517.50 17/10 Credit cash 7000.00 . . 5517.50" The account of the party in the Ledger shows a sum of Rs. 25,000 received on 17th Oct., 1978 which is referred to in F-3 note book. The year of receipt of cash of Rs. 7,000 could not be fixed because the party's account continues to be in credit. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . yr. 1977-78. For reasons discussed there, the addition is deleted. (26) Sri Bhagyalakshmi Cotton Co., Nidamanuru: (p. 81 of F-3 r/w LF 319) The entry in F-3 note book is as under: "Debt (outstanding) 1250.00 50 x 5 250.00 . 1500.00 Without 7 bales 210.00 . 1710.00" In this case, the assessee had pressed 7 bales outside the books for Rs. 210. There is no opening balance and closing balance in the account of this party in the Ledger. Only 50 bales were pressed for which the amount was settled. In the circumstances, the addition is sustained at Rs. 210. (27) Ramakrishna Cotton Traders, Guntur: (p. 82 of F-3 r/w LF 60) There is no indication in F-3 note book about the receipt of on-money. Hence, the addition is deleted. (28) Jamili Gopalarao, Ch. Naga Veerranjaneyulu Cotton Traders: (p. 83 of F-3 r/w LF 258) The entry in F-3 note book is as under: "10,000.00 37063.18 . 10000.00 . 27063.18 1440 x 5 7200.00 . 34263.18 Purchase of Guddikaya cotton 28154.40 Due 6108.78" As per the F-3 note book, the sum of Rs. 6,108.78 is termed as "(receivable)". In other words, it has not been received. This is also an instance of exercise in estimate. The amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no indication of receipt of on-money. The figures noted viz. Rs. 7,900.75 and Rs. 7,822 are found in the Ledger. The addition has been made on surmise based on an exercise in estimate. Hence, the addition is deleted. (35) Yeluri Venkata Subbayya & Co., Piduguralla: (p. 96 of F-3 r/w LF 114) The entry in F-3 note book is the same as that considered by us against item 16 for the asst. yr. 1977-78. The party's account in the Ledger is in credit for 1978 and 1979. The receipt of Rs. 20,000 is reflected in the Ledger account on 9th June, 1978. This is an instance of exercise in estimate. The addition is deleted. (36) Lakshmi Cotton Mill, Guntur: (p. 97 of F-3 r/w LF 117) The entry in F-3 note book is as under: "1978 650 x 5 3250 1977 50 250 700 3750 . 7250 26/10/78 Credit 3750 . 3500 . 3500 . 0000" In F-3 note book, the balance against this party is drawn to nil by deducting Rs. 3,500 which is an indication of receipt of on-money. However, the addition was made only in a sum of Rs. 3,250. Hence, it is confirmed. (37) Sri Dhanalakshmi Fertilisers & Cotton Traders, Amaravathi: (p. 97 of F-3 r/w LF 103) The receipt of Rs. 1,021.22 in F-3 note book is reflected i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted to the addition of Rs. 750 made by the ITO. (46) Sri Venkateswara Cotton Ginning Co., Rentachintala: (p. 46 of F-3 r/w LF 136) The entry in F-3 note book is as under: "1977 100 . 1978 850 . . 950 x 5 4750 . Cr. Cash in Ledger 650 . . 4100" The account of the party in the Ledger started with a debit balance of Rs. 2,515 for the year 1978. On 6th Oct., 1978, there is a credit balance of Rs. 650 in the party's account as per Ledger. On 28th Oct., 1978, the assessee received Rs. 4,100 by way of cheque. On 30th Nov., 1978, the assessee paid Rs. 4,750 in cash. All these transactions are found in F-3 note book against this item. There is absolutely no case for making any addition as has been made by the ITO. This is yet another instance to point out that the assessee was only making estimates or indulging in rough calculations of the balance in F-3 note book in a number of cases in the hope of garnering extra money. Hence, the addition is deleted. (47) Sri Tirumala Cotton Traders, Guntur: (p. 49 of F-3 r/w LF 140) The entry in F-3 note book is as under: "1977 312 x 5 1560 1978 50 x 5 250 .. 1810.00 A/c debit 918.52 .. 2728.52 1978 cash 1000.00 . 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Seva Kendram, Ponnekallu: (p. 58 of F-3 r/w LF 225) There is a credit balance of Rs. 93.61 as per Ledger. Indication of receipt of on-money not being available, the addition is deleted. (54) Srinivasa Commercial Corporation, Guntur: (p. 30 of F-3) and (55) Sri Satyanarayana Fertilisers, Atchampeta: (p. 31 of F-3) These items are repetitions of items 42 and 43 respectively, and the additions are accordingly deleted. 15. Now we deal with the additions made by the CIT(A) by way of enhancement, as follows: Asst. yr. 1977-78 (1) Sri Lakshmi Cotton Traders, Dachepalli: (p. 21 of F-3) the CIT(A) has added a sum of Rs. 3,165 based on the entries in F-3 note book. These entries have already borne our scrutiny at item 2 for the asst. yrs. 1978-79 and 1979-80 and, in view of the same, the addition of Rs. 3,165 is deleted. (2) Sri Jayalakshmi Cotton Ginning Mills, Piduguralla: (p. 23 of F-3) The entry in F-3 note book is as under:- "1976 pressed 1850 bales x 7 12950 Cr. Cash a/c balance 6914 .. 6036 1975 rebate 1300 bales 2600 Privately receivable 3436" We have sufficiently indicated that the test for taxing the on-money is at the point of time of receipt and this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 600 bales x 5 3000 Account debit 10090 . 13090 Credit 5000 . 8090" There is a receipt of Rs. 5,000 noted in F-3 note book which is not reflected in the account of this party in the Ledger. However, the enhancement made by the CIT(A) is only of the order of Rs. 3,000 and it is confirmed. (8) Sri Lakshmi Padmavathi Traders, Guntur: (p. 48 of F-3) The balance in the account of this party in the Ledger is only a sum of Rs. 2,103.15 which was written off in 1978. There is no indication of receipt of on-money. The addition of Rs. 2,605 is, therefore, deleted. (9) Sri Tirumala Cotton Traders, Guntur: (p. 49 of F-3) This case has been discussed by us against item 47 for the asst. yr. 1979-80. For the reasons stated there, the addition of Rs. 1,560 is deleted. (10) Sri Srinivasa Cotton Traders, Ankireddypalem: (p. 50 of F-3) This has been discussed by us against item 48 for 1979-80. For the reasons stated thereunder, the addition of Rs. 750 is deleted. (11) Srinivasa Cotton Traders, Piduguralla: (p. 51 of F-3) This party figured at item 49 for 1979-80. For the reasons stated thereunder, the addition of Rs. 500 is deleted. (12) Venkateswara Cotton Traders, Atchampeta: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1979-80. For the reasons stated thereunder the addition of Rs. 1,000 is deleted. (23) Perumalla Nagayya, Yechuri Venkateswarlu, Gurajala: (p. 93 of F-3) This party has figured at item 14 for 1977-78. For the reasons stated thereunder the addition of Rs. 5,770 is deleted. (24) Yeluri Venkata Subbaiah & Co., Piduguralla: (p. 95 of F-3) This party has figured at item 16 for 1977-78. For the reasons stated thereunder the addition of Rs. 4,835 is deleted. (25) Yeluri Venkata Subbaiah & Co., Piduguralla: (p. 96 of F-3) This party has figured at item 35 for 1979-80. For the reasons stated thereunder the addition of Rs. 500 is deleted. (26) Lakshmi Cotton Mill, Guntur/Sri Dhanalakshmi Fertilisers & Cotton Traders Amaravathi: Both these parties have figured for the asst. yr. 1979-80 at items 36 and 37 respectively. It is not known as to in respect of which case the addition has been made by the CIT(A). In any case, for the reason stated against items 36 and 37 referred to above, the addition cannot be sustained. The addition of Rs. 250 is, therefore, deleted. (27) Polisetti Somasundaram, Guntur: (p. 38 and 98 of F-3) This party has figured at item 45 for 1979-80. For the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bale, outside the books of accounts, there is no reason why the names of all such parties did not figure in the F-3 note book. The pencil entries in the diaries or loose sheets to which the learned CIT(A) has referred, can at best indicate only the hope of the assessee to garner extra receipts and unless and until the point of time of receipt of on-money or at least the year of receipt of on-money, or the fact of payment of on-money by the obliging parties, has been brought on record or established by the Revenue, it would be difficult for us to sustain any addition by travelling into the realm of conjectures or surmises. We have already held that the addition towards on-money receipt can be sustained only on receipt basis and not on accrual basis in the absence of agreement between the parties and/or in the absence of complete set of secret books of accounts. The parties examined by the ITO have denied having paid anything outside the books. Looked at from this angle, the case relied on by the learned CIT(A) viz., Rossette Franks (Kings Street) vs. Dick, 36 Tax Cases 100, is of no assistance in the particular facts and circumstances of the case. 20. The CIT(A) has referred to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries in A II returned to by the CIT, an addition of Rs. 10,000 is sustained on estimate basis and the balance of the addition is deleted. 24. In ground No. 3 for the asst. yr. 1979-80, the assessee objects to the confirmation of an addition of Rs. 25.225 as probable inflation of Muster charge. The CIT(A) in para 7 of his order has confirmed the addition for the reasons elaborately discussed in his order for the asst. yr. 1977-78. On going through the appellate order for the asst. yr. 1977-78, we notice that the CIT(A) had in fact deleted the addition made towards inflation in Muster charges for the asst. yr. 1977-78. In para 9(i) of his order, the CIT(A) has stated as follows: "I have carefully considered the submissions. I agree with the assessee that the ITO was not correct in extending his presumption arrived at on the basis of the papers reflecting transactions for the year 1979, for the earlier years such as 1976, 1977 and 1978. Any presumption in this regard, in my opinion, should be limited to the year in respect of which incriminating documents were found. Unless the ITO have some evidence directly or indirectly indicating that there was inflation of muster charges in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een drawn by the CIT(A) only because the accountant was not in a position to throw light on the nature of the entries. The jottings were made at the instance of Sri. K. Subba Rao who has not been examined by the ITO. He is also dead and, therefore, the accountant was unable to throw much light on the entries, but that does not mean that addition is called for. In fact, on a comparison of the year-wise ginning charges, incurred by the assessee, and also the year-wise payment of Pala Muster charges, it would be evident that the payment under this head was only reasonable. The CIT(A) did not consider this aspect of the matter. Hence, the addition should be deleted. Sri Radhakrishna Murty, the learned departmental representative, on the other hand, relied on the orders of the authorities below. He submitted that in the absence of adequate explanation on the part of the assessee or at least on the part of the person who has written the accounts, the addition should be sustained. 28. We have heard rival submissions and perused the materials on record. There is difference between the amount shown in the seized materials and the amount booked in the regular books of accounts in a few case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of every day to his people working in the factory (or once in 3 days or 2 days) and the balance would be kept with Sri Subba Rao until he returned and that as and when he returned from his place, the accumulated amount would be received by him for distribution to the mazdoors working in Kollipara Subbrao's factory. When a question was put to him that when Sri K. Subbarao was hospitalised for nearly two years, how it was possible for him to receive the accumulated amount, he had replied that he used to get the amount from Sri. K. Rajeshwara Rao, brother of Sri. K. Subba Rao. He had also described the nature of the job expected of him. Thus, the examination of Sri Abdul Hamid Khan had really established that 25 per cent of the cooli charges would be retained by Sri. K. Subba Rao for payment subsequently when he returned from his place. In fact, the CIT(A) himself had at para 8 of his order for the asst. yr. 1977-78 held that in the face of the statement given by Sri Abdul Hamid Khan that he was receiving Rs. 2 per bale as pressing charges, the addition made for the asst. yr. 1977-78 cannot be sustained. He had also indicated that as the seized materials referred to the transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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