TMI Blog1998 (2) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 and Rs. 28,245 by applying a g.p. rate of 7 per cent against g.p. rate declared by assessee at 5.38 per cent and 6.02 per cent in A. Ys. 1987-88 and 1988-89 respectively. At the time of assessment proceedings the AO found that a survey was conducted under sec. 133A on 23-3-88 and it was found that the daily sales were recorded on a plain paper. At the time of survey no such paper was found. It was claimed that the papers were destroyed after entering the same in the books of account. It was also noticed by the AO that assessee maintaining two bill books one for credit sale and other for cash sale. It was also admitted that no vouchers kept for expenses except that of electricity and water. Daily average sales were admitted at Rs. 7,000 to Rs. 8,000. It was further observed in the order of the A.O. that the assessee did not disclose the receipt on account of sales of empty tins, gunny bags, etc. it was also observed that the assessee received many items free of cost as per gift schemes introduced by the manufacturers, but the same were generally not given to the customers and the same were sold in the open market. The assessee however, did not show any profit on such sales. Keepin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere made. Therefore, the order of the AO should be restored. 6. We have heard the rival submissions and considered them carefully. We found that CIT(A) has considered all the aspects of the case and in our view he has given a very reasonable finding by reducing the additions to Rs. 15,000 and Rs. 10,000 in place of Rs. 47,000 and Rs. 28,000. Therefore, we are not inclined to interfere with the order of the CIT(A), as it suffers from no infirmity. This ground of the appellants, i.e., assessee and the department is, therefore, rejected. 7. Now we will take up ground Nos. 2 3 in assessee's appeal and ground No. 3 in department's appeal, i. e,. against the sustenance and reduction of additions made on account of M/s. Mahesh Bhandar, a proprietorship concern of Shri Shankarlal, younger brother of the assessee. The AO clubbed the income of M/s. Mahesh Bhandar at Rs. 30,000 each in the A. Ys. 1987-88 and 1988-89. During the course of survey it was found that assessee was running a branch in the name of Mahesh Bhandar. It was claimed that Mahesh Bhandar was proprietorship concern of Shankar Lal. An affidavit of Shri Shankar Lal was filed. To verify the contents of affidavit, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... watmull [1973] 87 ITR 349 (SC) and Kishinchand Chellaram v. CIT [1980] 125 ITR 713 / 4 Taxman 29 (SC). It was further submitted that no opportunity was given by CIT(A) for producing Shri Shankar Lal. It was further submitted that Shri Shankar Lal filed its return of income for the first time in 1990-91 when his income became taxable. Earlier the income of Shri Shankar Lal was not taxable. Therefore, no return of income was filed. It was further submitted that as per the ratio of decision, supra, evidence recorded in absence of assessee is no evidence. Therefore, statement of Shri Laxmichand does not have any weight. 10. On the other hand, the Id. D/R strongly supported the order of the AO and he further stated that AO has discussed in detail and all the facts are mentioned in the order of the A.O. Therefore, for the reasons given by A.O. the order of the AO should be restored. 11. We have heard the rival submissions and considered them carefully. The issue is a vital issue which relates to benami business made by assessee in the name of his younger brother. First of all we will see whether the benami business is established or not. in case of Prakash Narain v. CIT/CWT [1982] 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that both the father-in-law and mother-in-law of the assessee were dependent on him. The fact that the assessee's wife was the only child of her parents could not lead to the conclusion that the purchases of the properties were financed not by her parents but by the assessee. In India benami transactions were not considered to be dishonest and the Tribunal erred in concluding that the assessee was dishonest because he had admittedly purchased one house benami in the name of his wife. No motive had been suggested for the benami purchases by the assessee. There was no material or evidence on record in support of the finding of benami recorded by the Tribunal. The purchases of the first three items of properties were not benami purchases for purposes of income-tax. They could not be included in the total wealth of the assessee." Now we will see the facts of the instant case. The facts are that A.O. found that there is a shop in the name of Mahesh Bhandar. At the time of survey a statement of Shri Laxmichand was taken and as per his statement this shop belongs to the assessee, i.e., Shri Laxman Dass and the investment is made by Shri Laxman Dass. Except this evidence, there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprising to us that the department is relying on the statement given by third person and not relying the statement given by the assessee himself. They have not tried to call the real person to whom the business belongs. Nowhere it is mentioned in the order of the AO or in the order of the CIT(A) that they have summoned Shankar Lal independently neither here before us the Id. D / R brought any information of that type. It is only mentioned that they have asked the assessee to produce Shankal Lal and when he was not produced by the assessee, it was presumed that the business belongs to the assessee. This is undigestible f or us that a statement given by third person at the back of the person who is presumed to be the owner of the business belonging to other. There is a licence from shop and Establishment Department in the name of Shankar Lal. There is a credit facility obtained from bank and there is a letter from the bank in which it is mentioned that the bank facilities obtained by Shankar Lal. The A.O. did not rely on these informations. On the other hand he presumed that the business belongs to assessee. It is also worth mentioning that this is not the same business premises as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s evident from the fact that the salary paid to two employees duly debited in the books of account was not mentioned in the statement at the time of survey. These two amounts were shown in the name of Mahesh Rs. 7,200 and Rajesh Rs. 5,000. It was further submitted that the accounting year of both the assessment years ended on 31-12-1986 and 31-12-1987 whereas the survey was made on 23-3-1988, ie., after the close of both the accounting years. The position given in the statement was as on the date of survey and not for earlier years. It was further submitted that assessee also paid bonus @ 15 days salary to its employees and it was accounted for in the books of account and the AO has not considered the bonus paid while making the disallowances. After considering the submissions made by Id. A/R and other materials on record, the CIT(A) was satisfied that assessee claimed the salaries which were paid to employees. It was further observed by him that moreover, the salary claimed is fully accounted for on month-to-month basis. However, he found that a sum of Rs. 3,600 was shown paid on last day of the accounting year ended on 31-12-1986 and that was in the name of Shri Manoj Kumar. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were made for A.Ys. 1987-88 and 1988-89. After considering the submissions of Id. counsel for the assessee and various case laws relied upon, the CIT(A) reduced the trading addition by Rs. 36,000 in A.Y. 1989-90 and by Rs. 10,918 in A.Y. 1990-91 sustaining the additions at Rs. 41,140 in A.Y. 1989-90 and Rs. 10,000 in A.Y. 1990-91. 20. Now the assessee is in appeal here before us for both the years. 21. The same submissions were made as made earlier for A.Y. 1987-88. It was further submitted by the ld. counsel that during the Asst. year 1990-91 the assessee himself has shown g.p. rate at 6.49 per cent which was highest as compared to earlier years. Therefore, no addition be sustained for A.Y. 1990-91. 22. On the other hand, Id. D/R relied on the orders of the authorities below. 23. After hearing the rival submissions and considering the material on record, we find that during the asst. year 1989-90 the sales were increased more than 50 per cent and the g.p. rate was marginally declined. No doubt, the provisions of sec. 145(1) are applicable to the facts of the case of the assessee. However, we are of the view that CIT(A) sustained the additions on higher side. Looking to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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