TMI Blog1997 (3) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Accordingly the AO invoked the provisions of s. 145. He estimated the job receipts at Rs. 2,06,55,000 as against Rs. 2,06,22,420 declared by the assessee. On the estimated receipts the AO applied a G.P. rate of 10.25 per cent as against 9.92 per cent shown by the assessee and finally made an addition of Rs. 70,587. 3. In the first appeal, the CIT(A) observed that the assessee had shown job work receipts less by Rs. 11,00,081 by entering bogus debit notes and hence, after adjusting the addition of Rs. 70,587 made by the AO, further added a sum of Rs. 10,29,494 to the total income. 4. Shri N.M. Ranka, the learned counsel for the assessee, submitted that the assessee, doing only job work, maintains proper books of accounts and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the case of Richa Co., one of the major customers of the assessee, it was submitted that the assessee had done job work worth more than Rs. 1.24 crores and the debit notes issued by it were just above Rs. 12.00 lakhs. So, it was contended, compared to the overall volume, it could not be considered to be substantial and hence no aspersions be cast on these transactions. Thus it was urged by the learned counsel that the entire addition made both by the AO as well as the CIT(A), be deleted. 6. The contention of Shri A.K. Singh, the learned Departmental Representative was that even if a practice had been regularly followed by the assessee, if later it was found to be defective or non-genuine, the same had to be attacked and could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord. There are two trading additions, one of Rs. 70,587 made by the AO and the other of Rs. 10,29,494 made by the CIT(A). Firstly, we would deal with the addition made by the CIT(A). 8.1 At the outset, it would be advantageous to narrate the modus operandi of the assessee in order to appreciate the rival contentions in the right perspective. As mentioned earlier, the assessee does only job work of dyeing and printing of cloth. The assessee receives grey cloth from its customers, prints the same and sends it back to the customers. The assessee raises bill for doing the job work. After printing, if the goods are found defective in any respect or short, the concerned customer would raise debit note on the assessee. The assessee will debit th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count. Similarly, for the entire year the total of all debit-notes is Rs. 36,51,249. This amount is bifurcated into Rs. 26,03,595 as cloth purchase and Rs. 10,47,654 as job work charges. Upto this stage there is no disagreement with the CIT(A) as is evident from para 2.8 of his order. However, after explaining this position, the CIT(A) has observed as follows in the same para: "Actually both these figures are hypothetical as no cloth is reality has been received and debit-notes have been raised on account of normal shrinkage. It is all a collusive arrangement. This fact is further proved from the examination of cloth register, as the debit-notes are not entered on the date when they are received but of (so) the end of the account, i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtage in length and not for any defect in printing done by the assessee. If the assessee kept with it part of the printed cloth and sold the same as its own, then the assessee should have realised full price, i.e., price of the cloth plus the printing charges. This point has been discussed by the CIT(A) in para 2.11 of his order. In our opinion, the CIT(A) has not appreciated the transaction at all. There is no question of realising any price by the assessee. To illustrate, a customer of the assessee, say 'X', supplied 100 cms. of cloth to the assessee for printing. The price paid by 'X' for this cloth was say Rs. 50. The assessee prints the same at Rs. 10. These Rs. 10 are credited to jobcharges account. The assessee sends back the printed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te is necessary. However, a detailed and discreet enquiry would have revealed that the assessee's explanation that when the cloth is folded, at times the fold is not of 100 cms. but of 98 cms. or 98.5 cms. This, to our knowledge, is quite a usual phenomena in this line of business. Probably, there may be something unethical about it also. However, we are not concerned with whether it is ethical or unethical. If the CIT(A) did not believe it, it was imperative for him to enquire about it from the market. We do not see any reason to disbelieve the explanation without making the enquiries. The accounting aspect has already been discussed above. There is nothing to show that there was anything fraudulent about it. Accordingly, we are unable to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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