TMI Blog1988 (2) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... nied that he had made any purchases from M/s Raj Trading co., in excess of what appeared in his accounts, i.e., in excess of purchases made for Rs. 28,797. The ITO overruled him and held that the assessee had suppressed purchases. He brought out two or three reasons for his finding that there was suppression of purchases. On the suppressed purchases he worked out the profit of 2 per cent and reached the sum of Rs. 21,170 one of the two sums which had been pointed out above as forming an aggregate of Rs. 45,710. 3. The ITO also found that from a perusal of the accounts of the assessee as appearing in the books of M/s Raj Trading Co. that up to 28th Dec., 1977 the appellant firm had made payment to the tune of Rs. 1,92,069 as against goods purchased at Rs. 1,05,448. Even after adding the profit on the sale of Rs. 1,05,448 at 2per cent the excess payment worked out to Rs. 24,540 as no explanation was filed by the appellant firm to explain the source of investment he treated the above amount of Rs. 24,540 as unexplained investment and added the same to the total income of the appellant. 4. The two sums of Rs. 21,170 and Rs. 24,540 made up the aggregate of Rs. 45,710 which were adde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re unable to find any support for the finding of the CIT(A) and, therefore, we vacate it and strike down the addition. The appeal of the assessee on this issue is allowed. 6. There is another issue in respect of an addition of Rs. 1,08,818 made up of cash credits appearing in the names of several ladies, i.e., Sharda Devi Kerjriwal Rs. 20,000, Pramodi Devi Kerjriwal Rs. 17,000, Manu Devi Kerjriwal Rs. 18,000, Rukmani Devi Kerjriwal Rs. 8,000, Bimla Devi Kerjriwal Rs. 18,000, Geeta Devi Kerjriwal Rs. 18,818 and Laxmi Devi Kerjriwal Rs. 9,000. The ITO took these credits as those not proved by the assessee and therefore, added the amounts as income of the assessee from undisclosed sources. He also disallowed the interest of Rs. 4,805 claimed by the assessee as due for payment on these credits. Therefore, he caused additions of Rs. 1,08,818 and Rs. 4,805. The CIT(A) confirmed the additions. The assessee having felt aggrieved by this finding impugned the additions in an appeal filed before the Tribunal. 7. It is pointed out by the learned counsel for the assessee that the issue is covered by several orders passed by the Tribunal in the case of these ladies. The Tribunal accepted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e concur with the decision of my learned brother on this issue that this contention of the assessee be allowed. 4. As far as the next issue is concerned, I have not been able to agree with the conclusion of my learned brother. According to the facts as mentioned by my learned brother in the order, it was detected' in the account books of Raj Trading Co. which were found in the course of raid that the assessee had made purchases from them amounting to Rs. 10,87,306. The assessee had actually shown in its books purchases to the extent of only Rs. 28,797 from Raj Trading Co. Thus, it was held by the ITO that the assessee had suppressed purchases to the extent of Rs. 1,58,509. Further, the assessee had also made payments according to the books of Raj Trading Co. to the extent of Rs. 1,92,069. In the books of the assessee, the payments to Raj Trading Co. were shown at a lesser figure. The assessee completely denied to have made those purchases from Raj Trading Co. which were not shown in the books of the assessee. The ITO had added Rs. 45,710 as mentioned by my learned brother in his order treating that the assessee had made purchases outside books and the profit on the sale or purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of account seized would hold good only as far as the assessee is concerned. It is a presumption which would hold good even in the cases of other persons who are concerned with the entries in those books. Otherwise the result would be anomalous. If the presumption is for Raj Trading Co. only that Raj Trading Co. sold goods worth Rs. 10,87,306 to the assessee in this year and if the said presumption is not applicable in the case of the assessee, in the assessment of the assessee purchases from Raj Trading Co. would be held to be only of Rs. 28,797 while in the case of Raj Trading Co. sales to the assessee would be taken at Rs. 10,87,306. There would be, thus, clearly conflicting findings in the cases of the seller and the purchaser. I do not think that an interpretation of law which gives rise of contrary finding in two cases who are concerned with the two sides of a transaction would be correct. An interpretation which makes the law workable has to be taken and not an interpretation which places the provision of law under such an anomalous situation. Moreover provision of law is clear as it is. I, therefore, hold that the presumption in s. 132(4A)(ii) has to be drawn even ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts had been recovered and seized during the search under s. 132? 2. Whether on the facts and in the circumstances of the case, the Tribunal would be justified in setting aside the finding of the CIT(A) regarding the addition of Rs. 45,710 representing profit estimated by the ITO on the basis of entries of purchases made by the assessee found in his account in the books of M/s Raj Trading Co. which had been denied by the assessee completely and not striking out the addition? 3. If the answer to the question were in the affirmative whether the Tribunal would be justified in remanding the proceeding to ITO with the object of providing more opportunities to the assessee to disprove the entries of alleged purchases found in the books of M/s Raj Trading Co.?" Registry while sending the above will send the records of the case. B. NATH, A.M.: We, the Members of Patna Bench having differed on the following issue while deciding ITA No. 143(Pat) of 1984 for asst. yr. 1979-80 (case of Rama Traders) refer the following questions to President, Tribunal under s. 255(4). "(1) Whether in the facts of the case the addition of Rs. 21,170 + Rs. 24,540 = Rs.45,710 were correctly confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entries are passed in those books and who represent the other sides of the transactions mentioned in those books?" The following question would be the proper question: "Whether, on the facts and in the circumstances of the case, presumption under s. 132(4A) can be drawn against a third party also and whether the Tribunal would be justified in sending the case back to the ITO to consider the matter afresh with regard to the addition of Rs. 45,710?" 2. The dispute is with regard to the additions of Rs. 47,710. During the course of search under s. 132(1) at the business premises of Raj Trading Co. certain books were seized. It was found that the assessee had made purchases to the tune of Rs. 10,87,306 but in the books of the assessee purchases to the extent of Rs. 28,797 from M/s Raj Trading Co. alone was accounted. The ITO asked explanation why the difference of Rs. 10,58,509 was not accounted in the assessee's books. The assessee filed an explanation stating that there was no other transaction made with M/s Raj Trading Co. except to the extent of Rs. 28,797. The ITO did not accept this explanation. He estimated profit at 2 per cent on Rs. 10,58,509 and made addition of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the excess payment has not been proved the addition is justified. 5. I have considered the rival submissions. It is no doubt true that under s. 132(4A) presumption can be drawn only against person from whom books are seized and no such presumption can be drawn against any other person. But at the same time since the purchases to the extent of Rs. 10,87,306 by the assessee have been found in the books of Raj Trading Co. it may be necessary to make necessary enquiries in the assessment proceeding with regard to this transaction after giving a proper opportunity of being heard to the assessee. In the assessee's books purchases of Rs. 28,797 from M/s Raj Trading Co. have been recorded. It may also be necessary to summon M/s Raj Trading Co. to know the truth with regard to the purchases of Rs. 10,87,306 shown in the seized books. It may be necessary to find out what was done in their assessment. The ITO has only given two days' time to the assessee to offer the explanation and thus no reasonable opportunity of being heard has been given.. Hence the matter has to be sent back to the ITO to decide the issue afresh after giving a reasonable opportunity of being heard to the assessee. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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