TMI Blog2005 (1) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Income-tax Appellate Tribunal dated August 3, 2000. The assessment order relevant for the purpose herein is the assessment year 1988-89. A short point of law required to be considered in this appeal is: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in directing the Assessing Officer to make additions of the value of 400 bags of HDPE powder as unexplained investment under section 69 of the Income-tax Act, 1961, when the same is a part of the purchases and part of the closing stock recorded in the books of account maintained by the assessee and the nature and source of the investment has been duly explained by the assessee?" The assessee is a dealer in HDPE plastic powder. On January 29, 1987, search action under section 132 of the Income-tax Act was carried out at the godown belonging to M/s. Wak Bros, situated at Andheri (E), Mumbai. During the course of the search 540 bags of HDPE plastic powder weighing 25 kgs. each were found at the said godown. Prohibitory orders were issued by the income-tax authorities under section 132(3) of the Income-tax Act in respect of the said 540 bags of plas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issued by the assessee in the name of M/s. Gautam Trading Co. were deposited in that bank account. However, as the said Bipinkumar Shah had denied to have any dealings with the assessee and taking into account other factors such as inordinate delay on the part of the assessee in claiming the goods, the fact that the bank account in the name of M/s. Gautam Trading Co. was opened in February, 1987, i.e., after the search action on January 29, 1987, the fact that the assessee issued cheques towards the price of the goods in February, 1987, i.e., after the date of the search, the fact that the bank account in which the cheques issued by the assessee were deposited have been disowned by Bipinkumar B. Shah, proprietor of M/s. Gautam Trading Co., the fact that the sales tax challan for Rs. 1,05,000 being the sales tax payable by M/s. Gautam Trading Co. on sale of 50 M.Ts. of HDPE was also lying with the assessee and that the sales tax amount of Rs. 1,05,000 has not been credited to the account of the State Government, the Assessing Officer concluded that there was no genuine sale and the entire transaction of purchasing 50 M.Ts. of HDPE powder by the assessee from M/s. Gautam Trading Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e added to the income of the assessee. Challenging the said order of the Income-tax Appellate Tribunal the present appeal is filed by the assessee. Mr. Arun Sathe, learned advocate appearing on behalf of the appellant, submitted that the entire transaction relating to the purchase of 50 M.Ts. of HDPE powder from M/s. Gautam Trading Co. and sale of 40 M.Ts. (out of the said 50 M.Ts.) to third parties and the value of the balance stock of 10 M.Ts. of HDPE powder is duly recorded in the books of account maintained by the assessee. He submitted that after purchasing 50 M.Ts. of HDPE valued at Rs. 11,55,000, the assessee had paid to M/s. Gautam Trading Co. Rs. 9,27,500 from time to time (Rs. 3,00,000 on February 9, 1987, Rs. 2,00,000 on February 16, 1987, Rs. 2,00,000 on February 18, 1987 and Rs. 2,27,500 on March 18,1987) by cheque and the balance amount of Rs. 2,27,500 was due and payable by the assessee to M/s. Gautam Trading Co. at the relevant time. All the above payments were made from the regular bank account of the assessee. The rent paid by the assessee to M/s. Wak Bros, for storing the goods in their godown are also recorded in the books maintained by the assessee. The books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the failure on the part of M/s. Gautam Trading Co. to pay sales tax does not render the transaction not genuine. Mr. Sathe submitted that none of the conditions set out in section 69 of the Income-tax Act are satisfied and, therefore, the Tribunal was totally in error in holding that the transaction was not genuine and directing the Assessing Officer to make addition in respect of the value of 10 M.Ts. of HDPE powder. Mr. R.V. Desai, learned senior advocate appearing on behalf of the respondents, on the other hand submitted, that the order passed by the Tribunal is based on findings of fact and the appeal does not raise any substantial question of law and, therefore, no interference is called for in exercise of jurisdiction under section 260A of the Income-tax Act. He submitted that on the basis of the material on record, the Tribunal has rightly come to the conclusion that there was no genuine sale of 50 M.Ts. of HDPE powder and it was only a havala transaction. Mr. Desai further submitted that if the purchase of 50 M.Ts. was genuine, then the assessee would not have taken 11 months to claim 10 M.Ts. of HDPE powder lying at the godown of M/s. Wak Bros. He submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the question to be considered in this appeal is, whether the Tribunal was justified in rejecting the explanation offered by the assessee. As per the books of account maintained by the assessee, Rs. 11,55,000 was the price of 50 M.Ts. of HDPE powder purchased by the assessee from M/s. Gautam Trading Co. It is not in dispute that in the relevant assessment year payments in respect of the said goods has been made by the assessee to the extent of Rs. 9,27,500 by cheque from his regular bank account and the same has been duly credited in the Syndicate Bank account of M/s. Gautam Trading Co. It is also not in dispute that out of 50 M.Ts., the assessee has sold 40 M.Ts. of HDPE to third parties and the amounts received from those parties are also reflected in the books of account maintained by the assessee. The value of the remaining 10 M.Ts. of HDPE is also reflected in the books of account maintained by the assessee. Thus, the identity of the person from whom the goods have been purchased and the source of investment in such goods has been explained by the assessee. The Assessing Officer as well as the Tribunal rejected the explanation of the assessee mainly on the ground t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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