TMI Blog1988 (2) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... anch, and South Indian Bank, Quilon Branch. We shall first deal with the transactions of the assessee with the State Bank of Travancore, Quilon Branch. The Income-tax Officer made an addition of Rs. 3,54,350 being the value of 650 bags of excess raw cashew nuts under a key loan with the State Bank of Travancore, at the rate of Rs. 545 per bag. This was deleted in appeal by the Commissioner of Income-tax (Appeals). The Income-tax Officer also made an addition on account of excess raw nuts with the State Bank of Travancore being "yard loan" "Stock difference" in quantum and quality like costlier, local and cheaper African nuts. The "difference" was between the account of the assessee and that of the State Bank of Travancore, Quilon Branch. The addition made by the Income-tax Officer was Rs. 17,45,090. In appeal, the Commissioner of Income-tax (Appeals) sustained it to the extent of Rs. 10,08,250. The deletion of Rs. 3,54,350 and the reduction of addition on the other account to Rs. 10,08,250 were both the subject-matter of an appeal by the Revenue before the Income-tax Appellate Tribunal in I. T. A. No. 284 (Cochin) of 1983. The Appellate Tribunal sustained the deletion of Rs. 3,54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies ; (vi) goods not in existence are shown as pledge to avail of greater bank facilities and are not the above findings, irrational, against law, logic, inconsistent and based on surmises ?" 2. Whether, on the facts and in the circumstances of the case and in view of the fact that the addition to be made to the closing stock being Rs. 1,37,73,010, the Commissioner of Income-tax (Appeals) is right (and the Tribunal in confirming) in directing to increase the value of the opening stock thereby reducing the income of the current year to the extent of Rs. 7,07,446 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right, (i) in deleting the addition of Rs. 10,08,250 sustained by the Commissioner of Income-tax (Appeals) ? (ii) in holding that the entries are quite unreliable ; it has no evidentiary value ; (iii) in deleting the addition to Rs. 13,39,132 made by the Commissioner of Income-tax (Appeals) ? 4. Whether, on the facts and in the circumstances of the case, the assessee is entitled to weighted deduction under section 35B of the Income-tax Act on office and other miscellaneous expenses ? 5. Whether, on the facts and in the circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w formulated in paragraph 13 of the original petition. It is to the following effect : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the sum of Rs. 60,000 from the addition made under section 69A on the ground that this amount has already been disclosed by the assessee ?" We heard counsel for the Revenue, Mr. P. K. R. Menon, as also counsel for the respondent/assessee, Mr. Panicker. The questions detailed by the Revenue in Original Petition No. 7667 of 1984 arise out of the transactions which the respondent/assessee had with the State Bank of Travancore, Quilon Branch. The Appellate Tribunal stated that the additions were made solely on the basis of certificates issued by the State Bank of Travancore, on the basis of summary of extracts prepared from two registers, known as "Godown Register" and "Drawing Power Register". These registers were impounded by the Income-tax Officer. The Appellate Tribunal has stated that those registers were scrutinised by it in open court. It has observed that the registers disclose a sordid state of affairs. It opined that the total quantity of bags mentioned in the registers, relied on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal, meant only to back up the advance ... So this is a clear instance where goods not in existence are shown as pledged to avail of greater bank facilities. The Income-tax Officer, the Inspecting Assistant Commissioner and the Commissioner of Income-tax (Appeals) were aware of these and were convinced about the fact that it is only shown for facility for greater credit. That is why those authorities did not ask for the explanation of the assessee under section 69A of the Incometax Act, 1961, to show the source for these alleged investments of raw nuts and kernels in trust, etc. It is only before the Tribunal that the Department has raised a ground for the first time that these are unexplained purchases and closing stock (without even allowing purchase price) should be made. The Commissioner of Income-tax (Appeals) at one stage observes that as regards the books of account of the State Bank of Travancore, matters are different from that of the South Indian Bank and those registers showed certain discrepancies in dates. At another place in para 13, he states that, therefore, if anything, the appellant has had a definite advantage as a result of the bank not maintaining proper accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed deduction under section 35B of the Income-tax Act on office and other miscellaneous expenses. The Commissioner of Income-tax (Appeals) allowed weighted deduction in the light of the Special Bench decision of the Tribunal in the case of J. Hemchand and Co., which was accepted by the Department. The estimate was found to be correct by the Tribunal. No referable question of law arose out of the said finding of the Appellate Tribunal. We decline to refer question No. 4, specified in para 13 of Original Petition No. 7667 of 1984. No other question is posed or arises for consideration in Original Petition No. 7667 of 1984. With regard to Original Petition No. 7668 of 1984, it deals with the transactions of the assessee with the South Indian Bank, Quilon Branch. The Appellate Tribunal, while sustaining the principle of addition, held that the addition should be confined to the closing stock instead of being an addition under section 69A of the Act as, otherwise, the assessee may lose the benefit of treating the same as opening stock in the subsequent assessment year. Having accepted such a position and in sustaining the addition, the Appellate Tribunal held that a sum of Rs. 60,000 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the godown register and drawing power register perused by the said officer is produced. It is stated in the report dated July 11, 1987, that there has been lapses on the part of the officers and, for such lapses, appropriate action under the State Bank of Travancore (Officers) Service Regulations, 1979, is being initiated. Along with a memo dated August 11, 1987, five sets of memos issued to various officers have also been produced. Memos have been issued to Shri C. G. Sahasranamam, Shri S. L. Hariharan, Shri K. A. Varghese, Shri P. Krishna Kumar and Shri N. Venkateswara Iyer. It is evident from the memos that disciplinary action has been taken against those officers. We are not informed about the further developments in the matter. However, we are of the view that the observations contained in paragraphs 2 to 5 of the appellate order of the Income-tax Appellate Tribunal dated August 30, 1983, deserve serious notice and further follow-up action by the State Bank of Travancore in public interest, We have our own doubts as to whether the serious lapses found by the Appellate Tribunal in the above order are only isolated instances. Serious and grave consequences may ensue if such s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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