TMI Blog2002 (11) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... of Calcutta High Court in the case of Howrah Trading Co. (P) Ltd. vs. CIT (1968) 67 ITR 582 (Cal), books of account of assessee were held as unverifiable and unreliable. 5. The AO further noticed that the assessee had submitted statement of stock at the end of August, 1990, September, 1990, October, 1990, November, 1990, December, 1990, January, 1991 and March, 1991, to Punjab National Bank, Firozabad from which loan facility had been taken by the assessee. The AO further mentioned that the stock was pledged with them. The copy of statement as obtained from the bank was supplied to the assessee along with notice dt. 31st Jan., 1993. The AO further noticed that there was discrepancy in weight, number, as well as value regarding stock pledged to the bank in these months vis-a-vis books of account. Therefore, the assessee was required to reconcile these statements. The assessee submitted that stocks as per account books were correct and statements given to the bank were merely to cover up the overdraft facilities granted by the bank. Thus, the said statement did not show the real and correct position. The assessee further submitted that neither bank nor the assessee really bothere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the AO rejected the books of account. The AO estimated the sales at Rs. 1 crore on which GP rate of 12 per cent was applied. This resulted in addition of Rs. 1,93,775 for extra profit. 7. On appeal before the CIT(A), it has been submitted that the assessee regularly maintained and audited books of accounts which should have been accepted as no discrepancy has been found in the books of accounts as complete details and quantitative tally is available. Regarding the difference in stock as per books and as pledged with the bank, the assessee reiterated that stock shown to the bank was by estimate to cover up the overdraft facility. For difference in quantity of items, it was submitted that this was with a view to obtain maximum overdraft facility. It has also been submitted that the rates applied were higher than actual sale and purchase price of various items. The assessee also furnished chart to show the rates of items of glasswares, coal, sand, etc. as per books and relevant bills. Thus, it has been submitted that if this rate be applied, the maximum difference in the month of November, 1990, would be Rs. 5,10,922 and not Rs. 6,91,726 which had resulted in excess addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. CIT (1972) 83 ITR 484 (Ker) and Asstt. CIT vs. Laxmi Printing Co. (1993) 46 TTJ (Chd) 117. The learned counsel has also submitted that the books of account of the assessee have been accepted in the previous as well as in the subsequent years. Therefore, in order to maintain consistency the same may be accepted in this year also. 10. The learned counsel while referring to pp. 62 and 63 of the paper book has submitted that there were obvious mistakes in the statements furnished by the assessee to the bank. He pointed out that both the statements were August, 1990 and September, 1990, have been signed on 4th Oct., 1990. While conducting spot inspection, how the spot inspection enquiry could be made for the months of August and September on the same day when there could always be movement of stock. The learned counsel while referring to p. 4 of the CIT(A) order has submitted that books of the assessee have been signed by the official of the State Government. Thus, the learned counsel has urged that since the additions have been made only on non-existing basis, the same are not sustainable, hence, may be deleted. 11. The learned Departmental Representative, on the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the bank. It is seen that the AO extracted the difference noted in the stock shown to the bank and books of account in respect of the aforesaid months at p. 5 of the assessment order. The maximum stock difference of Rs. 69,176 noticed is for the month of November, 1990, and the said excess stock later on had been reduced to Rs. 900 in the month of March, 1991. The question is whether stock shown to the bank could be said to be the correct stock of the assessee. The claim of the assessee is that the bank authorities do not give much weight with regard to the stock mentioned therein as the amount given against the stock is fully secured from factory premises and other immovable properties of the partners. The stock statements were really prepared at the table of the bank and were accepted by the bank. These statements are given to the bank merely to cover the overdraft facility granted by the bank. The pp. 62 and 64 of the paper book would show the manner in which the stock position is shown to the bank and accepted by the bank. The stock statements shown to the bank for the month, of August and September, 1990, have been signed on the same date, i.e., 4th Oct., 1990. This sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upto the date of search. 15. In the second search dt. 24th Dec., 1991, deemed seizure of Rs. 4,15,489 was made. It was found that the assessee had obtained road release order vide CCL letter dt. 18th June, 1990, for 1,200 MT of coal after depositing draft of Rs. 7,36,921 on 19th May, 1990. Against the allotted coal of 900 MT from Religarh Colliery, 525.04 MT of coal valued at Rs. 3,21,432 had already lifted before the search and balance coal was not lifted. Thus, deemed seizure of Rs. 4,15,489 was made representing the value of unlifted coal of 674.96 MT. Thus, the assessee was required to explain the source of investment in these drafts. The statement of Sri L.K. Bansal was recorded on 24th Dec., 1993. The assessee had submitted that no investment in the 12 drafts totalling to Rs. 5,42,512 seized vide Panchnama dt. 30th July, 1990, was made by the assessee. The assessee also stated that it did not know who had made the investment. However, the assessee submitted that the investment in the second draft of Rs. 7,36,921 dt. 19th May, 1990, was made by M/s Sweta Coal Sales Corporation, 37, Dakapatti, Calcutta. The affidavit of Sri Krishna Kummar Thakkar, partner of the firm and pho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arted under s. 132(5) of the Act. Thus, the AO treated the investment of Rs. 7,36,921 as unexplained and made the addition under s. 69 of the Act. 17. Regarding the next investment of Rs. 5,42,512, the AO found that 12 drafts for this amount were deposited with CCL, along with other papers under the signatures of Shri L.K. Bansal, partner, including his affidavit. In his statement recorded on 24th Nov., 1993, Shri Bansal denied his signatures on the coal allotment application, on the application authorizing Shri Anil Kumar Thakkar and Shri Arjun Thakur to lift the coal and the application appointing Shri Vishnu Bahadur as agent in the coal application. It was stated by Shri Bansal that all these signatures had been forged by M/s Sweta Coal Sales Corporation. Form No. C filed with coal application was forged as the STO confirmed that no such form had been issued. The AO also found that there drafts had been purchased by Shri Surendra Bahadur Singh and the remaining by Shri Girish Narain Singh. The AO made enquiry through Asstt. CIT, Hazaribagh, who reported that none of these persons were available at the given address. From these facts as discussed in detail in the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd party, it was the obligation of the appellant to produce the said person with necessary evidence. In the present case, summons were issued on the request of the assessee but SSC did not appear. SSC even did not appear before ITO, Calcutta, with the relevant books of account. Even after this, the appellant did not take any action to produce the party for cross-examination by the AO. The appellant's obligation to establish the genuineness of transaction does not end with getting a summon issued. The AO has stated that ITO, Calcutta, reported that SSC was not available on the given address. The AO, found that some coal had been lifted by Arjun Thakur who had been authorized by Shri Bansal, partner to lift coal. It is now claimed that he was an employee of SSC but no evidence has been brought on record to establish his identity. The AO had also found that in the papers filed with CCL name of SSC does not appear as an authorized agent of the appellant. No submissions have been made before me to rebut this observation of the AO. In these circumstances, I agree with the AO that the investment of Rs. 7,36,921 has been made by the appellant from undisclosed sources. The addition is confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adverse inference can be drawn against the assessee. The learned counsel has further submitted that the AO issued summons to M/s Sweta Coal Sales Corporation but the report received by the AO in this regard from its counterpart at Calcutta was never confronted to the assessee. Since M/s Sweta Coal Sales Corporation is a regular assessee, hence his existence cannot be doubted. Therefore, the AO ought to have made further enquiry to ascertain the actual fact of deposit of DD by the said concern, but the same has not been done by the AO. Regarding release of 525.04 MT of coal, the learned counsel has submitted that Sri Arjun Thakur is an employee of M/s Sweta Coal Sales Corporation. However, the same was not sent by them to assessee after lifting the same from the collections in the month of June 1990 as there was panic amongst the agents. Therefore they could not make arrangement to send the coal. However, the same was sent to the assessee later on and was received by the assessee in the month of January and Feb 1992. Accordingly the assessee recorded the same in its books of accounts. However, no payment has been made to M/s Sweta Coal Sales Corporation in respect of the said delive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d entire purchases money deposited with the Central Coalfields Ltd., Ranchi, were made by bank drafts which were purchased from banks at Bihar and the said actual purchasers are evading payment of tax and never disclosed the source of money so deposited." 22. The learned counsel has further submitted that identical issue came up for consideration before the Tribunal, Allahabad, in the decision of Shri Kashi Prasad, Jhansi vs. Asstt. CIT (ITA Nos. 1901 1902/Alld/1992) and also CIT vs. Rameshwar Dayal Agarwal (R.A. Nos. 175 176/Alld/1996), wherein the Tribunal deleted the addition made under s. 69 of the Act being unexplained investment in the purchase of draft for supply of coals by CCL, Ranchi, by holding that the investment of the business cannot be said to have been done by the assessee and the reference application made against the said order has been dismissed. Thus, the learned counsel has urged that the impugned additions are not legally sustainable, hence the same may be deleted. 23. Before us, the learned Departmental Representative has submitted that the assessee is a manufacturer of glassware, hence requires coal. Therefore, the assessee regularly applies to CCL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce she requested for admission of the said additional evidence. After having heard the parties about the admissibility of additional evidence, the additional evidence was admitted as the same is a crucial evidence for adjudication of the issue involved in the matter. While relying upon the said additional evidence the learned Departmental Representative has argued that it is established beyond doubt that the assessee has made the unexplained investment in the purchase of demand drafts. On the other hand, the learned counsel for the assessee has submitted that these letters have been signed by one of the partners after his retirement seeking adjustment of money, hence no reliance can be made to the said letters. 24. We have heard the parties and perused the records of the case. The claim of the assessee is that the investment of Rs. 7,36,921 has been made by M/s Sweta Coal Sales Corporation on behalf of the assessee and the assessee has not made any investment in the purchase of the said draft. It is seen that the AO has made enquiries to find out the correct factual position with regard to the investment in the purchase of the said draft. The AO issued summons to M/s Sweta Coal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urth ground of appeal relates to the order sustaining the addition of Rs. 32,143. 26. Briefly stated, facts are that during course of search it was found that the coal of 525.04 MT lifted from CCL in June, 1990, by Sri Arjun Thakur, authorized agent. However, this coal did not reach Firozabad till February, 1992. The assessee having failed to explain where this coal remained for more than one and half years, the AO held that this coal worth Rs. 3,21,432 must have been sold in the open market on which net profit at 10 per cent was estimated at Rs. 32,143. Hence, the AO made the addition of Rs. 32,143 to the income of the assessee. On appeal the CIT(A) confirmed the same. 27. We, after having heard the parties, found no justification for making addition on this account inasmuch as the receipt of 525.04 MT of coal has been recorded in the books of the assessee. We, therefore, delete the same. 28. The ground No. 5 of the appeal is in respect of charging of interest under ss. 234B and 234C of the Act. 29. The learned counsel while referring to the assessment order has submitted that there had been no specific order for charging of interest. The interest levied under ss. 234B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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