9911796707
TMI Blog2001 (3) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... -------- -------------------------------------------------------------- The Assessing Officer received information from the ADI that Shri Sat Pal, partner of M/s. Ganesh Rice Mills had stated that the firm M/s. Ganesh Rice Mills had never purchased paddy from the assessee firm. The statement of said Shri Sat Pal was confronted to Shri Faqir Chand, partner of the assessee firm, by the ADI and the statement of Shri Faqir Chand was recorded by that authority on 18-12-1987. Shri Faqir Chand stated that the sales had been made against ST XXII forms received from M/s. Ganesh Rice Mills. Further enquiries were made from the Excise and Taxation Officer, Ferozepur who intimated that ST XXII forms upon which the assessee firm had relied, had never been issued to M/s. Ganesh Rice Mills. The Assessing Officer confronted the assessee firm with the gist of investigation made. Shri Faqir Chand partner of the assessee firm stated that the assessee firm had received the sales tax forms through the broker Shri Bachan Lal through whom the transaction was carried on. The assessee firm was called upon to produce Shri Bachan Lal broker but the broker was not produced for examination. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period from 1-2-1987 to 28-2-1987 as per receipt placed at page 29 of the compilation in which R.D. sales had been shown at Rs. 4,20,184 at page 30 of the compilation. The summary of all the sales is available at page 31 of the compilation. Our attention was drawn to page 47 of the compilation in which the sale of paddy was shown at 2509.65 Qtls. Referring to page 51 of the compilation which related to the account of M/s. Ganesh Rice Mills in the books of the assessee, it was pointed out that the payments of Rs. 2,00,000 and Rs. 2,20,184 had been received by way of two pay orders. Pages 52 and 53 were referred to, to show that the amounts received were brought in the day book. 7. The learned Counsel referred to the statement of Shri Sat Pal recorded on 28-9-1987, copy of which is available at pages 65 & 66 of the compilation. The statement of Shri Faquir Chand partner of the assessee firm appearing at pages 67 to 70 was also referred to. 8. The main submissions of the learned Counsel were as follows :- (i) Shri Sat Pal partner of M/s. Ganesh Rice Mills had not been produced for cross-examination though a request in this regard was made by the assessee; (ii) No adverse material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Sat Pal, the learned D.R. wondered as to whether any request in this regard had been made by the assessee. The learned D.R. strongly supported the confirmation of addition of Rs. 4,20,184. 11. In reply, Shri Sehgal filed a copy of the letter submitted before the learned CIT (A), Patiala in which it was contended that no opportunity to cross-examine Shri Sat Pal had been given to the assessee and that Shri Sat Pal may be summoned and necessary opportunity to cross-examine him should be given to the assessee, but no such opportunity was given. Reliance was placed on the Bombay High Court decision in the case of R. B. Jessaram Fatehchand (Sugar Deptt.) vs CIT [1970] 75 ITR 33 for the proposition that in the case of cash transaction where delivery of goods is taken against cash payment, it is hardly necessary for the seller to bother about the name and the address of the purchaser. 12. We have carefully considered the submissions of both the sides as also the facts on record. The Revenue has not pointed out any interpolations, cuttings or discrepancies in the books of account of the assessee which are maintained on a regular basis and which are duly audited by the Chartered Accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled by the assessee. The total concealed income on that account was computed at Rs. 3,76,114 as per details given in the body of the assessment order. Since the Assessing Officer was making a higher addition of Rs. 4,20,184, no further addition of Rs. 3,76,114 was made and the same was telescoped in the main addition. 15. Before the learned CIT (A), a contention was raised by the Assessing Officer that a further addition of Rs. 3,76,114 be made. The learned CIT (A) held that there was no justification for making further addition of Rs. 3,76,114. 16. The learned D.R. submitted that so long as the higher addition of Rs. 4,20,184 was there, the addition of Rs. 3,76,114 could be said to have been telescoped in the higher addition but if the higher addition itself was to be deleted, then the addition of Rs. 3,76,114 would come alive and has to be considered in the hands of the assessee. In this regard, it was submitted that if the Tribunal was inclined to delete the higher addition of Rs. 4,20,184, then, in all fairness, the learned CIT (A) be directed to consider the addition of Rs. 3,76,114 which had been telescoped in the higher addition. It was submitted that the Revenue had file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser. 3. The revenue authorities then made enquiries regarding ST-XXII. The revenue also inquired about the foodgrain licence number of M/s. Ganesh Rice Mills, as mentioned in the documents produced by the assessee. The licence number and sales-tax number, as given by the assessee of M/s. Ganesh Rice Mills, were found to be different from one available in record of M/s. Ganesh Rice Mills. The revenue also enquired from the office of the Excise & Taxation Officer and found that ST-XXII form, alleged to have been given to M/s. Ganesh Rice Mills, were never issued. This was again put to the assessee and Sh. Fakir Chand partner was asked to explain the position. In his statement dated 18-12-1987, Sh. Fakir Chand partner took the stand that paddy was sold through Sh. Bachan Lal broker, who had given document ST-XXII and other information to the assessee-firm. As direct contact with alleged purchaser was claimed to have been made by Sh. Bachan Lal and not by the partners of the assessee, (he Assessing Officer asked the assessee to produce Sh. Bachan Lal broker, in support of its claim. In spite of several opportunities, said Sh. Bachan Lal was not produced. It is to be noted that case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable manufacturing expenses add for phuck (net) 5,000.00 ---------------- 50,398.55 Say Rs. 60,000." The assessee, as per above calculations, clearly admitted in computation that paddy shown to have been sold was, in fact, milled and rice obtained was sold. The assessee further admitted that sale proceeds of paddy shown at Rs. 4,20,184, as credited, be adjusted and deducted from total profit of Rs. 4,75,582. The assessee also wanted reasonable manufacturing expenses at Rs. 5.000. However, subsequently, the assessee claimed that the above statement was made to buy peace and avoid litigation with the revenue and the same was not binding on the assessee. 6. The assessee, in the course of hearing of the appeal before CIT (A) also filed letter dated 24-9-1990, which is available at page 90 of the paperbook. Para 1 of the said letter is relevant and is reproduced below:- "At the outset, charge of having made any bogus sales or having introduced own funds, much less to the extent of Rs. 4,20,184 is vehemently denied. It is appellant's misfortune that facts were not properly appreciated and further to appellant's misfortune, Sh. Bachan Lal broker through whom the deal was struck, cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills, Guru Har Sahai, Ferozepur, carried huge sums of Rs. 2 lakh on 3-3-1987 and Rs. 2,20,184 on the next day, i.e., on 4-3-1987, in cash, from Guru Har Sahai - a disturbed town - to Amloh, to convert the same into pay order". This abnormal conduct of carrying huge cash to the place of business of the assessee and then purchasing pay orders, shows that transaction is not genuine but was entered into with mala fide arrangement to evade tax. 8. There is considerable gap between alleged sale and delivery of paddy and receipt of consideration from the purchaser. The seller did not get any document executed from the alleged purchaser as security to enforce payment in case of default by the purchaser. No signature on sale bills etc., were obtained. This is highly improbable. 9. In CIT (A) gave sound reason with discussion of case law in para 2.8 of his order, to hold that claim of sale to M/s. Ganesh Rice Mills was bogus. I entirely agree with the reasoning given by CIT (A). I may additionally cite the decision of the Andhra Pradesh High Court in the case of Kesarimal Sohanraj vs CIT [1972] 84 ITR 519, wherein their Lordships held that credit on account of unproved sale can be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm of the purchaser, were wrong. When this information was put to the assessee, the assessee took the stand that sale was made through Sh. Bachan Lal broker. The Assessing Officer gave opportunities to the assessee to produce said Sh. Bachan Lal and, in spite of several opportunities, Sh. Bachan Lal was not produced. So, all lacunas/defects found by the Tribunal in the case of Amar Rice & General Mills were fulfilled in the present case. In spite of untiring efforts made by the revenue to lift the veil of falsity, it will not be fair and just to blindly apply the ratio of the decision of Amar Rice & General Mills against the revenue. Again in the case in hand, the assessee took the clear stand that there was no direct dealing with the seller. The broker had met the seller and it is possible that wrong ST-XXII forms were given to them. The assessee talked of fraud committed on it (which is not established) and went to the extent of saying that broker might have sold goods to some one other than M/s. Ganesh Rice Mills. Before CIT (A) this stand is again changed and it is stated that Bachan Lal had contacted some Sh. Angrez Lal for effecting sale in question. Said Sh. Bachan Lal or S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for dictation. I find that reliance has been placed on the objections raised by the assessee in this document in the proposed order of Hon'ble A.M. There is mention of failure to provide opportunity to cross examine Sh. Sat Pal. There is further reference to copies of application form submitted by GRM with Bank of Baroda, Amloh, for preparing pay orders for making payment to the assessee. It is requested in the letter that above material be taken into evidence. It is not clear as to when undated letter was filed with CIT (A), as he had made no reference to it. The impugned order is dated 24-9-1990. Before that, the assessee filed a detailed written submission running into seven pages and available at pages 1 to 7 of the paper book. ITO had replied to the above submission, vide letter dated 19-9-1990. The assessee then filed a rejoinder before CIT (A) on 24-9-1990. In the rejoinder, filed on the date on which order was passed, as also in the earlier written submission, no such request as made in the above referred to letter, was made by the assessee. The authenticity of the above letter is very much in doubt. Even otherwise, in the circumstances of the case, there is no question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. The Assessing Officer looked into the details of these sales and it was shown that the assessee made the following sales : ---------------------------------------------------------------------------- Sl. No. Bill No./Date Quantity Amount ---------------------------------------------------------------------------- 1. 65/16-2-1987 1437.15 Qtls. Rs. 2,40,004 2. 66/17-2-1987 1072.50 Qtls. Rs. 1,80,180 --------------- Rs. 4,20,184. ---------------------------------------------------------------------------- The Assessing Officer carefully examined the working of the assessee during the year and it was his finding that there was no sale to M/s. Ganesh Rice Mill and the sale shown was bogus sale. According to him the assessee actually milled his paddy and sold its products and the by-products in the open market and the profit/income therefrom had not been accounted for in its books of account by the assessee. 3. The Assessing Officer also examined the details of the paddy milled during the year. The assessee in this case milled 41,702 qtls. According to the Assessing Officer the overall shortage in the yield comes to 6,648 qtls. which is 15.94% of the total paddy milled as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisclosed sources under section 68/69A of the Income-tax Act, 1961. 6. The assessee also raised the issue regarding the order of the Assessing Officer holding that the addition of Rs. 3,76,114 on account of low yield of rice etc. was called for. In fact the Assessing Officer pleaded before the CIT (Appeals) that this amount should be added to the income of the assessee as the same is totally different from the cash credit added by the Assessing Officer at Rs. 4,20,184. The learned CIT (Appeals) however held that after having made an addition of Rs. 4,20,184 on account of alleged bogus sale of paddy, the Assessing Officer was right in not making further addition of Rs. 3,76,114. In this regard, reliance was also made on the direction of the Dy. CIT under section 144A of the Act in the case of M/s. Shanker Rice Mills, under similar conditions where it was directed that the above addition, however, may be considered while making addition on account of bogus sale of paddy as normally the assessee would have ploughed back this profit in the bogus sale of paddy. As a result separate addition on account of this need not be made if there is sufficient and plausible reason that this profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recording of finding as to the reasonableness of the yield rate applied by the Assessing Officer, on the ground that addition sustained covers the proposed addition. 2. It is prayed that the order of the ld. CIT (A) be set aside and that of the Assessing Officer be restored. 3. The appellant craves leave to add or to amend the grounds of appeal before the appeal is heard and disposed off." 8. At the hearing before the Tribunal, S/Shri Sudhir Sehgal and Sanjeev Vohra appeared for the assessee and Shri R. P. Singh, learned D.R. appeared for the revenue. After considering the various submissions made by both the parties, the learned Accountant Member was of the view that there was no basis for addition of Rs. 4,20,184 under section 68/69A of the Act. According to him, there was no defect in the books of account of the assessee pointed out by the revenue. The assessee has been maintaining the books of account on a regular basis and the same was duly audited by the Chartered Accountants. The assessee maintained stock register which was found to be in order. The sales shown by the assessee in the sales-tax return also were accepted by the Sales-tax Department. The addition was mainly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of selling paddy through Shri Bachanlal, broker was not confirmed. When the assessee was asked to produce Shri Bachanlal, broker, it changed the stand and stated that the transaction was made through Shri Angrez Lal. The learned Judicial Member, further noted that the assessee itself more or less conceded before the CIT (Appeals) and prepared to offer for addition a sum of Rs. 60,000 as per their calculation. The learned Judicial Member also found fault with the banking transaction. According to him the business of the assessee is at Amloh whereas M/s. Ganesh Rice Mills is doing business at Guru Har Sahai. Firozepur. However, the payment was made through Bank of Baroda, Amloh. It is, therefore, doubtful for the assessee to carry huge sums of Rs. 2 lacs on 3-3-1987 and Rs. 2,20,184 on the next day to Amloh to be deposited in the Bank of Baroda for purchase of the pay order. He also found considerable gap between alleged sale and delivery of paddy and receipt of consideration from the purchaser. The learned Judicial Member further found that the decision in the case of M/s. Amar Rice & General Mills, Banur was distinguishable from the facts of the case of the assessee. He, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uineness of the transactions. Shri Sudhir Sehgal further submitted that the assessee was not given proper opportunity to cross examine Shri Sat Pal in regard to the statement made by him. Such denial is against the principal of natural justice and no adverse inference can be drawn against such evidence without giving opportunity to the assessee to cross examine the same. Reliance was placed on the decision in the case of Gargi Din Jwala Prasad vs CIT [1974] 96 ITR 97 (All.) and the case of the CIT vs Sham Lal [1981] 127 ITR 816 ([1980] 4 Taxman 452.) and the decision of the Tribunal in the case of Smt. Satinderjit Kaur vs ITO [1955] 52 TTJ 388. With regard to the offer made by the assessee to the CIT (Appeals), it is submitted that the said offer was made purely for buying peace and the same cannot be held against the assessee. In this regard, reliance was placed on the decision in the case of Sir Shadi Lal Sugar & General Mills Ltd. vs CIT [1987] 168 ITR 705 (33 Taxman 460A.) (SC). Shri Sudhir Sehgal further submitted that the assessee in this case duly reflected the sale proceeds of Rs. 4,20,184. Even if it is assumed, without admitting, that there was bogus sale and paddy was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank at Amloh for making out pay order. Even otherwise the transaction was not conducted within the normal period and there was considerable delay in the date of sale and the payment received. It is also noticed that the assessee did not pay any commission nor interest to the broker. Relying further on the decision in the case of CIT vs Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.) and also in the case of Shankar Industries vs CIT [1978] 114 ITR 689 (Cal.), it is submitted that the conditions required for proving genuineness of the transaction have not been fulfilled. Relying on the decision in the case of Kesarimal Sohanraj , it is submitted that the burden of proof in regard to the cash credit is upon the assessee to prove the source thereof and if the same is not proved, it is open to the Income-tax Officer to include the aggregate amount of cash credit as income of the assessee from undisclosed sources and no further duty lies upon the Department to prove from which source the assessee has earned that income. It is, therefore, submitted that due to the failure of the assessee to prove the source of the deposit, the Assessing Officer rightly treated the same as income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts, it is clear that the deposits of Rs. 4,20,184 made by the assessee in the bank account at Rs. 2 lacs on 3-3-1987 and Rs. 2,20,184 on 4-3-1987 were traced to the transaction of paddy weighing 2509.65 qtls. shown as sale to M/s. Ganesh Rice Mills by the assessee. It was the finding of both the Assessing Officer and the CIT (Appeals) that the source of these deposits was traceable to the above paddy which was not actually sold to M/s. Ganesh Rice Mills but actually milled by the assessee and disposed of in the open market. In such a case, the learned Accountant Member was fully justified in deleting the addition as the actual deposit of this amount in the books of account was not doubted. Even if these deposits are treated as on account of bogus sales no addition can be sustained as the assessee has already accounted for the sale proceeds in the manufacturing, trading and profit & loss account for the year ending 31-3-1987. The addition on this account has to be off set by the sale proceeds of paddy shown by the assessee at Rs. 4,20,185.05 in the manufacturing, trading and profit & loss account. If this sale proceed is deducted from the trading account and addition is made ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his issue. There is, however, no difference of opinion on the decision on this point. Both the parties will have full opportunity to represent and substantiate their respective claims before the CIT (Appeals). On the above facts, I hold that the addition of Rs. 4,20,184 cannot be sustained merely on legal grounds as the inference drawn would be opposed to the actual finding of facts recorded by the author 20. The matter will now go back to the regular Bench for decision according to majority opinion. ORDER Per Mehta - The aforesaid appeals were heard by a Division Bench of the Tribunal and on the solitary issue raised in the assessee's appeal i.e., an addition of Rs. 4,20,184. There was a difference of opinion between the Members. The ld. Accountant Member taking a view that the addition was not called for and the ld. Judicial Member opining otherwise. 2. On the matter being referred to the Third Member under section 255(4), the Hon'ble President of the Tribunal acting as the Third Member has by means of an order dated 22-3-2001 agreed with the view taken by the ld. Accountant Member to delete the addition of Rs. 4,20,184. 3. Both the parties were heard with a view to impleme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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