TaxTMI 
TaxTMI 
1981 (2) TMI 120
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Kochu K.unju 415 Rs. 13,280.00 . . 19,979 Rs. 6,72,001.50 3. After the return had been furnished, there was on 16th Dec., 1976 a search and seizure in the business premises of the assessee. In the day book and Ledger in respect of processing charges paid to Shri Suresh Babu and K. Mohamed Kunju, there were erasures and overwritings. This is what is stated about it in the assessment order. "In this context, the erasures and overwritings indulged in the day book and ledger in respect of processing charges paid to Shri Suresh Babu and K. Mohamed Kunju assume importance. The amounts were debited in the accounts with description giving the number of bags and rate at which charges were paid. The amounts remain in tact but the number of bags and rate have been altered as below: Page in the day book Date Amount Rs. No. of bags Rate . . . Original-Altered Original Altered (In the case of Sri T.K. Suresh Babu) .16 30-4-1973 22,506 1023 682 22 33 32 9-6-1973 14,564 662 441.25 22 33 44 5-7-1973 15,950 725 483 22 33 59 1-8-1973 16,764 762 508 22 33 82 20-9-1973 17,314 787 525 22 33 107 24-9-1973 17,820 810 540 22 33 131 16-1-19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the total figure. He relied on these altered figures of number of bags and rate per bag to show that the alteration was artificial and that the altered figures are false figures. The assessee argued that the total or final figures in respect of any of the four individuals are not altered or erased or tampered and which is an admitted fact and that the initial figures or breakup like number of bags and the rate were due to some clerical or inadvertent mistake and that it was altered only to show the correct position by showing the correct number of bags and the correct rate paid per bag and that there is no dishonest motive behind this correction especially when the ITO himself has accepted the figure of Rs. 1,32,330. 5. In this case, there is no real controversy about Suresh Babu because the ITO has accepted the figure of Rs. 1,32,330 claimed by the assessee as processing charges paid to Suresh Babu. So the question whether there are alterations and erasures may not be relevant or is redundant to determine the admissibility of Rs. 1,32,330 because it has been already allowed by the ITO. The assessee has claimed that he paid the other three Rs. 5,39,671 in the aggregate (Rs. 6,72,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble or relevant as far as the present case is concerned. 5. The AAC has erred in not affording opportunity to your appellant to point how the cases referred to in the appellate order are not comparable at all to the assessee's case, and also to cite cases which are comparable to that of the assessee and wherein the processing charges claimed compare with the amount allowed by your appellant in the assessment". This line of argument that the ITO was not given an opportunity is not acceptable. First of all, the ITO appeared before the AAC during the course of hearing. Now, the AAC has relied on two comparable case. One is a Tribunal order. We shall for the purpose of argument sake, ignore it because it was cited for the first time only before the AAC. But, what about the other comparable cases of Sri K.A. Karims heavily relied on by the AAC. That was placed before the IAC in draft assessment objections stage. The IAC refused to go into it by saying that in the light of evidence afforded in assessee's own books, he does not propose to go into the method of comparing the assessees own case with other cases. We also found from a letter of the ITO addressed to the AAC, a copy of whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d of that figure, the ITO himself has allowed a higher rate of Rs. 22 per bag for these outside works. Why should that higher rate be allowed? That shows that such improbability is not a sure ground for disbelief. In a case like this of probabilities and improbabilities of almost equal force, the Department should have summoned Suresh Babu and questioned him about the number of bags processed by him. All the more so, when the figure of Rs. 1,32,330 paid to him is being accepted by the Department. It should have also summoned the other three and questioned about the number of bags processed by each and the amount received by each of them particularly when there are no erasures and overwritings at least in the accounts of two of these three. If the Department did not summon, then, the assessee should have been at least asked by the Department to produce them for cross-examination. Nothing like that is seen done. At least, no such material is seen used against the assessee either in the draft assessment or in the directions by the IAC or in the assessment or at least in the departmental grounds before us. Without giving them an opportunity to say or explain the position about the numb....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see is supposed to have got 441.25 bags processed". The most crucial material is the portion italicized above to the effect that the details of the number of bags processed are mentioned against the bills. The basic documents in this method of accounting is the bill. What appears to us is that when the IAC says that the details of the number of bags processed are mentioned against the bills what the officer meant to say was the number of bags noted in the bills itself. It appears to us that the IAC did not find any alteration or overwriting in the number of bags shown in the bills. The figure of 441.25 bags is the altered figure for the initial figure of 662. It would appear to us that there is no case for the IAC that this figure of 441.25 is different from the figure in the bills. What we feel is, if there is any difference, the IAC would have capitalised upon that difference and held against the assessee on that reasoning alone. If there were no difference and there were no erasures or difference in the bills that would clearly show that the figure of 662 bags initially entered in the account is a mistake which is somehow or other crept in because the figure in the bill, as it....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... been made before 8th June, 1977 and not thereafter. We agree with the assessee. Sec. 144A assessment should be completed within the normal time allowed. So these additions are barred by limitation and have to be deleted. 10. The Deptl. Rep. argued that this is a case of concealment and that, therefore, eight years time is allowed for assessment. We cannot agree. The case under which time can be extended for concealment cases is indicated at page 1754 of Income Tax Law (Second Edn). by Chaturvedi and Pithisaria. The commentaries are based on reported decisions of High Courts. It is well settled by these decisions that the ITO should have made known to the assessee that he is making the assessment under the extended period for concealment. Here, there is nothing like that. The indications here are quite otherwise and clear to show that the ITO wanted only the extended period of 180 days allowed for proceedings. The draft assessment was prepared within two years and the final assessment order was made on the very next day after the receipt of the directions. If the ITO wanted to rely on eight years time his conduct would have been otherwise. The Deptl. Rep. pointed out that in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... do any service at all. The ITO has recorded a sworn statement from him on 5th Feb., 1977 where he denied having received any salary. A copy of it was forwarded to the assessee. The assessee wanted to cross-examine. The ITO refused it on the ground that at thing so obvious need no further proof. The assessee also stated before the IAC his case for cross examination. The IAC also did not extend an opportunity. He only stated that on the evidence available, he agrees with the ITO. Even the Appl. Authority found no defect in using a material against the assessee without giving an opportunity for cross-examination. He states in the Appellate order that the circumstances pointed out by the ITO clearly indicated that no service was rendered by Sri Anandan to the assessee and that in the light of this much cannot be made out of the fact that the statement of Sri Anandan was not put to the appellant. In saying so, he was lost sight of the fact that the circumstances pointed out by the ITO are mainly based on his deposition recorded by the ITO and for which a cross-examination was asked for. 13. We need only delete this addition. It is made on illegal principles. We have to exclude the de....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... wages of last week in March, is paid only in the first week of April,. That shows that the factory has worked even in March, 1974. So the probability relied on by the AAC has no factual basis. This provision for payment of wages could only be genuine. Without this payment, the processing charges comes only to Rs. 20 per bag if Rs. 36,78,080 is taken as the correct figure. Even the ITO and the IAC in his directions has in the case of the other two factories allowed Rs. 22 per bag. So even if this provision for wages is taken into consideration, the processing charges arrived at per bag seems only normal. It is not probable or possible to think that the assessee would have got the commodity manufactured at a rate lower than what the ITO himself thinks fit to allow. This probability is the strongest, surest and most reliable test to find out whether the provision is genuine one or not. We are satisfied that it is a genuine liability. So we delete this addition. The ground is allowed. 16. It was also pointed out by the Deptl. Rep. that the ITO in the draft assessment order has stated that he is not making any separate addition on account of the unaccounted purchases and investments ....