TaxTMI 
TaxTMI 
2000 (11) TMI 288
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....ve of schedules. The learned Departmental Representative has also filed a detailed argument note running into 18 pages and also a paper book. The learned counsel for the assessee has also filed his separate comments on the reasons given by the AO, and also his comments on the argument note filed by the learned Departmental Representative. 3. The assessee has filed originally various grounds running into ten pages. These grounds are of an argumentative nature. Subsequently, the learned counsel for the assessee has filed revised grounds, which are 12 in numbers. We do not find it necessary to reproduce all the grounds. The gist of the grounds is that each of the additions made by the AO has been arranged. 4. This is a case which illustrates the extent of damage that can be done by an ill-informed and ill-trained, and possibly overworked part-time accountant. 5 The assessee-firm is engaged in the business of purchase and sale of lottery tickets from 1991 onwards. It is one of the authorised principal agents of Kerala State lottery tickets. It is also authorised agent of lotteries run by other State Governments to sell their tickets within the State of Kerala. The lottery tick....
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....er an opportunity of being heard given to the assessee and enable the assessee to produce whatever evidence it would like to produce to substantiate its claim with proper application of mind. 8. In the result, the appeal is allowed for statistical purposes." 7. It may be mentioned that in the first block assessment made on the assessee, a substantial addition made of asmuch as Rs. 1,15,41,397 relates to the asst. yr. 1995-96. For this assessment year the assessee had filed the return in the normal course on 31st Oct., 1995, i.e., on the due date for filing of the normal return. In other words, the normal return for this year had been filed much before the block return had been filed, even though no assessment seems to have been framed under s. 143(3) before the first block assessment had been completed. This fact is of some relevance, as it will be apparent in the course of this order. 8. In pursuance of the directions given by the Tribunal in its order dt. 18th Nov., 1997, the AO had completed the block assessment a second time vide his impugned order dt. 28th March, 2000, and that is how the matter is again before us. In the second block assessment made by the AO he has ....
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....lance shown in the day book (cash book) includes not only the cash as such, but also the prize winning tickets (hereinafter referred to as PWTs) received. In the written submissions filed before us, the assessee has explained this aspect of the matter at pp. 10 and 11 of its argument notes, which reads as under: "(b) Settlement Procedure In a raffle, number of lottery tickets (more than 1,00,000) win prizes of smaller value. In a majority of the cases, the value of the prizes will be less than Rs. 100. To claim the prize, the person holding the prize-winning ticket should present the ticket in the office of the Directorate of State Lotteries. With regard to the prizes of the lotteries run by other State Governments the claim has to be made at the respective States. As the value of the prize is less than Rs. 100, it will not be economical to personally claim the prizes at the respective places. So to receive prize money at the earliest, the prize winning tickets will be given to the local agent. He will purchase such prize winning tickets and will take a nominal commission for such services rendered. The prize winning tickets so collected from several such persons will be give....
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....ve been ledgerised, whereas the others have not been ledgerised. This is an aspect of the matter which has been argued by the learned Departmental Representative before us, but this has no relevance so far as the additions made by the AO are concerned and so we shall revert to it subsequently. At this stage, suffice it to state that the cash balance recorded in the day books includes the value of the PWTs. 11. During the search action a number of registers were seized and they include the following: (i) Day book for financial year 1994-95. (ii) Fair ledger for the year 1994-95. (iii) Day book for the year 1995-96. (iv) Another ledger (hereinafter called personal ledger) for 1995-96 (MMC 11 & MMC 16). It may be mentioned that the ledger for 1995-96 was not among the seized ledgers and the claim of the assessee is that it had not been written even up on the date of the search. 12. It is also necessary to mention the nature of the so-called personal ledger for the year 1995-96, which forms the basis for a substantial portion of the addition made by the AO in the block assessment. It is in two parts described in the assessment order at pp 3 and 4 as ledger No. MMC 11 ....
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....m being illiterate and ignorant could not notice those blunders initially. The accountant maintained the day books for 1994-95 and 1995-96 continuously and in the day book for 1995-96 as on 1st April, 1995, he brought forward the cash balance as on 31st March, 1995, in the day book for 1994-95. He, however, noticed some of his egregious blunders only at the time of finalisation of accounts for the year 1994-95, i.e., in September, 1995, for the purpose of filing the income-tax return for the asst. yr. 1995-96. The blunder noticed was that the prize winning tickets (PWTs) received from different parties had been issued to other parties, i.e., creditors, but they were not recorded in the day book. While the receipts of PWTs were recorded regularly, the issue of PWTs, though effected, was not reflected in the day book. Consequently there was an overstatement of cash balance, which, as already mentioned, included the PWTs matched by a corresponding overstatement of creditors because their accounts were not debited in the books for the PWTs issued to them. So, when this blunder was noticed in about September, 1995, he recorded the issue of PWTs in the day book for 1994-95 as on 30th and....
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....addition of Rs. 65,58,110 on the ground of discrepancy between the cash balances on the basis of the figures recorded in the seized day books for 1994-95, 1995-96, he totally ignored the day book for 1995-96 and the rectification entries passed therein while making the other addition of Rs. 49,83,287 towards understatement of debtors, which has been discussed by us hereinabove. For making that addition the AO took into account only the personal ledger for 1995-96 and totally ignored the rectification entries passed both in the day book for 1994-95 as on 30th and 31st March, 1995, and the day book for 1995-96 as on 31st May, 1995. So, the claim of the learned counsel for the assessee has been that the AO had selectively relied and ignored the seized material to draw adverse inferences instead of taking a holistic view. 15. The story of the egregious blunders committed by the accountant does not stop here. As mentioned above, some of the blunders were rectified in September/October, 1995 while filing the income-tax return for 1995-96. The results of the rectification entries had also been incorporated in the final accounts filed along with the return for the year 1995-96. Thereaft....
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.... of the understated credits in the name of two creditors. Now, the question is how are these rectification entries effected. The version of the assessee is that as these blunders in question were noticed after the search action and as the day books of both the years 1994-95 and 1995-96 along with the fair ledger for 1994-95 had been seized by the Department and as such were not available to the assessee, it could not effect the necessary rectification entries in respect of the above five accounts (three debits and two credits) only in the fair ledger for 1995-96. The blunders in question in the above five accounts were noticed in about March, 1997. He incorporated the correct balances in the above five accounts (3 assets & 2 creditors) as opening balances in the ledger for 1995-96, as this ledger was not even started upto that date. As the total of the three assets is matched by the total of the two creditors, it did not make any difference for the tally of the trial balance. Even without a corresponding entry in the day book for 1994-95 or the ledger for 1994-95 the assessee incorporated the above assets and liabilities and filed a revised balance sheet as on 31st March, 1995. The....
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....counts the facts that they were drafts received and were sent to bank were not recorded as such. If that was so, there would be an inflation in cash/prize winning tickets in the cash book as the remittances to the bank were not routed through cash book. The inflation in cash Rs. 24,81,467 will be separately considered. The unaccounted bank balance for asst. yrs. 1992-93 to 1995-96 are considered as undisclosed income as under: Asst. yr. Rs. Rs. 1992-93 : Unaccounted balance 27,132 1993-94 : Unaccounted balance 31-3-1993 27,412 Less : Considered in 1992-93 27,132 1994-95 : Unaccounted balance 31-3-1994 27,412 280 Less : Considered in 1992-93 & 1993-94 27,412 Balance Nil 1995-96 : Considered separately under inflation in cash balance for 1996-97. Hence unaccounted balance assessable is considered as Nil Nil 10. Inflation in cash: While considering the unaccounted bank balance in the account of Canara Bank, Kottayam, an amount of Rs. 24,81,467 is stated to be drafts considered as prize winning tickets. In that case the cash balance as on 31st March 1....
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....ee out of the sales outside the books of accounts was estimated at 1 per cent of the sales. Thus, an addition of Rs. 5,70,000 was made in the case of the assessee." 18. Before us, the learned counsel for the assessee mentioned the background of the assessee, in the argument notes given by him, in the following terms: "Background of the assessee: For the purpose of more clarity and easy understanding, background of the appellant-firm and its partners are given below: The appellant is a partnership firm consisting of the following partners: 1. Mr. T. Murugan 2. Mr. T. Selvaraj 3. Mrs. Palthurachi 4. Mr. T. Sengottal Singam 5. Mrs. Madathiammal Out of these, Mrs. Madathiammal is the mother of the other four partners. She migrated to Kerala seeking livelihood and accepted the employment as a casual and domestic worker in various houses. She could give only primary education to her children. The eldest son Sri Murugan, at the age of 20 years, was searching for an employment to have his livelihood. Due to lack of education and any kind of support or encouragement from anybody in the society, he did not get any job. He started his career in life earning income by s....
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.... 2. T. Selvaraj 4,94,211.50 5,44,994.00 10,39,205.50 3. T. Sengottu Singham 5,35,792.15 2,43,492.00 7,79,284.25 4. Madathi Ammal 48,337.00 — 48,337.00 5. Palthuraichi 1,72,237.00 — 1,72,237.00 Total 16,47,784.50 13,92,983.00 30,40,767.50 The thrust of the argument of the learned counsel for the assessee is that if the firm or the partners have made income of the order of Rs. 1,46,20,170 during the block period, it would have surfaced as assets acquired during the block period. As there is no acquisition of unexplained assets, it is pleaded that the income returned in the block return deserves to be accepted. 19. Now we shall turn to the separate additions made by the AO. In respect of the addition of Rs. 49,83,287 made for the asst. yr. 1995-96, it is mentioned that the correct balance as per the personal ledger, i.e., the totals of MMC-11 and MMC-16 referred to by the AO at pp. 3 and 4 of his order, work out to Rs. 62,16,225 and not Rs. 60,06,224 mentioned by the AO. The reconciliation of these two figures with the balance of sundry debtors as shown in the original balance sheet of Rs. 10,22,9....
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.... 60,06,224 Error in the figure adopted by ADI and AO 2,10,000 Correct balance of debtors in MMC-11 and MMC-16 62,16,225 Less : Adjustments made in the accounts before filing the first balance sheet or before search 35,13,333** Balance as per revised balance sheet 27,03,192 Less : Debtors as per original balance sheet 10,22,936 Difference in the debtors between the first balance sheet and the revised balance sheet or total of adjustment made after search 16,80,256 @@ Rs. ** Discounts etc. written off (Col. 3 of Annexure -1 to assessment order) 15,29,853 Omissions in accounting for receipts, etc. rectified subsequently (Col. 7 of Annexure-1 to assessment order) 17,58,085 Amounts written off as bad debts 2,25,095 35,13,333 @@. Increase in the debit balance in the account of Shri Hariharan, Tellicherry, as mentioned in the bottom of Annexure-1 to the assessment order 14,00,000 Similar increase in the account of M.M. Khan & Bros. mentioned at bottom of Annexure-1 to assessment o....
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....osed to complete the assessment and determine the income for the block period on the basis of the finding made by the ADI, Kottayam, in his appraisal report. The ADI in finalising the appraisal report did not give us an opportunity to offer our explanations on the various matters relied on by him. It is understood that by referring to a rough book taken from the place of business of our firm the ADI had prepared a statement of certain balances as appeared in the name of some lottery sub-agents and came to a conclusion that those amounts represent the actual receivables from them. As already stated by us, this statement prepared by the ADI contains even the balances in the name of our own branches at Kottayam, Kumili and Koliam. The balances in the name of most of the agents were to be adjusted to account for various credits and debits against the incentive commission and other claims of the agents. We have filed the revised balance sheet as at 31st March, 1995. Now we are filing herewith affidavits from all the debtors and creditors shown in the balance sheet confirming the balance due from them/the adjustment entries passed for the various transactions. Wherever there are no amoun....
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..... So he did not make any attempt to examine the deponents or to throw doubt on their version. Having accepted the affidavits, it is pleaded that the AO was totally wrong in rejecting the contention of the assessee that the MMC-11 and MMC-16 did not reflect the correct balances due from the various parties. The learned counsel for the assessee has also furnished before us the affidavits filed by the different parties, which are contained at pp. 1 to 112 of the assessee's paper book No. 1. He has also filed the details of the adjustments made of Rs. 15,29,853 (col. 3 of Anneuxre-1 to the assessment order) and of Rs. 2,25,095 (col. 8 of Annexure-1 to the assessment order) at p. 1 of paper book No. II and the relevant details of the aggregate of these two amounts are as under: Rs. Amounts written off prior to 1st April, 1991, i.e., before the firm was constituted and the business was done in a proprietary capacity 14,75,900 Written off in 1991-92. 1,156 Written off in 1992-93 7,061 Written off in 1993-94 59,581 Written off in 1994-95 2,11,304 Total 17,55,002 (This is slightly more than the aggregate of cols. 1 & 8 in Annexure-I....
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....x hundred nineteen and paise sixty only) is outstanding, as per our records, as payable to us by you as on 31st March, 1995, against the value of lottery tickets sold to you. Our Income-tax No. (OLD) PAN : 45-52-PQ-2965/DC/Company Circle-11(1)/CBE and NEW PAN : ADJPM0921E. Thanking you and assuring you of our best cooperation always." It may be noticed that the confirmation is for Rs. 18,85,619, whereas as per the revised balance sheet the amount owed by the assessee is of the order of Rs. 19,49,368. The confirmation given by M/s Harsha Agencies, dt. 13th Jan., 2000, which was handed over to the AO in January, 2000 reads as under: "Sir, Sub: Confirmation of balance for the accounting year 1994-95. We do hereby confirm that a sum of Rs. 20,58,873 (twenty lakhs fifty eight thousand eight hundred and seventy-three only) is outstanding as (sic) to us from M/s Meenakshy Lucky Centre, YMCA Road, Kottayam, as on 31st March, 1995 against the value of lottery tickets sold to them. Certified further that the settlement of the value of lottery tickets sold to M/s Meenakshy Lucky Centre, Kottayam, are mostly done by exchange of prize winning tickets and the above balance of Rs. 20,....
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....on of Rs. 65,58,110 is totally unjustified, as the said entries were made before the search and are evidenced even by the seized records. 22. With regard to the addition of Rs. 24,81,361 for the asst. yr. 1996-97 and the linked additions of Rs. 27,132 for 1992-93 and Rs. 280 for the asst. yr. 1993-94 as unaccounted bank balances, we have already referred to the explanation of the assessee that the bank balances in the Canara Bank has been reflected in the revised balance sheet filed by the assessee. This was filed subsequent to the search. But as already mentioned, certain debit balances inclusive of the cash balance in the Canara Bank have been understated and such understatement of debit balances is matched by the understatement of credit balances in the names of Madhangi Agencies. The said credit balances have been confirmed by them and there is no reason to doubt the version of the assessee that it is only the blunders of the part-time. accountant that occasioned the filing of the revised balance sheet. So it is claimed that there is no basis for any of the additions included in the total undisclosed income of Rs. 1,46,20,170 determined by the AO. The learned counsel for the....
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....2000, referred to at No. 3 above reads as under: "Sir, Sub: Confirmation of balance in the case of M/s Harsha Agencies—Reg. As directed by the Addl. Director of Income-tax (Inv.), Unit-I, Bangalore, two Inspectors were deputed to cause an enquiry at M/s Harsha Agencies, Power Green Building, Paris Corner, Bangalore, Please find enclosed Inspector's Report which is self-explanatory. REPORT As directed by the Dy. Director of Income-tax (Inv.), Unit-1(3), Bangalore to collect the account extract of Meenakshi Lucky Centre from M/s Harsha Agencies, said to be situated at Power Green Building, Paris Corner, Bangalore, we went to 'Paris Corner' Building. It is ascertained that there is no such business concerned in the building known as 'Paris Corner' which accommodates so many other lottery agencies. 'Paris Corner' building is situated just behind Majestic Theatre (back side of building the building is facing Killari road). Discreet enquiries from various lottery agencies as well as direct enquiry from the beat postman was made. These enquiries reveals the following: (a) There is no building by name 'Power Green Building'. (b) Building name is 'Paris Corner'. (c....
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.... assessee which were allowed by Madhangi Lottery Agency subsequently, but not intimated to the assessee as on 31st March, 1995. So far as the Inspector's report regarding M/s Harsha Agency is concerned, the learned counsel for the assessee pointed out that possibility mentioned in the said letter of the tenants taking the premises in their individual capacity. At any rate, it is mentioned that the assessee did not have any further interest in M/s Harsha Agency after settling the account with then in May, 1995. As already mentioned, we are of the view that it is totally unfair to the assessee to filing some enquiries in its face at the time of hearing before the Tribunal. Accordingly, we decline to admit the above letters. Though we are of the view that they do not take the case of the Department far, and actually some of them may even be in favour of the assessee, as in the case of the confirmation by Madhangi Agency contained in the letter of the Dy. CIT, Coimbatore. 24. The learned Departmental Representative has filed argument notes running into 18 pages before us. The thrust of his argument is that the assessee has chosen to file the details of the various rectifications and....
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....nd the arguments advanced are so tangled, we find we have no alternative except to reproduce the relevant portion of the argument, though it is somewhat too expansive: "10. The objection of the assessee to the additions of Rs. 65,58,110 is based on the grounds that it is due to omission in accounting the issue of prize winning tickets to the creditors for the supply of lottery tickets on the actual date of issue. It is alleged that the mistake was identified in October, 1995, but by that time the opening balance had been brought forward in the cash book for the year 1995-96 at Rs. 66,42,185. It is claimed that this amount includes the value of PWT for Rs. 65,58,110 already issued and given to the creditors before 31st March, 1995. It is further stated that the issue of PWT to M/s Madhangi Lottery Agency for a total sum of Rs. 85,27,672 was correctly shown on 30th May, 1995. It is said that an amount of Rs. 19,49,368 actually payable to them as on 1st April, 1985 was also paid on 30th May, 1995. The assessee has filed the summary of transactions in Annexure V and the assessee's account copy of Madhangi Lottery Agency in Annexure-IV. In the assessment, the AO has dealt with this i....
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....me aware of the opening balance of Rs. 19,49,368 in October, 1995 while the assessee claims that it became aware of this opening balance in March, 1997, when it filed a raised balance sheet as on 31st March, 1995, before the AO. How is it that the assessee completely wiped out the alleged credit entries as on 1st April, 1995, by the debit entries of Rs. 1,11,77,992 consisting of two amounts on 29th May, 1995 and 30th May, 1995, while the alleged credit total till that date in that account was only of Rs. 84,85,783. What is the nature and source of other credits of Rs. 26,92,209 as on 26th March, 1996, in that account and how is it that the assessee had squared up this credit entry in advance in May, 1995, by the alleged rectification entries. The assessee has nowhere furnished a cogent and correct explanation for all these entries. It is the duty of the assessee to explain the business transactions and the accounting entries in the account of M/s Madhangi Lottery that generated the opening balance of Rs. 19,49,368 and corelate the same to the confirmed balance of Rs. 18,85,619 appearing in the party's account. The assessee has not filed any copy of the account obtained from that pa....
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....red by the assessee have been rejected without any basis, it does not mean that they are false. We are in agreement with this contention of the learned counsel for the assessee. As the AO has not made any effort to even question the deponents in spite of a specific opportunity having been granted by the Tribunal vide its earlier order dt. 18th Nov., 1997, we infer that the AO has implicitly accepted the affidavits. We also find that the assessee has claimed substantial amount under the head "agency bonus and commission" in different years, as is evident from the P&L a/c filed by the learned counsel for the assessee in paper book No. 9. The details are as under: Rs. Year ended 31-3-1992 13,560 Year ended 31-3-1993 26,38,733 Year ended 31-3-1994 53,98,042 Year ended 31-3-1995 64,95,308 The relevant P&L a/c were all filed before the search action in the course of the normal assessments. It is not the case of the Department that any substantial disallowance of the said claims has been made in any of the years in the regular assessments. Further, a major portion of the write offs is claimed to relate to the years earlier than 1991-92 when th....
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.... 84,85.783.00 26-3-1996 Other credits 26,92,209.00 Rectification entry passed for the issue of prize winning tickets 1,11,77,992.00 29-5-1995 26,50,320.00 30-5-1995 85,27,672.00 Closing balance. 11,177,992.00 The exact ledger page is at p. 18, but it is not convenient to reproduce it and so we prefer to go by the above summarised extract. The correctness of the above summarised extract is not disputed before us and we find, it tallies with the ledger copy of the account. The above entries need some explanation. We have already mentioned that as the day books for 1994-95 and 1995-96 were seized, the opening balance of Rs. 19,49,368 could be reflected only in the ledger for 1995-96. We have already mentioned hereinabove as to how this reflection of the opening balance in the ledger account does not distort the picture because of the other matching entries on the debit side similarly reflected in the relevant ledger accounts. Then the next question in this regard is the nature of the credit for the transfer entries effected on 31st March, ....
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....bsp; 1,37,12,898.44 Less : Payments made during the day excluding Madhangi and Harsha Agencies 26,03,510.11 Less : Payment to Madhangi Lottery Agency 85,27,672.00 Payment to Harsha Agencies 13,12,000.00 1,24,43,182.11 Closing Cash balance 12,69,716.33 The payment of Rs. 85,26,672 to Madhangi Lottery Agency includes the payment by way of issue of PWTs of Rs. 65,36,414 recorded in the day book for 1994-95 on 30th and 31st March, 1995. In other words, Rs. 65,36,414 is the amount which has initially been added to the opening balance of Rs. 19,49,368 to correspond to the brought forward inflated cash balance in the day book for 1995-96. In the light of the above clarifications given before us, with which we see no reason to differ, we see no merit in the contention of the learned Departmental Representative about the addition of Rs. 65,58,110. 29. The learned Departmental Representative mentioned that the assessee has not met the point raised in the assessment order that if the cash balance is to be taken at Rs. 66,42,185, there would be a credit balance of Rs. 64,79,983 in the account of Madhangi Lottery Agency as on 31s....
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...., 1995, if that is so, not cancelled by simple credit entry in the cash book on 29th May, 1995, of an equal amount clarifying that the mistake in the debit in the cash book was removed by the rectification entry". We have already explained the entries passed in this regard and in the light of the explanation offered by the assessee in this regard, we see no merit in this poser. We do not think it necessary to cover this ground once again. 30. The next question posed by the learned Departmental Representative is as to why is it that the assessee had made a credit entry of Rs. 65,36,414 on 1st April,1995, in the account of Madhangi Lottery Agency in the financial year 1995-96, while already this account had been squared up in the books of financial year 1994-95". This question also we have answered hereinbefore. The credit entry is passed to balance the inflated cash balance as on 1st April, 1995. The matter has to be considered in the context of the day book for 1995-96 having been written upto 31st May, 1995 by October, 1995 when the assessee noticed the inflated cash balance in the day book for 1994-95 and the non-recording of the issue of PWTs to Madhangi Lottery Agencies. The....
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....d in toto. We shall revert to this aspect of the matter. We have also to comment upon the argument of the Departmental Representative that some PWTs of the value of Rs. 1,09,81,290 have not been ledgerised. His comments in this regard are at para 14 of his argument notes. This is a matter raised by the learned Departmental Representative for the first time before us. The AO did not touch upon this aspect of the matter at all. So, this is one more instance where like the enquiries he made during the course of the hearing the learned Departmental Representative has brought out new material by the examination of the books of accounts in his possession. To our mind, it is totally unfair to the assessee to ask it to face in the course of the hearing before the Tribunal new material which was never put to him in the course of the assessment proceedings. The assessee furnishing some additional material in support of a claim already made before the AO, as is done in the present case, stands on a totally different footing from the Department facing him with allegations/material for the first time in the course of the hearing before the Tribunal when such material had not been put to the ass....
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....edited. At any rate, this new ground shall not be accepted as has been held in several judgments of the High Courts/the apex Court." As this is a totally new material, we decline to admit it. 32. The learned Departmental Representative also objected at para 15 of his argument notes, to the claim of the assessee that the bank balance in the Canara Bank of Rs. 23,27,987 reflected in the revised balance sheet represented the drafts received from various parties. His objections are as under: "15. The next objection of the assessee is against the addition of unexplained bank balance of Rs. 24,81,467. The assessee states that the unexplained balance is only Rs. 23,27,987. This is not correct. However, the claim of the assessee that this represents the DDs received from Hariharan, Tellicherry and deposited in the bank is both incorrect and baseless. The Annexure-VII shows the alleged receipts of DDs on various dates by the assessee. How the assessee could identify these amounts from the cash book has not been explained. In fact, the assessee has maintained a personal ledger which shows all the receipts from M/s Hariharan, Tellicherry and also the sales made to it. The assessee ha....
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....ng tickets/cash 23,27,987 Because of this wrong entry passed in the books of account, the liabilities payable to the creditors for supply of lottery tickets as well as the balance with the Canara Bank were understated to the extent of Rs. 23,27,987." In the light of the above, it is quite evident that the observation of the AO. reiterated by the learned Departmental Representative, before us, that if the version of the assessee that the DDS were deposited in bank is accepted it would result in deficit cash balance on certain days is totally misconceived. The DDs are entered in the day books and instead of being shown correctly as deposit in the Canara Bank account, they are shown as having been issued to the creditors as PWTs. Resultantly, there is no effect on the cash balance in the day book. There is a debit, but to the wrong account. Instead of the bank account having been correctly debited, there is a wrong debit to the account of the creditors. Consequently, both the bank balance and the creditors are understated. But there is no effect on the cash balance as reflected in the day book. In para 15 of his argument notes, the comment of the learned Departmental Represen....
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.... the assessee. The remarks of the learned counsel for the assessee on this comment of the AO, as contained at item No. 6 of his explanations for the defects stated by the AO, are as under: "The AO did not give any proposal to estimate the income of Rs. 5,70,000 against the alleged estimated unaccounted sales of Rs. 5,70,00,000. In the absence of a specific instance of suppression being detected either in the purchases and the sales, the estimation of the undisclosed income at Rs. 5,70,000 against unaccounted sales for the asst. yr. 1996-97 is not correct. All the sales made to the parties as shown in the personal ledger are recorded as cash sales in the books of accounts for the year 1995-96. Hence, this estimate of undisclosed income of Rs. 5,70,000 is against facts and law and to be deleted." As the omissions, if any, have never been put to the assessee and such alleged omissions are totally denied by the learned counsel for the assessee before us, and the learned Departmental Representative has also not pointed out any such omissions during the hearing, we hold that there is no basis for the addition of Rs. 5,70,000. We may also mention that the regular assessment for 1996....
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....recoverable certain debts due from various lottery agents (as stated in the assessment order amounting to Rs. 49,83,287 to whom we have supplied lottery tickets on credit basis during earlier years. Affidavits duly executed by these agents were also submitted confirming the fact that all these debts became irrecoverable due to financial incapacity/virtual insolvency of the concerned debtors. 4. Reconciliation of the list of sundry debtors as prepared by the ADI/stated in the assessment order and the actual amount of receivable as on 31st March, 1995 explaining the alleged understatement of debtors amounting to Rs. 49,83,287. It may kindly be noted that these debts do not represent any receivable and we did not receive any amount against these debts. 5. Reconciliation of the balance under the cash and prize winning tickets as revealed in the rough day book (Rs. 65,58,111) and the final books of account and supporting registers. 6. It was explained that this difference represent the value of the prize winning tickets given to the creditors on several occasions during the year for supply of lottery tickets and adjusted in the books of accounts at the time of the preparation o....
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....before the AO. It is also stressed that most of the relevant details were furnished even before the completion of the first block assessment in this case, as mentioned in the letter of the assessee dt. 24th Jan., 2000. The assessee furnished further details before the Tribunal only to support the claim already made before the AO vide Annexure-I to the assessment order. In the light of these contentions made out by the learned counsel for the assessee, we are of the view that there is no merit in the contention of the learned Departmental Representative that the relevant details were not furnished by the assessee before the AO. The assessee can furnish the details only when called upon, or required to do so. 36. Because of the variation noticed by the Department between the sundry debtors recorded in the personal ledger (MMC-11 and MMC-16) and the first balance sheet as on 31st March, 1995, the onus of explaining the discrepancy was upon the assessee. However, when it filed the revised balance sheet and also Annexure-I of the assessment order and the affidavits of the debtors and the confirmatory letters from the creditors. Madhangi Lottery Agency and Harsha Agencies, the onus of....
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....mains that the assessee had not explained as to how exactly it hit upon the fact that it owed money to the said parties only in March, 1997. Similar is the position with the monies owed to M.M. Khan & Bros., and Shri Hariharan. It is also incredible that the accountant had not debited the parties to whom the PWTs had been sent even though they were actually sent and that the entire omission came to notice only in October, 1995. Further, the fact remains that under the method of accounting adopted by the assessee, it is not possible for the Department to verify the daily cash balances, as admittedly the cash balance reflected in the day book is inclusive of the value of PWTs and the daily balances or cash are neither available nor verifiable from the day book. The write offs and discounts claimed to have been allowed are also unverifiable, because a substantial portion relates to the assessment years earlier to asst. yr. 1991-92, when the business was conducted as a proprietary concern. It is also not clear as to how the personal ledger (MMC-11 and MMC-16) contains the debtors relating to the assessee-firm and also the earlier propriety business. It is also not clear how some PWTs a....