2006 (8) TMI 582

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....fficer under section 68 of the Income-tax Act, 1961? 1. Meer Mullah Kabari Rs. 1,33,679/- 2. Noor Mohd. Kabari Rs. 1,34,575/-? 2. The reference relates to the assessment year 1976-77. Briefly stated the facts giving rise to the present reference are as follows: The original assessment in respect of the assessment for assessment year 1976-77 was completed on 5-9-1980. The same was, however, set aside by the Commissioner of Income-tax (Appeals) with the direction that the Income-tax Officer should make the assessment de novo; from the return stage onwards in accordance with law. Accordingly, the Income-tax Officer proceeded with the assessment de novo and asked the assessee to explain the nature and source of the various deposits ap....

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....he accounting year ending on 31-3-1978 and that it would be wrong to treat the credits in the accounts of the said creditors as cash credits much less unexplained. In support of the above proposition the assessee produced before the learned Commissioner of Income-tax (Appeals) his books of account wherein the relevant entries showing the purchases of the goods and the sale thereof appeared. The Commissioner of Income-tax (Appeals) accepted the assessee's contention that the credits appearing in the name of the aforesaid two persons did not represent deposit of cash by them with the assessee and that they represented the value of the goods supplied by them to the assessee and that therefore, the addition in question under section 68 of the A....

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.... above will not be accepted. This being so, it has to be taken as an admitted fact in this case that the assessee did make purchases genuinely of agricultural implements, etc., of the value of Rs. 2,76,352." After giving the aforesaid finding, the Tribunal raised the question as to from whom did the assessee makes the purchases? And thereafter proceeded to make the following observations on this subject: "As per its books of account, he had made these purchases, inter alia, from the aforesaid two Kabaris to the extent of Rs. 2,69,254. The case of the Income-tax Officer is that the said purchases were not made from the said two Kabaris, because their existence is not proved to his satisfaction. So far as his finding that the genuine exist....

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....by Rs. 2,69,254 increasing thereby the trading profit correspondingly. But the Income-tax Officer does not challenge the correctness of the trading profit, and in doing so, he impliedly accepts the genuineness of the purchases. As purchases were on credit, corresponding debits for them should appear in some accounts. Such credits in those accounts would not be for cash but for goods and it would be wrong to call them cash credits. The names of the suppliers may be wrong, but the supplies of the goods were reality. For wrong names of suppliers, the reality of purchases cannot be negatived. The finding of the learned Commissioner of Income-tax (Appeals) was, therefore, correct that it is not a case of cash deposits covered by section 68. It i....