2017 (5) TMI 1222

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....ted company engaged in the business of manufacture of finished leather shoe upper and shoes mainly for the purpose of export. In manufacturing the above items it uses raw hide specially raw goat hide. According to the trade practice raw animal hide is purchased by it generally from petty dealers on credit and the payment is made subsequently and as such these dealers are shown in the books of accounts as trade creditors. In respect of the assessment year, 2006-2007 assessee disclosed purchase of raw hide to the extent of (outstanding amount) Rs. 9,03,09,714/- from small vendors. In respect of purchases worth Rs. 7,98,07,768/-, the assessee was able to get it confirmed from small hide dealers and thus balance of Rs. 1,05,01,948/- remained....

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....assessment order or ITAT or to support the observation made by the ITAT on Page 5 of the impugned Order which reads as "It is very much possible that the payment was made in cash from undisclosed sources but such payment was not accounted for and creditors were shown", and as such the impugned Order of the ITAT is liable to be set aside ?" Both the questions are inter-linked and we propose to deal them simultaneously. Section 68 of the Act provides for the addition of the credit of the books of accounts of the assesee for which either no explanation is furnished or explanation furnished is not found to be satisfactory by the Assessing Officer to be added in the income of the assessee for the purposes of charging income tax over it. ....

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....rmation in respect of the above amount, opined that it may be possible that the payment was paid to such vendors in cash from undisclosed sources without accounting the same and therefore, the amount so paid has to be included or added in the income of the assessee. The aforesaid finding of the tribunal is based on no material and is simply on conjunctures and surmises. The tribunal has ignored the fact that the purchases made by the assessee were accepted by the Assessing Officer and there was no dispute to the trade practice that the payment in respect of the purchase of raw hide is made subsequently. Thus, the aforesaid finding is primarily perverse finding. A Division Bench of this Court in Commissioner of Income Tax Vs. Pancha....

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....e present case are similar and identical to that of Pancham Dass Jain (Supra) and the credit purchases reflected in the books of accounts of the assessee of raw-hide from petty dealers even if not confirmed would not mean that it is concealed income or deemed income of the assessee, which can be subjected to tax in view of Section 68 of the Act. In addition to the above it has come on record that in respect of an earlier assessment year, 2005-2006 the matter regarding such addition under Section 68 of the Act in respect of credit purchases of raw-hide by the assessee has travelled up-to the tribunal and after there was a difference between the two members, the matter was referred for the opinion of the third member, who accepted the opin....