TaxTMI 
TaxTMI 
TaxTMI 
2005 (5) TMI 239
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....s so carried on by the assessee, it had been maintaining books of account in regular course which are subjected to tax audit also under s. 44AB, year after year. The trading results were invariably accepted on the fact. A statement in this respect as extracted from the records is as under: Asst. yr. Purchases Net sales Gross profit GP rate Net profit NP rate Remarks 1994-95 117130693 117553810 7408154 6.3% 5445962 4.63% Accepted vide order u/s. 143(3), dt. 27-10-1995 1995-96 136019853 142215704 7818571 5.5% 5344396 3.76% Accepted vide order u/s. 143(3), dt. 22-3-1996 1996-97 150930320 159660780 8137754 5.09% 5615028 3.5% Extra ad hoc addition of Rs. 75,000 deleted by learned CIT(A) 1997 -98 129190757 135823829 6918991 5.9% 5989798 4.4% Accepted vide order u/s. 143(3), dt. 31-3-1998 1998-99 115384259 130576274 7020286 5.37% 6246359 4.78% Accepted vide order u/s. 143(1), dt. 31-3-1999 4. In the year under appeal also, the trading results were accepted. However, a part of the outstanding liabilities on "Karigars account" was treated as bogus liability and an addition of Rs. 1,05,800 has been made. Total liability on this account w....
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.... on the similar business the accounts were rejected by the AO and a higher GP rate was applied, on the ground of non-verifiability of purchases from Karigars. The controversy was resolved by the learned Third Member vide his order dt. 17th Jan., 2003, copy appearing at pp. 21-41 of the paper book. Looking to the peculiarity of the trade it was held that account could not be rejected merely on the ground that the Karigars were not produced for verification of purchases, as sales which have been made out of such purchases only, had been accepted. 8. It was further submitted that in a representation made by the Association of Banarsi saree dealers, the CBDT also issued instructions that presence of Karigars should not be insisted upon and such instructions were duly circulated by the Chief CIT, Allahabad, to the CIT, Varanasi. Copy of Board's instructions and the circular issued by the Chief CIT appearing at pp. 42-45 of the paper book. 9. At this stage, the Bench invited the comments of the learned Senior Departmental Representative about the applicability of the CBDT's instructions and overall effect of the same on the assessment of other dealers of Banarsi sarees. He was ....
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....e in the subsequent year(s), as per the particulars contained in Annex. 'A' to the impugned assessment order. The AO himself has extracted such particulars from the Jama Jakad Bahi. Payments made to these Karigars in the subsequent year(s) have not been adversely viewed in the assessment. In fact, it was an ongoing process as payments against the earlier years 'outstanding' have been made in this year. Further, the liabilities in question are referable to the purchases which have been accepted to be correct. All these informations taken together constitute 'material' and if due consideration is given to such "material", there was no justification to treat a part of the liabilities on account of purchases from the Karigars as bogus, so as to make addition. There is no infirmity in the order of the learned CIT(A), who has deleted the addition. 11. In rejoinder, the learned Senior Departmental Representative again placed reliance on the assessment order and submitted that the learned CIT(A) was not justified in deleting the addition. With reference to the records, he further submitted that the assessee was required to produce the Karigars for necessary verific....
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........... It is also not disputed that on the same day after sale was effected, the assessee was issuing a Purja to the weavers which indicated that assessee had purchased that saree from him and that Purja was giving out the number of sarees, price thereof and the date on which amount of purchase of saree by assessee would be payable. This Purja was being recognised in the market. The weavers used to come to assessee to collect the amount of Purja as per trend and it is also noted by learned JM and not disputed by the Department that discipline in date-wise payment and the amount of Purja was being maintained so that any weaver may not be having any complaint for being discriminated. It is also on record that the amount of those Purjas was being paid after gap of 5-6 months and sometime even after six months as noted by AO. The amount of Purja, therefore, remained outstanding for more than 5-6 months and this is the same amount noted by AO in the case of the assessee which remained payable to Karigars. Each of the assessees took the plea during assessment proceedings for asst. yr. 1994-95 that amount of outstanding liability of Karigars was cleared within 3-4 months. The same AO had....
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.... cent, i.e., a little fall over the earlier years but that was quite natural as there was a steep increase in sales from about Rs. 36 lakhs to Rs. 51 lakhs in this year from that of the last year. We, accordingly, decide the issue and delete the said addition.' 19. The above observation of the Bench clearly goes to show that practice of issuing Purjas, containing details with the names and addresses of the Karigars from whom alleged sarees were purchased, was prevailing in the trade for so many years and it amply proves that whatever assessee had asserted was not a new thing but was established trade practice in Varanasi. xxxx 21. The next observation of the AO was that Karigars were men of little means and they should not have waited for 5-6 months for payment of sarees. This fact has rightly been explained by the counsel that due to established trade practice of getting payment after 5-6 months the weavers/Karigars were getting supply of raw material on credit and payments were being made to sellers of raw material accordingly. The other observation of the AO that amounts were being paid to Karigars in chronological order and no advance was given to any Karigars was als....
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....o as to avoid the tax net. This fact could be judicially noticed by us. In fact, the corner stone of the case is that exactly as to whether all the Kabaris existed at the addresses provided by the assessee or not. It depended upon the fact as to whether the finished goods produced by the assessee were in commensurate with the raw material claimed to have been pumped in by them in their manufacturing process. This tally, even at the cost of repetition, was found to be wholly in order by the learned CIT(A) and not a whisper has been made before us to assail this categorical finding. It, therefore, cannot be gain-said that the quantity of raw material which the assessee claims to have consumed in its manufacturing process must have been purchased by them.' 23. The above ratio is fully applicable to the facts of the present case and mere non-production of the Karigars would be no ground to treat the outstanding liability as bogus when Department has accepted the sales which were on the basis of purchases of sarees from Karigars as it could not be assumed for a moment that sales were made without any purchases or in the absence of any material on record by the Department that sour....
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....the above subject. 2. I enclose a copy of Board's Instruction F. No. 272/46/2001. IT(J) , dt. 29th May, 2001, which must have come to your notice earlier also. Since the matter of assessment in the cases of dealers of Banarasi sarees is being considered at various levels in the Department we must take comprehensive and wholistic view in the matter. 3. I invite your attention to the contents of D.O.F. No. PG/1/95/4149, dt. 25th Jan., 2001. of Shri K.D. Gupta, Chief CIT, Lucknow, on the same issue which inter alia contained the following instruction: 'Whether the purchases claimed to have been made are genuine or not" is a pure question of fact. Besides, since the sales are fully verifiable, the whole amount of purchases cannot be said to be bogus because unless there are purchases, sales cannot be made. Each year's assessment is a separate proceeding and the AOs need not be influenced by the line of enquiry in the earlier year or years in completing the pending assessments.' 4. Considering the view taken by the Board regarding withdrawal of appeals filed by the Department before the Tribunal, I am of the view that in the cases of de-centralisation where notic....
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....tements of the learned Departmental Representative and more particularly when instructions are issued by the CBDT to withdraw the appeals which are binding on the IT authorities, we do not find any justification to interfere with the order of the CIT(A)." The assessee's compilation included various other orders also as had been passed by the Tribunal on similar lines. 17. Having discussed at length various features of the trade of Banarsi sarees, we proceed to decide the controversy before us. As has been noticed by us earlier, all the purchases made by the assessee wherever the same have been made from the Karigars are supported by the 'Purjas' issued by it (the assessee). Such 'Purjas' were found to be duly entered in 'Jama Jakar Bahi', which is a part of records kept by the assessee regularly to record its purchases from Karigars. In the financial records also, entries of the purchases of sarees have duly been made on the basis of primary records. The purchases recorded in this manner have been accepted in toto, without any kind of controversy whatsoever. After the purchases of sarees supported by the 'Purjas' have been accepted, any further....
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....to approach the Karigars for making payments to them. It has, therefore, to be held that even if the address is incomplete or even in an extreme situation, where the Karigar is not found at the address available with the assessee (as written in the Purja), no adverse inference can be drawn in the assessment of the same dealer or any of the aspects of the purchases. This is more so in a case like this where the purchases and sales have been duly accepted. This leads to a conclusion that 'Purjas' themselves as also contents thereof have got great evidentiary value. If payment against the 'Purja' recorded in the books of account, then the liability in relation to such 'Purja has to be treated as genuine unless of course some material is brought on record that the assessee has actually made payment against the same which is not recorded. In the present case, no such material having been brought on record, it could not be said that the liability is bogus. Even at the cost of repetition, we state that bogus liability pre-supposes two things, firstly, there is a liability incurred and secondly, such liability has been discharged without being recorded in the books of a....