TaxTMI 
TaxTMI 
1996 (9) TMI 165
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.... factory of the assessee directly to the ultimate buyer. However, bills for these goods were raised by the assessee on M/s. Shreejee Traders, who in turn, raised bills on the ultimate buyer. The assessee was asked to explain these transactions. It was submitted that they were in normal course of business. It was general practice in the trade to make such direct deliveries. Further M/s. Shreejee Traders did not have a godown of their own. The profit on such transactions in the hands of M/s. Shreejee Traders was only Rs. 54,467, which was less than 1.9% of the total turnover of the Company. 4. The Assessing Officer did not accept the explanation. He emphasised that the sales were made to a sister concern, which had its premises in the same building. He held that the transaction was nothing but a device for reduction of income and avoidance of tax in the hands of the company. The profit on such transactions came to Rs. 54,567 and the amount was added to the total income as diversion of profit to its sister concern. At one part of the assessment order, a reference was also made to section 40A(2)(b) of the Act. 5. Nothing more was added before the CIT(A) who held that the device a....
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....ss transaction. 9. However, when the Bench inquired from the learned counsel whether this chart had been produced before the Assessing Officer, or the CIT(A), it was admitted that this was fresh evidence placed before the Tribunal. His attention was thereafter invited to Rule 29 of the Tribunal Rules relating to additional evidence, according to which the parties to the appeal shall not be entitled to produce additional evidence before the Tribunal. No further submissions were made in this regard. 10. The learned counsel thereafter submitted that similar disputes had arisen in other years. In assessment year 1986-87, the CIT(A) had set aside the matter to the file of the Assessing Officer as per paras 6 and 7 of his appellate order. Thereafter, the Assessing Officer had accepted the explanation of the assessee in fresh assessment dated 28-7-1992 in para 2.25 of the assessment orders. 11. Our attention was also invited to the assessment order for assessment year 1989-90, where similar, dispute was discussed, but the assessee's explanation was accepted and no addition was made in para 5 of the assessment order dated 19-12-1991. The learned counsel submitted that when the dep....
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....ar under consideration i. e. assessment year 1988-89 was passed first and the fresh order for assessment year 1986-87 and the assessment order for assessment year 1989-90 were passed later as the following date will show : Assessment year Dates of assessment order 1988-89 24-3-1991 1989-90 19-12-1991 1986-87 28-7-1992 (After being set aside) 16. In case the principle of res judicata was applicable, the department would have been obliged to follow the finding for assessment year 1988-89 for the other two years also and not the other way round. However, it is well settled that this principle does not apply. We, therefore, proceed to examine the issue on merits for assessment year 1988-89 itself. 17. We also agree with the learned Departmental Representative that additional evidence cannot be filed by the assessee before the Tribunal in view of the prohibition contained in Rule 29 of the Tribunal Rules. Our view finds support from the decision of the Bombay High Court in the case of CIT v. Smt. Kamal C. Mehboobbani [1995] 214 ITR 15/81 Taxman 311. We, therefore, decline to consider the chart of comparative rates of sale filed by the learned counsel before us. We d....
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....o expose the devices for what they really are and to refuse to give judicial benediction." 20. We may add further that the observation on tax avoidance in A. Raman & Co.'s case and CIT v. B.M. Kharwar [1969] 72 ITR 603 (SC) were disapproved by the Supreme Court in the above judgment. 21. The facts of the present case should now be examined in light of the above guidelines of the Supreme Court. The assessee-company is a manufacturer and produces re-rolled bars, angles etc. It has a fairly large turnover of about 2.17 crores in this year. M/s. Shreejee Traders is a small trading firm having a turnover of only Rs. 36.48 lacs in this year. The purchases were Rs. 34.74 lacs, most of which were from the assessee-company, being Rs. 27.74 lacs. This firm was situated in the same premises as the assessee-company. The partners were the wives of the directors of the company and, thus, closely connected. The firm did not possess a godown. The staff was minimal, the salary for the year being only Rs. 38,490. There were no expenses on freight or storage and there was no opening or closing stock for the simple reason that the assessee-company despatched the goods directly to the ultimate bu....