TaxTMI 
TaxTMI 
2001 (3) TMI 253
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....bsp; 1,437.15 qtls. Rs. 2,40,004 2. 66/17-2-1987 1,072.50 qtls. Rs. 1,80,180 ------------------------------------ 2,509.65 qtls. Rs. 4,20,184. ------------------------------------ -------------------------------------------------------------- The Assessing Officer received information from the ADI that Shri Sat Pal, partner of M/s. Ganesh Rice Mills had stated that the firm M/s. Ganesh Rice Mills had never purchased paddy from the assessee firm. The statement of said Shri Sat Pal was confronted to Shri Faqir Chand, partner of the assess....
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.... stock register of rice/paddy/rice bran as per details given at pp. 38 to 49 of the Compilation. It was also submitted that the assessee had maintained a milling register which had been duly certified as per pages 1 to 26 of the second compilation. These registers, according to the learned Counsel for the assessee, had been maintained in the normal course of business and there were no interpolations, cuttings or defects found by the Revenue authorities in the same. It was submitted that in the earlier years also, similar registers had been maintained and no defects or discrepancies were found. 6. The learned Counsel referred to pages 8 and 9 of the compilation to show that there were sales bills in respect of sale of paddy to M/s. Ganesh Rice Mills. It was submitted that the assessee had filed sales-tax return for the period from 1-2-1987 to 28-2-1987 as per receipt placed at page 29 of the compilation in which R.D. sales had been shown at Rs. 4,20,184 at page 30 of the compilation. The summary of all the sales is available at page 31 of the compilation. Our attention was drawn to page 47 of the compilation in which the sale of paddy was shown at 2509.65 Qtls. Referring to page ....
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....re was no justification for confirming the addition of Rs. 4,20,184. 10. The learned D.R. strongly relied on the orders of the authorities below. It was pointed out that Shri Sat Pal, partner of M/s. Ganesh Rice Mills had given a statement disowning the purchase of paddy from the assessee. It was submitted that the sales-tax forms issued to M/s. Ganesh Rice Mills by the Sales tax Department were different from the ones produced by the assessee. It was also submitted that Shri Bachan Lal, the broker, had not been produced by the assessee and only his affidavit as appearing at pages 72 and 73 of the assessee's compilation had been filed. It was pointed out that the purchaser had denied having purchased the paddy and there was no documentary evidence on record in respect of the despatch of paddy by the assessee. As regards the cross-examination of Shri Sat Pal, the learned D.R. wondered as to whether any request in this regard had been made by the assessee. The learned D.R. strongly supported the confirmation of addition of Rs. 4,20,184. 11. In reply, Shri Sehgal filed a copy of the letter submitted before the learned CIT (A), Patiala in which it was contended that no opportunit....
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....eleted the addition. In our opinion, the application of section 68/69A is also not proper because it is not the case of a cash credit simpliciter. We are inclined to agree with the submission of the learned Counsel that the entire case of the Revenue is built on suspicion and suspicion howsoever strong, cannot be a substitute for evidence. 13. Taking into consideration the entire facts and circumstances of the case, we order the deletion or addition of Rs. 4,20,184. 14. Now we come to the Revenue's Appeal (I.T.A. No. 1727/Chd./90). This appeal is regarding the addition of Rs. 3,76,114 for which the facts are these. Besides making an addition of Rs. 4,20,184, the Assessing Officer in the body of the assessment order held that the assessee had shown lower yield of rice and other by-products of paddy milled out of the paddy shown as sold but actually milled by the assessee. The total concealed income on that account was computed at Rs. 3,76,114 as per details given in the body of the assessment order. Since the Assessing Officer was making a higher addition of Rs. 4,20,184, no further addition of Rs. 3,76,114 was made and the same was telescoped in the main addition. 15. Befo....
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....n as to why it chose to sell huge quantity of paddy (2509.65 qtls.). This is the only transaction of sale of paddy, otherwise, all paddy have been milled. As rightly pointed out by ld. CIT (A), this was a ground for probe and verification, which was carried by examining Sh. Sat Pal partner and books of account of alleged purchaser firm, M/s. Ganesh Rice Mills, Guru Har Sahai, by ADI. Examination of partner Sh. Sat Pal and books of account revealed that the said firm never purchased any paddy from the assessee-firm. In order to comply with principles of natural justice, the revenue immediately put above facts of non-purchase of paddy as also statement of Sh. Sat Pal to the assessee-firm and in this connection recorded the statement of the assessee's partner, Sh. Fakir Chand. Sh. Fakir Chand stood by the sale and relied upon ST-XXII, purported to be issued by the purchaser. 3. The revenue authorities then made enquiries regarding ST-XXII. The revenue also inquired about the foodgrain licence number of M/s. Ganesh Rice Mills, as mentioned in the documents produced by the assessee. The licence number and sales-tax number, as given by the assessee of M/s. Ganesh Rice Mills, were foun....
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....f account of the assessee-firm was not established, the amount was taken as the assessee's income from undisclosed sources and added in assessment under section 68 of the Act. 5. The assessee had challenged the impugned addition in appeal before ld. CIT (A). Simultaneously, the assessee approached ld. CIT, Patiala, with petition dated 6-2-1990, that to 'buy peace of mind' and to 'avoid litigation' with department, the assessee is prepared to offer for addition a sum of Rs. 60,000, as per calculations given below :- Rs. "Rice yield @ 66% 2509.65 i.e., 1656 qtls. 85% of rice, i.e., 1407.60 4,20,168.60 @ Rs. 300 15% of rice, i.e., 248.40 43,470.00 &n....
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....sp; 50,398.55 Say Rs. 60,000." The assessee, as per above calculations, clearly admitted in computation that paddy shown to have been sold was, in fact, milled and rice obtained was sold. The assessee further admitted that sale proceeds of paddy shown at Rs. 4,20,184, as credited, be adjusted and deducted from total profit of Rs. 4,75,582. The assessee also wanted reasonable manufacturing expenses at Rs. 5.000. However, subsequently, the assessee claimed that the above statement was made to buy peace and avoid litigation with the revenue and the same was not binding on the assessee. 6. The assessee, in the course of hearing of the appeal before CIT (A) also filed letter dated 24-9-1990, which is available at page 90 of the paperbook. Para 1 of the said letter is relevant and is reproduced below:- "At the outset, charge of having made any bogus sales or having introd....
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....r found that cash in dispute was deposited with the Bank of Baroda, Amloh, where the assessee was carrying on business first and, thereafter, two pay orders were received. According to ld. CIT (A), "it does not stand to reason that M/s. Ganesh Rice Mills, Guru Har Sahai, Ferozepur, carried huge sums of Rs. 2 lakh on 3-3-1987 and Rs. 2,20,184 on the next day, i.e., on 4-3-1987, in cash, from Guru Har Sahai - a disturbed town - to Amloh, to convert the same into pay order". This abnormal conduct of carrying huge cash to the place of business of the assessee and then purchasing pay orders, shows that transaction is not genuine but was entered into with mala fide arrangement to evade tax. 8. There is considerable gap between alleged sale and delivery of paddy and receipt of consideration from the purchaser. The seller did not get any document executed from the alleged purchaser as security to enforce payment in case of default by the purchaser. No signature on sale bills etc., were obtained. This is highly improbable. 9. In CIT (A) gave sound reason with discussion of case law in para 2.8 of his order, to hold that claim of sale to M/s. Ganesh Rice Mills was bogus. I entirely agr....
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....rms Were obtained from the purchaser. The revenue made enquiries from the Sales Tax Department and found that no such ST-XXII forms were issued to the seller firm. The revenue further found that registration number and licence number furnished by the assessee-firm of the purchaser, were wrong. When this information was put to the assessee, the assessee took the stand that sale was made through Sh. Bachan Lal broker. The Assessing Officer gave opportunities to the assessee to produce said Sh. Bachan Lal and, in spite of several opportunities, Sh. Bachan Lal was not produced. So, all lacunas/defects found by the Tribunal in the case of Amar Rice & General Mills were fulfilled in the present case. In spite of untiring efforts made by the revenue to lift the veil of falsity, it will not be fair and just to blindly apply the ratio of the decision of Amar Rice & General Mills against the revenue. Again in the case in hand, the assessee took the clear stand that there was no direct dealing with the seller. The broker had met the seller and it is possible that wrong ST-XXII forms were given to them. The assessee talked of fraud committed on it (which is not established) and went to the ext....
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.... addressed to CIT (A). Endorsement on the said letter says, "heard on 1-5-1996, filed on 2-5-1996". The appeal was heard on 1-5-1996 and this document appears to have been filed on 2-5-1996. After hearing the case by the Bench on 1-5-1996, file was given to Hon'ble A.M. for dictation. I find that reliance has been placed on the objections raised by the assessee in this document in the proposed order of Hon'ble A.M. There is mention of failure to provide opportunity to cross examine Sh. Sat Pal. There is further reference to copies of application form submitted by GRM with Bank of Baroda, Amloh, for preparing pay orders for making payment to the assessee. It is requested in the letter that above material be taken into evidence. It is not clear as to when undated letter was filed with CIT (A), as he had made no reference to it. The impugned order is dated 24-9-1990. Before that, the assessee filed a detailed written submission running into seven pages and available at pages 1 to 7 of the paper book. ITO had replied to the above submission, vide letter dated 19-9-1990. The assessee then filed a rejoinder before CIT (A) on 24-9-1990. In the rejoinder, filed on the date on which order w....
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.... total income of Rs. 55,450 which was completed under section 143(1). Subsequently, information was received from the ADI that the assessee had shown bogus sale of paddy to the tune of Rs. 4,20,184 to M/s. Ganesh Rice Mills, Firozepur. The case was reopened under section 143(2)(b) of the Act. The Assessing Officer looked into the details of these sales and it was shown that the assessee made the following sales : ---------------------------------------------------------------------------- Sl. No. Bill No./Date Quantity Amount ---------------------------------------------------------------------------- 1. 65/16-2-1987 1437.15 Qtls. Rs. 2,40,004 2. 66/17-2-1987 1072.50 Qtls. &nbs....
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....sp; (Coarse Rice Bran) (iv) Husk 5,420 Qtls. 13% ---------------- --------- 35,054 Qtls. 84.06%. The assessee explained the reason for the shortfall of the yield during the year. The Assessing Officer, however, found the same to be not acceptable. He, therefore, worked out the shortage in the production of various items and added back a sum of Rs. 1,96,004. 4. The Assessing Officer also considered the bogus sale of paddy at 2509.65 qtls. as actually milled by the assessee and sold in the open market. He, therefore, estimated the sale proceeds at Rs. 5,76,634. Estimating the actual cost of 2509.65 qtl....
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....here it was directed that the above addition, however, may be considered while making addition on account of bogus sale of paddy as normally the assessee would have ploughed back this profit in the bogus sale of paddy. As a result separate addition on account of this need not be made if there is sufficient and plausible reason that this profit has been introduced back in the account books in the form of bogus sales. The learned CIT (Appeals) also relied on the decision of the Hon'ble Madras High Court in the case of CIT vs K.S.M. Guruswamy Nadar & Sons [1984] 149 ITR 127 (19 Taxman 533.) for the proposition that when there are two additions one can be telescopic against the other. He, therefore, rejected the contentions of the Assessing Officer that the income should be enhanced on account of alleged suppression of closing stock of bardana, rice etc. as there was no material evidence to support such contentions. 7. Both the assessee and the revenue came up in appeal before the Tribunal raising the following grounds respectively : "I.T.A. No. 1657 (assessee's appeal) : That the learned CIT (A) was not justified to uphold the action of the ITO in having arbitrarily treated t....
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....ointed out by the revenue. The assessee has been maintaining the books of account on a regular basis and the same was duly audited by the Chartered Accountants. The assessee maintained stock register which was found to be in order. The sales shown by the assessee in the sales-tax return also were accepted by the Sales-tax Department. The addition was mainly based on the statement of Shri Sat Pal, partner of M/s. Ganesh Rice Mills, denying the purchase of paddy from the assessee. However, Shri Sat Pal was never produced for cross examination. The transactions was made through Shri Bachan Lal, broker who was available at the address given but not summoned by the Assessing Officer to ferret out the truth. The money was received by two pay orders prepared by M/s. Ganesh Rice Mills. There was no evidence on record to prove that the pay orders were fake or that the assessee itself purchased the pay orders in the name of M/s. Ganesh Rice Mills. Even in any case, if the paddy was held to be not sold to M/s. Ganesh Rice Mills then the closing stock of paddy has to be adjusted which would result in no addition on this account. The learned Accountant Member, further, considered the order in t....
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....he Bank of Baroda for purchase of the pay order. He also found considerable gap between alleged sale and delivery of paddy and receipt of consideration from the purchaser. The learned Judicial Member further found that the decision in the case of M/s. Amar Rice & General Mills, Banur was distinguishable from the facts of the case of the assessee. He, therefore, held that the addition was rightly made by the Assessing Officer. 11. As stated earlier, the Members referred the question reproduced at the beginning for decision. At the hearing Shri Sudhir Sehgal, learned counsel appeared for the assessee and S/Shri P. K. Shrivastava, Rajinder Singh and R. R. Thakur, Departmental Representatives appeared for the revenue. Shri Sudhir Sehgal, the learned counsel reiterated the earlier submissions. According to him the return was filed in time alongwith the manufacturing, trading and profit & loss account and balance sheet. The books of account are complete in all respect in regard to the purchase of paddy and sale of rice & paddy. Quantitative tally of the stock was maintained and there was no discrepancy in any of the accounts, either in the purchase or in the manufacturing process or i....
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....assessee. In this regard, reliance was placed on the decision in the case of Sir Shadi Lal Sugar & General Mills Ltd. vs CIT [1987] 168 ITR 705 (33 Taxman 460A.) (SC). Shri Sudhir Sehgal further submitted that the assessee in this case duly reflected the sale proceeds of Rs. 4,20,184. Even if it is assumed, without admitting, that there was bogus sale and paddy was not actually sold then the amount shown as sale proceeds has to be adjusted against the closing stock and the deposits made in the banks. Either way there cannot be addition and if any addition is sustained, it will amount to double addition. Since the assessee has been maintaining all the statutory registers, and the accounts have been duly audited and all the sales and purchases are fully vouched, there is no reason for any addition in the account of the assessee as held by the Special Bench of the Tribunal in the case of Shanker Rice Co. vs ITO [2000] 72 ITD 139. It is, therefore, submitted that no addition is called for in this regard. 12. On the other hand, Shri P. K. Shrivastava, the learned Sr. D.R. strongly supported the order of the learned Judicial Member. According to him, the assessee in this case made two....
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....icer to include the aggregate amount of cash credit as income of the assessee from undisclosed sources and no further duty lies upon the Department to prove from which source the assessee has earned that income. It is, therefore, submitted that due to the failure of the assessee to prove the source of the deposit, the Assessing Officer rightly treated the same as income from other sources and no interference is called for in this regard. It is, therefore, submitted that the amount has been rightly assessed as income from other sources. 14. I have carefully considered the rival submissions in the light of the material on record. From a careful reading of the order of the Assessing Officer, it is seen that the source of the deposit of Rs. 4,20,184 by the assessee on 3-3-1987 and 4-3-1987 has been traced to the paddy weighing 2509.65 qtls. According to the Assessing Officer this paddy shown as sales was actually bogus and the same was actually milled by the assessee from which profit was calculated by him at Rs. 1,80,110. He also found suppression in the yield of the paddy milled by the assessee as shown in the books which was estimated at Rs. 1,96,004. He, therefore, worked out th....
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....dy accounted for the sale proceeds in the manufacturing, trading and profit & loss account for the year ending 31-3-1987. The addition on this account has to be off set by the sale proceeds of paddy shown by the assessee at Rs. 4,20,185.05 in the manufacturing, trading and profit & loss account. If this sale proceed is deducted from the trading account and addition is made again on account of these deposits, the ultimate effect on the total income will be the same. It is only a question of proving the source of the said income which the assessee claim it to be on account of sale to M/s. Ganesh Rice Mills whereas the Assessing Officer held that it was not actually sold but milled and sold in the open market by the assessee. Ultimately the income suppressed has to be worked out on the basis of the actual paddy milled and sold by the assessee in the form of rice, rice bran, coarse rice and paddy husk. There is, therefore, no reason for making addition of Rs. 4,20,184 all over again. 17. The Departmental Representative before me also produced the monthwise electric bills statement for the year to support the view taken by the Assessing Officer that the paddy weighing 2509.65 qtls. w....