TaxTMI 
TaxTMI 
1998 (2) TMI 152
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....th the cases. 3. It is a search case under section 132 of the I.T. Act and books of account were seized. The Assessing Officer found that the assessee made purchases of cloth/acrylic yarn from various parties including certain local parties. He mentioned that in the case of following four parties, the transactions are not verifiable:- (i) Kamal Synthetic Hosiery (ii) Zebra Knitting Works (iii) M.S. Knitting Mills (iv) Madhu Trading Corpn. The Assessing Officer looked into the transactions with reference to the vouchers of the parties, mentioned above, and the assessee was asked to prove the genuineness of these transactions. The Assessing Officer informed the assessee that the first three parties were not traceable and that the whereabouts of these may be intimated. The assessee informed that these parties have left the place, after closing their business, but the assessee did not give any evidence where these parties were initially located, to verify whether they existed or where they have moved. The Assessing Officer held that these purchases were not genuine and these transactions were bogus, i.e., the purchases from these three parties. The Assessing Officer o....
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....nbsp; Amount of Party to whom payment payment paid -------------------------------------------------------------------------------------- 16-8-1983 6,000 Imprint, Calcutta (against expenses) 22-9-1983 &nb....
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....dence or material is either placed before us to take a different view that the one taken by ld. lower authorities. Disallowance of Rs. 3,970 under staff welfare expenses is confirmed and the assessee's ground fails. 7. Ground No. 4 relates to the disallowance of Rs. 15,044 towards tour expenses of Sh. Ashok Kumar and Rs. 12,000 as consultancy charges paid to him. Sh. Ashok Kumar is the son of the Managing Director Sh. Abhay Kumar Jain and is having an independent business also, which is proprietary concern. The Assessing Officer disallowed this expenditure of Rs. 12,000 as consultancy charges as he is neither a qualified engineer nor a technical expert. The expenditure has not been proved to be genuine. There was no agreement also. Further, Rs. 7,610 were incurred on foreign tour of Sh. Ashok Kumar. Purpose for which he went to Hongkong, is reported to be purchase of machinery from Taiwan and England. The assessee filed a written reply before the Assessing Officer and claimed that no information was given to the RBI. Sh. Ashok Kumar is neither an employee nor a director of the company. It was alleged that he is a consultant. No evidence was furnished that he had rendered any ser....
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....ition of Rs. 1,50,000 is deleted'. Ld. D.R. submitted that since no day-to-day raw material consumed record is maintained and purchases were made in kgs whereas sales were made in lengths, i.e., in meters, the assessee could not substantiate its claim. Results are, therefore, not open to verification. The assessee filed written submissions before ld. CIT(A). For the reasons recorded by ld. CIT(A) in the impugned order, which we adopt as our own, we find no justification to interfere in the same. We upheld her order on the point and the revenue's ground fails. 13. Ground No. 3 of the revenue's appeal is in support of grounds Nos. 1 and 2, which have been dealt with above. This ground is accordingly disposed off. The other grounds are also dealt with above. 14. In the result the assessee's appeal stands dismissed whereas the revenue's appeal is party allowed as above. Per Bali - I have very carefully gone through the proposed order of my learned brother but am not in a position to fully agree with his reasoning and conclusion. My disagreement with the proposed order of my ld. brother is in relation to the addition of Rs. 10,28,835 made by the Assessing Officer on account of ....
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....the transaction of purchases made by the assessee even from the fourth party could not be verified. The Assessing Officer accordingly treated the entire purchases as bogus and made an addition of Rs. 10,28,535 on account of inflation of purchases. The assessee appealed and submitted before the CIT(A) that the mere fact that these three parties mentioned at Sl. Nos. 1 to 3 were not available at the addresses shown in the vouchers, will not make the purchases bogus as those parties might have shifted their business premises or might have closed their business. It was pleaded before the CIT(A) that the payments have been made by the assessee to all the four parties by cheques part of which was paid in the accounting year under consideration and part payment was made in the subsequent year. It was further submitted that in case these purchases were to be treated as bogus, the GP on the declared sales will come to 24.9% in the assessment year 1985-86 and 27.79% in the assessment year 1986-87 which is not at all possible in the line of business undertaken by the assessee. It was submitted that the GP declared for the assessment years 1985-86 and 1986-87 were 9.05% and 11.55% respectively....
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....nses and consequent reduction in income. These are general observations which are not supported by any specific evidence on record except that the transactions of purchases relating to the four parties in dispute were recorded later in the? "count books than the dates on which the bills were issued by the parties selling the goods to the assessee. However, the fact remains that the assessee has claimed before the Assessing Officer as well as CIT(A) that the payment in relation to the goods purchased from the four disputed parties were made by cheques. Out of the four, M/s Madhu Trading Corpn. is an existing assessee which has confirmed having sold the goods to the assessee but claimed to have lost the books of account. With regard to the other three parties, these were not found to be in existence at the addresses noted in the bills but the fact remains that the payment in respect of goods purchased from these three parties were also made by the assessee by cheque. The Assessing Officer could very well have verified the existence of these parties by tracing the accounts in which the cheques issued by the assessee were credited and from there the exact address of the parties where t....
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....here was a search and seizure action on the assessee's premises during which the books of account were seized. It was noted that the assessee had made purchases from the following four parties:- --------------------------------------------------------------------- Rs. (i) M/s Kamal Synthetic Hosiery, Ludhiana 95,409.75 (ii) M/s Zebra Knitting Works, Ludhiana 2,51,344.50 (iii) M/s M.S. Knitting Mills, Ludhiana 1,50,000.00 (iv) M/s. Madhu Trading Corpn., Ludhiana 5,31,780.00 --------------------------------------------------------------------- On fu....
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....he matter restored back to the file of the Assessing Officer for passing a fresh order. As regards the remaining addition of Rs. 4,96,755 in respect of the first three parties, he confirmed the action of the authorities below. I may at the outset mention that no independent reasons have been given for the aforesaid action and the only observation is to the effect that "the Assessing Officer made local report as the basis for making the additions which was not confronted to the assessee". 5. The ld. Accountant Member passed a separate order disagreeing with the view expressed by the ld. Judicial Member but for purposes of disposing of the present reference to me, I would like to state that insofar as the addition of Rs. 5,31,780 in respect of M/s Madhu Trading Corpn. was concerned, both the Id. Members agreed that the matter should be set aside to the file of the Assessing Officer. In other words, I need not detain myself any further with the afot esaid addition and the item in dispute is in respect of the three parties from whom purchases aggregating Rs. 4,96,755 are purported to have been made. The ld. Accountant Member restored this addition back to the file of the Assessing O....
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....luding the ld. counsel urged that the view expressed by the ld. Accountant Member be approved. 7. The ld. D.R., on the other hand, supported the order passed by the ld. Judicial Member contendingin the process that the onus was squarely on the assessee to prove the purchases entered by it in the books of accounts. He highlighted the fact that there had been an inordinate delay in the recording of entries in the books of account. The further submissions were to the effect that the set aside on the part of the ld. Accountant Member vis-a-vis the three additions aggregating Rs. 4,96,755 was not justified on the facts and circumstances of the case as this had allowed an opportunity to the assessee to furnish fresh evidence in support of its claim and more so when the assessee had not asked for any such opportunity. It was further submitted that the assessee had not maintained any stock register and it was not possible to verify whether the goods shown to have been actually purchased had been accounted for. The ld. D.R. placed reliance on the decision in the case of Moti Lal Padampat Udyog Ltd v. CIT [1991] 187 ITR 515 (All.). 8. After examining the rival submissions, I am of the ....