Income Tax Appellate Tribunal - Agra
Technical Glass Industries vs Asstt. Cit on 7 November, 2002
Equivalent citations: (2004)91TTJ(AGRA)561
ORDER
N.K. Karhail, J.M. These are the cross-appeals filed by the assessee and revenue against order dated 25-3-1995, passed by the Commissioner (Appeals), Agra, for assessment year 1991-92.
2. We will firpt take up the appeal of the assessee.
3. The first ground of appeal relates to the addition of Rs. 5,10,922 made on account of difference in the value of stock as furnished to the bank and the value as appearing in the books of account of the assessee.
4. Briefly stated, facts are that the assessing officer on examination of the books noted that consumption of raw material like soda ash, coal, chemical and sand was taken in terms of weight. Even date-wise consumption of chemical was not available since the stock register is not maintained. But the production was taken place in terms of dozen or number of Tora. Therefore, exact weight of production was not known. Thus, the assessing officer observed that under the circumstances, the quantitative tally of purchase and sale was not possible to prepare. Therefore, as per decision of Calcutta High Court in the case of Howrah Trading Co. (P) Ltd. v. CIT (1968) 67 ITR 582 (Cal), books of account of assessee were, held as unverifiable and unreliable.
5. The assessing officer further noticed that the assessee had submitted statement of stock at the end of August, 1990, September, 1990, October, 1990, November, 1990, December, 1990, January, 1991 and March 1991, to Punjab National Bank, Firozabad from which loan facility had been taken by the assessee. The assessing officer further mentioned that the stock was pledged with them. The copy of statement as obtained from the bank was supplied to the assessee along with notice dated 31-1-1993. The assessing officer further noticed that there was discrepancy in weight, number, as well as value regarding stock pledged to the bank in these months vis-a-vis books of account. Therefore, the assessee was required to reconcile these statements. The assessee submitted that stocks as per account books were correct and statements given to the bank were merely to cover up the overdraft facilities granted by the bank. Thus, the said statement did not show the real and correct position. The assessee further submitted that neither bank nor the assessee really bothered about the real stock position. Therefore, no reliance on these statements could be made. The assessee also stated that in the accounts separate stocks were noted of item-wise like headlight, lab wares, chimneys, tumblers. jars, etc. The stock was broadly classified as glasswares (tumblers, jars, jugs, glass shades), chimney (lamps, lanterns), lab wares (beakers, funnels) and press ware (headlights). In the bank statement it was stated that these items were shown as category-wise and each category was valued at uniform rate. In respect of coal, the value was shown at substantial high rates. The assessing officer observed that the assessee failed to reconcile the stock even category-wise. The assessing officer was also not satisfied with the contention about categorization of items as in the statement for the month of March, 1991, separate details had been given. The assessing officer also did not accept the contention that stock shown to the bank was only on estimation to cover up the overdraft facility. He referred to Madras High Court decision in the case of Coimbatore Spinning & Weaving Co. Ltd. v. CIT (1974) 95 ITR 375 (Mad), basis where it has been observed that Tribunal is not expected to take judicial notice of such substandard morality so as to allow an assessee to go back on sworn statement. For his view that in, such circumstances accounts can be rejected, he relied upon the decision in the case of Swadeshi Cotton Mills Co. Ltd. v. CIT (1980) 125 TTR 33 (All), CIT v. Ashok Textiles (P) Ltd. (1983) 141 TTR 785 (Ker) and Jaichandra Kanji & Co. v. CIT (1986) 157 ITR 451 (Raj).
6. Thereafter, the assessing officer proceeded to work out the month-wise position of stock in excess for every month as per details at p. 6 of the assessment order. The maximum stock of Rs. 6,91,726 was found in the month of March, 1991. The assessing officer further found that the assessee had deposited drafts of Rs. 73,692 with CCL for obtaining coal out of which coal of Rs. 3,21,432 had been lifted in June, 1990. This was sold by the assessee at profit of Rs. 32,143. The assessing officer held that Rs. 3,21,432 being investment in coal lifted in June, 1990, was available with the assessee. He, therefore, allowed credit for Rs. 3,21,432 against Rs. 6,91,726 and made addition of Rs. 3,70,294 under section 69 of the Act. Keeping in view the difference of Rs. 6,91,726 in the stock position, the assessing officer rejected the books of account. The assessing officer estimated the sales at Rs. 1 crore on which GP rate of 12 per cent was applied. This resulted in addition of Rs. 1,93,775 for extra profit.
7. On appeal before the Commissioner (Appeals), it has been submitted that the assessee regularly maintained and audited books of accounts which should have been accepted as no discrepancy has been found in the books of accounts as complete details and quantitative tally is available. Regarding the difference in stock as per books and as pledged with the bank, the assessee reiterated that stock shown to the bank was by estimate to cover up the overdraft facility. For difference in quantity of items, it was submitted that this was with a view to obtain maximum overdraft facility. It has also been submitted that the rates applied were higher than actual sale and purchase price of various items. The assessee also furnished chart to show the rates of items of glasswares, coal, sand, etc. as per books and relevant bills. Thus, it has been submitted that if this rate be applied, the maximum difference in the month of November, 1990, would be Rs. 5,10,922, and not Rs-. 6,91,726 which had resulted in excess addition of Rs. 1,80,803. With regard to the addition made on account of difference in stock position, the assessee relied upon various case law as referred to at p. 3 of Commissioner (Appeals)'s order.
8. The learned Commissioner (Appeals) after having considered the decisions relied upon by the assessee has held thus :
"I am of the view that the ratio of the above decisions does not apply to facts of the case. The cash book was signed by the IT Inspector on 27-2-1991, but there is no evidence that he physically checked the stock position also. There is also no bank statement available for the month of February, 1991. The officers of the industries department checked the coal stock register on 26-3-1991. They also did not check the stocks of other materials, finished and unfinished goods. It is also significant that no discrepancy of stocks was found in the statement for March, 1991. However, I accept that the value of excess stock may be taken at cost of Rs. 5,10,922 as against Rs. 6,91,726. The addition is reduced to Rs. 5,10,922. The appellant gets relied of Rs. 1,80,804.
I, however, feel that further addition of Rs. 1,93,775 by rejection of accounts and higher application of GP rate is not justified. The addition made on the basis of discrepancy of stocks has been partly confirmed. The GP rate disclosed this year is better as compared to earlier years. There is not enough material to justify addition of Rs. 1, 93,775. The addition is deleted."
9. Before us, the learned counsel for the assessee has submitted that the assessee had hypotheated its stock to bank and has not pledged the stock with the bank. This fact has been wrongly stated in the assessment order. The learned counsel further submitted that merely stock was hypothecated with the bank which means that the goods remained in the possession and control of the assessee and that they were not physically verified at the time of hypothecation. The learned counsel has further reiterated the submissions as were made on behalf of the assessee before the lower authorities. The learned counsel has urged that the addition made on account of difference in the value of stock as furnished to the -bank and the value as appearing in the books of accounts is, therefore, legally not sustainable. In support thereof, he has made reliance to the decision in the cases of CIT v. General Metal Works (1988) 172 ITR 173 (All), M, Durai Raj v. CIT (1972) 83 ITR 484 (Ker) and Asstt. CIT v. Laxmi Printing Co. (1993) 46 TTJ (Chd) 117. The learned counsel has also submitted that the books of account of the assessee have been accepted in the previous as well as in the subsequent years. Therefore, in order to maintain consistency the same may be accepted in this year also.
10. The learned counsel while referring to pp. 62 and 63 of the paper book has submitted that there were obvious mistakes in the statements furnished by the assessee to the bank. He pointed out that both the, statements were August, 1990 and September, 1990, have been signed on 4-10-1990. While conducting spot inspection, how the spot inspection enquiry could be made for the months of August and September on the same day when there could always be movement of stock. The learned counsel while referring to p. 4 of the Commissioner (Appeals) order has submitted that books of the assessee have been signed by the official of the State Government. Thus, the learned counsel has urged that since the additions have been made only on non-existing basis, the same are not sustainable, hence, may be deleted.
11. The learned Departmental Representative, on the other hand, submitted that a perusal of the assessment order would show that there is clear finding of the assessing officer that the'stocks were pledged with the bank and not hypothecated with the bank. Despite this finding, the assessee raised no such contention before the Commissioner (Appeals). It is for the first time that the assessee has contended that the books (sic-stocks) were not pledged but merely hypothecated with the bank. However, the assessee has placed no evidence before the Tribunal that the stock was merely hypothecated and not pledged with the bank. Therefore, no reliance can be made to the decision referred to by the learned counsel. Thus, the learned Departmental Representative has further argued in support of the order passed by the assessing officer. A reliance in this connection has been made to the decisions in the case of Coimbatore Spinning & Weaving Co. Ltd. v. CIT (supra), Swadeshi Cotton Mills Co. Ltd. v. CIT (1989) 180 ITR 651 (All), Swadeshi Cotton Mills Co. Ltd. v. CIT (supra), Kaila Sweet Suppler v. CIT (1998) 100 Taxman 59 (All) and Century Foams (P) Ltd. v. CIT (1994) 210 ITR 625 (All).
12. We have heard the parties and perused the records of the case. It is seen that the assessing officer has made specific finding that the goods were pledged with bank. However, the assessee in its written submissions filed before Commissioner (Appeals) has specifically mentioned that "our case is of hypothecation and the stocks were really not pledged (in lock and key). The stocks always remained in our possession". However, the learned Commissioner (Appeals) without giving specific finding as to whether the stocks were pledged or hypothecated with bank has used the expression "pledged". The learned counsel has also not placed any material, such as certificate from the bank, as to whether stocks were pledged or hypothecated. However, perusal of the record, particularly copies of stock statement given to the bank for each of month, mentioned the word "hypothecated" as security with Punjab National Bank, Firozabad. The affidavit of Shri Laxmi Kant Bansal, dated 8-2-1995, also clarifies the position that the stock was hypothecated. We, therefore, hold that the stocks were merely hypothecated and not pledged with the bank and lower authorities loosely used the expression "pledged" instead of "hypothecated" without appreciating the fact that different consideration applies to the stocks hypothecated with the bank. It is seen that the assessing officer extracted the difference noted in the stock shown to the bank and books of account in respect of the aforesaid months at p. 5 of the assessment order. The maximum stock difference of Rs. 69,176 noticed is for, the month of November, 1990, and the said excess stock later on had been reduced to Rs. 900 in the month of March, 1991. The question is whether stock shown to the bank could be said to be the correct stock of the assessee. The claim of the assessee is that the bank authorities do not give much weight with regard to the stock mentioned therein as the amount given against the stock is fully secured from factory premises and other immovable properties of the partners. The stock statements were really prepared at the table of the bank and were accepted by the bank. These statements are given to the bank merely to cover the overdraft facility granted by the bank. The pp. 62 and 64 of the paper book would show the manner in which the stock position is shown to the bank and accepted by the bank. The stock statements shown to the bank for the month,'of August and September, 1990, have been signed on the same date, i.e., 4-10-1990. This shows that stocks have been reflected in casual manner to the bank and the stock position shown to the bank has not been physically verified by the bank. Thus, stock shown to the bank can be said to be on estimate basis inasmuch as the department has not brought any material on record to show that there had been physical verification of the stock shown to the bank. It is seen that the books of account of the assessee have been inspected by State Government authorities and Inspector of the department. Thus, the books of the assessee have been regularly maintained during the course of business and same have been duly audited by chartered accountant. Thus, we hold that stock was merely hypothecated to the bank which meant that the goods remained in the possession and control of the assessee and there had been no physical' verification of the stock at the time of hypothecation, and the stock was shown to the bank on mere estimate basis in order to obtain the overdraft facilities. In the facts and circumstances of the case, there appears to be no justification to sustain the impugned addition. We, therefore, delete the same.
13. The ground Nos. 2 and 3 read as under :
"The learned Commissioner (Appeals) erred on facts and in law in sustaining/confirming the addition of Rs. 7,36,921 for the unexplained investment in the drafts allegedly deposited with Central Coal Fields Ltd. Ranchi, on 18-6-1990. "
"The learned Commissioner (Appeals) erred on facts and in law in sustaining/confirming the addition of Rs. 5,42,512 for drafts similarly allegedly deposited with CCL, Ranchi, on 31-5-1990."
14. Briefly stated, facts are that two searches under section 132(l) were conducted at the office premises of Chief General Manager, Central Coal Field Ltd., Ranchi. The first search was conducted on 30-7-1990, and as per Panchnama of that date seizure of cash of Rs. 5,42,512 was made. It was found that the assessee had submitted coal application dated 31-5-1990, in the office of General Manager, CCL, Ranchi, vide its letter dated 31-5-1990, under the signature of the partner Sri Laxmi Kant Bansal. With this letter recommendation of Eastern Coal Field Ltd., Calcutta, ' vide their letter dated 23-2-1990, for 11'254 MT of coal, one sales-tax Form "C", No. 697177, an affidavit of Sri L.K. Bansal dated 25-5-1990, and 12 drafts of Rs. 5,42,512 were deposited. No quantity of coal was lifted upto the date of search.
15. In the second search dated 24-12-1991,, deemed seizure of Rs. 4,15,489 was made. It was found that the assessee had obtained road release order vide CCL letter dated 18-6-1990, for 1,200 MT of coal after depositing draft of Rs. 7,36,921 on 19-5-1990. Against the allotted coal of 900 MT from Religarh Colliery, 525.04 MT of coal valued at Rs. 3,21,432 had already lifted before the search and balance coal was not lifted. Thus, deemed seizure of Rs. 4,15,489 was made representing the value of unlifted coal of 674.96 MT. Thus, the assessee was required to explain the source of investment in these drafts. The statement of Sri L.K. Bansal was recorded on 24-12-1993. The assessee had submitted that no investment in the 12 drafts totalling to Rs., 5,42,512 seized vide Panchnama dated 30-7-1990, was made by the assessee. The assessee also stated that it did not know who had made the investment. However, the assessee submitted that the investment in the second draft of Rs. 7,36,921 dated 19-5-1990, was made by M/s Sweta Coal Sales Corporation, 37, Dakapatti, Calcutta. The affidavit of Sri Krishna Kummar Thakkar, partner of the firm and photocopy of agreement with this party had been filed by the assessee.
16. Regarding draft of Rs. 7,36,921, the assessee submitted that the investment of R~. 7,36,921 was made by M/s Sweta Coal Sales Corporation as per written agreement with them on 15-5-1990, copy of which was also filed. The assessing officer noted that the original agreement was not being produced. This agreement was not registered. The assessing officer further mentioned that the assessee was required to produce the partner of M/s Sweta Coal Sales Corporation for cross-examination, both during proceedings under section 132(5) as well as during current assessment proceedings. However, it failed to produce this party. On the request of the assessee, direct summons were also issued by the assessing officer to Shri Krishan Kumar Thakkar. However, he failed to attend. The assessing officer also issued summons directly which were received back unserved with the remark addressee not known at the given address'. Therefore, the direct enquiry was also sent to Income Tax Officer, Calcutta, in the case of M/s Arkay Glass Works, sister concern of assessee. Income Tax Officer, Calcutta, reported that M/s Sweta Coal Sales Corporation to whom summons were issued, did not produce books of accounts. The fact of Shri Krishan Kumar Thakkar being unknown at given address and failed to attend before the assessing officer were made known to the assessee. The assessing officer mentioned, the assessee, however, still failed to produced him. Despite further opportunity, he was not produced. Thus, he observed that it would clear that there was no such firm/person as M/s Sweta Coal Sales Corporation or as Shri Thakkar. If the investment was. really made by that party, there was absolutely no reason whey they were failed to produce books of account before him or before the assessing officer to prove source. Therefore, the assessing officer held that the agreement of the assessee with M/s Sweta Coal Sales Corporation was bogus., He further mentioned that M/s Sweta Coal Sales Corporation did not figure anywhere in the records of CCL, Ranchi, as agent of the assessee; All the papers filed at CCL were under the signatures of Shri L.K. Bansal. Upto the date of search 525.04 MT of coal had been lifted by Shri Arjun Thakur on the basis of authority letter given by Shri L.K. Bansal. From these facts and other, circumstances discussed in detail in the assessment order, the assessing officer concluded that the Calcutta party had been introduced in the scheme of things after enquiry had started under section 132(5) of the Act. Thus, the assessing officer treated the investment of Rs. 7,36,921 as unexplained and made the addition under section 69 of the Act.
17. Regarding the next investment of Rs. 5,42,512, the assessing officer found that 12 drafts for this amount were deposited with CCL, along with other papers under the signatures of Shri L.K. Bansal, partner, including his affidavit. In his statement recorded on 24-11-1993, Shri Bansal denied his signatures on the coal allotment application, on the application authorizing Shri Anil Kumar Thakkar and Shri Arjun Thakur to lift the coal and the application appointing Shri Vishnu Bahadur as agent in the coal application. It was stated by Shri Bansal that all these signatures had been forged by M/s Sweta Coal Sales- Corporation. Form No. C filed with coal application was forged as the STO confirmed that no such form had been issued. The assessing officer also found that there drafts had been purchased by Shri Surendra Bahadur Singh and the remaining by Shri Girish Narain Singh. The assessing officer made enquiry through Assistant Commissioner, Hazaribagh, who reported that none of these persons were available at the given address. From these facts as discussed in detail in the assessment order, the assessing officer inferred that the investment of Rs. 5,42,512 had been made by the assessee and as such, he made the addition under section 69 of the Act.
18. On appeal, the assessee contended that the investment of Rs. 7,36,921 had been really made by M/s Sweta Coal Sales Corporation as per agreement. The assessee further submitted that the original agreement was with the Calcutta party but both the copies had been certified by Notary. It was further submitted that M/s Sweta Coal Sales Corporation was as existing firm on whom summons were served. Regarding lifting of 1,200 MT of coal by Shri Arjun Thakur, it was submitted that he was an employee of M/s Sweta Coal Sales Corporation. It was also submitted that the coal lifted by him in June, 1990, was not immediately sent to use due to panic amongst the agents due to income-tax raids but was actually sent in January and February, 1992, when it was recorded in books. It was stated that during the intervening period coal remained with the agent in his godown. It was further stated that the blank letter papers with signatures were supplied to M/s Sweta Coal Sales Corporation who authorized Shri Arjun Thakur and others to deal with the lifting of coal. Regarding drafts of Rs. 5,42,512 the assessee reiterated the same contentions as were raised before the assessing officer. It stressed that it did not apply for any road permit to the Director of Industries, Kanpur. It submitted that the affidavit and other papers filed 'before CCL were forged inasmuch as the affidavit was sworn at Ranchi but the partner Shri L.K. Bansal never went to Ranchi. The firm did'not know anything . about Shri Anil Kumar Thakkar, Shri Arjun Thakur and Shri D.K. Murti who were allegedly authorized to life the coal. The firm did not known anything about Shri Surendra Bahadur Singh or Shri Girish Naraian Singh who actually purchased the drafts. Thus, it, was claimed that the additions of Rs. 7,36,921 and Rs. 5,42,512-were unjustified.
19. The Commissioner (Appeals) after having considered the submissions made by the assessee has held thus :
"I have considered the facts of the case as contained in the assessment order and the arguments made orally and in the written submissions filed on 9-2-1995. The appellant's claim is that the investment of Rs. 7,36,921 had been made by SSC on behalf of the appellant. As the appellant's claim is that the said investment was made by a third party, it was the obligation of the appellant to produce the said person with necessary evidence. In the present case, summons were issued on the request of the assessee but SSC did not appear. SSC even did not appear before Income Tax Officer, Calcutta, with the relevant books of account. Even after this, the appellant did not take any action to produce the party for cross-examination by the assessing officer. The appellant's obligation to establish the genuineness of transaction does not end with getting a summon issued. The assessing officer has stated that Income Tax Officer, Calcutta, reported that SSC was not available on the given address. The assessing officer, found that some coal had been lifted by Arjun Thakur who had been authorized by Shri Bansal partner to lift coal. It is now claimed that he was an employee of SSC but no evidence has been brought on record to establish his identity. The assessing officer had also found that in the papers filed with CCL name of SSC does not appear as an authorized agent of the appellant. No submissions have been made before me to rebut this observation of the assessing officer. In these circumstances, I agree with the assessing officer that the investment of Rs. 7,36,921 has been made by the appellant from undisclosed sources. The addition is confirmed.
"I am also not impressed with the contention that in respect of drafts for Rs. 5,42,512, the signatures of Shri Bansal, partner, had been forged by. somebody on various applications, papers including affidavits filed with the Director of Industries, Kanpur and CCL. The legal presumption is that apparent is real unless proved otherwise. The appellant has not filed any evidence or expert opinion in support of its claim. It also did not request the assessing officer to obtain expert opinion. The affidavit is sworn before the Notary and the identity of the persons swearing the affidavit is certified by some responsible person. The story of forged signatures does not carry any conviction with me. On the facts as contained in the assessmentr order, the assessing officer was justified in reaching the conclusion that the investment of Rs. 5,42,512 had been made out of unexplained funds. The addition is confirmed."
20. Before us, the learned counsel for the assessee has submitted that information about these drafts came into the possession of the department as a result of searches conducted at the premises of CCL, Ranchi, under section 132(l) of the Income Tax Act made on 30-7-1990 and 24-12-1991. The first draft of Rs. 7,36,921 was for delivery of 1,200 MT of coal and the second draft of Rs. 5,42,512 was for 1,254 MT of coal. Regarding draft of Rs. 7,36,921, the learned counsel has submitted that the draft was deposited by M/s. Sweta Coal Sales Corporation as per agreement between the assessee and the said party. Under the agreement, M/s. Sweta Coal Sales Corporation was authorized to act as an agent for doing necessary work including deposit of purchase price from their own fund. The learned counsel further pointed: out that no, investment in the said draft was made by the assessee, In this connection he has referred to the affidavit of M/s Sweta Coal Sales Corporation dated 29-11-1990, wherein it has been stated that the investment of Rs. 7,36,921 by demand draft in favour of CCL, Ranchi, on account of M/s Technical Glass Industries was made by them and they are regular income-tax assessee under IT File No. 2(12)/9116/S/Cal. The learned counsel has also referred to the copy of agreement dated 15-5-1990, entered into between the assessee and the said concern. Thus, the learned counsel has further pointed out that as per law it is not necessary to get this agreement registered and no adverse inference can be drawn against the assessee. The learned counsel has further submitted that the assessing officer issued summons to M/s Sweta Coal Sales Corporation but the report received by the assessing officer in this regard from its counterpart at Calcutta was never confronted to the assessee. Since M/s Sweta,Coal Sales Corporation is a regular assessee, hence his existence cannot be doubted. Therefore, the assessing officer ought to have made further enquiry to ascertain the actual fact of deposit of DD by the said concern, but the same has not been done by the assessing officer. Regarding release of 525.04 MT of coal, the. Learned counsel has submitted that Sri Arjun Thakur is an employee of M/s Sweta Coal Sales Corporation. However, the same was not sent by them to assessee after lifting the same from the collections in the month of June 1990 as there was panic amongst the agents. Therefore they could not make arrangement to send the coal. However, the same was sent to the assessee later on and was received by the assessee in the month of January and Feb 1992. Accordingly the assessee recorded the same in its books of accounts. However, no payment has been made to M/s Sweta Coal Sales Corporation in respect of the said delivery of coal as they,had forged certain documents. The assessing officer has merely proceeded to make the addition on the basis of surmises and conjectures and the same is not legally sustainable. Thus, the learned counsel has urged the there is no proof on record that the assessee had deposited the money for purchasing the, draft, hence section 69 of the Act cannot be invoked against the assessee.
21. With regard to draft of Rs. 5,42,512 the learned counsel submitted that the said draft was stated to have been deposited with CCL along with other papers under the signatures of Shri L.K. Bansal, the partner including his affidavit ' However, Sri. Bansal in his statement recorded on'24-11-1993 has specifically denied his signatures appearing on the said, papers. The learned counsel has thus reiterated the submissions of the assessee as were made before the lower authorities. He has further argued that no nexus has been established by the department between the assessee and the persons who purchased the draft on behalf of the assessee. The ST department also established that the sales-tax form was forged as the same was never issued to the assessee. The learned counsel has further pointed out that since the original documents had not been shown to the assessee then how the assessee could have got opportunity to obtain the expert opinion of handwriting experts on the, issue whether the signature of his partner does appear on the alleged documents filed before CCL on behalf of the assessee. The learned counsel has pointed out that the entire transaction covered by this draft was a part of scheme manoeuvred by some gang and the assessee had never paid any amount by draft or otherwise in this regard. In this connection, he has referred to affidavit filed before the Hon'ble High Court at Calcutta on behalf of the revenue in the matter of CO No. 8379(W) of 1990 in All India Coal Consumers & Traders Federation and Ors. v. Coal India Ltd. & Ors., wherein specific averment has been made as under :
"There were materials before the IT department to believe that though the delivery order issued in the name of the sponsored petitioners but the money value of the coal and actual delivery were never made by the sponsored petitioners but the amount invested in bank drafts and presented on behalf of the sponsored petitioners for value of the coal did not belong to the sponsored petitioners and entire purchases mo ney deposited with the Central Coalfields Ltd., Ranchi, were made by bank drafts which were purchased from banks at Bihar and the said actual purchasers are evading payment of tax and never disclosed the source of money so deposited."
22. The learned counsel has further submitted that identical issue came up for consideration before the Tribunal, Allahabad, in the decision of Shri Kashi Prasad, Jhansi v. Assistant Commissioner (ITA Nos. 1901 & 1902/Alld/1992) and also CIT v. Rameshwar Dayal Agarwal (R.A. Nos. 175 & 176/Alld/1996), wherein the Tribunal deleted the addition made under section 69 of the Act being unexplained investment in the purchase of draft for supply of coals by CCL, Ranchi, by holding that the investment of the business cannot be said to have been done by the assessee and the reference application made against the said order has been dismissed. Thus, the learned counsel has urged that the impugned additions are not legally sustainable, hence the same may be deleted.
23. Before us, the learned Departmental Representative has submitted that the assessee is a manufacturer of glassware, hence requires coal. Therefore, the assessee regularly applies to CCL, Ranchi, for supply of coal. It is also registered with department of Industries who gives permits for supply of coal. Hence, he has business connection with CCL. In respect of draft of Rs. 7,36,921, the learned Departmental Representative has submitted that the assessee has admitted that the coal was received through M/s Sweta Coal Sales Corporation. The learned Departmental Representative has submitted that since the assessee has claimed that the investment of Rs. 7,36,921 has been made by M/s Sweta Coal Sales Corporation on behalf of the assessee, the onus was on the assessee to prove that the said investment was made by thesaid party, particularly in view of the fact that all the documents found during the search have shown the investment made by the assessee. Since nobody appeared on behalf of the M/s Sweta Coal Sales Corporation despite summons having been issued to them by the assessing officer which fact was confronted to the assessee, however, it failed to produce the said concern. Hence, the assessee has failed to discharge the primary onus that lie on the assessee. While referring to the terms of agreement entered into between the assessee and M/s Sweta Coal Sales Corporation, the learned Departmental Representative has submitted that if the amount of Rs. 7,36,921 was invested by M/s Sweta Coal Sales Corporation then why M/s Sweta Coal Sales Corporation did not raise any bill. It is only in January, 1992, M/s Sweta Coal Sales Corporation had raised the bill. Thus, it is against human probability and as such raises a doubt about the genuineness of the transaction. During the course of hearing the learned Departmental Representative sought leave of the Bench to file an additional evidence in the form of an affidavit of Shri K.K. Sharma, Jt. CIT, Range-V, Firozadbad, dated 14-2-2002, enclosing therewith copies of the letters dated 31-7-1995, 13-9-1995 and 20-11-1995, of the assessee stating that the seizure of Rs. 9,59,000 should be utilized for adjustment of the outstanding tax liability of the assessee-firm for the assessment year 1991-92 and also stating that the said money was a part of the assets of the firm and belonged to the firm. The learned Departmental Representative has pointed out that this additional evidence was not available at the time when the assessment order was passed and has come into the possession of the revenue later on, hence she requested for admission of the said additional evidence. After having heard the parties about the admissibility of additional evidence, the additional evidence was admitted as the same is a crucial evidence for adjudication of the issue involved in the matter. While relying upon the said additional evidence the learned Departmental Representative has argued that it is established beyond doubt that the assessee has made the unexplained investment in the purchase of demand drafts. On the other hand, the learned counsel for the assessee has submitted that these letters have been signed by one of the partners after his retirement seeking adjustment of money, hence no reliance can be made to the said letters.
24. We have heard the parties and perused the records of the case. The claim of the assessee is that the investment of Rs. 7,36,921 has been made by M/s Sweta Coal Sales Corporation on behalf of the assessee and the assessee has not made any investment in the purchase of the said draft. It is seen that the assessing officer has made enquiries to find out the correct factual position with regard to the investment in the purchase of the said draft. The assessing officer issued summons to M/s. Sweta Coal Sales Corporation, however, M/s. Sweta Coal Sales Corporation did not appear which fact was brought to the notice of the assessee. Since the assessee has claimed that the investment has been made by M/s Sweta Coal Sales Corporation and not by it, the primary onus was on the assessee to discharge the same. However, the same has not been discharged. It is also on record that the assessee had received 525.04 MT coal lifted through M/s. Sweta Coal Sales Corporation in January and February, 1992, and the same has been recorded in the books of the assessee. The contention of the assessee that the assessee has not made any payment in respect of the said receipt of coal has not been substantiated, besides the same is against the terms of the agreement entered into between the assessee and the said concern. With regard to the draft of Rs. 5,42,512 all the documents seized during the search and seizure would show that the investment was made by the assessee. The legal presumption is that apparent is real unless proved otherwise. However, the assessee has not brought any material before' the assessing officer to rebut the said legal presumption. Further, it is seen that the additional evidence filed on behalf of the revenue department being the affidavit of Shri K.K. Sharma, Jt. CIT, enclosing therewith the copies of the letters dated 31-7-1995, 13-9-1995 and 20-11-1995, goes to the roots of the case. It has clearly been admitted by the assessee 'that the said money is a part of the assets of the firm and belonged to the firm, and the seized amount of Rs. 9,59,000 should be utilised for adjustment of the outstanding tax liability of the assessee-firm for assessment year 1991-92. Thus, the assessee's own admission clearly established that the investments in the drafts, of Rs. 7,36,921 and Rs. 5,42,512 have been made by the assessee-firm and has not been made by any outside party. The contention of the learned counsel that the said letters have been issued by erstwhile partner after his retirement does not make any difference as the admission by the said party has been made in respect of the assessment year 1991-92 when he was very much partner of the assessee-firm. In the facts and circumstances of the case, we hold that the impugned investments in the drafts have been made by the assessee-firm. Therefore, the lower authority was justified to make the impugned additions.
25. The fourth ground of appeal relates to the order sustaining the addition of Rs. 32,143.
26. Briefly stated, facts are that during course of search it was found that the coal of 625.04 MT lifted from CCL in June, 1990, by Sri Arjun Thakur, authorized agent. However, this coal did not reach Firozabad till February, 1992. The assessee having failed to explain where this coal remained for more than one and half years, the assessing officer held that this coal worth Rs. 3,21,432 must have been sold in the open market on which net profit at 10 per cent was estimated at Rs. 32,143. Hence, the assessing officer made the addition of Rs. 32,143 to the income of the assessee. On appeal the Commissioner (Appeals) confirmed the same.
27. We, after having heard the parties, found no justification for making addition on this account inasmuch as the receipt of 525.04 MT of coal has been recorded in the books of the assessee. We, therefore, delete the same.
28. The ground No. 5 of the appeal is in respect of,charging of interest under sections 234B and 234C of the Act.
29. The learned counsel while referring to the assessment order has submitted that there had been no specific order for charging of interest. The interest levied under sections 234B and 234C is not legally sustainable. In this connection he has relied upon the decision of Hon'ble Supreme Court in the case of CIT & Ors. v. Ranchi Club (2001) 247 ITR 209 (SC). It may be mentioned that identical issue came up for consideration before this Bench in the case of M/s Industrial and Building Glass Industries, Firozabad v. Assistant Commissioner in ITA No. 1423/Del/1994, wherein it has been held thus :
"From the above dismissal of SLP by the Hon'ble Supreme Court though apparent conflict noticed but it is certain that in the body of assessment order there must be express mention about the levy of interest, but in the instant case the assessing officer has not directed to charge interest at all what to say under a particular section."
30. We, therefore, hold that the department is not entitled to charge interest under sections 234B and 234C of the Act.
31. Now, we will take up the appeal of the revenue department.
32. The first ground of appeal related to the order deleting the addition of Rs. 1,80,804 out of addition of Rs. 3,70,294 made on account of unexplained investment in the stock. For the reasons stated in respect of ground of appeal taken by the assessee, we dismiss this ground of appeal.
33. The second ground of appeal,' relates to order deleting the addition of Rs. 1,93,775 made on account of extra profit. The assessing officer noticed that the declared sale was for Rs. 86,04,804 and observed that the excess stock pledged to the bank had been disposed of by March, 1990. Thus, keeping this fact in view the assessing officer estimated the sale of Rs. 1 crore on which GP rate of 12 per cent was applied against the declared GP of 11.7 per cent and estimated GP at Rs. 12 lakhs as against declared GP at Rs. 10,06,225. Thus, the extra profit worked out by the assessing officer came to Rs. 1,93,776 and the same was added to the income of the assessee.
34. On appeal, the Commissioner (Appeals) held that the addition of Rs. 1,93,775 by rejection of accounts and higher application of GP rate is not justified. We find no infirmity in the order passed by the Commissioner (Appeals) inasmuch as the addition made on account of discrepancy found in the stock shown to the bank and in the books of account has since been deleted. We, therefore, dismiss this ground of appeal.
35. Ground Nos. 3 and 4 are general in nature and need no comments, hence the same are dismissed.
36. In the result, the appeal of the assessee is partly allowed and that of the revenue is dismissed.