Income Tax Appellate Tribunal - Ahmedabad
M. Ravji & Co. vs Income Tax Officer. (Dy. Cit V. M. Ravji & ... on 22 March, 1996
Equivalent citations: (1996)55TTJ(AHD)625
ORDER
B. L. CHHIBBER, A. M. :
These cross appeals and the cross objection filed by the assessee arise out of the order of the CIT(A), Ahmedabad. First we take up the assessees appeal (ITA No. 2075/Ahd/1990) in which as many as 11 grounds have been raised.
2. In ground No. 1 it has been contended that the CIT(A) has erred in holding that the partnership loss in the firm of M/s. Marco Pharmaceuticals, is not allowable in computing the total income of the assessee. At the time of hearing this ground was not pressed. The same is accordingly dismissed.
3. In ground No. 2 it has been contended that the CIT(A) has erred in confirming the disallowance of motor car expenses and depreciation and thereby treating that 1/4th of the said expenses is non business and personal expenses. It is noted that a similar issue came up before the Tribunal in asst. yr. 1981-82 and the Tribunal restricted the disallowance to 1/5th. Respectfully following the order of the Tribunal in ITA No. 272/Ahd/1987 relating to asst. yr. 1981-82 we direct that disallowance on account of motor car expenses and depreciation thereon should be restricted to 1/5th. This ground succeeds in part.
4. In ground No. 3 it has been contended that the CIT(A) has erred in disallowing Rs. 1,000 being the cost of stamp paper to record the change in the partnership deed. At the time of hearing this ground was not pressed. The same is accordingly dismissed.
5. In ground No. 4 it has been contended that the CIT(A) has erred in confirming the disallowance of Rs. 12,761 being difference in balance sheet. At the time of hearing this ground was not pressed. The same is accordingly dismissed.
6. Ground No. 5 reads as under :
"The CIT(A) has also erred in confirming disallowance of Rs. 63,384 being four purchase bills of empty tins from Rajesh Trading Company mentioned at serial Nos. 2,3,4 and 5 in para No. 6(1) on page No. 7. It is submitted that purchase bills at serial Nos. 2 and 3 are dt. 22nd June, 1983 and 28th June, 1983 which happens to be the last week of the previous year.
Since the bills/goods are actually received after 1st July, 1983, the charge/accrual of liability for payment of purchase is during the relevant year and, therefore, the same ought to have been allowed as deductible expenses. Alternatively, if the bills are held as pertaining to earlier year, i.e., relevant to asst. yr. 1984-85, the CIT(A) ought to have allowed the same as a deduction in the appeal for asst. yr. 1984-85 which was simultaneously disposed of by him on the same day.
The CIT(A) has further erred in disallowing purchases at Sr. Nos. 4 and 5 holding that posting in daily expenses register is not in chronological order.
It is submitted that the posting in the daily expenses register is made on the basis of receipt of the bills/goods by the appellant from the suppliers and not on the basis of dates of the bills. Since the bills bearing different dates are received in course of day to day business, it is impossible for any businessman to enter the bills on the basis of date of bills and, therefore, merely because the entry is not in chronological order is not the ground for rejecting genuineness of the purchase bills in question."
At the time of hearing the above ground No. 5 was not pressed. The same is accordingly dismissed.
7. In ground No. 6 it has been contended that the CIT(A) has further erred in disallowing Rs. 19,876 out of advertisement bills of M/s. Navnitlal & Co. aggregating to Rs. 86,444 holding that bills aggregating to Rs. 19,876 pertains to earlier assessment year. At the time of hearing this ground was not pressed. The same is accordingly dismissed.
8. In ground No. 7 it has been contended that the CIT(A) is not justified in disallowing Rs. 94,821 out of advertisement expenses of Chitra Advertisers considering the same to be pertaining to the earlier assessment year. At the time of hearing this ground was not pressed. The same is accordingly dismissed.
9. In ground No. 8 it has been contended that the CIT(A) is not justified in disallowing Rs. 26,264 out of vehicle expenses of Rs. 84,768 in Tour and Travel Set and Rs. 40,031 out of diesel expenses in Tour and Travel Set.
9.1 The assessee had claimed vehicle expenses of Rs. 84,768 in its Tour and Travel Division. The Assessing Officer (AO) noted that there were self prepared cash bills not supported by bills/vouchers to the extent of Rs. 26,261. The AO gave a number of opportunities to the assessee to file the evidence but since no evidence was furnished before him, he disallowed the amount of Rs. 26,264.
9.2 On appeal, the CIT(A) confirmed the addition observing as under :
"On careful consideration of the matter I feel that since the entire expenses are not verifiable and as pointed out by the ITO that vouchers to the extent of Rs. 26,261 are self prepared cash vouchers without any support, I am of the view that addition made by the ITO after verification and for the facts deserves to be sustained. I would therefore confirm the addition of Rs. 26,264."
9.3 Also in the Tour & Travel Division the assessee had claimed the diesel expenses of Rs. 1,04,348. On verification of the vouchers for expenses claimed, the AO noted that payments to the extent of Rs. 40,031 were not supported by proper vouchers. He, therefore, added the same to the total income of the assessee.
9.4 On appeal, the CIT(A) confirmed the addition stating that "since the facts of the case on this point are similar to that of vehicle expenses, I, for the reasons given above confirm the addition of Rs. 40,031."
9.5 Shri K. H. Kaji, the learned counsel for the assessee, submitted that the CIT(A) ought to have considered the time to time break up of these expenses alongwith Xerox copies of supporting evidence, bills and vouchers filed in the paper book submitted at the time of hearing of the appeal and since all the expenses are supported by original vouchers, the same ought to have been allowed in full. The learned counsel for the assessee drew our attention to page 43 of the paper book which contains details of vehicle expenses not supported by proper vouchers and pointed out that a sum of Rs. 20,200 was expended on 6th March, 1984 by cheque for the purchase of tyres and atleast this amount should have been allowed, which is supported by internal voucher at page 56 of the paper book.
9.6 The learned Departmental Representative submitted that no details were furnished before the AO in spite of several opportunities allowed by him and accordingly the CIT(A) was justified in not entertaining the details. He further submitted that the expenses are only supported by internal vouchers and no reliance can be placed on the same.
9.7 We have considered the rival submissions and perused the facts on record. It is noted that the assessee did not furnish any evidence by way of supporting vouchers before the AO and accordingly the AO was justified in disallowing the expenses. The CIT(A) was justified in rejecting the contentions of the assessee because the expenses were not supported by any cogent evidence. As regards the contention of the learned counsel that the amount of Rs. 20,200 was paid by cheque for the purchase of tyres, we do not think that this amount can be allowed by us when it was not got verified before the authorities below. A perusal of the internal vouchers at page 56 of the paper book to which our attention has been drawn by the learned counsel, reveals that internal voucher was not made on the bill book of Amar Sales Agency and later on Amar Sales Agency was struck off and the words M. Ravji & Co. were written by hand. No. reliance can be placed on such an unauthenticated evidence. We accordingly hold that the authorities below were justified in making the impugned disallowances. This ground accordingly fails and is dismissed.
10. In ground No. 9, it has been contended that the CIT(A) is not justified in treating Rs. 2,26,718 as income of the assessee realised on sale of empty tins which is not accounted for. This ground is linked with ground No. 4 raised by the Revenue in its appeal (ITA No. 2698/Ahd/90) which reads as under :
"The learned CIT(A) has erred in law and on facts in restricting addition to Rs. 2,26,717 as against Rs. 43,56,464 added by the ITO on account of unaccounted sales."
We consolidate both the grounds and proceed to dispose of the same in the following paragraphs.
10.1 The assessee firm deals in edible oil. The oil is purchased in bulk. After filtration it is repacked in the packing of different sizes and sold under the trade name of "PANKAJ". After scrutinising the books of accounts and other records the ITO noted that the number of tins used for packing was less than the number of tins purchased and brought forward as opening stock. He further noted that there was shortage of 13,530 tins of 15 Kg., 778 of 10 Kg., 297 of 8 Kg., 1411 of 5 Kg., 1608 of 4 Kg., 2346 of 2 Kg., 3407 of 1 Kg., 519 of 1/2 Kg. and 78 of 200 Kg. The position has been worked out by the ITO in two annexures appended to the assessment order viz. Annexure A and Annexure B. In Annexure A of his order, the ITO has observed that there is a difference between number of tins purchased and number of tins for packing. This difference is taken by him as shortage. In the same annexure A, purchase cost of each empty tin is observed, multiplied with the number of tins taken as shortage and the aggregate value arrived at comes to Rs. 2,63,050. This would give actual cost of empty tins treated as shortage by the ITO. In annexure B there are elements like sale of empty tins, either fresh or damaged. There are some tins in the closing stock on the last day of the accounting period i.e., 30th June, 1984. The balancing figure is the number of tins which are missing in the tins tally. This represent number of tins either received less or lost in transit, stolen away or discarded as unserviceable/unsaleable. The ITO noted that total oil contained of these tins was 234,967 Kgs. and in terms of money it will amount to Rs. 43,56,464. He therefore concluded that this represented sales outside the books of account and therefore added this amount to the total income of the assessee.
10.2 On appeal, the CIT(A) held that there was no ground for presuming that the assessee had sold tins worked out as shortage by the ITO filled with edible oil because for making unaccounted sales assessee should have unaccounted purchases or get extra stock by claiming excess shortage or adulterate commodity, that the assessee had such extra stock either by way of purchase or by way of claiming excess stock or by way of adulterate can be proved inter alia with reference to packing materials expenses. He observed that in the present case the ITO had not brought anything on record to prove that assessee had made unaccounted purchases. He further noted that from the claim of the process loss or shortage at 0.26% of the assessee firm it could not be held that excess claim of shortage had been made because it was within the prescribed limit by the Food Control authority. The CIT(A) further noted that the assessee firm was subjected to food adulteration law also and there was nothing on record to show that the assessee was found violating the Food Adulteration Laws. The CIT(A) further noted that purchases and sales of the assessee firm were fully vouched and the ITO had not found any defects therein. The CIT(A) also got a chart prepared by the assessee showing the details of freight/octroi and majuri paid and it was seen that as per these details also there appeared to be no purchases outside the books of accounts. The CIT(A) further held that since the assessee firm was not manufacturing oil but only purchasing oil and refining it, there was no question of suppression of production. The CIT(A) therefore held that there was no justification in holding that the assessee had sold tins filled with edible oil.
10.3 As regards the shortage of empty tins the CIT(A) noted that full details of such sales were not available and therefore it would be fair and reasonable that addition on account of shortage of empty tins should be made. The assessee argued before him that the issue was covered in favour of assessee by the decision of the Tribunal in the case of the assessee itself for asst. yrs. 1964-65 and 1965-66. The CIT(A) held that such an addition will be justified in spite of the aforesaid decision of the Tribunal because at that time the stand of the assessee was that it was not maintaining any stock of empty tins and it was claimed that stock purchased in one year was being utilised in another year. According to the CIT(A) in this year the position was different because the assessee has made it clear that it had no closing stock of empty tins because they were exhausted either by way of sale or short receipt or damaged or theft but at the same time the assessee has failed to prove that such things really happened. The CIT(A) accordingly held "under these circumstances it cannot be ruled out that some bogus purchases of empty tins might have been incorporated in the books of accounts to reduce the profit. This impression is strengthened by observation of the ITO in para 4, 5, 6 and 7 of his assessment order wherein he has doubted the transaction relating to purchase of empty tins." The CIT(A) noted that the total cost of empty tins found short was Rs. 2,63,050 and since the assessee had already shown Rs. 36,332 as sale proceed, he reduced this amount from the amount of Rs. 2,63,050 and treated the balance as unaccounted income of the assessee. He thus confirmed the addition of Rs. 2,26,717 on account of shortage of tins. the CIT(A) has further observed as under :
"It may be added here that in the alternative argument the learned counsel of the appellant has admitted such an addition. In other words while the addition of Rs. 43,56,464 is deleted in its place addition of Rs. 2,26,717 is made. It means that out of total addition of Rs. 43,56,464, addition of Rs. 2,26,717 is confirmed and balance is deleted."
10.4 Shri K. H. Kaji, the learned counsel for the assessee, submitted that business run by the assessee is subject to the supervision and control of the State authorities under the Essential Commodities Act. The assessee is required to maintain a register issued by the Civil Supplies Department under their stamp. The said register is maintained on day to day basis containing the following details :
(i) Opening balance
(ii) Quantity of oil received during the day along with the name of the party from whom the supply was received, the bill number also.
(iii) Quantity of oil sold and the closing stock.
Fortnightly a statement is prepared and sent to the concerned department with respect to the aforesaid details. The said register supplied by the department is also stamped on every page and contains a note at the end about the number of pages contained in the register. Supervision is carried out by the department from time to time on the basis of the statement supplied and also by way of surprise checks from time to time.
Apart from the Essential Commodities Act, edible oil, being a sensitive commodity, is also subject to various controls and regulations under the Weights and Measurement Act, Prevention of Food Adulteration Act and the law controlling the rates for selling the commodities. These departments also carry out the supervision and surprise checks from time to time.
The assessee also maintains a stock register on day to day basis containing the record of packed tins of different sizes and different quality of edible oil such as groundnut oil, coconut oil, repseed oil etc. In the stock register, the particulars are recorded as under :
(1) Opening balance of packed tins (2) Tins packed during the day (3) Packed tins sold during the day (4) Closing stock of packed tins This register serves a dual purpose of recording ready packed tins, tins packed during the day and packed tins sold during the day. As is on the record, the tins are of different sizes and are filled with edible oil of different types.
10.5 The learned counsel for the assessee submitted that the AO has not found any fault and in spite of all proper records maintained which were shown to the AO with due explanations, there was no justification in presuming that the assessee had sold tins filled with edible oil, outside the books of accounts. As regards the addition sustained by the CIT(A) on account of shortage of empty tins the learned counsel for the assessee submitted that though the assessee did not maintain any stock register with regard to empty tins, the same were straightaway debited to the packing material account. In fact, at the end of the year some stock of empty tins obviously was there and the details of the same were furnished to the AO. He further submitted that the loss of tins by way of theft etc. is extremely small percentage of the total tins which is even less than the normal loss which will be there in the course of trade. Further, attention has been drawn to the orders of the Tribunal for the earlier years right from 1964-65 where the same issue was raised regarding addition on account of closing stock of empty tins and the same was explained by the assessee as above by the assessee. According to the assessee there is no difference in the practice followed by the assessee in this year and, therefore, to that extent the observations of CIT(A) that this year the position was different are not borne out by the record. The assessee had never stated that there was no closing stock and what was stated was that closing stock was not shown in the books as per the consistent accounting practice followed by the assessee. The learned counsel further submitted that the CIT(A) has made addition of Rs. 2,26,718 on altogether a fresh ground which is not dealt with by the ITO and therefore the same amounts to enhancement. He further submitted that the CIT(A) before making such enhancement has not granted show cause notice/opportunity of being heard to the assessee which is required as per procedures laid down by the IT Act and therefore the enhancement is bad in law and be deleted. The learned counsel further submitted that the CIT(A) is not justified in stating that "in the alternative argument the learned counsel of the appellant has admitted such an addition." He further submitted that the assessee had agreed only to an addition of Rs. 17,891 and in this connection he drew our attention to para 13 of the written submissions before the CIT(A) at page 77 of the paper book which reads as under :
"13. Without prejudice to above and in the alternative, if it is presumed without admitting that all contentions of the ITO are correct and all explanations/submissions of the appellant are not acceptable even then, at the most of the difference in the quantity tally of empty tins, the aggregate cost of which is worked out at Rs. 17,891/49 may be added as closing stock of empty tins, as done in the earlier assessment year."
10.6 The learned Departmental Representative submitted that the assessee had not maintained any proper accounts of the empty tins which fact has been noted by the CIT(A) at page 22 of his order, and as such the addition of Rs. 2,26,718 on account of empty tins is fully justified. As regards the issue that the assessee sold tins filled with edible oil, (which is subject matter of appeal by the Revenue), the learned Departmental Representative relied upon the observations of the AO.
10.7 We have considered the rival submissions and perused the facts on record. Except presuming that the assessee sold tins filled with edible oil, the AO has not brought anything on record to prove that the assessee had made unaccounted purchases. The business run by the assessee is subject to supervision and control of the State authorities under the Essential Commodities Act. The assessee has maintained all registers required by the Civil Supply department and as pointed out by the learned counsel for the assessee nothing adverse was noticed by Civil Supply Department. The business of the assessee is also subject to Prevention of Food Adulteration Act and nothing has been brought on record that the assessee adulterated edible oil and in the process had some edible oil to sell outside the books of accounts. The assessee has maintained complete stock tally of the oil purchased and sold and process loss or shortage is 0.26% which is within the prescribed limits by the Food Control Authorities. The purchases and sales of the assessee firm were fully vouched and the AO did not find any defects therein. It is further noted that the CIT(A) also got a chart prepared by the assessee showing the details of freight/octroi and Majuri paid and it was seen that as per these details also there appeared to be no purchases outside the books of accounts. Under the circumstances we hold that there is no justification on the part of the AO to presume that the assessee sold tins filled with edible oil and accordingly the CIT(A) is justified in deleting the addition of Rs. 40,93,414 (Rs. 43,56,464 - Rs. 2,63,050) on account of alleged sales of edible oil made outside the books of accounts. Thus, ground No. 4 raised by the Revenue in its appeal (ITA No. 2698/Ahd/90) stands dismissed.
10.8 As regards the addition on account of empty tins it is noted that all is not well with the accounts maintained by the assessee in respect of the empty tins. Though the assessee is purchasing empty tins on a very large scale it has not any separate account for the same but admittedly debits cost of empty tins to packing material account. Full details of sales of tins was not available and the assessee could not substantiate that there was loss of tins because of theft and short supply. Further, the AO has pointed out the specific defects in respect of purchases and disposal of empty tins in paras 4, 5, 6, 7 and 8 of his order. Under the circumstances we hold that the addition of Rs. 2,26,718 is justified. The contention of the learned counsel that the CIT(A) ought to have followed the order of the Tribunal relating to asst. yrs. 1964-65 and 1965-66, is untenable because as rightly pointed out by the CIT(A) the facts are distinguishable. Further, the year under appeal is 1985-86 and much water has flown through the bridges since asst. yr. 1964-65. We also do not find any merit in the contention of the learned counsel that the CIT(A) has made the addition of Rs. 2,26,718 on altogether a fresh ground and therefore the same amounts to enhancement because the AO in the two annexures i.e. Annexure A and Annexure B has dealt with the issue of empty tins and the issue before the CIT(A) was not a new one. The action of the CIT(A) does not amount to enhancement because out of total addition of Rs. 43,56,464 he has retained only an addition of Rs. 2,26,718. We however accept the contention of the learned counsel that the assessee had not agreed to the addition of Rs. 2,26,718 as stated by the CIT(A) in his order because as is evident from the paragraph reproduced in para 10.5 the assessee agreed only to an addition of Rs. 17,891 but that factor is not very material. If an addition of Rs. 2,26,718 is called for then the same is to be confirmed notwithstanding the fact whether the assessee agreed to such an addition or an addition of a lesser amount. Accordingly we dismiss ground No. 9 raised by the assessee.
11. Ground No. 10 reads as under :
"The CIT(A) has also erred in confirming the disallowance of Rs. 2,12,750 being the commission paid to Ravji Family Trust, Rajkot.
It is submitted that the commission had been paid during the course of business and for the purpose of business and the provision of s. 40A(2) to the facts of the case both on point of facts and point of law. are not applicable.
It is submitted that the payment of commission is fair and reasonable and keeping in mind the services rendered by the recipient Ravji Family Trust.
It is submitted that the payment of commission is at the usual market rate and at the rate at which Ravji Family Trust charges commission from other business constituents.
Alternatively it is submitted that if at all any disallowance is called for under this head and presuming that provision of s. 40A(2) applies, then the same should be restricted to excess payment of commission and not to the entire amount of commission as disallowed by the AO which is a fallacy and without regarding the matter and considering the facts of the case and provision of law."
11.1 The AO made the disallowance of Rs. 2,12,750 observing as under :
"The assessee was asked to furnish the details of commission payment to M. Ravji Family Trust, Rajkot. The same has not been supplied by the assessee. On the basis of information gathered, it is seen that the commission fixed is 30 paise per 100 Rupees. On the basis of the figure of sale effected from the above party during the year the commission is worked out at Rs. 2,12,750."
11.2 When the matter came up before the CIT(A) it was submitted by the assessees counsel that in the earlier years the CIT(A) had decided this issue against the assessee and therefore he would not argue this ground of appeal in detail but would reiterate the arguments given in the earlier years. The CIT(A) following his earlier order relating to asst. yr. 1980-81 confirmed the addition made by the ITO on this ground.
11.3 Shri K. H. Kaji, the learned counsel for the assessee, has drawn our attention to the order of the Tribunal Ahmedabad Bench B in ITA No. 2074/Ahd/1990 relating to asst. yr. 1984-85 to which one of us (Accountant Member) was a party and submitted that it was a covered issue in favour of the assessee. In the aforesaid order of the Tribunal the issue was decided in favour of the assessee following the order of the Tribunal relating to asst. yrs. 1980-81 and 1981-82 in ITA Nos. 2873/Ahd/86 and 2982/Ahd/86.
11.4 The learned Departmental Representative submitted that the issue was not covered one because every year is an independent year and the AO called for the details and since the assessee failed to furnish the details the AO was justified in making the impugned addition.
11.5 We have considered the rival submissions. It is well settled that principle of res judicata is not applicable to decisions of IT authorities. An assessment for a particular year is final and conclusive between the parties only in relation to assessment for that year and the decision given in the assessment for an earlier year are not binding either on the assessee or on the Department in a subsequent year. In the instant case the AO called for the details which were not filed. In our opinion the AO had every right to go through the details to find out the nature of transactions, terms/rate of commission paid especially when M/s M. Ravji Family Trust is an allied concern of the assessee firm. In our opinion the AO was justified in calling for the details and terms and conditions of commission paid especially when the payee was an allied concern and as such it cannot be said that the issue is a covered one. Further much water has flown through the bridges since 1980-81 and the whole issue deserves to be looked afresh. Under the circumstances we deem it fit to restore this issue to the file of the AO. The assessee will furnish requisite details before the AO and the AO after taking into consideration the terms and conditions of the commission paid, the date of payment of commission and reasonability of the same, will readjudicate upon the issue after giving an opportunity of being heard to the assessee.
12. In ground No. 11 it has been contended that the CIT(A) has erred in holding that interest under s. 139(8) and 217(1A) be charged as per law. This ground is consequential in nature and the AO is directed to charge interest, if any, under s. 139(8) and 217(1A) after taking into consideration the relief allowed by this order.
13. Now, we take up the Revenues appeal (ITA No. 2698/Ahd/1990). The first grievance of the Revenue is that the CIT(A) is not justified in deleting the addition of Rs. 14,715 out of free delivery charges. Out of total free delivery charges of Rs. 1,47,152, the ITO disallowed Rs. 14,715 i.e. 10% of total expenses for want of proper details.
13.1 When the matter came up before the CIT(A) it was submitted by the assessees counsel that complete details were kept, monthly break-up with copies of sample bills for free delivery were filed before the CIT(A) in support of this contention. After going through the details the CIT(A) deleted the addition of Rs. 14,715.
13.2 After hearing both the sides we do not find any infirmity in the finding of the CIT(A) as there is no justification for disallowing 10% of the expenditure by the AO on estimate. This ground fails and accordingly is dismissed.
14. The next grievance of the Revenue is that the CIT(A) is not justified in deleting the addition of Rs. 17,305 out of conveyance expenses at Bombay. The AO disallowed the expenditure of Rs. 17,305 on the ground that no details were furnished before him. The assessee filed details before the CIT(A) and after examining the same, the CIT(A) deleted the addition of Rs. 17,305.
14.1 The learned Departmental Representative pointed out that since no details were furnished before the AO and the same were furnished for the first time before the CIT(A), the CIT(A) ought to have restored this issue to the file of the AO or alternatively ought to have called for a remand report. The learned counsel for the assessee relied upon the order of the CIT(A).
14.2 We find merit in the contention of the learned Departmental Representative. The AO disallowed the expenditure for want of details from the assessee. The details were furnished for the first time before the CIT(A) and in all fairness the CIT(A) ought to have called for a remand report or ought to have restored the issue to the file of the AO. Accordingly we restore this issue to the file of the AO with the direction that he should go through the details to be furnished by the assessee and readjudicate upon the issue.
15. The next grievance of the Revenue is that the CIT(A) is not justified in deleting the addition of Rs. 17,118 on account of Hamali charges. The facts are that in the absence of supporting vouchers and evidence the ITO disallowed 50% of charges and made an addition of Rs. 17,118.
15.1 When the matter came up before the CIT(A) full details of the amount paid for loading and unloading were furnished before him. Photo copies of some vouchers were submitted to show that the back side of such vouchers contained the name of each and every contract through whom loading and unloading had been done. The CIT(A) deleted the addition "after going through the month-wise break up of loading and unloading and the photo copies of vouchers."
15.2 The learned Departmental Representative submitted that the AO was justified in disallowing the amount of Rs. 17,118 in the absence of supporting vouchers and evidence and the CIT(A) was not justified in entertaining the vouchers and details furnished before him for the first time. The learned counsel for the assessee relied upon the order of the CIT(A).
15.3 After hearing both the sides, we are of the opinion that this issue should be restored to the file of the AO because the CIT(A) was not justified in relying upon the vouchers and details furnished before him for the first time without confronting the same to the AO. This issue is accordingly remitted to the AO for fresh adjudication.
16. Ground No. 4 reads as under :
"The learned CIT(A) has erred in law and on facts in restricting addition to Rs. 2,26,717 as against Rs. 43,56,464 added by the ITO on account of unaccounted sales."
16.1 This ground has already been adjudicated by us in the assessees appeal (supra) and for the reasons given therein, this ground is dismissed.
17. Ground No. 5 reads as under :
"The learned CIT(A) has further erred in law and on facts in deleting the addition of Rs. 25,000 being deposit of Kanayalal & Co. under s. 68 of the IT Act."
During the course of assessment proceedings the AO noted a deposit of Rs. 25,000 in the name of M/s Kanaiyalal & Co. The AO called upon the assessee to produce the party before him for examination. Neither the depositor was produced before the AO nor any confirmation from him was furnished before the AO. The AO held that "in the absence of any evidence I have no other alternative but to hold that the said deposit is unexplained and, therefore, it is added to the total income of the assessee under s. 68 of the IT Act."
17.1 When the matter came up before the CIT(A) it was pointed out by the assessees counsel that the depositor could not be produced because his shop was burnt and he was engaged in that problem. Subsequently he had gone but the ITO did not take the case. It was further submitted that the amount was received by cheque and repaid by cheque. The CIT(A) held as under :
"Keeping in view the fact that the amount was received by cheque and repaid by cheque, interest was paid by cheque and TDS had also been deducted and M/s Kanaiyalal & Co. is an Income-tax assessee I am of the view that the addition made by the ITO is not warranted. I would therefore delete the same."
17.2 After hearing both the parties we do not find any merit in the action of the CIT(A) in deleting the addition of Rs. 25,000. The AO asked the assessee to produce the depositor for examination but neither the depositor was produced nor any confirmation was submitted. Thus the assessee failed to discharge the onus which lay upon it to prove the genuineness of the cash credit. Neither the identity of the creditor, nor his creditworthiness, nor the genuineness of the transaction i.e. the three tests laid down by the Honble Calcutta High Court in the case of Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal) were fulfilled by the assessee. The mere fact that the amount was received by cheque and repaid by cheque, is no ground for treating the cash credit as genuine by the CIT(A) as held by the Calcutta High Court in the case of CIT vs. Precision Finance Pvt. Ltd. (194) 208 ITR 465 (Cal) where it has been held as under.
"It is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. Mere furnishing of the particulars is not enough. Mere payment by account payee cheque is not sacrosanct nor can it make a non genuine transaction genuine."
We accordingly reverse the finding of the CIT(A) and restore that of the AO. The addition of Rs. 25,000 is confirmed.
18. In the cross objection filed by the assessee, the learned counsel for the assessee has supported the order of the CIT(A) with regard to deletion of the following additions.
(1)Rs. 14,715 being Free Delivery charges (2) Rs. 17,305 out of conveyance expenses (3) Rs. 17,118 on account of Hamali expenses (4) Rs. 25,000 on account of unexplained cash credit in the name of M/s Kanaiyalal & Co.
It has further been submitted that the CIT(A) has taken half hearted action in confirming the addition of Rs. 2,26,717 on account of empty tins.
18.1 All the issues have been adjudicated by us in the assessees appeal and the appeal filed by Revenue and no further comments on the above issues are called for.
19. In the result, both the appeals are allowed in part and the cross objection filed by the assessee is disposed of as indicated above.