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Amount 2-11-1987 2,08,000 4-11-1987 2,08,000 6-11-1987 2,08,000 8-11-1987 2,08,000 9-11-1987 2,08,000 10-11-1987 2,08,000 11-11-1987 2,08,000 12-11-1987 2,08,000 13-11-1987 2,08,000 14-11-1987 1,24,800 11-1-1988 2,13,200 10-1-1988 2,13,200 12-1-1988 2,13,200 13-1-1988 2,13,200 14-1-1988 2,74,700 20-1-1988 650(Basmati) 1,72,250 21-1-1988 520(Basmati) 1,37,800   Total 33,87,550 The date and mode of receipt of payments by the assessee is as under

3. During the course of assessment proceedings, it was noticed that the assessee had purchased 64,721.66 qtls. and 1244.81 qtl. of paddy parmal and paddy basmati respectively during the period relevant to the assessment year under consideration. The yield of rice and other by-products have been declared by the assessee as under :

Permal Basmati Rice 25,909 qtls.

Not shown Rice Bran 1,498 qtls.

Not shown Coarse rice/phuck __ (Wt. not given. However, sales of phuck extracted from paddy of peral has been shown at Rs. 1,92,058 in the P& EM.) However, the yield of rice and its by-products declared by the assessee is much less than the normal yield which should not be less than 95 per cent of the total paddy milled. The loss on account of dust, and other impurities seldom exceeds 1 per cent. The support price of paddy is fixed keeping in view the fact that it contains 18 per cent of less moisture. The moisture contents in the rice sold is never less than 14 per cent. The other by-products of rice contains moisture alone @ 14 per cent or above as they are normally stored in open and absorb moisture. Thus the overall loss on account of moisture alone cannot be more than 4 per cent.

6. The learned first appellate authority, while upholding the addition, held as under :

"3.4 I have considered the rival submissions, Prima facie the business of the appellant is shelling of paddy and not selling of paddy (which is apparently the business of a commission agent). Why the appellant chose to sell huge quantities of paddy as such (weighing 16,670 qtls.) is itself a ground for probe and verification and the report of the ADI that the appellant had made sales to the party who had denied such purchases is very vital piece of evidence which the appellant had failed to rebut. The only reason given by the appellant that the paddy sold as such was of inferior quality is not worthy of consumption in its own sheller is without any basis and deserves to be rejected outright. In fact on 20-1-1988 the appellant had sold 650 quintals of basmati paddy and again on 21-1-1988 it had sold 550 qtls. of basmati paddy. On the other hand, it is found from the report of the ADI who probed into the genuineness of the transactions and which report was confronted to the appellant that the socalled, sale were made to a firm which categorically denied having purchased any paddy from the appellant-firm. Its so-called proceeds were received by the appellant by pay orders (not by cheques or drafts) from the said party at Amritsar. It is noted that pay orders were taken from Punjab National Bank, Kurali, i.e., the place of the business of the appellant-firm. The money was first deposited in cash with the Bank to convert the same into pay orders. It does not stand to reason that the Amritsar party carried 3 lakhs on 2-1-1988, in cash, Rs. 6 lakhs in cash on 6-1-1988, Rs. 2,50,000 in cash on 7-1-1988, Rs. 3,00,000 in cash on 12-1-1988, Rs. 2,00,000 in cash on 13-1-1988, Rs. 3,00,000 in cash on 18-1-1988, Rs. 2,00,000 in cash on 28-1-1988, again Rs. 3,00,000 in cash on 3-2-1988, Rs. 4,00,000 in cash on 15-2-1988, Rs. 3,50,000 in cash on 24-2-1988 and Rs. 1,87,550 in cash on 26-2-1988 from Amritsar-a disturbed town-to Kurali to convert the same into pay orders. During the course of proceedings before me I called upon the Income Tax Officer to visit Punjab National Bank , Kurali and find out who signed for the pay orders. The learned Income Tax Officer contacted Shri V.P. Juneja, Manager, Punjab National Bank , on 12-9-1990 but he was unable to present the original relevant vouchers. Later on on 14-9-1990 he presented the original vouchers and it was found that the application form dated 2-10-1988 filled in vouchers and it was found that the application form dated 2-10-1988 filled in the name of M/s Rama Krishna Rice & Gen. Mills revealed that the pay order was prepared by the Bank at par, i.e., without charging any commission from the purchaser. This is a peculiar circumstance. When called upon to explain, Shri Juneja stated that as per the Bank manager exercised this discretion in favour of the party since he (Shri Juneja) joined this branch in the year 1990. Scrutiny of the original applications further revealed that the applications did not contain the address of M/s Rama Krishna Rice & Gen. Mills, Amritsar. The Bank manager confirmed that the proceeds of pay orders were credited to the same accounts of M/s Ganesh Rice Mills, Kurali, on the same date on which the cash was deposited with the Bank . This report of the learned Income Tax Officer was confronted to the appellant but the appellant had nothing to say and hence it is established that the transactions entered into with the aforesaid Amritsar party were not genuine transactions but were sham arrangements with the melaflde intention of tax evasion.

3. The learned Commissioner (Appeals) has also erred in adopting the rate of Rs. 336 per qtl. against Rs. 700 applied by the assessing officer on Basmati Rice holding the quality of rice as Basmati when this point of Basmati Rice was never taken earlier before the assessing officer and also the appellate authorities i.e., Commissioner (Appeals) and Tribunal.

4. The learned Commissioner (Appeals) has further erred in allowing the milling charges at Rs. 1,50,000 on the milling of paddy which was shown to have been sold in the books of account of the assessee but actually milled by it, without any basis or proportion.