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Bansal Rice Mills vs Income-Tax Officer on 30 March, 2001

Income Tax Appellate Tribunal – Chandigarh
Bansal Rice Mills vs Income-Tax Officer on 30 March, 2001
Equivalent citations: 2001 78 ITD 326 Chd
Bench: V Dongzathang, R Mehta, Vice, V Gandhi, N K Judicial, J K Accountant


ORDER

J. Kathuria

1. These cross appeals – one by the assessee and the other by the Revenue – perlain to assessment year 1987-88.

2. We shaft first take up the assessee’s appeal (I.T.A. No. 1657/Chd./90). The only issue is against the upholding of an addition of Rs. 4,20,184.

3. Brief facts of the case are these. The asscssee-firm derives income from a rice seller. During the year relevant to assessment year 1987-88, the assessce firm sold paddy to M/s Ganesh Rice Mills, Guru Harsahai, Distt. Ferozepur as per the following details :–

S. No.

BillNo/date

Quantity

Amount

1.

65/16-2-1987

1,437.15 qtls.

Rs. 2.40,004

2.

66/17-2-1987

1,072.50 qtls.

Rs. 1,80,180

 

 

2,509.65 qtls.

Rs. 4,20,184.

The Assessing Officer received information from the ADI that Shri Sat Pal, partner of M/s Ganesh Rice Mills had stated that the firm M/s Ganesh Rice Mills had never purchased paddy from the assessee firm. The statement of said Shri Sat Pal was confronted to Shri Faqir Chand, partner of the assessee firm, by the ADI and the statement of Shri Faqir Chand was recorded by that authority on 18-12-1987. Shri Faqir Chand stated that the sales had been made against ST XXII forms received from M/s Ganesh Rice Mills. Further enquiries were made from the Excise and Taxation Officer, Ferozepur who intimated that ST XXII forms upon which the assessee firm had relied, had never been issued to M/s Ganesh Rice Mills. The Assessing Officer confronted the assessee firm with the gist of investigation made. Shri Faqir Chand partner of the assessce firm stated that the assessee firm had received the sales tax forms through the broker Shri Bachan Lal through whom the transaction was carried on. The assessee firm was called upon to produce Shri Bachan Lal broker but the broker was not produced for examination. The Assessing Officer further noted that the alleged sale proceeds had been received through two pay orders of Rs. 2,00,000 and Rs. 2,20,184 on two consecutive dates 3-3-1987 and 4-3-1987, drawn on the Bank of Baroda, Amloh i.e., the place of business of the assessee firm. It was observed that the cash was first deposited with the bank and thereafter the two pay orders were obtained. On these facts, the Assessing Officer came to the conclusion that the aforesaid two transactions involving an amount of Rs. 4,20,184 were not genuine and that the assessee had introduced its own unaccounted cash amounting to Rs. 4,20,184.

4. The learned CIT(A) upheld the action of the Assessing Officer in treating the credit aggregating to Rs. 4,20,184 as the assessee firm’s income from undisclosed sources under section 68/69A of the Income-tax Act.

5. Shri Sudhir Sehgal, the learned Counsel for the assessee, submitted that the books of account of the assessce for assessment year 1987-88 were audited. It was submitted that as per the tax audit report at page 79 of the assessec’s compilation, yield of rice was shown at 66 per cent. It was pointed out that stock tally had been prepared and audited as per details placed at pages 80 and 81 of the compilation. It was submitted that the assessee had maintained the stock register. It was submitted that the stock register of paddy maintained by the assessee company had been duly checked by the Inspector, Food Supplies, Amloh as per certificate at page 37 of the assesscc’s compilation. It was pointed out that the assessee had maintained stock register of rice/paddy/rice bran as per details given at pp. 38 to 49 of the Compilation. It was also submitted that the assessee had maintained a milling register which had been duly certified as per pages 1 to 26 of the second compilation. These registers, according to the learned Counsel for the assessee, had been maintained in the normal course of business and there were no interpolations, cuttings or defects found by the Revenue authorities in the same. It was submitted that in the earlier years also, similar registers had been maintained and no defects or discrepancies were found.

6. The learned Counsel referred to pages 8 and 9 of the compilation to show that there were sales bills in respect of sale of paddy to M/s Ganesh Rice Mills. It was submitted that the assessee had filed sales-tax return for the period from 1-2-1987 to 28-2-1987 as per receipt placed at page 29 of the compilation in which R,D. sales had been shown at Rs. 4,20,184 at page 30 of the compilation. The summary of all the sales is available at page 31 of the compilation. Our attention was drawn to page 47 of the compilation in which the sale of paddy was shown at 2509.65 Qtls. Referring to page 51 of the compilation which related to the account of M/s Ganesh Rice Mills in the books of the assessee, it was pointed out that the payments of Rs. 2,00,000 and Rs. 2,20,184 had been received by way of two pay orders. Pages 52 and 53 were referred to, to show that the amounts received were brought in the day book.

7. The learned Counsel referred to the statement of Shri Sat Pal recorded on 28-9-1987, copy of which is available at pages 65 & 66 of the compilation. The statement of Shri Faquir Chand partner of the assessee firm appearing at pages 67 to 70 was also referred to.

8. The main submissions of the learned Counsel were as follows :–

(i) Shri Sat Pal partner of M/s Ganesh Rice Mills had not been produced for cross-examination though a request in this regard was made by the assessee;

(ii) No adverse material had been collected by the Revenue as regards the transportation of paddy sold;

(iii) The sale price had been received by pay orders;

(iv) Application form for taking out the pay orders, as per copies of the application forms at pages 93 and 94 of the compilation, were in the name of M/s Ganesh Rice Mills;

(v) The assessee had done the transactions through Shri Bachan Lal, broker, whose address was available to the Revenue authorities but the broker was not called for examination;

(vi) The entire case of the department was based on suspicion and conjectures;

(vii) A similar question had arisen in the case of M/5 Amar Rice & General Mills, Banur who had also sold paddy to M/s Ganesh Rice Mills. In the said case, the Tribunal vide order dated 8-6-1994 in I.T.A. No. 83/Chd./91 for assessment year 1987-88, deleted the addition;

(viii) The reference application of the Revenue in the case of M/s Amar Rice & General Mills in R.A. No. 244/Chd./94 was rejected by the Tribunal vide order dated 13-12-1994;

(ix) The assessee had filed a settlement petition dated 16-2-1990 before the Commissioner of Income-tax, Paliala offering a sum of Rs. 60,000 to buy peace of mind but since the department did not accept the same, the assessee was free to discard the same (copy of settlement petition is placed at pages 88 and 89 of the compilation); and

(x) It was not a case of cash credit but of sale and so the provisions of section 68/69A were not applicable.

9. In view of the above submissions, it was vehemently argued that there was no justification for confirming the addition of Rs. 4,20,184.

10. The learned D.R. strongly relied on the orders of the authorities below. It was pointed out that Shri Sat Pal, partner of M/s Ganesh Rice Mills had given a statement disowning the purchase of paddy from the assessee. It was submitted that the sales-tax forms issued to M/s Ganesh Rice Mills by the Sales tax Department were different from the ones produced by the assessee. It was also submitted that Shri Bachan Lal, the broker, had not been produced by the assessee and only his affidavit as appearing at pages 72 and 73 of the assessee’s compilation had been filed. It was pointed out that the purchaser had denied having purchased the paddy and there was no documentary evidence on record in respect of the despatch of paddy by the assessee. As regards the cross-examination of Shri Sal Pal, the learned D.R. wondered as to whether any request in this regard had been made by the assessee. The learned D.R. strongly supported the confirmation of addition of Rs. 4,20,184.

11. In reply, Shri Sehgal filed a copy of the letter submitted before the learned CIT(A), Patiala in which it was contended that no opportunity to cross-examine Shri Sat Pal had been given to the assessee and that Shri Sat Pal may be summoned and necessary opportunity to cross-examine him should be given to the assessee, but no such opportunity was given. Reliance was placed on the Bombay High Court decision in the case of R.B. Jessaram Fatehchand(Sugar Deptt.)v. CIT [1970] 75 ITR 33 for the proposition that in the case of cash transaction where delivery of goods is taken against cash payment, it is hardly necessary for the seller to bother about the name and the address of the purchaser.

12. We have carefully considered the submissions of both the sides as also the facts on record. The Revenue has not pointed out any interpolations, cuttings or discrepancies in the books of account of the assessee which are maintained on a regular basis and which arc duly audited by the Chartered Accountants. The assessee has maintained stock registers which have been found to be in order by the appropriate authorities. The sales shown by the assessee in its sales tax return have been accepted by the Sales-tax Department. The main case of the Revenue is built on the statement of Shri Sat Pal, partner of Gancsh Rice Mills. As per copy of the letter of the assessee addressed to the CIT(A), Patiala, it is clear that Shri Sat Pal had not been produced for cross-examination and even the request for summoning Shri Sat Pal at that stage perhaps was not acceded to. The assessee had done the transaction through Shri Bachan Lal, broker, whose address was available and who could have been summoned by the Assessing Officer so as to ferret out the truth but this was also not done. The money had been received by two pay orders. The pay orders had been prepared by Ganesh Rice Mills. There is no evidence on record that the pay orders were fake or that the assessee had itself purchased the pay orders in the name of Ganesh Rice Mills. If the Revenue alleges that the paddy had not as such been sold to Ganesh Rice Mills, then in all fairness, the amount of sales should have been reduced from the closing stock of paddy which would have also resulted in no addition being made. In the case of Amar Rice & General Mills. [IT Appeal No. 83 (Chd.) of 199) dated 8-6-1994] similar additions were made and in that case also M/s Ganesh Rice Mills figured as one of the parties purchasing paddy and the Tribunal vide order dated 8-6-1994 deleted the addition. In our opinion, the application of section 68/69A is also not proper because it is not the case of a cash credit simpliciter. We are inclined to agree with the submission of the learned Counsel that the entire case of the Revenue is built on suspicion and suspicion howsoever strong, cannot be a substitute for evidence.

13. Taking into consideration the entire facts and circumstances of the case, we order the deletion or addition of Rs. 4,20,184.

14. Now we come to the Revenue’s Appeal (I.T.A. No. 1727/Chd./90). This appeal is regarding the addition of Rs. 3,76,114 for which the facts are these. Besides making an addition of Rs. 4,20,184, the Assessing Officer in the body of the assessment order held that the assessee had shown lower yield of rice and other by-products of paddy milled out of the paddy shown as sold but actually milled by the assessee. The total concealed income on that account was computed at Rs. 3,76,114 as per details given in the body of the assessment order. Since the Assessing Officer was making a higher addition of Rs. 4,20,184, no further addition of Rs. 3,76,114 was made and the same was telescoped in the main addition.

15. Before the learned CIT(A), a contention was raised by the Assessing Officer that a further addition of Rs. 3,76,114 be made. The learned C1T(A) held that there was no justification for making further addition of Rs. 3,76,114.

16. The learned D.R. submitted that so long as the higher addition of Rs. 4,20,184 was there, the addition of Rs. 3,76,114 could be said to have been telescoped in the higher addition but if the higher addition itself was to be deleted, then the addition of Rs. 3,76,114 would come alive and has to be considered in the hands of the asscssee. In this regard, it was submitted that if the Tribunal was inclined to delete the higher addition of Rs. 4,20,184, then, in all fairness, the learned CIT(A) be directed to consider the addition of Rs. 3,76,114 which had been telescoped in the higher addition. It was submitted that the Revenue had filed a cross appeal to safeguard its interest in the event of the higher addition of Rs. 4,20,184 being ordered to be deleted by the Tribunal.

17. After hearing the learned representatives of both the sides, we are of the opinion that since we have deleted the higher addition of Rs. 4,20,184, the issue of addition of Rs. 3,76,114 has become alive and has to be considered. Since the learned CIT(A) did not consider the issue, we restore the matter back to the file of the learned CIT(A) to consider the issue of addition of Rs. 3,76,114.

18. In the result, the assessee’s appeal is allowed while the Revenue’s appeal is allowed for statistical purposes.

Gandhi

1. I have gone through the order proposed by my learned brother but find it difficult to share the conclusion that addition of Rs. 4,20,184, the sum credited for alleged sale to M/s Ganesh Rice Mills, is based upon suspicion alone. In my opinion, the revenue authorities have done whatever could possibly have been done in this case to show the transactions in genuine. The genuineness of the credit of the sum in dispute has not been established and, therefore, is to be charged to tax under section 68 of the Income-tax Act. I would refer to the following sequence of events.

2. The alleged sale of paddy is prima facie dubious and suspicious in character. The appellant-firm is engaged in shelling of paddy and sale of paddy is not its business. Admittedly, it is making good profit from shelling of paddy. No reasonable explanation has been given as to why it chose to sell huge quantity of paddy (2509.65 qtls.). This is the only transaction of sale of paddy, otherwise, all paddy have been milled. As rightly pointed out by Id. CIT(A), this was a ground for probe and verification, which was carried by examining Sh. Sat Pal partner and books of account of alleged purchaser firm, M/s Ganesh Rice Mills, Guru Har Sahai, by ADI. Examination of partner Sh. Sat Pal and books of account revealed that the said firm never purchased any paddy from the assessec-firm. In order to comply with principles of natural justice, the revenue immediately put above facts of non-purchase of paddy as also statement of Sh. Sat Pal to the assessee-firm and in this connection recorded the statement of the assessee’s partner, Sh. Fakir Chand. Sh. Fakir Chand stood by the sale and relied upon ST-XXII, purported to be issued by the purchaser.

3. The revenue authorities then made enquiries regarding ST-XXII. The revenue also inquired about the foodgrain licence number of M/s Ganesh Rice Mills, as mentioned in the documents produced by the assessee. The licence number and sales-tax number, as given by the assessee of M/s Ganesh Rice Mills, were found to be different from one available in record of M/s Ganesh Rice Mills. The revenue also enquired from the office of the Excise & Taxation Officer and found that ST-XXII form, alleged to have been given to M/s Ganesh Rice Mills, were never issued. This was again put to the assessee and Sh. Fakir Chand partner was asked to explain the position. In his statement dated 18-12-1987, Sh. Fakir Chand partner took the stand that paddy was sold through Sh. Bachan Lal broker, who had given document ST-XXII and other information to the assessee-firm. As direct contact with alleged purchaser was claimed to have been made by Sh. Bachan Lal and not by the partners of the assessee, the Assessing Officer asked the assessee to produce Sh. Bachan Lal broker, in support of its claim. In spite of several opportunities, said Sh. Bachan Lal was not produced. It is to be noted that case of sale through Sh. Bachan Lal was set up by the assessee and, therefore, it was for the assessee to produce him. There was no question of the Assessing Officer calling Sh. Bachan Lal for cross-examination by the assessee, as has now been argued.

4. In its reply dated 3-3-1990, the assessee-firm claimed, “that they feel that those persons have done fraud with them and they are trying to locate the buyers and brokers”. The Assessing Officer again provided opportunity to the assessee to produce Sh. Bachan Lal and so-called persons, who had done fraud with the assessee-firm. But the pleaded case was not established. Earlier, vide notice dated 18-1-1990, the Assessing Officer required the assessee-firm to show-cause why addition of Rs. 4,20,000 representing cash introduced in the form of pay orders dated 3-3-1987 and 4-3-1987, aggregating to Rs. 4,20,000, should not be made as unaccounted income earned from undisclosed sources. The assessee failed to produce any evidence except reply dated 3-3-1990. It is to be noted that the assessee clearly gave up the stand that paddy was sold by them to M/s Ganesh Rice. Mills. According to them, the name of the purchaser and ST-XXII forms were given by Sh. Bachan Lal broker, who had dealt with the party. It was admitted that a fraud has been committed and wrong information about purchaser supplied. In these circumstances, there was no question of the assessee asking for the cross examination of Sh. Satpal. As introduction of sum of Rs. 4,20,184 in the books of account of the assessee-firm was not established, the amount was taken as the assessee’s income from undisclosed sources and added in assessment under section 68 of the Act.

5. The assessee had challenged the impugned addition in appeal before Id. CIT(A). Simultaneously, the assessee approached Id. CIT, Patiala, with petition dated 6-2-1990, that to ‘buy peace of mind’ and to ‘avoid litigation’ with department, the assessee is prepared to offer for addition a sum of Rs. 60,000, as per calculations given below :–

Rice
yield & 66% 2509.65 i-e., 1656qtls.

Rs.

85% of rice,
ie., 1407.60 @ Rs. 300

4,20,168.60

15% of
rice, Le.., 248.40

43,470.00

 

4,63,538.60

Rice bran 82.80 qt!s. @ Rs. 100 –

per qtl.

8,280.00

Phoose

3,764.00

 

4,75,582.60

Less
sale proceeds of paddy

4,20,184.05

 

55,398.55

Less
reasonable manufacturing expenses add
for phuck (net)

5,000.00

 

50,398.55

Say

Rs.

60.000

The assessee, as per above calculations, clearly admitted in computation that paddy shown to have been sold was, in fact, milled and rice obtained was sold. The assessee further admitted that sale proceeds of paddy shown at Rs. 4,20,184, as credited, be adjusted and deducted from total profit of Rs. 4,75,582. The assessee also wanted reasonable manufacturing expenses at Rs. 5,000. However, subsequently, the assessee claimed that the above statement was made to buy peace and avoid litigation with the revenue and the same was not binding on the assessee.

6. The assessee, in the course of hearing of the appeal before C1T(A) also filed letter dated 24-9-1990, which is available at page 90 of the paperbook. Para 1 of the said letter is relevant and is reproduced below :–

“At the outset, charge of having made any bogus sales or having introduced own funds, much less to the extent of Rs. 4,20,184 is vehemently denied. It is appellant’s misfortune that facts were not properly appreciated and further to appellant’s misfortune, Sh. Bachan Lal broker through whom the deal was struck, could not be contacted earlier. Luckily, it has been possible to contact him and that his affidavit is being filed with the prayer that in the interest of justice and in the interest of proper adjudication of appeal, such affidavit may be entertained. The petitioner appellants are ready even to produce him. His affidavit and his presence should help to change the entire context. He has now informed that it was another broker who had brought the parly to him as Sh. Bachan Lal knew the partner/appellant-firm and had got the deal through. In fact, it was another broker Sh. Angrez Lal who was dealing with the party direct to whom the supply had been made.”

The assessee had, no doubt, filed an affidavit of one Sh. Bachan Lal and offered to even produce him. But simultaneously, it was contended that another broker, one Sh. Angrez Lal, was involved, who had dealt with the party, to whom the supply was made. Now, as admitted by the assessee, the context of transaction is attempted to be changed. Whereabouts and antecedents of Angrez Lal are not brought on record. In my considered opinion, the assessee not having produced Sh. Bachan Lal before the Assessing Officer, it was for the assessee to apply and make out a case for additional evidence under rule 46A of the Income-tax Rules and produce Bachan Lal or Angrez Lal and prove the case set up. Instead, the assessee took shifting stands and failed to produce any evidence or establish any case. It is unreasonable to expect the revenue to call Sh. Bachan Lal or Sh. Angrez Lal for cross examination of the assessee. No attempt was made to lead any additional evidence. The Id. CIT(A) having regard to act and conduct of the assessee and to the changed stand being adopted from time to time, refused to entertain affidavit of Sh. Bachan lal. No request for additional evidence was made nor any is shown to have been considered in the impugned order of CIT(A). I do not find any error in the approach of CIT(A), who disposed of the appeal on 24-9-1990, after hearing the assessee and after considering the written reply of the Assessing Officer dated 19-9-1990.

7. Ld. CLT(A) also further found that cash in dispute was deposited with the Bank of Baroda, Amloh, where the assessee was carrying on business first and, thereafter, two pay orders were received. According to Id, CIT(A), “it docs not stand to reason that M/s Ganesh Rice Mills, Guru Har Sahai, Ferozepur, earned huge sums of Rs. 2 lakh on 3-3-1987 and Rs. 2,20,184 on the next day, i.e.r on 4-3-1987, in cash, from Guru Har Sahai – a disturbed town – to Amloh, to convert the same into pay order”. This abnormal conduct of carrying huge cash to the place of business of the assessee and then purchasing pay orders, shows that transaction is not genuine but was entered into with mala fide arrangement to evade tax.

8. There is considerable gap between alleged sale and delivery of paddy and receipt of consideration from the purchaser. The seller did not get any document executed from the alleged purchaser as security to enforce payment in case of default by the purchaser. No signature on sale bills etc., were obtained. This is highly improbable.

9. In CIT(A) gave sound reason with discussion of case law in para 2.8 of his order, to hold that claim of sale lo M/s Ganesh Rice Mills was bogus. I entirely agree with the reasoning given by CIT(A). I may additionally cite the decision of the Andhra Pradesh High Court in the case of Kesarimal Sohanraj v. CIT [1972] 84 ITR 519, wherein their Lordships held that credit on account of unproved sale can be treated as income from other sources without further proof. No duty is cast upon the department to prove from which source the assessee had earned that income.

10. The assessee had placed great reliance on decision of the IT AT Chandigarh Bench, in the case of Amar Rice & General Mills (supra) relating to assessment year 1987-88. The facts brought on record in that case were quite different from the facts before us and the assessee can derive no benefit from the said decision. In the said case also, sale of paddy made by the assessee was disputed. The Bench held that sales have not been proved to be ingenuine. In the order, following observations are available :–

“… The partner of the asscssec-firm in his statement asserted that sale was definitely made through M/s Ganesh Rice Mills and ST-XXIl form had been obtained

*****

It was difficult for the assessee to treat ST form XXII to be bogus or fictitious. Ld. counsel has submitted that inference drawn by the Assessing Officer that ST form XXII was forged and bogus, is totally unfounded as no enquiry appears to have been made from Sales-tax department…..

*****

Ld. counsel had argued and we agree that enquiry from Sales-tax Department could have been made before reaching a conclusion that ST form XXII received by the assessee were forged and fictitious.”

In the above background and when no defect was found in the books of account of the assessee or in sale documents produced by him, the Tribunal did not accept that the case by the revenue has been established merely on account of denial by the partner of the firm purchasing paddy. The said statement of partner was further not relied upon, as opportunity of cross-examination was not afforded to the assessee. In the circumstances, purchases were treated as genuine.

11. In my view, facts in the present case are quite opposite to the facts in the case of Amar Rice & General Mills (supra). There, the principles of natural justice were held to be violated but here, at every stage, whatever information was collected by the revenue, was put to the assessee and statement of its partner was recorded. The assessee-firm claimed that ST-XXII forms were obtained from the purchaser. The revenue made enquiries from the Sales Tax Department and found that no such ST-XXII forms were issued to the seller firm. The revenue further found that registration number and licence number furnished by the assessee-firm of the purchaser, were wrong. When this information was put to the assessee, the assessee took the stand that sale was made through Sh. Bachan Lal broker. The Assessing Officer gave opportunities to the assessee to produce said Sh. Bachan Lal and, in spite of several opportunities, Sh. Bachan Lal was not produced. So, all lacunas/defects found by the Tribunal in the case of Amar Rice & General Mills (supra) were fulfilled in the present case. In spite of untiring efforts made by the revenue to lift the veil of falsity, it will not be fair and just to blindly apply the ratio of the decision of Amar Rice & General Milk (supra) against the revenue. Again in the case in hand, the assessee took the clear stand that there was no direct dealing with the seller. The broker had met the seller and it is possible that wrong ST-XXII forms were given to them. The assessee talked of fraud committed on it (which is not established) and went to the extent of saying that broker might have sold goods to some one other than M/s Ganesh Rice Mills. Before C1T(A) this stand is again changed and it is stated that Bachan Lal had contacted some Sh. Angrez Lal for effecting sale in question. Said Sh. Bachan Lal or Sh. Angrez Singh are not produced before CIT(A) nor any request for additional evidence is made nor any produced before the Id. CIT(A).

12. It was argued that the books of a/c were audited and that sales have been accepted by the ST authorities and that no defect has been found by the revenue in the books of a/c. In my view, there is no substance in these arguments. If sale is bogus, the books of a/c cannot be treated as having been accepted. The books have also been rejected and addition of Rs. 3,76,114 made for not disclosing proper yield in milling A/c. The said matter is still pending adjudication. The assessee also accepts that books of a/c were rejected by the Assessing Officer. In the grounds of appeal raised before CIT(A), ground No. 4 is to the following effect:–

“4. That Id ITO arbitrarily rejected the books of a/c, which have no basis.”

In my opinion, it is not the duty of the auditor to find out whether some of the transactions entered in the books of a/c were bogus. If it is otherwise then auditor in this case has failed to detect the disputed bogus sales. No benefit can be derived by the assessee from the fact that books arc audited. Like-wise, it does not lie in the mouth of the assessee to claim that his case by ST authorities has been accepted. It is found that ST-22, relied upon by him, are bogus. This fact has not been contradicted by the assessee at any stage of the proceedings. Direct material available on record cannot be ignored to draw favourable inference from the fact not considered by lower authorities.

13. It is settled law that several facts and circumstances in every case are not to be considered in isolation and rejected or accepted one by one. The cumulative effect of all the circumstances is required to be judicially seen. In the present case, when facts are so considered, no doubt is left that sale transactions of the disputed amount are bogus. Addition, therefore, is fully justified for the amount introduced in the books of a/c and is sustainable under section 68 of the Act.

14. Before close, I may refer to the copy of undated letter of the assessee addressed to CIT(A). Endorsement on the said letter says, “heard on 1-5-1996, filed on 2-5-1996”. The appeal was heard on 1-5-1996 and this document appears to have been filed on 2-5-1996. After hearing the case by the Bench on 1-5-1996, file was given to Hon’ble A.M. for dictation. I find that reliance has been placed on the objections raised by the assessee in this document in the proposed order of Hon’ble A.M. There is mention of failure to provide opportunity to cross examine Sh. Sat Pal. There is further reference to copies of application form submitted by GRM with Bank of Baroda, Amloh, for preparing pay orders for making payment to the assessee. It is requested in the letter that above material be taken into evidence. It is not clear as to when undated letter was filed with CIT(A), as he had made no reference to it. The impugned order is dated 24-9-1990. Before that, the assessee filed a detailed written submission running into seven pages and available at pages 1 to 7 of the paper book. ITO had replied to the above submission, vide letter dated 19-9-1990. The assessee then filed a rejoinder before CIT(A) on 24-9-1990. In the rejoinder, filed on the date on which order was passed, as also in the earlier written submission, no such request as made in the above referred to letter, was made by the assessee. The authenticity of the above letter is very much in doubt. Even otherwise, in the circumstances of the case, there is no question of admitting letter filed after hearing of the case was closed on 1-5-1996 into evidence. In my view, the letter cannot be taken into account.

15. For the aforesaid reasons, I am of the view that addition of Rs. 4,20,184 has rightly been made under section 68 of the Act. On other issues, I agree with the order proposed by Hon’ble A.M.

REFERENCE UNDER SECTION 255(4) TO HON’BLE PRESIDENT OF ITAT

Sir, We the Members of Chandigarh Bench have differed on the following point and, therefore, request you to take steps under the provisions referred to above :–

“Whether on the facts and in the circumstances of the case, addition of Rs. 4,20,184 is based upon legal material and is justified or it is based upon suspicion alone and is liable to be deleted ?”

THIRD MEMBER ORDER

Shri V. Dongzathang, President

1. There being a difference of opinion between the members, the following point was referred under section 255(4) of the Income-tax Act:

“Whether, on the facts and in the circumstances of the case, addition of Rs. 4,20,184 is based upon legal material and is justified or it is based upon suspicion alone and is liable to be deleted ?”

2. The facts leading to the above question can be briefly summarised as follows :

The assessee is a registered firm. The business consist of buying of paddy and milling of the same for supply of rice to the Government as also for sale in the open market. During the year under consideration, the assessee had shown opening balance of 8,456 bags and bardana purchase of 74,192 bags making a total of 82,648 bags out of which bardana supplied to Government and sold comes to 47,323 bags leaving a closing stock of 35,325 bags. Converted into rupees, bardana purchased during the year was shown in the manufacturing, trading and profit & loss account at Rs. 3,42,081.85. Correspondingly sale of paddy of 2509.65 qtls. was shown at Rs. 4,20,184. The asscssee has shown milling of paddy at 41,702 qtls. The total sale during the year was shown at Rs. 84,05,518.87. The net profit was shown at Rs. 55,445. Return of income was accordingly filed on 18-8-1987 declaring total income of Rs. 55,450 which was completed under section 143(1). Subsequently, information was received from the AD1 that the assesses had shown bogus sale of paddy to the tune of Rs. 4,20,184 to M/s Ganesh Rice Mills, Firozepur. The case was reopened under section 143(2)(b) of the Act. The Assessing Officer looked into the details of these sales and it was shown that the assessee made the following sales :

SI.

No.

Bill
No./Date

Quantity

Amount

1.

65/16-2-1987

1437.15
Qtls.

Rs.

2,40,004

2.

66/1
7-2- 1987

1072.50
Otls.

Rs.

1,80,180

 

 

 

Rs.

4,20,184.

The Assessing Officer carefully examined the working of the assessee during the year and it was his finding that there was no sale to M/s Ganesh Rice Mill and the sale shown was bogus sale. According to him the assessee actually milled his paddy and sold its products and the byproducts in the open market and the pro fit/income therefrom had not been accounted for in its books of account by the assessee.

3. The Assessing Officer also examined the details of the paddy milled during the year. The assessee in this case milled 41,702 qtls. According to the Assessing Officer the overall shortage in the yield comes to 6,648 qtls. which is 15.94% of the total paddy milled as under :

Product/By
product

Quantity

%
age

(1)
Rice

27,524
Qlls.

66%

(ii)
Rice Bran

1.465
Oils.

3.51%

(iii)
Phuck (Coarse Rice Bran)

645
Qtls.

1.55%

(iv)
Husk

5,420
Qtls.

13%

 

35.054
Qtls.

84.06%.

The assessee explained the reason for the shortfall of the yield during the year. The Assessing Officer, however, found the same to be not acceptable. He, therefore, worked out the shortage in the production of various items and added back a sum of Rs. 1,96,004.

4. The Assessing Officer also considered the bogus sale of paddy at 2509.65 qtls. as actually milled by the assessee and sold in the open market. He, therefore, estimated the sale proceeds at Rs. 5,76,634. Estimating the actual cost of 2509.65 qtls. of paddy at Rs. 158 per qtl., he deducted a sum of Rs. 3,96,524 and arrive at the income out of paddy actually milled by the assessee but shown as bogus sale at Rs. 1,80,110. The concealed income, therefore, was worked out at Rs. 3,76,114 consisting of difference on account of suppression of yield at Rs. 1,96,004 and profit out of paddy actually milled but shown as bogus sale a! Rs. 1,80,110. The Assessing Officer, however, made an addition only of Rs. 4,20,184 observing as follows :

“As already held in para 1 above the amount of cash of Rs. 4,20,184 introduced by the assesses in Us books of account on 3-3-1987 and 4-3-1987 is treated as concealed income from undisclosed sources. The addition on account of lower yield of rice and other by products and out of milling of paddy weighing 2509.65 qtls. shown as bogus sales by the assessee which was actually milled by the assessee and income out of these is calculated above comes to Rs. 3.76,114. The peak out of this concealed income and amount introduced by the assessee from undisclosed sources comes to Rs. 4,20,184. Accordingly, an addition of Rs. 4,20,184 is made to the total income of the assessee and it is treated as concealed income of the assessee for which the assessee has failed to prove the source thereof. This addition also covers Rs. 3,76,114.”

5. The assessee thereupon took up the matter in appeal before the CIT(Appeals) against the addition of Rs. 4,20,184. The learned CIT(Appeals), however, upheld the addition made by the Assessing Officer from undisclosed sources under section 68/69A of the Income-tax Act, 1961.

6. The assessee also raised the issue regarding the order of the Assessing Officer holding that the addition of Rs. 3,76,114 on account of low yield of rice etc. was called for. In fact the Assessing Officer pleaded before the CIT(Appcals) that this amount should be added to the income of the assessee as the same is totally different from the cash credit added by the Assessing Officer at Rs. 4,20,184. The learned CIT(Appcals) however held that after having made an addition of Rs. 4,20,184 on account of alleged bogus sale of paddy, the Assessing Officer was right in not making further addition of Rs. 3,76,114. In this regard, reliance was also made on the direction of the Dy. CIT under section 144A of the Act in the case of M/s Shanker Rice Mills, under similar conditions where it was directed that the above addition, however, may be considered while making addition on account of bogus sale of paddy as normally the assessee would have ploughed back this profit in the bogus sale of paddy. As a result separate addition on account of this need not be made if there is sufficient and plausible reason that this profit has been introduced back in the account books in the form of bogus sales. The learned CIT(Appeals) also relied on the decision of the Hon’ble Madras High Court in the case of CIT v. K.S.M. Guruswamy Nadar & Sons [1984] 149 ITR 127 for the proposition that when there are two additions one can be telescopic against the other. He, therefore, rejected the contentions of the Assessing Officer that the income should be enhanced on account of alleged suppression of closing stock of bardana, rice etc. as there was no material evidence to support such contentions.

7. Both the assessee and the revenue came up in appeal before the Tribunal raising the following grounds respectively :

“I.T.A. No. 7657(assessee’s appeal):

That the learned CIT(A) was not justified to uphold ihe action of the ITO in having arbitrarily treated the credits aggregating to Rs. 4,20,184 as appellant’s income under section 68/69A from allegedly undisclosed sources. He failed to appreciate the import of ihc submissions made and was not justified to have summarily refused to entertain and consider affidavit of Shri Bachan Lal Broker, through whom sale of paddy was transacted/made and who was a material witness in the matter.

That the learned CIT(A) was not justified to hold that there was any wilful attempt to evade tax for which purpose, appellant resorted to creating of false evidence. Charge made is vehemently denied. Observation made is sheer presumptuous and against facts.

In any case, upholding of addition of Rs. 4,20,184 in the facts and circumstances of the case was sheer presumptuous and unjustified.

The amounts used in the purchase of pay orders represented the sale proceeds (according to appellant, of paddy. . . admitting but not conceding, could be considered as sale proceeds of rice milled out of paddy claimed to have been sold).

(Viewing the matter in the total circumspectus, addition made at Rs. 4,20,184 by observing that the money used for purchase of pay orders was that of the appellant and upholding such action by the learned ClT(Appeals) was unjustified and unsustainable and thus addition upheld deserves to be deleted.’

I.T.A. No. 1727 (revenue’s appeal):

1. On the facts and in the circumstances of the case, the Id. CIT(A) has erred in law in holding that me addition of Rs. 3,76,114 on account of low yield of rico and allied by-products without recording of finding as to the reasonableness of the yield rate applied by the Assessing Officer, on the ground that addition sustained covers the proposed addition.

2. It is prayed that the order of the Id. C1T(A) be set aside and that of the Assessing Officer be restored.

3. The appellant craves leave to add or to amend the grounds of appeal before the appeal is heard and disposed off.”

8. At the hearing before the Tribunal, S/Shri Sudhir Sehgal and Sanjeev Vohra appeared for the assessee and Shri R.P. Singh, learned D.R. appeared for the revenue. After considering the various submissions made by both the parties, the learned Accountant Member was of the view that there was no basis for addition of Rs. 4,20,184 under section 68/69A of the Act. According to him, there was no defect in the books of account of the assessec pointed out by the revenue. The assessee has been maintaining the books of account on a regular basis and the same was duly audited by the Chartered Accountants. The assessee maintained stock register which was found to be in order. The sales shown by the assessee in the sales-tax return also were accepted by the Sales-tax Department. The addition was mainly based on the statement of Shri Sat Pal, partner of M/s Ganesh Rice Mills, denying the purchase of paddy from the assessee. However, Shri Sat Pal was never produced for cross examination. The transactions was made through Shri Bachan Lal, broker who was available at the address given but not summoned by the Assessing Officer to ferret out the truth. The money was received by two pay orders prepared by M/s Ganesh Rice Mills. There was no evidence on record to prove that the pay orders were fake or that the assessee itself purchased the pay orders in the name of M/s Ganesh Rice Mills. Even in any case, if the paddy was held to be not sold to M/s Ganesh Rice Mills then the closing stock of paddy has to be adjusted which would result in no addition on this account. The learned Accountant Member, further, considered the order in the case of M/s Amar Rice & General Mills and held that under similar circumstances, such addition was deleted. He, therefore, held that the application of section 68/69A was not proper as it was not a case of cash credit simpliciter.

9. Having said so, the learned Accountant Member held that the ground of appeal in regard to the addition of Rs. 3,76,114 which was not considered by the learned CIT(Appeals) stands restored and the matter has to be reconsidered by him. He, accordingly, directed that the same should be considered by the learned CIT(Appeals) and for this purpose the matter was restored to his file.

10. On the other hand, the learned Judicial Member was of the view that the addition of Rs. 4,20,184 was made on proper grounds. Firstly, the assessee is a firm engaged in shelling of paddy and not sale of paddy. The claim of sale of paddy amounting to 2509.65 qtls. to M/s Ganesh Rice Mills was flatly denied by this party. The assessee was given opportunity to rebut the statement made by Shri Sat Pal, partner of the said M/s Ganesh Rice Mills and recorded the statement of partner of assessee Shri Faqir Chand who stood by the sale to M/s Ganesh Rice Mills. Shri Faqir Chand relied on ST-XXH purported to be issued by the purchaser. However, it was found that the ST-XXU was not issued by the Sale Tax Authorities and the Licence number and the sales-lax number given by the assessee to M/s Ganesh Rice Mills were found to be different from the one available in the record of M/s Ganesh Rice Mills. The claim of the assessee of selling paddy through Shri Bachanlal, broker was not confirmed. When the assessee was asked to produce Shri Bachanlal, broker, it changed the stand and stated that the transaction was made through Shri Angrcz Lal. The learned Judicial Member, further noted that the assessee itself more or less conceded before the CIT(Appeals) and prepared to offer for addition a sum of Rs. 60,000 as per their calculation. The learned Judicial Member also found fault with the banking transaction. According to him the business of the assessee is at Amloh whereas M/s Ganesh Rice Mills is doing business at Guru Har Sahai, Firozepur. However, the payment was made through Bank of Baroda, Amloh. It is, therefore, doubtful for the assessee to cariy huge sums of Rs. 2 lacs on 3-3-1987 and Rs. 2,20,184 on the next day to Amloh to be deposited in the Bank of Baroda for purchase of the pay order. He also found considerable gap between alleged sale and delivery of paddy and receipt of consideration from ihc purchaser. The learned Judicial Member further found that the decision in the case of M/s Amar Rice & General Mills, Banur was distinguishable from the facts of the case of the assessee. He, therefore, held that the addition was rightly made by the Assessing Officer.

11. As stated earlier, the Members referred the question reproduced at the beginning for decision. At the hearing Shri Sudhir Sehgal, learned counsel appeared for the assessee and S/Shri P.K. Shrivastava, Rajinder Singh and R.R. Thakur, Departmental Representatives appeared for the revenue. Shri Sudhir Sehgal, the learned counsel reiterated the earlier submissions. According to him the return was filed in time alongwith the manufacturing, trading and profit & loss account and balance sheet. The books of account are complete in all respect in regard to the purchase of paddy and sale of rice & paddy. Quantitative tally of the stock was maintained and there was no discrepancy in any of the accounts, either in the purchase or in the manufacturing process or in the sale of the final product including paddy. All the transactions had been fully recorded and the Assessing Officer did not raise any objection in this regard. The sale of paddy was duly recorded and the sale proceeds were received by pay order. The cost of the paddy also was duly worked out by the Assessing Officer himself at Rs. 3,96,524. Since the amount of Rs. 4,20,184 was realisation from the sale of paddy, the same cannot be treated as income from undisclosed sources under section 68 or under section 69A of the Income-tax Act, 1961. Shri Sudhir Sehgal further submitted that the sale transaction of paddy was rejected by the revenue authorities merely on fhc statement of Shri Sat Pal, denying the purchase of paddy from the assessee by M/s Ganesh Rice Mills. On the other hand, the assessee had all the evidences including the brokers who handled the sale and also the S.T. Form XXII obtained by the assessee from the purchaser. If the purchaser did not record the purchase deliberately and issued false S.T. Forms to the assessee, the assessee cannot be faulted. The assessee duly accounted for the purchase and sale and also received the sale proceeds by pay order issued by the purchaser. In such a case, the onus is on the purchaser and the assessee cannot be blamed for the defects and the non-maintenance of books of account properly by the purchaser. The revenue raises objection in regard to the delay in the payment which is only 15 days. Such gap between the sale and payment cannot be said to be abnormal so as to cast doubt on the genuineness of the transactions. Shri Sudhir Sehgal further submitted that the assessee was not given proper opportunity to cross examine Shri Sat Pal in regard to the statement made by him. Such denial is against the principal of natural justice and no adverse inference can be drawn against such evidence without giving opportunity to the assessee to cross examine the same. Reliance was placed on the decision in the case of Gargi Din Jwala Prasadv. CIT[1974] 96 ITR 97 (All.) and the case of the CIT v. Sham Lal [1981] 127 ITR 816 and the decision of the Tribunal in the case of Smt. Satinderjit Kaur v. ITO [1955] 52 TTJ 388.

With regard to the offer made by the assessee to the CIT(Appcals), it is submitted that the said offer was made purely for buying peace and the same cannot be held against the assessee. In this regard, reliance was placed on the decision in the case of Sir Shadi Lal Sugar & General Mills Ltd v. CIT [1987] 168 ITR 705 (SC). Shri Sudhir Seligal further submitted that the assessee in this case duly reflected the sale proceeds of Rs. 4,20,184. Even if it is assumed, without admitting, that there was bogus sale and paddy was not actually sold then the amount shown as sale proceeds has to be adjusted against the closing stock and the deposits made in the banks. Either way there cannot be addition and if any addition is sustained, it will amount to double addition. Since the assessee has been maintaining all the statutory registers, and the accounts have been duly audited and all the sales and purchases are fully vouched, there is no reason for any addition in the account of the assessee as held by the Special Bench of the Tribunal in the case of Shanker Rice Co. v. ITO [2000] 72 ITD 139. It is, therefore, submitted that no addition is called forin this regard.

12. On the other hand, Shri P.K. Shrivaslava, the learned Sr. D.R. strongly supported the order of the learned Judicial Member. According to him, the assessee in this case made two deposits amounting to Rs. 4,20,184 on two dates. The source of the deposit is to be proved by the assessee and such burden lies on the assessee as held in the case of R. Dalmia v. CIT [1978] 113 ITR 522 (Delhi). The assessee in this case tried to explain the source of the deposit by stating that it was sale proceeds from the sale of paddy to M/s Ganesh Rice Mills which, however, was found to be false in view of the complete denial by the said party. It is also submitted that mere payment by account payee cheques does not make the transaction genuine as the said payment cannot be held to be sacrosanct in view of the decision in the case of CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465 (Cal.). The fact that the transactions were through banks was not conclusive. The assessee was to establish identity of creditors and their credit-worthiness. Since in this case the alleged purchaser totally denied the purchase the same has been rightly held as bogus and the amount has been treated as income from undisclosed sources.

13. Shri P.K. Shrivastava further submitted that the assessee itself conceded that there was no sale to M/s Ganesh Rice Mills and surrendered the amount of Rs. 60,000 before the CIT(Appeals). Shri Bachanlal who was alleged to be the broker for the transaction was not produced and when insisted the name of Shri Angrcz Lal was introduced as the real person which also was not produced. It is also incredible that the alleged purchaser will bring heavy cash all the way from Ferozpur to Amloh and deposit in the bank at Amloh for making out pay order. Even otherwise the transaction was not conducted within the normal period and there was considerable delay in the date of sale and the payment received. It is also noticed that the assessce did not pay any commission nor interest to the broker. Relying further on the decision in the case of CIT v. Korlay Trading Co. Ltd [1998] 232 ITR 820 (Cal.) and also in the case of Shankar Industries v. C1T [1978] 114 ITR 689 (Cal.), it is submitted that the conditions required for proving genuineness of the transaction have not been fulfilled. Relying on the decision in the case of Kesarimal Sohanraj (supra), it is submitted that the burden of proof in regard to the cash credit is upon the assessce to prove the source thereof and if the same is not proved, it is open to the Income-tax Officer to include the aggregate amount of cash credit as income of the assessce from undisclosed sources and no further duty lies upon the Department to prove from which source the asscssee has earned that income. It is, therefore, submitted that due to the failure of the assessee to prove the source of the deposit, the Assessing Officer rightly treated the same as income from other sources and no interference is called for in this regard. It is, therefore, submitted that the amount has been rightly assessed as income from other sources.

14. I have carefully considered the rival submissions in the light of the material on record. From a careful reading of the order of the Assessing Officer, it is seen that the source of the deposit of Rs. 4,20,184 by the assessee on 3-3-1987 and 4-3-1987 has been traced to the paddy weighing 2509.65 qtls. According to the Assessing Officer this paddy shown as sales was actually bogus and the same was actually milled by the assessee from which profit was calculated by him at Rs. 1,80,110. He also found suppression in the yield of the paddy milled by the assessee as shown in the books which was estimated at Rs. 1,96,004. He, therefore, worked out the income out of the total milling at Rs. 3,76,114. However, since the assessee has made deposit of Rs. 4,20,184 which was more than the profit computed by him at Rs. 3,76,114, he made the above addition covering the said amount of Rs. 3,76,114.

15. The assessee, thereupon challenged the order of the Assessing Officer both on account of addition of Rs. 4,20,184 as also on account of suppression of yield on the paddy milled during the year. The learned CIT(Appcals) considered the submissions of the assessee and eventually held that the Assessing Officer was justified in making addition of Rs. 4,20,184. According to him the Assessing Officer held that paddy weighing 2509.65 qtls. was not actually sold but milled by the assessee and the income therefrom was worked out by him. The income so estimated being less than the addition on account of deposit at Rs. 4,20,184, he therefore did not consider it necessary to make a separate addition. In this regard, reliance was placed tin the direction of the Dy. CIT in the case of Shanker Rice Co. (supra) wherein it was directed that the addition, however, may be considered while making addition on account of bogus sale of paddy as normally the assessee would have ploughed back this profit in the guise of bogus sale of paddy. As a result, separate addition on account of this need not be made, if there is sufficient and plausible reason that this profit has been introduced back in the account books in the form of bogus sales. He, therefore, did not see any reason to enhance the addition by Rs. 3,76,114.

16. From the above facts, it is clear that the deposits of Rs. 4,20,184 made by the assessee in the bank account at Rs. 2 lacs on 3-3-1987 and Rs. 2,20,184 on 4-3-1987 were traced to the transaction of paddy weighing 2509.65 qtls. shown as sale to M/s Ganesh Rice Mills by the assessee. It was the finding of both the Assessing Officer and the CIT(Appeals) that the source of these deposits was traceable to the above paddy which was not actually sold to M/s Ganesh Rice Mills but actually milled by the assessee and disposed of in the open market. In such a case, the learned Accountant Member was fully justified in deleting the addition as the actual deposit of this amount in the books of account was not doubted. Even if these deposits are treated as on account of bogus sales no addition can be sustained as the assessee has already accounted for the sale proceeds in the manufacturing, trading and profit & loss account for the year ending 31-3-1987. The addition on this account has to be off set by the sale proceeds of paddy shown by the assessee at Rs. 4,20,185,05 in the manufacturing, trading and profit & loss account. If this sale proceed is deducted from the trading account and addition is made again on account of these deposits, the ultimate effect on the total income will be the same. It is only a question of proving the source of the said income which the assessee claim it to be on account of sale to M/s Ganesh Rice Mills whereas the Assessing Officer held that it was not actually sold but milled and sold in the open market by the assessee. Ultimately the income suppressed has to be worked out on the basis of the actual paddy milled and sold by the assessee in the form of rice, rice bran, coarse rice and paddy husk. There is, therefore, no reason for making addition of Rs. 4,20,184 all over again.

17. The Departmental Representative before me also produced the monthwise electric bills statement for the year to support the view taken by the Assessing Officer that the paddy weighing 2509.65 qtls. was not actually sold but milled by the assessee as evidenced by the electric bill for the months of November, December, 1986 and January to March, 1987. Since the stand of the revenue has all throughout been that the sale was bogus and the paddy was actually milled by the assessee, there can be no separate addition on account of the sale proceeds shown by the assessee at Rs. 4,20,184 as the same was inter linked with the yield of the paddy milled during the year and sold in the open market. In other words having found that the source of the deposits in the bank account amounting to Rs. 4,20,184 is the paddy milled by the assessee, the same cannot again be treated as undisclosed income under section 68/69A of the Act as rightly held by the learned Accountant Member. Even in any case the amount having been accounted for in the profit and loss a/c, it will not have any effect on the total income of the asscssce as indicated earlier. There is, therefore, no infirmity in the order of the learned Accountant Member.

18. Further the learned Accountant Member did not stop at deleting the addition of Rs. 4,20,184. He, therefore, revived the issue regarding addition of Rs. 3,76,114 which was not considered by the learned CIT(Appcals) on the reasoning that the higher addition of Rs. 4,20,184 fully covered the issue. Since the learned CIT(Appeals) did not consider the same, it was restored back to him to consider the issue of addition of Rs. 3,76,114. The order on this point is not challenged by the assessee before the Tribunal. The revenue, however, challenged this issue. There is, however, no difference of opinion on the decision on this point. Both the parties will have full opportunity to represent and substantiate their respective claims before the CIT (Appeals).

19. On the above facls, I hold that the addition of Rs. 4,20,184 cannot be sustained merely on legal grounds as the inference drawn would be opposed to the actual finding of facts recorded by the authorities. I hold accordingly.

20. The matter will now go back to the regular Bench for decision according to majority opinion.

ORDER

Mehta

1. The aforesaid appeals were heard by a Division Bench of the Tribunal and on the solitary issue raised in the assessee’s appeal i.e., an addition of Rs. 4,20,184. There was a difference of opinion between the Members. The Id. Accountant Member taking a view that the addition was not called for and the Id. Judicial Member opining otherwise.

2. On the matter being referred to the Third Member under section 255(4), the Hon’ble President of the Tribunal acting as the Third Member has by means of an order dated 22-3-2001 agreed with the view taken by the Id. Accountant Member to delete the addition of Rs. 4,20,184.

3. Both the parties were heard with a view to implement the majority view and by means of the present order considering the majority opinion, the addition of Rs. 4,20,184 which is the subject matter of the assessee’s appeal stands deleted.

4. As regards the Revenue’s appeal, there was no difference of opinion between the Id. Members of the Division Bench and Id. Judicial Member agreed with the view expressed by the Id. Accountant Member to restore the addition of Rs. 3,76,114 to the file of the CIT(A), to reconsider the same. Nothing remains to be said on our part in the present order.

5. In the result, the assessee’s appeal is allowed whereas the Revenue’s appeal is allowed for statistical purposes.

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