RAJARAM AND COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, a registered firm, filed its return of income on June 30, 1969, for the assessment year 1969 -70 declaring a total income of Rs. 54,453. In the assessment order dated February 24, 1972, the income of the assessee was assessed at Rs. 1,66,660 under section 143(3) of the Income -tax Act, 1961 (hereinafter referred to as 'the said Act'). That order was set aside by the Appellate Assistant Commissioner on September 13, 1972, with a direction to pass the order on the registration issue and then to frame a fresh assessment. Thereafter a fresh assessment was made on January 19, 1973, by the Income -tax Officer who assessed the total income at Rs. 1,66,660 and initiated action under section 271(1)(c) of the said Act for furnishing in accurate particulars of income and concealing the income. The Appellate Assistant Commissioner granted certain reliefs to the assessee by reducing the addition of Rs. 12,180 to the book results in Bombay -set account to Rs. 10,000, deleting an addition of Rs. 15,502 relating to certain borrowings and reducing the rate of gross profit from 2.5% to 2% in the Vapi -set account.

(2.) THE Inspecting Assistant Commissioner, rejecting the contentions raised by the assessee, found that the sales as shown by the assessee were not genuine and, considering the facts and circumstances of the case narrated in his order, came to the conclusion that the assessee had furnished inaccurate particulars of income and had concealed the income exigible to tax. The assessee, on being given an opportunity by the Inspecting Assistants Commissioner, did not produce any fresh evidence and the Inspecting Assistant Commissioner, therefore evaluated the evidence which was on record before the Income -tax Officer. It was found that, on a single day i.e., on February 6, 1978, silver was sold at the rate of Rs. 530 per kg. to 92 parties as indicated in cash memos Nos. 1175 to 1266 and at the rate of Rs. 550 per kg. to 66 parties as indicated in cash memos Nos. 1267 to 1332 It was found that the fact 158 parties converged on the shop of the assessee on the same way, on March 18, 1968, 19 parties were sold silver at Rs. 500 per kg. as mentioned in cash memos Nos. 2657 to 2686 and, on the same day, 59 parties were sold silver at the rate of Rs. 520 per kg. as shown in cash memos Nos. 2687 to 2745. These 78 parties went to the shop of the assessee to buy silver of the same quantity and value and the assessee sold them at two different rates. It was found that though ample opportunity was given, the assessee was not able to produce any of the parties or indicate the addresses of such parties and it has not shown that the transactions in fact took place at the rates stated in the cash memos. It was found by the authorities that the assessee had tried to show that sales had taken place at particular rates mentioned in the cash memos and had failed to establish that these were genuine rates. It was also found that it was strange and surprising that each one of 6,570 sales was for an identical quantity of silver and for sums varying between Rs. 900 to Rs. 1,000. Moreover, there were sales only on 110 days in a year and, on the rest of the days, there were no sales whatsoever. The Inspecting Assistant Commissioner, on consideration of the entire evidence on record, found that the sales at the rates as shown in the cash memos were not genuine. It was also found that the matter was clearly covered by the Explanation to section 271(1)(c) of the said Act.

(3.) IN the above background, the Tribunal has, at the assessee's instance referred the 1following question for the opinion of this court under section 256(1) of the Act :