D.M. ENGINEERING Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal, Ahmedabad Bench 'C' has referred the following questions under Section 256(1) of the IT Act, 1961 (the Act), both at the instance of the Revenue and the assessee : At the instance of the Revenue :

(2.) THE assessment year is 1976 -77 and the relevant accounting period is Samvat Year 2031. The AO framed an assessment under Section 147 r/w Section 143(3) of the Act on 31st March, 1980 making addition of Rs. 4,75,000 as unexplained cash credit under Section 68 of the Act. The addition of Rs. 4,75,000 is in respect of four amounts credited in the books of the assessee on four different dates from 28th Nov., 1974 to 3rd March, 1975 for cash stated to have been received from Syndicate Bank against four bearer cheques drawn by the assessee -firm. The firm comprised of two partners, both having equal shares in the profits and losses. It is an undisputed fact that both the partners were whole -time employees of one group, popularly known as Vora Group of Rajkot. A concern named Economic Traders is the main entity of group with allied concerns like Economic Traders (Gujarat) (P) Ltd., Delta Engineering, Cima Industries, Ferrous Engineers, etc. Both the partners of the assessee -firm contributed capital of Rs. 5,000 each and traded in spare parts of diesel engines. The purchases were made from various parties of Rajkot, but all the sales were effected to the concerns of Vora Group. The assessee -firm had no shop or business premises and the business was conducted only from the residence of the partners.

(3.) THE assessee carried the matter in appeal before the CIT(A), who confirmed the addition in question. A further appeal was filed by the assessee before the Tribunal. After hearing both the sides as well as appreciating the evidence on record, the Tribunal accepted the explanation of the assessee in respect of the first two cheques, namely, of Rs. 50,000 and Rs. 1,50,000, totalling to Rs. 2,00,000 and deleted the addition to that extent. The addition in respect of remaining two cheques totalling to Rs. 2,75,000 (Rs. 1,50,000 and Rs. 1,25,000) was confirmed. The Revenue is in reference against deletion of addition to the tune of Rs. 2,00,000, while the assessee is in reference in respect of addition amounting to Rs. 2,75,000 relatable to other two cheques.