COMMISSIONER OF INCOME TAX Vs. MORADABAD SYATES LIMITED

JUDGEMENT

(1.) Heard learned counsel for the Revenue and learned counsel for the assessee.

(2.) The Revenue seeks reference of the following questions of law to this court under Section 256(2) of the Income-tax Act, 1961, as follows :

(3.) The assessee is a company engaged in the business of manufacture and sale of yera. During the course of assessment proceedings for the assessment year 1984-85 and while scrutinising the ledger book of the Moradabad office of the company, the Assessing Officer found that substantial amounts had been debited on account of payment of interest and commission to the bank on a large number of hundis drawn on parties at Delhi where the head office of the company was situated. Enquiries with the Bareilly Corporation Bank, through which these hundis had been discounted, revealed that there were a large number of hundi sales effected by the assessee but these sales were not reflected in the books of account of the assessee. Details of these hundi sales were obtained from the bank as well as the sales tax office at Moradabad. When confronted with these details, the assessee pleaded that these were only accommodation hundis which were raised in order to get bank finance for its business and there were no actual sales or movement of goods involved. The Assessing Officer, however, rejected the above explanation of the assessee and made an addition of Rs. 15,72,080 as profits on undisclosed sales relating to the discounted hundis as per details given in the assessment order.