KAVERI RICE MILLS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal, Delhi, has referred the following question of law under s. 256(2) of the IT Act, 1961 (hereinafter referred to as "the Act"), for opinion to this Court : "Whether the Tribunal was legally justified to treat the entire purchase of Kana as bogus and add their value at Rs. 36,817.95 to the income of the assessee -

(2.) THE reference relates to the asst. yr. 1984 -85.

(3.) BRIEFLY stated, the facts giving rise to the present reference are as follows : The applicant has been assessed to income -tax in the status of a registered firm. It is engaged in the business of manufacture and sale of rice by hauling paddy. In the process of manufacture of rice, the polishing is done and the powder produced in the course of producing rice is known as 'Kana' which is a waste product and is an animal fodder and also used for producing oil. The applicant had also been dealing in the purchase and sale of Kana. During the assessment proceedings, it was found that the applicant had failed to explain the quantity of purchase of Kana. An attempt was made by the AO to call for the alleged sellers from whom the Kana was alleged to have been purchased by the applicant and some of them denied having dealt with in the quantity of Kana. The AO, consequently, held that the alleged purchase of 300 quintals of Kana was bogus and not genuine. He accordingly added back the value of Rs. 36,817.95 the alleged purchase price of Kana as the income of the applicant. The plea that the entire purchase price cannot be added as the applicant has accounted for the entire quantity purchased in the sale account, was not believed. The addition has been upheld by the CIT(A) as also by the Tribunal.