DEORIA OXYGEN COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN Income Tax Reference No. 46 of 1988, the Income Tax Appellate Tribunal, Allahabad (hereinafter referred to as 'the Tribunal'), has referred the following four questions of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for opinion to this Court: 1. Whether the Tribunal was legally correct in holding that the assessment made by the Income Tax Officer on an 'Association of Persons', based on the return filed by the partnership firm styled as 'Deoria Oxygen Company' was valid?

(2.) WHETHER the Tribunal was legally justified in not following the decision of the Hon'ble High Court in the case of Commissioner of Wealth Tax v. J.K. Srivastava and Sons reported in : [1983]142ITR183(All) , as the same had been rendered under the Wealth Tax Act?

(3.) WHETHER on a true appreciation of the legal position, the Tribunal should not have held that the assessment order passed on 'Association of Persons' suffered from a serious jurisdictional error which could not have been corrected or rectified by the first appellate authority? 2. It appears that in the application filed under Section 256(1) of the Act, the applicant had raised eight questions of law out of which only four questions were referred by the Tribunal. Thereafter, the applicant approached this Court by filing an application under Section 256(2) of the Act and this Court directed the Tribunal to refer the following question of law also: Whether, in determining the taxable 'income' of the assessee, the Tribunal should not have given due regard to the legitimate outgoings in the form of entire purchases of gas cylinders but for which the returned income could not have been earned? 3. Both the references relate to the Assessment Year 1982 -83. 4. Briefly stated, the facts giving rise to the present references are as follow: The assessee filed the return on 15.10.1982 showing an income of Rs. 50,571/ -. It derived the income from its business in welding materials and in oxygen gas. The Income Tax Officer pointed out that the information available indicated that the applicant got printed bill pad of M/s Sardarji & Co., Moulviganj, Lucknow and M/s Asiatic Acetylene Co. Ltd. and gas cylinders obtained in black have been shown as purchases from those parties by preparing bogus purchase vouchers on the bills printed by the assessee. The Income Tax Officer made enquiries from M/s Asiatic Acetylene Co. Ltd. regarding those fake vouchers. It was replied that the Company never supplied any such bills as enquired by the Income Tax Officer and supplies were not made as per those vouchers, copy of which were given by the Income Tax Officer. The said Company, on the other hand, furnished a statement of accounts as per its records regarding the applicant. The Income Tax Officer fixed the hearing under Sections 143(3) and 142(1). The applicant took time. Later on, when the books were produced, such books and vouchers were impounded under Section 131(3). Again, the case was fixed for hearing for which the applicant sought time. The Income Tax Officer made enquiries with M/s Sardarji & Co. and found several discrepancies. The Income Tax Officer pointed out that fake purchase vouchers and printed bills were maintained. Similarly, fake vouchers were issued in the name of M/s Sardarji & Co. also which were placed before the applicant to enable it to prove that purchase vouchers were not fake. After being given some time, the applicant submitted a written contention. The Income Tax Officer pointed out that no efforts were made to establish that the vouchers were fake, but the applicant merely expressed its desire to know the source of information for such claim that the vouchers from the Companies concerned were fake. The Income Tax Officer allowed inspection of those impounded papers. The Income Tax Officer also asked the circumstances in which such cash payment over Rs. 2,500/ -were made and requested the applicant to justify the claim. The Income Tax Officer informed the applicant that the above two firms have denied to have issued vouchers or make supplies to the applicant as mentioned by the Income Tax Officer. He also pointed out that no vouchers for payment of freight and cartage was produced for the alleged purchases. He also asked the applicant to explain whether there was any special circumstances, if any, for the purpose of Rule 6DD. The applicant sent reply which was considered and time was allowed to it to do the needful. He, however, noticed that the applicant did not come forward with the correct facts and has been adopting delaying practice. The Income Tax Officer noted that the payments of those fake vouchers and bills were shown either by showing cash payment of partly cash payment and partly by showing fictitious outstanding liability. Correspondingly, fictitious transport freight and cartage were also shown as narrated by him at para 9 of the assessment order. The Income Tax Officer discussed the various items in detail with facts and figures which were reproduced in the assessment order. The Income Tax Officer noted amongst other things that the applicant had also failed to furnish/produce supporting vouchers or explanation in respect of the total sum of Rs. 50,000/ - credited in the accounts of M/s Asiatic Oxygen and Acetylene Co. Ltd. which was considered as income from undisclosed sources. In the case of M/s Sardarji & Co., Lucknow the Income Tax Officer brought out various facts and figures in the assessment order itself in order to show that it was beyond doubt that bogus purchase vouchers were made by the applicant which were found to be fictitious as it was in the case of the first Company. The Income Tax Officer accordingly added back Rs. 95,048/ - on account of bogus purchases and rental bills Rs. 56,672/ - has been added as purchase from the second party. Transport charges to the extent of Rs. 3,000/ - were disallowed. In view of the above, the Income Tax Officer made the additions of Rs. 2,63,892 in various heads.