SYSTEM INDIA CASTINGS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the assessee, and the following question of law has been referred by the Tribunal for the opinion of this court :

(2.) THE assessee is a partnership firm comprising two partners, viz., Smt Premila Jhamb and Shri Satish Jhamb. THE assessee-firm is engaged in the business of manufacturing various casting items from iron scrap and its factory is located at Tedesara village in Rajnandgaon district. During the course of assessment proceedings, the Assessing Officer noted purchases of 167.053 M.Ts. of iron scrap for a total price of Rs. 7,51,740 from Sagar Enterprises, Jabalpur. THE Assessing Officer, after examining the material and explanation submitted in this regard by the assessee, found that the said material was not purchased from Sagar Enterprises, Jabalpur, and the payments made to the Jabalpur party was actually received by. the assessee itself. Accordingly, the Assessing Officer made an addition of Rs. 7,51,740 to the disclosed income of the assessee towards investment in purchase of iron scrap from undisclosed sources. THE Assessing Officer also disallowed the transportation charges of Rs. 42,650 paid to the truck owners for bringing such iron scrap to the factory of the assessee because purchases of iron scrap from Jabalpur party were not accepted by him as genuine.