ASSTT CIT Vs. MASTER STORES

JUDGEMENT

(1.) The first ground in this departmental appeal relates to the addition of an amount of Rs, 13,01,382 consisting of payments made by the assessee towards gratuity, retirement benefit, ex gratia, etc., to its employees, as deleted in the first appeal.

(2.) Before the Commissioner (Appeals), it was contended on behalf of the assessee that the assessee did not actually close its business permanently and that there was only a temporary cessation of the business during the year under consideration. It was shown that the factory licence of the assessee and also registration with E.S.I. and employees provident fund scheme were continued. It was furthermore shown that during the year under consideration itself the assessee had effected manufacturing sales of Rs. 75,00,000 approximately. By referring to the audited accounts of the assessee for the two successive years, it was pointed out that the assessee continued to carry on its operations of flour-milling and sale of wheat products in those years. Furthermore, it was also pointed out that in addition to the milling of the assessee's own stock of wheat, the assessee also carried on milling of wheats on behalf of the Government of West Bengal, also. In this regard, references were also made to the periodical returns furnished by the assessee with the Director of Rationing, Government of West Bengal, every month not only during the year under consideration but also in the subsequent period. It was furthermore pointed out that the plant and machinery and other assets of the assessee were not at all sold out and were on the other hand, run by the assessee. It was again pointed out that the senior staff members of the mill and also the office staff were not at all disturbed. It was thus contended that in order to run the business in a smooth manner, the assessee resorted to the procedure of declaring the temporary closure and get rid of a large portion of its old work-force, who had become ineffective, in the process. It was thus contended that the assessee was entitled to allowance of the expenses incurred by it solely and exclusively for the purpose of running its business in a better manner. It was furthermore pointed out to the Commissioner (Appeals) that in his order under 144A, the Deputy Commissioner admitted that manufacturing activities were carried on by the assessee during the year under consideration and furthermore that the said manufacturing activities went on continuing during the periods covered by assessment years 1994-95 and 1995-96.

(3.) At the stage of the hearing of the appeal before us, the learned Departmental Representative pointed out that in the closure notices issued by the assessee to the member of staff as well as furnished before the different authorities, total closure" of the operations of the assessee from 1-2-1993, was mentioned. On the other hand, the learned counsel for the assessee reiterated all the facts submitted before the Commissioner (Appeals) and pointed out that the flour mill actually worked in the subsequent two years. So far as the genuineness of the payments is concerned, the learned counsel for the assessee pointed out to the audited books of accounts and other documents including vouchers, etc., maintained by the assessee and claimed that the genuineness of the payments could not at all be doubted.