U P CERAMICS AND POTTERIES LTD Vs. DEPUTY COMMISSIONER OF INCOME TAX
INCOME TAX APPELLATE TRIBUNAL
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M.A. Bakhshi, Judicial Member -
(1.) WE are disposing of these two appeals of the assessee relating to assessment years 1988-89 and 1989-90, by this consolidated order. Appellant is a private limited company engaged in the manufacture of potteries and ceramics items. A search and seizure operation under Section 132 was carried out at assessee's premises on 19-7-1989. During search operations, a statement being Annexure A-24 to the Panchnama dated 14-8-1989 was found and seized. This statement incorporates working of incentive bonus payable by the assessee to its distributors on the basis of increase effected by them in sales over the target fixed for the year. The Assessing Officer compared this statement with the sales register of the assessee and found discrepancies. For assessment year 1988-89, the said discrepancy was as under :
(2.) When confronted assessee sought to explain the discrepancies by pointing out that in respect of the above distributors not only the sales effected directly to them was taken into account but the sales made to some other parties which had been introduced by them were also taken into account for payment of incentive bonus. For assessment year 1988-89, assessee pointed out that in the case of M/s Sethi General Stores, the sales made to M/s Verma Crockeries amounting to Rs. 33,567 and to M/s Feather Touch amounting to Rs. 6,30,387 were included as these parties had been introduced by M/s Sethi General Stores. In the case of M/s Duggal Crockery, the sales made to M/s Raju Crockery of Rs. 10,872 and M/s Crockery Centre of Rs. 7,95,534 have been taken into account for the purposes of computing the incentive bonus. Similarly, in the case of M/s Capital Crockery Stores, the sales made to M/s Cheap and Best amounting to Rs. 4,23,258 had been included as the said party was introduced by M/s Capital Crockery Stores. It was accordingly pleaded before the Assessing Officer that when sales made to these parties is also included, there would be no discrepancy as alleged. A reconciliation statement was also furnished before the Assessing Officer. Assessee filed confirmations from two distributors, namely, M/s Duggal Crockery, Delhi and M/s Capital Crockery Stores confirming the version of the assessee. A certificate from M/s Sethi General Stores, however, could not be filed on the ground that the party was not available at the relevant time. The Assessing Officer did not accept the explanation of the assessee as according to him, there were no supporting records available with the assessee in this regard. The Assessing Officer considered the explanation of the assessee as an innovative one and 'after thought'. Assessing Officer was of the view that assessee has made a frantic hit to somehow tally the sales figures available to incentive bonus by locating suitable bills that can match them. He accordingly concluded that the amounts of sales available on the incentive bonus statement are correct figures of the sales and the difference between the sales available on the seized paper and those recorded in the assessee's books was taken as assessee's sales outside the books. He not only added the difference on the basis of basic value but also added excise duty @ 20% plus sales tax @ 10%. Addition of Rs. 24,87,111 was accordingly made for assessment year 1988-89.
Similarly, for assessment year 1989-90, addition of Rs. 61,28,207 was made on the basis of difference in the basic value in respect of 17 parties. For this year custom duty @ 20% and the sales tax @ 10% was somehow not added for the purpose of computing the sales made outside the books of account.
(3.) ASSESSEE appealed to the CIT(A) and reiterated his contentions. The CIT(A) not being satisfied with the explanation of the assessee confirmed the view of the Assessing Officer. It was observed by the first appellate authority that assessee had not established that the sales made to other parties were to be considered for working out the incentive bonus payable to the dealers. For assessment year 1989-90, the CIT(A) following his order for assessment year 1988-89, confirmed the addition of Rs. 58,24,911 on account of suppressed sales. In respect of three parties, namely, Kashmir Traders, Hindustan Trading Co., Bombay and Punjab Crockery House, Ernakulam, the matter has been remitted back to the Assessing Officer for verification of the claim of the assessee that there was no discrepancy in respect of these parties.;
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