Sikander Khan, A.M. - (1.) THIS appeal by the assessee, which is a firm, deriving income from steel rolling mill, is against the order of the CIT(A), II, Meerut dt. 23rd September, 1998 pertaining to asst. yr. 1993-94. As many as 17 grounds have been taken in the appeal. However, all along the assessee's objections in the grounds of appeal have been against additions of Rs. 3,43,177 and Rs. 51,995 made by the AO on account of alleged excessive purchase prices, addition of Rs. 57,98,103 made by the learned CIT(A) by way of enhancement on account of alleged non-genuine and bogus purchases addition of Rs. 45,964 under s. 43B in respect of provident fund contributions made by the assessee and Rs. 21,658 on account of disallowance out of telephone expenses.
(2.) We would first take up the dispute relating to the additions of Rs. 3,43,177 and Rs. 57,98,103 as well as enhancement of Rs. 57,98,103 by learned CIT(A) which are inter-connected on account of alleged excessive purchase prices and bogus purchases. The assessee declared gross profit of Rs. 76,47,926 on turnover of Rs. 25.48 crores, which resulted G.P. rate of 3.007 per cent. In the preceding year the G.P. shown was 3.000 per cent for turnover of Rs. 22.06 crores. The AO had doubts about the correctness of the accounts on the ground that the G.P. percentage for the year under consideration was almost the same as that of last year. He also examined the burning loss as well as melting scrap and observed that they were consistently the same as in the past, which also raised doubts in his mind about the correctness of the assessee's accounts. The AO examined purchases from M/s. Jay Shree Industries India, Jay Shree Steel and M/s. Shree Ram Steel Centre and also referred to the investigations conducted by Central Excise Department in the cases of the first two parties, where they had held that the said two parties were doing only paper transactions in sale and purchases and they were not engaged in actual manufacturing activities. Scrutiny of bank accounts of the said two parties indicated that whatever payments for the transactions had been received by cheques had been withdrawn on the same day, in cash from which the AO presumed that whatever amount was received by cheque for sales made by these two parties to the present assessee was returned in cash by the said two parties to the present assessee on the same date.
(3.) THE AO then referred to the enquiries conducted wherein it was found that the goods transported from the said two parties to the factory premises of the present assessee were through non-existent trucks or through cars, scooters, tanker, motor-cycles and even buses. He observed that it was not possible to transport all such heavy materials like scrap/forgings by such vehicles from the factory premises of the said two parties to the factory premises of the present assessee. THE enquiries from the TRO Delhi revealed that there were no trucks by registration No. DLI 1375, DLI 6370 and DLI 6364 because the registration No. DLI was for passenger cars and not for trucks. Similarly enquiries revealed that truck No. UTG 3492 shown on the bills was in fact a motor-cycle. He further observed that the owner of vehicle No. DEG 2000 stated that this truck was never operated in Ghaziabad and there was no question of using the truck for transportation of goods of the said two parties. THE assessee had shown payments of carriage and cartage through the so-called trucks amounting to Rs. 17,868.;