R.K.AGRAWAL,J. - (1.) THE Income Tax Appellate Tribunal has referred the following question of law under Section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for opinion to this Court: Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in refusing the assessee's right to cross examine the persons whose statements were relied for making the addition of Rs. 1,18,799/ - and in not following the principles of natural justice and the Supreme Court judgment in : [1980]125ITR713(SC)
(2.) THE reference relates to the Assessment Year 1975 -76. Briefly stated, the facts giving rise to the present reference are as follow: The assessee is a company. Besides other activities of business, it was also manufacturing vanaspati oil. It had been supplying vegetable oil to the traders including M/s Vishwakarma Oil Traders, Kanpur. The said firm was having wholesale licence for holding the vansapati oil. The Income Tax Department had conducted a search in the premises of Gopal Das Gupta and a rough cash book was seized, which contained certain transactions. It was found that Gopal Das alongwith Kanhaiya Lal and Badri Prasad were carrying on business in vansapati oil under the name and style of M/s Vishwakarma Oil Traders. The rough cash book found during the search operation was for the period from 2.1.1974 to 29.3.1974. The cash book was examined by the Income Tax Officer and he found the following payments had been made by M/s Vishwakarma Oil Traders to the assessee company and these payments were made as on money: Date Amount1. 22.1.1974 Rs. 19,212/ - for 800 tins2. 23.1.1974 Rs. 19,000/ -3. 25.1.1974 Rs. 6,760/ -4. 28.1.1974 Rs. 18,700/ -5. 29.1.1974 Rs. 3,391/ -6. 31.1.1974 Rs. 9,000/ -7. 5.2.1974 Rs. 18,000/ -8. 6.2.1974 Rs. 900/ -9. 19.3.1974 Rs. 40,000/Rs. 1,25.559/
(3.) THE Income Tax Officer had issued a notice to the assessee to show cause why an amount of Rs. 1,25,559/ - received as 'on money' from M/s Vishwakarma Oil Traders in addition to the purchase price of vegetable oil sold to the said party during the period 2.1.1974 to 29.3.1974 be not assessed in its hands. The assessee was also intimated that the rough cash book was found during the search conducted at the premises of Gopal Das. The assessee had requested for issue of a copy of the rough cash book as also statement of Gopal Das, Kanhaiya Lal and Badri Prasad, which were supplied to it. The assessee filed written reply dated 13.6.1977 and 12.8.1977 wherein it had contended that the rough cash book found at the time of search was not a document to be relied upon at all because the same is incomplete in all respects and even all the sales made by the assessee to M/s Vishwakarma Oil Traders had not been accounted for therein. It was also contended that Gopal Das did not own this cash book nor Badri Prasad in whose name the licence in the name of M/s Vishwakarma Oil Traders was issued, had explained all the entries appearing in the cash book. Thus, it was the case of the assessee that the material obtained from this cash book cannot be used to the disadvantage of the assessee unless and until these parties had affirmed the payment 'on money' alleged to have been received by the assessee. The Income Tax Officer was not satisfied by the explanation offered by the assessee. He held the amount of Rs. 1,25,559/ - to be the part of the receipt of the sale price of vanaspati oil which was sold by the assessee and treated the same as its income. In coming to this conclusion, he had made the following observations: A perusal of the cash book which was found at the time of raid and cash entry written therein clearly shows that the payments of on money has been recorded with complete details and on money has also been calculated on the basis of tins which ranges between Rs. 14/ - to Rs. 16/ - per tin and its actual payment to the assessee company on different dates has been recorded in that cash book. The question of affirming either the payment or the receipt of on money by either of the two parties when the transactions were effected outside the books, therefore, cannot arise at all because it is No. 2 affair for both the parties. Since the cash book in question found at the time of raid is an original record of transaction which must be relied upon because no body would write these transactions separately, it is not a secret affair for their personal gains and this rough cash book was never intended to be for either income tax or sales tax purposes. Had it not been found in raid the whole matter would have been gone unnoticed either in the assessment of Gopal Das or in the case of the assessee. The amount of Rs. 1,25,559/ - is, therefore, held to be the part of the receipt of the sale price of vanaspati ghee which was sold by the assessee. This amount is, therefore, the income of the assessee and assessed in its hands as such.;