TXA/62/2002 of THE COMMISSIONER OF INCOME TAX Vs M/S.TUBKI CASHEW WORKS AND ANR. on 27 November 2002

1. M/s. Tubki Cashew Works,Patnem, Canacona, Goa.

2. The Income Tax AppellateTribunal, Panaji Bench,Aayakar Bhawan,Patto Plaza, Panaji, Goa....Respondents.

Mr. S.R. Rivonkar and Ms. A. Fadte, Advocates for theAppellant.

Mr. M.S. Usgaonkar, Senior Advocate with Mr. S.V. Kamat,Advocate for the Respondent No.1.

DATE: 27TH NOVEMBER, 2002.

ORALJUDGMENT: (PER KAKADE, J.)

This is an appeal under Section 260A of theIncome Tax Act, 1961 preferred against the Judgmentand Order passed by the Income Tax AppellateTribunal, Panaji Bench, Panaji in IT AppealNo.146/PN/1993 for the Assessment Year 1990-91whereby Order of CIT(A) was upheld and appellant’sappeal came to be dismissed by Order dated 2ndJanuary, 2002.

2. The facts giving rise to the dispute in a nutshell are thus :- Respondent no.1/Assessee is a dealer incashews. The A.O. found that there was no openingstock as on 1.4.1989 and the Assessee had purchased33453.35 kgs. of cashew seeds in the month ofApril, 1989 and had sold 56160 kgs. in that monthmeaning thereby that 22706.65 kgs. of cashew seedshad been sold without there being correspondingpurchase to that extent. Likewise in the month ofMay, 1989, 28691.30 kgs. of cashew seeds werepurchased and the sale was recorded at 61280.70 kgs.The cumulative difference at the end of May, 1989was 55295.35 kgs. of cashew seeds for which nocorresponding purchase was there. On this basis,the A.O. worked out the purchase rate at 16.5 perkg. and calculated the cost of 55295.35 kgs. atRs.9,12,373/- which he added to the income of theAssessee as unexplained investment in purchasesoutside the books as discussed.

3. Aggrieved by such Order, Respondent No.1preferred an appeal before CIT(A). The RespondentNo.1/Assessee submitted that he had maintained roughbooks for purchase of cashews. The CIT(A) obtaineda remand report from the A.O. which was submittedby A.O. after examination of the said rough books maintained by the assessee for cashew purchases. Itwas the case of the assessee that it had madepurchases of raw cashews through agents, sent toremote forest from where the agents directly makepurchases and supply them to cashew factories. Itwas stated that advance payments are given to suchagents which are fully reflected in the bank accountof the assessee. It was submitted that the saidadvances and purchases were periodically reconciledwhenever the agents come back to the headquarters.The explanation of the assessee was that cashews isa seasonal crop and all the purchases had to be madewithin the months of April, May and June. Thepurchases and sales both are accounted and areperiodically reconciled. It was also demonstratedthat total purchases and total sales for the wholeyear tallied. The record shows that it was broughtto the notice of the CIT(A) that there was excesspurchase of 17000 kgs which were sold to theassessee’s processing unit for Rs.3,62,052/- whichamount had been shown as sales and is accounted forin arriving at the income of the assessee. Onconsideration of the above contentions of theassessee and there being no serious objection raisedby the A.O. the CIT(A) reached the conclusion thatthere was no suppression of purchases and hence theimpugned addition was not justified. Being aggrieved by the said order the appellant preferredan appeal before the Tribunal.

Conclusion

The Tribunal, on assessing the facts andcircumstances on record, vis-a-vis the relevantlegal aspects, came to the conclusion that there wasno dispute that the assessee was engaged in businesswhich is seasonal in nature and perusal of theassessment order revealed that no explanationwhatsoever was sought from the assessee in respectof the alleged excess of sales of cashew seedswithout there being corresponding purchases in themonths of April and May, 1989. The assessee hadfurnished quantitative details for the months ofApril, May and June and demonstrated that theallegation of the A.O. was not correct. Thequantities were tallied and the explanation offeredby the assessee could not be adversely commentedupon by the A.O. in the Remand Report submitted byhim before the CIT(A). Therefore the Tribunal wasof the opinion that on appreciation of the nature ofassessee’s business and the explanation offered bythe assessee for the alleged discrepancy which couldnot be found fault with, the CIT(A) reached theright conclusion so that the impugned addition wasunwarranted having regard to the facts andcircumstances of the assessee’s case and therefore in the result the appeal came to be dismissed.Hence this Tax Appeal.

4. We have heard Mr. Rivonkar, the learnedcounsel for the appellant and Mr. M.S. Usgaonkar,the learned Senior Advocate for the Respondent No.1.It may be noted that earlier at the time of filingof the appeal the substantial questions of lawsought to be raised on behalf of the appellant werefound to be incorrect. The appellant sought andobtained amendment regarding the substantialquestions of law and added the following substantialquestion of law :- " Whether on the facts and circumstances ofthe case there was any relevant material before theITAT to come to the conclusion that there was nosuppression of purchases by the assessee ? "

5. As pointed out earlier, the A.O. was ofthe view that since the purchase and sale figures ofthe cashew nuts for the months of April, May andJune did not tally and the accounts did not reflectthe correct position, there was suppression by theRespondent No.1 in that regard. In support of thisversion, provisions of Section 44AA of the IncomeTax Act was brought to our notice, which makes it obligatory on the part of every person carrying onprofession and business to keep and maintain suchbook of accounts and other documents as may enablethe assessing officers to compute his total incomein accordance with the provisions of this Act. Itwas urged on behalf of the appellant that since therough books which were subsequently presented by theappellant were not in accordance with Section 44AAof the Income Tax Act, the Respondent No.1 wasguilty of suppression of accounts and consequentlythe order of the Tribunal was illegal.

In this regard Mr. M.S. Usgaonkar, the

learned Senior Counsel for the respondent No.1brought to our notice the Rules framed under Section44AA of the Income Tax Act. Rule 6F is regardingthe books of account and other documents to be keptand maintained under Section 44AA(3) by personscarrying on certain professions. It is cleartherefrom that the proviso to such Rule makes itclear that the respondent No.1 and his business arenot covered by the said Rule which regulates themode of maintaining accounts regarding certainprofessions.

6. Moreover, in this regard it must bepointed out that the provisions of Section 260A of

the Income Tax Act enabling filing of this appeal,contemplates involvement of substantial question oflaw. Therefore, it is needless to mention that thesaid provision is akin to the provisions of Section100 of C.P.C. Therefore if we assess the merits ofthis appeal on the touchstone of the establishedprinciples of Civil Procedure Code pertaining toentertainment and adjudication of second appeal itis obvious that the appeal cannot be entertained ifno substantial question of law is involved at all.As noted earlier, the so called substantialquestions of law which are sought to be raised inthis appeal are in respect of either factual aspectsor pertaining to the allegations of the A.O. thatcertain purchases were suppressed by the assessee.In our considered view the members of the AppellateTribunal have rightly dealt with this aspect andhave come to the conclusion that the books ofaccount as well as the contemporaneous record of thepurchases and sales maintained by the assessee weresufficient compliance on their part to show thatthere was no suppression of any accounts orpurchases in any manner whatsoever.

In this regard it would be worthwhile to takenote of the ruling of the Supreme Court in the caseof Kondiba Dagadu Kadam v. Savitribai Sopan Gujar and others (1999) 3 S.C.C., 722, wherein the ApexCourt has come to the conclusion that it is notwithin the domain of the High Court to investigatethe ground on which the findings were arrived at bythe last Court of fact, being the first appellatecourt. In a case where from a given set ofcircumstances two inferences are possible, one drawnby the lower appellate court is binding on the HighCourt in second appeal. Adopting any other approachis not permissible. The High Court cannotsubstitute its opinion for the opinion of the firstappellate court unless it is found that theconclusions drawn by the lower appellate court wereerroneous being contrary to the mandatory provisionsof law applicable or its settled position on thebasis of pronouncements made by the Apex Court, orwas based upon inadmissible evidence or arrived atwithout evidence.

reasoning adopted and the findings recorded by boththe lower Tribunals are found to be legal, properand reasonable. The reasoning adopted by theTribunal is also found to be based upon factualevidence and there is no perversity at all in thesaid conclusion drawn by the said authority.

In view of this situation, we have nohesitation to hold that the order passed by theTribunal does not suffer from any irregularity orillegality and has to be maintained as it is legaland proper.

8. In the result, we have no reason tointerfere therewith and consequently the appealstands dismissed with no order as to costs.

P. V. KAKADE, J.

P. V. HARDAS, J.

sl.