1. The appeal by the assessee, Stretchlon (P.) Ltd., Bombay, and the cross objection by the revenue. Since pertain to the assessment year 1975-76 for which the relevant previous year ended 31-12-1974 and involve certain identical issues, both these matters were heard together and are disposed of by this consolidated order for the sake of convenience.
2 & 3. (Paras 2 and 3 are not reproduced here as they involve a minor issue.] 4. The second ground in the assessee's appeal pertains to disallowance of interest amounting to Rs. 11,623 paid to Delhi Development Authority for delayed payment of value of land purchased by the assessee for expansion of its business. The brief facts pertaining to this issue are that the assessee was contemplating of setting up a new unit in Delhi to manufacture nylon yarn and it was in this connection that a piece of land was purchased. Since a part of the price of the said land was not paid by the assessee, an amount of Rs. 11,623 was paid by the assessee as interest. Both the lower authorities, the ITO and the Commissioner (Appeals), disallowed the claim of the assessee on the short ground that the interest was in respect of the land which the assessee was acquiring for establishment of a new unit.
The Commissioner (Appeals) in paragraph 3 of his order found the reliance of the assesses on Calico Dyeing & Printing Works v. CIT  34 ITR 265 (Bom.) as misplaced and applied the well known Supreme Court decision in the case of Challapalli Sugars Ltd. v. CIT  98 ITR 167.
5. The learned authorised representative for the assessee vehemently argued that the Commissioner (Appeals) is in error in distinguishing the case of Calico Dyeing & Printing Works (supra) and his reliance in the case of Challapalli Sugars Ltd. (supra) is misplaced. He submitted that the administration, management, control, planning, etc., was one and the same of the assessee's business at Bombay and the new proposed unit at Delhi and in that light if the business was the same, then the assessee's claim ought to have been accepted and he placed his reliance on CIT v. Alembic Glass Industries Ltd.  103 ITR 715 (Guj.) and Bansidhar (P.) Ltd. v. CIT 127 ITR 65 (Guj.).
6. The learned departmental representative, on the other hand, placed his reliance on the order of the Commissioner (Appeals). After taking into consideration the rival submissions, we are unable to confirm the finding of the Commissioner (Appeals). On this issue, we find it as a fact that the administration, management and business organisation of the assessee was the same and the attempt of the assessee with same business organisation, administration, management and control to establish a new unit at Delhi would not disentitle it to interest on the late part payment for such land. The Gujarat High Court in the case of Alembic Glass Industries (supra) had occasion to deal with the expenditure referable to the establishment of Bangalore unit in case of Alembic Glass Industries Ltd. (supra) which was already running its business of manufacture of glass at Baroda and in that case what was held by their Lordships was as under: Held, (i) that it could not be disputed that the business organisation, administration and fund of both the units of the assessee, namely, the unit at Baroda and the unit at Bangalore, were common. There was one company which controlled the administration of both the units, which supplied the staff to both the units and which managed the whole of the business organisation of both the units.
The production of both the units was considered the production of the assessee-company itself. In the application for the proposed establishment of the new unit at Bangalore made by the assessee to the Government of India on December 8, 1959, and in the application for licence submitted by the assessee to the Government, it was stated that the new unit at Bangalore was nothing but an expansion of the existing business. Thus, there was complete interconnection, interlacing and inter-dependence of both the units, which in the test laid down for determining whether two lines of business constitute the same business within the meaning of Section 24(2) by the Supreme Court in the case of CIT v. Prithvi Insurance Co. Ltd.  63 ITR 632 and again approved by the Supreme Court in Produce Exchange Corporation Ltd. v. CIT  77 ITR 739.(p. 716) The above case of Alembic Glass Industries Ltd. (supra) with certain Supreme Court decisions which were referred to therein, also came to be referred by the Gujarat High Court in the case of Bansidhar (P.) Ltd. (supra). In the said case also, their Lordships attached more importance to the overall control and common fund from which necessary capital and working funds were supplied to various business activities and the said case also supports the contention of the assesses. In the said case, their Lordships made the observation : If there was complete inter-connection, inter-lacing, inter-dependence and dovetailing of the different business activities carried on by the assessee and all the activities constitute one and the same business, the deduction on account of retrenchment compensation by the assessee upon closure of one of its business and the write off outstanding dues as bad debt in the other were liable deductions.
Since there is no dispute about the fact in the instant case that management, control, business organisation, funds, etc., were the same, the assessee's claim deserves to be accepted. In the result, we reverse the finding of the Commissioner (Appeals) and allow the interest claim of Rs. 11,623.
7. The third and the fourth grounds in the appeal by the assessee pertain to the action of the Commissioner (Appeals) according to which out of the addition of Rs. 16,62,000 made by the ITO on account of cash credits, the Commissioner (Appeals) deleted only a sum of Rs. 12,24,634 and sustained the addition of Rs. 3,22,366 and Rs. 1,15,000. With this ground of the assessee's appeal, it will be convenient for us to dispose of the first ground raised by the revenue in its cross-objection in which the revenue has disputed the deletion of Rs. 12,24,634. In order to appreciate the submissions of both the parties, which claims and counter-claims, so vehemently placed before us, it will be better if the facts pertaining to the addition of Rs. 16,62,000 made by the ITO and sustained by the Commissioner (Appeals) at a figure of Rs. 3,22,366 plus Rs. 1,15,000 are narrated. Following were cash advances received by the assessee from seven parties :7. Laxmi Trading Company 4,14,000 -------------- The above seven parties in respect of which the total amount of Rs. 16,62,000 was added by the ITO in the course of assessment proceedings, can be categorised into three types. The first is those who were completely supplied with goods by the assessee in the form of crimp yarn. Secondly, those who were supplied for part of the credits by the crimp yarn and the third one, Mahavir Yarn Agency, who was not supplied crimp yarn at all. When the cash credits were disputed by the assessee before the Commissioner (Appeals), he accepted the claim of the assessee in respect of the amounts for which goods were supplied but for amounts for which no goods were supplied, the Commissioner (Appeals) sustained the addition. It will not be out of place to mention that in respect of three items, in respect of parties Nos. 2, 4 and 7 above, delivery challan for certain goods were made but the same were since not supplied came to be reversed subsequently as detailed in the order of the Commissioner (Appeals) and such items for which the goods were not supplied and items for which entry pertaining to supply of goods was reversed and the assessee paid off the cash to the respective parties, the additions were sustained by the Commissioner (Appeals). There is no dispute about the fact that from parties to whom goods were supplied, orders were oral as per submissions of the assessee. There is no correspondence either in respect of cash advances received by the assessee or for supply of goods. However, delivery challans in respect of goods supplied are signed and initialled and so arc the receipts which are in discharge of the return of cash for the balance amounts for which no goods were supplied and which were outstanding with the assessee and subsequently returned. Factually, none of the parties except Mahavir Yarn Agency, could be produced by the assessee before the income-tax authorities nor they were traceable when the revenue made efforts to locate them.
8. The learned authorised representative for the assessee prefixed his submissions by a scheme which was normally prevalent by the purchasers of crimp yarn. He submitted that most of the outside parties, due to octroi and sales tax, used to resort to cash purchases and what they normally used to do was to advance money and obtain goods, whenever needed by them, as they used to prefer to have a buyer in hand before obtaining the goods from the assessee. He submitted that genuineness of sales to whatever parties, full or in part, are not in dispute. Out of seven parties, three are the cases where full delivery of the goods has been made, whereas in case of other three parties, delivery is made for part of the amounts. It is only in respect of one party Mahavir Yarn Agency that no goods were purchased by him from the assessee. He does not dispute that fact that the orders were oral and that there is no correspondence with the assessee. However, photostat copies of delivery challans duly signed and initialled by the assessee or their representatives with receipts in discharge of the said advances from the loaners, who intended to buy crimp yarn from the assessee. are there and he also placed photostat copies of the same on record. He produced a well bound stock register in respect of crimp yarn and other yarn and goods in which the assessee deals and drew our attention to the quantity of goods shown as sold and also quantity of goods returned where goods could not be sold and he more than stoutly submitted that the alienation of the ITO that such details are on a separate page are frivolous. He also drew our attention to the utilisation and need of the total sum of Rs. 16,62,000 by the assessee as submitted by the ITO at the instance of the former Bench of the Tribunal when it heard the matter earlier and he submitted that overdraft facility of the assessee was to the tune of Rs. 10 lakhs and to that effect he placed a certificate from the bank on the assessee's compilation, He took us through itemwise seriatim that on certain occasions money was not needed at all, on certain occasions if it was utilised, it could be obtained through overdraft facility and on certain occasions it was for payment to sister concerns or to employees which too could not be that pressing as to warrant introduction of cash credits. He submitted that whatever burden in respect of the said amounts was there on the assessee, it was discharged by it. He also submitted that the assessee could also show cash sales and there was no restrictions on that. As per his submission, the total amount of Rs. 16,62,000 were genuine credits and in respect of the addition of Rs. 12,24,634 deleted by the Commissioner (Appeals) and contested by the revenue in its appeal, he placed his reliance on the order of the Commissioner (Appeals) whereas for the balance amount of Rs. 3,22,366 and Rs. 1,15,000 not deleted by the Commissioner (Appeals) he vehemently argued that in the light of the above submissions and facts, even the addition sustained by the Commissioner (Appeals) deserved to be deleted. He placed his reliance on CIT v. Daulat Ram Rawatmull  87 ITR 349 (SC).
9. The departmental representative, on the other hand, submitted that there cannot possibly be a clear case of introduction of cash credits than the one under consideration. He submitted that a total amount of Rs. 16,62,000 was introduced in a short span of time and, therefore, it called for thorough examination. He submitted that the parties from whom the cash is said to have come are just for name sake. According to him, it was strange that no safeguards were taken by the depositors in the form of the assessee's acknowledgment or receipt at the time they lent the money. Strangely enough, according to him, there were no agreements, either pertaining to advances received by the assessee or for contract for the supply of goods. He vehemently argued that in a case of this type, where no order book is maintained, the reliance on such sales could not be placed and the ITO was justified in his action.
He submitted that even addresses of the parties are not available on those addresses, He relied on a number of decisions such as Kale Khan Mohammad Hanif v. CIT  50 ITR 1 (SC), CIT v. Devi Prasad Vishwanath Prasad  72 ITR 194 (SC), Orient Trading Co. Ltd. v.CIT 49 ITR 723 (Bom.), B.R. Patel v. CIT  67 ITR 53 (AP), Challapalli Sugar Ltd. v. CIT (supra), Sarogi Credit Corporation v. CIT  103 ITR 344 (Pat.), Shankar Industries v. CIT  114 ITR 689 (Cal.) and CIT v. Kulwant Kaur  121 ITR 914 (Delhi), etc. He submitted that in the course of penalty proceedings, one of the parties denied having any relation with the assessee. According to him, when the genuineness cannot be proved by the assessee and the identity of the parties is not given and proved, the burden lies on the assessee and, in the instant case, it has since not been discharged, the entire addition of Rs. 16,62,000 deserves to be sustained.
10. After taking into considerations the rival submissions, we find it very difficult to sustain any addition out of the total sum of Rs. 16,62,000 except that of Rs. 1,15,000 in respect of Mahavir Yarn Agency for which we are inclined to remit the matter to the ITO. It is the totality of facts and circumstances which has to be taken into consideration for sustaining any addition of the type which is under consideration. We do not want to encumber this order by the details of advances received by the assessee date-wise and goods supplied for them and the reasons for which the ITO made the additions and also the reasons for which the Commissioner (Appeals) deleted the additions, because the same are very well detailed in the order of the Commissioner (Appeals). From the action of the Commissioner (Appeals) what we find is that according to him the amounts received in advance for which goods were supplied were genuine whereas amounts for which goods were supplied and returned and not supplied at all were not genuine. His view cannot be sustained in respect of items for which goods were supplied and returned because the assessee's submission all through has been that it was due to fluctuations in prices of the said crimp yarn, due to delay caused by the purchasers that the assessee declined to supply the goods and, therefore, they elected to receive back their money. The strongest pedestal for the assessee is that there are sales in respect of six parties and these sales have been accepted by the revenue. According to the ITO, though the sales in fact had taken place, they were effected to unknown parties.
Out of the seven parties, goods were supplied to the following three parties in toto : 1. Rayon and Textiles - Goods not supplied for Rs. 1,10,462 out of Rs. 2,95,000.
2. Kailash Trading Corporation - Goods not supplied for Rs. 1,21,583 out of Rs. 2,43,000.
3. Laxmi Trading Corporation - Goods not supplied for Rs. 90,321 out of Rs. 4,14,000.
In the third category would fall Mahavir Yarn Agency to whom no goods were supplied and total amount of Rs. 1,15,000 was returned. We may mention that in respect of Rayon and Textiles, Kailash Trading Corporation and Laxmi Trading Corporation a total sum of Rs. 3,22,366 for which no goods were supplied, is verifiable from stock book.
11. When we looked at the stock register, we found that the sales of crimp yarn was chronologically shown in the said register and as well were shown the return of goods. It is incorrect to say that these are shown on a separate paper. The assessee deals in several items and in the said register where crimp yarn sales are shown, sales of other items are also shown, whereas on certain papers where other sales are shown, crimp yarn sales are not shown, but there is no flaw in the said stock register. Now looking to the fact that orders were oral and there was no acknowledgment of the assessee when the advances were received, the parties are not traceable, that too after a number of years, and that the signatures on delivery challans and receipts given by those parties to the assessee on return of the money are incapable of being verified, all that this can lead to mere suspicion.
As there is no restriction on cash sales and there is no obligation on the assessee to acknowledge receipt of cash from intending purchasers, the allegation as put by the ITO in course of his assessment order and by the departmental representative before us cannot be fatal to the case of the assessee, except in the case of Mahavir Yarn Agency whose deposit was Rs. 1,15,000, which we are remitting back to the ITO. These are not the only sales where cash is the basis. Even in the case of Saliesh India Corporation, Arvind Yarn Agency, Shakti Yarn Agency, Shree Rayon Corporation, etc., cash sales have been effected as indicated on page 5 of the assessee's paper book. When we look to the copy of Shree Rayon Corporation account, we find that the assessee originally supplied goods to them for Rs. 60,847 and Rs. 7,043 after which the assessee received a cash of Rs. 1,60,000 and goods were supplied to them for the balance only afterwards, so it cannot be said that with the assessee these were the only sales in cash and these were the only sales for which the advance in cash was received. From the perusal of details filed before us, we find that there are cases of cash sales and there is of course only one single case of Shree Rayon Corporation but a case of advance receipt of cash and goods supplied afterwards is also there (sic). Once the assessee has placed evidence such as delivery challan duly signed by the purchasers or their people and the same are followed by the cash receipts signed by such purchasers for return of their money, it was for the revenue to prove the same to be false, in respect of all those 6 parties to whom goods were sold and sales accepted, wholly or partly.
12. The vehemence with which the departmental representative drew our attention to the statement of a party who admitted that he neither knew the assessee nor dealt with the assessee, is not factually one of the seven parties. When we look to pages 10, 11 and 12, etc., of the revenue's paper book, the entire story is based on the denial of one Mr. Kailash N. Shah, proprietor of Kailash Trading Corpn., whereas, out of the seven parties, there is no single party of this name as though there is one Kailash Trading Corporation which was one of the depositors to whom goods were supplied. Moreover, a perusal of the statement of Shri Kailash N. Shah shows that whatever he has alleged is in respect of polyester yarn and not in respect of crimp yarn, because in respect of all these seven parties the entire cash was received for purchase of crimp yarn and the issue pertains to sale of crimp yarn.
Even when we look to the report of the [TO filed by the departmental representative as required by this Tribunal on an earlier hearing, we may take into consideration certain items for the sake of sample where cash was received by the assessee. For example, on 1-1-1974, out of Rs. 50,000 received by the assessee from Kailash Trading Corpn., the entire payment was made to the sister concern of the assessee. Similarly, on 8-1-1974, Rs. 45,000 were paid to sister concern of the assessee which was received from Kailash Trading Corpn. and similarly on 16-1-1974 Rs. 30,000 which were received from Laxmi Trading Corpn. and Kailash Trading Corpn. were again given to sister concern of the assessee. Even on other occasions other money so received were given to sister concerns or utilised for purposes which could be postponed or for which the assessee was well within its overdraft capacity, though it was not wholly so in respect of Rs. 1,15,000 received on 6-6-1972. As stated above all this, at the most, can create a suspicion in respect of six parties on the basis of which no additions can be sustained, though the case of Mahavir Yarn Agency is different to whom no goods at all were sold.13. Before we deal with the law which supports the bifurcate all six deposits on one hand and that of Mahavir Yarn Agency on the other hand, contention of the assessee (sic), we would prefer to dispose of the reliance placed by the learned departmental representative on certain cases, pertaining to the six items other than Mahavir Yarn Agency. His reliance on Kale Khan Mohammad Hanif v. CIT (supra) is misplaced. In that case, the issue was whether income from undisclosed sources can be added in addition to the business income computed by estimate. The instant case is not of that type. The reliance on CIT v. Devi Pramd v.Vishwanath Prasad (supra) is also similarly misplaced. The Bombay High Court decision in the case of Orient Trading Co. (supra) only states that if the entry stands not in the name of any such person having a close relation or connection with the assessee but in the name of an independent party, the burden will still lie upon him to establish the identity of the party and to satisfy the [TO that the entry is real and not fictitious. In the instant case, the assessee has produced certain documents duly signed by those parties which the revenue has not been able to disapprove. Moreover, the revenue itself has accepted the sales to whatever extent made for a part of such deposits and it should not lie in the mouth of the revenue to disbelieve the cash received in advance after believing the sales in respect of the said six parties.
The reliance of the learned departmental representative on B. R. Patel v. CIT (supra) is also misplaced and so is misplaced the reliance of the learned departmental representative on rest of the cases so far six items are concerned.
All those cases are on different footing. Once the sales have been accepted not only in respect of these parties but cash sales in respect of other parties and also cash sales in one case as pointed above where sales were effected after the evidence pertaining to delivery challans, receipts, etc., no addition on this account can be sustained. We, however, do not sustain either or confirm the addition of Rs. 1,15,000 for whom no sales were made but remit that matter to the file of the ITO.14. When we get guidance from the decision of the Supreme Court in the case of Omar Salay Mohamed Sait v. CIT 37 ITR 151, we find the following observation of their Lordships on page 170 of the report : We are aware that the Income-tax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it this Court will not interfere. It is necessary, however, that every fact for and against the assessee. must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its finding on suspicions, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this Court.
Their Lordships in the said case have held that on no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises nor should it act on no material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises.
The only thing which even goes to show suspicion is non-availability of the parties.
15. In the case of S. Hastimal v. CIT  49 ITR 273 (Mad.), their Lordships on page 279 of the report observed : ... The assessee has been able to point out a source for this sum of Rs. 15,000 and this cannot be refuted by a mere steady disability on the part of the department or the Tribunal. After the lapse of ten years the assessee should be placed upon the rack and called upon to explain not merely the origin and source of his capital contribution but the origin of origin and the source of source as well.
The said case is not directly in support of the assessee but its ratio cannot be ignored when we see that the attempt of the revenue has been only to make the additions on the basis of untraceability of the parties to whom sales have been accepted. In respect of three parties to whom for part of the advances, goods were supplied (sic), for the balance part except to one party where no goods were supplied cannot be damaging to assessee's claim. But in respect of Mahavir Yarn Agency, where goods were not supplied at all, it cannot be said that this was a genuine cash credit or otherwise because except the ordinary receipts from him, which was originally shown to the lower authorities and a photostat copy was placed before us, there is nothing and it has been in the trade of the assessee to obtain cash in advance and sell goods thereafter but nowhere cash is obtained and no goods are supplied and the account is squared up. But in respect of Mahavir Yarn Agency, the following points are salient about the issue : 1. Sales to Mahavir Yarn Agency amounting to Rs. 34,034 dated 29-1-1974 have been accepted by the ITO for which amount was paid by cheque vide Item No. CY/9 on page 8 of assessee's compilation.
2. Mahavir Yarn Agency has filed a letter before the ITO dated 10-8-1978 on page 6 of revenue's compilation denying any amount with the assessee.
3. What is stated in letter dated 10-8-1978 is at variance with the transaction noted above of Rs. 34,034.
4. Mahavir Yam Agency is assessed to income-tax and sales tax as per above letter.
5. Amount in dispute was received in cash, a bill was made on 7-6-1974 but cancelled.
In the light of these facts stated above for Mahavir Yarn Agency, we remit back the issue to the file of the ITO with a direction to re-do the same again after giving full opportunity to the assessee and after putting relevant correspondence going against the assessee to him, 15A. In the light of the above discussion, we confirm the action of the Commissioner (Appeals) in deleting the sum of Rs. 12,24,634 but would reverse his finding for not deleting the sum of Rs. 3,22,266 out of Rs. 16,62,000. We, however, restore back the issue pertaining to Rs. 1,15,000 in respect of Mahavir Yarn Agency to the file of the ITO to be done de novo. We are also fortified in our finding by the Supreme Court decision in the case of Lalchand Bhagat Ambica Ram v. CIT  37 ITR 288 in which their Lordships came to the following conclusions : The Income-tax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it the Court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises, nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures and surmises, and if it does anything of the sort, its findings even though on questions of fact will be liable to be set aside by the Court.(p. 290) In the result, we accept ground Nos. 3 and 4 in the assessee's appeal and reject the very first ground in the revenue's appeal.
16 & 17. [Paras 16 and 17 are not reported here ax they involve minor issue.] 18. In the result, the assessee's appeal is partly allowed and the cross-objection of the revenue is dismissed.