Income-tax---

----Reference---Additions to disclosed income---Particular purchase transaction found sham---Finding of fact---No question of law arises---Indian Income Tax Act, 1961, S.256(2).

An addition of a certain sum was made to the disclosed income of the assessee by the Assessing Officer as he did not accept the particular purchase transaction as genuine. He also disallowed the related transportation charges. The assessee lost both before the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal. On a reference of the question whether the Tribunal was right in law in not allowing any deduction towards the particular purchase transaction:

Held, that on verification it was found that no such purchase was made. The whole transaction was a sham. The finding was purely a finding of fact and no question of law arose.

B.L. Nema for the Assessee.

V.K. Thankha for the Commissioner.

JUDGMENT

A. K. MATHUR, C.J.---This is a reference under section 256(1) of the Income Tax Act, 1961, at the instance of the assessee, and the following question of law has been referred by the Tribunal for the opinion of this Court:

"Whether, on the facts and in the circumstances of the case, the Tribunal having confirmed the addition of Rs.7,51,740 agreeing to the finding of the Assessing Officer that no iron scrap was purchased from Jabalpur party but such scrap' was received from undisclosed sources, was right in law in not allowing any deduction towards cost of such scrap used in the manufacturing process?"

The assessee is a partnership firm comprising two partners, viz., Sint. Premila Jhamb and Shri Satish Jhamb. The assessee-firm is engaged in the business of manufacturing various casting items from iron scrap and its factory is located at Tedesara village in Rajnandgaon district.. During the course of assessment proceedings, the Assessing Officer noted purchases of 167.053 M.T s. of iron scrap for a total price of Rs.7,51,740 from Sagar Enterprises, Jabalpur. The Assessing Officer, after examining the material 'and explanation submitted in this regard by the assessee, found that the said material was not purchased from Sagar Enterprises, Jabalpur, and the payments made to the Jabalpur party was actually received by the assessee itself. Accordingly, the Assessing Officer made an addition of Rs.7,51,740 to the disclosed income of the assessee towards investment in purchase of iron scrap from undisclosed sources. The Assessing Officer also disallowed the transportation charges of Rs.42,650 paid to the truck owners for bringing such iron scrap to the factory of the assessee because purchases of iron scrap from Jabalpur party were not accepted by him as genuine.

Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), Raipur, and the Commissioner of Income-tax (Appeals) dismissed the appeal of the assessee. Then the matter was taken up before the Tribunal and the Tribunal also affirmed the same. Hence, this reference has been made at the instance of the assessee and the aforesaid question of law has been referred by the Tribunal for answer of this Court.

We have heard learned counsel for the parties and perused the record. It is purely a question of fact. The party has tried to justify the purchase from the party at Jabalpur and also claimed transportation charges, but on verification, it is found that no such purchase was made from the Jabalpur party. It appears that the whole transaction was sham. Therefore, the said addition of Rs.7,51,749 and Rs.42,650 has been made in the income of the assessee. We are of the opinion that the Tribunal has rightly approached the matter and that there is no question of law involved. Hence, we answer the aforesaid question in favour of the Revenue and against the assessee.

M:B.A./3077/FC????????????????????????????????????????????????????????????????????????????????? Reference answered.