( 1 ) TAX Appeal No. 169 of 1999 and other companion appeals arise out of two judgments. Tax Appeal No. 166 of 1999 is arising on a consequential order that might be required to be passed.

( 2 ) FOR the Assessment Year 1984-85 the assessee M/s Adinath Industries was assessed under section 143 of the Income-tax Act 1961 (hereinafter referred to as the Act ). Along with its return filed on 28. 7. 1984 showing the total income at Rs. 60,814. 00, a statement showing computation of total income was filed along with copies of profit and loss account, manufacturing account, balance sheet and partners capital account. It appears that the assessing Officer issued show cause notice on 23. 1. 1987 pointing to the assessee as under:" On inquiry with the sales-tax authorities as also with the I. T. O. Junagadh ( who is having jurisdiction over Keshod), it is learnt that M/s Geeta Industries which is alleged to be the proprietary concern of one Shri Kishorechandra Hansraj at the given address at Keshod is merely a billing agent and there is no genuine seller as such. It has come to light that the S. T. Regn. No. being 67110528 dtd. 19. 11. 82 was cancelled with effect from 7. 12. 1982 by the concerned authority. Thus, on this score also, I am of the view that the purchases from the above party were of the fake nature and the alleged purchases were nothing but to claim your own stock of commodity in question titled as stocks of ground nut oil cake as purchases during the year is concerned. This is further supported by way of cheques issued for relevant purchases which were firstly credited to partys bank account with UBI Dhoraji and subsequently withdrawn by way of self bearer cheques on the very day of depositing the proceeds realised for alleged sales by Keshod party. You are however, requested to produce the party from whom the alleged purchases are claimed i. e. Keshod party. The mode of transportation with truck no. etc. should be furnished. Any evidence produced, in this behalf will be considered carefully. "

( 3 ) THE assessee in his reply dated 26. 2. 1987 through his Chartered Accountant submitted as under:"a) the assessee has purchased Ground Nut Oil Cakes from M/s Geeta Industries, Keshod during the A. Y. 2039 and 2040. The details of purchases have already been furnished earlier. B) in this connection, it is to be mentioned that the said goods were purchased through Dalal and a copy of Dalal bill is enclosed wherein Dalal is paid on these goods. C) the detailed procedure from the stage of receipt of goods to final production is mentioned in the Annexure. D) from the said details, it is to be stated that the goods from the said party have been received and have gone into production. This can be verified from the Gate Pass, Avak Chitti and Weight Chitti-supporting of all are enclosed herewith. E) the said goods are sent to Laboratory for report and sample report etc. are also sent herewith. From the sample report, quality difference is arrived and the party is also paid the difference or recovered also from the party, as the case may be. F) the said goods is entered in our day to day receipt register where the assessee is entering all the receipt cakes. G) these goods are produced and the production register shows the said production, copy is enclosed. H) as per excise rule, the party has to enter the materials in R. G. 4 Form. The copy of the said form is enclosed herewith. I) from the details submitted, it can be verified that the purchase is from Geeta Industries and are genuine Purchase and not of a fake nature as stated in your letter. J) it is to be stated that from the details filed, it can be verified that without these purchases no production would have been, to that extent, would have been possible and as such, there is no question of any fake nature purchases. K) it is to be stated that the assessee has paid to the party by the cheques and the same has been debited in our bank account. It is to be stated th