Commissioner Of Income Tax, Hisar v. Sh. Pawan Kumar

ITA No. 504 of 2007 IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No. 504 of 2007Date of Decision. February 19,2008 Commissioner of Income Tax, Hisar ......Appellant Versus Sh. Pawan Kumar Prop. BKO village Bijuwali ( Dabwali ) Distt. Sirsa .........Respondent CoramHon'ble Mr. Justice Satish Kumar MittalHon'ble Mr. Justice Rakesh Kumar Garg * * * * Present Mr. Yogesh Putney, Advocatefor the appellant. Rakesh Kumar Garg, J The revenue has filed this appeal under Section 260 A ofthe Income Tax Act, 1961( for short : the Act “ ), against the order of theIncome Tax Appellate Tribunal, Chandigarh Bench 'A' , Chandigarh, passedin ITA No. 146/Chandi/2005 dated 20.4.2007 for the assessment year 2001-02 raising the following substantial questions of law: “i. Whether on the facts and in the circumstances of the case, thelearned ITAT is right in restricting the addition to sales to theextent of Rs.1,44,000/- found unrecorded in the regular accountbooks than determination of sale by the Assessing Officer atRs.67,66,725/- particularly when the books of account were notauthentic and liable to be rejected u/s 145(3) of the Income TaxAct more particularly in view of the judgment of Hon'ble SupremeCourt in the case of Commissioner of Sales-tax, M. P v. H. M.Esufali H. M. Abdulali reported at 90-ITR -271.?” ii)Whether, on the facts and in the circumstances of the case, thelearned ITAT is justified in directing to apply a G. P rate of 10% as against 14% applied by the A. O without appreciatingobservations in para 11.2 of the order that non entry of salesmade to Shri Saurav Garg it can be held that same sales weremade outside the books of account which could effect the grossprofit rate also?observations in para 11.2 of the order that non entry of salesmade to Shri Saurav Garg it can be held that same sales weremade outside the books of account which could effect the grossprofit rate also? iii)Whether on the facts and circumstances of the case, thelearned ITAT is justified in restricting the addition ofunexplained investment to Rs.5000/- as against Rs.80,000/-made by the Assessing Officer without appreciating that theunrecorded sales were to the extent of Rs.29,86,064/-( 6766725-3780661) and not only Rs.1,44,000/- and foreffecting these sales of bricks the investment required in theirmanufacturing was much more?learned ITAT is justified in restricting the addition ofunexplained investment to Rs.5000/- as against Rs.80,000/-made by the Assessing Officer without appreciating that theunrecorded sales were to the extent of Rs.29,86,064/-( 6766725-3780661) and not only Rs.1,44,000/- and foreffecting these sales of bricks the investment required in theirmanufacturing was much more? iv)Whether on the facts and in the circumstances of the case, theorder passed by the learned ITAT dated 20.4.2007 is perverseas the findings recorded by the learned ITAT are contrary tothe evidence on record?order passed by the learned ITAT dated 20.4.2007 is perverseas the findings recorded by the learned ITAT are contrary tothe evidence on record? iv)Whether on the facts and in the circumstances of the case, theorder passed by the learned ITAT dated 20.4.2007 is perverseas the findings recorded by the learned ITAT are contrary tothe evidence on record?order passed by the learned ITAT dated 20.4.2007 is perverseas the findings recorded by the learned ITAT are contrary tothe evidence on record? 2.The assessee was engaged in the business ofmanufacturing and sale of bricks under the trade name of M/s. Sadhu RamPawan Kumar and Co. BKO in his individual capacity. He was alsoenjoying shares income as a partner, from M/s. Garg Bricks Co. Theassessee filed return of income on 27.9.2001 showing total income ofRs.74331/-. The return of income was accompanied by audit report in formNo. 3 CD comprising of balance sheet, trading account, P & L account,coal account, capital account of the proprietor and other details. The returnof income was processed u/s 143(1)(a) of I. T. Act at the returned income.Thereafter the case was selected for scrutiny. During the course ofassessment proceedings the Assessing Officer noticed that one Shri GauravGarg had shown purchases of 128000 number of bricks on credit basis for asale consideration of Rs.144000/- from the assessee. The aforesaidinformation was put to verification. After that the Assessing Officer cameto the conclusion that the assessee had been manufacturing the bricks andselling them outside the books and as such sales were not being disclosedin the return of income tax. The Assessing Officer also noticed certain more ITA No. 504 of 2007 discrepancies. Assessing Officer worked out the number of bricks at5775000. The Assessing Officer also accepted the figure of opening andclosing stock disclosed by the Assessing Officer and thus the same had beenworked out to 6766725/-. The Assessing Officer applied gross profit rateof 14% on the aforesaid estimated sale of Rs.6766725/-. In this manner,gross profit was worked out at Rs.947340/- as against returned gross profitof Rs.3,13,568/- and the addition of Rs.633772/- was thus made. 3.The assessee filed an appeal before the Commissioner ofIncome Tax ( Appeals ). The Commissioner of Income Tax ( Appeals ),Hisar after considering the submissions of both the parties opined that theassessee sold the bricks outside the books of accounts and thus, the books ofaccounts produced before the Assessing Officer deserves to be rejected and held that Section 145(3) of the Act was applicable. The Commissioner ofIncome Tax ( Appeals ), Hisar was also of the opinion that the estimate ofbricks produced at Rs.5775000/- was quite justified. The application ofgross profit rate of 14% was also held to be reasonable. Accordingly , theaddition of Rs.633772/- was confirmed and dismissed the appeal vide orderdated 18.11.2004. 4.The assessee filed appeal before the Tribunal. TheTribunal vide impugned order dated 20.4.2007 partly allowed the appealfiled by the assessee and instead of 14% applied gross profit rate at 10%.The Tribunal also made an addition of Rs.1,44,000/- for the sales disclosedby the assessee. 5.We have heard Sh. Yogesh Putney , Advocate for therevenue and perused the record. 6.Counsel for the revenue has vehemently argued that theestimate of gross profit rate of 14% as applied by the Assessing Officer wasquite reasonable in the facts and circumstances of the case and the Tribunalwrongly ordered the reduction at 10%. Learned counsel has also arguedthat in view of the details, as noticed and highlighted in the assessmentorder, the estimate of sales made by the Assessing Officer was quitereasonable and justified and therefore, the Tribunal has wrongly acceptedthe sales shown by the assessee. 7.After hearing the learned counsel, we find no infirmity inthe impugned order of the Tribunal. The Tribunal has given a pure finding ITA No. 504 of 2007 5.We have heard Sh. Yogesh Putney , Advocate for therevenue and perused the record. 6.Counsel for the revenue has vehemently argued that theestimate of gross profit rate of 14% as applied by the Assessing Officer wasquite reasonable in the facts and circumstances of the case and the Tribunalwrongly ordered the reduction at 10%. Learned counsel has also arguedthat in view of the details, as noticed and highlighted in the assessmentorder, the estimate of sales made by the Assessing Officer was quitereasonable and justified and therefore, the Tribunal has wrongly acceptedthe sales shown by the assessee. 7.After hearing the learned counsel, we find no infirmity inthe impugned order of the Tribunal. The Tribunal has given a pure finding ITA No. 504 of 2007 of fact on all the issues. While reducing the gross profit rate, the Tribunalhas noticed that neither the assessee nor the Assessing Officer has givenany instance of the comparable case belonging to the same vicinity wherethe brick klin of the assessee was situated. The cases relied upon by theAssessing Officer belongs to different Districts and States and the locationof the brick klin was far away from the site of the assessee and keeping inview the totality of the facts, the Tribunal held that the gross rate of 14% asapplied by the Assessing Officer was highly excessive and without anybasis. The gross profit rate of 10% as applied by the Tribunal was afterconsidering the past history and the gross profit rate in subsequent years.Thus, no substantial question of law arises for determination of this Courtin the present appeal and the same is hereby dismissed. ( Rakesh Kumar Garg) Judge February 19, 2008mamta ( Satish Kumar Mittal) Judge