Commissioner Of Income-Tax-I, Ludhiana v. M/S. Goyal Petrofills Yarn Pvt. Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 65 of 2011(O&M) Date of Decision: 29.11.2011 Commissioner of Income-Tax-I, Ludhiana vs. M/s. Goyal Petrofills Yarn Pvt. Ltd. ........Appellant .......Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTAHON'BLE MR. JUSTICE G.S. SANDHAWALIA Present:Mr. Rajesh Katoch, Advocatefor the appellant HEMANT GUPTA, J. The revenue is in appeal under Section 260A of theIncome Tax Act, 1961 (for short 'the Act') against the order passedby the Income Tax Tribunal, Chandigarh Bench 'A' Chandigarh in ITANo. 877/CHD/2009 dated 25.06.2010 for the assessment year 2005-06. The Revenue has sought the following substantialquestions of law:- (i) Whether on the facts and circumstances of thecase, the Ld. Tribunal Bench is justified in rejecting theappeal of revenue against the deletion of addition madeby ld. CIT (A) of Rs. 22,45,527/- made u/s 69 of theIncome Tax Act, 1961 by the Assessing officer onaccount of undisclosed investment in respect of negativework in progress ignoring the fact that there is negativework in progress which was detected from the books ofaccounts at the end of nine months in the year?(ii) Whether on the facts and circumstances of the case,the Ld. Tribunal Bench is justified in rejecting the appeal of revenue against the deletion of addition made by ld.CIT (A) of Rs. 2,12,025/- made u/s 69 of the Income TaxAct, 1961 on account of undisclosed income in respect ofexcess weight gain of 2812 kgs during the production ofknitted loop fabrics without assigning any reason? The assessee produces Polyester Texturised Yarn (PTY)from Polyster Oriented Yarn (POY) facilitated through use ofantistatic oil. Special audit under section 142(2A) was gotconducted, keeping in view the complexity of the entries in the booksof accounts of the assessee. The special auditors calculated themonth wise stock tally of production of Polyester Texturised Yarnfrom Polyster Oriented Yarn and concluded that there was negativestock of work-in-progress during the year. Relying upon such report,the Assessing Officer made addition of Rs. 22,45,527/- underSection 69 of the Act as undisclosed investment in the manufacturingactivity and sum of Rs. 2,12,025/- on account of excess weight gainof 2812 Kgs during production. Learned Commissioner of Income-tax found thatcalculation of special auditors is not sustainable, as a matter of factthere is no negative stock of work in progress after considering theproduction. In the order, the Commissioner concluded as under:- “Therefore, as is quite clear from these details, theappellant did have sufficient raw material and antistaticoil in different months of relevant period. However, therewas no need for the appellant to carry out certainproduction utilizing raw material which was not accountedfor in the books of account which is the impliedconclusion of the negative work in process worked out bythe Special Auditors.” In respect of addition of weight gain of 2812 kgs, theCommissioner returned the following finding:- “However, in respect of this weight gain, the entireamount in money value i.e. Rs. 2,12,025/- is taken intoaccount either in sales or in the closing stock. There is nocorresponding entry for the purchases in respect of thisweight gain. Therefore, it is not the Gross profit on Rs.2,12,025/- which goes to the income of the appellant butthe entire of Rs. 2,12,025/-. Now once the entire salesamount was taken into account, the gross profit on suchsales and the corresponding purchases amount isautomatically included.” The said finding has been affirmed by the Tribunal in theorder out of which the present appeal said to give rise to the abovestated question of law. In respect of addition of weight gain of 2812 kgs, theCommissioner returned the following finding:- “However, in respect of this weight gain, the entireamount in money value i.e. Rs. 2,12,025/- is taken intoaccount either in sales or in the closing stock. There is nocorresponding entry for the purchases in respect of thisweight gain. Therefore, it is not the Gross profit on Rs.2,12,025/- which goes to the income of the appellant butthe entire of Rs. 2,12,025/-. Now once the entire salesamount was taken into account, the gross profit on suchsales and the corresponding purchases amount isautomatically included.” The said finding has been affirmed by the Tribunal in theorder out of which the present appeal said to give rise to the abovestated question of law. We have heard learned counsel for the revenue at lengthand find that findings of the Tribunal accepting the explanation of theassessee are the finding of fact based on the basis the productiondata. The Commissioner of Income Tax and the Tribunal havereturned findings of fact. We do not find any question of law arises tojustify the addition made by the Assessing Officer. Dismissed. (HEMANT GUPTA)JUDGE (G.S. SANDHAWALIA) JUDGE