Commissioner Of Income Tax, Jalandhar-I, Jalandhar v. M/S Atam Valves (P) Ltd., 1051 Outside Industrial

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 358 of 2009 DATE OF DECISION: 22.7.2009 Commissioner of Income Tax, Jalandhar-I, Jalandhar..........Appellant Versus M/s Atam Valves (P) Ltd., 1051 Outside Industrial ..........RespondentArea, Jalandhar CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:-Mr. Vivek Sethi, Advocatefor the appellant. **** ADARSH KUMAR GOEL, J. (Oral) 1.The revenue has preferred this appeal under Section 260A ofthe Income Tax Act, 1961 (for short, “the Act) against the order of IncomeTax Appellate Tribunal, Amritsar Bench, Amritsar dated 30.12.2008 passedin ITA No. 442 (ASR)/2008 and ITA No. 453 (ASR)/2008 for theassessment year 2005-06, proposing to raise following substantialquestions of law:- (i) “Whether on the facts and in the circumstances of thecase the ITAT was right in law in setting aside theappeal of the assessee to the file of the AO for limitedpurpose for considering the wages recorded in theloose slips and not to make addition on the basis ofestimation of sales?” (ii)“Whether on the facts and in the circumstances of the case, the ITAT was right in law in directing to limit theaddition u/s 69 of the Act only to the extent wagespayment which is not reconciled with the books ofaccounts maintained by the assessee when thestatements of two persons confirm that the 'EasternSlips Pad' represents wages actually paid to variousemployees of the assessee and the same is not adump documents?” (iii)“Whether on the facts and in the circumstances of thecase, the ITAT has erred in law in not appreciatingthat addition made on account of wages under section69 of the I.T. Act, 1961 resulted into unaccountedincome to the assessee?”case, the ITAT has erred in law in not appreciatingthat addition made on account of wages under section69 of the I.T. Act, 1961 resulted into unaccountedincome to the assessee?” (iv)“Whether on the facts and in the circumstances of thecase, the ITAT has erred in law in not accepting thatthe estimate of unaccounted income was made by theAO on scientific and logical basis?”case, the ITAT has erred in law in not accepting thatthe estimate of unaccounted income was made by theAO on scientific and logical basis?” 2.During the pendency of assessment proceedings, a surveywas conducted by the Department under Section 133A of the Act on27.9.2005 in the premises of the assessee and certain incriminatingdocuments were found including a 'Slip Pad' containing payment of wagesto various persons. The slips were written by Manoj Jain, an employee ofthe Assessee, who was confronted with the slips, apart from questioning ofthe Director. Manoj Jain as well as Director of the assessee explained theposition as to how the slips had been written and the stand of the assesseewas that the same did not represent payment of wages during the year inquestion but were for the earlier year. However, the Assessing Officer didnot accept the explanation and made an addition. The CIT(A) as well asthe Tribunal partly set aside the addition. It was held that even though I.T.A. No. 358 of 2009 explanation of the assessee that the loose papers did not relate to paymentof wages during the year in question may not be accepted, in absence ofany other material, the loose sheets by itself were not enough to makeaddition as per estimate of the Assessing Officer. It was observed:- I.T.A. No. 358 of 2009 explanation of the assessee that the loose papers did not relate to paymentof wages during the year in question may not be accepted, in absence ofany other material, the loose sheets by itself were not enough to makeaddition as per estimate of the Assessing Officer. It was observed:- “Now the question is regarding estimating the income onthe basis of these loose slips. In our opinion, the AO isnot justified in estimating the sales on the basis of looseslips without substantiating that the assessee hasactually made the sales to that extent of estimationmade by the AO and having no iota of evidence in theform of sale bills or bank account or movable andimmovable property which represent earning ofunaccounted income by the assessee. As such, the ld.CIT(A) to that extent is justified in holding that estimationof sales on the basis of loose slips represented paymentof wages is not possible.” 3Learned counsel for the revenue submitted that once theexplanation of the assessee was found to be unacceptable, the additionmade by the Assessing Officer ought to have been upheld. 4.We are unable to accept this submission. 5.No doubt, a false explanation of assessee may be acircumstance to be taken into account for recording a finding ofundisclosed income and some degree of guess work is also permissible insuch a situation, as held by the Supreme Court in Kachwala Gems Vs.Joint Commissioner of Income Tax (2007) 288 ITR 10 (SC), relied uponby the learned counsel for the revenue, it depends upon facts andcircumstances of each case as to what is to be fair estimate of undisclosedincome. The CIT(A) as well as the Tribunal held that in the circumstances, the estimate of addition, to the extent assessed by the Assessing Officer,was not called for and the same was partly liable to be set aside. 6.It cannot be held that any substantial question of law arises for consideration. 7.The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE July 22, 2009(DAYA CHAUDHARY)poojaJUDGE Note:-Whether this case is to be referred to the Reporter .......Yes/No