Income-Tax Appeal v. Income Tax Officer, Ward-I, Sonepat (Haryana

Income-tax Appeal No.33 of 2008 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income-tax Appeal No.33of 2008 Date of decision: 10.12.2010 Smt. Raj Bala ...Appellant Versus Income Tax Officer, Ward-I, Sonepat (Haryana) ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Pankaj Jain, Advocate for the appellant. Ms. Urvashi Dhugga, Advocate for the respondent. **** ADARSH KUMAR GOEL, J (Oral). 1.This appeal has been preferred under Section 260-A ofIncome Tax Act, 1961 by the assessee against order dated31.5.2007 of the Income Tax Appellate Tribunal, Delhi Bench,passed in ITA No.2084/DE/2005 in respect of assessment year2001-02 and the same was admitted to consider the questionwhether finding recorded by the Tribunal in para 9 of the impugnedorder is perverse? 2.The assessee is running a brick kiln. During theassessment, assessing officer made addition on estimate basis bynot accepting the books of accounts in their entirety and it was heldthat the production of bricks shown in books of accounts was not correct. The production of the said bricks was held to be muchhigher in view of the higher consumption of coal than the normalconsumption. 3.On appeal by the assessee, further addition was made bythe CIT(A) under Section 251(1) as follows:- “...This shows that the books of account do not deserveto be accepted as they do not faithfully record the entries.Thus, on the aspect of coal purchased too, the books ofaccount deserve to be rejected. The appellant hasfurther tried to compare his results with that of anotherBKO M/s Madan Lal BKO, who got the Samman Patra,declaring the coal consumption of 19.3 MT for productionof 1 lac no. bricks (refer to reply at para 13(e) dt.14.2.2005 of the appellant). The same will not apply inthe case of the assessee (appellant) as in her case thebooks of accounts are being rejected on all counts.Incidentally, in the case of the appellant, the coalconsumption per 1,00,000 no. bricks produced is497.935/24.55 = 20.28 MT which is higher than the coalconsumption of 19.3 MT for the above said SammanPatra awardee. In the appellant's case, the books ofaccount are also rejected. After a careful consideration, Iam of the opinion that section 145(3) of Income Tax Actis applicable, according to which the assessment whichrequires to be completed, “in the manner stated in section144”, has to be made on a parameter/basis of productionof 9.75 lac no. bricks with consumption of 125 MT coal(allowing maximum consumption of 125 MT coal whereassuch number of bricks could not be manufactured with100 MT coal too). Having allowed the highestconsumption of coal as per the above standard, all theobjections raised are taken care of. The suppressed sales have been worked out by me at Rs.14,07,000/-against Rs.25,000/- added by the Assessing Officer onadhoc basis. Accordingly, the income is enhanced byRs.13,82,400/-.” 4.On appeal to the Tribunal, the plea of the assessee waspartly accepted and the addition was reduced as follows:- sales have been worked out by me at Rs.14,07,000/-against Rs.25,000/- added by the Assessing Officer onadhoc basis. Accordingly, the income is enhanced byRs.13,82,400/-.” 4.On appeal to the Tribunal, the plea of the assessee waspartly accepted and the addition was reduced as follows:- “So far as addition on account of production and sale isconcerned, we found that without any cogent material theld. CIT(A) has just compared coal consumption withJhajjar manufacturer and estimated sales by working outthe coal consumed by the assessee. There was nothingon record to indicate that assessee has sold the brickswithout recording the same in books of accounts. Thereis no dispute to the well settled legal position thatAssessing Officer can make addition after rejecting booksof accounts, but the same should be based on somematerial. Just on guess work and without any cogentmaterial such an addition is not permissible. Furthermore, whenever addition is proposed on the comparisonwith other manufacturer, such other manufacturer shouldbe of equal standing and parameters as the assesses isin the instant case we found that coal consumption of theassessee per lac of bricks works out to be 18.65 MT.Such coal consumption in case of Madan Lal, a SammanPatra Awardee, works out to be 19.3 MT. However, theld. CIT(A) at page 8 of his appellate order worked outcoal consumption at 12.83 MT on the basis of Jhajjarmanufacturer who were not at all of same parameter asthe assessee. The total production of bricks in case ofassessee works out to be 24,55,000 by applying the coalconsumption of 18.65 MT per lac of bricks. However, incase of Samman Patra Awardee, the brick production works out to be 23,72,720. Thus, it is clear thatproduction of bricks of the assessee was better than theSamman Patra Awardee, who was stated to be located inthe same locality as the assessee was. Thus, from thepoint of view of bricks, we do not find any justification inthe action of the ld. CIT(A) for estimating the same byapplying the coal consumption rate on the basis of Jhajjarmanufacturer, which are not comparable and not on thesame footings. If we works out the coal consumptioneven on the basis of Jhajjar manufacturer, the sameworks out to be 314.7 MT, against which the assesseehas actually consumed 457.93 MT. Therefore, if anyaddition is required to be made, the same should bemade with respect to the excess consumption of coal byapplying the rate of 1350 per MT which works out to beRs.1,93,325/-. Keeping in view the totality of the factsand circumstances of the instant case and thecomparative results with the other manufacturer beingawarded by Samman Patra by the Income TaxDepartment itself, we direct the Department to restrictthe addcition at the most to the extent of Rs.1,93,325/-instead of Rs.13,82,400/- retained by the ld. CIT(A). Wedirect accordingly.” 5.We have heard learned counsel for the parties. 6.Learned counsel for the assessee submitted that havingheld that addition on guess work was not permissible, the Tribunalcontradicted itself in sustaining the addition and, thus, finding of theTribunal was perverse. 7.We are unable to accept the submission. No doubt theTribunal has observed that addition merely on guess work was notjustified. The said observation is in the context of not sustaining the addition in its entirety only on the basis of coal consumption rate. TheTribunal has given valid reason for sustaining part of the addition i.e.excess consumption of coal by the assessee as against the normalcoal consumption rate. Guess work cannot be altogether excludedfrom assessment when books of account are found not reliable. Inany case, view taken by the Tribunal being a possible view,interference by this Court is not permissible merely on the groundthat different view may also be taken. The substantial question oflaw is answered against the assessee.8.Accordingly, the appeal is dismissed. (Adarsh Kumar Goel) Judge addition in its entirety only on the basis of coal consumption rate. TheTribunal has given valid reason for sustaining part of the addition i.e.excess consumption of coal by the assessee as against the normalcoal consumption rate. Guess work cannot be altogether excludedfrom assessment when books of account are found not reliable. Inany case, view taken by the Tribunal being a possible view,interference by this Court is not permissible merely on the groundthat different view may also be taken. The substantial question oflaw is answered against the assessee.8.Accordingly, the appeal is dismissed. (Adarsh Kumar Goel) Judge December 10,2010Pka (Ajay Kumar Mittal) Judge