Ita/156/2013 Of Umesh Trehan v. Commissioner Of Income Tax-I, Chd

IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH. Income Tax Appeal No. 156 of 2013 (O&M)Date of Decision: 09.08.2016 Umesh Trehan..Appellant Versus. Commissioner of Income Tax2I, Chandigarh...Respondents CORAM:HON'BLE MR. JUSTICE S.J.VAZIFDAR, CHIEF JUSTICE,HON'BLE MR. JUSTICE DEEPAK SIBAL. Present:Mr. Deepak Aggarwal, Advocate, for the appellant.Ms. Urvashi Dugga, Advocate, for the respondent. ©AIS F S.J.VAZIFDAR, CHIEF JUSTICE This is an appeal against the order of the Income Tax AppellateTribunal dismissing the appellant/assessee’s appeal against the order of theCommissioner of Income Tax (Appeals) which in tur dismissed theappellant’s appeal against the order of the Assessing Officer. The matterpertains to the assessment year 2007-08. 2.The assessee contends that the following substantial questions of law arise in this appeal:- 71)Whether in the present facts and circumstances of thecase the order of Ld. ITAT is perverse in estimating theaddition for capital investment to the tune of!Rs.1,90,00,000/- for achieving the alleged turnover|outside the books of accounts? 2)|Whether in the present facts and circumstances of thecase the order passed by the Ld. ITAT is perverse in partly holding the addition for capital investment to the tune of Rs.1,590,00,000/- for achieving the allegedturnover outside the books of accounts wherein the.specific details of investment for achieving the'turnover is provided itemwise?case the order passed by the Ld. ITAT is perverse in partly holding the addition for capital investment to the tune of Rs.1,590,00,000/- for achieving the allegedturnover outside the books of accounts wherein the.specific details of investment for achieving the'turnover is provided itemwise? 3)|Whether in the present facts and circumstances of thecase the order passed by the Ld. ITAT is perverse in|partly holding the addition for capital investment to the tune of Rs.1,50,00,000/- for achieving the alleged|turnover outside the books of accounts wherein the|addition of capital investment was based on the)sources of investment rather than application of|investment?| 4)|Whether the Ld. ITAT was justified in upholding the|addition of Rs.18,26,036/- on account of excess cash|and Rs.1,96,992/- on account of excess stock found|during the course of survey when the addition on|account of capital investment has already been|estimated? addition of Rs.18,26,036/- on account of excess cash|and Rs.1,96,992/- on account of excess stock found|during the course of survey when the addition on|account of capital investment has already been|estimated? o)Whether the Ld. ITAT is right in upholding the)disallowance of interest under section 36(1)(i11) of the|Act on the amount advanced to the employees of the|Appellant by terming the said advancement of money|as not for business purposes?disallowance of interest under section 36(1)(i11) of the|Act on the amount advanced to the employees of the|Appellant by terming the said advancement of money|as not for business purposes? 6)Whether the Ld. ITAT is right in upholding the)disallowance of interest under section 36(1)(i11) of the|Act on the amount invested in share application|money of the sister concern on the basis that the said|investment could have been done from the proprietary|concern of the Appellant, without examining the basic|conditions for disallowance under section 36(1)(i1i) ofthe Act?” disallowance of interest under section 36(1)(i11) of the|Act on the amount invested in share application|money of the sister concern on the basis that the said|investment could have been done from the proprietary|concern of the Appellant, without examining the basic|conditions for disallowance under section 36(1)(i1i) ofthe Act?” 3 |The appellant filed a return of income of about|=2.07 crores. 6)Whether the Ld. ITAT is right in upholding the)disallowance of interest under section 36(1)(i11) of the|Act on the amount invested in share application|money of the sister concern on the basis that the said|investment could have been done from the proprietary|concern of the Appellant, without examining the basic|conditions for disallowance under section 36(1)(i1i) ofthe Act?” disallowance of interest under section 36(1)(i11) of the|Act on the amount invested in share application|money of the sister concern on the basis that the said|investment could have been done from the proprietary|concern of the Appellant, without examining the basic|conditions for disallowance under section 36(1)(i1i) ofthe Act?” 3 |The appellant filed a return of income of about|=2.07 crores. The case was selected for scrutiny. On 16.03.2007, a survey was conductedunder section 133-A of the Income Tax Act, 1961 (for short ‘the Act’).During survey, the assessee offered an additional incomeot |=2) 05 crores fortaxation. The survey report indicated that disclosure had been made to coverup the discrepancies on account of unaccounted purchases and sales as alsoagainst unaccounted cash. The Assessing Officer noted that the assessee hadmade unaccounted sales worth|L10,00,70,135/- and unaccounted purchases.amounting to.45,05,56,490/- which were discovered during the course ofsurvey. The Assessing Officer took the figure of unaccounted salesamounting to.=10 crores as a base to calculate the unaccounted profits andunexplained investment. The trading results of the assessee as contained inthe profit and loss account and balance sheet were utilized. 4The assessee had for the assessment year in question shown a GP rate of 5.51%. Accordingly, the unaccounted income earned fromunrecorded cash sale of about410 crores at the GP rate of 5.51% was| 5 |The investment required for achieving the turnover of about=10 crores was calculated by referring to the assessee’s balance sheet as on31.03.2007. The assessee’s capital account excluding the profit earnedduring the year was.L49,05,880/-. The amount of secured loans as on|31.03.2007 was41,79,71,135/- and unsecured loans was416,25,285/-. Theaggregate of these three amounts was|L2,45,02,300/-. The total turnover forthat year in the trading account was413,27,91,312/-. The total turnover thusrequired an investment of about=2.45 crores. Proportionately to carry on abusiness having a turnover of about410 crores required an investment of|about=1.85 crores. Accordingly, the Assessing Officer computed theundisclosed income on unaccounted sales worthL10 crores as=2.45 Crores. —6.The assessee, however, contended that various amounts oughtto be deducted from the figure of=2.45 crores. For instance, he contendsthat an amount of.L65.80 lacs worth of fixed assets ought to be deducted asno investment is required in fixed assets for the unaccounted cash sale. Hefurther contends thatL55.38 lacs ought to be deducted as no investment is_required for the investment in M/s Gian Residency Pvt. Ltd. and that=34.40lacs ought to be deducted as no investment is required on account of debtorssince the sales are cash Sales. Ultimately the balance amount according tothe assessee works out to onlyLA? 63 lacs. 7 |Whether these amounts formed part of|L2.45 crores or notisaquestion of fact. The assessee has not adduced any evidence to establish thesame. The manner in which the Assessing Officer has came to the figure of=2.45 crores cannot be held to be perverse or irrational. His refusal todeduct the amounts as claimed by the assessee from this amount cannot be Said to be perverse or irrational either. The Tribunal indeed speculated byreducing the undisclosed investment at=1.50 crores and the addition of=55.01 lacs to about434.65 lacs. However, the Tribunal speculated in favourof the assessee. The assessee can hardly be aggrieved by the speculation inhis favour. 8.|The appeal as regards question Nos. 1 to 4 is dismissed as theydo not raise a substantial question of law. 7 |Whether these amounts formed part of|L2.45 crores or notisaquestion of fact. The assessee has not adduced any evidence to establish thesame. The manner in which the Assessing Officer has came to the figure of=2.45 crores cannot be held to be perverse or irrational. His refusal todeduct the amounts as claimed by the assessee from this amount cannot be Said to be perverse or irrational either. The Tribunal indeed speculated byreducing the undisclosed investment at=1.50 crores and the addition of=55.01 lacs to about434.65 lacs. However, the Tribunal speculated in favourof the assessee. The assessee can hardly be aggrieved by the speculation inhis favour. 8.|The appeal as regards question Nos. 1 to 4 is dismissed as theydo not raise a substantial question of law. OQQuestion Nos. 5 and 6 also do not raise a substantial question oflaw. [The assessee advanced amounts without interest to his sister concernand to the employees. It was found that there were no business transactionswith the sister concern. Commercial expediency was not established. As faras the employees are concerned, a sum Of410 lacs is alleged to have beenadvanced to him. Only a credit entry in his account was found. The amountWas advanced for the purpose of constructing a house. There was noevidence that the money was infact given for construction of a house. Reliefas regards supply of goods to one of the sister concern was partly granted.Relief as regards other transactions warrants no interference. It was found asa matter of fact that there was no commercial expediency. The appeal as regards question Nos. 5 and 6 is also, therefore, dismissed. 10.In the result, the appeal is dismissed. (S.J.VAZIFDAR) CHIEF JUSTICE