Ita/6005/2012 Of Shri Kushal D.oswal v. The Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA KALABURAGI BENCH DATED THIS THE 13 DAY OF JUNE, 2016 PRESENT THE HON’BLE MR.JUSTICE ANAND BYRAREDDY AND THE HON’BLE MR.JUSTICE RAGHVENDRA S. CHAUHAN INCOME TAX APPEAL No. 6005 OF 2012 BETWEEN: Shri Kushal D. OswalProp: Hemendra Kirana Bhandar,Kirana Bazar, Bijapur,PAN: … APPELLANT (Shri K.R. Prasad, Advocate) AND: The Commissioner ofIncome Tax,Belgaum – 590 001. … RESPONDENT (Shri Ameet Kumar Deshpande, Advocate) This Income Tax Appeal is filed Under Section 260 A of theIncome Tax Act, 1961 praying to formulate the substantialquestions of law and allow the appeal by setting aside the order ofthe Income Tax Appellate Tribunal in ITA No.593/BANG/11 dated29.06.2012 and set aside the order of the Commissioner of IncomeTax Belgaum in Pan No. dated 29.3.11 and suitablymodifying it as sought in the appeal. This appeal coming on for hearing this day, AnandByrareddy J., delivered the following: JUDGMENT Heard the learned counsel for the appellant and the learnedcounsel for the revenue. 2. The appellant is an individual assessed to tax. He isengaged in retail business dealing in kirana goods under the nameand style of ‘Hemendra Kirana Bhandar’, Bijapur, Karnataka. The appellant seeks to question the validity of the Income TaxAppellate Tribunal’s order in ITA.No.593/2011 dated 29.06.2012. For the assessment year 2004-05, the appellant is said to have filed its return of income declaring an income of Rs.1,63,930/-. The case however was taken up for scrutiny and it was said to have beennoticed that the Commercial Tax authorities had conducted aninspection of the appellant’s premises and noticed that there werecertain sales not accounted for in the Books of Account and relyingon such material found during inspection, the Commercial TaxAuthority had quantified such sales at Rs.37,99,755/-. TheAssessing Officer under the Income Tax Act, 1961 (hereinafterreferred to as ‘the IT Act’, for brevity), estimated the income at8.01% on such suppressed sales and made an addition ofRs.3,04,360/- by order dated 19.12.2008. Aggrieved by the saidassessment order, an appeal was preferred before the Commissionerof Income Tax (Appeals). That appeal having been considered onmerits, the authority had reduced the percentage of income onsuppressed sales to 5%. The appellant not being satisfied, hadmade a further appeal to the Tribunal, which restricted thepercentage of income to 3% of the net sales, with an observationthat no other expenses are to be allowed. That order of the Tribunalhad attained finality. Thereafter, the Commissioner of Income Tax, Belgaum, was of the view that the assessment order passed waserroneous and prejudicial to the interest of the revenue andtherefore, in exercise of power, issued notice under Section 263 ofthe IT Act, raising the following issues namely, that the sales tax ofRs.87,635/- was allowed as deduction. But the said sum was notpaid during the previous year and therefore, the same should nothave been allowed as a deduction. Secondly, in respect ofsuppressed sales, the assessee had made corresponding purchases,the source of which is not reflected in the books of account.Having regard to the tenor of Section 69 of the IT Act, theunexplained investment on such purchases was deemed to beincome. The first issue relating to sales tax deduction amount relatingto Rs.87,635/-, is however not the subject matter of the presentappeal. The appellant had appeared before the Commissioner ofIncome Tax and had filed written submissions. The Commissionerhowever not being satisfied with the explanation, directed theAssessing Officer to add Rs.21,24,207/- being the unaccounted purchases under Section 69 of the IT Act. It was observed by thesaid authority that the Assistant Commissioner, by order dated31.11.2005 had brought out that there were unaccounted purchasesto the tune of Rs.21.24 lakh and the appellant had not explained thesource of such investment. The first issue relating to sales tax deduction amount relatingto Rs.87,635/-, is however not the subject matter of the presentappeal. The appellant had appeared before the Commissioner ofIncome Tax and had filed written submissions. The Commissionerhowever not being satisfied with the explanation, directed theAssessing Officer to add Rs.21,24,207/- being the unaccounted purchases under Section 69 of the IT Act. It was observed by thesaid authority that the Assistant Commissioner, by order dated31.11.2005 had brought out that there were unaccounted purchasesto the tune of Rs.21.24 lakh and the appellant had not explained thesource of such investment. The appeal filed before the Income Tax Appellate Tribunalagainst the order passed under Section 263, it was contendedinteralia that the cash purchases alone excluding credit may beconsidered for the purpose of determination of the investment in theunaccounted purchases. The determination of unaccountedpurchases of Rs.21.24 lakh by the Sales Tax authorities could notipso facto added under Section 69 of the IT Act without anymaterial to suggest that the investment for such unaccountedpurchases were made during the financial year. It was further contended that the appellant made purchaseson credit basis, as was evident from material found duringinspection by the sales tax authorities on 8.6.2004, which may formpart of the turnover for the purpose of sales tax, but could not constitute unexplained investment for the purpose of Section 69 ofthe IT Act. Alternatively, it was contended that only the peakinvestments made during the financial year on account ofunaccounted purchases may be brought to tax. The Tribunal however, was not impressed with thecontentions and dismissed the appeal. The Tribunal placed relianceon the order passed by the Assistant Commissioner of CommercialTaxes wherein the unaccounted purchases have been quantified atRs.21,24,207/-. The contentions raised by the appellant wereignored. It was observed that since the appellant had accepted theorder passed by the Sales Tax Authorities, he was precluded fromseeking to urge grounds afresh insofar as those findings wereconcerned. The Commissioner of Income Tax incidentally haddirected the Assessing Officer to make addition under Section 69 ofthe IT Act, which was affirmed by the Tribunal. It is emphasizedtherefore in the present appeal that the purchases were made oncredit basis with no cash outflow. Alternatively, that only the peakinvestment may be considered as unexplained and that there is sufficient material to establish that there was credit purchase andwhich was not taken into account by the Sales Tax authorities inarriving at its findings. It is in this vein that the present appeal isfiled. 3. The learned counsel for the appellant would particularlytake this Bench through the old documents which were availablewith the Sales Tax authorities and on the basis of which the reportwas generated of the inspection conducted by the sales taxauthorities, which was never looked into by the income taxauthorities but have proceeded mainly on the report of the sales taxauthorities which was prepared for a wholly different purpose andwas not so much relevant in the Income Tax authorities arriving attheir findings. It is this which is emphasized in seeking that theappellant be given a further opportunity of demonstrating from thematerial on record that there was an error committed in notaddressing the material available in its proper perspective and thatthere has been a miscarriage of justice on account of materialavailable on record being overlooked. And hence, seeks that the matter may be remanded to the Assessing Authority in order thatthe appellant be given a fresh opportunity of establishing the caseas sought to be urged in this appeal. matter may be remanded to the Assessing Authority in order thatthe appellant be given a fresh opportunity of establishing the caseas sought to be urged in this appeal. 4. The learned counsel for the revenue however wouldvehemently resist the appeal and would submit that the appellant’sendeavour to bring on record fresh material at this stage before thisCourt, is impermissible. It is after the matter has gone through atear of the authorities that the appellant having suffered findings, isnot in a position to seek a remand at this stage seeking to drawsustenance from material which may never have formed part of therecord. 5. However, the learned counsel for the appellant wouldpoint out that the documents that are sought to be relied upon andpressed into service were in fact documents that were seized andwere not available to the appellant at the relevant point of time andthe fact that it has now emanated from the said authorities asdemonstrated from the acknowledgement and the seal of the SalesTax authorities. Therefore, it was not on account of any want of diligence on the part of the appellant that these documents couldnot be produced or relied upon at the relevant point of time, but forthe reason that the documents were not at all available with theappellant and the Income Tax authorities have proceededirrespective of the said material being available, which would havebrought home the case that the appellant seeks to put forth in thisappeal. 6. Given the circumstances that the appellant is indeedjustified in contending that the material documents were notavailable on hand in order to establish his case at the earliest pointof time, the appellant seeking an opportunity even at this point toestablish his case and to offer an explanation which would takeaway the case sought to be made out by the revenue, cannot bebrushed aside. Consequently, we are of the opinion that the matter requiresto be remanded for a fresh consideration. Hence, the appeal isallowed. The impugned orders are set aside and the matter isremanded to the Assessing Officer in order to enable the appellant to produce the relevant materials and to put forth his case as soughtto be urged in this appeal. The appellant shall be afforded anopportunity of hearing before a fresh assessment order is passed. Sd/- JUDGE Sd/- JUDGE KS