Ita/781/2008 Sidhant Leather Exports Private Limited v. Commissioner Of Income Tax, Kolkata - Iv

O-69 IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE ITA/781/2008SIDHANT LEATHER EXPORTS PRIVATE LIMITEDVS.COMMISSIONER OF INCOME TAX, KOLKATA - IV BEFORE : THE HON’BLE JUSTICE T.S. SIVAGNANAM AndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate : 7[th ]February, 2023 Appearance :Mr. J.P. Khaitan, Sr. Adv.Mrs. Swapna Das, Adv.….for appellantMr. Tilak Mitra, Adv.…for the respondent The Court : This appeal by the assessee filed under Section 260A of theIncome Tax Act (the Act) is directed against the order dated May 30, 2008passed by the Income Tax Appellate Tribunal, `B’ Bench, Kolkata (Tribunal) inI.T.A No. 2316(Kol)/2007 and C.O. No.1(Kol)/2008 for the assessment year2004-05. The appeal was admitted on the following substantial question of law :- “Whether the Tribunal was justified in reversing the order of theCommissioner of Income Tax (Appeals) and restoring the addition ofRs.1,55,67,517/- made in the assessment on account of an arithmetical mistake and its purported findings in that behalf are arbitrary,unreasonable and perverse ?” We have heard Mr. J.P. Khaitan, learned senior counsel appearing for theappellant and Mr. Tilak Mitra, learned standing counsel for the respondent. The issue is whether the Tribunal was justified in reversing the orderpassed by the Commissioner of Income Tax (Appeals) [CIT(A)] and restoring theaddition of Rs.1,55,67,517/- made in the assessment excluding the case of theassessee that it was on account of an arithmetical mistake. In the notes toaccounts submitted by the assessee, in no.1 under the column `FinishedLeather’, the quantity of the opening stock was given as 1,35,289.67 sq.ft. Thepurchase was 14,85,636.25 sq.ft. While giving the total quantity, the figure of14,85,636.25 sq.ft. was mentioned which, according to the assessee, was atotalling mistake and the figure 1,35,289.67 was inadvertently missed out, to beadded to 14,85.636.25. In fact, during the course of assessment proceedings,the Assessing Officer issued notice dated 4[th] December, 2006 calling upon theassessee to explain the whereabouts of closing stock alleged to have been notdisclosed in the account namely, 150181.42 sq.ft. of `Finished Leather’. Theassessee submitted a reply on 18[th] December, 2006 stating that whilecalculating the consumption figure, a simple arithmetical mistake occurred inthe quantitative analysis. It was stated that it is clearly written in the openingstock, add purchase. Therefore, 1,35,289.67 has to be added with 14,85,636.25and the total would be 16,20,925.92 instead of 14,85,636.25. This explanationwas received by the Assessing Officer on 20[th] December, 2006. However, while completing the assessment, by order dated 29[th] December, 2006 under section143(3), this explanation was not accepted by the Assessing Officer. Aggrieved by such order, the assessee preferred appeal before theCommissioner of Income Tax (Appeals) and placed all records which wereavailable and the learned Tribunal after going through the entire records heldthat the assessee has filed copy of the rectified TAR dated 3[rd] September, 2004along with the auditor’s certificate mentioning the original figure of availablestock and the corrected figure of available stock drawing the figure ofconsumption in the original as well as the rectified report. Thus, the CIT(A) wasconvinced with the stand taken by the assessee that it is an arithmetical mistakein quantitative defects which were demonstrated before the CIT(A)duly supportedby the auditor’s certificate. Aggrieved by such order, the assessee preferred appeal before theCommissioner of Income Tax (Appeals) and placed all records which wereavailable and the learned Tribunal after going through the entire records heldthat the assessee has filed copy of the rectified TAR dated 3[rd] September, 2004along with the auditor’s certificate mentioning the original figure of availablestock and the corrected figure of available stock drawing the figure ofconsumption in the original as well as the rectified report. Thus, the CIT(A) wasconvinced with the stand taken by the assessee that it is an arithmetical mistakein quantitative defects which were demonstrated before the CIT(A)duly supportedby the auditor’s certificate. The revenue carried the matter on appeal before the learned Tribunalwhich had reversed the order by the CIT(A)by the impugned order. On goingthrough the order passed by the learned Tribunal more particularly paragraph 7we find that the learned Tribunal has committed factual error which wouldrender the order perverse. The learned Tribunal had declined to take note of therevised tax audit report submitted by the assessee before the CIT(A) on theground that it was given nearly three years after the original tax audit report.However, the learned Tribunal failed to note that this issue arose during theassessment proceedings itself and the assessing officer had issued notice dated4[th] December, 2006 for which reply was given on 18[th] December, 2006 by theassessee which was rejected by the assessing officer while completing the assessment. Therefore, to state that merely because the revised tax audit reportwas submitted later when the appeal was pending before the CIT(A), may not bea ground on which the learned Tribunal could have taken a different view. Thatapart, the learned Tribunal has observed that the assessee could not point outany mistake as claimed in the tax audit report during the course of theassessment proceedings. This also is factually incorrect as mentioned by usabove as the matter was brought to the notice of the assessing officer during thecourse of the assessment. That apart, the learned Tribunal states that the copyof the remand report submitted by the assessing officer could not be producedby both parties. However, the learned Tribunal failed to note that the assesseewas not furnished with the copy of the remand report called for by the CIT(A) butin the order passed by the CIT(A) the said report has been extracted in page 5 ofthe order passed by the CIT(A). In any event, the assessee was able to establishthe factual position as to how it was a genuine arithmetical mistake. In theabsence of any material to show that it was not a genuine arithmetical mistake,the tribunal erred in non-suiting the assessee on the ground that the mistakeought to have been detected earlier by the assessee itself. Thus, we are of theview that the conclusion arrived at by the tribunal for setting aside the orderpassed by the CIT(A)is incorrect as the learned tribunal has ignored the factualposition which was available on record. For the above reasons, the appeal filed by the assessee is allowed. Theorder passed by the learned tribunal is set aside and, consequently, the order passed by the CIT(A) is restored and the substantial question of law is answeredin favour of the assessee. Accordingly, the appeal ITA/781/2008 stands disposed of. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.) SN/CS/S.Das/SG.