Itta/231/2013 Of Commisisoner Of Income Tax Vi v. Shri Purushottam Jhawar

IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH ATHYDERABAD THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTAAND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A. No.231 of 2013 DATE: 12.07.2013 Between: The Commissioner of Income Tax-VI,Hyderabad. … Appellant And Shri Purushottam JhawarWarangal District. … Respondent This Court made the following: THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTAANDTHE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A. No.231 of 2013 JUDGMENT:(Per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is preferred and sought to be admitted against thejudgment and order of the learned Tribunal, dated 28.11.2008, in relation toblock period from 1989-90 to 1999-2000 on the following suggested questionof law. “(A) Whether on the facts and circumstances of the case, theappellate Tribunal is justified in restricting the addition ofRs.33,29,300/- against Rs.87,10,100/- fixed by the AssessingOfficer by roping in the theory of peak credits? (B) Whether on the facts and circumstances of the case, theappellate Tribunal is justified in allowing the peak cash credittheory without there being nexus between the inflow and outflow ofthe cash? (C) Whether on the facts and circumstances of the case, theappellate Tribunal is justified in affirming the view of the CIT(Appeals) in deleting the addition of Rs.10,50,000/- as undisclosedincome, in spite of there being no material on record tosubstantiate that the advances rotated with the traders hadnexus with the squared-up amounts? (D) Whether on the facts and circumstances of the case, theappellate Tribunal is justified in reducing the addition made onaccount of unexplained investments in purchase of Chillies to theextent of alleged profit and closing stock, in spite of there beingno material to substantiate that the said items had been broughtinto books of accounts?” We have heard Sri S.R. Ashok, learned senior counsel for the appellantand gone through the impugned judgment and order of the learned Tribunal. It appears that the learned Tribunal has decided by its judgment and order three appeals in all. The first appeal was filed by the department,second appeal was filed by the respondent herein against the appellant andthe third appeal was filed by the department in the case of connectedassessee M/s. G.K. Cold Storage, Mahabubabad. The appellant/respondentfiled cross appeal against the judgment and order of the AssistantCommissioner of Income Tax in which the application of principle of peakcredit method in quantifying the undisclosed income was considered. Thelearned Tribunal on this issue has found that the lower authority came to thefact finding that the peak credit concept has to be applied and it cannot bedisputed that the concept of peak credit is one of the accepted methods ofaccounting principles for the purposes of computing the real profit, and cameto the conclusion that there is no fault with the view taken by theCommissioner of Income Tax (Appeals) unless and until the method adoptedby the lower authority is contrary to the provisions of the Income Tax Act,1961 (for short, “the Act”). We are in agreement with the views expressed bythe learned Tribunal on this issue. Next question relates to deletion of addition of Rs.10,50,000/-. Thelearned Tribunal found that the assessee has disclosed a sum ofRs.10,50,000/- and this factum of disclosure is not in dispute. Therefore, theaddition of the aforesaid amount of Rs.10,50,000/- would amounts to doubleaddition. The learned Tribunal while affirming the judgment of CIT (Appeals)has come to the conclusion that deletion of addition of Rs.10,50,000/- isjustified, since the same was already disclosed by the assessee in the blockreturn. Next question relates to deletion of addition of Rs.10,50,000/-. Thelearned Tribunal found that the assessee has disclosed a sum ofRs.10,50,000/- and this factum of disclosure is not in dispute. Therefore, theaddition of the aforesaid amount of Rs.10,50,000/- would amounts to doubleaddition. The learned Tribunal while affirming the judgment of CIT (Appeals)has come to the conclusion that deletion of addition of Rs.10,50,000/- isjustified, since the same was already disclosed by the assessee in the blockreturn. Next question is addition of Rs.1,13,500/-. It appears that the Tribunalcame to the conclusion on fact that the assessing officer has alreadydeducted a sum of Rs.89,000/- for the financial year 1996-97. Therefore, theCommissioner of Income Tax (Appeals) was not correct in deleting theaddition of Rs.1,13,500/- on the ground that the same was forming part ofRs.13,55,617/-. Having found the discrepancy the learned Tribunal thoughtthat some verification was necessary to find out whether the amount ofRs.1,13,500/- form part of addition of Rs.13,55,617/- or not and accordingly set aside the order of the lower authority on that issue and remanded thematter for fresh computation after verification as to whether the amount ofRs.1,13,500/- form part of the addition of Rs.13,55,617/-. Next question is with regard to Rs.4,21,748/- on account ofunaccounted investment in the purchase of chillies. The learned Tribunal onfact found that it was not in dispute that the assessee purchased chilliesoutside the books of account and the profit arising out of such purchase wasalready offered for taxation. Hence, there was no need for any furtheraddition. The learned Tribunal on fact also found that the assesseepurchased chillies outside the books of account, which was found during thecourse of search operations. The assessee has disclosed the closing stockto the extent of Rs.98,000/- in the block return, which was offered for taxation. Hence, the relief to the extent of Rs.98,000/- should have been given in theblock assessment and the profit admitted by the assessee to the extent ofRs.32,000/- in the block return cannot be added again. Therefore, on fact, thelearned Tribunal had correctly reduced the addition to Rs.2,91,748/- in caseof Rs.3,23,748/-. We do not find any flaw in this. Next point relates to the addition of Rs.4,67,909/- on account ofinvestment in M/s. G.K. Cold Storage. The learned Tribunal found on fact thatthe search operation was conducted in the premises of the assessee on24.02.1999, which was concluded on 02.04.1999. The assessee filed thebalance sheet of G.K. Cold Storage before the assessing officer on28.08.2000 in the course of block assessment proceedings. The learnedTribunal found that no material was found during the course of searchoperations with regard to addition of Rs.4,67,909/- and correctly applied thelaw, namely; Section 158BB(1) which clearly says that undisclosed incomehas to be computed on the basis of material found during the course ofsearch operation or the information, which is relatable to the material foundduring the course of search operations. It was found by the learned Tribunalon fact that there was no reference in the assessment order about thematerial found during the course of search operations and the addition wasmade purely on the basis of the balance sheet filed by the assessee on 28.08.2000 in the course of block assessment proceedings. Therefore, thelearned Tribunal correctly held that the sum of Rs.4,67,909/- cannot betreated as undisclosed income, and deleted the same from addition. While dealing with the assessee’s appeal, the learned Tribunal dealtwith the matter in the manner as follows. The first ground in this appeal was with regard to the addition ofRs.33,29,300/-. After examining the records and material, the learnedTribunal on fact found as follows. 28.08.2000 in the course of block assessment proceedings. Therefore, thelearned Tribunal correctly held that the sum of Rs.4,67,909/- cannot betreated as undisclosed income, and deleted the same from addition. While dealing with the assessee’s appeal, the learned Tribunal dealtwith the matter in the manner as follows. The first ground in this appeal was with regard to the addition ofRs.33,29,300/-. After examining the records and material, the learnedTribunal on fact found as follows. “Merely because the assessee made coded entries even forsmall figures, like Rs.100, Rs.200 etc., that does not mean that theassessee has omitted three zeroes. On the basis of the materialavailable on record, and the statements recorded from the variousdebtors examined, it is very much clear that what was omitted by theassessee is only two zeroes and not three zeroes. In the absence ofany material to the contrary brought on record, the assessing officeris not justified in ignoring the statements recorded from debtors. Thestatements recorded by the assessing officer clearly establish thatwhat was omitted by the assessee is only two zeroes and not threezeroes.” On the basis of the above fact finding, the learned Tribunal did notaccept the order of the Commissioner of Income Tax (Appeals) andaccordingly set aside the said order directing the assessing officer to re-compute the income of the assessee after adding two zeroes to the figuresmentioned in circle in coded form in the seized note book. The aforesaid factfinding does not call for any interference by this Court in exercise of itsjurisdiction under Section 260A of the Income Tax Act, 1961. Next point in the assessee’s appeal was with regard to the interest onadvances to the extent of Rs.1,56,820/- for the assessment year 1997-98,Rs.1,37,073/- for the assessment year 1998-99 and Rs.4,32,103/- for theassessment year 1999-2000. The learned Tribunal has examined the books of account and records. After doing that, the learned Tribunal found that what was omitted by theassessee with regard to the advances was also two zeroes and not threezeroes. Therefore, the learned Tribunal set aside the orders of the lowerauthorities on this issue and directed the assessing officer to make addition of only Rs.1 lakh instead of Rs.10 lakhs with regard to the advances made bythe assessee to Sri Ram Cold Storage. This factual computation andanalysis cannot be gone into by this Court, as it does not involve anyquestion of law. Next ground of the assessee’s appeal was with regard to addition ofRs.1,80,000/- on account of repayment of loan from undisclosed sources inthe case of B. Sriram Reddy. The learned Tribunal on this contention found that when theCommissioner of Income Tax (Appeals) has followed the peak credit concept,there is no need to make any separate addition in respect of Rs.1,80,000/-and that the assessee has explained the sources for repayment. Under suchcircumstances, the learned Tribunal found that there was no justification forseparate addition. In our view this is also a question of fact, which this Courtcannot decide. Next ground of the assessee’s appeal was with regard to the squaredup loans. It appears that the learned Tribunal on fact thought it fit that this issuerequires reconsideration and as such it set aside the order of theCommissioner of Income Tax (Appeals) insofar as the impugned addition ofRs.1,50,000/- is concerned and remanded the matter to the file of theassessing officer for due verification and decision in accordance with law,after giving reasonable opportunity of hearing to the assessee. It is a mereremand order. So we do not think that this should be scrutinized by this Courtin exercise of its jurisdiction under Section 260A of the Income Tax Act, 1961. The learned Tribunal has dismissed the revenue’s appeal in relation toM/s. G.K. Cold Storage. In this appeal the only issue was in relation toaddition of Rs.69,28,945/-. The learned Tribunal on fact gone into this matterand found as follows. The learned Tribunal has dismissed the revenue’s appeal in relation toM/s. G.K. Cold Storage. In this appeal the only issue was in relation toaddition of Rs.69,28,945/-. The learned Tribunal on fact gone into this matterand found as follows. “Admittedly, the partnership firm was established during theassessment year 1998-99. In other words, assessment year 1998-99 is the first year of assessment in the case of G.K. Cold Storage. The business of the assessee firm is that of running a cold storage. Within just one year of its establishment, the partnership firm, in ouropinion, could not have generated unaccounted money to the extentof Rs.69,28,945/-. Therefore, certainly the monies in question mustassessment year 1998-99. In other words, assessment year 1998-99 is the first year of assessment in the case of G.K. Cold Storage. The business of the assessee firm is that of running a cold storage. Within just one year of its establishment, the partnership firm, in ouropinion, could not have generated unaccounted money to the extentof Rs.69,28,945/-. Therefore, certainly the monies in question must have been introduced by the partners, as claimed by the assessee. Therefore, there is no question of making any addition in the hands ofthe present assessee.” Thereafter, the learned Tribunal found that the spouses of therespective partners who have also contributed substantially, were assessedto income tax. They have also sufficient credit balances in their books ofaccount, so as to advance funds to the assessee firm. In the circumstances,the addition of Rs.69,28,945/- as undisclosed income in the hands of theassessee firm is not warranted. Therefore, the finding of the Commissioner ofIncome Tax (Appeals) in deleting the addition made by the assessing officerwas just and perfect. In view of the above fact-findings, we do not see any reason to interferewith this appeal to upset the said fact-findings. Accordingly, we dismiss the appeal, as there is no element of lawinvolved in this matter. Almost this involves factual finding and question. _____________________ K.J. SENGUPTA, CJ ______________ G. ROHINI, J