M/S Gopal Mills v. The Commissioner Of Income Tax, Patiala And Another

ITA No. 144 of 20001] IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA No. 144 of 2000Date of decision: 21.1.2020 M/s Gopal Mills .. Appellant V. The Commissioner of Income Tax, Patiala and another.. Respondents.. Respondents CORAM:HON'BLE MR. JUSTICE AJAY TEWARIHON'BLE MR. JUSTICE AVNEESH JHINGANHON'BLE MR. JUSTICE AVNEESH JHINGAN Present: |Mr. Alok Mittal, Advocate for the appellant.Mr. Kunal Sharma, Senior Standing Counsel for theLTE@EVeEMr. Kunal Sharma, Senior Standing Counsel for theLTE@EVeE AVNEESH JHINGAN, J. The assessee is in appeal under Section 260A of the IncomeTax Act, 1961 (for short, ‘the Act’) against the order dated 12.7.2000 passedby the Income Tax Appellate Tribunal, Chandigarh (for short, ‘the Tribunal’)allowing the appeal of the revenue. Following substantial questions of lawhave been claimed in the appeal: @9+:Whether in the facts and circumstances of the caseorders Annexures P-1 and P-3 are legally sustainable?orders Annexures P-1 and P-3 are legally sustainable? 9<:Whether in the facts and circumstances of the case, theIncome Tax Appellate Tribunal was right in sustainingthe rejection of the books of accounts of the assessee-appellant, the same being based on mere presumptionsIncome Tax Appellate Tribunal was right in sustainingthe rejection of the books of accounts of the assessee-appellant, the same being based on mere presumptions ITA No. 144 of 2000|2]| and conjectures which cannot form the basis foradjudication?adjudication? 9/:Whether in the facts and circumstances of the case, theaddition of Rs.5,41,148/- on account of G.P. rate isaddition of Rs.5,41,148/- on account of G.P. rate is legally sustainable in as much as the amount surrendered was on account of the excess stock whichStood credited in the trading account and thus was to beStood credited in the trading account and thus was to be taken into consideration for arriving at the gross profit#+'$C#+'$C 9-:Whether in the facts and circumstances of the case, theIncome Tax Appellate Tribunal was right in sustainingIncome Tax Appellate Tribunal was right in sustaining the rejection of the books of account when there was nodiscrepancy in the books of account subsequent to theSearch and seizure operations?discrepancy in the books of account subsequent to theSearch and seizure operations? 9$:Whether in the facts and circumstances of the case, theLd. ITAT was right in sustaining the addition ofRs.5,41,148/- but not including the amount surrenderedin the trading account for calculation of loss and profit#+'$CILd. ITAT was right in sustaining the addition ofRs.5,41,148/- but not including the amount surrenderedin the trading account for calculation of loss and profit#+'$CI The appeal was admitted only with regard to question (c). The facts necessary for adjudication of the present appeal are that the assessment year involved is 1990-91. The assessee filed returndeclaring income otf =4,.03,566/-. A search was conducted on businesspremises on 11.8.1989, excess stock worth=10,50,000/- was found and itwas noted that various books of account were not written upto date. Theassessee failed to explain the source of investment but Mr. Rajesh Kumar ITA No. 144 of 2000}3]] The appeal was admitted only with regard to question (c). The facts necessary for adjudication of the present appeal are that the assessment year involved is 1990-91. The assessee filed returndeclaring income otf =4,.03,566/-. A search was conducted on businesspremises on 11.8.1989, excess stock worth=10,50,000/- was found and itwas noted that various books of account were not written upto date. Theassessee failed to explain the source of investment but Mr. Rajesh Kumar ITA No. 144 of 2000}3]] partner surrendered a sum Ot|410,50,000/-. The Assessing Officer whileframing assessment considered various aspects including that highconsumption of electricity for per quintal production and the fact that G.P.Rate worked out to 1.12% as compared to 4.49% for the assessment year1988-89, 2% for the assessment year 1989-90 and 3% for the assessmentyear 1991-92 and rejected the books of account. The income was assessedapplying rate of 2% as shown in the previous year. The assessment wasfinalised vide order dated 12.3.1993 calculating the total assessable incomeas|48,33,845/-. The Commissioner of Income Tax (Appeals) (for short,'CIT") allowed the appeal on 29.6.1993 and deleted addition ofL5,41,148/-made on the basis of estimated gross profit of 2%. The revenue preferred anappeal before the Tribunal. The Tribunal set aside the order of the CIT andallowed the appeal on 12.7.2000, hence the present appeal. Learned counsel for the assessee argued that while makingaddition of45,41,148/- on account of G.P. rate, the amount surrenderedworth =10,50,000/- should have been considered for calculating the grossprofit. The contention raised is not well founded. The books ofaccount of the appellant were rejected. The gross profit as per the previousyear was considered by the Assessing Officer. The same cannot be said tobe excessive or arbitrary. The Tribunal rightly came to the conclusion thatsurrendered amount of410,50,000/- was on account of un-explainedinvestment in the stock. It represented unaccounted transaction and doesnot represent the profit of unaccounted transaction of purchase and sale.There was no convincing reason put forth by the assessee justifying the low ITA No. 144 of 20004] There is another aspect of the matter. The Assessing Officerwhile finalising the assessment considered the profit amounting toL3,06,705/- as covered under the surrrendered amount ofL10,50,000/- andthereafter made the addition. The conclusion arrived at by the Tribunal is plausible and callsfor no interference. No question of law much less a substantial question oflaw arises. The appeal is dismissed. (AVNEESH JHINGAN) (AJAY TEWARI) JUDGE JUDGE 21.1.20204) Whether speaking/reasoned:Yes/NoWhether reportable:Yes/No