M/S Kamal Spinning Mills v. The Commissioner Of Income Tax, Rohtak

ITA No. 346 of 2005 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 346 of 2005 Date of Decision: 12.10.2010 M/s Kamal Spinning Mills ....Appellant. Versus The Commissioner of Income Tax, Rohtak ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sanjay Bansal, Senior Advocate with Ms. Ashima Bindlish, Advocate for the appellant.Ms. Ashima Bindlish, Advocate for the appellant. Ms. Urvashi Dhugga, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.In this appeal filed under Section 260A of the Income TaxAct, 1961 (in short “the Act”), the assessee has claimed the followingsubstantial questions of law said to be arising out of the order dated31.3.2005 passed by the Income Tax Appellate Tribunal, Delhi Bench“A”, New Delhi (hereinafter referred to as “the Tribunal“) in ITA No.3648/Del/2001 relating to the assessment year 1995-96:- “(i)Whether the Tribunal was right in law in notdismissing the appeal filed by the Department/Revenue contrary to the Circular issued by theCentral Board of Direct Taxes in the case of thepresent appellant?dismissing the appeal filed by the Department/Revenue contrary to the Circular issued by theCentral Board of Direct Taxes in the case of thepresent appellant? ITA No. 346 of 2005 (ii)Whether the impugned order passed by the Tribunalis perverse, illegal and contrary to the principle ofjudicial precedent and judicial discipline?is perverse, illegal and contrary to the principle ofjudicial precedent and judicial discipline? (iii)Whether on the facts and in the circumstances theTribunal misdirected itself in law as well as on facts inreversing the order passed by the CIT (A) therebyupholding the addition of Rs.1,28,000/- made by theAssessing Officer on account of investment made inpurchases outside the books of account?” 2.The facts as narrated in the appeal are that on 13.1.1998, asurvey was conducted at the premises of the assessee and during thecourse of said survey, certain bills and challans were found which werenot recorded in the books of account pertaining to the year in question.The assessment was reopened and the Assessing Officer estimated theunaccounted turnover at Rs.5 lacs. After determining the profit of thesaid transactions at the rate of 10%, the Assessing Officer made anaddition of Rs.50,000/-. The assessee took the matter in appeal and theCommissioner of Income Tax (Appeals) [in short “the CIT(A)”] videorder dated 25.6.2001 restricted the addition to Rs.21,568/- by applyingGP rate of 7.53% on unrecorded sales of Rs.2,86,429/-. Feelingaggrieved, the revenue approached the Tribunal who vide order dated31.3.2005 partly allowed the appeal upholding the addition ofRs.1,28,000/- made by the Assessing Officer. Hence, the presentappeal by the assessee. 3.We have heard learned counsel for the parties and perusedthe record. 4.Learned counsel for the assessee submitted that theappeal filed by the revenue before the Tribunal was in contravention ofthe circular issued by the Central Board of Direct Taxes (CBDT)whereby the revenue was precluded from filing an appeal before theTribunal where the tax effect was less than Rs.1 lac. According to thelearned counsel, Instruction No. 1979 dated 27.3.2000 read withInstruction No. 1985 dated 29.6.2000 prescribed that tax effect ofRs.1,00,000/- should have been involved before the revenue couldagitate a cause in appeal before the Tribunal and “tax effect” wouldembrace element of tax involved only excluding interest, penalty andfine. Learned counsel urged if the tax effect is held to be less thanRs.1,00,000/-, the appeal itself before the Tribunal was notmaintainable. Addressing on merits, learned counsel submitted that theaddition of Rs.1,28,000/- upheld by the Tribunal by reversing the orderof the CIT (A) was erroneous. 5.On the other hand, learned counsel for the revenuesubmitted that the CBDT had issued circular on 17.7.2003 whereby itclarified its earlier Instructions dated 27.3.2000 and 29.6.2000. It wasspecifically provided therein that monetary limit and “tax effect” shalldenote the amount of tax, interest, penalty, fine or any other suminvolved. According to the learned counsel, since the amount of tax,interest, penalty, fine constituting tax effect was more than Rs.1 lac, theappeal was validly filed. Further, on merits, the learned counselsupported the order passed by the Tribunal. 6.We have given our thoughtful consideration to therespective submissions made on behalf of the parties and find merit in ITA No. 346 of 2005 the submission made by learned counsel for the revenue. InstructionNo.6 dated 17.7.2003 clarifying its earlier Instructions dated 27.3.2000and 29.6.2000 reads as under:- “Reference is invited to Boards Instruction No. 1979dated 27[th] March 2000, Instruction No. 1985 dated29[th] June 2000 as also to earlier instructions issuedto reduce litigation by fixing monetary limit for filingdepartmental appeals before SC/HC/ITAT. In order to avoid ambiguity and to adopt uniformity inapproach while filing appeals by the field formations,it is hereby clarified by the Board that the word“monetary limit” and “tax effect” in the aforesaidinstruction be read as “revenue effect” which denotesthe amount of tax, interest, penalty, fine or any othersum involved. This instruction is clarificatory innature and will apply to litigation under other DirectTaxes also e.g. Wealth Tax, Gift Tax and Estate Dutyetc.” 7.A plain reading of the Instruction clearly depicts that therevenue effect comprises of tax, penalty, interest or fine or any othersum involved and that the instruction is clarificatory in nature. It isundisputed that the tax, interest, penalty, fine constituting revenue effectwas in excess of Rs.1 lac and, therefore, it cannot be held that theappeal filed before the Tribunal was in contravention of the Board'sInstructions.The argument raised by the learned counsel for theassessee is, thus, without any merit. Accordingly, the first question is answered against the assessee. 8.Adverting to question (iii), the finding recorded by theTribunal while reversing the finding of the CIT (A) in respect of additionof Rs.1,28,000/- on account of unexplained investment made inpurchases is as under:- “After hearing both the parties, we find merit in thisground raised by the Revenue. It is apparent fromthe facts of the case that assessee has accepted thefact of unaccounted sales of Rs.2,86,429/- since noappeal has been filed by it against the finding of theCIT(A). There is also no dispute that the firstunaccounted sale amounted to Rs.1,40,569/- andtherefore, in our opinion, the A.O. was justified inworking out the unexplained investment to the extentof Rs.1,28,000/- after excluding the profit element.No reason has been given by the CIT(A) in deletingsuch addition. Even before us, the ld counsel for theassessee could not advance any argument as to whythis addition should not be made. Everyunaccounted sale would involve unaccountedpurchase unless it is shown by the assessee thatpurchases of such unaccounted sale were dulyrecorded in the books of accounts. In the absence ofany evidence, we uphold the addition ofRs.1,28,000/- made by the A.O. and accordingly, thefinding of the CIT(A) is reversed on this account. The ITA No. 346 of 2005 -6- order of the A.O. on this issue is consequentlyrestored.” 9.The aforesaid finding of fact has not been shown to beperverse in any manner by the learned counsel for the assessee whichmay warrant interference by this Court. Accordingly, question (iii)cannot be said to be a substantial question of law. 10.Question (ii) being general question cannot be said to be asubstantial question of law. ITA No. 346 of 2005 -6- order of the A.O. on this issue is consequentlyrestored.” 9.The aforesaid finding of fact has not been shown to beperverse in any manner by the learned counsel for the assessee whichmay warrant interference by this Court. Accordingly, question (iii)cannot be said to be a substantial question of law. 10.Question (ii) being general question cannot be said to be asubstantial question of law. 11.In view of the above, there is no merit in this appeal and thesame is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE October 12, 2010gbs (ADARSH KUMAR GOEL) JUDGE