M/S Roshan Lal Tilak Raj & Co v. The Commissioner Of Income-Tax-Ii, Range Iv, Jalandhar

Income-tax Appeal No.722 of 2010 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income-tax Appeal No.722of 2010(O&M) Date of decision: 24.12.2010 M/s Roshan Lal Tilak Raj & Co. ...Appellant Versus The Commissioner of Income-tax-II, Range IV, Jalandhar ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Ms.Radhika Suri, Advocate for the appellant. **** ADARSH KUMAR GOEL, J ( Oral). This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (hereinafter referred to as“the Act”) against order dated 27.11.2008 passed by the IncomeTax Appellate Tribunal, Amritsar Bench, Amritsar in ITANo.432/Asr./2008, for the assessment year 2004-05, claimingfollowing substantial questions of law:- “1.Whether on the facts and in the circumstances ofthe case, the Tribunal erred in confirming theaddition of Rs.1,60,875/- made on account ofalleged undisclosed sale of bardana as perAnnexure 1? Whether on the facts and in the circumstances of the case, the Tribunal erred in confirming theaddition of Rs.10,31,592/- made on account ofalleged undisclosed sale of bags and sutli as perAnnexure III? Whether on the facts and in the circumstances ofthe case, the Tribunal erred in confirming theaddition of Rs.8,49,464 made on account of allegedundisclosed sale of paddy as per Annexure II? Whether on the facts and in the circumstances ofthe case, the order of the Tribunal vacating findingsof fact given by the CIT(A) and confirming additionsof alleged unrecorded sales as per Annexures I toIII is perverse? Whether the Tribunal erred in confirming theaddition of unrecorded sales on the basis ofannexures I to III without appreciating that theappellant was only a Kucha Arhatia and, therefore,addition could have been made of commissiononly? 6.Whether on the facts and in the circumstances ofthe case, the findings arrived at by the Tribunal areperverse, inasmuch as no reasonable personcorrectly informed of the provisions of law wouldcome to such a conclusion?” During the assessment, the assessing officer did not accept the declared income of ` 12,950/- and made, inter-alia,following additions:- a)` 1,60,875/- on account of unrecorded sales ofbardana;bardana; b)` 10,31,592/- on account of unrecorded sales ofbags and sutli; andbags and sutli; and c)` 8,49,464/- on account of unrecorded sales ofpaddy.paddy. The assessee derived income from purchase and sales of food grains and arhat. On 20.11.2003, a survey was conducted onthe premises of the assessee and statement of its partner ManojKumar was recorded. Copies of certain slips found at the time ofsurvey and some other material were also taken. The said slipsshowed that the assessee had received or sent bags of paddy orempty bags of bardana or other material which was not recorded inits books of account. Explanation of assessee was that bagsbelonged to the commission agents whose names were mentioned inthe slips. The slips happened to be with the assessee as brother ofits partner was having share in M/s Arora Rice and General Mills.With regard to gate passes, it was stated that bags were sold by theassessee. With regard to slips pertaining to bardana, it was statedthat the same belonged to M/s Arora Rice and General Mills andwere returned to them in due course. The assessing officer did notaccept the stand of the assessee. It held that the assessee had soldthe goods out side the books of account and on that basis impugnedadditions were made. On appeal, the CIT(A) set aside the additions, acceptingthe explanation of the assessee that material found during surveybelonged to M/s Arora Rice and General Mills and, thus, additionswere required to be in the hands of M/s Arora Rice and General Millsand not in the hands of the assessee. On appeal, the CIT(A) set aside the additions, acceptingthe explanation of the assessee that material found during surveybelonged to M/s Arora Rice and General Mills and, thus, additionswere required to be in the hands of M/s Arora Rice and General Millsand not in the hands of the assessee. On further appeal of the revenue to the Tribunal, theadditions made by the assessing officer were restored as follows:- “5.We have heard both the parties and perused thematerial placed on record. In this case, the assessee hassent empty bags to M/s Arora Rice & General Mills . Thesending of the empty bags by the assessee to M/s AroraRice & General Mills is an admitted fact and there is nodispute regarding this. For example, we reproducehereunder one of the gate passes bearing No.551 dated1.9.2003: M/s Arora Rice & General Mills IBRAHIMWAL (Distt. Kapurthala) No.551 dated 1.9.2003. Gate pass. 1.Sender M/s Roshan Lal Tilak Raj & Co., Nadala 2.Bardana A class 3.New Bardana B Class 20 bundle 4.Total 20 X 50 = 1000 bags 5.Truck/Thela No.PBK 8744 6.Signature of For M/s Arora Rice & General Mills Recipient Sd/ Manager/Partner As above, the assessee sent 1000 bags to M/s AroraRice & General Mills which were received by theManager/Partner of M/s Arora Rice & General Mills. Thecontention of the assessee is that M/s Arora Rice andGeneral Mills sent the empty bags to the assessee isincorrect when M/s Arora Rice & General Mills did notsend the empty bags to the assessee. The assesseeitself sending the empty bags to M/s Arora Rice &General Mills. The assessee is required to disclose saleof these empty bags. The finding of the CIT(A) is thatthere was no addition in the case of M/s Arora Rice &General Mills on this count. Hence, the addition cannotbe made in the hands of the assessee. In our opinion, itcannot be the reason for deletion of addition in the handsof the assessee. If the AO of M/s Arora Rice & GeneralMills fails to make addition and committed an error thaterror need not be perpetuated in the hands of theassessee. The assessee has not been able to lead anyevidence to show that the reason for not recording thesesales of empty bags to M/s Arora Rice & General Mills, intheir books. The AO is justified in treating the sale ofempty bags at Rs. 1,60,785. The same is confirmed.Accordingly, the order of the ld. CIT(A) is reversed thatthis ground of appeal of the revenue is allowed. xxxxxxxxx 6.1We have heard both the parties and perused thematerial placed on record. In this case, the sale of paddyby the assessee to M/s Arora Rice & General Mills wasnot disputed. The contention of the assessee that it wasalready included in the sale of 6906 bags which wasdisclosed in the books of account. But we are unable toagree with the findings of the ld. CIT(A) because therewas categorical findings given by the AO that there wasno entry in respect of slips bearing gate pass Nos. 113 to128 in the books of account of the assessee. Theassessee has failed to adduce any evidence to show thatthe paddy sold to M/s Arora Rice & General Mills videgate pass bearing Nos. 113 to 128 was accounted by theassessee. The AO further mentioned specific gate passbearing No.126 issued by M/s Arora Rice & General Millson 24.10.2003 which was unaccounted by the assessee.Being so, the learned CIT(A) observed that the sale of2750 bags included in the sale of 6906 bags accountedby the assessee incorrect. The assessee has not beenable to lead any evidence that receipt Nos. 1 to 16 issuedby M/s Arora Rice & General Mills are accounted onwhich date in the books of account. Hence, in theabsence of requisite material, the addition is to besustained. Accordingly, the order of the ld. CIT(A) is reversed and the ground of appeal of the revenue isallowed. xxxxxxxxx reversed and the ground of appeal of the revenue isallowed. xxxxxxxxx 7.1We have heard both the parties and perused thematerial placed on record. The assessee stated beforethe AO that it has received 25000 empty bags and 25000empty katta from M/s Arora Rice & General Mills, whichwere distributed among the commission agents fromwhom paddy was purchased. Once these empty bagsare distributed to the commission agents, there is nothingon record to send it back to M/s Arora Rice & GeneralMills. The admitted fact is that slips found during thecourse of survey show sending of the empty bags by theassessee to M/s Arora Rice & General Mills which werenot accounted by the assessee. Hence, the AO isjustified in bringing the value of these bags to taxation.The ld. CIT(A) made the deletion on the basis of stockstatement, which was never produced before the AO,cannot be considered. Hence, the deletion is notjustified. Accordingly, we reverse the order of the ld. CIT(A) on this issue. This ground of appeal of the revenue isallowed.” We have heard learned counsel for the appellant. Learned counsel for the appellant submits that theTribunal erred in reversing the finding of CIT(A). The assessee was working only as a Commission Agent and did not make any sale orpurchase of goods in its own account. The goods belonged to M/sArora Rice and General Mills whose name was described on theslips as rightly held by the CIT(A). We are unable to accept thesubmission. The finding of fact recorded by the assessing officer andupheld by the Tribunal is based on the evidence and inference drawnfrom the material on record after due consideration of the explanationof the assessee and is not shown to be perverse. Mere fact that theassessee was working as a commission agent could not beconclusive of its not deriving income from unrecorded sales.Description on the slips and the gate passes were also notconclusive of the assessee being not involved in the transactions inquestion. Admittedly, the bags were found in the premises ofassessee. In such a fact situation, no substantial question of lawarises. Accordingly, the appeal is dismissed. (Adarsh Kumar Goel) Judge December 24,2010Pka (Ajay Kumar Mittal) Judge