M/S S.k.traders v. Commissioner Of Income-Tax

Income-tax Appeal No.14 of 2005 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income-tax Appeal No.14of 2005 Date of decision: 13.12.2010 M/s S.K.Traders ...Appellant Versus Commissioner of Income-Tax ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Pankaj Jain, Advocate for the appellant. Mr. Tejinder K. Joshi, Advocate for the respondent. **** ADARSH KUMAR GOEL, J ( Oral). This appeal has been preferred under Section 260-A ofIncome Tax Act, 1961 by the assessee against order dated11.6.2004 of the Income Tax Appellate Tribunal, Chandigarh Bench,passed in ITA No.281/Chandi/98 in respect of assessment year1995-96. The assessee derives income from manufacture and saleof rice and its by-product. During search at the premises of M/sPartap Bhangu Solvex (P) Ltd., village Pasiana, a diary containingthe details of rice bran purchased by that company from variouspersons including the appellant was seized. In the said diary therewere entries pertaining to purchases made from the appellant and on being confronted, the assessee vide letter dated 24.3.1995 admittedthe correctness of said entries and surrendered a sum of Rs.7.50lacs as undisclosed income subject to no penalty and no prosecution.The basis of surrender by the assessee was under-billing in the ratesof by-products and sale of the by-products outside the books ofaccount. Accordingly, the amount surrendered was taxed asundisclosed income. The addition was deleted by CIT(A) but theTribunal restored the same. It observed:- “In the assessment year 94-95, assessee had disclosed aturnover of Rs.1,47,74,768/-. The income from millingwas disclosed at Rs.22,882. The GP disclosed wasRs.7,61,169. The net profit disclosed was Rs.2,066/-. Inthe year under appeal the assessee disclosed theturnover at Rs.1,77,90,955. The income from milling hasbeen disclosed at Rs.68,896/-. The GP has beendisclosed at Rs.12,29,629. This includes surrenderedincome of Rs.7.50 lacs. Thus, the GP after excluding thesurrendered income disclosed by the assessee isRs.4,79,627. The net profit disclosed is Rs.3,931. If weapply the yardstick of the income disclosed in thepreceding year of Rs.2,066/-, the income of Rs.3,931/- onthe turnover of Rs.17,90,955/- is too low. Even if the saidincome is considered to be reasonable, one cannotoverlook the income of Rs.7,50,000/- disclosed by theassessee for the year under appeal on account of under- billing of by-products of rice and on account of sale of by-products of rice and on account of sale of by-products ofrice outside the books of accounts. So, the income of theassessee, according to assessee's own admission oughtto be more than Rs.7,50,000. As against this, theassessee disclosed the income of Rs.3931/- only whichincludes the amount surrendered of Rs.7,50,000 whichmeans the assessee has disclosed the loss of more thanRs.7,45,000. The surrender of Rs.7.50 lacs of incomesubject to no penalty was made by the assessee on24.3.95 i.e. Just one week before the end of the previousyear. Thus, there was no scope of suffering loss up to24.3.95. Most of the sales are before the said date. Noevidence has been produced before the revenueauthorities to support the claim of loss. On the otherhand, the assessee has itself offered to surrender incomeof Rs.7,50,000. Even if there is no loss or profit on thesales as recorded in the books of account, the income ofthe assessee ought to have been more than Rs.7,50,000as per its own admission before the ADIT (Inv.), Patiala.The mere fact that in some other cases the Departmenthas failed to take cognizance of the surrender made bythem before the revenue authorities does not warrantdeletion of addition in the case of the assessee. Theissue before us is as to whether the addition made by the AO in this case is in accordance with law and justified onthe facts and in the circumstances of this case. Takingthe totality of the facts and circumstances of this case intoconsideration, we are of the firm view that the additionmade by the AO was justified. The manner, in which theaddition has been calculated, in our view, is not importantinsofar as the addition made by the AO was more or lessthe amount surrendered by the assessee for taxation. Itmay be pertinent to mention that the CIT(A) hasproceeded on the wrong assumption that the amount ofconcealment is covered by the surrender of Rs.7,50,000made by the assessee overlooking the fact that theassessee had adjusted the surrendered amount in thebooks of account without offering any tax on thesurrendered amount. We, therefore, set aside the order ofthe CIT(A) and restore the addition as challenged by therevenue in the ground of appeal.” The appeal was admitted to consider following substantial question of law claimed by the assessee:- “Whether under the facts and circumstances of the casethere being no evidence or material to prove the under-billing of the goods and assuming the sale having beenmade at a higher price the conclusion so drawn isperverse and need to be quashed?” We have heard learned counsel for the parties. Learned counsel for the assessee submitted thatsurrendered income could not have been added to the income ofthe assessee without taking into account the loss incurred as rightlyheld by the CIT(A). The Assessing Officer has not found any defectin the books of account and in such a situation, book result could notbe ignored. There being no evidence justifying addition, meresurrender could not be basis of the addition. Learned counsel for the assessee further submitted thatin another case in similar circumstances, being order dated12.5.2004 passed in ITA NO.663/Chandi/98 (Income Tax Officer,Ward-I, Patiala Vs. G.R.Traders, Said Kheri Road, Rajpura), theTribunal upheld the deletion by the CIT(A) with the followingobservations:- “We have heard the rival submissions, perused the ordersof the tax authorities and gone through the materialavailable on record as well as the case law cited by theassessee. In this case, we find that though there was adifference between the sale price of rice basmati sold andcost of production of rice basmati milled by the assesseeon its own but still AO could not bring any material onrecord to suggest that the assessee had resorted tounder-billing while making sales made throughcommission agents of Delhi. The AO had also notdoubted the sales by commission agents, which wereduly vouched. Therefore, the addition made by the AO only on the presumption that the sale price of rice basmatiwas much lower than the cost of production, was notjustified. Sales and purchases had not been doubtedand the AO was not justified in making the addition justbecause the fact that cost of production of rice basmatimilled by the assessee was higher than sale price of ricebasmati shown by the assessee. We have also gonethrough the case law relied upon by the CIT(A) reportedin 87 ITR 349 (supra), wherein it was held that thereshould be a strong piece of evidence against theassessee when the sales and purchases are vouched, noadverse inference should be deduced. The abovejudgment is directly applicable to the present case,wherein the sales of the assessee are duly vouched ,since made through commission agents at Delhi and theAO has not doubted such sales made through thecommission agents. We, therefore, considering the factsand circumstances of the case, are of the view that theCIT(A) while deleting the impugned addition has passed awell-reasoned and speaking order which does not needany interference from our side. We uphold the same andreject the ground of the revenue”. We are unable to accept the submission. The Tribunalhas clearly found that income disclosed by the assessee was notcorrect and invoices issued by the assessee were not genuine on its own admission. The surrender being voluntarily, no further evidencewas required and surrender itself could have been made the basis ofaddition. The said finding is not shown in any manner erroneous. As regards deletion in another case, we are not requiredto go into correctness thereof. Even if in that case addition was setaside, we cannot accept the same as a precedent unless theimpugned order is shown to be erroneous on merits. Moreover, inthe above finding, the question whether surrender itself could bebasis for addition has not been considered. The question is, thus, answered against the assessee. Accordingly, the appeal is dismissed. (Adarsh Kumar Goel) Judge December 13,2010Pka (Ajay Kumar Mittal) Judge