Sh. Rajiv Bhatia v. Commissioner Of Income Tax (Appeals) Jammu & Anr

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 354 of 2007 DATE OF DECISION: 12.8.2009 Sh. Rajiv Bhatia, Proprietor, M/s Sardhari Lal Bhatia& Sons (HUF), 11-A, Hukam Singh Road, Amritsar Versus Commissioner of Income Tax (Appeals) Jammu & Anr. ..........Appellant ..........Respondents CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:-Mr. Akshay Bhan, Advocatefor the appellant. Ms. Navender P.K. Singh, Advocatefor the respondent. **** ADARSH KUMAR GOEL, J. (Oral) 1.The assessee has preferred this appeal under Section 260-Aof the Income Tax Act, 1961 (for short, “the Act”) against the order ofIncome Tax Appellate Tribunal, Amritsar Bench dated 23.10.2006 passedin ITA No. 526/ASR/2004 for the assessment year 2001-02, proposing toraise following substantial questions of law:- (i) Whether in the facts and circumstances of the presentcase the impugned orders Annexure A-1 to A-3 arelegally sustainable in the eyes of law when themethod used for counting of bricks was not properand was merely on the basis of estimate?case the impugned orders Annexure A-1 to A-3 arelegally sustainable in the eyes of law when themethod used for counting of bricks was not properand was merely on the basis of estimate? (ii)Whether in the facts and circumstances of the present case the impugned orders Annexures A-1 to A-3 arelegally sustainable in the eyes of law by making anadditions of Rs. 169230/- on account of consumptionof coal outside the books of account by basing theirdecision that three coal firings took place whenactually only two coal firings had taken place in theassessed year? 2.The assessee is in the business of brick kiln. As a result ofsurvey under Section 133A in the premises of the assessee on 28.9.2000,the assessee was confronted with the adverse material warrantingadditions to the declared income. The discrepancies related to excessstock of coal, investment outside the books of accounts, shorttransportation charges declared, unexplained investment, purchase oftractor/trolly, trade expenses and other expenses. After considering thestand of the assessee, the Assessing Officer assessed the income bymaking additions to the declared income and also initiated proceedings forpenalty. The CIT(A) partly allowed the appeal and partly upheld theadditions. The Tribunal also partly allowed the appeal of the assessee butupheld the rest of the additions. 3.We have heard learned counsel for the parties. 4.Learned counsel for the assessee submits that method forcounting of bricks adopted by the Assessing Officer was not proper andthere was no basis for the estimate made. Additions on account ofconsumption of coal outside the books of accounts based on theassumption that three coal firings had taken place was against facts, asonly two coal firings had taken place. 5.Learned counsel for the revenue supports the impugnedfindings and submits that the proposed questions are questions of facts.The findings of the Tribunal are based on valid grounds and cannot be held to be perverse. 6.The relevant findings of the Tribunal on the issues raised are as under:- 3.We have heard learned counsel for the parties. 4.Learned counsel for the assessee submits that method forcounting of bricks adopted by the Assessing Officer was not proper andthere was no basis for the estimate made. Additions on account ofconsumption of coal outside the books of accounts based on theassumption that three coal firings had taken place was against facts, asonly two coal firings had taken place. 5.Learned counsel for the revenue supports the impugnedfindings and submits that the proposed questions are questions of facts.The findings of the Tribunal are based on valid grounds and cannot be held to be perverse. 6.The relevant findings of the Tribunal on the issues raised are as under:- “Now the next question whether the AO was justified inconsidering the stock lying inside the brick kiln at 6.50lakhs instead of 5.10 lakhs. Sh. Bhagwan Dass, anemployee of the assessee stated before the survey teamthat the bricks lying in the kiln were 6.50 lacs. This isclear from his statement placed at pages 42 to 43 of thepaper book. Now the basis of assessee's contentionthat evidence for stock lying in kiln was wages paid inthe month of October has been found untenable andfactually incorrect. The department, on the other hand,has based such conclusion on the reason that capacitywas 7 lakhs and the kiln was found fully loaded waitingfor cool down and the statement of an employee of theassessee. The reason given by authorities belowappears to be logical and acceptable more so whenthere is no material or evidence to prove the contrary.Thus, we reject the claim of the assessee that only 5.10lakhs bricks were lying inside the kiln more so when wehave already recorded a finding that 5.10 lakhs bricksrelated to third burning after the date of survey. Nospecific arguments have been advanced in regard to thevalue of bricks taken by the AO for the purpose ofmaking addition on account of excess stock. No billsand vouchers were submitted before us to show that theaverage sale and purchase price differed from one takenby the AO. The Ld. CIT(A) has also taken into account first class, second class and khinger categories of brickswhile estimating the cost after reducing the margin ofprofit. Therefore, we find no justification to interfere withthe findings of the authorities below in regard to anaddition of Rs. 3,60,154/- made by the AO on account ofexcess stock found at the time of survey. As regards the second ground relating to an addition ofRs.1,69,230/-, we have already recorded our finding thatlabour expenses of Rs.1,78,722/- debited to revisedtrading account related to third burning given in themonth of October, 2000 i.e. after the survey. The detailsof expenses which also included substantial amount ofcartage paid at Rs.30,600/- shows that these kachabricks were lying away from the brick kiln, which isusually the practice. Therefore, the very fact that thesewere not found at the time of survey or the survey teamdid not consider it worthwhile to find out the same wouldbe of no help to assessee when the evidence reliedupon by the assessee proves otherwise. The detailedreasons given in the earlier paragraphs show that wagespaid in October, 2000 related to fresh burning given tothe kiln after the survey. Thus, the only conclusionwhich we draw is that except the cost of wages, theentire cost of manufacturing of 5.10 lacs bricks includingthe cost of coal and the sales thereof have been keptoutside the books of account. The very fact that the AOhas not made any addition on account of profit earnedon sale of these bricks does not mean that the assesseehas not incurred any expenses on purchase of coal used for the third burning. The action of the AO for notmaking any addition on account of resultant profit onlyappears to be an act of omission. However, inconsonance with our finding recorded in respect ofexcess stock, we reject the submissions of the assesseein regard to addition of Rs. 1,69,230/- and uphold theorder of the CIT(A). This ground of appeal is alsodismissed.” 7.The above findings show that a possible view has been takenafter appreciating the material on record. Even if a different view ispossible, the impugned order cannot be held to be perverse.8.No substantial question of law arises. The appeal isdismissed. (ADARSH KUMAR GOEL) JUDGE August 12, 2009pooja (DAYA CHAUDHARY)JUDGE Note:-Whether this case is to be referred to the Reporter .......Yes/No