Surinder Kumar v. Commissioner Of Income Tax, Patiala

ITA No. 389 of 2009 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 389 of 2009 Date of Decision: 6.4.2011 Surinder Kumar Versus Commissioner of Income Tax, Patiala ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. D.K. Goyal, Advocate for the appellant. Mr. Tajendar K. Joshi, Standing counsel for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of ITA Nos. 389 and 390 of 2009as according to the learned counsel for the parties, identical questionsare involved therein. For brevity, the facts are being extracted from ITANo. 389 of 2009. 2.ITA No. 389 of 2009 was admitted by this Court vide orderdated February 17, 2010 for determination of the following substantialquestions of law:- “1.Whether on the facts and in the circumstancesof the case, the Tribunal acted illegally andperversely in sustaining the addition made bythe Assessing Officer on the basis of mathematical and multiplication formula? 2.Whether on the facts and in the circumstancesof the case, the Tribunal was legally correct insustaining the addition on account ofunaccounted production contrary to the standof the assessee which stand having beenaccepted by the department/revenue in theassessment years subsequent to the blockperiod?” 3.Briefly stated, the facts necessary for adjudication aspleaded in the appeal are that a search was conducted at the premisesof the assessee on 24.3.2000 in pursuance of which under Section158BC of the Income Tax Act, 1961 (in short “the Act”) was issued on24.4.2001 directing the assessee to file returns for the period from01.04.1989 to 24.03.2000 relevant to the block period from 1990-91 to2000-01. The assessee filed his return of income on 24.5.2001declaring nil income. The assessment was completed at an income ofRs.2,61,149/- vide order dated 28.3.2002. Feeling aggrieved, theassessee filed an appeal before the Commissioner of Income Tax(Appeals) [hereinafter referred to as “the CIT(A)]” who vide order dated15.11.2002 while partly allowing the appeal deleted the additions.Against the order of the CIT(A), the revenue approached the IncomeTax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh (in short“the Tribunal”) who vide order dated 25.4.2008 partly allowed theappeal. Hence, the present appeal by the assessee. 4.We have heard learned counsel for the parties. 5.The point that arises for consideration in these appeals iswhether the Tribunal was right in sustaining the addition which hadbeen made by the Assessing Officer by adopting mathematical andmultiplication formula inasmuch as the material which was seized fromthe assessee relating to 112 days whereas the addition on account ofunaccounted production has been made for the entire period during theblock period. 6.In the case of the assessee, the Tribunal had appliedmutatis mutandis the decision in the case of Mohan Lal (IT/SS No.8/CHANDI/2003) being identical on facts. It would be advantageous torefer to the finding of the Tribunal recorded in para 38 of its order(Annexure P-3) which reads thus:- “The manner in which the addition has beendetermined by the Assessing Officer has alreadybeen noted by us elsewhere in this order and we donot repeat the same for the sake of brevity. The firstissue made out by the assessee is that the period forwhich there is no seized material showingunrecorded sales, no addition should be made forsuch period. As noted earlier, the search hasresulted in unearthing of certain loose papers whichcontained a record of sales. A portion of the salesadmittedly was recorded in regular books of account.The Assessing Officer has estimated 50% of thesales recorded in the seized material as beingunrecorded sales. Pertinently this aspect has not “The manner in which the addition has beendetermined by the Assessing Officer has alreadybeen noted by us elsewhere in this order and we donot repeat the same for the sake of brevity. The firstissue made out by the assessee is that the period forwhich there is no seized material showingunrecorded sales, no addition should be made forsuch period. As noted earlier, the search hasresulted in unearthing of certain loose papers whichcontained a record of sales. A portion of the salesadmittedly was recorded in regular books of account.The Assessing Officer has estimated 50% of thesales recorded in the seized material as beingunrecorded sales. Pertinently this aspect has not been disputed by the assessee. The seized materialwas a set of loose papers running into 162 pages.However, the papers did not contain certain record oftransactions of complete 365 days of the year. Forinstance, for the financial year 1996-97 the loosepapers contained the detail of sales of 112 days.The Assessing Officer observed that the record wasof different dates and, therefore, for the interveningperiod the assessee would have made the sales on asimilar basis. Hence his action of extrapolating salesfor the entire financial year on the basis of the salesfound recorded in the seized material. TheAssessing Officer has thus computed the sales for allthe financial years comprised in the assessmentyears relevant to the block period in question. This isdisputed by the assessee on the ground that theunrecorded sales be computed only with respect tothe available seized material and not on ahypothetical basis. The logic advanced is that if it isnot so done it would mean that income on purelyestimated basis is assessed under Chapter XIV-B ofthe Act, which is impermissible as per law. In ourview this logic is not applicable to the facts of thepresent case. In para 13 of our order we havereferred to two elements which are to be satisfiedbefore an income can be assessed as 'undisclosed income' within Chapter XIV-B of the Act. Firstlyincome should be such which is undisclosed andsecondly that such non-disclosure should spring fromthe search carried out u/s 132(1) of the Act. In thepresent case the factum of the assessee makingsales outside the books of account standsestablished on the basis of the material found duringthe search. Therefore, the income so emerging isliable to be assessed under Chapter XIV-B of the Act.The only issue is that for certain period the materialfound does not record the sales made outside booksof account. This would not defeat the additionbecause it is not open to logic that intermittently theassessee was not making sales outsides the booksof account. Therefore the resort to the estimation ofunrecorded sale for the intervening period is justified.It is noteworthy that the Assessing Officer has notmade addition on this ground for the assessmentyears comprised in the block period for which there isno seized material at all. Therefore, the objection ofthe assessee on this count is misplaced.” 7.In such cases, some amount of estimate has to be made,however, it should not be unreasonable or arbitrary. The estimate hasto have some rational connection with the addition being made. Thefinding noticed above shows that the Tribunal had adopted a rationalbasis for determining the unaccounted production for the block period. ITA No. 389 of 2009 The view taken by the Tribunal is a plausible and reasonable view in which no perversity could be pointed out.8.Accordingly, the substantial questions of law are answeredin favour of the revenue and against the assessee. The appeals standdismissed. (AJAY KUMAR MITTAL) JUDGE April 6, 2011gbs (ADARSH KUMAR GOEL) JUDGE ITA No. 389 of 2009 -7- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 390 of 2009 Date of Decision: 6.4.2011 Mohan Lal Versus Commissioner of Income Tax, Patiala ....Appellant. ...Respondent. ITA No. 389 of 2009 The view taken by the Tribunal is a plausible and reasonable view in which no perversity could be pointed out.8.Accordingly, the substantial questions of law are answeredin favour of the revenue and against the assessee. The appeals standdismissed. (AJAY KUMAR MITTAL) JUDGE April 6, 2011gbs (ADARSH KUMAR GOEL) JUDGE ITA No. 389 of 2009 -7- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 390 of 2009 Date of Decision: 6.4.2011 Mohan Lal Versus Commissioner of Income Tax, Patiala ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. D.K. Goyal, Advocate for the appellant. Mr. Tajendar K. Joshi, Standing counsel for the respondent. AJAY KUMAR MITTAL, J. The appeal is dismissed. For reasons, see the detailed order of even date recorded in ITA No. 389 of 2009 (Surinder Kumar v. Commissioner of Income Tax, Patiala). (AJAY KUMAR MITTAL) JUDGE April 6, 2011gbs (ADARSH KUMAR GOEL) JUDGE