The Commissioner Of Income Tax-1 v. M/S. Ismail Bafati

ASN IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1296 OF 2011 The Commissioner of Income Tax-1...Appellant. v. M/s. Ismail Bafati...Respondent. Mr. Vimal Gupta, Sr. Advocate with Ms. Padma Divakar for the Appellant. Mr. Keshav B. Bhujle for the Respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATE : 21ST FEBRUARY, 2013 PC: In this appeal by the revenue for A.Y. 2001-02 following questions of law have been raised for our consideration. a)Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the addition of Rs.32,19,158/- made by the Assessing Officer as unexplained expenditure incurred by the Assessee Firm on purchase of Tendu Leaves during the period September, 2000 to December, 2000? b)Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in ignoring the fact that the Assessment order was passed by making the addition of Rs.32,19,158/- with the consent of the Assessee Firm and therefore, no further steps were undertaken by the Assessing Officer to further justify the addition made by the Assessing officer such as investigation of source of purchase, verification of unaccounted purchase bills, rejection of books of accounts u/s. 145 of the Income Tax Act etc.? 2)The respondent assessee is engaged in the manufacture of bidis. During the course of assessment, the Assessing Officer on verification of the books of accounts and by applying formula of raw material consumed to the manufacture of final product concluded that during the period September to December, 2000 the respondent assessee had manufactured bidis without the requisite stock of Tendu leaves which is the main raw material. On the basis of the above shortage of Tendu leaves the Assessing Officer concluded that the Tendu leaves to the extent of Rs.32.19 lacs were purchased without disclosure and the same was unexplained expenditure to be added amount to respondent-assessee's income. 3)In appeal, the CIT(A) deleted the additions by holding that formula adopted by the Assessing Officer for shortage of Tendu leaves during the period September to December 2000 was unscientific and unreliable. It was further held that there was no positive evidence of any unaccounted purchases on the part of the respondent-assessee. On appeal by the revenue, the Tribunal by the impugned order held that the formula adopted by the Assessing Officer to conclude that there was unexplained shortage of Tendu leaves (main material) was unscientific. This was on the ground that the figures of Tendu leaves given in the assessee's books were quantified in weight i.e. Kilograms whereas the details given in the excise records about manufacture of final product was in quantitative details. Thus, the formula adopted would not result in correctly revealing whether or not the necessary Tendu leaves were available in stock or not. In any case the Tribunal held that conclusion drawn by the Assessing officer was on the basis of the suspicion and surmises without there being any other evidence in support of the same. The Tribunal also recorded the fact that the production, transportation and consumption of Tendu leaves is under the control of the State Government and therefore, it is not proper to conclude only on the basis of suspicion and surmises that there was unaccounted purchases of tendu leaves made by the respondent. 4)We find that the decision of the CIT(A) and the Tribunal is reasonable taking into account the fact that the Assessing officer added an amount of Rs.32.19 lacs to the respondent assessee's income as unexplained expenditure for purchase of Tendu leaves on mere suspicion. In these circumstances we do not see any reason to entertain question (a) as formulated by the revenue. ASN 5)So far as question (b) is concerned, the very fact that same. The Tribunal also recorded the fact that the production, transportation and consumption of Tendu leaves is under the control of the State Government and therefore, it is not proper to conclude only on the basis of suspicion and surmises that there was unaccounted purchases of tendu leaves made by the respondent. 4)We find that the decision of the CIT(A) and the Tribunal is reasonable taking into account the fact that the Assessing officer added an amount of Rs.32.19 lacs to the respondent assessee's income as unexplained expenditure for purchase of Tendu leaves on mere suspicion. In these circumstances we do not see any reason to entertain question (a) as formulated by the revenue. ASN 5)So far as question (b) is concerned, the very fact that the assessee has filed appeal against the addition of Rs.32.19 lacs clearly shows that the assessee had not consented to the said additions during the course of assessment proceedings. Moreover, the CIT(A) in his order has recorded that the statement Moreover, the CIT(A) in his order has recorded that the statement of the respondent assessee regarding the addition of Rs.32.19 lacs was in view of the pressure of the Assessing Officer. The revenue has not challenged the above finding of CIT(A) as being perverse before the Tribunal nor has the revenue been able to lacs was in view of the pressure of the Assessing Officer. The revenue has not challenged the above finding of CIT(A) as being perverse before the Tribunal nor has the revenue been able to show before us that the finding of the CIT(A) was perverse. In these circumstances, we see no reason to entertain question (b).these circumstances, we see no reason to entertain question (b). 5)Accordingly, the appeal is dismissed with no order as to costs.to costs. (M.S.SANKLECHA, J.) (J.P. DEVADHAR, J.)