The Commissioner Of Income Tax, Rishi Nagar, Ludhiana v. M/S Jay Kay Feeds (P) Ltd. Sarabha Nagar, Ludhiana

ITC No. 61 of 1999 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH Date of decision: 13.03.2013ITC No. 61 of 1999 (O&M) The Commissioner of Income Tax, Rishi Nagar, Ludhiana versus ...Appellant M/s Jay Kay Feeds (P) Ltd. Sarabha Nagar, Ludhiana ...Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTAHON'BLE MS. JUSTICE RITU BAHRI Present:- Mr. Rajesh Katoch, Advocatefor the appellant. Mr. Akshay Bhan, Advocate and Mr. Alok Mittal, Advocatefor the respondent. HEMANT GUPTA, J. (ORAL) The present petition under Section 256(2) of the Income Tax Act,1961 (for short 'the Act') is by the Revenue arising out of an order of theIncome Tax Appellate Tribunal (for short 'the Tribunal') dated 18.05.1998pertaining to the assessment year 1987-88, claiming the following substantialquestions of law:- “1. Whether, on the facts and in the circumstances of thecase, the Income-tax Appellate Tribunal was right in law inholding deletion of addition of `98,813/- by theCommissioner of Income Tax (Appeals) by observing thatthe sales should not be estimated at the figure of ` 2.30crores and total sales should be restricted to the figuredeclared by the assessee at `1,67,19,652/- by enhancedby `9.10 lakhs? (2) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in law indisposing of the additional ground regarding cancellationby the CIT (A) of interest charged under Section 215/217only by observing that the department has challenged onlythe admission of additional ground by the CIT(A) and alsonot impliedly challenged the decision on merits?” The assessee filed its return reflecting the gross profit rate at therate of 4.2% from the sales of `1,67,19,652/-. However, the AssessingOfficer estimated sales at `2,30,00,000/- and by applying gross profit rate@ 5%, the profit would come to `11,50,000/-. Since the assessee hasshown profit of ` 7,01,187/- and had also surrendered an amount of`4,00,000/- under Section 132(4) of the Act, therefore, an amount of`48,813/- was found to be concealed income of the assessee during theyear under consideration. In addition to the said amount, another`50,000/- was added to the income on the basis of probable investmentmade by the assessee during the year under consideration. However, the Commissioner of Income Tax (Appeals), Ludhianavide its order dated 14.08.1991 set aside the said addition by observing tothe following effect:- “At best, addition can be made on the profits earned on theunrecorded sales amounting to `7,49,608/-. By applying aG.P rate of 5%, the addition works out to `37,480/-. Sincethe sales to the tune of `7,49,608/- were affected outsidethe books of account, the learned ACIT was justified inworking out un-explained investment on sales affectedoutside the books of account, but working out the same at`50,000/- on estimate is not warranted by the provisions oflaw. Such investment has to be worked out on proportionate basis as by the Hon'ble I.T.A.T, AmritsarBench, Amritsar, in I.T.A No. 503/1974-75 in the case of M/sHarjit Singh Tarlochan Singh, Railway Road, Khanna vs. ITOKhanna, relating to the assessment year 1971-72. Onproportionate basis such investment will work out to`4490/- = 100000/16719652 X 750000=4490. Thus at bestan addition of ` 41,970/- (37480+ 4490) could have beenmade, against which the appellant had surrendered a sum of`4,00,000/- during the course of search which surrender hasbeen accepted by the department. Accordingly, I hold thatthere is no justification for the impugned addition of`48,813+50,000=98,813/-. The same is accordingly deleted.The first two grounds accordingly succeed and the appellantgets a relief of `98,813/- (48,813+50,000/-).” proportionate basis as by the Hon'ble I.T.A.T, AmritsarBench, Amritsar, in I.T.A No. 503/1974-75 in the case of M/sHarjit Singh Tarlochan Singh, Railway Road, Khanna vs. ITOKhanna, relating to the assessment year 1971-72. Onproportionate basis such investment will work out to`4490/- = 100000/16719652 X 750000=4490. Thus at bestan addition of ` 41,970/- (37480+ 4490) could have beenmade, against which the appellant had surrendered a sum of`4,00,000/- during the course of search which surrender hasbeen accepted by the department. Accordingly, I hold thatthere is no justification for the impugned addition of`48,813+50,000=98,813/-. The same is accordingly deleted.The first two grounds accordingly succeed and the appellantgets a relief of `98,813/- (48,813+50,000/-).” The learned Commissioner of Income Tax (Appeals), Ludhiana hasalso recorded the finding that sum of ` 3,71,000/- was lying with thedepartment since 14.10.1996. A specific request was made by the assesseeon 17.03.1997 to adjust the seized amount towards the tax due at the timeof filing of the return. Therefore, the assessee is not liable to pay interest interms of Sections 215 and 217 of the Act. The Tribunal in further appealupheld the order of the Commissioner of Income Tax (Appeals), Ludhiana. The Revenue sought to raise the substantial questions of law asmentioned above, which were declined by the Tribunal vide order dated14.10.1998. The Revenue has thus filed the present petition under Section256(2) of the Act. In respect of first substantial question of law, the learnedCommissioner of Income Tax (Appeals) has found that sales to the tune of` 7,49,608/- were affected outside the books of account and therefore the gross profit rate has to be applied in respect of the said amount alone.Consequently, the addition of ` 98,813/- (48,813+50,000/-) was set aside.The said finding is pure finding of fact. No question of law on the basis ofsuch finding arises for consideration, as only income from concealed salescould be taken into consideration. In respect of second questions of law, the department has moreamount in its control than the amount of advance tax payable by theassessee. Therefore, it cannot be said that assessee is liable to pay intereston the amount of advance tax. We do not find any substantial question lawarises for consideration in the present appeal. The appeal is dismissed accordingly. (HEMANT GUPTA) JUDGE ( RITU BAHRI ) JUDGE