Winflex v. Asst. Commissioner Of Income Tax....opponent(S

O/TAXAP/902/2005 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 902 of 2005 With TAX APPEAL NO. 903 of 2005 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ WINFLEX....Appellant(s)Versus ASST. COMMISSIONER OF INCOME TAX....Opponent(s) ================================================================ Appearance: MR SAURABH N SOPARKAR, SENIOR COUNSEL with MR JAIMIN DAVE AND MRS SWATI SOPARKAR, ADVOCATE for the Appellant(s) No. 1MR.VARUN K.PATEL, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI andHONOURABLE MR.JUSTICE K.J.THAKER Date : 05/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.By way of filing these appeals, the appellant challenges the order of the Income Tax Appellate Tribunal being ITA No.1981 and 1982/Ahd/1997 for Assessment Year 1992/93 dated 30.11.2004. 2.The brief facts of the case are that the first grievance of the assessee relates to addition of Rs.4,90,777/- in the assessment year 1992-93 and Rs.6,01,595/- in the assessment year 1993-94 with reference to the statement of disclosure made by a partner of the assessee firm. That the assessee was engaged in the business of manufacturing and printing of plastic bags. Action u/s 132 was taken on 21.7.92 and during the course of search, one of the partners made a disclosure of Rs.35 lakhs in respect of the group companies owned by them. The assessing officer observed that in the statement recorded under section 132(4) of Shri Harshadbhai Patel had admitted that 5% to 10% of the turnover of the various business concerns was shown out of the books of account. After the necessary procedure, the assessing officer made the O/TAXAP/902/2005 JUDGMENT impugned additions to the income of the assessee by estimating higher turnover as compared to the turnover disclosed by the assessee. The CIT (Appeals) confirmed the action of the assessing officer. Against the said order, the assessee approached the Income Tax Appellate Tribunal, Ahmedabad Bench by filing ITA Nos.1981 and 1982/Ahd/97. The said appeals were partly allowed by order dated 30.11.2004 which is challenged by way of filing these appeals. 3.When the matter was admitted, the following question was framed in Tax Appeal No.902 of 2005: “Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in retaining lump-sum addition of Rs.1,00,000/- and in retaining part disallowanceoftransportation expenditure?” The following question was framed in Tax Appeal No.903 of 2005: “Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in O/TAXAP/902/2005 JUDGMENT 3.When the matter was admitted, the following question was framed in Tax Appeal No.902 of 2005: “Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in retaining lump-sum addition of Rs.1,00,000/- and in retaining part disallowanceoftransportation expenditure?” The following question was framed in Tax Appeal No.903 of 2005: “Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in O/TAXAP/902/2005 JUDGMENT law in retaining lump-sum addition of Rs.1,25,000/- and in retaining part disallowanceoftransportation expenditure?” Mr.Soparkar for the appellant and learned advocate Mr.Patel for the opponent. 5.Learned senior advocate Mr.Soparkar for the appellant fairly conceded to the later part of the question i.e. “in retaining part disallowance of transportation expenditure?” that looking to the smallness of the amount, he is not pressing this issue in these appeals. The appeals are disposed of qua the said question. The said claim is kept open for the subsequent assessment year. that the Tribunal, while considering the contentions of the assessee in paragraph 6 of the order and given finding in the judgment itself in paragraph 7 that there is no scope for making addition by estimating profit at a higher rate. However, in the next breath, the Tribunal has added Rs.1 lakh in the assessment year 1992-93 and Rs.1.25 lakhs in the assessment year 1993-94. He relied on the following decisions in support O/TAXAP/902/2005 JUDGMENT of his submissions: (1) Commissioner of Income-Tax V/s Vikram Plastics, reported in (1999)239 ITR 161. (2) Commissioner of Income-tax-IV V/s Symphony Comfort System Ltd., reported in (2013)35 taxmann.com 533(Gujarat). 7.Learned advocate Mr.Patel for the respondent submitted that in view of the statement made by the two partners before the authority, order passed by the Tribunal is just and proper. He has taken us through paragraphs 6 and 7 of the order and contended that the order passed by the authorities including the Commissioner of Income Tax (Appeals), no interference is called for. 8.From the record, it is very clear that the Tribunal has given the following findings in paragraphs 6 and 7 as under: “We have considered rival contentions, carefully gone through the orders of the lower authorities and also the statement of Shri H.Patel recorded u/s 132(4) of the IT Act. In the statement as recorded, there is some conflict with O/TAXAP/902/2005 JUDGMENT regard to the disclosure of Rs.35 lakhs with reference to all the concerns of 8.From the record, it is very clear that the Tribunal has given the following findings in paragraphs 6 and 7 as under: “We have considered rival contentions, carefully gone through the orders of the lower authorities and also the statement of Shri H.Patel recorded u/s 132(4) of the IT Act. In the statement as recorded, there is some conflict with O/TAXAP/902/2005 JUDGMENT regard to the disclosure of Rs.35 lakhs with reference to all the concerns of the assessee. At one place, the assessee has stated unaccounted sales of 5 to 10% in all the four concerns whereas in the same statement the total amount of Rs.35 lakhs disclosed was explained to be in respect of three concerns, M/s Winpolene Plastics, Winprints and M/s Winflen. The disclosed amount of Rs.35 lakhs was already added in the assessment of group concerns. As per our considered view, wheneveranystatementrecording disclosure is made, the same is to be considered in totality. It is not open to take only one part of the statement whichclearlystatedregarding disclosure of Rs.35 lakhs and to ignore the other part of the disclosure. There is no dispute about the fact that there was disclosure of Rs.35 lakhs which was assessed to tax in the hands of the group concerns and, therefore, as per the material placed on record, keeping in view the statement of Shri H.Patel u/s 132(4), we do not find any merit in the action of the lower authorities for making addition in the hands of the assessee-firm which is over and above O/TAXAP/902/2005 JUDGMENT the total disclosure of Rs.35 lakhs which has already been assessed in the hands of the group concerns. 7. The other ground of the assessing officer for making addition was that the assessee was not maintaining records showing quantitative details of raw materials and semi-finished goods. In this regard, we find that no specific discrepancy or defect was found in the books of account except absence of quantitative details as alleged by the assessing officer. The gross profit rate declaredduringtheyearunder consideration was also higher than the gross profit rate declared in the immediately preceding assessment year and, therefore, there is no scope for making addition by estimating profit at a higher rate. Keeping in view the totality of the facts and circumstances vis-a-vis the statement recorded u/s 132(4) as well as the absence of quantitative details pointed out by the lower authorities, we direct the assessing officer to restrict the addition to Rs.1 lakh in the assessment year 1992-93 and Rs.1,25 lakhs in the O/TAXAP/902/2005 JUDGMENT assessmentyear1993-94.Ordered accordingly.” 9.Considering the findings of the Tribunal, in our view, the lumpsum addition without basis and contrary to the findings given is uncalled for. 10. In view of the peculiar facts and circumstances of the case, the appeals are allowed to the aforesaid extent. The question is answered in favour of the assessee and against the revenue. (K.S.JHAVERI, J.) Srilatha (K.J.THAKER, J)