JAGRAON RICE MILLS vs. COMMISSIONER OF INCOME TAX LUDHIANA

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ITA/315/2014HC Punjab & HaryanaPHHC01109459201424 March 2015Author: MR. JUSTICE M.M. AGGARWAL,MR. JUSTICE A.B. CHAUDHARI3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises from the ITAT's order. The Court found that the ITAT had dealt with the facts in considerable detail and, based on the available evidence, concluded that the assessment order making the addition was correct. The Court stated that it was not possible to hold the Tribunal's view as perverse or unsustainable, deeming it a possible view. The Tribunal considered factors such as differences in closing stock, purchase and sales accounts, balances due from parties, and significant creditor balances. The assessee admitted to manipulating figures and maintaining two sets of audited accounts, signed by the same auditors and partners on the same day. The Court noted that the assessee failed to discharge the onus of establishing which of the two statements of account was correct. Therefore, the appeal, being a question of appreciation of evidence, was dismissed.

What were the facts?

The assessee, The Jagraon Rice Mills, through its partner Sh. Sanjeev Kumar, filed an appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated 24.11.2011. The ITAT had allowed an appeal against an order of the CIT (Appeals). The CIT (Appeals) had previously set aside an addition of ₹26 lacs made by the Assessing Officer (AO). This addition was on account of unexplained investment in unaccounted purchases and unexplained cash credits introduced to facilitate these purchases. The High Court noted discrepancies between statements filed before tax authorities and those filed with the assessee's bank. The assessee admitted to deliberately filing incorrect particulars with the bank to obtain larger financial facilities.

What were the issues?

1. Whether a substantial question of law arises from the ITAT's order allowing the appeal against the CIT(Appeals) order, which had set aside the AO's addition of ₹26 lacs. The Assessee contended that the High Court should consider the appeal as a substantial question of law arises. The assessee admitted to filing incorrect particulars with the bank to avail larger financial facilities, but argued that mere discrepancies in figures should not be a ground for addition. The assessee also pointed out that no additions were made under Section 68 of the Income Tax Act, 1961, for credits of ₹10 lacs, and that the CIT (Appeals) found no material to show purchases outside the books of accounts. The Revenue, implicitly through the ITAT's order which was upheld, argued that the discrepancies, including differences in closing stock valuation, purchase and sales accounts, balances due from parties, and substantial creditor balances, along with the admission of manipulating figures and maintaining two sets of audited accounts signed by the same auditors and partners, justified the addition. The Revenue contended that the assessee failed to discharge the onus of proving which statement was correct.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA-315-2014 (O&M) Date of decision:- 24.03.2015

The Jagraon Rice Mills, Jagraon (Punjab) through its partner Sh. Sanjeev Kumar. ...Appellant Versus

Commissioner of Income Tax, Ludhiana ...Respondent

CORAM: HON'BLE MR. JUSTICE S.J. VAZIFDAR, ACTING CHIEF JUSTICE

HON’BLE MR. JUSTICE G.S. SANDHAWALIA

Present: Mr. Pankaj Jain, Senior Advocate, with Mr. Divya Suri, Advocate, Mr. Sachin Bhardwaj, Advocate, and Mr. Deepanshu Jain, Advocate, for the appellant. * * * * S.J. VAZIFDAR, A.C.J. (ORAL) CM-21267-CII-2014 (for exemption)

The application is allowed subject to all just exceptions. CM-21268-CII-2014 (for condonation of delay in re-filing)

This is an application for condoning 23 days’ delay in re-filing the appeal.

For the reasons mentioned in the application, the delay of 23 days in re-filing the appeal is condoned. ITA-315-2014 This is an appeal against the order of the Income Tax Appellate Tribunal dated 24.11.2011 allowing the appeal against the order of the CIT (Appeals). The CIT (Appeals) set aside the addition made by the A.O. of ` 26 lacs on account of unexplained investment in unaccounted purchases and unexplained cash credits introduced to make investment in unaccounted purchases. AMODH SHARMA 2015.03.27 13:41 I attest to the accuracy and authenticity of this document chandigarh

ITA-315-2014 (O&M) 2ٰ

2.

The appeal raises no question of law leave alone a substantial question of law. Admittedly, there were serious discrepancies between the statement filed before the tax authorities and the statement filed before the appellant’s bank. The appellant had filed a return of income of ` 1,10,780/-. Upon investigation, the authorities came across the statements filed by the appellant with its bank. The statements showed purchases to the extent of ` 26 lacs, sales to the extent of ` 11 lacs and a closing stock of ` 15 lacs. Audited statements of account were also filed with the bank. The same were certified by the Chartered Accountant and by the appellant’s partner. These statements were at variance from those furnished to the authorities. The appellant admits the same. The appellant’s case is that they deliberately filed a statement before the bank with incorrect particulars in order to avail larger financial facilities. We will proceed on the basis that mere discrepancies in the figures is not a ground for making the addition. The Tribunal, however, has dealt with the facts in considerable detail and on the basis of the evidence available come to the conclusion that the assessment order adding the amount was correct. It is not possible to hold that the view taken by the Tribunal is perverse or unsustainable. It is to say the least a possible view. Some of the factors considered by the Tribunal are these. There were differences not only in the valuation of the closing stock, but in the purchase account and the sales account as also the balances due from the parties. Apart from what is stated earlier, the balances of two creditors were on the higher side to the tune of ` 10 lacs in the balance sheet. The appellant admitted that the figures furnished to the bank were manipulated. The appellant admittedly obtained two sets of accounts which were at a variance. Both the statements of account were audited and signed by the same auditors on the same day. The two sets of accounts were signed by the same partners. AMODH SHARMA 2015.03.27 13:41 I attest to the accuracy and authenticity of this document chandigarh

ITA-315-2014 (O&M) 3ٰ No additions were made under Section 68 of the Income Tax Act, 1961 on account of the credits of ` 10 lacs. The CIT (Appeals) held that there was no material to show that the appellant made purchases of ` 26 lacs outside the books of accounts. In view of these facts, the Tribunal took a different view. The Tribunal also noted that there were also other variances in the two statements of account. It was for the appellant to establish which of the statements were correct. The appellant failed to discharge the onus.

3.

In these circumstances, we find that no question of law arises in the present case. It is a question of appreciation of evidence.

4.

The appeal is, therefore, dismissed.

(S.J. VAZIFDAR) ACTING CHIEF JUSTICE

(G.S. SANDHAWALIA)

JUDGE 24.03.2015 Amodh

AMODH SHARMA 2015.03.27 13:41 I attest to the accuracy and authenticity of this document chandigarh

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