CIT-III, LUDHIANA vs. M/S JAY KAY WEARS (P) LTD.

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ITA/874/2010HC Punjab & HaryanaPHHC01093853201029 September 2011Author: MR. JUSTICE HEMANT GUPTA,MR JUSTICE JASWANT SINGH2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the question raised was not a substantial question of law, but rather a question of fact. The Court noted that the discrepancy in stock was found to be explained by the assessee, who provided a satisfactory reason that the excess stock belonged to its sister concern, M/s Jay Kay Expo & Knit Fab. The Commissioner (Appeals) had accepted this explanation, and the Tribunal had upheld this finding. Therefore, the High Court concluded that no substantial question of law arose from the ITAT's decision to delete the addition. The appeal was dismissed on this ground, without delving into the merits of the stock valuation.

What were the facts?

The Revenue, Commissioner of Income Tax-II, Ludhiana, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 28.10.2009 passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh. The ITAT had dismissed the Revenue's appeal against the order of the Commissioner of Income Tax (Appeals). The dispute arose from a survey conducted under Section 133A of the Act on 8.11.2002, where a stock discrepancy of Rs. 17,96,349/- was found. The assessee, M/s Jay Kay Wears (P) Ltd, Ludhiana, explained that the excess stock included goods belonging to its sister concern, M/s Jay Kay Expo & Knit Fab, which were also present at the assessee's premises and counted during the survey.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Hon’ble ITAT was right in deleting the addition of Rs. 17,96,349/- made by the Assessing Officer on account of excess stock found during the survey operation under Section 133A of the Income Tax Act, 1961. Assessee's Contention: The assessee argued that the excess stock found during the survey was explained by the presence of stock belonging to its sister concern, M/s Jay Kay Expo & Knit Fab, at the assessee's premises. The Commissioner (Appeals) accepted this explanation, finding no discrepancy when the stocks of both companies were considered together. Revenue's Contention: The Revenue contended that the addition of Rs. 17,96,349/- was justified based on the excess stock found during the survey operation.

Which sections of the Income-tax Act were involved?

Section 260A,Section 133A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 29.9.2011 Commissioner of Income Tax-II, Ludhiana …..

Appellant vs. M/s Jay Kay Wears (P) Ltd), Ludhiana …..Respondent CORAM: - HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MR. JUSTICE JASWANT SINGH Present: - Mr. Rajesh Katoch, Advocate for the appellant. M/s H.O. Arora, S.K.Mukhi and Rajiv Sharma, Advocates for respondent HEMANT GUPTA, J Revenue in the present appeal, under Section 260A of the Income Tax Act, 1961 (for short the ‘Act’) against the order dated 28.10.2009 passed by Income Tax Appellate Tribunal, Chandigarh (for short the ‘Tribunal’), has sought the following substantial question of law: - “Whether on the facts and in the circumstances of the case, the Hon’ble ITAT is right in deleting the addition of Rs. 17,96,349/- made by the Assessing Officer on account of excess stock found during the survey operation u/s 133A of I.T. Act, 1961.” A perusal of the order passed by Tribunal shows that a survey under Section 133A of the Act was carried out by the Income Tax Officer on 8.11.2002. On the physical verification, position of the stock was found to be Rs. 66,11,051/- whereas as per the books of account, the stock value was Rs. 35,70,775/-. The explanation of the assessee was that some stock of the sister concern M/s Jay Kay Expo & Knit Fab were also lying at the premises of the assessee which were counted as the stock of the assessee during the survey.

Learned Commissioner of Income Tax (Appeals) accepted the explanation and addition of Rs. 17,96,349/- was deleted as there was no discrepancy in the stocks of goods of the companies when considered together. It is the said finding which has been accepted by the Tribunal while dismissing the appeal of revenue.

We do not find that the question raised is a question of law. It is a question of fact that whether there was discrepancy in the stocks or on account of the stocks of sister concern i.e. M/s Jay Kay Knit Fab. The discrepancy has been found to be explained by the assessee. Therefore, it cannot be said that any substantial question of law arises in the present appeal.

Dismissed. (HEMANT GUPTA) JUDGE (JASWANT SINGH) JUDGE 28.9.2011 preeti 2

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