M/S V.M. SPINNING MILLS vs. COMMISSIONER OF INCOME TAX (APPEALS)-II, LUDHIANA

IN THE PUNJAB & HARYANA HIGH COURT AT CHANDIGARH Date of Decision: 22.09.2011 M/s V.M.Spinning Mills …Appellant Versus Commissioner of Income Tax (Appeals)-II, Ludhiana …Respondent CORAM: HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MR. JUSTICE JASWANT SINGH Present: Mr. Pankaj Gupta, Advocate, for the appellant. HEMANT GUPTA, J.

The assessee is in appeal under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’) arising out of an order passed by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short ‘the Tribunal’) dated 29.04.2009. The assessee has claimed the following substantial questions of law: (i) Whether on the facts and in law, the learned ITAT is legally justified to hold that the addition on account of profits on extrapolated sales be restricted to the unaccounted 17 sales bills amounting to Rs.1,11,99,427/- by applying GP rate of 10.35%? (ii) Whether on the facts and in law, the learned ITAT is legally justified in directing the addition of Rs.20 lacs on account of unexplained investment made towards working capital?

The Assessing Officer in its order dated 28.12.2007 (Annexure A-1) has found that the assessee has concealed the particulars of its income of Rs.21,00,000/- on account of investment made from the undisclosed sources; Rs.31,94,481/- on account of extrapolated sale for 340 days on the basis of sale out of books of Rs.1,11,99,427/- in 127 days by applying gross profit rate of 10.35% and; Rs.71,07,100/- as addition on account of working capital required for attaining sale of Rs.1,11,99,427/-. Such order of the Assessing Officer was modified in appeal. The learned Commissioner of Income Tax confirmed the addition on account of extrapolated sale on the basis of sale outside the books of accounts for the period 11.10.2004 to 25.02.2005. The Commissioner also confirmed the addition of Rs.71,07,100/- for working capital requirements of the assessee, whereas the addition of Rs.21,00,000/- in the capital account of assessee was set aside. The learned Tribunal in further appeal by the Revenue as well as by the Assessee rejected the contention of the assessee in respect of addition of sales through 17 sale bills amounting to Rs.1,11,99,427/- and affirmed the finding that such sales were made outside the books of accounts. However, it held that there is no justification to infer that the assessee would have undertaken sales outside the books of account during the rest of the financial year also, therefore, the assessment of unrecorded sales were limited to Rs.1,11,99,427/- representing 17 unrecorded sale bills alone. The Tribunal partly granted relief, when it made addition of Rs.20 lacs on account of unexplained investment made towards the working capital as against Rs.71,07,100/- added by the Assessing Officer and upheld by the Commissioner of Income Tax.

The Revenue preferred an appeal bearing ITA No.670 of 2009 before this Court in respect of issues decided by the Income Tax Appellate Tribunal against the Revenue. Such appeal was dismissed by this Court by passing a detailed order on 20.07.2010. It is, thereafter, the assessee filed the present appeal on 25.09.2010 along with an application for condonation of delay. Though we do not find any sufficient ground for condonation of delay, but also on merit, in our opinion, no substantial question of law arises for consideration by this Court. In respect of question No.1, the learned Tribunal has recorded finding of fact that the assessee had made sale of goods vide unaccounted 17 sale bills amounting to Rs.1,11,99,427/-. The Commissioner of Income Tax has rightly rejected the contention raised before it that such bills were raised to avail the financial benefits from the Bank. The Commissioner found that no such stand was taken before the assessing officer. In fact, Mr. Vipan Kumar Mahajan did not explain this fact during the assessment proceedings rather left the office without signing the order-sheet entries. Such question of fact does not raise any substantial question of law for consideration of this Court. The Assessing Officer has made addition of Rs. 71,07,100/- on account of working capital required for attaining sale of Rs.1,11,99,427/- by taking into consideration the secured loan, unsecured loans and capital of the partners. The Commissioner of Income Tax upheld the said finding, as the said amount is of unaccounted sale. The learned Tribunal modified the findings of the Assessing Officer and that of the Commissioner of Income Tax and restricted the addition to the extent of unrecorded sales to the tune of Rs.1,11,99,427/-. In view of the said modification of the findings, it found that level of sales made outside the books of accounts have been reduced, therefore, it would be proper that an addition of Rs.20 lacs on account of unexplained investment made towards the working capital, would meet the ends of justice. The Tribunal has reduced the addition of Rs.71,07,100/- to Rs.20,00,000/- keeping in view the sales made outside the books of accounts. The extension of such benefit does not raise any substantial question of law as such benefit has been extended in the facts of the case. Still further, the Revenue’s appeal against such addition stands dismissed and the assessee has chosen to file the present appeal after the decision in appeal of revenue. It is not a bona-fide appeal as well. Consequently, we do not find any merit in the present appeal. The same is dismissed. (HEMANT GUPTA) JUDGE 22.09.2011 (JASWANT SINGH) Vimal JUDGE 4