M/S MAHESH ISPAT YDYOG vs. THE COMMISSIONER INCOME TAX

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ITA/36/2004HC ChhattisgarhCGHC01007783200431 July 2011Author: HON'BLE SHRI JUSTICE SATISH K. AGNIHOTRI,HON'BLE SHRI JUSTICE R.S. SHARMA6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the ITAT was justified in treating the sum of Rs. 1,97,000/- as deemed income under Section 69 of the Income Tax Act, 1961. The court reasoned that Section 69 is a deeming provision applicable to investments made by the assessee which are not recorded in the books of account. In this case, the excess stock was not disclosed in the books, and the assessee failed to offer a satisfactory explanation for the source of investment. The AO, CIT(A), and ITAT had concurrently found the explanation unsatisfactory. Therefore, the excess stock was rightly treated as unexplained investment and deemed income for the relevant financial year. The court concluded that the assessment order was not bad on the ground that the head of income was not specified, as Section 69 itself deems such unexplained investments as income. The substantial question of law was answered accordingly.

What were the facts?

The assessee, M/s Mahesh Ispat Udyog, a registered firm dealing in iron and steel scraps, is in appeal against an order of the Income Tax Appellate Tribunal (ITAT). During a survey under Section 133A of the Income Tax Act, 1961, on January 15, 1997, physical verification of stock revealed an excess of Rs. 8,50,261/- compared to the book value. The assessee claimed certain items had only scrap value, reducing the excess to Rs. 1,97,000/-. The Assessing Officer (AO) found the assessee's explanation unsatisfactory and treated this difference as deemed income under Section 69 of the Act. The Commissioner of Income Tax (Appeals) and the ITAT affirmed the AO's order.

What were the issues?

1. Whether, in the facts and circumstances of the case, the ITAT was justified in treating the sum of Rs. 1,97,000/- as deemed income under Section 69 of the Income Tax Act, 1961, without specifying the head of income under which it is assessable? Assessee's Contention: The assessee argued that the ITAT was not justified in treating the sum as deemed income without specifying the head of income. The judgment does not record any specific arguments from the assessee regarding the excess stock itself, only the reduction claimed. Revenue's Contention: The revenue contended that Section 69 of the Act is a deeming provision that applies to unexplained investments, and the excess stock, not disclosed in the books and for which no satisfactory explanation was offered, was rightly treated as deemed income. The revenue relied on the provisions of Section 69 of the Act.

Which sections of the Income-tax Act were involved?

Section 69,Section 133A,Section 260A

AI-generated summary — verify with the full judgment below

INCME O TAX APPEAL NO.36 OF 2004 M h g . ASSSS .PPANT/ AELL _ /s Maesh Ispat Udyd EEE VRU ESS RSPO C x, ENDENT The' ommissioner of Income Ta ipu Jdg‘’i i ume‘n for con eration H é a on’ble Shri Justie Radhe Shyém Shaffm ” R.S. Sharma Judge \ Post for pronouncement of thejudgment on the likday , 1 of August 201 * Rar x V QT?

‘ - \ HIGH COURT OF CHHATTISGARH AT BILASPUR A INCOME TAX APPEAL No.36 OF 2004 APPELLANT/ : M/s Mahesh Ispat Udyog ASSESSEE VERSUS RéSPONDE‘NT :" ’ The Commussuoner of Income Tax, ‘ w "‘ ' ‘ Ralpur ll APPEAL UNDER SECTION 260A OF THE INCOME TAX ACT.1961 E- n Coram : Hon’ble Shri Satish K. Aqnihotri & V r Hon’ble Shri Radhe Shyam Sharma, JJ. I Present: Shn Moolchand Jam Advocate for the appellant t Shn Rajeev Shnvastava, Advocate With Shri Sameer Shrivastava, Advocate for the respondent. -——— “n * . t" ’ ' 3" (Delivered on .../....day of August, 201 1) I ' ' 1 ~ w ‘ .‘ E Per SATISH K. AGNIHOTRI, J. 'Heard learned counsel for the parties.

1.

The instant appeal filed under Section 260A of the income Tax Act, A 1961 (for short “the Act, 1961”) is against the order dated 29-12—2003, (Annexure — A/2) passed by the income Tax Appellate Tribunal (for short “ITAT“) in (Assessment year 199i 98) (M/s Mahesh Ispat Udyog v The Income Tax Officer N

1.

Ward III, Bhilai). J

2.

The appeal was admitted on the following substantial question of ‘law : “Whether in the facts and circumstances of the case, ITAT was justified in treating the sum of i Rs.1,97,000/- as deemed income under a Section 69 of the Income Tax Act, 1961 i without specifying the head of income * . under which it is assessable ?”

The assessee is a registered firm engaged in the‘business of? 'dealing in scraps of iron and steel The ITAT and the authorities below have concurrently recorded the finding that there was a ,. \ survey in the busmess premises of the assessee under Section 133A of the Act, 1961, on 15-1-1997. PhySIcal verification of the stock was carried out at. the time of survey. 'The‘ scrap was L ‘categorized as joint scraps, angles, plates, wheel rolling scraps. The valuation of the closing stock as per the bobks of acCount as r on the date of Survey was Rs.17,26,788/— and the value as per the ' physical verification .was » Rs.27,77,049/—. Thus, stoCkr' worth - , Rs.8,50,261/— was found in excess. i_ .3

4.

It was stated by‘the partner of the assessee firm that out o‘f physical inventory taken by the survey officer one ’fire pump and air compressor valued at Rs60001— and Rs 30 OOOI- respectively have only scrap value and therefore their value have to be . excluded. g 5. notice calling upon the assesseetasto why the difference in the total , income to ”the tune of Rs.1,9,7,000/— be not added, asincome of the assessee. Theexplanation was submitted by the assessee Which was not found satisfactory by the AO and the same was rejected Thus the AO found that the difference of Rs 1 97 OOOI— as excess and the same was treated as income of the assessee as per On other issues With regard to amount of Rs45OOI- spent on’, publication of message regarding the death of paitner s father The AO foundathat the expenses were of, the personal natureand the _ ‘claim was disallowed and on other issues with regard to deduction of various expenses, which are ’not the subject matter of this i deeming prOViSions of Section 69 of the Act 1961 " 3. r6. The Assessing Officer (for short “the AO”) issued a show cause

aeal. The COmmisSioner of lncome‘Tax Apeals-|, Raiur and pp (p) p ' th T tl i t ti d d of e IAT concurreny agreed wth he observaons an holing h AO te t he question asto whether a sum o s 1 97 OOOI- ma be deeme T f R y d ncome under ection 6 of the c, 961 wrout specrfyrng e I S 9 At 1 th th ead of income arises n this aea. h i ppl St f the A,96 reds as ecion 69 o ctz1v1 a under: 69 Were In the fmancral year Immediately precedg th assesmnt in e se e ha t r aco n > o an nre rc he “ te a ff , i pio ‘ ice, isa ntt ncome ial ye On eusal of the provsons o Sect of the Act, 1961 it is pr ii f ion 69 cea hat ay invesment mde by the aessee, whichdid no find ' lr t n t a ss t plce In e books of acunt may be demed t be Income of the a th co e o , asese of such fInanCIal year The ecess stock was not sse x discsed I the books of ant and suh tat was reated as I lo n ccou as c h t nexpined investmnt and the AO fter having.aforded an ula e a f opnity Of hearng tothe asesse fmed an Iopinion that portu i . se or lelanation offered by the ese s not satifactory. This xp assse wa s r findg of the AO was afirmed by the mmissioer of Income Tx. r in f Con a (Apps) as well as the. ITAT. Thu there is no dispute tht eal-l s, a exce tock has not een disclosedn the books of acounts and ss s b ‘i c e asse d o ofe act th ssee has faile t fr satisfory explanation about the I ,o aure o ee me l t nt f source of Invstmnt The sa was righty treaed as' ee to be ncome of h ssesee of uch finanal year. Thus, dmed i te as s ci hee o ifirmity or ieuly in the er passed by the TAT tr is n n rrgarit ord I. ‘\I: ~_* ~.. \s “ h year th assessee s made- Investments Which are no recoded In - the books of cunt Ifay, mamtamed by h/m fr any source of Income d the assessee offers no explanationr about'the atu and soue of t investments or h explantion oered by him is not n the onin of the Assessing Offr satfctory, the value of the ivesmens may be. deemed to be the i of the assessee of such financ ar. " I. "a \ 0. 1 in view o the above, a sum of Rs.1,97,000/— i demd ne S T t ection 69 of the Act‘1961 as deemed income. he- assessmen lorder cannot-be held as bad a'nd the same cannot be set aside o th ht h t e n e ground ta the ead of he income was not specified. Th i i d t ncome was rghtiy, held as unexp’Iained investments an as such i ‘was rigtlyhel as deemed to _be income under the provisions o ection 69 of the Act, 1961. Thus, the substantial question of la . ' i ‘r -' .i :v ' is answered accordingly. n the rsult,

the appeal fails and is accordinl dismissed. No ord to cst. er as os \ Satish K. Agnihom- Judge ,. — R.S. Sharma Judge ‘k .‘ f s ee udr hd f S w I e gy \

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