M/S S.K TRADERS vs. COMMISSIONER OF INCOME TAX

ITA/14/2005HC Punjab & HaryanaPHHC01069951200513 December 2010Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL7 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s S.K. Traders, engaged in the manufacture and sale of rice and by-products, is in appeal before the High Court against an order of the Income Tax Appellate Tribunal (ITAT) for assessment year 1995-96. During a search at M/s Partap Bhangu Solvex (P) Ltd., a diary was seized containing details of rice bran purchases from various persons, including the assessee. Confronted with these entries, the assessee admitted their correctness and surrendered Rs. 7.50 lacs as undisclosed income, subject to no penalty or prosecution. This surrender was based on under-billing in the rates of by-products and sales outside the books. The Commissioner of Income Tax (Appeals) deleted the addition, but the ITAT restored it, finding the assessee's disclosed income to be too low and the surrender to be voluntary. The High Court admitted the appeal on a substantial question of law.

What did the High Court hold?

The High Court held that the assessee's appeal was not maintainable. The Tribunal had clearly found that the income disclosed by the assessee was incorrect and that the invoices issued were not genuine, based on the assessee's own admission. The surrender was voluntary, and therefore, no further evidence was required; the surrender itself could form the basis of the addition. The court found this finding to be not erroneous. Regarding the deletion in another case, the High Court stated it was not required to go into its correctness and could not accept it as a precedent unless the impugned order was shown to be erroneous on merits. Furthermore, the court noted that the issue of whether a surrender itself could be the basis for an addition had not been considered in the other case. Therefore, the substantial question of law was answered against the assessee. The addition made by the Assessing Officer was upheld.

What were the issues?

1. Whether, under the facts and circumstances of the case, there being no evidence or material to prove under-billing of goods and assuming the sale having been made at a higher price, the conclusion drawn by the Tribunal is perverse and needs to be quashed? (Question of law and fact, relating to the validity of addition based on surrender and alleged under-billing). Assessee's contentions: - The surrendered income could not be added without considering the loss incurred, as held by the CIT(A). - The Assessing Officer found no defect in the books of account, so the book result should not be ignored. - Mere surrender, without evidence justifying the addition, cannot be the basis for addition. - In a similar case (ITA No. 663/Chandi/98, ITO Vs. G.R. Traders), the Tribunal upheld the deletion of addition by the CIT(A) where sales were vouched and the AO had no material to suggest under-billing. Revenue's contentions: - Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

Income-tax Appeal No.14

of 2005

-1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.14

of 2005

Date of decision: 13.12.2010 M/s S.K.Traders ...Appellant Versus Commissioner of Income-Tax

...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Pankaj Jain, Advocate for the appellant. Mr. Tejinder K. Joshi, Advocate for the respondent. **** ADARSH KUMAR GOEL, J (

Oral)

. This appeal has been preferred under Section 260-A of Income Tax Act, 1961 by the assessee against order dated 11.6.2004 of the Income Tax Appellate Tribunal, Chandigarh Bench, passed in ITA No.281/Chandi/98 in respect of assessment year 1995-96. The assessee derives income from manufacture and sale of rice and its by-product. During search at the premises of M/s Partap Bhangu Solvex (P) Ltd., village Pasiana, a diary containing the details of rice bran purchased by that company from various persons including the appellant was seized. In the said diary there were entries pertaining to purchases made from the appellant and on Income-tax Appeal No.14

of 2005

-2-

The order continues below.

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