M/S VICTORY MILLS vs. COMMISSIONER OF INCOME TAX
What did the High Court hold?
The High Court held that the Tribunal was justified in restoring the addition. The Court found that the sale price of rice bran recorded in the assessee's books of account was not genuine, and the actual sale price was found to be higher. The seized diary indicated sales at Rs.330 per quintal. The Court noted that the issue involved appreciation of evidence, and since the assessee's books of account were not reliable, the assessment had to be made on estimation. The Court found no perversity in the Tribunal's findings, which were based on the seized diary and a prior ITAT decision in a similar case (ITO V Sachdeva Traders). The Court answered the substantial question of law against the assessee.
What were the facts?
The assessee, M/s Victory Mills, is in appeal before the High Court against an order of the Income Tax Appellate Tribunal (ITAT) for assessment year 1995-96. The dispute pertains to an addition of Rs.1,49,557/- made by the Assessing Officer (AO) and later restored by the ITAT. The AO had made additions holding that the assessee had under-billed transactions, implying actual sale prices were higher than recorded. This was based on a diary seized during a search at M/s Partap Bhangu Solvex (P) Ltd., which showed unaccounted purchases from the assessee. The assessee had surrendered Rs. 4 Lacs of unaccounted income. The Commissioner of Income Tax (Appeals) had deleted the addition, but the ITAT reversed this deletion.
What were the issues?
1. Whether, under the facts and circumstances of the case, the Tribunal was justified in reversing the findings of the Commissioner of Income Tax (Appeals) who had deleted the addition of Rs.1,49,557/-, when such addition was based on no evidence or material to prove any excess price charged by the appellant for recorded sales, making the Tribunal's findings perverse? (Section 260A of the Income Tax Act, 1961). Assessee's Contention: The assessee argued that it could not be presumed that the sale consideration recorded in the seized diary was correct. Revenue's Contention: The revenue contended that the assessee had understated sale consideration, as indicated by the seized diary, and that the ITAT had correctly applied a rate of Rs.330 per quintal for rice bran, referencing its own prior decision in ITO V Sachdeva Traders.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income-tax Appeal No.
2 60 of 2004
-1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.260
of 2004
Date of decision: 13.12.2010 M/s Victory Mills ...Appellant Versus Commissioner of Income-Tax, Patiala
...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 260A of Income Tax Act, 1961 (hereinafter referred to as 'the Act”) proposing following substantial question of law arising out of order dated 17.2.2004 of the Income Tax Appellate Tribunal, Chandigarh Bench (hereinafter referred to as “the Tribunal”) passed in ITA No.155/Chandi/99 in respect of assessment year 1995-96:- “Whether under the facts and circumstances of the case, the Tribunal was justified in reversing the findings of the Commissioner of Income Tax (Appeals) who had deleted the addition of Rs.1,49,557/- made by Assessing Authority which was based on no evidence or material to Income-tax Appeal No.
2 60 of 2004
-2- **** prove any excess price as alleged was charged by the appellant for recorded sales and hence the findings of Tribunal are perverse?” As a result of search on the business premises of M/s Partap Bhangu Solvex (P) Ltd., village Pasiana, a diary showing unaccounted purchases from various concerns, including the assessee was seized. On being confronted with the said material, the assessee surrendered unaccounted income of Rs. 4 Lacs. During the assessment the assessing officer made additions to the declared income holding that the assessee had under-billed transactions and its books of account were not reliable. The addition represented difference in declared sale price and the actual sale price. The CIT(A) set aside the additions but the Tribunal restored the same. Dispute surviving in this appeal relates to addition of Rs.1,49,557/-. In this regard, the Tribunal observed:- “As regards allowing a relief of Rs.1,49,557/- on account of understatement of sale proceeds of rice bran, we find that the assessee has been understanding the sale consideration. This fact is admitted by the ld. CIT(A) himself. In fact, the details recorded in the seized diary indicated that the assessee and its sister concern had sold rice bran @ Rs.330 per qtl. The issue is about estimation of understatement of sale proceeds on the sale of rice bran. Similar issue came before us in the Income-tax Appeal No.
2 60 of 2004
-3- **** case of ITO V Sachdeva Traders, Rajpura in ITA No.32/Chandi/99 for assessment year 1995-96 which was heard on 4.4.03 and decided on 6.4. 03. We find that the same ld. CIT(A) has upheld the addition by applying sale rate of Rs.330 per qtl. by referring to the cases of Sunil Traders, Rajpura, S.K.Traders and Shakti Traders. We have already upheld the order of ld. CIT(A) in applying a rate of Rs.330. Therefore, we do not find any justification of applying a lower rate than wheat was applied in the case of Sachdeva Traders. Respectfully following our order dated 6.4.03 in the case of ITO V. Sachdeva Traders for assessment year 1995-96, we are of the opinion that the ld. CIT(A) was not justified in allowing relief on this ground. We set aside the order of ld. CIT(A) and restore that of the AO. This ground of appeal is allowed”.
We have heard learned counsel for the parties. Learned counsel for the assessee submitted that it could not be presumed that sale consideration in seized diary was correct one. We are unable to accept the submission. A perusal of the above findings shows that the sale price of rice bran recorded in the books of account was not found to be genuine and actual sale price was found to be higher which rate was also adopted in another case mentioned therein. The issue is in the realm of appreciation of Income-tax Appeal No.
2 60 of 2004
-4- **** evidence. The entry and the books of account of the assessee being not reliable, assessment had to be made on estimation. In absence of perversity, the finding recorded by the Tribunal has to be upheld. In view of the aforesaid, question raised is answered against the assessee. Accordingly, the appeal is dismissed.
(Adarsh Kumar Goel)
Judge December 13,2010 (Ajay Kumar Mittal) Pka
Judge
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