GROVER FABRICS INDIA P LTD. vs. C I T

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ITA/860/2008HC Punjab & HaryanaPHHC01080895200804 November 2009Author: MR. JUSTICE GURDEV SINGH,MR. JUSTICE ADARSH KUMAR GOEL3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises. It disagreed with the assessee's submission that the deletion of trading additions automatically necessitates the deletion of additions for unexplained credit entries. The Court reasoned that unexplained credit entries may or may not have a nexus with the trading results. The CIT(A) had deleted the trading additions after giving the benefit of telescoping, making it a question of fact whether additions for unexplained credit entries were justified despite the trading additions. The judgment relied upon by the assessee was considered to be on a different fact situation and not universally applicable. Therefore, the appeal was dismissed.

What were the facts?

The assessee, Grover Fabrics (India) Pvt. Ltd., engaged in trading handloom products, appealed an order of the Income Tax Appellate Tribunal (ITAT) for assessment year 2004-05. The Assessing Officer (AO) made an addition to the declared income based on trading results and a further addition for credit entries from bogus entities. The Commissioner of Income Tax (Appeals) deleted the trading addition, telescoping it against the addition for unexplained credit entries. The ITAT, finding contradictions in the assessee's documents, remanded the matter to the AO. The assessee then appealed to the High Court, challenging the ITAT's order.

What were the issues?

1. Whether, on the true and correct interpretation of Section 254 read with Rule 18 of the Appellate Tribunal Rules, 1963, the Tribunal's order is sustainable where the merits of sustaining the Trading addition remained unexamined? (Assessee's initial question). 2. Whether, on the true and correct interpretation of Section 145, once the trading addition has been made, then a separate addition under Section 68 towards such credit is sustainable? (Assessee's revised question). Assessee's Contention: The assessee argued that once the trading addition was deleted, the addition on account of unexplained credit entries should have also been automatically deleted. Reliance was placed on CIT v. Singhal Industrial Corporation (2008) 303 ITR 225 (Allahabad High Court). Revenue's Contention: The judgment records no specific contention for the revenue, but the High Court's reasoning implicitly addresses the revenue's position by upholding the possibility of separate additions.

Which sections of the Income-tax Act were involved?

Section 260A,Section 254,Section 145,Section 68

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.860 of 2008 (O&M) Date of decision: 04.11.2009 Grover Fabrics (India) Pvt. Ltd. -----Appellant Vs. Commissioner of Income Tax. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE GURDEV SINGH Present:- Mr. Pankaj Jain, Advocate for the assessee. -----

ORDER:

1.

The assessee has preferred this appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) against the order of Income Tax Appellate Tribunal, Chandigarh Bench in I.T.A. No.738/CHD/2007 for the assessment year 2004-05, dated 18.1.2008, proposing to raise following substantial question of law:- “I) Whether on the true and correct interpretation of provisions of Section 254 r.w. Rule 18 of the Appellate Tribunal Rules, 1963, the tribunal order is sustainable where the merits of sustaining the Trading addition has remained unexamined?”

2.

During the course of hearing, learned counsel for the assessee proposes to revise the said question as under:- “Whether on the true and correct interpretation of Section 145 once the trading addition has been made, then whether a separate addition u/s 68 towards such credit is sustainable?”

3.

The assessee derived income from trading in handloom products. The Assessing Officer did not accept the trading results reflected in the books of account and accordingly, made addition to the declared income. Apart from making the said addition, the Assessing Officer made further addition in respect of credit entries from bogus entities. The CIT(A) deleted the trading addition after giving the benefit of telescoping against addition in respect of unexplained credit entries. On further appeal by both sides, the Tribunal remanded the matter to the Assessing Officer by observing that there was contradiction in the documents submitted by the assessee.

4.

We have heard learned counsel for the appellant.

5.

Only contention which has been put forward is that once addition in respect of trading results was deleted, addition on account of unexplained credit entries should have also been automatically deleted. Reliance for this submission has been placed on judgment of Allahabad High Court in CIT v. Singhal Industrial Corporation (2008) 303 ITR 225. 6. We are unable to accept the submission. Unexplained credit entries may or may not have nexus with the trading results, as assessed. The CIT(A) deleted additions in respect of trading results after giving benefit of telescoping. It will, thus, be a question of fact in each case whether addition on account unexplained credit entries was justified, inspite of addition made to the declared trading results. Judgment relied upon by learned counsel for the assessee is on a different fact situation and cannot be read as laying down any norm of universal application that once addition was made in the trading results, no addition could ever be made on account of unexplained credit entries.

7.

Thus, we are of the view that no substantial question of law arises.

8.

The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE November 04, 2009 ( GURDEV SINGH ) ashwani JUDGE 3

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