CIT-II, CHANDIGARH vs. DHANI RAM PROP. M/S CHAUHAN BROTHERD
What did the High Court hold?
The High Court held that the findings of the CIT(A) and the ITAT were findings of fact. The assessment of income from documents found during a survey is fact-dependent and not subject to rigid principles. The court found that the CIT(A)'s conclusion that income would only be the commission earned from sales, rather than treating the investment as income, was a finding on facts. Therefore, no substantial question of law arose for consideration. The appeal was dismissed. The operative direction was the dismissal of the appeal, upholding the ITAT's order.
What were the facts?
The Revenue appealed the Income Tax Appellate Tribunal's (ITAT) order for Assessment Year 1999-2000. The Assessing Officer (AO) proposed an addition of Rs. 1,22,604/- on account of unaccounted sales to Shri Jagdish Chawla, discovered during a survey on 6.11.1998. The AO observed that the assessee had made unexplained investments in stock and treated 60% of the peak investment as income. The Commissioner of Income-tax (Appeals) partly set aside the addition, holding that profit should be assessed as commission at 5% of total sales, rather than treating investment as income. The ITAT upheld this view, noting that seized documents indicated sales on a commission basis.
What were the issues?
1. Whether the ITAT was legally right in upholding the CIT(A)'s decision based on CIT vs. President Industries (2002) 258 ITR 654, when the facts of the present case and the relied-upon case were altogether different (question of law)? 2. Whether the ITAT was right in ignoring the fact that sales of apples were out of stock lying with the assessee and that the assessee had invested in purchasing that stock (question of mixed law and fact)? Assessee's contentions: Not recorded. Revenue's contentions: The investment itself should have been treated as income, not just the commission. The Gujarat High Court judgment in CIT vs. President Industries was distinguishable. The CIT(A) erred in holding that investment could not be treated as income and that income would only be the commission earned from sales.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA.No.844 of 2008 (O&M) Date of decision: 2.7.2009 Commissioner of Income-tax-II, Chandigarh. ......Appellant Vs. Dhani Ram Porp M/s Chauhan Brothered, SCF 20, Sabzi Mandi, Sector 26, Chandigarh. ...Respondent CORAM:- HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MRS.JUSTICE DAYA CHAUDHARY PRESENT: Ms. Urvashi Dhugga, Advocate, Standing Counsel for the Revenue. **** ADARSH KUMAR GOEL, J. (Oral)
This appeal has been preferred by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) against the order of the Income Tax Appellate Tribunal, Chandigarh, Bench-B in ITA No. 1232/ Chandi/2004 dated 23.12.2005 for Assessment Year 1999-2000, proposing to raise following substantial questions of law: 1.” Whether in this case the Hon'ble lTAT was legally right in upholding the decision of the learned CIT (Appeals) based on the Hon'ble Gujrat High Court ITA NO. 844 OF 2008 -2- and case relied upon were altogether different?” 2. “Whether the Hon'ble ITAT was right in ignoring the fact that sales of apples made by the assessee (though on commission basis) were out of stock lying with him and the fact that assessee had made investment in purchase of that stock?”
The Assessing Officer asked the assessee to explain why addition be not made, on account of unaccounted sales to Shri Jagdish Chawla Prop. M/s Sai Baba Fruit Co., to the returned income revealed from the documents seized during the survey conducted on 6.11.1998 for the assessment year 1999-2000. The explanation furnished by the assessee was not accepted by the Assisting Officer and addition of Rs.1,22,604/-. It was observed that the assessee had made investment but the same has not been explained and accounts were not produced. 60% of the peak investment was treated as income. 3 On appeal, the Commissioner of Income-tax partly set aside the addition. It was also held that instead of taking 60 peak investment as income, the amount of the profits assessed on the basis of commission at the rate of 5% of the total sale should be added. The Tribunal upheld the said view. The conclusion of the Tribunal is as under: “ Thus, it is evident from the claim of the AO himself that the documents seized in the course of survey reveled that assessee had sold apples on commission basis to M/s Sai Baba Fruit Co. It is,
ITA NO. 844 OF 2008 -3- therefore, not reasonable for the revenue to treat the supply of apples on outright sale against the evidence found in the course of survey. Since the documents seized in the course of survey revealed that assessee had supplied apples to M/s Sai Baba Fruit Co. on commission basis, it is reasonable to assess the commission income in respect of the undisclosed turnover of Rs.6,23,550/-. This is in addition to the income disclosed by the assessee of Rs.64,200/-. The only issue that survives for our consideration is whether the CIT (A) was justified to assess the commission @ 5% only. In the case of Shri Sanjay Chhabra, Prop.M/s Sanjay Chhabra Traders (Supra), the ITAT, Chandigarh Bench has accepted the commission of 5% on fruit supply as reasonable.”
ITA NO. 844 OF 2008 -4- Assessment the income from the documents which were found during survey cannot be subject matter of any rigid principle. Assessment has to be made on facts of each case. The findings of the CIT (A) and the Tribunal are, thus, findings on fact.
No substantial question of law arises.
The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE (DAYA CHAUDHARY) July 02, 2009
JUDGE raghav Note: Whether this case is to be referred to the Reporter ........Yes/No ITA NO. 844 OF 2008 -5-
ITA NO. 844 OF 2008 -6-
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