COMMISSIONER OF INCOME TAX vs. GURUBACHHAN SINGH J.JUNEJA

ITR/109/1996HC GujaratGJHC24021789199612 February 2008Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MR. JUSTICE Z.K.SAIYED6 pages
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What were the facts?

During search proceedings under Section 132 of the Income-Tax Act, 1961, on the residential and business premises of the assessee, an individual engaged in the trading of tyres, loose sheets (Annexures C/4 to C/15) were seized. These sheets reflected sales made by M/s. Punjab Tyres and M/s. Paul Tyres (a concern of the assessee's son) between July 15, 1983, and June 1984. An examination revealed that sales amounting to Rs. 10,85,003/- for the period up to March 31, 1984, were not recorded in the books of either concern. The Income-tax Officer (ITO) added this amount as unaccounted cash sales. The Commissioner (Appeals) partly allowed the appeal, deleting the addition but sustaining a Gross Profit (GP) addition of Rs. 2,43,339/-. The Revenue appealed to the Tribunal, which, after a difference of opinion and reference to a third member, held that only the gross profit on the unaccounted sales was taxable.

What did the High Court hold?

The High Court held that the Appellate Tribunal was right in law and on facts in deleting the addition of Rs. 10,85,003/- made on account of unaccounted cash sales. The reasoning was that the Revenue had failed to bring any material on record to prove that the assessee had made any investment to facilitate these alleged unaccounted sales. The Tribunal's finding that only the gross profit on the said sales could be brought to tax was based on the fact that all purchases were from reputed companies and were fully vouched. In the absence of evidence of unexplained investment by the assessee, the Tribunal's decision to tax only the gross profit was upheld. The question referred to the court was answered in the affirmative, in favour of the assessee and against the Revenue. The reference was disposed of accordingly.

What were the issues?

1. Whether, on the facts and in law, the Appellate Tribunal was right in deleting the addition of Rs. 10,85,003/- made on account of unaccounted cash sales (turning on Section 132 and related provisions concerning undisclosed income)? Assessee's Contentions (as inferred from the Tribunal's decision and the High Court's reasoning): - The assessee argued that the entire amount of Rs. 10,85,003/- should not be taxed as unaccounted sales. - The assessee contended that since all purchases were vouched and from reputed companies/dealers, the Revenue had not proved any unexplained investment to support the alleged unaccounted sales. Revenue's Contentions (as inferred from the Tribunal's decision and the High Court's reasoning): - The Revenue argued that the unaccounted sales of Rs. 10,85,003/- should be added to the assessee's total income. - The Revenue's initial stance, as reflected by the ITO, was that for each sale entry in the loose sheets, there must be a corresponding entry in the regular books of accounts, and the absence of such entries indicated unaccounted sales.

Which sections of the Income-tax Act were involved?

Section 256(1),Section 132

AI-generated summary — verify with the full judgment below

ITR/109/1996 1/6 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 109 of 1996 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MR.JUSTICE Z.K.SAIYED ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX - Applicant(s) Versus GURUBACHHAN SINGH J.JUNEJA - Respondent(s) ========================================================= Appearance : MR BB NAIK for Applicant(s) : 1, 2MR MANISH J SHAH for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MR.JUSTICE Z.K.SAIYED Date : 12/02/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

ITR/109/1996 2/6 JUDGMENT

1.

Income-

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