M/S CHAUDHARY ENTERPRISES vs. COMMISSIONER OF IT JALANDHAR & ANR

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.268 OF 2012 DATE OF DECISION : 10

th MARCH, 2014

M/s. Chaudhary Enterprises, Bhadi Road, Balachur, Jalandhar …. Appellant Versus Commissioner of Income Tax, Jalandhar & another …. Respondents CORAM : HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MR. JUSTICE SURINDER GUPTA * * * * Present : Mr. Akshay Bhan, Senior Advocate with Mr. Alok Mittal, Advocate for the petitioner. Mr. Vivek Sethi, Advocate for the respondents. * * * * HEMANT GUPTA, J. (ORAL) The appellant has filed present appeal under Section 260 A of the Income Tax Act, 1961 (for short ‘the Act’) against the order dated 29.05.2012 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for short the Tribunal) in ITA No.189(ASR) of 2010 (Assessment year 2001-02). The assessee has claimed the following substantial questions of law in the present appeal: (i)Whether in facts and circumstances of the present case, the action of the Ld. Authorities below in wrongly construing the Kumar Vimal 2014.03.19 12:51 integrity of this document Chandigarh

ITA No.268 OF 2012 offer to surrender as an admission and the inability on the part of the appellant/assessee to produce evidence and therefore confirming the addition of Rs.11,67, 655/- being the sales outside the books of account and 5% of profit on the said purchases is legally unsustainable the eyes of law? (ii)Whether in facts and circumstances of the case, the assessee acting under the bonafide belief after making the offer to surrender was prevented by sufficient cause from producing the evidence and therefore the action of the ld. authorities below in denying the assessee from leading evidence under Rule 46A of the Income Tax Rules, 1962 is legally unsustainable in the eyes of law? (iii)Whether in facts and circumstances of the case, the action of the ld. Courts below in not appreciating the additional evidence in order to prove the free accessories given as incentive to the purchasers at the time of the sale of the tractors is legally unsustainable in the eyes of law? (iv)Whether in fact and circumstances of the case, the action of the authorities below, the impugned orders are legally sustainable in the eyes of law? Assessee is engaged in the sale of tractors and parts thereof. The assessee filed its return of income of `1,62,910/- on 31.10.2011. During the process of scrutiny of the the return of the assessee, it was found that no sale of spare parts of the tractors was shown to be made though the stock reflected such spares amounting to `11,12,052/-. The assessee submitted in writing that such tractor parts were supplied free of cost in line with the custom in the trade to supply spares to promote sale of tractors. It was also mentioned that delivery of such spares (farmer kits) were not mentioned on the sales bills to avoid legal complications. The Assessing Officer considered net profit at the rate of 5% and made Kumar Vimal 2014.03.19 12:51 integrity of this document Chandigarh

ITA No.268 OF 2012 addition accordingly on the amount of `11,12,052/- on the failure of the assessee to produce any documents regarding giving of such spare parts to the purchasers. The appeal against the said order was dismissed by the Commissioner of Income Tax (Appeals). However, in further appeal, the Tribunal remitted back to the Commissioner of Income Tax (Appeals) to allow a reasonable opportunity to both the parties to take into consideration the purchase and sales of the spares. Thereafter, the Commissioner of Income Tax (Appeals) considered the additional evidence sought to be produced by the appellant and returned the following finding: “3.1 I do not accept the appellant’s application for admission of fresh evidence at this stage of appellate proceedings. Firstly, this issue was very much before the assessee during the assessment proceedings. The AO had asked the assessee to lead evidence that the farmer kits and spare parts had been given free of cost to the purchasers. Before the AO, the counsel of the assessee stated that it was not possible to give details of persons to whom such incentives were given. The assessee could not lead any evidence to prove the explanation furnished. It was only because the assessee was not able to lead evidence during the assessment proceedings that the assessee offered to make an addition @ 5% in respect of these items. Under the provision of Rule 46A(1) of I.T. Rules, 1962, unless the assessee is able to show reasonable and sufficient cause as to why he did not submit the documents sought to be admitted as fresh evidence before the AO, only then can the fresh evidence be allowed to be admitted. The appellant had tried to contend that he was persuaded to make offer of surrender. There is nothing in the assessment record which suggests Kumar Vimal 2014.03.19 12:51 integrity of this document Chandigarh

ITA No.268 OF 2012 that the assessee tried to lead evidence of delivery of the spare parts etc. free of cost which was not accepted by the AO. On the other hand, there is evidence to show that the assessee was asked to give evidence that these items were given free of cost but the assessee was not able to lead any evidence in respect of the same. The order sheet nothing dated 28.01.2003 in the assessment record shows that the AO asked the assessee to produce the stock register of tractors and explain the sale of farmer kits and spare parts. The offer of 5% income in respect of these items was made by the ld. counsel for the assessee only on 04.11.2003 i.e. after almost 9 months. In this period, the assessee was not able to produce any evidence that these spare parts/kits had been given free of cost to the purchasers. I am, therefore, satisfied that the conditions prescribed in Rule 46A of I.T. Rules for allowing admission of additional evidence are not satisfied in respect of the documents sought to be admitted at this stage.” In view of the said finding, the Commissioner of Income Tax (Appeals) affirmed the order of the Assessing Officer applying net profit of 5%. Such order has been affirmed in further appeal by the Tribunal. Learned counsel for the appellant has argued that the appellant has lead sufficient evidence to prove that the tractor’s parts were given to the purchasers of the tractors, as a farmers kit without any charges and therefore, the same could not be added to the income of the appellant. It is also argued that the appellant has produced the challans, bills and also the affidavit of some of the purchasers to support that the gifts were given to the farmers at the time of purchase of the tractors in view the trade Kumar Vimal 2014.03.19 12:51 integrity of this document Chandigarh

ITA No.268 OF 2012 practices, therefore, the same could not have been added as income of the appellant. We find that the entire evidence has been taken into consideration by the Commissioner of Income Tax (Appeals). The CIT (Appeals) has not accepted the plea raised by the appellant. Since finding returned is based on the facts which were before the Commissioner of Income Tax (Appeals) we do not find that such finding of fact raises any substantial question of law for consideration of this Court. Consequently the present appeal is dismissed. (HEMANT GUPTA) (HEMANT GUPTA) (HEMANT GUPTA) (HEMANT GUPTA) JUDGE JUDGE JUDGE JUDGE 10th March, 2014 ‘raj’/Vimal (SURINDER GUPTA) (SURINDER GUPTA) (SURINDER GUPTA) (SURINDER GUPTA) JUDGE JUDGE JUDGE JUDGE Kumar Vimal 2014.03.19 12:51 integrity of this document Chandigarh