RAMESH CHANDER vs. IT APPELLATE TRIBUNAL & ORS

Income-tax Appeal No. 102 of 2006 1 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH. --- Income-tax Appeal No. 102 of 2006 Date of Decision: 8.11.2010 Ramesh Chander Gupta --- Appellant Versus Income Tax Appellate Tribunal, Amritsar and others --- Respondents CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL. --- PRESENT:Mr. Akshay Bhan, Advocate for the appellant. Ms. Savita Saxsena, Govt. Standing Counsel for the respondents. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act, 1961 (for short “the Act’”) has been filed by the assessee against the order dated 23.9.2005, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, (SMC) (in short “the Tribunal”) in ITA No. 61/ASR/1999 relating to the assessment year 1995-96. The point for determination in this appeal is, whether the excess stock of Ist and 2nd class bricks could be adjusted against shortage in stock of 3rd class tiles?

Income-tax Appeal No. 102 of 2006 2 Briefly stated the facts of the case as narrated in the appeal are that the assessee, who is a brick-kiln owner, filed return for the assessment year 1995-96 declaring his income at Rs. 33,980/- The Income Tax Officer, respondent No.3, on 5.8.1994 conducted a survey under Section 133-A of the Act and detected the difference as indicated herein below: As per physical verification As per Books Difference Bricks Ist Class 405300 376550 +28750 Bricks 2nd Class 372600 220280 +45280 Tiles 3rd Class 19500 82900 -63400 Though the assessee furnished written reply and disputed the correctness of the notice issued to him wherein he specifically mentioned that the difference of bricks noticed during survey was the result of counting of the bricks in the stacks and, in any case, the difference was merely 2.5% which should be treated as negligible and no addition on the basis thereof be made. But the assessing officer vide order dated 24.11.1997, Annexure P-1, besides initiating proceedings under Section 271(1)(c) separately, completed assessment at the total income of Rs. 1,40,770/-. Appeal preferred by the assessee against the order, Annexure P-1, was dismissed by the Commissioner of Income Tax (Appeals), Bathinda [hereinafter referred to as “CIT(A)”] vide order dated 1.7.1998, Annexure P-2. The appellant-assessee moved an application under Section 154 of the Act for rectification of order, Annexure P-2, but the same was dismissed vide order dated 2.12.1998, Annexure P-3.

Income-tax Appeal No. 102 of 2006 3 The assessee preferred appeal before the Tribunal challenging the order of CIT(A), Annexure P-3. The Tribunal partly allowed the appeal vide order dated 27.2.2004, Annexure P-4. The appellant thereafter filed Income-tax Appeal No. 300 of 2004 in this Court challenging the order, Annexure P-4. The said appeal was, however, dismissed as withdrawn with liberty to the appellant to move an application before the Tribunal for rectification of the order, Annexure P-4. The appellant then filed application under Section 254(2) of the Act wherein a plea was taken that there was no quality of 3rd class Tiles in the business of brick- manufacturing, and the tiles shown as of 3rd class quality were actually bricks of either 1st or 2nd Class quality and, thus, there should have been a set off of 63400, 3rd class tiles with excess stock of 28750 of 1st and 45280 of 2nd class tiles. The plea raised by the assessee in the application did not find favour with the Tribunal and was consequently dismissed vide order dated 23.9.2005, Annexure P-7, and it is this order of the Tribunal which is under appeal before this Court. We have heard learned counsel for the parties and perused the record. The assessing officer had made addition of Rs. 87,863/- on account of shortage of bricks and excess tiles found during survey carried out on 5.8.1994. The CIT(A) had affirmed the aforesaid addition. However, on further appeal to the Tribunal, the addition on account of excess stock of Ist and 2nd class bricks was sustained but the relief was allowed to the assessee in respect of shortage in 3rd

Income-tax Appeal No. 102 of 2006 4 class tiles as profit rate was to be applied to the same. The relevant observations of the Tribunal read thus: “6. After hearing both the sides and considering the material on record, I find that on survey, the assessee is found to have excess stock of first class bricks at 28,750, bricks of 2nd class at 45,280 and the short stock of third class tiles to the extent of 63,400 and by applying rate of Rs. 725/-, Rs. 500/- and Rs. 700/- per 100 bricks, respectively, and addition was worked out to the extent of Rs. 87,863/- on all these items. Since stock with respect to first class and second class bricks have been found in excess and inventory prepared at the time of survey had duly been signed by the assessee, therefore, the addition in this regard is called for and the same has rightly been made by the A.O. at Rs. 43,483/- by adopting the sale rate of Rs. 725/- and Rs. 500/- per one thousand bricks with respect to first and second class bricks respectively. Since the average rate comes to Rs. 612.50, therefore, the plea of the assessee to adopt Rs. 699/- is untenable and is rejected. As such, the CIT(A)’s order in rejecting the rectification application with regard to these two items is justified and calls for no interference. 7. So far as the short stock of 63,400 of third class tiles is concerned, the plea of the assessee is correct that G.P. rate can only be applied in the case of excess stock and not the entire amount could be added, therefore, the learned CIT(A) should have accepted the contention of

Income-tax Appeal No. 102 of 2006 5 the assessee to restrict such addition by applying the G.P. rate as declared / determined in this case. Hence, the order to this extent could validly be rectified. As such while considering the entirety of the facts and the circumstances, I allow the appeal of the assessee in this respect and adopt profit rate with respect to short stock of third class tiles found at the time of survey by restricting the addition to the extent of G.P. of 16.14% and restrict the addition to Rs. 7,163/- instead of Rs. 44,380/- made by the A.O. and confirmed by the CIT(A).” The miscellaneous application filed under Section 254(2) of the Act was dismissed by the Tribunal as there was no mistake apparent on the record which required rectification. The findings recorded by the Tribunal are pure finding of fact. However, an effort was made by the learned counsel for the appellant to persuade this Court to re-appreciate the evidence on record and render a different finding on the basis thereof. The findings recorded by the Tribunal are based on possible view taken on appreciation of evidence which calls for no interference by this Court in exercise of jurisdiction under Section 260-A of the Act. In view of the above, the appeal is accordingly dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) November 8, 2010 JUDGE *rkmalik*