COMMISSIONER OF INCOME TAX vs. M/S HANUMAN OIL AND GENERAL MILLS

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ITA/152/2008HC Punjab & HaryanaPHHC01080117200803 November 2008Bench: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE L.N. MITTAL4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the view taken by the CIT(A) and affirmed by the Tribunal was a possible view and was not shown to be perverse. Consequently, the Court found itself unable to hold that the questions raised constituted substantial questions of law. The Court noted the findings of the CIT(A) which were affirmed by the Tribunal. The CIT(A) had observed that purchases were entered in the books and there was no adverse inference from the AO regarding these purchases. The AO had not rejected the books of account. Therefore, the addition made by the AO of Rs. 2,11,150/- + Rs. 27,39,800/-, totaling Rs. 29,50,950/-, was not sustainable. The CIT(A) granted relief of Rs. 29,50,950/-, while confirming additions of Rs. 38,400/- and Rs. 76,000/- due to stock found by market authorities with no explanation. The Tribunal affirmed these observations. The operative direction was to dismiss the appeal.

What were the facts?

The Revenue, Commissioner of Income Tax, Hisar, has appealed under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, for Assessment Year 2003-04. The appeal challenges the ITAT's deletion of an addition of Rs. 29,50,950/- made by the Assessing Officer (AO) on account of excess stock of Narma/Kapas found during surveys. The surveys were conducted on the assessee's business premises, M/s Hanuman Oil & General Mills, Ellenabad, Distt. Sirsa, on multiple dates: December 18, 2002, January 7, 2003, and March 13, 2003. The AO believed this excess stock was not entered in the account books and represented investment made outside the books. The CIT(A) had accepted the assessee's explanation, and this view was affirmed by the Tribunal.

What were the issues?

The substantial questions of law before the High Court were: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs. 29,50,950/- made on account of the value of excess stock of Narma/Kapas found during surveys, which was not entered in the account books and represented investment outside the books (under Section 260A of the Income Tax Act, 1961)? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition by recording an erroneous finding contrary to the record, especially when the AO had specifically disbelieved the assessee's books of account? Contentions: Assessee: The assessee explained that there was no excess stock, and the Market Committee did not assess any fee on the alleged excess stock. A sum of Rs. 13,200/- was paid towards market fee by way of compromise. Discrepancies in record maintenance might have occurred due to partners residing in different cities. The CIT(A) and Tribunal accepted these explanations. Revenue: The revenue contended that the Tribunal was wrong in deleting the addition, arguing that the AO had disbelieved the books of account and that there was adverse material on record.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.152 of 2008 Decided on : 03.11.2008 Commissioner of Income Tax, Hisar. ....Appellant. VERSUS M/s Hanuman Oil & General Mills, Ellenabad, Distt. Sirsa. ....Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE L. N. MITTAL Present: Mr. Sanjeev Kaushik, Sr. Standing counsel for the appellant-revenue. ADARSH KUMAR GOEL J.(ORAL) 1. The revenue has preferred this appeal under Section 260A of Income Tax Act, 1961 against the order of learned Income Tax Appellate Tribunal, Chandigarh Bench “B” Chandigarh passed in ITA No.248/Chandi/2006 dated 18.05.2007 for the assessment year 2003-04 proposing to raise following substantial question of law:- i) “Whether on the facts and in the circumstances of the case, the Tribunal is right in law in deleting the addition of Rs.29,50,950/- made on account of value of excess stock of Narma/Kapas found by the Market Committee authorities

ITA No.152 of 2008 -2- during the course of surveys carried out on the assessee's business premises not only once but on different dates i.e. 18.12.2002, 07.01.2003, 13.03.2003 which was not found entered in the account books and investment for purchase thereof outside the account books? ii) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in deleting the addition referred to above by recording an erroneous finding contrary to record, that there was no adverse material especially when the A.O. disbelieved the books of account maintained by the assessee by recording specifically?” 2. In the course of assessment, the Assessing Officer held that at the time of inspection, excess stock of cotton was found by the representative of Market Committee, over and above the stock entered in the books of account. The said stock was liable to be added to the income. The assessee explained that there was no excess stock and even the Market Committee did not assess fee on the alleged excess stock, though by way of compromise, the assessee paid the sum of Rs.13,200/- towards market fee. The partners of the firm were residing in Bangalore and Bhubneshwar and there may be some discrepancies in maintenance of record. 3. The CIT(A) had accepted the explanation of the assessee. This view has been affirmed by the Tribunal. 4. We have learned counsel for the revenue. 5. Finding recorded by CIT(A) on the issue in question is as under:- “I have carefully gone through the facts and circumstances of

ITA No.152 of 2008 -3- the case and results of enquiries conducted by the Assessing Officer during remand proceeding and find as under: The purchases of 103 quintals (vide bill No.43) of M/s Singla Enterprises, figure at purchase book on 18/12/2002 and appears at unnamed sr. nos. of weight purchased 33.60, 39.80, 29.60 quintals at top, bottom, end of page dated 18.12.2002 of gate inward register (inward serial no. of mandi missing, goods having not purchased through auction). Similarly, the purchases of 770.20 quintals and 671.80 quintals are entered as purchases from M/s Singla Enterprises at purchase book on 24.12.2002 and 25.12.2002. The entries in gate book of date 24.12.2002 and 25.12.2002 (with no serial number of auction etc.) are found. Accordingly, I am of the opinion that in view of the fact that the purchases have been found entered in the books and that there is no adverse inference in respect of such purchases from the Assessing Officer and the fact that the books of account have not been rejected by the Assessing Officer, the addition made by the Assessing Officer of Rs.2,11,150/-+Rs.27,39,800/- does not deserve to be sustained. Appellant gets a relief of Rs.29,50,950/-. However, the additions of Rs.38,400/- and Rs.76,000/- are hereby confirmed in view of the stock having been found by the market authorities and no explanation forthcoming from the appellant.” 6. The Tribunal affirmed the above observations.

ITA No.152 of 2008 -4- 7. View taken in the said order is a possible view and is not shown to be perverse. We are unable to hold that the questions raised are substantial questions of law. 8. The appeal is dismissed. ( ADARSH KUMAR GOEL )

JUDGE November 03, 2008 ( L. N. MITTAL ) ashish JUDGE

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