High Court Of Punjab And Haryana
CIT, Jalandhar-I Vs. Atam Valves (P.) Ltd.
Assessment Year : 2005-06
Section : 69
Adarsh Kumar Goel And Daya Chaudhary, JJ.
IT Appeal No. 358 Of 2009
July 22, 2009
Adarsh Kumar Goel, J. – The revenue has preferred this appeal under section 260A of the Income-tax Act, 1961 (‘the Act’) against the order of Income-tax Appellate Tribunal, Amritsar Bench, Amritsar dated 30-12-2008 passed in ITA No. 442 (Asr.) of 2008 and ITA No. 453 (Asr.) of 2008 for the assessment year 2005-06, proposing to raise following substantial questions of law :—
“(i) Whether on the facts and in the circumstances of the case the ITAT was right in law in setting aside the appeal of the assessee to the file of the Assessing Officer for limited purpose for considering the wages recorded in the loose slips and not to make addition on the basis of estimation of sales.
(ii) Whether on the facts and in the circumstances of the case, the ITAT was right in law in directing to limit the addition under section 69 of the Act only to the extent wages payment which is not reconciled with the books of account maintained by the assessee when the statements of two persons confirm that the ‘Eastern Slips Pad’ represents wages actually paid to various employees of the assessee and the same is not a dump documents ?
(iii) Whether on the facts and in the circumstances of the case, the ITAT has erred in law in not appreciating that addition made on account of wages under section 69 of the Income-tax Act, 1961 resulted into unaccounted income to the assessee ?
(iv) Whether on the facts and in the circumstances of the case, the ITAT has erred in law in not accepting that the estimate of unaccounted income was made by the Assessing Officer on scientific and logical basis ?”
2. During the pendency of assessment proceedings, a survey was conducted by the Department under section 133A of the Act on 27-9-2005 in the premises of the assessee and certain incriminating documents were found including a ‘Slip Pad’ containing payment of wages to various persons. The slips were written by Manoj Jain, an employee of the assessee, who was confronted with the slips, apart from questioning of the Director. Manoj Jain as well as Director of the assessee explained the position as to how the slips had been written and the stand of the assessee was that the same did not represent payment of wages during the year in question but were for the earlier year. However, the Assessing Officer did not accept the explanation and made an addition. The CIT(A) as well as the Tribunal partly set aside the addition. It was held that even though explanation of the assessee that the loose papers did not relate to payment of wages during the year in question may not be accepted, in absence of any other material, the loose sheets by itself were not enough to make addition as per estimate of the Assessing Officer. It was observed :—
“Now the question is regarding estimating the income on the basis of these loose slips. In our opinion, the Assessing Officer is not justified in estimating the sales on the basis of loose slips without substantiating that the assessee has actually made the sales to that extent of estimation made by the Assessing Officer and having no iota of evidence in the form of sale bills or bank account or movable and immovable property which represent earning of unaccounted income by the assessee. As such, the ld. CIT(A) to that extent is justified in holding that estimation of sales on the basis of loose slips represented payment of wages is not possible.”
3. Learned counsel for the revenue submitted that once the explanation of the assessee was found to be unacceptable, the addition made by the Assessing Officer ought to have been upheld.
4. We are unable to accept this submission.
5. No doubt, a false explanation of assessee may be a circumstance to be taken into account for recording a finding of undisclosed income and some degree of guess work is also permissible in such a situation, as held by the Supreme Court in Kachwala Gems v. Jt. CIT  288 ITR 10, relied upon by the learned counsel for the revenue, it depends upon facts and circumstances of each case as to what is to be fair estimate of undisclosed income. The CIT(A) as well as the Tribunal held that in the circumstances, the estimate of addition, to the extent assessed by the Assessing Officer, was not called for and the same was partly liable to be set aside.
6. It cannot be held that any substantial question of law arises for consideration.
7. The appeal is dismissed.