Punjab & Haryana H.C : The ITAT confirming the order of the authorities below deserves to be set aside being devoid of merits, against the well settled law and in view of perversity in fact finding

High Court Of Punjab & Haryana

Smt. Shakuntla Thukral vs. CIT

Section 69, 69C, 32

Assessment Year 2005-06

Ajay Kumar Mittal And Ms. Anita Chaudhry, JJ.

IT Appeal No. 302 Of 2013

February 6, 2014

JUDGMENT

Ajay Kumar Mittal, J.-This appeal has been preferred by the assessee under section 260A of the Income-tax Act, 1961 (in short, “the Act”), against the order dated March 15, 2013, annexure A.3, passed by the Income-tax Appellate Tribunal, Bench “B” Chandigarh (in short, “the Tribunal”), in I. T. A. No. 380/CHD/2010, claiming the following substantial questions of law :

“(i) Whether the Income-tax Appellate Tribunal is justified in confirming the addition of Rs. 28,73,640 on account of difference of closing stock in the books and as per the statement given to the bankers there being a plausible explanation and by completely ignoring the accounting principles that closing stock of one year is opening stock of the following year and there being no tax effect, any addition on this count is futile in view of the judgment of the hon’ble Punjab and Haryana High Court in the case of CIT v. Fazilka Co-operative Sugar Mills Ltd. [2002] 255 ITR 411 (P&H) ?

(ii) Whether the Income-tax Appellate Tribunal is justified in confirming the addition of Rs. 5,20,889 on account of the alleged unaccounted fabrication work which was duly accounted for in subsequent month/year on account of normal accepted accounting principles and business practice which is against the well settled law ?

(iii) Whether the order of the Income-tax Appellate Tribunal confirming the order of the authorities below deserves to be set aside being devoid of merits, against the well settled law and in view of perversity in fact finding ?”

2. A few facts relevant for the decision of the controversy involved, as narrated in the appeal, may be noticed. The assessee is a resident of Ludhiana. She is engaged in the business of manufacture, purchase and sale of cloth and fabrication. She filed a return of income declaring an income at Rs. 2,80,161 for the assessment year 2005-06 on October 31, 2005. The return was selected for scrutiny. Upon notice, the assessee appeared and submitted the relevant documents. The Assessing Officer raised objections regarding the closing stock, unaccounted fabrication work and depreciation claimed by the assessee as under :

(i) Difference of stock Rs. 28,73,640
(ii) Unaccounted fabrication work Rs. 5,20,889
(iii) Depreciation on machinery Rs. 1,45,214

On July 4, 2007, the assessee submitted complete details of stocks supported by relevant documents. It was further explained by the assessee that she had applied for machinery term loan from the bank for importing computerized “flat knitting bed knitting machine” from Taiwan. The said loan could not be sanctioned by the bank due to technical reasons and the machinery for which order was placed on January 30, 2005, reached India on February 18, 2005. The appellant explained to the bank officials that in case the loan was not disbursed, she shall be liable for demurrage charges as per norms of port authorities. The bank officials, however, agreed to release the payment from cash credit limit account if the same was provided at inflated amount. To meet the need of the time, the inflated stock statement was given taking into consideration the stock lying at the factory premises of the assessee as well as of the fabricators and the assessee also increased the hypothecated quantity to get the payment of the machinery purchased. During the assessment proceedings, the assessee filed a reply dated November 29, 2007, explaining the objections raised by the Assessing Officer. After examining the documents on record, the Assessing Officer passed assessment order dated December 27, 2007, annexure A.1 under section 143(3) of the Act and made additions. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) (CIT(A)). Vide order dated February 24, 2010, annexure A.2, the Commissioner of Income-tax (Appeals) partly allowed the appeal while upholding the additions made by the Assessing Officer. Still not satisfied, the assessee filed an appeal before the Tribunal. Vide order dated March 15, 2013, annexure A.3, the Tribunal partly allowed the appeal while upholding the findings recorded by the Commissioner of Income-tax (Appeals) on first two issues whereas the issue pertaining to depreciation was remanded to the Assessing Officer as the assessee made a prayer for placing on record certain bills regarding purchase of machinery by way of additional evidence. Hence, the present appeal by the assessee.

3. We have heard learned counsel for the appellant and perused the record.

4. The Tribunal, vide order dated March 15, 2013, annexure A.3, impugned herein while affirming the findings recorded by the Assessing Officer and the Commissioner of Income-tax (Appeals) held as under :

“8. Ground No. 2 raised by the assessee relates to confirming the addition of Rs. 28,73,640 by the Commissioner of Income-tax (Appeals) under the head ‘difference of stock’ as shown in the books and shown in the bank statement without any base and reason thereof.

9. We have carefully perused the rival submissions, facts of the case and relevant records and case law relied upon by the assessee. The Assessing Officer made an addition of Rs. 28,73,640 as unexplained closing stock, on examination and analysis of various details of closing and opening stock, for the relevant assessment year. The learned Commissioner of Income-tax (Appeals) upheld the findings of the Assessing Officer.

10. The bare perusal of the order of the Commissioner of Income-tax (Appeals) reveals that a speaking and well reasoned order has been passed by him after affording a reasonable and due opportunity of hearing to the appellant. Further, the submission of the appellant was forwarded to the Assessing Officer and necessary opportunity was afforded both to the Assessing Officer and the appellant, in the matter. The Commissioner of Income-tax (Appeals) has discussed the issue in detail and appreciated the ratio of various decisions cited and relied on by the parties. In view of the detailed and well reasoned order passed by the learned Commissioner of Income-tax (Appeals), we do not find any ground to interfere with his findings and the same are upheld.

11. The appellant, vide ground No. 3 of the appeal raised the issue of confirmation of addition by the Commissioner of Income-tax (Appeals) of Rs. 5,20,889 (Rs. 87,385 + 30,000 + 4,03,505) under the head ‘unaccounted fabrication work’ without any base and reasons thereof.

12. The Assessing Officer made addition of Rs. 5,20,889 under the head ‘unaccounted fabrication work’ on examination and analysis of facts of the case. The learned Commissioner of Income-tax (Appeals) discussed the issue in detail and upheld the findings of the Assessing Officer.

13. The Assessing Officer made the above addition being fabrication charges receivable by the assessee but not accounted for in the regular books of account. The Assessing Officer on examination of the bills issued by the assessee, for fabrication of the work done on job work basis, for different parties and correlating the same with the challans of goods and bills issued for fabrication charges, made the addition. The Assessing Officer found that the assessee had not accounted for the fabrication charges for all the work done by the assessee, for other parties and by pointing out certain discrepancies made, an addition of Rs. 5,20,889. A bare perusal of the order of the Commissioner of Income-tax (Appeals) reveals that a speaking and well reasoned order has been passed by the learned Commissioner of Income-tax (Appeals), after affording a reasonable and due opportunity of hearing to the appellant and the Assessing Officer as the submissions of the appellant were forwarded to the Assessing Officer, and to provide opportunity in the matter. The Commissioner of Income-tax (Appeals) after detailed discussions passed a well reasoned order. In view of this, we do not find any ground, to interfere with his findings and, hence, the same are upheld.

14. Ground No. 4 relates to confirmation of the addition of Rs. 1,45,214 by the Commissioner of Income-tax (Appeals), on account of depreciation claimed on machinery under TUFF.

15. In respect of this ground, the assessee has filed an application for admission of additional evidence under rule 29 of the Income-tax (Appellate Tribunal) Rules and produced bills for the purchase of machinery under TUFF. The appellant has cited various case law. Having regard to the bills filed by the assessee which were not produced before the lower authorities, we deem it fit to admit the additional evidence with a view to advance the cause of justice. As the said bills were not produced before the Assessing Officer and the Commissioner of Income-tax (Appeals), consequently, in the interest of justice, we restore this issue to the file of the Assessing Officer for making necessary enquiry in the matter and fresh adjudication of the matter as per law after affording reasonable and due opportunity of being heard to the appellant.”

5. The Assessing Officer and the Commissioner of Income-tax (Appeals) had discussed the material on record in detail and had come to the conclusion that there was difference of stock amounting to Rs. 28,73,640 as per the books of account of the assessee and as shown in the inflated stock statement given to the bank. The Tribunal affirmed the aforesaid findings. Similarly, the addition made by the Assessing Officer of Rs. 5,20,889 due to unaccounted fabrication work was affirmed by the Commissioner of Income-tax (Appeals) and the Tribunal. Learned counsel for the appellant has not been able to point out any illegality or perversity in the findings recorded by the Tribunal while affirming the findings recorded by the Assessing Officer and the Commissioner of Income-tax (Appeals).

6. No substantial question of law arises in this appeal. Consequently, the same is hereby dismissed.

[Citation : 366 ITR 644]