CIT, JALANDHAR V. M/S ATAM VALVES (P) LTD.

ITA/358/2009

AI Insights

The case involves the Commissioner of Income Tax, Jalandhar-I, as the appellant, and M/s Atam Valves (P) Ltd., as the respondent. The dispute arose from a survey conducted under Section 133A of the Income Tax Act, 1961, which led to the discovery of incriminating documents, including a 'Slip Pad' that recorded wage payments. The Assessing Officer made additions to the income based on these slips, estimating unaccounted sales. Both the CIT(A) and the Tribunal found the additions unjustified without further substantiating evidence of actual sales. The High Court dismissed the appeal, agreeing with the lower authorities that the loose slips alone did not warrant the estimated additions.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 744779 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 22-07-2009
• Assessment Year: misc
• Other Referred Cases: Kachwala Gems Vs. Joint Commissioner of Income Tax (2007) 288 ITR 10 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: VIVEK SETHI
• Keywords: Assessment; Estimation of sales; Income Tax; Unaccounted income; Wages payment
• Section: 69; 133A; 260A

Judgement Text

"I.T.A. No. 358 of 2009 (1) IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 358 of 2009 DATE OF DECISION: 22.7.2009 Commissioner of Income Tax, Jalandhar-I, Jalandhar ..........Appellant Versus M/s Atam Valves (P) Ltd., 1051 Outside Industrial ..........Respondent Area, Jalandhar CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:- Mr. Vivek Sethi, Advocate for the appellant. **** ADARSH KUMAR GOEL, J. (Oral) 1. The revenue has preferred this appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act) against the order of Income Tax Appellate Tribunal, Amritsar Bench, Amritsar dated 30.12.2008 passed in ITA No. 442 (ASR)/2008 and ITA No. 453 (ASR)/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 AO 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 I.T.A. No. 358 of 2009 (2) case, the ITAT was right in law in directing to limit the addition u/s 69 of the Act only to the extent wages payment which is not reconciled with the books of accounts 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 I.T. 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 AO 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 I.T.A. No. 358 of 2009 (3) 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 AO 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 AO 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 Vs. Joint Commissioner of Income Tax (2007) 288 ITR 10 (SC), 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, I.T.A. No. 358 of 2009 (4) 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. (ADARSH KUMAR GOEL) JUDGE July 22, 2009 (DAYA CHAUDHARY) pooja JUDGE Note:-Whether this case is to be referred to the Reporter .......Yes/No "