COMMISSIONER OF INCOME TAX V. PRESIDENT INDUSTRIES..

ITA No. 53 of 1999

AI Insights

The case involves the Commissioner of Income Tax as the petitioner and President Industries as the respondent. The dispute arose from a survey conducted on December 1, 1994, which led to the discovery of undisclosed sales amounting to Rs.29,01,300. The assessing officer added this entire sum as income for the assessment year 1994-95, which was later reduced by the CIT (Appeals) to Rs.28,35,883. The Tribunal further modified this by applying the net profit rate to the undisclosed sales, adding only the estimated profits to the income. The Commissioner of Income Tax sought a reference under Section 256(1) to challenge the Tribunal's application of the net profit rate, which was rejected by the Tribunal and subsequently by the High Court.

• Counselvise Citation: [1999] 140 COUNSELVISE.COM (IT) 361518 (HC-GUJARAT)
• Appeal Type: High Court cases
• Pronouncement Date: 20-04-1999
• Appeal Filed By: Department
• Assessment Year: 1994-1995
• Laws Referred To: Section 256(2) of the Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: MANISH BHATT
• Keywords: Assessment year 1994-95; Income Tax; Net profit rate; Undisclosed sales
• Section: 256(1); 256(2)

Judgement Text

" IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX APPLICATION No 53 of 1999 -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus PRESIDENT INDUSTRIES.. -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner -------------------------------------------------------------- CORAM : MR.JUSTICE R.BALIA. and MR.JUSTICE A.R.DAVE Date of Order: 20/04/99 ORAL ORDER 1. By this application under Section 256(2), the CIT seeks a direction to the Income Tax Appellate Tribunal, Ahmedabad Bench B Ahmedabad to state the case and submit the following question of law said to be arising out of its order in Income Tax Application No. 3101/Ahd/97 for the assessment year 1994-95: \"Whether the Appellate Tribunal is right in law and on facts in holding that only the net profit rate can be applied in respect of admitted sales of goods outside the books of account?\" 2. The facts giving rise to the present case are that during the course of survey conducted on the premises of assessee on 1.12.94 from the excise records found, inference was drawn by the assessing officer from the movement of finished goods from the premises of assessee to godowns that sales amounting to Rs.29,01,300/- have not been disclosed in the books of account. Assessing Officer made the addition of the entire sum of the said undisclosed sales as income of the assessee for the assessment year 1994-95. The additions on account of undisclosed sales was affirmed by the CIT (Appeals) to the reduced sum of Rs.28,35,883/-. On further appeal the Tribunal found that the entire sale could not have been added as income of the assessee for Downloaded on : Tue Jun 03 15:22:17 IST 2025 Uploaded by S.N. DEVU(HC00044) on Thu Apr 29 1999 the assessment year in question but only to the extent the estimated profits embedded in the sales for which the net profit rate was adopted entailing addition of income on the suppressed amount of sales. The Tribunal also found that there is no material on the record to suggest that the assessee made any investment outside books of accounts to make alleged unaccounted sales in respect of the aforesaid appellate order. The applicant made an application under Section 256(1) for referring the aforesaid two questions said to be arising out of Tribunal's order. 3. Having perused the assessment order made by the assessing officer, the order made by the CIT (Appeals) and the Income Tax Appellate Tribunal, we are satisfied that the Tribunal was justified in rejecting the application under Section 256(1). It cannot be matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold have been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether entire sum of undisclosed sale proceeds can be treated income of the relevant assessment year answers by itself in negative. The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales. 4. We are therefore of the opinion that no question of law which requires to be referred to this court arise out of Tribunal's Appellate order. The order of Tribunal under Section 256(1) is not erroneous in reaching such conclusion. Application is rejected. (Rajesh Balia, J) (A.R. Dave, J) Downloaded on : Tue Jun 03 15:22:17 IST 2025 Uploaded by S.N. DEVU(HC00044) on Thu Apr 29 1999 "