Sh. Rajiv Bhatia, Proprietor V. Commissioner of Income Tax (Appeals) Jammu

ITA/354/2007

AI Insights

The case involves Sh. Rajiv Bhatia, the proprietor of M/s Sardhari Lal Bhatia & Sons (HUF), who appealed against the orders of the Income Tax Appellate Tribunal, Amritsar Bench. The appeal was related to the assessment year 2001-02 and concerned additions made to the declared income following a survey under Section 133A of the Income Tax Act, 1961. The survey revealed discrepancies such as excess stock of coal, unexplained investments, and short declared transportation charges. The Tribunal upheld most of the additions made by the Assessing Officer, leading to this appeal. The main legal questions pertained to the method of counting bricks and the basis for additions related to coal consumption outside the books of account.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 680020 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 12-08-2009
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: NAVENDER SINGH
• Assessee Lawyers: AKSHAY BHAN
• Keywords: Estimation; Excess stock; Income Tax; Survey; Brick Kiln; Coal Consumption
• Section: 133A; 260-A

Judgement Text

"I.T.A. No. 354 of 2007 (1) IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 354 of 2007 DATE OF DECISION: 12.8.2009 Sh. Rajiv Bhatia, Proprietor, M/s Sardhari Lal Bhatia ..........Appellant & Sons (HUF), 11-A, Hukam Singh Road, Amritsar Versus Commissioner of Income Tax (Appeals) Jammu ..........Respondents & Anr. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:- Mr. Akshay Bhan, Advocate for the appellant. Ms. Navender P.K. Singh, Advocate for the respondent. **** ADARSH KUMAR GOEL, J. (Oral) 1. The assessee has preferred this appeal under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order of Income Tax Appellate Tribunal, Amritsar Bench dated 23.10.2006 passed in ITA No. 526/ASR/2004 for the assessment year 2001-02, proposing to raise following substantial questions of law:- (i) Whether in the facts and circumstances of the present case the impugned orders Annexure A-1 to A-3 are legally sustainable in the eyes of law when the method used for counting of bricks was not proper and was merely on the basis of estimate? (ii)Whether in the facts and circumstances of the present I.T.A. No. 354 of 2007 (2) case the impugned orders Annexures A-1 to A-3 are legally sustainable in the eyes of law by making an additions of Rs. 169230/- on account of consumption of coal outside the books of account by basing their decision that three coal firings took place when actually only two coal firings had taken place in the assessed year? 2. The assessee is in the business of brick kiln. As a result of survey under Section 133A in the premises of the assessee on 28.9.2000, the assessee was confronted with the adverse material warranting additions to the declared income. The discrepancies related to excess stock of coal, investment outside the books of accounts, short transportation charges declared, unexplained investment, purchase of tractor/trolly, trade expenses and other expenses. After considering the stand of the assessee, the Assessing Officer assessed the income by making additions to the declared income and also initiated proceedings for penalty. The CIT(A) partly allowed the appeal and partly upheld the additions. The Tribunal also partly allowed the appeal of the assessee but upheld the rest of the additions. 3. We have heard learned counsel for the parties. 4. Learned counsel for the assessee submits that method for counting of bricks adopted by the Assessing Officer was not proper and there was no basis for the estimate made. Additions on account of consumption of coal outside the books of accounts based on the assumption that three coal firings had taken place was against facts, as only two coal firings had taken place. 5. Learned counsel for the revenue supports the impugned findings and submits that the proposed questions are questions of facts. The findings of the Tribunal are based on valid grounds and cannot be held I.T.A. No. 354 of 2007 (3) to be perverse. 6. The relevant findings of the Tribunal on the issues raised are as under:- “Now the next question whether the AO was justified in considering the stock lying inside the brick kiln at 6.50 lakhs instead of 5.10 lakhs. Sh. Bhagwan Dass, an employee of the assessee stated before the survey team that the bricks lying in the kiln were 6.50 lacs. This is clear from his statement placed at pages 42 to 43 of the paper book. Now the basis of assessee's contention that evidence for stock lying in kiln was wages paid in the month of October has been found untenable and factually incorrect. The department, on the other hand, has based such conclusion on the reason that capacity was 7 lakhs and the kiln was found fully loaded waiting for cool down and the statement of an employee of the assessee. The reason given by authorities below appears to be logical and acceptable more so when there is no material or evidence to prove the contrary. Thus, we reject the claim of the assessee that only 5.10 lakhs bricks were lying inside the kiln more so when we have already recorded a finding that 5.10 lakhs bricks related to third burning after the date of survey. No specific arguments have been advanced in regard to the value of bricks taken by the AO for the purpose of making addition on account of excess stock. No bills and vouchers were submitted before us to show that the average sale and purchase price differed from one taken by the AO. The Ld. CIT(A) has also taken into account I.T.A. No. 354 of 2007 (4) first class, second class and khinger categories of bricks while estimating the cost after reducing the margin of profit. Therefore, we find no justification to interfere with the findings of the authorities below in regard to an addition of Rs. 3,60,154/- made by the AO on account of excess stock found at the time of survey. As regards the second ground relating to an addition of Rs.1,69,230/-, we have already recorded our finding that labour expenses of Rs.1,78,722/- debited to revised trading account related to third burning given in the month of October, 2000 i.e. after the survey. The details of expenses which also included substantial amount of cartage paid at Rs.30,600/- shows that these kacha bricks were lying away from the brick kiln, which is usually the practice. Therefore, the very fact that these were not found at the time of survey or the survey team did not consider it worthwhile to find out the same would be of no help to assessee when the evidence relied upon by the assessee proves otherwise. The detailed reasons given in the earlier paragraphs show that wages paid in October, 2000 related to fresh burning given to the kiln after the survey. Thus, the only conclusion which we draw is that except the cost of wages, the entire cost of manufacturing of 5.10 lacs bricks including the cost of coal and the sales thereof have been kept outside the books of account. The very fact that the AO has not made any addition on account of profit earned on sale of these bricks does not mean that the assessee has not incurred any expenses on purchase of coal used I.T.A. No. 354 of 2007 (5) for the third burning. The action of the AO for not making any addition on account of resultant profit only appears to be an act of omission. However, in consonance with our finding recorded in respect of excess stock, we reject the submissions of the assessee in regard to addition of Rs. 1,69,230/- and uphold the order of the CIT(A). This ground of appeal is also dismissed.” 7. The above findings show that a possible view has been taken after appreciating the material on record. Even if a different view is possible, the impugned order cannot be held to be perverse. 8. No substantial question of law arises. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE August 12, 2009 (DAYA CHAUDHARY) pooja JUDGE Note:-Whether this case is to be referred to the Reporter .......Yes/No "