Smt. Shakuntla Thukral V. Commissioner of Income Tax, Aayakar Bhawan, Rishi Nagar, Ludhiana, Punjab

ITA/302/2013

AI Insights

Smt. Shakuntla Thukral, the appellant, challenged the orders of the Income Tax Appellate Tribunal which upheld the additions made by the Assessing Officer related to discrepancies in closing stock and unaccounted fabrication work, and the issue of depreciation on machinery. The appellant argued that the Tribunal erred in confirming these additions without proper basis and ignored established accounting principles. The High Court reviewed the submissions, the detailed orders of the CIT(A) and the Tribunal, and found no substantial question of law arising from the Tribunal's decision, leading to the dismissal of the appeal.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 817037 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 06-02-2014
• Assessment Year: misc
• Other Referred Cases: CIT v. Fazilka Cooperative Sugar Mills Limited, 255 ITR 411 (P&H)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: RAJIV SHARMA
• Keywords: Appeal; Assessment; Closing Stock; Depreciation; Income Tax; Unaccounted Fabrication Work
• Section: 143(3); 260A

Judgement Text

"ITA No.302 of 2013 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.302 of 2013 Date of decision: February 06, 2014 Smt.Shakuntla Thukral ……Appellant Vs. Commissioner of Income Tax, Aayakar Bhawan, Rishi Nagar, Ludhiana, Punjab. …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MS. JUSTICE ANITA CHAUDHRY Present: Mr. Rajiv Sharma, Advocate for Mr. S.K.Mukhi, Advocate for the appellant. Ajay Kumar Mittal,J. 1. 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 15.3.2013, Annexure A.3, passed by the Income Tax Appellate Tribunal, Bench 'B' Chandigarh (in short, “the Tribunal”) in ITA No.380/CHD/2010, claiming following substantial questions of law:- “i) Whether the ITAT is justified in confirming the addition of ` 28,73,640/- on account of difference of closing stock in the books and as per statement given to the Bankers there being plausible explanation and by completely ignoring the accounting principles that closing stock of one year is Singh Gurbax 2014.03.24 16:24 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.302 of 2013 2 opening stock of following year and there being no tax effect, any addition on this count is futile in view of judgment of Hon'ble Punjab and Haryana High Court in the case of CIT v. Fazilka Cooperative Sugar Mills Limited, 255 ITR 411 (P&H)? ii) Whether the ITAT is justified in confirming the addition of ` 5,20,889/- on account of 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 ITAT confirming the order of authorities below deserves to be set aside being devoid of merits, against 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 return of income declaring income at ` 2,80,161/- for the assessment year 2005-06 on 31.10.2005. The return was selected for scrutiny. Upon notice, the assessee appeared and submitted the relevant documents. The Assessing Officer raised objections regarding closing stock, unaccounted fabrication work and depreciation claimed by the assessee as under:- i) Difference of stock ` 28,73,640/- ii)Unaccounted fabrication ` 5,20,889/- work iii) Depreciation on machinery ` 1,45,214/- On 4.7.2007, the assessee submitted complete details of stocks supported by Singh Gurbax 2014.03.24 16:24 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.302 of 2013 3 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 30.1.2005 reached India on 18.2.2005. 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 reply dated 29.11.2007 explaining the objections raised by the Assessing Officer. After examining the documents on record, the Assessing Officer passed assessment order dated 27.12.2007, Annexure A.1 under Section 143(3) of the Act and made additions. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated 24.2.2010, Annexure A.2, the CIT(A) partly allowed the appeal while upholding the additions made by the Assessing Officer. Still not satisfied, the assessee filed appeal before the Tribunal. Vide order dated 15.3.2013, Annexure A.3, the Tribunal partly allowed the appeal while upholding the findings recorded by the CIT(A) on first two issues whereas the issue pertaining to depreciation was remanded to the Assessing Officer as the Singh Gurbax 2014.03.24 16:24 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.302 of 2013 4 assessee made 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 15.3.2013, Annexure A.3, impugned herein while affirming the findings recorded by the Assessing Officer and the CIT(A) held as under:- “8. The ground No.2 raised by the assessee relates to confirming the addition of ` 28,73,640/- by CIT(A) 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 laws relied upon by the assessee. The Assessing Officer made addition of ` 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 CIT(A) upheld the findings of the Assessing Officer. 10. The bare perusal of the order of CIT(A) 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 CIT(A) has discussed the issue in detail and appreciated the ratio of various decisions cited and relied by the parties. In view of the detailed and well reasoned order passed by the learned CIT(A), we do not find any ground to interfere with his findings and the Singh Gurbax 2014.03.24 16:24 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.302 of 2013 5 same are upheld. 11. The appellant vide ground No.3 of the appeal raised the issue of confirmation of addition by CIT(A) of `5,20,889/- (`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 ` 5,20,889/- under the head 'Unaccounted Fabrication work' on examination and analysis of facts of the case. The learned CIT(A) discussed the issue in a detail and upheld the findings of the Assessing Officer. 13. The Assessing Officer made the above addition being fabrication charge 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 `5,20,889/-. A bare perusal of the order of CIT(A) reveals that a speaking and well reasoned order has been passed by the learned CIT(A), 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 CIT(A) 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. The ground No.4 relates to confirmation of addition of `1,45,214/- by the CIT(A), on account of depreciation claimed on machinery under TUFF. Singh Gurbax 2014.03.24 16:24 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.302 of 2013 6 15. In respect of this ground, the assessee has filed application for admission of additional evidence under Rule 29 of the ITAT Rules and produced bills for the purchase of machinery under TUFF. The appellant has cited various case laws. 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 CIT(A), 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 CIT(A) had discussed the material on record in detail and had come to the conclusion that there was difference of stock amounting to ` 28,73,640/- as per 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 ` 5,20,889/- due to unaccounted fabrication work was affirmed by CIT(A) 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 CIT(A). 6. No substantial question of law arises in this appeal. Consequently, the same is hereby dismissed. (Ajay Kumar Mittal) Judge February 06, 2014 (Anita Chaudhry) 'gs' Judge Singh Gurbax 2014.03.24 16:24 I attest to the accuracy and integrity of this document High Court Chandigarh "