Surinder Kumar V. CIT, Central Revenue Building, Bathinda

ITA/318/2008

AI Insights

The case involves an appeal by Surinder Kumar against the order of the Income Tax Appellate Tribunal, Amritsar, which upheld the assessment made by the Assessing Officer. The Assessing Officer had rejected the books of account of Surinder Kumar and computed the gross profit by applying a flat rate on the total turnover. The Tribunal and the CIT(A) upheld this assessment, including additions made on account of unexplained credits and trading additions. The main legal contention in the appeal was whether the Income Tax authorities could rely on the rejected books of account for making additions towards cash credits of the depositors. The court referenced several precedents to support the principle that additions made to the book profits during an assessment are part of the real income and can be used to explain the source of investments or cash credits.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 808258 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 16-12-2008
• Assessment Year: misc
• Other Referred Cases: Anantharam Veerasinghaiah and Co. v. CIT, 123 ITR 457, Shiv Charan Dass v. CIT 126 ITR 263, CIT v. Prem Chand Jain, 189 ITR 320
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: SAVITA SAXENA
• Assessee Lawyers: R L GUPTA
• Keywords: Assessment; Best Judgment Assessment; Books of account; Cash Credits; Income Tax; Unexplained credits
• Section: 260A

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.318 of 2008 Date of decision: 16.12.2008 Surinder Kumar -----Appellant Vs. CIT, Central Revenue Building, Bathinda. --Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE L.N.MITTAL Present: Mr. R.L.Gupta, advocate for the appellant. Ms.Savita Saxena, Standing Counsel for the revenue. Adarsh Kumar Goel,J. 1. This appeal has been preferred by the assessee under section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar passed in ITA No.255(ASR)/2007 dated 8.2.2008, proposing to raise following substantial questions of law:- “i) Whether the Income Tax authorities having rejected the books of account while determining income from business should not have relied on the same books of account for the purpose of making the additions ITA No.318 of 2008 towards cash credits of the depositors in the facts and circumstances of the case? ii) Whether on the facts and circumstances of the case, Income Tax authorities are right in holding the addition on account of the cash creditors and interest thereon in the facts and circumstances of the case and more so in the face of their findings having rejected the books of account? 2. While making assessment, the Assessing Officer rejected the books of account of the assessee and computed gross profit by applying flat rate on the total turnover. The CIT(A) substantially upheld the order of assessment except to an extent as mentioned therein. The Tribunal also substantially upheld the order of assessment except to an extent indicated. The Tribunal held as under:- “24. We have heard both the parties and considered the rival contentions, examined the facts, evidence and material placed on record. We have already sustained the trading addition of Rs.2,28,960/- made by the AO. We have also upheld the additions of Rs.1,64,000/- made on account of unexplained credits. Besides, the addition of Rs.71,000/- made in respect of squared up accounts has also been upheld in principle subject to working out the addition on 2 ITA No.318 of 2008 the basis of peak credits. The basis and rationale behind sustaining the addition on account of unexplained credits is that the money belongs to the assessee and the same has been introduced in the books of account. However, the fact remains that the assessee has been carrying on business and the money generated represents income of assessee from such business. Therefore, if trading addition of Rs.2,28,960/- made by the AO is confirmed, the assessee would be entitled to claim benefit of the same against the addition on account of cash credits. Reliance in this regard is placed on the judgment of Hon’ble Supreme court in the case of Anantharam Veerasinghaiah and Co. v. CIT, 123 ITR 457, where the Hon’ble Apex Court has observed that the intangible addition made to the book profits during an assessment proceeding, is as much a part of his real income as that disclosed in the books of account. Therefore, the assessee can avail benefit of such addition for explaining the source of investments or of cash credits. Similarly, in the case of Shiv Charan Dass v. CIT 126 ITR 263 and CIT v. Prem Chand Jain, 189 ITR 320, the Hon’ble Punjab and Haryana High Court has held that the assessee would be entitled to claim the benefit of telescoping of the addition for explaining the source of investment or of cash credit. Thus, the action of CIT (A) is in conformity with the ratio of the aforesaid judgments of the Hon’ble Apex Court and the 3 ITA No.318 of 2008 jurisdictional High Court. Thus, we do not find any justification to interfere with the order of the CIT (A). The same is upheld and this ground of appeal is dismissed.” 3. We have heard learned counsel for the parties. 4. The substantial questions of law proposed cannot be held to be questions of law, as there is no inflexible rule that books of account must either be accepted or rejected. In view of infirmity found, result shown in books of account having not been accepted, for making best judgment assessment, entries in books of account could be looked into by the Assessing Officer. Making of assessment differs from case to case and there cannot be any rigid principle. 5. No substantial question of law arises. 6. The appeal is dismissed. (Adarsh Kumar Goel) Judge December 16, 2008 (L.N.Mittal) ‘gs’ Judge 4 ITA No.318 of 2008 5 "