THE COMMISSIONER OF INCOME TAX­I V. SAMIR SYNTHETICS MILL

TAX APPEAL No. 1522 of 2007

AI Insights

The case involves the Commissioner of Income Tax appealing against Samir Synthetics Mill concerning the alleged suppression of sales and production. The primary legal question was whether the Appellate Tribunal was correct in law and on facts in confirming the order of the CIT(A) which added Rs.4,32,848 as unaccounted sales while deleting a larger amount of Rs.41,61,922. The background of the case includes a search by the Excise Department at the premises of the assessee, which revealed discrepancies in production records and unaccounted fabric. The Tribunal and CIT(A) found that the assessee failed to adequately explain these discrepancies, leading to the confirmation of the addition of Rs.4,32,848 as unaccounted sales. The High Court, after reviewing the submissions and evidence, concurred with the findings of the lower authorities and dismissed the appeals.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 368928 (HC-GUJARAT)
• Appeal Type: High Court cases
• Pronouncement Date: 18-01-2008
• Appeal Filed By: Department
• Other Referred Cases: CIT vs. President Industries, CIT vs. Presidential Industries
• Laws Referred To: Section 145(2) of the Act
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: MANISH BHATT
• Keywords: Excise Department; Search and seizure; Stock verification; Suppression of sale; Unaccounted sales; Fabric production
• Section: 145(2)

Judgement Text

"TAXAP/1522/2007 1/3 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1522 of 2007 with TAX APPEAL No. 1523 of 2007 ====================================== THE COMMISSIONER OF INCOME TAX­I ­ Appellant(s) Versus SAMIR SYNTHETICS MILL ­ Opponent(s) ====================================== Appearance : MR MANISH R BHATT for Appellant(s) : 1, None for Opponent(s) : 1, ====================================== CORAM : HONOURABLE THE CHIEF JUSTICE Y.R.MEENA and HONOURABLE MR.JUSTICE J.C.UPADHYAYA Date : 18/01/2008 ORAL ORDER Heard learned counsel for the appellant. The following substantial question of law is proposed for admission of this appeal. “Whether the Appellate Tribunal is right in law and on facts in confirming the order of the CIT(A) confirming only unaccounted sales to the tune of Rs.4,32,848/­ and thereby deleting the remaining amount of Rs.41,61,922/­ made by the Assessing Officer invoking Section 145(2) of the Act ?” Whether there should be any addition on the ground of suppression of sale, the Tribunal has considered the aspects as under : Downloaded on : Tue Jun 03 15:23:29 IST 2025 Uploaded by K.P. PACHODE(HC00164) on Tue Jan 22 2008 2008:GUJHC:924-DB NEUTRAL CITATION TAXAP/1522/2007 2/3 ORDER “We have carefully considered the rival submissions, gone through the order of tax authorities as well as the order of the Assessing Officer. We have also gone through the order of the Hon'ble Gujarat High Court in the case of CIT vs. President Industries (Supra). This is a fact that as a result of search by the Excise Department in the business of premises of the assessee, various discrepancies were noted in the production of the assessee. Excise authorities had issued the show cause notice. What happened before the Excise authorities was not explained by the assessee neither before the authorities below nor before us. In the show cause notice, it was mentioned that on physical verification of the fabrics in the business of two independent witness, 28, 433 meters of man made fabric value at Rs.5,13,474/­ was found in excess as compared in the balance shown in the stock register. During the stock verification 30566 meter of cotton fabric value at Rs.3,56,647 was also found short as compared to the balance shown in the relevant record. Shri Shashi kant, Manager of the factory confirmed the said shortage and stated that the fabric had been cleared without payment of the Excise Duty. Further, 30,567 meter of fully processes fabric valued at Rs.3,45,270/­ were found ready for delivery which was not accounted for in RD­1 register. During the search certain documents, papers relating to production and clearance of fabric were found from the personal custody of Shri Sanjiv Gupta, Store and Excise Clerk of the factory and Shri Sharish Modi, Dying Consultant of the factory. In an enquiry Shri Sanjiv Gupta sated that he had been looking after store along with the Excise and other work in the factory and the documents recovered from his possession deals of stock of mad made fabric lying under process as on 15.09.92 in the factory mentioned. He had personally verified the physical stock of fabric on that date and the paper also contained details regarding dispatch of product from the factory to various parties. These papers also contain regarding item wise processing of cotton fabrics and man made fabric and the cost incurred separately during April, 92 to August, 92. Explaining the particulars mentioned in each papers Shri Sanjiv Gupta had stated before Excise authorities that at Page 9 regarding details of man made fabrics, recent process and cleared from the factory to various parties were mentioned. It was also found that the product cleared for various parties such as M/s Nidhi Fabrics and M/s Krupam Downloaded on : Tue Jun 03 15:23:29 IST 2025 Uploaded by K.P. PACHODE(HC00164) on Tue Jan 22 2008 2008:GUJHC:924-DB NEUTRAL CITATION TAXAP/1522/2007 3/3 ORDER Textile were without payment of any Excise Duty. The papers found on each person also showed itemwise consumption of raw material from April 92 to August 92 along with the details of month wise capital production processing of Rs.43,33,286 meters of cotton fabrics. The statement of Shri Sharish Modi also supported the statement of Shri Sanjiv Gupta and thus it was fond that the production of man made fabrics was suppressed and only a small part of the same was shown in the excise register. The assessee even could not be able to reconcile the production, sales and the closing stock although the specific opportunity was provided by the Assessing Officer. Under these circumstances, we agree with the CIT(Appeals) that the assessee failed to explain suppression of production of Rs 18,80,500 meter of cloth. We also fully agree that any addition that it to be made that is not in respect of the sale consideration but only in respect of the profit. As in this case no evidence has been brought out on record which may prove that the assessee has claimed all the expenses in profit and loss account as it is the case only of suppression of the sale consideration. In our opinion, in this regard, the judgment of jurisdictional High Court in the case of CIT vs. Presidential Industries 258 ITR 654 (supra) is fully applicable. Under these facts, we therefore do not find any illegality or infirmity in the order of the CIT(Appeals) while reducing the addition on account of suppressed sales and accordingly, we confirm the order of CIT(Appeals) in this regard. Thus, ground no.1 of assessee's appeal as well as revenue's appeal stand dismissed.” Whether there was any suppression of sale or not, is basically question of facts. The CIT (A) as well as Tribunal both found that the addition of Rs.4,32,848/­ is just and reasonable on account of papers found during the search. Considering the concurrent findings, we see no merit in this appeal. Both the appeals stand dismissed. ( Y. R. MEENA, C. J. ) ( J. C. UPADHYAYA, J. ) kailash Downloaded on : Tue Jun 03 15:23:29 IST 2025 Uploaded by K.P. PACHODE(HC00164) on Tue Jan 22 2008 2008:GUJHC:924-DB NEUTRAL CITATION "