THE COMMR.OF INCOME-TAX, LDH. V. M/S.JAY KAY FEEDS PVT.LTD.

ITC/61/1999

AI Insights

The case involves the Commissioner of Income Tax, Rishi Nagar, Ludhiana as the appellant and M/s Jay Kay Feeds (P) Ltd. as the respondent. The dispute arose from the assessment year 1987-88, where the Revenue challenged the deletion of an addition of `98,813 to the assessee's income by the Income Tax Appellate Tribunal. The primary issues were the estimation of sales and the applicability of interest under Sections 215 and 217 of the Income Tax Act. The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision, which led to the Revenue filing a petition under Section 256(2) of the Income Tax Act, seeking to raise substantial questions of law.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 718659 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 13-03-2013
• Assessment Year: misc
• Other Referred Cases: M/s Harjit Singh Tarlochan Singh vs. ITO Khanna
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: AKSHAY BHAN; ALOK MITTAL
• Assessee Lawyers: RAJESH KATOCH
• Keywords: Advance tax; Assessment Year; Concealed income; Gross Profit Rate; Income Tax; Interest on tax; Unrecorded sales
• Section: 215; 132(4); 256(2); 217

Judgement Text

"ITC No. 61 of 1999 -1 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH Date of decision: 13.03.2013 ITC No. 61 of 1999 (O&M) The Commissioner of Income Tax, Rishi Nagar, Ludhiana ...Appellant versus M/s Jay Kay Feeds (P) Ltd. Sarabha Nagar, Ludhiana ...Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MS. JUSTICE RITU BAHRI Present:- Mr. Rajesh Katoch, Advocate for the appellant. Mr. Akshay Bhan, Advocate and Mr. Alok Mittal, Advocate for the respondent. HEMANT GUPTA, J. (ORAL) The present petition under Section 256(2) of the Income Tax Act, 1961 (for short 'the Act') is by the Revenue arising out of an order of the Income Tax Appellate Tribunal (for short 'the Tribunal') dated 18.05.1998 pertaining to the assessment year 1987-88, claiming the following substantial questions of law:- “1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding deletion of addition of `98,813/- by the Commissioner of Income Tax (Appeals) by observing that the sales should not be estimated at the figure of ` 2.30 crores and total sales should be restricted to the figure declared by the assessee at `1,67,19,652/- by enhanced by `9.10 lakhs? (2) Whether, on the facts and circumstances of the case, ITC No. 61 of 1999 -2 the Income-tax Appellate Tribunal was right in law in disposing of the additional ground regarding cancellation by the CIT (A) of interest charged under Section 215/217 only by observing that the department has challenged only the admission of additional ground by the CIT(A) and also not impliedly challenged the decision on merits?” The assessee filed its return reflecting the gross profit rate at the rate of 4.2% from the sales of `1,67,19,652/-. However, the Assessing Officer estimated sales at `2,30,00,000/- and by applying gross profit rate @ 5%, the profit would come to `11,50,000/-. Since the assessee has shown profit of ` 7,01,187/- and had also surrendered an amount of `4,00,000/- under Section 132(4) of the Act, therefore, an amount of `48,813/- was found to be concealed income of the assessee during the year under consideration. In addition to the said amount, another `50,000/- was added to the income on the basis of probable investment made by the assessee during the year under consideration. However, the Commissioner of Income Tax (Appeals), Ludhiana vide its order dated 14.08.1991 set aside the said addition by observing to the following effect:- “At best, addition can be made on the profits earned on the unrecorded sales amounting to `7,49,608/-. By applying a G.P rate of 5%, the addition works out to `37,480/-. Since the sales to the tune of `7,49,608/- were affected outside the books of account, the learned ACIT was justified in working out un-explained investment on sales affected outside the books of account, but working out the same at `50,000/- on estimate is not warranted by the provisions of law. Such investment has to be worked out on ITC No. 61 of 1999 -3 proportionate basis as by the Hon'ble I.T.A.T, Amritsar Bench, Amritsar, in I.T.A No. 503/1974-75 in the case of M/s Harjit Singh Tarlochan Singh, Railway Road, Khanna vs. ITO Khanna, relating to the assessment year 1971-72. On proportionate basis such investment will work out to `4490/- = 100000/16719652 X 750000=4490. Thus at best an addition of ` 41,970/- (37480+ 4490) could have been made, against which the appellant had surrendered a sum of `4,00,000/- during the course of search which surrender has been accepted by the department. Accordingly, I hold that there is no justification for the impugned addition of `48,813+50,000=98,813/-. The same is accordingly deleted. The first two grounds accordingly succeed and the appellant gets a relief of `98,813/- (48,813+50,000/-).” The learned Commissioner of Income Tax (Appeals), Ludhiana has also recorded the finding that sum of ` 3,71,000/- was lying with the department since 14.10.1996. A specific request was made by the assessee on 17.03.1997 to adjust the seized amount towards the tax due at the time of filing of the return. Therefore, the assessee is not liable to pay interest in terms of Sections 215 and 217 of the Act. The Tribunal in further appeal upheld the order of the Commissioner of Income Tax (Appeals), Ludhiana. The Revenue sought to raise the substantial questions of law as mentioned above, which were declined by the Tribunal vide order dated 14.10.1998. The Revenue has thus filed the present petition under Section 256(2) of the Act. In respect of first substantial question of law, the learned Commissioner of Income Tax (Appeals) has found that sales to the tune of ` 7,49,608/- were affected outside the books of account and therefore the ITC No. 61 of 1999 -4 gross profit rate has to be applied in respect of the said amount alone. Consequently, the addition of ` 98,813/- (48,813+50,000/-) was set aside. The said finding is pure finding of fact. No question of law on the basis of such finding arises for consideration, as only income from concealed sales could be taken into consideration. In respect of second questions of law, the department has more amount in its control than the amount of advance tax payable by the assessee. Therefore, it cannot be said that assessee is liable to pay interest on the amount of advance tax. We do not find any substantial question law arises for consideration in the present appeal. The appeal is dismissed accordingly. (HEMANT GUPTA) JUDGE ( RITU BAHRI ) March 13, 2013 JUDGE G.Arora/Vimal "