Punjab-Haryana High Court
Commissioner Of Income-Tax vs Vishal Rubber Products on 24 April, 2003
Equivalent citations: [2003]264ITR542(P&H)
Author: S.S. Grewal
Bench: S.S. Grewal
JUDGMENT S.S. Grewal, J.
1. This is an appeal under Section 260A of the Income-tax Act, 1961, against the order passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (for short, "the Tribunal") in I. T. A. No. 477/ASR of 1995 decided on October 8, 2002.
2. The assessee was engaged in the manufacturing of rice rubber rolls. Search and seizure operation was conducted on April 11,1989, at the residential premises of Shri O. P. Sehgal, who had an interest in the firm. During the course of search, a document in the form of balance-sheet for the year ending March 31, 1987, was found and seized from the said premises. Scrutiny of the balance-sheet revealed that the same related to three different firms. The balance-sheet also contained three names, i.e., Ashish Singla, Vishal and Vikas, and against these names there were various entries on the assets and liabilities side. From this consolidated balance-sheet, the Assessing Officer (for short, "the AO"), inferred that it belonged to three firms, namely, Ashish Enterprises, Dada Colony, Jalandhar, Vishal Rubber Products, Dada Colony, Jalandhar, and Vikas Rubber Products, Dada Colony, Jalandhar, Shri O. P. Sehgal was found to have interest in all these three firms inasmuch as in all these firms the family members of Sh. O. P. Sehgal were the partners. The said seized document was compared with the balance-sheet filed by the said firms for the assessment year 1987-88 and in view of the discrepancies arising out of the comparison, proceedings under Section 148 of the Income-tax Act, 1961 (for short "the Act"), were initiated. The Assessing Officer, after weighing the entire evidence and in view of the various discrepancies, rejected the books of account under Section 145(2) of the Income-tax Act and made the following additions :
Rs.
(i) Investment in machinery 1,54,879
(ii) Addition on account of stock 4,32,702
(iii) Addition on account of bogus creditors 1,28,731 Total 7,16,322
3. On appeal, the Commissioner of Income-tax (Appeals), Jalandhar, deleted the addition of Rs. 7,16,322 made by the Assessing Officer by holding that no material could be found by the Assistant Commissioner of Income-tax to corroborate the entries made in the so-called balance-sheet on the basis of which addition was made. The order of the Commissioner of Income-tax (Appeals) was upheld by the Tribunal while dismissing the appeal of the Revenue.
4. In this appeal, the Revenue has prayed for determination of the following questions of law :
"1. Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal was right in law in ignoring the seized document found during the search in the form of balance-sheet which has been proved to be correct by the Assessing Officer while invoking the provisions of Section 145(2) of the Income-tax Act, 1961 ?
2. Whether, on the facts and in the circumstances of the case, the learned Income-tax Appellate Tribunal has erred in law in ignoring that the assessee had failed to disown the seized document in the form of balance-sheet or its entries which formed the basis for invoking the provisions of Section 145(2) of the Income-tax Act, 1961 ?"
5. We have heard Dr. N. L. Sharda and perused the record. A reading of the order annexure A2 passed by the Commissioner of Income-tax (Appeals), Jalandhar, shows that while deleting the additions made by the Assessing Officer, he made the following observations :
"On merits however I find substantial force in the submissions of the appellant because no material could be found by the learned Assistant Commissioner of Income-tax to corroborate the entries made in the impugned balance-sheet. Neither it is supported by the entries in the books of account of the three partnership firms nor by any other material. It could not be established that the impugned balance-sheet found in the course of the search from the residential premises of Sh. O. P. Sehgal is a genuine balance-sheet because no other evidence could be found like account books or any other material from where the balance-sheet has been withdrawn. No addition therefore can be made in the hands of the firms on the basis of that document. The same was the view held by my learned predecessor while disposing of the appeal in the individual case of Sh. O. P. Sehgal. The learned Assistant Commissioner of Income-tax attempted to gather some support from the entries in the individual balance-sheets of the firms filed with the return of income which are based on the regular books of account as mentioned by him in paras. 5 and 6 of the assessment order, but while examining these points in his presence it is found that the amount and the narrations do not agree. Similarly, the copies of the account called for by him from the four different parties duly agree with the account maintained in the regular books of account which form the basis of filing the return of income except minor variations like the entries made in the books of the party is against the name of Vishal Rubber Products but the assessee has made in the books as Vikas Rubber Roll Products. It is because of such discrepancies that the learned Assistant Commissioner of Income-tax has rejected the book version and made the additions on the basis of the entries shown in the impugned balance-sheet found in the course of the search. Considering therefore the facts of the case, I am of the opinion that the impugned balance-sheet cannot be relied upon without corroborative material to hold that the balance-sheet is a genuine document and is based on either in the books of account found in the course of the search or any document wherefrom it could have been drawn. From the record I find that the learned Assistant Commissioner of Income-tax has examined under Section 131 of the Income-tax Act the managing partners of the three concerns and also gathered the copies of the account from third parties in order to have some material to hold that the impugned balance-sheet is a genuine document but he could not gather any material adverse to the assessee. In the circumstances the additions made on the basis of the impugned balance-sheet cannot be sustained and accordingly the addition of Rs. 7,16,322 (1,54,879 + 4,32,702 + 1,28,741) is hereby deleted. Since the entire addition made is deleted, the other grounds in the appeal become infructuous."
6. Learned counsel for the Revenue could not point out any patent error in the reasons assigned by the Commissioner of Income-tax (Appeals) which were approved by the Tribunal. The finding recorded by the Assessing Officer that the assessee had concealed the income is not supported by any tangible evidence available on record. Therefore, we do not find any merit in the appeal and dismiss the same.