Gujarat High Court
Commissioner Of Income Tax Ii vs Suman Silk Mills Pvt ... on 13 January, 2014
Author: Akil Kureshi
Bench: Akil Kureshi, Sonia Gokani
O/TAXAP/1169/2013 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 1169 of 2013
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COMMISSIONER OF INCOME TAX II....Appellant(s)
Versus
SUMAN SILK MILLS PVT LTD....Opponent(s)
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Appearance:
MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MS JUSTICE SONIA GOKANI
Date : 13/01/2014
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal ("the Tribunal" for short) dated 25.1.2012 raising the following questions of law for our consideration :
"A. Whether on facts and circumstances of the case and in law, the Tribunal is correct in law in reversing the decision of the CIT(A) by holding that the addition of Rs.13.74 lacs was only on the basis of presumption without bringing any material in support of the said addition.?
B. Whether law and facts, the Hon'ble ITAT was justified in not appreciating the fact that there cannot be any out of books sales without out of book purchases and by not appreciating the basic question of discussing the evidence in respect thereof, there was non consideration of a Page 1 of 4 O/TAXAP/1169/2013 ORDER relevant factor on a factual aspect?
C. Whether the Hon'ble ITAT was correct in law in ruling that the excise duty liability of the assessee is not to be included in the income of the year in which it has been incurred merely because it has not been claimed in that year?"
2. Issues are interrelated and pertain to addition of Rs.13.74 lakhs made by the Assessing Officer under section 69 of the Income Tax Act, 1961 for alleged investment in purchase of clothes for processing and the job work charges paid for the same by the assessee. The other issue pertains to addition of Rs.24.80 lakhs (rounded off) made by the Assessing Officer for the alleged evasion of excise duty made by the assessee.
3. The assessee was engaged in processing of fabrics. It was subjected to proceedings for evasion of central excise by the Excise department. The adjudicating authority held that the assessee was engaged in unauthorised processing of goods and removal of the same without payment of the excise duty. He passed order holding that the value of such goods was Rs.2.36 crores(rounded off) which corresponded to excise duty evasion of 24.80 lakhs (rounded off).
4. On the basis of such findings, the Assessing Officer proceeded to make additions in the income of the assessee. He added sum of Rs.8.22 lakhs (rounded off) on the basis of the unaccounted production, applying gross profit rate of 19% otherwise disclosed by the assessee. This addition was not in challenged before the Tribunal. Having done that the Assessing Officer made two more additions noted Page 2 of 4 O/TAXAP/1169/2013 ORDER above. One was of Rs.13.74 lakhs under section 69 of the Act and another was Rs.24.80 lakhs on the premise that the assessee through unauthorised processing had evaded excise duty of the said sum which was its additional income.
5. Both these disputed additions were confirmed by the CIT(Appeals). The assessee therefore, approached the tribunal. The tribunal in the impugned judgement deleted both the additions. With respect to addition of Rs.13.74 lakhs the tribunal noted as under :
"8. On a careful perusal of the observations of the AO extracted above, we notice that the AO has made impugned addition of Rs.13.74 lacs only on the basis of presumption without bringing any material in support of the said conclusion i.e., there is no material on record to prove that the assessee has made any investment which are not recorded in the books of account, which is a mandatory condition for invoking section 69 of the Act. We also notice that the Ld. CIT(A) has simply confirmed the addition without making any discussion on this issue. In view of the foregoing discussions, we do not find any merit in the impugned addition. Accordingly, we set aside the order of the Ld. CIT(A) on this issue and direct the AO to delete the impugned addition."
6. With respect to addition of Rs.24.80 lakhs, the tribunal noted as under :
"With regard to this addition also, we find merit in the contention of the Ld. A.R. that there is no basis with the AO for drawing adverse conclusions. Though the Excise authorities have quantified the amount of duty evasion, there is no material on record to suggest that the assessee Page 3 of 4 O/TAXAP/1169/2013 ORDER did collect the said amount from its customers. The Ld A.R. also submitted that it did not claim the said amount as expenditure in its Profit and Loss account. In these circumstances, in our view, the AO could not make any addition of the amount of Excise duty evasion quantified by the Excise authorities. We notice that the Ld CIT(A) also did make detailed discussion on the merit of this addition. Accordingly, we set aside the order of the Ld CIT(A) on this issue and direct the AO to delete the said addition."
7. In our opinion, the tribunal's view is based on material on record and gives rise to no question of law. The Assessing Officer had already made additions of undisclosed income on the basis of production which was not disclosed to the excise department. Having done that there was no further scope for further additions particularly of Rs. 24.80 lakhs on the premise that the assessee had evaded excise duty to the said extent.
8. In the result, tax appeal is dismissed.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) raghu Page 4 of 4