Gujarat High Court
Commissioner vs Sangam on 21 December, 2011
Author: Akil Kureshi
Bench: Akil Kureshi
Gujarat High Court Case Information System
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TAXAP/1764/2010 4/ 4 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 1764 of 2010
To
TAX
APPEAL No. 1765 of 2010
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COMMISSIONER
OF INCOME TAX-II - Appellant(s)
Versus
SANGAM
PRINTS PRIVATE LIMITED - Opponent(s)
=================================================
Appearance
:
MR MR BHATT, SR.
ADV. with MR MALAK M BHATT and MRS
MAUNA M BHATT for Appellant(s) : 1,
None for Opponent(s) :
1,
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CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 21/12/2011
ORAL
ORDER
(Per : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Revenue is in appeal against the judgment of the Tribunal dated 12.2.2010. These two appeals arise out of the common judgment of the Tribunal, which disposed of the cross-appeals of the Revenue as well as the assessee. Hence, two appeals before this Court.
2. For the purpose of this order, we may notice the questions as framed in Tax Appeal No.1764 of 2010, which are as follows:-
"[i] Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in restricting the addition of Rs.12,76,39,490/- made by the Assessing Officer on account of unexplained expenditure, including gross profit addition of Rs.81,77,779/-, already restricted by the Appellate Commissioner to Rs.1,97,66,427/-, to Rs.27,20,857/- only, and further directing the Assessing Officer to allow deduction of payment of excise duty on the said goods, in light of the provisions of Section 69C of the Income Tax Act?
[ii] Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal has committed an error in reversing the order of the Commissioner of Income-Tax (Appeals)-II, Surat, without assigning any cogent and relevant reasons?
[iii] Whether on the facts and in the circumstances of the case and in law the Honourable ITAT is right in holding that the assessee has earned job work income from the illicitly cleared goods even though it has not furnished the name and address of the persons/parties who are real owner of the goods?
[iv] Whether on the facts and in the circumstances of the case and in law the Honourable ITAT is right in giving set off a amount declared during the course of survey as the disclosure was made on unaccounted stock during the course of survey?
[v] Whether on the facts and in the circumstances of the case and in law the Honourable ITAT is right in giving telescopic effect on the GP addition out of the income from illicitly cleared goods as and when the value of total turnover of illicitly cleared goods has not been included in the turnover shown in the books of accounts?
(vi) Whether on the facts and in the circumstances of the case and in law the Honourable ITAT is right in holding that "since books of accounts are not accepted but the gross profit is estimated and sustained, no separate addition can be made by invoking section 40A(3) of the I.T. Act?"
3. Though several questions are framed two principle issues debated before us, pertaining to all these questions, were with respect to the Tribunal's decision to restrict the additions confirmed by CIT(Appeals) on the premise that the assessee was a mere job-worker and did not process any grey fabric of its own. Second aspect is with respect to the Tribunal's opinion that some of the additions can be telescoped into a larger addition on the basis of gross-profit ratio.
4. The additions made by the Assessing Officer were substantially reduced by CIT(Appeals) to a sum of Rs.1.97 crores ( rounded off). Such order of CIT(Appeals) was carried further in appeal both by the Revenue as well as the assessee. The Tribunal disposed of both the appeals by a common impugned order, partly allowing the assessee's appeal and dismissing the Revenue's.
5. The Tribunal formed an opinion that the assessee was mere job-worker and that the additions made on the basis of the assessee, independently processing the grey fabric, were not justified. The Tribunal, therefore, to estimate the possible profit on clandestine work carried on by the assessee as a job-worker, calculated profit at the rate of Rs.7/- per meter and worked out the addition to Rs.77.20 lakhs ( rounded off). Out of the said sum, since the assessee had already disclosed Rs.50 lakhs and offered it to tax, the Tribunal, in essence, sustained addition of Rs.27.20 lakhs (rounded off).
6. Counsel for the Revenue drew our attention to the statement of the Director of the assessee company recorded by the Revenue authorities during the search to contend that the assessee was involved not only in processing the grey fabric as a job-worker but also independently in the said statement, the Director had admitted that some 98,413.20 meters of grey cloth was purchased from the unaccounted income. He, however, in the same breath also offered a sum of Rs.14.76 lakhs (rounded off to Rs.15 lakhs ), which was the purchase price of such cloth to tax.
7. We find that the Tribunal has recorded the following findings in coming to the above conclusions:-
"7.1 The basis of addition itself is based on the show-cause notice issued by the Central Excise & Customs Department and the allegation in the show cause notice being that the grey fabrics were received by the assessee from merchant manufacturers, in absence of any other evidence it cannot be said that the assessee was processing the goods on own account by purchasing the same from undisclosed sources. We, therefore, hold that as per the finding of Central Excise Department, the assessee can be said to be engaging itself only in Job-work of processing goods but not for purchasing grey fabrics and then processing it for sale on own account."
8. We find that the Tribunal having estimated the profit on the basis of job-work and having sustained part of the additions on the basis of the evidence on record, the whole issue in realm is of appreciation of evidence. No question of law, therefore, arises. It may be that as pointed out by the learned counsel for the Revenue, the Director himself had made certain statements to suggest that part of cloth was purchased by the assessee itself. However, purchase price thereof was also offered to tax.
9. Additionally, we also notice that the Tribunal has no reason to demonstrate that the principle of telescoping would apply.
10. In the result, no question of law arises, Tax Appeals are, therefore, dismissed.
(Akil Kureshi, J. ) (Ms. Sonia Gokani, J. ) sudhir Top