IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 65 of 2011(O&M) Date of Decision: 29.11.2011 Commissioner of Income-Tax-I, Ludhiana ........Appellant vs. M/s. Goyal Petrofills Yarn Pvt. Ltd. .......Respondent CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE G.S. SANDHAWALIA Present: Mr. Rajesh Katoch, Advocate for the appellant HEMANT GUPTA, J. The revenue is in appeal under Section 260A of the Income Tax Act, 1961 (for short 'the Act') against the order passed by the Income Tax Tribunal, Chandigarh Bench 'A' Chandigarh in ITA No. 877/CHD/2009 dated 25.06.2010 for the assessment year 2005- 06. The Revenue has sought the following substantial questions of law:- (i) Whether on the facts and circumstances of the case, the Ld. Tribunal Bench is justified in rejecting the appeal of revenue against the deletion of addition made by ld. CIT (A) of Rs. 22,45,527/- made u/s 69 of the Income Tax Act, 1961 by the Assessing officer on account of undisclosed investment in respect of negative work in progress ignoring the fact that there is negative work in progress which was detected from the books of accounts at the end of nine months in the year? (ii) Whether on the facts and circumstances of the case, the Ld. Tribunal Bench is justified in rejecting the appeal I.T.A. No. 65 of 2011(O&M) 2 of revenue against the deletion of addition made by ld. CIT (A) of Rs. 2,12,025/- made u/s 69 of the Income Tax Act, 1961 on account of undisclosed income in respect of excess weight gain of 2812 kgs during the production of knitted loop fabrics without assigning any reason? The assessee produces Polyester Texturised Yarn (PTY) from Polyster Oriented Yarn (POY) facilitated through use of antistatic oil. Special audit under section 142(2A) was got conducted, keeping in view the complexity of the entries in the books of accounts of the assessee. The special auditors calculated the month wise stock tally of production of Polyester Texturised Yarn from Polyster Oriented Yarn and concluded that there was negative stock of work-in-progress during the year. Relying upon such report, the Assessing Officer made addition of Rs. 22,45,527/- under Section 69 of the Act as undisclosed investment in the manufacturing activity and sum of Rs. 2,12,025/- on account of excess weight gain of 2812 Kgs during production. Learned Commissioner of Income-tax found that calculation of special auditors is not sustainable, as a matter of fact there is no negative stock of work in progress after considering the production. In the order, the Commissioner concluded as under:- “Therefore, as is quite clear from these details, the appellant did have sufficient raw material and antistatic oil in different months of relevant period. However, there was no need for the appellant to carry out certain production utilizing raw material which was not accounted for in the books of account which is the implied conclusion of the negative work in process worked out by the Special Auditors.” I.T.A. No. 65 of 2011(O&M) 3 In respect of addition of weight gain of 2812 kgs, the Commissioner returned the following finding:- “However, in respect of this weight gain, the entire amount in money value i.e. Rs. 2,12,025/- is taken into account either in sales or in the closing stock. There is no corresponding entry for the purchases in respect of this weight gain. Therefore, it is not the Gross profit on Rs. 2,12,025/- which goes to the income of the appellant but the entire of Rs. 2,12,025/-. Now once the entire sales amount was taken into account, the gross profit on such sales and the corresponding purchases amount is automatically included.” The said finding has been affirmed by the Tribunal in the order out of which the present appeal said to give rise to the above stated question of law. We have heard learned counsel for the revenue at length and find that findings of the Tribunal accepting the explanation of the assessee are the finding of fact based on the basis the production data. The Commissioner of Income Tax and the Tribunal have returned findings of fact. We do not find any question of law arises to justify the addition made by the Assessing Officer. Dismissed. (HEMANT GUPTA) JUDGE (G.S. SANDHAWALIA) 29.11.2011 JUDGE reena