Income-tax Appeal No.722 of 2010 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.722 of 2010(O&M) Date of decision: 24.12.2010 M/s Roshan Lal Tilak Raj & Co. ...Appellant Versus The Commissioner of Income-tax-II, Range IV, Jalandhar ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Ms.Radhika Suri, Advocate for the appellant. **** ADARSH KUMAR GOEL, J ( Oral) . This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) against order dated 27.11.2008 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar in ITA No.432/Asr./2008, for the assessment year 2004-05, claiming following substantial questions of law:- “1. Whether on the facts and in the circumstances of the case, the Tribunal erred in confirming the addition of Rs.1,60,875/- made on account of alleged undisclosed sale of bardana as per Annexure 1? 2. Whether on the facts and in the circumstances of Income-tax Appeal No.722 of 2010 -2- **** the case, the Tribunal erred in confirming the addition of Rs.10,31,592/- made on account of alleged undisclosed sale of bags and sutli as per Annexure III? 3. Whether on the facts and in the circumstances of the case, the Tribunal erred in confirming the addition of Rs.8,49,464 made on account of alleged undisclosed sale of paddy as per Annexure II? 4. Whether on the facts and in the circumstances of the case, the order of the Tribunal vacating findings of fact given by the CIT(A) and confirming additions of alleged unrecorded sales as per Annexures I to III is perverse? 5. Whether the Tribunal erred in confirming the addition of unrecorded sales on the basis of annexures I to III without appreciating that the appellant was only a Kucha Arhatia and, therefore, addition could have been made of commission only? 6. Whether on the facts and in the circumstances of the case, the findings arrived at by the Tribunal are perverse, inasmuch as no reasonable person correctly informed of the provisions of law would come to such a conclusion?” During the assessment, the assessing officer did not Income-tax Appeal No.722 of 2010 -3- **** accept the declared income of ` 12,950/- and made, inter-alia, following additions:- a) ` 1,60,875/- on account of unrecorded sales of bardana; b) ` 10,31,592/- on account of unrecorded sales of bags and sutli; and c) ` 8,49,464/- on account of unrecorded sales of paddy. The assessee derived income from purchase and sales of food grains and arhat. On 20.11.2003, a survey was conducted on the premises of the assessee and statement of its partner Manoj Kumar was recorded. Copies of certain slips found at the time of survey and some other material were also taken. The said slips showed that the assessee had received or sent bags of paddy or empty bags of bardana or other material which was not recorded in its books of account. Explanation of assessee was that bags belonged to the commission agents whose names were mentioned in the slips. The slips happened to be with the assessee as brother of its partner was having share in M/s Arora Rice and General Mills. With regard to gate passes, it was stated that bags were sold by the assessee. With regard to slips pertaining to bardana, it was stated that the same belonged to M/s Arora Rice and General Mills and were returned to them in due course. The assessing officer did not accept the stand of the assessee. It held that the assessee had sold the goods out side the books of account and on that basis impugned additions were made. Income-tax Appeal No.722 of 2010 -4- **** On appeal, the CIT(A) set aside the additions, accepting the explanation of the assessee that material found during survey belonged to M/s Arora Rice and General Mills and, thus, additions were required to be in the hands of M/s Arora Rice and General Mills and not in the hands of the assessee. On further appeal of the revenue to the Tribunal, the additions made by the assessing officer were restored as follows:- “5. We have heard both the parties and perused the material placed on record. In this case, the assessee has sent empty bags to M/s Arora Rice & General Mills . The sending of the empty bags by the assessee to M/s Arora Rice & General Mills is an admitted fact and there is no dispute regarding this. For example, we reproduce hereunder one of the gate passes bearing No.551 dated 1.9.2003: M/s Arora Rice & General Mills IBRAHIMWAL (Distt. Kapurthala) No.551 dated 1.9.2003. Gate pass. 1. Sender M/s Roshan Lal Tilak Raj & Co., Nadala 2. Bardana A class 3. New Bardana B Class 20 bundle 4. Total 20 X 50 = 1000 bags 5. Truck/Thela No.PBK 8744 6. Signature of For M/s Arora Rice & General Mills Income-tax Appeal No.722 of 2010 -5- **** Recipient Sd/ Manager/Partner As above, the assessee sent 1000 bags to M/s Arora Rice & General Mills which were received by the Manager/Partner of M/s Arora Rice & General Mills. The contention of the assessee is that M/s Arora Rice and General Mills sent the empty bags to the assessee is incorrect when M/s Arora Rice & General Mills did not send the empty bags to the assessee. The assessee itself sending the empty bags to M/s Arora Rice & General Mills. The assessee is required to disclose sale of these empty bags. The finding of the CIT(A) is that there was no addition in the case of M/s Arora Rice & General Mills on this count. Hence, the addition cannot be made in the hands of the assessee. In our opinion, it cannot be the reason for deletion of addition in the hands of the assessee. If the AO of M/s Arora Rice & General Mills fails to make addition and committed an error that error need not be perpetuated in the hands of the assessee. The assessee has not been able to lead any evidence to show that the reason for not recording these sales of empty bags to M/s Arora Rice & General Mills, in their books. The AO is justified in treating the sale of empty bags at Rs. 1,60,785. The same is confirmed. Accordingly, the order of the ld. CIT(A) is reversed that this ground of appeal of the revenue is allowed. Income-tax Appeal No.722 of 2010 -6- **** xxx xxx xxx 6.1 We have heard both the parties and perused the material placed on record. In this case, the sale of paddy by the assessee to M/s Arora Rice & General Mills was not disputed. The contention of the assessee that it was already included in the sale of 6906 bags which was disclosed in the books of account. But we are unable to agree with the findings of the ld. CIT(A) because there was categorical findings given by the AO that there was no entry in respect of slips bearing gate pass Nos. 113 to 128 in the books of account of the assessee. The assessee has failed to adduce any evidence to show that the paddy sold to M/s Arora Rice & General Mills vide gate pass bearing Nos. 113 to 128 was accounted by the assessee. The AO further mentioned specific gate pass bearing No.126 issued by M/s Arora Rice & General Mills on 24.10.2003 which was unaccounted by the assessee. Being so, the learned CIT(A) observed that the sale of 2750 bags included in the sale of 6906 bags accounted by the assessee incorrect. The assessee has not been able to lead any evidence that receipt Nos. 1 to 16 issued by M/s Arora Rice & General Mills are accounted on which date in the books of account. Hence, in the absence of requisite material, the addition is to be sustained. Accordingly, the order of the ld. CIT(A) is Income-tax Appeal No.722 of 2010 -7- **** reversed and the ground of appeal of the revenue is allowed. xxx xxx xxx 7.1 We have heard both the parties and perused the material placed on record. The assessee stated before the AO that it has received 25000 empty bags and 25000 empty katta from M/s Arora Rice & General Mills, which were distributed among the commission agents from whom paddy was purchased. Once these empty bags are distributed to the commission agents, there is nothing on record to send it back to M/s Arora Rice & General Mills. The admitted fact is that slips found during the course of survey show sending of the empty bags by the assessee to M/s Arora Rice & General Mills which were not accounted by the assessee. Hence, the AO is justified in bringing the value of these bags to taxation. The ld. CIT(A) made the deletion on the basis of stock statement, which was never produced before the AO, cannot be considered. Hence, the deletion is not justified. Accordingly, we reverse the order of the ld. CIT (A) on this issue. This ground of appeal of the revenue is allowed.” We have heard learned counsel for the appellant. Learned counsel for the appellant submits that the Tribunal erred in reversing the finding of CIT(A). The assessee was Income-tax Appeal No.722 of 2010 -8- **** working only as a Commission Agent and did not make any sale or purchase of goods in its own account. The goods belonged to M/s Arora Rice and General Mills whose name was described on the slips as rightly held by the CIT(A). We are unable to accept the submission. The finding of fact recorded by the assessing officer and upheld by the Tribunal is based on the evidence and inference drawn from the material on record after due consideration of the explanation of the assessee and is not shown to be perverse. Mere fact that the assessee was working as a commission agent could not be conclusive of its not deriving income from unrecorded sales. Description on the slips and the gate passes were also not conclusive of the assessee being not involved in the transactions in question. Admittedly, the bags were found in the premises of assessee. In such a fact situation, no substantial question of law arises. Accordingly, the appeal is dismissed. (Adarsh Kumar Goel) Judge December 24,2010 (Ajay Kumar Mittal) Pka Judge