ITA No. 346 of 2005 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 346 of 2005 Date of Decision: 12.10.2010 M/s Kamal Spinning Mills ....Appellant. Versus The Commissioner of Income Tax, Rohtak ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sanjay Bansal, Senior Advocate with Ms. Ashima Bindlish, Advocate for the appellant. Ms. Urvashi Dhugga, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. In this appeal filed under Section 260A of the Income Tax Act, 1961 (in short “the Act”), the assessee has claimed the following substantial questions of law said to be arising out of the order dated 31.3.2005 passed by the Income Tax Appellate Tribunal, Delhi Bench “A”, New Delhi (hereinafter referred to as “the Tribunal“) in ITA No. 3648/Del/2001 relating to the assessment year 1995-96:- “(i) Whether the Tribunal was right in law in not dismissing the appeal filed by the Department/ Revenue contrary to the Circular issued by the Central Board of Direct Taxes in the case of the present appellant? ITA No. 346 of 2005 -2- (ii) Whether the impugned order passed by the Tribunal is perverse, illegal and contrary to the principle of judicial precedent and judicial discipline? (iii) Whether on the facts and in the circumstances the Tribunal misdirected itself in law as well as on facts in reversing the order passed by the CIT (A) thereby upholding the addition of Rs.1,28,000/- made by the Assessing Officer on account of investment made in purchases outside the books of account?” 2. The facts as narrated in the appeal are that on 13.1.1998, a survey was conducted at the premises of the assessee and during the course of said survey, certain bills and challans were found which were not recorded in the books of account pertaining to the year in question. The assessment was reopened and the Assessing Officer estimated the unaccounted turnover at Rs.5 lacs. After determining the profit of the said transactions at the rate of 10%, the Assessing Officer made an addition of Rs.50,000/-. The assessee took the matter in appeal and the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”] vide order dated 25.6.2001 restricted the addition to Rs.21,568/- by applying GP rate of 7.53% on unrecorded sales of Rs.2,86,429/-. Feeling aggrieved, the revenue approached the Tribunal who vide order dated 31.3.2005 partly allowed the appeal upholding the addition of Rs.1,28,000/- made by the Assessing Officer. Hence, the present appeal by the assessee. 3. We have heard learned counsel for the parties and perused the record. ITA No. 346 of 2005 -3- 4. Learned counsel for the assessee submitted that the appeal filed by the revenue before the Tribunal was in contravention of the circular issued by the Central Board of Direct Taxes (CBDT) whereby the revenue was precluded from filing an appeal before the Tribunal where the tax effect was less than Rs.1 lac. According to the learned counsel, Instruction No. 1979 dated 27.3.2000 read with Instruction No. 1985 dated 29.6.2000 prescribed that tax effect of Rs.1,00,000/- should have been involved before the revenue could agitate a cause in appeal before the Tribunal and “tax effect” would embrace element of tax involved only excluding interest, penalty and fine. Learned counsel urged if the tax effect is held to be less than Rs.1,00,000/-, the appeal itself before the Tribunal was not maintainable. Addressing on merits, learned counsel submitted that the addition of Rs.1,28,000/- upheld by the Tribunal by reversing the order of the CIT (A) was erroneous. 5. On the other hand, learned counsel for the revenue submitted that the CBDT had issued circular on 17.7.2003 whereby it clarified its earlier Instructions dated 27.3.2000 and 29.6.2000. It was specifically provided therein that monetary limit and “tax effect” shall denote the amount of tax, interest, penalty, fine or any other sum involved. According to the learned counsel, since the amount of tax, interest, penalty, fine constituting tax effect was more than Rs.1 lac, the appeal was validly filed. Further, on merits, the learned counsel supported the order passed by the Tribunal. 6. We have given our thoughtful consideration to the respective submissions made on behalf of the parties and find merit in ITA No. 346 of 2005 -4- the submission made by learned counsel for the revenue. Instruction No.6 dated 17.7.2003 clarifying its earlier Instructions dated 27.3.2000 and 29.6.2000 reads as under:- “Reference is invited to Boards Instruction No. 1979 dated 27th March 2000, Instruction No. 1985 dated 29th June 2000 as also to earlier instructions issued to reduce litigation by fixing monetary limit for filing departmental appeals before SC/HC/ITAT. In order to avoid ambiguity and to adopt uniformity in approach while filing appeals by the field formations, it is hereby clarified by the Board that the word “monetary limit” and “tax effect” in the aforesaid instruction be read as “revenue effect” which denotes the amount of tax, interest, penalty, fine or any other sum involved. This instruction is clarificatory in nature and will apply to litigation under other Direct Taxes also e.g. Wealth Tax, Gift Tax and Estate Duty etc.” 7. A plain reading of the Instruction clearly depicts that the revenue effect comprises of tax, penalty, interest or fine or any other sum involved and that the instruction is clarificatory in nature. It is undisputed that the tax, interest, penalty, fine constituting revenue effect was in excess of Rs.1 lac and, therefore, it cannot be held that the appeal filed before the Tribunal was in contravention of the Board's Instructions. The argument raised by the learned counsel for the assessee is, thus, without any merit. Accordingly, the first question is ITA No. 346 of 2005 -5- answered against the assessee. 8. Adverting to question (iii), the finding recorded by the Tribunal while reversing the finding of the CIT (A) in respect of addition of Rs.1,28,000/- on account of unexplained investment made in purchases is as under:- “After hearing both the parties, we find merit in this ground raised by the Revenue. It is apparent from the facts of the case that assessee has accepted the fact of unaccounted sales of Rs.2,86,429/- since no appeal has been filed by it against the finding of the CIT(A). There is also no dispute that the first unaccounted sale amounted to Rs.1,40,569/- and therefore, in our opinion, the A.O. was justified in working out the unexplained investment to the extent of Rs.1,28,000/- after excluding the profit element. No reason has been given by the CIT(A) in deleting such addition. Even before us, the ld counsel for the assessee could not advance any argument as to why this addition should not be made. Every unaccounted sale would involve unaccounted purchase unless it is shown by the assessee that purchases of such unaccounted sale were duly recorded in the books of accounts. In the absence of any evidence, we uphold the addition of Rs.1,28,000/- made by the A.O. and accordingly, the finding of the CIT(A) is reversed on this account. The ITA No. 346 of 2005 -6- order of the A.O. on this issue is consequently restored.” 9. The aforesaid finding of fact has not been shown to be perverse in any manner by the learned counsel for the assessee which may warrant interference by this Court. Accordingly, question (iii) cannot be said to be a substantial question of law. 10. Question (ii) being general question cannot be said to be a substantial question of law. 11. In view of the above, there is no merit in this appeal and the same is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE October 12, 2010 (ADARSH KUMAR GOEL) gbs JUDGE