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Jai Chand Kanji and Co. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Case No. 62 of 1978
Judge
Reported in[1986]157ITR451(Raj)
ActsIncome Tax Act, 1961 - Sections 256, 256(1) and 256(2)
AppellantJai Chand Kanji and Co.
RespondentCommissioner of Income-tax
Appellant Advocate M.C. Bhoot, Adv.
Respondent Advocate J.L. Daga, Adv.
Excerpt:
.....into force - juvenile act, of 2000 has been given retrospective effect by rule 12 of juvenile justice rule, 2007 - as such, accused has to be treated as juvenile under the said act. - sheets which had been certified as pledged with the bank in the account of the assessee, was on the assessee and (on) the failure to do so by m/s. learned counsel could not satisfy that this finding is vitiated on any good ground so as to give rise to any question of law......tribunal to uphold an addition of rs. 5,000 as income from ' other sources ' being unrecorded cash sales ? 2. whether, on the facts and in the circumstances of the case, there was legal and admissible evidence to support the finding of the income-tax appellate tribunal contained in its order dated december, 1976, upholding the addition of rs. 5,000 as income from undisclosed sources ? 3. whether, on the facts and in the circumstances of the case, the income-tax appellate tribunal was legally justified to sustain an addition of rs. 27,000 as income from undisclosed sources ? 4. whether the order of the income-tax appellate tribunal is not vitiated on account of non-consideration of the material evidence and on consideration of the totally irrelevant and conjectural material ? 5......
Judgment:

S.K. Mal Lodha, J.

1. This is an application under Section 256(2) of the Income-tax Act, 1961 (for short ' the Act'), filed by the assesse for a direction to the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (' the Tribunal' herein), to state the case and refer the following questions of law for the opinion of this court:

' 1. Whether there was any material with the Income-tax Appellate Tribunal to uphold an addition of Rs. 5,000 as income from ' other sources ' being unrecorded cash sales ?

2. Whether, on the facts and in the circumstances of the case, there was legal and admissible evidence to support the finding of the Income-tax Appellate Tribunal contained in its order dated December, 1976, upholding the addition of Rs. 5,000 as income from undisclosed sources ?

3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified to sustain an addition of Rs. 27,000 as income from undisclosed sources ?

4. Whether the order of the Income-tax Appellate Tribunal is not vitiated on account of non-consideration of the material evidence and on consideration of the totally irrelevant and conjectural material ?

5. Whether, on the facts and in the circumstances of the case, could it be legally held that the burden to prove that M/s. Iron & Steel Association had with it the required quantity of G.C. sheets which had been certified as pledged with the bank in the account of the assessee, was on the assessee and (on) the failure to do so by M/s. Iron & Steel Association, would an addition of Rs. 27,000 as the income of the assessee (be justified) ?

6. If the answer to the above question is in the affirmative, whether there was any material with the Income-tax Appellate Tribunal to uphold the addition of Rs. 27,000 being the value of Rs. 150 bundles of G.C. sheets and against the shortage of 105 bundles of G.C. sheets '

2. The assessed is a firm consisting of four partners. It deals in sugar, foodgrains and agricultural commodities. The assessee has also income from property. The assessment year in question is 1970-71. The assessee filed its return for the assessment year 1970-71 on April 10, 1972, declaring an income at Rs. 25,295. The Income-tax Officer by his order dated March 13, 1973, completed the assessment on a total income of Rs. 2,11,630, making, inter alia, the following additions to the returned income :

Rs.

'1. Trading additions

67,970

2. Income from (other) sources :

(a)Unrecorded cash (sales) difference

5,000

(b) Thevalue of the difference in the stock of sugar as per the books of theassessee and as per the record of the bank

84,800

(c) The value of the difference in thestock of G.C. sheets as recorded in the books of the assessee and are foundrecorded in the books of the bank

27,000

3. The addition in the truck A/c

3,888

4. Addition due to sales tax penalty

2,388.'

3. The assessee went in appeal and the Appellate Assistant Commissioner gave relief to the assessee amounting in all to Rs. 1,14,212. He, however, sustained the following additions :

Value

Rs.

'1.

Trading account additions

38,558

2.

Addition in the truck A/c

3,388

3.

Addition due to unrecorded cash(sales)

5,000

4. Difference in the value of the stock of G.C. sheets as above

27,000

5.

Disallowance on account ofsales tax penalty

2,367.'

4. Dissatisfied, the assessee went in further appeal to the Tribunal. The Tribunal partly allowed the appeal by its order dated December 6, 1976. It, however, confirmed the additions of Rs. 5,000 and Rs. 27,000 and the aforesaid two items of additions are the subject-matter of the present reference application. An application under Section 256(1) of the Act was filed by the assessee for referring the questions of law arising out of the order dated December 6, 1976. The Tribunal rejected the reference application by its order dated January 9, 1978. The assessee has filed this application under Section 256 of the Act as aforesaid, stating that the decision of the Tribunal rejecting the application under Section 256 is erroneous, as referable questions of law arise out of the order of the Tribunal dated December 6, 1976.

5. We have heard Mr. M.C. Bhoot, learned counsel for the assessee-petitioner, and J.L. Daga for the Revenue.

6. We may state, at the outset, that the learned counsel for the assessee has pressed that the Tribunal should be directed to refer questions Nos. 2 and 3 stated hereinabove. He did not press for the remaining questions detailed in his application under Section 256 of the Act. We have carefully considered the order of the Tribunal.

7. A controversy was raised regarding the addition of Rs. 5,000 as unrecorded cash (sales) before the Tribunal. The Tribunal has excerpted the relevant part of the order of the Commercial Taxes Officer, in its order, which is as under :

' ...the trader was subjected to a survey on September 25, 1971, and, at that time, an account was found noted on certain loose papers. Therefore, the trader's records were subjected to scrutiny on various dates and his statement was recorded... An examination of the trader's loose papers taken into possession revealed that the opening and closing balances of cash on several days, as recorded on those loose sheets, did not tally with the corresponding balance recorded in the cash book. When the trader was asked to explain the cause for this discrepancy, he replied that this discrepancy has been there since last year itself which was on account of the the differences in sales of sugar and iron. But the sum in question was different in the last year's papers and this year's papers. It was admitted by the trader that he had sold certain goods in cash and that the aforesaid sum represented the proceeds of such sales. Therefore, his total sales have been increased by Rs. 5,000. '

8. Against this addition, two submissions were made on behalf of the assessee before the Tribunal: (i) that the Commercial Taxes Officer had not examined the original papers; (2) that on the basis of the order of the Commercial Taxes Officer that the assessee had admitted the unrecorded cash sale of Rs. 5,000, the additions could not have been made. The Tribunal examined both the submissions and observed as under :

' It has not been denied on behalf of the assessee that a survey of its shop was undertaken by the sales tax authorities and that they had discovered from his shop several loose sheets (showing) opening and closing balance of cash and that such balances, when compared with the cash book of the assessee, were found to be different. It is true that the assessee tried to explain this difference by stating that they have been coming from the earlier year, but this explanation was not accepted by the sales tax authorities. After this, a categorical admission was made by the assessee before the Commercial Taxes Officer that the aforesaid difference arose because of certain cash sales which had not been recorded in the books of the assessee. It is not possible to ignore this admission and, in our opinion, the authorities below were right in taking note of it and correspondingly increasing the total income of the assessee. It is true that the original papers were not before the income-tax authorities; in fact, nobody knows where they are. But it does not follow from this that they were never discovered and what is stated by the sales tax authorities is not correct. In the absence of the original record, the authorities below had no option but to take note of the finding given by the Commercial Taxes Officer in the normal discharge of his duties and which the assessee chose for whatever reason not to challenge. We, therefore, confirm the addition sustained by the learned Appellate Assistant Commissioner on this point. '

9. The addition of Rs. 5,000 as unrecorded cash (sales) is a finding of fact, since it has been arrived at on the basis of material on record. Even if question No. 2 is a question of law, in the facts and circumstances of the case, the addition of Rs. 5,000 is not vitiated, for, the original papers were not available with the Commercial Taxes Officer. The original papers and the admission before the Commercial Taxes Officer were that of the assessee itself and it was open to the assessee to accept or deny or explain the said admission before the Appellate Assistant Commissioner, which it did not do. The Tribunal has, on the basis of the material that was before it, came to the conclusion that the addition of Rs. 5,000 represented cash sales which has not been recorded in the assessee's books of account. In the circumstances of the case and further in view of the smallness of the amount of Rs. 5,000, we are of the opinion that the Tribunal was justified in not referring question No. 2 to this court.

10. This brings us to the addition of Rs. 27,000 in the stock of G.C. sheets pledged with the bank and as recorded in the books of account as closing stock.

11. The Tribunal examined the question of addition of Rs. 27,000 on the basis of the explanation given by the assessee and the affidavits that were filed. It was noticed by the Income-tax Officer that there was discrepancy in the stock of G.C. sheets as pledged with the bank and as recorded in the books of account as closing stock. The closing balance as per books was of 103 bundles of G.C. sheets, one bundle weighing one quintal and the stock pledged with the bank was 208 bundles of G. C. sheets. The certificate given by M/s. Iron & Steel Association, Banswara, was also considered. The books of account of M/s. Iron & Steel Association, Banswara, were not produced before the Income-tax Officer and ultimately it was submitted that the said books of account had been destroyed by a fire accident. The affidavit dated March 15, 1973, of Chandmal was taken into consideration. The affidavit of Shri Prakash Chandra, partner of M/s. Iron and Steel Association, was also considered. The Tribunal took into consideration the material on record, the circumstances emerging therefrom and also the reasons given by the Appellate Assistant Commissioner and opined that the version of the assessee was not proved and drew an adverse inference against it and sustained the addition of Rs. 27,000.

12. An alternative argument was raised before the Tribunal on behalf of the assessee that the addition should be restricted to the value of 105 bundles of G.C. sheets only. That was also rejected. The fact remains that the assessee did not succeed in explaining the discrepancies in regard to the G.C. sheets and so the addition of Rs. 27,000 as income from undisclosed sources was sustained. The finding relating to addition of Rs. 27,000 as income from undisclosed sources is based on evidence. No material evidence has been excluded. The finding has been arrived at on a consideration of the relevant material on record and the circumstances emerging therefrom. Learned counsel could not satisfy that this finding is vitiated on any good ground so as to give rise to any question of law. In our opinion, the decision of the Tribunal rejecting the reference application under Section 256(1) of the Act by its order dated January 9, 1978, is not incorrect.

13. The application for making a reference under Section 256(2) of the Act is dismissed as no question of law arises out of the order passed by the Tribunal dated December 6, 1976, in this case.


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