Commissioner of Income Tax vs Samir Synthetics Mill

Heard learned Counsel for the Appellant.

The following substantial question of law is proposed for admission of this appeal.

Whether the Appellate Tribunal is right in law and on facts in confirming the order of the Commissioner (Appeals) confirming only unaccounted sales to the tune of Rs. 4,32,848 and thereby deleting the remaining amount of Rs. 41,61,922 made by the assessing officer invoking Section 145(2) of the Act ?

Whether there should be any addition on the ground of suppression of sales, the Tribunal has considered the aspects as under:

We have carefully considered the rival submissions, gone through the order of the tax authorities as well as the order of the assessing officer. We have also gone through the order of the Hon''ble Gujarat High Court in the case of Commissioner of Income Tax Vs. President Industries, . This is a fact that as a result of search by the Excise department in the business premises of the Assessee, various discrepancies were noted in the production of the Assessee. The excise authorities had issued a show-cause notice. What happened before the excise authorities was not explained by the Assessee neither before the authorities below nor before us. In the show-cause notice, it was mentioned that on physical verification of the fabrics in the business of two independent witnesses, 28,433 meters of man made fabric value at Rs. 5,13,474 was found in excess as compared in the balance shown in the stock register. During the stock verification, 30,566 meters of cotton fabric value at Rs. 3,56,647 was also found short as compared to the balance shown in the relevant record. Shri Shashi Kant, manager of the factory confirmed the said shortage and stated that the fabric had been cleared without payment of the excise duty. Further, 30,567 meters of fully processed fabric valued at Rs. 3,45,270 were found ready for delivery which was not accounted for in RD-1 register. During the search certain documents, papers relating to production and clearance of fabric were found from the personal custody of Shri Sanjiv Gupta, store and excise clerk of the factory and Shri Sharish Modi, dyeing consultant of the factory. In an enquiry Shri Sanjiv Gupta stated that he had been looking after the store along with the excise and other work in the factory and the documents recovered from his possession deal with stock of man-made fabric lying under process as on 15-9-1992, in the factory mentioned. He had personally verified the physical stock of fabric on that date and the paper also contained details regarding dispatch of product from the factory to various parties. These papers also contain, regarding item wise processing of cotton fabrics and man-made fabric and the cost incurred separately during April, 1992, to August, 1992. Explaining the particulars mentioned in each paper Shri Sanjiv Gupta had stated before the excise authorities that at page 9 regarding details of man-made fabrics, recent process and cleared from the factory to various parties were mentioned. It was also found that the product cleared for various parties such as M/s. Nidhi Fabrics and M/s. Krupam Textile were without payment of any excise duty. The papers found on each person also showed item-wise consumption of raw material from April, 1992, to August, 1992, along with the details of month wise capital production processing of 43,33,286 meters of cotton fabrics. The staterhent of Shri Sharish Modi also supported the statement of Shri Sanjiv Gupta and thus it was found that the production of man-made fabrics was suppressed and only a small part of the same was shown in the excise register. The Assessee even could not be able to reconcile the production, sales and the closing stock although the specific opportunity was provided by the assessing officer. Under these circumstances, we agree with the Commissioner (Appeals) that the Assessee failed to explain the suppression of production of 18,80,500 meters of cloth. We also fully agree that any addition that is to be made is not in respect of the sale consideration but only in respect of the profit. As in this case no evidence has been brought out on record which may prove that the Assessee has claimed all the expenses in the profit and loss account it is a case only of suppression of the sale consideration. In our opinion, in this regard, the judgment of the jurisdictional High Court in the case of Commissioner of Income Tax Vs. President Industries, is fully applicable. Under these facts, we, therefore, do not find any illegality or infirmity in the order of the Commissioner (Appeals) while reducing the addition on account of suppressed sales and accordingly, we confirm the order of the Commissioner (Appeals) in this regard. Thus, ground No. 1 of the Assessees appeal as well as the revenues appeal stand dismissed.

Whether there was any suppression of sale or not, is basically a question of fact. The Commissioner (Appeals) as well as the Tribunal both found that the addition of Rs. 4,32,848 is just and reasonable on account of papers found during the search. Considering the concurrent findings, we see no merit in this appeal. Both the appeals stand dismissed.