2010 (2) TMI 76 - HC - Income Tax

Undisclosed stock CIT(A) and ITAT deleted the addition of Rs 1,15,44,926/-, which the Assessing Officer had made on account of undisclosed stock found with the assessee during the course of a survey - Commissioner of Income Tax (Appeals) observed that the crux of the matter pertains to the genuineness of purchase of Rs 1,46,00,078/- made by the respondent-assessee prior to the date of survey but which were not entered in the purchase account in the financial books. The Commissioner of Income Tax (Appeals) also noted that out of this, purchases to the extent of Rs 1,24,00,747/- were represented by six bills from M/s Sanjay International and M/s Maxwell. The case of the assessee was that even though the entries of such material had been made in the stock register and such stock was physically found in the factory premises of the assessee and formed part of the inventory taken in the survey, the purchase value of these items had not been debited in the purchase account as the purchase bills had not been handed over to the accountant for making entries thereof in the books of accounts. It was observed by the Commissioner of Income Tax (Appeals) that, as against this, the Assessing Officer felt that the aforesaid purchase bills had been arranged after the survey and were, therefore, not genuine. held that - . The present appeal is not a case where relevant evidence has not been considered nor is it a case where a finding has been returned by placing reliance on inadmissible evidence. Whatever is sought to be agitated before us was considered by the Commissioner of Income Tax (Appeals) as well the Tribunal. The Commissioner of Income Tax (Appeals) as well as the Tribunal have not placed reliance on any inadmissible evidence either. Consequently, the findings arrived at by the Tribunal cannot be interfered with

Summary

Issues:
Assessment year 2000-01 - Addition of undisclosed stock during survey - Genuineness of purchase bills - Commissioner of Income Tax (Appeals) order deletion of addition - Tribunal's view on Assessing Officer's approach - Findings of fact regarding purchases prior to survey - Scope of interference with findings of fact in appeal under Section 260A.

Analysis:
The High Court of Delhi heard an appeal by the Revenue concerning the assessment year 2000-01, arising from the Income Tax Appellate Tribunal's order. The matter revolved around the addition of undisclosed stock found during a survey. The Commissioner of Income Tax (Appeals) had deleted an addition of Rs 1,15,44,926/- made by the Assessing Officer. The core issue was the genuineness of purchases amounting to Rs 1,46,00,078/- made by the assessee before the survey but not entered in the financial books. The Commissioner noted that while the stock was physically present and accounted for in the inventory, the purchase value was not debited due to missing purchase bills. The Tribunal upheld the Commissioner's decision, finding the Assessing Officer's stance incorrect.

The Commissioner examined the authenticity of the purchase bills and confirmed the purchases were made before the survey, supported by evidence of Customs Duty payment, import entries, and verification from suppliers and clearing agents. The Tribunal concurred with the Commissioner's decision, emphasizing the genuineness of the purchases. The Court considered these findings as pure questions of fact, citing precedent on the scope of interference with factual findings in appeals under Section 260A. As neither situation warranting interference-omission of material evidence or reliance on inadmissible evidence-applied, the Court upheld the Tribunal's decision. No substantial question of law arose, leading to the dismissal of the appeal.

In conclusion, the High Court affirmed the Tribunal's findings on the genuineness of purchases made before the survey, highlighting the importance of factual determinations in such cases. The judgment underscored the limited scope for challenging concurrent factual findings in appeals, emphasizing the need for substantial legal questions to warrant interference. The decision provided a comprehensive analysis of the issues surrounding the undisclosed stock addition and the credibility of purchase transactions, ultimately upholding the lower authorities' conclusions.