2008 (9) TMI 516 - HC - Income Tax

Search and Seizure - The respondent-assessee is the owner of mines at different sites from which the assessee was extracting marble blocks. Such marble blocks are converted into slabs and marble tiles are manufactured from such slabs. The Assessing Officer worked out the unaccounted sales for the entire financial year, namely, from April 1, 1990 to March 31, 1991. Unaccounted sales were worked out on the basis of certain instances of underinvoicing. The Assessing officer took sales on the basis of underinvoicing at a figure of Rs. 78,73,938 and applying average rate of 50 percent. made addition. The Commissioner (Appeals) adopted a rate of 40 percent as being sale which were underinvoiced. Held that- (1) what should be the percentage adopted in a given set of facts of a case was a question of fact. The Tribunal had recorded that a copy of the seized diary contained unaccounted sales and unaccounted expenditure for the period from October 13, 1990 to February 19, 1991, and this fact had been verified by the Tribunal from the paper book 19, 1991 and this fact had been verified by the Tribunal from the paper book filed before the Tribunal. The Tribunal had thereafter stated that if unaccounted sales and income therefrom were estimated for the period from April 1, 1990 to Feb, the assessee could not be denied deduction of corresponding expenditure for the period between April 1, 1990 to October 12, 1990. Therefore, the Tribunal accordingly deleted the disallowance sustained by the Commissioner (Appeals). There was no legal infirmity I the order of the Tribunal.

Summary

Issues:
1. Underinvoicing estimation discrepancy
2. Deduction of unaccounted expenditure
3. Discrepancy in stock calculation

Underinvoicing Estimation Discrepancy:
The case involved two appeals arising from a Tribunal order. The primary issue was the correct estimation of underinvoicing by the Assessing Officer. The Tribunal upheld unaccounted sales at Rs. 68,72,970 but adjusted the underinvoicing rate to 36.41% instead of the 40% adopted by the Commissioner (Appeals). The Tribunal's decision was based on the evidence and facts on record, concluding that the percentage adopted in such cases is a factual matter. The Tribunal's findings were deemed not to raise any legal questions.

Deduction of Unaccounted Expenditure:
The second issue concerned the deduction of unaccounted expenditure amounting to Rs. 8,39,836. The Assessing Officer allowed Rs. 3,50,184 based on seized material, while the assessee claimed the full amount. The Commissioner (Appeals) further estimated and allowed Rs. 2 lakhs. The Tribunal ruled that once income is estimated for a period, corresponding expenditure must be estimated, deleting the disallowance sustained by the Commissioner (Appeals). The Tribunal's decision was based on factual evidence, and no legal questions arose.

Discrepancy in Stock Calculation:
Regarding the discrepancy in stock, the Assessing Officer made an addition of Rs. 4,19,913, which the Commissioner (Appeals) sustained partially. The Tribunal accepted the assessee's argument that the deficit in stock of slabs should be set off against the excess stock of tiles due to the mixing of inventory among three concerns. The Tribunal retained the addition partially at Rs. 19,725. This decision was also based on factual evidence, and no legal issues were identified.

In conclusion, both appeals were dismissed by the High Court, affirming the Tribunal's decisions on the various issues raised in the case. The judgments were based on a thorough analysis of the facts and evidence presented, with no substantial legal questions arising from the Tribunal's orders.