2003 (11) TMI 24 - HC - Income Tax

Additions Shortage vis- -vis Wastage - Assessing Officer made an addition of Rs. 1,35,80,987 to the trading results, on the ground that the assessee had processed more pan masala and had sold the same outside the books of account - Whether the order of the Tribunal deleting the addition of Rs. 1,35,80,987 is perverse and contrary to the evidence and tax audit report of the statutory auditors? - Tribunal has taken note of a very significant factor, namely, the wastage in supari, catechu and even cardamom, for the preceding years, has been much higher than in the year under consideration, but still the accounts of the assessee were accepted for the last eight years, particularly when assessments in respect of some of the years, were made under section 143(3), i.e., after scrutiny of accounts. The Tribunal has observed that the addition was made on the basis of doubts and surmises - findings recorded by the Tribunal, which are essentially findings of fact, are based on factors, which cannot said to be irrelevant. In our opinion, no question of law, much less a substantial question of law arises from the order of the Tribunal.

Summary

Issues involved:
1. Whether the deletion of the addition by the Tribunal was contrary to evidence and the tax audit report?
2. Whether the Tribunal erred in distinguishing between shortage and wastage in deleting the addition made by the assessee?
3. Whether the Tribunal's order involves a substantial question of law?

Analysis:

Issue 1: The Assessing Officer made an addition to the trading results due to claimed losses in raw materials by the assessee. The Commissioner restricted the addition, but the Tribunal deleted the entire addition. The Tribunal considered the wastage percentages of raw materials over the years and found no defects in the books of account. The Tribunal held that the rejection of books was unwarranted, and the addition was based on doubts and surmises. The Tribunal's decision was based on relevant facts and not arbitrary. The Tribunal's findings were upheld, and the appeal was dismissed.

Issue 2: The Tribunal emphasized the distinction between shortage and wastage, noting the history of wastage percentages in the accounts of the assessee. The Tribunal found no justification for the partial addition sustained by the Commissioner. The Tribunal concluded that the assessee correctly depicted figures in the balance sheet as per Schedule 6. The Tribunal's decision was based on factual analysis and consistency in assessing the accounts over the years.

Issue 3: The High Court analyzed whether the Tribunal's order raised a substantial question of law. Referring to legal precedents, the Court clarified the criteria for determining a substantial question of law. The Court found that the Tribunal's decision did not involve any substantial question of law. The Court upheld the Tribunal's findings as based on relevant factors and not warranting legal intervention.

In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision to delete the addition made by the Assessing Officer. The Court found no substantial question of law arising from the Tribunal's order, as the decision was based on factual analysis and consistent treatment of accounts over the years.