IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 24th February, 2010
+ ITA 1/2007
COMMISSIONER OF INCOME TAX ..... Appellant
-versus-
FORECH INDIA LTD ..... Respondent
Advocates who appeared in this case:
For the Appellant : Ms Prem Lata Bansal For the Respondent : Mr M.S. Syali, Sr Advocate with Ms Mahua Kalra CORAM: HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE SIDDHARTH MRIDUL
1. Whether reporters of local papers may be allowed to
see the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in the Digest?
BADAR DURREZ AHMED, J (ORAL)
1. The present appeal filed by the Revenue is in respect of the
assessment year 2000-01 and arises out of the Income Tax Appellate
Tribunal’s order dated 28th April, 2006 in ITA No. 4562/Del/2003.
2. The Revenue was also in appeal before the Tribunal being aggrieved
by the order passed by the Commissioner of Income Tax (Appeals), who had
deleted the addition of Rs 1,15,44,926/-, which the Assessing Officer had
ITA 1/2007 page 1 of 6
made on account of undisclosed stock found with the assessee during the
course of a survey.
3. We have heard counsel for the parties and have also examined the
orders passed by the Assessing Officer, the Commissioner of Income Tax
(Appeals) and the Income Tax Appellate Tribunal.
4. We note that the 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.
5. The Commissioner of Income Tax (Appeals) examined the
ITA 1/2007 page 2 of 6
genuineness of the purchase bills and examined the issue as to whether the
purchase bills had been arranged after the survey or that the materials had, in
fact, been purchased by the assessee prior to the survey. The Commissioner
of Income Tax (Appeals), on examining the facts in detail, found as under:-
“I find from the facts placed before me that these were
import purchases, on which Customs Duty has been paid
before the date of survey or the same have been imported
against the Duty Exemption Scheme of the Govt. of India.
The payment of Duty is verifiable from its bank account for
the period prior to the date of survey. Also the entries of such
imports are found to be duly made in the Duty Exemption
Export Certificate book, which is authenticated by the
Customs and Excise authorities prior to the date of survey.
The appellant has also submitted the copies of Bills of Entry
issued by customs authorities in respect of these goods, which
show that the dates of import of these goods are prior to the
date of survey and that these goods had been actually learned
by customs prior to the date of survey. Further, the export
obligation discharged certificate was also issued by the Joint
Director General, Foreign Trade, which shows that the goods
had been purchased by the appellant before the date of survey
and had also been utilized for manufacturing purposes to
discharge the export obligations. It is also noticed that gate
passes were issued in the name of the company by Container
Corporation of India while releasing the goods from the ICD,
Tuglakabad after levy of certain charges for storage of
container in which imports were made. The appellant has
shown that the dates on these gate passes are all prior to the
date of survey. The facts also show that one of these import
purchase bills is from M/s Bayer, GMBH, in respect of which
customs clearance has been made and the documentary
evidences produced before and the Assessing Officer show
that this purchase was made prior to the date of survey. The
claim of the appellant is found verifiable from the RG-23,
Part-II entries in excise registers, on which the MODVAT
credit has also been allowed by the Excise authorities prior to
the date of survey.
I find that the fact that purchases had actually been
made and the goods had actually been received by the
appellant prior to the date of survey has also been verified
independently by the Assessing Officer during the course of
assessment proceedings from the suppliers, as well as from
the clearing agents who have confirmed that they had cleared
the goods and transported and delivered the same to the
factory of the appellant. The entries of purchase of these
goods prior to the date of survey are also found recorded in
ITA 1/2007 page 3 of 6
the stock register of the appellant, which fact has been duly
verified by the Assessing Officer himself at the time of
assessment proceedings and it is not the case of the Assessing
Officer that there is any discrepancy in the maintenance of the
same. The fact that the books of account have been
maintained on the computer is not disputed by the Assessing
Officer. The facts show that it was only the Trial Balance
which was identified by the survey Team.”
6. The Tribunal was of the view that the order passed by the
Commissioner of Income Tax (Appeals) could not be faulted and that the
Assessing Officer’s approach was not correct. The Tribunal, inter alia, held
as under:
“17. The controversy as noted by the ld. CIT(A) is whether
claim of the assessee that purchases to the tune of
Rs.1,46,00,078/- made prior to the date of survey and claimed
to be not entered in the financial books was genuine or not.
Out of above, purchases to the extent of Rs.1,24,00,747/-
were made from two parties, namely, M/s Sanjay
International and M/s Maxwell through 6 bills noted by the
ld. Assessing Officer at page 3 of the impugned order. The ld.
Assessing Officer refused to believe the claim of the assessee.
We have already recorded reasons given by the Assessing
Officer in the assessment order for not accepting above claim.
The objections raised were met by the assessee before the ld.
CIT (Appeals) and his attention was drawn to various items
which showed that purchases made by the assessee were
genuine though not accounted for in the financial books. The
ld. CIT(A) for the reasons recorded by him and reproduced
above has held that on preponderance of probability the case
of the assessee has to be accepted as genuine. The addition
has been accordingly deleted.
18. Comparative study of two orders, and on facts, we are
inclined to accept and agree with the order passed by the ld.
CIT(A). Although complete detail of what happened at the
time of survey was not produced before us, it is agreed
between the parties that survey party on 20.1.2000 found
discrepancy between stock actually present in the factory
premises and stock worked out as per books of account of the
assessee. The discrepancy pointed out in stock was fully
reconciled on behalf of the assessee although the plea was
taken that some of the purchases including purchases made at
high sea were not entered in financial books though goods
were actually received at the factory premises. It is not in
ITA 1/2007 page 4 of 6
dispute that books of accounts of the assessee at the time of
survey were incomplete. The assessee later completed books
of accounts after incorporating all the purchases and showed
that position of stock at the premises and in the books of
accounts stood reconciled. This was conveyed by the assessee
to the Dy. Commissioner of Income-tax being certified it for
vide letter dated 7.2.2000. The same position was maintained
by the assessee during the course of assessment proceedings.
The assessee had also relied upon the fact that completed
books of accounts were audited and supported by report of an
Auditor.”
7. In our view, the findings returned by the Commissioner of Income
Tax (Appeals) and the Income Tax Appellate Tribunal with regard to the
genuineness of the purchases prior to the survey are pure findings of fact.
We would also like to note the decision of this Court in the case of
Commissioner of Income Tax v. NHK Japan Broadcasting Corporation:
291 ITR 331 (Delhi), wherein the scope of interference with findings of fact
in an appeal under Section 260A has been pithily explained. In the said
decision it was observed as under:-
“12. The effect of a concurrent finding has been dealt with
in Ishwar Dass Jain v. Sohan Lal, AIR 2000 SC 426. The
Supreme Court noted two situations where findings of fact
can be interfered with (though under section 100 of the Code
of Civil Procedure which is admittedly in pari materia with
section 260A of the Act). The first situation is when material
or relevant evidence is not considered which, if considered,
would have led to an opposite conclusion, while the second
situation in which interference is permissible is where a
finding has been arrived at by placing reliance on
inadmissible evidence which if it was omitted, an opposite
conclusion was possible. Neither of these two situations arises
in the present case. Therefore, on the basis of the decision
rendered by the Supreme Court, no substantial question of
law would arise on the finding of fact arrived at the by the
Commissioner and the Tribunal……….”
8. We find that neither of the two situations which permit an interference
ITA 1/2007 page 5 of 6
with concurrent findings of fact arises in the present case. 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. No substantial
question of law arises for our consideration. The appeal is dismissed.
BADAR DURREZ AHMED, J
SIDDHARTH MRIDUL, J
FEBRUARY 24, 2010
mk
ITA 1/2007 page 6 of 6
