COMMISSIONER OF INCOME-TAX VS VIKRAM PLASTICS
2001 P T D 526
[239 I T R 161]
[Gujarat High Court (India)]
Before R. K. Abichandani and A.R. Dave, JJ
COMMISSIONER OF INCOME‑TAX
versus
VIKRAM PLASTICS and others
Income‑tax Applications Nos.200 to 207 of 1998, decided on 27/08/1998.
(a) Income‑tax‑‑‑
‑‑‑‑Reference‑‑‑Accounting‑‑‑Finding that books of account had beer: maintained regularly and that no defects had been found in accounts‑‑ Tribunal justified in holding that accounts could not be rejected under S.145‑‑‑No question of law arose‑‑‑Indian Income Tax Act, 1961, Ss. 145 & 256(2).
Held, dismissing the application for directing reference, (i) that in view of the finding reached by the Tribunal that there were no discrepancies, or defects pointed out in the books of account and further that they were regularly maintained and also on the finding that there was no material brought on record to establish that purchases or expenses were inflated or sales suppressed and also in view of the finding that it was not the case that there was no method of regular accounting employed, the Tribunal was fully justified in coming to the conclusion that the provisions of section 145(2) the Income Tax Act, 1961, could not be invoked. This conclusion was bas: on a finding of fact and raised no question of law.
(b) Income‑tax‑‑‑
‑‑‑‑Reference‑‑‑Income from undisclosed sources‑‑‑Finding that explanation regarding consumption of raw materials was satisfactory‑‑‑Tribunal justified in deleting addition to income‑‑‑No question of law arose‑‑‑Indian Income Tax Act, 1961, S.256(2).
The Tribunal, as regards the raw material used, took note of the fact that according to the assessee, the average weight changed from time to time looking to the quality and market requirements. The explanation so offered had not been controverted by the Revenue by bringing any material on record. The Tribunal observed that there was preponderance of probability that the average weight of various items manufactured saw change from time to time from heavier quality to lighter quality and looking to such trend the was every possibility that the average weights of various items furnished during the appellate proceedings were in vogue during the current assessment year and the average weight thereafter, changed to the higher side. The Tribunal was justified in deleting the addition of the sum on account of excess raw material shown as consumed. No question of law arose from the order of the Tribunal.
(c) Income‑tax‑‑‑
‑‑‑Reference‑‑‑Business expenditure‑‑‑Disallowance of expenditure‑‑Finding that lease rent was reasonable‑‑‑Tribunal justified in setting aside disallowance of expenditure under S.40A(2)(a)‑‑‑No question of law arose‑‑ Indian Income Tax Act, 1961, Ss.40A & 256.
As regards the question relating to deletion of disallowance of rent claimed under section 40A(2)(a) of the Act, the finding of the Tribunal on the question of reasonableness of lease rent raised no question of law.
P.G. Desai instructed by Manish R. Bhatt for the Commissioner.
JUDGMENT
R.K. ABICHANDANI, J.‑‑‑The Revenue has filed these applications under section 256(2) of the Income Tax Act, 1961, suggesting the following questions in paragraph 4 of‑ these applications:
I. T. A. No. 200 of 1998:
"Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.90,17,888 on account of excess raw material shown as consumed?"
I.T.A. No. 201 of 1998:
"(2) Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.90,17,888 on account of excess raw material shown as consumed?
(3) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income‑tax (Appeals) deleting the disallowance made under section 40A(2)(a) in respect of rent paid?"
I.T.A. No.202 of 1998:
"Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.20,61,099 on account of excess raw material shown as consumed?"
I.T.A. No.203 of 1998:
"(2) Whether the Appellate Tribunal is right in .law and on facts in sustaining addition of Rs.7;00,000 as against Rs.3,1,82,616 made by the Assessing Officer on account of excess raw material shown as consumed?
(3) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income‑tax (Appeals) deleting the disallowance made under section 4OA(2)(a) in respect of rent paid?"
I.T.A. No. 204 of 1998:
"(2) Whether, the Appellate Tribunal is right in law and on facts in sustaining addition of Rs.2,00,000 as against Rs.10,12,320 made by the Assessing Officer on account of excess raw material shown as consumed?
(3) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income‑tax (Appeals) deleting the disallowance made under section 40A(2)(a) in respect of rent paid?"
I.T.A. No. 205 of 1998:
"(2) Whether the Appellate Tribunal is right in law and on facts in sustaining addition of only Rs.2,00,000 as against Rs.10,12,320 made by the Assessing Officer on account of excess raw material shown as consumed?"
I.T.A. No. 206 of 1998:
"(2) Whether the Appellate Tribunal .is right in law and on facts in deleting the addition of Rs.20,61,099 on account of excess raw material shown as consumed?
(3) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income‑tax (Appeals) deleting the disallowance made under section 40A(2)(a) in respect of rent paid?"
I.T.A. No. 207 of 1998:
"Whether the Appellate Tribunal is right in law and on facts in sustaining the addition of only Rs.7,00,000 as against Rs.31,82,660 on account of excess material shown as consumed?"
We have not reproduced question No. 1 which is not pressed as stated in paragraph 6 of the applications.
Learned counsel appearing for the applicants has taken us through the relevant material on record. It was contended by him that the provisions of section 145(2) of the said Act were rightly invoked by the Assessing Officer and the Tribunal ought not to have taken a different view of the matter. In this regard, we note that the Tribunal has specifically considered the provisions of section 145 in paragraph 7.3 of its order and after noticing the approach of the Assessing Officer it found that there was no defect or discrepancy pointed out specifically in the books of account maintained. The Tribunal reiterated in paragraph 7.4 of its order that the assessee maintained books of account adopting the mercantile method of accounting as in the past and the position being so, neither the Assessing Officer had given any finding nor could there be any such finding that no method of accounting had been regularly employed. It was held that the Assessing Officer, therefore, could invoke the provisions of subsection (2) of section 145 of the Act, only on being satisfied that the books of account maintained were not correct and complete. The Tribunal then found, after mentioning the situations in which the books of account maintained could be said to be incorrect and incomplete, that in this case there was no material brought on record to prove and establish that the purchases and expenses had been inflated or the sales had been suppressed and in the absence of any such material or finding given, the provisions of section 145(2) ought not to five been invoked. It was held that on the facts given, the Tribunal did not find sufficient justification for invoking the provisions of section 145(2) of the Act. In our opinion, in view of the finding reached by the Tribunal that there were no discrepancies or defects pointed out in the books of account and further that they were regularly maintained and also on the finding that there was no material brought on record to establish that purchases or expenses were inflated or sales suppressed and also in view of the finding that this was not a case that there was no method of regular accounting employed, the Tribunal was fully justified in coming to the conclusion that the provisions of section 145(2) could not be invoked. This conclusion is based on findings of fact and raises no question of law.
The Tribunal, as regards the raw material used, took note of the fact that, according to the assessee, the average weight changed from tithe to time looking to the quality and market requirements. The explanation so offered has not been controverted by the Revenue by bringing any material on record, as held by the Tribunal. Looking to the explanation offered and three sets of details of average weight found and furnished before the lower authorities on different occasions, the Tribunal observed that there was a preponderance of probability that the average weight of various items manufactured saw change from time to time from heavier quality to lighter quality and looking to such trend there was every possibility that the average weights of various items furnished during the appellate proceedings were in vogue during the current assessment year and the average weight thereafter, changed to the higher side. In our view, these are all questions‑of fact and there is no question of law involved.
Even as regards the question relating to deletion of disallowance of rent claimed under section 40A(2)(a) of the Act, the finding of the tribunal on the question of reasonableness of lease rent raised no question of law.
We, therefore, agree with the reasoning contained in the common order, dated January 5, 1998, made by the Tribunal in all the reference applications of the present applicants, which were made under section 256(1) of the said Act, and hold that there is no question of law arising in any of these applications. All these applications are therefore, rejected.
M.B.A./206/FC Application rejected.