GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (9) TMI 25 - JHARKHAND HIGH COURT

2015 (9) TMI 25 - JHARKHAND HIGH COURT - TMI - Undisclosed stock of gold & diamond jewellery - Whether ITAT was right in deleting the addition without considering that the assessee has not disclosed the aforesaid addition before the Settlement Commission as provided under section 245D(4) - ITAT deleted the addition added as undisclosed income for A.Y. 200203 on the strength of the seized document marked - Held that:- No error has been committed by the Commissioner of Income Tax (Appeals) nor by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the said plea cannot be altered by the department. Since the assessee is valuing the closing stock on the basis of the cost price or market price whichever is lower and therefore, assessee has valued his stock at cost price which is also supported by the auditors report and therefore, this addition of ₹ 41,51,301/- has been rightly dealt by both the authorities under the Income Tax Act namely, Commissioner of Income Tax (Appeals) and ITAT. The documents which are exhibited A/JJ/6 contains .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ainst revenue. - Tax Appeal No. 53 of 2006 - Dated:- 13-7-2015 - D. N. Patel And Ratnakar Bhengra, JJ. For the Appellant : Mr Deepak Roshan, Adv. For the Respondent : Mr Nitin Kumar Pasari, Adv. and Mrs Ranjana Mukherjee, Adv. JUDGMENT Per D. N. Patel, J. 1. This Tax Appeal has been preferred against the order, passed by the Income Tax Appellate Tribunal, Circuit Bench, Ranchi in Income Tax Appeal No. 15/Pat/2005 for the Block Assessment Period 1996-97 to 2001-02 and from 01.04.2001 to 26.09 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

; 22,84,923/without considering that the assessee has not disclosed the aforesaid addition before the Settlement Commission as provided under section 245D(4). b. Whether ITAT was right in deleting the addition of ₹ 22,84,923/- added as undisclosed stock of gold & diamond jewellery on the strength of difference in physical verification of the stock found and its booked value by ignoring the physical verification which was available on record. c. Whether on the facts and in the circumsta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he appellant, who has submitted that deleting the addition of ₹ 22,84,923/by the ITAT was without appreciating the fact that the respondentassessee has not disclosed the said addition before the Settlement Commission as provided under Section 245D(4) of the Income Tax Act, 1961 and this amount was added because of undisclosed stock of gold and diamond jewellery on the strength of difference in physical verification of the stock found and its book value. It is also submitted by the counsel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, application was preferred by Sri Prem Prakash Arya, who is main partner of M/s Jever Jewellers, Bangalore, under Section 245C of the Income Tax Act before the Settlement Commission. Settlement Commission took sometimes meanwhile Assessing Officer passed an order dated 23rd October,2003 and two major additions were made which is at ₹ 22,84,923/- on the basis of physical verification of the stock firm and the book value and the 2nd major addition was ₹ 41,51,301/- on the basis of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ax (Appeals) as well as ITAT has placed heavy reliance upon the order, passed by the Settlement Commission and more particularly, upon the disclosure of income by Mr. P.P. Arya. Thus, it is mainly submitted by the counsel for the appellant that ITAT has not properly appreciated that additions of income at ₹ 22,84,923/- which is based upon a difference in physical verification of stock and its book value and this was never disclosed before the Settlement Commission by Mr. P.P. Arya and 2nd .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y Mr. P.P. Arya includes the aforesaid amount which is at ₹ 22,84,923/- and so far as addition of ₹ 41,51,301/- is concerned, it is submitted that the basic principles of accountancy have been properly appreciated by the Commissioner of Income Tax (Appeals) and the ITAT. There is no variance of stocks. Nonetheless, the closing stock was made as per cost price by the assessee and the said plea cannot be altered by the department. Since the assessee is valuing the closing stock on the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

has also relied upon the decision rendered by Hon'ble Supreme Court as well as Hon'ble Delhi High Court as: (a) (2005) 2 SCC 324 (Para 11 to 15). To point out what is the substantive question of law and on the basis of this decision, it is submitted that there is no substantive question of law involved in this Tax Appeal. (b) (2004) 189 CTR (Del) 103 (Para 26, 30, 32 to 36). On the point that the order passed by the Settlement Commission may not be interfered with, except in exceptional .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by the Hon'ble Supreme Court as stated in para 26 On the basis of the aforesaid submissions, it is submitted by the counsel for the respondent that this appeal may not be entertained by this Court. Reasons: 5. Having heard counsels for both the sides and looking to the facts and circumstances of the case, we see no reason to entertain this Tax Appeal mainly on the following facts and reasons: (i) Search was carried out under Section 132 of the Income Tax Act, 1961 at various premises of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dent because it was not disclosed by the respondent before the Settlement Commission in the application under Section 245C and also for the reason that there was a difference in a physical verification of the stock found and its book value. Similarly, there is a major addition made by the Assessing Officer at ₹ 41,51,301/- as undisclosed income for the assessment year 2002-03 on the strength of seized documents marked as A/JJ/6. (iv) This order was challenged by the respondent before the C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d by this appellant-Department before the ITAT. There was also Cross Objection filed by the respondent before the ITAT and the appeal preferred by this appellant was dismissed by the ITAT vide order dated 23rd June, 2006 and therefore, the present Tax appeal has been preferred by this appellant raising the aforesaid substantial questions of law. (vi) The block assessment period involved in this matter is for the period running from 199697 to 200102 and for the period 01.04.2001 to 26.09.2001. (v .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e passing order under Sub Section 4 of Section 245D of the Act, 1961. The disclosure made by Mr. P.P. Arya of his income which is aggregating at ₹ 81,18,770/- includes two components of income which is at ₹ 21,42,460/- and ₹ 59,76,313/-. This has been accepted by the Settlement Commission. He has accepted all his liabilities except of Jever Jewellery situated at Ranchi. The order passed by the Settlement Commission cannot be called in question at this stage as has been held by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e computed and mentioned in the application. It needs little emphasis that Section 245C(1) of the Act mandates "full and true" disclosure of the particulars of undisclosed income and "the manner" in which such income was derived and, therefore, unless the Settlement Commission records its satisfaction on this aspect, it will not have the jurisdiction to pass any order on the matter covered by the application. 35. It is plain from the language of subsection (4) of Section 245D .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e scheme of Chapter XIX-A does not contemplate revision of the income so disclosed in the application against Item 11 of the form. Moreover, if an assessee is permitted to revise his disclosure, in essence, he would be making a fresh application in relation to the same case by withdrawing the earlier application. In this regard, Section 245C(3) of the Act which prohibits the withdrawal of an application once made under subsection (1) of the said section is instructive inasmuch as it manifests th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r revision of an application filed under Section 245C(1) of the Act and thus the natural corollary is that determination of income by the Settlement Commission has necessarily to be with reference to the income disclosed in the application filed under the said section in the prescribed form." (Emphasis Supplied) (viii) It has been held by Hon'ble Delhi High Court in Sukhmani Associates (P) Ltd. Vs. Income Tax Settlement Commission and Ors. reported in (2004) 189 CTR (Del) 103. Para 26, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rised under the Act and under the chapter only. 30. In the case of CIT v. Express Newspapers Ltd. MANU/SC/0314/1994: [1994] 206 ITR 443 (SC), the effect of the order under Section 245D(4) is indicated. It was held: "Sub-section (4) of Section 245D provides for passing of final orders by the Commission. It is not necessary to refer to the other provisions in the chapter except to mention that the Commission is empowered to direct the waiver of penalty as well as interest and to direct that t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and in accordance with law, the order was made by the Settlement Commission and the terms of settlement provided mode of payment etc. The Revenue accepted the same and did not challenge the correctness of the order made by the Settlement Commission. Thus, between the assessed and the AO or the CIT, when the decision was rendered by the Settlement Commission, the matter was settled and came to be disposed of finally and it could be reopened in the manner provided in that chapter itself or can be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tax proceedings. As pointed out by the apex Court in Express Newspapers Ltd.'s and Aujum Gashwala's case (supra), the order of the Settlement Commission being final, subject of course to constitutional remedies, and having not been challenged, in the opinion of this Court it would not be open for the Revenue to make an application under Section 154 of the Act. Despite the error of law, for a pretty long period of about four years, the decision was accepted. Having not challenged the deci .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Revenue as well as the assessed both accepted the correctness of the decision and they refrained from challenging the order made by the Settlement Commission and after reasonable period having expired, one would be preluded from touching the order as it has become final and conclusive. As pointed out by the apex Court in Express Newspapers Ltd.'s case (supra), such an order could be challenged before the constitutional forum only. The decision rendered by a competent forum having jurisdi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

does not depend upon its correctness. 36. There must be an end of litigation. The Settlement Commission is provided under the IT Act for the said purpose. Where the terms are settled and after having accepted the same merely because in some other decision it is pointed out as to what the law is, it is not open to move an application under Section 154 of the Act. When the order made by the Settlement Commission is made final and conclusive and cannot be reopened under any provisions of this Act o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

bout his income aggregating ₹ 81,18,770/- which includes the addition made by the Assessing Officer and therefore, rightly it is deleted by the Commissioner of Income Tax (Appeals) as well as the ITAT. (ix) So far as addition of income which is at ₹ 41,51,301/- is concerned this is mainly for the reason that the Assessing Officer has not properly appreciated the accounting system followed by the respondent and about the valuation of stock. The assessee has calculated the valuation of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he basic principles of valuation of the closing stock. Already guidance has been given by the Hon'ble Supreme Court in the case of United Commercial Bank, Calcutta Vs Commissioner of Income Tax, W.B.III, Calcutta reported in (1999) 8 SCC 338. Para 24, 25 and 26 thereof read as under: "24. From the decisions discussed above, it can be held: (1) That for valuing the closing stock, it is open to the assessee to value it at the cost or market value, whichever is lower. (2) In the balanceshe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

) The concept of real income is certainly applicable in judging whether there has been income or not, but, in every case, it must be applied with care and within their recognised limits. (5) Whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation. (6) Under Section 145 of the Act, in a case where accounts are correct and complete but the method employed is such that in the opinion of the Income Tax Officer, the income cannot be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the appellant for valuing its stock-in-trade (investment) for income tax purpose is the correct and the permissible method in law. If this method is not followed in writing and preparing accounts consistently, the assessee cannot claim a notional method of stock valuation only for computation of income by the tax authorities without following the same method in writing and preparing accounts. (c) Since stock valuation is admittedly a method of accounting the assessee Bank can claim the benefit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ally for income tax purposes only. 26. In our view, as stated above, consistently for 30 years, the assessee was valuing the stock-in-trade at cost for the purpose of statutory balance-sheet, and for the income tax return, valuation was at cost or market value, whichever was lower. That practice was accepted by the Department and there was no justifiable reason for not accepting the same. Preparation of the balancesheet in accordance with the statutory provision would not disentitle the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version