Commissioner of Income Tax vs Satyanaryan Agrawal

This appeal preferred by the appellant-Revenue u/s 260A of the Income Tax Act, 1961 (for short "Act"), against the order of the Income Tax Appellate Tribunal, Nagpur (for brevity "the Tribunal") dated March 31,1999, has been admitted for hearing on the following substantial question of law:

Whether, on the facts and circumstances of the case, learned Tribunal was justified in upholding the order of the learned Commissioner of Income Tax (Appeals) deleting the addition made by the Assessing Officer on account of excess stock found during the course of survey u/s 133A?

The facts, as projected in paragraph 2 of the impugned order, are that a survey operation u/s 133A of the Act was conducted at the business premises of the assessee on September 7, 1994, and excess stock of 254.98 quintals of dhaniya valuing at Rs. 1,100 per quintal was found in excess. The Assessing Officer (for short "AO") treating the said stock as undisclosed investment of the assessee made an addition of Rs. 2,79,400. The assessee''s appeal was allowed by the Commissioner of Income Tax (Appeals) and the addition made was deleted as the difference between the stock found and noted in the books of account on September 5,1994, and the stock found during survey proceedings was sought to be explained by the assessee by producing photo copy of the cash memos received by him from M/s. Harish Kumar Trading Co. and M/s, Ramchandra Shyam Bihari Goyal, however, the above explanation was rejected by the Assessing Officer. The Commissioner of Income Tax (Appeals) further held that non-acceptance of evidence and on presumption taking the stock as sales outside the books were not justified. It was held that the evidence submitted by the assessee was neither proved by the Assessing Officer to be false or bogus nor genuineness of the transactions was doubted. Further appeal by the Revenue has also been dismissed by the Tribunal.

Mr. Rao, learned Counsel for the appellant, submitted that the very purpose of conducting survey proceedings u/s 133A of the Act is to unearth the undisclosed income of the assessee. In the instant case, the survey was conducted on September 7, 1994, whereas the account books was maintained till September 6, 1994. However, there was no corresponding entry in the account books against the goods received on September 5, 1994, and, therefore, production of subsequent cash receipts for the undisclosed stock is an afterthought and both the appellate forums below have accepted the explanation of the assessee without considering this aspect.

On the other hand, Mr. Dubey, learned Counsel appearing for the assessee would argue that the explanation offered by the assessee and accepted by the appellate forums is a question of fact. The Tribunal is the final court for facts and, therefore, sufficiency of reliability of the explanation offered by the assessee is a question of fact and findings thereon, as recorded by the Tribunal, cannot be interfered with by the High Court as it does not give rise to any substantial question of law. Reliance is place on the judgment of the Rajasthan High Court in the matter of Commissioner of Income Tax Vs. Laxmi Engg. Industries, and the judgment of the Madras High Court in the matter of Commissioner of Income Tax Vs. N. Swamy, .

We have heard learned Counsel for the parties. We have perused the order of assessment as also the orders of the Commissioner of Income Tax (Appeals) and the Tribunal.

The explanation offered by the assessee with respect to excess stock found during the survey proceedings that the same were purchased by him from two dealers of Rajasthan and the same were received on September 5, 1994, however, the same could not be entered into the stock register as the son of the assessee, who looks after the assessee''s business, was out of station in connection with treatment of his mother, was accepted by both the appellate forums as valid explanation.

Following the principles of law laid down in the aforesaid judgments of the Rajasthan and Madras High Courts wherein it has been held that acceptance of explanation offered by the assessee is a finding of fact and the same does not give rise to any substantial question of law, we dismiss this appeal as no substantial question of law is involved in this appeal for adjudication.