Commissioner Of Income-Tax vs Goyal M.G. Gases Ltd.
2006 Latest Caselaw 831 Del

JUDGMENT

T.S. Thakur, J.

1. A search and seizure operation under Section 132 of the Income-tax Act, 1961, was conducted by the Revenue agencies on the premises of the assessed on November 29, 1995, which continued up to February 12, 1996. Based on the evidence collected in the course of search, a block assessment under Section 158BC was made in terms of an order dated February 28,1997. The Assessing Officer came to the conclusion that the assessed had not disclosed a sum of Rs. 62,11,490 and, accordingly, made addition to the taxable income of the assessed which was earlier said to be "nil". Three additions are for our purposes relevant. One of these represented interest allegedly attributable to the cash available in the books of account of the assessed but not found at the time of search. The Assessing Officer was of the view that, although, according to the books of account, the assessed had a sum of Rs. 86,40,522 as cash in hand, yet no such cash was actually available with the assessed. The assessed offered the explanation that the cash had been advanced in connection with the business of the company, which did not impress the Assessing Officer, according to whom the amount in question was not proved to have been utilized for the business of the company. It was instead advanced as interest-free loans to the employees. He calculated a sum of Rs. 13,32,666 towards interest which the said amount would have earned and added the same to the taxable income of the assessed.

2. The second addition which the Assessing Officer made was that a sum of Rs. 2,67,826 representing payments made to M/s. Agarwal Gases for the gas cylinders purchased from the said concern. The Assessing Officer relied upon the statement of one of the directors of the said company and held that no such transaction had actually taken place between the assessed and Agarwal Gas Agency.

3. The third addition with which we are concerned is a sum of Rs. 2,17,052 on account of proportionate interest which the Assessing Officer charged on the amount advanced to M/s. Agarwal Gases. According to the Assessing Officer, since, no transactions had taken place with M/s. Agarwal Gas Agency, there was no question of advancing any amount to them.

4. Aggrieved by the additions mentioned above, the assessed appealed to the Income-tax Appellate Tribunal who has upon an appreciation of the available material deleted the additions and granted relief to the assessed. The Tribunal was of the view that in the course of search, the Revenue authorities had seized trust receipts which according to it supported the version given by the assessed regarding advance of cash in hand to employees. The Tribunal was also of the view that in a block assessment, additions could be made only if there was any incriminating material found in the course of search.

5. Similarly in the case of purchases of gas cylinders from M/s. Agarwal Gas Agency, the Tribunal came to the conclusion that the purchase transactions had been properly entered into the books of account of the assessed and that the same had been disclosed by the assessed and were accepted as genuine in the course of assessment concluded under Section 143(3) of the Act. On that reasoning, the Tribunal deleted the addition of Rs. 2,67,826 as also the addition of Rs. 2,17,052 made by the Assessing Officer. The present appeal before us assailed the correctness of the above findings and the view taken by the Tribunal.

6. We have heard Mr. Jolly, learned Counsel for the Revenue at some length and perused the order under challenge. As noticed earlier, the question that essentially fell for determination before the Tribunal was, whether the explanation offered by the assessed for the non-availability of actual cash in hand was acceptable. It is true that the Assessing Officer had rejected the explanation given by the assessed but the Tribunal has, upon a reappraisal of the material correctly come to the conclusion that the said explanation was acceptable. In any event, whether or not the explanation was acceptable, having regard to the circumstances and the nature of the evidence produced by the assessed is a pure and simple question of fact. So also the question whether any transaction had taken place between the assessed and M/s. Agarwal Gas Agency was a question of fact. The Tribunal has correctly held that the transactions were disclosed by the assessed in the return which was accepted in terms of the assessment order passed under Section 143(3) of the Act. Besides, no incriminating material was found in the course of search which could be made a basis for addition in a block assessment. Suffice it to say that the view taken by the Income-tax Appellate Tribunal turns entirely on the appraisal of the material and evidence on record and does not give rise to any question of law, much less a substantial question of law for our determination in this appeal. This appeal, accordingly, fails and is hereby dismissed.