Gujarat High Court
Ronak Ceramics Industries Ltd vs Asstt. Commissioner Of Income Tax on 9 April, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/1211/2006 ORDER DATED: 09/04/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 1211 of 2006
With
R/TAX APPEAL NO. 663 of 2016
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RONAK CERAMICS INDUSTRIES LTD.
Versus
ASSTT. COMMISSIONER OF INCOME TAX
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Appearance:
MR. S. N. SOPARKAR, SR. ADVOCATE WITH MR. B. S. SOPARKAR for the
Appellant(s) No. 1
MRS SWATI SOPARKAR(870) for the Appellant(s) No. 1
MS MAITHILI D MEHTA(3206) for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 09/04/2025
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Advocate Mr. S. N. Soparkar with
learned advocate Mr. B. S. Soparkar with learned advocate
Mrs. Swati Soparkar for the appellant and learned Senior
Standing Counsel Ms. Maithili Mehta for the opponent.
2. These tax appeals are filed by the appellant assessee
under Section 260A of the Income Tax Act, 1961 (for short,
'the Act') arising out of the Judgment and Order dated
03/03/2005 passed by the Income Tax Appellate Tribunal
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Ahmedabad Bench "C" in IT(SS)A No.296/Ahd/2003 filed by
the appellant assessee and IT(SS)A No.315/Ahd/2003 filed by
the respondent Revenue for Block Assessment Period
01/04/1990 to 09/01/2001.
3. Tax Appeal No.1211 of 2006 is admitted on the following
substantial questions of law by order dated 26/12/2006.
"(i) Whether in the facts and circumstances of the case
the Income Tax Appellate Tribunal was right in law in
holding that debit under the head 'debtors' in Annexure
A-15 is not an allowable expenditure?
(ii) Whether in the facts and circumstances of the case
the Income Tax Appellate Tribunal was right in law in
not accepting debit side of the seized Annexure A-15
when the credit side of the very same seized Annexure
has been the basis for making additions in the hands of
the appellant?"
4. Tax Appeal No.663 of 2016 which was filed later on by
the appellant assessee is admitted on the following substantial
questions of law:
"(i) Whether, in the facts and circumstances of the
case, the Income Tax Appellate Tribunal was right in law
in holding that debit under the head "debtors" in
Annexure A-15 is not an allowable expenditure?
(ii) Whether, in the facts and circumstances of the
case, the Income Tax Appellate Tribunal was right in law
in not accepting debit side of the seized Annexure A-15
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when the credit side of the very same seized Annexure
has been the basis for making additions in the hands of
the appellant?"
5. As substantial questions of law arising from both appeals
are of similar nature, the appeals are taken up for hearing and
being disposed of by this common judgment.
6. Tax Appeal No.663 of 2016 is filed by the appellant
assessee being aggrieved by the order of the Tribunal
restoring the order passed by the Assessing Officer which was
also to the extent of 30% of the amount of deduction granted
by the CIT (Appeals) by which the Revenue had preferred the
appeal before the Tribunal.
7. Brief facts of the case are as under:
7.1. The appellant assessee is engaged in the business of
manufacture of ceramic tiles. Search took place at the
business premises of the appellant and residential premises of
its Director on 09/01/2001.
7.2. During the course of search, various documents and
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loose papers were found and seized which included a loose
paper file marked A-15 which contained receipts and payment
account from July, 1991 to December, 1999. This receipt and
payment account contained opening cash and bank balance,
sales and loans received on the receipt side whereas on the
payment side, apart from various expenses of revenue nature,
investment, repayment of loan and debtors etc. were shown.
7.3. The Assessing Officer, on analysis of loose papers
contained in file A-15 seized during the course of search,
arrived at the finding that sales and expenses were on higher
side than what was disclosed in the books of accounts. The
Assessing Officer worked out the sales for the period from
July, 1994 to December, 1999 at Rs.22,37,76,684/-. After
considering the receipt and payment details for the period
from 01/07/1999 to 31/12/1999, from the loose papers in file
A-15, the Assessing Officer further estimated the sales at
Rs.2,62,13,554/- for the said period and also estimated sales
for the period from 01/01/2000 to 31/03/2000 proportionately
at Rs.1,31,06,777/- and thus worked out the total sales from
July, 1994 to March, 2000 at Rs.23,68,83,461/-. However, the
appellant assessee had shown the sales as per the books of
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accounts in the return of income filed for the year from 1994-
1995 to 1999-2000 at Rs.7,46,39,558/-.
7.4. The Assessing Officer after considering that the sales
disclosed in the return of income was net of excise duty and
as the appellant assessee has accounted for excise duty
collected to separate account in which MODVAT credit on
purchases were adjusted whereas in the loose papers in file A-
15 the sale was inclusive of excise duty, the Assessing Officer
enhanced the sales shown in the books of accounts with the
excise duty collection during that period and accordingly total
sales was taken at Rs.8,41,46,058/- so as to work out the
unaccounted sales till 31/03/2000 at Rs.15,27,37,583/-
(Rs.23,68,83,461/- - Rs.8,41,46,058/-).
7.5. The Assessing Officer thereafter verified the expenses on
each head debited to profit and loss account and in the loose
paper file A-15 for the period from 01/04/1999 to 31/03/2000
and arrived at findings that the expenses to the extent of
Rs.10,76,52,157/- were not accounted for in the books of
accounts as compared to loose paper file at A-15.
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7.6. The Assessing Officer therefore worked out the
difference between the unaccounted sales and unaccounted
expenses at Rs.4,50,85,429/- and thereafter worked out the
proportionate profit for the period from 01/04/2000 to the
date of search i.e. 09/01/2001 at Rs.60,54,951/- and
determined the earned undisclosed income of the block period
at Rs.5,11,40,380/-.
7.7. Being aggrieved, the appellant assessee preferred an
appeal before the CIT (Appeals) who reduced the
determination of the undisclosed income from
Rs.5,11,40,380/- to Rs.1,89,85,035/-.
7.8. Being aggrieved by the order passed by the CIT
(Appeals), both the appellant assessee and the respondent
Revenue preferred appeals before the Tribunal.
7.9. These two appeals filed by the appellant assessee
pertains to dis-allowance of the amount of Rs.2,49,30,205/-
made by the Assessing Officer and confirmed by the Tribunal
which was shown in the payment side of the loose papers A-15
pertaining to the debtors under the head "debtors".
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7.10. The Assessing Officer, on perusal of the loose papers A-
15, found that on the payment side, there is a debt under the
head "debtors" and the total of such debt under the said head
was worked out at Rs.2,49,30,205/- which was claimed as an
expenditure by the appellant assessee but denied by the
Assessing Officer. However, the CIT (Appeals) directed the
Assessing Officer to allow 70% of the amount written under
the head "debtors". The Tribunal after considering the facts
and the material in form of loose papers A-15 set aside the
order passed by the CIT (Appeals) and disallowed 100% of the
amount claimed as an expenditure under the head "debtors"
by the appellant assessee.
8. The appellant assessee has therefore preferred these
two appeals, one being aggrieved by the order of the Tribunal
whereby the Tribunal reversed the order passed by the CIT
(Appeals) viz-a-viz the allowance of 70% of the amount written
under the head "debtors" and restoration of the order passed
by the Assessing Officer for remaining 30% of the amount
which was subject matter of the appeal filed by the
respondent Revenue before the Tribunal.
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9. The Tribunal while restoring the order passed by the
Assessing Officer to disallow the entire amount of
Rs.2,49,30,205/- claimed by the assessee as an expenditure
under the head "debtors" recorded the following findings:
"(iiid) We have carefully considered the arguments of
both the parties and perused the material placed before
us. We find that the Annexure A-15 is receipt and
payment account prepared every six months. On the
receipt side there is opening cash/bank balance, sales,
loan received, share application money received, etc.
Similarly, at the payment side, there is a payment for
liabilities, expenses, etc in the paper itself on the receipt
side it is mentioned as "receipt" while on the payment
side, it is mentioned as "payment". Therefore, we agree
with the contention of the ld. counsel for the assessee
that the amount debited under the head "debtors" at the
payment side is payment to the debtors and not the
closing balance of debtors. However, every outgoing is
not an expenditure. Therefore, it has to be further
examined whether the payment was for an expenditure
incurred for the purpose of business. It was claimed by
the assessee before the lower authorities as well as
before us that the debit under the head "debtors" in
Annexure A-15 is for discount and commission allowed to
the debtors and also for bad debts. So far as the
assessee's contention for bad debt is concerned, it has to
be rejected outright because in the case of bad debt, no
payment is made to the debtor but the outstanding
amount against the sale proceeds becomes
irrecoverable. Therefore, the question of bad debt being
debited in the payment side of receipt and payment
account does not arise coming to the assessee's
contention that the debit under the head "debtors"
reflects the discount and commission is also not
acceptable because in the payment side for several
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periods there is a debit separately under the head
"discount and commission" as under: -
1-4-1996 to 30th September, 1996 Rs. 81,500
1-10-1996 to 31-3-1997 Rs.1,95,000
1-4-1997 to 31-10-1997 Rs.2,27,720
1-11-1997 to 31-3-1998 Rs. 1,62,250
1-4-1998 to 30th June, 1998 Rs.1,14,526
1-7-1998 to 31-12-1998 Rs.2,15,815
1-1-1999 to 30-6-1999 Rs.1,85,760
1-7-1999 to 30-12-1999 Rs. 1,98,261
Once the assessee is maintaining separate head for
debiting "discount and commission" the question of
debiting the same under the head "debtors" does not
arise. Whatever discount and commission is paid by the
assessee would be debited under the head "discount and
commission". It was vehemently contended by the ld.
counsel that there is a general practice in this line of
trade to allow 30 to 40% discount to the traders on the
goods sold and that discount is separately paid to the
traders. However, if the contention of the assessee is
correct, then in respect of the recorded sales also the
discount should have been paid and which should have
been debited in the regular books of accounts. The ld.
counsel fairly admitted that in the audited profit and loss
account, there is no debit under the head "discount and
commission to the traders". Moreover, in the Annexure
A-15 also, the debit under the head "debtors" is only for
some period and not in all the periods. From 1-1-1999 to
30-6-1999 and also 1-7-1999 to 31-12-1999 there is no
payment to debtors. It was explained by the ld. counsel
that in this period sales recorded might be net i.e. after
allowing the discount to the customers. In support of this
contention, he pointed out that for the period 1-7-1999
to 31st December, 1999, the gross sale was
Rs.2,62,13,554/- while on the receipt and payment
account net sales i.e. Rs.2,33,00,266/- was recorded.
However, we find that at page No.8 of the assessee's
paper book which is page 110 of the bunch of loose
papers there details of month-wise sales for the period
July, 1999 to December, 1999 which reads as under: -
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Sales
Boxes Amount (Rs.)
July, 1999 33,125 44,70,513
August 1999 31,783 41,46,428
September, 1999 33,641 40,87,963
October, 1999 23,887 35,57,248
November, 1999 27,372 34,48,872
December, 1999 26,009 35,89,242
1,75,817 2,33,50,266
At page 11 of the assessee's paper book which is page
107 of the bunch of loose papers, the details of sale of
Rs.2,62, 13,554/- is there. The same reads as under: -
Boxes Amount (Rs.)
33125 44,70,513 July, 1999
31783 41,46,428 August, 1999
33641 40,87,963 September, 1999
33887 42,97,248 October, 1999
32272 41,03,845 November, 1999
37009 51,07,557 December, 1999
2,01,817 2,62,13,554
From the comparison of above, it is evident that the loss
sales at page 8 is because of less number of boxes
having been sold and not because of any discount or
commission being reduced from the gross sales. The
learned counsel has not brought on record any evidence
to support his contention that there is general trade
practice in this line of business of allowing cash discount
to traders and which is separately paid to them. On the
other hand, the assessee's own regular books prove to
the contrary. In view of above, we are unable to accept
the assessee's contention that debit under the head
"debtors" in the receipt and payment account reflects
payment of discount and commission by the assessee on
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the sales. We may also mention that every outgoing is
not an expenditure and burden is upon the assessee to
establish that any outgoing is in the nature of an
expenditure incurred for the purpose of business. The
assessee except making a claim that debit under the
head "debtors" is in the nature of discount and
commission has not brought on record any evidence to
support this claim. On the other hand, the other material
on record clearly establishes that the debit under the
head "debtors" is not in the nature of discount and
commission. In view of above, we reverse the order of
the CIT(A) on this point and restore that of the Assessing
Officer and hold that the debit under the head "debtors"
in Annexure A-15 is not an allowable expenditure."
10. Learned Senior advocate Mr. Soparkar reiterated the
same contentions which were raised before the CIT (Appeals)
and the Tribunal. Reference was also made to the loose
papers A-15 which are placed on record by filing the paper-
book to point out that the amount under the head "debtors" is
recorded on the payment side of the receipt and payment
account and therefore it is an outgoing and not the closing
balance of the debtors account. It was submitted that the
appellant assessee has explained right from the inception that
the amount shown under the head "debtors" on payment side
of the receipt and payment in the loose papers A-15 is nothing
but discount given to the debtors which ranges between 20%
to 30% which was a normal trade practice in the type of the
business carried out by the appellant assessee more
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particularly when on the receipt side, the gross sale amount is
shown coupled with the fact that the appellant assessee has
not shown any opening balance of debtors or receipt from
debtors on receipt side in any of the receipt and payment
details for the various periods. It was demonstrated by
learned Senior Advocate Mr. Soparkar from page-74 of the
paper-book containing the loose papers A-15 for the period
from 01/10/1996 to 31/02/1997 that payment includes debtors
of Rs.44,98,686/- whereas sales for the said period was shown
as gross sales and only opening balance of cash and bank was
noted on the receipt side. It was therefore submitted that
when gross sales are shown on payment side it means that
there is discount given by the appellant assessee to the
debtors out of the sales made. It was further pointed out from
page-24 of the paper-book containing loose papers A-15 that
there is no debtors on payment side but only discounts and
commission is mentioned. Reference was also made for the
period from 01/01/1999 to 30/06/1999. It was therefore
submitted that the contention was raised by the assessee
before the Tribunal and the CIT (Appeals) that when there is
no payment to debtors and the same are shown on the
payment side, the sales are taken as net sales.
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11. It was therefore submitted that the Assessing Officer and
the CIT (Appeals) could not have relied upon the same
documents to come to the conclusion that the amount shown
on the payment side did not pertain to the discounts and
commissions to the debtors for back dates. It was pointed out
that the CIT (Appeals) also in the order has arbitrarily
disallowed 30% of the amount of expenditure claimed as
payments under the head "debtors" by observing that there
are certain names which apparently do not relate to sales
though it may be on some other accounts and it was therefore
submitted that the CIT (Appeals) ought to have allowed 100%
claim of the amount shown under the head "debtors" which
the Tribunal has ignored and did not even refer to the reasons
assigned by the CIT (Appeals) for restricting the allowance to
70% of the claim of the expenditure shown on the payment
side under the head "debtors".
12. It was submitted that the Tribunal has failed to consider
that when the addition is made on the basis of the loose
papers by the Assessing Officer then in that case both receipts
and payments side are required to be treated equally and
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when the assessee has shown the gross sales on receipt side
then the expenditure shown on the payment side ought to
have been taken into consideration as stated in the loose
papers seized during the course of search and no other
analysis could have been made by the Authorities.
13. It was therefore submitted that the impugned order of
the Tribunal is required to be quashed and set aside and the
order of the Commissioner is also required to be modified by
permitting the assessee to claim 100% expenses shown on
payment side under the head "debtors".
14. On the other hand, learned advocate Ms. Maithili Mehta
appearing for the respondent assessee submitted that the
Assessing Officer has passed the assessment order for the
block period on the basis of the loose papers found during the
course of search and thereafter disallowed the claim of
expenditure under the head "debtors" which is upheld by the
Tribunal after arriving at findings of fact and after considering
the justification of the assessee on two counts that the amount
shown on payment side under the head "debtors" cannot be
considered as discount and commission as there is no debt
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under that discount and commission to the traders in the
audited Profit and Loss account of the assessee and there is a
separate head 'discount and commission' appearing on the
payment side on various receipts and payments details for
different periods and therefore question of debiting the
amount of payment under the head "debtors" would not arise.
It was submitted that the Tribunal has after detailed reasons
has come to the conclusion that the amount under the head
"debtors" shown on the payment side cannot be considered as
an expenditure on the basis of the loose papers and the
appellant assessee has failed to discharge the burden to
establish that the payment under the head "debtors" is in
nature of discount and commission and no evidence is brought
on record in support of such contention of the appellant
assessee. It was therefore submitted that in view of the
findings of fact arrived at by the Tribunal on the basis of the
loose papers A-15, it cannot be said that substantial question
of law arises to be answered in favour of the assessee.
15. It was further submitted that the Tribunal for the
reasons recorded for arriving at findings of fact has restored
the order passed by the Assessing Officer for the reasons that
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the payment to debtors is not an expenditure and the assessee
failed to establish that such payment was in nature of discount
and what is recorded in loose paper A-15 is nothing but
receipt and payment account which means whatever is
received and paid payment and therefore the payment made
to the debtors cannot be considered as an expenditure by
treating the same as discounts to the debtors and there is
nothing on record to show that what is shown is the gross
sales. It was therefore submitted that both the questions
framed by this Court are required to be answered in favour of
the Revenue and against the assessee.
16. Having heard the learned advocates for the respective
parties and taking into consideration the reasons assigned by
the Tribunal for restoring the order passed by the Assessing
Officer by disallowing the claim of the appellant assessee for
payments made to debtors as an expenditure, following facts,
which are not in dispute, are required to be taken note of.
16.1. The appellant assessee has maintained two sets of
accounts-one regular books of accounts and the other which is
found in the loose papers A-15 seized from the residence of
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the Director of the appellant assessee containing various
receipts and payment accounts for the period from July, 1991
to December 1999.
17. Such receipts and payment accounts containing opening
cash and bank balance, sales, bank loans on receipt side and
on payment side, revenue expenses, investment, repayment of
loan and debtor etc. are also figuring.
18. The Assessing Officer on comparison of the loose papers
A-15 with the regular books of accounts found that the sales
disclosed in such loose papers were substantially higher in
amount than what was disclosed in the regular books of
accounts and similarly, the expenses other than payment to
GEB, excise duty and loan payments etc., all other expenses
are higher than what was disclosed in the books of accounts.
Therefore, considering the duplicate sets of books containing
both accounted and unaccounted transactions, the Assessing
Officer issued the show cause notice for suppression of sales
and for various different additions to be made during the
course of assessment and thereafter framed the assessment
on the basis of the loose papers as well as the statements
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recorded during the course of search by holding that the
appellant assessee was systematically suppressing its sales
both in quantity and value terms and for that purpose also the
assessee was incurring unaccounted expenses.
19. The Assessing Officer thereafter computed the
undisclosed income on the basis of loose papers A-15 and for
that purpose the Assessing Officer calculated unaccounted
sales and also thereafter considered the unaccounted
expenses and reduced the same from the unaccounted sales
as under:
"Unaccounted Sales as
per annexure A-15 Rs.15,27,37,586/-
Less: unaccounted expenses
noted in annexure A-15 Rs.10,76,52,157/-
Undisclosed income from
suppression of production
and sales Rs.4,50,85,429/-"
20. During the course of the assessment, the appellant
assessee claimed that the debtors noted in the payment side
of the statements containing receipts and payments in the
loose papers A-15 should be considered as an allowable
expenses as the amount shown on the payment side under the
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head "debtors" pertains to the amount not realized or not
received from the debtors to the tune of Rs.2.49 crores. The
Assessing Officer, however, did not consider such claim made
by the appellant assessee.
21. The CIT (Appeals), however, while considering the claim
of the assessee for payment shown under the head "debtors",
observed as under:
"From the total sales worked out, the above sales of Rs
8,62,41,738/- is reduced, the total unaccounted sales
upto 31/3/2000 will be Rs. 15,06,41,723/- From this
sales, A.O. has allowed deduction for unaccounted
expenses of Rs. 10,76,52,157/-, which leaves an income
of Rs.4,29,89,566/- as against worked out by the A.O. at
Rs.4,50,85,429/- While doing so, I have rejected the
claim of the appellant company that sales for the period
of 3 months from 1/1/2000 to 31/3/2000 is not required
to be estimated. It is an admitted fact that for majority
of the block period, systematic working were found
indicating unaccounted receipts and since such receipts
and payment accounts were prepared normally at the
end of June & December of the each year. The action of
the A.O. in estimating the sales on proportionate basis
for the further period of 3 months is found to be logical
and confirmed by me. However, it is argued by the
appellant company that if the sales are estimated for this
period of three months, then proportionate deduction for
the expenses also requires to be allowed and it was
submitted that expenditure to sales ratio is 97.7%.
This claim of the appellant that if sales are estimated for
the three months 1/1/2000 to 31/3/2000, then
proportionate deduction for the expenditure is requires
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to be allowed, is accepted in principle, as it is an
admitted fact that for earning certain expenditure has to
be incurred by the appellant company. However, the
contention of the appellant company that such
expenditure is to the extent of 97.7% is not acceptable
because from the assessment order, I have found that
against the gross sales as per Annexure A-15 for the
period 6/7/94 to 31/12/99, the ratio of such expenditure
to gross sales is bout 60% which is further required to
be reduced because there is nothing to indicate that in
similar ratio, other interest payments, other expenses,
postage expenses, traveling expenses and general
expenses were incurred for the remaining period.
Besides this, many of these expenses are likely to be for
non business purposes. Hence, for this period, it would
be appropriate to allow expenses @ 50% which will also
take care of disallowable items in earlier period for
which details are not made available by the appellant.
Thus, expenditure of Rs.65,53,388/- is required to be
allowed as deduction. If all these are allowed, net
income would work out to Rs.3,64,36,178/-.
From the said net income of Rs.3,64,36,178/-, deduction
for the debtors of Rs.2,49,30,205/- has been claimed.
The appellant has submitted that while allowing the
deduction for expenditure, Assessing Officer has not
considered an amount of Rs.2,49,30,205/- which are in
the nature of payment to sales parties, as separately
described under the head debtors in the payment side
for each of the period. Complete details thereof for each
of the period was furnished during the course of hearing
of appeal giving reference to relevant loose papers of
Annexure A-15 and claimed that the same is required to
be allowed as deduction for expenditure. I have carefully
gone through these loose papers pertaining to this issue
and find that the appellant claim is partly correct for the
reasons that the debtors has been shown on the
payment side which inter alia includes repayment of
loan, interest paid on loan, excise duty, raw material,
various expenses and finally the closing balance of cash
on hand and bank balance is worked out. On the receipt
side, there appears opening balance of cash and bank,
sales, receipt of loan. Therefore, the balance shown
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under the head debtors cannot represent the
outstanding amount because the outstanding balance
pertaining to sundry creditors, outstanding for expenses,
cumulative balance of investment in fixed assets, etc.
are not appearing in the said receipt and payment a/c.
Therefore, considering the nature of the notings, amount
noted under the head debtors on the payment side
essentially means payment to debtors, which may be in
the nature of either discount, commission, non-recovery
of amount or advances for purchases etc. However, the
details of debtors do not categorically show that entire
amount paid relates to sales made. For example, there
are certain names, which apparently do not related to
sales, though it may be on some other account. For
example, following entries apparently do no relate to
non recovery of sales:
Page No.of Annex-15 Name Amount in Rs.
42 Moti Tahir 7,600/-
Usmanbhai 24,710/-
Moon Agro 7,695/-
There are similar type of entries in other pages also. The
fact of payment to debtors may also be for various
investments made by the appellant as noted on seized
documents. However, majority of them certainly relates
to sales In absence of any such clear cut details made
available by the appellant 70% of payment to debtors is
required to be allowed as a deduction on account of
discount and commission to various parties on sales or
for non recovery of sale amount, as the figures noted on
the seized documents cannot be totally brushed aside.
Thus, a sum of Rs.1,74,51,143/- is required to be
allowed. Thus net income would work out to
Rs.1,89,85,035/-. This working of income is also
supported by notings on page 70 of copies of seized
documents filed before me, in which investment by profit
upto 31/10/1997 has been shown at Rs. 1,39,69,019/-,
which means that upto 31/10/1997 itself a profit of
Rs.1,39,69,019/- was already earned If profit of later
period is correctly worked out, as discussed earlier in
this order, net undisclosed income upto 31/12/1999 after
giving set off to disclosed income in the return itself
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would work out to about Rs.1.85 crores. Thus, above
working of undisclosed income of Rs.1,89,85,035/- for
the block period is apparently correct and in tune with
the seized documents. Hence, addition of Rs.
1,89,85,035/- has to be confirmed."
22. Being aggrieved, both the assessee and the revenue has
preferred appeal before the Tribunal.
23. The reasons assigned by the Tribunal are reproduced
herein above.
24. It appears that the Tribunal after considering the loose
papers at A-15 which contains receipt and payment accounts
prepared every six months which includes opening cash and
bank balance on the receipt side, sales, loan receipts, share
application money receipt etc. which means that there is total
inflow of receipt in cash and bank is reflected on the receipt
side. The Tribunal after analyzing the payment side which
includes the payment under the head "debtors" is a subject
matter of controversy as to whether such payment is required
to be allowed as an expenditure from the total unaccounted
sales computed by the Assessing Officer or not.
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25. The Tribunal has come to the conclusion that
debt/payment under the head "debtors" shown on payment
side in loose papers A-15 is not an allowable expenditure
because it is neither a back date claim nor can be considered
as a discount and commission as per the reasons assigned by
the Tribunal on the basis of the facts available on record as
the loose papers also contain the payment under the head
'discount and commission' for several periods and therefore
the contention of the assessee was not considered by the
Tribunal that payment shown under the head "debtors"
pertains to the discount and commission.
26. The Tribunal has also arrived at findings of fact that the
contention of the assessee that there is general practice in the
line of the trade to allow 30% to 40% discount to the traders
on the goods sold was also not accepted in view of the fact
that the separate payment under the head 'discount and
commission' was mentioned on the payment side. The
Tribunal also found upon the perusal of the loose papers
Annexure-A-15 that debt under the head "debtors" is only for
some period and not for all periods. From 01/01/1999 to
30/06/1999 and from 01/07/1999 to 31/12/1999, there is no
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payment to debtors. The Tribunal, however, did not agree
with the explanation given on behalf of the appellant assessee
that the sales was shown as net i.e. after allowing discount to
customers. The Tribunal also has compared the details of
month-wise sales from the loose papers and thereafter arrived
at a finding that less sales is due to less number of boxes
having been sold and not because of any discount or
commission being reduced from the gross sales for the said
period.
27. The Tribunal therefore, considering the material
available on record and in absence of any evidence to support
the contention of the assessee that there is general trade
practice in the line of business of allowing cash discount of
30% to 40% to the traders, has rightly come to the conclusion
that debt under the head "debtors" in loose papers A-15 is not
allowable expenditure and the amount shown on payment side
of the loose papers also includes payments other than revenue
expenditure such as repayment of term loan, payments to a
new investment etc. and all payments are not relating to the
expenditure and therefore the Tribunal has rightly come to
the conclusion that merely because the credit side on the
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receipt side includes the sales then payments to debtor also is
not required to be considered as an expenditure.
28. As such, we are of the opinion that there is no addition
made by the Assessing Officer while computing the
unaccounted sales but the Assessing Officer has not allowed
the claim made by the assessee for the payment shown under
the head "debtors" which is upheld by the Tribunal on the
basis of facts emerging from the records and therefore while
considering the appeal under Section 260A of the Act, the
findings of fact arrived at by the Tribunal are not required to
be interfered when the same are not found to be perverse in
the facts of the case. The appeals therefore being devoid of
any merit are accordingly dismissed and the questions which
are admitted are answered accordingly in favour of the
Revenue and against the assessee.
(BHARGAV D. KARIA, J)
(D.N.RAY,J)
ILA
