Principal Commissioner Of Income vs Dimple Murarka
2023 Latest Caselaw 7893 Ori

         IN THE HIGH COURT OF ORISSA AT CUTTACK

                                    ITA No. 11 of 2021

      Principal Commissioner of Income                  ....                 Appellant
      Tax-1, Bhubaneswar

                                          -versus-

      Dimple Murarka                                    ....               Respondent



      Advocates appears in the case:


           For Appellant:          Mr. Tushar Kanti Satapathy,
                                   Senior Standing Counsel (Revenue)

           For Respondent: None


                   CORAM:


                                 JUSTICE ARINDAM SINHA
                                 JUSTICE SANJAY KUMAR MISHRA

----------------------------------------------------------------------------------------------
                      Date of Hearing and Judgment: 21.07.2023
----------------------------------------------------------------------------------------------
ARINDAM SINHA, J.

1. Mr. Satapathy, learned advocate, Senior Standing Counsel appears

on behalf of appellant/revenue. He submits, there was direction for

issuance of notice made by coordinate Bench. The notices have been

served but assessee goes unrepresented.

// 2 //

2. He submits, substantial questions of law arise for admission of the

appeal against order dated 25th September, 2022 passed by the Income

Tax Appellate Tribunal (ITAT), Cuttack Bench. He submits, though the

Tribunal upheld the order of revision made by the Principal

Commissioner of Income Tax (PCIT), but interfered with the directions

inasmuch as it said that the direction in respect of stock differences

found from the record does not require further verification.

3. He submits, the PCIT had on record, inflated stock statement

submitted by the assessee to the bank. Therefore, the difference is to be

treated as unaccounted sales. In those facts, interfering with the decision

gives rise to substantial questions of law.

4. He submits, the Tribunal erroneously relied on judgment of the

Supreme Court in Malabar Industrial Co. Ltd. v. CIT reported in

(2000) 243 ITR 83 (SC), paragraph-11 (Manupatra print). The

paragraph is reproduced below.

"11. In the instant case, the Commissioner noted that the Income-tax Officer passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the Income-tax Officer failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant- company

// 3 //

was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts the conclusion that the order of the Income-tax Officer was erroneous is irresistible. We are, therefore, of the opinion that the High Court has rightly held that the exercise of the jurisdiction by the Commissioner under Section 263(1) was justified.

(emphasis supplied)

5. He relies on view taken by a Division Bench in the High Court of

Madras by Coimbatore Spinning & Weaving Co. Ltd. v. CIT reported

in (1974) 95 ITR 375 (Mad), paragraph-15 (Manupatra print). The

paragraph is reproduced below.

"15. As pointed out already, once the assessee's explanation has not been accepted by the Tribunal, the resultant position is that there were excess stocks undisclosed in the books of account, and that the non- disclosure was only with a view to suppress the income. Once the Tribunal finds that there were excess stocks after rejecting the explanation of the assessee, the conclusion is inescapable that the excess stocks should have come from undisclosed sources. As already pointed out, the finding of the Tribunal that there were excess

// 4 //

stocks cannot be interfered with by this court, as it is exclusively a matter for the Tribunal to accept or reject the assessee's explanation on the facts and circumstances of this case, We are, therefore, of the view that the Tribunal is justified in taking the view that the excess stocks should represent the income of the assessee from undisclosed sources.

(emphasis supplied)

He submits, substantial questions of law be framed for admission of the

appeal.

6. Perused impugned order of the Tribunal. It appears therefrom that

the Assessing Officer (AO) completed assessment on basis of audit

report and copy of ledger, bank statements etc. but the assessee did not

produce books of accounts inspite of show cause notice issued to that

effect. In the circumstances, the AO completed the assessment and

disallowed difference of stock found during course of survey under

section 133-A. The PCIT observed that the assessment was erroneous

and prejudicial to interest of revenue. Assessee filed appeal before the

Tribunal against the order dated 12th March, 2015 passed under section

263.

7. By impugned order the Tribunal partly allowed the appeal

inasmuch as it said that direction of the PCIT in respect of stock

// 5 //

difference found from the record is not required to be further verified.

Revenue being aggrieved is before us for admission of the appeal on,

according to it, substantial questions of law arising on the modification

made by the Tribunal in partly allowed in the appeal.

8. The facts are, the assessment had been made on basis of audit

report and copy of ledger bank statements etc., in absence of books of

accounts. There was discrepancy found by the AO in taking into account

difference of stock found during course of survey. It must be

remembered that a survey is finding on physical verification, by survey.

Hence, the difference was taken and added back as income of the

assessee.

9. The Tribunal held that the order under section 263 was a good one

except the direction for verification of the stock by reason of the PCIT

having discovered there was on record inflated stock statement,

submitted by assessee to the bank and therefore further verification of

stock was necessary. The Tribunal relied on Malabar (supra) for its

view that the AO had correctly taken into account the position of stock

of the assessee.

10. In Malabar (supra), it will appear from above quoted paragraph,

the Supreme Court noted that the AO had accepted the entry in the

// 6 //

statement of account filed by appellant in absence of any supporting

material and without making any inquiry. On those facts the conclusion,

the Supreme Court said, the order of the ITO was erroneous, is

irresistible.

11. Moving on to Coimbatore Spinning & Weaving Co. Ltd. it is

seen that the Division Bench in the Madras High Court took view earlier

in point of time, consistent with view taken by the Supreme Court in

Malabar (supra). It said, once the Tribunal finds that there were excess

stocks after rejecting the explanation of the assessee, the conclusion is

inescapable that the excess stocks should have come from undisclosed

sources. It is evident that the Tribunal, in that case, found existence of

stock as unexplained. Here, the Tribunal noted that the PCIT had only

come upon an inflated stock statement and there was no inquiry or

verification in respect thereof.

12. We do not find any substantial question of law arises in the

appeal for admission. It is dismissed.

                                                                             (Arindam Sinha)
                                                                                    Judge


Signature Not Verified
Digitally Signed                                                              (S.K. Mishra)
Signed by: SISIR KUMAR SETHI
Designation: PERSONAL ASSISTANT                                                     Judge
Reason: Authentication
Location: ORISSA HIGH COURT
                       Sks
Date: 21-Jul-2023 18:23:41