# Commissioner of Income Tax,Kanpur v. M/s Kesarwani Sheetalaya

- **Citation:** (2019) 1 ILRA 487
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-08-20
- **Case number:** INCOME TAX APPEAL No.58 of 2013
- **Bench:** Bharati Sapru, Rohit Ranjan Agarwal
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/commissioner-of-income-tax-kanpur-v-m-s-kesarwani-sheetalaya-44498
- **Pages:** 6

## Headnote

A. Income Tax Act, 1961. Section 68 and
69-A. Cash in hand in the books of
account was found in excess of actual
cash found during the course of search -
Only presumption available - assessee
has spent the difference amount. No
ground to make addition either under
section 68 or 69A. (Para19)

B. Section 260-A. Finding of fact -
Undisputedly,
the
assessee
did
not
violate any provision of U.P. Regulation
of Cold Storage Act, 1976- Tribunal
rightly set aside the finding by the AO
and the first appellate authority that the
assessee
was
in
the
business
of
potatoes.
Addition
rightly
knocked
off.(Para22)

The appeal is dismissed. The question of law is,
therefore, answered against the Revenue and in
favour of the assessee.(Para26) (E-7)

## Text

1 All. Commissioner of Income Tax, Kanpur Vs. M/s Kesarwani Sheetalaya
487
upheld the reasoning given by the CIT(A)
wherein the CIT(A) has taken the average of
the gross profit rate of the two preceding
assessment years after considering the previous
history of the assessee. On this issue, we find
that the finding recorded by the Tribunal is a
concluded finding of fact recorded on the basis
of material and evidence on record and
warrants no interference.

40. The law as to what amounts to
substantial question of law is also well settled.
It has been emphasized that the finding of fact
recorded by the AO or the first appellate
authority or the Tribunal cannot be disturbed
by the High Court in exercise of powers under
Section 260-A of the Act unless such finding
is perverse or is such which no person of
reasonable prudence could arrive at in the
given facts of the case.

41. Undisputedly the powers of First
Appellate Authority in matters of assessment
are co-extensive with the Assessing Authority,
in so far as the CIT (A) had issued a notice
and thereafter made the enhancement on the
basis of relevant material, no question of law
may arise against such estimation as it would
remain a finding of fact. In so far as the
enhancement made by the CIT (A) is based
on cogent material and evidence, the said
finding does not suffer from any error of Law.

42. In M. Janardhana Rao Vs
Joint CIT, reported in (2005) 273 ITR
50 (SC), the Hon'ble Supreme Court held
that in the exercise of the powers under
Section 260-A of the Act, the findings of
fact of the Tribunal cannot be disturbed.
The Hon'ble Court held as follows.

14. Without insisting on the
statement of substantial question of law in the
memorandum of appeal and formulating the
same at the time of admission, the High Court
is not empowered to generally decide the
appeal under Section 260A without adhering to
the procedure prescribed under Section 260A.
Further, the High Court must make every effort
to distinguish between a question of law and a
substantial question of law. In exercise of
powers under Section 260A, the findings of fact
of the Tribunal cannot be disturbed. It has to be
kept in mind that the right of appeal is neither a
natural nor an inherent right attached to the
litigation. Being a substantive statutory right, it
has to be regulated in accordance with law in
force at the relevant time. The conditions
mentioned in Section 260A must be strictly
fulfilled before an appeal can be maintained
under Section 260A. Such appeal cannot be
decided on merely equitable grounds.
 (emphasis supplied)

43. Thus, we do not find any infirmity in
the order of the Tribunal. The findings recorded
by it are clearly findings of fact based on
material evidence. In view of the above we
answer the question no. 1, 2, 3 and 4 in favour
of revenue and against the assessee.

44. The appeal is dismissed. No
costs.
---------
APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 20.08.2019

BEFORE
THE HON'BLE BHARATI SAPRU, J.
THE HON'BLE ROHIT RANJAN AGARWAL, J.

INCOME TAX APPEAL No.58 of 2013

Commissioner of Income Tax,Kanpur
 ... Appellant
Versus
M/s Kesarwani Sheetalaya ...Respondent

Counsel for the Appellant:
Sri Krishna Agrawal,C.S.C., Sri Manu
Ghildyal , Sri Dhananjay Awasthi.
488 INDIAN LAW REPORTS ALLAHABAD SERIES
Counsel for the Respondent:
Sri Umesh Chandra Kesharwani, Sri
Suyash Agrawal, Sri Ravi Kant.

A. Income Tax Act, 1961. Section 68 and
69-A. Cash in hand in the books of
account was found in excess of actual
cash found during the course of search -
Only presumption available - assessee
has spent the difference amount. No
ground to make addition either under
section 68 or 69A. (Para19)

B. Section 260-A. Finding of fact -
Undisputedly,
the
assessee
did
not
violate any provision of U.P. Regulation
of Cold Storage Act, 1976- Tribunal
rightly set aside the finding by the AO
and the first appellate authority that the
assessee
was
in
the
business
of
potatoes.
Addition
rightly
knocked
off.(Para22)

The appeal is dismissed. The question of law is,
therefore, answered against the Revenue and in
favour of the assessee.(Para26) (E-7)

(Delivered by Hon'ble Bharati Sapru J.
Hon'ble Rohit Ranjan Agarwal J.)

1. This appeal under Section 260-A
of the Income Tax Act, 1961 (hereinafter
called as ''Act') has been filed assailing
the order of the Income Tax Appellate
Tribunal, Allahabad (hereinafter called as
''ITAT') dated 30.11.2012.

2. T his appeal was admitted on
26.11.2013 on the following question of
law:-

"(1) Whether on the ITAT erred
in law as well as on facts in deleting the
addition of Rs.23,31,28,321/- made on
account of investment in potatoes in
disregard of all the evidences on record,
and the fact that this belonged to one of
the partners Raj Kumar Kesarwani.

(2) Whether the ITAT has erred
in law as well as in the facts and
circumstances of the case in deleting the
addition of Rs.37,30,710/- made on
account of difference of cash balance as
reflected in the balance sheet and cash as
per
seized
documents
on
wrong
appreciation of facts.

(3) Whether the ITAT was
justified in substituting it own views
which were based on interpretation of
word "either" as used by both the A.O.
and C.I.T.(A) in coming to conclusion
that case reflected was either bogus
liability or unexplained cash.

(4) Whether the ITAT has erred
in law as well as in the facts and
circumstances of the case in directing the
A.O. to re-decide the issue by considering
the books of accounts produced by the
assessee,
ignoring
the
provision
of
Section 142A."

3.

Thereafter
two
additional
substantial questions of law were added
which are as under:-

"1. Whether the ITAT is legally
justified in reversing the concurrent
finding of fact of the authorities below
without appreciating the material on
record ?

2. Whether the ITAT is legally
justified in reversing the concurrent
findings of fact of the authorities below in
the balance of fresh material placed
before it ?"

4.

Respondent-assessee
is
a
partnership firm engaged in cold storage
business having its Head Office at
Sahson, Allahabad. The dispute relates to
the assessment year 2008-09. It appears
1 All. Commissioner of Income Tax, Kanpur Vs. M/s Kesarwani Sheetalaya
489
that action under Section 132(1) of the
Act was taken in group cases of
Kesarwani Zarda Bhandar, Allahabad and
its partners on 27.8.2009.

5. The Assessing Officer framed
assessment under Section 153-A of the Act
on 28.12.2011 for the assessment year in
question. The order of the AO was
challenged before the Commissioner Income
Tax (Appeals). The major challenge by the
assessee was for two additions and disallowances of expenses. As far as the
challenge to addition by the assessee was for
Rs.37,30,710/- being the lesser cash in hand
as per the seized paper as compared with the
books of account, in which the assessee has
shown more cash in hand. The other major
addition was of Rs.23,31,28,321/- on the
ground that the assessee was engaged in the
business of potatoes. The CIT(A) accepted
the addition so made by the AO.

6. Being aggrieved the assessee filed
an appeal before the ITAT which was
allowed to the extent as far as the addition
of amount of Rs.37,30,710/- and addition
of Rs.23,31,28,321/- are concerned, while
the Tribunal remanded back the matter to
the Assessing Authority as far the
addition of Rs.5,47,92/- on account of
addition under the heading ''building'.

7. Sri Manu Ghildyal, learned
Counsel appearing for the Revenue
submitted that ITAT was not correct in
deleting the addition of Rs.23,31,28,321/-
made on account of investment in
potatoes in disregard of all evidences on
record, and further the papers seized
during the search at the residential
premises of one of the partners of
assessee
firm
namely
Raj
Kumnar
Kesarwani. He further submitted that the
actual cash with the assessee firm was
only Rs.27,39,932/- whereas in the
audited balance-sheet, the amount was
shown
as
Rs.64,70,642/-
Thus
the
difference
of
Rs.37,30,710/-
was
considered as unexplained income by the
Assessing Officer and the same was
added. Lastly, it was submitted that ITAT
was not correct to reverse the concurrent
finding of fact recorded by the Income
Tax Authorities without appreciating the
material on record.

8. Per contra, Sri Ravi Kant, learned
Senior Advocate assisted by Sri U.C.
Kesarwani, learned Counsel for the
Assessee submitted that no papers were
seized from the residential premises of the
partners of the firm and the documents
relied upon were seized from the
residence of the Chartered Accountant, an
assessee being not the author of the
document nor the same having been
signed by any of the partners, nor the
Chartered Accountant examined at the
time of search or at the assessment stage.
It was further contended that the assessee
had maintained the proper books of
account and the AO had wrongly relied
upon the provisions of Section 68 of the
Act, which was not applicable in the case,
and
subsequently
in
appeal,
the
Commissioner of Income Tax (Appeals)
held that the provisions of Section 69A
were applicable, which according to him,
the First Appellate Authority did not have
the power to change the law to sustain the
addition.

9. He further submitted that the
assessee firm is not engaged in the
business of potatoes and the assessee is
running a cold storage and the business is
of storing potatoes for which rent is
realised from the farmers who store
agricultural produce in the Cold storage.
490 INDIAN LAW REPORTS ALLAHABAD SERIES

10. The assessee maintains complete
record as far as the storage of potatoes is
done and the assessee maintains the
storage
(bhandaran)
and
delivery
(nikasan) register and issues rent receipt
for the period for which potatoes are
stored.

11. Sri Ravi Kant, learned Senior
Counsel further placed on record the U.P.
Regulation of Cold Storage Act, 1976,
which regulates the functioning of the
Cold storage in the State of Uttar Pradesh.

12. Section 2 (c) defines the ''cold
storage', means an enclosed chamber
insulated and mechanically cooled by
refrigeration
machinery
to
provide
refrigerated
condition
to
agriculture
produce stored therein but does not
include refrigerated cabinets and chilling
plants. Further Section 2(d) defines the
word ''hirer' means a person who hires on
payment of the prescribed charges spaces
in a cold storage for storing agricultural
produce. Section 2(f) defines ''licensee'
means any person to whom a licence is
granted under this Act. Section 2(i)
defines ''receipt' means a cold storage
receipt including a duplicate receipt
issued by licensee under this Act. Section
5 of the Act provides restrictions on
carrying on the business of cold storage.

13. Section 12 of the Act provides
for reasonable care of goods, while
Section 13 is in regard to the duty to
exhibit the capacity of the cold storage.
Section 19 is in regard to the delivery of
goods, where on the demand made by
hirer, every licensee shall deliver the
goods stored in the cold storage provided
the hirer surrenders the receipt and pays
all charges due to the licensee. Section 20
provides that the licensee is entitled to
retain possession of the goods until the
receipt
therefor
is
surrendered
and
necessary charges are duly paid. Further
Section 37 of the Act provides for penalty
in case where any provision of the Act, or
any
rule,
order
or
direction
is
contravened,
then
on
conviction
punishment with imprisonment for a term
which may extend to two years or fine
which may extend to Rs. 10,000/- or both
shall be made.

14. Section 38 provides for the
offences by companies, in the explanation
to the said section, ''company' means any
body corporate, and includes a firm or
other association of individuals, and
''director' in relation to a firm, means a
partner in the firm. Section 39 further
provides for the cognizance of the offence
punishable under the Act by the Court not
inferior to that of a Magistrate of the first
class, who shall try any such offence.

15. Sri Ravi Kant, learned Senior
Counsel laid emphasis that a cold storage
cannot run without a licence being
granted by licensing authority and no
agricultural produce in a cold storage can
be stored except in accordance with the
terms and conditions of the licence. If,
there is any contravention of any
provision of the Act, the licensing
authority can take punitive action as
provided under the Act.

16. In the present case, no violation
has been noticed or has been brought on
record by the Assessing Officer meaning
thereby that the assessee did not violate
any of the terms of provisions of U.P.
Regulation of Cold Storage Act, 1976. He
further submitted that the addition is made
merely on presumption and no material or
evidence has been brought on record to
1 All. Commissioner of Income Tax, Kanpur Vs. M/s Kesarwani Sheetalaya
491
prove that assessee is engaged in the
business of potatoes. As in a cold storage
potatoes can only be stored and it cannot
be used for any other purposes. It was
also submitted that the case of the
assessee is only of bailee and the
transaction between the assessee and the
constituents are the bailment i.e. the
storage of potatoes and later on delivery.

17. We have heard learned Counsel
for the parties and perused the material on
record.

18. It is not in dispute that the
assessee is running of a cold storage, after
being granted the licence as mandated
under the U.P. Regulation of Cold Storage
Act, 1976. Under the said Act, it is only
the storage of the agricultural commodity
for which the licence is granted and no
other business can be carried out by the
licensee. The Act and the rules lay down
the
procedure
for
the
storage
of
agricultural commodity and also the
maintenance of the necessary records for
regulating the storage of such commodity.

19. In the present case, learned
Counsel for the Revenue has mainly
relied upon the two deletion made by the
ITAT of the addition so made by the AO
as confirmed by the CIT (A). As to the
addition made of Rs.37,30,710/-, which is
lesser cash in hand as compared with the
books of accounts in which the assess has
shown more cash in hand, the Tribunal
held that it is neither a case under Section
68 of the IT Act nor Section 69-A of the
Income Tax Act. The Tribunal further
went on to hold that it was not a case
where money is not recorded in the books
of account of assessee, and in the present
case cash in hand in the books of account
was found to be more than the actual cash
found during the course of search. At the
most, authorities could have presumed
that assessee has spent the difference of
amount in question somewhere as per
cash in hand, as per books of account and
lesser cash as per seized documents, but
that would also not suffice to make
addition
under
any
of
the
above
propositions.

20. As far as the other addition made
of Rs.23,31,28,321/-, the assessee had
challenged the same on the ground that
they are not engaged in business of
potatoes and the entries in the seized
register, gate pass and exit record were
totally ignored by the assessing authority
as well as by the first appellate authority.
The Tribunal being the last fact finding
authority recorded a categorical finding
that the assessee had submitted all the
documents as well as all the entries of the
bhandaran and exit register (nikasan)
tallied with the stock, as such the addition
made by the authorities were wrong.

21. The argument raised by the
counsel for the assessee as far as no
violation of the provisions of U.P.
Regulation of Cold Storage Act is
concerned, has force, as the Assessing
Officer has failed to bring on record any
notice given by any of the concerned
licencing authority regarding violation of
the Act or any proceedings pending
against the assessee firm.

22. When this fact was confronted
with the counsel for the Revenue, he
failed to produced any document in regard
to any violation made by the assessee,
Cold Storage of the provisions of the U.P.
Regulation of Cold Storage Act. Once it is
established that the assessee did not
violate any terms of provisions of U.P.
492 INDIAN LAW REPORTS ALLAHABAD SERIES
Regulation of Cold Storage Act, 1976,
then, the finding recorded by by AO as
well as the first appellate authority that
the assessee was in the business of
potatoes and the addition so made by the
Assessing Officer was merely on the basis
of presumption and assumption and
without any material on record.

23. The Tribunal has also recorded a
categorical finding that no evidence of
purchase,
sales
or
unaccounted
stock
belonging to the assessee during the course of
search or survey was found or established,
thus, there was no justification for the
authorities to make or confirm the addition of
the said amount. There is no doubt that the
business of running a cold storage is governed
by the U.P. Act of 1976 and it is only after the
grant of licence by the licencing authority that
a cold storage can run according to the terms
and conditions of the licence. Any violation of
the terms of licence has penal consequences as
provided under Section 37 and 38 of the Act,
for which the Magistrate of Ist Class is
empowered to take cognizance of any offence
so made by the licence holder. As, in the case
in hand, during the search and survey in the
business premises of the assessee, no such
violation was found or recorded, nor any
notice was given or action was taken against
the asssessee, as is evident from the perusal of
the documents before us. Further, the counsel
for the Revenue also could not point out to
any such violation made by the assessee of the
U.P. Act of 1976.

24. Once it is established that the
assessee had not violated the terms of
licence, so granted by the licencing
authority,
merely
on
the
basis
of
presumption and assumption from any
documents or papers seized during search
and survey cannot be the basis for the
addition of such an amount.

25. Having considered the facts and
circumstances of the case and going
through the records of the case, we are of
the considered opinion that the Revenue
has failed to establish that the order of the
Tribunal is manifestly illegal and suffers
from error apparent on face of the record.
As the Tribunal being the last fact finding
court has categorically recorded finding
that the authorities below had wrongly
made the additions without any material
on
record
on
the
basis
of
mere
presumption and assumption.

26. The appeal is dismissed. The
question of law is, therefore, answered
against the Revenue and in favour of the
assessee.
--------

APPELLATE JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 14.08.2019

BEFORE
THE HON'BLE BHARATI SAPRU, J.
THE HON'BLE ROHIT RANJAN AGARWAL, J.

INCOME TAX APPEAL No.223 of 2013

M/S Meerut Roller Flour Mills Pvt. Ltd.
 ... Appellant
Versus
Commissioner of Income Tax,Meerut
&Anr. ...Respondents

Counsel for the Appellant:
Sri Suyash Agarwal. Sri Rakesh Ranjan
Agarwal.

Counsel for the Respondents:
C.S.C., I.T., Income Tax, Sri Gaurav Mahajan.

A. Income Tax Act, 1961: 142(1), 143(1),
143(3), 260A, 263: Mere non-discussion
and non-mentioning about the reply in
the order-no assumption of order being
erroneous.