HIGH COURT OF PUNJAB AND HARYANA 
Commissioner of Income-tax
v.
Jay Kay Feeds (P.) Ltd.*
HEMANT GUPTA AND Ms. Ritu Bahri, JJ. 
ITC No. 61 OF 1999 (O&M)†
MARCH  13, 2013 
Section 145 of the Income-tax Act, 1961 - Method of accounting - Estimation of income [Unexplained investment on sale] - Assessment year 1987-88 - Assessee filed its return reflecting gross profit rate of 4.2 per cent from sales of Rs. 1.67 crore - Assessing Officer estimated sales at Rs. 2.30 crores and computed profit by applying gross profit rate of 5 per cent - Another amount Rs. 50,000 was also added to assessee's income on basis of probable investment made by assessee on sale outside books of account during year under consideration - On appeal, Commissioner (Appeals) held that gross profit rate could be applied only on unrecorded sales of Rs. 7.49 lakhs and unexplained investment on unrecorded sales had to be worked out on proportionate basis and, so computed, there was no justification for impugned addition - Whether findings recorded by Commissioner (Appeals) being pure finding of fact, no question of law did arise therefrom - Held, yes [Para 7] [In favour of assessee] 
Rajesh Katoch  for the Appellant. Akshay Bhan and Alok Mittal for the Respondent.
ORDER
 
Hemant Gupta, J. - The present petition under Section 256(2) of the Income Tax Act, 1961 (for short 'the Act') is by the Revenue arising out of an order of the Income Tax Appellate Tribunal (for short 'the Tribunal') dated 18.05.1998 pertaining to the assessment year 1987-88, claiming the following substantial questions of law:-
"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding deletion of addition of Rs. 98,813/- by the Commissioner of Income Tax (Appeals) by observing that the sales should not be estimated at the figure of Rs. 2.30 crores and total sales should be restricted to the figure declared by the assessee at Rs. 1,67,19,652/- by enhanced by Rs. 9.10 lakhs?
(2) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in law in disposing of the additional ground regarding cancellation by the CIT (A) of interest charged under Section 215/217 only by observing that the department has challenged only the admission of additional ground by the CIT(A) and also not impliedly challenged the decision on merits?"
2. The assessee filed its return reflecting the gross profit rate at the rate of 4.2% from the sales of Rs. 1,67,19,652/-. However, the Assessing Officer estimated sales at Rs. 2,30,00,000/- and by applying gross profit rate @ 5%, the profit would come to Rs. 11,50,000/-. Since the assessee has shown profit of Rs. 7,01,187/- and had also surrendered an amount of Rs. 4,00,000/- under Section 132(4) of the Act, therefore, an amount of Rs. 48,813/- was found to be concealed income of the assessee during the year under consideration. In addition to the said amount, another Rs. 50,000/- was added to the income on the basis of probable investment made by the assessee during the year under consideration.
3. However, the Commissioner of Income Tax (Appeals), Ludhiana vide its order dated 14.08.1991 set aside the said addition by observing to the following effect:-
"At best, addition can be made on the profits earned on the unrecorded sales amounting to Rs. 7,49,608/-. By applying a G.P rate of 5%, the addition works out to Rs. 37,480/-. Since the sales to the tune of Rs. 7,49,608/- were affected outside the books of account, the learned ACIT was justified in working out un-explained investment on sales affected outside the books of account, but working out the same at Rs. 50,000/- on estimate is not warranted by the provisions of law. Such investment has to be worked out on proportionate basis as by the Hon'ble I.T.A.T, Amritsar Bench, Amritsar, in I.T.A No. 503/1974-75 in the case of M/s Harjit Singh Tarlochan Singh, Railway Road, Khanna v. ITO Khanna, relating to the assessment year 1971-72. On proportionate basis such investment will work out to Rs. 4490/- = 100000/16719652 X 750000=4490. Thus at best an addition of Rs. 41,970/- (37480+ 4490) could have been made, against which the appellant had surrendered a sum of Rs. 4,00,000/- during the course of search which surrender has been accepted by the department. Accordingly, I hold that there is no justification for the impugned addition of Rs. 48,813+50,000=98,813/-. The same is accordingly deleted. The first two grounds accordingly succeed and the appellant gets a relief of Rs. 98,813/- (48,813+50,000/-)."
4. The learned Commissioner of Income Tax (Appeals), Ludhiana has also recorded the finding that sum of Rs. 3,71,000/- was lying with the department since 14.10.1996. A specific request was made by the assessee on 17.03.1997 to adjust the seized amount towards the tax due at the time of filing of the return. Therefore, the assessee is not liable to pay interest in terms of Sections 215 and 217 of the Act. The Tribunal in further appeal upheld the order of the Commissioner of Income Tax (Appeals), Ludhiana.
5. The Revenue sought to raise the substantial questions of law as mentioned above, which were declined by the Tribunal vide order dated 14.10.1998. The Revenue has thus filed the present petition under Section 256(2) of the Act.
6. In respect of first substantial question of law, the learned Commissioner of Income Tax (Appeals) has found that sales to the tune of Rs. 7,49,608/- were affected outside the books of account and therefore the gross profit rate has to be applied in respect of the said amount alone. Consequently, the addition of Rs. 98,813/- (48,813+50,000/-) was set aside. The said finding is pure finding of fact. No question of law on the basis of such finding arises for consideration, as only income from concealed sales could be taken into consideration.
7. In respect of second questions of law, the department has more amount in its control than the amount of advance tax payable by the assessee. Therefore, it cannot be said that assessee is liable to pay interest on the amount of advance tax. We do not find any substantial question law arises for consideration in the present appeal.
8. The appeal is dismissed accordingly.
Varsha 

*In favour of assessee.
†Arising out of order of Tribunal, dated 18-5-1998.