The High Court dismissed two Income Tax Appeals filed by the Revenue against the ITAT's order. The court held that no substantial question of law arose as the Tribunal's findings on facts regarding the application of Section 153A and deletion of additions were not perverse and could not be disturbed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
�
IN THE HIGH COURT OF KARNATAKA KALABURAGI BENCH
DATED THIS THE 13TH DAY OF JULY, 2016
PRESENT
THE HON’BLE MR.JUSTICE ANAND BYRAREDDY
AND
THE HON’BLE MR.JUSTICE RAGHVENDRA S. CHAUHAN
INCOME TAX APPEAL NO. 5029/2011 C/W INCOME TAX APPEAL NO. 5030/2011
INCOME TAX APPEAL NO.5029/2011:
BETWEEN:
… APPELLANTS
(Shri Ameet Kumar Deshpande, Advocate)
AND:
M/s. Bahubali Neminath Muttin Main Road at Post Chandachan
�
Taluk Indi, District Bijapur – 586 205.
… RESPONDENT
(Shri Ashok Kulkarni & Shri K.R. Prasad, Advocates)
This Income Tax Appeal is filed Under Section 260A of the Income-Tax Act, 1961 against order passed in Income Tax Appeal No.161/PNJ/2010 dated 08-07-2011 on the file of the Income Tax Appellate Tribunal, Panaji Bench, Panaji, allowing the appeal filed by an assessee.
INCOME TAX APPEAL NO.5030/2011:
BETWEEN:
… APPELLANTS
(Shri Ameet Kumar Deshpande, Advocate)
AND:
M/s. Bahubali Neminath Muttin Main Road at Post Chandachan Taluk Indi, District Bijapur – 586 205.
… RESPONDENT
(Shri Ashok Kulkarni & Shri K.R. Prasad, Advocates)
�
This Income Tax Appeal is filed Under Section 260A of the Income-Tax Act, 1961 against order passed in Income Tax Appeal No.161/PNJ/2010 dated 08-07-2011 on the file of the Income Tax Appellate Tribunal, Panaji Bench, Panaji, dismissing the appeal filed by a revenue.
These appeals having been reserved on 14.6.2016 and coming on for ‘Pronouncement of Judgement’ this day, Anand Byrareddy J., delivered the following:
JUDGMENT
These appeals are disposed of by this common judgment in
view of the questions arising for consideration being similar.
�
the assessment was completed in terms of Section 143 (3) of the
I.T. Act in making the following additions:
�
and the addition under Section 41 (1) was confirmed. That order was challenged by both, the assessee as well as the Revenue before
the Income Tax Appellate Tribunal (ITAT). The assessee had raised an additional ground on the validity of assessment completed under Section 143 (3) of the I.T. Act and since it was an action brought pursuant to a search under Section 132 of the I.T. Act, the assessment, it was contended, ought to have been completed under Section 153A of the I.T. Act and not under the usual provisions of the I.T. Act. The Tribunal had accepted the said contention and
held that the order of assessment was vitiated. On merits, the Tribunal deleted the entire additions made by the Assessing Officer and those confirmed by the appellate authority and therefore the present appeals.
by Shri Ameet Kumar Deshpande, the learned Counsel for the Revenue as on 14.06.2016 in variance with the substantial questions of law that were framed in the memorandum of appeal,
�
and as framed by this Court at the time of admission of these appeals as follows:
“1. Whether the ITAT is justified in holding that the assessment was required to be done under section 153A of the Income Tax Act, 1961 and not under section 143 of the Income Tax Act, 1961?
2. Whether the ITAT is justified in not upholding the addition made on account of ‘unaccounted purchases’, by ignoring the provisions of section 69B of the Income Tax Act, 1961?
3. Whether the ITAT is justified in deleting the addition made by the CIT(A) on account of ‘unaccounted sales/suppressed sales’, when the ITAT has not disbelieved the amount of closing stock arrived at by the CIT(A)?”
the assessment having been held to be bad in law since it ought to have been concluded under Section 153A read with Section 153B of the I.T. Act as being erroneous. It is contended that the Tribunal has failed to note, from a reading of Section 153A (1) (b) of the I.T.
Act, that the assessing officer has to finalise the assessment under
�
Section 153A alone in respect of each assessment year falling within such six assessment years and it is nowhere provided that he is empowered to issue notice under Section 153A of the I.T. Act for the year in which the search is conducted or would be vested with jurisdiction to finalise the assessment under Section 153A of the I.T. Act.
�
therefore he seeks that the substantial questions of law raised be answered in favour of the revenue.
“Whether assessment for the previous year in which search is initiated under Section 132 of the Act or requisition under Section 132A is made has to be done in accordance with the provisions of Section 153A/153B of the Act?”
It is contended by the learned Counsel for the respondent that after a detailed consideration of the provisions of the Act, the Tribunal has allowed the appeal filed by the Revenue therein, and therefore while construing a Central legislation, like the Income
�
Tax Act, which has an All-India application, there ought to be uniformity in the interpretation of the provisions, by the several benches of the Tribunal. Therefore the interpretation of the provision as canvassed and acted upon by the Department in one jurisdiction should not be departed from to the extent reasonably possible in other jurisdictions governed by the same law.
not tenable, as it is a question of jurisdiction and not a mere technicality. It is contended by the learned Counsel for the respondent that in any event the question is purely academic as the Tribunal has decided the appeal in favour of the respondent on merits and hence the question does not really arise for consideration.
��
that pursuant to the appeals before the CIT (Appeals) and the further appeals before the ITAT and the present appeals having been filed by the Revenue, the substantial questions of law that have been framed in the present appeals would have to be viewed in the background that the appellate Tribunal on a scrutiny of the entire factual material on record has passed the impugned order and now an attempt is being made by the Revenue to seek reappreciation of the evidence on factual aspects and the conclusions drawn in the order of the appellate tribunal, which according to the learned Counsel is impermissible under Section 260A of the I.T. Act.
��
findings of fact are to be assailed, it would require a substantial question as to there being a perverse finding of fact by the Tribunal to have been raised. In the absence of any such question having been raised, it cannot be said that any question of law arises for consideration and much less a substantial question of law as contemplated under Section 260A of the I.T. Act. Reliance is placed on the following authorities by the learned Counsel for the above propositions:
objections raised above, he would submit that, on merits it should
��
be noted that admittedly the books of accounts of the respondent have been rejected by the assessing authority. The profit of the respondent is estimated as provided under Section 145 (3) of the I.T. Act. When the gross profit rate is applied, it would cover any infirmity and there was no need for the Assessing Officer to make a scrutiny of the amounts incurred on the purchases by the respondent. In any event, the revenue would not be in a position to rely on the rejected books of accounts for making the additions on account of trade creditors and also for the purpose of arriving at a
closing stock. This is the view taken by atleast four High Courts in the following reported judgments:
��
��
“18. The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law.”
19. Similarly, in Santosh Hazari vs. Purushottam Tiwari [2001] 3 SCC 179, a three-judge Bench of this Court observed that:
“A point of law which admits of no two opinions may be a proposition of law but cannot be a substantial question of law. To be ‘substantial’ a question of law must be debatable, not previously settled by law of the land or a binding precedent, and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law ‘involving in the case’ there must be first a foundation for it laid in the pleadings and the question
��
should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. It will, therefore, depend on the facts and circumstance of each case whether a question of law is a substantial one and involved in the case, or not; the paramount overall consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and impelling necessity of avoiding prolongation in the life of any lis.”
20. In Hero Vinoth (Minor) Vs. Seshammal reported in [2006] 5 SCC 545, 556 this Court has observed that:
"The general rule is that High Court will not interfere with the concurrent findings of the courts below. But it is not an absolute rule. Some of the well-recognised exceptions are where (i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts have drawn wrong inferences from proved facts by applying the law erroneously; or (iii) the courts have wrongly cast the burden of proof. When we refer to ‘decision based on no evidence’, it not only refers to cases where there is a total dearth of evidence, but also refers to
��
any case, where the evidence, taken as a whole, is not reasonably capable of supporting the finding.”
21. A finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence, or when the evidence has been misread. (See: Madan Lal Vs. Mst. Gopi & Anr. [19800 4 SCC 255; Narendra Gopal Vidyarthi Vs. Rajat Vidyarthi [2009] 3 SCC 287; Commissioner of Customs (Preventive) Vs. Vijay Dasharath Patel [2007] 4 SCC 118; Metroark Ltd. Vs. Commissioner of Central Excise, Calcutta [2004] 12 SCC 505; West Bengal Electricity Regulatory Commission Vs. CESC Ltd. [2002] 8 SCC 715).”
13. Further, in Mangalore Ganesh Beedi works case supra the Supreme Court has held as follows:
“19. xxx There is a clear finding of fact by the Tribunal that the legal expenses incurred by the assessee were for protecting its business and that the expenses were incurred after November 18, 1994. There is no reason to reverse this finding of fact particularly since nothing has been
��
shown to us to conclude that the finding of fact was perverse in any manner whatsoever. That apart, if the finding of fact arrived at by the Tribunal were to be set aside, a specific question regarding a perverse finding of fact ought to have been framed by the High Court. The Revenue did not seek the framing of any such question. In this regard, reference may be made to K. Ravindranathan Nair v. Commissioner of Income Tax [2001] 247 ITR 178, 181 (SC) wherein it was observed:
“The High Court overlooked the cardinal principle that it is the Tribunal which is the final fact-finding authority. A decision on fact of the Tribunal can be gone into by the High Court only if a question has been referred to it which says that the finding of the Tribunal on facts is perverse, in the sense that it is such as could not reasonably have been arrived at on the material placed before the Tribunal. In this case, there was no such question before the High Court. Unless and until a finding of act reached by the Tribunal is canvassed before the High Court in the manner set out above, the High Court is obliged to proceed upon the findings of fact reached by the Tribunal and to give an answer in law to the question of law that is before it.”
20. Accordingly, we hold that the High Court was not justified in upsetting a finding of fact arrived at by the Tribunal, particularly in the absence of a substantial question of law being framed in this regard. Therefore, we
��
set aside the conclusion arrived at by the High Court on this question and restore the view of the Tribunal and answer the question in favour of the Assessee and against the Revenue.”
��
Engineering Company’s case and Amman Steel and Allied Industries , case supra.
Sd/JUDGE
Sd/JUDGE
swk
2 issues framed by the court
Whether the ITAT was justified in holding that assessment should have been completed under Section 153A instead of Section 143 following a search under Section 132.
Whether the ITAT was justified in deleting additions made on account of unaccounted purchases ignoring Section 69B of the Income-Tax Act.
Colour shows how this judgement treated each authority
Vijay Kumar Talwar vs. Commissioner of Income TaxDistinguished¶81
330 ITR 1 (SC) @ 7-9
Mangalore Ganesh Beedi Works vs. Commissioner of Income TaxDistinguished¶108
378 ITR 640 (SC) @ 648
Santosh Hazari vs. Purushottam TiwariReferred¶99
[2001] 3 SCC 179 · Who else cites this
Hero Vinoth (Minor) Vs. SeshammalReferred¶103
[2006] 5 SCC 545 · Who else cites this
Ujjain vs. Sushil Kumar JainExplained¶69
Ujjain vs. Sushil Kumar Jain
5 provisions across 1 enactments
The Commissioner of Income Tax, Belgaum
M/s. Bahubali Neminath Mutt
Anand Byrareddy
Raghvendra S. Chauhan
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
