2006 (2) TMI 126 - HC - Income Tax

(i) Whether Tribunal was right in law in confirming the first appellate authority s order deleting the addition made on account of bogus purchases? - trading results of the assessee had all along been accepted and the purchases of scrap from the seven parties could not be termed as bogus so tribunal was justified in dleting the additions - (ii) Whether, Tribunal was right in deleting the addition of made in the trading account by invoking the provisions of section 145(2)? Held, yes - In respect of allowability of triple shift allowance on machinery held that, extra shift allowance has to be calculated on the basis of the number of days during which the concerned had actually worked double shift or triple shift and the said allowance is not required to be calculated on the basis of the number of days a particular item of machinery or plant had worked double shift or triple shift

Summary

Issues:
1. Deletion of addition on account of bogus purchases
2. Deletion of addition in trading account invoking section 145(2) of the Income-tax Act, 1961
3. Allowing triple shift allowance on machinery

Analysis:

Deletion of Addition on Account of Bogus Purchases:
The Revenue challenged the Tribunal's decision to delete the addition of Rs. 1,48,93,286 made on account of alleged bogus purchases. The Commissioner of Income-tax (Appeals) had earlier held that the purchases were genuine, and the Tribunal concurred. The Tribunal noted that the purchases from the concerned parties were accepted in subsequent years and found no undervaluation or inflation in sale invoices. It also considered the financial standing of the parties involved. The High Court deemed this issue as a finding of fact based on evidence and not a question of law, leading to the dismissal of the petition.

Deletion of Addition in Trading Account invoking Section 145(2):
The Revenue contested the deletion of an addition of Rs. 35,47,867 in the trading account by invoking section 145(2) of the Income-tax Act, 1961. The Tribunal observed that the assessee's accounting method had been approved in previous assessments and highlighted the Revenue's inconsistent stance on the matter. The High Court concluded that the Tribunal's findings were factual and did not raise any legal questions, resulting in the dismissal of the petition.

Allowing Triple Shift Allowance on Machinery:
Regarding the allowance of triple shift on machinery, the High Court referenced a Supreme Court ruling that clarified the calculation method for extra shift allowance. As the issue was settled law, the High Court did not delve into it further. Therefore, the petition was dismissed based on the established legal principles.

In summary, the High Court upheld the Tribunal's decisions on the issues raised by the Revenue, emphasizing that the findings were based on factual analysis and did not present any legal questions warranting intervention.