2004 (3) TMI 48 - HC - Income Tax

CIT (Appeals) reducing the disallowance out of the assessee s claim of expenses in respect of job work receipts - assessee had in fact filed the labour register before the Commissioner of Income-tax, and only after being satisfied with the entries the benefit was extended to the assessee - Commissioner deleting the addition which was made by the Assessing Officer upon finding liability to that extent shown by the assessee in its balance-sheet furnished, did not in fact exist - A finding has been recorded in the enquiry that was conducted by the Assessing Officer behind the back of the assessee. This violated the principles of natural justice. In the light of this finding the CIT (Appeals) and the Tribunal both found the procedure adopted by the Assessing Officer as erroneous and against law. No substantial question of law arise Revenue s appeal dismissed

Summary

Issues:
1. Challenge to the order passed by the Income-tax Appellate Tribunal, Indore under section 260A of the Income-tax Act, 1961.
2. Validity of reducing disallowance of expenses in respect of job work receipts.
3. Deletion of addition made by the Assessing Officer based on liability shown in the balance sheet.
4. Violation of principles of natural justice by the Assessing Officer during the enquiry process.
5. Final decision on the appeal based on the substantial question of law.

The High Court of Madhya Pradesh heard an appeal by the Revenue challenging an order passed by the Income-tax Appellate Tribunal, Indore. The appellant sought to challenge a previous order from 2001 but was informed that it had attained finality as no appeal was filed against it at that time. The court decided to consider the correctness of the subsequent appellate order. The case pertained to the assessment year 1990-91, with two main questions raised by the Revenue regarding the reduction of expenses and the deletion of an addition based on the balance sheet liability.

Regarding the first issue, the Tribunal found that the labour register filed by the assessee was thoroughly examined by the Commissioner of Income-tax (Appeals), who verified the entries and extended benefits to the assessee based on satisfaction with the entries. The court upheld this finding as a fact not warranting interference. Concerning the second issue, the Tribunal noted that the Assessing Officer conducted an enquiry without involving the assessee and failed to provide an opportunity to produce relevant evidence, violating the principles of natural justice. Both the Commissioner of Income-tax (Appeals) and the Tribunal found this procedure erroneous and against the law, leading to a factual finding that could not be challenged in the appeal.

Ultimately, the High Court concluded that there was no substantial question of law involved in the appeal and dismissed it accordingly. The decision was based on the necessity to address substantial legal questions, and as such, the appeal was not considered further.

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