2010 (11) TMI 67 - HC - Income Tax

Incompleteness and incorrectness of books of accounts - levy of interest under section 234D of the I.T Act 1961 ignoring the fact that the provisions of section 234D were inserted with effect from 01.6.2003 and the case was completed on 28.2.2006 - Held that - finding recorded by the Tribunal that so far as shortfall in gross profit rate is concerned, it is supported by the facts on record and it was not refuted either by the AO or by the CIT(A). The same could not be a reason for rejection of the books of account - The said finding of the Tribunal is perfectly justified as no illegality or perversity therein could be pointed out by the learned standing counsel for the Department - appeal is not a substantial question of law - Appeal is dismissed

Summary

Issues involved:
1. Whether the ITAT was justified in deleting the addition of Rs.13,88,218 under section 145(2) of the Income Tax Act, 1961.
2. Whether the ITAT was justified in deleting the levy of interest under section 234D of the Income Tax Act, 1961.

Analysis:

Issue 1:
The appeal under section 260-A of the Income Tax Act, 1961 questions the deletion of an addition of Rs.13,88,218 by the ITAT. The primary concern is whether the ITAT was legally justified in deleting this addition without considering the deficiencies noted by the AO in the books of accounts under section 145(2) of the IT Act. The High Court, after hearing the arguments, concluded that the Tribunal had thoroughly examined the matter and accepted the explanation provided by the assessee. The Tribunal's finding on the shortfall in the gross profit rate was supported by evidence on record and remained unchallenged by the AO or the CIT(A). The High Court found no basis to reject the books of account based on this finding, deeming the Tribunal's decision justified and free from any legal flaws or errors. Consequently, the High Court held that Question No.1 did not raise a substantial question of law.

Issue 2:
The second issue in the appeal pertains to the deletion of interest levy under section 234D of the Income Tax Act, 1961 by the ITAT. The High Court determined that Question No.2, concerning the deletion of interest levy, indeed raised a substantial question of law. As a result, the High Court admitted the question for further consideration, issuing notice on the matter. An affidavit of service was filed and accepted by the Court for record-keeping purposes, indicating the progression of the legal proceedings related to this specific issue.

In summary, the High Court found that the first issue did not present a substantial question of law, as the Tribunal's decision was deemed justifiable and supported by evidence. However, the second issue regarding the deletion of interest levy was considered to raise a substantial question of law, leading to its admission for further examination by the Court.