2011 (3) TMI 425 - HC - Income Tax

Addition - The assessee who is the manufacturer of locks - The Assessing Officer made certain additions in the returned income of the assessee on the ground that in the earlier preceding assessment year 1988-89, additions were made - The chart clearly shows that for the assessment year 1988-89, the sales were to the extent of Rs.52,00,300/- while in the relevant assessment year, the sales were to the extent of Rs.55,75,029 - The order of the Tribunal is, therefore, vitiated as it has proceeded on a wrong assumption of fact - In this view of the matter, find that the Tribunal has committed a substantial error of law in passing the order under appeal

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding additions in returned income for assessment year 1989-90 based on preceding year's additions.

Analysis:
The judgment involves a challenge to the order passed by the Income Tax Appellate Tribunal, Agra Bench, Agra for the assessment year 1989-90 by the assessee, a lock manufacturer. The Assessing Officer had made additions to the assessee's returned income based on additions made in the preceding assessment year 1988-89. The assessee appealed to the CIT (A) who partially allowed the appeal on 2.9.1993. Subsequently, the matter was taken to the Tribunal, which allowed the appeal. The High Court admitted the appeal on the questions of law framed in the memo of appeal. During arguments, counsel for the assessee contended that the Tribunal's finding on decreased sales for the relevant assessment year was incorrect. The High Court considered the submissions and found that the Tribunal had wrongly assumed a decrease in sales, which was not the case based on the sales figures from the assessment years. Therefore, the Tribunal's order was deemed to be vitiated by a substantial error of law.

The Court observed that the order of the CIT (A) had appropriately considered the sales figures of the earlier years, demonstrating that the sales for the relevant assessment year were not decreased as assumed by the Tribunal. The Court noted a chart showing sales of Rs.52,00,300/- for 1988-89 and Rs.55,75,029 for the relevant assessment year, indicating an increase rather than a decrease. Consequently, the Tribunal's decision was held to be based on a wrong assumption of fact, leading to a substantial error of law in the order under appeal. As a result, the High Court allowed the appeal, setting aside the Tribunal's order and restoring the order of the CIT (A).