2009 (4) TMI 506 - HC - Income Tax

Weather determination of the rate of net profit on a higher side without assigning any reasons by Tribunal is Substantial Question of Law or not.- Held that - The findings recorded by the Tribunal are pure findings of fact and do not give rise to any substantial question of law for consideration by the High Court. decided against Assessee.

Summary

Issues:
1. Determination of net profit rate by the Income-tax Appellate Tribunal without assigning reasons.
2. Validity of estimating net profit at 7.5% in the case.
3. Whether the case involves a substantial question of law for appeal.

Issue 1: Determination of net profit rate by the Income-tax Appellate Tribunal without assigning reasons.

The appellant raised a question regarding the Tribunal's determination of the net profit rate at 7.5% without providing reasons, leading to a perceived discrimination and miscarriage of justice. The Tribunal relied on its earlier order in a similar case to justify the 7.5% profit rate. The appellant argued that this estimation was on the higher side without proper justification. However, the Tribunal's decision was based on factual analysis and case history, which were considered pure findings of fact and not substantial questions of law.

Issue 2: Validity of estimating net profit at 7.5% in the case.

The dispute centered on the Deputy Commissioner of Income-tax estimating the net profit at 12% due to the rejection of the appellant's accounting records under section 145(2) of the Income-tax Act. The subsequent orders by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal adjusted the net profit estimation to Rs. 2.5 lakhs and 7.5%, respectively. The appellant contended that the 7.5% estimation was unjustified, citing previous rulings and arguing for a lower rate. However, the Tribunal's decision was upheld as a factual finding, not constituting a substantial question of law for appeal.

Issue 3: Whether the case involves a substantial question of law for appeal.

The appellant's counsel argued that the case raised a substantial question of law based on the disparity between the Tribunal's 7.5% profit estimation and the earlier 2% estimation by the first appellate authority. However, the Revenue's counsel contended that the Tribunal's decision was final as a fact-finding authority, emphasizing the absence of a substantial question of law. The High Court referred to legal precedents defining substantial questions of law and concluded that the appellant's case did not meet the criteria for such an appeal. The judgment dismissed the appeal on this basis.

The judgment highlighted the importance of distinguishing between questions of law and substantial questions of law in appeals under section 260A of the Income-tax Act. It emphasized that factual findings by the Tribunal, even if erroneous, cannot be disturbed unless they involve substantial questions of law. The decision underscored that the mere existence of a question of law does not automatically qualify it as substantial, as demonstrated by legal precedents and the specific circumstances of the case.