2011 (11) TMI 426 - HC - Income Tax

Whether the ITAT was right in upholding the order of CIT (Appeals) wherein it was held that the AO rejected the books of Account of the assessee maintained and audited by the Chartered Accountant without pointing out any mistake in the books - Held that - It is purely a question of facts and the CIT(A) as well as the Tribunal have rightly recorded that the AO, without pointing out any specific mistake in the books of account have held that the books of account and other documents were not fully verifiable. The finding of the AO was rightly held as erroneous. There is no perversity in appreciation of facts - Appeal is dismissed

Summary

Issues:
Appeal by Revenue against ITAT order on substantial questions of law regarding rejection of books of account without pointing out mistakes.

Analysis:
The appeal was filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT) based on substantial questions of law. The Assessing Officer (AO) had added back a certain amount to the assessee's income, claiming the books of account were not fully verifiable despite being maintained by a Chartered Accountant. The Commissioner of Income Tax (Appeals) (CIT(A)) later deleted this addition, stating that the AO did not specify any mistakes in the books. The Tribunal upheld the CIT(A)'s decision, finding that the AO did not point out any defects or mistakes. The High Court noted that the AO's finding was erroneous, as no specific mistake in the books of account was identified. The Court emphasized that the substantial question of law arises only if there is perversity in the finding of fact.

The High Court referred to previous judgments to highlight that a finding of fact may lead to a substantial question of law if it is based on no evidence, relevant evidence is not considered, or legal principles are not applied correctly. In this case, the Court found that the CIT(A) and the Tribunal had appropriately appreciated the facts, and there was no perversity in their findings. The Court concluded that the issue at hand was purely a question of facts and not a substantial question of law. Therefore, the appeal was dismissed as it involved only factual considerations and did not raise any legal issues.