2012 (6) TMI 708 - HC - Income Tax

Substantial question of law - Setting aside of best judgement assessment by CIT(A) holding that assessment order passed cannot be categorized as a best judgment assessment as it not only suffer with technical and procedural irregularities but also the same was passed in an arbitrary and capricious manner in violation of the principles of natural justice - Revenue contesting the same - Held that - It has not been demonstrated that finding of CIT(A) was based on no evidence or it has not been properly appreciated and as such, there was any perversity. The substantial question of law arises for consideration only if there is perversity in the finding of fact. Since instant appeal involves only on the question of facts, and no question of law, much less substantial question of law, arises. Appeal being bereft of merit, is dismissed.

Summary

Issues:
Assessment order under section 144 of the Income Tax Act, 1961 for the assessment year 2005-2006, appeal under Rule 46-A for admission of additional evidence, best judgment assessment, procedural irregularities, principles of natural justice violation, deletion of additions made by the AO, appeal before the Income Tax Appellate Tribunal, failure to respond to notices, adjournment request due to personal illness, abnormal delay in finalization of assessment, admission of additional evidences under Rule 46A, discussion of issues raised, concurrence of Tribunal with CIT (A) findings, substantial question of law, perversity in finding of fact, relevant case laws on findings, determination of facts by CIT (A) and Tribunal.

Assessment Order and Additional Evidence:
The Assessing Officer passed an assessment order under section 144 of the Income Tax Act for the assessment year 2005-2006 based on proceedings initiated after a survey under section 133-A, assessing the total income of the assessee. The assessee appealed before the Commissioner of Income Tax (Appeals) seeking admission of additional evidence under Rule 46-A, which included confirmation letters from various persons. The CIT (A) held that the assessment order suffered from technical and procedural irregularities, was passed in an arbitrary manner, and violated the principles of natural justice. Consequently, the additions made by the AO were deleted.

Appeal Before Income Tax Appellate Tribunal:
Both the assessee and the revenue appealed before the Income Tax Appellate Tribunal. The Tribunal upheld the CIT (A) order, dismissing the revenue's appeal and allowing the assessee's appeal in part for statistical purposes. The Tribunal found no infirmity in the CIT (A) order and dismissed certain grounds as general in nature without adjudication.

Contentions and Observations:
The revenue contended that the findings were perverse as notices were issued to the assessee, but there was no response, contrary to the CIT (A) and Tribunal's findings. On the other hand, the assessee's counsel argued that the assessee's request for an adjournment due to personal illness was declined, denying an opportunity for a hearing. The CIT (A) observed that there were abnormal delays in the assessment proceedings, and due to the lack of proper opportunities, documentary evidence could not be filed before the AO but was later submitted during the appellate proceedings under Rule 46A.

Legal Principles and Case Laws:
The CIT (A) held that the case was not a "best judgment assessment" and discussed each issue raised by the parties. Referring to various decisions, the CIT (A) concluded that the findings were not based on no evidence and were not perverse. The Tribunal concurred with these findings, emphasizing that no substantial question of law arose as the facts were determined by the CIT (A) and affirmed by the Tribunal. Case laws were cited to support the proper appreciation of facts and the absence of substantial questions of law.

Conclusion:
The appeal was dismissed as it involved only questions of facts, which were determined by the CIT (A) and upheld by the Tribunal. No substantial question of law was found to arise in the case, leading to the dismissal of the appeal for being bereft of merit. The judgment highlighted the importance of factual determinations and the lack of perversity in the findings, emphasizing the adherence to legal principles and precedents in tax assessment matters.