2015 (1) TMI 661 - HC - Income Tax

Cash credit - ITAT deleted addition - Held that - From a perusal of the order passed by the CIT (Appeals) as well as the Tribunal, we find that the issue as raised is a pure question of fact as has been concurrently found by the CIT (Appeals) and the Tribunal. Accordingly, there being no infirmity in the above order of the Tribunal, the first question of law is answered in favour of the assessee. - Decided against revenue. Rule 46A - whether ITAT is right in law in not considering the fact that Rule 46A had been violated by upholding the action of the CIT Appeals? - Held that - Insofar as the second question of law is concerned, since the procedure prescribed under the Act has been complied with, the second question of law is also answered in favour of the assessee. - Decided against revenue.

Summary

Issues:
1. Addition towards cash credit for the assessment year 2001-2002
2. Violation of Rule 46A by the Income Tax Tribunal
3. Deletion of additions without affording an opportunity to cross-examine creditors

Analysis:

Issue 1: Addition towards cash credit for the assessment year 2001-2002
The respondent, a textile firm, filed its income tax return for the assessment year, which was later scrutinized due to sundry credits amounting to Rs. 109 Lakhs. The Assessing Officer, after multiple hearings, concluded that certain trade credits were not genuine and added the amount to the income. The CIT (Appeals) reviewed the records and reports, determining the trade creditors as genuine based on evidence provided by the assessee. Consequently, the addition was deleted. The Tribunal upheld this decision, emphasizing the credibility of the creditors. The High Court found no flaws in the Tribunal's decision, as it was a factual determination supported by the CIT (Appeals) and the Tribunal, ruling in favor of the assessee against the Revenue.

Issue 2: Violation of Rule 46A by the Income Tax Tribunal
The second issue raised was regarding the alleged violation of Rule 46A by the Income Tax Tribunal. However, the High Court noted that the procedural requirements under the Act were duly followed. As a result, this issue was also decided in favor of the assessee against the Revenue.

Issue 3: Deletion of additions without affording an opportunity to cross-examine creditors
The third issue, which questioned the deletion of additions without providing an opportunity to cross-examine the creditors, was deemed repetitive and academic by the High Court. Since the previous issues were decided in favor of the assessee, this third issue was not further addressed.

In conclusion, the High Court upheld the Tribunal's decision, dismissing the Revenue's appeal. The Court found no grounds for interference, emphasizing that the Tribunal's findings were well-supported by the CIT (Appeals) and the factual determinations made. No costs were awarded in the matter.