2017 (9) TMI 1762 - HC - Income Tax

Trading addition - Tribunal restricted part addition - qualified chartered accountant in special audit report which is based on very reasonable analysis of the facts derived from the seized material and information provided by the assessee during special audit process - Held that - The first issue is now covered by the decision of this court and the Tribunal has followed the same. In that view of the matter, the Tribunal has not committed any error in deciding question No. 1. Addition under section 40A(3) - Held that - The issue is covered by the decision of the Punjab and Haryana High Court in CIT v. Smt. Santosh Jain 2006 (8) TMI 167 - PUNJAB AND HARYANA HIGH COURT wherein it has been held that when income of the assessee was computed by applying a gross profit rate, there was no need to look into the provisions of section 40A(3) of the Act, as applying the gross profit rate takes care of the expenditure otherwise than by way of crossed cheque also - No substantial question of law arises.

Summary

Issues:
- Appeal against Tribunal's judgment
- Substantial questions of law framed by the appellant
- Disallowance under section 40A(3) of the Income-tax Act, 1961
- Tribunal's decision on trading addition and disallowance
- Perversity in Tribunal's judgment

Analysis:

1. The appellant challenged the Tribunal's decision in this appeal, where the Tribunal had dismissed the Department's appeal. The counsel for the appellant framed substantial questions of law regarding the trading addition and disallowance under section 40A(3) of the Income-tax Act, 1961. The first question raised whether the Tribunal's decision on restricting trading addition was incorrect, while the second question questioned the justification of confirming the deletion of disallowance made by the Assessing Officer under section 40A(3).

2. The counsel for the appellant argued that the Assessing Officer's view needed to be upheld, as per the order of the Assessing Officer and the Commissioner of Income-tax (Appeals). The Tribunal, however, followed a decision of the court for the first issue and did not commit any error in deciding question No. 1. Regarding question No. 2, the issue was addressed by referring to a decision of the Punjab and Haryana High Court, which clarified that applying a gross profit rate takes care of the expenditure, and there was no need to delve into section 40A(3) in certain circumstances.

3. The Tribunal's decision was supported by previous judgments of the Punjab and Haryana High Court, which emphasized that when the income was computed using a gross profit rate, there was no requirement to scrutinize section 40A(3) provisions. The Tribunal's decision was deemed appropriate, and the issue of perversity in the judgment did not arise. Consequently, the court concluded that no substantial question of law arose, leading to the dismissal of the appeal.

This comprehensive analysis covers the issues raised in the legal judgment, providing a detailed breakdown of the arguments presented and the court's reasoning behind the dismissal of the appeal.