2017 (1) TMI 820 - HC - Income Tax

Existence of substantial question of law - Addition on account of difference in trade creditors account - Whether the ITAT is justified in deleting the amount on account of difference in trade creditors account? - Whether the ITAT is justified in not upholding the addition made on account of unaccounted purchases , by ignoring the provisions of section 69B ? - Whether the ITAT is justified in deleting the addition made by the CIT(A) on account of unaccounted sales/suppressed sales , when the ITAT has not disbelieved the amount of closing stock arrived at by the CIT(A)? Held that - It is significant that no additional material is placed before this Court to demonstrate that the findings of fact arrived at by the Tribunal are perverse. It is emphasized that the cardinal principle is that the Tribunal which is the final fact finding authority and if such findings of fact are to be assailed, it would require a substantial question, as to there being a perverse finding of fact by the Tribunal, to have been raised. In the absence of any such question having been raised, it cannot be said that any question of law arises for consideration, and much less a substantial question of law, as contemplated under Section 260A of the I.T. Act. The learned Counsel for the appellants has re-worded the substantial questions of law as framed in the memoranda of appeals and as framed by this Court at the stage of admission, as on 14.06.2016 at the final hearing as above. The principle that if a finding of fact is not challenged as being perverse, the High Court is bound to accept such finding. Therefore, as no such substantial question of law has been framed and the questions pertain to findings of fact, which cannot be said to be perverse as it is evident that the books of accounts of the respondent had been rejected by the assessing authority, in which case the same books of accounts could not be relied upon in an addition on account of trade creditors and also for arriving at the closing stock. Thus there is no substantial question of law that arises for consideration and the findings of the Tribunal cannot be said to be perverse

Issues Involved:
1. Addition on account of difference in trade creditors.
2. Addition on account of unaccounted purchases.
3. Addition on account of gross profit on suppressed sales.

Detailed Analysis:

1. Addition on Account of Difference in Trade Creditors:
The Tribunal deleted the addition of ?2,67,556/- made by the Assessing Officer (AO) on account of the difference in trade creditors' accounts. The AO had brought on record the ledger extracts of the assessee as appearing in the books of the supplier, where no such outstanding balance was reflected. The Tribunal held that the correctness of accounts as appearing in the books of a supplier itself was not based on any evidence. The Revenue contended that the Tribunal erred by ignoring the AO's findings and the fact that the assessee failed to reconcile the differences in the statement of accounts. However, the High Court upheld the Tribunal's decision, noting that the Tribunal is the final fact-finding authority and its findings were not perverse.

2. Addition on Account of Unaccounted Purchases:
The Tribunal confirmed the deletion of ?50,18,173/- on account of unaccounted purchases by the CIT (Appeals). The AO had found unaccounted purchases during a search, but the Tribunal held that no interference was required with the CIT (Appeals)' findings. The Revenue argued that the Tribunal failed to consider the evidence of unaccounted purchases and sales. The High Court observed that the Tribunal's findings were based on a thorough scrutiny of the factual material and were not perverse, thus upholding the Tribunal's decision.

3. Addition on Account of Gross Profit on Suppressed Sales:
The Tribunal confirmed the addition of ?13,33,242/- made by the AO on account of gross profit on suppressed sales but deleted the enhancement to ?90,96,818/- made by the CIT (Appeals). The Tribunal found that the sales declared by the assessee and the unaccounted sales worked out by the AO were not disputed by the CIT (Appeals). The Tribunal held that there was no material to infer that the assessee earned gross profit at a higher rate than declared. The High Court noted that the Tribunal's findings were based on acceptable reasoning and did not warrant interference.

Legal Principles:
The High Court emphasized that an appeal under Section 260A of the Income Tax Act, 1961, lies only if there is a substantial question of law. The Court cited several Supreme Court judgments, including Vijay Kumar Talwar vs. Commissioner of Income Tax, to illustrate that findings of fact by the Tribunal can only be challenged if they are perverse. The Court reiterated that the Tribunal is the final fact-finding authority and its findings should not be interfered with unless there is a substantial question of law.

Conclusion:
The High Court concluded that no substantial question of law arose for consideration in the present appeals. The findings of the Tribunal were not perverse and were based on acceptable reasoning. Consequently, the appeals were dismissed.

← Previous Next →