2005 (1) TMI 11 - HC - Income Tax

The question, whether the explanation offered by assessee in relation to particular credit or debit entry in the profit and loss account is acceptable or not? Is a question of fact - since no substantial question of law was noticed in the impugned order - hence, it is dismissed

Summary

Issues:
Appeal by Revenue under section 260A of the Income-tax Act, 1961 against Tribunal's order. Formulation of substantial question of law for appeal. Dispute over entries in assessment proceedings for the assessment year 1994-95. Commissioner's notice under section 263 regarding assessment order. Tribunal's decision partially in favor of assessee. Lack of substantial question of law for appeal.

Analysis:

The judgment pertains to an appeal filed by the Revenue (Commissioner of Income-tax) under section 260A of the Income-tax Act, 1961 against an order passed by the Income-tax Appellate Tribunal (Tribunal) in I. T. A. No. 340/Ind./99. The appeal was admitted for final hearing based on the involvement of substantial questions of law. The High Court is obligated under section 260A to formulate substantial questions of law for the appeal. The court has the power to hear and decide the appeal only on the formulated questions. The High Court may also decide the appeal on other questions if satisfied that they arise in the case.

The dispute in this case arose during the assessment proceedings for the assessment year 1994-95 concerning various entries. The issues included discrepancies in sealing charges, purchase of liquor quantities, purchase prices, and shortage entries. The Assessing Officer made the assessment, but the Commissioner identified infirmities in the assessment order, leading to the exercise of section 263 powers. The Commissioner found the defects prejudicial to the Revenue's interests and issued a notice to the assessee. The Tribunal partially allowed the appeal by the assessee, leading to the Revenue filing an appeal against the upheld entries.

The High Court, after hearing the parties, found no substantial question of law as required under section 260A. The appeal did not involve the interpretation of legal provisions, rules, circulars, or judicial decisions. The acceptance of explanations offered by the assessee regarding entries was deemed a question of fact. The Tribunal had the jurisdiction to accept explanations, and the High Court could not interfere unless extreme perversity in factual findings was established. Since no substantial question of law was identified in the appeal, it was dismissed.

Upon reviewing the Tribunal's order, it was noted that the Tribunal examined each entry's explanation provided by the assessee and offered its reasoning. Two out of four entries were accepted, while the remaining were not. As no substantial question of law was found, the appeal was dismissed with no costs.

In conclusion, the High Court dismissed the appeal by the Revenue as it did not involve any substantial question of law, and the Tribunal's decision was upheld based on factual assessments and explanations provided by the assessee.