2019 (8) TMI 1072 - SC - Income Tax

Review of order - dismissed considering low tax effect - HELD THAT - We have perused the review petition and find that the tax effect in this case is above ₹ 1 crore, that is, ₹ 6,59,27,298/-. Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is less than ₹ 1 crore. Disallowance based on third party information - addition based on third party information gathered by Investigation Wing of the Department - AO denied opportunity of cross examination - CIT(A) and ITAT deleted the disallowance stating that assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation - HELD THAT - We find that on merits a disallowance of ₹ 19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. The High Court by the impugned judgment 2017 (7) TMI 774 - DELHI HIGH COURT affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT. - the Review Petitions are dismissed

Summary

Issues:
Tax effect threshold for review petition.

Analysis:
The Supreme Court, comprising Hon'ble Mr. Justice Rohinton Fali Nariman and Hon'ble Ms. Justice Indu Malhotra, considered a review petition where the tax effect exceeded ?1 crore, specifically amounting to ?6,59,27,298. Initially, the Court would have recalled its previous order based on the tax effect being less than ?1 crore. However, upon examining the judgments of the CIT, ITAT, and the High Court, it was noted that a substantial disallowance of ?19,39,60,866 was solely based on third-party information without further scrutiny. The CIT (Appeals) allowed the appeal of the assessee, emphasizing the lack of independent verification by the AO and denial of cross-examination opportunity to the appellant. The ITAT and the High Court upheld this decision based on factual findings, deeming the disallowance deletion as acceptable and dismissing the revenue's appeal.

In light of the above, the Supreme Court found that the disallowance was primarily founded on third-party information without adequate verification, leading to the deletion of the disallowance amounting to ?19,39,60,866. The judgments of the lower courts were upheld based on the absence of perversity in their factual findings. Consequently, the Review Petitions were dismissed by the Supreme Court.