2024 (3) TMI 1018 - HC - Income Tax

Substantial question of law to be made out u/s 260A or not? - Undisclosed income surrendered during the Search and Seizure action - to be taxed at normal rate or tax rate stipulated u/s 115BBE of the Income Tax Act - ITAT confirming the Order of CIT(A) that the undisclosed income surrendered during the Search and Seizure action, is liable to be taxed at normal rate instead of the tax rate stipulated under Section 115BBE of the Income Tax Act? - HELD THAT - From a bare reading of the Section, it is apparent that an appeal to the High Court from a decision of the Tribunal lies only when a substantial question of law is involved, and where the High Court comes to the conclusion that a substantial question of law arises from the said order, it is mandatory that such question(s) must be formulated. The expression substantial question of law is not defined in the Act. Nevertheless, it has acquired a definite connotation through various judicial pronouncements. A finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence, or when the evidence has been misread. See MADAN LAL VERSUS GOPI (MST.) ANR 1980 (8) TMI 204 - SUPREME COURT , WB. ELECTRICITY REGULATORY COMMISSION 2002 (10) TMI 772 - SUPREME COURT and METROARK LTD. 2004 (1) TMI 397 - SUPREME COURT Thus in the instant case no substantial question of law arises from the order of the Tribunal as the appellant has raised all the question of facts and have disputed the fact findings of the ITAT in the garb of substantial questions of law which is not permitted by the statute itself. This Court refrains from entertaining this appeal as there is no perversity in the order passed by the ITAT since the ITAT has dealt with all the grounds raised by the appellant in the order impugned and has passed a well reasoned and speaking order taking into consideration all the material available on record.

Summary

Issues Involved:
Condonation of delay in filing the appeal, Admission of appeal under Section 260A of the Income Tax Act, 1961, Taxation of undisclosed income at normal rate vs. under Section 115BBE, Consideration of undisclosed income not entered in regular books of accounts.

Condonation of Delay:
The High Court allowed the application for condonation of delay of 76 days in filing the appeal after considering the reasons stated in the application.

Admission of Appeal under Section 260A:
The appeal was filed under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal (ITAT) regarding the taxation of undisclosed income surrendered during a Search and Seizure action. The substantial questions of law proposed in the appeal were related to the justification of taxing the undisclosed income at a normal rate instead of the rate specified under Section 115BBE of the Act.

Taxation of Undisclosed Income:
The respondent/assessee had surrendered undisclosed income during a Search and Seizure action, which was not entered in regular books of accounts. The Assessing Officer accepted the returned income without making any addition under Section 69A, taxing the income at a special rate under Section 115BBE. However, the CIT(A) allowed the appeal, stating that the undisclosed income derived from regular business activities should be taxed at a normal rate. The ITAT upheld this decision, emphasizing that the surrendered amount was explained as business income and there was no application of Section 115BBE.

Consideration of Undisclosed Income Not Entered in Regular Books:
The undisclosed income surrendered by the assessee was not entered in regular books of accounts, leading to a dispute regarding the appropriate tax rate. The appellant contended that the ITAT erred in dismissing the appeal, arguing that the undisclosed income should have been taxed at the special rate under Section 115BBE due to not being recorded in the regular books of accounts.

Conclusion:
The High Court observed that no substantial question of law arose from the Tribunal's order, as the appellant's arguments mainly pertained to factual disputes rather than legal issues. Refraining from entertaining the appeal, the Court emphasized that interference with the ITAT's findings was not warranted unless there was demonstrated perversity. Consequently, the appeal was dismissed in limine for lack of merit in meeting the provisions of Section 260A of the Income Tax Act.