2024 (1) TMI 1336 - HC - Income Tax

Maintainability of appeal in High Court - substantial question of law or not? - income tax officer disallowed expenses and determining income at a higher amount - additional ground was incorporated in the appeal in respect of disallowance of payment as it was stated that there never existed any relationship between the appellant and the payee as contractor and sub-contractor HELD THAT - The appellant had undertaken civil contract from two companies and the work was widening and strengthening of existing road, repairing widening of road side shoulders etc. and in that connection the purchases were shown at Rs. 15,49,684/-. Then it was stated that there was sub contract of Rs. 2,24,63,228/- and the TDS liability was Rs. 2,41,846/-. The list of subcontractors went upto 25 persons and it appears that he had deliberately avoided to furnish the details of subcontractors. Each and every entry appears to have been considered by the AO. Being dissatisfied with the assessment order, when the petition was preferred, the first appellate authority had partly allowed the appeal and genuine expenses were considered. Reasoned orders have been given as to why they have been considered and why they have not been considered. Again the appeal was preferred by the appellant before Income Tax Appellate Tribunal, Pune. After giving hearing to the appellant, that appeal has also been partly allowed. Few more expenses were allowed to be shown as expenses, but what has been disallowed is that the parties in whose names the cheques were alleged to be issued by the appellant have deposed on oath that the signature on the back side of the cheques and the rubber stamps were not of their business establishments and they have neither encashed the cheques from the bank, nor received the amount from third parties i.e. to the extent of Rs. 13,10,000/- as it was claimed by the appellant that he has spent that amount on purchase of marble. It was found that the expenses incurred were bogus expenses. We have made inquiry with the learned Advocate for the appellant as to why the marble was purchased for construction of roads. He made a submission that the appellant has made the construction/repairing work of the office of the highway authority, where the marble has been put. In fact, we could not find any such document on record, which showed that contract of construction of such office was also given to the appellant. Certainly, the said expenses appear to be not connected to the work undertaken and, therefore, it has been said to be the bogus expenses. Further, as regards the additional ground that was raised, by a reasoned order, Tribunal has considered it to the extent of Rs. 1,45,00,000/- (rounded off only) and it is rightly to be so as it covered the partly allowed claim of the appellant by learned CIT(A) and taking into consideration the TDS deposited by the assessee on 15.10.2010 but the amount was debited from the bank account of assessee on 20.10.2010, it came to be partly allowed and, therefore, it is said that it is the part claim, but that part which has been granted is in favour of the appellant. A reasoned order has been passed for allowing or disallowing the claim of the appellant. There is no question of substantial question of law when all the facts have been considered.

Summary

Issues:
Appeal under Section 260-A of Income Tax Act challenging order of Income Tax Appellate Tribunal for Assessment Year 2010-2011.

Analysis:
The appellant, a construction contractor, challenged the assessment order passed by the Income Tax Officer disallowing expenses and determining income at a higher amount. The appeal was partly allowed by the CIT(A), and further appealed to the Income Tax Appellate Tribunal, Pune, which partly allowed the appeal. The appellant contended that genuine expenses were not considered and allowed. However, the authorities found that the expenses were not connected to the contract undertaken and could not be allowed. The Assessing Officer noted that the appellant did not respond to notices initially, and details of subcontractors were not furnished. The Tribunal found that certain expenses, including a claim for marble purchase, were bogus as they were not connected to the work undertaken. The Tribunal considered an additional ground raised by the appellant and partly allowed it, based on TDS deposited by the assessee. Ultimately, the Tribunal found no substantial question of law and dismissed the appeal at the admission stage.

In this case, the appeal was filed under Section 260-A of the Income Tax Act, which allows appeals to the High Court if a substantial question of law is involved. The appellant tried to argue that genuine expenses were not considered, but the authorities found otherwise. The Assessing Officer, CIT(A), and Income Tax Appellate Tribunal all considered the expenses and concluded that they were not connected to the contract undertaken by the appellant. The Tribunal also noted discrepancies in the appellant's responses to notices and the lack of documentation supporting certain expenses, such as the purchase of marble. The Tribunal partially allowed an additional ground raised by the appellant, based on TDS deposits, but ultimately found no substantial question of law in the case.

Therefore, the High Court, after considering the facts and reasoning provided by the authorities, upheld the decision of the Income Tax Appellate Tribunal and dismissed the appeal. The Court emphasized that no substantial question of law arose from the case, as all relevant facts and claims had been thoroughly considered and addressed by the authorities.