2024 (8) TMI 1488 - HC - Income Tax

Maintainability of appeal in High Court against order of ITAT - subtanstial question of law or not? - validity of assessment u/s 143(3) or 153C - ITAT justification in annuling the 143(3) assessment on the ground that the assessment should have been framed u/s 153C - ITAT holding that the mere financials of any entity, which were seized during the search action are incriminating material - HELD THAT - A bare reading of the Section 260-A , 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 Vs. Mst. Gopi Anr. 1980 (8) TMI 204 - SUPREME COURT ) 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. The Tribunal being a final fact finding authority, in the absence of demonstrated perversity in its finding, interference with the concurrent findings of the CIT (A) as well as the ITAT therewith by this Court is not warranted. For the aforesaid reasons, we have no hesitation in holding that no question of law, much less any substantial question of law arises from the order of the Tribunal requiring consideration of this court. There is no merit in the appeal as making addition/deletion cannot be said to be erroneous and prejudicial to the interest of revenue. Thus, in our opinion, the present case does not involve any substantial question of law so as to meet the provisions of Section 260(A) of the Act for admitting the appeal.

Summary

Issues Involved:
1. Justification of ITAT in annulling the Section 143(3) assessment.
2. Determination of incriminating nature of seized financial documents.
3. Validity of assessment under Section 143(3) versus Section 153C.
4. Justification of ITAT in quashing the assessment order and deleting the addition of unsecured loan.
5. Perversity in ITAT's findings.

Detailed Analysis:

1. Justification of ITAT in Annuling the Section 143(3) Assessment:
The appellant-Revenue challenged the ITAT's decision to annul the assessment framed under Section 143(3) on the grounds that the assessment should have been conducted under Section 153C. The ITAT's annulment was based on the premise that the seized documents were not of an incriminating nature, thus rendering the assessment under Section 143(3) invalid. The Revenue contended that the annulment did not appreciate the legal bar on framing assessments under Section 153C in the absence of incriminating material, as confirmed by the Supreme Court in the case of Abhishar Buildwell P. Ltd.

2. Determination of Incriminating Nature of Seized Financial Documents:
The ITAT held that the mere financials of an entity, which were seized during the search action, are incriminating material. The Revenue argued that the seized documents were not incriminating and thus should not have necessitated an assessment under Section 153C. The ITAT's interpretation was contested on the grounds that the jurisdictional requirement for Section 153C was not met, as no incriminating material was found related to the assessee during the search.

3. Validity of Assessment under Section 143(3) versus Section 153C:
The ITAT annulled the assessment under Section 143(3) on the basis that it should have been framed under Section 153C. The Revenue argued that in the absence of incriminating material, the assessment under Section 153C would have been invalid, as confirmed by the Supreme Court in Abhisar Buildwell P. Ltd. The ITAT's decision was challenged on the grounds that the AO's satisfaction was not recorded, and the mere handing over of seized material did not justify an assessment under Section 153C.

4. Justification of ITAT in Quashing the Assessment Order and Deleting the Addition of Unsecured Loan:
The ITAT quashed the assessment order made under Section 143(3) and deleted the addition of Rs. 3,68,00,000/- made on account of an unsecured loan from M/s Little State Securities Pvt. Ltd. The Revenue contended that this lender was a bogus company providing accommodation entries, and the loan was received in contravention of the Companies Act 2013. The ITAT's decision was challenged for failing to appreciate the facts brought on record by the AO.

5. Perversity in ITAT's Findings:
The Revenue argued that the ITAT's findings were perverse as they failed to consider relevant facts, misread evidence, and misunderstood the legal position. The ITAT's decision was claimed to suffer from perversity, thus giving rise to a substantial question of law.

Conclusion:
The High Court concluded that no substantial question of law arises from the order of the Tribunal. The Tribunal is the final fact-finding authority, and its findings can only be challenged if they are perverse, which was not demonstrated in this case. The ITAT's order was found to be well-reasoned and based on the material available on record. Consequently, the appeal was dismissed in limine, as it did not meet the provisions of Section 260(A) of the Income Tax Act for admitting the appeal.