2013 (3) TMI 173 - HC - Income Tax

Re opening of assessment - appeal filed by the assessee u/s 260A assailing order of the ITAT dismissing appeal regarding reassessment - As per ITAT income declared by the company regarding business expenditure were dis-allowable u/s 40A(3) and the reasoning forthcoming from the assessee as regards expenses incurred for expenditure regarding training of staff was not acceptable - Held that - Merely question of law is not sufficient and the requirement of statute as that there should be a substantial question of law which requires consideration u/s 260A of the Act and rightly so the legislature is certainly of the view that as regards the factual matrix the matter being examined at various levels upto the ITAT such factual matrix must be put to rest at some stage and that being so only substantial question of law if emerges certainly is to be considered by this Court. On submission made by appellant no substantial question of law at all emerges to be considered by this Court in the instant income tax appeal - against assessee.

Issues:
1. Reassessment based on notice under Section 148 of the Income Tax Act, 1961 for the assessment year 2002-03.
2. Disallowance of expenses under Section 40A(3) of the Act.
3. Appeal against the order of the Income Tax Appellate Tribunal regarding reassessment for the year 2002-03.
4. Existence of substantial question of law under Section 260A of the Act for consideration by the High Court.

Reassessment based on notice under Section 148:
The appellant-assessee filed an income tax appeal challenging the Income Tax Appellate Tribunal's order dismissing the appeal related to reassessment for the assessment year 2002-03. The assessing authority reopened the proceedings based on a notice under Section 148 of the Act, 1961, due to the escape of income. The assessing authority served a notice on the assessee, allowing an opportunity to submit objections regarding the disallowance of expenses. Reassessment was made under Section 143(3) of the Act, 1961, focusing on disallowances related to salary payments exceeding Rs. 20,000 in cash and certain government expenses. The Tribunal upheld the reassessment, considering the expenses as non-business expenses and adding them to the income of the assessee.

Disallowance of expenses under Section 40A(3):
The Tribunal found the business expenditures declared by the company to be disallowable under Section 40A(3) of the Act, 1961. The reasoning provided by the assessee for expenses related to staff training was deemed unacceptable, leading to the disallowance of such expenses as non-business expenses. The Tribunal affirmed the assessing authority's decision to add these expenses to the income of the assessee, resulting in the dismissal of the appeal concerning the assessment year 2002-03.

Appeal against the Tribunal's order:
The appellant's counsel expressed grievance only regarding the reopening of the assessment for the year 2002-03 and not for the assessment year 2004-05. The High Court noted that no substantial question of law emerged for consideration under Section 260A of the Act based on the submissions made by the appellant's counsel. Consequently, the High Court found the appeal to be without substance and dismissed it accordingly.

Existence of substantial question of law:
The High Court emphasized the requirement of a substantial question of law for consideration under Section 260A of the Act. Despite the counsel's submissions, the Court concluded that no substantial question of law arose from the factual matrix examined at various levels, including the Income Tax Appellate Tribunal. Therefore, the High Court dismissed the appeal as lacking in substance.

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