2015 (2) TMI 721 - HC - Income Tax

GP addition - AO noticing the defects in the stock register rejected the book results by invoking the provisions of section 145(3) - Tribunal not only rejecting the books results but also upholding the gross profit rate of 11 per cent - Held that - When the Assessing Officer found deficiencies as referred to by the Assessing Officer and approved by the two appellate authorities then the provisions of section 145(3) had to be invoked and have rightly been invoked and once the provisions of section 145(3) are invoked then what should be a reasonable gross profit rate is required to be seen which is a finding of fact and on the basis of appreciation of evidence thus it is a pure finding of fact. The assessee has failed to highlight, bring on record any perversity in the order of the Tribunal so as to hold that substantial question of law is involved. The hon'ble apex court and this court has consistently held that when the matter is decided on appreciation of evidence and facts then it is finding of fact. - Decided against assessee.

Summary

Issues:
Challenge to order of Income-tax Appellate Tribunal regarding gross profit rate for assessment year 2006-07.

Analysis:
The appellant, a partnership firm engaged in manufacturing and exporting goods, declared a lower gross profit rate for the year compared to the previous year. The Assessing Officer raised concerns about the genuineness of purchases made by the appellant from various parties. Despite the appellant's claims of being a 100% exporter and providing some confirmations, the Assessing Officer found discrepancies and defects in the stock register. Consequently, the Assessing Officer rejected the book results and applied a higher gross profit rate, resulting in a trading addition. The Commissioner of Income-tax (Appeals) partly allowed the appeal, reducing the gross profit rate applied by the Assessing Officer.

Both the Revenue and the appellant appealed to the Tribunal, which upheld the Commissioner's decision. The Tribunal emphasized the onus on the appellant to prove the increase in purchase value without adequate supporting evidence. The Tribunal found no reason to interfere with the Commissioner's decision, considering the facts and circumstances of the case.

The High Court, after reviewing all previous orders and facts, concluded that the Tribunal's decision was based on factual findings and evidence evaluation. The Court highlighted the failure of the appellant to produce the sellers for verification despite repeated opportunities and unserved notices. The Court agreed with the lower authorities' invocation of section 145(3) due to identified deficiencies and upheld the decision on the reasonable gross profit rate.

In the absence of any demonstrated legal error or perversity in the Tribunal's order, the High Court dismissed the appeal, emphasizing that findings based on evidence and facts constitute a finding of fact. The Court reiterated the established principle that matters decided on factual evaluation do not involve substantial questions of law.

Therefore, the High Court found no merit in the appeal and dismissed it summarily.