2015 (4) TMI 11 - HC - Income Tax

Revision u/s 263 - CIT held that the assessment order was erroneous and prejudicial to the interest of the Revenue in as much as the unproved, unsecured loans, sundry creditors, expenses have been accepted and the income had been under-assessed to that extent - Held that - No question of law arises in this matter. The ITAT has considered the issues, essentially on facts, in coming to the conclusion that the order of the CIT is not sustainable. It is sufficient to refer to some of the aspects regarding the impugned order passed by the ITAT. The ITAT noted that the fall in gross profit was examined by the Assessing Officer. The respondent/assesses' reply was considered. The volume of work had fallen during the year. As a result thereof, the profit had also decreased. Further, the profit had decreased only by less than a quarter percent. Even thereafter, the ITAT had come to the conclusion that the insignificant fall in the gross profit cannot lead to the conclusion that the assessment order was erroneous. As far as the loan and security in respect thereof was concerned, the ITAT noted that the certificate from the Bank was on record. The Bank statement was also produced by the respondent before the Assessing Officer and before the CIT. Based on the material produced, the ITAT noted that merely because there may be excess cash at a particular point of time, it does not follow that the respondent cannot raise a bank loan. In view of the nature of the respondent's business, namely, the construction business, the ITAT came to the conclusion, based essentially on facts that it was possible that the stock register was not maintained. Similarly, as regards the sundry creditors made possible in the current financial year, it was noticed that there was opening credit in the balance of the assessee and the copy of the accounts of the assessee was there in the books of M/s Garg Sales and thus, no adverse inference could be taken on the said account. - Decided against revenue.

Summary

Issues:
Appeal against ITAT order allowing respondent's appeal against CIT's order under Section 263 of the Income Tax Act for the assessment year 2008-09.

Analysis:
The appeal before the High Court pertained to the assessment year 2008-09, challenging the order of the Income Tax Appellate Tribunal (ITAT) dated 23.08.2013, which had allowed the respondent/assessee's appeal against the Commissioner of Income Tax's (CIT) order under Section 263 of the Income Tax Act, 1961. The CIT had proceeded under Section 263 on various grounds, including fall in gross profit rate, purpose of utilization of secured loan, non-verification of collateral securities, unsecured loan, non-confirmation from sundry creditors, non-maintenance of stock register, non-examination of disallowance under Section 40A(3), non-examination of business expenses, and penalty issue. The CIT held the assessment order as erroneous and prejudicial to the Revenue's interest, leading to its cancellation under Section 263(1) of the Act. The ITAT, however, examined each issue in detail and concluded that the CIT's order was not sustainable.

The ITAT's analysis revealed that the fall in gross profit was considered by the Assessing Officer, with the respondent/assessee's explanation taken into account. The decrease in profit was attributed to a decline in work volume during the year, resulting in a minor profit reduction. The ITAT found this insignificant decrease insufficient to deem the assessment order erroneous. Regarding the loan and security issue, the ITAT noted the presence of a bank certificate and statement, indicating the respondent's ability to raise a bank loan despite temporary excess cash. Considering the nature of the respondent's construction business, the ITAT concluded that the absence of a stock register might be justified. Similarly, the ITAT found no adverse inference regarding sundry creditors, as the opening credit balance and accounts' details were available.

In summary, the High Court dismissed the appeal, emphasizing that no question of law arose from the ITAT's decision. The judgment highlighted that the ITAT's order was primarily based on factual considerations and a thorough evaluation of the presented evidence, ultimately upholding the respondent's position against the CIT's allegations.