2016 (8) TMI 1011 - SC - Income Tax

Addition relating to trade creditors - additions u/s 68 - Held that - Both the Assessing Officer and the C.I.T. had recorded findings of fact adverse to the Assessee which has been upheld by the learned single judge of the High Court. The Division Bench of the High Court in the Writ Appeal thought it appropriate to reverse the said findings on the ground that the 37 persons who had advanced the loan to the Assessee ought to have been given notice. The jurisdiction of the Division Bench in a Writ Appeal is primarily one of adjudication of questions of law. Findings of fact recorded concurrently by the authorities under the Act and also in the first round of the writ proceedings by the learned single judge are not to be lightly disturbed. In the present case, in the face of the clear findings that the loan applications were processed by the Officers of the Assessee and the loan transactions in question of the aforesaid 37 persons were also handled really by the Assessee and further in view of the categorical finding that the loan amounts were not reflected in the returns of the 37 persons in question, we do not see how the High Court could have taken the above view and remanded the matter to the Assessing Officer. It has been pointed out before us that pursuant to the impugned order passed by the Division Bench of the High Court fresh assessment proceedings have been finalized by the Assessing Officer. The said exercise has been done in the absence of any interim order of this Court. However, merely because fresh assessment proceedings has been carried out in the meantime it would certainly not preclude the Court from judging the validity and correctness of the order of the Division Bench of the High Court. Thus we cannot uphold the order of the Division Bench passed in the Writ Appeal in question. Consequently, we allow this appeal and set aside the order of the Division Bench and consequently all further orders passed pursuant thereto.

Summary

Issues Involved:
Challenge to judgment and order dated 20th March, 2012 in Writ Appeal No.1611 of 2008 reversing the judgment of the learned single judge dated 10th September, 2008 in Writ Petition No.10507 of 2007.

Analysis:

1. Challenge to Judgment and Order:
The appeal in question challenged the judgment and order dated 20th March, 2012 in Writ Appeal No.1611 of 2008, which reversed the judgment of the learned single judge dated 10th September, 2008 in Writ Petition No.10507 of 2007. The learned single judge had dismissed the writ petition filed by the Assessee against the revisional order upholding the addition of an amount claimed by the Assessee as legally liable for deduction. The Commissioner of Income Tax had found discrepancies in the trade creditors' addition, exposing a fraudulent practice of creating accounts through name lending. The single judge upheld this view, leading to the appeal challenging the High Court's decision.

2. Jurisdiction of the Division Bench:
The Division Bench of the High Court reversed the findings of fact adverse to the Assessee, primarily on the ground that the 37 persons who had advanced the loan to the Assessee were not given notice. However, the jurisdiction of the Division Bench in a Writ Appeal is mainly to adjudicate questions of law, and findings of fact are not to be lightly disturbed. The High Court's decision to remand the matter to the Assessing Officer was questioned, especially considering the clear findings that the loan applications were processed by the Assessee's officers and the loan amounts were not reflected in the returns of the 37 persons in question.

3. Decision of the Supreme Court:
The Supreme Court, after thorough analysis, concluded that the order of the Division Bench in the Writ Appeal could not be upheld. The Court found that the High Court's decision to reverse the findings of fact without sufficient grounds was incorrect. The appeal was allowed, setting aside the order of the Division Bench and all further orders passed based on it. The Court emphasized that the completion of fresh assessment proceedings in the meantime did not preclude them from reviewing the validity and correctness of the High Court's order.

In summary, the Supreme Court allowed the appeal, setting aside the High Court's decision, emphasizing the importance of not disturbing findings of fact without proper grounds and reiterating the Court's authority to review judgments despite fresh assessment proceedings.