2022 (9) TMI 1102 - HC - Income Tax

Difference between a question of law and a substantial question of law - Addition u/s 68 - creditworthiness of the companies with whom assessee company had executed large scale transactions - ITAT upheld the findings of the CIT (A) and dismissed the appeal of the Revenue - addition made u/s 37(1) assessee has claimed and received excess incentive on the basis of erroneous declaration - HELD THAT - Appellate Authorities below have recorded concurrent findings of fact on both the issues - no substantial question of law arises for consideration in the present appeal and accordingly the same is dismissed. The Supreme Court in the case of Ram Kumar Aggarwal Anr. vs. Thawar Das 1999 (8) TMI 1008 - SUPREME COURT has reiterated that under Section 100 of the Code of Civil Procedure the jurisdiction of the High Court to interfere with the orders passed by the Courts below is confined to hearing on substantial question of law and interference with finding of the fact is not warranted if it involves re-appreciation of evidence. Supreme Court in State of Haryana Ors. vs. Khalsa Motor Limited Ors. 1990 (8) TMI 416 - SUPREME COURT has held that the High Court was not justified in law in reversing, in second appeal, the concurrent finding of the fact recorded by both the Courts below. The Supreme Court in Hero Vinoth (Minor) vs. Seshammal, 2006 (5) TMI 478 - SUPREME COURT has also held that in a case where from a given set of circumstances two inferences of fact are possible, the one drawn by the lower appellate court will not be interfered by the High Court in second appeal. Adopting any other approach is not permissible. It has also held that there is a difference between a question of law and a substantial question of law .

Summary

Issues:
1. Challenge to ITAT order regarding addition made under Section 68 of the Income Tax Act.
2. Challenge to ITAT order regarding addition made under Section 37(1) of the Income Tax Act.
3. Refund of incentive received from Custom Department Authority.

Analysis:

Issue 1:
The appellant challenged the ITAT order regarding the addition made under Section 68 of the Income Tax Act. The counsel argued that the ITAT erred in upholding the decision of the CIT(A) to delete the addition without considering the creditworthiness of the companies involved in the transactions. The CIT(A) found that the purchases were at arm's length price, and no adverse findings were brought on record by the Assessing Officer. The CIT(A) observed that the sundry creditors had corresponding purchases against sales, trade payables outstanding, and sufficient documentary evidence was submitted to prove the genuineness of the transactions. The ITAT upheld the CIT(A) findings, emphasizing that no adverse material was brought on record to treat the credit balance as non-genuine.

Issue 2:
The appellant challenged the ITAT order regarding the addition made under Section 37(1) of the Income Tax Act. The appellant received an incentive from the Custom Department Authority, which was later asked to be refunded as certain exports did not qualify for the incentive. The Appellate Authorities found that there was no indication of any offense under foreign trade regulation in the directive to refund the incentive. Additionally, the Revenue failed to demonstrate that the interest paid was on account of any prohibited act by the appellant, as required under Explanation 37(1) of the Act.

Issue 3:
The Court cited precedents to emphasize that the High Court's jurisdiction is limited to substantial questions of law and does not warrant interference with findings of fact that involve re-appreciation of evidence. The Court found no substantial question of law in the present appeal and dismissed it accordingly, citing the importance of upholding lower appellate court inferences when multiple interpretations of facts are possible.

In conclusion, the Court dismissed the appeal as no substantial question of law was found, upholding the concurrent findings of fact by the lower Appellate Authorities on both issues. The judgment highlighted the importance of respecting lower court inferences when multiple interpretations of facts are possible.