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Sanjay v. Commissioner Of Income-Tax
Factual and Procedural Background
The dispute relates to the assessment year 1998-99 involving an assessee engaged in the business of supplying machinery and spare parts such as bearings and gear boxes. The assessee did not maintain a stock register. During assessment, the Assessing Officer made an addition of Rs. 2,58,540 under section 69 of the Income-tax Act, 1961, based on discrepancies in closing stock quantification and application of a low gross profit rate. The addition was upheld by the Commissioner of Income-tax (Appeals) and subsequently by the Income-tax Appellate Tribunal (Tribunal). The assessee filed an appeal under section 260A of the Income-tax Act against the Tribunal's order dated April 28, 2005, challenging whether the appeal involved any substantial question of law.
Legal Issues Presented
- Whether the appeal under section 260A of the Income-tax Act involves any substantial question of law arising out of the impugned order of the Tribunal.
- Whether the factual findings by the Assessing Officer, Commissioner of Income-tax (Appeals), and the Tribunal regarding unexplained investment under section 69 are subject to judicial interference on the ground of substantial question of law.
Arguments of the Parties
Appellant's Arguments
- The appellant contended that the appeal involves substantial questions of law warranting admission under section 260A.
- Relying on precedents such as CIT v. Ms. Shehnaz Hussain and Santosh Kazan v. Purushottam Tiwari, the appellant argued that even concurrent findings of fact by lower authorities can be interfered with if they are incorrect as a matter of law.
The opinion does not contain a detailed account of the respondent's arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| CIT v. Ms. Shehnaz Hussain, [2004] 267 ITR 572 (Delhi) | Interference in concurrent findings of fact if they constitute substantial question of law. | The court acknowledged the principle but held it inapplicable as the issue was essentially factual without legal interpretation. |
| Santosh Kazan v. Purushottam Tiwari, [2001] 251 ITR 84 (SC) | Scope of interference in appellate jurisdiction under section 260A on substantial question of law. | The court noted the principle but found no substantial question of law in the facts of the present case. |
Court's Reasoning and Analysis
The court examined whether the appeal raised any substantial question of law, a prerequisite for admission under section 260A of the Income-tax Act. It emphasized that the appellate jurisdiction under this section does not permit reappraisal of factual findings made concurrently by the Commissioner of Income-tax (Appeals) and the Tribunal unless such findings are perverse, without reasoning, or contrary to law.
The court found that the Assessing Officer had made the addition after a detailed verification of records, including sales and purchase bills, due to the assessee's failure to maintain a stock register and provide satisfactory explanation for discrepancies. Both appellate authorities had upheld this addition after considering the assessee's submissions.
The court rejected the appellant's contention that the concurrent factual findings could be interfered with as a question of law, stating that the issue was essentially factual, involving no interpretation of statutory provisions or questions of public importance. The failure to maintain a stock register justified the Assessing Officer's application of discretion to determine unexplained investment under section 69.
Accordingly, the court held that there was no substantial question of law warranting admission of the appeal.
Holding and Implications
The appeal was dismissed in limine on the ground that it did not involve any substantial question of law as required under section 260A of the Income-tax Act.
The direct effect of this decision is the upholding of the addition made by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) and the Tribunal. No new precedent was established, and the ruling reinforces the principle that concurrent factual findings by tax authorities are not subject to appellate interference unless a substantial question of law arises.
I.T.A No. 107 of 2005
Decided on January 27, 2006
The Judgment of the Court was delivered by
A.M Sapre, J.:— This is an appeal filed by the assessee under section 260A of the Income-tax Act, 1961, against the order, dated April 28, 2005, passed by Income-tax Appellate Tribunal in I.T.A No. 397.Ind./2001.
2. The question that arises for consideration in this appeal is, whether the appeal involves any substantial question of law out of the impugned order of the Tribunal or, in other words, whether the two questions proposed by the appellant involves any substantial questions so as to admit the appeal ? It is not in dispute that the pre-requisite of admitting any appeal under section 260A of the Income-tax Act is to find out involvement of substantial question of law.
3. Heard Shri P.M Choudhary, learned counsel for the appellant.
4. Having heard, learned counsel for the appellant and having perused the record of the case, we are of the view that the appeal does not involve any substantial question of law as is required to be made out under section 260A of the Act and hence, it merits dismissal in limine, resulting in upholding of the impugned order of the Tribunal.
5. The dispute relates to the assessment year 1998-99. The assessee deals in business of supply of machinery and spare parts like bearings, gear boxes, etc. Admittedly, the assessee did not maintain any stock register. The Assessing Officer in the course of assessment made an addition of Rs. 2,58,540 by invoking the provisions of section 69 of the Act. It was done keeping in view the difference in the quantification of closing stock as well as on account of applying the low G.P rate.
6. The Assessing Officer after affording an opportunity to the assessee came to a conclusion that explanation offered by assessee is not acceptable. Accordingly, an addition was made. It was upheld by the Commissioner of Income-tax (Appeals) in an appeal filed by the assessee and further upheld by the Tribunal in an appeal filed by the assessee by impugned order. This is what the Tribunal held in paragraph 5 of the impugned order:
“5. After considering the arguments advanced by the parties in view of the material available on record and the orders of the authorities below, I do not find any substance in the submissions of the learned authorised representative as the Assessing Officer has specified the number of excess bearings which he could find on the basis of verification of records of the assessee relating to sales and purchase bills maintained by it. Since, the assessee has failed to furnish any satisfactory explanation about the same the Assessing Officer had no option but to apply the provisions laid down under section 69 of the Act treating the investment as unexplained. The assessee has failed to improve its case even before the Tribunal and thus I do not find any reason to interfere with the first appellate order in the absence of any satisfactory explanation of the assessee. The addition is upheld. The ground is thus rejected.”
7. It is against this order, the assessee is in appeal.
8. In our opinion, once the Commissioner of Income-tax (Appeals) and then, lastly, the Tribunal have taken the view in relation to particular addition/deletion and accordingly, made certain direction to the Assessing Officer as mentioned supra then it does not involve any substantial issue of law as such. In other words, this court in its appellate jurisdiction which is defined under section 260A ibid, cannot again de novo hold yet another inquiry with a view to find out whether the explanation offered by the assessee and which was gone into by the two appellate authorities, namely, the Commissioner of Income-tax (Appeals) and the Tribunal, is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding on such issue is entirely de hors the subject, or that it is based on no reasoning, or that it is absurd to the extent that no reasonable prudent man can ever reach to such conclusion, or that it is against any provision of law, and in particular Income-tax Act, a case for substantial question of law is made out.
9. Learned counsel for the appellant placing reliance on the decisions in CIT v. Ms. Shehnaz Hussain, [2004] 267 ITR 572 (Delhi) and Santosh Kazan v. Purushottam Tiwari, [2001] 251 ITR 84 (SC) made attempt to contend that approach of all the three authorities is not correct. According to him, even though the view of the authorities is concurrent in nature but if it is not correct then this court should interfere because it constitutes a question of law. We do not agree. There can be no quarrel to the law laid down in cases relied on by learned counsel for the appellant. What differs is its applicability to the facts of each case. What constitutes a question of law, has got to be seen with reference to facts of each case. As observed supra, the question involved is essentially a question of fact involving no interpretation of any section/rule and circular of the Act in question, nor it involves any question of public importance. When admittedly, the assessee failed to maintain the stock register in the course of his business then naturally all adverse consequences flowing from such non-maintenance must follow. In our view, it is obligatory for the assessee to maintain the stock register so that one is able to ascertain the actual position of stock lying with the assessee in which he is trading. In such circumstances, the Assessing Officer has every right to apply his best discretion on the facts of the case and on the basis of material on record for determining the actual turnover and profit earned out of the said business.
10. In our view, no such error could be noticed by us in the impugned order. The Commissioner of Income-tax (Appeals) and the Tribunal did go into the details of explanation offered by the assessee found no merit in it, thereby upholding the view of the Commissioner of Income-tax (Appeals).
11. We thus, do not find any merit in the appeal. It fails and is dismissed in limine by holding that it does not involve any substantial question of law.
12. No costs.
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