Commissioner Of Income-Tax vs Gupta Brothers
2003 Latest Caselaw 714 Del

JUDGMENT

D.K. JAIN J.

1. This is an appeal by the Revenue under Section 260A of the Income-tax Act, 1961 (for short "the Act"). The challenge is to the order, dated May 31, 2002, passed by the Income-tax Appellate Tribunal, Delhi Bench "E", New Delhi (for short "the Tribunal"), in I.T.A. No. 4524/Delhi of 1997, pertaining to the assessment year 1993-94. According to the Revenue, the said order involves the following substantial questions of law :

"(a) Whether the Income-tax Appellate Tribunal was correct in law in upholding the order of the Commissioner of Income-tax (Appeals) without giving its own finding ?

(b) Whether the Income-tax Appellate Tribunal was correct in confirming the order of the Commissioner of Income-tax (Appeals) and thereby deleting the trading addition of Rs. 11,15,967 made by the Assessing Officer ?

(c) Whether the Income-tax Appellate Tribunal was justified in law in deleting the trading addition made by the Assessing Officer on the basis of estimated sales after rejecting the books of account maintained by the assessed ?

(d) Whether the order of the Income-tax Appellate Tribunal is perverse in law when it passed a non-speaking order ?"

2. The factual background is as follows :

The respondent (hereinafter referred to as "the assessed") is a registered firm carrying on the business of trading in ball bearings, etc. For the aforementioned assessment year, the assessed filed its return of income on August 30, 1993, declaring a total income of Rs. 6,870. Prior to that, on April 23, 1993, a search had been conducted at the business and residential premises of the partners of the assessed and its books of account and some other documents were seized. During the course of assessment proceedings for the relevant assessment year, the assessed was required to explain and co-relate various documents seized during the course of the search, with the books of account. The assessed could not satisfy the Assessing Officer in regard to the difference in sales reflected in the seized documents and the books of account. In the seized documents, total sales reflected were to the tune of Rs. 3,33,225, whereas, as per the bills, the sales were only to the tune of Rs. 1,66,000. Thus, treating the balance amount of Rs. 1,67,225 as unexplained, the Assessing Officer added the amount to the total income of the assessed. Besides, on the basis of a slip, seized during the search, on which a sale of Rs. 93,387 as made on April 22, 1993, was recorded, the Assessing Officer estimated the total turnover for the relevant period at five times the total sales shown by the assessed. The gross profit rate was estimated at 15 per cent, in place of 13.49 per cent., declared by the assessed. Accordingly, estimating the turnover of the assessed at Rs. 90,71,830 a gross profit of Rs. 13,60,774 was worked out. Since the assessed had shown the gross profit at Rs. 2,44,807, the balance amount of Rs. 11,15,967 was added to the income of the assessed on this account as well.

3. Aggrieved, the assessed preferred appeal to the Commissioner of Income-tax (Appeals). The addition of Rs. 1,67,225 was not contested before the Com-missioner. The same was accordingly confirmed. However, in regard to the trading addition, the Commissioner observed that the sale reflected on the rough slip as on April 22, 1993, could not be taken as the basis for estimation of the sales during the assessment year 1993-94 because the slip pertained to the subsequent year. Inter alia, observing that the Assessing Officer had not brought any other relevant material to support the estimation of the sales and gross profit, the Commissioner deleted the trading addition of Rs. 11,15,967.

4. Being aggrieved by the order of the Commissioner, the Revenue carried the matter in further appeal to the Tribunal. Endorsing the view taken by the Commissioner that the sales shown on the slip dated April 22, 1993, could not form the basis for estimation of sales during the assessment year 1993-94, because it related to the subsequent year, the Tribunal also took the view that since the Assessing Officer had made a separate addition for the sales recorded in the seized material, the books of account of the assessed could not be rejected on the basis of the slip. Thus, the Tribunal came to the conclusion that the estimation of the sales and the gross profit rate by the Assessing Officer for the relevant assessment year was not supported by any document seized during the course of the search. Hence, the present appeal.

5. We have heard Ms. Premlata Bansal, learned counsel for the appellant. Assailing the order of the Tribunal, learned counsel has submitted that the Tribunal has failed to record its independent finding on the trading addition. The submission is that it was incumbent on the part of the Tribunal to record its own reasons for dismissing the Revenue's appeal and failure to do so has vitiated its order. In support of the proposition that every fact for and against the assessed must be considered and a finding on the question involved should be clearly given by the Tribunal, reliance is placed on the decision of the Supreme Court in Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151.

6. We are unable to agree with learned counsel for the appellant. There is no quarrel with the proposition that the Tribunal being a final fact-finding authority, it is required to take into account every fact for and against the assessed with due care and record its finding thereon. The Tribunal's order must clearly indicate the issues which arose for determination; the evidence--pro and contra in regard to each one of them and the findings reached thereon. There is no gainsaying that if the Tribunal has arrived at certain conclusions of fact upon consideration of all the evidence and material before it, its finding is final and cannot be interfered with. Nevertheless, if a finding of fact is arrived at by the Tribunal after improperly rejecting evidence or it is based on material partly relevant and partly irrelevant or it is based on no evidence, such finding is vitiated and then a question of law arises. However, having regard to the language of Section 260A of the Act, which uses the phrase "substantial question of law" and not "question of law", a distinction has to be drawn between the said two expressions. As recently observed in Santosh Hazari v. Purushottam Tiwari [2001] 251 ITR 84, the tests laid down in Sir Chunilal V. Mehta and Sons Ltd. v. Century Spinning and Manufacturing Company Limited, , to determine whether a question of law raised in a case is "substantial question of law", still hold good. These five tests are whether : (i) it is of general public importance ; or (ii) it directly or substantially affects the rights of the parties; or (iii) it is an open question in the sense that it is not finally settled by the Supreme Court; or (iv) is not free from difficulty ; and (v) it calls for discussion for alternative views.

7. Applying the aforementioned broad principles to the facts in hand, we are of the considered view that no question of law, much less a substantial question of law, arises from the order of the Tribunal. Though it does appear that the Tribunal has not specifically recorded its own findings on the issues raised but from the order it is clear that it has endorsed the view taken by the Commissioner (Appeals). As noted supra, the Commissioner had recorded in no uncertain terms that except for the slip containing particulars of sale made on April 22, 1993, no other material was brought on record by the Assessing Officer to support the estimation of the sales and gross profit. Admittedly, the sale reflected on the slip pertained to the assessment year 1994-95 and not the year under reference. Thus, in this factual scenario, we find it difficult to hold that the Tribunal's alleged failure to return independent findings on the issues raised gives rise to a substantial question of law. The only issue which the Tribunal was required to consider was the implication of the said slip, seized during the search operation, which has been found to be irrelevant in so far as the accounts for the relevant previous year were concerned.

8. We are, therefore, of the opinion that the order of the Tribunal does not involve any substantial question of law. Accordingly, we decline to entertain the appeal. Dismissed.