Gujarat High Court
Commissioner Of Income Tax vs Akar Laminators ... on 3 March, 2015
Author: Jayant Patel
Bench: Jayant Patel, S.H.Vora
O/TAXAP/142/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 142 of 2015
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COMMISSIONER OF INCOME TAX 1....Appellant(s)
Versus
AKAR LAMINATORS LIMITED....Opponent(s)
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Appearance:
MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE JAYANT PATEL
and
HONOURABLE MR.JUSTICE S.H.VORA
Date : 03/03/2015
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE JAYANT PATEL)
1. The revenue has preferred the present appeal by raising following questions.
"[A] Whether the Appellate Tribunal has substantially erred in remanding the issue of disallowance of loss of Rs.2,11,82,046/- to the file of Assessing Officer without giving any independent finding and cogent reasons as to how the CIT (Appeals)'s finding were incorrect despite the Tribunal being the final fact finding authority?
[B] Whether the Appellate Tribunal has substantially erred in remitting the issue of disallowance of claim of revenue expenses of Rs.3,10,49,616/- to the file of Assessing Officer without giving any independent finding and cogent reasons as to how the CIT (Appeals)'s finding were incorrect despite the Tribunal being the final fact finding authority?Page 1 of 9
O/TAXAP/142/2015 ORDER
[C] Whether the Appellate Tribunal has
substantially erred in disallowance of claim, rebate and reversal of claims of Rs.3,92,66,819/- to the file of Assessing Officer without giving any independent finding and cogent reasons as to how the CIT (Appeals)'s finding were incorrect despite the Tribunal being the final fact finding authority?
[D] Whether the Appellate Tribunal has substantially erred in remitting the issue of disallowance of claim of writing off Rs.64,504/- to the file of Assessing Officer without giving any independent finding and cogent reasons as to how the CIT (Appeals)'s finding were incorrect despite the Tribunal being the final fact finding authority?
[E] Whether the Appellate Tribunal has substantially erred in remitting the issue of disallowance of Rs.2,25,73,649/- u/s 36(1)(iii) of the Act to the file of Assessing Officer without giving any independent finding and cogent reasons as to how the CIT (Appeals)'s finding were incorrect despite the Tribunal being the final fact finding authority?
[F] Whether the Appellate Tribunal has substantially erred in remitting the issue of hire charges of Rs.5,24,421/- to the file of Assessing Officer following the order of the co-ordinate Bench of Tribunal for A.Y. 1999-2000?"
2. We have heard Mrs. Mauna Bhatt, learned counsel appearing for the appellant - revenue.
3. On question A, it appears that the AO in view of the fact that no evidence was produced as it was called upon by the AO, he invoked the power under section 144 of the Income Tax Act (hereinafter referred to as "the Act") and then, disallowed the claim for gross loss to the fullest extent. In the appeal before the CIT (Appeals), the view of the AO was concurred, but the relevant aspect is that there was no Page 2 of 9 O/TAXAP/142/2015 ORDER examination of the material on record in appeal. The Tribunal recorded the finding at para 9, which reads as under:
"9. We have heard the rival submissions and perused the material on record. We find that AO has noted that assessee was asked to justify the claim of loss, which assessee had failed to do. Further, assessee did not produce the books of accounts for examination by AO. We also find that even before CIT (A), no material has been placed on record by the assessee to substantiate its claim of loss. It is a fact that in the absence of details the entire gross profit has been disallowed by AO which we feel is unjustified. Before us, ld. A.R. has submitted that working of gross profit at paper book page 20 according to which the gross profit is at 4.14%. Since, this detail of working needs examination. We therefore, remit the issue back to the file of AO to verify the working and the submission of the assessee and thereafter, decide the issue in accordance with law. Thus, this ground of assessee is allowed for statistical purposes."
4. The aforesaid shows that the Tribunal having found that the gross profit even as per their representative was 4.14%, it was required for the AO to verify and the matter is therefore, remanded to the AO. The Tribunal also found the fact that in absence of details, the entire gross profit could not have been disallowed by the AO and the Tribunal found such an approach on the part of the AO as unjustified.
5. Learned counsel for the revenue submitted that if the documents were not produced, the AO was justified in disallowing the entire gross profit and the CIT (Appeals) had rightly conferred with the view of AO. She submitted that the Tribunal, which is ultimate fact finding authority ought to Page 3 of 9 O/TAXAP/142/2015 ORDER have appreciated the evidence on record and ought to have given the finding of fact as to what extent, the disallowance of the loss could be made and instead that, the Tribunal has given second innings to the assessee, which in her submission, was impermissible. She relied upon the decision of this Court in case of Rajesh Babulal Damania Vs. Commissioner of Income Tax reported at 251 ITR 541 (Guj) and therefore, she submitted that the appeal deserves consideration on the said question raised.
6. In our view, even if the notice was issued calling upon the assessee to produce certain documents and the assessee failed to produce the document, the power by the AO was required to be exercised judiciously to examine and to find out to what extent, the disallowance could be made, but it could not be to the fullest extent that too without any discussion and on a mere ground that the assessee failed to produce the document in support thereof. The aforesaid aspect was not appreciated in the appeal and therefore, the Tribunal has remanded the matter. It is not that in every case, the Tribunal may examine the material on its own if there is failure to consider the material by AO or in appeal by the CIT (Appeals). Had it been a case where some material was considered and a finding was recorded by AO, it may stand on different footing and different consideration. But when no material whatsoever was considered and just an adverse inference was drawn in disallowing the claim and such was not interfered in the appeal, if the Tribunal has exercised the discretion of remanding the matter in view of the reasons recorded herein above, such an exercise of discretion could not be said to be perverse. We do not find that any substantial question of law Page 4 of 9 O/TAXAP/142/2015 ORDER would arise on such a point.
7. The attempt to rely upon the decision of this Court in case of Rajesh Babulal Damania (supra) is ill-founded, because in the said case, the CIT (Appeals), at the appellate stage, had already examined the material and had given finding of facts, which was not appreciated by the Tribunal after considering the material and therefore, the observations were made by this Court in the said decision. Such are not the fact situation in the present case since no material is examined neither by the AO nor by the CIT (Appeals). Hence, we do not find that substantial question, as canvassed, would arise for consideration in the present appeal.
8. On question B, it appears that the AO adopted the same approach as has been considered by us while considering question A. In the appeal before the CIT (Appeals), similar consequence has arisen for disallowance. The Tribunal at para 19 observed thus:
"19. We have heard the rival submissions and perused the material on record. We find that assessee has not produced any material before AO or CIT (A) in support of his claim. Before us, it is ld. A.R.'s submission that it had already made the disalloawance. Since, the aforesaid submission has not been examined by AO, we feel that this factual aspect needs reexamination. We, therefore, remit the matter back to the file of AO for ascertaining the factual position. If the submission of ld. A.R. Is found correct, then the addition made be deleted. The assessee is also directed to submit all the required details before AO. In case, the assessee fails to furnish the required details, A.O. Is free to decide the matter on the basis of material on record. Thus, this ground of assessee is allowed for statistical purposes."Page 5 of 9
O/TAXAP/142/2015 ORDER
9. We find that considering the facts and circumstances, as observed by us while considering the question A, the discretion exercised by the Tribunal cannot be said to be perverse, which may call for interference in the present appeal before us, which is limited to substantial questions of law. No substantial questions of law would arise as canvassed.
10. On question C, more or less, similar situation has arisen as considered by us while considering question A and B, inasmuch as, the AO disallowed the total claim. In the appeal, the approach of the AO is upheld. The Tribunal in the further appeal has recorded the finding on para 24, which reads as under:
"24, We have heard the rival submissions and perused the material on record. We find that A.O. while disallowing the claim has noted that assessee has failed to submit any details or justification about expenditure. We also find that ClT(A) has also noted that no details were submitted and whether amounts were ever offered as income or not. Before us, it is submitted that the issue is covered by the decision of Hon'bIe Apex Court in the case of TRF Ltd. (supra). Since the aforesaid submission was not made before lower authorities by the assessee, we feel that the issue needs re- examination. We, therefore, remit the issue back to the file of A.O. to decide the issue in the light of decision of Apex Court in the case of TRF Ltd. (supra) and in accordance with law. The assessee is also directed to furnish the required details promptly to the A.O. In case, the assessee fails to furnish the required details, A.O. shall be free to decide the matter on the basis of material available on record. Thus, this ground of assessee is allowed for statistical purposes."Page 6 of 9
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11. The aforesaid shows that the Tribunal having found that the examination was required on the part of the AO to decide the issue in light of the decision of the Apex Court in case of TRF Limited (supra) and therefore, the discretion has been exercised for sending the matter back to the AO. Such an exercise of discretion cannot be said to be perverse. No substantial questions of law would arise for consideration as canvassed.
12. On question D, the AO disallowed the claim in absence of the evidence produced. In appeal before the CIT (Appeals), no interference was made to the approach of the AO. The Tribunal in further appeal, observed at para 29 as under:
29. We have heard the rival submissions and perused the material on record. We find that A.O. while disallowing the claim has noted that assessee has failed to submit any details or justification about expenditure. We also find that ClT(A) has also noted that no details were submitted and whether amounts were ever offered as income or not. Before us, it is submitted that the issue is covered by the decision of Hon'ble Apex Court in the case of TRF Ltd. (supra). Since the aforesaid submission was not made before lower authorities by the assessee, we feel that the issue needs re-
examination. We, therefore, remit the issue back to the file of A.O. to decide the issue in the light of decision of Apex Court in the case of TRF Ltd. (supra) and in accordance with law. The assessee is also directed to furnish the required details promptly to the A.O. In case, the assessee fails to furnish the required details, A.O. shall be free to decide the matter on the basis of material available on record. Thus, this ground of assessee is allowed for statistical purposes. "
13. The aforesaid shows that the Tribunal having found that Page 7 of 9 O/TAXAP/142/2015 ORDER the matter was required to be examined in light of the decision of the Apex Court in case of TRF Limited (supra), the discretion has been exercised relegating the matter to the AO. We do not find that the exercise of discretion could be said as perverse. No substantial questions of law would arise as canvassed.
14. On question E, the AO disallowed the claim for deduction of interest. In the appeal before the CIT (Appeals), no interference was made to the approach of the AO. Whereas the Tribunal in the further appeal observed at para 34 as under:
"34. We have heard the rival submissions and perused the material on record. Before us, Id. A.R. has submitted that the investments were made out of interest free funds and not borrowed funds and on the other hand, we find that ClT (A) has given finding that assessee does not have any surplus funds. In view of the contrary facts, we are of the view that the factual position needs to be re-- examined. We, therefore, remit the matter to the file of A.O. to verify the factual position and more so about the availability of free funds at the time of making investments and thereafter decide the matter in accordance with law. We also direct the assessee to furnish all the required details or any other details in its support promptly to the A.O. In case, the assessee fails to furnish the required details, A.O. shall be free to decide the matter on the basis of material available on record. Thus, this ground of assessee is allowed for statistical purposes."
15. The aforesaid shows that the Tribunal found that the factual aspects including that of the availability of the free fund at the time of making investment was required to be Page 8 of 9 O/TAXAP/142/2015 ORDER examined and therefore, the discretion has been exercised by the Tribunal to send the matter back to the AO. We do not find that the discretion has been perversely exercised as canvassed. No questions of law would arise for consideration.
16. On the last question F, CIT (Appeals) as well as the Tribunal has gone by the earlier decision including that of the Tribunal for the Assessment Year 1999-2000. The learned counsel for the revenue has brought to our notice that the decision of the Tribunal, which has been relied upon for the Assessment Year 1999-2000, was carried before this Court in Tax Appeal No.896 of 2009 decided on 21.2.2011 and the said appeal has been dismissed, as no substantial question of law was found for consideration by this Court. When this Court has already examined the said aspect on the above referred tax appeal, we do not find that any substantial questions of law would arise for consideration as sought to be canvassed.
17. In view of above, we do not find any case of interference in the impugned order passed by the Tribunal. The appeal being meritless is dismissed.
(JAYANT PATEL, J.) (S.H.VORA, J.) shekhar Page 9 of 9