Punjab-Haryana High Court
The Bandi Co-Operative Labour And ... vs Commissioner Of Income Tax on 16 May, 2006
Equivalent citations: (2006)203CTR(P&H)111, [2008]300ITR107(P&H)
Bench: Adarsh Kumar Goel, Rajesh Bindal
JUDGMENT
1. The assessee has approached this Court by way of filing the present appeal against the order dt. 11th Aug., 2005 passed by the Income-tax Appellate Tribunal, Amritsar Bench : SMC, Amritsar (for short 'the Tribunal'), in ITA No. 161/Asr/2005, dt. 11th Aug., 2005 for the asst. yr. 2002-03, raising the following substantial questions of law :
(i) Whether the instructions issued by the CBDT under Section 119 of the IT Act are binding upon the IT authorities ?
(ii) If the answer to the question No. 1 is negative whether the IT authorities at the time of assessment can travel beyond reasons recorded at the time of scrutiny and the reasons can be withheld from the assessee ?
(iii) Whether, in the facts and circumstances of the case, the appellant-assessee is entitled to be granted the benefit under Section 80P(2)(a)(vi) of the IT Act and that too in view of the benefits granted for the last more than one decade ?
(iv) Whether on the employment of some outside labour, the co-operative society is to be deprived of the exemptions of the whole of the amount of profits and gains and income of the collective disposal of the labour of its members ?
(v) Whether the impugned assessment of the net profits and gains of the assesses and the assessment @ 6 per cent is ultra vires of principles of natural justice and legal, justified and in order in the facts and circumstances of the case ?
(vi) Whether it is mandatory upon the IT authorities to decide the contentions/submissions advanced before them ?
(vii) Whether the whole approach of the learned IT authorities below in deciding the case against the appellant-assessee suffers from perversity and is based upon assumptions and presumptions and surmises and conjectures ?
(viii) Whether the provision for deduction/exemptions is to be interpreted liberally in favour of assessee ?
(ix) Whether discriminatory and unfair treatment is being met out to the appellant-society ?
2. The assessee co-operative labour society filed return of income for the asst. yr. 2002-03 on 25th June, 2002 declaring its income as nil. The same was processed under Section 143(1) of the IT Act, 1961 (for short 'the Act'), as per the returned income. The case of the assessee was selected for scrutiny and accordingly, statutory notices under Sections 142(1) and 143(2) of the Act were issued in time. Process for scrutiny was initiated with prior approval of the CIT, as is evident from the facts recorded in the order of assessment. On test checking of cash book for part of the year it was found that the assessee had introduced cash receipts ranging from Rs. 30,000 to Rs. 2 lacs in the cash book.
3. The assessee failed to explain the nature or source of amount so introduced in the cash book. It was further found that substantial amounts of cash were withdrawn from the bank on different dates and it was shown to have been utilized on the same day but without there being any evidence in the form of bills/vouchers, etc. to support the same. No stock register of the material purchased and utilization thereof was found to have been maintained. Seeing the totality of the circumstances and finding that the books of account maintained by the assessee did not reflect true and fair state of affairs of the assessee, the provision of Section 145 of the Act was invoked and books of account were rejected.
4. Even the claim of the assessee for exemption under Section 80P(2)(a)(vi) of the Act was also found to be false as no supporting material was produced before the assessing authority and since the books of account of the assessee had been rejected, an estimate of net profit vis-a-vis the turnover of the assessee was made at 8 per cent.
5. Against the order of assessment, the assessee went in appeal before the Commissioner of Income-tax (Appeals) [for short "the CIT(A)"] raising the various pleas. Arguments of the assessee with regard to selection of case in scrutiny in violation of the condition laid down in Circular dt. 26th July, 2002 was considered and rejected since it was found that the case was selected for scrutiny after approval of the CIT. Even on merits the appeal was rejected.
6. Still aggrieved the assessee went in appeal before the Tribunal who also, considering various pleas raised by the assessee, rejected the appeal. However, the net profit rate vis-a-vis gross receipt of the assessee was reduced from 8 per cent to 6 per cent.
7. We have heard Sh. R.L. Gupta, advocate, for the assessee and with his assistance have perused the relevant orders on record.
8. The primary contention raised by the counsel for the assessee is that the case of the assessee has been selected in scrutiny in contravention to the Circular dt. 26th July, 2002 and in terms of the settled position of law, a circular issued by the CBDT under Section 119 of the Act is binding on the authorities below. There is no dispute on the proposition that a circular issued by the Board under Section 119 of the Act is binding on the authorities under the Act. However, in the case in hand what has been found is that the due process required under the circular was followed while taking up the case of the assessee in scrutiny and finding to that effect has been recorded in the assessment order as well as the order of the CIT(A). The contention of the counsel for the assessee to the effect that the reason recorded for taking up the case of the assessee in scrutiny should have been disclosed to him is without any merit as there is no such legal requirement in the statute. The circular has been issued by the Board for guidance of the officers of the Department. Hence, we do not find any merit in this submission of the assessee.
9. As far as the merits of the case is concerned, the counsel for the assessee submitted that even if the discrepancies which have been pointed out by the AO while framing the assessment are ignored, still the assessee would be entitled for exemption as there was other sufficient material to show that the claim of the assessee falls under Section 80P(2)(a)(vi) of the Act but to support this, the counsel could not point out anything from the record which could substantiate its claim to that effect. For claiming the exemption one has to satisfy that it clearly falls within the four corners of the provision of law. That being not the position in the present case, even on merits, the claim of the assessee was rightly rejected by the Tribunal and we uphold the findings recorded to that effect also.
10. Another issue raised by the counsel for the assessee is that in the previous years as well as in the subsequent years the authorities had accepted the claim of the assessee.
11. It is a settled law that each year is independent assessment year. In the case in hand on a scrutiny of the material on record and from a perusal of the books of account whatever produced by the assessee, it was found that the assessee was not able to satisfy the authorities with regard to its claim for exemption under Section 80P(2)(a)(vi) of the Act. This being the position, it would not be just to claim that merely because in the earlier years or in the subsequent years the assessee had got exemption, the same should be granted in this year as well in spite of the fact that on a perusal of the record before the AO, the assessee was not found to be entitled for the same. Reliance upon a judgment of this Court in CIT v. Haryana State Co-operative Labour Construction Federation Ltd (2001) 161 Taxation 284 (P&H) and Delhi High Court in Director of IT v. Lovely Bal Shiksha Parishad is totally misplaced. Since the assessee had neither pleaded before any authorities below nor placed on record any material before any of the authorities below to show that there was no change of facts during the period, the exemption was (not) granted to the assessee. Hence, even this contention of the assessee is found to be without any merit.
12. Another contention raised by the assessee is that the estimation of net profit by the authorities is without any basis. As is found from the record the AO assessed the net profit @ 8 per cent of the receipt relying upon the net profit declared by certain other similarly placed labour contractors for the year in question. This estimation was required because the books of account of the assessee had been rejected under Section 145(3) of the Act. The estimate made by the AO was upheld by the CIT(A). However, the Tribunal while partly accepting the plea of the assessee reduced the net profit rate from 8 per cent to 6 per cent of the gross receipt. The contention of the counsel for the assessee is that this Court should substitute its own opinion on the rate of net profit as in some similar cases, the net profit rate upheld by the Tribunal was at 3 per cent of the gross receipt.
13. We are afraid that this would not fall within the domain of jurisdiction vested in this Court under Section 260A of the Act while hearing the present appeal. Even if this Court may have some different opinion for estimation, but still substitution thereof will not be the right course. As is found from the facts, the AO had estimated the net profit rate at 8 per cent relying upon declaration made by some similar other labour contractors whereas the assessee had relied upon another order of the Tribunal where the net profit was assessed at 3 per cent. The Tribunal while rejecting the contention of the assessee had granted substantial relief to the assessee by reducing the net profit rate to 6 per cent which is just near to the average of 8 per cent and 3 per cent taken together.
14. So in our opinion, the Tribunal has already granted substantial relief to the assessee to the extent of reduction in the net profit by 25 per cent as compared to what was estimated by the AO and we do not find any good reason to substitute our opinion or estimation for that matter.
15. The law as to what amounts to substantial question of law is now well settled. The guiding principles, which are to be kept in view, while entertaining an appeal under Section 260A of the Act, are well defined in a catena of judgments of Hon'ble the Supreme Court and this Court. The same being :
(a) An appeal under Section 260A of the Act cannot be entertained unless a substantial question of law arises for consideration by the High Court.
(b) To be substantial, a question of law must be debatable and must have a material bearing on the decision of the case and the rights of the parties. Where a question of law is fairly arguable or where there is a difference of opinion on the question of law, the same has to be treated as a substantial question of law.
(c) A point of law which admits of no two opinions may be a proposition of law but cannot be treated as a substantial question of law.
(d) If the question raised in the appeal is already settled by the highest Court of the country or the jurisdictional High Court, then the same cannot be regarded as a substantial question of law. Similarly, if the general principles to be applied in determining the question are well settled and the only issue relates to application of those principles to the particular facts of the case, then no substantial question of law can be said to arise in the appeal.
(e) If the conclusions recorded by the Tribunal in the particular facts of the case are plausible, then it would not be a case of substantial question of law.
(f) The finding of fact recorded by the AO or the first appellate authority or the Tribunal cannot be disturbed by the High Court in exercise of powers under Section 260A of the Act unless such finding is perverse or is such which no person of reasonable prudence could arrive at in the given facts of the case.
[See pp. 338-339 in CIT v. Ms. Monica Oswal .
16. Examining the case of the appellant on the above guiding principles, we do not find that the issues raised by the appellant in the appeal fall in any of such parameters. The findings are clearly findings of fact recorded concurrently by all the authorities. Issues raised by the appellant are not even the question of law, what to term these substantial questions of law.
In view of above, we do not find any merit in the appeal and dismiss the same.