COMMISSIONER OF INCOME TAX vs. M/S.GANESH TRADING CO.,

ITR/102/1996HC GujaratGJHC24021782199604 October 2006Author: HONOURABLE MR. JUSTICE D.H.WAGHELA,HONOURABLE MR. JUSTICE R.S.GARG4 pages
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What were the facts?

The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench 'B', at the instance of the Revenue, referred a question of law to the High Court of Gujarat under section 256(1) of the Income Tax Act, 1961. This reference arose from Income Tax Appeals No. 646, 3899, and 5603/Ahd/1991 concerning Assessment Years 1984-85, 1985-86, and 1986-87. The core issue was whether the ITAT was correct in deleting the clubbing of income of three sister concerns, namely Tea Trading Company, Bhagwati Traders, and Sahajanand Trading Company, in the hands of the assessee, M/s. Ganesh Trading Co. The Revenue contended that the ITAT's findings were perverse.

What did the High Court hold?

The High Court held that the question of perversity of findings becomes relevant when a court or tribunal reads something not in the record, ignores material evidence, or records a finding shockingly against the preponderance of probability. The scope of interference in a reference under section 256(1) is narrower than in a routine appeal. The Court found that the ITAT had properly appreciated the evidence and recorded its findings in accordance with the law. Therefore, the Tribunal was correct in concluding that the income of the three sister concerns could not be clubbed in the hands of the assessee. The question referred to the Court was answered in the affirmative, against the Revenue.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in deleting the clubbing of income of three sister concerns, namely, (i) Tea Trading Company, (ii) Bhagwati Traders and (iii) Sahajanand Trading Company in the hands of the Assessee? Assessee's Arguments: Not recorded in the judgment. Revenue's Arguments: The Revenue, through its learned Standing Counsel Mr. B.B. Naik, argued that the findings recorded by the ITAT were "perilously bordering perversity." Therefore, the findings could not be approved and required re-appreciation. The Revenue essentially challenged the factual and legal basis of the Tribunal's decision to de-club the income.

Which sections of the Income-tax Act were involved?

Section 256(1)

AI-generated summary — verify with the full judgment below

ITR/102/1996 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 102 of 1996 For Approval and Signature: HONOURABLE MR.JUSTICE R.S.GARG HONOURABLE MR.JUSTICE D.H.WAGHELA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX - Applicant(s) Versus M/S.GANESH TRADING CO., - Respondent(s) ========================================================= Appearance : MR BB NAIK for Applicant(s) : 1, SERVED BY RPAD - (N) for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR JUSTICE R. S. GARG

and

HONOURABLE MR JUSTICE D.H. WAGHELA Date : 04/10/2006 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE R.S.GARG)

1.

Heard Mr B B Naik, l

The order continues below.

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