COMMISSIONER OF INCOME TAX vs. PATEL PRINTING PRESS

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ITA/172/1998HC GujaratGJHC24024210199829 August 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE ANIL R. DAVE3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the two questions suggested by the Revenue converged on the aspect of whether the firm M/s. Duphant & Company was a benami concern. The Tribunal had allowed the assessee's appeal against the CIT's order under Section 263. The Tribunal found that the assessment order under Section 143(3) was passed by the Dy.CIT (Assessment) on March 31, 1989, after examining the books of accounts, noting purchases of ink, paper, etc., from M/s. Duphant & Company, and applying his mind. The Tribunal concluded that such an order could not be considered erroneous. Furthermore, the Tribunal noted that M/s. Duphant & Company had been in existence since 1983-84 and its income had never been clubbed with the assessee's in the past. The Tribunal reasoned that merely purchasing goods from M/s. Duphant & Company at market rates did not make it a benami concern of the assessee. The High Court agreed that the question of whether M/s. Duphant & Company was benami was purely a question of fact, and the Tribunal's decision did not raise any question of law. Therefore, the Rule was discharged.

What were the facts?

The Revenue sought a direction from the High Court under Section 256(2) of the Income Tax Act, 1961, to the Income Tax Appellate Tribunal (ITAT) to forward a statement of case. The ITAT had, by its order dated February 27, 1997, allowed the appeal of the assessee, Patel Printing Press, against an order passed by the Commissioner of Income Tax (CIT) under Section 263 of the Act. The CIT's order had presumably revised an assessment order passed by the Deputy Commissioner of Income Tax (Assessment) on March 31, 1989, under Section 143(3). The dispute centers on whether a firm, M/s. Duphant & Company, was a benami concern of the assessee.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in cancelling the order passed by the Commissioner of Income Tax under Section 263 of the Act? 2. Whether the Appellate Tribunal is right in law and on facts in not appreciating that in the case of the sister concern, namely, M/s. Duphant & Company, the concerned Assessing Officer had come to a specific finding that the income assessed therein in fact belonged to the present assessee? Assessee's Contentions: The judgment does not record specific contentions made by the assessee. The Tribunal's reasoning suggests that the assessment order under Section 143(3) was passed after due application of mind, considering books of accounts and purchases from M/s. Duphant & Company at market rates, and that M/s. Duphant & Company had existed since 1983-84 without its income being previously clubbed with the assessee. Revenue's Contentions: The Revenue argued that the Tribunal erred in cancelling the CIT's order under Section 263 and in failing to appreciate that the Assessing Officer had found the income of M/s. Duphant & Company to belong to the assessee.

Which sections of the Income-tax Act were involved?

Section 256(2),Section 263,Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX APPLICATION No 172 of 1998

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and

MR.JUSTICE A.R.DAVE ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

-------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus PATEL PRINTING PRESS -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner MR PRANAV G. DESAI for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE A.R.DAVE Date of decision: 29/08/98

ORAL JUDGEMENT

( Per R.K.Abichandani, J.)

The Revenue has suggested the following two

questions seeking a direction on the Income Tax Appellate Tribunal to forward statement of case in respect thereof under Section 256 (2) of the Income Tax Act, 1961:

"

1.

Whether, the Appellate Tribunal is right in law and on facts in cancelling the order passed by the Commissioner of Income Tax under Section 263 of the Act ?

2.

Whether, the Appellate Tribunal is right in law and on facts in not appreciating the fact that in the case of the sister concern, namely, M/s. Duphant & Company the concerned Assessing Officer had come to a specific finding that the income assessed therein in fact belonged to the present assessee ?"

2.

The two questions are suggested virtually to converge on the same aspect as to whether the firm in question was a benami concern. The Tribunal in its order dated 27th February, 1997 allowed the appeal against the order of the C.I.T. made under Section 263 of the Act. After taking into account the rival submissions of the parties, the Tribunal found that the Dy.CIT (Assessment) completed the assessment under Section 143 (3) on 31st March, 1989 after going through the books of accounts and after taking note of the purchases of ink, paper etc. made from M/s. Duphant & Company and after applying his mind. It was held that such an order cannot be called erroneous one as the same was passed in accordance with law. This obviously was a valid reason for interfering with the order made under Section 263 of the Act. The Tribunal itself also noted that M/s. Duphant & Company was in existence ever since 1983-84 and never in the past the income of M/s. Duphant & Company was clubbed with that of the assessee firm. It was observed that, simply because the assessee firm, as in the past, also purchased ink and paper from M/s. Duphant & Company, that too at the prevailing market rates, it will not make M/s. Duphant & Company a firm belonging to the assessee firm or, for that matter, benami of the assessee firm. The question whether the firm M/s. Duphant & Company was benami of the assessee firm is purely a question of fact and the decision of the Tribunal, therefore, does not raise any question of law. Rule is, therefore, discharged with no order as to costs.

(KMG Thilake) *********

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