M/S.SANDEEP AGENCY vs. COMMISSIONER OF INCOME-TAX

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ITA/24/1998HC GujaratGJHC24024062199806 August 1998Author: HONOURABLE MR. JUSTICE C.K.THAKKER,HONOURABLE MR. JUSTICE M.C.PATEL3 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court decided that a substantial question of law arose concerning the first two questions, relating to the nature of the expenditure (wooden partition) and whether the ITAT correctly distinguished the precedent case (CIT v. Mehta Transport Co.). The Court found it sufficient to raise only the first question, as it would encompass the second. Regarding the remaining questions (3 to 9), the Court held that they were essentially based on findings of fact and did not raise a substantial question of law. Therefore, the Court directed the ITAT to refer only question No. 1 for the High Court's opinion. The rule was made absolute to this extent. The Court did not decide on the merits of the disallowance or the addition of cash, but rather on whether these issues warranted reference to the High Court.

What were the facts?

This case involves an application by the assessee, M/s. Sandeep Agency, to the High Court of Gujarat under Section 256(2) of the Income Tax Act, 1961. The assessee sought a direction for the Income Tax Appellate Tribunal (ITAT) to refer certain questions of law for the High Court's opinion. The application concerns assessment years not explicitly stated. The ITAT had previously upheld decisions of lower authorities regarding the disallowance of expenditure and the addition of cash seized during a search and seizure operation. The assessee contested these decisions, arguing they were based on incorrect legal interpretations and a failure to distinguish between different provisions of the Act.

What were the issues?

The Tribunal had to decide whether to refer specific questions of law to the High Court. The primary questions raised by the assessee were: 1. (Q1) Whether the ITAT was correct in upholding the disallowance of Rs. 77,925/- as capital expenditure for wooden partition in leased premises (Section 37 of the Income Tax Act). 2. (Q2) Whether the ITAT was correct in distinguishing the decision in CIT v. Mehta Transport Co. (1986) 160 ITR 35. 3. (Q3) Whether the ITAT was correct in holding that Rs. 37,000/- cash seized during a search under Section 132 was liable to be added as income from undisclosed sources. 4. (Q4) Whether the ITAT was correct in relying on Section 132(5) proceedings to add the impugned amount. 5. (Q5) Whether the ITAT was correct in making the addition under Section 69A, rejecting the assessee's evidence. 6. (Q6) Whether the ITAT failed to distinguish between the presumption under Section 132(4) and Section 69A. 7. (Q7) Whether the ITAT failed to distinguish between proceedings under Section 69A and Section 132(5). 8. (Q8) Whether the ITAT failed to note that Section 69A does not override Section 132(5). 9. (Q9) Whether the ITAT's decision was based on evidence and material on record. Assessee's Contention: The assessee argued that the ITAT's decisions on these matters involved substantial questions of law. The revenue did not record specific arguments in the judgment, but their implicit contention was that no substantial question of law arose, or that the ITAT's findings were correct.

Which sections of the Income-tax Act were involved?

Section 256(2),Section 132(4),Section 132(5),Section 69A,Section 37

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX APPLICATION No 24 of 1998

For Approval and Signature:

Hon'ble MR.JUSTICE C.K.THAKKER and MR.JUSTICE M.C.PATEL ============================================================ 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?

-------------------------------------------------------------- M/S.SANDEEP AGENCY Versus COMMISSIONER OF INCOME-TAX -------------------------------------------------------------- Appearance: MR SN SOPARKAR for Petitioner MR MANISH R BHATT for Respondent No. 1

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

CORAM : MR.JUSTICE C.K.THAKKER and MR.JUSTICE M.C.PATEL Date of decision: 06/08/98

ORAL JUDGEMENT (Per C.K. Thakker, J.)

1.

This is an application filed by the assessee under Section 256 (2) of the Income Tax Act, 1961, for directing the Tribunal to refer the following questions for the opinion of this Court:

"(1) Whether the Tribunal was right in law in upholding the decisions of the authorities below that the expenditure of Rs.77,925/- being expenditure incurred on making wooden partition in the leased premises was rightly disallowed as capital expenditure?

(2) Whether the Tribunal was right in law in holding that the binding decision of the Honourable Gujarat High Court in the case of CIT v. Mehta Transport Co. (1986) 160 ITR 35 was distinguishable?

(3) Whether the Tribunal was right in law in holding that a sum of Rs.37,000/- being the amount of cash seized in course of search and seizure operations under section 132 was liable to be added as applicant's income from undisclosed sources?

(4) Whether the Tribunal was right in law in relying on the proceedings under section 132 (5) of the Act in reaching the conclusion that the impugned amount was liable to be added as applicant's income from undisclosed sources?

(5) Whether the Tribunal was right in law in holding that the impugned addition was properly made under section 69A of the Act rejecting the evidence produced by the applicant in course of assessment proceedings?

(6) Whether the Tribunal has failed to distinguish between the absolute presumption under Section 132 (4) of the Act and rebuttable presumption under Section 69A of the Act?

(7) Whether the Tribunal has failed to draw distinction between the proceedings under Section 69A of the Act and Section 132(5) of the Act?

(8) Whether the Tribunal had failed to take note of the fact that provisions of Section 69A of the Act do not override the provisions of Section 132 (5) of the Act?

(9) Whether the Tribunal's decision to uphold the impugned addition is based on evidence and material on record?"

2.

So far as question No.1 and 2 are concerned, they relate to the nature of expenditure and in our opinion, a question of law does arise from the decision of the Income Tax Appellate Tribunal. However, it will be sufficient to raise question No.1 because it will cover both questions.

3.

So far as the remaining questions No.3 to 9 are concerned, essentially they are based on findings of fact. No question of law, therefore, arises from the decision of the Tribunal.

4.

We, therefore, direct the Tribunal to refer the following question for the opinion of this Court:

The Income Tax Appellate Tribunal, Ahmedabad to refer to this Court the question No.1 as set out in para-5 of this application for opinion of this Court under Section 256 (2) of the Income Tax Act, 1961. 5. The Income Tax Appellate Tribunal, Ahmedabad to refer the above question to this Court under Section 256 (2) of the Income Tax Act, 1961. 6. Rule is made absolute to the above-said extent. No order as to costs. ---

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