PRINCIPAL COMMISSIONER OF INCOME TAX 2 vs. INDO COLCHEM LTD

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TAXAP/1047/2018HC GujaratGJHC24049740201828 August 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the issue was entirely fact-based. The Tribunal had provided detailed reasons and referred to the evidence on record. Consequently, the Court found that no substantial question of law arose for consideration. The appeal was dismissed. The ITAT's decision to delete the addition of Rs. 2,24,64,664/- was upheld by the High Court, implicitly agreeing with the Tribunal's reasoning that the AO had ignored the effect of foreign exchange fluctuations and that the matter was primarily factual. The operative direction was the dismissal of the Tax Appeal.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax 2, filed an appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated March 7, 2018. The appeal concerns the assessment year(s) not explicitly stated in the provided text. The core of the dispute involves the rejection of the assessee's (Indo Colchem Ltd) books of account under Section 145(3) of the Income Tax Act and subsequent additions made to the gross profit. The Commissioner of Income Tax (Appeals) had partially deleted the addition. The ITAT, however, made a complete deletion of the addition, which was stated to be Rs. 2,24,64,664/-, on grounds including the Assessing Officer's failure to consider foreign exchange fluctuations.

What were the issues?

1. Whether the Assessing Officer (AO) correctly rejected the assessee's books of account under Section 145(3) of the Income Tax Act, 1961, due to dissatisfaction with their correctness or completeness? (Question of law and fact) 2. Whether the ITAT erred in law and on facts by deleting the addition of Rs. 2,24,64,664/- made on account of Gross Profit (GP)/Net Profit (NP), which was based on past year's profit? (Question of law and fact) Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The AO correctly rejected the books of account under Section 145(3) as he was not satisfied with their correctness or completeness. The addition of Rs. 2,24,64,664/- on account of GP/NP based on past year's profit was justified. The ITAT erred in deleting this addition. The ITAT's decision to delete the addition was based on the ground that the AO ignored the effect of foreign exchange fluctuations, which the Revenue disputes.

Which sections of the Income-tax Act were involved?

Section 145(3)

AI-generated summary — verify with the full judgment below

C/TAXAP/1047/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1047 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 2 Versus INDO COLCHEM LTD ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA

Date : 28/08/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Revenue is in appeal against the judgment of the Income   Tax   Appellate   Tribunal   dated   07.03.2018 raising following questions for our consideration: “1. Whether the Hon'ble ITAT erred in law and on   facts   by   not   holding   that   the   AO   had correctly   rejected   the   Books   of   Account   u/s 145(3)  of  the  IT  Act  as he  was  not  satisfied about   the   correctness   or   completeness   of   the accounts of the assessee ? 2. Whether the Appellate Tribunal has erred in law   and   on   facts   in   deleting   the   addition   of Rs.2,24,64,664/­ made on account of addition of GP/NP which was based on past year's profit?” 2. The issue pertains to rejection of book reserves and   making   additions   to   the   gross   profit   of   the assessee,  inter­alia,  on   the   ground   that   other Page 1 of 2

C/TAXAP/1047/2018 ORDER industries   in   the   same   business   reflect   higher profit.  Commissioner of Income Tax (Appeals) partly deleted   the   addition.     In   further   appeal,   the Tribunal made complete deletion,  inter­alia,  on the ground   that   the   Assessing   Officer   had   ignored   the effect of foreign exchange fluctuations. 3. Having heard learned counsel for the Revenue and having perused documents on record, we find that the issue is entirely fact based.  The Tribunal has given detailed   reasons   and   referred   to   the   evidence   on record.   No question of law arises. Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH Page 2 of 2

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