PRINCIPAL COMMISSIONER OF INCOME TAX 2 vs. INDO COLCHEM LTD

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TAXAP/1072/2018HC GujaratGJHC24049743201828 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 is entirely fact-based. The Tribunal had provided detailed reasons and referred to the evidence on record to support its decision to delete the addition. The Court found that no substantial question of law arose from the ITAT's order. Therefore, the Tax Appeal filed by the Revenue was dismissed. The operative direction was the dismissal of the appeal, upholding the ITAT's deletion of the addition of Rs. 36,73,466. No issues were expressly left undecided.

What were the facts?

The Revenue, Principal Commissioner of Income Tax 2, is in 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 judgment. The ITAT had deleted an addition of Rs. 36,73,466 made by the Assessing Officer (AO) on account of an alleged unsubstantiated fall in net profit. The Commissioner of Income Tax (Appeals) had previously granted partial relief by deleting a portion of the addition. The AO's original addition was based on a comparison with other industries in the same business showing higher profits. The ITAT's deletion was partly on the ground that the AO had ignored the effect of foreign exchange fluctuations.

What were the issues?

1. Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs. 36,73,466 on account of unsubstantiated fall in net profit during the year under consideration? (Question of law and fact) The Revenue's contention is that the ITAT erred in deleting the addition. The Revenue relies on the fact that other industries in the same business reflected higher profits, implying the assessee's lower profit was not justified. The Revenue's argument is that the AO's action was based on this comparative analysis. The judgment does not record any specific arguments made by the assessee before the High Court, other than the fact that the ITAT had deleted the addition. The ITAT's reasoning for deletion, as stated by the Revenue, was that the AO ignored the effect of foreign exchange fluctuations.

AI-generated summary — verify with the full judgment below

C/TAXAP/1072/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1072 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 question for our consideration: “Whether the Appellate Tribunal has erred in law and   on   facts   in   deleting   the   addition   of Rs.36,73,466/­   on   account   of   unsubstantiated fall   in   net   profit   during   the   year   under consideration?” 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 industries   in   the   same   business   reflect   higher profit.  Commissioner of Income Tax (Appeals) partly deleted   the   addition.     In   further   appeal,   the Page 1 of 2

C/TAXAP/1072/2018 ORDER 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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