THE PR.COMMISSIONER OF INCOME TAX ROHTAK vs. M/S HARISH CHANDRA (INDIA) LTD

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ITA/98/2019HC Punjab & HaryanaPHHC01005186201903 March 2020Bench: MR. JUSTICE AJAY TEWARI,MR. JUSTICE AVNEESH JHINGAN2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the proposed questions of law were not substantial questions of law but were pure questions of fact. The Court noted that the AO had made an addition based on a drastic drop in the net profit ratio, invoking Section 145(3). However, a subsequent remand report found no discrepancies in the books of accounts produced by the assessee. The CIT(A) deleted the addition based on this, and the ITAT upheld the CIT(A)'s order. The High Court found that the core of the dispute revolved around the factual assessment of the books of accounts and the net profit ratio, which were matters of fact. Therefore, the Court concluded that no substantial question of law arose for consideration. The appeal was dismissed on this ground, without delving into the merits of the ITAT's decision or the cited Supreme Court case.

What were the facts?

The Revenue (Pr. Commissioner of Income Tax, Rohtak) filed an appeal against a judgment of the Income Tax Appellate Tribunal (ITAT). The ITAT had rejected the Revenue's appeal, upholding the order of the Commissioner of Income Tax (Appeals) [CIT(A)]. The dispute involved an addition of Rs. 15,53,42,066 made by the Assessing Officer (AO) on account of a difference in the net profit ratio. The AO had invoked Section 145(3) of the Income Tax Act, 1961, citing a drastic drop in the net profit rate. The assessee is M/s Harish Chandra (India) Ltd., Rohtak. Following the AO's assessment, a remand was ordered, and the remand report found no discrepancies in the books of accounts produced. The CIT(A) deleted the addition, and this deletion was upheld by the ITAT.

What were the issues?

The High Court was presented with three proposed questions of law: 1. Whether the ITAT was correct in upholding the CIT(A)'s deletion of an addition of Rs. 15,53,42,066, made by the AO due to a difference in the net profit ratio (invoking Section 145(3) of the Income Tax Act, 1961). 2. Whether the ITAT was correct in upholding the CIT(A)'s deletion of the addition without adjudicating the issue of the net profit ratio, by merely relying on a remand report where the issue was not examined. 3. Whether the ITAT was correct in upholding the CIT(A)'s deletion of the addition, without appreciating the Supreme Court's decision in S.N. Namasivyam Chettiar vs. CIT (38 ITR 579 SC), which allows estimation of profit in the absence of vouchers or quantitative stock tally. The Revenue argued that the ITAT erred in upholding the deletion. The Revenue contended that the AO's addition was justified due to the drastic drop in the net profit ratio and that the ITAT should have considered the Supreme Court's precedent allowing profit estimation. The judgment does not record specific arguments from the assessee.

Which sections of the Income-tax Act were involved?

Section 145(3)

AI-generated summary — verify with the full judgment below

ITA No.98 of 2019 (O&M) -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Sr. No.102 ITA No.98 of 2019 (O&M) Date of Decision : 03.03.2020 The Pr. Commissioner of Income Tax, Rohtak ...... Appellant Versus M/s Harish Chandra (India) Ltd., Rohtak

...... Respondent CORAM : HON'BLE MR.JUSTICE AJAY TEWARI HON'BLE MR.JUSTICE AVNEESH JHINGAN *** Present : Mr. Sandeep Goyal, Advocate for the appellant. *** AJAY TEWARI, J. (ORAL) 1. This appeal has been filed against the judgment of the Tribunal whereby the appeal filed by the Revenue was rejected. 2. The following questions of law have been proposed:- 1. Whether the Ld. ITAT was right in law as well as on facts in upholding the order of Ld. CIT(A) in deleting the addition of Rs.15,53,42,066/- made by the AO on account of difference in the net profit ratio of 4.40% as compared to the preceding year by invoking the provisions of Section 145(3) of the Income Tax Act, 1961. 2. Whether the Ld. ITAT was right in law as well as on facts in upholding the order of Ld. CIT(A) in deleting the addition of Rs.15,53,42,066/- made by the AO without adjudicating the issue of net profit ratio and simply relying upon the remand ASHISH 2020.03.06 10:44 I attest to the accuracy and authenticity of this document Chandigarh

ITA No.98 of 2019 (O&M) -2- report whereas in the remand report, the issue was not examined at all. 3. Whether the Ld. ITAT was right in law as well as on facts in upholding the order of Ld. CIT(A) in deleting the addition of Rs.15,53,42,066/- made by the AO, without appreciating the decision of Hon'ble Supreme Court in the case of S.N. Namasivyam Chettiar vs. CIT (38 ITR 579 (SC) wherein it was held that in absence of vouchers/quantitative tally of stock, profit can be estimated by the ITO. 3. Brief facts are that the Books of Accounts of the assessee were found to be doubtful on the ground that Net Profit rate had dropped drastically in the preceding years. Subsequently, a remand was ordered and in the remand report the Books of Accounts produced were checked but no finding of any discrepancy was ascertained. It was in these circumstances that the Commissioner allowed the appeal of the assessee and that finding was upheld by the Tribunal. 4. In this view of the matter, the questions proposed are pure questions of fact and not questions of law much less substantial questions of law. 5. Consequently, the appeal is dismissed. 6.

Since the main case has been decided, the pending C.M. Application, if any, also stands disposed of. ( AJAY TEWARI ) JUDGE ( AVNEESH JHINGAN ) March 03, 2020 JUDGE ashish Whether speaking/reasoned Yes/No Whether Reportable : Yes/No ASHISH 2020.03.06 10:44 I attest to the accuracy and authenticity of this document Chandigarh

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