TATA COFFEE LIMITED vs THE DEPUTY COMMISSIONER OF INCOME TAX

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 1ST DAY OF OCTOBER 2020

PRESENT

THE HON’BLE MR. JUSTICE ALOK ARADHE

AND

THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD

I.T.A. NO.46 OF 2015 BETWEEN:

TATA COFFEE LIMITED NO.57, RAILWAY PARALLEL ROAD KUMARA PARK WEST BANGALORE – 560 020. ... APPELLANT (BY SRI. ANKUR PAI, FOR SRI. K.R. VASUDEVAN, ADVS.)

AND:

THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 12(4), 14/3, 4TH FLOOR NRUPATHUNGA ROAD RASTROTHANA BHAVAN OPP. RBI, BANGALORE – 560 001. ... RESPONDENT (BY SRI. K.V. ARAVIND, ADV.) - - -

THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 28.08.2014 PASSED IN ITA NO.1113/BANG/2012 FOR THE ASSESSMENT YEAR 2005-06, PRAYING THAT THIS HON’BLE COURT MAY BE PLEASED TO: (I) FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE. (II) ALLOW THE APPEAL AND SET ASIDE THE COMMON ORDER OF THE INCOME TAX ITAT PASSED IN ITA

NO.1113/BANG/2012 RELATING TO ASSESSMENT YEAR 2005-06 DATED 28.08.2014 TO THE EXTENT OF THE ISSUES RAISED AS ABOVE.

THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the assessee. The subject matter of the appeal pertains to the Assessment year 2005-06. The appeal was admitted by a bench of this Court vide order dated 31.03.2015 on the following substantial questions of law: (i) Whether on the facts and circumstances of the case, the ITAT is incorrect in upholding the adhoc disallowance of the expenditure by ignoring that these expenses were wholly and exclusively incurred for the business of the appellant? (ii) Whether the respondent was justified in deciding on the reasonability of the expense without giving any finding or

proper reasons for questioning the reasonability of the expenses?

Facts leading to filing of the appeal briefly stated are that the assessee is a public limited company engaged in cultivation, process and export of coffee. The assessee filed the return of income on 29.10.2005 for Assessment Year 2005-06 declaring total income of Rs.8.22,13,273/-. The Assessing Officer selected the case of the assessee for scrutiny and notice under Section 143(2) of the Act was issued. The Assessing Officer by an order dated 30.11.2007 disallowed claims viz., treating the income on sale of shade trees as business income and not a capital asset, disallowance of claim under Section 14A, disallowance of expenses in marketing division, adhoc disallowance of miscellaneous expenses at Toopran division and disallowance of entertainment expenses etc. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 29.06.2012 partly

allowed the appeal. Being aggrieved, the assessee as well as the revenue field the appeals before Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). The Tribunal by an order dated 28.08.2014 partly allowed both the appeals. Being aggrieved, the assessee is in appeal before us.

Learned counsel for the assessee while inviting our attention to paragraphs 22, 23 and 24 of the order passed by the Tribunal submitted that the basis of disallowance has not been mentioned by the Tribunal. It is further submitted that the Tribunal has proceeded on the assumption that the vehicles must have been used for personal use by the assessee. It is also urged that under Section 37(1) of the Act, there cannot be adhoc disallowance of a claim and in case, the Assessing Officer is not satisfied, he can reject the claim in entirety under Section 145(3) of the Act. In support of aforesaid submission, learned counsel for the assessee has placed reliance on decision of the Supreme Court in

‘COMMISISONER OF INCOME-TAX VS. WALCHAND AND CO. P. LTD.’, (1967) 65 ITR 381 (SC) as well as decision of this court in ‘INGERSOLL RAND (INDIA) LTD. VS. THE COMMISSIONER OF INCOME-TAX-I AND ANR.’, I.T.ANO.6/2011 AND CONNECTED MATTERS DATED 11.03.2020.

On the other hand, learned counsel for the revenue has submitted that the burden is on assessee to prove the fact that the amount was expended for business purposes. It is further submitted that all the authorities have recorded findings of fact on the basis of meticulous appreciation of evidence on record and the assessee has not been able to point out any perversity in the findings of the fact. It is also urged that adhoc disallowance is permissible under the accounting principle. It is also urged that the matter stands concluded by findings of fact and no substantial question of law arises for consideration in this appeal.

We have considered the submissions made by learned counsel for the parties and have perused the record. After having noticed the statutory provisions, we may take note of the well settled legal principles. It is the cardinal principle of law that tribunal is fact finding authority and a decision on facts on the tribunal can be gone into by the High Court only if a question has been referred to it, which says the finding of the tribunal is perverse. [SEE: ‘SUDARSHAN SILKS & SAREES VS. CIT’, 300 ITR 205 SCC @ 211 and ‘MANGALORE GANESH BEEDI WORKS VS. CIT’, 378 ITR 640 (SC) @ 648]. A three judge bench of the Supreme Court in ‘SANTOSH HAZARI VS. PURSHOTTAM TIWARI’,

(2001) 3 SCC 179 while dealing with the expression ‘to be a question of law involving in the case’ held that ‘to be a question of law involving in the case’, there must be first a foundation for it laid in pleadings and the questions emerged from sustainable findings of fact arrived at by courts of fact and it must be necessary to

decide that question of law for a just and proper decision of the case. It has been held that entirely a new point raised for the first time before the High Court is not a question involved in a case unless, it goes to the root of the matter. In ‘HERO VINOTH (MINOR) VS. SESHAMMAL’, (2006) 5 SCC 545 while dealing with the scope of Section 260A of the Act, it was held that this court will not interfere with findings of the court, unless the courts have ignored material evidence or acted on no evidence or have drawn wrong inferences from proved facts by applying the law erroneously or the decision is based on no evidence.

In the light of aforesaid well settled legal position, we may advert to the facts of the case. From perusal of para 22 of the order passed by the Tribunal, it is evident that the Tribunal has notice that Assessing Officer has found that details of expenditure incurred by the assessee are not directly relatable to each heads. The Assessing Officer has bifurcated the expenditure

claimed by the assessee under various heads and then pointed out why expenses meant for a particular head has been debited under a different head viz., other marketing expenses. However, the assessee failed to give any reply to this aspect. The Commissioner of Income Tax (Appeals) has re appreciated the evidence and has observed that quantification of disallowance is on the higher side and therefore, the disallowance has been made on adhoc basis and has been restricted to Rs.25 Lakhs. Similarly, the Tribunal in paragraph 24 has found that the assessee has not maintained log book of the vehicles exhibiting their exclusive usage therefore, it has held that Commissioner of Income Tax (Appeals) has rightly arrived at the conclusion that possibility of user other than business purposes cannot be ruled out and therefore, 10% of the disallowance out of the total expenses has been upheld. Similarly, in paragraph 27 the Tribunal has held that the assessee has not been able to substantiate the claim incurred for expenditure

towards business by producing vouchers. Therefore, the Tribunal has upheld the order passed by the Commissioner of Income Tax (Appeals).

Learned counsel for the assessee was unable to point out any perversity in the findings of fact, which has been recorded by the Assessing Officer, Commissioner of Income Tax (Appeals) as well as the Tribunal. It is pertinent to mention her that even in the substantial questions of law no perversity has been averred. The scope of interference by this court in exercise of power under Section 260A of the Act is well settled. This court in exercise of powers under Section 260A of the Act would interfere with the findings of the fact provided the same are shown to be perverse. In the instant case, the findings recorded by all the authorities are based on meticulous appreciation of evidence on record which by no stretch of imagination can be said to be perverse. The matter stands concluded by findings of fact. Therefore, we hold that no substantial question of

law arises for consideration in this appeal.

In the result, the same fails and is hereby dismissed.

Sd/- JUDGE

Sd/- JUDGE ss

TATA COFFEE LIMITED vs. THE DEPUTY COMMISSIONER OF INCOME TAX