O/TAXAP/142/2015 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 142 of 2015 ================================================================ COMMISSIONER OF INCOME TAX 1....Appellant(s) Versus AKAR LAMINATORS LIMITED....Opponent(s) ================================================================ Appearance: MRS MAUNA M BHATT, ADVOCATE for Appellant(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE JAYANT PATEL and HONOURABLE MR.JUSTICE S.H.VORA Date : 03/03/2015 ORAL ORDER (PER : HONOURABLE MR.JUSTICE JAYANT PATEL) 1. revenue has preferred present appeal by raising following questions. [A] Whether Appellate Tribunal has substantially erred in remanding issue of disallowance of loss of Rs.2,11,82,046/- to file of Assessing Officer without giving any independent finding and cogent reasons as to how CIT (Appeals)'s finding were incorrect despite Tribunal being final fact finding authority? [B] Whether Appellate Tribunal has substantially erred in remitting issue of disallowance of claim of revenue expenses of Rs.3,10,49,616/- to file of Assessing Officer without giving any independent finding and cogent reasons as to how CIT (Appeals)'s finding were incorrect despite Tribunal being final fact finding authority? Page 1 of 9 HC-NIC Page 1 of 9 Created On Sat Feb 13 12:24:39 IST 2016 O/TAXAP/142/2015 ORDER [C] Whether Appellate Tribunal has substantially erred in disallowance of claim, rebate and reversal of claims of Rs.3,92,66,819/- to file of Assessing Officer without giving any independent finding and cogent reasons as to how CIT (Appeals)'s finding were incorrect despite Tribunal being final fact finding authority? [D] Whether Appellate Tribunal has substantially erred in remitting issue of disallowance of claim of writing off Rs.64,504/- to file of Assessing Officer without giving any independent finding and cogent reasons as to how CIT (Appeals)'s finding were incorrect despite Tribunal being final fact finding authority? [E] Whether Appellate Tribunal has substantially erred in remitting issue of disallowance of Rs.2,25,73,649/- u/s 36(1)(iii) of Act to file of Assessing Officer without giving any independent finding and cogent reasons as to how CIT (Appeals)'s finding were incorrect despite Tribunal being final fact finding authority? [F] Whether Appellate Tribunal has substantially erred in remitting issue of hire charges of Rs.5,24,421/- to file of Assessing Officer following order of co-ordinate Bench of Tribunal for A.Y. 1999-2000? 2. We have heard Mrs. Mauna Bhatt, learned counsel appearing for appellant revenue. 3. On question A, it appears that AO in view of fact that no evidence was produced as it was called upon by AO, he invoked power under section 144 of Income Tax Act (hereinafter referred to as Act ) and then, disallowed claim for gross loss to fullest extent. In appeal before CIT (Appeals), view of AO was concurred, but relevant aspect is that there was no Page 2 of 9 HC-NIC Page 2 of 9 Created On Sat Feb 13 12:24:39 IST 2016 O/TAXAP/142/2015 ORDER examination of material on record in appeal. Tribunal recorded finding at para 9, which reads as under: 9. We have heard rival submissions and perused material on record. We find that AO has noted that assessee was asked to justify claim of loss, which assessee had failed to do. Further, assessee did not produce books of accounts for examination by AO. We also find that even before CIT (A), no material has been placed on record by assessee to substantiate its claim of loss. It is fact that in absence of details entire gross profit has been disallowed by AO which we feel is unjustified. Before us, ld. A.R. has submitted that working of gross profit at paper book page 20 according to which gross profit is at 4.14%. Since, this detail of working needs examination. We therefore, remit issue back to file of AO to verify working and submission of assessee and thereafter, decide issue in accordance with law. Thus, this ground of assessee is allowed for statistical purposes. 4. aforesaid shows that Tribunal having found that gross profit even as per their representative was 4.14%, it was required for AO to verify and matter is therefore, remanded to AO. Tribunal also found fact that in absence of details, entire gross profit could not have been disallowed by AO and Tribunal found such approach on part of AO as unjustified. 5. Learned counsel for revenue submitted that if documents were not produced, AO was justified in disallowing entire gross profit and CIT (Appeals) had rightly conferred with view of AO. She submitted that Tribunal, which is ultimate fact finding authority ought to Page 3 of 9 HC-NIC Page 3 of 9 Created On Sat Feb 13 12:24:39 IST 2016 O/TAXAP/142/2015 ORDER have appreciated evidence on record and ought to have given finding of fact as to what extent, disallowance of loss could be made and instead that, Tribunal has given second innings to assessee, which in her submission, was impermissible. She relied upon decision of this Court in case of Rajesh Babulal Damania Vs. Commissioner of Income Tax reported at 251 ITR 541 (Guj) and therefore, she submitted that appeal deserves consideration on said question raised. 6. In our view, even if notice was issued calling upon assessee to produce certain documents and assessee failed to produce document, power by AO was required to be exercised judiciously to examine and to find out to what extent, disallowance could be made, but it could not be to fullest extent that too without any discussion and on mere ground that assessee failed to produce document in support thereof. aforesaid aspect was not appreciated in appeal and therefore, Tribunal has remanded matter. It is not that in every case, Tribunal may examine material on its own if there is failure to consider material by AO or in appeal by CIT (Appeals). Had it been case where some material was considered and finding was recorded by AO, it may stand on different footing and different consideration. But when no material whatsoever was considered and just adverse inference was drawn in disallowing claim and such was not interfered in appeal, if Tribunal has exercised discretion of remanding matter in view of reasons recorded herein above, such exercise of discretion could not be said to be perverse. We do not find that any substantial question of law Page 4 of 9 HC-NIC Page 4 of 9 Created On Sat Feb 13 12:24:39 IST 2016 O/TAXAP/142/2015 ORDER would arise on such point. 7. attempt to rely upon decision of this Court in case of Rajesh Babulal Damania (supra) is ill-founded, because in said case, CIT (Appeals), at appellate stage, had already examined material and had given finding of facts, which was not appreciated by Tribunal after considering material and therefore, observations were made by this Court in said decision. Such are not fact situation in present case since no material is examined neither by AO nor by CIT (Appeals). Hence, we do not find that substantial question, as canvassed, would arise for consideration in present appeal. 8. On question B, it appears that AO adopted same approach as has been considered by us while considering question A. In appeal before CIT (Appeals), similar consequence has arisen for disallowance. Tribunal at para 19 observed thus: 19. We have heard rival submissions and perused material on record. We find that assessee has not produced any material before AO or CIT (A) in support of his claim. Before us, it is ld. A.R.'s submission that it had already made disalloawance. Since, aforesaid submission has not been examined by AO, we feel that this factual aspect needs reexamination. We, therefore, remit matter back to file of AO for ascertaining factual position. If submission of ld. A.R. Is found correct, then addition made be deleted. assessee is also directed to submit all required details before AO. In case, assessee fails to furnish required details, A.O. Is free to decide matter on basis of material on record. Thus, this ground of assessee is allowed for statistical purposes. Page 5 of 9 HC-NIC Page 5 of 9 Created On Sat Feb 13 12:24:39 IST 2016 O/TAXAP/142/2015 ORDER 9. We find that considering facts and circumstances, as observed by us while considering question A, discretion exercised by Tribunal cannot be said to be perverse, which may call for interference in present appeal before us, which is limited to substantial questions of law. No substantial questions of law would arise as canvassed. 10. On question C, more or less, similar situation has arisen as considered by us while considering question and B, inasmuch as, AO disallowed total claim. In appeal, approach of AO is upheld. Tribunal in further appeal has recorded finding on para 24, which reads as under: 24, We have heard rival submissions and perused material on record. We nd that A.O. while disallowing claim has noted that assessee has failed to submit any details or justification about expenditure. We also find that ClT(A) has also noted that no details were submitted and whether amounts were ever offered as income or not. Before us, it is submitted that issue is covered by decision of Hon bIe Apex Court in case of TRF Ltd. (supra). Since aforesaid submission was not made before lower authorities by assessee, we feel that issue needs re- examination. We, therefore, remit issue back to file of A.O. to decide issue in light of decision of Apex Court in case of TRF Ltd. (supra) and in accordance with law. assessee is also directed to furnish required details promptly to A.O. In case, assessee fails to furnish required details, A.O. shall be free to decide matter on basis of material available on record. Thus, this ground of assessee is allowed for statistical purposes. Page 6 of 9 HC-NIC Page 6 of 9 Created On Sat Feb 13 12:24:39 IST 2016 O/TAXAP/142/2015 ORDER 11. aforesaid shows that Tribunal having found that examination was required on part of AO to decide issue in light of decision of Apex Court in case of TRF Limited (supra) and therefore, discretion has been exercised for sending matter back to AO. Such exercise of discretion cannot be said to be perverse. No substantial questions of law would arise for consideration as canvassed. 12. On question D, AO disallowed claim in absence of evidence produced. In appeal before CIT (Appeals), no interference was made to approach of AO. Tribunal in further appeal, observed at para 29 as under: 29. We have heard rival submissions and perused material on record. We nd that A.O. while disallowing claim has noted that assessee has failed to submit any details or justification about expenditure. We also find that ClT(A) has also noted that no details were submitted and whether amounts were ever offered as income or not. Before us, it is submitted that issue is covered by decision of Hon ble Apex Court in case of TRF Ltd. (supra). Since aforesaid submission was not made before lower authorities by assessee, we feel that issue needs re- examination. We, therefore, remit issue back to le of A.O. to decide issue in light of decision of Apex Court in case of TRF Ltd. (supra) and in accordance with law. assessee is also directed to furnish required details promptly to A.O. In case, assessee fails to furnish required details, A.O. shall be free to decide matter on basis of material available on record. Thus, this ground of assessee is allowed for statistical purposes. 13. aforesaid shows that Tribunal having found that Page 7 of 9 HC-NIC Page 7 of 9 Created On Sat Feb 13 12:24:39 IST 2016 O/TAXAP/142/2015 ORDER matter was required to be examined in light of decision of Apex Court in case of TRF Limited (supra), discretion has been exercised relegating matter to AO. We do not find that exercise of discretion could be said as perverse. No substantial questions of law would arise as canvassed. 14. On question E, AO disallowed claim for deduction of interest. In appeal before CIT (Appeals), no interference was made to approach of AO. Whereas Tribunal in further appeal observed at para 34 as under: 34. We have heard rival submissions and perused material on record. Before us, Id. A.R. has submitted that investments were made out of interest free funds and not borrowed funds and on other hand, we find that ClT (A) has given finding that assessee does not have any surplus funds. In view of contrary facts, we are of view that factual position needs to be re examined. We, therefore, remit matter to file of A.O. to verify factual position and more so about availability of free funds at time of making investments and thereafter decide matter in accordance with law. We also direct assessee to furnish all required details or any other details in its support promptly to A.O. In case, assessee fails to furnish required details, A.O. shall be free to decide matter on basis of material available on record. Thus, this ground of assessee is allowed for statistical purposes. 15. aforesaid shows that Tribunal found that factual aspects including that of availability of free fund at time of making investment was required to be Page 8 of 9 HC-NIC Page 8 of 9 Created On Sat Feb 13 12:24:39 IST 2016 O/TAXAP/142/2015 ORDER examined and therefore, discretion has been exercised by Tribunal to send matter back to AO. We do not find that discretion has been perversely exercised as canvassed. No questions of law would arise for consideration. 16. On last question F, CIT (Appeals) as well as Tribunal has gone by earlier decision including that of Tribunal for Assessment Year 1999-2000. learned counsel for revenue has brought to our notice that decision of Tribunal, which has been relied upon for Assessment Year 1999-2000, was carried before this Court in Tax Appeal No.896 of 2009 decided on 21.2.2011 and said appeal has been dismissed, as no substantial question of law was found for consideration by this Court. When this Court has already examined said aspect on above referred tax appeal, we do not find that any substantial questions of law would arise for consideration as sought to be canvassed. 17. In view of above, we do not find any case of interference in impugned order passed by Tribunal. appeal being meritless is dismissed. (JAYANT PATEL, J.) (S.H.VORA, J.) shekhar Page 9 of 9 HC-NIC Page 9 of 9 Created On Sat Feb 13 12:24:39 IST 2016 Commissioner of Income-tax 1 v. Akar Laminators Limited