The Principal Commissioner Of Income Tax-Iindore v. Akash Vijayvargiya

HIGH COURT OF MADHYA PRADESH : BENCH AT INDORE D.B.: HON'BLE MR. S. C. SHARMA ANDHON'BLE MR. ALOK VERMA, JJ INCOME TAX APPEAL No. 58 / 2017 THE PRINCIPAL COMMISSIONER OF INCOME TAX-IINDORE Vs. AKASH VIJAYVARGIYA * * * * * O R D E R(06/09/2017) PER : S. C. SHARMA, J :- The present appeal has been filed by the Principal Commissioner of Income Tax, being aggrieved by order dated 6/9/2011 passed by the Income Tax Appellate Tribunal, Bench at Indore, in I.T.A.No. 15/Ind/2015 (Revenue's Appeal) for the assessment year 2011-2012. Facts of the case reveal that the respondent – assessee filed his e-Return of income on 16/9/2011 declaring total income of Rs.16,37,760.00. The assessee derives income from salary and business. His case was selected for scrutiny and assessment was completed u/S. 143(3) of the the Income Tax --- 2 --- Act, 1961 on 29/3/2014 with total assessed income of Rs.1,47,54,743.00 as against the return income of Rs.16,37,760.00. The assessing Officer made an addition of Rs.1,31,16,983/- on account of unexplained expenditure u/S. 69C of the the Income Tax Act, 1961 towards food and catering at the time of marriage of the assessee. The respondent – assessee being aggrieved by the assessment order dt. 29/3/2014 preferred an appeal before the Commissioner of Income Tax Appeal-1, Indore and the learned Commissioner by order dt. 29/9/2014 partly allowed the appeal of the assessee and deleted addition of Rs,1,02,50,000.00. The appellate Authority on the basis of number of invitation cards printed, estimated the number of guests attending the function, approximately 20000 persons, estimated catering expenses of Rs.40 lacs and after reducing expenses already disclosed by the assessee maintained addition to the extent of Rs.28,66,983.00 against Rs.1,31,16,983.00 made by the Assessing Officer, meaning thereby, a relief of Rs.1,02,50,000/- was granted to the assessee – respondent. The Income Tax Department filed an --- 3 --- appeal against the order of Commissioner of Income Tax (Appeal) before the Income Tax Appellate Tribunal and a cross objection was filed by the assessee. The Income Tax Appellate Tribunal, has dismissed the appeal of the Department and has allowed the cross-objection of the assessee. The Income Tax Appellate Tribunal has affirmed the findings of the Commissioner of Income Tax (Appeal) about the estimate of number of persons attending the function which was based upon the invitation cards printed and distributed. While considering the expenses on catering the Income Tax Appellate Tribunal has considered and accepted the assessee's contention that the assessee's (respondent) family members are in the same line of business and they are running a restaurant in the name of 'Vrindavan' and, therefore, there was no such expenditure as estimated by the CIT(A). The Income Tax Appellate Tribunal in paragraph 6 of the judgment has held as under: 6.We have heard both the sides. Looking to the facts and circumstances of the case, we find that the learned CIT(A) has estimated the number of guests at 57,000 on estimate basis but the assessee has submitted that 9500 visiting cards were distributed and as such at least 19000 6.We have heard both the sides. Looking to the facts and circumstances of the case, we find that the learned CIT(A) has estimated the number of guests at 57,000 on estimate basis but the assessee has submitted that 9500 visiting cards were distributed and as such at least 19000 persons must have attended. Therefore, he has calculated and relief was granted but we are of the view that the assessee has given calculation that the assessee has provided entire material for preparation of food and the assessee is having experience of preparation of food. The family members of the assessee are running a restaurant in the name of 'Vrandavan', hence, there may not be much expenditure involved in catering the guests. In our opinion, the expenditure depends upon the items being served to the guests which may be of very high quality or very low quality. Since the assessee himself runs a restaurant 'Vrindavan' there is always a possibility of incurring less expenditure on the food items. We, therefore, confirm the findings of the learned CIT(A) on the issue and dismiss this ground of the appeal of the revenue. This Court has carefully gone through the order passed by the Assessing Officer, The Commissioner of Income Tax (Appeals) as well as the order of the Income Tax Appellate Tribunal. The Revenue has filed the present appeal u/S. 260 of the the Income Tax Act, 1961 on the following substantial questions of law : (1)Whether on the facts and in the circumstances of the case and in law the ITAT, was justified in upholding the decision of the CIT(A) while decision of CIT(A) as regards acceptance of affidavit without giving reasonable opportunity to counter the AO is contravention of provision of Rule 46A of the Income Tax Rule, 1962 ? (2)Whether on the facts and in the circumstances of the case and in law, the ITAT, was justified in allowing the relief on the cross objection filed by the assessee and restricting the addition to Rs.1,00,000/- as against Rs.28,66,983/- confirmed by learned CIT(A) u/S. 69C of the Act which is contrary to facts on record ? It is pertinent to note that so far as the first question regarding contravention of the provisions of Rule 46A of the IT Rules, 1962 on account of failure of CIT(A) to grant opportunity to AO before accepting affidavit is concerned, since no such issue was raised by Department before ITAT, the said question cannot be raised first time in present appeal u/s 260A of the IT Act . In this respect learned counsel for the assessee has drawn attention of this Court towards Para 5 of the ITAT’s order where ITAT has noted the arguments of departmental representatives, who has in fact, admitted that AO had made the addition in question on the basis of estimate about the number of persons attending the function . Thus, the question regarding admissibility of affidavit u/R. 46A has neither been raised nor argued by Department before the ITAT and the said question is being raised for the first time in the present appeal. It has been contended by the learned counsel for the respondent - assessee that the legal position on this aspect as to whether a question can be raised for the first time in an appeal to High --- 6 --- --- 6 --- Court is well settled by the judgment delivered by the Hon'ble Supreme Court in the case of Santosh Hajari Vs.Purshottam Tiwari reported in (2001) 251 ITR 84. To be a question of law ‘involved in the case’ there must be first a foundation for it laid in the pleading and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. Any entirely 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 . Reliance has also been placed upon the judgment delivered in the case of Sista's (P) Ltd.,Vs. CIT-2reported in (2012) 211 Taxmann 244 (Bom) and in the case of CIT Vs. Tata Chemicals Ltd., reported in (2002) 256 ITR 395 and in the case of Alok Todi & anotherVs. CIT reported in (2011) 339 ITR 102 (Cal). As regards the other question raised by the appellant Department, the same relates to the ITAT’s decision of allowing assesee’s cross objections filed against the decision of CIT(A) maintaining the addition of Rs 28,66,983/- u/s 69C of the Act . In this regard the contention of the respondent / assessee is that the decision of ITAT in this respect about the estimation of food and catering expenses is based entirely upon the findings recorded by it in Para 6 of its order, wherein after affirming the CIT(A)’s estimation about the number of guests attending the function, the ITAT has taken into consideration the family background of appellant regarding running of a restaurant and on that basis the ITAT has restricted the addition to Rs 1,00,000/-. The findings of the ITAT regarding the family background of the appellant are findings of fact and appreciation of attending circumstances regarding possibility of lower expenses on catering. The ITAT’s decision affirming the decision of CIT(A) cannot therefore be said to be erroneous or perverse. Moreover, the question about number of guests attending the ceremony and the quantum of expenditure incurred on the ceremony are both questions of facts requiring evidence and / or material to support any addition made on that account. In the present case, the sequence of events narrated above shows that the AO made addition purely on the basis of his wild guess work about number of persons attending the functions without bringing on record any material to support the same. In the appeal before CIT(A) ,the CIT(A) disapproved the estimate of AO about number of persons attending functions as without any basis and thereafter considering number of invitation cards printed and --- 8 --- distributed made an estimate about number of guests attending the function and further estimated the expenses on catering and food. Thus, neither the AO nor CIT(A) had gathered any material about actual number of guests attending functions or about the actual expenditure incurred on food and catering and both the orders were based purely on estimate basis . Under these circumstances in absence of any evidence / material to support the addition in question, the ITAT is fully justified in deleting the addition by maintaining a nominal addition of Rs 1,00,000/- . Since the finding of ITAT in this respect are not under challenge, the ITAT’s decision based on such finding being proper and correct does not warrant any interference and no substantial question of law arises in the case. distributed made an estimate about number of guests attending the function and further estimated the expenses on catering and food. Thus, neither the AO nor CIT(A) had gathered any material about actual number of guests attending functions or about the actual expenditure incurred on food and catering and both the orders were based purely on estimate basis . Under these circumstances in absence of any evidence / material to support the addition in question, the ITAT is fully justified in deleting the addition by maintaining a nominal addition of Rs 1,00,000/- . Since the finding of ITAT in this respect are not under challenge, the ITAT’s decision based on such finding being proper and correct does not warrant any interference and no substantial question of law arises in the case. Learned counsel for the respondent submits that an appeal u/s 260A is maintainable only if the case involves substantial question of law and in the instant case since no substantial question of law is involved, the appeal itself is not maintainable because the decision of ITAT is based purely upon findings of fact regarding absence of any evidence with regard to number of persons attending the functions. The CIT(A) has recorded a specific finding that the AO’s estimate about number of persons attending the functions was without any basis. Such finding which is a finding of fact has been affirmed by ITAT. Needless to say that the question as to how many persons attended the function is purely a matter of fact requiring evidence / material about the same. Similarly the issue about expenditure incurred on marriage is also a question of fact to be decided on the basis of material / evidence about actual expenses incurred as such question whether the Respondent has actually incurred the expenses or not is also a question of fact . The decision of ITAT is thus based on the findings on these issues which are not under challenge in this appeal at the instance of revenue. The legal position in this respect is well settled by the decisions of Apex Court that in an appeal u/s 260A findings of ITAT cannot be disturbed and there is no scope for interference by this Court with a finding recorded, when such can be treated as a finding of fact as held by the Hon'ble apex Court in the case of M.Janardan Rao Vs. Joint CIT reported in (2005) 273 ITR 50 and the same reads as under : A finding of fact can give rise to question of law only in the event finding is based on no evidence and/or while arriving at the said findings, relevant, admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence, or when evidence has been misread. A similar view has been taken by the Hon'ble Supreme Court in the case ofChandna Impex Pvt Ltd VsCommissioner of Customs, New Delhireported in (2011) 269 ELT 433. In the present case, the position is just reverse that the appellate authorities have set aside the order of AO for want of evidence for estimation of number of persons attending functions. The estimation was entirely based on his guess work without any material to support the same. Finding regarding absence of evidence / material to support the estimation is undoubtedly a finding of fact arrived by CIT(A) and affirmed by ITAT which is not even under challenge. The above principle has been followed and applied by this Court in the case of Kantilal Prabhudas PatelVs DCITreported in (2005) 277 ITR 504, wherein it is held as under : Any factual finding once recorded and consistently upheld by the Tribunal is binding on the high Court while hearing appeal u/s 260A of IT Act, 1961 . It is only when it is noticed that the finding is de-hors the evidence or against any provision of law or perverse to its extreme , that no judicial man can ever reach such a conclusion , that a case for interference in an appeal u/s 260A will be made out. Any factual finding once recorded and consistently upheld by the Tribunal is binding on the high Court while hearing appeal u/s 260A of IT Act, 1961 . It is only when it is noticed that the finding is de-hors the evidence or against any provision of law or perverse to its extreme , that no judicial man can ever reach such a conclusion , that a case for interference in an appeal u/s 260A will be made out. Learned counsel for the respondent submits that the legal position about the estimation is thus well settled by above decision by the Apex Court as such the concurrent decisions and the findings of both the appellate authorities ie., CIT(A) and the ITAT are therefore in conformity with the law laid down by the Apex Court and the ITAT is,therefore, correct in law in coming to the conclusion that the addition is unsustainable in law. Such decision of the Appellate Tribunal therefore, does not involve any question --- 11 --- of law / substantial question of law. The Apex Court in the case ofJ.J. Enterprises v/s CITreported in (2002) 254 ITR 216, wherein the case before ITAT had set aside the addition as unsustainable because it was made ‘on the basis of pure guess work’. The Apex Court held that the finding of Tribunal is one of fact in respect of which the Tribunal’s conclusion was final and no question of law arose out of the said decision. Reliance has also been placed upon the decision of the Delhi High Court in case of Vinay Kumar Modi V/s CITreported in (2005) 272 ITR 91 where arbitrary estimate of the guest attending the function made by AO and addition made on the basis of the same without proper material which was affirmed by ITAT was held to be improper by High Court . The Delhi High Court in the case of CIT v/s LubetecIndia Ltdreported in (2009) 311 ITR 175, has held that it is quite clear what is postulated in Section 69C of the Act and first of all the assessee must have incurred that expenditure and thereafter if the explanation offered by the assessee about the source of such expenditure is not found satisfactory by the assessing officer, the amount may be added to his income. In the present case there was nothing to show that the expenditure in fact was incurred by the assessee and the Tribunal noted that the AO had not made --- 12 --- any enquiry to find out whether such expenditure was actually incurred by the assessee. In such circumstances the High Court came to conclusion that no substantial question of law arose out of the order of Tribunal. Similarly the Bombay High Court in case of CIT V/s VideoconInternational Ltdreported in (2015) 229 Taxman 412 dismissed the appeal of revenue filed against the decision of ITAT deleting the addition made by AO u/s 69C on the basis of some statement without any further evidence about the fact of actual expenditure . Lastly, learned counsel for the respondent has placed reliance upon the decision of Madras High Court in the case of CIT V/s R Ganesh (minor)reported in (2005) 272 ITR 610 on the question of scope of appeal u/s 260A of the IT Act, 1961. According to their Lordships’ Section 260A does not enable parties to file an appeal, if they are aggrieved, as against the factual finding rendered by the Appellate authority. It has been further held that when the appellate authority have rendered factual finding that the order of AO was not correct, the finding that the addition was unwarranted being based upon no evidence, no substantial question of law is involved in such a case . Keeping in view the aforesaid, this Court is of the considered opinion that the orders passed by CIT(A) and the ITAT in the light of the above settled legal position, does KR --- 13 --- Keeping in view the aforesaid, this Court is of the considered opinion that the orders passed by CIT(A) and the ITAT in the light of the above settled legal position, does KR --- 13 --- not warrant any interference, the question as to how many persons attended the marriage function and the question about determination of such number of persons is undoubtedly a question of fact and the decisions of the Appellate authority deciding such questions clearly involves factual issues and does not involve any substantial question of law. Again the question whether any addition u/s 69C is warranted in the facts and circumstances of the case also revolves around factual findings and the decision of the ITAT that no addition is warranted in the facts and circumstances of the case does not involve any substantial question of law. Accordingly, the present appeal filed by the in limine. Department / Revenue is dismissed (S. C. SHARMA)(ALOK VERMA)J U D G EJ U D G E