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THE BANDI COOPERATIVE LABOUR & CONSTRUCT v. COMMISSIONER OF INCOME TAX, CENTRAL REVE - ITA-20-2006  RD-P&H 3342 (22 May 2006)
I.T.A. NO. 20 OF 2006
DATE OF DECISION: 16.05.2006
THE BANDI COOPERATIVE LABOUR & CONSTRUCTION SOCIETY ....APPELLANT
COMMISSIONER OF INCOME TAX, CENTRAL REVENUE BUILDING, BATHINDA
CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL
HON'BLE MR. JUSTICE RAJESH BINDAL
PRESENT: MR. RAM LAL GUPTA, ADVOCATE
FOR THE APPELLANT
The assessee has approached this Court by way of filing the present appeal against the order dated 11.8.2005 passed by the Income Tax Appellate Tribunal, Amritsar Bench; SMC; Amritsar (for short 'the Tribunal') in ITA No. 161 (ASR) of 2005 dated 11.8.2005 for the assessment year 2002-03, raising the following substantial questions of law:
"(i) Whether the instructions issued by the Central Board of Direct Taxes under Section 119 of the Income Tax Act are binding upon the Income Tax Authorities ?
(ii) If the answer to the question no.1 is negative whether the Income Tax Authorities at the time of assessment can travel beyond reasons recorded at the time of scrutiny and the reasons can be withheld from the assessee ?
(iii) Whether in the facts and circumstances of the case the appellant assessee is entitled to be granted the benefit under section 80 P (2) (a) (vi) of the Income Tax Act and that too in view of the benefits granted for the last more than one decade ?
(iv) Whether on the employment of some outside labour the cooperative society is to be deprived of the exemptions of the whole of the amount of profits and gains and income of the collective disposal of the labour of its members ?
(v) Whether the impugned assessment of the net profits and gains of the assessee and the assessment at the rate of 6 % is ultra vires of principle of natural justice and legal, justified and in order in the facts and circumstances of the case ?
(vi) Whether it is mandatory upon the income tax authorities to decide the contentions/submissions advanced before them ?
(vii) Whether the whole approach of the ld. Income Tax Authorities below in deciding the case against the appellant assessee suffer from perversity and is based upon assumptions and presumptions and surmises and conjectures ?
(viii) Whether the provisions for deduction/exemptions is to be interpreted liberally in favour of assessee ?
(ix) Whether discriminatory and unfair treatment is being met out to the appellant society ? The assessee-cooperative labour society filed return of income for the assessment year 2002-03 on 25.6.2002 declaring its income as nil.
The same was processed under Section 143 (1) of the Income Tax Act, 1961(for short 'the Act') as per the returned income. The case of the assessee was selected for scrutiny, and accordingly, statutory notices under Sections 142 (1) 143 (2) of the Act were issued in time. Process for security was initiated with prior approval of the Commissioner of Income Tax, as is evident from the facts recorded in the order of assessment. On test checking of cash book for part of the year it was found that the assessee had introduced cash receipts ranging from Rs. 30,000/- to Rs. 2 lacs in the cash book.
The assessee failed to explain the nature or source of amount so introduced in the cash book. It was further found that substantial amounts of cash were withdrawn from the bank on different dates and it was shown to have been utilized on the same day but without their being any evidence in the form of bills/vouchers etc. to support the same. No stock register of the material purchased and utilization thereof was found to have been maintained. Seeing the totality of the circumstances and finding that the books of accounts maintained by the assessee did not reflect true and fair state of affair of the assessee, the provision of Section 145 of the Act was invoked and books of account were rejected.
Even the claim of the assessee for exemption under Section 80 P (2) (a) (vi) of the Act was also found to be false as no supporting material was produced before the assessing authority and since the books of accounts of the assessee had been rejected, an estimate of net profit vis-a-vis the turnover of the assessee was made at 8 %.
Against the order of assessment the assessee went in appeal before the Commissioner of Income Tax (Appeals) (for short "the CIT (A)') raising the various pleas. Arguments of the assessee with regard to selection of case in scrutiny in violation of the condition laid down in circular dated 26.7.2002 was considered and rejected since it was found that the case was selected for scrutiny after approval of the CIT. Even on merits the appeal was rejected.
Still aggrieved the assessee went in appeal before the Tribunal who also, considering various pleas raised by the assessee, rejected the appeal. However, the net profit rate vis-a-vis gross receipt of the assessee was reduced from 8 % to 6 %.
We have heard Sh. R.L.Gupta, Advocate, for the assessee and with his assistance have perused the relevant orders on record.
The primary contention raised by the counsel for the assessee is that the case of the assessee has been selected in scrutiny in contravention to the circular dated 26.7.2002 and in terms of the settled position of law, a circular issued by the Central Board of Direct Taxes under Section 119 of the Act is binding on the authorities below. There is no dispute on the proposition that a circular issued by the Board under Section 119 of the Act is binding on the authorities under the Act.
However, in the case in hand what has been found is that the due process required under the circular was followed while taking up the case of the assessee in scrutiny and finding to that effect has been recorded in the assessment year as well as the order of the CIT (A). The contention of the counsel for the assessee to the effect that the reason recorded for taking up the case of the assessee in scrutiny should have been disclosed to him is without any merit as there is no such legal requirement in the statute.
The circular has been issued by the Board for guidance of the officers of the Department. Hence, we do not find any merit in this submission of the assessee.
As far as the merits of the case is concerned, the counsel for the assessee submitted that even if the discrepancies which have been pointed out by the assessing officer while framing the assessment are ignored, still the assessee would be entitled for exemption as there was other sufficient material to show that the claim of the assessee falls under Section 80 P (2) (a) (vi) of the Act but to support this, the counsel could not point out anything from the record which could substantiate it's claim to that effect. For claiming the exemption one has to satisfy that it clearly falls within the four corners of the provision of law. That being not position in the present case, even on merits, the claim of the assessee, was rightly rejected by the Tribunal and we uphold the findings recorded to that effect also.
Another issue raised by the counsel for the assessee is that in the previous years as well as in the subsequent years the authorities had accepted the claim of the assessee.
It is a settled law that each year is independent assessment year. In the case in hand on a scrutiny of the material on record and from a perusal of the books of accounts whatever produced by the assessee, it was found that the assessee was not able to satisfy the authorities with regard to it's claim for exemption under Section 80 P (2) (a) (vi) of the Act.
This being the position, it would not be just to claim that merely because in the earlier years or in the subsequent years the assessee had got exemption, the same should be granted in this year as well in spite of the fact that on a perusal of the record before the assessing officer, the assessee was not found to be entitled for the same. Reliance upon a judgment of this Court in CIT v. Haryana State Co-operative Labour & Construction Federation Ltd  161 Taxation 284 (P&H) and Delhi High Court in Director of Income-tax v. Lovely Bal Shiksha Parishad  266 ITR 349 is totally misplaced. Since the assessee had neither pleaded before any authorities below nor placed on record any material before any of the authorities below to show that there was no change of facts during the period , the exemption was granted to the assessee.
Hence, even this contention of the assessee is found to be without any merit.
Another contention raised by the assessee is that the estimation of net profit by the authorities is without any basis. As is found from the record the assessing officer assessed the net profit at the rate of 8 % of the receipt relying upon the net profit declared by certain other similarly placed labour contractors for the year in question. This estimation was required because the books of accounts of the assessee had been rejected under Section 145 (3) of the Act. The estimate made by the assessing officer was upheld by the CIT (A). However, the Tribunal while partly accepting the plea of the assessee reduced the net profit rate from 8 % to 6 % of the gross receipt. The contention of the counsel for the assessee is that this Court should substitute it's own opinion on the rate of net profit as in some similar cases, the net profit rate upheld by the Tribunal was at 3 % of the gross receipt.
We are afraid that this would not fall within the domain of jurisdiction vested in this Court under Section 260 A of the Act while hearing the present appeal. Even if this Court may have some different opinion for estimation, but still substitution thereof will not be the right course. As is found from the facts, the assessing Officer had estimated the net profit rate at 8 % relying upon declaration made by some similar other labour contractors whereas the assessee had relied upon another order of the Tribunal where the net profit was assessed at 3 %. The Tribunal while rejecting the contention of the assessee had granted substantial relief to the assessee by reducing the net profit rate to 6 % which is just near to the average of 8 % and 3 % taken together.
So in our opinion the Tribunal has already granted substantial relief to the assessee to the extent of reduction in the net profit by 25 % as compared to what was estimated by the assessing officer and we do not find any good reason to substitute our opinion or estimation for that matter.
The law as to what amount to substantial question of law is now well settled. The guiding principles, which are to be kept in view, while entertaining an appeal under Section 260 A of the Act, are well defined in a catina of judgments of Hon'ble the Supreme Court and this Court. The same being :-
"(a) An appeal under section 260 A of the Act cannot be entertained unless a substantial question of law arises for consideration by the High Court.
(b) To be substantial, a question of law must be debatable and must have a material bearing on the decision of the case and the rights of the parties. Where a question of law is fairly arguable or where there is a difference of opinion on the question of law, the same has to be treated as a substantial question of law.
(c) A point of law which admits of no two opinions may be a proposition of law but cannot be treated as a substantial question of law.
(d) If the question raised in the appeal is already settled by the highest court of the country or the jurisdictional High Court, then the same cannot be regarded as a substantial question of law. Similarly, if the general principles to be applied in determining the question are well settled and the only issue relates to application of those principles to the particular facts of the case, then no substantial question of law can be said to arise in the appeal.
(e) If the conclusions recorded by the Tribunal in the particular facts of the case are plausible, then it would not be a case of substantial question of law.
(f) The finding of fact recorded by the Assessing Officer or the first appellate authority or the Tribunal cannot be disturbed by the High Court in exercise of powers under section 260 A of the Act unless such finding is perverse or is such which no person of reasonable prudence could arrive at in the given facts of the case."
(See page 338-339 in C.I.T. v. Ms. Monica Oswal ( P & H)  267 ITR 308).
Examining the case of the appellant on the above guiding principles, we do not find that the issues raised by the appellant in the appeal fall in any of such para-meters. The findings are clearly findings of fact recorded concurrently by all the authorities. Issues raised by the appellant are not even the question of law, what to term these substantial questions of law.
In view of above, we do not find any merit in the appeal and dismiss the same.
May 16, 2006 (ADARSH KUMAR GOEL)
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