HIGH COURT OF PUNJAB AND HARYANA
New
Kailash Cotton Factory
v.
Assessing
Officer-cum-Income-Tax Officer, Ward No. 1, Mansa (Punjab)
M.M.
KUMAR AND RAJESH BINDAL, JJ.
I.
T. APPEAL NO. 510 OF 2006
March
21, 2007
Section 143 of the Income-tax Act, 1961 – Assessment – Additions to
income – Assessment year 1988-89 – Assessee claimed that during relevant year,
he conducted business on behalf of third parties and profits arising therefrom
were transferred to those parties – However, it was found that for purpose of
conducting so called business on behalf of 3rd parties, assessee
invested its own fund, used its own infrastructure in all transactions and no
‘Sauda Bahi’ was maintained recording day to day transactions – Further, there
was no proof available either in form of written or oral agreement between
parties for purchase and sale of commodities – Whether on facts, it could be
said that assessee had not been able to prove genuineness of transactions
resulting into claim made by him for diversion of profits – Held, yes – Whether
therefore, amount of profits, being a transfer of money to third parties
without any valid reason, was to be added to income of assessee – Held, yes
The assessee-firm, engaged in the business of cotton ginning and oil extracting, filed its return declaring some income. During the assessment proceedings, it was found that the assessee had claimed to have conducted business on behalf of various other parties resulting into a profit, which according to the assessee was transferred to those parties. However, when asked to justify genuineness of said claim, the assessee was unable to satisfy the Assessing Officer. Consequently, the Assessing Officer treated the transaction as a transfer of profit to third parties without any valid reason and added the amount of profits to assessee’s income. On appeal, the Commissioner (Appeals) as well as the Tribunal upheld the impugned addition.
On appeal to the High Court under section 260A:
HELD
There was no merit in the appeal. A perusal of the concurrent findings recorded by all the authorities below showed that assessee had not been able to prove on record the genuiness of the transactions resulting into claim made by it for diverting the profits arising out of its speculation business. It was found that there was no proof available either in the form of written or oral agreement between the parties for purchase and sale of commodities. For the purpose of conducting so called business on behalf of 3rd parties, the assessee invested its own fund, no ‘Sauda Bahi’ was maintained recording day to day transactions. All the purchases and sales were made in the account of assessee. It was assessee’s own infrastructure which was used in all the transactions. Those being the facts on record, even if there was a second view possible on re-appreciation of evidence on record in preference to view taken by the Tribunal, it could not be held that the view expressed by the Tribunal was not possible view. The findings recorded were based on evidence and could not be regarded as perverse. In the appellate jurisdiction under section 260A, the appeal can be entertained only on a substantial question of law. No doubt perversity in the findings of the Tribunal would amount to substantial question of law but the assessee had failed to point out any material on record which could impell the High Court to hold that the view expressed by the Tribunal was not at all possible. [Para 4]
Accordingly, there was no merit in the instant appeal and the same was to be dismissed. [Para 5]