TMI Blog2022 (10) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... h an appeal shall be heard need not necessarily be a question of law of general importance. To be 'substantial', a question of law must be debatable and it must have a material bearing on the decision of the case in the sense that if answered either way insofar as the rights of the parties are concerned. The tests are stated to be illustrative and in no way exhaustive of the powers of the High Court to entertain an appeal, if there is other substantive ground of law. It hardly needs to be stated that a provision for appeal should be liberally construed and read in a reasonable practical manner. Substantial question of law - The question on which the appeal is admitted involves, in the first place, the ascertainment of facts as to the business expenditure in question, and in the second, the application of the correct principle of law to the fact so ascertained. Therefore, essentially such a question is only a mixed question of fact law as observed by the Apex Court in COMMISSIONER OF INCOME TAX vs. GREAVES COTTON [ 1967 (5) TMI 11 - SUPREME COURT] . Therefore, we are not sure if the Revenue could maintain this appeal on the subject question. Added, there is a cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NG/2014 having been favoured the addition made by the Assessment Officer on account of transport creditors, is set at naught, and to that extent the Assessee has been relieved of tax liability. 2. The Revenue in its Memorandum of Appeal filed under Section 260A of the Income Tax Act, 1961 (hereinafter '1961 Act') had framed the following question, as the substantial question of law: Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in setting aside the disallowance of Rs.5,89,49,503/- claimed as Transport Creditors by following decisions in cases of CIT V/s Usha Stud Agricultural Farms (301 ITR page 384) and CIT V/s Prameshwar Bohra decided by Rajasthan High Court though credit worthiness of the transport creditors was not established by the assessee and not appreciating that the assessee had not provided even the identity of the Transport Creditors in the absence of which the assessing authority was not in a position to conduct further enquiries ? Subsequently, vide memo dated 22.03.2019, it had proposed the following Redrafted Substantial Question of Law : Whether in the facts and circumstances of the case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to 8.39% and therefore, the same should be taken as the ratio for the Assessment Year in question as well; on that basis, he worked out the sum at Rupees 5,89,49,503/- and added it to the income of the Assessee, for the purpose of levy. (c) The Assessee had called in question the said addition in the subject appeal inter alia contending that unless the books of accounts were rejected under Section 145 of the 1961 Act, the AO acting under Section 143(3) could not have made the ad hoc disallowance; the fact that for the Assessment Year 2008 - 09 some addition was made under the said head, cannot be the sole basis for making such an addition for the subsequent Assessment Year, each assessment being an independent compact. He also pleaded about CBI raid seizure of all documents, not even a piece of paper being in his custody or power. (d) The ITAT substantially upheld the version of Assessee and granted relief by setting aside the addition made by the AO. Aggrieved thereby, the Revenue has preferred this appeal under the provisions of the 260A of the 1961 Act with the substantial questions of law hereinabove mentioned. III. Having heard the learned counsel for the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 is of the view that the word 'substantial' qualifies the term 'question of law'; it means a question having substance, essential, real, of sound worth, important or considerable. The substantial question of law on which an appeal shall be heard need not necessarily be a question of law of general importance. To be 'substantial', a question of law must be debatable and it must have a material bearing on the decision of the case in the sense that if answered either way insofar as the rights of the parties are concerned. (iii) It is profitable to see what Kanga Palkhivala's 'Law and Practice of Income Tax', Vol. II, Eleventh Edn., Lexis Nexus at pages 3316 - 17 states: ...A question is a substantial question of law if: (i) it directly or indirectly affects substantial rights of the parties; or (ii) it is of general importance; (iii) it is an open question in the sense that the issue has not been settled by a pronouncement of the Supreme Court; (iv) it is not free from difficulty; or (v) it calls for a discussion for alternative view... The findings are based on no evidence; (vii) relevant admissible evidence has not been taken into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced above, has been framed keeping in view the provisions of sub section (1) section 37, which has the following text: Any expenditure (not being expenditure of the nature described in section 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of the business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession... . The text of this sub section shows its building blocks such as: 'expenditure', 'wholly and exclusively' and 'incurred for the business'. The burden of proving that the expenditure is incurred 'wholly and exclusively for the purpose of business is on the Assessee' vide JASWANT vs. CIT 212 ITR 24. The question whether an item of expenditure was wholly and exclusively laid out for the purpose of Assessee's business has to be decided on the basis of evidentiary material that prima facie establishes these 'building blocks'. (iv) The question on which the appeal is admitted involves, in the first place, the ascertainment of facts as to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m as it does in its general aphorisms, all intention of compelling to impossibilities... (ii) Section 131 of the 1961 Act vests powers of Civil Court in the AO inter alia for compelling the production of books of account other documents; for this purpose the section, in so, many words equates him with the Civil Court. The arguable enormity of this power can be seen in the observations of a learned Single Judge of this Court in SAI RAMAKRISHNA KATURIA vs. UNION OF INDIA 402 ITR 7 KAR that it avails even against a Consular Head of a foreign country who otherwise enjoys diplomatic immunity under the Diplomatic Relations (Vienna Convention) Act, 1962. Exercising the powers of a Civil Court under the provisions of O. XIII of CPC, the AO can send for the books of accounts documents that are seized (by a Magistrate) in other proceedings vide UNION OF INDIA vs. STATE 42 ITR 753. Courts have held that this power is coupled with a public duty, to call for the Assessee's books of accounts which are in the custody of a public authority vide EMC vs. INCOME TAX OFFICER 49 ITR 650. There is absolutely no explanation as to why the AO did not choose to invoke this provision in the fitne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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