The judgment of the court was delivered by
Akil Kureshi, J. - Revenue has challenged the judgment of the Income Tax Appellate Tribunal, Ahmedabad ["Tribunal" for short] dated 17th May 2013. Following questions have been presented for our consideration :-
'(1)(i) "Whether the ITAT had erred in law in not holding the lease transaction as financial lease transaction where the actual nature of transaction was lease finance and not an operating lease transaction ?"
(ii) "Whether the Hon'ble ITAT has erred in law and on facts in directing the Assessing Officer to follow the decision of Hon'ble Gujarat High Court in the case of CIT v. Gujarat Gas Ltd. [2009] 308 ITR 243 (Guj) which cannot be considered a good law in respect of finance lease in view of Hon'ble Supreme Court decision in the case of Asea Brown Boveri Ltd. v.Industrial Finance Corpn. Of India [2006] 154 Taxman. 512" ?
(iii) "Whether the Hon'ble ITAT erred in law in not applying the ratio of the ITAT Mumbai Special Bench decision in the case of IndusInd Bank Ltd. v. Addl. CIT Special Range 15, Mumbai [2012] 19 taxmann.com 173 (Mum.) (SB) which was applicable to the facts of this case."
2. "Whether on the facts and in the circumstances of the case and in law, the ITAT was correct in deleting the G.P addition of Rs. 1,55,637/- without considering the facts that G.P addition was made after rejecting the Books of Account of the assessee on the basis of various defects found therein.
3. "Whether decision of ITAT is perverse on facts in upholding the decision of the CIT (A), wherein the CIT (A) deleted the addition of Rs. 25,20,000/- made u/s. 40A(2) without appreciating that the assessee failed to furnish details/evidences in respect of services rendered by Shri Mehul Bhuva, as held by the A.O in the assessment order ?"
4. "Whether decision of ITAT is perverse on facts in upholding the decision of the CIT(A), wherein the CIT(A) deleted the addition of Rs. 11,96,100/- made on account of disallowance of interest on cash balance without appreciating that the assessee failed to furnish details / evidences before the A.O to prove that such cash was expended for business purposes ?"'
2. Question [1] pertains to the transaction of lease and buy back by the assessee with Rajasthan State Electricity Board for certain machinery. We notice that the Tribunal has merely remanded the issue before the Assessing Officer for fresh consideration. In that view of the matter, we see no reason to interfere. In the case of this very assessee, for the A.Y 1996-97 also, we had refused to interfere under similar circumstances.
3. Question [2] pertains to addition of Rs. 1.55 Crors [rounded off] on the estimation of gross profit, after rejecting the book results. The Assessing Officer considered the evidence on record and held that the accounts did not reflect the correct picture. He, therefore, made estimations and added the said sum to the total income of the assessee. CIT(A), however, took into account various factors and held that this was not a case of low yield and the addition was wrongly made. In further appeal, Tribunal confirmed the view of CIT(A) in the following manner :—
"43. We have heard the rival submissions and perused the material on record. CIT(A), while deleting the addition has given a finding that AO was not justified in comparing the yield of A.Y 1997-98 with the yield of A.Y 1995-96 ignoring the fact that the yield of current year was better than that in the immediately preceding year. He has further held that the assessee has maintained proper records of production and consumption in accordance with the excise regulations. He has further noted that during the search at assessee's premises in 1999-2000 minor difference in stock was observed which was due to various explainable factors. He has further held that AO has not brought any material on record to dispute the correctness of books of account and further no evidence has been brought on record to substantiate the allegation of unrecorded sales. He thus by a well reasoned order, deleted the addition. Before us, nothing has been brought on record by Revenue to controvert the findings of CIT(A) and thus we have no reason to interfere with the order of CIT(A). Thus, this ground of Revenue is dismissed."
4. In our view, the entire issue is based on appreciation of evidence. CIT(A) and the Tribunal, on the basis of materials on record, held that there was no case for making addition on the basis of gross profit rate, no question of law arises.
5. Third question pertains to addition of Rs. 25.20 lakhs made by the Assessing Officer under section 40A(2) of the Act. The Assessing Officer noted that the Company had made payment of Rs. 25.20 lakhs to one of its directors. He, therefore, applied section 40A(2) of the Act to disallow such expenditure.
6. CIT(A) and the Tribunal, however, deleted such addition in part. The Tribunal, while confirming the view of CIT(A), observed as under :-
"47. We have heard the rival submissions and perused the material on record. CIT(A) while deleting the addition has noted that the remuneration to Mr. Mehul Bhuva was approved by the members of the Company in the annual general meeting and was also approved by the Company Law Board. He has further noted that the salary was taxed in his hand at the maximum rate. He further relied on the decision of Delhi High Court in the case of CIT v. Shriram Piston & Rings Ltd. [1990] 181 ITR 230. Nothing has been brought on record by the Revenue to controvert the findings of CIT(A). We, therefore, find no reason to interfere with his order. Thus, this ground of Revenue is dismissed."
7. We notice that Section 40A(2) of the Act permits the Assessing Officer to disallow certain expenses or payments, where he is of the opinion that such expenditure or payment is excessive or unreasonable; having regard to the fair market value of the goods, services or facilities for which the payment is made.
8. In the present case, the Tribunal recorded that payment was authorized by the Company Law Board. The recipient of the payment was taxed at the maximum rate. Under the circumstances, we do not find any error. Such question is, therefore, no required to be considered.
9. Question [4] pertains to addition of a sum of Rs. 11.96 lakhs [rounded off] made on account of disallowance of interest on cash balance in the hands of the assessee. CIT(A) considered the matter at length and deleted the addition. Tribunal confirmed such deletion in the following manner :—
"51. We have heard the rival submissions and perused the material on record. CIT(A) while deleting the addition has noted that the Assessing Officer had no material to make a presumption that the cash balance did not exist and was used for non-business purpose. Revenue has not brought any tangible material to support its contention. The case law relied upon by Revenue are distinguishable on fact and are therefore not applicable. We thus find no reason to interfere with the order of CIT(A). Thus, this ground is dismissed."
10. Entire issue is based on facts. The Assessing Officer had not brought any material to support the presumption that the cash balance did not exist or that the same was used for non-business purposes.
In the result, Tax Appeal is dismissed.