2025 (1) TMI 1617 - HC - Income Tax

Appeal dismissed where concurrent findings by lower authorities upheld; clerical transcription error immaterial, no fresh proceedings required

Quartz Commecial Pvt. Ltd. Versus Income Tax Officer Ward 20 (3)

HC dismissed the assessee's appeal, finding that CIT(A) and ITAT had concurrently upheld the AO's decision and therefore no question of law arose. ... Incorrect passage from the decision of the learned ITAT was recorded in the order - AO had not resumed proceedings in respect of AY 2007-08 - According to the Assessee, the AO was required to examine the Assessee’s books and decide afresh and said assumption is premised on the basis that this court had remanded the matter to the AO by an order in Quartz Commercial Private Limited [2018 (2) TMI 2143 - DELHI HIGH COURT] in respect of AY 2007-08 Assessee had appealed the said impugned order passed by ITAT u/s 260A before this court in Quartz Commercial Private Limited v. Income Tax Officer [2018 (2) TMI 2143 - DELHI HIGH COURT] The said appeal was dismissed by an order [2018 (2) TMI 2143 - DELHI HIGH COURT] This court held that since all the authorities had given concurrent finding, no question of law arose. HELD THAT:- Assessee’s appeal against the said decision was dismissed by this court by an order dated [2018 (2) TMI 2143 - DELHI HIGH COURT] 09.02.2018. As noted above, this court had held that in view of the concurrent findings, no question of law arose. However, it appears that an incorrect passage from the decision of the learned ITAT was recorded in the order passed by this court in [2018 (2) TMI 2143 - DELHI HIGH COURT] Instead of recording the passage from the impugned order dated 31.07.2017 passed by the learned ITAT, an extract from the order dated 01.03.2013 passed by the learned ITAT, which was also reproduced in the learned ITAT’s order dated 31.07.2017 (which was impugned in the said appeal) was erroneously reproduced by this court in its order. It is apparent from the above that both, CIT(A) and ITAT had concurrently upheld the decision made by the AO. In view of these concurrent findings, this court had dismissed the Assessee’s appeal holding that no question of law arises. Since, the Assessee’s appeal against the impugned order dated 31.07.2017 passed by the learned ITAT was dismissed, the question of any further proceedings before the AO did not arise. The issue sought to be raised in this appeal stood concluded with the dismissal of the appellant’s appeal [2018 (2) TMI 2143 - DELHI HIGH COURT] ISSUES PRESENTED AND CONSIDERED 1. Whether a second appeal under Section 260A is maintainable where the High Court has previously dismissed an appeal on the ground that no question of law arises because of concurrent findings of fact by the AO, CIT(A) and the ITAT. 2. Whether an earlier High Court order (which reproduced an extract from a prior ITAT order) operated as a remand to the Assessing Officer requiring resumption of proceedings, or whether the operative part of that High Court order precluded further AO action. 3. Whether the addition made by the Assessing Officer treating amounts as income under Section 68 (unexplained cash credits/sham share premium) by applying a commission percentage (0.5% of turnover) on alleged accommodation-entry transactions was legally sustainable on the material before the authorities. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of second appeal under Section 260A in presence of concurrent findings Legal framework: Section 260A permits appeal to the High Court on substantial questions of law arising out of ITAT orders. The High Court's power is circumscribed where concurrent findings of fact by AO, CIT(A) and ITAT leave no question of law. Precedent Treatment: The Court applied the settled proposition that concurrence of findings by fact-finding authorities ordinarily precludes the existence of a question of law for the purpose of a Section 260A appeal. Interpretation and reasoning: The Court examined the impugned ITAT order and the subsequent High Court dismissal order and found that the High Court had dismissed the earlier appeal on the explicit basis that 'since all the authorities have concurrently given the finding, no question of law arises.' The present appeal sought to reopen issues concluded by that dismissal. The Court held that where concurrent findings exist and the High Court has dismissed an appeal for want of a question of law, a subsequent appeal challenging the same factual conclusion is misconceived. Ratio vs. Obiter: Ratio - A Section 260A appeal is not maintainable where the High Court has already dismissed a prior appeal on the ground that concurrent findings of fact by the AO, CIT(A) and ITAT raise no question of law. Conclusion: The appeal was misconceived and dismissed on maintainability grounds insofar as it sought to revisit issues already concluded by dismissal for lack of a question of law. Issue 2 - Effect of prior High Court order and alleged remand to the Assessing Officer Legal framework: A remand to the AO must be clear and unambiguous in the operative part of the order; incidental or quoted extracts from earlier orders do not automatically effect a remand unless the order's operative portion directs such action. Precedent Treatment: The Court relied on ordinary principles of appellate remand - that the operative direction controls and that reproducing an extract from an earlier tribunal order does not per se constitute a remand. Interpretation and reasoning: The Court analysed the High Court order that dismissed the earlier appeal and noted that the passage quoted by the High Court was an extract from an earlier ITAT order (dated 01.03.2013) and not the operative ITAT order under challenge. The operative portion of the High Court order simply dismissed the appeal for lack of a question of law; it did not direct remand. The appellant's reliance on the quoted passage to assert that the matter was remitted to the AO was therefore misplaced. The AO's subsequent actions and the timeline (including the fact that the AO had in any event examined books pursuant to the ITAT's 2013 direction) were reviewed to show there was no ambiguity warranting further proceedings based on the High Court's 09.02.2018 order. Ratio vs. Obiter: Ratio - An extract quoted in a dismissing order does not amount to a remand; explicit operative directions are necessary to remand a matter to the Assessing Officer. Conclusion: There was no remand effected by the High Court's order; the AO was not required to resume proceedings on the footing alleged by the appellant, and the appellant's attempt to treat the earlier dismissal as a remand failed. Issue 3 - Sustainment of addition under Section 68 treating transactions as accommodation entries and assessing notional commission Legal framework: Section 68 permits taxation of unexplained cash credits; the Revenue may treat sham share capital/premium and accommodation-entry operations as unexplained/unaccounted income where books, bank transactions and business realities support such a conclusion. The authorities may make additions based on inferences from documentary and bank evidence and established business patterns. Judicial decisions permit imputation of income where transactions are sham and the assessee functions as an entry provider, subject to verification of books and records. Precedent Treatment: The Tribunal and appellate authorities relied on established precedents upholding taxation of accommodation-entry operations and the imputation of commission as income (references to Supreme Court and other decisions were relied on by the tribunal and the Court noted those authorities as supporting the Revenue's stance). The Court accepted that such precedents 'fully support the case of the Revenue.' Interpretation and reasoning: The Court reviewed the factual matrix: the assessee had no operational income, received share application money with large premiums and on the same date transferred such amounts to other companies; bank statements and books corroborated the circular movement of funds; share capital and premium increases were noted. The ITAT in the earlier round had expressly directed examination of books; the AO examined the books, observed absence of operational expenditures and the identical-day transfers of share application money, and assessed a conservative commission (0.5%) as income. CIT(A) and ITAT both upheld that finding after considering the books and bank evidence and relevant authorities. Given the concurrent findings based on documentary evidence and permissible inferential reasoning, the Court found no infirmity in the addition. Ratio vs. Obiter: Ratio - Where books, bank statements and transactional patterns establish sham share premium and circular movement of funds indicative of accommodation-entry business, the AO may make an addition under Section 68 by imputing commission; concurrent affirmance by CIT(A) and ITAT precludes re-agitation before the High Court absent a substantial question of law. Conclusion: The addition of Rs. 7,85,000 (taken as 0.5% commission) was sustainable on the material examined by the AO and affirmed by appellate authorities; the grounds challenging this factual conclusion were dismissed. Cross-references For Issue 1 and Issue 2 - The inadmissibility of the present appeal derives from both the prior dismissal for lack of question of law and the absence of an operative remand direction in the earlier High Court order; see the Court's reading of paragraphs reproducing earlier ITAT material versus the operative dismissal. For Issue 2 and Issue 3 - Even if an earlier ITAT had once directed examination of books (and that extract appeared in subsequent orders), the AO's actual examination and resultant assessment (confirmed on appeal) render any claim of non-resumption of proceedings legally irrelevant when the High Court has dismissed the appeal on the ground of concurrent findings. Final disposition The appeal was dismissed as misconceived; concurrent factual findings by the AO, CIT(A) and ITAT left no question of law, no remand arose from the earlier dismissal, and the addition based on accommodation-entry findings and imputed commission was sustained on the material before the authorities. All pending applications were disposed of.