VIRENDRA NATH PATHAK V. INCOME TAX OFFICER

ITA/49/2007

AI Insights

The case involves an appeal by Virendra Nath Pathak against the Income Tax Officer, where the appellant challenged the decision of the ITAT which had dismissed his appeal. The ITAT had upheld the action of the Assessing Officer (AO) based on the absence of a stock register and other stock details, agreeing with the lower authorities that the appellant's stock valuation was inflated for obtaining a cash credit limit from the bank, which was deemed morally and legally wrong. The High Court, upon reviewing the ITAT's decision, found that the tribunal had not provided adequate reasoning for their conclusions and thus quashed their order, remitting the case back for proper evaluation.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 684345 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 11-05-2017
• Assessment Year: misc
• Other Referred Cases: Dr. T.A. Quereshi vs. Commissioner of Income Tax, Bhopal (2006) 287 ITR 547 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K D MATHUR; R B MATHUR
• Assessee Lawyers: ANANT KASLIWAL
• Keywords: Cash Credit Limit; Income Tax; Stock valuation; Moralistic Perception
• Section: 5

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 49 / 2007 Virendra Nath Pathak ----Appellant Versus Income Tax Officer ----Respondent _____________________________________________________ For Appellant(s) : Mr. Anant Kasliwal For Respondent(s) : Mr. K.D. Mathur for Mr. R.B. Mathur _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 11/05/2017 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby Tribunal has dismissed the appeal of the assessee. 2. The only ground taken by the Tribunal reads as under:- “5. After having gone through the orders of the lower authorities, I find that the ld. CIT(A) has upheld the action of the AO with this observation that assessee had not maintained any stock register nor had furnished list of opening or closing stock or the list of stock furnished to the bank. Therefore, there was no substance in the claim of the assessee that stock was tallied. I fully agree with this observation of the ld. CIT(A). I am also of the view that an assessee cannot be allowed to value its stock on higher side to procure cash credit limit from the bank because which is morally wrong is always wrong for all the (2 of 3) [ITA-49/2007] purposes including for the purpose of income tax. The assessee cannot be allowed to advance a plea that stock was valued on higher side than the value shown in the books for the purpose of procuring some favour from the bank and the same cannot be taken for income tax purposes. Under the circumstances, I do not find reason to interfere with the first appellate order as the ld. CIT(A) after discussing the case of the assessee vis-a-vis assessment order has rightly upheld the action of the AO. The first appellate order is thus upheld.” 3. This court while admitting the appeal on 24.9.2012 framed following substantial question of law:- “Whether the ITAT was correct in law in having confirmed the additions made by the lower authorities to the income declared by the appellant merely on the basis that in its opinion appellant’s action was not in confirmative with its own moralistic perception of the matter?” 4. We have considered the reasoning adopted by the tribunal. 5. In our considered opinion, the Tribunal ought to have given reasons on the question of law which is put before it. The observations made above in para no.4 are absolutely wrong. 6. Counsel for the appellant has relied upon the decision of Supreme Court in Dr. T.A. Quereshi vs. Commissioner of Income Tax, Bhopal reported in (2006) 287 ITR 547 (SC). 7. In view of the above, the order of the Tribunal is quashed only on the ground that it has not given proper reasoning while deciding the matter. The matter is remitted back to the (3 of 3) [ITA-49/2007] tribunal. It is made clear that we have not expressed any opinion on the merits of the case. The appeal stands disposed of accordingly. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Brijesh 130. "