Brief of the Case
In the case of Commissioner of Income Tax Vs.Karnataka Planters Coffee Curing Works (P) Ltd. assessee had shown sudden increase in creditors without any matching purchase transactions. The assessee claimed it to be crop loans raised in the names of planters within the family circle from bank and given to the assessee. The Hon’ble High Court had reversed the findings of the lower authorities on the ground that all the persons who had advanced loan to the assessee ought to have been given notice. The Hon’ble Supreme Court held that since it is clear from the findings of the lower authorities that the loan applications were processed by the officers of the assessee and all the loan transactions were also really handled by the assessee and further the loan amounts were not reflected in the returns of the persons in question, the High Court could not have taken the above view and remanded the matter to Assessing Officer.
Facts of the Case
The assessee had shown sudden increase in the trade creditors without any significant transactions of purchases during the year. The assessee claimed before the AO that the crop loans were raised in the names of the planters within the family circle hailing from Chennai purportedly owning some estates. The loans raised by them from bank where the assessee also operated its bank accounts were claimed to be given to the assessee.The representative of the assessee also claimed that all such persons were Income Tax payers having proper economic existence.
From the investigation carried out by the AO revealed that all the crop loan application were prepared and signed by none other than the top man in the management of the assessee. Also the crop loan accounts in the banks were also managed by the same person. Further in detailed investigation held in Chennai no such accounts of the so called estate owners were found in their records and the nexus of their sacrificial loan to bail out the assessee could not be bridged either.
Contention of the Assessee
The appellant contended that the such loan amount of Rs.2,72,19,285/-is legally liable for deduction.
Held by CIT(A)
Ld. CIT(A) relied on the investigation carried out by the AO and held that it may be true that these persons are separately assessed to tax, but the nexus of their running estates and their leading financial support could not be sustained. The ld. CIT(A) upheld the order of the AO stating that “there was no cause for interference in the present proceedings to approve the findings of the excellent investigation carried out by the AO”.
Held by ITAT
The Hon’ble ITAT upheld the order of the Ld. CIT(A).
Held by High Court
The learned single judge Hon’ble High Court upheld the findings and orders of the AO and the CIT(A) and not finding any merit in the petition dismissed it.
However, the Division bench of the High Court in the Writ Appeal thought it appropriate to reverse the said findings on the ground that the 37 persons who had advanced loan to the assessee ought to have been given notice and remanded the matter back to the AO.
Held by Supreme Court
The Hon’ble Supreme Court held that the jurisdiction of the Division Bench in the Writ Appeal is primarily one of the adjudication of questions of law. Findings of fact recorded concurrently by the authorities under the Act and also in the first round of the writ proceedings by the Ld. single judge are not to be lightly disturbed. It further stated that in the present case, in the face of the clear findings that the loan applications were processed by the officers of the assessee and the loan transactions in question of the aforesaid 37 persons were also handled by the assessee and further in the view of categorical finding that the loan amounts were not reflected in the returns of 37 persons in question, we do not see how the High Court could have taken the above view and remanded the matter to the Assessing Officer.
Also it was pointed out before the Hon’ble Supreme Court that pursuant to the impugned order passed by the Division Bench of the High Court fresh assessment proceedings have been finalised by the AO. The said exercise had been done in the absence of any interim order of the Supreme Court. In this regard it was held by the Supreme Court that merely because fresh assessment proceedings had been carried out in the meantime it would certainly not preclude the Court from judging the validity and correctness of the order of the Division Bench of the High Court.
On the above grounds the Hon’ble Supreme Court allowed the Appeal and set aside the order of the Division Bench and consequently all further orders passed pursuant thereto.