Mukesh Gupta Vs DCIT (Supreme Court of India)
The proceedings arose from two appeals filed by the assessee before the Karnataka High Court against orders of the ITAT Bangalore concerning AY 2012-13. ITA No.343/2019 challenged the ITAT order dated 20 July 2018 in ITA No.1453/Bang/2018, while ITA No.342/2019 challenged the order dated 25 January 2019 in M.P.No.3/Bang/2019. The assessee raised two questions: whether the ITAT was justified in holding that there was no business income for AY 2012-13 despite professional income having been returned, and whether an ad hoc disallowance of 10% of expenditure was justified.
Before the High Court, the assessee submitted that the ITAT had arbitrarily concluded that there was no business income without cogent reasons. Regarding the 10% disallowance, it was argued that the expenditure had been incurred in the regular course of the assessee’s profession and that the books of account had not been rejected. The Revenue submitted that the assessee had not declared business income and that the ITAT had therefore correctly recorded its finding. It also contended that the Assessing Officer had made the 10% disallowance because the assessee’s authorised representative could not establish the bills and vouchers.
The Karnataka High Court found that the ITAT’s finding regarding absence of business income was contrary to the assessment record. The statement of income for AY 2012-13 showed income chargeable under the head “Business and profession” of Rs.14,16,985/-. The Court therefore held the ITAT’s finding to be perverse.
On the 10% disallowance, the High Court noted that the Assessing Officer had made an ad hoc deduction because the assessee’s authorised representative was unable to establish all bills and vouchers. The Court referred to Principal Commissioner of Income Tax vs. R.G.Buildwell Engineers Ltd, where the Delhi High Court had considered an identical situation involving ad hoc disallowance and noted, among other things, that the books of account had not been rejected and that similar expenses had consistently been allowed in earlier scrutiny assessments. The Supreme Court had dismissed the Revenue’s SLP against that judgment.
Applying the stated reasoning, the Karnataka High Court noted that the assessee’s books had also not been rejected and that the deduction had been made on an ad hoc basis. It consequently allowed both appeals, set aside the ITAT orders dated 20 July 2018 and 25 January 2019, and answered the questions of law in favour of the assessee and against the Revenue. No costs were awarded.
The Revenue thereafter challenged the High Court decision before the Supreme Court. The supplied Supreme Court order records only that leave was granted. It does not set out the parties’ submissions, substantive reasoning, determination of the legal issues, or a final decision on the merits. Accordingly, on the supplied material, the Supreme Court’s order cannot be stated to have affirmed, reversed, modified or otherwise finally decided the Karnataka High Court’s ruling beyond granting leave.
Read Also HC Judgment in this case: Mukesh Gupta Vs DCIT (Karnataka High Court)
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Leave granted.
