Issue of perversity of findings could by itself come within the ambit of a substantial question of law

In a recent ruling, in the matter of Chevoit Company Ltd. Vs. CIT (ITA No. 137 of 2001) (Calcutta HC – Special Jurisdiction {Income-tax}) the Calcutta High Court (HC) held that assessment by lower authorities without reference to the evidence produced by the assessee must be held to be perverse, and that the perversity of the finding itself becomes a substantial question of law.

Facts :- The assessee is engaged in the business of manufacturing and has a factory in Noida. During the course of assessment proceedings, the Assessing Officer disallowed a part of welfare, power and fuel and laminating expenses on the basis of an estimate.  Following an appeal by the assessee, the Commissioner of Income-tax (Appeals) (CIT(A), after finding the approach of the Assessing Officer to be erroneous,  allowed the entire claim of the assessee without verifying the documents.  Aggrieved with the CIT(A)’s order, the Revenue approached the Income-tax Appellate Tribunal (Tribunal). The Tribunal, on the basis of guesswork, modified the order passed by the CIT(A) by partly upholding the dis allowances made by the Assessing Officer in his original order without reference to the documents produced by the assessee and without assigning any reason.  The assessee challenged the order of the Tribunal before the Calcutta High Court .

Issue

The Division Bench of Calcutta High Court , at the time of the admission of the appeal, formulated the following substantial questions of law:

1. Whether the Tribunal was justified in law in sustaining the disallowances in part and whether its purported findings were:

Please become a Premium member. If you are already a Premium member, login here to access the full content.