Perverse
:
§ Contrary to accepted/ expected standards and
practices
§ Showing deliberate & obstinate desire to
behave in an unreasonable/ unacceptable way
Perversity, as is too well known, is a factor which vitiates any exercise, legal or otherwise, determinative of the rights and obligations of the parties. Broadly understood, the concept of perversity, would mean all the facts possibly leading to one inference/conclusion, and if an opposite inference/conclusion is drawn, then any such exercise can be called as a result of perversity. Further, upon considering the same material, if no reasonable body of men would have reached such a conclusion, then the concept of perversity would spring up.
It is well settled that a finding or conclusion not supported by evidence brought on record or are against the law or suffer from the vice of procedural irregularity are perverse findings. The expression "perverse findings" would mean a finding which is not only against the weight of evidence but is altogether against the evidence itself. A deliberate departure from what is normal and reasonable is also termed a perverse. It is further well settled that a finding/conclusion/verdict arrived at that no reasonable person could have arrived on the basis of the material before him is also termed as perverse. Thus, a finding/conclusion arrived at by the quasi-judicial authorities/ Courts by considering irrelevant evidence or ignoring relevant evidence or against not properly weighing the evidence or against the evidence would be perverse and the order would be liable to be set aside on this ground alone.
Test and
benchmark of perversity is far stringent and strict
A finding of a Tribunal on fact does not become perverse merely because another finding or conclusion was possible. Test and benchmark of perversity is far stringent and strict. Factual findings can be only interfered with when they are patently unreasonable, not supported by any evidence or are based upon extraneous and irrelevant material. Interference may be justified when the conclusions are based upon mere conjectures and surmises or where no person acting judicially and properly instructed under the relevant law could have come to the same decision and conclusion.
The
only jurisdiction of the High Court in a reference application is to answer the
questions of law that are placed before it. It is only when a finding of the
Tribunal on fact is challenged as being perverse, in the sense set out above,
that a question of law can be said to arise.
The Hon’ble
Supreme Court in Sudarshan Silk & Sarees v. CIT (2008) 300 ITR 205 : 169 Taxman 321 (SC) has
laid down the attributes of perversity by holding that an order or finding is
perverse on facts if it falls under any of the following categories:
(a)
The finding is without any evidence.
(b)
The finding is contrary to the evidence.
(c)
There is no direct nexus between the conclusion of fact and primary fact
upon which that conclusion is based?
(d)
When an authority draws a conclusion which cannot be drawn by any
reasonable person or authority on the material and facts placed before it.
High Court
justified claim of Section 80-IC deduction as finding that printing &
binding of books is question of fact; Dismisses Revenue’s appeal since
fact-finding w.r.t. ‘Section 80-IC undertaking’ not challenged as perverse
Assessee was engaged in business of printing and binding of books. It claimed deduction under section 80-IC. Assessing Officer disallowed claim of assessee on ground that neither paper nor printed material reached eligible unit for printing, cutting and binding etc. and no manufacturing activity had actually taken place in said premises. Commissioner (Appeals) observed that Assessing Officer had not disallowed deduction under section 80-IC on ground of violation of prescribed conditions. He, thus held that since claim of deduction under section 80-IC in respect of publishing activity carried out from premise of eligible undertaking was found to be genuine, same was to be allowed.
Where Assessing Officer had disallowed deduction under
section 80-IC claimed by assessee, since Assessing Officer had not disallowed
deduction on ground of violation of prescribed conditions but based on finding
that assessee did not actually carry out any operation at premise of eligible
undertakingand Commissioner (Appeals) on fact observed that publishing
activity carried out from premise of eligible undertaking was found to be
genuine, thus claim of deduction under section 80-IC was to be allowed. Question as to whether
exercise of printing and binding of books was carried out at eligible
undertaking of assessee was a question of fact, on which findings of
Commissioner (Appeals) in favour of assessee were confirmed by Tribunal. Therefore,
no substantial question of law arose for consideration. [In favour of assessee]
(Related Assessment years : 2011-12 and 2012-13) - [PCIT v. Nirja Publishers
& Printers (P) Ltd. (2024) 158 taxmann.com 403 (Del.)]
Absent question of
perversity, ITAT’s ‘fact-finding’ final
Delhi
High Court upholds the ITAT ruling holding that the Assessee’s gains
on redemption of mutual funds shall be chargeable to tax as capital gain, and
not as business income; Relies on Supreme Court judgment in K. Ravindranathan Nair v. CIT (2001) 247 ITR 178 : 114 Taxman 53 : 2001
(1) SCC 135 (SC) wherein it was held that, “A decision on fact of the Tribunal can be
gone into by the High Court only if a question has been referred to it which
says that the finding of the Tribunal on facts is perverse, in the sense that
it is such as could not reasonably have been arrived at on the material placed
before the Tribunal.”; Finds that the ITAT, after appreciating the material
on record, held that the transactions concerning mutual funds were in the
nature of investment and not motivated by trade, thus the gains from the same
shall be chargeable to tax as capital gains and not as business income;
Further, High Court upholds ITAT ruling holding that the capital contribution
received by the Assessee from its partners was in the nature of a commercial
transaction and would not fall within the category of loans and advances that
could be construed as deemed dividend under Section 2(22)(e); Concurred with
ITAT’s view that it could not treat CIT(A)’s observations on charging the
contributions to tax in the hands of the shareholders of the investor companies
and remarks that the addition in the hands of the said shareholders can only be
made after affording a hearing. [In favour of assessee] - [PCIT v. Wig
Investment [TS-23-HC-2024(DEL)] – Date of Judgement :
15.01.2024 (Del.)]
Arm’s Length Price (ALP)
determined by ITAT can be challenged before High Court for perversity & non
observance of transfer pricing rules
Supreme Court held that
while determining the arm’s length price, the Tribunal has to follow the
guidelines stipulated under Chapter X of the IT Act, namely, Sections 92, 92A
to 92CA, 92D, 92E and 92F of the Act and Rules 10A to 10E of the Rules. Any
determination of the arm’s length price under Chapter X de hors the relevant
provisions of the guidelines, referred to hereinabove, can be considered as
perverse and it may be considered as a substantial question of law as
perversity itself can be said to be a substantial question of law. Therefore,
there cannot be any absolute proposition of law that in all cases where the
Tribunal has determined the arm’s length price the same is final and cannot be
the subject matter of scrutiny by the High Court in an appeal under Section
260A of the Income Tax Act. The Hon’ble Apex Court after considering the rival
submissions held that
“7. Any determination of
the arm’s length price under Chapter X de hors the relevant provisions of the
guidelines, referred to herein above, can be considered as perverse and it
can be considered as substantial question of law as perversity itself can be
said to be a substantial question of law. Therefore, there cannot be any
absolute proposition of law that in all cases where the Tribunal has determined
the arm’s length price the same is final and cannot be the subject matter of
scrutiny by the High Court in an appeal under Section 260A of the Income Tax
Act. When the determination of arm’s length price is challenged before the High
Court, it is always open for the High Court to consider and examine whether the
arm’s length price has been determined while taking into consideration the
relevant guidelines under the Act and the Rules. Even the High Court can also
examine the question of comparability of two companies or selection of filters
and examine whether the same is done judiciously and on the basis of the
relevant material/ evidence on record. The High Court can also examine whether
the comparable transactions have been taken into consideration properly or not,
i.e., to the extent non-comparable transactions are considered as comparable
transactions or not. Therefore, the view taken by the Karnataka High Court in
the case of PCIT v. Softbrands India (P) Ltd. (2018) 406 ITR 513 (Karn.) that
in the transfer pricing matters, the determination of the arm’s length price by
the Tribunal is final and cannot be subject matter of scrutiny under Section
260A of the Income Tax Act cannot be accepted.
8. Thus, in each case, the
High Court should examine whether the guidelines laid down in the Act and the
Rules are followed while determining the arm’s length price. Therefore, we are
of the opinion that the absolute proposition of law laid down by the Karnataka
High Court in the case of Softbrands India (P) ltd. (supra) that in the matter
of transfer pricing, determination of the arm’s length price by the Tribunal
shall be final and cannot be subject matter of scrutiny and the High Court is
precluded from examining the correctness of the determination of the arm’s
length price by the Tribunal in an appeal under Section 260A of the Income Tax
Act on the ground that it cannot be said to be raising a substantial question
of law cannot be accepted. As observed hereinabove, within the parameters of
Section 260A of the Income Tax Act in an appeal challenging the
determination of the arm’s length price, it is always open for the High Court
to examine in each case whether while determining the arm’s length price, the
guidelines laid down under the Act and the Rules, referred to hereinabove, are
followed or not and whether the determination of the arm’s length price and the
findings recorded by the Tribunal while determining the arm’s length price are
perverse or not” – [Sap
Labs India (P) Ltd. v. ITO (2023) 149 taxmann.com 327 (SC)]
Absent question of
perversity, dismisses Revenue’s appeal on Section 69A addition
Delhi
High Court upholds ITAT order wherein addition under Section 69A on account of
unexplained cash deposit by a non-resident Assessee was deleted, holding that
Section 69A has no applicability on non-resident Assessee’s whose only source
of income in India is interest on bank account and interest on income tax
refund; Observes that Revenue failed to discharge its onus and that in absence
of Revenue’s failure to propose any question of law on ITAT finding being
perverse, the power under Section 260A cannot be exercised into the arena of
appreciation of facts and document; Further notes that ITAT meticulously
examined and elaborately discussed the documentary records in support of the
explanation of the money ingress in the bank account of the Assessee;
Distinguishes Revenue’s reliance on Kerala High Court judgement in K.
V. Mathew v. ITO (2014) 42 taxmann.com 571 (Ker.) by observing that in
the said judgement it was also held that interference under Section 260A cannot
be made wherein the question of fact raised by the aggrieved party has been
clinched by ITAT. [In favour of assessee] (Related Assessment year 2017-18) - [CIT(international
Taxation) v. Hersh Washesher Chadha [TS-756-HC-2023(DEL)]
– Date of Judgement : 12.12.2023 (Del.)]
Absent question of
perversity on Rs. 100 Cr. loss from receivables-sale;
Dismisses Revenue’s appeal
Delhi
High Court dismisses Revenue’s appeal, holds that no substantial question of
law arises for consideration wherein Delhi ITAT allowed the loss of
Rs. 103.87 Cr. arising on sale of financial receivable being revenue in
nature on the premise that the same was crystallized in the relevant Assessment
year; Observes that Revenue failed to propose any question of law on
ITAT’s finding to the extent that full sale value of loan portfolio
crystallized in the relevant Assessment year and the loss was crystallized in
the said Assessment year and allowable being ‘revenue’ in nature is perverse;
Observes that issue pertaining to allowability of loss on sale of
financial receivable being revenue or capital in nature does not arise
from order passed by the statutory authorities;
During
Assessment year 2010-11, pursuant to an
assignment agreement with Shriram Transport Finance Company Ltd.
(STFCL) for outright sale of financial receivables, Assessee claimed
loss of Rs. 103.87 Cr on sale of financial receivables, which was
disallowed by Assessing Officer on the premise that loan facilities were not
transferred in totality and the loss was not crystallised in the relevant Assessment
year, therefore, the loss incurred is ‘capital’ in nature; DRP dismissed
Assessee’s objection; ITAT relied on coordinate bench ruling in
Assessee’s own case for Assessment year 2004-05 and held
that perusal of the assignment agreement executed with STFCL clearly evidence
that transaction took place in the relevant Assessment year and
accordingly, the loss was crystallized in the year under consideration,
therefore, loss of Rs. 103.87 Cr arising on sale of financial receivables
was on revenue account;
High
Court observes that it is undisputed fact that loan portfolios concerning 45000
borrowers were sold to STFCL in pursuance to an assignment agreement and the
difference between the value of financial receivables and consideration
received was claimed as revenue loss; Observes that ITAT after detailed
examination of facts categorically held that loss crystallised in the relevant
AY and the Assessee is entitled for claim of loss of Rs. 103.87 Cr in the
year itself; Observes that Revenue has not proposed any question to the effect
that ITAT’s finding is perverse and accordingly the appeal cannot be
entertained; On the issue of disallowance of Rs. 7.94 Cr under Section 14A read
with Rule 8D, High Court relies on coordinate bench ruling in Cheminvest Ltd. v. CIT (2015) 378 ITR33 (Del.) wherein it was held
that Section 14A will not apply if no exempt income is received or
receivable during relevant previous year, accordingly, holds that no
substantial question of law arises for consideration. [In favour of assessee] –
[Clix Capital Services (P) Ltd. (Formerly Known as Ge Money Financial services
(P) Ltd.) [TS-740-HC-2023(DEL)] – Date of Judgement :
02.11.2023 (Del.)]
Absent separate
cash-payment vouchers, confirms Section 40A(3) disallowance; Rejects ‘perversity’
plea
During
Assessment year 2004-05, Assessee claimed deduction of expenditure on account
of payments made to truck drivers for material purchases in excess of Rs. 20,000
in cash. During assessment, Revenue issued show cause notice as to why 20% of
the expenditure incurred in excess of Rs. 20,000 towards payment to truck
drivers in cash should not be disallowed under Section 40A(3) read with Rule
6DD to which Assessee replied and contended that books of accounts
including cash book and daybook evidences separate payments not exceeding
Rs. 20,000 in cash were made to individual truck drivers who brought material
in different trucks, accordingly, disallowance cannot be made. Revenue rejected
Assessee’s contention and held that Assessee failed to produce bills or
vouchers to substantiate separate transaction with truck drivers, accordingly,
made disallowance under Section 40A(3). CIT(A) partly allowed Assessee’s
appeal. ITAT dismissed Assessee’s appeal.
Before
High Court, Assessee relied on coordinate bench judgment in Sunil Kumar as well
as Orrisa High Court judgment in CIT,
Orissa v. Aloo Supply Co. (1980) 121 ITR 680 (Ori.) as well as Madhya Pradesh High
Court judgment in CIT v. Triveniprasad Pannalal (1997) 228
ITR 680 (MP) and contended that amendment to Section 40A(3) were made with
effect from 01.04.2009 to include the payment made other than by account payee
cheque/draft ‘to a person in a day’, accordingly, the amended section is not
applicable for the relevant Assessment year specifically in context of day book
which stipulates bifurcated payments. Also relied on Supreme Court judgment
in Indore Malwa United Mills Ltd. v. State
of Madhya Pradesh & Others (1966) 60 ITR 41 (SC) and contended that
erroneous finding of fact bordering on perversity would be a substantial
question of law in terms of Section 260A.
High
Court distinguished Assessee's reliance on Orrisa High Court judgment in
Aloo Supply and observed that the principle enunciated in the said case
that Section 40A(3) applies to payments made to party at a time and not to
aggregate of payment made to a party in course of a day as recorded in cash
book is not applicable in the present case since the Revenue specifically found
that Assessee’s contention of payment to truck drivers on delivery of goods at
different work sites is not supported by any bills or vouchers.
Rejected Assessee’s contention on perversity on fact would come
within the ambit of question of law and observed that there is no
perversity in ITAT order. Observed that CIT(A) order restricting the
disallowance on the premise that disallowance made by Revenue was on estimate
basis is incorrect since Section 40A(3) mandate such disallowance to the
percentage indicated therein on there being no evidence to indicate payment
exceeding Rs. 20,000 by account payee drawn cheque. Distinguished Assessee’s
reliance on Sunil Kumar judgment and observed that in the present case,
Assessee failed to produce vouchers in support of claim of separate
payments having been made on a single day at the work spots where the delivery
of the goods supplied were made. Referred to cash book produced by
Assessee and observed that there is nothing on record to suggest that
payment were made separately and not together.
Patna
High Court holds that no substantial question of law arises wherein ITAT upheld
the disallowance under Section 40A(3) on deduction of expenditure incurred in
excess of Rs. 20,000 other than by an account payee cheque/draft on the
premise that Assessee failed to provide the bills/vouchers to substantiate the
claim of separate payments been made in a single day to exclude from the ambit
of Section 40A(3); High Court distinguishes Assessee's reliance on
Orrisa High Court judgment in CIT, Orissa v.
Aloo Supply Co. (1980) 121 ITR 680 (Ori.) and observes that the principle enunciated in the said case that
Section 40A(3) applies to payments made to party at a time and not to aggregate
payment made in course of a day as recorded in cash book is not applicable in
the present case since the Revenue specifically found that Assessee’s
contention of payment to truck drivers on delivery of goods at different work
sites was not supported by any bills or vouchers. Thus,
dismissed Assessee's appeal. [In favour of revenue]
(Related Assessment year : 2004- 05) – [Mahendra Prasad Singh & Bros v. CIT [TS-788-HC-2023(PAT)] – Date of Judgement : 04.12.2023
(Patna)]
High Court quashes
perverse Section 148A(d) order as passed without application of mind
By this writ petition, petitioner has
challenged the impugned order under Section 148A(d) of the Income Tax Act,
1961, dated 29.07.2022 and all subsequent proceedings, on the ground that the
aforesaid impugned order is perverse and in total non-application of mind by
recording that no response was given to the letter in question issued by the
Assessing Officer nor any supporting document was attached while it appears
from record at page 41 of the writ petition that petitioner had filed the
response along with supporting documents. The aforesaid impugned order under
Section 148A(d) of the Act, in view of the fact which appears from record, is
perverse and is in total non-application of mind and on this ground alone, the
aforesaid impugned order is not sustainable and is liable to be quashed.
However, quashing of the aforesaid impugned order under Section 148A(d) of the
Act and all subsequent proceedings, will not be a bar on the part of the
Assessing Officer to pass a fresh order under Section 148A(d) of the Act after
considering the objection/ response of the petitioner dated 15.06.2022 in
accordance with law and by passing a reasoned and speaking order after giving
an opportunity of hearing to the petitioner or his authorised representatives,
within a period of eight weeks from the date of communication of this order.
With this observation and direction, this writ petition being WPA 4123 of 2023
stands disposed of. – [Dobby Media (P) Ltd. v. ITO - WPA 4123 of 2023 - Date of Judgement : 21.03.2023 (Cal.)]
High
Court can interfere in the order of the ITAT only if there is substantial
question of law or there is manifest illegality or it suffers from perversity
A search and seizure operation under section 132 was carried out on assessee-company. Assessing Officer found unexplained cash credit in assessee’s bank account and thus made additions under section 68. Commissioner (Appeals) in order to ascertain authenticity of assessee’s return of income and identity and creditworthiness of such cash credit addressed a letter to DIS and obtained a report. It was found that assessee had received certain amount from four entities, namely, MTC, TIDCO, TM and VC and out of these four entities, assessee was promoter director of TIDCO and TM. Thus, creditworthiness of amount received from TIDCO and TM was confirmed and additions made in respect of same were deleted - In regards to MTC and VC, assessee submitted copies of returns, computation sheet and balance sheet of partners of these entities however creditworthiness of few partners were still doubtful. Commissioner (Appeals) thus partially allowed amount credited from MTC and VC. Tribunal upheld order passed by Commissioner (Appeals).
The scope of jurisdiction in Section 260A is very well settled. It is a settled proposition that ITAT is the final arbiter of the facts. High Court can interfere in the order of the ITAT only if there is substantial question of law or there is manifest illegality or it suffers from perversity. The general rule is that High Court should be slow in interfering into the findings of ITAT, unless it suffers from any of the grounds mentioned hereinabove. In this case tribunal has minutely examined the case and marshaled the facts well. It may be noted that the ITAT is final arbiter of the facts and appeal can be entertained by the High court only if there is a substantial question of law. High Court consider that there is no substantial question of law in the present case. We also do not find any perversity in the order passed by the tribunal. The order passed by Tribunal was to be upheld. [In favour of assessee] (Related Assessment year : 2008-09) – [PCIT v. Madhur Mittal (2022) 142 taxmann.com 404 (Del.)]
Upholds commission
disallowance, ITAT’s finding not perverse merely because another finding /
conclusion possible
Delhi
High Court upholds ITAT order disallowing expenditure of Rs. 1 crore paid as
commission by assessee-company (agent of Korean based company) to its sub-agent
during Assessment year 2010-11, observes that ITAT's conclusions were based on
exhaustive examination of the material; During the relevant Assessment year
assessee’s sub-agent had failed to describe and elucidate on the nature and
manner in which the services were rendered against which commission was
received from assessee, therefore ITAT disallowed the same ; Observes that ITAT
had highlighted that crucial evidence in relation to four aspects were missing
i.e. details of service rendered by the sub-agent , details of expenses
incurred by the sub-agent, persons whom the sub-agent had contacted and
letters, report or document submitted by the sub-agent in the process of
rendering services ; Rejects assessee's contention that since similar payment
of Rs. 1.25 crores in Assessment year 2009-10 was not disallowed , ITAT's
decision was perverse, remarks that , As rightly observed by the Tribunal, rule
of consistency could not be extended to presume that the sub-agent must have
rendered services in the year in question.”; States that ITAT’s finding on fact
does not become perverse merely because another finding or conclusion was
possible, remarks that, Test and benchmark of perversity is far stringent and
strict ”, thus clarifies that interference with factual findings can be
justified only when the conclusions are based upon mere conjectures and
surmises or where no person acting judicially and properly instructed under the
relevant law could have come to the same decision and conclusion. [In favour of
revenue] (Related Assessment year : 2010-11) – [Alpasso Industries (P) Ltd. v. ITO [TS-465-HC-2018(DEL)]
– Date of Judgement : 23.07.2018 (Del.)]
Neither in the questions of law as urged by the Revenue nor in the grounds in the memorandum of Appeal is there a specific plea that the conclusions of the ITAT are perverse. In any event, the ground of perversity is not to be casually urged without proper pleading, untenable
Delhi High Court dismisses Revenue's appeal for
Assessment year 2006-07 challenging ITAT order on comparables selection,
notes Revenue's submission that ITAT order was perverse and
incomplete as it dealt with only one of the several grounds considered by DRP
in support of its conclusion; ITAT had directed inclusion of one loss making
comparable which was functionally similar to assessee and exclusion of 2
comparables on ground of functional differences; High Court notes
that ITAT order gave detailed reasons in support of its conclusion, further
the memorandum of appeal filed by Revenue and a question of law
raised for its consideration did not mention a specific plea that the ITAT
order was perverse; High Court observes that 'the ground of perversity is
not to be casually urged. It has to be supported by a proper pleadingwhich
again has to be on the basis of a detailed study of the impugned order of the
ITAT pointing out to the High Court in what manner the ITAT’s conclusions can
be said to be perverse. This condition is not met in the present case';
Remarks that exclusion/inclusion of comparables is by and large an exercise of
analysis of facts and if there has to be a substantial question of law framed
on such issue, the Revenue should come up with a proper plea based on
a detailed study of ITAT order; Thus, dismisses Revenue’s appeal holding
that no question of law arose for its consideration. [In favour of assessee]
(Related Assessment year : 2006-07) –
[PCIT v. Sojitz India (P) Ltd. [TS-391-HC-2017(DEL)]
– Date of Judgement : 04.09.2017 (Del.)]
Reference jurisdiction High Court
should not act as an appellate Court to review such findings of fact arrived at
by the Tribunal by a process of reappreciation and reappraisal of the evidence
on record, unless disputed before the High Court
While findings of fact found by the Tribunal are final and the High Court cannot reappraise the same, the High Court can take note of facts on record which are lost sight of by the Tribunal and also construe certain facts to be of significance as against the different view of the Tribunal
The legal position in this regard may be summed up by reiterating that it is the Tribunal which is the final fact finding authority and it is beyond the power of the High Court in the exercise of its reference jurisdiction to reconsider such findings on a reappraisal of the evidence and materials on record unless a specific question with regard to an issue of fact being opposed to the weight of the materials on record is raised in the reference before the High Court.
The Court held that it is well settled that issues of fact determined by the Tribunal are final and the High Court in exercise of its reference jurisdiction should not act as an appellate Court to review such findings of fact arrived at by the Tribunal by a process of reappreciation and reappraisal of the evidence on record. Unless a specific question with regard to an issue of fact being opposed to the weight of the material on record is raised in the reference before the High Court. On merit dismissed the appeal of assessee. (Related Assessment year : 1984-85). –[Ganapathy & Co. v. CIT( 2016) 381 ITR 363(SC)]
The findings of
fact and the appreciation of evidence by the Assessing Officer, the
Commissioner (Appeals) and the Tribunal cannot be faulted on any ground. They
are by no means perverse or unreasonable. The relevant facts were taken into
consideration and analysed. In the appreciation of facts no question of law
arises. – [Subhash Chander Malik v. DCIT, Chandigarh (2015) 57 taxmann.com
180 (P&H)]
Associate
Builders v. Delhi Development Authority, wherein the Supreme Court held that a
decision would be perverse if it was based on no evidence or on evidence which
was unreliable and no reasonable person would depend on it. – [Associate Builders v. Delhi Development Authority (2015) 3 SCC 49 (SC)]
NOTE : The
observations of the Hon’ble Supreme Court clearly assert that 'perversity' in
an order or verdict stems from a factual error which may arise on account of
several factors, including, but not limited to, incorrect appreciation and
consideration of relevant material and evidence. All things said, the scope of ‘perversity’,
as is well-understood, is confined to the factual determination of a dispute or
challenge before the Court.
A factual
decision is perverse if the authority has acted without any evidence or on view
of facts, which cannot be reasonably entertained. A perverse finding is one, if
it is arrived at without any material or if it is arrived at or inference is
made on material, which would not have been accepted or relied upon by a
reasonable person conversant with the law
This Court while
exercising appellate jurisdiction under Section 260A of the Act is not an
appellate Court for facts reprise. Factual findings can be challenged only on
the ground that the factual findings recorded are perverse or relevant evidence
has not been considered or irrelevant material has been relied. In such cases,
pleadings in this regard have to be specific, erudite and the should indicate
clearly the error or mistake. This Court in CIT versus Sunaero Ltd. (2012)
345 ITR 163, at page 187, regarding perversity of a decision of the
Tribunal, has observed:- “A factual decision is perverse if the authority has
acted without any evidence or on view of facts, which cannot be reasonably
entertained. A perverse finding is one, if it is arrived at without any
material or if it is arrived at or inference is made on material, which would
not have been accepted or relied upon by a reasonable person conversant with
the law. If the finding is based upon surmises, conjectures or suspicion and is
not rationally possible. A factual conclusion is regarded as perverse when no
person duly instructed or acting judicially could act upon the record before
him, have reached the conclusion arrived at by the tribunal/authority” (Related
Assessment years : 2000-01 to 2004-05 and 2006-07) - [CIT v. Rama Krishna
Jewellers – ITA 455,456,457 & 458/2014 Date of Judgement : 26.11.2014 (Del.)]
Issue of perversity of findings could by itself come within the ambit of
a substantial question of law; Perversity of findings of facts becomes a
substantial question of law, High Court can set-aside appeal
A division bench of Calcutta High Court held that if a finding of fact
was perverse and was based on no evidence, it could be set aside in appeal by
the High Court. The High Court observed that orders by Assessing Officer,
CIT(A) and ITAT were not passed based on evidence produced by the assessee but
on the basis of guesswork. The High Court observed that the perversity of the
finding itself becomes a substantial question of law. The High Court remanded
the matter back to the Tribunal for consideration of all factual details.
[In favour of assessee] (Related Assessment year : 1992-93) – [Chevoit Company Ltd. v. CIT [TS-167-HC-2011(CAL)]
– Date of Judgement : 25.04.2011 (Cal.)]
The import of “perversity”
was explained by the Hon’ble Apex Court in PSEB, in the following terms:
“28. If a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then the finding is rendered infirm in the eyes of law. If the findings of the Court are based on no evidence or evidence which is thoroughly unreliable or evidence that suffers from the vice of procedural irregularity or the findings are such that no reasonable person would have arrived at those findings, then the findings may be said to be perverse. Further, if the findings are either ipse dixit of the Court or based on conjecture and surmises, the judgment suffers from the additional infirmity of non-application of mind and thus, stands vitiated.” (See also, Punjab & Sind Bank v. Daya Singh (2010) 11 SCC 233, Prem Kaur v. State of Punjab (2013) 14 SCC 653) – [Municipal Committee, Hoshairpur v. Punjab State Electricity Board (2010) 13 SCC 216
Perversity is a
Substantial Question of Law
The Apex Court
has stated that in grounds of perversity appeal would lie. In the instant case,
the question of law referred to the High Court for its opinion was as to
whether the Tribunal was right in upholding the findings of the Commissioner
(Appeals) in cancelling the penalty levied under section 271(1)(c). Question as
to perversity of the findings recorded by the Tribunal on facts was neither
raised nor referred to the High Court for its opinion. The Tribunal is the
final court of fact. The decision of the Tribunal on facts can be gone into by
the High Court in reference jurisdiction only if a question has been referred
to it which says that findings arrived at by the Tribunal on facts are
perverse, in sense that no reasonable person could have taken such a view. In
reference jurisdiction, the High Court can answer the question of law referred
to it and it is only when a finding of fact recorded by the Tribunal is
challenged on the ground of perversity, that a question of law can be said to
arise. In the instant case, since the frame of question was not as to whether
the findings recorded by the Tribunal on facts were perverse, the High Court
was precluded from entering into any discussion regarding the perversity of the
findings of fact recorded by the Tribunal. Accordingly, the order under appeal
was to be set aside and that of the Commissioner (Appeals) and the Tribunal
were to be restored. In the facts and circumstances of the case, the penalty
under section 271(1)(c) was not exigible. - [Sudarshan Silks & Sarees v.
CIT (2008) 300 ITR 205 : 216 CTR 12 : 169 Taxman 321(SC)]
A decision of
Tribunal on facts can be gone into by High Court only if a question has been
referred to it which says that finding of Tribunal on facts is perverse, in the
sense that it is such as could not reasonably have been arrived at on the
material placed before Tribunal
The High Court overlooked the cardinal principle that it is the Tribunal which is the final fact-finding authority. A decision of the Tribunal on facts can be gone into by the High Court only if a question has been referred to it which says that the finding of the Tribunal on facts is perverse, in the sense that it is such as could not reasonably have been arrived at on the material placed before the Tribunal. In the instant case, there was no such question before the High Court. Unless and until a finding of fact reached by the Tribunal is canvassed before the High Court in the manner set out above, the High Court is obliged to proceed upon the findings of fact reached by the Tribunal and to give an answer in law to the question of law that is before it.
The
only jurisdiction of the High Court in a reference application is to answer the
questions of law that are placed before it. It is only when a finding of the
Tribunal on fact is challenged as being perverse, in the sense set out above,
that a question of law can be said to arise. (Related Assessment
year : 1972-73) – [K. Ravindranathan Nair v. CIT (2001) 247 ITR 178 : 114
Taxman 53 : 2001 (1) SCC 135 (SC)]
It is settled law that if a finding of fact is
perverse and is based on no evidence, it can be set aside in appeal even though
the appeal is permissible only on the substantial question of law. The
perversity of the finding itself becomes a substantial question of law. – [Kulwant
Kaur v. Gurdial Singh Mann, AIR 2001 SC 1273]
In
Kuldeep Singh v. Commissioner of Police, it was held:
“A broad distinction has, therefore, to be maintained between
the decisions which are perverse and those which are not. If a decision is
arrived at on no evidence or evidence which is thoroughly unreliable and no
reasonable person would act upon it, the order would be perverse. But if there
is some evidence on record which is acceptable and which could be relied upon,
howsoever compendious it may be, the conclusions would not be treated as
perverse.”
– [Kuldeep
Singh v. Commissioner of Police, (1999) 2 SCC 10]
In
Triveni Rubber & Plastics v. CCE, the Supreme Court held that a
‘perverse’ finding is one that is not only against the weight of the evidence
but is based on no evidence. The standard of a ‘perverse’ finding is thus, very
strict. – [Triveni Rubber & Plastics v. CCE AIR 1994 SC 134 (SC)]
