Madhya Pradesh High Court
Cit vs D & H Secheron Electrodes Ltd. on 17 May, 2006
Equivalent citations: [2006]156TAXMAN445(MP)
ORDER Per Sapre, J.
This is an appeal filed by the Commissioner of Income Tax (Revenue) under section 260A of the Income Tax Act against an order, dated 30-9-2003, passed by learned Members of Income Tax Appellate Tribunal in I.T.A. No. 26/Ind/97. This appeal was admitted for final hearing on following substantial questions of law :
"1. Whether ITAT was justified in setting aside of a finding recorded by the Commissioner of Income Tax in section 263 proceedings by deleting a sum of Rs. 6,83,304 in relation to penalty imposed upon the assessee under the Sales Tax Law?
2. Whether benefit of deletion amounting to Rs. 6,83,304 granted to the assessee by the Tribunal can be said to be justified and is an allowable deduction and if so under what head?
2. The dispute pertains to assessment year 1989-90. It is in relation to a deduction claimed by the assessee (respondent herein) amounting to Rs. 6,83,304 paid towards penalty under the Sales Tax Laws. In the assessment year in question, the question arose as to whether assessee can be granted benefit of this sum (Rs. 6,83,304) for claiming deduction from computation of their gross income. According to assessee, they were so entitled to claim its benefit because it formed part of a total sum of Rs. 55 lakhs which they had voluntarily surrendered to department for being taxed in their hands during the assessment year in question. In other words, the contention of the assessee before assessing officer was that since in the year in question, the assessee has voluntarily surrendered a total sum of Rs. 55 lakhs and hence, the impugned sum ie. Rs. 6,83,304 being a part of the surrendered sum and not over and above Rs. 55 lakhs for taxing purpose, the same cannot be taxed again. It is on this reasoning, the assessee contended before the assessing officer that a sum of Rs. 6,83,304 be not brought to tax and assessee be allowed to deduct the said sum from computation of gross total income of assessee for the year in question as part of Rs. 55 lakhs. In support of this contention, the assessee also placed reliance on their two letters dated 19-4-1990 and 3-3-1992 which they had sent to department while surrendering a sum of Rs. 55 lakhs to show that a sum of Rs. 6,83,304 was part of Rs. 55 lakh.
3. The assessing officer by order dated 27-3-1992 accepted the Explanation of assessee and accordingly, granted them the benefit of Rs. 6,83,304 by deleting the same from computation of their gross total income. In other words, it was held that the amount of Rs. 6,83,304 is a part of Rs. 55 lakhs which was voluntarily surrendered by assessee and hence, the same cannot be now again brought to tax for the year in question.
4. The Commissioner of Income-tax was not satisfied with this deletion made by assessing officer in favour of the assessee and hence, the Commissioner invoked his powers under section 263 of the Act and called upon the assessee to show as to why a sum of Rs. 6,83,304 be not included in the total income of the assessee. According to Commissioner, the order of assessing officer granting the benefit of Rs. 6,83,304 to assessee was not only erroneous but was equally prejudicial to the interest of revenue and hence, required to be corrected by taking recourse to the provisions of section 263 ibid. An Explanation of assessee was sought by granting them an opportunity of hearing. By order, dated 30-3-1994, the Commissioner set aside the order of assessing officer, dated 27-3-1992 insofar as it related to aforementioned impugned deletion. He held that the amount of Rs. 6,83,304 was not the part of Rs. 55 lakhs as contended by assessee and hence, it has to be brought within the tax net of assessee during the period in question. According to Commissioner, the order of assessing officer was erroneous as also prejudicial to the interest of revenue within the meaning of section 263 ibid, and hence, cannot be sustained. It was accordingly, set aside by giving consequential direction to make fresh assessment in the light of observations made in the order by adding the said sum in the total gross amount of assessee's income.
5. The assessee felt aggrieved filed appeal to the Tribunal. By order, dated 24-9-1998, the Tribunal dismissed the appeal insofar as it related to this issue. Rather, the Tribunal went into the issue more in detail and finding no merit in it, upheld the order of Commissioner. This is what the Tribunal held in para 9 of the order:-
"Para 9. As to the revision of the assessment order on the issue of Sales tax penalty, the letter dated 19-4-1990 of the assessee filed during assessment proceedings makes it abundantly clear that the assessee had made false claim of deduction in the return, as the amount(s) of Sales-tax penalty had been claimed and allowed in earlier years. It was in this backdrop that the assessee had requested the assessing officer to increase the returned income by the amount of Sales-tax penalty of Rs. 6,83,304. If that be so, the question of including this sum in the surrendered amount of Rs. 55 lakhs does not arise, as the fact of inclusion of the said sum being sales-tax penalty in conspicuous by its absence in the assessee's letter of surrender dated 3-3-1992 relating to assessment year 1989-90. Paras 3 & 4 thereof do not refer to sales-tax penalty. In sharp contract, letter of surrender of the same date does make mention of sales-tax penalty in para 3 thereof in clear terms. This conduct of the assessee itself negatives the assessee's claim of inclusion of the impugned sum of sales-tax penalty in the surrendered amount of Rs. 55 lakhs in assessment year 1989-90. Since the assessing officer had erroneously not increased the income originally returned by the amount of sales-tax penalty of Rs. 6,83,304 as requested by the assessee, vide letter dated 19-4-1990 while framing the assessment, the assessment was erroneous due to non-inclusion of this sum in the total income causing prejudice to the interests of revenue. The Commissioner was justified in invoking his Revisionary powers in respect of this issue."
6. The assessee accepted this order of Tribunal because they did not pursue this issue further in appeal to this court under section 260A ibid. In this view of the matter, the order passed by the Tribunal attained finality.
7. As a sequel to the order passed by: Commissioner, dated 30-3-1994 and later having been upheld by the Tribunal on 24-9-1998 (referred supra) the assessing officer passed a fresh consequential assessment order, dated 25-1-1996 and accordingly, added a sum of Rs. 6,83,304 in the gross income of assessee for the period in question. Indeed while giving effect to the Order passed by Commissioner, the assessing officer had to add this sum while computing the total income of assessee. The assessee felt aggrieved of this assessment filed an appeal to Commissioner (Appeals). By order, dated 29-11-1996 the Commissioner (Appeals) dismissed the appeal and upheld the assessment order including addition of Rs. 6,83,304. Aggrieved, the assessee filed further appeal to Tribunal. By impugned order, the Tribunal allowed the appeal filed by the assessee and deleted the addition of Rs. 6,83,304 made by assessing officer pursuant to the order of Commissioner. It is against this order of Tribunal, the Commissioner of Income Tax (Revenue) has felt aggrieved and filed this appeal. As stated supra, the appeal was admitted for final hearing on afore-mentioned substantial questions of law.
8. Heard Shri R.L. Jain, learned senior counsel with Ku. V. Mandlik, learned counsel for the appellant (Revenue) and Shri Vijay Asudani, learned counsel for the respondent (Assessee).
9. Shri Jain, learned counsel for the appellant (Revenue) while assailing the legality and proprietary of impugned order, contended that Tribunal was in error in deleting the addition made by assessing officer pursuant to the order of Commissioner passed in 263 proceedings. It was his contention that the issue, regarding addition/deletion of Rs. 6,83,304 had already attained finality when the order of Commissioner, dated 30-3-1994 was upheld by Tribunal by order dated 24-9-1998. He, therefore, urged that once the issue attained finality against the assessee then in such event, the Tribunal had no jurisdiction in same proceedings arising out of consequential order of assessment to take a different view in favour of assessee. It was, therefore, his submission that Tribunal should have upheld the addition of Rs. 6,83,304 made by assessing officer as the same was in conformity with the direction issued by Commissioner in suo moto Revisionary proceedings.
10. In reply, learned counsel for the assessee supported the impugned order and urged for its upholding. Placing reliance on the decisions in Mewa Ram v. Deo Prakash AIR 1954 All. 770, Ram Autar v. State AIR 1954 All. 771, Kochu Pennu Appi Rennu v. Kalyambi Nanan AIR 1958 (Ker) 66, V.E. Vasudevan v. State of Kerala AIR 1985 Ker. 69 (FB), Damodhar Rao v. Bhima Rao AIR 1965 Mys. 290, Rajani Kumar Mitra v. Ajmaddin Bhuiya AIR 1929 Cal. 163 (sic), Commissioner v. Seshasayee Paper & Boards Ltd. (2000) 242 ITR 490 (Mad), P.V. Doshi v. Commissione (1978) 113 ITR 22 (Guj), Sri Kubreswar Mahadeva Thakur v. Commissioner (1992) 196 ITR 6492 (Cal) and Commissioner v. South India Shipping Corpn. Ltd. (1998) 233 ITR 546 (Mad) learned counsel contended that the finding recorded by Commissioner and later upheld by the Tribunal against the assessee would not be a bar in subsequent proceedings arising out of appellate orders to again decide the issue on merits. It was his submission that firstly the order of Commissioner passed in section 263 proceedings is not final and secondly, it would not operate as res judicata.
11. Having heard learned counsel for the parties and having perused record of the case, we are inclined to allow this appeal and set aside the impugned order passed by Tribunal.
12. In our considered opinion, the issue regarding addition of Rs. 6,83,304 having attained finality in the earlier proceedings, which travelled from the suo moto Revisionary order of Commissioner, dated 30-3-1994 to that of an order dated 24-9-1998 passed by Tribunal, against the assessee, the same had to be decided against the assessee in consequential proceedings for giving effect to the said orders. Indeed, neither the assessing officer, nor Commissioner (Appeals) nor Tribunal had the jurisdiction to decide this issue again on its merits contrary to the earlier finding of Tribunal. Once the issue was decided in hierarchical system in the same year against any party, then it could not be allowed to be reagitated in collateral proceedings arising in the same year by any party.
13. In our considered opinion, the Tribunal was bound by the finding recorded by the Tribunal in its earlier order, dated 24-9-1998 quoted supra. It is not in dispute that the Commissioner had jurisdiction to invoke the powers conferred under section 263 ibid for recalling of the order passed by assessing officer on the ground of its being erroneous and prejudicial to the interest of revenue. It is also not in dispute that Commissioner did find that these two grounds did exist in the order of assessing officer and accordingly, recalled the same. It is also not in dispute that Tribunal too concurred with the finding of Commissioner when it proceeded to dismiss the appeal filed by the assessee. It is also not in dispute that assessee though had the opportunity to challenge the appellate order of Tribunal in further appeal under section 260A ibid but for the reasons best known to them, they did not prefer to challenge and accepted the appellate order of Tribunal.
14. In a situation emerging from the undisputed facts taken note of supra, we are clearly of the view that Tribunal had no jurisdiction to deal with the same issue in an appeal arising out of consequential order of assessment. What is unfortunate is that Tribunal did not even refer to its earlier order dated 24-9-1998 and hence, failed to consider its legal effect in the proceedings arising out of consequential assessment orders thereby committing an error of law.
15. In our considered view, it is a case where an issue regarding addition of Rs. 6,83,304 was debated inter se parties on merits and eventually merged into the appellate order of Tribunal which attained finality against the assessee. It could only be examined on its merits by High Court in an appeal filed by assessee under section 260A ibid against the said order (24-9-1998). If for any reasons, the assessee gave up the challenge then issue attained finality. The only thing that survived in such circumstance was implementation of the finding which attained finality by passing cons equential order by assessing officer, if necessary, so as to make the order-in conformity with the final order passed in the case.
16. We have gone through the several decisions cited at the bar by the learned counsel for the assessee mentioned supra. We are afraid, none of them are on the issue involved. They are distinguishable on facts. We, therefore, need not take the trouble of dealing with each and every case to show as to how they are distinguishable. It will in our opinion, only increase the length of our judgment with no utility and hence, we refrain from undertaking this exercise.
17. Accordingly and in view of foregoing discussion, the appeal succeeds and is allowed. Impugned order insofar as it relates to deletion of Rs. 6,83,304 in computation of gross income of assessee for the assessment year in question is set aside. As a consequence, the order passed by Commissioner (Appeals) which confirmed the order of assessing officer on this issue is restored.
No costs.