2023 Supreme(P&H) 3334
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
RITU BAHRI, MANISHA BATRA, JJ.
Commissioner of Income Tax, Rohtak – Appellant
Versus
M/s. Crystal Phosphates Ltd. – Respondent
ITA NO. 140 of 2013 (O&M) AND ITA NO. 141 of 2013
Decided On : 28-03-2023
Advocates Appeared:
Ms. Pridhi Jaswinder Sandhu, Senior Standing Counsel; For the Appellant
Mr. Pankaj Jain, Senior Advocate, with Mr. Sachin Bhardwaj, Advocate, for the respondent(s).
Headnote:(A) Income Tax Act, 1961 - Section 143 and CBDT Guidelines - Appeal by Revenue against ITAT order quashing assessment due to failure to comply with CBDT instructions - Tribunal found valid jurisdiction not established for scrutiny; due process not followed - Legal principle upheld that CBDT guidelines are binding on tax authorities - Lack of evidence from Revenue undermined appeal. (Paras 6-14)
(B) Jurisdiction - Importance of adhering to CBDT circulars in selection for scrutiny - Assessment quashed due to non-compliance. (Paras 11-12)
(C) Evidence - Burden on assessing authority to prove compliance with guidelines. (Paras 12-14)
Facts of the case:
Appeals by Revenue against ITAT decision quashing assessment order due to procedural and jurisdictional lapses in scrutiny selection for the assessment year 2006-07, following the principles established in prior case law.
Findings of Court:
Both the notice under Section 143(2) and the assessment were quashed due to lack of valid jurisdiction; the requirements of CBOT instructions were not satisfied.
Issues: Whether the ITAT erred in quashing the notice and assessment based on the CBDT instructions and its application to the case; the validity of the jurisdiction assumed by the tax authorities.
Ratio Decidendi: The Court upheld that the authority must prove compliance with CBDT guidelines, ruling on the invalidity of the assessment due to non-fulfillment of legal obligations.
Result: Appeals dismissed.
| Table of Content |
|---|
| 1. common questions of law and facts involved. (Para 1 , 2) |
| 2. assessment details and appellate history. (Para 3 , 4 , 5) |
| 3. substantial questions of law for consideration. (Para 6 , 7) |
| 4. cbdt circulars bind the department; compliance is essential. (Para 8 , 10) |
| 5. court's observations on compliance with cbdt guidelines. (Para 9 , 11 , 12) |
| 6. appeals dismissed; no merits found. (Para 14 , 15) |
JUDGMENT
Ms. Ritu Bahri, J. (Oral)
This judgment shall dispose of ITA No.140 and 141 of 2013 together as common questions of law and facts are involved in both the appeals. For reference, facts are being taken from ITA No.140 of 2013.
2. Appellant-revenue has come up in appeal against the order dated 02.11.2012 passed by the Income Tax Appellate Tribunal, Delhi Bench 'B', New Delhi in ITA No.3630/Del/2009 dated 02.11.2012, for the assessment year 2006-07.
3. Brief facts of the case are that the respondent-assessee filed the return of income on 28.11.2006 declaring income at Rs. 3,97,17,920/-. The case was selected for scrutiny. Assessment under section 144 of the INCOME TAX ACT was completed on 24.12.2008 by making the following additions:-
"(1) During the assessment proceedings, the identity and creditworthiness of the parties subscribed share capital remained unproved and the genuineness of the transaction was also unproved, therefore, the capital of Rs. 55,00,000/- was treated as income from undisclosed sources of the assessee's company.
(2) No information/details in respect of the share application money amounting to Rs. 51,50,000/- received by the company was furnished. Hence, in the absence of records the same was treated as unexplained share application money and the same was added to the declared total income.
(3) Addition of Rs. 1,45,57,286/- was made as the assessee failed to prove the identity, creditworthiness of the parties from whom the alleged loans were declared.
(4) No evidence was furnished to prove the genuineness of advances of Rs. 10,66,96,566/- from customers, as such out of the said amount, an amount of Rs. 2,00,00,000/- was added to the returned income of the assessee as income from undisclosed sources.
(5) Addition of Rs. 60,000/- on account of interest charged on investment in shares.
(6) The assessee has diverted its borrowed funds to non-interest bearing advances to the tune of Rs. 1,58,86,441/-. As such interest of Rs.19,06,373/- worked out @12% on interest free advances was disallowed.
(7) The assessee had debited expenses on account of charity and donation of Rs. 66,203/- and gift expenses of Rs. 42,530/-, totaling to Rs. 1,08,733/-, which were disallowed being not admissible as per provisions of the IT Act.
(8) An addition of Rs. 5,00,000/- is made out of total Foreign Travelling Expenses of Rs.9,87,601/- in its P & L Account as no evidence regarding the person travelled, sector travelled, parties contracted and business procured was available on record.
(9) An addition of Rs. 1,64,890/- was made as no evidence on record regarding the Subscription & Membership fees paid to the institution/organizations eligible for deduction under Section 80-G.
(10) The assessee-company had claimed total expenses of Rs. 1,97,72,54,772/- under different heads in the P & L Account. No details were furnished by the assessee to prove the genuineness of these expenses. Moreover, the expenses under various heads were allowable only when TDS was deducted and deposited in the Government account. Since no information was furnished by the assessee nor any evidence is available on record to substantiate the claim of the assessee as genuine, the expenses of Rs.2,00,00,000/- not relating to the business were disallowed and added to the income of the assessee."
4. Against the said order, the assessee-respondent filed an appeal before the Commissioner of Income Tax (Appeals), who vide order dated 20.07.2009, deleted the additions mentioned at Sr. Nos.1, 2, 3, 4 and 5 and partially confirmed the addition of Rs.4,00,000/-, out of Rs. 19,06
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