High Court Of Delhi
CIT vs. Eicher Goodearth Ltd.
Section 143(10)(a), 254
Asst. Year 1997-98
Madan B. Lokur & V.B. Gupta, JJ.
IT Appeal No. 868 of 2006
15th May, 2007
Counsel Appeared :
Ms. P.L. Bansal, for the Appellant : Ajay Vohra with Ms. Kavita Jha, for the Respondent
JUDGMENT
MadaN B. Lokur J. :
The Revenue is aggrieved by an order dt. 25th Oct., 2005, passed by the Tribunal, Delhi Bench “B” in ITA No. 84/Del/2002 relevant to the asst. yr. 1997-98. The assessee filed its return of income in which it included a long- term capital gain of Rs. 6,63,746 as a part of the book profits calculated under s. 115JA of the Income-tax Act, 1961 (“the Act”). The assessee computed tax at 20 per cent in respect of the long-term capital gain and at 40 per cent in respect of the remaining income. In an intimation under s. 143(1)(a) of the Act, the AO noted that the returned total income under s. 115JA of the Act was Rs. 39,50,258 and he levied tax on this at 40 per cent. According to learned counsel for the assessee this was incorrect and tax should have been levied on the long-term capital gain at 20 per cent and at 40 per cent on the rest of the income. Feeling aggrieved, the assessee preferred an appeal before the CIT(A) who noted that while computing the income under s. 115JA of the Act for the purposes of tax, whether the long-term capital gain is required to be taxed at 20 per cent as provided in s. 112 of the Act or at 40 per cent in view of the provisions of s. 115JA of the Act is a debatable issue. It was, therefore, held that the issue being debatable, it was not permissible for the AO to make an adjustment under s. 143(1)(a) of the Act. Feeling aggrieved, the Revenue preferred an appeal before the Tribunal which noted the contention of the assessee to the effect that the issue was debatable and no adjustment was possible under s. 143(1)(a) of the Act. However, the Tribunal went into the merits of the controversy and gave its decision to the effect that the long-term capital gain is chargeable to a lower rate of tax as provided for in s. 112 of the Act.
Our attention has been drawn to Samtel Color Ltd. vs. Union of India (2002) 177 CTR (Del) 289 : (2002) 258 ITR 1 (Del), where this Court had examined the meaning of the phrase “prima facie” as appearing in the proviso to s. 143(1)(a) of the Act. It was held that it is not open to the AO to make any adjustment in the returned income unless the claim is inadmissible on the face of it and there is no possibility of any debate thereon. Unless this view is taken, it might render the provision wholly arbitrary and unreasonable. Moreover, such an interpretation will not cause any prejudice to the Revenue and, in a given case, it is open to the AO to issue notice under s. 143(2) of the Act and have the evidence in support of the admissibility of the claim made by the assessee.
7. This is what this Court had to say in the matter (p. 9) :
“We are, therefore, of the considered opinion that under s. 143(1)(a) of the Act it is not open to the AO to make any adjustment in the returned income by disallowing any claim for deduction, allowance or relief, unless he is satisfied on the basis of information available in the return, documents, and the accounts accompanying it that such a claim is inadmissible on the face of it and there is no possibility of any debate thereon on such claim, etc. If anything more is read into the power of the AO to make unilateral adjustments, it would render the provision wholly arbitrary and unreasonable because : (a) a disallowance is made without giving an opportunity to the assessee to explain his view point in support of the deduction or allowance, and (b) additional tax on the increased amount is charged from him arbitrarily. This would not only be in total violation of the principles of natural justice, it will also be not in consonance with the spirit of the provision to cause minimum inconvenience to the assessee and at the same time put the assessee on guard against claiming inadmissible deductions and allowances. On the contrary, the above interpretation of s. 143(1)(a) of the Act will not cause any prejudice to the Revenue. In a given case where the AO has any doubt about the allowability of deduction or claim made by the assessee, it is open to him to issue a notice under sub-s. (2) of s. 143 and have the evidence in support thereof. Similar view have been expressed on the subject by the Bombay High Court in Khatau Junkar Ltd. vs. K.S. Pathania, Dy. CIT (1992) 102 CTR (Bom) 194 : (1992) 196 ITR 55 (Bom), the Calcutta High Court in Modern Fibotex India Ltd. vs. Dy. CIT (1995) 126 CTR (Cal) 69 : (1995) 212 ITR 496 (Cal), the Karnataka High Court in God Granites vs. CBDT (1996) 130 CTR (Kar) 252 : (1996) 218 ITR 298 (Kar) and some other High Courts as well.”
8. The question whether the long-term capital gain claimed by the assessee is liable to be taxed at a lower rate as provided under s. 112 of the Act or not is, admittedly, a debatable issue and that has also been held by the CIT(A). Unfortunately, the Tribunal was called upon only to decide this limited controversy but it has gone on the merits of the dispute and has come to the conclusion that the lower rate of tax was applicable. We are of the view that this finding of the Tribunal is per incuriam and did not arise from the order passed by the CIT(A).
9. After having heard learned counsel for the parties and having gone through the records, we do not see any reason to differ with the view taken by the CIT(A) that the issue is debatable. Though the Tribunal has dismissed the appeal filed by the Revenue against the order passed by the CIT(A) on different grounds, we are of the view that the reasons given by the CIT(A) hold good nevertheless.
10. In view of the fact that the issue with regard to the interpretation of s. 143(1)(a) and the meaning of the phrase prima facie occurring therein is no longer res integra, we do not think that any substantial question of law arises for consideration.
11. Under the circumstances, we dismiss the appeal, and confirm the order of the CIT(A) making it clear that the observations made by the Tribunal on the merits of the controversy about the rate of tax are per incuriam.
[Citation : 296 ITR 125]
