ASSISTANT COMMISSIONER OF INCOME TAX 3 (1) vs. CHHATTISGARH STATE CIVIL SUPPLIES CORPORATION LTD.

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TAXC/74/2019HC ChhattisgarhCGHC01025631201912 February 2020Author: HON'BLE THE CHIEF JUSTICE,HON'BLE SHRI JUSTICE PARTH PRATEEM SAHU4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court found that the ITAT had conducted a meticulous analysis of the facts, figures, legal provisions, and precedents. The Court noted that the ITAT had specifically considered subsequent events, including the Revenue's changed stand in respect of assessment for subsequent years, as detailed in paragraphs 20 and 21 of its order. Paragraph 20 referred to a decision of the Ahmedabad Bench of the Tribunal in DCIT vs. Gujarat State Civil Supplies Corporation Ltd., which held that surplus earned by the assessee company (set up by the Government) for activities carried out on behalf of the Government, and which belonged to the Government, was not taxable in the hands of the assessee. Paragraph 21 noted that the Assessee's submission regarding the Revenue accepting subsidy receipts in subsequent years (though under Section 143(1)) without action under Section 147 or 263 could not be controverted by the Revenue. The Tribunal concluded that the concession component received by the assessee, a government company implementing government projects as its agent, was not its income. The High Court agreed with the ITAT's reasoning and found no substantial question of law, dismissing the appeal.

What were the facts?

The Revenue is appealing an order dated 23-10-2018 passed by the Income Tax Appellate Tribunal (ITAT), Raipur. The ITAT had allowed the appeal of Chhattisgarh State Civil Supplies Corporation Ltd. (the Assessee) against an order dated 30-11-2017 of the Commissioner of Income Tax (Appeals)-I, Raipur. The original assessment for assessment year 2014-15 was finalized under Section 143(3) of the Income Tax Act, 1961, with an addition of Rs. 1,94,31,98,824/- to the Assessee's declared income. The CIT(A) had upheld this addition, which was then set aside by the ITAT. The Revenue contends that the ITAT failed to properly appreciate the facts, law, and precedents, leading to a miscarriage of justice.

What were the issues?

1. Whether, on points of law and facts, the ITAT was justified in setting aside the CIT(A)'s order which upheld the addition of Rs. 1,94,31,98,824/-, by ignoring the Assessee's admission of a change in accounting method noted in Form 3CD and the Balance Sheet? - Assessee: Not recorded. - Revenue: Argues that the Assessee admitted a change in accounting method, which the ITAT ignored, rendering its decision perverse. 2. Whether, on facts and law, the ITAT was justified in deleting the addition of Rs. 1,94,31,98,824/-, by ignoring the ratio in Luxor Writing Instruments Pvt. Ltd. Vs DCIT, wherein it was held that once a method of accounting is chosen, it should be employed regularly and cannot be changed in subsequent years? - Assessee: Not recorded. - Revenue: Relies on the ratio in Luxor Writing Instruments Pvt. Ltd. Vs DCIT to argue that the Assessee cannot change its accounting method. 3. Whether, on points of law and facts, the ITAT was justified in setting aside the CIT(A)'s decision by observing that since no contrary view was taken by the AO in subsequent years, the addition in the current year cannot be upheld, thereby ignoring that each income tax proceeding is separate and distinct and the principle of Res-Judicata is not applicable? - Assessee: Not recorded. - Revenue: Argues that the ITAT wrongly applied the principle of subsequent years' assessments to the current year, ignoring the distinct nature of each proceeding and the non-applicability of Res-Judicata, citing New Jahangir Vakil Mills Co Ltd vs CIT and Bharat Sanchar Nigam Limited and Anr Vs UOI & Ors.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 260A,Section 143(1),Section 147,Section 263

AI-generated summary — verify with the full judgment below

1 of 4 NAFR HIGH COURT OF CHHATTISGARH, BILASPUR TAXC No. 74 of 2019 • Assistant Commissioner of Income Tax 3(1), Aaykar Bhawan, Civil Lines, Raipur C.G.

------Appellant VERSUS • Chhattisgarh State Civil Supplies Corporation Ltd., Avani Vihar, Raipur C.G. ------Respondent For Appellant : Mr. Amit Chaudhari & Ms. Naushina Ali, Advocates Hon'ble Shri P.R. Ramachandra Menon, Chief Justice Hon'ble Shri Parth Prateem Sahu, Judge Judgment on Board Per P.R. Ramachandra Menon, CJ. 13/02/2020

1.

The Revenue is before this Court. Grievance is against the Annexure A-1 order passed by Income Tax Appellate Tribunal, Raipur on 23-10-2018, whereby the appeal preferred by the Assessee against the order dated 30-11-2017 of the Commissioner of Income Tax (Appeal)-I, Raipur, in relation to the assessment year 2014-15, came to be allowed.

2.

The assessment was finalized in terms of Section 143(3) of the Income Tax Act as per order dated 27-12-2016, by making an addition of Rs. 1,94,31,98,824/- to the income declared; which came to be challenged by filing an appeal before the Commissioner of Income Tax (Appeals)-I. The merit was considered, but interference was declined and the appeal was dismissed as per order dated 30-11-2017. This was taken up by the assessee by filing a further appeal before the Tribunal as aforesaid, which ultimately led to the order dated 23-10-2018 (Annexure A-1); which is put to challenge in this appeal; contending that the Tribunal has not properly appreciated the facts and figures in the light of relevant provisions of law and precedents and that there is miscarriage of justice.

2 of 4

3.

It is in the said context that the Revenue has suggested some questions as questions involving substantial questions of law in terms of Section 260A of the Income Tax Act, 1961, which are in the following terms:

“1. Whether on points of law and on facts & circumstances of the case, the Ld. ITAT was justified in setting aside the order of CIT(A) who upheld the addition of Rs. 1,94,31,98,824/- made by the assessing officer, thereby ignoring the assessee's own admittance of change in the method of accounting adopted during the financial year in hand as was mentioned in From 3CD at point no. 13(b), marked as 'Yes' and also in the note 1.4 of the change in accounting policy under 1 of Balance Sheet as on 31.03.2014, thereby rendering the decision which is perverse? 2. Whether on the facts & circumstances of the case and on points of law, the Ld. ITAT was justified deleting the addition of Rs.1,94,31,98,824/- upheld by the CIT(A) thereby ignoring the ratio of Ld. ITAT Delhi 'D' Bench in Circle-4(1), Delhi in ITA No. 3816/Del./2011 wherein the appeal of the assessee was dismissed by holding that “the income under the head “profit and gains of business or profession” or “income from other sources” shall be computed according with either cash or mercantile system of accounting regularly employed by the assessee and once the method has been chosen it should be employed regularly by the assessee and assessee may not be permitted to change it in the subsequent years? 3. Whether on points of law and on facts & circumstances of the case, the Ld. ITAT was justified in setting aside the decision of the CIT(A), thereby giving a sweeping general observation that since in subsequent years no contrary view was taken by the AO, thence the addition of Rs. 1,94,31,98,824/- in the financial year in hand cannot be upheld, thereby ignoring the fact that each income tax proceeding is separate and distinct and the precedent of Res-Judicata is not applicable to Income Tax proceedings, thereby ignoring the ratios judgment of the Hon'ble Supreme Court in the cases of and Bharat Sanchar Nigam Limited and Anr Vs UOI & Ors (SC) 282 ITR 273?”

4.

However, on going through the order passed by the Tribunal, it is evident that a meticulous analysis of the facts and figures in the light of the legal provisions and precedents has been done by the Tribunal. It would be worthwhile to note that the subsequent events, insofar as, the assessee is concerned, have also specifically noted in paragraph 21, with regard to the changed stand of the Revenue in respect of the assessment for the subsequent years. To avoid

3 of 4 repetition, we find it appropriate to extract paragraphs 20 & 21 of the order passed by Tribunal as part of the order so as to have a clear picture as to the course and events:

“20. We find the Ahmedabad Bench of the Tribunal in ITA No. 334/Ahd/2014 & CO No. 186/Ahd/2014, order dated 01.06.2017 has observed as under:- '

5.

We have heard the rival contentions perused the material as per record. We have noticed that the assessee company was set up by the Government of Gujarat under the companies Act, 1956. The assessee company manage the public distribution system and other public welfare scheme on behalf of the Government of Gujarat. The Government of Gujarat has been providing handling commission as per the Government of Gujarat (GR) Government Resolution. We observed that the surplus which was earned by the assessee for the activities carried out on behalf of the Government of Gujarat belonged to the Government and payable to the Government along with interest after deducting of commission earned by the assessee. We further observed that the commission income earned by the assessee on the activities carried on behalf of the Government and other income from its own activities are taxable in the hand of assessee.

5.

1 We have further noticed that in the earlier assessment year the assessing officer has accepted the similar accounting practices followed in the case of the assessee. We considered that surplus earned on behalf of the Government for carrying out function of Public Distribution System as agent of Government is not taxable in the hand of the assessee.

5.

2 We have also perused the detail facts and findings elaborated in the order of the Ld.CIT(A) and considered that the Ld.CIT(A) is justified in deleting the addition made by the Assessing Officer by stating that surplus earned from functioning of PDS on behalf of Government cannot be taxed in the hand of the assessee. In view of the above stated facts and findings we uphold the order of the Ld.CIT(A).'

21.

The various other decisions relied on by the ld. counsel for the assessee in the paper book also supports its case. The submission of the ld. counsel for the assessee that in subsequent years, since subsidy receipt has been accepted by the Revenue, although u/s 143(1), and no action u/s 147 or 263 has been taken could not be controverted by the ld. DR. We, therefore, are of the considered opinion that the concession component received by the assessee Government company in the course of implementing government projects of PDS as its agent, the surplus of which, if any, was refundable or adjustable in future was not income of 4 of 4 the assessee. We, therefore, set aside the order of the CIT(A) and the grounds raised by the assessee are allowed.”

5.

After hearing learned standing counsel for the appellant/ Revenue, we do not find any reason to take a different view, especially in the context as discussed by the Tribunal in detail.

6.

There is no substantial question of law, so as to call for interference of this Court. Appeal fails and it is dismissed accordingly. (P.R. Ramachandra Menon) (Parth Prateem Sahu) Chief Justice Judge Pawan

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