PR. COMMOISSIONER OF INCOME TAX vs. M/S NECTAR LIFESCIENCE LTD

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ITA/274/2017HC Punjab & HaryanaPHHC01117474201728 August 2017Author: MR. JUSTICE SURINDER GUPTA,MR. JUSTICE ARUN MONGA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal on the grounds of territorial jurisdiction. It held that since the Assessing Officer was based in New Delhi, the CIT(A) adjudicated the first appeal in New Delhi, and the ITAT also passed its order in New Delhi, the High Court at Chandigarh lacked the territorial jurisdiction to adjudicate the appeal filed under Section 260A of the Act. The Court relied on its previous judgments in Commissioner of Income Tax (Appeals), Gurgaon Vs. M/s Parabolic Drugs Limited and Commissioner of Income Tax Faridabad Vs. M/s Motorola India Limited, which established that the High Court has no territorial jurisdiction to hear appeals concerning orders passed by authorities located outside its territorial jurisdiction. Consequently, the appeal was returned to the revenue for filing before the competent court of jurisdiction. The substantive issues regarding the penalty under Section 271(1)(c) were not decided on merits.

What were the facts?

The Principal Commissioner of Income Tax (Central), Gurgaon (appellant-revenue) filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 30.11.2016 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench. The ITAT had allowed the appeal of M/s Nectar Lifescience Limited (assessee) and deleted the penalty imposed under Section 271(1)(c) of the Act for the assessment year 2001-02. The assessment was completed with additions totaling ₹9,50,087/- under various sections, including Section 43B. The additions were confirmed by the CIT(A) and initially by the ITAT. Subsequently, a penalty of ₹23,41,325/- was imposed by the Assessing Officer and confirmed by the CIT(A). The ITAT, in its impugned order, deleted this penalty, relying on the Supreme Court decision in CIT Ahmedabad Vs. Reliance Petroproducts Private Limited.

What were the issues?

1. Whether, in view of Explanation (ii) of Section 271(1)(c) of the Income Tax Act, the onus to prove no fault or neglect in filing correct income was not on the assessee? (Question of law) 2. Whether the finding of the Assessing Officer regarding furnishing of inaccurate particulars of income, affirmed by the CIT(A) and ITAT, was appropriately considered by the ITAT in its impugned order? (Question of mixed law and fact) 3. Whether the wrong and inaccurate claim made by the assessee under Section 80HHC regarding working of business profits can be said to be a contentious issue? (Question of law) 4. Whether, once the disallowance of gratuity amount was found to be against the provisions of law, the imposition of penalty was a direct consequence? (Question of law) 5. Whether, when the claim made under Section 43B was ex-facie bogus, the ITAT's view in deleting the penalty on this count is proper? (Question of law) 6. Whether the ITAT's view in the impugned order is sustainable in law and fact, or is it perverse? (Question of law) 7. Whether the ITAT's view in the impugned order is non-speaking? (Question of law) Assessee's Contentions: The judgment does not record specific contentions from the assessee regarding these issues. The ITAT allowed the appeal and deleted the penalty, relying on CIT Ahmedabad Vs. Reliance Petroproducts Private Limited (2010) 322 ITR 158. Revenue's Contentions: The revenue argued that the onus was on the assessee under Explanation (ii) of Section 271(1)(c). They contended that the findings of furnishing inaccurate particulars of income and the ex-facie bogus claim under Section 43B should have led to the penalty. The revenue also questioned the ITAT's order for being non-speaking and perverse. The primary argument before the High Court was about territorial jurisdiction.

Which sections of the Income-tax Act were involved?

Section 260A,Section 271(1)(c),Section 43B,Section 36(1)(va),Section 2(24)(x),Section 80HHC,Section 143(3)

AI-generated summary — verify with the full judgment below

ITA No. 274 of 2017 1

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA No. 274 of 2017

Date of decision: 28.08.2017 Pr. Commissioner of Income Tax (Central), Gurgaon

……Appellant

Vs. M/s Nectar Lifescience Limited, (through its Managing Director) 1596, Bhagirath Place, Delhi-110006

…..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL

HON’BLE MR. JUSTICE AMIT RAWAL Present: Mr. Rajesh Sethi, Senior Standing Counsel with Mr. Tushar

Gera, Advocate for the appellant-revenue. Ajay Kumar Mittal,J.

1.

The appellant-revenue has filed the instant appeal under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 30.11.2016, Annexure A.5, passed by the Income Tax Appellate Tribunal, Delhi Bench ‘F’, New Delhi (in short, “the Tribunal”) in ITA No. 2680/DEL/2010, for the assessment year 2001-02, claiming following substantial questions of law:- (i) “Whether on the facts and in the circumstances of the case, in view of Explanation (ii) of Section 271(1)(c) of Income Tax Act the onus to prove that there was no fault or neglect in filing the correct income was not on assessee?

(ii) Whether on the facts and in the circumstances of the case, the finding recorded by the Assessing Officer in quantum proceedings establishing the furnishing of inaccurate particulars of income by assessee which was affirmed by the CIT(A) and further affirmed by ITAT has not been Gurbax Singh 2017.09.12 11:53

ITA No. 274 of 2017 2

considered appropriately by the ITAT by passing the impugned order dated 30.11.2016?

(iii) Whether on the facts and in the circumstances of the case, the wrong and inaccurate claim made by assessee under Section 80HHC regarding working of business profits can be said to be a contentious issue?

(iv) Whether on the facts and in the circumstances of the case, in hand, once it is seen that the disallowance of gratuity amount was found to be against the provisions of law, the imposition of penalty was not bound to follow as a direct consequence thereof?

(v) Whether on the facts and in the circumstances of the case, in hand once the claim made under Section 43B was ex-facie bogus, the view point of ITAT in deleting the penalty on this count is proper or not?

(vi) Whether on the facts and in the circumstances of the case, in hand the view point of the ITAT taken in impugned order is neither sustainable in the eyes of law nor maintainable in the light of the facts and circumstances of the case and is not perverse in nature?

(vii) Whether on the facts and in the circumstances of the case, in hand the view point of the ITAT while passing the impugned order is not non-speaking in nature?”

2.

A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. Assessment in this case was completed under Section 143(3) of the Act at a total income of ` 4,43,44,621/- by making addition of ` 9,50,087/- under Sections 43B, 36(1)(va) and 2(24)(x) of the Act, ` 1,37,286/- on account of selling and distribution expenses, ` 61,859/- on account of depreciation of pollution

ITA No. 274 of 2017 3

and control equipment, ` 4,60,485/- on account of gratuity and ` 50,23,687/- under Section 80HHC of the Income Tax Act. The assessee filed an appeal before the Commissioner of Income Tax Appeals [CIT(A)]. The CIT(A) confirmed the additions made by the Assessing Officer. The Assessee filed an appeal before the Tribunal. Vide order dated 29.07.2008, Annexure A.2, the Tribunal dismissed the appeal and confirmed the additions made by the Assessing Officer. Penalty order under Section 271(1)(c) was passed by Deputy Commissioner of Income Tax, Circle 13(1), New Delhi, i.e. the Assessing Officer, imposing penalty of ` 23,41,325/-, vide order dated 27.03.2009, Annexure A.

3.

Aggrieved by the ITR 158. Hence, the instant appeal by the appellant-revenue.

3.

We have heard learned counsel for the appellant-revenue.

4.

The issue that arises for consideration in this appeal is that when the Assessing Officer who passed the assessment order and the penalty order was based at New Delhi and the first appeal was adjudicated by the CIT(A), New Delhi and the second appeal by the Tribunal at New Delhi, whether the appeal under Section 260A of the Act before this Court would be maintainable.

5.

The matter is no longer res integra. This Court in Commissioner of Income Tax (Appeals), Gurgaon Vs. M/s Parabolic

ITA No. 274 of 2017 4

Drugs Limited, ITA No.49 of 2012 decided on 11.10.2012, following the Division Bench judgment of this Court in Commissioner of Income Tax Faridabad Vs. M/s Motorola India Limited ITA No. 44 of 2005 decided on 03.10.2007 had held as under:- “Accordingly, the present appeal is dismissed by holding that this court has no territorial jurisdiction to adjudicate upon the lis over an order passed by the Assessing Officer at New Delhi. Consequently, the appeal is returned to the Revenue for filing before the competent Court of jurisdiction in accordance with law.”

6.

In view of the above, present appeal is dismissed as this Court has no territorial jurisdiction to adjudicate upon the lis over an order passed by the Assessing Officer at New Delhi. Consequently, the appeal is returned to the revenue for filing before the competent court of jurisdiction in accordance with law.

(Ajay Kumar Mittal)

Judge

August 28, 2017

(Amit Rawal)

‘gs’

Judge Whether speaking/reasoned

Yes Whether reportable

Yes

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