M/S GOPAL INDUSTRIES PVT. LTD. vs. COMMISSIONER OF INCOME TAX

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ITA/24/2011HC Punjab & HaryanaPHHC01095565201130 January 2017Author: MR. JUSTICE RAMENDRA JAIN,MR. JUSTICE AJAY KUMAR MITTAL4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that in view of the accepted additional evidence, it was not proposing to record detailed facts. The Court decided to remit the matter to the assessing officer. The reasoning was that the additional evidence (Annexures A-11 and A-12) needed to be examined for veracity, authenticity, and relevancy by the assessing officer, who would also afford an opportunity of hearing to the assessee. Consequently, the orders of the CIT(A) and the ITAT were set aside. The assessing officer was directed to adjudicate the issue regarding Section 40(a)(ia) in light of the additional evidence, after providing an opportunity to the assessee and passing a speaking order. The appeal was disposed of accordingly. No specific finding was given on the substantial questions of law by the High Court itself, as the matter was remanded.

What were the facts?

The assessee, M/s Gopal Cotton Industries Pvt. Ltd., filed an appeal before the High Court of Punjab and Haryana challenging an order dated August 31, 2010, passed by the Income Tax Appellate Tribunal (ITAT). The appeal pertains to assessment year 2006-07. The assessee sought to produce additional evidence (Annexures A-11 and A-12) relating to the payee having paid income tax on the disputed amount. The High Court allowed the application for additional evidence, taking these documents on record. The original substantial questions of law were reframed by the assessee. The High Court heard the parties and, in light of the accepted additional evidence, decided not to record detailed facts, opting to remit the matter to the assessing officer.

What were the issues?

The High Court was to decide several substantial questions of law, initially framed as: 1. Whether the Tribunal misdirected itself in law and on facts by relying on irrelevant and perverse findings while ignoring relevant material. 2. Whether the Tribunal correctly held that the assessee was required to deduct Tax Deduction at Source (TDS) for the period prior to the issuance of a certificate under Section 197 of the Income Tax Act, 1961. 3. Whether a certificate issued under Section 197(1) on September 26, 2005, was applicable to payments made by the appellant, preventing disallowance under Section 40(a)(ia) for non-deduction of TDS. 4. Whether the Tribunal's order was perverse due to misreading the Section 197(1) certificate and non-application of mind. Reframed questions included: (a) Whether disallowance of expenses prior to August 29, 2005, under Section 40(a)(ia) is sustainable in law, considering the proviso to Section 40(a)(ia) and evidence of the deductee paying tax. (b) Whether the Tribunal illegally and perversely misinterpreted the Section 197 certificate, which operated retrospectively, while upholding disallowance under Section 40(a)(ia). (c) Whether expenses under Section 40(a)(ia) could be disallowed when the recipient had paid tax, to prevent double taxation. Assessee's contentions focused on the retrospective effect of the proviso to Section 40(a)(ia) and the applicability of the Section 197 certificate, arguing that since the deductee had paid tax, disallowance was unwarranted and would lead to double taxation. The revenue's contentions are not explicitly recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 260A,Section 197,Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Decided on : 30.01.2017 M/s Gopal Cotton Industries Pvt. Ltd. . . . Appellant Versus The Commissioner of Income Tax, Rohtak . . . Respondent CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL HON'BLE MR. JUSTICE RAMENDRA JAIN PRESENT: Mr. Sanjay Bansal, Sr. Advocate with Mr. B.M. Monga, Advocate and Mr. Rohit Kaura, Advocate for the appellant. Mr. Yogesh Putney, Advocate for the respondent. **** AJAY KUMAR MITTAL, J. (Oral) CM No.16015-CII of 2012 This is an application under Section 260A(7) of the Act, read with Order 41 Rule 27 of the Code of Civil Procedure, 1908, for production of documents (Annexures A-11 and A-12) by way of additional evidence in the present appeal. Notice of this application to the learned counsel for the non- applicant/respondent. Mr. Yogesh Putney, Advocate, accepts notice on behalf of the non-applicant/respondent. After hearing learned counsel for the parties, we find that the documents viz. Annexure A-11 & A-12, sought to be appended by way of additional evidence are relating to the material depicting that the income tax had been paid by the payee. The amount was included in the income of the Jawala Ram 2017.02.15 15:27 authenticity of this document Chandigarh - 2 - payee on which tax had been paid. We find that in such circumstances, the additional evidence sought to be produced is relevant. Accordingly, the application is allowed and the additional evidence (Annexures A-11 & A- 12) is taken on record. CM stands disposed of. Main case: The assessee by way of present appeal filed under Section 260A of the Income Tax Act, 1961 (in short 'the Act'), assailed the order dated 31st August, 2010, passed by the Income Tax Appellate Tribunal, New Delhi, Bench “C” (hereinafter referred to as 'the Tribunal'), in ITA No.4854/Del/2009, for the assessment year 2006-07, claiming the following substantial questions of law:- “(i) Whether the Tribunal misdirected itself in law as well as on facts in recording its conclusion based on irrelevant and perverse findings and in ignoring uncontroverted relevant material on record ? (ii) Whether the Tribunal was legally correct on the facts and in the circumstances of the case in holding that the assessee-appellant was required to deduct Tax Deduction at Source for the period prior to the date of the issuance of the Certificate dated 26.09.2005 issued by the Assessing Officer of the deductee under Section 197 of the Income Tax Act, 1961 ? (iii) Whether the certificate issued by the Assessing Officer under Section 197(1) of the Income Tax Act, 1961 on 26.9.2005 was applicable to the payments made by the appellant subject to non deduction of TDS and no disallowance in respect of the TDS not deducted could be made warranting an addition under Section 40(a)(ia) of the Income Tax Act, 1961 ? (iv) Whether the impugned Order passed by the Tribunal is Jawala Ram 2017.02.15 15:27 authenticity of this document Chandigarh - 3 - perverse, mis-reading of the certificate issued under Section 1971(1) of the Income Tax Act, 1961 and a result of non application of mind ?”

3.

Vide CM No.2162-CII of 2015, the assessee-appellant had claimed the reframed substantial questions of law and amended grounds of appeal, which were accepted by this Court on February 05, 2015 and the same were taken on record. The reframed substantial questions of law are thus:- “(a) Whether the impugned order passed by the Tribunal upholding the Order of the CIT(A) in disallowing the expenses prior to 29.08.2005 for the assessment year 2006-07 is sustainable in law in view of the proviso to Section 40(a)(ia) of the Act, interpreted to be retrospective in effect, on the basis of the documents placed on the records by way of additional evidence justifying the payment of income tax by the deductee on the amount paid by the appellant herein ? (b) Whether the Tribunal acted illegally and perversely in misinterpreting the certificate dated 26.09.2005 issued by the Assessing Officer of the deductee under Section 197 of the Income Tax Act, 1961 which operated retrospectively w.e.f. 03.12.2004 to 31.03.2006, while upholding the disallowance under Section 40(a)(ia) towards expenses claimed by the appellant and income shown by the deductee having been subjected to payment of income tax thereon for the period prior to 26.09.2005 for the assessment year 2006-07 ? (c) Whether expenses under Section 40(a)(ia) of the Act at the hands of the appellant could be disallowed in respect of the payments on which correspondingly tax had been paid by the recipient of the income i.e. deductee, so as to prevent the applicability of the principle of double taxation not permitted by law under Jawala Ram 2017.02.15 15:27 authenticity of this document Chandigarh - 4 - the Income Tax Act, 1961 ?”

4.

We have heard learned counsel for the parties.

5.

In view of the fact that vide CM No.16015-CII of 2012, the application for additional evidence filed by the appellant has been accepted, we do not propose to record the detailed facts in the case, as the matter is required to be remitted to the assessing officer to examine the veracity, authenticity and relevancy of these documents after affording opportunity of hearing to the appellant-assessee. Consequently, the orders of the CIT(A) as well as the Tribunal are set aside and the matter is remanded to the assessing officer for adjudicating the issue regarding Section 40(a)(ia) of the Act, in the light of the additional evidence produced by the assessee after affording an opportunity to the assessee and by passing a speaking order in accordance with law. The present appeal stands disposed of accordingly. (AJAY KUMAR MITTAL) JUDGE (RAMENDRA JAIN) January 30, 2017 JUDGE J.Ram

Whether speaking/reasoned: Yes/No Whether Reportable: Yes/No Jawala Ram 2017.02.15 15:27 authenticity of this document Chandigarh

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