THE COMM.OF INCOME TAX vs. M/S RAODMASTER IND.

ITC/90/1999HC Punjab & HaryanaPHHC01038512199918 March 2013Author: MR. JUSTICE HEMANT GUPTA,MS. JUSTICE RITU BAHRI4 pages
AI SummaryDismissed

What were the facts?

The Revenue (Commissioner of Income Tax, Patiala) has filed an Income Tax Case (ITC) under Section 256(2) of the Income Tax Act, 1961, challenging an order dated August 19, 1998, passed by the Income Tax Appellate Tribunal (ITAT) for the assessment year 1990-91. The ITAT had partly allowed an appeal against an order passed by the Commissioner of Income Tax (CIT) under Section 263. The original assessment order dated July 22, 1991, was rectified twice. The CIT, exercising revisional powers under Section 263, set aside the assessment order on January 11, 1993, leading to a reframed assessment on March 30, 1993. The CIT's subsequent order on February 3, 1995, was partly allowed by the ITAT, which quashed the CIT's order concerning items not included in the show cause notice issued under Section 263.

What did the High Court hold?

The High Court dismissed the Revenue's petition, finding no merit in the arguments raised. The Court affirmed that Section 263 of the Act empowers the CIT to examine records and pass orders prejudicial to the revenue only after giving the assessee an opportunity of being heard. Since the show cause notice was limited to Sections 32 AB and 80 HHC, the assessee was not given an opportunity of hearing on other matters. Therefore, the ITAT's decision to quash the CIT's order in respect of items not forming the subject matter of the show cause notice was not illegal. The Court rejected the argument that the matter should have been remanded, stating that the ITAT's order was categorical in quashing the order only for matters not covered by the show cause notice. The Revenue had the option to issue a fresh show cause notice for other matters but failed to do so, precluding them from reopening the concluded assessment at this stage. The appeal was dismissed.

What were the issues?

The High Court was asked to decide three substantial questions of law: 1. Whether the ITAT was correct in quashing the CIT's order under Section 263 concerning items not covered by the show cause notice issued under Section 263. 2. Whether the ITAT was correct in holding that the matters on which the assessment was set aside under Section 263 were not put on notice, either in writing or verbally, before the CIT passed the order under Section 263. 3. Whether, in light of the Supreme Court's decision in CIT Vs. Electro House, the ITAT was correct in holding that a written notice was necessary, especially when the assessee had opportunities to argue before the Assessing Officer regarding the admissibility of claims under Sections 32 AB and 80 HHC. The Revenue argued that the non-inclusion of certain facts in the show cause notice was a procedural irregularity and that an opportunity should have been given to the Revenue to issue notice for such matters, citing the Supreme Court's decision in CIT Vs. Electro House. The Revenue contended that the ITAT's order should be set aside. The judgment records no specific arguments from the assessee.

Which sections of the Income-tax Act were involved?

Section 256(2),Section 143(3),Section 154,Section 263,Section 32 AB,Section 80 HHC

AI-generated summary — verify with the full judgment below

IN THE PUNJAB & HARYANA HIGH COURT AT CHANDIGARH ITC No.90 of 1999 Date of Decision: 18.03.2013 The Commissioner of Income Tax, Patiala …Petitioner Versus M/s Roadmaster Industries of India Ltd. …Respondent CORAM: HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MS. JUSTICE RITU BAHRI Present: Ms. Savita Saxena, Advocate, for the petitioner. HEMANT GUPTA, J. (ORAL)

The Revenue has invoked the juri iction of this Court under Section 256(2) of the Income Tax Act, 1961 (for short ‘the Act’) raising following substantial questions of law arising out of an order dated 19.08.1998 passed by the Income Tax Appellate Tribunal (for short “the Tribunal”) in respect of assessment year 1990-91: “(i)

Whether on the facts and in the circumstances of the case the Hon’ble ITAT was right in law in quashing the order of the Commissioner of Income Tax passed u/s 263 in respect of the items which do not form the subject matter of the show cause notices issued u/s 263? (ii)

Whether on the facts and in the circumstances of the case the Hon’ble ITAT was right in law in holding that the matter on which the assessment was set-aside under Section 263 were not put on notice either in writing or verbally before pass

The order continues below.

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