THE COMMISSIONER OF INCOME TAX , KARNAL vs. M/S OM OVERSEAS, SHIV NAGAR, PANIPAT

ITA/721/2010HC Punjab & HaryanaPHHC01093686201031 January 2011Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL14 pages
AI SummaryRemanded

What were the facts?

The Revenue (Commissioner of Income Tax, Karnal) appealed against an order of the Income Tax Appellate Tribunal (ITAT) concerning assessment year 2004-05. The dispute involved the correct valuation of factory construction and the calculation of deduction under Section 80HHC. The Assessing Officer (AO) referred the matter to the District Valuation Officer (DVO) who reported a higher construction cost than declared by the assessee, M/s Om Overseas. The CIT(A) sought a revised report under Rule 46A of the Income Tax Rules, 1962, after the assessee raised objections. The revised report reduced the estimated cost but did not fully accept the assessee's objections regarding 'Humidification Plant' and 'Trenches'. The ITAT dismissed the Revenue's appeal and allowed the assessee's appeal, disapproving the DVO's valuation for 'Humidification Plant' and 'Trenches'.

What did the High Court hold?

The High Court held that questions (i) to (iii) were not substantial questions of law. The Tribunal correctly upheld the CIT(A)'s action in admitting additional evidence under Rule 46A and giving the assessee benefit as per the revised report. The Tribunal's appreciation of material on record for upholding objections regarding 'Humidification Plant' and 'Trenches' and deleting additions was a finding of fact and not perverse. For questions (iv) to (vi), the Court noted that the matter was covered by its earlier order in CIT v. M/s F.C.Sondhi and Company (P) Limited, which remanded similar issues for fresh decision to the Tribunal. Therefore, the High Court remanded these issues to the Tribunal for a fresh decision. The appeals were disposed of accordingly.

What were the issues?

1. Whether the ITAT was right in holding that the CIT(A) did not violate Rule 46A by admitting additional evidence, despite the AO having given an opportunity under Section 142A(3) and the assessee not submitting objections to the DVO's report before the AO? (Section 142A(3), Rule 46A) 2. Whether the ITAT was right in observing no violation of Rule 46A, given that the conditions for admitting additional evidence were not met by the assessee? (Rule 46A) 3. Whether the ITAT was right in treating sums of Rs.91,30,355/- for 'Humidification Plant' and Rs.1,20,01,718/- for 'Trenches' as investment, thereby ignoring Section 142A? (Section 142A) 4. Whether the ITAT was justified in allowing deduction under Section 80HHC on the face value of DEPB when turnover exceeded Rs.10 crores, considering proviso (ii), (iii), and (iv) inserted by the Taxation Law (Amendment) Act, 2005? (Section 80HHC) 5. Whether the ITAT was justified in allowing deduction under Section 80HHC for the entire DEPB amount by incorporating it into business profit under Section 28(iiib)? (Section 80HHC, Section 28(iiib)) 6. Whether the ITAT was justified in relying on the decision of M/s Topman Exports v. ITO, which was subsequently reversed by the Bombay High Court in CIT v. Kalpataru Colours and Chemical? Revenue's contentions: The CIT(A) was not justified in seeking a revised report and should have upheld the AO's additions. Objections regarding 'Humidification Plant' and 'Trenches' should not have been accepted as the DVO had considered and rejected them. The ITAT's reliance on Topman Exports was erroneous due to the subsequent reversal by the Bombay High Court. Assessee's contentions: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 260A,Section 142A,Section 131(1)(d),Section 80HHC,Section 28(iiib)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

Date of decision: 31.1.2011 The Commissioner of Income Tax, Karnal -----Appellant Vs. M/s Om Overseas, Shiv Nagar, Panipat ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Yogesh Putney, Sr.Standing Counsel for the revenue. Adarsh Kumar Goel,J.

1.

This order will dispose of ITA Nos.697, 689, 708 and 721 of 2010 as it has been stated by learned counsel for the revenue that all the four appeals involve common questions.

2.

ITA No.721 of 2010 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (for short, ‘the Act’) against the order of the Income Tax Appellate Tribunal, Delhi bench ‘B’ New Delhi passed in ITA No.2726/Del/2009 dated 29.1.2010 for the assessment year 2004-05, claiming following substantial questions of law:- “i) Whether on the facts and circumstances of the case and in law, the learned ITAT was right in holding that the CIT(A) had duly put all the objections and documents to all the parties for their comments, it cannot be said that there was violation of provisions contained in R

The order continues below.

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