M/S JINDAL STEEL AND POWER LTD vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1) GURGAON & ANR

Facts

The petitioner, M/s Jindal Steel and Power Ltd., filed four writ petitions challenging notices issued under Section 148 of the Income Tax Act, 1961, and subsequent orders imposing penalties for assessment years 2009-2010 and 2010-2011. The proceedings were initiated solely on the ground that the assessee had not maintained separate books of accounts for different units. The petitioner argued that the reassessment orders and penalties were passed despite a stay order and that the basis for reassessment was legally untenable. The revenue acknowledged that the law on this issue was settled by this Court in a previous judgment.

Held

The High Court held that the entire proceedings initiated under Section 148 of the Income Tax Act, 1961, for the assessment years 2009-2010 and 2010-2011, including the reassessment and penalty imposition, cannot be sustained. The Court relied on its prior decision in Commissioner of Income Tax, Panchkula vs. Micro Instruments Co. (2016) 388 ITR 46 (Punjab and Haryana), which held that separate books of accounts for different units of an assessee for a particular assessment year are not statutorily required. Since the sole basis for initiating the reassessment proceedings was found to be illegal, all subsequent actions, including the reassessment orders and penalties, were vitiated in law and consequently set aside. The Court directed that any amounts deposited by the petitioner or further actions taken based on these vitiated orders would also stand nullified. The ratio decidendi is that reassessment proceedings initiated solely on the ground of not maintaining separate books of accounts for different units are unsustainable in light of the established legal position that such separate maintenance is not mandatory under the Act.

Key Issues

1. Whether the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, for assessment years 2009-2010 and 2010-2011, based on the non-maintenance of separate books of accounts for different units, are legally sustainable? (Question of law) Assessee's Contentions: - The reassessment proceedings and subsequent penalty imposition are vitiated as the sole basis for initiation, i.e., non-maintenance of separate books of accounts for different units, is contrary to the law settled by this Court in Commissioner of Income Tax, Panchkula vs. Micro Instruments Co. (2016) 388 ITR 46 (Punjab and Haryana). - The respondents proceeded to pass orders and impose penalties despite a stay order granted by this Court, which is impermissible in terms of Section 275 of the Act. Revenue's Contentions: - The revenue conceded that the law as settled by this Court in Micro Instruments case (supra) has been accepted by the department and has attained finality.