COMMISSIONER OF INCOME TAX vs. PETLAD TURKEY RED DYE WORKS CO. LTD.

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ITR/157/1984HC GujaratGJHC24011831198409 February 1999Author: HONOURABLE DR. JUSTICE J.N.BHATT,HONOURABLE MR. JUSTICE ANIL R. DAVE2 pages
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What did the High Court hold?

The High Court held that the order passed by the ITO giving effect to the order of the CIT under Section 263 of the Income-tax Act, 1961, was liable to be cancelled. The reasoning provided was based on the submission by the revenue's counsel that the CIT's order under Section 263 had been declared bad in law by the Income Tax Appellate Tribunal (ITAT) in other proceedings, and this ITAT order had become final. Since the foundation (the CIT's order) was invalid, any consequential order passed by the ITO based on it would also be invalid. Therefore, the cancellation of the ITO's order by the Tribunal was justified. The question referred to the Court was answered in the affirmative. The operative direction was to dispose of the reference with no order as to costs.

What were the facts?

This case involves an Income Tax Reference filed by the Commissioner of Income Tax before the High Court of Gujarat at Ahmedabad. The reference was made under Section 256(1) of the Income-tax Act, 1961, concerning an order passed by the Income Tax Officer (ITO) giving effect to an order of the Commissioner of Income Tax (CIT) under Section 263. The assessee is Petlad Turkey Red Dye Works Co. Ltd. The specific assessment year(s) are not explicitly stated. The core issue revolves around the validity of the ITO's order, which was based on the CIT's order under Section 263. The revenue's counsel acknowledged that the CIT's order under Section 263 had been previously held to be bad in law by the Income Tax Appellate Tribunal (ITAT) in separate proceedings, and this ITAT order had become final.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the order passed by the ITO giving effect to the orders of the CIT under section 263 of the Income-tax Act, 1961 was liable to be cancelled? Assessee's Contention: The judgment does not record any specific contentions made by the assessee. However, the outcome implies the assessee would have supported the Tribunal's decision to cancel the ITO's order. Revenue's Contention: The revenue, through its learned advocate, submitted that due to subsequent developments, it was not necessary to delve into the detailed facts. The crucial point raised was that the CIT's order under Section 263 had already been declared bad in law by the ITAT in separate proceedings, and this ITAT order had attained finality. Consequently, the CIT's order could not be considered valid, rendering the ITO's consequential order also invalid.

Which sections of the Income-tax Act were involved?

Section 256,Section 263

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 157 of 1984

For Approval and Signature:

Hon'ble MR.JUSTICE J.N.BHATT and MR.JUSTICE A.R.DAVE ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? 1 Yes 2 to 5 No -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus PETLAD TURKEY RED DYE WORKS CO. LTD. -------------------------------------------------------------- Appearance: MR BB NAIK with MR MANISH R BHATT for Petitioner SERVED BY RPAD - (N) for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE J.N.BHATT and MR.JUSTICE A.R.DAVE Date of decision: 09/02/99

ORAL JUDGEMENT (per A.R. Dave, J.)

The Income Tax Appellate Tribunal, Ahmedabad Bench 'B', has referred the following question for the opinion of this Court under the provisions of sec. 256(1) of the Income-tax Act, 1961. "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the order passed by the ITO giving effect to the orders of the CIT under section 263 of the Income-tax Act, 1961 was liable to be cancelled?"

2.

Learned Advocate Shri B.B. Naik appearing for the revenue has submitted that in view of the peculiar facts and circumstances and developments which have taken place during pendency of the present reference, it would not be necessary to go into the facts of the case in detail. It has been submitted by him that the order of the CIT under sec. 263 of the I.T. Act referred to hereinabove was held to be bad in law by the Tribunal in another proceedings and the said order of the Tribunal has become final by this time. In view of the said facts, the order passed by the CIT under section 263 of the Income-tax Act, 1961 cannot be said to be a valid order.

3.

In the above-referred circumstances, the order of the ITO giving effect to the order of the CIT u/s 263 of the I.T. Act will have to be cancelled.

4.

In the circumstances, cancellation of the order passed by the ITO by the Tribunal is justified and the question referred to this Court is answered in affirmative.

The reference is accordingly disposed of with no order as to costs.

_____ (hn)

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