C.I.T.PATIALA vs. M/S RIETA BIDCUITS CO.(P) LTD.PATIALA

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ITR/70/1990HC Punjab & HaryanaPHHC01021625199017 August 2007Author: MR. JUSTICE M.M. KUMAR,MR. JUSTICE RAJESH BINDAL3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court decided the reference against the revenue. While the primary question posed was whether fresh proceedings under Section 263 could be initiated on a different issue if earlier proceedings were filed, the Court noted that the ITAT had made a finding of fact that the earlier and subsequent proceedings under Section 263 were not on different issues, and this finding was not being challenged. Furthermore, the Court observed that for subsequent assessment years (1983-84), an identical issue had been decided in favour of the assessee and against the revenue. Applying the principle of consistency, the Court chose not to take a different view on a technical reason. Therefore, without specifically opining on the merits of the Section 263 proceedings, the reference was decided against the revenue, implying the ITAT's order was upheld.

What were the facts?

The assessee, M/s Rieta Biscuits Co. (P) Ltd., Patiala, had its assessment for the assessment year 1982-83 completed at nil income. The Assessing Officer had allowed deductions against lease income, which were not admissible. The Commissioner of Income-tax (CIT) initiated proceedings under Section 263 of the Income Tax Act, 1961, issuing a notice in March 1986. These proceedings were subsequently filed. The CIT re-initiated proceedings under Section 263 on March 25, 1987, directing a fresh assessment. The assessee appealed to the Income Tax Appellate Tribunal (ITAT), which set aside the CIT's order, holding it to be without jurisdiction. The ITAT found that the earlier and later proceedings under Section 263 were not on different issues.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that proceedings once filed under Section 263, on an issue, cannot be re-initiated on a different issue within the time limit allowed by law? Assessee's Contention: The assessee argued that the ITAT was correct in holding that once proceedings under Section 263 were initiated and subsequently filed, fresh proceedings on a different issue could not be initiated within the time limit. The ITAT's finding that the earlier and later proceedings were not on different issues was a finding of fact, not subject to challenge in this reference. Revenue's Contention: The revenue contended that fresh proceedings under Section 263 could be initiated within the time limit, even if on a different issue, provided the original assessment order was erroneous and prejudicial to the revenue. The judgment does not explicitly record the revenue's specific arguments on the legal interpretation of re-initiation of proceedings under Section 263, but it is implied that they challenged the ITAT's finding on the nature of the issues.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 32A,Section 256(1)

AI-generated summary — verify with the full judgment below

In the High Court of Punjab and Haryana, Chandigarh.

Date of Decision: 17.08.2007 The Commissioner of Income-tax, Patiala

…Applicant Versus M/s Rieta Biscuits Co. (P) Ltd., Patiala

…Respondent CORAM: HON’BLE MR. JUSTICE M.M. KUMAR

HON’BLE MR. JUSTICE RAJESH BINDAL Present: Mr. Yogesh Putney, Advocate for the applicant/revenue.

Mr. Akshay Bhan,Advocate for the respondent/assessee.

RAJESH BINDAL, J.

In this reference, the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short “the Tribunal”) vide its order dated 11.7.1988 arising out of ITA No. 502/Chandi/87 has referred the following question of law under Section 256(1) of the Income Tax Act, 1961 (for short “the Act) for the assessment year 1982-83 for opinion of this Court:- “Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that the proceedings once filed under the provisions of Section 263, on an issue, fresh proceedings u/s 263 cannot be initiated, within the time limit allowed under the law, even if the later proceedings are initiated on a different issue?”

2.

Briefly noticed, the facts are that vide order dated 2.6.1984 passed under Section 143(3) of the Act, the assessment was completed at nil income. Vide agreement dated 31.8.1977, the assessee-company leased out its land, building and plant and machinery to M/s Bakemans Home Products, a partnership firm and while framing assessment, the lease income of the assessee-company was wrongly assessed as business income. Accordingly, the investment allowance of Rs. 7,23,723/-, other expenses amounting to Rs. 50,111/- and extra shift allowance on plant and machinery amounting to Rs. 1,15,865/- were wrongly allowed by the IAC (Asstt.). As the above deductions were not admissible against the lease income, proceedings under Section 263 of the Act were initiated by the Commissioner of Income-tax (for short “the CIT”). In March 1986, notice was issued to the assessee for the assessment year 1982-83 to show cause as to why assessment order be not modified by passing suitable remedial orders. The proceedings initiated were subsequently filed. The CIT vide order dated 25.3.1987 re-initiated proceedings under the provisions of Section 263 of the act and directed the IAC (Asstt.), Patiala to frame a fresh assessment according to law after affording proper opportunity of hearing to the assessee. Being aggrieved, the assessee filed the appeal before the Tribunal who vide order dated 11.7.1988 accepted the appeal and set aside the order of the CIT holding it to be without juri iction.

3.

A perusal of order of the Tribunal shows that there is finding of fact that earlier proceedings initiated under Section 263 of the Act and the proceedings initiated subsequently were not on different issues as the same relate to only one issue. The perversity of these findings is not an issue in the present case.

4.

While deciding ITR No. 35 of 1991 (The Commissioner of Income- Tax, Patiala v. M/s Rieta Biscuits Co. Pvt. Ltd., Patiala) arising out of orders passed by the Tribunal for the assessment year 1983-84 on the issue of entitlement to deductions under Section 32A of the Act, the issue was decided in favour of the assessee and against the revenue.

5.

Keeping in view the principles of consistency once the issue on merits has been decided against the revenue on the same issue during the subsequent assessment years, we do not deem it appropriate to take a different view on a technical reason. Accordingly, without specifically opining on the issue on merits, the reference is decided against revenue.

6.

Reference is disposed of accordingly. (Rajesh Bindal)

Judge (M.M.Kumar)

Judge August 17, 2007

“DK”

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