CIT vs. M/S NAHAR SPINING MILLS LTD,LU

ITR/72/1998HC Punjab & HaryanaPHHC01038054199827 October 2006Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL2 pages
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What did the High Court hold?

The High Court held that the view taken by the Income Tax Appellate Tribunal was in accordance with the judgment of the Hon'ble Supreme Court in Commissioner of Income Tax v. Gujarat Electricity Board, (2003) 260 ITR 84. The Tribunal had held that once a notice under section 143(2) of the Income Tax Act, 1961, had been issued, an intimation under section 143(1)(a) was not permissible. The court found no reason to differ from the Tribunal's finding on this procedural aspect. The judgment does not explicitly discuss the second issue regarding income from non-trade investment and its inclusion for section 80-HHC deduction, but by answering the referred questions in favour of the assessee, it implicitly upholds the Tribunal's decision on both counts. The questions referred were answered against the revenue and in favour of the assessee. The reference was disposed of accordingly.

What were the facts?

The assessee, M/s. Nahar Spinning Mills Limited, filed its return for assessment year 1992-93 on 31.12.1992, claiming deduction under section 80-HHC. A revised return was filed on 11.3.1994, reducing this claim. The Assessing Officer (AO) issued a notice under section 143(2) on 17.12.1993. Subsequently, on 11.1.1994, before the revised return was filed, the AO sent an intimation under section 143(1)(a), treating income from non-trading investment as income from other sources and creating a tax demand. The assessee's application for rectification under section 154 was rejected, and its appeal to the Commissioner of Income Tax (Appeals) was dismissed. The Income Tax Appellate Tribunal (ITAT) accepted the assessee's plea, holding that an intimation under section 143(1)(a) was impermissible after issuing a notice under section 143(2). The Commissioner of Income Tax (Central) Ludhiana is the petitioner (revenue).

What were the issues?

The High Court was asked to decide the following questions of law: 1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that a prima-facie adjustment made under section 143(1)(a) is not permitted by law, when on the face of the statement of accounts, it was clearly a wrong claim of the assessee? 2. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that income from non-trade investment forms part of profit from business or profession for the purpose of deduction under section 80-HHC? Contentions: Assessee: The view taken by the Tribunal is in accordance with the Supreme Court's decision in Commissioner of Income Tax v. Gujarat Electricity Board, (2003) 260 ITR 84. Revenue: The view taken by the Tribunal is contrary to law. No specific provision or judgment was cited in support of this argument.

Which sections of the Income-tax Act were involved?

Section 143(1)(a),Section 143(2),Section 154,Section 80-HHC

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
ITR No.72 of 1998 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No.72 of 1998 Date of decision:27.10.2006 The Commissioner of Income Tax, (Central) Ludhiana ....Petitioner versus M/s. Nahar Spinning Mills Limited, Ludhiana ....Respondent CORAM: HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE RAJESH BINDAL Present: Mr. SK Garg Narwana, Advocate, for the revenue. Mr. Sanjay Bansal, Advocate, for the respondent.

JUDGMENT: Following questions have been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, arising out of its order dated 11.4.1996 in ITA No.1385/Chandi/1994, for the assessment year 1992-93:- “i) Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal was right in law in holding that prima-facie adjustment made under section 143(1)(a) is not permitted by law, when on the face of the statement of accounts, it was clearly a wrong claim of the assessee? ii) Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that income from non-trade investment forms part of

The order continues below.

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