THE PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA 1 vs. PRAHLADRAY M SHAH

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TAXAP/187/2021HC GujaratGJHC24025367202108 September 2021Bench: HONOURABLE THE CHIEF JUSTICE MS. JUSTICE SONIA GOKANI,HONOURABLE MR. JUSTICE RAJENDRA M. SAREEN2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court, without entering into the merits of the case and keeping the legal issues alive for decision in an appropriate case, dismissed and disposed of the Tax Appeal solely on the ground of the monetary aspect. The Court noted that the tax effect involved in the appeal for Assessment Year 2002-2003 was Nil. Therefore, the appeal was not decided on the substantial questions of law raised, but rather on the procedural ground of insignificant tax effect. The operative direction was to dismiss the appeal.

What were the facts?

The appellant, the Principal Commissioner of Income Tax, Vadodara 1, has filed this Tax Appeal challenging an order dated 21.02.2020 passed by the Income Tax Appellate Tribunal (ITAT). The ITAT's order pertains to Assessment Year 2002-2003 and was made in Appeal No. ITA No.1793/Ahd/2015. The appeal before the High Court raises two substantial questions of law concerning additions made by the Assessing Officer on account of non-operative finance and the ITAT's reliance on a previous co-ordinate bench decision. The revenue notes that the tax effect in this specific appeal for Assessment Year 2002-2003 is Nil, and an attempt was made to rely on CBDT Circular No.17 of 2019.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned ITAT erred in law and in facts in deleting the addition made on account of non-operative finance of Rs.3,70,000/-, considering that in the absence of details from the assessee, the Assessing Officer had no option but to make the addition, as returned/dishonoured cheques represented non-operative advances, distinct from operative advances? 2. Whether, in the facts and circumstances of the case, the learned ITAT erred in law and on facts in relying on the decision of a co-ordinate bench dated 30.01.2018 in ITA No.1758 to 1796/Ahd/2015 for Assessment Years 1998-99 to 2003-04, which was subsequently quashed and set aside by the High Court on 16.07.2019 in Tax Appeal No.47 of 2019 and other connected appeals? Assessee's Contentions: Not recorded. Revenue's Contentions: The learned standing counsel confirmed that similar issues regarding additions for non-operative finance and cases under the Negotiable Instruments Act have been challenged in other appeals. The revenue also highlighted the Nil tax effect for the Assessment Year 2002-2003 and attempted to invoke CBDT Circular No.17 of 2019.

Which sections of the Income-tax Act were involved?

Section 138

AI-generated summary — verify with the full judgment below

C/TAXAP/187/2021 ORDER DATED: 08/09/2021 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 187 of 2021 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA 1 Versus PRAHLADRAY M SHAH ========================================================== Appearance: MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MR. JUSTICE RAJENDRA M. SAREEN

Date : 08/09/2021

ORAL ORDER (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1. Aggrieved by the order dated 21.02.2020 passed by the Income Tax Appellate Tribunal (‘the ITAT’ for short) in an Appeal being ITA No.1793/Ahd/2015 for the Assessment Year 2002- 2003, the appellant has approached this Court with the following substantial questions of law: “(a) Whether on the facts and in the circumstances of the case, the learned ITAT has erred in law and in facts in deleting the addition made on account of non-operative finance of Rs.3,70,000/- without appreciating the facts that in absence of any details filed by the assessee, the Assessing Officer had no option but to come to the conclusion of addition of the same, since cheque returned/ dishonoured appearing in the bank accounts of the assessee represented non operative advances, in which cases u/s 138 of the N.I.Act have been filed and is distinct from the addition made on the basis of cheque credits representing operative advances? Page 1 of 2

C/TAXAP/187/2021 ORDER DATED: 08/09/2021 (b) Whether in the facts and circumstances of the case, learned ITAT has erred in law and on facts in relying on the decision of the co- ordinate bench dated 30.01.2018 in ITA No.1758 to 1796/Ahd/2015 for the A.Ys. 1998-99 to 2003-04, which has been quashed and set aside by this Hon’ble Court by order dated 16.07.2019 in Tax Appeal No.47 of 2019 and other connected appeals?” 2. We have heard the learned standing counsel, Mr.Varun Patel appearing for the appellant. He confirms that the very issues of addition made on account of non-operative and revealation of various cases under the Negotiable Instruments Act finance are already challenged in other appeals. We have noticed that the tax effect involved in the appeal of Assessment Year 2002-2003 is Nil. An attempt is made to take recourse to the CBDT Circular No.17 of 2019 dated 09.08.2019. 3. Without entering into the merits and keeping the legal issue alive to be decided in appropriate case, this Tax Appeal is dismissed and disposed of only on the ground of the monetary aspect. (SONIA GOKANI, J) (RAJENDRA M. SAREEN,J) M.M.MIRZA Page 2 of 2

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