PR. COMMISSIONER OF INCOME TAX, PANCHKULA vs. M/S HARYANA WAREHOUSING CORP BAY 15-18 SEC 2 PKL

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ITA/17/2017HC Punjab & HaryanaPHHC01117358201720 February 2017Bench: MR. JUSTICE SURINDER GUPTA,MRS JUSTICE DAYA CHAUDHARY3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Court noted that the Revenue's counsel fairly conceded that an identical substantial question of law had been dealt with by a Division Bench of the same Court in a previous case involving the same parties and assessment year. It was admitted that the Court had adjudicated the issue on merits in favor of the assessee and dismissed the Revenue's appeal. The Court acknowledged that the issue of revision of pay scales and unabsorbed overhead on capital work under miscellaneous expenses had been decided in favor of the assessee on merits. While the Revenue argued for the validity of the Section 263 proceedings, the Court found that the additions sought to be made by revising the Assessing Officer's order on these two issues could not be legally sustained. Therefore, the Tribunal's order did not require intervention. The Court clarified that it was not opining on the validity of the initiation of proceedings under Section 263, as the issue on merits had been pronounced against the Revenue.

What were the facts?

The Principal Commissioner of Income Tax, Panchkula (Revenue) appealed to the High Court against an order dated May 24, 2016, passed by the Income Tax Appellate Tribunal (ITAT) for assessment year 2009-10. The ITAT had dismissed the Revenue's appeal against the Commissioner of Income Tax's order dated March 6, 2014, which was passed under Section 263 of the Income Tax Act, 1961. The dispute involved the disallowance of Rs. 9,48,15,000/- claimed as prior period expenses for revision of pay scales and Rs. 15,16,675/- claimed as miscellaneous expenses, which were considered capital in nature. The Revenue's appeal to the High Court challenged the ITAT's decision to dismiss its appeal, particularly in light of the ITAT's earlier order upholding the validity of Section 263 proceedings.

What were the issues?

The High Court was to decide the following substantial questions of law: 1. Whether the ITAT was legally correct in dismissing the Revenue's appeal, given that the assessee's appeal against the Section 263 order was accepted, and the ITAT itself had previously held the invocation of Section 263 to be valid, with the issue pending before the High Court? 2. Whether the ITAT erred in dismissing the Revenue's appeal on the issue of revision of pay scales amounting to Rs. 9,48,15,000/-, claimed as prior period expenses and disallowed under Section 37, in view of the quashing of the Section 263 order on this issue? 3. Whether the ITAT erred in dismissing the Revenue's appeal on the issue of miscellaneous expenses amounting to Rs. 15,16,675/-, claimed as capital in nature, in view of the quashing of the Section 263 order on this issue? Contentions: Assessee: The judgment does not record specific contentions for the assessee. However, it is implied that the assessee benefited from the ITAT's order which quashed the Section 263 order on the merits of the disallowances. Revenue: The Revenue argued that the ITAT erred in dismissing its appeal, particularly questioning the ITAT's decision to dismiss the appeal despite its earlier finding on the validity of Section 263 proceedings. The Revenue also contended that the disallowances on revision of pay scales and miscellaneous expenses were justified.

Which sections of the Income-tax Act were involved?

Section 260A,Section 263,Section 37

AI-generated summary — verify with the full judgment below

ITA No.17 of 2017 (O&M) -1- ----- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH 110 Income Tax Appeal No.17 of 2017 (O&M) Date of decision: February 20, 2017 Pr. Commissioner of Income Tax, Panchkula ....Appellant versus M/s Haryana Warehousing Corporation ....Respondent CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL HON'BLE MR. JUSTICE RAMENDRA JAIN ***** Present: Mr. Yogesh Putney, Advocate for the appellant-Revenue. ****** AJAY KUMAR MITTAL, J.

(Oral)

The appellant-Revenue has approached this Court under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 24.05.2016 (Annexure A-7) passed by the Income Tax Appellate Tribunal, Division Bench, Chandigarh (in short, 'the Tribunal') in ITA No.176/CHD/2016 for the assessment year 2009-10, claimed the following substantial questions of law:- “(i) Whether on the facts and in the circumstances of the case, the Ld. ITAT is right in law in dismissing the Appeal of the Revenue in view of acceptance of Appeal of the Assessee against order dated 06.03.2014 passed by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961 ignoring the aspect that the invocation of provision of Section 263 of the Income Tax Sonia Kinra 2017.03.01 15:47 I attest to the accuracy and integrity of this document

ITA No.17 of 2017 (O&M) -2- ----- Act, 1961 has been held to be valid by the Ld. ITAT itself in its earlier order dated 21.10.2015 and the issue is pending adjudication before the Hon'ble High Court? (ii) Whether on the facts and in the circumstances of the case, the Ld. ITAT has erred in dismissing the Appeal of the Revenue on the issue of Revision of Pay Scales amounting to Rs.9,48,15,000/- claimed as prior period expenses and are not allowable under Section 37 of the Income Tax Act, 1961 in view of quashing of order under Section 263 of the Income Tax Act, 1961 on this issue? (iii) Whether on the facts and in the circumstances of the case, the Ld. ITAT has erred in dismissing the Appeal of the Revenue on the issue of Misc. Expenses amounting to Rs.15,16,675 claimed as Capital in nature in view of quashing of order under Section 263 of the Income Tax Act, 1961 on this issue? 2. At the outset, learned counsel for the Revenue very fairly accepted that the identical substantial question as claimed in the present appeal was dealt by the Division Bench of this Court in, 'Pr. Commissioner of Income Tax, Panchkula vs. M/s Haryana Warehousing Corporation' in ITA No.103 of 2016, decided on 11.11.2016 for the assessment year 2009-10. It was admitted that this Court on merits of the deduction which was sought to be disallowed under Section 263 of the Act, had adjudicated the issue in favour of the assessee and dismissed the appeal. In other words, it was not controverted that the issue has been adjudicated in favour of the assessee on merits on both the counts i.e. 'the provision of revision of pay scales and the unabsorbed overhead on capital work under miscellaneous expense' which are the questions in the present Sonia Kinra 2017.03.01 15:47 I attest to the accuracy and integrity of this document

ITA No.17 of 2017 (O&M) -3- ----- case. However, it was urged that the exercise of the powers of the Commissioner of Income Tax under Section 263 of the Act had been rightly invoked. 3. In view of the above, we do not find that the additions which were sought to be made by revising the order of the Assessing Officer relating to two issues, namely, 'the provision of revision of pay scales and the unabsorbed overhead on capital work under miscellaneous expenses' can be legally sustained and accordingly, the Tribunal's order does not require any intervention by this Court. Accordingly, the appeal is dismissed. However, it is clarified that the issue regarding the validity of initiation of proceedings under Section 263 of the Act is not being opined as the issue on merits has been pronounced against the revenue. (AJAY KUMAR MITTAL) JUDGE (RAMENDRA JAIN) February 20, 2017 JUDGE sonia gugnani Whether speaking/reasoned? Yes/No Whether reportable? Yes/No Sonia Kinra 2017.03.01 15:47 I attest to the accuracy and integrity of this document

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