C.I.T vs. HYBRID RICE INTERNATIONAL PVT LTD

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ITA - 1060 / 2008HC Delhi17 September 20081 pages
For Petitioner: B.K.SINGH
AI SummaryRemanded

What did the High Court hold?

The High Court noted that the Income Tax Appellate Tribunal had not decided the issue on merits. Instead, the Tribunal's order was based on judicial pronouncements that were subsequently either overruled or rendered inapplicable by legislative amendments. Specifically, the Supreme Court's decision in Virtual Soft Systems Ltd v. CIT was overruled by CIT v Gold Coin Health Food Pvt. Ltd, and the Delhi High Court's decisions in CIT v. Ram Commercial Enterprises Ltd and CIT v. Jai Bharat Maruti Ltd were no longer relevant due to the retrospective introduction of sub-section (1B) to Section 271 of the Income Tax Act, 1961, by the Finance Act, 2008. Consequently, the High Court set aside the impugned order of the ITAT. The matter was remanded back to the ITAT for a fresh decision on merits, considering the current legal position. The appeal before the High Court was disposed of.

What were the facts?

The appeal was filed by the assessee against the order of the Income Tax Appellate Tribunal (ITAT) dated 20.12.2007, pertaining to assessment year 2002-03. The ITAT's order concerned the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961. The ITAT had based its decision on the Supreme Court's ruling in Virtual Soft Systems Ltd v. CIT and the Delhi High Court's decisions in CIT v. Ram Commercial Enterprises Ltd and CIT v. Jai Bharat Maruti Ltd. The parties agreed that the Supreme Court's decision in Virtual Soft Systems Ltd was overruled by a larger bench in CIT v Gold Coin Health Food Pvt. Ltd. Furthermore, the decisions in Ram Commercial Enterprises and Jai Bharat Maruti Ltd were no longer applicable due to the retrospective introduction of sub-section (1B) to Section 271 of the Act by the Finance Act, 2008.

What were the issues?

1. Whether the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961, is valid in light of the subsequent overruling of the Supreme Court decision relied upon by the Tribunal and the retrospective amendment to Section 271 of the Act. Assessee's Contention: The assessee, through its counsel, agreed that the Supreme Court's decision in Virtual Soft Systems Ltd v. CIT, which formed the basis of the ITAT's order, had been overruled by a larger bench of the Supreme Court in CIT v Gold Coin Health Food Pvt. Ltd. The assessee also acknowledged that the Delhi High Court's decisions in CIT v. Ram Commercial Enterprises Ltd and CIT v. Jai Bharat Maruti Ltd were no longer applicable due to the retrospective amendment of Section 271 by the Finance Act, 2008. Revenue's Contention: The revenue's counsel did not present any arguments contrary to the assessee's submissions regarding the applicability of the cited precedents and the impact of the legislative amendment.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 271(1B)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF DELHI AT NEW DELHI . 17.09.2008 . Present: Mr B. K. Singh, Advocate for the Appellant. Mr Prakash Kumar, Advocate for the Respondent. . + ITA No. 1060/2008 . This appeal is directed against the order passed by the Income Tax Appellate Tribunal on 20.12.2007, inter alia, in ITA No.285/Del /07 pertaining to the assessment year 2002-03. The said matter pertains to the levy of penalty under Section 271 (1) (c) of the Income Tax Act, 1961. The Tribunal has passed the impugned order on the basis of the decision of the Supreme Court in Virtual Soft Systems Ltd v. CIT : 289 ITR 83 as also on the basis of this Court?s decisions in CIT v. Ram Commercial Enterprises Ltd : 246 ITR 568 (Del) and CIT v. Jai Bharat Maruti Ltd : 165 Taxman 240 (Del). The learned counsel for the parties are agreed that the decision of the Supreme Court in Virtual Soft Systems Ltd (supra) has been over-ruled by a larger Bench of the Supreme Court in CIT v Gold Coin Health Food Pvt. Ltd : 304 ITR 308. Moreover, the decision in Ram Commercial Enterprises (supra) as well as in the case of Jai Bharat Maruti Ltd (supra) would no longer be applicable in view of the introduction of sub-section (1B) to Section 271 of the Act by virtue of the Finance Act, 2008 with retrospective effect from 01.04.1989. The Tribunal has not decided the issue on merits. As a consequence, the impugned order is set aside and the matter is remanded to the Tribunal for a decision on merits. This appeal stands disposed of. . . . BADAR DURREZ AHMED, J . . . . RAJIV SHAKDHER, J September 17, 2008 mk . . . 04.

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