Office Of Principal Chief Commissioner Of Income Tax vs. Nitin Nema

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RP/989/2023HC Madhya Pradesh14 September 2023Author: HON'BLE SHRI JUSTICE SHEEL NAGU5 pages
For Petitioner: Siddharth Sharma
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the review petition. Regarding the first ground, the Court found that the use of the expression "obviously" in paragraph 6.1 was a conscious decision based on the definition of "income chargeable to tax" under Section 2(24) of the IT Act, and the Revenue had not brought to its notice any material to equate "income chargeable to tax" with "sale proceeds." Therefore, no palpable error was found. Concerning the second ground, the Court reiterated that while interference under Article 226/227 is generally limited, an exception exists for jurisdictional errors. The Court found that the original order under Section 148A(d) and the consequential notice under Section 148 suffered from a jurisdictional error because the entire sale proceeds were considered without first ascertaining the "income chargeable to tax," which is distinct from total sale proceeds. Thus, this ground also did not disclose a palpable error. On the third ground, the Court noted that the assessee's failure to file an ITR was considered in the original order, and while the view taken might be erroneous, it did not reflect a palpable error on the face of the record. Finally, regarding the cost, the Court affirmed that it was consciously imposed as a punitive and deterrent measure for the Revenue's casual invocation of Section 148A and issuance of notice under Section 148, subjecting the assessee to avoidable litigation and wasting court time. The cost was directly linked to the merits of the matter, which remained undisturbed. Consequently, the review petition was dismissed.

What were the facts?

The Revenue filed a review petition before the High Court of Madhya Pradesh seeking review of an order dated August 16, 2023. The original order had allowed a writ petition (WP. No. 8311/2023) by quashing an order dated March 25, 2023, passed under Section 148A(d) and the consequential notice issued under Section 148 of the Income Tax Act, 1961. The original order also imposed costs of Rs. 25,000 on the Revenue for unnecessarily dragging the assessee into litigation and wasting the court's time. The Revenue contended that the original order contained palpable errors on the face of the record and sought recall of the relief granted and the cost imposed.

What were the issues?

1. Whether the High Court committed a palpable error by using the expression "obviously" in paragraph 6.1 of its order dated August 16, 2023, when contradictory expressions like "possibility" and "cannot be ruled out" were also present, thereby indicating an error on the face of the record? (Question of law) 2. Whether the High Court erred in interfering with an order passed under Section 148A(d) of the Income Tax Act, 1961, by relying on the principle that such interference is generally declined when disputed questions of fact are involved, as suggested by the Apex Court's decision in Anshul Jain vs. Principal Commissioner of Income Tax and the Punjab & Haryana High Court's decision? (Question of mixed law and fact, turning on Section 148A and Article 226/227 of the Constitution) 3. Whether the original order suffers from an error on the face of the record by granting relief to the assessee who had allegedly failed to file an Income Tax Return (ITR) in respect of income amounting to Rs. 72,05,084? (Question of mixed law and fact) Revenue's Contentions: - The use of "obviously" in paragraph 6.1 of the original order, in conjunction with other expressions, constitutes a palpable error. - The High Court should not have interfered with the order under Section 148A(d) as disputed questions of fact were involved, citing Anshul Jain (supra) and the Punjab & Haryana High Court's decision. - The assessee's failure to file an ITR for a significant income amount renders the relief granted erroneous. - The imposition of cost on the Revenue was unjustified given the alleged errors in the original order. Assessee's Contentions: - Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148,Section 2(24)

AI-generated summary — verify with the full judgment below

Before: HONBLE SHRI JUSTICE SHEEL NAGU & HONBLE SHRI JUSTICE AVANINDRA KUMAR SINGH

This petition seeks review of final order passed by this Court on 16.08.2023 allowing WP. No.8311/2023 by quashing impugned order dated 25.03.2023 passed u/S.148A(d) and the consequential notice u/S.148 of Income Tax Act, 1961 (for brevity “I.T. Act”) and imposing cost of Rs.25,000/- on the Revenue, for having unnecessarily dragged the assessee to the Court and correspondingly wasting precious time of this Court in deciding an avoidable piece of litigation. 2, The grounds taken in support of this review petition are as follow :- (i) By employing the expression “obviously” in Para 6.1 of order dated 16.08.2023 in WP. No.8311/2023, this Court has committed palpable error in the face of contradictory expressions i.e. “possibility” and “cannot be ruled out” in the order under review; (ii) Relying upon decision of Apex Court in Anshul Jain vs. Principal Commissioner of Income Tax reported in (2022) 289 Taxman 239, the Revenue contends that Apex Court has upheld the view of Division Bench of Panjab & Haryana High Court in (2022) 143 Taxmann,com 37 (Punj. & Har.) which declined interference under Article 226/227 of Constitution to a challenge to an order passed u/S.148A(d) of 3 I.T. Act especially when disputed questions of facts are involved; (iii) The order under review suffers from an error on the face of the record by granting relief to the assessee, who had failed to even file I.T.R. in respect of income of Rs.7205084/-. (iv) In view of above grounds, it is submitted by learned counsel for review petitioner impugned order suffers from palpable error visible on the face of the record, and therefore there was no cause available to impose cost on the Revenue.

3.

As regards first ground of using contradictory expression “obviously” vis-a-vis “possibility” and “cannot be ruled out”, the contents of Para 6.1 are worthy of reference. In this paragraph, this Court with the aid of definition contained in Section 2(24) of I.T. Act. explained the use of expression “obviously” and more so, nothing was brought to knowledge of this Court by counsel for Revenue that expression “income chargeable to tax” contained in Section 148A and 149 of I.T. Act can be treated to be equal to the sale proceeds. Thus, a conscious decision was taken by this Court in regard to said ground, which does not disclose any palpable error.

4.

In regard to second ground where the Revenue relies upon the decision of Apex Court in Anshul Jain (supra), it is seen from contents of the said order as well as order of Division Bench of Panjab & Haryana High Court that in Para 8 of High Court’s order an exception has been carved out for exercise of power of judicial review under 4 Article 226/227 of the Constitution in cases where the order/notice suffers from jurisdictional error.

4.

1 In the instant case, jurisdictional folly suffered by order u/S.148A(d) and consequential notice issued u/S.148 of I.T. Act, was that entire proceeds of sale transaction were taken into account without first arriving at the “income chargeable to tax”. Unless, the income chargeable to tax (which is different than the concept of total sale proceeds) is ascertained by the Assessing Officer, said authority cannot invoke the provision of Section 148A(d) and Section 148 of I.T. Act.

4.

2 As such impugned order u/S.148A(d) and consequential notice issued u/S.148 of I.T. Act were rightly found to suffer from jurisdictional error by order under review. Accordingly, this ground also does not impress this Court as it does not disclose any palpable error.

5.

As regards third ground of assessee having failed to file I.T.R., this Court has considered this point in the order under review at Para

6.4.

The view taken was a considered one and may be erroneous, but the same does not reflect any palpable error on the face of the record.

6.

As regards last ground of cost having been imposed in the order under review, it is obvious from reading of order under review that this Court came to a considered finding that by casually invoking the provision of Section 148A and issuing notice issued u/S.148 of I.T. Act, the Revenue had subjected the assessee to an avoidable piece of litigation, which led to wasting precious time of this Court in deciding this frivolous litigation which could have been utilized in deciding more pressing matters. More so, element of cost contains punitive as well as 5 deterrent aspect. It is punitive to punish the Revenue for the wrong done and deterrent to avoid recurrence of such mistakes by the Revenue. Thus, cost was consciously imposed and has direct nexus to the merits of the matter, which have not been disturbed.

6.1.

Since there is no merit in this review petition, question of reducing or recalling order of cost does not arise.

7.

Before parting it, it would be appropriate to mention that cost imposed ought not to reflect adversely upon counsel for Revenue. The counsel for Revenue in writ petition had represented the Revenue to the best of his ability and thus the fault, if any, lies with the Revenue and not the counsel.

8.

In view of aforesaid findings, this review petition stands dismissed with aforesaid observations. (SHEEL NAGU) (AVANINDRA KUMAR SINGH) JUDGE JUDGE mohsin

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