Commissioner Of Income Tax vs. M/S Brij Builders And Promoters Pvt.Ltd.
What did the High Court hold?
The ITAT dismissed the Revenue's review petition. The Tribunal found no merit in the Revenue's argument that the appeal should be decided on merits due to a Revenue Audit objection. The ITAT reiterated the settled view that reassessment proceedings cannot be initiated solely on the basis of Revenue Audit objections, citing the Supreme Court's decision in M/s Larsen & Toubro Ltd. Versus State of Jharkhand. The Tribunal further noted that the plea of Revenue Audit Objection was not recorded in the reassessment order or in the appeals before the lower authorities. Therefore, the ITAT concluded that there was no error in its previous order which had rightly disposed of the appeal by leaving the questions of law open, given the tax effect was below the threshold and the reassessment was not permissible on audit objection.
What were the facts?
The Revenue sought a review of an order passed by the ITAT on March 11, 2016. The ITAT had held that the Revenue's appeal was not maintainable because the tax effect was Rs. 11,44,970, which was below the threshold of Rs. 20,00,000 stipulated in a CBDT Circular dated December 10, 2015. The Revenue's review petition was filed with a delay of 159 days, which the ITAT condoned. The Revenue argued that the appeal should have been decided on merits as the assessment was based on a Revenue Audit objection, which creates an exception to the maintainability rule under the circular.
What were the issues?
1. Whether the Income Tax Appellate Tribunal (ITAT) erred in holding that the Revenue's appeal was not maintainable due to the tax effect being below the prescribed monetary limit, despite the assessment being based on a Revenue Audit objection? Assessee's Contention (Revenue in this context, seeking review): The Revenue contended that the ITAT's order was erroneous because the CBDT Circular dated December 10, 2015, provides an exception for appeals based on Revenue Audit objections. Therefore, the appeal should have been decided on merits and was not rendered non-maintainable solely based on the tax effect. Revenue's Contention (ITAT's original order, being reviewed): The ITAT's original order, which the Revenue is seeking to review, held that the appeal was not maintainable due to the tax effect being below Rs. 20,00,000 as per the CBDT Circular.
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
The revenue has sought review of the order passed by this Court on 11 th March, 2016 holding that since the tax effect is Rs. 11,44,970/- which is less than Rs. 20,00,000/-, therefore, the appeal is not maintainable in terms of Circular dated 10 th December, 2015 issued by the Central Board of Direct Taxes.
Learned counsel for the appellant sought review of the said order on the ground that the said circular itself create exception in respect of entertainability of appeal on merits where the case has been assessed by the department on the basis of Revenue Audit objection. Therefore, the appeal of the Revenue was required to be decided on merits and that same could not be said to be not maintainable.
We do not find any merit in the said argument.
Firstly, the reassessment proceedings cannot be initiated on the basis of Revenue Audit objection.
Such is the settled view, reiterated recently in Civil Appeal No. 5390 of 2007 M/s Larsen & Toubro Ltd.
Versus State of Jharkhand decided on 21st March 2017.
The Court held as under:- “29) From a perusal of the last paragraph of the aforementioned report of the audit party, it is clear that the Assessing Officer was of the opinion that as the goods had not been transferred to appellant- Company but had been consumed, so it does not come under the purview of taxation. In other words, the Assessing Officer was not satisfied on the basis of information given by the audit party that any of the turnover of the appellant-Company had escaped assessment so as to invoke Section 19 of the State Act. From the above, it also appears that the assessing officer had to issue notice on the ground of direction issued by the audit party and not on his personal satisfaction which is not permissible under law.”
In view of the fact that the reassessment proceedings could not been taken on the basis of audit objection, therefore, there is no error in the order passed by the Income Tax Appellate Tribunal.
Still further, the plea of Revenue Audit Objection does not find mention in the order of reassessment or in appeal before the Commissioner of Income Tax (Appeals) or in further appeal before the Income Tax Appellate Tribunal. Since the tax effect was less than Rs.20,00,000/-, this Court has rightly disposed of the appeal by leaving the questions of law open.
In view of the above, the Review Petition is dismissed. (HEMANT GUPTA) (VIJAY KUMAR SHUKLA) CHIEF JUSTICE JUDGE Ami tabh
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