COMMISSIONER OF INCOME TAX IV vs. M/S MEDISPAN LTD

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TCA/991/2015HC Madras26 August 2022Bench: Hon`ble Mr Justice R. MAHADEVAN4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court did not decide the substantial questions of law on merits. Instead, the Revenue brought to the court's notice CBDT Circular No.17/2019, which mandates that appeals shall not be filed or pursued before the High Court if the tax effect does not exceed Rs.1,00,00,000/-. The Revenue submitted that the tax effect in the present appeal was less than this prescribed threshold. Consequently, the High Court, in light of the Revenue's submission regarding the tax effect being below the monetary limit, dismissed the appeal as withdrawn. The court explicitly stated that the substantial questions of law were kept open for determination in an appropriate case. No costs were awarded.

What were the facts?

The Commissioner of Income Tax IV (the Revenue) filed a Tax Case Appeal before the High Court of Judicature at Madras against an order dated 08.05.2015 passed by the Income Tax Appellate Tribunal (ITAT) Madras 'A' Bench in ITA No.2823/Mds/2014. The appeal pertained to Assessment Year 2006-07 and challenged the ITAT's decision regarding the reopening of assessment. The High Court admitted the appeal on substantial questions of law on 27.10.2015. Subsequently, during the hearing, the Revenue brought to the court's notice CBDT Circular No.17/2019, which stipulates that appeals shall not be filed or pursued where the tax effect does not exceed Rs.1,00,00,000/-. The Revenue submitted that the tax effect in this appeal was below this threshold.

What were the issues?

1. Whether, under the facts and circumstances, the Appellate Tribunal was legally correct in holding that the reopening of assessment was bad in law because a four-year period had expired, without considering Section 149(1)(b) of the Income Tax Act, 1961, which allows for reopening in such cases? 2. Whether the Income Tax Appellate Tribunal was correct in holding that the reassessment was bad in law when the claim of deferred revenue expenditure was originally available on record, indicating no negligence by the assessee in disclosing material facts, without considering Explanation 1 to the second proviso of Section 147 of the Income Tax Act, 1961? Assessee's Contentions: The assessee argued that the reopening of assessment was bad in law as four years had expired and there was no negligence in disclosing material facts regarding deferred revenue expenditure. The assessee relied on Section 149(1)(b) and Explanation 1 to the second proviso of Section 147 of the Income Tax Act, 1961. Revenue's Contentions: The Revenue contended that the ITAT erred in holding the reopening bad in law, arguing that Section 149(1)(b) and Explanation 1 to the second proviso of Section 147 should have been considered. However, the Revenue later withdrew the appeal based on CBDT Circular No.17/2019.

Which sections of the Income-tax Act were involved?

Section 147,Section 149(1)(b),Section 260-A

AI-generated summary — verify with the full judgment below

TCA.No.991 of 2015 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 26.08.2022 CORAM

THE HONOURABLE MR. JUSTICE R. MAHADEVAN and THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ T.C.A.No. 991 of 2015 The Commissioner of Income Tax IV, No.121, Mahatma Gandhi Road, Chennai 600 034

.. Appellant Versus M/s. Medispan Ltd., No.25, Temple Tower, North Mada Street, Mylapore, Chennai 600 004

.. Respondent Tax Case Appeal filed under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal Madras 'A' Bench, dated 08.05.2015 passed in ITA No.2823/Mds/2014 in respect of Assessment Year 2006-07. For Appellant : M/s. Karthik Ranganathan & Mr. Rajesh Standing Counsel For Respondent : Mr.R.Sivaraman 1/4 https://www.mhc.tn.gov.in/judis TCA.No.991 of 2015 JUDGMENT (Judgment of the Court was delivered by R. MAHADEVAN, J.) This Tax Case Appeal has been filed by the appellant / revenue, questioning the correctness of the order dated 08.05.2015 passed by the Income Tax Appellate Tribunal Madras 'A' Bench in ITA No.2823/Mds/2014 for the Assessment Year 2006-07. 2. On 27.10.2015, this tax case appeal is admitted by this Court on the following substantial questions of law; ' 1. Whether under the facts and circumstances of the case the Appellate Tribunal was right in law in holding that since four year period has admittedly expired, the reopening of assessment is bad in law without considering sub-section (1)(b) of Section 149 of the Income Tax Act, which provides for reopening of such cases? 2. Whether the Income Tax Appellate Tribunal was correct in holding that the reassessment is bad in law when the claim of deferred Revenue Expenditure which were originally available on record and hence there is no negligence on the part of the assessee in disclosing material facts, without considering explanation 1 to 2nd provision of 2/4 https://www.mhc.tn.gov.in/judis TCA.No.991 of 2015 Section 147 of the Income Tax Act?” 3. When the matter was taken up for consideration, the learned counsel for the appellant / Revenue brought to the notice of this court the Circular No.17/2019 dated 08.08.2019 issued by the Central Board Direct Taxes, wherein, it is stipulated that appeals shall not be filed/pursued by the Department before the High Court in cases where the tax effect does not exceed Rs.1,00,00,000/- (Rupees One Crore). It is also submitted that the tax effect in this appeal is less than the threshold limit. 4. In the light of the aforesaid submissions made by the learned counsel for the appellant / Revenue, the present appeal, wherein, the tax effect is said to be less than the monetary limit imposed, is dismissed as withdrawn, keeping open the substantial questions of law for determination in an appropriate case. No costs. [R.M.D,J.] [M.S.Q., J.] 26.08.2022 msr

Index : Yes / No 3/4 https://www.mhc.tn.gov.in/judis TCA.No.991 of 2015 R. MAHADEVAN, J. and MOHAMMED SHAFFIQ, J. msr To 1. The Income Tax Officer, Company Circle IV (2), Chennai-34. 2. The Commissioner of Income Tax (Appeals) IV, Chennai-34. 3. The Income Tax Appellate Tribunal Madras 'A' Bench, Chennai, T.C.A.No. 991 of 2015 26.08.2022 4/4 https://www.mhc.tn.gov.in/judis

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