PURSHOTTAM P PATEL vs. DY COMMISSIONER OF INCOME TAX

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SCA/1351/1998HC GujaratGJHC24012967199830 June 2008Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MR. JUSTICE H.B.ANTANI3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court of Gujarat quashed the notice dated 16/02/1996 issued under Section 148 of the Income-Tax Act, 1961, for Assessment Year 1985-1986. The Court referred to its own reasoned judgment dated 18/06/2008 in the case of Austin Engineering Co. Ltd. vs. Joint Commissioner of Income-Tax, SCA No. 12050/2000, which dealt with a similar fact situation and controversy between the parties. For the reasons stated in that prior judgment, the impugned notice was found to be invalid. The petition was allowed, and the rule was made absolute with no order as to costs. The specific reasoning from the Austin Engineering Co. Ltd. judgment, which would form the ratio decidendi, is not detailed in this judgment but is referenced as the basis for the decision.

What were the facts?

The petitioner, Purshottam P Patel, challenges a notice dated 16/02/1996 issued under Section 148 of the Income-Tax Act, 1961, by the Dy. Commissioner of Income Tax for Assessment Year 1985-1986. The original assessment under Section 143(3) was completed on 11/03/1988, where the Assessing Officer allowed the assessee's claim for investment allowance of Rs. 29,64,477/-, restricted to the extent of positive income. The impugned notice was issued beyond four years from the end of the Assessment Year, based on the Supreme Court decision in CIT vs. N.C. Budharaja & Co. The Assessing Officer believed income of Rs. 29,67,477/- escaped assessment due to the erroneous allowance of investment allowance, as the assessee was engaged in construction business.

What were the issues?

1. Whether the notice dated 16/02/1996 issued under Section 148 of the Income-Tax Act, 1961, for Assessment Year 1985-1986 is valid, considering it was issued beyond a period of four years from the end of the relevant Assessment Year. The Assessee's contention, implied by the challenge to the notice, is that the notice is time-barred and therefore invalid. The Revenue's contention, as reflected in the reasons recorded for issuing the notice, is that the investment allowance was wrongly allowed to the assessee engaged in construction business, citing the Supreme Court decision in CIT vs. N.C. Budharaja & Co., which held that investment allowance is not allowable to persons engaged in the construction of dams, canals, etc. This implies the Revenue believes the escapement of income falls within the exceptions allowing reassessment beyond four years.

Which sections of the Income-tax Act were involved?

Section 148,Section 143(3),Section 32-A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
SCA/1351/1998 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 1351 of 1998 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA AND HONOURABLE MR.JUSTICE H.B.ANTANI ========================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================= PURSHOTTAM P PATEL - Petitioner(s) Versus DY COMMISSIONER OF INCOME TAX - Respondent(s) ========================================= Appearance : MR SN SOPARKAR for Petitioner(s) : 1, MR MANISH R BHATT for Respondent(s) : 1, ========================================= CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MR.JUSTICE H.B.ANTANI SCA/1351/1998 2/3

JUDGMENT Date : 30/06/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

1.

This petition challenges notice dated 16/02/1996 issued under Section 148 of the Income-Tax Act, 1961 (the “Act”) by the respondent authority. The Assessment Year in question is 1985-1986. The assessment under Section 143(3) of the Act was framed by the Assessing Officer vide assessment order dated 11/03/1988. The assessee claimed investment allowance to the tune of Rs. 29,64,477/-. In principle, the Assessing Officer, after considering the submissions of the assessee and after making inquiries, allowed the claim in the following words; “In view of the above said decision, I am of the opinion that the assessee is entitled for investment allowance”

2.

However, the claim was restricted to the extent of positive income available.

3.

Admittedly, the impugned notice has been issued beyond a period of 4 years from the end of the relevant Assessment Year on the basis of Supreme Court decision in the case of COMMISSIONER OF INCOME-TAX Vs N.C. BUDHARAJA AND Co. AND ANR., (1993)204 ITR 412. The reasons recorded by the Assessing Officer read as under; “The assessee is engaged in the construction business. The assessee purchased certain machinery in the previous year relevant to Assessment Year 1985-86 and claimed investment allowance under the provisions of SCA/1351/1998 3/3 JUDGMENT Section 32-A of the Income-Tax Act. The Hon'ble Supreme Court in the case of N.C. BUDHRAJA & Co. reported in 204 ITR has held that the investment allowance is not allowable to the persons engaged in the construction of dam, canals etc. In view of this, the investment allowance was wrongly allowed to the assessee in the year under reference. I have reasons to believe that the income amounting to Rs. 29,67,477/- has escaped assessment on account of wrong allowance of investment allowance to the assessee.”

4.

It is an accepted position between the parties that in similar fact situation, this Court has, by a reasoned judgement rendered on 18/06/2008, decided the controversy between the parties in the case of AUSTIN ENGINEERING CO. LTD Vs JOINT COMMISSIONER OF INCOME-TAX, Special Civil Application No. 12050/2000 and cognate matters. Hence, it is not necessary to set out the facts and contentions in detail.

5.

For the reasons stated in the aforesaid judgement dated 18/06/2008 in the case of AUSTIN ENGINEERING CO. LTD (Supra), the impugned notice dated 16/02/1996 is quashed for the Assessment Year 1985-1986. The petition is allowed accordingly. Rule made absolute with no order as to costs. (D.A. MEHTA, J.) (H.B. ANTANI, J.) siji

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