SARBJIT SINGH,MANDI vs. ITO, SUNDERNAGAR

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ITA 530/CHANDI/2018Status: DisposedITAT Chandigarh01 November 2018AY 2005-066 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) lacked jurisdiction to enhance the income as the issue was already sub-judice before the High Court. The Tribunal restored the issue of the Section 154 disallowance back to the AO for re-examination.

What were the facts?

The Assessing Officer made a disallowance under Section 40(a)(ia) based on a CIT's direction. The Tribunal restored the issue to the AO to consider a Special Bench decision. Subsequently, the AO made a revised disallowance under Section 154, which the CIT(A) enhanced.

What were the issues?

Whether the CIT(A) had jurisdiction to enhance income when the matter was pending before the High Court, and whether the AO correctly computed the disallowance under Section 154 without proper hearing.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 263,Section 154,Section 251

AI-generated summary — verify with the full judgment below

आदेश / Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 27.2.2018 of the Commissioner of Income Tax (Appeals), Palampur (H.P.) [hereinafter referred to as CIT(A)].

2.

The brief facts relating to the issue under consideration in this appeal are that the original assessment in this case was competed u/s 144 of the Income-tax Act, 1961 (in short 'the Act') on 27.12.2007. Later on, the Commissioner of Income Tax, Shimla passed an order u/s 263 of the Act observing that the Assessing officer had failed to take note of the fact that the assessee was liable to deduct tax at source in respect of freight

ITA No.530/Chd/2018 Sh. Sarabjit Singh Prop. M/s Sachdeva Bros and J.S.Cargo Movers, Mandi 2

payments made to various truck owners / transporters. He, thereafter

directed the Assessing officer to reframe the assessment after considering

the assessee’s submissions on this issue and make a correct disallowance

u/s 40(a)(ia) of the Act and recompute the total income accordingly. The

Assessing officer give effect to the above order of the Ld. CIT(A) passed

u/s 263 of the Act and completed the revised assessment by adding a sum

of Rs. 1,34,53,063/- on account of disallowance made u/s 40(a)(ia) of the

Income Tax Act.

3.

The assessee preferred appeal against the said order and the matter

ultimately reached to the Tribunal. The Tribunal vide its order dated

26.7.2012 restored the issue to the file of the Assessing officer to allow

the relief to the assessee in the light of the decision of the Special Bench

of the Tribunal in the case of ‘Merilyn Shipping & Transport Vs. ACIT’

[2012] 70 DTR (Vishakhapatam)(SB)(Trib.) 81, wherein, it was held that

the provisions of section 40(a)(ia) of the Act were applicable only on the amount of expenditure which were payable on the 31st March of every year

and that it cannot be invoked to disallow which had been actually paid

during the previous year without deduction of TDS. The Assessing officer

gave effect to the order of the Tribunal and made the re-computation.

However, later on the assessee moved an application u/s 154 of the Act

pleading that computation of income had been wrongly made by the

Assessing officer while giving effect to the order of the Tribunal. The

Assessing officer thereafter passed the order u/s 154/155 of the Act dated

20.8.2013 making a fresh computation, he, however, disallowed a sum of

Rs. 11,30,656/- u/s 40(a)(ia) of the Act in respect of the payments which

ITA No.530/Chd/2018 Sh. Sarabjit Singh Prop. M/s Sachdeva Bros and J.S.Cargo Movers, Mandi 3

remained payable on 31st March in the light of the decision of the Special

bench of the Tribunal in the case of ‘Merilyn Shipping & Transport Vs.

ACIT’ (supra). Aggrieved by the above addition, the assessee preferred

appeal before the Ld. CIT(A).

4.

The Ld. CIT(A) while adjudicating the appeal of the assessee gave a

notice of enhancement u/s 251 of the I.T. Act and thereby enhanced the

taxable income of the assessee observing that the decision of the Special

Bench of the Tribunal in the case of ‘Merilyn Shipping & Transport Vs.

ACIT’ (supra) was no more a good law and that by the time the issue has

been settled by the decision of the Hon'ble Supreme Court in the case of

‘M/s Palam Gas Services Vs. CIT’ in Civil Appeal No. 5512/2017 dated

3.5.2017 in favour of the Revenue. He, therefore, enhanced the income of

the assessee.

5.

Now the assessee has come in appeal before us on two issues, firstly

agitating the enhancement of income and, secondly, agitating the addition

made by the Assessing officer in the order passed u/s 154 of the Act while

computing the income of the assessee as per the Special Bench decision of

the Tribunal in the case of ‘Merilyn Shipping & Transport Vs. ACIT’

(supra);

6.

We have heard the rival submissions and have also gone through the

record. So far as the issue relating to the additions made by the Assessing

officer while computing the income of the assessee as on an application

moved by the assessee u/s 154 of the Act is concerned, we find that the

ITA No.530/Chd/2018 Sh. Sarabjit Singh Prop. M/s Sachdeva Bros and J.S.Cargo Movers, Mandi 4

Assessing officer was supposed to give effect to the order of the Tribunal

vide which

he was directed to compute the disallowance u/s s 40(a)(ia) of the Act in

the light of the decision of the Special Bench of the Tribunal in the case of

‘Merilyn Shipping & Transport Vs. ACIT’ (supra). The Assessing officer

while passing the order u/s 154 of the Act has made the impugned

addition in respect of the amounts payable on the last of the filing or in the

light of the decision of the Special Bench of the Tribunal in the case of

‘Merilyn Shipping & Transport Vs. ACIT’ (supra)

7.

The Ld. Counsel for the assessee, on the other hand, has submitted

that while making the impugned additions u/s 154 of the Act, the Assessing

officer has not given any opportunity of hearing to the assessee. That the

Ld. Assessing officer mistook the fact that the payment of Rs. 11,30,656/-

was outstanding on the last date of the month of the financial year under

consideration. We, therefore, restore this issue back to the file of the

Assessing officer to re-examine this factual aspect and give effect to the

order of the Tribunal dated 26.7.2012 accordingly.

8.

So far as the issue relating to the enhancement of the income is

concerned, it has been pleaded by the assessee that the Revenue has

already preferred an appeal before the Hon'ble Himachal Pradesh High

Court against the directions of the Tribunal to the Assessing officer for

following the decision of the Special Bench of the Tribunal in the case of

‘Merilyn Shipping & Transport Vs. ACIT’ (supra). It has, therefore, been

ITA No.530/Chd/2018 Sh. Sarabjit Singh Prop. M/s Sachdeva Bros and J.S.Cargo Movers, Mandi 5

contended that the Revenue has already approached the Hon'ble High Court

and the Hon'ble High Court has been seized of the matter, hence, there

was no jurisdiction to the Ld. CIT to pass the impugned order of

enhancement. It has further been contended that even the appeal of the

assessee against the order passed by the CIT u/s 263 of the Act was also

pending before the Hon'ble High Court. However, no documents or

evidence showing the above pendency of the appeal of the Revenue as well

as of the assessee has been produced before us.

9.

We agree with the contention of the Ld. Counsel for the assessee that

if the issue in the own case of the assessee for the assessment year under

consideration is already sub-judice before the Hon'ble Himachal Pradesh

High Court, then there was no jurisdiction to the Ld. CIT to pass the

order of enhancement on the same. Moreover, the Assessing officer had

just given effect to the order of the Tribunal and the issue has been

principally decided by the Tribunal in the order dated 26.7.2012. The Ld.

CIT(A), therefore, was not justified to pass a fresh order on the same

issue. The rectification application, if any, on this issue could have been

moved before the ITAT only and the CIT(A) has no jurisdiction to further

adjudicate on the issue. The only remedy left with the Department in this

respect was either to move an application for rectification u/s 254 of the

Act before the Tribunal, if it was otherwise so admissible, or to file appeal

against the order of the Tribunal before the Hon'ble High Court. It has

been contended by the Ld. Counsel for the assessee that the Revenue has

already approached the Hon'ble High Court on this issue.

ITA No.530/Chd/2018 Sh. Sarabjit Singh Prop. M/s Sachdeva Bros and J.S.Cargo Movers, Mandi 6

In view of this, the order of enhancement passed by the Ld. CIT(A) is without jurisdiction and the said part of the order is accordingly set aside. In view of this, the appeal of the assessee is treated as partly allowed. Order pronounced in the Open Court on 05.11.2018

Sd/- Sd/- ( बी , आर . आर . कुमार / B.R.R. KUMAR) (संजय गग� / SANJAY GARG ) लेखा सद�य/ Accountant Member �या�यक सद�य /Judicial Member

Dated : 5.11.2018 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

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