Madhya Pradesh High Court Judgments — 2012

The High Court held that both the CIT (Appeal) and the Tribunal had not adequately considered the process of manufacturing or assembling the product. The CIT (Appeal) had focused on the legal aspect of manufacturing, while the Tribunal had considered expenditure and employment aspects. The Court found that neither authority had examined how the 'Microprocessor based Fast Bus Transfer Scheme Panel' is manufactured or assembled. Citing Supreme Court judgments in Oracle Software India Ltd., Emptee Poly-Yarn P. Ltd., and Morinda Co-operative Sugar Mills Ltd., the Court emphasized the need for expert examination of the actual process undertaken by the assessee. The Court found it appropriate to remand the matter to the Assessing Officer to obtain an opinion from an expert or a panel of experts to determine whether the product is manufactured or merely assembled. The Assessing Officer is to decide the matter in accordance with law after obtaining this expert opinion. The appeal was allowed, and the matter was remanded.

The Tribunal held that no substantial question of law was involved in the matter. It affirmed the findings of the CIT(Appeal) and the Tribunal that the payment of Rs. 3.5 crores for the land was made through pay orders and drafts from the bank accounts of M/s. Zoom Developers Private Limited on behalf of the assessee. The Tribunal found that the CIT(Appeal) had perused the accounts of the assessee and M/s. Zoom Developers Private Limited, reflecting the payment through their accounts in Allahabad Bank, United Bank of India, and Punjab National Bank. The Tribunal concluded that the findings of the CIT(Appeal) and the Tribunal were pure findings of fact based on the appreciation of available material. Therefore, the appeal was dismissed as devoid of merit. No other point was urged.

The High Court held that no substantial question of law was involved in the matter. The findings of the CIT(Appeal) and the Tribunal were considered pure findings of fact based on the appreciation of the material available on record. The Court found no question of law to be involved. Consequently, the appeal filed by the revenue, being devoid of any merit, was dismissed. The operative direction was the dismissal of the revenue's appeal. No issue was expressly left undecided.

The Tribunal held that no substantial question of law was involved in the matter. The findings of the CIT(A) and the Tribunal were considered pure findings of fact based on the appreciation of material available on record. The Tribunal affirmed the CIT(A)'s view that the payment of Rs. 3.5 crores was made through Pay Orders and Drafts from the bank accounts of M/s. Zoom Developers Private Limited on behalf of the assessee, and that the land was purchased through an open auction conducted by the High Court of Bombay. Consequently, the disallowance made under Section 40-A(3) was deleted. No issue was expressly left undecided. The operative direction was the dismissal of the appeal.

The Tribunal dismissed the appeal filed by the revenue. It affirmed the findings of the CIT(Appeal) and the Tribunal that the payment of Rs. 3.5 crores was made through Pay Orders and Drafts prepared from the bank accounts of M/s. Zoom Developers Private Limited on behalf of the assessee. The Tribunal noted that during the appellate proceedings, the CIT(Appeal) had perused the accounts of both the assessee and M/s. Zoom Developers Private Limited, which reflected the payment through their accounts maintained in Allahabad Bank, United Bank of India, and Punjab National Bank. The Tribunal concluded that the findings of the CIT(Appeal) and the Tribunal were pure findings of fact based on the appreciation of available material, and no substantial question of law was involved. The appeal was therefore dismissed as devoid of merit.

The Tribunal held that an addition to income cannot be made solely on the basis of a statement recorded during a survey under Section 133A of the Income Tax Act. Such a statement, without corroborating evidence, lacks evidentiary value. The Tribunal noted that Section 133A does not empower the Income Tax Officer to examine a person on oath, unlike Section 132(4) which allows statements made under oath during search and seizure to be used as evidence. The CIT(A) had rightly pointed out that the assessee had later submitted a detailed calculation of income based on the impounded documents and made a surrender in the return of income, which the AO had not doubted. The AO's addition of Rs. 40 lakhs was based only on the survey statement, ignoring the subsequent explanation and surrender by the assessee. The Tribunal relied on various High Court judgments, including CIT vs. Ms Dhingra Metal Works and CIT vs. S. Khader Khan Son, which held that statements recorded under Section 133A do not have evidentiary value unless corroborated by other material. Therefore, the deletion of the addition by the CIT(A) and the dismissal of the Revenue's appeal by the ITAT were found to be correct. The appeal was dismissed as it did not involve any substantial question of law.

The High Court disposed of the writ petition with specific directions. It directed the petitioner to file an application for hearing on stay applications and early hearing of appeals before respondent No. 3 within two weeks. Upon such an application, respondent No. 3 was directed to consider and decide the stay application expeditiously, preferably within 30 days from the date of the application. Regarding the appeals themselves, respondent No. 3 was directed to endeavor to decide them expeditiously, preferably within four months, as indicated by the revenue's counsel. Furthermore, the court directed that no coercive action would be taken against the petitioner for recovery for a period of one month or until the decision on the stay applications, whichever is later. The court did not decide the merits of the appeals or the stay applications.

The Tribunal, considering the identical circumstances of the present case to an earlier matter (Arun Sahlot vs. The Asstt. Commissioner of Income Tax and others), disposed of the petition with specific directions. The Tribunal directed the petitioner to file an application for expeditious hearing of the stay application. Upon filing such an application, respondent No.3 was directed to consider and decide the stay application expeditiously, preferably within 30 days from the date of filing. Regarding the appeal, respondent No.3 was directed to endeavor to hear and decide it expeditiously, preferably within 4 months. Furthermore, the Tribunal ordered that no coercive steps would be taken against the petitioner for recovery until the stay application is decided or for a period of 30 days, whichever is earlier. The Tribunal noted that the case was similar to the Arun Sahlot case, where similar directions were issued, including a period of 15 days for deciding stay applications and three months for appeals, with a stay on coercive action for three weeks.

The Tribunal permitted the writ petition to be withdrawn. The Tribunal also allowed the prayer of the respondents for an extension of the time period for passing the assessment order. The reasoning was based on the specific provisions contained within Section 153 of the Income Tax Act, 1961, which allows for an extension of time where an interim order has been passed against the final assessment order. The Court clarified that the withdrawal was granted with this extension of time for the assessment order. The petition was dismissed as withdrawn, with no order as to costs.

The Tribunal permitted the petition to be withdrawn. Consequently, the petition was dismissed as withdrawn. The Tribunal also allowed the prayer of the respondents (Revenue) for an extension of the time period for passing the assessment order. This extension was granted in view of the specific provisions contained in Section 153 of the Income Tax Act, 1961, acknowledging that the interim order passed by the Court had affected the finalization of the assessment. The Tribunal clarified that the extension was granted due to the existence of the interim order against the final assessment order. No order as to costs was made.

The Tribunal permitted the writ petition to be withdrawn. The Tribunal also allowed the prayer of the respondents to extend the time period for passing the assessment order, in view of the specific provisions contained in Section 153 of the Income Tax Act, 1961. This extension was granted because an interim order had been passed against the final assessment order during the pendency of the petition. The operative direction was to dismiss the petition as withdrawn with no order as to costs, subject to the clarification regarding the extension of time for assessment. No specific issue on merits was decided.

The Tribunal allowed the petition to be withdrawn. The Tribunal also granted the prayer of the revenue to extend the time period for passing the assessment order. The reasoning was that an interim order had been passed by the Court on November 22, 2011, which had the effect of staying the final assessment order. Therefore, in view of the specific provisions contained in Section 153 of the Income Tax Act, 1961, which deals with the time limits for completion of assessments, the period during which the interim order was in effect would be excluded from the computation of the time limit. The operative direction was that the petition was dismissed as withdrawn with no order as to costs, subject to the clarification regarding the extension of time for the assessment order.

The Court allowed the petition to be withdrawn. While permitting the withdrawal, the Court granted the respondent authorities an extended time period for passing the assessment order, in accordance with the specific provisions contained in Section 153 of the Income Tax Act, 1961. This extension was granted because an interim order had been in place against the final assessment order. The petition was accordingly dismissed as withdrawn, with no order as to costs. The Court did not decide on the merits of the original challenge, only on the procedural aspect of withdrawal and consequential time extension for assessment.

The Tribunal held that the impugned order cancelling the VDIS certificate cannot be sustained and is hereby set aside. Regarding the first issue, the Tribunal, relying on the Bombay High Court's decision in *Laherchand Dhanji* and the Gujarat High Court's decision in *Nitin P. Shah alias Modi*, opined that a certificate issued under Section 68(2) of VDIS 1997 cannot be cancelled or revoked unless it was issued contrary to the Scheme, ignoring the bar in Section 64(2)(ii), or obtained by fraud. The Tribunal found no evidence of fraud by the petitioner, noting that the department was calculating higher income on the same sales amount. Regarding the second issue, the Tribunal found that the respondents were not justified in attracting the bar of Section 64(2)(ii) in the petitioner's case, as no search was conducted on the petitioner's premises. Furthermore, the Tribunal noted procedural irregularities, including insufficient time granted to the petitioner to respond to the cancellation notice. The Writ Petition was allowed to the extent indicated.

The High Court held that the finding recorded by the ITAT, which affirmed the deletion of the addition of ₹3,33,09,596, was essentially a finding of fact. The Tribunal had elaborately dealt with the issue, appreciating the material on record and reaching a factual conclusion about the genuineness of the transaction. The Tribunal noted that detailed accounts of the concerned parties were filed, entries were through account payee cheques, the source of deposits was not disputed, and the identity and creditworthiness of the creditors were established. The High Court, in light of its own Division Bench judgment in Gyan Chand Anil Kumar Vs. Income Tax Officer (2001), held that such a finding of fact does not involve a substantial question of law. As the appellant failed to point out any error or perversity in the finding of fact, the appeal was dismissed. No issue was left undecided.

The Tribunal held that the question of whether the purchases were genuine or bogus is a pure question of fact. Both the Commissioner and the ITAT had concurrently found that the purchases were not bogus after considering all relevant circumstances and material on record. The Commissioner's detailed reasoning, which was affirmed by the ITAT, highlighted that the AO's grounds for doubting the purchases, such as discrepancies in vehicle numbers and the alleged inability of suppliers to sell soya seed, were not sufficiently substantiated. The Commissioner noted that the assessee had established the identity of the sellers, received goods supported by gate-passes, subjected them to lab testing and weighment, recorded them in stock registers, and made payments via account payee cheques. The Tribunal also noted that the assessee's production and sales were not doubted, and payments were made through cheques. Regarding the source of purchase, the Tribunal viewed that the assessee is not supposed to prove the 'source of source', and the assessee had duly proved the source of purchase from the named concerns. The Tribunal found no perversity in the findings of the lower authorities and concluded that the appeal did not involve any question of law.

The High Court held that the Tribunal erred in concluding that the assessee failed to show a reasonable cause for condonation of delay. The Court found that the reasons provided in the application for condonation, including the misplacement of the CIT(A)'s order due to dissolution of the firm, partnership dissolution complexities, joint family separation, and financial losses, constituted sufficient and reasonable cause. These averments were supported by affidavits from the proprietor and the firm's manager and were not controverted by the revenue. The Tribunal's dismissal was considered slipshod for not examining these reasons. Consequently, the delay was condoned, and the Tribunal was directed to decide the appeal on its merits. The substantial question of law was answered in favour of the assessee.

The Tribunal noted that while the existence of an alternative remedy does not bar a person from invoking writ jurisdiction, a petitioner who has already availed of the alternative remedy cannot pursue parallel remedies. In view of the statement by the revenue's counsel that the pending appeal would be decided expeditiously, and acknowledging that the petitioner had already availed the alternative remedy, the writ petition was disposed of. The appellate authority was directed to decide the appeal in accordance with law, preferably within three months. Until the decision, the interim relief granted by this court on 07.03.2012 was to remain in operation. The Tribunal did not decide the merits of the grounds of challenge regarding limitation or jurisdiction.

The Tribunal decided to dispose of the writ petition filed by the petitioner with specific directions. The reasoning was based on the joint submission of both parties. The petitioner sought disposal of the petition based on the statements made by Respondent No. 2, and Respondent No. 2 had no objection. Respondent No. 2 clarified that a certificate of deduction of Rs. 4,42,99,095 had not yet been issued but undertook to issue it within a week. The Tribunal directed Respondent No. 2 to issue this certificate to the petitioner within a week. Upon receiving the certificate, the petitioner would be at liberty to take further proceedings as advised, including filing an application for refund of any excess amount withheld. The operative direction was the issuance of the certificate and liberty to the petitioner to pursue further remedies.

The Tribunal found the petitioner's prayer to be reasonable. Accordingly, the writ petition was finally disposed of with a direction to the Commissioner of Income Tax (respondent no.1) to take a decision on the application for stay, Annexure P3, as expeditiously as possible, preferably within a period of one month from the date of receipt of the copy of the order. The Tribunal did not decide the merits of the appeal or the stay application itself, but rather directed the authority to adjudicate upon it.

Regarding questions 1 and 2, the High Court found that the CIT(A) and the Tribunal relied on an insurance survey report that was not disclosed to the assessee. The assessee was not given an opportunity to challenge the report or provide explanations, violating the principles of natural justice. The Court cited Supreme Court judgments in Dhakeshwari Cotton Mills Ltd., C. Vasantlal and Co., and Kishinchand Chellaram, emphasizing that if an authority relies on private inquiries or undisclosed material, the assessee must be informed and given an adequate opportunity to meet it. Consequently, question 2 was decided in favour of the assessee, holding that the finding of capital expenditure was vitiated. Due to this decision on question 2, question 1 was not answered. Regarding question 3, the High Court held that in the absence of specific details from the assessee regarding the allocation of expenses to individual units, the method of bifurcating expenses in the ratio of turnover adopted by the Tribunal was justified and tenable in law. The reference was disposed of, with the Tribunal to proceed in accordance with law.