Madhya Pradesh High Court Judgments — 2019

The High Court held that the issue is squarely covered by several judgments, including Principal Commissioner of Income-tax-5 Vs. Shri Mahila Sewa Sahakari Bank Ltd. (Gujarat High Court), which was upheld by the Supreme Court. The Court noted that cooperative banks act under RBI directives regarding prudential norms, and taxing interest on NPAs cannot be justified on the real income theory. The Supreme Court's dismissal of appeals against such decisions implies approval of the reasoning that interest on NPA, when recovery is doubtful, should not be taxed on accrual basis. The High Court found no reason to entertain the appeal as no substantial question of law arose. The substantial question of law was answered in favour of the assessee. The orders of the Assessing Officer, Appellate Authority, and Tribunal were set aside, and the deduction for uncharged interest on NPA was allowed.

The High Court held that the reassessment proceedings were initiated based on the same material that was available to the Assessing Officer during the original assessment. The Court found no new tangible material or evidence that had come to light. Therefore, the reopening was considered a clear case of change of opinion, which is not permissible under Section 147 of the Income Tax Act, 1961. The Court relied on the Supreme Court's decision in Indian & Eastern Newspaper Society Vs. Commissioner of Income Tax, which held that an error discovered on reconsideration of the same material does not empower the Assessing Officer to reopen the assessment. The Court also referred to various High Court judgments and Supreme Court decisions reinforcing this principle. Consequently, no substantial question of law arose, and the appeals filed by the Department were dismissed. The issue regarding the eligibility of the assessee for deduction under Section 80IA(4) was not decided on merits as the reassessment itself was quashed.

The High Court held that the reassessment proceedings were initiated based on the same material that was available to the Assessing Officer during the original assessment. The Court found no new tangible material or evidence that had come to light. Therefore, the reopening was considered a clear case of change of opinion, which is not permissible under Section 147 of the Income Tax Act, 1961. The Court relied on the Supreme Court's decision in Indian & Eastern Newspaper Society Vs. Commissioner of Income Tax, which held that an error discovered on reconsideration of the same material does not empower the Assessing Officer to reopen the assessment. The Court also referred to various High Court judgments and Supreme Court decisions reinforcing this principle. Consequently, no substantial question of law arose, and the appeals filed by the Department were dismissed. The issue regarding the eligibility of the assessee for deduction under Section 80IA(4) was not decided on merits as the reassessment itself was quashed.

The High Court held that the reassessment proceedings were initiated based on the same material that was available to the Assessing Officer during the original assessment. The Court found no new tangible material or evidence that had come to light. Therefore, the reopening was considered a clear case of change of opinion, which is not permissible under Section 147 of the Income Tax Act, 1961. The Court relied on the Supreme Court's decision in Indian & Eastern Newspaper Society Vs. Commissioner of Income Tax, which held that an error discovered on reconsideration of the same material does not empower the Assessing Officer to reopen the assessment. The Court also referred to various High Court judgments and Supreme Court decisions reinforcing this principle. Consequently, no substantial question of law arose, and the appeals filed by the Department were dismissed. The issue regarding the eligibility of the assessee for deduction under Section 80IA(4) was not decided on merits as the reassessment itself was quashed.

The High Court of Madhya Pradesh, while acknowledging the office objection regarding territorial jurisdiction, noted that the petitioner had already invoked the appellate jurisdiction of the Commissioner of Income Tax (Appeals), Jabalpur. The Court held that permitting parallel proceedings through a writ petition and an appeal against the same order would not be permissible. Consequently, in view of the petitioner's submission to withdraw the petition, the writ petition was disposed of as having been withdrawn. The Court also expressed an expectation that the Appellate Authority would consider any application for stay expeditiously if made as per law. No decision was made on the merits of the case.

The High Court held that the appeals filed by the Principal Commissioner of Income Tax (Revenue) were to be dismissed. This decision was based on Government of India Circular No. 3/2018 dated 11th July, 2018. The circular mandates that appeals shall not be filed before the High Court if the tax effect does not exceed Rs. 50,00,000/-. The Court noted that the present appeals, along with other connected appeals, were being disposed of in light of this circular. The reasoning is that the Revenue itself brought this circular to the Court's attention, and the appeals were consequently dismissed without delving into the merits of the ITAT's order. The operative direction was the dismissal of the appeals.

The High Court allowed the petition and quashed the impugned notice dated 9.5.2017 and the subsequent order dated 1.8.2017. The Court held that the proceedings initiated by the respondents were misplaced, misconceived, and perverse, as they ignored the final and binding orders passed by the Income Tax Officer on 30.8.2011 and the CIT(A) on 1.10.2012. The Court found that the initiation of Section 154 proceedings was uncalled for, as there was no mistake apparent from the record requiring rectification, especially given the admitted entitlement of the petitioner to claim benefit under Section 89(1) of the Act. The Court noted that the respondents had overlooked previous orders that allowed the petitioner to file a revised application under Section 154 for Section 89(1) relief, and that the order dated 1.8.2017 was passed without independent application of mind and was not properly communicated. The Court directed that the petitioner is entitled to and shall be paid his dues mentioned in the order dated 5.12.2014 by the Income Tax Department within two months with allowable interest. The issue of limitation raised by the revenue was considered an afterthought and not mentioned in the rectification notice.

The High Court held that no substantial question of law arises and dismissed the appeal. The Tribunal had found that no search was carried out at the assessee's premises, and no documents were seized to prove the movement of cash related to interest and loans. The Tribunal concluded that the Assessing Officer (AO) failed to provide corroborative and concrete evidence, basing the addition merely on suspicion, surmises, and conjectures. The Tribunal relied on Supreme Court judgments in *Dhakeshwari Cotton Mill Pvt. Ltd. Vs. CIT* and *K. P. Varghese Vs. ITO*, and the Bombay High Court's decision in *ACIT Vs. Lata Mangeshkar (Miss)*, stating that additions cannot be made based on notings found in the books of a third person. The High Court, in its judgment, also referred to Supreme Court decisions in *CBI Vs. V. C. Shukla* and *Common Cause Vs. Union of India*, which emphasize that entries in loose papers and electronic data, not regularly kept in the course of business, are inadmissible as evidence, especially against third parties. The High Court found that the incriminating materials in the present case were in the form of loose papers, making them inadmissible in evidence, and therefore, no case for interference with the Tribunal's order was made out.

The High Court held that its power to review its order is akin to the power of a civil court under Section 114 read with Order 47 Rule 1 of the CPC. It reiterated that review proceedings are not appeals and must be strictly confined to the scope and ambit of Order 47 Rule 1 CPC. The court emphasized that a review may be exercised when some mistake or error apparent on the face of the record is found, which must be an error that strikes one on mere looking at the record and does not require a long-drawn process of reasoning. The court cannot sit in appeal over its own judgment or correct an erroneous decision merely because a different view could have been taken. The judgment cited Supreme Court pronouncements stating that re-appreciation of evidence and re-hearing of a case without any error apparent on the face of the record is not permissible. In the present case, the petitioner failed to point out any error apparent on the face of the record. Therefore, no case for interference was made out. The Review Petition was dismissed.

The High Court dismissed the Review Petition. It held that the power of review is akin to that of a civil court under Section 114 read with Order 47 Rule 1 of the Code of Civil Procedure. The court emphasized that review is not an appeal in disguise and can only be exercised for a mistake or error apparent on the face of the record, or for any other sufficient reason. Citing Supreme Court judgments in Haridas Das, State of West Bengal vs. Kamal Sengupta, Inderchand Jain, and S. Bagirathi Ammal, the High Court reiterated that an error must be evident per se, not requiring detailed examination or long debate. The court found no error apparent on the face of the record in its previous order dated September 14, 2018, in I.T.A. No. 141/2016. The petitioner had not been able to point out any such error, and the case had been decided on merits. Therefore, no case for interference was made out.