Madhya Pradesh High Court Judgments — 2020

The High Court held that the principle of 'actus curiae neminem gravabit' (an act of the court shall prejudice no man) applied. It found that the Tribunal had not considered the merits of ITA No.225/JAB/2018 and that it could not have been dismissed as withdrawn, as it was covered by the exceptional conditions in para 10(c) of the Board's Circular. The Court perceived no jurisdictional or legal error in the ITAT's order restoring the appeal, which was based on the finding that the Revenue was not provided a proper opportunity to be heard and that the appeal met an exception to the withdrawal circular. Therefore, the proposed substantial question of law did not arise for consideration. The High Court dismissed the appeal.

The Tribunal held that the petitioner was afforded an effective opportunity of hearing. The court noted that before the impugned decision dated December 31, 2019, a notice was issued on December 27, 2019, to the petitioner, providing an opportunity to explain why the case should not be referred for a special audit under Section 142(2A). This notice explicitly stated that it was to be considered an opportunity to be heard as per the provisions of Section 142(2A). The court found that these facts nullified the petitioner's contention of not receiving an effective hearing. The Tribunal also referred to Section 142(2A) which contemplates an opportunity of hearing and cited the Supreme Court's observation in Rajesh Kumar vs. Dy.CIT & others (2007) 2 SCC 181, stating that the hearing need not be elaborate but must comply with the principles of natural justice. Since the petitioner was given an opportunity to be heard, the Tribunal found no reason to interfere with the Assessing Officer's decision. Consequently, the petition was dismissed.

The High Court held that the relief sought for quashing the bank account attachment notice was rendered infructuous as the bank account had been released after an amount of Rs. 4,45,000/- was attached against the outstanding demand. Regarding the challenge to the assessment order, the Court observed that the petitioner had already availed the statutory remedy of appeal under Section 144 of the Income Tax Act, 1961. The Court was not inclined to grant indulgence based on the petitioner's contention of pending appeals and the alleged non-availability of the Appellate Authority, which was disputed by the respondents. The Court noted that the petitioner was at liberty to file an appropriate application for early hearing before the Appellate Authority, which would be considered on its merits. The Court did not decide on the merits of the assessment order itself.

The High Court held that an appeal lies against the order of the Commissioner of Income Tax (Exemptions) before the Income Tax Appellate Tribunal (ITAT) under Section 253(1)(c) of the Income Tax Act, 1961. Therefore, the writ petition filed under Article 226 of the Constitution of India was not entertained on merits. The Court observed that the petitioner is entitled to take recourse to the alternative efficacious remedy of approaching the Tribunal in accordance with law. The petition was disposed of with this observation, and no decision was made on the merits of the exemption application or the Commissioner's order. The operative direction was for the petitioner to approach the ITAT.

The High Court held that questions (i) and (iii) were not substantial questions of law as they were not based on incorrect or improper reading of evidence. Regarding question (ii), the Court noted that the contention regarding Section 153C was raised for the first time before the High Court. It was observed that a search under Section 132 was conducted at the assessee's residence, along with group concerns where the assessee was a partner. Therefore, assessment under Section 153A was attracted, not Section 153C. The Court concluded that Section 153C had no relevancy, making question (ii) misconceived. The judgments relied upon by the assessee were deemed not applicable as they pertained to Section 153C assessments where the assessee's premises were not searched. Consequently, no substantial question of law arose, and the appeal was dismissed. The Tribunal's finding that the addition needed to be sustained only to the extent of ₹22,40,000/- was implicitly upheld as the High Court found no reason to interfere with the impugned order.

The High Court disposed of the writ petition with a direction to the respondent Department to pass an appropriate order. The order should keep in view the amount already recovered and the outstanding amount against the petitioner. The Commissioner was directed to decide the petitioner's applications within a period of 3 days from the date of receipt of a certified copy of the order, taking into account CBDT Circulars dated 29/2/2016 and 31/7/2017. The Court did not decide the merits of the freezing of bank accounts but directed a prompt decision on the pending applications.

The High Court held that the activity undertaken by the assessee did not amount to 'manufacture' in terms of the Central Excise Act, 1944. The Court relied on the Board's Circular F.No. 354/285/2011-TRU dated 8th December, 2011, which clarified that in cases where goods are received in a pre-packed, duty-paid retail form, and the vendor merely transfers them to another packing for safe transit without altering the retail pack or its declarations, excise duty is not attracted. The Court found that the assessee's activities, which involved receiving duty-paid medicines, affixing holograms and barcodes, and using an outer cover for safe transportation, were analogous to the activities described in the circular. The Court noted that there was no value addition, and the goods were sold at or below the MRP. Therefore, the impugned order of the Tribunal, which had allowed the assessee's appeal, was upheld. The Court found no substantial question of law arising from the appeal.

The appellant sought to withdraw the present appeal, having decided to approach the competent authority under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, for compounding the duty imposed. The High Court allowed the application for withdrawal. Consequently, the appeal was dismissed as withdrawn, with liberty granted to the appellant to file an appropriate application before the competent authority under the aforementioned scheme. The competent authority was directed to consider and decide such an application in accordance with the law, passing a reasoned and speaking order. The appellant was also granted liberty to seek revival of the appeal if any grievance survived after the order of the competent authority. The substantial questions of law were not decided on merits due to the withdrawal of the appeal.

The High Court held that the reasons assigned by the Revenue for declining the refund of interest under Section 201(1A) collected from Respondent No. 3 (NHAI) on behalf of the petitioner were untenable. The Court noted that Respondent No. 2 had allowed the TDS credit in favour of the petitioner after detailed scrutiny, finding that the petitioner was assessed at a loss. Since the TDS was refunded to the petitioner in accordance with law, the interest recovered from Respondent No. 3 under Section 201(1A) could not be legally retained by the Revenue. The Court reasoned that if the deductee is assessed at a loss, there is no justification for levying interest under Section 201(1A) as it is consequential to a default under Section 201(1). In such a scenario, the deductor should not be held in default, and no interest should be levied. The Court quashed the impugned order dated 14.09.2017 and directed Respondents No. 1 and 2 to refund the interest amount collected under Section 201(1A) from Respondent No. 3 on behalf of the petitioner, along with interest under Section 244A, to be paid by Respondent No. 3 to the petitioner. The ratio is that interest under Section 201(1A) cannot be retained by the Revenue when the deductee has been assessed at a loss and the TDS has been refunded.

The High Court dismissed the appeal filed by the Revenue. It held that the Commissioner of Income Tax had no express power to cancel a registration certificate granted under Section 12A of the Income Tax Act, 1961, until October 1, 2004. This was based on the Supreme Court's decision in Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. Vs. Commissioner of Income Tax, Gwalior, which stated that the order passed under Section 12A is quasi-judicial and can only be withdrawn when there is an express power vested in the authority. The amendment introducing sub-section (3) to Section 12AA, effective from October 1, 2004, was prospective and not retrospective. Since the CIT's order of cancellation was passed on August 12, 2003, prior to this amendment, the CIT lacked the jurisdiction to cancel the registration. The substantial question of law was answered against the Revenue and in favour of the assessee.

The High Court dismissed the appeal filed by the Revenue. The dismissal was based on the principle laid down by the Apex Court in Commissioner of Income Tax Vs. Dhanalekshmi Bank Limited (2015) 14 SCC 749, where an appeal was dismissed due to low tax effect without delving into the merits of the case, leaving the question of law open. The High Court explicitly clarified that the dismissal of the present appeal should not be construed as an affirmation of the ITAT's order on merits. Furthermore, the legal issues raised by the Revenue were expressly left open to be adjudicated in an appropriate future case. No specific findings were made on the substantial questions of law, nor were any operative directions issued regarding remand or deletion of additions, as the appeal was disposed of on the preliminary ground of low tax effect.

The High Court allowed the appeal, setting aside the impugned order of the ITAT. The Court held that the Tribunal was not justified in holding the appeals as not maintainable in the absence of CoD clearance. The Court relied on its own Division Bench decision in MAIT No.64/2006 (CIT, Jabalpur vs. Northern Coal Fields Limited, Singrauli), decided on 16.01.2020, which in turn relied on the Supreme Court's judgment in Electronics Corporation of India Limited vs. Union of India and others, (2011) 3 SCC 404. The ratio decidendi is that clearance from the Committee on Disputes is not a prerequisite for filing an appeal. The matter was remanded to the ITAT to re-decide the appeal on merits in accordance with law. No issue was expressly left undecided.

The High Court held that the power under Section 147 of the Income Tax Act, 1961, cannot be exercised merely on suspicion but requires 'reason to believe'. The Court found no illegality or perversity in the findings of fact recorded by the CIT(A) and affirmed by the learned Tribunal. The Tribunal had concurred with the CIT(A)'s view that the AO's reassessment was based on mere suspicion and that the Kerala State Excise Manual was inapplicable to an assessee operating in Madhya Pradesh. Furthermore, the Tribunal found that the AO had not correctly computed the production even based on the said manual, and there was no suppressed production as per the manufacturing process. Consequently, both substantial questions of law were answered against the Revenue and in favour of the assessee. The appeal was dismissed.

The High Court held that the Supreme Court in Electronics Corporation of India Ltd. vs. Union of India (2011) 332 ITR 0058 had recalled its earlier directions that mandated obtaining CoD approval for litigation between government entities. The Supreme Court found that the CoD mechanism, initially set up with a laudatory object to prevent inter-se litigation, had outlived its utility and led to delays and inconsistencies. Consequently, the High Court ruled that the ONGC's case, which established the requirement for CoD approval, no longer held sway. Therefore, it would be deemed that CoD approval was not a prerequisite for filing the appeal. The substantial questions of law were answered in favour of the appellant (Revenue). The impugned orders of the ITAT, which dismissed the appeals on the sole ground of lack of CoD clearance, were set aside as unsustainable. The matters were remanded to the ITAT for re-decision on merits.

The High Court held that the Supreme Court in Electronics Corporation of India Ltd. vs. Union of India (2011) 332 ITR 0058 had recalled its earlier judgments that mandated the mechanism of the Committee on Disputes (CoD) for settling inter/intra-government disputes. Consequently, the principle laid down in the ONGC's case, which required CoD approval, no longer held sway. The Court found that there was no longer a requirement for CoD approval for filing appeals. Therefore, the Tribunal's orders dismissing the Revenue's appeals solely on the ground of lacking CoD clearance were unsustainable. The High Court set aside the impugned orders and remanded the matters back to the Tribunal to decide the appeals on their merits. The substantial questions of law were answered in favour of the appellant (Revenue).

The Tribunal held that the additions of Rs. 23,02,500/- and Rs. 28,97,500/- for unexplained investments were made by the AO solely on the basis of a partner's statement recorded during survey proceedings. This statement was retracted the next day via an affidavit signed by all partners. Crucially, the Tribunal found no other incriminating material or documentary evidence to substantiate these additions. The Court agreed that an admission is not conclusive evidence and can be explained, especially when retracted promptly and without extraneous reasons. Therefore, the substantial questions of law (i) and (ii) did not arise. Regarding the addition for suppressed sales (question iii), the Tribunal noted that this issue had been decided for an earlier assessment year with similar facts. The CIT(A) had restricted the addition to Rs. 17,05,082/- by estimating sales at Rs. 2.5 Crores and applying an 8% net profit rate. The Tribunal affirmed the CIT(A)'s order, following its own precedent for the earlier year, and deleted the remaining addition of Rs. 3,55,74,328/-. The Revenue failed to demonstrate any difference in facts or that the earlier decision was set aside. The Court found no illegality or perversity in the findings of fact by the CIT(A) and Tribunal, and the Revenue's attempt to re-appreciate evidence was not permissible under Section 260A.

The High Court held that the appeals by the Revenue lacked merit and dismissed them. The Tribunal had correctly concluded that in earlier years, the AO had allowed similar advertisement expenses, and this order had attained finality. The Court found that advertisement expenditure is in the nature of revenue expenditure and, having been adjudged as such, must be allowed in the year it was incurred wholly and exclusively for business purposes. The Court distinguished the Supreme Court's decision in *Madras Industrial Investment Corporation Ltd.*, stating it was not applicable as the present case involved advertisement and sales promotion expenses, which are necessities of business and integral to its activities, not for acquiring an asset or right of a permanent character. The Court also referred to a Punjab and Haryana High Court decision in *CIT vs. M/s Glen Appliances Pvt. Ltd.*, which favored the assessee in similar circumstances. The substantial question of law was answered in favor of the assessee.

The High Court dismissed the appeal filed by the Revenue. The Court's decision was based on a prior order passed in a similar appeal, MAIT No. 114/2007, concerning the Commissioner of Income Tax-II, Jabalpur versus Krishi Upaj Mandi Samiti, Raheli, District Sagar, dated November 21, 2019. In that preceding case, the appeal had been dismissed. Therefore, following the precedent set by the earlier order, the present appeal was also dismissed. The specific questions of law were not independently adjudicated upon in this judgment, as the dismissal was based on the outcome of the related appeal. The operative direction was the dismissal of the Revenue's appeal.

The High Court dismissed the appeal filed by the Revenue. The Court acknowledged that a detailed order had been passed in a similar matter, M.A.I.T.No.114/2007 (Commissioner of Income Tax-II, Jabalpur Vs. Krishi Upaj Mandi Samiti, Raheli, District Sagar) on November 21, 2019, which would govern the decision of the present appeal. In that prior case, the appeal was dismissed. Therefore, following that precedent, the present appeal was also dismissed. The specific findings on the substantial questions of law were not elaborated upon in this judgment, as it relied on the outcome of the earlier, similar appeal. The operative direction was the dismissal of the Revenue's appeal.

The High Court held that the Revenue did not dispute that a detailed order passed in a similar case, M.A.I.T.No.114/2007 (The Commissioner of Income Tax-II, Jabalpur Vs. Krishi Upaj Mandi Samiti, Raheli, District Sagar) on 21.11.2019, would govern the decision of this appeal. In view of the order dated 21.11.2019 passed in that case, where the appeal was dismissed, this appeal is also dismissed. The specific reasoning for the dismissal in the cited case, and consequently for this appeal, is not elaborated upon in this judgment. The operative direction is the dismissal of the appeal. No issue was expressly left undecided.

The High Court held that the matter was squarely covered by the Supreme Court's judgment in Assam State Text Book Production and Publication Corporation Ltd. vs. Commissioner of Income Tax, Gauhati-I (2009) and a Division Bench judgment of the same High Court in M.P. Text Book Corporation (supra). The Supreme Court, in Assam State Text Book Production, had observed that State-controlled Educational Committees/Boards constituted to implement the State's educational policy should be treated as educational institutions. The Supreme Court had remitted the matter to the Assessing Officer for de novo consideration in light of various High Court judgments and Central Government letters. Following this, the Division Bench in M.P. Text Book Corporation had also remanded the matter to the Assessing Officer for de novo consideration. Consequently, the High Court set aside the impugned order of the ITAT and remanded the matter to the Assessing Officer for de novo consideration, leaving all questions open. The appeal was allowed and disposed of in terms of the M.P. Text Book Corporation judgment.

The High Court dismissed the appeal filed by the Revenue. The Court noted that the Revenue did not dispute that a detailed order passed in a similar case, M.A.I.T. No. 114/2007 (Commissioner of Income Tax-II, Jabalpur Vs. Krishi Upaj Mandi Samiti, Raheli, District Sagar) on November 21, 2019, would govern the decision of the present appeal. As that appeal was dismissed, the present appeal was also dismissed in view of the prior order. The reasoning for the dismissal of the prior appeal, which would have addressed the substantial questions of law, is not detailed in this judgment. Therefore, no specific finding on each issue or ratio decidendi is provided for this particular judgment, other than the operative direction to dismiss the appeal based on precedent.

The High Court held that the contribution of Rs. 1.50 Crores to the National HVDC Project was admissible as a deduction under Section 37(1) of the Income Tax Act. The Court reasoned that the expenditure was in conformity with Section 24 of the Electricity (Supply) Act, 1948, which enabled the Electricity Board to subscribe to associations conducive to the development of electricity. The contribution was made as per the Government of India's order and was necessary and exclusively for the purpose of business, not a voluntary donation. The Court found no error in the ITAT's finding. Regarding the provident fund, the Court held that the assessee was exempt from depositing with the Provident Fund Commissioner and allowed to deposit with its own PF Trust. As per Regulation 11 of the PF Regulations, there was no specific due date for deposit, and unpaid amounts were treated as invested with the Board. Relying on previous judgments in identical circumstances, the Court found no reason to differ. Consequently, the appeal was dismissed.

The High Court dismissed the appeal filed by the Revenue. The Court noted that the Revenue had admitted before the ITAT that the addition of Rs.96,50,334/- as speculation loss was made due to confusion, specifically regarding the carry-forward of business loss from an earlier year and the applicability of Section 43(5)(d) of the Act, which was introduced w.e.f. April 1, 2006. The Revenue conceded that the loss from shares and futures was covered by Section 43(5)(d) and was not a speculation loss. The Court found that the CIT(A) had obtained a remand report and examined contract notes, which revealed that the transactions were supported by time-stamped contract notes issued by the stock broker, indicating unique client identity and PAN number, thus fulfilling the conditions of Section 43(5)(d). The High Court found no error or perversity in the findings of the CIT(A) and the Tribunal. Therefore, the loss of Rs.96,50,334/- was held not to be a speculation loss. The substantial question of law was answered against the Revenue.

The High Court held that clearance from the Committee of Disputes is not required for the department to file an appeal. This decision was based on the Supreme Court's judgment in Electronics Corporation of India Limited vs. Union of India and others (2011) 3 SCC 404. The Court answered the substantial question of law in favour of the appellant-Revenue. Consequently, the impugned order of the ITAT was quashed, and the matter was remanded to the ITAT to re-decide the appeal on merits in accordance with law. The High Court allowed the appeal. No issue was expressly left undecided.

The High Court held that the appeal could not be entertained. It reasoned that while the Revenue had cited the CBDT circulars and mentioned an audit objection, it failed to provide any record to substantiate that this audit objection had been accepted by the Department. The court referred to the Bombay High Court's observation that merely raising an audit objection is not enough; the Revenue must prove that the objection has been accepted. Since no such proof was presented, the High Court found no reason to entertain the appeal and dismissed it. The operative direction was the dismissal of the appeal.

The High Court held that the Principal Commissioner erred in rejecting the petitioner's application for condonation of delay. The Court found that the petitioner had provided a reasonable cause for the delay, namely his wife's critical illness and hospitalization, which prevented him from submitting the ITR-V within the stipulated 120 days. The Court noted that the petitioner was aged 78 years and was actively involved in his wife's treatment. It was emphasized that the return was filed within the permissible period under Section 139(4), and the issue was only with the acknowledgment submission. The Court considered the CBDT Circular dated June 9, 2015, which grants discretion to the Principal Commissioner to condone such delays, especially when the claim is for a refund and the amount is not substantial. The Court concluded that this was a case of genuine hardship and the discretion should have been exercised in favor of the assessee. Consequently, the impugned order of the Principal Commissioner was quashed, and the application for condonation of delay was allowed. The respondent was directed to process the petitioner's refund claim of Rs. 43,590/- for AY 2015-16, ignoring the delay, within three months.

The High Court held that no substantial questions of law arose from the ITAT's order. Regarding the addition of Rs. 3,82,24,844, the Court found that the CIT(A) had correctly identified it as a double addition for the same project across two assessment years. The Court distinguished the case of Chuharmal vs. CIT, stating it was not applicable as the CIT(A) had found a double addition, implying the assessee had not failed to explain the papers. The Court also found no force in the Revenue's submission that multiple projects were in progress, as the CIT(A) had observed the AO failed to prove otherwise and had not made spot inspections. The AO also had not subjected other projects to tax in AY 2009-10. For the addition of Rs. 3,13,166, the Court noted the CIT(A) accepted the assessee's plea that the papers pertained to sub-contractors who had filed their ITRs. For the addition of Rs. 10,81,612, the CIT(A) deleted it because the Revenue failed to substantiate that the papers pertained to projects other than 'Shanti Residency', and the papers were captioned as 'estimate'. The Court found no illegality or perversity in the findings of fact made by the CIT(A) and affirmed by the ITAT. Therefore, the appeal was dismissed.

The High Court held that the ITAT was justified in directing the CIT to grant registration under Section 12AA of the Act. The Court found no reason to differ with the ITAT's findings. It noted that the assessee is a registered society engaged in imparting education, which is a charitable activity. The Court observed that the previous order of the Assessing Officer under Section 143(3) for AY 2008-09, which was based on satisfaction with the assessee's aims and objects, was not challenged as illegal and therefore could be relied upon. The Court considered the contention for remand as a mere submission and concluded that once the assessee was found entitled to registration, the ITAT's direction to the CIT to grant it was not an error. The substantial question of law was answered in favour of the assessee.

The High Court held that the assessee was eligible for the deduction under Section 80-IA. Regarding the first issue, the Court noted that the audit report in Form No. 10CCB was filed during the course of reassessment proceedings, before the completion of the reassessment order. Therefore, the condition under Section 80-IA(7) was satisfied. The Court found no reason to discard the audit report on the ground that separate audited financial statements of Unit-II were not attached in the original assessment proceedings, as the AO had material before him to rely upon the duly filed audit report. Consequently, question (A) was answered in favour of the assessee. On the second issue, the Court found the CIT(A)'s reasoning cogent. The CIT(A) had noted that Unit-I and Unit-II manufactured entirely different products (pesticides/insecticides vs. micronutrient fertilizers) and used different raw materials. Therefore, comparing the sales to raw material consumption ratio of Unit-II with the combined accounts of both units was inappropriate. The CIT(A) allowed the deduction of ₹16,71,579/-. The Tribunal concurred with the CIT(A)'s view that Unit-II was separate and maintained separate audited accounts. The High Court found no force in the Revenue's submission that the profit shown by Unit-II was erroneous. Question (B) was also answered against the Revenue. The Court found no illegality or perversity in the Tribunal's findings.

The High Court dismissed the writ petition. It held that Section 245D(6B) of the Income Tax Act, 1961, provides that an application for rectification can be made within six months from the end of the month in which the order was passed or within six months from the end of the month in which the rectification application is made. Crucially, the first proviso to Section 245D(6B) creates an embargo, stating that no application for rectification shall be made after the expiry of six months from the end of the month in which an order under sub-section (4) is passed. In this case, the order was passed on 28.11.2016. Six months from the end of November 2016 expired on 31st May 2017. The application filed on 30.06.2017 was therefore beyond the prescribed limitation. The Court distinguished the precedents cited by the petitioner, noting that Section 245D(6B) does not expressly require communication of the order for limitation purposes, unlike the Land Acquisition Act in *Raja Harish Chandra Raj Singh*. The Settlement Commission's interpretation was found to be correct and unambiguous.

The High Court dismissed the appeal filed by the Revenue. The Court found no force in the arguments advanced by the Revenue. The High Court agreed with the ITAT's conclusion that the genuineness of the objects of the assessee Society could not be doubted. The Court noted that the ITAT had rightly directed the CIT, Bhopal, to grant registration to the Society. The ITAT had also clarified that the Revenue would be at liberty to examine the issue of rent paid to members during assessment proceedings if any. The High Court found no illegality or perversity in the ITAT's findings that would warrant interference under Section 260-A of the Act. Therefore, no substantial question of law arose for consideration. The operative direction was that the appeal stands dismissed.

The High Court held that the appeal deserved to be dismissed. The Tribunal's reasoning, which was quoted and affirmed, stated that Section 12AA(1) of the Income Tax Act requires the Principal Commissioner or Commissioner to be satisfied about the objects and genuineness of the activities of the Trust or Institution. The Tribunal found no requirement in Section 12AA for a trust to be mandatorily registered as a Public Charitable Trust under the local law of the State where it is located. Therefore, the action of the CIT(E) in denying registration solely on the basis of non-registration under the MP Public Trust Act, 1951, was not justified. The High Court found no infirmity in the Tribunal's order and concluded that no substantial question of law arose for consideration. The appeal was accordingly dismissed.