Punjab & Haryana High Court Judgments — 2015

The High Court held that the matter was no longer res integra, referring to its own binding decision in ITA No.530 of 2006 (The Punjab State Cooperative Milk Producers Federation Limited vs. Commissioner of Income Tax II and another), decided on 28.3.2011. In that decision, the Court had considered the relevant statutory provisions and case law and decided an identical issue against the assessee. The Court noted that while the Delhi High Court had taken a contrary view in CIT vs. Kribhco, the dismissal of the Special Leave Petition by the Apex Court in limine did not amount to laying down any law. Therefore, in view of the binding precedent of this Court, no substantial question of law arose in the present appeals. The appeals were accordingly dismissed. The Court did not expressly leave any issue undecided.

The High Court dismissed the appeal, holding that the issues raised were no longer res integra. The Court referred to its own prior decision in ITA No. 253 of 2015 [Principal Commissioner of Income Tax, Faridabad v. Shri Krishan Gopal (HUF)] dated 15.09.2015, which adjudicated both issues against the revenue. The Court held that an appeal against the levy of interest under Sections 234A, 234B, and 234C before the CIT(A) was maintainable. Furthermore, under similar circumstances, the CIT(A) and Tribunal were justified in deleting interest under Sections 234A and 234C and restricting interest under Section 234B. The ratio decidendi is that appeals against interest levies under Sections 234A, 234B, and 234C are maintainable before the CIT(A), and the deletion/restriction of such interest by the lower authorities was upheld based on prior precedent.

The High Court noted that the Tribunal had relied on the Full Bench judgment of the Punjab & Haryana High Court in The Budhewal Co-operative Sugar Mills Ltd. v. Commissioner of Income Tax. However, the revenue pointed out that an appeal against this judgment was filed before the Supreme Court, which had remanded the matter for fresh adjudication. In light of this development and to ensure that the issue is decided in accordance with the law as interpreted by the higher courts, the High Court remitted the matter back to the Tribunal. The Tribunal is to decide the issue afresh after affording an opportunity of hearing to both parties. The appeals were disposed of accordingly.

The High Court found that the ITAT's order dated 21.11.2013 lacked detailed reasoning and did not consider the overall material and evidence on record. The Court noted that the ITAT, as the final fact-finding authority, was obligated to pass a well-reasoned order after examining all evidence. The operative part of the ITAT's order, which directed the AO to apply a 22% GP rate to meet ends of justice, was deemed insufficient. Citing the Supreme Court's decision in Kranti Associates P. Limited, the High Court held that the ITAT's order violated principles of natural justice and the requirement of a reasoned order. Consequently, the impugned order was set aside, and the matter was remanded back to the ITAT for a fresh decision after hearing both parties.

The High Court noted that the matter was concluded by its own prior decision in the case of the assessee itself, Commissioner of Income Tax, Panchkula v. M/s Gymkhana Club, Panchkula, and other connected cases, decided on 30.11.2015. Therefore, the appeals were disposed of in the same terms as that earlier decision. The judgment does not explicitly detail the reasoning or findings on each specific issue as argued, but implies that the earlier decision addressed and resolved these points in favor of the assessee, leading to the dismissal of the revenue's appeals. The operative direction was to dispose of the appeals in terms of the prior judgment.

The High Court did not decide the merits of the case. After arguing for some time, the learned counsel for the petitioner sought permission to withdraw the writ petition. The court granted this permission, allowing the petitioner to file an application before the appropriate authority with the grievance raised in the writ petition. The court noted that it would be open to the petitioner to take recourse to remedies available in accordance with law. No specific finding was given on the legality of the impugned letter or the applicability of Section 271(1)(C) or Section 253 of the Act. The issue of whether the penalty proceedings should have been kept in abeyance was not adjudicated.

The High Court did not decide the merits of the case. After some arguments, the learned counsel for the petitioner sought permission to withdraw the writ petition. The court granted this permission with liberty to the petitioner to file an application before the appropriate authority, incorporating the grievance raised in the present writ petition. The court noted that it would be open to the petitioner to take recourse to remedies available in accordance with law. No specific finding was given on the legality of the rejection letter or the merits of keeping the penalty proceedings in abeyance.

The High Court dismissed the revenue's appeals. The Court referred to its own previous decision in ITA No. 21 of 2010 (Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Hisar) and connected cases, decided on 29.4.2010. In that decision, the Court had held that there was no contract between Haryana Roadways and Haryana Roadways Engineering Corporation Limited for carrying out any work, as Haryana Roadways had not purchased any bus chassis. The transaction was considered a simple case of supply of buses by the Engineering Corporation to Haryana Roadways, which was liable to Sales Tax and VAT. The Court found that Section 194C(1) of the Act, which pertains to payments for carrying out any work in pursuance of a contract, was not applicable as there was no such contract. Consequently, no substantial question of law arose. The High Court found no merit in the present appeals and dismissed them.

The High Court held that the ITAT had dismissed the revenue's appeal on the ground that it had cancelled the order passed by the CIT under Section 263. The High Court, in a separate order of even date in ITA No. 352 of 2015, had upheld the ITAT's order dated 30.4.2013 which cancelled the revisional order passed by the CIT. Consequently, the High Court found that no substantial question of law arose in the present appeal. The appeal was dismissed. The reasoning is that the foundation of the revenue's appeal (the validity of the AO's reframed assessment) was predicated on the CIT's Section 263 order, which had been set aside by the ITAT and this decision was upheld by the High Court. Therefore, the subsequent actions based on the Section 263 order were rendered invalid. The operative direction is dismissal of the appeal.

The High Court held that the ITAT's finding of fact that the property was jointly owned by the assessee and other family members, supported by evidence such as the sale deed, declaration of rental income, and wealth tax returns, was not erroneous or perverse. The Tribunal had correctly noted that all co-owners had signed the sale deed and had been declaring rental income and their share in wealth tax returns. The ITAT's conclusion that the assessee was only a 1/6th share holder and that the capital gains were appropriately taxed in his hands was a plausible view. The ITAT had also found that the same AO had accepted 1/6th share in the hands of other co-owners, and the CIT had not revised those orders. Therefore, the ITAT was justified in cancelling the revisional order passed by the CIT under Section 263 of the Act. The appeal was dismissed as no substantial question of law arose.

The High Court found merit in the submissions of the revenue. It noted that determining whether an employer-employee relationship exists is a complex question of fact, with no single formula. The Court referred to its own decision in M/s Ivy Health Life Services Pvt. Ltd., Mohali, Punjab, which emphasized the need to ascertain if the agreement was a 'contract for service' (income from business/profession) or a 'contract of service' (salary, dependent on master-servant relationship). The judgment highlighted that various factors, beyond just control and organization tests, such as appointing authority, paymaster, dismissal power, nature of job, and establishment, need to be considered. Since the Tribunal had not clearly recorded findings on these aspects based on established principles, the High Court set aside the impugned orders. The matter was remanded to the Tribunal for a fresh decision, considering the principles laid down in M/s Ivy Health Life Services Pvt. Ltd. and passing a speaking order.

The High Court found merit in the revenue's submission. A perusal of the orders of the CIT(A) and the Tribunal revealed that no definite finding was recorded on whether the interest income earned by the assessee was derived from business activity. Similarly, the issue of netting of interest had not been considered in light of the Court's various pronouncements. Therefore, the Court considered it appropriate to refer back the issues concerning interest on FDRs and interest on refund of income tax for determining the deduction under Section 80HHC, and also the netting of interest for the purposes of deduction under Section 80HHC, to the CIT(A) to decide the same in accordance with law after hearing both parties. The appeal was disposed of accordingly, with the observation that nothing stated therein should be taken as an expression of opinion on the merits of the case. The operative direction was to remand the issues to the CIT(A).

The High Court found merit in the assessee's submission. It referred to its earlier decision in M/s Ivy Health Life Services Pvt. Ltd. where it was held that determining whether an agreement is a 'contract for service' or a 'contract of service' is crucial. If it's a 'contract for service', the income falls under 'business or profession'; if it's a 'contract of service', it's treated as salary, dependent on a master-servant relationship. The Court reiterated that establishing an employer-employee relationship is a complex question of fact, not solely dependent on the control or organization tests, but also on factors like appointing authority, paymaster, dismissal power, duration of alternative service, extent of control, nature of job, establishment, and right to reject. Since the Tribunal had not made a clear factual finding on this aspect based on these principles, the High Court set aside the ITAT's order and remanded the matter back to the Tribunal for a fresh decision, after hearing the parties and passing a speaking order.

The High Court held that the ITAT was justified in confirming the orders of the lower authorities. The Court reasoned that for the purpose of calculating exemptions under Section 10(10) (gratuity) and Section 10(10AA) (leave encashment), the definition of 'salary' is specifically provided in the Explanation to Section 10(10), which refers to clause (h) of Rule 2 of Part A of the Fourth Schedule. This rule states that 'salary' includes dearness allowance if the terms of employment so provide, but excludes all other allowances and perquisites. The Court found no ambiguity in this definition and affirmed that it should be applied, distinguishing it from the definition of 'salary' under Section 17 of the Act, which is for different purposes. The Court also noted that the Madras High Court in K. Gopalakrishnan had similarly interpreted the term 'salary' for these sections. Therefore, the additions made by the AO and confirmed by the CIT(A) and ITAT were upheld. The substantial questions of law were answered against the assessee.

The High Court consolidated questions (i) and (ii) concerning DEPB income. It noted the Tribunal's direction to re-compute the deduction under Section 80HHC as amended by the Taxation Laws (Amendment) Act, 2005, with retrospective effect from 1.4.1998, based on clauses (iiid) and (iiie) of Section 28. As this issue was remitted back to the Assessing Officer, the Court held that questions (i) and (ii) did not survive for consideration. Regarding question (iii), the Court referred to the Supreme Court's decision in M/s Liberty India v. Commissioner of Income Tax, which distinguished between 'profits derived from an industrial undertaking' and 'profits attributable to an industrial undertaking,' stating deduction is admissible only for profits derived from industrial activity. The Court also cited its own decision in Sneh Lata Jain v. Income Tax Officer, holding that FDR interest, even if used as security for business loans, does not have a direct nexus with the profits and gains of the industrial undertaking derived from export business activity. The Tribunal had concluded that the FDR interest did not have an immediate nexus with the export business and was correctly treated as income from other sources. Therefore, question (iii) was decided against the assessee.

The High Court noted that the conditions for invoking the principle of mutuality, as enumerated by the Apex Court in Bangalore Club's case, require complete identity between contributors and participators, actions in furtherance of the association's mandate for member benefit (direct or indirect), and no scope for profiteering by contributors. The Court found that the ITAT had not recorded any definite finding of fact on the basis of these legal enunciations. Therefore, considering the issue of mutuality's applicability as primarily a question of fact, the High Court set aside the ITAT's order and remanded the case back to the Tribunal. The Tribunal was directed to adjudicate the matter afresh and pass a speaking order after hearing both sides, without being influenced by any prior findings or observations. The Court explicitly stated that its observations were not an expression of opinion on the merits of the controversy.

The High Court held that the appeal was without merit and no substantial question of law arose. The Court affirmed the concurrent findings of the Assessing Officer, CIT(A), and the Tribunal. The reasoning was that the plot was purchased by four persons, and the housing loan was also taken jointly by them. Since the individual shares were not specified in the sale deed, Section 45 of the Transfer of Property Act, 1882, creates a presumption that all co-owners are equally interested in the property. The assessee had also failed to produce any evidence to support her claim of sole investment. Therefore, the authorities were justified in allowing only 1/4th (25%) of the total interest deduction to the assessee. The Court found the approach of the authorities to be plausible and based on the material on record, warranting no interference. The appeal was dismissed.

The High Court held that the ITAT had categorically recorded that notice under Section 143(2) was served on the assessee on 31.7.2006, and the assessee did not appear thereafter, leaving without providing a forwarding address. Subsequent notices and the ex parte assessment order were served by affixation at the last known address in the presence of witnesses, which was considered a valid mode of service as per the ruling in VRA Cotton Mills P. Limited vs. Union of India and others (359 ITR 495 (SC)). The Tribunal also noted that the appeal before the CIT(A) was time-barred, and no reasonable cause was explained for the delay. The High Court found the Tribunal's view plausible, based on the appreciation of material on record, and concluded that no illegality or perversity was shown, thus no substantial question of law arose. The appeal was dismissed.

The High Court held that the appeal lacked merit and no substantial question of law arose. The Court found that the Assessing Officer, CIT(A), and the Tribunal had concurrently recorded that ₹12,12,000 constituted unexplained deposits/investment in the assessee's bank account. The authorities below had considered the sale of the plot and the boutique business receipts but found that the dates of deposit and availability of cash did not tally. The Tribunal specifically noted that even if the bearer cheques were issued, it was not possible to encash them on the same day as the sale deed execution, and the subsequent installment-based deposits of the remaining amount were not satisfactorily explained. The Court concluded that the approach of the lower authorities was plausible and based on material on record, warranting no interference. Therefore, the appeal was dismissed.

The High Court dismissed the appeal on the ground of territorial jurisdiction. It noted that the Assessing Officer was based in Alwar, the CIT(A) in Jaipur, and the Tribunal in Jaipur. Citing its own previous judgments in Commissioner of Income Tax (Central) Gurgaon v. M/s Parabolic Drugs Ltd. and The Commissioner of Income Tax, Faridabad v. M/s Motorola India Ltd., the Court held that it lacked territorial jurisdiction to adjudicate the appeal when the order passed by the Assessing Officer was at Alwar. Consequently, the appeal was returned to the revenue for filing before the competent court of jurisdiction in accordance with law. The substantive issues raised by the revenue regarding the additions made under Section 68 and the ITAT's findings were not adjudicated upon.

The High Court noted that the ITAT had dismissed the Revenue's appeal for assessment year 2007-08 by relying on its own prior order for assessment years 1993-94 to 1995-96. The Court referred to its own judgment in ITA Nos. 75 to 77 of 2004, which had disposed of appeals concerning the same assessee for earlier years. In that prior decision, the Court had examined Section 11(1)(a), Section 11(4), and Section 11(4A) concerning business income and the requirement for business to be incidental to the trust's objectives. It also considered Section 13(1)(c) read with Section 13(3) regarding the application of income for the benefit of persons specified therein. The Court found that the ITAT had not adequately addressed the issue of utilization of newspaper income for charitable purposes and had not recorded a clear finding regarding the violation of Section 13(3). Therefore, the matter was remanded to the ITAT to re-adjudicate the exemption claim under Section 11, considering Section 11(1)(a) and the admissibility of deductions in light of Section 13(1)(c) read with Section 13(3).

The High Court, acknowledging that the matter was no longer res integra, decided to dispose of the appeals in terms of its earlier order dated 8.5.2014 in ITA No.652 of 2010. In that prior order, the High Court had referred to the Supreme Court's decision in Bharti Cellular Limited's case, which emphasized the necessity of human intervention for a service to be considered 'technical service' under Section 194J. The Supreme Court had highlighted that matters involving technical data and human intervention require expert examination. Consequently, the High Court set aside the orders of the authorities below and remitted the matter to the Assessing Officer (TDS). The Assessing Officer was directed to examine a technical expert from the department's side, consider the element of human intervention, and also determine the applicability of the Provisos to Sections 201(1) and 201(1A) inserted by the Finance Act, 2012, retrospectively, as urged by the assessee. The Assessing Officer was also to consider the element of income in the transaction before passing a fresh order.

The High Court found that the entire approach of the authorities in determining the ALP would need to be reconsidered in light of its observations. It noted that the Tribunal's finding that the TPO is not authorized to judge the allowability of business expenditure, relying on CIT vs. EKL Appliances Ltd., was based on a potentially contradictory interpretation of the DRP's order. The Tribunal held that the DRP had only described circumstances to test benefits, not to question commercial expediency, yet also concluded that only incidental and passive association benefits were provided. The High Court observed that the TPO and DRP did question commercial expediency and the actual delivery and benefit of services. Regarding the Revenue's appeal, the High Court noted the Tribunal's reasoning that since the DRP found SAP license and MS Office were purchased at a lower rate, benefiting the assessee, the addition by the TPO was improper. However, due to the findings on questions of law in the assessee's appeal, this matter also needed reconsideration. Consequently, the High Court set aside the ITAT's order and remanded the matter to the Tribunal for fresh consideration, directing it to decide whether to consider evidence itself or further remand. The High Court did not decide the specific questions of law raised but found them relevant for re-assessment.

The High Court held that the Tribunal was correct in upholding the levy of penalty on the ` 14 lacs addition. The court found that the surrender was made due to discrepancies in the assessee's books of account, loose papers, and documents. The assessee attempted to nullify the surrendered income by showing the sale of opening stock at a lower price, reducing the declared income. The subsequent explanation of purchasing and selling miscellaneous assets to justify the ` 14 lacs bank deposit lacked evidence. The court distinguished the present case from CIT vs. Ram Sanehi Gian Chand (supra) and CIT vs. Manjunatha Cotton and Ginning Factory (supra), stating that in those cases, the facts were different, and the current case involved admitted discrepancies. The court found the assessee's situation analogous to MAK Data P. Limited (supra), where the Supreme Court upheld the penalty, emphasizing that the statute does not recognize defenses like 'avoiding litigation' and that voluntary disclosure does not automatically absolve from penalty. Therefore, no substantial question of law arose, and the appeals were dismissed.

The High Court held that the Tribunal was correct in allowing the exemption under Section 54F of the Income Tax Act, 1961. The Court reasoned that Section 54F does not impose a restriction that the investment in the new asset must be sourced solely from the sale consideration of the original asset. The Court referred to the Kerala High Court's decision in K.C.Gopalan's case, which held that the law does not insist that the sale consideration obtained by the assessee must be utilized for the purchase of the house property. The Court also noted that other High Courts, including the Gauhati High Court in CIT vs. Rajesh Kumar Jalan and the Karnataka High Court in CIT, Bangalore vs. Anandraj, have taken a similar view. The Court found that the investment made by the assessee was within the stipulated time and exceeded the capital gain earned. Therefore, the addition of ₹1,21,32,636/- made by the revenue authorities was rightly deleted by the Tribunal. The Court concluded that no substantial question of law arose, and the appeals were dismissed.

The High Court decided the issues based on its previous pronouncements and Supreme Court rulings. Regarding question (i), the Court held that insurance claims do not fall within the scope of 'other receipts of a similar nature' as per Explanation (baa) to Section 80HHC(4C), applying the principle of 'ejusdem generis' and citing CIT v. Khemka Containers Private Ltd. Thus, 90% of such receipts could not be reduced from business profits. This question was answered against the revenue. For question (ii), the Court followed its decisions in CIT v. Lakshmi Machine Works and CIT v. Vardhman Polytex Ltd., holding that sales tax and CST are to be excluded from the total turnover for computing deduction under Section 80HHC. This question was also answered against the revenue. However, for question (iii), the Court accepted the Revenue's contention, relying on the Supreme Court's decision in Liberty India v. CIT, that profit from duty drawback schemes is not profit derived from an industrial undertaking eligible for deduction under Section 80IB. This question was decided in favour of the revenue. Consequently, the appeal was partly allowed.

The High Court observed that the facts and issues in this appeal were identical to those decided in C.S.Atwal's case (ITA No. 200 of 2013). In that case, the Court had concluded that no possession had been given by the transferor to the transferee of the entire land in part performance of the JDA so as to fall within Section 53A of the TPA. The possession delivered, if any, was as a licensee for development, not as a transferee. Furthermore, Section 53A of the TPA, by incorporation, is embodied in Section 2(47)(v) of the Act, requiring all essential ingredients of Section 53A to be fulfilled. Since the JDA, executed after September 24, 2001, was not registered, it did not fall under Section 53A of the TPA, and consequently, Section 2(47)(v) of the Act did not apply. The Court also noted the assessee's submission that capital gains tax had already been paid on amounts received, and sale deeds executed. In view of the cancellation of the JDA, no further amount was received. The Court held that the Tribunal and authorities below were incorrect in holding the assessee liable for capital gains tax on the remaining land for which no consideration was received and which stood cancelled. The issue of exigibility to capital gains tax was decided in favour of the assessee, rendering the question of exemption under Section 54F academic. The appeals were allowed.

The High Court held that the ITAT's findings were based on a plausible appreciation of the material on record and did not suffer from illegality or perversity. For assessment years 1984-85 to 1986-87, the Tribunal correctly deleted the penalty under Section 18(1)(c) by holding that a difference in valuation between the assessee's registered valuer and the District Valuation Officer (DVO) constituted an estimation, and such estimation, when at variance, did not amount to furnishing inaccurate particulars of assets. The Tribunal relied on judicial pronouncements stating that valuation is a matter of estimation. For assessment years 1987-88 and 1988-89, the Tribunal found that the assessee had a reasonable cause for not declaring the value of certain assets, as it was under the bonafide belief that no wealth tax was payable due to incurring losses, which was covered under Schedule I, Part II of the Wealth Tax Rules. Consequently, the High Court found no substantial question of law arising from the ITAT's order and dismissed the appeals filed by the revenue. The operative direction was the dismissal of the revenue's appeals.

The High Court noted that a similar appeal (ITA No. 215 of 2015) concerning the same assessee and an identical delay of 105 days had been decided by the Court on 6.8.2015. In that case, the impugned order of the Tribunal was set aside, the delay was condoned, and the matter was remanded to the Tribunal for decision on merits. Following this precedent, the present appeal was allowed. The High Court set aside the Tribunal's order dated 31.10.2014 and remitted the matter back to the Tribunal to decide the appeal on its merits in accordance with the law. The issue of the delay in filing the appeal before the Tribunal was effectively condoned by this order.

The High Court held that Section 254 of the Income Tax Act, 1961, does not confer any power upon the Income Tax Appellate Tribunal to interfere with prosecution proceedings, whether at the stage of a show cause notice or any other stage. The Court reasoned that the power to grant a stay under Section 254(1) and its proviso is circumscribed by 'any proceedings relating to an appeal' and must be exercised within the context of the appeal pending before the Tribunal. The pendency of appeals concerning quantum, penalty, or orders under Section 263 does not grant the Tribunal the power to stay consideration of a show cause notice for prosecution. The Court distinguished the Delhi High Court judgment relied upon by the assessee, stating it was based on peculiar facts where assessment proceedings were intrinsically linked to the legality of a Section 263 order, unlike the present case where only a show cause notice for prosecution had been issued. The Court concluded that it could not read into Section 254 any power to stay independent proceedings, as this was not the legislative intent. Consequently, the writ petition was allowed, and the ITAT's orders were set aside.

The High Court dismissed the appeal filed by the assessee. The Court noted that a similar issue had been decided by the same Court in ITA No. 79 of 2012 (M/s Haryana State Small Industries & Export Corporation Ltd. v. The CIT, Panchkula) on 1.8.2012 for assessment year 2007-08, and ITA No. 90 of 2013 (M/s Haryana State Small Industries & Export Corpn. Ltd. v. Commissioner of Income Tax, Panchkula) decided on 10.7.2013 for assessment year 2008-09. In those cases, the Court had adjudicated the same issue against the assessee and dismissed the appeals. Therefore, following its own precedent, the present appeal was dismissed. The specific reasoning from the cited precedents was not detailed in this judgment, but the principle applied was that expenses incurred after business closure are not allowable as business expenses.

The High Court held that the initiation of proceedings under Section 263 of the Act by the Commissioner was not justified. The Court agreed with the view taken by the Tribunal, which had relied on various High Court judgments, including that of the Delhi High Court in Additional Commissioner of Income Tax v. J.K.D'Costa (1982) 133 ITR 7 (Del), which was affirmed by the Supreme Court. The principle established is that the Commissioner, in exercise of his revisional powers under Section 263, cannot direct the Assessing Officer to initiate penalty proceedings under Section 271(1)(c) of the Act if the Assessing Officer had not initiated them during the assessment proceedings. Penalty proceedings are considered independent of assessment proceedings. The Court found itself unable to subscribe to the view adopted by the Allahabad High Court in Commissioner of Income Tax v. Surendra Prasad Agrawal, which had concurred with the Madhya Pradesh High Court's contrary view. Consequently, the Tribunal's order cancelling the revisional order passed by the CIT was upheld, and the appeal filed by the revenue was dismissed.

The High Court held that the findings of fact recorded by the Tribunal were based on material on record and after appreciating the cash flow statement. The Tribunal's view was plausible and did not warrant interference. Regarding the reliance on Smt. P.K. Noorjahan, the Court noted that the factual situation in the present case was different. The Tribunal had correctly restricted the addition to Rs. 5,87,500, holding that the deficit of Rs. 11,75,000 belonged equally to the assessee and his brother, and the assessee alone could not be held liable for the entire deficit. The Tribunal also found that the assessee had not treated the deficit as agricultural income in his cash flow statement, and thus, the plea could not be accepted. The appeal was dismissed as no substantial question of law arose.

The High Court found that the findings of the lower appellate authorities (CIT(A) and ITAT) were not legally sustainable. Regarding the addition under Section 68 (issue 1), the Court noted that while the initial statements of accountants indicated fake receipts, they later resiled from their statements via affidavits. The Court observed that the assessee is a registered trust claiming exemption under Sections 11 and 12, and if receipts form part of income and are found in account books, they are not deductible unless there is material to show they were spent on the trust's object. For the addition under Section 69-C (issue 2), the Court disagreed with the ITAT's conclusion that unexplained expenditure incurred on the trust's object was deductible. The Court held that under the proviso to Section 69-C, unexplained expenditure is to be added to the assessee's income and not allowed as a deduction. The Court concluded that the lower authorities had not considered these aspects in light of the observations made. Therefore, the appeals were allowed, and the orders of the CIT(A) and ITAT were set aside. The matter was remanded back to the CIT(A) for a fresh decision.

The High Court held that the appeal filed under Section 260A of the Income Tax Act, 1961, had become infructuous. This was based on the submission by the appellant's counsel that the Income Tax Appellate Tribunal had recalled its order dated 21.4.2014, which was the subject matter of the appeal. Consequently, the High Court found no necessity to adjudicate on the merits of the appeal. The operative direction was to dispose of the appeal as infructuous. No specific issue was left undecided, as the appeal itself was rendered moot by subsequent events.

The High Court held that the ITAT was justified in invoking Section 80IA(10) of the Income Tax Act, 1961. The Tribunal had found that the assessee showed a net profit rate of 12.66% in the Mohali unit versus 57.95% in the Baddi unit, despite the Baddi unit having significantly less machinery. The same products were sold from both units at comparable prices, ranging between ₹5,25,000/- to ₹6,25,000/-. The Tribunal concluded that this indicated an inflation of profits in the eligible Baddi unit. The assessee had also conceded before the CIT(A) that expenses were not properly allocated. The Tribunal reasoned that Section 80IA(10), made applicable to Section 80IC by Section 80IC(7), empowers the AO to recompute profits if they appear inflated due to a close connection or other reasons. The High Court found no error in the Tribunal's findings of fact. Therefore, the appeal was dismissed as no substantial question of law arose.

The High Court held that the CIT had rightly assumed jurisdiction under Section 263 of the Act because the assessment order dated 29.12.2004 was erroneous and prejudicial to the interest of the revenue. The Court noted that while the ITAT affirmed the CIT's action regarding points 1, 3, and 4 (which were accepted by the assessee during reassessment), it erred in holding that the revisional jurisdiction under Section 263 was without jurisdiction concerning issues 2 (stock-in-trade) and 5 (gift to minor son). Citing Malabar Industrial Co. Limited vs. CIT, the Court reiterated that an order is erroneous if it involves an incorrect assumption of facts or an incorrect application of law. The phrase 'prejudicial to the interests of the revenue' is of wide import and includes loss of tax. Therefore, the substantial question of law was answered in favour of the revenue. Consequently, ITA No.764 of 2008 was allowed, setting aside the ITAT's order. For ITA No.899 of 2010, which arose from assessment proceedings pursuant to the Section 263 order, the matter was remitted back to the Tribunal for a fresh decision after the High Court's decision on the validity of the Section 263 order.

The High Court noted that the Tribunal had relied on the case of Karnal Cooperative Sugar Mills Ltd. to deny the deduction under Section 80P(2)(a)(iii). However, a Full Bench of the High Court in The Budhewal Co-op. Sugar Mills Ltd. had overruled the Karnal Cooperative case. Furthermore, the Supreme Court, in Deputy Commissioner of Income-Tax v. Budhewal Co-operative Sugar Mills Ltd., following its judgment in Morinda Co-operative Sugar Mills Ltd. v. Commissioner of Income Tax, had remanded the matter for fresh adjudication. Therefore, the High Court remitted the issue of deduction under Section 80P(2)(a)(iii) back to the Tribunal for fresh adjudication in accordance with the law, after providing an opportunity of hearing to the parties. The Court did not decide the other issues raised in the appeal.

The High Court held that the appeal had no merit and dismissed it. The Court noted that the solitary question was whether the rent of ₹10 lacs was receivable by the assessee in the year. Referring to the Explanation to Section 23 of the Act, the Court stated that rent which the owner cannot realize is not to be included in the actual rent received or receivable. The Tribunal had relied on Section 25AA, holding that unrealized rent cannot be taxed in the year of non-realization but in the year of realization. The High Court found no infirmity in this approach. Regarding the revenue's reliance on Rule 4, the Court observed that neither the AO nor the CIT(A) had taken recourse to this rule, and no argument based on Rule 4 was raised before the Tribunal. The revenue also failed to show any material on record that the assessee was confronted regarding the requirements of Rule 4. Therefore, the substantial question of law claimed by the revenue did not arise. The judgments cited by the revenue were acknowledged as well-recognized principles but could not be applied in view of the findings.

The High Court of Punjab & Haryana at Chandigarh dismissed the appeal as withdrawn. The Court granted permission to the appellant-assessee to withdraw the appeal. The reason for withdrawal was the assessee's intention to file a rectification application under Section 254(2) of the Income Tax Act, 1961, as they believed certain points argued before the Tribunal were not discussed. The Court noted that it would be open to the appellant to pursue other remedies available in accordance with the law. No decision was made on the merits of the substantial questions of law that were initially raised.

The High Court found that the ITAT, as the final fact-finding authority, had not examined the material and evidence on record and had not provided detailed reasons for deleting the additions. The Court noted that the ITAT's reasoning was based on the premise that revised figures submitted by the assessee were not considered, leading to the rejection of books of account being unjustified. However, the High Court set aside the ITAT's order. The matter was remanded to the ITAT to decide afresh after hearing learned counsel for the parties and providing detailed and cogent reasons. The appeals were disposed of accordingly. The specific findings on the issues raised by the revenue were not adjudicated on merits by the High Court, as the case was remanded.

Regarding the first issue, the Tribunal held that the assessee had consistently followed the same method of accounting for many years, a fact not rebutted by the revenue. Therefore, departing from this past practice without justification was not permissible. The Tribunal reasoned that if the AO intended to change the method of accounting, they were required to provide a deduction for opening stock, which was an accepted accounting practice, and this was not done. The Tribunal also noted that the AO had not demonstrated that the assessee's method was incorrect or how profits were underestimated, and that the AO's reliance on a measurement book from one authority applied to other contractees was not accurate. The High Court found this to be a pure finding of fact, not illegal or perverse, and thus not warranting interference. Regarding the second issue, the High Court noted that this ground had not been pressed before the Tribunal, and therefore, the question did not arise.

The High Court held that it lacked territorial jurisdiction to adjudicate the appeals. Citing its own previous judgments in Commissioner of Income Tax (Central) Gurgaon v. M/s Parabolic Drugs Ltd. and The Commissioner of Income Tax, Faridabad v. M/s Motorola India Ltd., the Court reiterated that appeals under Section 260A are maintainable before the High Court within whose territorial jurisdiction the Assessing Officer passed the order. Since the AO's order was passed at Alwar, the Punjab and Haryana High Court had no territorial jurisdiction. Consequently, the appeals were dismissed and returned to the Revenue for filing before the competent court of jurisdiction. The other substantial questions of law framed by the Revenue were not adjudicated upon due to the lack of territorial jurisdiction.

The High Court held that the assessee failed to prove that the loan was raised from the Government and that the interest was payable to the Government. Annexures A-4 and A-5 were considered insufficient evidence. Annexure A-4, a certificate from PAIC, was deemed self-serving without corroboration, and Annexure A-5, minutes of a Corpus Fund Committee meeting, did not advance the assessee's case. Therefore, it could not be concluded that the interest paid by the appellant was to the Government and thus fell under Section 196(i) of the Act. The Tribunal's finding that there was no documentary evidence to support the claim was upheld. The High Court found no infirmity in the order of the CIT(A) and the Tribunal, dismissing the appeal on merits. The issue regarding the rate of TDS (10.30% or 11.33%) was remanded by the Tribunal to the Assessing Officer for determination, but this specific aspect was not the primary focus of the High Court's decision on the substantial questions of law.

The High Court found no merit in the revenue's submissions. The Court noted that the additions under Section 80IC were made on the basis that transport subsidy was not earned through manufacturing and bank interest/mibor premium were incidental to the business, not derived from the industrial undertaking. The CIT(Appeals) had observed that in AY 2005-06, deduction under Section 80IC was allowed, and for AY 2006-07, the return was filed based on an audited balance sheet and an audit certificate under Section 80IC, which was initially allowed by the AO. The disallowance was made only after the assessment order was set aside in revisional proceedings. The CIT(Appeals) concluded that all primary facts were disclosed, and no concealment or inaccurate particulars were furnished, citing the Supreme Court's decision in CIT vs. Reliance Petroproducts Pvt. Ltd. The ITAT affirmed these findings, also relying on Reliance Petroproducts. The High Court held that the CIT(Appeals) and ITAT had taken a plausible view, and the revenue failed to demonstrate any error or perversity. Therefore, no substantial question of law arose.

The High Court of Punjab and Haryana dismissed the writ petitions, holding that it lacked territorial jurisdiction to adjudicate the matter. The court found that the proposition of law in M/s Kusum Ingots and Alloys Limited's case, while unexceptionable, was not applicable to the facts at hand. The court distinguished the previous writ petitions filed by the petitioner, noting that in those cases, the question of jurisdiction was not in issue, and the petitions were disposed of because the grievance stood redressed as penalty proceedings did not survive. The court also referred to its own judgments in Commissioner of Income Tax, Faridabad Vs. M/s Motorola India Ltd. and Commissioner of Income Tax (Central) Gurgaon vs. M/s Parabolic Drugs Limited, which held that territorial jurisdiction vests with the High Court exercising jurisdiction over the situs of the Assessing Officer. Therefore, the court concluded that it had no territorial jurisdiction over an order passed by the Assessing Officer at New Delhi and returned the petitions to the petitioner for filing before the competent court.

The High Court addressed each issue as follows: Regarding wastage (Issue I), the Court found no illegality or perversity in the ITAT's finding. The Tribunal had noted an unusual increase in wastage during the last 26 days of the financial year, and the assessee had not provided a satisfactory explanation. The Court agreed with the Tribunal that while entries might be vouched for sale, this did not automatically entitle the assessee to claim excess wastage. For the Section 80HHC deduction on the surrendered amount (Issue II), the Court held that the ITAT was justified in disallowing the deduction. The Tribunal had found that the ` 20 lacs surrendered was not assessed under the head 'income from business or profession', and therefore, it was not available for computing deduction under Section 80HHC. The Court cited its own decision in National Legguard Works' case, emphasizing that the burden to prove eligibility for deduction under Section 80HHC lies with the assessee. For the Section 80HHC deduction on interest income (Issue III), the Court found no illegality or perversity in the ITAT's finding. The Tribunal had rejected the claim for deduction on interest income, and the High Court upheld this decision. Consequently, all substantial questions of law were answered against the assessee, and the appeal was dismissed.

The High Court held that the ITAT's decision was not illegal or perverse. The Court reiterated its previous rulings in Hero Cycles Limited and Metalman Auto P. Limited, emphasizing that a disallowance under Section 14A requires a finding that expenditure was actually incurred in relation to earning exempt income. The Court found that the lower authorities had not established a proximate nexus between administrative and other expenses and the exempt income. The judgment relied upon by the Revenue, CIT vs. Walfort Share and Stock Brokers P. Limited, was distinguished as it dealt with a different factual and legal context concerning dividend stripping transactions before April 1, 2002. Therefore, the substantial question of law was answered against the Revenue, and the appeal was dismissed.

The High Court answered both questions of law. Regarding Question I, the Court held that the set-off of tax credit under Section 115JAA is admissible for the purpose of calculating interest under Section 234B. The Court relied on the Supreme Court's decision in CIT vs. Tulsyan Nec Limited, which held that the Assessing Officer is required to give the benefit of tax credit available under Section 115JAA and then determine the interest payable under Section 234B. The Court emphasized that the right to claim set-off arises from the payment of tax under Section 115JA, and while the quantum may depend on the assessment, the entitlement is not postponed. The Court distinguished the Revenue's cited case, Rolta India Limited, as dealing with a different issue. Regarding Question II, the Court stated it was covered by a prior decision and answered it against the Revenue. Consequently, the appeal filed by the Revenue was dismissed.

The High Court held that the Tribunal was justified in upholding the penalty under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal correctly found that the assessee had furnished inaccurate particulars of income and concealed income, making her liable under the main provisions of Section 271(1)(c). The Tribunal rightly observed that the return filed by the assessee was a 'non est' return, as it was filed after the due date for a voluntary return (Section 139(4)) and after the issuance of a notice under Section 148, indicating concealment detected by the department. The assessee's claim of financial hardship was not a sufficient explanation for not depositing the tax. The Tribunal's reasoning that the assessee was aware of the facts from the firm's assessment and the issuance of the Section 148 notice was accepted. Therefore, the CIT(A)'s reliance on Explanation 3 to Section 271(1)(c) for deleting the penalty was deemed incorrect. The High Court found no substantial question of law and dismissed the appeal.