Commissioner Of Income Tax-I, Ludhiana v. M/S Trident Limited Ludhiana

IN THE HIGH COURT OF PUNJAB & HARYANA, CHANDIGARH ITA No.138 of 2012 Date of Decision: 13.03.2013 Commissioner of Income Tax-I, Ludhiana ..Petitioner Versus M/s Trident Limited Ludhiana ..Respondent CORAM:HON'BLE MR. JUSTICE HEMANT GUPTAHON'BLE MS. JUSTICE RITU BAHRI Present:Mr. Rajesh Katoch, Advocatefor the appellant. HEMANT GUPTA, J (Oral) The Revenue is in appeal against the order dated 27.12.2011under Section 260A of the Income Tax Act, 1961 passed by the Income TaxAppellate Tribunal, Chandigarh (for short 'the Tribunal') relating to theAssessment Year 2006-07. The revenue has claimed the followingsubstantial questions of law: “(i) Whether on the facts and circumstances of the case, theHon'ble Income Tax Appellate Tribunal erred in quashing theorder u/s 263 of the Income Tax, 1961 passed by CIT-I,Ludhiana wherein he only quantified the amount of penalty tobe levied u/s 271(i)(c) on the issue of Sales Tax Subsidywhich was omitted to be levied by the A.O. And did notchallenge the decision of the Ld. CIT(A) to delete the penaltyu/s 271(1)(c) on merits and, hence, the order of ITAT isperverse?” (ii) Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal was correct inmentioning in the paragraph 4 of the impugned order that ithad carefully perused the relevant records, whereas neither therecords (file u/s 263) was called nor it was correct to say thatit had known the facts, as it omitted to notice that in thepenalty order body, the A.O. had levied the penalty but hadnot levied penalty while calculating thereby mocking the factsby stating perversely that the CIT(A) had decided the issueand this may be called a complete denial of the facts availableon the record?” The assessee has received sales tax subsidy during theassessment year in question. The assessee claimed the said amount as acapital receipt but added a note that though the High Court has decided thematter holding that such amount is revenue receipt but an appeal against theorder passed in pending before the Supreme Court, therefore, the same isreflected as capital receipt. The Assessing Officer rejected the contention ofthe assessee and treated the receipt of sales tax subsidy as a revenue receiptand initiated penalty proceedings. In appeal against the order passed by theAssessing Officer, the Commissioner of Income Tax (Appeals) returned thefollowing findings: “A. Levy of penalty on disallowance of Sales tax subsidyamounting to Rs.7,84,56,517/- treated as revenue receipt. The AO has levied penalty u/s 271(1)(c) on assessee's claimthat sales tax subsidy should be treated as capital receipt. Inthis regard the assessee has submitted that though the issuehas been decided against the assessee by the Hon'ble Punjab& Haryana High Court but the fact of the matter is that theSLP against the above order stands admitted before thereLordships of Supreme Court. Otherwise also the fact thatassessee company had availed sales tax subsidy ofRs.7,84,56,517/- during the year under consideration has been given in the note to the computation to the total income whichis as under: “A. Levy of penalty on disallowance of Sales tax subsidyamounting to Rs.7,84,56,517/- treated as revenue receipt. The AO has levied penalty u/s 271(1)(c) on assessee's claimthat sales tax subsidy should be treated as capital receipt. Inthis regard the assessee has submitted that though the issuehas been decided against the assessee by the Hon'ble Punjab& Haryana High Court but the fact of the matter is that theSLP against the above order stands admitted before thereLordships of Supreme Court. Otherwise also the fact thatassessee company had availed sales tax subsidy ofRs.7,84,56,517/- during the year under consideration has been given in the note to the computation to the total income whichis as under: “1. THE COMPANY HAS AVAILED SALES TAXSUBSIDY OF RS.7,84,56,517/- DURING THE YEARUNDER CONSIDERATION. IN VIEW OF THEDECISION OF PB AND HARYANA HIGH COURT INTHE CASE OF ASSESSEE COMPANY THE SAMEHAVE BEEN TREATED AS REVENUE RECEIPT,HOWEVER THE COMPANY HAS FILED ANAPPEAL BEFORE THE HON'BLE SUPREME COURTOF INDIA TO CONSIDER THE SAME AS CAPITALRECEIPT. THUS THE SALES TAX SUBSIDY MAYPLEASE BE TREATED AS CAPITAL RECEIPT ATTHE TIME OF FRAMING OF ASSESSMENT.”SUBSIDY OF RS.7,84,56,517/- DURING THE YEARUNDER CONSIDERATION. IN VIEW OF THEDECISION OF PB AND HARYANA HIGH COURT INTHE CASE OF ASSESSEE COMPANY THE SAMEHAVE BEEN TREATED AS REVENUE RECEIPT,HOWEVER THE COMPANY HAS FILED ANAPPEAL BEFORE THE HON'BLE SUPREME COURTOF INDIA TO CONSIDER THE SAME AS CAPITALRECEIPT. THUS THE SALES TAX SUBSIDY MAYPLEASE BE TREATED AS CAPITAL RECEIPT ATTHE TIME OF FRAMING OF ASSESSMENT.” After the said order was passed, the Commissioner Income Taxpassed an order on 15.04.2011 under Section 263 of the Income Tax Act,1961 whereby the penalty was quantified for the reason that in the originalorder of the Assessing Officer, the same was omitted. It is the said orderpassed by the Commissioner of Income Tax, which has been set aside by theTribunal holding that once the penalty itself has been set aside by theCommissioner of Income Tax (Appeals), the provisions of Section 263 ofthe Act could not be invoked by the Revenue. We find that the Commissioner of Income Tax has exercisedjurisdiction under Section 263 of the Act in utter violation of not only ofjudicial proprietary also against the provisions of law. Once the penaltyproceedings have been set aside in appeal, the Commissioner of Income Taxcould not impose penalty on the basis of an order, which has since been setaside by the Commissioner of Income Tax (Appeals). In view of the said fact, we do not find that any question of law arises for consideration out of an order passed by the Tribunal.Consequently, the appeal is dismissed. (HEMANT GUPTA) JUDGE (RITU BAHRI) March 13, 2013 JUDGE jt/Vimal