Itxa/736/2012 Of Rajshri Productions (P) Ltd v. Asst. Commissi0Ner Of Income Tax Circle - 11 (1), Mumbai

sas IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.735 OF 2012 Rajshri International (P) Ltd. ..Appellant. V/s. Asstt. Commissioner of Income Tax, Circle-11(1), Mumbai..Respondent. WITH INCOME TAX APPEAL NO.736 OF 2012 Rajshri Productions Pvt. Ltd. ..Appellant. V/s. Asstt. Commissioner of Income Tax, Circle-11(1), Mumbai..Respondent. Mr.Mihir Naniwadekar for the appellant. Mr.P.C. Chhotaray for the respondent. CORAM : S.C.DHARMADHIKARI AND A.K. MENON, JJ. DATED : 22ND AUGUST, 2014 P.C. :- 1.Heard Mr.Naniwadekar appearing on behalf of the appellant-assessee in the two appeals, both of which arise out of the order passed by the Tribunal for assessment year 2006-07 upholding the exercise of powers under section 263 of the Income Tax Act, 1961 ('the Act' for short). 2.Mr.Naniwadekar in support of these appeals submits that in Income Tax Appeal No.283 of 2012, an order is passed by the Division Bench of this Court, to which one of us is a party, admitting a similar question of law. In the submission of Mr.Naniwadekar, the substantial question of law firstly is, whether the Tribunal was justified in upholding the order of the Commissioner passed under section 263 of the Act when the Commissioner has failed to apply his mind to all relevant and genuine factors, namely, the order of the assessing officer is erroneous in so far as it is prejudicial to the interest of the revenue. In the present case, the assessing officer's orders could not be said to be erroneous, leave alone prejudicial to the interest of the revenue. If at all it is erroneous, it could not have been held to be prejudicial to the interest of the revenue, because, the assessing officer had taken a view and it was in consonance with the judgment of the Hon'ble Supreme Court. The assessing officer has held that though interest on refund was received by the assessee in the relevant assessment year but that was contingent upon the decision which was to be rendered by the higher court. The interest which was awarded to the appellant had been challenged and the matter was pending in appeal at the instance of the department. It is in these circumstances and when the assessee applied the principles of finality, meaning thereby when the dispute came to an end, the amount of interest accrued and received. It was offered to tax, then, the view taken by the assessing officer was imminently possible. It is in these circumstances, the Tribunal ought to have allowed the assessee's appeals. Reliance is placed on the judgment of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. V/s. Commissioner of Income Tax reported in 243 ITR 83. Mr.Naniwadekar submits that secondly, the distinction made by the Tribunal in so far as the decision of the Supreme Court in the case of Commissioner of Income-tax, West Bengal-II V/s. Hindustan Housing and Land Development Trust Ltd. reported in 161 ITR 524 was entirely erroneous inasmuch as the amount was received by the assessee but was not offered to tax. Even otherwise, the judgment in the case of K.P.C. Ltd. V/s. Commissioner of Income Tax reported in 245 ITR 421 rendered by the Supreme Court concludes the issue in favour of the assessee. The Tribunal, therefore, could not have upheld the order of the Commissioner and dismissed the appeals of the assessee. 3.Mr.Chhotaray, on the other hand submits that in this case, the Tribunal's order deserves to be upheld on both counts, namely, that 3.Mr.Chhotaray, on the other hand submits that in this case, the Tribunal's order deserves to be upheld on both counts, namely, that the order of the assessing officer was erroneous and it was unsustainable in law in so far as it is prejudicial to the interest of the revenue. The Commissioner rightly invoked powers under section 263 of the Act. The Tribunal's order upholding his exercise of powers cannot be said to be perverse or vitiated by any error of law apparent on the face of record. The Tribunal has rightly distinguished the judgments which have been cited on behalf of the assessee and, therefore, the appeals be dismissed. 4.We have with the assistance of both the counsel perused the memo of appeal in both the appeals and annexures thereto. We have also perused the orders passed under section 263 of the Act and the impugned orders of the Tribunal. The admitted facts which have been noted by the Tribunal are that, the assessee had received interest on refund during the assessment year 2006-07. This was in pursuance to the order passed by the Commissioner of Income Tax / Tribunal in the case of Rajshri International (P) Ltd. so also in the case of Rajshri Productions Pvt. Ltd. The interest had been received on the refund issued consequent to the relief granted by the Tribunal in 1995-96, 1997-98 and 1998-99. Both the assessee had not disclosed the interest in the return of income for the assessment year 2006-07 on the ground that the relief orders of the Commissioner of Income Tax / Tribunal were disputed by the department in further appeal. The assessing officer in the assessments made under section 143(3) of the Act had accepted the claim of the assessee and therefore, the interest income of the assessee was not added to the total income. The Commissioner held that this was not a permissible course and not at all acceptable and all the more when the accrued interest amount was actually received but was not offered to tax as income on the spacious belief that the Tribunal order has been disputed and challenged by the department by taking recourse to further appeal. It is in these circumstances that the assessee relied upon the judgment in the case of Hindustan Housing and Land Development Trust Ltd. (supra). The Tribunal rightly distinguished it by holding that that firstly, this was not a case of refund of tax. Consequently, this was a case where the land of Hindustan Housing Ltd. was acquired and the Land Acquisition Officer awarded compensation with which the assessee company was not satisfied. They preferred an appeal and the compensation was thereafter enhanced. Therefore, the Government appealed to the High Court. Pending the appeal, the State Government deposited in the Court the additional amount payable under the Award of the arbitrator and the company was permitted to withdraw the amount only on furnishing security bond for refunding the amount if the appeal was allowed. The respondent thereafter credited the amount in its suspense account on the same date. The question was whether the same (the balance having been allowed to tax) and which was received with such condition could be taxed as income for the assessment year on the ground that it became payable pursuant to the arbitration award. The Hon'ble Supreme Court held that right to enhanced compensation is an inchoate right and the additional compensation does not accrue when the amount so awarded was disputed by filing an appeal. The decision in the case of K.C.P. Limited (supra) was then referred to and in that case as well what transpired was that there was a levy which was fixed per quintal on the levy price of sugar which was challenged by the assessee by filing a writ petition in which the High Court passed an interim order. In that interim order, there was protection given to the company and it was permitted to sell sugar at Rs.131/- per quintal. During the assessment year in question, the company collected an amount of Rs.14,96,130/- in excess of the levy price of sugar fixed by the Government. The income tax officer treated the amount as part of the trading receipts of the company. In the appeal preferred by the company, the Commissioner of Income Tax (Appeals) held that the said amount could not be brought to tax. When the revenue preferred appeal before the Tribunal, it was dismissed. However, the question of law was referred by the Tribunal for the opinion of the High Court at the instance of the revenue which the High Court answered in the negative inasmuch as against the assessee and in favour of the revenue. Thus, in these circumstances argument by the learned counsel by the revenue was upheld. That is how the aggrieved assessee went to the Supreme Court and the argument on behalf of the assessee was negatived by the Hon'ble Supreme Court and it held that that though the interim orders of the High Courts are differently worded in the three cases, the common feature of all the orders is that the realisation of the excess price by the respective assessee was hedged by several conditions one of which was that the assessee shall refund the amount received in excess of the price fixed in the event of the pending dispute being decided adversely by the Court. However, K.C.P.'s position was not identical. There the receipt was not conditional and hedged as noted by the Hon'ble Supreme Court. In these circumstances the Hon'ble Supreme Court held that the receipt of the amount by the assessee was clearly not associated with the liability to refund the amount, which liability was ascertainable and quantified in the cases that have been referred and distinguished by the Hon'ble Supreme Court in KCP Limited (supra). This was the position where when the dispute was pending in the High Court, the interim order granted protection subject to the condition as is noted by the Supreme Court judgment, whereas the finding of the Commissioner of Income Tax (Appeals) and the Tribunal were not upheld after noting the factual position and the assessee's appeal came to be dismissed. Thus, the assessee would not have derived any assistance from these observations which have been relied upon by Mr.Naniwadekar. The observations at page 427 of the report which has been relied upon by Mr.Naniwadekar and which are made in the context of the findings rendered by several High Courts. They would go contrary to the submissions canvassed earlier, inasmuch as, once an amount was received and merely because the receipt of the amount was disputed by the revenue and the matter was pending according to the assessee, by itself without anything more could not have been taken assistance of to postpone the liability as noted by the Commissioner's order. the factual position and the assessee's appeal came to be dismissed. Thus, the assessee would not have derived any assistance from these observations which have been relied upon by Mr.Naniwadekar. The observations at page 427 of the report which has been relied upon by Mr.Naniwadekar and which are made in the context of the findings rendered by several High Courts. They would go contrary to the submissions canvassed earlier, inasmuch as, once an amount was received and merely because the receipt of the amount was disputed by the revenue and the matter was pending according to the assessee, by itself without anything more could not have been taken assistance of to postpone the liability as noted by the Commissioner's order. 5.In the present case, the Commissioner was rightly of the opinion that the interest not only accrued but was actually received and ought to have been offered to tax as income for the assessment year in question. The assessing officer having not applied his mind, his order is erroneous in so far as it is prejudicial to the interest of the revenue. There was a obvious Revenue loss. The said order was clearly unsustainable in law. The Tribunal in this case is, therefore, justified in upholding the order of the Commissioner of Income Tax (Appeals) and dismissing the assessee's appeal. 6.As a result of the above discussion, we do not find any merit in the contentions of Mr.Naniwadekar that the order of the Tribunal can be said to perverse or vitiated by an error of law apparent on the face of record warranting further appellate interference. 7.The appeals do not raise any substantial question of law and are accordingly dismissed. No costs. (A.K. MENON, J.) (S.C.DHARMADHIKARI, J.)