M/S Paras Rice Mills, Kurukshetra v. Commissioner Of Income Tax, Karnal And Another

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A No. 524 of 2006 Date of decision : September 16, 2008 M/S Paras Rice Mills, Kurukshetra ...... Appellant. through Mr.Avneesh Jhingan, Advocate v. Commissioner of Income Tax, Karnal and another, ...... Respondents through Mr.Vivek Sethi, Advocate CORAM : HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY TEWARI *** 1. Whether Reporters of Local Newspapers may be allowed to see the judgment ? 2. To be referred to the Reporters or not ?3. Whether the judgment should be reported in the Digest ?*** AJAY TEWARI, J This appeal, filed under Section 260A of the Income Tax Act,1961 (for short “the Act”), proposes the following questions of law :- “ I.Whether in the facts and circumstances of thiscase, the passing of the appeal effect order u/s 154/254 ofthe Income Tax Act, 1961 by the assessing officerinstead of relevant section 240 of the I.T Act, 1961 isabsolutely illegal rendering the appeal effect orderAnnexure A-2 as null and void ? II.Whether in the facts and circumstances of the caseand in the event of quashing of the whole proceedingsagainst the appellant and cancelling the assessment order by the Income Tax Appellate Tribunal vide orderAnnexure A-1, the assessing officer gravely erred inrelying on adjudication of facts by the Income TaxAppellate Tribunal ? III.Whether the assessing officer was justified increating demand against the appellant on the basis of theadjudication on facts by the Income Tax AppellateTribunal in a situation when the appellant has suffered anet loss of Rs.36862.56 after telescoping and setoff ofloss as per Section 70 of the Act ? IV.Whether in the facts and circumstances of the casethe appellant is entitled to interest as per the provisionsof section 132B of the Act on the seized assets witheffect from 1996 when the notice u/s 158BC was issuedto the appellant as well as refund of Rs.23330/- alongwith upto date interest ? V.Whether in the facts and circumstances of the casethe Income Tax Appellate Tribunal was justified indismissing the appeal and upholding order of CIT(A) thatappeal against order of Appeal effect is not competent? VI.Whether in the facts and circumstances of the casethe Income Tax Appellate Tribunal was justified in notdeciding the ground numbers 2-6 of the grounds ofappeal Annexure A-9 ?VII.Whether in the facts and circumstances of the caseappeal is competent against the order of Appeal effect Annexure A-2 ? Assessment order under Section 158BC(c) of the Act wasframed against the assessee for the block period 1.4.1985 to 26.9.1995 inconsequence of the search conducted under Section 132 of the Act at thebusiness and residential properties of the assessee and its partners.Ultimately, the assessment was framed after making various additions on anundisclosed income of Rs.1,41,75,090/-. The assessee impugned theassessment order before the Tribunal on merits. Subsequently, the assesseemoved an application for addition of additional grounds relating to thevalidity of the search. On the allowing of this application by the Tribunal,the revenue challenged the same by way of ITA No.129 of 2002, in whichno relief was granted to the revenue. Eventually, the Tribunal held that ithad jurisdiction to look into the validity of the search in an appeal filedbefore it against the order passed under Section 158 BC(C) of the Actdetermining the undisclosed income of the assessee and that it could alsocall for the records of the authority authorizing the search. After noticingthat the revenue had not produced the material to justify the search before it,the Tribunal drawing an adverse inference against the revenue, quashed theassessment framed by the Assessing Officer. Thereafter, the Tribunal noticed that even though theassessment order had been quashed but since both sides had advancedlengthy arguments on the merits, the same were also being considered.Ultimately on merits too, the Tribunal gave substantive relief to theassessee. The matter then went back to the Assistant Commissioner ofIncome Tax for giving effect to the appeal order wherein the totalundisclosed income was reduced to Rs.14,12,234/- on which tax of Rs.8,47,340/- was computed. The above order was also challenged in appeal before theCommissioner of Income Tax, who dismissed the same holding that theappeal would lie only before the Tribunal. The matter was carried by theassessee again before the Tribunal on the grounds that firstly in law, theappeal would lie only before the Tribunal and not before the Commissioner,and secondly the Tribunal was required to adjudicate the matter on merits. The Tribunal held that the order of the Commissionerdismissing the appeal on the ground of jurisdiction was valid and, thus,dismissed the appeal. It, however, declined to go into the other grounds onmerits. Before us, counsel for the appellant has pressed only grounds 5and 6. As far as ground No.5 is concerned, we are of the opinion that thereasoning of the learned Tribunal that since the Assessing Officer hadmerely given effect to the order of the Tribunal, an appeal against the saidorder would lie only before the Tribunal and not before the Commissioner iscorrect. In our view, however, having found this, the Tribunal should havedecided grounds 2 to 6, raised by the assessee, on merits. This assumeseven greater significance, since in the appeal preferred by the revenue beingITA No.93 of 2004, The Commissioner of Income Tax, Karnalv. M/S ParasRice Mills, Kurukshetra, decided on 16.9.2008, we have already struckdown the finding of the Tribunal in respect of the quashing of search andseizure proceedings. Even otherwise, if the impugned order of the Tribunalis permitted to hold the field it would only result in the assessee having tofile another appeal on merits against the appeal effect order. In this view ofthe matter, we decide question No.5 against the assessee and question No.6 against the revenue and consequently remand the case back to the Tribunalfor decision of the questions on merits. ( AJAY TEWARI ) JUDGE September 16, 2008'kk' ( ADARSH KUMAR GOEL ) JUDGE