Sh.devi Prasad Gupta v. Principal Commissioner Of Income Tax, Shimla, Railway Board Building, Shimla

IN THE HIGH COURT OF HIMACHAL PRADESHSHIMLA ITA No. 66 of 2016 Date of Decision: October 31, 2018 Sh.Devi Prasad Gupta Versus …Appellant. Principal Commissioner of Income Tax, Shimla, Railway Board Building, Shimla. ..Respondents.Coram: The Hon’ble Mr. Justice Sanjay Karol, Judge. The Hon’ble Mr. Justice Chander Bhusan Barowalia, Judge. Whether approved for reporting?[1]No. Mr. Vishal Mohan, Advocate, with M/sSushant Kaprate, Aditya Sood andPraveen Sharma, Advocates, for theappellant. For the Appellant: For the Respondent:Mr.Vinay Kuthiala, Sr. Advocate withMr.Diwan Singh Negi, Advocate, forthe respondent. Sanjay Karol, J (Oral) The present appeal stands admitted on the following substantial questions of law:- (a)Whether the learned Income Tax Appellate Tribunal is rightin law in upholding the addition made under Section 80IA(10) read with Section 80IC (7) of the Income Tax Act, 1961 based on the addition made on agreed basis in the preceding assessment years though no business had been transacted between the appellant and his alleged sister concern?in law in upholding the addition made under Section 80IA(10) read with Section 80IC (7) of the Income Tax Act, 1961 based on the addition made on agreed basis in the preceding assessment years though no business had been transacted between the appellant and his alleged sister concern? (b)Whether the learned Income Tax Appellate Tribunal is rightin law in holding the addition made on the principle of res judicata though on the legal front, the same Bench of theHon’ble ITAT had held that if there is no business in law in holding the addition made on the principle of res judicata though on the legal front, the same Bench of theHon’ble ITAT had held that if there is no business 1 Whether reporters of the local papers may be allowed to see the judgment? transacted, no addition under section 80IA(10) read with Section 80IC(7) of the Income Tax Act, 1961 could be made? (c)Whether the order of the learned Income Tax Appellate Tribunal suffers from perversity as legal and factual submissions have not been considered in proper prospective? 2.Vide order dated 14.12.2010 (Annexure A-1), the Deputy Commissioner of Income Tax, Circle, Shimla, H.P.,found the assessee to have close connection with anotherconcern i.e. M/s Stoneage Industrial Diamond Product, alsopartnership concern of Sh.Devi Prasad Gupta, soleproprietor of the assessee M/s Shree Tools, thus, byapplying the principle of Section 80IA(10) of the Income TaxAct, 1961 (hereinafter referred to as the Act), assessed theincome of the assessee by reducing the net profit by 10%(5% for use of technical knowhow, customer base and 5%towards goodwill). 3.Subsequently, appeal preferred by the assesseestood dismissed vide order dated 22.01.2013, passed bythe Commissioner of Income Tax (Appeals), Shimla, H.P., inAppeal No.IT/442/2010-11/SML (Annexure A-2). 4.Further appeal filed by the assessee met thesame fate with the Income Tax Appellate Tribunal,Chandigarh, rejecting the same vide order dated23.06.2016(AnnexureA-4),passedinITA No.316/CHD/2013, titled as Shri Devi Prasad Gupta vs. TheDCIT, Circle Shimla. 5.Having heard learned counsel for the parties asalso perused all the orders, we are of the considered viewthat the matter needs to be remanded back, for we find theorder passed by the Assessing Officer suffering fromperversity, both legally and factually. 6.It is not in dispute that the reason assigned bythe Assessing Officer in applying the provisions of Section80IA (10) of the Act, is based only on an admission made bythe assessee in relation to the two preceding assessmentyears i.e. 2006-07 and 2007-08. Well, in our consideredview, about which there cannot be a dispute, assessment ofeach year is required to be independently carried out on thebasis of material before the Assessing Officer. No.316/CHD/2013, titled as Shri Devi Prasad Gupta vs. TheDCIT, Circle Shimla. 5.Having heard learned counsel for the parties asalso perused all the orders, we are of the considered viewthat the matter needs to be remanded back, for we find theorder passed by the Assessing Officer suffering fromperversity, both legally and factually. 6.It is not in dispute that the reason assigned bythe Assessing Officer in applying the provisions of Section80IA (10) of the Act, is based only on an admission made bythe assessee in relation to the two preceding assessmentyears i.e. 2006-07 and 2007-08. Well, in our consideredview, about which there cannot be a dispute, assessment ofeach year is required to be independently carried out on thebasis of material before the Assessing Officer. 7.We notice that the authorities below failed toconsider compliance of essential ingredients required forinvocation of the said provisions. The Assessing Officer asalso other authorities proceeded on the presumption thatsince in the preceding years the assessee admitteddeduction to the extent of 10%, hence, in future alsoassessee would continue to be bound by the same. This, inour considered view, is not a reasonable approach adoptedby the authorities, for each case of the assessee has to be considered independent of the each assessment year andnot on the basis of assessment carried out in the precedingyear. The approach adopted by the authorities below iserroneous and perverse. 8.Thus, we quash and set aside the orders dated14.12.2010 (Annexure A-1), passed by the DeputyCommissioner of Income Tax, Circle, Shimla, H.P.; dated22.01.2013, passed by the Commissioner of Income Tax(Appeals), Shimla, H.P., in Appeal No.IT/442/2010-11/SML(Annexure A-2); and dated 23.06.2016 (Annexure A-4),passed by the Income Tax Appellate Tribunal, Chandigarh, inITA No.316/CHD/2013, titled as Shri Devi Prasad Gupta vs.The DCIT, Circle Shimla, and remand the matter back to theAssessing Officer for consideration afresh. Partiesundertake to appear before the Assessing Officer on20.11.2018. We may not be misunderstood to haveexpressed any opinion on the merits of the case. In view of the above, present appeal standsdisposed of, so also pending application(s), if any. (Sanjay Karol), Judge. October 31, 2018(Purohit) (Chander Bhusan Barowalia)Judge.