The Commissioner Of Income Tax-I, Chandigarh v. M/S A.b.sugar Mills Ltd., Chandigarh

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH (1) Income Tax Appeal No.199 of 2014(O&M) Date of Order: 16.02.2015 The Commissioner of Income Tax-I, Chandigarh ..Appellant Versus M/s A.B.Sugar Mills Ltd., Chandigarh ..Respondent (2) Income Tax Appeal No.237 of 2014(O&M) The Commissioner of Income Tax-I, Chandigarh ..Appellant Versus M/s A.B.Sugar Mills Ltd., Chandigarh ..Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE AMOL RATTAN SINGH Present:Ms. Urvashi Dhugga, Advocate,for the appellant. Mr. Nitin Kaushal, Advocate,for the respondent. RAJIVE BHALLA, J (Oral) C.M.No.13733-CII of 2014 &C.M.No.14726-CII of 2014 Prayer in these applications are to condone delay of 07 days in filing the appeals. Notice of the applications to counsel for the non- applicant-respondent. Counsel for the non-applicant-respondent states that hehas no objection, if the applications are allowed. In view of averments in the applications and thestatement made by counsel for the non-applicant-respondent, weallow the applications and condone delay of 07 days in filing theappeals. C.M.No.13734-CII of 2014&C.M.No.14727-CII of 2014 Allowed as prayed for.. Income Tax Appeal No.199 of 2014 As Income Tax Appeal Nos.199 and 245 of 2014 raisethe same substantial questions of law and pertain to the sameassessee, they shall be decided by a common order. The revenue is before us challenging order dated27.11.2013, passed by the Income Tax Appellate Tribunal,Chandigarh Bench 'A;, Chandigarh. Counsel for the revenue submits that the Income TaxAppellate Tribunal, after holding that Rule 8D of the Income TaxRules, 1962 operates prospectively had no jurisdiction to arbitrarilyand abruptly reduce disallowance from Rs.7,19,513/- toRs.1,00,000/- and Rs.60,97,429/- to Rs. 5,00,000/- in ITA No.199 of2014, and Rs.7,55,849 to Rs.1,23,754/-in ITA No.237 of 2014,without recording satisfaction much less by referring to any relevantfacts. The impugned order, insofar as it has reduced the quantum ofdisallowance, may be set aside. Counsel for the assessee submits that once it was heldthat Rule 8D of the Rules, operates prospectively, the Tribunal wasfully justified in determining the quantum of disallowance. The merefact that the Tribunal may not have assigned detailed reasons,cannot be a ground to hold that the order is contrary to law or raisesany substantial questions of law. We have heard counsel for the parties. The question of law that arises for adjudication iswhether the Tribunal could have reduced the quantum ofdisallowance without recording satisfaction in terms of Section 14A ofthe Act? The dispute before the Assessing Officer, the CIT(A) andthe ITAT, was whether Rule 8D was prospective or retrospective.The Tribunal rightly held that Rule 8D is prospective. A perusal of thisRule reveals that it does not, whether by words or intent, lendcredence to the revenue's stand that Rule 8D is retrospective. TheTribunal, therefore, rightly placed reliance upon the judgment inGodrej & Boyce Manufacturingv. DCIT(supra), while holding thatRule 8D shall operate prospectively. The matter, however, does not rest here. The Tribunalhaving held that Rule 8D operates prospectively, proceeded toreduce the quantum of disallowance without recording satisfaction orassigning any cogent reasons or referring to any relevant facts/factors. The power to determine the quantum of disallowance,inhers the recording of satisfaction based upon relevant facts/factors.A perusal of the impugned order reveals that after holding that RuleNARESH KUMAR2015.02.26 14:13I attest to the accuracy andauthenticity of this documentChandigarh The matter, however, does not rest here. The Tribunalhaving held that Rule 8D operates prospectively, proceeded toreduce the quantum of disallowance without recording satisfaction orassigning any cogent reasons or referring to any relevant facts/factors. The power to determine the quantum of disallowance,inhers the recording of satisfaction based upon relevant facts/factors.A perusal of the impugned order reveals that after holding that RuleNARESH KUMAR2015.02.26 14:13I attest to the accuracy andauthenticity of this documentChandigarh 8D of the Rules is prospective in operation, the Tribunal abruptly orshould we say arbitrarily proceeded to reduce the quantum ofdisallowance recorded by the Assessing Officer from Rs.7,19,513/- toRs.1,00,000/- and Rs.60,97,429/- to Rs. 5,00,000/- in ITA No.199 of2014, and Rs.7,55,849 to Rs.1,23,754/-in ITA No.237 of 2014,without reference to any relevant facts or factors. Consequently, we answer the question of law in favour ofthe revenue, allow the appeal to the limited extent of error indetermining the quantum of disallowance and remit the matter to theAssessing Officer for determining the quantum of disallowance, aftergranting an adequate opportunity to the Assessee to put forth hispleas regarding the quantum of disallowance. Parties are directed to appear before the AssessingOfficer on 30.03.2015. (RAJIVE BHALLA) JUDGE February 16, 2015nt (AMOL RATTAN SINGH) JUDGE