Case Law Details
Malabar Regional Co-Operative Milk Producers Union Limited Vs ACIT (Kerala High Court)
The Kerala High Court set aside the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, and remanded the matter for fresh consideration after finding that the Tribunal proceeded on an erroneous assumption while deciding the assessee’s appeal. The dispute arose from an order passed by the Commissioner of Income Tax under Section 263 of the Income Tax Act concerning two disallowances. The assessee contended that the Commissioner had already decided one of the issues relating to ₹1,57,94,958 in its favour, while only the issue concerning performance allowance had been remitted to the Assessing Officer for reconsideration.
The assessee also argued that the Government had ratified the expenditure on 31.01.2019, making the expenditure neither illegal nor prohibited, and that this aspect had not been properly considered by the Tribunal. The Revenue acknowledged that one issue had indeed been decided in favour of the assessee by the Commissioner and that only the performance allowance issue had been remitted. The High Court observed that the ITAT wrongly assumed that the Assessing Officer had not examined either of the provisions and failed to consider the assessee’s specific contentions regarding the Government’s ratification.
Holding that the Tribunal had not properly considered the Commissioner’s order or the grounds raised in appeal, the Court set aside the ITAT’s order and directed it to reconsider the appeal after hearing both parties and pass fresh orders within six months. The Court clarified that it had expressed no opinion on the merits, leaving all questions of fact and law open.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The appellant is before us against the final order of the Income Tax Appellate Tribunal, Cochin Bench (ITAT), in ITA No.318/COCH/2023, making several assertions and impelling various grounds.
2. Sri.Anil D. Nair, learned Senior Counsel, instructed by Smt.Binisha Baby – appearing for the appellant, argued that the learned ITAT omitted to note that, among the two figures disallowed by the Commissioner of Income Tax – done invoking powers under Section 263 of the Income Tax Act (‘Act’ for short) – one was found in favour of his client, while the latter was concluded against. He pointed out that, against the order of the Commissioner, his client moved the learned ITAT specifically asserting that, even while the obtention of Government sanction for expenditure is an internal management regulation, the allowability or otherwise of the same is to be decided with reference to the “Act”; and that the fact that the Government had sanctioned the same (by way of rectification) as early as on 31.01.2019, renders such expenditure to be not forbidden. He pointed that the learned ITAT, however, misdirected itself to the impression that both the figures originally objected to by the learned Commissioner had been not considered by the Assessing Authority and hence approved the order of the former. He contended that the findings of the learned Tribunal are in error and hence liable to be set aside.
3. Harikumar – learned Senior Standing Counsel for the Department of Income Tax, affirmed some of the submissions of the learned Senior Counsel, agreeing that, in Annexure D order of the Commissioner, one of the aspects has been found in favour of the assessee, while the other not. He took us specifically to paragraph No.5 of the said order, to show us that the issue relating to ‘Performance Allowance’ was found to be against the interests of the Revenue by the Commissioner; and that it is this which has now been approved by the learned ITAT. He prayed that this appeal be, therefore, dismissed.
4. We must record upfront that we find some problem with the impugned order of the learned ITAT, for the reason inter alia, that it has proceeded on the assumption that the Assessment Officer had not examined the allowability of either of the provisions. However, as evident from Annexure D order of the Commissioner itself, the first provision – namely with respect to a figure of Rs.1,57,94,958/- has already been found in favour of the assessee; while that with respect to the ‘performance allowance’, has been remitted back to the Assessing Authority, for the purpose of re-consideration, invoking Section 263 of the Act.
5. It is thus indubitable that the learned Tribunal does not appear to have adverted properly to the specific contention of the appellant, that the amount in question had been sanctioned by the Government, through ratification, as early as on 31.01.2019; and consequently, that the expenditure claimed by them was not illegal, or prohibited.
6. We, therefore, are of the firm view that the appeal of the assessee ought to be directed to be re-considered by the learned ITAT, adverting specifically to Annexure D order of the Commissioner, as also to the grounds projected by them in their memorandum of appeal.
7. Consequently, we allow this appeal and set aside the impugned order; and direct the learned Tribunal to re-consider ITA No.318/COCH/2023 in the afore manner, after affording necessary opportunities to both sides, thus culminating in appropriate fresh orders, as expeditiously as possible, but not later than six months from the date of receipt of a copy of this judgment.
8. Needless to say, though we have recorded the essential facts, we have not expressed any opinion on any of the contentions of the rival positions and leave all of them open, to be decided by the learned ITAT in terms of the afore remand.
It is also, therefore, needless to say that, since we are ordering a remand, none of the questions of law had been considered or answered and that they are also left open.
Author Bio
