Title: THE PR. COMMISSIONER OF INCOME TAX -CENTRAL -1 vs VALLEY IRON & STEEL CO. LTD.
Date of decision: 18.07.2023
+ ITA 913/2019
CORAM: HON’BLE MR JUSTICE RAJIV SHAKDHER
HON’BLE MR JUSTICE GIRISH KATHPALIA
Introduction
Delhi High Court Dismissed the petition seeking overturn the order passed by Income Tax Appellate Tribunal as the Assesee filed a return with nil gains and never had filed a revised return.
Facts of the case
The respondent/assessee suffered significant losses as a result of the floods in Himachal Pradesh and was forced to use the Corporate Debt Restructuring Scheme (“CDR”) to restructure the debts it had obtained from banking institutions, which were its lenders.
A working capital loan became a working capital term loan (“WCTL”) due to CDR, and the accumulated interest became a fund interest term loan (“FITL”).
The respondent/assessee filed a Return of Income (“ROI”) for the AY in question on November 30, 2014.The respondent/assessee updated the first ROI on September 1, 2016, (the online submission was submitted on August 29, 2016).The revision in the ROI was triggered by a revision in the tax audit
A disallowance under Section 43B of the Act was included in the original tax audit report, however it only amounted to Rs. 6,08,64,813/-. The disallowance was suo motu increased to Rs. 48,18,93,419 in the updated tax audit report.The AO first questioned the disallowance under Section 43B of the Act in a notification dated November 21, 2016, which was issued according to Section 142(1) of the Act. report, which was carried out on 26.08.2016. The tax audit report was revised by the Chartered Accountant of the respondent/assessee suo motu.
Analysis of the court
It is obvious that the assessee/respondent increased the disallowance according to Section 43B of the Act from Rs. 6,08,64,813/- to Rs. 48,18,93,419/- on their own initiative. This course correction was carried out with the submission of a revised tax audit report on August 26, 2016, which resulted in the filing of a corrected return both physically and electronically. On August 29, 2016, a revised ROI was submitted electronically. On September 1, 2016, a physical filing of the amended ROI was made.
The Tribunal stated that there is no disputing the fact that the AO initially raised a particular concern over the disallowance under Section 43B of the Act via a notification dated November 21, 2016, issued under Section 142(1) of the Act. Therefore, as rightly asserted by respondent it was not the case that the respondent/assessee made a course correction after the disallowance under Section 43B of the Act was incorrectly entered in the tax audit report, as observed by the AO.
Furthermore, there is no disputing the fact that the Gujarat High Court rendered decisions at the pertinent period that supported the respondent/assessee. For convenience’s sake, the order dated August 31, 2006 in Commissioner of Income Tax v. Gujarat Cypromet Ltd. appellant does not contest the fact that the Gujarat High Court’s position was only overturned by the Supreme Court on February 21, 2019, in a decision published in Commissioner of Income-tax, Ahmedabad v. Gujarat Cypromet Ltd., (2019) 103 taxmann.com 346 (SC). Given the above, it cannot be claimed that the respondent/assessee did not willingly increase the disallowance under Section 43B of the Act.
According to us, the Madras High Court decision in Gangotri Textiles Ltd. v. Deputy Commissioner of Income Tax, Corporate Circle 2, Coimbatore, (2020) 121 taxmann.com 171 (Madras), on which Appallant has relied, is distinguishable on the basis of facts.
Reading the Madras High Court decision would reveal that the assessee hid its profits that resulted from the sale of the subject windmills and land. In reality, the assessee had submitted a return with “nil” capital gains.
The assessee never submitted a corrected return, and only after the case was brought before the Tribunal did it finally acknowledge that such a sale had indeed occurred.
The Supreme Court’s ruling in MAK Data (P) Ltd. v. Commissioner of Income-tax-II, (2013) 38 taxmann.com 448 (SC), is also notable because it involved documents such as share application forms, bank statements, and memoranda of association for corporations, among others, that were discovered during a survey carried out in accordance with Section 133A of the Act.
In our opinion, the Madras High Court’s and the Supreme Court’s rulings in the cases of Gangotri Textiles Ltd. and MAK Data (P) Ltd. were made in contexts that were distinct from the one that arose in the current case.
Thus, for the forgoing reasons, we are not inclined to interdict the decision of the Tribunal. According to us, no substantial question of law arises for our consideration. The appeal is, accordingly, closed.
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