Referred Sections:
Section 144 of the Income Tax Act
Section 143(3)
Section 254 of the Act,
Referred Cases / Judgments:
Sehet Synthetics P. Ltd. v. CIT, 302 ITR 126.
$~7.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ Date of Decision: 28.11.2019
% ITA 259/2018
CUREWEL (INDIA) LTD. ..... Appellant
Through: Mr. G.C. Srivastava, Mr. Suvinay
Dash and Mr. Siddharth, Advocates.
versus
INCOME TAX OFFICER ..... Respondent
Through: Ms. Vibhooti Malhotra and
Mr.Siddharth Manocha, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
HON'BLE MR. JUSTICE SANJEEV NARULA
VIPIN SANGHI, J. (ORAL)
1. The following questions of law arise for our consideration:
"I. Whether, in the facts and circumstances of the case and in
law, the ITAT erred in upholding the action of the CIT(A) in
refusing to adjudicate on the issue of non-taxability of income
on account of waiver of loan payable by the appellant to
Canara Bank, without going into the merits of such claim?
II. Whether, in the facts and circumstances of the case and in
law, the ITAT erred in not appreciating that the earlier remand
order of the ITAT was a de novo remand order and not specific
to any issue and therefore the appellant could have raised a
fresh claim before the AO in the set aside proceedings?"
2. We have heard learned counsels and proceed to answer the aforesaid
questions. The Assessing Officer passed the assessment order in respect of
the assessment year 2002-03 under Section 144 of the Income Tax Act on
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30.03.2005. Eventually, on 07.01.2009, the Income Tax Appellate Tribunal
(ITAT) set aside the matter to the file of the Assessing Officer to adjudicate
afresh after considering the documents and submissions of the assessee. The
Assessing Officer then passed a fresh assessment order on 01.12.2009 under
Section 143(3) read with Section 254 of the Act, making certain additions
and disallowances. The said order was upheld by the CIT (A) on
20.10.2010.
3. On further appeal, once again, the ITAT vide order dated 10.03.2011,
set aside the matter to the file of the Assessing Officer with a direction to re-
framing a fresh assessment. While passing this order, the Tribunal observed
in paragraph 5 as follows:
"5. We have heard rival submissions and have gone through
the entire material available on record. As the facts emerge,
assessee stipulates that the finding of lower authorities that
books of account were not maintained, is not correct, as
assessee is willing to produce the books of account before
ITAT also. Further, we find merit in the argument of learned
counsel that even in a case of best judgment assessment, in
absence of accounts and record the AO cannot adopt an
arbitrary and ad hoc approach. The assessee being regularly
assessed to tax, its earlier and subsequent record will be there
and a best judgment assessment could have been properly
made on that basis. We see no justification in summarily
disallowing the entire manufacturing, administrative, selling &
finance charges and further adding back share capital,
unsecured loans, current liabilities and addition to fixed
assets. The approach adopted by lower authorities in making
these additions is highly unjustified and regrettable. The lower
authorities being quasi judicial authorities, are under
obligation to be fair and judicious. In view of these facts and
circumstances, we are of the view that the present assessment
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being excessive, harsh and arbitrary, deserves to be set aside,
restored back to the file of AO to reframe the same afresh.
Assessee is willing to produce the books of account which are
to be considered after affording an opportunity to the assessee.
In an eventuality where best judgment assessment is inevitable,
then fair and reasonable approach as warranted by law has to
be adopted by lower authorities, which the AO will keep in
mind while reframing the assessment. We order accordingly."
4. On this occasion, the Assessing Officer deleted the additions and the
disallowances made in the first two rounds. A fresh addition of Rs. 40,045/-
was made towards late deposit of employees contribution towards PF and
ESI, and brought forward losses to the extent of Rs. 2,14,35,459/- were not
allowed to be set off. The assessee made a fresh claim regarding non-
taxability of income arising from write-off of liability by Canara Bank in its
favour amounting to Rs. 1,36,45,525, which earlier had been offered to tax
as income. The Assessing Officer without examining the said claim of the
assessee, rejected the same at the threshold on the ground that in remand
proceedings, the assessee could not raise a fresh claim. The appeal preferred
by the assessee before the CIT (A) was rejected on 19.07.2013.
5. By the impugned order dated 30.06.2017, the ITAT in ITA No.
5346/Del/2013 upheld the order of the CIT (A). The ITAT, in the impugned
order, inter alia, observed as follows:
"8. We have heard the rival submissions and perused the
relevant material on record including the order of the lower
authorities and the orders of the Tribunal, in which matter
was restored to the file of the Assessing Officer. It is
undisputed fact that appeal of the assessee has been restored
back to the file of the Assessing Officer twice. From the facts
of the case, it is also evident that the additions which were
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made in the first and second round of assessment proceedings
by the Assessing Officer, have not been made in present round
of proceedings. Thus the additions which are agitated by the
assessee in first and second round proceedings and restored
back to the Assessing Officer, no longer existing in this appeal,
which means the Assessing Officer has allowed relief to the
assessee on those issues.
9. But in remand proceeding before the Assessing Officer,
consequent to the second order of the Tribunal dated
10/03/2011, the assessee made a fresh claim for allowing
deduction of Rs.1,36,45,525/- being the liability of the Canara
bank, written back by the company as same should not be
treated as income of the assessee. The question before us is
whether the assessee should be allowed to make fresh claim of
deduction in remand proceedings and that too in second round
of remand by the Tribunal."
6. The Tribunal went on to answer the question raised by it against the
assessee by placing reliance on a decision of the Gujarat High Court in
Sehet Synthetics P. Ltd. v. CIT, 302 ITR 126.
7. The submission of learned counsel for the appellant is that a perusal
of the order of remand dated 10.03.2011 would show that the ITAT had
completely set aside the assessment order on a fundamental premise,
namely, on finding the approach of the lower authorities - which included
the Assessing Officer, to be "highly unjustified and regrettable". The
Tribunal had found the assessment to be excessive, harsh and arbitrary. The
assessment order and the first appellate order were set aside and "restored to
the file of the Assessing Officer to frame the same afresh". The assessee was
permitted to produce its books of accounts and was required to be granted an
opportunity for that purpose. Since the original assessment had been framed
on Best Judgment Basis, and the assessee claimed that its books of accounts
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were available for the relevant assessment year, the Tribunal held that in the
eventuality, the Best Judgment Assessment is inevitable, then fair and
reasonable approach, as warranted by law, has to be adopted by lower
authorities and that the Assessing Officer should keep the same in mind
while re-framing the assessment.
8. Learned counsel submits that in view of the aforesaid, the finding
returned by the Tribunal in the impugned order that the remand to the
Assessing Officer vide the earlier order dated 10.03.2011 was limited, is
incorrect. Reliance placed on Sehet Synthetics P. Ltd. (supra) was also
misplaced in view of the complete remand in the present case. He further
submits that, in fact, the Assessing Officer had also made fresh additions
while passing the fresh assessment order, precisely on the same basis that a
fresh assessment was being framed. Else, the Assessing Officer could not
have made fresh additions of Rs. 40,045/- towards late deposit of employees
contribution towards PF and ESI, and could not have disallowed set-off of
the brought forward losses to the extent of Rs. 2,14,35,459/-.
9. On the other hand, Ms. Malhotra submits that the Assessing Officer
had not examined the merits of the fresh claim made by the assessee
regarding non-taxability of income arising from write-off of liability by
Canara Bank in its favour amounting to Rs. 1,36,45,525/-, on the threshold
objections that in remand proceedings a fresh claim could not be raised by
the assessee.
10. Having heard learned counsels and perused the impugned order as
well as the order dated 10.03.2011 passed by the ITAT in ITA No.
ITA 259/2018 Page 5 of 7
04/Del/2011 preferred by the assessee, it is clear to us that the remand made
by the Tribunal to the Assessing Officer vide order dated 10.03.2011 was a
complete and wholesale remand for framing a fresh assessment. The
remand was not limited in its scope and was occasioned upon the Tribunal
finding the approach of the Assessing Officer and the CIT (A) to be
excessive, harsh and arbitrary. The earlier assessment had been framed on
the basis of Best Judgment without examining the books of accounts of the
assessee, which the assessee has claimed were available.
11. That being the position, the Assessing Officer ought to have
evaluated the claim made by the assessee for write-off of liability by Canara
Bank in its favour amounting to Rs. 1,36,45,525/-, and should not have
rejected the same merely on the ground of it being raised for the first time.
The reliance placed by the Tribunal on Sehet Synthetics P. Ltd. (supra) is
misplaced in the light of the scope and nature of remand in the present case.
The finding returned by the Tribunal in paragraphs 8, 9 and 12 of the
impugned order are erroneous since the Tribunal has not appreciated the
scope and nature of the remand ordered by it by its earlier order dated
10.03.2011.
12. We, therefore, answer the questions framed aforesaid in favour of the
assessee and set aside the impugned order. Since the Assessing Officer has
not evaluated the appellant's claim regarding non -taxability of income
arising from write-off of liability by Canara Bank in its favour amounting to
Rs. 1,36,45,525/- on merits, we remand the matter back to the Assessing
Officer for evaluation of the said claim on its own merits.
ITA 259/2018 Page 6 of 7
13. We make it clear that we have not made any observations on the
merits of the said claim.
VIPIN SANGHI, J
SANJEEV NARULA, J
NOVEMBER 28, 2019
B.S.Rohella
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