The Commissioner of Income Tax-IV V. Priyadarshini Spinning Mills Ltd

ITTA/79/2012

AI Insights

The case involves an appeal by the Commissioner of Income Tax-IV, Hyderabad against Priyadarshini Spinning Mills Ltd., Hyderabad, concerning the dismissal of the Revenue's appeal by the Income Tax Appellate Tribunal. The Tribunal had dismissed the appeal based on the grounds that the tax effect was below Rs. 2 lakhs, following a CBDT instruction. However, the Revenue contended that the actual tax effect was significantly higher, amounting to Rs. 18,47,946, due to the CIT (Appeals) order which deleted an addition of Rs. 50,50,070 to the assessee's income. The High Court agreed with the Revenue's assessment and remitted the case back to the Tribunal for a decision on the merits.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 681128 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 05-10-2012
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: CIT(A); Dismissal of appeal; Income Tax; Tax effect; Tax effect; Commission on Export Sales
• Section: 40(a)(i); 260-A

Judgement Text

"THE HONOURABLE SRI JUSTICE GODA RAGHURAM AND THE HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO ITTA No. 79 of 2012 Dated: 05-10-2012 Between: The Commissioner of Income Tax-IV Hyderabad …Appellant And Priyadarshini Spinning Mills Ltd., Hyderabad …Respondent. Judgment: (Per Hon’ble Sri Justice Goda Raghuram) This appeal by the Revenue under Section 260-A of the Income Tax Act, 1961 is preferred to consider the following substantial question of law framed: Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in dismissing the departments’ appeal on the ground that the tax effect is less than Rs. 2 lacs ignoring the fact that the tax effect as a result of the order of the CIT (A) would be Rs.18,47,946/-? Notice before admission was ordered in this appeal on 17-9-2012 and the learned Standing counsel directed to serve the notice on the respondent departmentally and file proof of service. By Memo dated 28-9-2012 (filed by the learned Standing counsel for the appellant) acknowledgement of proof of service of notice in this appeal on the respondent has been filed and it is apparent that the respondent was served notice on 26-9-2012. When the matter is taken up today however there is no representation on behalf of the respondent- assessee. Hence we dispose of this appeal on merits. The Income Tax Appellate Tribunal, Hyderabad Bench (for short ‘the Tribunal’), by the order dated 3-1-2011 in ITA No. 1170/Hyd/09 (impugned) dismissed the Revenue’s appeal on the singular ground that the tax effect in the appeal is less than Rs.2 lakhs and in view of Instruction No.2 of 2005 dated 24-10-2005 issued by the CBDT, the appeal ought not to have been preferred by the Revenue. In this appeal, the Revenue contests the finding of the Tribunal (as to the quantum of the tax effect), recorded for dismissing the appeal. By the order of Assessment dated 18-12-2007 the Joint Commissioner of Income Tax, Range 16, Hyderabad had disallowed the claim of the assessee that he has debited commission on export sales at Rs.50,50,025/-; and the said amount was added to the income of the assessee under Section 40(a)(i) of the Act. The appeal preferred by the assessee was allowed by the CIT (Appeals), who by the order dated 22-9-2009 deleted the addition of Rs.50,50,070/-. It is the claim of the Revenue in this appeal as set out in the substantial question of law framed that the tax implication on the addition of Rs.50,50,070/- as a result of the order of the CIT (Appeals) would be Rs.18,47,946/-. On the aforesaid analysis the order of the Tribunal suffers from a substantial error of misconception of an essential fact and requires to be invalidated. Consequently the order of the Tribunal dated 3-1-2011 in ITA No. 1170/Hyd/09 is set aside. In the facts and circumstances, the matter is remitted to the Tribunal which shall take up the appeal and dispose it of on merits and in accordance with law. No costs. _________________________ GODA RAGHURAM, J 5th October, 2012 _______________________________ M.S.RAMACHANDRA RAO, J GRR "