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2015 (4) TMI 108 - HC - Indian LawsDisallowance of substantial portion of the expenditure - Addl. Commissioner of Commercial Taxes invoked the power under Sec. 35 of the Act on the ground that the order passed by the First Appellate Authority is erroneous and prejudicial in the interest of the revenue and decided matter in favour of assessee - Commissioner of Commercial Taxes initiated suo-motto proceedings under Sec.35A of the Act and set aside the said order and restored the order of the First Appellate Authority, the effect of which is the Assessing Authority has to consider the case on merits afresh - Held that - When a power is conferred on the revision authority to initiate suo-motto proceedings on the ground that the order is erroneous and prejudicial in the interest of revenue in that jurisdiction, the only order that could be passed is to set aside the erroneous order and restore the order of the Assessing Authority. Unfortunately, without keeping this basic principle in mind, the order of the First Appellate Authority is set aside. The order of the Assessing Authority is also set aside. The revision authority frames the assessment for the first time, granting benefits to the assessee. It is totally impermissible in law. Therefore, rightly, the Commissioner of Commercial Tax, in a suo-motto proceedings, has set aside the said order. In that view of the matter, we do not see any justification to interfere with the well-considered order passed by the revision authority. - Decided against Assesseee.
Issues:
Challenging order under Sec. 35A of Karnataka Agricultural Income Tax Act, 1957; Disallowance of expenditure by Assessing Authority; Appeal to Joint Commissioner of Commercial Taxes; Invocation of power under Sec. 35 by Addl. Commissioner; Initiation of suo-motto proceedings by Commissioner of Commercial Taxes; Setting aside orders and restoring assessments; Legality of revision authority's actions. Analysis: The judgment pertains to a revision petition filed by the assessee against an order passed by the Commissioner of Commercial Taxes under Sec. 35A of the Karnataka Agricultural Income Tax Act, 1957. The Assessing Authority initially disallowed a significant portion of the expenditure claimed by the assessee, leading to an appeal to the Joint Commissioner of Commercial Taxes, who remanded the matter back for fresh assessment. Subsequently, the Addl. Commissioner of Commercial Taxes utilized the power under Sec. 35 to set aside the First Appellate Authority's order, granting relief to the assessee by reducing the tax liability. However, the Commissioner of Commercial Taxes initiated suo-motto proceedings under Sec. 35A, setting aside the previous orders and directing the Assessing Authority to reconsider the case on its merits. The High Court observed that when a revision authority is empowered to initiate suo-motto proceedings due to an order being erroneous and prejudicial to revenue, the correct course of action is to set aside the erroneous order and reinstate the Assessing Authority's decision. In this case, the revision authority had improperly framed the assessment for the first time, providing benefits to the assessee, which was deemed impermissible in law. Consequently, the Commissioner of Commercial Tax rightfully set aside the revision authority's order in the suo-motto proceedings. The High Court upheld the decision, dismissing the revision petition and returning the matter to the Assessing Authority for a fresh assessment. The assessee was instructed to present all necessary documents, and the Assessing Authority was directed to evaluate the claim on its merits and in compliance with the law, without being influenced by any previous observations. In conclusion, the judgment highlights the importance of adhering to legal principles when exercising revisionary powers, emphasizing the need to rectify erroneous orders without granting undue benefits to the assessee. The decision underscores the significance of fair and lawful assessment procedures in tax matters, ensuring that all claims are considered based on their merits and in accordance with the applicable laws.
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