2006 (5) TMI 56 - HC - Income Tax

Tribunal uphold the order of CIT(A), for not providing deduction of Rs 6,83,304 (penalty imposed under Sale tax law) - assessee accepted this order of the Tribunal because they did not pursue this issue further in appeal hence order of tribunal attained finality & subsequently AO passed a fresh assessment order and, accordingly, made additions held that once tribunal earlier order has attained finality then ITAT is not allowed to delete addition again in further appeal dept. appeal allowed

Summary

Issues:
1. Whether the Income-tax Appellate Tribunal was justified in setting aside a finding recorded by the Commissioner of Income-tax in section 263 proceedings by deleting a sum of Rs. 6,83,304 related to penalty imposed under the sales tax law?
2. Whether the benefit of deletion amounting to Rs. 6,83,304 granted to the assessee by the Tribunal can be considered justified and is an allowable deduction, and if so, under what head?

Analysis:
1. The case involved an appeal by the Commissioner of Income-tax against an order passed by the Income-tax Appellate Tribunal regarding a deduction claimed by the assessee for a penalty paid under the sales tax law for the assessment year 1989-90. The assessee contended that the penalty amount was part of a total sum voluntarily surrendered to the Department for taxation, hence should not be taxed again. The Assessing Officer accepted this explanation and granted the benefit of Rs. 6,83,304 by deleting it from the gross total income of the assessee.
2. The Commissioner, disagreeing with this deletion, invoked his powers under section 263 of the Income-tax Act, stating that the amount should be included in the total income of the assessee. The Tribunal upheld the Commissioner's decision, emphasizing that the penalty amount was not included in the surrendered sum of Rs. 55 lakhs. The Tribunal dismissed the appeal filed by the assessee, concluding that the Commissioner was justified in invoking revisionary powers.
3. The Tribunal's decision was accepted by the assessee, leading to the finality of the order. Subsequently, the Assessing Officer added the penalty amount to the gross income of the assessee in a fresh assessment. The Commissioner of Income-tax (Appeals) upheld this addition, leading to an appeal by the assessee to the Tribunal, which deleted the addition. The Commissioner of Income-tax (Revenue) then appealed against this decision.
4. The High Court held that once an issue attains finality in earlier proceedings, it cannot be re-agitated in subsequent proceedings. The Tribunal was bound by its earlier finding, and the Commissioner's order under section 263 was not final. The High Court set aside the Tribunal's order and restored the Commissioner of Income-tax (Appeals) decision to include the penalty amount in the gross income of the assessee for the assessment year in question.

This detailed analysis covers the issues involved in the legal judgment comprehensively, outlining the arguments, decisions, and reasoning provided by the authorities involved.