2015 (8) TMI 181 - HC - Income Tax

Addition on account of sale of scrap in A.Y. 2005-06 - ITAT deleted the addition by holding it to be pertaining to assessment year 2007-08 - Held that - It was conceded that even in the present case, the rate of tax remained the same in both the assessment years i.e. 2005-06 and 2007-08. Following the above judgment of Commissioner of Income Tax v. Excel Industries Limited 2013 (10) TMI 324 - SUPREME COURT it must be held that the dispute raised by the revenue is essentially academic. The issue may have some tax effect in that if the department is correct and the amount ought to have been brought to tax two years earlier, there would be loss of interest for two years on the amount of ₹ 31,10,000/-. The department has not raised the claim in that regard. We do not wish to express any opinion as to the right of the department to claim interest.

Summary

Issues:
Appeal against ITAT order deleting addition in assessment year 2005-06.

Analysis:
The appeal before the High Court involved the deletion of an addition of Rs. 31,10,000 made by the Assessing Officer in the assessment year 2005-06. The revenue raised substantial questions of law challenging the ITAT's findings, alleging misreading and misinterpretation of facts. The primary contention was whether the addition should be taxed in the assessment year 2005-06 or 2007-08 based on seized documents. The High Court assumed the correctness of the finding that the amount pertained to 2005-06. However, it cited precedents to emphasize that the year in which a deduction is allowable may not significantly impact the tax liability, especially when the tax rate remains constant across years.

The High Court referred to the Bombay High Court's judgment in Nagri Mills Co. Ltd. case and the Delhi High Court's decision in Dinesh Kumar Goel case to underscore that disputes over the year of taxation, when the tax rate remains the same, are often inconsequential and do not affect the revenue collected. The judgments highlighted that the Revenue should not engage in unnecessary litigation over such matters. The High Court also cited the Supreme Court's ruling in Excel Industries Limited case, emphasizing that disputes over the year of tax payment may be academic if the tax rate remains constant, and the Revenue is not deprived of tax collection.

In light of the consistent legal precedents emphasizing the insignificance of the year of taxation when the tax rate remains unchanged, the High Court held that the dispute raised by the revenue was essentially academic. The Court noted that while there could be a minor tax effect due to the timing of tax payment, the issue did not warrant continued litigation. Ultimately, the High Court decided in favor of the assessee, dismissing the appeal brought by the revenue. The judgment highlighted the need for the Revenue to focus on substantive tax matters rather than engaging in prolonged disputes over the timing of tax liability when the tax rate remains consistent.