Jharkhand HC Quashes ITAT Relief To Assessee For Relying On Overruled Precedent In TDS Default Case, Remands Matter For Fresh Adjudication

The Jharkhand High Court has quashed an order of the Income Tax Appellate Tribunal (ITAT), Circuit Bench, Ranchi, after finding that it was solely based on a precedent that had been overruled by the Supreme Court.

The Tribunal had earlier deleted the entire addition made by the Assessing Officer under Section 40(a)(ia) of the Income Tax Act, 1961, on the ground that the payments in question had already been made.

The Division Bench comprising Justice Sujit Narayan Prasad and Justice Rajesh Kumar ruled that the Tribunal's reliance on the Allahabad High Court's decision in CIT v. Vector Shipping Services (P) Ltd. was no longer legally tenable in view of the Supreme Court's subsequent judgment in Palam Gas Service v. CIT.

The Bench held, “This Court, taking into consideration the fact the forum has passed the impugned order solely taking into consideration the judgment passed by Allahabad High Court in the case of CIT Vs. Vector Shipping Services (P) Ltd. (supra) which has been over-ruled holding the same to be not good in law by the Hon‟ble Apex Court, as such it is not rendered to be in existence, as such the impugned order requires interference.”

The above ruling was made in two Tax Appeals filed by the Commissioner of Income Tax, Jamshedpur, against M/s New Punjab Motor Transport, which challenged the common order passed by the ITAT for the assessment year 2010–11.

In both the cases, assessment order for Assessment Year 2010-11 was framed on 30-03-2013 under Section 143(3) of the Income Tax Act, 1961, on a total income of Rs. 8,99,42,090/-. The Assessee had filed a return disclosing total income of Rs. 9,36,120/-, which was processed under Section 143(1) of the Act and same was selected for scrutiny under CASS. Notably, the reason for selection of the case for scrutiny assessment was to examine the various aspects of the contractor business. Finally, the Assessing Officer completed the assessment under Section 143(3) of the Act determining total income at Rs. 8,99,42,090/-.

However, the Assessee being aggrieved challenged the Assessment Order of the AO before the CIT (A), which partly allowed the appeal of the assessee and sustained few additions made by the Assessment Officer. The assessee as well as the Revenue Authority challenged the Order of the CIT (A) before the ITAT, which through its common order allowed the case of the assessee and dismissed the case of the Revenue, and deleted the entire addition made by the AO.

Being aggrieved with the common order, the appellant moved the High Court, whereby the matter was heard by the Co-ordinate Bench of the Court which after hearing the counsel for the parties, admitted the appeal(s) for hearing on two substantial questions of law:

I.Whether the Tribunal was right in deleting the addition made by the Assessing Officer as well as Commissioner under Section 4)(a)(ia) of the Income Tax Act, 1961 in respect of payments made without deduction of tax?

II.Whether the Commissioner and the Tribunal were right in law in allowing depreciation @ 30@ in respect of trucks, trailors and excavators treating them as plant and machinery?

Although the issues were framed by the Court, the parties argued the matter on the issue of the law laid by Allahabad High Court in the case of CIT Vs. Vector Shipping Services (P) Ltd. [(2013) 262 CTR (All) 545] had been overruled by the Apex Court in the case of Palam Gas Service Vs. Commissioner of Income Tax [(2017) 7 SCC 613] which was the basis of passing the impugned order.

The High Court in its ruling observed, “in the instant case also, the sole consideration taken by the forum is the judgment passed by the Allahabad High Court in CIT Vs. Vector Shipping Services (P) Ltd. (supra), which has been over-ruled by the Hon‟ble Apex Court in the case of Palam Gas Service Vs. Commissioner of Income Tax (supra), holding therein that the Allahabad High Court has not laid down good law; meaning thereby the error has been rectified by the Hon‟ble Apex Court, said to be committed by the Allahabad High Court, by laying down the correct law.”

Therefore, the Court held, “applying the law laid down by the Hon‟ble Apex Court in the case of Directorate of Revenue Intelligence vs. Raj Kumar Arora & Ors. (supra), will have retrospective application.”

Accordingly, the Court quashed and set aside the impugned order passed by the Income Tax Appellate Tribunal, Circuit Bench, Ranchi and remitted the matter before the Income Tax Appellate Tribunal, Circuit Bench, Ranchi for fresh adjudication of the issue, taking into consideration the observation made by the High Court.

“It is made clear that the Tribunal shall pass order afresh without being prejudice of the order passed by this Court,” the Court concluded while disposing of the appeals.

Case Title: The Commissioner of Income Tax, Jamshedpu vs M/s New Punjab Motor Transport

LL Citation: 2025 LiveLaw (Jha) 42

Click Here To Read Judgement