Principal Commissioner Of Income Tax … vs Alkem Laboratories Limited on 20 April, 2026

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    Patna High Court

    Principal Commissioner Of Income Tax … vs Alkem Laboratories Limited on 20 April, 2026

    Author: Chandra Shekhar Jha

    Bench: Chandra Shekhar Jha

         IN THE HIGH COURT OF JUDICATURE AT PATNA
                      Miscellaneous Appeal No.639 of 2022
    ======================================================
    Principal Commissioner of Income Tax (PCIT) I, Patna, 2nd Floor, Central
    Revenue Building, Beer Chand Patel Path Marg, Patna- 800001, Bihar.
    
                                                             ... ... Appellant/s
                                     Versus
    Alkem Laboratories Limited Exhibition Road, Patna- 800001.
    
                                              ... ... Respondent/s
    ======================================================
    Appearance :
    For the Appellant/s    :      Mr. Archana Sinha @ Archana Shahi
                                  Senior Standing Counsel, Income Tax
                                  Ms. Shilpi Keshri, Advocate
                                  Mr. Alok Kumar, Advocate
                                  Ms. Swarna Roy, Advocate
                                  Ms. Komal, Advocate
                                  Ms. Nisha Kumari, Advocate
                                  Ms. Richa Rajiv Singh, Advocate
    For the Respondent/s   :      Mr. Ajay Rastogi, Sr. Advocate
                                  Ms. Smriti Singh, Advocate
    ======================================================
    CORAM: HONOURABLE MR. JUSTICE BIBEK CHAUDHURI
            and
            HONOURABLE MR. JUSTICE CHANDRA SHEKHAR JHA
    CAV JUDGMENT
    (Per: HONOURABLE MR. JUSTICE BIBEK CHAUDHURI)
    
     Date : 20-04-2026
    
                   1. This is a Miscellaneous Appeal, assailing an
    
      order, dated 20th of June, 2022, passed by the Income Tax
    
      Appellate Tribunal, Patna Bench, Patna (hereinafter referred
    
      to as the "Tribunal" for short) in ITA No. 24/PAT/2021 for
    
      Assessment Year 2015-2016 on the following substantial
    
      questions of law: -
    
                                (i) Whether the honourable
                     ITAT is correct in law that the claim of
                     assessee   regarding     deduction      under
                     section 35(2AB) with reference to the
     Patna High Court MA No.639 of 2022 dt.20-04-2026
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                            certificate in 3CL issued by DSIR, dated
                            14.8.2017

    is accepted only on the ground
    that the same has been dropped by the
    Principal Commissioner of Income Tax
    Mumbai.

    (ii) Whether the honourable
    ITAT was not justified in law as it
    restricts/infringes upon the power
    conferred on the PCIT under section 263
    of the Income Tax Act to direct the AO to
    reframe order on the issues where no
    proper enquiry/investigation has been
    made as such assessment order is
    erroneous and prejudicial to the interest
    of the revenue.

    SPONSORED

    (iiii) Whether on the facts and
    circumstances of the case the honourable
    ITAT was justified in holding that
    Principal Commissioner of Income Tax
    was not authorised to explore as to why
    the entire amount of Rs. 20,17,86,432 /
    was not offered to tax even in view of the
    fact that no proper enquiry has been
    made by the AO before finalizing the
    assessment on this particular issue.

    (iv) Whether on the facts and
    circumstances of the case the honourable
    ITAT was justified in quashing order
    under section 263 of the Income Tax Act
    on the issue of commission payments to
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    M/S Reynold Petrochem Ltd., amounting
    to Rs. 1,61,83,762/-, when the PCIT has
    observed that such commission has been
    allowed without proper verification and
    enquiry made by the AO.

    (v) At any other ground that
    may be urged at the time of hearing.

    2. Factual matrix, leading to filing of the instant

    Appeal is that the assessee filed its return of income on 28 th of

    November, 2015, declaring total income at Rs. 5,13,71,110/-.

    The assessee has also shown income of Rs. 381,18,39,146/-

    under Section 115JB of the Act. The Assessment Officer took

    up the case for scrutiny on service of notice under Section

    143(2) of the Income Tax Act (hereinafter referred to as “I.T.

    Act” for short). Subsequently the return was scrutinized

    according to law and the Assessing Officer passed scrutiny

    assessment order on 31st of May, 2017 under Section 143(3) of

    the I.T. Act. The assessment order was reviewed by the

    Commissioner of Income Tax and the same was found to be

    erroneous as well as prejudicial to the interest of the revenue.

    Therefore, the Commissioner issued a notice to show cause

    under Section 263 of the Income Tax Act. The Principal

    Commissioner of Income Tax-I, Patna, by an order, dated 27th

    of March, 2021 cancelled and set aside the assessment order
    Patna High Court MA No.639 of 2022 dt.20-04-2026
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    under Section 143(3) of the I.T. Act, dated 31 st of May, 2017,

    for assessment year 2015-2016, passed by the Assessment

    Officer on the ground that proper enquiry and verification

    were not made by the Assessing Officer on:- (i) Taxability of

    payment of Rs. 20,17,86,432/- made by the assessee to

    Avenue Venture Real Estate Fund (AVREF); (ii) Claim of

    deduction under Section 35(2AB) of the I.T. Act, 1961 with

    reference to the certificate of 3CL issued by DSIR, dated 14 th

    of August, 2017; and (iii) Genuineness of services rendered by

    M/s Reynolds Petro Chems Limited, corresponding to the

    claim of commission expenditure amounting to Rs.

    1,61,83,762/- during Financial Year 2014-2015, relevant to

    Annual Year 2015-2016.

    3. The Assessment Officer was directed to make

    fresh enquiry, investigation and verification on the above-

    mentioned points and finalize the assessment in accordance

    with law.

    4. The respondent Company challenged the said

    order in appeal, bearing ITA No. 24/PAT/2021 before the

    ITAT, Patna Bench, Patna. The said appeal was disposed of on

    20th of June, 2022, setting aside and quashing the order passed

    under Section 263 of the I.T. Act, by the PCIT, Patna.
    Patna High Court MA No.639 of 2022 dt.20-04-2026
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    Accordingly the Tribunal allowed the appeal, reversing the

    judgement passed by the PCIT, Patna.

    5. The judgement of the ITAT, Patna Bench, Patna is

    assailed in the instant appeal by the Principal Commissioner

    of Income Tax-I, Patna.

    6. The learned Advocate appearing on behalf of the

    appellant submits taking together the above-mentioned

    questions of law involved in the instant appeal. At the outset,

    it is submitted by the learned Advocate appearing on behalf of

    the appellant that Section 263 of the I.T. Act empowers the

    CIT to revise the assessment orders, deemed erroneous and

    prejudicial to the revenue’s interest. Such order can only be

    made when an Assessing Officer’s order lacks enquiry, fails to

    apply the law or misappreciates evidence to the resulting in

    loss of revenue. The order of Assessing Officer was

    overturned by the Principal CIT on his finding that an amount

    of Rs. 20,17,86,432/- was not offered to tax even in view of

    the fact that no proper enquiry has been made by the

    Assessing Officer before finalizing the assessment. Similarly,

    the Principal CIT was well within its authority to held that a

    sum of Rs. 1,61,83,762/- was not paid to Ms. Reymonds Petro

    Chem Limited as commission. If the aforesaid amount was
    Patna High Court MA No.639 of 2022 dt.20-04-2026
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    added, the tax liability of the assessee would have been

    enhanced to many fold. Non-consideration of the aforesaid

    issues caused loss of revenue and this Court is well within its

    jurisdiction to reconsider the question of law being substantial

    in nature in the instant appeal.

    7. The learned Senior Advocate appearing on behalf

    of the respondent submits that the purported questions of law

    that have been agitated by the appellant to set aside are

    actually question of fact and in the absence of any substantial

    question of law, this appeal cannot be entertained.

    8. In order to substantiate his contention, learned Sr.

    Advocate on behalf of the Respondent submits that

    declaration of income by the assess was included in return. So

    return is a document which necessitates factual consideration,

    and enquiry on such return is a question of fact which has

    already been decided up to ITAT. Secondly, it is submitted by

    the learned Sr. Counsel on behalf of the respondent that a

    proceeding under Section 263 of the I.T. Act was initiated

    earlier and the same was dropped. In view of such

    circumstances, second proceeding under the same provision of

    law is not permissible. It is also submitted by him that when

    the assessment order was passed on 31st of Mary, 2017, the
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    appellant cannot rely upon an order, dated 11th of April, 2016.

    9. In support of his contention, he refers to

    paragraph 23 of the impugned judgement. Paragraph 23 of the

    impugned judgement runs as hereunder: –

    “23. Apart from the above
    reply, the assessee has filed copies of the
    invoices issued by Reynolds Petro Chems
    Ltd., details of TDS etc. After going
    through these replies, the Assessing
    Officer has accepted the stand of the
    assessee. On the strength of these details,
    it was submitted by the ld. Counsel for the
    assessee that even though there is no
    discussion made by the Assessing Officer
    in the assessment order but, it does not
    mean that enquiry was not conducted. He
    submitted that passing of an assessment
    order is the prerogative of the Assessing
    Officer and the assessee has no control
    over the language or the manner in which
    the assessment order is to be drafted. But
    on account of non-discussion of an issue,
    the assessee should not suffer a second
    round of proceedings. It has to be
    examined whether the details were filed
    by the assessee before the Assessing
    Officer and the Assessing Officer has
    applied his mind on all these details and
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    after being satisfied with the contention,
    he had taken a plausible view accepting
    the stand of the assessee, without making
    any finding. For buttressing this
    contention, he relied on the judgment of
    the Hon’ble Patna High Court in the case
    of CIT vs. Mukul Kumar reported in
    (2009)
    4 PLJR 417. He placed on
    record a copy of this decision. He also
    placed reliance on the following case-
    laws:-

    Banco Products (India) Ltd.
    v. DCIT
    (2018) 405 ITR 318/258 Taxman
    244 (Guj) (HC)
    CIT v. Claris Lifesciences
    Ltd.
    [2010] 326 ITR 251/[2008] 174
    Taxman 113
    Commissioner of Income Tax
    v. Sandan Vikas (India) Ltd.
    , [2011] 335
    ITR 117 (Del)
    ➤ CIT D. TVS Electronics Ltd.

    (2019) 419 ITR 187/263 Taxman 164
    (Mad.) (HC)
    ACIT v. Eastern Silk
    Industries Ltd. (2019) 179 ITD 22/184
    DTR
    406 (Kol) (Trib.)
    ➤ DCIT. STP Ltd. (2021) 187
    ITD 538/86 ITR 14 (Kol.) (Trib)”

    10. It is submitted by the learned Senior Advocate
    Patna High Court MA No.639 of 2022 dt.20-04-2026
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    appearing on behalf of the respondent, relying on a Division

    Bench Judgment of this Court in Commissioner of Income

    Tax, Patna v. Mr. Mukul Kumar, reported in (2009) 4 PLJR

    417 that the ITAT set aside the order of the PCIT under

    Section 263 of the I.T. Act on appreciation of pure question of

    fact that the Assessing Officer had undertaken and held

    reasonable enquiry by calling for explanations from the

    assessee and in view of such finding it interfered with the

    order of Commission, who had erroneously came to a finding

    that proper enquiry was not held by the Assessing Officer.

    Thus, there being materials on record to show that enquiry

    was made regarding the expenditure claimed, the Division

    Bench of this was pleased to hold that the ITAT was justified

    in quashing the order of the Commissioner.

    11. Last but not the least, we are inclined to record

    that the question as to whether the Assessing Officer made

    enquiry and passed the order or passed the order without

    enquiry, is a question of fact, which has been finally decided

    by the ITAT.

    12. For the reasons stated above, we are of the view

    that the issues which have been raised as substantial question

    of law are really question of fact and there being no
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    substantial question of law, the instant appeal is set aside.

    (Bibek Chaudhuri, J)

    (Chandra Shekhar Jha, J)
    skm/-

    AFR/NAFR                N.A.F.R.
    CAV DATE                10.04.2026
    Uploading Date          21.04.2026
    Transmission Date       N/A
     

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