Intellectual Dishonesty - of CA or CIT? Cost to be imposed on CA or CIT?
THAT brings us to another interesting case.
In QMAX TEST EQUIPMENTS PVT LTD Vs ASSISTANT COMMISSIONER OF INCOME TAX - 2012-TIOL-639-ITAT-MAD, the ITAT imposed costs of Rs. 25,000 on the Income Tax Department with the observation:
We are of the considered opinion that the order has been passed by the CIT(A) in a non-judicious and arbitrary manner. The order of the CIT(A) is not only against the law laid down by the Hon'ble High Court but smacks mala fide on the part of the CIT(A). It is evident that the CIT(A) has committed "intellectual dishonesty" extending it to the limit of perversity. The impugned order has burdened the assessee with the avoidable cost of litigation before the Tribunal and harassment. We feel that the instant case is one of the rare and fit case where the Revenue should compensate the assessee for causing unnecessary mental and financial harassment. The valuable time of the Tribunal has also been lost in adjudicating the issue which is squarely covered by the judgement of the Hon'ble High Court. Therefore, the appeal of the assessee is allowed with costs of Rs.25,000/-. The cost shall be paid to the assessee in accordance with Rule 32A(2) of the Appellate Tribunal Rules, 1963.
The issue was a simple one. The assessee was eligible for deduction under Section 10B of the Income Tax Act for a period of ten years - the controversy was the period of this ten years. The assessee claimed the deduction from assessment year 1995- 96 to 2004-05. Revenue alleged that the assessee had claimed deduction under section 10B in the 11th year. According to the provisions of section 10B the deduction is available only upto 10th year of production. Accordingly, the AO disallowed the deduction for the year 2004-05. The AO's order was upheld by the CIT(A).
The assessee had placed on record the Chartered Accountant's Report under section 10A/10B of the Income Tax Act. In the Annexure ‘A' of the said Report it has been specifically mentioned that assessment year 2004-05 is the 10th year for claiming deduction by the assessee.
The CIT(A) had not considered the CA's report and disallowed the deduction for 2004-05. It was while setting aside the CIT's order that the ITAT passed the above order and imposed cost on the Department.
The Revenue was really aggrieved and agitated and took the matter again to the Tribunal in a rectification petition.
While hearing the ROM, the Tribunal realised that the assessee started manufacturing in May 1993 and was therefore eligible for claiming deduction under section 10B for the period of 10 years beginning with the assessment year 1994-95. Accordingly, the assessee was entitled for benefit upto assessment year 2003-04 and not 2004-05 as held in the impugned order.
The Tribunal very fairly observed, "The Tribunal inadvertently calculated the period of 10 years starting from assessment year 1995-96 and ending with assessment year 2004-05. This is a mistake, which in our opinion has to be rectified."
Incidentally, the AR appearing on behalf of the assessee also fairly conceded to the factual error in calculation of period of 10 years.
So, the impugned order was recalled and the appeal will be heard afresh.
It requires great courage to admit one's mistake and the stature of the Tribunal is enhanced by admitting such mistakes and correcting them. There is a feeling that the honourable judges refuse to admit their mistakes!
A Commissioner of Income Tax who saw the ROM order of the Tribunal asked us in right indignation, "Now who showed intellectual dishonesty? The CIT(A) or the C.A. of the assessee who gave an eligibility certificate for deduction u/s 10B knowing fully well that it is the 11th year of manufacture and deduction under sec. 10B is only available for 10 years ? Who should be punished and cost to be recovered from whom????"