JCIT vs. Saheli Leasing & Industries (Supreme Court)

DATE: (Date of pronouncement)
DATE: May 8, 2010 (Date of publication)

Click here to download the judgement (saheli_leasing_penalty_speaking_order.pdf)

S. 271(1)(c) Penalty: Supreme Court chides High Court for “casual” order. Guidelines laid down as to how judgements should be written. Correctness of Gold Coin 304 ITR 308 (SC) reiterated

The assessee filed a Nil return after claiming depreciation. The AO disallowed depreciation but still assessed the total income at Rs. Nil. Penalty u/s 271(1)(c) was levied on the disallowance which was deleted by the Tribunal on the ground that as the returned income and the assessed income was Nil, penalty could not be levied. The department filed an appeal before the High Court which was dismissed on the basis that no penalty u/s 271(1)(c) could be levied where the returned and assessed income were Nil. On further appeal by the Revenue, HELD allowing the same:

(i) The High Court has dealt with the appeal in a most casual manner. The order is not only cryptic but does not even remotely deal with the arguments projected by the Revenue before it. It is unfortunate that the guidelines issued by the Supreme Court from time to time as to how judgments/orders are to be written are not being adhered to. It is true that brevity is an art but brevity without clarity is likely to enter into the realm of absurdity, which is impermissible. This is reflected in the impugned order. Detailed guidelines laid down as to how judgements should be written;

(ii) On merits, in view of CIT vs. Gold Coin Health 304 ITR 308 (SC) (which overruled Virtual Soft Systems 289 ITR 83 SC), penalty u/s 271(1)(c) is leviable even if the assessment is at a loss;

(iii) At first glance, it appeared that Gold Coin Health required reconsideration by a larger Bench in view of CIT vs. Elphinstone Spinning and Weaving Mills Co 40 ITR 142 (which was followed in Virtual Soft) but it is not so because of distinguishing features between Gold Coin and Elphinstone Spinning;

(iv) In order to enable the Court to refer any case to a larger Bench for reconsideration, it is necessary to point out that particular provision of law having a bearing over the issue involved was not taken note of or there is an error apparent on its face or that a particular earlier decision was not noticed, which has a direct bearing or has taken a contrary view. This is not the case herein and so a reference to a larger Bench is not necessary.

See Also: The Art of Writing Judgments by Shri. M. A. Bakshi Sr. VP (Retd) and Guidelines to Hon’ble Members of ITAT for drafting orders. In Mangat Ram vs. State of Haryana it was held that while other courts were required to pass reasoned orders, the Supreme Court itself was not bound to do so as it was the final court!!