ITAT To Maintain Consistent Views - Jurishour No. 1 Latest

Q: Can ITAT take 2 different views in same set of facts?

The Gauhati High Court in the case of Williamson Financial Services Limited Versus Commissioner Of Income Tax held that the Income Tax Appellate Tribunal (ITAT) while discharging judicial functions is expected to maintain consistency in its views in respect of judicial matters because any unjust deviation may affect the credibility of the authority.

The Gauhati High Court has held that the Income Tax Appellate Tribunal (ITAT) while discharging judicial functions is expected to maintain consistency in its views in respect of judicial matters because any unjust deviation may affect the credibility of the authority.

The bench of Chief Justice Vijay Bishnoi and Justice N. Unni Krishnan Nair has observed that the ITAT held that the Explanation inserted to Section 14A is applicable prospectively. However, the same Bench subsequently has concluded that the Explanation inserted to Section 14A is not applicable prospectively.

Background

The appellant/assessee, Williamson Financial Services Limited, is a Company, incorporated under the Companies Act, 1956, engaged in the business of Lease Financing, Financial Advisory and Capital Market Operations, had filed its return of income for the Assessment Year 2013-14 on 26.09.2013 showing a loss.

The case of the appellant Company was selected for scrutiny through CASS and a notice under Section 143(2) of the Income Tax Act of 1961 was issued and thereafter, another notice under Section 142(1) was issued asking the Assessee to file certain details and documents for the relevant period.

The appellant Company, through its representative, had furnished the details before the Assessing Officer and the Assessing Officer, after considering it, passed the Assessment Order.

The appellant Company preferred an appeal before the Commissioner of Income Tax (Appeals), Guwahati under Section 250 of the Income Tax Act, 1961 and the appeal was partly allowed by affirming the action of invocation of provisions of Section 14A read with Rule 8D of the Income Tax Rules, 1962.

However, the CIT(A) held that the disallowance under Section 14A read with Rule 8D of Income Tax Rules, 1962 cannot exceed the income claimed exempt.

The appellant Company preferred separate appeals challenging the aforesaid Assessment orders before the CIT(A). The CIT(A) passed separate orders dated 31.01.2019 partly allowing the appeals preferred by the Appellant Company affirming the action of invocation of provisions of Section 14A read with Rule 8D of the Income Tax Rules, 1962.

However, the CIT(A) held that the disallowance under Section 14A of the Act of 1961 read with Rule 8D of the Rules of 1962 cannot exceed the income claimed exempt.

The ITAT accepted the appeals and set aside the orders passed by the CIT(A) relating to different assessment years and affirmed the orders passed by the Assessing Officer.

Arguments

The assessee contended that the Tribunal has grossly erred in setting aside the orders dated 31.01.2019 passed by the CIT(A) while observing that the Explanation to Section 14A of the Act of 1961 inserted by Finance Act, 2022 being clarificatory in nature has retrospective effect.

The assesse stated that the finding recorded by the Tribunal is contrary to law because the Ministry of Finance, Union of India, has issued Memorandum Explaining the Provisions in the Finance Bill, 2022 and clarified that the amendment to Section 14A of Income Tax Act by which the explanation is inserted will take effect from 01.04.2022 and will accordingly apply in relation to the assessment year 2022-23 and subsequent assessment years. Various High Courts have held that the Explanation inserted under Section 14A is prospective in nature.

The department admitted that in view of the Memorandum Explaining the Provisions of the Finance Bill, 2022, issued by the Ministry of Finance, it is now settled that the Explanation inserted to Section 14A of the Act of 1961, is prospective in nature and cannot be made effective retrospectively.

Conclusion

The court held that the order passed by the Tribunal holding that insertion of Explanation to Section 14A of the Income Tax Act, 1961 is clarificatory and thereby retrospective in nature, is erroneous in law.

The court while allowing the appeal held that the findings of the Tribunal to the effect that the insertion of Explanation to Section 14A of the Income Tax Act, 1961 is clarificatory, is contrary to the legislative intention as expressed in Memorandum to the Finance Bill, 2022.

FAQs

Can ITAT take 2 different views in same set of facts?

The Gauhati High Court in the case of Williamson Financial Services Limited Versus Commissioner Of Income Tax held that the Income Tax Appellate Tribunal (ITAT) while discharging judicial functions is expected to maintain consistency in its views in respect of judicial matters because any unjust deviation may affect the credibility of the authority.