ACIT, CENTRAL CIRCLE-2, PATNA V. SHRI DUDHESHWAR NATH SINGH, PATNA

ITA 15/PAT/2021

AI Insights

The case involves an appeal by the ACIT, Central Circle-2, Patna against Shri Dudheshwar Nath Singh concerning a penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, related to an addition of Rs. 2,22,20,400 made during the assessment year 1995-96. The assessee, a firm implicated in a Bitumen Scam, initially faced this penalty which was later deleted by the CIT(A). The department challenged this deletion, arguing that the CIT(A) erred in his decision, particularly citing a clerical error in the notice issued under section 271(1)(c). However, the Tribunal noted a significant development where the Supreme Court had ruled in favor of the assessee, stating that the addition made under section 69A was not applicable, as the assessee was merely a carrier and not the owner of the goods in question. This ruling effectively nullified the basis for the penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33460 (ITAT-PATNA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 1995-1996
• Other Referred Cases: Mithila Motors (P) Ltd. vs. Department, Dudheshwar Nath Singh vs. Department
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 250; 271(1)(c); 69A; 274; 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “PATNA BENCH”, PATNA (VIRTUAL HEARING AT KOLKATA) SHRI DUVVURU RL REDDY, VICE PRESIDENT SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER I.T.A. No. 15/Pat/2021 Assessment Year: 1995-96 ACIT, Central Circle-2, Patna, 6th Floor, C.R. (Annexe) Building, Bir Chand Patel Marg, Patna – 800001 ........…...…………….... Appellant vs. Shri Dudheshwar Nath Singh Sunil Bhawan, Punai Chak, Patna [PAN: ADYPS8930N] ..........…..….................... Respondent Appearances by: Assessee represented by : Sh. Sudipta Sannigrahi, C.A. Department represented by : Ashwani Kr. Singal, JCIT Date of concluding the hearing : 01.01.2025 Date of pronouncing the order : 08.01.2025 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER: 1. The present appeal emanates from the order u/s 250 of the Act dated 28.01.2021, passed u/s 250 of the Income Tax Act, 1961 (hereafter ‘the Act’). The impugned order arises from the order u/s 271(1)(c) of the Act dated 31.03.2008 in the case of M/s D.N. Singh, Sunil Bhawan, Punai Chak, Patna (status of “firm”). 1.1 The facts in brief are that apparently the assessee firm was an accused in some Bitumen Scam. In assessment proceedings, an addition of Rs. 2,22,20,400/- was made and penalty was also levied on this amount. 2 ITA No. 15/Pat/2021 Shri Dudheshwar Nath Singh 1.2 Before the Ld. CIT(A), this penalty was deleted but, as has been pointed out by the Ld. AR, the impugned order is passed in the name of Dudheshwar Nath Singh, Sunil Bhawan, Punai Chak, Patna – 800023 (status of “individual”). 2. Aggrieved with the action of Ld. CIT(A), the department is in appeal before ITAT through the following grounds of appeal: “1. That under the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the penalty of Rs. 1,33,69,740/- imposed by the A.O. under the provisions of section 271(1)(c) of the 1.T. Act by holding that issue of notice u/s 271(1)(c) by not specifying the nature of default i.e. penalty proceedings are being initiated for furnishing of inaccurate particulars or for concealment of income makes the penalty order liable to be cancelled. In deciding the issue the Ld. CIT(A) has failed to appreciate that it was just a clerical error or omission which is protected u/s 292B of the I.T. Act, 1961. 2. That in deciding the case the Ld. CIT(A) has made reference to the order of the Hon'ble Mumbai High Court and jurisdiction ITAT whereas the jurisdictional High Court i.e. Hon'ble Patna High Court in the case of Mithila Motors (P) Ltd. has given its observation in favour of the department as under :- \"even if the notice under section 274 read with section 273(b), was a bad one, wrong labeling of the section or some mistake in the charge framed against the assessee did not prejudice the assessee, since the ITO had not only given the assessee an opportunity of being heard but the assessee had in fact, given a written reply and was quite aware of the charges which he was required to meet. Under section 274, all that was required was that the assessee should be given an opportunity to show cause. No statutory notice was prescribed in this behalf. In view of these facts, the impugned notices could not be said to be intio void\". 3. That on the facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that the assessee had never raised such issue before the A.O. that on account of defect in notice he was put to prejudice. 4. That the applicant craves leave to add, alter, delete, modify the grounds of appeal before the Hon'ble ITAT.” 3. The Ld. DR read from the order of Ld. AO and assailed the order of Ld. CIT(A). 3.1 Per contra, the Ld. AR pointed out that not only is there a mismatch between the status of the assessee in the orders of authorities below, but also that the main addition leading to the impugned penalty has been 3 ITA No. 15/Pat/2021 Shri Dudheshwar Nath Singh decided in favour of the assessee by the order of the Hon’ble Apex Court in assessee’s own case reported in 454 ITR 595 (SC), vide order dated 16.05.2023. The Ld. AR placed a copy of the said order before the Bench for perusal. It was thereafter averred by the Ld. AR that since the very basis for the penalty does not exist anymore, hence the same should be deleted. 4. We have carefully considered the rival submissions and gone through the orders of authorities below. While it is clear that the Ld. AO’s order is passed in the status of “firm” and the Ld. CIT(A)’s order is passed in the status of “individual” but this fact would not be material at this stage since after the date of the impugned order (dated 28.01.2021), the Hon’ble Apex Court has granted relief to the assessee vide their order dated 16.05.2023. For the sake of record, the head notes from the said order are extracted as under: Section 69A of the Income-tax Act, 1961 - Unexplained money (Bitumen) - Assessment year 1996-97 - Assessee carried on business as carriage contractor for bitumen loaded from oil companies - Assessee delivered bitumen goods to various divisions of Road Construction department of State Government - Assessing Officer noted that there was misappropriation of bitumen lifted for delivery and actually delivered - He, thus, invoked section 69A and made additions on account of short supply of bitumen - Whether a bailee, who is a common carrier, is not an owner of goods and thus, during subsistence of contract of carriage of goods, bailee would not become owner of goods - Held, yes - Whether having mere posession without legal ownership or title over goods would not be covered within ambit of section 69A and thus, assessee who was mere carrier supplying goods from consignor i.e. oil marketing companies to consignee i.e. road construction department could not be said to be owner for purpose of section 69A - Held, yes - Whether an article under section 69A was to be considered valuable if said article was a high priced article commanding a premium price, thus, common placed article like bitumen could not be said to be valuable article only on basis of its huge mass - Held, yes - Whether thus, section 69A would not be applicable in instant case and impugned addition was to be deleted - Held, yes [Paras A.39, A.79, B.3, B.16, B.17 and B.19] [In favour of assessee] Words and Phrases : Words 'owner' and 'other valuable articles' as occuring in section 69A of Income-tax Act, 1961 Interpretation of statutes : Principle of Ejusdem generis and principle of noscitur a sociis Circulars and Notifications : Circular No. 20 of 1964, dated 7-7-1964” 4 ITA No. 15/Pat/2021 Shri Dudheshwar Nath Singh 4.1 Considering that the very basis for the said penalty does not exist any more with the order of the Hon’ble Apex Court (supra), hence we direct the deletion of penalty levied u/s 271(1)(c) of the Act. 5. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the court on 08.01.2025 Sd/- Sd/- (Duvvuru RL Reddy) (Sanjay Awasthi) Vice President Accountant Member Dated: 08.01.2025 AK, P.S. Copy of the order forwarded to: 1. Shri Dudheshwar Nath Singh 2. ACIT, Central Circle-2, Patna 3. CIT(A)- 4. CIT- 5. CIT(DR) //True copy// By order Assistant Registrar, Kolkata Benches "