Commissioner of Income Tax-III V. M/s Shri Ravi Teja Restaurents AND Resorts Private Limited

ITTA/354/2014

AI Insights

The case involves an appeal by the Commissioner of Income Tax-III, Hyderabad against M/s Shri Ravi Teja Restaurants & Resorts Private Limited concerning a penalty imposed during a block period assessment from 01-04-1996 to 04-07-2002. The primary legal issue was whether the Tribunal was justified in setting aside the penalty initiated by the Assessing Officer, which was based on undisclosed income determined during search and seizure proceedings. The High Court examined the validity of the penalty proceedings, particularly in light of the fact that the initial determination of undisclosed income was overturned in subsequent appeals. The court concluded that the penalty proceedings were improperly resumed by the Assessing Officer and could not be validated by the Commissioner of Income Tax (Appeals) reducing the quantum of penalty.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 679661 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 24-06-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Block assessment; Penalty proceedings; Quasi Judicial Proceedings; Undisclosed income
• Section: 158BC; 158BFA(2)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH (Special Original Jurisdiction) PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.354 OF 2014 DATED: 24-06-2014 Between: Commissioner of Income Tax-III, Hyderabad … Appellant And M/s Shri Ravi Teja Restaurents & Resorts Private Limited … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.354 OF 2014 JUDGMENT: (per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is directed against the judgment and order of the learned Tribunal dated 17-01-2014 in relation to the block period assessment from 01-04-1996 to 04-07-2002. 2. In response to the pre-admission notice, a learned counsel appears on behalf of the assessee. 3. We admit the appeal for statistical purpose on the following substantial question of law. “Whether in the facts and circumstances of the case, the learned Tribunal was justified in setting aside the subject penalty in quasi judicial proceedings initiated by the Assessing Officer ?” 4. We have heard both the learned counsel and we have considered the material placed before us. The undisputed fact is that the Assessing Officer concerned after determining undisclosed income in search seizure proceeding, had initiated penalty proceeding. But this undisclosed income determined by the Assessing Officer in the block assessment order was not sustained by the Commissioner of Income Tax (Appeals) in the quantum proceedings. Thus the penalty proceeding initiated by the Assessing Officer became without any basis as his determination of undisclosed income was set aside in the appeal. However, Commissioner of Income Tax (Appeals) determined quantum of undisclosed income afresh on the basis of voluntary statement. 5. On analysis of facts as above, we now examine whether the penalty proceeding that was kept pending was resumed by the Assessing Officer followed by Commissioner of Income Tax (Appeals) is legally permissible or not. Section 158BFA(2) of the Income Tax Act, 1961 being relevant provision of power is extracted hereunder: “Section 158BFA(2): The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under Clause (c) of Section 158BC.” 6. Upon reading the aforesaid Section, we are of the view that the Assessing Officer had no jurisdiction to resume penalty proceeding consequently to impose penalty, as his determination of income being undisclosed was set aside, valid determination as above is sine qua non. It should have been done by the Commissioner (Appeals) himself, as he determined afresh, if he so chose. Instead, he has accepted partly the order of Assessing Officer imposing punishment, in an invalid proceeding. 7. We are of the view that when the resumption of the penalty proceedings was bad in itself, such proceedings could not be regularised by the Commissioner of Income Tax (Appeals) subsequently by reducing the quantum of penalty. According to us, there has not been any lawful initiation of penalty proceedings. It would have been open to the Commissioner of Income Tax (Appeals) to initiate penalty proceedings initially as he invested with power coextensively to do so. We accordingly set aside the judgment and order of the learned Tribunal and also set aside the orders of the Assessing Officer, and the Commissioner of Income Tax (Appeals). However, we give liberty to the Commissioner of Income Tax (Appeals) to initiate penalty proceedings in accordance with law afresh on the basis of own determination in terms of Section 158BFA(2) of the Income Tax Act, 1961. While doing so, he shall take the entire case facts and circumstances into consideration and complete the exercise within a fortnight from the date of communication of this order. If no such proceedings are initiated within the time above, this issue shall be a closed chapter. 8. The appeal is accordingly disposed of. No costs. _____________________ K.J. SENGUPTA, CJ _____________________ SANJAY KUMAR, J 24-06-2014 Svv "