ACIT, CHENNAI V. M/s. Polaris Software Lab Ltd., CHENNAI

ITA 1634/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4888 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-06-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 15-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: PUNEET JAIN
• Keywords: Rectification of order
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NOS. 1634 & 1635/MDS/2009 ASSESSMENT YEARS : 2001-02 AND 2002-03 THE ACIT COMPANY CIRCLE V(2) CHENNAI VS M/S POLARIS SOFTWARE LAB LTD 173, ANNA SALAI CHENNAI 600 006 [PAN AAACB4341E] (APPELLANT) (RESPONDENT) C.O. NOS. 191 & 192/MDS/2009 ASSESSMENT YEARS : 2001-02 AND 2002-03 M/S POLARIS SOFTWARE LAB LTD 173, ANNA SALAI CHENNAI 600 006 VS THE ACIT COMPANY CIRCLE V(2) CHENNAI (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : DR.I.VIJAYAKUMAR, CIT ASSESSEE BY : SHRI PUNEET JAIN O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THE ABOVE CAPTIONED TWO APPEALS BY THE REVENUE AND RESPECTIVE CROSS OBJECTIONS BY THE ASSESSEE, PERTAI NING TO ASSESSMENT YEARS 2001-02 AND 2002-03, ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD. CIT(A), DATED 29.12.2008, WHICH EMANATE FRO M THE ORDERS OF ITA 1634&1635/09 CO 191 & 192/09 :- 2 -: PENALTY PASSED U/S 271(1)(C) OF THE ACT DATED 31.7. 2008 AND 3.10.2008, FOR THE RESPECTIVE ASSESSMENT YEARS. FO R THE SAKE OF CONVENIENCE AND BREVITY, WE PROCEED TO DECIDE THEM BY A COMMON ORDER. 2. TO SUMMARIZE THE FACTS LEADING TO LEVY OF PENAL TY IMPOSED IN THESE YEARS, WE MAY NARRATE THAT FOR THE PERIOD REL EVANT TO ASSESSMENT YEAR 2001-02, THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME ON 30.10.2001 DECLARING TOTAL TAXABLE INCOME OF ` 10,01,129/-. WHILE TAKING RECOURSE TO SECTION 147/148 OF THE ACT VIDE ORDER DATED 28.3.2005, THE ASSESSING OFFICER HAS DETERMINED THE INCOME AT ` 13,81,26,596/- BY RAISING A DEMAND OF ` 6,98,58,842/-. FOR THE PERIOD RELEVANT TO ASSESSMENT YEAR 2002-03, THE ASS ESSEE-COMPANY FILED ITS RETURN OF INCOME ON 29.10.2002 DECLARING TOTAL INCOME OF ` 9,17,13,730/- WHICH WAS SCRUTINIZED VIDE ASSESSMENT ORDER DATED 30.3.2005AND TOTAL INCOME CHARGEABLE TO TAX WAS DET ERMINED AT ` 31,07,07,384/- AND A DEMAND OF ` 11,04,85,997/- WAS RAISED. 3. THE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED BY THE ASSESSING OFFICER FOR BOTH THE YEARS AND PEN ALTIES OF ` 4,85,70,071/- AND ` 7,59,11,260/- FOR THE RESPECTIVE ASSESSMENT YEARS WERE IMPOSED, VIDE ORDERS DATED 30.7.2008 AND 3.10. 2008. THERAFTER, THE ASSESSING OFFICER REVISED THE PENALTIES COMMENS URATE WITH THE ITA 1634&1635/09 CO 191 & 192/09 :- 3 -: RELIEF GRANTED BY THE LD. CIT(A), IN RECTIFICATION ORDERS DATED 3.10.2008 BY REDUCING THE PENALTIES TO ` 83,51,442/- FOR ASSESSMENT YEAR 2001-02 AND ` 2,87,24,084/- FOR ASSESSMENT YEAR 2002-03. AGAINST THESE PENALTIES LEVIED FOR BOTH THE YEARS, THE ASSESSEE P REFERRED APPEALS BEFORE THE LD. CIT(A), WHO, IN TURN, HAS DELETED TH E PENALTIES IN TOTO, BY PASSING A COMMON ORDER FOR BOTH YEARS, AGAINST W HICH THE REVENUE IS NOW IN APPEAL. THE ASSESSEE HAS FILED CROSS OBJ ECTIONS RAISING A LEGAL ISSUE THAT BOTH THE PENALTY ORDERS ARE BARRED BY LIMITATION AND DESERVE TO BE CANCELLED. IN THIS REGARD, REFERENC E TO FIRST PROVISO TO SECTION 275 HAS BEEN MADE. ONE MORE GROUND HAS BEE N RAISED WITHOUT PREJUDICE TO THE LEGAL GROUND THAT THE LD. CIT(A) SHOULD HAVE REALIZED AND SPECIFICALLY HELD THAT EVEN IF MENS RE A WAS NOT NECESSARY FOR LEVY OF PENALTY U/S 271(1)(C), THESE ARE, EVEN OTHERWISE, NOT AT ALL FIT CASES FOR LEVY OF PENALTY. SINCE THE LEGAL ISS UE RAISED BY THE ASSESSEE GOES TO THE VERY ROOT OF THE MATTER, IT WA S THOUGHT PROPER TO DECIDE THIS ISSUE. 4. IT WAS ARGUED BY THE LD.AR, SHRI PUNEET JAIN, THAT FOR ASSESSMENT YEAR 2001-02, RETURN OF INCOME WAS FILED ON 30.10.2001 AND ORDER U/S 143(3) WAS FRAMED ON 28.3.2005. ON ASSESSEES APPEAL, THE LD. CIT(A) PASSED THE APPELLATE ORDER O N 29.11.2005. IT HAS BEEN MENTIONED THAT ON FURTHER APPEAL, THE HON' BLE ITAT PASSED ORDER ON 19.12.2007. THE PENALTY ORDER WAS PASSED ON 31.7.2008. ITA 1634&1635/09 CO 191 & 192/09 :- 4 -: ACCORDINGLY, THIS ORDER IS BARRED BY LIMITATION. T O SUPPORT HIS ABOVE CONTENTION, REFERENCE WAS MADE TO SECTION 275, WH ICH STIPULATES A BAR ON IMPOSING PENALTIES AND SUB-SECTION (1)(A) CO NTAINS THE BASIC TIME LIMITS FOR LEVY OF PENALTY IN RESPECT OF THE ASSESSMENT ORDERS AND OTHER ORDERS WHICH ARE MADE SUBJECT MATTER OF APPEA L(S) BEFORE THE CIT(A) AND ITAT. IT WAS ARGUED THAT A PROVISO WAS INSERTED BY THE FINANCE ACT, 2003, WITH EFFECT FROM 1.6.2003 TO THE AFORESAID MAIN PROVISION VIZ. SECTION 275(1)(A) WHICH MANDATES THA T ON ASSESSEES APPEAL IF THE CIT(A) PASSES THE APPELLATE ORDER ON OR AFTER 1 ST JUNE 2003, AN ORDER OF PENALTY SHALL BE PASSED (I) BEFORE THE EXPIRY OF THE FINANCIAL YEAR IN WHI CH THOSE PROCEEDINGS ARE CONTEMPLATED IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY IS INITIATED OR (II) WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE CIT(A) IS RECEIVED BY THE CI T OR CCIT. WHICHEVER IS LATER. 5. AS PER THE LD.AR, APPLYING THIS PROVISO TO THE FACT S AND RELEVANT DATES, IT BECOMES CLEAR THAT THE PENALTY PROCEEDING S ARE TO BE INITIATED ON OR BEFORE THE DATE OF THE ASSESSMENT ORDER I.E 2 8.3.2005, THEREFORE, THE PENALTY ORDER COULD HAVE BEEN PASSED ON OR BEFO RE 31.3.2005. BUT THE SECOND CONDITION IS THAT THE ORDER OF PENALTY C OULD HAVE BEEN PASSED WITHIN ONE YEAR FROM THE END OF THE FINANCIA L YEAR IN WHICH THE ITA 1634&1635/09 CO 191 & 192/09 :- 5 -: ORDER OF THE LD. CIT(A) IS RECEIVED BY THE CIT OR C CIT. THE LD. CIT(A)S ORDER IS DATED 29.11.2005 AND OBVIOUSLY, I T SHOULD HAVE BEEN RECEIVED BY THESE AUTHORITIES WITHIN FOUR MONTHS TH EREOF BY 31.3.2006. SO, ACCORDING TO HIM, THE PENALTY ORDER SHOULD HAVE BEEN PASSED ON BEFORE 31.3.2007, HENCE, THE PENALTY ORDER BECOMES TIME BARRED BY ONE YEAR AND FOUR MONTHS. LIKEWISE, FOR OTHER ASS ESSMENT YEAR, THE PENALTY PROCEEDINGS SHOULD HAVE BEEN INITIATED ON O R BEFORE THE DATE OF ASSESSMENT ORDER WHICH IS 30.3.2005 AND THE PENA LTY ORDER SHOULD HAVE BEEN PASSED ON OR BEFORE 31.3.2007. 6. ON THE OTHER HAND, THE LD.DR WANTED TO ASCERTAIN A S TO WHEN THE ORDER OF THE LD. CIT(A) WERE RECEIVED BY THE CC IT OR CIT BECAUSE THIS FACT HAS NOT BEEN CLEARLY SPELLED OUT BY THE L D.AR AND HE HAS SIMPLY SPECULATED IN THIS REGARD. 7. DURING HEARING OF THIS CASE AND WHILE GOING THRO UGH THE PROVISIONS OF SECTION 275, IT WAS FOUND THAT AFTER CLAUSE(1)(A), ANOTHER PROVISO HAS BEEN APPENDED BY TAXATION (AMENDMENT) A CT, 2006, WHICH CAME INTO EFFECT FROM 30.7.2006. IT SPEAKS A BOUT THE ORDERS WHICH MIGHT HAVE BEEN APPEALED STEP BY STEP UPTO TO HON'BLE SUPREME COURT AND PRESCRIBES LIMITATION FOR IMPOSIN G PENALTY IN THOSE EVENTUALITIES. WHEN THIS ASPECT WAS BROUGHT TO TH E NOTICE OF LD.AR, HE STATED THAT FIRST PROVISO ON WHICH HE HAS RELIED IS THE MAIN PROVISO AND GOES TO MAIN SECTION 275 AND THE PROVISO AFTER SUB-CLAUSE (1)(A) ITA 1634&1635/09 CO 191 & 192/09 :- 6 -: HAS NO RELEVANCE BECAUSE IN THIS CASE, PENALTY PROC EEDINGS WERE INITIATED AFTER THE ORDER OF THE LD. CIT(A). BUT GIVEN THE FACTS AND THE LEGAL POSITION, WE ARE UNABLE TO ACCEPT OR REJECT H IS ABOVE CONTENTION. THE IMPORTANT FACT REGARDING RECEIPT OF ORDER OF LD . CIT(A) IN THE OFFICE OF LD. CCIT OR LD. CIT, IS NOT KNOWN EITHER TO LD. AR OR LD.DR. MOREOVER, THIS LEGAL ISSUE HAS BEEN RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL, OF-COURSE, IT IS LEGALLY PERMITTED, BUT T HE FULL AND FINAL FACTS RELATING TO THIS ISSUE ARE NOT AVAILABLE ON RECORD ALTHOUGH THE ASSESSING OFFICER IS NOT REQUIRED TO DIG INTO THESE FACTS BY MAKING FURTHER INVESTIGATION, ETC., BUT WITH A VIEW TO DO SUBSTAN TIAL JUSTICE, WE ARE OF THE CONSIDERED OPINION THAT INSTEAD OF GOING BY PED ANTIC REASONS, WE MUST REMAND THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER SO THAT IT CAN BE ASCERTAINED AS TO UNDER WHICH PROVISO THESE CASES FALL. THIS ACTION WILL SUBSERVE THE LEGAL CAUSE AND WILL HELP IN IMPARTING JUSTICE TO BOTH THE PARTIES. THEREFORE, WE RESTORE ALL MAT TERS BEFORE US IN APPEAL TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THAT HE SHALL DECIDE THE LEGAL ISSUE RAISED REGARDING LIMITATION FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN BOTH THE YEARS. THIS ISSUE IS OPEN AND CAN BE DECIDED WITH RECOURSE TO ANY CASE LAW OR THE OTHER RELEVANT PROVISIONS OF THE LAW SO THAT THE SAME CAN BE SETTLED FOR GOOD . IN VIEW OF OUR ABOVE FINDINGS, WE REFRAIN FROM DECIDING THE ISSUES ON MERITS. THE ASSESSING OFFICER IS AT LIBERTY TO INITIATE FRESH P ENALTY PROCEEDINGS IF HE ITA 1634&1635/09 CO 191 & 192/09 :- 7 -: IS SO ADVISED OR PERMITTED BY LAW EVEN CONSIDERING THE TRIBUNALS ORDER. BUT WE ARE NOT GIVING ANY SUCH DIRECTION. THE LEVY OF PENALTY IS LEFT TO ASSESSING OFFICERS WISDOM ONLY. IN CASE H E FINDS THE ORDERS NOT BARRED BY LIMITATION, HE CAN SEND BACK THE ENTIRE MATTERS TO TRIBUNAL SO THAT THESE CAN BE DECIDED AFRESH BOTH ON LEGAL A S WELL AS ON MERITS AFTER THE FACTS RELATING TO THE LEGAL ISSUE GETS SE TTLED. 8. IN THE RESULT, THE CROSS OBJECTIONS AND APPEALS CAN BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ISSUES ON ME RITS RAISED IN THE CROSS OBJECTIONS AND/OR IN THE APPEALS OF THE REVEN UE, ARE KEPT OPEN BUT IN ABEYANCE. ORDER PRONOUNCED IN THE OPEN COURT ON 13.6.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 13 TH JUNE, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR