ITO 25(3)(2), MUMBAI V. K. TANNA & CO., MUMBAI

ITA 2711/MUM/2010

• Counselvise Citation: 271119914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 1994-1995
• Appeal Filed On: 08-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Keywords: Search and seizure; Period of limitation; Time period of passing order
• Section: 246; 27; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.2711/MUM/2010 (ASSESSMENT YEAR: 1994-95) THE I.T.O. 25(3)(2), C-11, R.NO.306, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 VS. M/S. K. TANNA & CO. 107/108, SUPER SHOPPING COMPLEX, BAJAJ X RD, KANDIVALI (W), MUMBAI-400 067 PAN NO: AAA FK 8879 P (APPELLANT) (RESPONDENT) ITA NO.2712/MUM/2010 (ASSESSMENT YEAR: 1995-96) THE I.T.O. 25(3)(2), C-11, R.NO.306, PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 VS. M/S. K. TANNA & CO. 107/108, SUPER SHOPPING COMPLEX, BAJAJ X RD, KANDIVALI (W), MUMBAI-400 067 PAN NO: AAA FK 8879 P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAGDISH RESPONDENT BY : SHRI P RAMOD KUMAR PARIDA DATE OF HEARING : 1 5 .0 7 .2011 DATE OF PRONOUNCEMENT : 26. 08.2011 ORDER PER R. S. PADVEKAR, J. THESE TWO APPEALS BY THE REVENUE ARE AGAINST THE I MPUGNED ORDERS OF THE LD. CIT (A) 35, MUMBAI FOR THE AYS. 1994-9 5 AND 1995-96, DELETING THE PENALTY LEVIED BY THE AO U/S.271(1)(C) OF THE I.T. ACT ON THE ITA NOS. 2711 & 2712/MUM/2010 M/S. K. TANNA & CO. 2 REASON THAT THE PENALTY ORDERS ARE PASSED BY THE AO BEYOND THE TIME LIMIT PRESCRIBED UNDER SEC. 275(1)(A) OF THE ACT. 2. WE FIRST TAKE THE APPEAL FOR THE ASSESSMENT YEAR 1994-95 BEING ITA NO.2711/MUM/2010. THE REVENUE HAS TAKEN THE FOLLOWI NG EFFECTIVE GROUND WHICH IS OTHERWISE COMMON IN BOTH THE APPEAL S:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, LD. CIT(A) ERRED IN HOLDING THAT THE ORDER IMP OSING PENALTY U/S.271(1)(C) OF THE I.T. ACT, PASSED WITHIN THE TI ME LIMIT PRESCRIBED IN ORIGINAL ENACTMENT AS CONTAINED IN SE CTION 275(1)(A), WAS TIME BARRED AS PER PROVISO INSERTED TO THE ABOVE SECTION WITHOUT APPRECIATING THE FACT THAT A PROVIS O DOES NOT NULLIFY THE SCOPE OF THE ORIGINAL ENACTMENT AS HELD BY HON'BLE APEX COURT IN VARIOUS REPORTED DECISIONS. 3. THE ASSESSEE IS A PARTNERSHIP FIRM WHICH IS ENGA GED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. THERE WAS A SEARCH AND SEIZURE OPERATION U/S.132 OF THE I.T. ACT AGAINST THE ASSESSEE AS WEL L AS THE OTHER GROUP CONCERNS. ON 18.04.1995 AND THE ASSESSMENT U/S.14 3(3) R.W.S. 147 WAS COMPLETED ON 30.03.1999. THE ASSESSEE CHALLENGED TH E ASSESSMENT ORDER BEFORE THE LD. CIT (A) AND THE LD. CIT (A) ALLOWED THE PARTIAL RELIEF. THE ASSESSEE FURTHER WENT INTO AN APPEAL BEFORE THE TRI BUNAL BY FILING THE APPEAL BEING ITA NO.1242/MUM/2006 DATED 26.11.2008. THE AO HAS PASSED THE PENALTY ORDER AND LEVIED THE PENALTY U/S .271(1)(C) OF THE I.T. ACT ON 30.06.2009 BY GIVING A REASON THAT THE ORDER OF TRIBUNAL DATED 26.11.2008 WAS RECEIVED IN THE OFFICE OF THE C.I.T. IN THE MONTH OF DECEMBER, 2008 AND, THEREFORE, THE PENALTY ORDER CO ULD BE PASSED WITHIN 6 MONTHS I.E. ON OR BEFORE 30.06.2009. THE ASSESSEE C HALLENGED THE PENALTY ORDER BY RAISING THE GROUND ON THE PERIOD OF LIMITA TION AS WELL AS ON MERIT. THE ASSESSEE CONTENTED BEFORE THE LD. CIT (A) THAT PENALTY ORDER DATED ITA NOS. 2711 & 2712/MUM/2010 M/S. K. TANNA & CO. 3 30.06.2009 FOR THE ASSESSMENT YEAR 1994-95 PASSED B Y THE AO WAS TIME BARRED IN VIEW OF THE AMENDED PROVISIONS OF SECTION 275(1)(A) WHICH WAS INSERTED BY THE FINANCE ACT, 2003 W.E.F. 01.06.2003 . IT WAS PLEADED THAT AS PER THE AMENDED PROVISION, THE AO MUST PASS THE PENALTY ORDER WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHIC H THE ORDER OF THE LD. CIT (A) IS RECEIVED BY THE C.I.T. THE LD. CIT (A) A CCEPTED THE PLEA OF THE ASSESSEE AND ALSO INTERPRETED DECISION OF THE HON'B LE HIGH COURT OF MADRAS IN THE CASE OF M/S. RAYALA CORPN. (P.) LTD. 288 ITR 452 AND HELD THAT THE AO SHOULD HAVE PASSED THE ORDER ON OR BEFORE 31.03. 2007 AND HENCE, AS THE ORDER IS PASSED ON 30.06.2009, THE IMPUGNED PEN ALTY ORDER WAS TIME BARRED AND ALLOWED THE APPEAL FILED BY THE ASSESSEE . THE LD. CIT (A) DID NOT CONSIDER THE GROUNDS TAKEN ON MERITS. 4. NOW, THE REVENUE HAS CHALLENGED THE IMPUGNED ORD ER OF THE LD. CIT (A) BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. THE LIMITED ISSUE TO BE EXAMINED IS WHETHE R THE STATUTE HAS PROVIDED TIME LIMIT FOR PASSING THE PENALTY ORDER U /S.271(1)(C) OF THE I.T. ACT AND IF IT IS SO, WHETHER THE AO HAS PASSED THE ORDER WITHIN THE TIME LIMIT PRESCRIBED. SECTION 275 PRESCRIBED THE PERIOD OF LIMITATION FOR PASSING THE PENALTY ORDERS PRESCRIBED UNDER DIFFERENT SECTI ON AND THE RELEVANT PART OF THE SAID SECTION READS AS UNDER :- 275. (1) NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE PASSED (A) IN A CASE WHERE THE RELEVANT ASSESSMENT OR O THER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE 97 [***] COMMISSIONER (APPEALS) UNDER SECTION 246 OR SECTION 246A OR AN APPEAL TO THE APPELLATE TRIBUNAL UNDER SECTION 253 , AFTER THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COU RSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITI ATED, ARE COMPLETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ITA NOS. 2711 & 2712/MUM/2010 M/S. K. TANNA & CO. 4 ORDER OF THE COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISS IONER OR COMMISSIONER, WHICHEVER PERIOD EXPIRES LATER : PROVIDED THAT IN A CASE WHERE THE RELEVANT ASSESSMENT OR OT HER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE COM MISSIONER (APPEALS) UNDER SECTION 246 OR SECTION 246A, AND TH E COMMISSIONER (APPEALS) PASSES THE ORDER ON OR AFTER THE 1ST DAY OF JUNE, 2003 DISPOSING OF SUCH APPEAL, AN ORDE R IMPOSING PENALTY SHALL BE PASSED BEFORE THE EXPIRY OF THE FI NANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH AC TION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPL ETED, OR WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER IS LATER;] (B) IN A CASE WHERE THE RELEVANT ASSESSMENT OR O THER ORDER IS THE SUBJECT-MATTER OF REVISION UNDER SECTION 263 OR SECTION 264, AFTER THE EXPIRY OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH SUCH ORDER OF REVISION IS PASSED; (C) IN ANY OTHER CASE, AFTER THE EXPIRY OF THE F INANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTIO N FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPL ETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH ACTION FO R IMPOSITION OF PENALTY IS INITIATED, WHICHEVER PERIOD EXPIRES L ATER. (2). 6. THE LD. DR SUBMITS THAT IN THIS CASE THE ASSESSE E PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL PASSED THE ORDER DATED 26.11.2008 WHICH WAS RECEIVED IN THE OFFICE OF THE C.I.T. IN THE MONTH OF DECEMBER, 2008 AND HENCE, THE AO HAD THE TIME LIMIT UP TO 30.06.2009 AND THE ORDER PASSED BY THE LD. CIT (A) IS WELL WIT HIN THE TIME LIMIT. THE LD. DR RELIED ON THE DECISION IN THE CASE OF M/S. R AYALA CORPN. (P.) LTD. (SUPRA). PER CONTRA, THE LD. COUNSEL SUBMITS THAT P ROVISO IS INSERTED TO SECTION 275(1)(A) BY THE FINANCE ACT, 2003 W.E.F. 0 1.06.2003 AND HENCE, THE AO SHOULD HAVE PASSED THE PENALTY ORDER WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE LD. CIT(A) IS RECEIVED BY THE COMMISSIONER AND IN THE PRESENT CASE THE LD. CIT(A) PASSED THE ORDER ON ITA NOS. 2711 & 2712/MUM/2010 M/S. K. TANNA & CO. 5 06.12.2005, HENCE, AT THE MOST AO SHOULD HAVE PASSE D THE ORDER ON OR BEFORE 31.03.2007. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED RECO RD. IN THE PRESENT CASE THE FACTS ARE NOT IN DISPUTE. ONLY WE HAVE TO EXAMINE LEGISLATIVE EFFECT OF THE PROVISO INSERTED BY THE FINANCE ACT, 2003 BE LOW CLAUSE (A) TO SECTION 275(1) OF THE ACT. IN THE CASE OF M/S. RAYALA CORP N. (P.) LTD. (SUPRA) THE PETITIONER COMPANY HAS FILED AN APPEAL BEFORE THE L D. CIT(A) AND THE SAID APPEAL WAS DISPOSED OF BY GIVING PARTIAL RELIEF. TH E PETITIONER FILED THE APPEAL BEFORE THE TRIBUNAL WHICH WAS PENDING. AFTER THE APPEAL WAS DISPOSED OF BY THE LD. CIT (A), THE AO INITIATED TH E PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT. THE PETITIONER FILED WRIT PETITION BY TAKING CONTENTION THAT THE AO HAS STILL TIME TO PASS THE P ENALTY ORDER, AS THE MATTER WAS PENDING BEFORE THE TRIBUNAL. IN THAT CON TEXT, THE HON'BLE HIGH COURT EXAMINED THE PROVISIONS OF SECTION 275(1)(A) AND HELD AS UNDER :- 10. SECTION 275(1)(A) OF THE INCOME-TAX ACT, 1961, READS AS FOLLOWS : 275. BAR OF LIMITATION FOR IMPOSING PENALTIES.-(1) NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE PASS ED- (A) IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHE R ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE COMMISSIONER (APPEALS) UNDER SECTION 246 OR SECTIO N 246A OR AN APPEAL TO THE APPELLATE TRIBUNAL UNDER SECTION 253, AFTER THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPL ETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE O RDER OF THE COMMISSIONER (APPEALS) OR, AS THE CASE MAY B E, THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISS IONER OR COMMISSIONER, WHICHEVER PERIOD EXPIRES LATER. ITA NOS. 2711 & 2712/MUM/2010 M/S. K. TANNA & CO. 6 11. A READING OF THE ABOVE SAID PROVISION MAKES IT CLEAR THAT THE INTERPRETATION PLACED BY LEARNED COUNSEL FOR TH E PETITIONER ON THE SAID PROVISION IS ACCEPTABLE. THERE IS NO DISPU TE IN THIS CASE THAT THE PETITIONER HAS FILED AN APPEAL BEFORE THE TRIBUNAL AND THE SAME IS PENDING. IN SUCH A CASE, THE LIMITATION PERIOD FOR THE LEVY OF PENALTY WILL BE AS PROVIDED FOR UNDER SECTI ON 275(1)(A), I.E. SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COM MISSIONER. THERE CANNOT BE ANY DOUBT ON THIS ASPECT. ACCORDING LY, THIS COURT IS OF THE VIEW THAT THE PROVISO TO SECTION 27 5(!)(A) OF THE ACT, DOES NOT NULLIFY THE AVAILABILITY TO THE THIRD RESPONDENT OF THE PERIOD OF LIMITATION OF SIX MONTHS FROM THE END OF THE MONTH WHEN THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL , CHENNAI, IS RECEIVED BY THE THIRD RESPONDENT HEREIN. 8. NO OTHER DECISION HAS BEEN BROUGHT TO OUR NOTICE CONTRARY TO THE DECISION IN THE CASE OF M/S. RAYALA CORPN. (P.) LTD . (SUPRA). WE, THEREFORE, IN CONFORMITY WITH THE JUDICIAL DISCIPLINE RESPECTF ULLY FOLLOWING THE DECISION IN THE CASE OF M/S. RAYALA CORPN. (P.) LTD. (SUPRA) REVERSES THE ORDER OF THE LD. CIT (A) AND ALLOWS THE RELEVANT GROUNDS TAKEN B Y THE REVENUE. THE LD. CIT (A) HAS MERELY DISPOSED OF THE APPEAL ON THE IS SUE OF THE LIMITATION AND NOT ON MERIT. WE ACCORDINGLY, CONSIDERED IT FIT TO RESTORE THE MATTER TO THE FILE OF THE LD. CIT (A) TO DISPOSE OF THE GROUNDS T AKEN BY THE ASSESSEE ON MERIT ALSO. 9. NOW WE TAKE UP THE APPEAL FOR THE ASSESSMENT YE AR 1995-96 BEING ITA NO.2712/MUM/2010. IN THIS ASSESSMENT YEAR THE A SSESSMENT WAS COMPLETED U/S.143(3) ON 27.03.1998. THE ASSESSEE CH ALLENGED THE ORDER BEFORE THE LD. CIT (A) WHO SET ASIDE THE ASSESSMENT TO THE FILE OF THE AO FOR FRESH DETERMINATION BY ORDER DATED 26.03.1999. THE AO COMPLETED THE FRESH ASSESSMENT ON 23.03.2001 BY DETERMINING THE T OTAL INCOME OF THE ASSESSEE AT `. 68,01,416/-. THE ASSESSEE CHALLENGED THE SAID ASSES SMENT ORDER AGAIN BEFORE THE LD. CIT (A) BY FILING THE AP PEAL BEING ITA ITA NOS. 2711 & 2712/MUM/2010 M/S. K. TANNA & CO. 7 NO.84/M/2001-02 DATED 09.12.2005 AND THE ASSESSEE W AS ALLOWED PARTIAL RELIEF. THE ASSESSEE FURTHER WENT INTO THE APPEAL B EFORE THE TRIBUNAL BY FILING AN APPEAL BEING ITA NO.1243/MUM/2006 WHICH W AS DECIDED VIDE ORDER DATED 26.11.2008. IN THIS CASE ALSO THE AO PA SSED THE PENALTY ORDER ON 30.06.2009 ON THE GROUND THAT THE ORDER OF THE T RIBUNAL DATED 26.11.2008 WAS RECEIVED IN THE OFFICE OF THE C.I.T. IN THE MONTH OF THE DECEMBER, 2008 AND, THEREFORE, THE PENALTY ORDER WA S PASSED WELL WITHIN THE TIME LIMIT I.E. ON 30.06.2009. THE ASSESSEE CH ALLENGED THE PENALTY ORDER BEFORE THE LD. CIT (A) BY TAKING THE PLEA OF THE LIMITATION AS WELL AS ON MERIT. THE LD. CIT (A) ALLOWED THE APPEAL FILED BY THE ASSESSEE BY ADOPTING THE REASONS GIVEN IN ASSESSEES APPEAL IN THE ASSESSMENT YEAR 1994-95. 10. NOW THE REVENUE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES AND PERUSED THE RECORDS. THE ARGUMENT OF THE LD. COUNSEL IS THAT IN THIS CASE THE FIRST APPEAL WAS DISPOSED OF BY THE LD. CIT (A) VIDE ORDE R DATED 26.03.1999 AND HENCE, THE AO SHOULD HAVE PASSED THE PENALTY ORDER ON OR BEFORE 31.03.2000. HE FURTHER SUBMITS THAT EVEN THE SECOND APPEAL WAS DISPOSED OF BY THE LD. CIT(A) VIDE ORDER DATED 09.12.2005 AN D HENCE THE AO SHOULD HAVE PASSED THE PENALTY ORDER WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR 2005-06 I.E. ON OR BEFORE 31.03.2007 BUT THE AO HAS PASSED THE ORDER ON 30.06.2009. HENCE THE PENALTY ORDER IS TIME BARRED. WE HAVE ALSO HEARD THE LD. DR. 12. WE FIND THAT SO FAR AS THE FIRST APPEAL OF THE ASSESSEE IS CONCERNED, THE ENTIRE ASSESSMENT WAS SET ASIDE BY THE LD. CIT (A) TO THE FILE OF THE AO FOR FRESH DETERMINATION OF THE INCOME. ONCE THE ENT IRE ASSESSMENT ORDER IS SET ASIDE, THEN ASSESSMENT ORDER DOES NOT REMAIN IN EXISTENCE AS ORIGINAL ASSESSMENT ORDER GET MERGED WITH THE ORDER OF THE L D. CIT (A). THOUGH THE ITA NOS. 2711 & 2712/MUM/2010 M/S. K. TANNA & CO. 8 ASSESSMENT PROCEEDINGS ARE LEGALLY KEPT ALIVE BUT D UE TO SETTING ASIDE OF THE ASSESSMENT ORDER WHICH IS SUBJECT MATTER OF THE APPEAL DOES NOT SURVIVE. ADMITTEDLY IN THIS CASE, THE TRIBUNAL DECI DED THE ASSESSEES APPEAL BEING ITA NO.1243/MUM/2006 VIDE ORDER DATED 26.11.2008. AS NOTED BY THE AO, THE TRIBUNAL ORDER WAS RECEIVED BY THE C.I.T. IN THE MONTH OF DECEMBER, 2008. HENCE, IN OUR OPINION, FOL LOWING THE DECISION IN THE CASE OF M/S. RAYALA CORPN. (P.) LTD. (SUPRA) T HE PENALTY ORDER PASSED BY THE AO ON 30.06.2009 IS WELL WITHIN THE TIME LIM IT. IN THIS CASE ALSO THE LD. CIT (A) DECIDED THE ASSESSEES APPEAL ON THE IS SUE OF THE LIMITATION U/S.275(1)(A). IT IS SEEN THAT THE ASSESSEE HAS ALS O TAKEN GROUNDS ON THE MERIT, AND THIS GROUNDS ARE NOT DECIDED BY THE LD. CIT (A). WE ACCORDINGLY, SET ASIDE THE MATTER TO THE FILE OF TH E LD. CIT (A) TO DISPOSE OF THE APPEAL BY DECIDING THE GROUNDS TAKEN ON MERIT. 13. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED. ORDER PRONOUNCED ON THIS 26 TH DAY OF AUGUST, 2011. SD/- SD/- ( J. SUDHAKAR REDDY ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE 26 TH AUGUST, 2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, A- BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI