M/s. Khajana Textiles, Indore V. The I..T.O., Indore

ITA 35/IND/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9498 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-03-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 21-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MITRA
• Assessee Lawyers: H P VERMA
• Keywords: Revision of order; Period of limitation; Time period of passing order
• Section: 246

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER PAN NO. : AABCK 3540 P I.T.A.NO. 35 /IND/2010 A.Y. : 2000-01 M/S. KHAJANA TEXTILES PRIVATE LIMITED, MANORAMA GANJ, A.B. ROAD, NEAR GEETA BHAWAN SQUARE, INDORE ITO-2(3), INDORE APPELLANT RESPONDENT APPELLANT BY : S/SHRI H.P. VERMA & ASHISH GOYAL RESPONDENT BY : SHRI PRADEEP KUMAR MITRA, SR. DR O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-I, INDORE, DATED 1.10.2009 FOR THE AY 2000-01 IN THE MATTER OF ORDER PASSED U/S 271(1)(C) OF THE I.T . ACT, 1961. THE FOLLOWING GROUNDS HAVE BEEN RAISED: ON THE FACTS AND CIRCUMSTANCES OF THE CASE, -: 2: - 2 1. THE ORDER PASSED IS BAD-IN-LAW, NOT SUSTAINABLE, BARRED BY LIMITATION, CONTRARY TO MATERIAL AND LAW, WITHOUT JURISDICTION, ILLEGAL AND THEREFORE LIABLE TO BE QUASHED. 2. THE LD. CIT(A) ERRED IN SUSTAINING THE ORDER WHICH IS BARRED BY LIMITATION, PASSED WITHOUT JURISDICTION, BAD-IN-LAW, CONTRARY TO MATERIAL AND LAW AND WAS ILLEGAL. 3. THE LD. CIT(A) ERRED IN SUSTAINING THE PENALTY OF RS.3,45,000/- U/S 271(1)(C) OF THE I.T. ACT. 2. THE LD. AUTHORIZED REPRESENTATIVE HAS BASICALLY AGITATED THE GROUND WITH REGARD TO THE LIMITATION P ERIOD FOR PASSING THE PENALTY ORDER BY THE ASSESSING OFFICER, WHICH, ACCORDING TO THE LD. AUTHORIZED REPRESENTATIVE WAS BARRED BY LIMITATION IN VIEW OF THE PROVISO TO SECTION 275(1) (A) OF THE INCOME-TAX ACT, 1961. HOWEVER, ON THE OTHER HAND, L D. SENIOR D.R. ARGUED THAT PENALTY COULD BE LEVIED WITHIN 6 M ONTHS OF THE ORDER OF THE APPELLATE TRIBUNAL ACCORDING TO TH E MAIN PROVISION OF SECTION 275(1)(A) OF THE ACT. SINCE IN THE INSTANT -: 3: - 3 CASE, THE ORDER OF THE APPELLATE TRIBUNAL WAS PASSE D ON 16.1.2008, HENCE LEVY OF PENALTY WAS WITHIN TIME. I T WAS ALSO CONTENDED BY THE LD. SENIOR D.R. THAT PROVISO DOES NOT SUPERCEDE THE MAIN PROVISION OF SECTION 275(1)(A) G OVERNING THE LIMITATION PERIOD FOR PASSING PENALTY ORDER. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. CONTROVERSY IN THE INSTANT APPEAL REVOLVES AROUND THE LIMITATION PERIOD FOR PASSING PENALTY ORDER AFT ER INSERTION OF PROVISO BELOW SECTION 275(1)(A) BY THE FINANCE A CT, 2003, W.E.F. 1.6.2003. THE FACTS, IN BRIEF ARE THAT IN QU ANTUM ASSESSMENT ADDITION WAS MADE ON ACCOUNT OF DISCRE PANCY OF STOCK. ASSESSMENT ORDER WAS PASSED ON 24.3.2003. A N APPEAL WAS FILED BY THE ASSESSEE BEFORE THE CIT(A). THE LD . CIT(A) PASSED APPELLATE ORDER ON 10.3.2004 AGAINST THE ASS ESSMENT ORDER DURING WHICH PENALTY WAS INITIATED. ASSESSEE FURTHER APPROACHED TO THE TRIBUNAL AGAINST THE ORDER OF CIT (A) AND THE TRIBUNAL PASSED ITS ORDER DATED 16.1.2008, WHEREIN PARTIAL RELIEF WAS GIVEN. AFTER PASSING OF ORDER BY THE TRI BUNAL DATED 16.1.2008, THE AO LEVIED PENALTY U/S 271(1)(C) OF T HE ACT VIDE ORDER DATED 25.7.2008. AN APPEAL FILED AGAINST PENA LTY ORDER -: 4: - 4 WAS DISMISSED BY THE LD. CIT(A) AND THE ASSESSEE IS NOW BEFORE US AGAINST THE ORDER OF CIT(A) CONFIRMING THE PENAL TY ORDER. IN THE GROUNDS OF APPEAL, THE ASSESSEE IS BASICALLY A GGRIEVED BY THE ORDER OF AO LEVYING PENALTY PASSED AFTER INSERT ION OF PROVISO TO SECTION 275(1)(A) W.E.F. 1.6.2003, WHICH WAS STATED TO BE BARRED BY LIMITATION. AS PER LD. AUTHORIZED REPRESENTATIVE AFTER INSERTION OF PROVISO, ORDER OF PENALTY CAN BE PASSED BEFORE THE EXPIRY OF FINANCIAL YEAR IN WH ICH PROCEEDINGS IN THE COURSE OF WHICH ACTION FOR IMPOS ITION OF PENALTY HAS BEEN INITIATED ARE COMPLETED, OR WITHIN ONE YEAR OF THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF CIT(A) IS RECEIVED BY THE CCIT OR CIT, WHICHEVER IS LATER. AC CORDINGLY, IN VIEW OF THE PROVISO TO SECTION 275(1)(A), THE PENAL TY ORDER PASSED ON 25.7.2008 WAS CONTESTED TO BE BARRED BY L IMITATION AND, THEREFORE, NULL AND VOID. 4. THERE IS NO DISPUTE TO THE FACTUAL DATES MENTIONED HEREINABOVE WITH REGARD TO PASSING OF ASSESSMENT OR DER, THE DATE OF CIT(A)S ORDER IN QUANTUM APPEAL DATE OF TR IBUNAL ORDER AND THE ORDER PASSED BY THE ASSESSING OFFICER U/S 271(1)(C) FOR LEVY OF PENALTY. SECTION 275 GOVERNS BAR OF -: 5: - 5 LIMITATION FOR IMPOSING PENALTIES. RELEVANT PROVISI ONS OF SECTION 275 READS AS UNDER :- 275. 95 [(1)] NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL BE PASSED 96 [( A ) IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT- MATTER OF AN APPEAL TO THE [***] 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 COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED, OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE [***] COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER PERIOD EXPIRES LATER : FOLLOWING PROVISO WAS INSERTED BY THE FINANCE ACT, 2003, W.E.F. 1.6.2003 :- [ PROVIDED THAT IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE -: 6: - 6 SUBJECT-MATTER OF AN APPEAL TO THE COMMISSIONER (APPEALS) UNDER SECTION 246 OR SECTION 246A , AND THE COMMISSIONER (APPEALS) PASSES THE ORDER ON OR AFTER THE 1ST DAY OF JUNE, 2003 DISPOSING OF SUCH APPEAL, AN ORDER IMPOSING PENALTY SHALL BE PASSED BEFORE THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED, 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;] 5. IT IS CLEAR FROM THE ABOVE PROVISIONS THAT AS PER CLAUSE(A) OF SUB SECTION (1) OF SECTION 275, THE OU TER LIMIT WITHIN WHICH PENALTY U/S 275(1)(A) CAN BE IMPOSED I N CASE WHERE THE RELEVANT ASSESSMENT ORDER IS SUBJECT MATT ER OF APPEAL TO THE COMMISSIONER U/S 246 OR APPELLATE TRI BUNAL U/S 253. HOWEVER, BY FINANCE ACT, 2003, A PROVISO HAS B EEN APPENDED BELOW CLAUSE (A) W.E.F. 1.6.2003, WHICH PR OVIDES AN -: 7: - 7 EXCEPTION TO THE PERIOD OF LIMITATION STIPULATED UN DER SECTION 275(1)(A). A BARE READING OF THE PROVISO TO SECTION 275(1)(A) SHOWS THAT IN CASE WHERE RELEVANT ASSESSMENT ORDER IS SUBJECT MATTER OF APPEAL TO THE COMMISSIONER U/S 264 AND TH E COMMISSIONER OF APPEAL PASSES THE ORDER ON OR AFTER 1 ST JUNE, 2003, DISPOSING OF SUCH APPEAL, THEN THE PENALTY OR DER SHALL BE PASSED EITHER BEFORE THE END OF THE FINANCIAL YE AR IN WHICH THE PROCEEDINGS IN THE COURSE OF WHICH ACTION FOR I MPOSITION OF PENALTY HAS BEEN INITIATED ARE COMPLETED, OR WITHIN ONE YEAR OF THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE CIT(A) IS RECEIVED BY THE CCIT OR CIT, WHICHEVER IS LATER. TH US, W.E.F. 1.6.2003 THE PROVISO TAKES CARE OF SITUATION WHERE QUANTUM ASSESSMENT IS SUBJECT TO APPEAL BEFORE CIT(A) WHO P ASSES APPELLATE ORDER THEREON AFTER 1.6.2003. THUS, THE P ROVISO TO SECTION 275(1)(A) IS APPLICABLE ONLY TO THE SITUATI ON WHERE THE CIT(A) PASSES ORDER ON OR AFTER 1 ST JUNE, 2003. THIS HAS DIVIDED THE LIMITATION PERIOD FOR IMPOSITION OF PE NALTY INTO TWO PARTS (I) PRE 1.6.2003 PERIOD (II) POST 31.5.2003 PERIOD. -: 8: - 8 6. OUR ABOVE VIEW IS FURTHER FORTIFIED BY CLAUSE 85 OF FINANCE BILL 2003, SEEKING TO AMEND SECTION 285(1)( A) BY INSERTING PROVISO LIMITING THE TIME PERIOD FOR PASS ING PENALTY ORDER IN CASE THE ORDER OF CIT(A) IN QUANTUM APPEAL IS PASSED AFTER 1.6.2003. 7. FURTHERMORE, THE EXPLANATORY NOTE ON PROVISIONS RELATING TO DIRECT TAX CIRCULAR NO.7/2003 DATED 5.9 .2003 PROVIDES AS UNDER :- 80. AMENDMENT OF SECTION 275 RELATING TO TIME LIMIT FOR IMPOSING OF PENALTY 80.1 UNDER THE EXISTING PROVISIONS CONTAINED IN CLAUSE (A) OF SUB-SECTION (1) OF SECTION 275, NO ORDER IMPOSING A PENALTY SHALL BE PASSED, IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE COMMISSIONER (APPEALS), OR TO THE APPELLATE TRIBUNAL AFTER THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALTY HAS BEEN -: 9: - 9 INITIATED, ARE COMPLETED, OR WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS), OR, AS THE CASE MAY BE, THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER PERIOD EXPIRES LATER. 80.2 THE FINANCE ACT, 2003 HAS INSERTED A PROVISO IN THE SAID CLAUSE SO AS TO PROVIDE THAT IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS THE SUBJECT-MATTER OF AN APPEAL TO THE COMMISSIONER (APPEALS) UNDER SECTION 246 OR SECTION 246A OF THE INCOME-TAX ACT, AND THE COMMISSIONER (APPEALS) PASSES THE ORDER ON OR AFTER THE 1ST JUNE, 2003 IN SUCH APPEAL, AN ORDER IMPOSING PENALTY SHALL BE PASSED BEFORE THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED OR WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE -: 10: - 10 COMMISSIONER (APPEALS) IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISSIONER, WHICHEVER IS LATER. 8. READING OF EXPLANATORY NOTE ON PROVISIONS RELAT ING TO DIRECT TAX CIRCULAR NO.7/2003 DATED 5.9.2003 MAKES IT CLEAR THAT PROVISO HAD BEEN BROUGHT ON STATUTE TO PROVIDE FOR TIME LIMIT IN CASE THE ORDER OF CIT(A) IN QUANTUM APPEAL IS PASSED AFTER 1.6.2003. THE PROVISO DEALS WITH PENALTY PROC EEDINGS WHICH REQUIRE LITERAL INTERPRETATION. WHEN THE LANG UAGE OF THE PROVISO IS CLEAR AND UNAMBIGUOUS, THERE IS NO SCOPE FOR ADDING OR SUBTRACTING FROM THE SAME. THE INTENTION OF IN SERTING THE PROVISO TO SECTION 275(1)(A) IS TO AVOID DELAY IN C OMPLETION OF PENALTY PROCEEDINGS. 9. AS PER OUR CONSIDERED VIEW, CLAUSE (C) OF SECTIO N 275(1) GOVERNS THE LIMITATION PERIOD FOR IMPOSITION OF PEN ALTY WHEN THE ORDER OF CIT(A) IN QUANTUM ASSESSMENT HAS BEEN PASSED PRIOR TO 1.6.2003, WHEREAS PROVISO GOVERNS THE LIMI TATION PERIOD WHEN CIT(A) PASSES ORDER ON OR AFTER 1.6.200 3. IF WE ACCEPT THE CONTENTION OF LD. DR TO THE EFFECT THAT EVEN AFTER INSERTION OF PROVISO THE LIMITATION PERIOD IN RESPE CT OF ORDER -: 11: - 11 PASSED BY CIT(A) IN QUANTUM APPEAL AFTER 1.6.2003, IS SAME AS PROVIDED IN CL.(A) OF SEC. 275(1), THE PROVISO ITSE LF WILL BECOME REDUNDANT. 10. IN THE INSTANT CASE BEFORE US, AS THE ORDER OF CIT(A) IN QUANTUM APPEAL WAS PASSED ON 10.3.2004 I.E. AFTER 1 ST JUNE, 2003, OUR CASE FALLS IN THE PROVISO TO CLAUSE (A) O F SUB-SECTION (1) AND NOT UNDER MAIN CLAUSE (A) OF SECTION 275(1). IN TERMS OF PROVISO TO SECTION 275(1)(A), THE PENALTY ORDER COULD BE PASSED EITHER UP TO 31 ST MARCH, 2003, SINCE THE QUANTUM ORDER DURING COURSE OF WHICH PENALTY PROCEEDINGS WA S INITIATED FALLS IN THE FINANCIAL YEAR 2002-03 OR UP TO 31 ST MARCH, 2005, I.E. WITHIN ONE YEAR AFTER THE END OF THE FINANCIAL YEAR WHEN THE CIT(A) PASSED THE ORDER IN QUANTUM APPEAL AND THE S AME WAS RECEIVED BY THE CCIT OR CIT. EVEN THOUGH IT IS NOT MENTIONED AS TO WHEN THE ORDER OF CIT(A) DATED 10.3.2004 WAS RECEIVED BY THE CCIT OR CIT, WE CAN REASONABLY PRESUME THAT IT WAS DELIVERED ATLEAST UP TO 31 ST MARCH, 2005, I.E. WITHIN ONE YEAR AND TWENTY ONE DAYS. IT IS NOT POSSIBLE TO ASSUME T HAT THE ORDER OF CIT(A) DATED 10.03.2004 WAS NOT SERVED TO CCIT OR CIT EVEN UP TILL 31 ST MARCH, 2005. AS PER FORM NO. 36 FILED -: 12: - 12 BEFORE THE TRIBUNAL, THE ORDER OF CIT(A) DATED 10.3 .2004 WAS SERVED ON ASSESSEE ON 25.3.2004, THEREFORE, IT IS R EASONABLE TO PRESUME THAT IT WAS SERVED ON CCIT OR CIT AT LEAST UP TO 31.3.2005. THUS, AS AN ALTERNATIVE CONDITION AS PR OVIDED UNDER PROVISO TO SECTION 275(1)(A), THE PENALTY ORD ER SHOULD HAVE BEEN PASSED WITHIN ONE YEAR AFTER THE END OF T HE FINANCIAL YEAR WHEN THE CIT(A) PASSED THE ORDER IN ASSESSMENT IN QUANTUM APPEAL IS RECEIVED BY THE CCIT OR CIT. ONE YEAR IS COMPLETE ON 31 ST MARCH, 2006, WHICH IS A LATER DATE AS PER ALTERNATIVE PROVIDED IN PROVISO, THUS, THE PENALTY COULD HAVE BEEN IMPOSED UP TO 31 ST MARCH, 2006. HOWEVER, IN THE INSTANT CASE, PENALTY ORDER WAS PASSED ON 25.7.2008, WHICH IS APPARENTLY BARRED BY LIMITATION. 10. AS THE ORDER OF CIT(A) WAS PASSED ON 10.3.20 04, OUR CASE FALLS IN THE PROVISO TO CLAUSE (A) AND NOT UNDER MA IN CLAUSE (A). AS PER OUR CONSIDERED VIEW, THE PROVISO IS SOMETHIN G ENGRAFTED ON THE MAIN ENACTMENT. IT IS A CARDINAL RULE OF INT ERPRETATION -: 13: - 13 THAT A PROVISO TO A PROVISION OF STATUTE ONLY EMBRA CES THE FIELD WHICH IS COVERED BY THE MAIN PROVISION. THE LEGISLA TOR ENACTS A PROVISO TO PRECEDING SECTION, WHICH IS IN SUBSTANCE A FRESH ENACTMENT ADDING TO OR QUALIFYING, THAT WHICH GOES BEFORE. PROVISO IS ACTUALLY EXCEPTION TO THE MAIN CLAUSE. T ERRITORY OF PROVISO IS TO CARVE OUT EXCEPTION TO THE MAIN ENACT MENT AND TO EXCLUDE THAT WHICH OTHERWISE WOULD HAVE BEEN WITHIN THE SECTION. THUS, THE PROVISO QUALIFIES OR MAKE AN EXC EPTION TO ENACTING PART. THE FUNCTION OF A PROVISO IS TO EXCE PT OUT OF A PREVIOUS ENACTMENT IN EARLIER PART OF A SECTION, SO METHING WHICH BUT FOR THE PROVISO WOULD HAVE FALLEN WITHIN THE SCOPE OF THE ENACTMENT. PROVISO WHERE THEY IMPOSE RESTRICTI ON CANNOT BE IGNORED MERELY TO ALLOW WHAT IS ALLOWED IN THE M AIN SECTION BUT SPECIALLY DISALLOWED IN THE PROVISO, IN THE SAM E MANNER WHERE THE PROVISO GIVES A RELAXATION, THE SAME CANN OT BE IGNORED MERELY TO DECLINE WHAT IS NOT ALLOWED IN TH E MAIN SECTION BUT SPECIFICALLY ALLOWED IN THE PROVISO. 11. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDER ED VIEW THAT PENALTY ORDER DATED 25.7.2008 WAS BARRED BY LIMITAT ION UNDER -: 14: - 14 PROVISO TO SECTION 275(1)(A), THUS, WITHOUT JURISDI CTION, ILLEGAL AND, THEREFORE, LIABLE TO BE QUASHED . 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST MARCH, 2011. CPU* 212231