Asst. Commissioner of Income tax, Circle-1, Margao V. Ganghadhar N. Agrawal (HUF), Margao

ITA 44/PAN/2002

• Counselvise Citation: 4424114 RSA 2002
• Duration Of Justice: 11 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2013
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 1997-1998
• Appeal Filed On: 13-03-2002
• Court: TRIBUNAL
• Department Lawyers: ASHA DESAI
• Assessee Lawyers: A A KULKARNI
• Keywords: Recovery proceedings; Initiation of penalty proceedings; Right to appeal
• Section: 143(3); 246; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 44/PNJ/2002 : (ASST. YEAR : 1997 - 98) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1, MARGAO, GOA (APPELLANT) VS. GANGADHAR N. AGRAWAL (HUF) STATION ROAD, MARGAO, GOA. (RESPONDENT) CO NO. 14/PNJ/2005 (IN ITA NO. 44/PNJ/2002) : (ASST. YEAR : 1997 - 98) GANGADHAR N. AGRAWAL (HUF) STATION ROAD, MARGAO, GOA. (CROSS OBJECTOR) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1, MARGAO, GOA (RESPONDENT) REVENUE BY : SMT. ASHA DESAI , DR ASSESSEE BY : A.A. KULKARNI DATE OF HEARING : 22 /0 7 /2013 DATE OF PRONOUNCEMENT : 28 /08/2013 O R D E R PER P.K. BANSAL : 1. THIS APPEAL AS WELL AS CROSS OBJECTION HAS BEEN FILED AGAINST THE ORDER OF CIT(A) DT. 8.1.2002 BY WHICH THE CIT(A) DELETED THE PENALTY IMPOSED ON THE ASSESSEE BY THE AO. THE REVENUE HAS COME IN APPEAL AGAINST THE ORDER OF CIT(A) CANCELLING THE PENALTY IMPOSED ON THE ASSESSEE BY TAKING THE ISSUE THAT THE CIT(A) ERRED IN CANCELLING THE PENALTY ON THE BASIS THAT THE ASSESSMENT WAS SET ASIDE BY CIT(A) WHEN THE ASS ESSMENT WAS NOT SET ASIDE BUT THE AO WAS ONLY DIRECTED TO ASCERTAIN SPECIFIC AND GIVE EFFECT TO THE APPELLATE ORDER. THE ASSESSEE IN THE CROSS OBJECTION HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 2 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) THE COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE DEALT WITH THE GROUND NO. 3 IN AS MUCH AS PENALTY U/S 271(1)(C) WAS LEVIED BY THE LEARNED JCIT, SPECIAL RANGE, PANAJI - GOA ON DIFFERENT FOOTING AS COMPARED TO THE FINDING GIVEN BY HIM IN THE ORDER GIVING EFFECT TO CIT(A) ORDER PASSED BY HIM DATED 31 ST MARCH 2000 ON MERITS. THE COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE DEALT WITH GROUNDS AS PER GROUND NOS. 4, 5, 6, 7 AND 8 QUESTIONING THE LEVY OF PENALTY ON MERITS. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGINAL ASSESSMENT U/S 143(3) WAS MADE ON 5.11.1999 DETERMINING THE INCOME AT RS.54,49,180/ - AGAINST THE RETURNED LOSS OF RS.13,32,280/ - . THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). THE ONLY GROUND BEFORE THE CIT(A) RELATED TO THE DISALLOWANCE OF RS.1.40 CRORE BEING PROVISION MADE FOR THE EXPENSES ON RESTORATION OF LAND AFFECTED BY MINING. CIT(A) DIRECTED THE AO TO ASCERTAIN THE YEAR OF ALLOWABILITY AND THE PRECISE BASIS OF QUANTIFICATION OF THE PROVISION OF RS.1.40 CRORE AND THUS RESTORED THE ISSUE TO THE FILE OF THE AO WITH THE FOLLOWING OBSERVATION : 7. THE AO HAS ASSUMED WITHOUT ANY TANGIBLE BASIS THAT IN THE CASE OF GOGTE MINERALS, THE AMOUNT OF PIT FILLING EXPENSES WAS ACTUALLY SPENT. THE FACT IS THAT THE WHOLE QUESTION OF DEDUCTIBILITY OF EXPENDITURE, ITS QUANTUM AND POINT OF TIME OF ACCRUAL WAS REVERTED BACK TO THE ASSESSING AUTHORITY IN THE SAID CASE. SINCE THE AO IN THE PRESENT CASE HAS NOT ADDRESSED THE QUESTION WHETHER THE RELEVANT MINE WAS ABANDONED IN THIS YEAR AND WHETHER A LIABILITY OTHERWISE AROSE IN THIS YEAR AND WHAT WAS THE BASIS OF QUANTIFICATION OF LIABILITY AT SUCH A HUGE FIGURE, THE MATTER DESERVES TO BE RECONSIDERED BY HIM IN ACCORDANCE WITH THE LAW IN THE LIGHT OF THE ABOVE DISC USSION. HE IS DIRECTED TO ASCERTAIN THE YEAR OF ALLOWABILITY AND THE PRECISE BASIS OF QUANTIFICATION OF PROVISION AT RS.1,40,00,000/ - IN THE LIGHT OF THE FACTORS GOVERNING THE CASE ON THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR WHEN THIS PROVISION WAS MA DE AND ALLOW THE LIABILITY ONLY IF, AND TO THE EXTENT, IT COULD BE SAID TO BE A REAL LIABILITY IN PRAESENTI CRYSTALLIZED ON OR BEFORE THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR. FOR THIS, THE AO WILL AFFORD A REASONABLE OPPORTUNITY TO THE APPELLANT. 8. THE APPEAL IS DISPOSED OF ACCORDINGLY. FOR STATISTICAL PURPOSES, IT MAY BE TREATED AS PARTLY ALLOWED. 3 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) SUBSEQUENTLY, IN CONSEQUENCE OF THE ORDER OF CIT(A), THE AO GAVE APPEAL EFFECT TO THE ORDER OF THE CIT(A) AND PASSED AN ORDER ORDER GIVING EFFECT TO THE ORDER OF CIT(A), BELGAUM DT. 30.3.2001 AND THE ASSESSED INCOME REMAINED AT RS.54,49,180/ - . AGAINST THE SAID ORDER, NEITHER THE ASSESSEE NOR THE REVENUE WENT IN APPEAL. THE AO WHILE PASSING THE ASSESSMENT ORDER DT. 8.2.200 0 INITIATED THE PENALTY PROC EEDINGS U/S 271(1)(C). SUBSEQUENTLY, THE AO VIDE ORDER DT. 28.5.2001 LEVIED PENALTY U/S 271(1)(C) AMOUNTING TO RS.40 LACS WITH THE OBSERVATION THAT I AM THEREFORE SATISFIED THAT THE ASSESSEE HAS CONCEALED INCOME AND FURNISHED INACCURATE PARTICULARS BY MA KING A FALSE DEBIT ENTRY IN THE BOOKS OF ACCOUNTS AND THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS NOT BONAFIDE NOR SATISFACTORY . AGAINST THE LEVY OF THE PENALTY, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) VIDE ORDER DT. 8 .1.2002 CANCELLED THE LEVY OF THE PENALTY BY HOLDING THAT THE ORIGINAL ASSESSMENT ORDER DT. 5.11.1999 DID NOT SURVIVE ON 16.11.200 0 W HEN THE APPELLATE ORDER WAS PASSED DE FACTO SETTING ASIDE THE ORIGINAL ASSESSMENT ORDER PASSED BY THE AO. THE AO WAS FIRST REQUIRE D TO FRAME FRESH ORDER AS PER DIRECTIONS OF CIT(A) AND RE - INITIATE PENALTY PROCEEDINGS U/S 271(1)(C) IF THE FACTS OF THE CASE SO DEMANDED. AGAINST THE SAID ORDER, THE REVENUE WENT IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DT. 7.4.2006 SET AS IDE THE ORDER OF THE CIT(A) DELETING THE PENALTY AND RESTORED THE MATTER TO CIT(A) TO DECIDE THE PENALTY APPEAL ALSO ON MERIT, BUT BY PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE BY OBSERVING AS UNDER : 4. WITH THIS BACKGROUND, WE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD FROM WHICH IT APPEARS THAT THE CIT(A) HAS CANCELLED THE PENALTY MERELY ON TECHNICAL GROUND BUT WITHOUT DISCUSSING ANY MERIT. THE CIT(A) HAS CONSIDERED THAT T HE DIRECTIONS IN THE QUANTUM APPEAL AMOUNTS TO SET ASIDE SO PENALTY CANNOT BE LEVIED. DURING THE COURSE OF ARGUMENT, THE LD. D/R SUBMITTED THAT IT WAS NOT A SET ASIDE BUT ONLY A DIRECTION WHICH WAS DULY IMPLEMENTED BY THE AO, WHO RIGHTLY LEVIED THE PENA LTY. 5. ON THE OTHER HAND, THE LD. A/R ADMITTED THAT ON MERIT, CIT(A) HAS NOT DISCUSSED THE ISSUE THAT IS WHY ASSESSEE IS IN CROSS OBJECTION. IT WAS ALSO ARGUED 4 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) THAT ON MERIT, IN QUANTUM APPEAL EVEN SOME ADDITION MIGHT HAVE BEEN SUSTAINED BUT THE SAME DO ES NOT ATTRACT TO LEVY OF PENALTY. 6. IN THE LIGHT OF ABOVE DISCUSSION, BY CONSIDERING THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT CIT(A) HAS CANCELLED THE LEVY OF PENALTY MERELY ON TECHNICAL GROUND WITHOUT DISCUSSING THE MERIT OF THE CASE WHICH IS NOT DESIRABLE. THEREFORE, WE DEEM FIT TO SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO HIM TO DECIDE THE PENALTY APPEAL ALSO ON MERIT, BUT BY PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE. FOR THE SIMILAR REASONS, THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALSO ALLOWED. 7. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT AND CROSS OBJECTION FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES AS STATED ABOVE AND ANNOUNCED IN THE OPEN COURT. AGAINST THE ORDER OF THE TRIBUNAL, THE ASSESSEE FILED APPEAL BEFORE THE HON'BLE HIGH COURT. THE HON'BLE HIGH COURT REMANDED THE MATTER TO THE TRIBUNAL WITH THE DIRECTION TO DECIDE THE ISSUE OF JURISDICTION OF THE AO. THE RELEVANT PORTION OF THE ORDER OF THE HON'BLE HIGH COURT IS REPRODUCED AS UNDER : 7. AFTER HAVING PERUSED THE ORDER PASSED BY CIT(A) AND ITAT, IT IS OBVIOUS THAT THE ITAT HAS COMMITTED ERROR OF LAW WHICH IS APPARENT ON THE FACE OF RECORD IN THE SENSE THAT THE CORE ISSUE WHICH WAS CHALLENGED BY THE REVENUE WAS ABOUT THE JURISDI CTION OF ASSESSMENT OFFICER IN LEVYING PENALTY WITHOUT ISSUANCE OF PENALTY PROCEEDINGS. 8. AFTER THE SAID ISSUE HAD BEEN DECIDED IN FAVOUR OF THE RESPONDENT HEREIN, THEN, THE QUESTION OF REMAND WOULD HAVE ARISEN. WE, THEREFORE, DEEM IT NECESSARY AGAIN TO REMAND THE MATTER TO THE APPELLATE TRIBUNAL WITH A DIRECTION TO DECIDE THE ISSUE OF JURISDICTION OF ASSESSMENT OFFICER. 9. WITH THIS DIRECTION, THE APPEAL IS ALLOWED AND DISPOSED OF. 2.1 BEFORE US, THE LD. AR STATED THAT IN THE INITIAL ASSESSMENT ORDER D T. 8.2.2000 U/S 143( 3 ), THE ONLY ADDITION MADE WAS A SUM OF RS.1.40 CRORE ON THE GROUND THAT THERE WAS NO LIABILITY AT ALL UNDER THE MINING LEASE TO RESTORE THE LAND MINED AND IN THAT ORDER THERE WAS A NOTING AT THE FOOT ISSUE PENALTY PROCEEDINGS U/S 271(1)(C). THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A) EXAMINED THE ASPECTS OF RS.1.40 CRORE AND CAME TO THE CONCLUSION THAT 5 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) HAVING REGARD TO THE TERMS OF THE MINING LEASE, THERE WAS A LIABILITY TO RESTORE THE MINING PITS TO THEIR ORIGINAL CON DITION AFTER ABANDONMENT OF THE MINES AND THIS LIABILITY IN THE APPROPRIATE YEAR HAD TO BE QUANTIFIED AND ALLOWED. HAVING GIVEN THIS FINDING, THE CIT(A) RESTORED THE MATTER TO THE AO TO DETERMINE WHETHER THERE WAS AN ABANDONMENT OF THE MINES DURING THE RE LEVANT YEAR AND IF SO, TO QUANTIFY THE SAME AND ALLOW IT. WHILE DISPOSING OFF THE APPEAL ULTIMATELY, CIT(A) VIDE ORDER DT. 16.11.2000 HELD AS UNDER : HE IS DIRECTED TO ASCERTAIN THE YEAR OF ALLOWABILITY AND THE PRECISE BASIS OF QUANTIFICATION OF PROVISIO N AT RS.1,40,00,000/ - IN THE LIGHT OF THE FACTORS GOVERNING THE CASE ON THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR WHEN THIS PROVISION WAS MADE AND ALLOW THE LIABILITY ONLY IF, AND TO THE EXTENT, IT COULD BE SAID TO BE A REAL LIABILITY IN PR A ESENTI CRYST ALLIZED ON OR BEFORE THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR. FOR THIS, THE AO WILL AFFORD A REASONABLE OPPORTUNITY TO THE APPELLANT. CONTINUING, CIT(A) SAID APPEAL IS DISPOSED OFF ACCORDINGLY. THE ORDER OF CIT( A) ACHIEVED FINALITY. THEREAFTER, THE AO ISSUED NOTICE U/S 143(2) CALLING UPON THE ASSESSEE TO ATTEND AND PRODUCE THE EVIDENCE FOR WHICH ATTENTION WAS DRAWN TOWARDS PG. 15 OF THE PAPER BOOK. THE AO SUBSEQUENTLY RE - EXAMINED THE ISSUE AND VIDE ORDER DT. 30 .3.2001 PASSED AN ORDER CAPTIONED ORDER GIVING EFFECT TO THE ORDER OF CIT(A) , BELGAUM . THE INCOME WAS DETERMINED AS DETERMINED IN THE ORIGINAL ORDER. THE SAID ORDER DOES NOT CONTAIN ANY WHISPER OR INDICATE EITHER SATISFACTION OR INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) MUCH LESS DIRECTION TO ISSUE NOTICE THEREOF. THERE WAS NO ALLEGATION OF ANY CONCEALMENT/FURNISHING OF INACCURATE PARTICULARS OF INCOME IN THE BODY OF THE SAID ORDER. THE AO AFTER HEARING THE ASSESSEE IN THE PENALTY PROCEEDINGS W HICH HA D NOT BEEN INITIATED WHILE PASSING THE ORDER DT. 30.3.2001 LEVIED PENALTY FOR A SUM OF RS. 40 LACS. THE ASSESSEE WENT IN APPEAL. THE CIT(A) CANCELLED THE PENALTY ON TECHNICAL GROUND THAT THERE WAS NO INITIATION IN THE SO - CALLED GIVING EFFECT ORDE R. THE DEPARTMENT CAME IN APPEAL BEFORE THE TRIBUNAL AND THE 6 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) TRIBUNAL WITHOUT DECIDING THE ACTUAL ISSUE OF JURISDICTION TO LEVY PENALTY PURSUANT TO AN ORDER WHICH DOES NOT CONTAIN EXPLICITLY OR IMPLICITLY ANY SATISFACTION AS REGARDS CONCEALMENT/INACCURAT E PARTICULARS, RESTORED THE MATTER TO CIT(A) DIRECTING HIM TO EXAMINE LEVABILITY OF PENALTY ON MERITS. THE SAID ORDER WAS CHALLENGED BEFORE THE HON'BLE HIGH COURT. THE HON'BLE HIGH COURT VIDE ITS ORDER DT. 19.2.2013 DIRECTED THE TRIBUNAL TO DECIDE THE IS SUE OF JURISDICTION TO LEVY THE PENALTY. IT WAS CONTENDED THAT AS PER THE LAW PREVALENT DURING THE IMPUGNED ASSESSMENT YEAR CIT(A) U/S 250(4) HAS THE POWER BEFORE DISPOSING OFF THE APPEAL TO MAKE INQUIRY AS HE THINKS FIT OR HE MAY DIRECT THE AO TO MAKE SU CH INQUIRY AND REPORT TO CIT(A). THIS IS COMMONLY UNDERSTOOD AS REMAND . ON RECEIPT OF THE REMAND REPORT, IF CALLED FOR, OR OTHERWISE THE CIT(A) HAS POWER AS LISTED OUT IN SECTION 25 1 (1) IN DEALING WITH THE APPEAL. THE RIGHT OF APPEAL AND POWER TO DECI DE THE APPEAL ARE BOTH CREATURES OF STATUTE. CIT(A) CAN EXERCISE ONLY THE POWER AS HAS BEEN SPECIFICALLY CONFERRED ON HIM U/S 251. FOR THIS, OUR ATTENTION WAS DRAWN TO THE PROVISIONS OF SEC. 251(1) WHICH STATES HE MAY CONFIRM, REDUCE, ENHANCE OR ANNUL T HE ASSESSMENT OR HE MAY SET ASIDE THE ASSESSMENT AND REFER THE CASE BACK TO THE AO FOR MAKING A FRESH ASSESSMENT . IN VIEW OF THIS, IT WAS CONTENDED THAT THE ORDER OF CIT(A) EMPOWERING THE SO - CALLED GIVING EFFECT ORDER OF THE AO AGAIN CANNOT BE CALLED AS AN ORDER CONFIRMING, REDUCING, ENHANCING OR ANNULLING THE ASSESSMENT. THIS ORDER CAN ONLY BE AN ORDER SETTING ASIDE THE ASSESSMENT AND NOTHING ELSE. ONLY WHEN THE CIT(A) SETS ASIDE THE ASSESSMENT, THE AO WHO IS FUNCTUS OFFICIO ON PASS ING THE IMPUGNED ORDER GETS FRESH JURISDICTION TO PASS AN ORDER NOT OTHERWISE. IN FACT, SEC. 251(1) AND UNDER NO OTHER POWER, THE CIT(A) CAN VEST THE AO WITH THE POWER TO PASS A FRESH ASSESSMENT OF WHATSOEVER NATURE EXCEPT ON AN ORDER OF SET ASIDE . IT WA S FURTHER SUBMITTED THAT NON - MENTIONING OF THE SECTION OR WRONG MENTIONING OF THE SECTION WHILE PASSING THE ORDER IS N EITHER CRUCIAL NOR FATAL AND IF CONTENTS OF THE ORDER CAN BE TRACED TO A POWER OTHERWISE AVAILABLE UNDER THE 7 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) ACT , THE ORDER SHOULD BE HELD TO HAVE BEEN PASSED UNDER SUCH POWER. ATTENTION WAS DRAWN TOWARDS THE ORDER OF THE HON'BLE SUPREME COURT IN THE CASE OF ITO VS. SEGHU BUCHIAH SETTY , 52 ITR 538 AT PG. 542 & 546 WHERE THE ASSESSMENT IS SET ASIDE AND THE AO HAS BEEN GIVEN POWER TO ISSUE NO TICE U/S 143(2) FOR PASSING FRESH ORDER OF ASSESSMENT. IT WAS CONTENDED THAT THE ONLY DIFFERENCE BETWEEN ANNULMENT AND SET ASIDE IS THAT IN THE LATTER CASE THE LOWER AUTHORITY AUTOMATICALLY GETS POWER TO RE - DO THE ORDER WITHIN THE FRAMEWORK OF THE A PPELLATE ORDER AND NOTHING MORE. W HILE GIVING EFFECT TO THE ORDER OF REDUCTION OR ENHANCEMENT AT THE HANDS OF THE CIT(A), T HE AO CARRIES OUT ONLY A MINISTERIAL/CLERICAL FUNCTION WHICH IS DISTINCT AND SEPARATE FROM PASSING AN ORDER . IN THE FORMER, THE AO HAS ONLY A MERE POST FUNCTUS OFFICIO WHEREAS IN THE LATTER, HE IS VESTED WITH ALL THE STATUTORY POWER TO PASS A FRESH ORDER. THE AO IS NOT GIVING EFFECT TO THE ORDER AS SUCH BUT IS EXERCISING HIS POWER TO PASS ORDER SUBJECT TO ANY CONSTRAINT THAT MIGHT HA VE BEEN PLACED UPON HIM BY THE APPELLATE AUTHORITY THAT HAS SET ASIDE THE MATTER. THEREFORE, THE NOMENCLATURE THAT IS PLACED UPON AN ORDER PASSED EITHER BY CIT(A) OR BY AO DOES NOT DETERMINE THE TRUE NATURE OF THE ORDER BUT THAT NATURE IS DETERMINED BY TH E CONTENTS OF THE ORDER OF CIT(A), WHICH IN THIS CASE CAN ONLY BE AN ORDER OF SET ASIDE AND NOTHING ELSE. AGAIN STRESS WAS PLACED ON THE CONCLUDING PORTION OF SEC. 251(1 )(A ) WHICH STATES THAT AFTER MAKING SUCH FURTHER INQUIRY AS MAY BE NECESSARY, THE A SSESSING O FFICER SHALL THEREUPON PROCEED TO MAKE SUCH FRESH ASSESSMENT AND DETERMINE, WHERE NECESSARY, THE AMOUNT OF TAX PAYABLE ON THE BASIS OF SUCH FRESH ASSESSMENT . THUS, IT WAS CONTENDED THAT THE AO WA S PASSING FRESH ORDER OF ASSESSMENT DETERMINING T HE INCOME AFRESH AND THE TAX THEREON. RELIANCE WAS PLACED IN THIS REGARD ON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT(A) VS. BHAN TEXTILES PVT. LTD., 300 ITR 176. IT WAS FURTHER SUBMITTED THAT THERE IS NOTHING CALLED AS PART IAL SET ASIDE IN THE INCOME TAX. A S ET ASIDE MEANS THAT NO PART OF ANY ORDER OR FINDING, DIRECTION OR SATISFACTION WITH RESPECT 8 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) TO A MATTER DEALT WITH THEREIN RESULTING APPEAL , ON SET ASIDE SURVIVES AFTER THE ORDER OF SET ASIDE. AGAIN ATTENTION WAS DRAWN TO T HE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ITO VS. SEGHU BUCHIAH SETTY, 52 ITR 538 ( SUPRA ) AT PG. 546 WHICH READS AS UNDER : THE ORDER OF REDUCTION MUST, IN MY OPINION, NECESSARILY HAVE THE EFFECT OF SETTING ASIDE THE ORIGINAL ORDER AS A WHOLE. IT DOES NOT SIMPLY STRIKE OUT A FEW OF THE FIGURES APPEARING IN THE ORIGINAL ORDER. THAT WOULD REALLY BE A CASE OF RECTIFICATION FOR WHICH PROVISION IS MADE IN SECTION 35 OF THE ACT. WHAT AS APPELLATE ORDER DOES IN A CASE OF REDUCTION IS, AS IN THE PRESENT CASE, TO GO INTO ALL THE FIGURES AND ARRIVE AFRESH AT THE ASSESSABLE INCOME WHICH REPLACES THE AMOUNT OF THE INCOME ARRIVED AT BY T HE INCOME - TAX OFFICER. THEREFORE IT SEEMS TO ME THAT IN ALL CASES OF AN APPELLATE ORDER REDUCING THE ASSESSMENT, THE ORIGINAL ORDER GOES AND IF IT GOES, OF COURSE, THE NOTICE OF DEMAND ALSO FALLS TO THE GROUND AND THE DEFAULT BASED THEREUPON ALSO CEASED T O BE DEFAULT ANY MORE . ON THE BASIS OF THE UNDERLINED PORTION ABOVE, IT WAS SUBMITTED THAT THE UNDERLINED PORTION CLEARLY SPEL LS OUT THAT THE DEFAULT, IF ANY, BY WAY OF CONCEALMENT/FURNISHING OF INACCURATE PARTICULARS WITH RESPECT TO WHICH SATISFACTION W AS DERIVED BY THE AO IN THE INITIAL ORDER DISAPPEARED WHEN THE CIT(A) PASSED THE ORDER AND MORE SO WHEN HIS ORDER WAS NOT A CASE OF MERE REDUCTION BUT A DIRECTION TO RE - DO THE ASSESSMENT IN FULL. IF IN A CASE OF MERE REDUCTION, THE ORIGINAL ASSESSMENT DIS APPEARS, IN THE PRESENT WHERE THE ENTIRE ADDITION HAS BEEN DELETED WITH POWER TO RE - DO ASSESSMENT, IT IS MORE SO. AGAIN, IT WAS SUBMITTED THAT THE DIRECTION IN THE ASSESSMENT ORDER DT. 8.2.2000 GETS DISAPPEARED AS THE DIRECTION WAS BASED UPON THE SATISFAC TION REACHED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AS IS EVIDENCED FROM THE TERMINOLOGY OF SEC. 271(1) WHICH SPEAKS OF IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT STEMS WHOLLY FROM THE FINDING OF AO IN THAT ORDER THAT THERE WAS NO LIABILITY AT ALL UNDER THE MINING LEASE TO RESTORE THE MINED LAND TO ITS EARLIER CONDITION AND HENCE THERE COULD BE NO CLAIM FOR DEDUCTION OF ACCOUNT OF PIT FILLING EXPENSES. THIS FINDING IS KNOCKED DOWN BY THE ORDER OF CIT(A) AND ANY SATISFACTION 9 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) REACHED ON THE BASIS OF THAT FINDING GIVEN IN THE ORDER DT. 8.2.2000 CEASES TO EXIST. ACTION U/S 271(1)(C) HAS TO BE FOUNDED ONLY ON THE SATISFACTION, IF ANY, ARRIVED AT IN THE COURSE OF ORDER DT. 30.3.2001. FOR THIS RELIANCE WAS PLACED ON THE ORDER OF T HE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ANGIDI CHETTIAR, 44 ITR 739, 745 WHERE POWER TO IMPOSE PENALTY IS HELD TO BE DEPENDENT UPON THE SATISFACTION OF THE AO IN THE COURSE OF THE ASSESSMENT UNDER THIS ACT. ATTENTION WAS DRAWN TOWARDS THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF V.K. PACKAGING INDUSTRIES VS. TRO, 266 ITR 283 AT PG. 290 FOR THE PROVISION OF LAW THAT ONCE CIT(A) PASSED THE ORDER, THE ORDER DT. 8.2.2000 DISAPPEARED AND CEASED TO EXIST AND THE FINDING OR DIRECTION IN SUCH ORDER OR SATISFACTION, IF ANY, FOUNDED ON SUCH ORDER ALSO DISAPPEAR S . THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT WAS PASSED FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KUNHAYAMMED & ORS. VS. STATE OF KERALA , 245 ITR 360 (SC). THUS, IT WAS CONTENDED THAT THE ORDER OF CIT(A) DT. 16.11.2000 MUST BE CONSTRUED AS AN ORDER OF SET ASIDE AND ACCORDINGLY, SINCE THE AO HAS NOT INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) IN THE ORDER DT. 30.3.2001, THE ORDER PASSED BY THE AO LE VYING THE PENALTY MUST BE QUASHED. 2.2 THE LD. DR, ON THE OTHER HAND, VEHEMENTLY CONTENDED THAT THE AO HAS DULY INITIATED THE PROCEEDINGS U/S 271(1)(C) DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS WHICH WERE COMPLETED BY PASSING AN ORDER U/S 143(3) ON 8.2.2 000. THE AO MADE AN ADDITION OF RS.1.40 CRORE IN RESPECT OF MINING AND RESTORATION CHARGES BEING PROVISION MADE BY THE ASSESSEE. THE ASSESSEE WENT IN APPEAL AGAINST THE SAID ADDITION BEFORE THE CIT(A). CIT(A) WHILE DISPOSING OFF THE APPEAL OF THE A SSESSEE RESTORED THE ISSUE OF ALLOWABILITY OF THE DEDUCTION IN RESPECT OF PROVISION MADE BY THE ASSESSEE AMOUNTING TO RS. 1.40 CRORE. CIT(A) HAS NOT SET ASIDE THE WHOLE OF THE ASSESSMENT BUT ONLY THE MATTER RELATING TO THE ALLOWABILITY OF THE DEDUCTION IN RESPECT OF SUM OF RS.1.40 CRORE WAS RESTORED TO 10 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) THE FILE OF THE AO WITH THE DIRECTION TO ASCERTAIN THE YEAR OF ALLOWABILITY AND THE PRECISE BASIS OF QUANTIFICATION OF THE PROVISION IN THE LIGHT OF THE FACTORS GOVERNING THE CASE ON THE LAST DAY OF THE RELE VANT ACCOUNTING YEAR WHEN THIS PROVISION WAS MADE AND ALLOW THE LIABILITY ONLY IF, AND TO THE EXTENT, IT COULD BE SAID TO BE A REAL LIABILITY IN PRAESENTI CRYSTALLIZED ON OR BEFORE THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR . THE AO WAS ALSO DIRECTED TO AFFORD AN OPPORTUNITY TO THE ASSESSEE IN THIS REGARD. ATTENTION WAS DRAWN TO PARA 7 OF THE ORDER OF CIT(A). BY REFERRING TO PG. 16 OF THE PAPER BOOK, IT WAS POINTED OUT THAT THE AO , IN CONSEQUENCE OF THE ORDER OF CIT(A) , PASSED AN ORDER DT. 30.3.2001 BUT DID NOT ALLOW THE CLAIM OF THE ASSESSEE. THAT ORDER HAS BECOME FINAL. THE AO HAS NOT MADE ANY FRESH ASSESSMENT. IF THE ASSESSMENT WOULD HAVE BEEN SET ASIDE, THE AO WOULD HAVE MADE A FRESH ASSESSMENT AND COULD HAVE LOOKED INTO THE ISSUES OTHER THAN DISA LLOWANCE OF RS. 1.40 CRORE. THE PENALTY PROCEEDINGS HAS DULY BEEN INITIATED U/S 271(1)(C) . REFERRING TO PG. 15 OF PAPER BOOK , IT WAS POINTED OUT THAT THE NOTICE ISSUED TO THE ASSESSEE IS MERELY A PRINTED PROFORMA OF THE NOTICE. NO DOUBT, THIS NOTICE MEN TIONS NOTICE U/S 143(2) OF THE INCOME TAX ACT BUT IF THE CONTENTS OF THIS NOTICE ARE READ, IT IS APPARENT THAT THE NOTICE CLEARLY STATES THAT THERE ARE CERTAIN POINTS IN CONNECTION WITH THE APPEAL EFFECT TO BE GIVEN. THIS NOTICE, IN FACT, IS ISSUED TO AFFORD AN OPPORTUNITY TO THE ASSESSEE AS DIRECTED BY THE CIT(A) FOR ASCERTAINING THE CLAIM OF THE ASSESSEE IN RESPECT OF DEDUCTION OF RS.1.40 CRORE. SINCE NO NOTICE OR PROFORMA OF THE NOTICE HAS BEEN PRESC RIBED UNDER THE ACT, THEREFORE, THE PROFORMA GIVEN IN RESPECT OF NOTICE TO BE ISSUED U/S 143(2) IS USED BY THE DEPARTMENT IN THIS REGARD. THIS NOTICE NOWHERE STATES THAT THE NOTICE HAS BEEN ISSUED FOR MAKING A FRESH ASSESSMENT. ONCE THE AO HAS INITIATED THE PROCEEDINGS U/S 271(1)(C) VIDE ORDER DT. 8.2.2000, THERE WAS NO NEED FOR INITIATING THE PENALTY PROCEEDINGS U/S 271(1)(C) AFTER GIVING THE APPEAL EFFECT. THIS FACT IS APPARENT IN VIEW OF THE PROVISIONS OF SEC. 275 OF THE INCOME TAX ACT WHICH EXTENDS T HE LIMITATION FOR IMPOSING THE 11 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) PENALTY IN CASE THE RELEVANT ASSESSMENT OR OTHER ORDER IS SUBJECT MATTER OF AN APPEAL TO THE CIT(A) U/S 246. IF FRESH PENALTY PROCEEDINGS ARE TO BE INITIATED WHILE PASSING AN ORDER IN CONSEQUENCE TO THE ORDER OF THE CIT(A) , THE PROVISION OF SEC. 275 WILL BECOME REDUNDANT. THUS, IT WAS CONTENDED THAT THE AO HAS VALIDLY INITIATED THE PROCEEDINGS U/S 271(1)(C). SO FAR AS THE CASE LAWS REFERRED TO BY THE LD. AR, IT WAS POINTED OUT THAT NONE OF THE CASE LAWS ARE APPLICABLE TO TH E FACTS OF THE CASE OF THE ASSESSEE. 2.3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW. FROM THE FACTS AS HAS BEEN NARRATED BY US HEREINABOVE, IT IS APPARENT THAT THE O NLY ISSUE WHICH HAS TO BE DECIDED BY US IN VIEW OF THE ORDER OF THE HON'BLE BOMBAY HIGH COURT AT GOA DT. 19.2.2013 IS WHETHER THE AO LEVIED THE PENALTY WITHOUT ISSUING OF PENALTY PROCEEDINGS. THE CONTENTION OF THE LD. AR BEFORE US IS THAT THE CIT(A) HAS S ET ASIDE THE ASSESSMENT AND THEREFORE THE AO MUST HAVE INITIATED THE PROCEEDINGS U/S 271(1)(C) WHILE PASSING THE ORDER GIVING THE APPEAL EFFECT AS T HE PENALTY PROCEEDINGS WHICH WERE INITIATED BY THE AO WHILE PASSING THE ORDER U/S 143(3) DT. 8.2.2000 HAD CE ASED TO EXIST. NOW, THE IMPUGNED ISSUE BEFORE US IS WHETHER THE CIT(A) HAS SET ASIDE THE ASSESSMENT TO BE MADE DE NOVO WHILE PASSING THE ORDER DT. 16.11.2000 OR WHETHER THE CIT(A) HAS RESTORED THE ISSUE WHICH WAS BEFORE HIM BEFORE THE AO WITH CERTAIN DIR ECTIONS FOR DECIDING THE ISSUE AFRESH TAKING INTO ACCOUNT THE DIRECTIONS ISSUED BY THE CIT(A). WE MAY MENTION HERE THAT THE ORDER OF THE CIT(A) AGAINST THE ASSESSMENT ORDER PASSED BY THE AO DT. 8.2.2000 HAS BECOME FINAL AS AGAINST THE SAID ORDER NEITHER T HE ASSESSEE NOR THE REVENUE CAME IN APPEAL BEFORE THE TRIBUNAL. THE AO IN CONSEQUENCE OF THE ORDER OF THE CIT(A) DT.16.11.2000 ISSUED NOTICE TO THE ASSESSEE TITLED AS NOTICE U/S 143(2) OF THE INCOME TAX ACT. THIS NOTICE, COPY OF WHICH IS AVAILABLE AT PG. 15 READS AS UNDER : 12 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) THERE ARE CERTAIN POINTS IN CONNECTION WITH THE APPEAL EFFECT TO BE GIVEN FOR THE ASSESSMENT YEAR 1997 - 98 ON WHICH I WOULD LIKE SOME FURTHER INFORMATION. 2. YOU ARE HEREBY REQUIRED TO ATTEND MY OFFICE ON 15/1/2001 AT 11.00 A.M. EITHER IN PERSON OR BY A REPRESENTATIVE DULY AUTHORISED IN WRITING IN THIS BEHALF OR PRODUCE OR CAUSE THERE TO BE PRODUCED AT THE SAID TIME ANY DOCUMENTS, ACC OUNTS AND ANY OTHER EVIDENCE ON WHICH YOU MAY RELY IN SUPPORT OF THE RETURN FILED BY YOU. WE HAVE EXAMINED THE CONTENTION OF THE LD. AR THAT IN ACCORDANCE WITH THE PROVISIONS OF SEC. 251(1A) AS WERE PREVALENT DURING THE IMPUGNED ASSESSMENT YEAR, CIT(A) H AS POWER TO SET ASIDE THE ASSESSMENT. THE POWER AS STIPULATED U/S 251(1A) DOES NOT EMPOWER THE CIT(A) TO SET ASIDE PARTICULAR GROUND OR PARTICULAR ISSUE. WE DO NOT AGREE WITH THIS CONTENTION OF THE LD. AR. THE POWER OF THE CIT(A) ARE CO - TERMIN O US WITH T HAT OF THE AO. CIT(A) HAS PLENTY OF POWER TO DISPOSE OFF AN APPEAL. THE SCOPE OF ITS POWER IS CO - TERMINOUS WITH THAT OF THE ITO. HE CAN DO WHAT THE AO CANNOT DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. THE POWERS OF CIT(A) HAS BEEN DISCUSSED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KANPUR COAL SYNDICATE, 53 ITR 225. THEREFORE, ONCE HE HAS CO - TERMINUOUS POWER, IN OUR OPINION, THE POWER TO SET ASIDE THE ASSESSM ENT WILL INCLUDE THE POWER FOR SETTING ASIDE ANY ISSUE OR GROUND OR THE MATTER RELATING TO THE APPEAL BEFORE THE CIT(A) THAT ARISE OUT OF THE ASSESSMENT AND RESTORE THAT ISSUE TO THE FILE OF THE AO TO RE - DECIDE IT AFRESH. SETTING ASIDE THE WHOLE ASSESSMEN T AND SETTING ASIDE A PARTICULAR ISSUE, MATTER OR GROUND HAS A DIFFERENT MEANING. IN CASE THE WHOLE OF THE ASSESSMENT IS SET ASIDE, DIRECTION IS GIVEN TO THE AO TO MAKE THE ASSESSMENT AFRESH ACCORDING TO LAW AND IN THAT CASE, THE AO SHALL BE FREE TO MAKE THE ASSESSMENT AFRESH AND EXAMINE THOSE ISSUES WHICH MAY NOT BE IN APPEAL BEFORE THE CIT(A). IN CASE A PARTICULAR ISSUE OR MATTER OR GROUND IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO FOR DECIDING IT AFRESH, THE JURISDICTION OF THE AO IS LIMITED WHILE PASSING A CONSEQUENTIAL ORDER ONLY IN RESPECT OF THE ISSUE, MATTER OR GROUND 13 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) WHICH HAS BEEN SET ASIDE BY THE APPELLATE AUTHORITY AND RESTORED TO HIM. IN CASE THE WHOLE OF THE ASSESSMENT IS SET ASIDE, THE ORDER PASSED IS CALLED ASSESSMENT O RDER PASSED U/S 143(3) R/W SEC. 250 WHILE IN CASE AN ORDER IS PASSED GIVING EFFECT TO THE DIRECTION OF CIT(A) IN RESPECT OF A PARTICULAR ISSUE, ISSUES OR MATTERS, SUCH ORDER IS CALLED ORDER PASSED IN CONSEQUENCE OF THE ORDER GIVING EFFECT TO THE APPELLAT E ORDER . IN THE FORMER CASE, THE ASSESSMENT ORDER EARLIER PASSED U/S 143(3) NO MORE REMAINS IN EXISTENCE. SUCH ASSESSMENT ORDER GETS SUBSTITUTED BY A FRESH ASSESSMENT ORDER PASSED IN CONSEQUENCE OF THE APPELLATE AUTHORITY S ORDER. B UT IN CASE OF THE SE COND SITUATION, THE ORIGINAL ORDER PASSED U/S 143(3) REMAINS IN EXISTENCE AND THAT ORDER GETS MERGED WITH THE DIRECTIONS OR THE ORDER OF THE APPELLATE AUTHORITY AND T HE PROCEEDINGS WHICH HAS BEEN INITIATED BY THE AO DURING THE COURSE OF THE ASSESSMENT REMAINS VALID AND IN EXISTENCE. IN CASE THE WHOLE OF THE ASSESSMENT IS SET ASIDE, THE PROCEEDINGS INITIATED DURING THE COURSE OF THE ORIGINAL ASSESSMENT NO MORE REMAINS IN EXISTENCE AS THE ASSESSMENT ORDER PASSED LOSES ITS IDENTITY. 2.3.1 WE HAVE GONE THROUGH THE ORDER OF CIT(A), COPY OF WHICH IS AVAILABLE AT PG. 7 - 14 OF THE PAPER BOOK. THE CONCLUDING PARAGRAPH OF THE ORDER READS AS UNDER : 7. THE AO HAS ASSUMED WITHOUT ANY TANGIBLE BASIS THAT IN THE CASE OF GOGTE MINERALS, THE AMOUNT OF PIT FILLING EXPENSES WAS ACTUALLY SPENT. THE FACT IS THAT THE WHOLE QUESTION OF DEDUCTIBILITY OF EXPENDITURE, ITS QUANTUM AND POINT OF TIME OF ACCRUAL WAS REVERTED BACK TO THE AS SESSING AUTHORITY IN THE SAID CASE. SINCE THE AO IN THE PRESENT CASE HAS NOT ADDRESSED THE QUESTION WHETHER THE RELEVANT MINE WAS ABANDONED IN THIS YEAR AND WHETHER A LIABILITY OTHERWISE AROSE IN THIS YEAR AND WHAT WAS THE BASIS OF QUANTIFICATION OF LIABI LITY AT SUCH A HUGE FIGURE, THE MATTER DESERVES TO BE RECONSIDERED BY HIM IN ACCORDANCE WITH THE LAW IN THE LIGHT OF THE ABOVE DISCUSSION. HE IS DIRECTED TO ASCERTAIN THE YEAR OF ALLOWABILITY AND THE PRECISE BASIS OF QUANTIFICATION OF PROVISION AT RS.1,40 ,00,000/ - IN THE LIGHT OF THE FACTORS GOVERNING THE CASE ON THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR WHEN THIS PROVISION WAS MADE AND ALLOW THE LIABILITY ONLY IF, AND TO THE EXTENT, IT COULD BE SAID TO BE A REAL LIABILITY IN PRAESENTI CRYSTALLIZED ON O R BEFORE THE LAST 14 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) DAY OF THE RELEVANT ACCOUNTING YEAR. FOR THIS, THE AO WILL AFFORD A REASONABLE OPPORTUNITY TO THE APPELLANT. 8. THE APPEAL IS DISPOSED OF ACCORDINGLY. FOR STATISTICAL PURPOSES, IT MAY BE TREATED AS PARTLY ALLOWED. FROM THE READING OF THE SAID PARAGRAPH OF THE ORDER, IT IS APPARENT THAT THE CIT(A) HAS CLEARLY STATED THAT SINCE THE AO IN THE PRESENT CASE HAS NOT ADDRESSED THE QUESTION WHETHER THE RELEVANT MINE WAS ABANDONED IN THIS YEAR AND WHETHER THE LIABILITY OTHERWISE AROSE IN THIS YEAR AND WHAT WAS THE BASIS OF THE QUANTIFICATION OF THE LIABILITY AT SUCH A HUGE FIGURE, THE MATTER DESERVES TO BE RE - CONSIDERED BY HIM IN ACCORDANCE WITH THE LAW IN THE LIGHT OF THE ABOVE DISCUSSION. THE WORD MATTER HEREIN REFERS TO THE ISSUE RELATING TO THE ALLOWABILITY OF THE DEDUCTION IN RESPECT OF THE PROVISION MADE BY THE ASSESSEE AMOUNTING TO RS. 1.40 CRORE. FURTHER, CIT(A) HAS GIVEN THE DIRECTION TO THE AO TO ASCERTAIN THE YEAR OF ALLOWABILITY AND THE PRECISE BASIS OF THE QUANTIFICATION OF THE PROVISION OF RS. 1.40 CRORE IN THE LIGHT OF THE FACTORS GOVERNING THE CASE ON THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR WHEN THIS PROVISION WAS MADE AND ALLOW THE LIABILITY ONLY IF, AND TO THE EXTENT, IT COULD BE SAID TO BE A REAL LIABILITY IN PRAESENTI CRYSTALLIZED ON OR BEFORE THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR . THIS DIRECTION ALSO CLEARLY STIPULATES THAT ONLY THE MATTER RELATING TO THE ALLOWABILITY OF THE DEDUCTION OF RS. 1.40 CRORE HAS BEEN RESTORED TO THE FILE OF THE AO WITH CERTAIN DIREC TIONS WHICH INCLUDES VERIFYING AND EXAMINING THE RELEVANT POINT RELATING TO THE ACCRUAL OF THE LIABILITY DURING THE IMPUGNED ASSESSMENT YEAR. EVEN THE LAST SENTENCE OF THE SAID PARAGRAPH CLEARLY STATES THAT THE AO WILL AFFORD A REASONABLE OPPORTUNITY TO T HE ASSESSEE FOR THIS. THIS PARAGRAPH CLEARLY DENOTES THAT THE WHOLE OF THE ASSESSMENT HAS NOT BEEN SET ASIDE. IT IS ONLY THE MATTER RELATING TO THE ALLOWABILITY OF THE DEDUCTION OF RS. 1.40 CRORE THAT HAS BEEN SET ASIDE AND RESTORED TO THE FILE OF THE AO WITH CERTAIN DIRECTIONS. THUS, IN OUR OPINION, THIS IS NOT A CASE WHERE THE ORIGINAL ASSESSMENT 15 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) PASSED BY THE AO VIDE ORDER DT. 8.2.2000 GOT SET ASIDE. IT IS ONLY PART OF THE ASSESSMENT RELATING TO THE ALLOWABILITY OF THE DEDUCTION OF RS. 1.40 CRORE WHI CH HAS TO BE RE - DECIDED BY THE AO AFTER THE ORDER OF CIT(A) IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE CIT(A) AND AFTER AFFORDING OPPORTUNITY TO THE ASSESSEE. THE ORDER PASSED ON 8.2.2000, IN OUR OPINION, REMAINS IN EXISTENCE AND THEREFORE ANY ACTION OR NOTICE OR ANY PROCEEDINGS INITIATED DURING THE COURSE OF THAT ASSESSMENT REMAINS VALID AS THE VERY EXISTENCE OF THE ASSESSMENT DOES NOT VANISH AFTER THE PASSING OF THE APPELLATE ORDER DT. 16.11.2000. THIS IS A CASE WHERE THE APPELLATE ORDER GOT MERGED WITH THE ASSESSMENT ORDER PASSED ON 8.2.2000. THE NOTICE WHICH IS TITLED NOTICE U/S 143(2) OF THE INCOME TAX ACT IS MERELY A NOTICE FOR AFFORDING OPPORTUNITY TO THE ASSESSEE FOR PASSING AN ORDER FOR GIVING APPEAL EFFECT IN ACCORDANCE WITH THE DIRECTIONS OF THE CIT(A). THIS NOTICE NOWHERE MENTIONS THAT THIS NOTICE HAS BEEN ISSUED FOR MAKING A FRESH ASSESSMENT. IT IS A FACT THAT NO PROFORMA FOR AFFORDING OPPORTUNITY TO THE ASSESSEE FOR GIVING APPEAL EFFECT IS LAID DOWN AND GENERALLY THE NOTICE AS HAS BEE N DRAFTED FOR ISSUING U/S 143(2) IS USED FOR THIS PURPOSE. 2.3.2 WE HAVE ALSO LOOKED INTO THE PROVISIONS OF SEC. 143(2). THIS NOTICE IS ISSUED ONLY TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO PRODUCE OR CAUSE TO BE PRODUCED ANY EVIDENCE OR PARTICULARS ON WHICH THE ASSESSEE MAY RELY IN SUPPORT OF HIS RETURN. THE DIRECTIONS GIVEN BY THE CIT(A) UNDER PARA 7 TO THE AO IS TO AFF ORD AN OPPORTUNITY TO THE ASSESSEE SO THAT THE AO MAY ASCERTAIN THE YEAR OF ALLOWABILITY AND THE PRECISE BASIS OF THE QUANTIFICATION OF THE PROVISION IN THE LIGHT OF THE FACTORS GOVERNING THE CASE ON THE LAST DAY OF THE RELEVANT ACCOUNTING YEAR. AT THE MOST, IT MAY BE AN IRREGULARITY BUT IT CANNOT BE AN ILLEGALITY. I SSUING OF THE NOTICE WITH NOMENCLATURE NOTICE ISSUED U/S 143(2) CANN OT CHANGE THE SUBSTANCES OF THE ISSUE. WE HAVE LOOKED INTO THE SUBSTANCE NOT TO THE NOMENCLATURE. THE SUBSTANCE OF THE NOTICE IS TO AFFORD OPPORTUNITY TO THE ASSESSEE IN ACCORDANCE WITH THE DIRECTIONS OF THE CIT(A) WHICH THE AO HAS 16 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) DONE. WE HAVE ALSO LOOKED INTO THE ORDER DT. 30.3.2001. WE NOTED THAT THE ORDER HAS NOT BEEN PASSED BY THE AO U/S 143(3) R/W SEC. 250 BUT HAS BEEN PASSED MERELY TO GIVE EFFECT TO THE ORDER OF THE CIT(A). THIS ORDER CLEARLY DENOTES THAT THIS ORDER HAS BEEN PASS ED IN CONSEQUENCE OF THE ORDER OF CIT(A) QUANTIFYING THE INCOME AFTER GIVING THE APPEAL EFFECT. IN VIEW OF THIS FACT, IN OUR OPINION, THE PENALTY PROCEEDINGS INITIATED U/S 271(1)(C) DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS WHICH WAS TERMINATED BY P ASSING OF ORDER DT. 8.2.2000 IS VALID AND THE AO WAS COMPETENT TO PASS THE ORDER ON THE BASIS OF THE INITIATION OF THE PROCEEDINGS U/S 271(1)(C) WHILE PASSING THE ORDER DT. 8.2.2000. WE HAVE GONE THROUGH THE PROVISIONS OF SEC. 271(1)(C) AND WE NOTED THAT THE PENALTY PROCEEDINGS U/S 271(1)(C) HAS TO BE INITIATED BY THE AO OR CIT(A) OR CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT. SEC. 275 PUTS BAR OF LIMITATION FOR IMPOSING THE PENALTY. IT CLEARLY STIPULATES THAT NO ORDER FOR IMPOSING THE PENALTY U NDER THIS CHAPTER CAN BE PASSED IN A CASE WHERE THE RELEVANT ASSESSMENT OR OTHER ORDER IS A SUBJECT MATTER OF APPEAL TO THE CIT(A) U/S 246 OR 246A OR APPEAL TO THE APPELLATE TRIBUNAL U/S 253 AFTER EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN T HE COURSE OF WHICH ACTION FOR IMPOSITION OF THE PENALTY HAS BEEN INITIATED, ARE COMPLETED OR 6 MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE CIT(A) OR, AS THE CASE MAY BE, THE APPELLATE TRIBUNAL IS RECEIVED BY THE CHIEF COMMISSIONER OR COMMISS IONER, WHICHEVER PERIOD EXPIRES LATER. IT IS AN UNDISPUTED FACT THAT THE CIT(A) HAS PASSED THE ORDER ON 16.11.2000 AND THE PENALTY HAS BEEN IMPOSED ON THE ASSESSEE U/S 271(1)(C) VIDE ORDER DT. 28.5.2001 . WE ALSO DO NOT AGREE WITH THE SUBMISSION OF THE LD . AR THAT WHILE PASSING THE ORDER GIVING EFFECT TO THE CIT(A)S ORDER, THE AO SHOULD HAVE INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C). HAD THAT BEEN THE INTENTION OF THE LEGISLATURE, THE LEGISLATURE WOULD HAVE NOT PROVIDED A LIMITATION OF 6 MONTHS FRO M THE END OF THE MONTH IN WHICH THE ORDER OF THE CIT(A) IS PASSED 17 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) FOR PASSING THE ORDER IMPOSING THE PENALTY. IF THIS INTERPRETATION IS GIVEN, THE PROVISIONS OF SEC. 275(1A) WILL BE REDUNDANT. 2.3.3 WE HAVE ALSO GONE THROUGH THE VARIOUS DECISIONS AND C ASE LAWS AS RELIED BY THE LD. AR. THE DECISION IN THE CASE OF ITO VS. SEGHU BUCHIAH SETTY, 52 ITR 538 ( SUPRA ) RELATES TO THE RECOVERY PROCEEDINGS. IT RELATES TO THE QUESTION WHERE THE TAX REDUCED ON APPEAL WHETHER ANY FRESH NOTICE OF DEMAND IS NECESSARY OR NOT. IN THAT CONTEXT, THE HON'BLE SUPREME COURT OBSERVED AT PG. 542 THAT THERE IS NO DISPUTE THAT ALL THE STEPS TAKEN IN THE PRESENT CASE BY THE REVENUE AUTHORITIES WERE VALID WHEN TAKEN FOR THE APPELLATE ORDER S HAD NOT TILL THEN BEEN MADE . IN THAT CONTEXT, THE HON'BLE JUSTICE SHRI A.K . SARKAR IN THE ORDER OBSERVED THAT THE ORDER OF REDUCTION MUST, IN MY OPINION, NECESSARILY HAVE THE EFFECT OF SETTING ASIDE THE ORIGINAL ORDER AS A WHOLE. I T DOES NOT SIMPLY STRIKE OUT A FEW OF THE FIGURES AP PEARING IN THE ORIGINAL ORDER . WITH THE LOGIC THAT AFTER SAID ORDER THE ORIGINAL ORDER MUST GO FOR THE DEBT BEING ONE, THE TWO CANNOT EXIST TOGETHER. IF THAT ORDER GOES, ALL DEFAULT ARISING OUT OF IT MUST ALSO GO. THIS JUDGEMENT NOWHERE STATES THAT THE RECOVERY PROCEEDINGS WILL BECOME ANNULLED WHICH IS APPARENT FROM THE ORDER OF JUSTICE HIDAYATULLAH IN THE SAME VERY JUDGEMENT WHEN AT PG. 554 HE ORDERED THAT THE INCOME TAX OFFICER WOULD BE ABLE TO RECALL THE OLD CERTIFICATE ISSUED TO THE REVENUE OFFICER, AMEND IT AND BRING IT IN LINE WITH TAX NOW DEMANDABLE AND RETURN IT TO HIM FOR CONTINUING THE RECOVERY PROCEEDINGS . THIS IS EVEN MORE CLEAR FROM THE DECISION OF JUSTICE SHAH IN THE VERY SAME CASE WHEN AT PG. 558 HE HELD AS UNDER : IT IS CLEAR THEREFOR E THAT WHEN TAX, PENALTY OR INTEREST IS DETERMINED AND DEMANDED, PROCEEDINGS SHALL BE COMMENDED FOR RECOVERY AND THESE PROCEEDINGS MAY BE COMMENCED AND CONTINUED NOTWITHSTANDING THE PRESENTATION OF AN APPEAL. BY FAILING TO COMPLY WITH THE DEMAND THE ASSES SEE BECOMES A DEFAULTER AND IT IS NOT PROVIDED THAT HE SHALL CEASE TO BE A DEFAULTER ON THE DISPOSAL BY THE APPELLATE AUTHORITY OF THE APPEAL AGAINST THE ORDER OF ASSESSMENT. IN THE ABSENCE OF SUCH A PROVISION, IT IS DIFFICULT TO PERCEIVE ANY GROUND FOR H OLDING THAT THE PROCEEDINGS 18 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) COMMENCED AGAINST A DEFAULTING TAXPAYER FOR RECOVERY OF TAX MUST BE ABANDONED AND FRESH PROCEEDINGS COMMENCED FOR RECOVERY OF TAX PURSUANT TO THE ORDER OF THE APPELLATE AUTHORITY. IF ON THE PASSING OF AN ORDER BY THE APPELLATE AUTHORITY, THE NOTICE OF DEMAND PREVIOUSLY ISSUED IS DEEMED TO BE CANCELLED OR SUPERSEDED, AN ASSESSEE MUST BE TREATED AS ABSOLVED FROM THE CONSEQUENCES OF HIS DEFAULT EVEN IF THE APPELLATE AUTHORITY CONFIRMS THE ORDER OF THE INCOME - TAX OFFICER BECAUSE THE EARLIER DEFAULT BY THE TAXPAYER WILL IN EVERY CASE GO BY THE BOARD, AND THE PROCEEDINGS MUST BE COMMENCED AGAIN AFTER SERVICE OF A FRESH NOTICE OF DEMAND, THE DISCRETION VESTED IN THE INCOME - TAX OFFICER TO TREAT OR NOT TO TREAT AN ASSESSEE PENDING APPEAL IN DEFAULT WILL, IN ALL CASES BE VALUELESS. THE PROVISIONS OF THE ACT DO NOT INDICATE ANY SUCH LEGISLATIVE INTENT AND EXPRESS ENACTMENT CONFERRING UPON THE INCOME - TAX OFFICER, IN HIS EXERCISE OF DISCRETION, POWER NOT TO TREAT PERSON WHO HAS PREFERRED AN A PPEAL AS A DEFAULTER, CONTAINS STRONG INDICATION TO THE CONTRARY. THEREFORE, IN MY VIEW, A PERSON WHO HAS FAILED TO COMPLY WITH A NOTICE OF DEMAND WOULD CONTINUE TO BE A DEFAULTER NOTWITHSTANDING THE REDUCTION OF LIABILITY BY ORDER OF THE APPELLATE AUTHOR ITY. THERE WOULD BE ONLY ONE EXCEPTION TO THIS RULE, I.E., WHEN THE ORDER OF ASSESSMENT IS WHOLLY SET ASIDE. BUT THAT IS NOT A REAL EXCEPTION, FOR AGAINST THE ASSESSEE NO STEPS CAN BE TAKEN BECAUSE THERE IS NO DEBT DUE BY HIM. FROM THIS ORDER IT IS APPARENT THAT THE INITIATION OF THE PROCEEDINGS IN THE CASE OF THE ASSESSEE VIDE ASSESSMENT ORDER DT. 8.2.2000 REMAINS VALID AS WE HAVE ALREADY HELD THAT THE ASSESSMENT WAS NOT WHOLLY SET ASIDE. THE DECISION OF CIT VS. BHAN TEXTILES PVT. LTD., 300 ITR 176 WILL ALSO NOT ASSIST THE ASSESSEE. IN THAT CASE, THE QUESTION BEFORE THE HON'BLE HIGH COURT OF DELHI RELATED TO THE WHETHER NOTICE ISSUED BY THE AO FOR MAKING A FRESH ASSESSMENT IN CONSEQUENCE OF THE ORDER OF CIT(A) WAS BARRED BY LI MITATION IN VIEW OF THE PROVISIONS OF SEC. 153(2A) OF THE ACT OR NOT. THE QUESTION BEFORE THE HON'BLE HIGH COURT DID NOT RELATE TO THE POWER OF INITIATING THE PENALTY NOTICE. IN THIS CASE WHEN THE MATTER WENT BEFORE CIT(A) AGAINST THE ORDER PASSED U/S 14 4, THE CIT(A) DIRECTED THE AO TO PASS ORDER U/S 144 AND GIVE THE ASSESSEE OPPORTUNITY TO FILE ITS EVIDENCE WHILE DISPOSING OFF THE GROUND NO. 2 OF THE APPEAL. THIS DIRECTION BY THE CIT(A) CLEARLY DENOTES THAT THE AO MAY PASS ORDER U/S 144. THE DIRECTION DOES NOT TALK OF GIVING EFFECT TO THE ORDER PASSED BY THE CIT(A). THE NATURAL MEANING OF SUCH DIRECTION IN ANY CASE WILL TANTAMOUNT TO SETTING ASIDE OF THE ASSESSMENT. 19 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) NO SUCH DIRECTION HAS BEEN GIVEN BY THE CIT(A) IN THE CASE OF THE ASSESSEE IN THE ORDER PASSED DT. 16.11.2000 AS IS APPARENT FROM PARA 7 OF THE SAID ORDER. THIS JUDGEMENT, THEREFORE, IS NOT APPLICABLE TO THE ASSESSEES CASE. T HE CASE REPORTED IN 266 ITR 283 (S UPRA ) IN FACT ACCEPTED THE DOCTRINE OF MERGER AT PG. 290. THEREFORE, THIS DECISION WILL ALSO NOT HELP THE ASSESSEE. THE OTHER DECISIONS RELIED ON BY THE LD. DR & AR, IN OUR OPINION, ARE ALSO NOT RELEVANT TO THE ISSUE BEFORE US. IN VIEW OF OUR FINDING, WE DECIDE THE ISSUE WHICH HAS COME BEFORE US FOR DECISION IN VIEW OF T HE ORDER OF THE HON'BLE HIGH COURT DT. 19.2.2013 AGAINST THE ASSESSEE AND WE HOLD THAT THE AO IS NOT REQUIRED TO INITIATE THE PROCEEDINGS U/S 271(1)(C) AFRESH WHILE GIVING THE APPEAL EFFECT IN RESPECT OF THE ORDER PASSED BY THE CIT(A) DT. 16.11.2000 IN THE CASE OF THE ASSESSEE. THE AO HAS THE POWER FOR LEVYING THE PENALTY AS HE HAS DULY INITIATED THE PENALTY PROCEEDINGS DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 2.3.4 SO FAR THE ISSUES RELATING TO THE MERIT OF THE IMPOSITION OF THE PENALTY IS CONC ERNED, IN OUR OPINION, THE ORDER OF THIS TRIBUNAL DT. 7.4.2006 REMAINS IN EXISTENCE AS THE MATTER RELATING TO THE ISSUE OF JURISDICTION OF THE AO WAS RESTORED TO THIS TRIBUNAL. THUS, THIS APPEAL IS DISPOSED OFF ACCORDINGLY. 3. IN THE RESULT, THE APPEAL F ILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISPOSED OFF AS STATED ABOVE IN CONSEQUENCE OF THE ORDER OF THE HON'BLE HIGH COURT. 4. ORDER PRONOUNCED IN THE OPEN COURT ON 2 8 /08/2013. S D / - (D.T.GARASIA) JUDICIAL MEMBE R S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 2 8 /08/ 2013 *SSL* 20 ITA NO. 44/PNJ/2002 & CO NO. 14/PNJ/2005 (ASST. YEAR : 1997 - 98) COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT, PANAJI (4) CIT(A), PANAJI (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER , SR. P RIVATE S ECRETARY ITAT, PANAJI, GOA