Sri.A.M.Fazil, Alappuzha V. The ACIT, Kottayam

ITSSA 2/COCH/2014

• Counselvise Citation: [2017] 122 COUNSELVISE.COM (IT) 3258 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 18-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 15-05-2017
• Assessment Year: misc
• Appeal Filed On: 23-12-2014
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Assessee Lawyers: R KRISHNAN
• Keywords: Block assessment
• Section: 260A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI ABRAHAM P. GEORGE, AM & GEORGE GEORGE K., JM I.T(SS)A. NO.02/COCH/2014 BLOCK ASSESSMENT YEAR : 1988 - 89 TO 1997 - 98 SHRI A.M. FAZIL, DARUSALAM, SEA VIEW WARD, ALLEPPEY. [PAN: AEAPM 5689R] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOTTAYAM. (ASSESSEE - APPELLANT) (REVENU E - RESPONDENT) ASSESSEE BY SHRI R. KRISHNAN, CA REVENUE BY SHRI SHANTAM BOSE, CIT(DR) DATE OF HEARING 1 6 / 0 5 / 201 7 DATE OF PRONOUNCEMENT 18 / 0 5 /201 7 O R D E R PER GEORGE GEORGE K.,JUDICIAL MEMBER: THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-V, KOCHI DATED 30-09-2014 , PERTAINING TO BLOCK PERIOD 1988-89 TO 1997-98. THE ORDER OF THE CIT(A) ARISES OUT OF THE ORDER OF THE ASSISTANT COMMISSIONER OF INCOME-TAX PASSED U/S. 158BFA(2) OF THE I.T. ACT. IT(SS)A NO.02/COCH/2014 2 2. THE GROUNDS RAISED READS AS FOLLOWS: 1. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERR ED IN SUSTAINING THE PENALTY OF RS.13,32,515/- U/S. 158BF A(2) OF THE INCOME TAX ACT. 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUG HT TO HAVE APPRECIATED THAT CHAPTER XIVB IS A SELF CONTAINED C ODE IN ITSELF AND IN THE ABSENCE OF SPECIFIC PROVISION TO ENHANCE PENALT Y LIKE CHAPTER XXI OF THE INCOME TAX ACT, THE QUANTUM OF PENALTY WOULD NOT GET ALTERED ON THE BASIS OF ALTERATION IN INCOME IN QUANTUM APP EAL, PARTICULARLY BASED ON THE ORDERS OF HIGH COURT AND SUPREME COURT . 3. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUG HT TO HAVE APPRECIATED THAT THIS IS A CASE OF LEVY OF PENALTY FOR THE SECOND TIME, WHICH IS WITHOUT PROPER INITIATION AND BARRED BY LI MITATION AND IS THEREFORE, ABINITIO-VOID. 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERR ED IN NOT CONCURRING WITH THE VIEW OF THE APPELLANT THAT THE PROVISIONS OF SECTION 158BFA(3)(C) ARE NOT APPLICABLE TO THE FACTS OF THE APPELLANTS CASE. HE OUGHT TO HAVE HELD THAT THE PENALTY ORDER IS BARRED BY LIMITATION. 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERR ED IN CONCLUDING THAT FURTHER ORDER PASSED U/S. 158BFA(2) CONSEQUENT UPON CHANGES IN APPEAL IS NOTHING, BUT A REVISION OF THE ORIGINAL PENALTY ORDER WHICH CHANGES WITH CHANGE OF QUANTUM OF UNDIS CLOSED INCOME DETERMINED. 6. THE LEARNED OFFICERS BELOW ERRED IN BLINDLY REVISIN G THE PENALTY ORDER WITHOUT LOOKING INTO THE MERITS OF THE ADDITI ONS MADE AND WITHOUT ESTABLISHING THAT THE ADDITIONS UPHELD BY T HE HIGH COURT IN FACT, WARRANTED LEVY OF PENALTY. IT(SS)A NO.02/COCH/2014 3 3 . THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS AN INDIVIDUAL WHO IS A FILM P RODUCER CUM DIRECTOR. THERE WAS A SEARCH U/S. 132 OF THE I.T. ACT IN THE PREMIS ES OF THE ASSESSEE ON 29/07/1997. BLOCK ASSESSMENT U/S. 158BC OF THE ACT WAS COMPLETED DETERMINING THE UNDISCLOSED INCOME AT RS.1,29,43,77 0/-. ON COMPLETION OF THE ASSESSMENT, PENALTY PROCEEDINGS U/S. 158BFA OF THE ACT WAS INITIATED. 3.1 IN THE QUANTUM ASSESSMENT, SUBSTANTIAL RELIEF W AS GRANTED BY THE COMMISSIONER OF INCOME-TAX(APPEALS). THE ASSESSEE A ND THE REVENUE FILED AN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL, WH ICH CONFIRMED THE ORDER OF THE CIT(A). THE UNDISCLOSED INCOME, WHILE GIVING E FFECT TO THE ORDER OF THE CIT(A), WAS DETERMINED AT RS.23,11,668/-. THE ASSE SSING OFFICER LEVIED PENALTY U/S. 158BFA AMOUNTING TO RS.20,80,503/-, BEING 150% OF THE TAX ON THE UNDISCLOSED INCOME DETERMINED. ON APPEAL, THE CIT(A ) REDUCED THE PENALTY U/S. 158BFA(2) OF THE ACT TO RS.5,37,915/- ON FURTHER A PPEAL, THE PENALTY WAS REDUCED TO RS.2,42,431/-. 3.2 IN THE MEANWHILE, THE DEPARTMENT HAD CARRIED IN APPEAL THE TRIBUNAL ORDER ON QUANTUM ASSESSMENT BEFORE THE HONBLE HIGH COURT OF KERALA U/S. 260A OF THE ACT. THE HONBLE HIGH COURT PARTLY RESTORED THE AD DITION MADE BY THE ASSESSING OFFICER. A FURTHER SUM OF RS.22,20,959/- WAS DETER MINED AS UNDISCLOSED INCOME BY THE HONBLE HIGH COURT. IT(SS)A NO.02/COCH/2014 4 3.3 THE ASSESSING OFFICER WAS OF THE VIEW THAT S INCE THE HONBLE HIGH COURT HAD ENHANCED THE UNDISCLOSED INCOME BY RS.22,20,959/-, PENALTY U/S. 158BFA(2) IS ALSO TO BE IMPOSED ON THAT AMOUNT. THE ASSESSEE RAISED THE OBJECTION FOR ENHANCEMENT U/S. 158BFA(2) OF THE ACT. IT WAS CONTE NDED BY THE ASSESSEE THAT ONCE PENALTY HAS BEEN LEVIED U/S. 158BFA(2) OF THE ACT, THERE IS NO PROVISION UNDER CHAPTER XIVB UNLIKE CHAPTER XXI OF THE ACT TO ENHANCE/REDUCE THE PENALTY, ONCE THE QUANTUM GETS ALTERED IN APPEAL. THE ASSESSING OFFICER HOWEVER REJECTED THE OBJECTIONS RAISED BY THE ASSES SEE AND CONCLUDED THAT PENALTY CAN BE LEVIED ON THE PORTION OF THE UNDISCL OSED INCOME SUSTAINED BY THE HONBLE HIGH COURT. THE ASSESSING OFFICER HELD THAT THERE IS NO PROVISION IN THE INCOME TAX ACT PROHIBITING THE ASSESSING OFFICER FR OM ENHANCING/REDUCING/LEVYING PENALTY U/S. 158BFA(2) OF THE ACT BASED ON THE JUDGMENTS OF THE HONBLE HIGH COURT AND THE HONBLE SUPREME COURT. ACCORDINGLY, THE ASSESSING OFFICER LEVIED PENALTY O F RS.13,32,575/- U/S. 158BFA(2) OF THE ACT. 3.4 AGGRIEVED BY THE ORDER OF THE ASSESSING OFF ICER IMPOSING PENALTY U/S. 158BFA(2) OF THE ACT, THE ASSESSEE PREFERRED AN APP EAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE AND CONFIRMED THE PENALTY IMPOSED U/S. 158BFA(2) OF THE ACT. THE RELE VANT OBSERVATION OF THE CIT(A) IN DISMISSING THE APPEAL OF THE ASSESSEE REA DS AS FOLLOWS: IT(SS)A NO.02/COCH/2014 5 HOWEVER, ON RATIONAL AND LOGICAL ANALYSIS, IT IS A MPLY CLEAR THAT THE PROVISIONS CONTAINED IN SEC.158BFA(3) (C) IS ONLY AP PLICABLE FOR DETERMINING THE LIMITATION FOR THE IMPOSITION OF PE NALTY WHICH PRESCRIBES CERTAIN TIME LIMIT. IN THE INSTANT CASE, THE FACTS OF THE CASE SUGGESTS THAT THE INITIATION OF PENALTY AS WELL AS THE IMPOSITION OF PENALTY U/S. 158BFA(2) HAVE BEEN MADE WELL WITHIN THE LIMITATION S PROVIDED. THE APPELLANTS PLEA THAT THE A.O. HAS PASSED A FRESH P ENALTY ORDER, IS A FLAWED LOGIC BECAUSE, IT IS NOT MATERIAL AS TO WHICH FORMA T THE ORDER HAS BEEN PASSED BUT RATHER, THE SUBSTANCE OF THE ORDER IS MO RE IMPORTANT. IT HAS BEEN DISCUSSED IN THE FOREGOING PARAS THAT SINCE TH E SUM OF PENALTY IMPOSABLE IS STATUTORILY LINKED WITH THE AMOUNTS OF UNDISCLOSED INCOME DETERMINED AND THE AMOUNT SO DETERMINED IS SUBJECT TO FINALITY AFTER APPEALS. IN THIS CASE, THE QUANTUM OF UNDISCLOSED INCOME DETERMINED BY THE A.O. HAS GOT FINALITY BY THE ORDER OF THE HONB LE HIGH COURT OF KERALA, THE PENALTY ORDER U/S. 158BFA(2) IS NOTHING BUT IN CONTINUITY OF THE ORIGINAL PENALTY ORDER PASSED BY THE A.O. THE APPELLANT HAS TRIED TO DRAW THE DISTINCTION BETWEEN THE PENALTY U/S. 271(1)(C) AND THAT OF SECTION 158BFA(2) BY COMPARIN G FOR THE SPECIFIC MENTION THAT PENALTY BEING ENHANCED AS A RESULT OF THE ORDER OF THE HONBLE HIGH COURT OR HONBLE SUPREME COURT, AND TH AT SUCH A PROVISION IS ABSENT IN CHAPTER XIVB. AS IT HAS BEEN CLEARLY MAD E OUT THAT SECOND PROVISO TO SECTION 158BFA(2) INCORPORATES SUBSTANTI VELY THE QUANTUM OF IMPOSABLE PENALTY IS LINKED WITH THE QUANTUM OF THE UNDISCLOSED INCOME DETERMINED, SUCH MEANING IS INHERENTLY IMPLIED. IN VIEW OF THE FACTS OF THE CASE AND THE INTERPR ETATION OF THE RELEVANT PROVISIONS, IT IS HELD THAT THE APPELLANT HAS GOT N O CASE WHICH COULD ESTABLISH THAT THE PENALTY HAS GOT BARRED BY LIMITA TION AND THE PENALTY IMPOSED AS AGAINST THE PROVISIONS OF CHAPTER-XIVB. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEE PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES AND HAS FILED A BRIEF NOTE ENLISTING THE CHRONOLOGY OF EVENTS. IT(SS)A NO.02/COCH/2014 6 5. THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTE D THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THERE IS NO DISPUTE TO THE FACT THAT IN THE INSTANT CASE THE QUANTUM ASSESSMENT OF THE ASSESSEE WAS THE SUBJECT MATTER OF APPEAL BE FORE THE HONBLE HIGH COURT OF KERALA U/S. 260A OF THE ACT. THE HONBLE HIGH C OURT IN THE QUANTUM ASSESSMENT HAD ENHANCED THE UNDISCLOSED INCOME BY R S.22,20,959/- THE TAX ON THE UNDISCLOSED INCOME OF RS.22,20,959/- WORKS O UT TO RS.13,32,575/-. THE ASSESSING OFFICER HAD IMPOSED MINIMUM PENALTY OF RS .13,32,575/- BEING TAX SOUGHT TO BE EVADED. 6.1 THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE C ASE OF ACIT VS. SHRI P.P. UMMERKUTTY IN IT(SS)A 01/COCH/2013 DATED 09/03/2016 HAD HELD THAT THE JUDGMENT OF THE HONBLE HIGH COURT WILL COME WITHIN THE PROVISIONS OF SECTION 138BFA(3)(E) OF THE I.T. ACT. THE RELEVANT OBSERVAT ION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF (SUPRA) READS AS FOL LOWS: 7. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE FACTS OF THE CASE. FIRST OF ALL, WE PROCEED TO DECIDE THE FIRST QUESTI ON WHETHER THE ASSESSING OFFICER PASSED THE PENALTY ORDER WITHIN THE TIME AL LOWED STATUTORILY BY THE INCOME TAX ACT. THERE IS NO DISPUTE TO THE FACT IN THE PRESENT CASE THAT THE QUANTUM ASSESSMENT OF THE ASSESSEE WAS THE SUBJECT MATTER OF APPEAL BEFORE THE HONBLE HIGH COURT OF KERALA U/S. 260A A ND THEREFORE, THE PRESENT CASE FALLS U/S. 158BFA(3)(E) OF THE ACT. A CCORDINGLY, THE PROCEEDINGS IN THE COURSE OF WHICH ACTION FOR IMPOS ITION OF PENALTY WAS IT(SS)A NO.02/COCH/2014 7 INITIATED ARE COMPLETED WITH THE PRONOUNCEMENT OF T HE ORDER OF THE HONBLE HIGH COURT OF KERALA ON 03/11/2009 OR ON 24/02/2010 WHEN THE STANDING COUNSEL OF THE DEPARTMENT RECEIVED THE CERTIFIED CO PY OF THE ORDER. IT IS ALSO UNDISPUTED THAT IN THE CASE OF THE ORDERS U/S. 260A, ORDER III, RULE 3 OF CODE OF CIVIL PROCEDURE APPLIES AND NOT RULE 35 OF THE APPELLATE TRIBUNAL RULES. ACCORDINGLY, AS PER SECTION 158BFA(3)(E) , THE PENALTY ORDER GETS TIME BARRED 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 ACTION FOR IMPOSITION OF PENALTY IS INITIATED, WHIC HEVER PERIOD EXPIRES LATER. 6.2 IN THE INSTANT CASE, THE HONBLE HIGH COURT V IDE ORDER DATED 10/02/2012 IN I.T.A. NO.1583 OF 2009 HAD PARTLY REVERSED THE ORDE R OF THE ITAT AND RESTORED THE ADDITION OF RS.22,20,959/-. CONSEQUENT TO THE JUDGMENT OF THE HONBLE HIGH COURT, THE UNDISCLOSED INCOME WAS DETERMINED AT RS. 72,88,011/- AS AGAINST RS.50,65,052/- BASED ON THE ITAT ORDER. THE CO-OR DINATE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. SHRI P.P. UMMERKUTTY (SUPR A) HAD HELD THAT THE PROVISIONS OF SECTION 158BFA(3)(E) OF THE ACT HAS AP PLICATION AS REGARDS THE ADDITION RESTORED BY THE HONBLE HIGH COURT. THE AS SESSING OFFICER IS PERFECTLY JUSTIFIED IN IMPOSING PENALTY U/S. 158BFA WITHIN SI X MONTHS FROM THE DATE OF RECEIPT OF HONBLE HIGH COURT JUDGMENT. IN THE INS TANT CASE, THE ASSESSEE DOES NOT HAVE A PLEA THAT THE ORDER PASSED BY THE ASSESS ING OFFICER IS BARRED BY LIMITATION VIS--VIS RECEIPT OF THE JUDGMENT OF THE HONBLE HIGH COURT. THEREFORE, WE CONFIRM THE ORDERS OF THE AUTHORITIES BELOW. IT(SS)A NO.02/COCH/2014 8 6.3 HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER HAS MERELY IMPOSED PENALTY U/S. 158BFA(2) OF THE ACT WITHOUT GOING INTO THE ME RITS OF THE ADDITION RESTORED BY THE HONBLE HIGH COURT. VARIOUS JUDICIAL PRONOU NCEMENTS HAVE HELD THAT PENALTY U/S. 158BFA OF THE ACT IS NOT MANDATORY BUT DISCRETIONARY. WHEN THE PENALTY IS DISCRETIONARY, NECESSARILY, THE ASSESSIN G OFFICER BEFORE IMPOSING THE PENALTY HAS TO EXAMINE THE MERITS OF THE ADDITIONS SUSTAINED AND THEREAFTER TAKE A DECISION AS TO WHETHER THE PENALTY IS IMPOSABLE O N EACH OF SUCH ADDITIONS THAT ARE SUSTAINED BY THE HONBLE HIGH COURT. THE FOLLOW ING JUDICIAL PRONOUNCEMENTS HAVE HELD THAT PENALTY U/S. 158BFA OF THE ACT IS NO T MANDATORY BUT DISCRETIONARY: 1. CIT VS. SATYENDRA KUMAR DOSH I 222 CTR 258 (RAJ.) 2. CIT VS. DODSAL LTD. 312 ITR 112 (BOM.) 3.SALUJA HIRE PURCHASE LTD. VS. ACIT 305 ITR (AT) 3 9 (LUCKNOW) 6.4 IN THE INSTANT CASE, SINCE THE ASSESSING OFFI CER HAS MECHANICALLY PASSED AN ORDER IMPOSING PENALTY OF RS.13,32,575/- WITHOUT EX AMINING THE MERITS OF THE ADDITION RESTORED BY THE HONBLE HIGH COURT. THEREF ORE WE DEEM IT PROPER TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFF ICER. THE ASSESSING OFFICER SHALL EXAMINE THE ADDITIONS SUSTAINED BY THE HONBLE HIGH COURT AND TAKE A DECISION WHETHER PENALTY U/S. 158BFA IS IMPOSABLE ON EACH OF SUCH ADDITIONS. IT IS ORDERED ACCORDINGLY. IT(SS)A NO.02/COCH/2014 9 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 18-05-2017. SD/- SD/- (ABRAHAM P. GEORGE) ( GEORGE GEORGE K.) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: KOCHI DATED: 18 TH MAY, 2017 GJ COPY TO: 1. SHRI A.M. FAZIL, DARUSALAM, SEA VIEW WARD, ALLEP PEY. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1, KOTTAYAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS) -V, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRA R) I.T.A.T. , COCHIN