KAMAL KUMAR KOTHARI, SON OF SHRI BHANWAR SINGH KOTHARI V. ASSISTANT COMMISSIONER OF INCOME TAX

/15187/2024

AI Insights

The case revolves around the petitioner, Kamal Kumar Kothari, challenging the continuation of penalty proceedings under Section 271E of the Income Tax Act, 1961, during the pendency of an appeal against the assessment order. The petitioner argued that according to Section 275(1)(a) of the Act, once an appeal is filed, penalty proceedings should be kept in abeyance. The respondents contended that the filing of an appeal does not prevent the initiation of penalty proceedings, provided they are initiated within the prescribed period of limitation. The court examined the provisions of Section 275(1)(a) and Section 220(6) of the Act to determine the appropriate legal framework governing the initiation of penalty proceedings during the pendency of an appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 756392 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 10-12-2024
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: SIDDHARTH BAPNA; MEYHUL MITTAL
• Assessee Lawyers: SIDDHARTH RANKA; ROHAN CHATTER
• Keywords: Appeal; Assessment Order; Income Tax Act; Penalty proceedings; Section 220(6); Section 275(1)(a)
• Section: 271E; 275(1)(A); 220(6)

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 15187/2024 Kamal Kumar Kothari, Son Of Shri Bhanwar Singh Kothari, Aged About 64 Years, Resident Of 501, Panchratna Building, M.s.b. Ka Rasta, Johri Bazar, Jaipur ----Petitioner Versus 1. Assistant Commissioner Of Income Tax, Central Circle-2, Jaipur Having Its Address At Room No. 403, 4Th Floor, Jeevan Nidhi-2, Lic Building, Ambedkar Circle, Jaipur 2. Joint Commissioner Of Income Tax, Central Circle, Jaipur, New Central Revenue Building, Bhagwan Dass Road, Statue Circle, Jaipur ----Respondents For Petitioner(s) : Mr. Siddharth Ranka with Mr. Rohan Chatter For Respondent(s) : Mr. Siddharth Bapna with Mr. Meyhul Mittal HON'BLE THE CHIEF JUSTICE MR. MANINDRA MOHAN SHRIVASTAVA HON'BLE MR. JUSTICE ASHUTOSH KUMAR Order 10/12/2024 1. When this case was listed on 28.11.2024, this Court noticed the point arising for consideration in the case as to whether the order of assessment having been assailed in the appeal, during the pendency of the appeal, penalty proceedings could continue. 2. Learned counsel for the petitioner, relying upon the provisions contained in Section 275(1)(a) of the Income Tax Act, 1961 (for short ‘the Act of 1961’) would submit that once an appeal is preferred, penalty proceedings have to be kept in abeyance as mandated by law and penalty proceedings could not (2 of 5) [CW-15187/2024] proceed. The alternative submission is that the satisfaction which has been recorded by the Assessing Authority that present is a fit case for initiating penalty proceedings, is based on incorrect appreciation of facts and law and such finding was not warranted. He would submit that as the Appellate Authority does not have jurisdiction to stay demand created under the order passed by the Assessing Authority, this writ petition had to be filed. 3. Learned counsel for the petitioner would further submit that unless a demand notice is actually issued against the petitioner, he may not take recourse to the provisions contained in Section 220 (6) of the Act of 1961. 4. On the other hand, learned counsel appearing for the respondent-Revenue would submit that the provisions contained in Section 275(1)(a) does not create an absolute embargo on initiation of penalty proceedings but it only bars such proceedings to be initiated beyond prescribed period of limitation. 5. He would next submit that even if the Appellate Authority may not stay the demand created under order of assessment, impugned in the appeal, the petitioner otherwise has a remedy of making such application for stay of demand under Section 220 (6) of the Act of 1961. The petitioner without taking recourse to the appropriate remedy available to him under the law, has filed this writ petition. He would submit that as and when the demand notices are issued, the petitioner may take recourse to appropriate remedy available under the law. 6. The writ petition filed by the petitioner seeks quashing and setting aside of notice dated 01.07.2024 issued under Section 271E of the Act of 1961, or in alternative, to keep the notice in (3 of 5) [CW-15187/2024] abeyance till the outcome of the appeal pending before the Commissioner of Income Tax (Appeals). 7. The assessment order which has been impugned in the appeal, records satisfaction that present is a fit case for initiating penalty proceedings. 8. The question which arises for consideration is as to whether the provisions contained in Section 275(1)(a), per se, operates as bar to initiation of penalty proceedings once an appeal is filed. To resolve this controversy, we need to closely look into and scrutinize the provisions contained in Section 275(1)(a) of the Act of 1961 which is extracted herein below:- “275. [(1)] No order imposing a penalty under this Chapter shall be passed- [(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the [Joint Commissioner (Appeals) or 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 [Joint Commissioner (Appeals) or the] Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, whichever period expires later: [Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the [Joint Commissioner (Appeals) or to the] Commissioner (Appeals) under section 246 or section 246A, and [the Joint Commissioner (Appeals) or] 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 (4 of 5) [CW-15187/2024] financial year in which the order of [the Joint Commissioner (Appeals) or] the Commissioner (Appeals) is received by the [Principal Chief Commissioner or] Commissioner, whichever is later;]” 9. On carefully scanning through the aforesaid provision what is revealed is that the provision creates a bar based on limitation. It does not create a complete embargo on initiation of penalty proceedings on mere filing of appeal. The bar is that if the proceedings are not initiated within the period of limitation, prescribed therein, it will be barred by limitation. Therefore, the bar is based on failure to initiate proceedings and not on mere filing of appeal. That is what flows on literal reading of the provision. There is no warrant for us to add something more into it and to create a new bar on initiation or continuance of penalty proceedings upon mere filing of appeal. Therefore, the submission of learned counsel for the petitioner in this regard must fail. 10. The next submission of learned counsel for the petitioner is that at present he is left with no remedy against penalty proceedings, if any, initiated by issuance of a demand. According to him, remedy under Section 220 (6) of the Act of 1961 could not be taken recourse to unless a notice for initiation of penalty proceedings or demand is issued against the petitioner. 11. We do not find any difficulty in holding that the remedy under Section 220 (6) of the Act of 1961 would be available as soon as any demand is issued against the petitioner. There is a complete mechanism provided under the law. Even though the Appellate Authority before whom the assessment order is under challenge may not stay the demand which is initiated separately by instituting proceedings, the moment such notices are issued, (5 of 5) [CW-15187/2024] the provisions contained in Section 220 (6) of the Act of 1961 and the remedy engrafted therein, becomes invocable at the instance of the assessee. It will always be open for the assessee to move appropriate application before the Assessing Officer and seek declaration in the matter of stay. 12. Learned counsel for the respondent-Revenue is right in submitting that if the order passed by the Assessing Officer under Section 220 (6) of the Act of 1961 does not redress the grievance, an application could be preferred before the next higher authority i.e. Commissioner, Income Tax. 13. We are of the view that at this stage, the writ remedy need not be invoked because the petitioner does have a remedy under the law. Whether or not in a given case, stay of demand has to be ordered, would essentially be in the exercise of the discretion by the Assessing Officer, as provided under Section 220 (6) of the Act of 1961. 14. We leave it open for the petitioner to approach the appropriate authority at an appropriate stage when the demand notices are issued to him. 15. The writ petition is dismissed with the aforesaid observation. Pending application, if any, also stands dismissed. (ASHUTOSH KUMAR),J (MANINDRA MOHAN SHRIVASTAVA),CJ KAMLESH KUMAR-RAHUL/3 "