Kanthi Resorts Private Limited V. The Assistant Commissioner of Income Tax, Circle 1 and The Commissioner of Income Tax (Appeals) and The Commissioner of Income Tax (Administration)

WP/139942/2020

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The case involves M/s Kanthi Resorts Private Limited, which challenged a penalty order imposed by the Assistant Commissioner of Income Tax under Section 271(1)(c) of the Income Tax Act, 1961, for alleged tax evasion. The petitioner argued that the penalty was unjustly imposed without proper hearing, as required by the Act. The High Court found that the order was passed in violation of the principles of natural justice, as the petitioner was not given an opportunity to be heard before the imposition of the penalty. Consequently, the court set aside the order and remitted the matter back to the Assessing Officer for a fresh hearing.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 798958 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 09-03-2021
• Assessment Year: misc
• Other Referred Cases: M.Shivanna and another Vs. Deputy Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: Y V RAVIRAJ
• Assessee Lawyers: H R KAMBIYAVAR
• Keywords: Natural Justice; Penalty; Tax Evasion; Writ of Mandamus
• Section: 143(3); 271(1)(c)

Judgement Text

"IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 9TH DAY OF MARCH 2021 BEFORE THE HON’BLE MR. JUSTICE SACHIN SHANKAR MAGADUM W.P.NO.139942/2020 (T-IT) BETWEEN M/S KANTHI RESORTS PRIVATE LIMITED, NEAR NIONS SCHOOL, EXTENSION AREA, BAGALKOT-587 101, DIST: BAGALKOT, KARNATAKA, R/BY ITS DIRECTOR SRI.GIRISH S/O RAJASHEKHAR KANTHI, AGED ABOUT 48 YEARS. ... PETITIONER (BY SRI.H.R.KAMBIYAVAR & PATRI SHASHIKALA K. ADVS.) AND 1. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, AAYKAR BHAVAN, ALL INDIA RADIO, ATHANI ROAD, VIJAPUR. 2. THE COMMISSIONER OF INCOME TAX (APPEALS), KIMJI BAI BUILDING, OPP. CIVIL HOSPITAL, BELAGAVI-590001. 3. THE COMMISSIONER OF INCOME TAX (ADMINISTRATION), KIMJI BAI BUILDING, OPP. CIVIL HOSPITAL, BELAGAVI-590001. ... RESPONDENTS (BY SRI.Y.V.RAVIRAJ, ADV.) THIS PETITION IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE WRIT OF MANDAMUS OR WRIT OF DIRECTION TO THE 2ND RESPONDENT AUTHORITY TO CONSIDER THE APPEAL FILED BY THE PETITONER BEORE THE 2ND RESPONDENT AGAINST THE IMPUGNED PENALTY ORDER BEARING 2 PAN NO.AACCK3045N ONLINE FORM-35 DATED 12.07.2018 VIDE ANNEXURE-B AND ETC. THIS PETITION COMING ON FOR PRELIMINARY HEARING ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The captioned writ petition is filed challenging the order passed by respondent No.1 as per Annexure-G. 2. Facts leading to the case are as under: Petitioner is a private limited company having its registered office at Bagalkot. The case of the petitioner is that the company is engaged in hotel industry. The petitioner has maintained books of accounts on the basis of the mercantile system of accounting. It is specifically stated that assessee has filed return of income on 14.03.2016 for the assessment year 2015-16 electronically declaring the total loss to the tune of Rs.4,30,16,916/-. It is further stated that case was selected for scrutiny under CASS and accordingly, scrutiny assessment was concluded on 29.12.2017. But the assessing authority completed assessment under Section 143(3) of the Income Tax Act, 3 1961 (hereinafter referred to as ‘the Act’ for short) on 29.12.2017 by recording a finding that petitioner has indulged in filing inaccurate particulars of income. Pursuant to the assessment order, it appears that respondent No.1 has initiated proceedings to impose penalty under Section 271(1)(c) of the Act. In the said proceeding, the officer has come to the conclusion that assessee has evaded tax of Rs.1,01,56,098/- for the assessment year 2015-16. The assessing authority has come to the conclusion that, it is a fit case to levy of penalty under Section 271(1)(c) of the Act and thereby the assessing authority has imposed penalty of Rs.1,01,56,098/-. 3. The petitioner/assessee being aggrieved by the order imposing penalty by respondent No.1 preferred an appeal before respondent No.2/Commissioner of Income Tax (appeals) Belagavi and the same is pending for consideration. 4 4. The petitioner moved an application before respondent No.1 assessing authority to stay the collection of penalty as imposed by respondent No.1. Respondent No.1 without hearing the petitioner as contemplated under the Act has passed the impugned order as per Annexure-G without affording an opportunity to the petitioner. Being aggrieved by the order, the petitioner/assessee is before this court. 5. The grievance of the petitioner before this court is that prima facie there is no concealment and there is no evading of tax by the petitioner/assessee. He would contend that question of levying under Section 271(1)(c) of the Act is not attracted and the assessing authority has erred in levying huge penalty on the petitioner and the same is not sustainable. In this background, the petitioner has moved an application seeking stay of collection of penalty before respondent No.1 authority. Respondent No.1-authority was required to afford an opportunity before 5 passing the impugned order as per Annexure-G. On these set of grounds he would submit to this court that the impugned order passed by respondent No.1 as per Annexure-G is not sustainable. It is also borne out from the records that petitioner availed similar remedy before respondent No.3 seeking stay of imposition of penalty by respondent No.1 as per Annexure-K. 6. To buttress his arguments, learned counsel has relied on a judgment rendered in M.Shivanna and another Vs. Deputy Commissioner of Income Tax1. 7. Learned counsel appearing for the respondents would vehemently argue and submit to this Court that the order passed by the respondent/Assessing officer would not cause any prejudice to the present petitioner since he has already availed a remedy of statutory appeal before the Appellate Authority who has power to grant similar relief. 1 (2008) 76 CHH 0222 Kar HC 6 8. In that view of the matter, he would submit to this Court that the order under challenge does not suffer from any illegality and the same would not warrant any interference by this Court. 9. I have heard learned counsel for the petitioner and also learned counsel for respondents. 10. On perusal of the order under challenge, it is found that the respondent/Assessing Officer has passed an order without hearing the petitioner. The said order is passed by the respondents without following the relevant provisions of the Act and Rules. Since the order under challenge is passed in gross violation of the principles of natural justice, I deem it fit to set aside the order and remit back to the respondent/Assessing Officer to rehear the matter after affording an opportunity to the petitioner. 11. For the reasons stated supra, I proceed to pass the following: ORDER The writ petition is allowed. 7 The impugned order passed by the respondent/Assessing Officer as per Annexure-G is set aside. The matter stands remitted to the respondent- /Assessing Officer with a direction to hear the matter after notifying the petitioner and pass appropriate order in accordance with law. It is needless to say that the respondent/ Assessing Authority shall not take any coercive steps till the application filed by the petitioner is heard on merits in accordance with law. Sd/- JUDGE MBS/- "