THE COMMISSIONER OF INCOME TAX V. M/S.REMA CONSTRUCTIONS,

ITA/917/2006

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax and the Income Tax Officer against M/s. Rema Constructions concerning the disallowance of certain revenue expenditure claims and the subsequent initiation of penalty proceedings. The Assessing Officer initially disallowed the claims made by M/s. Rema Constructions for commission, traveling expenses, and labor charges as revenue expenditures. The Commissioner of Income Tax (Administration) later directed the initiation of penalty proceedings for furnishing inaccurate particulars. However, the Income Tax Appellate Tribunal overturned this decision, citing lack of jurisdiction under Section 263 of the Income Tax Act, 1961. The High Court's judgment affirmed the Tribunal's decision, emphasizing the jurisdictional limitations of the Commissioner (Administration) prior to the amendment on June 1, 2002.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 745730 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 18-07-2012
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S
• Assessee Lawyers: M
• Keywords: Assessment Year; Income tax appeal; Jurisdiction; Penalty proceedings; Revisional Jurisdiction
• Section: 263; 271(1)(c); 260-A

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE 18TH DAY OF JULY 2012 PRESENT HON' BLE MR. JUSTICE K.SREEDHAR RAO AND HON' BLE MR. JUSTICE B.MANOHAR INCOME TAX APPEAL NO.917 OF 2006 BETWEEN: 1. The Commissioner of Income tax Central Circle, C.R. Building, Queens Road, Bangalore. 2. The Income tax Officer, Ward – 8(4) C.R. Building, Queens Road, Bangalore. ... Appellants ( By Shri.M.Thirumalesh, Adv.) AND : M/s. Rema Constructions, No.59, Millers Road, Benson Town, Bangalore – 560 046 … Respondent (By Shri.S.Parthasarathi. Adv.) 2 This ITA is filed under Section. 260-A of I.T. Act, 1961 arising out of order dated 06.01.2006 passed in I.T.A. No.2225/BANG/2004 for the Assessment years 2001-02, praying that this Hon’ble Court may be pleased to: (i) formulate the substantial questions of law stated therein, (ii) allow the appeal and set aside the order passed by the ITAT, Bangalore in ITA No. 2225/BANG/2004, dated 06.01.2006 & confirm the order passed by the Commissioner of Income Tax-IV, Bangalore, in the interest of justice and equity. This appeal coming on for Final Hearing this day K.SREEDHAR RAO, J., delivered the following: J U D G M E N T The assessee in the return sought exemption of the commission paid to an extent of Rs.3,35,665/-, towards travelling expenses Rs.2,05,200/- and towards labour charges Rs.58,300/- as revenue expenditure. 2. The Assessing Authority disallowed the claim. The CIT (Administration) exercising revisional jurisdiction found that mere disallowance of the said items by the Assessing Officer was not proper. The Assessing Officer should have initiated penalty proceedings under Section – 271(1)(c) for deliberately 3 furnishing inaccurate particulars and thus directed the Assessing Authority to initiate penalty proceedings. 3. Aggrieved by the said order, the assessee filed an appeal before the Tribunal. The Tribunal allowed the appeal holding that the CIT (Administration) had no jurisdiction to direct initiation of penalty proceedings. The following question of law was framed by this Court for consideration: “i) Whether the Appellate Tribunal is right in holding that Commissioner of Income tax has no jurisdiction in exercise of his power under Section – 263 of the Act for the purpose of remanding the matter to the Assessing Officer imposing penalty under Sec. 271(1)(c) of the IT Act.” 4. The provisions of Section - 271 of the Income tax Act reads as follows: “271 (1) If the [Assessing] Officer or the [Commissioner] (Appeals)] [ or the Commissioner] in the course of any proceedings under this Act, is satisfied that any person – (a) [***] 4 (b) has [***] failed to comply with a notice [under sub-section (2) of section 115WD or under sub-section (2) of Section 115WE or] under sub-section (1) of Section 142 or sub-section (2) of Section 143 [or fails to comply with a direction issued under sub- section (2A) of section [42] or (c) has concealed the particulars of his income or furnished inaccurate particulars of [such income, or] (d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits,]” 5. The words of “the Commissioner” to mean “the Commissioner (Administration)” was instituted by amendment w.e.f. 01.06.2002. The assessment year in the present appeal pertains to 2001-2002. In the absence of the amended provisions, the Commissioner (Administration) had no jurisdiction. It was only the Assessing Officer or the Commissioner (Appeals) could have exercised the jurisdiction for initiating penalty proceedings. 5 6. The Commissioner (Appeals) could have directed initiation of penalty proceedings and he could have also suo-moto exercised the penalty proceedings. But for the Commissioner (Administration), it is only after the amendment that jurisdiction is vested. 7. In that view of the matter, the order of the Tribunal is sound and proper. The question of law framed by this Court is answered against the Revenue. Appeal dismissed. Sd/- JUDGE Sd/- JUDGE JJ "