THE COMMISSIONER OF INCOME TAX VISAKHA. V. M.VENKATRAMAIAH

RC/107/1999

AI Insights

The case involves the Commissioner of Income Tax, Visakhapatnam as the applicant and Sri Mattapalli Venkataramayya, Rajahmundry as the respondent. The core issue was whether the penalty levied under Section 271(1)(a) of the Income Tax Act, 1961, amounting to Rs.25,872, was justified after the assessment, which was the basis for the penalty, was reversed by the Income Tax Appellate Tribunal. The assessee was initially found to be the owner of seized gold, leading to an addition in his income and subsequent penalty. However, the Appellate Tribunal later reversed the assessment, leading to the cancellation of the penalty, which the Revenue contested, seeking a reference to the High Court.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 737315 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 27-12-2011
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v Moti Lal Sharma
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Appeal; Assessment; Gold Seizure; Income Tax; Penalty; Tribunal
• Section: 69A; 271(1)(a); 256(2)

Judgement Text

"THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.107 of 1999 Dated:27.12.2011 Between: The Commissioner of Income Tax, Visakhapatnam. …Applicant and Sri Mattapalli Venkataramayya, Rajahmundry. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.107 of 1999 ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) In obedience to the direction of this Court in I.T.C.No.84 of 1997, dated 31.03.1998, the Income Tax Appellate Tribunal, Hyderabad Bench “A”, referred the following question for the opinion of this Court. Whether on the facts and in the circumstances of the case, whether the Tribunal was justified in deleting the penalty levied u/s.271(1)(a) of Rs.25,872/- with the quantum appeal u/s.256(2) is pending for disposal before the Hon’ble High Court of Andhra Pradesh? The brief fact of the matter is as follows. The assessee was a partner in the firm M/s.Sri Krishna Tulabar, Rajahmundry, engaged in the business of Dharma Kanta up to the assessment year 1984-1985. On 14.06.1984 the Officers of the Customs and Central Excise Department apprehended him. They recovered 11 gold biscuits with foreign markings from the assessee. This gold was valued at Rs.2,26,000/-. Before the Court of the Special Judge for Economic Offences, Hyderabad, the assessee contended that he is not the owner of the gold and that he is its carrier which belongs to one Gulabchand. He could not substantiate the claim. Therefore, by judgment dated 12.11.1986 the learned Special Judge held that the assessee is the owner of the seized gold. In the meanwhile, the assessee filed return of income on 01.07.1986 declaring NIL income. After the judgment of the Special Judge for Economic Offences, in view of the order that the assessee is the owner of the gold, the Assessing Officer made an addition of Rs.2,26,000/- under Section 69A of the Income Tax Act, 1961 (the Act), and accordingly completed the assessment. In the consequential penalty proceedings under Section 271(1)(a) of the Act, after following due process of law, the Assessing Officer levied penalty of Rs.25,872/-. The same was confirmed by the Commissioner of Income Tax (Appeals). The assessee filed appeal against the assessment order, which was accordingly allowed. Therefore, in the appeal being I.T.A.No.1876/Hyd/94 against the penalty, the Income Tax Appellate Tribunal held that as the assessment no longer survives, the consequential penalty has no legs to stand. The penalty was accordingly cancelled, aggrieved by which, the Revenue successfully sought reference under Section 256(1) of the Act, and thereupon moved this Court by filing I.T.C.No.84 of 1997 in which a direction was issued to refer the case to this Court. This matter was heard yesterday. The Junior Standing Counsel brought to our notice that against the order of the Appellate Tribunal setting aside the assessment, the Revenue sought for a reference, and therefore, the view taken by the Appellate Tribunal in the penalty proceedings is erroneous. We adjourned the matter to enable the Junior Counsel to place before this Court the particulars of the reference case. Today when the matter is called, he fairly submits that no such reference is filed. In view of this, the only question is whether the penalty proceedings can be sustained when the proceedings based on which penalty jurisdiction was invoked, are themselves reversed by the appellate authority. The question as posed above was considered by the Delhi High Court in Commissioner of Income Tax v Moti Lal Sharma[1] wherein the following observations are made. The assessee being aggrieved by the order of the Commissioner of Income Tax (Appeals) upholding the penalty imposed under section 273(2)(a) of the Act filed an appeal before the Income Tax Appellate Tribunal. When the aforesaid matter came up for hearing before the Income Tax Appellate Tribunal, the quantum appeal was already decided by the Income Tax Appellate Tribunal as aforesaid, and the amount was deleted by the Tribunal in the quantum assessment. In view of the aforesaid factual position the Tribunal cancelled the penalties imposed in view of the fact that the basis on which penalties were imposed had already been deleted by the Tribunal in the quantum assessment and directed the Assessing Officer to refund the amount of penalty in case the same had been recovered… In view of the above, the question referred to this Court is answered in the affirmative in favour of the assessee and against the Revenue. The Referred Case shall stand disposed of accordingly without any order as to costs. _______________ (V.V.S.RAO, J) ____________________ (B.N.RAO NALLA, J) 27.12.2011 vs [1] (1995) 215 ITR 458 "