THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, MADURAI, MADURAI V. SRI JEYAPRABHA JEWELLERS PRIVATE LIMITED, MADURAI

MA 118/CHNY/2024

AI Insights

The case revolves around a Miscellaneous Application by the Revenue challenging the Tribunal's earlier decision which had deleted a penalty imposed on Sri Jeyaprabha Jewellers Pvt. Ltd. for the Assessment Year 2014-15. The penalty was initially levied under section 271(1)(c) due to alleged defects in the notice issued under sections 274 and 271(1)(c). The Tribunal had found the notice to be defective as it did not specify the exact nature of the fault for which the penalty was levied. The Revenue's application argued that the Tribunal's decision was inconsistent with the Supreme Court's ruling in Gangotri Textiles Ltd., which upheld the validity of similar notices. However, the Tribunal distinguished the case based on specific facts and noted that the Supreme Court's dismissal of the SLP did not affect the legal standing of the case under discussion.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775594 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 20-12-2024
• Other Referred Cases: Gangotri Textiles Ltd Vs Deputy Commissioner of Income-tax, Manjunatha Cotton & Ginning Factory, Commissioner of Income-tax v. SSA'S Emerald Meadows, Babuji Jacob v. ITO, Mohd. Farhan A. Shaikh v. ACIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T.VASUDEVAN
• Keywords: Revised return; Question of law; Capital Gains
• Section: 271(1)(c)

Judgement Text

"आयकर अपीलीय अिधकरण, ‘बी’ \u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI \u0001ी एबी टी. वक , ाियक सद\u0011 एवं एवं एवं एवं \u0001ी एस. आर. रघुनाथा, लेखा सद\u0007 क े सम\u001b BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER Miscellaneous Application No.118/Chny/2024 (in ITA No.794/Chny/2024) िनधा\u000eरण वष\u000e/Assessment Year: 2014-15 The DCIT, Central Circle-1, Madurai. v. M/s.Sri Jeyaprabha – Jewellers Pvt. Ltd., 285/91 B, South Avani Moola Street, Madurai-625 001. [PAN: AARCS 2844 Q] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) Departmentt by : Ms. Gouthami Manivasagam, JCIT Assessee by : Mr. T. Vasudevan, Advocate सुनवाईक तारीख/Date of Hearing : 04.07.2025 घोषणाक तारीख /Date of Pronouncement : 12.09.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: This is a Miscellaneous Application preferred by the Revenue against the impugned order of this Tribunal in ITA No.794/Chny/2024 for AY 2014-15 passed on 26.07.2024 in the aforesaid captioned case. Printed from counselvise.com MA No.118/Chny/2024 (in ITA No.794/Chny/2024 ) Sri Jeyaprabha Jewellers Pvt. Ltd. :: 2 :: 2. The Revenue has raised the following grounds: 1. The above appeal was disposed by the Hon'ble Tribunal vide order in ITA No.794/Chny/2024 for the Assessment Year 2014-15 dated 26.07.2024. The appellant, in respect of assessment year 2014-15, requests to present this petition for rectification of a mistake which is apparent from record u/s 254(2) of the Income-tax Act, 1961, in the said order. 2. The respondent filed appeal before the Hon'ble Tribunal raising issues on the grounds of appeal in I.T.A. No.794/Chny/2024 for the AY 2014-15 against the order of the CIT(A) in DIN & Order No. ITBA/APL/S/250/2023- 24/1060339204(1) dated 31.01.2024. 3. The ITAT passed an order dated 26.07.2024 in ITA No.794/Chny/2024 for the Assessment Year 2014-15. The Appellant submits that the Hon'ble ITAT has allowed the appeals of the assessee for the Assessment Year 2014-15 on legal grounds stating that the penalty notice u/s 274 r.w.s. 271(1)(c) dated 31.12.2016 issued by the AO is bad in law. 4. The decision of the ITAT is not in consonance with the decision of the Hon'ble Supreme Court of India in Gangotri Textiles Ltd Vs Deputy Commissioner of Income-tax [2022] 137 taxmann.com 198 (SC) wherein it has dismissed the SLP filed by the assessee against the order of the Hon'ble High Court of Madras on the contention that notice issued under section 274 read with section 271(1)(c) was defective on the ground that the Assessing Officer did not apply his mind while issuing the notice to state as to whether he was of the prima facie view that the assessee concealed the particulars of income or furnished inaccurate particulars of income. 5. Among the decisions, which were relied on emphasis was laid on the decision in Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565/218 Taxman 423/35 taxmann.com 250. This decision is pressed into service to substantiate the contention that if the notice does not specify as to which limb of section 271(1)(c) is attracted, the penalty proceedings are vitiated. 6. The High Court, Madras by impugned order held that since assessee did not act bona fide therefore, penalty under section 271(1)(c) of the Act was rightly levied. The Hon'ble Supreme Court has concurred with the findings of the Hon'ble High Court above and accordingly dismissed the SLP filed by the assessee and the case has been decided in favour of Revenue. 7. This in effect also nullifies the ruling in [2016] 73 taxmann.com 248 (SC) Commissioner of Income-tax v. SSA'S Emerald Meadows case as the said case was followed while delivering the order in Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565/218 Taxman 423/35 taxmann.com.250. 8. The Appellant, therefore, prays that the Hon'ble Tribunal may be pleased to rectify the order dated 26.07.2024 in ITA No.794/Chny/2024 which allowed the appeal of the assessee for the Assessment Year 2014-15 by entertaining the Miscellaneous Petition of the department which is filed u/s 254(2) of Income Tax Act. Printed from counselvise.com MA No.118/Chny/2024 (in ITA No.794/Chny/2024 ) Sri Jeyaprabha Jewellers Pvt. Ltd. :: 3 :: 3. The Ld.DR has assailed the action of the Tribunal cancelling/deleting penalty levied u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) on the ground that the notice issued u/s.274 r.w.s.271(1)(c) of the Act was defective and invalid for the failure on the part of the AO not striking down the limbs/fault for levying penalty. According to the Ld.DR, the impugned action of Tribunal is erroneous since it didn’t consider the decision of the Hon’ble Supreme Court in the case of Gangotri Textiles Ltd. v. DCIT reported in [2022] 137 taxmann.com 198 (SC), wherein the Apex Court confirmed the action of the Hon’ble Madras High Court repelling similar grounds raised by the assessee that notice issued before penalty was levied u/s.271(1)(c) of the Act was invalid since the notice issued by the AO [u/s.274 r.w.s.271(1)(c) of the Act] had reflected both the two (2) limbs of Clause (c) of Section 271(1) of the Act. Further, according to the Revenue, since the decision of the Hon’ble Supreme Court in the case of Gangotri Textiles Ltd. (supra) has been rendered in the year 2022, it nullifies the following other decisions cited in the impugned order passed by the Tribunal: 1. CIT vs Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar) 2. CIT, Bangalore Vs. SSA Emerald Meadows (2016) 73 Taxmann.com 241 (Kar.) 3. Babuji Jacob reported in 430 ITR 259 (Madras-HC) 4. Mohd. Farhan A. Shaikh v. ACIT (2021) 434 ITR 1 ( FB ) (Bom) (HC) Printed from counselvise.com MA No.118/Chny/2024 (in ITA No.794/Chny/2024 ) Sri Jeyaprabha Jewellers Pvt. Ltd. :: 4 :: And therefore, impugned order of the Tribunal needs to be recalled and decided on merits. 4. Per contra, the Counsel representing the assessee submitted that the decision of the Hon’ble Supreme Court in the case of Gangotri Textiles Ltd. was decided by the Hon’ble Madras High Court by order dated 25.08.2020 in favour of the Revenue and the SLP preferred by the assessee has been dismissed by the Hon’ble Supreme Court, refusing to exercise its powers under Article 136 of the Constitution and thus, dismissal of the SLP was an action without going into the merits of the decision of the Hon’ble Madras High Court. Therefore, the Counsel asserted that dismissal of SLP in limine by passing a non-speaking order without indicating any reasons for its dismissal implies that the Supreme Court has decided not to exercise its discretion to hear the appeal filed before it. For such a proposition, he relied on the decision of the Hon’ble Supreme Court in the case of Kunhayammed v. State of Kerala reported in [2000] 6 SCC 359 (SC), wherein the Hon’ble Supreme Court has observed as under: \"A petition for leave to appeal to this Court may be dismissed by a non- speaking order or by a speaking order. Whatever be the phraseology employed in the order of dismissal, if it is a non-speaking order, i.e. it does not assign reasons for dismissing the special leave petition, it would neither attract the doctrine of merger so as to stand substituted in place of the order put in issue before it nor would it be a declaration of law by the Supreme Court under Article 141 of the Constitution for there is no law which has been declared. Printed from counselvise.com MA No.118/Chny/2024 (in ITA No.794/Chny/2024 ) Sri Jeyaprabha Jewellers Pvt. Ltd. :: 5 :: ...iv) An order refusing special leave to appeal may be a non-speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed.\" 5. Hence, the Ld.Counsel submitted that the order of the Hon’ble Supreme Court refusing Special Leave Peititon to appeal doesn’t attract the doctrine of merger and doesn’t substitute in place of the order under challenge the order of the Hon’ble Supreme Court in order to be the declaration of Law by the Hon’ble Supreme Court under Article 141 of the Constitution. Therefore, according to the Ld.Counsel, the dismissal of SLP in the case of Gangotri Textiles Ltd., can’t be said to have nullified the following other decisions cited in the impugned order of the Tribunal: 1. CIT vs Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar) 2. CIT, Bangalore Vs. SSA Emerald Meadows (2016) 73 Taxmann.com 241 (Kar.) 3. Babuji Jacob reported in 430 ITR 259 (Madras-HC) 6. Further, according to the Ld.AR, facts involved in Gangotri Textiles Ltd. (supra), was clearly distinguishable as discussed infra and therefore, the decision cannot be said to have judicial precedence to the case in hand. The Hon’ble Madras High Court in Gangotri Textiles Ltd. (supra) has clearly found in the facts of that case the assessee therein had understood the contents/ faults spelt out in the notices issued u/s.274 r.w.s.271(1)(c) of the Act and observed that there was indeed concealment of the particulars of income/furnishing of inaccurate Printed from counselvise.com MA No.118/Chny/2024 (in ITA No.794/Chny/2024 ) Sri Jeyaprabha Jewellers Pvt. Ltd. :: 6 :: particulars of income. Moreover in that case, the Hon’ble High Court noted that the legal ground assailing the defect in the notice was raised for the first time before it and therefore, declined to entertain the same by holding that such a ground doesn’t raise a substantial question of law. Therefore, the Gangotri Textiles (supra) was distinguishable on the facts and therefore, the ratio laid down by the Hon’ble Madras High Court in the case of Gangotri Textiles Ltd. is not applicable to the facts of the present assessee. Moreover, the Ld.AR drew our attention to the fact that the order in the case of Gangotri Textiles Ltd. (supra) in favour of the Revenue was passed on 25.08.2020 whereas the decision in the case of Babuji Jacob v. ITO reported in [2021] 430 ITR 259 (Mad.)(HC) was passed after 08.12.2020 and by the very same Judge, Hon’ble Justice T.S. Shivagnanam, who had taken note of the decision in the case of Sundaram Finance Ltd v. ACIT reported in [2018] 403 ITR 407 which was challenged by Sundaram Finance before the Hon’ble Supreme Court by filing SLP which was dismissed and reported in [2018] 99 taxmann.com 152 (SC). Having considered all the contentions of the Revenue and after considering a host of decision, their Lordships was pleased to hold in the case of Babuji Jacob (supra) that the notice initiating penalty proceedings if found to be defective and invalid, imposition of penalty vitiated/un- warranted. Therefore, according to the Ld.AR, there is no mistake Printed from counselvise.com MA No.118/Chny/2024 (in ITA No.794/Chny/2024 ) Sri Jeyaprabha Jewellers Pvt. Ltd. :: 7 :: apparent on the face of the record which would warrant interference from our side. 7. We have heard both the parties and perused the material available on record, we note that Miscellaneous Application has been preferred by the Revenue challenging the action of this Tribunal holding the penalty notice issued by the AO u/s.274 r.w.s.271(1)(c) of the Act to be defective/invalid and therefore, legally untenable and consequently deleted the penalty levied u/s.271(1)(c) of the Act. The defect noticed in the impugned order was that the AO issued notice proposing penalty, without striking down the limbs/faults which are not applicable for the facts of the assessee’s case for the proposed levy of penalty. The main contention of the Revenue is that the Tribunal had not taken notice of the decision of the Hon’ble Supreme Court in the case of Gangotri Textiles Ltd. (supra). According to the Revenue, similar legal issue [defective notice] was raised by that assessee initially before the Hon’ble Madras High Court, which contention/issue was repelled by the Hon’ble High Court and thereby the Hon’ble High Court was pleased to pass an order in favour of the Revenue by order dated 25.08.2020. And such a decision was challenged by the assessee before the Hon’ble Supreme Court by filing SLP which was dismissed on 18.02.2022 by the Hon’ble Supreme Court which order reads as under: Printed from counselvise.com MA No.118/Chny/2024 (in ITA No.794/Chny/2024 ) Sri Jeyaprabha Jewellers Pvt. Ltd. :: 8 :: We have heard Shri Arvind P. Datar, learned senior counsel appearing on behalf of the petitioner. In the facts and circumstances of the case, we do not want to interfere with the impugned judgment and order passed by the High Court in exercise of powers under Article 136 of the Constitution of India. Hence, the Special Leave petitions stand dismissed. Pending application(s) shall stand disposed of. 8. According to the Revenue, since the Hon’ble Supreme Court upheld the action of the Hon’ble Madras High Court in the case of Gangotri Textiles Ltd. (supra), similar legal issue raised by the assessee in respect of defective notice should have been answered against the assessee. And by not doing so, the Tribunal erred in answering in favour of the assessee. Further according to the Revenue, since the SLP has been dismissed in 2022, all other orders cited by the Tribunal in the impugned order stands nullified. We don’t agree with the contention of the Revenue. Doctrine of merger doesn’t take place when the Hon’ble Supreme Court refuses Special Leave to appeal. In other words, the order of the Hon’ble High Court [under challenge before the Hon’ble Supreme Court] doesn’t get substituted by the order of the Hon’ble Supreme Court. This position of law has been clarified by the Hon’ble Supreme Court itself that SLP dismissal or refusal by the Hon’ble Supreme Court to entertain Special Leave to appeal before it doesn’t mean that the order challenged before it, gets substituted by the order of the Supreme Court and in such an event the doctrine of merger doesn’t take place. In other words, the Printed from counselvise.com MA No.118/Chny/2024 (in ITA No.794/Chny/2024 ) Sri Jeyaprabha Jewellers Pvt. Ltd. :: 9 :: order challenged before the Hon’ble Supreme Court [in this case, the Hon’ble Madras High Court] doesn’t merge with the decision of the Hon’ble Supreme Court and therefore, it can’t be held to be a declaration of law by the Hon’ble Supreme Court under Article 141 of the Constitution. For such a proposition, we rely on the following decisions: I. Kunhayammed v. State of Kerala (2000)6 SCC 359 II. Khoday Distilleries v. Sri Mahadeshwara Sahakara Sakkare Karkhane (2019) 2 SCC 136 9. Having said so, we also find force in the submission of the Ld.AR that the order passed by the Hon’ble Madras High Court in the case of Gangotri Textiles Ltd., was on the peculiar facts of that case and so, it is distinguishable. And in that case, the defect in the notice was raised for the first time before the Hon’ble Madras High Court, which was also a fact, the Hon’ble High Court noted to refuse admission of the same; and secondly, the Hon’ble High Court took note of the distinguishing facts of the case, wherein the assessee didn’t disclose about the sale of its land & windmill in its RoI filed u/s.139(1) of the Act on 26.09.2012 and after ‘13’ months of issuance of statutory notice u/s.143(2) of the Act, the assessee by letter dated 03.03.2015, admitted that due to oversight, it didn’t offer the capital gains in its return and attached a summary of total income adjusting profit on the LTCG & STCG; and even at that stage, didn’t bother to file revised return. Considering the aforesaid facts, the Hon’ble Printed from counselvise.com MA No.118/Chny/2024 (in ITA No.794/Chny/2024 ) Sri Jeyaprabha Jewellers Pvt. Ltd. :: 10 :: High Court wondered as to how the assessee while responding to the penalty notice dated 12.03.2015, could have asserted that there was no concealment of income or furnishing of inaccurate particulars of income as envisaged, sec.271(1)(c) of the Act. The Hon’ble High Court took note of the fact that, the assessee didn’t disclose about the sale of the land & windmill in its return which fact/omission was clearly discernable from the perusal of the RoI/ITR, wherein, at the relevant column, it is stated as ‘nil’. In such factual back ground, the Hon’ble High Court held that “it will not only be a case of filing of inaccurate particulars, but also a case of concealment of income” meaning in the peculiar facts both faults are attracted. Therefore, in the aforesaid factual back ground, the assessee having understood the ingredients of the penalty proposed to be levied against it, coupled with the omission on the part of the assessee of not raising the invalidity/legal issue pertaining to the notice before the Ld.CIT(A)/Tribunal, refused to entertain the legal issue regarding defect in the notice and was of the view that there was no substantial question of law against the action of the Tribunal confirming the penalty u/s.271(1)(c) of the Act. Therefore, the decision rendered in Gangotri Textiles Ltd., is distinguishable on the peculiar facts of that case and therefore, dismissal of the SLP refusing leave to appeal, as noted supra would not come to the aid of the Revenue to wipe out the stare- Printed from counselvise.com MA No.118/Chny/2024 (in ITA No.794/Chny/2024 ) Sri Jeyaprabha Jewellers Pvt. Ltd. :: 11 :: decisis/judicial precedent of ratio laid down by the Hon’ble jurisdictional High Court in the case of Babuji Jacob (supra). Therefore, we don’t find any merits in the Miscellaneous Application filed by the Revenue against the impugned order of the Tribunal which was passed citing the binding decision of the Hon’ble jurisdictional High Court in the case of Babuji Jacob (supra) and a host of other decision; and hence, Miscellaneous Application of the Revenue stands dismissed. 10. In the result, Miscellaneous Application filed by the Revenue is dismissed. Order pronounced on the 12th day of September, 2025, in Chennai. Sd/- (एस. आर. रघुनाथा) (S.R.RAGHUNATHA) लेखा सद\u0001य/ACCOUNTANT MEMBER Sd/- (एबी टी. वक ) (ABY T. VARKEY) \u0003याियक सद\u0001य/JUDICIAL MEMBER चे ई/Chennai, !दनांक/Dated: 12th September, 2025. TLN, Sr.PS आदेश क \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ /Appellant 2. \u000eथ /Respondent 3. आयकरआयु\u0014/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय ितिनिध/DR 5. गाड फाईल/GF Printed from counselvise.com "