ITO 24(20(3), MUMBAI v. VIJAY AJMERA, MUMBAI

ITA 3549/MUM/2010 | 2004-2005
Pronouncement Date: 22-07-2011

Appeal Details

RSA Number 354919914 RSA 2010
Assessee PAN ACLPA6193R
Bench Mumbai
Appeal Number ITA 3549/MUM/2010
Duration Of Justice 1 year(s) 2 month(s) 16 day(s)
Appellant ITO 24(20(3), MUMBAI
Respondent VIJAY AJMERA, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Bench Allotted F
Tribunal Order Date 22-07-2011
Date Of Final Hearing 13-07-2011
Next Hearing Date 13-07-2011
Assessment Year 2004-2005
Appeal Filed On 06-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH MUMBAI BEFORE SHRI N.V. VASUDEVAN JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 3549/MUM/2010 (ASSESSMENT YEAR: 2004-05) INCOME TAX OFFICER - 24(2)(3) SHRI VIJAY AJMERA C-13 PRATYAKSHAKAR BHAVAN A-701 NEW D.S. NAGAR BANDA KURLA COMPLEX BANDRA (E) VS. NARSING LANE S.V. ROAD MUMBAI 400051 MALAD (W) MUMBAI 400064 PAN - ACLPA 6193 R APPELLANT RESPONDENT APPELLANT BY: SHRI SUBACHAN RAM RESPONDENT BY: SHRI SUBASH S. SHETTY O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) WHO CANCELLED THE PENALTY ORDER UNDER SECTION 271(1)(C) AS THE QUANTUM APPEAL HAS BEEN SET ASIDE BY THE ITAT AND HAD BEEN RESTORE D TO THE FILE OF THE A.O. TO CONSIDER THE MATTER AFRESH. 2. REVENUE HAS RAISED THE FOLLOWING TWO GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN CANCELLING THE PENALTY ORDER PA SSED UNDER SECTION 271(1)(C) AS THE QUANTUM APPEAL HAS BEEN SE T ASIDE BY THE ITAT AND HAD BEEN RESTORED TO THE FILE OF THE A SSESSING OFFICER TO CONSIDER THE MATTER AFRESH. 2. WHETHER THE ORDER OF THE LD. CIT(A) IS NOT CONTR ARY TO THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE F CIT VS. HIND MERCANTILE CORPORATION (177 ITR 149 (MAD) & CIT VS . V. RAMAKRISHNA SONS (P) LTD. (192 ITR 282 (MAD). 3. THE FACTS OF THE CASE ARE THAT THE A.O. VIDE ORDER DATED 29.12.2006 PASSED UNDER SECTION 144 OF THE I.T. ACT DID NOT AL LOW THE EXEMPTION CLAIMED UNDER SECTION 10A AND BROUGHT TO TAX. HE INITIATED PROCEEDINGS UNDER SECTION 271(1)(C). WHEN THE MATTER WAS CARRIED TO T HE CIT(A) HE REJECTED ASSESSEES APPEAL STATING THAT THE CLAIM WAS MADE W RONGLY. THE MATTER WAS ITA NO. 3549/MUM/2010 SHRI VIJAY AJMERA 2 CARRIED TO THE ITAT AND WAS RESTORED TO THE A.O. TO EXAMINE THE CLAIM OF THE ASSESSEE AFRESH WHILE SETTING THE ORDER PASSED UNDE R SECTION 144. CONSEQUENT TO THAT THE CIT(A) CANCELLED THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C). REVENUE IS IN APPEAL. 4. WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE R OF THE CIT(A) AS THE VERY BASIS FOR INITIATING THE PENALTY PROCEEDIN GS AND LEVY THEREON HAS BEEN SET ASIDE BY THE ITAT. 5. REVENUE HAS RAISED THE SECOND GROUND STATING THAT T HE DECISION OF THE CIT(A) IS CONTRARY TO THE DECISIONS OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. HIND MERCANTILE CORPORATION 177 ITR 149 AND CIT VS. RAMAKRISHNA SONS (P) LTD. 192 ITR 282. WE ARE UNABL E TO UNDERSTAND ON WHAT BASIS REVENUE IS CONTESTING THE ISSUE IN THIS GROUND AS THE FACTS IN THOSE CASES ARE ENTIRELY DIFFERENT FROM THE FACTS O F ASSESSEES CASE. 6. IN THE CASE OF HIND MERCANTILE CORPORATION(SUPRA) T HE FACTS WERE THAT THE ASSESSMENT ORDER HAS BEEN SET ASIDE BY THE TRIB UNAL FOR BEING DONE DE NOVO BY THE CIT(A). HOWEVER WHILE CONSIDERING PENA LTY UNDER SECTION 271(1)(C) THE TRIBUNAL CONSIDERED THE MERITS AND CA NCELLED THE PENALTY ON MERITS. IT IS AGAINST THIS CANCELLATION OF PENALTY THE DEPARTMENT OBTAINED A REFERENCE WHEREIN THE HON'BLE MADRAS HIGH COURT HEL D AS UNDER: - FROM THE STATEMENT OF THE CASE IT IS CLEAR THAT T HE ASSESSMENT FOR THE RELEVANT YEAR HAS BEEN SET ASIDE. WHEN THE ASSE SSMENT ITSELF WAS SET ASIDE THE QUESTION OF LEVY OF PENALTY COUL D NO LONGER BE A LIVE ISSUE. IN ORDER THAT THE PENALTY PROCEEDINGS SHOULD SURVIVE THE ASSESSMENT PROCEEDINGS SHOULD BE ALIVE. AS THE ASSE SSMENT HAD BEEN SET ASIDE THE PENALTY PROCEEDINGS COULD NOT H AVE BEEN TERMINATED BY THE CANCELLATION OF PENALTY. THE QUES TION AS TO WHETHER PENALTY WAS LEVIABLE OR NOT HAS TO BE CONSIDERED IN THE LIGHT OF THE FINDINGS IN THE ASSESSMENT TO BE MADE AS A RESULT O F DIRECTIONS GIVEN BY THE TRIBUNAL WHILE SETTING ASIDE THE SAME. IN TH ESE CIRCUMSTANCES THE TRIBUNAL ACTED ERRONEOUSLY IN CANCELLING THE PE NALTY. IN FACT THE QUESTIONS AS FRAMED APPEAR TO ANSWER THEMSELVES AS THE QUESTIONS ARE ANSWERED IN THE NEGATIVE AND IN FAVOUR OF THE D EPARTMENT. IN THE PARTICULAR CIRCUMSTANCES OF THE CASE THERE WILL BE NO ORDER AS TO COSTS. 7. SIMILARLY IN THE CASE OF CIT VS. RAMAKRISHNA SONS ( P) LTD.(SUPRA) ON SIMILAR FACTS WHEN THE TRIBUNAL REMITTED THE MATTER BACK FOR FRESH ITA NO. 3549/MUM/2010 SHRI VIJAY AJMERA 3 CONSIDERATION BUT THE PENALTY WAS DECIDED ON MERITS THE HON'BLE MADRAS HIGH COURT HAS HELD AS UNDER: - IN ORDER TO ENABLE THE PENALTY PROCEEDINGS TO SURV IVE THE ASSESSMENT PROCEEDINGS SHOULD BE ALIVE. IF THE ASSE SSMENT ORDER IS SET ASIDE AND THE MATTER IS REMITTED THE QUESTION OF LEVY OF PENALTY CAN BE CONSIDERED ONLY IN THE LIGHT OF THE ASSESSME NT TO BE MADE ON THE ASSESSEE PURSUANT TO THE DIRECTIONS GIVEN BY TH E TRIBUNAL WHILE SETTING ASIDE THE ASSESSMENT ORDER. EVEN A WRONG OR DER HAS A FINALITY AND UNLESS THAT FINALITY IS DISTURBED BY A PROCESS KNOWN TO LAW OR BY A PROCESS AUTHORISED BY LAW THE RIGHTS OF THE ASSE SSEE AND THE REVENUE WILL CONTINUE TO BE GOVERNED BY THE ORDER. FOR THE ASSESSMENT YEARS 1964-65 THE ASSESSEE CLA IMED DEDUCTION OF THE LOSS IN THE SPUN PIPE PLANT AND ALSO THE EXC ESS AMOUNT PAID TO A FINANCIAL ADVISER. THE INCOME-TAX OFFICER REJECTE D THE CLAIM AND ALSO FOUND THAT THE ASSESSEE HAD INTRODUCED BOGUS HUNDI CREDITS AND ACCORDINGLY THE INCOME-TAX OFFICER INCLUDED THE HU NDI AMOUNTS WITH INTEREST AS INCOME AND COMPLETED THE ASSESSMENT. PE NALTY PROCEEDINGS WERE ALSO INITIATED UNDER SECTION 271(1 )(C) OF THE INCOME- TAX ACT 1961. THE TRIBUNAL SET ASIDE THE DISALLOWA NCES IN REGARD TO THE LOSS IN THE SPUN PIPE PLANT AND THE EXCESS REMU NERATION AND REMITTED TO THE APPELLATE ASSISTANT COMMISSIONER TH E ISSUE REGARDING THE UNEXPLAINED HUNDI CREDITS. IN THE COURSE OF THE PENALTY PROCEEDINGS THE INSPECTING ASSISTANT COMMISSIONER CONSIDERED THE DISALLOWANCES MADE BY THE INCOME-TAX OFFICER FOR LE VY OF PENALTY. THE TRIBUNAL WHICH HELD THAT NO PENALTY WAS LEVIABLE IN RESPECT OF DISALLOWANCES IN REGARD TO THE LOSS IN THE SPUN PIP E PLANT AND THE EXCESS REMUNERATION PAID TO THE FINANCIAL ADVISER W HICH HAD BEEN ALLOWED IN THE APPEAL FROM THE ASSESSMENT ORDERS A LSO HELD THAT AS THE ASSESSEE HAD PRODUCED THE DISCHARGE HUNDI KHOKA S IN PROOF OF THE GENUINENESS OF THE LOANS AND IN THE ABSENCE OF MATERIALS TO ESTABLISH THAT THE CLAIM OF THE ASSESSEE WAS BOGUS NO CONCEALMENT OF INCOME WAS MADE OUT AND ACCORDINGLY THE LEVY O F PENALTY IN REGARD TO THE HUNDI CREDITS COULD NOT BE SUSTAINED. ON A REFERENCE : HELD THAT WHEN THE ASSESSMENT ORDERS HAD BEEN SET ASIDE BY THE TRIBUNAL IN REGARD TO THE HUNDI CREDITS AND REMITTE D FOR FRESH CONSIDERATION AND THE FRESH ASSESSMENT HAD NOT YET BEEN FINALISED PURSUANT TO THE REMIT ORDER THE TRIBUNAL WAS NOT J USTIFIED IN EXAMINING THE QUESTION OF LEVY OF PENALTY ON MERITS AND IN CANCELLING THE SAME. THE QUESTION WHETHER PENALTY WAS LEVIABLE OR NOT HAD TO BE CONSIDERED IN THE LIGHT OF THE CONCLUSIONS ARRIVED AT AS A RESULT OF THE DIRECTIONS GIVEN BY THE TRIBUNAL WHILE SETTING ASID E THE ORIGINAL ASSESSMENT ORDERS AND REMITTING THE MATTER. THE TRI BUNAL WAS THEREFORE IN ERROR IN CANCELLING THE PENALTY LEVIE D. AS CAN BE SEEN FROM THE ABOVE THERE IS A REQUIREME NT OF ASSESSMENT ORDER WHICH IS ALIVE FOR CONSIDERING THE PENALTY ON MERI TS. ONLY IN THAT EVENT THE ITA NO. 3549/MUM/2010 SHRI VIJAY AJMERA 4 PENALTY CAN BE CONSIDERED ON MERITS OF THE CASE. IN THE PRESENT CASE AS STATED BY THE CIT(A) THE VERY BASIS OF THE ORDER W AS SET ASIDE. CONSEQUENTLY WITHOUT GOING INTO THE MERITS OF LEVY OF PENALTY T HE CIT(A) HAS CANCELLED THE ORDER ON THE SOLE REASON THAT THE ASSESSMENT ORDER ITSELF WAS SET ASIDE. THEREFORE THE QUESTION OF PENALTY CONSEQUENT TO TH AT ORDER DOES NOT ARISE. WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE RS OF THE CIT(A) WHO SIMPLY CANCELLED THE PENALTY UNDER SECTION 271(1)(C ) WITHOUT CONSIDERING THE MERITS. THE JUDGEMENTS RELIED ON BY THE REVENUE IN GROUND NO. 2 WERE RENDERED IN THE CONTEXT OF DECIDING THE PENALTY ON MERITS WHEN NO ASSESSMENT ORDER WAS ALIVE. THE APPLICATION OF THE PRINCIPLES ESTABLISHED THEREIN TO THE FACTS OF THE CASE IS NOT CORRECT AND THE REVENUE CONTESTED THE ISSUE WITHOUT EXAMINING THE FACTS. THEREFORE WE SO NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY THE GROUN DS ARE CONSIDERED DISMISSED. A.O. HOWEVER IS FREE TO CONSIDER INITIA TION OF PENALTY PROCEEDINGS AFRESH WHILE COMPLETING THE ASSESSMENT. IN THE RES ULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JULY 2011. SD/- SD/- (N.V. VASUDEVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 22 ND JULY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXXIV MUMBAI 4. THE CIT XXIV MUMBAI CITY 5. THE DR F BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.