IT : Once penalty itself had been set aside by Commissioner (Appeals), provisions of section 263 could not be invoked by revenue to impose penalty
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[2013] 34 taxmann.com 226 (Punjab & Haryana)
HIGH COURT OF PUNJAB AND HARYANA
Commissioner of Income-tax-I, Ludhiana
v.
Trident Ltd.*
HEMANT GUPTA AND MS. RITU BAHRI, JJ.
IT APPEAL NO.138 OF 2012†
MARCH 13, 2013
Section 271(1)(c), read with section 263, of the Income-tax Act, 1961 - Penalty - For concealment of income [Doctrine of merger] - Assessment year 2006-07 - Assessee claimed sales tax subsidy receipt as capital receipt - Assessing Officer treated said receipt as a revenue receipt and also levied penalty under section 271(1)(c) - On appeal, Commissioner (Appeals) deleted penalty - Thereafter, Commissioner passed an order under section 263 whereby penalty was quantified for reason that in original order of Assessing Officer, same was omitted - Whether once penalty itself had been set aside by Commissioner (Appeals), provisions of section 263 could not be invoked by revenue to impose penalty - Held, yes [Para 4] [In favour of assessee]
Rajesh Katoch for the Appellant.
ORDER
Hemant Gupta, J. - The Revenue is in appeal against the order dated 27.12.2011 under Section 260A of the Income Tax Act, 1961 passed by the Income Tax Appellate Tribunal, Chandigarh (for short 'the Tribunal') relating to the Assessment Year 2006-07. The revenue has claimed the following substantial questions of law:
| "(i) | Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal erred in quashing the order u/s 263 of the Income Tax, 1961 passed by CIT-I, Ludhiana wherein he only quantified the amount of penalty to be levied u/s 271(i)(c) on the issue of Sales Tax Subsidy which was omitted to be levied by the A.O. And did not challenge the decision of the Ld. CIT(A) to delete the penalty u/s 271(1)(c) on merits and, hence, the order of ITAT is perverse?" | |
| (ii) | Whether on the facts and circumstances of the case, the Hon'ble Income Tax Appellate Tribunal was correct in mentioning in the paragraph 4 of the impugned order that it had carefully perused the relevant records, whereas neither the records (file u/s 263) was called nor it was correct to say that it had known the facts, as it omitted to notice that in the penalty order body, the A.O. had levied the penalty but had not levied penalty while calculating thereby mocking the facts by stating perversely that the CIT(A) had decided the issue and this may be called a complete denial of the facts available on the record?" |
2. The assessee has received sales tax subsidy during the assessment year in question. The assessee claimed the said amount as a capital receipt but added a note that though the High Court has decided the matter holding that such amount is revenue receipt but an appeal against the order passed in pending before the Supreme Court, therefore, the same is reflected as capital receipt. The Assessing Officer rejected the contention of the assessee and treated the receipt of sales tax subsidy as a revenue receipt and initiated penalty proceedings. In appeal against the order passed by the Assessing Officer, the Commissioner of Income Tax (Appeals) returned the following findings:
"A. Levy of penalty on disallowance of Sales tax subsidy amounting to Rs.7,84,56,517/- treated as revenue receipt. The AO has levied penalty u/s 271(1)(c) on assessee's claim that sales tax subsidy should be treated as capital receipt. In this regard the assessee has submitted that though the issue has been decided against the assessee by the Hon'ble Punjab & Haryana High Court but the fact of the matter is that the SLP against the above order stands admitted before there Lordships of Supreme Court. Otherwise also the fact that assessee company had availed sales tax subsidy of Rs.7,84,56,517/- during the year under consideration has been given in the note to the computation to the total income which is as under:
"1. The Company has availed sales tax subsidy of Rs.7,84,56,517/- during the year under consideration. In view of the decision of PB and Haryana High Court in the case of assessee company the same have been treated as revenue receipt, however the company has filed an appeal before the hon'ble Supreme Court of India to consider the same as capital receipt. Thus the sales tax subsidy may please be treated as capital receipt at the time of framing of assessment."
3. After the said order was passed, the Commissioner Income Tax passed an order on 15.04.2011 under Section 263 of the Income Tax Act, 1961 whereby the penalty was quantified for the reason that in the original order of the Assessing Officer, the same was omitted. It is the said order passed by the Commissioner of Income Tax, which has been set aside by the Tribunal holding that once the penalty itself has been set aside by the Commissioner of Income Tax (Appeals), the provisions of Section 263 of the Act could not be invoked by the Revenue.
4. We find that the Commissioner of Income Tax has exercised jurisdiction under Section 263 of the Act in utter violation of not only of judicial proprietary also against the provisions of law. Once the penalty proceedings have been set aside in appeal, the Commissioner of Income Tax could not impose penalty on the basis of an order, which has since been set aside by the Commissioner of Income Tax (Appeals).
5. In view of the said fact, we do not find that any question of law arises for consideration out of an order passed by the Tribunal. Consequently, the appeal is dismissed.
VARSHA*In favour of assessee.
†Arising out of order of ITAT, Chandigarh, dated 27-12-2011.
Regards
Prarthana Jalan
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