D.b. Income Tax Appeal v. Late Shri Gyan Chand Jain

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR D.B. Income Tax Appeal No.33/2014Commissioner of I.T.-I New Central Revenue Building, Jaipurv. Late Shri Gyan Chand Jain Order reserved on25.2.2016Order of pronouncement29.3.2016 Hon'ble Mr. Justice Ajay RastogiHon'ble Mr. Justice J.K. Ranka Mr. Anuroop Singhi } counsel for appellant Mr. Saurabh Jain}Mr. Naresh Gupta, counsel for respondent By the Court(per J.K. Ranka, J.) 1.The instant appeal is directed against order of the learnedIncome Tax Appellate Tribunal dated 7.3.2014. It relates to theassessment year 1998-99. The Tribunal deleted penalty u/sec. 271(1)(c) of the Income Tax Act amounting to Rs.29,02,743/-. 2.Brief facts noticed are that the respondent-assessee furnishedreturn of income declaring total income of Rs.61,800/- on30.10.1998, however, the assessment was completed on a totalincome of Rs.1,00,31,240/-. Thereafter proceedings u/sec. 263were initiated by the Commissioner of Income Tax (Admn.), and finding that the claim of depreciation was wrongly allowed so alsoother expenses by the Assessing Officer on Tractor, Jeep, RingMachine, Dumper, Road Roller etc. @ 40% as against 25% and theother issues, the original assessment was set aside. It was noticedby the Assessing Officer that after the order passed by the Tribunalon merits pursuant to order passed u/sec. 263 by the AO, theincome has been substantially enhanced to what was declared bythe assessee and pursuant thereto, penalty proceedings u/sec. 271(1)(c) were initiated. The AO, on merits found that after order of the Tribunal, following additions were sustained :- 3.The AO issued show-cause notice u/sec. 271(1)(c) as to whypenalty be not imposed as assessee has concealed the particulars ofincome or has deliberately furnished inaccurate particulars of suchincome. However, the AO noticed that the assessee has notcontroverted many of the additions and the reply was also lacking in many respects. Ultimately the AO, after seeking sanction fromthe Addl. Commissioner of Income tax Range-3, Jaipur, found thatthe assessee has concealed income of Rs.97,65,209/- on which thetax chargeable was Rs.29,02,743/-. He imposed the minimumpenalty at Rs.29,02,743/-. 4.The said order was assailed before the CIT(A) who afteranalysing the material, upheld the findings of the AO that penaltyhas rightly been imposed as the assessee has deliberately furnishedinaccurate particulars of income or has wrongly claimed theexpenses which were not in accordance with the provisions of theAct. However, the CIT(A) sustained penalty leviable only on thecommission income of Rs.19,93,474/-, and directed to levyminimum penalty of the tax sought to be evaded on the concealedincome on Rs.19,93,474/-. 5.Both the AO as well as the respondent-assessee preferredappeals before the Tribunal. 6.Before the Tribunal for the first time the assessee raised alegal ground as ground no.1(b) on the premise that the penaltyorder is required to be treated as void ab initio for the reason thatthe AO has not obtained requisite prior approval of JointCommissioner before passing order imposing penalty under Chapter XXI of the Income Tax Act and that since the AO has nottaken prior approval of Joint Commissioner, the entire proceedinghas been vitiated and the order imposing penalty becomes null andvoid. On behalf of the Revenue it was contended that where Addl.CIT is functioning as AO, penalty imposed by him are not subjectmatter of jurisdictional dispute before the appellate authorities andthe approval by Addl. CIT was just and proper. Further that thesaid legal issue was not raised before the lower authorities and,therefore, it could not have been raised for the first time before theTribunal. Chapter XXI of the Income Tax Act and that since the AO has nottaken prior approval of Joint Commissioner, the entire proceedinghas been vitiated and the order imposing penalty becomes null andvoid. On behalf of the Revenue it was contended that where Addl.CIT is functioning as AO, penalty imposed by him are not subjectmatter of jurisdictional dispute before the appellate authorities andthe approval by Addl. CIT was just and proper. Further that thesaid legal issue was not raised before the lower authorities and,therefore, it could not have been raised for the first time before theTribunal. 7.The Tribunal, analysing the provisions vide impugned orderdated 7.3.2014 held that since the penalty imposed was withoutobtaining prior approval of Joint CIT, and that the approval wasobtained from Addl. CIT, which was without jurisdiction andauthority, the penalty order in question was quashed by theTribunal, and having held so the Tribunal did not decide the othergrounds raised on merits. 8.Following question was admitted by this Court :- “Whether the Tribunal was justified in holding that theprior approval taken for levy of penalty from AdditionalCommissioner does not fulfill the mandate under Sec.274which provide for taking approval from JointCommissioner in complete defiance of the definition of 5 “Joint Commissioner of Income Tax” provided u/S.2(28C) of the Act, which includes “AdditionalCommissioner of Income Tax ?” 9. Learned counsel for the Revenue at the outset contended that the order of the Tribunal is perverse and without considering theplain and simple language of sec. 274(2) r/w sec. 2(28C) and sec. 2(19C). Elaborating his arguments he further contended that sec.274(2) speaks that where the penalty exceeds Rs.10,000/- no ordercan be passed without prior approval of Joint Commissioner. Hefurther contended that as per sec. 2(28C) 'Joint Commissioner'means a person appointed to be a Joint Commissioner of IncomeTax or an Addl. Commissioner of Income Tax. He thus contendedthat taking into consideration the conjoint reading of sec. 274(2)and sec. 2(28C) Addl. CIT includes Joint Commissioner and in theinstant case the AO has rightly taken approval of the Addl. CITRange-3 Jaipur on 28.6.2007 which is also part of the appeal memoand thus contended that the Tribunal is wholly unjustified inholding that the Addl. CIT was not an authority authorised by lawto grant approval and it was the Joint Commissioner, who wasrequired to accord sanction. He relied upon the judgmentsrendered in Dharam Pal Singh Rao v. Income-tax Officer [2004]271 ITR 223, Farrukhabad Gramin Bank v. Addl. CIT & Anr. [2005] 277 ITR 320 (All), and Arun Kumar Maheshwari & Anr. v.ITO [2006] 285 ITR 179 (All), and contended that the judgmentssupport the view of the Revenue. 10.Per contra, learned counsel for the assessee contended thatthe order of Tribunal is just and proper and is not required to beinterfered with and the legal issue which went to the root of thematter was rightly raised, admitted and deliberated by the Tribunal.He further contended that plain and simple language of sec. 274(2)clearly speaks about obtaining approval of Joint Commissioner andJoint Commissioner is separately defined under the Income-taxAct, therefore, approval had to be obtained from JointCommissioner alone and not by Addl. Commissioner.11.He further contended that sec. 116 clearly specifies aboutincome tax authorities and Addl. CITs, Joint CITs or the AOs havedifferent roles to play and Addl. CIT might be a higher officer inhierarchy than the Joint CIT but permission under the law havingnot been obtained of Joint CIT, the Tribunal was justified inholding the penalty proceedings to be void ab initio. He reliedupon Brij Mohan v. CIT [1979] 120 ITR 1 (SC), Varkey Chacko v.CIT [1993] 203 ITR 885, Anirudhsinghji Karansinghji Jadeja &Anr. v. State of Gujarat AIR 1995 SC 2390(1), CIT v. Pawan Kumar Garg [2011] 334 ITR 240 (Del). He further contended thatthe tax / revenue involved in the instant appeal being below Rs.20lac, in the light of Circular No.21/2015 issued by the Central Boardof Direct Taxes on 10.12.2015, the appeal of the Revenue is liableto be dismissed and rather learned counsel for the Revenue oughtnot to have pressed for this appeal in the light of the said Circular. 12.In so far as the issue raised by the learned counsel for theassessee about the tax effect and the Circular dated 10.12.2015, itwas contended by the learned counsel for the Revenue that this is acase of penalty imposed to the extent of Rs.29,02,743/- which mayhave been reduced by the CIT (A), but before the Tribunal andbefore this Court the issue raised is of the penalty on merits. Hecontended that penalty levied being in excess of Rs.20 lac, the casedoes not fall within the limits as mentioned in the said Circular. 13.We have heard the learned counsel for the parties andperused the material on record. 14.It would be appropriate to quote relevant sections, namely2(1C), 2(19B), 2(28C), 116(cca), 117(1), 151, and 274(2) of theIncome Tax Act, 1961 :- 2. In this Act, unless the context otherwise requires,— (1C) "Additional Commissioner" means a person appointed to bean Additional Commissioner of Income-tax under sub-section (1) of section 117. (19B) "Deputy Commissioner (Appeals)" means a personappointed to be a Deputy Commissioner of Income-tax (Appeals)or an Additional Commissioner of Income-tax (Appeals) undersub-section (1) of section 117. (28C) "Joint Commissioner" means a person appointed to be aJoint Commissioner of Income-tax or an AdditionalCommissioner of Income-tax under sub-section (1) of section117. 116. There shall be the following classes of income-taxauthorities for the purposes of this Act, namely :—(cca) Joint Directors of Income-tax or Joint Commissioners ofIncome-tax, 117. (1) The Central Government may appoint such persons as itthinks fit to be income-tax authorities. 151. (1) No notice shall be issued under section 148 by anAssessing Officer, after the expiry of a period of four years fromthe end of the relevant assessment year, unless the Principal ChiefCommissioner or Chief Commissioner or Principal Commissioneror Commissioner is satisfied, on the reasons recorded by theAssessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), nonotice shall be issued under section 148 by an Assessing Officer,who is below the rank of Joint Commissioner, unless the JointCommissioner is satisfied, on the reasons recorded by suchAssessing Officer, that it is a fit case for the issue of such notice. (3) For the purposes of sub-section (1) and sub-section (2), thePrincipal Chief Commissioner or the Chief Commissioner or thePrincipal Commissioner or the Commissioner or the JointCommissioner, as the case may be, being satisfied on the reasonsrecorded by the Assessing Officer about fitness of a case for theissue of notice under section 148, need not issue such noticehimself. 274. (2) No order imposing a penalty under this Chapter shall bemade— (a) by the Income-tax Officer, where the penalty exceeds tenthousand rupees; (b) by the Assistant Commissioner or Deputy Commissioner,where the penalty exceeds twenty thousand rupees, except with the prior approval of the Joint Commissioner. 15.On a bare perusal of the above definitions and sec. 2(28C)read with 274(2) in particular, it is clear that 'Joint Commissioner'means a person appointed to the post of Joint Commissioner ofIncome-Tax and includes Addl. Commissioner of Income-Tax andgranting approval by the Addl. Commissioner of Income-Taxu/sec. 274(2)(b) of the Act on a permission sought by the AObefore imposing penalty u/sec. 271(1)(c), in our view is accordedby the authority competent under the law. 274. (2) No order imposing a penalty under this Chapter shall bemade— (a) by the Income-tax Officer, where the penalty exceeds tenthousand rupees; (b) by the Assistant Commissioner or Deputy Commissioner,where the penalty exceeds twenty thousand rupees, except with the prior approval of the Joint Commissioner. 15.On a bare perusal of the above definitions and sec. 2(28C)read with 274(2) in particular, it is clear that 'Joint Commissioner'means a person appointed to the post of Joint Commissioner ofIncome-Tax and includes Addl. Commissioner of Income-Tax andgranting approval by the Addl. Commissioner of Income-Taxu/sec. 274(2)(b) of the Act on a permission sought by the AObefore imposing penalty u/sec. 271(1)(c), in our view is accordedby the authority competent under the law. 16.Taking into consideration above, the Tribunal in our viewerred in quashing the penalty order merely on the premise thatAddl. CIT does not find place in Sec. 274(2)(b) and imposition ofpenalty is bad and void ab initio.17.We may also deal with the contention raised by the learnedcounsel for the assessee about the Circular dated 10.12.2015. Inour view the said Circular may not be applicable for the reason thatthe Revenue has assailed the penalty amounting to Rs.29,02,743/-and not only the penalty reduced by the CIT(A). Before theTribunal, both the Revenue as well as the assessee preferredappeals and the entire penalty as referred to hereinbefore, was inissue before the Tribunal and now before this Court. Therefore, we reject the contention of the learned counsel for the assessee as theCircular has no application. 18.The judgments relied upon by the assessee basically are theprinciples of interpretation of the provisions of law, before us whenthe provision is self explicit clear and plain language isunambiguous, need no interpretation. 19.The judgment in the case of Brij Mohan v. CIT (supra), was acase relating to the change of law before and after amendmentmade in sec. 271(1)(c) clause (iii) of the Finance Act, 1968. In ourview, this case is not relevant for the present purpose. 20.On the facts and in view of the law analysed hereinbefore, theorder of Tribunal is not sustainable in law and deserves to bequashed and accordingly quashed. 21.The appeal accordingly succeeds, the question of law isanswered in favour of the Revenue and against the assessee. Nocosts. (J.K. Ranka) J.(Ajay Rastogi) J. [All corrections made in the judgment/order have been incorporated in the judgment/order being emailed.]Deepankar Bhattacharya PSDeepankar Bhattacharya PS