Ita/138/2010 Of The Commissioner Of Income Tax,Kannur v. M/S.cannanore Co-Op.hospital Society

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN WEDNESDAY, THE 21ST JULY 2010 / 30TH ASHADHA 1932 ITA.No. 138 of 2010() --------------------- ITA.442/2009 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX, KANNUR. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT ------------------------ M/S.KANNUR CO-OPERATIVE HOSPITAL SOCIETY LTD,TALAP,KANNUR-2. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ALONG WITH ITA NO.139/2010 & CONN. CASES ON 21/07/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR &P.S.GOPINATHAN, JJ. .................................................................... I.T. Appeal Nos.138,139,141,142 & 175 of 2010 ....................................................................Dated this the 21st day of July, 2010. JUDGMENT Ramachandran Nair, J. Question raised is whether the Tribunal was justified incancelling suo moto revisional order issued by the Commissioner underSection 263 of the Income Tax Act levying penalty under Section 271Bwhich was dropped by the Assessing Officer. On facts, we find that therespondent is a hospital in the Co-operative sector, the assessment ofwhich is completed on heavy loss. Further, the Co-operative Societyrunning the hospital which started in 1980, did not file return for 26years and only in 2006 in a survey the existence of the assessee came tothe notice of the Income Tax Department. Penalty proposed by theCommissioner in suo moto proceedings is the one considered anddropped by the Assessing Officer. A Co-operative Society's accountsare to be audited mainly by the Auditors appointed under the statuteand in several cases we find inordinate delay in finalisation of auditingof Society's accounts by the statutory Auditor. The department onlyencouraged the omissions on the part of the assessee because for 25 years the assessee's existence was not noticed by the department. Wefeel when assessment is commenced after detection after 25 years ofrunning a Co-operative Hospital, the department should be lenient andthis is exactly what the Assessing Officer did by dropping penalty forthe technical violation of delay in audit. Assessments are completedon heavy losses. Since respondent is a Co-operative society running ahospital on heavy losses, we do not think there is any justification tointerfere with the orders of the Tribunal cancelling the suo motorevisional orders issued by the Commissioner to levy penalty. Sicnethe Tribunal has found on facts no justification for penalty on merits,there is no need for us to consider the questions of law raisedpertaining to jurisdiction of the Tribunal. Accordingly appeals aredismissed. C.N.RAMACHANDRAN NAIRJudge P.S.GOPINATHANJudge