Itta/354/2014 Of Commissioner Of Income Tax-Iii v. M/S Shri Ravi Teja Restaurents And Resorts Private Limited

IN THE HIGH COURT OF JUDICATURE AT HYDERABADFOR THE STATE OF TELANGANA ANDTHE STATE OF ANDHRA PRADESH (Special Original Jurisdiction) PRESENTTHE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.354 OF 2014 DATED: 24-06-2014 Between: Commissioner of Income Tax-III,Hyderabad … Appellant And M/s Shri Ravi Teja Restaurents& Resorts Private Limited … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA ANDTHE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.354 OF 2014 JUDGMENT:(per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is directed against the judgment and order of thelearned Tribunal dated 17-01-2014 in relation to the block periodassessment from 01-04-1996 to 04-07-2002. 2. In response to the pre-admission notice, a learned counselappears on behalf of the assessee. 3. We admit the appeal for statistical purpose on the followingsubstantial question of law. “Whether in the facts and circumstances of the case, the learnedTribunal was justified in setting aside the subject penalty in quasijudicial proceedings initiated by the Assessing Officer ?” 4. We have heard both the learned counsel and we haveconsidered the material placed before us. The undisputed fact is thatthe Assessing Officer concerned after determining undisclosed incomein search seizure proceeding, had initiated penalty proceeding. Butthis undisclosed income determined by the Assessing Officer in theblock assessment order was not sustained by the Commissioner ofIncome Tax (Appeals) in the quantum proceedings. Thus the penaltyproceeding initiated by the Assessing Officer became without anybasis as his determination of undisclosed income was set aside in theappeal. However, Commissioner of Income Tax (Appeals) determinedquantum of undisclosed income afresh on the basis of voluntary statement. 5. On analysis of facts as above, we now examine whether thepenalty proceeding that was kept pending was resumed by theAssessing Officer followed by Commissioner of Income Tax (Appeals)is legally permissible or not. Section 158BFA(2) of the Income TaxAct, 1961 being relevant provision of power is extracted hereunder: “Section 158BFA(2): The Assessing Officer or the Commissioner (Appeals) in thecourse of any proceedings under this Chapter, may direct thata person shall pay by way of penalty a sum which shall not beless than the amount of tax leviable but which shall notexceed three times the amount of tax so leviable in respect ofthe undisclosed income determined by the Assessing Officerunder Clause (c) of Section 158BC.” 6. Upon reading the aforesaid Section, we are of the view thatthe Assessing Officer had no jurisdiction to resume penalty proceedingconsequently to impose penalty, as his determination of income beingundisclosed was set aside, valid determination as above is sine quanon. It should have been done by the Commissioner (Appeals)himself, as he determined afresh, if he so chose. Instead, he hasaccepted partly the order of Assessing Officer imposing punishment, inan invalid proceeding. 7. We are of the view that when the resumption of the penaltyproceedings was bad in itself, such proceedings could not beregularised by the Commissioner of Income Tax (Appeals)subsequently by reducing the quantum of penalty. According to us,there has not been any lawful initiation of penalty proceedings. Itwould have been open to the Commissioner of Income Tax (Appeals)to initiate penalty proceedings initially as he invested with powercoextensively to do so. We accordingly set aside the judgment andorder of the learned Tribunal and also set aside the orders of theAssessing Officer, and the Commissioner of Income Tax (Appeals). However, we give liberty to the Commissioner of Income Tax 7. We are of the view that when the resumption of the penaltyproceedings was bad in itself, such proceedings could not beregularised by the Commissioner of Income Tax (Appeals)subsequently by reducing the quantum of penalty. According to us,there has not been any lawful initiation of penalty proceedings. Itwould have been open to the Commissioner of Income Tax (Appeals)to initiate penalty proceedings initially as he invested with powercoextensively to do so. We accordingly set aside the judgment andorder of the learned Tribunal and also set aside the orders of theAssessing Officer, and the Commissioner of Income Tax (Appeals). However, we give liberty to the Commissioner of Income Tax (Appeals) to initiate penalty proceedings in accordance with law afreshon the basis of own determination in terms of Section 158BFA(2) of theIncome Tax Act, 1961. While doing so, he shall take the entire casefacts and circumstances into consideration and complete the exercisewithin a fortnight from the date of communication of this order. If nosuch proceedings are initiated within the time above, this issue shallbe a closed chapter. 8. The appeal is accordingly disposed of. No costs. _____________________ K.J. SENGUPTA, CJ _____________________ SANJAY KUMAR, J 24-06-2014 Svv