Rc/107/1999 Of The Commissioner Of Income Tax Visakha v. M.venkatramaiah

THE HON’BLE SRI JUSTICE V.V.S.RAOAND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.107 of 1999 Dated:27.12.2011 Between: The Commissioner of Income Tax,Visakhapatnam. …Applicant and Sri Mattapalli Venkataramayya,Rajahmundry. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAOANDTHE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERRED CASE No.107 of 1999 ORDER:(Per Hon’ble Sri Justice V.V.S.Rao) In obedience to the direction of this Court in I.T.C.No.84 of1997, dated 31.03.1998, the Income Tax Appellate Tribunal,Hyderabad Bench “A”, referred the following question for theopinion of this Court. Whether on the facts and in the circumstances of thecase, whether the Tribunal was justified in deleting the penaltylevied u/s.271(1)(a) of Rs.25,872/- with the quantum appealu/s.256(2) is pending for disposal before the Hon’ble HighCourt of Andhra Pradesh? The brief fact of the matter is as follows. The assesseewas a partner in the firm M/s.Sri Krishna Tulabar, Rajahmundry,engaged in the business of Dharma Kanta up to the assessmentyear 1984-1985. On 14.06.1984 the Officers of the Customs andCentral Excise Department apprehended him. They recovered 11gold biscuits with foreign markings from the assessee. This goldwas valued at Rs.2,26,000/-. Before the Court of the SpecialJudge for Economic Offences, Hyderabad, the assesseecontended that he is not the owner of the gold and that he is itscarrier which belongs to one Gulabchand. He could notsubstantiate the claim. Therefore, by judgment dated 12.11.1986the learned Special Judge held that the assessee is the owner ofthe seized gold. In the meanwhile, the assessee filed return of income on01.07.1986 declaring NIL income. After the judgment of theSpecial Judge for Economic Offences, in view of the order that theassessee is the owner of the gold, the Assessing Officer made anaddition of Rs.2,26,000/- under Section 69A of the Income TaxAct, 1961 (the Act), and accordingly completed the assessment. In the consequential penalty proceedings under Section 271(1)(a)of the Act, after following due process of law, the AssessingOfficer levied penalty of Rs.25,872/-. The same was confirmed bythe Commissioner of Income Tax (Appeals). The assessee filed appeal against the assessment order,which was accordingly allowed. Therefore, in the appeal beingI.T.A.No.1876/Hyd/94 against the penalty, the Income TaxAppellate Tribunal held that as the assessment no longer survives,the consequential penalty has no legs to stand. The penalty was accordingly cancelled, aggrieved by which, the Revenuesuccessfully sought reference under Section 256(1) of the Act,and thereupon moved this Court by filing I.T.C.No.84 of 1997 inwhich a direction was issued to refer the case to this Court. This matter was heard yesterday. The Junior StandingCounsel brought to our notice that against the order of theAppellate Tribunal setting aside the assessment, the Revenuesought for a reference, and therefore, the view taken by theAppellate Tribunal in the penalty proceedings is erroneous. Weadjourned the matter to enable the Junior Counsel to place beforethis Court the particulars of the reference case. Today when thematter is called, he fairly submits that no such reference is filed. In view of this, the only question is whether the penaltyproceedings can be sustained when the proceedings based onwhich penalty jurisdiction was invoked, are themselves reversedby the appellate authority. The question as posed above was considered by the Delhi High Court in Commissioner of Income Tax v Moti LalSharma[[1]]wherein the following observations are made. The question as posed above was considered by the Delhi High Court in Commissioner of Income Tax v Moti LalSharma[[1]]wherein the following observations are made. The assessee being aggrieved by the order of theCommissioner of Income Tax (Appeals) upholding thepenalty imposed under section 273(2)(a) of the Act filed anappeal before the Income Tax Appellate Tribunal. Whenthe aforesaid matter came up for hearing before theIncome Tax Appellate Tribunal, the quantum appeal wasalready decided by the Income Tax Appellate Tribunal asaforesaid, and the amount was deleted by the Tribunal inthe quantum assessment. In view of the aforesaid factualposition the Tribunal cancelled the penalties imposed inview of the fact that the basis on which penalties wereimposed had already been deleted by the Tribunal in thequantum assessment and directed the Assessing Officerto refund the amount of penalty in case the same hadbeen recovered… In view of the above, the question referred to this Court isanswered in the affirmative in favour of the assessee and againstthe Revenue. The Referred Case shall stand disposed of accordinglywithout any order as to costs. _______________ (V.V.S.RAO, J) 27.12.2011vs ____________________ (B.N.RAO NALLA, J) [1](1995) 215 ITR 458