Sanjeev Woollen Mills109, Churchgate Chambers,5, New Marine Lines,Mumbai 400 020 v. The Income-Tax Officer,Ward 12 (2)(1)Aayakar Bhavan, M.k.marg,Mumbai 400 020

salgaonkar IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1683 OF 2009 Sanjeev Woollen Mills109, Churchgate Chambers,5, New Marine Lines,Mumbai 400 020. ..Appellant versus The Income-tax Officer,Ward 12 (2)(1)Aayakar Bhavan, M.K.Marg,Mumbai 400 020 ..Respondent Mr.S.P. Goyal, petitioner, in person.Mr.Charanjeet Chanderpaul for the Respondent, Union of India. ALONGWITH INCOME TAX APPEAL NO. 4109 OF 2009 The Income-tax Officer-122[nd] floor, Aayakar Bhavan, M.K.Marg,Mumbai 400 020 ..Appellant versus Sanjeev Woollen Mills103, Krishna Chambers,5, New Marine Lines,Mumbai 400 020. ..Respondent Mr.Suresh Kumar for the petitioner.Mr.S.P. Goyal, respondent, in person. salgaonkar CORAM:MOHIT S. SHAH, C.J. & M.S.SANKLECHA, J.DATE :4 FEBRUARY 2014 P.C.: 1.These two appeals under Section 260A of the Income Tax Act 1961 (the Act) one by the assessee for the Assessment Year 1993-94 and the other by the Revenue for the Assessment year 1993-93 challenge a common order dated 26[th] March, 2009 of the Income Tax Appellate Tribunal (Tribunal). Therefore both the appeals are being heard together and being disposed of by this common order. 2.The Appeal No. 4109 of 2009 filed by the Revenue for the Assessment Year 1992-93 was admitted on 11[th] April, 2011 on the following question of law: “Whether on the facts and in the circumstances of the case, ITAT was justified in deleting penalty levied under Section 27(1)(c) of the Income Tax Act, 1961?” 3.The Appeal No. 1683 of 2003 filed by the assessee for the Assessment Year 1993-94 was admitted on 11[th] April, 2011 on the following questions of law: “Whether on the facts and in the circumstances of the case the ITAT was justified in confirming the penalty under Section 271(1)(c) of Income-tax Act, 1961?” 4.The assessee firm was engaged in the manufacture and export of blankets. During the Assessment Year 1992-93, it exported blankets and claimed exemption under Section 80HHC of the Act. The salgaonkar exemption claimed was in respect of the export income which was its entire income for that year. The assessee's net income was Rs.6.40 crores and the same was claimed as exempt under Section 80HHC of the Act for the Assessment Year 1992-93. So far as the Assessment Year 1993-94 was concerned, there was no export and the assessee had only local sales and had returned a net loss of Rs.54,420/-. 5.During the assessment proceeding for the Assessment Year 1992-93, as also for the Assessment Year 1993-94, the Assessing Officer had noted that the assessee had inflated the value of its closing stock, for the year 1992-93 by taking its value at higher market value. This resulted in artificially inflating its profit for the year 1992-93 so as to claim exemption of its entire profit under Section 80HHC of the Act. The Assessing Officer, therefore, rejected the books of account and valued the closing stock at the same rate as the opening stock for the Assessment Year 1992-93 at Rs.90/- per kg and restricted the deduction under Section 80HHC to Rs.3.78 crores. This consequently resulted in reduction of the rate of opening stock for Assessment Year 1993-94 resulting in addition of Rs.2.67 crores as a part of its income. 6.The assessee disputed the decision of the Assessing Officer with regard to the value closing stock for Assessment Year 1992-93 and the value of opening stock for the Assessment Year 1993-94 was carried in appeal. The Commissioner of the Income Tax (Appeals) by order dated 30[th] March, 1995 and 27[th] January, 1998 upheld the orders of the Assessing Officer for both the Assessment Year 1992-93 and 1993-94 respectively. On further appeal, the Tribunal upheld the assesse's contention and reversed the decision of the Assessing Officer as well as the CIT (Appeals) for both Assessment Year 1992-93 and 1993-94. salgaonkar 6.The assessee disputed the decision of the Assessing Officer with regard to the value closing stock for Assessment Year 1992-93 and the value of opening stock for the Assessment Year 1993-94 was carried in appeal. The Commissioner of the Income Tax (Appeals) by order dated 30[th] March, 1995 and 27[th] January, 1998 upheld the orders of the Assessing Officer for both the Assessment Year 1992-93 and 1993-94 respectively. On further appeal, the Tribunal upheld the assesse's contention and reversed the decision of the Assessing Officer as well as the CIT (Appeals) for both Assessment Year 1992-93 and 1993-94. salgaonkar However, on further appeal in the quantum proceeding, this court by an order dated 11[th] December, 2002 passed in the appeal filed by the Revenue in Income Tax Appeal No.9 of 2001 reversed the decisions of the Tribunal and restored the orders of the Assessing Officer. The assessee carried the matter in appeal to the Supreme Court. However, the assessee's appeal was also dismissed by the Supreme Court by its order dated 24th November 2005. Therefore, the appeal in quantum proceeding is decided against the assessee by the Apex Court and it is binding on all. 7.In the meantime, on 23[rd] July, 2003 the Assessing Officer for the Assessment Years 1992-93 and 1993-94, issued two notices to the assessee to show cause as to why penalty should not be imposed upon the appellant under Section 271(1)(c) of the Act for furnishing incorrect particulars of Income. By two orders dated 7th August 2003, the Assessing Officer imposed a penalty of Rs.47.08 lakhs for Assessment Year 1992-93 and Rs.1.06 crores for Assessment Year 1993-94. The assessee carried both the orders in appeal before the Commissioner of Income-tax (Appeals). By a common order dated 12[th ]March, 2004, the Commissioner of Income-tax (Appeals) dismissed both the appeals for Assessment Year 1992-93 and 1993-94. On further appeal, the Tribunal, by common impugned order dated 26th March 2009, held that no penalty is imposable for the Assessment year 1992-93 while upholding the penalty of Assessment Year 1993-94. The Tribunal held that so far as Assessment Year 1992-93 was concerned, the entire income of the appellant was exempted under Section 80HHC of the Act. The Tribunal was of the view that whatever be the quantum of Income, the same in any view of the matter would be exempted from tax by virtue of Section 80HHC of the Act and, salgaonkar therefore, there would be no occasion to impose penalty under Section 271(1)(c) of the Act. So far as the Assessment Year 1993-94 was concerned, the Tribunal by the impugned order dated 26[th] March, 2009 upheld the order of the Assessing Officer and the Commissioner of Income-tax (Appeals) and confirmed the penalty of Rs.47.08 crores imposed for the Assessment Year 1992-93. 8.The assessee is in appeal before us so far as the Assessment Year 1992-93, is concerned and the revenue in respect of Assessment Year 1993-94. The assessee points out that order imposing penalty for both the Assessment Year 1992-93 and 1993-94 are completely without jurisdiction. It is submitted that in terms of section 275 of the Act, no order imposing a penalty can be passed after a period of six months from the expiry of the end of financial year in which the penalty proceedings were initiated while passing the Assessment Order for Assessment Year 1992-93 on 30[th] March, 1995 and for Assessment Year 1993-94 on 27[th] March, 1996. The order imposing penalty under Section 271(1)(c) of the Act is dated 7[th] August, 2003 for both the Assessment Year 1992-93 and 1993-94. Therefore, the order dated 7[th ]August, 2003 is undisputedly passed beyond the period of six months for the end of the final year 30 March 1995 and 30 March 1996. 9.Alternatively, it is pointed out that an order imposing penalty under Section 271(1)(c) of the Act cannot be passed in view of Section 275 of the Act after the period of six months from the end of the month in which the order of Commissioner (Appeals) or Tribunal is passed in quantum proceedings. In this case the order of Commissioner (Appeals) in quantum proceedings were passed in 1995 and 1998 for Assessment Year 1992-93 and 1993-94 respectively. While the Tribunal salgaonkar passed the order on 4[th] July, 2000 allowing the assessee's appeal. In such cases no penalty can be imposed after the period of six months from the end of the month in which the Commissioner (Appeals) or the Appellate Tribunal passes an order in quantum proceeding. Sub-section 1(A) of Section 275 of the Act was introduced into the statute w.e.f. 13[th] July, 2006, providing for passing of order of penalty within six months from the date of High Court or Supreme Court Order in quantum proceedings would have no application to the present facts as we are dealing with a prior period. 10.Mr. Suresh Kumar, learned Advocate appearing for the Revenue in the appeal filed by the Revenue for the Assessment Year 1992-93 and Mr. Chanderpaul, learned Advocate appearing for the Revenue in the appeal filed by the Assessee for the Assessment year 1993-94 submits that the issue of limitation not being an issue which was raised before the Tribunal and, therefore, cannot be urged before the High Court in Appeal under Section 260A of the Act. So far as the Assessment Year 1992-93 is concerned, Mr. Suresh Kumar, learned Counsel for the Revenue submits that on merits penalty is imposable as there has been furnishing of inaccurate particulars of income on the part of the assessee. Therefore, the appeal of the assessee for the Assessment Year 1992-93 be allowed. 11.We have considered the rival submissions. We find that the objection on behalf of the Revenue that as the issue of limitation was not raised before the Tribunal, it cannot be raised before us in appeal is not sustainable. This is for the reason that if the order imposing penalty is passed beyond the period provided under Section 275 of the Act, the order is one without jurisdiction. An order without jurisdiction salgaonkar can be challenged at any stage as held by the Supreme Court in Kanwar Singh V/s. High Court of Delhi 2012(4) SCC 307. Therefore, the order imposing penalty passed beyond the period of limitation prescribed under Section 275 of the Act is completely without jurisdiction. The appeal of the Assessee for the Assessment Year 1993-94 has to be allowed, while in respect of the Assessment Year 1992-93, the appeal of the revenue cannot be allowed as the order imposing penalty by the Assessing Officer would be barred by limitation. 12.Moreover, in terms of Section 271(1)(c) of the Act, the quantum of penalty which can be imposed even if it is assumed that the revenue is right in its contention for Assessment Year 1992-93, that there is furnishing of inaccurate particulars of income, such penalty should not be less than the amount of tax sought to be evaded by reason thereof. In this case, the Tribunal has held that the entire income attributable to the year 1992-93 was arising out of export and the same was entitled to deduction under Section 80HHC of the Act. Therefore, as no tax was at all payable during the Assessment Year 1992-93 no issue of evading any tax can arise, therefore, the question of imposing any penalty would also not arise. We find that the conclusion reached by the Tribunal for Assessment Year 1992-93 is concerned, the same is unimpeachable on merits and thus does not call for any interference. In any view of the matter, the order imposing penalty for both the Assessment Years 1992-93 and 1993-94 are barred by Section 275 of the Act. 13.In view of the above, so far as the Assessment Year 1992-93 is concerned, we answer the question in the affirmative i.e. the Tribunal was justified in deleting penalty under Section 271(1)(c) of the Act. So far as the question raised for the Assessment Year 1993-94 is concerned, we answer the question in negative i.e. the Tribunal was not justified in confirming the penalty under Section 271(1)(c) of the Act for the Assessment Year 1993-94. 14.Accordingly, the appeal of the assessee for the Assessment Year 1993-94 is allowed and the appeal by the Revenue for the Assessment Year 1992-93 is dismissed. CHIEF JUSTICE (M.S.SANKLECHA, J.)