Gujarat H.C : Penalty proceedings under section 271(1)(c) of the Act for concealment of income and for furnishing inaccurate particulars of income

High Court Of Gujarat

Nitin Babubhai Rohit vs. Dharmendra Vishnubhai Patel

Section 143(3)

Akil Kureshi & B.N. Karia, JJ.

Special Civil Application No. 22959 of 2017

5th February, 2018

Counsel Appeared:

Mauna M Bhatt, Adv., for the Petitioner. : Tushar Hemani with MS Vaibhavi K Parikh, Adv., for the Respondent.

AKIL KURESHI, J:

Petitioner, the Assessing Officer of the respondent herein has challenged an order dated 15.03.2017 passed by the Commissioner of Income Tax, under which, the Revision Petition filed by the assessee challenging the order of penalty passed by the Assessing Officer came to be allowed.

Brief facts are as under.

The respondent is a proprietor of a sales agency. He had filed the return of income for the year 2011-12 on 24.10.2011. Such return was taken in scrut ny. The Assessing Officer passed order of assessment under section 143(3) of the Income Tax Act, 1961 ‘the Act’ for short) on 25.02.2014. He initiated penalty proceedings under section 271(1)(c) of the Act for concealment of income and for furnishing inaccurate particulars of income. Despite the assessee’s objections, the Assessing Officer imposed penalty of Rs.10,00,399/-under his order dated 23.02.2016.

On 24.09.2016, the assessee filed appeal against such order of penalty before the Commissioner of Income Tax (Appeals). Subsequently however on 16.02.2017, the assessee filed a Revision Petition against the order of penalty passed by the Assessing Officer before the Commissioner of Income Tax. On same day, he also made a communication to the Commissioner (Appeals) before whom his appeal was pending, in which, he conveyed as under:

“Dear Sir,

Re :Dharmendra Vishnubhai Patel

Appeal against order 271(1)(1) (C) of I.T. Act

Asst. Year 2011 – 2012

Sub: Withdrawal of Appeal

“The appellant had filed an online appeal against A.O.’s order u/s. 271(1)(C) dt.23/02/2016 on 24/09/2016. Efiling acknowledgment no. is 461739941240916, the copy of the same is enclosed herewith.

The appellant had filed revision petition u/s.264 before Hon’ble Commissioner of Income Tax Gandhinagar on 16/02/2017. The appellant hereby withdraws the above referred appeal subject to the condition that the stay petition is allowed by the CIT Gandhinagar in favour of the appellant.”

5. The Commissioner allowed the assessee’s revision petition by the impugned order dated 15.03.2017. In such order, he noted that;

“4. The undersigned has gone through the contents of the revision petition u/s 264 of the I.T. Act, 1961 of the assessee, written submissions of the assessee as well as the assessment records and the following issue merits adjudication.

The Assessing Officer has reported that during the course of assessment proceedings, on verification of the ITD system, it was noticed that the assessee has filed e-return in Form No.SUGAM 4S, on 24.10.2011. In this return, it was found that LTCG of Rs.47,93,267/-was not appearing in the Return of Income filed. Thus, it was clear that the assessee had concealed his income and furnished inaccurate particulars of income to the extend, which attracts penalty proceedings u/s 271(1) (C), of the IT Act, 1961. Had this case not been selected for scrutiny, the assessee could have gone away with lower return of income, i.e. gross total income as claimed by the assessee in his computation of income.

It is observed that the assessee has not reflected the LTCG in his return as the ITR4S does not have a separate column for the same. However, the gross total income is shown including the LTCG. This is visible in the ITR-V dated 24.10.2011 filed by the assessee as well as in the statement of Total Income, wherein the assessee has shown Rs.47,93,267 as LTCG and has paid Advance Tax of Rs 10,00,000. Thus, there is no be willful effort by the assessee to conceal the LTCG income and evade tax thereon. The penalty order u/s. 271(1)(C), of the IT Act, 1961 has been passed in absence of any attempt of concealment of income or furnishing of inaccurate particulars of income by the assessee.

5. For the reasons given above, the order passed by the Assessing Officer levying penalty u/s.271(1)(C) of the I.T.Act, 1961 on 23/02/2016 is erroneous and is set-aside. In the interest of justice and fair play, the Assessing Officer is directed to allow the claim of the assessee in respect of the same and refund the penalty levied to tune of Rs.10,00,399 forthwith and compute the correct income of the applicant accordingly.”

Thus, under the said order dated 15.03.2 017, the order of penalty passed by the Assessing Officer came to be set aside by the Commissioner in exercise of his revisional powers under section 264 of the Act. By that time, though the Commissioner (Appeals) had not passed any order on the petitioner’s request for withdrawal of the appeal made under the letter dated 16.02.2017, such appeal should have become infructuous. This was brought to the notice of the Commissioner of Income Tax (Appeals) by the assessee, despite which, the Appellate Commissioner proceeded to decide the appeal on merits and by an order dated 25.09.2017 dismissed the same. We are informed that the assessee thereupon approached the Tribunal challenging the said order of the Commissioner of Income Tax (Appeals) dated 25.09.2017 and the Tribunal by the order dated 13.12.2017 has allowed the appeal and thus set aside the same order of penalty observing that the Assessing Officer had completely ignored that the long term capital gain has been included in the gross income of the assessee and thus the assessee did disclose the capital gain in the income and therefore this was not a fit case for penalty.

The main ground on which this petition has been filed by the Assessing Officer is that the Commissioner could not have exercised powers under section 264 of the Act when appeal of the assessee pertaining to the same subject matter was pending before the Commissioner (Appeals).

We are not sure under what circumstances, the Assessing Officer was instructed to file the present petition. We have serious doubts whether on his own he could have taken such a decision to challenge the order of the superior authority. Whether he was acting under the instructions of the competent authority or the panel vested with such powers is not known. In an appropriate case, we would examine this aspect. For the present case, it is sufficient to recall that the assessee while filing petition under section 264 of the Act had simultaneously conveyed to the Commissioner (Appeals) that he does not want to pursue the appeal. Thus, his intention was very clear and which was to pursue the revision petition and not the appeal. He was thus, not desirous of riding on two horses simultaneously. Section 264 (4) of the Act imposes restrictions on the Commissioner to exercise his revisional powers in following cases. 264(4) The [Principal Commissioner or] Commissioner shall not revise any order under this section in the following cases

(a) where an appeal against the order lies to the [Deputy Commissioner (Appeals)] [or to the Commissioner (Appeals)] or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired, or, in the case of an appeal [to the Commissioner (Appeals) or] to the Appellate Tribunal, the assessee has not waived his right of appeal; or

(b) where the order is pending on an appeal before the [Deputy Commissioner (Appeals)]; or

(c) where the order has been made the subject of an appeal [to the Commissioner (Appeals) or] to the Appellate Tribunal.”

In terms of clause (a) of sub-section (4) of section 264, revisional powers would not be exercised, inter alia, in a case where the period of limitation for filing appeal has not expired and the assessee has not waived the right of appeal. This is essentially to ensure that at the hands of the same assessee a single issue does not receive consideration at the hands of two separate and independent authorities, one exercising appellate jurisdiction and the other revisional jurisdiction. Applying this principle to the facts on hands, we find that the assessee had clearly made a choice to persuade the Commissioner of Income Tax to exercise his revisional powers under section 2 64 of the Act and not pursue his appeal before the Appellate Commissioner. The revisional authority therefore correctly proceeded to decide the revision petition of the assessee and on facts correctly allowed the same. This later observation needs no elaboration since the order of the Commissioner is self explanatory and eloquent. The assessee had made full disclosure of the capital gain tax and there was no failure on his part to give necessary details thereof.

Before closing, we find it somewhat unusual to note that the Commissioner (Appeals) even after the revisional authority had set aside the order of penalty, proceeded to decide the appeal of the assessee. Even if the Commissioner of Income Tax (Appeals) was personally of the opinion that the revisional order should not have been passed, once such order was passed, he must abide by the discipline of a quasi-judicial structure and respect the order as it stands. Unless the order of the revisional authority was set aside by competent authority or Court, its effect must be allowed to be felt on record with full force. The only effect of the order was that the order of penalty passed by the Assessing Officer does not survive. If the penalty order was thus set aside by revisional authority, it was thereafter not open for the appellate Commissioner to still examine the merits of such an order and declare his legal opinion on the same. His actions led to two separate and parallel orders being passed by two independent quasi-judicial authorities which is the most undesirable circumstance. We must add, we wish the department had not carried such a matter before the High Court merely adding burden to the litigation.
Petition is disposed of accordingly.

[Citation : 409 ITR 276]