SHRI BHAGWAN SINGH PALARIA vs. THE COMMISSIONER OF INCOME TAX AND ANR

ITA/95/2018HC RajasthanRJHC02036970201820 December 2018Author: MOHAMMAD RAFIQ,GOVERDHAN BARDHAR2 pages
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What were the facts?

The appeal is against the order dated 26.06.2009 of the Income Tax Appellate Tribunal (ITAT), Jaipur Bench, which upheld a penalty of Rs.98,19,531/- under Section 158 BFA (2) of the Income Tax Act, 1961. This penalty arose from an assessment order for the block period 1988-89 to 1997-98 up to 20.01.1998. The appellant argued that a previous appeal filed by him (D.B. Income Tax Appeal No.54/2006) against the main assessment order was allowed on 25.04.2017, relying on another High Court judgment. The department's Special Leave Petition against this decision was dismissed by the Supreme Court on 05.03.2018. The appellant also filed a rectification application against the penalty order, which was rejected by the ITAT on 11.10.2017 as time-barred.

What did the High Court hold?

The Tribunal held that when the main assessment order itself has ceased to exist, the assessee cannot be saddled with a penalty that is consequential to that assessment. The High Court allowed the appeal, setting aside the impugned ITAT order dated 26.06.2009 upholding the penalty. The reasoning was that the primary assessment order had been nullified, rendering the penalty unsustainable. The ratio decidendi is that a penalty cannot exist independently of the assessment order it is predicated upon. The operative direction was to set aside the ITAT's order on penalty. The appellant's counsel stated he would withdraw the writ petition filed against the rectification order rejection.

What were the issues?

1. Whether the penalty under Section 158 BFA (2) can survive when the main assessment order, on which it is based, has been set aside. (Question of law). Assessee's contention: The appellant argued that since the main assessment order for the block period has been set aside by this court and confirmed by the Supreme Court, there is no basis for the penalty to stand. The appellant relied on the High Court's judgment in D.B. Income Tax Appeal No.54/2006, which was decided on 25.04.2017, and the subsequent dismissal of the department's SLP by the Supreme Court on 05.03.2018. Revenue's contention: The judgment records no specific contention from the revenue regarding the survival of the penalty in light of the set-aside assessment order. However, the revenue's counsel noted that the appellant had also filed a writ petition against the ITAT's order rejecting the rectification application.

Which sections of the Income-tax Act were involved?

Section 158 BFA (2)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No.95/2018 Shri Bhagwan Singh Palaria, Jones Ganj, Ajmer. ----Appellant Versus 1. The Commissioner Of Income Tax, Income Tax Department, Ajmer. 2. The Income Tax Officer, Ward-2(2), Ajmer. ----Respondents For Appellant(s) : Mr. P.K. Kasliwal For Respondent(s) : Ms. Parinitoo Jain with Ms. Shiva Goyal HON'BLE MR. JUSTICE MOHAMMAD RAFIQ HON'BLE MR. JUSTICE GOVERDHAN BARDHAR

Order 20/12/2018 Learned counsel for the appellant submits that the present appeal is directed against the order dated 26.06.2009 of the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur, whereby the penalty under Section 158 BFA (2) of the Income Tax Act, 1961 amounting to Rs.98,19,531/- arising out of the assessment order for the block period 1988-89 to 1997-98 upto 20.01.1998 has been upheld. Learned counsel has referred to the judgment of this court in D.B. Income Tax Appeal No.54/2006, filed by the appellant himself, which was decided on 25.04.2017. Earlier the appeal filed against the main assessment order was allowed relying on earlier judgment of this court dated 21.03.2017 in D.B.

Income Tax Appeal No.2/2008 – M/s. Moo

The order continues below.

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