COMMISSIONER OF INCOME TAX vs. REMI STEEL HOUSE

As common question of law and fact arise in both these appeals and as such arise out of the common judgement and order passed by the Income Tax Appellate Tribunal (hereinafter referred to as “the ITAT”), both these appeals are disposed of by this common judgement and order.

Both these appeals have been preferred by the revenue challenging impugned common judgement and order 1547/Ahd/2010 dated 5/4/2013 with respect to AY 2007-2008 by which the ITAT has allowed the said appeals preferred by the respondents – assessee on altogether a different ground which was neither canvassed before the Assessing Officer nor before the CIT(A).

Facts leading to both these appeals in nutshell, are as under :-

That search and seizure operation under section 133A of the Income Tax Act was carried out at the business premises on Remi Steel Group of Vapi and simultaneously, Survey proceedings under section 133A was conducted at the business premises of the group. It was found that the assessee was in possession of unexplained cash of Rs.5 Lacs and unaccounted stock of Rs.1,23,36,409/- which was not recorded in the books of accounts. The case was taken under scrutiny under section 143(3) of the Act for AY 2007-08. The assessee filed return of income at Rs.1,31,26,410/-. While passing assessment order, penalty proceedings under section 271(1) (C) of the Act were initiated in respect to unexplained cash and stock and notice under section 271(1)(c) of the Act was issued upon the assessee to show cause as to why penalty under section 271(1)(c) of the Act should not be levied. That the Assessing Officer passed order imposing minimum penalty under section 271(1)(c) of the Income Tax Act.

Being aggrieved by and dissatisfied with the order passed by the Assessing Officer imposing penalty upon respective assessee, both the assessee preferred appeals before the CIT(A) and CIT(A) dismissed the appeals confirming the orders passed by the assessing officer imposing penalty under section 271(1)(c) of the Act.

Being aggrieved by and dissatisfied with the separate orders passed by the Commissioner (Appeals), both the assessee preferred appeals before the ITAT being in ITA Nos.1546/Ahd/2010 and 1547/Ahd/2010. That before the ITAT for the first time, it was the case on behalf of the assessee that it was the case of survey under section 133A of the Act and disclosure was made pursuant to survey under section 133A and not search under section 132 and therefore, penalty under section 271(1)(c) cannot be levied and accepting the said contention, the learned tribunal by the impugned common judgement and order has allowed both the appeals and quashed and set aside the orders passed by the assessing officer imposing penalty under section 271(1)(c) of the Act.

Being aggrieved by and dissatisfied with the impugned common judgement and order passed by the learned tribunal, the revenue has preferred the present appeals.

Mr.Manav Mehta, learned counsel appearing on behalf of the appellant - revenue has vehemently submitted that the tribunal has materially erred in allowing the appeals and quashing and setting aside the orders of penalty, accepting the contention of the case on behalf of the assessee that the disclosure was made under section 133A and not under section 132 of the Income tax Act. It is submitted that the aforesaid contention on behalf of the assessee was neither raised before the assessing officer nor before the CIT(A) and as such the said contention was raised for the first time before the tribunal. It is submitted that the learned tribunal as such ought not to have permitted the assessee to raise the aforesaid contention which was raised for the first time before the tribunal and which was neither raised before the assessing officer nor before the CIT(A). It is submitted that as such before the assessing officer as well as CIT(A) it was the case on behalf of the assessee that the disclosure was made under section 132 of the Act. It is submitted that in any case, the learned tribunal ought to have remanded the matter to the assessing officer, directing to consider the said issue in accordance with law and on merits and after giving opportunity to the revenue. Therefore, it is requested to allow both these appeals and quash and set aside the orders passed by the tribunal and in the alternate to remand the matter to the assessing officer.

Mr.Hardik Vora, learned advocate appearing on behalf of the respondent – assessee is, as such, not in a position to dispute and even not disputing that the case on behalf of the appellant that disclosure was made under section 133A of the Income Tax Act and not under section 132 of the Act, was raised for the first time before the tribunal. He is also not disputing that such contention was neither raised before the assessing officer nor before the CIT(A), however, has submitted that on facts, it was found that disclosure was made by the assessee in the proceedings under section 133A of the Act and therefore, the learned tribunal has not committed any error and/or illegality in considering the aforesaid issue and quashed and set aside the penalty imposed under section 271(1)(c) of the Income Tax Act.

Heard the learned advocates appearing on behalf of the respective parties at length and perused the impugned order passed by the assessing officer as well as the judement and order passed by the learned tribunal.

At the outset, it is required to be noted that the assessing officer imposed penalty under section 271(1)(c) of the Act on the basis of the disclosure made by the assessee on the ground of disclosure made in the proceedings under section 132 of the Income Tax Act. The assessee never disputed the same before the assessing officer and the assessing officer proceeded to impose penalty treating disclosure in a proceeding under section 132 of the Income Tax Act and imposed penalty. The learned CIT(A) also confirmed the same on the premise that the disclosure was made by the assessing officer in the proceedings under section 132 of the Income Tax Act. However, in appeals before the learned tribunal, the assessee for the first time contended before the learned tribunal that the disclosure by the assessee was in the proceedings under section 133A of the Income Tax Act and therefore, considering explanation 5(i) of section 271(1)(c) of the Act, penalty cannot be imposed. The learned tribunal entertained the said plea which was raised for the first time before it and held that the disclosure was made under section 133A of the Act and therefore, penalty under section 271(1)(c) of the Act cannot be imposed. As stated above, and it is not in dispute that no such contention that the disclosure was made in the proceedings under section 133A of the Act was ever raised by the assessee before the assessing officer or even before the learned CIT(A). In view of the above, the learned tribunal, as such ought to have remanded the matter to the assessing officer if the tribunal was of the opinion that the aforesaid aspect is required to be considered and when it goes to the root of the matter, rather than considering it, which was raised for the first time before it, more particularly when the assessing officer and the CIT(A) had no occasion to consider the same.

In view of the above and on the aforesaid ground alone, the impugned Judgement and Order passed by the tribunal deserves to be quashed and set aside and the matters are to be restored to the file of concerned assessing officer with a direction to consider the case on behalf of the assessee that the disclosure was made by the assessee in a proceedings under section 133A of the Income Tax Act and for that, to hold necessary inquiry on the same and thereafter to pass appropriate order after giving opportunity to the revenue in accordance with law and on merits.

Under the circumstances, both these appeals are allowed and the impugned common judgement and order 1547/Ahd/2010 dated 5/4/2013 is hereby quashed and set aside and the matters are remanded to the assessing officer to consider penalty proceedings under section 271(1)(c) of the Income Tax Act afresh in accordance with law and on merits and to consider the contention on behalf of the assessee that the disclosure was made under section 133A of the Income Tax Act, after holding necessary inquiry and after giving opportunity to the assessee as well as revenue on the said issue and thereafter to pass a reasoned order in accordance with law and on merits, as aforesaid. Both these appeals are allowed to the aforesaid extent. (M.R.SHAH, J.) (MS SONIA GOKANI, J.) Rafik.