COMMISSIONER OF INCOME TAX-VI vs. MILAN S PATEL

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TAXAP/1388/2011HC GujaratGJHC24025756201106 September 2012Author: HONOURABLE MR. JUSTICE VIJAY MANOHAR SAHAI,HONOURABLE MR. JUSTICE N.V.ANJARIA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal's order was eminently justified. The penalty was imposed by the Assessing Officer based on additions made under Section 69C. These additions were subsequently deleted by the CIT(A) and this deletion was confirmed by the ITAT in the quantum appeal. Since the quantum additions were set aside, the entire premise on which the penalty was based ceased to exist. Therefore, no ground survived to sustain the penalty. The High Court found no infirmity in the CIT(A)'s order, which was sustained by the Tribunal. The appeal was dismissed as it did not raise any substantial question of law and was devoid of merit. The operative direction was the dismissal of the Revenue's appeal.

What were the facts?

The Revenue (Commissioner of Income Tax-VI) filed an appeal against an order of the Income Tax Appellate Tribunal (ITAT). The appeal concerns assessment for the block period 1.4.1995 to 12.7.2001, following a search at the assessee's (Milan S Patel) premises. The Assessing Officer (AO) had made additions for unexplained interest paid in cash on loans from three parties, totaling Rs. 89,500, under Section 69C. The Commissioner of Income Tax (Appeal) deleted these additions. Subsequently, the AO imposed a penalty of Rs. 13,00,000 under Section 271D for contravention of Section 269SS. The CIT(A) restricted this penalty to Rs. 1,00,000. The Revenue appealed to the ITAT against the CIT(A)'s order.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in deleting the penalty levied under Section 271D of the Income Tax Act, 1961, amounting to Rs. 12,00,000 out of Rs. 13,00,000, which was in contravention of Section 269SS of the Act? Assessee's contentions: The judgment does not record specific contentions made by the assessee before the High Court. However, the ITAT's reasoning, upheld by the High Court, indicates that the penalty was based on additions made under Section 69C, which were deleted in the quantum appeal by the CIT(A) and confirmed by the ITAT. Therefore, the basis for the penalty ceased to exist. Revenue's contentions: The Revenue argued that the Tribunal was wrong in deleting the penalty. The appeal raises the question of whether the Tribunal was right in deleting the penalty levied under Section 271D, amounting to Rs. 12,00,000, for contravention of Section 269SS.

Which sections of the Income-tax Act were involved?

Section 271D,Section 269SS,Section 69C,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
TAXAP/1388/2011 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1388 of 2011 For Approval and Signature: HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX-VI - Appellant(s) Versus MILAN S PATEL – Opponent(s) ========================================================= Appearance : MS PAURAMI B SHETH for Appellant(s) : 1, None for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 06/09/2012

ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) This appeal filed by the Revenue under section 260A of the Income Tax Act, 1961, is directed against common order dated

TAXAP/1388/2011 2/4 JUDGMENT 29/04/2011 of the Income Tax Appellate Tribunal , Ahmedabad B Bench in IT (SS) A No. 38/2008 with Cross Objection No. 85/200. The appeal relates in so far as the common order is referable to IT SS AO. 38 of 2008.

1.

1 The following question is raised by the revenue as substantial question of law. “Whether the Appellate Tribunal is right in law and on facts in deleting the penalty levied u/s 271D of the act amounting to Rs. 12,00,000/- out of Rs. 13,00,000/- being in contravention of the provisions of section 269SS of the act?”

2.

We heard learned advocate Ms. Paurami B. Sheth for the applicant.

3.

The relevant facts in the background are that assessment for the block period 1.4.95 to 12.7.01 was undertaken in assessee's case pursuant to a search carried out at his premises on 12.7.2001. The Assessing Officer treated certain transactions as an unexplained expenditure under section 69C of the Income Tax Act, 1961 (hereinafter referred to ‘the Act’ for sake brevity) In the income of the assessee, an addition was made for Rs. 89,500 as unexplained interest paid in cash in respect of loan from three parties, namely one Amrutbhai Patel, Shri Dipakbhai patel and Dr. Bharat J. Mehta.

TAXAP/1388/2011 3/4 JUDGMENT

3.

1 The aforesaid additions came to be deleted by the Commissioner of Income Tax (Appeal) and the deletion was confirmed by the Tribunal. The Assessing Officer initiated penalty proceedings at the relevant time. He imposed penalty of Rs. 13 lacs under section 271D of the Act by his order dated 23.3.2006. The assessee preferred an appeal before CIT(A) challenging the penalty order. The CIT(A) restricted penalty amount to Rs. 1 lac and the balance was deleted by order dated 11.12.2007.

3.

2 The department preferred appeal before Income Tax Appellate Tribunal against the order of CIT(A). The Tribunal dismissed the appeal by observing and holding as under : “The AO had also made certain other additions for unexplained interest and the total addition for unexplained interest was Rs. 89,500/- . In the quantum appeal, the CIT(A) deleted the addition vide order dated 20/10/2003. The Revenue had filed the appeal against the order of the CIT(A) which was dismissed by the ITAT in IT(SS)A No. 432/Ahd/2003 dated 27/7/2007. By these facts, in the quantum appeal, the CIT(A) deleted the penalty with the finding that in the quantum appeal, the CIT(A) as well as the Tribunal has deleted the addition made under Section 69C. The finding by the CIT(A) in the penalty order is based upon the finding of the ITAT in the quantum appeal. On the facts, we find no infirmity in the order of the CIT(A) whereby he deleted the penalty levied under Section 271D in respect of borrowing from S/Shri Dipakbhai Amrutbhai and Bharat Mehta. The same is sustained and the Revenue's appeal is dismissed.”

4.

The findings of the Tribunal were eminently justified in view of the fact that the Assessing Officer had imposed penalty on the basis

TAXAP/1388/2011 4/4 JUDGMENT of the additions he had originally made in his assessment order. Those additions were already deleted, and the deletion was confirmed by the Income Tax Tribunal. Therefore, when the quantum appeal itself was allowed and the additions made were set aside, the whole premise on which imposition of penalty was based, ceased to exist. In the circumstances, no ground could survive to sustain the penalty.

The appeal does not raise any substantial question of law and is devoid of merit.

5.

The appeal is accordingly dismissed. [V.M.SAHAI, J.] [N.V.ANJARIA, J.] cmjoshi

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