SAFARI MERCANTILE PVT. LTD. vs. INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH

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WP/1517/2007HC Bombay31 July 2007Bench: HON'BLE SHRI JUSTICE F.I. REBELLO, HON'BLE SHRI JUSTICE J.P. DEVADHAR5 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal was not justified in rejecting the Miscellaneous Application on the ground that the assessee had not raised the plea of non-service of demand notice. The Court observed that the order of the CIT(A) clearly indicated that the penalty was deleted because the demand notice had not been served. When the revenue appealed against this order, the main issue before the Tribunal was precisely whether the CIT(A) was correct in holding that there was no service of the demand notice. Therefore, the Tribunal's finding that this plea was not raised before it was unsustainable. Consequently, the writ petition was allowed, the impugned order of the ITAT was set aside, and the ITAT was directed to dispose of the Miscellaneous Application on merits. The contentions of both sides were kept open.

What were the facts?

The assessee, M/s. Safari Mercantile Pvt. Ltd., filed a writ petition challenging the order of the Income-tax Appellate Tribunal (ITAT), Mumbai Bench 'A', dated March 7, 2007. This order dismissed the assessee's Miscellaneous Application seeking rectification of a previous ITAT order dated May 9, 2006. The assessment year in question is 2001-2002. The assessee had paid self-assessment tax of Rs. 90,00,000/-. The Assessing Officer, under Section 140-A, treated the assessee as being in default for unpaid tax, surcharge, and interest, and levied a penalty under Section 221. The CIT(A) deleted the penalty, holding that no demand notice was served. The ITAT, on revenue's appeal, sustained the penalty, holding the tax demand to be undisputed. The assessee's subsequent Miscellaneous Application was dismissed by the ITAT.

What were the issues?

1. Whether the Tribunal was justified in rejecting the Miscellaneous Application filed by the assessee on the ground that the assessee had not raised the plea of non-service of demand notice at the hearing of the appeal? (Question of law and fact, turning on the interpretation of the proceedings before the ITAT and the scope of a Miscellaneous Application). Assessee's contention: The assessee argued that the CIT(A) had deleted the penalty specifically on the finding that no demand notice was served. Therefore, the Tribunal could not have held that no plea was raised by the assessee regarding the non-service of the demand notice. Revenue's contention: The revenue submitted that documents existed to show that the demand notice was, in fact, served upon the assessee.

Which sections of the Income-tax Act were involved?

Section 140-A,Section 221

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICITON WRIT PETITION NO.1517 OF 2007 M/s.Safari Mercantile Pvt.Ltd. C/o.M/s. G.P. Mehta & Co. C.As. 807, Tulsiani Chambers, Nariman Point, Mumbai - 400 021 .. Petitioner. Versus 1. Income-tax Appellate Tribunal Mumbai Bench "A" Mumbai, having its office of Govt. of India, Old C.G.O. Building, 4th Floor, Maharshi Karve Road, Mumbai - 400 020. 2. Asstt. Commissioner of Income- tax, Circle 2(3), Mumbai, having his Office at Aayakar Bhavan, M. Karve Road, Mumbai - 400 020. 3. The Union of India, through Ministry of Law, Aayakar Bhavan, M.K. Road, Mumbai - 400 020. .. Respondents. Mr.S.J. Mehta for the petitioner. Mr.Ashok Kotangale for the respondent. CORAM : F.I. REBELLO & J.P. DEVADHAR, JJ. DATED : 31ST JULY, 2007. ORAL JUDGMENT (Per J.P. Devadhar, J.) 1. Heard. Rule. Rule made returnable forthwith. By consent of the parties, the Writ Petition is taken up for final hearing. 2. This petition is filed to challenge the CNR No : HCBM020119362007 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:15:36

2 order passed by the Income tax Appellate Tribunal, Bombay dated 7th March, 2007 whereby the Miscellaneous Application filed by the petitioners seeking rectification of mistake in the order passed by the Tribunal on 9th May, 2006 has been dismissed. 3. The assessment year involved herein is A.Y.2001-2002. 4. Return of income for assessment year 2002-2003 was filed on 31st October, 2001 and the assessee paid self assessment tax of Rs.90,00,000/-. 5. On 30th December, 2001, an order was passed by the respondent No.2 under Section 140-A of the Act stating therein that the assessee has not paid full amount of self assessment tax and accordingly the assessee was treated as assessee deemed to be in default in respect of tax, surcharge and interest remaining unpaid. After issuing notice under Section 221 of the Act, penalty was levied by passing an order on 7th February, 2002. 6. On appeal filed by the assessee, the CIT (A) inter alia accepted the contention of the assessee that the Assessing Officer did not raise any demand against the assessee and simply issued the penalty notice and, accordingly held that the assessee Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:15:36

3 cannot be said to be in default. 7. On appeal filed by the revenue, the I.T.A.T. by its order dated 9th May, 2006, held that the demand of tax in this case was undisputed and, accordingly sustained the penalty to the extent of tax remaining unpaid. 8. The assessee filed a Miscellaneous Application before the I.T.A.T. seeking rectification of the order dated 9th May, 2006. By the impugned order dated 7th march, 2007 the Tribunal dismissed the said Miscellaneous Application. Hence, this petition. 9. The grievance of the petitioner is that when the CIT (A) has deleted the penalty by recording a finding that the Assessing Officer did not raise any demand against the assessee, the Tribunal could not have held that no plea was raised by the assessee regarding non service of the demand notice. Mr.Kotangale, learned Counsel for the revenue submitted that there are documents to show that the demand notice was in fact served upon the assessee. 10. The only question to be considered in this petition is whether the Tribunal is justified in Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:15:36

4 rejecting the Miscellaneous Application filed by the assessee on the ground that at the hearing of the appeal the assessee had not raised the plea that demand notice has not been served upon the assessee. 11. On perusal of the order passed by CIT (A), it is seen that the penalty levied under Section 221 of the Act was deleted on the ground that the demand notice has not been served upon the assessee. In the appeal filed by the revenue against the said order of CIT (A), the main issue was whether the CIT (A) was justified in holding that there was no service of demand notice. Therefore, the finding recorded by the Tribunal that the plea regarding non service of the demand notice was not raised before the Tribunal cannot be sustained. 12. Accordingly, the Writ Petition is allowed. The impugned order dated 7th March, 2007 passed by the Tribunal is set aside and the Tribunal is directed to dispose of the Miscellaneous Application on merits. 13. The contention of both sides are kept open. 14. The Writ Petition is allowed in the aforesaid terms with no order as to costs. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:15:36

5 (F.I. REBELLO, J.) (J.P. DEVADHAR, J.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:15:36 Powered by TCPDF (www.tcpdf.org)

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