KARAKULAM SERVICE CO-OPERATIVE BANK LTD vs. ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER INCOME TAX /NATIONAL FACELESS ASSESSMENT CENTRE
What did the High Court hold?
The High Court held that the question of the petitioner's liability for any penalty would depend on the orders to be passed by the First Appellate Authority following the remand by the Tribunal. The Court also noted that the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, which deals with exemption under Section 80P, is a matter that the First Appellate Authority will need to consider. Taking these factors into account, the Court decided to set aside the impugned penalty order (Ext.P1). However, it clarified that this setting aside would not preclude the initiation of fresh penalty proceedings if deemed necessary at a later stage. The operative direction is the setting aside of the penalty order with liberty to initiate fresh proceedings.
What were the facts?
The petitioner, M/s. Karakulam Service Co-operative Bank Ltd., is challenging an order imposing penalty under Section 271(1)(c) of the Income Tax Act, 1961 (Ext.P1). The assessment year in question is 2014-15. The assessment proceedings have a complex procedural history involving remands by the Income Tax Appellate Tribunal (ITAT) to the Assessing Officer and then back to the First Appellate Authority. The petitioner argues that the penalty order arises from these ongoing assessment proceedings, which are currently before the First Appellate Authority following a remand by the ITAT on May 19, 2020. They also point to a Supreme Court judgment in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax that may impact the underlying issue.
What were the issues?
1. Whether the High Court should entertain a writ petition challenging a penalty order under Section 271(1)(c) of the Income Tax Act, 1961, when an effective alternative remedy is available before the First Appellate Authority, and the underlying assessment proceedings are still pending. Assessee's Contention: The petitioner argues that the penalty order is intrinsically linked to the assessment proceedings, which are currently at large before the First Appellate Authority after a remand by the ITAT. They also rely on the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, suggesting it may resolve the core issue. Revenue's Contention: The respondent argues that the petitioner has an effective alternative remedy against the penalty order and that the High Court should not interfere under Article 226 of the Constitution. They contend that assessment and penalty are separate proceedings, and the pendency of the assessment before the First Appellate Authority does not invalidate the penalty order.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT
Petitioner has approached this Court, being aggrieved by Ext.P1 order, imposing penalty under Section 271(1)(c) of the Income Tax Act,1961. 2. The assessment against the petitioner for the year 2014-15 was completed on 27.12.2016. The matter finally reached the Tribunal from where it was remanded to the Assessing Officer for reconsideration. The Assessing Officer passed the same order which was confirmed by the First Appellate Authority and again, the matter went to the Tribunal. The Tribunal has, by order dated 19.05.2020, again remanded the matter for consideration of the First Appellate Authority. It is submission of the learned counsel appearing for the petitioner that Ext.P1 order imposing penalty essentially arises out of the proceedings finalized against the petitioner as above by the Assessing Officer which is now at large before the First Appellate Authority, following the order of remand by the Tribunal on 19.05.2020. It is submitted that, in the meanwhile, the issue has been also settled by the Judgment of the Hon’ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax
WP(C) NO. 12676 OF 2022 3 [2021 (1) KHC 303]. It is submitted that the question as to whether any penalty can be imposed will depend on the orders to be passed by the First Appellate Authority following remand by the Tribunal.
Heard the learned Standing Counsel appearing for the respondents. Learned Standing Counsel points out that there is no ground for the petitioner to challenge Ext.P1 order of penalty before this Court directly under Article 226 of the Constitution of India. It is submitted that the petitioner has an effective alternative remedy against Ext.P1 and it is not necessary for this Court to examine the question as to whether the petitioner is liable for penalty under Section 271(1)(c) of the Income Tax Act, at this stage. It is submitted that the assessment and penalty are separate proceedings and merely because the assessment is now at large before the First Appellate Authority, that does not mean that the order of penalty is bad in any manner.
Having heard the learned counsel appearing for the petitioner and the learned Standing counsel appearing for the respondent Department, I am of the view that the question as to whether the petitioner is liable for any penalty will depend on the orders to be passed by the First Appellate Authority,
WP(C) NO. 12676 OF 2022 4 following the remand by the Tribunal through order dated 19.05.2020. Still further, I note that the Hon’ble Supreme Court in Mavilayi (supra) has decided the question as to whether Societies like the petitioner are entitled to exemption under Section 80P of the Income Tax Act. That is also a matter which will have to be considered by the First Appellate Authority, following remand by the Tribunal. Taking all the above facts into consideration, I am of the view that Ext.P1 order can be set aside, making it clear that setting aside of Ext.P1 will not bar initiation of fresh proceedings for imposition of penalty, if the same is found necessary at a later stage.
The Writ petition is allowed in the manner indicated above. GOPINATH P. JUDGE ajt
WP(C) NO. 12676 OF 2022 5
Appendix — schedule of exhibits
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- Hetal Vinodchandra Sheth, Ahmedabad vs The ITO, Ward-5(3)(1), AhmedabadITA 2369/AHD/2025[2014-15]Status: Disposed16 Oct 2026AY 2014-15
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