PRINCIPAL COMMISSIONER OF vs. M/S.H.M.BROTHERS LTD.,

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TCA/358/2017HC Madras21 July 2020Bench: THE HON'BLE DR.JUSTICE VINEET KOTHARI4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The primary reason for dismissal was the Circular No. 17/2019 issued by the Central Board of Direct Taxes (CBDT), which stipulates that appeals shall not be filed or pursued by the Department before the High Court if the tax effect does not exceed Rs. 1,00,00,000/- (Rupees One Crore). The Court noted that in the instant case, the tax effect was less than this monetary limit. Consequently, the appeal was dismissed as withdrawn, with the substantial questions of law left open for determination in appropriate cases. No decision was made on the merits of the substantial questions of law raised.

What were the facts?

This case involves an appeal by the Principal Commissioner of Income Tax (Revenue) against an order of the Income Tax Appellate Tribunal (ITAT), Madras D Bench, dated 29.04.2016. The ITAT had cancelled a penalty levied under Section 271(1)(c) of the Income Tax Act, 1961, against M/s.H.M.Brothers Ltd. (Assessee). The original assessment order had been set aside by the CIT(A), leading to a consequential order under Section 143(3) read with Section 250. The Revenue's appeal to the High Court challenges the ITAT's decision to cancel the penalty, particularly concerning the initiation of penalty proceedings after the original assessment was set aside and the deletion of penalty on a bogus depreciation claim.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in cancelling the penalty levied under Section 271(1)(c). 2. Whether the Tribunal was justified in holding that the Assessing Officer (AO) exceeded his jurisdiction in initiating penalty proceedings under Section 271(1)(c) when the original assessment order was set aside by the CIT(A), and whether the AO rightly initiated penalty in the consequential order. 3. Whether the Tribunal erred in holding that the AO cannot initiate penalty in reassessment proceedings, especially when the original assessment order was set aside, and whether this finding is perverse. 4. Whether the Tribunal was right in deleting the penalty levied on a bogus depreciation claim when the assessee failed to substantiate the claim by producing at least an invoice. The Revenue contended that the AO rightly initiated penalty proceedings in the consequential order after the original assessment was set aside and that the penalty deletion on bogus depreciation was unjustified. The judgment does not record specific arguments from the Assessee.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 143(3),Section 250

AI-generated summary — verify with the full judgment below

Order dt.21.07.2020 TCA No.358 of 2017 1/4 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 21.07.2020 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARI AND THE HON'BLE MR.JUSTICE KRISHNAN RAMASAMY TCA No.358 of 2017 Principal Commissioner of Income Tax 2, No.121, Mahathma Gandhi Road, Chennai 34 ... Appellant vs. M/s.H.M.Brothers Ltd., 13, Errabulla Street, Chennai ... Respondent Prayer ::- Appeal filed against the order of the Income Tax Appellate Tribunal, Madras D Bench, dated 29.04.2016 in ITA No.331/Mds/2014. For appellant : Mr.Karthik Ranganathan, Senior Standing Counsel For respondent : No appearance JUDGMENT (Made by DR.VINEET KOTHARI, J.) The Court was held by Video Conference, as per the Resolution of the Full Court dated 3 July 2020, by Judges at their respective residence and the counsel, staff of the Court appearing from their respective residences. http://www.judis.nic.in Order dt.21.07.2020 TCA No.358 of 2017 2/4 2. This Tax Case Appeal has been filed by the Revenue, calling in question the correctness of the order passed by the Income Tax Appellate Tribunal, Income Tax Appellate Tribunal, Madras D Bench, in ITA No.331/Mds/2014, dated 29.04.2016, by raising the following substantial questions of law: "1. Whether on the facts and circumstances of the case and in law, the Tribunal was correct and justified in cancelling the penalty levied u/ s 271(I)(c) ? 2. Whether on the facts and circumstances of the case and in law, the Tribunal was right and justified in holding that AO exceeded his jurisdiction in initiating the penalty proceedings u/s 271(1)(c) when the original assessment order was set-aside by CIT(A) and in the consequential order passes u/s 143(3) r.w.s 250, the AO rightly initiated the penalty on satisfaction of concealment of income during such proceedings ? 3. Whether on the facts and circumstances of the case and in law, the Tribunal erred in holding that AO cannot initiate penalty in the reassessment proceedings especially when the original assessment order does not exist as it was set-aside by CIT(A)directing the AO to pass fresh speaking order and whether such finding by Tribunal is perverse both in the eyes of law and facts? http://www.judis.nic.in Order dt.21.07.2020 TCA No.358 of 2017 3/4 4. Whether on the facts and circumstances of the case and in law, the Tribunal was right and justified in deleting the penalty levied on bogus depreciation claim when assessee failed to substantiate the claim by producing at least the invoice evidencing purchase of such asset? 2. When the matter was taken up for hearing, the learned Standing Counsel brought to our notice, the Circular instruction issued by the Central Board of Direct Taxes vide Circular No.17/2019 dated 8th August 2019, wherein, it is stipulated that appeals shall not be filed/pursued by the Department before the High Court in cases where the tax effect does not exceed Rs.1,00,00,000/- (Rupees One Crore). 3. In the instant case, the tax effect is said to be less than the monetary limit imposed and therefore, the Appeal filed by the Revenue is dismissed as withdrawn, keeping open the substantial questions of law for determination in appropriate cases. No costs. (V.K.,J.) (K.R.,J.) 21.07.2020

kpl/tar http://www.judis.nic.in Order dt.21.07.2020 TCA No.358 of 2017 4/4 DR.VINEET KOTHARI, J. and

KRISHNAN RAMASAMY, J. (tar) TCA No.358 of 2017 21.07.2020 http://www.judis.nic.in

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