M/S KAMAKHYA PHOTO LAB PVT. LTD. vs. COMMISSIONER OF INCOME TAX

We have heard Sri A Goyal, learned counsel for the appellant-ass essee and Sri U Bhuyan, learned Standing Counsel of the Income Tax Department.

The brief facts that will be required to be noticed for the purp oses of the present adjudication may now be set out hereunder: In the course of computation of the income of the assessee for t he assessment year 2002-2003 under the provisions of Section 143(3) of the Act, the Assessing Officer found a list of sundry creditors against whom different am ounts were mentioned in the balance sheet of the assessee. Specifically, against one M/s Phil Corporation an amount of Rs. 9,31,022/- was shown by the assessee whereas against two other creditors i.e. Agfa India Pvt. Ltd and one M/s Indian Jogi a sum of Rs. 51,276/- and Rs. 3260/- respectively was shown by the assessee . The Assessing Officer issued letters dated 8.2.2005 by registered post to the three creditors seeking confirmation. While M/s Agfa India Pvt. Ltd had replied indicating that it had shown a sum of Rs. 31,163/- in its balance sheet as due from the assessee, M/s India Jogi had pointed out that their closing balance wa s nil. No reply was received from M/s Phil Corporation. Notice, therefore, was i ssued to the assessee asking for its explanation by 28.3.2005. The authorized re presentative of the assessee appeared before the Assessing Officer on 29.3.2005 and submitted a account confirmation of M/s Phil Corporation to the extent of R s. 3,68,857/-. The authorized representative of the assessee wanted further time to effectively reconcile the accounts of the creditors which was, however, refu sed by the Assessing Officer as the assessment had to be completed by 31.3.2005. Accordingly, the difference between the amounts shown by the assessee and those confirmed by the creditors totaling Rs. 5,85,537/- was treated as the undisclos ed income of the assessee. By the assessment order dated 31.3.2005, penalty proc eedings were directed to be initiated against the assessee.

In the course of the penalty proceedings the asessee appeared be fore the Assessing Officer and, inter alia, contended that the Director of the a ssessee-Firm had no knowledge of accountancy and that the mistake in question wa s committed by the Accountant of the Firm. It was also contended that mere failu re on the part of the assessee to explain the situation would not be sufficient for the levy of penalty. Additionally, it was contended that the major addition made in the assessment pertained to M/s Phil Corporation Ltd. which was so done by rejecting the prayer for time made by the authorized representative of the as sessee. Consequently, it was contended that adequate opportunity was not given t o the assessee before imposition of penalty.

The learned Tribunal, after an elaborate consideration of the co ntentions advanced by the contesting parties, took the view that imposition of p enalty on the facts and materials brought on record of the present case was not justified. The learned Tribunal held that to impose penalty under the provisions of the Act, the Assessing Officer had to be satisfied that the assessee had con cealed particulars of his income. In the present case, no such finding was recor ded by the Assessing Officer and penalty was imposed merely because the assessee had accepted the anomalies in its balance sheet and, thereafter, had paid the a dditional tax that was demanded. Accordingly, the learned Tribunal took the view that the order of the first appellate authority confirming the penalty should b e interfered with and the matter remanded to the Assessing Officer for a fresh c onsideration.

Sri Goyal, learned counsel for the appellant-assessee has veheme ntly contended that if the learned Tribunal was satisfied that the order imposin g penalty was not justified on the materials available, the penalty should have been set aside without causing remand of the matter to the Assessing Officer. Sr i Goyal has contended that from the discussions available in para 5 of the order of the learned Tribunal it clearly transpires that the learned Tribunal found t he imposition of penalty to be not tenable. The learned counsel has submitted th at that should have been the end of the matter and the learned Tribunal could no t have required the Assessing Officer to repeat the exercise all over again. Con sequently, according to the learned counsel, the aforesaid part of the order of the learned Tribunal i.e. remanding the matter to the Assessing Officer would ca ll for the Court’s interference.

Opposing the contentions advanced on behalf of the assessee, Sri Bhuyan, learned Standing Counsel of the Department has contended that it was wi thin the power and discretion of the learned Tribunal to require the Assessing O fficer to re-do the exercise. In this regard, Sri Bhuyan has placed before the Court Rule 28 of the Income Tax (Appellate Tribunal) Rules, 1963 which empower t he learned Tribunal to remand a matter with such directions as may be considered necessary. Sri Bhuyan has further submitted that as the Tribunal had found that certain relevant facts and materials have not been brought on record, the matte r should be re-determined by the Assessing Officer. Accordingly, the learned Tri bunal ordered remand of the case to the Assessing Officer. Accordingly, it is su bmitted that there is no infirmity in the order passed by the learned Tribunal s o as to require the Court’s interference.

We have considered the submissions advanced on behalf of the par ties. In the present case, initiation of the penalty proceedings against the ass essee is not an issue before the Court. The assesee had taken part in the said p roceedings and is basically aggrieved by the merits of the order imposing penalt y. The learned Tribunal took the view that the facts and materials germane to th e issue were not brought on record of the penalty proceedings by the parties the reto and, therefore, though the penalty order is liable to be set aside, the mat ter should be re-decided by the primary authority after affording both the parti es full opportunity to bring such materials as are relevant to the issue. The po wer of remand of a case with necessary directions has been conferred on the Trib unal by Rule 28 of the Income Tax (Appellate Tribunal) Rules, 1963. 9. The power of remand vested in an appellate forum is to be exerci sed on a satisfaction that the issue needs to be re-decided in the light of addi tional materials that are not on record. If materials are already available on r ecord to enable the appellate forum to decide the matter finally the question of remand may not arise. However, if such materials had not been brought on record by either of the parties and the appellate forum is of the view that such mater ials should be brought on record and thereafter the matter re-decided, the power of remand may be exercised. In the present case, the learned Tribunal took the view that the relevant facts and materials had not been brought on the record of the penalty proceedings by either of the parties to the said proceeding. The ma terials available not being adequate for a conclusive determination of the issue , the question of imposition of penalty on the assessee, therefore, was open and needed to be determined afresh. Accordingly, the learned Tribunal remanded the matter to the primary authority. Before the said authority the assessee would ha ve full opportunity to justify its stand that in the facts of the case no penalt y is required to be imposed. In the above facts, we do not see how the order of the learned Tribunal can be said to suffer from any error giving rise to a subst antial question of law which will justify this Court’s interference in exercise of powers under Section 260 of the Income Tax Act.

Consequently and in the light of the foregoing discussions, this appeal has to fail. It is, accordingly, dismissed. However, in the facts and ci rcumstances of the case, we make no order as to costs.