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Facts
The assessee appealed against an order passed under Section 154 of the Income Tax Act which rectified an earlier order that had allowed the assessee's appeal against a penalty. The original penalty was imposed for concealment of income, but the first appellate authority had deleted it.
Held
The Tribunal held that the impugned rectification order was bad in law as it ignored previous submissions and case laws that formed the basis of the original order. The Tribunal found that the facts of the assessee's case were materially different from the case relied upon for rectification.
Key Issues
Whether the CIT(A) was justified in rectifying his earlier order under Section 154 to restore a penalty when there was no apparent mistake, and the facts were distinguishable from the relied-upon case law.
Sections Cited
253, 154, 250(6), 271AAB(1)(a), 271, 274, 143(3)
AI-generated summary — verify with the full judgment below
Order PER PARESH M. JOSHI, J.M. : This is a appeal filed by the Assessee under section 253 of the Income Tax Act, 1961 (hereinafter referred to as the Act for sake of brevity and ease) before this Tribunal. The assesse is aggrieved by the order bearing number: 09/IT/CIT(A)-5/LDH/2017-18 dt. 29/08/2019 passed under section 154 of the Act which is hereinafter referred to as the “impugned order”. The relevant Assessment Year is 2015-16 and the corresponding previous year period is from 01/04/2014 to 31/03/2015.
2. Factual Matrix 2.1 That by an order in first appeal bearing number 09/IT/CIT(A)- 5/LDH/2017-18 dt. 21/12/2018 the Ld. CIT(A) in terms of Section 250(6) of the Act had allowed the appeal of the assessee against the penalty order dt. 12/05/2017 wherein penalty of Rs. 12,30,000/- was imposed on 2 the assessee u/s 271AAB(1)(a). The 1st appeal of the assessee was thus allowed.
2.2 That later on by the impugned order passed u/s 154 of the Act the Ld. CIT(A) upon request made by the Revenue vide their letter dt.
12/03/2019 for rectification of order in Appeal No. 09/IT/CIT(A)- 5/LDH/2017-18 dt. 21/12/2018 has sustained the penalty of Rs. 12,30,000/- imposed vide Ld. AO order dt. 12/05/2017, on ground specified therein.
2.3 That the Assessee being aggrieved by the impugned order has filed appeal before this Tribunal and has raised following grounds of appeal against the impugned order which are as follows:
1. That the order U/s 154 of the Ld. CIT(A) dated 29.08.2019 modifying his earlier order dated 21.12.2018 by allowing the rectification petition filed by the Ld. A.O. U/s 154 is against the law and facts of the case.
2. That while allowing rectification petition of the Ld. A.O. U/s 154, the Ld. CIT(A) has failed to appreciate that there is no mistake apparent from record in his order dated 21.12.2018 which can be rectified U/s 154.
3. That while allowing the rectification petition of the Ld. A.O., the Ld. CIT(A) failed to appreciate that the order dated 21.12.2018 was passed by him after due consideration of the facts of the case and law and relying upon the judgment of Hon'ble SC in CIT & ANR Vs. SSA's Emerald Meadows , Judgment of Karnataka HC in CIT Vs. Manujanatha Cotton & Ginning Factory & Others Judgment of ITAT, Chennai in DCIT Vs. Sh. R.Elangovan and Various other judicial pronouncements. 4. That the Ld. CIT(A) while allowing the rectification petition of the Ld. A.O. has not considered that the order of the non-jurisdictional Allahabad High court in case of PCIT Vs. Sandeep Chandak (which is the only basis for allowing rectification application) is not applicable/relevant to the case of the appellant since the facts of the appellant case are totally different and are clearly distinguishable from the above referred case relied upon by the Ld. A.O./Ld. CIT(A) and hence rectification is bad in law. 5. That the Ld. CIT(A) while allowing rectification application of the Ld. A.O. and sustaining penalty amounting to Rs. 12.30 Lacs U/s 271AAB has grossly erred on facts and in law by ignoring the fact that notice issued U/s 274 r.w.s 271 dated 31.12.2016 by the Ld. A.O. initiating the penalty proceedings is vague notice and is against the law as laid down by the Hon'ble SC in CIT & ANR Vs. SSA's Emerald Meadows and Hon'ble Karnataka HC in CIT Vs. Manujanatha Cotton & Ginning Factory & Others and various other judicial pronouncements.
3 3. Record of Hearing 3.1 The hearing in the matter took place before this Tribunal on 04/12/2024 when the Ld. AR appeared for and on behalf of the assessee and interalia contended that the impugned order u/s 154 of the Ld. CIT(A) sustaining the penalty of Rs. 12,30,000/- is bad in law and illegal. The issue covered by the impugned order is debatable issue. The Ld. CIT(A) ought not to have exercised power u/s 154 of the Act at all. The Ld. AR has placed on record of this Tribunal a paper book containing pages from 1 to 102. The Ld. AR has also placed on record summary of arguments containing 3 pages which is dated 13/04/2021. 3.2 Basis PB and summary of argument it was contended by Ld. AR that the Ld. CIT(A) ought not to have rectified his order dt. 21/12/2018 solely on the basis of decision of Hon’ble Allahabad High Court in case of PCIT Vs. Sandeep Chandak dt. 27/11/2017 in of 2017 which was given to the assessee by office of CIT(A) vide letter no 1167 dt. 01/08/2019. It was contended by the Ld. AR that Section 154 of the Act deals with rectification of mistake and that there was no mistake in the order of the Ld. CIT(A) dt. 21/12/2018 that impugned order ought not to have been made at all. 3.3 It was contended by Ld. AR that Ld. CIT(A) by passing the impugned order has modified / rectified earlier order dt. 21/12/2018 which had completely deleted the penalty, solely on basis of the judgement of Allahabad High Court (supra) only and in the process has 4 totally ignored the submissions that were made before him including case law which were all well considered by him in the earlier order dt. 21/12/2018. 3.4 The Ld. AR on merits of the case reiterated that earlier order of CIT(A) dated 21/12/2018 was well merited and that overall facts were considered including the relevant case laws and basis that penalty was deleted. But in the impugned order sole reliance is placed on the judgement of Allahabad High Court (supra) and that penalty is sustained. 3.5 The Ld. AR then distinguished the facts of the assessee case vis a vis the facts of case before Allahabad High Court as follows: Sr. Facts in the case of Appellant Facts in case of PCIT Vs. No. Sandeep Chandak i) Specific Charge for which Specific Charge mentioned penalty initiated as mentioned in in the notice is "have in a the notice U/s 274 r.w.s 271 dated statement under sub- 31.12.2016 issued by the Ld. A.O. section 4 of Section 132 is " have concealed the during the course of Search particulars of your Income and and Seizure operation furnished the inaccurate admitted undisclosed particulars of such Income". income" (Refer question of (Refer notice at page No. 15 of Law at Sr. No. B at page 2 of the Paper Book) the Allahabad H.C. order at page No. 97 of P.Book for specific charge mentioned in the notice). ii) Penalty Proceedings U/s 271(1)(c) No Penalty Proceedings U/s has been initiated in the case of 271(1)(c) has been initiated assessee while passing the in the above case. Refer assessment order U/s 143(3) by para no. 4 of Page No. 7 of the Ld. A.O. (Refer page No. 2 the order of Allahabad HC para No. 6 of the Assessment at page 102 of P.Book). Order dated 31.12.2016 at page no. 40 of P.B). In the case of appellant, notice was issued U/s 274 r.w.s 271 and Charge mentioned was " have concealed the particulars of your Income and furnished the inaccurate particulars of such Income"
5 whereas in the case of PCIT Vs. Sandeep Chandhak , Charge mentioned was "have in a statement under subsection 4 of Section 132 during the course of Search and Seizure operation admitted undisclosed income" and hence Allahabad HC judgement is totally on different facts. The Hon'ble ITAT, Indore in case of Ashok Bhatia Vs. DCIT, Indore in dated 05.02.2020 has also considered the above judgement of Allahabad HC and after distinguishing the same allowed the appeal of the assessee. Refer page 70-89 of P.Book for judgement. 3.6 The Ld. AR then contended that there is no mistake much less apparent mistake which can be rectified U/s 154 of the Act in the order dated 21.12.2018 (appeal No. 9/IT/CIT(A)-5/2017-18) passed by the Ld. CIT(A)-5. The above order was passed by the Ld. CIT(A)-5 after due consideration of the facts of the case and on the basis of various binding judicial pronouncements, inter-alia, the decision passed in the case of 1. CIT & ANR Vs. M/s SSA's Emerald Meadows (Appeal No. CC 11485/2016 date of judgement 05.08.2016 S.C. (397) (Refer 90-94 of P.Book).
CIT Vs. Manjunatha Cotton & Ginning Factory and others (2013) 359ITR 565; 3. Hon'ble ITAT, Chennai in DCIT Vs. Shri R Elangovan dated 05.04.2018. Since, the original order was passed after considering the judgement of Hon'ble Supreme Court, Hon'ble Karnataka High Court and Hon'ble ITAT, Chennai and hence, no rectification can be made only on the basis of judgement of Hon'ble Allahabad High Court.
6 Further, Hon'ble Supreme Court in CIT Vs. Vegetable Products Limited reported in 88 ITR 192 (SC) has observed that if two reasonable constructions of a taxing provisions are possible, that construction which favors the assessee must be adopted. 3.7 Per contra the Ld. DR has placed reliance on impugned order of Ld. CIT(A). Observations, findings and conclusions 4. 4.1 We not have to examine the legality, validity and proprietary of the impugned order which is passed the Ld. CIT(A) u/s 154 of the Act wherein earlier order dt. 21/12/2018 in which assessee appeal was allowed was reversed. 4.2 We at the outset and threshold hold that the impugned order u/s 154 of the Act dated 29/08/2019 has taken a summer salt and volte facie solely on ground of Allahabad High Court decision (supra) and totally ignoring other submissions and the case laws which were found to be not only relevant but basis that appeal of the assessee was allowed, in as much as penalty was set aside. We therefore hold that it was incumbent upon the Ld. CIT(A) to have taken into consideration on his own very order dt. 21/12/2018 and ought not have swayed solely with decision of Hon’ble Allahabad High Court. In the instant case appeal of assessee stands dismissed solely on ground of Allahabad High Court decision (supra) and other cited precedent case 7 law including of ITAT Coordinate Benches have been given a convenient go by an approach wholly untenable in law. 4.3 We conquer with the submissions of the Ld. AR that facts of the present case / instant case are materially different with facts of the case which was before Hon’ble Allahabad High Court, basis above table made in para 3.5 (supra). 4.4 We also conquer with the original finding of Ld. CIT(A) made in the order dt. 21/12/2018 which was to the following effect: The AR argued that the case of the assessee is on a stronger footing as the caption of the notice also mentions that it was being issued u/s 274 r.w.s. 271 and further that the charge for which the penalty initiation notice has been issued is started as ‘have concealed the particulars of your income and furnished the inaccurate particulars of such income’ and there is no mention that the assessee has ‘undisclosed income’ within the meaning of Section 271AAB of the Income Tax Act, 1961. On perusal of the facts including the assessment order and the notice issued by the AO, it is found that the assessee’s case is fully covered by the judgment dated 05/04/2018 passed by Hon’ble ITAT Chennai Bench in and C.O. No. 75/CHNY/2017 in the case of DCIT Vs. R. Elangovan (A.Y. 2013-14), in his favour. Hence, the arguments of the AR are found acceptable and the penalty levied by the AO in this case is not found sustainable in view of the judicial pronouncement referred by the AR. Therefore, the penalty of Rs. 12,30,000/- levied by the AO u/s 271AAB is deleted. Accordingly, these grounds of appeal are allowed.