M/S.SSS PROJECTS LTD vs. THE DEPUTY COMMISSIONER OF INCOME TAX

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 1ST DAY OF FEBRUARY 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE NATARAJ RANGASWAMY I.T.A. NO.249 OF 2011 BETWEEN: M/S. SSS PROJECTS LTD REP. BY ITS MANAGING DIRECTOR SRI. K. SATHISH KUMAR NO.4, SHIRDI SAI KRUPA COMPLEX III FLOOR, NAGAPPA STREET SHESHADRIPURAM, BANGALORE-560020. .... APPELLANT (BY MR. S. ANNAMALAI, ADV., WITH MR. V. CHANDRASEKHAR, ADV., FOR MR. M. LAVA, ADV.,) AND: THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-12 (3), R.P. BHAVAN OPP. RBI, NO.14/3 5TH FLOOR NRUPATHUNGA ROAD BANGALORE-560001. ... RESPONDENT (BY MR. JEEVAN J. NEERALGI, ADV.,) - - - THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 14.03.2011 PASSED IN ITA NO.408/BANG/2010 FOR THE ASSESSMENT YEAR 2008-09, PRAYING TO: (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN.

2 (ii) ALLOW THE APPEAL AND SET ASIDE THE FINDINGS TO THE EXTENT AGAINST THE APPELLANT IN THE ORDER PASSED BY THE TRIBUNAL IN ITA NO.408/BANG/2010 DATED 14.03.2011, IN THE INTEREST OF JUSTICE AND EQUITY. THIS I.T.A. COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been filed by the assessee. The subject matter of the appeal pertains to the Assessment Year 2008-09. The appeal was admitted by a Bench of this Court vide order dated 01.08.2012 on the following substantial question of law: "Whether the financial incapacity of an assessee to pay the tax does not warrant levy of penalty under Section 221 of the Income Tax Act?" 2. Facts leading to filing of this appeal briefly stated are that the assessee is a company. The assessee filed its return of income for the Assessment Year 2008-09 declaring an income of Rs.4,07,660/-. The tax payable on the aforesaid income was assessed at Rs.1,37,619/- which was duly paid by the assessee. The Assessing Officer, however, vide order

3 dated 09.02.2009, levied the penalty of Rs.50,00,000/- for the Assessment Year 2008-09. The assessee further pleaded that it appears that the Assessing Officer had considered the facts of the case for the Assessment Year 2007-08 for levying the penalty for Assessment Year 2008-09 and passed an order under Section 221 of the Act and raised a demand of Rs.50,00,000/-. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals), who by an order dated 09.02.2010, dismissed the appeal preferred by the assessee. The assessee thereupon filed an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). The Tribunal, by an order dated 14.03.2011, dismissed the appeal preferred by the assessee. In the aforesaid factual background, the assessee has filed this appeal. 3. Learned counsel for the assessee submitted that even though the assessee had taken a specific ground before the Commissioner of Income Tax (Appeals) as well as the Tribunal that the assessee has not committed any default in the Assessment Year 2008-09, the aforesaid ground was not

4 adjudicated either by the Commissioner of Income Tax (Appeals) or by the Tribunal and the order of the Assessing Officer under Section 221 of the Act has been maintained. It is further submitted that the action against the assessee under Section 221 of the Act has been taken while taking into account the facts of the case for the Assessment Year 2007-08 and the demand dated 09.02.2009 has been issued in respect of Assessment Year 2008-09. It is submitted that levying of penalty under Section 221 of the Act suffers from the vice of non-application of mind and since the specific ground which has been raised by the assessee has not been adjudicated by the Commissioner of Income Tax (Appeals) as well as the Tribunal, the matter deserves to be remitted to the authorities for decision afresh in accordance with law. It is also urged that invoking the provisions of Section 221 of the Act is without jurisdiction for non-payment of self- assessment tax partly, under Section 140A(3) of the Act. 4. On the other hand, learned counsel for the revenue has invited our attention to paragraph 21(b) of the memorandum of appeal and has submitted that infact in the

5 memorandum of appeal itself, the assessee has admitted that it had committed a default for the Assessment Year 2007-08 in respect of demand of tax on account of paucity of funds. It is also submitted that on account of typographical error in the orders passed by the Assessing Officer, Commissioner of Income Tax (Appeals) and the Tribunal, reference has been made to the Assessment Year 2008-09 whereas on admitted facts, the penalty has been levied under Section 221 of the Act in respect of the Assessment Year 2007-08. Learned counsel for the revenue has also referred to Section 292B of the Act and has submitted that merely because there is a mistake in mentioning the year of assessment, the orders cannot be invalidated. In support of aforesaid submission, reference has been made to Section 292B of the Act as well as the decision of the Supreme Court in 'SKY LIGHT HOSPITALITY LLP Vs. ASSISTANT COMMISSIONER OF INCOME-TAX' (2018) 92 TAXMANN.COM 93(SC), decision of Delhi High Court in 'COMMISSIONER OF INCOME-TAX Vs. JAGAT NOVEL EXHIBITORS (P) LTD. (2012) 18 TAXMANN.COM 138 (DELHI) and decision of Calcutta High Court in

6 'COMMISSIONER OF INCOME TAX, SILIGURI Vs. SHYAMAL SARKAR' (2017) 84 TAXMANN.COM 146 (CALCUTTA). 5. We have considered the submissions made on both sides and have perused the record. Section 292B of the Act on which reliance has been placed by the learned counsel for the revenue, has been reproduced below for the facility of reference: "292B. Return of income, etc., not to be invalid on certain grounds. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act."

7 From close scrutiny of Section 292 B of the Act, it is evident that no return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. In other words, any clerical or typographical error or omission in the return of income, assessment, notice, summons or other proceeding shall not invalidate the proceedings. The Supreme Court dealt with the aforesaid provision in SKY LIGHT HOSPITALITY LLP, supra and held that merely wrong mention of a name in the notice amounts to clerical error which could be corrected under Section 292B of the Act. Similarly, the Delhi High Court in the case of COMMISSIONER OF INCOME TAX, supra has held that when there is no confusion or prejudice caused due to non-

8 observance of technical formalities, the proceedings cannot be invalidated and therefore, a defective notice to an assessee under Section 292B of the Act is not invalid. In COMMISSIONER OF INCOME-TAX, SILGURI, supra, the High Court of Calcutta has held that there is a presumption in law that all official and judicial acts were regularly performed and presumption is reinforced by the admitted position in the facts of that case. The aforesaid decisions have no application to the facts of the case for the reasons stated hereinafter. 6. From the order of penalty, it is evident that same refers to Assessment Year 2008-09. The aforesaid order has been affirmed by the Commissioner of Income Tax (Appeals), by which the penalty was levied by the Assessing Officer in respect of Assessment Year 2008-09. Similarly, the Tribunal vide order dated 14.03.2011, has held that the penalty has been levied in respect of Assessment Year 2008-09. From perusal of Annexure-B annexed with the memorandum of appeal, it is evident that the assessee has paid tax in respect of Assessment Year 2008-09. It is also not in dispute that

9 admittedly the assessee has committed a default in respect of Assessment Year 2007-08 and did not pay the tax on account of financial hardship. However, the authorities under the Act have taken into account the fact in respect of the Assessment Year 2007-08 and have held the assessee to be in default in respect of Assessment Year 2008-09 and have created the penalty under Section 221 of the Act in respect of Assessment Year 2008-09. The aforesaid mistake, if any, is not same under Section 292B of the Act under which only clerical error or accidental omissions can be protected. Therefore, the decisions on which reliance has been placed by the learned counsel for the revenue, has no application to the factual matrix of the case. 7. In view of preceding analysis, we have no option but to quash the order dated 14.03.2011 passed by the Tribunal and remit the matter to the Tribunal. Needless to state that it will be open for the parties to urge their contentions before the Tribunal and all questions of law are kept open to be raised before the Tribunal. It is also made clear that this Court has not expressed any opinion on the merits of the

10 case by either of the parties. Therefore, in the fact situation of the case, it is not necessary for us to answer the substantial question of law which has been framed by this Court. In the result, the appeal is disposed of. Sd/- JUDGE Sd/- JUDGE RV