ACIT, CHENNAI vs. CRN INVESTMENTS P. LTD., CHENNAI

आयकर अपीलीय अिधकरण, ‘ए’ �यायपीठ, चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI �ी एन.आर.एस. गणेशन, �याियक सद�य एवं �ी िड.एस. सु�दर �सह, लेखा सद�य केसम� BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 2662/Mds/2004 िनधा�रण वष� / Assessment Year : 1996-97 The Asstt. Commissioner of M/s. CRN Investments P. Ltd., Income Tax, v. 10, Karpagambal Nagar, Company Circle – I(3), Luz, Chennai – 4. Chennai – 600 034. PAN : AAACC3114A (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri Shiva Srinivas, JCIT ��यथ� क� ओर से/Respondent by : Shri T.N. Seetharaman, Advocate सुनवाई क� तारीख/Date of Hearing : 12.01.2017 घोषणा क� तारीख/Date of Pronouncement : 28.02.2017 आदेश आदेश /O R D E R आदेश आदेश PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) – III, Chennai, passed under Section 154 of the Income Tax Act, 1961 (in short ‘the Act’) for the assessment year 1996-97.

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submitted that the CIT (Appeals) by placing reliance on the

judgment of the Supreme Court in CIT v Prithipal Singh & Co.

249 ITR 670 set aside his earlier order by way of rectification and

deleted the penalty. According to the Ld. D.R., the judgment of the

Supreme Court in Prithipal Singh & Co. (supra) is very much

available on the date of passing of the original order on 17.03.2004.

The amendment brought in by way of explanation 4(a) by Financial

Act 2002 is only to clarify the existing position of law. Therefore it

would apply retrospectively. According to the Ld. D.R., the levy of

penalty is debatable in nature. Therefore, the CIT (Appeals) ought

not to have deleted the penalty in a proceeding under Section 154

of the Act.

submitted that for the assessment year under consideration, the

Assessing Officer levied penalty under Section 271(1) of the Act.

The CIT (Appeals) by an order dated 17.03.2004 initially confirmed

the penalty levied by the Assessing Officer. Subsequently, the

judgment of the Apex court in Prithipal Singh & Co. supra was

brought to the notice of the CIT (Appeals). The CIT (Appeals) by

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placing reliance on the judgment of the Apex court in Prithipal Singh

& Co case supra found that there was a prima facie error in the

order. Accordingly, the penalty levied by the Assessing Officer was

deleted. Against that order of the CIT (Appeals) passed under

Section 154 of the Act, the Revenue filed the present appeal.

judgment of the Apex court in Prithipal Singh & Co case (supra) was

available on the date of passing of order by the CIT(Appeals).

Therefore, there was no mistake in the original order which is

apparent from the record. Accordingly, the penalty levied by the

Assessing Officer was confirmed by this Tribunal.

Tax case (Appeal) No.155 of 2007. The High Court by judgment

dated 13.02.2014 found that the CIT (Appeals) has rightly

entertained the application under Section 154 of the Act and

rectified the error solely on the ground that as per law, which holds

the field, at the relevant point of time, no penalty was imposable

when a loss has been incurred by the assessee. Referring to the

judgment of the Madras High Court more particularly at para 10, the

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Ld. counsel for the assessee submitted that the Madras High Court

concurred with the submission of the counsel for the assessee that

there was a mistake in the order of the CIT(Appeals). Accordingly,

the same was rectified. However, in the last paragraph, the matter

was remitted back to the file of the Tribunal to take up the appeal on

merit. Since the High Court has already found that the CIT

(Appeals) has rightly rectified the error under Section 154 of the Act

and deleted the penalty, the further observation of the High Court in

remitting back the matter to the file of this Tribunal is infructuous.

The Ld. counsel has also submitted that the assessee has already

filed a review petition before the High Court which is not listed so far

for hearing.

perused the material available on record. Admittedly, the penalty

levied by the Assessing Officer under Section 271(1)(c) of the Act

was confirmed by the CIT (Appeals) by an order dated 17.03.2004.

The CIT (Appeals) in a proceeding under Section 154 of the Act, by

placing reliance on the judgment of the Supreme Court in the case

of Prithipal Singh & Co (supra) rectified the order dated 17.03.2004

and deleted the penalty. The question arises for consideration is

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whether the order of the CIT (Appeals) dated 17.03.2004 can be

rectified subsequently. In the earlier round of litigation, this Tribunal

found that the judgment of the Apex court in Prithipal Singh & Co

(supra) is very much available on 17.03.2004. Therefore it is not a

debatable issue. Accordingly, this Tribunal confirmed the penalty

levied by the Assessing Officer by an order dated 31.08.2006. On

further appeal by the assessee, the Madras High Court found that

the term ‘income’ under Section 271(1)(c) of the Act was interpreted

to mean positive income. The assessee in this case, disclosed loss

to be carried forward. Therefore, by placing reliance on the

judgment in Honda Seil Power Products Limited v CIT, (2007), 295

ITR 466 (SC), the High court hold that Commissioner was justified

in entertaining the application filed by the assessee under Section

154 of the Act and rectified the mistake. In fact, the Madras High

Court has observed as follows at para 10: Para 10: Admittedly, the miscellaneous application filed under Section 154 of the Act to rectify the mistake in the order of the first appellate authority dated 17.3.2004 was based on the decision of the Supreme Court in the case of Prithipal Singh, (supra). It is not in dispute that on the date when the first appellate authority passed order dated 17.3.2004, the decision in the case of Prithipal Singh, (Supra), was very much available. Therefore, the first appellate authority rightly entertained the application under Section 154 and

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rectified the error solely on the ground that as per the law, which holds the land, at the relevant point of time, no penalty was imposable when a loss has been incurred by the assessee. In other words, the term income “income” in Section 271(1)(c) was interpreted to mean “prospective income”. As far as the present case is concerned, the assessment order disclose loss to be carried forward. Therefore, by applying the decision in Honda Seil Power Products Limited (supra), the Commissioner was justified in entertaining the application and rectifying the mistake. To that extent we agree with the submission made by the learned counsel for the assessee.

found that the order of the Tribunal has to be set aside and restore

the appeal before the Tribunal for a decision on the question of levy

of penalty on merit. We have carefully gone through the provision

154 of the Act. Section 154 of the Act provides for rectification of

error, which is apparent on the face of the record. The High Court

accepted the argument of the assessee and found that the

Commissioner was justified in entertaining the application and

rectifying the mistake in his order dated 17.03.2004. However,

subsequently the High Court directed the Tribunal to decide the

question of levy of penalty on merit. Since this is a specific direction

from the High Court, this Tribunal may not go beyond the direction

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of the High Court. Therefore, we have examined the merit in compliance to the direction of the High Court.

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on the same set of facts. The Ld. counsel further submitted that the

Tribunal by applying the doctrine of continuity found that the penalty

has to be levied only in the first year of assessment. Accordingly,

the penalty levied for the subsequent year was cancelled. In this

case the penalty levied by the Assessing Officer for claiming

depreciation was confirmed by this Tribunal up to the year 1995-96

and therefore for subsequent years, there cannot be any levy of

penalty.

claims depreciation for the assessment year 1996-97 which was

disallowed by the Assessing Officer can there be a levy of penalty

under Section 271(1)(c) of the Act. This Tribunal is of the

considered opinion that claim of depreciation is a statutory claim.

Merely because the assessee made a statutory claim in the return

of income which was disallowed by the Assessing Officer, that

cannot be a reason for levying penalty under Section 271(1)(c) of

the Act. A mere wrong claim under the statutory provisions of the

Income Tax Act cannot be considered to be concealment of income

or furnishing any inaccurate particulars of income. The Apex court

in the case of Reliance Petroproducts Pvt. Ltd., 322 ITR 158

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examined this issue and found that when an assessee makes a claim by furnishing all the particulars and the Assessing Officer disallowed the same cannot be a reason to conclude that the assessee has furnished any inaccurate particulars. This Tribunal is of the considered opinion that levy of penalty for the assessment year 1996-97 is not justified. Accordingly, the order of the CIT (Appeals) is confirmed.

Order pronounced on 28th February, 2017 at Chennai.

Sd/- Sd/- (िड.एस. सु�दर �सह) (एन.आर.एस. गणेशन) (D.S. Sunder Singh) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �याियक सद�य/Judicial Member चे�ई/Chennai, �दनांक/Dated, the 28th February, 2017. JR. आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A)-III 4. आयकर आयु�/CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.