EDGEVERVE SYSTEMS LIMITED vs. ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER

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WP/8652/2022HC KarnatakaKAHC01019115202212 August 2022Bench: S.R.KRISHNA KUMAR5 pages
AI SummaryAllowed

What did the High Court hold?

The tribunal held that the penalty order was passed on an erroneous ground as the appeal was still pending. Consequently, the penalty order and demand notice were quashed.

What were the facts?

The petitioner's appeal against an assessment order was pending adjudication. Despite this, the respondent passed an order levying penalty under Section 271(1)(c) on the erroneous premise that the appeal had been dismissed.

What were the issues?

Whether penalty proceedings under Section 271(1)(c) can be initiated and confirmed when the assessee's appeal against the underlying assessment order is still pending.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274,Section 156

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF KARNATAKA, BENGALURU

DATED THIS THE 12TH DAY OF AUGUST, 2022

BEFORE

THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR

WRIT PETITION No.8652 OF 2022 (T-IT)

BETWEEN:

EDGEVERVE SYSTEMS LIMITED PLOT NO.44, HOSUR MAIN ROAD, ELECTRONICS CITY, BANGALORE-560 100. REPRESENTED HEREIN BY ITS AUTHORIZED SIGNATORY, MR P PRAKASH.

…PETITIONER (BY SRI.T. SOORYANARAYANA., SR.COUNSEL FOR SRI. TANMAYEE RAJKUMAR., ADVOCATE)

AND:

1 . ADDITONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER

OF INCOME TAX/INCOME-TAX OFFICER

NATIONAL FACELESS ASSESMENT CENTRE,

ROOM NO.401,2ND FLOOR, E- RAMP,

JAWAHARLAL NEHRY STADIUM,

DELHI-110003.

2 . ASSISTANT COMMISSIONER OF INCOME TAX SPECIAL

RANGE-2,BMTC BUILDING,

80 FEET ROAD,6TH BLOCK,

KORAMANGALA,

BENGALURU-560095.

3 . ADDITIONAL COMMISSIONER OF INCOME TAX CIRCLE

2(1)(1), BMTC BUILDING,

80 FEET ROAD, 6TH BLOCK,

KORAMANGALA,

BENGALURU-560095

…RESPONDENTS (BY SRI. DILIP., ADVOCATE FOR SRI. K.V. ARAVIND., ADVOCATE)

2 THIS W.P. IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED: 29.03.2022 ANNEXURE-J PASSED BY THE R-1 UNDER SECTION 271(1) (C) OF THE ACT FOR THE ASSESSMENT YEAR 2016-17 AND ETC.

THIS W.P. COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:-

ORDER

In this petition, the petitioner has sought for the following reliefs: a) Quashing the order dated 29.03.2022 (Annexure-J) bearing DIN ITBA/PNL/F/271(1)(c) /2021- 22/1041995337(1) passed by the 1st Respondent under Section 271(1)(c) of the Act for the Assessment year 2016-17; b) Quashing the demand notice dated 29.03.2022 (Annexure-K) bearing DIN ITBA/PNL/S/156/ 2021-22/1041992914(1) issued by the 1st Respondent under Section 156 of the Act for the assessment year 2016-17. c) Directing the Respondents to keep the penalty proceedings initiated vide notice bearing DIN No.ITBA/PNL/S/271(1)(c)/2019-20/10230355 47(1) dated 24.12.2019 under Sections 274 read with Section 271(1)(c) of the Act (Annexure-B), in abeyance, until disposal of the Petitioner’s appeal against the assessment order dated 24.12.2019 by the CIT(A); and d) Pass such other or further orders as this Hon’ble Court may deem fit in the facts and

3 circumstances of the case, in the interests of justice and equity.

2.

Heard Sri. T. Sooryanarayana, Senior counsel appearing on behalf of learned counsel for the petitioner and learned counsel for the respondents and perused the material on record.

3.

The material on record discloses that aggrieved by the Assessment Order dated 24.12.2019, passed by respondent No.2, petitioner preferred an appeal before the Appellate Authority and the same is pending adjudication. In the meanwhile, in response to the notice issued by respondent No.2 proposing to levy penalty under Section 274 r/w. 271(1)(c) of the Income Tax Act, 1961 (for short “the I.T. Act”), petitioner addressed a communication dated 10.01.2020 requesting the respondents to drop the penalty proceedings or atleast keep the same in abeyance. However, respondent No.1 issued notices dated 23.03.2021 and 07.05.2021 reiterating the demand to levy penalty on the petitioner, to which the petitioner issued replies dated 24.03.2021 and 21.05.2021 reiterating that the appeal was pending before the Appellate Authority and

4 consequently, the penalty proceedings are to be dropped or kept in abeyance. It is the grievance of the petitioner that despite the aforesaid facts and circumstances, respondent No.1 has proceeded to pass the impugned order dated 29.03.2022 levying penalty upon the petitioner on the erroneous premise/basis that the appeal filed by the petitioner had been disposed of without appreciating that the appeal was still pending adjudication. Subsequently, petitioner has filed rectification application dated 30.03.2022, which is also pending adjudication, despite which the respondents are proceeding to enforce and implement the impugned order and demand notice and as such, petitioner is before this Court by way of the present petition.

4.

Per contra, learned counsel for the respondents submits that there is no merit in the petition and that the same is liable to be dismissed.

5.

As rightly contended by the learned counsel for the petitioner, respondent No.1 has proceeded to pass the impugned order dated 29.03.2022 and imposed penalty

5 upon the petitioner under Sec.271(1)(c) of the I.T. Act on the erroneous premise/ground that the appeal preferred by the petitioner had been dismissed without appreciating the material on record including the latest status of the appeal, which clearly establishes that the appeal is still pending adjudication as on today and consequently, the impugned order and notice passed/issued by respondent No.1 deserves to be quashed and the same are to be directed to be kept in abeyance till disposal of the appeal.

6.

In the result, I pass the following:- ORDER

(i) Petition is hereby allowed.

(ii) The impugned penalty order at Annexure-J dated 29.03.2022 and the impugned demand notice at Annexure- K dated 29.03.2022 are hereby quashed.

(iii) The respondents are directed to keep the penalty proceedings in abeyance till the disposal of the appeal preferred by the petitioner before the appellate authority and the same attaining finality in accordance with law.

Sd/- JUDGE Srl/Bmc

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