IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD
“C” BENCH
Before: Shri D.K. Tyagi, Judicial Member and
Shri Anil Chaturvedi, Accountant Member
Stay Application No.62/Ahd/2012
(Arising out of ITA No.2210/Ahd/2012
A.Y. 2004-05
GE India Industrial Pvt. Ltd.
1, Rafi Marg, AIFACS Building,
New Delhi
The C.I.T.(A)-IV,
Baroda
Vs.
Appellant
Department by
Assessee by
Respondent
:
:
Date of hearing
Date of pronouncement
Shri D.K. Singh, Sr. D.R.
Shri S.N. So parkar, A.R.
:
:
14.12.2012
04.01.2013
आदे श/ORDER
PER : D.K. TYAGI, JUDICIAL MEMBER
This Stay Application has been filed by the assessee for securing stay of
penalty proceedings initiated by the CIT(A) u/s 271(1)(c) of the Act pursuant to
his appellate order dated 17.07.2012.
2.
Brief facts, leading to this stay application are as under:Assessee company is engaged in manufacturing and trading of electrical
lamps, trading of critical locomotives, manufacturing and trading in engineering
plastics and related products, erection and commissioning services, export of
computer software etc. Assessment u/s 143(3) of the Act was completed on
29th December, 2006 wherein following adjustments/disallowances were made
to the return of income:•
Denial of set off business loss and prohibition on carry forward of
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business loss;
Stay Application No.62/Ahd/2012
(Arising out of ITA No.2210/Ahd/2012
A.Y. 2004-05
•
•
2
Net disallowance of Rs.9,59,91,566/- on account of non-acceptance of
revised return; and
Transfer pricing adjustment of Rs.2,11,55,611/-
In appeal ld. CIT(A) vide its order dated 17th July, 2012 deleted net
disallowance of Rs.9,59,91,566/- on account of non-acceptance of revised
return.
It was further held by him that assessee is entitled to set off the
relevant unabsorbed business loss in the year under appeal and carry forward
the balance unabsorbed business loss.
However, ld. CIT(A) enhanced the
income of the assessee on account of following:•
•
3.
Bad debts of Rs.7,53,08,029/- pertaining to Power Control Domestic
Tariff Area division written off through provision for bad and doubtful
debt account; and
Upward Transfer Pricing Adjustment of Rs.5,50,73,555/-.
Ld. CIT(A) in its order also recorded his satisfaction that assessee had
furnished inaccurate particulars of income with respect to the enhancements
made by him.
Consequently ld. CIT(A) has initiated penalty proceedings u/s
271(1)(c) of the Act. Thereafter notice u/s 274 read with Section 271(1)(c) of
the Act was issued to the assessee seeking appearance before ld. CIT(A) to
show cause as to why an order imposing penalty should not be made.
The
assessee filed detailed submissions in response to this show cause notice.
Alternatively it was contended by the assessee before ld. CIT(A) that since the
assessee proposed to file an appeal before the I.T.A.T. on the quantum
proceedings (the appeal has since been filed on 4th October, 2012), the penalty
should be kept in abeyance till the disposal of appeal by Hon’ble I.T.A.T.
Reliance in this regard was placed on the provisions of Section 275(1)(a) of the
which provide that where an appeal against the relevant order has been filed
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Stay Application No.62/Ahd/2012
(Arising out of ITA No.2210/Ahd/2012
A.Y. 2004-05
3
before Hon’ble I.T.A.T., the time limit for disposal of penalty proceeding is six
months from the end of the month in which the order of the Hon’ble I.T.A.T. is
received by the Commissioner/Chief Commissioner. Hence, it was argued upon
that the ld. CIT(A) would have adequate time to dispose of penalty proceeding
even after receipt of order passed by Hon’ble I.T.A.T.
This request of the
assessee was not accepted by ld. CIT(A) hence this stay petition has been filed
by the assessee.
4.
At the time of hearing ld. counsel of the assessee submitted that ld.
CIT(A) is acting in undue haste and not waiting till the disposal of assessee’s
appeal in quantum proceeding by Hon’ble I.T.A.T. despite the fact that as per
the provisions of Section 275(1)(a) of the Act he will have six months from the
end of the month in which the order of the I.T.A.T. is received by the
Commissioner or the Chief Commissioner to dispose of the penalty proceedings.
It was further submitted that assessee has strong prima facie case on the
penalty as well as on the quantum proceedings and any action by the ld. CIT(A)
in imposing penalty would cause immense undue hardship to the assessee. It
was, therefore, prayed that a direction should be given to ld. CIT(A) to keep the
penalty proceedings in abeyance till the disposal of quantum appeal by Hon’ble
I.T.A.T.
For making this submission reliance was placed on the decision of
Hon’ble Bombay High Court in the case of CIT vs. Wander Pvt. Ltd. (ITA
No.2753 of 2010) wherein following was held:“As noted earlier, the appeal against the quantum proceedings has
been admitted and is pending hearing in this Court. If the appellant
succeeds in the quantum proceedings, it would not even be necessary
to consider the proceedings under section 271. In the circumstances,
no prejudice has been caused to the appellant (i.e. tax authorities)
even qua the penalty proceedings.
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Stay Application No.62/Ahd/2012
(Arising out of ITA No.2210/Ahd/2012
A.Y. 2004-05
4
The apprehension that any order in the penalty proceedings may be
barred by limitation under section 275(1A), is not well founded. In
any event, the apprehension is set at rest by directing that in the
event the same being held to be barred by limitation, this appeal shall
stand revived automatically and without further orders of this Court.”
Reliance was also placed on the judgment of Hon’ble Allahabad High Court in
the case of Commercial Engineers Body Builders Co. Pvt. Ltd. vs. Union of India
(163 TAXMAN 218) wherein it was held as under:“Learned counsel for the petitioner has submitted that in the present
case penalty notice under section 274 read with section 271 of the
Income-tax Act was issued for the first time by the Commissioner,
Income-tax (Appeals) and no penalty proceeding was issued by the
Assessing Officer while framing the assessment. Looking to the facts
and circumstances of the case we direct that, in the mean time, till the
disposal of the appeal before the Tribunal, penalty proceedings may be
finalized but the penalty order may not be served on the petitioner.”
Reliance was also placed on the judgment of Hon’ble Apex Court in the case of
ITO vs. Mohammad Kunhi 71 ITR 815 wherein it was held that the Tribunal
while exercising its appellate power under the Income Tax Act, has also the
power to ensure that fruits of success are not rendered futile or nugatory and
for this purpose it is empowered to pass appropriate orders including orders of
stay. On the basis of these submissions, ld. counsel of the assessee prayed for
exercising our inherent powers and stay the penalty proceedings initiated by ld.
CIT(A) till the disposal of quantum appeal by the Tribunal.
5.
Ld. D.R., on the other hand, placing reliance on the decision of Hon’ble
Supreme Court in the case of Commissioner of Income Tax vs. Manick Sons
submitted that Tribunal cannot assume power which are inconsistent with the
express provisions of the Act or its scheme and therefore prayed that no
direction for staying the penalty proceedings initiated by ld. CIT(A) may kindly
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Stay Application No.62/Ahd/2012
(Arising out of ITA No.2210/Ahd/2012
A.Y. 2004-05
5
be issued. He, however, did not make any submission regarding the merits of
the case.
6.
After hearing both the parties, perusing the record and the case laws
relied by both the parties we find that in this case penalty proceedings have
been initiated by ld. CIT(A) pursuant to enhancement of income made by him
vide his order dated 17.07.2012. The appeal against this order has been filed
before the Tribunal on 4th October, 2012 which is in fact the first appeal of the
assessee against the enhancement of income by ld. CIT(A). As the appellate
proceedings are already on, we are not going into the merits of the case.
However, it will not be out of place to mention that the contention of the
assessee that it has prima facie case in its favour, has not been commented
upon by the Revenue.
As per the provisions of Section 275(1)(a) of the Act
Assessing Officer cannot pass an order imposing penalty u/s 271(1)(c) of the
Act till relevant assessment is subject matter of appeal before ld. CIT(A) (i.e.
the first appellate authority). By the same analogy assessee’s prayer for stay
of penalty proceedings undertaken by ld. CIT(A) till the disposal of appeal by
the Tribunal does not appear to be unreasonable. We further find that there is
no dispute about the fact that as per the provision of Section 275(1)(a) of the
Act ld. CIT(A) will get six months time to dispose of the penalty proceedings
from the end of the month in which the order of the Tribunal is received by the
Commissioner or the Chief Commissioner. In view of these facts, we are of the
considered opinion that if ld. CIT(A) is allowed to proceed with the penalty
proceedings, already undertaken by him, prejudice will cause to the assessee
as it will have to face multiplicity of the proceedings.
In case assessee
succeeds in quantum appeal, the penalty order passed
by ld. CIT(A) will have
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Stay Application No.62/Ahd/2012
(Arising out of ITA No.2210/Ahd/2012
A.Y. 2004-05
6
no legs to stand while in a situation the assessee fails ld. CIT(A) will get ample
time of six months to dispose of the penalty proceedings. Therefore, exercising
our appellate powers conferred u/s 254(1) of the Act, as interpreted by Hon’ble
Apex Court in the case of ITO vs. Mohammad Kunhi 71 ITR 815 and to
prevent multiplicity of proceedings and harassment to the assessee, we are
inclined to direct ld. CIT(A) to keep the penalty proceedings in abeyance till the
disposal of quantum appeal by the Tribunal.
7.
In the result, Stay Application filed by the assessee is allowed.
Order pronounced in open Court on
Sd/-
04.01.2013
Sd/-
(Anil Chaturvedi)
Accountant Member
(D.K. Tyagi)
Judicial Member
True copy
N.K. Chaudhary, Sr. P.S.
Copy of the Order forwarded to:
1.
The applicant
2.
The Respondent
3.
The CIT Concerned
4.
The Ld. CIT (Appeals)
5.
The DR, Ahmedabad
6.
The Guard File
By order
AR,ITAT,Ahmedabad
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