Commissioner Of Income Tax vs British Airways
2006 Latest Caselaw 2213 Del

ORDER

1. IT Appeal No. 310 of 2004 is directed against the order dt. 8th Oct., 2003 passed by the Income-tax Appellate Tribunal ('Tribunal') in ITA No. 1725 of 1999 for the financial year ('FY') 1989-90. By the impugned order, while dismissing the Revenue's appeal the Tribunal confirmed the deletion of penalty under Section 271C on the basis of the short deduction of tax on payment of meal and conveyance allowance, as on the date of imposition of such penalty, the quantum appeal in respect of these issues had already been decided by the Tribunal in favor of the assessed.

2. The other two appeals viz., IT Appeal 32 and 52 of 2006 are directed against the impugned order dt. 6th May, 2005 passed by the Tribunal dismissing the Revenue's appeals, ITA Nos. 3846 and 3847 of 2003, concerning the levy of penalty for the financial years 1990-91 and 1991-92.

3. The facts in brief are that for the financial years 1989-90, 1990-91 and 1991-92, the AO passed an order dt. 10th June, 1996 calculating short deduction of tax at source on the meal allowance and conveyance allowance paid by the respondent/assessed to its cabin crew. The assessed appealed against this order to the Commissioner of Income-tax (Appeals) [CIT(A)], who by order dt. 22nd Oct., 1996 deleted the short deduction of tax on conveyance allowance and confirmed the short deduction of tax on meal allowance.

4. Against the said order dt. 22nd Oct., 1996 both the assessed and the Revenue filed appeals before the Tribunal. By an order dt. 22nd July, 1997, the Tribunal allowed the assessed's appeals and deleted the short deduction of tax on meal allowance for the financial years 1989-90, 1990-91 and 1991-92. The Revenue sought a reference to this High Court against this order but the reference application was dismissed by the Tribunal on 24th Feb., 1999. Thus the question of meal allowance attained finality. The Revenue's appeals before the Tribunal on the question of conveyance allowance were still pending before the Tribunal at this point.

5. Meanwhile, on 5th Dec, 1997, a show-cause notice was issued by the AO seeking to levy penalty on the short deduction of tax on both the meal allowance and the conveyance allowance. This was followed by an order dt. 30th June, 1998 levying a penalty on the assessed under Section 271C of the Act. This penalty order dt. 30th June, 1998 was reversed by the CIT(A) by order dt. 18th Jan., 1999. The CIT(A) held that since by order dt. 22nd July, 1997, the Tribunal had already deleted the short deduction on the meal allowance and the conveyance allowance had already been deleted by the CIT(A), there could be no question of levying penalty on this score. Against this order dt. 18th Jan., 1999, the Revenue filed an Appeal being ITA No. 1725 of 1999 before the Tribunal. This appeal concerned the levy of penalty for the asst. yr. 1989-90. The corresponding penalty appeals filed by the Revenue before the Tribunal as regards asst. yrs. 1990-91 and 1991-92 were ITA Nos. 3846 and 3847 of 2003 respectively.

6. We now revert to the Revenue's quantum appeals on the issue of conveyance allowance, for the three asst. yrs. 1989-1990, 1990-91 and 1991-92, which were pending before the Tribunal. By its common order dt. 9th Jan., 2003 the Tribunal dismissed all the three appeals of the Revenue on technical grounds. The Revenue filed a batch of appeals which were allowed by this Court on 24th Aug., 2004 The order dt. 9th Jan., 2003 passed by the Tribunal was set aside and the case was remanded to the Tribunal for a fresh disposal of the issue of short deduction of tax on conveyance allowance on merits. We are informed that on remand, the Tribunal again dismissed the appeals on 30th March, 2006 against which the Revenue has filed appeals again in this Court. Therefore the issue of short deduction of tax on payment of conveyance allowance is pending in this Court.

7. Reverting to the penalty proceedings, by the impugned order dt. 8th Oct., 2003, the Tribunal dismissed the Revenue's appeal (ITA No. 1725 of 1999) pertaining to asst. yr. 1989-90 holding that since by the earlier order dt. 9th Jan., 2003, the Tribunal had already decided the quantum appeal in favor of the assessed, the penalty appeal of the Revenue had to be dismissed. Against this order the Revenue has filed the present appeal IT Apepal 310 of 2004. At the first hearing on 26th July, 2004, this Court framed the following substantial question of law:

Whether the Tribunal was correct in law in deleting the penalty of Rs. 14,46,382 levied under Section 271C of the IT Act ?

8. By its order dt. 6th May, 2005, the Tribunal dismissed the Revenue's penalty appeals for asst. yrs. 1990-91 and 1991-92 (ITA Nos. 3846 and 3847 of 2003). Against the said order dt. 6th May, 2005, the other two appeals before us, IT Appeal Nos. 32 of 2006 and 52 of 2006 have been filed by the Revenue. At the hearing on 7th July, 2006 this Court directed that "the files of ITA Nos. 310/2004, 342/2003 and 280/2003 may be sent to the Court on the next date of hearing." Further it was recorded in the said order : "Learned Counsel is put to notice that IT Appeal No. 310 of 2004 may be taken up for disposal along with this case." That is how we are, by this order disposing of IT Appeal No. 310 of 2004 along with the other two appeals, IT Appeal 32 and 52 of 2006, which also involve a similar question of law.

9. To recapitulate, the penalty has been sought to be levied on the short deduction of tax on both the meal allowance as well as the conveyance allowance. As regards the meal allowance, since the quantum issue has been decided in favor of the assessed and has attained finality, it is conceded by the learned Counsel for the appellant that the Revenue is no longer challenging the impugned orders of the Tribunal insofar as the penalty on the meal allowance part is concerned. The only question that remains as far as these appeals are concerned is, therefore, the validity of the levy of penalty for the short deduction of tax on conveyance allowance.

10. As regards conveyance allowance, the quantum appeals which had earlier been dismissed by the Tribunal on technical grounds on 9th Jan., 2003 have been remanded to the Tribunal by this Court on 24th Aug., 2004 and on remand have once again been dismissed by the Tribunal on 30th March, 2006. The said issue is stated to be now pending in this Court. The penalty appeals of the Revenue were dismissed by the Tribunal by the two impugned orders dt. 8th Oct., 2003 and 6th May, 2005 following the decision dt. 9th Jan., 2003 of the Tribunal. Since the said order dt. 9th Jan., 2003 has already been set aside by this Court on 24th Aug., 2004, learned Counsel on both sides agree that the impugned orders dt. 8th Oct., 2003 and 6th May, 2005 of the Tribunal in the present penalty appeals, insofar as they concern the short deduction of tax on conveyance allowance, should also be set aside and the matters remanded to the Tribunal for a fresh decision, notwithstanding that the quantum appeals on remand on this issue have already been dismissed by the Tribunal on 30th March, 2006.

11. We accordingly hold that as far as the penalty on short deduction of tax on meal allowance is concerned, the Tribunal was justified in rejecting the Revenue's appeals and to this extent the impugned orders do not call for interference. However, as regards the penalty concerning the short deduction of tax on conveyance allowance for the asst. yrs. 1989-90, 1990-91 and 1991-92,. the impugned orders dt. 8th Oct., 2003 and 6th May, 2005 of the Tribunal are set aside and the matters remanded to the Tribunal for a fresh decision.

12. With the above directions these three appeals are disposed of.