Mallelil Industries Private ... vs Additional/ Joint/ Deputy/ ...
2022 Latest Caselaw 1547 Ker

         IN THE HIGH COURT OF KERALA AT ERNAKULAM

                         PRESENT

      THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS

 TUESDAY, THE 15TH DAY OF FEBRUARY 2022 / 26TH MAGHA, 1943

                  WP(C) NO. 2712 OF 2022

PETITIONER:

         MALLELIL INDUSTRIES PRIVATE LIMITED,
         MALLELIL HOUSE,
         ATTACHAKKAL P.O.,
         PATHANAMTHITTA,
         KERALA 689 691,
         REPRESENTED BY ITS MANAGING DIRECTOR,
         SREEDHARAN NAIR RAGHAVAN PILLAI.
         BY ADVS.
         SRI.ANIL D. NAIR
         SMT.TELMA RAJU
         SMT.EDATHARA VINEETA KRISHNAN
         SRI.ARAVIND SREEKUMAR


RESPONDENT:

         ADDITIONAL/ JOINT/ DEPUTY/ ASSISTANT
         COMMISSIONER OF INCOME TAX
         INCOME TAX OFFICER,
         NATIONAL FACELESS ASSESSMENT CENTRE,
         NATIONAL E-ASSESSMENT CENTRE-NeAC
         ROOM NO 402, 2ND FLOOR,
         E-RAMP, NEAR GATE NO.10,
         JAWHARLAL NEHRU STADIUM
         DELHI 110003.
         BY ADVS.
         SRI.JOSE JOSEPH, SC FOR INCOME TAX


     THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 27.01.2022, THE COURT ON 15.02.2022 DELIVERED
THE FOLLOWING:
 W.P.(C) No.2712/22
                                  -:2:-


                    BECHU KURIAN THOMAS, J.
                    --------------------------------
                      W.P.(C) No.2712 of 2022
                    ---------------------------------
                Dated this the 15th day of February, 2022

                              JUDGMENT

Petitioner assails an order of penalty issued under section

271(1)(c) of the Income Tax Act, 1961, (for short, 'the Act') in

this proceeding under Article 226 of the Constitution of India.

Though an alternate remedy of appeal is available to the

petitioner, resort is made to the extraordinary jurisdiction of this

Court, on the contention that the entire exercise that resulted in

the impugned order was one without jurisdiction.

2. Petitioner is an assessee under the Act and carries on its

business of quarrying and sale of rock aggregates. For the

assessment year 2013-14, the revised return filed by the

petitioner was accepted and the assessment was completed

under section 143(3) of the Act on 27.12.2016. Subsequently, in

exercise of the powers under section 263 of the Act, the Principal

Commissioner of Income Tax, Kottayam, called for and examined

the proceedings that resulted in the assessment order and found W.P.(C) No.2712/22

the assessment order erroneous and prejudicial to the interest of

revenue. Therefore, the assessment order was set aside and

remanded to the assessing officer for passing a fresh assessment

order. Pursuant thereto, by order dated 05.12.2019, a fresh

order of assessment was issued, assessing the total income of

the petitioner after disallowing the existing depreciation claimed.

On 03.08.2021, a show-cause notice was issued to the petitioner

proposing to impose a penalty. After considering the objections

filed by the petitioner, Ext.P6 order was issued, imposing a

penalty upon the petitioner. The impugned order of penalty

issued under section 271(1)(c) is produced as Ext.P6.

3. Sri.Anil D.Nair, learned counsel for the petitioner,

vehemently contended that the order of penalty is ex facie

without jurisdiction or authority since the assessment

proceedings having been initiated pursuant to the proceedings

under section 263 of the Act, cannot confer authority upon the

assessing officer to initiate proceedings for imposing penalty.

Learned Counsel based his contentions on the fact that the

original assessment order had not expressed the satisfaction of

the assessing officer necessary to initiate proceedings for W.P.(C) No.2712/22

imposing penalty under section 271(1)(c) of the Act. According

to the learned counsel, the subsequent order of assessment

issued consequent to the order under section 263 of the Act

cannot confer the jurisdiction upon the assessing officer to

initiate proceedings for imposing penalty. Learned Counsel relied

upon the decisions in Commissioner of Income Tax v. Super

Metal Re-Rollers (P) Ltd. [(2004) 265 ITR 82 (Del.)], Addl.

Commissioner of Income Tax v. J.K.D's Costa [(1982) 133

ITR 7 (Del.) Commissioner of Income Tax v. Keshrimal

Parasmal [(1986 157 ITR 484 (Raj.)], Commissioner of

Income Tax v. C.R.K. Swamy [(2002) 254 ITR 158 (Mad.)]

Commissioner of Income Tax v. Parmanand M.Patel

[(2005) 278 ITR 3 (Guj.)] Commissioner of Income Tax

(Central), Ludhiana v. Rakesh Nain Trivedi [(2016) 282 CTR

205 (Punjab & Haryana)].

4. Sri.Jose Joseph, learned Standing Counsel for the

respondent, submitted that the order assailed in this writ petition

can be the subject matter of an appeal and hence the petitioner

has an efficacious and alternative remedy under the statute and

also that recourse to Article 226 of the Constitution was not W.P.(C) No.2712/22

warranted. He further submitted that the order of assessment

issued after remand clearly expressed the satisfaction of the

assessing officer that penalty proceedings ought to be initiated,

which satisfies the requirements of section 271(1)(c) of the Act

and hence there is no lack of jurisdiction.

5. I have considered the rival contentions.

6. A perusal of Ext.P2 order issued under section 263 of

the Act reveals that the earlier assessment order was set aside in

its entirety, and a fresh assessment order was directed to be

issued. It was observed in the said order that virtually no

enquiries were made by the assessing officer at the time of

assessment and only a very 'sketchy order' was passed.

7. Though the learned counsel for the petitioner

vehemently asserted that Ext.P2 order was not an open remand

but only a limited remand solely to consider the question of

excess depreciation claimed/allowed, I cannot agree. A perusal

of Ext.P2 order reveals that the aforesaid argument is incorrect.

In this context, it is appropriate to refer to some of the

observations in Ext.P2 order issued under section 263 of the Act.

"2. The Assessing Officer passed a very sketchy order without application of mind accepting the claims made by W.P.(C) No.2712/22

the assessee on face value without any inquiries. He failed to examine and consider the observations of the Hon'ble Supreme Court in the case of Mak Data P. Ltd vs. Commissioner of Income Tax-II.

3. Further, it is also observed from the records that during the course of survey some incriminating material/document were found & the same were seized. These books/documents were never confronted by the Assessing Officer to assessee at the time of assessment proceedings though it was survey assessment. Whatever books of account were produced by the assessee was accepted on their face value without any observations regarding impounded books of account/document in this case by the Assessing Officer.

8. Finally, in the concluding two paragraphs, the following

are observed:

"The main issue of non-examination of impounded books of account with reference to the return of income filed is apparent from records as discussed above. After detailed discussion as per order sheet entry dated 25-03-2019, the assessee stated that the company shall have no objection for revision u/s.263 of the Income-Tax Act, 1961 of the assessment order dated 27-12-2016 if the same is set aside for fresh assessment as per law, by passing a speaking order by the Assessing Officer provided the assessee is given a reasonable opportunity of being heard."

"In view of above discussion and the detailed show cause notice u/s 263 issued in this case it is held that assessment order u/s.143(3) dated 27-12-2016 passed by the DCIT, Circle-1, Thiruvalla is both erroneous as well as prejudicial to the interest of the revenue and is a fit case for revision u/s 263 of the Income Tax Act. Accordingly, the Assessment Order u/s.143(3) dated 27-12-2016 is set W.P.(C) No.2712/22

aside with the directions to the AO to pass a fresh assessment order, after affording a reasonable opportunity of being heard to the assessee."

9. A reading of the aforesaid observations clearly indicates

that the initial order of assessment was wholly set aside and the

proceedings were remanded as an open remand. On a reading

of Ext.P2 order in its entirety, it is explicit that there were no

limited issues for the assessing officer to decide. In my

considered opinion, Ext.P2 order was an open remand,

conferring power upon the assessing officer to pass fresh orders

of assessment on all the issues.

10. Consequent to Ext.P2, the assessing officer issued

Ext.P3 order of assessment, wherein he has expressed his

satisfaction that this is a fit case where penalty under section

271(1)(c) of the Act, for concealment of income, ought to be

initiated. As a consequence of the said satisfaction expressed in

Ext.P3 assessment order, the notice of penalty was issued as

Ext.P4. Thereafter Ext.P6 order was issued imposing a penalty

upon the petitioner.

11. Since I have already held that Ext.P2 order was an

open remand, I find that the assessing officer, while issuing W.P.(C) No.2712/22

Ext.P3 order of assessment, was vested with all the powers

including the jurisdiction to express his satisfaction for initiating

penalty proceedings, as has been held in Commissioner of

Income Tax and Others v. S.V.Angidi Chettiar (AIR 1962 SC

970). In the aforementioned judgment, it was held that the

power to impose penalty depends upon the satisfaction of the

Income Tax Officer in the course of proceedings under the Act

and the proceedings for penalty ought not to be commenced

before the conclusion of proceedings for assessment.

12. In the context of the circumstances arising in this case,

it is profitable to bear in mind the distinction between the

proceedings under section 263 and the initiation of penalty under

section 271(1)(c). There is no quarrel that while issuing orders

under section 263 of the Act, the Principal Commissioner of

Income Tax cannot direct penalty to be imposed. However, when

in the exercise of powers under section 263 of the Act, an

assessment order was set aside and remanded back to the

assessing officer, all the powers of an original assessing officer

gets vested by operation of law. In such proceedings, if the

assessing officer expresses his satisfaction that penalty W.P.(C) No.2712/22

proceedings can be initiated, the same is, in my considered view,

within his jurisdiction and authority.

13. The satisfaction recorded by the assessing officer in

Ext.P3 that proceedings for penalty must be initiated under

section 271(1)(c) is clearly within his jurisdiction, despite the

fact that the original assessment order did not mention anything

about initiating penalty proceedings. Ext.P3 assessment order

issued after remand, is a proceeding under this Act and satisfies

the ingredients of section 271(1)(c) and hence, the assessing

officer was vested with the jurisdiction to record his satisfaction

and thereafter initiate penalty proceedings.

14. The decisions in Commissioner of Income Tax v.

Super Metal Re-Rollers (P) Ltd. [(2004) 265 ITR 82 (Del.)],

Addl. Commissioner of Income Tax v. J.K.D's Costa [(1982)

133 ITR 7 (Del.) Commissioner of Income Tax v. Keshrimal

Parasmal [(1986 157 ITR 484 (Raj.)], Commissioner of

Income Tax v. C.R.K. Swamy [(2002) 254 ITR 158 (Mad.)]

Commissioner of Income Tax v. Parmanand M.Patel

[(2005) 278 ITR 3 (Guj.)] Commissioner of Income Tax

(Central), Ludhiana v. Rakesh Nain Trivedi [(2016) 282 CTR W.P.(C) No.2712/22

205 (Punjab & Haryana)] are all cases where the assessment

order had not recorded the satisfaction for initiating penalty

proceedings. In the above cases, such a satisfaction was either

recorded in proceedings under section 263 of the Act or directed

to initiate penalty. The facts in those cases are totally different

and the principle laid down therein have no application to the

case on hand.

15. Coming to the instant case, nowhere in Ext.P2 order

has the Principal Commissioner of Income Tax expressed his

satisfaction for initiating penalty proceedings. On the contrary,

he merely set aside the assessment order in its entirety and

remanded the case for a fresh consideration by the assessing

officer. Thus, while issuing the order of assessment, as per

Ext.P3, the assessing officer was bestowed with all powers as in

an original assessment, including the power to express his

satisfaction for initiating penalty proceedings. In such a view of

the matter, I find that the initiation of proceedings for imposing

penalty and the consequent imposition was within the

jurisdiction and authority of the assessing officer. Hence there is

no merit in the challenge raised.

W.P.(C) No.2712/22

Accordingly, I dismiss this writ petition. However, liberty of

the petitioner to pursue its statutory remedies against the order

imposing penalty (Ext.P6) shall not be affected and if any such

appeal is preferred, the same shall be considered and disposed

of in accordance with law, untrammelled by any of the

observations made in this judgment.

Sd/-

BECHU KURIAN THOMAS JUDGE vps W.P.(C) No.2712/22

APPENDIX

PETITIONER'S/S' EXHIBITS EXHIBIT P1 TRUE COPY OF THE ASSESSMENT ORDER DATED 27.12.2016 FOR THE YEAR 2013-14 PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX THIRUVALLA.

EXHIBIT P2 TRUE COPY OF THE ORDER DATED 27.3.2019 UNDER SEC.263 PASSED BY THE PRL.

COMMISSIONER OF INCOME TAX, KOTTAYAM.

EXHIBIT P3 TRUE COPY OF THE ORDER DATED 05.12.2019 PASSED BY THE AST. COMMISSIONER OF INCOME TAX, THIRUVALLA.

EXHIBIT P4 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 03.08.2021 FOR PENALTY UNDER SEC.271(1)

(c) ISSUED BY THE RESPONDENT.

EXHIBIT P5 TRUE COPY OF THE REPLY TO THE SHOW CAUSE NOTICE FILED BY THE PETITIONER.

EXHIBIT P6 TRUE COPY OF THE ORDER DATED 12.01.2022 UNDER SEC.271(1)(c) WAS ISSUED BY THE RESPONDENT.