Gujarat High Court
Parikh Bros. vs A.C.I.T. on 22 March, 2005
JUDGMENT D.A. Mehta, J.
1. The appellant assessee has proposed as many as six questions stated to arise out of Tribunal's order dated 8th July, 2003 made in ITA No. 165/AHD/2000 upholding levy of penalty of Rs. 60,430/- under Section 271(1)(c) of the Income Tax Act, 1961 (the Act).
2. Heard Mr. K.R. Dixit, learned Advocate appearing on behalf of the appellant. He has invited attention to order dated 25th January, 2005 made by the Tribunal in ITA No. 1559/AHD/99 for Assessment Year 1995-96 to point out that the quantum appeal was decided by the Tribunal subsequent to the Tribunal having rendered its decision in penalty appeal. In the circumstances, the following substantial question of law arises. Hence ADMIT.
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in proceeding to decide the appeal relating to levy of penalty under Section 271(1)(c) of the Act despite the pendency of quantum appeal relating to addition made under Section 143(3) of the Act".
3. Mr. Dixit on behalf of the appellant has requested that the present appeal relatable to penalty proceedings be decided on merits in light of Tribunal's order dated 25th January,1995 in quantum proceedings, as well as taking into consideration the fact that there was no concealment and the entire addition was based on estimate which formed the basis of the assessee agreeing to certain addition. It was further submitted that in light of settled legal position including decision of this Court (Commissioner of Income-tax v. Vinaychand Harilal, 120 ITR 752) no penalty could have been sustained and a statement made during course of survey proceedings would not have any evidentiary value so as to form the basis for making addition or levy of penalty. For this purpose reliance has been placed on decision of High Court of Kerala in case of Paul Mathews & Sons v. Commissioner of Income Tax (2003) 129 TAXMAN 416 (Ker). He therefore urged that it be held that the Tribunal had committed an error in sustaining penalty and the appeal be decided on merits.
4. Mr. K.M. Parikh, learned Standing Counsel appearing on behalf of the respondent submitted that even if the order of Tribunal dated 25th January,2005 in quantum proceedings is taken into consideration it was clear that the Tribunal had upheld the addition and granted only partial relief and in the circumstances there was no error in the order sustaining penalty which would require this Court to intervene.
5. The question is not as to whether any penalty is sustainable or not on merits of the matter, but the fundamental issue that arises is, whether the Tribunal could have proceeded to decide the appeal in penalty proceedings despite pendency of appeal in quantum proceedings. As can be seen from the impugned order of Tribunal dated 8th July,2003 sustaining penalty, it has extracted a portion of the order of Commissioner (Appeals) upholding levy of penalty and thereafter proceeded to decide on merits and ultimately dismissed the appeal of the assessee. The Tribunal has not, as is apparent from the impugned order, even taken care to ascertain whether any appeal in quantum proceedings had been filed by the assessee, and if yes, whether the same was pending or not. For the self same Assessment Year once the quantum was in dispute it is apparent that the Tribunal ought to have taken care to see that the same was decided first in point of time, the Tribunal being the final fact finding authority, and only upon such decision in quantum proceedings being rendered, could the Tribunal have proceeded to decide the appeal in penalty proceedings. The Tribunal having adopted an entirely contrary procedure the impugned order dated 8th July,2003 requires to be quashed and set aside and the appeal, being ITA 165/AHD/2000, restored to file of the Tribunal for being decided in accordance with law after taking into consideration its own finding rendered in quantum proceedings as per its order dated 25th January,2005.
6. In the circumstances, the substantial question of law is answered in the aforesaid terms. Needless to state that the Tribunal shall decide the appeal in penalty proceedings after according full and proper opportunity to both the sides of being heard. This appeal is allowed accordingly. There shall be no order as to costs.