Income Tax Appellate Tribunal - Delhi
Hindustan Coca Cola Beverages (P) Ltd., ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI 'C' BENCH
BEFORE SHRI RAJPAL YADAV, JM & SHRI A.N. PAHUJA, AM
ITA no.116 /Del/2012
Assessment year:2004-05
A.C.I.T.,Circle-12 (1), V/s.M/s Hindustan Coca Cola
New Delhi Beverages (P) Ltd., 113, Abul
Fazal Road,New Delhi-110001
[PAN : AAACH 3005 M ]
(Appellant) (Respondent)
Assessee by Shri Ajay Vohra, AR
Revenue by Shri R.I.S. Gill,DR
Date of hearing 04-07-2012
Date of pronouncement 13-07-2012
ORDER
A.N.Pahuja:- This appeal filed on 09.01.2012 by the Revenue against an order dated 28.10.2011 of the ld. CIT(A)-XV, New Delhi, raises the following grounds:-
1 "Whether Ld. CIT(A) was correct on facts and circumstances of the case and in law in cancelling the penalty of ``8,52,85,341/- u/s 271(1)(c) of the Income-tax Act, 1961 imposed by AO.
2. The appellant craves leave to add, alter or amend any ground of the appeal raised above at the time of hearing."
2 Facts, in brief, as per relevant orders are that assessment in this case was completed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act) vide order dated 29.12.2006,determining loss of ``310,44,80,700/- in pursuance to return declaring loss of ``384,18,05,410/- filed on 30.10.2006 by the assessee, manufacturing non alcoholic beverages. Inter alia, disallowance of ``37,83,02,343/- on account of non compete fee, ``29,94,15,920/- on account 2 ITA No.116/Del./2012 of depreciation on goodwill, ``14,64,622/- on account of depreciation on amount paid for acquisition of distributor list; `60,96,622/- on a/c of depreciation on acquisition of signages & ice boxes;``21,32,262/- on account of donation and ``4,99,12,941/- on account of processing charges, was made. Subsequently, CIT-IV, Delhi vide his order dated 25.3.2009 u/s 263 of the Act, set aside the assessment on the issue of claim on account of service charges of `14,06,31,773/- and advertisement, publicity and sale promotion expenses of `9,70,97,401/-. The AO completed the consequential assessment vide order dated 5.10.2009 ,determining loss of `286,67,51,526/- with the disallowance of aforesaid two amounts. Inter alia, penalty proceedings u/s 271(1)(c) of the Act were also initiated.
3. Later, on an appeal filed by the assessee against the order of the CIT u/s 263 of the Act, the ITAT vide their order dated 30th October,2009 concluded that the said order u/s 263 of the Act was without jurisdiction. Subsequently, in response to a showcause notice before levy of penalty, the assessee submitted vide letter dated 14.04.2010 that the ITAT vide their order dated 30th October, 2009 having set aside the order of the CIT u/s 263 of the Act, no penalty can be imposed.. However, the AO did not accept the submissions of the assessee and imposed a penalty of ``8,52,85,341/- @100% tax sought to be evaded on the aforesaid amount of ``23,77,29,174/-for furnishing inaccurate particulars of income. Inter alia, the AO relied upon the decision of Hon'ble Supreme Court in the case of Union of India Vs. Dharmendra Textiles Processors,306 ITR 277(SC) and CIT vs. Gurbachan Lal,250 ITR 157(Del.).
4. On appeal, the ld. CIT(A) cancelled the penalty, holding as under:-
""6. I have considered the submissions of the appellant and findings of the AO and facts on records and 1 am of the view that proceedings initiated under Section 143(3) of the Act consequent to the CIT's order under Section 263 dated 25th March 2009 are null and void as the parent proceedings were held not 3 ITA No.116/Del./2012 tenable in law. Therefore, penalty under section 271(1)(c) of the Act cannot be levied as penalty proceedings under Section 271(1)(c) of the Act are not independent proceedings and are in the nature of simultaneous proceedings.
6.1 In coming to the above conclusion, I also take support from the decision of the Apex Court in the case of K.C. Builders and Others Vs. ACIT (265 ITR
562) (2004) (SC) wherein the question before the Court were
a) Whether a penalty imposed under Section 271(1)(c) of the Income Tax Act and prosecution under Section 276C of the Income Tax Act are simultaneous?
b) Whether the Criminal Prosecution gets quashed automatically when the Income Tax Appellate Tribunal which is the final Court on the facts comes to the conclusion that there is no concealment of income, since no offence survives under the Income Tax Act thereafter?
c) Whether the High Court was justified in dismissing the Criminal Revision Petition vide its impugned order ignoring the settled law as laid down by this Court that the finding of the Appellate Tribunal was conclusive and the prosecution cannot be sustained since the penalty after having been cancelled by the complaint following the Income Tax Appellate Tribunal's order no offence survives under the Income Tax Act and thus the quashing of the prosecution is automatic?
d) Whether the finding of the Income Tax Appellate Tribunal is binding upon the Criminal Curt in view of the fact that the Chief Commissioner and the Assessing officer who initiated the prosecution under Section 276C(l) had no right to overrule the order of the Income Tax Appellate Tribunal. More so when the Income Tax Officer giving the effect to the order cancelled the penalty levied under Section 271 (l)(c).
e) Whether the High Court's order is liable to be set aside in view of the errors apparent on record.4 ITA No.116/Del./2012
While deciding on the above questions Hon'ble Court has observed as under:
"Where the additions made in the assessment order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment and, therefore, in such a case no such penalty can survive and the same is liable to be cancelled as in the instant case. Ordinarily, penalty cannot stand if the assessment itself is set aside. Where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled as in the instant case ordered by the Tribunal and later cancellation of penalty by the authorities.
In the instant case, the penalties levied under Section 271(l)(c) were cancelled by the respondent by giving effect to the order of the Income Tax Appellate Tribunal in I.T.A. Nos.3129-3132. It is settled law that levy of penalties and prosecution under Section 276C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment the quashing of prosecution under section 276C is automatic.
In our opinion the appellants cannot be made to suffer and face the rigorous of criminal trial when the same cannot be sustained in the eye of law because the entire prosecution in view of conclusive finding of the Income Tax Tribunal that there is no concealment of income becomes devoid of jurisdiction and under Section 254 of the Act, a finding of the Appellate Tribunal supersedes the order of the Assessing Officer under Section 143(3) more so when the Assessing Officer cancelled the penalty levied.
In our view, once the finding of concealment and subsequent levy of penalties under Section 271(l)(c) of the Act has been struck down by the Tribunal, the Assessing Officer has no other alternative except to correct his order under Section 154 of the Act as per the directions of the 5 ITA No.116/Del./2012 Tribunal. As already noticed, the subject-matter of the complaint before this Court is concealment of income arrived at on the basis of the finding of the Assessing Officer. If the Tribunal has set aside the order of concealment and penalties, there is no concealment in the eyes of law and, therefore the prosecution cannot be proceeded with by the complaint and further proceedings will be illegal and without jurisdiction. The Assistant Commissioner of Income Tax cannot proceed with the prosecution even after the order of concealment has been set aside by the Tribunal when the Tribunal has set aside the levy of penalty, the criminal proceedings against the appellants cannot survive for further consideration.
6.2 In addition to the above, reliance can also be placed on the following judgments of the various High Courts including jurisdictional high court wherein the decision of K.C. Builders (supra) has been relied upon:
ITO vs. Rajan and Co. [2007} 291 ITR 345 (Del) Rakesh Kalia Vs ITO: [2007}295 ITR486(Del)
7. In view of the above discussions, I am of the considered view that the penalty levied under Section 271(1)(c) by the A.O. is not correct and deserves to be deleted."
5. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). At the outset, both the parties agreed that ITAT having set aside the order dated 5th October, 2009 of the CIT u/s 263 of the Act and the said order having been upheld by the Hon'ble Delhi High Court vide order dated 1.4.2011, penalty is not leviable.
6. We have heard both the parties and gone through the facts of the case. We find that the ITAT vide their decision dated 30th October,2009 set aside order dated 25th March, 2009 of the CIT u/s 263 of the Act . On the basis of said order, the ITAT vide their order dated 13.4.2012 in ITA no. 484/Del./2012 6 ITA No.116/Del./2012 dismissed the quantum appeal filed by the Revenue. Accordingly consequential assessment proceedings as also penalty proceedings stood quashed.. Since the additions ,forming the basis of levy of penalty itself have been set aside, penalty imposed u/s 271(1)(c) of the Act does not survive. Hon'ble Supreme Court in the case of K.C.Builders Vs. ACIT,265 ITR 562(SC) held that ordinarily, penalty cannot stand if the assessment itself is set aside. W here an order of assessment or reassessment on the basis of which penalty has been levied on the assessee, has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled. Hon'ble Delhi High Court in the case of CIT Vs. R.Dalmia,(1992)107 Taxation 107, held that no penalty survives after deletion of additions, forming the basis for the levy of penalty. Similar view was taken in Addl. Commissioner of Income-tax v. Badri Kashi Prasad (1993] 200 ITR 206 (All) and Prabhat Oil Traders v. Income- tax Officer (No. 3) (1996) 218 ITR (A.T.) 39 (ITAT, Ahmedabad),City Dry Fish Company v. Commissioner of Income-tax (1999) 238 ITR 63 (A.P.) , CIT vs. Mohd. Bux Sokat Ali (2004) 265 ITR 326 (Raj)and ACIT vs. VIP Industries (2009) 122 TTJ 289 (Mum).
6.1 Since the very basis upon which the penalty has been imposed on the amount of ``23,77,29,174/-added by the AO, does not exist in view of the aforesaid orders dated 30-10-2009 & 13.4.2012 of the ITAT, we are of the opinion that penalty levied in relation to the said amount does not survive. Therefore, ground no. 1 in the appeal is dismissed.
7. No additional ground having been raised before us in terms of residuary ground no.2 in the appeal, accordingly, this ground is dismissed.
8. No other plea or argument was made before us.
7 ITA No.116/Del./20129.. In the result, appeal is dismissed.
Order pronounced in open Court
Sd/- Sd/-
(RAJPAL YADAV) (A.N. PAHUJA)
(Judicial Member) (Accountant Member)
NS
Copy of the Order forwarded to:-
1. Assessee
2. A.C.I.T.,Circle-12 (1),New Delhi
3. CIT concerned
4. CIT(A)-XV, New Delhi
5. DR, ITAT,'C' Bench, New Delhi
6. Guard File.
By Order,
Deputy/Asstt.Registrar
ITAT, Delhi