Commissioner of Income Tax, Agra vs Brij Bhushan Cold Storage

The Income Tax Appellate Tribunal, Allahabad has referred the following question of law u/s 256(1) of the income tax Act, 1961 (hereinafter referred to as the Act) for opinion of this Court. Whether the Tribunal was legally justified in confirming the cancellation of penalty order on the basis of cancellation of order of C.I.T., Agra passed u/s 263, while the order u/s 263 is still subjudice and pending before the Hon''ble Allahabad High Court ?

The reference relates to the assessment year 1977-78.

Briefly stated the facts giving rise of the present reference are as follows:

The assessee, by status a registered firm, runs a Cold Storage. Its assessment for the assessment year under consideration was completed on 28.3.1980 on a total income of Rs. 25,660/- as against the return loss. Penalty proceedings were initiated u/s 271(1)(c) of the Act. In appeal against the assessment, certain relief was allowed by the Commissioner of income tax (Appeals) and the total income was reduced by Rs. 24,401/-. The penalty proceedings initiated u/s 271(1)(c) of the Act were dropped by the Assessing Officer with a note that after appeal effect, there was no tax effect. The Commissioner of income tax, Agra vide order dated 29.8.1985 u/s 263 of the Act cancelled the order dropping the penalty proceedings and directed the Assessing Officer to decide on merits the question whether penalty u/s 271(1)(c) was leviable. In appeal by the assessee against the order u/s 263 of the Act, the Income Tax Appellate Tribunal Bench, Allahabad vide order in I.T.A. No. 1873 (All) of 1985 dated 19.6.1989 quashed the order on the ground that on the facts the Commissioner of income tax was not competent to invoke the jurisdiction u/s 263 of the Act. On the reference application made by the Department, two questions of law, arising out of the aforesaid order of the Tribunal, were referred to this Court vide statement of case in R.A. No. 301 (All) of 1989 dated 15.4.1991. In the meantime, vide order u/s 271(1)(c) dated 24.11.1987, passed in the light of the directions of the Commissioner of income tax contained in order u/s 263 of the Act a penalty of Rs. 1,34,693/- was imposed by the Assessing Officer. The penalty order was quashed by the Commissioner of income tax (Appeals) in view of the fact that the order u/s 263 of the Act in pursuance to which the impugned penalty was levied, had been cancelled by the Tribunal. The order of the Commissioner of income tax (Appeals) was affirmed by the Tribunal on the ground that the order u/s 263 having been quashed by it, the penalty order had no legal legs to stand upon.

We have heard Sri A.N. Mahajan, learned standing counsel appearing for the Revenue and Sri S.K. Garg, learned counsel appearing for the respondent assessee.

We find that this Court in the case of Commissioner of Income Tax Vs. Braj Bhushan Cold Storage, which is inter parties relating to assessment year 1977-78 while holding the action of the Commissioner of income tax in invoking the jurisdiction u/s 263 of the Act has held that penalty proceedings stood barred by limitation. Consequently, in view of the aforesaid facts, we are of the considered opinion that the Tribunal was justified in cancelling the order of penalty. We, accordingly, answer the question referred to us in the affirmative i.e. in favour of the assessee and against the Revenue. There will be no order as to costs.