2015 (5) TMI 511 - AT - Income Tax

Tribunal Upholds Penalties under Income Tax Act, CIT(A) Decision Reversed

The Tribunal confirmed the penalties imposed by the Assessing Officer, holding that the CIT(A) was not justified in deleting the penalties under section ... Penalty under section 271(1)(c) - CIT(A) deleted penalty levy - whether the Tribunal while complying with the provisions of section 255(4) of the Act can consider the judgment of the Hon'ble High Court in the case of ABG Heavy Industries [2010 (2) TMI 108 - BOMBAY HIGH COURT]? - grievance with the majority view - Held that:- In the light of the clear directions given by the Hon'ble Bombay High Court in the appeals filed by the assessee for the impugned assessment years inter alia directed the Tribunal to consider the said decision of ABG Heavy Industries and all other decisions, we can consider the said judgments of ABG Heavy Industries and also the other judgments for allowing the deduction u/s. 80IA(4) of the Act while giving effect to the opinion of the Third Member as per the provisions of section 255(4) of the Act. Following the directions of the Hon'ble Bombay High Court being the Jurisdictional High Court, the Tribunal is bound to follow the directions and we do accordingly. In case anyone has grievances with the majority view, the aggrieved party can seek appropriate remedy against the same. That situation will come only when the majority view is implemented and a formal order is passed on the appeal. However, just because one of the parties before us has a grievance with the majority view, notwithstanding the merits of such grievance, even if any, we must not delay the judicial process of giving effect to the majority view. The majority view in these appeals is that the learned CIT(A) was correct in confirming the impugned penalties of ₹ 54,82,239 and ₹ 34,90,015 in the case of Jupiter Corporation Services Ltd for the assessment year 1995-96 and 1996-97 and of ₹ 9,17, 680 in the case of Smt Sulochana V Gupta for the assessment year 1996-97. We, accordingly, confirm the same. - Respectfully following the same and rejecting the objections raised by the learned counsel for the assessee, we hold that the majority view is that CIT(A) was not justified in deleting the penalties, imposed on the assessee under section 271(1)(c) of the Income Tax Act, 1961, of ₹ 46,64,350 for the assessment year 1995-96, ₹ 2,88,42,796 for the assessment year 1996-97 and of ₹ 34,78,593 for the assessment year 1997-98. The relief so granted by the CIT(A) thus stands vacated and the penalty orders passed by the Assessing Officer stands restored. - Decided against assessee. Issues Involved:1. Justification of CIT(A) in deleting the penalty under section 271(1)(c) of the Income Tax Act, 1961.2. Validity of the Third Member's decision and its alignment with division bench decisions.3. Procedural appropriateness of referring the matter to a special bench.4. Impact of pending quantum proceedings before the Gujarat High Court.5. Relevance of judicial precedents and their binding nature on the Tribunal.Detailed Analysis:1. Justification of CIT(A) in Deleting the Penalty under Section 271(1)(c) of the Act:The primary issue was whether the CIT(A) was justified in deleting the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The Tribunal initially had a difference of opinion between the Judicial Member and the Accountant Member. This led to the referral of the matter to a Third Member under section 255(4) of the Act. The Third Member, after considering the facts and circumstances, concurred with the Accountant Member, concluding that the deletion of the penalty was not justified. Consequently, the majority opinion was that CIT(A) was correct in confirming the penalty levied under section 271(1)(c).2. Validity of the Third Member's Decision and its Alignment with Division Bench Decisions:The learned counsel for the assessee argued that the Third Member's decision disregarded the division bench orders, which should bind the single-member benches, including the Third Member. Citing the Vallabhdas Vithaldas case, it was asserted that a Third Member's decision cannot override the division bench's rulings. The Tribunal acknowledged this legal position but noted that the approach adopted by the Third Member was consistent with the prevailing legal standards at that time, as per the Delhi High Court's decision in P C Puri Vs CIT.3. Procedural Appropriateness of Referring the Matter to a Special Bench:The counsel for the assessee requested that the matter be referred to a special bench, arguing that the Third Member should have sought the constitution of a special bench if he had doubts about the division bench's decisions. However, the Tribunal, referencing the B T Patil & Sons Belgaum Constructions Pvt Ltd case, concluded that at the stage of giving effect to the majority views, it is not open to the Tribunal to revisit the adjudication process. The Tribunal emphasized that its role was to implement the majority view, not to re-examine the legal issues.4. Impact of Pending Quantum Proceedings Before the Gujarat High Court:The counsel for the assessee sought adjournment on the grounds that the quantum proceedings were pending before the Gujarat High Court. The Tribunal, however, expressed its disinclination to delay the proceedings, noting that the valuable time of the bench was being wasted. The Tribunal held that it should not delay the judicial process of giving effect to the majority view due to pending proceedings or grievances with the majority view.5. Relevance of Judicial Precedents and Their Binding Nature on the Tribunal:The Tribunal discussed the binding nature of judicial precedents, particularly the Vallabhdas Vithaldas decision, which established that division bench decisions bind single-member benches, including Third Members. The Tribunal also referenced various judicial precedents, including Sayaji Iron & Engg Co Ltd Vs CIT and Union of India Vs Paras Laminates Pvt Ltd, to support its conclusion. The Tribunal emphasized that while the Third Member's decision was consistent with the legal position at the time, the subsequent guidance from the jurisdictional High Court must be followed.Conclusion:The Tribunal concluded by confirming the penalties imposed by the Assessing Officer, aligning with the majority view that the CIT(A) was not justified in deleting the penalties under section 271(1)(c). The appeals were allowed, and the relief granted by the CIT(A) was vacated. The penalties imposed on the assessee for the relevant assessment years were restored. The judgment was pronounced in the open court on 24th April 2015.