ITO v. H. E. Distillery Pvt. Ltd.
IT(SS)A No. 28 (Bang.)/2008
Block Period : 1-4-1990 to 18-1-2001 Dated : 30-1-2009
Income-tax Act, 1961 — S. 158BFA — Whether for levy of
penalty u/s.158BFA issuance of notice is mandatory — Held, Yes. Whether in the
absence of issuance of pre-requisite notice, the entire penalty proceedings
are to be held as illegal and without jurisdiction — Held, Yes.
Facts :
The assessee, in response to notice u/s158BC, filed return
for block period on 13-8-2001 admitting undisclosed income of Rs.73,80,526.
The AO assessed the undisclosed income at Rs.2,42,47,658 and initiated
proceedings for levy of penalty u/s.158BFA(2) on the ground that the assessee
failed to disclose the income and furnished inaccurate particulars of income.
Against the order assessing undisclosed income the assessee filed an appeal on
the ground that business loss suffered by the assessee during the block period
and depreciation have to be set off against undisclosed income. The CIT(A) and
the Tribunal decided the appeal against the assessee.
The assessee vide letter dated 15-12-2005 was asked to
offer explanation to the proposed penalty. No reply was received from the
assessee. The AO levied a minimum penalty of Rs.1,18,40,726.
The assessee filed an appeal to the CIT(A) and challenged
levy of penalty on the ground that no notice for initiation of penalty was
issued. The CIT(A) cancelled the penalty.
Aggrieved, the revenue preferred an appeal to the Tribunal
where on behalf of the Revenue it was inter alia contended that the assessment
order did mention that penalty proceedings u/s.158BFA(2) are initiated; the
assessee attended the proceedings for levy of penalty; during the penalty
proceedings when the AO was transferred the new AO did issue a notice before
imposing penalty. It was submitted that CIT(A) took a rigid and narrow view
that physical service of notice was a must before imposition of penalty for
concealment. The intention of the AO to levy penalty was never in doubt.
Held :
The Tribunal relying on the decision of the Supreme Court
in the case of 82 ITR 821, 61 ITR 147, 76 ITR 696, 168 ITR 705 and also on the
decision of the co-ordinate bench of the Tribunal in IT(SS)A. No.
21/Bang./2001 in the case of Nemichand held that issuance of notice is a
pre-requisite for assuming jurisdiction to levy penalty u/s.158BFA(2) and in
the absence of issuance of a pre-requisite notice, the entire penalty
proceedings were held to be illegal and without jurisdiction. It held that
CIT(A) was perfectly justified in canceling the penalty. The Tribunal
confirmed the order of CIT(A) and dismissed the appeal filed by the revenue.
