"Supreme Court Dismisses Assessee's Appeal, Upholds High Court's Decision in a Case of Tax Penalty under Section 271(1)(c) (of Income Tax Act, 1961)"

In this case, the Supreme Court dismissed an appeal by an assessee unhappy with a High Court ruling that reinstated a penalty previously deleted by the Income Tax Appellate Tribunal (ITAT) under Section 271(1)(c) (of Income Tax Act, 1961).

The appellant argued that the CBDT Circular No.21 of 2015 rendered the Revenue's appeal to the High Court non-maintainable, as the tax effect was less than Rs.20,00,000, due to a reduced penalty amount of approximately Rs.6,00,000.

However, the court noted that the original penalty of Rs.29,02,743 was the contested issue before the Tribunal and the High Court, not the subsequent reduction. Therefore, the court found no reason to interfere with the High Court's findings and confirmed the appeal's maintainability.

As a result, the Supreme Court agreed with the High Court's view and dismissed the appellant's appeal.

1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 29.03.2016 passed by the High Court of Judicature for Rajasthan, Jaipur in D.B. Income Tax Appeal No.33 of 2014 by which the High Court has

allowed the said appeal preferred by the Revenue and has set aside the order passed by the Income Tax Appellate Tribunal (hereinafter referred to as the ‘ITAT’) deleting the penalty under Section 271(1)(c) (of Income Tax Act, 1961) (for short ‘the Act’), the assessee has preferred the present appeal.

2. It is mainly submitted on behalf of the appellant that in

view of the CBDT (Central Board of Direct Taxes) Circular

No.21 of 2015 dated 10.12.2015 the appeal preferred by the

Revenue was not maintainable. It is the case on behalf of

the appellant that in view of the aforesaid circular no appeal

can be filed by the Department in any High Court, for non-

payment of taxes, where the tax effect is less than

Rs.20,00,000/­. It is the case on behalf of the appellant

that in view of the order passed by the CIT(A) and in view of

the subsequent demand, the penalty amount was reduced to

Rs.6,00,000/­ (approximately) and therefore when the tax

effect would be less than Rs.20,00,000/­, in view of the

CBDT Circular dated 10.12.2015 the appeal preferred by the

Revenue before the High Court was not maintainable.

2.1 Learned counsel appearing on behalf of the appellant

has also made some submissions on merits on the

jurisdiction of the Additional Commissioner of Income Tax.

However considering the definitions contained in Section

2(28C) read with Section 274(2) (of Income Tax Act, 1961), ‘Joint

Commissioner’ means a person appointed to the post of

Joint Commissioner of Income Tax and includes Additional

Commissioner of Income Tax and in the present case the

approval of the Additional Commissioner of Income Tax was

obtained, we see no reason to interfere with the findings

recorded by the High Court on merits on the powers of the

Additional Commissioner to grant the approval sought by

the AO for imposing penalty under Section 271(1)(c) (of Income Tax Act, 1961) of the

Income Tax Act.

2.2 Now so far as the primary submission on behalf of the

appellant assessee that as the penalty amount was

substantially reduced to Rs.6 lakhs and even the

subsequent demand notice was for an amount of Rs.6 lakhs

(approximately) only and therefore in view of the CBDT

Circular dated 10.12.2015 the tax effect being lower than

the permissible limit to prefer the appeal before the High

Court and therefore the appeal before the High Court was

not maintainable is concerned, at the outset it is required to

be noted that what was assailed by the Revenue was the

penalty amounting to Rs.29,02,743/­ and not the penalty

reduced by the CIT(A). Before the Tribunal, both the

Revenue, as well as the assessee, preferred the appeals and

the entire penalty amounting to Rs.29,02,743/­ was an

issue before the Tribunal as well as before the High Court.

The subsequent reduction in penalty in view of the

subsequent order cannot oust the jurisdiction. What is

required to be considered is what was under challenge

before the Tribunal as well as the High Court. At the cost of

repetition, it is observed that what was challenged by the

Revenue was the penalty amounting to Rs.29,02,743/­ and

not the subsequent reduction of penalty by the CIT(A). The

aforesaid aspect has been dealt with by the High Court in

paragraph 17 of the impugned judgment and order. We are

in complete agreement with the view taken by the High

Court. Therefore, it cannot be said that the appeal before

the High Court at the instance of the Revenue challenging

the order passed by the ITAT was not maintainable in view

of CBDT circular dated 10.12.2015.

4. In view of the above and for the reasons stated above

there is no substance in the present appeal and the same

deserves to be dismissed and is accordingly dismissed. No

costs.

[M.R. SHAH]

[B.V. NAGARATHNA]

NEW DELHI;

APRIL 19, 2022