2018 (5) TMI 62 - HC - Income Tax

Penalty under Section 271E - maintainability of the present appeal filed on the basis of CBDT Circular No.21/2015, dated 10.12.2015 - monetary limit - Held that - In view of the CBDT Circular No.21/2015, the stake of revenue to the extent of amount of penalty under Section 271E of the Act for the Assessment Year 2008-09 is below ₹ 20,00,000/- namely, the reduced amount of penalty as imposed by the learned Commissioner of Income Tax (Appeals) only to the extent of ₹ 7,59,443/-, therefore, the present appeal is not maintainable and the present appeal is therefore dismissed as not maintainable in view of the above said CBDT Circular No.21/2015.

Summary

Issues:
1. Maintainability of the appeal by Revenue under Section 260A of the Income Tax Act, 1961 based on tax effect below ? 20,00,000.
2. Reduction of penalty under Section 271E imposed on the respondent-Assessee by the First Appellate Authority and complete setting aside by the Income Tax Appellate Tribunal.

Issue 1:
The first issue revolves around the maintainability of the appeal by Revenue under Section 260A of the Income Tax Act, 1961, considering the tax effect involved is below ? 20,00,000. The respondent-Assessee raised a preliminary objection citing CBDT Circular No.21/2015, which states that appeals with a tax effect below the mentioned monetary limit need not be filed by the Revenue. The penalty under Section 271E imposed on the respondent-Assessee for alleged violation of Section 269T was reduced by the First Appellate Authority to ? 7,59,443 from ? 57,77,213. The Income Tax Appellate Tribunal, on the second appeal by the Assessee, completely set aside the penalty, following a decision of the Supreme Court. The High Court, after considering the arguments, held that the appeal by Revenue is not maintainable as per the CBDT Circular due to the reduced penalty amount falling below the specified limit.

Issue 2:
The second issue pertains to the penalty under Section 271E imposed on the respondent-Assessee and subsequent legal proceedings. The penalty was initially imposed by the Income Tax Officer but was reduced by the First Appellate Authority and completely set aside by the Income Tax Appellate Tribunal. The Tribunal's decision was based on a Supreme Court ruling regarding the independence of penalty proceedings under Section 271E from assessment proceedings. The Tribunal and the High Court concurred that the penalty order could not survive once the original assessment order was set aside. The High Court ultimately dismissed the appeal by Revenue, upholding the Tribunal's decision to set aside the penalty under Section 271E.

In conclusion, the High Court dismissed the appeal by Revenue under Section 260A of the Income Tax Act, 1961, based on the tax effect being below ? 20,00,000 as per the CBDT Circular. The Court upheld the decision of the Income Tax Appellate Tribunal to set aside the penalty under Section 271E imposed on the respondent-Assessee, following a Supreme Court ruling on the independence of penalty proceedings from assessment proceedings.