PCIT Vs. Dhariwal Industries Ltd (Bombay High Court)

Mr Tejveer Singh, learned counsel appearing on behalf of the Revenue, relied upon a decision of the Division Bench of this Court in the case of Principal CIT-2 v/s Shree Gopal Housing and Plantation Corporation, Mumbai in Income Tax Appeal No.701 of 2015 decided on 6th February, 2018 to contend that merely because an appeal has been admitted by this Court in the quantum proceedings, would not automatically mean that the penalty ought to be deleted. Considering the facts that we have discussed above and especially considering that when the claims as mentioned herein were made by the Assessee, they were governed by judicial decisions of the Tribunal, we do not think that this judgment would apply in the factual matrix before us. From the facts of the present case, it is clear that they were debatable and arguable questions which certainly did not warrant the levy of penalty on the Assessee. This being the case, we find that the reliance placed by Mr Tejveer Singh on the aforesaid decision in the case of M/s Shree Gopal Housing and Plantation Corporation (supra) is wholly misplaced.

FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT

1. By these three appeals filed by the Revenue, under the provisions of Section 260A of the Income Tax Act, 1961, the Revenue assails the Judgment and Order of the Income Tax Appellate Tribunal (“ITAT”) Pune Bench ‘B’, Pune dated 12th June, 2015. By the impugned order, the three appeals filed by the Revenue before the ITAT for the Assessment Years (“A.Y.”) 2003-04, 2004-05 and 2005-06 were dismissed and the appeal filed by the assessee before the ITAT for the A.Y. 2003-04 was partly allowed. Income Tax Appeal i.e. ITXA No. 1133 of 2016 is with reference to the A.Y. 2003-04, whereas ITXA No. 1136 of 2016 and ITXA No. 1129 of 2016 are with reference to A.Y. 2004-05 and 2005-06 respectively. Since common questions of fact and law arise in all the three appeals, they are being disposed of by this common order and Judgment.

2. For the sake of convenience, we shall refer to the facts as narrated in Income Tax Appeal No. 1133 of 2016 which is in relation to the A.Y. 2003-04. The assessee (Dhariwal Industries Ltd.) is a company engaged in the business of manufacturing of Pan Masala as well as manufacturing and sale of rawa, atta, maida and salt. Over and above this, they are also involved in sale of mineral water and are also doing business in the area of power generation by wind mills. It is the case of the Revenue that for the A.Y. 2003-04, the assessment was completed under Section 143(3) of the Income Tax Act, 1961 (I.T.Act) on 31st March, 2006. After completion of the assessment, the Assessing Officer (A.O.) also initiated penalty proceedings under Section 271(1)(c) of the I.T.Act and the penalty order was passed by the A.O. on 26th March, 2008 levying penalty of Rs.3,68,00,000/- with respect to the following additions:-

Please become a Premium member. If you are already a Premium member, login here to access the full content.