PCIT Vs KPC Medical College And Hospital (Supreme Court of India)
KPC Medical College and Hospital filed four appeals under Section 260A of the Income Tax Act, 1961 before the Calcutta High Court challenging a common order of the Income Tax Appellate Tribunal relating to penalty proceedings for Assessment Years 2007-08 to 2009-10 and 2011-12. Initially, three appeals (ITAT 105/2015, 107/2015 and 108/2015) were dismissed by a Division Bench on 7 August 2015 on the ground that no substantial question of law arose. However, another connected appeal arising from the same common ITAT order, ITAT 106/2015 (renumbered as ITA 21/2015), had already been admitted on 26 August 2015 on substantial questions of law concerning penalty under Section 271(1)(c). The assessee challenged the dismissal before the Supreme Court, which, by order dated 14 March 2016, granted liberty to seek review before the High Court.
Pursuant to that liberty, the assessee filed review applications with a delay of 120 days. The High Court condoned the delay, observing that it was not inordinate and noting that a connected appeal arising from the same common Tribunal order had already been admitted. Holding that dismissal of the three appeals despite the admission of the connected appeal constituted an error apparent on the face of the record, the High Court allowed the review applications, restored the appeals and directed that they be heard together with ITA 21/2015.
The principal issue before the High Court was the validity of the penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act. The Court examined the show cause notice issued under Section 274 read with Section 271(1)(c) and observed that none of the relevant columns had been indicated and the irrelevant columns had not been struck off. Consequently, the notice did not specify whether the penalty proceedings were for concealment of particulars of income or for furnishing inaccurate particulars of income. The High Court also examined the notice issued under Section 271AAA and found that it suffered from the same defect.
In deciding the appeals, the High Court referred to the decisions in Commissioner of Income Tax (LTU) Vs. State Bank of India, CIT Vs. SSA’s Emerald Meadows, CIT Vs. Manjunatha Cotton & Ginning Factory, Principal Commissioner of Income Tax Vs. Unitech Reliable Projects (P.) Ltd., Principal Commissioner of Income Tax (Central) Vs. Golden Peace Hotels and Resorts (P.) Ltd., Principal CIT-1, Kolkata Vs. Robbs Traders & Finance Pvt. Ltd., Commissioner of Income Tax, Chennai-IV Vs. M/s. Gem Granites (Karnataka), Union of India Vs. Rajasthan Spinning and Weaving Mills, Union of India and Ors Vs. Dharmendra Textiles Processors & Ors., Commissioner of Income Tax Vs. Reliance Petroproducts Pvt., Ltd., Mak Data P. Ltd. Vs. Commissioner of Income Tax-II, CIT Vs. Sinhgad Technical Education Society, Principal Commissioner of Income Tax, Central–2, Chennai Vs. S.R. Trust and Pr. CIT v. Brijendra Kumar Poddar. The assessee also raised a ground regarding proceedings under Section 153C, and the High Court noted the decision in CIT Vs. Sinhgad Technical Education Society concerning the requirement of correlation between seized documents and the relevant assessment years.
Applying the legal position emerging from the authorities referred to by it, the High Court held that the show cause notice under Section 274 read with Section 271 was bad in law and that the initiation of penalty proceedings was vitiated. Accordingly, it allowed all four appeals and answered the substantial questions of law in favour of the assessee.
The Revenue challenged the High Court’s judgment before the Supreme Court by filing a Special Leave Petition. The Supreme Court recorded that there was a delay of 332 days in filing the petition for which no sufficient cause had been shown. The Court further observed that, even otherwise, it was not inclined to interfere with the impugned order. The Special Leave Petition was dismissed both on the ground of delay and on merits.
The dismissal of the Special Leave Petition left the High Court judgment allowing the assessee’s appeals and setting aside the penalty proceedings undisturbed.
Read HC Judgment in this case: Calcutta HC Quashes Penalty Under Section 271(1)(c) for Unspecified Charge
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. There is a huge delay of 332 days in filing the present petition for which no sufficient cause has been shown.
2. Even otherwise, we are not inclined to interfere with the impugned order.
3. The Special Leave Petition is accordingly dismissed both on the ground of delay as well as on merits.
