Kanpur Fertilizers & Cement Ltd., Noida vs DCIT, Circle-2, Noida – Penalty Dispute and Jurisdiction Issues for AY 2012-13

Case Overview: Kanpur Fertilizers & Cement Ltd., Noida vs DCIT, Circle-2, Noida – AY 2012-13

This case, involving Kanpur Fertilizers & Cement Ltd., Noida (the appellant) and the Deputy Commissioner of Income Tax (DCIT), Circle-2, Noida (the respondent), was heard before the Income Tax Appellate Tribunal (ITAT) Delhi ‘C’ Bench under case number ITA 6671/DEL/2019. The appeal pertained to the assessment year (AY) 2012-13 and was filed on August 9, 2019, with the final tribunal order being pronounced on April 27, 2023. The case primarily revolved around a penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, and a jurisdictional challenge due to the retirement of the CIT(A) who passed the impugned order.

Background of the Case

The dispute arose from the penalty of Rs. 62,86,480 levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act. The penalty was imposed on the grounds that the assessee had allegedly concealed income and furnished inaccurate particulars of its income. The specific issue in question was the assessment of interest income of Rs. 1,93,75,902, which the assessee claimed as an adjustment against preoperative expenses, while the AO assessed it as income from other sources. The assessee argued that this was a debatable issue and did not constitute concealment or furnishing of inaccurate particulars.

Jurisdictional Challenge

A significant issue in this case was the challenge to the jurisdiction of the Commissioner of Income Tax (Appeals) [CIT(A)], who had passed the impugned order. The CIT(A), Mr. S.K. Srivastava, was compulsorily retired by the Government of India with effect from June 11, 2019. However, the order in question was dated December 31, 2018, and was allegedly passed after his retirement, raising questions about its validity. The Revenue raised a cross-objection, arguing that any order passed after the CIT(A) had become functus officio (having fulfilled his function and thus no longer holding office) was a nullity in law and without jurisdiction.

Arguments by the Parties

During the hearing, both the assessee and the Revenue presented their arguments. The Revenue’s primary contention was that the CIT(A) had no jurisdiction to pass the order after his retirement, and thus the order should be set aside. The Revenue also pointed out that there were discrepancies in the records, with some orders being uploaded to the ITBA system only after the CIT(A) had retired.

On the other hand, the assessee argued that the penalty was wrongly imposed as there was no concealment or furnishing of inaccurate particulars of income. The assessee emphasized that the issue was debatable and based on a difference of opinion, which did not warrant a penalty under Section 271(1)(c).

Tribunal’s Decision

The ITAT carefully considered the submissions from both parties and examined the records. The Tribunal noted that the impugned order by the CIT(A) was indeed passed after his retirement, and there were valid concerns about the jurisdiction under which the order was passed. Given these jurisdictional issues and the fact that the penalty was imposed based on a debatable legal issue, the Tribunal decided to set aside the impugned order.

The ITAT remanded the case back to the jurisdictional CIT(A) for fresh adjudication on the merits, ensuring that the assessee would be given an adequate opportunity to present their case. The Tribunal directed the CIT(A) to consider the outcome of the assessee’s appeal in ITA No. 308/Del/2016, which was related to the quantum additions.

Conclusion

In conclusion, the ITAT allowed the appeal filed by Kanpur Fertilizers & Cement Ltd., Noida, for statistical purposes, and similarly allowed the cross-objection filed by the Revenue for statistical purposes. The Tribunal’s decision underscores the importance of jurisdictional validity in the adjudication process and highlights the complexities involved in penalty cases where debatable issues and differences of opinion are at play.

The case will now be reconsidered by the jurisdictional CIT(A), who will reassess the penalty issue afresh, taking into account the Tribunal’s observations and the relevant legal precedents. This decision ensures that justice is served in accordance with the law and that any orders passed are within the proper jurisdictional authority.

Kanpur Fertilizers & Cement Ltd., Noida vs DCIT, Circle-2, Noida – Penalty Dispute and Jurisdiction Issues for AY 2012-13