2015 (2) TMI 322 - AT - Income Tax

Stay of penalty proceedings u/s 271(1)(c) Held that - As relying on GE India Industrial (P.) Ltd. Versus Commissioner of Income-tax (A) -IV, Baroda 2013 (12) TMI 191 - ITAT AHMEDABAD the provisions of Section 275(1)(a) of the Act Assessing Officer cannot pass an order imposing penalty u/s 271(1)(c) of the Act till relevant assessment is subject matter of appeal before ld. CIT(A) (i.e. the first appellate authority). By the same analogy CIT(A) shall not undertake penalty proceedings till the disposal of appeal by the Tribunal In view of the powers conferred u/s 254(1) and Following M.K. Mohammad Kunhi 1968 (9) TMI 5 - SUPREME Court and to prevent multiplicity of proceedings and harassment to the assessee, we are inclined to direct Id. CIT(A) to keep the penalty proceedings in abeyance till the disposal of quantum appeal by the Tribunal - Decided in favour of assessee.

Issues Involved:
1. Stay of penalty proceedings initiated by the Commissioner of Income-tax (Appeals) [CIT(A)].
2. Jurisdiction and power of the Tribunal to stay penalty proceedings.
3. Prematurity and maintainability of the stay petition.
4. Exhaustion of available remedies before approaching the Tribunal.
5. Legal interpretation of Section 275(1)(a) and Section 254 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Stay of Penalty Proceedings Initiated by CIT(A):
The applicant sought a stay of penalty proceedings initiated by the CIT(A) following the enhancement of income in the appellate order dated 14/10/2014. The applicant argued that the quantum addition enhanced by the CIT(A) would not sustain before higher authorities, and an appeal against the order was already pending before the ITAT. The Tribunal referenced a previous order in the case of GE India Industrial Pvt. Ltd., where it was held that penalty proceedings should be stayed to avoid multiplicity of proceedings and potential harassment to the assessee.

2. Jurisdiction and Power of the Tribunal to Stay Penalty Proceedings:
The Tribunal examined its jurisdiction under Section 254(1) of the Income-tax Act, which grants it wide powers to pass "such orders" as it "thinks fit." The Tribunal also referenced Rule 35A of the Appellate Tribunal Rules, 1963, which allows for an application for the stay of recovery of demand, including penalty. The Tribunal concluded that it has the power to stay penalty proceedings to prevent the appeal from being rendered nugatory, as affirmed by the Hon'ble Gujarat High Court in ACIT vs. GE India Industrial Pvt Ltd.

3. Prematurity and Maintainability of the Stay Petition:
The Revenue argued that the stay petition was premature since no penalty had been imposed yet, and no demand had been raised. The Tribunal noted that the applicant had sought time to request a stay of penalty proceedings from the CIT(A), but this was not considered, leading to the issuance of a notice for penalty imposition. The Tribunal found that an emergency situation had arisen, justifying the stay petition.

4. Exhaustion of Available Remedies Before Approaching the Tribunal:
The Revenue contended that the applicant had not exhausted all available remedies, such as requesting the CIT(A) to keep the penalty proceedings in abeyance. The Tribunal acknowledged this point but noted that the applicant had attempted to seek such a stay, which was not entertained by the CIT(A). Hence, the Tribunal found it appropriate to entertain the stay petition.

5. Legal Interpretation of Section 275(1)(a) and Section 254 of the Income-tax Act:
The Tribunal discussed the provisions of Section 275(1)(a), which stipulate the time limits for passing a penalty order. It noted that the CIT(A) would have six months from the end of the month in which the Tribunal's order is received to pass a penalty order. The Tribunal emphasized that allowing the penalty proceedings to continue would cause prejudice to the assessee and result in multiplicity of proceedings. The Tribunal, therefore, decided to stay the penalty proceedings until the disposal of the quantum appeal by the Tribunal, following the precedent set by the Hon'ble Gujarat High Court.

Conclusion:
The Tribunal granted the stay petition, directing the CIT(A) to keep the penalty proceedings in abeyance until the disposal of the quantum appeal by the Tribunal. The Tribunal emphasized the need to avoid multiplicity of proceedings and potential harassment to the assessee, following the principles laid down by the Hon'ble Gujarat High Court in similar cases. The Tribunal also directed that the main appeal be decided and disposed of within three months to ensure timely resolution.

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