1 IN HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO.52 OF 2014 Gangadhar Narsingas Agrawal (HUF), Hindu Undivided Family having its address at Anand Bhavan, Station Road, Post Box 107, Margao, Goa 403 601. Appellant. V/s. Assistant Commissioner of Income Tax, Circle 1, Margao, Goa. . Respondent. Mr. Ashok A. Kulkarni with Ms. Vinita Palyekar, Advocates for appellant. Ms. Amira Abdul Razaq, Standing Counsel for respondent. Coram : M. S. SONAK & SMT. M.S. JAWALKAR, JJ. Date : 4th February, 2020. Oral Judgment: (Per M.S. Sonak, J.) : Heard Mr. Ashok Kulkarni along with Ms. Vinita Palyekar, learned Counsels for appellant and Ms. Amira Abdul Razaq, learned Standing Counsel for respondent. 2 2. This appeal was admitted on 9.9.2014 by making speaking Order and incorporating therein substantial questions of law. Accordingly, for convenience of reference, we transcribe Order dated 9.9.2014: Question is whether Order dated 16.11.2000 passed by CIT (Appeals) which remands matter back to AO completely wipes out earlier order appealed against. 2. In earlier order, Assessee was not permitted deduction of Rs.1,40,00,000/- on account of mine refilling charges and initiated Section 271 proceedings. CIT (Appeals) found some fault in exercise of jurisdiction by AO and remanded matter back. However, in process CIT (Appeals) did not observe anything expressly on direction about initiating penalty proceedings. 3. fresh order was thereafter passed by AO without observing on need to initiate Section 271 proceedings therein. Perhaps on strength of earlier observation, penalty proceedings have been taken up. objection of Assessee is earlier order did not survive and in absence of any specific direction to initiate such proceedings in later assessment order, initiation itself is barred. 4. We have heard respective counsels. 3 5. Admit on following substantial questions of law: 1. Whether on facts and in circumstances of case, there was jurisdiction in respondent to levy impugned penalty? 2. Whether on facts and in circumstances of case, Tribunal was right in law in giving finding that as at relevant time, Commissioner of Income Tax (Appeals) had power to partially set aside order of assessment and any finding in order of assessment so set aside as regards satisfaction as no concealment survives after such set aside? 6. Advocate Ms. Desai waives notice for respondent . 3. appellant in present case filed return of income disclosing loss of Rs.13,32,280/- and net agricultural income of Rs.10,500/- for Assessment Year 1997-1998 before concerned Assessment Officer (AO). By Order dated 8.2.2000, made under Sec.143 (3) of Income Tax Act, 1961 (said Act), AO, disallowed mining land restoration charges in amount of Rs.1,40,00,000/- and added back this amount to return income. In said Order dated 8.2.2000, AO, also made following endorsement, which was to form part of Order: 4 Issue penalty notice u/s.271(1)(c) 4. appellant, aggrieved by aforesaid Order dated 8.2.2000 instituted appeal before Commissioner (Appeals). Appeal Memo in this appeal is produced before us. Appeal Memo makes no reference to endorsement in relation to issuance of Notice under Section 271(1)(c) or to initiation of any penalty proceedings. Order of Commissioner of Income Tax (Appeals) dated 16.11.2000 also records that only objection raised in appeal was against disallowance of Rs.1,40,00,000/- being provision made for expenses on restoration of land affected by mining. 5. This appeal, as noted earlier, was disposed of by Commissioner (Appeals) vide Order dated 16.11.2000. 6. In pursuance of aforesaid remand (AO) made Order dated 30.3.2001 giving effect to Order of Commissioner (Appeals) dated 16.11.2000. This time, AO, upon reconsideration of matter in terms of remand Order, once again, disallowed amount of Rs.1,40,00,000/- for which appellant had made provision towards mining land restoration charges, thereby maintaining returned income at Rs.54,49,180/-. 5 In this Order dated 30.3.2001, there was no specific reference to penalty or initiation of penalty. 7. AO, however, by separate Order dated 28.5.2001, imposed penalty of Rs.40,00,000/- upon appellant in exercise of powers under Section 271 of said Act. 8. appellant instituted appeal before Commissioner (Appeals) against AO's Order giving effect to Order of Commissioner (Appeals) dated 30.3.2001. However, on 7.1.2002, appellant, withdrew this appeal. Accordingly, Order of AO dated 30.3.2001 maintaining appellant's income at Rs.54,49,180/- or in other words, maintaining disallowance of Rs.1,40,00,000/-, attained finality. 9. appellant also instituted separate appeal before Commissioner (Appeals) questioning Order dated 28.5.2001 imposing penalty upon appellant in amount of Rs.40,00,000/-. 10. Commissioner (Appeals) vide Order dated 8.1.2002 allowed appellant's appeal by agreeing with appellant's contention that Order dated 16.11.2000 made by 6 Commissioner (Appeals) in first round of litigation had completely set aside and even obliterated Assessment Order dated 8.2.2000. Commissioner (Appeals) reasoned that since entire Order had been set aside, even endorsement regards issue of penalty notice stands set aside. 11. Accordingly, AO's Order dated 28.5.2001 levying penalty upon appellant was set aside. 12. respondent Revenue appealed to Income Tax Appellate Tribunal Panaji Bench (ITAT) against Order dated 8.1.2002 made by Commissioner (Appeals) setting aside levy of penalty. This was disposed of by Order dated 7.4.2006, operative portion of which, is contained in paragraphs 6 and 7, which reads as follows: 6.In light of above discussion, by considering facts of case, we are of view that CIT (A) has cancelled levy of penalty merely on technical ground without discussing merit of case which is not desirable. Therefore, we deem fit to set aside order of CIT (A) and restore matter to him to decide penalty appeal also on merit, but by providing reasonable opportunity to assessee. For similar reasons, cross objection filed by assessee is also 7 allowed. 7.In result, appeal filed by department and cross objection filed by assessee are allowed for statistical purposes as stated above and announced in open court. 13. appellant, thereupon instituted Tax Appeal No.68/2006 before this Court contending that ITAT was obliged to first decide issue of jurisdiction to initiate penalty proceedings, instead of simply remanding matter to Commissioner (Appeals) to decide matter on issue of jurisdiction as well as merits. 14. Tax Appeal No.68/2006 was disposed of by this Court vide Judgment and Order dated 19.2.2018, accepting appellants aforesaid contentions. matter was once again remanded to ITAT to decide issue of jurisdiction of AO in levying penalty. operative portion of Judgment and Order dated 19.2.2018 is found in paragraphs no.7, 8 and 9 which read as follows: 7.After having perused order passed by CIT (A) and ITAT, it is obvious that ITAT has committed error of law which is apparent on face of record in sense that core issue which 8 was challenged by revenue was about jurisdiction of Assessment Officer in levying penalty without issuance of penalty proceedings. 8.After said issue had been decided in favour of respondent herein, then, question of remand would have arisen. We, therefore, deem it necessary again to remand matter to Appellate Tribunal with direction to decide issue of jurisdiction of Assessment Officer. 9.With this direction, appeal is allowed and disposed of . 15. In pursuance of remand as aforesaid, ITAT, has passed impugned Judgment and Order dated 28.8.2013, in which, it has held that AO, in facts and circumstances of present case, had jurisdiction to levy penalty and that endorsement regarding initiation of Penalty proceedings contained in AO's initial Order dated 8.2.2000 was not wiped out by Order dated 16.11.2000 made by Commissioner (Appeals). 16. Aggrieved by impugned Judgment and Order dated 28.8.2013, appellant instituted present Tax Appeal, which, as noted earlier came to be admitted vide Order dated 9.9.2014 on aforesaid substantial questions of law. 9 17. Although, this Court, has framed two substantial questions of law in its Order dated 9.9.2014, it is apparent that issue raised by both questions is really one and same namely whether in facts and circumstances of present case, did AO have jurisdiction to impose penalty upon appellant based upon initiation of penalty proceedings as endorsed in AO's Order dated 8.2.2000, which Order was subject matter of appeal before Commissioner (Appeals) and which appeal came to be disposed of vide Order dated 16.11.2000? 18. Mr. Kulkarni, learned Counsel for appellant submits that Order dated 16.11.2000 made by Commissioner (Appeals), upon being read in its entirety, clearly suggests that AO's Order dated 8.2.2000 was set aside in its entirety, i.e. including endorsement for initiation of penalty proceedings. He submits that merely because expressions like set aside or quash may not have been used by Commissioner (Appeals), that does not mean that AO's Order was not in fact set aside or quashed in its entirety. He submits that it is necessary to read Order in its entirety and in context in which it was delivered. He submits that from this it is apparent that endorsement in initiation of penalty proceedings was at least impliedly set aside by Commissioner of Income-Tax (Appeals) in its Order dated 10 16.11.2000. He relies on Commissioner of Income-Tax Vs. Bhan Textile P. Ltd. 1, V. K. Packaging Industries Vs. Tax Recovery Officer and others, 2 and Commissioner of Income-Tax Vs. Basumati (P) Ltd., 3 in support of his contentions. 19. Mr. Kulkarni, by way of elaboration submits that Order of AO merges in Order of Commissioner (Appeals) and not other way round as held by ITAT in impugned Order. He also submits that original endorsement for initiation of penalty proceedings was on basis of assessment in Order dated 8.2.2000. Once, assessment was set aside by Commissioner (Appeals) though impliedly, and matter was remanded for reconsideration, obviously, Order of initiation of proceedings would not survive. He submits that AO in his Order dated 30.3.2001 giving effect to Order of Commissioner (Appeals) has not applied his mind afresh and issued any notice for initiation of penalty proceedings, which is sine qua non for sustaining any order for imposition of penalty. Mr. Kulkarni submits that these are good and weighty reasons for answering substantial questions of law in favour of appellant and against revenue. 1(2008) 300 ITR 176 (Delhi) 2(2004) 266 ITR 283 3(1989) 180 ITR 175 11 20. Ms. Razaq, learned Standing Counsel for respondent defends impugned Order made by ITAT on basis of reasoning reflected therein. She submits that issue raised by appellant is hyper technical and it ignores substance of remand Order dated 16.11.2000. She submits that in this case, appellant has taken part in penalty proceedings without any demur or protest. She therefore submits that this appeal warrants dismissal. 21. Rival contentions now fall for our determination. 22. entire appeal turns on interpretation of Order dated 16.11.2000 made by Commissioner (Appeals), in appeal against AO's Order dated 8.2.2000. AO, as noted earlier, by his Order dated 8.2.2000 has not only disallowed mining land restoration charges and ordered same to be added back to return income, but further ordered initiation of penalty proceedings under Sec.271 (1) (c) of said Act. 23. appellant in his appeal against AO's Order dated 8.2.2000 had raised no formal grounds to initiation of penalty but had only attacked Order, insofar as it made disallowance of Rs.1,40,00,000/- being provision made for 12 expenses on restoration of land affected by mining. This is quite clear not only from Appeal Memo handed in by learned Counsel for appellant but also from Order dated 16.11.2000 made by Commissioner (Appeals). 24. crucial portion of Order dated 16.11.2000 is to be found in paragraphs 7 and 8, which read as follows: 7.The AO has assumed without any tangible basis that in case of Gogte Minerals, amount of pit filling expenses was actually spent. fact is that whole question of deductibility of expenditure, its quatum and point of time of accrual was reverted back to assessing authority in said case. Since AO in present case has not addressed question whether relevant mine was abandoned in this year and whether liability otherwise arose in this year and what was basis of quantification of liability at such huge figure, matter deserves to be reconsidered by him in accordance with law in light of above discussion. He is directed to ascertain year of allowability and precise basis of quantification of provision at Rs.1,40,00,000/- in light of factors governing case on last day of relevant accounting year when this provision was made and allow liability only if, and to extent, it could be said to be real liability in praesenti crystallized on or before last day of relevant accounting year. For this, 13 AO will afford reasonable opportunity to appellant. 8. appeal is disposed of accordingly. For statistical purposes, it may be treated as partly allowed . 25. According to us, aforesaid portion suggests that Commissioner (Appeals) basically directed AO to revisit issue of disallowance but did not specifically interfere with or set aside endorsement relating to issuance of notice under Section 271 (1) (c) of IT Act. From tenor of Order dated 16.11.2000, it is clear that Commissioner (Appeals) did not wish to interfere with endorsement at stage of disposal of appeal as endorsement would undoubtedly lose its efficacy, in case, upon remand, AO were to revoke disallowance to extent of Rs.1,40,00,000/- thereby reducing returned income to that which was originally declared by appellant at time of filing of initial returns for Assessment Year 1997-1998. 26. Order dated 16.11.2000, upon contextual reading and understanding also suggests that in case, upon remand, AO were to maintain his original position of disallowing amount of Rs.1,40,00,000/-, thereby maintaining return income at 14 Rs.54,49,180/-, then, obviously, there could be no jurisdictional bar to continuance of penalty proceedings, initiated by endorsement which is to be found in AO's Order dated 8.2.2000. If Order dated 16.11.2000 is read and interpreted in this fashion, then, it is difficult to agree with Mr. Kulkarni's submissions or to take view at variance with that taken by ITAT in impugned Order dated 28.8.2013. 27. Mr. Kulkarni, is quite right in his submission, that in absence of words like quash or set aside do not really make any significant difference when evaluating substance of order as has been held in Bhan Textile P. Ltd. (supra). However, this principle will have to be extended to determining substance of Order dated 16.11.2000 in its entirety and not merely to extent which benefits only appellant assessee. Therefore, applying principle that it is substance of Order which is important and not mere form, we find that interpretation of ITAT in impugned Order, is interpretation which promotes such substance over mere form and therefore there is really no case made out to interfere with impugned Order made by ITAT. 28. Mr. Kulkarni, quite correctly urged that observation made by ITAT on aspect of merger is incorrect. Ms. Razaq, also did 15 not defend such observation. In fact, it is settled by Hon'ble Apex Court in case of Kunhayammed Vs. State of Kerela, 4 that it is decree of Trial Court which merges in that of Appellate Court and effect of merger is that in eyes of law it dies civil death. However, based only upon stray erroneous observation, there is no case made out to interfere with impugned Order made by ITAT. In fact, what ITAT has held is that there was no merger, insofar as endorsement for initiation of penalty was concerned. If, upon remand, AO were to maintain his earlier assessment, then, endorsement was sufficient to confer jurisdiction to continue with penalty proceedings, without necessity of issuance of fresh endorsement to that effect. 29. As noted earlier, in this case AO not only maintained earlier income as determined in his Order dated 8.2.2000 but even appeal instituted by appellant against same was withdrawn by appellant. In such circumstances, we are unable to agree with contentions of Mr. Kulkarni that at stage of making order giving effect to Order of Commissioner (Appeals), there was necessity of making fresh Order or there was necessity of issuing fresh notice for initiating penalty proceedings. Such contention appears to emphasise entirely on 4AIR 2000 SC 2587 16 form than on substance, even, though it is case of appellant that it is substance which must prevail over form, when it comes to interpretation of Order dated 16.11.2000. 30. In case of Basumati (P) Ltd. (supra) very clearly, Appellate Court, had set aside entire Order made by Assessing Officer. V. K. Packaging Industries (supra) only explains doctrine of merger, again by relying upon Kunhayammed (supra). Both these decisions, therefore, do not advance cause of appellant any further. 31. In view of aforesaid discussions, we answer substantial questions of law against appellant in favour of Revenue. appeal is therefore dismissed and parties are directed to appear before Commissioner (Appeals) on 9 th March, 2020 at 11.00 a.m., in order to enable Commissioner (Appeals) to decide on merits whether penalty of Rs.40,00,000/- was correctly levied upon appellant. 32. We make it clear that all contentions of parties on merits of Order dated 28.5.2001, levying penalty upon appellant are left open for determination by Commissioner (Appeals) on their own merits and in accordance with law. 17 33. appeal is accordingly disposed of in aforesaid terms. There shall be no order as to costs. SMT. M.S. JAWALKAR, J. M. S. SONAK, J. af* Gangadhar Narsingas Agrawal (HUF) v. Assistant Commissioner of Income-tax, Circle-1, Margao