TaxTMI 
TaxTMI 
2013 (11) TMI 174
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....ng the validity of the penalty order dated 18.03.2009 without appreciating that as per clause (a) of section 275(1) of the Act, the penalty order could have been passed on or before 31st March 2006 only. 1.2 That the CIT(A) failed to appreciate that the penalty order dated 18.03.2009 was illegal and bad in law since satisfaction for initiating penalty was not recorded in the assessment order. 2. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in levying penalty under section 271(1)(c) of the Act on disallowance of Rs.78,89,965 towards interest on Sugar Development Fund ('SDF'). 2.1 That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in levying penalty under section 271(1)(c) of the Act on the aforesaid disallowance without appreciating that no satisfaction regarding concealment or filing of inaccurate particulars was recorded by the assessing officer while passing the assessment order. 2.2 That the CIT(A) further failed to appreciate that no penalty could have been imposed on the aforesaid disallowance since the issue of allowability of....
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.... Commissioner of Income Tax(A) has categorically mentioned the dates of relevant orders and then he arrived to a conclusion that the penalty order was passed within the prescribed period of limitation. The DR also relied on the judgment of Hon'ble Jurisdictional High Court of Delhi in the case of Commissioner of Income Tax vs Mohair Investment & Trading Co. Pvt. Ltd (supra) and the judgement of Hon'ble High Court of Madras in the case of Rayala Corporation Pvt. Ltd. vs. Union of India and Others (2007) 288 ITR 452 (Mad.) wherein it was held that the limitation period for levy of penalty order would be as provided u/s 275(1)(a) of the Act i.e. six months from the end of the month in which the order of the Tribunal is received by the Chief Commissioner or Commissioner. The assessee's counsel has also submitted the copy of the judgment of ITAT, Lucknow in the case of ITO vs Blossom Floriculture reported as 134 TTJ 51 (ITAT, Lucknow). In view of above submissions and citations, at the outset, we find it appropriate to consider the judgment of Hon'ble Jurisdictional High Court of Delhi in the case of Commissioner of Income Tax vs Mohair Investment & Trading Co. Pvt. Ltd.(supra) wherein ....
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....sp; Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Chief Commissioner or Commissioner, whichever is later" 18. A plain reading of this section shows that under section 275(1)(a), the requirement of the main section is that, when an assessment order is a subject matter of appeal before the Commissioner (Appeals), then the penalty order should be passed, within a period of six months from the end of the month in which the order of the Commissioner (Appeals) is received by the Chief Commissioner / Commissioner. The proviso to this section was inserted w.e.f. 1-06-2003, to expand this time period....
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....ner of Income Tax(A) pertaining to legal objection of limitation which was decided with the following observations and findings:- "8. I have gone through the penalty order and the detailed written submissions filed by the AR in this regard. 9. The following are details of the various orders passed for A.Y. 2000-01 in the case of the assessee. Order Date Assessment order 31.03.2003 C.I.T.(Appeals) order 31.03.2004 ITAT order against cross appeals in quantum proceedings 08.08.2008 Penalty order 18.03.2009 ITAT order against M.A. of the appellant 18.02.2010 10.1 According to the AR, the order u/s 271(1)(c) should have been passed before 31.03.2006 in terms of clause(a) of subsection (1) of S.275. 10.2 In the case of Rayala Corporation Pvt. Ltd. vs. Union of India and Others (2007) 288 ITR 452 (Mad.) the Hon'ble High Court held that the limitation period for the levy of penalty would be as provided for under section 275(1)(a) i.e. six months from the end of the month in which the order of Tribunal is received by the Assessing Officer. The decision is as under: "....
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....lly, the penalty order was passed on 18.3.2009. As per provisions of Section 275(1)(a) of the Act, the crucial date is the date of receipt of the order of ITAT by the Chief Commissioner, Commissioner or the Assessing Officer because the same would decide the basis of calculation of limitation because for calculation of limitation, the month of receipt and its subsequent six months period is relevant. Respectfully following the view of the Hon'ble Jurisdictional High Court of Delhi in the case of Mohair Investment of India Co. Pvt. Ltd. (supra), we are of the opinion that the penalty order passed by Assessing Officer was not barred by limitation. Hence, ground nos. 1 and 1.1 are dismissed. Ground No.1.2 11. Ld. counsel for the assessee submitted that the Commissioner of Income Tax(A) erred and failed to appreciate the fact that the penalty order dated 18.03.2009 was ab initio illegal and bad in law since satisfaction for initiating penalty proceedings was not recorded in the assessment order. He placed his reliance on the judgment of Hon'ble Jurisdictional High Court in the case of Madhushree Gupta vs Union of India (2009) 317 ITR 107 (Delhi), judgment of ITAT 'E' Bench Delhi ....
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....ection 271(1)(c) post amendment will be read in the manner indicated above." 13. In the case of Cornerstone Financial Services (supra) ITAT Delhi held as follows:- "7. In the present case, we find that even from the body of the assessment order, no such satisfaction is discernable. The presence of prima facie satisfaction of the AO for initiation of penalty proceedings, is a jurisdictional fact, as held in 'Ms. Madhushree Gupta & Another v. Union of India & Another' (supra). To reiterate, in the present case, no prima facie satisfaction of the Assessing Officer that the case may deserve the imposition of penalty is discernible from the assessment order. 8. Therefore, the grievance of the assessee in this regard is justified and is accepted as such. In view thereof, once the jurisdictional fact of prima satisfaction of the AO for initiation of concealment penalty proceedings is conspicuous by its absence and is not discernible from the assessment order, no concealment penalty could have been imposed. The penalty imposed is thus void ab initio and is liable to be set aside." 14. In the case of ITO vs Budge Budge Co. Ltd. (supra), ITAT Kolkata Ben....
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....f satisfaction is not merely an empty formality since the assessing officer has to apply his mind and form an opinion at the time of disallowing the appellant's claim fully or partly or making an addition to the appellant's income. The assessing officer has to apply his mind - whether the appellant had, on the facts of the case and in view of the position in law, by making a claim or not disclosing an amount, sought to conceal/file inaccurate particulars of income. It will be kindly appreciated that there may be items in respect whereof there may be bona fide difference of opinion between the appellant and the assessing officer or divergence of judicial opinion, in which case there cannot be any charge of concealment or filing of inaccurate particulars of income. Further, there may be items in respect whereof particulars of income may be considered to have been concealed and some other items in respect whereof inaccurate particulars of income may have been filed; and the same is required to be so stated by the assessing officer in the assessment order, as the two concepts 'concealment of income' and 'filing of inaccurate particulars of income' are not overlapping or interchangeable....
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....t order as under: * In context of software expenses, the assessing officer initiated 'penalty proceedings by observing after para 2.7 as under: "Penalty u/s 271(1)(c) is initiated in claiming excessive deduction on account of software expenses as discussed above." In context of provision for gratuity, the assessing officer after para 3.3 observed as under: "Penalty U/S 271 (1)(c) is initiated for claiming wrong deduction on account of provision made for gratuity fund." In context of commission paid, after para 9.1, the assessing officer observed as under:- "Penalty u/s 271(1)(c) is initiated for unsubstantiated claim of deduction for commission as discussed above". Similar observations have been made by the assessing officer after each and every addition/disallowance, wherever the assessing officer wanted to initiate penalty proceedings under section 271(1)(c) of the Act. On perusal of para 5 on page 5 of the assessment order, it will, however, kindly be noticed that the assessing officer did not record any such observations/findings after discussing the i....
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.... dated 31.03.2003, this issue was decided in para 5 with the following observations:- "5. Interest On SDF Loan: 5.1 As per point no. 17 of the notes of the statement of income it is stated as under:- "The erstwhile Triveni Engg. & Industries Ltd. as earlier being providing interest on loan from Sugar Development Fund in its books on accrual basis but the unpaid amounts have been disallowed by the department u/s 43B in earlier assessments holding SDF to be a financial institution against which the assessee is in appeal in the respective years. During the previous years relevant to this asstt. year, the assessee company has paid interest of Rs. 14.40 lacs out of the amounts provided earlier. The actual payment now having been made in this year, the assessee has claimed the amount ofRs.J4.40 lacs as deductible u1s 43B, since, the provision made in earlier years have not been a11owed. In case the assessee succeeds in its appeal the amount claimed this year shall be offered for tax." 5.2 On examination of the record of earlier years, 'it is found that in the earlier years, the Assessing Officer in the case of the assesseee company has d....