TaxTMI 
TaxTMI 
2017 (2) TMI 1378
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....y imposed under Section 271(1)(c) of Act, 1961 by holding that limitation to impose penalty had expired notwithstanding the fact that this ground was never taken earlier by Assessee. (II) Whether on the facts and in the circumstances of the case, Tribunal was justified in holding that imposition of penalty was time barred in respect of those issues which had become final on the basis of an earlier order thereby implying that penalty is to be imposed in piecemeal as and when the individual issues of an assessment are concluded. (III) Whether on the facts and in the circumstances of the case, Tribunal was justified in law in deleting the penalty under Section 271(1)(c) by holding that there was no concealment of income while at the same time admitting in its order that there was substantial difference in the assessed income and the returned income. (IV) Whether on the facts and in the circumstance of the case, Tribunal has erred in law in deleting penalty levied under Section 271(1)(c) Explanation-1 against the additions made on account of delayed payments of statutory deductions to Government under Section 43B when additions in quantum appeal were confirme....
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....n Assessee's Behrain Office of Rs. 10.14 lacs, as sales promotion expenses. (2) Disallowance under Section 43B of to Rs. 16,69,693/-. 8. Revised assessment order was passed by AO on 31.03.2003 assessing income at Rs. 7,79,45,650/- Assessee preferred appeal before CIT(A) who confirmed addition of Rs. 11,83,429/- out of total disallowance of Rs. 16,69,673/- and confirmed disallowance on account of sale promotion. 9. AO then proceeded for penalty vide order dated 30.03.2005 whereby penalty of Rs. 3,20,60,021/- under Section 271(1)(c) was imposed. In appeal CIT(A) partly confirmed penalty. It cancelled penalty in respect of disallowance under Section 37(3A) and 37(3B) on the ground that additions were made on estimate basis but in respect to additions referable to Section 43B, amounting to Rs. 11,83,429/0, order was confirmed. CIT(A) held that penalty is not justified since there is no concealment. However, with respect to disallowance of Rs. 10.14, penalty was confirmed. It also confirmed penalty in respect to valuation of stock amounting to Rs. 6,87,000/-. 10. Appeals were filed by both, i.e. Assessee and Revenue before Tribunal which has allowed appeal preferre....
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....ve been mentioned in assessment order itself. In the initial order dated 21.12.1987, AO nowhere has discussed, what has been concealed by Assessee or what particular of income should have been furnished but not furnished. It is only at the end of assessment order, A.O. has written that penalty proceedings under Section 271(1)(c) would be initiated. He submitted that judgment of Supreme Court in Dilip N. Shroff Vs. Joint Commissioner of Income Tax (2007) 291 ITR 519 insofar as it has held that mens rea is must for attracting penalty under Section 271(1) (c) has been overruled in Union of India and others Vs. Dharamendra Textile Processors and others (2008) 306 ITR 277 but with regard to other aspects there is no otherwise findings and hence he placed reliance on the following observations made in Dilip N. Shroff Vs. Joint Commissioner of Income Tax (supra): "Primary burden of proof, therefore, is on the revenue. The statute requires satisfaction on the part of the assessing officer. He is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee had concealed the amount or furnished inaccurate particulars and t....
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.... penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later; (b) ........... (c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later." 19. Section 275(1)(a) provides limitation of six months from the end of month in which order of Appellate Tribunal is received by Chief Commissioner or Commissioner or after expiry of financial year in which proceedings, in course of which action for imposition of penalty has been initiated, are completed, whichever period expires later. Clause (c) of Section 275(1) applies to cases not covered by Clauses (a) and (b). The two points of limitation provided under Section 275(1)(a) and (c) in the matters wherever they are applicable are two independent provisions. 20. With refe....
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....come Tax (1967) 64 I.T.R 637, but disagreed and dissented therewith. Bombay High Court took the view that initiation of penalty proceeding cannot be held over until after the completion of assessment and that section 271(1) and section 275 indicate that penalty proceeding has to be commenced before completion of assessment proceeding. This Court observed that Bombay High Court seems to have considered that satisfaction of Income Tax Officer in the course of assessment proceeding itself constitute commencement of penalty proceeding, which is not correct. Disagreeing with this view of Bombay High Court, this Court said: "if these observations are capable of being understood to mean that the Income Tax Officer must, besides recording his satisfaction, take further action by the issue of a notice to the Assessee before completing the assessment, we are unable with respect to agree with the proposition so laid down." 21. Court clarified in Commissioner of Income Tax, U.P versus Bankey Lal Hira Lal (Supra) that penalty proceeding commenced when action under section 271 is taken and Section 275 does not deal with the question, when such proceeding can be considered to comme....
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....n Subodh Kumar Bhargava versus Commissioner of Income Tax (2009) 309 ITR 31 (Del). Court has explained conditions by giving illustrations in paragraph 13 and 14 and we are reproducing the same as under: "13. There may be cases which fall under section 275(1) (c) in which action for the imposition of penalty is initiated in the course of some other proceedings. There may also be cases under section 275(1)(c) in which the action for imposition of penalty is initiated, but not in the course of some proceedings. In the former category of cases, both the periods of limitation may be applicable, whereas in the latter category, only the second period of limitation of six months from the end of the month in which action for imposition of penalty is initiated, would apply. To illustrate this, let us take the first category of cases. This is that category where the action for imposition of penalty is initiated in the course of some other proceeding. In such a situation, it is obvious that both the period of limitation would come into play. One would be reckoned from the date on which the other proceedings are completed upto and including the end of the financial year in whi....
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.... which action for imposition of the penalty had been initiated, are completed. However, in terms of the second part of section 275(1) (c), the period of limitation would end on October 31,2007. This is because, the period of six months would have to be reckoned from the end of the month in which action for imposition of penalty was initiated. Action for penalty in this example was initiated on April 15 ,2007.The end of the month would be April 30,2007. Consequently, the period of six months from this date would end on October 31, 2007. Thus, in this example, we are once again faced with two periods of limitation; the period ending on March 31, 2008 being the end of the financial year relatable to May 25,2007, the date on which the proceedings were completed and October 31, 2007, being the date relatable to the initiation of the penalty proceedings. Once again, applying the expression " whichever period expires later", the period of limitation for this example would be March 31,2008. 14. The above two examples illustrates cases where the applicable period of limitation would be relatable either to the date of initiation of the penalty proceedings or to the date of completio....
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....slature has left any scope of imagination or a provision must be read by applying casus omissus." 25. However, there is a slight distinction in the issue up for consideration in this appeal and that is on account of a fresh order passed by AO after remand made by Tribunal in respect to only two items. The question is, whether in respect to six items also period of limitation would commence from the date Tribunal passed order on 19.02.2001, when it was received by CIT or will commence when, after remand, assessment order is passed by AO in respect to two items and that order attained finality and communicated to CIT. 26. This aspect, we find has been considered by a Division Bench in CIT Vs. Moradabad General Art Metal Mills (supra). Therein Assessee, Moradabad General Art Metal Mills (hereinafter referred to as "MGAMM") for Assessment Year 1972-73 filed two returns of income, one for 01.04.1971 to 30.06.1971 disclosing income of Rs. 34,510/- and another for 01.07.1971 to 31.03.1972 disclosing income of Rs. 1,76,172/-. AO made assessment in respect to both the periods computing income of Rs. 9,15,710/- vide order dated 25.03.1975. Subsequently, AO vide order dated 27.06.197....
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....ter six months, i.e., 30.09.2002. The argument advanced otherwise by learned counsel for appellant, therefore, cannot be accepted. It is not the question of piecemeal penalty but when penalty is being imposed taking into account quantum of additions upheld or accepted, then statute providing limitation will have to be applied strictly in that respect. Questions-I and II, therefore, are answered against Revenue and in favour of Assessee. 28. Now coming to Questions- III and IV, we find that both can be dealt with together. In nutshell, the argument is that mere addition must be deemed sufficient to attract penalty under Section 271(1)(c) and factum that there was no finding of concealment of income would be irrelevant as there is deemed concealment of income when there is substantial difference in the reported income and assessed income. 29. Sri Manish Misra, learned counsel for appellant, contended that Tribunal has erred in law in ignoring that in what manner AO will record a satisfaction is not provided anywhere but Apex Court has held in Mak Data P. Ltd. Vs. Commissioner of Income Tax-II (supra) that AO has to satisfy whether penalty proceedings be initiated or not during ....
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.... were not placed on record with regard to claims made by Assessee, the claims have not been accepted and additions have been made. 33. Counsel for appellant, then contended that mere difference noticed by AO between reported and assessed income raises a presumption of concealment. This aspect has been clarified by Supreme Court in Mak Data P. Ltd. Vs. Commissioner of Income Tax (supra) wherein it has been said that if there is a difference between reported and assessed income and noticed by AO, Section 271(1) raises a presumption of concealment. Thereafter it is for Assessee to offer any explanation for such income. Once explanation is offered by Assessee, then onus shifts on Revenue to show that amount in question constituted income and not otherwise and there was a concealment. For the purpose of justifying penalty under Section 271(1)(c) Court, in Mak Data P. Ltd. Vs. Commissioner of Income Tax (supra) observed: "It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recor....
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....preme Court referred to and relied on its earlier judgments in CIT, Delhi Vs. Atul Mohan Bindal (supra), Union of India Vs. Dharamendra Textile Processors (supra) and Rajasthan Spinning and Weaving Mills 2009 (8) SCALE 231. It was reiterated that AO has to be satisfied that a person has concealed "particulars" of his income or furnished "inaccurate particulars" of such income. Court also observed that while declaring income, there is no necessity of 'mens rea' to attract 271(1)(c) and this part of judgment in Dilip N. Shroff Vs. Joint Commissioner of Income Tax (supra) was not correct. The Larger Bench in Union of India Vs. Dharamendra Textile Processors (supra) did not found fault with the reasoning in the decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax (supra) where Court explained meaning of word "conceal" and "inaccurate". Court said that it is only ultimate inference drawn in Dilip N. Shroff Vs. Joint Commissioner of Income Tax (supra) that mens rea was essential ingredients, that decision was overruled. Court also considered meaning of word "inaccurate" and observed that it means "not accurate", "not exact" or "correct"; "not according to truth"; "err....