TaxTMI 
TaxTMI 
2017 (2) TMI 1378
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....y 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 confirmed." 3. Facts in brief are that respondent-Assessee, U.P. State Bridg....
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..... 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 preferred by Assessee and dismissed appeal of Revenue and penalty demanded by AO has been deleted. 11. With reference to substantial questions no. 3 and 4 lea....
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....ular 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 this onus is to be discharged by the department." 15. He lastly submitted that assessment order has to show some positive material with which AO can compare, what filed by Ass....
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....... (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 reference to Section 271(1)(c) this issue was examined in Commissioner of Income-Tax, U.P Vs. Bankey Lal Hira Lal (1973) 92 ITR 587 (All). Therein penalty proceedings were initiated under section 271(1)(c), that is concealment of income represented by cash credit entries in the accounts of four credito....
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....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 commence, hence for the purpose of determining commencement of penalty proceeding, there is no need to look into Section 275. For that purpose section 271 should be looked into and when action is commenced therein, then for the purpose of limitation Section 275 would come into picture. 22. Karnataka High Court in S....
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....itiated 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 which that date occurs. The other period of limitation would be that which applies irrespective of the date of completion of the " other proceedings" and which is relatable simply to the date on which action for imposition of penalty is initiated.The period of limitation in such a case would be six months from the end of the month ....
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....nalty 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 completion of the proceedings in the course of which action for the imposition of penalty has been initiated. But there is a third / residuary category of cases where the initiation of action for imposition of penalty is not in the course of some proceedings. In such cases, the first part of section 275(1) (c) would have no application and it is only the period of limitat....
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....uld 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 27.06.1975 passed under Section 154 of Act, 1961 rectifying assessment order, reduced income to Rs. 6,00,220/-. MGAMM preferred appeal before Assistant Commissioner challenging additions as also clubbing of income of both periods. Appeal was transferred to CIT(A) and vide order dated 30.08.1978 appellate authority directed AO to pass separate assessment orders for two periods. On the quantum C....
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....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 course of assessment proceedings and AO is not required to record his satisfaction in a particular manner or to reduce it into writing. It is also contended that once an amount is added or disallowed in computing complete income, it is deemed to represent concealed income. Section 271(1)(c) confers power upon Revenue to direct a person to pay penalty if Revenue authorities are satisfied in ....
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....nce 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 recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961." 34. In the present case, it is not the case of AO that there was no disclosure inasmuch entries of loans/credits/deposits etc. were in the account-books but some were not accepted by Revenue Authorities and, therefor, addition was mad....
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....9; 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"; "erroneous"; "as an inaccurate statement", copy or transcript. Reading the words in conjunction, "inaccurate particulars" would mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. But a finding has to be recorded to this effect by AO, otherwise there would be no question of inviting penalty under Section 271(1)(c) of Act, 1961. Court very categorically held: "A mere making of the claim, which is n....