TaxTMI 
TaxTMI 
2025 (4) TMI 1354
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....ng which the assessee was also covered. In response to the notice u/s 153A served on the assessee for assessment years 2007-08 to 2012-13, the assessee submitted that the original returns of income filed u/s 139(1) for assessment years 2007-08 to 2012-13 may be treated as returns in response to the notice issued u/s 153A of the Act. 3. During the course of assessment proceedings the assessee took the decision to approach the Income Tax Settlement Commission and filed an application u/s 245C(1) of the Act on 20.03.2014 for settlement of his tax liability for assessment years 2007-08 to 2012-13. He disclosed the additional income of Rs. 3,65,24,551/- before the Settlement Commission for various years, the details of which are as under: A.Y. Income offered in return in response to notice u/s 153A Additional income offered in SOF 2007-08 1,18,22,840/- 10,21,000/- 2008-09 55,28,100/- 10,25,200/- 2009-10 3,84,01,950/- 10,25,200/- 2010-11 77,29,880/- 53,88,920/- 2011-12 6,81,83,870/- 2,07,56,798/- 2012-13 3,57,72,592/- 73,07,433/- 4. The application was admitted vide order dated 245D(1) on 01.04.2014.. The application wa....
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....this addition was admitted by the Hon'ble High Court. It was accordingly pleaded that no penalty. It was further submitted that as the prosecution notice was withdrawn in the case of the assessee, the penalty should not be levied till the decision of the Hon'ble Bombay High Court. 8. However, the Assessing Officer rejected this plea of the assessee on the ground that the assessee's plea for granting of stay in penalty proceedings was cancelled by the Hon'ble Bombay High Court, therefore, the situation does not warrant the withdrawal of penalty proceedings. Subsequently, the application for stay of penalty proceedings was rejected by the Hon'ble Bombay High Court. The Assessing Officer, therefore, proceeded to decide the issue of penalty leviable u/s 271(1)(c) of the Act. He noted that for the year under consideration the assessee had filed return u/s 153A at Rs. 77,29,880/- and the additional income offered in the statement of facts is Rs. 53,88,920/-, out of which Rs. 50 lakh was offered as buffer income and Rs. 3,88,920/- was offered as notional rental income on house property. The addition of Rs. 39,20,00,000/- on income from salary was made by the Settlement Commission in it....
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....income. It was submitted that the assessee declared this income to cover any omission or error. However, this plea of the assessee was not accepted by the Assessing Officer. According to the Assessing Officer, even though the assessee has made this buffer income voluntarily, it is nonetheless not offered for taxation in the return filed in the response to notice u/s 153A of the Act. According to the Assessing Officer, the assessee has disclosed the buffer income because he was sure that the income tax department during the search action had collected many evidences which would eventually result in enhanced income over and above that of the income offered in response to notice issued u/s 153A. The assessee had not hoped to cover the mistakes but to cover many possible additions to his total income. He, therefore, levied penalty on this additional income also. 11. The Assessing Officer further noted that the Settlement Commission, in its order passed u/s 245D(4), dated 27.08.2015, has unequivocally decided that assessee's global income will be taxed in India but before going to Settlement Commission the assessee, while submitting his original return of income, has revealed oth....
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....e statutory provision has revoked the immunity of the assessee from prosecution and penalty. Thus the assessee can't be given the benefit of the doubt as there is a settled legal proposition and can't be said that he was ignorant of the provision of law Hence it's a clear case to levy penalty for concealing the particulars of income. 19. AR of the assessee also made claim that if the assessee is in writ before the high court AO cant levy penalty but it is to be noted that the Hon'ble Settlement Commission has revoked the immunity of the assessee from prosecution and penalty very well knowing that the assessee has gone into writ and also Hon'ble High Court has not allowed the assessee's prayer no (c) & (e) (i.e. pending the final hearing and disposal of the petition, direct that the respondents be restrained (whether acting themselves or through their servants / agents / employees or officers) from initiating and continuing any coercive, recovery or penalty proceedings in furtherance of the impugned order inter alia in relation to penalty notices or in respect of the additions resulting on account of the impugned order of the civil application. ....
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....eir order dated 03.05.2017 passed u/s 245H(1A) withdrew the immunities from penalty and prosecution granted as per order u/s 245D(4) dated 27.08.2015. Now the question arises that in which date the penalty proceedings u/s 271(1)(c) of the IT Act, 1961 to be initiated i.e. 03.05.2017 (order passed by the Hon'ble settlement commission) or 31.03.2018 (notice initiated by the AO) and in which date, the said penalty proceedings to be completed i.e. 31.03.2018 (end of the financial year in which order u/s 245H(1A) passed by the Hon'ble settlement commission) or 30.09.2018 (within 06 months from the end of the month in which action for imposition of penalty is initiated). 5.4 Appellant has raised various grounds on merits as well as on technical aspects in this appeal. Apart from various contentions Appellant has also raised issue of time limit for levy of penalty u/s 271(1)(c) of the Act. In this regard, following key events chart is extracted from Appellant's submissions. Date Event 30-08-2008 Filing of regular return of income by the appellant. 27-08-2015 Hon'ble Settlement commission passed order u/s 245D(4) and made addit....
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....the levy of penalty is stayed by an order or injunction of any court, shall be excluded. 5.7 From the above, and in particular from sub-clause (ii), it transpires that, period during which immunity is granted u/s 245H is required to be excluded. As such, for computing the actual limitation period u/s 271(1)(c), period for which immunity was granted is required to be worked out. Same is worked out as under. Date of granting immunity 245D(4) order dated 27.08.2015 Date of immunity withdrawal 245H(1A) order dated 03.05.2017 Immunity period 20 Months and 7 days i.e. August-15 balance days 4 days + Sep-15 to Apr-17 =20 Month + May-17 balance days = 3 days 20 Months and 7 days 5.8 The above mentioned period of 20 Months and 7 days is required to be added to the two time periods specified in section 275(1)(c). The emerging limitation dates are as under. 1st limitation date-For deducing the 1st limitation date, the date on which penalty proceedings were initiated needs to be determined. The said date has to be considered as the date of 245D(4) order i..e. 27.08.2015 (and not any earlier date of....
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....nitiated needs to be determined. Now, this date is considered as 03.05.2017. As such, the 1st limitation period ends on 31.03.2018. In the present case, the concealment penalty is levied on 26.09.2018 hence, the said penalty order happens to be beyond the date of 1st date of limitation. 2nd limitation date - For deducing the 2nd limitation date, one needs to work out the end date of 6 months period from the end of month in which, the penalty proceedings are initiated. Now, this 2nd limitation date transpires to be 30.11.2017 [i.e. 6 months from 31st May 2017 i.e. the end date of the month in which 245H(1A) order was passed.] In the present case, the concealment penalty is levied on 26.09.2018, hence, the said penalty order happens to be beyond the date of 2nd date of limitation. 5.9 Time limit u/s 245D(7) In the section 245D(7), a different time limit is provided for such Settlement Orders which are VOID. As per section 245D(6), a void order is that, wherein, Settlement has been obtained by misrepresentation of facts. Perusal of the 245D(4) order and 245H(1A) order does not reveal any such case, and as such, time limits u/s 245D(7) is not relevant in the instant c....
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....;ble Income Tax Settlement Commission. Also, the Ld CIT(A) himself determined two different dates for initiation of penalty which proves that there is no specific time limit for initiation of penalty. 03. The Ld. CIT(A) has erred in holding that the initiation of penalty is time barred without appreciating the fact that the AO had initiated the penalty only after verification of the facts of the case and provisions of the Income Tax Act, 1961 and after getting satisfaction that there is concealment of income. 16. The assessee has also raised the following grounds in the appeal filed by him: 1. The learned I-T Authorities erred in law and on facts in levying penalty u/s 271(1)(c) of the ITA, 1961 amounting to Rs. 12,27,93,180/- (being 100% of the alleged tax evaded) for concealment of income. 2. The learned I-T Authorities erred in law and on facts in assuming jurisdiction for levying penalty u/s 271(1)(c) of the ITA, 1961 without appreciating that learned AO did not have any jurisdiction since the appellant's application was admitted by the Hon'ble Settlement Commission & it was for the Hon'ble Settlement Commission alone to deal with all t....
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....ation by Honourable High Court ought not to subjected for levy of concealment penalty. 9. The learned IT Authorities erred in law and on facts in levying penalty on notional income of house property amounting to Rs. 3,88,920, without appreciating that the said "income" was not part of any incriminating material & as such, the same could not have been assessed at the 153A stage by the learned AO. It is further contended, learned AO devised concealment penalty w.r.t. such income which didn't emanate from any search proceeding. 10. The learned IT Authorities erred in law and on facts in levying penalty on ad-hoc buffer income amounting to Rs. 50,00,000 shown in Settlement Application without appreciating that the said income was included by the appellant to avoid any unintended lapses/errors/ omissions, etc. The learned AO erred on facts in levying penalty w.r.t. the said buffer income on the surmises/assumption/presumption that, the buffer income as in fact concealed income, despite the factum of absence of any relevant incriminating material. 11. Appellant craves leave to add/alter/delete/ modify, all/ any of the above grounds of appeal. 17. The Ld.....
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.... 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." 18. He submitted that since the order was passed by the Settlement Commission under Section 245D(4) and Section 245H(1A), which are categorized as "any other case, therefore, the order passed u/s 271(1)(c) should be completed within six months from the end of the month in which the penalty action was initiated. He submitted that in the instant case, the Assessing Officer initiated penalty proceedings on 31st March 2018, and the penalty order was passed on 29th September 2018. Since the order passed by the Assessing Officer is within the allowable period i.e. 30th September 2018, therefore, such order being in accordance with law is correct and the Ld. CIT(A) is not justified in deleting the penalty merely on the technical ground that the same is barred by limitation. 19. The Ld. DR submitted that in the assessment order for A.Y. 2010-2011, the additional income as per the ....
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....ision of the Hon'ble Gujarat High Court in the case of CIT vs. Prakash S. Vyas (2015) 58 taxmann.com 334 (Guj) and submitted that the Hon'ble High Court in the said decision has held that mere admission of an appeal by the Hon'ble High Court cannot without there being anything further, be an indication that the issue is debatable one so as to delete the penalty u/s 271(1)(c) of the Act even if there are independent grounds and reasons to believe that the assessee's case would fall under the mischief envisaged in the said clause (c) of sub-section (1) of section 271 of the Act. He accordingly submitted that the Assessing Officer was fully justified in levying the penalty u/s 271(1)(c) of the Act and the Ld. CIT(A) was not justified in deleting the same. 22. The Ld. Counsel for the assessee on the other hand while supporting the order of Ld. CIT(A) in quashing the penalty being barred by limitation submitted that the Assessing Officer has levied penalty u/s 271(1)(c) of the Act on the amount of Rs. 39,73,88,920/-, the details of which are as under: (i) Income on account of house property Rs. 3,88,920/- (ii) Buffer income declared Rs. 50,00,000/- (iii) Incom....
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....he Hon'ble High Court. He submitted that treating the issue of residential status as a part and parcel of issue of concealment of income is not in accordance with law. 27. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Nayan Builders and Developers (2014) 368 ITR 722 (Bom), he submitted that the Hon'ble High Court in the said decision has held that where the High Court admits the substantial question of law in respect of which penalty was levied, such penalty has to be deleted. 28. Referring to the decision of Hon'ble Bombay High Court in the case of Pr.CIT vs. Dhariwal Industries Ltd. vide ITA Nos.1133, 1136 and 1129 of 2016, order dated 04.09.2018, he submitted that the Hon'ble High Court in the said decision has upheld the order of the Tribunal holding that when substantial question of law is admitted before the High Court, no penalty can be levied u/s 271(1)(c) of the Act. 29. In his next plank of argument, the Ld. Counsel for the assessee referred to the order of the Ld. CIT(A) and submitted that the penalty levied by the Assessing Officer is barred by limitation and the Ld. CIT(A) has rightly cancelled the penalty on account of bein....
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....berate attempt to evade tax for which penalty should not be levied. We accordingly hold that no penalty is leviable on account of this difference in rental income. 33. So far as the levy of penalty on the amount of Rs. 50 lakhs which was offered as buffer income is concerned, it is the submission of the Ld. Counsel for the assessee that the assessee with abundant precaution has disclosed the amount of Rs. 50 lakhs to take care of omission, if any. We find there is absolutely no finding of any income on this account which calls for levy of penalty as the assessee has voluntarily disclosed this additional income of Rs. 50 lakhs. It is the case of the Assessing Officer that since the assessee has not offered this buffer income for taxation in the return filed in response to notice u/s 153A, therefore, penalty is leviable. We do not accept this proposition of the Assessing Officer. This amount, in our opinion, is an income voluntarily disclosed by the assessee to overcome omission, if any. However, no such omission or error was found by the Assessing Officer. Since assessee has not paid tax on the amount disclosed before the Settlement Commission, the immunity was withdrawn and the ....
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.... explanations (a) and (b), both being inapplicable on the facts of the case. In view of this finding, we are not dealing with the alternate contentions raised by CIT(DR) on applicability of provisions of section 9(i)(ii) and article 4 of DTAA between India and UAE. Accordingly, salary of Rs. 39.2 crores earned by the applicant in UAE during A.Y. 2010-11 is taxable as per section 6(1)(c) r.w.s. 5 of the Act." 36. From the above we find that two different combinations of the Settlement Commission which consists of very very senior officers of the department are not in agreement with each other regarding the status of the assessee. Under these circumstances, alleging the assessee that the assessee has concealed the particulars of his income of Rs. 39,20,00,000/- with respect to salary income by treating himself as non-resident, in our opinion, is not justified. 37. We further find the Settlement Commission vide order dated 27.08.2015 passed u/s 245D(4), copy of which is placed at pages 1 to 35 of the paper book, has observed at para 10.2 of the order that there has been no attempt to conceal any material facts. The relevant observations of the Settlement Commission read as under....
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....of law on an addition, it becomes apparent that the addition is certainly debatable. In such circumstances penalty cannot be levied u/s 271(1)(c) as has been held in several cases including Rupam Mercantile Vs. DCIT [(2004) 91 ITD 237 (Ahd) (TM)] and Smt.Ramila Ratilal Shah Vs. ACIT [(1998) 60 TTJ (Ahd) 171]. The admission of substantial question of law by the Hon'ble High Court lends credence to the bona fides of the assessee in claiming deduction. Once it turns out that the claim of the assessee could have been considered for deduction as per a person properly instructed in law and is not completely debarred at all, the mere fact of confirmation of disallowance would not per se lead to the imposition of penalty. Since the additions, in respect of which penalty has been upheld in the present proceedings, have been held by the Hon'ble High Court to be involving a substantial question of law, in our considered opinion, the penalty is not exigible under this section. We, therefore, order for the deletion of penalty." 40. We find when the Revenue challenged the order of the Tribunal, the Hon'ble High Court dismissed the appeal filed by the Revenue by observing as under: "1....
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....o Products (P) Ltd. (2010) 322 ITR 158 (SC) has held that mere making of a claim which is not sustainable in law by itself, will not attract penalty under the section when the assessee has furnished all the particulars of income, which are not found to be inaccurate. It is up to the authorities to accept the claim of the assessee or not, but that cannot call for imposition of penalty. We also find merit in the argument of Ld. Counsel for the assessee that treating the issue of residential status as a part and parcel of issue of concealment of income is not justified. In our opinion, scope of concealment of income ought to be construed / interpreted from the specific clear words which do not include issue of residential status. 43. So far as the decision relied on by the Ld. CIT-DR in the case of CIT vs. Prakash S. Vyas (supra) is concerned, we find the Hon'ble High Court has held that unless there is an indication in the order passed by the Hon'ble High Court, simply because tax appeal is admitted, would not give rise to presumption that the issue is debatable, therefore, the penalty u/s 271(1)(c) of the Act could not be deleted on this ground. Although there is a contrary decis....