| Article Section | |||||||||||
AN ENIGMATIC SECTION 271 (1) (c) |
|||||||||||
|
|||||||||||
AN ENIGMATIC SECTION 271 (1) (c) |
|||||||||||
|
|||||||||||
- Benjamin Franklin AN ENIGMATIC SECTION 271 (1) (c) Boon who defies and bane who complies Give me the liberty to know, to utter, and to argue freely according to conscience, above all liberties". John Milton Why a taxpayer is subject to ante mortem twice, one while making assessment and another after assessment of the same year. After reincarnation from section 28(1) (c) of 1922 Act to section 271(1) (c) of 1961 Act, the section condition remain pathetic although it occupied a voluminous place in the tax books. The provision of the 1961 Act reads: S.271: Failure to furnish returns, comply with notices, concealment of income, etc 1) If the assessing officer or the commissioner (Appeals), or the Commissioner in the course of proceeding under this Act, is satisfied that any person--- a) b) (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or d) he may direct that such person shall pay by way of penalty, - Just a quick look on the wording of section271 (1) (c): Paradoxically, as long as the income is has been concealed or remain concealed there is no penalty and the provisions of section cannot be made applicable. Conversely, when the income is revealed over and above the returned income. , the tax is imposed on the part of the income, which is either revealed suo motto or made to be revealed by the assessing officer. So as long as the income is not revealed either shrewdness of the assessee or remain concealed due to imprudence of the assessing officer, then how to penalize. Therefore, that no penalty can be imposed until your income remains concealed. In addition, the provision does not or nowhere state that the penalty shall be imposed on revealing the concealed income. How come the assessor knows what has been concealed without it being revealed? The most abused, overused, misused, confused and controversial section in the income tax act, which is concerned with imposition of penalty on the taxpayers for concealment of income and furnishing of the inaccurate particulars. Since, it is enacted, it has been a matter of long drawn controversy in lower or higher authorities, and none of them has been able to finally determine whether it is imposed on income concealed or income revealed and what amounts to concealment and what amount to revelation and what amount to furnishing of inaccurate particulars. To save from clutches of the vigorous of this section everyone elucidate the concealment and furnishing of inaccurate particulars in his own term, and up to some extent is able to establish that concealment is not a concealment and furnishing of return with wrong particulars is not amount to furnishing of inaccurate particulars. Every now and then, we notice a land mark judgment of the Apex court on the subject, few days that judgment remain vivid and then new judgment comes, few are cited as under In plain language when an assessee files the return of income claiming a particular deduction or rebate , which he knows, would not be admissible, but is claimed, and the same is noticed by the assessing officer, it amounts to furnishing of the inaccurate particulars, and in similar way, if the assessee files a return without showing the transaction reported in the AIR report or any other income received or accrued to him, The assessing officer, notices those income or transactions and show cause the assessee to explain and on failure of the assessee bring it to taxes as the income revealed out of income concealed. Is it not furnishing of inaccurate particulars, but the law takes a twisted turns and some way or another it is established in favour of the assessee Recently again, the Supreme Court in the case Price Water House Coopers Pvt. Ltd. v. CIT (Supreme Court) 2012 (9) TMI 775 - SUPREME COURT has observed as under: "... The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. All that happened in the present case is that through a bona fide and inadvertent error failed to add the provision for gratuity to its total income. This can only be described as a human error, which we are all prone to make. The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Consequently, given the peculiar facts of this case, the imposition of penalty on the assessee is not justified." On the other hand, if an assessee does not file the returns there would be no concealment of income and furnishing of inaccurate particulars because the Concealment takes place on the date when return is filed without disclosing the particulars of income of that year, Brijmohan-v-CIT 1979 (8) TMI 2 - SUPREME Court . and law on the date of filing of return would be applicable. It means that no concealment can be presumed before filing of the return Madras High Court in the case of S.Santosh Nadar –v- Addl. ITO 1961 (9) TMI 64 - MADRAS HIGH COURT held that mere non-filing would not amount to concealment. It means that the assessee who files the returns inadvertently incorrect shall be subject to penalty and the non-filers would have merry-go-round. The person who made compliance was punished, and who defied was rewarded, because he knows the tricks to escape from the tax net. Since the enactment, volumes of judgments have come only on this section, and an untiring struggle between the assessee and assessor is continued. The government or CBDT has not been able to clarify and suitable modify or amend the provision of the section. The CBDT, which is otherwise very active or say undue hasty in amending the law or overruling the apex court decisions even with retrospective date, have not waken as yet, and the lot of time is being wasted in litigation for the matters pertains to section 271(1)(c) of the act , One funny example of retrospective amendment I would like in the year 2012, when the RBI was exempted from paying wealth tax with retrospective effect since 1957, that is prior to commencement of this Act. On the notorious habit of retrospective amendments, once the Senior Lawyer Sh Ram Jethamalani has said in his own style "that if the government will continue its habit of amending the laws retrospectively, then the days are not far when the government will declare all the prostitutes as virgin with retrospective effect. The government should need to introspect its notorious way of abusing the platform of the august parliament for this purpose. One thing more comes to mind the fashion of artificial arriving at the satisfaction while detecting the concealment , what type of satisfaction, perhaps many officers are not aware of what satisfaction means and for the sake of requirement they simply write that " I am satisfied , that assessee had concealed the income or furnished inaccurate particulars" without understanding any thing. Many of the assessee has brought the law in their favour on the satisfaction count, although admittedly they had concealed the income and furnished inaccurate particulars. As far as I remember the word satisfaction was first originated from the Judgment in Commissioner Of Income-Tax Versus Ram Commercial Enterprises Ltd. 1998 (10) TMI 13 - DELHI High Court and then Diwan Enterprises Versus Commissioner Of Income Tax And Others 1998 (11) TMI 27 - DELHI High Court , and prior to that no technicalities of this type were involved, even the amendment by inserting clause 1B was not of much help and discernibility of the “satisfaction still remains there. Satisfaction word had both good and bad instinct. The professional must go into the depth of this word, if they want to remain in practice and have their aura established in the department. Without satisfaction, you cannot survive, not in professional but even in domestic field, if you forget this word than it would be total failure. How to, what to, when to, which way to and whom to satisfy is big art, of course a science too. The moment enter the department you have to satisfy the security guard about your identity, and at the last to your client that you have satisfied him , other there wise many others who give guaranteed satisfaction will overtake your profession, because they know how to give heavy dose make both ends meet. The discretion of the assessing officer to impose penalty from 100 percent to 300 percent of the tax sought to be evaded is the judicious part of this section, which is dealt in by the officers in non judicious ways and wherever the word discretion is allowed to be applied by the assessing officer, the assessing officer must act and apply his discretion in most balanced, appropriate and rational manner, but it is not so, in the income tax department many of the officers take the word discretion as his desire and sweet will and levy the penalty of 200 percent to 300 percent without considering the facts and obvious non application of the judicial mind. Discretion literarily means the right to choose what should be done in a particular situation and the quality of being careful about what you do and say so that people will not be embarrassed or offended: the quality of being discreet. The assessing officer should be the soil of discretion but it is generally seen that the discretion is applied in an indiscreet manner. A phrase is coming to mind and would be appropriate to quote: "Discretion is the better part of valor, used to say that it is better to be careful than to do something that is dangerous and unnecessary." Assessing officer are not well-trained and suffering from cut and paste habits, the covered matters are copied from preceding year orders and satisfaction is cut and pasted in a purely mechanical manner. If an exam is conducted with a syllabus covering moot assessment, the most of the assessing officers especially, who has been christened by the routine promotion, would not be able a draft a single assessment order or penalty order. Approval of the immediate higher authority is a matter of joke, after all he has empowered for monitoring of the cases, (which I call as money-tring of the cases).Which otherwise can be defined as permission to the assessing officer to squeeze the lemon to extract the juice and if you do not succeed bring it to me I will squeeze, if both the officer fails then go to higher authority and get him (the taxpayer) squeezed. Therefore, the assessment or its post assessment proceeding can be well defined as a process of exploring the scope of making taxpayer exponential looser and officer an undue enriched, leaving the department on margin. It is interesting to note that satisfaction note is typed at the end of the order without arriving at any satisfaction to initiate penalty proceedings , just to fulfill the requirement of the act, wherever, by six months the assessing officer if remain the same would drop the penalty proceeding , because of being non-satisfied but otherwise well satisfied. There is no check and balance system, the approving authority in majority of cases will approve on the assessing officer note, with no difference of opinion and without going into detail of facts, who has the time? and what is the need? Let the taxpayer go the hell and beg, borrow or steal to pay those illegal taxes or demands forced to be recoverable in an unconstitutional way. Before I come to some remedial measures, one more thing disturbs is that why this section, what is need of this section and further the initiation of the penalty , satisfaction, and then imposition of the penalty that too within six months or abeyance thereof if appeal is pending. Generally, this allocation generally comes with the successor-assessing officer. But why it is not imposed simultaneously with passing of the assessment order, why to hang a sword on the assessee for six months and financial burden on the assessee. In my opinion, the section should be abolished, If the case is selected for SCRUITNY, any income brought to tax in the assessment due to any reason should be taxed at the scrutiny rate , which should be flat double of the normal tax rate. Self-assessment tax rate should be only up to the self-assessment level and should have no linkage with the income detected or brought to tax during assessment. This action will augment the revenge besides decline in filing of wrong claim and check on in accuracy. The appellate burden will decrease. Time of separate proceeding will be saved and the move will bring more transparency and the time saved could be utilized for other revenue yielding methods
By: Harish Chander Bhatia - November 5, 2013
|
|||||||||||
| |
|||||||||||
