TMI Blog2013 (11) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... disturbed in any manner by the insertion of the proviso as interpreted by the Hon’ble Madras High Court in the case of Rayala Corpn. (P.) Ltd [2006 (4) TMI 96 - MADRAS High Court]. The facts of the present appeal in hand are that the assessment order was passed on 31.03.2003. The Commissioner of Income Tax(A) passed order on 31.03.2004 and ITAT passed order deciding the cross appeals in quantum proceedings on 8.8.2008 and finally, 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 – Penalty order not barred by limitation. There is no dispute in this case that the petitioner has filed an appeal before the Tribunal and the same is pending. In such a case, the limitation period for the levy of penalty will be as provided for under s. 275(1)(a), i.e., six months from the end of the month in which the order of the Tribunal is received by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) erred on facts and in law in not holding that the impugned penalty order dated 18.03.2009 levying penalty under section 271(1)(c) of the Income Tax Act, 1961 ('the Act') is illegal and bad-in-law, having barred by limitation. 1.1 That the CIT(A) erred on facts and in law in upholding 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 inaccur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008 and the order passed by the Assessing Officer levying penalty was passed on 26th February, 2009 i.e. within a period of six months from the order of the ITAT. 7. Replying to the above submissions, the DR submitted that the ld. 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 submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later: 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 / Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee filed an additional ground before the Commissioner 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 Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd finally, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stone 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 Bench held as under:- 14. We also find that from the last para of the impugned assessment order that the Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim 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 and have distinct connotation and meaning. Reference in this regard may be made to the following decisions wherein it has been consistently held that satisfa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "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 issue of interest paid on SDF loan. The assessing officer, it will thus kindly be appreciated, did not initiate penalty proceedings under section 271(1)(c) of the Act on account of disallowance of interest on SDF loan. In view of the aforesaid, it is respectfully submitted that since penalty proceedings were not at all initiated by the assessing officer on disallowance of interest on SDF loan amounting to Rs.77.89.965. there was no warrant to impose penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 disallowed the provision of interest on loan from Sugar Development Fund u/s 43B holding SDF to be a financial institution. This year on checking the details of Interest accrued but not Due, it has been found that following amount of interest which have accrued during the year have either been not paid or paid after filing of Return: DEOBAND UNIT Amount Date of Payment (i) SDF SOFT LOAN Rs. 88,767/- 29.01.01 (ii) SDF MODERN Rs 69,75,000/- Not yet paid (iii) SDF(CANE DEV) Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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