9911796707
TMI Blog2013 (12) TMI 1214X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the end the assessee made it clear that although the provision for diminution in the value of investment is under the provisions of the Income Tax Act, the said decline is not allowable. On receipt of the said explanation, the department wrote another letter on 04.11.2003 calling upon the assessee to categorically state whether he is withdrawing the said claim. By letter dated 07.11.2003 a reply was sent stating that claims regarding both the expenditure may be kindly be treated as withdrawn. Thereafter the Assessing Authority proceeded to pass assessment order disallowing the said claim of Rs.4,40,00,000-00. Thereafter it was observed in the end of the order that 'Penalty under u/s 271(1)(c) initiated separately'. 3. The assessee contested the said proceedings by contending that on the date of levy of penalty, the assessee ceased to exist inasmuch as the same was merged with the UB Holdings Ltd., vide Karnataka High Court order dated 31.08.2005. It was contended that the notice issued in proceedings is invalid. On merits, it was contended that the assessee had withdrawn the claim of diminution in value of investment with intention to buy peace. The assessee being an investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after disallowing the said diminution in value, the assessee is not liable to pay tax as the assessee was under loss and that is no reason for not claiming penalty as held by the Apex Court. Lastly it was contended that even in the absence of a direction in the assessment order, to initiate penalty proceedings the deeming provision is applicable and proceedings initiated is in accordance with law. 8. Per contra, the learned Senior Counsel appearing for the assessee contended that even though the deeming provision is attracted, satisfaction of the concealment is not to be found in the order of assessment, still only if the Assessing Authority is satisfied that it is a case of concealment, he has to pass a direction for initiation of proceedings. If that direction is not there in the order, the entire proceedings initiated is vitiated. Secondly he contended that diminution in value of the assets was claimed as a business loss. It was pointed out that in order to purchase peace and to avoid litigation, they have withdrawn the claim. Therefore there was no intent to conceal the said amount. Therefore, Section 271 of the Act is not attracted. 9. In the light of the aforesaid facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order contains a direction for initiation of penalty proceedings under clause (c) of sub-Section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c)." 49. By the aforesaid deeming provision a legal fiction is created. When the assessment order contains a direction for initiation of penalty proceedings such order shall deem to constitute satisfaction of the Assessing Officer for initiation of penalty proceedings under sub-clause (c) of Section 271 of the Act. As the language of Section 271 makes it clear before a direction is issued to pay penalty, the person issuing the direction must be satisfied about the condition mentioned in clause (c) of Section 271(1). The question is, whether such satisfaction should be in writing. As the satisfaction has to be in the course of any proceedings and it is at the time of computation of the total income of any person and as it results in an assessment order which has to be mandatorily in writing, the satisfaction should be found in the said order. The existence of these facts is a condition preceden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of legal fiction are to be construed more strictly. They have to be interpreted only for the said issue for which it has deemed and the manner in which the deeming has been contemplated to be restricted in the manner sought to be deemed. As the words used in the legal fiction or the deeming provisions of Section 271(1B) is Direction, it is imperative that the assessment order contains a direction. Use of the phrases like (a) penalty proceedings are being initiated separately and (b) penalty proceedings under Section 271(1)(c) are initiated separately, do not comply with the meaning of the word direction as contemplated even in the amended provisions of law. The direction should be clear and without any ambiguity. The word 'direction' has been interpreted by the decision of the Apex Court in the case of RAJENDRANATH reported in 120 ITR pg.14, where it has been held that in any event whatever else it may amount to, on its very terms the observation that the ITO is free to take action, to assess the excess in the hand of the co-owners cannot be described as a direction. A direction by a statutory authority is in the nature of an order requiring positive compliance. When it is left to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
