TMI Blog2014 (9) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... chapter XXI reveal that section 271 is a substantive provision whereas section 274 provides the procedure to be followed in giving effect to the said substantive charging provision and section 275 creates a bar of limitation against the imposition of penalty - while deciding the question of limitation as mentioned in the section, penalty order passed by the AO was within the time-limit envisaged by the Act - the FAA has reduced the penalty from 200% to 100% - thus, the order of the CIT(A) is upheld – Decided against assessee. - ITA No. 7569/Mum/2011 - - - Dated:- 3-9-2014 - Sh. D. Manmohan And Rajendra,JJ. For the Petitioner : Sh. Vijay Mehta For the Respondent : Shri Senthil Kumaran ORDER Per Rajendra, AM. Challenging the order dt. 09. 09. 2011of the CIT(A)-18, Mumbai, assessee-company has Raised following Grounds of Appeal: 1. On the facts and circumstance of the case and in law, the LD. CIT(A) erred in confirming the action of the LAO of passing order levying penalty uls. 271(1)(C) ignoring the fact that time limit for passing the said order has expired. Order passed beyond time permissible under the Act is bad in law and the same needs to be quashe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the FAA and therefore penalty proceeding should be kept in abeyance. The FAA dismissed the appeal filed by it, vide his order dated 04. 04. 2006. The assessee agitated the issue before the Tribunal. Vide its order dated 05. 09. 2008 (ITA No. 4156/Mum/2006) the 'H' Bench of ITAT, Mumbai dismissed the appeal of the assessee as withdrawn by it. After the dismissal of the appeal by the Tribunal a fresh opportunity was granted to the assessee by the AO, vide his letter dated 06. 12. 2009. It was submitted before him that it had withdrawn the appeal filed before the Tribunal because the returned income and the assessed income was loss, that in respect of AY 1999-2000 its appeal against the penalty order was allowed by the FAA, that there was no tax liability. After considering the reply of the assessee, the AO held that in view of the decision of the judgment of Hon'ble Supreme Court in the case of Gold Coin Health Foods P. Ltd. penalty was leviable, that the FAA had dismissed the appeal filed by the assessee for the year under consideration filed by it against the addition relating to the disallowance made by the AO, that it was mentioned by the FAA that at no sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eech of the FM had to be given due weightage while deciding the cases, that the background material has to be considered for understanding the amendment, that the explanation given by the assessee was not found to be false, that it had made a claim in the return of income, that it had disclosed all the facts in earlier years. He referred to the sections 143(2), 115JB(vi), 115(O)(vi)of the Act and stated that proviso to the section should be considered in background of the section referred above. He relied upon the decision of K. P. Varghese(131 ITR 597) and orders of Jasbirsingh(ITA/694/ Chd/ 2010-AY. 2004-05, -18. 10. 2010), Bloosom Floriculture(134TTJ51), TarlochanSingh Sons-HUF) (114 TTJ 82), Mahindra and Mahindra Ltd. (313 ITR-AT, 263), Bansal Parivahan(India)(P)Ltd. He also referred to the Report of the Task Force on Direct taxes, CBDT Circular No. 7 of 2003 [Explanatory Notes on Finance Act, 2003] explaining amendment to Section 275 relating to time limit for imposing penalty(263ITR-St. -117-118)], Memorandum explaining provisions in the Finance Bill, 2003[260ITR-St. -222, 223]and budget speech of the FM. Departmental Representative (DR) argued that the penalty was imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that the assessee had claimed that it had received a sum of ₹ 1. 90 Crores(app. )for discounting. From the details filed by it, one thing is clear that money received by it was utilised for purchasing shares of Ushdev International. In these circumstances, the claim of discount charges falls flat prima facie. It is surprising that a person advancing ₹ 1. 90Crore(app. )has decided to forgo its claim. Making a claim of any expenditure in itself is not sufficient. It has to be proved by some kind of evidence. If the assessee fails to do so, then it exposes itself to the provisions of section 271(1)(c)of the Act. In the case under consideration, similar situation had arisen. The AO, after considering the facts of the matter for the year under consideration, had levied the penalty for furnishing inaccurate particulars of income and concealing income. As the quantum appeal has not been decided on merits by the Tribunal, so, we would not like to discuss the issue in detail. But, we would definitely like to meet all the arguments raised by the assessee before us. 2. 3. 1. First, we would discuss the argument raised by the assessee about the speech of the FM. In our opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the case of Ampro Food Products (215ITR904) the Hon'ble Andhra Pradesh High Court had also deliberated upon the issue of speech of the FM while deciding the provisions of section 37 (3A) of the Act. Following is the relevant portion of the judgment: In order to understand the provision of any Act, reference to the speech made at the time of introduction of the Bill is permissible only when the court finds that the provisions of the Act are vague or ambiguous. The provisions of sub-section (3A) of section 37 are neither vague nor ambiguous and hence the Finance Minister's speech while introducing sub-section (3A) of section 37 will not be a ground to hold that when the expenditure sought to be deducted under the head Sales promotion is extravagant or socially wasteful, then only section 37(3A) should be applied. In the matter of Bhandari Machinery Co. (P. ) Ltd. (231ITR294)the Hon'ble Delhi High Court found that that the Tribunal allowed relief to the assessee, with regard to the provisions of section 40A(8)of the Act, on the basis of the speech of the FM. Reversing the decision Hon'ble Court held that the speech of the Finance Minister, the Notes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result is not to be imputed to a statute if there is some other construction available. Where to apply words literally would defeat the obvious intention of the legislation and produce a wholly unreasonable result the court must do some violence to the words so as to achieve that obvious intention and produce a rational construction. In our opinion, a budget speech is only an introductory step to the Bill in Parliament and that in itself is not an end, whereas the Act or the provisions of the Act are the final product of the exercise carried out by the legislature after the bill is discussed at length at the floor of the house and amended, if required. If the provisions of the Act are so clear that there cannot be two opinions about them then to go behind them and to refer the speech of the FM is only an academic exercise. In the case under consideration it cannot be held that there is ambiguity in the provisions or there can be two opinions. While deciding an identical issue in the case of Mohair Investment and Trading Co. P. Ltd. (supra) the Hon'ble Delhi court has mentioned that the Counsel of the assessee had referred to purpose of the amendment was to accelerate the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision. The period of six months provided for imposition of penalty under section 275(1)(a) of the Income-tax Act, 1961, starts running after the successive appeals from an assessment order has been finally decided by the Commissioner (Appeals) or the Tribunal, as the case may be, whichever period expires later. The proviso to section 275(1)(a) has only the effect of extending the period of imposing penalty from six months to one year within the receipt of the order of the Commissioner after June 1, 2003. The proviso thus carves out an exception from the main section inasmuch as in cases where no appeal is filed before the Tribunal the Assessing Officer must impose penalty within a period of one year to be reckoned from the date of receipt of the order by the Commissioner. Section 275(1A) which was introduced later on does not dilute or in any manner render nugatory the main provision, which can only be read to mean that the limitation period for levy of penalty, only in the case of order of the Tribunal, to be as provided under the main section and not otherwise. The proviso to section 275(1)(a) of the Act does not nullify the availability to the Assessing Officer of the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the procedure and limitation has to be considered as a part of the procedural law as distinct from substantive law, that the law of procedure may be said to be that branch of the law which governs the process of litigation, that it is the law of actions : all the residue is substantive law and relates not to the process of litigation, but to its purposes and subject-matter. In other words, the substantive law defines the remedy and the right, while the law of procedure defines the modes and conditions of application of the one to the other. Our view is based on the full bench decision of the Hon'ble Andhra Pradesh High Court pronounced in the case of Watan Mechanical and Turning Works(107ITR743). In that matter the Hon'ble Court was dealing with the amendment to the section 275 of the Act. Hon'ble Court held as under: The liability for tax or penalty would always remain on the assessee; but if the time prescribed under the Act expires, the liability cannot be imposed by the authorities, the reason being that the assessee should not be subjected to unending hardship. However, before the limitation prescribed expires, if the same is enlarged, the limitation being a p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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