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2016 (2) TMI 878 - ITAT VISAKHAPATNAM

2016 (2) TMI 878 - ITAT VISAKHAPATNAM - TMI - Validity of penalty orders u/s 271(1)(c) - period of limitation - Held that:- The case of Rayala Corporation Pvt. Ltd. Vs. UOI & Ors. (2006 (4) TMI 96 - MADRAS High Court) has considered proviso to section 275(1)(a) of the Act vis--vis appeal to the Tribunal and held that the proviso to section 275(1)(a) of the Act, does not nullify the availability to the third respondent of the period of limitation of 6 months from the end of the month when the or .....

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authorities below and also particularly the penalty order passed by the A.O., we find that the assessee has not filed the details in respect of interest payment, unexplained investment in jewellery, bogus sundry creditors. Therefore, the A.O. after considering the non-filing of the above details and held that the assessee has concealed the income and came to a conclusion that it is a fit case to levy the penalty and accordingly penalty has been levied. We find that the assessee has not filed det .....

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os.273 to 278/Vizag/2013 - Dated:- 28-1-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri I. Kama Sastry, AR For The Respondent : Shri M.K. Sethi and Shri T.S.N. Murthy, DRs ORDER PER V. DURGA RAO, Judicial Member: These appeals are filed by the assessee against the order of CIT(A), Visakhapatnam dated 27.3.2013 for the assessment years 2000-01, 2002-03, 2003-04, 2004-05, 2005-06 & 2006-07 respectively. Since, the facts are identical .....

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s well as residential premises of the assessee at Visakhapatnam and Srikakulam on 25.8.2005. During the course of search and seizure operations, some incriminating material was found and seized. Simultaneously, survey operation was also conducted in the company s premises of the assessee at Visakhapatnam and Vizianagaram. 3. The assessee has filed the original return of income for the assessment year 2002-03 on 1.12.2003 admitting income of ₹ 9,52,139/- besides agricultural income of ͅ .....

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and after considering the explanation given to the show cause letter, additions were made and assessment was completed on 18.12.2007. 5. The assessee carried matter in appeal before the CIT(A), Visakhapatnam. The Ld. CIT(A) upheld the order of the A.O. by order dated 30.3.2010. 6. Subsequent to the additions confirmed by the Ld. CIT(A) dated 30.3.2010, the A.O. has issued a show cause notice and called the explanation from the assessee that why penalty u/s 271(1)(c) of the Act should not be imp .....

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sses an order. 7. The A.O. after considering the explanation given by the assessee he has observed that the assessee simply sought time to defer the penalty proceedings till disposal of the assessee s appeal except that assessee has not offered any explanation on merits of the case. With the above observation, he has initiated the penalty proceedings by observing that it is clear that the assessee has resorted to concealment of income of undisclosed interest payment of ₹ 80,000/-, unexplai .....

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ence, the order passed in consequence is void ab initio. 2. The notice issued under section 274 r.w.s. 271(1)(c) dated 18.12.2007 is vague and hence the same is invalid. Hence, the order passed in consequence of such an invalid notice is void ab initio. 3. The penalty order u/s 271(1)(c) has been passed totally on the basis of findings in the assessment order and findings in the CIT(A) order without independent findings for the levy of penalty through the penalty proceedings are independent of a .....

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Gross Profit - MIMS Project 234816 c. Unaccounted cash receipts from MIMS Project 647000 d. Undisclosed loans and interest (This should be undisclosed investment) 1400000 e. Disallowance u/s 40A(3) 269258 6. For these and other grounds that may be urged at the time of hearing the appellant prays for justice. 8. The Ld. Counsel for the assessee has submitted before the CIT(A) that the order u/s 271(1)(c) of the Act passed by DCIT, Central Circle(2), Visakhapatnam on 31.3.2010 is barred by limita .....

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mpany Pvt. Ltd. (2011) 245 CTR (Delhi) 312 and submitted that the Delhi High Court wherein a paragraph 10 of the order, it has been held that the proviso thus carves out an exception from the main section in as much as in case where no appeal is filed before the Tribunal. The A.O. must impose penalty within a period of 6 months to be reckoned from the date of the receipt of penalty order by the CIT(A). He further submitted that from the ratio laid down by the Hon ble Delhi High Court, it is impl .....

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of the Ld. Counsel for the assessee and also the judgement of the Hon ble Delhi High Court and observed that the proviso to section 275(1)(a) of the Act extends the period of imposing penalty from 6 months to 1 year within the receipt of the order by the Commissioner if the CIT(A) has passed the order after 1st June, 2003, consequently the proviso only deals with the orders passed by the CIT(A) does not provide for an order passed by the ITAT deciding the appeal from the order of the CIT(A) and .....

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ded that the impugned penalty order is not barred by limitation and is validly passed within the time limit prescribed by the statute and dismissed the ground raised by the assessee. 10. The CIT(A) has further considered the ground no.2 raised by the assessee in respect of vague notice that the assessee has contended that the notice issued u/s 274 r.w.s. 271(1)(c) of the Act dated 18.12.2007 is vague and hence invalid. Therefore, consequent penalty order is void-ab-initio. A copy of the notice w .....

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ept the A.R. s contention, as I find from the penalty order the appellate has given response to the penalty notice and has also requested to keep the penalty in abeyance. Thus, it is evident that the appellant is aware of the purpose and has responded to the same. If the appellant has not understood, he has to raise this plea in response to the show cause notice. This ground of appeal raised by the assessee is dismissed and the appeal filed by the assessee is partly allowed. 11. On being aggriev .....

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sessment proceedings, hence, the order passed u/s 271(1)(c) is invalid. 3. The penalty order u/s 271(1)(c) has been passed by the Ld. AO without giving reasonable opportunity to the assessee as required under section 274. 4. The Ld. CIT(Appeals) is not correct in directing the AO to levy penalty with respect to additions confirmed by the Honourable Tribunal without even considering the submissions made by the assessee on merits. 5. The appellant craves leave to amend, alter or delete any of the .....

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noting that penalty proceedings are initiated separately will not amount to direction as mandated by the provisions of section 271(1B). 3. Detailed submissions will be made at the time of actual hearing. 12. The Ld. Counsel for the assessee has submitted that the Ld. CIT(A) passed his order on 30.3.2010 received by the CIT on 20.4.2010. As per section 275(1)(a) of the Act, the A.O. ought to have passed an order on or before 31.10.2010. However, he has passed an order on 31.3.2011 after 6 months .....

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by limitation. Further, to the above, to support his arguments, he relied on the judgement of the CIT Vs. Mohair Investments & Trading Company Pvt. Limited (2011) 245 CTR (Delhi) 312. 13. On the other hand, the Ld. D.R. has submitted that the proviso to section 275(1)(a) of the Act has been inserted by the Finance Act on 1st day of June, 2003. Once the CIT(A) passed an order on or after the first day of June, 2013, as per the proviso, the time limit of 6 months provided by the section 275(1) .....

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imit is within 6 months. Therefore, that judgement is not directly on the issue and no application to the facts of the present case. 14. We have heard both the parties, perused the records, gone through the orders of the authorities below. The issue involved in this appeal is whether the extended period of one year by the proviso inserted to Finance Act, 2003 is available to the assessing officer in the case of order passed by CIT(A) and further appeal has been preferred before the Tribunal? In .....

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this case, the A.O. passed an order after 6 months as per the judgement of the Delhi High Court, in the case of CIT Vs. Mohair Investments & Trading Company Pvt. Ltd. (supra), once an appeal is preferred against the order of the CIT(A), the proviso has no application. Therefore, the order passed by the AO beyond 6 months, however, within one year barred by limitation. To decide the above issue, it is relevant to examine the section 275(1)(a) of the Act. For the sake of convenience, the above .....

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has been initiated, are completed or six months from the end of the month in which the order of the [***] Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the [Principal Chief Commissioner or] Chief Commissioner or [Principal 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 t .....

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sioner or] Commissioner, whichever is later;] 15. From the plain reading of the above section and proviso thereto, the following issues are emerging. The legal position before 1.6.2003, the time limit for passing of the penalty order where an appeal has been filed against the assessment order to the Commissioner (A) u/s 275(1)(a) of the Act. i. On or before the expiry of the financial year in which assessment proceedings are completed or (this is no application in so far as present case is conce .....

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ne year from the end of the financial year in which the order of the CIT(A) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner of Income Tax, whichever period expires later. The proviso inserted by the Finance Act, 2003 w.e.f. 1.6.2003 the extended period of limitation to pass the penalty order extended by the proviso, from 6 months to one year in the case where the A.O. decided to pass the penalty order without waiting the ITAT order .....

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is as per the limitation period prescribed by the Act. 16. So far as case law relied by the Ld. Counsel for the assessee, in case of Mohair Investments and Trading Company Ltd. (supra), the issue before the Hon ble Delhi High Court is that whether an order passed by the A.O. within 6 months from the order of the Tribunal could be considered time barred for the reason it is beyond the time limit prescribed by the proviso. The Hon ble Delhi High Court has considered and observed that we are of the .....

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by the Commissioner and in case assessing officer imposes penalty order passed by the ITAT, then the period of 6 months is provided by the main section. This judgement of the Hon ble Delhi High Court has no relevance to the argument of the Ld. Counsel for the assessee and therefore, we reject the argument of the Ld. Counsel and we hold that the order passed by the CIT(A) after 1st June, 2003, the extended period of limitation from 6 months to 1 year is available to the assessing officer, to pass .....

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roviso to section 275(1)(a) of the Act, does not nullify the availability to the third respondent of the period of limitation of 6 months from the end of the month when the order of the Tribunal, is received by the third respondent. The Hon ble Madras High Court also supports our view expressed above. In view of the above, we find that the Ld. CIT(A) has rightly held that the penalty order passed by the A.O. within the period of limitation i.e. within 1 year as per the proviso to section 275(1)( .....

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per law, the satisfaction of the AO regarding concealment of income or furnishing of inaccurate particulars of income is not discernible from the assessment order. The mere noting that penalty proceedings are initiated separately will not amount to direction as mandated by the provisions of section 271(1B). 3. Detailed submissions will be made at the time of actual hearing. 18. In so far as above additional ground raised by the assessee is concerned, we find that the assessee has raised very sa .....

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the A.O. in respect of the show cause notice, having participated in the penalty proceedings, now raising the objection in respect of vague notice is not acceptable and reject the same. 19. We find that once the assessee already raised an issue in respect of vague notice, the same is considered by the Ld. CIT(A) and again raising the same issue as an additional ground is not permissible. 20. The assessee can raise an additional ground before the Tribunal only where he has not raised the ground b .....

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