TMI Blog2017 (2) TMI 1378X X X X Extracts X X X X X X X X Extracts X X X X ..... be applied strictly in that respect. Questions-I and II, therefore, are answered against Revenue and in favour of Assessee. Levy of penalty - concealment of particulars - Held that:- Meaning of word "concealment" is to hide, to keep secret. Free concealment of particulars and income would include false deduction or exemption claimed by Assessee in his Return. The word "conceal" involves and implicit a knowledge on the part of Assessee of his real income when furnished particulars. If an income was already in the knowledge of Department, it cannot be said to be a case of concealment. An erroneous claim and deduction which was withdrawn when error was discovered cannot be said to be concealment of income and penalty cannot be imposed. - No penalty. - Decided against the revenue. - Income Tax Appeal No. - 140 of 2008 - - - Dated:- 2-2-2017 - Sudhir Agarwal And Ravindra Nath Mishra-II, JJ. For the Appellant : D.D. Chopra, Manish Mishra For the Respondent : Pradeep Agarwal 1. Heard Sri Manish Mishra, Advocate, for appellant and Sri Pradeep Agarwal, Advocate, for respondent. 2. This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter referred to as AO ) made assessment on 21.12.1987, making following additions in the profit declared in profit and loss account. Profit before Tax as per P/L a/c 67167062/- Add: depreciation 57462948/- 124630040/- Add: 1. Expenses disallowed on midan project 10748933/- 2. Provision for exgratia 3643310/- 3. Disallowance u/s 43B 1669673/- 4. Disallowance u/s 37(3A) (3B) 174276/- 5. Sales Promotion 1014000/- 6. Stock Difference 687000/- 7. Earlier years adjustments 164066/- 142731298/- Less: Depreciation as per charge given by Assessee 39040642/- 10,36,90,656/- 6. In the last paragraph of assessment order, it was also observed by AO that Assessee is liable to pay p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that mere fact that additions have been upheld, it proved a case of concealment of income and, therefore, penalty leviable under Section 271(1)(c) was justified. In this regard he placed reliance on CIT, Delhi Vs. Atul Mohan Bindal 2009 (9) SCC 589 and Mak Data P. Ltd. Vs. Commissioner of Income Tax- II 2014 (1) SCC 674 . Sri Misra also contended that Tribunal in observing that penalty order dated 30.03.2005 was barred by limitation provided in Section 275(1)(a) has erred in law inasmuch remand of matter to AO and revised order passed by AO would cover the period of limitation. 12. Sri Pradeep Agarwal, learned counsel for Assessee, on the contrary, contended that order of penalty should have been passed by AO in respect to items which became final, after order of Tribunal, within six months from end of March 2002, in which order of Tribunal dated 19.02.2001 was received in the Office of CIT/CIT(A). Assessment order dated 21.12.1987 of AO rendered final and complete in respect to six items. Only for two items, Tribunal remanded the matter to AO. Therefore, in respect to six items, limitation of six months would expire on 30.09.2002 and penalty imposed by AO after 30.09.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by Assessee was inaccurate or false, leading to the inference that Assessee has concealed income or filed inaccurate particulars of income. Mere disallowance or non acceptance of claim of Assessee will not be sufficient for attracting penalty proceedings. In support thereof reliance is placed on Shyam Bidi Works Pvt. Ltd. Vs. Commissioner of Income Tax (2003) 259 ITR 625 . 16. In order to adjudicate the questions of law formulated above in the light of relevant provisions and rival submissions, in our view, it would be appropriate first to place on record various events chronologically which will make various aspects explicit. i. Date of passing original assessment order 21.12.1987 ii. Date of initiating original penalty proceedings 21.12.1987 iii. Date of CIT(A) order 28.10.1988 iv. Date of order u/s 251 10.2.1989 v. Date of reassessment order 7.2.1991 vi. Date of order of the Tribunal 19.2.2001 vii. Date of receipt of the order of Tribunal in the office of CIT/CCIT 14.3.2002 viii. Date of reassessment (on the same income as in the order of 7.2.1991) 31.3.2003 ix. Date of order of CIT(A) 24.12.2003 x. Date of order of appeal effect 15.3.2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by cash credit entries in the accounts of four creditors during previous year, relevant to the assessment year 1963-64. Therein assessment had completed on 30.11.1963. A notice under section 271(1)(c) was issued on 25.4.1964 and thereafter order imposing penalty was passed. An objection was raised that penalty proceedings must have commenced before conclusion of assessment proceeding. It was argued that penalty proceedings were initiated by issue of a notice to show cause but since it was done after completion of assessment, hence illegal. Penalty for the purpose of Section 271(1)(c) is attracted where there is a case of concealment of particulars of income by Assessee or it has deliberately furnished in accurate of such income. This Court relied on a pari materia provision contained in Section 28(1) Indian Income Tax Act, 1922 considered in Commissioner of Income Tax versus S.V. Angidi Chettiar (1962) 44 I.T.R 739 wherein Court held that proceedings to levy penalty are not to be commenced by Assessing Officer before completion of assessment proceedings. To attract penalty under section 271(1)(c) only satisfaction of Assessing Officer in the assessment proceedings that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation Section 275 would come into picture. 22. Karnataka High Court in Shanbhag Restaurant versus Deputy Commissioner of Income Tax (2004) 266 ITR 393 (Kar) has considered Section 275(1)(c) holding that it comprises of two parts. First part provides that no order imposing penalty under Chapter XXI could be made, in cases, which do not fall under section 275(1) (a) and (b) after the expiry of financial year in which proceedings in the course of which action for imposition of penalty, has been initiated, are completed. Second part relates to cases which prohibit passing of an order imposing penalty after expiry of six months from the end of the month in which action for imposition of penalty is initiated. It further says that out of the two parts, whichever period would expires later, would enure to the benefit of Revenue, and would apply. Having said so Court said that for the purpose of first part, financial year in which proceedings in the course of which action for imposition of penalty, is required to be understood as the proceedings relating to assessment order. The financial year in which proceedings in the course of which action for imposition of penalty has been initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .The period of limitation in such a case would be six months from the end of the month in which the action for imposition of penalty is initiated. It is clear that where penalty proceedings are initiated in the course of some other proceedings, the Legislature has provided for for two different periods of limitation. However, so that there is no confusion with regard to which of the two would apply, the Legislature has added the expression whichever period expires later at the end .To explain this ,let us take two examples: Example 1: Assumes that the action for imposition of penalty is initiated on March 15, 2007, in the course os some proceedings which are completed on March 25, 2007. On the basis of the forst part of section 275(1)(c), the period of limitation would end on March 31,2007, being the end of the financial year in which the proceedings in the course of which action for the imposition of penalty was initiated, is completed.However, taking recourse to the provisions of the second part of section 275(1) (c), the end of the period of limitation would be September 30, 2007. This would be so because the action for imposition of penalty was initiated on March 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the first part of section 275(1) (c) would have no application and it is only the period of limitation prescribed in the second part which would apply. Since only one period of limitation would be applicable,the expression whichever period expires later would have to be read as that very perod of limitation. The present case undoubtedly falls under section 275(1)(c) and, that too, under the second part thereof. Therefore, on a plain reading and on a logical analysis of the relevant provisions of the said Act, the period of limitation during which an order imposing a penalty could have been passed in the present case would be a period of six months beginning from the end of the month in which the action for imposition of penalty was initiated. We have already noticed above that the show -cause notice under section 274 read with section 271B of the said Act was issued on July 31,2003. Since that happened to be the end of the month also, the period of six months would have to be reckoned from that date. That would take us to January 31, 2004. Thus, the penalty order could have been passed on any date up to and including January 31,2004. The penalty order came to be passed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) and vide order dated 30.08.1978 appellate authority directed AO to pass separate assessment orders for two periods. On the quantum CIT(A) allowed certain reliefs to MGAMM. The relief in respect of first period was ₹ 1,435/- and total income was reduced to 1,28,402/- as against ₹ 1,29,837/- assessed by AO. CIT(A), however, while granting relief of ₹ 1,435/- made addition on account of low gross profit by ₹ 52,938/- and sustained addition of ₹ 7,942/- out of addition of ₹ 62,315/- made on account of credit in the old MGAMM. Assessee and Revenue both filed appeals before Tribunal. Revenue challenged direction of CIT(A) with regard to separate assessments for two periods and Assessee challenged additions confirmed by CIT(A). Tribunal vide order dated 27.06.1980 dismissed Revenue's appeal but MGAMM's appeal was allowed in respect to claim under Section 35B and matter was restored back to CIT(A). Other points Tribunal decided on merits and allowed in part. CIT(A) got the matter on remission by Tribunal and forwarded to AO vide order dated 06.01.1981. AO reaffirmed assessment on 11.03.1983 and computed income of ₹ 1,26,301/- in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete income, it is deemed to represent concealed income. Section 271(1)(c) confers power upon Revenue to direct a person to pay penalty if Revenue authorities are satisfied in the course of any proceedings under Act, 1961 that any person has concealed particulars of his income or there is inadequate particulars of such income. 30. After insertion of Explanation-1 to Section 271(1), law of concealment and penalty, it is said has become a little bit stricter and effect of Explanation to Section 271(1)(c) is: (1) Every difference between reported and assessed income needs an explanation. (2) If no explanation is offered, it may justify penalty. (3) If explanation is offered, but is found to be false, penalty will be exigible. (4) if explanation is offered and it is not found to be false, penalty may not be leviable, if- (a) such explanation is bona fide, (b) the assessee had made available to the AO all the facts and materials necessary in computation of income. 31. Thus, concealment referred to in Clause-(c) is a concealment from AO. Further AO in the course of a proceeding before him must be satisfied that Assessee has concealed or furnished incorrect particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of AO that there was no disclosure inasmuch entries of loans/credits/deposits etc. were in the account-books but some were not accepted by Revenue Authorities and, therefor, addition was made. Explanation was also furnished by Assessee which was not accepted. In such circumstances, it was incumbent upon AO to record finding that there was concealment on the part of Assessee otherwise penalty could not have been imposed. 35. In CIT Vs. Reliance Petroproducts Pvt. Ltd. (2010) 11 SCC 762 , particulars were furnished in record but some were not accepted and disallowing the same, additions were made. Thereupon penalty under Section 271(1)(c) was sought to be imposed. It was argued before Supreme Court that mere disallowing certain entries and thereafter making additions does not amount to concealment of particulars of income so as to attract Section 271(1)(c). Supreme Court referred to meaning of particulars and said: As per Law Lexicon, the meaning of the word particular is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word particulars used in the Section 271(1)(c) would embrace the meaning of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous. But a finding has to be recorded to this effect by AO, otherwise there would be no question of inviting penalty under Section 271(1)(c) of Act, 1961. Court very categorically held: A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. (emphasis added) 37. Court also said, when certain details have been furnished regarding expenditure as well as income in the return, which are not found inaccurate nor could be viewed as concealment of income on the part of Assessee, but it was up to the authorities to accept the claim in Return or not, merely because Assessee had claimed expenditure, which claim was not accepted or was not acceptable to Revenue, that by itself would not, in the opinion of Court, would attract penalty under Section 271(1)(c) of Act, 1961. Court further said: If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
