TMI Blog1998 (2) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... period for change of the previous year to financial year which increased the period of previous year beyond 12 months and consequently the sale exceed minimum limit of Rs. 40,00,000. The appellant also took plea before the Assessing Officer that no such proceedings were initiated alongwith 143(3). In response to another show cause notice the appellant took plea before the Assessing Officer that the appellant had applied for change of previous year and no reply was received and therefore, he was not clear in consolidating and finalisation of its accounts. The Assessing Officer was of the opinion that the stand taken by the appellant is not borne out from the records. The Assessing Officer observed that the appellant applied for change of previous year on 29-3-1988 whereas previous year was ended on 15-8-1987. According to him this proves that the appellant has already taken for granted that his request for change of previous year was granted by the ITO. The Assessing Officer also observed that there is nothing on record to establish the pleading of the appellant that the change of previous year was granted by the ITO at the time of assessment and ITO agreed not to initiate penalty p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to audit objection. He has relied on the decision of the Hon'ble Supreme Court, decided in the case of Indian Eastern Newspaper Society v. CIT [1979] 119 ITR 996/2Taxman 197. This issue on the facts has been dealt by the Assessing Officer as well as by the CIT(A) who have categorically denied the fact that the penalty proceedings have been started due to the audit objection raised by the Internal Audit Party. The application of case law as cited has to be analysed from the legal point of view. In Indian Eastern Newspaper Society's case, the issue to be decided was whether the information based on audit objection can form information for the purpose of invoking section 147(b). The Hon'ble Supreme Court held that the opinion of audit party on a point of law could be regarded as information for initiating penalty proceedings under section 147(b) of the IT Act, 1961. In the case of the appellant the Assessing Officer has only to frame a prima facie belief, if appellant has committed a default as envisaged under section 271B. The decision of the Hon'ble Supreme Court does not make function of audit party as illegal or without jurisdiction. Many situations and opinions of audit par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f both the periods were available and it was in his knowledge that his sale has exceeded Rs. 40,00,000. It was immaterial whether extension was granted or otherwise but if he close his previous year on 31st March, 1988 and during the previous year sale exceeded Rs. 40,00,00 he has to file a audit certificate under section 44AB alongwith his return. We, are, therefore unable to accept this as reasonable cause. We have also gone through section 44AB which is in operation from 1-4-1985 and section clearly says that every person carrying on business or profession has to get his accounts of such previous year audited by an accountant, if total turnover exceeds sum of Rs. 40,00,000 in any previous year. Whatever may be the reasons and whosoever may by the authorities, in case the appellant chooses a particular previous year and files return in accordance with that previous year, he has to get his accounts audited, if his sale exceeds the limit of Rs. 40,00,000. The appellant filed a return of income on 29-6-1988 and in the said return, the appellant mentioned previous year ended as on 31-3-1988. Assessment itself was completed on 13-12-1988. We are of the opinion that this cannot constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act. 9. The second relevant and related issue is regarding initiation of penalty proceedings alongwith assessment order. The learned counsel of the appellant has pleaded, relying on the decision cited, if the Assessing Officer will not or fails to issue penalty proceedings along with assessment order, he cannot issue the same after the completion of the assessment order. He is of the opinion that the Assessing Officer has apparently not initiated penalty proceedings during the assessment order. Therefore, same cannot be issued after completion of the assessment order. Even though imposition of the penalty proceedings is passed within time limit prescribed by section 275 of the Income-tax Act. 10. In the case of H. Ajitbhai Co. The Hon'ble the ITAT has agreed that the section 271B or any other provisions of the Act, nowhere expressly prescribed the period of limitation for initiation of penalty proceedings under section 271B. However, they are interpreting the section 271B that the period is to be calculated from the end of financial year in which proceedings in the course of which action for imposition of penalty has been initiated. 11. Section 275 of the IT Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is obliged to impose such penalty is what is relevant. Whoever this authority may be, he is obliged to impose such penalty as was permissible under the law in that behalf on the date on which the offence of concealment of income was committed, that is to say, on the date of offending return. The two aspects must firmly be borne in mind, namely, who may impose the penalty and in what measure." From the decision of the Hon'ble Supreme Court, it is quite clear that the penalty proceedings can be initiated only after an assessment order is made. The Hon'ble Supreme Court has indirectly interpreted that it is not essential to initiate penalty proceedings and mention the same in the assessment order. The main emphasis in the decision is that at the time of imposition of the penalty, the Assessing Officer should have jurisdiction which is valid and in accordance with the law. In the present case after the completion of the assessment a show cause notice was issued to the appellant which clearly shows that it was during the assessment proceedings that the Assessing Officer came to know that the appellant violated the provisions of section 44AB and consequently after the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 275. It is not for the Judicial Authorities to incorporate meaning to a particular section for which it does not stand for. That power is exclusively domain of the legislature. The purpose of section 275 is to provide a period of limitation for completion of penalty proceedings. By directly, indirectly, impliedly or even by any sort of interpretation, it will be difficult and illogical for us to give a meaning to the section so that we can interpret the section 275 so that the section will deals with initiation of penalty proceedings. The words 'in the course of which the proceedings' are nothing but descriptive part of proceedings giving two years period or six months as the case may be from the end of the financial year in which proceedings resulting into the action or cause by which the penalty proceedings have been initiated. There has to be proceedings in a previous year which will give a logical conclusion for coming to a finding that the appellant has violated some or any provisions of the Act and then the limitation will start from the two years or six months of such proceedings. In the instance case, proceedings were the assessment proceedings and penalty was imposed wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case Navayuga Traders Gunnies Firm v. CIT [1971] 79 ITR 519. The Hon'ble Andhra Pradesh High Court has given following findings: "We express our respectful disagreement with those observations. To our minds, section 275 is plainly and exclusively intended to prescribe a limit of time within which penalty proceedings must be concluded. It is not intended to prescribe the stage after which penalty proceedings cannot be commenced. It does not do so expressly; nor does the language of section 275 lead us to such a necessary implication. We would indeed be reading too much into section 275 if we read any such implication. The words "in the course of which the proceedings for the imposition of penalty have been commenced are merely descriptive of the proceedings two years after whose completion penalty cannot be imposed. The words are used to identify the particular proceedings before the Income-tax Officer or the Assistant Commissioner which are referred to in clauses (a), (b) and (c) of section 271(1) rather than to prescribe when a penalty proceedings may commence." 16. Keeping in view the above discussions, the appeal of appellant is dismissed. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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