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Income Tax Appellate Tribunal, “RAJKOT” BENCH, RAJKOT
Before: SHRI WASEEM AHMED
आदेश/O R D E R
PER BENCH:
All three captioned appeal have been filed at the instance of the assessee against the orders of the Commissioner of Income Tax
ITA Nos. 215/Rjt/15, 254 & 255/Rjt/14[M/s. Gupta Global Exim Pvt. Ltd. vs. ACIT] A.Ys. 2001-02, 1999-2000 & 2005-06 - 2 -
(Appeals)-3, Rajkot (CIT(A) in short) dated 28/04/2015 relevant to Assessment Year (AY) 2001-02 & CIT(A)-II, Rajkot dated 20/02/2014 for the relevant assessment years 1999-2000 & 2005- 06 .
ITA No. 214/Rjt/2015 A.Y. 2001-02
The assessee has raised the following grounds of appeal:
“1. That, the learned CIT(A) has erred in imposing penalty u/s. 271(1)(c) of Rs.6,71,930/- is not justified and should be cancelled.”
The only issue raised by the assessee is that the learned CIT (A) erred in imposing the penalty of Rs. 6,71,930/- under the provisions of section 271(1)(c) of the Act.
The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of timber trading. There was the survey operation carried out at the premises of the assessee under section 133A of the Act. As a result of survey, certain documents of incriminating nature were found. Accordingly the income of the assessee was estimated at the rate of 7% based on such incriminating documents which resulted in the addition of Rs. 16,98,943/- to the total income of the assessee. Thus the assessment was framed under section 143(3) read with section 147 of the Act, vide order dated 29-12-2008 after making the impugned addition to the total income of the assessee. The AO simultaneously issued notice under section 274 read with section 271(1)(c) of the Act, for initiating the penalty which was confirmed at Rs. 6,71,930/- being 100% of the amount of tax sought to be evaded.
Aggrieved assessee preferred an appeal to the learned CIT (A) who also confirmed the order of the AO.
ITA Nos. 215/Rjt/15, 254 & 255/Rjt/14[M/s. Gupta Global Exim Pvt. Ltd. vs. ACIT] A.Ys. 2001-02, 1999-2000 & 2005-06 - 3 -
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR before us submitted that the addition has been made on estimated basis. Therefore there cannot be any penalty under section 271(1)(c) of the Act.
The learned AR also contended that the AO in the penalty order has not mentioned any specific charge whether it was for the concealment of income or furnishing of inaccurate particular of income. Thus the penalty order is not sustainable.
On the other, the learned DR vehemently supported the order of the authorities below.
We have heard the ld. DR and perused the materials available on record. At the outset, we note that the penalty has been imposed by the AO u/s 271 (1)(c) without mentioning the specific charge in its penalty order dated 23/10/2013, whether, it was levied on account of concealment of income or furnishing inaccurate particulars of income. The relevant extract of the penalty order is reproduced as under:
“it is established that the assessee has concealed but gross of income/ furnished inaccurate particulars of income and this is, therefore, a fit case for levy of penalty u/s. 271(1)(c) of the Act”
On perusal of above, it is clear that the AO has not levied the penalty on the specific charge as mandated u/s 271(1)(c) of the Act. In such facts and circumstance the Hon'ble Jurisdictional High Court in the case of Snita Transport Pvt. Ltd. Vs. Assistant Commissioner of Income Tax reported in 42 taxmann.com 54 has held that penalty cannot be imposed without mentioning the specific charge. The relevant extract of the order is reproduced below:
ITA Nos. 215/Rjt/15, 254 & 255/Rjt/14[M/s. Gupta Global Exim Pvt. Ltd. vs. ACIT] A.Ys. 2001-02, 1999-2000 & 2005-06 - 4 -
“9. Regarding the contention that the Assessing Officer was ambivalent regarding under which head the penalty was being imposed namely for concealing the particulars of income or furnishing inaccurate particulars, we may record that though in the assessment order the Assessing Officer did order initiation of penalty on both counts, in the ultimate order of penalty that he passed, he clearly held that levy of penalty is sustained in view of the fact that the assessee had concealed the particulars of income. Thus insofar as final order of penalty was concerned, the Assessing Officer was clear and penaltywas imposed for concealing particulars of income. In light of this, we may peruse the decision of this Court in case of Manu Engineering Works (supra). In the said decision, the Division Bench came to the conclusion that language of "and/or" may be proper in issuing a notice for penalty, but it was incumbent upon the Assessing Authority to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by them. If no such clear cut finding is reached by the authority, penalty cannot be levied. It was a case in which in final conclusion the authority had recorded that "I am of the opinion that it will have to be said that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income." It was in this respect the Bench observed that "Now the language of "and/or" may be proper in issuing a notice as to penalty order or framing of charge in a criminal case or a quasi- criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee.No such clear cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by the IAC was liable to be struck down."
The principles laid down by the Hon’ble Jurisdictional High Court in the above case are squarely applicable to the facts of the case on hand. The AO has not mentioned the specific charge in its penalty order whether it was levied for concealment of income or for furnishing inaccurate particulars of income. Therefore, in our considered view, the penalty levied by the AO and confirmed by the learned CIT (A) is not sustainable.
As we have deleted the penalty imposed by the AO & confirmed by the ld. CIT- A on the technical ground, i.e. no specific charge has been invoked as discussed above. Therefore, we are inclined to refrain ourselves from adjudicating the grounds of appeal of assessee raised on merits.
In the result the appeal filed by the assessee is partly allowed.
Coming to the ITA No. 254/AHD/2014 for the AY 1999-00 where the assessee has raised the following grounds of appeal:
“1. That, the learned CIT(A) has wrong confirmed the penalty u/s. 271(1)(c) of the I.T. Act of Rs.17,07,205/-.”
ITA Nos. 215/Rjt/15, 254 & 255/Rjt/14[M/s. Gupta Global Exim Pvt. Ltd. vs. ACIT] A.Ys. 2001-02, 1999-2000 & 2005-06 - 5 -
At the outset we note that we have decided the identical issue in the own case of the assessee in ITA No. 214/RJT/2015 in its favour vide paragraph number 9 of this order. For the detailed discussion, please refer the relevant paragraph. Respectfully following the same, we set aside the finding of the learned CIT (A) and direct the AO to delete the penalty imposed by him. Hence the ground of appeal of the assessee is partly allowed.
In the combined result, both the appeals of the assessee are partly allowed.
Coming to the ITA No. 255/AHD/2014 for the AY 2005-06 where the assessee has raised the following grounds of appeal:
“1. That, the learned CIT(A) has wrong confirmed the penalty u/s. 271(1)(c) of the I.T. Act of Rs.40,90,779/-.”
The only issue raised by the assessee is that the learned CIT (A) erred in imposing the penalty of Rs. 40,90,779.00 under the provisions of section 271(1)(c) of the Act.
The assessee in the year under consideration has declared the loss of � 1,51,39,300 in the return filed by it. However, the AO made the disallowances of interest expenses amounting to � 1,80,000 and determined the gross profit at the rate of 3% in the assessment framed under section 143(3) of the Act. However, the ITAT restricted the addition of the GP to the extent of 2% of the turnover amounting to � 1,11,79,287.00 and deleted the addition made by the AO on account of interest expenses vide order dated 6 January 2012 in ITA No. 1127/RJT/2010. The AO subsequently issued a notice under section 271(1)(c)/274 of the Act proposing the penalty on the amount of the addition confirmed by the ITAT. The assessee in response to such notice replied that the addition has been made on estimated basis, therefore there cannot be any penalty. However, the AO disregarded the contention of the assessee and
ITA Nos. 215/Rjt/15, 254 & 255/Rjt/14[M/s. Gupta Global Exim Pvt. Ltd. vs. ACIT] A.Ys. 2001-02, 1999-2000 & 2005-06 - 6 -
levied the penalty of Rs. 40,90,779.00 being 100% of the amount of tax sought to be evaded.
Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned AR before us contended that there cannot be any penalty for the concealment of income on the addition made on estimated basis.
On the other hand the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the addition was made on estimated basis. Therefore in our considered view there cannot be any penalty qua to the addition made on estimated basis. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in the case of ITO Vs. Bombay wala readymade stores reported in 55 taxmann.com 258 wherein it was held as under:
“6. The penalties were upheld as it was only estimated value on which estimates of income tax was made and the books of accounts were rejected. There was no scope to levy the penalty under Section 271(1)(c), the appellant had been assessed by the Income Tax. The Tribunal has very rightly considered that both the additions are on a estimated basis. Therefore, just because estimates are made, penalty cannot be levied under Section 271(c).”
Respectfully following the principles laid down by the Hon’ble Gujarat High Court in the case above, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
ITA Nos. 215/Rjt/15, 254 & 255/Rjt/14[M/s. Gupta Global Exim Pvt. Ltd. vs. ACIT] A.Ys. 2001-02, 1999-2000 & 2005-06 - 7 -
Before we part with the issue/appeal as discussed above, it is pertinent to note that the clause (c) of rule 34 of the Appellate Tribunal Rules 1963 requires the bench to make endeavour to pronounce the order within 60 days from the conclusion of the hearing. However the period of 60 days can be extended under exceptional circumstances but the same should not ordinarily be further extended beyond another 30 days. In simple words the total time available to the Bench is of 90 days upon the conclusion of the hearing.
However, during the prevailing circumstances where the entire world is facing the unprecedented challenge of Covid 2019 outbreak, resulting the lockdown in the country, the orders though substantially prepared but could not be pronounced for the unavoidable reasons within the maximum period of 90 days. In such circumstances we find that the Hon’ble Mumbai Tribunal in the case of JSW Limited Vs Deputy Commissioner of Income Tax in ITA No. 6103/MUM/2018 vide order dated 14-5-2020 extended the time for pronouncing the order within 90 days of time by observing as under:
Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time- bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand
ITA Nos. 215/Rjt/15, 254 & 255/Rjt/14[M/s. Gupta Global Exim Pvt. Ltd. vs. ACIT] A.Ys. 2001-02, 1999-2000 & 2005-06 - 8 -
that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure…”. The term ‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be neither anticipated nor controlled’ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary” period.
In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon’ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon’ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed “while calculating the time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”. The extraordinary steps taken suo motu by Hon’ble jurisdictional High Court and Hon’ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words “ordinarily”, in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case.
To sum up, the appeal of the assessee is allowed, and appeal of the Assessing Officer is dismissed. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board.
Considering the above, we express to pronounce the order beyond the period of 90 days. Accordingly, we proceed to pronounce the order as on date.
ITA Nos. 215/Rjt/15, 254 & 255/Rjt/14[M/s. Gupta Global Exim Pvt. Ltd. vs. ACIT] A.Ys. 2001-02, 1999-2000 & 2005-06 - 9 -
In the combined result, appeal of the assessee in ITA No.214/Rjt/2015 & 254/Rjt/14 are partly allowed whereas ITA No.255/Rjt/2014 is allowed.
This Order pronounced in Open Court 01/06/2020
Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 01/06/2020 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file.
By ORDER
Deputy/Asstt.Registrar ITAT, Rajkot