Loading judgment…
No AI summary yet for this case.
Before: Shri V. Durga Rao & Shri G. Manjunatha
आयकर अपीलीय अिधकरण, ’सी’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी वी दुगा� राव, �ाियक सद� एवं �ी जी. मंजुनाथा, लेखा सद� के सम� Before Shri V. Durga Rao, Judicial Member & Shri G. Manjunatha, Accountant Member आयकर अपील सं./I.T.A. Nos. 2691 & 2692/Chny/2018 िनधा�रण वष�/Assessment Years:2001-02 & 2002-03 Shri D. Srinivas Vyas, Vs. The Income Tax Officer, No. 1, D Block, Eashwaran Koil Non Corporate Ward 12(5), Street, West Mambalam, Chennai. Chennai 600 033. [PAN:ABVPV4760G] (अपीलाथ�/Appellant) (��थ�/Respondent) आयकर अपील सं./I.T.A. Nos. 2693, 2694, 2695, 2696, 2697 & 2698/Chny/2018 िनधा�रण वष�/Assessment Years:1998-99, 99-2000, 2000-01, 2001-02, 2002-03 & 2003-04 Gayathri Devi Vyas, D. Srinivas Vyas, Vs. The Income Tax Officer, Manohar Vyas, Vijay Shri, Legal Heirs Non Corporate Ward 12(5), of Late Shri Durga Das Vyas, No. 1, D Chennai. Block, Eashwaran Koil Street, West Mambalam, Chennai 600 033. [PAN:ADAPV2591C] (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Shri N.V. Balaji, Advocate & Ms. N.V. Lakshmi, Advocate ��थ� की ओर से/Respondent by : Shri P. Sajit Kumar, JCIT सुनवाई की तारीख/ Date of hearing : 23.11.2022 घोषणा की तारीख /Date of Pronouncement : 30.11.2022 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: These appeals filed by the two different assessees are directed against the respective orders of the ld. Commissioner of Income Tax
2 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
(Appeals) 13, Chennai, all dated 17.07.2018 in confirming the penalty levied by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 [“Act” in short] relevant to the assessment years 2001-02 & 2002-03 in the case of Shri D. Srinivas Vyas and the assessment years 1998-99, 99-2000, 2000-01, 2001-02, 2002-03 & 2003-04 in the case of Gayathri Devi Vyas, D. Srinivas Vyas, Manohar Vyas, Vijay Shri, Legal Heirs of Late Shri Durga Das Vyas. Since common issues were raised for consideration in all the appeals, heard together and are being disposed of by this common order for the sake of brevity. The common grounds raised in the appeals of the assessee are as under: “1. The Order of the assessing officer and CIT(A) is contrary to law, facts and circumstances of the case and principles of natural justice and equity. 2. The assessing officer and CIT(A) failed to appreciate that there was neither concealment of particulars of income or furnishing of inaccurate particulars of income and therefore no penalty under section 271(1)(c) can be levied. 3. The CIT(A) failed to appreciate that the assessing officer did not record any satisfaction that the assessee had concealed particulars of income or has furnished inaccurate particulars of income. Penalty is therefore to be deleted. 4. The assessing officer levied penalty based on a notice that did not specify whether the proceedings were initiated on furnishing inaccurate particulars of income or concealment of particulars of income.
3 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
The CIT(A) failed to appreciate that levy of penalty on a notice that did not specify the charge of penalty renders the penalty proceedings void. 6. The CIT(A) erred in upholding that the penalty since the penalty order specifies that penalty is levied for furnishing inaccurate particulars of income and that it can be concluded from the assessment order that the assessing officer has initiated penalty for furnishing inaccurate particulars, the penalty levied is valid. 7. The CIT(A) failed to appreciate that the assessee must be informed of the charge for which penalty is levied, specifically before the levy of penalty. The order of the assessing officer is without opportunity and therefore bad in law. 8. The CIT(A) erred in upholding order of penalty, when the assessment itself was done on protective basis. 9. The assessing officer and CIT(A) failed to appreciate that the appellant had offered the income accrued in the return of income itself and hence there is no concealment of particulars of income or furnishing inaccurate particulars of income. 10. The appellant craves to adduce such additional grounds as may required at the time of hearing or before the hearing of the appeal.” 2. For the sake of convenience, the facts from the appeal in I.T.A. No. 2691/Chny/2018 have been taken into consideration.
2.1 Facts are, in brief, that the assessee, Shri D. Srinivas Vyas is the Proprietor of two firms, viz. 1) M/s. Pushpak Sales Corporation which is engaged in the commission agency business and 2) M/s. Quick Cargo Movers which is engaged in the business of transport contract. For the assessment year 2001-02, he has filed his return of income on
4 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
31.12.2001 before the ACIT, Circle- 44, Kolkata and admitted total income of ₹.68,140/-. In the case of proprietorship firm of M/s. Pushpak Sales Corporation, the assessee was in receipt of commission income from M/s. Siemens Limited, Mumbai and other two entities viz., M/s. Balaha Chemicals and M/s. Gem Enterprises, Chennai, aggregating to the tune of ₹.2, 73,69,761/-. A survey under section 133A of the Act was carried out in the business premises of the assessee and his father, Shri Durga Das Vyas (He is the Proprietor of M/s. Narottam Agencies which is also engaged in the commission agency business) at Chennai on 29.12.2003. The survey report highlighted that the assessee Shri D. Srinivas Vyas has received a huge sum of ₹. 2,73,69,761/- as commission from M/s. Siemens Limited and two other entities viz. M/s. Balaha Chemicals and M/s. Gem Enterprises Chennai. Further, as a result of survey, it was found that though the assessee was in receipt of huge commission income from the parties as mentioned above and claimed bogus payment in respect of sub-commission to various parties, he has not rendered services to these three entities. Based on the findings of the survey, there was a reason to believe that the income chargeable to tax has escaped assessment and hence, the assessment for the assessment year 2001-02 was reopened under section 147 of the Act and notice under section 148 of the Act was issued and the
5 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
Assessing Officer proceeded with the re-assessment proceedings. During the course of the assessment proceedings, the assessee argued that M/s. Siemens Limited have already admitted the commission payments in their hands before the Settlement Commission and paid full tax on the same and hence, tax liability may not be raised in respect of the commission receipts in the hands of the assessee. But, the Assessing Officer has noticed that M/s. Siemens Limited did not deny the payment made to the assessee and the Settlement Commission also did not give a finding that the payments received by the assessee from M/s. Siemens Limited were returned back to them by the assessee, but it has only withdrawn the claim of expenditure as it was not able to substantiate that payment was made towards legitimate business purposes. In view of the above facts, the assessee was given an opportunity to file an affidavit to the effect that whatever commission he received from the three entities including M/s. Siemens Limited was ultimately given back to them. But, the assessee has neither filed an affidavit nor a letter to that effect. Accordingly, the Assessing Officer has completed the assessment under section 143(3) r.w.s. 147 of the Act on 30.12.2008 by determining the total income at ₹.3,23,72,421/- as against the returned income of ₹.68,140/- by adding commission payment of ₹.2,73,69,761/- from the above mentioned three entities and also by disallowing the expenditure of
6 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
₹.49,34,520/-. Penalty proceedings under section 271(1)© of the Act was also initiated in the assessment completed on 30.12.2008. The order was appealed before the CIT(A) and the appeal was partly allowed. The Department preferred an appeal against the order passed by the ld. CIT(A) dated 31.03.2009. The ITAT disposed of the appeals vide its order in I.T.A. Nos.1140 & 1141/Mds/2009 and ITA Nos.1311-1316/Mds/2009 dated 14.11.2011. The Tribunal has allowed the appeal filed by the Revenue by reversing the order passed by the ld. CIT(A). The assessee carried the matter in appeal before the Hon’ble Madras High Court and the Hon’ble High Court dismissed the appeal filed by the assessee in T.C.A. Nos. 167 to 174 of 2012 vide order dated 08.03.2016. Since the assessment order dated 30.12.2008 was restored by the ITAT, Chennai, the penalty proceedings got revived. The Assessing Officer considering the time limit available as per the provisions of section 275(1)(a) of the Act, the assessee was given another opportunity of hearing under section 274 r.w.s. 271(1)(c ) of the Act with a request to furnish his explanation. The assessee requested to keep in abeyance till the High Court’s decision is received. However, by considering entire facts of the case, the Assessing Officer levied penalty under section 271(1)(c) of the Act on 29.06.2012, levying a minimum penalty of ₹.1,13,78,280/- for the assessment year 2001-02.
7 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
2.2 Aggrieved by the penalty order dated 29.06.2012, the assessee has filed an appeal before the CIT(A) and vide his order in ITA.Nos.1017 & 1022/2013-14 dated 17.02.2014, the CIT(A) dismissed the appeal of the assessee and confirmed the levy of penalty.
2.3 Aggrieved by the CIT(A)'s Order dated 17.02.2014, the assessee has filed an appeal before the ITAT, Chennai. While disposing the assessee's appeal vide its order in ITA.Nos.867-872/Mds/2014 and ITA Nos.873 & 874/Mds/2014 dated 23.03.2017, the ITAT has set aside the orders of the lower authorities and remitted back the entire issue to the file of the Assessing Officer with a direction to consider and decide the issue in accordance with law.
2.4 Subsequent to the order passed by the ITAT dated 23.03.2017, the Assessing Officer passed the penalty order under section 271(1)(c) of the Act dated 30.10.2017 by levying penalty under section 271(1)(c) of the Act. On appeal, the ld. CIT(A) confirmed the penalty order of the Assessing Officer.
The issue under consideration before the Tribunal arises out of the directions given by the Tribunal vide order dated 23.03.2017 and in pursuance to the order passed by the Assessing Officer as well as the ld.
8 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
CIT(A) are also challenged before us. For the sake of convenience, the order passed by the Tribunal in I.T.A. Nos. 867, 868, 869, 870, 871 & 872/Chny/2017 dated 23.03.2017 is extracted as under: “11. Moreover, the assessees have also raised an issue with regard to failure of the Assessing Officer to specify in the show cause notice whether he initiated penalty proceeding for concealing the particulars of income or for furnishing inaccurate particulars of such income. This Tribunal is of the considered opinion that the assessees shall be given an opportunity to explain why penalty should not be levied before passing the order. Therefore, the Assessing Officer is incumbent upon to specify the reasons for initiating penalty proceeding. In other words, the Assessing Officer has to specify whether the penalty proceeding was initiated for furnishing inaccurate particulars of income or for concealing any part of such income. 12. Since the issue of limitation is remitted back to the file of the Assessing Officer, this Tribunal is of the considered opinion that this issue also needs to be considered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside for all the assessment years and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter afresh and bring on record the actual date on which the orders of the CIT(Appeals) and the orders of the Tribunal in the case of both the assessees, were served on the Commissioner or Principal Commissioner as the case may be. The Assessing Officer shall also bring on record the reasons for initiating penalty proceeding either for concealment of income or for providing inaccurate particulars of such income and also examine whether penalty can be levied when the assessments were made on protective basis, and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessees. 13. In the result, all the appeals of the assessees are allowed for statistical purposes. 4. From the above, so far as initiation of penalty proceedings is concerned, the ITAT has directed the Assessing Officer that “the Assessing Officer shall also bring in record the reasons for initiating penalty proceedings either for concealment of income or for providing inaccurate particulars of such income and also examine whether penalty
9 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
can be levied when the assessments were made on protective basis”.
By considering the above directions of the ITAT, the Assessing Officer has initiated penalty proceedings in view of the assessment order dated 30.12.2008 and penalty notice under section 274 r.w.s. 271(1)(c) of the Act dated 30.12.2008 has been issued and duly served on the assessee. The Assessing Officer has noted that the facts as discussed in the assessment order reveals that it is for the reason of furnishing inaccurate particulars of income, the penalty proceedings were initiated under section 271(1)(c) of the Act. In the penalty order passed on 29.06.2012, the reason was clearly brought out. Hence, it was considered that the penalty proceedings under section 271(1)(c) of the Act was initiated for furnishing of inaccurate particulars of such income. The Assessing Officer has further noticed that as directed by the ITAT vide its order dated 23.03.2017, the basic facts with regard to the receipt of appellate orders and the reasons for initiating penalty proceedings were brought on record and intimated to the assessee vide letter dated 04.10.2017 and the case was posted for hearing on 13.10.2017. The assessee’s AR Shri K.S. Raghunathan, CA appeared and filed a letter dated 13.10.2017 signed by the assessee Shri D. Srinivas Vyas, wherein, he has sought for further time to file an elaborate reply. Considering the
10 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
request of the assessee, the case was adjourned to 20.10.2017. After considering the submissions, the Assessing Officer has levied penalty under section 271(1)(c) of the Act of ₹.1,13,78,280/- vide order dated 30.10.2017 for the assessment year 2001-02, which was confirmed by the ld. CIT(A).
Before us, the ld. Counsel for the assessee has submitted that the Assessing Officer has not examined the issue whether the penalty levied for filing of inaccurate particulars or concealment of income. It was further submitted that the Assessing Officer has simply levied the penalty under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income, which is not in accordance with the directions given by the ITAT. He has referred to the penalty notice dated 06.03.2006, wherein, it was mentioned that “you have concealed the particulars of your income or ……………… furnished inaccurate particulars of such income” and has not been specified by the Assessing Officer. Therefore, the penalty notice dated 06.03.2006 issued to the assessee is not a valid notice and consequently, the penalty order passed by the Assessing Officer dated 30.10.2017 is also not valid and should be quashed.
On the other hand, the ld. DR has submitted that the Assessing Officer, by following the directions of the ITAT, examined the entire facts
11 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
of the case and completed the penalty order dated 30.10.2017 and pleaded for confirming the order passed by the Assessing Officer.
We have heard the rival contentions, perused the materials available on record and gone through the orders of the authorities below. In this case, in pursuance to the directions of the ITAT, in first round of litigation, the Tribunal has remitted the matter back to the file of the Assessing Officer for fresh consideration. Accordingly, as directed by the ITAT vide its order dated 23.03.2017, the basic facts with regard to the receipts of appellate orders and the reasons for initiating penalty proceedings on account of furnishing of inaccurate particulars were intimated and called for the explanation from the assessee by issuing notice vide letter dated 04.10.2017 and the case was posted for hearing on 13.10.2017. Again, as per the request of the AR of the assessee, the case was posted for hearing on 17.10.2017. Ultimately, a letter dated 19.10.2017 consisting of 18 pages has been filed by the AR of the assessee before the Assessing Officer and opposed levy of penalty. Under these facts and circumstances of the case, it is necessary to examine the directions given by the ITAT to the Assessing Officer whether the Assessing Officer has followed the directions of the ITAT or not.
12 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
So far as notice issued by the Assessing Officer dated 06.03.2006 placed in the paper book page 173-174, the Tribunal has directed the Assessing Officer that he shall bring on record the reasons for initiating penalty proceedings, i.e., either for furnishing of inaccurate particulars of income or concealment of income. In this regard the Assessing Officer has recorded the reasons for initiating penalty proceedings that as per the facts discussed in the assessment order, which reveals that the penalty proceedings has been initiated for the reason of furnishing inaccurate particulars of income and the assessee has not submitted any explanation in respect of initiation of penalty proceedings towards furnishing of inaccurate particulars of income and therefore, the Assessing Officer has concluded the penalty order and levied penalty under section 271(1)(c) of the Act dated 30.10.2017. We find that as per the directions of the ITAT vide its order dated 23.03.2017, the Assessing Officer, after considering the assessment order and appellate order, came to a conclusion that the penalty proceedings has been initiated for furnishing of inaccurate particulars of income. As per the directions of the ITAT, the Assessing Officer has to examine why the penalty has been initiated and the Assessing Officer, after examining the facts of the case, came to a conclusion that penalty initiated for filing of inaccurate particulars of income and accordingly levied penalty under section
13 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
271(1)(c) of the Act. Now, the assessee has raised the issue of whether penalty is levied for “either concealment of income or furnishing of inaccurate particulars of income is not the issue before us to consider. The penalty notice dated 06.03.2006 issued has already been merged with the order passed by the ITAT vide its order dated 23.03.2017. We find that the Assessing Officer has rightly followed the directions of the ITAT and penalty has been levied on this count.
One more directions given by the ITAT to the Assessing Officer that whether the penalty can be levied when the assessment was made on protective basis. The Assessing Officer has noted that there is no mention in the assessment order for the assessment year 2001-02 that the assessee was made on protective basis. Moreover, even after taking into consideration of the order of the Settlement Commission dated 07.01.2008 in the case of M/s. Siemens Ltd. The ITAT and the Hon’ble Madras High Court have confirmed the assessment in the hands of the assessee and it is worthwhile to mention here that the contentions of the assessee before the Hon’ble High Court and the decision of the Hon’ble Madras High Court.
The substantial question of law raised before the Hon’ble Madras High Court are as follows:
14 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
The substantial questions of law framed in T.C.A. Nos. 167 and 168 of 2012 are as follows:- “1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the alleged commission receipts from M/s. Siemens Ltd. were assessable in the hands of the appellant on a substantive basis even though on the basis of an application filed by M/s. Siemens Ltd. before the Settlement Commission admitting the unsubstantiated commission payments as its own income and the Settlement Commission had accepted such disclosure by M/s. Siemens Ltd. and the income of the said company for the assessment years 2001-02 and 2002-03 had been recomputed on that basis? 2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the alleged commission receipts from M/s. Balaha Chemicals and M/s. Gem Enterprises were assessable in the hands of the appellant even though the said amounts had been assessed in their respective hands and the appeals filed by those concerns had been dismissed?” 4. The substantial questions of law framed in T.C.A. Nos. 169 to 174 of 2012 are as follows:- “1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the alleged commission receipts from M/s. Siemens Ltd. were assessable in the hands of the appellant on a substantive basis even though on the basis of an application filed by M/s. Siemens Ltd. before the Settlement Commission admitting the unsubstantiated commission payments as its own income and the Settlement Commission had accepted such disclosure by M/s. Siemens Ltd. and the income of the said company for the assessment years 1998-99 to 2003-04 had been recomputed on that basis? 2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the issue involved was debatable the Assessing was right in rejecting the appellant's petition under Section 154 for the assessment years 1998- 99 to 2003-04 even though the Assessing Officer had not passed any speaking order setting forth the reasons for the rejection? 12. The observations and findings of the Hon’ble Madras High Court are reproduced as under:
15 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
The assessees in this batch of cases, claimed to be involved in Commission Agency business. The father Mr.Durga Das Vyas, who is the appellant in T.C.A.Nos. 169 to 174 of 2012, filed return of income on 19.10.2001, admitting total income of Rs.1,78,730/-. It was processed under Section 143(1) of the Income Tax Act, 1961 and a notice was issued under Section 143(2) of the Act. 7. In the course of assessment, the father accepted that he had received commission to the tune of Rs.1,18,56,346/- from M/s. Seimens Limited, Mumbai, a sum of Rs.30,00,000/- from M/s. Shree Balaha Chemical Agencies, Chennai, Rs.7,50,000/- from M/s. Gem Enterprises, Chennai and Rs.1,34,075/- from M/s. Cable Corporation of India, Mumbai. The total commission so received was Rs.1,57,40,421/-. 8. The father-assessee also claimed that he had paid commissions to six different entities to the total tune of Rs.1,40,95,000/-. When notices were issued to all those six persons, only one responded. 9. When the father-assessee was examined under Section 131 of the Act, he admitted that he had no technical qualification or expertise and that he did not have any infrastructure or agreement to render any services to M/s. Seimens Limited. 10. Therefore, the Assessing Officer passed an order dated 31.3.2004, disallowing the commission of Rs.1,40,95,000/- allegedly paid by the father-assessee to third parties and completed the assessment. 11. Similarly, independent Assessment Orders were passed for the Assessment Years 1998-99, 1999-2000, 2000-01, 2002-03 and 2003-04, on 6.3.2006, disallowing the commission claimed by the father-assessee to have been paid to third parties. 12. Without challenging the Orders of Assessment by way of appeal, the father-assessee filed independent applications under Section 154 for rectification. It is pertinent to note that these applications for rectification were filed after more than two years and 8 months. The only ground on which rectification was sought was that the company from which the father-assessee received commission, went before the Settlement Commission, accepted the payments made to the father- assessee as un-substantiated payments, got them treated as part of their income, paid tax and also got immunity from further action.
16 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
The petitions filed under Section 154 of the Act were dismissed by a non-speaking one line order dated 30.3.2009 by the Assessing Officer. But by a speaking order, the Commissioner of Income Tax (Appeals) allowed the appeals on 29.05.2009, holding that there was an error apparent which could have been corrected by the Assessing Officer. 14. The Revenue filed Second Appeals before the Income Tax Appellate Tribunal. These appeals were allowed by the Tribunal, by a common order dated 14.11.2011, holding that when the issue raised in Application under Section 154 is a debatable issue, it would not fall under the category of error apparent. Therefore, aggrieved by the order of the Tribunal, the father-assessee is before us. 15. As we have pointed out earlier, this Court had framed two substantial questions of law for consideration in the appeals of the father namely T.C.A. Nos. 169 to 174 of 2012. The first substantial question of law revolves around the effect of the order of the Settlement Commission in favour of M/s. Siemens Limited. 16. This issue was answered by the Tribunal in paragraph 7 of its order. The Tribunal pointed out that the specific case of Siemens Limited before the Settlement Commission was that in some cases, the monies paid to individuals like the assessees herein, were received back. Therefore, the Tribunal held that there were two different categories of cases and hence the Settlement Commission's Order cannot be taken advantage by the father-assessee. 17. Assailing the order of the Tribunal, it is contended by Mr. K. Subramaniam, learned counsel for the assessee that when the Assessing Officer as well as Commissioner of Income Tax (Appals) did not make any categorisation, the Tribunal could not have made categorisation. Additionally it is contended that even in their grounds of appeal, the Department agreed to the grant of relief to the extent of commission received, but the Tribunal overreached even the Department's case. 18. We have carefully considered both the above submissions. 19. Irrespective of the nitty-gritty, the admitted fact in the case of the father-assessee is that he received payments from M/s Siemens Limited. These payments running to more than Rs.1 Crore was made by M/s. Siemens in the form of cheques. According to Siemens Limited, before
17 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
the Settlement Commission, they were unable to substantiate the nature of the services rendered by the father-assessee, so as to entitle him to receive such a huge amount. Even according to the father-assessee, he did not have any technical expertise, he did not have any agreement with M/s. Siemens Limited and he could not indicate the nature of the services rendered by him so as to receive such a huge commission. Therefore, it is clear that the father-assessee received a payment which was not due to him. We do not know whether the father-assessee acted as a conduit for some other person. 20. The payments received by the father-assessee in the form of cheques, were also deposited by him into his bank account and immediate withdrawals of cash was observed from the accounts. Therefore, two things would follow. They are (1) either these cash withdrawals were for payment to the persons to whom they were actually intended or (2) they were paid back to M/s. Siemens Limited. These two things that follow as a corollary, will not amount to categorisation of payment. Therefore, we are unable to accept the contention that the Tribunal made a categorisation not found by two lower authorities. 21. It is true that by an order passed on 7.1.2008, the Settlement Commission, Mumbai not only added these amounts as the income of M/s. Siemens Limited, but also taxed them and granted them immunity from other proceedings. But the same would not tantamount to a protection granted to other persons who are subjected to protective orders of assessment. 22. In a Circular issued by the Central Board of Direct Taxes, bearing No.71, dated 20.12.1971, the Board has indicated that once the same income is assessed as a protective measure in the hands of more than one assessee, the protective assessment needs to be cancelled after the relevant assessments have become final and conclusive. The Circular also indicates that the only method of doing this is by invoking Section 154, irrespective of the time prescription contained in Sub-Section (7) of Section 154. 23. We do not think that the above Circular can be made use of by persons whose transactions prima facie do not appear to be genuine. There may be a genuine transaction where one assessee is unable to substantiate a payment as an expenditure and hence suffers an assessment. His counter part who was the recipient of the money, if he
18 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
has genuinely received the payment for certain services rendered or goods supplied, cannot be made to suffer once more. 24. But such a benefit cannot be extended to transactions which are made in the nature of accommodation entries, for collateral purposes. In the case of the father-assessee, cash withdrawals had been made immediately after receipt of cheque payments from M/s. Siemens Limited. The father-assessee attempted to show these withdrawals as payments to six different parties. That claim was rejected by the Assessing Officer and that rejection attained finality, as the father- assessee failed to challenge the Assessment Orders. 25. In other words, the cases on hand will not be covered by the Circular for one more reason namely that the assessee do not stop with the mere receipt of money. He withdrew it and claimed to have paid to different third parties, but those payments were disallowed. Therefore, if his submission that he had paid money to third parties is true, the money received by him could be only his income. Therefore, the appellant cannot contend that the order of the Settlement Commission clinches the entire issue. 26. In view of the above, the first substantial question of law in T.C.A.Nos. 169 to 174 of 2012 has to be answered against the appellant/father-assessee. 27. The second substantial question of law relates to the maintainability of the application under Section 154. The Assessing Officer rejected the application under Section 154 by a one line order. It was set aside by the Commissioner of Income Tax (Appeals). The Tribunal held that the issue raised by the assessee will fall under the category of a "debatable issue" and not "error apparent". We think that is a correct view taken by the Tribunal. 28. While the treatment of the payment made by M/s. Siemens Limited at the hands of the appellant herein, after it was treated differently at the hands of M/s. Siemens Limited can, given some allowance, be treated as an error apparent, the moment it is shown to have been rejected in the order of Assessment, it would become at the most a mistake correctable on an appeal but not an error apparent. Hence, the second substantial question of law is also to be answered against the appellant/assessee.
19 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
Coming to the two appeals filed by the son-assessee namely T.C.A. Nos. 167 and 168 of 2012, it is seen that the first substantial question of law is just the same. Therefore, for the reasons that we have indicated in the case of the father, the first substantial question of law in T.C.A. Nos. 167 and 168 of 2012 is also to be answered against the appellant/assessee. 30. The second substantial question of law arising in T.C.A. Nos. 167 and 168 of 2012, is on a weaker wicket them even the first substantial question of law. At least in so far as the first substantial question of law is concerned, the appellant could rely upon the order of the Settlement Commission. But in the case of the payments allegedly received from two different entities there is not even an order of the Settlement Commission. Therefore, the second substantial question of law is also to be answered against the appellant/assessee.” 13. In view of the above, it is considered that the assessment made in the case of the assessee for the assessment year 2001-02 is on substantive basis and not on protective basis.
The ld. CIT(A), by considering the judgement of the Hon’ble Madras High Court in para 16 to 25, held that the assessment made in the case of the assessee for the assessment year 2001-02 is on substantive basis and clearly establishes that the assessee has furnished inaccurate particulars of income. Therefore, the Assessing Officer has rightly initiated penalty proceedings under section 271(1)(c) of the Act for the assessee having furnished inaccurate particulars of income and accordingly, the ld. CIT(A) has upheld the penalty levied under section 271(1)(c) of the Act of ₹.1,13,78,280/- and rightly dismissed the appeal of the assessee.
20 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
The another contention of the ld. Counsel for the assessee is that whether the assessment was completed on protective basis or substantive basis, the findings has to be given by the ITAT being final facts finding body and not the Hon’ble Madras High Court. The ld. Counsel for the assessee has further submitted that against the order passed by the Hon’ble Madras High Court dated 08.03.2016 in TCA Nos. 167 & 168/2012 and TCA Nos. 169 to 174/2012 and MP Nos. 1 of 2015 (8 cases), the assessee carried the matter in appeal before the Hon’ble Supreme Court and the same was withdrawn and review petition has been filed before the Hon’ble Madras High Court. We have considered the arguments of the ld. Counsel for the assessee and find that as on the day, the findings given by the Hon’ble Madras High Court in quantum appeal i.e., the addition made by the Assessing Officer is substantive basis and that finding was not disturbed by neither the Hon’ble Supreme Court nor the Hon’ble Madras High Court.
Therefore, the Assessing Officer as well as the ld. CIT(A) by following the findings given by the Hon’ble Madras High Court, came to conclusion that the penalty can be levied on account of addition made on substantive basis. We find no infirmity in the order passed by the authorities below.
21 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
The next issue for consideration is with regard to the findings of the ITAT in the first round of litigation that before the ITAT, the assessee has raised the issue that the penalty order passed by the Assessing Officer is time barred for the first time. Since the assessee has raised this issue for the first time before the ITAT, the ITAT directed the Assessing Officer to examine the same. The Assessing Officer has examined the same and held that the penalty is within the period of limitation and the ld. CIT(A) has confirmed the order of the Assessing Officer. Before us, the assessee has failed to raise the ground of limitation and he has raised additional ground by filing a petition for admission of the same. The additional ground raised by the assessee is reproduced as under: “The CIT(A) failed to appreciate that the order of the AO is barred by limitation in light of Proviso to section 275(1)(a) of the Act”. 18. The Assessing Officer has noted in detail and decided the issue of limitation for initiating penalty, which is reproduced as under: “11. As directed by the Hon'ble ITAT vide its order dated 23.03.2017, the basic facts with regard to receipt of appellate orders and the reasons for initiating penalty proceedings are brought on record and intimated to the assessee vide letter dated 04.10.2017 and the case was posted for hearing on 13.10.2017. On 13.10.2017. the assessee's authorized representative, Shri K.S. Raghunathan, C.A. appeared and filed a letter dated 13.10.2017 signed by the assessee, Shri D. Srinivas Vyas wherein he has sought for further time to file an elaborate reply. Considering the assessee's request, the case was adjourned to 20.10.2017. The assessee's authorized representative appeared on 20.10.2017 and filed a letter dated 19.10.2017 (18 pages) and also
22 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
enclosed a copy or the CIT(A)'s Order dated 16.03.2006 in the case of M/s. Balaha Chemicals for the assessment year 2001-02 and Board’s Circular No. I of 2007 dated 27.04.2007. The main contention of the assessee is as follows: i) The matter relating to bar of limitation for imposing penalty which the Hon'ble ITA T directed to examine is with reference to Sec.275(1)(a) of the Act and not with reference to the provisions of Sec.275(1A) of the Act. So, the Tribunal's direction on Bar of limitation requires re- examination with reference to Section 275(1)(a). The penalty proceedings were not completed as per the provision of Sec.275(1)(a) of the Act on receipt of order dated 31.03.2009 from the CIT(A). 12.1 The provisions of Section 275(1) of the Act contains sub-clause (a), proviso to sub-clause (a) and sub-clauses (b) and (c). As mentioned in para 11 above, the CIT(A)'s order dated 31.03.2009 and the ITAT’s Order dated 14.11.2011 was received in the office of the CIT on 14.05.2009 and 16.12.2011, respectively. As per the provisions of sub- clause (a) to sub-section (1) of Section 275 of the Act, the time limit available for the assessing officer to complete the penalty proceedings initiated u/s.271 ( (c) of the Act, taking into account the date of 16.12.2011 on which the ITAT’s order was received, was 30.06.2012 (i.e. within six months from the date of receipt of the order of the ITAT where the assessment is subject matter of an appeal before the ITAT) and hence, the order imposing penalty u/s.271(1)(c) passed on 29.06.2012 was well within the time limit. And as per the proviso to clause (a) to sub-section(1) of Section 275 of the Act, the time limit available for the assessing officer, taking into account the date of 14.05.2009, the time limit available for the assessing officer was 31.03.2011 (i.e. within one year from the end of the financial year in which the order of the CIT(A) is received in case the CIT(A)’s order is passed after 1st day of June, 2003). The assessee's contention is that since the CIT(A)’s order was passed after 1st day of June, 2003 and as per the proviso to Sec.275(1)(a) of the Act, the penalty order ought to have been passed on or before 31.03.2011 (i.e. within one year from the end of 31.03.2010). 12.2 The assessee is interpreting the proviso to clause (a) to sub- section (1) of Section 275 of the Act in isolation of the provisions of Sec. 275(1)(a) of the Act. In this regard, reliance is placed on the
23 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
decision of the Hon’ble High Court of Madras in the case of Royala Corporation Vs. UOI 288 ITR 452 Mad wherein it was held by the Court that the proviso cannot curtail the period of limitation prescribed in the main provisions and the proviso would apply only where no appeal is filed against the order of CIT(A). Similar view is taken by the Tribunal in the case of Trilochan Singh-v-ITO 114 TTJ 82(Asr). In this case, it was contended that order of penalty could not be passed beyond the period prescribed in the proviso. This contention was rejected by the Tribunal by holding that period of limitation as per the main provisions of section 275(1)(a) would apply. The facts of the cases are applicable in the case of the assessee, Shri D. Srinivas Vyas in the sense that the assessment order passed by the assessing officer for the assessment year 2001-02 on 30.12.2008 was not confirmed by the CIT(A) i.e. the addition made in the assessment order got deleted by the CIT(A) and appeal was filed against the CIT(A)'s Order. When the addition for which the penalty proceedings were initiated got deleted, there was no occasion for the assessing officer to levy penalty and it got revived when the ITAT restored the assessment order. Hence, an order passed on 29.06.2012, imposing the penalty u/s.271(1)(c) of the Act, was within the time allowed as per the provisions of Sec.275(1)(a) of the Act and it is valid.” 19. On appeal, the ld. CIT(A) has considered the submissions of the assessee on limitation and discussed in detail while confirming the penalty levied under section 271(1)(c) of the Act, which is extracted as under: BAR OF LIMITATION FOR IMPOSING PENALTIES 275 (1) No order imposing a penalty under this Chapter shall be passed- (a) 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 or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the
24 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
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 the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever is later ; (b) In a case, where the relevant assessment or other order is the subject-matter of revision under section 263 or section 264, after the expiry of six months from the end of the month in which such order of revision is passed; (c) In any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. For the purpose of deciding the issue of limitation, which was raised as additional ground for the first time before this Tribunal, this Tribunal needs to ascertain the exact date of the order of the CIT(Appeals) and order of this Tribunal served on the Commissioner or Principal Commissioner as the case may be. As rightly submitted by the Ld. Departmental Representative, these details are not available on record. Since the issue of limitation goes to very root of the matter, this Tribunal is of the considered opinion that the Assessing Officer has to reconsider
25 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
the matter after ascertaining the exact date on which the orders of this Tribunal and the orders of the CIT(Appeals) were served on the Commissioner or Principal Commissioner as the case may be. Moreover, the assesses have also raised an issue with regard to failure of the Assessing Officer to specify in the show cause notice [Page No.352 to 364 of the paperbook] whether he initiated penalty proceeding for concealing the particulars of income or for furnishing inaccurate particulars of such income. This Tribunal is. of the considered opinion that the assesses shall be given an opportunity to explain why penalty should not be levied before passing the order. Therefore, the Assessing Officer is incumbent upon to specify the reasons for initiating penalty proceeding. In other words, the Assessing Officer has to specify whether the penalty proceeding was initiated for furnishing inaccurate particulars of income or for concealing any part of such income. Since the issue of limitation is remitted back to the file of the Assessing Officer, this Tribunal is of the considered opinion that this issue also needs to be considered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside for all the assessment years and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the matter afresh and bring on record the actual date on which the orders of the CIT(Appeals) and the orders of the Tribunal in the case of both the assesses, were served on the Commissioner or Principal Commissioner as the case may be. The Assessing Officer shall also bring on record the reasons for initiating penalty proceeding either for concealment of income or for providing inaccurate particulars of such income Also examine whether penalty can be levied when the assessments were made on protective basis. Thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessees. The AO, after complying the direction of Hon'ble ITAT passed the penalty order which is the subject matter of this appeal and ground of appeal issuewise are dealt as under:
26 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
Grounds of appeal on bar of limitation for imposing penalties The appellant contended that the assessing officer after receipt of the order of the Hon'ble Tribunal in the quantum appeal proceeded to levy the penalty. The assessing officer vide his order dated 29.06.2012 levied penalty under section 271 (1) (c) of the Act. The petitioner submits prior to this order, the assessing officer did not levy any penalty or drop the proceedings in respect of the assessment year prior to the receipt of the order of the Hon'ble Tribunal in the quantum appeal. The penalty was levied for the first time after the receipt of the order dated 14.11.2011 of the Hon'ble Tribunal. The petitioner submitted that the order of the assessing officer is barred by limitation. Under these circumstances, the Petitioner craves the leave of the Hon'ble Tribunal to raise the following additional ground aforementioned appeal. “The order of the assessing officer levying penalty under section 271 (1) (c) is invalid, since the same is barred by limitation.” which the tribunal considered and passed the order which is reproduced below of that of page 6 to 10 of the Hon'ble ITAT Order dated 23.03.2017. Extract from Page 6 to 10 of the Hon'ble ITAT Order dated 23.03.2017 The assessees now claims that the order passed by the Assessing Officer levying penalty under Section 271(1)(c) of the Act is barred by limitation. This issue was not raised before both the authorities below. For the first time, the assesses are raising before this Tribunal. Since the question of limitation goes to the root of the matter, the assessees can raise this issue before this Tribunal. According to the Ld. Counsel for the assessees, the penalty proceeding was initiated in the course of assessment order. The CIT (Appeals) disposed of the appeal on 29.05.2009 and 31.03.2009 in the case of both the assessees The ITAT disposed of the appeals on 14.11.2011 and the penalty order was passed on 29.06.2012 in all the cases.
27 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
We have carefully gone through the provisions of Section 275( 1) of the Act which reads as under: BAR OF LIMITATION FOR IMPOSING PENALTIES 275 (1) No order imposing a penalty under this Chapter shall be passed- (d) 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 or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty 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 the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever is later; (e) In a case, where the relevant assessment or other order is the subject-matter of revision under section 263 or section 264, after the expiry of six months from the end of the month in which such order of revision is passed ;
28 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
(f) In any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later. For the purpose of deciding the issue of limitation, which was raised as additional ground for the first time before this Tribunal, this Tribunal needs· to ascertain the exact date of the order of the CIT(Appeals) and order of this Tribunal served on the Commissioner or Principal Commissioner as the case may be. As rightly submitted by the Ld. Departmental Representative, these details are not available on record. Since the issue of limitation goes to very root of the matter, this Tribunal is of the considered opinion that the Assessing Officer has to reconsider the matter after ascertaining the exact date on which the orders of this Tribunal and the orders of the CIT(Appeals) were served on the Commissioner or Principal Commissioner as the case may be. D D VYAS/ D SRINIVAS VYAS - DATES AT A GLANCE - Submission with reference to 275(1) (a) and 275(1A 1. Assessments Completed D D VYAS D S VYAS 1998-99 to 2003-2004 except 2001-2002 06.03.2006 NA B) AY 2001-2002 31.03.2004 NA C)AY 2001-2002 & 2002-2003 NA 30.12.2008 2) Penalty initiated in the respective assessment orders Order u/s 154 30.03.2009 NA CIT Appeal Order dated From ITA Nos. 08 to 13/09-10 29.05.2009 ITA Nos. 126 & 125/08-09 31.03.2009 Consequential order on Receipt of CIT Appeal Order 30.06.2009 16.06.2009 Initial Penalty Orders should have been passed by 31.03.2011 31.03.2011 ITAT Order dated 14.11.2011 14.11.2011 Penalty Order passed on 29.06.2012 29.06.2012
29 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
Commissioner appeal order dated 29.05.2009 received by Assessing Officer in the month of June 2009. As per Sec 275 (1) (a), penalty order should have been passed at the 1' stage within one year from the end of the FY 2009-2010 i.e 31.03.2011 whereas the penalty order is passed in all the cases only on 29.06.2012. Section· 275 (1) (a) is the main section for levying penalty and 275 (IA) is for modification of the penalty levied earlier. Penalty order not made as per the proviso to section 275 (1) (a) cannot be done a fresh at a later date beyond the time limit. Hence in this case the penalty levied vide order dated 29.06.2012 is abinitio null and void. Otherwise there is no need for the ITAT to set aside the penalty levied vide order dated 29.06.2012. Hon'ble ITAT directed to examine the dates for deciding the time barring aspect of the penalty order. As per the revenue records, if the penalty order was not passed as per the proviso of section 275 (1) (a), no penalty can be levied now by means of a fresh order. [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 the Commissioner (Appeals) passes the order on or after the 1s day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever is later. Assessing Officer erred in relying on wrong facts and legal position which has no applicability to this relevant case and situation. I have carefully considered the appellant's contention above. The AO has verified the records and stated that the CIT(A)'s Order dated 31.03.2009, partly allowing the assessee's appeal filed against the assessment order u/s.143(3) r.w.s. 147 of the Act dated 30.12.2008, was received in the O/o the CIT(Judicial),
30 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
Chennai, on 14.05.2009 and the Hon'ble ITAT's Order dated 14.11.2011, restoring the assessment order u/s.143(3) r.w.s. 147 of the Act dated 31.12.2008, was received in the O/o the CIT(Judicial), Chennai, on 16.12.2011. The provisions of Section 275(1) of the Act contains sub-clause (a), proviso to sub-clause (a) and sub-clauses (b) and (c). As mentioned in para 11 above, the CIT(A)'s order dated 31.03.2009 and the ITAT's Order dated 14.11.2011 was received in the office of the CIT on 14.05.2009 and 16.12.2011, respectively. As per the provisions of sub-clause (a) to sub- section (1) of Section 275 of the Act, the time limit available for the assessing officer to complete the penalty proceedings initiated u/s.271(1)(c) of the Act, taking into account the date of 16.12.2011 on which the ITAT's order was received, was 30.06.2012 (i.e. within six months from the date of receipt of the order of the ITAT where the assessment is subject matter of an appeal before the ITAT) and hence, the order imposing penalty u/s.27l(l)(c) passed on 29.06.2012 was well within the time limit. And as per the proviso to clause (a) to sub-section (1) of Section 275 of the Act, the time limit available for the assessing officer, taking into account the date of 14.05.2009, the time limit available for the assessing officer, was 31.03.2011 (i.e. within one year from the end of the financial year in which the order of the CIT(A) is received in case the CIT(A)'s order is passed after 1st day of June, 2003). The assessee's contention is that since the CIT(A)'s order was passed after 1st day of June, 2003 and as per the proviso to Sec.275(1)(a) of the Act, the penalty order ought to have been passed on or before 31.03.2011 (i.e. within one year from the end of 31.03.2010). The assessee is interpreting the proviso to clause (a) to sub- section (1) of Section 275 of the Act in isolation of the provisions of Sec. 275(1)(a) of the Act. In this regard, reliance is placed on the decision of the Hon'ble High Court of Madras in the case of Royala Corporation vs. UOI 288 ITR 452 Mad wherein it was held by the Court that the proviso cannot curtail the period of limitation prescribed in the main provisions and the proviso would apply only where no appeal is filed against the order of CIT(A). Similar view is taken by the Tribunal in the case of Trilochan Singh-v-ITO 114 TTJ 82(Asr). In this case, it was contended that order of penalty could not be passed beyond the
31 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
period prescribed in the proviso. This contention was rejected by the Tribunal by holding that period of limitation as per the main provisions of section 275(1)(a) would apply. The facts of the cases are applicable in the case of the assessee, Shri D. Srinivas Vyas in the sense that the assessment order passed by the assessing officer for the assessment year 2001-02 on 30.12.2008 was not confirmed by the CIT(A) i.e. the addition made in the assessment order got deleted by the CIT(A) and appeal was filed against the CIT(A)'s Order. When the addition for which the penalty proceedings were initiated got deleted, there was no occasion for the assessing officer to levy penalty and it got revived when the ITAT restored the assessment order. Hence, an order passed on 29.06.2012, imposing the penalty u/s.27l(1)(c) of the Act, was within the time allowed as per the provisions of Sec.275(1)(a) of the Act and it is valid. The ground of appeal on this issue is therefore dismissed. 20. Before us, the ld. Counsel for the assessee has submitted that as per the proviso to section 275(1)(a) of the Act, the penalty order ought to have been passed on or before 31.03.2011 [i.e., within one year from the end of 31.03.2010]. He has also submitted that once the ld. CIT(A) deleted the addition made by the Assessing Officer, the Assessing Officer ought to have been initiated penalty proceedings and ought to have been asked the ITAT to stay the proceedings. Therefore, it was submitted that the penalty order passed by the Assessing Officer in the case of D.D. Vyas dated 29.06.2012 and in the case of D.S. Vyas dated 29.06.2012 are time barred.
On the other hand, the ld. DR has submitted that as per section 275(1)(a) of the Act, the Assessing Officer has initiated penalty
32 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
proceeding within the time limit available as per the Act. Therefore, the penalty order is valid and relied on the orders of authorities below.
We have heard the rival contentions. In this case, the Assessing Officer has passed the assessment order under section 143(3) r.w.s. 147 of the Act dated 30.12.2008. On appeal, the ld. CIT(A) allowed the appeal of the assessee on 31.03.2009. On further appeal the ITAT, vide its order dated 14.11.2011 restored the assessment order passed under section 143(3) r.w.s. 147 of the Act dated 30.12.2008 and the same was received by the Office of the CIT (Judicial) on 16.12.2011. For the sake of convenience, section 275(1)(a) of the Act is extracted as under: 275 (1) No order imposing a penalty under this Chapter shall be passed- (a) 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 or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty 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 the Commissioner (Appeals) passes the order
33 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
on or after the 1st day of June, 2003 disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever is later ; From the above, it is very clear that the time limit available for the Assessing Officer to complete the penalty proceedings under section 271(1)(c) of the Act taking into account the date on which the ITAT’s order received was on 16.12.2011 and the penalty imposed by the Assessing Officer on 29.06.2012,( i.e., within six months from the date of receipt of the order of the ITAT, where the assessment is subject matter of an appeal before the ITAT). Hence, the order of imposing penalty under section 271(1)(c) of the Act dated 29.06.2012 was well within the time limit as per section 275(1)(a) of the Act.
The contention of the assessee is that as per the proviso to clause (a) to sub-section(1) of Section 275 of the Act, the time limit available for the assessing officer, taking into account the date of 14.05.2009, the time limit available for the assessing officer was 31.03.2011 (i.e. within one year from the end of the financial year in which the order of the CIT(A) is received in case the CIT(A)’s order is passed after 1st day of June, 2003).
34 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
The argument of the ld. Counsel for the assessee is that since the CIT(A) passed the order after 1st day of June, 2003 and as per the proviso to section 275(1)(a) of the Act, the penalty order ought to have been passed on or before 31.03.2011 (i.e. within one year from the end of 31.03.2010). We find that the penalty order has been passed by the Assessing Officer as per section 275(1)(a) of the Act. Therefore, there is no need to consider for the proviso. Same view has been taken by the Hon’ble Madras High Court in the case of Royala Corporation vs. UOI 288 ITR 452 and the operative portion of the decision is reproduced as under: “4. Against the assessment order of the third respondent dated March 29, 2004, and the penalty proceedings initiated under Section 271(1)(c) of the Act, the petitioner-company has filed an appeal under Section 246A of the Act to the Commissioner of Income-tax (Appeals). Admittedly, the appeal was disposed of by the Commissioner of Income-tax (Appeals)-V, by partly allowing the appeal. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the petitioner-company has filed the statutory appeal under Section 253 of the Act before the Income-tax Appellate Tribunal, Madras Bench, and the said appeal has been admitted and numbered as I.T.A. No. 103 (MDS) of 2005. According to the petitioner, the appeal is pending before the Tribunal. 5. It is the further case of the petitioner that by an order dated November 17, 2005, passed in W.P.M.P. No. 39766 of 2005 in W.P. No. 37145 of 2005, this Court has stayed the demand, made by the third respondent in the assessment order, in question. It is the further case of the petitioner that on March 3, 2006, the third respondent issued a notice of hearing of the penalty proceeding initiated under Section 271(1)(c) of the Act, fixing the date of hearing as March 14, 2006. The petitioner appeared before the third respondent
35 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
and filed a memo dated March 10, 2006, requesting the third respondent to keep the penalty proceedings in abeyance till the disposal of the appeal filed by the petitioner in I.T.A. No. 103(MDS) 2005 before the Income-tax Appellate Tribunal, Madras Bench, under Section 253 of the Act. It is the case of the petitioner that the third respondent, during the hearing, informed the representative of the petitioner-company that he would not be able to keep the proceedings in abeyance in view of the insertion of the proviso to Section 275(1)(a) of the Act by the Finance Act, 2003, with effect from June 1, 2003, curtailing the limitation period provided under Section 275(1)(a) of the Act. 6. In the said circumstances, the above writ petition has been filed for a declaration, declaring that in the petitioner's case where an appeal is pending before the Income-tax Appellate Tribunal, Chennai, 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 six months from the end of the month when the order of the Income- tax Appellate Tribunal, Chennai, is received by the third respondent herein. 7. The contention of the petitioner is that the proviso to Section 275(1)(a) is not applicable to the cases where further appeal has been preferred to the Income-tax Appellate Tribunal under the provisions of Section 253 against the orders of the Commissioner of Income-tax (Appeals). In the event an appeal is filed by an assessee under Section 253 before the Income-tax Appellate Tribunal against an order of the Commissioner of Income-tax (Appeals), the limitation period for the levy of penalty will be as provided for in Section 275(1)(a), i.e., six months from the end of the month in which the order of the Appellate Tribunal is received by the Chief Commissioner. 8. Learned Counsel for the petitioner took me through the provisions contained in Section 275(1) of the Act and reiterated the above said contentions. 9. Mrs. Pushya Sitaraman, learned senior standing Counsel for the Income-tax Department, fairly agreed with the interpretation sought to be placed by learned Counsel for the petitioner and submitted that the relief sought for by the petitioner in this writ petition may be granted.
36 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
Section 275(1)(a) of the Income-tax Act, 1961, reads as follows: 275.(1) No order imposing a penalty under this Chapter shall be passed- (a) 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 or an appeal to the Appellate Tribunal under Section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty 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 Chief Commissioner or Commissioner, whichever period expires later. 11. A reading of the abovesaid provision makes it clear that the interpretation placed by learned Counsel for the petitioner on the said provision is acceptable. There is no dispute in this case that the petitioner has filed an appeal before the Tribunal and the same is pending. In such a case, the limitation period for the levy of penalty will be as provided for under Section 275(1)(a), i.e., six months from the end of the month in which the order of the Appellate Tribunal is received by the Chief Commissioner. There cannot be any doubt on this aspect. Accordingly, this Court is of the view 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 six months from the end of the month when the order of the Income-tax Appellate Tribunal, Chennai, is received by the third respondent herein. Similar view has also been taken by the Coordinate Bench of the Tribunal in the case of Trilochan Singh-v-ITO 114 TTJ 82 (Asr).
So far as case law relied on by the ld. Counsel for the assessee in respect of application of proviso is concerned, in the case of Union of
37 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
India v. Sanjay Kumar Jain 6 SCC 708 (SC), the Hon’ble Supreme Court has observed as under: “11. The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. As was stated in Mullins v. Treasurer of Survey [1880 (5) QBD 170, (referred to in Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha (AIR 1961 SC 1596) and Calcutta Tramways Co. Ltd. v. Corporation of Calcutta (AIR 1965 SC 1728); when one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject matter of the proviso. The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment and its effect is confined to that case. It is a qualification of the preceding enactment which is expressed in terms too general to be quite accurate. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule. "If the language of the enacting part of the statute does not contain the provisions which are said to occur in it you cannot derive these provisions by implication from a proviso." Said Lord Watson in West Derby Union v. Metropolitan Life Assurance Co. (1897 AC 647)(HL). Normally, a proviso does not travel beyond the provision to which it is a proviso. It carves out an exception to the main provision to which it has been enacted as a proviso and to no other.....” We have gone through the judgement of the Hon’ble Supreme Court and find that the case law relied upon by the ld. Counsel for the assessee has no application to the facts of the present case.
Keeping in view of the facts and circumstances of the case and by considering section 275(1)(a) of the Act and also the decision of the Hon’ble Madras High Court in the case of Royala Corporation v. UOI
38 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
(supra) and also the decision of the Coordinate Bench of the Tribunal in the case of Trilochan Singh v ITO (supra), we find no infirmity in the order passed by the ld. CIT(A). Accordingly, this ground of appeal is dismissed.
The above all legal grounds raised by the assessee has been considered and decided keeping in view of the judgement of the Hon’ble Madras High Court dated 07.03.2022 in T.C.A. nos. 640, 644 and 649 to 652 of 2019 and 424 & 425 of 2020.
So far as case law brought on record in the form of paper book-1 in the cases of (1) CIT v. Behari Lal Pyare Lal 141 ITR 32 (1983) Pubnjab & Haryana, (2) Bhailal Manilal Patel vs. CIT 49 taxmann.com 539 (2014) Gujarat, (3) CIT vs. Super Steel (Sales) Co. 47 Taxmann 36 (1989) Calcutta, (4) S. Narayanan vs. CIT 80 taxmann.com 20(2017) Madras, (5) CIT v. Manjunath Cotton & Ginning Factory 35 taxmann.com 250 (2013) Karnataka), (6) Dilip N. Shroff vs. JCIT 161 Taxman 218 (2007) (SC), (7) CIT vs. Suresh Chandra Mittal 123 Taxman 1052 (2002) Madhya Pradesh and (8) CIT v. Suresh Chandra Mittal 119 Taxman 433 (2001)(SC) have no application to the facts of the present case.
39 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
So far as case law brought on record in the form of paper book-2 and relied on by the ld. Counsel for the assessee in the case of Shri Mahaveerchand Jain v. DCIT in ITA Nos. 905 to 912/Chny/2020 dated 13.05.2022 is relating to striking off in the notice, it is no more issue before us for consideration and therefore, the case law relied on by the ld. Counsel for the assessee has no application.
The other case law brought on record in the form of paper book-2 in the case of (2) Babuji Jacob vs. ITO 430 ITR 259, (3) Mohd Farhan A sheikh vs. DCIT 434 ITR (Bom) and (4) CIT vs. SSA Emerald Meadows 73 txmann.com 241 (Karnataka) have no application to the facts of the present case.
In view of the above, the appeal filed by the assessee in I.T.A. No. 2691/Chny/2018 in the case of Shri D. Srinivas Vyas is dismissed. Since, similar are the facts in I.T.A. No. 2692/Chny/2018 and accordingly, the appeal filed by the assessee is also dismissed. Further, identical facts and grounds have been raised in the appeals filed by the assessee in I.T.A. Nos. 2693, 2694, 2695, 2696, 2697 & 2698/Chny/2018 and accordingly, all the appeals are dismissed.
40 I.T.A. No.2691 & 2692/Chny/18 & 2693 to 2698/Chny/18
In the result, all the appeals filed by both the assessees are dismissed. Order pronounced on the 30th November, 2022 in Chennai.
Sd/- Sd/- (G. MANJUNATHA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 30.11.2022 Vm/- आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant, 2.��थ�/ Respondent, 3. आयकर आयु� (अपील)/CIT(A), 4. आयकर आयु�/CIT, 5. िवभागीय �ितिनिध/DR & 6. गाड� फाईल/GF.