Income Tax Appellate Tribunal - Ahmedabad
Bil Metal Industries Ltd.,, ... vs Assessee on 18 December, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "D", AHMEDABAD
Before Shri Mahavir Singh,JM & Shri A.N. Pahuja, AM
I.T.A. No.900/Ahd/2008
(Assessment year 1989-90)
M/s Bil Metal Works vs ACIT, Circle-2(1)
Opp Bhalli Railway Station Baroda
PO : Bhalli
Dist : Baroda -391 410
[PAN : AABFB7131Q]
(Appellant) (Respondent)
Assessee by : Shri Sanjay R Shah,AR
Revenue by : Shri CK Mishra,DR
ORDER
A.N. Pahuja : This appeal filed by the assessee is directed against an order dated 18-12-2007 of the ld. CIT(A)-II, Baroda ,upholding the penalty of Rs. 5,29,355/- levied u/s 271(1)(c) r.w.s.254 of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') .
2. Facts, in brief, as per relevant orders are that penalty u/s 271(1)(c) of the Act was initially imposed by the Assessing Officer[AO in short] vide order dated 27.6.2002 @125% of the tax sought to be evaded for concealing particulars of income on account discrepancy in stock to the extent of Rs.6,48,000/- and incorrect claim of investment allowance of Rs.3,60,300/-. Though the ld. CIT(A) vide his order dated 24.12.2002 upheld the levy of penalty @100% of the tax sought to evaded, the ITAT vide their order dated 17.8.2005 in ITA No.745/Ahd/2003 while upholding levy of penalty on the amount of Rs.3,60,300/- on account of investment allowance in the absence of any explanation before the AO/ld. CIT(A), set aside the order imposing penalty with regard to addition of Rs.6,48,000/- on account of stock on the ground that the Hon'ble High Court vide their order dated 27.1.2003 expunged para 11 of the order dated 27.11.2001 of the ITAT in quantum appeal in the following terms :
2 ITA No.900/Ahd/2008"We may observe that we do not subscribe to the observations made in paragraph 11 of the order by the Tribunal against the Chartered Accountant in respect of his conduct which, even, as per the learned counsel for the Revenue, were unnecessary for deciding the matter."
3. Consequently, the AO allowed fresh opportunity of hearing and in response the assessee vide letter dated 13.10.2006 reiterated that addition was made on account of clerical mistake in calculating and preparing detailed stock statement of raw material . However, the AO did not accept the explanation of the assessee on the ground that the said explanation of the assessee was also considered during the course of scrutiny of assessment as also in appellate proceedings. The AO further referred to the following observations of the Tribunal in the quantum order dated 27.11.2001 in ITA no.2730/Ahd./2005 :
"It is very difficult to believe from the explanation and reason given by the assessee for difference in quantitative details of CRCA sheet in between stock card and tax audit report. It has been explained by the assessee in February 1989, the quantity of sheets issued was 80530 kgs. Whereas, in audit report, it has been taken as 34,530 kgs of which difference comes 46,000 Kgs. of sheets.In the month of March 1989 sheets as per stock card was 59,820 kgs. whereas in the audit report, it was 69,820 Kgs of which difference is 10,000 kgs sheets and in this way, net difference of 36,000 kgs noticed by Assessing Officer, as reconciled by the assessee. This type of reconciliation of figures have no values for the purpose of evidence. Under the facts and circumstances, it has been noticed that the explanation of the assessee is perverse explanation."
Accordingly, the AO maintained the penalty in respect of addition of Rs. 6,48,000/- on account of incorrect valuation of closing stock. .
4. On appeal, the assessee submitted that the AO passed the order without considering the implications of the aforesaid observations of Hon.Gujarat High Court. The order of the ITAT setting-aside the penalty levied earlier was passed in 2005 while the impugned penalty order was passed on 08-12-2006, purporting to give effect to ITAT's order. Therefore, the said order has been passed by the 3 ITA No.900/Ahd/2008 AO beyond the limitation period stipulated u/s 275 of the Act. Besides pointing out defect in the demand notice in mentioning the A.Y.. 2004-05 instead of AY 1989-90, it was further argued that the AO did not mention in the order that prior approval of Jt.Commissioner was taken. Since the issue was restored back to the file of the AO for a fresh decision, the submissions on merit of the addition should have been considered by the AO, the assessee argued.Inter alia, reliance was placed on the judgments in the case of CIT vs Valmikbhai H Patel 280 ITR 467 (Guj),Hindustan Steel Ltd., Vs State of Orissa 83 ITR 26 (SC),CIT vs Subhash Trading Co 86 Taxman 20 (Guj),CIT vs Rahul G & Co 250 ITR 225 (Del), CIT vs Dhuli T Co. Ltd 231 ITR 65 (Cal),KC Builders vs ACIT 265 ITR 562 (SC), Dilip N Shroff vs JCIT 291 ITR 519 (SC) and National Textile Co vs CIT 249 ITR (Guj). The assessee added that there was no mens rea on the part of the assessee as the addition to closing stock even after being upheld in the quantum proceedings will be tax neutral. After considering these submissions, the ld. CIT(A) concluded as under:
"2.3 I have considered the submissions of the ld. counsel and facts of the case. The penalty in this case was levied by the Assessing Officer after the addition was not only confirmed but had severe observation against the appellant and its Chartered Accountant. Hon. Gujarat High Court did not agree with the observation against the conduct of Chartered Accountant and therefore the observation of Hon. ITAT against the Chartered Accountant has to be ignored while considering the levy of penalty. The observation of ITAT in quantum appeal in Para-11 (excluding the observation against Chartered Accountant) are as under:
"It is very difficult to believe from the explanation and reason given by the assessee for difference in quantitative details of CRCA sheet in between stock card and tax audit report. It has been explaied by the assessee in February 1989, the quantity of sheets issued was 80530 kgs. Whereas, in audit report, it has been taken as 34,530 kgs of which difference comes 46,000 Kgs. ff sheets. in the month of March 1989 sheets as per stock card was 59,820 kgs. whereas in the audit report, it was 69,820 Kgs of which difference is 10,000 kgs sheets and in this way, net difference of 36,000 kgs noticed by Assessing Officer, as reconciled by the assessee. This type of reconciliation of figures have no values for the purpose of evidence.4 ITA No.900/Ahd/2008
Under the facts and circumstances, it has been noticed that the explanation of the assessee is perverse explanation."
From the above, it is clear that the explanation given by the appellant is found to be perverse and such observation are valid since Hon.High Court did not comment on the same. The observation against the Chartered Accountant was not necessary to prove whether the explanation given by the assessee is bona- fide or not. Since the highest fact finding authority had already concluded that the explanation of the assessee is perverse explanation, the same cannot be held to be bona-fide in view of Explanation 1 to section 271(1)(c). Considering these appellant had definitely concealed the particulars of income and the explanation offered by it was found to be false and perverse and therefore penalty u/s 271(1)(c) is leviable. Considering these the penalty levied by the Assessing Officer is justified on merit.
Coming to the other objections of the appellant that Assessing Officer did not consider implication arising out of the observation of Hon. Gujarat High Court, is not correct. Assessing Officer dealt this aspect clearly in his order and therefore the same does not suffer from any infirmity. As regards limitation period in passing the order, appellant's observation is just suspicion or inferential. The same is not based on facts and therefore cannot be adjudicated.
As regards the wrong mention of assessment year in demand notice, the same is covered under the provisions of section 292B and such mistakes do not invalidate the order.
As regards appellant's objection that the prior approval from higher authorities is not mentioned in the order. The penalty order was passed originally with the approval. The present order is in consequence to the directions of Hon.ITAT given to the Assessing Officer. In any case, the approval taken need not be mentioned in the order and that does not make the order legally weak.
The order was set-aside with a specific purpose for considering the observation of Hon.Gujarat High Court the same cannot be considered as set-aside in general and therefore again going into the merits of the addition and levy of penalty, etc. may not be required.
The decisions relied upon by the appellant were gone through. None of them applied to the facts of the appellant's case since the explanation offered by the appellant to explain the 5 ITA No.900/Ahd/2008 discrepancy in stock was found to be perverse. In none of the decisions, assessee's explanation was found to be perverse and therefore the appellant had deemed to have concealed the particulars of income within the meaning of Explanation 1 to section 271(1)(c). In view of the specific facts of the appellant's case, the decisions referred by the appellant are not individually discussed here.
As regards appellant's claim that mens rea was not proved by the Department, the same is not required to be done after the word 'deliberately' have been removed and Explanation 1 have been inserted to section 271(1)(c).
Considering the above, the penalty levied by the Assessing Officer is justified on the facts of the case and hence the same is confirmed."
5. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A). At the outset, the ld. AR on behalf of the assessee submitted that the order dated 17.8.2005 of the ITAT having been received by the CIT on 19.9.2005 , apparently, the order passed by the AO on 8.12.2006 is barred by limitation. In this connection, the ld. AR relied upon a decision in the case of CIT Vs. Shiv Das Sire Mal,175 ITR 546(Raj). On the other hand the ld. DR while supporting the impugned order did not dispute that the order dated 17.8.2005 of the ITAT had been received by the CIT on 19.9.2005.
6. We have heard both the parties and gone through the facts of the case. Undisputedly and as mentioned by the DCIT Circle-2(1),Baroda in his letter dated 26.11.2009, order dated 17.8.2005 of the ITAT had been received by the concerned CIT on 19.9.2005 . Admittedly. impugned order imposing penalty was passed on 8.12.2006 i.e beyond the period of six months from the end of the month in which order of the ITAT had been received by the concerned CIT. The ld. CIT(A) while considering the plean on behalf of the assessee regarding limitation period in passing the order,merely observed that appellant's observation is just suspicion or inferential and that the same is not based on facts and therefore cannot be 6 ITA No.900/Ahd/2008 adjudicated. However, in somewhat similar circumstances, when a penalty order had been set aside by the AAC, Hon'ble Rajasthan High Court in the case of Shiv Das Sire Mal (supra) held that "An order imposing penalty under section 271 is appealable to the Appellate Assistant Commissioner under section 246. Assuming that remand could be validly made under section 251 (1) (b), as claimed by the Revenue, the limitation prescribed under section 275(a)(ii) for making an order imposing penalty is six months from the end of the month in which the order of the Appellate Assistant Commissioner is received by the Commissioner, which is admittedly the period which expired later in the present case. It is also an admitted fact that the Income-tax Officer's fresh order imposing penalty passed on March 30, 1979, was made after the expiry of this period of six months prescribed under section 275(a)(ii). This being so, the Income-tax Officer's order imposing penalty passed on March 30, 1979, was barred by limitation prescribed under section 275 of the Act.
We may also mention that there was no provision corresponding to subclause (ii) of clause (a) of section 275 in section 33B of the Indian Income-tax Act, 1922, and this provision was also not present in section 275 of the 1961 Act, as originally enacted. For this reason, the decisions rendered in connection with section 33B of the 1922 Act or section 275 of the 1961 Act, as initially enacted are distinguishable. The Supreme Court decision in CIT v. National Taj Traders [1980] 121 ITR 535, relates to section 33B of the 1922 Act and the decision of this court in J. P. Sharma and Sons v. CIT [1985] 151 ITR 138, relates to section 275 of the 1961 Act prior to its amendment whereby sub-clause (ii) of clause (a) of section 275 has been inserted. After this amendment in section 275 with which we are concerned in the present case, it is clear that the bar of limitation for imposing penalty applies not only to the initial order imposing penalty but also to an order of penalty imposed as a consequence of the appellate order. Accordingly, the Tribunal's view that the fresh order imposing penalty was time- barred is justified.
6.1 In the light of view taken in the aforesaid decision, we are of the opinion that in terms of provisions of section 275 of the Act with which we are concerned in the present case, it is clear that the bar of limitation for imposing penalty applies not only to the initial order imposing penalty but also to an order of penalty imposed as a consequence of the appellate order. Consequently, the penalty order dated 8.12.2006 having been passed admittedly beyond the period of six months from the end of September 2005 i.e the month in which order of the ITAT had been received by the concerned CIT , is barred by limitation in 7 ITA No.900/Ahd/2008 terms of provisions of sec. 275 of the Act. In these circumstances, we have no option but to vacate the findings of the ld. CIT(A) and quash the aforesaid penalty order. As a corollary , grounds on merit of penalty do not survive for adjudication.
7. In the result , appeal is allowed Order pronounced in the open court on this 26th day of February, 2010.
Sd/- Sd/-
(Mahavir Singh) (A.N. Pahuja)
Judicial Member Accountant Member
Ahmedabad,
Dated :26th February, 2010
Pk/-
Copy to:
1. The assessee
2. ACIT, Circle-2(1) , Baroda
3. CIT(A)-II, Baroda
4. CIT concerned By order
5. DR, "D" Bench
Deputy Registrar, ITAT, Ahmedabad