Income Tax Appellate Tribunal - Mumbai
Amruta Enterprises vs Deputy Commissioner Of Income Tax on 27 June, 2002
Equivalent citations: [2003]84ITD172(MUM), (2003)79TTJ(MUM)214
ORDER
Mukul Shrawat, J. M.
1. All the above four appeals have been posted before us first to decide a limited issue about appeal filing fees in respect of penalty appeals and thereafter if deemed fit to adjudicate upon the merits of the case. This matter has come up before us in view of the following circumstances. The assesses has filed above referred appeals to the Tribunal on 11th July, 2001, by hand as indicated by the Registry. The only dispute in the above four appeals relates to the confirmation of penalty levied under Section 271(1)(c). The penalties levied for concealment of income are as under :
Asst year Nature of penalty Quantum of Penalty 1993-94 Under s. 271(l)(c) 45,114 1994-95
-do-
49,620 1995-96
-do-
1,42,288 1996-97
-do-
49,620 The assessee has paid Rs. 500 each respectively for each assessment year as "Filing Fees" at the time of filing appeals before the Tribunal. The Registry has doubted that the appropriate filing fee payable under Section 253(6) of IT Act has not been deposited. The Registry has worked out shortfall in deposit of fees as under :
ITANo Asst. yr.
Under s.
T.R filed Less fees 4646/M/01 1993-94 271{l)(o) 500 1,000 4647/M/01 1994-95
-do-500
1,000 4648/M/01 1995-96 do-500
3,058 4649/M/01 1996-97
-do-500
1,000
2. The matter was placed before Hon'ble Vice President for orders as to whether the fee paid may be accepted and the appeal may be treated to be in order or the fee should be determined as calculated above so that the assessee may be directed to make good the shortfall. The Hon'ble Vice President has directed to place the matter before the Bench so that the issue may be adjudicated upon and decided. Accordingly the aforesaid appeals were fixed for hearing before us on 5th Feb., 2002, and we have heard the arguments of both the sides.
3. The contention of learned authorised representative, Shri K. Gopal is that the assessee has challenged only the levy of penalty imposed under Section 271(1)(c) and the appeals are not related to the total income assessed. The quantum of penalty has no relation to the total income of the assessee as computed by the AO but is based on the tax sought to be evaded. He has categorically pointed out the last para of penalty orders wherein the AO fixed the amount of penalty on the tax sought to be evaded. Therefore, the appeals filed are in accordance with d. (d) of Section 253(6). He has thus reiterated that there is no direct nexus between the penalty imposed and the assessed income and the imposition of penalty is on the basis of the tax and not on the basis of the quantum of income assessed. In support of his contention, learned authorised representative has drawn our attention to the Memorandum explaining provisions of Finance Bill, 1999, reported in (1999) 236 ITR 185 (St), para (vii). He has further argued that the penalty proceedings are independent and separate proceedings from the assessment proceedings having no connection with the assessed income and this view has been expressed by Hon'ble Bombay High Court in the case of CIT v. Dharamchand L Shah (1993) 204 ITR 462 (Bom).
4. We have carefully examined the issue before us in the light of the provisions of the Act as well as the circulars issued in this regard. Penalties have been levied under Section 271(1)(c) by the AO and all of them have been confirmed by learned CIT(A). Being aggrieved the assessee has filed second appeal before the Tribunal depositing filing fee of Rs. 500 respectively for all the four assessment years. According to assessee the fee has been correctly deposited as per Section 253(6)(d) of the Act. As per the newly substituted Section 253(6) by the Finance (No. 2) Act, 1998, subsequently amended w.e.f. 1st June, 1999, by Finance Act, 1999, the structure of fee has been changed and it has been prescribed that an appeal to the Tribunal should be accompanied by a fee of :
(a) Rs. 500 where the total income of the assessee as computed by the AO, in the case to which the appeal relates is Rs. 1,00,000 or less;
(b) Rs. 1,500 where the total income of the assessee, computed as aforesaid, in the case to which the appeal relates; is Rs. 1,00,000 but not more than Rs. 2,00,000;
(c) 1 per cent of the assessed income, subject to a maximum of Rs. 10,000, where the total income of assessee, computed as aforesaid, in the case to which the appeal relates; is more than Rs. 2,00,000;
(d) Rs. 500, where the subject-matter of an appeal relates to any matter, other than those specified in Clauses (a), (b) and (c).
5. Before the amendment there were only three clauses i.e., Clauses (a), (b) and (c). Clause (d) has been included w.e.f. 1st June, 1999. According to first three clauses the filing fee is directly linked and depends upon the total income of the assessee as computed by the AO. However, Clause (d) does not refer to the total income assessed and specifies that where the subject-matter of appeal relates to any other matter than specified in the aforesaid three clauses, the filing fee should be Rs. 500. In this regard the Memorandum explaining provisions in Finance Bill, 1999, reported in (1999) 236 ITR 185 (St) para (vii) states as reproduced below :
"(vii) Finance (No. 2) Act, 1998, introduced a scale of fees for filing appeals before the CIT(A) and also enhanced the existing scale of fee payable before the Tribunal under various direct tax Acts. The fee payable under IT Act both before the CIT(A) and the Tribunal is relatable to the assessed income. However, appeals are also filed on issues such as TDS defaults, non-filing of returns, etc. which may not have any nexus with the assessed income. It is, therefore, proposed to provide a fee of Rs. 250 for appeal before the CIT(A) and Rs. 500 for appeals before the Tribunal for the residuary group of appeals which cannot be linked with assessed income or assessed net wealth.
The proposed amendments shall take effect on the 1st June, 1999."
6. CBDT Circular No. 779, dt. 14th Sept., 1999 reported in (1999) 240 ITR 3 (St). relevant p. 41, para 54 with the headlines "Rationalisation of provisions relating to reduction of litigation and other allied issues" is also worth mention. This para has explained the reasons for introduction of Clause (d) in Section 253(6). On reading of the Memorandum explaining the provisions of Finance Bill, 1999, and the circular of CBDT it is clear that if subject-matter of an appeal is not linked with the assessed income then filing fee should be Rs. 500 only. It is mentioned that fee payable under IT Act both before CIT(A) and Tribunal was relatable to the assessed income. However, appeals are also filed on issues such as TDS defaults, non-filing of returns, etc. which may not have any nexus with the assessed income. Accordingly, an amendment has been made providing Rs. 500 for appeals before the Tribunal for the residuary group of appeals that cannot be linked with the assessed income. Thus, the intention of the legislature is amply clear that the appeals not connected with income assessed can be filed before the Tribunal by depositing Rs. 500 as filing fee. It is worth mentioning that the memorandum explaining provisions of the clause as well as the circular issued by CBDT have used the word "etc." after citing some examples of appeals relatable to issue such as TDS defaults or non-filing of returns. This indicates that the clarification and explanation is not exhaustive but inclusive. According to us, the sub-clause includes appeals related to the penalty as well. The subject-matter of the present appeals is not the total income assessed by the AO but the levy of penalty. When we look into the provisions of Section 271(1)(c) we find that if the AO in the course of any proceedings is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income then in addition to any tax payable by him, such person shall pay by way of penalty a sum which shall not be less than the amount of tax sought to be evaded but which shall not exceed three times the amount of tax sought to be evaded. Thus, the levy of penalty is based on the tax sought to be evaded and not based on the total income determined by AO. A reading of Section 271(1)(c) makes it clear that the quantum of penalty cannot be linked with the assessed income. Therefore, a conclusion be drawn that the subject-matter of the appeal is not linked with the assessed income and, therefore, the filing fee payable should be governed by Clause (d) of Sub-section (6) of Section 253. Moreover, Clauses (a), (b) and (c) have particularly referred the quantum of total income on the basis of which filing fee is determined and the legislature has not linked anywhere the quantum of total income with the amount of penalty. Therefore, it would be unfair and unjust to charge more fee from the appellant by enlarging the scope of such provisions. We, therefore, conclude, in the light of the CBDT circular and the memorandum explaining the provisions that the appellant has deposited the proper filing fee in terms of Section 253(6)(d) of Rs. 500 each separately for all the 4 assessment years under appeal. Hence, the appeals are valid and to be adjudicated upon.
7. Since all these appeals have been held as valid appeals, we proceed to decide the same on merits. As per penalty orders the returns were filed declaring 'Nil' income in compliance of notice under Section 148 of IT Act. The assessee-firm came into existence w.e.f. 24th April, 1991, and engaged in the business of construction. As per AO the assessee has shown substantial work-in-progress in the P&L a/c but no income was declared. Considering the business activity of the assessee the AO estimated profit on work-in-progress and assessed accordingly. Due to this reason he has held that the assessee deliberately concealed particulars of income and in the result, penalties have been imposed.
8. In first appeal it was reiterated that the assessee had followed project completion method of account and since the project had not been completed, no income was assessable. Rejecting the plea of the assessee all the penalties have been confirmed in first appeal.
9. After hearing both the parties and on the basis of the material placed before us we are of the opinion that no penalty for concealment should be imposed on the assessee. We have perused the assessment order of all the years under appeal which are identical on facts. The assessee contended before the AO during the assessment proceedings that it had decided to show the profit on completion of project. It was stated that since during the years under assessment the project was in progress and was not complete the assessee had shown "work-in-progress" in P&L a/c. It was recorded that in subsequent years the assessee had shown profits but the AO observed that the assessee should have disclosed the profit from year to year. The AO has estimated the net profit @ 8 per cent on the amount of work-in-progress reflected in the books of account. From these facts it is apparent that only an estimation has been made to determine net profit of the assessee by rejecting the method adopted by the assessee. In our opinion the "project completion method" as adopted by the assessee is a recognised method which has also been accepted through various judicial pronouncements. In this regard, during the course of hearing learned authorised representative has cited following decisions where the "Project Completion Method" for construction business was approved.
(1) CIT v. V.S. Dempo & Co.(P) Ltd;
(2) Shapoorji Pallonji & Co. (Rajkot) (P) Ltd. v. ITO (1994) 49 ITD 479 (Bom); and (3) Shree Nirmal Commercial Ltd. v. CIT (1992) 193 ITR 694 (Bom).
10. In the instant case the assessee had reason to declare 'Nil' income for which a legitimate explanation was offered. Merely non-believing an explanation may not lead to levy of penalty automatically unless the explanation is not found to be bona fide. It has been brought to our notice that on identical facts and circumstances in assessee's own case in ITA No. 4645/M/2001 for the asst. yr. 1992-93, Mumbai Tribunal vide order dt. 26th Nov., 2001, has already deleted the concealment of penalty. Respectfully following the order of the Tribunal and in view of the findings recorded we are of the view that under the circumstances no penalty for concealment should have been levied. We direct accordingly.
11. In the result, all the four appeals of the assessee are allowed.