Income Tax Appellate Tribunal - Delhi
Triveni Engineering & Industries Ltd., ... vs Assessee on 1 September, 2010
1 ITA No.5709/Del/2010
Asstt.Year: 2000-01
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `H' NEW DELHI
BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
AND
SHRI CHANDRAMOHAN GARG, JUDICIAL MEMBER
I.T.A.No.5709/Del/2010
Assessment Year : 2000-01
Triveni Engineering & Industries Ltd., vs Dy.Commisioner of Income Tax,
8th Floor, Express Trade Towers, Circle 16(1), New Delhi.
Plot No.15-16, Sector 16A,
Noida.
(PAN No.AABCT6370L)
(Appellant) (Respondent)
Appellant by: Shri Rohit Jain
Respondent by : Dr. B.R.R. Kumar, Sr.DR
PER CHANDRAMOHAN GARG, JUDICIAL MEMBER
This appeal has been preferred by the assessee against the order of Commissioner of Income Tax(A)-XIX, New Delhi dated 01.09.2010 for AY 2000-01 by which the appeal of the assessee on levying of penalty u/s 271(1)(c) of the Income Tax Act (for short the Act) was partly allowed and also upholding the levy of penalty of Rs.78,89,965 towards interest on Sugar Development Fund ('SDF').
2. The grounds of appeal read as under:-
"1. That the CIT(A) erred on facts and in law in not holding that the impugned penalty order dated 18.03.2009 levying penalty under section 271(1)(c) of the Income Tax 2 ITA No.5709/Del/2010 Asstt.Year: 2000-01 Act, 1961 ('the Act') is illegal and bad-in-law, having barred by limitation.
1.1 That the CIT(A) erred on facts and in law in upholding the validity of the penalty order dated 18.03.2009 without appreciating that as per clause (a) of section 275(1) of the Act, the penalty order could have been passed on or before 31st March 2006 only.
1.2 That the CIT(A) failed to appreciate that the penalty order dated 18.03.2009 was illegal and bad in law since satisfaction for initiating penalty was not recorded in the assessment order.
2 That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in levying penalty under section 271(1)(c) of the Act on disallowance of Rs.78,89,965 towards interest on Sugar Development Fund ('SDF').
2.1 That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in levying penalty under section 271(1)(c) of the Act on the aforesaid disallowance without appreciating that no satisfaction regarding concealment or filing of inaccurate particulars was recorded by the assessing officer while passing the assessment order.
2.2 That the CIT(A) further failed to appreciate that no penalty could have been imposed on the aforesaid disallowance since the issue of allowability of interest on SDF is a highly debatable issue and the pre-requisites for imposing penalty were not existing."
3. Brief facts of the case giving rise to this appeal are that the assessee filed a return showing loss of Rs.12,58,22,130/-which was revised on 3 ITA No.5709/Del/2010 Asstt.Year: 2000-01 28.03.2002 declaring loss of Rs.21,27,51,250 and the assessment was completed u/s 143(3)(ii) of the Act at the business loss of Rs.14,03,30,430/- on 30.03.2003 with certain disallowances under various heads.
4. The aggrieved assessee carried the matter to the Commissioner of Income Tax(A) and ITAT but remained empty handed. Thereafter, the Assessing Officer continued with the penalty proceedings and finalized the same, passing order dated 18.03.2009 levying penalty of Rs.1,96,83,112/-. The aggrieved assessee filed an appeal before the Commissioner of Income Tax(A) which was partly allowed by the impugned order reducing the penalty to the amount of Rs.77,89,965/- towards disallowance of interest on SDF and directed the Assessing Officer to rework the penalty leviable after considering above interest amount. Now, the assessee is in second appeal before this Tribunal.
Ground No. 1 and 1.1
5. Apropos these grounds, ld. counsel for the assessee submitted that the impugned penalty order dated 18.03.2009 levying penalty is illegal and bad in law having been barred by limitation because the Commissioner of Income Tax(A) upheld the validity of the penalty order without appreciating the fact and legal position as per section 275(1)(a) of the Act, the penalty order would have been passed only on or before 31.3.2006. 4 ITA No.5709/Del/2010 Asstt.Year: 2000-01
6. The AR relied on the judgement of Jurisdictional High Court of Delhi in the case of Commissioner of Income Tax vs Mohair Investment & Trading Co. Pvt. Ltd. 345 ITR 51(Del)(HC) wherein it was held as under:-
"11. Thus, we are of the view that the proviso to Section 275(1)(a) of the Act does not nullify the availability to the Assessing Officer of the period of limitation of six months from the end of the month when the order of the ITAT is received by the Assessing Officer. In the present case the order of the ITAT was rendered on 11th August, 2008 and the order passed by the Assessing Officer levying penalty was passed on 26th February, 2009 i.e. within a period of six months from the order of the ITAT."
7. Replying to the above submissions, the DR submitted that the ld. Commissioner of Income Tax(A) has categorically mentioned the dates of relevant orders and then he arrived to a conclusion that the penalty order was passed within the prescribed period of limitation. The DR also relied on the judgment of Hon'ble Jurisdictional High Court of Delhi in the case of Commissioner of Income Tax vs Mohair Investment & Trading Co. Pvt. Ltd (supra) and the judgement of Hon'ble High Court of Madras in the case of Rayala Corporation Pvt. Ltd. vs. Union of India and Others (2007) 288 ITR 452 (Mad.) wherein it was held that the limitation period for levy of penalty order would be as provided u/s 275(1)(a) of the Act i.e. six months from the end of the month in which the order of the Tribunal is received by 5 ITA No.5709/Del/2010 Asstt.Year: 2000-01 the Chief Commissioner or Commissioner. The assessee's counsel has also submitted the copy of the judgment of ITAT, Lucknow in the case of ITO vs Blossom Floriculture reported as 134 TTJ 51 (ITAT, Lucknow). In view of above submissions and citations, at the outset, we find it appropriate to consider the judgment of Hon'ble Jurisdictional High Court of Delhi in the case of Commissioner of Income Tax vs Mohair Investment & Trading Co. Pvt. Ltd.(supra) wherein it was held that the proviso to Section 275(1)(a) of the Act does not nullify the availability to the Assessing Officer, the period of limitation six months from the end of the month when the order of the ITAT is received. Therefore, the calculation of limitation would start after the end of month of receiving the order by the Chief Commissioner or Commissioner and it would spread over to next six months.
8. At this stage, we find it appropriate to take note of judgment of the ITAT, Mumbai Bench 'B' in the case of Mahindra Intertrade Ltd. vs DCIT(Mum.) 133 ITD 597 wherein the ITAT Bench held as under:-
"17. The first issue that has to be adjudicated is, whether the penal passed under section 271(1)(c) on 30th January 2009, is barred by limitation. The case of the assessee is that the Commissioner (Appeals), in the quantum proceedings, passed his order on 31st August 2004 and in view of the proviso to section 275(1)(a), the order of penalty dated 30-01-2009 is barred by limitation. An appeal in ITA No.8276/Mum./2004, against the quantum i.e. order dated 30-08-2004 of C.I.T. (Appeals), was filed by the assessee before the Tribunal 6 ITA No.5709/Del/2010 Asstt.Year: 2000-01 and the same was disposed off vide order dated 09-05- 2008. The penalty order under section 271(1)(c) was passed by the Assessing Officer within a period of six months from the end of the month in which the order of the Tribunal was received by the Chief Commissioner / Commissioner in the quantum proceedings. To examine this issue we first refer to Section 275(1)(a) and which reads as follows:-
"Section 275 - Bar of limitation for imposing penalties.-
(l) 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:
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 Chief Commissioner or Commissioner, whichever is later"
18. A plain reading of this section shows that under section 275(1)(a), the requirement of the main section is 7 ITA No.5709/Del/2010 Asstt.Year: 2000-01 that, when an assessment order is a subject matter of appeal before the Commissioner (Appeals), then the penalty order should be passed, within a period of six months from the end of the month in which the order of the Commissioner (Appeals) is received by the Chief Commissioner / Commissioner. The proviso to this section was inserted w.e.f. 1-06-2003, to expand this time period of six months to one year, in cases wherein the Commissioner (Appeals) passes an order on/after 1st June 2003 and no appeal is filed before the tribunal. The proviso does not deal with cases where the appeals are pending before the ITAT under section 253 of the Act. That limb of section 275(1)(a), which fixes the time limit of six months from the date of receipt of order of the ITAT by the Commissioner / Chief Commissioner, for passing an order of penalty is not disturbed in any manner by the insertion of the proviso. This is the interpretation of the Hon'ble Madras High Court in the case of Rayala Corpn. (P.) Ltd (supra), wherein it has held as follows:-
"A reading of the above said 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 s. 275(1)(a), i.e., six months from the end of the month in which the order of the Tribunal is received by the Chief CIT. There cannot be any doubt on this aspect. Accordingly, this Court is of the view that the proviso to s. 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 Tribunal, Chennai, is received by the third respondent herein"
19. Coming to the decision of Amritsar Bench of the Tribunal in Tarlochan Singh & Sons (HUF) as well as the decision of Lucknow Bench of the Tribunal it Bloosom Floriculture (supra), we find that the Benches did not have the benefit of the judgment of Hon'ble Madras High Court in 8 ITA No.5709/Del/2010 Asstt.Year: 2000-01 Rayala Corpn. (P.) Ltd (supra). This case was not cited or considered. As the issue of interpretation of proviso to section 275(1)(a) has been considered and adjudicated upon by the Hon'ble Madras High Court and as this is the sole judgment on this issue from a High Court, we prefer to follow the same.
20. In view of the aforesaid discussion, we uphold the findings of the first appellate authority and dismiss the ground raised by the assessee."
9. In the present case, from the impugned order we observe that the assessee filed an additional ground before the Commissioner of Income Tax(A) pertaining to legal objection of limitation which was decided with the following observations and findings:-
"8. I have gone through the penalty order and the detailed written submissions filed by the AR in this regard.
9. The following are details of the various orders passed for A.Y. 2000-01 in the case of the assessee.
Order Date
Assessment order 31.03.2003
C.I.T.(Appeals) order 31.03.2004
ITAT order against cross appeals in quantum proceedings 08.08.2008
Penalty order 18.03.2009
ITAT order against M.A. of the appellant 18.02.2010
10.1 According to the AR, the order u/s 271(1)(c) should have been passed before 31.03.2006 in terms of clause(a) of subsection (1) of S.275.
10.2 In the case of Rayala Corporation Pvt. Ltd. vs. Union of India and Others (2007) 288 ITR 452 (Mad.) the Hon'ble High Court held that the limitation period for the levy of penalty would be as provided for under section 275(1)(a) i.e. 9 ITA No.5709/Del/2010 Asstt.Year: 2000-01 six months from the end of the month in which the order of Tribunal is received by the Assessing Officer. The decision is as under:
"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(l)(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 abovesaid 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.
10. Section 275(1)(a) of the Income-tax Act, 1961, read 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 10 ITA No.5709/Del/2010 Asstt.Year: 2000-01 case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later."
10.3 In view of the above position of law, the penalty order is passed within the prescribed period of limitation, after receipt of the order of Hon'ble ITAT.
Accordingly, additional ground is dismissed."
10. The facts of the present appeal in hand are that the assessment order was passed on 31.03.2003. The Commissioner of Income Tax(A) passed order on 31.03.2004 and ITAT passed order deciding the cross appeals in quantum proceedings on 8.8.2008 and finally, the penalty order was passed on 18.3.2009. As per provisions of Section 275(1)(a) of the Act, the crucial date is the date of receipt of the order of ITAT by the Chief Commissioner, Commissioner or the Assessing Officer because the same would decide the basis of calculation of limitation because for calculation of limitation, the month of receipt and its subsequent six months period is relevant. Respectfully following the view of the Hon'ble Jurisdictional High Court of Delhi in the case of Mohair Investment of India Co. Pvt. Ltd. (supra), we are of the opinion that the penalty order passed by Assessing Officer was not barred by limitation. Hence, ground nos. 1 and 1.1 are dismissed. 11 ITA No.5709/Del/2010 Asstt.Year: 2000-01 Ground No.1.2
11. Ld. counsel for the assessee submitted that the Commissioner of Income Tax(A) erred and failed to appreciate the fact that the penalty order dated 18.03.2009 was ab initio illegal and bad in law since satisfaction for initiating penalty proceedings was not recorded in the assessment order. He placed his reliance on the judgment of Hon'ble Jurisdictional High Court in the case of Madhushree Gupta vs Union of India (2009) 317 ITR 107 (Delhi), judgment of ITAT 'E' Bench Delhi in the cases of Cornerstone Financial Services Ltd. vs Commissioner of Income Tax in ITA No.13/Del/2005 dated 24.09.2010, judgment of ITAT Delhi 'C' Bench in the case of Global Green Company Ltd. vs DCIT in ITA No.1390/D/2011 dated 13.07.2012 and judgment of ITAT Kolkata in case of ITO vs Budge Budge Co. Ltd. in ITA No. 1162/Kol/2005 dated 07.11.2005.
12. In case of Madhushree Gupta (supra), Hon'ble High Court of Delhi concluded as follows:-
"Conclusions In the result, our conclusion are as follow:-
(i) Section 271(1B) of the Act is not violative of Article 14 of the Constitution.12 ITA No.5709/Del/2010 Asstt.Year: 2000-01
(ii) The position of law both pre and post amendment is similar, in as much, the Assessing Officer will have to arrive at a prima facie satisfaction during the course of proceedings with regard to the assessee having concealed particulars of income or furnished inaccurate particulars, before he initiates penalty proceedings.
(iii) Prima facie 'satisfaction of the Assessing Officer that the case may deserve the imposition of penalty should be discernible from the order passed during the course of the proceedings. Obviously, the Assessing Officer would arrive at a decision, i.e., a final conclusion only after hearing the assessee.
(iv) At the stage of initiation of penalty proceeding the order passed by the Assessing Officer need not reflect satisfaction vis-a-vis each and every item of addition or disallowance if overall sense gathered from the order is that a further prognosis is called for.
(v) However, this would not debar an assessee from furnishing evidence to rebut the "prima facie" satisfaction of the Assessing Officer; since penalty proceeding are not a continuation of assessment proceedings. [See Jain Brothers v. Union of India (1970) 77 ITR 107(SC)]
(vi) Due compliance would be required to be made in respect of the provisions of Section 274 and 275 of the Act.
(vii) the proceedings for initiation of penalty proceeding cannot be set aside only on the ground that the assessment order states 'penalty proceedings are initiated separately' if otherwise , it conforms to the parameters set out hereinabove are met.
In view of above, we reject the prayers made in the writ petitions with the caveat that the provisions of section 271(1)(c) post amendment will be read in the manner indicated above."
13 ITA No.5709/Del/2010Asstt.Year: 2000-01
13. In the case of Cornerstone Financial Services (supra) ITAT Delhi held as follows:-
"7. In the present case, we find that even from the body of the assessment order, no such satisfaction is discernable. The presence of prima facie satisfaction of the AO for initiation of penalty proceedings, is a jurisdictional fact, as held in 'Ms. Madhushree Gupta & Another v. Union of India & Another' (supra). To reiterate, in the present case, no prima facie satisfaction of the Assessing Officer that the case may deserve the imposition of penalty is discernible from the assessment order.
8. Therefore, the grievance of the assessee in this regard is justified and is accepted as such. In view thereof, once the jurisdictional fact of prima satisfaction of the AO for initiation of concealment penalty proceedings is conspicuous by its absence and is not discernible from the assessment order, no concealment penalty could have been imposed. The penalty imposed is thus void ab initio and is liable to be set aside."
14. In the case of ITO vs Budge Budge Co. Ltd. (supra), ITAT Kolkata Bench held as under:-
"14. We also find that from the last para of the impugned assessment order that the Assessing Officer has merely stated that "penalty u/s. 271(1)(c) of the I. T. Act is initiated for furnishing inaccurate particulars". A similar note recorded by the Assessing Officer was held to be insufficient to indicate the satisfaction of the Assessing Officer by the Hon'ble Delhi High Court in the case of Diwan Enterprises vs CIT (2000) 246 ITR 571. In CIT -vs- Ram Commercial Enterprises Ltd. (2000) 246 ITR 568, the Hon'ble Delhi High Court held that merely because penalty proceedings have been initiated, it cannot be assumed that the requisite satisfaction was arrived at in 14 ITA No.5709/Del/2010 Asstt.Year: 2000-01 the absence of the same being spelt out by the order of the assessing authority. Though section 271 (1)(c) does not prescribe any particular form or language in which the requisite satisfaction is to be recorded, the bare minimum is that the language must clearly spell out the reasons as to why the Assessing Officer feels satisfied about the guilt of the assessee. In JCIT -vs- Rakesh Fuel (P) Ltd. (supra), the Tribunal has followed the law laid down by the Hon'ble Delhi High Court and after applying the same deleted the penalty.
15. In Conco Engineers Cooperative Society Ltd. -vs- DCIT in ITA NO.1113 /Ko1/2005 dated 4.10.2005 for the assessment year 1999-2000. this Bench following the decision of Hon'ble Delhi High, Court in Ram Commercial Enterprise Ltd. (Supra). Diwan Enterprises (Supra) and in CIT -vs- B. R. Sharma (2005) 275 ITR 303 (Del) has deleted the penalty since no satisfaction has been recorded by the Assessing Officer."
15. Replying to the above submissions and citations, the DR submitted that at the end of impugned order, the Assessing Officer specifically mentioned that "Issue penalty notice u/s 271(1)(c) as discussed above". Therefore, it cannot be said that the Assessing Officer did not record required satisfaction as per the provisions of the Act.
16. After careful consideration of the submissions and relevant citations including the citations placed before us and on careful perusal of relevant observations and findings of Commissioner of Income Tax(A), we observe that the submissions of the AR in this regard before the Commissioner of Income Tax(A) were as under:-
15 ITA No.5709/Del/2010Asstt.Year: 2000-01
"It will be kindly appreciated that recording of satisfaction is not merely an empty formality since the assessing officer has to apply his mind and form an opinion at the time of disallowing the appellant's claim fully or partly or making an addition to the appellant's income. The assessing officer has to apply his mind - whether the appellant had, on the facts of the case and in view of the position in law, by making a claim or not disclosing an amount, sought to conceal/file inaccurate particulars of income. It will be kindly appreciated that there may be items in respect whereof there may be bona fide difference of opinion between the appellant and the assessing officer or divergence of judicial opinion, in which case there cannot be any charge of concealment or filing of inaccurate particulars of income. Further, there may be items in respect whereof particulars of income may be considered to have been concealed and some other items in respect whereof inaccurate particulars of income may have been filed; and the same is required to be so stated by the assessing officer in the assessment order, as the two concepts 'concealment of income' and 'filing of inaccurate particulars of income' are not overlapping or interchangeable and have distinct connotation and meaning.
Reference in this regard may be made to the following decisions wherein it has been consistently held that satisfaction is a prerequisite for assuming valid jurisdiction to impose penalty under section 271 (l)( c) of the Act:-
- Dilip N. Shroff: 291 ITR 519 (SC)
- Sri T. Ashok Pai: 292 ITR 11 (SC)
- CIT vs Rampur Engineering Co Ltd (2009) 309 ITR 143(Del)
- CIT vs Rajan& Co.: 197 CTR 199 (Del.)
- CIT V. Ram Commercial Enterprises Ltd: 246 ITR 568 (Del.)
- CIT V. Diwan Enterprises: 246 ITR 571 (Del.)
- Shri Bhagwant Finance Co. Ltd V. CIT: 280 ITR 412/196 CTR 462 (Del.)
- CIT V. Auto Lamps Ltd: 278 ITR 32/196 CTR 459 (Del.) 16 ITA No.5709/Del/2010 Asstt.Year: 2000-01
- CIT V. Globe Sales Corporation: 196 CTR 187 (Del.)
- CIT V. B.R. Sharma: 275 ITR 303/196 CTR 454 (Del)
- CIT V. Vikas Promoters (P) Limited: 277 ITR 337/ 194 CTR 384 (Del.)
- CIT V. Mayar India Limited: 142 Taxman 230 (Del.)
- CIT v. Super Metal Re-rollers (P) Ltd.: 265 ITR 82 (Del)
- CIT V. Munish Iron Store: 263 ITR 484/186 CTR 159 (P&H)
- Nainu Mal Het Chand: 160 Taxman 49 (All.)
- CIT V. Pannanand M. Patel: 278 ITR 3 (Guj.) It may also be pointed out that by Finance Act, 2008, sub-
section (IB) was inserted in section 271, with retrospective effect from 01.04.1989, to provide that where any amount is added or disallowed in computing the total income and the said order contains a direction for initiation of penalty proceedings, such an order shall be deemed to constitute satisfaction of the assessing officer for initiating penalty proceedings under section 271(1)(c) of the Act. Thus, recording of satisfaction for initiating penalty proceedings has, it will kindly be appreciated, has also received judicial recognition by insertion of sub-section (IB) in section 271 of the Act.
On perusal of the assessment order dated 31st March, 2003, it will kindly be noticed that the assessing officer had separately recorded satisfaction for initiating penalty proceedings in respect of certain additions/disallowances. Reference, in this regard, may be made to some of the observations in the assessment order as under:
• In context of software expenses, the assessing officer initiated 'penalty proceedings by observing after para 2.7 as under:
"Penalty u/s 271(1)(c) is initiated in claiming excessive deduction on account of software expenses as discussed above."
In context of provision for gratuity, the assessing officer after para 3.3 observed as under:
17 ITA No.5709/Del/2010Asstt.Year: 2000-01
"Penalty U/S 271 (1)(c) is initiated for claiming wrong deduction on account of provision made for gratuity fund."
In context of commission paid, after para 9.1, the assessing officer observed as under:-
"Penalty u/s 271(1)(c) is initiated for unsubstantiated claim of deduction for commission as discussed above".
Similar observations have been made by the assessing officer after each and every addition/disallowance, wherever the assessing officer wanted to initiate penalty proceedings under section 271(1)(c) of the Act.
On perusal of para 5 on page 5 of the assessment order, it will, however, kindly be noticed that the assessing officer did not record any such observations/findings after discussing the issue of interest paid on SDF loan. The assessing officer, it will thus kindly be appreciated, did not initiate penalty proceedings under section 271(1)(c) of the Act on account of disallowance of interest on SDF loan.
In view of the aforesaid, it is respectfully submitted that since penalty proceedings were not at all initiated by the assessing officer on disallowance of interest on SDF loan amounting to Rs.77.89.965. there was no warrant to impose penalty on the said issue. The penalty imposed by the assessing officer on the said disallowance is, therefore, without jurisdiction, and bad in law and calls for being deleted."
17. The Commissioner of Income Tax(A) decided the issue with the following observations and findings:-
"17.1 The AO has recorded satisfaction as seen from the assessment order before finalizing the assessment proceedings. The satisfaction recorded reads as under:18 ITA No.5709/Del/2010 Asstt.Year: 2000-01
"Assessed at Business Loss of (-) Rs. (-) 14,03,30,430/-. Issue necessary forms. Issue Penalty notice u/s 271(1)(c) as discussed above."
17.2 Though the assessment order need not reflect every item, viz., addition or disallowance, yet one has to find out that the order is couched in such a manner and the discussion leads towards the opinion of the AO that the assessee had concealed particulars of income or furnished inaccurate particulars. This has to be discerned from the reading of the assessment order. It becomes clear from the reading of the assessment order in its entirety that the assessee did not substantiate the various expenses in question because of which penalty proceedings under Section 271(1)(c) were initiated by him. Thus, his prima facie satisfaction about non-furnishing of particulars/inaccurate particulars is clearly discernible. 17.3 In terms of S. 271(lB), there is clear satisfaction of the Assessing Officer with regard to furnishing of inaccurate particulars of income or concealment of income as seen from the assessment order.
17.4 Hence, the objection of the assessee is not tenable and the contentions of the AR on this technical issue are not acceptable."
18. On careful perusal of the impugned order, at the outset, we observe that the Assessing Officer confirmed and upheld the penalty of Rs.77,89,965/- towards interest on HDF. In the original assessment order dated 31.03.2003, this issue was decided in para 5 with the following observations:-
19 ITA No.5709/Del/2010Asstt.Year: 2000-01
"5. Interest On SDF Loan:
5.1 As per point no. 17 of the notes of the statement of income it is stated as under:-
"The erstwhile Triveni Engg. & Industries Ltd. as earlier being providing interest on loan from Sugar Development Fund in its books on accrual basis but the unpaid amounts have been disallowed by the department u/s 43B in earlier assessments holding SDF to be a financial institution against which the assessee is in appeal in the respective years. During the previous years relevant to this asstt. year, the assessee company has paid interest of Rs. 14.40 lacs out of the amounts provided earlier. The actual payment now having been made in this year, the assessee has claimed the amount ofRs.J4.40 lacs as deductible u1s 43B, since, the provision made in earlier years have not been a11owed. In case the assessee succeeds in its appeal the amount claimed this year shall be offered for tax."
5.2 On examination of the record of earlier years, 'it is found that in the earlier years, the Assessing Officer in the case of the assesseee company has disallowed the provision of interest on loan from Sugar Development Fund u/s 43B holding SDF to be a financial institution. This year on checking the details of Interest accrued but not Due, it has been found that following amount of interest which have accrued during the year have either been not paid or paid after filing of Return:
DEOBAND UNIT Amount Date of Payment
(i) SDF SOFT LOAN Rs. 88,767/- 29.01.01
(ii) SDF MODERN Rs 69,75,000/ Not yet paid
(iii) SDF(CANE DEV) Rs. 4, 27,420/- 10.02.01 KHATAULI UNIT
(iv) S.D.F.-MOD-ISO Rs 66,575/- 22.01.01 RAM KOLA UNIT
(v) SDF NEW DELHI Rs 2,32,203/- 31.03.2001 Total Interest on SDF Loan Rs. 77,89,965 20 ITA No.5709/Del/2010 Asstt.Year: 2000-01 5.3 Therefore unpaid or late paid amount of Rs77,89,965/- on account of SDF LOAN is disallowed u/s 43B following the decision of the department in earlier years that Sugar Development Fund is a Financial Institution.
5.4 Following the above stand of the department) deduction of Rs. 14,40,000,- as interest paid on SDF Loan is allowed to the assessee on payment basis. However, the whole computation with regard to allowability of this interest will be reviewed on final outcome of pending appeal."
19. In view of above, we observe that in the original assessment order, the Assessing Officer has made multiple additions by making disallowances and after conclusion of every issue and addition, he has specifically mentioned his satisfaction about initiation of penalty proceedings related to that issue and at the end of the order, he stated that issue penalty notice u/s 271(1)(c) as discussed above. But at the same time, on careful reading of para 5 of assessment order pertaining to the interest on SDF loan, we observe that after para 5.4, there is nothing to show that the Assessing Officer has recorded his satisfaction as required by the statute for initiation of penalty proceedings.
20. Respectfully following the judgment of Hon'ble Jurisdictional High Court in the case of Madhushree Gupta (supra) and ITAT Delhi Bench in the cases of Cornerstone Financial Services (supra), Global Green Company Limited(supra) and ITAT Kolkata Bench in the case of Budge Budge 21 ITA No.5709/Del/2010 Asstt.Year: 2000-01 Co.Ltd. (supra), in the present case, we hold that the Assessing Officer has not recorded his satisfaction for initiation of penalty proceedings in regard to the additions made pertaining to interest on SDF loan at the end of relevant part of the order. Accordingly, impugned order inter alia original penalty order dated 18.03.2009 cannot be sustained and upheld. Therefore, we set aside the same and ground no. 1.2 is allowed.
Ground No. 2, 2.1 and 2.2
21. Since apropos ground no.1.2, it has been held that the Assessing Officer has not recorded his satisfaction in the assessment order for initiation of penalty proceedings and all subsequent proceeding become futile because the initiation of penalty proceedings was void ab initio. In the light of above observation and the issue of limitation, penalty not automatic, true and full disclosure, bonafide belief/bonafide claim and debatable issue raised before Hon'ble High Court become academic, therefore, we decline to decide this issue in the light of our decision for ground no.1.2. Hence, these grounds are also dismissed.
22. In the result, the appeal of the assessee is allowed. 22 ITA No.5709/Del/2010 Asstt.Year: 2000-01
Order pronounced in the open court on 07.02.2013.
Sd/- Sd/-
(SHAMIM YAHYA) (CHANDRAMOHAN GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
DT. 7th FEBRUARY, 2013
'GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. Commissioner of Income Tax(A)
4. CIT
5. DR
True copy
By Order
Asstt.Registrar