2016 (2) TMI 878 - AT - Income Tax

Validity of penalty orders u/s 271(1)(c) - period of limitation - Held that - The case of Rayala Corporation Pvt. Ltd. Vs. UOI & Ors. (2006 (4) TMI 96 - MADRAS High Court) has considered proviso to section 275(1)(a) of the Act vis- -vis appeal to the Tribunal and held 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 6 months from the end of the month when the order of the Tribunal, is received by the third respondent. The Hon ble Madras High Court also supports our view expressed above. In view of the above, we find that the Ld. CIT(A) has rightly held that the penalty order passed by the A.O. within the period of limitation i.e. within 1 year as per the proviso to section 275(1)(a) of the Act. Thus, we uphold the order of the CIT(A). This ground of appeal raised by the assessee is dismissed. After careful consideration of the orders of the authorities below and also particularly the penalty order passed by the A.O., we find that the assessee has not filed the details in respect of interest payment, unexplained investment in jewellery, bogus sundry creditors. Therefore, the A.O. after considering the non-filing of the above details and held that the assessee has concealed the income and came to a conclusion that it is a fit case to levy the penalty and accordingly penalty has been levied. We find that the assessee has not filed details in respect of the interest payment, unexplained investment in jewellery, sundry creditors. Therefore, by filing inaccurate particulars, the assessee has concealed the income. In the present case, section 271(1)(c) of the Act attracts on both the counts i.e. concealment of particulars of income and furnishing inaccurate particulars. Therefore, the penalty levied by the A.O. is justified and the notice issued by the A.O. cannot be said that a vague notice. - Decided against assessee

Issues Involved:
1. Limitation period for passing the penalty order.
2. Validity of notice issued under section 274 r.w.s. 271(1)(c).
3. Independent findings for the levy of penalty.
4. Reasonable opportunity to the assessee.
5. Merits of the penalty levied.

Issue-wise Detailed Analysis:

1. Limitation Period for Passing the Penalty Order:
The assessee contended that the penalty order passed by the AO was barred by limitation as per section 275(1)(a) of the Act. The CIT(A) upheld the AO's order, stating that the proviso to section 275(1)(a) extends the period of imposing penalty from 6 months to 1 year if the CIT(A) passes the order after 1st June 2003. The Tribunal confirmed that the penalty order was passed within the extended period of one year, referencing the Hon'ble Delhi High Court's judgment in CIT Vs. Mohair Investments & Trading Company Pvt. Ltd., which clarified that the extended period applies only to orders passed by the CIT(A).

2. Validity of Notice Issued Under Section 274 r.w.s. 271(1)(c):
The assessee argued that the notice issued was vague and thus invalid. The CIT(A) rejected this argument, noting that the assessee had responded to the notice and requested to keep the penalty in abeyance, indicating awareness of the notice's purpose. The Tribunal upheld this view, stating that since the assessee participated in the penalty proceedings, the objection regarding the notice's vagueness was not acceptable.

3. Independent Findings for the Levy of Penalty:
The assessee claimed that the penalty order was based solely on findings from the assessment and CIT(A) orders without independent findings. The Tribunal did not find merit in this argument, noting that the AO had considered the non-filing of details regarding interest payment, unexplained investment in jewelry, and bogus sundry creditors, concluding that the assessee had concealed income and furnished inaccurate particulars.

4. Reasonable Opportunity to the Assessee:
The assessee contended that the AO did not provide a reasonable opportunity as required under section 274. The CIT(A) and Tribunal found that the assessee had been given opportunities to respond and had requested to keep the penalty proceedings in abeyance, thus dismissing this ground.

5. Merits of the Penalty Levied:
The Tribunal reviewed the specific additions for which penalties were levied, including additional construction agreements, under-reporting of gross profit, unaccounted cash receipts, undisclosed loans and interest, and disallowance under section 40A(3). The Tribunal upheld the penalties, finding that the assessee had not filed necessary details and had concealed income, thereby justifying the penalty under section 271(1)(c).

Conclusion:
The Tribunal dismissed the appeals for all assessment years, confirming that the penalty orders were within the limitation period, the notices were valid, the AO had made independent findings, reasonable opportunity was provided, and the penalties were justified on merits. The order was pronounced in the open court on 28th January 2016.

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