2021 (4) TMI 1139 - HC - Income Tax

Levy of penalty u/s 271 (1) (c) - Appellant has not established reasonable cause for the non submission of the returns within the time prescribed u/s 153(1) - Scope of amendment to Explanation 3 to Section 271(1)(c) - whether the Income Tax Appellate Tribunal was correct in upholding the orders of the Assessing Officer who in fact had 'allegedly' given retrospective effect to Explanation 3 to Section 271(1)(c)? - HELD THAT - It is not the case of the appellant that he had filed the Income Tax Returns for all the three years namely 1999-2000, 2000- 2001 and 2001-2002 within the specified period as mentioned in sub section 1 of Section 153 of Income Tax Act. As such the due dates for filing these returns were 31.10.1999, 31.10.2000 and 31.10.2001 respectively. While this being so, these returns were filed on 07.04.2005, 15.06.2005 and 19.12.2005 respectively for the assessment years. These filing of returns were also subsequent to the issue of notice dated 23.12.2004 under Section 148 of the Act after the survey under Section 133-A of the Act. It is also pertinent to mention that the survey under Section 133 A of the Act was conducted subsequent to which the audit of accounts was completed and the consequent Income Tax Returns were filed. Explanation 3 to Section 271(1)(C) is categorical as to where concealment of income can be deemed. Moreover, in the instant case the Income Tax Appellate Tribunal observation is significant. It is not also the case of the appellant that the Income Tax Returns were filed before the amendment to Explanation 3 to Section 271(1)(c) was brought in. Therefore, there is no substance in the contention of the learned counsel for the appellant in claiming that the said amendment has been applied retrospectively. Interestingly, the learned counsel for the appellant has tried to take shelter that the words Who has not previously been assessed under this Act which was a part of the Explanation 3 to Section 271(1)(C) prior to 01.04.2003 and omitted thereafter stating that he was an existing assessee even prior to the amendment and therefore the amended explanation was not applicable to him. However, this point has already been dealt with and clarified and needs no further elaboration. Appeal dismissed.

Summary

Issues:
1. Appeal against the order of the Income Tax Appellate Tribunal regarding penalty under Section 271(1)(c) for assessment years 1999-2000, 2000-2001, and 2001-2002.
2. Applicability of the amended Explanation 3 to Section 271(1)(c) of the Income Tax Act retrospectively.

Issue 1: Appeal against Penalty Order:
The appellant, engaged in business, challenged the penalty imposed under Section 271(1)(c) by the Assessing Officer, which was upheld by the Income Tax Appellate Tribunal. The Commissioner of Income Tax (Appeals) initially set aside the penalty, but the Tribunal reversed this decision. The substantial questions of law raised included the confirmation of the penalty for the mentioned assessment years and the establishment of reasonable cause for late submission of returns under Section 153(1).

Analysis:
The appellant argued that the amended Explanation 3 should not apply retrospectively to assessment years before 01.04.2003. Citing relevant judgments, the appellant contended that the amendment did not apply to those previously assessed. However, the respondent highlighted the appellant's failure to file returns within the specified period, despite subsequent notices and surveys under Section 133-A. The Tribunal's decision was based on the conditions specified in Explanation 3, emphasizing non-filing of returns within the prescribed time and the satisfaction of the Assessing Officer regarding taxable income.

Issue 2: Applicability of Amended Explanation 3:
The contention revolved around the retrospective application of the amended Explanation 3 to Section 271(1)(c), specifically whether the Tribunal was correct in upholding the penalty based on this amendment. The appellant's argument centered on the timing of return filings and the absence of reasonable cause for the delays.

Analysis:
The Tribunal's decision emphasized the lack of reasonable cause provided by the appellant for late filings, especially after notices were issued. The Tribunal noted that the appellant failed to furnish returns within the specified time, as mandated by Section 153(1). The Tribunal's observation highlighted the appellant's inability to provide valid reasons for the delays, leading to the dismissal of the appeals against the penalty.

In conclusion, the High Court dismissed the appeals, upholding the Tribunal's decision regarding the penalty under Section 271(1)(c) for the mentioned assessment years. The Court clarified that the amended Explanation 3 applied to the appellant's case, given the fulfillment of conditions outlined in the provision. The judgments cited by the appellant were deemed inapplicable due to differences in factual circumstances.