2014 (9) TMI 608 - AT - Income Tax

Levy of penalty u/s 271(1)(c) Time limit for passing order expired or not Limitation period u/s 275(1)(a) - Concealment of facts and furnishing of inaccurate particulars or not Held that - The AO had made certain additions to the income of the assessee, while finalsing the assessment, that the appeal filed by the assessee was dismissed by the FAA, that the assessee itself withdrew the quantum appeal filed before the Tribunal, that the AO levied penalty u/s 271(1)(c) of the Act - no one has a vested and substantive right in the procedure and limitation has to be considered as a part of the procedural law as distinct from substantive law, that the law of procedure may be said to be that branch of the law which governs the process of litigation, that it is the law of actions, all the residue is substantive law and relates not to the process of litigation, but to its purposes and subject-matter - as far as provisions of sections 115, 143, 115(o) are concerned, it is suffice to say that they all deal with substantive law and determine the rights of the assessee - A perusal of chapter XXI reveal that section 271 is a substantive provision whereas section 274 provides the procedure to be followed in giving effect to the said substantive charging provision and section 275 creates a bar of limitation against the imposition of penalty - while deciding the question of limitation as mentioned in the section, penalty order passed by the AO was within the time-limit envisaged by the Act - the FAA has reduced the penalty from 200% to 100% - thus, the order of the CIT(A) is upheld Decided against assessee.

Issues Involved:
1. Whether the penalty order under section 271(1)(c) was passed beyond the permissible time limit.
2. Whether the imposition of penalty under section 271(1)(c) was justified given the facts and circumstances of the case.

Issue-Wise Detailed Analysis:

1. Time Limit for Passing the Penalty Order:

The assessee argued that the penalty order was passed beyond the time limit prescribed by the Act. The Authorized Representative (AR) contended that the Act did not stipulate that the Assessing Officer (AO) should wait for the order of the Tribunal for imposing penalty. The AR referred to the budget speech of the Finance Minister and various case laws to support the argument that the penalty order was time-barred.

The Departmental Representative (DR) countered that the penalty was imposed within the time limit. The DR argued that the limitation period for the levy of penalty would be as provided for under section 275(1)(a), which is six months from the end of the month in which the order of the Tribunal is received by the AO.

The Tribunal examined the rival submissions and noted that two High Courts had decided the issue against the assessee's stand. The Tribunal referred to various judgments, including the case of Mohair Investment and Trading Co. P. Ltd. and Rayala Corporation P. Ltd., to conclude that the penalty order was passed within the permissible time limit. The Tribunal emphasized that judicial discipline and precedents demand following the decisions of higher courts.

2. Justification of Penalty Imposition:

The assessee contended that the penalty under section 271(1)(c) was not justified as it had neither concealed any facts nor furnished any inaccurate particulars. The AR argued that the explanation given by the assessee was not found to be false and that it had disclosed all the facts in earlier years.

The AO found that the assessee had claimed an expenditure of Rs. 10,50,578/- on account of discounting charges but failed to provide necessary details and evidence to substantiate the claim. The AO held that the assessee had concealed the particulars of income and initiated penalty proceedings under section 271(1)(c).

The First Appeal Authority (FAA) upheld the AO's decision, stating that the assessee was in no position to explain and substantiate its claim of discounting charges. The FAA relied on the judgment of the Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. and confirmed the penalty imposed by the AO, though reduced it to 100% of the tax sought to be evaded instead of 200%.

The Tribunal reviewed the facts and noted that the assessee had failed to substantiate its claim about the payments to be made. The Tribunal found it surprising that the parties who were to receive the sums had not approached the assessee for many years. The Tribunal held that making a claim of any expenditure in itself is not sufficient; it has to be proved by some kind of evidence. The Tribunal concluded that the AO rightly levied the penalty for furnishing inaccurate particulars of income and concealing income.

Conclusion:

The Tribunal dismissed the appeal filed by the assessee, confirming that the penalty order was passed within the time limit prescribed by the Act and that the imposition of penalty under section 271(1)(c) was justified given the facts and circumstances of the case. The Tribunal upheld the FAA's order, which had reduced the penalty from 200% to 100% of the tax sought to be evaded.

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