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TMI Blog2004 (1) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 4445 and 4446/Del/2000 against two orders of learned CIT(A), both dt.12th March, 1998for asst. yrs. 1993-94 and 1994-95. The learned CIT(A) has sustained penalty of Rs. 25,000 under s. 271(1)(c) of the IT Act, 1961 (hereinafter referred to as the "Act") for asst. yr. 1993-94 and the penalty of Rs. 28,000 under the same provision for asst. yr. 1994-95. The sustenance of the penalty in both the years has been challenged by the assessee before the Tribunal in the two appeals. 4. At the time of filing of the appeals, the assessee had deposited Tribunal fee of Rs. 10,000 in each of these appeals. Later on, the assessee moved an application stating that he was required to pay fee of Rs. 500 each and, therefore, the balance amount of Rs. 9,500 be refunded to him in each of the appeals. In this regard reliance was placed on the decision of Bombay Bench of the Tribunal in the case of Amruta Enterprises vs. Dy. CIT (2003) 79 TTJ (Mumbai) 214 : (2003) 84 ITD 172 (Mumbai). The Bench considered the application of the assessee and observed that since conflicting views had been taken by different Benches of the Tribunal on the issue as to how much Tribunal fee is required to be paid on an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connected with the assessment order, the fees shall be regulated by sub-cls. (a) to (c) of s. 253(6). He laid emphasis on the words "in the case to which appeal relates" and submitted that since the appeal relates to the case i.e. to the assessment order, the income as computed by the AO, has got significance for the determination of the levy of Tribunal fee. He emphatically submitted that the order of penalty is intrinsically connected with the assessed income and therefore the penalty order emanates from the assessment order. He further explained that it is the assessed income which is relevant and if the assessment order is set aside or cancelled, the penalty order also stands cancelled or set aside accordingly and if the addition on which penalty has been imposed, is reduced, then the amount of penalty is also reduced. According to him, the imposition of penalty under s. 271(1)(c) is directly related to the assessed income and therefore the Tribunal fee payable on the appeals filed against the sustenance of penalty is to be regulated by cls. (a) to (c) and not by cl. (d). The learned Departmental Representative also pointed out that even the CBDT while explaining the scope of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the total income of the assessee as computed by the AO, in the case to which the appeal relates, is one hundred thousand rupees or less, five hundred rupees. (b) Where the total income of the assessee, computed as aforesaid, in the case to which the appeal relates is more than one hundred thousand rupees but not more than two hundred thousand rupees, one thousand five hundred rupees, (c) Where the total income of the assessee, computed as aforesaid in the case to which the appeal relates is more than two hundred thousand rupees, one per cent of the assessed income, subject to a maximum of ten thousand rupees. (d) Where the subject-matter of an appeal relates to any matter, other than those specified in cls. (a), (b) and (c), five hundred rupees. 11. On a bare perusal of the above provisions, it is found that the legislature has adopted different terms in different clauses of s. 253(6) of the IT Act. So far as cls. (a), (b) and (c) are concerned, the relevant terms are "in the case to which appeal relates" i.e. if the appeal relates to the case , the total income of the assessee, as computed by the AO shall be taken into account for working out the Tribunal fee. The te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined , the Tribunal has very wide power to deal with all questions of fact and law pertaining to that subject-matter of appeal. 15. In the case of Ugar Sugar Works Ltd. vs. CIT (1982) 27 CTR (Bom) 174 : (1983) 141 ITR 326 (Bom) the Hon ble Bombay High Court has observed that if initially the Tribunal did not have jurisdiction to adjudicate on a finding of the ITO as it was not the subject-matter of appeal before it, then it would not get the jurisdiction merely because such a contention was taken in the memo of appeal. Thus, the subject-matter of appeal before the Tribunal gives jurisdiction to it for exercising its powers to pass such an order as it deems fit. 16. The Hon ble Allahabad High Court has also considered the issue in the case of S.P. Kochhar vs. ITO (1983) 37 CTR (All) 49 : (1984) 145 ITR 255 (All). While explaining the scope of s. 254, relating to the power of Tribunal, the Hon ble Court has observed that the word "thereon" is significant inasmuch as it restricts the jurisdiction of the Tribunal to the subject-matter of the appeal as constituted by the original grounds of appeal and such additional grounds as may be raised by the leave of the Tribunal. It was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of say Rs. ten lakhs and out of these additions he treats an addition of Rs. one lakh representing concealed income. He is, therefore, to confine only to this item of concealed income for imposing penalty and for computing the amount of penalty. Therefore, the total income computed by AO though relevant for working out the manner of computation of penalty, is irrelevant for imposition of penalty. Thus the total assessed income or income as computed by the AO has little significance to the concealed income which is relevant for imposition of penalty. 19.2 The matter may be viewed from a different angle also. Supposing AO computes income at Rs. one crore out of which an amount of Rs. one lakh represents the concealed income. The income assessed by the AO is reduced to Rs. ten lakhs by the learned CIT(A) without affecting the addition of Rs. one lakh relating to concealed income. In this case though the assessed income is reduced but the concealed income remains the same. Thus in this case also the assessed income is different from the concealed income. 20. It may be noted out that the levy of penalty is based on the tax sought to be evaded and not on the total income determined b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of levy of penalty under s. 271(1)(c) and the powers of departmental authorities, observed as under: "Sec. 271(1) confers power upon the ITO as well as upon the AAC to take penalty proceedings. If the ITO in the course of any proceedings under the Act before him is satisfied that any one of the defaults mentioned in cls. (a), (b) and (c) has been committed he may take proceedings for imposition of a penalty. Likewise, if the AAC is satisfied in the course of proceedings before him that such default has been committed, he may also take proceedings for imposing a penalty; it would seem then that whether the ITO is empowered to impose a penalty or the AAC is empowered to do so depends upon whether the satisfaction that a default is committed is arrived at by the authority concerned in the course of proceedings before him." 24. Further, theHon ble Courtin the said report has observed as under: "The IAC has jurisdiction to impose penalty in respect of concealed income discovered by the ITO in a proceeding before him and the AAC has jurisdiction to impose penalty in respect of concealed income discovered by him in a proceeding before him." 25. In the case of Banaras Textorium v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of penalty under s. 271(1)(c)." 28. In view of these decisions also, it is clear that penalty proceedings are different from the assessment proceedings and the two proceedings involve separate considerations and thus the basis for imposing penalty for concealment of income is to be taken out separately and independently for the assessment order. 29. It may be pointed out that by Finance Act, 1999 s. 253(6) was amended by adding cl. (d). The Board vide Circular No. 779 dt.14th Sept., 1999reported in [(1999) 156 CTR (St) 17 : (1999) 240 ITR 3 (St)] has clarified the objects behind inserting the new clause in para 54. The relevant part of this para is as under: "(i) The Finance Act, 1999, 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 the 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. The Act, therefore, has amended s. 249 of the IT Act to provide a fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason of the remedy. 33. The rule then directs that the Courts must adopt that construction which shall suppress the mischief and advance the remedy. This rule was further explained by Hon ble Shri S.R. Das, the then Chief Justice of India, in the case of Bengal Immunity Co. vs. State of Bihar AIR 1955 SC 661 and it was observed by the Hon ble Court that the Judges should make such construction as shall suppress the mischief and advance the remedy, and to suppress subtle inventions and evasions for continuance of the mischief. From this approach also it will be obvious that through sub-cl. (d) the legislature intends to remove the mischief by excluding those cases from the purview of cls. (a), (b) and (c) whose subject-matter was different. To iterate, the subject-matter of the cases relating to assessed income is different from the subject-matter of the cases relating to other matters and since imposition of penalty is a different subject-matter other than the matter of assessment order or assessed income, as clarified above, such cases are to be taken out from cls. (a), (b) and (c) and are to be put in cl. (d). Thus, the purpose for which the newly inserted provision was made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid that the penalty order under s. 271(1)(c) is distinct from the total assessed income. According to the Bench, it is proper to say that penalty order is directly related to the assessed income and is inseparable from the assessment order. We are unable to concur with this view. In view of the discussion made in the preceding paragraphs and in view of our reasons given in support of our conclusion, we, therefore, do not subscribe to this view as in our view the subject-matter of penalty order is not directly and necessarily related to the subject-matter of assessment order, since a separate provision has been inserted in cl. (d) of s. 253(6), for dealing with such different matters including the matter of concealed income. The same are to be taken out of the sweep of the provisions contained under sub-cls. (a) to (c) of s. 253(6). In taking this view we are supported by the earlier orders of the Tribunal in the cases of Amruta Enterprises vs. Dy. CIT, and Maini Co. vs. Asstt. CIT. 36. In view of the above, we are unable to uphold the contention of the learned Departmental Representative and agree with the learned counsel for the assessee that the subject-matter of appeal rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed challans showing payment of Court fee of Rs. 500 for each of the assessment years. On the directions of the Registrar, Tribunal, the assessee further deposited Court fees of Rs. 9,500 for each of the years on9th Nov., 2000. Subsequently, however, the assessee filed applications for refund of Rs. 9,500 for each assessment year which, according to the assessee, has been paid in excess. The assessee contended that since the two appeals do not relate to assessment of income, filing fees of Rs. 500 for each assessment year is to be paid in view of cl. (d) of sub-s. (6) of s. 253. It was, in these circumstances, that the issue whether filing fee in the case of order of penalty levied under s. 271(1)(c) is to be paid as per scale of fee provided under cls. (a) to (c) of s. 253(6) or whether the residuary cl. (d) would be applicable for determining the Court fees. 5. Sec. 253(6) of the IT Act, 1961 deals with payment of Court fees in respect of the appeal before the Tribunal. This section, as originally enacted, reads as under: "An appeal to the Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and shall except in the case of an appeal referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,500 in cases where the total income as so computed is more than Rs. 1 lakh. The former type of cases would include cases where the total income computed by the AO is a negative figure." 6. With effect from1st Oct., 1998, s. 253(6) was amended by the Finance (No. 2) Act, 1998 enhancing the Court fee for filing appeals before the Tribunal. This amended provision which came into force w.e.f.1st Oct., 1998read as under: "(6) An appeal to the Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and shall, in the case of an appeal made, on or after the 1st day of Oct., 1998, irrespective of the date of initiation of the assessment proceedings relating thereto, be accompanied by a fee of, (a) where the total income of the assessee as computed by the AO, in the case to which the appeal relates is one hundred thousand rupees or less, five hundred rupees, (b) where the total income of the assessee, computed as aforesaid, in the case to which the appeal relates is more than one hundred thousand rupees but not more than two hundred thousand rupees, one thousand five hundred rupees, (c) where the total income of the assessee, computed as aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f s. 253 or whether it falls in the residuary cl. (d). Shri K.R. Manjani, learned counsel appearing on behalf of the assessee argued that penalty under s. 271(1)(c) falls in the residuary cl. (d) inasmuch as it has no relation with the assessed income. According to the learned counsel, the legislative intention in introducing cl. (d) by the Finance Act, 1999 is to specifically provide that in case of appeals which involve penalties under various sections of the IT Act like ss. 269D, 271B, 271D and 271 etc., fee of Rs. 500 would be paid by an aggrieved assessee while filing an appeal. He further added that since such appeals do not involve the question of assessment of income, the legislature de-linked the levy of filing fee in this residuary group from the quantum of total income computed by the AO. Learned counsel strongly pleaded that provision involving the amount of fee to be paid by the assessee has to be liberally construed and the assessee should get the benefit of any ambiguity in the construction of the provisions contained under s. 253(6). Shri Manjani placed reliance on the two decisions of the Tribunal, namely, Amruta Enterprises vs. Dy. CIT and Maini Co. vs. Asstt. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictive content and ought not be so construed. When the section speaks of an appeal which relates to a case in which total income has been assessed by an AO at a particular figure, this clearly means that the appeal bears a relationship or connection with the entire factual matrix involving assessment of total income. In case the appeal has no such connection with the assessment of income, like penalties under ss. 271D, 271B, 271E, etc., this would clearly be outside the purview of cls. (a), (b) and (c) and would thus fall under the residuary group of appeals as provided under cl. (d). 12. Now, the question which arises before us is whether penalty under s. 271(1)(c) is relatable to assessed income and hence covered by cls. (a) to (c) or not. As per the statutory requirement indicated under s. 271(1), penalty proceedings under s. 271(1)(c) are necessarily to be initiated during the course of assessment proceedings and, therefore, the close connection or nexus of concealment penalty with the assessed income is intrinsically engrained in the statute itself. Penalty under s. 271(1)(c) is leviable on the income concealed which has obviously been added in the total income and forms a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... June, 1992 as per the amendment inserted by Finance Act, 1992. The constitutional validity of the amended provision substituted by Finance Act, 1992 has been upheld by the Rajasthan High Court in the case of Moti Engineering (P) Ltd. vs. Union of India (1995) 126 CTR (Raj) 393 : (1996) 218 ITR 50 (Raj) wherein, while explaining the amended provision, the High Court observed that the provision indicates the guidelines and the basis on which the Court fee is to be paid linking the same with the quantum of income assessed. Thus, the expression "appeal relates to a case in which the total income of the assessee as computed by the AO " has been interpreted by the High Court as levy of fee based on the total income assessed in the case of the aggrieved assessee. The cls. (a), (b) and (c) inserted under s. 253(6) by the Finance (No. 2) Act, 1998 are similarly worded and would essentially be construed in a similar manner as laid down by the Rajasthan High Court in the aforesaid judgment. Now, coming to cl. (d) which has been added to s. 253(6) by Finance Act, 1999 w.e.f. 1st June, 1999, this has been inserted by the legislature since, appeals are also filed on issues, such as TDS defaults, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -connected and interlinked. Regarding the observation of the learned Judicial Member that assessed income and concealed income are different subject-matters, I cannot help observing that facts in the instant two appeals before us indicate that assessed income and concealed income are the same. In fact, it is not difficult to visualise such situations where the assessed income and concealed income are same inasmuch as what is brought to tax may, in the circumstances of a case, be treated as income concealed for the purposes of penalty under s. 271(1)(c). Be that as it may, the point for consideration arising before us is whether appeal against concealment penalty relates to assessed income or not. In my considered opinion, the obvious answer is yes. 15. The view taken by the learned Judicial Member, with which the learned Vice President has also concurred with, that the expression "case to which the appeals relates" denotes assessment order only is in my opinion contrary to full and true import of the expression used in cls. (a), (b) and (c) and the restrictive interpretation tantamounts to doing violence to the unambriguous language in which these clauses have been enacted. Had t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsiderations of justice and reason flows from the language of the s. 253(6). 16. Levy of Court fee in relation to appeal involving penalty under s. 271(1)(c) has been invariably considered on the same footing as a quantum appeal as per s. 253(6). A long-standing practice which is in conformity with the legislative intention and also sanctified by judicial benediction should not normally be departed from unless it is in conflict with the express provision contained in the statute. For construction of a statute, it is trite, the actual practice may be taken into consideration. 17. In Corpus Juris Secondum, Vol. 82, p. 761, it is stated that the controlling effect of this aid which is known as executive construction would depend upon various factors such as the length of time for which it is followed, the nature of rights and property affected by it, the injustice resulting from its departure and the approval that it has received in judicial decisions or in legislation. 18. In Francis Sennion Statutory Interpretation, Fourth Ed., the law is stated in the following terms at p. 596: "Sec. 231. The basic rule: In the period immediately following its enactment, the history of ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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