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TMI Blog2019 (4) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... gs in the assessment proceedings have not thus be treated as final adjudication binding in the penalty proceedings. An approach adopted by the basis of the views expressed by Hon’ble High Court, even if non jurisdictional, cannot be said to be a glaring error incapable of two views being taken. Even if the rectification petition was to be treated as a petition filed well within the time limit, the rectification petition was to be dismissed on merits anyway- in the light of the nature of the mistake and the limited scope of powers under section 254(2). There would not have been any difference to the outcome of the exercise. Dismissal of this rectification petition is on account of delay in filing of rectification petition as also on account of inherently limited powers vested in the Tribunal under section 254(2). That does not affect the fact that, in the light of the observations of Hon’ble jurisdictional High Court, this Tribunal was in error in granting the relief in the impugned order and we must gracefully acknowledge the same. There are, however, limitation to what we can do in the course of exercise of our powers under section 254(2) and as much as we must acknowledge o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at. The Assessing Officer also imposed the concealment penalty under section 271(1)(c) by treating the entire amount of ₹ 43,72,650 as income that the assessee concealed and in respect of which reasonable explanation of the assessee was not available. The explanation given by the assessee was rejected by the Assessing Officer who, inter alia, observed as follows: However, the same (explanation) is not acceptable as the assessee has not filed any justification of cash deposited in bank account. The same story is repeated as submission filed by the assessee at the time of assessment proceedings. As such, I have reasons to believe that the assessee has nothing (worthwhile) to say about the penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961. Further, the assessee has not filed appeal against the order passed under section 143(3) before the CIT(A). 3. The assessee was thus imposed a penalty of ₹ 13,00,990 being equivalent to 100% of the tax sought to be evaded. In appeal, learned CIT(A) extensively reproduced from Hon ble Supreme Court s judgment in the case MAK Data Limited Vs CIT [(2013) 358 ITR 593 (SC)], confirmed the said penalty a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able profit on turnover of the assessee reflecting by cash deposits. Thus, as against an addition of ₹ 43,72,650/- penalty to the extent relatable to addition of ₹ 4,37,265/- will certainly be justified. Learned counsel for the assessee does not also dispute this position. As regards the balance quantum addition, we find that similar deposits have been treated as deposits in the course of business, in past, and, to that extent, explanation deserves to be accepted at least for penalty purposes. Accordingly, in our considered view, accepting assessee s explanation, though not proved to the hilt, that the deposits represent dealings in connection with business, we confirm the impugned penalty to the extent relatable to the addition of ₹ 4,37,265/-. The balance amount of penalty stands deleted. 4. Rather than challenging this relief in appeal before Hon ble High Court, which was not permissible anyway in the light of applicable monetary limits for filing of appeals, the Principal Commissioner of Income Tax concerned filed a writ petition before Hon ble Gujarat High Court on the ground that the Tribunal reduced penalty under section 271(1)(c) to 10% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of justice; or (c) such other undesirable and serious consequences. 4. The present case does not fall in any of the above categories of rare and exceptional cases , and, for this reason, Hon ble jurisdictional High Court did not entertain the writ petition challenging the order passed by the Tribunal. 5. Hon ble jurisdictional High Court has thus allowed the order passed by the Tribunal, which was challenged in the writ petition, to achieve finality. 6. Their Lordships, however, did not stop at that. Their Lordships had a message of caution and of disapproval of the course adopted by this Tribunal as well, and this message was so glaring in the closing observation as reproduced below: Before closing, however, we may record our disapproval of the approach adopted by the Tribunal while reducing the penalty. In plain terms, statutory provisions contained in section 271 envisage penalty which would be 100% of the tax sought to be evaded and which may go upto 300% thereof. The Tribunal, however, found a way to bypass this minimum limit by suggesting that the profit element embedded in the cash deposits could be subjected to penalty. When the proceedings of assessment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of income in this case became final, it was not open to Hon'ble ITAT to adjudicate the same and determine the concealed income a fresh in an appeal against penalty order. 2.4 The petitioner humbly submits that the quantum addition of ₹ 43,72,650/- on account of unexplained cash deposit in account of assessee has attained finality. Thus, the concealed income is ₹ 43,72,650/- and this has attained finality. The tax on the said addition is also calculated and thus, the tax sought to be evaded works out to ₹ 13,00,990/- as is evident from the penalty order dt. 29.07.2013. 2.5 As per law, therefore, minimum penalty leviable in this case is ₹ 13,00,990/-. However, the Hon'ble ITAT has upheld the penalty levied only of tax sought to be evaded, which is in gross violation of law u/s 271(1)(c) of the Act. 2.6. I humbly and with full respect submit that the Appellate Tribunal has exceeded its jurisdiction in penalty proceedings in restricting the penalty to 10% of tax payable on concealed income despite the fact that the addition u/s 69 of the Act has attained finality as the same has not been challenged by the Assessee. It is this order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Soparkar, learned Senior Advocate representing the assessee. We have also carefully perused the material on record and duly considered facts of the case in the light of the applicable legal position. 9. We must, at the outset, humbly bow to the observations made by Hon ble jurisdictional High Court and state, with all humility and in all sincerity, that we have taken a careful note of what Their Lordship consider the right course of action, and we will bear in mind these observations, in letter and in spirit, in the discharge of our judicial duties. As we go along, we may have to explain what the approach of the Tribunal was but that is not from the point of view of a debate on merits but simply from the limited point of view of whether our decision can be rectified under the limited scope of section 254(2) and there is absolutely no, and there cannot be any, question about reservations on what Their Lordships hold to be correct approach. As was said by Hon ble Supreme Court in the case of Assistant Collector of Central Excise vs Dunlop India Ltd. [1985] 154 ITR 172 , where the Hon ble Court has itself quoted from the decision of House of Lords, ..as was said in Cassell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 254(2) of the Act. Let us now take up these three aspects one by one. 12. So far as the limitation aspect is concerned, we find that Section 254(2), as it stands, provides, inter alia , that the Tribunal may, at any time within six months from the end of the month in which the order was passed , with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer . This time limit of six months from the end of the month in which the order has been passed is, as learned representatives fairly agree, judicially construed as application being filed within six months from the end of the month in which order is served on the aggrieved party and that is how the rectification petitions are being dealt with this Tribunal consistently. The delay is explained as on account of approaching the Hon ble High Court and it is contended that, for that reason, the delay was bonafide and the same deserves to be condoned. The impugned order was passed on 22nd September 2017 while the present rectification petition is filed on 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e undisputed past history of the case and the stand of the Departmental Representative, these bank deposits, aggregating to ₹ 43,72,650, could be treated as business receipts but then there was no explanation for the assessee not disclosing income element embedded therein to the extent of profits, which were taken @10% of turnover- as per past case history. In effect thus, explanation of the assessee was accepted to the extent of 90% of the quantum addition of ₹ 43,72,650 and there was no explanation at all for the remaining amount of 10% of quantum addition i.e. ₹ 4,37,265. The penalty to the extent relatable to ₹ 4,37,265 was confirmed, and as regards the balance amount of ₹ 39,35,385, the Tribunal observed that, we find that similar deposits have been treated as deposits in the course of business in the past, and, to that extent, explanation deserves to be accepted at least for penalty purposes . In effect thus, so far as the addition of ₹ 43,72,650 was concerned, the Tribunal held that the explanation of addition to the extent of ₹ 39,35,385 was acceptable inasmuch the additions in question were of the same nature which were treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this minimum limit by suggesting that the profit element embedded in the cash deposits could be subjected to penalty and observes that When the proceedings of assessment in which the additions in the hands of the assessee were made, the Tribunal could not have ignored such final conclusions by simply adopting the difference mode or yardstick to judge the amount of tax sought to be evaded by the assessee . With utmost respect, we humbly bow to the observations made by Their Lordships and accept, without entering into any debate or controversy, that it was a mistake to accept explanation to the extent of a part of the amount added to the income of the assessee, on the basis of past case history, on the basis of stand of the Departmental Representation and on the basis of what we considered to be reasonable explanation, but what needs to be carefully examined today is whether mistake be said to be a mistake apparent on record. The conclusions arrived at by us were purely factual and somewhat subjective in the sense it was based on our perceptions of what is reasonable. The observations of Hon ble High Court, disapproving the conclusions, are based on the proposition that the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al position will inevitably take us there, and we humbly accept our mistake. We may, however, add that the school of thought that It is settled that the findings given in the assessment proceedings would be relevant and admissible materials in penalty proceedings, but those findings cannot operate as res judicata because the considerations that arise in penalty proceedings are different from those in the assessment proceedings has consistently found favour with several non jurisdictional High Courts, including in the case of CIT Vs Ishitiaq Hussain [(1998) 232 ITR 673 (All)] . The findings in the assessment proceedings have not thus be treated as final adjudication binding in the penalty proceedings. An approach adopted by the basis of the views expressed by Hon ble High Court, even if non jurisdictional, cannot be said to be a glaring error incapable of two views being taken. 19. In view of the above discussions, even if the rectification petition was to be treated as a petition filed well within the time limit, the rectification petition was to be dismissed on merits anyway- in the light of the nature of the mistake and the limited scope of powers under section 254(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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