9911796707
TMI Blog2025 (4) TMI 1354X X X X Extracts X X X X X X X X Extracts X X X X ..... esponse to the notice u/s 153A served on the assessee for assessment years 2007-08 to 2012-13, the assessee submitted that the original returns of income filed u/s 139(1) for assessment years 2007-08 to 2012-13 may be treated as returns in response to the notice issued u/s 153A of the Act. 3. During the course of assessment proceedings the assessee took the decision to approach the Income Tax Settlement Commission and filed an application u/s 245C(1) of the Act on 20.03.2014 for settlement of his tax liability for assessment years 2007-08 to 2012-13. He disclosed the additional income of Rs. 3,65,24,551/- before the Settlement Commission for various years, the details of which are as under: A.Y. Income offered in return in response to notice u/s 153A Additional income offered in SOF 2007-08 1,18,22,840/- 10,21,000/- 2008-09 55,28,100/- 10,25,200/- 2009-10 3,84,01,950/- 10,25,200/- 2010-11 77,29,880/- 53,88,920/- 2011-12 6,81,83,870/- 2,07,56,798/- 2012-13 3,57,72,592/- 73,07,433/- 4. The application was admitted vide order dated 245D(1) on 01.04.2014.. The application was further allowed to be proceeded with vide order u/s 245D(2C) dated 26.05.2014. During ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty. It was further submitted that as the prosecution notice was withdrawn in the case of the assessee, the penalty should not be levied till the decision of the Hon'ble Bombay High Court. 8. However, the Assessing Officer rejected this plea of the assessee on the ground that the assessee's plea for granting of stay in penalty proceedings was cancelled by the Hon'ble Bombay High Court, therefore, the situation does not warrant the withdrawal of penalty proceedings. Subsequently, the application for stay of penalty proceedings was rejected by the Hon'ble Bombay High Court. The Assessing Officer, therefore, proceeded to decide the issue of penalty leviable u/s 271(1)(c) of the Act. He noted that for the year under consideration the assessee had filed return u/s 153A at Rs. 77,29,880/- and the additional income offered in the statement of facts is Rs. 53,88,920/-, out of which Rs. 50 lakh was offered as buffer income and Rs. 3,88,920/- was offered as notional rental income on house property. The addition of Rs. 39,20,00,000/- on income from salary was made by the Settlement Commission in its order u/s 245D(4) dated 27.08.2015. 9. So far as the Income from House property is concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, this plea of the assessee was not accepted by the Assessing Officer. According to the Assessing Officer, even though the assessee has made this buffer income voluntarily, it is nonetheless not offered for taxation in the return filed in the response to notice u/s 153A of the Act. According to the Assessing Officer, the assessee has disclosed the buffer income because he was sure that the income tax department during the search action had collected many evidences which would eventually result in enhanced income over and above that of the income offered in response to notice issued u/s 153A. The assessee had not hoped to cover the mistakes but to cover many possible additions to his total income. He, therefore, levied penalty on this additional income also. 11. The Assessing Officer further noted that the Settlement Commission, in its order passed u/s 245D(4), dated 27.08.2015, has unequivocally decided that assessee's global income will be taxed in India but before going to Settlement Commission the assessee, while submitting his original return of income, has revealed otherwise. According to the Assessing Officer in view of the settled law by Apex Court in Reliance case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;t be given the benefit of the doubt as there is a settled legal proposition and can't be said that he was ignorant of the provision of law Hence it's a clear case to levy penalty for concealing the particulars of income. 19. AR of the assessee also made claim that if the assessee is in writ before the high court AO cant levy penalty but it is to be noted that the Hon'ble Settlement Commission has revoked the immunity of the assessee from prosecution and penalty very well knowing that the assessee has gone into writ and also Hon'ble High Court has not allowed the assessee's prayer no (c) & (e) (i.e. pending the final hearing and disposal of the petition, direct that the respondents be restrained (whether acting themselves or through their servants / agents / employees or officers) from initiating and continuing any coercive, recovery or penalty proceedings in furtherance of the impugned order inter alia in relation to penalty notices or in respect of the additions resulting on account of the impugned order of the civil application. 20 In view of the above, discussion, the undersigned is satisfied that the assessee has concealed the particulars of income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question arises that in which date the penalty proceedings u/s 271(1)(c) of the IT Act, 1961 to be initiated i.e. 03.05.2017 (order passed by the Hon'ble settlement commission) or 31.03.2018 (notice initiated by the AO) and in which date, the said penalty proceedings to be completed i.e. 31.03.2018 (end of the financial year in which order u/s 245H(1A) passed by the Hon'ble settlement commission) or 30.09.2018 (within 06 months from the end of the month in which action for imposition of penalty is initiated). 5.4 Appellant has raised various grounds on merits as well as on technical aspects in this appeal. Apart from various contentions Appellant has also raised issue of time limit for levy of penalty u/s 271(1)(c) of the Act. In this regard, following key events chart is extracted from Appellant's submissions. Date Event 30-08-2008 Filing of regular return of income by the appellant. 27-08-2015 Hon'ble Settlement commission passed order u/s 245D(4) and made addition of Rs. 39.2 CR in excess of additional income for AY 2010-11 offered by the appellant and held that appellant as resident of India for AY 2010-11. 10-11-201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puting the actual limitation period u/s 271(1)(c), period for which immunity was granted is required to be worked out. Same is worked out as under. Date of granting immunity 245D(4) order dated 27.08.2015 Date of immunity withdrawal 245H(1A) order dated 03.05.2017 Immunity period 20 Months and 7 days i.e. August-15 balance days 4 days + Sep-15 to Apr-17 =20 Month + May-17 balance days = 3 days 20 Months and 7 days 5.8 The above mentioned period of 20 Months and 7 days is required to be added to the two time periods specified in section 275(1)(c). The emerging limitation dates are as under. 1st limitation date-For deducing the 1st limitation date, the date on which penalty proceedings were initiated needs to be determined. The said date has to be considered as the date of 245D(4) order i..e. 27.08.2015 (and not any earlier date of Settlement Commission proceedings). Typically, Penalty proceedings are initiated always during the assessment proceedings, wherein, point of "satisfaction" of concealment is reached. Now, perusal of the order u/s 245D(4) reveals that till the conclusion of hearings / proceedings, issues of QUANTUM of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d limitation date, one needs to work out the end date of 6 months period from the end of month in which, the penalty proceedings are initiated. Now, this 2nd limitation date transpires to be 30.11.2017 [i.e. 6 months from 31st May 2017 i.e. the end date of the month in which 245H(1A) order was passed.] In the present case, the concealment penalty is levied on 26.09.2018, hence, the said penalty order happens to be beyond the date of 2nd date of limitation. 5.9 Time limit u/s 245D(7) In the section 245D(7), a different time limit is provided for such Settlement Orders which are VOID. As per section 245D(6), a void order is that, wherein, Settlement has been obtained by misrepresentation of facts. Perusal of the 245D(4) order and 245H(1A) order does not reveal any such case, and as such, time limits u/s 245D(7) is not relevant in the instant case. 5.10 Time limit u/s 245HA - In section 245HA, various situations of abatement of Settlement proceedings are envisaged such as, case where, Settlement Application gets rejected or where, Settlement order is not passed within 18 months period and so on. Perusal of the 245D(4) and 245H(1A) order does not reveal such abatement situations. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and provisions of the Income Tax Act, 1961 and after getting satisfaction that there is concealment of income. 16. The assessee has also raised the following grounds in the appeal filed by him: 1. The learned I-T Authorities erred in law and on facts in levying penalty u/s 271(1)(c) of the ITA, 1961 amounting to Rs. 12,27,93,180/- (being 100% of the alleged tax evaded) for concealment of income. 2. The learned I-T Authorities erred in law and on facts in assuming jurisdiction for levying penalty u/s 271(1)(c) of the ITA, 1961 without appreciating that learned AO did not have any jurisdiction since the appellant's application was admitted by the Hon'ble Settlement Commission & it was for the Hon'ble Settlement Commission alone to deal with all the issues pertaining to tax, penalty or interest relating to the assessment years in question as per the provision of Sec. 245F(2) of ITA, 1961. It is further submitted that the exclusive jurisdiction u/s 245F(2) can't bestowed upon the regular AO in absence of suitable provision to that effect. 3. The learned I-T Authorities erred in law and on facts in levying penalty w.r.t. each and every issue of additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty w.r.t. such income which didn't emanate from any search proceeding. 10. The learned IT Authorities erred in law and on facts in levying penalty on ad-hoc buffer income amounting to Rs. 50,00,000 shown in Settlement Application without appreciating that the said income was included by the appellant to avoid any unintended lapses/errors/ omissions, etc. The learned AO erred on facts in levying penalty w.r.t. the said buffer income on the surmises/assumption/presumption that, the buffer income as in fact concealed income, despite the factum of absence of any relevant incriminating material. 11. Appellant craves leave to add/alter/delete/ modify, all/ any of the above grounds of appeal. 17. The Ld. DR at the outset challenged the order of the Ld. CIT(A) in cancelling the penalty on account of limitation. He submitted that the Ld. CIT(A) calculated the time for passing the penalty order u/s 245D(4) dated 27.08.2015 which was not correct and not acceptable. Referring to the provisions of section 275 of the Act, he submitted that the provisions of section 275(1)(c) are applicable to the facts of the case which read as under: "Section-275-Bar of limitation for imposing penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed within six months from the end of the month in which the penalty action was initiated. He submitted that in the instant case, the Assessing Officer initiated penalty proceedings on 31st March 2018, and the penalty order was passed on 29th September 2018. Since the order passed by the Assessing Officer is within the allowable period i.e. 30th September 2018, therefore, such order being in accordance with law is correct and the Ld. CIT(A) is not justified in deleting the penalty merely on the technical ground that the same is barred by limitation. 19. The Ld. DR submitted that in the assessment order for A.Y. 2010-2011, the additional income as per the return filed under Section 153A is Rs. 53,88,880/-. Furthermore, an addition of Rs. 39,20,00,000/- was made by the Settlement Commission on account of salary income in its order passed u/s 245D(4) dated 27th August 2015, which was not offered in the return of income filed under Section 153A. He submitted that the type of income disclosed before the Settlement Commission could have been disclosed by the assessee either in the original return of income or in the return filed in response to the notice under Section 153A. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) of sub-section (1) of section 271 of the Act. He accordingly submitted that the Assessing Officer was fully justified in levying the penalty u/s 271(1)(c) of the Act and the Ld. CIT(A) was not justified in deleting the same. 22. The Ld. Counsel for the assessee on the other hand while supporting the order of Ld. CIT(A) in quashing the penalty being barred by limitation submitted that the Assessing Officer has levied penalty u/s 271(1)(c) of the Act on the amount of Rs. 39,73,88,920/-, the details of which are as under: (i) Income on account of house property Rs. 3,88,920/- (ii) Buffer income declared Rs. 50,00,000/- (iii) Income from salary Rs. 39,20,00,000/- 23. So far as the income from house property amounting to Rs. 3,88,920/- is concerned, the Ld. Counsel for the assessee submitted that the assessee in his original return has declared the income from house property of Rs. 1,46,524/- (from Lunkad colonnade, Pune - Rs. 1,21,324/- and for Talegaon flat Rs. 25,200/-) and in the statements of facts submitted before the Settlement Commission, the assessee disclosed an amount of Rs. 31,920/- from Talegaon flat and Rs. 42,000/- from Lunkad Collonade Viman Nagar property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombay High Court in the case of Pr.CIT vs. Dhariwal Industries Ltd. vide ITA Nos.1133, 1136 and 1129 of 2016, order dated 04.09.2018, he submitted that the Hon'ble High Court in the said decision has upheld the order of the Tribunal holding that when substantial question of law is admitted before the High Court, no penalty can be levied u/s 271(1)(c) of the Act. 29. In his next plank of argument, the Ld. Counsel for the assessee referred to the order of the Ld. CIT(A) and submitted that the penalty levied by the Assessing Officer is barred by limitation and the Ld. CIT(A) has rightly cancelled the penalty on account of being barred by limitation. Referring to various other decisions including the decision of Hon'ble Supreme Court in the case of CIT vs. Reliance Petro Products (P.) Ltd. (2010) 322 ITR 158 (SC), he submitted that both legally and factually, the penalty so levied by the Assessing Officer has to be deleted and the grounds raised by the assessee be allowed and the grounds raised by the Revenue be dismissed. 30. We have heard the rival arguments made by both the sides, perused the order of the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed this additional income of Rs. 50 lakhs. It is the case of the Assessing Officer that since the assessee has not offered this buffer income for taxation in the return filed in response to notice u/s 153A, therefore, penalty is leviable. We do not accept this proposition of the Assessing Officer. This amount, in our opinion, is an income voluntarily disclosed by the assessee to overcome omission, if any. However, no such omission or error was found by the Assessing Officer. Since assessee has not paid tax on the amount disclosed before the Settlement Commission, the immunity was withdrawn and the penalty was levied. This being the case, we are of the considered opinion that the penalty on this amount of Rs. 50 lakhs disclosed by the assessee as buffer income does not call for levy of penalty u/s 271(1)(c) of the Act. 34. So far as the penalty on the major issue is concerned i.e. levy of penalty on the amount of Rs. 39,20,00,000/- received by the assessee as salary which was not added by the assessee in its return of income being a non-resident, we find the Settlement Commission vide order dated 26.05.2014 passed u/s 245D(2C) at para 6 of the order has held that the assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e status of the assessee. Under these circumstances, alleging the assessee that the assessee has concealed the particulars of his income of Rs. 39,20,00,000/- with respect to salary income by treating himself as non-resident, in our opinion, is not justified. 37. We further find the Settlement Commission vide order dated 27.08.2015 passed u/s 245D(4), copy of which is placed at pages 1 to 35 of the paper book, has observed at para 10.2 of the order that there has been no attempt to conceal any material facts. The relevant observations of the Settlement Commission read as under: "10.2 We are satisfied that there has been no attempt to conceal any material facts. The only addition to income disclosed in settlement application is on account of taxing salary received from foreign entity, holding the applicant to be a resident in view of section 6(1)(c) of the Act and after rejection of legal arguments of the applicant regarding non-taxability of the same. The applicant has co-operated during proceedings before us. As such, the provisions of Section 245H are applicable and the applicant is entitled for grant of immunity. We, therefore, grant immunity from prosecution and penalty unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact of confirmation of disallowance would not per se lead to the imposition of penalty. Since the additions, in respect of which penalty has been upheld in the present proceedings, have been held by the Hon'ble High Court to be involving a substantial question of law, in our considered opinion, the penalty is not exigible under this section. We, therefore, order for the deletion of penalty." 40. We find when the Revenue challenged the order of the Tribunal, the Hon'ble High Court dismissed the appeal filed by the Revenue by observing as under: "1. Having heard Mr Ahuja, learned counsel appearing on behalf of the appellant, we find that this appeal cannot be entertained as it does not raise any substantial question of law. The imposition of penalty was found not to be justified and the appeal was allowed. As a proof that the penalty was debatable and arguable issue, the Tribunal referred to the order on the assessee's appeal in quantum proceedings and the substantial questions of law which have been framed therein. We have also perused that order dated September 27, 2010, admitting Income Tax Appeal No. 2368 of 2009. In our view, there was no case made out for imposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific clear words which do not include issue of residential status. 43. So far as the decision relied on by the Ld. CIT-DR in the case of CIT vs. Prakash S. Vyas (supra) is concerned, we find the Hon'ble High Court has held that unless there is an indication in the order passed by the Hon'ble High Court, simply because tax appeal is admitted, would not give rise to presumption that the issue is debatable, therefore, the penalty u/s 271(1)(c) of the Act could not be deleted on this ground. Although there is a contrary decision in favour of the Revenue, however, the same is of a non-jurisdictional High Court and much prior to the two decisions of Hon'ble Bombay High Court i.e. the jurisdictional High Court which is binding on us. Therefore, the case law cited by the Revenue cannot be accepted and the decision of the Hon'ble jurisdictional High Court has to be followed. We, therefore, hold that the penalty levied by the Assessing Officer is not sustainable on account of substantial question of law being admitted on the issue of salary income and the residential status of the assessee. 44. Even otherwise also, we are of the considered opinion that the penalty proceedings initiated b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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