1. The Hon'ble President of the Tribunal has constituted this Special Bench to consider and decide the following question in the above captioned appeal: "Whether the Tribunal fees on an appeal against the order of penalty levied under Section 271(1)(c) is governed by Clause (d) of Section 253(vi) or Clauses (a) to (c) of Section 253(vi) of the IT Act whereas the penalty under Section 271(1)(c) directly relate to the assessed income?" 1.1 The question as framed and as reproduced above appears to be confusing as the last part of the last sentence is misleading. Hence, for more clarity we modify the questions and reframe the same as under: "Whether the Tribunal fees on an appeal against the order of penalty levied under Section 271(1)(c) is governed by Clauses (d) of Section 253(6) or Clauses (a) to (c) of Section 253(6) of the IT Act." 2. The relevant facts, giving rise to the issue for the consideration of the Special Bench are being narrated in brief, as under: 3. The assessee filed ITA Nos. 4445 and 4446/Del/2000 against two orders of learned CIT(A), both dt. 12th March, 1998 for asst. yrs.
1993-94 and 1994-95. The learned CIT(A) has sustained penalty of Rs. 25,000 under Section 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 v. 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 appeal filed against an order of penalty levied under Section 271(1)(c) of the Act and whether the Tribunal fee is governed by Sub-clause (d) of Section 253(6) or Clauses (a), (b) and (c) of Section 253(6) and therefore the matter should be referred to the Hon'ble President for constituting a Special Bench. On the request of the,. Bench contained in the order dt. 14th Oct., 2003, the Hon'ble President has constituted this Special Bench for deciding the question referred to above.
5. Shri K.R. Manjani, Advocate, appearing on behalf of the assessee made detailed submissions before us. According to him the terminology adopted in Clauses (a), (b) and (c) of Section 253(6) of the Act makes it clear that the Tribunal's fee is to be paid in relation to appeals which are in the case of assessed income and all other matters which are outside the purview of Clauses (a), (b) and (c), fall within the ambit of Clause (d). He illustrated that penalties under Sections 269D, 271B, 271D fall in the purview of Clause (d) and likewise penalty under Section 271(1)(c) also is covered by the same clause. He further submitted that the assessment of income by the AO has no relevance for imposing penalty under Section 271(1)(c) inasmuch as penalty is imposed or levied for concealment of income and, therefore, the subject-matter of penalty being "concealed income", the same does not have relevance to the total income as computed by the AO.6. The learned counsel also contended that Clause (d) was introduced by the Finance Act of 1999 to cover those cases which did not fall within the purview of Clauses (a), (b) and (c). In this regard he made reference to Clause 85 of the Finance Bill, 1999 and also to the relevant letter of the CBDT through which the amended provision falling in Clause (d) has been explained. The learned counsel also placed reliance on the following decisions:Federation of Andhra Pradesh Chambers of Commerce & Industry and Ors. v. State of Andhra Pradesh and Ors. (2001) 165 CTE (SC) 672 : (2001) 247 ITR 36 (SC); (iv) CIT v. Swat Jilla Kamdar Sahakari Sangh Ltd. (1993) 201 ITR 157 (Guj); and 7. The learned Departmental Representative contended that since the appeal against the penalty order is directly connected with the assessment order, the fees shall be regulated by Sub-clauses (a) to (c) of Section 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 Section 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 Clauses (a) to (c) and not by Clause (d). The learned Departmental Representative also pointed out that even the CBDT while explaining the scope of the amended provision, has not included the provision of Section 271(1)(c) and specific exclusion of this provision clearly indicates that the penalty imposed under Section 271(1)(c) shall not fall within the ambit of Clause (d). According to the learned Departmental Representative, liberal construction cannot be applied for construing provisions under Section 253(6). The learned Departmental Representative also placed reliance on the order of Tribunal, Indore Bench in the following cases Kakada Rolling Mills v. Asstt. CIT (ITA No. 544/Ind/1999); (ITA No. 670/Ind/1999) Indore Bench of Tribunal order dt. 12th May, 2000; MM. Newatia v. ITO (ITA No. 868/Ind/1999).
8, In reply, the learned counsel submitted that Clause (d) inserted w.e.f. 1st June, 1999 provides that where the "subject-matter" of the appeal relates to any other matter other than those specified in Clauses (a), (b) and (c), the assessee is required to pay a fee of Rs. 500 only and therefore if the appeal is filed against the order of learned CIT(A) with regard to the upholding of penalty order passed by the AO under Section 271(1)(c), the subject-matter being different, the residuary clause i.e. Clause (d) will be applicable. In support of this contention he also placed reliance on the order of Tribunal, Amritsar Bench 'in the case of Maini & Co. v. Asstt. CIT 157 Taxation 119 (Asr); and the order of Mumbai Bench of Tribunal in the case of Amruta Enterprises v. Dy. CIT (supra).
9. We have carefully considered the relevant material and the rival submissions. At the outset it, is to be pointed out that no direct decision of any High Court or that of Hon'ble Supreme Court of India has been brought to our notice on the issue and therefore, we have to take into consideration and rely upon the material available on record and the decisions cited at the time of arguments before us.
10. For a proper and better appreciation of the controversy involved in the question referred for the consideration of the Special Bench, we consider it necessary to reproduce the provisions contained under Section 253(6), These provisions are as under: "253(6). An appeal to the Tribunal shall be in 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 to 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 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 Clauses (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 Section 253(6) of the IT Act. So far as Clauses (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 term "to which the appeal relates" refers to 'the case' i.e. a particular case or an order and therefore the term 'case' here means the 'assessment order'. The term 'total income', as computed by the AO has co-relation to the whole assessment order. By this analogy it is clear that the appeals agitating the assessed income or parts thereof are to be treated as appeals relating to the case which means against the assessment order and therefore the Tribunal fee is to be determined by taking into account the assessed income.
12. However, the terms used in Sub-clause (d) are totally different from the terms used in Sub-clauses (a), (b) and (c) of Section 253(6).
In this clause the relevant terms are, "where the subject-matter of an appeal relates to any matter, other than those specified in Clauses (a), (b) and (c)". The term "subject-matter of appeal" is different from the term "the case to which the appeal relates". Thus whereas in all those cases where the appeal relates to the assessment order, Clauses (a), (b) and (c) are to be applied but where the subject-matter of appeal is not the case i.e. the assessment order as such, and the assessed income is not the basis of such subject-matter then Clause (d) will be applicable.
13. The term "subject-matter" has been defined in the Webstor's Comprehensive Dictionary, to mean: "The object of consideration or study; the subject of thoughts." 14. In view of the above, the meaning of the phrase "subject-matter of appeal" is to be deciphered and identified for applying the provisions contained in newly inserted Clause (d). While explaining the scope of appellate powers of Tribunal, in the case of CIT v. Steel Cast Corporation (1977) 107 ITR 683 (Guj), the Hon'ble Gujarat High Court, by following the decision in the case of Hukamchand Mills Ltd. v. CIT (1967) 63 ITR 232 (SC) and the decision in the case of CIT v.Mahalakshmi Textile Mills Ltd. (1967) 66 ITR 710 (SC), has observed that it must be found as to what is the subject-matter of appeal and that can be determined only by finding out, what the AAC expressly or impliedly decided. It was further observed that the subject-matter of appeal before the Tribunal can only be the decision expressed or implied of the AAC and the jurisdiction of the Tribunal is restricted 'to the subject-matter of appeal'. The Hon'ble Court has further observed that once the subject-matter of the appeal is determined', 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. v. CIT (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 v. ITO (1984) 145 ITR-255 (All). While explaining the scope of Section 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 also observed that when the Tribunal sets aside the assessment and remands the case for making a fresh assessment, the power of ITO is confined to the 'subject-matter of appeal before the Tribunal' and he cannot take up the questions which were not again the subject-matter of appeal before the Tribunal, even though no specific direction had been given by the Tribunal.
17. In view of the above decisions, it is clear that the subject-matter of appeal has to be separately identified and it cannot be confused with the assessment order or the income as computed by the AO. To reiterate, the subject-matter of appeals relating to penalty under Section 271(1)(c) is the concealment of penalty and the question to be determined is as to whether the assessee has concealed the income or has furnished inaccurate particulars of income or not and therefore, whether the penalty is imposable or not, The basis for initiation of penalty proceedings under Section 271(1)(c) as well as the subject-matter of the penalty order is not identical to the subject-matter of assessment order. The subject-matter in respect of penalty order under Section 271(1)(c) is levy of penalty with reference to concealed income while the subject-matter in the appeals falling under Clauses (a) to (c) of Section 253(6) is the determination of the total income, Both the subject-matters are different and distinct and connection between the two, if any, is a remote one inasmuch as the addition in the assessment order may or may not be deleted but the penalty can be deleted despite the confirmation of the addition.
Likewise an addition on account of the explained cash credits by disbelieving the material or evidence furnished by the assessee would form part of total income but may not be considered as concealed income at all. Therefore, the argument of the learned Departmental Representative that the penalty is deleted or reduced as per the quantum of assessment order, cannot be accepted.
18. If we examine any penalty order, we find that the penalty is imposed on "concealed income" and not on the assessed income. For example, there may be several additions in an assessment order and AO may, treat only some of such additions as reflecting concealed income.
19. Thus, 'assessed income' and 'concealed income' are different subject matters. The matter may be illustrated by giving the following examples-- 19.1 The AO makes additions 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 by the AO.The quantum of penalty, imposed under Section 271(1)(c) of the Act, thus cannot be linked or correlated with the assessed income. As the 'subject-matter' of the appeal relating to penalty order is not to be linked with the assessed income, the filing fee payable is to be governed by Clause (d) of Sub-section (6) of Section 253 of the Act alone. It is thus clear that the quantum of total income on the basis of which filing fee is to be determined in Clauses (a), (b) and (c) has no relevance to the quantum of penalty amount and, therefore, it will not be proper to charge from the assessee the same fee which is to be charged for assailing the assessment order or for challenging any part relating to the assessment order. A similar view was taken by the Bombay Bench "H" of the Tribunal in the case of Amruta Enterprises v.Dy. CIT (supra).
21. The issues relating to consideration and requirements for imposition of penalty for concealment of income have been discussed in various cases by the Courts. In the cases of CIT v. S.V. Angidi Chettiar (1962) 44 ITR 739 (SC) and in the case of D.M. Manasvi v. CIT (1972) 86 ITR 557 (SC) and also in the latest decision of the Hon'ble Jurisdictional High Court of Delhi in the case of CIT v. Ram Commercial Enterprises Ltd. (2000) 246 ITR 568 (Del), it was held that the AO is required to record a satisfaction about the 'concealment of income'.
The relevant observation of the Hon'ble Jurisdictional High Court in the case of Ram Commercial Enterprises Ltd. (supra) are as under: "The satisfaction as to the assessee having concealed the particulars of his income or furnished inaccurate particulars of such income is to be arrived at by the AO during the course of any proceedings under the Act, which would mean the assessment proceedings, without which, the very jurisdiction to initiate the penalty proceedings is not conferred on the assessing authority by reference to Clause (c) of Sub-section (1) of Section 271 of the IT Act, 1961." 22. This also shows that for imposing penalty first concealed income is to be discovered and shown which means that assessed income is not automatically concealed income or that all the additions and disallowances do not amount to concealed income.
23. In the case of CIT v. Dwarka Prasad Subhash Chandra (1974) 94 ITR 154 (All), the Hon'ble Allahabad High Court while explaining the scope of levy of penalty under Section 271(1)(c) and the powers of departmental authorities, observed as under: "Section 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 Clauses (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, the Hon'ble Court in 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. CIT (1988) 169 ITR 782 (All) the Hon'ble Allahabad High Court has observed as under: "In the scheme of the Act, the proceedings for imposition of penalty, though emanating from proceedings of assessment, are essentially independent and a separate aspect of the proceedings which closely follow the assessment proceedings. Penalty proceedings are quasi-criminal. Findings given in assessment proceedings are certainly relevant and have probative value, but such findings are material alone and may not justify the imposition of penalty in a given case, because the consideration that arise in penalty proceedings are different from those that arise in assessment proceedings." 26. In the case of CIT v. Metal Products of India (1984) 150 ITR 714 (P&H) the Hon'ble Punjab and Haryana High Court has observed as under: "Held, that merely because the addition had been made on estimate under the proviso to Section 145(1) by adopting the view that the gross profit shown in the books of account was too low as there were defects in the method of accounting employed, did not automatically lead to the conclusion that there was failure-to return the correct income by means of fraud or gross or wilful neglect." 27. In the case of CIT v. Dharamchand L. Shah (1993) 204 ITR 462 (Bom), the Hon'ble Bombay High Court has observed that assessment proceedings and penalty proceedings are two and distinct proceedings. The relevant observations of the Hon'ble High Court are reproduced as under: "Assessment proceedings and penalty proceedings are two separate and distinct proceedings. The fact that certain additions were made in the assessment proceedings would not automatically justify the imposition of penalty under Section 271(1)(c). It is also a well established principle that the provisions relating to penalty proceedings are quasi-criminal in nature and, therefore, the burden is large on the Revenue to establish the charge before imposing penalty under Section 271(1)(c), more so, when the Explanation to that section has not been invoked. The provisions of Section 69A are enabling provisions for making certain additions if the assessee fails to give an explanation or the explanation given by the assessee is not to the satisfaction of the ITO. The additions made on this count would not automatically justify the imposition of penalty under Section 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 Section 253(6) was amended by adding Clause (d). The Board vide Circular No. 779 dt. 14th Sept., 1999 reported in [(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 Section 249 of the, IT Act to provide a fee of Rs. 250 for appeals before the CIT(A) and Rs. 500 for appeals before the Tribunal for the residuary group of appeals which cannot be linked with the assessed income." 30. The term "appeals are also filed on issues such as TDS defaults non-filing of return etc.," which may not have any nexus with the assessed income, clearly shows that not only the categories specified in the above para are to fall within the scope of Sub-clause (d) but there may be other categories also, The term "etc." indicates that the list is not exhaustive and further items may be added to the categories mentioned in it. Since imposition of penalty for concealment of income is not solely dependent upon the assessed income and subject-matter of appeal arising out of penalty order, being different from the assessed income, in our considered view, it is also be included in the category of matters which do not have any nexus with the assessed income.
31. We may also examine the matter by making reference to the legislative history behind the insertion of the newly added provision as contained in Sub-clause (d). The amendment was necessitated because it was felt that there were matters which had no nexus with the assessed income, like, penalties for TDS defaults etc. and other matters which do not have nexus with the assessed income. It was, therefore, with the object of doing away with the mischief for which there was no remedy in the existing law i.e. pre-amended law, as contained under Section 253(6) of the IT Act. Thus, the object of the legislature behind introducing the amendment has to be seen from this angle and the interpretation of Clause (d) is to be placed after taking into consideration the object sought to be achieved for making the amendment.
32. The legislative intent and legislative purpose can be ascertained by making reference to the history of legislation, which is a well recognised external aid of construction. In the context of legislative history, we can also apply the 'mischief rule' or 'rule of purposive construction'. This rule was laid down in Heydon's case 76 ER 67. The rule which is known as mischief rule, enables consideration of four matters in construing an Act-- (ii) What was the mischief or defect for which the law did not provide; 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. v. 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-clause (d) the legislature intends to remove the mischief by excluding those cases from the purview of Clauses (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 Clauses (a), (b) and (c) and are to be put in Clause (d). Thus, the purpose for which the newly inserted provision was made also makes it clear that the mischief was there before the amendment and the same has been cured by making the amendment and this amendment will cover all those cases for which there was no remedy in Clauses (a), (b) and (c). Since we are concerned only with the matter relating to penalty for concealment of income under Section 271(1)(c), we have to confine our findings on this matter alone.
34. The learned Departmental Representative has contended that a liberal construction cannot be applied while construing provision of tax statute and that the rule of equity has no application in interpreting the tax statute. While in principle we agree with the learned Departmental Representative on this approach, we can definitely point out and clarify that we are not adopting the approach of liberal construction. It is true that the fiscal statutes are to be construed strictly but while doing so the scope of any provision cannot be widened. In the case of Mathuram Agarwal v. State of Madhya Pradesh AIR 2000 SC 109 (p. 113) it has been held that in construing fiscal statute and in determining the liability of a subject to tax one must have regard to the strict letter of the law. According to the Hon'ble Court, if the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions to the legislature and by considering what was the substance of the matter. In view of this approach also, the subject of concealment of income is not covered within the ambit of Clauses (a), (b) and (c), because a separate clause has been inserted for such matters.
35. The Indore Bench of the Tribunal in the cases of Kakada Rolling Mills & MM. Newatia v. ITO (supra), has observed that the Tribunal fee shall be determined on the basis of total income of the assessee, as computed by the AO as per Clauses (a) to (c). This view has been taken on the ground that the penalty under Section 271(1)(c) always emanates from disallowance of particular claim of the assessee during the course of assessment proceedings, It has also been observed that penalty under this section is to be determined after taking into account the total assessed income by the ITO and, therefore, it cannot be said that the penalty order under Section 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 Clause (d) of Section 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-clauses (a) to (c) of Section 253(6). In taking this view we are supported by the earlier orders of the Tribunal in the cases of Amruta Enterprises v. Dy. CIT (supra), and Maini & Co. v. Asstt. CIT (supra).
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 relating to penalty order being different than the subject-matter of the assessed income, the appeal relates to a different matter than the cases relating to assessed income and therefore the Tribunal fee for filing the appeals relating to penalty under Section 271(1)(c) will be governed by Clause (d) and not Clauses (a), (b) and (c) of Section 253(6) of the Act. We, therefore, answer the question accordingly, in favour of the assessee.
37. Let the record be placed before the regular Bench for deciding the grounds of appeal in the light of our observations and finding recorded in this order, 1. I have carefully gone through the order proposed by the learned Judicial Member and endorsed by the learned Vice-president. I regret I am unable to persuade myself to concur with the reasoning and conclusion of my esteemed colleagues.
2. At the outset, it would be useful to briefly set out the relevant facts giving rise to the issue referred to the Special Bench. The two appeals ITA Nos. 4445 of 2000 and 4446 of 2000 filed by the same assessee are directed against orders by learned CIT(A) sustaining the penalties under Section 271(1)(c) for asst. yrs. 1993-94 and 1994-95.
For asst. yr. 1993-94, the assessee filed the return on 22nd Feb., 1995 showing nil income whereas assessment has been made on total income of Rs. 37,35,120 vide order dt. 8th March, 1996. AO has levied penalty under Section 271(1)(c) amounting to Rs. 25 lakhs for asst. yr. 1993-94 treating the entire income of Rs. 37,392 as the concealed income (the quantum of penalty has been wrongly .mentioned by the learned Judicial Member at Rs. 25,000 only). CIT(A) upheld the same penalty vide order dt. 12th March, 1998. Aggrieved, the assessee filed the appeal before the Tribunal on 13th Nov., 2000, which is registered as ITA No. 4445 of 2000.
3. For asst, yr. 1994-95, the assessee filed a return on 28th Feb., 1995 showing nil income. AO made the assessment on total income of Rs. 41,80,214 and levied penalty of Rs. 28 lakhs under Section 271(1)(c) vide order dt. 31st July, 1997 treating the entire income of Rs. 41,80,214 as the concealed income. In appeal, the CIT(A) upheld the said penalty vide order dt. 12th March, 1998. Aggrieved, the assessee filed the appeal before the Tribunal on 13th Nov., 2000, which is registered as ITA No. 4446 of 2000.
4. For the aforementioned two appeals, the assessee enclosed 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 on 9th 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 Clause (d) of Sub-section (6) of Section 253. It was, in these circumstances, that the issue whether filing fee in the case of order of penalty levied under Section 271(1)(c) is to be paid as per scale of fee provided under Clauses (a) to (c) of Section 253(6) or whether the residuary Clause (d) would be applicable for determining the Court fees.
5. Section 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 referred to in Sub-section (2) or a memorandum of cross-objections referred to in Sub-section (4) be accompanied by a fee of one hundred rupees." Subsequently, the fee was enhanced to Rs. 125 by the Taxation Laws (Amendment) Act (1970) Finance Act, 1981 further enhanced the Court fee to Rs. 200 w.e.f. 1st June, 1981. The basis for payment of the fee for filing appeals to the Tribunal was the date of initiation of assessment proceedings. Section 253(6), as it stood upto 31st May, 1992, prior to its amendment by Finance Act, 1992, provided that the memorandum of appeal in Form No. 36 was to be accompanied by the specified amount of fee as under: "(a) In a case where the assessment proceedings were initiated before 1st April, 1971, Rs. 100; (b) In a case where the assessment proceedings were initiated between 1st April, 1971, and 31st May, 1981 (both days inclusive), Rs. 125; For this purpose, the assessment proceedings are deemed to have been initiated on the date on which a return of income is filed or, if no return has been filed, the date on which the assessee was served with a notice under Section 142(1)(i)/148 calling upon him to file the return.
Between 1st June, 1992 and 30th Sept., 1998, as per the provisions of Section 253(6) as amended (w.e.f. 1st June, 1992) by the Finance Act, 1992, and, subsequently, as substituted (w.e.f. 1st June, 1992) the fee was increased, in the case of an appeal made on or after 1st June, 1992 irrespective of the date of initiation of the assessment proceedings relating thereto, to-- (a) Rs. 250, where the total income of the assessee as computed by the AO in the case to which the appeal relates is Rs. 1,00,000 or less; (b) Rs. 1,500, where the total income of the assessee as computed by the AO in the case to which the appeal relates is more than Rs. 1,00,000." Circular No. 636 dt. 31st Aug., 1992 [(1992) 198 ITR 1 (St)] issued by the CBDT explaining the amended provisions observed: 52. "Filing fee for appeals before Tribunal--The Finance Act has amended Section 253 enhancing the fee to be paid for filing appeals before the Tribunal. Under the pre-amended provisions of Sub-section (6), an appeal to the Tribunal shall be in prescribed format and shall be accompanied by a fee of Rs. 200. After the amendment, the fee will be Rs. 250 where the total income computed by the AO is upto Rs. 1 lakh and Rs. 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 from 1st Oct., 1998, Section 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., 1998 read 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 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.
Provided that no such fee shall be payable in the case of an appeal referred to in Sub-section (2) or a memorandum of cross-objections referred to in Sub-section (4)." 7. The Finance Act, 1999 inserted Clause (d) to Section 253(6) with a view to provide for payment of fee in appeals which fall in the residuary group and are not relatable to the assessed income. This residuary Clause (d), introduced w.e.f. 1st June, 1999, reads as under: "(d) where the subject-matter of an appeal relates to any matter, other than those specified in Clauses (a), (b) and (c), five hundred rupees.
The rationale for inserting Clause (d), has been explained by the CBDT Circular No. 779 dt. 14th Sept., 1999, which reads as under: "(i) The Finance (No. 2) Act, 1998, 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 Section 249 of the IT Act to provide a fee of Rs. 250 for appeals before the CIT(A) and Rs. 500 for appeals before the Tribunal for the residuary group of appeals which cannot be linked with the assessed income." 8. From the aforesaid legislative history of Section 253(6), it emerges that upto 31st May, 1992, the scale of fee to be paid by an aggrieved assessee for filing an appeal in the Tribunal depended upon date of initiation of assessment proceedings, However, from 1st June, 1992, the fee prescribed under Section 253(6) is relatable to the assessed income, Form No. 36 has been amended by IT (Fifth Amendment) Rules, 1993 w.e.f. 1st June, 1992. Item No. 12 and 13 relating to dates of filing return and service of notices for filing returns have been omitted. S. No. 2 of the Notes appended to the prescribed form has also been suitably amended w.e.f. 1st June, 1992.
9. The basic issue which falls for consideration before us is whether penalty under Section 271(1)(c) is relatable to assessed income and thus covered by Clauses (a) to (c) of Sub-section (6) of Section 253 or whether it falls in the residuary Clause (d). Shri K.R. Manjani, learned counsel appearing on behalf of the assessee argued that penalty under Section 271(1)(c) falls in the residuary Clause (d) inasmuch as it has no relation with the assessed income. According to the learned counsel, the legislative intention in introducing Clause (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 Sections 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 Section 253(6). Shri Manjani placed reliance on the two decisions of the Tribunal, namely, Amruta Enterprises v. Dy.
CIT (supra) and Maini & Co. v. Asstt. CIT (supra).
10. Shri Amitabh Misra, learned CIT, Departmental Representative, on the other hand, strenuously urged that penalty under Section 271(1)(c) is inextricably and inherently connected with the assessment proceedings and is clearly relatable to assessed income. Learned Departmental Representative argued that the cluster of clauses, namely, (a), (b) and (c) enacted under Section 253(6) envisages appeal relating to a case in which total income of the assessee has been computed by the AO at a specified figure. He argued that it would be contrary to accepted cannons of construction to unreasonably cut down the scope and ambit of the expression "case to which the appeal relates" used in these clauses as meaning only the assessment order. According to the learned Departmental Representative, Clauses (a) to (c) would bring within its purview all appeals which are connected with the assessed income and since penalty under Section 271(1)(c) bears a close nexus and connection with the assessment proceeding and is even quantified on the basis of the assessed income, it cannot be ousted from Clauses (a) to (c). He argued that residuary Clause (d) has been inserted by the legislature with a view to specify the fee required to be paid by an aggrieved assessee for filing appeals on issues such as TDS default, non-filing of TDS return which have no nexus or relation with the assessed income. In support of his contention, learned Departmental Representative placed reliance on the decision of Tribunal, Indore Bench, in the following cases: (ii) Kakada Rolling Mills v. Asstt. CIT (ITA No. 670/Ind/1999), Order dt. 12th May, 2000; and 11. In my considered opinion, the expression used in Clauses (a) to (c) "where the total income of the assessee, as computed by the AO, in the appeal to which the case relates is....." is not limited in its import to merely the assessment order only. The expression used by the legislature has comprehensive import and must be understood as including any appeal which is relatable to or connected with the total income computed by the AO. The word "case" used in the Clauses (a) to (c) in its technical legal senses means cause or state of facts which furnishes an occasion for exercise of jurisdiction by a judicial authority. The words "relate to" as used in Clauses (a) to (d) above are not words of restrictive 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 Sections 271D, 271B, 271E, etc., this would clearly be outside the purview of Clauses (a), (b) and (c) 'and would thus fall under the residuary group of appeals as provided under Clause (d).
12. Now, the question which arises before us is whether penalty under Section 271(1)(c) is relatable to assessed income and hence covered by Clauses (a) to (c) or not. As per the statutory requirement indicated under Section 271(1), penalty proceedings under Section 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 Section 271(1)(c) is leviable on the income concealed which has obviously been added in the total income and forms a vital component of assessed income. Unless such income is brought into the purview of assessment, it cannot form the basis for levy of penalty under Section 271(1)(c). Assessment of income and concealment penalty are thus inextricably interlinked and inter-connected.
Assessment is in fact unquestionably the very foundation for levy of penalty under Section 271(1)(c). In case, the amount of income in relation to which penalty under Section 271(1)(c) is levied is deleted by the appellate authority in a quantum appeal, 'this would per se lead to quashing of the concealment penalty since both are interlinked and inter-connected. In fact, even the quantification of the concealment penalty is linked with the concealed income as well as the total assessed income. The close and integral connection of assessment and concealment penalty is eloquently manifested in the judgment of Delhi High Court in the case of CIT v. Atma Ram Properties Ltd (2002) 258 ITR 246 (Del) wherein Their Lordships have laid down that the appellate authority should wait for disposal of quantum appeal and then take up the adjudication of the penalty appeal under Section 271(1)(c). The close nexus of assessment and concealment penalty is further reflected in the decision of Delhi High Court in the case of CIT v. Ram Commercial Enterprises Ltd. (2000) 246 ITR 568 (Del) wherein Their Lordships have cancelled the penalty under Section 271(1)(c) on the ground that the assessment order did not record the satisfaction of the AO for initiating penalty proceedings for concealment. In support of this decision, Their Lordships have placed reliance on the following two decisions of the apex Court.
In the backdrop of the aforesaid legal perspective the inference is irresistible that penalty for concealment is essentially related to the assessed income and appeal against such penalty squarely falls within the criteria as enumerated in Clauses (a) to (c) of Sub-section (6) of Section 253.
13. I have already indicated earlier that the basis for levy of Court fees for filing an appeal was originally taken as the date of initiation of the assessment proceedings and the same has been changed and the scale of fees has been linked with the assessed income w.e.f.
1st 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. v. Union of India (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 Clauses (a), (b) and (c) inserted under Section 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 Clause (d) which has been added to Section 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, non-filing of TDS returns, non-audit of accounts, etc. which may not have any nexus with assessed income. Such appeals are obviously not linked with the assessed income and, therefore, a separate clause has been inserted by the Finance Act, 1999, to provide for levy of fees in the residuary group of appeals which are not related to the assessed income. However, in so far as penalty for concealment under Section 271(1)(c) is concerned since appeal against such penalty is clearly linked with the assessed income, this would not fall in the residuary Clause (d) introduced w.e.f. 1st June, 1999.
14. While taking the view that concealment penalty falls in Clause (d) of Section 253(6), learned Judicial Member has observed that assessed income and concealed income are different subject-matters and penalty proceedings are different from the assessment proceedings. A few judicial authorities have been cited by the learned Judicial Member in support of his observations that ingredients of penalty proceedings are different from that of assessment proceedings. It appears that learned Vice President has concurred with the same view. However, with utmost regard for my esteemed colleagues, I would in all humility observe that what we are required to construe in the present reference is not the nature of penalty proceedings or the ingredients of default for levy of penalties. The basic point which falls for consideration before us is whether appeal against concealment penalty relates to the assessed income or not. The expression used in Clauses (a), (b) and (c) of Sub-section (6) of Section 253 "the case to which the appeal relates" has to be interpreted in conformity with the language used by the legislature as well as the historical setting in which Section 253(6) came to be enacted in its present form by the legislature. Merely to say that penalty under Section 271(1)(c) is levied on concealed income whereas assessment order shows the assessed income would not by itself establish that there is no relation between the concealment penalty and the assessed income. As I have already indicated the word "relates" has comprehensive import and cannot be interpreted in a restricted and narrow manner. If the ingredients of concealment penalty are different from assessed income, this would not by itself imply that there is no relationship between the concealment penalty and the assessment. Both are unquestionably inter-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 Section 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 Clauses (a), (b) and (c) and the restrictive interpretation tantamounts to doing violence to the unambriguous language in which these clauses have been enacted. Had the legislature intended to restrict these clauses to appeals against assessment orders only, it could as well have said so. There was in that case no occasion for the legislature to use the widely worded expression "the case to which the appeal relates". I have no hesitation in observing that any attempt to restrict the scope and ambit of Clauses (a) to (c) to merely assessment order would be contrary to well established rules of literal as well as purposive interpretation of statutes. The basis of, levy of Court fee for filing appeal before the Tribunal has been changed w.e.f. 1st June, 1992, linking the Court fee with the assessed income. It was only in 1999 that Clause (d) for levy of Court fee in residuary group of appeals not related to assessed income has been inserted. If the expression 'case' as used in Section 253(6) is to be read as assessment order then for the period prior to June, 1999 when Clause (d) was inserted, no Court fee would be leviable for filing appeals by assessee against orders other than assessment orders like concealment penalty etc. The interpretation canvassed by the learned Judicial Member would thus produce a wholly unreasonable result causing unnecessary confusion, uncertainty and absurdity. In determining either the general object of the legislature or the meaning of its language in any statutory provision, it is obvious that the intention which appears to be most in accordance with convenience, reason, justice and legal principles should be presumed to be the true one, An intention to produce an unreasonable result is not to impute to a statute if there is some other construction available. In the instant appeals before us, if appeals were to be filed before June, 1999, against the CIT(A)'s orders, then according to the construction placed by the learned Judicial Member on Section 253(6), no Court fee would be leviable inasmuch as Clause (d) has been inserted w.e.f. 1st June, 1999. In fact, the view expressed by the learned Judicial Member would lead to the situation wherein no Court fee would be liable to be paid by an assessee for appeals filed against all appealable orders in the Tribunal before 1st June, 1999 except appeals involving assessment orders. I find myself unable to subscribe to such a construction of statute which may lead to such unsatisfactory and unreasonable results particularly when a rational and literal based construction, on considerations of justice and reason flows from the language of the Section 253(6).
16. Levy of Court fee in relation to appeal involving penalty under Section 271(1)(c) has been invariably considered on the same footing as a quantum appeal as per Section 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: "Section 231. The basic rule; In the period immediately following its enactment, the history of how an enactment is understood forms part of the contempomnea expositio, and may be held to throw light on the legislative intention. The later history may, under the doctrine that an ongoing Act, is always speaking, indicate how the enactment is regarded in the light of developments from time to time.
On a superficial view, it may be thought that nothing that happens after an Act is passed can affect the legislative intention at the time it was passed. This overlooks the two factors stated in this section.
Contemporanea expositio. The concept of legislative intention is a difficult one. Contemporary exposition helps to show what people thought the Act meant in the period immediately after it was passed.
Official statements on its meaning are particularly important here, since every Act is supervised, and most were originally promoted, by a Government Department which may be assumed to know what the legislative intention was." 19. In R. v. Wandsworth London Borough Council, Ex. parte, Beckwith (1996) 1 All ER 129 (HL). The House of Lords has held that a departmental circular is entitled to respect. It can only be ignored when it is patently wrong. The said principle has also been followed in Indian Metals & Ferro Alloys Ltd. v. Collector of Central Excise AIR 1991 SC 1028, p. 1034, Keshavji Ravji & Co. v. CIT AIR 1991 SC 1806, p.
1817, Raymand Synthetics Ltd. v. Union of India AIR 1992 SC 847, p, 859, Kasilingam v. P.S.G. College of Technology 1995 (2) SCALE 387, p.
397 and Collector of Central Excise, Vadodra v. Dhiren Chemical Industries 20. The view taken by my esteemed brothers would in my humble opinion be contrary to the plain and unambiguous language of the provision under Section 253(6) and result in violation of the principle of contempomnea expositio. Such an interpretation would in any case produce a wholly unreasonable result which would be contrary to the legislative intention, executive construction as well as long-standing practice and usage. I am constrained to record my dissenting opinion.
21. For the aforesaid reasons, I hold that appeal against penalty under Section 271(1)(c) is covered under Clauses (a) to (c) of Section 253(6) for purpose of levy of Court fee for filing an appeal to the Tribunal.
I would, therefore, disagree with the view of my esteemed colleagues that levy of Court fees for filing an appeal involving penalty under Section 271(1)(c) is governed by Clause (d) of Section 253(6) of the IT Act, 1961.