Assistant Commissioner of Income Vs. U.P. Hotel Ltd. - Court Judgment

Excerpt:
1. the revenue has filed ita no. 207/all/1996 against the order of the cit(a), varanasi dt. 16th oct., 1995, for asst. yr. 1984-85 against the deletion of penalty under section 271(1)(c) of the it act, 1961 and has raised the following ground : "1. that the learned cit(a) has erred in law and on the facts in cancelling the penalty of rs. 5,10,000 under section 271(1)(c) imposed by the ao, without appreciating that the assessee concealed the particulars of its income and furnished inaccurate particulars of such income in respect of amount of rs. 7,82,728 written off under the head flood/fire rescue account and made wrong claim of depreciation on boiler amounting to rs. 55,841 and these two additions have been confirmed by the learned cit(a) as per order dt. 24th aug., 1995, and the assessee has not filed appeal before the tribunal. the department's view is fully supported by the decision of the hon'ble allahabad high court in the case of rampur finance corporation ltd. v. cit (1991) 67 taxman 162 (all)." 2. the assessee has preferred cross-objection no. 1 of 2002 against the same order of the cit(a) for the same assessment year on the following grounds: "1. because the learned cit(a) has erred in upholding the validity of the penalty proceedings which had clearly barred by limitation in terms of section 275 of the it act. 2. because the learned cit(a) has failed to appreciate that the penalty proceedings had not been validly initiated and hence the entire proceedings were ab initio void." 3. the assessee has filed cross-objection on 26th dec., 2001, when the bench was hearing appeals on tour at varanasi. however, appeal was filed on 25th jan., 1996, as per endorsement on the appeal. the learned departmental representative objected to the admission of the cross-objection as it was time-barred. therefore, we have heard the learned departmental representative and the learned counsel for the assessee on this point also. it would be appropriate (sic-if) this point be decided first before dealing with the main appeal.4. the learned departmental representative argued that the affidavit explaining the delay has not been filed by authorised person and that the company has shifted its office is also not clear from the affidavit. the learned departmental representative also argued that one-man office was maintained at varanasi and, therefore, the assessee must have the knowledge of the grounds served upon them.5. on the other hand, the learned counsel for the assessee relied upon the affidavit filed by the assessee, which is filed by manager corporate accounts of the assessee stating therein that the company/assessee came to know of the departmental appeal only vide tribunal's notice dt. 3rd dec., 2001, which was sewed upon the assessee on 10th dec., 2001. it is further explained that on receipt of the notice, the assessee immediately filed application dt. 12th dec., 2001, for supply of the grounds as the same were not served upon the assessee. this bench vide order dt. 26th dec., 2001, directed that grounds be supplied to the assessee and only thereafter cross-objection was filed. the learned counsel argued that the assessee has not received the grounds earlier and the cross-objection was legal in nature and as such, could be argued even in defence against the appeal of the revenue.6. we have considered the rival submissions of the parties. though postal receipt is available on the file showing despatch of the grounds to the assessee earlier but there is no acknowledgement of record to show that the same were served upon the assessee. the assessee has been claiming that they came to know of the appeal on receipt of the notice of the main appeal. this fact is supported by an affidavit. we have also allowed the assessee to get the copy of the grounds. this shows that the assessee could not have got the grounds of appeal earlier.even otherwise, the grounds taken by the assessee are legal in nature and, therefore, in our considered view, no prejudice would be caused to the revenue if the assessee is allowed to argue on the points raised in the cross-objection, which could otherwise be argued by the assessee as a respondent against the appeal of the revenue. keeping in view the above discussion, we are satisfied that there is no delay in filing of the cross-objections. accordingly, the cross-objection is admitted and the assessee is allowed to argue on the cross-objection also.7. we have heard the learned departmental representative and the learned counsel of the assessee on main appeal. the learned counsel for the assessee also filed paper book containing all the copies of the orders, and replies connected with this case. the learned counsel argued on cross-objection that original assessment order was passed on 24th march, 1987, in which no penalty proceedings under section 271(1)(c) were initiated. against the assessment order, the assessee preferred appeal to the cit(a) which was decided vide order dt. 20th june, 1989, and the cit(a) remanded the case to the ao. the assessee filed appeal against the order of the cit(a) before the tribunal and the tribunal decided the appeal vide order dt. 29th nov., 1994.8. the learned counsel for the assessee further argued that fresh assessment order was passed by the ao in pursuance of the cit(a)'s direction vide fresh assessment order dt. 16th jan., 1991, in which for the first time penalty proceedings under section 271(1)(c) were initiated against the assessee. the assessee preferred appeal against the assessment order to the cit(a) who decided the appeal of the assessee vide order dt. 24th aug., 1992. the learned counsel for the assessee further argued that penalty order under section 271(1)(c) was passed by the ao on 25th aug., 1995. he further argued that the period of limitation of six months expired on order dt. 24th aug., 1992, of the cit(a), which was passed on fresh assessment. he has relied upon section 275(1)(c) in this regard. he has further relied upon the following decisions : (4) saurashtra cement & chemical industries ltd. v. cit (1995) 213 itr 523 (guj).the learned counsel for the assessee further argued that pendency of appeal before the tribunal is no ground to extend the period of limitation as originally no penalty proceeding under section 271(1)(c) was initiated against which appeal before the tribunal was pending. the learned counsel for the assessee on merits argued that though it was a case of income but after adjustment of carry forward, assessment was also framed at loss. he has further argued that the cit(a) has rightly deleted the penalty in the matter.9. on the other hand, the learned departmental representative argued that provision of section 275(1)(a) was applicable in this case. he has further argued that the appeal by the tribunal was decided vide order dt. 29th nov., 1994, which was received in the office of the cit on 24th feb., 1995, and as such penalty order was passed within the period of limitation. he has filed copy of bifurcated section 275 of it act that the words "other order is the subject-matter of an appeal" are applicable in this case.the learned departmental representative on merits argued that in this case expenses of 1981-82 and 1982-83 were claimed by the assessee in the assessment year in appeal i.e., 1984-85 as such it is a case of filing inaccurate particulars and concealment of income. he has further argued that the order of the cit(a) is vague and liable to be set aside and that section 41 of it act is also applicable.10. the learned counsel for the assessee in rejoinder, argued that "other order" as described in section 275(1)(a) refers to only the relevant and connected orders and not unconnected orders. he has further argued that on pp. 5 and 6 of the paper book all the claim of loss by flood and fire were brought to the notice of the ao in the statement of accounts and several details filed at the time of assessment. therefore, no inaccurate particulars were filed before the ao. he has further argued that section 41 is not applicable as in earlier years no expenses were claimed. lastly, he has argued that in similar circumstances, tribunal, allahabad bench has allowed the appeal of the assessee for the asst. yr. 1988-89 and the copy of the order of the tribunal has been filed at p. 13 of the paper book.11. we have bestowed our careful consideration to the rival submissions of the parties. the facts and dates of the orders mentioned above are almost admitted by both the parties. it is clear from pp. 5 and 6 of the paper book filed by the assessee that the assessee had been showing the expenses incurred for repairs in hotel at jaipur on account of flood and fire in earlier years, which was proved by the united india insurance company. since the claim was not finalised during the years, the repairs and renovations were carried out, the expenditure was put under suspense account. the assessee has incorporated all these details in its balance sheet and annual report and other details, which were filed before the ao as well as before the cit(a). all these details were available with the ao in asst. yrs. 1981-82 and 1982-83 also. the insurance company settled the claim of the assessee in january, 1983 and only on reimbursement by the insurance company, the difference was claimed as expenditure in the assessment year in question. as has already been pointed out all these details were available with the revenue authorities right from the assessment year when the suspense account was opened and repair was carried out till the claim of the assessee was finalised by the insurance company. we would like to add here that it is a settled practice that insurance company on their contract with the assessee could have settled the claim of the assessee after sometime. the assessee has made repairs and renovation as would have been necessary to run their hotel at the time prior to the assessment year and till that time the claim of the assessee was not settled. therefore, the assessee in the hope of settlement of claim had not claimed the expenses at that time. the assessee ascertained the losses only on the settlement of the claim by the insurance company.assuming that insurance company would have granted full claim to the assesses, then the assessee would not have claimed losses in the assessment year. therefore, there was no occasion for the revenue authorities to claim that expenses should have been claimed in the year in which they were made. however, that is not the position in this case. the assessee would have known the losses only on settlement of the claim by the insurance company. since claim was settled in the assessment year in question, therefore, the assessee has rightly claimed losses in the year in question. hon'ble gujarat high court in the case of saurashtra cement & chemical industries ltd. (supra) decided the similar question. for the sake of convenience, we reproduce question no. 5.: "5. whether, on the facts and in the circumstances of the case, the tribunal was justified in holding that the expenditure of rs. 39,823 was not allowable in the. year in question on the ground that the liability has arisen in the years 1968-69 to 1973-74?" it was held by the hon'ble high court that if any liability, though relating to the earlier year, depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the later previous years it cannot be disallowed as deduction merely on the basis that the accounts are maintained on mercantile basis and that it related to a transaction of the previous year. the hon'ble high court, therefore, answered question no. 5 in the negative, i;e. in favour of the assessee and against the revenue.11.1. the hon'ble patna high court in the case of gouri shankar suresh prasad (supra) held : "tribunal finding that difference arose owing to disallowance of expenditure claimed--not a case of concealment of income." 11.2. the hon'ble madras high court in the case of cit v. s.i paripushpam (2001) 249 itr 550 (mad; held- "the tribunal has found that the aac was right in holding that the amount, addition of which was agreed to by the assessee, was an amount which had been set out in an enclosure filed along with the assessee's return of income." the hon'ble court, therefore, held that the tribunal was justified in cancelling the penalty levied under section 271(1)(c) of the it act, 1961.11.3. the tribunal, b-bench, allahabad in the case of the assessee itself for asst. yr. 1988-89 vide order dt. 29th nov., 2000, has deleted the penalty in almost similar circumstances.12. in this case, the assessee from the very beginning had been giving all the particulars of the claim and pendency of the insurance claim to the revenue authorities. the claim was not settled till the assessment year in question and, as such, it was kept in suspense account we fail to understand how a case of filing of inaccurate particulars was made out by the revenue authorities. the assessee has filed all the particulars in all the returns with regard to the claim in each year.the cit(a) also held that on these facts, it cannot be held that the assessee concealed its income or furnished inaccurate particulars.therefore, keeping in mind the above facts and circumstances, we are of the considered view that it is not a case of concealment of income or filing of inaccurate particulars of income by the assessee. our view is also fortified by the various decisions of the hon'ble high courts mentioned above. therefore, relying upon those decisions of various high courts and the order of the tribunal, we find no merit in the appeal of the revenue on merits.13. though we are of the view that on merits appeal of the revenue has no merits, however, we may examine the law point involved in this case which is also raised in the cross objection, and argued by both the parties. for the sake of convenience, section 275(1)(a) and (c) are reproduced below : "sec. 275(1) no order imposing penalty under this chapter shall be passed- (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the cit(a) under section 246 or section 246a or an appeal to the tribunal under section 253 after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the cit(a) or, as the case may be, the tribunal is received by the chief cit or cit, whichever period expires later; (c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later." the learned departmental representative argued that since in this case the order of the tribunal dt. 29th nov., 1994, was received in the office of the cit on 24th feb., 1995, therefore, the penalty order was within limitation. he has stressed upon the words "other order".according to the learned departmental representative, the order of the tribunal has extended the period of limitation in this case. we are unable to agree with the submission of the learned departmental representative if we accept the view of the learned departmental representative, then any appeal or matter, which is pending would extend the period of limitation which would be against the provisions of section 275. the object and purpose of section 275 is to extend the period of limitation in cases where appeals are pending finalisation before the competent lawful authorities. further the object of the section is that penalty could be imposed on finalisation of the appeals upto the stage of finalisation of appeal before the tribunal in this case, the order of the tribunal was passed on 29th nov., 1994, in which the assessment order dt. 24th march, 1987, and the order of the cit(a) dt. 20th june, 1989, were subject-matter. this fact is not disputed by both the sides. it is also not disputed that no penalty proceedings were initiated in assessment order dt. 24th march, 1987, which was subject-matter before the tribunal. section 275(1)(a) starts with the words "in a case where the relevant assessment or other order is the subject matter of an appeal" in the course of which action for imposition of penalty has been initiated. the learned departmental representative has failed to note that the requirement of section 275(1)(a) is also that the other order should be connected with the proceedings in the course of which action for imposition of penalty has been initiated. section 275(1)(a) has to be read together, though it has two parts. in this case penalty proceedings had not been initiated in the order which is the subject-matter of appeal before the tribunal.no other order was pending before the tribunal hon'ble rajasthan high court in the case of m.a. presstressed works (supra) held as under: "penalty--limitation--firm--assessment of firm on 30th sept., 1983--appeal against assessment dismissed on 24th feb., 1984--notice for penalty issued in course of assessment proceedings--order of penalty passed on 24th march, 1988--barred by limitation--cancellation of registration of firm and dismissal of appeal against order of cancellation on 25th sept., 1987--would not extend period of limitation--it act, 1961, section 275" tribunal, patna bench (third member) in the case of asstt. cit v.nageshwar prasad (supra) has held as under : "section 275 of the it act, 1961---penalty--bar of limitation--whether where original assessment was passed on 28th july, 1977, and cit(a)'s order was dt. 23rd march, 1979, penalty order passed on 21st march, 1986, i.e. after expiry of 6 months from cit(a)'s order, was barred by limitation under section 275--held, yes." 14. the crux of the matter would be that the other order, as relied upon by the learned departmental representative should have been connected with the matter in which action for imposition of penalty has been initiated. the appeal which is pending before the cit(a) or tribunal as prescribed under section 275(1)(a) should be not only relevant but should also be connected with regard to the initiation of the penalty proceedings. therefore, keeping in view the aforesaid authorities and discussion, we are of the considered view that section 275(1)(a) is not attracted in favour of the revenue in this case as argued by the learned departmental representative. maximum the period of limitation could be extended upto six months from the date of the order of cit(a) dt. 24th aug., 1992, which was passed on fresh assessment in which penalty proceedings were initiated for the first time. however, the penalty order was passed on 25th aug., 1995.therefore, the penalty order is barred by limitation. keeping in view the above discussion, we find no merits in the appeal of the revenue and accordingly the same is dismissed and the cross objection filed by the assessee is allowed.

Judgment:
1. The Revenue has filed ITA No. 207/All/1996 against the order of the CIT(A), Varanasi dt. 16th Oct., 1995, for asst. yr. 1984-85 against the deletion of penalty under Section 271(1)(c) of the IT Act, 1961 and has raised the following ground : "1. That the learned CIT(A) has erred in law and on the facts in cancelling the penalty of Rs. 5,10,000 under Section 271(1)(c) imposed by the AO, without appreciating that the assessee concealed the particulars of its income and furnished inaccurate particulars of such income in respect of amount of Rs. 7,82,728 written off under the head flood/fire rescue account and made wrong claim of depreciation on boiler amounting to Rs. 55,841 and these two additions have been confirmed by the learned CIT(A) as per order dt.

24th Aug., 1995, and the assessee has not filed appeal before the Tribunal. The Department's view is fully supported by the decision of the Hon'ble Allahabad High Court in the case of Rampur Finance Corporation Ltd. v. CIT (1991) 67 Taxman 162 (All)." 2. The assessee has preferred Cross-objection No. 1 of 2002 against the same order of the CIT(A) for the same assessment year on the following grounds: "1. Because the learned CIT(A) has erred in upholding the validity of the penalty proceedings which had clearly barred by limitation in terms of Section 275 of the IT Act.

2. Because the learned CIT(A) has failed to appreciate that the penalty proceedings had not been validly initiated and hence the entire proceedings were ab initio void." 3. The assessee has filed cross-objection on 26th Dec., 2001, when the Bench was hearing appeals on tour at Varanasi. However, appeal was filed on 25th Jan., 1996, as per endorsement on the appeal. The learned Departmental Representative objected to the admission of the cross-objection as it was time-barred. Therefore, we have heard the learned Departmental Representative and the learned counsel for the assessee on this point also. It would be appropriate (sic-if) this point be decided first before dealing with the main appeal.

4. The learned Departmental Representative argued that the affidavit explaining the delay has not been filed by authorised person and that the company has shifted its office is also not clear from the affidavit. The learned Departmental Representative also argued that one-man office was maintained at Varanasi and, therefore, the assessee must have the knowledge of the grounds served upon them.

5. On the other hand, the learned counsel for the assessee relied upon the affidavit filed by the assessee, which is filed by manager corporate accounts of the assessee stating therein that the company/assessee came to know of the Departmental appeal only vide Tribunal's notice dt. 3rd Dec., 2001, which was sewed upon the assessee on 10th Dec., 2001. It is further explained that on receipt of the notice, the assessee immediately filed application dt. 12th Dec., 2001, for supply of the grounds as the same were not served upon the assessee. This Bench vide order dt. 26th Dec., 2001, directed that grounds be supplied to the assessee and only thereafter cross-objection was filed. The learned counsel argued that the assessee has not received the grounds earlier and the cross-objection was legal in nature and as such, could be argued even in defence against the appeal of the Revenue.

6. We have considered the rival submissions of the parties. Though postal receipt is available on the file showing despatch of the grounds to the assessee earlier but there is no acknowledgement of record to show that the same were served upon the assessee. The assessee has been claiming that they came to know of the appeal on receipt of the notice of the main appeal. This fact is supported by an affidavit. We have also allowed the assessee to get the copy of the grounds. This shows that the assessee could not have got the grounds of appeal earlier.

Even otherwise, the grounds taken by the assessee are legal in nature and, therefore, in our considered view, no prejudice would be caused to the Revenue if the assessee is allowed to argue on the points raised in the cross-objection, which could otherwise be argued by the assessee as a respondent against the appeal of the Revenue. Keeping in view the above discussion, we are satisfied that there is no delay in filing of the cross-objections. Accordingly, the cross-objection is admitted and the assessee is allowed to argue on the cross-objection also.

7. We have heard the learned Departmental Representative and the learned counsel of the assessee on main appeal. The learned counsel for the assessee also filed paper book containing all the copies of the orders, and replies connected with this case. The learned counsel argued on cross-objection that original assessment order was passed on 24th March, 1987, in which no penalty proceedings under Section 271(1)(c) were initiated. Against the assessment order, the assessee preferred appeal to the CIT(A) which was decided vide order dt. 20th June, 1989, and the CIT(A) remanded the case to the AO. The assessee filed appeal against the order of the CIT(A) before the Tribunal and the Tribunal decided the appeal vide order dt. 29th Nov., 1994.

8. The learned counsel for the assessee further argued that fresh assessment order was passed by the AO in pursuance of the CIT(A)'s direction vide fresh assessment order dt. 16th Jan., 1991, in which for the first time penalty proceedings under Section 271(1)(c) were initiated against the assessee. The assessee preferred appeal against the assessment order to the CIT(A) who decided the appeal of the assessee vide order dt. 24th Aug., 1992. The learned counsel for the assessee further argued that penalty order under Section 271(1)(c) was passed by the AO on 25th Aug., 1995. He further argued that the period of limitation of six months expired on order dt. 24th Aug., 1992, of the CIT(A), which was passed on fresh assessment. He has relied upon Section 275(1)(c) in this regard. He has further relied upon the following decisions : (4) Saurashtra Cement & Chemical Industries Ltd. v. CIT (1995) 213 ITR 523 (Guj).

The learned counsel for the assessee further argued that pendency of appeal before the Tribunal is no ground to extend the period of limitation as originally no penalty proceeding under Section 271(1)(c) was initiated against which appeal before the Tribunal was pending. The learned counsel for the assessee on merits argued that though it was a case of income but after adjustment of carry forward, assessment was also framed at loss. He has further argued that the CIT(A) has rightly deleted the penalty in the matter.

9. On the other hand, the learned Departmental Representative argued that provision of Section 275(1)(a) was applicable in this case. He has further argued that the appeal by the Tribunal was decided vide order dt. 29th Nov., 1994, which was received in the office of the CIT on 24th Feb., 1995, and as such penalty order was passed within the period of limitation. He has filed copy of bifurcated Section 275 of IT Act that the words "other order is the subject-matter of an appeal" are applicable in this case.

The learned Departmental Representative on merits argued that in this case expenses of 1981-82 and 1982-83 were claimed by the assessee in the assessment year in appeal i.e., 1984-85 as such it is a case of filing inaccurate particulars and concealment of income. He has further argued that the order of the CIT(A) is vague and liable to be set aside and that Section 41 of IT Act is also applicable.

10. The learned counsel for the assessee in rejoinder, argued that "other order" as described in Section 275(1)(a) refers to only the relevant and connected orders and not unconnected orders. He has further argued that on pp. 5 and 6 of the paper book all the claim of loss by flood and fire were brought to the notice of the AO in the statement of accounts and several details filed at the time of assessment. Therefore, no inaccurate particulars were filed before the AO. He has further argued that Section 41 is not applicable as in earlier years no expenses were claimed. Lastly, he has argued that in similar circumstances, Tribunal, Allahabad Bench has allowed the appeal of the assessee for the asst. yr. 1988-89 and the copy of the order of the Tribunal has been filed at p. 13 of the paper book.

11. We have bestowed our careful consideration to the rival submissions of the parties. The facts and dates of the orders mentioned above are almost admitted by both the parties. It is clear from pp. 5 and 6 of the paper book filed by the assessee that the assessee had been showing the expenses incurred for repairs in hotel at Jaipur on account of flood and fire in earlier years, which was proved by the United India Insurance Company. Since the claim was not finalised during the years, the repairs and renovations were carried out, the expenditure was put under suspense account. The assessee has incorporated all these details in its balance sheet and annual report and other details, which were filed before the AO as well as before the CIT(A). All these details were available with the AO in asst. yrs. 1981-82 and 1982-83 also. The Insurance Company settled the claim of the assessee in January, 1983 and only on reimbursement by the insurance company, the difference was claimed as expenditure in the assessment year in question. As has already been pointed out all these details were available with the Revenue authorities right from the assessment year when the suspense account was opened and repair was carried out till the claim of the assessee was finalised by the insurance company. We would like to add here that it is a settled practice that insurance company on their contract with the assessee could have settled the claim of the assessee after sometime. The assessee has made repairs and renovation as would have been necessary to run their hotel at the time prior to the assessment year and till that time the claim of the assessee was not settled. Therefore, the assessee in the hope of settlement of claim had not claimed the expenses at that time. The assessee ascertained the losses only on the settlement of the claim by the insurance company.

Assuming that insurance company would have granted full claim to the assesses, then the assessee would not have claimed losses in the assessment year. Therefore, there was no occasion for the Revenue authorities to claim that expenses should have been claimed in the year in which they were made. However, that is not the position in this case. The assessee would have known the losses only on settlement of the claim by the insurance company. Since claim was settled in the assessment year in question, therefore, the assessee has rightly claimed losses in the year in question. Hon'ble Gujarat High Court in the case of Saurashtra Cement & Chemical Industries Ltd. (supra) decided the similar question. For the sake of convenience, we reproduce question No. 5.: "5. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the expenditure of Rs. 39,823 was not allowable in the. year in question on the ground that the liability has arisen in the years 1968-69 to 1973-74?" It was held by the Hon'ble High Court that if any liability, though relating to the earlier year, depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the later previous years it cannot be disallowed as deduction merely on the basis that the accounts are maintained on mercantile basis and that it related to a transaction of the previous year. The Hon'ble High Court, therefore, answered question No. 5 in the negative, i;e. in favour of the assessee and against the Revenue.

11.1. The Hon'ble Patna High Court in the case of Gouri Shankar Suresh Prasad (supra) held : "Tribunal finding that difference arose owing to disallowance of expenditure claimed--Not a case of concealment of income." 11.2. The Hon'ble Madras High Court in the case of CIT v. S.I Paripushpam (2001) 249 ITR 550 (Mad; held- "The Tribunal has found that the AAC was right in holding that the amount, addition of which was agreed to by the assessee, was an amount which had been set out in an enclosure filed along with the assessee's return of income." The Hon'ble Court, therefore, held that the Tribunal was justified in cancelling the penalty levied under Section 271(1)(c) of the IT Act, 1961.

11.3. The Tribunal, B-Bench, Allahabad in the case of the assessee itself for asst. yr. 1988-89 vide order dt. 29th Nov., 2000, has deleted the penalty in almost similar circumstances.

12. In this case, the assessee from the very beginning had been giving all the particulars of the claim and pendency of the insurance claim to the Revenue authorities. The claim was not settled till the assessment year in question and, as such, it was kept in suspense account We fail to understand how a case of filing of inaccurate particulars was made out by the Revenue authorities. The assessee has filed all the particulars in all the returns with regard to the claim in each year.

The CIT(A) also held that on these facts, it cannot be held that the assessee concealed its income or furnished inaccurate particulars.

Therefore, keeping in mind the above facts and circumstances, we are of the considered view that it is not a case of concealment of income or filing of inaccurate particulars of income by the assessee. Our view is also fortified by the various decisions of the Hon'ble High Courts mentioned above. Therefore, relying upon those decisions of various High Courts and the order of the Tribunal, we find no merit in the appeal of the Revenue on merits.

13. Though we are of the view that on merits appeal of the Revenue has no merits, however, we may examine the law point involved in this case which is also raised in the cross objection, and argued by both the parties. For the sake of convenience, Section 275(1)(a) and (c) are reproduced below : "Sec. 275(1) No order imposing penalty under this Chapter shall be passed- (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the CIT(A) under Section 246 or Section 246A or an appeal to the Tribunal under Section 253 after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the CIT(A) or, as the case may be, the Tribunal is received by the Chief CIT or CIT, whichever period expires later; (c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later." The learned Departmental Representative argued that since in this case the order of the Tribunal dt. 29th Nov., 1994, was received in the office of the CIT on 24th Feb., 1995, therefore, the penalty order was within limitation. He has stressed upon the words "other order".

According to the learned Departmental Representative, the order of the Tribunal has extended the period of limitation in this case. We are unable to agree with the submission of the learned Departmental Representative If we accept the view of the learned Departmental Representative, then any appeal or matter, which is pending would extend the period of limitation which would be against the provisions of Section 275. The object and purpose of Section 275 is to extend the period of limitation in cases where appeals are pending finalisation before the competent lawful authorities. Further the object of the section is that penalty could be imposed on finalisation of the appeals upto the stage of finalisation of appeal before the Tribunal In this case, the order of the Tribunal was passed on 29th Nov., 1994, in which the assessment order dt. 24th March, 1987, and the order of the CIT(A) dt. 20th June, 1989, were subject-matter. This fact is not disputed by both the sides. It is also not disputed that no penalty proceedings were initiated in assessment order dt. 24th March, 1987, which was subject-matter before the Tribunal. Section 275(1)(a) starts with the words "in a case where the relevant assessment or other order is the subject matter of an appeal" in the course of which action for imposition of penalty has been initiated. The learned Departmental Representative has failed to note that the requirement of Section 275(1)(a) is also that the other order should be connected with the proceedings in the course of which action for imposition of penalty has been initiated. Section 275(1)(a) has to be read together, though it has two parts. In this case penalty proceedings had not been initiated in the order which is the subject-matter of appeal before the Tribunal.

No other order was pending before the Tribunal Hon'ble Rajasthan High Court in the case of M.A. Presstressed Works (supra) held as under: "Penalty--Limitation--Firm--Assessment of firm on 30th Sept., 1983--Appeal against assessment dismissed on 24th Feb., 1984--Notice for penalty issued in course of assessment proceedings--Order of penalty passed on 24th March, 1988--Barred by limitation--Cancellation of registration of firm and dismissal of appeal against order of cancellation on 25th Sept., 1987--Would not extend period of limitation--IT Act, 1961, Section 275" Tribunal, Patna Bench (Third Member) in the case of Asstt. CIT v.Nageshwar Prasad (supra) has held as under : "Section 275 of the IT Act, 1961---Penalty--Bar of limitation--Whether where original assessment was passed on 28th July, 1977, and CIT(A)'s order was dt. 23rd March, 1979, penalty order passed on 21st March, 1986, i.e. after expiry of 6 months from CIT(A)'s order, was barred by limitation under Section 275--Held, yes." 14. The crux of the matter would be that the other order, as relied upon by the learned Departmental Representative should have been connected with the matter in which action for imposition of penalty has been initiated. The appeal which is pending before the CIT(A) or Tribunal as prescribed under Section 275(1)(a) should be not only relevant but should also be connected with regard to the initiation of the penalty proceedings. Therefore, keeping in view the aforesaid authorities and discussion, we are of the considered view that Section 275(1)(a) is not attracted in favour of the Revenue in this case as argued by the learned Departmental Representative. Maximum the period of limitation could be extended upto six months from the date of the order of CIT(A) dt. 24th Aug., 1992, which was passed on fresh assessment in which penalty proceedings were initiated for the first time. However, the penalty order was passed on 25th Aug., 1995.

Therefore, the penalty order is barred by limitation. Keeping in view the above discussion, we find no merits in the appeal of the Revenue and accordingly the same is dismissed and the cross objection filed by the assessee is allowed.