CBDT Clarification on Amendment to Section 271 of Income Tax Act

Exchange Rate for imported goods is Rs 74.03 Per Pound Sterling and Rs 51.22 Per Yen-Exchange Rate for export is Rs 72.45 Per Pound Sterling and Rs 49.94 Per Yen-Customs Non-Tariff Notification No.128 Sensex slips further and closes at 8773 100 per cent EOUs allowed to export non-basmati rice-DGFT Notification No.59 Customs duty of 5 per cent imposed on import of Pig Iron, spiegeleisen, semi-finished products, flat products & long products Import of Crude Soyabean Oil subjected to 20 per cent customs duty- no change in import duty on refined soyabean oil-Customs Tariff Notification No.122 Time-limit for filing refund of service tax extended to 6 months-Service Tax Notification No.32 Rahul Bajaj asks Industry to prepare for the worst Tariff Value for import of Brass Scrap is 3525 and for poppy seeds 5206-Customs Non-Tariff Notification No. 127 CBEC clarifies the entire amount of duty paid by the manufacturer, as shown in the invoice would be available as credit irrespective of the fact that subsequent to clearance of the goods, the price is reduced by way of discount or otherwise-Central Excise Circular No.877 Mandavariya (Kishangarh), District Ajmer notified for Unloading of imported goods and loading of export goods-Customs Non-Tariff Notification No.117 SC Ruling-the entitlement of benefit in terms of Section 32AB, Section 80HH and Section 80I of the Income Tax Act- conversion of Jumbo rolls of photographic films into small flats and rolls in the desired sizes amounted to manufacture/production-AIT-2008-413-SC SC Ruling-Whether any "gift" arose in terms of Section 2(xii) of the Gift-tax Act, 1958 on the allotment of rights issue by the appellant company to its shareholders vide Board's Resolution- Whether there was any element of "gift" as defined under Section 2(xii) in the appellant issuing Bonus shares in the ratio of 1:23-AIT-2008-412-SC DEPB benefit allowed on export of cement and steel-DGFT PN 108 exports of cement in all types and forms and primary steel products eligible for export incentives under Focus Market Scheme-DGFT Notification No.58 Import of Marble Tiles-DGFT Notification No.57 Clarification on setting up Duty Free Shops approved by FIPB-Customs Circular No.19 HC Ruling-Income Tax-"reserves" arising out of the acquisition of the business of Tata Cellular Limited could never have the character of "income" in the hands of the petitioners-pre-requisite condition contained in proviso to section 147 to enable the re-assessment to be opened after period of 4 years have elapsed have not been met-AIT-2008-410-HC HC Ruling-Central Excise- valuation of the goods for the purpose of excise duty and whether excise duty was chargeable under Section 4 or Section 4A of the Central Excise Act 1944-while construing rule 3, who are excluded are only the institutional or industrial consumers as explained in Rule 2A and the industrial or institutional consumers in terms of the proviso to rule 2(p) for the purpose of chapter-II are the same-If the person who purchase the prepacked commodity not directly from the manufacturer or packers, they are consumers and the declaration will be of no effect-AIT-2008-408-HC Government considering imposition of import duty on steel Bad News for Consulting Engineers- whether turnkey contract can be vivisected?- The conclusion in Daelim case on the point, prima facie, being not in accordance with law, matter goes to Larger Bench-AIT-2008-405-CESTAT Larger Bench of CESTAT rules Credit is admissible on an input service relating to the business-AIT-2008-407-CESTAT credit of the service tax paid on the outdoor catering (canteen) service is admissible as input service under Rule 2(l) of the Cenvat Credit Rules, 2004-AIT-2008-406-CESTAT The payment for use of "services for MTNL/other companies via the interconnect/port/access/toll by the assessee would not fall within the purview of payments as provided for under section 194J of the Act, so as to be eligible for tax deduction at source-The interconnect charges/port access charges cannot be regarded as fees for technical services-AIT-2008-404-HC Computation of Value under Section 14 for Levy of Export Duty - Customs Circular No. 18 Advance Ruling- Whether the service fee paid by the applicant to Intertek Testing Management Limited UK under Global Management Service Agreement is taxable as "Royalties & Fee for Technical Services" as per the provisions of Article 13 of DTAA between India & UK? Whether the applicant is required to deduct tax at source on the service fee paid to Intertek Testing Management Limited, UK, at the rate of 10% plus applicable surcharge and cess as per the provisions of section 115A(1)(b)(BB) of the Income-tax Act-AIT-2008-401-AAR Larger Bench of SC Ruling-whether the revenue can be precluded from filing an appeal even though in respect of some other years involving identical dispute no appeal is filed -AIT-2008-403-SC SC Ruling-whether transfer of Banking Undertaking gave rise to taxable capital gains under Section 45 of the 1961 Act-it was not possible to compute capital gains and, therefore, the said amount of Rs. 10.20 cr. was not taxable under Section 45 of Income Tax Act-AIT-2008-400-SC Export duty of 8 per cent notified in place of earlier rate of Rs. 200 per tonne on export of iron ore fines-Customs Tariff Notification No.121 Pan Masala Packing Machines (Capacity Determination And Collection of Duty) Second Amendment Rules, 2008-Central Excise Non-Tariff Notification No.45 SC rules Ethylene and propylene manufactured by the assessee and used in its factory in the further manufacture of the same goods would be entitled to the benefit of exemption contained in notification no.217/86-AIT-2008-398-SC New DEPB Rates on export of all products notified–DGFT PN 102 service tax paid under Section 66A is available as 'input credit' under Cenvat Credit Rules, 2004 provided the said services are used as input services by the manufacturer or producer of final products or a provider of output taxable service-Service Tax Trade Notice No.43/2008 Anti-dumping duty imposed on import of cable ties from China & Taiwan-Customs Tariff Notification No.118 Definitive Anti-dumping duty imposed on import of Phenol from Singapore, South Africa & European Union-Customs Tariff Notification No.114 High-tech products entitled to benefits under High-Tech Products Export Promotion Scheme –DGFT PN 101

JUDGMENTS

CENTRAL EXCISE

CUSTOMS

exchange rate

SERVICE TAX

INCOME TAX

VAT

FINANCE ACTS

FINANCE BILLS

EOU STPI

SEZ

DGFT

RBI

NTT

RESOURCES

Email | Print

CBDT Clarification on Amendment to Section 271 of Income Tax Act

AIT News Network

NEW DELHI. In view of the apprehension raised on the retrospective amendment to section 271 of the Income-tax Act, proposed in the Finance Bill, 2008, empowering the assessing officer to, inter-alia, levy penalty in case of concealment of income, the Ministry of Finance has issued the following clarification.

"In the context of levy of penalty under section 271 of the Income-tax Act, there has been an ongoing dispute between the Income-tax department and taxpayers on whether an assessing officer is required to record his satisfaction before initiating penalty proceedings. The Income-tax department has held the view that no separate satisfaction is required to be recorded before initiating penalty proceedings. In the case of Commissioner of Income-tax Vs. S.V. Angidi Chettiar (44 ITR 739; 1962), the Supreme Court has, while dealing with penalty under section 28 of the Indian Income-tax Act, 1922, held that "satisfaction before conclusion of proceeding under the Act, and not the issue of a notice or initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction". The same matter came up once again before the Calcutta High Court in the case of Becker Gray And Company (1930) Limited Vs. Income-tax Officer, Central Circle-I, Calcutta, And Others (112 ITR 503; 1977). Relying on the Supreme Court decision in the above case, the Calcutta High Court held that "It is true that the Income-tax Officer should be prima facie satisfied before the penalty notice is issued, but it does not mean that he is required to record such satisfaction in writing in every case." Following these decisions, wherever additions are made, assessing officers have, without separately recording any satisfaction, been issuing directions for initiating penalty proceedings.

However, interpreting the aforesaid Supreme Court decision, the Delhi High Court has, in the case of CIV Vs. Ram Commercial Enterprises Limited (246 ITR 568; 2000) held that "It is the assessing authority which has to form its own opinion and record its satisfaction before initiating penalty proceedings."

Subsequently, the Allahabad High Court went into this issue in the case of Shyam Biri Works Pvt. Ltd. Vs. CIT (259 ITR 625; 2002). After considering the above Calcutta High Court decision and the Delhi High Court decision, it has held that "With profound respect to the Delhi High Court decision, we are unable to agree…. We are, therefore, of the opinion that although the Assessing Officer must have satisfaction as required under section 273 of the Act, it is not necessary for him to record that satisfaction in writing before initiating penalty proceedings under section 273 of the Act.".

In view of conflicting judicial opinion on this issue, it was necessary to make legislative intervention and settle the matter. Therefore, clause 48 of the Finance Bill, 2008 proposes to insert a new sub-section (1B) in section 271 of the Income-tax Act so as to unambiguously provide that where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment, and such order contains a direction for initiating of penalty proceedings under sub-section (1) of section 271, such an order of assessment or reassessment shall be deemed to constitute satisfaction of the assessing officer for initiating penalty proceedings under sub-section (1) of that section.

The proposed amendment has been given retrospective effect in order to protect the revenue's contention on this issue in pending cases. However, this retrospective effect will not prejudice taxpayers' right to agitate the levy of penalty on merits. Further, while no separate satisfaction is required to be recorded before initiating penalty proceedings, it is still incumbent upon the assessing officer to record his satisfaction before levying the penalty. Accordingly, there is neither violation of the principle of natural justice nor any prejudice caused to the taxpayer as a result of the retrospective amendment."

Related Story:

Mandatory E-payment of Income Tax