ORDER
1. The following question has been referred to the Special Bench for decision:
“Whether, the Tribunal fee on an appeal against the order of penalty levied Under Section 271(1)(c) of the I.T. Act is governed by Clause (d) of Section 253(6) or Clauses (a) to (c) of Section 253(6) of the I.T.Act?”
2. The reference arises in the following circumstances:
The assessee filed an appeal to the Tribunal against the order of the CIT(Appeals) of 14.2.2003. The appeal was against the levy of penalty of Rs. 9,990 levied Under Section 271(1)(c). The appeal was accompanied by a filing fee of Rs. 500. The Registry had marked the appeal as having been filed without the proper filing fee. According to the Registry the filing fee was paid short by Rs. 2,912. Apparently the Registry calculated the filing fee on the basis of the assessed income which was Rs. 3,41,220 as per the assessment order. According to Section 253(6)(c), where the total income of the assessee, “in the case to which the appeal relates” is more than Rs. 2 lacs, the appeal to the Tribunal shall be accompanied by a filing fee of 1% of the assessed income, subject to a maximum of Rs. 10,000. The Registry relied on this provision and calculated the filing fee at Rs. 3,412, being 1% of the assessed income of Rs. 3,41,220. The assessee, however, paid only Rs. 500 as filing fee, apparently relying on Clause (d) of the section which says that “where the subject matter of an appeal relates to any matter, other than those specified in Clauses (a), (b) and (c)” . This clause was inserted by the Finance Act, 1999 w.e.f. 1.6.1999. As the Registry took the view that the filing fee was short paid by Rs. 2,912, a defect memo was issued to the assessee. The assessee did not pay the amount as demanded and, therefore, the matter was placed before the Division Bench. The assessee was given an opportunity of being heard in response to which it was contended that the proper filing fee is only Rs. 500 and reliance for this was placed on the order of Special Bench of the Tribunal (Three Members) in the case of Vinod Khatri v. Dy. CIT 82 TTJ (Del) SB 911.
3. The Division Bench noted that the majority opinion in the aforesaid Special Bench order was that the appeal against the levy of penalty will be governed by Clause (d) of Section 253(6) for purposes of filing fee and not by Clauses (a) to (c). The Division Bench also noted that the dissenting opinion in the aforesaid order was to the effect that since the appeal against the penalty is clearly linked to the assessed income, the filing fee would be governed not by the residuary Clause (d), but would be governed by Clauses (a) to (c). The Division Bench felt, prima facie, that the reasons given in the dissenting opinion “appear to be more appealing”. The matter was, therefore, placed before the Hon’ble President of the Tribunal with a request to constitute, if thought fit, a Special Bench consisting of more than three Members of the Tribunal to consider the issue afresh. Accordingly, the Hon’ble President was pleased to constitute a larger Special Bench consisting of five Members of the Tribunal and the question reproduced earlier was referred to the said Special Bench. This is how the matter is before us.
4. Section 253(6) is as under:
“An appeal to the Appellate 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 Ist day of October, 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 Assessing Officer, 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 often 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.
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).”
Clause (d) was inserted by the Finance Act, 1999 w.e.f. 1.6.1999.
5. The main contention advanced by Mr. R. Salarpuria, the learned representative for the assessee before the Special Bench, was that the words “in the case to which the appeal relates”, which appear in Clauses (a) to (c) of the sub-section really mean and refer to an appeal before the Tribunal simplicitor, that the penalty is normally imposed on the concealed income and not on the assessed income and, therefore, these clauses do not apply where the appeal is filed against the levy of penalty. He submitted, relying on the observations of the Special Bench in Vinod Khatri’s case (supra) in paragraph 17 of its order, that concealed income may not have a link with the assessed income and further that the penalty proceedings are wholly independent of assessment proceedings. Mr. Salarpuria further drew our attention to the expression “tax sought to be evaded” appearing in Explanation 4 below Section 271(1)(c) and pointed out that a concealment penalty is imposed only with reference to the tax sought to be evaded and has no connection with the income assessed in the assessment order. He accordingly submitted that there is absolutely no connection between the amount of penalty levied and the income assessed and, therefore, an appeal against the levy of penalty, filed before the Tribunal should be governed by the residuary Clause (d) and the filing fee would, therefore, be only Rs. 500.
6. Mr. A.K. Chakraborty, the learned counsel for the assessee in ITA No. 1423/K/2003 (Intervener) put forth the following submissions:
According to him the question is whether the penalty is in any manner linked with the assessment. In his submission, the word “case” appearing in Clauses (a) to (c) is to be given a general meaning. The words “subject matter of an appeal” appearing in the residuary Clause (d) denote an entirely different aspect of the matter and is not to be confused with the import of the word “case” appearing in the earlier clauses. Mr. Chakraborty further submitted that for purposes of levying a penalty for concealment Under Section 271(1)(c), the A.O. is required to be satisfied about the guilt of the assessee and it is only that part of the income ultimately assessed, which the assessee concealed from the Income-tax Department, that would form the basis of the levy of penalty. In other words, the income assessed by the A.O. does not have any connection with the amount of penalty. He pointed out that it is a well settled proposition, recognized by the Bombay High Court in CIT v. Dharamchand L. Shah 204 ITR 462 that the assessment and penalty proceedings are different from each other and that they are linked with each other only for a limited purpose of calculation of the amount of penalty and this distinction should not be lost sight of while interpreting the provisions of Section 253(6). Reliance was also placed on the judgment of the Supreme Court in Commissioner of Central Excise v. Kisan Sahkari Chinni Mills Ltd. 255 ITR 57 in which it was held that there is no equity in tax proceedings. The following judgments/orders/circulars were also relied upon generally in support of the contentions:
1. CIT v. National Taj Traders 121 ITR 535 (SC) at 545.
2. Amruta Enterprises v. Dy. CIT 84 ITD 172
3. Circular No. 779 dated 14.9.1999 reported in 240 ITR Statutes page 3 at page 41.
4. Circular explaining the object of introducing Clause (d) reported in 236 ITR Statutes page 185.
Besides the above Mr. Chakraborty relied on the majority judgment of the Special Bench in the case of Vinod Khatri (supra). He also adopted generally the arguments of Mr. Salarpuria.
7. Mr. Subhash Agarwal, the learned counsel appearing for the Intervener Dr. Arti Chakraborty in ITA No. 72 and 75 also made submissions. He put forth the following points:
The word “relates” appearing in Clause (d) was not a word of wide import as was held in the dissenting opinion expressed in the Special Bench in the case of Vinod Khatri, that it is a word which merely connects the appeal and the penalty proceedings and that if there is any doubt as to the true meaning of the word, the same should be gathered from associated words as opined by the learned author G.P. Singh in page 379 of his treatise on the Principles of Statutory Interpretation, 8th Edition. No word can be substituted or added while interpreting a statutory provision. According to Mr. Agarwal, the flaw in the reasoning of the majority as pointed out in the dissenting opinion, namely that if Clause (d) is interpreted in the manner done by the majority then it would mean that before introduction of the clause on 1.6.1999 there would have been no provision prescribing the filing fee in the case of an appeal against the levy of penalty, was itself flawed. In this connection, it was submitted that the principle of contemporanea exposite relied upon in the minority opinion was not apposite. Mr. Agarwal criticized the approach adopted in the dissenting opinion as an incorrect approach which cannot substitute the law and that such an approach overlooked the actual practice that was being followed by the Registry of the Tribunal in accepting the appeals filed against penalty orders accompanied by filing fees calculated by the assesses.
8. Mr. Agarwal also submitted that having regard to the doctrine of “stare decisis”, a Special Bench cannot be constituted for reviewing an earlier Special Bench order. Relying on the judgment of the Supreme Court in the case of Keshav Mills Co. Ltd. v. CIT 56 ITR 365, he submitted that Courts should be slow to depart from a construction of statute which has held the field for considerable period of time and at any rate the basic principle of review was that if two views are equally possible, the earlier view should be left undisturbed.
9. On behalf of the Department, Mr. Chatterjee submitted that a concealment penalty always owes its origin to the assessment order and the requisite satisfaction is always to be reached in the course of the assessment proceedings and in this manner there is always a link between the penalty and the quantum of income assessed. He also pointed out that the computation of the penalty is linked to the tax. The penalty order falls to the ground if the assessment itself is quashed and this demonstrates the link between the assessment proceedings and the penalty proceedings. According to Mr. Chaterjee the residuary clause which refers to the “subject matter of an appeal” advisedly uses an expression which is different from that used in the earlier three clauses which is “in the case to which the appeal relates” and this difference has an entirely different import which should not be lost sight of. He generally relied on the Circular issued by the C.B.D.T. while introducing Clause (d) and also on the dissenting opinion expressed in the Special Bench order in the case of Vinod Khatri.
10. We have carefully considered the matter in the light of the order of Special Bench in the case of Vinod Khatri, the relevant statutory provisions as well as the rival contentions ably placed before us by both the sides. Section 253(6) as originally enacted was 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. Ist 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 Ist April, 1971, Rs. 100;
(b) In a case where the assessment proceedings were initiated between Ist April, 1971, and 31st May, 1981 (both days inclusive), Rs. 125;
(c) In any other case, Rs. 200.”
Between Ist June, 1992 and 30th September, 1998, as per the amendment made by the Finance Act, 1992, the fee was increased, in the case of an appeal made on or after Ist June, 1992, to Rs. 250 where the total income of the assessee as computed by the Assessing Officer in the case to which the appeal relates was Rs. 1 lac or less and to Rs. 1,500 where the total income was computed at more than Rs. 1 lac. The distinction earlier made on the basis of the initiation of assessment proceedings was done away with. The amendment made w.e.f. 1.6.1992 was explained by Circular No. 636 dated 31st August, 1992 (198 ITR (St.) page 1), as under:
“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.”
With effect from Ist October, 1998 another amendment was made to the section by the Finance (No.2) Act, 1998 enhancing the fees for filing the appeals. Sub-section (6) to Section 253 was amended to 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 Ist day of October, 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).”
With effect from Ist June, 1999, a new clause, Clause (d) was introduced by the Finance Act, 1999 which 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 insertion of the above clause, which may be called hereinafter as the residuary clause was explained by Central Board of Direct Taxes Circular No. 779 dated 14th September, 1999 in the following words:
“(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.”
11. Having set out the legislative history relating to Section 253(6) we may now proceed to examine the order of the Special Bench in the case of Vinod Khatri and the arguments presented by both the sides. The majority opinion in the case of Vinod Khatri was based on the following major premises:
(a) The words “in the case to which the appeal relates” which appear in Clauses (a) (c) of the sub-section refer to the particular case or an order and, therefore, the word “case” would mean the assessment order.
(b) The words “total income of the assessee as computed by the A.O.” have co-relation to the whole assessment order and by this analogy, the appeals which agitate assessed income or the components parts thereof alone are to be treated as appeals relating to the case, which in turn means that only in the case of an appeal challenging the quantum of assessed income the fee payable to the Tribunal is to be determined on the basis of the assessed income.
(c) The phraseology of the residuary clause is totally different. It uses the words “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 quite different from the term “the case to which the appeal relates”. In other words an appeal against the penalty order cannot be treated as an appeal as if it is an appeal against the assessment order and, therefore, the assessed income cannot form the basis for filing the appeal fee. Such an appeal would, therefore, fell under the residuary clause. The subject matter of appeal is the penalty imposed on the assessee and is separately identifiable and should not be confused with the assessment order or the quantum of income assessed therein.
(d) The assessment and penalty proceedings are quite different and distinct and the connection between the two, if any, is remote inasmuch as the addition in the assessment order may or may not be deleted but a penalty can be deleted despite the confirmation of the addition. An addition made in the assessment may not form the subject matter of a penalty though it may form part of the total income. Therefore, the “assessed income” and “concealed income” are different concepts or different subject matters.
(e) The penalty levied is based on the tax sought to be evaded and not on the total income assessed by the A.O. Thus the penalty amount has no co-relation with the assessed income.
(f) The Circular No. 779 itself clarifies that the residuary clause would cover the appeals on issues such as TDS defaults, non-filing of return etc. which may not have any nexus with the assessed income. The penalty levied, which does not have any nexus with the assessed income would thus fall under the residuary clause.
12. The minority opinion expressed in the above case was based on the following premises:
(a) The expression “in the appeal to which the case relates” appearing in Clauses (a) to (c) is not limited in its import to merely the assessment order only. The expression has to be widely construed so as to include any appeal which is relatable to or connected with the total income computed by the A.O.
(b) The word “case” used in the above clauses in its technical or legal sense means cause or a state of facts which furnishes the occasion for the exercise of jurisdiction by a judicial Tribunal.
(c) The word “relates” used in all the four clauses should not be construed in a restrictive manner.
(d) Clauses (a) to (c), when they speak of an appeal which relates to a case in which the total income is assessed at a particular figure, only means that the appeal bears a relationship or connection with the entire factual matrix involving the assessment of the total income.
(e) In case the appeal has no such connection with the assessment of the income, such as penalties under Sections 271D, 271B, penalties for default in TDS etc, they would be outside the purview of the first three clauses and would fall under the residuary clause.
13. The minority opinion thereafter proceeded to examine whether a penalty order for concealment of income is in any way related to the assessed income so that the required nexus under the first three clauses is present. It was observed that unless the concealed income is brought to assessment and forms part of the assessed income, it cannot form the basis for the levy of penalty and in this sense the assessment of the concealed income and the penalty for concealment are inextricably inter-linked and inter-connected. The assessment is the foundation for the penalty. If the concealed income is deleted in appeal, that would per se lead to cancellation of the penalty because of such inter-connection. Even the quantification of the penalty is linked with the concealed income as well as the total assessed income. In fact this is the reason why the Delhi High Court in CIT v. Atma Ram Properties Ltd. 258 ITR 246 held that the appellate authority sitting in appeal over a penalty order should wait for the disposal of the appeal against the quantum. In CIT v. Ram Commercial Enterprises 246 ITR 568 the Delhi High Court placing reliance on the judgments of the Supreme Court in CIT v. Angidi Chettiar 44 ITR 739 and D.M. Manasvi v. CIT 86 ITR 557, held that the recording of the satisfaction regarding concealment in the course of the assessment proceedings is an indispensable requirement for the validity of the penalty proceedings. It has further been observed in the dissenting opinion that the judgment of the Rajasthan High Court in Moti Engg. (P) Ltd. v. UOI 218 ITR 50, in which the constitutional validity of the amendment made to Section 253(6) by the Finance Act, 1992 was upheld, shows that the filing fee to be paid in respect of a penalty appeal is linked with the quantum of income assessed. In the light of this judgment the same interpretation should be placed on Clauses (a) to(c).
14. Turning to the addition on Clause (d), the residuary clause to the sub-section by the Finance Act, 1999 w.e.f. 1.6.1999, the dissenting opinion has noted that this became necessary because there are certain penalties which are not linked to the assessed income, such as TDS defaults, failure to audit accounts etc. Nevertheless a filing fee with regard to these appeals had to be provided. This has been done by this residuary clause. It was further pointed out that the basis of levy of filing fee was changed even w.e.f. 1.6.1992 where it was linked with the assessed income and it was in 1999 that Clause (d) was introduced to take care of the appeals filed against residuary cases namely cases of penalties or other orders which have nothing to do with the quantum of assessed income. The dissenting opinion made a pertinent point that if the expression “case” as used in the section is to be read as the assessment order, then for the period prior to 1.6.1999 when Clause (d) was introduced as the residuary clause, no court fee would have been payable for filing appeals against orders other than assessment order, such as concealment penalty etc. etc. This would produce a wholly unreasonable result causing confusion, uncertainty and absurdity.
15. The dissenting opinion also referred to the long standing practice which is in conformity with the legislative intention and sanctified by judicial benediction and concluded that such a practice should not be normally departed from, if it is not in conflict with the express provisions of the statute.
16. We are of the considered opinion, on re-examination of the statutory provisions and the different opinions expressed in the Special Bench order in the case of Vinod Khatri, in the light of the arguments placed before us, that the opinion expressed by the minority in the above case seems to be the better reasoned and more acceptable view. We make this observation with utmost respect to the majority opinion expressed in the above case. In our view also the words “in the case to which the appeal relates” only refer to the proceedings relating to the assessee in whose case the penalty order has been passed. We are in full agreement with the view expressed in the dissenting opinion that these words should not be understood in a restrictive sense and must be broadly construed so as to cover all appeals which are filed in the case of the assessee where the appeal is filed against an order which is based on the quantum of income assessed. An order levying penalty for concealment is undeniably connected with the assessment order or more particularly to the total income computed by the A.O. It may be that, as contended by one of the learned representatives appearing before us for the assessee, the penalty is levied only with reference to the tax sought to be evaded on the concealed income, but the concealed income, as rightly pointed out in the dissenting opinion in the case of Vinod Khatri, does form part of the assessed income as computed by the AO and this is sufficient to establish the nexus between the amount of income assessed by the AO and also establish the requisite relationship between the assessed income and the filing fee. If the Legislature wanted to provide for the filing fee based on the quantum of income assessed only in the case of appeals filed against the assessment orders, then they could have easily used a much simpler phraseology in Clauses (a) to (c) as has been done in Section 246 of the Act which provides for appeals to the CIT(Appeals). However since the expression “in the case to which the appeal relates” have been coined in Clauses (a) to (c), it indicates a clear intention on the part of the Legislature to link the filing fee with the amount of income assessed by the A.O. in cases of all appeals which have a relation with the amount of income assessed, including appeals against penalty for concealment. The residuary clause introduced w.e.f. 1.6.1999 takes care of all appeals, including appeals against certain penalties, which have no nexus with the amount of income assessed. We are also in agreement with the view expressed in the dissenting opinion to the effect that if the expression “case” used in the sub-section is to be read as assessment order, then for the period prior to 1.6.1999, when Clause (d) was inserted, no filing fee would be leviable in respect of appeals filed by the assessee against orders other than assessment orders, such as concealment penalty etc. Such an interpretation should obviously be avoided.
17. We have no quarrel with the proposition that assessment proceedings and penalty proceedings are different in nature. But this principle is applicable for a limited and a different purpose. The settled legal position is that the penalty proceedings are quasi criminal in nature, whereas assessment proceedings are not so and that, therefore, any material gathered against the assessee during the assessment proceedings or findings recorded in the course of the assessment proceedings, though would constitute good evidence for purposes of levying penalty, would not be conclusive evidence against the assessee in penalty proceedings. The legal position is also that it is open to the income-tax authorities and the appellate authorities to make a reappraisal of the entire materials while judging the correctness or justification of the penalty imposed on an assessee for concealment of income and come to a different conclusion. This principle recognizing the distinction between the assessment and penalty proceedings cannot be extended, in our humble opinion, for determining a provision which prescribes the filing fee in respect of appeals filed before the Tribunal. Nor can it follow that penalty proceedings have no relation to assessed income. Further as held in the dissenting opinion, the requirement that the A.O. should record the satisfaction that the assessee has concealed his income and such satisfaction should be reached in the course of the assessment proceedings, supports the view that there is a link or nexus or relationship between the assessment proceedings and the penalty proceedings.
18. For the above reasons, we are in full agreement with the view expressed in the dissenting opinion in the Special Bench decision in the case of Vinod Khatri. We are, therefore, unable to accept the arguments advanced on behalf of the assesses and the interveners before us. We are, however, indebted to both sides for their lucid arguments.
19. We, therefore, answer the question referred to us in the following manner:
The Tribunal fee on an appeal against the order of penalty levied Under Section 271(1)(c) of the I.T.Act is governed by Clauses (a) to (c) of Section 253(6) of the Income-tax Act.