BIPINCHANDRA K. BHATIA V. ASSTT.COMMISSIONER OF INCOME TAX

TAXAP/596/2006

AI Insights

The case involves an appeal by the assessee, Bipinchandra K. Bhatia, against the order of the ITAT, Rajkot Bench, which partly allowed the assessee's appeal concerning additions and disallowances made by the Assessing Officer (AO) for the Assessment Year 2000-01. The primary legal issue was the confirmation of a penalty under Section 271(1)(c) of the Income-tax Act, 1961, following the additions made to the assessee's income. The High Court examined whether the penalty was justified based solely on the ITAT's earlier findings in the quantum proceedings.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 762991 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 04-12-2014
• Assessment Year: misc
• Other Referred Cases: CIT vs. Khoday Eswarsa & Sons, Amrut Tubewell Company vs. Asst. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M R BHATT; MAUNA BHATT
• Assessee Lawyers: R K PATEL
• Keywords: Assessment; Disallowances; Gold Seizure; Income Tax; Penalty
• Section: 271(1)(c)

Judgement Text

"O/TAXAP/596/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 596 of 2006 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ BIPINCHANDRA K. BHATIA....Appellant(s) Versus ASSTT.COMMISSIONER OF INCOME TAX....Opponent(s) ================================================================ Appearance: MR RK PATEL, ADVOCATE for the Appellant(s) No. 1 MR MR BHATT, SR. ADVOCATE, with MRS MAUNA M BHATT, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 04/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This is an appeal by the appellant- assessee, seeking to challenge the order of the learned ITAT, Rajkot Bench (for short, ‘the Page 1 of 8 O/TAXAP/596/2006 JUDGMENT Tribunal’), Dated : 22.11.2005, rendered in ITA No. 59/Rjt/2005 for the A.Y. 2000-01, whereby, it allowed the appeal filed by the assessee in part. 2. The brief facts giving rise to the present appeal are that the assessee filed his return of income for the A.Y. 2000-01. Pursuant thereto, several additions and dis-allowances came to be made by the concerned AO. Being aggrieved with the same, the assessee approached the learned CIT(A), who partly allowed the appeal of the assessee. However, since, the assessee was not satisfied with the order of the CIT(A), he carried the matter before the learned Tribunal, which passed the impugned order, as stated in Para-1, herein above. Hence, the assessee preferred the present appeal raising the following questions of law; “(1) Whether on the facts and in the circumstances of the case the Tribunal is right in law in interpreting the provisions of section 271(1)(c) of the Income-tax Act, 1961, while confirming the addition/disallowances of Rs.2,57,000/- by placing ‘disproved’ as equivalent to ‘unproved’ on analysis of appellant’s explanation in quantum and penal proceedings? (2) Whether on the facts and in the circumstances of the case the approach of the Tribunal is right in law when it confirms the levy of penalty under Page 2 of 8 O/TAXAP/596/2006 JUDGMENT section 271(1)(c) of the Act as a consequent to addition correlatable to the penal proceedings being confirmed in quantum proceedings before the Tribunal? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in confirming the order of penalty under Section 271(1)(c) of the Income-tax Act, 1961 solely on the basis of assessment order without anything more?” 3. It, however, appears that at the time of admitting the present appeal, this Court framed only one question for consideration, which reads as under; “Whether on the facts the tribunal is right in law in confirming levy of penalty under section 271(1)(c) as a consequence to addition of Rs.2,57,000/- being confirmed in quantum proceedings before the Tribunal?” 4. In view of the above, we are not required to consider or answer the remaining two questions raised by the assessee in this appeal and they are to be treated as rejected. 5. Mr. Patel, learned Advocate for the appellant-assessee, invited our attention to the order of the learned CIT(A) as well as the Tribunal in connection with the proceedings Page 3 of 8 O/TAXAP/596/2006 JUDGMENT under Section 271(1)(c) of the Income Tax Act, 1961 (for short, ‘the Act’) and more particularly to Para-4 of the order of the Tribunal. He, further, invited our attention to the reply of the assessee filed in respect of the seized gold, whereby, he disclosed the source from which he had purchased the gold from Nayan Jewellers. Mr. Patel, therefore, submitted that in view of the fact that the assessee had already disclosed all the facts truly and correctly, present appeal deserves to be allowed. 6. In support of his submissions, Mr. Patel placed reliance on a decision of the Apex Court in “CIT VS. KHODAY ESWARSA & SONS”, [1972] 83 ITR 369. He has also played reliance on a decision of this Court in the case of “AMRUT TUBEWELL COMPANY VS. ASST. CIT”, rendered in Tax Appeal Nos. 128 & 129 of 2001 and prayed that the appeal be allowed. 7. On the other hand, Mr. Bhatt, learned Sr. Advocate for the Respondent-Revenue, invited our attention to the order of the learned CIT(A) and submitted that, though, the assessee was called-upon to explain the source of purchase of gold, he could not explain the same properly, and therefore, this appeal deserves to be dismissed as being without merit. Page 4 of 8 O/TAXAP/596/2006 JUDGMENT 8. Heard learned Counsels for the parties and perused the material on record, including the orders of the learned CIT(A) and the learned Tribunal. From a perusal of the order of the material on record, it appears that certain gold was seized from the assessee and since, according to the Revenue, he failed to disclose the source of purchase thereof, appropriate proceedings were initiated against him, including the penalty proceedings under Section 271(1)(c) of the Act. 9. In above view of the matter, here, it would be relevant to refer to the decision of the Apex Court in “CIT VS. KHODAY ESWARSA & SONS”(Supra), wherein, in an unnumbered para, the Apex Court observed and held as under; “From the above it is clear that penalty being proceedings being penal in character, the department must establish that the receipt of the amount in dispute constitutes income of assessee. Apart from falsity of explanation given by the assessee department must have before it before levying penalty cogent material or evidence from which it could be inferred that assessee has consciously concealed particulars of his income or had deliberately furnished inaccurate particulars in respect of the same and that the disputed amount is a revenue receipt. No doubt the original assessment proceedings, for computing Page 5 of 8 O/TAXAP/596/2006 JUDGMENT the tax may be a good item of evidence in the penalty proceeding s but the penalty cannot be levied solely on the basis of the reasons given in the original order of assessment.” 10. In the case on hand, there is no material to show that that the assessee has consciously concealed certain particulars pertaining to his income or has supplied inaccurate particulars, deliberately. Further, it is the case of the Revenue that the explanation given by the assessee in connection with his income is not acceptable and it is not the case that the assessee has offered no explanation or false explanation, at all. Instead the case of the revenue is that the explanation given by the assessee cannot be accepted. In similar circumstances, this Court in the case of “AMRUT TUBEWELL COMPANY VS. ASST. CIT” (Supra), observed as under in Para-15; “15. So far as the penalty under Section 273(2)(a) is concerned, said section reads as under; “273(2)[a] has furnished under sub- section(1) or sub-section(2) or sub- section(3) or sub-section (5) of section 209A, or under sub-section (1) or subsection (2) of section 212, an estimate of the advance tax payable by him which he knew or had reason to believe to be untrue, ...]” The Tribunal has recorded that the Page 6 of 8 O/TAXAP/596/2006 JUDGMENT CIT(A) confirmed the penalty imposed by the AO under this section on the ground that the difference between the earned income and the assessed income of the assessee was more and that the assessee, himself, had declared income of Rs.75,000/- by filing revised return. The Tribunal, further, observed that the CIT(A) had found that the assessee was not able to prove the source of cash credit, and therefore, CIT(A) upheld the penalty levied by the AO, which is confirmed by the Tribunal. However, while doing so, here again, the Tribunal failed to appreciate the fact that the assessee had not furnished any details pertaining to advance tax which was untrue. On the contrary, the additions were of such nature that the assessee could not have foreseen. We are, therefore, of the opinion that the order of the Tribunal cannot be sustained and deserves to be quashed and set aside.” 11. In above view of the matter, the decision of the Apex Court in “CIT VS. KHODAY ESWARSA & SONS”(Supra) and of this Court in “AMRUT TUBEWELL COMPANY VS. ASST. CIT” (Supra), would apply to the facts of the present case. Hence, the appeal deserves to be allowed. 12. In the result, this appeal is ALLOWED. The question of law raised in this appeal is answered in favour of the appellant-assessee and against the respondent-Revenue, accordingly. Page 7 of 8 O/TAXAP/596/2006 JUDGMENT (K.S.JHAVERI, J.) (K.J.THAKER, J) UMESH Page 8 of 8 "