C.T.CHACKO V. THE COMMISSIONER OF INCOME TAX

ITA/198/2012

AI Insights

The case involves multiple appeals by C.T. Chacko against the penalties imposed for concealment of income and furnishing of inaccurate particulars of income over several assessment years from 1995-96 to 2001-02. The penalties were based on reassessments that revealed significant discrepancies between the income declared by Chacko and the income assessed by the tax authorities. The primary legal issues revolved around the justification for the penalties under Section 271(1)(c) of the Income Tax Act, the applicability of the limitation period under Section 275, and the interpretation of Explanation-3 to Section 271(1)(c). The court found that the penalties were justified due to the non-maintenance of books of accounts and the substantial difference in declared and assessed incomes.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 755820 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 03-12-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: T M SREEDHARAN; V P NARAYANAN; DIVYA RAVINDRAN
• Keywords: Concealment of income; Inaccurate particulars of income; Income Tax; Limitation; Penalty; Reassessment
• Section: 271(1)(c); 275

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE TUESDAY, THE 3RD DAY OF DECEMBER 2013/12TH AGRAHAYANA, 1935 ITA.No. 198 of 2012 ---------------------------- [AGAINST THE COMMON ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN DATED 27-04-2012 IN I.T.A. NO.216/COCH/2010 FOR THE A.Y-1995-96] .............. APPELLANT/APPELLANT/ASSESSEE: ------------------------------------------------------ C.T.CHACKO, CHALUVELIL, THOTTACKADKU, CHANGANACHERRY. BY SRI.T.M.SREEDHARAN, SENIOR ADVOCATE, ADVS.SRI.V.P.NARAYANAN, SMT.DIVYA RAVINDRAN. RESPONDENT/RESPONDENT/REVENUE: ----------------------------------------------------------- THE COMMISSIONER OF INCOME TAX, AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM-695 003. BY SRI.JOSE JOSEPH, S.C. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 03-12-2013, ALONG WITH I.T.A. NO.215/2012 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Prv. I.T.A. NO.198/2012: APPENDIX PETITIONER'S ANNEXURES: ANNEXURE-A: COPY OF THE ASSESSMENT ORDER DTD. 28/03/2002 PASSED BY THE INCOME TAX OFFICER, WARD-1, THIRUVALLA. ANNEXURE-A1: COPY OF THE PENALTY ORDER DTD. 23/04/2008 PASSED BY THE ASSESSING OFFICER FOR THE YEAR 1995-96. ANNEXURE-B: COPY OF THE MEMORANDUM OF APPEAL DTD.20/05/2008 FILED BY THE APPELLANT BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS)-1, THIRUVANANTHAPURAM. ANNEXURE-C: COPY OF THE COMMON APPELLATE ORDER IN I.T.A. NO.3/TVLA/08-09 FOR 1995-96 DTD. 30/12/2009 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1, THIRUVANANTHAPURAM. ANNEXURE-D: COPY OF THE MEMORANDUM OF APPEAL DTD. 25/02/2010 FILED BY THE APPELLANT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. ANNEXURE-E: COPY OF THE COMMON ORDER DTD. 27/04/2012 IN I.T.A. NO.216/COCH/2010 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. RESPONDENTS' ANNEXURES: NIL. //TRUE COPY// P.A. TO JUDGE. Prv. MANJULA CHELLUR,C.J. & A.M.SHAFFIQUE, J. = = = = = = = = = = = = = = = = I.T.A.Nos.198,215,216,217,218,219 and 220 of 2012 = = = = = = = = = = = = = = = = = = = = = Dated this the 3rd day of December, 2013 JUDGMENT Manjula Chellur,CJ These matters are taken up for final disposal by consent of both the parties. The assessment years with reference to the above appeals are as under:- I.T.A.Nos. Assessment Years 198 of 2012 1995-96 215 of 2012 1996-97 216 of 2012 1997-98 217 of 2012 1998-99 218 of 2012 1999-00 219 of 2012 2000-01 220 of 2012 2001-02 2. The following substantial questions of law arise for consideration. i) Whether on the facts and circumstances of the case, is the Appellate Tribunal justified in sustaining the penalty imposed u/s.271(1)(c) for concealment of income/furnishing of inaccurate particulars of income for the Assessment Years? I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 2 ii) Should not the Appellate Tribunal have held that the order imposing penalty was barred by limitation by virtue of the proviso to Section 275 of the Act? iii) Has not the Appellate Tribunal erred in relying on Explanation-3 to Section 271(1)(c) without noticing the amendment to the above Explanation with effect from 01.04.2003 and in sustaining the penalty on that ground? 3. The facts that led to the filing of the present appeals are under:- Appellant assessee, admittedly, was running a poultry farm and a piggery. He was supplying chicken to hotels and different shops. The appellant comes within the Income Tax office, Ward No.I, Thiruvalla Circle. For the above assessment years, the appellant filed return of income voluntarily under Section 139 of the Income Tax Act (hereinafter referred to as the Act) on 26.03.1997 declaring total income as 44,000/-. The return was ₹ processed as per intimation issued on 01.01.1998. It is also not in dispute that out of the above assessment years for about 5 years only such voluntary returns came to be filed. Thereafter, assessment came to be reopened and notice was issued calling I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 3 upon the appellant to furnish return of income on the ground that there was escapement of income from assessment in the original assessments. No return of income came to be filed in response to the said notices. Thereafter, reassessment proceedings continued and ultimately reassessment orders came to be passed which assessments were also subject matter of challenge before the Commissioner of Income Tax (Appeals), Tribunal and ultimately came before this Court. Finally, the matters went against the appellant-assessee so far as quantum appeals are concerned. The subject matter in the above appeals is not the reassessment quantum, but penalty imposed after the reassessment orders. 4. It is not in dispute that notice of penalty was served on 28.03.2002 along with assessment orders so far as reassessments for the year 1995-96 to 1997-98. So far as assessment year 1998-99, notice of penalty was issued along with assessment order dated 29.03.2001. Then for the assessment years from 1999-2000 to 2001-02, penalty notice came to be issued on 29.03.2004. I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 4 5. As stated earlier, so far as the quantum appeals before the Tribunal is concerned, the judgment was on 27.09.2007. The assessee was not filing return of income regularly. However, no books of accounts were also maintained. 6. It is also not in dispute that he was required to maintain books of accounts whenever the income exceeded a particular limit. In response to penalty notice, when the assessee did not file returns, the Assessing Officer made a detailed enquiry by collecting information from various hotels, shops etc. to which there was supply of poultry products (chicken) from the poultry of the assessee. He also maintained a bank account which reflected certain amounts not noted in the books of account. There was no explanation for the amounts reflected in the bank account and so also with regard to the bills that were collected from various shops and hotels. The explanation given by the assessee was, non-availability of an accountant to maintain the books of accounts at a remote village where he was running his business. In the absence of maintaining books of accounts, Assessing Officer, having regard to the vast difference between I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 5 income voluntarily declared by the assessee and the quantum of amount arrived during the course of re-assessment proceedings, opined that penalty deserves to be imposed. The question is, what should be the percentage of penalty that has to be paid? 7. Admittedly, Section 271(1)(c) proceedings were also initiated and 150% penalty came to be imposed, having regard to the income estimated in all the above said assessment years. Apart from the vast variance in the quantum of income disclosed and arrived at during reassessment, the fact remains, none of the obligations required to be discharged by the assessee, were discharged. Non-maintenance of books of accounts as the income in all these years exceeded prescribed limit was also glaring at the assessee. Apart from this, bank accounts reflected, he was maintaining a bank account and other materials reflected that he was supplying chicken to various hotels and shops, but not a single paper was maintained in this regard. These were the main reasons for imposition of penalty at 150%. So far as the penalty proceedings, the Assessing Officer imposed 1½ times the tax payable as penalty which came to be I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 6 reduced to 100% by the First Appellate Authority, which was confirmed by the Tribunal in the above appeals. 8. Learned counsel for the appellant-assessee raised two fold arguments one is with regard to the limitation placing reliance on Section 275 and according to him, the Explanation to Section 275(1) was introduced much later than the year in which penalty proceedings were initiated, therefore the question of deemed concealment would not come to the aid of the Department as indicated at Explanation III. Section 275 of Act reads as under:- “275. Bar of limitation for imposing penalties-[(1)] No order imposing a 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 Commissioner(Appeals) under Section 246 [or section 246A] or an appeal to the Appellate 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 Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later: I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 7 [Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under Section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003, disposing of such appeal, an order imposing penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial in which the order of the Commissioner (Appeals) is received by the Chief Commissioner or Commissioner, whichever is later;] [(b) in a case where the relevant assessment or other order is the subject matter of revision under Section 263 [or Section 264] after the expiry of six months from the end of the month in which such order of revision is passed;] [(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 initialled, whichever period expires later.] [(1A) In a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner(Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253 or an appeal to the High Court under section 260A or an appeal to the Supreme court under section 261 or revision under Section 263 or section 264 and an order imposing I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 8 or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty is passed before the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Chief Commissioner or the Commissioner or the order of revision under Section 263 or Section 264 is passed, an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the Commissioner (Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Court or order of revision under section 263 or section 264: Provided that no order of imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty shall be passed- (a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard; (b) after the expiry of six months from the end of the month in which the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Chief Commissioner or the Commissioner or the order of revision under section 263 or section 264 is passed: Provided further that the provisions of sub-section (2) of section 274 shall apply in respect of the order imposing or enhancing or reducing penalty under this sub-section.] I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 9 [(2) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws(Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any action initiated for the imposition of penalty on or before the 31st day of March,1989.] [Explanation - In computing the period of limitation for the purposes of this section,-- (i) the time taken in giving an opportunity to the assessee to be re-heard under the proviso to section 129; (ii) any period during which the immunity granted under section 245H remained in force; and (iii) any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court, shall be excluded.]” 9. Now the crucial date would be when exactly the notice of penalty was issued with reference to particular assessment years. So far as 1995-96 to 1997-98, it was 28.03.2002. The quantum appeal before the Tribunal was finally decided on 27.09.2007, therefore the financial year in which the quantum appeal before the Tribunal came to be decided being 27.09.2007, the proceedings ought to have been initiated on or before 31.03.2008. The notice is dated 28.03.2002. I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 10 10. Similarly, so far as 1998-99, it was in 2001 and the rest of the assessment years, it was in 2004. In all the appeals the initiation of penalty proceedings were much prior to 31.03.2008. Therefore, the contention of limitation raised by the appellant- assessee that proceedings are barred by limitation for imposing penalty as contemplated under Section 275 of the Act is not available to the appellant-assessee. None of the contentions with reference to Section 275 of the Act are available to the appellant assessee. 11. Then coming to Section 271(1)(c) of the Act, we fail to understand why learned counsel for the appellant-assessee is placing much emphasis on Explanation 3 to Section 271 of the Act. The assessment order and the orders of the CIT (Appeals) clearly indicate that there was no reference, so far as Explanation 3 to Section 271 of the Act. Based on the main Section 271(c), the penalty proceedings were made by the Assessing Officer, after completion of the reassessment proceedings. I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 11 12. Deemed concealment is explained under Explanation 3. If all the conditions at Explantaion 3 are complied with, even if the assessee had filed the returns, if the returns are filed beyond the period of limitation or the time prescribed then the department by operation of law has the benefit of opining deemed concealment. 13. In the present case, the facts reveal that in response to the notice under Section 148 of the Act, the assessee never filed returns, therefore question of filing return beyond the period prescribed would not arise in the present case. Reading of Section 271(1)(c) itself indicates whether there is concealment of income or not as reflected in the material collected by the Assessing Officer. The vast difference between voluntary disclosed income and the income arrived by the Assessing Officer in the reassessment proceedings clearly indicates, there is concealment of income without even filing of the returns by the appellant-assessee in response to Section 148 notice. Whether Explanation 3 is applicable to I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 12 the facts of the present case or not, the date of introduction of Explanation 3 is relevant. It is not a ground to be considered, so far as facts in the present appeals are concerned. 14. Tribunal while referring to provisions of Section 271 (1)(c) incidentally seems to have referred to Explanation 3 which has no application so far as the facts of the present appeals. Mere reference to Explanation 3 to Section 271 would not imply that reassessment proceedings which led to penalty proceedings are based on deemed concealment of income. There was no occasion for the authorities to invoke this provision in the present situation. Therefore, none of the decisions relied upon by learned counsel for the appellant- assessee are of any help to the appellant-assessee. 15. Quantum of penalty imposed by the Assessing Officer was substantially reduced by the CIT (Appeals) which came to be confirmed by the Tribunal, we find no good ground to interfere with the said opinion of the Tribunal, as the First I.T.A.Nos.198,215, 216,217,218,219 and 220 of 2012 13 Appellate Authority has explained with reasons why such imposition of penalty should be imposed and why it was brought to 100% by the First Appellate Authority. In the light of above discussion and reasoning, we decline to interfere with the order of the Tribunal. Accordingly, all the questions of law raised are answered against the appellant-assessee. These appeals are dismissed. MANJULA CHELLUR, CHIEF JUSTICE A.M.SHAFFIQUE, JUDGE. sj 5/12 "