Sh. D.N. Thakur, Kullu V. ITO, Shimla

ITA 14/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5415 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2002-2003
• Appeal Filed On: 04-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Recovery proceedings; Difference of opinion; Change of opinion; TDS
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH SMC, CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.14 /CHD/2011 (ASSESSMENT YEAR : 2002-03) SH.D.N.THAKUR, VS. THE INCOME-TAX OFFICER, GOVT.SENIOR SECONDARY SCHOOL, WARD RAMPUR BUSHAHR NEETHAR, TEH.ANNI, SHIMLA. SHIMLA. PAN: ABBPT8796N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VISHAL MOHAN RESPONDENT BY : SMT.SARITA KUMARI, DR O R D E R THE APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (A), DATED 08.11.2010 RELATING TO ASS ESSMENT YEAR 2002-03 AGAINST PENALTY LEVIED U/S 271(1)(C) OF THE I.T.ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APPE AL : 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) IS NOT JUSTIFIED IN UYPHOLDING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT 1961 OF RS.91250/-. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST PENALTY LEVIED U/S 271(1)(C) OF THE INCOME-TAX ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD PURCHASED AN ELECTR OLUX REFRIGERATOR ON 26.10.2000 FROM A DEALER M/S G.D.KHANNA & SONS, SHI MLA. AS PER THE SCHEME ATTACHED WITH THE PURCHASE OF REFRIGERATOR, THE ASSESSEE RECEIVED A SCRATCH CARD ON THE BASIS OF WHICH HE WAS DECLARED A WINNER OF ONE MATIZ 2 CAR. THE CAR WAS DELIVERED TO THE ASSESSEE ON 23.0 4.2001. THE PLEA OF THE ASSESSEE WAS THAT M/S ELECTROLUX INDIA LTD., THE MA NUFACTURER, HAD GIFTED THE CAR TO HIM AND THE CAR BEING A GIFT WAS NOT ASS ESSABLE TO TAX. THE AO WAS OF THE VIEW THAT THE VALUE OF CAR RECEIVED BY T HE ASSESSEE WAS LIABLE TO BE TAXED AS INCOME FROM LOTTERY. THE AO ASSESSED T HE VALUE OF CAR AT RS.2,98,204/- AS WINNING FROM LOTTERY AND THE SAME WAS CHARGED TO TAX. THE CIT(A) OBSERVED THAT THE BASIC INGREDIENTS OF A VALID GIFT WERE THAT IT SHOULD BE GIVEN VOLUNTARILY AND WITHOUT CONSIDERATI ON. HOWEVER, IN THE PRESENT CASE THE CONDITION FOR ELIGIBILITY TO RECEI VE THE GIFT WAS PURCHASE OF REFRIGERATOR OF ELECTROLUX MAKE. THE CIT(A) FURTHE R OBSERVED THAT THE CUSTOMERS WHO COULD RECEIVE THE GIFT WERE TO BE AMO NG THOSE WHO HAD PURCHASED THE FRIDGE OF THAT MAKE AND IN NO WAY THE OFFER TO PARTICIPATE IN THE GIFT SCHEME WAS VOLUNTARY. THE CONTENTION OF T HE ASSESSEE THAT NON DEDUCTION OF TAX AT SOURCE BY THE COMPANY CONFIRMS THAT THE VALUE OF CAR WAS NOT INCOME, WAS DISMISSED BY THE CIT(A) HOLDING THAT TDS IS ONE OF THE MODES OF RECOVERY OF TAX AND ITS DEDUCTION OR N ON-DEDUCTION WAS NOT DETERMINING THE QUESTION WHETHER THE TRANSACTION RE SULTED IN INCOME OR NOT. THE CIT(A) HELD THE RECEIPT OF CAR AS WINNING FROM LOTTERY WITHIN THE MEANING OF SECTION 2(24)(IX) OF THE INCOME-TAX ACT. ACCORDINGLY, THE SAID RECEIPT OF CAR WAS UPHELD TO BE WINNING FROM LOTTER Y AND TAXABLE UNDER THE PROVISIONS OF SECTION 2(24)(IX) OF THE ACT. ANOTHE R ISSUE ADDRESSED BY THE CIT(A) WAS THE YEAR OF TAXABILITY OF THE SAID VALUE OF CAR AND IT WAS HELD THAT AS THE ASSESSEE DOES NOT MAINTAIN ANY BOOKS OF ACCOUNT, THE INCOME IS TO BE TAXED IN THE YEAR OF RECEIPT I.E. IN ASSESSME NT YEAR 2002-03. THE TRIBUNAL VIDE ORDER DATED 15.05.2006 IN ITA NO.963/ CHD/2005 RELATING TO ASSESSMENT YEAR 2002-03, HELD THAT THE MATIZ CAR RE CEIVED BY THE ASSESSEE ON THE BASIS OF SCRATCH CARD ON PURCHASE OF REFRIGE RATOR FALLS WITHIN THE DEFINITION OF LOTTERY U/S 2(24)(IX) READ WITH EXP LANATION TO THE SAID ACTION. 3 5. DURING THE PENALTY PROCEEDINGS INITIATED U/S 271 (1)(C) OF THE ACT, THE PLEA OF THE ASSESSEE WAS THAT THOUGH THE RECEIPT OF CAR HAD BEEN HELD TO BE WINNING FROM LOTTERY, THE SAME WAS RECEIVED AS A GI FT AND TAXING THE SAME IS MERE CHANGE OF OPINION, UNDER WHICH NO PENALTY I S LEVIABLE UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. THE AO REJECTING THE CONTENTION OF THE ASSESSEE HELD THE ASSESSEE NOT TO HAVE DISCLOSED THE VALUE OF CAR RECEIVED BY WAY OF LOTTERY FROM THE COMPANY AND FURTHER HELD THE ASSESSEE TO HAVE CONCEALED THE INCOME TO THE TUNE O F RS.2,98,204/- CHARGEABLE TO TAX. ACCORDINGLY, PENALTY OF RS.91,2 50/- WAS LEVIED UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. TH E CIT(A) UPHELD THE ORDER OF THE AO. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF THE CIT(A). 6. THE LD. AR FOR THE ASSESSEE REFERRED TO THE FACT S OF THE PRESENT CASE AND POINTED OUT THAT THE TRIBUNAL IN ASSESSEE'S OWN CASE HAD CONFIRMED THE ORDER OF CIT(A) IN HOLDING THAT THE VALUE OF CAR IS TO BE ASSESSED AS INCOME UNDER THE PROVISIONS OF SECTION 2(24)(IX) OF THE IN COME-TAX ACT. LD. AR FURTHER POINTED OUT THAT THOUGH MY CONTENTION HAD B EEN FORTIFIED, BUT IT IS NOT A CASE OF CONCEALMENT OR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. LD. AR FURTHER SUBMITTED THAT THERE WAS AN AMBIGUIT Y OF LAW AS THE WINNING FROM LOTTERY IS SUBJECT TO TAX, DEDUCTION AT SOURCE AT FIRST POINT BUT, IN THE CASE OF THE ASSESSEE NO SUCH TAX WAS DEDUCTED AND H ENCE NO PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE. 7. THE LD. DR FOR THE REVENUE POINTED OUT THAT THE EXPLANATION BELOW SECTION 2(24)(IX) WAS INSERTED W.E.F. 01.04.2002 WH ICH HAS BEEN COMMENTED UPON BY THE TRIBUNAL IN ITS ORDER AND HEN CE IT WAS A CASE OF CONCEALMENT OF INCOME ON WHICH PENALTY IS LEVIABLE U/S 271(1)(C) OF THE ACT. 4 8. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED R ECORD. PENALTY U/S 271(1)(C) OF THE ACT IS LEVIABLE WHERE THE ASSESSEE HAS EITHER CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. BEFORE LEVYING PENALTY U/S 271(1)(C) OF THE ACT, THE REQUIREMENT O F THE LAW IS THAT THE ASSESSEE IS TO BE ALLOWED AN OPPORTUNITY TO EXPLAIN THE BONAFIDES OF ITS CLAIM AND/OR TO ESTABLISH ITS CASE. THUS, IN EACH AND EVERY CASE WHERE ADDITION HAS BEEN MADE, THE LEVY OF PENALTY U/S 271 (1)(C) OF THE ACT IS NOT AUTOMATIC AND IT HAS BEEN SO HELD BY VARIOUS COURTS . IN THE FACTS OF THE PRESENT CASE BEFORE US, THE ASSESSEE HAD RECEIVED A MATIZ CAR GIVEN TO THE ASSESSEE ON THE PURCHASE OF REFRIGERATOR AND THE AS SESSEE RECEIVED THE SAID MATIZ CAR PURSUANT TO THE AFORESAID PURCHASE OF THE REFRIGERATOR. THE CLAIM OF THE ASSESSEE IN THIS REGARD WAS THAT THE SAID MA TIZ CAR WAS A GIFT FROM THE COMPANY. HOWEVER, THE AUTHORITIES BELOW INCLUD ING THE TRIBUNAL IN ASSESSEE'S OWN CASE HELD THAT THE SAID MATIZ CAR RE CEIVED BY THE ASSESSEE WAS BY WAY OF LOTTERY COVERED UNDER THE EXPLANATION TO SECTION 2(24)(IX) OF THE INCOME-TAX ACT AND THE VALUE OF THE CAR WAS INCLUDED AS INCOME IN THE HANDS OF THE ASSESSEE. UNDER THE PROVISIONS OF SECTION 194B OF THE ACT WHERE THE PERSON RESPONSIBLE FOR PAYING TO ANY PERS ON ANY INCOME BY WAY OF WINNINGS FROM LOTTERY, OR CROSSWORD PUZZLE OR CA RD GAME AND OTHER GAME OF ANY SORT, WHERE THE AMOUNT EXCEEDS FIVE THO USAND RUPEES SHALL, AT THE TIME OF PAYMENT, DEDUCT TAX AT SOURCE AT THE RA TES IN FORCE. IT IS FURTHER PROVIDED THAT WHERE THE WINNINGS ARE WHOLLY IN KIND OR PARTLY IN CASH AND PARTLY IN KIND BUT THE PART IN CASH IS NOT SUFFICIE NT TO MEET THE LIABILITY OF DEDUCTION OF TAX IN RESPECT OF WHOLE OF THE WINNING S, THE PERSON RESPONSIBLE IS TO ENSURE THAT TAX HAS BEEN PAID IN RESPECT OF THE WINNINGS. THE VALUE OF THE MATIZ CAR DELIVERED TO THE ASSESSE E WAS RS.2,98,204/- AND UNDER THE PROVISIONS OF SECTION 194B OF THE ACT, IT WAS THE LIABILITY OF THE PERSONS TRANSFERRING THE CAR TO THE ASSESSEE TO DED UCT TAX AT SOURCE BEING TAX DEDUCTED OUT OF WINNINGS FROM LOTTERY. ADMITTE DLY, NO SUCH TAX WAS 5 DEDUCTED AT SOURCE BY THE MAKERS OF ELECTROLUX REFR IGERATORS, WHO HAD FORMULATED THE SAID SCHEME AND HAD DELIVERED THE MA TIZ CAR TO THE ASSESSEE. EVEN THE SCRATCH CARD ISSUED BY THEM BEING PART OF THE SCHEME ON PURCHASE OF ANY REFRIGERATOR TALK ABOUT THE GIFT OF MATIZ CA R AND NOT ANY WINNINGS FROM THE LOTTERY. IN VIEW THEREOF, THE ASSESSEE WA S UNDER THE BONAFIDE IMPRESSION THAT THE VALUE OF CAR RECEIVED BY HIM IS NOT INCOME IN HIS HAND BEING INCOME FROM LOTTERY. IN SUCH CIRCUMSTANCES, T HE ASSESSEE CANNOT BE HELD TO HAVE CONCEALED ITS INCOME AND IS NOT EXIGIB LE TO LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. ACCORDINGLY, WE DIRECT THE A O TO DELETE THE PENALTY LEVIED AT RS.91,250/-. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS, THUS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MAY, 2011 SD/- (SUSHMA CHOWLA) JUDICIAL MEMBER DATED : 31 ST MAY,2011 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSTT.REGISTRAR,ITAT, CHANDIGARH