Deputy Commissioner of Income-tax,Circle-8, Nagpur V. M/s. A.S.Iyer & Company, Nagpur

ITA 184/NAG/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9653 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 21-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH DAWANDE
• Assessee Lawyers: SURESH TOLANI
• Keywords: Onus to prove
• Section: 68

Judgement Text

ITA NO. 184/NAG/2010 M/S. A.S.IYER & COMPANY, NAGPUR IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH , NAGPUR BEFORE: SHRI P.K. BANSAL , ACCOUNTANT MEMBER AND SHRI D.T. GARASIA , JUDICIAL MEMBER ITA NO. 184 / NAGPUR / 20 10 ASSESSMENT YEAR : 2005 - 06 DCIT, CIRCLE - 8 NAGPUR VS. A.S. IYER & COMPANY NAGPUR (APPELLANT) (RESPONDENT) PAN NO.AACCS 9854P APPELLANT BY: SHRI RAMESH DAWANDE, SR. DR RESPONDENT BY: SHRI MANOJ MORYANI, ADVOCATE & SHRI SURESH TOLANI, ADVOCATE DATE OF HEARING: 17.10.12 DATE OF PRONOUNCEMENT: 19.10.12 ORDER PER P.K. BANSAL, ACCOUNTANT MEMBER: - THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) DATED 20.10.2010. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATE TO THE DELETION OF THE PENALTY IMPOSED U/S 271(1)(C) OF THE INCOME - TAX ACT BY THE AS SESSING OFFICER. 2. THE BRIEF FACTS OF THE CASE ARE THAT AN ADDITION OF RS.9 LAKHS WAS MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF THE CAPITAL INTRODUCED BY ONE OF THE PARTNER SHRI R.G. WANDILE. THE AMOUNT WAS SURRENDERED BY SHRI R.G. WANDILE, PARTNER OF THE ASSESSEE FIRM BY FILING A REVISED COMPUTATION OF INCOME. PENALTY PROCEEDINGS U/S 271(1)(C) WAS INITIATED. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) AND INITIATED THE PENALTY PROCEEDINGS. SUBSEQUENTLY, THE ASSESSING OFFICER IMPOSED THE PENALTY HOLDING THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF THE INCOME. WHEN THE MATTER WENT BE FORE THE CIT(A), THE CIT(A) DELETED THE PENALTY BY OBSERVING AS UNDER: ITA NO.184/NAG/2010 M/S. A.S.IYER & COMPANY, NAGPUR 2 ON A CAREFUL CONSIDERATION OF THE FACTS OF THE CASE, IT IS SEEN THAT THE ADDITION MADE BY THE AO IN THE CASE OF THE FIRM HAS BEEN MAINLY MADE BECAUSE THE APPELLANT HAS AGREED TO THE ADDITION AND SURRENDERED THE AMOUNT. THE ENTRIES BEING MADE IN THE BOOKS OF ACCOUNT OF THE PARTNER WHICH ACCORDING TO THE AO WAS NOT SATISFACTORILY EXPLAINED, THE ADDITION WOULD BE LEGALLY TENABLE WHEN MADE IN THE HANDS OF THE PARTNER OF THE FIRM. WHEN T WO ALTERNATE VIEWS ARE POSSIBLE ON THE ADDITION MADE, NO PENALTY U/S 271(1)(C) IS ATTRACTED. THE DECISION IN THE CASE OF DURGA RICE MILL VS. CIT 265 ITR 25 CALCUTTA HELD THAT PENALTY COULD NOT BE LEVIED FOR THE REASON THAT DESPITE ADDED THE AMOUNT IN THE INCOME OF THE ASSESSEE THE IT AUTHORITY HAS AGAIN ACCEPTED THE SAME IN THE HANDS OF THE PARTNER. THE DECISION OF SHRI NIRMAL COMMERCIAL CO. PVT. LTD. VS. CIT 218 CTR 581 BOMBAY IT HAS BEEN HELD THAT WHEN THE ASSESSEE HAS NOWHERE ADMITTED THAT THE AMOUNT ADDED U/S 68 WAS HIS CONCEALED INCOME NO PENALTY U/S 271(1)(C) COULD BE LEVIED. THE APEX COURT IN THE CASE OF DILIP SHROFF 291 ITR 519 HAS HELD THAT LEVY OF PENALTY U/S 271(1)(C) IS NOT AUTOMATIC AND IS A MATTER OF DISCRETION AND THE AO HAS TO BE FAIR A ND OBJECTIVE. IN ANOTHER RECENT JUDGEMENT, THE HON BLE SUPREME COURT IN 322 ITR 158 (SC) CIT VS. RELIANCE PETROPRODUCTS HAS HELD AS FOLLOWS: IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY P ROVISIONS CANNOT BE INVOKED. A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. SINCE THE BURDEN OF PROOF IN PENALTY PROCEEDINGS VARIES FROM THAT ASSESSMENT PROCEEDINGS THE FINDIN G IN THE ASSESSMENT ORDER THAT A PERSON ACCEPTED A CERTAIN AMOUNT HIS INCOME CANNOT BE AUTOMATICALLY ADOPTED AND THE MATTER MUST BE CONSIDERED AFRESH FROM A DIFFERENT ANGLE IN THE PENALTY PROCEEDINGS. IT IS SEEN FROM THE PENALTY ORDER THAT THE AO HAS TREA TED THE PENALTY PROCEEDINGS AS A MERE CONTINUATION OF THE ASSESSMENT PROCEEDINGS. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE A.O. THAT PENALTY U/S 271(1)(C) IS ATTRACTED BASED ON THE FACTS OF THE CASE AND THAT THERE WAS CONCEALMENT AND FURNISHING OF IN ACCURATE PARTICULARS BY THE ASSESSEE. ON A CAREFUL CONSIDERATION OF THE FACTS OF THE CASE I HOLD THAT THE AO WAS NOT JUSTIFIED IN IMPOSING PENALTY U/S 271(1)(C) ON GROUNDS THAT THE ASSESSEE HAS CONCEALED HIS INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME. THEREFORE PENALTY IS HEREBY DELETED. 3. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH PARTIES AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDER OF THE AUTHORITIES BELOW. SECTION 271 (1)(C) READS AS UNDER: - 271 (1) IF THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) [OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON ITA NO.184/NAG/2010 M/S. A.S.IYER & COMPANY, NAGPUR 3 (A) .. (B) .. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, OR ( D) .. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY, - EXPLANATION 1 - WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EX PLANATION WHICH IS FOUND BY THE AO OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND [FAILS TO PROVE SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM], THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE OF THIS SUB - SECTION BE D EEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 4. FROM THE PERUSAL OF THE AFORESAID SECTION, IT IS APPARENT THAT PENALTY U/S 271 (1)(C) IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF THE INCOME. THIS IS THE SETTLED LAW THAT THE PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE DIFFERENT. THE PENALTY PROCEEDINGS CAN BE INITIATED ON 2 CHA RGES I.E. I) CONCEALMENT OF PARTICULARS OF INCOME AND II) FURNISHING OF INACCURATE PARTICULARS OF INCOME. BOTH THE CHARGES ARE ENTIRELY DIFFERENT. IF THE PROCEEDINGS ARE INITIATED ON CHARGE OF CONCEALMENT, THEN PENALTY CANNOT BE LEVIED ON THE CHARGE OF FUR NISHING OF INACCURATE PARTICULARS OF INCOME AND VICE VERSA. THUS, THERE MUST BE A CLEAR FINDING ABOUT THE CHARGE FOR WHICH PENALTY IS IMPOSED OR INITIATED. IT IS INCUMBENT UPON THE AO TO STATE WHETHER PENALTY WAS BEING LEVIED FOR CONCEALMENT OF INCOME OR F OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE ABSENCE OF SUCH FINDINGS, THE ORDER WOULD BE BAD IN LAW. THE CASE OF NEW SORATHIA ENGINEERING CO. LTD., 282 ITR 642, HON BLE GUJARAT HIGH COURT HAS HELD AS UNDER: - IT IS INCUMBENT UPON THE ASSESS ING OFFICER TO STATE WHETHER THE PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF INCOME HAD BEEN FURNISHED BY THE ASSESSEE. ITA NO.184/NAG/2010 M/S. A.S.IYER & COMPANY, NAGPUR 4 HELD, THAT THE PENALTY ORDER AND THE ORDER OF THE COMMIS SIONER (APPEALS) SHOWED THAT NO CLEAR CUT FINDING HAD BEEN REACHED. THE TRIBUNAL HAD FAILED TO APPRECIATE THIS LEGAL ISSUE. THE RATION IN CIT V. MANU ENGINEERING WORKS 132 ITR 306 (GUJ) WAS APPLICABLE AND THE ORDER OF PENALTY COULD NOT BE UPHELD BY THE TRI BUNAL. THE ORDER WAS INVALID. 5. IN THE CASE OF COMMISSIONER OF INCOME TAX V. RAJAN AND CO. 291 ITR 340 (DEL), IT IS HELD THAT THE PROVISION OF SECTION 271 (1) (C) OF THE INCOME TAX 1961 WOULD REQUIRE PROPER APPLICATION OF MIND AND RECORDING OF AT LEAST A BARE MINIMUM OPINION ON THE PART OF AO THAT A CASE FOR INITIATION OF PENALTY PROCEEDING WAS MADE AS THERE WAS CONCEALMENT OF INCOME OR THAT INCORRECT PARTICULARS HAD BEEN FURNISHED BY THE ASSESSEE WITH THE INTENTION TO AVOID PAYMENT OF TAXES. AO HAS NOT MADE OUT ANY CHARGE EITHER OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 6. THE PENALTY U/S 271(1) (C) CAN BE LEVIED FOR EITHER OF THE CHARGE. THE PENALTY ORDER SIMPLY STATES THAT PENALTY IS ATTRACTED ON THIS ADDITION AS IT IS MANDATORY AND AUTOMATIC. IT DOES NOT STATE FOR WHAT DEFAULT PENALTY IS LEVIED S. 271(1) (C) (III) IS EXPRESSLY CLEAR THAT THE PENALTY CAN BE LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOM E. IT IS THE PARTICULARS OF INCOME WHICH IS THE COMMON SUBJECT MATTER OF BOTH THE CHARGES. THE WORD CONCEAL AS PER WEBSTER S DICTIONARY MEANS TO HIDE, WITHDRAW, OR REMOVE FROM OBSERVATION; COVER OR KEEP FROM SIGHT; TO KEEP SECRET; TO AVOID DISCLOSING OR DIVULGING. THAT MEANS NON DISCLOSURE OF PARTICULARS OF INCOME. ON THE OTHER HAND, WHERE PARTICULARS ARE DISCLOSED BUT SUCH DISCLOSURE IS NOT CORRECT, TRUE OR ACCURATE, IT WOULD AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. FOR EXAMPLE, IN CASE OF BUSINESSMAN, IF A PARTICULAR TRANSACTION OF SALE IS NOT SHOWN IN THE BOOKS, IT WOULD AMOUNT TO CONCEALMENT OF PARTICULARS OF INCOME WHILE SALE IS SHOWN BUT AT A LESSER VALUE, IT WOULD AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 7. IN OUR OPINION, EXPLANATION 1 TO SECTION 271(1) (C) CANNOT BE APPLIED WHERE CHARGE AGAINST THE ASSESSEE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME SINCE IT PROVIDES A DEEMING FICTION QUA CONCEALMENT OF PARTICULARS OF INCOME ONLY AND CONSEQUENTLY CANNOT BE EXTENDED TO A CASE WHERE CHARGE ITA NO.184/NAG/2010 M/S. A.S.IYER & COMPANY, NAGPUR 5 AGAINST THE ASSESSEE IS FURNISHING OF INACCURATE PARTICULARS OF INCOME. ON THE OTHER HAND, WHERE CHARGE AGAINST THE ASSESSEE IS CONCEALMENT OF PARTICULARS OF INCOME, THE AO HAS TO ESTABLISH EITHER THAT ASSESSEE HAS NOT DISCLOSED THE PARTICULARS OF INCOME UNDER THE MAIN PROVISIONS OR THE CASE OF ASSESSEE FALLS WITHIN THE SCOPE OF THE DEEMING FICTIONS CREATED UNDER THE EXPLANATIONS. FOR EXAMPLE, THE ASSESSEE MIGHT NOT DISCLOSE PARTICULAR SALES OR DIVIDEND INCOME O R INCOME FROM ANY SOURCE. SUCH INSTANCES WOULD FALL UNDER THE MAIN PROVISIONS ITSELF. IN SUCH CASES, THE BURDEN IS ON THE AO TO ESTABLISH THE EXISTENCE OF THE CHARGE ON THE BASIS OF MATERIAL ON RECORD. 8. EXPLANATION 1 TO SECTION 271(1) (C) STATES THAT TH E AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE SHALL BE DEEMED TO BE THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THIS DEEMING PROVISION IS NOT ABSOLUTE ONE BUT IS REBUTTABLE ONE. IT ONLY SHIFTS THE ONUS ON TH E ASSESSEE. EXPLANATION 1 REFERS TO THE TWO SITUATIONS IN WHICH PRESUMPTION OF THE CONCEALMENT OF THE PARTICULARS OF INCOME IS DEEMED. IT IS NOT APPLICABLE WHERE THE CHARGE AGAINST THE ASSESSEE IS FURNISHING INACCURATE PARTICULARS OF THE INCOME. THE FIRST SITUATION IS WHERE THE ASSESSEE IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION, WHICH IS FOUND BY THE AO OR THE COMMISSIONER TO BE FALSE. THE SECOND SITUATION IS WHERE THE ASSES SEE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME OFFERS AN EXPLANATION, WHICH, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AND ALSO FAILS TO PROVE THAT SUCH EXPLANATION WAS BONA FIDE ONE AND THAT ALL THE FACTS RELATING TO THE COMPUT ATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THE PRESUMPTION AVAILABLE UNDER EXPLANATION TO SECTION 271(1) (C), CANNOT BE DRAWN UNLESS THE CASE OF THE ASSESSEE FALLS UNDER EITHER OF THE CLAUSES (A) OR (B). 9. IN THIS CASE, THE AO HAS NOT BROUGHT OUT ANY SPECIFIC CHARGE FOR WHICH THE PENALTY HAS BEEN IMPOSED ON THE ASSESSEE U/S 271(1) (C) OF THE ACT. HE HAS NOT BROUGHT OUT WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR WHETHER THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME . ITA NO.184/NAG/2010 M/S. A.S.IYER & COMPANY, NAGPUR 6 10. THE AO IN THIS CASE LEVIED THE PENALTY FOR BOTH THE CHARGES WITHOUT MENTIONING ANY SPECIFIC CHARGE. IN CIT V. ATUL MOHAN BINDAL (2009) 9 SCC 589, WHERE HON BLE SUPREME COURT WAS CONSIDERING THE SAME PROVISION, IT OBSERVED THAT THE ASSESSING OFFICER HAS TO BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THUS THE SATISFACTION OF THE AO ABOUT THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUC H INCOME IS ESSENTIAL BEFORE LEVYING ANY PENALTY U/S 271(1) (C). THE AO AS IS APPARENT FROM THE PENALTY ORDER HAS NOT SATISFIED ABOUT THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. ON THIS BASIS ITSELF THE PENALTY DELETED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19.10 .20 1 2 SD/ - SD/ - ( D.T. GARASIA ) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS NAGPUR DATED 19 TH OCTOBER , 20 1 2 COPY TO 1 DCIT, CIRCLE - 8, NAGPUR 2 M/S. A.S. IYER & COMPANY, 227, JAGAT SHANTI, HILL ROAD, SHIVAJI NAGAR, NAGPUR 3 THE CIT - IV , NAGPUR 4 THE CIT (A) , NAGPUR 5 THE DR, ITAT, NAGPUR 6 GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL NAGPUR