M/s B and B Infratech Limited , Bangalore V. The Income Tax Officer Ward-1(1)(3), Bangalore

ITA 2438/BANG/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9294 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-12-2019
• Assessment Year: 2005-2006
• Appeal Filed On: 27-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KARUPPUSAMY
• Keywords: Onus to prove; Reassessment proceedings
• Section: 271(1)(c); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.2438/BANG/2018 ASSESSMENT YEAR : 2005-06 M/S B AND B INFRATECH LTD., NO.17, SHAS SULTAN, 4 TH FLOOR, ALI ASKAR ROAD, BENGALURU-560 052. PAN AAACR 6295 D VS. THE INCOME-TAX OFFICER, WARD-1(1)(3), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI T SRINIVASA, C.A RESPONDENT BY : SHRI KARUPPUSAMY, ADDL. CIT (DR) DATE OF HEARING : 19.12.2019 DATE OF PRONOUNCEMENT : 08.01.2020 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 22-06-2018 PASSED BY LD CIT(A)-3, BENGA LURU FOR ASSESSMENT YEAR 2005-06, WHEREIN HE HAS CONFIRMED T HE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE ACT. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E ASSESSING OFFICER, IN THE REASSESSMENT PROCEEDINGS, RE- ITA NO.2438 /BANG/2018 PAGE 2 OF 9 COMPUTED THE BOOK PROFIT U/S 115JB OF THE ACT BY DI SALLOWING THE CLAIM FOR DEDUCTION OF RS.43.00 LAKHS, BEING TH E AMOUNT RELATING TO WAIVER BENEFITS RECEIVED BY THE ASSESSE E FROM BANKS ON ACCOUNT OF ONE TIME SETTLEMENT OF LOAN. T HE ASSESSEE, THOUGH DISCLOSED THE SAME IN THE PROFIT A ND LOSS ACCOUNT AS ITS INCOME, YET EXCLUDED IT FROM NET PRO FIT WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. HENCE T HE AO, IN THE REASSESSMENT PROCEEDINGS, RE-COMPUTED THE BOOK PROFIT BY DISALLOWING THE ABOVE SAID CLAIM. THE LD CIT(A) CONFIRMED THE SAME AND THE APPEAL FILED BY THE ASSESSEE BEFOR E TRIBUNAL WAS ALSO DISMISSED. HENCE THE ASSESSING OFFICER PA SSED PENALTY ORDER IMPOSING A PENALTY OF RS.4,45,860/- U /S 271(1)(C) OF THE ACT IN RESPECT OF ABOVE SAID ADDIT ION. THE PENALTY ORDER WAS CONFIRMED BY LD CIT(A) AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. AT THE TIME OF HEARING, THE ASSESSEE FURNISH ED A COPY OF PENALTY NOTICE ISSUED BY THE AO AND SUBMITTED THAT THE AO HAS NOT STRUCK OFF THE INAPPLICABLE PORTION OUT OF THE TWO LIMBS MENTIONED IN SEC.271(1)(C) OF THE ACT. ACCOR DINGLY HE SUBMITTED THAT THE IMPUGNED PENALTY ORDER WILL GET VITIATED AS PER THE DECISION OF HONBLE KARNATAKA HIGH COURT RE NDERED IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (35 9 ITR 565)(KAR). THE LD A.R FURTHER SUBMITTED THAT THE A O DID MENTION ABOUT THE LIMB IN THE ASSESSMENT ORDER ALSO AND HE HAS LEVIED PENALTY IN THE PENALTY ORDER UNDER BOTH THE LIMBS. HE SUBMITTED THAT THE AO CANNOT LEVY PENALTY UNDER BOTH THE LIMBS. ITA NO.2438 /BANG/2018 PAGE 3 OF 9 4. THE LD A.R ALSO SUBMITTED THAT THE ASSESSEE HAS DULY DISCLOSED THE FACT OF WAIVER OF LOAN BY BANK AND TH E WAIVER BENEFIT WAS DULY CREDITED TO THE PROFIT AND LOSS AC COUNT. SINCE THE ASSESSEE CONSIDERED THE SAME AS CAPITAL R ECEIPT, IT EXCLUDED THE IMPUGNED AMOUNT FROM THE NET PROFIT WH ILE COMPUTING BOOK PROFIT. HE SUBMITTED THAT THERE ARE DECISIONS SUPPORTING THE VIEW OF THE ASSESSEE THAT THE CAPITA L RECEIPTS SHOULD BE EXCLUDED FROM THE NET PROFIT WHILE COMPUT ING BOOK PROFIT U/S 115JB OF THE ACT, IF THE SAME IS CREDIT ED IN PROFIT AND LOSS ACCOUNT. ACCORDINGLY HE SUBMITTED THAT TH E ISSUE IS DEBATABLE ONE AND HENCE AO WAS NOT JUSTIFIED IN LEV YING PENALTY U/S 271(1)(C) OF THE ACT. 5. WE HEARD LD D.R AND PERUSED THE RECORD. THE PENALTY U/S 271(1)(C) OF THE ACT IS LEVIED EITHER OF THE TW O LIMBS, VIZ., FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISH ING OF INACCURATE PARTICULARS OF INCOME. WE NOTICE THAT TH E ASSESSING OFFICER HAS NOT MENTIONED THE NATURE OF C HARGE IN THE ASSESSMENT ORDER AND HAS ONLY STATED THAT PENA LTY PROCEEDINGS U/S 271(1)(C) IS INITIATED SEPARATELY. IN THE PENALTY NOTICE ALSO, THE AO HAS NOT STRUCK OFF INAP PLICABLE CHARGE/LIMB. HENCE IT APPEARS THAT HE WAS NOT CLEA R ABOUT THE REASON FOR WHICH THE PENALTY PROCEEDINGS HAVE B EEN INITIATED. THE FOLLOWING OBSERVATIONS MADE BY THE AO IN THE PENALTY ORDER WOULD SHOW THAT THE AO WAS NOT CLEAR IN HIS MIND ABOUT THE CHARGE UNDER WHICH HE HAS IMPOSED TH E PENALTY:- ITA NO.2438 /BANG/2018 PAGE 4 OF 9 .....BY CLAIMING INCORRECT DEDUCTION AND BY FILING WRONG PARTICULARS, THE ASSESSEE HAS CONCEALED ITS TAXABLE INCOME AND THEREBY EVADED PAYMENT OF TAXES DUE TO THE REVENUE. HENCE IT IS HELD THAT THE CASE CLEARL Y FALLS UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE IN COME TAX ACT 1961, FOR LEVY OF PENALTY FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME FOR THE PURPOSE OF TAXATION. 6. IT IS NOW WELL SETTLED PROPOSITION OF LAW TH AT THE EXPRESSIONS CONCEALMENT OF PARTICULARS OF INCOME AND FURNISH ING OF INACCURATE PARTICULARS OF INCOME CONNOTE DIFFERENT MEANINGS. THIS LEGAL POSITION HAS BEEN EXPLAINED BY HONBLE SUPREM E COURT IN THE CASE OF DILIP N SHROFF, WHICH HAS BEEN REPRODUCED B Y HONBLE SUPREME COURT IN THE CASE OF T. ASHOK PAI VS. CIT ( 292 ITR 11). FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OBSER VATIONS MADE BY HONBLE SUPREME COURT IN THE CASE OF T. ASHOK PAI ( SUPRA):- 14. IN DILIP N. SHROFF V. JOINT COMMISSIONER OF IN COME-TAX, MUMBAI (CIVIL APPEAL ARISING OUT OF SLP (C) NO.26831/2004) DELIVERED TODAY, THIS COURT OBSERVED. 'THE EXPRESSION 'CONCEAL' IS OF GREAT IMPORTANCE. A CCORDING TO LAW LEXICON, THE WORD 'CONCEAL' MEANS: 'TO HIDE OR KEEP SECRET. THE WORD 'CONCEAL' IS CON PLUS CELARE WHICH IMPLIES TO HIDE. IT MEANS TO HIDE OR WITHDRAW FROM OBSERVATION; TO COVER OR KEEP FROM SIGHT; TO PREVENT THE DISCOVERY OF; TO WITHHOLD KNOWLEDGE OF. THE OFFENCE OF CONCEALMENT IS, THUS, A DIRECT ATTEMPT TO HIDE AN ITEM OF INCOME OR A PORTION THEREOF FROM THE KNOWLEDGE OF THE INCOME TAX AUTHORITIES.' IN WEBSTER'S DICTIONARY, 'INACCURATE' HAS BEEN DEFI NED AS: ITA NO.2438 /BANG/2018 PAGE 5 OF 9 'NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRAN SCRIPT.' 15. IT SIGNIFIES A DELIBERATE ACT OF OMISSION ON TH E PART OF THE ASSESSEE. SUCH DELIBERATE ACT MUST BE EITHER FOR THE PURPOSE OF CO NCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. 16. THE TERM 'INACCURATE PARTICULARS' IS NOT DEFINE D. FURNISHING OF AN ASSESSMENT OF VALUE OF THE PROPERTY MAY NOT BY ITSE LF BE FURNISHING OF INACCURATE PARTICULARS. EVEN IF THE EXPLANATIONS AR E TAKEN RECOURSE TO, A FINDING HAS TO BE ARRIVED AT HAVING REGARD CLAUSE ( A) OF EXPLANATION 1 THAT THE ASSESSING OFFICER IS REQUIRED TO ARRIVE AT A FI NDING THAT THE EXPLANATION OFFERED BY AN ASSESSEE, IN THE EVENT, HE OFFERS ONE WAS FALSE. HE MUST BE FOUND TO HAVE FAILED TO PROVE THAT SUCH EXPLANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE INCOME WERE NOT DISCLOSED BY HIM. THUS, APART FROM HIS EXPLANATION BEING NOT BONA FIDE, IT SHOULD BE FOUND AS OF FACT THAT HE HAS NOT DISCLOSE D ALL THE FACTS WHICH WAS MATERIAL TO THE COMPUTATION OF HIS INCOME. 17. THE EXPLANATION HAVING REGARD TO THE DECISION O F THIS COURT MUST BE PRECEDED BY A FINDING AS TO HOW AND AS TO IN WHAT M ANNER HE FURNISHED THE PARTICULARS OF HIS INCOME. IT IS BEYOND ANY DOUBT O R DISPUTE THAT FOR THE SAID PURPOSE THE INCOME TAX OFFICER MUST ARRIVE AT ITS S ATISFACTION IN THIS BEHALF. [ SEE COMMISSIONER OF INCOME TAX V. RAM COMMERCIAL EN TERPRISES LTD ., 246 ITR 568 AND DIWAN ENTERPRISES V. COMMISSIONER OF INCOME TAX , 246 ITR 571]. 18. THE ORDER IMPOSING PENALTY IS QUASI-CRIMINAL IN NATURE AND, THUS, BURDEN LIES ON THE DEPARTMENT TO ESTABLISH THAT THE ASSESSEE HAD CONCEALED HIS INCOME. SINCE BURDEN OF PROOF IN PENALTY PROCEE DINGS VARIES FROM THAT IN THE ASSESSMENT PROCEEDING, A FINDING IN AN ASSES SMENT PROCEEDING THAT A PARTICULAR RECEIPT IS INCOME CANNOT AUTOMATICALLY B E ADOPTED, THOUGH A FINDING IN THE ASSESSMENT PROCEEDING CONSTITUTE GOO D EVIDENCE IN THE PENALTY PROCEEDING. IN THE PENALTY PROCEEDINGS, THU S, THE AUTHORITIES MUST CONSIDER THE MATTER AFRESH AS THE QUESTION HAS TO B E CONSIDERED FROM A DIFFERENT ANGLE. 19. IT IS NOW A WELL-SETTLED PRINCIPLE OF LAW THAT THE MORE IS THE STRINGENT LAW, MORE STRICT CONSTRUCTION THEREOF WOULD BE NECE SSARY. EVEN WHEN THE BURDEN IS REQUIRED TO BE DISCHARGED BY AN ASSESSEE, IT WOULD NOT BE AS HEAVY AS THE PROSECUTION. [ SEE P.N. KRISHNA LAL AND OTHERS V. GOVT. OF KERALA AND ANOTHER , 1995 SUPP (2) SCC 187] ITA NO.2438 /BANG/2018 PAGE 6 OF 9 20. THE OMISSION OF THE WORD 'DELIBERATE', THUS, MA Y NOT BE OF MUCH SIGNIFICANCE. 21. SECTION 271(1)(C) REMAINS A PENAL STATUTE. RULE OF STRICT CONSTRUCTI ON SHALL APPLY THERETO. INGREDIENTS OF IMPOSING PENALT Y REMAINS THE SAME. THE PURPOSE OF THE LEGISLATURE THAT IT IS MEANT TO BE D ETERRENT TO TAX EVASION IS EVIDENCED BY THE INCREASE IN THE QUANTUM OF PENALTY , FROM 20% UNDER THE 1922 ACT TO 300% IN 1985. 22. 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INAC CURATE PARTICULARS' CARRY DIFFERENT CONNOTATIONS. CONCEALMENT REFERS TO DELIBERATE ACT ON THE PART OF THE ASSESSEE. A MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSIO VERI OR SUGGESTIO FA LSI. 23. WE MAY NOTICE THAT IN COMMISSIONER OF INCOME-TAX V. JEEVAN LAL SAH 1994 (205) ITR 244, THIS COURT DEALT WITH THE AMEN DMENT OF SECTION 271(1)(C) MADE IN THE YEAR 1964 TO HOLD : 'EVEN AFTER THE AMENDMENT OF 1964, THE PENALTY PROC EEDINGS, IT IS EVIDENT, CONTINUE TO BE PENAL PROCEEDINGS. SIMILARL Y, THE QUESTION WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME CONTINUES TO REMAIN A QUESTION OF FACT. WHETHER THE EXPLANATION HAS MADE A DIFFERENCE IS WHILE DECIDING THE SAID QUESTION OF F ACT THE PRESUMPTION CREATED BY IT HAS TO BE APPLIED, WHICH HAS THE EFFECT OF SHIFTING THE BURDEN OF PROOF. THE ENTIRE MATERIAL O N RECORD HAS TO BE CONSIDERED KEEPING IN MIND THE SAID PRESUMPTION AND A FINDING RECORDED.' 24. THE QUESTION CAME FOR CONSIDERATION OF THIS COU RT YET AGAIN IN K.C. BUILDERS AND ANR V. ASSISTANT COMMISSIONER OF INCOM E-TAX 2004 (265) ITR 562 = (2004) 5 SCC 731), WHEREIN IT WAS HELD : 'ONE OF THE AMENDMENTS MADE TO THE ABOVEMENTIONED PROVISIONS IS THE OMISSION OF THE WORD 'DELIBERATELY' FROM THE EXPRESSION 'DELIBERATE LY FURNISHED INACCURATE PARTICULARS OF SUCH INCOME'. IT IS IMPLICIT IN THE WORD 'CONCEALED' THAT THERE HAS BEEN A DELIBERATE ACT ON THE PART OF THE ASSESS EE. THE MEANING OF THE WORD 'CONCEALMENT' AS FOUND IN SHORTER OXFORT ENGLI SH DICTIONARY, THIRD EDITION, VOLUME I, IS AS FOLLOWS : 'IN LAW, THE INT ENTIONAL SUPPRESSION OF TRUTH OR FACT KNOWN, TO THE INJURY OR PREJUDICE OF ANOTHER.' THE WORD 'CONCEALMENT' INHERENTLY CARRIED WITH IT THE ELEMEN T OF MENS REA. THEREFORE, THE MERE FACT THAT SOME FIGURE OR SOME PARTICULARS HAVE BEEN DISCLOSED BY ITSELF, EVEN IF IT TAKES OUT THE CASE FROM THE PURV IEW OF NON-DISCLOSURE, IT ITA NO.2438 /BANG/2018 PAGE 7 OF 9 CANNOT BY ITSELF, EVEN IF IT TAKES OUT THE CASE FRO M THE PURVIEW OF NON- DISCLOSURE, IT CANNOT BY ITSELF TAKE OUT THE CASE F ROM THE PURVIEW OF NON- DISCLOSURE, IT CANNOT BY ITSELF TAKE OUT THE CASE F ROM THE PURVIEW OF FURNISHING INACCURATE PARTICULARS. MERE OMISSION FR OM THE RETURN OF AN ITEM OF RECEIPT DOES NEITHER AMOUNT TO CONCEALMENT NOR D ELIBERATE FURNISHING OF INACCURATE PARTICULARS OF INCOME UNLESS AND UNTIL T HERE IS SOME EVIDENCE TO SHOW OR SOME CIRCUMSTANCES FOUND FROM WHICH IT CAN BE GATHERED THAT THE OMISSION WAS ATTRIBUTABLE TO AN INTENTION OR DESIRE ON THE PART OF THE ASSESSEE TO HIDE OR CONCEAL THE INCOME SO AS TO AVO ID THE IMPOSITION OF TAX THEREON. IN ORDER THAT A PENALTY UNDER SECTION 271(1)(III) MAY BE IMPOSED, IT HAS TO BE PROVED THAT THE ASSESSEE HAS CONSCIOUSLY MADE THE CONCEALMENT OR FURNISHED INACCURATE PARTICULARS OF HIS INCOME.' 7. IN THE INSTANT CASE, WE HAVE NOTICED THAT TH E ASSESSING OFFICER WAS NOT CLEAR ON THE CHARGE/LIMB HE WANTED TO INVOK E IN RESPECT OF DISALLOWANCE MADE BY HIM WHILE COMPUTING BOOK PROFI T. IN THE ASSESSMENT ORDER, HE HAS NOT REFERRED TO ANY OF THE LINK. IN THE PENALTY ORDER, THE AO STATES INITIALLY THAT IT IS A CASE OF CONCEALMENT OF INCOME, BUT PROCEEDS TO LEVY PENALTY FOR CONCEAL MENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. AS PER THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE C ASE OF DILIP N SHROFF (SUPRA), THE ADDITION MAY FALL UNDER ANY OF THE TWO LIMBS. IN FACT, WE NOTICE THAT THE ASSESSEE HAS FULLY DISCLOS ED ALL THE PARTICULARS RELATING TO WAIVER BENEFITS IN ITS RETU RN OF INCOME. HENCE IT CANNOT CERTAINLY A CASE OF FURNISHING OF I NACCURATE PARTICULARS OF INCOME AT ALL. ALL THESE FACTORS WO ULD SHOW THAT THE AO WAS NOT CLEAR AS TO CHARGE FOR WHICH HE HAS INIT IATED PENALTY PROCEEDINGS. 8. IN ANY CASE, WE HAVE NOTICED THAT THE AO H AS ALSO NOT STRUCK OFF INAPPLICABLE LIMB IN THE PENALTY NOTICE, WHICH FURTHER FORTIFIES THE CASE THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND. HENCE, ITA NO.2438 /BANG/2018 PAGE 8 OF 9 AS PER THE DECISION RENDERED BY HONBLE KARNATAKA H IGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SU PRA), THE PENALTY ORDER IS LIABLE TO BE QUASHED. ACCORDINGLY WE QUASH THE ORDERS PASSED BY TAX AUTHORITIES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JANUARY, 2020. SD/ - (PAVAN KUMAR GADALE) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, THE 8 TH JANUARY, 2019. /VMS/ COPY TO: 1. APPELLANT (S) / CROSS OBJECTOR(S) 2. RESPONDENT(S) 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, BANGALORE ITA NO.2438 /BANG/2018 PAGE 9 OF 9 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DICTATION NOTE ENCLOSED DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. . 14. DICTATION NOTE ENCLOSED