The ACIT, 1(1), V. M/s Hind Syntex Ltd.,

ITA 274/IND/2004

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1512 (ITAT-INDORE)
• Duration Of Justice: 5 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-10-2009
• Assessment Year: 1997-1998
• Appeal Filed On: 20-04-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K KARAN
• Assessee Lawyers: S N AGARWAL
• Keywords: Question of law; Initiation of penalty proceedings; Revised return
• Section: 271(1)(c); 133A

Judgement Text

PAGE 1 OF 14 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : N.A. I.T.A.NO. 781/IND/2006 A.Y. : 1993-94 INCOME-TAX OFFICER, SHRI ANUBHAV BHARGAV, 1(1), L/H OF LATE SHRI RAVI BHARGAV, INDORE. GF-20-21, DAWA BAZAR, 13-14, R.N.T.MARG, INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI V.K.KARAN, ADDL. CIT DR RESPONDENT BY : SHRI S.N. AGARWAL, C. A. O R D E R PER GUPTA, A.M. THIS APPEAL FILED BY THE REVENUE ARISES OUT OF ORDER OF THE LD. CIT(A)-I, DATED 11.10.2006, FOR THE ASSESSME NT YEAR 1993-94. PAGE 2 OF 14 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. GROUND RAISED BY THE REVENUE, IN THIS APPEAL, READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-I ERRED IN CANCELING THE PENALTY OF RS. 4,35,000/- LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) ON ADDITIONAL INCOME OF RS. 10,00,000/- OFFERED BY THE ASSESSEE BY FILING REVISED RETURN OF INCOME AFTER THE SURVEY WAS CONDUCTED U/S 133A OF THE INCOME-TAX ACT, 1961, BY THE DEPARTMENT. 4. THE FACTS, IN BRIEF, ARE THAT THE THERE WAS A SURVE Y ACTION U/S 133A OF THE INCOME-TAX ACT, 1961, ON 18.7 .1994, WHEREIN IT WAS FOUND THAT THE CLOSING STOCK AS ON 3 1.3.1992, WAS RS. 32,20,178/-, WHEREAS OPENING STOCK AS ON 1.4.1 992, HAD BEEN STATED AT RS. 22,20,178/-. THE ASSESSEE, S URRENDERED PAGE 3 OF 14 THE DIFFERENCE OF RS. 10 LAKHS BETWEEN THESE TWO FI GURES AS ITS INCOME, PAID TAX THEREON AND FILED REVISED RETURN ON 31 ST AUGUST, 1994, OFFERING SUCH DISCLOSURE AS ITS INCOME. THE A.O. ALSO MADE CERTAIN OTHER ADDITIONS. THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE LD. CIT(A) AND ALSO BEFORE THE TRIBU NAL AGAINST THE ORDER OF LD. CIT(A). IN THE APPEAL BEFOR E THE TRIBUNAL, THE ASSESSEE RAISED AN ADDITIONAL GROUND F OR DELETION OF AMOUNT OF RS. 10 LAKHS OFFERED BY THE ASSES SEE FOR THE REASON THAT SUCH DISCLOSURE HAD BEEN MADE BY THE ASSESSEE DUE TO WRONG OPINION OF THE COUNSEL. THE TRI BUNAL, HOWEVER, DISMISSED THIS ADDITIONAL GROUND OF THE ASSE SSEE ON MERITS. THEREAFTER, THE A.O. INITIATED PENALTY PROCE EDINGS U/S 271(1)(C)OF THE ACT. IN THE PENALTY PROCEEDINGS, TH E ASSESSEE SUBMITTED THAT THE ASSESSEE DID NOT ACT DELIBERATEL Y IN DEFIANCE OF LAW NOR IT WAS GUILTY OF CONTUMACIOUS CON DUCT. IT WAS ALSO CONTENDED THAT IT WAS A CASE OF BONA FIDE MI STAKE. ON THIS BASIS, THE ASSESSEE CONTENDED THAT THE PENAL TY WAS NOT LEVIABLE AND FOR ITS SUCH CLAIM, THE ASSESSEE ALS O PLACED PAGE 4 OF 14 RELIANCE ON VARIOUS JUDICIAL DECISIONS. THE A.O., HOW EVER, HELD THAT THIS INCOME HAD BEEN OFFERED BY THE ASSES SEE AS A CONSEQUENCE OF SUCH CONCEALMENT BEING BROUGHT TO THE NOTICE BY THE SURVEY PARTY DURING THE COURSE OF SURVE Y U/S 133A. HENCE, THE ACTION OF THE ASSESSEE WAS NOT VOLUNT ARY. THE A.O. ALSO HELD THAT WHERE THE ASSESSEE ADMITTED CONCEALMENT OF INCOME, THEN THERE WAS NO ONUS ON THE DEPARTMENT TO PROVE BY AN INDEPENDENT EVIDENCE THAT THE AMOUNT IN QUESTION WAS ASSESSEES INCOME. THE A.O. P LACED RELIANCE ON VARIOUS JUDICIAL DECISION IN SUPPORT OF I TS VIEW THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME. ACCORDINGLY, HE LEVIED A PENALTY OF RS. 4,35, 000/- U/S 271(1)(C) OF THE ACT. AGGRIEVED BY THIS, THE ASSESSE E CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHERE IN THE ASSESSEE SUBMITTED THAT SURVEY HAD BEEN CARRIED OUT ON 18.7.1994 AT THE BUSINESS PREMISES OF THE ASSESSEE, WHICH FELL INTO ASSESSMENT YEAR 1995-96. HENCE, IF ANY ADDITION COULD BE MADE ON ACCOUNT OF ANY DISCREPANCY IN STOCK, IT C OULD PAGE 5 OF 14 BE MADE IN ASSESSMENT YEAR 1995-96 AND NOT IN ASSES SMENT YEAR 1993-94. THE ASSESSEE ALSO SUBMITTED THAT THE INCOME WAS DECLARED BY THE ASSESSEE WITHOUT UNDERSTANDING THE TECHNICALITIES, WHICH SHOULD HAVE BEEN BROUGHT TO T HE NOTICE OF THE ASSESSEE BY THE ASSESSING OFFICER AS PER THE CIRCULAR OF C.B.D.T., WHICH WAS NOT DONE, HENCE, THE ACTION OF THE REVENUE AUTHORITIES WAS NOT JUSTIFIED. THE ASSESSEE A LSO SUBMITTED THAT THE OPENING STOCK COULD BE LESS BY RS . 10 LAKHS ONLY IF THE STOCK SHOWN IN THE BALANCE SHEET H AD BEEN SOLD BY THE ASSESSEE IN THE MID NIGHT OF 3.3.1992 A ND IN THAT EVENTUALITY ONLY PROFIT COULD BE TAXED. THEREAFTER, T HE ASSESSEE RELIED ON VARIOUS JUDICIAL DECISIONS FOR THE PROPOSITION THAT PENALTY PROCEEDINGS WERE OF QUASI-CRIM INAL NATURE, HENCE MENS REA WAS NECESSARY. THE ASSESSEE ALSO BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE DE CISION OF THE TRIBUNAL ON THE ADDITIONAL GROUND RAISED BY THE A SSESSEE HAD BEEN ADMITTED BY THE HON'BLE M.P. HIGH COURT AS SUBSTANTIAL QUESTION OF LAW AND THE CIRCUMSTANCES UN DER PAGE 6 OF 14 SUCH APPEAL HAD BEEN ADMITTED BY THE HON'BLE M.P. H IGH COURT WERE ALSO BROUGHT TO THE NOTICE OF THE LD. CIT( A). ACCORDINGLY, IT WAS SUBMITTED THAT ONCE THE IMPUGNED ADDITION WAS SUBJECT TO THE JUDICIAL REVIEW, HENCE, IT WAS A CASE WHERE ENTIRE DIFFERENCE IN VALUE OF OPENING STO CK COULD NOT BE CONSIDERED AS INCOME. THE LD. CIT(A) EXAMINED THE BASIS OF INITIATION OF PENALTY PROCEEDINGS IN THE ASS ESSMENT ORDER BY THE ASSESSING OFFICER. THEREAFTER, THE LD. CIT(A) TOOK COGNIZANCE OF THE DECISION OF THE TRIBUNAL IN REGARD TO ADDITIONAL GROUND RAISED BY THE ASSESSEE BEFORE THE T RIBUNAL. THE LD. CIT(A) ALSO TOOK NOTE OF THE FACT THAT ADMISSION OF ASSESSEES APPEAL ON THE DECISION OF THE TRIBUNAL BY THE HON'BLE M.P. HIGH COURT. THE LD. CIT(A), THEREAFTER OBSERVED THAT THIS MISTAKE WAS PATENT AND OBVIOUS IN ITSELF AND IN THE COURSE OF SURVEY, NO FURTHER FACTS OR EVIDENCES WERE F OUND OR ESTABLISHED AND THE ASSESSEE HIMSELF SURRENDERED SU CH DIFFERENCE AS INCOME AND, ACCORDINGLY, HE HELD THAT T HE A.OS FINDING THAT HAD THERE BEEN NO SURVEY, THE INC OME PAGE 7 OF 14 DISCLOSED BY THE ASSESSEE WOULD HAVE ESCAPED THE ASSESSMENT WAS NOT CORRECT AS THE A.O. COULD HAVE TAK EN APPROPRIATE ACTION IN THE RELEVANT ASSESSMENT YEAR ON THE BASIS OF RETURN FILED BY THE ASSESSEE. THE LD. CIT(A ) ALSO OBSERVED THAT IN THE ADDITIONAL GROUND RAISED BY THE ASSESSEE, DIFFERENT ISSUE HAD BEEN CONTESTED AND TH E TRIBUNAL HAD DISMISSED THE ADDITIONAL GROUND OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE FAILED TO EXPLAIN TH E REASONS THAT DESPITE THE SIGNIFICANT DIFFERENCE IN THE VALU E OF OPENING STOCK VIS--VIS CLOSING STOCK OF IMMEDIATELY PRECEDING YEAR, HOW THE BALANCE WAS TALLIED. THE LD . CIT(A), THEREAFTER, PROCEEDED TO RE-APPRAISE THE FACTS AND H ELD THAT BUT FOR THE ADMISSION BY THE ASSESSEE HIMSELF, THE ADDITION COULD HAVE BEEN MADE ONLY TO THE EXTENT OF PROFIT, IF IT WAS PRESUMED THAT IT WAS A CASE OF SALE OF STOCK OUTSIDE THE BOOKS, PARTICULARLY WHEN THE ASSESSEE HAD NOT CLAIMED ANY CREDIT OR SET-OFF OR AVAILABILITY OF FUNDS TO THE EXTE NT OF RS. 10 LAKHS IN THE YEAR UNDER CONSIDERATION OR IN LATER Y EARS. THE LD. PAGE 8 OF 14 CIT(A), ACCORDINGLY, OBSERVED THAT IF THE ISSUE WAS EXAMINED IN THIS MANNER, THEN, THE PENALTY COULD BE LEVIED ON LY ON AN AMOUNT OF RS. 1,10,000/- BEING THE PROFIT. HOWEVER, T HAT WOULD CHANGE THE VERY BASIS OF LEVY OF PENALTY AS AGA INST THE BASIC SATISFACTION RECORDED BY THE ASSESSING OFF ICER IN THIS REGARD. THE LD. CIT(A) ALSO HELD THAT THE A.O. DID NOT RECORD A CLEAR AND CATEGORICAL FINDING WHETHER IT WAS A CAS E OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, HENCE, THE PENALTY WAS NOT JUST IFIED. THE LD. CIT(A) ALSO HELD THAT THE PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS WERE DISTINCT FROM EACH OTHER AND THE FINDINGS IN THE ASSESSMENT ORDER WERE NOT CONCLUSI VE, THOUGH THAT COULD BE A RELIABLE PIECE OF EVIDENCE. TH US, TAKING INTO CONSIDERATION THESE FACTS AND LEGAL POSITI ON, THE LD. CIT(A) DELETED THE PENALTY IMPOSED BY THE ASSES SING OFFICER. AGGRIEVED BY THIS, THE REVENUE IS IN APPEA L BEFORE US. PAGE 9 OF 14 5. THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE FACTS, DREW OUR ATTENTION TO THE RELEVANT PAGES OF T HE APPELLATE ORDER TO SHOW THAT THE LD. CIT(A) HAD TAKEN A DIFFERENT VIEW OF QUANTUM OF ADDITION AS AGAINST THE VIEW TAKEN BY THE TRIBUNAL AND, THEREFORE, THE BASIS OF LD. CIT(A) FOR DELETING THE PENALTY WAS NOT CORRECT. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO SUBMITTED THAT MER ELY BECAUSE THE HON'BLE M.P.HIGH COURT HAD ADMITTED THE APPEAL FILED BY THE ASSESSEE ON THE VALIDITY OF QUANT UM ADDITION CONFIRMED BY THE TRIBUNAL, THE LEVY OF PENALT Y COULD NOT BE HELD AS UNJUSTIFIED. HE FURTHER PLACED RELIAN CE ON THE ORDER OF THE A.O. 6. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, CONTENDED THAT IT WAS A CASE WHERE OPENING STOC K HAD BEEN SHOWN AT A LESSER VALUE AS COMPARED TO THE V ALUE OF CORRESPONDING CLOSING STOCK SHOWN IN THE IMMEDIATELY PRECEDING FINANCIAL YEAR, HENCE, THERE WAS NO REASON FOR OFFERING SUCH INCOME. HOWEVER, THE ASSESSEE DUE TO WRON G PAGE 10 OF 14 ADVISE AND OUT OF IGNORANCE SURRENDERED THE SAME AS INCOME. IT WAS ALSO CONTENDED THAT ONLY GROSS PROFIT CO ULD BE TAXED AND THAT TOO EITHER IN ASSESSMENT YEAR 1992-93 OR 1993- 94, HENCE, WHEN THE ASSESSMENT YEAR AND QUANTUM OF ADDITION COULD VARY, THE LEVY OF PENALTY WAS NOT JUSTI FIED. HE ALSO PLACED RELIANCE ON THE DECISION OF HON'BLE CALCU TTA HIGH COURT IN THE CASE OF DURGA KAMAL RICE MILL VS. CIT, AS REPORTED IN 265 ITR 25, WHEREIN PENALTY U/S 271(1)(C ) OF THE ACT WAS CANCELLED FOR THE REASON THAT INCOME COULD BE ASSESSED IN THE SUBSEQUENT ASSESSMENT YEAR, HENCE, TWO VIEWS WERE POSSIBLE AND, THEREFORE, IF THE ASSESSEE HAD SHOWN THE AMOUNT SURRENDERED AS INCOME IN THEIR REVISE D RETURN, THE PENALTY COULD BE LEVIED. 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES. IT IS NOTED THAT CLOSING STOCK AS ON 31 ST MARCH, 1992, STANDS AT RS. 32,20,178/-, WHICH HAS BEEN SHOWN AT RS. 22,20,178/- AS ON 1.4.1992 AS OPENING STOCK RELEVANT T O THE ACCOUNTING YEAR 1992-93. IT IS ALSO NOTED THAT RETUR NS PAGE 11 OF 14 ALONGWITH BALANCE SHEET FOR ASSESSMENT YEAR 1992-93 & 1993- 94 HAVE BEEN FILED ON 13.11.1992 AND 30.11.1993 RESPECTIVELY. THUS, THESE RETURNS HAVE BEEN FILED M UCH BEFORE THE DATE OF SURVEY I.E. 18.7.1994. HENCE, THE FACT O F SUCH DISCREPANCY IS ALREADY ON RECORDS OF THE DEPARTMENT . IT IS FURTHER NOTED THAT IN THE COURSE OF SURVEY, NO OTHER DISCREPANCY RELATING EITHER TO ASSESSMENT YEAR 1992 -93 OR 1993-94 HAVE BEEN FOUND. THE ASSESSEE, HOWEVER, HAS SURRENDERED THIS DIFFERENCE AS ITS INCOME, PAID TAXE S THEREON AND HAS ALSO FILED REVISED RETURN. THE A.O. HAS CLAI MED THAT IT WAS DONE SO AFTER THE DETECTION OF SUCH DISCREPANCIES BY THE DEPARTMENT IN THE COURSE OF SURVEY. IN OUR VIEW, THIS DISCREPANCY ALREADY EXISTS AND IS ALSO ON RECORD OF THE DEPARTMENT AS STATED EARLIER, AND IN THE COURSE OF S URVEY, THE ASSESSEE HAS OFFERED THE SAME AS INCOME FOR IMPUGNED ASSESSMENT YEAR INSPITE OF THE FACT THAT NO OTHER DIS CREPANCY OR INCRIMINATING MATERIAL WAS FOUND DURING THE COURS E OF SURVEY, HENCE, IT CANNOT BE SAID THAT SUCH AN ACTION OF THE PAGE 12 OF 14 ASSESSEE IS A CASE OF DETECTION OF CONCEALED INCOME B Y THE DEPARTMENT. HAVING STATED SO, IT IS ALSO NOTEWORTHY T HAT IT IS A SETTLED PRINCIPLE IN LAW THAT THE FINDINGS IN THE Q UANTUM PROCEEDINGS IS NOT A FACTOR FOR DETERMINING THE QUES TION FOR THE PURPOSE OF IMPOSING PENALTY AS BOTH THE PROCEEDI NGS ARE DISTINCT AND DIFFERENT FROM EACH OTHER AND DIFFER ENT CONSIDERATIONS PREVAIL FOR EACH OF THESE PROCEEDING S. THERE MAY BE HUNDRED REASONS FOR SURRENDERING AN AMOUNT AS INCOME, BUT MERE FACT OF SUCH SURRENDER DOES NOT MAKE THE ASSESSEE LIABLE TO BE VISITED WITH THE PENALTY NECE SSARILY. HENCE, IF WE DO NOT FALL BACK ON THE FINDINGS IN THE QUANTUM PROCEEDINGS OR ON THE VOLUNTARY ACT OF SURRENDER OF S UCH INCOME BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATIO N, THEN, IT SEEMS, ON FACTS, THAT IT WAS OPEN TO THE AS SESSEE TO DISCLOSE THE SAID INCOME IN THE RETURN FOR THE PREVI OUS YEAR IN WHICH SURVEY TOOK PLACE AND NOT IN THE YEAR UNDER CONSIDERATION OR IT COULD BE INCOME OF EARLIER PREV IOUS YEAR. HENCE, IT IS DIFFICULT TO DETERMINE WHETHER IT IS A CASE OF PAGE 13 OF 14 CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME FOR THE YEAR UNDER CONSIDERATI ON OR FOR THE EARLIER/FOLLOWING PREVIOUS YEAR. HENCE, TWO VIEWS ARE POSSIBLE IN LAW, IN THIS RESPECT, AND, THEREFORE, W HEN TWO VIEWS ARE POSSIBLE AND WHEN NO CLEAR AND DEFINITE INF ERENCE CAN BE DRAWN, IN PENALTY PROCEEDINGS, THE PENALTY C ANNOT BE IMPOSED. THE RATIO OF THE DECISION OF THE ORDER OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF DURGA KA MAL RICE MILLS (SUPRA) CITED BY THE ASSESSEE, ALSO SUPPORTS T HE ABOVE VIEW. IN VIEW OF THE REASONS STATED BY US HEREINABOV E, WE HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. ACCORDINGLY, WE DISMISS THIS GROUND OF THE R EVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER, 2009. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23 RD OCTOBER, 2009. CPU* 58D20 PAGE 14 OF 14