SHRI KAMAL KUMAR CHAWLA, Dewas V. THE DCIT Circle- 1(1), Ujjain

ITA 773/IND/2014

• Counselvise Citation: 77322714 RSA 2014
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S SOLANKI; PRANAY GOYAL CAS
• Keywords: Deemed to accrue or arise in india; Onus to prove
• Section: 68; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I.T.A.NO. 773/IND/2014 A.Y. : 2009-10 SHRI KAMAL KUMAR CHAWLA, DY. CIT, CIRCLE 1(1), M/S.KAMAL DAIRY, 10/2, AGRASEN NAGAR, DEWAS VS UJJAIN APPELLANT RESPONDENT P.A.N. NO A BEPC1861C APPELLANT BY S/SHRI S. S. SOLANKI, AND PRANAY GOYAL, CAS RESPONDENT BY SHRI R. A. VERMA, SR. DR DATE OF HEARING : 23.07. 2015 DATE OF PRONOUNCEMENT : 23.07. 2015 -: 2: - 2 O R D E R PER GARASIA, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), UJJAIN, DATED 02.09.2014, FOR THE ASSESS MENT YEAR 2009-10. 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE I S INDIVIDUAL AND DERIVES INCOME FROM BUSINESS AND HOU SE PROPERTY. THE ASSESSEE HAS FILED THE RETURN OF INCO ME DECLARING INCOME OF RS. 46,42,680/- ON 30.09.2009. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT PROD UCE TRADE CREDITORS AND ASSESSEES DEEMED INCOME U/S 41(1) OF RS. 10,53,656/- WAS ASSESSED. THEREFORE, THE PENALTY U/ S 271(1) WAS IMPOSED. 3. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT WHEN THE AO HAS NOT SPECIFIED THE CHARGE THAT THE A SSESSEE HAS CONCEALED ANY INCOME, NO PENALTY CAN BE LEVIED. MOREOVER, THE LD. AUTHORIZED REPRESENTATIVE ALSO RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. M. S.BINDRA & SONS (P) LTD., (2011) 336 ITR 125 (DEL), WHEREIN THE SIMILAR -: 3: - 3 ADDITION WAS MADE U/S 41(1) AND THE TRIBUNAL HAS DE LETED THE PENALTY AND HON'BLE HIGH COURT HAS CONFIRMED THE OR DER OF THE TRIBUNAL DELETING THE PENALTY. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. 5. ON THE ABOVE FACTS WHETHER THE PENALTY U/S 271(1)(C) CAN BE IMPOSED OR NOT, THE SIMILAR ISSUE HAD COME BEFORE HONBLE A.P. HIGH COURT IN THE CASE OF CIT VS. CHENNUPATI TYRES & RUBBER PRODUCTS, 90 CCH 181 (APHC) WHEREIN THE HON'BLE HIGH COURT HAS HELD AS U NDER: PENALTY U/S 271(1)(C) - CONCEALMENT OF INCOME ASSESSEE FILED A RETURN, SHOWING LOSS FOR AY 1994-9 5 INTIMATION WAS GIVEN U/S 143(1)(A) BY ASSESSING OFFICER REDUCING LOSS ASSESSEE FILED AN APPLICATI ON FOR RECTIFICATION THEREOF AND SAID REQUEST WAS ACCEPTED BY ASSESSING OFFICER THEREAFTER AN EXERC ISE U/S 143(2) WAS UNDERTAKEN AND SCRUTINY OF EACH AND EVERY ITEM WAS MADE IN RESPECT OF TWO ITEMS OF SUNDRY CREDITS, EXPLANATION OFFERED BY ASSESSEE WAS -: 4: - 4 NOT FOUND SATISFACTORY ASSESSEE AGREED FOR TREATI NG THOSE TWO ITEMS AS INCOME AND IT PAID TAX ASSESSI NG OFFICER IMPOSED PENALTY U/S 271(1)(C) IN RESPECT OF TWO SUNDRY CREDITORS, REJECTING ASSESSEES EXPLANAT ION THAT HE DID NOT HAVE ANY INTENTION TO CONCEAL AMOUNTS, AND TWO AMOUNTS WERE CARRIED FORWARD FROM PREVIOUS AY CIT(A) DELETED PENALTY IMPOSED B Y ASSESSING OFFICER HOLDING THAT THERE WAS NO INTENTI ON ON PART OF ASSESSEE TO HIDE INCOME TRIBUNAL AFFIRMED ORDER PASSED BY CIT(A) HELD, BEFORE LEVY ING PENALTY U/S 271(1)(C) REVENUE HAS TO DISCHARGE ITS BURDEN TO PROVE THAT THERE WAS SOME INTENTION TO CONCEAL OR FURNISH INACCURATE PARTICULARS ON PART O F ASSESSEE CONCEALMENT CAN OCCUR, ONLY WHEN PERSON IS IN FULL KNOWLEDGE OF STATE OF AFFAIRS AND EVEN W HILE BEING UNDER OBLIGATION TO MAKE IT KNOWN TO OTHERS, AND IN PARTICULAR AUTHORITIES UNDER THE ACT FAILS O R REFUSES TO DO SO IT IS THEN, AND ONLY THEN, THAT HE -: 5: - 5 CAN BE SAID TO HAVE CONCEALED AND ONCE FACTUM OF CONCEALMENT IS PROVED, HIS ATTEMPT TO VOLUNTARILY DISCLOSE IT DOES NOT SAVE HIM HOWEVER, AN INADVERTENT MISTAKE, OR A BONA FIDE BELIEF, AS TO CLASSIFICATION, OR CHARACTER OF AN AMOUNT, CANNOT P ER SE PROVIDE A GROUND FOR LEVY OF PENALTY IN INSTANT CASE ASSESSEE AGREED TO TREAT TWO SUNDRY CREDITORS AS INCOME AS A MEASURE OF PURCHASING PEACE LACK OF ANY MALA FIDE INTENTION ON PART OF ASSESSEE CLEAR F ROM THE FACT THAT THOSE TWO ITEMS WERE CARRIED FORWARD FROM PREVIOUS YEAR AND WERE NOT NEW ADDITIONS AT AL L THERE WAS NO INGREDIENTS TO CONCEALMENT. 6. WE FIND THAT IN THE SAME JUDGMENT, THE HON'BLE HIGH COURT ALSO DISTINGUISHED THE MAK DATA (SUPRA) BY OBSERVING AS UNDER: LEARNED COUNSEL FOR THE APPELLANT PLACED RELIANCE UPON THE JUDGMENT OF THE SUPREME COURT IN MAK DATA P. LTD. VS. CIT, 358 ITR 593. THEIR LORDSHIPS -: 6: - 6 HELD THAT ONCE AN ITEM OF INCOME WAS FOUND TO HAVE BEEN CONCEALED, THE MERE FACT THAT THE ASSESSEE HAS VOLUNTARILY DISCLOSED IT THEREAFTER, DOES NOT ABSOL VE HIM FROM BEING PROCEEDED UNDER SECTION 271(1)(C) OF THE ACT. WE RESPECTFULLY FOLLOW THAT. HOWEVER, IT I S IMPORTANT TO UNDERSTAND THE PURPORT OF VERY WORD CONCEALMENT. THAT CAN OCCUR, ONLY WHEN THE PERSON IS IN FULL KNOWLEDGE OF THE STATE OF AFFAIRS AND EV EN WHILE BEING UNDER OBLIGATION TO MAKE IT KNOW TO OTHERS, AND IN PARTICULARS THE AUTHORITIES UNDER TH E ACT FAILS OR REFUSES TO DO SO. IT IS THEN, AND ONLY THEN, THAT HE CAN BE SAID TO HAVE CONCEALED AND ONCE THE FACTUM OF CONCEALMENT IS PROVED, HIS ATTEMPT TO VOLUNTARILY DISCLOSE IT DOES NOT SAVE HIM. IN THE INSTANT CASE, WE DO NOT FIND ANY INGREDIENTS OF CONCEALMENT. 7. WE ALSO FIND SUPPORT FROM THE ORDER OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. AGRAWAL ROLLIN G -: 7: - 7 MILLS, 88 CCH (0036) (ISCC) WHEREIN IT IS HELD THAT WHEN ASSESSEE HAS FILED THE RETURN AND DURING THE SCRUTI NY OF THE ACCOUNT OF SHARE APPLICATION MONEY RECEIVED, TH E ASSESSEE COULD NOT FURNISH THE DOCUMENTS RELATING T O SOME OF APPLICANTS AND SURRENDERED THE AMOUNT PERTAINING TO THEM. ASSESSING OFFICER MADE ADDITION U/S 68 IN RES PECT OF SURRENDERED AMOUNT, NO PENALTY CAN BE LEVIED U/S 27 1(1) OF THE ACT. 8. WE ALSO GET SUPPORT FROM THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROCHEMICAL S 322 ITR 158 (SC) WHEREIN HON'BLE SUPREME COURT HAS HELD THAT MERE RAISING A CLAIM, EVEN IF NOT SUSTAINABLE IN LAW, IS NOT BY ITSELF, SUFFICIENT TO HELD THAT IT DENOTES F URNISHING OF INACCURATE PARTICULARS WITH AN INTENT AS WOULD INVI TE A PENALTY. 9. THE POSITION OF LAW REGARDING LEVY OF PENALTY U/ S 271(1)(C) HAS UNDERGONE A SUBSTANTIAL CHANGE AFTER INSERTION OF EXPLANATION I TO SECTION 271(1)(C) WITH EFFECT FROM 01.04.1976. -: 8: - 8 EXPLANATION 1 TO SECTION 271(1)(C) RAISES A PRESUMP TION THAT AS AND WHEN ANY AMOUNT IS ADDED OR DISALLOWED IN CO MPUTING THE TOTAL INCOME, THE SAME SHALL BE DEEMED OR REPRE SENT THE INCOME IN RESPECT OF WHICH THE PARTICULARS HAVE BEE N CONCEALED. FURTHER WITH EFFECT FROM 10.9.1986 AMEND MENT HAS BEEN MADE TO EXPLANATION 1(B) TO SECTION 271(1)(C), AFTER THIS AMENDMENT FURTHER ONUS HAS BEEN PLACED ON THE ASSES SEE TO PROVE THAT EXPLANATION FURNISHED BY HIM WAS BONA FI DE. THE POSITION NOW IS THAT UNLESS AND UNTIL THE ASSESSEE SUBSTANTIATES THE EXPLANATION AND PROVES THAT THE E XPLANATION WAS BONA FIDE, THE ADDITION MADE TO HIS INCOME SHAL L BE DEEMED TO REPRESENT THE CONCEALED INCOME. ON ANALYS IS OF PROVISIONS OF SECTION 271(1)(C), IT IS OBSERVED THA T EXPLANATION 1 TO SECTION 271(1)(C) PROVIDES THE SITUATION, WHER E NO EXPLANATION FOR THE FAILURE IS OFFERED BY THE ASSES SEE OR WHERE THE EXPLANATION THAT HAS BEEN OFFERED IS FOUND TO B E FALSE OR WHERE THE ASSESSEE IS NOT ABOUT TO SUBSTANTIATE THE EXPLANATION OFFERED BY HIM. IN ALL THE CASES, THE A MOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON SHALL BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH -: 9: - 9 THE PARTICULARS HAVE BEEN CONCEALED. AS PER PROVISO TO THIS EXPLANATION, THE ONUS TO ESTABLISH THAT EXPLANATION OFFERED WAS BONA FIDE AND FACTS RELATING TO SAME AND MATERIAL T O THE COMPUTATION OF HIS INCOME EVEN DISCLOSED BY HIM WIL L BE ON THE PERSONS CHARGED FOR CONCEALMENT. 10. AS PER THE PROVISIONS 2 TO EXPLANATION 1(B) NOW THE ENTIRE ONUS IS ON THE ASSESSEE TO NOT ONLY OFFER AN EXPLANATION BUT ALSO TO SUBSTANTIATE IT AND TO PROVE THAT THE P RESUMPTION WAS BONA FIDE. AT THE SAME TIME THE PRESUMPTION SO RAISED BY THE EXPLANATION 1 IS REBUTTABLE. THE EFFECT IS THAT UNLESS AND UNTIL REBUTS THE PRESUMPTION, HE WOULD BE LIABLE TO PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961. IT IS NO W ESTABLISHED LAW THAT PRESUMPTION WOULD NOT STAND RE BUTTED MERELY BY FURNISHING ANY GENERAL OR FANTASTIC OR FA NCIFUL OR UNREASONABLE EXPLANATION BY THE ASSESSEE, THE EXPLA NATION SHOULD BE BASED ON COGENT AND RELEVANT MATERIAL AND SHOULD BE ACCEPTED TO THE AUTHORITIES. 11. THE EXPRESSION FURNISHING THE INACCURATE PA RTICULARS OF INCOME HAS BEEN NOT DEFINED IN THE ACT. THE EXP RESSION -: 10: - 10 INACCURATE REFERS TO NOT ONLY IN CONFORMITY WITH THE FACT OR TRUTH AND THAT IS AMENDMENT, WHICH IS RELEVANT IN T HE CONTEXT OF FURNISHING INACCURATE PARTICULARS. THE MEANING B Y FURNISHING INACCURATE PARTICULARS OF INCOME IMPLIES FURNISHING OF DETAILS OR INFORMATION ABOUT THE INCOME WHICH AR E NOT IN CONFORMITY WITH THE FACT OR TRUTH. THE DETAILS OR I NFORMATION ABOUT INCOME DEALS WHICH ARE FACTUAL DETAIL OF INCO ME AND THIS CANNOT BE EXTENDED TO THE AREA, WHICH ARE SUBJECTIV E SUCH AS STATUS OF TAXABILITY OF INCOME, ADMISSIBILITY OF DE DUCTION AND INTERPRETATION OF LAW. FURNISHING OF INACCURATE INF ORMATION, THUS, RELATES TO FURNISHING THE FACTUAL INCORRECT D ETAILS AND INFORMATION ABOUT THE INCOME. THE ADMISSION OR REJE CTION OF A CLAIM SUBJECT TO EXERCISE AND WHETHER THE CLAIM IS ACCEPTED OR REJECTED HAS NOTHING TO DO WITH FURNISHING OF INACC URATE PARTICULARS OF INCOME. RAISING A LEGAL CLAIM, EVEN IF IT IS ULTIMATELY FOUND TO BE LEGALLY UNACCEPTABLE CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE FIND THAT, IN THIS CASE, THE ASSESSEE HAS MADE A BONA FIDE LEGAL CLAIM, WHICH WAS NOT ACCEPTED BY THE TAX AUTHORITY OR JUDI CIAL AUTHORITY. WE FIND THAT THE ASSESSEES CLAIM WAS NO T ACCEPTED -: 11: - 11 BY THE AUTHORITY, IT DOES NOT MEAN THAT THE ASSESSE E HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE HON 'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. RAJASTHAN SPINNING AND WEAVING MILLS REPORTED IN (2009) 13 SCC 448, CONSIDERED THE EARLIER DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA AND ORS VS. DHARMENDRA TEXTILES PROCESSORS &ORS., REPORTED IN (2008) 306 ITR 277 (SC) AND HELD THAT IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271(L)(C) OF THE ACT, CONDITION STATED THEREIN MUST EXIST. THE ABOVE SAID DECISION CAME UP FOR CONSIDERATION IN THE CASE OF COMMISSIONER OF INCOME TAX VS. RELIANCE PETROPRODUCTS PVT., LTD., REPORTED IN (2010) 322 ITR 158 (SC). ON READING OF SECTION 271(1)(C) , THE HON'BLE SUPREME COURT POINTED OUT THAT IN ORDER TO BRING THE CASE UNDER SECTION 271(1)(C), TH ERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHE D INACCURATE PARTICULARS OF HIS INCOME. IN ORDER TO E XPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY CO VERED BY THE PROVISION, THE PENALTY PROVISION COULD NOT BE INVOK ED. THUS, -: 12: - 12 THE HON'BLE SUPREME COURT POINTED OUT THAT A MERE M AKING OF CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSEL F, WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGA RDING THE INCOME OF THE ASSESSEE. THE READING OF THE DECISION OF THE HON'BLE SUPREME COURT REFERRED TO ABOVE, THUS POINT S OUT THAT FOR SUSTAINING PENALTY, THE BONA FIDE EXPLANAT ION OF THE ASSESSEE MUST BE LOOKED AT, SO THAT THE CONTUMACIOU S CONDUCT OF THE ASSESSEE FOR THE PURPOSE OF SUSTAINI NG THE PENALTY WOULD BE TAKEN AS CONDITION THAT IS THE MAI N REQUIREMENT UNDER SECTION 271(L)(C) OF THE ACT. REFERRING TO THE DECISION IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS, (SUPRA), THE HON'BLE SUPREME COURT POINTED OUT THAT IN THE BACKGROUND OF SECTION 271(L )(C) OF THE ACT, THERE IS NO NECESSITY OF MENS REA BEING SHOWN BY THE REVENUE, HOWEVER REFERRING TO THE EXPLANATION T O SECTION 271(L)(C) PENALTY BEING A MULTIPLE LIABILIT Y, THE BONA FIDE OF THE CONDUCT OF THE ASSESSEE NECESSARILY ASS UMES SIGNIFICANT EVEN THOUGH WILLFULNESS OF THE ASSESSEE MAY NOT BE A CRITERIA, THE CONDUCT IS TO BE CONSIDERED. THU S, A MERE FACT THAT THE ADDITION IN THIS CASE HAS BEEN SUSTAI NED BY THIS -: 13: - 13 COURT BY ITSELF WOULD NOT LEAD TO THE AUTOMATIC APP LICATION TO SECTION 271(L). 7. WE, RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, DEL ETE THE PENALTY. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. THIS ORDER HAS BEEN PRONOUNCED AT THE TIME OF HEARING IN THE OPEN COURT ON 23 RD JULY, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 8 TH SEPTEMBER, 2015. CPU* 179