2005-VIL-370-DEL-DT

Equivalent Citation: [2005] 277 ITR 429, 196 CTR 541

DELHI HIGH COURT

Date: 05.05.2005

KAMAL CHAND JAIN

Vs

INCOME-TAX OFFICER

BENCH

Judge(s)  : SWATANTER KUMAR., MADAN B. LOKUR

JUDGMENT

The judgment of the court was delivered by

Swatanter Kumar J.- The facts giving rise to the present appeal under section 260A of the Income-tax Act, 1961 are that Sh. Kamal Chand Jain, assessee, filed the return for the assessment year 1991-92 on October 4, 1991 declaring a net income of Rs. 1,00,880. Subsequently, the case was taken up for scrutiny under section 143(3) with the approval of the competent authority. Notices were issued to the assessee and after providing opportunity to the assessee, the Assessing Officer made an addition of Rs. 3,77,950 in terms of the surrender made by the assessee vide his letter dated October 18, 1993. The penalty proceedings under section 271(1)(c) of the Act were initiated by the same order, though separately. Vide his order dated November 21, 1995, the Commissioner of Income-tax (Appeals) partly allowed the appeal of the assessee. However, in regard to the initiation of penalty proceedings on the surrender of the income of Rs. 3,77,950 it was held that the appeal was premature as no penalty had been imposed by that time. Subsequently, the order of penalty was passed against which the assessee again preferred an appeal, which was allowed by the Commissioner of Income-tax (Appeals) vide his order dated December 31, 1996 in which it was held as under:

"In the instant case the appellant has surrendered certain amount for taxation just to buy peace and avoid further litigation. Following the ratio laid down by the hon'ble Supreme Court in the case of Shadi Lal Sugar [1987] 168 ITR 705, no penalty under section 271(1)(c) is imposable on the amount surrendered for taxation. I have also verified the facts whether such surrender was made after the concealed income was detected by the Department. I notice that surrender was made during the course of assessment proceedings and therefore, it could not be said that the Department has detected any concealment. Thus the surrender made by the appellant has to be treated voluntarily. Needless to say that if income has been surrendered voluntarily no penalty under section 271(1)(c) is imposable. I, therefore, hold that the Assessing Officer was not justified in imposing the penalty on the surrendered amount.

The decision of the hon'ble Supreme Court in the case of Shadi Lal Sugar [1987] 168 ITR 705 was given after the amendment to section 271(1)(c) where the word 'deliberately' was omitted, though in the assessment year before the hon'ble Supreme Court the word 'deliberately' was on the statute. In this connection, I have perused the decision on the Andhra Pradesh High Court in the case of B.C. Krishnamurty and Co. [1980] 121 ITR 326. The hon'ble High Court dealing with this issue held as under:

'Even after the omission of the word "deliberately" by the Finance Act of 1964 the legal position i.e. applicable to penalty proceedings as enunciated by the Supreme Court in Anwar Ali's case [1970] 76 ITR 696 and Khoday Eswarsa and Sons case [1972] 83 ITR 369 (SC) does not materially alter.'

As regards, imposition of penalty on the trading addition made by the Assessing Officer and sustained by the Commissioner of Income-tax (Appeals) I have perused the observations of learned counsel that the addition may be good for the purposes of taxation as the appellant has not substantiated its explanation. But the appellant had filed his explanation on the trading addition which was rejected by the Assessing Officer/Commissioner of Income-tax (Appeals). But such explanation filed by the appellant was bona fide. Needless to say that penalty under section 271(1)(c) was not imposable where the explanation furnished by the appellant was bona fide. My views find support from various decisions including the decisions reported in CIT v. Gajanand Shyamlal [1978] 111 ITR 816 (Gauhati) 146 ITR 204 (Cal) (sic) and CIT v. Nipani Tobacco Stores [1984] 145 ITR 128 (Patna). Respectfully following the ratio laid down by the hon'ble courts mentioned above, I hold that the Assessing Officer, was not justified in imposing the penalty based on the trading addition also. Thus, the penalty imposed by the Assessing Officer is cancelled.

In the result, the appeal is allowed."

The Department preferred an appeal against the order of the first appellate authority which was allowed by the Income-tax Appellate Tribunal vide its order dated July 15, 2002. The Tribunal while accepting the appeal of the Department and setting aside the order of the first appellate authority held as under:

"We find that the law as it stands goes against the arguments advanced by learned counsel for the assessee. The Delhi High Court and the Supreme Court have held that penalty under section 271(1)(c) is clearly leviable after the insertion of the Explanation to section 271(1)(c) and the onus was clearly on the assessee to rebut the claim that the assessee had concealed the particulars of his income which he has failed to do. The assessee's claim that he had made the surrender to buy peace with the Income-tax Department would also not prevent levy of penalty for concealment of income as there can be no agreement or estoppel against the statute. We also find that the Commissioner of Income-tax (Appeals) had considered the claim of the assessee regarding the draft penalty order imposed by the Assessing Officer. Therefore, the assessee's claim that it was not considered at the appellate stage is incorrect. The order passed by the Assessing Officer is valid and within the time-limit prescribed under section 271(1)(c) for imposition of penalty. We set aside the order of the Commissioner of Income-tax (Appeals) and restore the penalty imposed by the Assessing Officer.

In the result, the appeal of the Department is allowed."

It was contended that no question of law arises from the order of the Appellate Tribunal and as such the appeal of the assessee should be dismissed. However, reference in this regard can be made to the judgment of the Supreme Court in the case of CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 ITR 589 wherein it was held that where the Tribunal fails to deal with a question of law raised before it, it must be deemed to have been dealt with by it and is therefore one arising out of its order. Thus, we find no merit in the contention raised before us by the Revenue.

Vide letter dated October 18, 1993 the assessee had surrendered the amount to buy peace and avoid further litigation. While relying upon the judgment of the Supreme Court in the case of Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705, the Commissioner of Income-tax had formed an opinion that it was not a case for imposition of penalty under the provisions of section 271(1)(c) of the Act. This finding arrived at by the first appellate authority was also based upon a finding of fact arrived at by the authority on the premises that surrender was made during the course of the assessment proceedings and was not a direct consequence of detection of concealment by the Department. It was held to be a voluntary surrender. Even the explanation given by the assessee was found to be bona fide. The above conclusions of the Commissioner of Income-tax were disturbed by the Tribunal as already noticed. According to the Tribunal it was a case of deemed concealment and even the explanation made by the assessee was not bona fide and it was a result of the Department's detection, that this amount could be made taxable. For this purpose, reliance was placed on the judgment of this court in the case of Electrical Agencies Corporation v. CIT [2002] 253 ITR 619 and the judgment of the Supreme Court in the case of K.P. Madhusudhanan v. CIT [2001] 251 ITR 99.

Reference to the order of the Assessing Officer, at this stage, would be appropriate. It has been noticed by the Income-tax Officer that the assessee was not able to offer any satisfactory explanation for the sum of Rs. 11,99,242.54 in regard to its source. On October 11, 1993 a specific order was passed requiring the assessee to explain the source and also to furnish the balance-sheet for the immediately preceding year. The assessee failed to do either, but then on the hearing of October 18, 1993, he submitted a letter stating that he was not aware of his tax affairs. Unable to get any proper explanation from the assessee, the Income-tax Officer added the said amount of Rs. 3,77,950 and specifically recorded his opinion in that regard which reads as under:

"... therefore, he offered the same for taxation by surrendering it only when tax Assessing Officer confronted him. Needless to mention here that the assessee had concealed/furnished inaccurate particulars of his income to the extent of the amount in question as well as in respect of the trading addition."

We are concerned with the assessment year 1991-92. The Explanation to the provisions of section 271 of the Act were in force at the relevant time. Explanation 1 to this section was made effective from April 1, 1976. Under the Explanation where an explanation offered by the assessee is found by the Assessing Officer, or even the Commissioner (Appeals) to be false the assessee fails to substantiate such explanation, or prove that the explanation was bona fide, then the amount added or disallowed in computing the total income of such person as a result thereof would be deemed to represent the income in respect of which particulars have been concealed. In other words, there is a deemed addition in the event the concerned authorities record their satisfaction that there is no proper and plausible explanation offered by the assessee or he has failed to substantiate such explanation. Obviously, the law places an obligation upon the assessee to substantially support his explanation in all reasonable manner.

It is a settled law that the Income-tax Appellate Tribunal is a final authority in relation to facts and normally this court while examining the matter within the purview and scope of section 260A of the Act, would not interfere with the findings of fact recorded by the authorities. In the present case, the Assessing Officer had recorded a finding which has been affirmed by the Tribunal, while upsetting the findings recorded by the Commissioner of Income-tax (Appeals). Thus, in our view no question of law, much less a substantial question of law arises in the present appeal for our consideration.

The appeal is thus dismissed, while leaving the parties to bear their own costs.

 

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