2009-VIL-454-GUJ-DT
Equivalent Citation: [2011] 330 ITR 93
GUJARAT HIGH COURT
50 of 1999
Date: 03.03.2009
LMP PRECISION ENGG. CO. LTD.
Vs
THE DY. CIT (ASSTT.)
Mr. S.N. Soparkar, Senior Advocate with Ms. Niti P. Sheth, Advocate for Mrs. Swati Soparkar for the Applicant.
Mr. B.B. Naik for the Respondent.
BENCH
D. A. MEHTA and S. R. BRAHMBHATT, JJ.
JUDGMENT
JUSTICE D. A. MEHTA - The Income Tax Appellate Tribunal, Ahmedabad Bench 'A' has referred the following three questions under Section 256(1) of the Income Tax Act, 1961 (the Act) at the instance of the assessee :
"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that levy of penalty under section 27(1)(c) of the Income-tax Act, 1961, was justified in law ?
2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in confirming levy of penalty on the appellant inspite of the finding given by the assessing officer in the assessment proceedings that nothing specific was found by the Assessing Officer and whether the said finding can be regarded as "casual remarks" made by the Assessing Officer?
3. Whether, on the facts and in the circumstances of the case, the finding of the Income-tax Appellate Tribunal that the appellant was liable to levy of penalty on the disclosed income is borne out of record and contrary to evidence?"
2. The Assessment Years in question are 1985-86, 1986-87 and 1987-88. The respective accounting periods are years ended on 30.06.1984, 30.06.1985 and 30.06.1987. The assessee, a Private Limited Company was assessed on total income of Rs. 34,75,190/- on 28.5.1986 under section 143(3) of the Act for Assessment Year 1985-86. Similarly, the assessment was completed on 3.6.1987 at a total income of Rs.56,14,730/- for Assessment Year 1986-87. For Assessment Year 1987-88 the assessment was completed on 1.3.1988 computing the total income at a sum of Rs.46,10,500/-. Subsequently, for Assessment Year 1985-86 a revised return of income was filed on 14.2.1989 disclosing additional income of Rs.54,71,463/-. For each of the two subsequent years viz. Assessment Years 1986-87 and 1987-88, revised returns were also filed on 14.2.1989 disclosing additional income of Rs.18 lacs for each of the two Assessment Years. Thereafter, on 30.3.1990 the revised return of Assessment Year 1985-86 was further revised upward by disclosing additional income of Rs.78,56,613/- under forwarding letter dated 30.3.1990.
3. The Assessing Officer issued Notices under section 148 of the Act for each of the three years and the revised returns filed by the assessee were thus regularised. This was followed by reassessment order dated 15.4.1991 for Assessment Year 1985-86 whereby a sum of Rs.1,33,28,076/- came to be added by Assessing Officer towards unverifiable purchases from four different parties. Similarly reassessments were framed for Assessment Years 1986-87 and 1987-88 adding Rs.18 lacs in each of the years under consideration vide reassessment orders dated 15.4.1991. The said assessments have not been challenged by the assessee.
4. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act. The explanation of the assessee for all the three years was that the revised returns were voluntary, additional income in each of the revised returns was declared to purchase peace and no concealment was involved. It was submitted that the returns were revised even before issuance of Notice under section 148 of the Act viz. commencement of reassessment proceedings. The Assessing Officer did not accept the explanation of the assessee and levied penalties at Rs.1,69,43,380/- for Assessment Year 1985-86, Rs.10,39,500/- for Assessment Year 1986-87 and Rs.22,57,872/- for Assessment Year 1987-88. Successive Appeals filed by the assessee before Commissioner (Appeals) and the Tribunal were dismissed by the said two Appellate Authorities confirming the penalties levied by the Assessing Officer. However, the Tribunal came to the conclusion that as the assessee had cooperated in finalisation of the assessment and accepted the assessment of additional income the Tribunal reduced the penalty levied from the maximum to the minimum, which was 100% of the concealed income. It is this order of the Tribunal dated 31.3.1997, which is under challenge in the present Reference.
5. Mr. S.N.Soparkar, learned Senior Advocate appearing for the applicant-assessee assailed the impugned order of Tribunal and submitted that the Tribunal had failed to appreciate the facts in the right perspective. That the revised returns filed by the assessee were voluntary in nature and the assessee was under a bona fide impression that no penalty proceedings would be initiated considering the fact that the assessee had made an application under section 273A of the Act before filing the revised returns. It was further submitted that Revenue was not in possession of any concrete evidence against the assessee to establish concealment of any income. Various purchases made by the petitioner from International Steel Corporation, Shreeji Corporation, Narendra Brothers and Navnit Pipe and Steel Traders were all genuine purchases but the assessee chose to declare the value of such purchases as income only to avoid long drawn litigation considering the fact that the stand of the first supplier, viz. International Steel Corporation was inconsistent, the second supplier Shreeji Corporation was not traceable, that Narendra Brothers and Navnit Pipe and Steel Traders had in fact confirmed the sales made to the assessee but the Assessing Officer had come to the conclusion that their respective purchases were from Shreeji Corporation and hence, the said purchases made by the assessee were also not believable. In the circumstances, it was contended that no case for concealment was made out, and it was also not a case of furnishing inaccurate particulars of income as all the details were available with the assessing authority, he having undertaken detailed inquiry in relation to the transactions with each of the four parties.
5.1. Alternatively, it was contended that for Assessment Years 1986-87 and 1987-88 at least the impugned order of Tribunal suffered from vice of perversity as the finding of the Tribunal was based on no evidence. That except for the declaration made by the assessee on 20.10.1998 the Assessing Officer was not in a position to pinpoint from any evidence on record any concealment. That in fact, both for Assessment Years 1986-87 and 1987-88, the Assessing Officer had observed in the assessment orders nothing specific was found against the assessee. It was therefore submitted that the Tribunal had committed an error by treating the said finding as casual remarks while confirming the penalty levied for the said two years.
5.2 A further alternative contention was raised to submit that the Tribunal had committed an error apparent on record and therefore the assessee had sought rectification of Tribunal's order dated 31.3.1997 for Assessment Year 1985-86 vide Misc. Application No. 65 of 1997. That the Tribunal had very cursorily rejected the Misc. Application without even dealing with the grievance ventilated by the assessee. It was submitted that from the evidence on record, in the form of Paperbook and the written submissions, the assessee was in a position to point out for the said Assessment Year 1985-86 that the excess consumption of materials could not exceed a sum of Rs.20 lacs and therefore, if at all penalty was leviable, the same was leviable only in relation to the said sum which had to be worked out after considering the wastage in processing raw material @ 5%. That the Tribunal had not dealt with the said contention in its order dated 31.3.1997 and hence, this being an error apparent on record, the Tribunal was duty bound to rectify the same. The Tribunal having failed to do so, the order at least for Assessment Year 1985-86 was contrary to the evidence on record and thus perverse.
5.3. Referring to order dated 31.3.1997 made by the Tribunal in Misc. Application No. 65/Ahd/97, it was submitted that even while passing the said order, the Tribunal had glossed over the error pointed out by merely stating that all the arguments advanced by the assessee's Counsel had been noted without actually dealing with the grievance of the assessee that the alternative contention was not considered and not dealt with. The learned Counsel therefore submitted that in light of principles laid down by the Apex Court in the case of Omar Salay Mohamed Sait Vs. CIT, (1959) 37 ITR 151 the matter was required to be restored to the file of the Tribunal without entering into the merits of the controversy.
5.4. In support of various submissions made, the learned Counsel placed reliance on following decisions :
[1] CIT Vs. Manibhai And Bros. [2007] 294 ITR 501 (Guj)
[2] CIT Vs. Suresh Chandra Mittal, (2001) 251 ITR 9 (SC).
[3] CIT Vs. Suresh Chandra Mittal (2000) 241 ITR 124 (MP).
[4] K.C.Builders And Another Vs. Assistant Commissioner of Income Tax (2004) 265 ITR 562 (SC).
6. The learned Standing Counsel appearing for the respondent Department submitted that no error had been committed by the Tribunal so as to warrant any other view of the matter. That the conduct of the assessee in repeatedly revising its return of income for Assessment Year 1985-86 was also required to be considered. It was contended that, the finding of the Tribunal that whether the revised return was voluntary or not, would be a finding of fact and not amenable to be scrutinised and answered in any other manner. That in the present case the Tribunal had recorded a finding of fact that the revised returns were not voluntary and thereafter upheld the penalties levied.
6.1 Responding to the alternative submission it was contended that, as could be seen from the Reference Applications made by the assessee before the Tribunal, it was only order dated 31.3.1997 which was challenged by the assessee and the subsequent order dated 19.9.1997 was not even in existence when Reference Applications were filed from which the present Reference arises. Therefore, according to Mr. Naik there was no question of entering into the controversy as to whether the impugned order of Tribunal dated 31.3.1997 suffers from any factual or legal error apparent on record. That the subsequent order dated 19.9.1997 of the Tribunal in M.A.No. 65/Ahd/1997 having not been challenged any error therein cannot be taken support of for the purpose of ascertaining the validity of the first order dated 31.3.1997. In support of the submission, reliance was placed on the judgment in case of CIT Vs. Kashiram Textile Mills P. Ltd. [2006] 284 ITR 61 (Guj).
6.2. On merits it was submitted that the principles enunciated in the following decisions;
[1] Deepak Construction Co. Vs. CIT (2007) 293 ITR 285 (Guj).
[2] G.S.Nanjee And Sons Vs. CIT (2006) 284 ITR 172(Guj)
[3] P.C.Joseph And Brothers Vs. CIT (2000) 243 ITR 818.
[4] Karmachari Union Vs. Union of India And Others (2000) 243 ITR 818.
make it clear in what circumstances a revised return can be termed to be voluntary. That applying said principles to the facts of the case, it was apparent that the declaration made by the assessee originally at a sum of Rs.54,71,463/- followed by further revision to the extent of Rs.78,56,613/- and Rs. 18 lacs in each of the Assessment Years 1986-87 and 1987-88 could not be termed to be voluntary so as to exonerate the assessee from charge of concealment.
7. The facts are not in dispute. Deputy Director of Income-tax(Investigation), Bombay (DDIT) (Inv.) had undertaken survey action some time in September, 1988 and on verification of certain purchases made by the assessee it was found that the said purchases did not appear to be genuine. The statement of Chairman and Managing Director of assessee Company was recorded on 21.9.1988. Before the said proceedings could be finally concluded the assessee filed a declaration under section 273A of the Act disclosing additional income of Rs.54,71,463/- as being relatable to Assessment Year 1985-86. On the same day, declaration was also made of a sum of Rs. 18 lacs each for Assessment Years 1986-87, 1987-88 and 1988-89. This application under section 273A of the Act was followed by revised returns filed on 14.2.1989 for all the three Assessment Years declaring identical additional income in the revised returns. Before assessments could be finalised, after regularising the same by issuance of notice under section 148 of the Act, the assessee came forward with another application declaring additional income of Rs.78,56,613/-. The first declaration was in relation to purchases from one M/s. International Steel Corporation while the second disclosure was in relation to purchases made from Shreeji Corporation, Narendra Brothers and Navnit Pipe And Steel Traders. Though it is contended by the learned Senior Advocate appearing for the applicant-assessee that vide second declaration dated 30.3.1990 while disclosing Rs.78 lacs and odd for three other concerns, the assessee had withdrawn the declaration of the sum of Rs.18 lacs each for the two years under consideration viz. Assessment Years 1986-87 and 1987-88 but the said withdrawal had not been considered, the said contention is not supported by any evidence on record and does not appear to have been pleaded on the basis that there was retraction vis-a-vis the statement made by the Chairman and Managing Director who had declared a total sum of Rs.108 lacs on 20.10.1988 in line with the statement recorded on 21.9.1988. The Tribunal has recorded the said contention in the following terms :
" ... Therefore, on 30.3.1990 the assessee revised its earlier declaration for offering for tax additional sum of Rs.78,56,613/- for the asstt. Year 1985-86, being the purchases made from the above referred three parties. The learned Counsel for the assessee submitted that it was specifically clarified that on account of this disclosure the adhoc disclosure made of Rs. 18 lacs in each of the subsequent years is required to be deleted."
Thus, it is apparent that the assessee had at no stage made a categorical assertion that the amount of Rs.18 lacs each was not concealed income of the assessee for Assessment Years 1986-87 & 1987-88, but the statement was that on account of additional sum of Rs.78 lacs and odd being offered for tax in Assessment Year 1985-86 the disclosure of Rs.18 lacs each in the subsequent years was required to be deleted. This request cannot be equated with withdrawal or retraction of the disclosure made by the assessee.
8. The facts of the case reveal that only after statement of the Chairman and Managing Director was recorded by DDIT (Inv.), Mumbai that the first disclosure dated 20.10.1988 disclosing a sum of Rs.54,71,463/- was made accompanied by another disclosure of Rs.54 lacs in round figure being divided into three segments of Rs.18 lacs each for Assessment Years 1986-87, 1987-88 and 1988-89. Therefore, it is not possible to agree with the submission made on behalf of the assessee that the revised returns filed on 14.2.1989 for all the three years were voluntary in nature. This fact has to be appreciated in the context of filing of further revised return by way of letter dated 30.3.1990 declaring a sum of Rs.78,56,613/- which came about as a consequence of follow-up proceedings undertaken by DDIT, Surat in relation to other three suppliers viz. Shreeji Corporation, Narendra Brothers and Navnit Pipe And Steel Traders. Therefore, the assessee cannot be stated to have voluntarily come forward to disclose income which had unintentionally been omitted from the original return of income.
9. The law on the subject of treating a revised return of income as voluntary or otherwise is well settled. Merely because a return is revised that fact by itself cannot lead to any presumption as to concealment in the original return of income, because legislature itself has provided for furnishing a revised return in case of any omission in the original return. Albeit such omission has to be inadvertent and bonafide. If the omission is intentional the revised return cannot absolve an assessee. The fact that the department has initiated certain inquiries per-se would not be sufficient to treat the revised return as not being voluntary. This would depend on facts of each case considering the stage at which the investigation has progressed, the subject matter of investigation by the department, and the evidence available in the course of such investigation.
10. If the aforesaid principles are applied to the facts of the case, it can safely be noted that the overall conduct of the assessee does not indicate that the revised returns were filed voluntarily and in good faith. In fact, the first disclosure on 20.10.1988 came in pursuance of the inquiries undertaken by DDIT (Inv), Mumbai and after statement of Chairman and Managing Director in relation to the subject matter of purchases being recorded on 21.9.1988. For Assessment Year 1985-86 the assessee, by its very conduct, acted contrary to its own stand of the revised return being voluntary when the assessee itself revised the revised return under letter dated 30.3.1990 by disclosing a further sum of Rs.78 lacs and odd. It is true that mere fact of not challenging the assessment order per se would not be indicative of any acceptance that there was concealment of income, but in the facts of the present case, the said fact of the assessee not having challenged any of the assessment orders for the three years under consideration, assumes significance. This fact on its own, as a solitary factor may not be sufficient but read in conjunction with overall conduct of the assessee would definitely be a pointer to the factum of assessee having indulged in an act of concealment of income in the form of unverifiable purchases.
11. In relation to the second question the submission that the Assessing Officer had categorically found that nothing specific was found for the said two Assessment Years could not be termed to be casual remarks and the Tribunal had erred in observing accordingly, suffice it to state that the said sentence appearing in the assessment orders of the subsequent two years cannot be read in isolation. The learned Counsel may be right to the extent that the choice of language employed by the Tribunal is not happy and the Tribunal has very cursorily and terserely rejected the said contention. But that by itself cannot be of any help to the assessee.
12. The earlier part of the very same paragraph in which the sentence appears on which reliance has been placed by the assessee, indicates that by principle of incorporation findings in relation to the conduct of the assessee as recorded in assessment order for Assessment Year 1985-86 have been made part and parcel of the subsequent assessment orders instead of repeating the same, and therefore it is not possible to accept the contention that nothing adverse had been observed by the Assessing Officer. The said finding has to be appreciated in the context of the fact that the declaration made by the assessee on 20.10.1988 in relation to the first Assessment Year viz. 1985-86 was in exact figures being sum of Rs.54,71,463/-, whereas for the subsequent three assessment years the declaration was in round figures of Rs.18 lacs each. This is also reflected by the figures incorporated in the revised returns for all the three assessment years filed on 14.2.1989. Therefore, when the Assessing Officer observed that nothing specific was found by the Assessing Officer, the same had to be appreciated in the context of the fact that nothing more than what was declared was found when the assessment was framed. The assessee therefore cannot succeed on this count also.
13. The submission on behalf of the assessee that the alternative plea was not considered by the Tribunal when the Appeals were decided and the Misc. Application moved by the assessee was rejected without assigning reasons need not be considered. Admittedly, the Reference Applications were moved by the assessee challenging only the order dated 31.3.1997 and on that day the subsequent order dated 19.9.1997 was nowhere in picture. Therefore, question No.3 cannot be said to cover the said controversy sought to be projected by the learned Counsel. Furthermore, whether an argument was raised and not considered by the Tribunal would primarily turn on facts of the case. Merely because Reference is made to certain pages of the Paperbook and paragraphs of the written submissions in the Miscellaneous Application that by itself would not establish that such an argument was raised at the time of hearing before the Tribunal. However, on this count, the learned Counsel made a statement at the bar that if necessary, he would place the said fact on record by way of an Affidavit. Therefore, one can proceed on the footing that in this case the said argument was raised before the Tribunal. Yet, the fact remains, that the order of Tribunal dated 19.9.1997 has not been challenged. On reading the said order, it is not possible to accept the submission that the said order has merged with order dated 31.3.1997 so as to give rise to the controversy sought to be raised in the present proceedings. Therefore, this aspect of the matter has not been gone into at this stage.
14. In the circumstances, the finding of the Tribunal in relation to each of the three years under consideration cannot be termed to be either legally infirm or one which is not supported by evidence on record. In fact, this is not a case which can be termed to be one on which the two hypothesis : that there is no concealment, or that there is concealment : are equally possible. If that would have been the situation the assessee would have succeeded. To the contrary, the facts and circumstances of the case indicate that the factum of concealment stands established on the facts and circumstance of the case and the evidence on record and it is not possible to accept the case of applicant-assessee.
15. Accordingly, all the three questions are answered in the affirmative i.e. in favour of the revenue and against the assessee. Reference stands disposed of accordingly with no order as to costs.
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