Commissioner Of Income Tax I, Ludhiana v. M/S Sidhartha Enterprises, Ludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. ITA No.908 of 2008 (O&M)Date of decision: 14.7.2009 Commissioner of Income Tax I, Ludhiana Vs. M/s Sidhartha Enterprises, Ludhiana -----Appellant Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:-Mr. Rajesh Sethi, Sr.Standing Counsel for the revenue.None for the assessee. Adarsh Kumar Goel,J. 1.The revenue has preferred this appeal under section260-A of the Income Tax Act, 1961 (in short, ‘the Act’) against theorder of the Income Tax Appellate Tribunal, Chandigarh, passed inITA No.136/CHD/2008 dated 30.5.2008, for the assessment year2005-06, proposing to raise following substantial questions of law,for opinion of this Court:- (i)Whether on the facts and in law, the Hon’bleIncome Tax Appellate Tribunal was justified inlaw in dismissing the appeal of the departmentby deleting the penalty under section 271(1)(c)imposed by the Assessing Officer ‘for furnishing inaccurate particulars of income’ asin view of provisions of section 50 and 71(3) ofthe Income Tax Act, 1961 loss on sale ofmachinery being capital loss could not be setoff against any other head of income? (ii)Whether on the facts and in the circumstancesof the case, the Hon’ble ITAT was justified inlaw in giving a finding that the mistake hasbeen committed by the counsel and that therewas no scope for concealing any income orfurnishing of inaccurate particulars ofincome?” 2. The assessee in its return claimed set off on account of capital loss against profits of business, which was disallowed andpenalty proceedings were initiated. Finally, penalty was imposedfor ‘furnishing inaccurate particulars’. The CIT(A) deleted thepenalty holding that set off was claimed by counsel’s negligencewhich view was upheld by the Tribunal. The Tribunal observed asunder:- “8. We have given our careful consideration to therival contentions. Whether the assessee hasconcealed the income or furnished inaccurateparticulars of income depends on the facts andcircumstances of each case. In this case, theassessee has suffered a loss on the sale of machinery which has been disclosed in thestatement of accounts filed alongwith the return.There is no allegation about the incorrectness ofloss on the sale of machinery. The mistakecommitted by the counsel for assessee is that theloss suffered on the sale of machinery has beenadjusted against the profits of business. Whetherthe loss on sale of machinery is adjustable againstthe profits of business or not has got to bedetermined with reference to the provisions of theAct. The Assessing Officer has found that the losssuffered on sale of machinery is not allowable tobe set off against the profits of business. He hasconfronted the assessee and the assessee onrealizing the mistake committed by the counsel,has accepted the decision of the Assessing Officerin disallowing the loss. In our considered view,the facts and circumstances of this case do notjustify an inference that the assessee hasconcealed the income or furnished inaccurateparticulars of income. The mistake has beencommitted by the counsel of the assessee and theentire facts had been disclosed by the assessee inthe documents filed alongwith the return. Therewas no scope for concealing any income orfurnishing of inaccurate particulars of income.” We have heard learned counsel for the revenue. 4.Learned counsel for the revenue submits that even ifclaim of set-off of capital loss against profits of business was bynegligence or mistake, the fact remains that the particulars ofincome furnished were not correct and willful concealment notbeing an essential requirement for levy of penalty under section271(1)( c) of the Act, as held by the Hon’ble Supreme Court inUnion of India v. Dharmendra Textile Processors, (2008) 306ITR 277, the penalty could not be deleted. We have heard learned counsel for the revenue. 4.Learned counsel for the revenue submits that even ifclaim of set-off of capital loss against profits of business was bynegligence or mistake, the fact remains that the particulars ofincome furnished were not correct and willful concealment notbeing an essential requirement for levy of penalty under section271(1)( c) of the Act, as held by the Hon’ble Supreme Court inUnion of India v. Dharmendra Textile Processors, (2008) 306ITR 277, the penalty could not be deleted. 5.We are unable to accept the submission. The judgmentof the Hon’ble Supreme Court in Dharmendra Textile(supra)cannot be read as laying down that in every case where particularsof income are inaccurate, penalty must follow. What has been laiddown is that qualitative difference between criminal liability undersection 276C and penalty under section 271(1) ( c) had to be keptin mind and approach adopted to the trial of a criminal case neednot be adopted while considering the levy of penalty. Even so,concept of penalty has not undergone change by virtue of the saidjudgment. Penalty is imposed only when there is some element ofdeliberate default and not a mere mistake. This being the position,the finding having been recorded on facts that the furnishing ofinaccurate particulars was simply a mistake and not a deliberate attempt to evade tax, the view taken by the Tribunal cannot be held to be perverse. 6.Substantial questions of law proposed in the appeal do not, thus, arise for consideration. 7.The appeal is dismissed. (Adarsh Kumar Goel)Judge July 14, 2009‘gs’ (Daya Chaudhary)Judge