Commissioner Of Income Tax-Iv, Chennai v. M/S. Admirality Hotel, Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 11.09.2007 Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANANDTHE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN Tax Case (Appeal) No.254 of 2004 Commissioner of Income Tax-IV,Chennai. Appellantv. M/s. Admirality Hotel, Chennai. Respondent Tax Case Appeal preferred under section 260A of the Income Tax Act,1961 against the order of the Income Tax Appellate Tribunal dated16.10.2003 in ITA. Nos.1822/Mds/94. Assessment year 1986-87 against theorder of the Commissioner of Income Tax (Appeal) Madras.34. In IT/WT/GTAppeal No.242/91-92 assessment year 1986-87 against the order of theAssistant Commissioner City Circle VI (1) Madras.6. Dated 31.3.86assessment year 1986-87. For Appellant : Mr.J.Narayanasamy, Jr.Standing Counsel For Respondent : Mrs.Anitha Sumanth JUDGMENT(Judgment of the Court was delivered byK.RAVIRAJA PANDIAN, J.) The relevant assessment year is 1986-87. The assessee is anunregistered firm. It filed its return for the above assessment year. Ithad deleted an immovable asset in its balance sheet. On enquiry it wasfound that the assessee had sold the said asset for Rs.6.00 lakhs andthereby concealed the income arising out of the capital gains. Theassessing officer accordingly initiated penal proceedings and leviedpenalty at Rs.2,05,000/- under section 271(1)(c) of the Income Tax Act. Onappeal, the Commissioner of Income Tax (Appeals), while confirming thecorrectness of the imposition of penalty, enhanced the same toRs.4,10,000/- for the reasons stated therein. The assessee took thematter on appeal to the Income Tax Appellate Tribunal. The Tribunalallowed the appeal in favour of the assessee. The correctness of the sameis now put in issue before this Court on the ground that the appellateTribunal has miserably failed to note that the assessee had deleted the https://hcservices.ecourts.gov.in/hcservices/ particulars of the assets from the balance sheet and the submission of theimproper particulars warrants levy of penalty under section 271(1)(c) ofthe Income Tax Act, 1961. 2. Heard the learned counsel on either side and perused the materialsavailable on record. 3. The ultimate fact finding authority in its order has recorded afinding that the property was not conveyed through the registered saledeed. The possession of the property was given to the buyer on thestrength of the power of attorney. Whether the action of the power ofattorney would constitute a legal transfer as per the provisions of theAct was a debatable issue at that point of time. The ownership of theproperty by the assessee was de facto or de jure is also a debatableissue. Of course it was for this purpose section 2(47) of the Income TaxAct, 1961 has defined the word “transfer” with effect from 01.04.1988.The Tribunal further recorded a finding of fact that it could not brushaside the contention of the assessee that the assessee was under the bonafide belief that no transfer took place within the meaning of section 2(47) of the Act during the relevant previous year and therefore there wasno question of computing capital gains for the impugned assessment year.Considering the available materials, the Tribunal has recorded acategorical finding that it could not be said that the addition made inthe assessment on account of capital gains amounted to concealment; norit implied a case of furnishing of inaccurate particulars. Holding so,the Tribunal accepted the possibility of bona fide difference of opinionand has come to the conclusion that the levy of penalty under section 271(1)(c) is unwarranted in this case. 4. It has been held by the Supreme Court in the case of T.Ashok Paiv. CIT (2007) 292 ITR 11 that the word “inaccurate” in the context oflevying penalty under section 271(1)(c) signifies a deliberate omission onthe part of the assessee. Such deliberate omission must be either for thepurpose of concealment of income or furnishing of inaccurate particulars.The assessing officer was required to arrive at a finding that theexplanation offered by the assessee, in the event of he offers one, wasfalse and also record a finding to the effect that the explanation was notonly not bona fide but also the facts relating to the same which arematerial to the income were not disclosed by the assessee. Thus, apartfrom his explanation not being bona fide, it should be found as a factthat he has not disclosed all the facts which were material for thecomputation of his income. The order imposing penalty was quasi criminalin nature and the burden lay on the department to establish that theassesee had concealed his income. Since the burden of proof in penaltyproceedings varies from that in the assessment proceedings, a finding inan assessment proceeding that a particular receipt was income cannotautomatically be adopted, though a finding in the assessment proceedingsconstitutes good evidence in the penalty proceedings. In the penaltyproceedings the authorities must consider the matter afresh as thequestion has to be considered from a different angle. 5. Having regard to the nature of the penal provisions, the Courtfurther held that the more the law is stringent, more strict aconstruction thereof would be necessary. Even when the burden is requiredto be discharged by an assessee, it would not be as heavy as that on theprosecution. 6. The Court further held that the existence of mens rea wasessentially a question of fact. The Appellate Tribunal alone as thehighest authority empowered to determine the question of fact and the HighCourt should not ordinarily disturb the finding of fact. The finding ofthe Appellate Tribunal was not perverse, the High Court ought not to haveinterfered with the finding. 7. Applying the guidelines enunciated in the judgment above referredto the case on hand, as rightly held by the Tribunal, the ingredients offurnishing inaccurate particulars or concealment of income cannot beattributed to the assessee in the given set of facts. We are of the viewthat the Tribunal has given a cogent and categorical reason to arrive atsuch a finding and we find no perversity or irregularity in the order ofthe Tribunal. On the face of the factual finding arrived at by theTribunal and in the light of the judgment referred to above, we are of theview that there is no material to interfere with the decision of theTribunal. The appeal is dismissed. Sd/-Asst. Registrar. /true copy/ Sub Asst. Registrar. To 1. The Assistant Registrar, Income Tax Appellate Tribunal Bench 'C' Rajaji Bhavan, III Floor, Besent Nagar, Chennai.90.2. The Commissioner of Income Tax (Appeal) Madras.34 3. The Assistamt Commissioner City Circle VI (1) Madras.6 4. The Commissioner of Income Tax -IV, Chennai. + 1 cc to Ms.Pushya Sitaraman Advocate SR.NO.56914+ 1 cc to Ms.Dr. Anitha Sumanth Advocate SR.NO.56653 KK(CO)RD 26.9.07 TC(A).No.254 of 2004