Ita/51/2013 Of M/S.manural Huda Trust, Trivandrum v. The Commissioner Of Income Tax, Trivandrum

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY TUESDAY, THE 2ND DAY OF JUNE 2015/12TH JYAISHTA, 1937 ITA.No. 51 of 2013 () ---------------------- AGAINST THE ORDER/JUDGMENT IN ITA 778/Coch/2009 of I.T.A.TRIBUNAL,COCHINBENCH DATED 30-04-2010 APPELLANT(S)/RESPONDENTS/ASSESSEE: ------------------------------------------------------------------ M/S.MANURAL HUDA TRUST, EMKE MANZIL, KALLATTUMUKKU, MANACAUD.P.O TRIVANDRUM, REPRESENTED BY MANAGING TRUSTEE SHRI.SAMIR BIN KAMAL. BY ADVS.SRI.T.M.SREEDHARAN (SR.) SMT.BOBY M.SEKHAR SMT.DIVYA RAVINDRAN SRI.V.P.NARAYANAN RESPONDENT(S)/APPELLANT/REVENUE: ---------------------------------------------------------------- THE COMMISSIONER OF INCOME TAX, TRIVANDRUM-695001. R. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) R. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 28.05.2015, THE COURT ON 02.06.2015 DELIVERED THE FOLLOWING: APPENDIX IN ITA.51/13 APPELLANTS' EXHIBITS: ANNEXURE A: TRUE COPY OF ASSESSMENT ORDER DATED 28.12.2006 PASSED BYTHE ASESSING OFFICER FOR THE A.Y.2004-05.THE ASESSING OFFICER FOR THE A.Y.2004-05. ANNEXURE B: TRUE COPY OF THE ORDER IN ITA.NO.190T/06-07 DATED 18.7.2007PASSED BY THE CIT(A).PASSED BY THE CIT(A). ANNEXURE C: TRUE COPY OF THE ORDER IMPOSING PENALTY PASED BY THEASSISTANT DIRECTOR OF INCOME TAX (EXEMPTION), TRIVANDRUM DATED24.1.2008.ASSISTANT DIRECTOR OF INCOME TAX (EXEMPTION), TRIVANDRUM DATED24.1.2008. ANNEXURE D: TRUE COPY OF THE ORDER DATED 21.2.2008 IN ITA NO.142T/07-08PASSED BY THE CIT(A) -1 TRIVANDRUM.PASSED BY THE CIT(A) -1 TRIVANDRUM. ANNEXURE E: TRUE COPY OF THE ORDER DATED 30.4.2010 IN ITA NO.778/COCH/08PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH.PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. TRUE COPY PS TO JUDGE C.R. ANTONY DOMINIC & SHAJI P. CHALY, JJ.-----------------------------------I.T.A.No.51 of 2013 ----------------------------------- Dated this the 2[nd] day of June, 2015 JUDGMENT Antony Dominic, J. 1.This appeal is filed against the order of the IncomeTaxAppellateTribunal,CochinBenchinITA.778/Coch/2009. TaxAppellateTribunal,CochinBenchinITA.778/Coch/2009. 2.The appellant is a trust registered under section12AA of the Income Tax Act. A survey under section133A was conducted in one of the establishments ofthe appellant, Al-Arif Hospital, Ambalathara,Trivandrum, on 12.12.2005 and some books of accountswere impounded. Subsequently, the assessee filed itsreturn for the year 2004-05 on 31.3.2006, showing adeficit of `1,89,38,383/-. Later, on 24.11.2006,summons was issued requisitioning some other books ofaccounts and finally, on 28.12.2006, Annexure Aassessment order under section 144 was passed, makingadditions of `12,51,427/- towards short collection atthe hospital. Further, though the assessee hadclaimed deduction on account of capital expenditureat `1,84,39,383/-, the Assessing Officer allowed only`68,02,297/-. ITA.51/13 3.In the appeal filed, the Commissioner of Income Tax(Appeals), after verification of the documentsproduced, sustained capital expenses, except to theextent of `34.65 lakhs. The addition towards shortcollection at the hospital was upheld. There was nofurther challenge against the assessment proceedingsand accordingly, the order has become final.(Appeals), after verification of the documentsproduced, sustained capital expenses, except to theextent of `34.65 lakhs. The addition towards shortcollection at the hospital was upheld. There was nofurther challenge against the assessment proceedingsand accordingly, the order has become final. ITA.51/13 3.In the appeal filed, the Commissioner of Income Tax(Appeals), after verification of the documentsproduced, sustained capital expenses, except to theextent of `34.65 lakhs. The addition towards shortcollection at the hospital was upheld. There was nofurther challenge against the assessment proceedingsand accordingly, the order has become final.(Appeals), after verification of the documentsproduced, sustained capital expenses, except to theextent of `34.65 lakhs. The addition towards shortcollection at the hospital was upheld. There was nofurther challenge against the assessment proceedingsand accordingly, the order has become final. 4.The Assessing Officer, thereafter, initiatedproceedings under section 271(1)(c) and issued noticefor the levy of penalty. Finally, penalty of`16 lakhs as against the minimum leviable penalty of`15.56 lakhs was levied. In the appeal filed by theassessee, the Appellate Commissioner set aside theorder of penalty. This order was challenged by theRevenue before the Income Tax Appellate Tribunal,which, by Annexure E order, allowed the appeal andrestored the order of the Assessing Officer. It isthis order which is under challenge before us.proceedings under section 271(1)(c) and issued noticefor the levy of penalty. Finally, penalty of`16 lakhs as against the minimum leviable penalty of`15.56 lakhs was levied. In the appeal filed by theassessee, the Appellate Commissioner set aside theorder of penalty. This order was challenged by theRevenue before the Income Tax Appellate Tribunal,which, by Annexure E order, allowed the appeal andrestored the order of the Assessing Officer. It isthis order which is under challenge before us. 5.We heard learned senior counsel for the appellant andthe learned senior standing counsel for the Revenueand have considered the submissions made.the learned senior standing counsel for the Revenueand have considered the submissions made. ITA.51/13 6.Section 271(1)(c) of the IT Act, in so far as it isrelevant, provides that in the course of anyproceedings under this Act, if the Assessing Officeris satisfied that any person has concealed theparticulars of his income or furnished inaccurateparticulars of such income, he may direct that suchperson shall, in addition to tax, if any, payable byhim, pay by way of penalty a sum which shall not beless than, but which shall not exceed three times theamount of tax sought to be evaded by reason of theconcealment of particulars of his income or thefurnishing of inaccurate particulars of such income.Explanation 1 to this section, in so far as it isrelevant for the purpose of this judgment, providesthat where in respect of any facts material to thecomputation of the total income of any person underthis Act, such person offers an explanation which heis not able to substantiate and fails to prove thatsuch explanation is bona fide and that all the factsrelating to the same and material to the computationof his total income have been disclosed by him, then,the amount added or disallowed in computing the totalincome of such person as a result thereof shall, for ITA.51/13 the purpose of section 271(1)(c), be deemed torepresent the income in respect of which particularshave been concealed. Evidently therefore, section271(1)(c) is attracted in a case where the AssessingOfficer is satisfied that any person has concealedthe particulars of his income or has furnishedincorrect particulars of such income. Once theAssessing Officer has arrived at such a satisfaction,he is entitled to levy, in addition to the taxpayable, by way of penalty, the amount indicated in271 (1)(iii). In addition to this, as provided inthe explanation, if the person concerned is not ableto substantiate the explanation and fails to provethe bona fides of the explanation and all factsrelating to the same and material to the computationof his total income, the amount added or disallowedshall be deemed to be his income. 7.It is in the background of this statutory provisionthat this Court has to examine whether the Tribunalwas right in upholding the order of penalty that waspassed by the Assessing Officer in exercise of hispowers under section 271(1)(c) of the IT Act.that this Court has to examine whether the Tribunalwas right in upholding the order of penalty that waspassed by the Assessing Officer in exercise of hispowers under section 271(1)(c) of the IT Act. ITA.51/13 8. Admittedly, as per the Profit & Loss Account of the assessee, the collection of Al-Arif Hospital was `70,83,991/-. The account books impounded at the time of survey revealed total collection of`83,35,418/-. Evidently therefore, the assessee hadnotaccountedthedifferential amountof`12,51,427/-. This finding has been upheld by theappellate authority also and has attained finality. 9.The assessee had also claimed deduction of `1,84,39,383/-. The Assessing Officer allowed only `68,02,297/-. The Commissioner (Appeals), afterverification of some of the documents produced by theassessee, allowed the claim except to the extent of`34.65 lakhs. This finding also has become final.Therefore, in view of the aforesaid findings againstthe assessee, this is a case where clause (c) ofsection 271(1) providing concealment of theparticulars of income or furnishing of inaccurateparticulars of such income is attracted. ITA.51/13 10.The only explanation offered by the assessee wasthat its books of accounts for the relevant year wereimpounded by the Revenue and therefore, the correctfigures of income could not be furnished as per itsreturn of income. They also contended that onaccount of the impounding of the books, theiraccounts could not be audited and that therefore,there was no intentional omission on their part.However, this explanation was rightly rejected by theAssessing Officer pointing out that it was theassessee's duty to get its accounts audited and thetime for which had expired long before the survey.The Assessing Officer has further found that if atall there is any truth in the contention of theassessee, they could have applied for copies ofextracts of the records impounded which was not doneby the assessee. 11.In the aforesaid circumstances, this clearly is acase to which section 271(1)(c) is attracted and thelevy of penalty cannot be interfered with. case to which section 271(1)(c) is attracted and thelevy of penalty cannot be interfered with. 12.Counsel for the appellant relied on the judgment ofthe Apex Court in Hindustan Steel Ltd.v. State ofOrissa[(1972) 83 ITR 26] to contend that penaltywill not ordinarily be imposed unless the partyobliged, either acted deliberately in defiance of lawor was guilty of conduct contumacious or dishonest oracted in conscious disregard of its obligation.However, as rightly pointed out by the learned seniorcounsel appearing for the Revenue, the Apex Courtitself had clarified in its judgment in Chairman,SEBIv. Shriram Mutual Fund[(2006) 5 SCC 361] thatthe said judgment being rendered in the context of aquasi criminal proceedings, the principles laid downtherein cannot be relied on in a proceedings forimposition of civil liabilities. Our attention wasalso invited to the judgment of the Apex Court inUnion of Indiav. Dharmendra Textiles Processors[(2008) 306 ITR 277] to contend that willfulconcealment is not essential for attracting civilliability of penalty under section 271(1)(c). 13. Counsel for the appellant sought to rely on thejudgment of the Apex Court in Commissioner of Incomejudgment of the Apex Court in Commissioner of Income 13. Counsel for the appellant sought to rely on thejudgment of the Apex Court in Commissioner of Incomejudgment of the Apex Court in Commissioner of Income Taxv. Reliance Petro Products Pvt. Ltd[(2010) 322ITR 158] to contend that the fact that a return isfiled with incorrect particulars did not attract theprovisions of section 271(1)(c). Though thisprinciple is not open to doubt, we cannot ignore thefact that the above judgment was rendered in a casewhere the assessee had made an incorrect claim in thereturn on the basis of which proceedings undersection 271(1)(c) was initiated. It was in thatcontext, the Apex Court said that furnishing ofinaccurate particulars of the income of the assesseein the return filed did not attract the provision.This judgment, in our view, cannot have any relevanceto the facts of this case. 14.Counsel for the appellant also placed reliance onthe judgment in Price Waterhouse Coopers Pvt. Ltd.v.Commissioner of Income Tax[(2012) 348 ITR 306].That was a case where the assessee had committed amistake and has rightly held section 271(1)(c) waswrongly invoked. ITA.51/13 15.As we have already stated, this is a case wherefactually and legally all the ingredients of section271(1)(c) are made out. Such being the case, we areunable to accept the case of the appellant that theTribunal committed an illegality in restoring theorder of the Assessing Officer. Appeal fails. It is accordingly dismissed. Sd/- ANTONY DOMINIC, Judge. Sd/- SHAJI P. CHALY, Judge. kkb. /True copy/ PS to Judge