Itta/565/2013 Of Commissioner Of Income Tax Ii v. Shri N.laxman Rao

IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR INCOME TAX TRIBUNAL APPEAL NO.565 OF 2013 DATED:20.11.2013 Between: Commissioner of Income Tax-IIHyderabad … Appellant And N. Laxman Raoand others … Respondents THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTISENGUPTA ANDTHE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.565 OF 2013 JUDGMENT:(per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be preferred against the judgment andorder of the Tribunal, dt.28.8.2009, in relation to assessment year2002-2003 and is sought to be admitted on the following suggestedquestions of law: (A)“Whether on the facts and in the circumstances of the case,the Appellate Tribunal is justified in setting aside thepenalty imposed under Section 271(1)(c) of the Income TaxAct?the Appellate Tribunal is justified in setting aside thepenalty imposed under Section 271(1)(c) of the Income TaxAct? (B)Whether the Appellate Tribunal is justified in placingburden of establishing, on the revenue, by conclusiveevidence that there has been conscious concealment ofincome by the assessee for the purpose of imposingpenalty under Section 271(1)(c) of the Income Tax Act,overlooking explanation 1 to Section 271(1)(c) of theIncome Tax Act?burden of establishing, on the revenue, by conclusiveevidence that there has been conscious concealment ofincome by the assessee for the purpose of imposingpenalty under Section 271(1)(c) of the Income Tax Act,overlooking explanation 1 to Section 271(1)(c) of theIncome Tax Act? (C)Whether the finding of the Appellate Tribunal that therewas no fraud or gross or wilful neglect to return the correctincome by the assessee can be said to be based onmaterial on record?”was no fraud or gross or wilful neglect to return the correctincome by the assessee can be said to be based onmaterial on record?” 2. Learned counsel for the appellant submits that the learnedTribunal has ignored the explanation 1 to Section 271(1)(c) of theIncome Tax Act (for short, ‘the Act’). Had the aforesaid provision beenapplied, the penalty proceedings would have been justified. 3. We are unable to accept the contention of the learned counselfor the appellant. The explanation 1 to Section 271(1)(c) of the Act,for the appellant. The explanation 1 to Section 271(1)(c) of the Act, “Explanation 1.- Where in respect of any facts material to thecomputation of the total income of any person under this Act,- (A)such person fails to offer an explanation or offers anexplanation which is found by the Assessing Officer orthe Commissioner (Appeals) or the Commissioner to befalse, or (B)such person offers an explanation which he is notable to substantiate and fails to prove that suchexplanation is bona fide and that all the facts relating tothe same and material to the computation of his totalincome have been disclosed by him, then, the amount added or disallowed in computing the total incomeof such person as a result thereof shall, for the purposes of clause (c)of this sub-section be deemed to represent the income in respect ofwhich particulars have been concealed.” 4. On a plain reading of the aforesaid explanation, it appears that ifthe assessee offers an explanation, which he is not able tosubstantiate and fails to prove such explanation is bona fide, thenpenalty proceedings would have been justified. Here the learnedTribunal on fact found as follows: (B)such person offers an explanation which he is notable to substantiate and fails to prove that suchexplanation is bona fide and that all the facts relating tothe same and material to the computation of his totalincome have been disclosed by him, then, the amount added or disallowed in computing the total incomeof such person as a result thereof shall, for the purposes of clause (c)of this sub-section be deemed to represent the income in respect ofwhich particulars have been concealed.” 4. On a plain reading of the aforesaid explanation, it appears that ifthe assessee offers an explanation, which he is not able tosubstantiate and fails to prove such explanation is bona fide, thenpenalty proceedings would have been justified. Here the learnedTribunal on fact found as follows: “Adverting to the fact of the case, there is no evidence available withthe department which could show conclusively said the assessee had, infact, concealed the income and assessee having furnished inaccurateparticulars of income. Therefore, in any case, the addition has been madebecause the explanation has not been found satisfactory. B u t suchexplanation could not be considered as false or mala fide. Moreover, inour opinion, an addition has been made on estimate basis only by assuminga portion of deposits made in the bank accounts of the assessee as incomeof the assessee. The fact of the concealment of income or furnishinginaccurate particulars of income has not been proved conclusively.” (emphasis supplied) 5. In view of the aforesaid fact finding, we are to conclude that thepre-conditions mentioned in Section 271 of the Act for initiating penaltyproceedings are not satisfied. Moreover, we are of the view that whenincome is estimated by the revenue officials, there is no scope for concealment of income or furnishing of any inaccurate particulars, forwhatever particulars furnished, are deemed to have been accepted bythe revenue officials and thereafter estimate has been made, and insuch circumstances where is the scope for concealment of income orfurnishing of inaccurate particulars? 6. In view of the aforesaid discussion, we dismiss the appeal. There will be no order as to costs. ________________________ K.J. SENGUPTA, CJ ______________________ SANJAY KUMAR, J 20.11.2013 bnr