M/S Sethi Industries Corporation v. Deputy Commissioner Of Income Tax

ITA No. 69 of 2009 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 69 of 2009 Date of Decision: 6.4.2011 M/s Sethi Industries Corporation Versus Deputy Commissioner of Income Tax ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Aveneesh Jhingan, Advocate for the appellant. Ms. Urvashi Dhugga, Senior Standing Counsel,for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 28.3.2007 passed by the Income Tax AppellateTribunal, Delhi Bench, New Delhi (hereinafter referred to as “theTribunal”) in ITA No. 31/D/2004, relating to the assessment year 1999-2000, claiming the following substantial questions of law:- “(i)Whether in the facts and circumstances of the casewhen deduction itself was disputed that in which yearthe deduction was allowable the penalty u/s 271(1)(c)could be levied and upheld?when deduction itself was disputed that in which yearthe deduction was allowable the penalty u/s 271(1)(c)could be levied and upheld? (ii)Whether in the facts and circumstances of the case penalty can be imposed for claiming the deduction inAY 1999-2000 when the department itself was of theview that the deduction is not allowable in AY 1998-99?” 2.The facts, in brief, necessary for disposal of the appeal arethat the assessee is manufacturer of auto parts and supplier to MarutiUdyog Ltd. It filed its return of income for the assessment year 1998-99on 29.10.1998 declaring an income of Rs.1,46,140/-. The said returnwas revised on 21.10.1999 declaring loss of Rs.8,53,860/- on accountof receipt of debit notes amounting to Rs.10,00,000/- from the MarutiUdyog Limited. The assessment order was passed on 27.3.2001accepting the loss of Rs.6,35,767/- after allowing the claim ofRs.10,00,000/-. The assessee for the year 1999-2000 filed return ofincome on 16.12.1999 declaring net loss of Rs.5,94,541/-. Here, theassessee had again claimed loss amounting to Rs.10,00,000/- onaccount of debit note received from Maruti Udyog Ltd. The assessmentwas completed by the Assessing Officer on 21.3.2002 disallowing theloss of Rs.10,00,000/- on the ground that the assessee had alreadyavailed of the said loss in the assessment year 1998-99. TheAssessing Officer also imposed penalty of Rs.3,50,000/- upon theassessee under Section 271(1)(c) of the Act vide order dated 24.9.2002for concealment of income and furnishing inaccurate particulars. Theassessee filed an appeal before the Commissioner of Income Tax(Appeals) [in short “the CIT(A)]” against the levy of penalty by theAssessing Officer. In the meantime, the Commissioner of Income Tax(CIT) vide order dated 26.12.2002 initiated proceedings under Section 263 of the Act for the assessment year 1998-99 on the ground that lossof Rs.10,00,000/- had been wrongly allowed as the same was notwritten off in the books of account for the said year. The CIT(A) videorder dated 20.11.2003 dismissed the appeal of the assessee againstlevy of penalty. Feeling aggrieved, the assessee filed appeals againstthe orders dated 20.11.2003 and 26.12.2002 before the Tribunal. Therevenue also filed appeal against the order of the CIT(A) deleting theaddition of Rs.10,00,000/- made by the Assessing Officer in theconsequential proceedings taken in pursuance to the order of the CITdated 26.12.2002 under Section 263 of the Act. The Tribunal vide orderdated 25.3.2007 allowed the appeal of the assessee and set aside theorder of the CIT passed under Section 263 of the Act and restored thatof the Assessing Officer dated 27.3.2001 allowing deduction ofRs.10,00,000/- from income relating to the assessment year 1998-99.The appeal of the revenue against the order deleting the addition wasdismissed as the order under Section 263 of the Act was set aside andit was held that the consequential proceedings thereto have becomeinfructuous. However, the order imposing penalty under Section 271(1)(c) of the Act was upheld by the Tribunal. Hence, the present appeal bythe assessee. 3.We have heard learned counsel for the parties. 4.The point in issue is whether the penalty imposed underSection 271(1)(c) of the Act by the Assessing Officer and sustained bythe Tribunal was justified. 5.It is not in dispute that the assessee had filed the originalreturn for the assessment year 1998-99 on 29.10.1998 which was ITA No. 69 of 2009-4- revised claiming a loss of Rs.10,00,000/-on account of debit notesissued by the Maruti Udyog Limited on 21.10.1999. The assessee forthe next assessment year 1999-2000 filed return on 16.12.1999 inwhich it had again claimed loss of Rs.10,00,000/- which had alreadybeen claimed for the assessment year 1998-99. Thus, the assesseehad claimed loss of Rs.10,00,000/- twice over i.e. one in the return filedfor the assessment year 1998-99 and second time in the return filed forthe assessment year 1999-2000. The Tribunal while upholding thepenalty under Section 271(1)(c) of the Act had recorded that theExplanation furnished by the assessee was not bonafide and theassessee was unable to substantiate its version. The findings recordread as under:- “16.1 The question now is – whether the assesseefurnished inaccurate particulars of income? Section271(1)(c), Explanation I, provides that where inrespect of any facts material to the computation ofthe 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 Officerto be false or (B) such person offers an explanationwhich he is not able to substantiate and fails to provethat such explanation is bonafide and that all thefacts relating to the same and material to thecomputation of his total income have been disclosedby him, then, the amount added or disallowed incomputing the total income of such person as a result thereof shall, for the purpose of clause (c) of this subsection, be deemed to represent the income inrespect of which particulars have been concealed. thereof shall, for the purpose of clause (c) of this subsection, be deemed to represent the income inrespect of which particulars have been concealed. 16.2 Explanation I, enacts a rule of evidence underwhich initial onus of offering explanation about anysum added to the income is placed on the assessee.There could be two situations, namely, that theexplanation is offered or the explanation is notoffered. In this case, the explanation has beenoffered by the assessee. Clause (B) of theExplanation further requires that the explanation is tobe substantiated by the assessee and if he fails tosubstantiate the explanation as bonafide show andthat all facts relating to the same and material tocomputation of income have been disclosed, then,the case would get covered squarely under theExplanation. It was the explanation that the amountwas claimed in assessment year 1998-99 on legaladvice. There is no evidence to that effect on record.It was also explained that claim in this year wasmerely a clerical mistake. It has been held that thisexplanation is not bonafide because the assesseecould not have forgotten that this very amount wasclaimed in the return for assessment year 1998-99less than two months ago. The claim was a very bigamount and it materially altered its income. Therefore, we are of the view that the explanation isnot bonafide. It has also been pointed out that nomention whatsoever was made in the return aboutthe material fact that this very amount had also beenclaimed in assessment year 1998-99. Thus, all theingredients of clause (B) are satisfied and, therefore,in terms of Explanation I, the impugned amount hasto be deemed to represent the income in respect ofwhich in accurate particulars have been furnished.16.3 Having considered the assessee's explanation,we are of the view that the default committed by theassessee is not a technical or venial default, assubstantial tax is involved. There is no doubt that theassessee had claimed the same amount twice over,second time in this year. Having claimed the amountin assessment year 1998-99, there was no reason forthe assessee to claim the same amount in this yearagain. The default of the assessee has beenconsidered separately in penalty proceedings by theAssessing Officer and the learned CIT(A). It is nodoubt true that the levy of penalty is not mandatory.However, when same claim is made twice overwithout disclosing material facts at the time of makingthe claim for the second time, it becomes obligatoryfor the authorities under that Act to examine whetherthe facts of the case called for imposition of penalty. We are of the view that the instant case has beenconsidered by both the lower authorities in the rightperspective and, therefore, the penalty was rightlylevied and upheld respectively by them. Thus, we donot find any reason to interfere with the order of thelearned CIT(A).” 6.The Tribunal had concluded that the assessee hadfurnished inaccurate particulars of income and the same had been donedeliberately. No illegality or perversity could be pointed out by thelearned counsel for the assessee except an attempt was made topersuade this Court to reappreciate the material on record, which is notpermissible. The levy of penalty under Section 271(1)(c) of the Act had,thus, rightly been sustained. 7.Accordingly, the questions of law are answered against theassessee and in favour of the revenue. The appeal stands dismissed. (AJAY KUMAR MITTAL) JUDGE April 6, 2011gbs (ADARSH KUMAR GOEL) JUDGE