M/S. Vsb Investment Pvt. Ltd v. Commissioner Of Income Taxfaridabad

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 860 of 2010Date of decision: 29.3.2011 M/s. VSB Investment Pvt. Ltd.through its Director Manoj Sharma --- Appellant Versus Commissioner of Income TaxFaridabad --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. S.K. Mukhi, Advocatefor appellant-assessee. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961(for short “the Act”) has been filed by the assessee against the orderdated 11.6.2010, passed by the Income Tax Appellate Tribunal DelhiBench ‘H’, New Delhi (in short “the Tribunal”) in ITA No. 3741/DEL/2009,relating to the assessment year 2005-06. 2.The following substantial questions of law have been claimed for determination of this Court: “ (a) Whether on the facts and in the circumstances of the case,Hon’ble Tribunal has erred in law in setting aside the order ofHon’ble Tribunal has erred in law in setting aside the order of CIT(A) and confirming the levy of penalty of Rs. 3,14,478/-under Section 271(1)(c)?under Section 271(1)(c)? (b) Whether on the facts and in the circumstances of the case,Hon’ble Tribunal has erred in law in not following the decisionof the Hon’ble Supreme Court in the case of CIT vs. ReliancePetro-products Pvt. Ltd. 322 ITR 158?Hon’ble Tribunal has erred in law in not following the decisionof the Hon’ble Supreme Court in the case of CIT vs. ReliancePetro-products Pvt. Ltd. 322 ITR 158? (c) Whether the Tribunal erred in applying Explanation 1(B) ofSection 271(1)(c) in respect of charge of furnishing inaccurateparticulars of income, contrary to express language of lawcontained in this regard?Section 271(1)(c) in respect of charge of furnishing inaccurateparticulars of income, contrary to express language of lawcontained in this regard? (d) Whether the order passed by Hon’ble Tribunal is perverse asit has not appreciated that the assessee had disclosed all thefacts relating to and material to the computation of incomeand, therefore, Explanation 1 to Section 271(1)(c) is notapplicable?it has not appreciated that the assessee had disclosed all thefacts relating to and material to the computation of incomeand, therefore, Explanation 1 to Section 271(1)(c) is notapplicable? 3. The facts, in brief, necessary for adjudication as narrated inthe appeal, are that the appellant-assessee is engaged in the business ofpurchase and sale of shares. The assessee filed return for theassessment year 2005-06 at the income of Rs. 68,27,290/-. According tothe assessee, it suffered a loss of Rs. 8,59,817/- on the sale of shares. Inassessment proceedings under Section 143(3) of the Act, the assessingofficer made disallowance of the aforesaid amount under the provisions ofSection 94(7) of the Act and accordingly, assessed the income of theassessee at Rs. 76,87,110/-. Proceedings under Section 271(1) (c) of theAct for imposing penalty were also initiated and the reply submitted onbehalf of the assessee to the notice issued in that behalf having beenfound not satisfactory, the assessing officer observed that it was a case of concealment. The assessing officer, thus, imposed a penalty of Rs.3,14,478/- by order dated 30.5.2008, which, was however, deleted by theCommissioner of Income-tax (Appeals) [in short “CIT(A)”] vide orderdated 10.7.2009 passed in the appeal preferred by the assessee. 4.The Revenue preferred appeal before the Tribunal. TheTribunal accepted the appeal and reversed the order of the CIT(A) andrestored that of the assessing officer, by the order appealed against. 5.We have heard learned counsel for the appellant-assesseeand perused the record. concealment. The assessing officer, thus, imposed a penalty of Rs.3,14,478/- by order dated 30.5.2008, which, was however, deleted by theCommissioner of Income-tax (Appeals) [in short “CIT(A)”] vide orderdated 10.7.2009 passed in the appeal preferred by the assessee. 4.The Revenue preferred appeal before the Tribunal. TheTribunal accepted the appeal and reversed the order of the CIT(A) andrestored that of the assessing officer, by the order appealed against. 5.We have heard learned counsel for the appellant-assesseeand perused the record. 6. Learned counsel for the assessee submitted that in thecourse of huge and voluminous transactions of sale of shares, a loss ofRs. 8,59,817/- disallowed under the provisions of Section 94(7) of the Act,could not have been taken as concealed income of the assessee, moreso, when the assessee of its own, during the assessment proceedings,had surrendered the above amount subject to the condition of imposingno penalty and the calculation so made was even accepted by theAssessing Officer. Learned counsel in support of his submission placedreliance on a judgment of the Supreme Court in Commissioner of IncomeTax vs. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158. 7.The only point for consideration before this Court is, whetherthe assessing officer was justified in imposing the penalty of Rs.3,14,478/- under Section 271(1)(c) of the Act, on the ground that theassessee had not complied with the provisions of Section 94(7) of the Actwhile furnishing its return of income. 8. As noticed earlier, the penalty imposed by the assessingofficer was deleted by the CIT(A) but this deletion was not accepted bythe Tribunal and accordingly, while accepting the appeal of the Revenue, the order of the CIT(A) was set aside and that of the Assessing Officerrestored. It would in the first instance be advantageous to notice as tohow the Tribunal upset the order of the CIT(A) and sustained the order ofthe Assessing Officer imposing penalty under Section 271(1)(c) of the Act. 9.The Tribunal on analysis of the matter observed that it couldnot be said that the assessee was not aware of the provisions of Section94(7) of the Act. It was noticed that the assessee-company had beenavailing the services of a Chartered Accountant and in spite of that noreply was filed by the assessee on the issue why the provisions of Section94(7) had not been complied with while working out the income shown inthe income tax return. The Tribunal made reference to Explanation-1 toSection 271(1)(c) of the Act which envisaged that if the assessee fails tooffer explanation in respect of any material fact relevant for computationof total income of the assessee, the amount added or disallowed incomputing the income of such assessee as a result thereof, shall beconsidered as income deemed to represent the income in respect ofwhich particulars have been concealed for the purpose of imposition ofpenalty under Section 271(1)(c) of the Act. The aforesaid Explanationfurther provides that even if any explanation was furnished by theassessee and the same was found to be false by the assessing officer,then also, the assessee is required to either substantiate suchexplanation or to prove that the same is bona fide and all the facts relatingto the same and material to the computation of total income have beendisclosed by him. The Tribunal while embarking on the above issueobserved that in the instant case the facts relating to disallowance of lossas per the provisions of sub-section (7) of Section 94 of the Act were notdisclosed by the assessee in the return filed, and even if some explanation was offered by the assessee, the same was not bona fidebecause no reason had been given by the assessee for not makingdisallowance under Section 94(7) of the Act. The Tribunal, thus, observedthat for this reason as well, the assessee has to be blamed for non-disclosure of the facts relating to the same and the material to thecomputation of total income. The Tribunal, thus, after elaboratelydiscussing the issue observed that the Explanation-1 to Section 271(1)(c)of the Act was directly applicable and the penalty was rightly imposed bythe Assessing Officer. While holding so, the other reason for disagreeingby the Tribunal with the observations of the CIT(A) on the basis of whichthe penalty was deleted, mentioned in its order was that no material hadbeen brought on record in its order by the learned CIT(A) or by theassessee during the course of hearing before them to show that therewas any difference of opinion in that behalf. 10.A perusal of the order of the Tribunal, especially theobservations contained in para 9 thereof, shows that in the opinion of theTribunal, the judicial enunciations relied upon by the CIT(A) for deletingthe penalty, were not applicable to the resolution of the controversy inhand and were clearly distinguishable on facts, and it was a clear case ofnon-compliance of Explanation-1 to Section 271(1)(c) of the Act. 11. No perversity or illegality could be pointed out by the learnedcounsel for the assessee in the findings recorded by the Tribunal that maypersuade this Court to interfere therewith. 12. Referring to the judgment in Reliance Petroproducts (P) Ltd’scase (supra) relied upon by the learned counsel for the appellant, sufficeit to notice that the said case was not dealing with Explanation 1 toSection 271(1)(c) of the Act which is applicable in the present case and, therefore, it does not come to its rescue for the reason that the facts inthe said judgment and that of the case in hand are noticeably differentand have no application to the controversy directly in issue here. 13..In view of the above, the substantial questions of law asclaimed do not arise and there being no merit in the appeal, the same isdismissed. (AJAY KUMAR MITTAL) JUDGE March 29, 2011*rkmalik* (ADARSH KUMAR GOEL) JUDGE