M/S.rajarajan Electrical Equipments P.ltd. Aif v. The Deputy Commissioner Of Income-Tax, Co, Circle V(3), Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 23.2.2006 CORAM: THE HONOURABLE MR.JUSTICE P.D.DINAKARANandTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA T.C.No.44 of 2003 M/s.Rajarajan ElectricalEquipments P.Ltd.AIF.4, Industrial Estate,Maraimalai Nagar,Chennai 603 209,rep. By its Managing Director,Mr.X.Durairaj. ...Appellantvs. The Deputy Commissioner of Income-tax,CO, Circle V(3),Chennai. ...Respondent T.C.Appeal filed against the order dated 8.11.2002 inITA.No.698/Mds/2002 on the file of Income-tax Appellate Tribunal, C-Bench, Chennai (I.T.A. No.730/2001-2002 dated 5.3.2002 on the fileof the Commissioner of Income Tax (Appeals) V, Chennai-34 againstG.I.No.143-R/98-99 dated 25.9.2001 on the file of the DeputyCommissioner of Income Tax - Company Circle V (3) Chennai againstG.I.R.No.143-R dated 26.3.2001 on the file of the DeputyCommissioner of Income - Tax, Company Circle IV (5) Chennai-6.) For appellant ::Mr.M.Aravind SubramaniamFor respondent::Mrs.Pushya Sitaraman, Sr.SC. For IT.JUDGMENT (Delivered by P.D.DINAKARAN,J.) As against the order of the Appellate Tribunal dated8.11.2002 in ITA.No.698/Mds/2002 imposing penalty of Rs.6,67,045/-under section 271(1)(c) of the Income-tax Act, 1961, theunsuccessful assessee has preferred the above appeal raising thefollowing substantial questions of law: https://hcservices.ecourts.gov.in/hcservices/ 1.Whether the learned Tribunal was justified in holdingthat the appellant was guilty of deliberate misstatementof facts and concealment of facts, thereby attractingpenalty under section 271(1)(c) of the Income-tax Act inthe surrounding facts and circumstances of the case? 2.Whether the learned Tribunal had erred in not holdingthat the provisions of section 273(A) of the Income-taxAct, were attracted in the instant case and therebyexempted the appellant from paying the impugned penaltyassessment? 2. The brief facts of the case are stated as follows:- 2.1. The assessment year involved is 1998-99. The assesseecompany filed the return for the assessment year 1998-99 admitting atotal income of Rs.26,52,200/-. The assessment was completed undersection 143(3) of the Act determining a total income ofRs.46,23,676/-. The enhancement in the income assessed was causedbecause of the addition of Rs.19,71,481/- made by the assessingofficeronthegroundthatthesalesturnoverto that extent was not brought to the account of the assessee andthe sales turnover was kept outside the purview of income-taxassessment. 2.2. On the other hand, the explanation offered by theassessee was that even the sale was effected on 31.3.1998 and theassessee claimed certain deductions under the General Sales Tax Act,the sale was completed only in June 1998, when the purchaserreceived the goods sold. According to the assessee, the issue ofinvoice and delivery chalan on 31.3.1998 cannot be construed as theconfirmation of sale. 2.3. The assessing officer, however, refused to accept theexplanation offered by the assessee as not satisfactory, findingthat the assessee raised the sales bill on 31.3.1998 and also filedsales-tax return admitting the same as turnover for the month ofMarch, 1998 and paid sales-tax for the same. The assessee alsopaid Central Excise duty applicable and claimed the same asexpenditure in the profit and loss account based on the deliverychalan prepared by the assessee on 31.3.1998, supported by lorryreceipt dated 31.3.1998. Hence, the assessing officer imposedpenalty of Rs.6,67,045/- under section 271(1)(c) of the Act. 2.3. The assessing officer, however, refused to accept theexplanation offered by the assessee as not satisfactory, findingthat the assessee raised the sales bill on 31.3.1998 and also filedsales-tax return admitting the same as turnover for the month ofMarch, 1998 and paid sales-tax for the same. The assessee alsopaid Central Excise duty applicable and claimed the same asexpenditure in the profit and loss account based on the deliverychalan prepared by the assessee on 31.3.1998, supported by lorryreceipt dated 31.3.1998. Hence, the assessing officer imposedpenalty of Rs.6,67,045/- under section 271(1)(c) of the Act. 2.4. Against the order of the assessing officer, theassessee filed an appeal before the Commissioner of Income-tax(Appeals) contending that the assessing officer failed toappreciate the explanation offered by the assessee that even thoughthe assessee had paid the sales-tax, the same was deleted for thenext year and the assessee, in fact, paid the income-tax for thesaid receipt in the assessment year 1999-2000 on the basis that the sale got completed only in June, 1998 when the purchaser receivedthe goods in question. It was also the case of the assessee beforethe Commissioner of Income-tax(Appeals) that the assessee neitherconcealed income, nor furnished any inaccurate fact, but, on theother hand, paid the income-tax voluntarily in the assessment year1999-2000. Rejecting the contentions raised by the assessee, theCommissioner of Income-tax (Appeals) confirmed the order ofassessing officer by order dated 5.3.2002 which was, on furtherappeal, confirmed by the Appellate Tribunal. Hence, the presentappeal. 3. Mr.Aravind Subramaniam, learned counsel appearing for theassessee reiterated the contentions made on behalf of the assesseebefore the authorities below that even though the invoice of theimpugned sale was issued on 31.3.1998, the sale in fact wascompleted only in June, 1998 when the purchaser received the goodsin question, based on which the assessee paid income-tax for theassessment year 1999-2000 and hence, there is no valid andjustifiable reason for imposing penalty under section 271(1)(c) ofthe Act. 4. Mrs.Pushya Sitaraman, learned senior standing counsel forthe Revenue is not disputing the fact that though the invoice wasissued on 31.3.1998, the sale was completed only in June, 1998 whenthe purchaser received the goods as well as the fact that theassessee paid the income-tax for the said receipt voluntarily in theassessment year 1999-2000. 5.1. Whether the learned Tribunal was justified inholding that the appellant was guilty of deliberatemisstatement of facts and concealment of facts, therebyattracting penalty under section 271(1)(c) of the Income-tax Act in the surrounding facts and circumstances of thecase? 5.2. It is a settled law that the expression, 'concealment'as found in section 271 would mean the existence of an intentdeliberately to prevent relevant facts from becoming known. TheExplanation to section 271 of the Act makes it clear that in suchcircumstances, the assessee is entitled to offer an explanation thathis act was sequel not amounting to concealment or not amounting tofurnishing inaccurate particulars. 5.3. In the instant case, the fact remains that the sale ofthe goods in question was completed only in June, 1998 when thepurchaser received the goods, even though the assessee issuedinvoice on 31.3.1998. So, to decide the question whether theassessee has concealed income or not with intent to prevent therelevant facts from becoming known, the fact that the sale wascompleted in June,1998 has to be taken into consideration. The act 5.3. In the instant case, the fact remains that the sale ofthe goods in question was completed only in June, 1998 when thepurchaser received the goods, even though the assessee issuedinvoice on 31.3.1998. So, to decide the question whether theassessee has concealed income or not with intent to prevent therelevant facts from becoming known, the fact that the sale wascompleted in June,1998 has to be taken into consideration. The act of the assessee that it has paid sales-tax for the assessment year1998-99 with regard to the sale of the goods based on the invoicedated 31.3.1998 and claimed deduction under the General Sales taxand also paid Central Excise duty for the goods would not by itselfbe a justification to find the assessee at fault that he hasconcealed income or furnished inaccurate particulars to levypenalty. It is also not in dispute that the assessee paid theincome-tax for the sale receipt in the assessment year 1999-2000voluntarily, even before the scrutiny of the assessment for theassessment year 1998-99 which has not been duly weighed by theauthorities below. We are therefore of the considered opinion thatthe penalty could not be levied. 5.4. Further, the above view is also supported by thedecision of a Division Bench of this Court reported in India CineAgencies Vs. Deputy Commissioner of Income-tax (275 ITR 430) whereinit is held as follows: "The battle of wits between the assessee and theiradvisors on the one hand and the Revenue on the other isbound to result in different view points being projectedand, as long as there is nothing to show that the assesseeconcealed the income with a dishonest intent or hadfurnished inaccurate particulars either deliberately or asa result of gross negligence which was not capable ofbeing regarded as an innocent act, penalty is not to beordinarily levied. We cannot agree with the submissionmade for the Revenue that intent has no place at all insection 271(1)(c) of the Act. The word “conceal” asdefined in the Concise Oxford Dictionary as “not allowedto be seen; hide; keep secret; prevent from doing known.”.Concealment, implies the existence of a deliberate intentto prevent relevant facts from becoming known. This, however, is not to say that the assesseescan afford to be routinely careless and casual whilesubmitting the returns. They certainly do have a duty toverify the particulars furnished by them and ensure thatparticulars furnished are indeed accurate. The power undersection 271 is discretionary and it is while exercisingthe discretion that the factors referred to by us arerequired to be taken into account." 5.5. In this view of the matter, we hold that the AppellateTribunal was not correct in confirming the penalty. Accordingly,the first question of law is answered in favour of the assessee. 6.1.Whether the learned Tribunal had erred in notholding that the provisions of section 273(A) of theIncome-tax Act, were attracted in the instant case andthereby exempted the appellant from paying the impugnedpenalty assessment? https://hcservices.ecourts.gov.in/hcservices/ 6.2. With regard to the second question of law, learnedcounsel appearing for the assessee fairly conceded that the pointwas neither raised, nor considered by the Appellate Tribunal.Hence, there is no need to raise the question to answer the same. The appeal stands allowed. No costs. ConnectedT.C.M.P.No.47 of 2003 is closed. Sd/-Asst. Registrar. /true copy/Sub Asst. Registrar. na.To1. The Assistant Registrar, Income-tax Appellate Tribunal, Rajaji Bhavan, III Floor, Besant Nagar, Chennai 2. The Commissioner of Income-tax (Appeals),V, Chennai.3. The Deputy Commissioner of Income-tax Company Circle V(3), Chennai.4. The Deputy Commissioner of Income Tax,Company Circle IV (5)Chennai-6. 1 cc to Mr.M.Aravind Subramaniam, Advocate, Sr. 85991 cc to Mrs.Pushya Sitaraman, SR. SC.for IT SR. No.8488 T.C.No.44 of 2003 Sd/-Asst. Registrar. /true copy/Sub Asst. Registrar. na.To1. The Assistant Registrar, Income-tax Appellate Tribunal, Rajaji Bhavan, III Floor, Besant Nagar, Chennai 2. The Commissioner of Income-tax (Appeals),V, Chennai.3. The Deputy Commissioner of Income-tax Company Circle V(3), Chennai.4. The Deputy Commissioner of Income Tax,Company Circle IV (5)Chennai-6. 1 cc to Mr.M.Aravind Subramaniam, Advocate, Sr. 85991 cc to Mrs.Pushya Sitaraman, SR. SC.for IT SR. No.8488 T.C.No.44 of 2003 JRG (CO)kk 22/3