Of Commissioner Of Income Tax, Ahmedabad v. Itr 158(Sc

Priya Soparkar 122 itxa 1812-16-o-corrected IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1812 OF 2016 The Pr.Commissioner of Income-Tax-18… Appellant V/s. Shri Bharatkumar Maneklal Parikh … Respondent --- Mr.Prakash Chandra Chhotaray for the Appellant.Mr. Nitesh Joshi with Mr.Atul Karsandas Jasani for theRespondent. --- CORAM : AKIL KURESHI AND M.S.SANKLECHA, JJ. DATE : MARCH 04, 2019. P.C.:- 1.Revenue has filed this appeal against the judgment of the Income Tax Appellate Tribunal ("Tribunal" for short) dated 21[st] October, 2015 raising following questions for our consideration: “I.Whether on the facts and in the circumstancesof the case and in law the ITAT was justified in notupholding the order of penalty passed by theAssessing Officer under Section 271(1)(c) of the Act? II.Without prejudice to above, whether on thefacts and in the circumstances of the case and inlaw, the CIT (A) was justified in reducing penaltyrelatable to excess claim of exemption u/s 54EC ofthe Act?” 2. The principle dispute of the revenue in this appeal relatesto the judgment of the Tribunal deleting penalty imposed bythe Assessing Officer against the respondent-assessee underSection 271(1)(c) of the Income Tax Act, 1961 ("the Act" forshort). 3.Case of the revenue is that the assessee had earned sizableincome, which should have been offered to the tax by way ofcapital gain, which in the return of income filed by the assesseefor the assessment year 2010-11, assessee had not done. It isonly upon the Assessing Officer noticing the huge mismatchbetween the assessee's declared income and the claim of therefund of advance tax, that the revenue decided to take thereturn of the assessee in scrutiny during which the necessaryfacts could be gathered. After making additions in the hands ofthe assessee, the Assessing Officer instituted penalty proceedings.Such penalty was confirmed by the CIT (Appeals), upon whichthe assessee carried the matter before the Tribunal. The Tribunalby the impugned judgment deleted the penalty inter-alia Priya Soparkar322 itxa 1812-16-o-correctedobserving that for the year under consideration the assesseehad filed return on 20[th] September, 2010. On the same day,the assessee had also filed a letter with the Assessing Officergiving relevant information to the effect that the capital gainaccruing on account of sale of leasehold rights in the propertysituated at Goregaon was not included in the computation on theplea of self generated asset. A note was also appended at the endof the computation of the income, which suggests that receiptaccrued out of sale of leasehold rights and the assessee'sjustification for the same not being exhibitable tax. During thecourse of the proceedings, the assessee had furnished furtherdetails which included the lease documents, letter makingdetailed grounds why according to the assessee receipt on sale ofleasehold rights was not chargeable to capital gain tax etc. Onsuch basis the Tribunal recorded that there was no dispute thatno information given in the return was found to be incorrect orinaccurate. Merely because the claim put forth by the assesseewas found to be unsustainable in law, in the opinion of theTribunal penalty would not necessarily attach. In this context,the Tribunal relied on the decision of the Supreme Court in case 422 itxa 1812-16-o-corrected of Commissioner of Income Tax, Ahmedabad Vs. ReliancePetroproducts Pvt. Ltd.[1]. The Tribunal also noted that beforefiling the return, the assessee had obtained an opinion of theChartered Accountant why the receipt in question was notexhibitable to tax. Primarily, on such grounds, the Tribunaldeleted the penalty and allowed the assessee's appeal. 422 itxa 1812-16-o-corrected of Commissioner of Income Tax, Ahmedabad Vs. ReliancePetroproducts Pvt. Ltd.[1]. The Tribunal also noted that beforefiling the return, the assessee had obtained an opinion of theChartered Accountant why the receipt in question was notexhibitable to tax. Primarily, on such grounds, the Tribunaldeleted the penalty and allowed the assessee's appeal. 4.Appearing for the revenue, learned counsel Shri Chhotarayvehemently contended that the assessee had not made true andfull disclosures of income in the return filed. The existence of theso-called letter dated 20[th] September, 2010 was doubtful. Inany case, by merely writing the letter giving further details, theassessee cannot escape the penalty proceedings. He submittedthat there was clear attempt on the part of the assessee tosuppress the income and the attempt would have succeeded ifthe return had not been taken in scrutiny. He further submittedthat Chartered Accountant's opinion was not produced on record.Counsel relied on certain decisions to which reference would bemade at the later stage. Priya Soparkar 5.On the other hand, the learned counsel Shri Joshi for therespondent-assessee opposed the appeal contending that fullparticulars were produced before the Department. CIT (Appeals)had also referred to the assessee's letter dated 20[th] September,2010. Before the Tribunal the revenue had never questioned theexistence of the said letter or of the certificate of the CharteredAccountant relied upon by the Tribunal. 6.Having heard learned counsel for the parties and havingperused documents on record, we find that the Tribunal has givenelaborate reasons for deleting the penalty. The record suggeststhat assessee had not offered certain receipts to tax underbonafide belief that the same was not taxable. Quite apart fromthe existence of the letter dated 20[th] September, 2010 not beingdisputed by the revenue either before the CIT (Appeals) or theTribunal, during the assessment proceedings undoubtedly theassessee had made full representation why according to hisbelief the receipt was not chargeable to tax. Merely because theAssessing Officer did not accept such a stand of the assessee, 622 itxa 1812-16-o-corrected would not automatically permit revenue to levy penalty. So much, it made abundantly clear by the Supreme Courtthrough series of judgments particularly in case of Reliance Petroproducts Pvt. Limited (supra). Further, the reference tothe Chartered Accountant's opinion in favour of the assesseemade by the Tribunal also cannot be discarded. We do not findany assertion of the revenue at any stage of the proceedings thatno such opinion existed. 7.We may now refer to the decision cited by Shri Chhotaray. In case of Commissioner of Income tax Vs. A. Sreenivasa Pai[1]Division Bench of Kerala High Court referred to the explanationadded by the Finance Act, 1964 and subsequently, substituted inthe year 1976 to Section 271 and observed that such explanationwas introduced to shift the burden of proof from the revenue tothe assessee. While doing so, the Court also observed that :- "It is for the fact finding body to judge the relevancyand sufficiency of the materials. If such a fact findingbody, bearing the aforesaid principles in mind, comesto a conclusion that the assessee had discharged theopinion, it becomes a conclusion of the fact and noquestion of law arises." 7.We may now refer to the decision cited by Shri Chhotaray. In case of Commissioner of Income tax Vs. A. Sreenivasa Pai[1]Division Bench of Kerala High Court referred to the explanationadded by the Finance Act, 1964 and subsequently, substituted inthe year 1976 to Section 271 and observed that such explanationwas introduced to shift the burden of proof from the revenue tothe assessee. While doing so, the Court also observed that :- "It is for the fact finding body to judge the relevancyand sufficiency of the materials. If such a fact findingbody, bearing the aforesaid principles in mind, comesto a conclusion that the assessee had discharged theopinion, it becomes a conclusion of the fact and noquestion of law arises." Reliance was placed on the decision of the Supreme Court in caseof Union of India and others Vs. Dharmendra TextilesProcessors and others[1], in which while examining the provisionsof Section 11AC of the Central Excise Act, 1944 in the context ofthe penalty provisions contained in Section 271(1)(c) of the Act,it was observed that the penalty under the said provision is in thenature of the civil liability and the requirement of the mens-readoes not exist. Reliance was also placed on the decision of theSupreme Court in case of Mak Data P. Ltd. Vs. Commissioner ofIncome Tax-II[2] in which it was held that mere statement of anassessee that he had surrendered the additional income with aview to avoid litigation to buy peace would not be a properdefence under Section 271(1)(c) of the Act. These judgmentsthus cover different areas with which we are not concerned inthe present appeal. We have given independent reasons forconfirming the view of the Tribunal. No question of law in thisrespect arises. 1(2008) 306 ITR 277(SC) 2Civil Appeal No. 9772 of 2013 (SC) Priya Soparkar 822 itxa 1812-16-o-corrected 8.The second question pertains to penalty for breach ofSection 54EC of the Act. Amount involved is extremely smalland we therefore, do not entertain the question without goinginto merits thereof. We however record the confession of ShriJoshi for the assessee that the question whether investmentunder section 54EC can be total of Rs.50 lakhs in all or would becapped to Rs.50 lakhs in a assessment year, permitting similarsuch investment in the next year was not free from doubt. Theassessee had no intention to breach this ceiling. 9.Income Tax Appeal is dismissed. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.) ….