Principal Commissioner Of Income Tax 5 v. Devendra Jasraj Kothari

C/SCA/7872/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 7872 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 5VersusDEVENDRA JASRAJ KOTHARI ========================================================== Appearance:MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHIandHONOURABLE MR.JUSTICE B.N. KARIA Date : 11/05/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Principal Commissioner of Income Tax has filed this petition to challenge the judgement of the Income Tax Appellate Tribunal dated 22.09.2017 by which, the Tribunal reduced the penalty imposed by the Assessing Officer and confirmed by the CIT(A) under section 271(1)(c) of the Income Tax Act, 1961, from Rs. 13,00,990/- to the extent relatable to addition of Rs. 4,37,265/-.to challenge the judgement of the Income Tax Appellate Tribunal dated 22.09.2017 by which, the Tribunal reduced the penalty imposed by the Assessing Officer and confirmed by the CIT(A) under section 271(1)(c) of the Income Tax Act, 1961, from Rs. 13,00,990/- to the extent relatable to addition of Rs. 4,37,265/-. 2. Brief facts are as under: Respondent-assessee for the assessment year 2010-11 had filed the return of income. During the assessment of the return, the Assessing Officer noticed that the assessee had deposited a sum of Rs. 43,72,650/- by cash in his savings bank account. The assesee contended that he was in the business of used clothes in which, the profit margin is as low as 3% to 4%. The Assessing Officer rejected such defence and added the entire amount as assessee's unexplained cash credits. The Assessing Officer also imposed penalty under section 271(1)(c) at 100% of the Tax sought to be evaded which came to Rs.13,00,990/-. The assessee carried the penalty order in appeal before the CIT(A). He contended that he had agreed to surrender the sum by way of income to buy peace. He insisted that the figure represented business dealings. However, he admitted that he had not maintained any books of accounts to show that the amount invested represented sale proceeds. CIT(A) therefore dismissed the appeal confirming the penalty. The assessee carried the matter in further appeal before the Tribunal. The Tribunal allowed the appeal in part reducing the penalty from Rs. 13,00,990/- to the extent relatable to addition of Rs. 4,37,265/-. The Tribunal, in principal, accepted the assessee's version that he was running a small business. The Tribunal, therefore, held that the penalty could be imposed in proportion to the profit of the business which the assessee might not have offered to tax. Without saying so effectively, the Tribunal considered 10% of the total deposits as the assessee's profit from the business and that is how reduced the penalty to about 1/10[th] of the originally imposed. 3. Revenue has filed this petition for two reasons. Firstly, according to the counsel for the petitioner, the Tribunal has according to the counsel for the petitioner, the Tribunal has exceeded his jurisdiction. She pointed out that under section 271(1)(c), the discretion to impose penalty ranges between equivalent to amount of tax sought to be evaded to three times that much. The Tribunal imposed penalty which was 10% of the tax sought to be evaded which was wholly impermissible. The other reason for the Revenue to file this writ petition was that as per CBDT circular dated 10.12.2015, no appeal would be filed before the High Court if the tax effect is less than Rs. 20 lacs. 3. Revenue has filed this petition for two reasons. Firstly, according to the counsel for the petitioner, the Tribunal has according to the counsel for the petitioner, the Tribunal has exceeded his jurisdiction. She pointed out that under section 271(1)(c), the discretion to impose penalty ranges between equivalent to amount of tax sought to be evaded to three times that much. The Tribunal imposed penalty which was 10% of the tax sought to be evaded which was wholly impermissible. The other reason for the Revenue to file this writ petition was that as per CBDT circular dated 10.12.2015, no appeal would be filed before the High Court if the tax effect is less than Rs. 20 lacs. 4. It may be possible for the Revenue to argue that the monetary limits set out by CBDT are for filing appeals before various foras including the High Court and the Supreme Court. These limitations imposed under the circular cannot be applied to a writ petition that may be filed by the Revenue. However, when we recognize the philosophy behind issuance of the said circular which happens to be to .reduce litigation, such liberty to file writ petition even if available cannot be lightly granted. In a rare and exceptional case, we may entertain a writ petition filed by the Revenue ignoring the monetary limit set out by the CBDT for filing the appeal particularly, when we find that the jdugement of the Tribunal is likely to have long term or cascading effect or would result into gross miscarriage of justice of such like. Under the circumstances, we are not inclined to entertain this petition. 5. Before closing however, we may record our disapproval of the approach adopted by the Tribunal while reducing the penalty. In plain terms, statutory provisions contained in section 27 envisage penalty which would be 100% of the tax sought to be evaded and which may go up to 300% thereof. The Tribunal, however, found a way to bypass this minimum limit by suggesting that the profit element embedded in the cash deposits could be subjected to penalty. When the proceedings of assessment in which the additions in the hands of the assessee were made, the Tribunal could not have ignored such final conclusions by simply adopting the different mode or yardstick to judge the amount of tax sought to be evaded by the assessee. approach adopted by the Tribunal while reducing the penalty. In plain terms, statutory provisions contained in section 27 envisage penalty which would be 100% of the tax sought to be evaded and which may go up to 300% thereof. The Tribunal, however, found a way to bypass this minimum limit by suggesting that the profit element embedded in the cash deposits could be subjected to penalty. When the proceedings of assessment in which the additions in the hands of the assessee were made, the Tribunal could not have ignored such final conclusions by simply adopting the different mode or yardstick to judge the amount of tax sought to be evaded by the assessee. 6. In the result, Petition is disposed of with above observations. (AKIL KURESHI, J) JYOTI V. JANI (B.N. KARIA, J)