Ram Chandra Singh, Son Of Late Ramnandan Singh, Resident Of v. Commissioner Of Income Tax, Patna

IN THE HIGH COURT OF JUDICATURE AT PATNAMiscellaneous Appeal No.773 of 2014 ====================================================== Ram Chandra Singh, son of Late Ramnandan Singh, resident of 301,Awadhkunj Apartment, Yarpur, Kachchi Talab, P.O. GPO, Patna, P.S.Gardanibag, District-Patna ... ... Appellant/s Versus 1. Commissioner Of Income Tax, Patna having its office at Central RevenueBuilding, Beerchand Patel Marg, Patna. 2. Deputy Commissioner of Income Tax, Circle – 5, Patna, having its office atLoknayak Jaiprakash Bhavan, Dak Bungalow Road, Patna ... ... Respondent/s ======================================================Appearance :For the Appellant/s: Mr. D.V.Pathy, Advocate For the Respondent/s: Mrs. Archana Sinha @ Archana Shahi, Sr. SC ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE RAJIV ROYORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE) Date : 10-01-2024 The appeal is filed from an order of the IncomeTax Appellate Tribunal (hereinafter the ‘Tribunal’), in whichfour questions of law were raised with respect to sundrycreditors. The four substantial questions of law raised by orderdated 20.05.2016 are extracted below :- "(i) Whether on the facts and in the circumstances ofthis case the Tribunal was in error in adopting a findingarrived at in assessment proceeding, particularly in view ofthe settled law that in penalty proceeding the taxing authorityis bound to consider the matter afresh on the material before itwith the burden of proof resting on the revenue? (ii) Whether in view of the disclosure of Sundry tradeCreditors in the return of income and in absence of any freshmaterial in penalty proceedings pointing to a conclusion to the contrary the order of the Tribunal in the confirmation ofpenalty is erroneous in law? (iii) Whether in view of acceptance of the entirety ofthe purchases in the assessment proceeding and also thebrought forward outstanding balance of the same trade credittransaction in the subsequent assessment year the levy ofpenalty justified? (iv) Whether the order of the Tribunal is contrary to thematerials available on record and is, therefore, perverse?" 2. The penalty with respect to unexplained cash deposit was deleted especially finding that addition in thatrespect was deleted in the appeal before this Court. As far as thesundry creditors were concerned, the penalty was affirmed. 3. Learned counsel Sri D. V. Pathy contended that the books of accounts of the assessee were perfectly in orderand the mere fact of the sundry creditors having not turned upcannot be held against the assessee. When there was no defectfound in the transactions as revealed in the books of accounts,there could not have been a penalty imposed on the sole groundof sundry creditors not turning up to admit the credit. It issubmitted that Section 271(1)(c) cannot be invoked unless thereis a deliberate intention found on the party to conceal anincome. In the present case in the course of transactions, theassessee had permitted credit to some of its purchasers whichwas shown as such in the books of accounts. The name andaddress of the creditors were supplied and they were summoned. But, except one, the others did not appear. The assessee cannotbe found fault with for such non-appearance and hence, therecould not have been a penalty imposed, is the contention.Learned counsel would rely on Anantharam Veerasinghaiah &Co. v. Commissioner of Income Tax, Andhra Pradesh reportedin 1980 Supp SCC 13 and Dilip N. Shroff v. JointCommissioner of Income Tax, Mumbai and Another reportedin (2007) 6 SCC 329 to further buttress his contentions. But, except one, the others did not appear. The assessee cannotbe found fault with for such non-appearance and hence, therecould not have been a penalty imposed, is the contention.Learned counsel would rely on Anantharam Veerasinghaiah &Co. v. Commissioner of Income Tax, Andhra Pradesh reportedin 1980 Supp SCC 13 and Dilip N. Shroff v. JointCommissioner of Income Tax, Mumbai and Another reportedin (2007) 6 SCC 329 to further buttress his contentions. 4. Smt. Archana Sinha, Learned Senior StandingCounsel for the Income Tax Department points out that theassessee was given an opportunity to produce the sundrycreditors, which he did not do. But for the entry in the books ofaccounts there was no materials produced, like invoices, toestablish the transactions, which led to the credit as recorded inthe books of accounts. Reliance was placed on a Division Benchjudgment of the High Court of Kerala in Commissioner ofIncome Tax v. M/s AL-Ameen Educational Trust reported in2018 101 CCH 0518 Ker High Court and Joint Commissionerof Income Tax v. Saheli Leasing & Industries Ltd. reported in(2010) 324 ITR 0170. 5. The order of assessment itself indicates that theassessee had shown sundry creditors at Rs. 15,43,496/-. On issuance of notice in the address furnished by the assessee itself,only one creditor turned up and confirmed the balanceoutstanding at Rs. 1,03,875/-. It was hence, the penalty wasimposed. The Assessing Officer at the time of assessment hadissued a questionnaire asking the assessee to produce thecomplete address, PAN and confirmation of creditors. Theassessee only submitted the address of the creditors without thePAN or confirmation. Even the bills/invoices to establish thepurchases from the creditors were not furnished. Certificatefrom some of the suppliers was furnished which, however, didnot mention any outstanding liability. Though notice was issuedto the addresses provided by the assessee except one, noneappeared. Saheli Leasing and Industries Ltd. (supra) found thatthe purpose behind Section 271 (1)(c) is to penalize the assesseefor concealing particulars of income and non-furnishing of suchincome, would be penalized even if there is loss returned in thesubject assessment year. Hence, even if tax was not payable, thepenalty was still leviable, if there is suppression found. Even inthe circumstances of the income concealed having only reducedthe returned loss, penalty was held to be leviable. 6. Having considered the decisions and theprovision at Section 271(1)(c), we are of the opinion that the questions of law are to be answered against the assessee.Anantharam Veerasinghaiah (supra) was at a time when clause(c) of Section 271(1) penalized ‘deliberate’ furnishing ofinaccurate particulars of income, which led to the Hon’bleSupreme Court holding that the revenue should find consciousconcealment of particulars of income or deliberate furnishing ofinaccurate particulars. The word ‘deliberately’ was omitted withretrospective effect from 01.04.1964. Dilip N. Schroff (supra)found that deletion of the word ‘deliberately’ may not havesignificance since the concealment and furnishing of inaccurateparticulars of income signifies a deliberate act or omission onthe part of the assessee. There the issue was of furnishing of anassessment of the value of the property which, cannot be termeda conscious act of furnishing of inaccurate particulars. 7. On facts, the sundry credits as claimed by theassessee has not been substantiated before the Assessing Officer.The assessee had not produced any evidence but for theaddresses furnished of the creditors. As was noticed by theAssessing Officer, the invoices which led to the credits werealso not produced by the assessee. Despite that, the AssessingOfficer gave an opportunity to the assessee by way of issuingsummons in the addresses furnished and also a further 7. On facts, the sundry credits as claimed by theassessee has not been substantiated before the Assessing Officer.The assessee had not produced any evidence but for theaddresses furnished of the creditors. As was noticed by theAssessing Officer, the invoices which led to the credits werealso not produced by the assessee. Despite that, the AssessingOfficer gave an opportunity to the assessee by way of issuingsummons in the addresses furnished and also a further opportunity to produce the creditors before the AssessingOfficer. It cannot be said that the penalty was levied only on thecreditors having not turned up and confirmed the credits. Therewas absolutely no evidence produced to substantiate the creditthat was recorded in the books of accounts; when there can beinferred a deliberate furnishing of inaccurate particulars ofincome. This is a clear case falling under Section 271(1)(c)since the assessee had merely doctored its books of accounts toshow sundry credits without even the invoices leading to suchcredits being produced. The certificates furnished, of the socalled creditors, also did not show the credits; thus bringing inmens rea. 8. On the first question of law, we have to noticeSaheli Leasing and Industries Ltd. (supra) wherein the burdenunder Section 271(1)(c) is found entirely on the assessee andthere cannot be any shifting of burden on to the revenue,especially in the context of no material having been placed beforethe Assessing Officer to substantiate the sundry credits claimed.The mere disclosure of the name and address of the sundrycreditors cannot lead to substantiation of the credits especiallywhen there was no evidence produced regarding the transactionswhich led to the credit. The mere acceptance of the entirety of the purchases would not lead to substantiation of the creditsclaimed; since the purchases which led to the credit, has notbeen established before the Assessing Officer. There was nomaterial available on record before the Assessing Officer, theFirst Appellate Authority or the Tribunal, which would havepersuaded them to take a contrary decision with respect topenalty. 9. We answer the questions of law framed againstthe assessee and in favor of the revenue. The appeal standsrejected. (K. Vinod Chandran, CJ) ( Rajiv Roy, J) sharun/- AFR/NAFRNAFRCAV DATEUploading Date16.01.2024Transmission Date