Shri Kamal Basha Appellant v. The Deputy Commissioner Of Income Tax Business Circle Viii 611, Anna Salai Chennai 6. Respondent

Dated : 20.04.2009 Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN and THE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal)No.155 of 2009 Shri Kamal Basha Appellantv. The Deputy Commissioner of Income TaxBusiness Circle VIII611, Anna SalaiChennai 6. Respondent Tax Case Appeal filed under section 260A of the Income Tax Act, 1961 against the order of theIncome Tax Appellate Tribunal, Madras 'B' Bench, Chennai, dated 26.09.2008 passed in ITANo.1875/Mds/2007. For appellant : Mr.J.Balachandar forMr.S.Sridhar JUDGMENT(Judgment of the Court was delivered byK.RAVIRAJA PANDIAN, J.) The revenue on appeal against the order of the Income Tax Appellate Tribunal, Madras 'B' Bench,Chennai, 26.09.2008 passed in ITA No.1875/Mds/07 in respect of the assessment year 2003-04. 2. The material facts as culled out from the statement of facts in the memorandum of grounds ofappeal are as follows:- (i)The assessee is an individual carrying on business of trading in Iron and Steel as also job work ofdecoiling of iron and steel to two of his proprietary concerns viz., M/s Kamal Steel Corporation andM/s Modern Steel Enterprises. For the assessment year 2003-2004, the return of income was filedon 31.10.2003 on a total income of Rs.12,93,439/- which return was taken up for scrutinyassessment and it was finalised u/s 143(3) of the Act on 10.03.2006. While so doing, the AssessingOfficer made an addition of Rs.34,51,447/- for the aggregate of sundry creditors appearing in the books of the assessee on the ground that in the course of assessment proceedings the assessee hadfiled a letter dated 02.02.2006 explaining the sundry creditors' position and that the assessee hadpaid some of the creditors in the subsequent years. The balance amount of Rs.34,51,447/- wasoffered for. taxation. The Assessing Officer brought to tax the aforesaid amounts under Section 41(1)of the Act and initiated penalty proceedings u/s 271(1)(c) of the Act. The Assessing Officer, afterconsidering the reply of the assessee dated 02.02.2006, rejected the plea of the assessee that theadditional income was offered voluntarily in order to buy peace and should not be construed asconcealment of income and or furnishing of inaccurate particulars of income. (ii) At the first appellate stage, the levy of penalty was contested by the appellant on the ground thatthe sum of Rs.34,51,447/- offered for taxation being the remission of trade creditor which wasaccepted by the Assessing Officer and he did not give any finding as to the non existence or bogus-ness of the creditors. (iii) The Commissioner of Income Tax (Appeals) by accepting the plea of the assessee, deleted thepenalty under section 271(1)(c) of the Act, against which the revenue filed an appeal before theTribunal. (iv) The Tribunal on facts has found that during the assessment proceedings, when the assessee wasasked to file the details of sundry creditors whose outstanding was above Rs.50,000/-, he filed detailsof the same. When he was further asked to file confirmation of the creditors, he filed a letterexplaining the sundry creditors position and further contended that some of the creditors were paidin subsequent years and balance amount of Rs.34,51,447/- was offered to taxation. The AssessingOfficer added the same amount and initiated penalty proceedings under Section 271(1)(c) aftergiving due opportunity to the proceedings. The Tribunal after hearing the parties has ultimately heldthat the approach of the assessee cannot be legally sustainable and the levy of penalty under Section271(1)(c) is in accordance with the statutory provision. (v) The correctness of the same is canvassed before us in this appeal by formulating the followingquestions of law:- (v) The correctness of the same is canvassed before us in this appeal by formulating the followingquestions of law:- "(1)Whether the Appellate Tribunal is correct in law in sustaining the levy of penalty u/s 271(1)(c) ofthe Act on the rejection of claim of sundry creditors which were offered for taxation in the course ofthe assessment proceedings by the appellant even though the presumption on the concealment ofincome or furnishing of inaccurate particulars of income as per explanation 1 was rebutted in theproceedings? (2) Whether the appellate Tribunal is correct in law in sustaining the action of the respondent inimposing penalty u/s 271(1)(c) of the Act even though the application of the deeming provisions inSection 41(1) of the Act would not come within the ambit of the said penal provisions especially theexplanation offered was bonafide and not rejected as malafide? (3) Whether the Appellate Tribunal is correct in law in dismissing the cross objection as infructuouseven though the cross objection as per the legal prescription should be construed as a separateproceedings, requiring independent consideration and recording of findings on the issues emanatingand urged by the Cross Objector/Appellant herein? 3. The learned counsel for the appellant very strenuously contended that the Tribunal went wrong inallowing the appeal of the revenue by setting aside the order of the Commissioner of Income Tax(Appeals) and he also relied on the decision of the Division Bench of this Court in the case of IndiaCane Agencies vs. Deputy Commissioner of Income Tax reported in 275 ITR 430. 4. We are not able to subscribe our views with the reasoning of the counsel for the assessee. It isevident from the records that the assessee took one stand before the assessing officer and totally a different stand before the Commissioner of Income Tax (Appeals), the first appellate authority. Butthe assessee could not substantiate either of the stands in as much as the plea before the assessingofficer about the offering of additional income voluntarily is believed in view of the fact that only onscrutiny of the assessment and querry from the department, the assessee had come forward to offerremission of liability. 5. Even as regards the plea taken before the first appellate authority that the remission was onaccount of defective goods, the assessee did not substantiate by adducing necessary evidence ormaterials with regard to the nature of the goods, the details of purchases, out of which, the defectivegoods were segregated and whether any claim made by the assessee in respect of the defectivegoods against which the remission has been made by the assessee and offered for taxation. Thus, itis evident that the assessee was not able to establish the reasoning adduced by him. As such thepenalty is warranted. Reliance placed on the judgment of the Division Bench of this Court in the caseof India Cane Agencies vs. Deputy Commissioner of Income Tax reported in 275 ITR 430, is amisplaced reliance, because, it was held in that case as follows:- " As long as there is nothing to show that the assessee concealed the income with a dishonest intentor had furnished inaccurate particulars either deliberately or as a result of gross negligence whichwas not capable of being regarded as an innocent act, penalty is not ordinarily levied. Concealmentimplies the existence of a deliberate intent to prevent relevant facts from becoming known. Thishowever is not to say that the assessee can afford to be routinely careless and casual whilesubmitting the returns. He certainly does have a duty to verify the particulars furnished by him toensure that particulars furnished are accurate. It was further held that the discount to be given bythe assessee to its customers which was to take effect in future years could be shown as an amountdue to sundry debtors, would not by itself justify a finding that the assessee had concealed theincome or furnished inaccurate particulars and on that basis the penalty levied was deleted". 6. Recently, the apex Court has considered section 271(1)(c) of the Act on a reference made,wherein the ratio laid down in Dhilip N,.Shroff vs. Joint CIT reported in 291 ITR 519, was doubted.The three Judge Bench of the apex Court in the case of Union of India vs. Dharmendra TextilesProcessors 306 ITR 277, has clearly enunciated that, in order to invoke Section 271(1)(c) of theIncome Tax Act, the existence of dishonest intention and deliberate failure to give correct particularsis not necessary. The Supreme Court has held that the explanation appended to Section 271(1)(c) ofthe Income Tax Act 1961 indicate the element of strict liability on the assessee for concealment orfor giving inaccurate particulars while filing the return. The object behind the enactment of Section271(1)(C) read with the Explanations indicates that the section has been enacted to provide for aremedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment isnot an essential ingredient for attracting civil liability as is the case in the matter of prosecutionunder section 276C of the Income Tax Act and held that any concealment come within the purview ofSection 271(1)(c) would automatically render the assessee for penalty under Section 271(1)(c) of theAct. 7. On the facts, we have concluded that the assessee's attitude before the officer is inconsistent andeven the inconsistent stand could not be established with the supportive evidence or materials. Inthe light of the decision of the apex Court in the case of Union of India v. Dharmendra TextilesProcessors, 306 ITR 277, we are of the view the penalty u/s 271(1)(c) of the Act is attracted in thiscase. 8. We do not find any merit in the appeal for determining any question of law. The appeal isdismissed. No costs. (K.R.P.,J.) (M.M.S.,J.) Index : Yes/Internet : Yes/ rg To 1. The Commissioner of Income TaxMadurai 2. The Income Tax Appellate Tribunal,Chennai 'B' Bench, Chennai. K.RAVIRAJA PANDIAN, J. And M.M.SUNDRESH, J. rg T.C.(A)No.155 of 2009 20.04.2009