Tax Case (Appeal) v. The Revenue On Appeal Against The Order Of The Income Taxappellate Tribunal, Madras 'B' Bench, Chennai, 26.09.2008 Passed Inita

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 20.04.2009 Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANandTHE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal)No.155 of 2009 Shri Kamal BashaAppellant v. The Deputy Commissioner of Income TaxBusiness Circle VIII611, Anna SalaiChennai 6.Respondent Tax Case Appeal filed under section 260A of the Income TaxAct, 1961 against the order of the Income Tax Appellate Tribunal,Madras 'B' Bench, Chennai, dated 26.09.2008 passed in ITANo.1875/Mds/2007 and against the order of the Commissioner of IncomeTax(Appeals) IX Chennai,dated 07.3.2007 in ITA.306/06-07 and againstthe order of the Dy.Commissioner of Income Tax Business Circle VIIIChennai-6 dated.28.9.06 in DCIT/BC VIII/AAIPK 5393G/06-07 For appellant : Mr.J.Balachandar forMr.S.SridharJUDGMENT(Judgment of the Court was delivered byK.RAVIRAJA PANDIAN, J.) The revenue on appeal against the order of the Income TaxAppellate Tribunal, Madras 'B' Bench, Chennai, 26.09.2008 passed inITA No.1875/Mds/07 in respect of the assessment year 2003-04. 2. The material facts as culled out from the statement offacts in the memorandum of grounds of appeal are as follows:- (i)The assessee is an individual carrying on business oftrading in Iron and Steel as also job work of decoiling of iron andsteel to two of his proprietary concerns viz., M/s Kamal SteelCorporation and M/s Modern Steel Enterprises. For the assessmentyear 2003-2004, the return of income was filed on 31.10.2003 on atotal 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 Assessing Officer made an addition ofRs.34,51,447/- for the aggregate of sundry creditors appearing in thebooks of the assessee on the ground that in the course of assessmentproceedings the assessee had filed a letter dated 02.02.2006https://hcservices.ecourts.gov.in/hcservices/explaining the sundry creditors' position and that the assessee had paid some of the creditors in the subsequent years. The balanceamount of Rs.34,51,447/- was offered for. taxation. The AssessingOfficer brought to tax the aforesaid amounts under Section 41(1) ofthe Act and initiated penalty proceedings u/s 271(1)(c) of the Act.The Assessing Officer, after considering the reply of the assesseedated 02.02.2006, rejected the plea of the assessee that theadditional income was offered voluntarily in order to buy peace andshould not be construed as concealment of income and or furnishing ofinaccurate particulars of income and imposed penalty under Section271(1)(c) of the Act. (ii) At the first appellate stage, the levy of penalty wascontested by the appellant on the ground that the sum ofRs.34,51,447/- offered for taxation being the remission of tradecreditor which was accepted by the Assessing Officer and he did notgive any finding as to the non existence or bogus-ness of thecreditors. (ii) At the first appellate stage, the levy of penalty wascontested by the appellant on the ground that the sum ofRs.34,51,447/- offered for taxation being the remission of tradecreditor which was accepted by the Assessing Officer and he did notgive any finding as to the non existence or bogus-ness of thecreditors. (iii) The Commissioner of Income Tax (Appeals) by acceptingthe plea of the assessee, deleted the penalty 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 theassessment proceedings, when the assessee was asked to file thedetails of sundry creditors whose outstanding was above Rs.50,000/-,he filed details of the same. When he was further asked to fileconfirmation of the creditors, he filed a letter explaining thesundry creditors position and further contended that some of thecreditors were paid in subsequent years and balance amount ofRs.34,51,447/- was offered to taxation. The Assessing Officer addedthe same amount and initiated penalty proceedings under Section 271(1)(c) after giving due opportunity to the proceedings. The Tribunalafter hearing the parties has ultimately held that the approach ofthe assessee cannot be legally sustainable and the levy of penaltyunder Section 271(1)(c) is in accordance with the statutoryprovision. (v) The correctness of the same is canvassed before us inthis appeal by formulating the following questions of law:- "(1)Whether the Appellate Tribunal is correct inlaw in sustaining the levy of penalty u/s 271(1)(c) of theAct on the rejection of claim of sundry creditors whichwere offered for taxation in the course of the assessmentproceedings by the appellant even though the presumption onthe concealment of income or furnishing of inaccurateparticulars of income as per explanation 1 was rebutted inthe proceedings? (2) Whether the appellate Tribunal is correct in law insustaining the action of the respondent in imposing penaltyu/s 271(1)(c) of the Act even though the application of thehttps://hcservices.ecourts.gov.in/hcservices/deeming provisions in Section 41(1) of the Act would not come within the ambit of the said penal provisionsespecially the explanation offered was bonafide and notrejected as malafide? (3) Whether the Appellate Tribunal is correct in lawin dismissing the cross objection as infructuous eventhough the cross objection as per the legalprescription should be construed as a separateproceedings, requiring independent consideration andrecording of findings on the issues emanating andurged by the Cross Objector/Appellant herein? 3. The learned counsel for the appellant very strenuouslycontended that the Tribunal went wrong in allowing the appeal of therevenue by setting aside the order of the Commissioner of Income Tax(Appeals) and he also relied on the decision of the Division Bench ofthis Court in the case of India Cane Agencies vs. Deputy Commissionerof Income Tax reported in 275 ITR 430. 4. We are not able to subscribe our views with the reasoningof the counsel for the assessee. It is evident from the records thatthe assessee took one stand before the assessing officer and totallya different stand before the Commissioner of Income Tax (Appeals),the first appellate authority. But the assessee could notsubstantiate either of the stands in as much as the plea before theassessing officer about the offering of additional income voluntarilyis believed in view of the fact that only on scrutiny of theassessment and querry from the department, the assessee had comeforward to offer remission of liability. 4. We are not able to subscribe our views with the reasoningof the counsel for the assessee. It is evident from the records thatthe assessee took one stand before the assessing officer and totallya different stand before the Commissioner of Income Tax (Appeals),the first appellate authority. But the assessee could notsubstantiate either of the stands in as much as the plea before theassessing officer about the offering of additional income voluntarilyis believed in view of the fact that only on scrutiny of theassessment and querry from the department, the assessee had comeforward to offer remission of liability. 5. Even as regards the plea taken before the first appellateauthority that the remission was on account of defective goods, theassessee did not substantiate by adducing necessary evidence ormaterials with regard to the nature of the goods, the details ofpurchases, out of which, the defective goods were segregated andwhether any claim made by the assessee in respect of the defectivegoods against which the remission has been made by the assessee andoffered for taxation. Thus, it is evident that the assessee was notable to establish the reasoning adduced by him. As such the penaltyis warranted. Reliance placed on the judgment of the Division Benchof this Court in the case of India Cane Agencies vs. DeputyCommissioner of Income Tax reported in 275 ITR 430, is a misplacedreliance, because, it was held in that case as follows:- " As long as there is nothing to show thatthe assessee concealed the income with a dishonestintent or had furnished inaccurate particulars eitherdeliberately 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 toprevent relevant facts from becoming known. Thishowever is not to say that the assessee can afford tohttps://hcservices.ecourts.gov.in/hcservices/be routinely careless and casual while submitting the returns. He certainly does have a duty to verify theparticulars furnished by him to ensure thatparticulars furnished are accurate. It was furtherheld that the discount to be given by the assessee toits customers which was to take effect in futureyears could be shown as an amount due to sundrydebtors, would not by itself justify a finding thatthe assessee had concealed the income or furnishedinaccurate particulars and on that basis the penaltylevied 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 DhilipN,.Shroff vs. Joint CIT reported in 291 ITR 519, was doubted. Thethree Judge Bench of the apex Court in the case of Union of India vs.Dharmendra Textiles Processors 306 ITR 277, has clearly enunciatedthat, in order to invoke Section 271(1)(c) of the Income Tax Act, theexistence of dishonest intention and deliberate failure to givecorrect particulars is not necessary. The Supreme Court has heldthat the explanation appended to Section 271(1)(c) of the Income TaxAct 1961 indicate the element of strict liability on the assessee forconcealment or for giving inaccurate particulars while filing thereturn. The object behind the enactment of Section 271(1)(C) readwith the Explanations indicates that the section has been enacted toprovide for a remedy for loss of revenue. The penalty under thatprovision is a civil liability. Wilful concealment is not anessential ingredient for attracting civil liability as is the case inthe matter of prosecution under section 276C of the Income Tax Actand held that any concealment come within the purview of Section 271(1)(c) would automatically render the assessee for penalty underSection 271(1)(c) of the Act. 7. On the facts, we have concluded that the assessee'sattitude before the officer is inconsistent and even the inconsistentstand could not be established with the supportive evidence ormaterials. In the light of the decision of the apex Court in thecase of Union of India v. Dharmendra Textiles Processors, 306 ITR277, we are of the view the penalty u/s 271(1)(c) of the Act isattracted in this case. To 1. The Commissioner of Income Tax Madurai Madurai 2. The Commissioner of Income Tax (Appeal)IX 121,Mahatma Gandhi Road, Chennai -34. 3. The Asst.Registrar, Income Tax Appellate Tribunal, Chennai 'B' Bench, III Floor, Rajaji Bhavan, Besant Nagar,Chennai-90 Income Tax Appellate Tribunal, Chennai 'B' Bench, III Floor, Rajaji Bhavan, Besant Nagar,Chennai-90 RSI(CO)EM/8.6.09 T.C.(A)No.155 of 2009