The Commissioner Of Income-Tax, Chennai v. Shri Sri Krishna Saraf

DATED: 07.07.2009 CORAM: THE HONOURABLE MR.JUSTICE F.M.IBRAHIM KALIFULLA and THE HONOURABLE MR.JUSTICE B.RAJENDRAN Tax Case Appeal Nos.477 & 478 of 2009 The Commissioner of Income-tax,Chennai. .. Appellant in both vs. Shri Sri Krishna Saraf .. Respondent in both ----- PRAYER: Tax Case appeals are filed under Section 260-A of the Income Tax Act, 1961 praying forthe reliefs stated therein. For appellant : Mr.J.Narayanaswamy----- J U D G M E N T (Judgment of the Court was made byF.M.IBRAHIM KALIFULLA,J.) The Revenue filed these appeals against the order of the Income Tax Appellate Tribunal, ChennaiBench "C", made in I.T.A. Nos.2457 & 2172/Mds/2007 dated 30.6.2006. 2. In these two appeals, the substantial questions of law which arise for consideration are, (i)whether on the facts and circumstances of the case, the Tribunal was right in holding that thepenalty under Section 271(1)(c) cannot be levied?, (ii) whether on the facts and circumstances of thecase, the issue of claim of interest under Section 132B(4)(a) can be considered in a rectificationpetition under Section 154?, and (iii) whether on the facts and in the circumstances of the case, theTribunal was right in holding that the assessee is entitled for interest under Section 132B(4)(a) whenthere was no search under Section 132 in the assessee's premises? 3. Having heard Mr.J.Narayanaswamy, learned Standing Counsel for the appellant Revenue, we arenot inclined to interfere with the order of the Tribunal. To state the facts in brief, a search wasconducted on l7.7.2003 under Section 132 in the premises of one Shri.G.Ashok Kumar at No.13,Badrachala Mudali Street, Porur, Chennai-600 116. The accounts and other incriminating materialswere seized from the said premises. Based on the seizure, a notice was issued to the respondentassessee, pursuant to which, a return of income for the assessment year 2004-05 was filed by the respondent on 28.3.2005 admitting his total income to the tune of Rs.1,13,79,337/=. The return wasprocessed under Section 143(1) which was subsequently scrutinised by issuing the notice underSection 143(2) and after hearing the respondent assessee, the return of income filed by therespondent was accepted and the assessment was concluded. Thereafter the tax liability wasdetermined. The Assessing Officer passed his order of assessment on 27.3.2006. 4. In the order of assessment, there is a specific statement to the effect that during the course ofsearch, safe deposit vault was found in the premises, which belonged to the respondent assessee,and it contained cash of Rs.60 lakhs, Indira Vikas Patras worth Rs.50 lakhs and jewellery and Bullionworth Rs.17,84,865/= (as per Valuation Report). The order of assessment was appealed against andthereafter, the assessing authority, by his order dated 19.10.2006 gave effect to the appellateauthority's order dated 1.9.2006 and revised the order passed under Section 143(3), by which theamount refundable to the assessee was also determined. The respondent assessee sought forrectification of the said order dated 19.10.2006 by filing an application under Section 154 of the Act,which came to be rejected by the Assessing Officer on 3.5.2007. As against which the assesseeapproached the Commissioner of Income-tax Appeals, and the first appellate authority, by his orderdated 02.7.2007 held that the omission of grant of interest under Section 132B(4) was a mistakeapparent on record, and therefore, the assessing authority should rectify the said mistake and grantinterest as per Section 132B(4) of the Act. 5. That apart, as against the levy of penalty, the respondent assessee approached the Commissionerof Income-tax Appeals independently, and, by order dated 8.8.2007, the first appellate authority tookthe view that even going by the order of assessment, there being no concealment nor undisclosedincome, the levy of penalty under Section 271(1)(c) was uncalled for and set aside that part of theorder. The Tribunal, by the impugned common order dated 30.6.2008, having confirmed the abovereferred to orders of the first appellate authority, the Revenue has come forward with these twoappeals. 6. Mr.J.Narayanaswamy, learned Standing Counsel for the appellant Revenue, in his submissions,after referring to Section 132B(4), contended that inasmuch as no seizure was effected by invokingSection 132 of the Act in the premises of the respondent assessee, the application under Section132B(4)(a) would not arise. The learned counsel then contended that in any event, the non-grant ofinterest in the order dated 19.10.2006 cannot fall under Section 154 of the Act to enable therespondent assessee to seek for rectification of a mistake apparent on the face of the record. As faras the deletion of penalty is concerned, the learned counsel contended that inasmuch as theproduction of the entries contained in a diary was after the seizure, there was every justification forthe assessing authority to have levied penalty by invoking Section 271(1)(c) of the Act. 7. Though, in the first blush, the submission of the learned Standing Counsel appears to be forceful,on a perusal of the orders of the Tribunal, as well as, that of the first appellate authority, we findthat none of the contentions raised by the learned Standing Counsel merits acceptance. As far as thecontention, viz., the seizure was not effected in the premises of the respondent assessee isconcerned, in the first place, the very fact that the seizure was effected from the safe deposit vaultbelonging to the respondent assessee as stated in uncontroverted terms in the order of assessmentitself would be the answer to reject the said contention. When once it is admitted that there wasseizure of the cash, the Indira Vikas Patras and the bullion in the course of the search made underSection 132 from the safe deposit vault belonging to the respondent assessee, it is too late in the dayfor the appellant to contend that the same were not recovered from the premises of the respondentassessee. In fact, though the search was said to have been held in the premises of one Thiru.G.AshokKumar at No.13, Badrachala Mudali Street, Porur, Chennai-600 116, the seizure and recovery werefrom the safe deposit lockers belonging to the respondent assessee and the very fact that after the seizure, the appellant proceeded to issue the notice under Section 142(1) to the assessee wassufficient to hold that the seizure made under Section 132 of the Act had every nexus to the assesseeand the safe deposit lockers belonging to him and consequently the resultant proceedings incontinuation of such seizure by way of an assessment made under Section 143(3) of the Act, were allto be considered in favour of the assessee. Consequently, it would enable him to seek for thenecessary relief under Section 132(B)(4)(a) of the Act in the event of any default in the application ofthe said provision. We are, therefore, convinced that the conclusion of the first appellate authority aswell as that of the Tribunal in having held that the respondent assessee was entitled to invokeSection 132(B)(4)(a) was perfectly justified. 8. Insofar as the contention that the respondent assessee was not entitled to invoke Section 154 ofthe Act is concerned, a plain reading of Section 154 makes it clear that under Section 154(1)(a), if inthe event of any mistake apparent from the record in respect of any order passed by the Income-taxauthority referred to in Section 116 is found, the amending of such an order can be made on its ownmotion by the authority concerned or at the instance of the assessee by invoking Section154(2)(a)(b) of the Act. Therefore, in the case on hand, when the assessing authority, having passedits order of refund dated 19.10.2006 and inasmuch as we have held that Section 132(b)(4)(a) getsattracted to the case on hand, when under the said provision, the assessee is entitled for grant ofinterest as provided therein and when the same did not find a place in the order of refund dated19.10.2006, it is nothing but a mistake apparent on the face of the record which could have beenrectified either on its own motion by the assessing authority himself under Section 154(2)(a) and inthe absence of any such rectification carried out, the assessee was fully entitled to invoke Section154(2)(b) and seek for necessary rectification. Therefore, we hold that the order of the first appellateauthority and confirmation of the same by the Tribunal was fully justified. 9. The assessing authority himself, in his order of assessment dated 27.3.2006, has noted that thecase was selected for scrutiny by issuing notice under Section 143(2) and after hearing, the assesseeas well as his representative accepted the return of income and completed the assessment. Whileholding so, the assessing authority has fully noted the value of the jewellery and bullion found at thetime of search, which were valued in the presence of the assessee by the Registered Valuer, whovalued the same at Rs.17,84,865/=, whereas according to the assessee, the value was only Rs.17lakhs. Though the assessee sought to explain the difference in the value, the assessing authoritydeclined to accept the explanation and treated the difference of Rs.84,865/= as unaccountedinvestment in the relevant assessment order. The first appellate authority, in the order dated8.8.2007, therefore, rightly held that there was neither concealment nor furnishing of inaccurateparticulars. In fact, the first appellate authority has noted that the assessing authority while issuingthe penalty proceedings used the printed form of ITNS-29 and the assessing authority has not evenchosen to struck off either "concealed the particulars of your income" or "furnished inaccurateparticulars of such income". The first appellate authority has observed that 'even the AssessingOfficer passed the impugned penalty order has not arrived at a clear conclusion whether theassessee had concealed the particulars of income or furnished inaccurate particulars of income inrespect of value of jewellery and maintenance of diary. It is relevant to note that in the assessmentorder passed under Section 143(3), no addition was made on account of maintenance of diary. Theonly addition made was in respect of value of jewellery. 10. As far as the levy of penalty is concerned, going by Section 271(1)(c) of the Act, the provisionsmake it clear that such levy of penalty would be warranted if at all the assessee had concealedparticulars of his income or furnished inaccurate particulars of such income. In such circumstances,even going by the assessing authority's order itself, none of the above two ingredients of Section271(1)(c) gets attracted, and therefore, the question of levy of penalty did not arise at all. Theassessing authority therefore ought not to have proceeded to levy any such penalty. The order of thefirst appellate authority as well as that of the Tribunal in having interfered with the said order of the 10. As far as the levy of penalty is concerned, going by Section 271(1)(c) of the Act, the provisionsmake it clear that such levy of penalty would be warranted if at all the assessee had concealedparticulars of his income or furnished inaccurate particulars of such income. In such circumstances,even going by the assessing authority's order itself, none of the above two ingredients of Section271(1)(c) gets attracted, and therefore, the question of levy of penalty did not arise at all. Theassessing authority therefore ought not to have proceeded to levy any such penalty. The order of thefirst appellate authority as well as that of the Tribunal in having interfered with the said order of the appellant as regards the levy of penalty cannot therefore be found fault with. For the above statedreasons, the questions of law raised by the appellant are answered against the Revenue. The appealsfail and the same are dismissed. No costs. Consequently, M.P.No.1 of 2009 is closed. gs To The Commissioner of Income taxChennai