The Commissioner Of Income-Tax, Tiruchirapalli v. Lakshmi Vilas Bank Ltd., Salem Road, Kathaparai, Karur

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 18.06.2007 Coram : THE HONOURABLE MR.JUSTICE P.D.DINAKARAN AND THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.676 of 2007 The Commissioner of Income-tax,Tiruchirapalli. ..Appellant/RespondentVs Lakshmi Vilas Bank Ltd.,Salem Road, Kathaparai,Karur. ..Respondent/Appellant Appeal under Section 260A of the Income-tax Act, 1961 againstthe order of the Income Tax Appellate Tribunal, Bench 'D', Chennaiin I.T.A. No.807/Mds/98 dated 17.08.2005 for the assessment year1994-95.against the order of the Commissioner of the Income Tax(Appeal) XIII, Chennai 34 dated 25.02.1998 in ITA NO. 59/97-98 forthe Assessment year 1994-95 against the order of the DeputyCommissioner of Income Tax Appeal Range Trichy at PAN/GIR NO.CQ0362 dated 31.12.1996. For Appellant :Mr.N.Muralikumaran, Sr. Standing Counsel forIncome-tax Department JUDGMENT (Judgment of the Court was delivered byP.P.S.Janarthana Raja, J.) This appeal is filed under Section 260A of the Income TaxAct, 1961 by the Revenue, against the order of the Income TaxAppellate Tribunal, Bench 'D', Chennai in I.T.A. No.807/Mds/98dated 17.08.2005, raising the following substantial questions oflaw:- "1. Whether in the facts and circumstances ofthe case, the Tribunal was right in holdingthat penalty under section 27(1)(c) is notleviable on the assessee on the ground thatthe assessee did not have Mens rrea to conceal https://hcservices.ecourts.gov.in/hcservices/ income and to avoid tax?2. Whether in the facts and circumstances ofthe case, the Tribunal was right in followingthe decision of the Supreme Court in the caseof Shri Shadilal Sugars Ltd., reported in 168ITR 705?3. Whether in the facts and circumstances ofthe case, the Tribunal was right in deletingthe penalty even though the assessee had filedinaccurate particulars and had failed tosubmit the accounts in respect of the issuepertaining to provision for bad debt undersection 36(1)(viia)?" 2.The facts leading to the above substantial questions oflaw are as under: The assessee is carrying on business of banking. Therelevant assessment year is 1994-95 and the correspondingaccounting year ended on 31.03.1994. The assessee filed Return ofincome admitting a total income of Rs.8,46,04,647/- on 28.11.1994.The same was processed under Section 143(1)(a) of the Income-taxAct ("Act" in short) determining the total income atRs.9,82,96,869/-. Later, notice under Section 143(2) was issuedto the assessee. The assessment was completed under Section 143(3) determining the total income at Rs.13,01,03,800/-. Whilecompleting the assessment, the Assessing Officer found that theassessee had made excess claim amounting to Rs.25,62,640/- whichwas disallowed while computing the deduction under Section 36(1)(viia) of the Act. Later, the Assessing Officer initiated penaltyproceedings under Section 271(1)(c) of the Act. Show Cause Noticewas also issued under Section 274 and the assessee sent replydated 07.03.1997 to the said Show Cause Notice stating that therewas a mistake which occurred due to clerical errors. The AssessingOfficer levied a penalty of Rs.13,26,551/- under Section 271(1)(c)of the Act which worked out to 100% of the tax sought to beavoided. Aggrieved by the order, the assessee filed an appeal tothe Commissioner of Income-tax (Appeals). The Commissioner ofIncome-tax (Appeals) dismissed the appeal and confirmed the orderof levy of penalty under Section 271(1)(c) of the Act. Aggrieved,the assessee filed an appeal to the Income-tax Appellate Tribunal("Tribunal" in short). The Tribunal allowed the appeal and setaside the orders of the lower authorities. Hence the presentappeal by the Revenue. 3.Learned Senior Standing Counsel appearing for theRevenue submitted that the assessee had deliberately claimedexcess deduction. It is also submitted that there is a mistakecommitted by the assessee and the said mistake had been within theknowledge of the assessee. When this aspect was brought to thenotice of the assessee while computing the assessment, theassessee had readily agreed that the mistake committed by him wasdue to misplacement of the decimal. There is a clear finding by https://hcservices.ecourts.gov.in/hcservices/ the Assessing Officer that there is concealment of income andhence the Assessing Officer is right in levying penalty underSection 271(1)(c) of the Act. It is also submitted that if theverification of the Assessing Officer has not been done, the samecould have been gone unnoticed and the assessee could have gainedthe advantage of tax benefit on the enhanced claim. 4.Heard the counsel. The assessee had claimed deduction ofRs.1,44,12,865/- as deduction under Section 36(1)(viia). For thispurpose, the provision for Rural branch advance has been deductedat Rs.94,55,818/-. This sum of Rs.94,55,818/- has been arrived atdeducting 4% on the gross advance of Rs.23,63,95,437/-. Theassessee also furnished break up for the sum of Rs.23,63,95,437/-relating to 41 branches. Out of this, the amount attributable toThottiam Branch amounts to Rs.7,11,83,542/-. Thottiam is only asmall but a fertile area and for a place of that nature, the claimof advance of Rs.7,11,83,542/- appeared to be a little bit on thehigher side. Hence the assessee was requested to furnish the basisof working for this advance, relating to this branch. Theassessee also furnished the details. The basis of working isgiven as under:- Date Total Advances Rs.April 30, 199376,27,784/-May 31, 199372,60,205/-June 30, 199370,67,858/-July 31, 199368,71,584/-August 31, 199367,86,791/-September 30, 199370,57,524/-October 31, 199370,25,124/-November 30, 199370,23,623/-December 31, 199371,46,057/-January 31, 199471,25,659/-February 28, 199472,68,455/-March 31, 199471,59,587/- --------------Total 8,54,20,251/-Average 7,11,83,542/- The assessee's total advance for the 12 months was onlyRs.8,54,20,251/- and for none of the months the average hasexceeded even Rs.80 lakhs. The correct average was worked out andit was found to be only Rs.71,18,354/-. When the mistake wasbrought to the notice of the assessee, the assessee agreed thatthere is a mistake and the same has crept in on account ofmisplacement of the decimals. The correct amount of rural advancewill be Rs.17,23,30,249/- and the 4% provision on the same willwork out to Rs.68,93,208/- as against the claim of Rs.94,55,818/-.The difference in excess claim amounts to Rs.25,62,640/- and the https://hcservices.ecourts.gov.in/hcservices/ excess claim was disallowed. The said mistake is due to clericalerror, which was unnoticed. The said mistake had not occurred inthe earlier years. Also an explanation was offered by theauthorities that it was an inadvertant mistake and the assesseehad not concealed particulars of income or furnished inaccurateparticulars. The Tribunal found that the mistake was due tomisplacement of decimals and that there was no malafide intentionin making the same. Also, it is seen that the Tribunal had given acategorical finding that the said misplacement of decimals couldnot tantamount to concealment of particulars or furnishinginaccurate particulars. Levying of penalty is quasi-criminal innature. The burden always lies upon the Department to establishthat the assessee had concealed his income. In the case of DilipN.Shroff Vs. Joint Commissioner of Income-tax and Another (291 ITR519), the Apex Court considered the scope of levying of penaltyunder Section 271(1)(c) of the Act, wherein it was held asfollows:- "The legal history of section 271(1)(c) ofthe Act traced from the 1922 Act prima facieshows that the Explanations were applicableto both the parts. However, each case mustbe considered on its own facts. The role ofthe Explanation having regard to theprinciple of statutory interpretation must beborne in mind before interpreting theaforementioned provisions. Clause (c) ofsub-section (1) of section 271 categoricallystates that the penalty would be leviable ifthe assessee conceals the particulars of hisincome or furnishes inaccurate particularsthereof. By reason of such concealment orfurnishing of inaccurate particulars alone,the assessee does not ipso facto becomeliable for penalty. Imposition of penalty isnot automatic. Levy of penalty is not onlydiscretionary in nature but such discretionis required to be exercised on the part ofthe Assessing Officer keeping the relevantfactors in mind. Some of those factors apartfrom being inherent in the nature of penaltyproceedings as has been noticed in some ofthe decisions of this court, inheres on theface of the statutory provisions. Penaltyproceedings are not to be initiated, as hasbeen noticed by the Wanchoo Committee, onlyto harass the assessee. The approach of theAssessing Officer in this behalf must be fairand objective." "....The term "inaccurate particulars" is notdefined. Furnishing of an assessment ofvalue of the property may not by itself befurnishing of inaccurate particulars. Evenif the Explanations are taken recourse to, afinding has to be arrived at having regard toclause (A) of Explanation 1 that theAssessing Officer is required to arrive at afinding that the explanation offered by anassessee, in the event he offers one, wasfalse. He must be found to have failed toprove that such explanation is not only notbona fide but all the facts relating to thesame and material to the income were notdisclosed by him. Thus, apart from hisexplanation being not bona fide, it shouldhave been found as of fact that he has notdisclosed all the facts which was material tothe computation of his income." "...."Concealment of income" and "furnishingof inaccurate particulars" are different.Both concealment and furnishing inaccurateparticulars refer to deliberate act on thepart of the assessee. A mere omission ornegligence would not constitute a deliberateact of suppressio veri or suggestio falsi.Although it may not be very accurate or aptbut suppressio veri would amount toconcealment, suggestio falsi would amount tofurnishing of inaccurate particulars." In the present case, the Tribunal applied the principlesenunciated in the Supreme Court judgment cited supra, and acceptedthe explanation offered by the assessee. It was found that themisplacement of a decimal cannot tantamount to concealment ofparticulars or furnishing inaccurate particulars and thecomputation was only due to misplacement of a decimal. On facts,the Tribunal correctly deleted the penalty levied under Section271(1)(c) of the Act. The reasons given by the Tribunal are basedon valid materials and evidence and we do not find any error orlegal infirmity in the order of the Tribunal so as to warrantinterference. 5.Under these circumstances, no substantial questions oflaw arise for consideration of this Court and accordingly the taxcase is dismissed. No costs. kmSd/Asst.Registrar/true copy/Sub Asst.RegistrarTo1. The Assistant Registrar, Income-tax Appellate Tribunal, Bench 'D', Chennai. Besant Nagar, Chennai 902. The Commissioner of Income tax, Tiruchirapalli3. The Commissioner of Income-tax (Appeals)-XIII,11, Mahatma Gandhi Road, Chennai 344. The Deputy Commissioner of Income-tax, Special Range, Tiruchy.+ one cc to Mr. N. Muralikumaran, SSC FOR IT sr no. 35729rs(co)nm(29.06.07) T.C.(A) No.676 of 2007