The Commissioner Of Income Taxchennai v. M/S.cafco Syndicate Shipping Co

In the High Court of Judicature at Madras Dated : 23.7.2007 Coram : The Honourable Mr.Justice K.RAVIRAJA PANDIAN and The Honourable Mr.Justice P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.942 of 2007 The Commissioner of Income TaxChennai. Vs .. Appellant M/s.Cafco Syndicate Shipping Co.,No.9,Old No.5, 3[rd] FloorErrabalu Chetty StreetChennai 1. .. Respondent TAX CASE (APPEAL) under Section 260A of the Income Tax Act against theorder of the Income Tax Appellate Tribunal Madras 'A' Bench dated25.1.2007 made in I.T.A.No.1130/Mds/2005 for the assessment year 2002-03 and against the Order of the Commissioner of Income Tax, [Appeals] IXChennai dated 25.02.2005 and made in ITA.93/2004-05 and against thepenalty order under Section 271[1][c] for the Assessment year 2002-03dated 18.3.2004, GIR No.33493 P, PAN AABFC 3747 R. For Appellant : Mr.J.Naresh KumarJunior Standing Counsel (Income Tax) JUDGMENT OF THE COURT WAS DELIVERED BY K.RAVIRAJA PANDIAN,J This appeal is filed invoking Section 260A of the Income Tax Act,against the order of the of the Income Tax Appellate Tribunal Madras 'A'Bench made in I.T.A.No.1130/Mds/2005 dated 25.1.2007 . The relevantassessment year is 2002-03. The substantial questions of law formulatedfor entertainment of the appeal are as follows:- 1. Whether on the facts and circumstances of the case,the Tribunal was right in holding that no penalty underSection 271(1)(c) is impermissible as nothing wasconcealed from the department, when the assessee hadfiled revised returns admitting an additional income ofRs.22,65,900/- only after the survey under Section 133Aof the I.T. Act 1961 ? https://hcservices.ecourts.gov.in/hcservices/ 2. Whether on the facts and circumstances of the caseliability to penalty can be avoided by filing a revisedreturn after concealment was detected by the assessingofficer by a survey u/s 133A of the Income Tax Act1961 ? 2. The statement of facts as culled out from the grounds of appeal isas follows:- The assessee is engaged in the business of clearing and forwarding ofimport and export cargo at Chennai Port. The assessee filed its return ofincome on 30.10.2002 admitting a total income of Rs.7,27,150/- There was asurvey operation under Section 133A on 10.12.2002. During the course ofsurvey at the business premises of the assessee, it was noticed that someof the vouchers of expenses were self-vouchers and they were notsupported by third party receipts, vouchers, etc. The assessee filed arevised return on 24.12.2002 admitting the total income ofRs.29,93,050/-. The Assessing officer held that since the expenditurewere not supported by proper vouchers, the appellant should not haveclaimed the expenditure for deduction, especially when the amount involvedis huge. Therefore, the assessing officer held that the assessee hasconcealed income to the tune of Rs.22,65,900/- and thus imposed a penaltyof Rs.8,08,925/- under Section 271(1)(c). Aggrieved by the assessmentorder, the assessee went on appeal before the Commissioner of Income Tax(Appeals), who allowed the assessee's appeal on the ground that theassessing officer has not proved such expenses were not incurred by theassessee. Aggrieved by the order of the Commissioner of Income TaxAppeals the Revenue filed an appeal before the Income Tax AppellateTribunal. The Tribunal relying on the decision of this Court in the caseof COMMISSIONER OF ICOME TAX VS. S.SANKARAN (241 ITR 825), wherein it washeld that mere addition of income by disallowing expenses would not beregarded as concealment of income and therefore levy of penalty underSection 271(1)(c) was not justified in such cases, has confirmed theorder of the Commissioner of Income Tax Appeals. The correctness of thesaid order is now put in issue before this Court. 3. Learned counsel appearing for the Revenue submitted that butfor the survey the assessee would not have filed revised return andfurther the admission of additional income in the revised returnconsequent to survey is an acceptance by the assessee and that theaddition would amount to concealment. Section 271(1)(c) speaks about notonly concealment but also incorrect particulars. The present case ifdoes not come within "concealment" it would at least come within"incorrect particulars". 4. We heard the arguments of the learned counsel for theRevenue and perused the materials on record. 5. The issue has been squarely answered by the Supreme court inthe case of DILIP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TAX ANDANOTHER ( 291 ITR 519) wherein it has been held that Clause (c) ofSection 271(1) of the Income Tax Act, 1961 categorically states thatpenalty would be leviable if the assessee conceals particulars of hisincome or furnishes inaccurate particulars thereof. But by reason ofsuch concealment or furnishing of inaccurate particulars alone, theassessee does not ipso facto become liable for penalty. Imposition ofpenalty is not automatic. Not only is the levy of penalty discretionaryin nature but the discretion is also required to be exercised on the partof the Assessing Officer keeping the relevant factors in mind. Some ofthose factors, apart from being inherent in the nature of penaltyproceedings, inhere on the face of the statutory provisions. Penaltyproceedings are not to be initiated merely to harass the assessee. Theapproach of the Assessing Officer in this behalf must be fair andobjective. "Concealment of income" and" furnishing inaccurate particulars"are different. Both concealment and furnishing of inaccurate particularsrefer to deliberate acts on the part of the assessee. A mere omission ornegligence would not constitute a deliberate act of suppressio veri orsuggestio falsi. 6. The Apex Court further observed that the explanationappended to Section 271(1)(c) is an exception to the general rule. Itraises a legal fiction by reason whereof the burden of proof shifts fromthe Department to the assessee. Legal fiction, however, as is well known,must be given full effect the conditions precedent thereof are satisfiedand not otherwise. 7. The object of an Explanation to a statutory provision is (a)to explain the meaning and intendment of the Act itself (b ) where thereis any obscurity or vagueness in the main enactment, to clarify the sameso as to make it consistent with the dominant object which it seems tosubserve; (c) to provide additional support to the dominant object of theAct in order to make it meaningful and purposeful; (d) an Explanationcannot in any way interfere with or change the enactment or any partthereof, but where some gap is left which is relevant for the purpose ofthe Explanation, in order to suppress the mischief and advance the objectof the Act, it can help or assist the court in interpreting the truepurport or intendment of the enactment; (e) it cannot however, take away astatutory right with which any person under a statute has been clothedor set at naught the working of an Act by becoming a hindrance in theinterpretation of the same. 8. The Supreme Court after referring to the earlier judgments ofthe Supreme Court , further observed that the word" inaccurate" signifiesa deliberate act or omission on the part of the assessee. Deliberate actmust be either for the purpose of concealment of income or furnishinginaccurate particulars. The Supreme Court further held that in the https://hcservices.ecourts.gov.in/hcservices/ 8. The Supreme Court after referring to the earlier judgments ofthe Supreme Court , further observed that the word" inaccurate" signifiesa deliberate act or omission on the part of the assessee. Deliberate actmust be either for the purpose of concealment of income or furnishinginaccurate particulars. The Supreme Court further held that in the https://hcservices.ecourts.gov.in/hcservices/ absence of any definition to the term "inaccurate particulars" furnishingof inaccurate particulars for the value of property may not by itself beconstrued as furnishing inaccurate particulars. The Supreme Courtfurther observed that the assessing officer has to record a finding thatthe explanation offered by the assessee in the event he offers one, wasfalse. He must be found to have failed to prove that such explanation isnot only not bona fide but all the facts relating to the same andmaterial to the income were not disclosed by him. Thus apart from hisexplanation being not bona fide, it should have been found as a fact thathe has not disclosed all the facts which were material to the computationof his income. 9. So far as the present case is concerned the assessingauthority has given reasons for imposition of penalty as follows:- "As the expenses claimed are not supported by proper vouchers theassessee offered for assessment Rs.22,65,900/- in the course of surveyoperation. This is clear indication that the assessee had claimedexpenditure to the tune of Rs.22,65,900/- though no proper vouchersexisted for the same. Since the expenditure incurred is not supported byproper vouchers, the assessee should not have claimed the same, especiallywhen the amount involved is huge. The fact of filing revised returnwhen concealment was detected by the department is admission of theconcealment. 10. We are not able to subscribe our view to the stand taken bythe assessing officer. Admittedly, the expenses to the tune as aforesaidhas already been there in the books of accounts. The one and only reasonfor the assessee to file the revised return was that he was not able toproduce the proper voucher for the expenses incurred for the above saidamount. The primary burden of proof is on the revenue. The books ofaccounts revealed that the expenses were incurred by the assessee, butthe only incapacity on the part of the assessee was that he was notable to produce proper voucher for the expenses incurred and that wouldnot amount to concealment of income as observed by the Supreme Court inthe above said judgment, particularly having regard to the nature of theassessee's business. In view of the facts and in the light of thejudgment of the Supreme Court, we find no reason to interfere with theorder of the lower authorities who have consistently taken a view thatimposition of penalty under Section 271(1)(c) is impermissible. Hence, we are of the view that the appeal deserves no entertainment as itinvolves no question of law . The Tax Case Appeal is dismissed. Sd/- Asst. Registrar. /true copy/ krr/ Sub Asst. Registrar. To 1.The Assistant Registrar, Income-Tax Appellate Tribunal, III Floor, Rajaji Bhavan, Besant Nagar, Madras 90 (with records five copies). 2.The Secretary, Central Board of Revenue, New Delhi (3 copies). 3. The Income Tax Officer, Ward -IX(3), Chennai. + 1 CC To M/s.Pushya Sitaraman, Advocate SR NO.45541 vrk[co]gp/21.8. Tax Case (Appeal) No.942 of 2007