The Deputy Commissioner Of Income Tax, Special Range Ii,Madurai v. The Appeal Has Been Admitted On The Following Substantialquestion Of Law :“Whether The Appellate Tribunal Wasright In Law In Holding That The Provisionsof Secti

In the High Court of Judicature at MadrasDated : 30.8.2018 Coram :The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal No.141 of 2009 M/s.Sundaram Finance Ltd., Madurai-1. (Cause title accepted vide order dated 20.4.2006 in TCMPNo.1202 of 2005 by PSJ and JAKSJ) ...Appellant The Deputy Commissioner of Income Tax, Special Range II,Madurai. Vs ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961against the order dated 28.1.2005 made in I.T.A.No.1848/Mds/1997on the file of the Income Tax Appellate Tribunal, Chennai Bench'C' for the assessment year 1989-90 against the order ofCommissioner of Income Tax (Appeal-1), Madurai dt.05/07/94. ItAppeal No. 171/92-93 and against the order dt.31.5.94 inA.No.392/92-93/89-90 by the Commissioner of Income Tax (Appeal),Madurai and against the order dt.17.07.92 by the DeputyCommissioner of Income Tax, Special Range II, Madurai. For Appellant :Mr.M.Venkata Narayanan for M/s.Subbaraya Aiyer Padmanabhan For Respondent :Mr.T.Ravikumar, SSC and Mrs.R.Hemalatha, SSC Judgment was delivered by T.S.SIVAGNANAM,JThis appeal by the assessee has been directed against theorder passed by the Income Tax Appellate Tribunal inITA.No.1898/Mds/1997 dated 28.1.2005 for the assessment year1989-90. 2. The appeal has been admitted on the following substantialquestion of law :“Whether the Appellate Tribunal wasright in law in holding that the provisionsof Section 271(1)(c) are attracted when the https://hcservices.ecourts.gov.in/hcservices/ assessee had voluntarily offered the incomein good faith for taxation ?" 3. We have heard Mr.Venkata Narayanan, learned counselappearing on behalf of the appellant and both the learned SeniorStanding Counsel appearing for the Revenue. 4. The short issue, which falls for consideration in theinstant case, is as to whether the levy of penalty under Section271(1)(c) of the Income Tax Act, 1961 (hereinafter referred toas the Act) was justified in the facts and circumstances of thecase. 5. The assessee filed the return of income for the saidassessment year and the return was processed under Section 143(3) of the Act. While examining the return of income, theAssessing Officer pointed out that a sum of Rs.1,06,173/- hasbeen debited to the profit and loss account under the head'other expenses', which was included under 'administrative andother expenses' and the same was stated to have been incurredfor land up-keep. 6. The Assessing Officer called for details from theassessee, who, on so being called for, admitted that theexpenses were non business expenses and requested the AssessingOfficer to disallow the same. Accordingly, the said sum wasadded to the income. Subsequently, a notice for levying penaltyunder Section 271(1)(c) of the Act was issued, for which, theassessee submitted a detailed reply dated 17.4.1992. The replyof the assessee was considered. However, the proposal in theshow cause notice was confirmed and penalty was imposed. 7. The assessee carried the matter on appeal to theCommissioner of Income Tax (Appeal) [for brevity the CIT (A)],who confirmed the order passed by the Assessing Officer. Notstopped with that, the assessee filed an appeal before theTribunal. The Tribunal, by the impugned order, confirmed theorders passed by both the CIT (A) as well as the AssessingOfficer. 8. Admittedly, the expenses, which were included under thehead 'other expenses' towards land up-keep, when pointed out bythe Assessing Officer, to be justified, the assessee was unableto place any documents to substantiate the same. On thecontrary, they accepted it as a non business expenditure.Accordingly, the same was added to the income. 7. The assessee carried the matter on appeal to theCommissioner of Income Tax (Appeal) [for brevity the CIT (A)],who confirmed the order passed by the Assessing Officer. Notstopped with that, the assessee filed an appeal before theTribunal. The Tribunal, by the impugned order, confirmed theorders passed by both the CIT (A) as well as the AssessingOfficer. 8. Admittedly, the expenses, which were included under thehead 'other expenses' towards land up-keep, when pointed out bythe Assessing Officer, to be justified, the assessee was unableto place any documents to substantiate the same. On thecontrary, they accepted it as a non business expenditure.Accordingly, the same was added to the income. 9. However, it is to be seen as to whether this could be areason for levying of penalty. The assessee, in their reply tothe show cause notice issued under Section 271(1)(c) of the Act,contended that it was not a deliberate attempt or intentionalattempt to conceal and that the omission was only by oversight. 10. The CIT (A) took note of the said stand taken by theassessee and the decision in the case of CIT Vs. Badri Prasad OmPrakash [reported in 163 ITR 440] and held that when a query israised by the Assessing Officer and after the query is raised,the assessee accepts the same, it should be termed as a wilfulomission. https://hcservices.ecourts.gov.in/hcservices/ 11. Before the First Appellate Authority, the assesseeappears to have set up a slightly different defence bycontending that they offered to file the return, which requestwas not acceded to by the Assessing Officer. However, we findthat there was no such stand taken before the Assessing Officerand that the stand taken for the first time before the CIT (A)had not been established. Because of the factual position, theCIT (A) rejected the appeal. Again on appeal by the assessee,this was confirmed by the Tribunal by taking note of the factualposition that only after the Assessing Officer pointed out thesame, the assessee agreed for the disallowance and added theamount to their income. On facts, we find that all the threeAuthorities below have concurrently held against the assessee. 12. The learned counsel appearing on behalf of the assesseehas referred to the decision in the case of CIT Vs. Sri SaradhaTextile Processors (P) Ltd. [reported in (2006) 286 ITR 0499]. 13. However, we find that in the said case, the factualposition was entirely different pertaining to the claim fordepreciation and investment allowance wherein the Authoritiesconcurrently held in favour of the assessee that the assesseehad withdrawn the claim for depreciation and investmentallowance on the machinery and filed revised return. The case onhand is not similar to that of Sri Saradha Textile Processors(P) Ltd. As observed by us earlier, the assessee attempted toset up a new case before the CIT (A) by stating that they wantedto file revised return. However, this was not established by theassessee. Therefore, the decision in Sri Saradha TextileProcessors (P) Ltd., cannot be applied to the case of theassessee herein. 13. However, we find that in the said case, the factualposition was entirely different pertaining to the claim fordepreciation and investment allowance wherein the Authoritiesconcurrently held in favour of the assessee that the assesseehad withdrawn the claim for depreciation and investmentallowance on the machinery and filed revised return. The case onhand is not similar to that of Sri Saradha Textile Processors(P) Ltd. As observed by us earlier, the assessee attempted toset up a new case before the CIT (A) by stating that they wantedto file revised return. However, this was not established by theassessee. Therefore, the decision in Sri Saradha TextileProcessors (P) Ltd., cannot be applied to the case of theassessee herein. 14. With regard to the decision in the case of PriceWaterhouse Coopers Pvt. Ltd. Vs. CIT [reported in (2012) 348 ITR0306], relied upon by the learned counsel appearing on behalf ofthe assessee, the legal principle laid down by the Hon'bleSupreme Court was that imposition of penalty would beunwarranted in a case where the assessee had committed aninadvertent and bona fide error and had not intended to orattempted to either conceal its income or furnish inaccurateparticulars. The legal principle, as laid down in the case ofPrice Waterhouse Coopers Pvt. Ltd., if applied to the facts ofthe present case, we would have no option except to hold thatthe conduct of the assessee cannot be termed to be aninadvertent or bona fide error. Furthermore, this aspect, beinga factual aspect and having been considered by both theAuthorities below as well as the Tribunal, cannot be upset bythis Court in an appeal filed by the assessee wherein thedecision shall be on a substantial question of law. Therefore,this decision does not render much assistance to the case of theassessee. 15. Reliance is also placed by the learned counsel appearingon behalf of the assessee on the decision in the case of CIT Vs.Reliance Petroproducts (P) Ltd. [reported in (2010) 322 ITR https://hcservices.ecourts.gov.in/hcservices/ 0158] wherein the ratio laid down in the said decision by theHon'ble Supreme Court is that merely because the assesseeclaimed deduction of interest expenditure, which has not beenaccepted by the Revenue, penalty under Section 271(1)(c) of theAct is not attracted and that mere making of the claim, which isnot sustainable in law, by itself, will not amount to furnishingof inaccurate particulars regarding the income of the assessee.Had it been a case of an individual assessee or a person, who isengaged in manufacture or any other activity, we might haveexamined the case as to whether it would fall within theparameters as laid down in the decision in ReliancePetroproducts (P) Ltd. 16. We are unable to do so due to the fact that the assesseeis a company engaged in financial services such as leasing andhire purchase finance and it is beyond one's apprehension thatin their returns, they inadvertently included the sum incurredfor land up-keep expenses and debited to the profit and lossaccount. 17. Mr.T.Ravikumar and Mrs.R.Hemalatha, learned SeniorStanding Counsel for the Revenue have placed reliance on thedecision of the Hon'ble Supreme Court in the case of Mak Data P.Ltd. Vs. CIT [reported in (2013) 358 ITR 0593] wherein it hasbeen held that voluntary disclosure/ surrender made in view ofthe deduction by the Assessing Officer in the search conducteddoes not release the assessee from the mischief of penaltyproceedings. 16. We are unable to do so due to the fact that the assesseeis a company engaged in financial services such as leasing andhire purchase finance and it is beyond one's apprehension thatin their returns, they inadvertently included the sum incurredfor land up-keep expenses and debited to the profit and lossaccount. 17. Mr.T.Ravikumar and Mrs.R.Hemalatha, learned SeniorStanding Counsel for the Revenue have placed reliance on thedecision of the Hon'ble Supreme Court in the case of Mak Data P.Ltd. Vs. CIT [reported in (2013) 358 ITR 0593] wherein it hasbeen held that voluntary disclosure/ surrender made in view ofthe deduction by the Assessing Officer in the search conducteddoes not release the assessee from the mischief of penaltyproceedings. 18. Reliance is also placed by the learned Senior StandingCounsel for the Revenue on the decision of the Division Bench ofthis Court in the case of CRN Investments (P) Ltd. Vs. CIT[reported in (2008) 300 ITR 0342] wherein it has been held thatthe conduct of the assessee in withdrawing the unmeriteddeduction by filing a revised return subsequent to the surveyunder Section 133A of the Act was a case where penalty wasleviable. 19. Reliance is also placed on the decision in the case ofLanxess India Pvt. Ltd. Vs. ACIT [reported in (2015) 373 ITR0346] wherein the Division Bench of this Court held that bycogent and relatable evidence, the assessee should first showthat there was neither concealment of particulars of income norfurnished inaccurate particulars of income in order to avoidpenalty proceedings under Section 271(1)(c) of the Act. 20. Further reliance is placed by the learned SeniorStanding Counsel for the Revenue on the decision in the case ofCIT Vs. Zoom Communication (P) Ltd. [reported in (2010) 327 ITR0510] wherein the Division Bench of the Delhi High Court heldthat the Tribunal committed an error in law in deleting thepenalty under Section 271(1)(c) of the Act in respect of theclaim on account of payment of income tax and capitalexpenditure written off in the profit and loss account of theassessee, the claim, besides being incorrect in law, was malafide. 21. There is nothing on record to show that the inclusion ofthe said sum under the head 'administrative and other expenses'was an inadvertent error. Furthermore, the assessee was unableto substantiate their stand before the CIT (A) that there was anattempt to file revised returns. Thus, the Authorities below aswell as the Tribunal rightly came to the conclusion, on thefacts and in the circumstances of the case, that penalty wasleviable on the assessee. 22. In the result, the above tax case appeal is dismissed byanswering the substantial question of law framed against theassessee and in favour of the Revenue. No costs. Sd/- Assistant Registrar(CS VIII) //True Copy// Sub Assistant RegistrarrsTo1.The Income Tax Appellate Tribunal, Chennai 'C' Bench. 2.The Deputy Commissioner of Income Tax, Special Range II, Madurai.3.The Commissioner of Income Tax(Appeal-I)Madurai.+1cc to Mr.T.Ravikumar, Advocate, S.R.No.59718TCA.No.141 of 2009SJ(CO)rrs 24/09/2018.