Vinay Oil Mill v. Income-Tax Officer....opponent(S

O/TAXAP/123/2001 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 123 of 2001 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ VINAY OIL MILL....Appellant(s) Versus INCOME-TAX OFFICER....Opponent(s) ================================================================ Appearance: MR SN DIVATIA, ADVOCATE for the Appellant(s) No. 1 MR PRANAV G DESAI, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIandHONOURABLE MR.JUSTICE K.J.THAKER Date : 19/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1.Being aggrieved and dissatisfied with the impugned order dated 31.10.2000 passed by the Income Tax Appellate Tribunal, Rajkot Bench in ITA No. 3411/Ahd/95 for the assessment year 1985-86, the assessee has preferred the present tax appeal. 2.This appeal was admitted by this Court on 16.04.2001 for consideration of the following substantial question of law: “(1) Whether on the facts and circumstances of the case, the Tribunal is justified in upholding the penalty of Rs. 83,780/- imposed u/s. 271 (1)(c ) of the Income Tax Act, 1961 by the A.O? (2) Whether on the facts and circumstances of the case, the Tribunal is right in law in holding that penalty under sec. 271(1)(c ) would be attracted even in a case where the finally assessed income is loss?” 3.The assessee is a partnership firm and is engaged in the business of oil & oil seeds. The assessee filed its return of income for the assessment year in question for Rs. 3,85,470/-.. The Assessment Officer vide his order u/s. 143(3) of the Act held that an amount of Rs. 3,68,615/- debited to profit and loss account as bad debts in pursuance to the agreement dated 30.07.1984 with Sunrise Soap & Chemicals Pvt limited was inadmissible since the conditions laid down u/s 36(1)(vii) rws 36(2)(i) of the Act were not satisfied. 3.1The assessee challenged the said assessment order by filing appeal before CIT(A) and CIT(A) vide order dated 08.12.1993 confirmed the disallowance. The assessing officer therefore initiated penalty proceedings u/s 271(1)(c ) of the Act levying penalty of Rs. 83,780/-. Being aggrieved by the said penalty order, the assessee preferred appeal before the CIT(A). The CIT(A) however deleted the penalty so imposed. 3.2The revenue therefore challenged the said order by filing appeal before the Tribunal. The Tribunal vide order dated 31.10.2000 reversed the order of CIT(A) and restored the penalty order passed by the Assessing Officer. Hence the assessee is before this Court by way of the present appeal. rws 36(2)(i) of the Act were not satisfied. 3.1The assessee challenged the said assessment order by filing appeal before CIT(A) and CIT(A) vide order dated 08.12.1993 confirmed the disallowance. The assessing officer therefore initiated penalty proceedings u/s 271(1)(c ) of the Act levying penalty of Rs. 83,780/-. Being aggrieved by the said penalty order, the assessee preferred appeal before the CIT(A). The CIT(A) however deleted the penalty so imposed. 3.2The revenue therefore challenged the said order by filing appeal before the Tribunal. The Tribunal vide order dated 31.10.2000 reversed the order of CIT(A) and restored the penalty order passed by the Assessing Officer. Hence the assessee is before this Court by way of the present appeal. 4.Mr. S.N. Divatia, learned advocate appearing for the assessee- appellant submitted that both the Tribunal has erred in reversing the order of CIT(A). He has drawn the attention of this Court to the impugned order passed by the Tribunal and submitted that the Tribunal itself has observed in para 7 of the impugned order that as far as inaccuracy of particulars of income is concerned, the assessee has clearly disclosed all particulars qua its claim for deduction of bad debts. He therefore submitted that the order under section 271(1)(c) is bad in law. In this connection he has relied upon a decision of the Apex Court in the case of Commissioner of Income-Tax vs. Reliance Petroproducts Pvt. Ltd reported in [2010] 322 ITR 158 (SC). He further submitted that even if the finally assessed income is loss, the order imposing penalty shall not be attracted. 5.Mr. Pranav Desai, learned advocate appearing for the revenue supported the impugned order and submitted that the Tribunal has rightly considered that the penalty order is just and proper. He submitted that the present appeal lacks merits and therefore deserves to be dismissed. He submitted that question no. 2 raised in the present appeal is governed by the decision of the Apex Court in the case of Commissioner of Income-Tax vs. Gold Coin Health Food P. Ltd reported in [2008] 304 ITR 308(SC). 5.We have heard learned advocates for both the sides and perused the orders passed by the Tribunal. It is pertinent to note that the Tribunal vide its impuged order has very specifically observed that as far as inaccuracy of the particulars of income is concerned, the assessee has clearly disclosed all particulars qua its claim for deduction of bad debts. The Tribunal however concluded that disclosing of particulars does not mean that all particulars were accurate. In this connection, it shall be relevant to peruse the decision of the Apex Court cited by learned advocate for the assessee. In the case of Reliance Petroproducts Pvt. Ltd (supra), the Apex Court has held that when there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false, there would be no question of inviting the penalty under Section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. 5.1Considering the aforesaid law laid down by the Apex Court we are of the opinion that question no. 1 is required to be answered in favour of the assessee. The penalty order ought not to have been imposed upon the assessee on the facts and circumstances of the present case. 5.2So far as question no. 2 is concerned, the issue is governed by the decision of the Apex Court in the case of Gold Coin Food (supra), the Apex Court held as under: 5.1Considering the aforesaid law laid down by the Apex Court we are of the opinion that question no. 1 is required to be answered in favour of the assessee. The penalty order ought not to have been imposed upon the assessee on the facts and circumstances of the present case. 5.2So far as question no. 2 is concerned, the issue is governed by the decision of the Apex Court in the case of Gold Coin Food (supra), the Apex Court held as under: “A combined reading of the Committee's recommendations and the Circular makes the position clear that Explanation 4(a) to Section 271(1) (c) intended to levy the penalty not only in a case where after addition of concealed income, a loss returned, after assessment becomes positive income but also in a case where addition of concealed income reduces the returned loss and finally the assessed income is also a loss or a minus figure. Therefore, even during the period between 1.4.1976 to 1.4.2003 the position was that the penalty was leviable even in a case where addition of concealed income reduces the returned loss. When the word "income" is read to include losses as held in Harprasad's case (supra) it becomes crystal clear that even in a case where on account of addition of concealed income the returned loss stands reduced and even if the final assessed income is a loss, still penalty was leviable thereon even during the period 1.4.1976 to 1.4.2003. Even in the Circular dated 24.7.1976, referred to above, the position was clarified by Central Bureau of Direct Taxes (in short `CBDT'). It is stated that in a case where on setting of the concealed income against any loss incurred by the assessee under any other head of income or brought forward from earlier years, the total income is reduced to a figure lower than the concealed income or even to a minus figure the penalty would be imposable because in such a case "the tax sought to be evaded" will be tax chargeable on concealed income as if it is "total income". Law is well settled that the applicable provision would be the law as it existed on the date of the filing of the return. It is of relevance to note that when any loss is returned in any return it need not necessarily be the loss of the concerned previous year. It may also include carried forward loss which is required to be set up against future income under Section 72 of the Act. Therefore, the applicable law on the date of filing of the return cannot be confined only to the losses of the previous accounting years. “ 5.3Thus, in view of the aforesaid proposition of law, we find that question no. 2 is required to be answered in favour of the revenue. 6.Accordingly, appeal is partly allowed. We answer question no. 1 in favour of the assessee and against the revenue whereas question no. 2 is answered in favour of the revenue and against the assessee. The impugned order passed by the Tribunal is modified accordingly. (K.S.JHAVERI, J.) divya (K.J.THAKER, J)