IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated :
03. 06.2013 Coram The Honourable Mrs.Justice CHITRA VENKATARAMAN and The Honourable Ms.Justice K.B.K.VASUKI Tax Case (Appeal) No.143 of 2010 --- The Commissioner of Income Tax Business Range XV, Chennai ...Appellant -vs- Shri.M.Thiruvengadam ...Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal Madras 'A' Bench, Chennai dated 04.09.2009 passed in ITA.No.29/Mds/09. For appellant : Mr.J.Narayanaswamy Standing counsel for Income Tax Department For respondent : No appearance JUDGMENT
(The Judgment of the Court was made by CHITRA VENKATARAMAN, J.) The Revenue is on appeal as against the order of the Income Tax Appellate Tribunal, Madras 'A' Bench dated 04.09.2009 in ITA.No.29/Mds/2009 relating to the assessment year 2004-05 raising the following question of law:- ".Whether on the facts and in the circumstances of the case, the Tribunal is right in deciding that the expenses claimed could not be properly explained would not amount to concealment of income and penalty ?.".
2. Inspite of service of notice by this Court on 22.04.2010 to the assessee/respondent, there is no representation for the assessee and the assessee chose to remain exparte.
3. After hearing the learned counsel for the Revenue and on going through the records, we have decided to take up the Tax Case Appeal filed by the Revenue.
4. The assessee is an individual, who derived income by acting as a Mediator between granite quarry owners and purchasers of granite. The assessee filed return of income for the assessment year 2004-05, offering total income of Rs.32,67,730/-. When the case was taken up for scrutiny and the notice was issued, it was found that the assessee had debited Rs.32,67,730/- towards service charges. The expenditure was incurred through vouchers, the maintenance of which, raised doubts about their genuineness. Thus, a survey under Section 133A of the Income Tax Act, 1961 (hereinafter called as the ".Act".) was conducted and statement was recorded through assessee.
5. A reading of the same shows that the assessee was in the habit of maintaining two sets of vouchers. When a specific question was put to assessee, he stated that on some of the cash vouchers, which were for more than Rs.20,000/- each, new vouchers were prepared in newly printed voucher forms. Thus, there were 43 vouchers for a total value of Rs.21,01,500/- with a cash value of each of the vouchers at Rs.20,000/-. The assessee admitted that he had maintained two sets of vouchers. Thus, based on the materials collected, proceedings were initiated for levy of penalty under Section 271(1)(c) of the Act.
6. After hearing the assessee, it was pointed out that original vouchers were replaced by newly printed voucher forms. The names mentioned in the newly printed voucher forms were different from the first set. The assessee had no records regarding as to who assisted him during inspection at quarry every time. The 43 newly created vouchers were for a total value of Rs.21,01,500/-. Although during the survey, the assessee had admitted that an amount of Rs.19,00,000/- was actually debited to Profit and Loss Account under the head service charges, after survey, by his letter dated 07.11.2006, the assessee offered the entire amount of Rs.32,67,730/- as his additional income and paid the tax of Rs.14,24,512/- on 15.11.2006. In the circumstances, the Assessing Officer came to the conclusion that there were manipulations in the supporting vouchers and there were no records to show that it amounted to service charges. Hence, the claims were not genuine and not bona fide one. Thus, the penalty was levied under Section 271(1)(c) of the Act at 100% of the tax sought to be evaded. The assessee preferred appeal as against this order.
7. The Commissioner of Income Tax found that subsequent on the survey conducted under Section 133 A of the Act, sworn statement was recorded from the assessee, thereafterwards, he filed a letter on 16th October 2006, wherein, he came forward with a disclosure of additional income of Rs.32,67,730/- claiming towards service charges and commission payments for different assessment years viz., 2003-04, 2004-05 and 2005-06. The Commissioner of Income Tax further found that the assessee had furnished details of how this income was deployed in various assets viz., promissory notes, investments made in land, gifts made to relatives and unsecured loans disbursed to friends etc. The assessee himself produced specific details on this aspect. Based on the above admitted fact, the Commissioner of Income Tax found that the amounts claimed towards service charges was invested in different assets and was also given as unsecured loans and that the assessee was conscious of the false claim and that there was fabrication of the evidence by the assessee, which resulted in suppression of facts.
8. The Commissioner of Income Tax further pointed out that the assessee had admitted that he had not maintained any records as to who were the persons who were assisting him during inspection of quarries every time. It is further pointed out that there were two sets of vouchers, one set of vouchers to debit Rs.32,67,730/- and another set of vouchers for taking signatures from persons for payments to them on the basis of cubic meters. In view of the sets of vouchers in newly printed forms by replacing the old cash vouchers, the Commissioner of Income Tax, ultimately held that the assessee had consciously made a false claim. Even though the assessee made an attempt by making the debits towards 'Service Charges', he had withdrawn monies from his business and had made investments in various assets and none of these investments were included in the disclosure of Rs.73,11,487/- in the Account Statement filed along with the returns, thus, it clearly showed that there had been a conscious attempt to make a bogus claim, thus, the levy of penalty was confirmed.
9. Aggrieved by that, the assessee filed further appeal before the Income Tax Appellate Tribunal, which, cancelled the penalty under Section 271(1)(c) of the Act, holding that failure to furnish or explain expenditure per se would not lead to an inference to concealment. Referring to the decision in the case of Union of India and others Vs. Dharamendra Textile Processors and others reported in 306 ITR277as well as the decision in the case of Sir Shadilal Sugar and General Mills and another Vs CIT reported in (1987) 168 ITR705 the Income Tax Appellate Tribunal held that a mere concealment or furnishing of inaccurate particulars by itself would not justify the levy of penalty.
10. Thus, referring to the decisions of this Court in the case of CIT Vs Cafco Syndicate Shipping Co. reported in (2007) 294 ITR134, the Income Tax Appellate Tribunal further pointed out that when the assessee had offered the amount for assessment, on the mere ground that the expenditure were not supported by proper vouchers, one cannot draw the inference that the assessee had concealed income. Thus, referring to the decision of the Supreme Court in the case of Hindustan Steel Limited Vs. State of Orissa reported in 83 ITR26 the Income Tax Appellate Tribunal held that penalty cannot be levied ".unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation". and the Tribunal held that penalty in the case was not warranted. Aggrieved by the same, the present Tax Case Appeal is filed by the Revenue.
11. Learned Standing counsel appearing for the Revenue submitted that considering the detailed order passed by the Commissioner of Income Tax and the statement recorded from the assessee, it is evident that the assessee had consciously created bogus records for claiming deduction on expenditure, thereby, reducing his tax liability. It is worthwhile to note that the assessee had created bogus records to invest the said amount covered in the bogus expenditure on various names, which fact, cannot be lost sight in this case.
12. In the circumstances, the view of the Income Tax Appellate Tribunal ignoring the law declared by this Court and Apex Court in the decision in the case of Union of India and others Vs. Dharamendra Textile Processors and others reported in 306 ITR277cannot be sustained.
13. We agree with the contentions of the learned Standing counsel for the Revenue. As already narrated in the preceding paragraphs, it is evident that 43 vouchers created by the assessee were for a sum of Rs.21,01,500/-, whereas, the amount debited in the profit and loss account was to the extent of Rs.32,67,730/-, therefore, the entire claim made towards service charges had been proved to be false or bogus because those details were not even furnished in the new vouchers. It is no doubt true that confronted by above facts the assessee offered the said amount for assessment and paid tax thereon. This however does not absolve the assessee on the aspect of concealment attracting the penalty provisions. The assessee admitted that the amount, which was claimed to be the expenditure towards 'service charges' were diverted for investment in various properties and gifting and advancing monies etc. They were reflected in the accounts of the assessee for the assessment years 2003-04 and 2004-05.
14. Considering the above said admitted facts that the amounts claimed towards service charges were utilised in assessee's business and had been diverted for investment in various properties and the same were in fact consciously claimed as expenditure as payment towards service charges, the attempt to fabricate the evidence to make an illegal gain, by suppression of profits is clearly made out attracting penalty provisions. The Apex Court pointed out that the penalty under Section 271(1)(c) as a civil liability for which wilful concealment is not an essential ingredient as is the case in the matter of the proceedings under Section 276-C of the Income Tax Act.
15. Considering the above said law declared by the Apex Court and the facts herein, we have no hesitation in setting aside the order of the Income Tax Appellate Tribunal and we hold that the Income Tax Appellate Tribunal ought to have considered the law declared by the Apex Court in the proper perspective to sustain the penalty. CHITRA VENKATARAMAN, J.
and K.B.K.VASUKI, J.
nvsri 16. The Tax Case Appeal stands allowed on the above terms. No costs. (C.V.,J) (K.B.K.V.,J) 03.06.2013 Index:No Internet:Yes nvsri To 1.The Commissioner of Income Tax, Business Range XV, Chennai. 2.The Commissioner of Income Tax (Appeals)-XII No.121, Nungambakkam High Road, Chennai-34 3.The Income Tax Appellate Tribunal, Chennai Bench A Chennai. Tax Case (Appeal) No.143 of 2010