1. ITA No. 252/Nag/2004 is an appeal filed by the Revenue against the order of the learned CIT(A)-II, Nagpur and ITA No. 253/Nag/2004 is also filed by the Revenue in the matter of penalty under Section 271(1)(c).
Since both these appeals relate the same assessee and they were heard together, they are disposed of by this consolidated order for the sake of convenience.
2. This is an appeal filed by the Revenue against the order of the learned CIT(A)- II, Nagpur, dt. 14th June, 2004 for the asst. yr. 1997-98 on the following grounds: 1. On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the addition of Rs. 2,80,000 on account of unexplained loans.
2. On the facts and in the circumstances of the case, the learned CIT(A) erred in holding that assessee has discharged its onus of proving the cash credits of Rs. 2,80,000.
3. On the facts and in the circumstances of the case, the learned CIT(A) erred in observing that names, addresses and confirmations in respect of loans were furnished by the assessee.
3. Though the Revenue has raised three grounds of appeal, the main dispute relates to the deletion of the addition of Rs. 2,80,000 made by the AO on account of unexplained loans.
4. The brief facts leading to the dispute are that the Tribunal, Nagpur Bench in its order in ITA No. 25/Nag/2001 dt. 28th Feb., 2003 while considering this issue set aside the order of the learned CIT(A) and remanded the matter back to the file of the AO so as to offer an opportunity to the assessee to explain the credits in question in respect of the following 12 unsecured loans: On verification, the loans extended by five parties aggregating to Rs. 3,26,725 were treated as genuine by the AO. In respect of creditors mentioned at serial Nos. 1, 2, 3, 4, 6, 7 and 10 of the above table, an amount aggregating to Rs. 2,80,000 was treated as income of the assessee under Section 68 of the IT Act, 1961 on the following grounds: (a) In case of creditor Shri Satyanarayan Jhanwar, the assessee has filed only confirmation letter with detail of name, address and PAN and no other evidence to establish the genuineness of the credit advanced by him to the assessee.
In the case of creditor Mrs. Seema Khan, the assessee did not even file the confirmation letter or any other evidence and thus the assessee failed to establish the genuineness of the credit extended by her to the assessee.
(c) In cases of the creditors mentioned at serial numbers 3, 4, 6, 7 and 10, the assessee filed the confirmations but failed to intimate PAN of any of these five persons.
Aggrieved by the order of the AO, the assessee filed appeal before the learned CIT(A).
5. Before the learned CIT(A), the assessee made the following submissions: (i) In case of Shri Satyanarayan Jhanwar, the assessee had furnished PAN which was also available in confirmation filed before the AO, along with details of name and address. The assessee received the loan amount on 6th April, 1996 by cheque and the same was repaid on 2nd May, 1997 by cheque.
(ii) In case of creditor Mrs. Seema Khan, her PAN was furnished before the AO. The assessee also received the loan amount from this party by cheque and the same was repaid by the assessee by cheques and Rs. 8000 by cash. The assessee furnished the copy of account of Smt. Seema Khan.
(iii) The details of all the creditors from whom loans were received by cheques were also mentioned in the extract of audit report in Annex. B. (iv) The assessee repaid the loans by account payee cheques to the creditors on various dates and the details of the same were furnished.
(v) The assessee also furnished the copies of account of the above seven creditors.
(vi) The assessee has submitted all the confirmation with names and addresses before the AO and he submitted that the above cash credits were explained satisfactorily and onus has been discharged by the assessee.
Considering the above submissions of the assessee, the learned CIT(A) deleted the impugned addition by holding that the assessee has discharged the primary onus by furnishing the names, addresses and confirmations, copy of repayment of loan etc. He also observed that the assessee not only disclosed the identity of the creditors but also names, addresses, cheque number, bank name and addresses and the amount has been returned by cheque. Aggrieved by the order of the learned CIT(A), the Revenue has filed the present appeal before the Tribunal.
6. Before us, the learned Departmental Representative relied on the order of the AO.6.1 On the other hand, the learned Counsel for the assessee, strongly relied on the order of the learned CIT(A) and reiterated his submissions as were made by him before the learned CIT(A). He has also filed a paper book enclosing all the documents, which were filed by him before the lower authorities. He has also filed the extract of chart mentioning the details of repayment such as name of bank, address, cheque number and date etc. He submitted that the assessee submitted all the confirmation and names and addresses of the alleged creditors.
He submitted that the assessee has discharged the primary onus by furnishing the above details and burden now shifts to the Department to establish the Revenue's case. He relied on the following decisions and the propositions laid down therein: When the assessee furnishes name and address of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness.
(2) CIT v. U.M. Shah, Proprietor, Shrenik Trading Co.
The assessee having discharged the initial onus of giving complete name and address of bankers and confirmation letters it was for the ITO to show that the explanation rendered by the assessee was unturn.
The apparent must be considered real, unless there are reasons to disbelieve by looking into the evidence and surrounding circumstances and by applying the test of human probabilities.
Particularly with reference to the addition of Rs. 50,000 was unsustainable. An enquiry should have been made out whether the genuineness of the loan of Rs. 50,000 had been established and if that had been accepted the addition would have stood reduced by Rs. 50,000.
Held, on the facts, that the conclusions reached by the Tribunal were possible conclusions, which a reasonable man could have arrived at. There was evidence before the Tribunal to support its finding.
The deletion of Rs. 1,51,000 and Rs. 52,000 and interest thereon from the total income of the assessee for the asst.yr. 1963-64 was justified.Addl. CIT v. Bahri Bros. (P) Ltd. The assessee discharged the primary onus and the assessee not only disclosed the identity of the creditors but also the sources of income. Then the onus shifted on the Department to verify. The creditors were having bank accounts. Hence, they were known not only to the bank but they were introduced by a third person to the bank.
It could not be said that the creditors were fictitious persons. The Tribunal was, therefore, right in deleting the addition of Rs. 20,000 and also allowing the interest of Rs. 1,318.
6.2 He also relied on the case of CIT v. Camco Colour Co.
. The counsel further relied on order of the, Nagpur Bench of Tribunal and filed copy of the same and submitted that, Nagpur Bench in the assessee's own case in ITA No. 154/Nag/2005 for the asst.yr. 1998-99 on identical issue, the Hon'ble Tribunal has decided the similar issue in favour of the assessee.
7. We have considered the rival submissions and gone through the material available before us. It is seen that out of twelve creditors mentioned above, the AO accepted the loans as genuine in cases of five creditors because these creditors were produced before the AO. In respect of other seven creditors, though all the details were available before the AO, including confirmation letters, names, addresses, details of cheque numbers, date, bank names and addresses, details of repayment of loan amounts by cheques etc. the AO rejected the explanation of the assessee without making any enquiry to prove that the loan transactions were not genuine. The assessee submitted that some creditors emigrated to USA temporarily. By producing or furnishing all the above detailed informations, we are of the considered opinion that the assessee has discharged its primary onus and the Revenue failed to prove that these creditors were not genuine or they have no capacity to advance the loans to the assessee. The case laws relied upon by the learned Counsel for the assessee support his case. In view of the above, we do not find any reason to interfere with the order of the learned CIT(A) and the same is confirmed. The appeal of the Revenue on all the three grounds is dismissed.
8. This is an appeal filed by the Revenue against the order of the learned CIT(A)-II, Nagpur, dt. 14th June, 2004 for the asst.yr. 1997-98 on the ground that the learned CIT(A) erred in cancelling the penalty of Rs. 2,40,000 levied under Section 271(1)(c) of the Act.
9. The facts leading to the dispute are that the assessee filed the return on 30th Nov., 1997 declaring loss of Rs. 68,37,080. The loss was assessed under Section 143(3) at Rs. 15,01,994. The AO finally assessed loss under Section 154/254 at Rs. 20,83,719. The AO levied the impugned penalty under Section 271(1)(c) in view of reduction in loss. The learned CIT(A) deleted the penalty by observing as under in para 5 of his order: I have carefully gone through the facts of the case and submissions of the learned Counsel. Respectfully following the judgments cited above and Expln. 4 to Section 271(1)(c) which was amended by Finance Act, 2002, I am of the opinion that the said amendment is applicable from 1st April, 2003. The provisions for imposing penalty being substantive law cannot have retrospective effect unless expressly stated by the legislature to be so applicable. There is no word or language from which it can be inferred that the amendment of Section 271(1)(c) of the IT Act, 1961 by the Finance Act, 2002 has retrospective operation. The law, which was in force at the time when the assessee filed his original return will be applicable. I, therefore, hold that the levy of penalty under Section 271(1)(c) is improper. I, therefore, cancel the order of penalty under Section 271(1)(c) of the IT Act, 1961.
Aggrieved by the order of the learned CIT(A), the Revenue has filed the present appeal before the Tribunal.
10. Before us, the learned Departmental Representative submitted that the AO was justified in levying the penalty on the basis of reduction in loss. He relied on the decision reported in Cadbury Schweppes Beverages India (P) Ltd. v. Jt. CIT (2005) 96 TTJ (Mumbai) 773 and submitted that this decision supports the case of the Department and the penalty was exigible in the case of the assessee.
11. The learned Counsel for the assessee, on the other hand, submitted that as per the provisions applicable to the asst. yr. 1997-98, the penalty can be levied only when the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income. Relying on the decision of the Hon'ble Supreme Court in the case of CIT v. Prithipal Singh & Co. , he submitted that the penalty for concealment can be levied only in cases where tax was sought to be evaded and unless there was an income which would give the payment of tax, no evasion could be conceived and thus, no penalty could be imposed. He invited our attention to Expln. 4 to Section 271(1)(c) which were amended by the Finance Act, 2002 and submitted that the AO has erred in levying penalty under Section 271(1)(c) by applying the provisions applicable w.e.f. 1st April, 2003.
In support of his contentions, he relied upon the following decisions and propositions laid down therein: Penalty-Concealment of income-Law applicable-Principles-Original return filed on 1st March, 1967-Law as it stood prior to amendment by Finance Act, 1968, applies-IT Act, 1961, Section 271(1)(c).
Tax has to be assessed for an assessment year according to the law as it stood on the 1st day of April of the relevant financial year and any amendment made after that date would not ordinarily apply to the assessment of that year even if the assessment was actually made after the amendment had come into force. For purposes of levying penalty, the law as it stood on the date of concealment of income would apply. Concealment occurs at the time when the original returns are filed. It is true that the legislature has power to apply a new law retrospectively. But the provision for imposing penalty being substantive law cannot have retrospective effect unless expressly stated by the legislature to be so applicable.
There is no word or language from which it can be inferred that the amendment of Section 271 by the Finance Act, 1968, has retrospective operation.
The assessee submitted his returns for 1965-66 and 1966-67 on 1st March, 1967. In 1969, a notice under Section 148 was served on him in respect of those years and on the basis of the returns submitted assessment was completed and penalty proceedings were initiated.
Considering the circumstance that the assessee co-operated with the Department the Tribunal imposed a minimum penalty for each of the two assessment years in question by applying Section 271 as it stood prior to 1st April, 1968. On a reference: Held, that the Tribunal was correct in its decision to impose a minimum penalty for each of the two assessment years in question by applying the law which was in force at the time when the assessee filed his original return.
In the assessment of the petitioner for 1970-71, the return for which was filed on 22nd Dec., 1970, the officer included a sum of Rs. 4,000 as income from undisclosed sources by his order dt. 25th Jan., 1973. Thereafter, he initiated penalty proceedings under Section 27(1)(c) and by his order dt. 9th Oct., 1973, levied a penalty of Rs. 4,000. This was confirmed by the Commissioner. In the writ petition filed in the High Court, the petitioner contended that, by reason of the provisions of Section 274(2) prior to its amendment, w.e.f. 1st April, 1971, by Act 42 of 1970, the officer did not have any jurisdiction to levy the penalty. The High Court held that, as it was the law in force on 22nd Dec., 1970, when the return was filed, that would be applicable and Section 274(2) as it stood prior to its amendment on 1st April, 1971, was the relevant provision that was to be applied in the instant case and hence the officer had no jurisdiction to levy penalty.
Penalty-Concealment of income-Law applicable-Law as on date offence committed-Return filed on 15th Sept., 1964, after introduction of Explanation to Section 271(1)(c)-Explanation to Section 271(1)(c) applies-IT Act, 1961, Section 271(1)(c), Expln.
Penalty-Concealment of income-Law applicable-Law as on date when original return was filed-IT Act, 1961, Section 271(1)(c).
The provisions of Section 271(1)(c) of the IT Act, 1961 provide that, if the ITO, in the course of any proceedings, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, then he may direct that such person shall pay by way of penalty the amount specified in Clause (iii) of that sub-section. The word "satisfaction" which has been used is for the purpose of initiating the penalty proceedings and assuming jurisdiction. The offence is committed when the particulars are concealed or inaccurate particulars are furnished in respect of the income, which could be by furnishing the return and, therefore, the offence is committed at the time when initially the return is submitted. For concealment of particulars of income or for furnishing inaccurate particulars of income, penalty is to be imposed under Section 217(1)(c), according to the law prevailing on the date on which the act of concealment took place, i.e., the date on which the original return was filed, and it is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past. The law prevailing on the date of passing of the assessment order or the initiation of penalty proceedings is also wholly immaterial for the purpose of imposition of penalty (see pp 145B-D, 142F-H).
A fiscal statute cannot be construed retrospectively unless there are clear words to that effect in the statute itself. Section 18(1)(a) of the WT Act, 1957, as amended by the Finance Act, 1969, is not retrospective in its operation.
Under Section 18 the wrongful act on the part of an assessee becomes complete as soon as he does not file the return of his wealth on the stipulated date. His omission to do so does not make the wrongful act a continuing one, merely because the penalty on him may either continue or get enhanced. Penalty can be imposed on an assessee for failure to file a return on the due date only on the basis of the law, which was prevalent on that date.
Wealth-tax-Penalty-Levy of-Law applicable-Returns for asst. yrs.
1961-62, 1962-63 and 1963-64, filed after due date on November, 1969-Amendment increasing rate of penalty from 1st April, 1969-Law applicable is the law as on date when default occurred and not law as amended-Wealth-tax Act, 1957, Section 18(1)(a) Penalty under Section 17(1)(a)-Law applicable-Is the law is force as on the last date on which return was due to be filed-Return for asst. yr. 1962-63 due on 30th June, 1962; filed on 22nd Oct., 1962, and penalty levied on 31st March, 1964 on the date of completion of assessment-Law in force as on 30th June, 1962, would apply and the provisions of Section 17(1)(a) as amended by GT (Amendment) Act, 1962, w.e.f. 1st April, 1963, will not be applicable.
Held, that the assessee had not misled the AO while filing the return under Section 139 of the Act. An intimation was sent to it accepting the return. At the time when the return was filed under Section 139 of the Act on 29th Dec., 1989, Section 28(iiib) was not in existence. It was only when the AO was finalizing the return filed by the assessee, that the law came into force w.e.f. 1st April, 1967, and, therefore, the AO levied additional tax. Where the assessee had voluntarily filed the return at the time when a particular law was in existence and if it is retrospectively amended the assessee cannot be held liable for filing a wrong return and cannot be subjected to levy of additional tax.
12. The counsel further relied on several other decisions mentioned in his paper book. The counsel further relied on judgments of Nagpur Bench Tribunal vide ITA No. 611/Nag/98, Asstt. CIT v. Guru Storage Batteries.
He also relied on the judgments of Nagpur Bench of the Tribunal in Asstt. CIT v. Rajendra Mulak (2002) 77 TTJ (Nag) 524 : (2002) 83 ITD 670 (Nag) for the following proposition: Section 271(1)(c) of the IT Act, 1961-Penalty for concealment of income-Asst. yr. 1992-93-Whether if main Section 271(1)(c) has no application in a case where both returned as well as assessed income are loss, then such a case cannot be said to have been covered by Expln. 4 to said section w.e.f. 1st April, 1976, since said Explanation cannot be so construed as to widen scope of main Section 271(1)(c) which is charging section-Held, yes-Whether there was no infirmity in order of CIT(A) cancelling penalty imposed under Section 271(1)(c) where both returned and finally assessed figure were loss-Held, YesCadbury Schweppes Beverages India (P) Ltd. v. Jt. CIT (supra). He says that in the aforesaid case the appeal against the scrutiny assessment was filed and withdrawn by assessee and the assessee had filed incorrect audit report under Section 44AB with the original return-The circumstances under which the assessee had to carryout second audit on 19th May, 1997 was not spelt out and above all the assessee could have revised its return after it received second audit report on 19th May, 1997 but it chose not to do so-Similarly, in respect of booking of expenditure of Rs. 10 lakh payable to PDL, the claim was incorrect and on being asked by AO, assessee changed its explanation though not substantiated-Concealment was thus writ large and assessee's case was covered by Expln. 1 to Section 271(1)(c)-As regards leviability of penalty in case where assessment resulted in a reduced loss, Expln. 4 to Section 271(1)(c) inserted by Taxation Laws (Amendment) Act, 2002 is clarificatory in nature-The case is covered by the jurisdictional Bombay High Court decision. The assessee had filed incorrect audit report under Section 44AB with the original return.
13. He further submitted that so far as case of the assessee is concerned, the same is covered by the judgment of the jurisdictional High Court in case of CIT v. Oriental Syntax Ltd. Mumbai and also two jurisdictional judgment of this Hon'ble Bench and also on fact the penalty was levied with respect of addition of credit of Rs. 2,80,000 and share application money at Rs. 3,01,000 as the addition of credit of Rs. 2,80,000 were already deleted by CIT(A) as well as order of Tribunal vide ITA No. 252/Nag/2004, therefore on facts also penalty on aforesaid amount itself is not leviable and so far as addition of Rs. 3,01,000 is concerned on account of share application money. The counsel further submitted file copy of the order of the Nagpur Bench ITA No. 12/Nag/2004 in the case of Mehta Cast Iron (P) Ltd., Nagpur dt.
23rd Sept., 2005 and also 11/Nag/2004 Asstt. CIT v. Parashwa Engg. (P) Ltd. and it was stated that in the penalty proceedings, the question to be considered is whether the assessee concealed any income or furnished inaccurate particulars of income. The assessee had already furnished confirmation of all the shareholders, there is a finding in the Tribunal order that the confirmation of all the shareholders is placed on record and the assessee had already furnished names, addresses and confirmation of all the creditors from whom amount was received for share application and all the details were furnished by the assessee in the audit report as well as during the course of appellate proceedings as well as placed before the Tribunal. Merely because the said claim is disallowed by the Tribunal cannot be made a ground for levying penalty under Section 271(1)(c) when all the relevant facts are stated in the return and its annexures. We find force in the assessee's stand that there could not be any mala fide intention in claiming the said loss because it was a case of huge loss and no tax liability was at all involved. Before invoking Expln. 4, it is necessary to establish that there was a concealment and Expln. 4 comes into play if there is any tax which sought to be evaded. In the case of Sir Shadilal Sugar & General Mills Ltd. and Anr. v. CIT , the Hon'ble Supreme Court has held that from the mere fact that the assessee agreed for certain addition, it does not follow that the assessee concealed any income. The Hon'ble Madras High Court report in CIT v. Inden Bislers (2000) 158 CTR (Mad) 323, has held that the mere fact that certain claim is disallowed, it does not follow that the assessee concealed any income. On the facts of the present case, it cannot be concluded that the assessee concealed any income or furnished inaccurate particulars thereof merely because the claim of the assessee was rejected by AO or the assessee surrendered the said claim of capital loss. The particulars of the share application money were distinctly shown in the various schedules filed along with, the return.
In penalty proceedings which are distinct from the assessment proceedings, the question to be considered is whether the assessee has concealed any income and not to see whether the claim or part of it is rightly disallowed or not. On the basis of the facts and material on record, we are of the considered opinion that the Revenue totally failed to prove the concealment in this case and in our view, this is not a fit case for levying the penalty under Section 271(1)(c). The learned CIT(A) has give cogent reasons for deleting the penalty of Rs. 2,40,000 and we do not find any infirmity in his order. The decisions relied upon by the learned Departmental Representative are distinguishable on facts ad hence they are not applicable to the facts of the present case since in the present case no concealment of income or furnishing of inaccurate particulars thereof has been proved or established by the AO to levy the penalty under Section 271(1)(c) of Rs. 2,40,000 and dismiss the appeal filed by the Revenue. He argued that the case of the assessee is also covered by the judgment of the Bombay High Court dt. 25th July, 2005 in the case of CIT v. Oriental syntax Ltd., Mumbai.
14. We have considered the rival submissions and gone through the various case laws cited by the both the parties. The assessment year involved in this case is 1997-98 and Expln. 4 to Section 271(1)(c) was amended by Finance Act, 2002 and the said amendment is applicable from 1st April, 2003. Therefore, we find force in the contention of the learned Counsel for the assessee that as per the provisions applicable to the asst. yr. 1997-98, the penalty can be levied only when the tax that would have been chargeable on the income in respect of which particulars have been concealed or inaccurate particulars have been furnished had such income been the total income and, therefore, the AO has erred in levying penalty under Section 271(1)(c) by applying the provision applicable w.e.f. 1st April, 2003. The said amendment was made in Finance Bill, 2002 in case of loss also, the assessee is liable for penalty. Hence the law applicable from 1st April, 2003 cannot be applied for the asst. yr. 1997-98. In the case of CIT v. Prithipal Singh & Co. (supra), it has been held that the law contemplated penalty for concealment only in cases where tax was sought to be evaded and unless there was an income which would give the payment of tax, no evasion could be conceived and thus, no penalty could be imposed. In the judgment of the Hon'ble Bombay High Court in the case of CIT v.Orient Syntax Ltd., Mumbai, a copy of which has been filed on record, the question of law sought to be raised was as under: Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the penalty levied under Section 271(1)(c) because the finally assessed income is loss.
The Hon'ble High Court, in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Prithipal Singh & Co. (supra), answered the question against the Revenue and in favour of the assessee. This decision of the jurisdictional High Court also supports the case of the assessee and on facts also when the addition of Rs. 2,40,000 was already deleted and on fact also as well as judgment cited above which fully supports the case of the assessee. In view of the facts and circumstances of the case and above discussions, we find no infirmity in the older of the learned CIT(A) deleting the penalty of Rs. 2,40,000 levied under Section 271(1)(c) of the Act. His ordered is confirmed and the appeal of the Revenue is dismissed.