Rajesh Chawla Vs. Commissioner of Income Tax - Court Judgment

Excerpt:
- sections 100-a [as inserted by act 22 of 2002], 110 & 104 & letters patent, 1865, clause 10: [dr. b.s. chauhan, cj, l. mohapatra & a.s. naidu, jj] letters patent appeal order of single judge of high court passed while deciding matters filed under order 43, rule1 of c.p.c., - held, after introduction of section 110a in the c.p.c., by 2002 amendment act, no letters patent appeal is maintainable against judgment/order/decree passed by a single judge of a high court. a right of appeal, even though a vested one, can be taken away by law. it is pertinent to note that section 100-a introduced by 2002 amendment of the code starts with a non obstante clause. the purpose of such clause is to give the enacting part of an overriding effect in the case of a conflict with laws mentioned with the.....order1. this order will dispose of ita nos. 107, 108 and 109 of 2004 arising out of common order of the tribunal, chandigarh bench 'smc' in respect of asst. yr. 1994-95 on the question of imposition of penalties under section 271(1)(c) of the it act, 1961 (for short, the act), proposing following substantial questions of law:1. that, whether under the facts and circumstances of the case and on the true and correct interpretation of the provisions of law, the tribunal was justified in upholding the levy of penalty whereby the revised return having been filed voluntarily and the surrender being made at the initiation of the enquiry before the detection of any undisclosed income ?2. that, whether under the facts and circumstances of the case and on the true and correct interpretation of the.....

Judgment:
ORDER

1. This order will dispose of ITA Nos. 107, 108 and 109 of 2004 arising out of common order of the Tribunal, Chandigarh Bench 'SMC' in respect of asst. yr. 1994-95 on the question of imposition of penalties under Section 271(1)(c) of the IT Act, 1961 (for short, the Act), proposing following substantial questions of law:

1. That, whether under the facts and circumstances of the case and on the true and correct interpretation of the provisions of law, the Tribunal was justified in upholding the levy of penalty whereby the revised return having been filed voluntarily and the surrender being made at the initiation of the enquiry before the detection of any undisclosed income ?

2. That, whether under the facts and circumstances of the case and on the true and correct interpretation of the provisions of law, the Tribunal was justified in upholding the levy of penalty whereas there is a difference between the initiation of the enquiry proceedings and detection of the income by the Department ?

3. That, whether under the facts and circumstances of the case and on the true and correct interpretation of the provisions of law, the Tribunal was justified in upholding the levy of penalty treating the return filed as non est though the revised return filed having been accepted during the penalty proceedings.

At the time of hearing, question No. 1 was sought to be substituted and question No. 4 was sought to be added to the following effect:

1. That, whether under the facts and circumstances of the case and on the true and correct interpretation of the provisions of law, the Tribunal was justified in upholding the levy of penalty whereby the revised return having been filed voluntarily and the Surrender being made without initiation of the enquiry before the detection of any undisclosed income.

4. That, whether under the facts and circumstances of the case, the finding of the Tribunal is perverse in mentioning that Mr. Rajesh was present before the ADI and the necessary revising of return had been done after the enquiry made by the ADI which is patently incorrect as it was Rajneesh and Rajeev who were present before ADI. Also the findings of the Tribunal are perverse holding that the explanation is not bona fide and hence made applicability of Expln. 1 to Section 271(1)(c).

2. The assessees are members of group known as M/s Baldev Electricals, Ludhiana. Information was received by the intelligence wing that the members of the group are indulging in tax evasion by showing income from other sources as agricultural income. During investigation, the appellant Rajesh Chawla and Rajiv Chawla were summoned by the ADI, Ludhiana and asked to produce evidence about agricultural income. As per order of the Asstt. CIT, summons dt. 24th May, 1996 were sent to Rajesh Chawla and Rajiv Chawla under Section 131(a) of the Act asking the assessees to produce the relevant documents. Rajesh Chawla and Rajiv Chawla attended the office on 4th June, 1996 but no documents were produced. Statement of Sh. Rajiv Chawla was recorded on 4th June, 1996. On 10th June, 1996, assessees' counsel got an adjournment for 14th June, 1996. On 14th June, 1996, assessees' counsel offered to disclose income subject to no penalty but he was told that disclosure could not be conditional. He was again asked to produce the genuineness of his claim and file statement on 20th June, 1996. On 20th June, 1996, counsel stated that certain agricultural receipts were in cash for which no record was available and original agreements of the family members were not traceable. On 18th June, 1996, revised return surrendering agricultural income was filed. The AO, taking it to be a case of escaped assessment, issued notice under Section 148 of the Act on 16th Oct., 1996 and after accepting the revised returns under Section 143(3) r/w Section 147 of the Act, initiated penalty proceedings under Section 271(1)(c) of the Act.

3. The stand of the assessees was that since agricultural income was voluntarily surrendered before being detected by the authorities, no penalty was leviable. This explanation was rejected. Decision of the Hon'ble Supreme Court in Sir Shadi Lal Sugar & General Mills v. CIT : [1987]168ITR705(SC) was held to be distinguishable. Instead decisions in CIT v. Dr. Sajjan Singh Malik ; CIT v. J.K.A. Subramania Chettiar : [1977]110ITR602(Mad) ; Amjad AM Nazir AH v. CIT : [1977]110ITR419(All) ; Addl. CIT v. Radhey Shyam : [1980]123ITR125(All) and Mahavir Metal Works v. CIT were held to be applicable. It was held that the assessees furnished inaccurate particulars of income. Penalty equal to 100 per cent of the tax was levied. On appeal, the CIT(A) upheld the order. The explanation that agricultural operations were being managed through one Mr. Palla of village Khurza was found not to be acceptable. The order of the CIT(A) has been affirmed by the Tribunal. In paras 17 to 23, the Tribunal held as under :

17. As per settled law, the question of concealment of income or furnishing of inaccurate particulars of income for purposes of Section 271(1)(c) of the IT Act is to be determined with reference to the original return. Even if income is surrendered in the revised return, the assessee still have to explain why the income was not shown and why inaccurate particulars of income were furnished in the original return. In case of bona fide error or a case of technical or venial breach of statutory provisions, the assessee might not be held guilty of default under Section 271(1)(c) where the assessee fully co-operated, with the Revenue authorities. On the other hand, when from the very beginning, the assessee intentionally concealed some income or furnished inaccurate particulars of income, there is no question of assessee's escaping penalty on account of filing of revised return. In this connection, apart from the decision relied upon by the Revenue authorities, I would like to draw attention to the following decisions:

(i) Vadilal Ichhachand v. CIT : [1957]32ITR569(Bom)

(ii) Ayyasami Nadar & Bros. v. CIT : [1956]30ITR565(Mad)

Blameworthiness attached to the assessee with reference to the original return cannot be avoided by filing a fresh return after concealment was detected by the AO.(iii) Bachumal Uttam Mal v. CIT Taxation 424 (Raj)

(iv) Delhi Automobiles (P) Ltd. v. CST 84 STC 271 (Del)

Where the surrender of income made in the revised return was not voluntary but was as a result of detection by the AO, the filing of the revised return is of no consequence.(v) Biland Ram Hargan Dass v. CIT : [1988]171ITR390(All)

18. Further in the case of CIT v. J.K.A. Subramania Chettiar : [1977]110ITR602(Mad) , their Lordships of Madras High Court held as under:

Section 139(5) applies only to a limited category of cases where in the original return there was any omission or any wrong statement and not to cases of concealment of false statements. If a case does not fall under Section 139(5), the fact that the revised return was filed before any investigation was started by the IT Department will be of no consequence. The fact that the assessee furnished the particulars before any detection was made by the Department or not will be relevant only when the CIT is considering the question whether the minimum penalty imposable under Section 271(1) should be waived or reduced, on an application made by the assessee under Section 271(4A), but they are foreign to the scope of Section 271(1)(c).18.1. The same view has been taken in the following cases:

Ganga Parsad v. CIT : [1980]123ITR349(All) : Sulemanji Ganibhai v. CIT : [1980]121ITR373(MP) ; Mohd. Ibrahim Azimullah v. CIT : [1981]131ITR680(All) ; CIT v. Haji P. Mohammad (1981) 132 ITR 623; Kumar Jagadish Chandra Sinha v. CIT : [1982]137ITR722(Cal) ; Nav Nirman Co. v. CIT : [1984]148ITR703(MP) ; Union Engineering Co. v. CIT 0065/1979 : [1980]122ITR719(Ker) ; Add/. CIT v. Radhey Shyam : [1980]123ITR125(All) ; Badshah Prasad v. CIT : [1981]127ITR601(Patna) ; CIT v. P.T. Antony & Sons : [1985]151ITR34(Ker) .19. It is evident from above that the question of filing of revised return or claim of surrender/disclosure of income before its detection is immaterial for purpose of Section 271(1)(c) where default is intentional in the first return. As explained by their Lordships of Madras High Court in the case of CIT v. J.K.A. Subramania Chettiar (supra) 'surrender before detection' is relevant for purposes of waiver or reduction of penalty under Section 271(4A) (now 273A) of IT Act or various voluntary disclosure schemes issued by the Government from time to time enabling the assessee to disclose income which they earlier did not disclose in the return. The benefit of scheme is granted for a particular period and on satisfaction of certain conditions. One of the conditions generally prescribed is that disclosure should be made before it is detected. Above scheme is not applicable to general cases falling under Section 271(1)(c) of the IT Act like the cases in these appeals.

19.1. Under Section 271(1)(c) of the IT Act, the question to be considered is whether the assessee concealed the particulars of his income or furnished inaccurate particulars of such income in the, first return. There is no requirement of 'detection before surrender of income', Explanations have been added-to the above Section 271(1)(c) in order to make task of the Revenue less difficult. The main purpose of Explanation is to shift burden in certain cases to the assessee and also to provide cases of deemed concealment or deemed furnishing of inaccurate particulars of income.

19.2 As per Expln. 1(A) to the sub-section, if a person fails to offer an explanation of any facts material to computation of total income, then amount added in the total income of such person would be deemed to represent income in respect of which particulars have been concealed for purposes of Section 271(1)(c) of the IT Act. The above Explanation is attracted in this case. Besides, the case is also covered by the provision of main Section 271(1)(c).

20. The assessee here claimed portion of income as having been derived from agriculture and, therefore, disclosed the same for rate purposes only. This was deliberate and conscious act and not an omission or any wrong statement which could be later 'discovered' to justify the filing of the revised return. After inquiries were carried by the Revenue, these assessees accepted that agricultural income was part of total assessable income by including above income in the total taxable income in the so-called revised return. The AO thereafter issued notice under Section 148 of the IT Act. In response to above notice, the assessees again accepted agricultural income as part of total income chargeable to tax. The validity of reassessment proceedings could not be and was not questioned before me and, therefore, validity of returns filed by the assessees is not material. The Revenue is correct in contending that having accepted agricultural income as part of total income, the case of furnishing of inaccurate particulars of income stood established. Nothing was retired to be proved by the Revenue.

21. The learned Counsel for the assessee, however, contended that surrender made in the revised return was subject to certain conditions. There is no provision to make a conditional surrender. At any rate, the assessee having admitted so-called agricultural income as part of total income, the Revenue had nothing further to prove. The Revenue could rely upon assessee's admission. But this admission like other admissions could be proved to be erroneous and not reliable. But except assertion and arguments, nothing has been done by the assessee. Further, it was open to the assessee to establish that the amount surrendered was in fact, agricultural income and rightly shown in the original return notwithstanding the surrender. But no material is available on record to prove any assertion or claims of the assessee. The findings of learned CIT(A) on any of the facts found by her have not been shown to be erroneous. Her decision not to admit additional evidence sought to be filed before her has not been challenged before me. No material whatsoever has been placed before me to show that the assessee had income from agriculture as shown in the original return. I, therefore, confirm that the assessees failed to show that they have income from agriculture as disclosed in the original return. It is, therefore, a case of no explanation in terms of Expln. 1(A) to Section 271(1)(c) of the IT Act and levy of penalty is fully justified.

22. The learned Counsel for the assessee laid considerable stress that in some other cases on similar facts, the Revenue authorities either did not initiate or cancelled penalties under Section 271(1)(c) of the IT Act. The facts and circumstances considered by the officers in all the cases are not before me and, therefore, it may not be proper to comment adversely on the conduct of those officers who took a contrary view. Consistency has to be maintained. Yet error cannot be perpetuated.

In this case, after independent consideration of facts and material, I have held that penalty under Section 271(1)(c) is exigible and rightly imposed. I leave the matter without comments.

23. The learned Counsel for the assessee vehemently argued that penalty is not exigible in the light of decision of Hon'ble Supreme Court in the case of CIT v. Suresh Chandra Mittal : [2001]251ITR9(SC) , where their Lordships of Supreme Court affirmed the decision of Hon'ble Madhya Pradesh High Court by observing that no interference with the order of the High Court is called for. I have, therefore, to consider the High Court decision. The Hon'ble High Court as per report in CIT v. Suresh Chandra Mittal : [2000]241ITR124(MP) reproduced the following finding of fact recorded by the Tribunal:

The assessee had no chance of carrying through his explanation and the AO too did not record any finding as to the acceptability or otherwise of the explanation of the assessee. Under these circumstances, the proviso to Expln. 1 to Section 271 is not attracted. The Revenue did not at all discharge the burden to prove that there was concealment of income by the assessee. It simply rested its conclusion on the act of voluntary surrender by the assessee which obviously was done in good faith and to buy peace.23.1 Their Lordships thereafter held as under:

In the present case, though it is true that the assessee had not surrendered at all and that he had done so on the persistent queries made by the AO, but once the revised assessment was regularised by the Revenue and once assessing authority had failed to take any objection in the matter, the declaration of income made by the assessee in his revised returns and his explanation that he had done so to buy peace with the Department and to come out of vexed litigation could be treated as bona fide in the facts and circumstances of the case. Therefore, the Tribunal was justified in cancelling the penalty levied by the AO and affirmed by the CIT(A) in the facts and circumstances of the case. This reference is accordingly answered in the affirmative holding that the Tribunal was justified in doing so.23.2 From-the above, it clearly emerges as under:

(i) The Tribunal as a finding of fact found that the AO did not consider explanation of the assessee, not recorded any finding of its acceptability or otherwise.

(ii) That Expln. 1 to Section 271(1)(c) was not attracted and the Revenue failed to prove that there was concealment of income.

(iii) That surrender was made by the assessee in good faith and to buy peace with the Department and to come out of vexed litigation.

4. The above discussion by the Tribunal clearly shows that it was not a case of bona fide voluntary disclosure but only to avoid consequences of law. It is not possible to hold that in every case, mere surrender of income will foreclose any action for concealment of income. Judgments of the Hon'ble Supreme Court in Sir Shadi Lal (supra) and CIT v. Suresh Chandra Mittal : [2001]251ITR9(SC) have rightly been distinguished by the Tribunal. Findings recorded by the Tribunal cannot be held to be perverse in any manner, the same being based on relevant material. The assessees have been held to be members of the same family and it has also been found that revised returns were filed on coming to know about detection of concealment. A Division Bench of this Court in Padam Kumar Garg v. ITO and Anr. (2005) 26 ITR 26, held that assessee could not escape penalty merely on the ground that he had surrendered the amount. Similar view has been taken in P.O. Joseph & Bros. v. CIT (2000) 158 CTR (Ker) 104 : (2000) 240 ITR 818 and CIT v. Sudharshan Silks & Sarees : [2002]253ITR145(KAR) .

Accordingly, no substantial question of law arises.

The appeals are dismissed.