Income Tax Appellate Tribunal - Jabalpur
Jainarayan Moolchand Agrawal (Decd) ... vs Assistant Commissioner Of Income Tax on 7 July, 2006
Equivalent citations: [2007]109ITD275(JAB), (2006)104TTJ(JAB)854
ORDER
U.B.S. Bedi, J.M.
1. This appeal of the assessee is directed against the order passed by learned CIT(A)-I, Jabalpur, dt. 17th March, 2005 relevant to asst. yr. 1991-92 whereby confirmation of penalty of Rs. 60,000 imposed under Section 271(1)(c) has been challenged.
2. This appeal was earlier treated as unadmitted and as such was dismissed vide order dt. 2nd Nov., 2005 and on the application of the assessee said order of the Tribunal was recalled vide order dt. 31st March, 2006.
3. The assessee in this case is found to have paid less fee in as much as challans of Rs. 500 was enclosed with the memo of appeal and since the amount of the Tribunal fee paid was less than the prescribed amount of Rs. 4,539, so a defect memo was issued to the assessee about short payment of Rs. 4,039 and in response thereto, the assessee asserted in the written communication that his case falls under Section 253(6)(d) of the Act as the appeal is against the penalty and not against the quantum, so the fee of Rs. 500 has rightly been paid by the assessee and the objection as raised should be dropped.
4. When after recalling of the order, the case was fixed for first hearing on 6th April, 2006, the assessee's counsel requested for adjournment which was granted and the assessee's counsel was reminded that fee paid is short by Rs. 4,039. The case was adjourned for 25th April, 2006, when again the assessee filed application for condonation of delay taking the plea that the assessee is still of the opinion that the fee is payable at Rs. 500 only, however, to purchase peace and to avoid dispute, he has paid difference of fees of Rs. 4,039 on 19th April, 2006 at SBI Nainpur. So it was requested that delay, if any, in payment of fees may be condoned and appeal be admitted and heard on merits.
5. Learned Departmental Representative opposed the move of the assessee and in view of Special Bench decision in the case of Bidyut Kumar Sett v. ITO (2004) 85 TTJ (Cal)(SB) 896 : (2005) 142 Taxman 50 (Cal)(SB)(Mag) pleaded that since the assessee is pleading that fee of Rs. 500 has correctly been paid so his appeal should not be admitted as delay caused in payment of deficient fee cannot be said to be in good faith which is to be taken as date of filing the appeal.
6. Both sides have been heard on the point of admission of the appeal and case law cited has been gone into. The right of appeal is neither an absolute right nor an ingredient of natural law of justice, principles of which must be followed in all judicial and quasi-judicial adjudications. The right to appeal is a statutory right and it can be circumscribed by the condition in the grant. If this statute gives a right to appeal upon certain condition, it is upon fulfillment of these conditions that the right becomes vested in and exercised by the appellant [reference can be made to Vijay Prakash D. Mehta and Anr. v. Collector of Customs ].
7. In this case, the assessee has not shown any valid reason for not preferring the fee of appeal within prescribed time because only on payment of full Tribunal fee, the appeal would be treated to have been filed and in this case deficiency in payment of fee has been made good on 19th April, 2006 so the assessee was required to explain the delay beyond 8th June, 2005 till 19th April, 2006. The assessee is still of the opinion that fee payable is Rs. 500 whereas Special Bench of the Tribunal in the case of Bidyut Kumar Sett v. ITO (supra) Calcutta Tribunal Special Bench, has held that Tribunal fee against the penalty under Section 271(1)(c) was to be in accordance with the income determined as provided under Section 253(6)(a)(b)(c) and not under Section 253(6)(d), as contended by learned Counsel for the assessee, and relevant conclusion is as under-
The words 'in the case to which the appeal relates' which appear in cls. (a) to (c) of Section 253(6) only refer to the proceedings relating to the assessee in whose case the penalty order has been passed. These words should not be understood in a restrictive sense and must be broadly construed so as to cover all appeals which are filed in the case of the assessee where the appeal is filed against an order which is based on the quantum of income assessed. An order levying penalty for concealment is undeniably connected with the assessment order or more particularly with the total income computed by the AO. It may be that the penalty is levied only with reference to the tax sought to be evaded on the concealed income but the concealed income does form part of the assessed income as computed by the AO and that is sufficient to establish the nexus between the amount of income assessed by the AO and the concealed income and also establish the requisite relationship between the assessed income and the filing fee. If the legislature wanted to provide for the filing fee based on the quantum of income assessed only in the case of appeals filed against the assessment order, then they could have easily used a much simpler phraseology in cls. (a) to (c) as has been done in Section 246 which provides for appeals to the CIT(A). However, since the expression 'in the case to which the appeal relates' has been coined in cls. (a) to (c), it indicates a clear intention on the part of the legislature to link the filing fee with the amount of income assessed by the AO in cases of all appeals which have a relation with the amount of income assessed including appeals against penalty for concealment. The residuary clause takes care of all appeals, including appeals' against certain penalties which have no nexus with the amount of income assessed.
8. Though the assessee has not shown his bona fides and he has just made good the deficiency only to purchase peace and to avoid dispute yet fact of the matter is that the assessee has paid the full amount of Tribunal fee and if any lapse is found to be there that could at the most be attributable to the advise received by him and not to him. It is to be seen whether delay involved could be condoned or not because the appeal can at the most be taken to have been filed on the date when the deficiency in fee has been made good.
9. Similar situation arose before Tribunal Bench 'A' Delhi in WTA No. 1347 and 1348 of 1990 in the case of Mohan Anand v. WTO (1999) 68 IYD 541 (Del) wherein, the order of CWT(A) against non-entertainment of appeal for not depositing wealth-tax on returned wealth before filing of the first appeal was under challenge and Delhi 'A' Bench vide order dt. 31st July, 1998 (which is authored by the me) has drawn following finding and conclusion from paras 7 to 10 as under-
7. We have heard the rival submissions, perused the record and gone through the orders of the learned CWT(A) and case laws as cited. From the facts as appearing from the record, we find that the assessee had been able to show sufficient reasons for late payment of admitted tax and specific request was made before the CWT(A) to admit the appeal relying upon the judgment of the Hon'ble Supreme Court whereas he, without considering the case law cited, has dismissed the appeal as unadmitted. Since with all necessary evidence and documents it was shown to the learned CWT(A) that assessee's financial position was bad at the time of filing of the appeal and as and when he was able to arrange the amount, he deposited the same against admitted tax liability of wealth-tax for the years under consideration and payments of admitted tax were made before any effective step for entertaining/admitting the appeal was taken as first notice in this caste was admittedly issued on 30th March, 1990, therefore, in our view, these appeals became entertainable on depositing of admitted tax and our view finds support from the judgment of Hon'ble Supreme Court in the case of Lalta Prasad Khinni Lal v. AC (Judl) Sales-tax 1972 CTR (SC) 158 : (1972) 4 SCC 505, wherein it was held as under:
A Full Bench of the Allahabad High Court considered the question of the applicability of Section 5 of the Limitation Act to a case where the admitted amount of tax is not deposited by the appellant within the time prescribed for filing the appeal in Fanta Cycle and Motor Mart v. Asstt. CIT (J) III, Sales-tax Kanpur Range and Anr. The Full Bench relied on an observation of this Court in Lakshmiratan Engineering Works Ltd. v. Asstt. CIT (J) I, Sales-tax, Kanpur and Anr. with regard to the meaning of the word "entertain". According to that decision "entertain" meant the first occasion on which the Court took up the matter for decision. It might be at the admission stage or if by the rules of the Tribunal the appeals were automatically admitted it would be the time of the hearing of the appeal. The High Court considered that according to the aforesaid decision of this Court when the first proviso is read with the main provision of Section 9(1) of the Act the deposit also had to be made within limitation. The High Court came to the conclusion that Section 9(6) of the Act could not be applied and Section 5 of the Limitation Act was not attracted when the question arose whether the delay in depositing the admitted tax should be condoned.
We are wholly unable to comprehend and appreciate the above reasoning or the conclusion of the Allahabad High Court on the point under consideration. It is true that an appeal filed under Section 9 of the Act cannot be entertained by the appellate authority unless satisfactory proof is adduced of the payment of tax admitted by the appellant to be due but in a case where the amount of admitted tax is deposited after the period of limitation has expired all that will happen is that the appeal will become entertainable only on the day on which satisfactory proof of payment of that amount is produced. In other words, the appeal will be deemed to have been properly filed on the date on which the amount of admitted tax is paid. If that is beyond the period of 30 days the appeal will be barred by time. Section 9(6) will immediately become applicable to that appeal and it will be open to the appellant to apply for condonation of delay under that provision. We are wholly unable to follow the argument that the deposit of the amount of admitted tax must be made within 30 days even though the delay in filing the appeal can be condoned under Sub-section (6). A proper and correct reading of Section 9 cannot justify such an approach. If a petition of appeal has been filed without proof of payment of tax accompanying it that appeal can be said to have been preferred only when proof of payment of tax is furnished. Such furnishing of the proof may take place within the period prescribed for preferring the appeal or after the lapse of that period. If the proof of payment of admitted tax is furnished within the period prescribed the appeal must be entertained. If the furnishing of that proof is done after the expiry of the period of limitation the question will arise whether the appeal should be entertained or not. In such cases Section 9(6) will come into operation and the question will arise whether there has been sufficient cause for not preferring the appeal within the statutory period. The correct approach is to treat the appeal as having been preferred on the date on which proof of payment of the tax was furnished and then to see whether under Sub-section (6) of Section 9 there was sufficient cause for excusing the delay in preferring the appeal....
The Allahabad High Court appears to have been greatly influenced by the decision of this Court in Lakshmiratan Engineering Works Ltd. v. Asstt. CIT (J)I, Sales-tax, Kanpur and by the meaning of the word "entertain" as explained there. We have found considerable difficulty in discovering how that decision could afford any assistance to the respondents in the present case. Indeed according to that decision the words "no appeal shall be entertained" in the proviso to Section 9 do not denote the filing of the memorandum of appeal but refer to the point of time when the appeal is being considered. Therefore, though the memorandum of appeal filed within time is not accompanied by the treasury challan showing payment of tax, if before the appeal is being considered satisfactory proof of payment of tax is given, then the proviso to Section 9 is satisfied. In the present case when the assessee produced the necessary documents which showed that the deposit of the full amount had been made by 27th May, 1966, the appeal became entertainable. It only suffered from the defect that it was barred by time on that date. The assessee could, therefore, apply under Section 9(6) for extending the period of limitation in accordance with Section 5 of the Limitation Act. It is entirely a different matter whether on the facts of the present case the appellate authority would have condoned the delay or not but to say that the appellate authority had no jurisdiction to extend the time simply because the amount of admitted tax had been deposited beyond the period of 30 days would be wholly erroneous and would not represent a true and correct view of the provisions of Section 9. It may be pointed out that the case of Lakshmiratan Engineering Works (supra) on which the High Court largely relied did not involve the question of the extension of the period of limitation under Section 9(6). Indeed, in om judgment the word "entertain" in Section 9(1) has hardly any material bearing on the point under consideration.
8. In another case of Sadhna Enterprise v. CSTMP 54 STC 172, it was held, non-payment of tax assessed at the time of filing of appeal but depositing the tax before appeal taken up for hearing on notice to show cause for dismissal of appeal for non-payment of tax-Summary dismissal of appeal for non-deposit of tax-Not justified-Following Babulal Mohanlal Kandel v. CST (1981) 47 STC 60 (MP) and in this case SLP was also dismissed by SC [(1987) 64 STC FRSL 9, serial No. 27].
9. Now question arises whether delay could be condoned and our attention is attracted towards the reasons and explanation offered by the assessee supported by material and evidence placed before learned CWT(A), copies supplied to us and after taking into account all these explanations, reasons, etc. and considering all the facts and circumstances and case law as discussed above, we are of the considered view that facts of the case do not conclusively show that the assessee had deliberately intended to avoid payment of admitted tax. On the other hand, assessee has tried to show that he was in acute financial difficulty and moreover the admitted tax had been paid before the appeal was taken up for hearing. Therefore, this is a fit case in which judicial discretion to exempt the assessee from the operation of provisions as contained in Section 23(2A) should have been exercised by the CWT(A) which he has failed to do.
10. We are also of the considered view that if judicial dictum laid down by the decisions as referred to supra is taken into account, it would be appropriate in this case to treat the appeals to have been presented on the day when payment of admitted tax was made and in view of financial hardships and difficulties as faced by the assessee and apparent from the sequence of facts narrated, it is a fit case for condonation of delay. So while accepting the appeal of the assessee we condone the delay and direct the CWT(A) to admit these appeals for hearing and decide the appeals on merits after due opportunity to the assessee. While passing this direction we are well aware that the right of appeal is neither an absolute right nor an ingredient of natural justice the principles of which must be followed in judicial and quasi-judicial adjudication. The right to appeal is a statutory right and it can be circumscribed by the condition in the grant. If a statute gives a right to appeal upon certain conditions it is upon fulfillment of those conditions that the right becomes vested in and exercisable by the appellant. But all other circumstances are also to be taken into account before applying the provisions of law in this regard and in this case assessee conclusively fulfilled the required conditions. So his appeals were held to be entertainable. As a result, appeals of the assessee get accepted.
10. Now adverting to the facts of the present case in relation to admission of the appeal I find that difference between the case in hand and the case decided by the Delhi 'A' Bench of Tribunal is that in this case question about delayed payment of deficit Tribunal fee is there whereas in that case, delayed payment of wealth-tax before the filing of first appeal was there but in both the cases, the deficiency in payment has been made good before the Tribunal or CWT(A) could take up the appeals for effective hearing. Since issue is more or less the same, as the assessee has paid the balance of the Tribunal fee before effective hearing could take place in this case, therefore, following the earlier decision as noted above, I find it just and appropriate to admit the present appeal for hearing which is admitted for hearing.
11. As regards merits of the case, facts indicate that assessee filed return of income on 27th Aug., 1991 under Section 139(1) of the IT Act, showing income of Rs. 54,594. Subsequently, search and seizure operation under Section 132 of the IT Act was conducted at the residential and business premises of the assessee in December, 1991. During the course of search undisclosed assets and incriminating documents were found on the basis of which notice under Section 148 was issued. In response to this notice, return was filed on 28th April, 1992 declaring income of Rs. 83,094. This return contained income from undisclosed sources amounting to Rs. 28,500 which was surrendered during the search. Assessment under Section 143(3) was completed on 31st March, 1994 and income from undisclosed sources were determined at Rs. 3,99,251. The matter went at the appellate stage and finally by the order of Tribunal, the addition on account of undisclosed sources were sustained to the extent of Rs. 1,02,000 and AO after considering the reply of the assessee has imposed the penalty with following observation.
In reply to above notices the assessee submitted a letter dt. 29th May, 2000 stating the additions have been deleted by the Hon'ble Bench of Tribunal, the penalty may be dropped. The reply of the assessee is not tenable. Since the assessee has concealed the true particulars of his income to the extent of Rs. 1,02,000 he is liable for levy of penalty under Section 271(1)(c) of the IT Act 1961.
Keeping in view the above mentioned facts and circumstances of the case, I direct the assessee to pay the penalty of Rs. 60,000 (Rs. Sixty Thousand only) under Section 271(1)(c) of the IT Act 1961.
12. Against the order of imposition of penalty under Section 271(1)(c), the assessee preferred appeal and raised various grounds but CIT(A) while considering but not accepting the pleas of the assessee, has concluded to confirm the action of AO against which the assessee is in further appeal.
13. Learned Counsel for the assessee pleaded before this bench that firstly, penalty could not be imposed as addition made and to the extent sustained was on estimate basis. Therefore, penalty is liable to be deleted and alternatively it was pleaded that since addition sustained to the extent of Rs. 1,02,000 includes addition of Rs. 28,500 which was the amount surrendered at the time of search and disclosed in the return filed in response to notice under Section 148 so penalty with respect to such amount is not imposable at all, therefore, if penalty has to be sustained it should be in relation to Rs. 73,500 and not with respect to Rs. 1,02,000.
14. Learned Departmental Representative while relying on the basis and reasoning as given by the authorities below has pleaded for the confirmation of the impugned order. It was further submitted that assessee in this case, in response to notice in penalty proceeding has stated an incorrect fact that entire addition made by the AO has been deleted by the Tribunal whereas such addition was restricted to Rs. 1,02,000 by Tribunal and not deleted as contended, therefore, Expln. 1 to Section 271(1)(c) comes into operation and penalty is imposable with respect to addition sustained to the extent of Rs. 1,02,000. However, as pleaded by the learned Counsel for the assessee, that immunity from levy of penalty with respect to surrendered amount is available to the assessee for the period when search took place and not before that period. So plea of the assessee in this regard is untenable because provision of Expln. 5 to Section 271(1)(c) with respect to period other than the year in which search took place cannot come to the rescue of the assessee and, otherwise, even on the estimated income penalty is imposable as such plea of the assessee in this regard should be dismissed. It was urged for the confirmation of the impugned order.
15. I have heard both the sides and considered materials on record as well as relevant provisions of law. In this case search took place in the month of December, 1991 and certain incriminating material was found on the basis of which notice under a. 148 was issued in response to which the assessee filed return disclosing additional income which was surrendered during the search amounting to Rs. 28,500 besides the income already disclosed. AO made assessment determining income from undisclosed sources at Rs. 3,99,259 and matter went at appellate stage and finally by the order of Tribunal, the addition on account of undisclosed sources was sustained to extent of Rs. 1,02,000 including Rs. 28,500 surrendered during the search and disclosed by the assessee in the return filed in response to notice under Section 148. The assessee in response to penalty notice has categorically stated in letter dt. 29th May, 2000 that the addition have been deleted by the Tribunal and penalty may be dropped but fact of the matter is that addition to the extent of Rs. 1,02,000 has been sustained by the Tribunal though on estimate basis and this addition includes the addition of Rs. 28,500 which is the amount surrendered by the assessee at the time of the search and disclosed by him in return filed. So in my considered view, provisions of Expln. 1 to Section 271(1)(c), when explanation furnished by the assessee is found to be false, get attracted. Otherwise, in view of the Hon'ble Supreme Court's order in the case of BA. Balasubramaniam & Bros. Co. v. CIT (1999) 157 CTR (SC) 556, penalty can even be imposed on estimated addition also. Relevant head notes and conclusion as drawn by the Hon'ble Supreme Court are reproduced as under:
Penalty under Section 271(1)(c), Explanation-Burden of proof-Difference between income assessed and income returned was more than 20 per cent-Assessee not able to discharge the onus which was on it under the Expln. to Section 271(1)(c)-ITO justified in imposing penalty, notwithstanding the fact that income was assessed on estimate basis-CIT v. BA. Balasubramaniam & Bros. (1984) 40 CTR (Mad) 217 : (1985) 152 ITR 529 (Mad) affirmed; CIT v. Mussadilal Ram Bharose ; CIT v. K.R. Sadayappan and Addl. CIT v. Jeevan Lal Sah Mowed.
Conclusion : Difference between the income assessed and the income returned being more than 20 per cent, the Expln. to Section 271(1)(c) became applicable and the ITO was justified in imposing penalty because the assessee had not been able to discharge the onus which was on it under the said Explanation, notwithstanding the fact that income was assessed on estimate basis.
16. Therefore, in view of the facts and circumstance and in the light of above noted authoritative pronouncement, the orders of the authorities below are upheld to the extent penalty is imposable in this case.
17. So far as amount in relation to which penalty imposable is concerned, it is seen that Tribunal has upheld the addition to the extent of Rs. 1,02,000 including the amount of Rs. 28,500 which was surrendered and disclosed in the return filed by the assessee in response to notice under Section 148. The Hon'ble Madras High Court in the case of CIT v. S.D.V. Chandru , has held a under:
Explanation 5 to Section 271(1)(c) of the IT Act, 1961, provides that in the circumstances set out in paras (1) and (2) of that Explanation, the assessee is not to be regarded as having concealed his income. While cls. (a) and (b) make a clear distinction between the previous year which has ended before the date of the search and a previous year which is to end on or after the date of the search, para (2) in Expln. 5 does not make any such distinction. It refers to the statement given by the assessee at the time of the search under Section 132(4) with regard to the assets found at the time of search being the statement to the effect that such assets have been acquired out of his undisclosed income and the specification by the assessee in such statement with regard to the manner in which such income had been derived, and the subsequent payment by the assessee of the tax on such undisclosed income together with interest. The words in para. (2),"... has been acquired out of his income which has not been disclosed in his return of income to be furnished before the expiry of time specified in Sub-section (1) of Section 139", is not to be read as referring to income so far not disclosed in respect of the previous year which is to end after the date of the search. The words used are "income which has not been so far disclosed in his return of income". The additional words which refer to the time specified in Section 139(1) are only a reiteration of the legal requirement regarding the time within which returns should normally be filed. In cases where the assessee had not disclosed his income in the returns filed for the previous year which had ended prior to the date of the search and in the statement given under Section 132(4), the assessee admits the receipt of undisclosed income for those years and also specifies the manner in which such income had been derived, and thereafter pays the tax on that undisclosed income with interest, such undisclosed income would get immunised from the levy of penalty.
There was a search in the premises of the assessee on 13th Feb., 1990. A statement of the assessee was recorded, under Section 132(4) of the Act, at the time of search. Thereafter, the assessee filed his returns for the earlier year: and admitted a larger income and also paid the tax together with interest. The AO levied penalty. The Tribunal cancelled the penalty. On reference:
Held, that the Tribunal was right in holding that the penalty was not leviable.
18. Since no contrary decision has been cited in this regard, and as per Hon'ble Madhya Pradesh High Court in the case titled as CIT v. G.M. Mittal Stainless Steel Ltd. (2004) 192 CTR (MP) 18 : (2005) 142 Taxman 349 (MP) in the absence of Hon'ble Supreme Court/jurisdictional High Court decision, help can be taken from other High Court decision so in view of Hon'ble Madras High Court decision, as noted above, penalty with respect to Rs. 28,500 surrendered during the search and disclosed in the return after having made payment of tax and interest on the same, could not be imposed. As such while upholding the order of authorities below, that penalty is imposable in this case, I direct the AO to restrict the penalty to minimum imposable amount on the addition of Rs. 73,500 instead of Rs. 1,02,000 and allow necessary relief to the assessee accordingly.
19. As a result the appeal of the assessee gets partly allowed.