Income Tax Appellate Tribunal - Mumbai
Sidhivinayak Chemicals (P.) Ltd. vs Assistant Commissioner Of Income-Tax on 14 October, 1994
Equivalent citations: [1995]52ITD226(MUM)
ORDER
K.C. Singhal, Judicial Member
1. These are two appeals by the assessee against the order of the CIT(A) Bombay pertaining to assessment years 1983-84 and 1984-85. In both the appeals, the facts and issue involved being common, for the sake of convenience both the appeals are being decided by this common order.
2. The issue involved in both the appeals is in respect of levy of penalty under Section 271 (1)(c) for concealment of particulars of income. The facts in both the appeals are identical. The assessee is a private limited company which had filed returns of income for assessment years 1983-84 and 1984-85 declaring loss of Rs. 12,320 and Rs. 2,51,090 respectively on 27-3-1986. As per the balance sheet filed along with the return, there was increase in the share capital and loans from unsecured creditors. The increase in share capital was Rs. 2,24,000 and Rs. 2,54,000 while in respect of unsecured loans it was Rs. 15,973 and Rs. 1,21,000 in respect of assessment years 1983-84 and 1984-85 respectively. But no details were filed by the assessee in respect of such increase. The Assessing Officer in the course of assessment proceedings asked the assessee to furnish details in respect of these cash credits. In spite of various opportunities given to the assessee, it did not produce any details whatsoever before the Assessing Officer. The Assessing Officer therefore made exparte assessment on 23-3-1987 and assessed the receipt by way of increase in share capital and unsecured loans as income from undisclosed sources. The penalty proceedings under Section 271 (1)(c) were also initiated in respect of these additions by the Assessing Officer while completing the assessment proceedings.
3. As appeal was filed by the assessee before the CIT(A) who also confirmed the order of the Assessing Officer vide his order dated 17-8-1990 as according to him the assessee did not even file any evidence before him. He also held that the assessee has not even discharged the primary onus of disclosing the basic material facts which lay upon it.
4. An application for rectification under Section 154 was filed by the assessee before the CIT(A) wherein it was stated that details of unsecured loans and share capital had been given to the CIT(A) as per assessee's letters dated 14-10-1987 and 30-11-1987, The CIT(A) perused the record and dismissed the application of the assessee filed under Section 154 vide order dated 6-5-1991 holding that though the list of shareholders and unsecured creditors along with their addresses and GIR Nos. had been filed by the assessee yet these could not be held as evidence to prove the cash creditors.
5. The matter was carried to the Tribunal. Though the Tribunal confirmed the ex parte order under Section 144 yet some relief was given in respect of share capital in addition. It accepted the share capital amount received from Maharashtra State Financial Corporation amounting to Rs. 25,000 relating to assessment year 1983-84 and Rs. 1,61,000 relating to assessment year 1984-85. Rest of the additions in respect of share capital and unsecured loans were confirmed. Though some other relief in respect of depreciation, etc., was given but we are not concerned with them as these are not in dispute.
6. In the course of penalty proceedings also, the assessee neither produced any details nor any explanation before the Assessing Officer in spite of various opportunities given to it. Therefore, relying upon the findings of the assessment proceedings the Assessing Officer imposed penalty for concealment of particulars of income for both the years under Section 271(1)(c) vide his orders dated 25-3-1991. The CIT(A) also confirmed the orders of penalty by a common order dated 5-12-1991 in respect of the additions in dispute before us. He also justified the penalty by applying Explanation 1 to Section 271 (1) (c). It was also held by him that mens rea was not required in view of the Supreme Court judgment in the case of R.S. Joshi v. Ajit Mills AIR 1977 SC 2279 and Gujarat Travancore Agency v. CIT [1989] 177 ITR 455. He also stated that the assessee had not filed any evidence before him. The assessee has filed appeals against this order of the CIT(A) before the Tribunal.
7. The learned counsel for the assessee has been heard at length. The first contention raised by him was that the CIT(A) was not justified in invoking the Explanation 1 to Section 271(1)(c). He referred to the penalty notices appearing at pages 26 and 27 of the paper book to show that the Assessing Officer did not invoke the Explanation 1 to Section 271(1)(c). He also referred to the order of assessment wherein also the said Explanation had not been invoked while directing the office to issue penalty notices. It was also stated by him that even in the orders of penalties there is no mention of the said Explanation. The crux of the argument was that it is only the Assessing Officer who could invoke the Explanation while levying the penalty and no other authority is empowered to invoke the same. In support of his contention he relied upon the judgment of Bombay High Court in the cases of CIT v. P.M. Shah [1993] 203 ITR 792 and CIT v. Dharamchand L. Shah [1993] 204 ITR 462.
8. On the other hand the learned departmental representative argued that the appeal proceedings are in continuation of the assessment proceedings and therefore the CIT (Appeals) could do what the Assessing Officer could have done. The crux of his argument was that the CIT (Appeals) could correct the mistake committed by the Assessing Officer. In support of his contention he relied upon the judgment of the Hon'ble Supreme Court in the cases of CIT v. Kanpur Coals Syndicate [1964] 53 ITR 225, Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688, CIT v. McMillan & Co.[1958] 33 ITR 182 and Kapurchand Shrimal v. CIT [1981] 131 ITR 451. He also submitted that the Bombay High Court judgments are distinguishable as in those cases the Explanation was never applied by the CIT (Appeals).
9. After considering the rival contentions we are of the view that the contention of the assessee has force. The jurisdictional High Court in the case of P.M. Shah (supra) and Dharamchand L. Shah (supra) has clearly held that the Explanation can be applied only when the Assessing Officer has invoked the same at the time of issuing notice itself. We have perused the notices issued by the department and do not find the applicability of the said Explanation by the Assessing Officer. This fact had been conceded by the learned departmental representative in the course of the hearing before us. There cannot be any dispute about the legal contention of the revenue that power of the CIT (Appeals) is coterminous with that of the Assessing Officer. But this power is subject to limitations and restrictions placed by the statutory provisions. The reading of Section 271 shows that it is the satisfaction of that authority regarding the concealment of particulars of income or furnishing of inaccurate particulars of income who has to levy the penalty. This satisfaction of the authority levying the penalty cannot, therefore, be substituted by any other authority. The restriction on the powers of CIT (Appeals) is implicit in the provision of Section 271 itself. However, the Hon'ble Bombay High Court has held that where the Explanation has not been invoked by the Assessing Officer then the Asstt. Commissioner in reference could not invoke the Explanation. Since the judgment of jurisdictional High Court is binding upon us and we hold that the CIT (Appeals) was not justified in invoking the Explanation.
10. The next contention of the assessee is as under :-
(i) That in the absence of application of Explanation 1, the onus lies upon the revenue to establish the mens rea on the part of the assessee as the penalty proceedings were quasi-criminal in nature and the CIT (Appeals) was not justified in holding that mens rea was not required in view of Supreme Court's judgments.
(ii) That the ratio laid down by the Hon'ble Supreme Court in the case of CIT v. Anwar Ali [1970] 76 ITR 696 would apply to the facts of the present case. Therefore, the penalty cannot be imposed on the mere findings arrived at in the course of assessment proceedings as these findings, though relevant, are not conclusive.
(iii) That all the facts on the record should be taken into consideration in deciding the justification of penalty imposed by the Assessing Officer.
(iv) That addition on account of unexplained share capital is itself highly debatable in view of the two judgments of the Delhi High Court in CIT v. Stellar Investment Ltd. [1991] 192 ITR 287 and CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (FB).
(v) That Section 68 is only a deeming provision for assessment purpose only but it should not be applied in the penalty proceedings.
On the other hand the departmental representative's contentions are as under :-
(i) That on facts the additions have been confirmed by the Tribunal and therefore that has to be treated as income of the assessee.
(ii) The assessee has not discharged the burden of disclosing even the primary facts in respect of additions made by the Assessing Officer. No details whatsoever were furnished by the assessee before the Assessing Officer.
(iii) The revenue has discharged its burden by showing the conduct of the assessee of withholding the basic facts which in itself amounts to concealment.
(iv) That even in the penalty proceedings the assessee did not come forward with any details whatsoever before the Assessing Officer in spite of sufficient opportunities given to the assessee.
In support of his contention he also referred to the decision of the Tribunal in Third Member case in the case of B. Tex Corporation v. ITO [1993] 202 ITR 17 (Bom.).
11. Both the parties have been heard at length and the material placed before us had been perused. There cannot be any dispute about the legal position taken by the assessee that in the absence of application of Explanation the law declared by the Supreme Court in Anwar All's case (supra) would apply. Penalty proceedings being quasi-criminal in nature the onus lies on the revenue to prove that there is concealment of the particulars of the income by the assessee. The CIT (Appeals) is wrong in holding that mens rea was not required in view of Supreme Court's judgments in the case of Ajit Mills (supra) and Gujarat Travancore Agency (supra). These Supreme Court's judgments are, in our opinion, distinguishable as they were rendered in different context. There the Court was concerned with penalty for late filing of return where Legislature has not used the word deliberately. But in the present case we are concerned with concealment. The word "concealed" itself shows the guilty state of mind. Therefore, we agree with the learned counsel for the assessee that ratio of judgment of Supreme Court in the case of Anwar Ali (supra) would apply and therefore onus would lie on the revenue to show the concealment on the part of the assessee.
12. Let us examine whether the respective burden have been discharged by both the parties. The word "concealment" has not been defined in the Act. According to the Black's dictionary it means :-
'Concealment' : - To conceal. A withholding of something which one knows and which one, in duty, is bound to reveal. A 'concealment' in law of Insurance implies an intention to withhold or secretes information so that the one entitle to be informed will remain in ignorance.
While according to Webster's dictionary it means ;-
Concealment: - The act of concealing, or state of being concealed. 2. A hiding .place.
Therefore, where a fact which is in the special knowledge of a particular person and he hides or withholds the same from the knowledge of other, he can be said to have been concealed the said fact. Hence a person can be said to have concealed the particulars of income only when he is under obligation to disclose the same and withholds the same from the knowledge of the Assessing Officer. Since it is the duty of the assessee to disclose the basic and primary facts which are within his special knowledge, he would have disclosed the relevant details in respect of increase in the share capital and unsecured loans either in the return or in the course of assessment proceedings. Even if the same were not disclosed and the additions had been confirmed by the Tribunal, the assessee had also a chance to disclose them in the course of penalty proceedings to show prima facie that receipts in question were not the income of the assessee. We have perused the material placed before us and the orders of the Assessing Officer was well as the CIT(A) but we do not find anything about the existence of any of the details before the Assessing Officer.
13. The learned counsel for the assessee has referred to the details furnished by the assessee before the CIT(A) along with the letters dated 14-10-1987 and 30-11-1987. These details are at pages 33 to 39 of the paper book which are in form of list of shareholders showing name plus addresses plus GIR Nos. and cumulative shareholding by them at the end of the year- plus also list of creditors from whom the money has been received. First of all, we may mention that these details were never available with the Assessing Officer who levied the penalties and therefore the Assessing Officer had no opportunity to consider these details. Even the CIT(A)'s original order dated 17-8-1990 did not indicate about these details being filed by the assessee. It is only the rectification order of the CIT(A) under Section 154 which indicates that these details were filed by the assessee. But that order of the CIT(A) is subsequent to the order of the penalty passed by the Assessing Officer. Therefore, we hold that Assessing Officer has no knowledge of the said details filed before the CIT(A). Therefore, to our opinion, the learned Sr. Departmental Representative was right in contending that onus has been discharged by the revenue by showing the conduct of the assessee in withholding the basic any primary facts which assessee was under obligation to disclose being within its special knowledge. Such withholding of facts by the assessee amounts itself to concealment.
14. Let us also examine the other aspect of the contention of the assessee whether on the basis of details filed by assessee before the CIT(A) penalty could be justified. After perusing the said details we are of the opinion that the said details furnished by the assessee did not make out a prima facie case that receipt in question was not the income of the assessee. As already mentioned, these details are in the shape of list of shareholders along with their addresses and GIR. Nos. as well as list of creditors with their addresses and GIR Nos. from whom the loans were received. It was conceded by assessee's counsel that these shareholders and the creditors in respect of whom additions have been made are either directors of the assessee-company or the close relatives of these directors. Therefore, this information was within the special knowledge of the assessee and if it did not furnish the details about these cash credits, the only inference which can be drawn is that the assessee wanted to hide the same from the Assessing Officer. The assessee had every chance to file these details in the assessment proceedings as well as penalty proceedings. But it chose not to furnish the same for the reasons best known to it. Even it is not known whether the payment is through cash or cheque. The dates of the transactions are also not known. Even before us, no other material has been brought. Even at this stage the assessee has not made any request for producing any other material. His only contention was that on the basis of information of the record, it could not be said that there was concealment of particulars of income by assessee. Mere information given by assessee before CIT(A) is not sufficient to hold against the revenue. In view of this special non-cooperative attitude of the assessee we hold that it concealed the particulars of income which it was under the obligation to furnish the same. The revenue cannot be expected to discharge the onus which is impossible.
15. The ratio of judgment of the Supreme Court in the case of Anwar Ali (supra) is relevant only when the assessee tenders explanation which is found to be unbelievable. It is in this context that the Hon'ble Supreme Court held that finding in assessment proceedings are not conclusive. Merely the explanation of the assessee has not been believed no penalty could be levied in the absence of additional material brought by the revenue. But this ratio cannot be applied to the case where the assessee adopts a negative attitude and neither gives any explanation nor furnishes any particulars about the money received in the previous year. It has been clearly stated by the Supreme Court that findings in the assessment proceedings are relevant though not conclusive. In the present case the confirmation of additions in the assessment proceedings has been made by the final fact-finding authority and that finding is to our opinion, not only relevant but also conclusive in the penalty proceedings inasmuch as no cogent material has been placed either before the Assessing Officer or before the CIT(A) or before the Tribunal. Mere furnishing of the information in the form of list of shareholders and creditors without the supporting evidence or material is not sufficient to make out even a prima facie case in favour of the assessee. We, therefore hold that the assessee has deliberately not furnished the particulars of income for the reasons best known to it which, in our opinion, amounts to concealment of the particulars of income by the assessee. The CIT(A) was therefore justified in confirming the penalty.
16. Since we have held on merits that there is concealment of particulars of income, we refrain ourselves from expressing our view in respect of other legal contentions raised by the assessee. However, we may also mention that the learned counsel for the assessee had argued that the CIT(A) was not justified in observing that no explanation had been filed by the assessee. He pointed out about the letter written by the assessee before the Assessing Officer which appears at page 28 of the paper book. This letter is dated 1-12-1988. It has been examined by us and we find that no explanation has been tendered in that letter of the assessee and the assessee has merely requested for keeping the penalty proceedings in abeyance till the decision of the CIT(A). Therefore, the contention of the assessee that explanation had been filed is without force.
17. In view of the above discussions, the appeals for both the years are dismissed.