Madras High Court
Principal Commissioner Of Income Tax 7 vs M.P.Purushothaman
Author: Abdul Quddhose
Bench: Indira Banerjee, Abdul Quddhose
IN THE HIGH COURT OF JUDICATURE AT MADRAS Reserved on : 01.02.2018 Delivered on : 06.08.2018 CORAM: THE HONOURABLE MS.JUSTICE INDIRA BANERJEE, CHIEF JUSTICE and THE HONOURABLE MR.JUSTICE ABDUL QUDDHOSE T.C.A.No.266 of 2017 Principal Commissioner of Income Tax 7, No.121, Mahatma Gandhi road, Chennai 600 034 ... Appellant Vs. M.P.Purushothaman ... Respondent Prayer: Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against an order dated 05.08.2016 passed by the Income Tax Appellate Tribunal, Madras B Bench in I.T.A.No.1313 /Mds/2008. For Appellant : M/s.Karthick Ranganathan Mr.Vijyakumar Punna For Respondent : M/s.S.Sridhar Mr.A.S.Sriraman JUDGMENT
This tax case appeal has been filed by the Revenue, challenging the order dated 05.08.2016 passed by the Income Tax Appellate Tribunal, Madras B Bench in I.T.A.No.1313 /Mds/2008.
2. The facts leading to the filing of the appeal are as follows:
(i) The assessee being the respondent in the appeal and hereinafter referred to as the respondent assessee is the Chairman & Managing Director of M/s.Empee Group of Companies. The main sources of income of the respondent assessee were from (i) salary income from M/s.Empee Distilleries Limited; (ii) rental income from properties; (iii) income from other sources such as sub-lease income from M/s.Aruna Construction; and (iv) lease rental from M/s.Vasantha Lunch Home.
(ii) The respondent assessee filed return of income for the assessment year 2001 02, declaring total income of Rs.14,68,830/-. The case of the respondent assessee was was selected for scrutiny assessment and notice under Section 143(2) was issued and served on the respondent assessee.
3. By an order of assessment dated 31.03.2004, the Assessing Officer made the following additions/disallowances resulting in assessed income of Rs.1,04,77,36/-, and initiated separate penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961, hereinafter referred to as the said Act.
Sl.No. Addition/ Disallowance Amount Amount Income admitted 14,68,830 1 Loan obtained in 1988-89 inclusive of interest that was shown as gift in assesse's capital account 40,80,000 2 Loan from creditors added as unexplained Cash Credits u/s 68 for want of confirmation & where no interest was paid.
39,62,212 3 Rental income from group company added (After allowing deduction u/s 24(1) of Rs.2,25,000/-) 6,75,000 4 Disallowance of interest (Rs.2,04,225/-) & Commission (Rs.30,900/-) 2,35,125 5 Disallowance of depreciation 45,933 89,98,270 Total assessed income 1,04,67,100
4. Aggrieved by the order of the Assessing Officer, the respondent assessee filed an appeal being I.T.A.No.116/04-05 before the Commissioner of Income Tax (Appeals)-I. The CIT (Appeals)-I vide his order dated 14.11.2005 confirmed the additions/ disallowances made by the Assessing Officer and dismissed the appeal filed by the respondent assessee.
5. Thereafter, the Assessing Officer completed penalty proceedings and by an order dated 29.3.2007, the Assessing Officer levied on the respondent assessee penalty of Rs.31,61,994/- being the minimum penalty leviable u/s 271(1)(c) of the said Act for concealing his income and furnishing inaccurate particulars of income.
6. The respondent assessee filed an appeal being I.T.A.No.3/07-08 against the impugned order of penalty dated 29.03.2007 before the Commissioner of Income Tax (Appeals)-IX, Chennai, hereinafter referred to as CIT (Appeals). By an order dated 24.03.2008, the CIT (Appeals) allowed the said appeal and deleted the penalty, thereby giving in effecting a finding on facts that the respondent assessee had not concealed his income or furnished inaccurate particulars of his income. In a nutshell, the CIT (Appeals) observed:
(i)Addition u/s 41(1)(a): The respondent assessee had already declared all these amounts over the years. Hence, penalty u/s 271 (1)(c) was not called for;
(ii)Unexplained Cash Credits u/s 68: The unsecured creditors included the NRI loan creditor Shri.Ittiachen for Rs.20.00 lakhs whose identity, credit worthiness & genuineness of transaction was accepted by the AO. Since these additions were opening balances, penalty was not leviable u/s 271(1)(c).
(iii) Addition of rental income: The respondent assessee filed his return of income on 31.07.2001 whereas, the auditing of the company (tenant) was completed on 31.10.2001. Hence, there was reasonable cause for omission of rent.
7. Being aggrieved by the appellate order of the CIT (Appeals), the Revenue filed an Appeal before the Income Tax Appellate Tribunal, 'B' Bench, Chennai being Appeal No.ITA.No.1313/Mds/2006. The said appeal, being ITA.No.1313/Mds/2006, was heard along with an appeal, being ITA.No.107/Mds/2006, from an order of the CIT (Appeals) confirming the order of the assessment for the assessment year 2001-02.
8. By a common order dated 05.8.2016, which is under appeal before us, the learned Tribunal, inter alia, dismissed the Revenue's appeal holding that the CIT (Appeals) had rightly deleted the penalty. The learned Tribunal held:
8. As rightly submitted by ld. Counsel for the assessee, the assessee has received loan from non-resident Indian after obtaining necessary approval from RBI. A sum of Rs.40,60,000/- was converted into gift subsequently. From the very same person, the assessee has received a cash credit of Rs.39,62,000/-. Since the assessee has received the money after getting necessary approval from RBI, it is not correct to say that the identity and creditworthiness of the creditor is not proved. This Tribunal is of the considered opinion that merely because an addition was made in the assessement proceedings that will not result automatically in levy of penalty u/s 271(1)(c) of the Act. The Assessing Officer has to re-appreciate the material available on record. This Tribunal is of the considered opinion that there was a justification in claiming the loan amount as gift. Merely because the claim of the assessee was disallowed in the assessment proceedings, this Tribunal is of the considered opinion that it cannot be construed that the assessee has furnished inaccurate particulars in view of the judgment of the Apex Court in Reliance Petroproducts Pvt. Ltd (supra). Similarly, rental receipt was fund to be omitted in the return of income. The CIT (A) found that there was reasonable cause in not disclosing the same in the return of income. This Tribunal do not find any reason to interfere with the order of the CIT (A).
9. Similarly, for the disallowance of interest and commission and restricting the depreciation to 15% as against the claim of 25% by the Assessing Officer cannot be construed as furnishing inaccurate particulars of income. In view of the above, this Tribunal is of the considered opinion that the CIT (A) has rightly deleted the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT (A) and accordingly the same is confirmed.
9. Both the Commissioner of Income Tax (Appeals) and the learned Tribunal arrived at the factual finding that the respondent assessee had not concealed his income nor furnished inaccurate particulars of his income.
10. Aggrieved by the order of the Income Tax Appellate Tribunal, the appellant has filed this Appeal under Section 260 A of the Income Tax Act, 1961.
11. The Revenue has raised the following question of law:
Whether on the facts and circumstances of the case, the Appellate Tribunal was correct in deleting the penalty levied under Section 271(1)(c) of the Income Tax Act when the Tribunal had, by the very same order upheld the additions to the income of the respondent assessee?
12. The learned counsel for the Revenue submits that the assessment records would reveal that even though the respondent assessee had claimed a sum of Rs.40,60,000/- as gift and added the same in the capital account, the respondent assessee had not given details like name of the donor, mode of receipt, etc. The alleged donor Mr.Ittiachan had not given his acceptance to convert the loan of Rs.40.60 lakhs together with interest as gift to the respondent.
13. Counsel argued that even though the funds had come through banking channels, it was not known whether there existed any real person by the name of Mr.Ittiachan and even if he existed, it was not known whether he was capable of giving Rs.50 lakhs as loan in the previous years relevant to assessment year 1988 89 and 1989 90 or Rs.91.50 lakhs as gift in the previous year 1992-93.
14. Counsel argued that no documents had been filed to prove repayment of loan or payment of interest to the non-resident Indian lender Mr.Ittiachan, though in the grounds of appeal before the CIT (Appeals) it was contended that the loan had been repaid with interest and the gift had been received subsequently.
15. Counsel submitted that the respondent had not even given the correct and complete address of Mr.Ittiachan before the Assessing Officer or the Commissioner of Income Tax (Appeals), or the learned Tribunal.
16. Counsel for the Revenue submitted that the respondent had not furnished details of the unsecured loans as on 31.03.2001 and no confirmation letters had been filed. It was for the respondent assessee to prove and establish the identity of the creditors, the credit worthiness and genuineness of the transactions.
17. Counsel argued that the respondent had not disclosed the rental income of Rs.9 lakhs from M/s.Empee International Hotels and Resorts to the Assessing Officer. When asked to explain, the respondent had agreed to treat Rs.9 lakhs as rental income. Moreover, deduction of a sum of Rs.1,47,123/- paid toward property tax and a sum of Rs.79,300/- paid towards water tax had been claimed by the respondent assessee without furnishing any proof of payment of the same. On verification of the capital account of the respondent, no debit towards expenses on account of payment of corporation tax or water tax was found.
18. Counsel argued that the respondent had claimed deduction of interest without actually making payment which amounted to concealment and furnishing of inaccurate particulars to the extent of interest deduction claims.
19. Counsel further submitted that the Commissioner of Income Tax (Appeals) and the Tribunal having confirmed the additions/ disallowances made by the Assessing Officer ought not to have deleted the penalty proceedings against the respondent under Section 271(1)(c) of the Income Tax Act.
20. Learned counsel for the respondent assessee argued that the Commissioner of Income Tax (Appeals) and the learned Tribunal rightly deleted the penalty, since the respondent assessee had not concealed income nor furnished inaccurate particulars of income. In any case, in view of the concurrent factual finding of the Commissioner of Income Tax (Appeals) and the learned Tribunal of there being no concealment of income or furnishing of inaccurate particulars of income, there is no question of law, not to speak of substantial question of law involved in this appeal.
21. Learned counsel argued that mere failure of the respondent assessee to explain satisfactorily the issues under scrutiny would not automatically attract penalty proceedings even though the addition/disallowances made in quantum proceedings might have been upheld.
22. Learned counsel argued that the conditions for applying Section 41(1)(a) of the Act in any event were wrongly invoked and can be tested only in the appeal filed by the respondent assessee which is pending adjudication before this Court.
23. Learned Counsel submitted that the Appellant has not brought on record any material before this Court to refute the factual findings arrived at by the Lower Appellate Authorities. The only issue that arose for consideration during the assessment year under consideration is with regard to the transfer of entries from loan to gift account which act was rejected by the Assessing Officer and such rejection would not automatically lead to the conclusion of concealment of income or furnishing inaccurate particulars of income.
24. Citing the decision of the Bombay High Court in the case of Commissioner of Income Tax vs. Nayan Builders and Developers, reported in (2014) 89 CCH 0187 (Mumbai) and the decision of the Karnataka High Court in the case Commissioner of Income Tax v. Ankita Electronics Pvt. Ltd., reported in (2015) 379 ITR 0050 (Karn), counsel argued that mere admission of the substantial question of law formulated in the appeal against the deletions would justify the plea for deletion of penalty imposed under Section 271(1)(c) of the Act.
25. Counsel also relied on Commissioner of Income Tax vs. Reliance Petroproducts (P) Ltd. reported in (2010) 322 ITR 0158, where the Supreme Court held that, in order to attract the provisions of Section 271(1)(c), there had to be concealment of income or furnishing of inaccurate particulars of income by the assessee. In the case before the Supreme Court, the assessee had claimed deduction of interest on loans taken by it for purchase of shares. The Assessing Officer disallowed such deduction. No information given in writing was found to be incorrect or inaccurate. The assessee was, therefore, held not to be guilty of furnishing inaccurate particulars. The Supreme Court held that making an inaccurate claim cannot tantamount to furnishing of incorrect particulars. Merely because the assessee claimed deduction which has not been accepted by the revenue, penalty under Section 271(1)(c) is not attracted.
26. The short question before us is whether this appeal filed by the Revenue against the order of the Tribunal should be entertained?
27. Section 260A of the Income Tax Act, 1961, provides as follows:
Section 260A. Appeal to High Court.
(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal before the date of establishment of the National Tax Tribunal, if the High Court is satisfied that the case involves a substantial question of law.
(2) The Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be-
(a) filed within one hundred and twenty days from the date on which the order appealed against is received by the assessee or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.
(b) [***];
(c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.
(2A) The High Court may admit an appeal after the expiry of the period of one hundred and twenty days referred to in clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.
(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.
(4) The appeal shall be heard only on the question so formulated, and the respondents shall at the hearing of the appeal, be allowed to argue that the case does not involve such question:
Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.
(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.
(6) The High Court may determine any issue which -
(a) has not been determined by the Appellate Tribunal; or
(b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1).
(7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908) relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.
28. An appeal lies under Section 260-A of the IT Act, only when there is a substantial question of law. We find that there is no question of law involved in these appeals much less any substantial question of law.
29. In Sir Chunilal V. Mehta & Sons Ltd. vs Century Spg. & Mfg. Co. Ltd., reported in AIR 1962 SC 1314, the Supreme Court agreed with and approved a Full Bench Judgment of this Court in Rimmalapudi Subba Rao vs Noony Veeraju And Ors reported in AIR 1951 Mad 969 and laid down the principles for deciding when a question of law becomes a substantial question of law.
30. In Hero Vinoth Vs. Seshammal reported in (2006) 5 SCC 545, the Supreme Court followed Sir Chunilal V. Mehta & Sons (supra) and other judgments and summarized the tests to find out whether a given set of questions of law were mere questions of law or substantial questions of law.
31. The relevant paragraphs of the judgment of the Supreme Court in Hero Vinoth (supra) are set out herein below :
21. The phrase 'substantial question of law', as occurring in the amended Section 100 CPC is not defined in the Code. The word substantial, as qualifying 'question of law', means - of having substance, essential, real, of sound worth, important or considerable. It is to be understood as something in contradistinction with - technical, of no substance or consequence, or academic merely. However, it is clear that the legislature has chosen not to qualify the scope of 'substantial question of law' by suffixing the words of general importance as has been done in many other provisions such as Section 109 of the Code or Article 133(1)(a) of the Constitution. The substantial question of law on which a second appeal shall be heard need not necessarily be a substantial question of law of general importance. In Guran Ditta v. Ram Ditta [(1927-28) 55 IA 235 : AIR 1928 PC 172] the phrase substantial question of law as it was employed in the last clause of the then existing Section 100 CPC (since omitted by the Amendment Act, 1973) came up for consideration and their Lordships held that it did not mean a substantial question of general importance but a substantial question of law which was involved in the case. In Sir Chunilal case [1962 Supp (3) SCR 549 : AIR 1962 SC 1314] the Constitution Bench expressed agreement with the following view taken by a Full Bench of the Madras High Court in Rimmalapudi Subba Rao v. Noony Veeraju [AIR 1951 Mad 969 : (1951) 2 MLJ 222 (FB)] : (Sir Chunilal case [1962 Supp (3) SCR 549 : AIR 1962 SC 1314] , SCR p. 557) 'When a question of law is fairly arguable, where there is room for difference of opinion on it or where the Court thought it necessary to deal with that question at some length and discuss alternative views, then the question would be a substantial question of law. On the other hand if the question was practically covered by the decision of the highest court or if the general principles to be applied in determining the question are well settled and the only question was of applying those principles to the particular fact of the case it would not be a substantial question of law.' This Court laid down the following test as proper test, for determining whether a question of law raised in the case is substantial: (Sir Chunilal case [1962 Supp (3) SCR 549 : AIR 1962 SC 1314] , SCR pp. 557-58) 'The proper test for determining whether a question of law raised in the case is substantial would, in our opinion, be whether it is of general public importance or whether it directly and substantially affects the rights of the parties and if so whether it is either an open question in the sense that it is not finally settled by this Court or by the Privy Council or by the Federal Court or is not free from difficulty or calls for discussion of alternative views. If the question is settled by the highest court or the general principles to be applied in determining the question are well settled and there is a mere question of applying those principles or that the plea raised is palpably absurd the question would not be a substantial question of law.'
22. In Dy. Commr. v. Rama Krishna Narain [1954 SCR 506 : AIR 1953 SC 521] also it was held that a question of law of importance to the parties was a substantial question of law entitling the appellant to a certificate under (the then) Section 100 CPC.
23. To be 'substantial' a question of law must be debatable, not previously settled by law of the land or a binding precedent, and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law 'involving in the case' there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. It will, therefore, depend on the facts and circumstance of each case whether a question of law is a substantial one and involved in the case or not, the paramount overall consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and impelling necessity of avoiding prolongation in the life of any lis. (See Santosh Hazari v. Purushottam Tiwari [(2001) 3 SCC 179] .)
24.The principles relating to Section 100 CPC relevant for this case may be summarised thus :
(i) An inference of fact from the recitals or contents of a document is a question of fact. But the legal effect of the terms of a document is a question of law. Construction of a document involving the application of any principle of law, is also a question of law. Therefore, when there is misconstruction of a document or wrong application of a principle of law in construing a document, it gives rise to a question of law.
(ii) The High Court should be satisfied that the case involves a substantial question of law, and not a mere question of law. A question of law having a material bearing on the decision of the case (that is, a question, answer to which affects the rights of parties to the suit) will be a substantial question of law, if it is not covered by any specific provisions of law or settled legal principle emerging from binding precedents, and, involves a debatable legal issue. A substantial question of law will also arise in a contrary situation, where the legal position is clear, either on account of express provisions of law or binding precedents, but the court below has decided the matter, either ignoring or acting contrary to such legal principle. In the second type of cases, the substantial question of law arises not because the law is still debatable, but because the decision rendered on a material question, violates the settled position of law .
(iii) The general rule is that High Court will not interfere with the concurrent findings of the courts below. But it is not an absolute rule. Some of the well-recognised exceptions are where (i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts have drawn wrong inferences from proved facts by applying the law erroneously; or (iii) the courts have wrongly cast the burden of proof. When we refer to decision based on no evidence, it not only refers to cases where there is a total dearth of evidence, but also refers to any case, where the evidence, taken as a whole, is not reasonably capable of supporting the finding.
32. The learned counsel appearing on behalf of the respondent assessee cited the Division Bench judgment of this Court in Commissioner of Income Tax vs. Balaha Chemicals Agencies reported in (2015) 94 CCH 0163. In the said case, this Court found that the Revenue had not been in a position to show that the payments of commission made by the respondent assessee were bogus in nature. There was also nothing on record to show that the assessee had concealed particulars of income or furnished inaccurate particulars of income. The appeals of the Revenue were, accordingly, found to be without merit and dismissed the same.
33. The learned counsel for the respondent assessee cited a Division Bench judgment of this Court in N.Ranjit vs. Commissioner of Income Tax-V reported in (2013) 85 CCH 0102 ChenHC, where the Division Bench upheld the decision of the Tribunal and dismissed the appeal of the Revenue with the following observations:
12. It is not that every case of addition warrants levy of penalty. The application of penal provisions are not automatic and the levy itself depends upon the facts and circumstances of each case. On the incorrectness of the returns originally filed, not disclosing the transaction in shares, the proceedings susbequent to the statement filed certainly indicates the conduct of the assessee. Thus in view of the decision of the Apex Court reported in 2009 (233) E.L.T. 3 (S.C.) Union of India vs. Rajasthan Spinning & Weaving Mills) on the law propounded on penalty, we reject this Tax Case Appeal and thereby confirm the order of the Tribunal.
34. Imposition of penalty undoubtedly depends on the facts and circumstances of the case. Section 271(1)(c) of the Income Tax Act, 1961 provides that if the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner, in the course of any proceedings under the 1961 Act, is satisfied that any person has concealed particulars of his income or furnished inaccurate particulars of income, he may direct the person to pay penalty as stipulated.
35.Explanation I to Section 271 of the 1961 Act is set out herein below for convenience:
Explanation 1. - Where in respect of any facts material to the computation of the total income of any person under this Act, (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.
36. In view of Explanation I, referred to above, the amount added or disallowed in computing the total income of the respondent assessee is, for the purpose of Section 271(1)(c), to be deemed to represent his income in respect of which particulars have been concealed, only if the respondent assessee fails to offer an explanation or offers an explanation which is found by the Assessing Authority to be false or if the respondent assessee offers an explanation which he is unable to substantiate and fails to prove that the explanation was bona fide and that facts material to the computation of his total income had been disclosed by him.
37. Under Section 271(1)(c) of the 1961 Act, the imposition of penalty is not automatic whenever there is less income returned. The pre-condition for imposition of penalty is subjective satisfaction of the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or the Commissioner, as the case may be, that the assessee has concealed particulars of his income or furnished inaccurate particulars of such income. The furnishing of inaccurate particulars would have to be deliberate.
38. In view of Explanation I, referred to above, there is no requirement on the part of the Revenue to establish mens rea for the purpose of imposition of penalty. Mere satisfaction of concealment and/or furnishing of inaccurate particulars would in itself attract the penal provisions.
39. In Sir Shadilal Sugar & General Mills Ltd. v. Commissioner of Income Tax, reported in (1987) 168 ITR 705, the respondent assessee had agreed to additions to his income to buy peace. The Supreme Court held that it did not follow that the amount that was agreed to be added was concealed income. The Revenue was, therefore, required to prove mens rea.
40. However, in K.P.Madhusudhanan v. Commissioner of Income Tax, reported in (2001) 251 ITR 0099 (SC), the Supreme Court held that the Explanation to Section 271(1)(c) of the 1961 Act is a part of Section 271. When the Income Tax Officer or the Appellate Assistant Commissioner issues to an assessee a notice under Section 271 of the 1961 Act, he makes the assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By reason of the Explanation, where the total income returned by the assessee is less than 80 per cent of the total income assessed under Sections 143 or 144 or 147, reduced to the extent therein provided, the assessee is deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof, unless he proves that the failure to return the correct income did not arise from any fraud or neglect on his part. The assessee is, therefore, by virtue of the notice under Section 271 of the 1961 Act put to notice that if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof and, consequently, be liable to penalty.
41. In K.P.Madhusudhanan (supra), the Supreme Court differed from and disapproved its earlier view in Sir Shadilal Sugar & General Mills Ltd. (supra) that the Revenue was required to prove mens rea for imposition of penalty. The proposition in Sir Shadilal Sugar & General Mills Ltd (supra) that the Revenue is required to prove mens rea for imposition of penalty is no longer good law.
42. The case of K.P.Madhusudhanan (supra), is clearly distinguishable, as it was a case of concealment, where income of Rs.93,000/- had not been disclosed. Only after explanation was called for, the assessee in that case stated that it had obtained loans, which could not be established and ultimately, the concealed income was treated as additional income. In the background of the aforesaid facts, penalty was imposed. The Supreme Court rejected the contention that the onus lay on the Assessing Officer to establish mens rea. In effect and substance, the Supreme Court held that on receipt of a notice, it was for the assessee to explain, that concealment was not deliberate.
43. After the insertion of the Explanation, it cannot be said that the onus lies on the Revenue to establish mens rea for concealment of income before imposition of penalty. If there was failure to return the correct income, there would be a presumption of concealment, unless the assessee was able to prove that his failure to return his correct income was not due to fraud or neglect.
44. In M.A.K.Data P. Ltd. v. Commissioner of Income Tax, reported in (2013) 358 ITR 0593 (SC), the Supreme Court held that the Explanation to Section 271(1)(c) of the Act raises a presumption of concealment, when a difference is noticed by the Assessing Officer, between reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the Explanation has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constituted the income of the assessee and not otherwise.
45. In the aforesaid case, the contention of the assessee of having surrendered the additional sum of Rs.40,74,000/- to avoid litigation, buy peace and to channelize energy and resources towards productive work and to make amicable settlement with the Income Tax Department was not accepted. The Supreme Court held that voluntary disclosure did not release the assessee from the mischief of penal proceedings. Voluntary disclosure of concealed income did not absolve the assessee from penalty. The Supreme Court also held that the Assessing Officer was not required to record his satisfaction of concealment of particulars of income in any particular way or to reduce it into writing.
46. In CRN Investments (P) Ltd. v. Commissioner of Income Tax, reported in (2008) 300 ITR 0342 (Madras), a Division Bench of this Court found that there was claim for supply of steel rolls, when in fact there was never any supply. Bills had been raised to facilitate finance from credit institutions and the alleged lease transaction was found to be false and a make believe one. The assessee resisted the claim of the department contending that they were not aware of forged documents and contended that they had not concealed income nor furnished inaccurate particulars. There was no dispute that the documents were forged.
47. In the aforesaid case, the learned Tribunal had upheld the imposition of penalty. The Division Bench found that the conclusion was factual giving rise to no questions of law. Considering the limited scope of Section 260A of the Act, the Division Bench did not find any justification to disturb the order of the learned Tribunal and, accordingly, the appeal was dismissed.
48. In Union of India v. Dharamendra Textile Processors, reported in (2008) 13 SCC 369, the Supreme Court observed as under:
17. It is of significance to note that the conceptual and contextual difference between Section 271(1)(c) and Section 276-C of the IT Act was lost sight of in Dilip N. Shroff v. CIT, (2007) 6 SCC 329.
18. The Explanations appended to Section 271(1)(c) of the IT Act entirely indicates the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The judgment in Dilip N. Shroff case has not considered the effect and relevance of Section 276-C of the IT Act. Object behind enactment of Section 271(1)(c) read with Explanations indicate that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276-C of the IT Act.
49. The proposition of law enunciated in Dharamendra Textile Processors (supra) is unexceptionable. However, in the present case, as observed above, the learned Tribunal, the fact finding body, has arrived at a finding on facts that there was concealment and hence, the interference of this Court under Section 260A of the Act is not warranted.
50. In Commissioner of Income Tax, Delhi v. Atul Mohan Bindal, reported in (2000) 9 SCC 589, the Supreme Court referred to and explained its earlier decision in Dharamendra Textile Processors case (supra) and found that there was an element of strict liability on the assessee for concealment and for giving inaccurate particulars in view of the explanation appended to Section 271(1)(c) of the Act. The Supreme Court concluded that for applicability of Section 271(1)(c) of the Act, the conditions stated therein must exist.
51. The proposition of law that emerges from the judgments referred to above is that in view of the explanation added, it cannot be said that the onus lies on the Revenue to establish mens rea in cases of concealment and/or short payment of tax. There is an onus on the assessee to show that there was no mens rea. Whether the assessee has been able to discharge the onus of establishing that there was no concealment or deliberate furnishing of inaccurate particulars of income, would depend on the facts and circumstances of the case.
52. In Lanxess India (P) Ltd. v. Assistant Commissioner of Income Tax, reported in (2015) 60 Taxmann.com 352 (Madras), a Division Bench of this Court, having regard to the facts of that case, found that the department was justified in imposing penalty as the explanation of the assessee in that case was no explanation at all in the eye of law. The Division Bench also found that the facts had thoroughly been examined by the Tribunal and rightly held against the assessee. The Division Bench found that there was no question of law, far less any substantial question of law, arising for consideration in the appeal and, accordingly, dismissed the appeal. In this case too, there is no question of law, far less any substantial question of law. We are in full agreement with the Division Bench that when the appeal does not raise any substantial question of law, the appeal is liable to be dismissed.
53. In the other judgments relied on by the learned counsel, the Courts confirmed imposition or alternatively ordered deletion of penalty having regard to the facts and circumstances of the said cases.
54. A judgment is a precedent for the issue of law which is raised and decided. A decision rendered in the particular facts and circumstances of a case does not constitute a binding precedent.
55. The initiation of penal proceedings is not automatic and depends upon the facts and circumstances of each case. In the case at hand, the learned Tribunal arrived at factual findings which ought not to be interfered with in an appeal under Section 260A of the Income Tax Act. In this case, the learned Tribunal, as observed above, arrived at the finding that the claim to the expenditure towards brokerage/commission was bogus and in effect, held that imposition of penalty was justified.
56. We do not find any question of law, far less any substantial question of law that warrants interference.
This appeal is, therefore, not entertained and the same is dismissed. No costs.
(I.B. C.J.,) (A.Q. J.,)
Internet: Yes
Index : Yes
sts/pam/bbr/sasi
To
1. The Registrar
The Income Tax Appellate Tribunal,
Madras B Bench
Chennai.
2. The Commissioner of Income Tax (Appeals)-IX
Chennai.
3. The Assistant Commissioner of Income Tax
Central Circle I(2), Chennai 34.
THE HON'BLE CHIEF JUSTICE
and
ABDUL QUDDHOSE, J.
sts/pam/bbr/sasi
T.C.A.No.266 of 2017
6.8.2018