Madras High Court
Commissioner Of Income Tax Iii vs M/S.Sriram Chits Tamil Nadu P. Ltd on 17 June, 2013
Bench: Chitra Venkataraman, K.B.K.Vasuki
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 17.06.2013 CORAM: THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN and THE HONOURABLE MS.JUSTICE K.B.K.VASUKI Tax Case (Appeal) No.55 of 2010 Commissioner of Income Tax III Chennai. .. Appellant Versus M/s.Sriram Chits Tamil Nadu P. Ltd. "Greams Dugar", 4th and 5th Floor No.149, Greams Road Chennai-600 006. .. Respondent ----- PRAYER: Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961, as against the order of the Income Tax Appellate Tribunal, Chennai 'D' Bench, dated 26.06.2009 made in ITA No.2115/Mds/2008. ----- For appellant : Mr.N.V.Balaji Standing Counsel for Income Tax For respondent : Mr.R.Sivaraman ----- ORDER
(Order of the Court was made by CHITRA VENKATARAMAN,J.) The Revenue contests the calculation of levy of penalty. This Tax Case Appeal, relating to the assessment year 2000-2001, was admitted on the following substantial question of law:
" Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in upholding the order of the Commissioner of Income Tax (Appeals), cancelling the penalty levied under Section 271(1)(c)? "
The Revenue seeks to support the levy of penalty, particularly on the issue relating to the addition towards foreman's commission and dividend received by the company, that by keeping the foreman's commission and foreman's dividend under suspense account, the assessee had furnished inaccurate particulars of income, leading to concealment of income.
2. It is seen from the order of the first Appellate Authority that it cancelled the penalty by observing that the assessee had disclosed all the materials relating to the computation of income of the assessee in the returns itself. The difference in the view points between the assessee and the Officer would not be a good ground for imposition of penalty for concealment. The Tribunal agreed with the contention of the assessee that when the assessee had disclosed all the particulars about the receipts and that the practice adopted by the assessee of keeping the particulars of receipts duly explained, it being a bona fide explanation on behalf of the assessee, there could be no case for levying penalty. Thus, following the order passed by the Tribunal for the earlier year, the Tribunal cancelled the levy of penalty, thereby upheld the order of the Commissioner of Income Tax (Appeals). Aggrieved by this, the present appeal has been filed before this Court.
3. As far as the assessability of commission received by the foreman is concerned, the said issue was considered by this Court in T.C.No.228 of 2007 along with three other appeals in T.C.Nos.207 to 209 of 2007, vide order dated 23.11.2012 in favour of the assessee by following the decision of this Court in the assessee's own case in T.C.(A) Nos.141 and 213 of 2004 and batch cases by order dated 30.09.2012. Going by the integrated scheme of the chit transaction spread over a period of time and in the context of the provisions of the Income Tax Act, this Court held that there could be no certainty as regards the receipt of dividend paid to the company and the same could be properly accounted only at the completion of the transaction and hence, completed contract method alone could be the basis for assessing the income. This Court pointed out that while there might be a certainty as to the dividend received every month for considering the same for assessment and on accrual basis at the hands of the subscriber, yet, as far as a company running chit business is concerned, the dividend and the discount could properly be ascertained only at the completion of the transaction and not in the midway. Thus, while upholding the contention of the assessee that it was following the mercantile system of accounting and adopting the completed contract method to arrive at the real income, this Court held that the dividend income was assessable in the year of accrual itself. In the background of this, one may note that the assessee did not address the issue on mutuality. This Court further pointed out that dividend is the share of the subscriber in the amount of discount available for reasonable distribution among the subscribers at each instalment of the chit and given the fact that the company may have to fit itself as a subscriber either at the beginning for want of number of subscribers or in the middle of a series on account of the default committed by the prized subscriber, the distinction or dichotomy thus maintained on the company as a subscriber, we do not find any justifiable ground to accept the plea of the Revenue that in the context of the assessee giving up the principle of mutuality, penalty has to be levied in this regard.
4. Learned Standing Counsel appearing for the Revenue, however, pointed out that on the aspect of commission, the same being decided in favour of the assessee, there could be no case for penalty. He, however, submits that the issue of foreman's dividend, particularly in the context of the assessee giving up the principle of mutuality, calls for levy of penalty.
5. We do not agree with the submission of the learned Standing Counsel appearing for the Revenue, particularly in the context of the discussion on the role of a foreman and the acceptance of the case on the dividend under the provisions of the Income Tax Act. Thus, going by the reasoning given in the order dated 30.09.2012 in T.C.(A) Nos.141 and 213 of 2004 and batch cases that, on the mere fact that the assessee had given up the plea of mutuality, one cannot immediately draw an inference that the assessee was lacking in bona fides in the matter of its claim.
6. In similar situation, in the decision reported in [2010] 327 ITR 510 (Del.) (Commissioner of Income-tax v. Zoom Communication P. Ltd.) the Delhi High Court brought out the distinction between a claim made with bona fide intention and a claim which lacked bona fides, in the context of a deduction claimed under the provisions of the Income Tax Act. Agreeing with the decision of the Delhi High Court reported in [2010] 327 ITR 510 (Del.) (Commissioner of Income-tax v. Zoom Communication P. Ltd.) and the law laid down by the Supreme Court in the decision reported in [2010] 322 ITR 158 CIT v. Reliance Petroproducts P. Ltd.) and 2009 (238) ELT 3 (SC) (Union of India Vs. Rajasthan Spinning & Weaving Mills), we have no hesitation in rejecting the Revenue's plea, thereby confirming the orders of the Tribunal.
In the result, the Tax Case Appeal stands dismissed. No costs.
ksv To
1. The Income Tax Appellate Tribunal, Bench 'D', Chennai.
2. The Commissioner of Income Tax (Appeals-V), Chennai.
3. The Income Tax Officer (OSD), Company Circle VI(2), Chennai 34