High Court Of Delhi
CIT vs. Atma Ram Properties (P) Ltd.
Section 260A, 271(1)(c), Expln.
Asst. Year 1985-86
D.K. Jain & Ms. Sharda Aggarwal, JJ.
IT Appeal No. 198 of 2002
26th July, 2002
Sanjiv Khanna, for the Appellant : None, for the Respondent
D.K. JAIN J. :
This appeal by the Revenue under s. 260A of the IT Act, 1961 (for short “the Act”), is directed against the order of the Income-tax Appellate Tribunal (for short “the Tribunal”), dt. 25th Sept., 2001, in ITA No. 2331/Del of 1995. By the said order the Tribunal has upheld the decision of the Commissioner of Income-tax (Appeals) [for short the “CIT(A)”], deleting the penalty levied on the assessee under s. 271(1)(c) of the Act to the extent of Rs. 5,93,432.
2. Briefly stated the background facts are that in respect of the asst. yr. 1985-86, the AO while completing the assessment made certain additions/disallowances. However, in this appeal we are concerned with the disallowances made under the following heads : Electricity and water charges Rs. 68,378 Connection charges Rs. 37,878 Addition made under s. 28(iv) r/w s. 2(24)(va) of the Act. Addition in respect of capital gains. Rs. 3,57,000.
The ITO was of the view that the rental income earned by the assessee from Scindia House building was assessable as income from house property and not income from business, as claimed by the assessee; the amount of Rs. 38.20 lakhs received by the assessee under two rent agreements were benefits on account of interest-free advances/deposits and, therefore, chargeable to income-tax as profits and gains of business in terms of s. 28(iv) r/w s. 2(24) of the Act. The value of the benefit in the form of interest at 18 per cent, per annum on the amount received by the assessee was thus included in the total income. The AO also held in view that the assessee was liable to pay capital gains tax on the sale of flat No. 3 in Scindia House. While completing the assessment, the AO initiated penalty proceedings under s. 271(1)(c) of the Act and vide order dt. 30th Nov., 1990, levied a penalty of Rs. 7,07,572 in respect of seven items, including the aforenoted four items. Aggrieved, the assessee preferred appeal to the CIT(A), who vide his order dt. 23rd Nov., 1994, upheld the levy of penalty in respect of some of the items but deleted the same in respect of the aforenoted items. The CIT(A) held that in so far as the first three items were concerned, the addition/disallowance having been deleted by the Tribunal in the quantum appeal, no penalty could be levied in respect thereof and as regards the fourth addition on account of capital gains, he was of the view that the assessee had disclosed all the material facts relating to the sale, which was duly reflected in the balance-sheet and a note for not taking the sale to the P&L a/c was appended to the directors report, which formed part of the balance-sheet of the assessee. The CIT(A) thus deleted the penalty levied in respect of the aforenoted items.
The assessee seems to have accepted the said order. However, the Revenue took the matter in appeal to the Tribunal. As noted above, the Tribunal has affirmed the order of the CIT(A). Hence, the present appeal. It is submitted by Shri Sanjiv Khanna, learned senior standing counsel for the Revenue, that merely because the additions, subject-matter of penalty, had been deleted by the Tribunal, penalty under s. 271(1)(c) could not be deleted automatically, particularly when the order of the Tribunal in the quantum appeal was under reference. It is urged that since the assessed income was more than the returned income, the Explanation to s. 271(1)(c) was attracted in the instant case but the Tribunal lost sight of this important fact. Learned counsel would also urge that in any case the Tribunal should have awaited the decision of the High Court in the quantum appeal. We are unable to persuade ourselves to agree with learned counsel for the Revenue. Insofar as the issue relating to the scope and effect of Explanation added to s. 271(1)(c) of the Act is concerned, it is no longer res integra in view of the decision of this Court in CIT vs. Gurbachan Lal (2001) 168 CTR (Del) 266 : (2001) 250 ITR 157 (Del). In the said decision Chief Justice Arijit Pasayat (as his Lordship then was) observed as follows : “A conspectus of the Explanation added by the Finance Act, 1964, and the subsequent substituted Explanations make it clear that the statute visualises assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the Explanation (after 1964) is a rule of evidence. Presumptions which are rebuttable in nature are available to be drawn. The initial burden of discharging the onus is on the assessee. Explanation 1 automatically comes into operation when in respect of any facts material to the computation of the total income of any person, there is failure to offer an explanation or the explanation offered is found to be false by the AO or the first appellate authority, or an explanation is offered which is not substantiated. According to the proviso to Explanation 1, the onus to establish that the explanation offered was bona fide and all facts relating to the same material to the computation of the income have been disclosed by him, will be on the person charged with concealment. If he fails to discharge that burden, the presumption that he had concealed income or furnished inaccurate particulars thereof is available to be drawn.” It was held that the principal logical import of the Explanation is to shift the burden of proof from the Revenue on to the assessee. Rebuttal must be on materials relevant and cogent. It is for the fact-finding body to judge the relevancy and sufficiency of the materials. If such a fact-finding body bearing the abovesaid principles in mind comes to the conclusion that the assessee has discharged the onus, it becomes a conclusion of fact, and no question of law arises.
It is equally true that it cannot be laid down as a principle of universal application that whenever the addition made is deleted, penalty under s. 271(1)(c) of the Act cannot be levied. The factual position in each case has to be considered on its own peculiar facts. Having perused the order of the CIT(A) and the Tribunal, we find that on both the main issues, namely, (1) whether rental income was to be assessed as business income, and (2) whether profit on sale of flat was to be assessed as income from business or as capital gains, the authorities below have accepted the explanation of the assessee as bona fide. The CIT(A) has in fact recorded that the assessee has not concealed or furnished inaccurate particulars of its income. In our view, these are pure findings of fact, beyond the limited and restricted scope of appeal under s. 260A of the Act. As regards the plea of learned counsel for the Revenue that the Tribunal should have awaited the decision of the High Court in the reference arising out of quantum proceedings, we feel that we can do no better than to refer to the decision of this Court in CIT vs. Popular Jewellers (1999) 238 ITR 676 (Del), wherein R.C. Lahoti, J. (as his Lordship then was) observed that in such a situation the appropriate course for the Revenue was to have requested the Tribunal to adjourn hearing in the appeal in the penalty proceedings sine die awaiting the decision of the High Court in the quantum proceedings. It was held that since in that case no such prayer was made by the Revenue, no question on that issue arose as a question of law from the order of the Tribunal. In the present case also we find that neither any prayer to await the decision of the High Court in the quantum reference was made before the Tribunal nor the factum of pendency of reference in the High Court in quantum proceedings was brought to the notice of the Tribunal. It is evident from the impugned order that in fact no such plea was raised before the Tribunal. Therefore, in the light of the decision in CIT vs. Popular Jewellers (supra), with which we are in respectful agreement, no question of law, much less a substantial question of law, arises from the order of the Tribunal.
[Citation : 258 ITR 246]