High Court Of Gujarat
CIT vs. Milex Cable Industries
Sections 271(1)(c)
Asst. Year 1979-80, 1980-81
A.R. Dave & K.M. Mehta, JJ.
IT Ref. No. 104 of 1988
4th December, 2002
Counsel Appeared
Tanvish U. Bhatt, for the Petitioner : K.H. Kaji, for the Respondent
JUDGMENT
A.R. DAVE, J. :
At the instance of the Revenue, the following question of law has been referred to this Court for its opinion by the Tribunal, Ahmedabad Bench ‘A’, under the provisions of s. 256(1) of the IT Act, 1961 (hereinafter referred to as ‘the Act’) : “Whether, on the facts and in the circumstances of the case, the penalty under s. 271(1)(c) of the IT Act, 1961, was leviable on the assessee for the assessment years under reference ?”
We have heard learned standing counsel Shri Tanvish Bhatt for the central Government appearing for the applicant and learned advocate Shri K.H. Kaji appearing for the respondentassessee. The facts giving rise to the reference, in a nutshell, are as under : The respondent-assessee is a partnership-firm. It filed its returns for the asst. yrs. 1979-80 and 1980-81, the previous years being S. Yrs. 2034 and 2035, respectively. After filing the returns, the assessments were framed on 18th Oct., 1979, and 12th Feb., 1981, for the said two years, respectively. In the course of internal audit, it was revealed that the assessee had made certain mistakes in totals and as a result thereof, lesser income had been returned by the assessee. The said fact was revealed by the audit department somewhere in the month of April, 1981, and the AO was informed about the same in the same month. Upon getting the information with regard to the mistakes, which had resulted into showing lesser income by the assessee, the ITO had issued notice, dt. 4th July, 1981, to the assessee. The AO informed the assessee under the said letter that it was noticed that some mistakes had been committed in preparation of the accounts and as the AO wanted to verify certain figures from the books of accounts, the assessee was requested to attend the office of the AO on 13th July, 1981.
In pursuance of the said notice, the assessee had attended the office of the AO on 13th July, 1981. On that day, the assessee had submitted a letter, dt. 11th July, 1981, wherein it was stated by the assessee that certain mistakes had been committed in the totalling and as a result thereof lessor income had been returned by the assessee for the asst. yr. 1979-80 and asst. yr. 1980-81. In the said reply, dt. 11th July, 1981, the assessee had not referred to the notice dt. 4th July, 1981, issued to him by the AO. In view of the fact that mistakes had been committed in the totals and as a result of the investigation or audit work done by the audit party of the Revenue, the income of the assessee was likely to be increased, the AO sought guidance from the CIT, under his letter, dt. 5th Aug., 1981, as to whether the CIT would like to exercise his powers under the provisions of s. 263 of the Act. Thereupon, under letter dt. 9th Sept., 1981, the CIT exercised his powers under s. 263 of the Act and ultimately remanded the case to the AO so that after taking into account the facts stated by the assessee as well as in pursuance of the further information gathered by the AO, the assessment can be framed. Ultimately, the AO framed the assessment
resulting into increase in income for both the assessment years. The AO also imposed penalty under the provisions of s. 271(1)(c) of the Act upon the assessee as the assessee had concealed particulars of his income. The AO ultimately imposed penalty of Rs. 78,920 for the asst. yr. 1979-80 and penalty of Rs. 1,10,790 for the asst. yr. 1980-81. Being aggrieved by the orders passed by the AO, the assessee filed appeals before the CIT(A). It was the case of the assessee before the CIT(A) that there was no concealment of particulars of income by the assessee and as there was no mala fide intention of the assessee, the penalty ought not to have been imposed upon the assessee by the AO. It was submitted before the CIT(A) that upon knowing the fact with regard to the mistakes committed by the assessee, the AO was informed by the assessee under letter, dt. 11th July, 1981. It was also submitted that the assessee came to know about the mistakes which had been committed in totalling at the time when accounts for asst. yr. 1982-83 were being prepared. Thus, it was submitted that the assessee himself had revealed the facts with regard to the mistakes committed in totalling and, therefore, no penalty should have been imposed by the AO.
After hearing the assessee, the CIT(A) upheld the orders passed by the AO. Being aggrieved by the orders passed by the CIT(A), the assessee filed appeals before the Tribunal. After hearing the assessee, the Members of the Tribunal had given different opinions. The JM had opined that there was no case for imposition of penalty, whereas the AM was of the view that the AO was justified in imposing penalty. In the circumstances, according to the provisions of the Act, the case was referred to the Third Member, that is, the Vice-Chairman of the Tribunal and the Vice-Chairman had concurred with the view expressed by the JM of the Tribunal. Thus, the majority view of the Tribunal was to the effect that the penalty ought not to have been imposed upon the assessee. In the above set of circumstances, the question which has been referred to this Court is whether the penalty imposed upon the assessee under the provisions of s. 271(1)(c) of the Act is justified. Learned standing counsel Shri Tanvish Bhatt appearing for the Revenue has vehemently submitted that the assessee had deliberately committed errors in totalling. According to him, it was not a case of an error, but it was an attempt to misguide the Revenue.According to him, the totals were erroneous to such an extent that no accountant or even a man of normal prudence would ever commit such mistakes. He has drawn our attention to the fact that even the trial balance could not have tallied on account of the mistakes committed in the total. It has been submitted by him that only because the notice, dt.
4th July, 1981, had been issued to the assessee, the assessee got an idea that the fraud, which he had committed while making totals, had been revealed and, therefore, so as to see that the fraud is not revealed and the entire case is converted into a bona fide mistake, the assessee addressed the letter, dt. 11th July, 1981, to the AO stating the fact that the errors had been committed in totalling and he made a request for rectification of the errors committed. According to learned standing counsel Shri Bhatt, if notice, dt. 4th July, 1981, would not have been given to the assessee, possibly the assessee would not have written the letter, dt. 11th July, 1981. It has been also submitted by him that though the assessee had written letter, dt. 11th July, 1981, only upon getting the notice, dt. 4th July, 1981, the assessee did not refer to the notice dt. 4th July, 1981, addressed to him, by the AO. He has submitted that, in fact, the assessee was aware of the fact that he had made incorrect totals so as to understate the amount of income returned for the relevant assessment years. It has been, therefore, submitted by him that the view expressed by the dissenting AM of the Tribunal is just and proper. According to him, the Tribunal ought to have imposed penalty as the assessee had deliberately stated incorrect figures while totalling the trial balance. He has drawn our attention to the provisions of s. 271(1)(c) of the Act to show that this is a just case where penalty should be imposed. It has been submitted by him that in fact by making incorrect totals, the assessee had made an effort to give inaccurate details or particulars about the income as the income had been reduced on account of deliberate act of the assessee.
Learned standing counsel Shri Bhatt has also drawn our attention to the contents of the judgment delivered in the case of CIT vs. Vidyagauri Natverlal & Ors. (1999) 153 CTR (Guj) 546 : (1999) 238 ITR 91 (Guj). He has submitted that, according to the law laid down in the said judgment, stating incorrect details with regard to the total, would amount to concealment of income. On the other hand, learned advocate Shri K.H. Kaji appearing for the assessee has submitted that the view expressed by the majority members of the Tribunal is just and proper. It has been submitted by him that immediately upon knowing the fact that mistakes had been committed in totalling, under letter, dt. 11th Jan., 1981, the assessee had informed the AO that there were mistakes in the totals.According to him, it is pertinent to note that the mistakes had been revealed only when the accounts for the subsequent year were being drawn up. At that time it was found that errors had been committed in the totalling and immediately upon knowing the fact with regard to the mistakes committed by the assessee, the assessee had addressed letter, dt.
11th July, 1981. According to the learned advocate, the assessee had no dishonest intention to conceal particulars of his income. It has been further submitted by learned advocate Shri Kaji that for the purpose of imposing penalty upon the assessee, it must be established beyond any doubt that the assessee had dishonest intention. He has made an effort to compare the act of imposition of penalty with inflicting punishment under any penal law. He has submitted that the burden with regard to establishing the fact that the assessee had concealed the particulars of his income or had furnished inaccurate particulars of such income lies on the Revenue. If the Revenue is not in a position to establish the said fact beyond doubt, no penalty can be imposed upon any assessee. It has been also submitted by him that if there is any doubt with regard to the state of mind of the assessee, benefit of doubt must be given to the assessee.
He has also submitted that whether the assessee had a guilty mind is a question of fact. According to him, the JM and the Vice-Chairman have already come to the conclusion that it was not proper on the part of the Revenue to impose penalty upon the assessee as the assessee was not having guilty mind. Whether the assessee wanted to conceal particulars of his income or wanted to furnish inaccurate particulars of such income is dependent on the state of mind of the assessee and when the Tribunal has opined that the assessee is not guilty of concealment of particulars of his income, this Court should not reverse the finding of the Tribunal because the finding pertains to the fact and this Court should not disturb the finding of the Tribunal unless it is found to be perverse, and according to the learned advocate, the finding arrived at by the Tribunal cannot be considered as perverse. He has further submitted that even the Revenue has not submitted that the finding arrived at by the Tribunal is perverse. In the circumstances, according to him, the view expressed by the Tribunal should not be changed by this Court. We have heard the learned advocates at length and have also gone through the judgments cited by the learned advocates. Upon perusal of the relevant orders and hearing the learned advocates, it is not in dispute that before the proceedings with regard to initiation of penalty and rectification started, the assessee had informed the AO under his letter, dt. 11th July, 1981, that he had committed mistakes in totalling and this fact denotes that the assessee was not having guilty mind. It is true that the assessee had already received the notice, dt. 4th July, 1981, at the relevant time, but when the Tribunal has come to a conclusion that the assessee had no intention of concealing particulars of his income or misguiding the AO by making incorrect totals, in our opinion, it would not be proper for us to come to a different conclusion. It is a settled legal position that the finding of fact, which might be arrived at by the Tribunal, should not be interfered with by this Court while giving its opinion under the provisions of s. 256 of the Act. It is not in dispute that whether a person is having guilty mind or what state of mind the person is having and determination thereof is a question of fact and as the Tribunal has already opined that the assessee had not made any effort to conceal particulars of his income, it would be difficult for this Court to set aside the said finding so as to accept the view expressed by the Revenue before this Court.
The Hon’ble Supreme Court in the case of Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26 (SC) has already opined that penalty need not be imposed merely because it is lawful to do so. Even if minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act. In the instant case, mistakes were committed in totalling and the moment the assessee came to know about the mistakes committed in the books of accounts, while preparing the accounts for the subsequent year, under his letter, dt. 11th July, 1981, the assessee informed the AO about the mistakes committed. Thus, in our opinion, the finding arrived at by the Tribunal to the effect that the assessee was not having any guilty mind or had no intention to conceal the particulars of his income, cannot be disturbed by this Court. Looking to the facts stated hereinabove and more particularly in view of the fact that the Tribunal has come to a final conclusion that there was no case for imposing penalty and the mental state of the assessee being a question of fact, in our opinion, it would not be proper to take a different view than the one which has been taken by the Tribunal. Looking to the above-referred discussion and the law laid down in the judgments referred to hereinabove, we answer the question referred to us in the negative, i.e., in favour of the assessee and against the Revenue. The reference, thus, stands disposed of with no order as to costs.
[Citation : 261 ITR 675]
