Andhra Pradesh H.C : Whether there was deliberate concealment of income in relevant year and, hence, levy of penalty was justified

High Court Of Andhra Pradesh

Kuldeep Wines vs. CIT (Appeals)

Assessment Year : 1982-83

Section : 271(1)(c)

G. Chandraiah And Challa Kodanda Ram, JJ.

R.C. No. 52 Of 2001

March 4, 2014

JUDGMENT

Challa Kodanda Ram, J. – At instance of the Revenue, the below mentioned question of law, which arises from the order dated August 7, 1995, of the Tribunal in I.T.A. No. 376/Hyd/90 for the assessment year 1982-83, has been referred for opinion of this court.

“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is justified in upholding the levy of maximum penalty of Rs. 10.50 lakhs and whether the Tribunal’s findings are vitiated by non-consideration of the relevant factors?”

2. Heard Sri Ch. Pushyam Kiran, learned counsel for the assessee and Sri S.R. Ashok, learned senior counsel for the Income-tax Department.

3. After perusing the orders of the Tribunal and hearing both the learned counsel, we deem it appropriate to reframe the question of law as under :

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in upholding the levy of maximum penalty under section 271(2) of the Income-tax Act, 1961, on account of the issue relating to concealment of refundable empty bottle deposit and the Tribunal’s findings are vitiated by non-consideration of the relevant factors ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in upholding the maximum penalty arising on account of unreconciled difference in the balance-sheet and the Tribunal’s findings are vitiated by non-consideration of the relevant factors ?”

4. The assessee is carrying on the business of liquor. For the assessment year 1982-83, the assessee was levied with penalty under section 271(2) of the Income-tax Act, 1961 (for short “the Act”) for concealment of income amounting to Rs. 8,29,966 on three counts as mentioned below :

(a) Refundable empty bottle deposit                                     Rs. 5,19,329

(b) Packing and servicing charges                                         Rs. 1,26,096

(c) Unreconciled difference in the balance-sheet                    Rs. 1,84,541

Total                                                                                   Rs. 8,29,966

The assessee’s appeal before the Commissioner came to be allowed in part. Out of the three items mentioned above, the assessee himself agreed to the penalty on packing and servicing charges and paid the penalty. The assessee’s explanation was accepted by the first appellate authority so far as the refundable empty bottle deposit and unreconciled difference in the balance-sheet are concerned. The Department appealed to the Income-tax Appellate Tribunal and the assessee filed cross-objections in that appeal with a delay of 17 days. The Tribunal allowed the appeal of the Department while rejecting the cross-objections on the ground of delay and that no petition was filed by the assessee seeking condonation of such delay. In the above set of facts and circumstances, the assessee has sought the above referred questions of law for opinion of this court.

5. The learned counsel for the assessee contends that the reasoning recorded by the Tribunal for reversing the order of the first appellate authority and coming to a different conclusion is erroneous and unsustainable. He submits that the Tribunal has erred in properly appreciating the judgment of the Supreme Court in Punjab Distilling Industries Ltd. v. CIT [1959] 35 ITR 519 and would point out that the said judgment has been distinguished in another judgment in United Breweries Ltd. v. State of Andhra Pradesh [1997] 3 SCC 530. He also contends that the Tribunal failed to deal with the aspect of penalty arising on account of unreconciled difference in the balance-sheet.

6. On the other hand, the learned senior counsel for the Department supports the order of the Tribunal.

7. From a perusal of the order of the Tribunal, we find that the Tribunal recorded a finding that the assessee did not disclose the income on account of refundable empty bottle deposit and servicing and packing charges either in the profit and loss account or in the balance-sheet besides not claiming exemption in respect thereof in Part IV of the return. The Tribunal also found that with respect to the refundable empty bottle deposit, the assessee had disclosed the amount of the refundable empty deposits for the assessment years 1981-82 and 1983-84 but strangely failed to disclose the same for the assessment year 1982-83. The concealment with respect to the collection of the refundable empty bottle deposits would never have come to light but for the search operations conducted by the Revenue on March 16, 1985. In other words, the finding of the Tribunal is that there was a deliberate and wanton concealment on the part of the assessee and this finding is not dislodged before us in any manner by the assessee. So far as the distinguishing aspect which is sought to be made by the learned counsel for the assessee referring to the fact that the Supreme Court in United Breweries Ltd.’s case (supra) had distinguished the judgment of the Punjab Distilling Industries Ltd.’s case (supra) is concerned, we may point out at once that the United Breweries Ltd.’s case (supra) is in relation to the sales tax. Though the Supreme Court, while analysing the facts of Punjab Distilling’s Industries Ltd. case (supra), had made a mention that the decision of the case is on its peculiar facts, the crucial aspect of the ratio laid down in that case is to the effect that the amount collected on account of the refundable empty bottle deposit is a trading receipt and is required to be brought into the profit and loss account. It is not the contention of the learned counsel for the assessee that the amount received on account of refundable empty bottle deposit is not a trading receipt. As a matter of fact, the assessee himself for the assessment years 1981-82 and 1983-84 treated the same as trading receipt. In that view of the matter, the distinguishing aspect which is sought to be made, has no distinction at all. Further, in the absence of dislodging the finding of the Tribunal to the effect that there was a deliberate concealment of the refundable empty bottle deposits by not disclosing the same either in the profit and loss account or in the balance-sheet, the levy of penalty as provided under section 271(1)(c) of the Act on the facts of the case, cannot be found fault with.

8. So far as the aspect of penalty with respect to unreconciled difference in the balance-sheet is concerned we are inclined to accept the argument of the learned counsel for the assessee in view of the categorical finding of the first appellate authority to the effect that:

“Similarly, the differences in the balance-sheet can be the result of various wrong entries. The Assessing Officer himself noticed some wrong entries like the understatement of purchases and understatement of sundry creditors and no motive of concealment can be attributed to these wrong entries.

So, I am of the view that there is no justification for the levy of penalty under section 271(1)(c) in respect of this addition.”

There is no contra finding given by the Tribunal in its order, and in other words, the finding recorded by the first appellate authority has not been disturbed. In that view of the matter, there cannot be any justification for the Income-tax Appellate Tribunal in reversing the said finding without there being any discussion.

9. In the result, question No. 1 is answered in favour of the Revenue and against the assessee and question No. 2 is answered in favour of the assessee and against the Revenue.

10. Accordingly, the referred case is disposed of. No order as to costs.

11. As a sequel to the disposal of the referred case, miscellaneous petitions, if any pending, shall stand disposed of as infructuous.

[Citation : 364 ITR 195]