High Court Of MP
Dayaram Khandelwal vs. Pr.CIT
Section 273(A), 273(A)(4)
P.K. Jaiswal & Virender Singh, JJ.
W.P.No.1918 & 1922/2018
1st March, 2018
P.M. Choudhary, learned Sr counsel with A.K. Jain, Adv., for the Petitioner. : Veena Mandlik, Adv., for the Respondent.
P.K. JAISWAL, J:
Since a common question of law is involved in these petitions therefore, they are being heard together and are being disposed of by this common order. For the sake of convenience the facts are borrowed from W.P.No.1918/2018.
By these writ petitions under Article 226 of the Constitution of India, the petitioner -assessee is assailing the order dated 15.12.2017 (Annexure P/1), passed by the Principal Commissioner Income Tax -I, Indore whereby, he has rejected the application filed by the petitioner under Section 273(A) / 273(A)(4) of the Income Tax Act, 1961, (hereinafter referred as âthe Actâ), for waiver of penalty imposable under Section 271(1)(c) of the Act.
The facts of the case are that the petitioner is proprietor of M/s. Khandelwal Chemicals, engaged in the business of manufacture and sale of chemicals. He is also the partner in partnership firm of M/s. Khandelwal Chemicals. The petitioner filed his return of income tax for Assessment Year 2014-15 on 25.3.2015, declaring a total income of Rs.4,15,030/-and shown income under the head salary and business and interest income. He has also shown long term capital gain of Rs.13,58,846/-on transfer of liability equity shares, which was claimed as exemption u/s. 10(38) of the Act. On transfer of equity shares of M/s. Kappac Pharma Ltd., to the tune of Rs.13,58,846/-. The petitioner claimed the said long term capital gain as exempt u/s. 10(38), which provides exemption to income arising from transfer of a long term capital asset being an eligible equity share in a company.
The case of the petitioner selected for scrutiny under CASS. The reason for scrutiny was suspicious Long Term Capital Gain on Share (Input from investigation wing). Consequently, a notice under Section 143(2) of the Act was issued on 18.9.2015. Further, the notice under Section 142(1) of the Act, also issued to him on 4.1.2016 and 4.8.2016 and quarries raised in respect of the income and deduction u/s. 10(38) claimed by him in the Income Tax Return.
On 26.10.2017, the Assessing Officer issued letter to the petitioner with regard to share transaction. The details of his letter reads as under :
“Whereas this office is in possession of of detailed and specific information that you have undertaken transaction in the sale of shares amounting to Rs.24,58,600/under the scrip KAPPAC PHARMA and the same has been found to be a bogus transaction.”
During the assessment proceedings, the assessee revised computation withdrawing deduction u/s 10(38) and shown this gain under the head âIncome from other sourcesâ and also paid tax thereon. The petitioner did not surrendered capital gain of Rs.10,58,646/-himself.
The Assessing Officer while completing the assessment, add the amount of LTCG under the head of âIncome From Other Sourcesâ and also initiated penalty under Section 271(1)(c) as the assessee furnished inaccurate particulars of income and also passed assessment order on 7.12.2017 vide Annexure P/9. The observation of the Assessing Officer in para 4 of the assessment order reads as under :
“4. Assesee got LTCG of Rs.13,58,846/-on sale of penny stock ie., 2000 equity shares of KAPPAC PHARMA during the year, this profit was claimed u/s 10(38) I.T. Act, 1961 in his return of income. During the course of assessment proceedings assessee withdrew his deduction u/s 10(38) I.T. Act, 1961 and offered the income under the head income from other sources. Assessee did not surrendered capital gain of Rs.10,58,646/-himself. He withdrew dudction of Rs.13,58,646/-u/s 10(38) I.T. Act after detection by department. Therefore, the total amount of Rs.13,58,646/-is added to his return income under the head income from other sources. Penalty proceedings u/s 27(1)(c) are also initiated for furnishing inaccurate particulars.
6. Assessed u/s. 143(3) of the Income-tax Act and interest are determined as per the ITNS-150 which is a part of this assessment order. Demand Notice and Challan are issued accordingly. Penalty proceedings u/s 271(1)(c) of I.T. Act, 1961 is initiated.”
8. On 27.12.2016, the petitioner filed a petition before the Principal Commissioner of Income Tax -I, for waiver of penalty leaviable u/s 271(1)(c) of the Income Tax Act and in para 6 he has submitted that he has fulfilled following condition for waiving of leviable penalty :
“a. The assessee has prior to detection by the A.O. has voluntarily and in good faith made full disclosures of such particulars.
b. The assessee has also cooperated in all the quires relating to the assessment of income.
c. That the assessee has also paid the resultant tax and interest on the deduction withdrawn.”
9. In the mean time the Assessing Officer also levied penalty of Rs.3,53,000/-u/s 271(1)(c) of the Income Tax Act, 1961 vide his order dated 30.6.2017. The observation of the assessment officer is as under :
“â¦â¦â¦â¦â¦â¦â¦.. it is clear assessee did not surrendered capital gain voluntarily. He withdrew deduction u/s 10(38) I.T. Act, 1961 after deduction of department. Therefore, the assessee is liable for penatly u/s 271(1)(c) of the I.T. Act, 1961. Penalty imposable is @ 100% to 300% of tax sought to be evaded. In the facts of the case, I am imposing minimum 100% penalty calculated as under, which is leviable as per provision of section 271(1)(c) of Income Tax Act after providing due and reasoable opportunities of being a heard to the assessee. After careful consideration of the facts placed on record, it is found that for no reasonable cause assessee has furnished inaccurate particulars of income of Rs.13,58,647/-. The penalty proceedings u/s 271(1) (c) were therefore rightly initiated in the assesseeâs case for furnishing inaccurate particulars of Income of Rs.13,58,846/-which tantamount to concealment & furnishing of inaccurate particulars of such income.
Therefore, I am satisfied that it is fit case for levy of penalty u/s 271(1)(c) of IT Act r.w. Sec 274 of IT Act as the assessee has failed to file his correct particular of income and has committed default within the meaning of Sec. 271(1)(c) r.w. Sec 274 of IT Act.”
10. On 30.6.2017 and 14.12.2017, Shri Pradeep Jain, Chartered Accountant attended the hearing before the Principal Commissioner of Income Tax and submitted that the petitioner fulfilled all the conditions for waiver of penalty u/s. 273(A) of the I.T. Act and prayed for waiver of penalty.
11. The condition for waiver of penalty in Section 273(A)(1) are as under :
(i) Prior to the detection by the Assessing Officer, of the concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income, voluntarily and in good faith, made full and true disclosure of such particulars by the assessee and
(ii) The assessee has co-operated in any enquiry relating to the assessment of his income and
(iii) The Assessee has either paid or made satisfactory arrangements for the payment of any tax or interest payable in consequence of an order passes under this act in respect of the relevant assessment year.
12. The Principal Commissioner after examining the record of the case found that the condition prescribed for waiver of penalty u/s.273A is not fulfilled by the assessee in respect of assessment year 2014-15, as the income of the assessee selected for scrutiny under CASS for the reason of suspicious long term capital gain on share (Input from investigation wing). The Assessing Office was in possession of detailed and specific information on which he had written a letter to the petitioner on 26.7.2016, whereas the assessee submitted his revised computation and accepted LTCG under the head âIncome From Other Sourcesâ vide his letter dated 16.8.2016 and these facts the assessing officer has mentioned in assessment order and penalty order u/s 27(1)(c) of the Act in para 4 and 6 of the order.
13. The condition for waiver of penalty in Section 273(A) (4) of the Act are as under :
(i) To do otherwise would cause genuine hardship to the assessee, having regard to the circumstances to the case; and
(ii) The assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.”
The Principal Commissioner after considering the case came to the conclusion that the case of the petitioner is not a genuine hardship as he did not submit any evidence / document to show that it was called genuine hardship financially or in any manner and rejected the petition filed by him for waiver of penalty u/s.273(A) of the Act.
Learned Senior counsel for the petitioner has drawn our attention to the conditions for waiver of penalty in section 273(A) (1) & 4 of the Act and also drawn our attention to CBDT Circular dated 21.9.2016 (Annexure P/10) and submitted that the Principal Commissioner should have taken a lenient view in the matter as a valid declaration has been made by the petitioner.
The CBDT Circular relates to assessee, who obtained IDS (Income Tax Declaration Scheme, 2016), where the petitioner did not declared income under that âIDS Schemeâ for the assessment year 2014-15 and, therefore, the assessee will not get any help from the aforesaid circular.
His further submission is that the petitioner was cooperated in enquiry. As per Clause No.(I) of section 273A, the assessee has to inform about the suspicious long term capital gain share prior to the detection by the A.O. or he has to voluntarily disclosed the same. In the case in hand, the case of the petitioner was selected under CASS for scrutiny for the reason of “Suspicious Long Term Capital Gain on Share” (Input from investigation wing). The Assessing Officer was in possession of detailed and specific information on which he had written a letter to the petitioner on 26.7.2016, whereas the assessee submitted his revised computation and accepted LTCG under the head âIncome From Other Sourcesâ vide his letter dated 16.8.2016 and this question has been considered by the learned Principal Commissioner of Income Tax in its order. In respect of condition for waiver of penalty in section 273A (4), we have found that his case is not a genuine hardship, as he did not submit any evidence / document to show that it would cause genuine hardship financially or in any manner. The learned Principal Commissioner also found that the petitioner could not produce any document / evidence of genuine hardship for waiver of penalty u/s. 273(A)(4) nor specific requirement of section. The petitioner is the author of the situation.
He claimed long term capital deduction u/s. 10(38) of Rs.13,58,846/-on account of Transfer of Eligible Equity Share and after “Input from the investigation Wing”, the case was selected for scrutiny and thereafter only after receipt of letter dated 26.10.2017, the assessee withdrawn the deduction claimed u/s 10(38) and accepted as “Income From Other Sources”.
In the case of Vasantbhai Jethalal Lathiwala V/s. Commissioner of Income-tax. (2008) 174 Taxman 280 (Bombay), it has been held that the power u/s. 273A of the Act is purely discretionary character and once the conditions required for exercise of discretion in any judicial or quasi-judicial proceedings are satisfied, exercise of discretion cannot be either arbitrary or capricious and has to be judicious and objective. He has placed reliance on the decision of the Bombay High court in the case of Laxman V/s Commissioner of Income-tax, (1988) 174ITR 465 (Bombay) and submitted that the full and true disclosure was made by the petitioner voluntarily and in good faith and once full and true disclosure of income was made voluntarily then he could file his application for waiver and erred in law in rejected the application for waiver of penalty.
The Division bench of Bombay High Court in the case of Laxman V/s. Commissiner of Income-tax (supra) had also on occasion to deal with the interpretation of section 273A of the Act, wherein the Division Bench observerd that the most important facet of Section 273A is furnishing of return in respect of income voluntarily and in good faith with full and true disclosure of particulars thereof. According to the Division Bench âvoluntaryâ means âwithout compulsionâ. Secondly, according to the Division Bench though âgood faithâ is not defined under the Act, considering the definition given under section 2(22) of the General Clauses Act it means an act done honestly even if it is tainted with negligence or mistake. According to the Division Bench all that is required is that disclosure of income must be full and true according to the honest belief of the assessee.
In the case of Vasantbhai Jethaiai Lathiwala V/s. Commissioner of Income-tax (supra), the petitioner therein made a full and true disclosure of his income before issuance of any notice by the Income Tax Deptt. u/s. 139(2) or u/s 148 of the Act. The assessee accordingly, paid the full tax on income so disclosed. He also informed about the filing of voluntarily return prior to the date and requested to consider the same accordingly. The Income Tax Officer accepted the income and made assessment, however, charged interest for all years u/s. 139 of the Act for late filing of the return and charge the penalty u/s. 217 for non-payment of advance tax for the assessment year. He challenged the waiver and penalty by filing application u/s. 273 of the Act on the ground that he fulfills the condition for waiver as contemplated u/s. 273A(1)(c) of the act. His application was rejected by the Commissioner on the ground that the return(s) were filed beyond period and, therefore, invalid and further held the the return(s) were being filed after issuance of notice u/s. 148 of the Act and, therefore, rejected the application. The Bombay High Court has observed that the power / discretion, so provided to the Commissioner to levy penalty and reduce interest needs to be exercised judiciously, fairly, reasonably, objectively and not arbitrarily. The order of the Commissioner was quashed and it was directed to consider the application in accordance with law, on merits. The facts of Vasantbhai Jethaiai Lathiwala V/s. Commissioner of Income-tax and Commissiner of Income-tax (supra) are distinguishable on facts.
The respondent has drawn our attention to the decisions of the Allahabad High court in the case of Jyoti Steels V/s. Commissioner of Income-Tax & Another. 1987 (166) ITR 558, Hakam Singh & Others V/s. Commissioner of Income-Tax., Meerut. 1980 (ITR) 124 Pg. 228 (AH.) and Mool Chand Mahesh Chand V/s. Commissioner of Income-Tax. Agra & Another, 1978 (ITR) Vol. 115 Pg.1 (All.) and submitted that the order dated 15.12.2017 passed by the Principal Commissioner Income Tax-1, is just and proper and prayed for dismissal of the petition.
In order to avail of the benefit of Section 273A of the Act, it is for the petitioner to make out a case that imposition of penalty would cause genuine hardship to him and this to be done to the satisfaction of the Commissioner. The petitioner must also specify the Commissioner that he has co-operated in an equiry relating to his assessment or proceeding for the recovery of any amount due from him.
In the present case, the petitioner was in possession of the detailed and specific information in respect of the suspicious long term capital gain on share, but he failed to submit the same prior to the detection of the Assessing Officer (prior to letter dated 27.10.2017 issued by the Assessing Officer) and neither he produced any material evidence or document that his case is of genuine hardship nor he pointed out that it would cause genuine hardship financially or in any manner and thus, the learned authority rightly rejected the prayer for waiver of penalty in section 273A(1)(4) of the Act, as he failed to fulfill the conditions prescribed therein and thus, we are of the view that the learned authority has not committed any legal error in passing the impugned order, no case is made out to interfere with the well reasoned impugned order as prayed by the petitioner is made out. The petition filed by the petitioner has no merit and is accordingly, dismissed.
No orders as to costs.
[Citation : 405 ITR 569]