High Court Of Madras
Rajarajan Electrical Equipments Commissioner Of Income Tax (P) Ltd. vs. DCIT
Section 271(1)(c)
Asst. Year 1998-99
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case No. 44 of 2003
23rd February, 2006
Counsel Appeared
M. Aravind Subramaniam, for the Appellant : Mrs. Pushya Sitaraman, for the Respondent
JUDGMENT
P.D. Dinakaran, J. :
As against the order of the Tribunal dt. 8th Nov., 2002 in ITA No. 698/Mad/2002 imposing penalty of Rs.6,67,045 under s. 271(1)(c) of the IT Act, 1961, the unsuccessful assessee has preferred the above appeal raising the following substantial questions of law :
“1. Whether the learned Tribunal was justified in holding that the appellant was guilty of deliberate mis-statement of facts and concealment of facts, thereby attracting penalty under s. 271(1)(c) of the IT Act in the surrounding facts and circumstances of the case ?
2. Whether the learned Tribunal had erred in not holding that the provisions of s. 273A of the IT Act, were attracted in the instant case and thereby exempted the appellant from paying the impugned penalty assessment ?”
2. The brief facts of the case are stated as follows :
2.1 The assessment year involved is 1998-99. The assessee- company filed the return for the asst. yr. 1998-99 admitting a total income of Rs. 26,52,200. The assessment was completed under s. 143(3) of the Act determining a total income of Rs. 46,23,676. The enhancement in the income assessed was caused because of the addition of Rs. 19,71,481 made by the AO on the ground that the sales turnover to that extent was not brought to the account of the assessee and the sales turnover was kept outside the purview of income-tax assessment.
2.2 On the other hand, the explanation offered by the assessee was that even the sale was effected on 31st March, 1998 and the assessee claimed certain deductions under the General Sales-tax Act, the sale was completed only in June, 1998, when the purchaser received the goods sold. According to the assessee, the issue of invoice and delivery challan on 31st March, 1998 cannot be construed as the confirmation of sale.
2.3 The AO, however, refused to accept the explanation offered by the assessee as not satisfactory, finding that the assessee raised the sales bill on 31st March, 1998 and also filed sales-tax return admitting the same as turnover for the month of March, 1998 and paid sales-tax for the same. The assessee also paid Central excise duty applicable and claimed the same as expenditure in the P&L a/c based on the delivery challan prepared by the assessee on 31st March, 1998, supported by lorry receipt dt. 31st March, 1998. Hence, the AO imposed penalty of Rs. 6,67,045 under s. 271(1)(c) of the Act. 2.4 Against the order of the AO, the assessee filed an appeal before the CIT(A) contending that the AO failed to appreciate the explanation offered by the assessee that even though the assessee had paid the sales-tax, the same was deleted for the next year and the assessee, in fact, paid the income-tax for the said receipt in the asst. yr. 1999-2000 on the basis that the sale got completed only in June, 1998 when the purchaser received the goods in question. It was also the case of the assessee before the CIT(A) that the assessee neither concealed income, nor furnished any inaccurate fact, but, on the other hand, paid the income-tax voluntarily in the asst. yr. 1999-2000. Rejecting the contentions raised by the assessee, the CIT(A) confirmed the order of AO by order dt. 5th March, 2002 which was, on further appeal, confirmed by the Tribunal. Hence, the present appeal.
3. Mr. Aravind Subramaniam, learned counsel appearing for the assessee reiterated the contentions made on behalf of the assessee before the authorities below that even though the invoice of the impugned sale was issued on 31st March, 1998, the sale in fact was completed only in June, 1998 when the purchaser received the goods in question, based on which the assessee paid income-tax for the asst. yr. 1999-2000 and hence, there is no valid and justifiable reason for imposing penalty under s. 271(1)(c) of the Act.
4. Mrs. Pushya Sitaraman, learned senior standing counsel for the Revenue is not disputing the fact that though the invoice was issued on 31st March, 1998, the sale was completed only in June, 1998 when the purchaser received the goods as well as the fact that the assessee paid the income-tax for the said receipt voluntarily in the asst. yr. 1999-2000.
5.1 Whether the learned Tribunal was justified in holding that the appellant was guilty of deliberate mis-statement of facts and concealment of facts, thereby attracting penalty under s. 271(1)(c) of the IT Act in the surrounding facts and circumstances of the case ?
5.2 It is a settled law that the expression, ‘concealment’ as found in s. 271 would mean the existence of an intent deliberately to prevent relevant facts from becoming known. The Explanation to s. 271 of the Act makes it clear that in such circumstances, the assessee is entitled to offer an explanation that his act was sequel not amounting to concealment or not amounting to furnishing inaccurate particulars.
5.3 In the instant case, the fact remains that the sale of the goods in question was completed only in June, 1998 when the purchaser received the goods, even though the assessee issued invoice on 31st March, 1998. So, to decide the question whether the assessee has concealed income or not with intent to prevent the relevant facts from becoming known, the fact that the sale was completed in June, 1998 has to be taken into consideration. The act of the assessee that it has paid sales-tax for the asst. yr. 1998-99 with regard to the sale of the goods based on the invoice dt. 31st March, 1998 and claimed deduction under the general sales-tax and also paid Central excise duty for the goods would not by itself be a justification to find the assessee at fault that he has concealed income or furnished inaccurate particulars to levy penalty. It is also not in dispute that the assessee paid the income-tax for the sale receipt in the asst. yr. 1999-2000 voluntarily, even before the scrutiny of the assessment for the asst. yr. 1998-99 which has not been duly weighed by the authorities below. We are, therefore, of the considered opinion that the penalty could not be levied.
5.4 Further, the above view is also supported by the decision of a Division Bench of this Court reported in India Cine Agencies vs. Dy. CIT (2005) 275 ITR 430 (Mad) wherein it is held as follows :
The battle of wits between the assessee and their advisors on the one hand and the Revenue on the other is bound to result in different view points being projected and, as long as there is nothing to show that the assessee concealed the income with a dishonest intent or had furnished inaccurate particulars either deliberately or as a result of gross negligence which was not capable of being regarded as an innocent act, penalty is not to be ordinarily levied. We cannot agree with the submission made for the Revenue that intent has no place at all in s. 271(1)(c) of the Act. The word ‘conceal’ as defined in the Concise Oxford Dictionary as ‘not allowed to be seen; hide; keep secret; prevent from being known.’ Concealment, implies the existence of a deliberate intent to prevent relevant facts from becoming known. This, however, is not to say that the assessee can afford to be routinely careless and casual while submitting the returns. They certainly do have a duty to verify the particulars furnished by them and ensure that particulars furnished are indeed accurate. The power under s. 271 is discretionary and it is while exercising the discretion that the factors referred to by us are required to be taken into account.”
5.5 In this view of the matter, we hold that the Tribunal was not correct in confirming the penalty. Accordingly, the first question of law is answered in favour of the assessee.
6.1 Whether the learned Tribunal had erred in not holding that the provisions of s. 271A of the IT Act were attracted in the instant case and thereby exempted the appellant from paying the impugned penalty assessment ?
6.2 With regard to the second question of law, learned counsel appearing for the assessee fairly conceded that the point was neither raised, nor considered by the Tribunal. Hence, there is no need to raise the question to answer the same. The appeal stands allowed. No costs. Connected TCMP No. 47 of 2003 is closed.
[Citation : 284 ITR 448]
