High Court Of Madras
CIT vs. Cholamandalam Securities Ltd.
Section 260A, 271(1)(c)
Asst. Year 1997-98
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) No. 424 of 2007
6th June, 2007
Counsel Appeared :
J. Naresh Kumar, for the Appellant
JUDGMENT
P.P.S. Janarthana Raja, J. :
This appeal is filed under s. 260A of the IT Act, 1961 by the Revenue, against the order of the Tribunal, “A” Bench, Chennai, in ITA No. 1620/Mad/2002, dt. 6th Oct., 2006 raising the following substantial question of law :
“Whether in the facts and circumstances of the case, the Tribunal had properly exercised its discretion and was right in deleting the penalty imposed under s. 271(1)(c), when clearly the assessee had not included the total brokerage received by it in its P&L a/c ?”
2. The facts leading to the above substantial question of law are as under : The assessee is a company incorporated on 28th Sept., 1994 as a 100 per cent subsidiary of M/s Cholamandalam Investments & Finance Co. Ltd. The company is a member of the Madras Stock Exchange and is doing business as a share broker. The relevant assessment year is 1997-98 and the corresponding accounting year ended on 31st March, 1997. The assessee filed return of income on 1st Dec., 1997 admitting taxable income at Rs. 3,31,710. The return was processed under s. 143(1)(a) of the IT Act (“Act” in short) and thereafter taken up for scrutiny and notice under s. 143 (2) was served. The AO completed the assessment under s. 143(3) of the Act on 30th Nov., 1999 on a total income of Rs. 27,44,016 and made the following additions and disallowances to the IT return : Aggrieved by the order, the assessee filed an appeal to the CIT(A). The CIT(A) confirmed the additions and disallowances made as per sl. Nos. (i), (iii), (iv) and (v) mentioned above and directed that the disallowance of the loss of Rs. 1,36,000 should be examined again after affording an opportunity to the assessee. The AO also passed a consequential order after giving an opportunity to the assessee and the said assessment order has also been accepted by the assessee. During the course of assessment proceedings, the assessee was served with a show-cause notice for concealment of brokerage income. In response to the show-cause notice, the assessee filed a letter dt. 2nd Feb., 2000 and offered an explanation. The AO, not satisfied with the explanation offered by the assessee regarding concealment of income earned by way of brokerage income, levied the penalty in dispute. The AO levied a penalty of Rs. 10 lakhs. Aggrieved by the order the assessee filed an appeal to the CIT(A).
The CIT(A) allowed the appeal and held that the assessee had not filed any inaccurate particulars of income and has also not concealed any income from the Revenue. Aggrieved, the Revenue filed an appeal to the Income-tax Appellate Tribunal (“Tribunal” in short). The Tribunal dismissed the appeal filed by the Revenue and upheld the order of the CIT(A) cancelling the penalty. Hence, the present appeal is filed by the Revenue. Learned standing counsel appearing for the Revenue submitted that the assessee had not shown the sub-brokerage in the P&L a/c. The assessee had shown only the net brokerage in the P&L a/c which is against the method of accounting adopted by the assessee. It is further submitted that the AO called the details of current liability in Sch. VII of the balance sheet. Only after examination, it was found by the AO that there was understatement of brokerage receipts and hence the levying of penalty by the AO is in conformity with law. Heard the counsel. The assessee is a member of stock exchange and is a share broker. During the course of assessment proceedings, the AO found that the assessee had admitted profit of Rs. 68.32 lakhs as brokerage. However, on examination it was found that gross brokerage earning was Rs. 88.32 lakhs. The assessee itself had deducted the sub-brokerage payable to M/s Cazenove & Co. amounting to Rs. 19.98 lakhs and only the net brokerage of Rs. 68.32 lakhs had been admitted in the P&L a/c. The sub-brokerage of Rs. 19.98 lakhs payable was shown as liability in the balance sheet in Sch. VII. The assessee had filed all the details before the AO and also not concealed anything from the Department on the basis of the available record and details furnished by the assessee. It is seen from the record that the assessee has been following the accounting practice of netting the brokerage earned against sub-brokerage payable and only the net amount was reflected in the P&L a/c. Since the sub-brokerage has not been paid, it was shown as outstanding in the balance sheet. Hence, there has been no concealment of income or there is no furnishing of inaccurate particulars of income.
The only mistake committed by the assessee is not showing the sub-brokerage as payable in the P&L a/c. Instead it has shown the net brokerage receivable and correspondingly, the outstanding sub-brokerage payable has been shown in the balance sheet. This is an acceptable system of accounting. The AO has found out only from the details available from the accounts furnished. The Tribunal as well as the first appellate authority were of the view that this is not a case where inaccurate particulars of income have been furnished or there is concealment of income by the assessee. Rather, this is a case where a genuine and bona fide mistake of not showing sub- brokerage explicitly in the P&L a/c, has been committed, because the assessee was following the netting of brokerage earned. For the purpose of levying penalty, there should be a direct attempt of concealment of items of income or a portion thereof from the knowledge of IT authorities. The imposition of penalty is not automatic and in this case, the mistake committed by the assessee is accidental or inadvertant and not intentional. It is also seen that the assessment has been accepted and tax has been paid since the entries relating to the sub-brokerage have been written back in the financial year 1999-2000. Both the authorities have given a concurrent finding that there is no concealment or inaccurate particulars furnished by the assessee and it is only a bona fide mistake and not intentional. The findings given by the Tribunal as well as the first appellate authority were based on valid materials and evidence. Recently, the Supreme Court in the case of CIT vs. P. Mohanakala (2007) 210 CTR (SC) 20 : (2007) 291 ITR 278 (SC) held that whenever there is a concurrent factual finding by the authorities below, the same should be accepted and no interference should be called for by the High Court. Under these circumstances, we do not find any error or legal infirmity in the order of the Tribunal so as to warrant interference. In view of the foregoing reasons, no substantial question of law arises for consideration of this Court and accordingly the tax case is dismissed. No costs.
[Citation : 296 ITR 408]
