Punjab & Haryana H.C : the Tribunal has set aside the penalty levied on the assessee under s. 271(1)(c)

High Court Of Punjab & Haryana

CIT vs. Tirath Singh Parkash Singh

Section 271(1)(c)

Adarsh Kumar Goel & Rajesh Bindal, JJ.

IT Appeal No. 98 of 2004

17th July, 2006

Counsel Appeared :

S.K. Garg, for the Appellant : S.K. Mukhi, for the Respondent


By the court :

This order will dispose of IT Appeal Nos. 98 and 99 of 2004 filed by the Revenue against the order passed by the Income-tax Appellate Tribunal, Chandigarh Bench (for short ‘the Tribunal’) whereby the Tribunal has set aside the penalty levied on the assessee under s. 271(1)(c) of the IT Act, 1961 (for short ‘the Act’).

2. We have heard counsel for the parties and have perused the order passed by the Tribunal. While accepting the plea of the assessee for setting aside the penalty for the years in question, the Tribunal recorded the following findings in para No. 27 of the order : “Even if it is held that abovesaid circumstances were good material to uphold the addition in assessments, the aforesaid facts, under no circumstances, can be treated as sufficient to establish the case of fraud, gross or wilful neglect on the part of the assessee, GP rate of different traders carrying on the same or similar business may vary from trader to trader and from year to year. But it cannot follow that the traders showing lesser rate of profit have concealed income or are guilty of fraud, gross or wilful neglect. Some material has to be produced by the Revenue to establish the case relating to assessment year under consideration. The Revenue cannot rely on facts like record of other traders and admission made by the assessee in some other years to establish the case of penalty in the years of account. Reverting to the question whether onus under Expln. (1) has been discharged in these cases, we find that the Revenue has justified this action by presuming that the assessee must have charged commission @ 1-1/2 per cent. On the basis of above presumption, we cannot hold that the assessee in the present case is guilty of fraud, gross or wilful neglect in not returning income from commission @ 1-1/2 per cent. The charging of commission @ 1 per cent as disclosed cannot be ruled out. Therefore, on the basis of material we hold that the onus has been discharged and that the levy of penalty under s. 271(1)(c) even under the Expln. (1) in asst. yr. 1974-75 or 1975-76 is not legally justified. Further legal and factual implication of asst. yr. 197778 is also to be seen.

It has been accepted by the Revenue that commission in that year was charged at 1 per cent only. Commission at a similar rate was charged in other assessment years before and it cannot be ruled out that commission @ 1 per cent was charged in the four years under appeal. It is not improbable. Similar principles have been applied by Courts where estimates were taken on purely estimate basis and penalty imposed. See case of Harigopal Singh vs. CIT (2002) 177 CTR (P&H) 580 : (2002) 258 ITR 85 (P&H) where income was taken at Rs. 1,50,000 against Rs. 52,000 disclosed by the assessee. Even then their Lordships held that no penalty under Expln. (1) to s. 271(1)(c) could be imposed. The penalty levied was cancelled. We, therefore, hold that no case of concealment has been established. Penalty imposed in all the five years is cancelled.”

3. Bare perusal of above observations of the Tribunal shows that the finding of fact has been recorded holding that no case of concealment has been established by the Revenue inviting levy of penalty.

4. We have also perused other material on record and find that mere surrender of income by taking the commission @ 1-1/2 per cent in some other years before the Settlement Commission cannot be taken to be a ground to hold that even during the years in question, the assessee had deliberately concealed the income when even in the subsequent years, it was accepted by the Revenue that the assessee had in fact charged commission only @ 1 per cent.

5. In view of the concurrent finding of facts recorded by the authorities below that no case of concealment is made out, we do not find any reason to interfere in the present appeals as the same do not raise any substantial question of law. Accordingly, the appeals are dismissed.

[Citation : 296 ITR 191]

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