SHEVETA CONSTRUCTION CO PVT LT vs. I T O WARD 3 JAIPUR

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ITA/534/2008HC RajasthanRJHC02038020200806 December 20165 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the contention raised by the appellant (assessee) is required to be accepted. Following the observations in the cited judgment, the AO must issue a notice specifying whether the penalty is proposed for concealment of income or furnishing inaccurate particulars. The AO cannot proceed on both conditions without clarity. If both are applicable, it must be clearly stated in the notice and a finding recorded in the penalty order. The issue is answered in favour of the assessee and against the department. The appeal is accordingly allowed. The High Court did not expressly leave any issue undecided.

What were the facts?

The assessee, Sheveta Construction Co. Pvt. Ltd., filed its return for Assessment Year 1993-94 declaring an income of Rs. 2,70,719/-. During assessment proceedings for AY 1994-95, it was found that the assessee claimed payments of hire charges to Sh. Nand Kishore, brother of a Director, for vehicles. Inquiries revealed Sh. Nand Kishore did not own any such vehicles and had not rendered services. Similar bogus payments were noted in other cases. Reassessment proceedings under Section 147 were initiated by issuing a notice under Section 148 on 04.12.1997. The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars.

What were the issues?

1. Can penalty under Section 271(1)(c) for alleged concealment of income or furnishing inaccurate particulars of income be levied when the legality of assessment proceedings is subjudice before the High Court and the question has been admitted in a quantum appeal? The assessee contended that the AO must be clear in the assessment order whether the penalty is for concealment of income or furnishing inaccurate details, and cannot proceed on both grounds simultaneously. The assessee relied on the Andhra Pradesh High Court decision in Chennakesava Pharmaceuticals Vs. Commissioner of Income Tax and the Supreme Court decision in Dilip N. Shroff Vs. Joint Commissioner of Income Tax & Anr. The revenue, through its counsel, argued that a perusal of the penalty order makes it clear that both conditions were fulfilled, and therefore, the Tribunal's view should be accepted.

Which sections of the Income-tax Act were involved?

Section 44AB,Section 143(1)(a),Section 147,Section 148,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR. DB INCOME TAX APPEAL NO.534/2008 Sheveta Construction Co. Pvt.Ltd., through its Managing Director Dinesh Kr. Choudhary, Son of Late. Sh. Ganesh lal Choudhary, aged about 52 years, resident of D-65,Chomu House, C-Scheme, Jaipur. Versus ITO, Ward 3(4), Jaipur. DATE OF ORDER ::: 06.12.2016. HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE DINESH MEHTA Mr, Prakul Khurana, for the appellant. Mr. Anuroop Singhi, for the respondent .

1.

By way of this appeal, the assessee has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal filed by the department.

2.

This Court while admitting the appeal on 22.04.2011 framed the following substantial questions of law: “Can penalty for alleged “Concealment of income” or “furnishing inaccurate particulars of income” be levied when legality of assessment proceedings itself is subjudice before Hon'ble High Court and the question to that effect has already been admitted in Quantum Appeal?”

3.

The brief facts of the case are that the return in the case of assessee company was filed on 31.12.1993 declaring income of Rs.2,70,719/-. Along with the return audit report dated 30.09.1993 as per requirement of Section 44AB has also been furnished. The return was processed u/s.143(1)(a) on 28.03.1994. Subsequently in the course of assessment

2 proceedings for the assessment year 94-95 it was found that assessee had shown payment to Sh. Nand Kishore, brother of Sh. D.K. Choudhary, Director, on account of hire charges of vehicle allegedly taken by the assessee from the said person. On inquiries it was gathered that in fact Sh. Nand Kishore did not own any truck/tractor and had never worked or rendered services to assessee company. The above position emerged on inquiry by the Inspector of the circle from Sh. Nand Kishire. He also denied of having any deposit with the company or any money was paid by or due to him from the assessee. Although an affidavit of Sh. Nand Kishore was subsequently filed by the assessee but he was not produced before the A.O for examination despite specific requisition in this regard. It was also noted that in many other cases, the claimed payments of hire charges were bogus as the persons shown as recipients of such payments had no vehicles to give on hire for assessee's business. In view of the above, the claim of the assessee with regard to payment of hire charges to Sh. Nand Kishore and others was not accepted and for the above bogus claim and other defects in accounts profit was determined by applying net profit rate rejecting book version. Claim of interest payment to Sh. Nand Kishore was also disallowed. In the period relevant to A.Y. 93-94 also the assessee claimed payment of hire charges at Rs. 73,500 to Sh. Nand Kishore from May, 1992 to September, 1992 his account was further credited by Rs. 47,000 on account of hire charges payable from September, 92

3 to March, 93. For the reasons given above the claim of payment of hire charges to the above person was not genuine in this year also and therefore there was a case of escapement/under assessment of income and accordingly reassessment proceedings u/s 147 were initiated by issuing notice u/s 148 on 4.12.97. 4. From the order of the assessment, the Assessing Officer has used the language as under: “Penalty proceedings under Section 271(1)(c) for concealment of income/furnishing of inaccurate particulars of Income have been initiated separately.”

5.

(2012) 349 ITR 196, wherein it has been held as under: “In Reliance Petro products Pvt.Ltd’s case (1 supra), the Supreme Court also held that imposition of penalty is unwarranted when there is no finding in the assessment order that details supplied by the assessee were found to be false. This indicates that the view taken by the Delhi High Court in Ram Commercial Enterprises Ltd.’s case (6 supra ) which has been approved in Dilip N. Shroff’s case (10 supra) continues to be valid and this part of the judgment in Dilip N. Shroff’s case (10 supra) has not been over ruled and continues to be good law. Moreover the decision of the Delhi High Court in Ram Commercial Enterprises (6 supra)was also followed by the same High Court in Commissioner of Income Tax v. M.K.Sharma(9 supra) and SLP(c) No.17591 of 2008 filed against the said decision was dismissed by the Supreme Court on 18.7.2008. Applying the above principle that the assessing officer should record in the assessment order his satisfaction that the assessee had either concealed the income or furnished inaccurate particulars of 4 income in his return before imposing penalty, we noticed that in the assessment orders passed by the assessing officer for the assessment year 198283 ‐ (which is the subject matter of I.T.T.A.No.29 of 2000) and for the assessment year 198384 (which ‐ is subject matter of I.T.T.A.No.33 of 2000), no such satisfaction is recorded.”

6.

Another decision of Supreme Court in case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax & Anr. (2007) 291 ITR 519 (SC) it has been held as under “It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. The Income Tax Officer had merely held that the assessee is guilty of furnishing of inaccurate particulars and not of concealment of income; which finding was arrived at also by the Commissioner of Income Tax and the Income Tax Appellate Tribunal. In the facts and circumstances of the case, there are enough material to show that the action on the part of the appellant may not be said to be such which would attract the penal provision under s. 271 (1)(c). For the reasons aforementioned, the impugned judgment cannot be sustained.”

7.

He contended that while concluding the assessment order the officer must be clear whether it is the concealment of income or furnishing of inaccurate detail. He cannot have both the things.

5

7.

1 However, Mr. Singhi appearing for the department submits that a perusal of the order of penalty makes it amply clear that both the things are fulfilled. In that view of the matter the view taken by the Tribunal is required to be accepted.

8.

We have heard Mr. Prakul Khurana and Mr. Anuroop Singhi.

9.

Taking into consideration the decision of the Andhra Pradesh High Court which virtually considered the subsequent law and the law which was prevailing on the date the decision was rendered on 27.08.2012. In view of the observations made in the said judgment, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding of Assessing Officer in the assessment order it is held that the AO, has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order.

10.

In that view of the matter, the issue is answered in favour of the assessee and against the department.

The appeal is accordingly allowed. (DINESH MEHTA), J. (K.S. JHAVERI), J. BM Gandhi 05

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