THE COMMISSIONER OF IT vs. M/S IQBAL SINGH & CO

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ITA/86/2006HC Punjab & HaryanaPHHC01075387200625 September 2008Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY TEWARI3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court found no error in the judgment of the ITAT and held that the substantial questions of law proposed by the Revenue did not arise in the appeal. The Court relied on its own judgment in CIT vs M.M.Rice Mills, 253 ITR 17, which held that additions made to income under the proviso to section 145(1) due to defects in accounting methods do not automatically lead to the conclusion of failure to return correct income by means of fraud or gross or willful neglect. The ITAT had noted that the Commissioner (Appeals) had not stated that the assessee failed to disclose all facts and that additions were made on estimation without material to substantiate failure to return correct income due to fraud or willful neglect. Therefore, the High Court dismissed the appeal. No issue was expressly left undecided.

What were the facts?

The Revenue, Commissioner of Income-tax, Panchkula, is in appeal against an order dated 27.6.2005 passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench. The ITAT had allowed the assessee's appeal against orders dated 5.9.2002 passed by the Commissioner of Income-tax (Appeals) and 16.5.2001, which imposed a penalty under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was levied for the assessment year 1990-91, amounting to Rs.1,38,454/-, and had been confirmed by the Commissioner (Appeals). The ITAT noted that the Commissioner (Appeals) did not state that the assessee had failed to disclose all facts for income computation and that additions were based on estimation without substantiating failure to return correct income due to fraud or willful neglect.

What were the issues?

1. On the facts and in the circumstances of the case, whether the learned ITAT was right in law in deleting the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Act, which was confirmed by the learned CIT(A)? 2. On the facts and in the circumstances of the case, whether the Explanation to section 271(1)(c) needs to be specifically adverted to in an ex parte order levying penalty under section 271(1)(c), when the provisions of section 271(1)(c) are otherwise attracted? Assessee's contentions: The judgment does not record specific contentions made by the assessee before the High Court. However, the ITAT's reasoning, which the High Court upheld, suggests the assessee argued that additions were based on estimation and there was no evidence of fraud or willful neglect. Revenue's contentions: The judgment does not record specific contentions made by the Revenue before the High Court. However, the appeal itself indicates the Revenue's contention that the ITAT erred in deleting the penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 145(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision : September 25, 2008 The Commissioner of Income-tax, Panchkula ...... Appellant. through Mr.Yogesh Putney, Sr. Standing counsel. v. M/S Iqbal Singh & company ...... Respondent through Mr.Sunish Bindlesh, Advocate CORAM : HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY TEWARI ***

1.

Whether Reporters of Local Newspapers may be allowed to see the judgment ?

2.

To be referred to the Reporters or not ?

3.

Whether the judgment should be reported in the Digest ? *** AJAY TEWARI, J The revenue is before this Court against the order dated 27.6.2005 of the Income Tax Appellate Tribunal, Chandigarh Bench allowing the appeal of the assessee against the orders dated 5.9.2002 passed by the Commissioner of Income-tax, and dated 16.5.2001 whereby a penalty under Section 271(1)(c) of the Income Tax Act, 1961 was imposed upon the assessee. This appeal proposes the following substantial questions of law:- “1. On the facts and in the circumstances of the case, whether the learned ITAT was right in law in deleting the penalty imposed by the AO under section 271(1)(c) of the Act which was confirmed by the ld CIT (A) also ? 2) On the facts and in the circumstances of the case whether Explanation to section 271(1)(c) needs to be specifically adverted to in an exparte order levying penalty under section 271(1)(c), when the provisions of section 271(1)(c) are otherwise attracted ? For the assessment year 1990-91, a penalty of Rs.1,38,454/- follows :- “.... Merely because the additions have been made to income under the proviso to section 145(1) of I.T.Act, 1961 by adopting the view that the gross profit shown in the books of account was too low as there were defects in the method of accounting employed it would not automatically lead to the conclusion that there was failure to return the correct income by means of fraud or gross or willful neglect. We find no error in the judgment of the Tribunal. The above quoted judgment applies squarely to the facts of this case. In this view of the matter, we hold that the questions proposed do not arise in this appeal and dismiss the same with, however, no order as to costs. ( AJAY TEWARI ) JUDGE

( ADARSH KUMAR GOEL )

JUDGE September 25, 2008

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