C I T AJMER vs. M/S UNIQUE PRECURED RETRADERS AJMER

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR ------------------------------------------------- (1) INCOME TAX APPEAL No. 80 of 2006 C I T AJMER V/S M/S UNIQUE PRECURED RETRADERS (2) INCOME TAX APPEAL No. 52 of 2006 C I T AJMER V/S M/S UNIQUE PRECURED RETRADERS (3) INCOME TAX APPEAL No. 79 of 2006 C I T AJMER V/S M/S UNIQUE PRECURED RETRADERS

Mr. K.K. BISSA, for the appellant. Mr. NIRAJ JAIN FOR MR.ANJAY KOTHARI, for the respondent. Date of Order : 12.9.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J. ORDER ----- These three appeals have been filed by the Revenue, against the common judgment of the tribunal, dated 04.1.2005. The appeals were admitted on different dates, by different orders,

2 framing following substantial question of law, being as under:- “Whether on the facts and in the circumstances of the case, when return is submitted in pursuance of notice under Section 148 showing higher income than returned in original return, as a result of survey in the premises of the assessee during which assessee has surrendered income in addition to the income assessed originally and the assessment has been made at such returned income, whether presumption under Explanation 1 to Section 271 (1) (c) could be raised about the concealment of particulars of income to initiate proceedings for levy of penalty during the course of such re- assessment?”

The matters relate to same assesses, but to three different assessment years, being 1995- 1996, 1996-1997 and 1997-1998, and involve common question, and are therefore being decided by this common judgment. The necessary facts are, that the assessee submitted returns, for the relevant assessment years, and for the assessment years 1995-1996 and 1996-1997, returns were processed under Sec. 143

3 (1)(a), while the return for the assessment year 1997-1998 had not been so processed. It is during this time, i.e. on 22.10.1997, a survey was conducted in the factory premises of the assessee, and certain discrepancies were pointed out. During this survey, statement of one of the partners of the firm were recorded by the survey team, the partner, has explained the discrepancies; in as much as, in answer to question No. 16, relating to receipts of Rs. 15,43,451/- during October, 1995 to March 1997, it was given out, that during this period, the work was done in the name of Unique Tyre and Trade, and the plant was given on contract, to Sabir Mohammad, whose address is not known, and the contract was given @ 2000/- per month, and that, the income of this contract is not entered in books of account. It was also explained while answering the question No 17, that since Sabir was not literate, Shantilal was maintaining the register, then on a second thought, he gave out, that the receipt is of his firm, and is not entered in the books of account, and offered to surrender 15% of the receipt as income, to be

4 levied to tax, then in answer to question No. 18, relating to the claims to three different amounts, during the assessment years, 1995-1996,1996-1997 and also 1997-1998, expenditure on account of discount and claim, so also commission and rebate, it was deposed, that the particulars of this claim, i.e. confirmation or other details from the concerned parties is not available, it was given out, that actually the expenditure was incurred, but it is not possible to get it verified to the extent of 100%, therefore, in order to purchase peace of mind, he surrendered the total amount of Rs. 1,00,000/- for the assessment year 1995-1996 and Rs. 1,70,000/- for the assessment year 1996- 1997, and prayed, that he may be exempted form liability of penalty and interests. It is this surrendered amount, which is bone of contention, in as much as, after the survey, the assessee filed revised return, disclosing the income, as surrendered, those returns were accepted, and assessment orders have been passed, but at the same time, in the assessment order, penalty proceedings under Section 271 (1) (c) were ordered to be

5 initiated. Accordingly, notice were issued, and assessing officer, passed order, imposing penalty for the three different assessment years. These orders were challenged in appeal, by the assesses, and three appeals were decided by common order, by the learned Commissioner, who set aside the penalty, by holding inter alia, that the assessee had voluntarily surrendered the income, and in the statement, he has not admitted, that he has concealed income, and since, nothing was produced on the side of the revenue, to establish, that the assesses had concealed the income, rather the surrender was made to purchase peace, and in the background of the fact, that the wife of the partner had undergone major operation, and his brother-in-law also died untimely. In such disturbed set of mind, this surrender was made, and it could not be said to be the case of concealment, within the meaning of Sec. 270 (1) (c), read with explanation 1. The learned Commissioner relied upon the various judgments, including the judgment of Hon'ble Supreme Court, and other High Courts, and

6 thus, set aside the impugned order. This setting aside has been confirmed by the learned Tribunal. The learned Tribunal, relied upon the judgment of Bombay Bench of the Tribunal, in the case of Kumar Agencies (India) Vs. ACIT, ITAT, and quoted the portion thereof which was relied upon in extenso. In this judgment, the judgment of Hon'ble Supreme Court in case of CIT Vs. Suresh Chandra Mittal, (reported in 251 ITR 9) and K.P. Madhusudhanan Vs. CIT (reported in 251 ITR 99) were considered and followed. Learned Tribunal also relied upon the judgment of the Jaipur Bench of the Tribunal, confirming the order of the learned Commissioner. Learned counsel for the revenue, relying upon the judgment of Hon’ble the Supreme Court, in Chairman SEBI Vs. Shriram Mutual Fund (reported in (2006) 5 SCC 361) contended, that Mens-rea is not one of the essential ingredient, for attracting liability, under Section 271. It was also contended that the learned Tribunal, and the learned

7 Commissioner, have proceeded on the basis, that the surrender made by the assesses, was on the condition of any proceedings for penalty or interest were not to be initiated, while from a look at the statement of the partner of the assesses firm, it is clear, that there was no such condition. In such circumstances, since admittedly, the assesses had filed return, showing enhanced income, and it was only in the course of survey, that it came to light, that the assessee had earned higher income, which he concealed, while the assesses surrendered it, and filed revised return, in pursuance of notice under Sec. 148 and, therefore, the presumption arises under explanation 1 to 271 (1) (c), about concealment of the particulars of income, and thus, the assessing officer was right in imposing penalty, and the order of the learned Commissioner, and the learned Tribunal, are required to be set aside. On the other hand, learned counsel for the assesses, placed reliance on the judgment of Hon'ble Supreme Court, in CIT Vs. M. Pachamuthu and

8 Anr. (reported in 295 ITR 502), and then on a latest judgment of Hon'ble Supreme Court, in Sudarshan Silks and Sarees vs. CIT (reported in 300 ITR 205 (SC)). Learned counsel also relied upon the judgment of this court in Shivlal Tak Vs. CIT 251 ITR 373, and supported the impugned orders. We have gone through the judgments sited at the bar. In our view, the judgment in Sudarshan's case clinches the controversy, apart from the fact, that the judgment in Suresh Chandra Mittal and K.P. Madhusudhanan also support the case of the assesses. In Sudarshan's case, it has further been held, that the finding recorded by the Tribunal, or the authorities below, on the question of liability of penalty, is essentially finding of fact, and unless, those findings are alleged to be perverse, or to be vitiated on other counts, available under Sec. 260 A, High court cannot interfere with them. In this sequence, we may gainfully refer to the judgment cited by the learned counsel for the revenue, in Union of India & Ors. Vs. Dharmendra Textile Processors and Ors.,

9 (reported in 295 ITR 244 (SC)), wherein it was noticed, that there is a direct conflict, between two judgments of Hon’ble Supreme Court, being in Dilip N. Shroff Vs. Joint CIT (2007) 8 scale 304 and Chairman, SEBI Vs. Shriram Mutual Fund (reported in (2006) 5 SCC 361) on the question, about requirement of Mens-rea for attracting liability of penalty, and the question has been referred for consideration, to the larger bench. In that view, if two learned authorities below had followed one line of reasoning, and has declined to maintain the penalty, it cannot be said, that the findings could not have been arrived at, or are required to be interfered with by this court, in view of the judgment of Hon'ble Supreme Court, in Sudharshan's case. Accordingly, the question as framed, is answered, as above. The appeals thus have no force and are dismissed.

( KISHAN SWAROOP CHAUDHARI ),J. ( N P GUPTA ),J. /ns./