COMMISSIONER OF INCOME TAX vs. M/S HOME DE ROYALE

Commissioner of Income Tax Vs. M/s. Home De Royale, Bhopal 1 Income Tax Appeal No. 9 / 2010 11.12.2013. Shri Sanjay Lal, learned counsel for the appellant. Challenge in this appeal under Section 260-A of the Income Tax Act, 1961 is made to the orders passed by the Tax Appellate Tribunal and the Appellate Authority in the matter of levying penalty against respondent/assessee under Section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2001-2002. The assessee is a partnership firm trading in cloth and furnishing items. On 15.11.2000 survey at the premises of assessee was undertaken under Section 133-A of the Income Tax Act, 1961. Return was filed by the assessee declaring the income of Rs.83,157/- on 21.3.2002. The case was taken up for scrutiny and the assessing authority concluded the assessment under Section 143(3) and a total income of Rs.9,64,940/- was found. Subsequently on rectification being undertaken under Section 154 on 14.2.2005 the correct income was determined at Rs.15,88,504/-. However, during the course of assessment under Section 143(3) the assessing authority found that the declaration of stock done by the assessee was not tallying with the physical survey done a difference of Rs.9,00,000/- was found unaccounted with regard to excess of stock. Similarly, concealment of income to the tune of Rs.8,00,000/- on account of unexplained Commissioner of Income Tax Vs. M/s. Home De Royale, Bhopal 2 investment made by the partners i.e. Rs.2,00,000/- each by four partners was found. For this concealment to the tune of Rs.8,00,000/- and Rs.9,00,000/- respectively on two counts vide order dated 28.3.2007 penalty proceedings under Section 271(1)(c) was initiated and a sum of Rs.7,50,000/- as penalty was assessed vide order Annexure A-1. The assessee challenged the imposition of penalty by filing an appeal before the Commissioner of Income Tax (Appeal) and the Commissioner of Income Tax (Appeal) vide its order dated 16.12.2008 held that the levying of penalty to the tune of Rs.7,50,000/- is in excess. The appellate authority found that the concealment to the tune of Rs.9,00,000/- with regard to excess of stock was not a deliberate or intentional concealment and for the said amount the penalty could not be imposed, but for the concealment of Rs.8,00,000/- it was found to be unexplained and penalty on this count was upheld. After appropriating the penalty, the amount of penalty levied was assessed at Rs.3,13,600/-and the penalty of Rs.4,36,400/- on account of concealment of stock was quashed. This order passed by the appellate authority vide Annexure A-2 was challenged before the Income Tax Appellate Tribunal both by the revenue and the assessee. The income tax appellate tribunal vide Annexure A-3 allowed the appeal of assessee and dismissed the appeal of revenue, this appeal has been filed by the revenue under Section260-A of Commissioner of Income Tax Vs. M/s. Home De Royale, Bhopal 3 the I.T. Act. Shri Sanjay Lal, learned counsel for the petitioner took us through the orders passed by the appellate authority and the appellate tribunal, the reasons given by the authorities and tried to emphasize that for the purpose of imposing the penalty under Section 271(1)(c) mens rea is not an essential ingredient and once concealment of income is established no discretion is available to the competent authority to interfere with the penalty imposed or to modify it. It is stated that in perverse manner the interference is made by the appellate authority and the tribunal and, therefore, the appeal be admitted on the questions formulated in the memorandum. We have heard learned counsel for the Revenue at length, it is seen that for the purpose of considering the question of levying penalty, both the concealment i.e. Rs.9,00,000/- on account of difference of stock and Rs.8,00,000/- pertaining to investment by partners, both the appellate authority and the appellate tribunal have meticulously evaluated the matter. As far as disclosure of excess stock which was detected during survey under Section 133-A is concerned, the appellate authority has evaluated the entire matter and it is found that assessee has explained the concealment and has indicated it in the return filed. It is found that the assessee has given reasonable justification for Commissioner of Income Tax Vs. M/s. Home De Royale, Bhopal 4 the differences with regard to excess stock. It was found that this amount was disclosed in the return filed by the assessee under Section 139 of the Act and had also paid tax on surrender income and the assessing authority accepted the return of income filed by the assessee in this regard. Evaluating the reason given for the said concealment of excess stock after detailed analysis concurrent findings are recorded, both the appellate authorities say that there was no deliberate or intentional concealment and, therefore, on this count penalty cannot be imposed. However, with regard to concealment of Rs.8,00,000/- i.e. regarding unexplained investment by partners deliberate act of concealment is found and imposition of penalty on this amount is established. The findings, concurrent in nature recorded by the appellate authority and the appellate tribunal seems to be reasonable and as the exoneration from payment of penalty for concealment on account of excess stock is found to be not a concealment in accordance to the authorities concerned we see no reason to interfere into the matter in this proceeding. The concurrent findings recorded by the appellate authority and the appellate tribunal is based on due appreciation of the totality of facts and circumstances and the discretion exercised in the matter cannot be termed as perverse or erroneous to such an extent that a substantial question of law rises, which warrants consideration by this Court. The Commissioner of Income Tax Vs. M/s. Home De Royale, Bhopal 5 question of mens rea and interference with the penalty imposed would arise only if concealment deliberate in nature is found to be established. Once the concurrent findings with regard to excess stock being deducted is held not to be a concealment at all we cannot accept the submission of Shri Sanjay Lal. Accordingly, finding no merit in this appeal filed by the revenue the same is dismissed at this stage itself without notice to the respondent. With the aforesaid the appeal stands disposed of. (RAJENDRA MENON) (A.K. SHARMA) J U D G E J U D G E ss/