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Facts
The assessee appealed against the confirmation of penalties under Section 271(1)(c) for AYs 2012-13, 2015-16, and 2016-17. The penalties were levied consequent to additions made by the Assessing Officer for alleged bogus sales and disallowances of expenses like PF and ESI contributions paid beyond the due date.
Held
The Tribunal held that penalty under Section 271(1)(c) is not leviable if the assessee has fully disclosed particulars in its books of account and return, and no inaccurate particulars or concealment of income has occurred. The addition of sales treated as bogus without changing the total income, and disallowance of expenses where facts were disclosed, did not warrant penalty.
Key Issues
Whether penalty under Section 271(1)(c) is leviable on additions/disallowances when the assessee has disclosed all particulars and there is no concealment or furnishing of inaccurate particulars of income.
Sections Cited
271(1)(c), 143(3), 147, 148, 68, 36(1)(va), 40A(7)
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
The ld. CIT (A) confirmed the penalty levied by the ld. AO by upholding the penalty order passed u/s 271(1)(c) of the Act.
After hearing the rival contentions and perusing the materials available on record, we find that the penalty was imposed by the ld. AO by treating the sales made by the assessee to SR Trading of ₹11,31,000/- as bogus. We note that the sales were duly recorded in the books of account by the company and were also shown in the profit and loss account under the head revenue from operation. Consequently, the income was offered to tax in the return of income. The ld. AO during the course of assessment proceedings again added the said amount u/s 68 of the Act, meaning thereby that the same income has been subject to tax twice (1) when the assessee suo moto declared the said sales in the books of account and (ii) when the ld. AO made the addition u/s 68 of the Act for the second time. In our opinion, the same is against the ratio laid down by the Hon'ble Apex Court in the case of Mahaveer Kumar Jain vs. Commissioner of Income Tax, Jaipur [2018] 92 taxmann.com 340 (SC)/[2018] 255 Taxman 161 (SC)/[2018] 404 “11. In the above backdrop, it would be appropriate to refer the decision of this Court in the case of Laxmipat Singhania v. CIT [1969] 72 ITR 291 wherein this Court has observed that "It is a fundamental rule of law of taxation that, unless otherwise expressly provided, income cannot be taxed twice".
Further, in a decision of this Court in Jain Brothers v. Union of India and Others [1970] 77 ITR 107 (SC), it has been held as under:— "6 It is not disputed that there can be double taxation if the legislature has distinctly enacted it. It is only when there are general words of taxation and they have to be interpreted, they cannot be so interpreted as to tax the subject twice over to the same tax….. If any double taxation is involved, the Legislature itself has, in express words, sanctioned it. It is not open to any one thereafter to invoke the general principles that the subject cannot be taxed twice over."
13. The above referred cases make it clear that there is no prohibition as such on double taxation provided that the legislature contains a special provision in this regard. Now, the only question remains to be decided is whether in fact there is a specific provision for including the income earned from the Sikkim lottery ticket prior to 01.04.1990 and after 1975, in the income-tax return or not. We have gone through the relevant provisions but there seems to be no such provision in the IT Act wherein a specific provision has been made by the legislature for including such an income by an assessee from lottery ticket. In the absence of any such provision, the assessee in the present case cannot be subjected to double taxation. Furthermore, a taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over for the payment of tax on the taxpayer unless the language of the Statute is so compelling that the court has no alternative than to accept it. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted. So, it is clear enough that the income in the present case is taxable only under one law. By virtue of clause (k) to Article 371F of the Constitution which starts with a non-obstante clause, it would be clear that only the Sikkim Regulations on Income-tax would be applicable in the present case. Therefore, the income cannot be brought to tax any further by applying the rates of the IT Act.
In view of the aforementioned discussions, we are of the considered view that once the assessee has paid the income tax at source in the State of Sikkim as per the law applicable at the relevant time in Sikkim, the same income was not taxable under the IT Act, 1961. Having decided so, the other issue whether the income that is to be allowed deduction under section 80 TT of the IT Act is on 'Net Income' or 'Gross Income', becomes academic.” 5.1. Besides, we have perused the explanation 4 to Section 271(1)(c) of the Act and observed that sub clause (c) of explanation 4 specifically provides that for the purpose of clause (iii) of this sub-section, the3
“7. As against this, learned Counsel appearing on behalf of the respondent pointed out that the language of section 271(1)(c) had to be strictly construed, this being a taxing statute and more particularly the one providing for penalty. It was pointed out that unless the wording directly covered the assessee and the fact situation herein, there could not be any penalty under the Act. It was pointed out that there was no concealment or any inaccurate particulars regarding the income were submitted in the Return. Section 271(1)(c) is as under :— "271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person— (c )has concealed the particulars of his income or furnished inaccurate particulars of such income." A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the learned Counsel for revenue suggested that by making incorrect claim for the A.Y. 2015- In this appeal, the assessee has raised additional ground which is extracted below:-
“Additional Ground 1: "That, the Ld. A.O. erred in levying penalty was 271(1)(c) of the Act of Rs. 10,81,787/- consequent to disallowance of Rs. 33,33,704/- being PF and ESI contributions paid beyond the stipulated period when such a disallowance does not lead to any concealment of income or furnishing of inaccurate particulars of income to warrant any penalty." 6.1. After hearing the rival contentions and perusing the material on record, we find that the assessee has raised the above additional
The facts in brief are that during the year the assessee had made sales to M/s Jagmata Traders Pvt. Ltd. of ₹40,04,181/-, M/s Historic Dealtrade Pvt. ltd. of ₹20,05,118 and M/s Sparkle Vincom Pvt. Ltd. of ₹3,62,51,955/-. The said sales were fully recorded in the books of account and shown in the profit and loss account as revenue from operation. Thus, fully offered to tax and the same is not in dispute. During the course of assessment proceedings, the ld. AO treated the sales as bogus and held the same as unexplained cash credit u/s 68 of the Act. A search action u/s 132(1) of the Act was conducted on 28.04.2022 on the group. The assessee filed the return of income u/s 148 of the Act declaring total income at ₹3,91,45,340/-. The assessment was completed at ₹4,24,79,134/- as under:-
Particulars Amount (Rs.) Income as per ITR dated 18.02.2023 3,91,45,430/- Less: Bogus Sales (4,22,61,254) Add: Unexplained cash credit u/s 68 of the Act 4,22,61,254/- Add: Addition on account of delayed payment of PF and ESI 33,33,704/-
7.1. Thus, the ld. AO made two additions (i) in respect of sales made to three parties treated as bogus amounting to ₹4,22,61,454/- by reducing the same from the head (income from business and profession) and adding the same under the head “income from other sources” u/s 68 of the Act and the penalty proceedings were initiated for inaccurate particulars of income. The second addition was made u/s 36(1)(va) of the Act of ₹33,33,704/- on account of delayed payment of PF and ESI and the penalty was initiated for concealment of income. The ld. AO accordingly imposed penalty of ₹1 ,47 ,93,284/- being 100% of the tax sought to be evaded.
The ld. CIT (A) in the appellate proceedings affirmed the order of the ld. AO.
After hearing the rival contentions and perusing the materials available on record, we find that the penalty was imposed on two additions; namely i) in respect of sales recorded by the assessee in the books of accounts and offered to tax which was treated by the ld. AO as bogus sales and added u/s 68 of the Act. The income from business or profession was reduced and addition was made under the head income from other sources. Thus, there was no change in the returned income and assessed income. Therefore, in our opinion, the penalty is not leviable on this amount which was treated as unexplained cash credit u/s 68 of the Act, for the reason that the explanation 4 to Section 271(1)(c) of the Act, there is no difference between the tax on total income assessed and tax that would have been chargeable if the total income reduced by the amount of income in respect of which inaccurate particulars have been filed. Moreover, we have decide the 9.1.1. So far as the penalty on the second addition is concerned, which is qua the delayed payment of PF and ESI of ₹33,33,704/- , we find that the assessee has fully disclosed the facts qua this item of expenses in the books of account. Therefore, we are of the view that the assessee has not concealed the income as has been decided in the case of CIT vs. Reliance Petroproducts (P.) Ltd. (supra).
9.1.2. Considering the facts in the light judicial pronouncements, we are inclined to set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition.
A.Y. 2016- In this appeal, the assessee has raised additional ground which is extracted below:-
"That, the Ed. A.O. erred in levying penalty u/s 271(1)(c) of the Act consequent to disallowance of Rs.28,30,401/- being PF and ESI contributions paid beyond the stipulated period when such a disallowance does not lead to any concealment of income or furnishing of inaccurate particulars of income to warrant any penalty." 10.1. After hearing the rival contentions and perusing the material on record, we find that the assessee has raised the above additional ground of appeal challenging the jurisdiction of the AO to make addition. In our opinion the issued raised in the additional ground is a purely a legal issue qua which all the facts are available in the appeal folder and no further verification of facts are required from any quarter whatsoever. In our considered view the assessee is at liberty to raise any legal issue before any appellate authority for the first time even when the same has not been raised before the lower authorities. The
The assessee filed the return of income u/s 139 of the Act, declaring total income at ₹8,66,68,360/-. After that a search u/s 132(1) of the Act was conducted on 24.08.2022. The assessment was completed u/s 147 of the Act by making three additions;
i. Disallowance of ₹28,30,401/- u/s 36(1)(va) of the Act in respect of delayed payment of PF and ESI Fund. ii. Disallowance u/s 40A(7) of the Act, being provision for payment of gratuity. iii. Addition u/s 68 of the Act in respect of loan of ₹30,00,000/- treated as unexplained cash credit and interest thereon of ₹71,013/-.
11.1. So far as the first two additions are concerned the assessee has fully disclosed all the particulars in the books of accounts. So far as the third addition in respect of unsecured loan is concerned of ₹30,00,000/-,the assessee furnished before the ld. AO all the particulars explaining three limbs of Section 68 of the Act. We note that the ld. AO issued notice u/s 133(6) of the Act to the lenders, however, same was not responded. In our opinion, the same cannot be a valid ground for addition as has been held in the case of CIT vs. Orissa Corpn, (P.) Ltd. [1986] 25 Taxman 80F (SC)/[1986] 159 ITR 78 (SC)/[1986] 52 CTR 138 (SC)[19-03-1986].
In the result, all the three appeals of the assessee are allowed.
Order pronounced in the open court on 20.01.2026.