TAURUS TRANSPORT,MUMBAI vs. ASST CIT 13(2), MUMBAI

Per Joginder Singh (Judicial Member) Both these appeals are by the assessee, aggrieved by

the impugned orders both dated 27/03/2014 of the Ld. First

Appellate Authority, Mumbai. First, we shall take up ITA

No.4978/Mum/2014, wherein, the only ground raised by the assessee pertains to disallowing a sum of `2,32,249/-

i.e. 5% of the travelling, advertisement, staff welfare, office,

repair and maintenance expenses on ad-hoc basis and disallowing salaries and wages of `55 lakhs on ad-hoc basis.

During hearing, the ld. counsel for the assessee, Shri

Prakash G. Jhunjhunwala, did not press the appeal and the

ground raised therein. The Ld. DR, Shri V. Justin, had no

objection to the request of the assessee. Considering the

request of the ld. counsel for the assessee and no objection

from the Ld. DR, this appeal of the assessee is dismissed as

not pressed.

assessee in ITA No. 4979/Mum/2014, confirming the penalty of ` 16,99,500/-, imposed u/s 271(1)(c) of the

3 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport Income Tax Act, 1961 (hereinafter the Act) and confirmed by

the First Appellate Authority.

2.1. The contention of the ld. counsel for the assessee

is that there is delay of 47 days for filing the appeal may be

condoned. The assessee has filed an application for

condonation of delay supported by an affidavit, explaining

the reasons of delay. The ld. counsel reiterated the contents

of the application/affidavit by pleading that the delay may

be condoned. On the other hand, the ld. DR, contended that

the assessee is to explain the delay of each day, therefore,

the delay may not be condoned.

2.2. We have considered the rival submissions and

perused the material available on record. In view of the

assertions made by the ld. respective counsel, so far as,

condonation of delay is concerned no doubt filing of an

appeal is a right granted under the statute to the assessee

and is not an automatic privilege, therefore, the assessee is

expected to be vigilant in adhering to the manner and mode

in which the appeals are to be filed in terms of the relevant

provisions of the Act. Nevertheless, a liberal approach has to

4 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport be adopted by the appellate authorities, where delay has

occurred for bona-fide reasons on the part of the assessee or

the Revenue in filing the appeals. In matters concerning the

filing of appeals, in exercise of the statutory right, a refusal

to condoned the delay can result in a meritorious matter

being thrown out at the threshold, which may lead to

miscarriage of justice. The judiciary is respected not on

account of its power to legalize in justice on technical

grounds but because it is capable of removing injustice and

is expected to do so.

2.3. The Hon’ble Apex Court in a celebrated decision

in Collector, Land Acquisition vs Mst. Katiji & Ors. 167 ITR

471 opined that when technical consideration and

substantial justice are pitted against each other, the courts

are expected to further the cause of substantial justice. This

is for the reason that an opposing party, in a dispute, cannot

have a vested right in injustice being done because of a non-

deliberate delay. Therefore, it follows that while considering

matters relating to the condonation of delay, judicious and

liberal approach is to be adopted. If sufficient cause is

found to exist, which is bona-fide one, and not due to

5 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport negligence of the assessee, the delay needs to condoned in

such cases. The expression ‘sufficient cause’ is adequately

elastic to enable the courts to apply law in a meaningful

manner, which sub-serves the end of justice- that being the

life purpose of the existence of the institution of the courts.

When substantial justice and technical consideration are

pitted against each other, the cause of substantial justice

deserves to be preferred. The Hon’ble Apex Court in

Vedabhai vs Santaram 253 ITR 798 observed that inordinate

delay calls of cautious approach. This means that there

should be no malafide or dilatory tactics. Sufficient cause

should receive liberal construction to advance substantial

justice. The Hon’ble Apex Court in 167 ITR 471 observed as

under:-

“3. The legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits. The expression “sufficient cause” employed by the legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal

6 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport approach in matters instituted in this court. But the message does not appear to have percolated down to all the others courts in the hierarchy.”

2.4. Furthermore, the Hon'ble Supreme Court in the

case of Vedabai Alia Vaijayanatabai Baburao Patil vs.

Shantaram Baburao Patil 253 ITR 798 held that the court

has to exercise the discretion on the facts of each case

keeping in mind that in construing the expression ‘sufficient

cause’, the principle of advancing substantial justice is of

prime importance. The court held that the expression

“sufficient cause” should receive liberal construction.

2.5. The decision of the Tribunal in People Infocom

Private Ltd. v/s CIT (ITA No.210/Mum/2013) order dated

19/05/2016, M/s Neutron Services Centre Pvt. Ltd vs ITO (ITA

No.1180/Mum/2012) order dated 18/02/2016, Shri Saidatta

Coop-. Credit Society Ltd. v/s ITO (ITA No.2379/Mum/2015)

order dated 15/01/2016 and Mr. Nikunj Barot (Prop. Enigma)

vs ITO (ITA No.4887/Mum/2015) order dated 06/01/2016,

wherein, substantial delay was condoned, supports the case

of the present assessee. Having made the aforesaid

observation and various decisions discussed hereinabove,

7 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport including from Hon’ble Apex Court, the circumstances

narrated by the assessee, wherein, he has stated the reasons

which caused the delay, we are satisfied that there were

bonafide reason, which were beyond the control of the

assessee, therefore, the delay is condoned.

on merit. The crux of arguments on behalf of the assessee is

that the disallowance were made by the Ld. Assessing Officer

on estimate basis and identically for Assessment Year 2007-

08 and 2008-09, the claim of the assessee was accepted

though u/s 143(1) of the Act. It was explained that survey

was carried out and there is no finding that the expenses

were inflated and nothing incriminating was found. It was

pleaded that the assessee made surrender of `55 lakh to buy

peace with the Department as the assessee was in custody

and the assessee during custody period, was asked to

substantiate the claim, which could not be done. The crux

of the argument is that the surrender was made to buy

peace with the Department, therefore, the penalty may be

deleted. On the other hand, the Ld. DR contended that

penalty can be levied even on a estimate basis for which

8 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport reliance was placed upon the decision in CIT vs Smt.

Chandrakanta, 205 ITR 607 (MP), CIT vs S. Krishnaswamy

& Sons, 219 ITR 157, A.M. Shah & Co. vs CIT, 238 ITR 415

(Guj.) and CIT vs Mohammad Warasat Hussain, 177 ITR 405

(Pat.).

3.1. We have considered the rival submissions and

perused the material available on record. The facts, in brief,

are that the assessee is a partnership firm, declared income

of `6,24,135/- in its return filed on 30/09/2009. A survey

action was carried out u/s 133A of the Act at the premises

of the assessee on 15/01/2009. The Ld. Assessing Officer

while framing the assessment u/s 143(3) of the Act made

disallowance of `55 lakh towards salary and wages on ad-

hoc basis and further ` 2,32,249/- i.e. 5% of the travelling,

advertisement, staff welfare, office, repair and maintenance

expenses on ad-hoc basis. The Ld. Assessing Officer levied

penalty of `16,99,500/- u/s 271(1)(c) of the Act, which was

confirmed by the First Appellate Authority. The assessee is

in appeal before this Tribunal. ‘

9 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport 3.2. If the observation made in the assessment order,

leading to addition made to the total income, penalty order,

conclusion drawn in the impugned order, material available

on record, assertions made by the ld. respective counsel, if

kept in juxtaposition and analyzed, there is no dispute to the

fact that the assessee was in custody during the relevant

time and could not furnished the necessary documents as

asked by the Ld. Assessing Officer. This is also an admitted

fact that disallowance was made on ad-hoc basis and the

assessee to buy peace with the Department made the

surrender. Now, question arises, whether the penalty u/s

271(1) can be said to be justified. Considering the totality of

facts explained before us and since, the assessee was in

custody during the relevant period, when the assessee was

asked to produce the necessary documents, to substantiate

its claim, it may not be possible to furnish the same. The

assessee to buy peace with the Department made a

surrender and paid the taxes thereupon. In such a situation,

the decision in CIT v. SDV Chandru 266 ITR 175 (Mad)

wherein it was held by the Hon'ble High Court that where

the assessee has not disclosed his income in the returns

10 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport filed for the previous years which have ended prior to the

date of search and in the statement given u/s 132(4), the

assessee admits the receipt of undisclosed income for those

years and therefore pays taxes on the undisclosed income,

such undisclosed income would be immunized from the levy

of penalty. Similarly, in the case of CIT v. Suresh Chand

Mital 241 ITR 124 (MP) wherein the Hon'ble High Court had

held that where the assessee gives an explanation that

additional income is declared to buy peace with the

Department and to come out with the vexed litigation,

penalty u/s 271(1)(c) was held to be not leviable. Similarly,

in ITA No/4356/Del/12 the case of CIT v. Suraj Bhan 294

ITR 481 (P&H) wherein pursuant to search & seizure

operation, the assessee filed revised return declaring higher

income and the Hon'ble Court had held that since the

assessee surrendered additional income to buy peace of

mind no inference of admission of concealment could be

drawn comes to the rescue of the assessee. The Hon'ble

jurisdictional High Court in CIT vs Hira Lal Doshi, (ITA

No.2331 of 2013) order dated 09/02/2016 on the issue

when the assessee made the surrender buy peace with the

11 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport Department decided in favour of the assessee. The relevant

portion from the aforesaid order is reproduced hereunder:-

“This Appeal has been filed by the Revenue under Section 260A of the Income Tax Act, 1961( the “Act”) assailing the order dated 1st May, 2013 passed by the Income Tax Appellate Tribunal (Tribunal). The impugned order dated 1st May, 2013 deleted the penalty imposed under Section 271(1)(c) of the Act relating to Assessment Year 2006-2007.

“Whether on the facts and circumstances of the case and in law, the ITAT is justified in deleting the penalty u/s.271(1)(c) of the I. T. Act,1961 on the income which was offered for taxation during survey and return of income was revised after detection by department”

3 The Respondent-assessee had originally filed a return of income on 31st October, 2006 declaring a total income of Rs.9.69/- lakhs. In its return of income, as filed an amount of

Rs.1.62 Crores was credited to its capital account being Long Term Capital Gain on sale of shares. However, no income on account of the above was offered for taxation. Thereafter, on 5th October, 2007, during a course of survey, the Respondent-assessee declared additional income of Rs. 5 Crores which included an amount of Rs.1.62 Crores for Assessment Year 2006-07 which had not been returned as income being long term capital gains in view of exemption claimed under Section 10(38) of the Act.

12 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport 5. By an order dated 27th May, 2009 the Assessing Officer imposed a penalty of Rs.55.79 lakhs under Section 271(1)(c) of the Act for having concealed particulars of income and furnishing inaccurate particulars thereof. This on the ground that the amount of Rs.1.62 Crores had originally been claimed as Long Term Capital Gain being exempt in its regular return of income. However, the same was withdrawn and offered to tax as business only consequent to the survey on 5th October, 2007.

13 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport business income during survey of proceeding only by to buy peace. In the circumstances, the impugned order upheld the deletion of penalty of the CIT(A).

(a) The Commissioner of Income Tax(Appeals) has referred to brokers note, copy of balance sheet, copy of Demat Account, bank statement etc to reach a conclusion that prima facie the income appears to be on account of Long Term Capital Gain. This is totally unjustified as no remand report was called for from the Assessing Officer and the Revenue was given no opportunity to contest the same;

(b) The justification by the Assessee of having made the disclosure of Rs.1.62 Crores as business income when originally claimed as capital gain was for the purposes of buying peace is not available as held by the Apex Court in Mak Data P. Ltd v/s Commissioner of Income Tax- II(Civil Appeal No.9772 of 2013 rendered on 30th October, 2013; and

(c) That a change of head of income during the assessment proceeding would warrant penalty upon a defaulting assessee if the same has an impact on the tax payable. Thus the decision of this Court in Bennett Column Ltd(supra) will not apply. In the above view, it is submitted that the appeal be admitted.

9 Mr. Malhotra's contention that the order of the CIT(A) was in breach of principles of natural justice in as much as no remand report was called for by the CIT(A) in respect of the fresh evidence led by the Respondent-assessee before him is not even mentioned in the memo of appeal. We find that there is nothing on record to indicate that no remand report were called for by the CIT(A). However,when confronted, Mr Malhotra submits that evidence of no remand report having been called for is the absence of it being mentioned in the order of the CIT(A). Thus, he wants us to infer that no remand report was called for. However, it is also to be noted that before the Tribunal, the Revenue did not raise this issue. This could equally lead to the inference that either the remand report was called for or at the very least, in any event, the Revenue did not have any grievance on the remand report not being called for before the Tribunal. This submission on behalf of the Revenue requires determination of facts which have to be determined by the Tribunal.

14 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport It is not open at this stage in an appeal under Section 260A of the Act to go into facts which were not disputed at any prior stage.

income and/or furnishing of inaccurate particulars of income by leading cogent and reliable evidence. The Apex Court further records that in the facts of the case before it the surrender of income was not voluntary but was made only on the account of detection by the Assessing Officer during the course of survey. Further, the Apex Court also records the fact that the survey was conducted more than 10 months before the assessee filed its return of income. However, the assessee therein had not declared this income in its return of income filed subsequent to the survey which again indicated the fact that he had no intention to declare its true income. In any event, the facts in the present case as found by the CIT(A) and the Tribunal is that the Respondent assessee had disclosed an amount of Rs.1.62 Crores in the original return by crediting the same to its capital account being Long Term Capital Gain on the sale of share. Thus, the Appellant was under bonafide belief that the income from long term capital gain was exempt from tax. Thus, the decision of the Apex Court would not apply to the facts arising in the present case .

15 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport payment of tax as in this case. We are unable to accept the aforesaid submission. According to us, the distinction sought to made on behalf of the Revenue is not acceptable as the ratio of the decision in M/s Bennett Coleman(supra) is where complete disclosure of income had been made in the return of income and head of the income undergoes a change at the hands of the Assessing Officer would not by itself justify the imposition of penalty under Section 271(1)(c) of the Act.”

13 In the present fact, the view taken by the CIT(A) as well as the Tribunal is a reasonable and possible view. Nothing has been shown to us to hold that the findings of the CIT(A) and Tribunal was perverse and/or arbitrary warranting any interference by this Court. It may be pointed out that even in the Memo of Appeal, it is not urged by the Revenue that the finding of the CIT(A) and Tribunal are in any manner perverse.

14 In the above view, we see no reason to entertain the question as proposed, as it does not give rise to any substantial question of law. Accordingly, the Appeal is dismissed. No order as to costs.” 3.3. Though the ld. DR has sighted various decisions

as mentioned above, but following the decision from Hon'ble

jurisdictional High Court in Hira Lal Doshi (supra) and the

material facts available on record, we are of the view that

quantum and penalty additions are all together different and

16 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport since ad-hoc disallowance was made by the assessee and

during the relevant period, the assessee, being in judicial

custody, could not file the necessary evidence and made

surrender to buy peace with the Department and paid taxed

thereupon, therefore, at least, the penalty u/s 271(1)(c) will

not survive. Thus, this appeal of the assessee is allowed.

Finally, ITA No.4978/Mum/2014 is dismissed as not

pressed, whereas, the penalty appeal (ITA

No.4979/Mum/2014) is allowed.

This Order was pronounced in the open court in the

presence of ld. representative of both sides at the conclusion

of the hearing on 13/09/2017.

Sd/- Sd/- (G. Manjunatha) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated :-13/09/2017 f{x~{tÜ? P.S /�नजी स�चव आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :

17 ITA Nos.4978 & 4979/Mum/2014 M/s Taurus Transport 6. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai,