(Judgment of the Court was delivered by K.RAVIRAJA PANDIAN, J.) The revenue on appeal against the order of the Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai, 26.09.2008 passed in ITA No.1875/Mds/07 in respect of the assessment year 2003-04.
2. The material facts as culled out from the statement of facts in the memorandum of grounds of appeal are as follows:-
(i)The assessee is an individual carrying on business of trading in Iron and Steel as also job work of decoiling of iron and steel to two of his proprietary concerns viz., M/s Kamal Steel Corporation and M/s Modern Steel Enterprises. For the assessment year 2003-2004, the return of income was filed on 31.10.2003 on a total income of Rs.12,93,439/- which return was taken up for scrutiny assessment and it was finalised u/s 143(3) of the Act on 10.03.2006. While so doing, the Assessing Officer made an addition of Rs.34,51,447/- for the aggregate of sundry creditors appearing in the books of the assessee on the ground that in the course of assessment proceedings the assessee had filed a letter dated 02.02.2006 explaining the sundry creditors' position and that the assessee had paid some of the creditors in the subsequent years. The balance amount of Rs.34,51,447/- was offered for. taxation. The Assessing Officer brought to tax the aforesaid amounts under
Section 41(1) of the Act and initiated penalty proceedings u/s 271(1)(c) of the Act. The Assessing Officer, after considering the reply of the assessee dated 02.02.2006, rejected the plea of the assessee that the additional income was offered voluntarily in order to buy peace and should not be construed as concealment of income and or furnishing of inaccurate particulars of income.
(ii) At the first appellate stage, the levy of penalty was contested by the appellant on the ground that the sum of Rs.34,51,447/- offered for taxation being the remission of trade creditor which was accepted by the Assessing Officer and he did not give any finding as to the non existence or bogus-ness of the creditors.
(iii) The Commissioner of Income Tax (Appeals) by accepting the plea of the assessee, deleted the penalty under section 271(1)(c) of the Act, against which the revenue filed an appeal before the Tribunal.
(iv) The Tribunal on facts has found that during the assessment proceedings, when the assessee was asked to file the details of sundry creditors whose outstanding was above Rs.50,000/-, he filed details of the same. When he was further asked to file confirmation of the creditors, he filed a letter explaining the sundry creditors position and further contended that some of the creditors were paid in subsequent years and balance amount of Rs.34,51,447/- was offered to taxation. The Assessing Officer added the same amount and initiated penalty proceedings under Section 271(1)(c) after giving due opportunity to the proceedings. The Tribunal after hearing the parties has ultimately held that the approach of the assessee cannot be legally sustainable and the levy of penalty under Section 271(1)(c) is in accordance with the statutory provision.
(v) The correctness of the same is canvassed before us in this appeal by formulating the following questions of law:-
"(1)Whether the Appellate Tribunal is correct in law in sustaining the levy of penalty u/s 271(1)(c) of the Act on the rejection of claim of sundry creditors which were offered for taxation in the course of the assessment proceedings by the appellant even though the presumption on the concealment of income or furnishing of inaccurate particulars of income as per explanation 1 was rebutted in the proceedings?
(2) Whether the appellate Tribunal is correct in law in sustaining the action of the respondent in imposing penalty u/s 271(1)(c) of the Act even though the application of the deeming provisions in
Section 41(1) of the Act would not come within the ambit of the said penal provisions especially the explanation offered was bonafide and not rejected as malafide?
(3) Whether the Appellate Tribunal is correct in law in dismissing the cross objection as infructuous even though the cross objection as per the legal prescription should be construed as a separate proceedings, requiring independent consideration and recording of findings on the issues emanating and urged by the Cross Objector/Appellant herein?
3. The learned counsel for the appellant very strenuously contended that the Tribunal went wrong in allowing the appeal of the revenue by setting aside the order of the Commissioner of Income Tax (Appeals) and he also relied on the decision of the Division Bench of this Court in the case of India Cane Agencies vs. Deputy Commissioner of Income Tax reported in 275 ITR 430.
4. We are not able to subscribe our views with the reasoning of the counsel for the assessee. It is evident from the records that the assessee took one stand before the assessing officer and totally a different stand before the Commissioner of Income Tax (Appeals), the first appellate authority. But the assessee could not substantiate either of the stands in as much as the plea before the assessing officer about the offering of additional income voluntarily is believed in view of the fact that only on scrutiny of the assessment and querry from the department, the assessee had come forward to offer remission of liability.
5. Even as regards the plea taken before the first appellate authority that the remission was on account of defective goods, the assessee did not substantiate by adducing necessary evidence or materials with regard to the nature of the goods, the details of purchases, out of which, the defective goods were segregated and whether any claim made by the assessee in respect of the defective goods against which the remission has been made by the assessee and offered for taxation. Thus, it is evident that the assessee was not able to establish the reasoning adduced by him. As such the penalty is warranted. Reliance placed on the judgment of the Division Bench of this Court in the case of India Cane Agencies vs. Deputy Commissioner of Income Tax reported in 275 ITR 430, is a misplaced reliance, because, it was held in that case as follows:-
" As long as there is nothing to show that the assessee concealed the income with a dishonest intent or had furnished inaccurate particulars either deliberately or as a result of gross negligence which was not capable of being regarded as an innocent act, penalty is not ordinarily levied. Concealment implies the existence of a deliberate intent to prevent relevant facts from becoming known. This however is not to say that the assessee can afford to be routinely careless and casual while submitting the returns. He certainly does have a duty to verify the particulars furnished by him to ensure that particulars furnished are accurate. It was further held that the discount to be given by the assessee to its customers which was to take effect in future years could be shown as an amount due to sundry debtors, would not by itself justify a finding that the assessee had concealed the income or furnished inaccurate particulars and on that basis the penalty levied was deleted".
6. Recently, the apex Court has considered section 271(1)(c) of the Act on a reference made, wherein the ratio laid down in Dhilip N,.Shroff vs. Joint CIT reported in 291 ITR 519, was doubted. The three Judge Bench of the apex Court in the case of Union of India vs. Dharmendra Textiles Processors 306 ITR 277, has clearly enunciated that, in order to invoke Section 271(1)(c) of the Income Tax Act, the existence of dishonest intention and deliberate failure to give correct particulars is not necessary. The Supreme Court has held that the explanation appended to Section 271(1)(c) of the Income Tax Act 1961 indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The object behind the enactment of Section 271(1)(C) read with the Explanations indicates that the section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under
section 276C of the Income Tax Act and held that any concealment come within the purview of Section 271(1)(c) would automatically render the assessee for penalty under Section 271(1)(c) of the Act.
7. On the facts, we have concluded that the assessee's attitude before the officer is inconsistent and even the inconsistent stand could not be established with the supportive evidence or materials. In the light of the decision of the apex Court in the case of Union of India v. Dharmendra Textiles Processors, 306 ITR 277, we are of the view the penalty u/s 271(1)(c) of the Act is attracted in this case.
8. We do not find any merit in the appeal for determining any question of law. The appeal is dismissed. No costs.
20.04.2009 (K.R.P.,J.) (M.M.S.,J.) Index : Yes/ Internet : Yes/ rg To
1. The Commissioner of Income Tax Madurai
2. The Income Tax Appellate Tribunal, Chennai 'B' Bench, Chennai.
K.RAVIRAJA PANDIAN, J.
And M.M.SUNDRESH, J.
rg T.C.(A)No.155 of 2009 20.04.2009