Sharma Alloys (India) Ltd. v. ITO

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The Tax Publishers2013 TaxPub(DT) 2162 (Mad-HC) : (2013) 053 (I) ITCL 0426 : (2013) 357 ITR 0379 : (2013) 260 CTR 0403 : (2013) 090 DTR 0399 Income Tax Act, 1961 --Penalty under section 271(1)(c)Concealment Bogus claims--Where assessee offered estimated additions towards deficiency in gross profit and bill discounting and the Commissioner invoking section 263, while restricting addition, accepted assessee's plea, Commissioner merely pointed out that non initiation of penalty proceedings did not warrant interference, same did not tie assessing officer's hands, as such on bogus claims of deficiency in gross profit, bill discounting and depreciation, penalty under section 271(1)(c) was rightly imposed by assessing officer. It is no doubt true that in the order passed under section 263, the Commissioner pointed out to the offer made by the assessee for addition and ultimately held that in view of the submissions of the assessee and the facts of the case, the decision of the assessing officer in not initiating penalty proceedings did not need interference. Having said so, while remanding the matter for fresh consideration for assessing officer for further examination and decision, the assessing officer was directed to consider the claim of the assessee as per the provisions of the Act. Thus, contrary to the assertion of the assessee, all that the Commissioner did in the revisional order was that while accepting the plea of the assessee for restricting the addition, he merely pointed out that a non-initiation of penalty proceedings did not warrant any interference. This, however, does not mean that the hands of the assessing officer is (Sic-are) tied on invoking the provisions under the Act, which, otherwise, would be applicable to the facts of the case. Thus, in the given fact situation, if the provisions of the Act on penalty are attracted, the assessing officer has to go by the dictates of the law, rather than by the order of the Commissioner. In fact,' the Commissioner did not comment anything at all on this. In the circumstances, the plea of the assessee that based on the order under section 263, there could not be any penalty, was rejected. [Para 19] As far as levy of penalty is concerned, as rightly pointed out by the standing counsel for the Income Tax Department, the claim for bill discounting for both assessment years was found to be totally untrue, as there was no physical movement of goods. The bills were found to be bogus one. Apart from that, the addition was made towards gross profit for the assessment year 2002-03 only on account of non-reliability of the books of accounts. [Para 20] As far as assessment year 2003-04 is concerned, the claim for depreciation was also found as a bogus claim. As far as the claim on depreciation on machinery is concerned, admittedly, the machinery was not at all put to use during the said year. As far as the claim for deduction towards fine and penalty is concerned, evidently, the assessee cannot legally sustain this claim in terms of section 37. Thus, in the garb of the bona fide claim, the assessee cannot escape levy of penalty. [Para 21] In the circumstances, there is no hesitation in rejecting the plea of the assessee that additions were not substantial additions and hence there could be no penalty. The reliance made by the counsel for the assessee on the unreported decisions of this Court in Tax Case (Appeal). No. 341 of 2010 (CIT v. P. Rojes) (supra) does not, in any manner, support the case of the assessee. [Para 22] Thus, levy of penalty would depend on the existence or otherwise of the conditions calling for levy of penalty. 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, by reason of concealment of particulars of income. Thus, being a civil liability and that the explanation offered by the assessee not being a bona fide one, particularly on the facts of the case, there is no hesitation in confirming the order of the Tribunal. [Para 28] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 2162 (Mad-HC) : (2013) 053 (I) ITCL 0426 : (2013) 357 ITR 0379 : (2013) 260 CTR 0403 : (2013) 090 DTR 0399

Income Tax Act, 1961

--Penalty under section 271(1)(c)Concealment Bogus claims--Where assessee offered estimated additions towards deficiency in gross profit and bill discounting and the Commissioner invoking section 263, while restricting addition, accepted assessee's plea, Commissioner merely pointed out that non initiation of penalty proceedings did not warrant interference, same did not tie assessing officer's hands, as such on bogus claims of deficiency in gross profit, bill discounting and depreciation, penalty under section 271(1)(c) was rightly imposed by assessing officer.

It is no doubt true that in the order passed under section 263, the Commissioner pointed out to the offer made by the assessee for addition and ultimately held that in view of the submissions of the assessee and the facts of the case, the decision of the assessing officer in not initiating penalty proceedings did not need interference. Having said so, while remanding the matter for fresh consideration for assessing officer for further examination and decision, the assessing officer was directed to consider the claim of the assessee as per the provisions of the Act. Thus, contrary to the assertion of the assessee, all that the Commissioner did in the revisional order was that while accepting the plea of the assessee for restricting the addition, he merely pointed out that a non-initiation of penalty proceedings did not warrant any interference. This, however, does not mean that the hands of the assessing officer is (Sic-are) tied on invoking the provisions under the Act, which, otherwise, would be applicable to the facts of the case. Thus, in the given fact situation, if the provisions of the Act on penalty are attracted, the assessing officer has to go by the dictates of the law, rather than by the order of the Commissioner. In fact,' the Commissioner did not comment anything at all on this. In the circumstances, the plea of the assessee that based on the order under section 263, there could not be any penalty, was rejected. [Para 19] As far as levy of penalty is concerned, as rightly pointed out by the standing counsel for the Income Tax Department, the claim for bill discounting for both assessment years was found to be totally untrue, as there was no physical movement of goods. The bills were found to be bogus one. Apart from that, the addition was made towards gross profit for the assessment year 2002-03 only on account of non-reliability of the books of accounts. [Para 20] As far as assessment year 2003-04 is concerned, the claim for depreciation was also found as a bogus claim. As far as the claim on depreciation on machinery is concerned, admittedly, the machinery was not at all put to use during the said year. As far as the claim for deduction towards fine and penalty is concerned, evidently, the assessee cannot legally sustain this claim in terms of section 37. Thus, in the garb of the bona fide claim, the assessee cannot escape levy of penalty. [Para 21] In the circumstances, there is no hesitation in rejecting the plea of the assessee that additions were not substantial additions and hence there could be no penalty. The reliance made by the counsel for the assessee on the unreported decisions of this Court in Tax Case (Appeal). No. 341 of 2010 (CIT v. P. Rojes) (supra) does not, in any manner, support the case of the assessee. [Para 22] Thus, levy of penalty would depend on the existence or otherwise of the conditions calling for levy of penalty. 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, by reason of concealment of particulars of income. Thus, being a civil liability and that the explanation offered by the assessee not being a bona fide one, particularly on the facts of the case, there is no hesitation in confirming the order of the Tribunal. [Para 28]