CIT v. Ashim Kumar Agarwal & ANS.

In the Jharkhand High Court S.J. Mukhopadhaya, ACTG. C.J. & Narendra Nath Tiwari, J.

Tax Cases Nos. 13 & 14 of 1993 (P) 7 February 2005.

Counsel: K.K. Jhunjhunwala, for the Assessee Anil Choudhary, for the Revenue.

JUDGMENT

S.J. Mukhopadhaya, ACTG. C.J.

As in both these cases, at the instance of the revenue, the Incorne Tax Appellate Tribunal, Patna Bench, Patna, referred to a common question for this court's opinion, they have been heard together and are being decided by this common order.

In the course of a raid conducted on 9-9-1986, at the residences of the assessee, cash amounting to Rs. 16,300 was found and assessed to be the income of the assessee. The explanation was submitted at the time of assessment before the assessing officer, but it was not accepted. By order dated 24-9-1987, the assessing officer held that a sum of Rs. 16,300 was unexplained and added it to the income of the assessee. It was challenged by the assessee before the Commissioner (Appeals) (hereinafter referred to as 'the CIT (Appeals)' in I.T.A. No. 320/RAN of 1987-88. The Commissioner of Income Tax (Appeals) by his judgment dated 8-3-1988, accepted the explanation submitted by the assessee and deleted the addition. The revenue, thereafter, moved before the Income Tax Appellate Tribunal which on hearing the parties vide order dated 12-4-1991, set aside the order passed by the Commissioner (Appeals) and restored the original order of addition of Rs. 16,300 in income as was ordered by the assessing officer. The assessee has already preferred an appeal, Tax Appeal No. 4 of 1992 (P) against the order passed by the Income Tax Appellate Tribunal, Patna.

The revenue, thereafter, imposed a penalty of Rs. 10,000 on the assessee under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter to be referred to as 'the Act' for short), vide order dated 29-7-1991. It was affirmed by the Commissioner of Income Tax (Appeals) on 23-1-1992, but the Income Tax Appellate Tribunal by its judgment dated 30-7-1992, set aside the order of penalty on the ground that there was no concealment.

In the course of a raid conducted on 9-9-1986, at the residences of the assessee, cash amounting to Rs. 40,532 was found and assessed to be the income of the assessee. The explanation was submitted at the time of assessment before the assessing officer, but it was not accepted. By order dated 14-9-1987, the assessing officer held that a sum of Rs. 40,532 was unexplained and added it to the income of the assessee. It was challenged by the assessee before the Deputy Commissioner (Appeals) (hereinafter referred to as 'the DCIT (Appeals)' in I.T.A. No. 66/D of 1987-88. The Deputy Commissioner (Appeals) by his judgment dated 30-3-1988, accepted the explanation submitted by the assessee and deleted the additon. The revenue thereafter moved before the Income Tax Appellate Tribunal which on hearing the parties vide order dated 11-4-1991, set aside the order passed by the Deputy Commissioner (Appeals) and restored the original order of addition of Rs. 40,532 in income as was ordered by the assessing officer. The assessee has already preferred an appeal, Income Tax Appeal No. 518 (PAT) of 1988 against the order passed by the Income Tax Appellate Tribunal, Patna.

The revenue thereafter imposed penalty of Rs. 18,000 on the assessee under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), vide order dated 29-7-1991. It was affirmed by the Commissioner (Appeals) on 23-1-1992, but the Income Tax Appellate Tribunal by its judgment dated 31-7-1992, in I.T.A. No. 237 (PAT) of 1992 set aside the order of penalty on the ground that there was no concealment.

In view of the aforesaid order passed by the Income Tax Appellate Tribunal, two separate applications, both under section 256(1) of the Act, at the instance of the revenue, the Income Tax Appellate Tribunal has referred the following question for this court's opinion :

'Whether, on the facts and in the circumstances of the case, the Hon'ble Tribunal was justified in concluding that no penalty under section 271(1)(c) is leviable ?'

Learned counsel for the assessee raised preliminary objection relating to the maintainability of second appeals as were preferred before the Income Tax Appellate Tribunal. Reliance was placed on a decision of the Bombay High Court in the case of CIT v. Camco Colour Co. (2002) 254 ITR 565. In the said case, the Bombay High Court noticed a policy decision taken by the Central Board of Direct Taxes (hereinafter referred to as 'the CBDT') which was circulated vide Circular F. No. 279/126/98- TTJ, dated 27-3-2000. The Central Board of Direct Taxes directed the revenue not to raise questions of law where the tax effect is less than the amount prescribed in the instructions issued by it. The said circular reads as under (page 566)

'Instruction No. 1979 F. No. 279/126/98-ITJ Government of India, Ministry of Finance (department of revenue), Central Board of Direct Taxes. New Delhi, dated the 27-3-2000.

To

All Chief Commissioners of Income-tax/

Directors General of Income-tax.

Sir,

Subject : Revising monetary limits for filing departmental appeals/ references before Income Tax Appellate Tribunal, High Courts and Supreme Court-Measures for reducing litigation-Regarding.

Reference is invited to the Board's Instruction No. 1903, dated 28-10-1992, and Instruction No. 1777, dated 4-11-1987, wherein monetary limits of Rs. 25,000 for departmental appeals (in income-tax matters) before the Appellate Tribunal, Rs. 50,000 for filing reference to the High Court and Rs. 1,50,000 for filing appeal to the Supreme Court were laid down.

2. In supersession of the above instruction, it has now been decided by the Board that appeals will be filed only in cases where the tax effect exceeds the revised monetary limits given hereunder :

The new monetary limits would apply with reference to each case taken singly. In other words, in group cases, each case should individually satisfy the new monetary limits. The working out of monetary limits will, therefore, not take into consideration the cumulative revenue effect as envisaged in the Board's earlier instruction referred to above.

3. Adverse judgments relating to the following should be contested irrespective of revenue effect :

(i) Where revenue audit objection in the case has been accepted by the department.

(ii) Where the Board's order, notification, instruction or circular is the subject-matter of an adverse order.

(iii) Where prosecution proceedings are contemplated against the assessee.

(iv) Where the constitutional validity of the provisions of the Act are under challenge.

4. Special leave petitions under article 136 of the Constitution are filed before the Supreme Court only in consultation with the Ministry of Law. Therefore, where the Chief Commissioner decides to contest an adverse judgment by filing special leave petition before the Supreme Court, they should send the proposal to the Board for further processing.

5. These instructions will apply to litigation under other direct taxes also, e.g., wealth-tax, gift-tax, estate duty, etc.

6. These monetary limits will not apply to writ matters.

7. This instruction will come into effect from 1-4-2000.

(Sd.) Anuradha Goyal,

Deputy Secretary to the Government of India.'

8 Having noticed the instruction aforesaid, the Bombay High Court held that the revenue should not have preferred any such appeal covered by the instruction and dismissed the appeal in limine.

9 Counsel for the revenue submitted that the instruction is not mandatory. If the law permits to prefer appeal, the revenue cannot be prohibited to do so, but such submission cannot be accepted as the circular issued by the Central Board of Direct Taxes is binding on all the officers and appeal.

In the circumstances, we agree with the submissions made by counsel for the assessee that the revenue should not have preferred appeal before the Income Tax Appellate Tribunal with regard to a petty amount of Rs. 16,300 or Rs. 40,532 which is covered by the Instruction of the Central Board of Direct Taxes including Instruction No. 1903 dated 28-10-1992, and Instruction No. 1777 dated 4-11-1987, which have been referred to in Instruction No. 1979 dated 27-3-2000 as quoted above.

The other question is whether there was a concealment on the part of the assessee for the purpose of imposing penalty under section 271(1)(c) of the Act. The word 'concealment' as mentioned in section 271 of the Act fell for consideration before the Supreme Court in the case of K.C. Builders v. Asst. CIT (2004) 265 ITR 562 wherein the following observation was made by the Apex Court (page 569)

'The word 'concealment' inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if it takes out the case from the purview of non-disclosure, it cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under section 271(1)(iii) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income.'

In the present case, the assessee explained the cash amount which was found in his possession, though it was not accepted by the assessing authority but the first appellate court accepted it. However, the Income Tax Appellate Tribunal affirmed the order passed by the assessing authority. In such a situation, even if it is presumed that the particulars have not been properly disclosed by the assessee, mere omission from the return of the amount does not amount to concealment, as observed by the Supreme Court. There is nothing on the record to suggest that there was a deliberate attempt on the part of the assessee in furnishing of inaccurate particulars of income. Even no circumstantial evidence found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon.

In the aforesaid circumstances, I hold that the Income Tax Appellate Tribunal was justified in concluding that no penalty under section 271(1)(c) of the Act is leviable. It is accordingly decided in the affirmative and in favour of the assessee and against the revenue.

NARENDRA NATH TIWARI J.I agree

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