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inspecting Assistant Vs. Panipat Co-operative Sugar Mills - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Chandigarh
Decided On
Judge
Reported in(1983)3ITD734(Chd.)
Appellantinspecting Assistant
RespondentPanipat Co-operative Sugar Mills
Excerpt:
.....order dated 28-8-1980 sustained the penalty only of rs. 17,666, i.e., on account of addition in respect of income from residential unit which was offered by the assessee for tax in the form of revised return though as a consequence of enquiry made by the iac (assessment) in that regard in the assessment proceedings. the commissioner (appeals) while reducing the penalty regarding addition of rs. 11,45,229, observed that the revenue has no case in respect of the said addition for penalty purpose as the same has been deleted by the tribunal. in respect of additions of rs. 5,051 and rs. 3,604 in respect of mollasses tank fund account in the sugar unit and distillery unit respectively, the commissioner (appeals) observed that the assessee had credited these two sums in compliance with a.....
Judgment:
1. The only ground raised by the revenuein this appeal in the case of Panipat Co-operative Sugar Mills Ltd., pertaining to the assessment year 1974-75, disputes the action of the Commissioner (Appeals) in reducing the penalty of Rs. 11,71,550 to a figure of Rs. 17,666, which runs as under : On the facts and in the circumstances of the case, the CIT(A) has erred in reducing the penalty levied under Section 271(1)(c) from Rs. 11,71,550 to Rs. 17,666.

2. It will be of immense help in case the matter pertaining to quantum of the assessment which travelled up to the stage of the Tribunal, is briefly discussed. The assessee derived income from running of a sugar mill and of a distillery. In the course of the assessment proceedings, the ITO made the following four additions : i. Income from sale of sugar of the sugar unit amounting to Rs. 11,45,229 which was included in the sum of Rs. 14,56,202 shown as liability in the balance-sheet of the sugar unit under the head 'Contingent liabilities' ; ii. Income from residential quarters of the assessee amounting to Rs. 17,666 which was included in the sum of Rs. 34,341 shown as liability in the balance-sheet of the sugar unit under the head 'Residential income reserve'; iii. An amount of Rs. 5,061 transferred from sales to an account called as 'Mollasses Tank Fund Account' and shown as a liability in the balance-sheet of the sugar unit ; iv. An amount of Rs. 3,604 transferred from sales to an account called as 'Mollasses Tank Fund' and shown as a liability in the balance-sheet of distillery unit under the head 'Provision for storage of Mollasses tank'.

It was on account of these four additions that the IAC levied a penalty of Rs. 11,71,550 under Section 271 (1)(c) of the Income-tax Act, 1961 ('the Act'). We are not encumbering this order with the facts pertaining to the four additions, as the same are detailed in the order of the IAC levying penalty but, in short, would mention that the addition of Rs. 11,45,229 came to be deleted by the Tribunal in the second appeal filed at the instance of the assessee. Regarding addition of Rs. 17,666, it may be mentioned that it was offered for taxation by the assessee itself when the entry pertaining to the said amount carrying it to the balance-sheet was required to be explained by the ITO but this became final right at the stage of the IAC himself. The two additions-those of Rs. 5,051 and of Rs. 3,604 -were disputed by the assessee up to the first appeal but after having a finding against itself from the Commissioner (Appeals), the assessee accepted the same and did not pursue the matter before the Tribunal.

3. When the IAC (Assessment) levied a penalty of Rs. 11,71,550 on account of the four additions vide order dated 18-3-1980, the assessee disputed the matter before the Commissioner (Appeals) who vide his order dated 28-8-1980 sustained the penalty only of Rs. 17,666, i.e., on account of addition in respect of income from residential unit which was offered by the assessee for tax in the form of revised return though as a consequence of enquiry made by the IAC (Assessment) in that regard in the assessment proceedings. The Commissioner (Appeals) while reducing the penalty regarding addition of Rs. 11,45,229, observed that the revenue has no case in respect of the said addition for penalty purpose as the same has been deleted by the Tribunal. In respect of additions of Rs. 5,051 and Rs. 3,604 in respect of Mollasses Tank Fund account in the sugar unit and distillery unit respectively, the Commissioner (Appeals) observed that the assessee had credited these two sums in compliance with a notification of the Haryana Government.

He accepted the contention of the assessee that it had transferred the sums from the Mollasses account to the separate funds so that credits in those funds could be utilised in erection of adequate storage facilities of mollasses as envisaged in the notification of the Haryana Government and, therefore, according to him, the assessee did not attempt consciously to defraud the revenue in respect of these items.

In respect of the addition of Rs. 17,666, the Commissioner (Appeals) sustained the penalty because, according to him, the assessee not only offered the said addition in response to a query but a similar sum of Rs. 16,676 was included in the assessee's total income for the assessment year 1973-74 order of which was served on the assessee on 10-3-1976 and in spite of this fact, in the course of revising the return for the first time on 21-9-1976 the assessee did not offer the said addition when it first revised the return.

4. It is this action of the Commissioner (Appeals) which is contested by the revenue. The learned departmental representative, Mrs. Sudha Sharma, after reading out the order of the IAC (Assessment) levying the penalty, which gives all the details about the four additions, was fair enough to admit the deletion of addition of Rs. 11,45,229 by the Tribunal and also submitted that even revenue's reference application under Section 256(1) of the Act, in that regard, has been rejected.

5. The learned counsel for the assessee, Shri. K.S. Suri, on the other hand, besides relying on the order of the Commissioner (Appeals) not only drew support in respect of penalty deleted for the three amounts of Rs. 11,45,229, Rs. 5,051 and Rs. 3,604 but even in respect of addition of Rs. 17,666 for which penalty was sustained on the basis of legal grounds raised by the learned counsel before the Commissioner (Appeals) that penalty proceedings under Section 271(1)(c) were initiated 'for furnishing wrong particulars of income' by the assessing authority whereas the same were levied for concealment of income. He submitted that under Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963, he has every right not only to support the order of the Commissioner (Appeals) on grounds adjudicated against the assessee but he can ask for a different finding even in respect of penalty sustained at a figure of Rs. 17,666 and in that respect he submitted that the satisfaction has to be expressed by the assessing authority during assessment proceedings and when the assessment order is perused he highlighted the fact that the assessing authority said that wrong particulars are furnished, whereas when the penalty came to be levied it was on the basis of concealment. He was, however, fair enough to admit that the notice served by the assessing authority under Section 271(1)(c) included both the issues which pertained to furnishing of wrong particulars and also concealment. But he submitted that the notice was stereotype and the satisfaction expressed by the assessing officer was in the course of assessment proceedings, which was only in respect of furnishing of inaccurate particulars. He reiterated the same arguments as brought forward before the Commissioner (Appeals) and also reiterated his reliance on the Gujarat High Court decision in the case of CIT v. Lakhdhir Lalji [1972] 85 ITR 77.

6. The learned departmental representative vehemently argued that against the levy of penalty in a sum of Rs. 17,666 confirmed by the Commissioner (Appeals), the assessee has neither come in appeal nor in cross-objection and as a respondent its rights are limited. She also submitted that it is trite law that legal issue can be raised at any stage of hearing but the issue sought to be raised by the learned counsel for the assessee is not one which will not require going into the facts such as looking at the notice, etc. and in case certain facts are required to be seen, the submission of the learned counsel should not carry the assessee's case any further. She submitted that the Tribunal has held over and again that the charge can be changed. She submitted that satisfaction is during the course of assessment proceedings and once the lapse, if any, has been made while issuing the notice, as it carried both inaccurate particulars and concealment of income, the assessee's contention should not find favour with the Bench. She also submitted that in the initial notice the assessing authority mentioned wrong particulars, which meant both furnishing of inaccurate particulars and concealment.

7. After taking into consideration the rival submissions, we are unable to interfere in the finding of the Commissioner (Appeals) sustaining the penalty of Rs. 17,666. However, before we give our reasons for confirming the said finding, we would like to deal with the contention of the assessee raised regarding initiation of penalty proceedings.

There is no dispute about the fact that when the assessee carried the matter regarding penalty of Rs. 11,71,550 levied by the IAC (Assessment) before the Commissioner (Appeals), the Commissioner (Appeals) vide his order dated 28-8-1980 reduced the quantum of penalty to Rs. 17,666 and against the said order the assessee neither came in appeal nor filed any cross-objection, after the said order was appealed against by the revenue. Rule 27 of the Income-tax (Appellate Tribunal) Rules, from which the learned counsel for the assessee attempted to draw strength for raising the legal issue, reads as under : The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.

By mere reading of the above rule, it is apparent that the learned counsel for the assessee could utmost support the order of the Commissioner (Appeals) which reduced the penalty of Rs. 11,71,550 to Rs. 17,666. Reliance of the learned counsel for the assessee on disputing the finding of the Commissioner (Appeals) on legal issue that when penalty proceedings were initiated were for furnishing of wrong particulars, whereas when the penalty was levied, it was for concealment, rejected by the Commissioner (Appeals) in paras 4 and 5 of his order, is misplaced before us in respect of levy of penalty amounting to Rs. 17,666 confirmed by the Commissioner (Appeals) because, as observed by us above, the right granted to the respondent under Rule 27 of the Income-tax (Appellate Tribunal) Rules is limited.

All that the respondent can do is to support the order of the appellate authority as a respondent, who has neither come in appeal nor in cross-objection, but cannot ask for a different finding than that of the appellate authority on the basis of re-arguing the grounds rejected by the first appellate authority. The contentions, therefore, raised by the learned counsel for the assessee against the levy of penalty of Rs. 17,666 specifically, are unauthorised for the extent of supporting the Commissioner (Appeals) order in respect of three items of Rs. 11,45,229, Rs. 5,051 and Rs. 3,604 arguments of learned counsel for the assessee will merely be of academic character because on he basis of facts alone the penalty in respect of the said three amounts was deleted by the Commissioner (Appeals) and no further oxygen would be needed by the legal grounds less raised by the assessee.

8. When we take into consideration the addition of Rs. 11,45,229 itself being deleted by the Tribunal, we find the very bottom on which the said penalty of concealment in equal amount was levied is no more and, therefore, the Commissioner (Appeals) on account of the said amount was justified to grant reduction in the amount of penalty. Regarding the two additions for Rs. 5,051 and Rs. 3,604 in respect of Mollasses Tank Fund in sugar and distillery units respectively, when there was a Haryana Government notification in that regard and on the strength of the said notification since the assessee had transferred the sums from Mollasses accounts to separate funds so that the credits in those funds could be utilised in the erection of adequate storage facilities of Mollasses as envisaged in the notification of the Haryana Government, it makes it a case of bona fide belief rather than a case of conscious attempt on the part of the assessee to defraud the revenue in respect of these items. The mere fact that the two additions were accepted by the assessee, cannot give any strength to the contention of the revenue for levy of penalty. On the basis of above observations and for the reasons given by the Commissioner (Appeals) in his order, we confirm his action.


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