Commissioner of Income Tax vs R. Bharathan

C.N. Ramachandran Nair, J.—Heard standing counsel appearing for the applicant and counsel for the respondent/assessee. The assessee an Abkari Contractor, was assessed by the assessing officer for the year 1983-84 by rejecting the books of account and making an addition of above Rs. 17 lakhs. The addition pertains to higher sales price estimated by the assessing officer for the sale of arrack. The assessing officer concluded that the assessee was selling arrack at the minimum rate of Rs. 25 per litre as against Rs. 18. The assessing officer also found that th assessee had suppressed the sale proceeds of arrack during the relevant year by Rs. 17,98,950.

The assessee being aggrieved by the said assessment order of the assessing officer filed appeal before the Commissioner (Appeals). After considering the arguments advanced on behalf of the assessee the Commissioner (Appeals) upheld the addition of Rs. 17,98,950 to the income of the assessee. The assessing officer also initiated penalty proceedings and issued a notice u/s 271 read with Section 274. The assessee did not give any explanation. Therefore the assessing officer held that there was no explanation by the assessee for the penalty proceedings also. He also levied a penalty of Rs. 27,74,619 u/s 271(1)(c) of the Income Tax Act, for concealment of income or furnishing inaccurate particulars of income u/s 271(1)(c). The assessee being aggrieved by the said order imposing penalty for concealment of income agitated the dispute before the Commissioner (Appeals). The Commissioner (Appeals) relying upon the order of the Appellate Tribunal in the quantum appeal, cancelled the penalty levied u/s 271(1)(c).

Even though appeals were filed against the assessment order as well as the penalty, the Appellate Tribunal accepted the sales rate at Rs. 18, but sustained the addition of Rs. 5 lakhs. The case of the department is that penalty should have been considered u/s 271(1)(c) with reference to the sustained addition. The contention of the counsel for the assessee is that penalty was levied solely based on the differential rate adopted on the sale price and when this is cancelled by the Commissioner (Appeals), penalty gets automatically cancelled. We are unable to accept this contention because the Commissioner (Appeals) has only changed the pattern of disallowance and addition under other heads. We are not expressing any opinion as to whether penalty is leviable for the sustained addition. In fact from the order of the Appellate Tribunal it is not clear that they have not considered the consequences of the addition sustained by them. We therefore dispose of this reference case by declining to answer the question but by setting aside the order of the Appellate Tribunal and of the Commissioner (Appeals) and remand the case back to the assessing officer to consider whether penalty is leviable u/s 271(l)(c) with the explanation then in force, with specific reference to the amount sustained by the Appellate Tribunal Rs. 5 lakhs. The assessing officer shall decide afresh if penalty is leviable or not and pass fresh orders after issuing notice to the respondent/assessee.

ITR 2/2007 arises from the order of the Appellate Tribunal confirming the order of Commissioner (Appeals) whereunder it cancelled the penalty leviable u/s 274(2)(a) of the Income Tax Act. We have heard Senior counsel appearing for the applicant and counsel appearing for the assessee. We find that during the relevant year the assessee filed the return of income declaring loss of Rs. 1,05,757 after adjusting an unabsorbed loss of Rs. 5,36,341. Consequently there was no requirement for filing a statement of advance tax u/s 209A of the Act. Since the assessment order was modified in appeal by the Commissioner (Appeals), we do not think it is fit case for penalty for non-filing of statement for payment of advance tax. Accordingly we uphold the order of the Commissioner (Appeals) and the Appellate Tribunal and dispose of this reference case by answering the question referred, against the revenue and in favour of the assessee. Registry will forward a copy of the Judgment to the Income Tax Tribunal, Cochin Bench.