Commissioner of Income TaxChennai v. M/s. Ample Properties Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 30.11.2009CORAMTHE HONOURABLE MR. JUSTICE K. RAVIRAJA PANDIANANDTHE HONOURABLE MR. JUSTICE M.M. SUNDRESHTAX CASE (APPEAL) NOS.1283 TO 1289 OF 2009ANDM.P.NOS. 1 (6 COUNTS) OF 2009 IN T.C.(A)NOS.1284 TO 1289 OF 2009Commissioner of Income TaxChennai.... Appellant/Appellant in all the appeals.Vs.M/s. Ample Properties Ltd.,(formerly known as Arunodhaya Chemicals (P) Ltd.,)New No.9/2 (Old No.2)Raghvendra EnclaveRaghvendra ColonyVirugambakkamChennai – 600 092.... Respondent/Respondent in all the appealsTax Case Appeals filed under Section 260A of the Income Tax Act,1961 against the orders of the Income Tax Appellate Tribunal, Madras'A' Bench, dated 15.4.2009 in ITA Nos.1364, 1393, 1394, 1395, 1396,1397 and 1398/Mds/2008 for the Assessment Years 1992-93, 1990-91,1991-92, 1993-94, 1994-95, 1995-96 and 1996-97 respectively againstthe order of the Commissioner of Income-Tax (Appeals) - VIII, Chennaidated 31.03.2008 and made in ITA.Nos.068, 071 to 073/07-08, 67/07-08,69 & 70/07-08 for the assessment year 1993-94, 1994-95, 1995-96,1996-97, 1992-93, 1990-91, 1991-92, against the order of theAssistant Commissioner of Income Tax, Company Circle 1(1), Chennaidated 04.09.2007 in GIR.NO.AX3-208/1996-97, dated 04.09.2007 inGIR.NO.AX3-208/1995-96, dated 04.09.2007 in GIR.NO.AX3-208/1994-95,dated 04.09.2007 in GIR.NO.AX3-208/1991-92, dated 04.09.2007 inGIR.NO.AX3-208/1990-91, dated 19.06.2007 in GIR.NO.AX3-208/1993-94,dated 19.06.2007 in GIR.NO.AX3-208/1992-93.For Appellant : Mr. J. Narayanasamy https://hcservices.ecourts.gov.in/hcservices/ COMMON JUDGMENT(Judgment of the Court was delivered by K. Raviraja Pandian, J.)These appeals, relating to the assessment years 1992-93, 1990-91, 1991-92, 1993-94, 1994-95, 1995-96 and 1996-97 respectively, havebeen filed against the common order of the Income Tax AppellateTribunal, Madras 'A' Bench, dated 15.4.2009 in ITA Nos.1364, 1393,1394, 1395, 1396, 1397 and 1398/Mds/2008, at the instance of theRevenue, by formulating the following substantial question of law:-" Whether, on the facts and circumstances of the case, theTribunal was right in holding that no penalty for concealmentis leviable under Section 271(1)(c) if the assessment isbased on estimate basis ? "2. The facts, which are common in all these cases, are asfollows:-The appeal filed against ITA.No.1364/Mds/2008 relating to theassessment year 1992-93 has been taken as typical case of narrationof facts. (i) The assessee is engaged in the business of manufactureand sale of solvent ether and anesthetic ether. The assessee filedits return of income for the assessment year 1990-91 on 27.9.1991declaring a loss of Rs.24,34,390/-. The income wasdetermined at Rs.1,34,74,380/- by the assessment order, dated30.3.1993. (ii) The assessee filed an appeal to the Commissioner of IncomeTax (Appeals), who remanded the matter to the Assessing Officer. Theassessment was redone and the income was determined to Rs.20,90,400/-by the proceedings dated 10.3.1997. The Commissioner once againremanded the matter to the Assessing Officer. (iii) The order so made by the Commissioner of Income Tax(Appeals) was carried on appeal by the Revenue to the Income TaxAppellate Tribunal, which, by order dated 10.2.2004, set aside theorders of both the authorities and remanded back the issue to thefile of the Assessing Officer with a direction to examine the factsonce again and decide the issue afresh. (iv) After the assessment was redone once again, the assesseefiled an appeal before the Commissioner of Income Tax (Appeals), whodetermined the income at Rs.7,87,343/-, which was accepted by theassessee. While the matter in respect of the assessment was resisted,the Assessing Officer initiated penalty proceedings under Section 271 https://hcservices.ecourts.gov.in/hcservices/ (1)(c) of the Income Tax Act, 1961, by issuing a notice demandingpenalty of Rs.4,41,435/- for the assessment year 1990-91 andRs.2,97,211/- for the assessment year 1991-92. Aggrieved against thelevy of penalty, the assessee filed an appeal before the Commissionerof Income Tax (Appeals), who allowed the appeal and directed theAssessing Officer to cancel the penalty against the assessee underSection 271(1)(c) of the Income Tax Act, 1961. Aggrieved by thatorder, the Revenue filed further appeal before the Income TaxAppellate Tribunal. Thus, the Tribunal relying on the decision ofthis Court in the case of Commissioner of Income Tax vs. MeenakshiKutty, reported in (2002) 258 ITR 494, wherein it was held that nopenalty for concealment can be levied if the assessment is based onestimate and there is no gross or wilful negligence on the part ofthe assessee, the Appellate Tribunal upheld the order of theCommissioner of Income Tax (Appeals). The order so made by theTribunal is canvassed before this Court by filing these appeals.3. We have heard the argument of Mr.J.Narayasamy, learnedstanding counsel appearing for the Revenue.4. For the assessment year 1988-89, the department took the viewthat the assessee had not manufactured solvent ether, but soldrectified spirit in the black market and earned substantial profitand on this assumption, assessments were completed, determining theincome of the assessee by adopting the profit of Rs.5 per Kg. ofrectified spirit purchased from the Government of Tamil Nadu, whichis the raw material for manufacture of solvent ether. On appeal, theCommissioner of Income Tax (Appeals) confirmed all the assessments inprinciple, but reduced the income to Rs.1 per litre of rectifiedspirit. On appeal, the Tribunal set aside the assessment for beingredone afresh after examining the Central Excise records and theassessment was completed on 31.3.2006 determining the income byadopting the profit at Rs.1 per litre of rectified spirit purchasedfrom the Government and the said order forms the basis for all thesubsequent assessment years. That order has not been carried on bythe Revenue by way of appeal. In respect of the assessment years,which are under consideration in these appeals, the assessment ordersmade by the Assessing Officer were set aside by the Tribunal with adirection to reframe the assessments, after examining the CentralExcise records and that the Assessing Officer could not collect theCentral Excise records and completed the assessments. On appeal, theCommissioner of Income Tax (Appeals) examined the entire facts of thecase relating to earlier years and directed the Assessing Officer toadopt the profit of Rs.1 per litre of the rectified spirit. Whiledoing so, the Tribunal has also taken into consideration theobservation made by the Assessing Officer himself in the assessmentorder in respect of the assessment year 1988-89, which reads asunder:- https://hcservices.ecourts.gov.in/hcservices/ " Going by the peculiar set of circumstances prevalent inthis case and considering that the assessment has gone backand forth to the various authorities without any benefit tothe revenue by way of taxes or to the assessee in the form ofending a protracted litigation, it appears to me that in thefitness of things and in the absence of any clinchingmaterials to decide the issue otherwise, I am inclined toaccept the appeal made by the assessee and determine theprofit on sale of rectified spirit at Rs.1 per litre, takingdue note of the decision of the final fact finding authorityin the immediately preceding assessment year."5. The order of the lower authority including that of theTribunal has given a clear finding that the Assessing Officer was notable to point out any specific evidence on the basis of which theaddition was made. On the issue of suppression of sales, it isevident that the Assessing Officer did not bring any material onrecord to prove that there was suppression of sales. The ultimateaddition has been fixed by following the order of the authorities inrespect of the assessment year 1988-89, which has become final and noappeal was preferred for that order. In addition to that, theassessee also in order to give a quietus to the litigation requestedthe Commissioner to complete the assessment as done for theassessment year 1988-89 agreeing for adopting the profit at Rs.1/-per litre. On that basis, the assessment has been made. There is nofinding whatsoever that the assessee has suppressed any material orfiled inaccurate return for any one of the earlier assessment orderunder consideration for the purpose of levy of penalty. As alreadysaid, the Assessing Officer was not able to fix the exact quantum ofsuppression and the assessment has been made on concession for thepurchase of spirit. In the absence of any finding as to suppressionof sales or furnishing inaccurate particulars of such income,invocation of the penal provision under Section 271 of the Income TaxAct, 1961 is not correct. The Assessing Officer has completed theassessment as per the direction of the appellate authority byadopting 1% of profit, which is not based on any material, but on thebasis of concession. 6. In respect of analogous factual position of a case, decidedby a Division Bench of this Court, in the case of Commissioner ofIncome Tax vs. K.Meenakshi Kutty, reported in (2002) 258 ITR 494,would be of useful. In the above said decision, it is held that it isis not as if the Tribunal has held in all cases, where estimation hasbeen made, the penal provision cannot be invoked, but in the givenset of facts, even the estimation was based on any material and onthe offer made by the assessee and in the face of the finding reliedby the Assessing Officer, there is no clinching materials availableto decide the issue. The invocation of penal provision, which https://hcservices.ecourts.gov.in/hcservices/ requires concealment and inaccurate particulars is unwarranted in thefacts of the present case. Even in Union of India and Others vs.Dharmendra Textiles Processors and Others, reported in (2008) 306 ITR277, the Supreme Court has observed that the finding as tosuppression or inaccurate particulars in the return are necessary forattracting the penal provision under Section 271(1)(c) of the IncomeTax Act, 1961. Therefore, we find no illegality or irregularityin the order of the Tribunal, so as to warrant interference byentertaining these appeals. Accordingly, the Tax Case Appeals aredismissed. Consequently, connected miscellaneous petitions are alsodismissed.Sd/Asst.Registrar/true copy/Sub Asst.RegistrarkbTO1. The Assistant Registrar,Income-Tax Appellate Tribunal,Rajaji Bhavan, III Floor,Besant Nagar, Chennai - 90.2. The Commissioner of Income - Tax,Appeals VIII, Chennai.3. The Assistant Commissioner of Income Tax,Company Circle-1(1), Chennai.T.C.(A)Nos.1283 to 1289 of 2009PKB(CO)RVL 14.12.2009