Commissioner Of Income-Tax vs Atma Ram Properties Pvt. Ltd.
2002 Latest Caselaw 1156 Del

JUDGMENT

D.K. Jain, J.

1. This appeal by the Revenue under Section 260A of the Income-tax Act, 1961 (for short "the Act"), is directed against the order of the Income-tax Appellate Tribunal (for short "the Tribunal"), dated September 25, 2001, in I. T. A. No. 2331/D of 1995. By the said order the Tribunal has upheld the decision of the Commissioner of Income-tax (Appeals) (for short the "CIT(A)"), deleting the penalty levied on the assessed under Section 271(1)(c) of the Act to the extent of Rs. 5,93,432.

2. Briefly stated the background facts are that in respect of the assessment year 1985-86, the Assessing Officer while completing the assessment made certain additions/disallowances. However, in this appeal we are concerned with the disallowances made under the following heads :

1. Electricity and water charges Rs. 68,378

2. Connection charges Rs. 37,878

3. Addition made under section 28(iv) read with section 2(24)(va) of the Act.

4. Addition of Rs. 3,57,000 in respect of capital gains.

3. The Income-tax Officer was of the view that the rental income earned by the assessed from Scindia House building was assessable as income from house property and not income from business, as claimed by the assessed; the amount of Rs. 38.20 lakhs received by the assessed under two rent agreements were benefits on account of interest-free advances/deposits and, therefore, chargeable to income-tax as profits and gains of business in terms of Section 28(iv) read with Section 2(24) of the Act. The value of the benefit in the form of interest at 18 per cent, per annum on the amount received by the assessed was thus included in the total income. The Assessing Officer also held in view that the assessed was liable to pay capital gains tax on the sale of flat No. 3 in Scindia House. While completing the assessment, the Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Act and vide order dated November 30, 1990, levied a penalty of Rs. 7,07/572 in respect of seven items, including the aforenoted four items.

4. Aggrieved, the assessed preferred appeal to the Commissioner of Income-tax (Appeals), who vide his order dated November 23, 1994, upheld the levy of penalty in respect of some of the items but deleted the same in respect of the aforenoted items. The Commissioner of Income-tax (Appeals) held that in so far as the first three items were concerned, the addition/disallowance having been deleted by the Tribunal in the quantum appeal, no penalty could be levied in respect thereof and as regards the fourth addition on account of capital gains, he was of the view that the assessed had disclosed all the material facts relating to the sale, which was duly reflected in the balance-sheet and a note for not taking the sale to the profit and loss account was appended to the directors report, which formed part of the balance-sheet of the assessed. The Commissioner of Income-tax (Appeals) thus deleted the penalty levied in respect of the aforenoted items.

5. The assessed seems to have accepted the said order. However, the Revenue took the matter in appeal to the Tribunal. As noted above, the Tribunal has affirmed the order of the Commissioner of Income-tax (Appeals). Hence, the present appeal.

6. It is submitted by Shri Sanjiv Khanna, learned senior standing counsel for the Revenue, that merely because the additions, subject-matter of penalty, had been deleted by the Tribunal, penalty under Section 271(1)(c) could not be deleted automatically, particularly when the order of the Tribunal in the quantum appeal was under reference. It is urged that since the assessed income was more than the returned income, the Explanation to Section 271(1)(c) was attracted in the instant case but the Tribunal lost sight of this important fact. Learned counsel would also urge that in any case the Tribunal should have awaited the decision of the High Court in the quantum appeal.

7. We are unable to persuade ourselves to agree with learned counsel for the Revenue.

8. In so far as the issue relating to the scope and effect of Explanation added to Section 271(1)(c) of the Act is concerned, it is no longer res integra in view of the decision of this court in CIT v. Gurbachan lal [2001] 250 ITR 157. In the said decision Chief Justice Arijit Pasayat (as his Lordship then was) observed as follows (headnote) :

"A conspectus of the Explanation added by the Finance Act, 1964, and the subsequent substituted Explanations make it clear that the statute visualises assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the Explanation (after 1964) is a rule of evidence. Presumptions which are rebuttable in nature are available to be drawn. The initial burden of discharging the onus is on the assessed. Explanation 1 automatically comes into operation when in respect of any facts material to the computation of the total income of any person, there is failure to offer an explanation or the explanation offered is found to be false by the Assessing Officer or the first appellate authority, or an explanation is offered which is not substantiated. According to the proviso to Explanation 1, the onus to establish that the explanation offered was bona fide and all facts relating to the same material to the computation of the income have been disclosed by him, will be on the person charged with concealment. If he fails to discharge that burden, the presumption that he had concealed income or furnished inaccurate particulars thereof is available to be drawn."

9. It was held that the principal logical import of the Explanation is to shift the burden of proof from the Revenue on to the assessed. Rebuttal must be on materials relevant and cogent. It is for the fact-finding body to judge the relevancy and sufficiency of the materials. If such a fact-finding body bearing the above said principles in mind comes to the conclusion that the assessed has discharged the onus, it becomes a conclusion of fact, and no question of law arises.

10. It is equally true that it cannot be laid down as a principle of universal application that whenever the addition made is deleted, penalty under Section 271(1)(c) of the Act cannot be levied. The factual position in each case has to be considered on its own peculiar facts.

11. Having perused the order of the Commissioner of Income-tax (Appeals) and the Tribunal, we find that on both the main issues, namely, (1) whether rental income was to be assessed as business income, and (2) whether profit on sale of flat was to be assessed as income from business or as capital gains, the authorities below have accepted the explanation of the assessed as bona fide. The Commissioner of Income-tax (Appeals) has in fact recorded that the assessed has not concealed or furnished inaccurate particulars of its income. In our view, these are pure findings of fact, beyond the limited and restricted scope of appeal under Section 260A of the Act:

12. As regards the plea of learned counsel for the Revenue that the Tribunal should have awaited the decision of the High Court in the reference arising out of quantum proceedings, we feel that we can do no better than to refer to the decision of this court in CIT v. Popular Jewellers [1999] 238 ITR 676, wherein R.C. Lahoti J. (as his Lordship then was) observed that in such a situation the appropriate course for the Revenue was to have requested the Tribunal to adjourn hearing in the appeal in the penalty proceedings sine die awaiting the decision of the High Court in the quantum proceedings. It was held that since in that case no such prayer was made by the Revenue, no question on that issue arose as a question of law from the order of the Tribunal.

13. In the present case also we find that neither any prayer to await the decision of the High Court in the quantum reference was made before the Tribunal nor the factum of pendency of reference in the High Court in quantum proceedings was brought to the notice of the Tribunal. It is evident from the impugned order that in fact no such plea was raised before the Tribunal. Therefore, in the light of the decision in Popular Jewellers [1999] 238 ITR 676 (Delhi), with which we are in respectful agreement, no question of law, much less a substantial question of law, arises from the order of the Tribunal,

14. Dismissed.