Delhi High Court

Asstt. Cit vs Amarpali Mercantile Ltd. on 11 November, 2002

Equivalent citations: (2004) 91 TTJ Del 854

ORDER

Phool Singh, J.M.:

This appeal, preferred by the revenue, is directed against Commissioner (Appeals)'s order dated 30-5-1997, relating to assessment year 1990-91. The only ground raised in this appeal reads as under :

"On the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in deleting the penalty of Rs. 90,132 imposed under section 271(l)(c) ignoring the material fact that the assessed had tried to conceal its income with the interest receivable."

2. Relevant facts, giving rise to this appeal, are that assessed, a private limited company, earning income by way of interest on loans and advances filed return for assessment year 1990-91 at an income of Rs. 71,530. During assessment proceedings the assessing officer noted that assessed had shown the income from interest on receipt basis while assessed being company was supposed to follow mercantile system of accounting and interest income was to be calculated on accrual basis. Accordingly, the assessing officer assessed the income at Rs. 2,38,442 on accrual basis. The assessing officer initiated fixated penalty proceedings under section 271(l)(c) of the Income Tax Act, 1961 (hereinafter referred to as the "Act"), and served a notice which remained uncomplied with and assessing officer levied a penalty of Rs. 90,132 for furnishing of inaccurate particulars of income by assessed- company. The assessed preferred appeal and it was submitted by the assessed that there was a genuine difference of opinion between the assessed and the revenue. The assessed had furnished all necessary particulars which were required for computation of income and assessment was completed on the basis of those documents. The Commissioner (Appeals) considered the submissions and noted that in spite of change in the method of accounting for book purposes, income for income-tax purposes could be accounted for on cash basis or not was a question of law which required to be decided by higher authorities. No doubt the assessed lost case up to Tribunal in assessment year 1989-90 but that order is not final as assessed has challenged the same before the Hon'ble High Court through reference.and that would show that income had not become final nor assessed could be held liable for concealing the particulars of income. The assessed had itself computed its income as per final accounts maintained by it as per mercantile system of accounting to file the return as per income-tax. The explanation of the assessed was bona fide as assessed was still continuing to follow cash system of accounting for income-tax purposes and it was not a case of penalty. Aggrieved, the revenue is in appeal before the Tribunal.

3. Learned Departmental Representative placed reliance on the order of assessing officer and submitted that assessed lost its case in just preceding year 1989-90 and in spite of that he had shown the income for assessment year 1990-91 as per cash system of accounting which was not justifiable and thus he was rightly held liable for furnishing of inaccurate particulars and penalty was rightly levied.

4. As against it, the learned counsel for the assessed placing reliance on the decision of Hon'ble Delhi High Court in the case of CIT v. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321 : (2000) 246 ITR 568 (Del) submitted that there was no satisfaction recorded by the assessing officer in the assessment order and as per ratio of decision in the aforesaid case, the penalty was liable to be deleted. This ratio was applied by the Tribunal, Delhi Bench "F" in the case, of Dy. CIT v. R.J. Wood & Co. (P) Ltd. in WTA No. 73/Del/1996 (2002) 76 TTJ (Del) 387 (to which I was a party) and penalty was deleted for non-recording of satisfaction.

5. Other plea of the learned counsel is that assessing officer has not applied his mind. Paper No. 1 of the paper book is copy of notice dated 12-3-1993, issued by the assessing officer under section 274 read with section 271 of the Act and assessed was called upon to show as to why penalty should not be levied for concealment of particulars of the income but penalty had been imposed for furnishing of inaccurate particulars of income and thus penalty was not leviable in view of the decision of Hon'ble Gujarat High Court in the case of CIT v. Lakhdhir Lalji (1972) 85 ITR 77 (Guj) and another decision in the case of KM Bhatia (Quarry) v. CIT (1992) 193 ITR 379 (Guj) wherein it was laid down that if proceedings were initiated on the ground of furnishing of inaccurate particulars, imposition of penalty on the ground of concealment of income was not justified.

6. About merit, the learned counsel submitted that it was just difference of opinion in between the assessed and department as assessed under bona fide belief was of the view that its income was to be computed for income-tax purpose on the basis of receipt while department had been of the view that it was to be computed on accrual basis. In just preceding year the matter is pending before the Hon'ble High Court as copy of statement of case dated 25-11-1993 in R.A. No. 524/Del/1993 is available at pp. 35 to 37 of the paper book. It was submitted that no penalty was leviable if there was difference of opinion. Lastly, it was submitted that assessing officer had "computed the income on the basis of information voluntarily provided by the assessed along with return of income which was in the form of audited P&L a/c and balance sheet, etc'. and as such the question of concealment or furnishing of inaccurate particulars does not arise, as assessed had disclosed all the particulars of its income.

7. I have heard the rival submissions and have gone through the entire material vailable on record. The conclusion is that penalty had rightly been deleted by e Commissioner (Appeals). It is to go firstly on the ground of non-recording of satisfaction as quired by Their Lordships in the case of CIT v. Ram Commercial Enterprises td. (supra). Secondly, the assessing officer issued notice for levy of penalty for concealment of income while penalty had been levied for inaccurate particulars which is not permissible in view of the case law referred to by the learned counsel for the assessed. Thirdly, the difference of opinion in between assessed and department is about computation of the income, i.e., on receipt basis or accrual basis and matter is pending before the Hon'ble High Court. Once assessed had submitted audited P&L a/c, etc. which are maintained on mercantile system of accounting as required under Companies Act, then assessed cannot be held liable for furnishing of inaccurate particulars, as assessed had himself given all the relevant documents and issue remains in between the parties about actual computation of income for income-tax purposes. The appeal has no force and is liable to be dismissed.

8. Revenue's appeal stands dismissed accordingly.