Commissioner Of Income Tax vs Graphic (India)
2007 Latest Caselaw 1417 Del

JUDGMENT

V.B. Gupta, J.

1. Present appeal has been filed by the Revenue under Section 260A of the IT Act, 1961 (for short as 'Act') against the order dt. 2nd Sept., 2005 passed by the Income-tax Appellate Tribunal (for short as 'Tribunal') Delhi 'E' Bench in ITA No. 3210/Del/2003 for the asst. yr. 1998-99 vide which the Tribunal had deleted the penalty imposed by AO under Section 271(1)(c) of the Act.

2. The facts in brief are that during the assessment proceedings, the AO from the perusal of the balance sheet noticed that the assessed had shown balance of Rs. 81,83,063 with Hong Kong Bank, Delhi representing dollar account. The assessed was required to show earnings out of this account on interest and exchange rate. Information was also called by the AO from the bank. Vide letter dt. 23rd June, 2001 the bank informed that as per the conversion rate of US$ on 31st March, 1998 the value of dollars in Indian currency was Rs. 92,98,123 as against Rs. 81,83,063 shown by the assessed. The difference of Rs. 11,15,052 was taxed as income from other sources.

3. The assessed took the plea that at the time of withdrawal from the account the income was taken into consideration but the same was not accepted by the AO as there was withdrawal of USfl! 79,095.52 during the year as maturity proceeds vide bank letter dt. 23rd June, 2000. The assessed vide letter dt. 28th March, 2001 stated that US$ 79,096.52 matured during the year under consideration was not paid to him as the fixed deposit was renewed and no withdrawal was made. In order to buy peace, the assessed accepted this addition made to his income and did not prefer any appeal.

4. The AO thereafter started penalty proceedings and levied penalty of Rs. 3,08,203.

5. Aggrieved against the order passed by the AO, the assessed filed an appeal before the Commissioner of Income-tax (Appeals) [for short as 'CIT(A)']. The CIT(A) confirmed the penalty order passed by the AO holding that Rs. 81,80,580 was the concealed particulars of income by the assessed who had not disclosed the exact amount of closing balance in dollar account with the bank.

6. Aggrieved with the order passed by the CIT(A), the assSssee filed an appeal before the Tribunal and vide impugned order the Tribunal set aside the orders of AO and CIT(A) and deleted the penalty.

7. It has been contended by learned Counsel for the Revenue that as per Rule 115 of IT Rules, the rate of exchange for the calculation of value in rupees of any income accruing in foreign currency shall be the telegraphic transfer buying rate of such currency as on the specified date and as per Expln. (2)(c) to Rule 115 specified date means, in respect of income chargeable under the head "Profit and gains of business", the last day of the previous year of the assessed.

8. On the other hand, it has been contended by the learned Counsel for the assessed that assessed vide letter dt. 16th Oct., 2002 has given his explanation stating that he earns commission in foreign .exchange and out of this commission received, transfers part of foreign exchange within the permissible limit prescribed by the RBI to dollar account maintained with HSBC Bank Ltd. where it is held by the bank as term deposit and assessed earns interest on the same and pays the tax year-wise. It is also contended that the difference represented only on account of difference in exchange rate fluctuation and as the amount in dollar terms stood reconciled and tallied as per bank certificate there has been no concealment of particulars of the income and as such penalty cannot be levied under these circumstances.

9. The question to be seen here in the present case is as to whether any case of concealment of income and levy of penalty is made out against the assessed or not.

10. Section 271 of the Act deals with failure to furnish returns, comply with notices, concealment of income, etc. The relevant provision of this section for the disposal of present appeal is (1)(c) and it read as under:

(1) If the AO or the CIT(A) or the CIT in the course of any proceedings under this Act, is satisfied that any person--

(a)

(b)...

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or

(d)...

he may direct that such person shall pay by way of penalty,-

(i)

11. Provisions of this section are attracted where in the course of any proceedings under the Act, the AO or the first appellate authority is satisfied that any person--

--has concealed the particulars of his income

or

--has furnished inaccurate particulars of such income.

12. As per order passed under Section 271(1)(c) of the Act by the AO it says:

It is a clear case of concealment where a firm willfully tried to conceal its particulars of income under the pretext of accounting method being followed by it and having connivance with its chartered accountant too for not declaring in report under Section 44AB in any of its assessment years, this particular deviation; that the dollar account balance in the balance sheet is being shown as a principal balance and not as a rupee convertible balance as on 31st March of the relevant year so that the Department remains in dark even though there were specific mandatory guidelines of the Institute of Chartered Accountant in this regard. It was only at the instance of the Department, now that the concealment in value of foreign currency account has been detected and the same even on appeal by the assessed too stands confirmed.

13. It is well settled that on an issue where there can be two views possible, it cannot be considered to be a case of concealment of particulars of income by the assessed.

14. The Tribunal has given a finding to this effect that it is not the case of the Revenue that foreign exchange in dollars terms amounting to US$ 2,36,774 was not fully declared by the assessed. It is clear that difference in amounts is due to foreign rate fluctuation only. The assessed has been following the method whereby exchange difference was shown on maturity of the deposit which he has been consistently following and the AO wanted to tax it on yearly accrual basis. The assessed has also filed bank certificate showing that interest earned amounting to US$ 6058.235 has been credited to his account after deduction of tax at the source by bank.

15. The assessed was following the method by which the exchange fluctuation has been shown on realisation of maturity proceeds of the fixed deposit whereas the AO has taken the same on yearly accrual basis on account of difference in exchange rate fluctuation. Since there has been no change in the method of accounting followed by the assessed in the past which was accepted by the Revenue, under these circumstances, it cannot be said that the assessed has concealed any particulars so far as its computation of income is concerned and as such provisions of Section 271(1)(c) of the Act are not attracted in this case and we do not find any infirmity in the reasoning given by the Tribunal.

16. The above being the position, no fault can be found with the view taken by the Tribunal. Thus, the order of the Tribunal does not give rise to a question of law, much less a substantial question of law, to fall within the limited purview of Section 260A of the Act, which is confined to entertaining only such appeal against the order which involves a substantial question of law.

17. The present appeal filed by the Revenue is, hereby, dismissed.