ITA No. 69 of 2009 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 69 of 2009 Date of Decision: 6.4.2011 M/s Sethi Industries Corporation ....Appellant. Versus Deputy Commissioner of Income Tax ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Aveneesh Jhingan, Advocate for the appellant. Ms. Urvashi Dhugga, Senior Standing Counsel, for the respondent. AJAY KUMAR MITTAL, J. 1. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 28.3.2007 passed by the Income Tax Appellate Tribunal, Delhi Bench, New Delhi (hereinafter referred to as “the Tribunal”) in ITA No. 31/D/2004, relating to the assessment year 1999- 2000, claiming the following substantial questions of law:- “(i) Whether in the facts and circumstances of the case when deduction itself was disputed that in which year the deduction was allowable the penalty u/s 271(1)(c) could be levied and upheld? (ii) Whether in the facts and circumstances of the case ITA No. 69 of 2009 -2- penalty can be imposed for claiming the deduction in AY 1999-2000 when the department itself was of the view that the deduction is not allowable in AY 1998- 99?” 2. The facts, in brief, necessary for disposal of the appeal are that the assessee is manufacturer of auto parts and supplier to Maruti Udyog Ltd. It filed its return of income for the assessment year 1998-99 on 29.10.1998 declaring an income of Rs.1,46,140/-. The said return was revised on 21.10.1999 declaring loss of Rs.8,53,860/- on account of receipt of debit notes amounting to Rs.10,00,000/- from the Maruti Udyog Limited. The assessment order was passed on 27.3.2001 accepting the loss of Rs.6,35,767/- after allowing the claim of Rs.10,00,000/-. The assessee for the year 1999-2000 filed return of income on 16.12.1999 declaring net loss of Rs.5,94,541/-. Here, the assessee had again claimed loss amounting to Rs.10,00,000/- on account of debit note received from Maruti Udyog Ltd. The assessment was completed by the Assessing Officer on 21.3.2002 disallowing the loss of Rs.10,00,000/- on the ground that the assessee had already availed of the said loss in the assessment year 1998-99. The Assessing Officer also imposed penalty of Rs.3,50,000/- upon the assessee under Section 271(1)(c) of the Act vide order dated 24.9.2002 for concealment of income and furnishing inaccurate particulars. The assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)]” against the levy of penalty by the Assessing Officer. In the meantime, the Commissioner of Income Tax (CIT) vide order dated 26.12.2002 initiated proceedings under Section ITA No. 69 of 2009 -3- 263 of the Act for the assessment year 1998-99 on the ground that loss of Rs.10,00,000/- had been wrongly allowed as the same was not written off in the books of account for the said year. The CIT(A) vide order dated 20.11.2003 dismissed the appeal of the assessee against levy of penalty. Feeling aggrieved, the assessee filed appeals against the orders dated 20.11.2003 and 26.12.2002 before the Tribunal. The revenue also filed appeal against the order of the CIT(A) deleting the addition of Rs.10,00,000/- made by the Assessing Officer in the consequential proceedings taken in pursuance to the order of the CIT dated 26.12.2002 under Section 263 of the Act. The Tribunal vide order dated 25.3.2007 allowed the appeal of the assessee and set aside the order of the CIT passed under Section 263 of the Act and restored that of the Assessing Officer dated 27.3.2001 allowing deduction of Rs.10,00,000/- from income relating to the assessment year 1998-99. The appeal of the revenue against the order deleting the addition was dismissed as the order under Section 263 of the Act was set aside and it was held that the consequential proceedings thereto have become infructuous. However, the order imposing penalty under Section 271(1) (c) of the Act was upheld by the Tribunal. Hence, the present appeal by the assessee. 3. We have heard learned counsel for the parties. 4. The point in issue is whether the penalty imposed under Section 271(1)(c) of the Act by the Assessing Officer and sustained by the Tribunal was justified. 5. It is not in dispute that the assessee had filed the original return for the assessment year 1998-99 on 29.10.1998 which was ITA No. 69 of 2009 -4- revised claiming a loss of Rs.10,00,000/-on account of debit notes issued by the Maruti Udyog Limited on 21.10.1999. The assessee for the next assessment year 1999-2000 filed return on 16.12.1999 in which it had again claimed loss of Rs.10,00,000/- which had already been claimed for the assessment year 1998-99. Thus, the assessee had claimed loss of Rs.10,00,000/- twice over i.e. one in the return filed for the assessment year 1998-99 and second time in the return filed for the assessment year 1999-2000. The Tribunal while upholding the penalty under Section 271(1)(c) of the Act had recorded that the Explanation furnished by the assessee was not bonafide and the assessee was unable to substantiate its version. The findings record read as under:- “16.1 The question now is – whether the assessee furnished inaccurate particulars of income? Section 271(1)(c), Explanation I, provides that where in respect of any facts material to the computation of the total income of any person under this Act – (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer to be false or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result ITA No. 69 of 2009 -5- thereof shall, for the purpose of clause (c) of this sub section, be deemed to represent the income in respect of which particulars have been concealed. 16.2 Explanation I, enacts a rule of evidence under which initial onus of offering explanation about any sum added to the income is placed on the assessee. There could be two situations, namely, that the explanation is offered or the explanation is not offered. In this case, the explanation has been offered by the assessee. Clause (B) of the Explanation further requires that the explanation is to be substantiated by the assessee and if he fails to substantiate the explanation as bonafide show and that all facts relating to the same and material to computation of income have been disclosed, then, the case would get covered squarely under the Explanation. It was the explanation that the amount was claimed in assessment year 1998-99 on legal advice. There is no evidence to that effect on record. It was also explained that claim in this year was merely a clerical mistake. It has been held that this explanation is not bonafide because the assessee could not have forgotten that this very amount was claimed in the return for assessment year 1998-99 less than two months ago. The claim was a very big amount and it materially altered its income. ITA No. 69 of 2009 -6- Therefore, we are of the view that the explanation is not bonafide. It has also been pointed out that no mention whatsoever was made in the return about the material fact that this very amount had also been claimed in assessment year 1998-99. Thus, all the ingredients of clause (B) are satisfied and, therefore, in terms of Explanation I, the impugned amount has to be deemed to represent the income in respect of which in accurate particulars have been furnished. 16.3 Having considered the assessee's explanation, we are of the view that the default committed by the assessee is not a technical or venial default, as substantial tax is involved. There is no doubt that the assessee had claimed the same amount twice over, second time in this year. Having claimed the amount in assessment year 1998-99, there was no reason for the assessee to claim the same amount in this year again. The default of the assessee has been considered separately in penalty proceedings by the Assessing Officer and the learned CIT(A). It is no doubt true that the levy of penalty is not mandatory. However, when same claim is made twice over without disclosing material facts at the time of making the claim for the second time, it becomes obligatory for the authorities under that Act to examine whether the facts of the case called for imposition of penalty. ITA No. 69 of 2009 -7- We are of the view that the instant case has been considered by both the lower authorities in the right perspective and, therefore, the penalty was rightly levied and upheld respectively by them. Thus, we do not find any reason to interfere with the order of the learned CIT(A).” 6. The Tribunal had concluded that the assessee had furnished inaccurate particulars of income and the same had been done deliberately. No illegality or perversity could be pointed out by the learned counsel for the assessee except an attempt was made to persuade this Court to reappreciate the material on record, which is not permissible. The levy of penalty under Section 271(1)(c) of the Act had, thus, rightly been sustained. 7. Accordingly, the questions of law are answered against the assessee and in favour of the revenue. The appeal stands dismissed. (AJAY KUMAR MITTAL) JUDGE April 6, 2011 (ADARSH KUMAR GOEL) gbs JUDGE