Income Tax Appeal No. 860 of 2010 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 860 of 2010 Date of decision: 29.3.2011 M/s. VSB Investment Pvt. Ltd. through its Director Manoj Sharma --- Appellant Versus Commissioner of Income Tax Faridabad --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. S.K. Mukhi, Advocate for appellant-assessee. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the assessee against the order dated 11.6.2010, passed by the Income Tax Appellate Tribunal Delhi Bench ‘H’, New Delhi (in short “the Tribunal”) in ITA No. 3741/DEL/2009, relating to the assessment year 2005-06. 2. The following substantial questions of law have been claimed for determination of this Court: “ (a) Whether on the facts and in the circumstances of the case, Hon’ble Tribunal has erred in law in setting aside the order of Income Tax Appeal No. 860 of 2010 2 CIT(A) and confirming the levy of penalty of Rs. 3,14,478/- under Section 271(1)(c)? (b) Whether on the facts and in the circumstances of the case, Hon’ble Tribunal has erred in law in not following the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro-products Pvt. Ltd. 322 ITR 158? (c) Whether the Tribunal erred in applying Explanation 1(B) of Section 271(1)(c) in respect of charge of furnishing inaccurate particulars of income, contrary to express language of law contained in this regard? (d) Whether the order passed by Hon’ble Tribunal is perverse as it has not appreciated that the assessee had disclosed all the facts relating to and material to the computation of income and, therefore, Explanation 1 to Section 271(1)(c) is not applicable? 3. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the appellant-assessee is engaged in the business of purchase and sale of shares. The assessee filed return for the assessment year 2005-06 at the income of Rs. 68,27,290/-. According to the assessee, it suffered a loss of Rs. 8,59,817/- on the sale of shares. In assessment proceedings under Section 143(3) of the Act, the assessing officer made disallowance of the aforesaid amount under the provisions of Section 94(7) of the Act and accordingly, assessed the income of the assessee at Rs. 76,87,110/-. Proceedings under Section 271(1) (c) of the Act for imposing penalty were also initiated and the reply submitted on behalf of the assessee to the notice issued in that behalf having been found not satisfactory, the assessing officer observed that it was a case of Income Tax Appeal No. 860 of 2010 3 concealment. The assessing officer, thus, imposed a penalty of Rs. 3,14,478/- by order dated 30.5.2008, which, was however, deleted by the Commissioner of Income-tax (Appeals) [in short “CIT(A)”] vide order dated 10.7.2009 passed in the appeal preferred by the assessee. 4. The Revenue preferred appeal before the Tribunal. The Tribunal accepted the appeal and reversed the order of the CIT(A) and restored that of the assessing officer, by the order appealed against. 5. We have heard learned counsel for the appellant-assessee and perused the record. 6. Learned counsel for the assessee submitted that in the course of huge and voluminous transactions of sale of shares, a loss of Rs. 8,59,817/- disallowed under the provisions of Section 94(7) of the Act, could not have been taken as concealed income of the assessee, more so, when the assessee of its own, during the assessment proceedings, had surrendered the above amount subject to the condition of imposing no penalty and the calculation so made was even accepted by the Assessing Officer. Learned counsel in support of his submission placed reliance on a judgment of the Supreme Court in Commissioner of Income Tax vs. Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158. 7. The only point for consideration before this Court is, whether the assessing officer was justified in imposing the penalty of Rs. 3,14,478/- under Section 271(1)(c) of the Act, on the ground that the assessee had not complied with the provisions of Section 94(7) of the Act while furnishing its return of income. 8. As noticed earlier, the penalty imposed by the assessing officer was deleted by the CIT(A) but this deletion was not accepted by the Tribunal and accordingly, while accepting the appeal of the Revenue, Income Tax Appeal No. 860 of 2010 4 the order of the CIT(A) was set aside and that of the Assessing Officer restored. It would in the first instance be advantageous to notice as to how the Tribunal upset the order of the CIT(A) and sustained the order of the Assessing Officer imposing penalty under Section 271(1)(c) of the Act. 9. The Tribunal on analysis of the matter observed that it could not be said that the assessee was not aware of the provisions of Section 94(7) of the Act. It was noticed that the assessee-company had been availing the services of a Chartered Accountant and in spite of that no reply was filed by the assessee on the issue why the provisions of Section 94(7) had not been complied with while working out the income shown in the income tax return. The Tribunal made reference to Explanation-1 to Section 271(1)(c) of the Act which envisaged that if the assessee fails to offer explanation in respect of any material fact relevant for computation of total income of the assessee, the amount added or disallowed in computing the income of such assessee as a result thereof, shall be considered as income deemed to represent the income in respect of which particulars have been concealed for the purpose of imposition of penalty under Section 271(1)(c) of the Act. The aforesaid Explanation further provides that even if any explanation was furnished by the assessee and the same was found to be false by the assessing officer, then also, the assessee is required to either substantiate such explanation or to prove that the same is bona fide and all the facts relating to the same and material to the computation of total income have been disclosed by him. The Tribunal while embarking on the above issue observed that in the instant case the facts relating to disallowance of loss as per the provisions of sub-section (7) of Section 94 of the Act were not disclosed by the assessee in the return filed, and even if some Income Tax Appeal No. 860 of 2010 5 explanation was offered by the assessee, the same was not bona fide because no reason had been given by the assessee for not making disallowance under Section 94(7) of the Act. The Tribunal, thus, observed that for this reason as well, the assessee has to be blamed for non- disclosure of the facts relating to the same and the material to the computation of total income. The Tribunal, thus, after elaborately discussing the issue observed that the Explanation-1 to Section 271(1)(c) of the Act was directly applicable and the penalty was rightly imposed by the Assessing Officer. While holding so, the other reason for disagreeing by the Tribunal with the observations of the CIT(A) on the basis of which the penalty was deleted, mentioned in its order was that no material had been brought on record in its order by the learned CIT(A) or by the assessee during the course of hearing before them to show that there was any difference of opinion in that behalf. 10. A perusal of the order of the Tribunal, especially the observations contained in para 9 thereof, shows that in the opinion of the Tribunal, the judicial enunciations relied upon by the CIT(A) for deleting the penalty, were not applicable to the resolution of the controversy in hand and were clearly distinguishable on facts, and it was a clear case of non-compliance of Explanation-1 to Section 271(1)(c) of the Act. 11. No perversity or illegality could be pointed out by the learned counsel for the assessee in the findings recorded by the Tribunal that may persuade this Court to interfere therewith. 12. Referring to the judgment in Reliance Petroproducts (P) Ltd’s case (supra) relied upon by the learned counsel for the appellant, suffice it to notice that the said case was not dealing with Explanation 1 to Section 271(1)(c) of the Act which is applicable in the present case and, Income Tax Appeal No. 860 of 2010 6 therefore, it does not come to its rescue for the reason that the facts in the said judgment and that of the case in hand are noticeably different and have no application to the controversy directly in issue here. 13.. In view of the above, the substantial questions of law as claimed do not arise and there being no merit in the appeal, the same is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) March 29, 2011 JUDGE *rkmalik*