The Commissioner Of Income Tax v. Shri Soundarrajan Parthasarathy
In the High Court of Judicature at Madras Dated : 04.6.2019 Coram :
The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal No.302 of 2019 The Commissioner of Income Tax, Chennai.
...Appellant Vs Shri.Soundarrajan Parthasarathy
...Respondent
APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 24.7.2018 in ITA No.350/Chny/2018 on the file of the Income Tax Appellate Tribunal Chennai 'B' Bench for the assessment year 2011-12 as against the order dated 28.11.2017 made in ITA.NO.12/CIT(A)-5 2017-2018 on the file of the Commissioner of Income Tax (Appeals)-5, Chennai 34. as against the order dated 28.03.2017 for the Assessment Year 2011-2012 on the file of the Assistant Commissoner of Income Tax,Non Corporate Circle 17, chennai. For Appellant : Mrs.R.Hemalatha, SSC Judgment was delivered by T.S.SIVAGNANAM,J We have heard the learned Senior Standing Counsel for the appellant.
2. This appeal, filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act), is directed against the order dated 24.7.2018 passed by the Income Tax Appellate Tribunal, Chennai 'B' Bench (for brevity, the Tribunal) in ITA No.350/Chny/2018 for the assessment year 2011-12.
3. The Revenue has filed this appeal by raising the following substantial questions of law :
"i. Whether, on the facts and in the circumstances of the case, the Tribunal was right in deleting the penalty levied under Section 271(1)(c) of the Income Tax Act, 1962 ? And
ii. Whether the reasoning and finding of the Tribunal is right by holding that furnishing of income under incorrect head and consequential short payment of taxes does not amount to concealment of income or furnishing of inaccurate particulars of income ?"
4. The short question, which falls for consideration, is as to whether the Tribunal was justified in allowing the appeal filed by the assessee and overturning the order dated 28.11.2017 passed by the Commissioner of Income Tax (Appeals) [for brevity, the CIT(A)], who confirmed the order of penalty passed by the Assessing Officer by order dated 28.3.2017 under Section 271(1)(c) of the Act for the assessment year 2011-12.
5. It is not in dispute that the assessment proceedings had attained finality and the assessee was made liable to pay tax. Thereafter, the Assessing Officer issued a show cause notice dated 06.3.2017 stating that during the course of assessment proceedings, the Assessing Officer held that the perquisites in the form of Employee Stock Option Plan (ESOP) sold by the assessee were liable to tax in India, that the CIT(A), vide order dated 11.1.2016, came to the conclusion that the action of the Assessing Officer to tax the perquisites under the head 'income from salary' was upheld and that subsequently, the Tribunal, vide order dated 05.5.2016, confirmed the same. After stating all the above facts, it was further stated that the penalty proceedings under Section 271(1)(c) of the Act got time barred on 31.3.2017 since the order of the CIT(A) was received before 31.3.2016 and that the assessee was given an opportunity to show cause as to why the penalty under Section 271(1)(c) of the Act should not be levied. The assessee was also granted further time till 13.3.2017 to submit their reply.
6. The assessee filed a reply dated 20.3.2017 raising a preliminary objection and pointing out the defect in the said show cause notice dated 06.3.2017 stating that the notice did not contain the particulars of income alleged to have been concealed by the assessee. Apart from that, various other explanation was given with regard to the factual aspects pointing out as to how the penalty proceedings could not have been invoked merely because additions have been made in the quantum assessment and that the Assessing Officer had to prove that there was a concealment of income or the returns of income furnished by the assessee or the documents submitted by the assessee during scrutiny proceedings were based on incorrect facts, falsity and untruth. In support of their contention, the assessee relied upon the decision of the Hon'ble Supreme
Court in the case of Dilip N.Shrof Vs. JCIT [reported in (2007) 291 ITR 519] and various other decisions including the decision of the Division Bench of this Court in TCA.No.273 of 2012 dated 12.9.2012.
7. The explanation offered by the assessee did not find favour with the Assessing Officer, who rejected the same and confirmed the proposal in the said show cause notice and levied penalty to the tune of Rs.54,53,840/- under Section 271(1)(c) of the Act. Aggrieved by that, the assessee preferred an appeal before the CIT(A), who, by order dated 28.11.2017, confirmed the order passed by the Assessing Officer. This order was challenged by the assessee before the Tribunal and by the impugned order, the Tribunal allowed the appeal filed by the assessee. Hence, the Revenue is before us.
8. Before we move on to consider as to the correctness of the order passed by the Tribunal and decide the substantial questions of law raised before us, we wish to point out the manner, in which, the CIT(A) drafted his order. Initially, we were under the impression that the 69 page order passed by the CIT(A) was a detailed and speaking order. But, after carefully going through the order, we find that the CIT(A) had verbatim extracted the objections raised by the assessee to the show cause notice and the grounds of appeal raised by the assessee before the CIT(A) and the discussion in the 69 page order starts only from page 66. It is cardinal principle of judgment writing that reasons should be assigned in support of the conclusion that a Court or a Quasi Judicial Authority may arrive at. To say the least, the order passed by the CIT(A) is devoid of reasons.
9. The order passed by the CIT(A) further shows that at the first instance, the assessee raised a preliminary objection with regard to the defective penalty notice dated 06.3.2017. The assessee contended that the said notice dated 06.3.2017 did not contain any particulars of income alleged to have been concealed by the assessee. The Assessing Officer, in paragraph 6 of the penalty order dated 28.3.2017, extracted the relevant portion of the show cause notice dated 06.3.2017, a reading of which shows that it did not contain any particulars of income alleged to have been concealed by the assessee. Though such a contention was raised, the Assessing Officer did not dwell into that aspect as it is expected of him to do. Therefore, the assessee raised such a plea before the CIT(A). Unfortunately, the CIT(A) took a narrow and pedantic view that the assessee did not file a copy of the penalty notice along with the grounds of appeal to substantiate their case. We fail to understand as to why the CIT(A) took such a stand and as the First Appellate Authority, he could have
called for the files as well to verify the plea raised by the assessee that the penalty notice was defective. Therefore, to say the least, such an observation in the order passed by the CIT(A) and more particularly in paragraph 6.2 is perverse.
10. It is the consistent case of the assessee that there had been no deliberate concealment nor there had been deliberate non disclosure and that the assessee disclosed the amount, which, according to the Department, should have been shown as a perquisite because the employer had treated it as a perquisite and deducted tax at source. Though the assessee offered an explanation, it was not found to be acceptable by the Assessing Officer. The CIT(A), when he proposed to confirm the findings of the Assessing Officer, should record his own independent reasons as to how the conduct of the assessee was deliberate in not disclosing the perquisites shown by the employer in Form 16 and as to how such a deliberate conduct would amount to concealment of income. The CIT(A) did not give independent reasons in support of his conclusions except stating that the assessee's conduct was deliberate. This would be sufficient to set aside the order passed by the CIT(A). The Tribunal, in our considered view, examined the conduct of the assessee.
11. The assessee, who is a salaried employee, had disclosed the value of the stock appreciation rights and gain thereof and claimed the same as capital gain. However, the Assessing Officer treated the gain as a revenue receipt and levied tax. In such circumstances, whether it could have been stated that there was concealment of income or whether the assessee furnished inaccurate particulars of income. In our considered view, the Tribunal rightly held that it is nobody's case that the assessee concealed the allotment of stock appreciation rights or gain arising out of such appreciation. In fact, there had been a difference of opinion or difference in interpretation of the manner, in which, the assessee interpreted the returns. Therefore, when there were two opinions possible, it cannot be stated that the conduct of the assessee amounted to deliberate concealment of income with certain mala fide intentions.
12. Mrs.R.Hemalatha, learned Senior Standing Counsel for the appellant has pressed into service the decision of the Division Bench of the High Court of Delhi in the case of CIT Vs. Zoom Communication (P) Ltd. [reported in (2010) 191 Taxman 179].
13. The legal position pointed out in the said decision would fully support the stand of the assessee. However, the facts in the said case were totally different and the Court, on facts, found that the explanation offered by the assessee was lacking in bona fides. The Court took into
consideration the fact that the assessee therein namely Zoom Communication (P) Limited was a company having professional assistance in computation of its income and its accounts were compulsorily subjected to audit and disbelieved the stand taken by the assessee that due to oversight, the amount mentioned was not added back in the computation of income. As pointed out in the said decision, mere submitting a claim, which is incorrect in law, would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bonafide and if the claim, besides being incorrect in law, is malafide, Explanation 1 to Section 271(1) of the Act would come into play and work to the disadvantage of the assessee.
We find from the facts in the case before us that there is no mala fide established by the Revenue against the assessee nor can we state that the conduct of the assessee is lacking in bona fide. Furthermore, in the decision in the case of Zoom Communication (P) Limited, the Court found that there was no difference of opinion as regards disallowance of the expenses and the incorrect computation given by the assessee. However, on facts, in the present case before us, we find that there had been two opinions or there had been difference of opinion between the assessee and the Assessing Officer.
14. Mrs.R.Hemalatha, learned Senior Standing Counsel for the appellant also relies upon the decision of the Division Bench of the High Court of Bombay in the case of Jivanlal and Sons Vs. ACIT [reported in (2019) 103 Taxmann.com 207].
15. We are of the view that the said decision does not render any assistance to the case of the Revenue, because, on facts, the Court found that the Chartered Accountant of the assessee could not feign ignorance of Section 40(ii) of the Act, as he was well trained and well versed in law representing not only the assessee, but also various other clients. It had been contended by the assessee that the error had been admitted by the Chartered Accountant and that the assessee should be exonerated of penalty. This contention was rejected and it was held that the attempt to blame the Chartered Accountant could not result in the assessee's exoneration claimed in absolute terms. It was also held that the penalty was liable to be imposed. Thus, the decision of the Bombay High Court in the case of Jivanlal and Sons, which was confirmed by the Hon'ble Supreme Court in the decision reported in (2019) 103 Taxman.com 208, is distinguishable on facts.
16. Thus, we are of the view that the Revenue has not made out any case to interfere with the order passed by the Tribunal as the reasons assigned by it having been found to be correct apart from the reasons assigned by us in this judgment.
17. Accordingly, the above tax case appeal is dismissed.
Sd/- Assistant Registrar(CS) //True Copy// Sub Assistant Registrar To The Income Tax Appellate Tribunal, Madras 'B' Bench. 2.The Commissioner of Income Tax (Appeals)-5,Nungambakkam Chennai 34.
3.The Assistant Commissioner of Income Tax, Non Corporate Circle-17(1), 5th Floor,Room No.514,BSNL Complex, 16 Greems Road, Chennai 06.
+1cc to Mr.T.Ravikumar , Advocate SR.No. 44784 TCA.No.302 of 2019 A.SK(19/07/2019) A.SK(07/08/2019)